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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
Suburban Propane Partners, L.P.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------------------------------------------------------------
(3) Filing Party:
-------------------------------------------------------------------------
(4) Date Filed:
-------------------------------------------------------------------------
Notes:
Reg. (S) 240.14a-101.
SEC 1913 (3-99)
<PAGE>
Suburban
One Suburban Plaza . 240 Route 10 West . P.O. Box 206 . Whippany, NJ 07981-0206
Office 973-887-5300
http://www.suburbanpropane.com
Mark A. Alexander
President &
Chief Executive Officer
March 6, 2000
Dear Fellow Suburban Unitholder:
You are cordially invited to attend the Tri-Annual Meeting of the Limited
Partners of Suburban Propane Partners, L.P. to be held on Wednesday, April 19,
2000, beginning at 9:00 a.m. at our executive offices at One Suburban Plaza,
240 Route 10 West, Whippany, New Jersey.
Whether or not you plan to attend in person, it is important that your units be
represented at the meeting. You may vote on the matters that come before the
meeting by completing the enclosed proxy card and returning it in the envelope
provided.
Attendance at the Tri-Annual Meeting will be open to holders of record of units
as of the close of business on February 23, 2000. I look forward to greeting
those of you who will be able to attend.
Sincerely,
/s/ Mark A. Alexander
Mark A. Alexander
President and Chief Executive
Officer
<PAGE>
SUBURBAN PROPANE PARTNERS, L.P.
NOTICE OF TRI-ANNUAL MEETING
April 19, 2000
The Tri-Annual Meeting of the Limited Partners of Suburban Propane Partners,
L.P. will be held at 9:00 a.m. on Wednesday, April 19, 2000, at our executive
offices at One Suburban Plaza, 240 Route 10 West, Whippany, New Jersey, for
the following purposes:
1. To elect three Elected Supervisors; and
2. To consider any other matters that may properly come before the meeting.
Only holders of record of common units as of the close of business on February
23, 2000, are entitled to notice of, and to vote at, the meeting.
By Order of the Board of
Supervisors,
/s/ Janice G. Meola
Janice G. Meola
Secretary
March 6, 2000
IMPORTANT
Your vote is important. Whether or not you expect to attend the meeting in
person, we urge you to complete and return the enclosed proxy card at your
earliest convenience in the postage-paid envelope provided.
<PAGE>
SUBURBAN PROPANE PARTNERS, L.P.
One Suburban Plaza
240 Route 10 West
Whippany, New Jersey 07981-0206
PROXY STATEMENT
This Proxy Statement (first mailed, together with a form of proxy, on or about
March 6, 2000) is being furnished to holders ("unitholders") of common units
("units") in connection with the solicitation of proxies by the Board of
Supervisors (the "Board") of Suburban Propane Partners, L.P. ("Suburban" or
the "Partnership") for use at Suburban's Tri-Annual Meeting of Limited
Partners and any postponements or adjournments (the "Meeting").
1. Q: What is the Board's proposal?
A: To elect three Elected Supervisors.
2. Q: How does the Board recommend I vote on the proposal?
A: The Board recommends a vote FOR each of its nominees for Elected
Supervisor.
3. Q: How will voting on any other business be conducted?
A: The Board does not know of any business to be considered at the
Meeting other than the proposal described in this Proxy Statement.
However, if any other business is properly presented, your signed
proxy card gives authority to the persons named in the proxy to
vote on these matters at their discretion.
4. Q: Who is entitled to vote?
A: Each unitholder as of the close of business on the record date,
February 23, 2000, is entitled to vote at the Meeting.
5. Q: How many units may be voted?
A: As of the record date, 22,278,587 units were outstanding. Each
unit entitles its holder to one vote, subject to the exception
described in the next sentence. A unitholder holding more than 20%
of the total number of units outstanding may not vote any units in
excess of those representing 20%, and, as used in this proxy
statement, the term "outstanding" excludes such excess units. The
Board is not aware of any such holder as of the Record Date.
6. Q: What is a "quorum"?
A: A quorum is a majority of the outstanding units represented in
person or by proxy at the Meeting. There must be a quorum for the
Meeting to be held. If you submit a properly executed proxy card,
even if you abstain from voting, then you will be considered part
of the quorum. However, abstentions are not counted in the tally
of votes FOR or AGAINST a proposal.
7. Q: What vote is required to approve the proposal?
A: The affirmative vote of holders of a plurality of the outstanding
units is required to elect each Elected Supervisor.
1
<PAGE>
8. Q: How do I vote?
A: Please mark, sign and date each proxy card you receive and return
it in the envelope provided. Units represented by properly
executed proxies that are not revoked will be voted in accordance
with the instructions shown on the proxy card. If you return your
signed proxy card but do not give instructions as to how you wish
to vote, your units will be voted FOR the proposal.
You have the right to revoke your proxy at any time before the
meeting by:
(1) Notifying Suburban's Secretary;
(2) Voting in person; or
(3) Returning a later-dated proxy card.
Attendance at the Meeting will not, in and of itself, revoke your
proxy.
9. Q: What does it mean if I receive more than one proxy card?
A: If your units are registered differently and/or are in more than
one account, you will receive more than one proxy card. Please
mark, sign, date and return all of the proxy cards you receive to
ensure that all of your units are voted. We encourage you to have
all accounts registered in the same name and address (whenever
possible). You can accomplish this by contacting our transfer
agent, Equiserve-First Chicago Trust Company of New York Division,
at (201) 324-0313. The telephone number for the hearing impaired
is TDD: (201) 222-4955.
10. Q: What do I do if my units are held in "street name"?
A: If your units are held in the name of your broker, a bank, or
other nominee, that party will give you instructions about how to
vote your units.
11. Q: Who will count the vote?
A: Representatives of Equiserve-First Chicago Trust Company of New
York Division, our transfer agent and an independent tabulator,
will count the votes and act as the inspector of election.
12. Q: Where and when will I be able to find out the results of voting?
A: In addition to announcing the results at the Meeting, Suburban
will post the results on our web site at www.suburbanpropane.com
within two days after the Meeting. You will also be able to find
the results in our Form 10-Q for the third quarter of fiscal 2000,
which we will file with the SEC in August 2000.
13. Q: Who is bearing the cost of this proxy solicitation?
A: Corporate Investor Communications, Inc. was hired to assist in the
distribution of proxy materials and the solicitation of votes and
will be paid a customary fee plus reasonable out-of-pocket
expenses. Suburban is bearing the cost of soliciting proxies for
the Meeting. In addition to using the mail, supervisors, officers
and employees may solicit proxies by telephone, personal interview
or otherwise. They will not receive additional compensation for
this activity, but
2
<PAGE>
may be reimbursed for their reasonable out of pocket expenses.
Suburban will reimburse brokerage houses and other custodians,
nominees and fiduciaries for reasonable out-of-pocket expenses for
forwarding proxy and solicitation materials to unitholders.
14. Q: Will the independent accountants attend the Meeting?
A: Representatives of PricewaterhouseCoopers LLP, Suburban's
independent accountants for the fiscal year ended September 25,
1999, will attend the Meeting, will have an opportunity to make a
statement if they desire to do so and will be available to respond
to appropriate questions.
15. Q: When are the unit holder proposals for the 2003 Tri-Annual Meeting due?
A: We presently expect our next Tri-Annual Meeting to be held in April
of 2003 (the "2003 Tri-Annual Meeting"). The deadline for the
submission of unitholder proposals for inclusion in the proxy
materials relating to that meeting will be October 31, 2002.
Unitholders who intend to present a proposal at the 2003 Tri-Annual
meeting without inclusion of such proposal in the Partnership's
proxy materials are required to provide notice of such proposal to
the Partnership no later than January 17, 2003. If the date of the
2003 Tri-Annual Meeting is changed to a different month, we will
advise our unitholders of the new date for the submission of
unitholder proposals in one of our periodic filings with the SEC.
3
<PAGE>
ELECTION OF ELECTED SUPERVISORS
(Item 1 on the Proxy Card)
Unitholders are entitled to elect three members of the Board (the "Elected
Supervisors"). The nominees for Elected Supervisors, all of whom are currently
serving as Elected Supervisors, are described below. If elected, all nominees
are expected to serve until the 2003 Tri-Annual Meeting and until their
successors are duly elected. Although the Board does not anticipate that any
of the persons named below will be unable to stand for election, if for any
reason a nominee becomes unavailable for election, the persons named in the
form of proxy have advised that they will vote for such substitute nominee as
the Board may propose.
Nominees for Election as Elected Supervisors
-- To Serve Until the 2003 Tri-Annual Meeting
John Hoyt Stookey Age 70
Mr. Stookey has served as an Elected Supervisor and Chairman of the Board
since March 1996. From 1986 until its acquisition by Hanson PLC ("Hanson") on
September 30, 1993, he was the Chairman, President and Chief Executive Officer
of Quantum Chemical Corporation ("Quantum"), Suburban's predecessor. He then
served as the non-executive Chairman and a director of Quantum under Hanson's
ownership until October 1995. Mr. Stookey is also a director of United States
Trust Company of New York and ACX Technologies, Inc.
Harold R. Logan, Jr. Age 55
Mr. Logan has served as an Elected Supervisor since March 1996. He has been
Executive Vice President-Finance, Treasurer and a Director of TransMontaigne
Inc. since 1995. From 1987 until 1995, he was Senior Vice President of Finance
and a director of Associated Natural Gas Corporation, an independent gatherer
and marketer of natural gas, natural gas liquids and crude oil, which in 1994
was acquired by Panhandle Eastern Corporation. Mr. Logan is also a director of
Santa Fe Snyder Corporation and Union Bankshares Ltd.
Dudley C. Mecum Age 65
Mr. Mecum has served as an Elected Supervisor since June 1996. Mr. Mecum has
been a managing director of Capricorn Holdings, LLC (a sponsor of and investor
in leveraged buyouts) since June 1997. Mr. Mecum was a partner of G.L.
Ohrstrom & Co. (a sponsor of and investor in leveraged buyouts) from 1989 to
June 1996. Mr. Mecum is also a director of Lyondell Chemical Co., Dyncorp,
Vicorp Restaurants, Inc., CITIGROUP, Inc., Travelers Property Casualty
Corporation and CCC Information Systems Inc.
