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
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))
Definitive Proxy
Statement
Definitive Additional
Materials
Soliciting Material Pursuant to
§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):
No fee
required.
Fee computed on table below per
Exchange Act Rules 14a-6(i)(1) 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:
One
Suburban Plaza • 240 Route 10 West • P.O. Box 206 •
Whippany, NJ 07981-0206
Office
973-887-5300
http://www.suburbanpropane.com
[ ], 2006
Dear Fellow Suburban Unitholder:
You are cordially invited to attend the Tri-Annual Meeting of the Limited Partners of Suburban Propane Partners, L.P. (‘‘Suburban’’) to be held on [ , ], 2006, beginning at 9:00 a.m. at our executive offices at One Suburban Plaza, 240 Route 10 West, Whippany, New Jersey. At this important meeting, you will be asked to consider and vote on the following matters:
1. | Election of three Elected Supervisors; |
2. | Approval of the issuance of 2,300,000 Common Units to our general partner in exchange for cancellation of our general partner’s Incentive Distribution Rights, the economic interest in Suburban included in the general partner interest therein and the economic interest in our operating partnership, Suburban Propane, L.P., included in the general partner interest therein (the ‘‘Exchange’’); |
3. | Approval of the Third Amended and Restated Agreement of Limited Partnership of Suburban (the ‘‘Restated Partnership Agreement’’), which amends and restates the Second Amended and Restated Agreement of Limited Partnership of Suburban, dated as of May 26, 1999 (the ‘‘Existing Partnership Agreement’’), to effect and reflect the Exchange (the ‘‘Exchange-Related Amendments’’). This proposal excludes the additional amendments proposed to be included in the Restated Partnership Agreement set forth in Proposal Nos. 4 and 5; |
4. | Approval of an amendment to the Existing Partnership Agreement to include restrictions on business combinations with certain interested Unitholders, in which event an existing provision will be eliminated that limits the voting rights of any Unitholder that beneficially owns more than 20% of the total Common Units outstanding; |
5. | Approval of an amendment to the Existing Partnership Agreement to require a 66 2/3% vote for changes to the procedure to nominate Supervisors; |
6. | Approval of Suburban’s 2000 Restricted Unit Plan, as amended and restated, including to provide for the authorization of the issuance of 230,000 additional Common Units to be available for grant under the Plan; |
7. | Approval of the adjournment of the Tri-Annual Meeting, if necessary, to solicit additional proxies, in the event that there are not sufficient votes at the time of the Tri-Annual Meeting to approve Proposal No. 2 – the Exchange or Proposal No. 3 – the Exchange-Related Amendments, in which case additional proxies would also be solicited, if necessary, for Proposals Nos. 1 and 4-6; and |
8. | Any other matters that may properly come before the meeting. |
Our Board of Supervisors believes that each of the seven proposals to be presented at the meeting is in the best interests of our Unitholders and unanimously recommends that the Unitholders approve each of the proposals. The Audit Committee of our Board of Supervisors unanimously approved, and recommended that the Board of Supervisors and our Unitholders approve, the Exchange and the amendments to the Existing Partnership Agreement.
Our Board of Supervisors is recommending the Exchange and the Exchange-Related Amendments because:
• | The Exchange will simplify our capital structure and lower our future cost of equity capital for the benefit of our Unitholders and in support of our long-term growth strategies. When we say that the Exchange will lower our future cost of equity capital, we mean that, because of the elimination of the Incentive Distribution Rights, the total amount of incremental distributable cash that Suburban would need to generate to pay the current quarterly distribution on additional Common Units would decrease. |
• | The dilutive effect of our general partner’s disproportionate 15% share of future distribution growth resulting from its Incentive Distribution Rights will be eliminated in exchange for approximately 7% of the total Common Units to be outstanding. |
• | Our Unitholders will receive the benefit of 100% of all future distribution growth opportunities. |
• | The interests in Suburban of our senior management (who own a majority interest in our General Partner) will be entirely in the form of Common Units, further aligning the interests of management with those of our Unitholders. |
• | Our Unitholders will have the right to elect all our Supervisors and we will have the ability to expand the Board. |
On July 28, 2006, Suburban announced an increase in its quarterly distribution from $0.6375 to $0.6625 per Common Unit – the eleventh increase since 1999. This increase equates to $0.10 per Common Unit, annualized to $2.65 per Common Unit. The quarterly distribution at this increased level will be payable in respect of the fourth quarter of fiscal 2006 on November 14, 2006 to Unitholders of record on November 7, 2006.
Your vote is important. Whether or not you plan to attend in person, it is important that your Common 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.
The form of proxy provides Unitholders the opportunity to vote on each of the seven proposals separately. However, neither the Exchange Proposal (Proposal No. 2) nor the Exchange-Related Amendment Proposal (Proposal No. 3) will be effective unless BOTH proposals are approved by the Unitholders. The holders of a majority of the outstanding Common Units present in person or by proxy at the meeting will constitute a quorum and permit us to conduct the proposed business at the meeting.
The affirmative vote of holders of a plurality of the Common Units represented in person or by proxy at the meeting is required to elect each Elected Supervisor. The affirmative vote of holders of both (i) a majority of the issued and outstanding Common Units and (ii) a majority of the issued and outstanding Common Units other than the Common Units held by the individuals who, directly or indirectly, own our general partner is required to approve the Exchange and the amendments to the Existing Partnership Agreement. A majority of the votes cast by the Unitholders (provided that the total votes cast represent at least 50% of all Common Units entitled to vote thereon) is required to approve the amended and restated Restricted Unit Plan. A majority of the votes cast by the Unitholders is required to approve the Adjournment Proposal (Proposal No. 7).
Attendance at the meeting will be open to holders of record of Common Units as of the close of business on August 18, 2006. We look forward to greeting those of you who will be able to attend.
Sincerely, | |||
John
H. Stookey Chairman of the Board of Supervisors |
Mark
A. Alexander Chief Executive Officer |
||
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If you need assistance in voting your Common Units, please call the firm assisting us in the solicitation or proxies for the meeting:
Innisfree M&A
Incorporated 501 Madison Avenue New York, NY 10022 Phone: 877-717-3930 (Toll-Free) Fax: (212) 750-5799 Email: info@innisfreema.com |
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SUBURBAN PROPANE PARTNERS, L.P.
NOTICE OF TRI-ANNUAL MEETING
[ ], 2006
The Tri-Annual Meeting of the Limited Partners of Suburban Propane Partners, L.P. (‘‘Suburban’’) will be held at 9:00 a.m. on [ , ], 2006, 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; |
2. | To approve the issuance of 2,300,000 Common Units to our general partner, Suburban Energy Services Group LLC, in exchange for cancellation of the general partner’s Incentive Distribution Rights, the economic interest in Suburban included in the general partner interest therein and the economic interest in our operating partnership, Suburban Propane, L.P., included in the general partner interest therein; |
3. | To approve the Third Amended and Restated Agreement of Limited Partnership of Suburban (the ‘‘Restated Partnership Agreement’’), which amends and restates the Second Amended and Restated Agreement of Limited Partnership of Suburban, dated as of May 26, 1999 (the ‘‘Existing Partnership Agreement’’), to effect and reflect the exchange described in Proposal No. 2. This proposal excludes the additional amendments proposed to be included in the Restated Partnership Agreement set forth in Proposal Nos. 4 and 5; |
4. | To approve an amendment to the Existing Partnership Agreement to include restrictions on business combinations with certain interested Unitholders, in which event an existing provision will be eliminated that limits the voting rights of any Unitholder that beneficially owns more than 20% of the total Common Units outstanding; |
5. | To approve an amendment to the Existing Partnership Agreement to require a 66 2/3% vote for changes to the procedure to nominate Supervisors; |
6. | To approve Suburban’s 2000 Restricted Unit Plan, as amended and restated, including to provide for the authorization of the issuance of 230,000 additional Common Units to be available for grant under the Plan; |
7. | To approve the adjournment of the Tri-Annual Meeting, if necessary, to solicit additional proxies, in the event that there are not sufficient votes at the time of the Tri-Annual Meeting to approve Proposal No. 2 – the Exchange or Proposal No. 3 – the Exchange-Related Amendments, in which case additional proxies would also be solicited, if necessary, for Proposal Nos. 1 and 4-6; and |
8. | 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 August 18, 2006 are entitled to notice of, and to vote at, the meeting.
By Order of the Board of Supervisors, |
Paul
Abel General Counsel & Secretary |
[ ], 2006
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.
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TABLE OF CONTENTS
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TABLE OF CONTENTS (Continued)
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TABLE OF CONTENTS (Continued)
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SUBURBAN PROPANE
PARTNERS, L.P.
