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 December 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)
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 December 28, 1996:
Suburban Propane Partners, L.P. - 21,562,500 Common Units
- 7,163,750 Subordinated Units
This Report contains a total of 17 pages.
<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 Sheets as of December 28, 1996 3
and as of September 28, 1996
Condensed Consolidated Statement of Operations for the three
months ended December 28, 1996 4
Condensed Consolidated Statement of Cash Flows for the
three months ended December 28, 1996 5
Condensed Consolidated Statement of Partners' Capital
for the three months ended December 28, 1996 6
Notes to Condensed Consolidated Financial Statements 7-11
Suburban Propane division of Quantum Chemical Corporation
---------------------------------------------------------
(Predecessor)
-------------
Condensed Consolidated Statement of Operations for the
three months ended December 30, 1995 4
Condensed Consolidated Statement of Cash Flows for the
three months ended December 30, 1995 5
Notes to Condensed Consolidated Financial Statements 7-11
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations 14-15
Part 2 Other Information
Item 5 - Other 16
Item 6 - Exhibits and Reports on Form 8-K 16
Signatures 17
<PAGE>
SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES
<TABLE>
<CAPTION>
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
December 28, September 28,
1996 1996
---- ----
<S> <C> <C>
Current assets:
Cash and cash equivalents ............................. $ 19,290 $ 18,931
Accounts receivable, less allowance for
doubtful accounts of $3,842 and $3,312, respectively 110,230 55,021
Inventories ........................................... 57,012 40,173
Prepaid expenses and other current assets ............. 5,747 6,567
--------- ---------
Total current assets ............................. 192,279 120,692
Property, plant and equipment, net ......................... 374,015 374,013
Net prepaid pension cost ................................... 47,810 47,514
Goodwill and other intangible assets, net .................. 254,467 255,948
Other assets ............................................... 9,309 9,257
--------- ---------
Total assets ..................................... $ 877,880 $ 807,424
========= =========
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable ...................................... $ 58,815 $ 40,730
Accrued employment and benefit costs .................. 22,622 25,389
Accrued insurance ..................................... 5,280 5,280
Short-term borrowings ................................. 49,000 --
Customer deposits and advances ........................ 6,862 8,242
Accrued interest ...................................... 16,294 8,222
Other current liabilities ............................. 14,095 13,963
--------- ---------
Total current liabilities ........................ 172,968 101,826
Long-term debt ............................................. 428,229 428,229
Postretirement benefits obligation ......................... 81,120 81,374
Accrued insurance .......................................... 16,811 19,456
Other liabilities .......................................... 11,232 11,860
--------- ---------
Total liabilities ................................ 710,360 642,745
Partners' capital:
Common unitholders .................................... 134,842 129,283
Subordinated unitholder ............................... 40,754 40,100
General Partners ...................................... 3,340 3,286
Unearned compensation ................................. (11,416) (7,990)
--------- ---------
Total partners' capital .......................... 167,520 164,679
--------- ---------
Total liabilities and partners' capital .......... $ 877,880 $ 807,424
========= =========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
<PAGE>
SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
( in thousands, except per unit amounts)
(unaudited)
Three Months Ended
December 28, December 30,
1996 1995
(Predecessor)
------- --------
Revenues
Propane ..................................... $224,557 $170,697
Other ....................................... 21,471 19,982
------- --------
246,028 190,679
Costs and expenses
Cost of sales ............................... 148,094 97,295
Operating ................................... 54,725 50,632
Depreciation and amortization ............... 9,281 8,716
Selling, general and administrative expenses 8,028 6,865
Management fee .............................. 0 775
-------- --------
220,128 164,283
Income before interest expense and income taxes .. 25,900 26,396
Interest expense, net ............................ 8,498 0
-------- --------
Income before provision for income taxes ......... 17,402 26,396
Provision for income taxes ....................... 64 12,023
-------- --------
Net income .................................. $ 17,338 $ 14,373
======= ========
General Partner's interest in net income ......... $ 347
--------
Limited Partners' interest in net income ......... $ 16,991
========
Net income per Unit .............................. $ 0.59
========
Weighted average number of Units outstanding ..... 28,726
--------
The accompanying notes are an integral part of these condensed consolidated
financial statements.
