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 27, 1999
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)
(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) has 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 May 10, 1999:
Suburban Propane Partners, L.P. - 21,562,500 Common Units
- 7,163,750 Subordinated Units
This Report contains a total of 24 pages.
<PAGE>
SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES
Index to Form 10-Q
Page
----
Part 1 Financial Information
Item 1 - Financial Statements
Suburban Propane Partners, L.P. and Subsidiaries
------------------------------------------------
Condensed Consolidated Balance Sheets as of March 27, 1999
and September 26, 1998 4
Condensed Consolidated Statements of Operations for the three
months ended March 27, 1999 and March 28, 1998 5
Condensed Consolidated Statements of Operations for the six
months ended March 27, 1999 and March 28, 1998 6
Condensed Consolidated Statements of Cash Flows for the three
and six months ended March 27, 1999 and March 28, 1998 7
Condensed Consolidated Statement of Partners' Capital
for the six months ended March 27, 1999 8
Notes to Condensed Consolidated Financial Statements 9-15
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations 16-21
Item 3 - Quantitative and Qualitative Disclosures about
Market Risk 22
Part 2 Other Information
Item 4 - Submission of Matters to a Vote of Security Holders 23
Item 6 - Exhibits and Reports on Form 8-K 23
Signatures 24
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
- -----------------------------------------------
This Quarterly Report on Form 10-Q contains forward-looking statements within
the meaning of Section 21E of the Securities Exchange Act of 1934, as amended,
relating to the Partnership's future business expectations and predictions and
financial condition and results of operations. These forward-looking statements
involve certain risks and uncertainties. Important factors that could cause
actual results to differ materially from those discussed in such forward-looking
statements ("cautionary statements") include, among other things: the impact of
weather conditions on the demand for propane; the impact of fluctuations in the
unit cost of propane; the ability of the Partnership to compete with other
suppliers of propane and other energy sources; the ability of the Partnership to
retain customers; the impact of energy efficiency and technology advances on the
demand for propane; the ability of management to continue to control expenses;
the impact of regulatory developments on the Partnership's business, including
the resolution of Final Rule HM-225 (49 CFR 171.5) promulgated by the research
<PAGE>
and special programs administration of the U.S Department of Transportation; the
impact of legal proceedings on the Partnership's business; and, if the proposed
recapitalization of the Partnership discussed below is completed in the third
fiscal quarter as presently anticipated, the impact of the use of a significant
portion of the Partnership's cash-on-hand to redeem the General Partner's
Subordinated Units and additional partnership units and to pay transaction
expenses and the impact of the replacement of the distribution support
arrangement provided by an affiliate of the General Partner with a liquidity
arrangement provided by the Partnership. All subsequent written and oral
forward-looking statements attributable to the Partnership or persons acting on
its behalf are expressly qualified in their entirety by such cautionary
statements.
<PAGE>
<TABLE>
SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES
<CAPTION>
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
March 27, September 26,
1999 1998
(unaudited) (audited)
----------- -------------
ASSETS
Current assets:
<S> <C> <C>
Cash & cash equivalents ............................. $ 74,842 $ 59,819
Accounts receivable, less allowance for
doubtful accounts of $2,937 and $2,382, respectively 64,498 39,134
Inventories ......................................... 25,269 29,962
Prepaid expenses and other current assets ........... 6,883 3,866
--------- ---------
Total current assets ........................ 171,492 132,781
Property, plant and equipment, net ...................... 334,318 343,828
Net prepaid pension cost ................................ 34,012 34,556
Goodwill & other intangibles assets, net ................ 215,485 214,782
Other assets ............................................ 5,295 3,618
--------- ---------
Total assets ................................ $ 760,602 $ 729,565
========= =========
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable .................................... $ 33,275 $ 31,315
Accrued employment and benefit costs ................ 16,382 20,926
Accrued insurance ................................... 4,990 4,830
Customer deposits and advances ...................... 8,458 16,241
Accrued interest .................................... 8,226 8,198
Other current liabilities ........................... 9,883 10,040
--------- ---------
Total current liabilities ................... 81,214 91,550
Long-term debt .......................................... 428,268 427,897
Postretirement benefits obligation ...................... 35,519 35,980
Accrued insurance ....................................... 17,284 16,574
Other liabilities ....................................... 8,660 9,764
--------- ---------
Total liabilities ........................... 570,945 581,765
Partners' capital:
Common Unitholders ................................ 111,119 84,847
Subordinated Unitholder ........................... 64,649 49,147
General Partner ................................... 25,318 24,488
Unearned compensation ............................. (11,429) (10,682)
--------- ---------
Total partners' capital ..................... 189,657 147,800
--------- ---------
Total liabilities and partners' capital ..... $ 760,602 $ 729,565
========= =========
</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
March 27, 1999 March 28, 1998
-------------- --------------
Revenues
<S> <C> <C>
Propane ............................... $203,645 $214,134
Other ................................. 18,333 16,295
-------- --------
221,978 230,429
Costs and expenses
Cost of sales .......................... 96,237 115,351
Operating .............................. 54,972 55,136
Depreciation and amortization .......... 8,730 9,173
General and administrative expenses .... 7,262 6,012
-------- --------
167,201 185,672
Income before interest expense and
provision for income taxes ............. 54,777 44,757
Interest expense, net ...................... 7,597 7,741
-------- --------
Income before provision for income taxes ... 47,180 37,016