The Board recommends that Unitholders vote "FOR" the election of each of the
Board's nominees.
Other Members of the Board of Supervisors
In addition to the Elected Supervisors, the Board consists of two supervisors
(the "Appointed Supervisors") appointed by Suburban's general partner,
Suburban Energy Services Group LLC (the "General Partner") and a Supervisor
Emeritus.
4
<PAGE>
Mark A. Alexander Age 41
Mr. Alexander has served as Chief Executive Officer of Suburban and as a
member of the Board since March 1996. He was Executive Vice Chairman from
March 1996 until September 1996 and became President in October 1996. Mr.
Alexander was Senior Vice President - Corporate Development of Hanson
Industries (Hanson's management division in the United States) from January
1995 until March 1996, where he was responsible for mergers, acquisitions and
real estate. He was an Associate Director of Hanson from 1993 and a Director
of Hanson Industries from June 1995 until March 1996. Mr. Alexander has served
as the Chairman of the Board of Managers of the General Partner since May
1999. He is also a director-at-large of the National Propane Gas Association
and a member of its Executive Committee. He is the President of the Coalition
for Competition in Rural Markets and the Chairman of the Research and
Development Advisory Committee for the Propane Education and Research Council.
Michael J. Dunn, Jr. Age 50
Mr. Dunn has been a member of the Board since July 1998. He has served as
Senior Vice President of Suburban since 1998 and was Vice President -
Procurement and Logistics from March 1997 until June 1998. From 1981 until
January 1997, he was Vice President of Commodity Trading for Goldman Sachs &
Company. Mr. Dunn has served on the Board of Managers of the General Partner
since May 1999.
Mark J. Anton Age 74
Mr. Anton has served as Supervisor Emeritus of the Board since January 1999.
He is a former President, Chief Executive Officer and Chairman of the Board of
Directors of Suburban Propane Gas Corporation prior to its acquisition by
Quantum and a former Executive Vice President of Quantum.
PARTNERSHIP GOVERNANCE
Suburban's partnership agreement provides that all management powers over the
business and affairs of Suburban are exclusively vested in the Board and,
subject to the direction of the Board, the officers of Suburban. Neither the
General Partner nor any unitholder has any management power over the business
and affairs of Suburban or actual or apparent authority to enter into
contracts on behalf of, or to otherwise bind, Suburban. The members of the
General Partner are executives and key employees of Suburban.
Committees of the Board
The Board has two standing committees: an Audit Committee and a Compensation
Committee.
Audit Committee. The Audit Committee recommends the appointment of
Suburban's independent accountants and reviews Suburban's procedures for
internal auditing and the adequacy of Suburban's internal accounting controls.
In addition, the Audit Committee has the authority to review, at the Board's
request, specific matters as to which the Board believes
5
<PAGE>
there may be a conflict of interest in order to determine if the resolution of
such conflict proposed by the Board is fair and reasonable to the unitholders.
Any such matters approved by the Audit Committee will be conclusively deemed
to be fair and reasonable to Suburban and the unitholders, approved by all
partners of Suburban and not a breach by the General Partner or the Board of
any duties they may owe Suburban or the unitholders. The committee met 5 times
during fiscal 1999, 3 times during fiscal 1998 and 3 times during fiscal 1997.
Its members are Messrs. Stookey, Mecum and Logan, who serves as its Chair.
Compensation Committee. The Compensation Committee determines compensation
for all executives and administers incentive plans for executive officers. The
committee met 1 time in fiscal 1999 and 3 times in fiscal 1998 but did not
meet during fiscal 1997. Its members are Messrs. Logan and Stookey, who serves
as its Chair.
Prior to March 2000, the Board had a separate Restricted Unit Plan Committee
that administered the 1996 Restricted Unit Plan. The committee met 1 time in
fiscal 1999 and 3 times in fiscal 1998 but did not meet during fiscal 1997.
Its members were Messrs. Logan and Stookey, who served as its Chair.
Special Committee. In addition to the foregoing standing committees, the
Board established a Special Committee to evaluate and make a recommendation on
behalf of the public unitholders regarding Suburban's recapitalization and
substitution of a new general partner completed in May 1999 (the
"Recapitalization"). The committee met 11 times during fiscal 1999 and once
during fiscal 1998. Its members were Messrs. Logan, Mecum and Stookey, who
served as its Chair.
Attendance at Meetings
The Board held 12 meetings in fiscal 1999, 8 meetings in fiscal 1998 and 8
meetings in fiscal 1997. Each Supervisor attended at least 75% of the
aggregate of the total number of meetings of the Board and of all committees
of the Board on which such Supervisor served.
Supervisors' Remuneration
Appointed Supervisors receive no remuneration for serving on the Board. Mr.
Stookey receives annual compensation of $75,000 for his services as Chairman
of the Board. Mr. Logan and Mr. Mecum, the other Elected Supervisors, receive
annual compensation of $50,000. Mr. Anton, the Supervisor Emeritus, receives
annual compensation of $15,000. All Elected Supervisors and the Supervisor
Emeritus receive reimbursement of reasonable out-of-pocket expenses incurred
in connection with attendance at meetings of the Board and Board committees.
Each of the Elected Supervisors received 14,634 restricted units pursuant to
Suburban's 1996 Restricted Unit Plan in connection with Suburban's March 1996
initial public offering. At the closing of the Recapitalization, the vesting
of these restricted units accelerated and they converted into an equal number
of units having a value of approximately $283,076 in the case of each Elected
Supervisor.
6
<PAGE>
EXECUTIVE OFFICERS
Biographical information about Suburban's executive officers, other than those
serving as Appointed Supervisors, is set forth below.
David R. Eastin Age 41
Mr. Eastin has served as Chief Operating Officer since May 1999. From 1992
until he joined Suburban, he held various positions at Star Gas Propane LP,
most recently as Vice President - Operation.
Edward J. Grabowiecki Age 37
Mr. Grabowiecki has served as Controller and Chief Accounting Officer since
October 1996 and became a Vice President in October 1999. He was Director of
Accounting Services from January 1996 to September 1996. From June 1993 until
he joined Suburban, Mr. Grabowiecki was a regional controller for Discovery
Zone, Inc.
Jeffrey S. Jolly Age 47
Mr. Jolly has served as Vice President - Information Services since July 1997
and became Chief Information Officer in May 1999. From 1993 until joining
Suburban, he was Vice President - Information Systems at The Wood Company.
Michael M. Keating Age 46
Mr. Keating has served as Vice President - Human Resources and Administration
since August 1996. He was Director of Human Resources at Hanson Industries
from December 1993 to July 1996.
Janice G. Meola Age 34
Ms. Meola has served as General Counsel and Secretary since May 1999. She was
Counsel from July 1998 to May 1999 and Associate Counsel from September 1996
to July 1998. From 1994 until she joined Suburban, Ms. Meola was Environmental
Counsel for the CNA Insurance Companies and its predecessor, Continental
Insurance Company.
Robert M. Plante Age 51
Mr. Plante has served as Treasurer since March 1996 and became a Vice
President in October 1999. He was Director of Financial Services from 1993
until March 1996.
Anthony M. Simonowicz Age 49
Mr. Simonowicz has served as Vice President and Chief Financial Officer since
March 1997. He was Vice President - Business Development from March 1996 to
March 1997, Vice President - Business Development of Quantum from September
1995 until March 1996 and Director - Financial Planning and Analysis of
Quantum from 1991 to September 1995.
7
<PAGE>
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth a summary of all compensation awarded, paid to
or earned by the chief executive officer and the four other most highly
compensated executive officers of Suburban for services rendered to Suburban
during each of the last three fiscal years.
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
------------------------------------- -------------------------------------
Other Restricted Restricted All
Name and Principal Salary Bonus/1/ Annual Units Units Other
Position Year ($) ($) Compensation($) ($)/2/ (#) Compensation/3/
- ------------------------ ---- ------- -------- --------------- ---------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Mark A. Alexander 1999 400,000 400,000 -- -- -- 95,000
President and Chief
Executive Officer 1998 381,250 381,528 -- -- -- 64,275
1997 375,000 100,000 -- 1,953,000 97,561 4,500
Michael J. Dunn, Jr. 1999 225,000 191,250 -- -- -- 48,024
Senior Vice President 1998 178,000 153,177 -- -- -- 31,561
1997 150,000 30,038 -- 900,000 48,780 --
Anthony M. Simonowicz 1999 165,000 107,250 -- -- -- 28,619
Vice President and Chief 1998 154,000 100,000 -- -- -- 20,337
Financial Officer 1997 138,000 24,000 -- 539,000 29,268 4,140
Jeffrey S. Jolly 1999 145,000 72,500 -- 96,000 5,366 20,213
Vice President and Chief 1998 137,500 67,500 -- 289,000 14,146 14,655
Information Officer 1997 33,750 -- -- -- -- --
Michael M. Keating 1999 140,000 70,000 -- -- -- 19,837
Vice President, Human
Resources 1998 135,000 67,500 -- -- -- 14,145
and Administration 1997 130,000 16,000 -- 594,000 29,268 4,050
</TABLE>
- -------------------------
/1/ Bonuses are reported for the year earned, regardless of the year paid.
/2/ The aggregate dollar value of Restricted Units was computed by multiplying
the number of Restricted Units granted by the closing market price on the
date of grant. These Restricted Units would have vested automatically upon
the Recapitalization under a "change of control" provision contained in
Suburban's 1996 Restricted Unit Plan. Each executive officer, however,
agreed to surrender all of his Restricted Units, prior to their vesting
upon the Recapitalization, in exchange for an equal number of units. These
units were deposited into Suburban's Benefits Protection Trust (the
"Benefits Protection Trust"), and are being held in such trust and will be
distributed to each executive in accordance with the terms of the new
compensation deferral plan of Suburban and Suburban Propane, L.P., a
subsidiary of Suburban through which Suburban operates (the "Operating
Partnership"), described below (the "Deferral Plan"). The number of units
held in the Benefits Protection Trust at September 25, 1999, and the
aggregate value thereof (calculated at a per unit price of $19.88, the
closing price of a common unit on September 24, 1999, as reported on the
New York Stock Exchange) were 243,902 ($4,848,772) for Mr. Alexander,
48,780 ($969,746) for Mr. Dunn, 48,780 ($969,746) for Mr. Simonowicz,
19,512 ($387,899) for Mr. Jolly and 29,268 ($581,848) for Mr. Keating.
