2015 ANNUAL REPORT
Partnership Profile
A Master Limited Partnership since 1996,
Suburban Propane Partners, L.P. (NYSE:SPH)
has been in the customer service business since 1928. A
value and growth-oriented company headquartered in Whippany, New
Jersey, Suburban is managed for long-term, consistent performance.
Suburban is a nationwide marketer and distributor of a diverse array of energy-related products,
specializing in propane, fuel oil and refined fuels, as well as marketing natural gas and electricity in deregulated
markets. With approximately 3,650 full-time employees, Suburban maintains business operations in 41 states,
providing dependable service to approximately 1.1 million residential, commercial, industrial and agricultural
customers through 700 company-owned locations.
According to Department of Energy statistics, approximately 5 percent of U.S. households depend on propane
as their primary space heating fuel and about 5 percent utilize fuel oil as their main heating fuel. Propane is an
abundant, clean-burning, environmentally safe fuel with 100 percent of Suburban’s supply produced in North
America.
As one of the largest retail marketers of propane in the United States, Suburban had retail propane sales of 480.4
million gallons in fiscal 2015. In addition, Suburban sold 41.9 million gallons of fuel oil and other refined fuels.
It is the mission of Suburban Propane to:
Serve our customers, employees and communities by maintaining the highest level of safety standards,
ethical principles, satisfaction and total value in all that we do.
Key Investment Considerations
• Attractive tax-advantaged current yield
• Consistent track record of cash distributions
• Investor-friendly partnership structure
• MLP is controlled by unitholders
through independently elected Board
of Supervisors
• No incentive distribution rights (IDRs)
• Low relative cost of capital
• Leading propane MLP with stable cash flows
• Diversity of geography and
customer base
• Flexible cost structure
• Strong financial position and distribution
coverage
• Experienced and proven management team
Proudly serving customers since 1928
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the fiscal year ended September 26, 2015
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Commission File Number: 1-14222
SUBURBAN PROPANE PARTNERS, L.P.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of
incorporation or organization)
22-3410353
(I.R.S. Employer
Identification No.)
240 Route 10 West
Whippany, NJ 07981
(973) 887-5300
(Address, including zip code, and telephone number,
including area code, of registrant’s principal executive offices)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Common Units
Name of each exchange on which registered
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data
File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months
(or for such shorter period that the registrant was required to submit and post such files). Yes No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange
Act. (Check one):
Large accelerated filer
Non-accelerated filer
(do not check if a smaller reporting company)
Accelerated filer
Smaller reporting company
Indicate by check mark whether registrant is a shell company (as defined in Rule 12b-2 of the Securities Exchange Act of
1934). Yes No
The aggregate market value as of March 28, 2015 of the registrant’s Common Units held by non-affiliates of the registrant, based on the
reported closing price of such units on the New York Stock Exchange on such date ($43.00 per unit), was approximately $2,600,814,000.
Documents Incorporated by Reference: None
Total number of pages (excluding Exhibits): 122
SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES
INDEX TO ANNUAL REPORT ON FORM 10-K
ITEM 1.
BUSINESS .............................................................................................................................................................
ITEM 1A.
RISK FACTORS....................................................................................................................................................
PART I
Page
1
9
ITEM 1B.
UNRESOLVED STAFF COMMENTS ................................................................................................................. 19
ITEM 2.
PROPERTIES ........................................................................................................................................................ 19
ITEM 3.
LEGAL PROCEEDINGS ...................................................................................................................................... 19
ITEM 4.
MINE SAFETY DISCLOSURES .......................................................................................................................... 19
PART II
ITEM 5.
MARKET FOR THE REGISTRANT’S COMMON UNITS, RELATED UNITHOLDER MATTERS AND
ISSUER PURCHASES OF UNITS .................................................................................................................. 20
ITEM 6.
SELECTED FINANCIAL DATA ......................................................................................................................... 21
ITEM 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS .................................................................................................................................................. 24
ITEM 7A.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK....................................... 41
ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA ....................................................................... 43
ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE .................................................................................................................................................. 45
ITEM 9A.
CONTROLS AND PROCEDURES ...................................................................................................................... 45
ITEM 9B.
OTHER INFORMATION ..................................................................................................................................... 45
PART III
ITEM 10.
DIRECTORS, EXECUTIVE OFFICERS AND PARTNERSHIP GOVERNANCE ............................................ 46
ITEM 11.
EXECUTIVE COMPENSATION ......................................................................................................................... 52
ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
UNITHOLDER MATTERS ............................................................................................................................. 79
ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE .... 81
ITEM 14.
PRINCIPAL ACCOUNTING FEES AND SERVICES ........................................................................................ 82
ITEM 15.
EXHIBITS, FINANCIAL STATEMENT SCHEDULES ..................................................................................... 83
SIGNATURES.................................................................................................................................................................................. 84
PART IV
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K contains forward-looking statements (“Forward-Looking Statements”) as defined in the Private
Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended, relating to future business expectations and predictions and financial condition and results of
operations of Suburban Propane Partners, L.P. (the “Partnership”). 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 involve 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 Annual Report
identifying such risks and uncertainties are referred to as “Cautionary Statements”). The risks and uncertainties and their impact on the
Partnership’s results include, but are not limited to, the following risks:
The impact of weather conditions on the demand for propane, fuel oil and other refined fuels, natural gas and electricity;
Volatility in the unit cost of propane, fuel oil and other refined fuels, natural gas and electricity, the impact of the Partnership’s
hedging and risk management activities, and the adverse impact of price increases on volumes sold as a result of customer
conservation;
The ability of the Partnership 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, global terrorism and other general economic conditions;
The ability of the Partnership to acquire sufficient volumes of, and the costs to the Partnership of acquiring, transporting and
storing, propane, fuel oil and other refined fuels;
The ability of the Partnership to acquire and maintain reliable transportation for its propane, fuel oil and other refined fuels;
The ability of the Partnership to retain customers or acquire new customers;
The impact of customer conservation, energy efficiency and technology advances on the demand for propane, fuel oil and other
refined fuels, natural gas and electricity;
The ability of management to continue to control expenses;
The impact of changes in applicable statutes and government regulations, or their interpretations, including those relating to the
environment and climate change, derivative instruments and other regulatory developments on the Partnership’s business;
The impact of changes in tax laws that could adversely affect the tax treatment of the Partnership for income tax purposes;
The impact of legal proceedings on the Partnership’s business;
The impact of operating hazards that could adversely affect the Partnership’s operating results to the extent not covered by
insurance;
The Partnership’s ability to make strategic acquisitions and successfully integrate them;
The impact of current conditions in the global capital and credit markets, and general economic pressures;
The operating, legal and regulatory risks the Partnership may face; and
Other risks referenced from time to time in filings with the Securities and Exchange Commission (“SEC”) and those factors
listed or incorporated by reference into this Annual Report under “Risk Factors.”
Some of these Forward-Looking Statements are discussed in more detail in “Management’s Discussion and Analysis of Financial
Condition and Results of Operations” in this Annual Report. On different occasions, the Partnership or its representatives have made or
may make Forward-Looking Statements in other filings with the SEC, press releases or oral statements made by or with the approval of
one of the Partnership’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. The Partnership undertakes no obligation to update any Forward-
Looking Statement or Cautionary Statement, except as required by law. 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 the Cautionary Statements in this
Annual Report and in future SEC reports. For a more complete discussion of specific factors which could cause actual results to differ
from those in the Forward-Looking Statements or Cautionary Statements, see “Risk Factors” in this Annual Report.
ITEM 1.
BUSINESS
Development of Business
PART I
Suburban Propane Partners, L.P. (the “Partnership”), a publicly traded Delaware limited partnership, is a nationwide marketer
and distributor of a diverse array of products meeting the energy needs of our customers. We specialize in the distribution of propane,
fuel oil and refined fuels, as well as the marketing of natural gas and electricity in deregulated markets. In support of our core
marketing and distribution operations, we install and service a variety of home comfort equipment, particularly in the areas of heating
and ventilation. We believe, based on LP/Gas Magazine dated February 2015, that we are the third largest retail marketer of propane
in the United States, measured by retail gallons sold in the calendar year 2014. As of September 26, 2015, we were serving the energy
needs of approximately 1.1 million residential, commercial, industrial and agricultural customers through 700 locations in 41 states
with operations principally concentrated in the east and west coast regions of the United States, as well as portions of the midwest
region of the United States and Alaska. We sold approximately 480.4 million gallons of propane and 41.9 million gallons of fuel oil
and refined fuels to retail customers during the year ended September 26, 2015. Together with our predecessor companies, we have
been continuously engaged in the retail propane business since 1928.
We conduct our business principally through Suburban Propane, L.P., a Delaware limited partnership, which operates our
propane business and assets (the “Operating Partnership”), and its direct and indirect subsidiaries. Our general partner, and the
general partner of our Operating Partnership, is Suburban Energy Services Group LLC (the “General Partner”), a Delaware limited
liability company whose sole member is the Chief Executive Officer of the Partnership. Since October 19, 2006, the General Partner
has no economic interest in either the Partnership or the Operating Partnership (which means that the General Partner is not entitled to
any cash distributions of either partnership, nor to any cash payment upon the liquidation of either partnership, nor any other economic
rights in either partnership) other than as a holder of 784 Common Units of the Partnership. Additionally, under the Third Amended
and Restated Agreement of Limited Partnership (the “Partnership Agreement”) of the Partnership, there are no incentive distribution
rights for the benefit of the General Partner. The Partnership owns (directly and indirectly) all of the limited partner interests in the
Operating Partnership. The Common Units represent 100% of the limited partner interests in the Partnership.
On August 1, 2012 (the “Acquisition Date”), we acquired the sole membership interest in Inergy Propane, LLC, including
certain wholly-owned subsidiaries of Inergy Propane LLC, and the assets of Inergy Sales and Service, Inc. (the “Inergy Propane
Acquisition”). The acquired interests and assets are collectively referred to as “Inergy Propane.” As of the Acquisition Date, Inergy
Propane consisted of the former retail propane assets and operations, as well as the assets and operations of the refined fuels business,
of Inergy, L.P. (“Inergy”), a publicly traded limited partnership at the time of the acquisition. On the Acquisition Date, Inergy
Propane and its remaining wholly-owned subsidiaries which we acquired in the Inergy Propane Acquisition became subsidiaries of
our Operating Partnership, but were merged into the Operating Partnership on April 30, 2013. The results of operations of Inergy
Propane are included in the Partnership’s results of operations beginning on the Acquisition Date.
With the Inergy Propane Acquisition, we effectively doubled the size of our customer base and expanded our geographic reach
into eleven new states, including establishing a presence in portions of the midwest region of the United States. The Inergy Propane
Acquisition was consistent with key elements of our business strategy to focus on businesses that complement our existing business
segments and that can extend our presence in strategically attractive markets. This acquisition has provided, and will continue to
provide, us with an opportunity to apply our operational expertise and customer-oriented initiatives to a much larger enterprise in
order to enhance our growth prospects and cash flow profile. The total cost of the Inergy Propane Acquisition, as measured by the fair
value of the total consideration, was approximately $1.9 billion.
Direct and indirect subsidiaries of the Operating Partnership include Suburban Heating Oil Partners, LLC, which owns and
operates the assets of our fuel oil and refined fuels business; Agway Energy Services, LLC, which owns and operates the assets of our
natural gas and electricity business; and Suburban Sales and Service, Inc., which conducts a portion of our service work and appliance
and parts business. Our fuel oil and refined fuels, natural gas and electricity and services businesses are structured as either limited
liability companies that are treated as corporations or corporate entities (collectively referred to as “Corporate Entities”) and, as such,
are subject to corporate level income tax.
Suburban Energy Finance Corp., a direct 100%-owned subsidiary of the Partnership, was formed on November 26, 2003 to
serve as co-issuer, jointly and severally with the Partnership, of the Partnership’s senior notes. Suburban Energy Finance Corp. has
nominal assets and conducts no business operations.
In this Annual Report, unless otherwise indicated, the terms “Partnership,” “Suburban,” “we,” “us,” and “our” are used to refer
to Suburban Propane Partners, L.P. and its consolidated subsidiaries, including the Operating Partnership. The Partnership and the
1
Operating Partnership commenced operations in March 1996 in connection with the Partnership’s initial public offering of Common
Units.
We currently file Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and current reports on Form 8-K with the
SEC. You may read and receive copies of any materials that we file with the SEC at the SEC’s Public Reference Room at 100 F
Street, N.E., Washington, D.C. 20549. You may obtain information on the operation of the Public Reference Room by calling the
SEC at 1-800-SEC-0330. Any information filed by us is also available on the SEC’s EDGAR database at www.sec.gov.
Upon written request or through an information request link from our website at www.suburbanpropane.com, we will provide,
without charge, copies of our Annual Report on Form 10-K for the year ended September 26, 2015, each of the Quarterly Reports on
Form 10-Q, current reports filed or furnished on Form 8-K and all amendments to such reports as soon as is reasonably practicable
after such reports are electronically filed with or furnished to the SEC. Requests should be directed to: Suburban Propane Partners,
L.P., Investor Relations, P.O. Box 206, Whippany, New Jersey 07981-0206. The information contained on our website is not included
as part of, or incorporated by reference into, this Annual Report on Form 10-K.
Our Strategy
Our business strategy is to deliver increasing value to our Unitholders through initiatives, both internal and external, that are
geared toward achieving sustainable profitable growth and steady or increased quarterly distributions. The following are key elements
of our strategy:
Internal Focus on Driving Operating Efficiencies, Right-Sizing Our Cost Structure and Enhancing Our Customer Mix. We
focus internally on improving the efficiency of our existing operations, managing our cost structure and improving our customer mix.
Through investments in our technology infrastructure, we continue to seek to improve operating efficiencies and the return on assets
employed. We have developed a streamlined operating footprint and management structure to facilitate effective resource planning
and decision making. Our internal efforts are particularly focused in the areas of route optimization, forecasting customer usage,
inventory control, cash management and customer tracking. In connection with the Inergy Propane Acquisition, we have developed
and effectively completed a detailed integration plan that combined the best practices of the two companies. Our strategy will include
continuing to pursue operational efficiencies while staying focused on providing exceptional service to the combined customer base.
Our systems platform is advanced and scalable and we will seek to leverage that technology for enhanced routing, forecasting and
customer relationship management.
Growing Our Customer Base by Improving Customer Retention and Acquiring New Customers. We set clear objectives to
focus our employees on seeking new customers and retaining existing customers by providing highly responsive customer service.
We believe that customer satisfaction is a critical factor in the growth and success of our operations. “Our Business is Customer
Satisfaction” is one of our core operating philosophies. We measure and reward our customer service centers based on a combination
of profitability of the individual customer service center and net customer growth. We have made investments in training our people
both on techniques to provide exceptional customer service to our existing customer base, as well as advanced sales training focused
on growing our customer base.
Selective Acquisitions of Complementary Businesses or Assets. Externally, we seek to extend our presence or diversify our
product offerings through selective acquisitions. Our acquisition strategy is to focus on businesses with a relatively steady cash flow
that will extend our presence in strategically attractive markets, complement our existing business segments or provide an opportunity
to diversify our operations. We are very patient and deliberate in evaluating acquisition candidates. Consistent with this strategy, the
Inergy Propane Acquisition, completed on August 1, 2012, was a transformative event for Suburban by expanding our geographic
reach, doubling the size of our customer base and providing us with opportunities to achieve operational synergies by combining
operations in overlapping territories and implementing our operating model and systems platform on a much larger business.
Selective Disposition of Non-Strategic Assets. We continuously evaluate our existing facilities to identify opportunities to
optimize our return on assets by selectively divesting operations in slower growing markets, generating proceeds that can be
reinvested in markets that present greater opportunities for growth. Our objective is to maximize the growth and profit potential of all
of our assets.
Business Segments
We manage and evaluate our operations in four operating segments, three of which are reportable segments: Propane, Fuel Oil
and Refined Fuels and Natural Gas and Electricity. These business segments are described below. See the Notes to the Consolidated
Financial Statements included in this Annual Report for financial information about our business segments.
2
Propane is a by-product of natural gas processing and petroleum refining. It is a clean burning energy source recognized for its
transportability and ease of use relative to alternative forms of stand-alone energy sources. Propane use falls into three broad
categories:
Propane
residential and commercial applications;
industrial applications; and
agricultural uses.
In the residential and commercial markets, propane is used primarily for space heating, water heating, clothes drying and
cooking. Industrial customers use propane generally as a motor fuel to power over-the-road vehicles, forklifts and stationary engines,
to fire furnaces, as a cutting gas and in other process applications. In the agricultural market, propane is primarily used for tobacco
curing, crop drying, poultry brooding and weed control.
Propane is extracted from natural gas or oil wellhead gas at processing plants or separated from crude oil during the refining
process. It is normally transported and stored in a liquid state under moderate pressure or refrigeration for ease of handling in
shipping and distribution. When the pressure is released or the temperature is increased, propane becomes a flammable gas that is
colorless and odorless, although an odorant is added to allow its detection. Propane is clean burning and, when consumed, produces
only negligible amounts of pollutants.
Product Distribution and Marketing
We distribute propane through a nationwide retail distribution network consisting of approximately 680 locations in 41 states as
of September 26, 2015. Our operations are principally concentrated in the east and west coast regions of the United States, as well as
portions of the midwest region of the United States and Alaska. As of September 26, 2015, we serviced approximately 973,000
propane customers. Typically, our customer service centers are located in suburban and rural areas where natural gas is not readily
available. Generally, these customer service centers consist of an office, appliance showroom, warehouse and service facilities, with
one or more 18,000 to 30,000 gallon storage tanks on the premises. Most of our residential customers receive their propane supply
through an automatic delivery system. These deliveries are scheduled through proprietary computer technology, based upon each
customer’s historical consumption patterns and prevailing weather conditions. Additionally, we offer our customers a budget payment
plan whereby the customer’s estimated annual propane purchases and service contracts are paid for in a series of estimated equal
monthly payments over a twelve-month period. From our customer service centers, we also sell, install and service equipment to
customers who purchase propane from us including heating and cooking appliances and, at some locations, propane fuel systems for
motor vehicles.
We sell propane primarily to six customer markets: residential, commercial, industrial (including engine fuel), agricultural, other
retail users and wholesale. Approximately 94% of the propane gallons sold by us in fiscal 2015 were to retail customers: 47% to
residential customers, 25% to commercial customers, 9% to industrial customers, 5% to agricultural customers and 14% to other retail
users. The balance of approximately 6% of the propane gallons sold by us in fiscal 2015 was for risk management activities and
wholesale customers. No single customer accounted for 10% or more of our propane revenues during fiscal 2015.
Retail deliveries of propane are usually made to customers by means of bobtail and rack trucks. Propane is pumped from
bobtail trucks, which have capacities typically ranging from 2,400 gallons to 3,500 gallons of propane, into a stationary storage tank
on the customers’ premises. The capacity of these storage tanks ranges from approximately 100 gallons to approximately 1,200
gallons, with a typical tank having a capacity of 300 to 400 gallons. As is common in the propane industry, we own a significant
portion of the storage tanks located on our customers’ premises. We also deliver propane to retail customers in portable cylinders,
which typically have a capacity of 5 to 35 gallons. When these cylinders are delivered to customers, empty cylinders are refilled in
place or transported for replenishment at our distribution locations. We also deliver propane to certain other bulk end users in larger
trucks known as transports, which have an average capacity of approximately 9,000 gallons. End users receiving transport deliveries
include industrial customers, large-scale heating accounts, such as local gas utilities that use propane as a supplemental fuel to meet
peak load delivery requirements, and large agricultural accounts that use propane for crop drying.
3
Supply
Our propane supply is purchased from approximately 50 oil companies and natural gas processors at approximately 190 supply
points located in the United States and Canada. We make purchases primarily under one-year agreements that are subject to annual
renewal, and also purchase propane on the spot market. Supply contracts generally provide for pricing in accordance with posted
prices at the time of delivery or the current prices established at major storage points, and some contracts include a pricing formula
that typically is based on prevailing market prices. Some of these agreements provide maximum and minimum seasonal purchase
guidelines. Propane is generally transported from refineries, pipeline terminals, storage facilities (including our storage facility in Elk
Grove, California) and coastal terminals to our customer service centers by a combination of common carriers, owner-operators and
railroad tank cars. See Item 2 of this Annual Report.
Historically, supplies of propane have been readily available from our supply sources. However, during the fiscal 2014 heating
season, we were adversely affected by supply constraints resulting from industry-wide supply shortages and logistics issues involving
propane transportation sourcing and costs. Nevertheless, through relationships with our suppliers and extraordinary efforts by our
supply and logistics personnel, we were able to effectively manage the challenging environment in fiscal 2014 without a material
disruption in supply. Such supply shortages and logistics issues were not repeated during fiscal 2015. Although we make no
assurance regarding the availability of supplies of propane in the future, we currently expect to be able to secure adequate supplies
during fiscal 2016. During fiscal 2015, Crestwood Midstream Partners L.P. (“Crestwood”), Enterprise Products Partners L.P.
(“Enterprise”) and Targa Liquids Marketing and Trade LLC (“Targa”) provided approximately 20%, 13% and 12% of our total
propane purchases, respectively. No other single supplier accounted for more than 10% of our propane purchases in fiscal 2015. The
availability of our propane supply is dependent on several factors, including the severity of winter weather, the magnitude of
competing demands for available supply (e.g., crop drying and exports), the availability of transportation and storage infrastructure
and the price and availability of competing fuels, such as natural gas and fuel oil. We believe that if supplies from Crestwood, Targa
or Enterprise were interrupted, we would be able to secure adequate propane supplies from other sources without a material disruption
of our operations. Nevertheless, the cost of acquiring and transporting such propane might be higher and, at least on a short-term
basis, our margins could be affected. Approximately 91% of our total propane purchases were from domestic suppliers in fiscal 2015.
We seek to reduce the effect of propane price volatility on our product costs and to help ensure the availability of propane
during periods of short supply. We are currently a party to forward and option contracts with various third parties to purchase and sell
propane at fixed prices in the future. These activities are monitored by our senior management through enforcement of our Hedging
and Risk Management Policy. See Items 7 and 7A of this Annual Report.
We own and operate a large propane storage facility in California. We also operate smaller storage facilities in other locations
and have rights to use storage facilities in additional locations. These storage facilities enable us to buy and store large quantities of
propane particularly during periods of low demand, which generally occur during the summer months. This practice helps ensure a
more secure supply of propane during periods of intense demand or price instability. As of September 26, 2015, the majority of the
storage capacity at our facility in Elk Grove, California was leased to third parties.
Competition
According to the US Census Bureau’s 2014 American Community Survey, propane ranks as the fourth most important source of
residential energy in the nation, with about 5% of all households using propane as their primary space heating fuel. This level has not
changed materially over the previous two decades. As an energy source, propane competes primarily with natural gas, electricity and
fuel oil, principally on the basis of price, availability and portability.
Propane is more expensive than natural gas on an equivalent British Thermal Unit (“BTU”) basis in locations serviced by
natural gas, but it is an alternative or supplement to natural gas in rural and suburban areas where natural gas is unavailable or
portability of product is required. Historically, the expansion of natural gas into traditional propane markets has been inhibited by the
capital costs required to expand pipeline and retail distribution systems. Although the recent extension of natural gas pipelines to
previously unserved geographic areas tends to displace propane distribution in those areas, we believe new opportunities for propane
sales may arise as new neighborhoods are developed in geographically remote areas. However, over the last few years, fewer new
housing developments have been started in our service areas as a result of recent economic circumstances. The increasing availability
of natural gas extracted from shale deposits in the United States may accelerate the extension of natural gas pipelines in the future.
Propane has some relative advantages over other energy sources. For example, in certain geographic areas, propane is generally
less expensive to use than electricity for space heating, water heating, clothes drying and cooking. Utilization of fuel oil is
geographically limited (primarily in the northeast), and even in that region, propane and fuel oil are not significant competitors
because of the cost of converting from one to the other.
4
In addition to competing with suppliers of other energy sources, our propane operations compete with other retail propane
distributors. The retail propane industry is highly fragmented and competition generally occurs on a local basis with other large full-
service multi-state propane marketers, thousands of smaller local independent marketers and farm cooperatives. Based on industry
statistics contained in 2013 Sales of Natural Gas Liquids and Liquefied Refinery Gases, as published by the American Petroleum Institute
in December 2014, and LP/Gas Magazine dated February 2015, the ten largest retailers, including us, account for approximately 41% of
the total retail sales of propane in the United States. Each of our customer service centers operates in its own competitive environment
because retail marketers tend to locate in close proximity to customers in order to lower the cost of providing service. Our typical
customer service center has an effective marketing radius of approximately 50 miles, although in certain areas the marketing radius may
be extended by one or more satellite offices. Most of our customer service centers compete with five or more marketers or distributors.
Fuel Oil and Refined Fuels
Product Distribution and Marketing
We market and distribute fuel oil, kerosene, diesel fuel and gasoline to approximately 54,000 residential and commercial
customers primarily in the northeast region of the United States. Sales of fuel oil and refined fuels for fiscal 2015 amounted to 41.9
million gallons. Approximately 66% of the fuel oil and refined fuels gallons sold by us in fiscal 2015 were to residential customers,
principally for home heating, 7% were to commercial customers, and 7% to other users. Sales of diesel and gasoline accounted for the
remaining 20% of total volumes sold in this segment during fiscal 2015. Fuel oil has a more limited use, compared to propane, and is
used almost exclusively for space and water heating in residential and commercial buildings. We sell diesel fuel and gasoline to
commercial and industrial customers for use primarily to operate motor vehicles.
Approximately 41% of our fuel oil customers receive their fuel oil under an automatic delivery system. These deliveries are
scheduled through proprietary computer technology, based upon each customer’s historical consumption patterns and prevailing
weather conditions. Additionally, we offer our customers a budget payment plan whereby the customer’s estimated annual fuel oil
purchases are paid for in a series of estimated equal monthly payments over a twelve-month period. From our customer service
centers, we also sell, install and service equipment to customers who purchase fuel oil from us including heating appliances.
Deliveries of fuel oil are usually made to customers by means of tankwagon trucks, which have capacities ranging from 2,500
gallons to 3,000 gallons. Fuel oil is pumped from the tankwagon truck into a stationary storage tank that is located on the customer’s
premises, which is owned by the customer. The capacity of customer storage tanks ranges from approximately 275 gallons to
approximately 1,000 gallons. No single customer accounted for 10% or more of our fuel oil revenues during fiscal 2015.
Supply
We obtain fuel oil and other refined fuels in pipeline, truckload or tankwagon quantities, and have contracts with certain
pipeline and terminal operators for the right to temporarily store fuel oil at 14 terminal facilities we do not own. We have
arrangements with certain suppliers of fuel oil, which provide open access to fuel oil at specific terminals throughout the northeast.
Additionally, a portion of our purchases of fuel oil are made at local wholesale terminal racks. In most cases, the supply contracts do
not establish the price of fuel oil in advance; rather, prices are typically established based upon market prices at the time of delivery
plus or minus a differential for transportation and volume discounts. We purchase fuel oil from approximately 30 suppliers at
approximately 55 supply points. While fuel oil supply is more susceptible to longer periods of supply constraint than propane, we
believe that our supply arrangements will provide us with sufficient supply sources. Although we make no assurance regarding the
availability of supplies of fuel oil in the future, we currently expect to be able to secure adequate supplies during fiscal 2016.
Competition
The fuel oil industry is a mature industry with total demand expected to remain relatively flat to moderately declining. The fuel
oil industry is highly fragmented, characterized by a large number of relatively small, independently owned and operated local
distributors. We compete with other fuel oil distributors offering a broad range of services and prices, from full service distributors to
those that solely offer the delivery service. We have developed a wide range of sales programs and service offerings for our fuel oil
customer base in an attempt to be viewed as a full service energy provider and to build customer loyalty. For instance, like most
companies in the fuel oil business, we provide home heating equipment repair service to our fuel oil customers on a 24-hour a day
basis. The fuel oil business unit also competes for retail customers with suppliers of alternative energy sources, principally natural
gas, propane and electricity.
5
Natural Gas and Electricity
We market natural gas and electricity through our 100%-owned subsidiary, Agway Energy Services, LLC (“AES”), in the
deregulated markets of New York and Pennsylvania primarily to residential and small commercial customers. Historically, local utility
companies provided their customers with all three aspects of electric and natural gas service: generation, transmission and
distribution. However, under deregulation, public utility commissions in several states are licensing energy service companies, such
as AES, to act as alternative suppliers of the commodity to end consumers. In essence, we make arrangements for the supply of
electricity or natural gas to specific delivery points. The local utility companies continue to distribute electricity and natural gas on
their distribution systems. The business strategy of this segment is to expand its market share by concentrating on growth in the
customer base and expansion into other deregulated markets that are considered strategic markets.
We serve over 75,000 natural gas and electricity customers in New York and Pennsylvania. During fiscal 2015, we sold
approximately 3.8 million dekatherms of natural gas and 439.3 million kilowatt hours of electricity through the natural gas and
electricity segment. Approximately 84% of our customers were residential households and the remainder were small commercial and
industrial customers. New accounts are obtained through numerous marketing and advertising programs, including telemarketing and
direct mail initiatives. Most local utility companies have established billing service arrangements whereby customers receive a single
bill from the local utility company which includes distribution charges from the local utility company, as well as product charges for
the amount of natural gas or electricity provided by AES and utilized by the customer. We have arrangements with several local
utility companies that provide billing and collection services for a fee. Under these arrangements, we are paid by the local utility
company for all or a portion of customer billings after a specified number of days following the customer billing with no further
recourse to AES.
Supply of natural gas is arranged through annual supply agreements with major national wholesale suppliers. Pricing under the
annual natural gas supply contracts is based on posted market prices at the time of delivery, and some contracts include a pricing
formula that typically is based on prevailing market prices. The majority of our electricity requirements are purchased through the
New York Independent System Operator (“NYISO”) under an annual supply agreement, as well as purchase arrangements through
other national wholesale suppliers on the open market. Electricity pricing under the NYISO agreement is based on local market
indices at the time of delivery. Competition is primarily with local utility companies, as well as other marketers of natural gas and
electricity providing similar alternatives as AES.
All Other
We sell, install and service various types of whole-house heating products, air cleaners, humidifiers and space heaters to the
customers of our propane, fuel oil, natural gas and electricity businesses. Our supply needs are filled through supply arrangements
with several large regional equipment manufacturers and distribution companies. Competition in this business segment is primarily
with small, local heating and ventilation providers and contractors, as well as, to a lesser extent, other regional service providers. The
focus of our ongoing service offerings are in support of the service needs of our existing customer base within our propane, refined
fuels and natural gas and electricity business segments. Additionally, we have entered into arrangements with third-party service
providers to complement and, in certain instances, supplement our existing service capabilities.
Seasonality
The retail propane and fuel oil distribution businesses, as well as the natural gas marketing business, are seasonal because the
primary use of these fuels is for heating residential and commercial buildings. Historically, approximately two-thirds of our retail
propane volume is sold during the six-month peak heating season from October through March. The fuel oil business tends to
experience greater seasonality given its more limited use for space heating, and approximately three-fourths of our fuel oil volumes
are sold between October and March. Consequently, sales and operating profits are concentrated in our first and second fiscal
quarters. Cash flows from operations, therefore, are greatest during the second and third fiscal quarters when customers pay for
product purchased during the winter heating season. We expect lower operating profits and either net losses or lower net income
during the period from April through September (our third and fourth fiscal quarters).
Weather conditions have a significant impact on the demand for our products, in particular propane, fuel oil and natural gas, for
both heating and agricultural purposes. Many of our customers rely on propane, fuel oil or natural gas primarily as a heating source.
Accordingly, the volume sold is directly affected by the severity of the winter weather in our service areas, which can vary
substantially from year to year. In any given area, sustained warmer than normal temperatures will tend to result in reduced propane,
fuel oil and natural gas consumption, while sustained colder than normal temperatures will tend to result in greater consumption.
6
Trademarks and Tradenames
We utilize a variety of trademarks and tradenames owned by us, including “Suburban Propane.” As part of the Inergy Propane
Acquisition, we acquired a number of different tradenames, such as “Yates Gas,” under which Inergy Propane conducted its business
as of the Acquisition Date. We regard our trademarks, tradenames and other proprietary rights as valuable assets and believe that they
have significant value in the marketing of our products and services.
Government Regulation; Environmental, Health and Safety Matters
We are subject to various federal, state and local environmental, health and safety laws and regulations. Generally, these laws
impose limitations on the discharge of hazardous materials and pollutants and establish standards for the handling, transportation,
treatment, storage and disposal of solid and hazardous wastes and can require the investigation, cleanup or monitoring of
environmental contamination. These laws include the Resource Conservation and Recovery Act, the Comprehensive Environmental
Response, Compensation and Liability Act (“CERCLA”), the Clean Air Act, the Occupational Safety and Health Act, the Emergency
Planning and Community Right to Know Act, the Clean Water Act and comparable state statutes. CERCLA, also known as the
“Superfund” law, imposes joint and several liability without regard to fault or the legality of the original conduct on certain classes of
persons that are considered to have contributed to the release or threatened release of a “hazardous substance” into the environment.
Propane is not a hazardous substance within the meaning of CERCLA, whereas some constituents contained in fuel oil are considered
hazardous substances. We own real property at locations where such hazardous substances may be or may have been present as a
result of prior activities.
We expect that we will be required to expend funds to participate in the remediation of certain sites, including sites where we
have been designated as a potentially responsible party under CERCLA or comparable state statutes and at sites with aboveground and
underground fuel storage tanks. We will also incur other expenses associated with environmental compliance. We continually
monitor our operations with respect to potential environmental issues, including changes in legal requirements and remediation
technologies.
Through an acquisition in fiscal 2004, and in the Inergy Propane Acquisition, we acquired certain properties with either known
or probable environmental exposure, some of which are currently in varying stages of investigation, remediation or monitoring.
Additionally, certain of the active sites acquired contained environmental conditions which required further investigation, future
remediation or ongoing monitoring activities. The environmental exposures included instances of soil and/or groundwater
contamination associated with the handling and storage of fuel oil, gasoline and diesel fuel. With respect to certain of the properties
acquired in the Inergy Propane Acquisition, Inergy (now known as Crestwood Midstream Partners LP) is contractually obligated to
indemnify us for the costs associated with the investigation, monitoring, remediation and/or resolution of identified conditions. As of
September 26, 2015, we had accrued environmental liabilities of $0.7 million representing the total estimated future liability for
remediation and monitoring of all of our properties.
Estimating the extent of our responsibility at a particular site, and the method and ultimate cost of remediation and monitoring
of that site, requires making numerous assumptions. As a result, the ultimate cost to remediate and monitor any site may differ from
current estimates, and will depend, in part, on whether there is additional contamination, not currently known to us, at that site.
However, we believe that our past experience provides a reasonable basis for estimating these liabilities. As additional information
becomes available, estimates are adjusted as necessary. While we do not anticipate that any such adjustment would be material to our
financial statements, the result of ongoing or future environmental studies or other factors could alter this expectation and require
recording additional liabilities. We currently cannot determine whether we will incur additional liabilities or the extent or amount of
any such liabilities, or the extent to which such additional liabilities would be subject to the contractual indemnification of Inergy.
National Fire Protection Association (“NFPA”) Pamphlet Nos. 54 and 58, which establish rules and procedures governing the
safe handling of propane, or comparable regulations, have been adopted, in whole, in part or with state addenda, as the industry
standard for propane storage, distribution and equipment installation and operation in all of the states in which we operate. In some
states these laws are administered by state agencies, and in others they are administered on a municipal level.
NFPA Pamphlet Nos. 30, 30A, 31, 385 and 395, which establish rules and procedures governing the safe handling of distillates
(fuel oil, kerosene and diesel fuel) and gasoline, or comparable regulations, have been adopted, in whole, in part or with state addenda,
as the industry standard for fuel oil, kerosene, diesel fuel and gasoline storage, distribution and equipment installation and operation in
all of the states in which we sell those products. In some states these laws are administered by state agencies and in others they are
administered on a municipal level.
7
With respect to the transportation of propane, distillates and gasoline by truck, we are subject to regulations promulgated under
the Federal Motor Carrier Improvement Safety Act. These regulations cover the transportation of hazardous materials and are
administered by the United States Department of Transportation or similar state agencies. We conduct ongoing training programs to
help ensure that our operations are in compliance with applicable safety regulations. We maintain various permits that are necessary
to operate our facilities, some of which may be material to our operations. We believe that the procedures currently in effect at all of
our facilities for the handling, storage, transportation and distribution of propane, distillates and gasoline are consistent with industry
standards and are in compliance, in all material respects, with applicable laws and regulations.
The Department of Homeland Security (“DHS”) has published regulations under 6 CFR Part 27 Chemical Facility Anti-
Terrorism Standards. We have a number of facilities registered with the DHS. Because our facilities are currently operating under the
security programs developed under guidelines issued by the Department of Transportation, Department of Labor and Environmental
Protection Agency, we do not anticipate that we will incur significant costs in connection with our ongoing efforts to comply with
these DHS regulations.
In December 2009, the U.S. Environmental Protection Agency (“EPA”) issued an “Endangerment Finding” under the Clean Air
Act, determining that emissions of carbon dioxide, methane and other greenhouse gases (“GHGs”) present an endangerment to public
health and the environment because emissions of such gases may be contributing to warming of the earth’s atmosphere and other
climatic changes. Based on these findings, the EPA has begun adopting and implementing regulations to restrict emissions of GHGs
and require reporting by certain regulated facilities on an annual basis. The EPA’s authority to regulate GHGs has been upheld by the
U.S. Supreme Court.
Both Houses of the United States Congress also have considered adopting legislation to reduce emissions of GHGs. Although
Congress has not yet enacted federal climate change legislation, numerous states and municipalities have adopted laws and policies on
climate change.
The adoption of federal, state or local climate change legislation or regulatory programs to reduce emissions of GHGs could
require us to incur increased capital and operating costs, with resulting impact on product price and demand. We cannot predict
whether or in what form climate change legislation provisions and renewable energy standards may be enacted. In addition, a possible
consequence of climate change is increased volatility in seasonal temperatures. It is difficult to predict how the market for our fuels
would be affected by increased temperature volatility, although if there is an overall trend of warmer temperatures, it could adversely
affect our business.