One Suburban Plaza
240 Route 10
West
Whippany, New Jersey 07981-0206
PROXY STATEMENT
QUESTIONS AND ANSWERS ABOUT THE TRI-ANNUAL MEETING
This Proxy Statement (first mailed, together with a form of proxy, on or about [ ], 2006) is being furnished to holders of Common Units of Suburban Propane Partners, L.P., which we refer to as Suburban, we or our, in connection with the solicitation of proxies by the Board of Supervisors of Suburban for use at Suburban’s Tri-Annual Meeting of Limited Partners and any postponements or adjournments thereof, which we refer to as the Meeting.
Q: | When and where is the Meeting? |
A: The Meeting will be held at 9:00 a.m. on [ , ], 2006, at our executive offices at One Suburban Plaza, 240 Route 10 West, Whippany, New Jersey.
Q: | What is the purpose of the Meeting? |
A: At the Meeting, holders of Common Units, whom we refer to as Unitholders, will be asked to consider and vote on the following seven proposals:
• | PROPOSAL NO. 1 – To elect three Elected Supervisors. We refer to this proposal as the Election Proposal. |
• | PROPOSAL NO. 2 – To approve the issuance of 2,300,000 Common Units to Suburban Energy Services Group LLC, our general partner, in exchange for cancellation of the Incentive Distribution Rights, the economic interest in Suburban included in the general partner interest in Suburban and the economic interest in our operating partnership, Suburban Propane, L.P., included in the general partner interest in the operating partnership, all of which are held by our general partner. We refer to this proposal as the Exchange Proposal. |
• | PROPOSAL NO. 3 – To approve amendments to the Second Amended and Restated Agreement of Limited Partnership of Suburban, dated as of May 26, 1999, which we refer to as the Existing Partnership Agreement, as set forth in the Third Amended and Restated Agreement of Limited Partnership of Suburban, which we refer to as the Restated Partnership Agreement, to effect and reflect the Exchange. We refer to this proposal as the Exchange-Related Amendment Proposal. This proposal does not include the additional amendments proposed to be included in the Restated Partnership Agreement set forth in Proposal Nos. 4 and 5, which we refer to as the Additional Amendment Proposals. We refer to the Exchange-Related Amendment Proposal and the Additional Amendment Proposals, together, as the Amendment Proposals. |
• | PROPOSAL NO. 4 – To approve an amendment to the Existing Partnership Agreement to include restrictions on business combinations with certain interested Unitholders, in which event an existing provision will be eliminated that limits the voting rights of any Unitholder that beneficially owns more than 20% of the total Common Units outstanding. |
• | PROPOSAL NO. 5 – To approve an amendment to the Existing Partnership Agreement to require a 66 2/3% vote for changes to the procedure to nominate Supervisors. |
• | PROPOSAL NO. 6 – To approve Suburban’s 2000 Restricted Unit Plan, as amended and restated, including to authorize 230,000 additional Common Units to be available for grant under the 2000 Restricted Unit Plan. We refer to this proposal as the Restricted Unit Plan Proposal. |
• | PROPOSAL NO. 7 – To approve the adjournment of the Tri-Annual Meeting, if necessary, to solicit additional proxies, in the event that there are not sufficient votes at the time of the Tri-Annual Meeting to approve Proposal No. 2 (the Exchange Proposal) or Proposal No. 3 (the Exchange-Related Amendment Proposal), in which case additional proxies would also be solicited, if necessary, for Proposals Nos. 1 and 4-6. We refer to this proposal as the Adjournment Proposal. |
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Q: | How does the Board recommend I vote on the proposals? |
A: The Board recommends a vote FOR each of its nominees for Elected Supervisor, approval of the Exchange Proposal, approval of the Amendment Proposals, approval of the Restricted Unit Plan Proposal and approval of the Adjournment Proposal.
The Audit Committee of our Board of Supervisors, which consists of our Elected Supervisors, unanimously approved, and recommended that our Board of Supervisors and our Unitholders approve, the Exchange Proposal and Amendment Proposals.
Q: | How will voting on any other business be conducted? |
A: The Board of Supervisors does not know of any business to be considered at the meeting other than the proposals 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.
Q: | Who is entitled to vote? |
A: Each holder of Common Units as of the close of business on August 18, 2006, which we refer to as the Record Date, is entitled to vote at the Meeting.
Q: | How many Common Units may be voted? |
A: As of the Record Date, 30,314,262 Common Units were outstanding. Each Common Unit entitles its holder to one vote, subject to the exception described in the next paragraph.
Under the Existing Partnership Agreement, a Unitholder holding more than 20% of the total number of Common Units outstanding, may not vote any Common Units in excess of those representing 20% on the election of the Elected Supervisors (Proposal No. 1). Therefore, as used in this Proxy Statement, the term ‘‘outstanding’’ excludes such excess Common Units when referring to the election of the Elected Supervisors. The Board is not aware of any such Unitholder as of the Record Date. If Proposal No. 4 is approved, the provision of the Existing Partnership Agreement limiting the voting rights of such a Unitholder will be eliminated.
Q: | What is a ‘‘quorum’’? |
A: There must be a quorum for the meeting to be held. A quorum will be present if holders of a majority of the outstanding Common Units are represented in person or by proxy at the meeting. 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.
Q: | What vote is required to approve the proposals? |
A:
• | PROPOSAL NO. 1 – Under the Existing Partnership Agreement, the affirmative vote of holders of a plurality of the Common Units represented in person or by proxy at the Meeting is required to elect each Elected Supervisor. |
• | PROPOSAL NO. 2 – Under the Existing Partnership Agreement, the affirmative vote of holders of a majority of the issued and outstanding Common Units is required to approve the Exchange Proposal. This will also satisfy the rules of the New York Stock Exchange, under which the Exchange Proposal must receive the approval of a majority of the votes cast by the Unitholders, whether in person or by proxy, provided that the total votes cast on the Exchange Proposal represent over 50% of all Common Units entitled to vote thereon. However, under the agreement executed to effect the exchange, the Exchange Proposal must also receive approval by the holders of a majority of the issued and outstanding Common Units other than the Common Units held by any of the 40 current and former members of our management who, directly or indirectly, own our General Partner. We refer to these individuals as General Partner Members. |
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• | PROPOSAL NOS. 3-5 – Under the Existing Partnership Agreement, the affirmative vote of holders of a majority of the issued and outstanding Common Units is required to approve each of the Amendment Proposals. However, under the agreement executed to effect the exchange, the Amendment Proposals must also receive approval by the holders of a majority of the issued and outstanding Common Units other than the Common Units held by the General Partner Members. |
• | PROPOSAL NO. 6 – Under the rules of the New York Stock Exchange, the affirmative vote of a majority of the votes cast by the Unitholders, whether in person or by proxy, provided that the total votes cast on the proposal represent at least 50% of all Common Units entitled to vote thereon, is required to approve the Restricted Unit Plan Proposal. |
• | PROPOSAL NO. 7 – The affirmative vote of a majority of the votes cast by the Unitholders, whether in person or by proxy, is required to approve the Adjournment Proposal. |
Neither the Exchange Proposal (Proposal No. 2) nor the Exchange-Related Amendment Proposal (Proposal No. 3) will be effective, unless BOTH proposals are approved by the Unitholders. The approval of Proposal Nos. 4 and 5 is NOT required for the effectiveness of Proposal Nos. 2 and 3.
Because the affirmative vote of the holders of a majority of the outstanding Common Units of Suburban is needed to adopt the Exchange Proposal (Proposal No. 2) and the Amendment Proposals (Proposal Nos. 3-5), the failure to submit your proxy or vote in person will have the same effect as a vote ‘‘against’’ the adoption of these proposals. Abstentions and broker non-votes also will have the same effect as a vote ‘‘against’’ the adoption of these proposals. In the case of Proposal Nos. 1, 6 and 7, abstentions and broker non-votes will be excluded from the vote or not treated as votes cast on such proposals.
Q: | How do I vote? |
A: You may vote by any one of three different methods:
• | In Writing. You can vote by marking, signing and dating the enclosed proxy card and returning it in the enclosed envelope. |
• | By Telephone or through the Internet. You can vote your proxies by touchtone telephone from the US or through the Internet. Please follow the instructions on the enclosed proxy card. |
• | In Person. You can vote by attending the Meeting. |
Common 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 Common Units will be voted FOR each of the proposals.
Our Board of Supervisors urges Unitholders to complete, date, sign and return the accompanying proxy card, or to submit a proxy by telephone or through the Internet by following the instructions included with your proxy card, or, in the event you hold your Common Units through a broker or other nominee, by following the separate voting instructions received from your broker or nominee. Your broker or nominee may provide proxy submission through the Internet or by telephone. Please contact your broker or nominee to determine how to vote.
