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 27, 1997
-----------------
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
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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)
(973)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 27, 1997:
Suburban Propane Partners, L.P. - 21,562,500 Common Units
- 7,163,750 Subordinated Units
This Report contains a total of 16 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 27, 1997 3
and September 27, 1997
Condensed Consolidated Statements of Operations for the three
months ended December 27, 1997 and December 28, 1996 4
Condensed Consolidated Statements of Cash Flows for the
three months ended December 27, 1997 and December 28, 1996 5
Condensed Consolidated Statement of Partners' Capital
for the three months ended December 27, 1997 6
Notes to Condensed Consolidated Financial Statements 7-11
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations 12-14
Part 2 Other Information
Item 5 - Other 15
Item 6 - Exhibits and Reports on Form 8-K 15
Signatures 16
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
Statements made in this Form 10-Q which relate to the Partnership's expectations
or predictions are or may be deemed to be forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and 21E of the Securities
Exchange Act of 1934. The Partnership's actual results may differ materially
from those contained in any such forward-looking statements depending on a
number of factors, risks and uncertainties, some of which are outside the
Partnership's control, including the unit cost of propane, weather, continued
control of expenses, customer retention and regulatory developments.
<PAGE>
<TABLE>
SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES
<CAPTION>
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
DECEMBER 27, SEPTEMBER 27,
1997 1997
(UNAUDITED) (AUDITED)
------------ -------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ................................... $ 37,612 $ 19,336
Accounts receivable, less allowance for
doubtful accounts of $3,182 and $2,682, respectively...... 76,995 45,927
Inventories ................................................. 30,052 31,915
Prepaid expenses and other current assets ................... 3,747 7,183
--------- ---------
Total current assets ................................... 148,406 104,361
Property, plant and equipment, net ............................... 358,777 364,347
Net prepaid pension cost ......................................... 48,808 48,598
Goodwill and other intangible assets, net ........................ 250,745 249,790
Other assets ..................................................... 1,430 9,311
--------- ---------
Total assets ........................................... $ 808,166 $ 776,407
========= =========
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable ............................................ $ 37,148 $ 37,785
Accrued employment and benefit costs ........................ 18,591 19,957
Accrued insurance ........................................... 4,980 5,280
Customer deposits and advances .............................. 10,958 12,795
Accrued interest ............................................ 16,350 8,306
Other current liabilities ................................... 12,756 12,578
--------- ---------
Total current liabilities .............................. 100,783 96,701
Long-term debt ................................................... 428,176 427,970
Postretirement benefits obligation ............................... 81,196 81,896
Accrued insurance ................................................ 18,185 18,468
Other liabilities ................................................ 10,417 10,133
--------- ---------
Total liabilities ...................................... 638,757 635,168
Partners' capital:
Common Unitholders .......................................... 111,436 100,476
Subordinated Unitholder ..................................... 46,399 39,835
General Partner ............................................. 25,223 12,830
Unearned compensation ....................................... (13,649) (11,902)
--------- ---------
Total partners' capital ................................ 169,409 141,239
--------- ---------
Total liabilities and partners' capital ................ $ 808,166 $ 776,407
========= =========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
<PAGE>
<TABLE>
SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES
<CAPTION>
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
( in thousands, except per unit amounts)
(unaudited)
Three Months Ended
December 27, 1997 December 28, 1996
----------------- -----------------
<S> <C> <C>
Revenues
Propane ........................................ $ 182,905 $ 224,557
Other .......................................... 21,981 21,471
--------- ---------
204,886 246,028
Costs and expenses
Cost of sales .................................. 105,657 148,094
Operating ...................................... 52,044 54,725
Depreciation and amortization .................. 9,292 9,281
Selling, general and administrative expenses ... 7,958 8,028
Gain on sale of investment in Dixie Pipeline Co. (5,090) 0
--------- ---------
169,861 220,128
Income from operations .............................. 35,025 25,900
Interest expense, net ............................... 8,108 8,498
--------- ---------
Income before provision for income taxes ............ 26,917 17,402
Provision for income taxes .......................... 16 64
--------- ---------
Net income ..................................... $ 26,901 $ 17,338