Future developments, such as stricter environmental, health or safety laws and regulations thereunder, could affect our
operations. We do not anticipate that the cost of our compliance with environmental, health and safety laws and regulations, including
CERCLA, as currently in effect and applicable to known sites will have a material adverse effect on our financial condition or results
of operations. To the extent we discover any environmental liabilities presently unknown to us or environmental, health or safety laws
or regulations are made more stringent, however, there can be no assurance that our financial condition or results of operations will
not be materially and adversely affected.
On July 21, 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) was signed into
law. The Dodd-Frank Act regulates derivative transactions, which include certain instruments used by the Partnership for risk
management activities.
Pursuant to the Dodd-Frank Act, the Commodity Futures Trading Commission (the “CFTC”) and the SEC have implemented,
and continue to promulgate, rules and regulations relating to, among other things, swaps, participants in the derivatives markets,
clearing of swaps and reporting of swap transactions. In general, the Dodd-Frank Act subjects swap transactions and participants to
greater regulation and supervision by the CFTC and the SEC and will require many swaps to be cleared through a registered CFTC- or
SEC-clearing facility and executed on a designated exchange or swap execution facility.
We are subject to certain regulatory requirements as a result of the Dodd-Frank Act and the implementing regulations and may
be indirectly affected by requirements imposed on our counterparties. Transactional, margin, capital, recordkeeping, reporting,
clearing and other requirements may increase our operational and transactional cost of entering into and maintaining derivatives
contracts and may adversely affect the number and/or creditworthiness of derivatives counterparties available to us. If we were to
reduce our use of derivatives as a result of regulatory burdens or otherwise, our results of operations could become more volatile and
our cash flow could be less predictable.
8
Many of the states in which we do business have passed laws prohibiting “unfair or deceptive practices” in transactions between
consumers and sellers of products used for residential purposes, which give the Attorney General or other officials of that state the
authority to investigate alleged violations of those laws. From time to time, we receive inquiries or requests for additional information
under these laws from the offices of Attorneys General or other government officials in connection with the sale of our products to
residential customers. Based on information to date, and because, our policies and business practices are designed to comply with all
applicable laws, we do not believe that the costs or liabilities associated with such inquiries or requests will result in a material adverse
effect on our financial condition or results of operations; however, there can be no assurance that our financial condition or results of
operations may not be materially and adversely affected as a result of current or future government investigations or civil litigation
derived therefrom.
Employees
As of September 26, 2015, we had 3,646 full time employees, of whom 702 were engaged in general and administrative
activities (including fleet maintenance), 34 were engaged in transportation and product supply activities and 2,910 were customer
service center employees. As of September 26, 2015, 113 of our employees were represented by 16 different local chapters of labor
unions. We believe that our relations with both our union and non-union employees are satisfactory. From time to time, we hire
temporary workers to meet peak seasonal demands.
ITEM 1A. RISK FACTORS
Investing in our common units involves a high degree of risk. The most significant risks include those described below; however,
additional risks that we currently do not know about may also impair our business operations. You should carefully consider the
following risk factors, as well as the other information in this Annual Report. If any of the following risks actually occurs, our
business, results of operations and financial condition could be materially adversely affected. In this case, the trading price of our
common units would likely decline and you might lose part or all of the value in our common units. You should carefully consider the
specific risk factors set forth below as well as the other information contained or incorporated by reference in this Annual Report.
Some factors in this section are Forward-Looking Statements. See “Disclosure Regarding Forward-Looking Statements” above.
Risks Related to Our Business and Industry
Since weather conditions may adversely affect demand for propane, fuel oil and other refined fuels and natural gas, our results of
operations and financial condition are vulnerable to warm winters.
Weather conditions have a significant impact on the demand for propane, fuel oil and other refined fuels and natural gas for both
heating and agricultural purposes. Many of our customers rely on propane, fuel oil or natural gas primarily as a heating source. The
volume of propane, fuel oil and natural gas sold is at its highest during the six-month peak heating season of October through March
and is directly affected by the severity of the winter. Typically, we sell approximately two-thirds of our retail propane volume and
approximately three-fourths of our retail fuel oil volume during the peak heating season.
Actual weather conditions can vary substantially from year to year, significantly affecting our financial performance. For
example, average temperatures in our service territories were 2% warmer than normal, 3% colder than normal and 4% warmer than
normal for fiscal 2015, fiscal 2014 and fiscal 2013, respectively, as measured by the number of heating degree days reported by the
National Oceanic and Atmospheric Administration (“NOAA”). Furthermore, variations in weather in one or more regions in which
we operate can significantly affect the total volume of propane, fuel oil and other refined fuels and natural gas we sell and,
consequently, our results of operations. Variations in the weather in the northeast, where we have a greater concentration of propane
accounts and substantially all of our fuel oil and natural gas operations, generally have a greater impact on our operations than
variations in the weather in other markets. We can give no assurance that the weather conditions in any quarter or year will not have a
material adverse effect on our operations, or that our available cash will be sufficient to pay principal and interest on our indebtedness
and distributions to Unitholders.
Sudden increases in our costs to acquire and transport propane, fuel oil and other refined fuels and natural gas due to, among
other things, our inability to obtain adequate supplies from our usual suppliers, or our inability to obtain adequate supplies of such
products from alternative suppliers, may adversely affect our operating results.
Our profitability in the retail propane, fuel oil and refined fuels and natural gas businesses is largely dependent on the difference
between our costs to acquire and transport product and retail sales price. Propane, fuel oil and other refined fuels and natural gas are
commodities, and the availability of those products, and the unit prices we need to pay to acquire and transport those products, are
subject to volatile changes in response to changes in production and supply or other market conditions over which we have no control,
9
including the severity of winter weather, the price and availability of competing alternative energy sources, competing demands for
the products and infrastructure (including highway, rail, pipeline and refinery) constraints. Our supply of these products from our
usual sources may be interrupted due to these and other reasons that are beyond our control, necessitating the transportation of
product, if it is available at all, by truck, rail car or other means from other suppliers in other areas, with resulting delay in receipt and
delivery to customers and increased expense. As a result, our costs of acquiring and transporting alternative supplies of these products
to our facilities might be materially higher at least on a short-term basis. Since we may not be able to pass on to our customers
immediately, or in full, all increases in our wholesale and transportation costs of propane, fuel oil and other refined fuels and natural
gas, these increases could reduce our profitability. In addition, our inability to obtain sufficient supplies of propane, fuel oil and other
refined fuels and natural gas in order for us to fully meet our customer demand for these products on a timely basis could adversely
affect our revenues, and consequently our profitability.
In general, product supply contracts permit suppliers to charge posted prices at the time of delivery or the current prices
established at major supply points, including Mont Belvieu, Texas, and Conway, Kansas. We engage in transactions to manage the
price risk associated with certain of our product costs from time to time in an attempt to reduce cost volatility and to help ensure
availability of product. We can give no assurance that future increases in our costs to acquire and transport propane, fuel oil and
natural gas will not have a material adverse effect on our profitability and cash flow, or that our available cash will be sufficient to pay
principal and interest on our indebtedness and distributions to our Unitholders.
High prices for propane, fuel oil and other refined fuels and natural gas can lead to customer conservation, resulting in reduced
demand for our product.
Prices for propane, fuel oil and other refined fuels and natural gas are subject to fluctuations in response to changes in wholesale
prices and other market conditions beyond our control. Therefore, our average retail sales prices can vary significantly within a
heating season or from year to year as wholesale prices fluctuate with propane, fuel oil and natural gas commodity market conditions.
During periods of high propane, fuel oil and other refined fuels and natural gas product costs our selling prices generally increase.
High prices can lead to customer conservation, resulting in reduced demand for our product.
Because of the highly competitive nature of the retail propane and fuel oil businesses, we may not be able to retain existing
customers or acquire new customers, which could have an adverse impact on our operating results and financial condition.
The retail propane and fuel oil industries are mature and highly competitive. We expect overall demand for propane and fuel oil
to be relatively flat to moderately declining over the next several years. Year-to-year industry volumes of propane and fuel oil are
expected to be primarily affected by weather patterns and from competition intensifying during warmer than normal winters, as well
as from the impact of a sustained higher commodity price environment on customer conservation and the impact of continued
weakness in the economy on customer buying habits.
Propane and fuel oil compete with electricity, natural gas and other existing and future sources of energy, some of which are, or
may in the future be, less costly for equivalent energy value. For example, natural gas currently is a significantly less expensive source
of energy than propane and fuel oil on an equivalent BTU basis. As a result, except for some industrial and commercial applications,
propane and fuel oil are generally not economically competitive with natural gas in areas where natural gas pipelines already exist.
The gradual expansion of the nation’s natural gas distribution systems has made natural gas available in many areas that previously
depended upon propane or fuel oil. We expect this trend to continue, and, with the increasingly abundant supply of natural gas from
domestic sources, perhaps accelerate. Propane and fuel oil compete to a lesser extent with each other due to the cost of converting
from one to the other.
In addition to competing with other sources of energy, our propane and fuel oil businesses compete with other distributors of
those respective products principally on the basis of price, service and availability. Competition in the retail propane business is highly
fragmented and generally occurs on a local basis with other large full-service multi-state propane marketers, thousands of smaller
local independent marketers and farm cooperatives. Our fuel oil business competes with fuel oil distributors offering a broad range of
services and prices, from full service distributors to those offering delivery only. In addition, our existing fuel oil customers, unlike
our existing propane customers, generally own their own tanks, which can result in intensified competition for these customers.
As a result of the highly competitive nature of the retail propane and fuel oil businesses, our growth within these industries
depends on our ability to acquire other retail distributors, open new customer service centers, add new customers and retain existing
customers. We can give no assurance that we will be able to acquire other retail distributors, add new customers and retain existing
customers.
10
Energy efficiency, general economic conditions and technological advances have affected and may continue to affect demand for
propane and fuel oil by our retail customers.
The national trend toward increased conservation and technological advances, including installation of improved insulation and
the development of more efficient furnaces and other heating devices, has adversely affected the demand for propane and fuel oil by
our retail customers which, in turn, has resulted in lower sales volumes to our customers. In addition, continued weakness in the
economy may lead to additional conservation by retail customers seeking to further reduce their heating costs, particularly during
periods of sustained higher commodity prices. Future technological advances in heating, conservation and energy generation and
continued economic weakness may adversely affect our volumes sold, which, in turn, may adversely affect our financial condition and
results of operations.
Current conditions in the global capital and credit markets, and general economic pressures, may adversely affect our financial
position and results of operations.
Our business and operating results are materially affected by worldwide economic conditions. Current conditions in the global
capital and credit markets and general economic pressures have led to declining consumer and business confidence, increased market
volatility and reduction of business activity generally. This turmoil, especially when coupled with increasing energy prices, may cause
our customers to experience cash flow shortages which in turn may lead to delayed or cancelled plans to purchase our products, and
affect the ability of our customers to pay for our products. In addition, disruptions in the U.S. residential mortgage market and the rate
of mortgage foreclosures may adversely affect retail customer demand for our products (in particular, products used for home heating
and home comfort equipment) and our business and results of operations.
Our operating results and ability to generate sufficient cash flow to pay principal and interest on our indebtedness, and to pay
distributions to Unitholders, may be affected by our ability to continue to control expenses.
The propane and fuel oil industries are mature and highly fragmented with competition from other multi-state marketers and
thousands of smaller local independent marketers. Demand for propane and fuel oil is expected to be affected by many factors beyond
our control, including, but not limited to, the severity of weather conditions during the peak heating season, customer conservation
driven by high energy costs and other economic factors, as well as technological advances impacting energy efficiency. Accordingly,
our propane and fuel oil sales volumes and related gross margins may be negatively affected by these factors beyond our control. Our
operating profits and ability to generate sufficient cash flow may depend on our ability to continue to control expenses in line with
sales volumes. We can give no assurance that we will be able to continue to control expenses to the extent necessary to reduce the
effect on our profitability and cash flow from these factors.
The risk of terrorism, political unrest and the current hostilities in the Middle East or other energy producing regions may
adversely affect the economy and the price and availability of propane, fuel oil and other refined fuels and natural gas.
Terrorist attacks, political unrest and the current hostilities in the Middle East or other energy producing regions may adversely
impact the price and availability of propane, fuel oil and other refined fuels and natural gas, as well as our results of operations, our
ability to raise capital and our future growth. The impact that the foregoing may have on our industry in general, and on us in
particular, is not known at this time. An act of terror could result in disruptions of crude oil or natural gas supplies and markets (the
sources of propane and fuel oil), and our infrastructure facilities could be direct or indirect targets. Terrorist activity may also hinder
our ability to transport propane, fuel oil and other refined fuels if our means of supply transportation, such as rail or pipeline, become
damaged as a result of an attack. A lower level of economic activity could result in a decline in energy consumption, which could
adversely affect our revenues or restrict our future growth. Instability in the financial markets as a result of terrorism could also affect
our ability to raise capital. Terrorist activity, political unrest and hostilities in the Middle East or other energy producing regions could
likely lead to increased volatility in prices for propane, fuel oil and other refined fuels and natural gas. We have opted to purchase
insurance coverage for terrorist acts within our property and casualty insurance programs, but we can give no assurance that our
insurance coverage will be adequate to fully compensate us for any losses to our business or property resulting from terrorist acts.
Our financial condition and results of operations may be adversely affected by governmental regulation and associated
environmental and health and safety costs.
Our business is subject to a wide and ever increasing range of federal, state and local laws and regulations related to
environmental and health and safety matters including those concerning, among other things, the investigation and remediation of
contaminated soil, groundwater and other environmental media, and the transportation of hazardous materials. These requirements are
complex, changing and tend to become more stringent over time. In addition, we are required to maintain various permits that are
necessary to operate our facilities, some of which are material to our operations. There can be no assurance that we have been, or will
11
be, at all times in complete compliance with all legal, regulatory and permitting requirements or that we will not incur significant costs
in the future relating to such requirements. Violations could result in penalties, or the curtailment or cessation of operations.
Moreover, currently unknown environmental issues, such as the discovery of additional contamination, may result in significant
additional expenditures, and potentially significant expenditures also could be required to comply with future changes to
environmental laws and regulations or the interpretation or enforcement thereof. Such expenditures, if required, could have a material
adverse effect on our business, financial condition or results of operations.
We are subject to operating hazards and litigation risks that could adversely affect our operating results to the extent not covered
by insurance.
Our operations are subject to all operating hazards and risks normally associated with handling, storing and delivering
combustible liquids such as propane, fuel oil and other refined fuels. We have been, and are likely to continue to be, a defendant in
various legal proceedings and litigation arising in the ordinary course of business, both as a result of these operating hazards and risks
and as a result of other aspects of our business. We are self-insured for general and product, workers’ compensation and automobile
liabilities up to predetermined amounts above which third-party insurance applies. We cannot guarantee that our insurance will be
adequate to protect us from all material expenses related to potential future claims for personal injury and property damage or that
these levels of insurance will be available at economical prices, or that all legal matters that arise will be covered by our insurance
programs.
If we are unable to make acquisitions on economically acceptable terms or effectively integrate such acquisitions into our
operations, our financial performance may be adversely affected.
The retail propane and fuel oil industries are mature. We expect overall demand for propane and fuel oil to be relatively flat to
moderately declining over the next several years. With respect to our retail propane business, it may be difficult for us to increase our
aggregate number of retail propane customers except through acquisitions. As a result, we expect the success of our financial
performance to depend, in part, upon our ability to acquire other retail propane and fuel oil distributors or other energy-related
businesses and to successfully integrate them into our existing operations and to make cost saving changes. The competition for
acquisitions is intense and we can make no assurance that we will be able to acquire other propane and fuel oil distributors or other
energy-related businesses on economically acceptable terms or, if we do, to integrate the acquired operations effectively.
The adoption of climate change legislation could result in increased operating costs and reduced demand for the products and
services we provide.
In December 2009, the EPA issued an “Endangerment Finding” under the Clean Air Act, determining that emissions of GHGs
present an endangerment to public health and the environment because emissions of such gases may be contributing to warming of the
earth’s atmosphere and other climatic changes. Based on these findings, the EPA has begun adopting and implementing regulations to
restrict emissions of GHGs and require reporting by certain regulated facilities on an annual basis. The EPA’s authority to regulate
GHGs has been upheld by the U.S. Supreme Court.
Both Houses of the United States Congress also have considered adopting legislation to reduce emissions of GHGs. Although
Congress has not yet enacted federal climate change legislation, numerous states and municipalities have adopted laws and policies on
climate change.
The adoption of federal, state or local climate change legislation or regulatory programs to reduce emissions of GHGs could
require us to incur increased capital and operating costs, with resulting impact on product price and demand. We cannot predict
whether or in what form climate change legislation provisions and renewable energy standards may be enacted. In addition, a possible
consequence of climate change is increased volatility in seasonal temperatures. It is difficult to predict how the market for our fuels
would be affected by increased temperature volatility, although if there is an overall trend of warmer temperatures, it could adversely
affect our business.
Our use of derivative contracts involves credit and regulatory risk and may expose us to financial loss.
From time to time, we enter into hedging transactions to reduce our business risks arising from fluctuations in commodity prices
and interest rates. Hedging transactions expose us to risk of financial loss in some circumstances, including if the other party to the
contract defaults on its obligations to us or if there is a change in the expected differential between the price of the underlying
commodity or financial metric provided in the hedging agreement and the actual amount received.
12
Transactional, margin, capital, recordkeeping, reporting, clearing and other requirements imposed on parties to derivatives
transactions as a result of legislation (such as the Dodd-Frank Act) and related rulemaking may increase our operational and
transactional cost of entering into and maintaining derivatives contracts and may adversely affect the number and/or creditworthiness
of derivatives counterparties available to us. If we were to reduce our use of derivatives as a result of regulatory burdens or otherwise,
our results of operations could become more volatile and our cash flow could be less predictable.
Because we depend on particular management information systems to effectively manage all aspects of our delivery of propane, a
failure in our operational systems or cyber security attacks on any of our facilities, or those of third parties, may adversely affect
our financial results.
We depend on our management information systems to process orders, manage inventory and accounts receivable collections,
maintain distributor and customer information, maintain cost-efficient operations and assist in delivering our products on a timely
basis. In addition, our staff of management information systems professionals relies heavily on the support of several key personnel
and vendors. Any disruption in the operation of those management information systems, loss of employees knowledgeable about such
systems, termination of our relationship with one or more of these key vendors or failure to continue to modify such systems
effectively as our business expands could negatively affect our business.
If any of our financial, operational, or other data processing systems fail or have other significant shortcomings, our financial
results could be adversely affected. Our financial results also could be adversely affected if an employee or third party causes our
operational systems to fail, either as a result of inadvertent error or by deliberately tampering with or manipulating our operational
systems. In addition, dependence upon automated systems may further increase the risk that operational system flaws, employee
tampering or manipulation of those systems will result in losses that are difficult to detect or recoup, including damage to our
reputation. To the extent customer data is hacked or misappropriated, we could be subject to liability to affected persons.
Cash distributions are not guaranteed and may fluctuate with our performance and other external factors.
Risks Inherent in the Ownership of Our Common Units
Cash distributions on our Common Units are not guaranteed, and depend primarily on our cash flow and our cash on hand.
Because they are not dependent on profitability, which is affected by non-cash items, our cash distributions might be made during
periods when we record losses and might not be made during periods when we record profits.
The amount of cash we generate may fluctuate based on our performance and other factors, including:
the impact of the risks inherent in our business operations, as described above;
required principal and interest payments on our debt and restrictions contained in our debt instruments;
issuances of debt and equity securities;
our ability to control expenses;
fluctuations in working capital;
capital expenditures; and
financial, business and other factors, a number which will be beyond our control.
Our Partnership Agreement gives our Board of Supervisors broad discretion in establishing cash reserves for, among other
things, the proper conduct of our business. These cash reserves will affect the amount of cash available for distributions.
We have substantial indebtedness. Our debt agreements may limit our ability to make distributions to Unitholders, as well as our
financial flexibility.
As of September 26, 2015, our long-term debt borrowings consisted of $346.2 million in aggregate principal amount of 7.375%
senior notes due August 1, 2021 (excluding unamortized premium of $19.9 million), $525.0 million in aggregate principal amount of
5.5% senior notes due June 1, 2024, $250.0 million in aggregate principal amount of 5.75% senior notes due March 1, 2025 and
$100.0 million under our senior secured revolving credit facility. The payment of principal and interest on our debt will reduce the
cash available to make distributions on our common units. In addition, we will not be able to make any distributions to holders of our
common units if there is, or after giving effect to such distribution, there would be, an event of default under the indentures governing
13
the senior notes. The amount of distributions that we may make to holders of our common units is limited by the senior notes, and the
amount of distributions that the Operating Partnership may make to us is limited by our revolving credit facility.
The revolving credit facility and the senior notes both contain various restrictive and affirmative covenants applicable to us and
the Operating Partnership, respectively, including (i) restrictions on the incurrence of additional indebtedness, and (ii) restrictions on
certain liens, investments, guarantees, loans, advances, payments, mergers, consolidations, distributions, sales of assets and other
transactions. The revolving credit facility contains certain financial covenants: (a) requiring our consolidated interest coverage ratio, as
defined, to be not less than 2.5 to 1.0 as of the end of any fiscal quarter; (b) prohibiting our total consolidated leverage ratio, as
defined, from being greater than 4.75 to 1.0 (or 5.0 to 1.0 during an acquisition period, as defined in the credit agreement governing
the credit facility) as of the end of any fiscal quarter; and (c) prohibiting the senior secured consolidated leverage ratio, as defined, of
the Operating Partnership from being greater than 3.0 to 1.0 as of the end of any fiscal quarter. Under the indentures governing the
senior notes, we are generally permitted to make cash distributions equal to available cash, as defined, as of the end of the
immediately preceding quarter, if no event of default exists or would exist upon making such distributions, and our consolidated fixed
charge coverage ratio, as defined, is greater than 1.75 to 1. We and the Operating Partnership were in compliance with all covenants
and terms of the senior notes and the revolving credit facility as of September 26, 2015.
The amount and terms of our debt may also adversely affect our ability to finance future operations and capital needs, limit our
ability to pursue acquisitions and other business opportunities and make our results of operations more susceptible to adverse
economic and industry conditions. In addition to our outstanding indebtedness, we may in the future require additional debt to finance
acquisitions or for general business purposes; however, credit market conditions may impact our ability to access such financing. If
we are unable to access needed financing or to generate sufficient cash from operations, we may be required to abandon certain
projects or curtail capital expenditures. Additional debt, where it is available, could result in an increase in our leverage. Our ability
to make principal and interest payments depends on our future performance, which is subject to many factors, some of which are
beyond our control. As interest expense increases (whether due to an increase in interest rates and/or the size of aggregate outstanding
debt), our ability to fund distributions on our Common Units may be impacted, depending on the level of revenue generation, which is
not assured.
Unitholders have limited voting rights.
A Board of Supervisors governs our operations. Unitholders have only limited voting rights on matters affecting our business,
including the right to elect the members of our Board of Supervisors every three years and the right to vote on the removal of the
general partner.
It may be difficult for a third party to acquire us, even if doing so would be beneficial to our Unitholders.
Some provisions of our Partnership Agreement may discourage, delay or prevent third parties from acquiring us, even if doing
so would be beneficial to our Unitholders. For example, our Partnership Agreement contains a provision, based on Section 203 of the
Delaware General Corporation Law, that generally prohibits the Partnership from engaging in a business combination with a 15% or
greater Unitholder for a period of three years following the date that person or entity acquired at least 15% of our outstanding
Common Units, unless certain exceptions apply. Additionally, our Partnership Agreement sets forth advance notice procedures for a
Unitholder to nominate a Supervisor to stand for election, which procedures may discourage or deter a potential acquirer from
conducting a solicitation of proxies to elect the acquirer’s own slate of Supervisors or otherwise attempting to obtain control of the
Partnership. These nomination procedures may not be revised or repealed, and inconsistent provisions may not be adopted, without
the approval of the holders of at least 66-2/3% of the outstanding Common Units. These provisions may have an anti-takeover effect
with respect to transactions not approved in advance by our Board of Supervisors, including discouraging attempts that might result in
a premium over the market price of the Common Units held by our Unitholders.
Unitholders may not have limited liability in some circumstances.
A number of states have not clearly established limitations on the liabilities of limited partners for the obligations of a limited
partnership. Our Unitholders might be held liable for our obligations as if they were general partners if:
a court or government agency determined that we were conducting business in the state but had not complied with the
state’s limited partnership statute; or
Unitholders’ rights to act together to remove or replace the General Partner or take other actions under our Partnership
Agreement are deemed to constitute “participation in the control” of our business for purposes of the state’s limited
partnership statute.
14
Unitholders may have liability to repay distributions.
Unitholders will not be liable for assessments in addition to their initial capital investment in the Common Units. Under specific
circumstances, however, Unitholders may have to repay to us amounts wrongfully returned or distributed to them. Under Delaware
law, we may not make a distribution to Unitholders if the distribution causes our liabilities to exceed the fair value of our assets.
Liabilities to partners on account of their partnership interests and nonrecourse liabilities are not counted for purposes of determining
whether a distribution is permitted. Delaware law provides that a limited partner who receives a distribution of this kind and knew at
the time of the distribution that the distribution violated Delaware law will be liable to the limited partnership for the distribution
amount for three years from the distribution date. Under Delaware law, an assignee who becomes a substituted limited partner of a
limited partnership is liable for the obligations of the assignor to make contributions to the partnership. However, such an assignee is
not obligated for liabilities unknown to him at the time he or she became a limited partner if the liabilities could not be determined
from the partnership agreement.
If we issue additional limited partner interests or other equity securities as consideration for acquisitions or for other purposes, the
relative voting strength of each Unitholder will be diminished over time due to the dilution of each Unitholder’s interests and
additional taxable income may be allocated to each Unitholder.
Our Partnership Agreement generally allows us to issue additional limited partner interests and other equity securities without
the approval of our Unitholders. Therefore, when we issue additional Common Units or securities ranking on a parity with the
Common Units, each Unitholder’s proportionate partnership interest will decrease, and the amount of cash distributed on each
Common Unit and the market price of Common Units could decrease. The issuance of additional Common Units will also diminish
the relative voting strength of each previously outstanding Common Unit. In addition, the issuance of additional Common Units will,
over time, result in the allocation of additional taxable income, representing built-in gains at the time of the new issuance, to those
Unitholders that existed prior to the new issuance.
Tax Risks to Unitholders
Our tax treatment depends on our status as a partnership for U.S. federal income tax purposes. The Internal Revenue Service
(“IRS”) could treat us as a corporation, which would substantially reduce the cash available for distribution to Unitholders.
The anticipated after-tax economic benefit of an investment in our Common Units depends largely on our being treated as a
partnership for U.S. federal income tax purposes. If less than 90% of the gross income of a publicly traded partnership, such as
Suburban Propane Partners, L.P., for any taxable year is “qualifying income” within the meaning of Section 7704 of the Internal
Revenue Code, that partnership will be taxable as a corporation for U.S. federal income tax purposes for that taxable year and all
subsequent years.
If we were treated as a corporation for U.S. federal income tax purposes, then we would pay U.S. federal income tax on our
income at the corporate tax rate, which is currently a maximum of 35%, and would likely pay additional state income tax at varying
rates. Because a tax would be imposed upon us as a corporation, our cash available for distribution to Unitholders would be
substantially reduced. Treatment of us as a corporation would result in a material reduction in the anticipated cash flow and after-tax
return to Unitholders and thus would likely result in a substantial reduction in the value of our Common Units.
The tax treatment of publicly traded partnerships or an investment in our Common Units could be subject to potential legislative,
judicial or administrative changes and differing interpretations thereof, possibly on a retroactive basis.
The present U.S. federal income tax treatment of publicly traded partnerships, including Suburban Propane Partners, L.P., or an
investment in our Common Units may be modified by legislative, judicial or administrative changes and differing interpretations
thereof at any time. Any modification to the U.S. federal income tax laws or interpretations thereof may or may not be applied
retroactively. Moreover, any such modification could make it more difficult or impossible for us to meet the exception that allows
publicly traded partnerships that generate qualifying income to be treated as partnerships (rather than as corporations) for U.S. federal
income tax purposes, affect or cause us to change our business activities, or affect the tax consequences of an investment in our
Common Units. On May 5, 2015, the U.S. Treasury Department and the Internal Revenue Service issued proposed regulations
interpreting the scope of qualifying income for publicly traded partnerships by providing industry-specific guidance with respect to
activities that will generate qualifying income for purposes of the qualifying income requirement. The proposed regulations could
modify the amount of our gross income that we are able to treat as qualifying income for purposes of the qualifying income
requirement. Based on the legislative history of Section 7704 of the Internal Revenue Code and previous Internal Revenue Service
guidance, we do not believe that the proposed regulations should affect our ability to qualify as a publicly traded partnership or the
characterization of the income from our propane activities as qualifying income. However, there are no assurances that the proposed
regulations, when published as final regulations, will not take a position that is contrary to our interpretation of Section 7704 of the
Internal Revenue Code. We have not requested, and do not plan to request, a ruling from the IRS on this or any other tax matter
15
affecting us. We are unable to predict whether any of these changes, or other proposals, will ultimately be enacted. Any such changes
could negatively impact the value of an investment in our units.
In addition, because of widespread state budget deficits and other reasons, several states are evaluating ways to subject
partnerships to entity-level taxation through the imposition of state income, franchise and other forms of taxation.
A successful IRS contest of the U.S. federal income tax positions we take may adversely affect the market for our Common Units,
and the cost of any IRS contest will reduce our cash available for distribution to our Unitholders.
We have not requested a ruling from the IRS with respect to our treatment as a partnership for U.S. federal income tax purposes
or any other matter affecting us. The IRS may adopt positions that differ from the positions we take. It may be necessary to resort to
administrative or court proceedings to sustain some or all of the positions we take. A court may not agree with the positions we take.
Any contest with the IRS may materially and adversely impact the market for our Common Units and the price at which they trade. In
addition, our costs of any contest with the IRS will be borne indirectly by our Unitholders because the costs will reduce our cash
available for distribution.
A Unitholder’s tax liability could exceed cash distributions on its Common Units.
Because our Unitholders are treated as partners, a Unitholder is required to pay U.S. federal income taxes and state and local
income taxes on its allocable share of our income, without regard to whether we make cash distributions to the Unitholder. We cannot
guarantee that a Unitholder will receive cash distributions equal to its allocable share of our taxable income or even the tax liability to
it resulting from that income.
Ownership of Common Units may have adverse tax consequences for tax-exempt organizations and foreign investors.
Investment in Common Units by certain tax-exempt entities and foreign persons raises issues specific to them. For example,
virtually all of our taxable income allocated to organizations exempt from U.S. federal income tax, including individual retirement
accounts and other retirement plans, will be unrelated business taxable income and thus will be taxable to the Unitholder.
Distributions to foreign persons will be reduced by withholding taxes at the highest applicable effective tax rate, and foreign persons
will be required to file U.S. federal income tax returns and pay tax on their share of our taxable income. Tax-exempt organizations and
foreign persons should consult, and should depend on, their own tax advisors in analyzing the U.S. federal, state, local and foreign
income tax and other tax consequences of the acquisition, ownership or disposition of Common Units.
The ability of a Unitholder to deduct its share of our losses may be limited.
Various limitations may apply to the ability of a Unitholder to deduct its share of our losses. For example, in the case of
taxpayers subject to the passive activity loss rules (generally, individuals and closely held corporations), any losses generated by us
will only be available to offset our future income and cannot be used to offset income from other activities, including other passive
activities or investments. Such unused losses may be deducted when the Unitholder disposes of its entire investment in us in a fully
taxable transaction with an unrelated party, such as a sale by a Unitholder of all of its Common Units in the open market. A
Unitholder’s share of any net passive income may be offset by unused losses from us carried over from prior years, but not by losses
from other passive activities, including losses from other publicly-traded partnerships.
The tax gain or loss on the disposition of Common Units could be different than expected.
A Unitholder who sells Common Units will recognize a gain or loss equal to the difference between the amount realized and its
adjusted tax basis in the Common Units. Prior distributions in excess of cumulative net taxable income allocated to a Common Unit
which decreased a Unitholder’s tax basis in that Common Unit will, in effect, become taxable income if the Common Unit is sold at a
price greater than the Unitholder’s tax basis in that Common Unit, even if the price is less than the original cost of the Common Unit.
A portion of the amount realized, if the amount realized exceeds the Unitholder’s adjusted basis in that Common Unit, will likely be
characterized as ordinary income. Furthermore, should the IRS successfully contest some conventions used by us, a Unitholder could
recognize more gain on the sale of Common Units than would be the case under those conventions, without the benefit of decreased
income in prior years. In addition, because the amount realized will include a holder’s share of our nonrecourse liabilities, if a
Unitholder sells its Common Units, such Unitholder may incur a tax liability in excess of the amount of cash it receives from the sale.
Reporting of partnership tax information is complicated and subject to audits.
We intend to furnish to each Unitholder, within 90 days after the close of each calendar year, specific tax information, including
a Schedule K-1 that sets forth its allocable share of income, gains, losses and deductions for our preceding taxable year. In preparing
16
these schedules, we use various accounting and reporting conventions and adopt various depreciation and amortization methods. We
cannot guarantee that these conventions will yield a result that conforms to statutory or regulatory requirements or to administrative
pronouncements of the IRS. Further, our income tax return may be audited, which could result in an audit of a Unitholder’s income
tax return and increased liabilities for taxes because of adjustments resulting from the audit.
We treat each purchaser of our Common Units as having the same tax benefits without regard to the actual Common Units
purchased. The IRS may challenge this treatment, which could adversely affect the value of the Common Units.
Because we cannot match transferors and transferees of Common Units and because of other reasons, uniformity of the
economic and tax characteristics of the Common Units to a purchaser of Common Units of the same class must be maintained. To
maintain uniformity and for other reasons, we have adopted certain depreciation and amortization conventions that may be
inconsistent with Treasury Regulations. A successful IRS challenge to those positions could adversely affect the amount of tax
benefits available to a Unitholder. It also could affect the timing of these tax benefits or the amount of gain from the sale of Common
Units, and could have a negative impact on the value of our Common Units or result in audit adjustments to a Unitholder’s income tax
return.
We prorate our items of income, gain, loss and deduction between transferors and transferees of our Common Units each month
based upon the ownership of our Common Units on the first day of each month, instead of on the basis of the date a particular
Common Unit is transferred. The IRS may challenge this treatment, which could change the allocation of items of income, gain,
loss and deduction among our Unitholders.
We prorate our items of income, gain, loss and deduction between transferors and transferees of our Common Units each month
based upon the ownership of our Common Units on the first day of each month, instead of on the basis of the date a particular
Common Unit is transferred. The U.S. Treasury Department has issued proposed Treasury Regulations that provide a safe harbor
pursuant to which publicly traded partnerships may use a similar monthly simplifying convention to allocate tax items among
transferors and transferees of our common units. However, if the IRS were to challenge our proration method, we may be required to
change the allocation of items of income, gain, loss and deduction among our Unitholders.
Unitholders may have negative tax consequences if we default on our debt or sell assets.
If we default on any of our debt obligations, our lenders will have the right to sue us for non-payment. This could cause an
investment loss and negative tax consequences for Unitholders through the realization of taxable income by Unitholders without a
corresponding cash distribution. Likewise, if we were to dispose of assets and realize a taxable gain while there is substantial debt
outstanding and proceeds of the sale were applied to the debt, Unitholders could have increased taxable income without a
corresponding cash distribution.
The sale or exchange of 50% or more of our capital and profits interests during any twelve-month period will result in the
termination of our partnership for federal income tax purposes.
We will be considered to have terminated as a partnership for U.S. federal income tax purposes if there is a sale or exchange of
50% or more of the total interests in our capital and profits within a twelve-month period. Our termination would, among other things,
result in the closing of our taxable year for all Unitholders and could result in a deferral of depreciation deductions allowable in
computing our taxable income. In the case of a Unitholder reporting on a taxable year other than the calendar year, the closing of our
taxable year may also result in more than twelve months of our taxable income or loss being includable in his taxable income for the
year of termination. Our termination currently would not affect our treatment as a partnership for U.S. federal income tax purposes,
but instead, after our termination we would be treated as a new partnership for U.S. federal income tax purposes. If treated as a new
partnership, we must make new tax elections and could be subject to penalties if we are unable to determine that a termination
occurred.
There are state, local and other tax considerations for our Unitholders.
In addition to U.S. federal income taxes, Unitholders will likely be subject to other taxes, such as state and local taxes,
unincorporated business taxes and estate, inheritance or intangible taxes that are imposed by the various jurisdictions in which we do
business or own property, even if the Unitholder does not reside in any of those jurisdictions. A Unitholder will likely be required to
file state and local income tax returns and pay state and local income taxes in some or all of the various jurisdictions in which we do
business or own property and may be subject to penalties for failure to comply with those requirements. It is the responsibility of each
Unitholder to file all U.S. federal, state and local income tax returns that may be required of each Unitholder.
17
A Unitholder whose Common Units are loaned to a “short seller” to cover a short sale of Common Units may be considered as
having disposed of those Common Units. If so, that Unitholder would no longer be treated for tax purposes as a partner with
respect to those Common Units during the period of the loan and may recognize gain or loss from the disposition.
Because there is no tax concept of loaning a partnership interest, a Unitholder whose Common Units are loaned to a “short
seller” to cover a short sale of Common Units may be considered as having disposed of the loaned Common Units. In that case, a
Unitholder may no longer be treated for tax purposes as a partner with respect to those Common Units during the period of the loan to
the short seller and may recognize gain or loss from such disposition. Moreover, during the period of the loan to the short seller, any
of our income, gain, loss or deduction with respect to those Common Units may not be reportable by the Unitholder and any cash
distribution received by the Unitholder as to those Common Units could be fully taxable as ordinary income. Unitholders desiring to
ensure their status as partners and avoid the risk of gain recognition from a loan to a short seller should consult their own tax advisors
to discuss whether it is advisable to modify any applicable brokerage account agreements to prohibit their brokers from borrowing
their Common Units.
18
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2.