Q: | What do I do if I want to change my vote? |
A: | You have the right to revoke your proxy at any time before the meeting by: |
• | Notifying our Corporate Secretary; |
• | Voting in person; or |
• | Returning a later-dated proxy card. |
Attendance at the Meeting will not, in and of itself, revoke your proxy.
Q: | What does it mean if I receive more than one proxy card? |
A: If your Common 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
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to ensure that all of your Common 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, Computershare Trust Company, N.A., at P.O. Box 43069, Providence, RI 02940-3069 or telephone 781-575-2724. The hearing impaired may contact Computershare at TDD 800-952-9245.
Q: | What do I do if my Common Units are held in ‘‘street name’’? |
A: If your Common 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 Common Units.
Q: | Who will count the votes? |
A: Representatives of Computershare Trust Company, N.A., our transfer agent and an independent tabulator, will count the votes and act as the inspector of election.
Q: | Who is bearing the cost of this proxy solicitation? |
A: We are bearing the cost of soliciting proxies for the Meeting. Innisfree M&A Incorporated has been retained to assist in the distribution of proxy materials and the solicitation of votes and will be paid a customary fee for its services totaling approximately $20,000, plus reasonable out-of-pocket expenses. In addition to using the mail, our Supervisors, officers and employees may solicit proxies by telephone, personal interview or otherwise. They will not receive additional compensation for this activity, but may be reimbursed for their reasonable out-of-pocket expenses. We will reimburse brokerage houses and other custodians, nominees and fiduciaries for reasonable out-of-pocket expenses for forwarding proxy and solicitation materials to Unitholders.
Q: | Will the independent accountants attend the Meeting? |
A: Representatives of PricewaterhouseCoopers LLP, our independent registered public accounting firm for the fiscal years ended September 24, 2005 and ending September 30, 2006, 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.
Q: | When are the Unitholder proposals for the next meeting of Unitholders due? |
A: We presently expect that our next Tri-Annual Meeting will be held in April 2009. The deadline for the submission of Unitholder proposals for inclusion in the proxy materials relating to that meeting will be October 31, 2008. Unitholders who intend to present a proposal at the 2009 Tri-Annual Meeting without inclusion of such proposal in our proxy materials are required to provide notice of such proposal to us no later than January 17, 2009. If the date of the 2009 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 our earliest possible quarterly report on Form 10-Q filed with the Securities and Exchange Commission.
Q: | Where and when will I be able to find the voting results? |
A: In addition to announcing the results at the Meeting, we 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 Annual Report on Form 10-K for our 2006 fiscal year, which we will file with the Securities and Exchange Commission in December 2006.
Q: | How can I obtain a copy of our 2005 Annual Report on Form 10-K or our 2005 Annual Report to Unitholders? |
A: We will provide an additional copy of our 2005 Annual Report on Form 10-K, including the financial statements and financial statement schedule filed therewith, and our 2005 Annual Report to Unitholders without charge, upon written request to Investor Relations, Suburban Propane Partners, L.P., One Suburban Plaza, 240 Route 10 West, P.O. Box 206, Whippany, New Jersey 07981-0206. We will furnish a requesting Unitholder with any exhibit not contained therein upon payment of a reasonable fee.
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Q: | Who can I contact for further information? |
A: If you need assistance in voting your Common Units, please call the firm assisting us in the solicitation or proxies for the Meeting:
Innisfree
M&A Incorporated
501 Madison Avenue
New York, NY
10022
Phone: (212) 750-5833
Fax: (212) 750-5799
Email:
info@innisfreema.com
Q: | What can I do if I and another Unitholder with whom I live want to receive two copies of this proxy statement? |
A: In order to reduce our printing and postage costs, Unitholders who share a single address will receive only one copy of this proxy statement at that address unless we have received instructions to the contrary from any Unitholder at that address. However, if a Unitholder residing at such an address wishes to receive a separate copy of this proxy statement or of future proxy statements (as applicable), he or she may contact Investor Relations, Suburban Propane Partners, L.P.,P.O. Box 206, Whippany, New Jersey 07981-0206. We will deliver separate copies of this proxy statement promptly upon written or oral request. If you are a Unitholder receiving multiple copies of our proxy statement, you can request to receive only one copy by contacting us in the same manner. If you own your Common Units through a bank, broker or other Unitholder of record, you may request additional or fewer copies of this proxy statement by contacting the Unitholder of record.
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SUBURBAN
We are a nationwide marketer and distributor of a diverse array of products to meet the energy needs of our customers. We specialize in propane, fuel oil and other refined fuels, as well as the marketing of natural gas and electricity in deregulated markets. To complement our core marketing and distribution operations, we install and service a variety of home comfort equipment, particularly in the areas of heating, ventilation and air conditioning. We believe, based on LP/Gas Magazine dated February 2005, that we are the third largest retail marketer of propane in the United States, measured by the retail gallons we sold in our fiscal year ended September 25, 2004. As of September 24, 2005, we were serving the energy needs of more than 1,000,000 active residential, commercial, industrial and agricultural customers through approximately 370 customer service centers in 30 states located primarily in the east and west coast regions of the United States. We sold approximately 516.0 million gallons of propane to retail customers and 244.5 million gallons of fuel oil and other refined fuels during the fiscal year ended September 24, 2005. Together with our predecessor companies, we have been continuously engaged in the retail propane business since 1928.
The business strategy of Suburban is to deliver increasing value to the holders of our Common Units (the ‘‘Unitholders’’) through initiatives, both internal and external, that are directed at achieving sustainable profitable growth and increased quarterly distributions. Our business and initiatives are subject to various risks and uncertainties. Please refer to ‘‘Risk Factors’’ beginning on page 37 of this Proxy Statement, as well as those contained in our Quarterly Report on Form 10-Q for the quarter ended June 24, 2006.
We are a publicly traded Delaware limited partnership. Our Common Units (the ‘‘Common Units’’) have been listed on the New York Stock Exchange (the ‘‘NYSE’’) since March 1996. We conduct our business principally through Suburban Propane, L.P. (the ‘‘Operating Partnership’’) and its direct and indirect subsidiaries. The Operating Partnership also is a Delaware limited partnership. We own all of the limited partner interests in the Operating Partnership.
Our general partner, Suburban Energy Services Group LLC (the ‘‘General Partner’’), is a Delaware limited liability company owned, directly and through Suburban Energy Membership LLC (‘‘LLC 2’’), another Delaware limited liability company, by 40 current and former members of the management of Suburban. In this Proxy Statement, we refer to these individuals as the General Partner Members and we refer to holders of Common Units who are not General Partner Members as the Unaffiliated Unitholders. The General Partner owns an approximate 0.74% general partner interest in Suburban (the ‘‘MLP GP Interest’’), all the Incentive Distribution Rights in Suburban (described in more detail in ‘‘PROPOSAL NO. 2 – THE EXCHANGE – Description of the Common Units’’ on page 59) and a 1.0101% general partner interest in the Operating Partnership (the ‘‘OLP GP Interest,’’ and together with the MLP GP Interest, the ’’GP Interests’’). The General Partner does not currently own any Common Units. The General Partner has the right to appoint two members of our Board of Supervisors, whom we refer to as the Appointed Supervisors (currently Mark A. Alexander, our Chief Executive Officer, and Michael J. Dunn, Jr., our President).
Our headquarters are located at One Suburban Plaza, 240 Route 10 West, P.O. Box 206, Whippany, NJ 07981-0206 and our telephone number is (973) 887-5300.