========= =========
General Partner's interest in net income ............ $ 538 $ 347
--------- ---------
Limited Partners' interest in net income ............ $ 26,363 $ 16,991
========= =========
Net income per Unit ................................. $ 0.92 $ 0.59
========= =========
Weighted average number of Units outstanding ........ 28,726 28,726
--------- ---------
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
<PAGE>
<TABLE>
SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES
<CAPTION>
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Three Months Ended Three Months Ended
December 27, December 28,
1997 1996
------------------ ------------------
<S> <C> <C>
Cash flows from operating activities:
Net income ........................................................ $ 26,901 $ 17,338
Adjustments to reconcile net income to net cash
provided by (used in) operations:
Depreciation ................................................. 7,360 7,395
Amortization ................................................. 1,932 1,886
Gain on disposal of investment ............................... (5,090) 0
Gain on disposal of property, plant and
equipment .................................................. (401) (382)
Changes in operating assets and liabilities, net of
acquisitions and dispositions:
(Increase) in accounts receivable ............................. (31,068) (55,209)
Decrease/(increase) in inventories ............................ 1,863 (16,839)
Decrease in prepaid expenses and
other current assets ........................................ 3,436 820
(Decrease)/increase in accounts payable ....................... (637) 18,085
(Decrease) in accrued employment
and benefit costs ........................................... (1,171) (2,609)
Increase in accrued interest ................................. 8,044 8,072
(Decrease) in other accrued liabilities ...................... (1,959) (1,248)
Other noncurrent assets ........................................... (333) (348)
Deferred credits and other noncurrent liabilities ................. (493) (3,526)
-------- ----------
Net cash provided by (used in) operating activities ..... 8,384 (26,565)
-------- ----------
Cash flows from investing activities:
Capital expenditures ............................................. (3,070) (8,762)
Acquisitions ..................................................... (3,693) (694)
Proceeds from sale of investment ................................. 13,090 0
Proceeds from sale of property, plant and equipment, net ......... 2,491 2,036
-------- ----------
Net cash provided by (used in) investing activities ..... 8,818 (7,420)
-------- ----------
Cash flows from financing activities:
Short-term borrowings, net ....................................... 0 49,000
Proceeds from General Partner APU contribution ................... 12,000 0
Partnership distribution ......................................... (10,926) (14,656)
-------- ----------
Net cash provided by financing activities ............... 1,074 34,344
-------- ----------
Net increase in cash and cash equivalents .............................. 18,276 359
Cash and cash equivalents at beginning of period ....................... 19,336 18,931
-------- ----------
Cash and cash equivalents at end of period ............................. $ 37,612 $ 19,290
======== ==========
Supplemental disclosure of cash flow information:
Cash paid for interest ........................................... $ 168 $ 168
======== ==========
Non-cash investing and financing activities
Assets acquired by incurring note payable ........................ $ 250 $ 0
======== ==========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
<PAGE>
<TABLE>
SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES
<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 27, 1997 ........ 21,562 7,164 $100,476 $ 39,835 $ 12,830 $ (11,902) $ 141,239
Grants under Restricted Unit
Plan ................................. 1,942 (1,942)
Partnership distribution ............. (10,781) (145) (10,926)
Amortization of Restricted Unit
compensation ......................... 195 195
APU contribution
(120 Units) .......................... 12,000 12,000
Net income ........................... -- -- 19,799 6,564 538 -- 26,901
------- ------------- -------- ----------- ---------- --------------- ---------
Balance at December 27, 1997 ......... 21,562 7,164 $111,436 $ 46,399 $ 25,223 $ (13,649) $ 169,409
======= ============= ======== =========== ========== =============== =========
</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 27, 1997
(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
Partnership Entities 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 Millennium Petrochemicals Inc., ("Millennium Petrochemicals"), formerly
Quantum Chemical Corporation, and serves as the general partner of the
Partnership and the Operating Partnership. Both the General Partner and
Millennium Petrochemicals are indirect wholly-owned subsidiaries of Millennium
Chemicals Inc. ("Millennium"), which was formed as a result of Hanson PLC's
demerger in October 1996. Millennium is a Security and Exchange Commission
registrant which files periodic reports. Millennium's annual report on Form 10-K
for the fiscal year ended December 31, 1996 has been filed (Commission File
Number 1-12091). 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 and a
special limited partner interest in the Partnership. The limited partner
interest is evidenced by 7,163,750 Subordinated Units and the special limited
partner interest is evidenced by 220,000 Additional Partnership Units ("APUs").