PROPERTIES
As of September 26, 2015, we owned approximately 73% of our customer service center and satellite locations and leased the
balance of our retail locations from third parties. We own and operate a 22 million gallon refrigerated, aboveground propane storage
facility in Elk Grove, California. Additionally, we own our principal executive offices located in Whippany, New Jersey.
The transportation of propane requires specialized equipment. The trucks and railroad tank cars utilized for this purpose carry
specialized steel tanks that maintain the propane in a liquefied state. As of September 26, 2015, we had a fleet of 13 transport truck
tractors, of which we owned 6, and 23 railroad tank cars, of which we owned none. In addition, as of September 26, 2015 we had
1,210 bobtail and rack trucks, of which we owned 52%, 121 fuel oil tankwagons, of which we owned 74%, and 1,389 other delivery
and service vehicles, of which we owned 62%. We lease the vehicles we do not own. As of September 26, 2015, we also owned
906,708 customer propane storage tanks with typical capacities of 100 to 500 gallons, 66,630 customer propane storage tanks with
typical capacities of over 500 gallons and 298,254 portable propane cylinders with typical capacities of five to ten gallons.
ITEM 3.
LEGAL PROCEEDINGS
Litigation
Our operations are subject to operating hazards and risks normally incidental to handling, storing and delivering combustible
liquids such as propane. We have been, and will continue to be, a defendant in various legal proceedings and litigation as a result of
these operating hazards and risks, and as a result of other aspects of our business. Although any litigation is inherently uncertain,
based on past experience, the information currently available to us, and the amount of our accrued insurance liabilities, we do not
believe that currently pending or threatened litigation matters, or known claims or known contingent claims, will have a material
adverse effect on our results of operations, financial condition or cash flow.
ITEM 4. MINE SAFETY DISCLOSURES
None.
19
PART II
ITEM 5. MARKET FOR THE REGISTRANT’S COMMON UNITS, RELATED UNITHOLDER MATTERS AND
ISSUER PURCHASES OF UNITS
(a) Our Common Units, representing limited partner interests in the Partnership, are listed and traded on the New York Stock
Exchange (“NYSE”) under the symbol SPH. As of November 23, 2015, there were 680 Unitholders of record (based on
the number of record holders and nominees for those Common Units held in street name). The following table presents,
for the periods indicated, the high and low sales prices per Common Unit, as reported on the NYSE, and the amount of
quarterly cash distributions declared and paid per Common Unit in respect of each quarter.
Fiscal 2015
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
Fiscal 2014
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
Common Unit Price Range
High
Low
Cash Distribution
Declared per
Common Unit
$
$
46.05 $
45.87
44.75
41.14
48.90 $
47.16
48.61
46.21
40.81 $
42.55
39.47
31.00
44.21 $
39.91
40.94
41.13
0.8750
0.8875
0.8875
0.8875
0.8750
0.8750
0.8750
0.8750
We make quarterly distributions to our partners in an aggregate amount equal to our Available Cash (as defined in our
Partnership Agreement) with respect to 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. The amount of
distributions that we may make to holders of our Common Units is limited by the senior notes, and the amount of
distributions that the Operating Partnership may make to us is limited by our revolving credit facility. See “Risk Factors—
We have substantial indebtedness. Our debt agreements may limit our ability to make distributions to Unitholders, as well
as our financial flexibility” and “Management’s Discussion and Analysis—Liquidity and Capital Resources.”
We are a publicly traded limited partnership and, other than certain corporate subsidiaries that are taxed as corporations,
we are not subject to corporate level federal income tax. Instead, Unitholders are required to report their allocable share
of our earnings or loss, regardless of whether we make distributions.
(b) Not applicable.
(c) None.
20
ITEM 6.
SELECTED FINANCIAL DATA
The following table presents our selected consolidated historical financial data as derived from our audited consolidated
financial statements, certain of which are included elsewhere in this Annual Report. All amounts in the table below, except per unit
data, are in thousands.
September 26,
2015
September 27,
2014
Year Ended
September 28,
2013
September 29,
2012 (a)
September 24,
2011
Statement of Operations Data
Revenues
Costs and expenses
Acquisition-related costs (b)
Operating income
Interest expense, net
Pension settlement charge (c)
Loss on debt extinguishment (d)
Provision for income taxes
Net income
Net income per Common Unit - basic (e)
Net income per Common Unit - diluted (e)
Cash distributions declared per unit
Balance Sheet Data
Cash and cash equivalents
Current assets
Total assets
Current liabilities
Total debt
Total liabilities
Partners' capital - Common Unitholders
Statement of Cash Flows Data
Cash provided by (used in)
Operating activities
Investing activities
Financing activities
Other Data
Depreciation and amortization
EBITDA (f)
Adjusted EBITDA (f)
Capital expenditures - maintenance and growth (g)
Retail gallons sold
Propane
Fuel oil and refined fuels
$ 1,416,979 $ 1,938,257 $ 1,703,606 $ 1,063,458 $ 1,190,552
1,239,221 1,748,131 1,526,630 1,003,885 1,047,324
—
143,228
27,378
—
—
884
114,966
3.24
3.22
3.41
—
176,976
95,427
—
2,144
607
78,798
1.35
1.34
3.50 $
—
177,758
77,634
2,000
15,072
700
84,352
1.39
1.38
3.54 $
—
190,126
83,261
—
11,589
767
94,509
1.56
1.56
3.50 $
17,916
41,657
38,633
—
2,249
137
638
0.02
0.02
3.41 $
$
$
92,639 $
294,865
152,338 $
273,413
107,232 $
293,322
134,317 $
337,515
2,485,730 2,609,363 2,727,987 2,883,850
253,715
1,241,107 1,242,685 1,245,237 1,422,078
1,587,410 1,587,910 1,598,861 1,793,351
947,203 $ 1,067,358 $ 1,176,479 $ 1,151,606 $
$
233,894
210,346
222,266
149,553
297,822
956,459
151,514
348,169
598,241
418,134
$
$
$
$
324,209 $
(35,972 )
(228,538 ) $
225,551 $
(16,532 )
(223,612 ) $
214,306 $
(14,663 )
(226,728 ) $
110,973 $
(239,758 )
113,549 $
132,786
(19,505 )
(120,636 )
133,294 $
295,980
334,039
41,213 $
136,399 $
314,936
338,502
30,052 $
130,384 $
305,216
329,253
27,823 $
47,034 $
86,442
108,536
17,476 $
35,628
178,856
179,425
22,284
480,372
41,878
530,743
49,071
534,621
53,710
283,841
28,491
298,902
37,241
(a) Fiscal 2012 includes 53 weeks of operations compared to 52 weeks in each of fiscal 2015, 2014, 2013 and 2011. In addition, on
August 1, 2012, we acquired Inergy Propane. The results of operations of Inergy Propane have been included in the
consolidated results from the Acquisition Date through September 29, 2012 and all of fiscal 2013, fiscal 2014 and fiscal 2015,
and the assets and liabilities of Inergy Propane have been included in the consolidated balance sheet since September 29, 2012.
(b) Due to the Inergy Propane Acquisition on August 1, 2012 we recorded acquisition-related costs of $17.9 million during fiscal
2012. These costs were primarily attributable to investment banker, legal, accounting and other consulting fees.
(c) We incurred non-cash pension settlement charges of $2.0 million during fiscal 2015 to accelerate the recognition of actuarial
losses in our defined benefit pension plan as a result of the level of lump sum retirement benefit payments made.
(d) We recognized a loss on debt extinguishment during the following periods:
On February 25, 2015, we repurchased and satisfied and discharged all of our 2020 Senior Notes with net proceeds from
the issuance of the 2025 Senior Notes and cash on hand pursuant to a tender offer and redemption. In connection with this
21
tender offer and redemption, we recognized a loss on the extinguishment of debt of $15.1 million consisting of $11.1
million for the redemption premium and related fees, as well as the write-off of $2.9 million and $1.1 million in
unamortized debt origination costs and unamortized discount, respectively.
On May 27, 2014, we repurchased and satisfied and discharged all of our 2018 Senior Notes with net proceeds from the
issuance of the 2024 Senior Notes and cash on hand pursuant to a tender offer and redemption. In connection with this
tender offer and redemption, we recognized a loss on the extinguishment of debt of $11.6 million consisting of $31.6
million for the redemption premium and related fees, as well as the write-off of $5.3 million and ($25.3) million in
unamortized debt origination costs and unamortized premium, respectively.
On August 2, 2013, we repurchased pursuant to optional redemption $133.4 million of our 7.375% Senior Notes due
August 1, 2021 using net proceeds from our May 2013 public offering and net proceeds from the underwriters’ exercise of
their over-allotment option to purchase additional Common Units. In addition, on August 6, 2013, we repurchased $23.9
million of our 2021 Senior Notes in a private transaction using cash on hand. In connection with these repurchases, which
totaled $157.3 million in aggregate principal amount, we recognized a loss on the extinguishment of debt of $2.1 million
consisting of $11.7 million for the repurchase premium and related fees, as well as the write-off of $2.1 million and
($11.7) million in unamortized debt origination costs and unamortized premium, respectively.
During fiscal 2012 we amended the Credit Agreement (the “Amended Credit Agreement”) to increase the five-year
$250.0 million revolving credit facility (the “Revolving Credit Facility”) to $400.0 million, of which, $100.0 million was
outstanding as of September 26, 2015, and also to extend the maturity date from June 25, 2013 to January 5, 2017. In
connection with the execution of the Amended Credit Agreement, we recognized a non-cash charge of $0.5 million for the
write-off of previously incurred debt origination costs associated with lenders who did not participate, or whose lending
capacity decreased, in the amended facility. On August 1, 2012, we amended the Amended Credit Agreement to provide
for a $250.0 million senior secured 364-day incremental term loan facility (the “364-Day Facility”). On August 1, 2012,
in connection with the Inergy Propane Acquisition, we drew $225.0 million on the 364-Day Facility and on August 14,
2012, using the proceeds of our secondary offering of common units, we repaid the $225.0 million term loan facility, and
wrote off $1.7 million of unamortized commitment fees associated with the 364-Day Facility.
(e) Computations of basic earnings per Common Unit were performed by dividing net income by the weighted average number of
outstanding Common Units, and restricted units granted under our 2000 and 2009 Restricted Unit Plans (which we collectively
refer to as the “Restricted Unit Plans” or the “RUP”) to retirement-eligible grantees. Computations of diluted earnings per
Common Unit were performed by dividing net income by the weighted average number of outstanding Common Units and
unvested restricted units granted under our Restricted Unit Plans.
On May 17, 2013, we sold 2.7 million Common Units in a public offering. On May 22, 2013, following the underwriters’
exercise of their over-allotment option, we sold an additional 0.4 million Common Units.
On August 1, 2012, in connection with the Inergy Propane Acquisition, we issued 14.2 million Common Units, and on
August 14, 2012, we sold 7.2 million Common Units in a secondary offering.
The aforementioned Common Units have been included in basic and diluted earnings per common unit from the
respective dates of issuance.
(f) EBITDA represents net income before deducting interest expense, income taxes, depreciation and amortization. Adjusted
EBITDA represents EBITDA excluding the unrealized net gain or loss from mark-to-market activity for derivative instruments
and other items, as applicable, as provided in the table below. Our management uses EBITDA and Adjusted EBITDA as
supplemental measures of operating performance and we are including them because we believe that they provide our investors
and industry analysts with additional information to evaluate our operating results. EBITDA and Adjusted EBITDA are not
recognized terms under US GAAP and should not be considered as an alternative to net income or net cash provided by
operating activities determined in accordance with US GAAP. Because EBITDA and Adjusted EBITDA as determined by us
excludes some, but not all, items that affect net income, they may not be comparable to EBITDA and Adjusted EBITDA or
similarly titled measures used by other companies.
22
The following table sets forth our calculations of EBITDA and Adjusted EBITDA:
September 26,
2015
September 27,
2014
Year Ended
September 28,
2013
September 29,
2012 (a)
$
84,352 $
94,509 $
78,798 $
638 $
September 24,
2011
114,966
Net income
Add:
Provision for income taxes
Interest expense, net
Depreciation and amortization
EBITDA
Unrealized (non-cash) (gains) losses on changes in
fair value of derivatives
Integration-related costs
Loss on debt extinguishment
Multi-employer pension plan withdrawal charge
Pension settlement charge
Acquisition-related costs
Loss on legal settlement
Loss on asset disposal
Severance charges
Adjusted EBITDA
700
77,634
133,294
295,980
767
83,261
136,399
314,936
607
95,427
130,384
305,216
137
38,633
47,034
86,442
(1,855 )
11,542
15,072
11,300
2,000
—
—
—
—
334,039 $
(306 )
12,283
11,589
—
—
—
—
—
—
338,502 $
4,318
10,575
2,144
7,000
—
—
—
—
—
329,253 $
(4,649 )
—
2,249
—
—
17,916
4,500
2,078
—
108,536 $
$
884
27,378
35,628
178,856
(1,431 )
—
—
—
—
—
—
—
2,000
179,425
(g) Our capital expenditures fall generally into two categories: (i) maintenance expenditures, which include expenditures for repair
and replacement of property, plant and equipment; and (ii) growth capital expenditures which include new propane tanks and
other equipment to facilitate expansion of our customer base and operating capacity.
23
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following is a discussion of our financial condition and results of operations, which should be read in conjunction with our
consolidated financial statements and notes thereto included elsewhere in this Annual Report.
Executive Overview
The following are factors that regularly affect our operating results and financial condition. In addition, our business is subject
to the risks and uncertainties described in Item 1A of this Annual Report.
Product Costs and Supply
The level of profitability in the retail propane, fuel oil, natural gas and electricity businesses is largely dependent on the
difference between retail sales price and our costs to acquire and transport products. The unit cost of our products, particularly
propane, fuel oil and natural gas, is subject to volatility as a result of supply and demand dynamics or other market conditions,
including, but not limited to, economic and political factors impacting crude oil and natural gas supply or pricing. We enter into
product supply contracts that are generally one-year agreements subject to annual renewal, and also purchase product on the open
market. We attempt to reduce price risk by pricing product on a short-term basis. Our propane supply contracts typically provide for
pricing based upon index formulas using the posted prices established at major supply points such as Mont Belvieu, Texas, or
Conway, Kansas (plus transportation costs) at the time of delivery.
To supplement our annual purchase requirements, we may utilize forward fixed price purchase contracts to acquire a portion of
the propane that we resell to our customers, which allows us to manage our exposure to unfavorable changes in commodity prices and
to assure adequate physical supply. The percentage of contract purchases, and the amount of supply contracted for under forward
contracts at fixed prices, will vary from year to year based on market conditions.
Changes in our costs to acquire and transport products can occur rapidly over a short period of time and can impact profitability.
There is no assurance that we will be able to pass on product acquisition and transportation cost increases fully or immediately,
particularly when such costs increase rapidly. Therefore, average retail sales prices can vary significantly from year to year as our
costs fluctuate with the propane, fuel oil, crude oil and natural gas commodity markets and infrastructure conditions. In addition,
periods of sustained higher commodity and/or transportation prices can lead to customer conservation, resulting in reduced demand for
our product.
Seasonality
The retail propane and fuel oil distribution businesses, as well as the natural gas marketing business, are seasonal because these
fuels are primarily used for heating in residential and commercial buildings. Historically, approximately two-thirds of our retail
propane volume is sold during the six-month peak heating season from October through March. The fuel oil business tends to
experience greater seasonality given its more limited use for space heating and approximately three-fourths of our fuel oil volumes are
sold between October and March. Consequently, sales and operating profits are concentrated in our first and second fiscal quarters.
Cash flows from operations, therefore, are greatest during the second and third fiscal quarters when customers pay for product
purchased during the winter heating season. We expect lower operating profits and either net losses or lower net income during the
period from April through September (our third and fourth fiscal quarters). To the extent necessary, we will reserve cash from the
second and third quarters for distribution to holders of our Common Units in the fourth quarter and the following fiscal year first
quarter.
Weather
Weather conditions have a significant impact on the demand for our products, in particular propane, fuel oil and natural gas, for
both heating and agricultural purposes. Many of our customers rely heavily on propane, fuel oil or natural gas as a heating source.
Accordingly, the volume sold is directly affected by the severity of the winter weather in our service areas, which can vary
substantially from year to year. In any given area, sustained warmer than normal temperatures will tend to result in reduced propane,
fuel oil and natural gas consumption, while sustained colder than normal temperatures will tend to result in greater consumption.
24
Hedging and Risk Management Activities
We engage in hedging and risk management activities to reduce the effect of price volatility on our product costs and to ensure
the availability of product during periods of short supply. We enter into propane forward, options and swap agreements with third
parties, and use futures and options contracts traded on the New York Mercantile Exchange (“NYMEX”) to purchase and sell
propane, fuel oil and crude oil at fixed prices in the future. The majority of the futures, forward and options agreements are used to
hedge price risk associated with propane and fuel oil physical inventory, as well as, in certain instances, forecasted purchases of
propane or fuel oil. In addition, we sell propane and fuel oil to customers at fixed prices, and enter into derivative instruments to
hedge a portion of our exposure to fluctuations in commodity prices as a result of selling the fixed price contracts. Forward contracts
are generally settled physically at the expiration of the contract whereas futures, options and swap contracts are generally settled at the
expiration of the contract through a net settlement mechanism. Although we use derivative instruments to reduce the effect of price
volatility associated with priced physical inventory and forecasted transactions, we do not use derivative instruments for speculative
trading purposes. Risk management activities are monitored by an internal Commodity Risk Management Committee, made up of
seven members of management and reporting to our Audit Committee, through enforcement of our Hedging and Risk Management
Policy.
Critical Accounting Policies and Estimates
Our significant accounting policies are summarized in Note 2 - Summary of Significant Accounting Policies included within the
Notes to Consolidated Financial Statements section elsewhere in this Annual Report.
Certain amounts included in or affecting our consolidated financial statements and related disclosures must be estimated,
requiring management to make certain assumptions with respect to values or conditions that cannot be known with certainty at the
time the financial statements are prepared. The preparation of financial statements in conformity with accounting principles generally
accepted in the United States of America (“US GAAP”) requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period. We are also subject to risks and uncertainties that may
cause actual results to differ from estimated results. Estimates are used when accounting for depreciation and amortization of long-
lived assets, employee benefit plans, self-insurance and litigation reserves, environmental reserves, allowances for doubtful accounts,
asset valuation assessments and valuation of derivative instruments. We base our estimates on historical experience and on various
other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making
judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Any effects on our
business, financial position or results of operations resulting from revisions to these estimates are recorded in the period in which the
facts that give rise to the revision become known to us. Management has reviewed these critical accounting estimates and related
disclosures with the Audit Committee of our Board of Supervisors. We believe that the following are our critical accounting
estimates:
Allowances for Doubtful Accounts. We maintain allowances for doubtful accounts for estimated losses resulting from the inability of
our customers to make required payments. We estimate our allowances for doubtful accounts using a specific reserve for known or
anticipated uncollectible accounts, as well as an estimated reserve for potential future uncollectible accounts taking into consideration
our historical write-offs. If the financial condition of one or more of our customers were to deteriorate resulting in an impairment in
their ability to make payments, additional allowances could be required. As a result of our large customer base, which is comprised of
approximately 1.1 million customers, no individual customer account is material. Therefore, while some variation to actual results
occurs, historically such variability has not been material. Schedule II, Valuation and Qualifying Accounts, provides a summary of
the changes in our allowances for doubtful accounts during the period.
Pension and Other Postretirement Benefits. We estimate the rate of return on plan assets, the discount rate used to estimate the
present value of future benefit obligations and the expected cost of future health care benefits in determining our annual pension and
other postretirement benefit costs. In October 2014, the Society of Actuaries (“SOA”) issued new mortality tables (RP-2014) and a
new mortality improvement scale (MP-2014). We use SOA and other actuarial life expectancy information when developing the
annual mortality assumptions for our pension and postretirement benefit plans, which are used to measure net periodic benefit costs
and the obligation under these plans. While we believe that our assumptions are appropriate, significant differences in our actual
experience or significant changes in market conditions may materially affect our pension and other postretirement benefit obligations
and our future expense. With other assumptions held constant, an increase or decrease of 100 basis points in the discount rate would
have an immaterial impact on net pension and postretirement benefit costs. See “Liquidity and Capital Resources - Pension Plan
Assets and Obligations” below for additional disclosure regarding pension benefits.
25
Self-Insurance Reserves. Our accrued self-insurance reserves represent the estimated costs of known and anticipated or unasserted
claims under our general and product, workers’ compensation and automobile insurance policies. Accrued insurance provisions for
unasserted claims arising from unreported incidents are based on an analysis of historical claims data. For each unasserted claim, we
record a self-insurance provision up to the estimated amount of the probable claim utilizing actuarially determined loss development
factors applied to actual claims data. Our self-insurance provisions are susceptible to change to the extent that actual claims
development differs from historical claims development. We maintain insurance coverage wherein our net exposure for insured
claims is limited to the insurance deductible, claims above which are paid by our insurance carriers. For the portion of our estimated
self-insurance liability that exceeds our deductibles, we record an asset related to the amount of the liability expected to be paid by the
insurance companies. Historically, we have not experienced significant variability in our actuarial estimates for claims incurred but
not reported. Accrued insurance provisions for reported claims are reviewed at least quarterly, and our assessment of whether a loss is
probable and/or reasonably estimable is updated as necessary. Due to the inherently uncertain nature of, in particular, product liability
claims, the ultimate loss may differ materially from our estimates. However, because of the nature of our insurance arrangements,
those material variations historically have not, nor are they expected in the future to have, a material impact on our results of
operations or financial position.
Loss Contingencies. In the normal course of business, we are involved in various claims and legal proceedings. We record a liability
for such matters when it is probable that a loss has been incurred and the amounts can be reasonably estimated. The liability includes
probable and estimable legal costs to the point in the legal matter where we believe a conclusion to the matter will be reached. When
only a range of possible loss can be established, the most probable amount in the range is accrued. If no amount within this range is a
better estimate than any other amount within the range, the minimum amount in the range is accrued.
We contribute to multi-employer pension plans (“MEPPs”) in accordance with various collective bargaining agreements
covering union employees. As one of the many participating employers in these MEPPs, we are responsible with the other
participating employers for any plan underfunding. Due to the uncertainty regarding future factors that could impact the withdrawal
liability, the Partnership is unable to determine the timing of the payment of the future withdrawal liability, or additional future
withdrawal liability, if any.
Fair Values of Acquired Assets and Liabilities. From time to time, we enter into material business combinations. In accordance with
accounting guidance associated with business combinations, the assets acquired and liabilities assumed are recorded at their estimated
fair value as of the acquisition date. Fair values of assets acquired and liabilities assumed are based upon available information and
may involve us engaging an independent third party to perform an appraisal. Estimating fair values can be complex and subject to
significant business judgment. Estimates most commonly impact property, plant and equipment and intangible assets, including
goodwill. Generally, we have, if necessary, up to one year from the acquisition date to finalize our estimates of acquisition date fair
values.
Results of Operations and Financial Condition
Net income for fiscal 2015 was $84.4 million, or $1.39 per Common Unit, compared to $94.5 million, or $1.56 per Common
Unit, in fiscal 2014.
Net income and EBITDA (as defined and reconciled below) for fiscal 2015 included: (i) a loss on debt extinguishment of $15.1
million; (ii) $11.5 million in expenses related to the integration of Inergy Propane; (iii) an $11.3 million charge related to the
Partnership’s voluntary partial withdrawal from a multi-employer pension plan covering certain employees acquired in the Inergy
Propane acquisition; and (iv) a pension settlement charge of $2.0 million. Net income and EBITDA for fiscal 2014 included: (i) a loss
on debt extinguishment of $11.6 million; and (ii) $12.3 million in expenses related to the integration of Inergy Propane. Excluding the
effects of the foregoing items and unrealized (non-cash) mark-to-market adjustments on derivative instruments in both years, Adjusted
EBITDA (as defined and reconciled below) amounted to $334.0 million in fiscal 2015, compared to Adjusted EBITDA of $338.5
million in fiscal 2014.
Retail propane gallons sold in fiscal 2015 decreased 50.4 million gallons, or 9.5%, to 480.4 million gallons from 530.7 million
gallons in fiscal 2014. Sales of fuel oil and other refined fuels decreased 7.2 million gallons, or 14.7%, to 41.9 million gallons from
49.1 million gallons in fiscal 2014. According to the National Oceanic and Atmospheric Administration, average temperatures (as
measured by heating degree days) across all of the Partnership’s service territories for fiscal 2015 were 2% warmer than normal and
5% warmer than the prior year. The fiscal 2015 heating season started with unseasonably warm temperatures throughout much of the
first quarter, inclusive of a December that was one of the warmest on record, followed by inconsistent temperatures across the
Partnership’s eastern and midwestern service territories for the remainder of the heating season. The Partnership’s western service
territories experienced sustained warmer than normal temperatures throughout the year with average temperatures that were 23%
warmer than normal and 9% warmer than the prior year.
26
Revenues for fiscal 2015 of $1,417.0 million decreased $521.3 million, or 26.9%, compared to the prior year, primarily due to
lower retail selling prices associated with lower wholesale costs and, to a lesser extent, lower volumes sold. Average posted propane
prices (basis Mont Belvieu, Texas) for fiscal 2015 were 52.7% lower than the prior year, and average posted prices for fuel oil were
35.5% lower than the prior year.
Cost of products sold for fiscal 2015 of $593.4 million decreased $487.4 million, or 45.1%, compared to $1,080.8 million in t he
prior year, primarily due to lower wholesale costs and, to a lesser extent, lower volumes sold. Cost of products sold for fiscal 2015 and
fiscal 2014 included unrealized (non-cash) gains of $1.9 million and $0.3 million, respectively, attributable to the mark-to-market
adjustment for derivative instruments used in risk management activities. These unrealized gains and losses are excluded from
Adjusted EBITDA for both periods in the table below.
Combined operating and general and administrative expenses of $512.5 million for fiscal 2015 were $18.4 million, or 3.5%,
lower than fiscal 2014. Excluding integration-related expenses for both periods, as well as the multi-employer pension plan
withdrawal and pension settlement charges in fiscal 2015 discussed above, combined operating and general administrative expenses
decreased 6.0% compared to the prior year. The Partnership continued to realize operating efficiencies and synergies as a result of the
integration of Inergy Propane, including lower headcount and lower vehicle count, and lower general insurance and bad debt expense.
Depreciation and amortization expense of $133.3 million for fiscal 2015 decreased $3.1 million, or 2.3%, primarily due to the
acceleration of depreciation expense recorded in the prior year for assets taken out of service as a result of integration activities. Net
interest expense of $77.6 million for fiscal 2015 decreased $5.6 million, or 6.8%, primarily due to savings from the refinancing of
certain of the Partnership’s senior notes completed in the third quarter of fiscal 2014 and in the second quarter of fiscal 2015.
During fiscal 2015, we succeeded in accomplishing many significant goals. The following highlight a few key
accomplishments for fiscal 2015:
We finished the year strongly, with three consecutive quarters of year-over-year growth in Adjusted EBITDA;
We increased the annualized distribution rate by $0.05, or 1.4%, per Common Unit compared to the annualized rate at the
end of fiscal 2014;
We achieved our goals for the third and final year of the integration of Inergy Propane;
We successfully refinanced our previous 7.375% Senior Notes due 2020 with new 5.75% Senior Notes due 2025, which
effectively extended maturities on this portion of our debt by five years and reduced our cash interest requirements by
more than $4 million annually;
We made enhancements to our technology platform to drive further operating efficiencies and to enhance our customers’
ability to interact with us; and
We announced a shift in organizational responsibilities within our senior leadership ranks, including the creation of a new
role of Chief Development Officer to strengthen our focus on growth initiatives.
As we look ahead to fiscal 2016, our anticipated cash requirements include: (i) maintenance and growth capital expenditures of
approximately $35.0 million; (ii) approximately $74.9 million of interest and income tax payments; and (iii) approximately $215.7
million of distributions to Unitholders, assuming distributions remain at the current annualized rate of $3.55 per Common Unit. Based
on our current cash position of $152.3 million as of September 26, 2015, availability of funds under the Revolving Credit Facility
(unused borrowing capacity of $253.8 million at September 26, 2015) and expected cash flow from operating activities, we expect to
have sufficient funds to meet our current and future obligations.
27
Fiscal Year 2015 Compared to Fiscal Year 2014
Revenues
(Dollars and gallons in thousands)
Revenues
Propane
Fuel oil and refined fuels
Natural gas and electricity
All other
Total revenues
Retail gallons sold
Propane
Fuel oil and refined fuels
Fiscal
2015
Fiscal
2014
Decrease
Percent
Decrease
$ 1,176,980 $ 1,606,840 $
194,684
87,093
49,640
$ 1,416,979 $ 1,938,257 $
127,495
66,865
45,639
(429,860 )
(67,189 )
(20,228 )
(4,001 )
(521,278 )
(26.8 )%
(34.5 )%
(23.2 )%
(8.1 )%
(26.9 )%
480,372
41,878
530,743
49,071
(50,371 )
(7,193 )
(9.5 )%
(14.7 )%
Total revenues decreased $521.3 million, or 26.9%, to $1,417.0 million for fiscal 2015 compared to $1,938.3 million for the
prior year due to lower average propane, fuel oil and refined fuels and natural gas selling prices and, to a lesser extent, lower volumes
sold. As discussed above, average temperatures (as measured in heating degree days) across all of our service territories for fiscal
2015 were 2% warmer than normal and 5% warmer than the prior year. The weather pattern during the fiscal 2015 heating season was
characterized by warmer than normal temperatures for the first quarter of fiscal 2015, particularly during the month of December 2014
(December 2014 was 15% warmer than normal and 21% warmer than December 2013), followed by inconsistent temperatures in our
eastern and midwestern territories during the latter half of the heating season. We also experienced sustained warmer than normal
temperatures in our western territories throughout fiscal 2015 as average temperatures were 23% warmer than normal and 9% warmer
than the comparable prior year period.
Revenues from the distribution of propane and related activities of $1,177.0 million for fiscal 2015 decreased $429.9 million, or
26.8%, compared to $1,606.8 million for the prior year, primarily due to lower average retail selling prices associated with lower
wholesale propane costs and, to a lesser extent, lower volumes sold. Average propane selling prices for fiscal 2015 decreased 20.3%
compared to the prior year, resulting in a $281.0 million decrease in revenues year-over-year. Retail propane gallons sold in fiscal
2015 decreased 50.4 million gallons, or 9.5%, resulting in a decrease in revenues of $145.0 million. Volumes sold during fiscal 2015
were adversely affected by the unseasonably warm weather during key parts of the winter heating season discussed above. Included
within the propane segment are revenues from other propane activities of $75.3 million for fiscal 2015, which decreased $3.9 million
compared to the prior year.
Revenues from the distribution of fuel oil and refined fuels of $127.5 million for fiscal 2015 decreased $67.2 million, or 34.5%,
from $194.7 million for the prior year, primarily due to lower average selling prices and, to a lesser extent, lower volumes sold.
Average selling prices in our fuel oil and refined fuels segment decreased 23.2%, resulting in a $38.5 million decrease in revenues.
Fuel oil and refined fuels gallons sold in fiscal 2015 decreased 7.2 million gallons, or 14.7%, resulting in a decrease in revenues of
$28.7 million. The decrease in volumes sold was primarily due to the impact of the unfavorable weather trends discussed above.
Revenues in our natural gas and electricity segment decreased $20.2 million, or 23.2%, to $66.9 million in fiscal 2015 compared
to $87.1 million in the prior year as a result of lower average selling prices for natural gas and electricity as a result of lower average
wholesale costs and, to a lesser extent, lower natural gas and electricity usage.
Cost of Products Sold
(Dollars in thousands)
Cost of products sold
Propane
Fuel oil and refined fuels
Natural gas and electricity
All other
Total cost of products sold
As a percent of total revenues
$
$
28
Fiscal
2015
Fiscal
2014
Decrease
Percent
Decrease
443,538 $
92,628
42,313
14,901
844,855 $
155,773
64,448
15,674
593,380 $ 1,080,750 $
55.8 %
41.9 %
(401,317 )
(63,145 )
(22,135 )
(773 )
(487,370 )
(47.5 )%
(40.5 )%
(34.3 )%
(4.9 )%
(45.1 )%
The cost of products sold reported in the consolidated statements of operations represents the weighted average unit cost of
propane, fuel oil and refined fuels, natural gas and electricity sold, including transportation costs to deliver product from our supply
points to storage or to our customer service centers. Cost of products sold also includes the cost of appliances and related parts sold or
installed by our customer service centers computed on a basis that approximates the average cost of the products.
Given the retail nature of our operations, we maintain a certain level of priced physical inventory to help ensure that our field
operations have adequate supply commensurate with the time of year. Our strategy has been, and will continue to be, to keep our
physical inventory priced relatively close to market for our field operations. Consistent with past practices, we principally utilize
futures and/or options contracts traded on the NYMEX to mitigate the price risk associated with our priced physical inventory. Under
this risk management strategy, realized gains or losses on futures or options contracts, which are reported in cost of products sold, will
typically offset losses or gains on the physical inventory once the product is sold (which may or may not occur in the same accounting
period). We do not use futures or options contracts, or other derivative instruments, for speculative trading purposes. Unrealized
(non-cash) gains or losses from changes in the fair value of derivative instruments that are not designated as cash flow hedges are
recorded within cost of products sold. Cost of products sold excludes depreciation and amortization; these amounts are reported
separately within the consolidated statements of operations.
From a commodity perspective, propane prices declined rather sharply during the first quarter of fiscal 2015 and continued to
trend downward for the remainder of the fiscal year, primarily due to sustained record or near-record high U.S. propane inventories.
The movement in commodity prices in fiscal 2015 was in stark contrast to the prior year, when prices were rising rapidly due to
industry-wide supply and logistics challenges, particularly during the peak of the fiscal 2014 heating season. Overall, average posted
prices for propane (basis Mont Belvieu, Texas) and fuel oil prices for fiscal 2015 were 52.7% and 35.5% lower than the prior year,
respectively. The net change in the fair value of derivative instruments during the period resulted in unrealized (non-cash) gains of
$1.9 million and $0.3 million reported in cost of products sold in fiscal 2015 and 2014, respectively, resulting in a decrease of $1.6
million in cost of products sold in fiscal 2015 compared to the prior year, $1.3 million of which was reported in the propane segment
and $0.3 million was reported in the fuel oil and refined fuels segment.
Cost of products sold associated with the distribution of propane and related activities of $443.5 million for fiscal 2015
decreased $401.3 million, or 47.5%, compared to the prior year primarily due to lower wholesale costs and, to a lesser extent, lower
volumes sold. Lower average propane costs and lower propane volumes sold during fiscal 2015 resulted in a decrease of $310.3
million and $78.2 million, respectively. Cost of products sold from other propane activities decreased $11.5 million.
Cost of products sold associated with our fuel oil and refined fuels segment of $92.6 million for fiscal 2015 decreased $63.1
million, or 40.5%, compared to the prior year. Lower fuel oil and refined fuels wholesale costs and lower volumes sold, resulted in
decreases of $39.8 million and $23.0 million, respectively, in costs of products sold during fiscal 2015 compared to the prior year.
Cost of products sold in our natural gas and electricity segment of $42.3 million for fiscal 2015 decreased $22.1 million, or
34.3%, compared to the prior year, primarily due to lower natural gas and electricity wholesale costs and, to a lesser extent, lower
usage.
Total cost of products sold as a percent of total revenues decreased 13.9 percentage points to 41.9% in fiscal 2015 from 55.8%
in the prior year, primarily due to the decline in wholesale costs outpacing the decline in average selling prices in all segments during
fiscal 2015.
Operating Expenses
(Dollars in thousands)
Operating expenses
As a percent of total revenues
Fiscal
2015
444,251 $
31.4 %
$
Fiscal
2014
466,389 $
24.1 %
Decrease
Percent
Decrease
(22,138 )
(4.7 )%
All costs of operating our retail distribution and appliance sales and service operations are reported within operating expenses in
the consolidated statements of operations. These operating expenses include the compensation and benefits of field and direct
operating support personnel, costs of operating and maintaining our vehicle fleet, overhead and other costs of our purchasing, training
and safety departments and other direct and indirect costs of operating our customer service centers.
29
Operating expenses of $444.3 million for fiscal 2015 decreased $22.1 million, or 4.7%, compared to $466.4 million in the prior
year, primarily due to operating efficiencies and synergies realized as a result of the integration of Inergy Propane; including lower
payroll and benefit-related expenses attributable to reduced headcount, lower vehicles expenses attributable to reduced vehicle count
and lower fuel costs to operate our fleet, and lower bad debt and insurance expenses. Operating expenses for fiscal 2015 included
expenses of $9.7 million associated with the integration of the Inergy Propane operations, an $11.3 million charge related to our
voluntary partial withdrawal from a multi-employer pension plan, and a pension settlement charge of $2.0 million. Operating
expenses for fiscal 2014 included integration-related expenses of $8.1 million. These items were excluded from our calculation of
Adjusted EBITDA below.
General and Administrative Expenses
(Dollars in thousands)
General and administrative expenses
As a percent of total revenues
Fiscal
2015
Fiscal
2014
Increase
Percent
Increase
$
68,296 $
4.8 %
64,593 $
3.3 %
3,703
5.7 %
All costs of our back office support functions, including compensation and benefits for executives and other support functions,
as well as other costs and expenses to maintain finance and accounting, treasury, legal, human resources, corporate development and
the information systems functions are reported within general and administrative expenses in the consolidated statements of
operations.
General and administrative expenses of $68.3 million for fiscal 2015 increased $3.7 million from $64.6 million in the prior year,
primarily due to higher payroll expenses, including variable compensation, and higher professional service fees associated with
uninsured legal matters. General and administrative expenses for fiscal 2015 and 2014 included $1.9 million and $4.2 million,
respectively, of professional services and other expenses associated with the integration of the Inergy Propane operations. These items
were excluded from our calculation of Adjusted EBITDA below.