Provision for income taxes ................. 19 5
-------- --------
Net income ............................. $ 47,161 $ 37,011
======== ========
General Partner's interest in net income ... $ 943 $ 740
-------- --------
Limited Partners' interest in net income ... $ 46,218 $ 36,271
======== ========
Basic and diluted net income per Unit ...... $ 1.61 $ 1.26
======== ========
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 OPERATIONS
(in thousands, except per Unit amounts)
(unaudited)
Six Months Ended
March 27, 1999 March 28, 1998
-------------- --------------
Revenues
<S> <C> <C>
Propane ....................................... $ 342,435 $ 397,039
Other ......................................... 40,759 38,276
--------- ---------
383,194 435,315
Costs and expenses
Cost of sales .................................. 165,108 221,008
Operating ...................................... 107,246 109,066
Depreciation and amortization .................. 17,512 18,465
General and administrative expenses ............ 14,588 12,084
Gain on sale of investment in Dixie Pipeline Co. -- (5,090)
--------- ---------
304,454 355,533
Income before interest expense and
provision for income taxes .................... 78,740 79,782
Interest expense, net .............................. 15,183 15,849
--------- ---------
Income before provision for income taxes ........... 63,557 63,933
Provision for income taxes ......................... 26 21
--------- ---------
Net income ..................................... $ 63,531 $ 63,912
========= =========
General Partner's interest in net income ........... $ 1,271 $ 1,278
--------- ---------
Limited Partners' interest in net income ........... $ 62,260 $ 62,634
========= =========
Basic and diluted net income per Unit .............. $ 2.17 $ 2.18
========= =========
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 Six Months Ended
March 27, March 28, March 27, March 28,
1999 1998 1999 1998
--------- --------- --------- ---------
Cash flows from operating activities:
<S> <C> <C> <C> <C>
Net Income ........................................................... $ 47,161 $ 37,011 $ 63,531 $ 63,912
Adjustments to reconcile net income to net cash
provided by operations:
Depreciation .................................................... 6,796 7,345 13,694 14,705
Amortization .................................................... 1,934 1,828 3,818 3,760
(Gain) on disposal of investment ............................... 0 0 0 (5,090)
(Gain) on disposal of property, plant and
equipment ..................................................... (24) (1,006) (112) (1,407)
Changes in operating assets and liabilities, net of
acquisitions and dispositions:
(Increase)/decrease in accounts receivable ...................... (6,417) 8,116 (25,364) (22,952)
Decrease in inventories ......................................... 4,970 8,725 4,693 10,588
(Increase) in prepaid expenses and other
current assets ................................................. (2,407) (3,649) (3,017) (213)
(Decrease)/increase in accounts payable ........................ (514) (6,767) 1,960 (7,404)
Increase/(decrease) in accrued employment
and benefit costs .............................................. 702 1,907 (4,216) 736
(Decrease)/increase in accrued interest ......................... (8,086) (8,107) 28 (63)
(Decrease) in other accrued liabilities ......................... (6,202) (3,964) (7,780) (5,923)
Other noncurrent assets .............................................. (453) (717) (1,486) (1,050)
Deferred credits and other noncurrent liabilities .................... 335 (2,634) (436) (3,127)
-------- -------- -------- --------
Net cash provided by operating activities .................. 37,795 38,088 45,313 46,472
-------- -------- -------- --------
Cash flows from investing activities:
Capital expenditures ................................................ (2,920) (4,572) (5,856) (7,642)
Acquisitions ........................................................ (4,227) 0 (4,336) (3,693)
Proceeds from sale of investment .................................... 0 0 0 13,090
Proceeds from sale of property, plant and equipment, net ............ 1,008 1,613 1,952 4,104
-------- -------- -------- --------
Net cash (used in) provided by investing activities........ (6,139) (2,959) (8,240) 5,859
-------- -------- -------- --------
Cash flows from financing activities:
Long-term debt repayments ........................................... (1) (1) (48) (1)
Proceeds from General Partner APU contribution ...................... 0 0 0 12,000
Partnership Distribution ............................................ (11,001) (10,926) (22,002) (21,852)
-------- -------- -------- --------
Net cash (used in) financing activities ................... (11,002) (10,927) (22,050) (9,853)
-------- -------- -------- --------
Net increase in cash and cash equivalents ............................... 20,654 24,202 15,023 42,478
Cash and cash equivalents at beginning of period .......................... 54,188 37,612 59,819 19,336
-------- -------- -------- --------
Cash and cash equivalents at end of period ................................ $ 74,842 $ 61,814 $ 74,842 $ 61,814
======== ======== ======== ========
Supplemental disclosure of cash flow information:
Cash paid for interest .............................................. $ 16,175 $ 16,175 $ 16,283 $ 16,343
======== ======== ======== ========
Non-cash investing and financing activities
Assets acquired by incurring note payable ........................... $ -- $ -- $ -- $ 250
======== ======== ======== ========
</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 26, 1998 21,562 7,164 84,847 49,147 24,488 (10,682) 147,800
Net Grants issued under
Restricted Unit Plan ......... 1,075 (1,075) --
Partnership distribution ..... (21,562) (440) (22,002)
Amortization of Restricted
Unit compensation ............ 328 328
Net income ................... -- -- 46,759 15,502 1,270 -- 63,531
------ ------------ ------- ------------ ------- ---------------- ---------
Balance at March 27, 1999 .... 21,562 7,164 111,119 64,649 25,318 (11,429) 189,657
====== ============ ======= ============ ======= ================ =========
</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
March 27, 1999
(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 Suburban Propane, a division of
Quantum Chemical Corporation (the "Predecessor Company"). In addition, Suburban
Sales & Service, Inc. (the "Service Company"), a subsidiary of the Operating
Partnership, was formed to acquire and operate the service work and appliance
and parts businesses of the Predecessor Company. The Partnership, the Operating
Partnership and the Service Company are collectively referred to hereinafter as
the "Partnership Entities".