Quarterly distributions associated with the units held in the Benefits
Protection Trust will be deposited into the trust and deferred by each
executive until the date the General Partner's $6.0 million loan from
Mellon Bank ("Mellon") used to finance the acquisition of Suburban's
general partnership interests from the former general partner (the "GP
Loan") is repaid in full, or the seventh anniversary of the closing of the
Recapitalization, whichever date the executive has chosen, but subject to
the earlier distribution and forfeiture provisions of the Deferral Plan.
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/3/These amounts include the following:
(a) Matching contributions under the Retirement Savings and Investment Plan.
(b) Amounts awarded under the 1996 Long-Term Incentive Program.
Deferral Plan
Under the terms of Suburban's 1996 Restricted Unit Plan, the substitution of
the General Partner as the general partner of Suburban resulted in a "change
of control" that would have caused all unvested Restricted Units to
automatically vest. However, all of the executives and key employees of
Suburban who became members of the General Partner and owned Restricted Units
agreed to surrender such Restricted Units, prior to vesting, in exchange for
the right to participate in the Deferral Plan. Suburban deposited the units
issued in exchange for Restricted Units into the Benefits Protection Trust,
which was structured as a "rabbi" trust within the meaning of the Internal
Revenue Code of 1954, as amended. All cash distributions made by Suburban on
units held in the Benefits Protection Trust are deposited into the Benefits
Protection Trust.
Pursuant to the Deferral Plan, the members of the General Partner deferred
receipt of their units and related distributions until the date the GP Loan is
repaid in full or the seventh anniversary of the closing of the
Recapitalization, whichever date the deferring party may choose, but subject
to the earlier distribution and forfeiture provisions of the Deferral Plan.
The members of the General Partner also defer receipt of $930,000 per year of
quarterly distributions on deferred units to support Suburban's minimum
quarterly distribution through the fiscal quarter ending March 31, 2001. In
addition, if the Operating Partnership elects or is required to purchase the
GP Loan from Mellon Bank, the terms of the Deferral Plan provide that all of
the members' deferred units may, at Suburban's or the Operating Partnership's
discretion, be forfeited and cancelled (and all of the related distributions
may also be forfeited), regardless of the amount paid by the Operating
Partnership to purchase the GP Loan. Notwithstanding the foregoing, if a
"change of control" of Suburban occurs (as defined in the Deferral Plan), all
of the deferred units (and related distributions) held in the trust
automatically become distributable to the members of the General Partner.
Long-Term Incentive Plan
Suburban adopted a non-qualified, unfunded long-term incentive plan for
officers and key employees, effective October 1, 1997. Awards are based on a
percentage of base pay and are subject to the achievement of certain
performance criteria, including Suburban's ability to earn sufficient funds
and make cash distributions on its units with respect to each fiscal year.
Awards vest over time with one third vesting at the ends of years three, four,
and five from the award date.
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<PAGE>
Long-Term Incentive Plan awards earned in fiscal year 1999 were as follows:
<TABLE>
<CAPTION>
Performance or Potential Awards Under
Other Period Plan
Award Until Maturation --------------------------
Name FY 1999 or Payout Threshold Target Maximum
- ---- ------- ---------------- --------- ------- --------
<S> <C> <C> <C> <C> <C>
Mark A. Alexander $90,000 3-5 Years $ 0 $60,000 $120,000
Michael J. Dunn, Jr. 43,031 3-5 Years 0 28,687 57,375
Anthony M. Simonowicz 24,131 3-5 Years 0 16,087 32,175
Jeffrey S. Jolly 16,313 3-5 Years 0 10,875 21,750
Michael M. Keating 15,750 3-5 Years 0 10,500 21,000
</TABLE>
Retirement Benefits
The following table sets forth the annual benefits upon retirement at age 65
in 1999, without regard to statutory maximums, for various combinations of
final average earnings and lengths of service which may be payable to Messrs.
Alexander, Dunn, Simonowicz, Jolly and Keating under the Pension Plan for
Eligible Employees of Suburban Propane, L.P. and Subsidiaries and the Suburban
Propane, L.P. Supplemental Executive Retirement Plan. Each such plan has been
assumed by Suburban and each such person will be credited for service earned
under such plan to date. Messrs. Alexander, Dunn and Simonowicz, have 3 years,
2 years and 10 years, respectively, under both plans. Messrs. Jolly and
Keating have 2 years and 11 years, respectively, under the Pension Plan for
eligible employees of Suburban Propane, L.P. and Subsidiaries.
Pension Plan
Annual Benefit for Years of Credited Service Shown /1/,/2/,/3/,/4/
<TABLE>
<CAPTION>
Average
Earnings 5 Yrs. 10 Yrs. 15 Yrs. 20 Yrs. 25 Yrs. 30 Yrs. 35 Yrs.
- -------- ------ ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
$100,000 8,027 16,054 24,080 32,107 40,134 48,161 56,188
$200,000 16,777 33,554 50,330 67,107 83,884 100,661 117,438
$300,000 25,527 51,054 76,580 102,107 127,634 153,161 178,688
$400,000 34,277 68,554 102,830 137,107 171,384 205,661 239,938
$500,000 43,027 86,054 129,080 172,107 215,134 258,161 301,188
</TABLE>
/1/ The Plans' definitions of earnings consist of base pay only.
/2/ Annual Benefits are computed on the basis of straight life annuity
amounts. The pension benefit is calculated as follows: the sum of (a) plus
(b) multiplied by (c) where (a) is that portion of final average earnings
up to 125% of social security Covered Compensation times 1.4% and (b) is
that portion of final average earnings in excess of 125% of social
security Covered Compensation times 1.75% and (c) is credited service up
to a maximum of 35 years.
/3/ Effective January 1, 1998, the Pension Plan was amended to a cash balance
benefit formula for current and future Plan participants. Initial account
balances were established based upon the actuarial equivalent value of the
accrued prior plan benefit as of December 31, 1997. Annual interest
credits and pay-based credits will be credited to this account. The 1999
pay-based credits for Messrs. Alexander, Dunn, Simonowicz, Jolly and
Keating are 2.5%, 1.5%, 2.0%, 1.5% and 2.5%, respectively. Participants as
of December 31, 1997, will receive the greater of the cash balance benefit
and the prior plan benefit through the year 2002.
10
<PAGE>
/4/In addition, a supplemental cash balance account was established equal to
the value of certain benefits related to retiree medical and vacation
benefits. An initial account value was determined for those active employees
who were eligible for retiree medical coverage as of April 1, 1998 equal to
$415 multiplied by years of benefit service (maximum of 35 years). Future
pay-based credits and interest are credited to this account. The 1999 pay-
based credits for Messrs. Alexander, Dunn, Simonowicz, Jolly and Keating are
2.0%, 0.0%, 0.0%, 0.0% and 2.0%, respectively. This account is payable in
addition to the "grandfathered benefit calculations."
Supplemental Executive Retirement Plan
Suburban adopted a non-qualified, unfunded supplemental retirement plan (the
"SERP") to provide certain executive officers with a level of retirement
income from Suburban, without regard to statutory maximums. Under the SERP, a
participant's annual benefit, assuming retirement at age 65, is equal to (a)
1.4% of the participant's highest average annual compensation for the 60
consecutive months in the last 120 months of benefit service affording the
highest such average, or during all months of benefit service if less than 60
months (the "Average Final Compensation") not in excess of 125% of Covered
Compensation plus (b) 1.75% of the participant's Average Final Compensation in
excess of 125% of Covered Compensation times (c) the participant's years of
benefit service with Suburban (not to exceed 35) minus (d) the amount of the
monthly accrued benefit payable as of the determination date (reduced to
reflect commencement of the benefit payable hereunder prior to the normal
retirement date) to the participant under Suburban's Pension Plan in the form
of a single line annuity multiplied by twelve (the "Pension Offset"). Messrs.
Alexander, Dunn, Eastin, and Simonowicz currently participate in this the
SERP. The participants in the Plan waived their rights to receive lump sum,
"change of control" payments under the SERP solely in connection with the
Recapitalization. The SERP was amended as of April 14, 1999 to provide that a
sale or transfer of the General Partner of Suburban would not constitute a
"change of control" under the SERP entitling its participants to lump-sum
payments.
Employment Agreement
Suburban entered into an employment agreement (the "Employment Agreement")
with Mr. Alexander, which became effective March 5, 1996, and was amended
October 23, 1997, and April 14, 1999.
Mr. Alexander's Employment Agreement had an initial term of three years, and
automatically renews for successive one-year periods, unless earlier
terminated by Suburban or by Mr. Alexander or otherwise terminated in
accordance with the Employment Agreement. The Employment Agreement for Mr.
Alexander provides for an annual base salary of $400,000 as of September 25,
1999. In addition, Mr. Alexander may earn a bonus up to 100% of annual base
salary (the "Maximum Annual Bonus") for services rendered based upon certain
performance criteria. The Employment Agreement also provides for the
opportunity to participate in benefit plans made available to other senior
executives and senior managers of Suburban. Suburban also provides Mr.
Alexander with term life insurance with a face amount equal to three times his
annual base salary. If a "change of control" (as defined in the
11
<PAGE>
Employment Agreement) of Suburban occurs and within six months prior thereto
or at any time subsequent to such change of control Suburban terminates the
Executive's employment without "cause" or the Executive resigns with "good
reason" or the Executive terminates his employment during the six month period
commencing on the six month anniversary and ending on the twelve month
anniversary of a "change of control", then Mr. Alexander will be entitled to
(i) a lump sum severance payment equal to three times the sum of his annual
base salary in effect as of the date of termination and the Maximum Annual
Bonus, and (ii) medical benefits for three years from the date of such
termination. The Employment Agreement provides that if any payment received by
Mr. Alexander is subject to the 20% federal excise tax under Section 4999 of
the Internal Revenue Code, the payment will be grossed up to permit Mr.