Depreciation and Amortization
(Dollars in thousands)
Depreciation and amortization
As a percent of total revenues
Fiscal
2015
133,294 $
9.4 %
$
Fiscal
2014
136,399 $
7.0 %
Decrease
Percent
Decrease
(3,105 )
(2.3 )%
Depreciation and amortization expense of $133.3 million in fiscal 2015 decreased $3.1 million from $136.4 million in the prior
year, primarily as a result of accelerated depreciation expense recorded in the prior year for assets taken out of service from integration
activities.
Loss on Debt Extinguishment
On February 25, 2015, we repurchased and satisfied and discharged all of our previously outstanding 2020 Senior Notes with
net proceeds from the issuance of the 2025 Senior Notes and cash on hand, pursuant to a tender offer and redemption. In connection
with this tender offer and redemption, during the second quarter of fiscal 2015 we recognized a loss on the extinguishment of debt of
$15.1 million, consisting of $11.1 million for the redemption premium and related fees, as well as the write-off of $2.9 million and
$1.1 million in unamortized debt origination costs and unamortized discount, respectively.
On May 27, 2014, we repurchased and satisfied and discharged all of our previously outstanding 2018 Senior Notes with net
proceeds from the issuance of the 2024 Senior Notes and cash on hand, pursuant to a tender offer and redemption. In connection with
this tender offer and redemption, we recognized a loss on the extinguishment of debt of $11.6 million in the third quarter of fiscal
2014, consisting of $31.6 million for the redemption premium and related fees, as well as the write-off of $5.3 million and ($25.3)
million in unamortized debt origination costs and unamortized premium, respectively.
30
Interest Expense, net
(Dollars in thousands)
Interest expense, net
As a percent of total revenues
Fiscal
2015
Fiscal
2014
Decrease
Percent
Decrease
$
77,634 $
5.5 %
83,261 $
4.3 %
(5,627 )
(6.8 )%
Net interest expense of $77.6 million for fiscal 2015 decreased $5.6 million from $83.3 million in the prior year, primarily due
to the refinancing of $496.6 million of 7.5% Senior Notes due 2018 with $525.0 million of 5.5% Senior Notes due 2024 in the third
quarter of fiscal 2014, and the refinancing of $250.0 million of 7.375% Senior Notes due 2020 with $250.0 million of 5.75% Senior
Notes due 2025 in the second quarter of fiscal 2015. See Liquidity and Capital Resources below for additional discussion.
Net Income and Adjusted EBITDA
Net income for fiscal 2015 amounted to $84.4 million, or $1.39 per Common Unit, compared to $94.5 million, or $1.56 per
Common Unit, in fiscal 2014. Earnings before interest, taxes, depreciation and amortization (“EBITDA”) for fiscal 2015 amounted to
$296.0 million, compared to $314.9 million for fiscal 2014.
Net income and EBITDA for fiscal 2015 included: (i) a loss on debt extinguishment of $15.1 million; (ii) $11.5 million in
expenses related to the integration of Inergy Propane; (iii) an $11.3 million charge related to our voluntary partial withdrawal from a
multi-employer pension plan; and (iv) a pension settlement charge of $2.0 million. Net income and EBITDA for fiscal 2014 included:
(i) a loss on debt extinguishment of $11.6 million; and (ii) $12.3 million in expenses related to the integration of Inergy Propane.
Excluding the effects of these items, as well as the unrealized (non-cash) mark-to-market adjustments on derivative instruments in
both years, Adjusted EBITDA amounted to $334.0 million for fiscal 2015, compared to Adjusted EBITDA of $338.5 million in fiscal
2014.
EBITDA represents net income before deducting interest expense, income taxes, depreciation and amortization. Adjusted
EBITDA represents EBITDA excluding the unrealized net gain or loss on mark-to-market activity for derivative instruments and other
items, as applicable, as provided in the table below. Our management uses EBITDA and Adjusted EBITDA as supplemental
measures of operating performance and we are including them because we believe that they provide our investors and industry
analysts with additional information to evaluate our operating results. EBITDA and Adjusted EBITDA are not recognized terms
under US GAAP and should not be considered as an alternative to net income or net cash provided by operating activities determined
in accordance with US GAAP. Because EBITDA and Adjusted EBITDA as determined by us excludes some, but not all, items that
affect net income, they may not be comparable to EBITDA and Adjusted EBITDA or similarly titled measures used by other
companies.
The following table sets forth our calculations of EBITDA and Adjusted EBITDA:
(Dollars in thousands)
Net income
Add:
Provision for income taxes
Interest expense, net
Depreciation and amortization
EBITDA
Unrealized (non-cash) (gains) on changes in fair value
of derivatives
Integration-related costs
Loss on debt extinguishment
Multi-employer pension plan withdrawal charge
Pension settlement charge
Adjusted EBITDA
Year Ended
September 26, September 27,
2015
2014
$
84,352 $
94,509
700
77,634
133,294
295,980
(1,855 )
11,542
15,072
11,300
2,000
334,039 $
767
83,261
136,399
314,936
(306 )
12,283
11,589
—
—
338,502
$
31
Fiscal Year 2014 Compared to Fiscal Year 2013
Revenues
(Dollars and gallons in thousands)
Revenues
Propane
Fuel oil and refined fuels
Natural gas and electricity
All other
Total revenues
Retail gallons sold
Propane
Fuel oil and refined fuels
Fiscal
2014
Fiscal
2013
Increase
(Decrease)
Percent
Increase
(Decrease)
$ 1,606,840 $ 1,357,102 $
208,957
79,432
58,115
$ 1,938,257 $ 1,703,606 $
194,684
87,093
49,640
249,738
(14,273 )
7,661
(8,475 )
234,651
18.4 %
(6.8 )%
9.6 %
(14.6 )%
13.8 %
530,743
49,071
534,621
53,710
(3,878 )
(4,639 )
(0.7 )%
(8.6 )%
Total revenues increased $234.7 million, or 13.8%, to $1,938.3 million for fiscal 2014 compared to $1,703.6 million for the
prior year due to higher average propane, fuel oil and refined fuels and natural gas selling prices, offset to an extent by lower volumes
sold. As discussed above, average temperatures (as measured in heating degree days) across all of our service territories for fiscal
2014 were 3% colder than normal, compared to 4% warmer than normal in the prior year. However, the weather pattern during the
fiscal 2014 heating season was characterized by warmer than normal temperatures for the first two months of the period, followed by
significantly colder than normal temperatures for the remainder of the heating season. In addition, during the peak of our heating
season, we experienced considerably colder than normal temperatures in our east and midwest service territories, but sustained
unseasonably warm temperatures in our western territories. Average temperatures in our western territories during the fiscal 2014
heating season were 11% warmer than normal and 6% warmer than the comparable prior year period.
Revenues from the distribution of propane and related activities of $1,606.8 million for fiscal 2014 increased $249.7 million, or
18.4%, compared to $1,357.1 million for the prior year, primarily due to higher average retail selling prices associated with higher
wholesale propane costs, partially offset by a decrease in retail propane volumes sold. Average propane selling prices for fiscal 2014
increased 20.0% compared to the prior year as a result of higher wholesale propane costs, resulting in a $254.6 million increase in
revenues year-over-year. Retail propane gallons sold in fiscal 2014 decreased 3.9 million gallons, or 0.7%, to 530.7 million gallons
from 534.6 million gallons in the prior year. Volumes sold during fiscal 2014 were adversely affected by supply constraints resulting
from industry-wide supply shortages and logistics issues adversely affecting propane transportation sourcing and costs that persisted
throughout much of our heating season. Customer conservation attributable to the significant rise in propane prices also adversely
affected volumes sold. Lower retail propane volumes sold resulted in a decrease in revenues of $9.3 million for fiscal 2014 compared
to the prior year. Included within the propane segment are revenues from other propane activities of $79.1 million for fiscal 2014,
which increased $4.4 million compared to the prior year.
Revenues from the distribution of fuel oil and refined fuels of $194.7 million for fiscal 2014 decreased $14.3 million, or 6.8%,
from $209.0 million for the prior year, primarily due to lower volumes sold, partially offset by higher average selling prices. Fuel oil
and refined fuels gallons sold in fiscal 2014 decreased 4.6 million gallons, or 8.6%, to 49.1 million gallons from 53.7 million gallons
in the prior year, primarily due to a decline in lower margin gasoline and diesel volumes. Lower fuel oil and refined fuels volumes
sold resulted in a decrease in revenues of $18.0 million for fiscal 2014 compared to the prior year. Average selling prices in our fuel
oil and refined fuels segment in fiscal 2014 increased 2.0% compared to the prior year, resulting in a $3.7 million increase in revenues
year-over-year.
Revenues in our natural gas and electricity segment increased $7.7 million, or 9.6%, to $87.1 million in fiscal 2014 compared to
$79.4 million in the prior year as a result of higher average selling prices for natural gas and electricity as a result of higher average
wholesale costs, partially offset by lower electricity usage.
32
Cost of Products Sold
(Dollars in thousands)
Cost of products sold
Propane
Fuel oil and refined fuels
Natural gas and electricity
All other
Total cost of products sold
As a percent of total revenues
Fiscal
2014
Fiscal
2013
Increase
(Decrease)
Percent
Increase
(Decrease)
$
844,855 $
155,773
64,448
15,674
$ 1,080,750 $
55.8 %
612,240 $
172,022
55,995
21,648
861,905 $
50.6 %
232,615
(16,249 )
8,453
(5,974 )
218,845
38.0 %
(9.4 )%
15.1 %
(27.6 )%
25.4 %
In the commodities markets, propane prices were extremely volatile during fiscal 2014 as a result of the supply and logistics
issues that started late in the first fiscal quarter and continued throughout most of the second quarter. Overall, average posted prices
for propane for fiscal 2014 were 24.8% higher than the prior year while fuel oil prices were 2.1% lower than the prior year. The net
change in the fair value of derivative instruments during the period resulted in unrealized (non-cash) gains of $0.3 million and
unrealized (non-cash) losses of $4.3 million reported in cost of products sold in fiscal 2014 and 2013, respectively, resulting in a
decrease of $4.6 million in cost of products sold in fiscal 2014 compared to the prior year, $4.4 million of which was reported in the
propane segment.
Cost of products sold associated with the distribution of propane and related activities of $844.9 million for fiscal 2014
increased $232.6 million, or 38.0%, compared to the prior year primarily due to higher wholesale costs and higher transportation costs
associated with the extraordinary measures we took to ensure adequate propane supplies were delivered to our customer service
centers to meet customer demand during the heating season. Higher average propane costs resulted in an increase of $233.3 million,
partially offset by a decrease of $4.3 million related to lower propane volumes sold during fiscal 2014 compared to the prior year.
Cost of products sold from other propane activities increased $8.0 million.
Cost of products sold associated with our fuel oil and refined fuels segment of $155.8 million for fiscal 2014 decreased $16.2
million, or 9.4%, compared to the prior year. Lower fuel oil and refined fuels volumes sold coupled with lower wholesale costs
resulted in decreases of $14.8 million and $1.4 million, respectively, in costs of products sold during fiscal 2014 compared to the prior
year.
Cost of products sold in our natural gas and electricity segment of $64.4 million for fiscal 2014 increased $8.5 million, or
15.1%, compared to the prior year, primarily due to higher natural gas and electricity wholesale costs, partially offset by lower
volumes sold.
Total cost of products sold as a percent of total revenues increased 5.2 percentage points to 55.8% in fiscal 2014 from 50.6% in
the prior year, primarily due to the rise in wholesale propane costs outpacing the rise in propane average selling prices during fiscal
2014.
Operating Expenses
(Dollars in thousands)
Operating expenses
As a percent of total revenues
Fiscal
2014
466,389 $
24.1 %
$
Fiscal
2013
469,496 $
27.6 %
Decrease
Percent
Decrease
(3,107 )
(0.7 )%
Operating expenses of $466.4 million for fiscal 2014 decreased $3.1 million, or 0.7%, compared to $469.5 million in the prior
year, primarily due to synergies realized as a result of the continuing integration of Inergy Propane operations, which was offset to an
extent by higher overtime and vehicle expenses attributable to harsh weather conditions during our fiscal 2014 heating season, as well
as higher provisions for potential uncollectible accounts. Operating expenses for fiscal 2014 included integration-related expenses of
$8.1 million associated with the integration of the Inergy Propane operations compared to $4.6 million in the prior year. In addition,
fiscal 2013 included a $7.0 million charge related to our voluntary partial withdrawal from a multi-employer pension plan and full
withdrawal from four multi-employer pension plans for certain employees acquired in the Inergy Propane Acquisition. These charges
were excluded from our calculation of Adjusted EBITDA below.
33
General and Administrative Expenses
(Dollars in thousands)
General and administrative expenses
As a percent of total revenues
Fiscal
2014
Fiscal
2013
Decrease
Percent
Decrease
$
64,593 $
3.3 %
64,845 $
3.8 %
(252 )
(0.4 )%
General and administrative expenses of $64.6 million for fiscal 2014 was relatively flat compared to the prior year. General and
administrative expenses for fiscal 2014 and 2013 included $4.2 million and $6.0 million, respectively, of professional services and
other expenses associated with the integration of the Inergy Propane operations. These items were excluded from our calculation of
Adjusted EBITDA below.
Depreciation and Amortization
(Dollars in thousands)
Depreciation and amortization
As a percent of total revenues
Fiscal
2014
136,399 $
7.0 %
Fiscal
2013
130,384 $
7.7 %
$
Increase
Percent
Increase
6,015
4.6 %
Depreciation and amortization expense of $136.4 million in fiscal 2014 increased $6.0 million, primarily as a result of
depreciation expense on buildings, vehicles and equipment taken out of service as a result of the integration of Inergy Propane
operations.
Loss on Debt Extinguishment
On May 27, 2014, we repurchased and satisfied and discharged all of our 2018 Senior Notes with net proceeds from the
issuance of the 2024 Senior Notes and cash on hand pursuant to a tender offer and redemption. In connection with this tender offer
and redemption, we recognized a loss on the extinguishment of debt of $11.6 million consisting of $31.6 million for the redemption
premium and related fees, as well as the write-off of $5.3 million and ($25.3) million in unamortized debt origination costs and
unamortized premium, respectively.
On August 2, 2013, we repurchased, pursuant to an optional redemption, $133.4 million of our 7.375% senior notes due
August 1, 2021 using net proceeds from our May 2013 public offering and net proceeds from the underwriters’ exercise of their over-
allotment option to purchase additional Common Units. In addition, on August 6, 2013, we repurchased $23.9 million of our 2021
senior notes in a private transaction using cash on hand. In connection with these repurchases, which totaled $157.3 million in
aggregate principal amount, we recognized a loss on the extinguishment of debt of $2.1 million consisting of $11.7 million for the
repurchase premium and related fees, as well as the write-off of $2.1 million and ($11.7) million in unamortized debt origination costs
and unamortized premium, respectively.
Interest Expense, net
(Dollars in thousands)
Interest expense, net
As a percent of total revenues
Fiscal
2014
Fiscal
2013
Decrease
Percent
Decrease
$
83,261 $
4.3 %
95,427 $
5.6 %
(12,166 )
(12.7 )%
Net interest expense of $83.3 million for fiscal 2014 decreased $12.2 million compared to $95.4 million in the prior year,
primarily due to the reduction of $157.3 million in long-term borrowings during the fourth quarter of fiscal 2013 and, to a lesser
extent, the impact of the refinancing of our 7.5% Senior Notes due 2018 with 5.5% Senior Notes due 2024 completed during the third
quarter of fiscal 2014. See Liquidity and Capital Resources below for additional discussion.
34
Net Income and Adjusted EBITDA
Net income for fiscal 2014 amounted to $94.5 million, or $1.56 per Common Unit, compared to $78.8 million, or $1.35 per
Common Unit, in fiscal 2013. Earnings before interest, taxes, depreciation and amortization (“EBITDA”) for fiscal 2014 amounted to
$314.9 million, compared to $305.2 million for fiscal 2013.
Net income and EBITDA for fiscal 2014 included: (i) $12.3 million in expenses related to the ongoing integration of Inergy
Propane and (ii) a loss on debt extinguishment of $11.6 million. Net income and EBITDA for fiscal 2013 included: (i) $10.6 million
in expenses related to the ongoing integration of Inergy Propane; (ii) $7.0 million in charges related to our voluntary withdrawal from
multi-employer pension plans covering certain employees acquired in the Inergy Propane Acquisition; and (iii) a loss on debt
extinguishment of $2.1 million. Excluding the effects of these charges, as well as the unrealized (non-cash) mark-to-market
adjustments on derivative instruments in both years, Adjusted EBITDA amounted to $338.5 million for fiscal 2014, compared to
Adjusted EBITDA of $329.3 million in fiscal 2013.
The following table sets forth our calculations of EBITDA and Adjusted EBITDA:
(Dollars in thousands)
Net income
Add:
Provision for income taxes
Interest expense, net
Depreciation and amortization
EBITDA
Unrealized (non-cash) (gains) losses on changes in fair
value of derivatives
Integration-related costs
Loss on debt extinguishment
Multi-employer pension plan withdrawal charge
Adjusted EBITDA
Year Ended
September 27, September 28,
2014
2013
$
94,509 $
78,798
767
83,261
136,399
314,936
(306 )
12,283
11,589
—
338,502 $
607
95,427
130,384
305,216
4,318
10,575
2,144
7,000
329,253
$
Liquidity and Capital Resources
Analysis of Cash Flows
Operating Activities. Net cash provided by operating activities for fiscal 2015 amounted to $324.2 million, an increase of $98.7
million compared to the prior year. The increase was primarily attributable to a substantial decrease in working capital requirements
as a result of the decline in wholesale costs on our inventory (average posted prices for propane and fuel oil for fiscal 2015 were
52.7% and 35.5% lower than the prior year, respectively), accounts receivable and accounts payable.
Investing Activities. Net cash used in investing activities of $36.0 million for fiscal 2015 consisted of capital expenditures of
$41.2 million (including $19.4 million for maintenance expenditures and $21.8 million to support the growth of operations) and $6.5
million for the acquisition of a business, partially offset by $11.7 million in net proceeds from the sale of property, plant and
equipment. Net cash used in investing activities of $16.5 million for fiscal 2014 consisted of capital expenditures of $30.1 million
(including $18.2 million for maintenance expenditures and $11.9 million to support the growth of operations), partially offset by the
net proceeds of $13.5 million from the sale of property, plant and equipment.
Financing Activities. Net cash used in financing activities for fiscal 2015 of $228.5 million reflects the quarterly distribution to
Common Unitholders at a rate of $0.8750 per Common Unit paid in respect of the fourth quarter of fiscal 2014 and the first quarter of
fiscal 2015, and at a rate of $0.8875 per Common Unit paid in respect of the second and third quarters of fiscal 2015. In addition, cash
used in financing activities included proceeds of $250.0 million from the issuance of the 2025 Senior Notes in February 2015 which
were used, along with cash on hand, to repurchase and satisfy and discharge all of the previously outstanding 2020 Senior Notes, as
well as to pay tender premiums and other related fees of $11.1 million and debt issuance costs of $4.6 million, pursuant to a tender
offer and redemption.
Net cash used in financing activities for fiscal 2014 of $223.6 million reflects the quarterly distribution to Common Unitholders
at a rate of $0.8750 per Common Unit paid in respect of the fourth quarter of fiscal 2013 and the first, second and third quarters of
fiscal 2014. In addition, cash used in financing activities included proceeds of $525.0 million from the issuance of the 2024 Senior
35
Notes in May 2014. The net proceeds from the 2024 Senior Notes offering were used, along with cash on hand, to repurchase and
satisfy and discharge all of the outstanding 2018 Senior Notes, as well as to pay tender premiums and other related fees of $31.6
million and debt issuance costs of $9.5 million, pursuant to a tender offer and redemption.
Summary of Long-Term Debt Obligations and Revolving Credit Lines
As of September 26, 2015, our long-term debt consisted of $346.2 million in aggregate principal amount of 7.375% senior notes
due August 1, 2021 (excluding unamortized premium of $19.9 million), $525.0 million in aggregate principal amount of 5.5% senior
notes due June 1, 2024, $250.0 million in aggregate principal amount of 5.75% senior notes due March 1, 2025 and $100.0 million
outstanding under our senior secured Revolving Credit Facility.
Senior Notes
2018 Senior Notes and 2021 Senior Notes
On August 1, 2012, we and our 100%-owned subsidiary, Suburban Energy Finance Corp., issued $496.6 million in aggregate
principal amount of unregistered 7.5% senior notes due October 1, 2018 (the “2018 Senior Notes”) and $503.4 million in aggregate
principal amount of unregistered 7.375% senior notes due August 1, 2021 (the “2021 Senior Notes”) in a private placement in
connection with the Inergy Propane Acquisition. Based on market rates for similar issues, the 2018 Senior Notes and 2021 Senior
Notes were valued at 106.875% and 108.125%, respectively, of the principal amount, on the Acquisition Date as they were issued in
exchange for Inergy’s outstanding notes, not for cash. On December 19, 2012, we completed an offer to exchange our then-
outstanding unregistered 7.5% senior notes due 2018 and 7.375% senior notes due 2021 for an equal principal amount of 7.5% senior
notes due 2018 and 7.375% senior notes due 2021, respectively, that have been registered under the Securities Act of 1933, as
amended.
On August 2, 2013, we repurchased, pursuant to optional redemption, $133.4 million of our 2021 Senior Notes using net
proceeds from our May 2013 public offering and net proceeds from the underwriters’ exercise of their over-allotment option to
purchase additional Common Units. In addition, on August 6, 2013, we repurchased $23.9 million of our 2021 Senior Notes in a
private transaction using cash on hand.
On May 27, 2014, we repurchased and satisfied and discharged all of our 2018 Senior Notes with net proceeds from the
issuance of the 2024 Senior Notes, as defined below, and cash on hand, pursuant to a tender offer and redemption during the third
quarter of fiscal 2014. In connection with this tender offer and redemption, we recognized a loss on the extinguishment of debt of
$11.6 million consisting of $31.6 million for the redemption premium and related fees, as well as the write-off of $5.3 million and
($25.3) million in unamortized debt origination costs and unamortized premium, respectively. The 2018 Senior Notes required semi-
annual interest payments in April and October, and the 2021 Senior Notes require semi-annual interest payments in February and
August.
The 2021 Senior Notes are redeemable, at our option, in whole or in part, at any time on or after August 1, 2016, in each case at
the redemption prices described in the table below, together with any accrued and unpaid interest to date of the redemption.
Year
2016
2017
2018
2019 and thereafter
Percentage
103.688%
102.459%
101.229%
100.000%
2020 Senior Notes
On March 23, 2010, we and our 100%-owned subsidiary, Suburban Energy Finance Corp., completed a public offering of
$250.0 million in aggregate principal amount of 7.375% senior notes due March 15, 2020 (the “2020 Senior Notes”). The 2020
Senior Notes were issued at 99.136% of the principal amount and required semi-annual interest payments in March and September.
On February 25, 2015, we repurchased and satisfied and discharged all of our 2020 Senior Notes with net proceeds from the
issuance of the 2025 Senior Notes, as defined below, and cash on hand, pursuant to a tender offer and redemption during the second
quarter of fiscal 2015. In connection with this tender offer and redemption, we recognized a loss on the extinguishment of debt of
$15.1 million consisting of $11.1 million for the redemption premium and related fees, as well as the write-off of $2.9 million and
$1.1 million in unamortized debt origination costs and unamortized discount, respectively.
36
2024 Senior Notes
As previously discussed, on May 27, 2014, we and our 100%-owned subsidiary, Suburban Energy Finance Corp., completed a
public offering of $525.0 million in aggregate principal amount of 5.5% senior notes due June 1, 2024 (the “2024 Senior Notes”). The
2024 Senior Notes were issued at 100% of the principal amount and require semi-annual interest payments in June and December.
The net proceeds from the issuance of the 2024 Senior Notes, along with cash on hand, were used to repurchase and satisfy and
discharge all of the 2018 Senior Notes.
The 2024 Senior Notes are redeemable, at our option, in whole or in part, at any time on or after June 1, 2019, in each case at the
redemption prices described in the table below, together with any accrued and unpaid interest to the date of the redemption.
Year
2019
2020
2021
2022 and thereafter
Percentage
102.750%
101.833%
100.917%
100.000%
2025 Senior Notes
As previously discussed, on February 25, 2015, we and our 100%-owned subsidiary, Suburban Energy Finance Corp.,
completed a public offering of $250.0 million in aggregate principal amount of 5.75% senior notes due March 1, 2025 (the “2025
Senior Notes”). The 2025 Senior Notes were issued at 100% of the principal amount and require semi-annual interest payments in
March and September. The net proceeds from the issuance of the 2025 Senior Notes, along with cash on hand, were used to
repurchase and satisfy and discharge all of the 2020 Senior Notes.
The 2025 Senior Notes are redeemable, at our option, in whole or in part, at any time on or after March 1, 2020, in each case at
the redemption prices described in the table below, together with any accrued and unpaid interest to the date of the redemption.
Year
2020
2021
2022
2023 and thereafter
Percentage
102.875%
101.917%
100.958%
100.000%
Our obligations under the 2021 Senior Notes, 2024 Senior Notes and 2025 Senior Notes (collectively, the “Senior Notes”) are
unsecured and rank senior in right of payment to any future subordinated indebtedness and equally in right of payment with any future
senior indebtedness. The Senior Notes are structurally subordinated to, which means they rank effectively behind, any debt and other
liabilities of the Operating Partnership. The Senior Notes each have a change of control provision that would require us to offer to
repurchase the notes at 101% of the principal amount repurchased, if a change of control, as defined in the indenture, occurs and is
followed by a rating decline (a decrease in the rating of the notes by either Moody’s Investors Service or Standard and Poor’s Rating
Group by one or more gradations) within 90 days of the consummation of the change of control.
Credit Agreement
Our Operating Partnership has an amended and restated credit agreement entered into on January 5, 2012, as amended on
August 1, 2012 and May 9, 2014 (collectively, the “Amended Credit Agreement”) that provides for a five-year $400.0 million
revolving credit facility (the “Revolving Credit Facility”), of which $100.0 million was outstanding as of September 26, 2015 and
September 27, 2014. Borrowings under the Revolving Credit Facility may be used for general corporate purposes, including working
capital, capital expenditures and acquisitions. Our Operating Partnership has the right to prepay any borrowings under the Revolving
Credit Facility, in whole or in part, without penalty at any time prior to maturity.
The amendment and restatement of the credit agreement on January 5, 2012 amended the previous credit agreement to, among
other things, extend the maturity date from June 25, 2013 to January 5, 2017, reduce the borrowing rate and commitment fees, and
amend certain affirmative and negative covenants.
37
The amendment on August 1, 2012 amended, among other things, certain restrictive and affirmative covenants applicable to our
Operating Partnership and to us, as well as certain financial covenants, including (a) requiring our consolidated interest coverage ratio,
as defined in the amendment, to be not less than 2.5 to 1.0 as of the end of any fiscal quarter; (b) prohibiting the total consolidated
leverage ratio, as defined in the amendment, of the Partnership from being greater than 4.75 to 1.0 as of the end of any fiscal quarter
(or 5.0 to 1.0 during an acquisition period as defined in the amendment). The amendment on May 9, 2014 made certain technical
amendments with respect to agreements relating to debt refinancing.
We act as a guarantor with respect to the obligations of our Operating Partnership under the Amended Credit Agreement
pursuant to the terms and conditions set forth therein. The obligations under the Amended Credit Agreement are secured by liens on
substantially all of the personal property of the Partnership, the Operating Partnership and their subsidiaries, as well as mortgages on
certain real property.
Borrowings under the Revolving Credit Facility of the Amended Credit Agreement bear interest at prevailing interest rates
based upon, at the Operating Partnership’s option, LIBOR plus the applicable margin or the base rate, defined as the higher of the
Federal Funds Rate plus ½ of 1%, the agent bank’s prime rate, or LIBOR plus 1%, plus in each case the applicable margin. The
applicable margin is dependent upon our ratio of Consolidated Total Debt to Consolidated EBITDA, as defined in the Revolving
Credit Facility. As of September 26, 2015, the interest rate for the Revolving Credit Facility was approximately 2.5%. The interest
rate and the applicable margin will be reset at the end of each calendar quarter.
In connection with the Amended Credit Agreement, our Operating Partnership entered into an interest rate swap agreement with
a notional amount of $100.0 million, an effective date of June 25, 2013 and a maturity date of January 5, 2017. Under this interest rate
swap agreement, our Operating Partnership will pay a fixed interest rate of 1.63% to the issuing lender on the notional principal
amount outstanding, and the issuing lender will pay our Operating Partnership a floating rate, namely LIBOR, on the same notional
principal amount. The interest rate swap has been designated as a cash flow hedge.
As of September 26, 2015, our Operating Partnership had standby letters of credit issued under the Revolving Credit Facility in
the aggregate amount of $46.2 million which expire periodically through April 3, 2016. Therefore, as of September 26, 2015, after
giving effect to $100.0 million in outstanding borrowings, we had available borrowing capacity of $253.8 million under the Revolving
Credit Facility.
The Amended Credit Agreement and the Senior Notes both contain various restrictive and affirmative covenants applicable to
the Operating Partnership and the Partnership, respectively, including (i) restrictions on the incurrence of additional indebtedness, and
(ii) restrictions on certain liens, investments, guarantees, loans, advances, payments, mergers, consolidations, distributions, sales of
assets and other transactions. Under the Amended Credit Agreement and the indentures governing the Senior Notes, the Operating
Partnership and the Partnership are generally permitted to make cash distributions equal to available cash, as defined, as of the end of
the immediately preceding quarter, if no event of default exists or would exist upon making such distributions, and with respect to the
indentures governing the Senior Notes, our consolidated fixed charge coverage ratio, as defined, is greater than 1.75 to 1. We and our
Operating Partnership were in compliance with all covenants and terms of the Senior Notes and the Amended Credit Agreement as of
September 26, 2015.
Debt origination costs representing the costs incurred in connection with the placement of, and the subsequent amendment to,
long-term borrowings are capitalized within other assets and amortized on a straight-line basis over the term of the respective debt
agreements. During fiscal 2015, we recognized charges of $2.9 million to write-off unamortized debt origination costs associated with
the tender offer and redemption of our 2020 Senior Notes. During fiscal 2014, we recognized charges of $5.3 million to write-off
unamortized debt origination costs associated with the tender offer and redemption of our 2018 Senior Notes. Other assets at
September 26, 2015 and September 27, 2014 include debt origination costs with a net carrying amount of $18.5 million and $21.0
million, respectively.
The aggregate amounts of long-term debt maturities subsequent to September 26, 2015 are as follows: fiscal 2016: $-0-; fiscal
2017: $100.0 million; fiscal 2018: $-0-; fiscal 2019: $-0-; fiscal 2020: $-0-; and thereafter: $1,121.2 million.
Partnership Distributions
We are required to make distributions in an amount equal to all of our Available Cash, as defined in our Third Amended and
Restated Partnership Agreement, as amended (the “Partnership Agreement”), no more than 45 days after the end of each fiscal quarter
to holders of record on the applicable record dates. Available Cash, as defined in the Partnership Agreement, generally means all cash
on hand at the end of the respective fiscal quarter less the amount of cash reserves established by the Board of Supervisors in its
reasonable discretion for future cash requirements. These reserves are retained for the proper conduct of our business, the payment of
38
debt principal and interest and for distributions during the next four quarters. The Board of Supervisors reviews the level of Available
Cash on a quarterly basis based upon information provided by management.
On October 22, 2015, we announced that our Board of Supervisors had declared a quarterly distribution of $0.8875 per
Common Unit for the three months ended September 26, 2015. This quarterly distribution rate equates to an annualized rate of $3.55
per Common Unit. The distribution was paid on November 10, 2015 to Common Unitholders of record as of November 3, 2015.
Pension Plan Assets and Obligations
We have a noncontributory defined benefit pension plan which was originally designed to cover all of our eligible employees
who met certain requirements as to age and length of service. Effective January 1, 1998, we amended the defined benefit pension plan
to provide benefits under a cash balance formula as compared to a final average pay formula which was in effect prior to January 1,
1998. Our defined benefit pension plan was frozen to new participants effective January 1, 2000 and, in furtherance of our effort to
minimize future increases in our benefit obligations, effective January 1, 2003, all future service credits were eliminated. Therefore,
eligible participants will receive interest credits only toward their ultimate defined benefit under the defined benefit pension plan.
There were no minimum funding requirements for the defined benefit pension plan during fiscal 2015, 2014 or 2013. As of
September 26, 2015 and September 27, 2014 the plan’s projected benefit obligation exceeded the fair value of plan assets by $42.6
million and $32.1 million, respectively. As a result, the net liability recognized in the consolidated financial statements for the defined
benefit pension plan increased by $10.5 million during fiscal 2015, which was primarily attributable to an increase in the benefit
obligation as a result of the change in mortality assumptions (new mortality tables and new mortality improvement scale were issued
by the Society of Actuaries in October 2014), coupled with a return on plan assets that lagged the interest cost of the benefit
obligation. During fiscal 2016, the Partnership expects to contribute approximately $0.7 million to the defined benefit pension plan in
the form of a minimum funding requirement.
Our investment policies and strategies, as set forth in the Investment Management Policy and Guidelines, are monitored by a
Benefits Committee comprised of six members of management. The Benefits Committee employs a liability driven investment
strategy, which seeks to increase the correlation of the plan’s assets and liabilities to reduce the volatility of the plan’s funded status.
The execution of this strategy has resulted in an asset allocation that is largely comprised of fixed income securities. A liability driven
investment strategy is intended to reduce investment risk and, over the long-term, generate returns on plan assets that largely fund the
annual interest on the accumulated benefit obligation. However, as we experienced in recent fiscal years, significant declines in
interest rates relevant to our benefit obligations, and/or poor performance in the broader capital markets in which our plan assets are
invested, could have an adverse impact on the funded status of the defined benefit pension plan. For purposes of measuring the
projected benefit obligation as of September 26, 2015 and September 27, 2014, we used a discount rate of 3.875%, reflecting current
market rates for debt obligations of a similar duration to our pension obligations.
During fiscal 2015, lump sum settlement payments of $5.8 million exceeded the interest and service cost components of the net
periodic pension cost. As a result, we recorded a non-cash settlement charge of $2.0 million during the fourth quarter of fiscal 2015 in
order to accelerate recognition of a portion of cumulative unrecognized losses in the defined benefit pension plan. These
unrecognized losses were previously accumulated as a reduction to partners’ capital and were being amortized to expense as part of
our net periodic pension cost. During fiscal 2014 and fiscal 2013, the amount of the pension benefit obligation settled through lump
sum payments did not exceed the settlement threshold (combined service and interest costs of net periodic pension cost); therefore, a
settlement charge was not required to be recognized in either of those fiscal years.
We also provide postretirement health care and life insurance benefits for certain retired employees. Partnership employees who
were hired prior to July 1993 and retired prior to March 1998 are eligible for health care benefits if they reached a specified retirement
age while working for the Partnership. Partnership employees hired prior to July 1993 are eligible for postretirement life insurance
benefits if they reach a specified retirement age while working for the Partnership. Effective January 1, 2000, we terminated our
postretirement health care benefit plan for all eligible employees retiring after March 1, 1998. All active and eligible employees who
were to receive health care benefits under the postretirement plan subsequent to March 1, 1998 were provided an increase to their
accumulated benefits under the defined benefit pension plan. Our postretirement health care and life insurance benefit plans are
unfunded. Effective January 1, 2006, we changed our postretirement health care plan from a self-insured program to one that is fully
insured under which we pay a portion of the insurance premium on behalf of the eligible participants.
39
Long-Term Debt Obligations and Operating Lease Obligations
Contractual Obligations
The following table summarizes payments due under our known contractual obligations as of September 26, 2015:
(Dollars in thousands)
Long-term debt obligations
Interest payments
Operating lease obligations (a)
Self-insurance obligations (b)
Other contractual obligations (c)
Total
Fiscal
2016
$
$
— $
73,930
22,422
12,235
5,006
113,593 $
Fiscal
2017
100,000 $
71,427
16,894
10,740
4,571
203,632 $
Fiscal
2018
Fiscal
2019
Fiscal
2020
Fiscal
2021 and
thereafter
— $
68,781
13,404
8,904
3,606
94,695 $
— $
68,781
10,038
5,407
1,759
85,985 $
— $ 1,121,180
68,781 205,718
7,876
7,857
15,455
3,445
1,199
14,861
81,282 $ 1,365,090
(a) Payments exclude costs associated with insurance, taxes and maintenance, which are not material to the operating lease
obligations.
(b) The timing of when payments are due for our self-insurance obligations is based on estimates that may differ from when actual
payments are made. In addition, the payments do not reflect amounts to be recovered from our insurance providers, which
amount to $3.4 million, $3.1 million, $2.6 million, $1.4 million, $0.9 million and $4.5 million for each of the next five fiscal
years and thereafter, respectively, and are included in other assets on the consolidated balance sheet.
(c) These amounts are included in our consolidated balance sheet and primarily include payments for postretirement and long-term
incentive benefits.
Additionally, we have standby letters of credit in the aggregate amount of $46.2 million, in support of retention levels under our
casualty insurance programs and certain lease obligations, which expire periodically through April 3, 2016.
Operating Leases
We lease certain property, plant and equipment for various periods under noncancelable operating leases, including 42% of our
vehicle fleet, approximately 27% of our customer service centers and portions of our information systems equipment. Rental expense
under operating leases was $32.7 million, $31.8 million and $33.0 million for fiscal 2015, 2014 and 2013, respectively. Future minimum
rental commitments under noncancelable operating lease agreements as of September 26, 2015 are presented in the table above.
Off-Balance Sheet Arrangements
Guarantees
Certain of our operating leases, primarily those for transportation equipment with remaining lease periods scheduled to expire
periodically through fiscal 2022, contain residual value guarantee provisions. Under those provisions, we guarantee that the fair value
of the equipment will equal or exceed the guaranteed amount upon completion of the lease period, or we will pay the lessor the
difference between fair value and the guaranteed amount. Although the fair value of equipment at the end of its lease term has
historically exceeded the guaranteed amounts, the maximum potential amount of aggregate future payments we could be required to
make under these leasing arrangements, assuming the equipment is deemed worthless at the end of the lease term, was approximately
$14.4 million. The fair value of residual value guarantees for outstanding operating leases was de minimis as of September 26, 2015
and September 27, 2014.