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FORWARD-LOOKING STATEMENTS
This Proxy Statement contains forward-looking statements (‘‘Forward-Looking Statements’’) as defined in the Private Securities Litigation Reform Act of 1995 and Section 27A of the Securities Act of 1933, as amended, relating to future business expectations and predictions and financial condition and results of operations of Suburban. Some of these statements can be identified by the use of forward-looking terminology such as ‘‘prospects,’’ ‘‘outlook,’’ ‘‘believes,’’ ‘‘estimates,’’ ‘‘intends,’’ ‘‘may,’’ ‘‘will,’’ ‘‘should,’’ ‘‘anticipates,’’ ‘‘expects’’ or ‘‘plans’’ or the negative or other variation of these or similar words, or by discussion of trends and conditions, strategies or risks and uncertainties. These Forward-Looking Statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those discussed or implied in such Forward-Looking Statements (statements contained in this Proxy Statement identifying such risks and uncertainties are referred to as ‘‘Cautionary Statements’’). The risks and uncertainties and their impact on Suburban’s results include, but are not limited to, the following:
• | The impact of weather conditions on the demand for propane, fuel oil and other refined fuels, natural gas and electricity; |
• | Fluctuations in the unit cost of propane, fuel oil and other refined fuels and natural gas, and the impact of price increases on customer conservation; |
• | The ability of Suburban to compete with other suppliers of propane, fuel oil and other energy sources; |
• | The impact on the price and supply of propane, fuel oil and other refined fuels from the political, military or economic instability of the oil producing nations, war in the Middle East, global terrorism and other general economic conditions; |
• | The ability of Suburban to acquire and maintain reliable transportation for its propane, fuel oil and other refined fuels; |
• | The ability of Suburban to retain customers; |
• | The impact of energy efficiency and technology advances on the demand for propane and fuel oil; |
• | The ability of management to continue to control expenses, including the results of our recent field realignment initiative; |
• | The impact of changes in applicable statutes and government regulations, or their interpretations, including those relating to the environment and global warming and other regulatory developments, on Suburban’s business; |
• | The impact of legal proceedings on Suburban’s business; |
• | The impact of operating hazards that could adversely affect our operating results to the extent not covered by insurance; and |
• | Suburban’s ability to integrate acquired businesses successfully. |
Some of these Forward-Looking Statements are discussed in more detail in ‘‘Risk Factors’’ beginning on page 37 of this Proxy Statement. On different occasions, Suburban or its representatives have made or may make Forward-Looking Statements in other filings with the Securities and Exchange Commission (the ‘‘SEC’’), press releases or oral statements made by or with the approval of one of Suburban’s authorized executive officers. Readers are cautioned not to place undue reliance on Forward-Looking Statements, which reflect management’s view only as of the date made. Suburban undertakes no obligation to update any Forward-Looking Statement or Cautionary Statement. All subsequent written and oral Forward-Looking Statements attributable to Suburban or persons acting on its behalf are expressly qualified in their entirety by the Cautionary Statements in this Proxy Statement and in future SEC reports.
7
SUMMARY OF THE
EXCHANGE AND AMENDMENT PROPOSALS
(PROPOSAL NOS.
2-5)
This summary highlights certain information from this Proxy Statement and may not contain all the information that is important to you. Accordingly, we encourage you to carefully read this entire document, including the Appendices, and the documents that are incorporated by reference. You may obtain a copy of the documents that we have incorporated by reference without charge by following the instructions in the section entitled, ‘‘Additional Information for Unitholders’’ beginning on page 74 of this Proxy Statement. We have included page references in this summary to direct you to more complete descriptions of the topics presented in this summary.
The Exchange (see page 41)
On July 27, 2006, Suburban, the Operating Partnership and the General Partner entered into the Exchange Agreement, which is the legal document governing the proposed Exchange. Under the terms of the Exchange Agreement, Suburban will issue 2,300,000 Common Units to the General Partner in exchange for cancellation of all outstanding Incentive Distribution Rights, the entire economic interest included in the MLP GP Interest and the entire economic interest included in the OLP GP Interest (the ‘‘Exchange’’). Upon completion of the Exchange and the Distribution referred to below:
• | The number of outstanding Common Units will be increased to 32,614,262. |
• | No Incentive Distribution Rights will be outstanding and no provisions for future Incentive Distribution Rights will be contained in the Restated Partnership Agreement. The Unitholders (including the General Partner Members) will hold 100% of the limited partner interests in Suburban. |
• | The General Partner will continue to be the general partner of both Suburban and the Operating Partnership, but its general partner interests will have no economic value (by which we mean that such general partner interests will not entitle the holder thereof to any cash distributions of either partnership, or to any cash payment upon the liquidation of either partnership, or any other economic rights in either partnership). |
• | Suburban will continue to own all of the limited partner interests in the Operating Partnership, but 0.1% thereof will be held through a newly-organized limited liability company, wholly-owned (directly and indirectly) by Suburban (‘‘New LLC’’), rather than directly by Suburban. |
On July 27, 2006, Suburban, the Operating Partnership, the General Partner, LLC 2 and certain General Partner Members entered into a Distribution, Release and Lockup Agreement (the ‘‘Distribution Agreement’’) in connection with the proposed Exchange. Under the terms of the Distribution Agreement, the General Partner will distribute to the General Partner Members all of the 2,300,000 Common Units it receives in the Exchange, other than 784 Common Units that the General Partner will retain (the ‘‘Distribution’’). The General Partner Members have agreed to certain restrictions on the transfer of the Common Units they receive. See ‘‘Interests of Certain Persons in the Exchange’’ below.
Please refer to ‘‘Current Ownership and Ownership Following the Exchange’’ below.
The Exchange Agreement is attached to this Proxy Statement as Appendix A. Please read the Exchange Agreement in its entirety. For summaries of the Exchange Agreement and the Distribution Agreement, please see the section entitled ‘‘PROPOSAL NO. 2 – THE EXCHANGE PROPOSAL – The Exchange Agreement’’ and ‘‘– The Distribution Agreement’’ beginning on page 43 of this Proxy Statement.
Recommendation of our Board of Supervisors and Reasons for the Exchange and Amendment Proposals (see pages 49, 64, 65 and 66)
Upon the unanimous recommendation of our Audit Committee, the Board of Supervisors has unanimously approved the Exchange Proposal and the Amendment Proposals and recommends a vote
8
FOR each of these proposals at the 2006 Tri-Annual Meeting of Unitholders or any adjournment or postponement thereof (the ‘‘Meeting’’). It is important to note that neither the Exchange Proposal nor the Exchange-Related Amendment Proposal (Proposal No. 3) will be effective unless BOTH proposals are approved by the Unitholders. The approval of Proposal Nos. 4 and 5 is NOT required for the effectiveness of Proposal Nos. 2 and 3. Our Board of Supervisors believes that the Exchange Proposal and the Amendment Proposals are in the best interests of Suburban and our Unitholders.
Our Board of Supervisors is recommending the Exchange and the Exchange-Related Amendments because:
• | The Exchange will simplify our capital structure and lower our future cost of equity capital for the benefit of our Unitholders and in support of our long-term growth strategies. When we say that the Exchange will lower our future cost of equity capital, we mean that, because of the elimination of the Incentive Distribution Rights, the total amount of incremental distributable cash that Suburban would need to generate to pay the current quarterly distribution on additional Common Units would decrease. |
• | The dilutive effect of our General Partner’s disproportionate 15% share of future distribution growth resulting from its Incentive Distribution Rights will be eliminated in exchange for approximately 7% of the total Common Units to be outstanding. |
• | Our Unitholders will receive the benefit of 100% of all future distribution growth opportunities. |
• | The interests in Suburban of our senior management (many of whom are General Partner Members) will be entirely in the form of Common Units, further aligning the interests of management with those of our Unitholders. |
• | Our Unitholders will have the right to elect all our Supervisors and we will have the ability to expand the Board. |
For a discussion of the factors considered by the Board of Supervisors in making its decision to approve the Exchange and the Exchange-Related Amendments and recommend their adoption to the Unitholders, see ‘‘PROPOSAL NO. 2 – THE EXCHANGE – Reasons for the Exchange and the Exchange-Related Amendments’’ beginning on page 49 of this Proxy Statement.
Opinion of the Audit Committee’s Financial Advisor (see page 51)
Goldman, Sachs & Co. (‘‘Goldman Sachs’’) delivered its opinion to the Audit Committee of the Board of Supervisors of Suburban that, as of July 27, 2006 and based upon and subject to the factors and assumptions set forth therein, the consideration consisting of 2,300,000 Common Units to be issued by Suburban to the General Partner pursuant to the Exchange Agreement is fair from a financial point of view to the Unaffiliated Unitholders.
The full text of the written opinion of Goldman Sachs, dated July 27, 2006, which sets forth assumptions made, procedures followed, matters considered and limitations on the review undertaken in connection with the opinion, is attached to this Proxy Statement as Appendix C. Goldman Sachs provided its opinion for the information and assistance of the Audit Committee in connection with its consideration of the transactions contemplated by the Exchange Agreement. The Goldman Sachs opinion is not a recommendation as to how any Unitholder should vote with respect to the transactions contemplated by the Exchange Agreement. Pursuant to an engagement letter between the Audit Committee of the Board of Supervisors of Suburban and Goldman Sachs, Suburban has agreed to pay Goldman Sachs a transaction fee of $2,000,000, all of which is payable upon consummation of the transactions contemplated by the Exchange Agreement.