<PAGE>
SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES
<TABLE>
<CAPTION>
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Three Months Ended Three Months Ended
December 28, December 30,
1996 1995
(Predecessor)
--------------- ------------------
<S> <C> <C>
Cash flows from operating activities:
Net income ................................................ $ 17,338 $ 14,373
Adjustments to reconcile net loss to net cash
provided by (used in) operations:
Depreciation ......................................... 7,395 7,087
Amortization ......................................... 1,886 1,629
Gain on disposal of property, plant and
equipment .......................................... (382) (33)
Changes in operating assets and liabilities, net of
acquisitions and dispositions:
(Increase) in accounts receivable ..................... (55,209) (35,466)
(Increase) in inventories ............................. (16,839) (5,004)
Decrease/(Increase) in prepaid expenses and
other current assets ................................ 820 (1,221)
Increase in accounts payable .......................... 18,085 8,998
(Decrease) in accrued employment
and benefit costs ................................... (2,609) (2,340)
Increase in accrued interest ......................... 8,072 0
(Decrease) in other accrued liabilities .............. (1,248) (3,731)
Other noncurrent assets ................................... (348) (4)
Deferred credits and other noncurrent liabilities ......... (3,526) (1,799)
------- --------
Net cash used in operating activities ........... (26,565) (17,511)
-------- --------
Cash flows from investing activities:
Capital expenditures ..................................... (8,762) (6,408)
Acquisitions ............................................. (694) (3,544)
Proceeds from sale of property, plant and equipment, net.. 2,036 569
-------- --------
Net cash used in investing activities ........... (7,420) (9,383)
-------- --------
Cash flows from financing activities:
Cash activity with parent, net ........................... 0 26,877
Short-term borrowings, net ............................... 49,000 0
Partnership distribution ................................. (14,656) 0
-------- --------
Net cash provided by financing activities ....... 34,344 26,877
-------- --------
Net increase/(decrease) in cash and cash equivalents ........... 359 (17)
Cash and cash equivalents at beginning of period ............... 18,931 136
-------- --------
Cash and cash equivalents at end of period ..................... $ 19,290 $ 119
======== ========
Supplemental disclosure of cash flow information:
Cash paid for interest ................................... $ 168 $ 0
-------- --------
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
<PAGE>
SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES
<TABLE>
<CAPTION>
CONDENSED CONSOLIDATED STATEMENT OF PARTNERS' CAPITAL
(in thousands)
(unaudited)
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 September 28, 1996 ........ 21,562 7,164 $ 129,283 $ 40,100 $ 3,286 $ (7,990) $164,679
Additional grants under restricted
Unit plan (174,882 units) ............ 3,585 (3,585)
Quarterly distribution ............... (10,787) (3,576) (293) (14,656)
Unamortized restricted Unit
compensation ......................... 159 159
Net income ...................... -- -- 12,761 4,230 347 -- 17,338
--------- --------- --------- --------- --------- --------- ---------
Balance at December 28, 1996 ......... 21,562 7,164 $ 134,842 $ 40,754 $ 3,340 $ (11,416) $ 167,520
========= ========= ========= ========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
<PAGE>
SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
December 28, 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) 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 Millennium Chemicals, Inc.
("Millennium"), which was formed as a result of the demerger (spin-off) of
Hanson PLC's ("Hanson") chemicals businesses 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.
<PAGE>
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 intercompany
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 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
Company's Annual Report on Form 10-K for the fiscal year ended September 28,
1996, including management's discussion of financial results contained therein.
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 Saturday nearest the
end of the quarter.
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.
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 December 28, 1996 and September 28, 1996 was $93,382
and $85,987, respectively.