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 Securities and Exchange Commission
("SEC") registrant under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and files periodic reports thereunder. Millennium's Annual
Report on Form 10-K for the fiscal year ended December 31, 1998 has been filed
under the Exchange Act (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
irrevocably 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 (See Note 7 - The
Recapitalization, for information concerning the proposed redemption of the
General Partner's Subordinated Units and APUs and the proposed replacement of
the General Partner as part of a proposed recapitalization of the Partnership).
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 SEC. 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 Partnership's Annual Report on Form 10-K
for the fiscal year ended September 26, 1998, including management's discussion
<PAGE>
of financial results contained therein, as amended and restated on Form 10-K/A
filed with the SEC on April 22, 1999. 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.
Financial Instruments. The Partnership routinely uses propane futures and
forward contracts to reduce the risk of future price fluctuations and to help
ensure supply during periods of high demand. Gains and losses on futures and
forward contracts designated as hedges are deferred and recognized in cost of
sales as a component of the product cost for the related hedged transaction. In
order for a future or forward contract to be accounted for as a hedge, the item
to be hedged must expose the Partnership to price risk and the future or forward
must reduce such price risk. As the Partnership is subject to propane market
pricing and the propane forwards and futures highly correlate with changes in
the market price of propane, hedge accounting is often utilized. The Partnership
accounts for financial instruments which do not meet the hedge criteria or for
hedging transactions which are terminated, under the mark or market rules which
require gains or losses to be immediately recognized in earnings. In the
Consolidated Statement of Cash Flows, cash flows from qualifying hedges are
classified in the same category as the cash flows from the items being hedged.
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 March 27, 1999 and September 26, 1998 was
$155,309 and $141,669, respectively.
Goodwill and Other Intangible Assets. Goodwill and other intangible assets are
comprised of the following:
March 27, 1999 September 26, 1998
-------------- ------------------
Goodwill $241,964 $237,812
Debt origination costs 6,224 6,224
Other, principally noncompete agreements 5,092 5,076
-------- --------
253,280 249,112
Less: Accumulated amortization 37,795 34,330
-------- --------
$215,485 $214,782
======== ========
Income Taxes. As discussed in Note 1, the Partnership Entities consist of two
limited partnerships, the Partnership and the Operating Partnership, and one
<PAGE>
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 (Loss) Per Unit. Basic net income (loss) per limited partner Unit is
computed by dividing net income (loss), after deducting the General Partner's 2%
interest, by the weighted average number of outstanding Common Units and
Subordinated Units. Diluted net income (loss) per limited partner Unit is
computed by dividing net income (loss), after deducting the General Partner's 2%
interest, by the weighted average number of outstanding Common Units and
Subordinated Units and the weighted average number of Restricted Units granted
under the Restricted Unit Award Plan which vest over time (See Note 6 -
Restricted Unit Plan).
Reclassifications. Certain prior period balances have been reclassified to
conform with the current period presentation.
3. Distributions of Available Cash
- -- -------------------------------
The Partnership makes 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 the amount of 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. The Partnership has not required any cash contributions in exchange for
APUs from the General Partner since the distribution for the third and fourth
fiscal quarters of the fiscal year ended September 27, 1997. On February 9, 1999
the Partnership paid the Minimum Quarterly Distributions on all outstanding
Common Units for the fiscal quarter ended December 26, 1998. The Partnership did
not make a quarterly distribution on its Subordinated Units (which are held by
the General Partner) for said fiscal quarter. At March 27, 1999 the General
Partner has contributed a total of $22,000 in exchange for 220,000 APUs and has
a remaining maximum contribution obligation of $21,600 (representing 216,000
APUs) under the Distribution Support Agreement (See Note 7 - The
Recapitalization).
4. Commitments and Contingencies
- -- -----------------------------
The Partnership leases certain property, plant and equipment for various periods
under noncancelable leases. Rental expense under operating leases was $8,204 for
the six months ended March 27, 1999.
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 March 27, 1999, accrued insurance liabilities amounted to
<PAGE>
$22,274, 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. Although any litigation is inherently
uncertain based on past experience, the information currently available to it
and the amount of self-insurance reserves for known and unasserted claims, the
Partnership does not believe that the ultimate resolution of these matters will
have a material adverse effect on the Partnership's financial position or future
results of operations.