Alexander to retain a net amount on an after-tax basis equal to what he would
have received had the excise tax not been payable.
The substitution of the General Partner as the general partner of Suburban
resulted in a "change of control" under the terms of Mr. Alexander's
employment agreement. As of April 14, 1999, Mr. Alexander agreed to waive his
right to receive a change of control payment solely in connection with the
Recapitalization. Mr. Alexander also agreed that a sale or transfer of the
General Partner after the Recapitalization would not constitute a change of
control under the Employment Agreement.
Mr. Alexander also participates in the SERP, which provides retirement income
which could not be provided under Suburban's qualified plans by reason of
limitations contained in the Internal Revenue Code.
Severance Protection Plan for Key Employees
Suburban's officers and key employees are provided with employment protection
following a "change of control" as defined in the Plan. This Plan provides for
severance payments equal to sixty-five weeks of base pay and target bonuses
for such officers and key employees following a "change of control" and
termination of employment. Pursuant to their Severance Protection Agreements,
Messrs. Dunn, Simonowicz, Jolly and Keating, as executive officers of
Suburban, have been granted severance protection payments of 78 weeks of base
pay and target bonuses following a "change in control" and termination of
employment in lieu of participation in the Severance Protection Plan.
Certain Relationships and Related Transactions
In connection with the Recapitalization, the General Partner acquired the
general partner interests, including its incentive distribution rights, in
Suburban from Millennium Chemicals Inc. for $6.0 million using the proceeds of
the GP Loan. Suburban paid expenses of $0.3 million incurred by the General
Partner.
Under the occurrence and continuance of an event of default, as defined in the
GP Loan, Mellon Bank will have the right to cause Suburban to purchase the
note evidencing the GP Loan (the "GP Note"). Suburban has agreed to maintain
borrowing availability under its available lines of credit, which will be
sufficient to enable it to repurchase the GP Note in
12
<PAGE>
these circumstances. The GP Note will also cross-default to Suburban's
obligations under its Senior Note Agreement and its Revolving Credit
Agreement. Upon a default under the GP Loan, Suburban will also have the right
to purchase the GP Note from Mellon Bank.
If Suburban elects or is required to purchase the GP Note from Mellon Bank,
Suburban has the right, exercisable in its sole discretion pursuant to the
Deferral Plan, to cause up to all of the units deposited in the trust related
to the Deferral Plan to be forfeited and cancelled (and to cause all of the
related distributions to be forfeited), regardless of the amount paid by
Suburban to purchase the GP Note.
Compensation Committee Interlocks and Insider Participation in Compensation
Decisions
Compensation of the executive officers of Suburban is determined by the
Compensation Committee of its Board. The Compensation Committee is comprised
of Messrs. Stookey and Logan, both of whom are not officers or employees of
Suburban.
13
<PAGE>
Report of the Compensation Committee
Executive Compensation Philosophy: The Compensation Committee of the Board has
approved principles for the compensation of management which:
. Encourage strong financial and operational performance;
. Emphasize performance-based compensation, which balances rewards for
short-term and long-term results;
. Focus executives on satisfying Suburban's customers through plans that
include measurements of customer satisfaction;
. Align the interests of management with those of the unitholders to
encourage the achievement of continuing increases in unitholder value;
and
. Provide a competitive level of total compensation necessary to attract
and retain talented and experienced executives.
Compensation Method: Suburban strives to provide a comprehensive executive
compensation program that is competitive and performance-based in order to
attract and retain superior executive talent. Current total compensation
competitiveness is targeted in the third quartile (on a scale where the fourth
quartile is the highest and first quartile is the lowest) of the range of
total compensation of a comparison group of companies consisting of other
publicly traded master limited partnerships. This comparison group does not
consist of the same companies that comprise the peer group for the performance
graph contained in this Proxy Statement. Rather, entities that exhibit
leadership in performance characteristics such as distribution payment levels,
controllable profit and earnings before interest, taxes, depreciation and
amortization ("EBITDA") over sustained periods are selected as benchmarks for
Suburban's compensation standards. The Compensation Committee also may choose
to benchmark pay practices at companies that reflect a broader market for
executive talent.
Components of Executive Compensation:
.BASE SALARY: Annual base salary is designed to compensate executives for
their level of responsibility and sustained individual performance. The
Compensation Committee approves in advance all salary increases for executive
officers. Increases in base pay are determined by Suburban's performance as
well as individual performance. Performance reviews are conducted on an annual
basis. Base salary is targeted at the third quartile of the range for the
comparison group.
.ANNUAL BONUS COMPENSATION: Annual bonus compensation is provided in order to
promote the achievement of Suburban's business objectives. Target annual
bonuses are established based on EBITDA, controllable profit, customer
satisfaction and personal performance. Participants do not receive any bonus
unless minimum Partnership thresholds are achieved. Generally, EBITDA,
controllable profit and customer satisfaction are weighted higher than
personal performance, but the Compensation Committee may adjust weightings to
take into account unusual circumstances. Annual bonus compensation is targeted
at the third quartile of the range of the comparison group.
14
<PAGE>
.LONG-TERM INCENTIVES: Suburban provides two forms of long-term incentives:
A non-qualified, unfunded long-term incentive plan was adopted for
officers and key employees effective October 1, 1997. Awards vest over
time with one-third vesting at the end of years three, four, and five
from the award date. Awards are based on a percentage of base pay and
are subject to the achievement of certain performance criteria,
including the Partnership's ability to earn sufficient funds and make
cash distributions on its units with respect to each fiscal year. The
Compensation Committee has reserved the right to fix and require a level
of funds in excess of that necessary to make the cash distributions in
order for the incentive to be earned for each fiscal quarter.
Suburban has also provided long-term incentives through the 1996
Restricted Unit Plan, which was intended to align the interests of
management with the interests of all other unitholders. Under the 1996
Restricted Plan, a total of 673,165 Restricted Units were issued to
supervisors, executives and key employees of Suburban. These Restricted
Units would have vested automatically upon the Recapitalization under a
"change of control" provision contained in Suburban's 1996 Restricted
Unit Plan. Each executive officer, however, agreed to surrender all of
his Restricted Units, prior to the vesting upon the Recapitalization, in
exchange for an equal number of units of Suburban. These units were
deposited into the Benefits Protection Trust, and are being held in such
trust and will be distributed to each executive in accordance with the
terms of the Deferral Plan. Quarterly distributions on the units held in
the Benefits Protection Trust will be deposited into the trust and
deferred by each executive until the date the GP Loan is repaid in full
or the seventh anniversary of the Recapitalization closing, whichever
date the executive has chosen, but subject to the earlier distribution
and forfeiture provisions of the Deferral Plan.
.SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN: The Supplemental Executive Retirement
Plan is a non-qualified, unfunded plan, designed to provide certain senior
executives of the Partnership with additional retirement benefits. Benefits
under the Plan are calculated without regard to statutory maximums to replace
benefit opportunities lost due to regulatory limits.
.BENEFITS: A different purpose is served by the benefits offered to key
executives than the other elements of total compensation. In general, they
provide a safety net of protection against the financial catastrophes that can
result from illness, disability or death. The benefits offered to key
executives are largely those that are offered to the general employee
population, with some variation, primarily to promote tax efficiency and to
replace benefit opportunities lost due to regulatory limits.
Chief Executive Officer's Compensation
The compensation of Mr. Alexander is based upon an Employment Agreement with
him which became effective on March 5, 1996, and which was amended October 23,
1997, and
15
<PAGE>
April 14, 1999. The outside directors meet annually, in private, to review Mr.
Alexander's performance. The Compensation Committee uses this performance
evaluation in considering Mr. Alexander's compensation. Mr. Alexander
participates in the same programs and receives compensation based on the same
factors as the other executive officers. In addition, Mr. Alexander may earn a
bonus of up to 100% of his annual base salary for services rendered based upon
certain performance criteria. Overall, his compensation reflects a high degree
of policy and decision-making authority with respect to the strategic
direction of the Partnership. Mr. Alexander's base salary for fiscal 1999 was
$400,000 and he received a bonus of 100% of his base salary.
Respectfully submitted by the members of the Compensation Committee of the
Board of Supervisors.
John Hoyt Stookey, Chairman
Harold R. Logan, Jr.
16
<PAGE>
Performance Graph/1/
The following graph compares the performance of Suburban's common units with
the performance of the New York Stock Exchange Index (the "NYSE Market Index")
and a peer group index over the period from February 29, 1996, when regular
trading of the common units commenced on the NYSE, through September 25, 1999,
the end of the 1999 fiscal year. The graph assumes that on February 29, 1996,
$100 was invested in each of (1) Suburban's common units, (2) the NYSE Index,
and (3) the peer group, and that all distributions or dividends were
reinvested.
Suburban does not believe that any published industry or line-of-business
index accurately reflects its business. Accordingly, Suburban has created a
special peer group index consisting of the five other propane-marketing
companies whose common units are publicly traded. Suburban's peer group index
includes the common units of the following companies: Ferrellgas Partners,
L.P., AmeriGas Partners, L.P., Star Gas Partners, L.P., Cornerstone Propane
Partners, L.P., and Heritage Propane Partners, L.P. The peer group weighs the
returns of Ferrellgas, AmeriGas, and Star Gas according to each company's
public market capitalization as of February 29, 1996. It weighs the returns of
Cornerstone Propane and Heritage Propane according to each company's market
capitalization as of December 11, 1996 and June 25, 1996, respectively, the
dates their common units began to trade publicly.
<TABLE>
<CAPTION>
--------------------FISCAL YEAR ENDING-------------------
<S> <C> <C> <C> <C> <C>
COMPANY/INDEX/MARKET 2/29/1996 9/28/1996 9/27/1997 9/26/1998 9/25/1999
Suburban Prpn 100.00 109.60 109.82 119.13 136.73
Customer Selected Stock List 100.00 107.47 122.65 115.46 108.08
NYSE Market Index 100.00 107.82 147.38 151.71 181.16
</TABLE>
- -------------------------
/1/ The performance graph shall not be deemed incorporated by reference by any
general statement incorporating by reference this Proxy Statement into any
filings under the Securities Act of 1933, as amended or the Securities
Exchange Act of 1934, as amended, except to the extent that Suburban
incorporates this information by reference, and shall not otherwise be deemed
filed under such Acts.