Interests of Certain Persons in the Exchange (see page 56)
In considering the recommendation of our Board of Supervisors to approve the Exchange and Amendment Proposals, you should be aware that our Appointed Supervisors and some of our executive
9
officers and other officers and key employees have interests in the Exchange that are different from, or in addition to, those of Unitholders generally, including the following:
• | The General Partner is owned, directly and indirectly, by 40 current and former members of the management of Suburban. Among the General Partner Members are Messrs. Alexander and Dunn (the Appointed Supervisors), as well as other executive officers of Suburban. |
• | Following closing of the Exchange, Suburban will file a registration statement with respect to resale of the 2,300,000 Common Units issued to the General Partner. Upon effectiveness of the registration statement, these Common Units will be distributed to the General Partner Members based upon their direct and indirect interests in the General Partner. The Appointed Supervisors and other named executive officers of Suburban will receive the following numbers of Common Units: Mark A. Alexander – 1,026,010 (including 784 Common Units to be retained by the General Partner), Michael J. Dunn, Jr. – 168,216, Robert M. Plante – 82,038 and Jeffrey S. Jolly – 92,641. |
• | Each of the General Partner Members has agreed to restrictions on the transfer of the Common Units he or she receives. Each of Messrs. Alexander and Dunn has agreed not to transfer any of the Common Units received by him in the Distribution for a period of two years following the consummation of the Exchange, and each of the other General Partner Members has agreed not to transfer any of the Common Units received by him or her in the Distribution for a period of 90 days following the consummation of the Exchange, subject to certain exceptions. |
Material U.S. Federal Income Tax Consequences of the Exchange (see page 57)
Existing Unitholders should generally not recognize any gain or loss for federal income tax purposes upon the effectiveness of the Exchange. However, Suburban estimates that if the Exchange becomes effective, it will result in an increase in the amount of net income (or a decrease in the amount of net loss) allocable to our current Unitholders. Suburban estimates that existing Unitholders will be allocated, on a cumulative basis, up to $0.37 more net income (or less net loss) per Common Unit during the period from the date the Exchange becomes effective through December 31, 2008 as a result of the effectiveness of the Exchange. After 2008, Suburban estimates that existing Unitholders will be allocated less net income (or more net loss) than they would have been allocated in the absence of the Exchange.
For more information concerning the U.S. federal income tax consequences of the Exchange, see ‘‘PROPOSAL NO. 2 – THE EXCHANGE – Material U.S. Federal Income Tax Consequences of the Exchange’’ beginning on page 57 of this Proxy Statement.
Tax matters are very complicated and the consequences of the Exchange to any particular Unitholder will depend on that Unitholder’s particular facts and circumstances. Unitholders are strongly urged to consult their own tax advisors to determine their own tax consequences from the Exchange.
Conditions and Termination Provisions (see page 44)
The obligations of each of Suburban and the General Partner, respectively, to complete the Exchange are subject to:
• | the approval of the Exchange (Proposal No. 2) and the Exchange-Related Amendment Proposal (Proposal No. 3) by (1) the holders of a majority of the outstanding Common Units and (2) the holders of a majority of the outstanding Common Units other than the Common Units held by the General Partner Members; |
• | amendment of the partnership or operating agreements of each of Suburban, the Operating Partnership and the General Partner; and |
• | approval by the NYSE of a supplemental listing application for the Common Units to be issued to the General Partner pursuant to the Exchange. |
10
The obligations of Suburban and the Operating Partnership to complete the Exchange are subject to:
• | the accuracy of the General Partner’s representations and warranties as of the closing and delivery of an officer’s certificate relating thereto; and |
• | the absence of a material adverse effect on the business, assets, condition (financial or otherwise) or prospects of Suburban and its subsidiaries, taken as a whole, since July 27, 2006. |
The obligations of the General Partner to complete the Exchange are subject to the accuracy of Suburban’s and the Operating Partnership’s representations and warranties as of the closing and delivery of officer’s certificates relating thereto.
The Exchange Agreement will automatically terminate if the Exchange (Proposal No. 2) and the Exchange-Related Amendment Proposal (Proposal No. 3) are not approved by Unitholders at the Meeting. In addition, either Suburban (acting at the direction of the Audit Committee) or the General Partner may terminate the Exchange Agreement if the closing has not occurred by December 31, 2006.
Amendments to the Existing Partnership Agreement (see pages 62, 65 and 66)
On July 27, 2006, the Board of Supervisors unanimously approved an amendment and restatement of the Existing Partnership Agreement, as described below in Proposal Nos. 3-5. Our Board of Supervisors is recommending that the Unitholders approve the Restated Partnership Agreement. The description set forth below in Proposal Nos. 3-5 of the amendments to the Existing Partnership Agreement, as reflected in the Restated Partnership Agreement, is qualified in its entirety by the full text of the Restated Partnership Agreement, a copy of which is attached hereto as Appendix D and which we encourage you to read. If any of Proposal Nos. 3-5 is not approved by Unitholders, the amendments reflected in the Restated Partnership Agreement which are the subject of the Proposal(s) not approved will not be made.
• | Proposal No. 3 (Exchange-Related Amendments): If approved, the Restated Partnership Agreement would include various amendments necessary to effect or reflect the Exchange. In addition, the Restated Partnership Agreement would provide for a minimum of five and a maximum of eleven Supervisors, as determined from time to time by the Board, all of whom would be elected by the Unitholders. The Existing Partnership Agreement sets the number of members of the Board of Supervisors at five, two appointed by the General Partner and three elected by the Unitholders. |
It is important to note that neither the Exchange Proposal (Proposal No. 2) nor the Exchange-Related Amendment Proposal (Proposal No. 3) will be effective unless BOTH proposals are approved by the Unitholders. The approval of Proposal Nos. 4 and 5 is NOT required for the effectiveness of Proposal Nos. 2 and 3.
• | Proposal No. 4 (Restrictions on Business Combinations with Certain Interested Unitholders): If approved, the Restated Partnership Agreement would include a provision based on Section 203 of the Delaware General Corporation Law. This provision would generally prohibit Suburban from engaging in a business combination with an interested Unitholder for a period of three years following the date the person became an interested Unitholder, unless: (i) prior to the date of the transaction pursuant to which a person becomes an interested Unitholder, the Board of Supervisors approved such transaction; (ii) the Unitholder owned at least 85% of the Common Units outstanding at the time such transaction commenced, excluding for purposes of determining the number of Common Units outstanding, Common Units owned by persons who are Supervisors or officers; or (iii) on or subsequent to the date of the transaction, the business combination is approved by the Board of Supervisors and authorized at an annual or special meeting of Unitholders by the affirmative vote of holders of at least 66 2/3% of the outstanding Common Units that are not owned by the interested Unitholder. A ‘‘business combination’’ would be defined generally as a merger, asset or stock sale or other transaction resulting in a financial benefit to the interested Unitholder. An ‘‘interested Unitholder’’ would be defined generally as a person who, together with affiliates and associates, owns or, within three years prior to the determination of interested Unitholder status, owned 15% or more of the Common Units. |
11
Under Proposal No. 4, amendments to the provisions of the Restated Partnership Agreement relating to business combinations with interested Unitholders and any definitions used in such provisions, would require the approval of the holders of at least 66 2/3% of the outstanding Common Units.
While the adoption of Proposal No. 4 may have an anti-takeover effect with respect to transactions the Board of Supervisors does not approve in advance, if Proposal No. 4 is approved, an existing provision limiting the voting rights of a Unitholder who beneficially owns more than 20% of the total Common Units will be eliminated.
• | Proposal No. 5 (Supermajority Vote for Change to Procedure to Nominate Supervisors): If approved, the Restated Partnership Agreement would require the approval of the holders of at least 66 2/3%, rather than a majority, of the outstanding Common Units to amend the provisions relating to nomination of Supervisors by Unitholders and any definitions used in such provisions. |
12
Current Ownership and Ownership Following the Exchange
The following charts show the current and post-Exchange ownership of Suburban and the Operating Partnership (based on the number of Common Units outstanding as of the Record Date).
13
Price Range of Common Units and Quarterly Cash Distributions
The following table presents, for the periods indicated, the high and low sales prices per Common Unit, as reported on the NYSE. The last reported sales price of Common Units on the NYSE on August 15, 2006 was $35.27 per Common Unit.