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 27,
1997, 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.
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 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 27, 1997 and September 27, 1997 was
$123,065 and $115,705, respectively.
GOODWILL AND OTHER INTANGIBLE ASSETS. Goodwill and other intangible assets are
comprised of the following:
DECEMBER 27, 1997 SEPTEMBER 27, 1997
----------------- ------------------
Goodwill ............................... $268,545 $266,212
Debt origination costs ................. 6,224 6,224
Other, principally noncompete agreements 5,065 4,514
-------- --------
279,834 276,950
Less: Accumulated amortization ........ 29,089 27,160
-------- --------
$250,745 $249,790
======== ========
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
<PAGE>
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.
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 less cash reserves established by the Board of Supervisors in its
reasonable discretion for future cash requirements. In accordance with the
Distribution Support Agreement among the Partnership, the General Partner and
Millennium, to enhance the Partnership's ability to distribute the Minimum
Quarterly Distribution on the Common Units, the General Partner has agreed to
contribute to the Partnership cash in exchange for APUs. The APUs represent
non-voting, limited partner Partnership interests with a stated value per unit
of $100. The APUs are not entitled to cash distributions or allocations of any
items of Partnership income, gain, loss, deduction or credit. On November 6,
1997 the General Partner contributed $12,000 to the Partnership in exchange for
120,000 additional APUs. The Partnership used the contribution to pay the
Minimum Quarterly Distributions on all outstanding Common Units for the quarter
ended September 27, 1997 on November 10, 1996. The Partnership did not make a
quarterly distribution on its Subordinated Units (which are held by the General
Partner) for said fiscal quarter. At December 27, 1997, the General Partner has
contributed a total of $22,000 or 220,000 APUs and has a remaining maximum
contribution obligation of $21,600 or 216,000 APUs under the Distribution
Support Agreement.
4. RELATED PARTY TRANSACTIONS
--------------------------
Pursuant to a Computer Services Agreement (the "Services Agreement") dated as of
the Closing Date between Millennium Petrochemicals and the Partnership,
Millennium Petrochemicals permits the Partnership to utilize Millennium
Petrochemicals' mainframe computer for the generation of customer bills, reports
and information regarding the Partnership's retail sales. For the three months
ended December 27, 1997, the Partnership incurred expenses of $101 under the
Services Agreement. Millennium Petrochemicals has notified the Partnership of
its intention to terminate the Services Agreement on or about March 31, 1998.
5. COMMITMENTS AND CONTINGENCIES
-----------------------------
The Partnership leases certain property, plant and equipment for various periods
under noncancelable leases. Rental expense under operating leases was $3,920 for
the three months ended December 27, 1997.
The Partnership is self-insured for general and product, workers' compensation
and automobile liabilities up to predetermined amounts above which third party
insurance applies. At December 27, 1997, accrued insurance liabilities amounted
<PAGE>
to $23,165, representing the total estimated losses under these self-insurance
programs. These liabilities represent the gross estimated losses as no claims or
lawsuits, individually or in the aggregate, were estimated to exceed the
Partnership's deductibles and its insurance policies.
The Partnership is also 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, after considering its self-insurance liability for
known and unasserted self-insurance claims.
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.
On September 30, 1997, the Partnership amended and restated its Bank Credit
Facilities. The amended agreement provides for a $75,000 working capital
facility and a $25,000 acquisition facility. The Operating Partnership's
obligations, under the terms of the new agreement, will continue to be unsecured
on an equal and ratable basis with the Operating Partnership's obligations under
the Senior Notes. Borrowings under the amended agreement will bear interest at a
rate based upon either LIBOR plus a margin, First Union National Bank's prime
rate or the Federal Funds rate plus 1/2 of 1%. An annual fee ranging from .20%
to .25% based upon certain financial tests will be payable quarterly whether or
not borrowings occur. As of December 27, 1997, such fee was .25%. The agreement
expires September 30, 2000.