Recently Issued Accounting Pronouncements.
In April 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting standards Update (“ASU”) 2015-03,
“Simplifying the Presentation of Debt Issuance Costs” (“ASU 2015-03”). This update requires that debt issuance costs related to a
recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability,
consistent with the presentation of debt discounts. ASU 2015-03 is effective for the first interim period within annual reporting
periods beginning after December 15, 2015, which will be our first quarter of fiscal year 2017. In August 2015, the FASB issued
ASU No. 2015-15, which provides additional guidance related to the presentation and subsequent measurement of debt issuance costs
related to line-of-credit arrangements. An entity may present debt issuance costs as an asset and subsequently amortize the deferred
debt issuance costs ratably over the term of the line-of-credit arrangement, regardless of whether there are any outstanding
40
borrowings. Other than the reclassification of existing debt issuance costs on the balance sheet, the adoption of ASU 2015-03 will
have no impact on our operations or cash flows.
In May 2014, FASB issued ASU 2014-09 “Revenue from Contracts with Customers” (“ASU 2014-09”). This update provides a
principles-based approach to revenue recognition, requiring revenue recognition to depict the transfer of goods or services to
customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or
services. The ASU provides a five-step model to be applied to all contracts with customers. The five steps are to identify the
contract(s) with the customer, identify the performance obligations in the contract, determine the transaction price, allocate the
transaction price to the performance obligations in the contract and recognize revenue when each performance obligation is satisfied.
On July 9, 2015, the FASB finalized a one-year deferral of the effective date of ASU 2014-09. The revenue standard is therefore
effective for the first interim period within annual reporting periods beginning after December 15, 2017, which will be our first quarter
of fiscal year 2019. Early adoption as of the original effective date is permitted. ASU 2014-09 can be applied either retrospectively to
each prior reporting period presented or retrospectively with the cumulative effect of initially applying the update recognized at the
date of the initial application along with additional disclosures. While we are still in the process of evaluating the potential impact of
ASU 2014-09, we do not expect the adoption of ASU 2014-09 will have a material impact on our results of operations, financial
position or cash flows.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Commodity Price Risk
We enter into product supply contracts that are generally one-year agreements subject to annual renewal, and also purchase
product on the open market. Our propane supply contracts typically provide for pricing based upon index formulas using the posted
prices established at major supply points such as Mont Belvieu, Texas, or Conway, Kansas (plus transportation costs) at the time of
delivery. In addition, to supplement our annual purchase requirements, we may utilize forward fixed price purchase contracts to
acquire a portion of the propane that we resell to our customers, which allows us to manage our exposure to unfavorable changes in
commodity prices and to ensure adequate physical supply. The percentage of contract purchases, and the amount of supply contracted
for under forward contracts at fixed prices, will vary from year to year based on market conditions. In certain instances, and when
market conditions are favorable, we are able to purchase product under our supply arrangements at a discount to the market.
Product cost changes can occur rapidly over a short period of time and can impact profitability. We attempt to reduce commodity
price risk by pricing product on a short-term basis. The level of priced, physical product maintained in storage facilities and at our
customer service centers for immediate sale to our customers will vary depending on several factors, including, but not limited to, price,
supply and demand dynamics for a given time of the year. Typically, our on hand priced position does not exceed more than four to eight
weeks of our supply needs, depending on the time of the year. In the course of normal operations, we routinely enter into contracts such
as forward priced physical contracts for the purchase or sale of propane and fuel oil that, under accounting rules for derivative instruments
and hedging activities, qualify for and are designated as normal purchase or normal sale contracts. Such contracts are exempted from fair
value accounting and are accounted for at the time product is purchased or sold under the related contract.
Under our hedging and risk management strategies, we enter into a combination of exchange-traded futures and options
contracts and, in certain instances, over-the-counter options and swap contracts (collectively, “derivative instruments”) to manage the
price risk associated with physical product and with future purchases of the commodities used in our operations, principally propane
and fuel oil, as well as to ensure the availability of product during periods of high demand. In addition, the Partnership sells propane
and fuel oil to customers at fixed prices, and enters into derivative instruments to hedge a portion of its exposure to fluctuations in
commodity prices as a result of selling the fixed price contracts. We do not use derivative instruments for speculative trading
purposes. Futures and swap contracts require that we sell or acquire propane or fuel oil at a fixed price for delivery at fixed future
dates. An option contract allows, but does not require, its holder to buy or sell propane or fuel oil at a specified price during a
specified time period. However, 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 the product to the respective party or are
settled by the payment of a net amount equal to the difference between the then market price and the fixed contract price or option
exercise price. To the extent that we utilize derivative instruments to manage exposure to commodity price risk and commodity prices
move adversely in relation to the contracts, we could suffer losses on those derivative instruments when settled. Conversely, if prices
move favorably, we could realize gains. Under our hedging and risk management strategy, realized gains or losses on derivative
instruments will typically offset losses or gains on the physical inventory once the product is sold to customers at market prices, or
delivered to customers as it pertains to fixed price contracts.
Futures are traded with brokers of the NYMEX and require daily cash settlements in margin accounts. Forward contracts are
generally settled at the expiration of the contract term by physical delivery, and swap and options contracts are generally settled at
expiration through a net settlement mechanism. Market risks associated with our derivative instruments are monitored daily for
41
compliance with our Hedging and Risk Management Policy which includes volume limits for open positions. Open inventory
positions are reviewed and managed daily as to exposures to changing market prices.
Credit Risk
Exchange-traded futures and options contracts are guaranteed by the NYMEX and, as a result, have minimal credit risk. We are
subject to credit risk with over-the-counter forward, swap and options contracts to the extent the counterparties do not perform. We
evaluate the financial condition of each counterparty with which we conduct business and establish credit limits to reduce exposure to
the risk of non-performance by our counterparties.
Interest Rate Risk
A portion of our borrowings bear interest at prevailing interest rates based upon, at the Operating Partnership’s option, LIBOR,
plus an applicable margin or the base rate, defined as the higher of the Federal Funds Rate plus ½ of 1% or the agent bank’s prime
rate, or LIBOR plus 1%, plus the applicable margin. The applicable margin is dependent on the level of the Partnership’s total
consolidated leverage ratio (the ratio of consolidated total debt to consolidated EBITDA). Therefore, we are subject to interest rate
risk on the variable component of the interest rate. We manage our interest rate risk by entering into interest rate swap agreements.
The interest rate swaps have been designated as a cash flow hedge. Changes in the fair value of the interest rate swaps are recognized
in other comprehensive income (“OCI”) until the hedged item is recognized in earnings. At September 26, 2015, the fair value of the
interest rate swaps was a net liability of $1.3 million, which is included within other current liabilities and other liabilities, as
applicable, with a corresponding unrealized loss reflected in accumulated other comprehensive income.
Derivative Instruments and Hedging Activities
All of our derivative instruments are reported on the balance sheet at their fair values. On the date that derivative instruments
are entered into, we make a determination as to whether the derivative instrument qualifies for designation as a hedge. Changes in the
fair value of derivative instruments are recorded each period in current period earnings or OCI, depending on whether a derivative
instrument is designated as a hedge and, if so, the type of hedge. For derivative instruments designated as cash flow hedges, we
formally assess, both at the hedge contract’s inception and on an ongoing basis, whether the hedge contract is highly effective in
offsetting changes in cash flows of hedged items. Changes in the fair value of derivative instruments designated as cash flow hedges
are reported in OCI to the extent effective and reclassified into earnings during the same period in which the hedged item affects
earnings. The mark-to-market gains or losses on ineffective portions of cash flow hedges are immediately recognized in earnings.
Changes in the fair value of derivative instruments that are not designated as cash flow hedges, and that do not meet the normal
purchase and normal sale exemption, are recorded in earnings as they occur. Cash flows associated with derivative instruments are
reported as operating activities within the consolidated statement of cash flows.
Sensitivity Analysis
In an effort to estimate our exposure to unfavorable market price changes in commodities related to our open positions under
derivative instruments, we developed a model that incorporates the following data and assumptions:
A.
B.
The fair value of open positions as of September 26, 2015.
The market prices for the underlying commodities used to determine A. above were adjusted adversely by a
hypothetical 10% change and compared to the fair value amounts in A. above to project the potential negative
impact on earnings that would be recognized for the respective scenario.
Based on the sensitivity analysis described above, the hypothetical 10% adverse change in market prices for open derivative
instruments as of September 26, 2015 indicates an increase in potential future net losses of $1.4 million. 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.
42
ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Our Consolidated Financial Statements and the Report of Independent Registered Public Accounting Firm thereon listed on the
accompanying Index to Financial Statements in Part IV, Item 15 (see page F-1) and the Supplemental Financial Information listed on
the accompanying Index to Financial Statement Schedule in Part IV, Item 15 (see page S-1) are included herein.
Selected Quarterly Financial Data
Due to the seasonality of the retail propane, fuel oil and other refined fuel and natural gas businesses, our first and second
quarter revenues and earnings are consistently greater than third and fourth quarter results. The following presents our selected
quarterly financial data for the last two fiscal years (unaudited; in thousands, except per unit amounts).
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
Total
Year
Fiscal 2015
Revenues
Costs of products sold
Operating income (loss)
Loss on debt extinguishment (a)
Net income (loss)
$
Net income (loss) per common unit - basic (b)
Net income (loss) per common unit - diluted (b) $
$
422,944 $
187,921
75,968
—
55,807
0.92 $
0.92 $
599,389 $
253,667
171,591
15,072
136,634
2.26 $
2.24 $
220,302 $
94,198
(21,834 )
—
(40,952 )
(0.67 ) $
(0.67 ) $
174,344 $
57,594
(47,967 )
—
(67,137 )
(1.11 ) $
(1.11 ) $
1,416,979
593,380
177,758
15,072
84,352
1.39
1.38
Cash provided by (used in):
Operating activities
Investing activities
Financing activities
EBITDA (c)
Adjusted EBITDA (c)
Retail gallons sold
Propane
Fuel oil and refined fuels
33,605
(11,453 )
(52,777 )
108,597 $
101,005 $
126,332
(10,083 )
(68,197 )
189,748 $
214,316 $
99,205
(8,419 )
(53,843 )
10,896 $
12,067 $
65,067
(6,017 )
(53,721 )
(13,261 ) $
6,651 $
324,209
(35,972 )
(228,538 )
295,980
334,039
$
$
134,534
11,261
199,690
19,898
77,633
6,181
68,515
4,538
480,372
41,878
Fiscal 2014
Revenues
Costs of products sold
Operating income (loss)
Loss on debt extinguishment (a)
Net income (loss)
Net income (loss) per common unit - basic (b)
$
Net income (loss) per common unit - diluted (b) $
$
526,056 $
280,526
80,055
—
58,671
0.97 $
0.97 $
873,772 $
517,198
171,044
—
149,547
2.47 $
2.46 $
297,143 $
161,482
(26,575 )
11,589
(58,989 )
(0.98 ) $
(0.98 ) $
241,286 $
121,544
(34,398 )
—
(54,720 )
(0.90 ) $
(0.90 ) $
1,938,257
1,080,750
190,126
11,589
94,509
1.56
1.56
Cash provided by (used in):
Operating activities
Investing activities
Financing activities
EBITDA (c)
Adjusted EBITDA (c)
Retail gallons sold
Propane
Fuel oil and refined fuels
4,161
(3,424 )
(52,702 )
114,882 $
117,708 $
16,226
(4,947 )
2,232
204,326 $
206,269 $
124,583
(3,731 )
(120,313 )
(5,172 ) $
10,023 $
80,581
(4,430 )
(52,829 )
900 $
4,502 $
225,551
(16,532 )
(223,612 )
314,936
338,502
$
$
157,858
13,997
213,689
22,617
83,156
6,981
76,040
5,476
530,743
49,071
(a) During the second quarter of fiscal 2015, we repurchased and satisfied and discharged all of our 2020 Senior Notes with net
proceeds from the issuance of the 2025 Senior Notes and cash on hand, pursuant to a tender offer and redemption. In
connection with this tender offer and redemption, we recognized a loss on the extinguishment of debt of $15.1 million
consisting of $11.1 million for the redemption premium and related fees, as well as the write-off of $2.9 million and $1.1
million in unamortized debt origination costs and unamortized discount, respectively. During the third quarter of fiscal 2014, we
43
repurchased and satisfied and discharged all of our 2018 Senior Notes with net proceeds from the issuance of the 2024 Senior
Notes and cash on hand pursuant to a tender offer and redemption. In connection with this tender offer and redemption, we
recognized a loss on the extinguishment of debt of $11.6 million consisting of $31.6 million for the redemption premium and
related fees, as well as the write-off of $5.3 million and ($25.3) million in unamortized debt origination costs and unamortized
premium, respectively.
(b) Basic net income (loss) per Common Unit is computed by dividing net income (loss) by the weighted average number of
outstanding Common Units, and restricted units granted under the Restricted Unit Plans to retirement-eligible grantees.
Computations of diluted net income per Common Unit are performed by dividing net income by the weighted average number
of outstanding Common Units and unvested restricted units granted under our Restricted Unit Plans. Diluted loss per Common
Unit for the periods where a net loss was reported does not include unvested restricted units granted under our Restricted Unit
Plans as their effect would be anti-dilutive.
(c) EBITDA represents net income before deducting interest expense, income taxes, depreciation and amortization. Adjusted
EBITDA represents EBITDA excluding the unrealized net gain or loss on mark-to-market activity for derivative instruments
and other items, as applicable, as provided in the table below. Our management uses EBITDA and Adjusted EBITDA as
supplemental measures of operating performance and we are including them because we believe that they provide our investors
and industry analysts with additional information to evaluate our operating results. EBITDA and Adjusted EBITDA are not
recognized terms under US GAAP and should not be considered as an alternative to net income or net cash provided by
operating activities determined in accordance with US GAAP. Because EBITDA and Adjusted EBITDA as determined by us
excludes some, but not all, items that affect net income, they may not be comparable to EBITDA and Adjusted EBITDA or
similarly titled measures used by other companies. The following table sets forth our calculations of EBITDA and Adjusted
EBITDA:
Fiscal 2015
Net income (loss)
Add:
Provision for income taxes
Interest expense, net
Depreciation and amortization
EBITDA
Unrealized (non-cash) (gains) losses on changes
in fair value of derivatives
Integration related costs
Loss on debt extinguishment
Multi-employer pension plan withdrawal charge
Pension settlement charge
Adjusted EBITDA
$
Fiscal 2014
Net income (loss)
Add:
Provision for income taxes
Interest expense, net
Depreciation and amortization
EBITDA
Unrealized (non-cash) losses (gains) on changes
in fair value of derivatives
Integration related costs
Loss on debt extinguishment
Adjusted EBITDA
$
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
Total
Year
$
55,807 $
136,634 $
(40,952 ) $
(67,137 ) $
84,352
162
19,999
32,629
108,597
(9,505 )
1,913
—
—
—
101,005 $
174
19,711
33,229
189,748
7,433
2,063
15,072
—
—
214,316 $
185
18,933
32,730
10,896
37
1,134
—
—
—
12,067 $
179
18,991
34,706
(13,261 )
180
6,432
—
11,300
2,000
6,651 $
700
77,634
133,294
295,980
(1,855 )
11,542
15,072
11,300
2,000
334,039
$
58,671 $
149,547 $
(58,989 ) $
(54,720 ) $
94,509
177
21,207
34,827
114,882
290
2,536
—
117,708 $
271
21,226
33,282
204,326
(291 )
2,234
—
206,269 $
163
20,662
32,992
(5,172 )
(707 )
4,313
11,589
10,023 $
156
20,166
35,298
900
402
3,200
—
4,502 $
767
83,261
136,399
314,936
(306 )
12,283
11,589
338,502
44
ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
The Partnership maintains disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities
Exchange Act of 1934 (the “Exchange Act”)) that are designed to provide reasonable assurance that information required to be
disclosed in the Partnership’s filings and submissions under the Exchange Act is recorded, processed, summarized and reported within
the periods specified in the rules and forms of the SEC and that such information is accumulated and communicated to the
Partnership’s management, including its principal executive officer and principal financial officer, as appropriate, to allow timely
decisions regarding required disclosure.
Before filing this Annual Report, the Partnership completed an evaluation under the supervision and with the participation of the
Partnership’s management, including the Partnership’s principal executive officer and principal financial officer, of the effectiveness
of the design and operation of the Partnership’s disclosure controls and procedures as of September 26, 2015. Based on this
evaluation, the Partnership’s principal executive officer and principal financial officer concluded that as of September 26, 2015, such
disclosure controls and procedures were effective to provide the reasonable assurance level described above.
Changes in Internal Control Over Financial Reporting
There have not been any changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of
the Exchange Act) during the quarter ended September 26, 2015, that have materially affected, or are reasonably likely to materially
affect, our internal control over financial reporting. Management’s Report on Internal Control over Financial Reporting is included
below.
Management’s Report on Internal Control Over Financial Reporting
Management of the Partnership is responsible for establishing and maintaining adequate internal control over financial
reporting. The Partnership's internal control over financial reporting is designed to provide reasonable assurance as to the reliability of
the Partnership's financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of
changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
The Partnership’s management has assessed the effectiveness of the Partnership’s internal control over financial reporting as of
September 26, 2015. In making this assessment, the Partnership used the criteria established by the Committee of Sponsoring
Organizations of the Treadway Commission (“COSO”) in “Internal Control-Integrated Framework (2013).” These criteria are in the
areas of control environment, risk assessment, control activities, information and communication, and monitoring. The Partnership's
assessment included documenting, evaluating and testing the design and operating effectiveness of its internal control over financial
reporting.
Based on the Partnership’s assessment, as described above, management has concluded that, as of September 26, 2015, the
Partnership’s internal control over financial reporting was effective.
Our independent registered public accounting firm, PricewaterhouseCoopers LLP, issued an attestation report dated November
25, 2015 on the effectiveness of our internal control over financial reporting, which is included herein.
ITEM 9B. OTHER INFORMATION
None.
45
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND PARTNERSHIP GOVERNANCE
Partnership Management
Our Partnership Agreement provides that all management powers over our business and affairs are exclusively vested in our
Board of Supervisors and, subject to the direction of the Board of Supervisors, our officers. No Unitholder has any manageme nt
power over our business and affairs or actual or apparent authority to enter into contracts on behalf of or otherwise to bind us. Under
the current Partnership Agreement, members of our Board of Supervisors are elected by the Unitholders for three-year terms. All of
our current Supervisors, namely Messrs. Harold R. Logan Jr., Lawrence C. Caldwell, Matthew J. Chanin, John D. Collins, Michael A.
Stivala, John Hoyt Stookey and Ms. Jane Swift were elected to their current three-year terms at the Tri-Annual Meeting of our
Unitholders held on May 13, 2015. There is currently one vacancy on the Board.
Three Supervisors, who are not officers or employees of the Partnership or its subsidiaries, serve on the Audit Committee with
authority to review, at the request of the Board of Supervisors, specific matters as to which the Board of Supervisors believes there
may be a conflict of interest, or which may be required to be disclosed pursuant to Item 404(a) of Regulation S-K adopted by the SEC,
in order to determine if the resolution or course of action in respect of such conflict proposed by the Board of Supervisors is fair and
reasonable to us. Under the Partnership Agreement, any matter that receives the “Special Approval” of the Audit Committee (i.e.,
approval by a majority of the members of the Audit Committee) is conclusively deemed to be fair and reasonable to us, is deemed
approved by all of our partners and shall not constitute a breach of the Partnership Agreement or any duty stated or implied by law or
equity as long as the material facts known to the party having the potential conflict of interest regarding that matter were disclosed to
the Audit Committee at the time it gave Special Approval. The Audit Committee also assists the Board of Supervisors in fulfilling its
oversight responsibilities relating to (i) integrity of the Partnership’s financial statements and internal control over financial reporting;
(ii) the Partnership’s compliance with applicable laws, regulations and its code of conduct; (iii) independence and qualifications of the
independent registered public accounting firm; (iv) performance of the internal audit function and the independent registered public
accounting firm; and (v) accounting complaints.
The Board of Supervisors has determined that all three members of the Audit Committee, John D. Collins, Lawrence C.
Caldwell and Jane Swift, are independent and (with the exception of Ms. Swift) audit committee financial experts within the meaning
of the NYSE corporate governance listing standards and in accordance with Rule 10A-3 of the Exchange Act, Item 407 of Regulation
S-K and the Partnership’s criteria for Supervisor independence (as discussed in Item 13, herein) as of the date of this Annual Report.
Mr. Logan, Chairman of the Board, presides at the regularly scheduled executive sessions of the non-management Supervisors,
all of whom are independent, held as part of the regular meetings of the Board of Supervisors. Investors and other parties interested in
communicating directly with the non-management Supervisors as a group may do so by writing to the Non-Management Members of
the Board of Supervisors, c/o Company Secretary, Suburban Propane Partners, L.P., P.O. Box 206, Whippany, New Jersey 07981-
0206
46
Board of Supervisors and Executive Officers of the Partnership
The following table sets forth certain information with respect to the members of the Board of Supervisors and our executive
officers as of November 25, 2015. Officers are appointed by the Board of Supervisors for one-year terms and Supervisors are elected
by the Unitholders for three-year terms.
Name
Michael A. Stivala ........................................
Mark Wienberg .............................................
Michael A. Kuglin ........................................
Paul Abel ......................................................
Steven C. Boyd .............................................
Douglas T. Brinkworth .................................
Michael M. Keating ......................................
Neil E. Scanlon .............................................
A. Davin D’Ambrosio ...................................
Keith P. Onderdonk ......................................
Sandra N. Zwickel ........................................
Daniel S. Bloomstein ....................................
Harold R. Logan, Jr. ......................................
John Hoyt Stookey ........................................
John D. Collins .............................................
Jane Swift ......................................................
Lawrence C. Caldwell ...................................
Matthew J. Chanin ............................................
Age
46
53
45
62
51
54
62
50
51
51
49
42
71
85
77
50
69
61
Position With the Partnership
President and Chief Executive Officer; Member of the Board of Supervisors
Chief Development Officer
Chief Financial Officer & Chief Accounting Officer
Senior Vice President, General Counsel and Secretary
Senior Vice President – Operations
Senior Vice President – Product Supply, Purchasing & Logistics
Senior Vice President
Senior Vice President – Information Services
Vice President and Treasurer
Vice President – Operational Support
Vice President – Human Resources
Controller
Member of the Board of Supervisors (Chairman)
Member of the Board of Supervisors
Member of the Board of Supervisors (Chairman of the Audit Committee)
Member of the Board of Supervisors
Member of the Board of Supervisors
Member of the Board of Supervisors (Chairman of the Compensation Committee)
Mr. Stivala has served as our President since April 2014 and as our Chief Executive Officer since September 2014. Mr. Stivala has
served as a Supervisor since November 2014. From November 2009 until March 2014 he was our Chief Financial Officer, and, before
that, our Chief Financial Officer and Chief Accounting Officer since October 2007. Prior to that he was our Controller and Chief
Accounting Officer since May 2005 and Controller since December 2001. Before joining the Partnership, he held several positions with
PricewaterhouseCoopers LLP, an international accounting firm, most recently as Senior Manager in the Assurance practice.
Mr. Stivala’s qualifications to sit on our Board include his fourteen years of experience in the propane industry, including as our
current President and Chief Executive Officer and, before that, as our Chief Financial Officer for almost 7 years, which day to day
leadership roles have provided him with intimate knowledge of our operations.
Mr. Wienberg has served as our Chief Development Officer since September 2015 and before that was our Chief Operating
Officer since April 2014. Prior to that he served as our Vice President – Operational Support and Analysis (formerly Vice President –
Operational Planning) from October 2007 to April 2014, as our Managing Director, Financial Planning and Analysis from October
2003 to October 2007 and as Director, Financial Planning and Analysis from July 2001 to October 2003. Prior to joining the
Partnership, Mr. Wienberg was Assistant Vice President – Finance of International Home Foods Corp., a consumer products
manufacturer.
Mr. Kuglin has served as our Chief Financial Officer & Chief Accounting Officer since September 2014 and was our Vice
President – Finance and Chief Accounting Officer from April 2014 through September 2014. Prior to that he served as our Vice
President and Chief Accounting Officer since November 2011, our Controller and Chief Accounting Officer since November 2009
and our Controller since October 2007. For the eight years prior to joining the Partnership he held several financial and managerial
positions with Alcatel-Lucent, a global communications solutions provider. Prior to Alcatel-Lucent, Mr. Kuglin held several positions
with the international accounting firm PricewaterhouseCoopers LLP, most recently as Manager in the Assurance practice. Mr. Kuglin
is a Certified Public Accountant and a member of the American Institute of Certified Public Accountants.
Mr. Abel has served as our General Counsel and Secretary since June 2006, was additionally made a Vice President in October
2007 and a Senior Vice President in April 2014. Prior to joining the Partnership, Mr. Abel served as senior in-house legal counsel
(including as a General Counsel) for several technology companies.
Mr. Boyd has served as our Senior Vice President – Operations since September 2015 and before that was our Senior Vice
President – Field Operations since April 2014. Previously he was our Vice President – Field Operations (formerly Vice President –
Operations) since October 2008, our Southeast and Western Area Vice President since March 2007, Managing Director – Area
47
Operations since November 2003 and Regional Manager – Northern California since May 1997. Mr. Boyd held various managerial
positions with predecessors of the Partnership from 1986 through 1996.
Mr. Brinkworth has served as our Senior Vice President – Product Supply, Purchasing & Logistics since April 2014 and was
previously our Vice President – Product Supply (formerly Vice President – Supply) since May 2005. Mr. Brinkworth joined the
Partnership in April 1997 after a nine year career with Goldman Sachs and, since joining the Partnership, has served in various
positions in the product supply area.
Mr. Keating has served as our Senior Vice President since October 2014 and before that was our Senior Vice President –
Administration since July 2009. From July 1996 to that date he was our Vice President – Human Resources and Administration. He
previously held senior human resource positions at Hanson Industries (the United States management division of Hanson plc, a global
diversified industrial conglomerate) and Quantum Chemical Corporation (“Quantum”), a predecessor of the Partnership.
Mr. Scanlon became our Senior Vice President – Information Services in April 2014, after serving as our Vice President –
Information Services since November 2008. Prior to that he served as our Assistant Vice President – Information Services since
November 2007, Managing Director – Information Services from November 2002 to November 2007 and Director – Information
Services from April 1997 until November 2002. Prior to joining the Partnership, Mr. Scanlon spent several years with JP Morgan &
Co., most recently as Vice President – Corporate Systems and earlier held several positions with Andersen Consulting, an
international systems consulting firm, most recently as Manager.
Mr. D’Ambrosio has served as our Treasurer since November 2002 and was additionally made a Vice President in October
2007. He served as our Assistant Treasurer from October 2000 to November 2002 and as Director of Treasury Services from January
1998 to October 2000. Mr. D’Ambrosio joined the Partnership in May 1996 after ten years in the commercial banking industry.
Mr. Onderdonk has served as our Vice President – Operational Support since November 2015 and before that was our Assistant
Vice President – Financial Planning and Analysis since November 2013. Prior to that, he served as our Managing Director, Financial
Planning and Analysis from November 2010 to November 2013. Mr. Onderdonk joined the Partnership in September 2001 after
fourteen years in the consumer products industry.
Ms. Zwickel has served as our Vice President – Human Resources since November 2013. Prior to that, she was our Assistant
Vice President – Human Resources since April 2011 and earlier held several roles in the Partnership’s Legal Department (including
Assistant General Counsel from October 2009 to April 2011 and Counsel from October 2002 to October 2009), where she was
responsible for, among other things, providing legal counsel on employment issues. Ms. Zwickel joined the Partnership in June 1999
after eight years in the private practice of law.
Mr. Bloomstein joined the Partnership as its Controller in April 2014. For the ten years prior to joining the Partnership, he held
several executive financial and accounting positions with The Access Group, a network of professional services companies, and with
Dow Jones & Company, Inc., a global news and financial information company. Mr. Bloomstein started his career with the
international accounting firm PricewaterhouseCoopers LLP, working his way to the level of Manager in the Assurance/Business
Advisory Services practice. Mr. Bloomstein is a Certified Public Accountant and a member of the American Institute of Certified
Public Accountants.
Mr. Logan has served as a Supervisor since March 1996 and was elected as Chairman of the Board of Supervisors in January 2007.
Mr. Logan is a Co-Founder and, from 2006 to the present has been serving as a Director, of Basic Materials and Services LLC, an
investment company that has invested in companies that provide specialized infrastructure services and materials for the pipeline
construction industry and the sand/silica industry. From 2003 to September 2006, Mr. Logan was a Director and Chairman of the Finance
Committee of the Board of Directors of TransMontaigne Inc., which provided logistical services (i.e. pipeline, terminaling and marketing)
to producers and end-users of refined petroleum products. From 1995 to 2002, Mr. Logan was Executive Vice President/Finance,
Treasurer and a Director of TransMontaigne Inc. From 1987 to 1995, Mr. Logan served as Senior Vice President – Finance and a
Director of Associated Natural Gas Corporation, an independent gatherer and marketer of natural gas, natural gas liquids and crude oil.
Mr. Logan is also a Director of InfraREIT, Inc., Cimarex Energy Co., Graphic Packaging Holding Company and Hart Energy Publishing
LLP.
Over the past forty years, Mr. Logan’s education, investment banking/venture capital experience and business/financial
management experience have provided him with a comprehensive understanding of business and finance. Most of Mr. Logan’s
business experience has been in the energy industry, both in investment banking and as a senior financial officer and director of
publicly-owned energy companies. Mr. Logan’s expertise and experience have been relevant to his responsibilities of providing
oversight and advice to the managements of public companies, and is of particular benefit in his role as our Chairman. Since 1996, Mr.
Logan has been a director of ten public companies and has served on audit, compensation and governance committees.
48
Mr. Stookey has served as a Supervisor since March 1996. He was Chairman of the Board of Supervisors from March 1996
through January 2007. From 1986 until September 1993, he was the Chairman, President and Chief Executive Officer of Quantum. He
served as non-executive Chairman and a Director of Quantum from its acquisition by Hanson plc in September 1993 until October 1995,
at which time he retired. Since then, Mr. Stookey has served as a trustee of a number of non-profit organizations, including founding and
serving as non-executive Chairman of Per Scholas Inc. (a non-profit organization dedicated to training inner city individuals to become
computer and software technicians), The Berkshire Choral Festival and Landmark Volunteers and also currently serves on the Board of
Directors of The Clark Foundation and The Robert Sterling Clark Foundation and as a Life Trustee of the Boston Symphony Orchestra.
Mr. Stookey’s qualifications to sit on our Board include his extensive experience as Chief Executive Officer of four
corporations (including a predecessor of the Partnership) and his many years of service as a director of publicly-owned corporations
and non-profit organizations.
Mr. Collins has served as a Supervisor since April 2007. He served with KPMG LLP, an international accounting firm, from 1962
until 2000, most recently as senior audit partner of its New York office. He has served as a United States representative on the
International Auditing Procedures Committee, a committee of international accountants responsible for establishing international auditing
standards. Until recently, Mr. Collins was a Director of Montpelier Re, Columbia Atlantic Funds and Mrs. Fields Original Cookies, Inc.
Mr. Collins’ qualifications to sit on our Board, and serve as Chairman of its Audit Committee, include his 40 years of
experience in public accounting, including 31 years as a partner supervising the audits of public companies. Mr. Collins has served on
a number of AICPA and international accounting and auditing standards bodies.
Ms. Swift has served as a Supervisor since April 2007. She is currently the CEO of Middlebury Interactive Languages, LLC, a
marketer of world language products. From 2010 through July 2011, Ms. Swift served as Senior Vice President – ConnectEDU Inc., a
private education technology company. In 2007, she founded WNP Consulting, LLC, a provider of expert advice and guidance to
early stage education companies. From 2003 to 2006 she was a General Partner at Arcadia Partners, a venture capital firm focused on
the education industry. She has previously served on the boards of K12, Inc., Animated Speech Company and The Young Writers
Project, and currently serves on the board of Sally Ride Science Inc. and several not-for-profit boards, including the National Alliance
for Public Charter Schools. Ms. Swift is also a Trustee for Champlain College. Prior to joining Arcadia, Ms. Swift served for fifteen
years in Massachusetts state government, becoming Massachusetts’ first woman governor in 2001.
Ms. Swift’s qualifications to sit on our Board include her strong skills in public policy and government relations and her
extensive knowledge of regulatory matters arising from her fifteen years in state government.
Mr. Caldwell has served as a Supervisor since November 2012. He was a Co-Founder of New Canaan Investments, Inc.
(“NCI”), a private equity investment firm, where he was one of three senior officers of the firm from 1988 to 2005. NCI was an active
“fix and build” investor in packaging, chemicals, and automotive components companies. Mr. Caldwell held a number of board
directorships and senior management positions in these companies until he retired in 2005. The largest of these companies was Kerr
Group, Inc., a plastic closure and bottle company where Mr. Caldwell served as Director for eight years and Chief Financial Officer
for six years. From 1985 to 1988, Mr. Caldwell was head of acquisitions for Moore McCormack Resources, Inc., an oil and gas
exploration, shipping, and construction materials company. Mr. Caldwell is currently a director of Magnuson Products, LLC, a private
company which manufactures specialty engine components for automotive original equipment manufacturers and aftermarket. Mr.
Caldwell also currently serves on the Board of Trustees and as Chairman of the Investment and Finance Committee of Historic
Deerfield, and on the Board of Directors and as Chairman of both the Finance and Strategic Planning Committees of the Leventhal
Map Center; both of which non-profit institutions focus on enriching educational programs for K-12 children locally and nationwide.
Mr. Caldwell's qualifications to sit on our Board include over forty years of successful investing in and managing of a broad
range of public and private businesses in a number of different industries. This experience has encompassed both turnaround
situations, and the building of companies through internal growth and acquisitions.
Mr. Chanin has served as a Supervisor since November 2012. He was Senior Managing Director of Prudential Investment
Management, a subsidiary of Prudential Financial, Inc., from 1996 until his retirement in January 2012. He headed the firm’s private
fixed income business, chaired an internal committee responsible for strategic investing and was a principal in Prudential Capital
Partners, the firm’s mezzanine investment business. He currently serves as a Director of two private companies that are in Prudential
Capital Partners funds’ portfolios, and provides consulting services to Prudential and one other client.
Mr. Chanin’s qualifications to sit on our Board include 35 years of investment experience with a focus on highly structured
private placements in companies in a broad range of industries, with a particular focus on energy companies. He has previously
served on the audit committee of a public company board and is currently a member of the audit committee for a private company
board. Mr. Chanin has earned an MBA and is a Chartered Financial Analyst.
49
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires our Supervisors, executive officers and holders of ten percent or more of our
Common Units to file initial reports of ownership and reports of changes in ownership of our Common Units with the SEC.
Supervisors, executive officers and ten percent Unitholders are required to furnish the Partnership with copies of all Section 16(a)
forms that they file. Based on a review of these filings, we believe that all such filings were timely made during fiscal year 2015.
Codes of Ethics and of Business Conduct
We have adopted a Code of Ethics that applies to our principal executive officer, principal financial officer and principal
accounting officer, and a Code of Business Conduct that applies to all of our employees, officers and Supervisors. A copy of our
Code of Ethics and our Code of Business Conduct is available without charge from our website at www.suburbanpropane.com or
upon written request directed to: Suburban Propane Partners, L.P., Investor Relations, P.O. Box 206, Whippany, New Jersey 07981-
0206. Any amendments to, or waivers from, provisions of our Code of Ethics or our Code of Business Conduct that apply to our
principal executive officer, principal financial officer and principal accounting officer will be posted on our website.
Corporate Governance Guidelines
We have adopted Corporate Governance Guidelines and Principles in accordance with the NYSE corporate governance listing
standards in effect as of the date of this Annual Report. In addition, we have adopted certain Corporate Governance Policies,
including an Equity Holding Policy for Supervisors and Executives and an Incentive Compensation Recoupment Policy. A copy of
our Corporate Governance Guidelines and Principles, as well as a copy of the Corporate Governance Policies, is available without
charge from our website at www.suburbanpropane.com or upon written request directed to: Suburban Propane Partners, L.P., Investor
Relations, P.O. Box 206, Whippany, New Jersey 07981-0206.
Audit Committee Charter
We have adopted a written Audit Committee Charter in accordance with the NYSE corporate governance listing standards in
effect as of the date of this Annual Report. The Audit Committee Charter is reviewed periodically to ensure that it meets all
applicable legal and NYSE listing requirements. A copy of our Audit Committee Charter is available without charge from our website
at www.suburbanpropane.com or upon written request directed to: Suburban Propane Partners, L.P., Investor Relations, P.O. Box
206, Whippany, New Jersey 07981-0206.
Compensation Committee Charter
Three Supervisors, who are not officers or employees of the Partnership or its subsidiaries serve on the Compensation
Committee. The Board of Supervisors has determined that all three members of the Compensation Committee, Matthew J. Chanin,
Harold R. Logan, Jr. and John Hoyt Stookey, are independent.
We have adopted a Compensation Committee Charter in accordance with the NYSE corporate governance listing standards in
effect as of the date of this Annual Report. A copy of our Compensation Committee Charter is available without charge from our
website at www.suburbanpropane.com or upon written request directed to: Suburban Propane Partners, L.P., Investor Relations, P.O.
Box 206, Whippany, New Jersey 07981-0206.
During fiscal 2015, the Compensation Committee independently retained Towers Watson & Co. (“Towers Watson”), a human
resources consulting firm, to assist the Compensation Committee in developing competitive compensation packages for the
Partnership’s executive officers. See Item 11 below.
Nominating/Governance Committee Charter
The Nominating/Governance Committee participates in Board succession planning and development and identifies individuals
qualified to become Board members, recommends to the Board the persons to be nominated for election as Supervisors at any Tri-
Annual Meeting of the Unitholders and the persons (if any) to be elected by the Board to fill any vacancies on the Board, develops and
recommends to the Board changes to the Partnership’s Corporate Governance Guidelines and Principles when appropriate, and
oversees the annual evaluation of the Board. The Committee’s members are Harold R. Logan, Jr. (its Chairman), Lawrence C.