17
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of the Record Date
regarding the beneficial ownership of units and incentive distribution rights
by each person or group known by Suburban (based upon filings under Section
13(d) or (g) under the Exchange Act) to own beneficially more than 5% thereof,
each member of the Board, each executive officer named in the Summary
Compensation Table and all members of the Board and executive officers as a
group. Except as set forth in the notes to the table, the business address of
each person in the table is c/o Suburban, One Suburban Plaza, 240 Route 10
West, Whippany, New Jersey 07981-0206. Each individual or entity listed below
has sole voting and investment power over the units reported, except as noted
below.
<TABLE>
<CAPTION>
Name of Amount and Nature of Percent
Title of Class Beneficial Owner Beneficial Ownership of Class
- -------------- ---------------- -------------------- --------
<S> <C> <C> <C>
Common Units Mark A. Alexander(a) 25,000 *
Michael J. Dunn, Jr.(a) 0 --
Anthony M. Simonowicz(a) 2,000 *
Michael M. Keating(a) 0 --
Jeffrey S. Jolly(a) 0 --
John Hoyt Stookey 24,634 *
Harold R. Logan, Jr. 17,134 *
Dudley C. Mecum 5,634 *
Mark J. Anton(b) 3,600 *
All supervisors and executive
officers as a group (14 persons) 78,452 *
Incentive Distribution
Rights Suburban Energy Services Group LLC N/A 100%
</TABLE>
- -------------------------
(a) Excludes the following numbers of units held in the Benefits Protection
Trust as to which these individuals have no voting or investment power.
Mr. Alexander: 243,902; Mr. Dunn: 48,780; Mr. Simonowicz: 48,780; Mr.
Keating: 29,268; and Mr. Jolly: 19,512. These individuals have the
following ownership interests in the General Partner: Mr. Alexander:
40.9%; Mr. Dunn: 8.2%; Mr. Simonowicz: 8.2%; Mr. Keating: 4.9%; and Mr.
Jolly: 3.3%.
(b)Mr. Anton shares voting and investment power over these units with his
wife.
* Less than 1%.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires Suburban's directors and executive
officers and persons who own more than 10 percent of Suburban's Common Units
to file with the Securities and Exchange Commission (the "SEC") initial
reports of ownership and reports of changes in ownership of common units.
Officers, directors, and unitholders holding more than 10 percent are required
by SEC regulations to furnish Suburban with copies of all Section 16(a) forms
they file. To Suburban's knowledge, based solely on a review of the copies of
such reports furnished to Suburban and representations that no other reports
were required, during the fiscal year ending September 25, 1999, all of the
Section 16(a) filing requirements
18
<PAGE>
applicable to its officers, directors and beneficial owners holding more than
10 percent were complied with, except that reports for the following
supervisors and executive officers were not filed in a timely manner in the
years indicated: Mr. Stookey: one required Form 5 reporting one transaction
and one required Form 4 reporting one transaction in 1996 and 1999,
respectively; Mr. Logan: one required Form 5 reporting one transaction and one
required Form 4 reporting one transaction in 1996 and 1999, respectively; Mr.
Mecum: one required Form 4 reporting one transaction in 1999; Mr. Alexander:
one required Form 5 reporting one transaction, one required Form 5 reporting
two transactions, and one required Form 4 reporting three transactions in
1996, 1997, and 1999, respectively; Mr. Dunn: one required Form 4 reporting
two transactions in 1999; Mr. Grabowiecki: one required Form 5 reporting one
transaction and one required Form 4 reporting three transactions in 1997 and
1999, respectively; Mr. Keating: one required Form 5 reporting two
transactions and one required Form 4 reporting two transactions in 1997 and
1999, respectively; Ms. Meola: one required Form 3 and Form 4 reporting one
transaction in 1999; Mr. Plante: one required Form 3, one required Form 5
reporting three transactions and one required Form 4 reporting four
transactions in 1996, 1997 and 1999, respectively; Mr. Simonowicz: one
required Form 5 reporting one transaction, one required Form 5 reporting two
transactions, and one required Form 4 reporting two transactions in 1996,
1997, and 1999 respectively; and Mr. Anton: one required Form 3 in 1999. All
Section 16(a) forms referred to above have been filed as of the date of this
Proxy Statement.
ANNUAL REPORTS
Upon written request to the Secretary, Suburban Propane Partners, L.P., One
Suburban Plaza, 240 Route 10 West, P.O. Box 206, Whippany, New Jersey 07981-
0206, Suburban will provide without charge to each person soliciting an
additional copy of its 1999 Annual Report on Form 10-K, including the
financial statements and financial statement schedules filed therewith.
Suburban will furnish a requesting unitholder with any exhibit not contained
therein upon payment of a reasonable fee.
The attention of our unitholders is directed to the Supplemental Financial
Information accompanying this Proxy Statement, as well as to Suburban's 1999
Annual Report mailed previously under separate cover.
SUBURBAN PROPANE PARTNERS, L.P.
19
<PAGE>
SUBURBAN PROPANE PARTNERS, L.P.
SUPPLEMENTAL FINANCIAL INFORMATION
ACCOMPANYING PROXY STATEMENT
FOR APRIL 19, 2000 TRI-ANNUAL MEETING
OF LIMITED PARTNERS
<PAGE>
Index to Supplemental Financial Information
Page
Selected Historical and Pro Forma Financial Data 2
Quantitative and Qualitative Disclosures about Market Risk 4
Market for Suburban's Units and Related Unitholder Matters 6
Form 10-Q for the period ending December 25, 1999 7
1
<PAGE>
SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA.
The following table presents selected condensed consolidated historical
financial data of Suburban and Suburban Propane, a division of Quantum Chemical
Corporation (the "Predecessor Company"). The selected condensed consolidated
historical data is derived from the audited financial statements of Suburban
and the Predecessor Company. The dollar amounts in the table below, except per
unit data, are in thousands.
<TABLE>
<CAPTION>
Predecessor Company
Partnership (a) -------------------
March 5, October 1, Year
Year Ended Year Ended Year Ended 1996 1995 Ended
---------- ---------- ---------- through through --------
Sept 25, Sept 26, Sept 27, Sept 28, March 4, Sept 30,
1999 1998 1997 1996 1996 1995
---------- ---------- ---------- -------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
Statement of Operations
Data
Revenues $ 619,778 $667,287 $771,131 $323,947 $383,999 $633,620
Depreciation and
Amortization 34,906 36,531 37,307 21,046 14,816 34,055
Restructuring Charge -- -- 6,911 2,340 -- --
Recapitalization Cost 18,903 -- -- -- -- --
Income (Loss) Before
Interest
Expense and Income Taxes 53,272 68,814 47,763 (3,464) 61,796 55,544
Interest Expense, Net 30,765 30,614 33,979 17,171 -- --
Provision for Income
Taxes 68 35 190 147 28,147 25,299
Net Income (Loss) 22,439 38,165 13,594 (20,782) 33,649 30,245
Net Income (Loss) per
Unit (b) $ 0.83 $ 1.30 $ 0.46 $ (0.71) -- --
Balance Sheet Data (end
of period)
Current Assets $ 78,637 $132,781 $104,361 $120,692 $ 78,846
Total Assets 659,220 729,565 745,634 776,651 705,686
Current Liabilities 103,006 91,550 96,701 101,826 69,872
Long-term Debt 427,634 427,897 427,970 428,229 --
Other Long-term
liabilities 60,194 62,318 79,724 81,917 77,579
Predecessor Equity -- -- -- -- -- 558,235
Partners' Capital --
General Partner 2,044 24,488 12,830 3,286 -- --
Partners' Capital --
Limited Partners 66,342 123,312 128,409 161,393 -- --
Statement of Cash Flows
Data
Cash Provided by (Used
in)
Operating Activities $ 81,758 $ 70,073 $ 58,848 $ 62,961 $ (3,765) $ 53,717
Investing Activities $ (12,241) $ 2,900 $(20,709) $(30,449) $(21,965) $(22,317)
Financing Activities $(120,944) $(32,490) $(37,734) $(13,786) $ 25,799 $(31,562)
Other Data
EBITDA (c) $ 88,178 $105,345 $ 85,070 $ 17,582 $ 76,612 $ 89,599
Capital Expenditures (d)
Maintenance and growth $ 11,033 $ 12,617 $ 24,888 $ 16,089 $ 9,796 $ 21,359
Acquisitions $ 4,768 $ 4,041 $ 1,880 $ 15,357 $ 13,172 $ 5,817
Retail Propane Gallons
Sold 524,276 529,796 540,799 257,029 309,871 527,269
</TABLE>
2
<PAGE>
Notes:
- ------
(a) Suburban acquired the propane business and assets of the Predecessor
Company on March 5, 1996 (the "Closing Date"). There are no material
differences in the basis of assets and liabilities between Suburban and
the Predecessor Company.
(b) Net income (loss) per unit is computed by dividing the limited partners'
interest in net income (loss) by the number of weighted average units
outstanding.
(c) EBITDA (earnings before interest, taxes, depreciation and amortization) is
defined as income (loss) before interest expense and income taxes plus
depreciation and amortization. EBITDA should not be considered as an
alternative to net income (as an indicator of operating performance) or as
an alternative to cash flow (as a measure of liquidity or ability to
service debt obligations) and is not in accordance with or superior to
generally accepted accounting principles, but provides additional
information for evaluating Suburban's ability to pay the minimum quarterly
distribution.
(d) Suburban's capital expenditures fall generally into three categories: (i)
maintenance expenditures, which include expenditures for repair and
replacement of property, plant and equipment, (ii) growth capital
expenditures which include new propane tanks and other equipment to
facilitate expansion of the Partnership's customer base and operating
capacity; and (iii) acquisition capital expenditures, which include
expenditures related to the acquisition of retail propane operations and a
portion of the purchase price allocated to intangibles associated with
such acquired businesses.