5. 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 $75,000 working capital facility and a
$25,000 acquisition 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. Borrowings under the
Bank Credit Facilities 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 is payable quarterly whether or not borrowings occur. As of March 27,
1999, such fee was .25%. The Bank Credit Facilities will expire September 30,
2000.
No amounts were outstanding under the Bank Credit Facilities as of September 26,
1998 and March 27, 1999.
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.
For the six months ended March 27, 1999, interest expense was $16,389.
(See Note 7 - The Recapitalization, for information concerning the amendment of
the Senior Note Agreement and the Bank Credit Facilities if the proposed
recapitalization of the Partnership is completed.)
6. 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,
<PAGE>
unearned compensation is amortized ratably over the applicable vesting periods
under the Plan. As of March 27, 1999, 7,772 Units were vested.
Following is a summary of activity in the Restricted Unit Plan:
Units Value Per Unit
-------- ---------------
Outstanding September 26, 1998 621,811 $18.41 - $21.63
Awarded 74,143 $17.88 - $19.06
Forfeited (14,632) $17.88 - $19.91
-------- ---------------
Outstanding March 27, 1999 681,322 $17.88 - $21.63
======== ===============
For the six months ended March 27, 1999, the Partnership amortized $328 of
unearned compensation. (See Note 7 - The Recapitalization, for information
relating to the accelerated vesting of the Restricted Units.)
7. The Recapitalization
- -- --------------------
On November 27, 1998, the Partnership and the Operating Partnership entered into
a Recapitalization Agreement with Millennium, the General Partner and Suburban
Energy Services Group LLC (the "Successor General Partner"). (The
Recapitalization Agreement was amended and restated on March 15, 1999.) The
Recapitalization Agreement provides for a recapitalization of the Partnership
(the "Recapitalization") that includes:
o The redemption by the Partnership of all 7,163,750 Subordinated Units and
220,000 APUs, which are owned by the General Partner, for $69,000 in cash.
o The sale by the General Partner of its combined 2% general partner
interests in the Partnership and the Operating Partnership and its
incentive distribution rights in the Partnership to the Successor General
Partner for $6,000 in cash payable by the Successor General Partner (the
"GP Interest Purchase").
o The amendment of the partnership agreements of the Partnership and the
Operating Partnership to permit and effect the Recapitalization (which
amendment includes, among other things, reducing the distribution levels
that apply to the incentive distribution rights that will be purchased by
the Successor General Partner).
o The termination of the Distribution Support Agreement among the
Partnership, the General Partner and Millennium, which will be replaced by
a liquidity arrangement provided by the Partnership under the Bank Credit
Facilities, as amended on completion of the Recapitalization.
o An increase in the quarterly distribution to the Partnership's Unitholders
from $0.50 to $0.5125 per Unit per quarter (from $2.00 to $2.05 per Unit
per year), effective for the quarter in which the Recapitalization is
completed. (The total amount of the increase consists of the existing
Minimum Quarterly Distribution of $0.50 per Unit per quarter plus an
additional $0.0125 per Unit per quarter above the Minimum Quarterly
Distribution.)
<PAGE>
The Partnership estimates that the total cost of the Recapitalization will be
approximately $78,500, including the $69,000 redemption price for the
Subordinated Units and APUs and approximately $9,500 in transaction fees and
expenses (which includes the fees and expenses of the GP Interest Purchase).
The Successor General Partner, which was formed to replace the General Partner
as the general partner of the Partnership and the Operating Partnership, will be
owned by 42 executives and key employees of the Partnership. All of these
individuals have elected to surrender substantially all of their Restricted
Units before they vest (according to their terms, the Restricted Units will
accelerate and convert into Common Units on completion of the Recapitalization)
in exchange for the right to participate in a new compensation deferral plan of
the Partnership and the Operating Partnership. The Partnership will deposit into
a trust on behalf of these individuals a number of Common Units equal to the
number of Restricted Units they surrender. The total number of Common Units that
will be surrendered is expected to be 561,579. Pursuant to the new compensation
deferral plan, these individuals will defer receipt of these Common Units and
related distributions by the Partnership until the date the GP Loan is repaid in
full or the seventh anniversary of the date the Recapitalization is completed,
whichever they may choose, but subject to the earlier distribution and
forfeiture provisions of the compensation deferral plan. The remaining 119,743
Restricted Units, which consist of unsurrendered Restricted Units and Units held
by members of the Board of Supervisors, will accelerate and convert into Common
Units on completion of the Recapitalization.
The Successor General Partner will borrow the $6,000 purchase price for the GP
Interest Purchase from Mellon Bank, N.A. ("Mellon"). In connection with such
loan (the "GP Loan"), the Operating Partnership will enter into a purchase
agreement with Mellon on completion of the Recapitalization under which the
Operating Partnership will be required and will have the right to purchase the
note evidencing the GP Loan in the event of a default under the GP Loan by the
Successor General Partner.
In addition, the Senior Note Agreement and the Bank Credit Facilities will be
amended on completion of the Recapitalization. (See "Management's Discussion and
Analysis of Financial Condition and Results of Operations - Liquidity and
Capital Resources" for additional information concerning these amendments.)