Caldwell, Matthew J. Chanin, John D. Collins, John Hoyt Stookey and Jane Swift, all of whom are independent in accordance with
our Corporate Governance Guidelines and Principles and the rules of the NYSE.
50
We have adopted a written Nominating/Governance Committee Charter. A copy of our Nominating/Governance Committee
Charter is available without charge from our website at www.suburbanpropane.com or upon written request directed to: Suburban
Propane Partners, L.P., Investor Relations, P.O. Box 206, Whippany, New Jersey 07981-0206.
NYSE Annual CEO Certification
The NYSE requires the Chief Executive Officer of each listed company to submit a certification indicating that the company is
not in violation of the Corporate Governance listing standards of the NYSE on an annual basis. Our Chief Executive Officer submits
his Annual CEO Certification to the NYSE each December. In December 2014, our Chief Executive Officer, Michael A. Stivala,
submitted his Annual CEO Certification to the NYSE without qualification.
51
ITEM 11. EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
This Compensation Discussion and Analysis (“CD&A”) explains our executive compensation philosophy, policies and practices
with respect to those executive officers of the Partnership identified below whom we collectively refer to as our “named executive
officers”:
Name
Through September 26, 2015
Position
Michael A. Stivala
Michael A. Kuglin
Michael M. Keating
Mark Wienberg
Steven C. Boyd
President and Chief Executive Officer
Chief Financial and Chief Accounting Officer
Senior Vice President
Chief Operating Officer
Senior Vice President – Field Operations
From September 27, 2015
No change
No change
No change
Chief Development Officer
Senior Vice President – Operations
Key Topics Covered in our CD&A
The following table summarizes the main areas of focus in the CD&A:
Compensation Governance
Participants in the Compensation Process
The Annual Compensation Decision Making Process
Risk Mitigation Policies
Executive Compensation Philosophy
Overview
Pay Mix
Components of Compensation
Base Salary
Annual Cash Bonus
Long-Term Incentive Plan
Restricted Unit Plan
Benefits and Perquisites
Compensation Governance
Participants in the Compensation Process
Role of the Compensation Committee
The Compensation Committee of our Board of Supervisors (the “Committee”) is responsible for overseeing our executive
compensation program. In accordance with its charter, available on our website at www.suburbanpropane.com, the Committee
ensures that the compensation packages provided to our executive officers are designed in accordance with our compensation
philosophy. The Committee reviews and approves the compensation packages of our managing directors, assistant vice presidents,
vice presidents, senior vice presidents, and our named executive officers. The Committee establishes and enforces our general
compensation philosophy in consultation with our President and Chief Executive Officer.
Among other duties, the Committee has overall responsibility for:
Reviewing and approving the compensation of our President and Chief Executive Officer, our Chief Financial Officer,
and our other executive officers;
Reporting to the Board of Supervisors any and all decisions regarding compensation changes for our President and Chief
Executive Officer and our other executive officers;
Evaluating and approving our annual cash bonus plan, Long-Term Incentive Plan, and grants under our Restricted Unit
Plan, as well as all other executive compensation policies and programs;
52
Administering and interpreting the compensation plans that constitute each component of our executive officers’
compensation packages; and
Engaging consultants, when appropriate, to provide independent, third-party advice on executive officer-related
compensation.
Role of the President and Chief Executive Officer
The role of our President and Chief Executive Officer in the executive compensation process is to recommend individual pay
adjustments for the executive officers, other than himself, to the Committee based on market conditions, the Partnership’s
performance, and individual performance. When recommending individual pay adjustments for the executive officers, Mr. Stivala,
our President and Chief Executive Officer, presents the Committee with information comparing each executive officer’s current
compensation to the mean compensation figures for comparable positions included in benchmarking data utilized by the Committee.
Role of Outside Consultants
Prior to each Committee meeting at which executive compensation packages are reviewed, members of the Committee are
provided with benchmarking data from the Mercer Human Resource Consulting, Inc. (“Mercer”) database for comparison. The
Committee’s sole use of the Mercer database is to compare and contrast our executives’ current salaries to the data provided in the
Mercer benchmarking database. The information provided by Mercer was derived from a proprietary database maintained by Mercer
and, as such, there was no formal consultancy role played by them. Therefore, prior to the Committee’s meetings, neither the
Committee members nor our President and Chief Executive Officer met with representatives from Mercer.
In addition to using the benchmark data supplied by Mercer, the Committee engaged the services of Towers Watson & Co.
(“Towers Watson”), a human resources consulting firm, during fiscal 2013 to review our Long-Term Incentive and our Restricted Unit
Plans, and in fiscal 2014 for assistance in developing competitive compensation packages for those executive officers identified by the
Committee as our senior level executive officers (including all of our named executive officers). The fiscal 2013 review resulted in a
revision of our cash bonus plan, a revision of our Long-term Incentive Plan, and an alteration of the vesting schedule of our Restricted
Unit Plan. The recommendations that Towers Watson put forth to the Committee in 2014 were considered in the development of the
respective compensation packages for each of our named executive officers. In summary, these recommendations supported the
Committee’s long-established approach to executive compensation. As previously noted, during fiscal 2015, the Committee again
retained Towers Watson to assist it in developing competitive compensation packages for the Partnership’s executive officers.
Our Unitholders: Say-on-Pay
At their 2015 Tri-Annual Meeting, our Unitholders overwhelmingly approved the advisory “Say-on-Pay” resolution required by
Section 14A of the Exchange Act. As a result, the Committee has determined that no major revisions of its executive compensation
practices are required. However, the Committee has, and will continue to, periodically evaluate its compensation practices for possible
improvement. The following represents the 2015 Say-on-Pay voting results:
For
28,802,659
Against
1,712,622
Abstain
613,603
Broker Non-Votes
22,303,948
The Annual Compensation Decision Making Process
Fiscal 2015 Committee Meetings
The Committee has two regularly-scheduled meetings during the year: one in November and one in July, and may meet at other
times during the year as warranted.
The November 11, 2014 Compensation Committee Meeting
Because Messrs. Stivala, Kuglin, Wienberg and Boyd were promoted and received corresponding compensation package
adjustments during the latter half of fiscal 2014, the Committee did not review or adjust the fiscal 2015 compensation packages
provided to these named executive officers. Since Mr. Keating was not among that group of newly-promoted executives, the
Committee reviewed Mr. Keating’s compensation package in accordance with its established practices (to which it adheres when
reviewing and adjusting the compensation packages of all of the Partnership’s executives) described below.
53
As in past fiscal years, the Committee was provided with a comprehensive analysis of Mr. Keating’s past and current
compensation - including benchmarking data for comparison - to enable it to assess and determine his executive compensation
package for fiscal 2015. The Committee considered a number of factors in establishing Mr. Keating’s fiscal 2015 executive
compensation package, including, but not limited to, his experience, his scope of responsibility and his individual performance.
The benchmarking data provided to the Committee for fiscal 2015 was derived from the Mercer database containing information
obtained from surveys of over 3,080 organizations and approximately 1,304 positions which may or may not include similarly-sized
national propane marketers for the reasons stated below. The use of the Mercer database provides a broad base of compensation
benchmarking information for companies of sizes similar to the size of the Partnership.
In making its decision regarding Mr. Keating’s fiscal 2015 compensation package, the Committee reviewed the total cash
compensation opportunity that was provided to him during the previously completed fiscal year. “Total cash compensation
opportunity” consists of base salary and an annual cash bonus. The Committee then compared Mr. Keating’s total cash compensation
opportunities to the total mean cash compensation opportunity for the parallel position in the Mercer database. After conducting its
review of Mr. Keating’s compensation package, the only adjustment made by the Committee on his behalf was an award of restricted
units under the Partnership’s Restricted Unit Plan.
The July 21, 2015 Compensation Committee Meeting
As a result of the completion of the integration of the former Inergy Propane locations into our infrastructure, the Committee
decided to make several senior management changes in order to enable us to focus on our next phase of internal and external strategic
growth. Effective September 27, 2015, Mr. Wienberg moved from his former role as Chief Operating Officer to the newly created
position of Chief Development Officer. In this new role, Mr. Wienberg will devote all of his business time and energy to seeking
external growth opportunities for the Partnership with the goals of enabling us to expand into other businesses that can complement or
supplement our core propane operations, as well as acquisitions in the propane industry.
Effective September 27, 2015, the Committee also moved Mr. Boyd from his former role as Senior Vice President – Field
Operations to Senior Vice President – Operations. In this new role, Mr. Boyd will develop strategies intended to continue to
maximize our operational efficiencies, with the goal of driving market share growth within our areas of operation through exceptional
customer service. In addition, Mr. Boyd is now responsible for several operational support functions.
Our Approach to Setting Compensation Packages
In reviewing and determining the compensation packages of our named executive officers, the Committee considers a number of
factors relating to each executive, including, but not limited to, years of experience in current position, scope and level of
responsibility, influence over the affairs of the Partnership and individual performance. The relative importance assigned to each of
these factors by the Committee may differ from executive to executive and from year to year. As a result, different weights may be
given to different components of compensation among each of our named executive officers.
The Committee is provided with benchmarking data for comparison. This benchmarking data is just one of a number of factors
that is considered by the Committee, but is not necessarily the most persuasive factor. The Committee compares total cash
compensation opportunities, comprising base salary and annual cash bonuses, as well as total direct compensation (which includes
opportunities under our Long-Term Incentive Plan and Restricted Unit Plan awards) to the total mean cash compensation opportunity
for the parallel position in the Mercer benchmark database.
Compensation Peer Group
The Committee bases its benchmarking on a broad base of companies of similar size to the Partnership, and does not rely solely
on a peer group of other propane marketers. The Committee takes this approach because it believes that the proximity of our
headquarters to New York City and the need to realistically compete for skilled executives in an environment shared by numerous
other enterprises seeking similarly skilled employees requires a broader review of the market. Furthermore, similarly-sized propane
marketers (of which there are only two) compete for executives in vastly different economic environments. This benchmarking
approach has been in place for a number of years.
54
Risk Mitigation Policies
Equity Holding Policy
Effective April 22, 2010, the Committee adopted an Equity Holding Policy which establishes guidelines for the level of
Partnership equity holdings that members of the Board and our executive officers are expected to maintain. Effective November 11,
2015, the Committee approved an amendment to the Equity Holding Policy to increase the equity holding requirement for members of
our Board of Supervisors from two times their annual fees to three times their annual fees.
The Partnership’s equity holding requirements for the specified positions are currently as follows:
Position
Member of the Board of Supervisors
President and Chief Executive Officer
Chief Operating Officer
Chief Financial Officer
Chief Development Officer
Executive Vice President
Senior Vice President
Vice President
Assistant Vice President
Managing Director
Amount
3 x Annual Fee
5 x Base Salary
3 x Base Salary
3 x Base Salary
3 x Base Salary
3 x Base Salary
2.5 x Base Salary
1.5 x Base Salary
1 x Base Salary
1 x Base Salary
As of the January 2, 2015 measurement date, all of our executive officers, including our named executive officers, as well as all
of the members of our Board of Supervisors, were in compliance with our Equity Holding Policy.
The Equity Holding Policy can be accessed through a link on our website at www.suburbanpropane.com under the “Investors”
tab.
Incentive Compensation Recoupment Policy
Upon recommendation by the Committee, the Board of Supervisors has adopted an Incentive Compensation Recoupment Policy
which permits the Committee to seek the reimbursement from certain executives of the Partnership of incentive compensation (i.e.,
payments/awards pursuant to the annual cash bonus plan, the Long-Term Incentive Plan and the Restricted Unit Plan) paid to those
executives in connection with any fiscal year for which there is a significant restatement of the published financial statements of the
Partnership triggered by a material accounting error, which results in less favorable results than those originally reported. Such
reimbursement can be sought from executives even if they had no responsibility for the restatement. In addition to the foregoing, if
the Committee determines that any fraud or intentional misconduct by an executive was a contributing factor to the Partnership having
to make a significant restatement, then the Committee is authorized to take appropriate action against such executive, including
disciplinary action, up to, and including, termination, and requiring reimbursement of all, or any part, of the compensation paid to that
executive in excess of that executive’s base salary, including cancellation of any unvested restricted units.
The Incentive Compensation Recoupment Policy is available on our website at www.suburbanpropane.com under the
“Investors” tab.
Executive Compensation Philosophy
Overview
Our executive compensation program is underpinned by two core objectives:
To attract and retain talented executives who have the skills and experience required to achieve our goals; and
To align the short- and long-term interests of our executive officers with those of our Unitholders.
We accomplish these objectives by providing our executives with compensation packages that combine various components,
specifically linked to either short-term or long-term performance measures. Therefore, our executive compensation packages are
designed to achieve our overall goal of sustainable, profitable growth by rewarding our executive officers for behaviors that facilitate
our achievement of this goal.
55
The principal components of the compensation we provide to our named executive officers are as follows:
Component
Base Salary
• To reward individual performance,
experience and scope of responsibility
• To reflect value in the market
Purpose
Features
Annual cash
incentive
• Drive and reward the delivery of
financial and operating performance
during a particular fiscal year
Long-term
incentives
Restricted units
• To ensure alignment of interests with the
long-term goals of Unitholders
• To reward activities and practices that
are conducive to sustainable, profitable
growth and long-term value creation
• To attract and retain skilled individuals
• To provide an adequate compensation
package in connection with an internal
promotion
• To reward outstanding performance
• Same as Long-term incentives above,
and:
• Retain the services of the recipient over
the vesting period
• Further align the long-term interests of
the recipient with the long-term interests
of our Unitholders through
encouragement of equity ownership
• To help make up for potential
shortfalls in total cash compensation of
our executive officers when compared
to benchmarked total cash compensation
• Reviewed and approved annually
• Market benchmarked
• Mean market salary data is considered in
determining levels
• Paid in cash
• Based solely on one-year EBITDA
performance compared to budgeted
EBITDA
• Annual awards of phantom units settled
in cash
• Measured over a three-year period based
on the level of our average distributable
cash flow over such three-year
measurement period
• No pre-determined frequency or amounts
of awards
• Plan provides the Committee flexibility
to respond to different facts and
circumstances
• Awards normally vest in equal thirds on
the first three anniversaries of the
date of grant
• Awards are settled in Common Units
We align the short-term and long-term interests of our executive officers with the short-term and long-term interests of our
Unitholders by:
Providing our executive officers with an annual incentive target that encourages them to achieve or exceed targeted
financial results and operating performance for a particular fiscal year;
Providing a long-term incentive plan that encourages our executive officers to implement activities and practices
conducive to sustainable, profitable growth; and
Providing our executive officers with restricted units in order to encourage the retention of the participating executive
officers, while simultaneously encouraging behaviors conducive to the long-term appreciation of our Common Units.
Pay Mix
Under our compensation structure, each executive officer’s “total cash compensation opportunity” consists of a mix of base
salary, cash bonus and cash-settled long-term incentives. This “mix” varies depending on his or her position. The base salary for each
executive officer is the only fixed component of compensation. All other cash compensation, including annual cash bonuses and long-
term incentive compensation, is variable in nature as it is dependent upon achievement of certain performance measures.
In allocating among these components, in order to align the interests of our senior executive officers—the executive officers
having the greatest ability to influence our performance—with the interests of our Unitholders, we consider it crucial to emphasize the
performance-based elements of the total compensation opportunities that we provide to them. Therefore, the total cash compensation
opportunity for our senior executive officers, including our named executive officers, is at least 50% performance-based under our
annual cash bonus and long-term incentive plans, neither of which provide for minimum payments.
56
The following table summarizes each of these components as a percentage of each named executive officer’s total cash
compensation opportunity for fiscal 2015:
Michael A. Stivala
Michael A. Kuglin
Michael M. Keating
Mark Wienberg
Steven C. Boyd
Components of Compensation
Base Salary
Base Salary
40%
47%
47%
46%
46%
Cash Bonus
Target
40%
35%
35%
36%
36%
Long-Term
Incentive
20%
18%
18%
18%
18%
The fiscal 2015 base salaries of Messrs. Stivala, Kuglin, Wienberg, and Boyd were unchanged from those approved during
fiscal 2014 in conjunction with the Committee’s approvals of their 2014 promotions.
The following base salaries were in effect during fiscal 2015 for our named executive officers:
Michael A. Stivala
Michael A. Kuglin (a)
Michael M. Keating
Mark Wienberg
Steven C. Boyd
Fiscal 2015
Base Salary
425,000
275,000
278,000
325,000
315,000
$
$
$
$
$
Fiscal 2014
Year-End Base Salary
425,000
265,000
278,000
325,000
315,000
$
$
$
$
$
(a) At its July 22, 2014 meeting, the Committee approved Mr. Kuglin’s promotion to Chief Financial Officer and a base
salary increase of $10,000, effective September 28, 2014.
At its November 10, 2015 meeting, the Committee adjusted the base salaries of our named executive officers to the following:
Michael A. Stivala
Michael A. Kuglin
Michael M. Keating
Mark Wienberg
Steven C. Boyd
Fiscal 2016
Base Salary
500,000
310,000
300,000
335,000
330,000
$
$
$
$
$
The base salaries paid to our named executive officers in fiscal 2015, fiscal 2014 and fiscal 2013 are reported in the column
titled “Salary” in the Summary Compensation Table below.
57
Annual Cash Bonus Plan
The Committee uses the Annual Cash Bonus Plan (which falls within the Securities and Exchange Commission’s definition of a
“Non-Equity Incentive Plan” for the purposes of the Summary Compensation Table and otherwise) to provide a cash incentive award
to our executive officers for the attainment of EBITDA goals for the particular fiscal year, in accordance with targets that are set at the
start of the year.
Performance Condition
The sole metric measures Actual Plan EBITDA relative to Budgeted EBITDA.
Definitions
Actual EBITDA: represents net income before deducting interest expense, income taxes, depreciation and amortization.
Actual Plan EBITDA: represents Actual EBITDA adjusted for various items considered to be non-recurring in nature; including,
but not limited to, unrealized (non-cash) gains or losses on changes in the fair value of derivative instruments; acquisition-related
costs; integration-related costs; multi-employer pension plan withdrawal charges; pension settlement charges; and losses on debt
extinguishment.
Budgeted EBITDA: represents our target budgeted EBITDA developed using a bottom-up process factoring in reasonable
growth targets from the prior year’s performance, while at the same time attempting to reach a balance between a target that is
reasonably achievable, yet not assured.
58
The performance targets for our annual cash bonus plan for fiscal years subsequent to fiscal 2014 were established by the
Committee at its January 22, 2014 meeting, following a review of recommendations made by Towers Watson who had been engaged
by the Committee for that purpose. For fiscal 2015, our named executive officers had the opportunity to earn between 50% and 120%
of their target cash bonuses and for fiscal years prior to fiscal 2015, our named executive officers had the opportunity to earn between
60% and 120% of their target cash bonuses, depending upon the achievement of our Actual Plan EBITDA compared to Budgeted
EBITDA in accordance with the following tables:
Fiscal 2015
Actual EBITDA as a
% of budgeted
EBITDA
% of Target Cash
Bonus Earned
Fiscal 2014 and 2013
Actual EBITDA as a
% of budgeted
EBITDA
% of Target Cash
Bonus Earned
Maximum 120% and above
119%
118%
117%
116%
115%
114%
113%
112%
111%
110%
109%
108%
107%
106%
105%
104%
103%
102%
101%
100%
99%
98%
97%
96%
95%
94%
93%
92%
91%
90%
89%
88%
87%
86%
85%
Below 85%
Target
Entry
120%
119%
118%
117%
116%
115%
114%
113%
112%
111%
110%
109%
108%
107%
106%
105%
104%
103%
102%
101%
100%
98%
96%
94%
92%
90%
85%
82.5%
80%
77.5%
75%
70%
65%
60%
55%
50%
0%
Maximum 120% and above
119%
118%
117%
116%
115%
114%
113%
112%
111%
110%
109%
108%
107%
106%
105%
104%
103%
102%
101%
100%
99%
98%
97%
96%
95%
94%
93%
92%
91%
90%
Below 90%
Target
Entry
120%
119%
118%
117%
116%
115%
114%
113%
112%
111%
110%
109%
108%
107%
106%
105%
104%
103%
102%
101%
100%
98%
96%
94%
92%
90%
68%
66%
64%
62%
60%
0%
The Committee made this change to the performance targets of our annual cash bonus plan based upon Tower Watson’s
findings and recommendations set forth in its detailed assessment of the plan. The study indicated that the entry point utilized in our
plan was higher than those in similar plans utilized by comparable companies.
59
Fiscal 2015 Annual Cash Bonus
For fiscal 2015, our Budgeted EBITDA was $350.0 million. Our Actual Plan EBITDA was such that each of our executive
officers earned 90% of his or her target cash bonus. Over the past three fiscal years, our Actual Plan EBITDA was such that each of
our named executive officers earned 90%, 68% and 60% of their respective target cash bonus for fiscal 2015, fiscal 2014 and fiscal
2013, respectively
The fiscal 2015 target cash bonuses established for each named executive officer and the actual cash bonuses earned by each of
them during fiscal 2015 are summarized as follows:
Name
Michael A. Stivala
Michael A. Kuglin
Michael M. Keating
Mark Wienberg
Steven C. Boyd
The Use of Discretion
Fiscal 2015 Target
Cash Bonus as a
Percentage of
Base Salary
100%
75%
75%
80%
80%
Fiscal 2015 Target
Cash Bonus
425,000
206,250
208,500
260,000
252,000
$
$
$
$
$
Fiscal 2015 Actual
Cash Bonus
Earned at 90%
382,500
185,625
187,650
234,000
226,800
$
$
$
$
$
Although our annual cash bonus plan is generally administered in accordance with the provisions of the plan, the Committee
may exercise its broad discretionary powers, expressly provided for in the plan, to decrease or increase the annual cash bonus paid to a
particular executive officer, upon the recommendation of our President and Chief Executive Officer, or to the executive officers as a
group, when the Committee determines that an adjustment is warranted. During fiscal 2015, fiscal 2014 and fiscal 2013, no such
discretionary adjustments were made to the annual cash bonuses earned by our named executive officers.
At its meeting of November 10, 2015, the Committee approved the following fiscal 2016 target cash bonuses:
Name
Michael A. Stivala
Michael A. Kuglin
Michael M. Keating (a)
Mark Wienberg
Steven C. Boyd
Fiscal 2016 Target
Cash Bonus as a
Percentage of Base
Salary
100%
80%
0%
80%
80%
Fiscal 2016 Target
Cash Bonus
500,000
248,000
—
268,000
264,000
$
$
$
$
$
(a) Mr. Keating will retire on January 30, 2016; therefore, it was decided by the Committee that he will not be eligible for a
fiscal 2016 bonus.
The bonuses earned by our named executive officers under the annual cash bonus plan for fiscal 2015, fiscal 2014 and fiscal
2013 are reported in the column titled “Non-Equity Incentive Plan Compensation” in the Summary Compensation Table below.
Long-Term Incentive Plan
To complement the Annual Cash Bonus Plan, which focuses on our short-term financial goals, the Long-Term Incentive Plan,
which we hereafter refer to as the “LTIP,” is a phantom unit plan that is designed to motivate our executive officers to focus on our
long-term financial goals. In fiscal year 2013 the Committee replaced the 2013 LTIP with the 2014 LTIP. Awards made for fiscal
years 2014, 2015 and 2016 were made under the 2014 LTIP.
Performance Condition
Under the 2014 LTIP, performance is assessed based on the level of our distribution coverage ratio over a three-year
measurement period (“Distribution Coverage Ratio”). This ratio will be calculated (as shown below) by dividing our Average
Distributable Cash Flow generated during an outstanding award’s three-year measurement period by a Baseline Cash Flow set on the
initial grant date of the award. The Committee adopted this measure for LTIP awards made subsequent to fiscal 2013 because the
60
Partnership’s ability to support future cash distributions is essential to successfully attracting and retaining investors, making it an
important performance metric over the long-term.
Average Distributable Cash Flow
(Average Actual Plan EBITDA less capital expenditures and other adjustments)
Baseline Cash Flow
(Total # of Common Units outstanding at beginning of the three-year measurement period times the then annualized
distribution rate)
Definitions
Distributable Cash Flow: represents Actual Plan EBITDA for a particular fiscal year less capital expenditures, cash interest
expense, and the provision for income taxes for the same fiscal year.
Actual Plan EBITDA: represents the same definition as Actual Plan EBTIDA under the Annual Cash Bonus Plan. Actual
EBITDA is adjusted for various items considered to be non-recurring in nature; including, but not limited to, unrealized (non-cash)
gains or losses on changes in the fair value of derivative instruments; acquisition-related costs; integration-related costs; multi-
employer pension plan withdrawal charges; pension settlement charges; and losses on debt extinguishment.
Average Distributable Cash Flow: represents average distributable cash flow for each of the three years in a particular award’s
three-year measurement period, adjusted by the sum of the annual differences between the per-Common Unit annualized distribution
rate at the beginning of the three-year measurement period and the actual per-Common Unit distributions paid during each of those
three years.
Baseline Cash Flow: represents the total number of Common Units outstanding at the beginning of the three-year measurement
period multiplied by the then per Common Unit annualized distribution rate.
The following table summarizes the performance targets and associated level of vesting that applies to awards made under the
2014 LTIP based on the achievement level of the Distribution Coverage Ratio:
Distribution Coverage Ratio
1.50 or higher (Maximum)
1.20 (Target)
1.00 (Entry)
Less than 1.00
% of Award Earned
150%
100%
50%
0%
61
Between entry and target performance, for every additional 0.01 increase in the Distribution Coverage Ratio, an additional 2.5%
of the award is earned. Between target and maximum performance, awards are earned according to the following schedule:
Distribution Coverage Ratio
1.50 or higher
1.49
1.48
1.47
1.46
1.45
1.44
1.43
1.42
1.41
1.40
1.39
1.38
1.37
1.36
1.35
% of Award Earned
150.0%
148.4%
146.8%
145.1%
143.4%
141.8%
140.1%
138.4%
136.7%
135.1%
133.4%
131.7%
130.1%
128.4%
126.7%
125.1%
Distribution Coverage Ratio
1.34
1.33
1.32
1.31
1.30
1.29
1.28
1.27
1.26
1.25
1.24
1.23
1.22
1.21
1.20
% of Award Earned
123.4%
121.7%
120.0%
118.4%
116.7%
115.0%
113.4%
111.7%
110.0%
108.4%
106.7%
105.0%
103.3%
101.7%
100.0%
Awards made prior to fiscal 2014 under the 2013 LTIP measure the market performance of our Common Units on the basis of
total return to our Unitholders, which we refer to as “TRU,” during a three-year measurement period commencing on the first day of
the fiscal year in which an unvested award was granted and compares our TRU to the TRU of each of the other members of a
predetermined peer group, consisting solely of eleven other master limited partnerships, approved by the Committee. The fiscal 2013
LTIP award was the last award subject to this metric.
The Committee’s decision to replace the 2013 LTIP with the 2014 LTIP reflects its members’ collective determination to
fashion a long-term incentive structure aligned with and focused on our distributable cash flow over a three-year measurement period.
This focus is designed to support the sustainability of our cash distributions to Unitholders - future growth in distributions being
viewed by the Committee as a more meaningful indicator of our performance than comparative TRU - and also better aligns
management’s interests with those of our Unitholders. The Committee’s decision was based on two significant factors. The first was
the recognition that the structure of the 2013 LTIP was based primarily on the structure of an earlier LTIP, which was adopted in 2003
when the twelve-member peer group contained six (including the Partnership) publicly-traded partnerships engaged in the business of
selling propane. As a result of acquisitions and mergers that have occurred in the propane industry since 2003, at the time of the
adoption of the 2014 LTIP, there remained in the peer group only three (including Suburban) publicly-traded partnerships engaged in
the business of selling propane. The second factor that the Committee considered was that publicly-traded partnerships are generally
regarded as cash income-oriented investments. As a cash income-oriented investment, publicly-traded partnerships make cash
distributions of available cash within 45 days after each quarter’s end. Therefore, the change in metric was made because of the
increased dissimilarities between the Partnership and any peer group of publicly-traded partnerships against which our TRU could be
compared, and because the ability to support future cash distributions is essential to successfully attracting investors, making it an
important performance metric over the long-term.
Grant Process
At the beginning of each fiscal year, LTIP unit awards are granted as a Committee-approved percentage of each executive
officer’s salary. In accordance with the terms of the 2014 LTIP, at the beginning of each three-fiscal year measurement period, each
executive officer’s number of unvested LTIP unit awards is calculated by dividing a predetermined percentage (52% for awards made
prior to fiscal 2014 and 50% for all subsequent awards) of each executive officer’s target cash bonus by the average of the closing
prices of our Common Units for the twenty days preceding the beginning of the first fiscal year in the measurement period. Cash
payments, if any, are earned and paid at the end of a three-year measurement period, depending on performance.
62
Outstanding Awards under the 2014 LTIP
The following are the quantities of unvested LTIP units granted to our named executive officers during fiscal 2015 and fiscal
2014 that will be used to calculate cash payments at the end of each award’s respective three-year measurement period (i.e., at the end
of fiscal 2017 for the fiscal 2015 award and at the end of fiscal 2016 for the fiscal 2014 award):
Michael A. Stivala
Michael A. Kuglin
Michael M. Keating
Mark Wienberg
Steven C. Boyd
Fiscal 2015 Award
4,770
2,315
2,340
2,918
2,828
Fiscal 2014 Award
2,620
1,703
2,276
2,445
2,533
At its meeting on November 10, 2015, the Committee granted the following quantities of unvested LTIP units to our named
executive officers for fiscal 2016. These quantities will be used to calculate cash payments, if earned, at the end of this award’s three-
year measurement period (i.e., at the end of fiscal 2018).
Michael A. Stivala
Michael A. Kuglin
Michael M. Keating
Mark Wienberg
Steven C. Boyd
Fiscal 2016 Award
7,095
3,519
3,193
3,803
3,746
Vesting of the Fiscal 2013 LTIP Awards
The three-year measurement period of the fiscal 2013 award ended simultaneously with the conclusion of fiscal 2015. The 2013
awards were the last made subject to the TRU performance condition. The Partnership’s rank within the peer group of eleven other
publicly traded partnerships determined the level of vesting in accordance with the following table:
Ranking Within Peer Group
Bottom quartile (lowest)
Second quartile
Third quartile
Top quartile (highest)
Vesting Performance Factor
0%
50%
100%
125%
The Partnership’s TRU fell within the second quartile; therefore, the participants’ awards, including those of our named
executive officers, were adjusted by 50%. The following is a summary of the cash payouts related to the fiscal 2013 award earned by
our named executive officers at the conclusion of fiscal 2015:
Michael A. Stivala (a)
Michael A. Kuglin (a)
Michael M. Keating (a)
Mark Wienberg (a)
Steven C. Boyd (a)
$
$
$
$
$
72,728
47,273
63,191
67,880
70,304
(a) The cash payouts related to our named executive officers’ fiscal 2013 awards earned at the conclusion of fiscal 2015 is an
additional disclosure that bears no meaningful relationship to the estimated probable outcomes reported in column (e) of
the Summary Compensation Table below.
Retirement Provision
A retirement-eligible participant’s outstanding awards under the LTIP will vest as of the retirement-eligible date, but will remain
subject to the same three-year measurement period for purposes of determining the eventual cash payment, if any, at the conclusion of
the remaining measurement period.
***
63
The grant date values based on the probable outcomes of the awards under the LTIP granted during fiscal 2015, fiscal 2014 and
fiscal 2013 are reported in the column titled “Unit Awards” in the Summary Compensation Table below.
Restricted Unit Plan
At our July 22, 2009 Tri-Annual Meeting, our Unitholders approved our adoption of the 2009 Restricted Unit Plan (“RUP”)
effective August 1, 2009. Upon adoption, this plan authorized the issuance of 1,200,000 Common Units to our executive officers,
managers and other employees and to the members of our Board of Supervisors. On May 13, 2015, following approval by our
Unitholders at their 2015 Tri-Annual Meeting, we adopted an amendment to this plan which increased the number of Common Units
authorized for issuance under this plan by 1,200,000 for a total of 2,400,000. At the conclusion of fiscal 2015, there remained
1,468,910 restricted units available under the RUP for future awards.
When the Committee authorizes an award of restricted units, the unvested units underlying an award do not provide the grantee
with voting rights and do not receive distributions or accrue rights to distributions during the vesting period.
Grant Process
All RUP awards are approved by the Committee. Because individual circumstances differ, the Committee has not adopted a
formulaic approach to making RUP awards. Although the reasons for granting an award can vary, the objective of granting an award
to a recipient generally is to retain the services of the recipient over the vesting period while, at the same time providing the type of
motivation that further aligns the long-term interests of the recipient with the long-term interests of our Unitholders. The reasons for
which the Committee grants RUP awards include, but are not limited to, the following:
To attract skilled and capable candidates to fill vacant positions;
To retain the services of an employee;
To provide an adequate compensation package to accompany an internal promotion; and
To reward outstanding performance.
In determining the quantity of restricted units to grant to executive officers and other key employees, the Committee considers,
without limitation:
The executive officer’s or key employee’s scope of responsibility, performance and contribution to meeting our
objectives;
The total cash compensation opportunity provided to the executive officer or key employee for whom the award is being
considered;
The value of similar equity awards to executive officers of similarly sized enterprises; and
The current value of an equivalent quantity of outstanding Common Units.
In addition, in establishing the level of restricted units to grant to our executive officers, the Committee considers the existing
level of outstanding unvested RUP awards held by our executive officers.
The Committee generally approves awards under the RUP at its first meeting each fiscal year following the availability of the
financial results for the prior fiscal year; however, occasionally the Committee grants awards at other times of the year, particularly
when the need arises to grant awards because of promotions and new hires.
Upon vesting, restricted units are automatically converted into our Common Units, with full voting rights and rights to receive
distributions.
Vesting Schedule
Restricted unit awards granted prior to August 6, 2013 normally vest as follows: 25% on each of the third and fourth
anniversaries of the grant date and the remaining 50% on the fifth anniversary of the grant date.
64
At its August 6, 2013 meeting, after its review of recommendations made by Towers Watson, the Committee amended the
Partnership’s 2009 Restricted Unit Plan to revise the normative vesting schedule of awards granted thereafter to one third on each of
the first three anniversaries of the award grant date. The Committee retains the ability to deviate, at its discretion, from the normal
vesting schedule with respect to particular restricted unit awards. The Committee amended the plan in order to make its vesting
schedule comparable to those of similar plans offered by other companies. Unvested awards are subject to forfeiture in certain
circumstances as defined in the RUP.
Outstanding Awards under the 2014 RUP
At its November 11, 2014 meeting, in order to further align his interests with those of our Unitholders, the Committee approved
a grant of 11,150 restricted units to Mr. Keating. In determining this fiscal 2015 award for Mr. Keating, the Committee relied upon
information provided by the Mercer database to conclude that this award was necessary to remediate shortfalls perceived by the
Committee in the cash compensation opportunity provided by the Partnership to Mr. Keating, as well as in recognition of his
individual achievements throughout fiscal 2014. The Committee’s choice to remediate perceived shortfalls with RUP awards reflects
our Board’s disciplined approach to cash management and the Committee’s desire to reward past exemplary performance to those
whose past performance has warranted such awards.
Because our other named executive officers received RUP awards on April 1, 2014, in connection with their concurrent
promotions, no awards were granted to Messrs. Stivala, Kuglin, Wienberg, and Boyd at the Committee’s November 11, 2014 meeting.
The aggregate grant date fair values of RUP awards made during fiscal 2015, fiscal 2014 and fiscal 2013, computed in
accordance with accounting principles generally accepted in the United States of America, are reported in the column titled “Unit
Awards” in the Summary Compensation Table below.
Retirement Provision
The RUP contains a retirement provision that provides for the vesting (six months and one day after the retirement date of
qualifying participants) of unvested awards held by a retiring participant who meets all three of the following conditions on his or her
retirement date:
The unvested award has been held by the grantee for at least six months;
The grantee is age 55 or older; and
The grantee has worked for us or one of our predecessors for at least 10 years.
***
At its November 10, 2015 meeting, the Committee granted the following RUP awards to our named executive officers:
Name
Michael A. Stivala
Michael A. Kuglin
Michael M. Keating
Mark Wienberg
Steven C. Boyd
Grant Date
November 15, 2015
November 15, 2015
November 15, 2015
November 15, 2015
November 15, 2015
Quantity
18,277
8,773
8,773
8,773
8,773
The Committee granted these awards as a result of each named executive officer having achieved his goals for fiscal 2015 and
in order to make up for perceived shortfalls in the cash compensation of our named executive officers.
65
Benefits and Perquisites
Pension Plan
We sponsor a noncontributory defined benefit pension plan that was originally designed to cover all of our eligible employees
who met certain criteria relative to age and length of service. Effective January 1, 1998, we amended the plan in order to provide for a
cash balance format rather than the final average pay format that was in effect prior to January 1, 1998. The cash balance format is
designed to evenly spread the growth of a participant’s earned retirement benefit throughout his or her career rather than the final
average pay format, under which a greater portion of a participant’s benefits were earned toward the latter stages of his or her career.
Effective January 1, 2000, we amended the plan to limit participation in this plan to existing participants and no longer admit new
participants to the plan. On January 1, 2003, we amended the plan to cease future service and pay-based credits on behalf of the
participants and, from that point on, participants’ benefits have increased only due to interest credits. Of our five named executive
officers, only Mr. Keating and Mr. Boyd participate in the plan.
The changes in the actuarial value relative to their participation in the plan during fiscal 2015, fiscal 2014 and fiscal 2013 are
reported in the column titled “Change in Pension Value and Nonqualified Deferred Compensation Earnings” in the Summary
Compensation Table below.
Deferred Compensation
All employees, including the named executive officers, who satisfy certain service requirements, are eligible to participate in our
IRC Section 401(k) Plan, which we refer to as the “401(k) Plan,” in which participants may defer a portion of their eligible cash
compensation up to the limits established by law. We offer the 401(k) Plan to attract and retain talented employees by providing them
with a tax-advantaged opportunity to save for retirement.