Fiscal 2006 | Fiscal 2005 | Fiscal 2004 | ||||||||||||||||||||||||||||||||||
Quarter | High | Low | High | Low | High | Low | ||||||||||||||||||||||||||||||
First | $ | 29.68 |
|
$ | 23.51 |
|
$ | 35.70 |
|
$ | 30.00 |
|
$ | 32.49 |
|
$ | 28.75 |
|
||||||||||||||||||
Second | $ | 30.23 |
|
$ | 24.90 |
|
$ | 36.00 |
|
$ | 33.45 |
|
$ | 34.50 |
|
$ | 31.05 |
|
||||||||||||||||||
Third | $ | 31.09 |
|
$ | 27.70 |
|
$ | 35.70 |
|
$ | 31.55 |
|
$ | 33.97 |
|
$ | 27.60 |
|
||||||||||||||||||
Fourth (1) | $ | 35.55 |
|
$ | 30.80 |
|
$ | 37.40 |
|
$ | 25.39 |
|
$ | 35.50 |
|
$ | 32.00 |
|
||||||||||||||||||
(1) | Fourth quarter of fiscal 2006 high and low sales prices reflect the period from June 25, 2006 to August 15, 2006. |
The following table sets forth the quarterly cash distributions declared and, except for the distribution in respect of the fourth quarter of fiscal 2006, paid to the Unitholders, on the one hand, and to the General Partner in respect of the GP Interests and the Incentive Distribution Rights, on the other hand, in respect of each quarter in fiscal 2003 through fiscal 2006 (dollars in thousands):
Distributions Per Unit |
Common Units Outstanding |
Distributions on Common Units |
Percentage of Total Distributions |
Distributions to General Partner for GP Interests |
Percentage of Total Distributions |
Distributions to General Partner for Incentive Distribution Rights |
Percentage of Total Distributions |
Total Distributions |
|||||||||||||||||||||||||||||||||||||
2003 | |||||||||||||||||||||||||||||||||||||||||||||
1st Quarter | $ | 0.5750 |
|
24,631,287 |
|
$ | 14,163 |
|
97.45% | $ | 276 |
|
1.90% | $ | 94 |
|
0.65% | $ | 14,533 |
|
|||||||||||||||||||||||||
2nd Quarter | $ | 0.5750 |
|
24,631,287 |
|
$ | 14,163 |
|
97.45% | $ | 276 |
|
1.90% | $ | 94 |
|
0.65% | $ | 14,533 |
|
|||||||||||||||||||||||||
3rd Quarter | $ | 0.5875 |
|
27,256,162 |
|
$ | 16,013 |
|
97.24% | $ | 298 |
|
1.81% | $ | 156 |
|
0.95% | $ | 16,467 |
|
|||||||||||||||||||||||||
4th Quarter | $ | 0.5875 |
|
27,256,162 |
|
$ | 16,013 |
|
97.24% | $ | 298 |
|
1.81% | $ | 156 |
|
0.95% | $ | 16,467 |
|
|||||||||||||||||||||||||
2004 |
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||
1st Quarter | $ | 0.5875 |
|
30,256,767 |
|
$ | 17,776 |
|
97.32% | $ | 316 |
|
1.73% | $ | 173 |
|
0.95% | $ | 18,265 |
|
|||||||||||||||||||||||||
2nd Quarter | $ | 0.6000 |
|
30,256,767 |
|
$ | 18,154 |
|
97.04% | $ | 324 |
|
1.73% | $ | 230 |
|
1.23% | $ | 18,708 |
|
|||||||||||||||||||||||||
3rd Quarter | $ | 0.6125 |
|
30,256,767 |
|
$ | 18,532 |
|
96.77% | $ | 331 |
|
1.73% | $ | 288 |
|
1.50% | $ | 19,151 |
|
|||||||||||||||||||||||||
4th Quarter | $ | 0.6125 |
|
30,264,822 |
|
$ | 18,537 |
|
96.77% | $ | 331 |
|
1.73% | $ | 288 |
|
1.50% | $ | 19,156 |
|
|||||||||||||||||||||||||
2005 |
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||
1st Quarter | $ | 0.6125 |
|
30,276,411 |
|
$ | 18,544 |
|
96.77% | $ | 331 |
|
1.73% | $ | 288 |
|
1.50% | $ | 19,163 |
|
|||||||||||||||||||||||||
2nd Quarter | $ | 0.6125 |
|
30,278,241 |
|
$ | 18,545 |
|
96.77% | $ | 331 |
|
1.73% | $ | 288 |
|
1.50% | $ | 19,164 |
|
|||||||||||||||||||||||||
3rd Quarter | $ | 0.6125 |
|
30,278,241 |
|
$ | 18,545 |
|
96.77% | $ | 331 |
|
1.73% | $ | 288 |
|
1.50% | $ | 19,164 |
|
|||||||||||||||||||||||||
4th Quarter | $ | 0.6125 |
|
30,312,432 |
|
$ | 18,566 |
|
96.77% | $ | 331 |
|
1.73% | $ | 289 |
|
1.50% | $ | 19,186 |
|
|||||||||||||||||||||||||
2006 |
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||
1st Quarter | $ | 0.6125 |
|
30,312,432 |
|
$ | 18,566 |
|
96.77% | $ | 331 |
|
1.73% | $ | 289 |
|
1.50% | $ | 19,186 |
|
|||||||||||||||||||||||||
2nd Quarter (1) | $ | 0.6125 |
|
30,314,262 |
|
$ | 18,567 |
|
96.77% | $ | 331 |
|
1.73% | $ | 289 |
|
1.50% | $ | 19,187 |
|
|||||||||||||||||||||||||
3rd Quarter | $ | 0.6375 |
|
30,314,262 |
|
$ | 19,325 |
|
96.26% | $ | 346 |
|
1.73% | $ | 404 |
|
2.01% | $ | 20,075 |
|
|||||||||||||||||||||||||
4th Quarter (2) | $ | 0.6625 |
|
30,314,262 |
|
$ | 20,083 |
|
95.80% | $ | 361 |
|
1.72% | $ | 519 |
|
2.48% | $ | 20,963 |
|
|||||||||||||||||||||||||
(1) | In the second quarter of fiscal 2006, Suburban paid $0.3 million to the General Partner as a true-up of the cumulative amount of underpayments resulting from an error in the computation of quarterly cash distributions to the General Partner. The amounts in the table are presented as if the correct amounts had been distributed to the General Partner in the applicable quarters. |
(2) | On July 27, 2006, Suburban declared a quarterly distribution of $0.6625 per Common Unit, which will be payable in respect of the fourth quarter of fiscal 2006 on November 14, 2006 to Unitholders of record on November 7, 2006. The entries in this row for the fourth quarter of fiscal 2006 are calculated based on the number of Common Units currently outstanding and without regard to the Exchange. If the Exchange is completed prior to the record date for the distribution, the number of Common Units outstanding will be 32,614,262 and the total amount of the distribution will be $21,606,949, all of which will be paid to the Unitholders (including General Partner Members). |
14
Summary Historical and Pro Forma Financial and Other Data
The following table presents our summary financial data for the periods ended and as of the dates indicated. We derived the historical data for the fiscal years ended September 24, 2005, September 25, 2004 and September 27, 2003 and as of those dates from our audited consolidated financial statements. We derived the historical data for the nine months ended June 24, 2006 and June 25, 2005 and as of those dates from our unaudited interim consolidated financial statements. The results for the interim periods are not necessarily indicative of the results that can be expected for a full fiscal year. The pro forma financial data for the fiscal year ended September 24, 2005 and for the nine months ended June 24, 2006 reflect the impact of the Exchange as if it had occurred on September 26, 2004 (the beginning of fiscal 2005). The pro forma balance sheet data as of September 24, 2005 and June 24, 2006 reflect the unaudited pro forma effect on partners’ capital as if the Exchange had occurred on those dates. All amounts in the table below, except per unit data, are in thousands.
Year Ended | Nine Months Ended | |||||||||||||||||||||||||||||||||||||||||
Pro
Forma Sept. 24, 2005 (a) |
Sept.
24, 2005 |
Sept. 25, 2004 (b) |
Sept.