The Recapitalization, among other things, is subject to the approval of the
Partnership's Common Unitholders holding at least a majority of the outstanding
Common Units (excluding those holders of such Units who are members of the
Partnership's management). On April 22, 1999, the Partnership filed with the
SEC, and first mailed to its Common Unitholders who were holders of record of
Common Units on April 12, 1999, a definitive Proxy Statement (the "Proxy
Statement") for a special meeting of such Common Unitholders to be held on May
26, 1999 for the purpose of voting on the Recapitalization.
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.
<PAGE>
9. Subsequent Event - Common Unit Distribution
- -- -------------------------------------------
On April 22, 1999 the Partnership announced a quarterly distribution of $0.50
per Limited Partner Common Unit for the first quarter of fiscal 1999 payable on
May 11, 1999. The Partnership will not make a quarterly distribution on its
Subordinated Units (which are held by the General Partner) for said fiscal
quarter.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Three Months Ended March 27, 1999
- ---------------------------------
Compared to Three Months Ended March 28, 1998
- ---------------------------------------------
REVENUES
Revenues decreased 3.6% or $8.4 million to $222.0 million for the three months
ended March 27, 1999 as compared to $230.4 million for the three months ended
March 28, 1998. Revenues from retail activities were $185.2 million for the
three months ended March 27, 1999 which is consistent with the prior period's
comparable quarter, as an increase in retail sales volumes was offset by lower
propane costs resulting in lower sales prices to customers. Propane sold to
retail customers increased 8.3% or 14.9 million gallons to 195.0 million
gallons, as compared to 180.1 million gallons in the prior period's quarter. The
increase in retail gallons is principally due to colder temperatures which
nationwide were 6% colder than the prior period's quarter and 7% warmer than
normal. Revenues from wholesale and hedging activities decreased $11.5 million
or 38.5% to $18.4 million for the three months ended March 27, 1999 compared to
$29.9 million in the prior period's comparable quarter. This decrease is
attributed to the Partnership's reduced emphasis on wholesale marketing due to
the low margin nature of the wholesale market and a decrease in the
Partnership's product procurement and price risk management activities.
OPERATING EXPENSES
Operating expenses for the three months ended March 27, 1999 were $55.0 million
which is consistent with the prior period's comparable quarter.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses increased 21.7% or $1.3 million to $7.3
million for the three months ended March 27, 1999 as compared to $6.0 million
for the three months ended March 28, 1998. The increase is primarily
attributable to the absence of offsetting dividend income earned in the prior
year's quarter on the sold investment in the Dixie Pipeline Company and higher
information systems expenses.
INCOME BEFORE INTEREST EXPENSE AND INCOME TAXES AND EBITDA
Income before interest expense and income taxes increased $10.0 million to $54.8
million compared to $44.8 million in the prior period's second quarter. EBITDA
increased $9.6 million to $63.5 million. The increase in income before interest
expense and income taxes and EBITDA is primarily attributable to higher overall
gross profit resulting from the increase in retail gallons sold, partially
offset by the increase in general and administrative expenses.
EBITDA (earnings before interest, taxes, depreciation and amortization) should
not be considered as an alternative to net income (as an indicator of operating
performance) or as an alternative to cash flow (as a measure of liquidity or
ability to service debt obligations) and is not in accordance with or superior
<PAGE>
to generally accepted accounting principles, but provides additional information
for evaluating the Partnership's ability to distribute the Minimum Quarterly
Distribution. Because EBITDA excludes some, but not all, items that affect net
income and this measure may vary among companies, the EBITDA data presented may
not be comparable to similarly titled measures of other companies.
INTEREST EXPENSE
Net interest expense was $7.6 million for the three months ended March 27, 1999
as compared to $7.7 million in the prior year's quarter. The decrease of $0.1
million is attributable to higher interest income on increased short-term
investment balances.
Six Months Ended March 27, 1999
- -------------------------------
Compared to Six Months Ended March 28, 1998
- -------------------------------------------
REVENUES
Revenues decreased 12.0% or $52.1 million to $383.2 million for the six months
ended March 27, 1999 as compared to $435.3 million for the six months ended
March 28, 1998. Revenues from retail activities decreased $34.0 million or 9.8%
to $312.4 million for the six months ended March 27, 1999 compared to $346.4
million in the same period in the prior year. The decrease is primarily
attributable to lower propane costs resulting in lower sales prices to customers
and, to a lesser extent, a decline in retail volumes. Propane sold to retail
customers decreased 1.7% or 5.8 million gallons to 332.6 million gallons, as
compared to 338.4 million gallons in the same period in the prior year. The
decrease in retail gallons is principally due to warmer temperatures which
nationwide were 9% warmer than normal during the six month period and 2% warmer
than the prior year's period. Revenues from wholesale and hedging activities
decreased $20.6 million or 40.6% to $30.1 million for the six months ended March
27, 1999 compared to $50.7 million the same period in the prior year. This
decrease is attributed to the Partnership's reduced emphasis on wholesale
marketing due to the low margin nature of the wholesale market and a decrease in
the Partnership's product procurement and price risk management activities.