3
<PAGE>
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As of September 25, 1999, Suburban was party to propane forward and option
contracts with various third parties and futures traded on the New York
Mercantile Exchange ("NYMEX"). Forward and future contracts provide that
Suburban sell or acquire propane at a fixed price at fixed future dates. An
option contract allows, but does not require its holder to buy or sell propane
at a specified price during a specified time period; the writer of an option
contract must fulfill the obligation of the option contract, should the holder
choose to exercise the option. 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 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, options and forward
contracts are monitored daily for compliance with Suburban's trading policy
which included volume limits for open positions. Open inventory positions are
reviewed and managed daily as to exposures to changing market prices.
Market Risk
Suburban is subject to commodity price risk to the extent that propane market
prices deviate from fixed contract settlement amounts. Future contracts traded
with brokers of the NYMEX require daily cash settlements in margin accounts.
Forward and option contracts are generally settled at the expiration of the
contract term.
Credit Risk
Future contracts are guaranteed by the NYMEX and as a result have minimal
credit risk. Suburban is subject to credit risk with forward and option
contracts to the extent the counterparties do not perform. Suburban evaluates
the financial condition of each counterparty with which it conducts business
and established credit limits to reduce exposure to credit risk of non-
performance.
Sensitivity Analysis
In an effort to estimate Suburban's exposure to unfavorable market price
changes in propane related to its open inventory positions, Suburban developed
a model which incorporated the following data and assumptions:
A. The actual fixed price contract settlement amounts were utilized
for each of the future periods.
B. The estimated future market prices were derived from the New York
Mercantile Exchange for traded propane futures for each of the
future periods as of September 25, 1999.
C. The market prices determined in B above were adjusted adversely by
a hypothetical 10% change in the future periods and compared to
the fixed
4
<PAGE>
contract settlement amounts in A above to project the additional
loss in earnings which would be recognized for the respective
scenario.
Based on the sensitivity analysis described above, the hypothetical 10%
adverse change in market prices for each of the future months for which a
future, forward and/or option contract exists indicate potential losses in
future earnings of $0.7 million, as of September 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.
As of September 25, 1999, Suburban's open position portfolio reflected a net
long position (purchase) aggregating $17.2 million.
As of November 30, 1999, the posted price of propane at Mont Belvieu, Texas (a
major storage point) was 41 cents per gallon as compared to 44 cents per
gallon at September 25, 1999, representing a 7% decline. Such decline is
attributable to factors including warmer weather patterns, high national
propane inventory levels and decreases in the market price of crude oil.
5
<PAGE>
MARKET FOR SUBURBAN'S UNITS AND RELATED UNITHOLDER MATTERS
The common units, representing limited partner interests in Suburban, are
listed and traded on the New York Stock Exchange under the symbol SPH. As of
December 10, 1999, there were 1,060 registered common unitholders of record.
The following table sets forth, for the periods indicated, the high and low
sale prices per common unit, as reported on the New York Stock Exchange, and
the amount of cash distributions paid per common unit.
<TABLE>
<S> <C> <C> <C>
Common Unit Price Cash Distribution Paid
Range
High Low
<CAPTION>
1998 Fiscal
Year
-----------
<S> <C> <C> <C>
First Quarter $20.56 $15.38 $0.50
Second Quarter 20.00 17.50 0.50
Third Quarter 19.50 18.00 0.50
Fourth Quarter 20.00 17.56 0.50
<CAPTION>
1999 Fiscal
Year
-----------
<S> <C> <C> <C>
First Quarter $19.94 $17.13 $0.50
Second Quarter 20.13 18.00 0.50
Third Quarter 20.50 17.94 0.5125
Fourth Quarter 20.75 19.00 0.5125
<CAPTION>
2000 Fiscal
Year
-----------
<S> <C> <C> <C>
First Quarter $20.625 $16.438 $0.525
</TABLE>
Suburban makes quarterly distributions to its partners in an aggregate amount
equal to its Available Cash (as defined) for such quarter. Available Cash
generally means all cash on hand at the end of the fiscal quarter plus all
additional cash on hand as a result of borrowings subsequent to the end of
such quarter less cash reserves established by the Board of Supervisors in its
reasonable discretion for future cash requirements.
Suburban is a publicly traded limited partnership that is not subject to
federal income tax. Instead, unitholders are required to report their
allocable share of Suburban's earnings or losses, regardless of whether
Suburban makes distributions.
6
<PAGE>
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 25, 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 (State or other jurisdiction 22-3410353 (I.R.S. Employer
-------- ----------
of 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 February 7, 2000: 22,278,587 Common Units
This Report contains a total of 18 pages.
7
<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
------------------------------------------------
<TABLE>
<S> <C>
Condensed Consolidated Balance Sheets as of December 25, 1999
and September 25, 1999 3
Condensed Consolidated Statements of Operations for the three
months ended December 25, 1999 and December 26, 1998 4
Condensed Consolidated Statements of Cash Flows for the three
months ended December 25, 1999 and December 26, 1998 5
Condensed Consolidated Statement of Partners' Capital for the
three months ended December 25, 1999 6
Notes to Condensed Consolidated Financial Statements 7-12
</TABLE>
<TABLE>
<S> <C>
Item 2 -- Management's Discussion and Analysis of Financial
Condition and Results of Operations 13-15
Item 3 -- Quantitative and Qualitative Disclosures about Market
Risk 15-16
Part 2 Other Information
Item 6 -- Exhibits and Reports on Form 8-K 17
Signatures 18
</TABLE>
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;
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 and acquire customers; the Partnership's ability
to implement its expansion strategy and to integrate acquired businesses
successfully; 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; and the
impact of legal proceedings on the Partnership's business. 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.
8
<PAGE>
SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
December 25, September 2,
1999 1999
(unaudited) (audited)
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash & cash equivalents $ 9,961 $ 8,392
Accounts receivable, less allowance for doubtful
accounts of $2,389 and $2,089, respectively 69,615 37,620
Inventories 43,866 29,727
Prepaid expenses and other current assets 3,753 2,898
-------- --------
Total current assets 127,195 78,637
Property, plant and equipment, net 373,206 325,224
Net prepaid pension cost 33,545 33,498
Goodwill & other intangible assets, net 252,253 213,963
Other assets 2,414 7,898
-------- --------
Total assets $788,613 $659,220
======== ========
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable $ 53,827 $ 40,068
Accrued employment and benefit costs 16,431 19,629
Short-term borrowings -- 2,750
Accrued insurance 5,405 5,120
Customer deposits and advances 15,778 17,774
Accrued interest 17,300 8,250
Other current liabilities 10,906 9,415
-------- --------
Total current liabilities 119,647 103,006
Long-term borrowings 524,572 427,634
Postretirement benefits obligation 34,497 34,394
Accrued insurance 17,215 18,009
Other liabilities 7,894 7,791
-------- --------
Total liabilities 703,825 590,834
-------- --------
Partners' capital:
Common Unitholders 83,232 66,342
General Partner 2,372 2,044
Common Units held in trust, at cost 11,567 10,712
Deferred compensation trust (11,567) (10,712)
Unearned Compensation (816) --
-------- --------
Total partners' capital 84,788 68,386
-------- --------
Total liabilities and partners' capital $788,613 $659,220
======== ========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
9
<PAGE>
SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per Unit amounts)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended
-------------------------
December 25, December 26,
1999 1998
------------ ------------
<S> <C> <C>
Revenues
Propane $174,008 $138,790
Other 26,454 22,426
-------- --------
200,462 161,216
-------- --------
Costs and expenses
Cost of sales 102,441 68,871
Operating 55,289 52,274
Depreciation and amortization 9,006 8,782
General and administrative expenses 6,643 7,326
Gain on sale of assets (10,328) --
-------- --------
163,051 137,253
Income before interest expense and provision for
income taxes 37,411 23,963
Interest expense, net 9,399 7,586
-------- --------
Income before provision for income taxes 28,012 16,377
Provision for income taxes 21 7
-------- --------
Net income $ 27,991 $ 16,370
======== ========
General Partner's interest in net income $ 560 $ 327
-------- --------
Limited Partners' interest in net income $ 27,431 $ 16,043
======== ========
Basic and diluted net income per Unit $ 1.23 $ 0.56
======== ========
Weighted average number of Units outstanding 22,264 28,726
-------- --------
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
10
<PAGE>
SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended
-----------------------------------
December 25, 1999 December 26, 1998
----------------- -----------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 27,991 $ 16,370
Adjustments to reconcile net income to net cash provided
by operations:
Depreciation 7,072 6,898
Amortization 1,934 1,884
(Gain) on disposal of property, plant and equipment (10,544) (88)
Changes in operating assets and liabilities, net of
acquisitions and dispositions:
(Increase) in accounts receivable (29,384) (18,947)
(Increase) in inventories (6,893) (277)
(Increase) in prepaid expenses and other current assets (805) (610)
Increase in accounts payable 13,759 2,474
(Decrease) in accrued employment and benefit costs (3,159) (4,918)
Increase in accrued interest 9,050 8,114
(Decrease) in other accrued liabilities (1,525) (1,578)
Other noncurrent assets (145) (1,033)
Deferred credits and other noncurrent liabilities (638) (771)
-------- --------
Net cash provided by operating activities 6,713 7,518
-------- --------
Cash flows from investing activities:
Capital expenditures (4,579) (2,936)
Acquisitions (97,914) (109)
Proceeds from sale of property, plant and equipment, net 17,862 944
-------- --------
Net cash (used in) investing activities (84,631) (2,101)
-------- --------
Cash flows from financing activities:
Long-term borrowings (net) 96,988 (47)
Short-term borrowings/(repayments) (net) (2,750) --
Credit agreement expenses (3,123) --
Partnership distribution (11,628) (11,001)
-------- --------
Net cash provided by (used in) financing activities 79,487 (11,048)
Net increase/(decrease) in cash and cash equivalents 1,569 (5,631)
Cash and cash equivalents at beginning of period 8,392 59,819
======== ========
Cash and cash equivalents at end of period $ 9,961 $ 54,188
======== ========
Supplemental disclosure of cash flow information:
Cash paid for interest $ 199 $ 108
======== ========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
11
<PAGE>
SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF PARTNERS' CAPITAL
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
Common
Number of Units Deferred Total
Common General in Compensation Unearned Partners'
Units Common Partner Trust Trust Compensation Capital
--------- -------- ------- ------- ------------ ------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at September 25,
1999 22,236 $ 66,342 $2,044 $10,712 $(10,712) $ -- $ 68,386
Partnership Distribution (11,396) (232) (11,628)
Grants issued under
Compensation
Deferral Plan 43 855 855 (855) (855)
Amortization of
Compensation
Deferral Plan 39 39
Net income -- 27,431 560 -- -- -- 27,991
------ -------- ------ ------- -------- ----- --------
Balance at December 25,
1999 22,279 $ 83,232 $2,372 $11,567 $(11,567) $(816) $ 84,788
====== ======== ====== ======= ======== ===== ========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
12
<PAGE>
SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
December 25, 1999
(Dollars in Thousands)
(Unaudited)
1. Partnership Organization and Formation
--------------------------------------
Suburban Propane Partners, L.P. (the "Partnership") and its subsidiary,
Suburban Propane, L.P. (the "Operating Partnership"), were formed on December
19, 1995 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, the Service
Company and a corporate operating entity subsequently acquired by the
Operating Partnership are collectively referred to hereinafter as the
"Partnership Entities". The Operating Partnership and the Service Company
commenced operations on March 5, 1996 (the "Closing Date") upon consummation
of an initial public offering.