GOODWILL AND OTHER INTANGIBLE ASSETS. Goodwill and other intangible assets are
comprised of the following at December 28, 1996:
Goodwill $265,537
Debt origination costs 6,224
Other, principally noncompete agreements 4,164
-----
275,925
Less: Accumulated amortization 21,458
------
$254,467
========
<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 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 paid the
Minimum Quarterly Distributions on all outstanding Common Units and Subordinated
Units for the quarter ended September 28, 1996 on November 12, 1996. The
aggregate amount of these Common and Subordinated Distributions was $14,363.
4. Related Party Transactions
- -----------------------------
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 three months ended December 28, 1996, the Partnership incurred
expenses of $92 under the Services Agreement.
<PAGE>
5. Commitments and Contingencies
- --------------------------------
The Partnership leases certain property, plant and equipment for various periods
under noncancelable leases. Rental expense under operating leases was $3,597 for
the three months ended December 28, 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 and Bank Credit Facilities
- --------------------------------------------
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 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 installments 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 and will rank on an equal and ratable basis with
the Operating Partnership's obligations under the Senior Notes. The Bank Credit
Facilities bear interest at a rate based upon either LIBOR, Chase Manhattan's
(formerly 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. As of December 28, 1996 such fee was 0.375%.
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.
As of December 28, 1996, the Partnership had outstanding short-term borrowings
of $35,000 under the Working Capital Facility and $14,000 under the Acquisition
Facility.
The Senior Note Agreement and Bank Credit Facilities contain 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.
<PAGE>
7. Unaudited Pro Forma Financial Information
- --------------------------------------------
The accompanying unaudited pro forma condensed consolidated statements of
operations for the three months ended December 30, 1995 were derived from the
historical statements of operations of the Predecessor Company and the
statements for the three months ended December 28, 1996 were derived from the
condensed consolidated statement of operations of the Partnership. The 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 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.
SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per unit amounts)
Three Months Ended
December 28, December 30,
1996 1995
----------- -----------
Revenues
Propane .................................... $224,557 $170,697
Other ...................................... 21,471 19,982
-------- --------
246,028 190,679
Costs and Expenses
Cost of sales .............................. 148,094 97,295
Operating .................................. 54,725 50,632
Depreciation and amortization .............. 9,281 8,716
Selling, general and administrative expenses 8,028 7,640
-------- --------
220,128 164,283
Income before interest expenses and income taxes 25,900 26,396
Interest expense, net ........................... 8,498 8,230
-------- --------
Income before provision for income taxes ........ 17,402 18,166
Provision for income taxes ...................... 64 63
-------- --------
Net income ...................................... $ 17,338 $ 18,103
======== ========
General Partner's interest in net income ........ $ 347 $ 362
-------- --------
Limited Partners' interest in net income ........ $ 16,991 $ 17,741
======== ========
Net income per Unit ............................. $ 0.59 $ 0.62
======== ========
Weighted average number of Units outstanding .... 28,726 28,726
======== ========
<PAGE>
7. Unaudited Pro Forma Financial Information - Continued
- --------------------------------------------------------
Significant pro forma adjustments reflected in the above data include the
following:
a. For the three month period ended December 30, 1995, the elimination of
management fees paid by the Predecessor Company to a wholly-owned
affiliate of Hanson.
b. For the three month period ended December 30, 1995, the addition of
the estimated incremental general and administrative costs associated
with the Partnership operating as a publicly traded partnership.
c. For the three month period ended December 30, 1995, an adjustment to
interest expense to reflect the interest expense associated with the
Senior Notes and Bank Credit Facilities.
d. For the three month period ended December 30, 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.
8. Restricted Unit Plan
- -----------------------
The Partnership's 1996 Restricted Unit Award Plan authorizes the issuance of
Common Units with an aggregate value of $15,000 to executives, managers and
Elected Supervisors of the Partnership. Initial Restricted Unit grants with a
total value of $7,990 were awarded effective March 5, 1996 and additional grants
with a total value of $3,585 were awarded effective October 1, 1996. Upon
issuance of Restricted Units, unearned compensation is amortized ratably over
the applicable vesting periods under the Plan. Unamortized unearned compensation
was $11,416 at December 28, 1996 and is shown as a reduction of partners'
capital in the Partnership's Condensed Consolidated Balance Sheets.