OPERATING EXPENSES
Operating expenses decreased 1.7% or $1.8 million to $107.2 million for the six
months ended March 27, 1999 as compared to $109.1 million for the six months
ended March 28, 1998. The decrease in operating expenses is principally
attributable to lower payroll and benefit costs and vehicle fuel expenses
resulting from lower propane costs.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses increased 20.7% or $2.5 million to $14.6
million for the six months ended March 27, 1999 as compared to $12.1 million for
the six months ended March 28, 1998. The increase is primarily attributable to
the absence of offsetting dividend income earned in the prior year's period on
the sold investment in the Dixie Pipeline Company and higher information systems
expenses.
<PAGE>
INCOME BEFORE INTEREST EXPENSE AND INCOME TAXES AND EBITDA
Results for the prior year's six month period 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 this one-time item, income before interest expense and income taxes
increased $4.0 million to $78.7 million in the six months ended March 27, 1999
compared to $74.7 million in the prior year's comparable period. EBITDA,
excluding the one-time item, increased $3.1 million to $96.3 million. The
increase in income before interest expense and income taxes and EBITDA is
primarily attributable to higher overall gross profit of $3.8 million reflecting
higher appliance, materials and installation revenues and an increase in overall
retail unit margins.
EBITDA should not be considered as an alternative to net income (as an indicator
of operating performance) or as an alternative to cash flow (as a measure of
liquidity or ability to service debt obligations) and is not in accordance with
or superior to generally accepted accounting principles, but provides additional
information for evaluating the Partnership's ability to distribute the Minimum
Quarterly Distribution. Because EBITDA excludes some, but not all, items that
affect net income and this measure may vary among companies, the EBITDA data
presented may not be comparable to similarly titled measures of other companies.
INTEREST EXPENSE
Net interest expense decreased $0.7 million to $15.2 million in the six months
ended March 27, 1999 compared to $15.9 in the comparable prior period. The
decrease is attributable to higher interest income on significantly increased
cash investments.
HEDGING
The Partnership engages in hedging transactions to reduce the effect of price
volatility on its product costs and to help ensure the availability of propane
during periods of short supply. The Partnership is currently a party to propane
futures contracts on the New York Mercantile Exchange and enters into agreements
to purchase and sell propane at fixed prices in the future. These activities are
monitored by management through enforcement of the Partnership's Commodity
Trading Policy. Hedging does not always result in increased product margins and
the Partnership does not consider hedging activities to be material to
operations or liquidity for the six month period ended March 27, 1999.
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 six months ended March 27,
1999, net cash provided by operating activities was $45.3 million compared to
cash provided by operating activities of $46.5 million in the six months ended
March 28, 1998. The decrease of $1.2 million was primarily due to payment of
accrued incentive compensation and a decrease in customer deposits and advances,
partially offset by an increase in net income, net of the gain on disposal of
the investment in the Dixie Pipeline Co.
Net cash used in investing activities was $8.2 million during the six months
ended March 27, 1999 consisting of capital expenditures of $5.9 million
(including $1.6 million for maintenance expenditures and $4.3 million to support
<PAGE>
the growth of operations) and acquisition payments of $4.3 million, offset by
proceeds from the sales of property, plant and equipment of $2.0 million. Net
cash provided by investing activities was $5.9 million for the six months ended
March 28, 1998 which included proceeds of $13.1 million from the sale of the
Partnership's minority interest in the Dixie Pipeline Co., $4.1 million from the
sale of property, plant and equipment, offset by business acquisition payments
of $3.7 million and capital expenditures of $7.6 million (including $3.5 million
for maintenance expenditures and $4.1 million to support the growth of
operations).
Net cash used in financing activities for the six months ended March 27, 1999
was $22.1 million, principally reflecting the Partnership's distribution.
Net cash provided by financing activities for the six months ended March 28,
1998 was $9.9 million, reflecting proceeds of the General Partner's APU
contributions of $12.0 million offset by the Partnership's distributions of
$21.9 million.
The Partnership has announced that it will make a distribution of $.50 per Unit
to its Common Unitholders on May 11, 1999 for the second fiscal quarter of 1999.
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 third quarter of fiscal 1999.
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. Based on its current cash position, available Bank Credit Facilities
and expected cash flow from operating activities, the Partnership expects to
have sufficient funds to meet its obligations and working capital needs during
fiscal 1999.
In connection with the Recapitalization (see Note 7 - The Recapitalization), the
Operating Partnership will amend the Bank Credit Facilities to, among other
things, (i) extend the maturity date to March 31, 2001, (ii) amend the minimum
adjusted consolidated net worth covenant to reduce the required minimum net
worth of the Operating Partnership from $125 to $50 million, (iii) provide for a
$22 million liquidity subfacility to be available to finance certain shortfalls
in the payment of the Minimum Quarterly Distribution, (iv) exclude from the
mandatory prepayment provision an amount sufficient to purchase the $6 million
GP Loan if an event of default occurs under such loan, (v) decrease the maximum
ratio of consolidated total indebtedness to EBITDA (as defined in the Bank
Credit Facilities) from 5.25 to 1.00 to 5.10 to 1.00, (vi) modify certain
definitions and covenants relating to the ownership of the General Partner and
the Operating Partnership, (vii) increase the Applicable Margins (as defined in
the Bank Credit Facilities) and (viii) provide for the lenders' consents to the
amendments to the Partnership Agreement and the Senior Note Agreement
contemplated by the Recapitalization and to the termination of the Distribution
Support Agreement.