For fiscal 2015, all of our named executive officers participated in the 401(k) Plan. The benefits provided to our named
executive officers under the 401(k) Plan are provided on the same basis as to our other exempt employees. Amounts deferred by our
named executive officers under the 401(k) Plan during fiscal 2015, fiscal 2014 and fiscal 2013 are included in the column titled
“Salary” in the Summary Compensation Table below.
In order to be competitive with other employers, if certain performance criteria are met, we will match our employee-
participants’ contributions up to the lesser of 6% of their base salary or $265,000, at a rate determined based on a Partnership
performance-based scale. The following chart shows the performance target criteria that must be met for each level of matching
contribution:
If We Meet This Percentage of Budgeted EBITDA (a)
115% or higher
100% to 114%
90% to 99%
Less than 90%
The Participating Employee Will Receive this Matching
Contribution for the Year
100%
50%
25%
0%
(a) For purposes of the 401(k) Plan, the definition of the term “Budgeted EBITDA” is identical to that of “Budgeted
EBITDA” discussed under the heading title “Annual Cash Bonus Plan” above.
Actual Plan EBITDA, when applied to the 401(k) Plan, was such that we will provide participants in the 401(k) Plan with a
matching contribution equal to 25% of their calendar year 2015 contributions that do not exceed 6% of their total base pay, up to a
maximum annual compensation limit of $265,000.
The matching contributions made on behalf of our named executive officers for 2015 are reported in the column titled “All
Other Compensation” in the Summary Compensation Table below.
Other Benefits
Each named executive officer is eligible to participate in all of our other employee benefit plans, such as the medical, dental,
group life insurance and disability plans, on the same basis as other exempt employees. These benefit plans are offered to attract and
retain talented employees by providing them with competitive benefits.
66
There are no post-termination or other special rights provided to any named executive officer to participate in these benefit
programs other than the right to participate in such plans for a fixed period of time following termination of employment, on the same
basis as is provided to other exempt employees, as required by law.
The costs of all such benefits incurred on behalf of our named executive officers in fiscal 2015, fiscal 2014 and fiscal 2013 are
reported in the column titled “All Other Compensation” in the Summary Compensation Table below.
Perquisites
Perquisites represent a minor component of our executive officers’ compensation. Each of the named executive officers is
eligible for tax preparation services, a company-provided vehicle, and an annual physical. The following table summarizes both the
value and the utilization of these perquisites by the named executive officers in fiscal 2015.
Name
Tax Preparation
Services
Employer
Provided Vehicle
Physical
Michael A. Stivala
Michael A. Kuglin
Michael M. Keating
Mark Wienberg
Steven C. Boyd
$
$
$
$
$
— $
— $
9,000 $
— $
3,500 $
17,516 $
13,033 $
13,742 $
16,986 $
8,004 $
1,600
1,600
—
1,600
—
Perquisite-related costs for fiscal 2015, fiscal 2014 and fiscal 2013 are reported in the column titled “All Other Compensation”
in the Summary Compensation Table below.
Severance Benefits
We believe that, in most cases, employees should be paid reasonable severance benefits. Therefore, it is the general policy of
the Committee to provide executive officers and other key employees who are terminated by us without cause or who choose to
terminate their employment with us for good reason with a severance payment equal to, at a minimum, one year’s base salary, unless
circumstances dictate otherwise. This policy was adopted because it may be difficult for former executive officers and other key
employees to find comparable employment within a short period of time. However, depending upon individual facts and
circumstances, particularly the severed employee’s tenure with us, the Committee may make exceptions to this general policy.
A “key employee” is an employee who has attained a director level pay-grade or higher. “Cause” will be deemed to exist where
the individual has been convicted of a crime involving moral turpitude, has stolen from us, has violated his or her non-competition or
confidentiality obligations, or has been grossly negligent in fulfillment of his or her responsibilities. “Good reason” generally will
exist where an executive officer’s position or compensation has been decreased or where the employee has been required to relocate.
Change of Control
Our executive officers and other key employees have built the Partnership into the successful enterprise that it is today;
therefore, we believe that it is important to protect them in the event of a change of control. Further, it is our belief that the interests of
our Unitholders will be best served if the interests of our executive officers are aligned with them, and that providing change of
control benefits should eliminate, or at least reduce, the reluctance of our executive officers to pursue potential change of control
transactions that may be in the best interests of our Unitholders. Additionally, we believe that the severance benefits provided to our
executive officers and to our key employees are consistent with market practice and appropriate both because these benefits are an
inducement to accepting employment and because the executive officers are subject to non-competition and non-solicitation covenants
for a period following termination of employment. Therefore, our executive officers and other key employees are provided with
employment protection following a change of control, which we refer to as the “Severance Protection Plan.” During fiscal 2015, our
Severance Protection Plan covered all executive officers, including the named executive officers.
The Severance Protection Plan provides for severance payments of either 65 or 78 weeks of base salary and target cash bonuses
for such officers and key employees if within one year following a change of control their employment is terminated by us or our
successor or they resign for Good Reason (as defined in the Severance Protection Plan). All named executive officers who participate
in the Severance Protection Plan are eligible for 78 weeks of base salary and target bonuses. The cash components of any change of
control benefits are paid in a lump sum.
67
In addition, upon a change of control, without regard to whether a participant’s employment is terminated, all unvested awards
granted under the RUP will vest immediately and become distributable to the participants. Also, without regard to whether a
participant’s employment is terminated, all outstanding, unvested LTIP awards will vest immediately as if the three-year measurement
period for each outstanding award concluded on the date the change of control occurred. Under the provisions of the LTIP document,
an amount equal to the cash value of 125% of a participant’s unvested LTIP units, plus a sum equal to 125% of a participant’s
unvested LTIP units multiplied by an amount equal to the cumulative, per-Common Unit distribution from the beginning of an
unvested award’s three-year measurement period through the date on which a change of control occurred, would become payable to
the participants.
For purposes of these benefits, a change of control is deemed to occur, in general, if:
An acquisition of our Common Units or voting equity interests by any person immediately after which such person
beneficially owns more than 30% of the combined voting power of our then outstanding Common Units, unless such
acquisition was made by (a) us or our subsidiaries, or any employee benefit plan maintained by us, the Operating
Partnership or any of our subsidiaries, or (b) any person in a transaction where (A) the existing holders prior to the
transaction own at least 50% of the voting power of the entity surviving the transaction and (B) none of the Unitholders
other than the Partnership, our subsidiaries, any employee benefit plan maintained by us, the Operating Partnership, or the
surviving entity, or the existing beneficial owner of more than 25% of the outstanding Common Units owns more than
25% of the combined voting power of the surviving entity, which transaction we refer to as a “Non-Control Transaction”;
or
The consummation of (a) a merger, consolidation or reorganization involving the Partnership other than a Non-Control
Transaction; (b) a complete liquidation or dissolution of the Partnership; or (c) the sale or other disposition of 40% or
more of the gross fair market value of all the assets of the Partnership to any person (other than a transfer to a subsidiary).
For additional information pertaining to severance payable to our named executive officers following a change of control-related
termination, see the tables titled “Potential Payments Upon Termination” below.
Additional Information
Impact of Accounting and Tax Treatments of Executive Compensation
As we are a partnership and not a corporation for federal income tax purposes, we are not subject to the limitations of IRC
Section 162(m) with respect to tax deductible executive compensation. Accordingly, none of the compensation paid to our named
executive officers is subject to a limitation as to tax deductibility. However, if such tax laws related to executive compensation
change in the future, the Committee will consider the implication of such changes to us.
Although it is our practice to comply with the statutory and regulatory provisions of IRC Section 409A, the Suburban Propane,
L.P. Severance Protection Plan for Key Employees, which we refer to as the “Severance Plan,” provides that if any payment under the
Severance Plan subjects a participant to the 20% additional tax under IRC Section 409A, the payment will be grossed up to permit
such participant to retain a net amount on an after-tax basis equal to what he or she would have received had the additional tax not
been payable.
Report of the Compensation Committee
The Compensation Committee has reviewed and discussed with management this Compensation Discussion and Analysis.
Based on its review and discussions with management, the Committee recommended to the Board of Supervisors that this
Compensation Discussion and Analysis be included in this Annual Report on Form 10-K for fiscal 2015.
The Compensation Committee:
Matthew J. Chanin, Chair
Harold R. Logan, Jr.
John Hoyt Stookey
68
ADDITIONAL INFORMATION REGARDING EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth certain information concerning the compensation of each named executive officer during the fiscal
years ended September 26, 2015, September 27, 2014 and September 28, 2013:
Name
(a)
Michael A. Stivala
President and Chief Executive
Officer
Michael A. Kuglin
Chief Financial Officer and
Chief Accounting Officer
Michael M. Keating
Senior Vice President
Mark Wienberg
Chief Development Officer
Steven C. Boyd
Senior Vice President -
Operations
Salary (1)
(c)
Year
(b)
2015 $ 425,000 $
2014 $ 362,500 $
2013 $ 300,000 $
Bonus (2)
(d)
Unit Awards (3)
(e)
263,241 $
1,182,776 $
376,313 $
— $
— $
— $
2015 $ 275,000 $
2014 $ 252,500 $
2013 $ 240,000 $
2015 $ 278,000 $
2014 $ 278,000 $
2013 $ 278,000 $
2015 $ 325,000 $
2014 $ 302,500 $
2013 $ 280,000 $
2015 $ 315,000 $
2014 $ 302,500 $
2013 $ 290,000 $
— $
— $
— $
— $
— $
— $
— $
— $
— $
— $
— $
— $
127,751 $
675,618 $
257,297 $
547,977 $
335,072 $
277,673 $
161,040 $
758,784 $
364,382 $
156,083 $
763,708 $
370,348 $
Change in
Pension Value
and
Nonqualified
Deferred
Compensation
Earnings (5)
(h)
All Other
Compensation (6)
(i)
Total
(j)
Non-Equity
Incentive Plan
Compensation (4)
(g)
382,500 $
226,100 $
144,000 $
185,625 $
116,110 $
93,600 $
187,650 $
141,780 $
125,100 $
234,000 $
164,560 $
134,400 $
226,800 $
164,560 $
139,200 $
— $
— $
— $
— $
— $
— $
43,527 $
40,906 $
42,073 $
1,114,268
1,812,282
862,386
36,841 $
33,430 $
35,161 $
625,217
1,077,658
626,058
11,238 $
48,808 $
— $
46,956 $
48,131 $
46,484 $
1,071,821
851,791
727,257
— $
— $
— $
42,201 $
37,800 $
36,055 $
762,241
1,263,644
814,837
5,787 $
28,917 $
— $
36,437 $
35,341 $
33,416 $
740,107
1,295,026
832,964
(1)
(2)
(3)
(4)
(5)
Includes amounts deferred by named executive officers as contributions to the 401(k) Plan. For more information on the relationship between salaries and other
cash compensation (i.e., annual cash bonuses and LTIP awards), refer to the subheading titled “Components of Compensation” in the “Compensation Discussion
and Analysis” above.
This column is reserved for discretionary cash bonuses that are not based on any performance criteria. During fiscal years 2015, 2014 and 2013, we did not
provide our named executive officers with non-performance related bonus payments.
The amounts reported in this column represent the aggregate grant date fair value of RUP awards made during fiscal years 2015, 2014 and 2013, as well as the
value at the grant date of awards made in fiscal years 2015, 2014, and 2013 under the LTIP, based on the probable outcome with respect to satisfaction of the
performance conditions. The specific details regarding these plans are provided in the preceding “Compensation Discussion and Analysis” under the
subheadings “Restricted Unit Plan” and “Long-Term Incentive Plan.” The breakdown for each plan with respect to each named executive officer is as follows:
Plan Name
2015
RUP
LTIP
Total
2014
RUP
LTIP
Total
2013
RUP
LTIP
Total
Mr. Stivala
Mr. Kuglin
Mr. Keating
Mr. Wienberg
Mr. Boyd
$
$
$
$
$
$
— $
263,241
263,241 $
1,035,266 $
147,510
1,182,776 $
197,351 $
178,962
376,313 $
— $
127,751
127,751 $
579,736 $
95,882
675,618 $
140,971 $
116,326
257,297 $
418,835 $
129,142
547,977 $
206,924 $
128,148
335,072 $
140,971 $
136,702
277,673 $
— $
161,040
161,040 $
621,111 $
137,673
758,784 $
197,351 $
167,031
364,382 $
—
156,083
156,083
621,111
142,597
763,708
197,351
172,997
370,348
The amounts reported in this column represent each named executive officer's annual cash bonus earned in accordance with the performance measures discussed
under the subheading “Annual Cash Bonus Plan” in the “Compensation Discussion and Analysis.”
Nothing was reported in this column for fiscal 2013 because there was a decline in value of the participating named executive officers’ Cash Balance Plan
holdings. The declines in pension values for fiscal 2013 were as follows: ($26,234) and ($28,591), for Messrs. Keating and Boyd, respectively. Mr. Stivala,
Mr. Kuglin and Mr. Wienberg do not participate in the Cash Balance Plan.
69
(6)
The amounts reported in this column consist of the following:
Type of Compensation
401(k) Match
Value of Annual Physical Examination
Value of Partnership Provided Vehicles
Tax Preparation Services
Cash Balance Plan Administrative Fees
Insurance Premiums
Total
Type of Compensation
401(k) Match
Value of Annual Physical Examination
Value of Partnership Provided Vehicles
Tax Preparation Services
Cash Balance Plan Administrative Fees
Insurance Premiums
Total
Type of Compensation
401(k) Match
Value of Annual Physical Examination
Value of Partnership Provided Vehicles
Tax Preparation Services
Cash Balance Plan Administrative Fees
Insurance Premiums
Total
Fiscal 2015
Mr. Kuglin
Mr. Keating
Mr. Wienberg Mr. Boyd
Mr. Stivala
$
4,125 $
1,600
13,033
—
— $
18,083
36,841 $
4,170 $
—
13,742
9,000
1,500
18,544
46,956 $
4,500 $
1,600
16,986
—
—
19,115
42,201 $
4,500
—
8,004
3,500
1,500
18,933
36,437
Fiscal 2014
Mr. Kuglin
Mr. Keating
Mr. Wienberg Mr. Boyd
Mr. Stivala
$
3,788 $
—
12,725
—
—
16,917
33,430 $
3,900 $
1,850
14,657
8,800
1,500
17,424
48,131 $
3,900 $
1,750
13,142
—
—
19,008
37,800 $
3,900
—
6,837
4,450
1,500
18,654
35,341
Fiscal 2013
Mr. Kuglin
Mr. Keating
Mr. Wienberg Mr. Boyd
Mr. Stivala
$
3,600 $
1,750
12,882
—
—
16,929
35,161 $
3,825 $
1,500
13,913
8,950
1,500
16,796
46,484 $
3,825 $
1,500
13,570
—
—
17,160
36,055 $
3,825
—
7,705
2,650
1,500
17,736
33,416
4,500 $
1,600
17,516
—
—
19,911
43,527 $
3,900 $
—
18,153
—
—
18,853
40,906 $
3,825 $
1,750
19,319
—
—
17,179
42,073 $
$
$
$
Note: Column (f) was omitted from the Summary Compensation Table because we do not grant options to our employees.
70
Grants of Plan Based Awards Table for Fiscal 2015
The following table sets forth certain information concerning grants of awards made to each named executive officer during the
fiscal year ended September 26, 2015:
LTIP
Units
Underlying
Equity
Incentive
Plan
Awards
Estimated Future
Payments Under
Non-Equity Incentive
Plan Awards
Estimated Future
Payments Under
Equity Incentive Plan
Awards
All
Other
stock
Awards:
Number
of
Shares
of Stock
Grant
Date Fair
Value of
Stock and
Option
(LTIP) (4) Target Maximum Target Maximum or Units Awards (5)
(g)
(d)
(h)
(e)
(i)
(l)
$ 425,000 $ 510,000
4,770
$ 263,241 $ 394,862
Plan
Name
Approval
Date
Grant
Date
(b)
Bonus (2) 28 Sep 14 11 Nov 14
LTIP (3) 28 Sep 14 11 Nov 14
Bonus (2) 28 Sep 14 11 Nov 14
LTIP (3) 28 Sep 14 11 Nov 14
2,315
$ 206,250 $ 247,500
$ 127,751 $ 191,627
RUP (1) 15 Nov 14 11 Nov 14
Bonus (2) 28 Sep 14 11 Nov 14
LTIP (3) 28 Sep 14 11 Nov 14
2,340
$ 208,500 $ 250,200
$ 129,142 $ 193,713
11,150 $ 418,835
Bonus (2) 28 Sep 14 11 Nov 14
LTIP (3) 28 Sep 14 11 Nov 14
2,918
$ 260,000 $ 312,000
$ 161,040 $ 241,560
Bonus (2) 28 Sep 14 11 Nov 14
LTIP (3) 28 Sep 14 11 Nov 14
2,828
$ 252,000 $ 302,400
$ 156,083 $ 234,125
Name
(a)
Michael A. Stivala
Michael A. Kuglin
Michael M. Keating
Mark Wienberg
Steven C. Boyd
(1)
(2)
(3)
(4)
(5)
The quantity reported on this line represents an award granted under the Restricted Unit Plan. RUP awards granted subsequent to fiscal 2013 vest as follows:
one third of the award on the first anniversary of the grant date; one third of the award on the second anniversary of the grant date; and one third of the award on
the third anniversary of the grant date, subject in each case to continued service through each such date. If a recipient has held an unvested award for at least six
months; is 55 years or older; and has worked for the Partnership for at least ten years, an award held by such participant will vest six months following such
participant’s retirement if the participant retires prior to the conclusion of the normal vesting schedule, unless the Committee exercises its authority to alter the
applicability of the plan’s retirement provisions in regard to a particular award. On September 26, 2015, Mr. Keating was the only named executive officer who
held RUP awards and, at the same time, satisfied all three retirement eligibility criteria. A discussion of the general terms of the RUP, and the facts and
circumstances considered by the Committee in authorizing this fiscal 2015 award to Mr. Keating, is included in the “Compensation Discussion and Analysis”
under the subheading “Restricted Unit Plan.”
Amounts reported on these lines are the targeted and maximum annual cash bonus compensation potential for each named executive officer under the annual
cash bonus plan as described in the “Compensation Discussion and Analysis” under the subheading “Annual Cash Bonus Plan.” Actual amounts earned by the
named executive officers for fiscal 2015 were equal to 90% of the “Target” amounts reported on this line. Column (c) (“Threshold $”) was omitted because the
annual cash bonus plan does not provide for a guaranteed minimum cash payment. Because 90% of the “Target” awards was earned by our named executive
officers during fiscal 2015, 90% of the “Target” amounts reported under column (d) have been reported in the Summary Compensation Table above.
The LTIP is a phantom unit plan. Payments, if earned, are based on a combination of (i) the fair market value of our Common Units at the end of a three-year
measurement period, which, for purposes of the plan, is the average of the closing prices for the twenty business days preceding the conclusion of the three-year
measurement period, and (ii) cash equal to the distributions that would have inured to the same quantity of outstanding Common Units during the same three-
year measurement period. The fiscal 2015 award “Target” and “Maximum” amounts are estimates based upon (i) the fair market value (the average of the
closing prices of our Common Units for the twenty business days preceding September 27, 2014) of our Common Units at the beginning of fiscal 2015, and (ii)
the estimated distributions over the course of the award’s three-year measurement period. Column (f) (“Threshold”) was omitted because the LTIP does not
provide for a guaranteed minimum cash payment. The “Target” amount represents a hypothetical payment at 100% of target and the “Maximum” amount
represents a hypothetical payment at 150% of target. Detailed descriptions of the plan and the calculation of awards are included in the “Compensation
Discussion and Analysis” under the subheading “Long-Term Incentive Plan.”
This column is frequently used when non-equity incentive plan awards are denominated in units; however, in this case, the numbers reported represent the LTIP
units each named executive officer was awarded under the LTIP during fiscal 2015
The dollar amounts reported in this column represent the aggregate fair value of the RUP awards on the grant date, net of estimated future distributions during
the vesting period. The fair value shown may not be indicative of the value realized in the future upon vesting due to the variability in the trading price of our
Common Units.
Note: Columns (j) and (k) were omitted from the Grants of Plan Based Awards Table because we do not award options to our employees.
71
Outstanding Equity Awards at Fiscal Year End 2015 Table
The following table sets forth certain information concerning outstanding equity awards under our Restricted Unit Plan and
LTIP unit awards under our LTIP for each named executive officer as of September 26, 2015:
Stock Awards
Number of
Shares or Units of
Stock That Have
Not Vested (6)
(g)
35,390
21,814
25,933
27,429
27,429
Market Value of
Shares or Units of
Stock That Have
Not Vested (7)
(h)
1,186,096
731,096
869,144
919,283
919,283
$
$
$
$
$
Equity Incentive
Plan Awards:
Number of
Unearned Shares,
Units or Other
Rights that Have
Not Vested (8)
(i)
7,390
4,018
4,616
5,363
5,361
Equity Incentive
Plan Awards:
Market or
Payout Value of
Unearned
Shares, Units or
Other Rights
That Have Not
Vested (9)
(j)
338,889
184,243
211,648
245,907
245,812
$
$
$
$
$
Name
(a)
Michael A. Stivala (1)
Michael A. Kuglin (2)
Michael M. Keating (3)
Mark Wienberg (4)
Steven C. Boyd (5)
(1) Mr. Stivala’s RUP awards will vest as follows:
Vesting Date
November 15, 2015
Quantity of Units
8,189
April 1, 2016
7,962
November 15, 2016
7,062
April 1, 2017
7,961
November 15, 2017
4,216
(2) Mr. Kuglin’s RUP awards will vest as follows:
Vesting Date
November 15, 2015
Quantity of Units
5,795
April 1, 2016
3,981
November 15, 2016
5,046
April 1, 2017
3,981
November 15, 2017
3,011
(3) Mr. Keating’s RUP awards will vest as follows:
Vesting Date
Quantity of Units
November 15, 2015
10,091
November 15, 2016
9,115
November 15, 2017
6,727
(4) Mr. Wienberg’s RUP awards will vest as follows:
Vesting Date
November 15, 2015
Quantity of Units
8,189
April 1, 2016
3,981
November 15, 2016
7,062
April 1, 2017
3,981
November 15, 2017
4,216
(5) Mr. Boyd’s RUP awards will vest as follows:
Vesting Date
November 15, 2015
Quantity of Units
8,189
April 1, 2016
3,981
November 15, 2016
7,062
April 1, 2017
3,981
November 15, 2017
4,216
(6) The figures reported in this column represent the total quantity of each of our named executive officer’s unvested RUP awards.
(7) The figures reported in this column represent the figures reported in column (g) multiplied by the average of the highest and the
lowest trading prices of our Common Units on September 25, 2015, the last trading day of fiscal 2015.
(8) The amounts reported in this column represent the quantities of LTIP units that underlie the outstanding and unvested fiscal
2015 and fiscal 2014 awards under the LTIP. Payments, if earned, will be made to participants at the end of a three-year
measurement period and will be based upon the Partnership’s distribution coverage ratio for the three-year measurement period.
For more information on the LTIP, refer to the subheading “Long-Term Incentive Plan” in the “Compensation Discussion and
Analysis.”
(9) The amounts reported in this column represent the estimated future target payouts of the fiscal 2015 and fiscal 2014 awards
granted under the LTIP. These amounts were computed by multiplying the quantities of the unvested LTIP units in column (i)
72
by the average of the closing prices of our Common Units for the twenty business days preceding September 26, 2015 (in
accordance with the plan’s valuation methodology), and by adding to the product of that calculation the product of each year’s
underlying LTIP units times the sum of the distributions that are estimated to inure to an outstanding Common Unit during each
award’s three-year measurement period. Due to the variability in the trading prices of our Common Units, as well as our
performance relative to the peer group, actual payments, if any, at the end of the three-year measurement period may differ. The
following chart provides a breakdown of each year’s awards:
Fiscal 2015 LTIP Units
Value of Fiscal 2015 LTIP Units
Estimated Distributions over Measurement
Period
Fiscal 2014 LTIP Units
Value of Fiscal 2014 LTIP Units
Estimated Distributions over Measurement
Period
$
$
$
$
Mr. Stivala
Mr. Kuglin
Mr. Keating
4,770
168,085 $
2,315
81,576 $
Mr. Wienberg Mr. Boyd
2,918
102,824 $
2,828
99,653
2,340
82,457 $
50,741
$
24,626
$
24,892
$
31,040
$
30,083
2,620
92,324 $
1,703
60,010 $
2,276
80,202 $
2,445
86,157 $
2,533
89,258
27,739
$
18,031
$
24,097
$
25,886
$
26,818
Note: Columns (b), (c), (d), (e) and (f), all of which are for the reporting of option-related compensation, have been omitted from
the “Outstanding Equity Awards At Fiscal Year End 2015 Table” because we do not grant options to our employees.
Equity Vested Table for Fiscal 2015
Awards under the Restricted Unit Plans are settled in Common Units upon vesting. Awards under the LTIP, a LTIP-equity
plan, are settled in cash. The following two tables set forth certain information concerning the vesting of awards under our Restricted
Unit Plans and the vesting of the fiscal 2013 award under our LTIP for each named executive officer during the fiscal year ended
September 26, 2015:
Name
Michael A. Stivala
Michael A. Kuglin
Michael M. Keating
Mark Wienberg
Steven C. Boyd
Restricted Unit Plans
Unit Awards
Number of
Common Units
Acquired on
Vesting
15,237
9,065
6,404
11,256
11,256
Value Realized on
Vesting (1)
$
$
$
$
$
662,220
395,443
284,818
492,888
492,888
(1) The value realized is equal to the average of the high and low trading prices of our Common Units on the vesting date,
multiplied by the number of units that vested.
Long-Term Incentive Plan - Fiscal 2013 (2) Award
Name
Michael A. Stivala
Michael A. Kuglin
Michael M. Keating
Mark Wienberg
Steven C. Boyd
Cash Awards
Number of LTIP
Units Acquired on
Vesting (3)
3,180
2,067
2,763
2,968
3,074
Value Realized on
Vesting (4)
$
$
$
$
$
72,728
47,273
63,191
67,880
70,304
73
(2) The fiscal 2013 award’s three-year measurement period concluded on September 26, 2015.
(3)
In accordance with the formula described in the “Compensation Discussion and Analysis” under the subheading “Long-Term
Incentive Plan,” these quantities were calculated at the beginning of the three-year measurement period and were based upon
each individual’s salary and target cash bonus at that time.
(4) The value (i.e., cash payment) realized was calculated in accordance with the terms and conditions of the LTIP. For more
information, refer to the subheading “Long-Term Incentive Plan” in the “Compensation Discussion and Analysis.”
Pension Benefits Table for Fiscal 2015
The following table sets forth certain information concerning each plan that provides for payments or other benefits at, following,
or in connection with retirement for each named executive officer as of the end of the fiscal year ended September 26, 2015:
Michael A. Stivala (1)
Michael A. Kuglin (1)
Michael M. Keating
Mark Wienberg (1)
Steven C. Boyd
Name
Plan Name
N/A
N/A
Cash Balance Plan (2)
LTIP (3)
RUP (4)
N/A
Cash Balance Plan (2)
Number of Years
Credited Service
N/A
N/A
15
N/A
N/A
N/A
15
$
$
$
$
$
$
$
Present Value of
Accumulated
Benefit
Payments During
Last Fiscal Year
—
— $
— $
571,841 $
211,648 $
869,144 $
— $
204,616 $
—
—
—
—
—
—
(1) Because Messrs. Stivala, Kuglin and Wienberg commenced employment with the Partnership after January 1, 2000, the date on
which the Cash Balance Plan was closed to new participants, they do not participate in the Cash Balance Plan.
(2) For more information on the Cash Balance Plan, refer to the subheading “Pension Plan” in the “Compensation Discussion and
Analysis.”
(3) Currently, Mr. Keating is the only named executive officer who meets the retirement criteria of the LTIP. For such participants,
upon retirement, outstanding but unvested awards under the LTIP become fully vested. However, payouts on those awards are
deferred until the conclusion of each outstanding award’s three-year measurement period, based on the outcome of the distributable
cash flow measurement for the 2015 and 2014 awards. The number reported on this line represents a projected payout of Mr.
Keating’s outstanding fiscal 2015 and fiscal 2014 awards under the LTIP. Because the ultimate payout, if any, is predicated on the
trading prices of the Partnership’s Common Units at the end of the three-year measurement period, the value reported may not be
indicative of the value realized in the future upon vesting due to the variability in the trading price of our Common Units.
(4) Currently, Mr. Keating is the only named executive officer who meets the retirement criteria of the RUP. For more information
on this and the retirement provisions, refer to the subheading “Restricted Unit Plans” in the “Compensation Discussion and
Analysis.” For participants who meet the retirement criteria, upon retirement, outstanding RUP awards vest six months and one
day after retirement.
74
Potential Payments Upon Termination
The following table sets forth certain information containing potential payments to the named executive officers in accordance
with the provisions of the Severance Protection Plan, the RUP and the LTIP for the circumstances listed in the table assuming a
September 26, 2015 termination date. For more information on severance and change of control payments, refer to the subheadings
“Severance Benefits” and “Change of Control” above.
Executive Payments and Benefits Upon Termination
Death
Disability
Involuntary
Termination
Without Cause by
the Partnership or
by the Executive for
Good Reason
without a Change of
Control Event
Involuntary
Termination
Without Cause
by the
Partnership or
by the Executive
for Good Reason
with a Change of
Control Event
Michael A. Stivala
Cash Compensation (1) (2) (3) (4)
Accelerated Vesting of Fiscal 2015, 2014 and
2013 LTIP Awards (5)
Accelerated Vesting of Outstanding RUP Awards (6)
Medical Benefits (3)
Total
Michael A. Kuglin
Cash Compensation (1) (2) (3) (4)
Accelerated Vesting of Fiscal 2015, 2014 and
2013 LTIP Awards (5)
Accelerated Vesting of Outstanding RUP Awards (6)
Medical Benefits (3)
Total
Michael M. Keating
Cash Compensation (1) (2) (3) (4)
Accelerated Vesting of Fiscal 2015, 2014 and
2013 LTIP Awards (5)
Accelerated Vesting of Outstanding RUP Awards (6)
Medical Benefits (3)
Total
Mark Wienberg
Cash Compensation (1) (2) (3) (4)
Accelerated Vesting of Fiscal 2015, 2014 and
2013 LTIP Awards (5)
Accelerated Vesting of Outstanding RUP Awards (6)
Medical Benefits (3)
Total
Steven C. Boyd
Cash Compensation (1) (2) (3) (4)
Accelerated Vesting of Fiscal 2015, 2014 and
2013 LTIP Awards (5)
Accelerated Vesting of Outstanding RUP Awards (6)
Medical Benefits (3)
Total
$
— $
— $
425,000 $
1,275,000
$
$
$
$
$
$
$
$
$
—
1,186,096
—
1,186,096 $
—
1,186,096
—
1,186,096 $
—
—
19,911
444,911 $
551,358
1,186,096
—
3,012,454
— $
— $
275,000 $
721,875
—
731,096
—
731,096 $
—
731,096
—
731,096 $
—
—
18,083
293,083 $
320,321
731,096
—
1,773,292
— $
— $
278,000 $
729,750
—
869,144
—
869,144 $
—
869,144
—
869,144 $
—
869,144
18,544
1,165,688 $
391,600
869,144
—
1,990,494
— $
— $
325,000 $
877,500
—
919,283
—
919,283 $
—
919,283
—
919,283 $
—
—
19,115
344,115 $
440,253
919,283
—
2,237,036
— $
— $
315,000 $
850,500
—
919,283
—
919,283 $
—
919,283
—
919,283 $
—
—
18,933
333,933 $
446,603
919,283
—
2,216,386
75
(1)
(2)
In the event of death, the named executive officer’s estate is entitled to a payment equal to the decedent’s earned but unpaid
salary and pro-rata cash bonus.
In the event of disability, the named executive officer is entitled to a payment equal to his earned but unpaid salary and pro-rata
cash bonus.
(3) Any severance benefits, unrelated to a change of control event, payable to these officers would be determined by the Committee
on a case-by-case basis in accordance with prior treatment of other similarly situated executives and may, as a result, differ from
this hypothetical presentation. For purposes of this table, we have assumed that each of these named executive officers would,
upon termination of employment without cause or for resignation for good reason, receive accrued salary and benefits through
the date of termination plus one times annual salary and continued participation, at active employee rates, in our health
insurance plans for one year.
(4)
(5)
In the event of a change of control followed by a termination without cause or by a resignation with good reason, each of the
named executive officers will receive 78 weeks of base pay plus a sum equal to their annual target cash bonus divided by 52 and
multiplied by 78 in accordance with the terms of the Severance Protection Plan. For more information on the Severance
Protection Plan, refer to the subheading “Change of Control” in the “Compensation Discussion and Analysis.”
In the event of a change of control, all awards under the LTIP will vest immediately regardless of whether termination
immediately follows. If a change of control event occurs, payments will be equal to 125% of the cash value of a participant’s
unvested LTIP units plus a sum equal to 125% of a participant’s unvested LTIP units multiplied by an amount equal to the
cumulative, per-Common Unit distribution from the beginning of an unvested award’s three-year measurement period through
the date on which the change of control occurred. If a change of control event occurred on September 26, 2015, the fiscal 2015,
fiscal 2014 and fiscal 2013 awards would have been subject to this treatment. For more information, refer to the subheading
“Long-Term Incentive Plan” in the “Compensation Discussion and Analysis.”
In the event of death, the inability to continue employment due to permanent disability, or a termination without cause or a good
reason resignation unconnected to a change of control event, awards will vest in accordance with the normal vesting schedule
and will be subject to the same requirements as awards held by individuals still employed by us and will be subject to the same
risks as awards held by all other participants.
(6) Effective November 13, 2012, the Committee amended the RUP document to provide for the vesting of unvested awards held
by a participant at the time of his or her death. If a recipient of a RUP award becomes permanently disabled, only those awards
that have been held for at least one year on the date that the employee’s employment is terminated as a result of his or her
permanent disability will immediately vest; all awards held by the recipient for less than one year will be forfeited by the
recipient. All of the named executive officers, with the exception of Mr. Keating, have held all of their unvested awards for
more than one year. Because all of Mr. Keating’s unvested awards are subject to the plan’s retirement provisions, if Mr. Keating
became permanently disabled on the last day of the fiscal year, none of his unvested awards would have been forfeited.
Under circumstances unrelated to a change of control, if a RUP award recipient’s employment is terminated without cause or he
or she resigns for good reason, any RUP awards held by such recipient will be forfeited. Because Mr. Keating’s unvested
awards are subject to the plan’s retirement provisions, if Mr. Keating had been terminated without cause on the last day of fiscal
2015, none of his unvested awards would have been forfeited.
In the event of a change of control, as defined in the RUP document, all unvested RUP awards will vest immediately on the date
the change of control is consummated, regardless of the holding period and regardless of whether the recipient’s employment is
terminated.
76
SUPERVISORS’ COMPENSATION
The following table sets forth the compensation of the non-employee members of the Board of Supervisors of the Partnership
during fiscal 2015.
Supervisor
Harold R. Logan, Jr.
Lawrence C. Caldwell
Matthew J. Chanin
John D. Collins
Dudley C. Mecum (3)
John Hoyt Stookey
Jane Swift
Fees Earned
or
Paid in
Cash (1)
$ 117,500
86,250
$
88,750
$
90,000
$
42,500
$
86,250
$
86,250
$
Unit
Awards (2)
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Total
$ 117,500
86,250
$
88,750
$
90,000
$
42,500
$
86,250
$
86,250
$
(1) This includes amounts earned for fiscal 2015, including quarterly retainer installments for the fourth quarter of 2015 that were
paid in November 2015. It does not include amounts paid in fiscal 2015 for fiscal 2014 quarterly retainer installments.
(2) On September 26, 2015, Messrs. Logan, Collins, Stookey and Ms. Swift each held awards of 6,000 unvested restricted units,
Mr. Mecum held 7,000 unvested restricted units, and Messrs. Caldwell and Chanin each held awards of 6,023 unvested
restricted units. At its meeting on July 21, 2015, the Compensation Committee approved the following restricted unit plan
awards with an effective grant date of November 15, 2015:
Supervisor
Mr. Logan
Mr. Caldwell
Mr. Chanin
Mr. Collins
Mr. Stookey
Ms. Swift
Grant Quantities
10,967
8,773
8,773
8,773
8,773
8,773
The unit quantities were determined by dividing the award amounts by the average of the closing prices of our Common Units
for the twenty business days preceding November 15, 2015.
(3) Mr. Mecum retired from our Board of Supervisors on May 13, 2015.
Note: The columns for reporting option awards, non-equity incentive plan compensation, changes in pension value and non-qualified
deferred compensation plan earnings and all other forms of compensation were omitted from the Supervisor’s Compensation
Table because the Partnership does not provide these forms of compensation to its non-employee supervisors.
Fees and Benefit Plans for Non-Employee Supervisors
Annual Cash Retainer Fees. For the first three quarters of fiscal 2015, as the Chair of the Board of Supervisors, Mr. Logan received
an annual retainer of $115,000, payable in quarterly installments of $28,750 each. For the first three quarters of fiscal 2015, each of
the other non-employee Supervisors received an annual cash retainer of $85,000, payable in quarterly installments of $21,250 each.
At its July 21, 2015 meeting, the Compensation Committee determined that for subsequent quarters, as the Chair of the Board of
Supervisors, Mr. Logan is to receive an annual cash retainer of $125,000, payable in quarterly installments of $31,250 each. Each of
the other non-employee Supervisors is to receive an annual cash retainer of $90,000 each, payable in quarterly installments of
$22,500. As Chair of the Compensation Committee, Mr. Chanin is to receive an additional annual cash retainer of $10,000, payable in
quarterly installments of $2,500 each. As Chair of the Audit Committee, Mr. Collins is to receive an additional annual cash retainer of
$15,000, payable in quarterly installments of $3,750 each.
Meeting Fees. The members of our Board of Supervisors receive no additional remuneration for attendance at regularly scheduled
meetings of the Board or its Committees, other than reimbursement of reasonable expenses incurred in connection with such
attendance.