No amounts were outstanding under the Bank Credit Facilities as of December 27,
1997.
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.
7. 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. Upon issuance of Restricted Units,
unearned compensation is amortized ratably over the applicable vesting periods
under the Plan.
<PAGE>
UNITS VALUE PER UNIT
----- --------------
Outstanding September 27, 1997 634,148 $18.41 - $21.63
Awarded ...................... 97,556 $17.91
Forfeited .................... (12,195) $18.41 - $21.63
------- ---------------
Outstanding December 27, 1997 719,509 $17.91 - $21.63
======= ===============
For the three months ended December 27, 1997, the Partnership amortized $195 of
unearned compensation.
8. SALE OF INVESTMENT
------------------
In December 1997, the Partnership sold its minority interest in the Dixie
Pipeline Company, which owns and operates a propane pipeline, for net cash
proceeds of $13,090 and realized a gain of $5,090.
9. SUBSEQUENT EVENT - COMMON UNIT DISTRIBUTION
-------------------------------------------
On January 20, 1998 the Partnership announced a quarterly distribution of $0.50
per Limited Partner Common Unit for the first quarter of fiscal 1998 payable on
February 10, 1998. 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 27, 1997
- ------------------------------------
COMPARED TO THREE MONTHS ENDED DECEMBER 28, 1996
- ------------------------------------------------
REVENUES
Revenues decreased 16.7% or $41.1 million to $204.9 million for the three months
ended December 27, 1997 as compared to $246.0 million for the three months ended
December 28, 1996. The overall decrease is primarily attributable to lower
propane costs being passed on to customers. Propane sold to retail customers
remained at the same level as the prior period's comparable quarter while
wholesale gallons sold decreased 27.6% or 18.5 million gallons to 48.5 million
gallons. The decrease in wholesale gallons is primarily attributable to the
Partnership's reduced emphasis on the wholesale market due to the low-margin
nature of such sales.
GROSS PROFIT
Gross profit increased 1.3% or $1.3 million to $99.2 million in the first
quarter of fiscal 1998, principally attributable to higher margins and increased
volume in sales of propane-related parts and services.
OPERATING EXPENSES
Operating expenses decreased 4.9% or $2.7 million to $52.0 million for the three
months ended December 27, 1997 as compared to $54.7 million for the three months
ended December 28, 1996. The decrease in operating expenses is principally
attributable to lower payroll expenses resulting from the restructuring
activities undertaken during 1997.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses were $8.0 million for the three
months ended December 27, 1997, which are consistent with the prior period's
quarter.
OPERATING INCOME AND EBITDA
Operating income increased $9.1 million to $35.0 million in the three months
ended December 27, 1997 compared to $25.9 million in the prior year's first
quarter. EBITDA increased $9.1 million to $44.3 million. Results for the first
quarter include a $5.1 million gain from the sale of an investment in the Dixie
Pipeline Company which the Partnership sold after determining it did not offer
any strategic business advantages. Excluding the gain, EBITDA and operating
income increased $4.0 million attributable to lower period expenses and higher
overall gross profit. 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
<PAGE>
provides additional information for evaluating the Partnership's ability to
distribute the Minimum Quarterly Distribution.
INTEREST EXPENSE
Interest expense decreased $.4 million to $8.1 million in the three months ended
December 27, 1997 compared with $8.5 million in the prior period. The decrease
is attributable to improved working capital management and APU contributions
from the General Partner which resulted in no amounts being borrowed on the
Partnership's Bank Credit Facilities during the first quarter of fiscal 1998.
READINESS FOR YEAR 2000
The Partnership has taken actions and continues to evaluate the extent of work
required to make its computer-based systems Year 2000 compliant, including
replacing and/or updating existing legacy systems. While these efforts will
involve additional costs, the Partnership believes, based on available
information, that it will be able to manage its total Year 2000 transition
without any material adverse effect on its business operations.