In connection with the Recapitalization (see Note 7 - The Recapitalization), the
Senior Note Agreement will be amended to, among other things, (i) reduce the
minimum adjusted consolidated net worth requirement from $125 to $50 million,
(ii) create a financial covenant exception for non-recurring, non-cash charges
to be incurred in connection with the Recapitalization, (iii) decrease the
maximum ratio of consolidated total indebtedness to EBITDA from 5.25 to 5.10,
with a further decrease to 5.00 effective as of April 1, 2001, and (iv) include
a new interest coverage maintenance test requiring the Operating Partnership to
maintain a ratio of consolidated EBITDA (as defined in the Senior Note
<PAGE>
Agreement) for any four fiscal quarters to consolidated interest expense for
such period of at least 2.50 to 1.0. The Partnership has obtained the consent of
a majority of the holders of the Senior Notes to (i) the replacement of the
General Partner with the Successor General Partner, (ii) the amendments to the
Partnership Agreements necessary for the Recapitalization, (iii) the termination
of the Distribution Support Agreement and (iv) the distribution by the Operating
Partnership to the Partnership of borrowings under the Bank Credit Facilities,
as amended on completion of the Recapitalization, as necessary to permit the
Partnership to pay the redemption price for the Subordinated Units and APUs that
will be redeemed from the General Partner on completion of the Recapitalization.
In consideration for granting their consent to the foregoing, the Operating
Partnership will pay a fee to each holder of Senior Notes in an amount equal to
0.375% of the outstanding principal amount of Senior Notes held by such holder.
The total amount of such fees is expected to be $1.6 million.
READINESS FOR YEAR 2000
Many information technology ("IT") and non-information technology ("non-IT")
systems in use throughout the world today may not be able to properly interpret
date related data from the year 1999 into the year 2000 (the "Y2K" issue). As a
result, the Y2K issue could have adverse consequences upon the operations and
information processing of many companies, including the Partnership.
In the second half of 1997, the Partnership began to identify the Y2K exposure
of its IT systems by focusing upon those systems and applications it considered
critical to its ability to operate its business, supply propane to its
customers, and accurately account for those services. The critical systems
identified were the retail/sales, the human resources/payroll and the general
ledger/financial accounting systems. Based upon the reasonable assurances of the
software developers and vendors, the Partnership believes that it has replaced
the human resources/payroll and the general ledger/financial accounting systems
with Y2K compliant versions. In addition, the Partnership has retained the
services of a third party vendor to assist in the remediation of its
retail/sales system, as well as the majority of the programs supporting this
system. The Partnership anticipates that the retail/sales system will be Y2K
compliant by June 1999.
The Partnership has also developed and is currently implementing a comprehensive
Y2K project plan to identify and address both its non-critical IT and non-IT
systems that could potentially be impacted by Y2K. The Y2K project plan for
non-critical systems is currently on schedule. In conjunction with this plan and
in an effort to improve its business efficiency, the Partnership made the
decision to replace all its computer hardware and PC-based computer software, as
well as to migrate the majority of its network-based software to a server
environment. According to the reasonable representations of the manufacturers,
software developers and vendors, all of the newly purchased IT hardware and PC
software are functionally Y2K compliant with some minor issues outstanding.
The Partnership has assessed the non-IT systems utilized by its field locations
to determine the Y2K compliance of those systems. With limited exceptions which
are being addressed, the safety related devices at the Partnership's field
locations do not incorporate electronic components and, as such, do not require
Y2K remediation. The Partnership does not believe that the failure of any of its
non-IT systems at any field location would have a material adverse impact upon
it.
<PAGE>
As of April 30, 1999, the Partnership has incurred approximately $0.93 million
to address its Y2K issues. It is currently estimated that the Partnership will
spend between $1.0 and $1.25 million to complete its Y2K compliance program.
This figure does not include the amounts spent to upgrade and replace computer
hardware and PC-based software. The Partnership does not view the foregoing
costs as having a material impact upon its overall financial position and has
not delayed or eliminated any other scheduled computer upgrades or replacements
due to the Y2K compliance project.
The Partnership has completed the testing, as well as any required remediation,
of all but one of its critical IT systems. Remediation and testing of the
remaining system is scheduled to be completed by June 1999. In addition to
testing the individual systems, the Partnership anticipates conducting an
overall IT system Y2K compliance test by June 1999. The Partnership is
developing a formal Y2K contingency plan that is to be in place prior to July
31, 1999, which will be based upon its overall disaster recovery plan. At this
time, the Partnership anticipates that its Y2K contingency plan will be based
upon manual processes and procedures.
While propane itself is not date-dependent, the supply, transportation and
consumption of propane is dependent upon third parties, beyond the control of
the Partnership, which may have systems potentially impacted by the Y2K issue.