9. Subsequent Event - Common Unit Distribution
- ----------------------------------------------
On January 21, 1997, the Partnership announced a quarterly distribution of $0.50
per Limited Partner Common Unit for the first quarter of fiscal 1997 payable on
February 11, 1997. The Partnership will not make a quarterly distribution on its
Subordinated Units (which are held by the General Partner) for said fiscal
quarter.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Three Months Ended December 28, 1996
Compared to Three Months Ended December 30, 1995
REVENUES
Revenues increased 29.0% or $55.3 million to $246.0 million for the three months
ended December 28, 1996 as compared to $190.7 million for the three months ended
December 30, 1995. The overall increase is primarily attributable to higher
retail and wholesale selling prices resulting from the increased cost of
propane. Propane sold to retail customers increased .9% or 1.4 million gallons
to 159.0 million gallons while wholesale gallons sold increased 32.7% or 16.5
million gallons to 67.0 million gallons. Nationwide temperatures nationally were
approximately 3% warmer than the prior period. The increase in wholesale gallons
resulted from favorable trading opportunities arising from the volatility of
industry-wide propane prices during the period.
GROSS PROFIT
Gross profit increased 4.9% or $4.6 million to $97.9 million. The increase is a
result of higher retail and wholesale volumes and margins. Average product cost
for the Partnership increased substantially when comparing the three months
ended December 28, 1996 to the same period in the prior year. The product cost
increase is principally attributable to significant price increases charged by
the Partnership's suppliers during the 1996 period resulting from perceived low
nationwide propane inventory levels. During the three months ended December 28,
1996, the Partnership was able to pass on these increases and maintain overall
margins above the prior period.
OPERATING EXPENSES
Operating expenses increased 8.1% or $4.1 million to $54.7 million for the three
months ended December 28, 1996 as compared to $50.6 million for the three months
ended December 30, 1995. The increase in operating expenses is principally due
to higher vehicle fuel costs resulting from the increase in propane prices and
higher payroll expenses attributable to an increase in the operational workforce
to support enhanced customer service programs.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses, including the management fee,
increased 5.1% or $.4 million to $8.0 million for the three months ended
December 28, 1996 compared to $7.6 million for the three months ended December
30, 1995. Expenses were higher than the prior period principally due to higher
information system development costs.
<PAGE>
OPERATING INCOME AND EBITDA
Operating income decreased $.5 million to $25.9 million in the three months
ended December 28, 1996 compared to $26.4 million in the prior period. EBITDA
increased $.1 million to $35.2 million. The increase is attributable to
increased gross profits offset by higher period 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 December
28, 1996, net cash used in operating activities increased $9.1 million to $26.6
million compared to $17.5 million used in operating activities in the three
months ended December 30, 1995. Such increase was principally due to higher
working capital requirements for receivables and inventory of $31.6 million
partially offset by an increase in accounts payable of $9.1 million and an
increase in accrued interest and other accrued liabilities of $10.6 million. The
increases in receivables, inventory and accounts payable primarily result from
the increase in propane costs and corresponding selling prices.
Net cash used in investing activities was $7.4 million for the three months
ended December 28, 1996 consisting of capital expenditures of $8.8 million and
acquisition payments of $.7 million, offset by proceeds from the sale of
property, plant and equipment of $2.1 million. Net cash used in investing
activities was $9.4 million for the three months ended December 30, 1995
consisting of capital expenditures of $6.4 million and acquisition payments of
$3.5 million, offset by proceeds from the sale of property, plant and equipment
of $.6 million.
Prior to March 5, 1996, the Predecessor Company's cash accounts had been managed
on a centralized basis by an affiliate of Hanson. Accordingly, cash receipts and
disbursements relating to the operations of the Predecessor Company were
received or funded by the Hanson affiliate. Net cash provided by financing
activities, which are reflected as a increase in division invested capital, was
$26.9 million during the three months ended December 30, 1995. Net cash provided
by financing activities for the three months ended December 28, 1996 was $34.3
million, arising from net short-term borrowings of $49.0 million principally for
working capital requirements and to fund the Partnership's fiscal 1996 fourth
quarter distribution.