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
27, 1997, net cash provided by operating activities was $8.4 million compared to
cash used in operating activities of $26.6 million in the three months ended
December 28, 1996. The increase of $35.0 million was primarily due to lower
working capital requirements for receivables and inventory of $42.8 million and
higher net income, which was partially offset by an decrease in accounts payable
of $18.7 million. The changes in receivables, inventory and accounts payable
primarily result from the decrease in propane costs and corresponding selling
prices.
Net cash provided by investing activities amounted to $8.8 million during the
three months ended December 27, 1997 which included proceeds of $13.1 million
from the sale of the Partnership's minority interest in the Dixie Pipeline Co.,
$2.5 million from the sale of property, plant and equipment, offset by business
acquisition payments of $3.7 million and capital expenditures of $3.1 million
(including $1.1 million for maintenance expenditures and $2.0 million to support
the growth of operations). 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 (including $4.6 million for maintenance
expenditures and $4.2 million to support the growth of operations) and
acquisition payments of $.7 million, offset by proceeds from the sale of
property, plant and equipment of $2.1 million.
Net cash provided by financing activities for the three months ended December
27, 1997 was $1.1 million arising from the proceeds of the General Partner's APU
contributions exceeding the Partnership's fiscal 1997 fourth quarter
distribution.
<PAGE>
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.
The Partnership has announced that it will make a distribution of $.50 per Unit
to its Common Unitholders on February 10, 1998 for the first fiscal quarter of
1998. The Partnership will not make a distribution to the Subordinated
Unitholder for said fiscal quarter. The Partnership does not anticipate
utilizing proceeds available under the Distribution Support Agreement with
respect to the funding of the Minimum Quarterly Distribution for the second
quarter of fiscal 1998.
The ability of the Partnership to satisfy its future obligations will depend on
its future performance, which will be subject to prevailing economic, financial,
business and weather conditions and other factors, many of which are beyond its
control. Future capital needs of the Partnership are expected to be provided by
future operations, existing cash balances, the Bank Credit Facilities and, to
the extent required, APU contributions from the General Partner. The Partnership
may incur additional indebtedness or issue additional Units to fund possible
future acquisitions.
<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
(b) Reports on Form 8-K
Report on Form 8-K dated December 19, 1997, containing
the Partnership's press release dated December 19, 1997
with respect to the sale of its 8.6% ownership interest
in the Dixie Pipeline Company.
<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 9, 1998 BY /S/ ANTHONY M. SIMONOWICZ
-------------------------
ANTHONY M. SIMONOWICZ
VICE PRESIDENT, CHIEF FINANCIAL OFFICER
BY /S/ EDWARD J. GRABOWIECKI
-------------------------
EDWARD J. GRABOWIECKI
CONTROLLER AND CHIEF ACCOUNTING OFFICER
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This shedule contains summary financial information extracted from the financial
statementscontained in the body of the accompanying For 10-Q and is qualified in
it's entirety by reference to such financial statements
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-26-1998
<PERIOD-START> SEP-29-1997
<PERIOD-END> DEC-27-1997
<CASH> 37,612
<SECURITIES> 0
<RECEIVABLES> 80,177
<ALLOWANCES> 3,182
<INVENTORY> 30,052
<CURRENT-ASSETS> 148,406
<PP&E> 481,842
<DEPRECIATION> 123,065
<TOTAL-ASSETS> 808,166
<CURRENT-LIABILITIES> 100,783
<BONDS> 428,176
0
0
<COMMON> 0
<OTHER-SE> 169,409
<TOTAL-LIABILITY-AND-EQUITY> 808,166
<SALES> 204,886
<TOTAL-REVENUES> 204,886
<CGS> 105,657
<TOTAL-COSTS> 157,701
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 891
<INTEREST-EXPENSE> 8,108
<INCOME-PRETAX> 26,917
<INCOME-TAX> 16
<INCOME-CONTINUING> 26,901
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 26,901
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