The Partnership has contacted the 335 vendors/suppliers identified as being
significant to its business and to date has received 249 written responses
regarding Y2K from these parties. Within the group of significant
vendors/suppliers, 78 firms have been identified as critical to the
Partnership's business; 77 of these 78 firms have, to date, responded in writing
to the Partnership's requests regarding Y2K. The responses received by the
Partnership typically outline Y2K compliance programs in effect at these firms
and disclose anticipated compliance dates ranging from the first to the fourth
calendar quarters of 1999. The Partnership has contacted those vendors/suppliers
identified as critical whose response outlined a Y2K compliance program to
compare the status of the respective program to the deadlines identified. No
vendor/supplier has, to date, indicated that it will not be Y2K compliant by the
fourth quarter of 1999. The Partnership intends to continue to follow up with
vendors/suppliers who have not provided written responses and address potential
issues contained in responses through the third calendar quarter of 1999. The
Partnership believes that by obtaining these responses, it will be able to
minimize any potential business interruption arising out of Y2K's impact upon
these vendors/suppliers. Further, although the Y2K failure of any one customer
will not have a material adverse effect upon the Partnership, if a significant
percentage of either its customers and/or vendors/suppliers fail in achieving
Y2K compliance, the Y2K issue may have a material adverse impact upon the
Partnership's operations.
Although the Partnership currently anticipates that its internal mission
critical IT and non-IT systems will be Y2K compliant, it has taken steps to
identify and mitigate Y2K compliance issues with its vendors/suppliers and
customers and has begun to work on a Y2K contingency plan, the failure of a
mission critical IT or non-IT system or the combined failure of
vendors/suppliers and/or customers to achieve Y2K compliance could have a
material adverse impact on the Partnership's operations and financial condition.
<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As of March 27, 1999, the Partnership was party to propane forward contracts
with various third parties and futures traded on the New York Mercantile
Exchange ("NYMEX"). Such contracts provide that the Partnership sell or acquire
propane at a fixed price at fixed future dates. At expiration, the contracts are
settled by the delivery of propane to the respective party or are settled by the
payment of a net amount equal to the difference between the then current price
of propane and the fixed contract price. The contracts are entered into for
purposes other than trading in anticipation of market movements, and to manage
and hedge exposure to fluctuating propane prices as well as to help ensure the
availability of propane during periods of high demand.
Market risks associated with the trading of futures and forward contracts are
monitored daily for compliance with the Partnership's trading policy which
includes volume limits for open positions. Open inventory positions are reviewed
and managed daily as to exposures to changing market prices.
MARKET RISK
The Partnership is subject to commodity price risk to the extent that propane
market prices deviate from fixed contract settlement amounts. Futures contracts
traded with brokers of the NYMEX require daily cash settlements in margin
accounts. Forward contracts are generally settled at the expiration of the
contract term.
CREDIT RISK
Futures contracts are guaranteed by the NYMEX and as a result have minimal
credit risk. The Partnership is subject to credit risk with forward contracts to
the extent the counterparties do not perform. The Partnership evaluates the
financial condition of each counterparty with which it conducts business and
establishes credit limits to reduce exposure to credit risk of non-performance.
SENSITIVITY ANALYSIS
In an effort to estimate the exposure of unfavorable market price movements, a
sensitivity analysis of open positions as of March 27, 1999 was performed. Based
on this analysis, a hypothetical 10% adverse change in market prices for each of
the future months for which a future and/or forward contract exists indicates a
potential loss in future earnings of $2.4 million as of March 27, 1999.
The above hypothetical change does not reflect the worst case scenario. Actual
results may be significantly different depending on market conditions and the
composition of the open position portfolio.
<PAGE>
SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES
Part II
Item 4.
Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders during
the period of this report. However, the Recapitalization will
be submitted, pursuant to the definitive Proxy Statement of
the Partnership filed with the SEC and first mailed to Common
Unitholders who were holders of record of Common Units on
April 12, 1999, for a vote of such Unitholders to be held at
8:30 a.m. on Wednesday, May 26, 1999, at the Partnership's
principal executive offices at One Suburban Plaza, 240 Route
10 West, Whippany, New Jersey. The Proxy Statement is hereby
incorporated by this reference herein.
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 April 23, 1999, regarding
the Partnership's earnings and regular quarterly
distribution for the Common Units for the quarter
ended March 27, 1999.
<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 10, 1999 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 schedule contains summary financial information extracted from the
financial statements contained 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> 6-MOS
<FISCAL-YEAR-END> SEP-25-1999
<PERIOD-START> SEP-28-1998
<PERIOD-END> MAR-27-1999
<CASH> 74,842
<SECURITIES> 0
<RECEIVABLES> 67,435
<ALLOWANCES> 2,937
<INVENTORY> 25,269
<CURRENT-ASSETS> 171,492
<PP&E> 489,627
<DEPRECIATION> 155,309
<TOTAL-ASSETS> 760,602
<CURRENT-LIABILITIES> 81,214
<BONDS> 428,268
0
0
<COMMON> 0
<OTHER-SE> 189,657
<TOTAL-LIABILITY-AND-EQUITY> 760,602
<SALES> 383,194
<TOTAL-REVENUES> 383,194
<CGS> 165,108
<TOTAL-COSTS> 272,354
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1,474
<INTEREST-EXPENSE> 15,183
<INCOME-PRETAX> 63,557
<INCOME-TAX> 26
<INCOME-CONTINUING> 63,531
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 63,531
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