On May 26, 1999, the Partnership completed a recapitalization (the
"Recapitalization") which included the redemption of all limited partner
interests held by the Former General Partner, Suburban Propane GP, Inc. a
wholly-owned subsidiary of Millennium Chemicals, Inc., and the substitution of
a new general partner, Suburban Energy Services Group LLC which, is owned by
senior management 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 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 Partnership's Annual Report on Form 10-K for the fiscal year ended
September 25, 1999, 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
13
<PAGE>
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 the Condensed 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 standard cost
basis for appliances, which estimates average cost.
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 25, 1999 and September 25, 1999 was
$173,571 and $168,538, respectively.
Goodwill and Other Intangible Assets. Goodwill and other intangible assets are
comprised of the following:
<TABLE>
<S> <C> <C>
December 25, 1999 September 25, 1999
----------------- ------------------
Goodwill $ 279,213 $ 242,230
Debt origination costs 8,024 8,024
Deferred credit agreement costs 3,123 --
Other, principally noncompete
agreements 4,978 4,948
----------------- ------------------
295,338 255,202
Less: Accumulated amortization 43,085 41,239
----------------- ------------------
$ 252,253 $ 213,963
================= ==================
</TABLE>
Income Taxes. As discussed in Note 1, the Partnership Entities consist of two
limited partnerships, the Partnership and the Operating Partnership, and two
corporate entities, the Service Company and Gas Connection, Inc. 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 corporate entities are subject to federal and state income taxes.
Accordingly, the Partnership's consolidated financial statements reflect
income tax expense related to the corporate entities' earnings.
Net Income (Loss) Per Unit. Prior to May 26, 1999, basic net income (loss) per
limited partner Unit was computed by dividing net income (loss), after
deducting the General Partner's 2% interest, by the weighted average number of
outstanding Common Units and
14
<PAGE>
Subordinated Units. Diluted net income (loss) per limited partner Unit was
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 were to vest over time.
Subsequent to May 26, 1999, basic and 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.
New Accounting Standard. In June 1998, the Financial Accounting Standards
Board ("FASB") issued Statement of Financial Accounting Standards No. 133,
"Accounting for Derivative Instruments and Hedging Activities" ("Statement No.
133"). Statement No. 133 requires entities to record derivatives as assets or
liabilities on the balance sheet and to measure them at fair value. FASB has
delayed this standard's effective date for one year and, accordingly, it will
be adopted by the Partnership in fiscal year 2001. Management is currently
evaluating the impact this statement may have on the Partnership's financial
statements.
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. The
Partnership's Revolving Credit Agreement (See Note 5--Long-Term Debt and
Revolving Credit Agreement) includes a $22,000 subfacility to support the
Minimum Quarterly Distribution on Common Units. No drawings have been made
under this subfacility.
4. Commitments and Contingencies
-----------------------------
The Partnership leases certain property, plant and equipment for various
periods under noncancelable leases. Rental expense under operating leases was
$4,878 for the three months ended December 25, 1999.
The Partnership effectively is self-insured for general and product, workers'
compensation and automobile liabilities up to predetermined amounts above
which third party insurance applies. At December 25, 1999, accrued insurance
liabilities amounted to $22,620, 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 on 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 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.
15
<PAGE>
5. Long-Term Debt and Revolving Credit Agreement
---------------------------------------------
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 Revolving Credit
Agreement discussed below. The Senior Notes will mature June 30, 2011. The
Note Agreement requires that the principal be paid in equal annual
installments of $42,500 starting June 30, 2002.
On November 10, 1999, in connection with the acquisition of SCANA (See Note
7--Acquisition and Divestiture), the Partnership replaced its former Bank
Credit Facilities with a new $175,000 Revolving Credit Agreement with a
syndicate of banks led by First Union National Bank as Administrative Agent.
The Revolving Credit Agreement consists of a $100,000 acquisition facility and
a $75,000 working capital facility which expire on March 31, 2001. Borrowings
under the Revolving Credit Agreement 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 of 1%. An annual fee ranging from .25% to .50%, based upon
certain financial tests, is payable quarterly whether or not borrowings occur.
As of December 25, 1999, such fee was .50%.
The Revolving Credit Agreement provides the Partnership, at the Partnership's
option, the right to extend the expiration date from March 31, 2001 to
December 31, 2001 provided that the maximum ratio of consolidated total
indebtedness to EBITDA (as defined in the Revolving Credit Agreement) will
decrease from 5.10 to 1.00 to 4.75 to 1.00 during the nine month extension
period.
As of December 25, 1999, $97,000 was outstanding under the Revolving Credit
Agreement resulting from the acquisition of SCANA (See Note 7--Acquisition and
Divestiture). As of September 25, 1999, $2,750 was outstanding under the
former Bank Credit Facilities.
The Senior Note Agreement and Revolving Credit Agreement contain various
restrictive and affirmative covenants applicable to the Operating Partnership,
including (i) maintenance of certain financial tests (including maintaining
minimum net worth of $50,000), (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.
6. Compensation Deferral Plan
--------------------------
Effective May 26, 1999, in connection with the Partnership's Recapitalization,
the Partnership adopted the Compensation Deferral Plan (the "Deferral Plan")
which provided for eligible employees of the Partnership to surrender their
right to receive all or a portion of their unvested Common Units granted under
the Partnership's 1996 Restricted Unit Award Plan prior to the time their
Common Units were substantially certain to vest in exchange for the right to
participate in and receive certain payments under the Deferral Plan. Senior
management of the Partnership surrendered 553,896 Restricted Units
representing substantially all of their Restricted Units, before they vested
in exchange for the right to participate in the Deferral Plan. The Partnership
deposited into a trust on behalf of these individuals 553,896 Common Units.
16
<PAGE>
The Deferral Plan also allows eligible employees to defer receipt of Common
Units that may be subsequently granted by the Partnership under the Deferral
Plan. The Common Units granted under the Deferral Plan and related Partnership
distributions are subject to forfeiture provisions such that (a) 100% of the
Common Units would be forfeited if the grantee shall cease to be employed by
the Partnership within three years of the date of the Recapitalization, (b)
75% would be forfeited if the grantee shall cease to be employed after the
third anniversary, but prior to the fourth anniversary of the Recapitalization
date and (c) 50% would be forfeited if the grantee shall cease to be employed
after the fourth anniversary, but prior to the fifth anniversary. Upon
issuance of Common Units under the Deferral Plan, unearned compensation
equivalent to the market value of the Common Units is charged at the date of
grant. The unearned compensation is amortized in accordance with the Deferral
Plan's forfeiture provisions. The unamortized unearned compensation value is
shown as a reduction of partners' capital in the accompanying consolidated
balance sheets. During the three months ended December 25, 1999, the
Partnership granted 42,925 Common Units to eligible employees. During the
three months ended December 25, 1999, the Partnership amortized $39 of
unearned compensation.
Pursuant to the Deferral Plan, participants have deferred receipt of these
Common Units and related distributions by the Partnership by depositing the
Units into a trust. The value of the Common Units deposited in the trust and
the related deferred compensation trust liability are reflected in the
accompanying consolidated balance sheet at December 25, 1999 as components of
partners' capital.
7. Acquisition and Divestiture
---------------------------
On November 8, 1999, the Partnership acquired the assets of SCANA Propane Gas,
Inc., SCANA Propane Storage, Inc., SCANA Propane Supply, Inc., USA Cylinder
Exchange, Inc., and C&T Pipeline, LLC from SCANA Corp. SCANA Propane Gas, Inc.
distributes approximately 20 million gallons annually and services more than
40,000 customers from 22 customer service centers in North and South Carolina.
USA Cylinder Exchange, Inc. operates an automated 20-lb. propane cylinder
refurbishing and refill center in Hartsville, South Carolina, selling to
approximately 1,600 grocery and convenience stores in the Carolinas, Georgia
and Tennessee. SCANA Propane Storage, Inc. owns a 60 million gallon storage
cavern in Tirzah, South Carolina which is connected to the Dixie Pipeline by
the 62 mile propane pipeline owned by C&T Pipeline, LLC. The Partnership
borrowed $97,000 under the acquisition facility of its Revolving Credit
Agreement to fund the acquisition, consisting of $86,000 for the SCANA assets,
$8,600 in acquired working capital and $2,400 in related bank fees. The
acquisition has been accounted for using the purchase method of accounting.
Accordingly, the accompanying balance sheet reflects a preliminary purchase
price allocation to the assets and liabilities based on their estimated
values, with the balance of $36,893 being recorded as goodwill and amortized
over forty years on a straight-line basis.