<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 January 21, 1997
announcing fiscal 1997 first quarter results
and Common Unit quarterly distribution.
(B) Form 8-K
None
<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: February 7, 1997 By /s/ Charles T. Hoepper
----------------------
Charles T. Hoepper
Senior Vice President, Chief Financial Officer
and Chief Accounting Officer
<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> 3-MOS
<FISCAL-YEAR-END> SEP-28-1996
<PERIOD-END> DEC-28-1996
<CASH> 19,290
<SECURITIES> 0
<RECEIVABLES> 114,072
<ALLOWANCES> 3,842
<INVENTORY> 57,012
<CURRENT-ASSETS> 192,279
<PP&E> 467,397
<DEPRECIATION> 93,382
<TOTAL-ASSETS> 877,880
<CURRENT-LIABILITIES> 172,968
<BONDS> 428,229
0
0
<COMMON> 0
<OTHER-SE> 167,520
<TOTAL-LIABILITY-AND-EQUITY> 877,880
<SALES> 246,028
<TOTAL-REVENUES> 246,028
<CGS> 148,094
<TOTAL-COSTS> 202,819
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</TABLE>
NEWS RELEASE
For Immediate Release
Suburban Propane Partners, L.P. Reports First Quarter Results and
Declares Common Unit Quarterly Distribution
Whippany, New Jersey, January 21, 1997 -- Suburban Propane Partners, L.P.
(NYSE: SPH) today announced its results for the three months ended December 28,
1996, and declares its Common Unit quarterly distribution.
Suburban's sales for the first quarter of 1997 rose 29 percent to $246.0 million
from $190.7 million a year ago. The company reported net income for the first
quarter of $17.3 million or $0.59 per unit compared to a pro forma net income of
$18.1 million or $0.62 per unit in the first quarter ended December 30, 1995.
EBITDA for the first quarter 1997 and pro forma EBITDA for the first quarter
1996 were $35.2 million and $35.1 million respectively.
Retail sales gallons in the first quarter of 1997 increased to 159 million,
slightly above the 157.6 million gallons sold in the first quarter of 1996.
Operating expenses for the first quarter increased by approximately 8 percent
principally due to higher vehicle fuel costs resulting from the increase in
propane prices, and higher payroll expenses attributable to an increase in our
operational workforce to support enhanced customer service programs.
Nationwide temperatures averaged 2 percent colder than normal as compared to 5
percent colder than normal last year. However, on the East Coast and West Coast,
temperatures were 1 percent and 2 percent respectively warmer than normal.
Temperatures in December, which accounted for 45 percent of the company's first
quarter's volume, were approximately 90 percent of normal and approximately 14
percent warmer than last year.
"We are pleased with first quarter results which showed a volume improvement
over the prior year, even though the weather was 3 percent warmer than last
year. Our volume gains would have been more pronounced except for the fact that
our customers are being forced to take extraordinary measures to reduce their
energy consumption as a result of record high prices for propane," said Mark A.
Alexander, President and Chief Executive Officer.
<PAGE>
Suburban also today announced a quarterly distribution of $0.50 per Limited
Partner Common Unit for the first quarter ended December 28, 1996. The
distribution for the Partnership's first fiscal quarter is payable on February
11, 1997 to Common Unit holders of record as of January 31, 1997. The
Partnership will not make the quarterly distribution on its Subordinated Units.
"The Board of Supervisors is making this difficult decision to benefit the long
term needs of the company," said Mark A. Alexander, President and Chief
Executive Officer.
Suburban Propane Partners, L.P. is a publicly traded company listed on the New
York Stock Exchange. Headquartered in Whippany, New Jersey, Suburban has been in
the customer service business since 1928 and is the nation's third largest
propane gas marketer. The company serves more than 730,000 active residential,
commercial, industrial and agricultural customers through more than 350 customer
service centers in more than 40 states.
Company contact: Beverly M. Saco
Director, Investor Relations & Public Relations
(201) 503-9973
E-mail: [email protected]