27, 2003 |
Pro Forma June 24, 2006 (a) |
June
24, 2006 |
June
25, 2005 |
||||||||||||||||||||||||||||||||||||
Statement of Operations Data |
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||
Revenues | $ | 1,620,234 |
|
$ | 1,620,234 |
|
$ | 1,307,254 |
|
$ | 735,075 |
|
$ | 1,382,404 |
|
$ | 1,382,404 |
|
$ | 1,338,595 |
|
|||||||||||||||||||||
Costs and expenses | 1,548,436 |
|
1,548,436 |
|
1,231,356 |
|
655,225 |
|
1,234,660 |
|
1,234,660 |
|
1,241,636 |
|
||||||||||||||||||||||||||||
Restructuring costs (c) | 2,775 |
|
2,775 |
|
2,942 |
|
— |
|
4,427 |
|
4,427 |
|
625 |
|
||||||||||||||||||||||||||||
Impairment of goodwill (d) | 656 |
|
656 |
|
3,177 |
|
— |
|
— |
|
— |
|
— |
|
||||||||||||||||||||||||||||
Income before interest expense, loss on debt extinguishment and provision for income taxes (e) | 68,367 |
|
68,367 |
|
69,779 |
|
79,850 |
|
143,317 |
|
143,317 |
|
96,334 |
|
||||||||||||||||||||||||||||
Loss on debt extinguishment (f) | 36,242 |
|
36,242 |
|
— |
|
— |
|
— |
|
— |
|
36,242 |
|
||||||||||||||||||||||||||||
Interest expense, net | 40,374 |
|
40,374 |
|
40,832 |
|
33,629 |
|
31,192 |
|
31,192 |
|
30,286 |
|
||||||||||||||||||||||||||||
Provision for income taxes | 803 |
|
803 |
|
3 |
|
202 |
|
354 |
|
354 |
|
336 |
|
||||||||||||||||||||||||||||
(Loss) income from continuing operations (e) | (9,052 |
)
|
(9,052 |
)
|
28,944 |
|
46,019 |
|
111,771 |
|
111,771 |
|
29,470 |
|
||||||||||||||||||||||||||||
Discontinued operations: |
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||
Gain on sale of customer service centers (g) | 976 |
|
976 |
|
26,332 |
|
2,483 |
|
— |
|
— |
|
976 |
|
||||||||||||||||||||||||||||
(Loss) income from discontinued customer service centers | — |
|
— |
|
(972 |
)
|
167 |
|
— |
|
— |
|
— |
|
||||||||||||||||||||||||||||
Net (loss) income (e) | (8,076 |
)
|
(8,076 |
)
|
54,304 |
|
48,669 |
|
111,771 |
|
111,771 |
|
30,446 |
|
||||||||||||||||||||||||||||
(Loss) income from continuing operations per Common Unit – basic | (0.28 |
)
|
(0.29 |
)
|
0.96 |
|
1.77 |
|
3.43 |
|
3.37 |
|
0.94 |
|
||||||||||||||||||||||||||||
Net (loss) income per Common Unit – basic (h) | (0.25 |
)
|
(0.26 |
)
|
1.79 |
|
1.87 |
|
3.43 |
|
3.37 |
|
0.97 |
|
||||||||||||||||||||||||||||
Net (loss) income per Common Unit – diluted (h) | (0.25 |
)
|
(0.26 |
)
|
1.78 |
|
1.86 |
|
3.41 |
|
3.35 |
|
0.97 |
|
||||||||||||||||||||||||||||
Cash distributions declared per Common Unit | $ | 2.45 |
|
$ | 2.45 |
|
$ | 2.41 |
|
$ | 2.33 |
|
$ | 1.86 |
|
$ | 1.86 |
|
$ | 1.84 |
|
|||||||||||||||||||||
Balance Sheet Data (end of period) |
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||
Cash and cash equivalents | $ | 14,411 |
|
$ | 14,411 |
|
$ | 53,481 |
|
$ | 15,765 |
|
$ | 37,876 |
|
$ | 37,876 |
|
$ | 11,208 |
|
|||||||||||||||||||||
Current assets | 236,803 |
|
236,803 |
|
252,894 |
|
98,912 |
|
232,651 |
|
232,651 |
|
219,467 |
|
||||||||||||||||||||||||||||
Total assets | 965,597 |
|
965,597 |
|
992,007 |
|
670,559 |
|
955,642 |
|
955,642 |
|
951,324 |
|
||||||||||||||||||||||||||||
Current liabilities, excluding short-term borrowings and current portion of long-term borrowings | 194,987 |
|
194,987 |
|
202,024 |
|
94,802 |
|
142,063 |
|
142,063 |
|
137,593 |
|
||||||||||||||||||||||||||||
Total debt | 575,295 |
|
575,295 |
|
515,915 |
|
383,826 |
|
548,245 |
|
548,245 |
|
563,736 |
|
||||||||||||||||||||||||||||
Other long-term liabilities | 119,199 |
|
119,199 |
|
105,950 |
|
107,853 |
|
129,315 |
|
129,315 |
|
119,590 |
|
||||||||||||||||||||||||||||
Partners’ capital – Unitholders | 157,420 |
|
159,199 |
|
238,880 |
|
165,950 |
|
208,715 |
|
209,052 |
|
215,413 |
|
||||||||||||||||||||||||||||
Partners’ capital – General Partner | $ | — |
|
$ | (1,779 |
)
|
$ | 852 |
|
$ | 1,567 |
|
$ | — |
|
$ | (337 |
)
|
$ | 13 |
|
|||||||||||||||||||||
Statement of Cash Flows Data |
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||
Cash provided by (used in) |
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||
Operating activities | $ | 39,005 |
|
$ | 39,005 |
|
$ | 93,065 |
|
$ | 57,300 |
|
$ | 120,884 |
|
$ | 120,884 |
|
$ | 22,287 |
|
|||||||||||||||||||||
Investing activities | (24,631 |
)
|
(24,631 |
)
|
(196,557 |
)
|
(4,859 |
)
|
(12,425 |
)
|
(12,425 |
)
|
(19,126 |
)
|
||||||||||||||||||||||||||||
Financing activities | $ | (56,699 |
)
|
$ | (53,444 |
)
|
$ | 141,208 |
|
$ | (77,631 |
)
|
$ | (87,151 |
)
|
$ | (84,994 |
)
|
$ | (45,434 |
)
|
|||||||||||||||||||||
15
Year Ended | Nine Months Ended | |||||||||||||||||||||||||||||||||||||||||
Pro
Forma Sept. 24, 2005 (a) |
Sept.
24, 2005 |
Sept. 25, 2004 (b) |
Sept.
27, 2003 |
Pro Forma June 24, 2006 (a) |
June
24, 2006 |
June
25, 2005 |
||||||||||||||||||||||||||||||||||||
Other Data |
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||
Depreciation and amortization | $ | 37,762 |
|
$ | 37,762 |
|
$ | 36,743 |
|
$ | 27,520 |
|
$ | 24,865 |
|
$ | 24,865 |
|
$ | 27,513 |
|
|||||||||||||||||||||
EBITDA and Adjusted EBITDA (i) | 107,105 |
|
107,105 |
|
131,882 |
|
110,020 |
|
168,182 |
|
168,182 |
|
124,823 |
|
||||||||||||||||||||||||||||
Capital expenditures – maintenance and growth (j) | 29,301 |
|
29,301 |
|
26,527 |
|
14,050 |
|
15,303 |
|
15,303 |
|
23,130 |
|
||||||||||||||||||||||||||||
Acquisitions | $ | — |
|
$ | — |
|
$ | 211,181 |
|
$ | — |
|
$ | — |
|
$ | — |
|
$ | — |
|
|||||||||||||||||||||
Retail gallons sold |
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||
Propane | 516,040 |
|
516,040 |
|
537,330 |
|
491,451 |
|
391,319 |
|
391,319 |
|
438,912 |
|
||||||||||||||||||||||||||||
Fuel oil and refined fuels | 244,536 |
|
244,536 |
|
220,469 |
|
— |
|
125,078 |
|
125,078 |
|
207,260 |
|
||||||||||||||||||||||||||||
(a) | The pro forma financial data for the fiscal year ended September 24, 2005 and for the nine months ended June 24, 2006 represents the unaudited pro forma effect on our cash distributions and net income (loss) per Common Unit as if the Exchange had occurred on September 26, 2004 (the beginning of fiscal 2005). The pro forma balance sheet data as of September 24, 2005 and June 24, 2006 reflect the unaudited pro forma effect on partners’ capital as if the Exchange had occurred on those dates. The unaudited pro forma financial data does not give effect to any financial advisory, legal or accounting fees to be incurred as a result of the Exchange subsequent to June 24, 2006. The pro forma adjustments are as follows (amounts in thousands, except per unit data): |
Pro
Forma Fiscal Year Ended September 24, 2005 |
Pro Forma
Nine Months Ended June 24, 2006 |
|||||||||||||||||||||||||||||
As Reported |
Adjustments | Pro Forma |
As Reported |
Adjustments | Pro Forma |
|||||||||||||||||||||||||
Net (loss) income | $ | (8,076 |
)
|
$ — | $ | (8,076 |
)
|
$ | 111,771 |
|
$ — | $ | 111,771 |
|
||||||||||||||||
General Partner’s interest in net (loss) income | (251 |
)
|
251(i) | — |
|
3,511 |
|
(3,511)(i) | — |
|
||||||||||||||||||||
Limited Partners’ interest in net (loss) income | (7,825 |
)
|
(251)(i) | (8,076 |
)
|
108,260 |
|
3,511(i) | 111,771 |
|
||||||||||||||||||||
(Loss) income from continuing operations per Common Unit – basic | (0.29 |
)
|
0.01(ii) | (0.28 |
)
|
3.37 |
|
0.06(ii) | 3.43 |
|
||||||||||||||||||||
Net (loss) income per Common Unit – basic | (0.26 |
)
|
0.01(ii) | (0.25 |
)
|
3.37 |
|
0.06(ii) | 3.43 |
|
||||||||||||||||||||
Net (loss) income per Common Unit – diluted | (0.26 |
)
|
0.01(ii) | (0.25 |
)
|
3.35 |
|
0.06(ii) | 3.41 |
|
||||||||||||||||||||
Partners’ capital – Unitholders | 159,199 |
|
(1,779)(iii) | 157,420 |
|
209,052 |
|
(337)(iii) | 208,715 |
|
||||||||||||||||||||
Partners’ capital – General Partner | (1,779 |
)
|
1,779(iii) | — |
|
(337 |
)
|
337(iii) | — |
|
||||||||||||||||||||
Cash (used in) financing activities | $ | (53,444 |
)
|
$(3,255)(iv) | $ | (56,699 |
)
|
$ | (84,994 |
)
|
$(2,157)(iv) | $ | (87,151 |
)
|
||||||||||||||||
(i) | Reflects the elimination of the General Partner’s share of reported net income or loss as a result of the elimination of the General Partner’s Incentive Distributive Rights and the economic interests included in its general partner interests in Suburban and its Operating Partnership. |
(ii) | Reflects the impact on net (loss) income per Common Unit from eliminating the General Partner’s share of net income or loss and the impact of allocating the entire net income or loss to the Common Units to be outstanding after giving pro forma effect to the Exchange. For the nine months ended June 24, 2006, the pro forma adjustment also reflects the elimination of our requirement to compute earnings per Common Unit in accordance with the two-class method under Emerging Issues Task Force consensus 03-6 ‘‘Participating Securities and the |