On December 3, 1999, the Partnership sold 23 customer service centers,
principally located in Georgia, for cash proceeds of $18,000 plus working
capital. The Partnership realized a gain of $10,328 as a result of the
transaction.
17
<PAGE>
8. Subsequent Event--Common Unit Distribution
------------------------------------------
On January 21, 2000, the Partnership announced a quarterly distribution of
$.5250 per Common Unit for the first quarter of fiscal 2000 consisting of the
Minimum Quarterly Distribution of $.50 per Common Unit and an additional
distribution of $.025 per Common Unit payable on February 8, 2000 to holders
of record on January 28, 2000.
18
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Three Months Ended December 25, 1999
- ------------------------------------
Compared to Three Months Ended December 26, 1998
- ------------------------------------------------
Revenues
Revenues increased 24.3% or $39.2 million to $200.5 million for the three
months ended December 25, 1999 compared to $161.2 million for the three months
ended December 26, 1998. The overall increase is primarily attributable to
higher propane costs resulting in higher sales prices to customers, an
increase in retail volumes and an increase in the sales of appliances and
related products. Propane sold to retail customers increased 2.1% or 2.9
million gallons to 140.5 million gallons, compared to 137.6 million gallons in
the prior period's quarter. The increase in retail gallons is principally due
to the acquisition of SCANA in the current quarter. Temperatures nationwide
during the quarter continued to be unusually warm, averaging 11% warmer than
normal as compared to 12% warmer than normal in the prior period's quarter.
Wholesale gallons sold and gallons sold related to price risk management
activities increased 31.3% or 13.6 million gallons to 57.0 million gallons,
principally resulting from increased market opportunities attributable to a
more volatile propane pricing environment.
Operating Expenses
Operating expenses increased 5.8% or $3.0 million to $55.3 million for the
three months ended December 25, 1999 compared to $52.3 million for the three
months ended December 26, 1998. The increase in operating expenses is
principally attributable to increased payroll and benefit costs resulting from
the SCANA acquisition and, to a lesser extent, higher vehicle fuel costs.
General and Administrative Expenses
General and administrative expenses decreased 9.3% or $0.7 million to $6.6
million for the three months ended December 25, 1999 compared to $7.3 million
for the three months ended December 26, 1998. The decrease is primarily
attributable to lower information systems expenses in the current quarter.
Income Before Interest Expense and Income Taxes and EBITDA
Results for the first quarter include a $10.3 million gain from the sale of
assets. Excluding this one-time item, income before interest expense and
income taxes increased $3.1 million to $27.1 million in the three months ended
December 25, 1999 compared to $24.0 million in the prior year's first quarter.
EBITDA, excluding the one-time item, increased $3.3 million or 10.2% to $36.1
million. The increases in income before interest expense and income taxes and
in EBITDA are primarily attributable to higher gross profit of $5.7 million
due to higher appliances and related product sales and an increase in gallons
sold, partially offset by higher operating expenses.
19
<PAGE>
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 above may not be comparable to similarly
titled measures of other companies.
Interest Expense
Net interest expense increased $1.8 million to $9.4 million in the three
months ended December 25, 1999 compared with $7.6 million in the prior period.
The increase is attributable to interest expense on borrowings for the
acquisition of SCANA.
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 three month
period ended December 25, 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 three months ended
December 25, 1999, net cash provided by operating activities was $6.7 million
compared to cash provided by operating activities of $7.5 million in the three
months ended December 26, 1998. The decrease of $0.8 million was primarily due
to higher working capital requirements due to the increased cost of propane.
Net cash used in investing activities was $84.6 million during the three
months ended December 25, 1999 consisting of acquisition payments of $97.9
million reflecting the SCANA acquisition and capital expenditures of $4.6
million (including $3.5 million for maintenance expenditures and $1.1 million
to support the growth of operations), offset by proceeds from the sales of
property, plant and equipment of $17.9 million, including 23 customer service
centers. Net cash used in investing activities was $2.1 million for the three
months ended December 26, 1998 consisting of capital expenditures of $2.9
million (including $1.5 million for maintenance expenditures and $1.4 million
to support the growth of operations) and business acquisition payments of $0.1
million, offset by $0.9 million from the sale of property, plant and
equipment.
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Net cash provided by financing activities for the three months ended December
25, 1999 was $79.5 million, principally reflecting borrowings to fund the
SCANA acquisition partially offset by the Partnership's distribution. Net cash
used in financing activities for the three months ended December 26, 1998 was
$11.0 million, principally reflecting the Partnership's distribution.
The Partnership has announced that it will make a distribution of $.525 per
Unit to its Common Unitholders on February 8, 2000 for the first fiscal
quarter of 2000 consisting of the Minimum Quarterly Distribution of $.50 per
Common Unit and an additional distribution of $.025 per Common Unit.
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, and pay distributions at the current level, during
fiscal 2000.
On January 20, 2000, the Partnership filed an S-4 Registration Statement with
the Securities and Exchange Commission for the issuance from time-to-time of
up to 10 million Common Units to be used as the consideration for the
acquisition of other businesses. The Partnership will file a prospectus
supplement containing specific information about the terms of an acquisition
each time Common Units are intended to be issued pursuant to the registration
statement.
Year 2000
The Partnership's information technology and non-information technology
systems successfully transitioned into the Year 2000 with no disruptions in
operations or information processing. In addition, the Partnership believes
that no significant vendors/suppliers and/or customers experienced any
interruptions attributable to the Year 2000 issue.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As of December 25, 1999, the Partnership was party to propane forward and
option contracts with various third parties and futures traded on the New York
Mercantile Exchange ("NYMEX"). Forward and future contracts provide that the
Partnership sell or acquire propane at a fixed price at fixed future dates. An
option contract allows, but does not require its holder to buy or sell propane
at a specified price during a specified time period; the writer of an option
contract must fulfill the obligation of the option contract, should the holder
choose to exercise the option. 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 in anticipation
of market movements and to manage and hedge exposure to fluctuating propane
prices.
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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 and option 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 and option
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 December 25, 1999 was performed.
Based on this analysis, a hypothetical 10% adverse change in market prices for
each of the future months for which an option, future and/or forward contract
exists indicates a potential loss in future earnings of $0.7 million as of
December 25, 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.
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SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES
Part II
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 September 29, 1999 announcing the
Partnership's agreement with SCANA Corporation to acquire the
assets of SCANA Propane Gas, Inc., SCANA Propane Storage,
Inc., SCANA Propane Supply, Inc., USA Cylinder Exchange, Inc.
and C&T Pipeline, LLC for $86.0 million plus working capital.
Report on Form 8-K dated November 17, 1999 announcing the
Partnership's consummation of its previously announced
purchase of the assets of SCANA Propane Gas, Inc., SCANA
Propane Storage, Inc., SCANA Propane Supply, Inc., USA
Cylinder Exchange, Inc. and C&T Pipeline, LLC for $86.0
million plus working capital.
Report on Form 8-K dated January 21, 2000 announcing the
Partnership's earnings and increase in its quarterly
distribution for the quarter ended December 25, 1999.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1934, the registrant has
caused this report to be signed on its behalf by the undersigned thereunto
duly authorized:
SUBURBAN PROPANE PARTNERS, L.P.
Date: February 7, 2000 /s/ Anthony M. Simonowicz
By ____________________________________
Anthony M. Simonowicz
Vice President, Chief Financial
Officer
/s/ Edward J. Grabowiecki
By ____________________________________
Edward J. Grabowiecki
Vice President, Controller and
Chief Accounting Officer
24
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PROXY
SUBURBAN PROPANE PARTNERS, L.P.
PROXY FOR 2000 TRI-ANNUAL MEETING OF LIMITED PARTNERS
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF SUPERVISORS
The undersigned hereby appoints each of Mark A. Alexander and Michael J. Dunn,
Jr., proxy and attorney in-fact with full power of substitution, on behalf and
in the name of the undersigned, to represent the undersigned and to vote as
specified on the reverse side all common units of Suburban Propane Partners,
L.P. which the undersigned is entitled to vote at the Tri-annual Meeting of
Limited Partners on April 19, 2000, or any adjournments or postponements
thereof.
Please mark, sign, date and return this proxy card promptly in the enclosed
envelope provided.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED OR, IF NO
DIRECTION IS INDICATED, WILL BE VOTED "FOR" THE PROPOSAL LISTED, AND IN THE
DISCRETION OF THE PROXIES ON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE
MEETING, INCLUDING, AMONG OTHER THINGS, CONSIDERATION OF ANY MOTION MADE FOR
ADJOURNMENT OR POSTPONEMENT OF THE MEETING.
SEE REVERSE
SIDE
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/\ FOLD AND DETACH HERE /\
<PAGE>
Please mark your
[X] vote as in this
example.
THIS PROXY WILL BE VOTED FOR EACH NOMINEE FOR ELECTED SUPERVISOR FOR WHOM
AUTHORITY TO VOTE IS NOT WITHHELD.
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THE BOARD OF SUPERVISORS RECOMMENDS A VOTE "FOR" ALL NOMINEES.
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FOR ALL
NOMINEES
LISTED WITHHELD If marked, vote NOMINEES:
1. Election of is withheld John Hoyt Stookey
Elected [_] [_] from all Harold R. Logan, Jr.
Supervisors nominees listed Dudley C. Mecum
For, except vote withheld from the following nominee(s):
- -------------------------------------------------------
NOTE: Please sign exactly as name appears to the
left. Joint owners should each sign. When
signing as attorney, executor, administrator,
trustee or guardian, please also give your full
title, if a corporation, please sign in full
corporate name by an authorized officer. If a
partnership, please sign in full partnership
name by an authorized person.
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SIGNATURE(S) DATE
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/\ FOLD AND DETACH HERE /\
2000 TRI-ANNUAL MEETING OF LIMITED PARTNERS
DATE: APRIL 19, 2000
TIME: 9:00 A.M. LOCAL TIME
PLACE: ONE SUBURBAN PLAZA
240 ROUTE 10 WEST
WHIPPANY, NEW JERSEY 07981