16
Two-Class Method Under FAS 128’’ (‘‘EITF 03-6’’) as a result of the elimination of the General Partner’s Incentive Distribution Rights as further described in (h) below. |
(iii) | Reflects the net adjustment to partners’ capital from the elimination of the General Partner’s capital account in exchange for the issuance of 2,300,000 Common Units. |
(iv) | Reflects the pro forma effect on cash distributions paid by Suburban, as reported within cash flow used in financing activities in the consolidated statement of cash flows, from the net effect of eliminating cash distributions to the General Partner in exchange for cash distributions on the newly issued Common Units under the Exchange. For purposes of the pro forma cash distribution adjustment, we used the quarterly distribution rates in effect during the periods presented. |
(b) | Includes the results from our acquisition of substantially all of the assets and operations of Agway Energy Products, LLC (‘‘Agway’’) from December 23, 2003, the date of acquisition. |
(c) | During fiscal 2005, we incurred $2.8 million in restructuring charges associated primarily with severance costs from an internal realignment of our field operations. During fiscal 2004, we incurred $2.9 million in restructuring charges to integrate our assets, employees and operations with Agway assets, employees and operations. During the nine months ended June 24, 2006, we incurred $4.4 million in restructuring charges related primarily to additional severance costs associated with our field realignment efforts which began during the fourth quarter of fiscal 2005, including the elimination of nearly 200 positions in our HVAC segment during the third quarter of fiscal 2006 related to our decision to restructure our HVAC service offerings in furtherance of our efforts to streamline the field operations. |
(d) | During fiscal 2005, we recorded a non-cash charge of $0.7 million related to the impairment of goodwill in our HVAC segment. During fiscal 2004, we recorded a non-cash charge of $3.2 million related to impairment of goodwill for one of our reporting units acquired in fiscal 1999. |
(e) | These amounts include, in addition to the gain on sale of customer service centers, gains from the disposal of property, plant and equipment of $2.0 million for fiscal 2005, $0.7 million for fiscal 2004, $0.6 million for fiscal 2003, $1.2 million for the nine months ended June 24, 2006 and $1.9 million for the nine months ended June 25, 2005. |
(f) | During fiscal 2005, we incurred a one-time charge of $36.2 million as a result of our March 2005 debt refinancing to reflect the loss on debt extinguishment associated with a prepayment premium of $32.0 million and the write-off of $4.2 million of unamortized bond issuance costs associated with previously outstanding senior notes. |
(g) | Gain on sale of customer service centers for fiscal 2005 of $1.0 million reflects the finalization of certain purchase price adjustments with the buyer of the customer service centers sold during fiscal 2004. Gain on sale of customer service centers for fiscal 2004 of $26.3 million reflects the sale of 24 customer service centers for net cash proceeds of approximately $39.4 million. Gain on sale of customer service centers for fiscal 2003 of $2.5 million reflects the sale of nine customer service centers for net cash proceeds of approximately $7.2 million. The gains on sale have been accounted for within discontinued operations pursuant to Statement of Financial Accounting Standards (‘‘SFAS’’) No. 144, ‘‘Accounting for the Impairment or Disposal of Long-Lived Assets.’’ Prior period results of operations attributable to the customer service centers sold in fiscal 2004 have been reclassified to remove financial results from continuing operations. |
(h) | Computations of earnings per Common Unit are performed in accordance with EITF 03-6, when applicable. EITF 03-6 requires, among other things, the use of the two-class method of computing earnings per unit when participating securities exist. The requirements of EITF 03-6 do not apply to the computation of earnings per Common Unit in periods in which a net loss is reported and therefore did not have any impact on loss per Common Unit for the fiscal year ended September 24, 2005. In |
17
addition, the application of EITF 03-6 did not have any impact on income per Common Unit for the fiscal years ended September 25, 2004 and September 27, 2003, or for the nine months ended June 25, 2005. |
Basic net income (loss) per Common Unit for the fiscal years ended September 24, 2005, September 25, 2004 and September 27, 2003 and for the nine months ended June 25, 2005 is computed under SFAS No. 128 ‘‘Earnings Per Share’’ (‘‘SFAS 128’’) by dividing net income (loss), after deducting the General Partner's approximate 3.7% interest, by the weighted average number of outstanding Common Units. Diluted net income (loss) per Common Unit for these same periods is computed by dividing net income (loss), after deducting the General Partner's approximate 3.7% interest, by the weighted average number of outstanding Common Units and time vested restricted units granted under our 2000 Restricted Unit Plan.
Basic income per Common Unit for the nine months ended June 24, 2006 is computed by dividing the limited partners’ share of income, calculated under the two-class method of computing earnings, by the weighted average number of outstanding Common Units. The two-class method is an earnings allocation formula that computes earnings per unit for each class of Common Unit and participating security according to distributions declared and the participating rights in undistributed earnings, as if all of the earnings were distributed to the limited partners and the General Partner (inclusive of the Incentive Distribution Rights of the General Partner which are considered participating securities for purposes of the two-class method). Net income is allocated to the Unitholders and the General Partner in accordance with their respective partnership ownership interests, after giving effect to any priority income allocations for Incentive Distribution Rights of the General Partner. Application of the two-class method under EITF 03-6 had a negative impact on income per Common Unit of $0.20 for the nine months ended June 24, 2006 compared to the computation under SFAS 128.
(i) | EBITDA represents net income before deducting interest expense, income taxes, depreciation and amortization. Our management uses EBITDA as a measure of liquidity and we are including it because we believe that it provides our investors and industry analysts with additional information to evaluate our ability to meet our debt service obligations and to pay our quarterly distributions to holders of our Common Units. In addition, certain of our incentive compensation plans covering executives and other employees utilize EBITDA as the performance target. We use the term Adjusted EBITDA to reflect the presentation of EBITDA for the fiscal year ended September 24, 2005 and for the nine months ended June 25, 2005 exclusive of the impact of the non-cash charge for loss on debt extinguishment in the amount of $36.2 million. We use this non-GAAP financial measure in order to assist industry analysts and investors in assessing our liquidity on a year-over-year basis. Moreover, our revolving credit agreement requires us to use EBITDA or Adjusted EBITDA as a component in calculating our leverage and interest coverage ratios. EBITDA and Adjusted EBITDA are not recognized terms under GAAP and should not be considered as alternatives to net income or net cash provided by operating activities determined in accordance with GAAP. Because EBITDA as determined by us excludes some, but not all, items that affect net income, it may not be comparable to EBITDA or similarly titled measures used by other companies. |
The following table sets forth (i) our calculations of EBITDA and Adjusted EBITDA and (ii) a reconciliation of EBITDA and Adjusted EBITDA, as so calculated, to our net cash provided by operating activities (amounts in thousands):
18
Year Ended | Nine Months Ended | |||||||||||||||||||||||||||||||||||||||||
Pro
Forma Sept. 24, 2005 |
Sept. 24, 2005 |
Sept.
25, 2004 |
Sept. 27, 2003 |
Pro Forma June 24, 2006 |
June 24, 2006 |
June
25, 2005 |
||||||||||||||||||||||||||||||||||||
Net (loss) income | $ | (8,076 |
)
|
$ | (8,076 |
)
|
$ | 54,304 |
|
$ | 48,669 |
|
$ | 111,771 |
|
$ | 111,771 |
|
$ | 30,446 |
|
|||||||||||||||||||||
Add: |
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||
Provision for income taxes | 803 |
|
803 |
|
3 |
|
202 |
|
354 |
|
354 |
|