77
Restricted Unit Plans. Each non-employee Supervisor participates in the Restricted Unit Plans. All awards vest in accordance with
the provisions of the plan document (see “Compensation Discussion and Analysis” section titled “Restricted Unit Plans” for a
description of the vesting schedule). Upon vesting, all awards are settled by issuing Common Units.
Additional Supervisor Compensation. Non-employee Supervisors receive no other forms of remuneration from us. The only
perquisite provided to the members of the Board of Supervisors is the ability to purchase propane at the same discounted rate that we
offer propane to our employees, the value of which was less than $10,000 in fiscal 2015 for each Supervisor.
78
ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
UNITHOLDER MATTERS
The following table sets forth certain information as of November 23, 2015 regarding the beneficial ownership of Common
Units by (a) each person or group known to the Partnership, based upon its review of filings under Section 13(d) or (g) under the
Securities Act, to own more than 5% of the outstanding Common Units; (b) each member of the Board of Supervisors; (c) each
executive officer named in the Summary Compensation Table in Item 11 of this Annual Report; and (d) all members of the Board of
Supervisors and executive officers as a group. Except as set forth in the notes to the table, each individual or entity has sole voting
and investment power over the Common Units reported.
Name of Beneficial Owner
Neuberger Berman Group LLC (a)
Michael A. Stivala (b)
Michael A. Kuglin (c)
Michael M. Keating (d)
Mark Wienberg (e)
Steven C. Boyd (f)
Harold R. Logan, Jr. (g)
John Hoyt Stookey (h)
Jane Swift (h)
John D. Collins (h)
Lawrence C. Caldwell (i)
Matthew J. Chanin (j)
All Members of the Board of Supervisors and
Executive Officers, as a group (18 persons) (k)
Amount and
Nature of
Beneficial
Ownership (1)
Percent of Class (2)
8,131,019
38,470
8,660
20,091
10,570
35,968
13.4%
*
*
*
*
*
14,107
12,666
3,300
20,546
23,629
6,506
302,742
*
*
*
*
*
*
*
(1) With the exception of the 8,131,019 units held by Neuberger Berman Group LLC (of which the Partnership has no knowledge,
see note (a) below), the 784 units held by the General Partner (see note (b) below) and the 16,252 units held by charitable
organizations over which Mr. Caldwell has shared investment and voting power (see note (i) below), the above listed units may
be held in brokerage accounts where they are pledged as security.
(2) Based upon 60,744,727 Common Units outstanding on November 23, 2015.
*
Less than 1%.
(a) Based upon a Schedule 13G/A dated February 11, 2015 filed by Neuberger Berman Group LLC and Neuberger Berman LLC,
which indicates that as of December 31, 2014 they had the shared power to vote or direct the vote of 7,832,713 Common Units
and the shared power to dispose or direct the disposition of 8,131,019 Common Units. The Schedule 13G indicates that
Neuberger Berman Group LLC may be deemed to be a beneficial owner of these Common Units for purposes of Rule 13d-3
because certain affiliates have shared power to retain or dispose of Common Units belonging to many unrelated clients. We
make no representation as to the accuracy or completeness of the information reported. The address of Neuberger Berman
Group LLC is 605 Third Avenue, New York NY 10158.
(b)
Includes 784 Common Units held by the General Partner, of which Mr. Stivala is the sole member. Excludes 45,478 unvested
restricted units, none of which will vest in the 60-day period following November 23, 2015.
(c) Excludes 24,792 unvested restricted units, none of which will vest in the 60-day period following November 23, 2015.
(d) Excludes 24,615 unvested restricted units, none of which will vest in the 60-day period following November 23, 2015.
(e) Excludes 28,013 unvested restricted units, none of which will vest in the 60-day period following November 23, 2015.
(f) Excludes 28,013 unvested restricted units, none of which will vest in the 60-day period following November 23, 2015.
(g) Excludes 15,467 unvested restricted units, none of which will vest in the 60-day period following November 23, 2015.
(h) Excludes 13,273 unvested restricted units, none of which will vest in the 60-day period following November 23, 2015.
79
(i)
Includes 16,252 Common Units held by charitable organizations over which Mr. Caldwell has shared investment and voting
power. Excludes 13,290 unvested restricted units, none of which will vest in the 60-day period following November 23, 2015.
(j)
Excludes 13,290 unvested restricted units, none of which will vest in the 60-day period following November 23, 2015.
(k)
Inclusive of the unvested restricted units referred to in footnotes (b), (c), (d), (e), (f), (g), (h), (i) and (j) above, the reported
number of units excludes 368,399 unvested restricted units, none of which will vest in the 60-day period following November
23, 2015.
Securities Authorized for Issuance Under the Restricted Unit Plans
The following table sets forth certain information, as of September 26, 2015, with respect to the Partnership’s Restricted Unit
Plans, under which restricted units of the Partnership, as described in the Notes to the Consolidated Financial Statements included in
this Annual Report, are authorized for issuance.
Number of
restricted units
remaining
available for
future issuance
under the
Restricted Unit
Plan (excluding
securities
reflected in
column (a))
(c)
Number of
Common Units
to be issued upon
vesting of
restricted units
(a)
Weighted-
average grant
date fair value
per restricted
unit
(b)
627,399 (2)
$ 31.87
1,468,910
—
627,399
—
$ 31.87
—
1,468,910
Plan Category
Equity compensation plans approved by security
holders (1)
Equity compensation plans not approved by
security holders
Total
(1) Relates to the Restricted Unit Plans.
(2) Represents number of restricted units that, as of September 26, 2015, had been granted under the Restricted Unit Plans but had
not yet vested.
80
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Related Person Transactions
None. See “Partnership Management” under Item 10 above for a description of the Audit Committee’s role in reviewing, and
approving or ratifying, related party transactions.
Supervisor Independence
The Corporate Governance Guidelines and Principles adopted by the Board of Supervisors provide that a Supervisor is deemed
to be lacking a material relationship to the Partnership and is therefore independent of management if the following criteria are
satisfied:
1. Within the past three years, the Supervisor:
a.
b.
c.
d.
e.
has not been employed by the Partnership and has not received more than $100,000 per year in direct compensation from
the Partnership, other than Supervisor and committee fees and pension or other forms of deferred compensation for prior
service;
has not provided significant advisory or consultancy services to the Partnership, and has not been affiliated with a
company or a firm that has provided such services to the Partnership in return for aggregate payments during any of the
last three fiscal years of the Partnership in excess of the greater of 2% of the other company’s consolidated gross revenues
or $1 million;
has not been a significant customer or supplier of the Partnership and has not been affiliated with a company or firm that
has been a customer or supplier of the Partnership and has either made to the Partnership or received from the Partnership
payments during any of the last three fiscal years of the Partnership in excess of the greater of 2% of the other company’s
consolidated gross revenues or $1 million;
has not been employed by or affiliated with an internal or external auditor that within the past three years provided
services to the Partnership; and
has not been employed by another company where any of the Partnership’s current executives serve on that company’s
compensation committee;
The Supervisor is not a spouse, parent, sibling, child, mother- or father-in-law, son- or daughter-in-law or brother- or sister-in-
law of a person having a relationship described in 1. above nor shares a residence with such person;
The Supervisor is not affiliated with a tax-exempt entity that within the past 12 months received significant contributions from
the Partnership (contributions of the greater of 2% of the entity’s consolidated gross revenues or $1 million are considered
significant); and
The Supervisor does not have any other relationships with the Partnership or with members of senior management of the
Partnership that the Board determines to be material.
2.
3.
4.
A copy of our Corporate Governance Guidelines is available without charge from our website at www.suburbanpropane.com or
upon written request directed to: Suburban Propane Partners, L.P., Investor Relations, P.O. Box 206, Whippany, New Jersey 07981-0206.
81
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
The following table sets forth the aggregate fees for services related to fiscal years 2015 and 2014 provided by
PricewaterhouseCoopers LLP, our independent registered public accounting firm.
Audit Fees (a)
Tax Fees (b)
All Other Fees (c)
Total
Fiscal
2015
2,487,000 $
1,033,000
1,800
3,521,800 $
Fiscal
2014
2,440,000
1,064,200
1,800
3,506,000
$
$
(a) Audit Fees consist of professional services rendered for the integrated audit of our annual consolidated financial statements and
our internal control over financial reporting, including reviews of our quarterly financial statements, as well as the issuance of
consents in connection with other filings made with the SEC.
(b) Tax Fees consist of fees for professional services related to tax reporting, tax compliance and transaction services assistance.
(c) All Other Fees represent fees for the purchase of a license to an accounting research software tool.
The Audit Committee of the Board of Supervisors has adopted a formal policy concerning the approval of audit and non-audit
services to be provided by the independent registered public accounting firm, PricewaterhouseCoopers LLP. The policy requires that
all services PricewaterhouseCoopers LLP may provide to us, including audit services and permitted audit-related and non-audit
services, be pre-approved by the Audit Committee. The Audit Committee pre-approved all audit and non-audit services provided by
PricewaterhouseCoopers LLP during fiscal 2015 and fiscal 2014.
82
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
(a) The following documents are filed as part of this Annual Report:
PART IV
1.
Financial Statements
See “Index to Financial Statements” set forth on page F-1.
2.
Financial Statement Schedule
See “Index to Financial Statement Schedule” set forth on page S-1.
3.
Exhibits
See “Index to Exhibits” set forth on page E-1.
83
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
Date: November 25, 2015
SUBURBAN PROPANE PARTNERS, L.P.
By: /s/ MICHAEL A. STIVALA
Michael A. Stivala
President, Chief Executive Officer and
Supervisor
Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report has been signed below by the following
persons on behalf of the Registrant and in the capacities and on the dates indicated:
Signature
Title
By: /s/ MICHAEL A. STIVALA
(Michael A. Stivala)
President, Chief Executive
Officer and Supervisor
Date
November 25, 2015
By: /s/ HAROLD R. LOGAN, JR.
Chairman and Supervisor
November 25, 2015
(Harold R. Logan, Jr.)
By: /s/ JOHN HOYT STOOKEY
(John Hoyt Stookey)
By: /s/ JOHN D. COLLINS
(John D. Collins)
By: /s/ JANE SWIFT
(Jane Swift)
Supervisor
Supervisor
Supervisor
November 25, 2015
November 25, 2015
November 25, 2015
By: /s/ LAWRENCE C. CALDWELL
Supervisor
November 25, 2015
(Lawrence C. Caldwell)
By /s/ MATTHEW J. CHANIN
(Matthew J. Chanin)
By: /s/ MICHAEL A. KUGLIN
(Michael A. Kuglin)
Supervisor
November 25, 2015
Chief Financial Officer and
Chief Accounting Officer
November 25, 2015
By: /s/ DANIEL S. BLOOMSTEIN
Controller
November 25, 2015
(Daniel S. Bloomstein)
84
INDEX TO EXHIBITS
The exhibits listed on this Exhibit Index are filed as part of this Annual Report. Exhibits required to be filed by Item 601 of
Regulation S-K, which are not listed below, are not applicable.
Exhibit
Number
2.1
3.1
3.2
Description
Contribution Agreement dated as of April 25, 2012, as amended as of June 15, 2012, July 6, 2012 and July 19, 2012,
among Inergy, L.P., Inergy GP, LLC, Inergy Sales and Service, Inc. and Suburban Propane Partners, L.P. (Incorporated
by reference to Exhibit 2.1 to the Partnership’s Current Reports on Form 8-K filed April 26, 2012, June 15, 2012, July 6,
2012 and July 19, 2012, respectively).
Third Amended and Restated Agreement of Limited Partnership of the Partnership dated as of October 19, 2006, as
amended as of July 31, 2007. (Incorporated by reference to Exhibit 3.1 to the Partnership’s Current Report on Form 8-K
filed August 2, 2007).
Third Amended and Restated Agreement of Limited Partnership of the Operating Partnership dated as of
October 19, 2006, as amended as of June 24, 2009. (Incorporated by reference to Exhibit 10.2 to the Partnership’s
Current Report on Form 8-K filed June 30, 2009).
3.3
Amended and Restated Certificate of Limited Partnership of the Partnership dated May 26, 1999 (Incorporated by
reference to Exhibit 3.2 to the Partnership’s Quarterly Report on Form 10-Q filed August 6, 2009).
3.4
4.1
4.2
4.3
4.4
4.5
4.6
4.7
10.1
Amended and Restated Certificate of Limited Partnership of the Operating Partnership dated May 26, 1999 (Incorporated
by reference to Exhibit 3.3 to the Partnership’s Quarterly Report on Form 10-Q filed August 6, 2009).
Description of Common Units of the Partnership. (Incorporated by reference to Exhibit 4.1 to the Partnership’s Current
Report on Form 8-K filed October 19, 2006).
Indenture, dated as of August 1, 2012, related to the 7.375% Senior Notes due 2021, by and among Suburban Propane
Partners, L.P., Suburban Energy Finance Corp. and The Bank of New York Mellon, as Trustee, including the form of
7.375% Senior Notes due 2021. (Incorporated by reference to Exhibit 4.1 to the Partnership’s Current Report on Form
8-K filed August 2, 2012).
First Supplemental Indenture, dated as of May 23, 2014, related to the 7.375% Senior Notes due 2021, by and among
Suburban Propane Partners, L.P., Suburban Energy Finance Corp. and The Bank of New York Mellon, as Trustee.
(Incorporated by reference to Exhibit 4.1 to the Partnership’s Current Report on Form 8-K filed May 27, 2014).
Indenture, dated as of May 27, 2014, relating to the 5.50% Senior Notes due 2024, among Suburban Propane Partners,
L.P., Suburban Energy Finance Corp. and The Bank of New York Mellon, as Trustee, including the form of 5.50%
Senior Notes due 2024. (Incorporated by reference to Exhibit 4.1 to the Partnership’s Current Report on Form 8-K filed
May 28, 2014).
First Supplemental Indenture, dated as of May 27, 2014, relating to the 5.50% Senior Notes due 2024, among Suburban
Propane Partners, L.P., Suburban Energy Finance Corp. and The Bank of New York Mellon, as Trustee. (Incorporated
by reference to Exhibit 4.1 to the Partnership’s Current Report on Form 8-K filed May 28, 2014).
Second Supplemental Indenture, dated as of February 25, 2015, to the Indenture, dated as of May 27, 2014, relating to
the 5.75% Senior Notes due 2025, among Suburban Propane Partners, L.P., Suburban Energy Finance Corp. and The
Bank of New York Mellon, as Trustee. (Incorporated by reference to Exhibit 4.1 to the Partnership’s Current Report on
Form 8-K filed February 25, 2015).
Support Agreement, dated as of August 1, 2012, among Inergy, L.P., the Partnership and Suburban Energy Finance
Corp. (Incorporated by reference to Exhibit 4.3 to the Partnership’s Registration Statement on Form S-4 dated September
19, 2012).
Suburban Propane Partners, L.P. 2000 Restricted Unit Plan, as amended and restated effective October 17, 2006 and as further
amended on July 31, 2007, October 31, 2007, January 24, 2008, January 20, 2009, November 10, 2009 and November 13, 2012.
(Incorporated by reference to Exhibit 99.1 to the Partnership’s Current Report on Form 8-K filed November 14, 2012).
E-1
10.2
10.3
10.4
10.5
10.6
10.7
10.8
10.9
Suburban Propane Partners, L.P. 2009 Restricted Unit Plan, effective August 1, 2009, as amended on November 13, 2012, and
August 6, 2013 and May 13, 2015. (Incorporated by reference to Exhibit 10.1 to the Partnership’s Current Report on Form 8-K
filed May 14, 2015).
Suburban Propane, L.P. Severance Protection Plan, as amended on January 24, 2008, January 20, 2009 and November
10, 2009. (Incorporated by reference to Exhibit 10.8 to the Partnership’s Annual Report on Form 10-K for the fiscal year
ended September 26, 2009).
Suburban Propane, L.P. 2013 Long Term Incentive Plan. (Incorporated by reference to Exhibit 99.1 to the Partnership’s
Current Report on Form 8-K filed November 10, 2011).
Suburban Propane, L.P. 2014 Long Term Incentive Plan. (Incorporated by reference to Exhibit 99.1 to the Partnership’s
Current Report on Form 8-K filed August 7, 2013).
Amended and Restated Retirement Savings and Investment Plan of Suburban Propane effective as of January 1, 1998).
(Incorporated by reference to Exhibit 10.24 to the Partnership’s Annual Report on Form 10-K for the fiscal year ended
September 29, 2001).
Amendment No. 1 to the Retirement Savings and Investment Plan of Suburban Propane (effective January 1, 2002).
(Incorporated by reference to Exhibit 10.25 to the Partnership’s Annual Report on Form 10-K for the fiscal year ended
September 28, 2002).
Amended and Restated Credit Agreement, among the Operating Partnership, the Partnership and Bank of America, N.A.,
as Administrative Agent and the Lenders party thereto, dated January 5, 2012. (Incorporated by reference to Exhibit
10.1 to the Partnership’s Current Report on Form 8-K filed on January 6, 2012).
First Amendment to the Amended and Restated Credit Agreement, among the Operating Partnership, the Partnership and
Bank of America, N.A., as Administrative Agent, and the Lenders party thereto, dated August 1, 2012. (Incorporated by
reference to Exhibit 10.1 to the Partnership’s Current Report on Form 8-K filed on August 2, 2012).
10.10
Second Amendment to the Amended and Restated Credit Agreement, among the Operating Partnership, the Partnership
and Bank of America, N.A., as Administrative Agent, and the Lenders party thereto, dated May 9, 2014. (Incorporated
by reference to Exhibit 10.1 to the Partnership’s Current Report on Form 8-K filed on May 12, 2014).
10.11
Propane Storage Agreement, dated September 17, 2007, between Suburban Propane, L.P. and Plains LPG Services, L.P.
(Incorporated by reference to Exhibit 10.3 to the Partnership’s Current Report on Form 8-K filed September 20, 2007).
21.1
23.1
31.1
31.2
32.1
32.2
99.1
Subsidiaries of Suburban Propane Partners, L.P. (Filed herewith).
Consent of PricewaterhouseCoopers LLP. (Filed herewith).
Certification of the President and Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
(Filed herewith).
Certification of the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (Filed herewith).
Certification of the President and Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002. (Filed herewith).
Certification of the Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002. (Filed herewith).
Equity Holding Policy for Supervisors and Executives of Suburban Propane Partners, L.P., as amended on November 10,
2015. (Filed herewith).
99.2
Five-Year Performance Graph (Filed herewith).
101.INS
XBRL Instance Document
101.SCH
XBRL Taxonomy Extension Schema Document
101.CAL
XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF
XBRL Taxonomy Extension Definition Linkbase Document
101.LAB
XBRL Taxonomy Extension Label Linkbase Document
101.PRE
XBRL Taxonomy Extension Presentation Linkbase Document
E-2
INDEX TO FINANCIAL STATEMENTS
SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES
Report of Independent Registered Public Accounting Firm .......................................................................................................... F-2
Consolidated Balance Sheets – As of September 26, 2015 and September 27, 2014 .................................................................... F-3
Consolidated Statements of Operations – Years Ended September 26, 2015, September 27, 2014 and September 28, 2013 ....... F-4
Consolidated Statements of Comprehensive Income – Years Ended September 26, 2015, September 27, 2014 and
September 28, 2013 .................................................................................................................................................................. F-5
Consolidated Statements of Cash Flows – Years Ended September 26, 2015, September 27, 2014 and September 28, 2013 ..... F-6
Consolidated Statements of Partners’ Capital – Years Ended September 26, 2015, September 27, 2014 and
September 28, 2013 .................................................................................................................................................................. F-7
Notes to Consolidated Financial Statements .................................................................................................................................. F-8
Page
F-1
Report of Independent Registered Public Accounting Firm
To the Board of Supervisors and Unitholders of
Suburban Propane Partners, L.P.:
In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations, partners’ capital,
comprehensive income, and cash flows present fairly, in all material respects, the financial position of Suburban Propane Partners,
L.P. and its subsidiaries at September 26, 2015 and September 27, 2014, and the results of their operations and their cash flows for
each of the three years in the period ended September 26, 2015 in conformity with accounting principles generally accepted in the
United States of America. In addition, in our opinion, the financial statement schedule listed in the accompanying index appearing
under Item 15(a)(2) presents fairly, in all material respects, the information set forth therein when read in conjunction with the related
consolidated financial statements. Also in our opinion, the Partnership maintained, in all material respects, effective internal control
over financial reporting as of September 26, 2015, based on criteria established in Internal Control - Integrated Framework (2013)
issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Partnership’s management is
responsible for these financial statements and financial statement schedule, for maintaining effective internal control over financial
reporting and for its assessment of the effectiveness of internal control over financial reporting, included in Management's Report on
Internal Control over Financial Reporting appearing in Item 9A. Our responsibility is to express opinions on these financial
statements, on the financial statement schedule, and on the Partnership’s internal control over financial reporting based on our
integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in
all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an
understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating
the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other
procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the
maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the
company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in
accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect
on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections
of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in
conditions, or that the degree of compliance with the policies or procedures may deteriorate.
PricewaterhouseCoopers LLP
Florham Park, New Jersey
November 25, 2015
F-2
SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)
ASSETS
Current assets:
Cash and cash equivalents
Accounts receivable, less allowance for doubtful accounts of $3,520 and
$11,122, respectively
Inventories
Other current assets
Total current assets
Property, plant and equipment, net
Goodwill
Other intangible assets, net
Other assets
Total assets
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable
Accrued employment and benefit costs
Accrued insurance
Customer deposits and advances
Accrued interest
Other current liabilities
Total current liabilities
Long-term borrowings
Accrued insurance
Other liabilities
Total liabilities
Commitments and contingencies
Partners' capital:
September 26,
2015
September 27,
2014
$
152,338 $
92,639
$
$
59,929
47,686
13,460
273,413
781,058
1,087,429
307,789
36,041
2,485,730 $
34,922 $
29,236
13,430
105,147
16,382
11,229
210,346
1,241,107
43,653
92,304
1,587,410
96,915
90,965
14,346
294,865
826,826
1,087,429
359,293
40,950
2,609,363
49,253
24,033
10,040
107,386
16,313
15,241
222,266
1,242,685
52,410
70,549
1,587,910
Common Unitholders (60,531 and 60,317 units issued and outstanding at
September 26, 2015 and September 27, 2014, respectively)
Accumulated other comprehensive loss
Total partners' capital
Total liabilities and partners' capital
947,203
(48,883 )
898,320
2,485,730 $
1,067,358
(45,905 )
1,021,453
2,609,363
$
The accompanying notes are an integral part of these consolidated financial statements.
F-3
SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per unit amounts)
Revenues
Propane
Fuel oil and refined fuels
Natural gas and electricity
All other
Costs and expenses
Cost of products sold
Operating
General and administrative
Depreciation and amortization
Operating income
Loss on debt extinguishment
Interest expense, net
Income before provision for income taxes
Provision for income taxes
Net income
Net income per Common Unit - basic
Weighted average number of Common Units outstanding - basic
Net income per Common Unit - diluted
Weighted average number of Common Units outstanding - diluted
September 26,
Year Ended
September 27,
2015
2014
September 28,
2013
$
$
$
$
1,176,980 $
127,495
66,865
45,639
1,416,979
593,380
444,251
68,296
133,294
1,239,221
177,758
15,072
77,634
85,052
700
84,352 $
1.39 $
60,650
1.38 $
60,907
1,606,840 $
194,684
87,093
49,640
1,938,257
1,080,750
466,389
64,593
136,399
1,748,131
190,126
11,589
83,261
95,276
767
94,509 $
1.56 $
60,481
1.56 $
60,751
1,357,102
208,957
79,432
58,115
1,703,606
861,905
469,496
64,845
130,384
1,526,630
176,976
2,144
95,427
79,405
607
78,798
1.35
58,378
1.34
58,600
The accompanying notes are an integral part of these consolidated financial statements.
F-4
SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
Net income
Other comprehensive income:
Net unrealized (losses) gains on cash flow hedges
Reclassification of realized losses on cash flow hedges into earnings
Amortization of net actuarial losses and prior service credits into
earnings and net change in funded status of benefit plans
Recognition in earnings of net actuarial loss for pension settlement
Other comprehensive (loss) income
Total comprehensive income
September 26,
Year Ended
September 27,
2015
2014
September 28,
2013
$
84,352 $
94,509 $
78,798
(1,159 )
1,388
(5,207 )
2,000
(2,978 )
81,374 $
(518 )
1,406
560
—
1,448
95,957 $
584
2,465
10,705
—
13,754
92,552
$
The accompanying notes are an integral part of these consolidated financial statements.
F-5
SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Cash flows from operating activities:
Net income
$
Adjustments to reconcile net income to net cash provided by operations:
84,352 $
94,509 $
78,798
September 26,
Year Ended
September 27,
2015
2014
September 28,
2013
Depreciation and amortization
Loss on debt extinguishment
Pension settlement charge
Other, net
Changes in assets and liabilities:
Accounts receivable
Inventories
Other current and noncurrent assets
Accounts payable
Accrued employment and benefit costs
Accrued insurance
Customer deposits and advances
Other current and noncurrent liabilities
Net cash provided by operating activities
Cash flows from investing activities:
Capital expenditures
Acquisition of business
Proceeds from sale of property, plant and equipment
Adjustment to purchase price for Inergy Propane
Net cash (used in) investing activities
Cash flows from financing activities:
Proceeds from long-term borrowings
Repayment of long-term borrowings (includes premium and fees)
Proceeds from borrowings under revolving credit facility
Repayment of borrowings under revolving credit facility
Issuance costs associated with long-term borrowings
Net proceeds from issuance of Common Units
Partnership distributions
Net cash (used in) financing activities
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
Supplemental disclosure of cash flow information:
Cash paid for interest
133,294
15,072
2,000
11,605
36,986
43,279
3,223
(14,761 )
5,203
(5,367 )
(2,239 )
11,562
324,209
(41,213 )
(6,500 )
11,741
—
(35,972 )
250,000
(260,852 )
—
—
(4,568 )
—
(213,118 )
(228,538 )
59,699
92,639
152,338 $
136,399
11,589
—
5,664
(2,061 )
(13,342 )
266
(3,513 )
474
4,298
(176 )
(8,556 )
225,551
(30,052 )
—
13,520
—
(16,532 )
525,000
(528,077 )
61,700
(61,700 )
(9,515 )
—
(211,020 )
(223,612 )
(14,593 )
107,232
92,639 $
130,384
2,144
—
(2,796 )
(5,910 )
10,553
5,436
(375 )
7,045
3,601
(16,735 )
2,161
214,306
(27,823 )
—
7,310
5,850
(14,663 )
—
(168,915 )
—
—
—
143,444
(201,257 )
(226,728 )
(27,085 )
134,317
107,232
$
$
75,597 $
91,836 $
86,583
The accompanying notes are an integral part of these consolidated financial statements.
F-6
SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF PARTNERS’ CAPITAL
(in thousands)
Number of
Common
Common Units Unitholders
57,013 $
1,151,606 $
Accumulated
Other
Total
Comprehensive Partners'
(Loss)
Capital
(61,107 ) $ 1,090,499
Balance at September 29, 2012
Net income
Net unrealized gains on cash flow hedges
Reclassification of realized losses on cash flow hedges into
earnings
Amortization of net actuarial losses and prior service credits into
earnings and net change in funded status of benefit plans
Partnership distributions
Sale of Common Units under public offering, net of offering
expenses
Common Units issued under Restricted Unit Plans
Compensation cost recognized under Restricted Unit Plans, net of
forfeitures
Balance at September 28, 2013
Net income
Net unrealized losses on cash flow hedges
Reclassification of realized losses on cash flow hedges into
earnings
Amortization of net actuarial losses and prior service credits into
earnings and net change in funded status of benefit plans
Partnership distributions
Common Units issued under Restricted Unit Plans
Compensation cost recognized under Restricted Unit Plans, net of
forfeitures
Balance at September 27, 2014
Net income
Net unrealized losses on cash flow hedges
Reclassification of realized losses on cash flow hedges into
earnings
Amortization of net actuarial losses and prior service credits into
earnings and net change in funded status of benefit plans
Recognition in earnings of net actuarial loss for pension settlement
Partnership distributions
Common Units issued under Restricted Unit Plans
Compensation cost recognized under Restricted Unit Plans, net of
forfeitures
Balance at September 26, 2015
78,798
584
78,798
584
(201,257 )
143,444
3,105
113
2,465
2,465
10,705
10,705
(201,257 )
143,444
—
60,231 $
3,888
1,176,479 $
3,888
(47,353 ) $ 1,129,126
94,509
(518 )
94,509
(518 )
1,406
1,406
560
560
(211,020 )
(211,020 )
86
60,317 $
7,390
1,067,358 $
7,390
(45,905 ) $ 1,021,453
84,352
(1,159 )
84,352
(1,159 )
1,388
1,388
(5,207 )
2,000
(5,207 )
2,000
(213,118 )
(213,118 )
214
60,531 $
8,611
947,203 $
(48,883 ) $
8,611
898,320
The accompanying notes are an integral part of these consolidated financial statements.
F-7
SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except unit and per unit amounts)
1.
Partnership Organization and Formation
Suburban Propane Partners, L.P. (the “Partnership”) is a publicly traded Delaware limited partnership principally engaged, through its
operating partnership and subsidiaries, in the retail marketing and distribution of propane, fuel oil and refined fuels, as well as the
marketing of natural gas and electricity in deregulated markets. In addition, to complement its core marketing and distribution
businesses, the Partnership services a wide variety of home comfort equipment, particularly for heating and ventilation. The publicly
traded limited partner interests in the Partnership are evidenced by common units traded on the New York Stock Exchange (“Common
Units”), with 60,531,070 Common Units outstanding at September 26, 2015. The holders of Common Units are entitled to participate
in distributions and exercise the rights and privileges available to limited partners under the Third Amended and Restated Agreement
of Limited Partnership (the “Partnership Agreement”), as amended. Rights and privileges under the Partnership Agreement include,
among other things, the election of all members of the Board of Supervisors and voting on the removal of the general partner.
Suburban Propane, L.P. (the “Operating Partnership”), a Delaware limited partnership, is the Partnership’s operating subsidiary
formed to operate the propane business and assets. In addition, Suburban Sales & Service, Inc. (the “Service Company”), a subsidiary
of the Operating Partnership, was formed to operate the service work and appliance and parts businesses of the Partnership. The
Operating Partnership, together with its direct and indirect subsidiaries, accounts for substantially all of the Partnership’s assets,
revenues and earnings. The Partnership, the Operating Partnership and the Service Company commenced operations in March 1996 in
connection with the Partnership’s initial public offering.
The general partner of both the Partnership and the Operating Partnership is Suburban Energy Services Group LLC (the “General
Partner”), a Delaware limited liability company, the sole member of which is the Partnership’s Chief Executive Officer. Other than as
a holder of 784 Common Units that will remain in the General Partner, the General Partner does not have any economic interest in the
Partnership or the Operating Partnership.
The Partnership’s fuel oil and refined fuels, natural gas and electricity and services businesses are structured as either limited liability
companies that are treated as corporations or corporate entities (collectively referred to as the “Corporate Entities”) and, as such, are
subject to corporate level U.S. income tax.
Suburban Energy Finance Corp., a direct 100%-owned subsidiary of the Partnership, was formed on November 26, 2003 to serve as
co-issuer, jointly and severally with the Partnership, of the Partnership’s senior notes.
On August 1, 2012 (the “Acquisition Date”), the Partnership completed the acquisition of the sole membership interest in Inergy
Propane, LLC, including certain wholly-owned subsidiaries of Inergy Propane LLC, and the assets of Inergy Sales and Service, Inc.
The acquired interests and assets are collectively referred to as “Inergy Propane.” As of the Acquisition Date, Inergy Propane
consisted of the former retail propane assets and operations of Inergy, L.P. (“Inergy”). On the Acquisition Date, Inergy Propane and
its remaining wholly-owned subsidiaries acquired became subsidiaries of the Operating Partnership, but were merged into the
Operating Partnership on April 30, 2013. The results of operations of Inergy Propane are included in the Partnership’s results of
operations beginning on the Acquisition Date.
The Partnership serves approximately 1.1 million residential, commercial, industrial and agricultural customers through 700 locations
in 41 states. The Partnership’s operations are principally concentrated in the east and west coast regions, including Alaska. No single
customer accounted for 10% or more of the Partnership’s revenues during fiscal 2015, 2014 or 2013.
2.
Summary of Significant Accounting Policies
Principles of Consolidation. The consolidated financial statements include the accounts of the Partnership, the Operating Partnership
and all of its direct and indirect subsidiaries. All intercompany transactions and account balances have been eliminated. The
Partnership consolidates the results of operations, financial condition and cash flows of the Operating Partnership as a result of the
Partnership’s 100% limited partner interest in the Operating Partnership.
Fiscal Period. The Partnership uses a 52/53 week fiscal year which ends on the last Saturday in September. The Partnership’s fiscal
quarters are generally 13 weeks in duration. When the Partnership’s fiscal year is 53 weeks long, the corresponding fourth quarter is
14 weeks in duration. Fiscal 2015, fiscal 2014 and fiscal 2013 included 52 weeks of operations.
F-8
Revenue Recognition. Sales of propane, fuel oil and refined fuels are recognized at the time product is delivered to the customer.
Revenue from the sale of appliances and equipment is recognized at the time of sale or when installation is complete, as applicable.
Revenue from repairs, maintenance and other service activities is recognized upon completion of the service. Revenue from service
contracts is recognized ratably over the service period. Revenue from the natural gas and electricity business is recognized based on
customer usage as determined by meter readings for amounts delivered, some of which may be unbilled at the end of each accounting
period. Revenue from annually billed tank fees is deferred at the time of billings and recognized on a straight-line basis over one year.
Fair Value Measurements. The Partnership measures certain of its assets and liabilities at fair value, which is defined as the price
that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants – in either the
principal market or the most advantageous market. The principal market is the market with the greatest level of activity and volume
for the asset or liability.
The common framework for measuring fair value utilizes a three-level hierarchy to prioritize the inputs used in the valuation
techniques to derive fair values. The basis for fair value measurements for each level within the hierarchy is described below with
Level 1 having the highest priority and Level 3 having the lowest.
Level 1: Quoted prices in active markets for identical assets or liabilities.
Level 2: Quoted prices in active markets for similar assets or liabilities; quoted prices for identical or similar instruments in
markets that are not active; and model-derived valuations in which all significant inputs are observable in active markets.
Level 3: Valuations derived from valuation techniques in which one or more significant inputs are unobservable.
Business Combinations. The Partnership accounts for business combinations using the acquisition method and accordingly, the
assets and liabilities of the acquired entities are recorded at their estimated fair values at the acquisition date. Goodwill represents the
excess of the purchase price over the fair value of the net assets acquired, including the amount assigned to identifiable intangible
assets. The primary drivers that generate goodwill are the value of synergies between the acquired entities and the Partnership, and
the acquired assembled workforce, neither of which qualifies as an identifiable intangible asset. Identifiable intangible assets with
finite lives are amortized over their useful lives. The results of operations of acquired businesses are included in the consolidated
financial statements from the acquisition date. The Partnership expenses all acquisition-related costs as incurred.
Use of Estimates. The preparation of financial statements in conformity with accounting principles generally accepted in the United
States of America (“US GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Estimates have been made by management in the areas of self-insurance and
litigation reserves, pension and other postretirement benefit liabilities and costs, valuation of derivative instruments, depreciation and
amortization of long-lived assets, asset impairment assessments, tax valuation allowances, allowances for doubtful accounts, and
purchase price allocation for acquired businesses. Actual results could differ from those estimates, making it reasonably possible that
a material change in these estimates could occur in the near term.
Cash and Cash Equivalents. The Partnership considers all highly liquid instruments purchased with an original maturity of three
months or less to be cash equivalents. The carrying amount approximates fair value because of the short maturity of these instruments.
Inventories. Inventories are stated at the lower of cost or market. Cost is determined using a weighted average method for propane,
fuel oil and refined fuels and natural gas, and a standard cost basis for appliances, which approximates average cost.
Derivative Instruments and Hedging Activities.
Commodity Price Risk. Given the retail nature of its operations, the Partnership maintains a certain level of priced physical inventory
to help ensure its field operations have adequate supply commensurate with the time of year. The Partnership’s strategy is to keep its
physical inventory priced relatively close to market for its field operations. The Partnership enters into a combination of exchange-
traded futures and option contracts and, in certain instances, over-the-counter options and swap contracts (collectively, “derivative
instruments”) to hedge price risk associated with propane and fuel oil physical inventories, as well as future purchases of propane or
fuel oil used in its operations and to help ensure adequate supply during periods of high demand. In addition, the Partnership sells
propane and fuel oil to customers at fixed prices, and enters into derivative instruments to hedge a portion of its exposure to
fluctuations in commodity prices as a result of selling the fixed price contracts. Under this risk management strategy, realized gains or
losses on derivative instruments will typically offset losses or gains on the physical inventory once the product is sold or delivered as
it pertains to fixed price contracts. All of the Partnership’s derivative instruments are reported on the consolidated balance sheet at
their fair values. In addition, in the course of normal operations, the Partnership routinely enters into contracts such as forward priced
physical contracts for the purchase or sale of propane and fuel oil that qualify for and are designated as normal purchase or normal
sale contracts. Such contracts are exempted from the fair value accounting requirements and are accounted for at the time product is
F-9
purchased or sold under the related contract. The Partnership does not use derivative instruments for speculative trading purposes.
Market risks associated with derivative instruments are monitored daily for compliance with the Partnership’s Hedging and Risk
Management Policy which includes volume limits for open positions. Priced on-hand inventory is also reviewed and managed daily
as to exposures to changing market prices.
On the date that derivative instruments are entered into, other than those designated as normal purchases or normal sales, the
Partnership makes a determination as to whether the derivative instrument qualifies for designation as a hedge. Changes in the fair
value of derivative instruments are recorded each period in current period earnings or other comprehensive income (“OCI”),
depending on whether the derivative instrument is designated as a hedge and, if so, the type of hedge. For derivative instruments
designated as cash flow hedges, the Partnership formally assesses, both at the hedge contract’s inception and on an ongoing basis,
whether the hedge contract is highly effective in offsetting changes in cash flows of hedged items. Changes in the fair value of
derivative instruments designated as cash flow hedges are reported in OCI to the extent effective and reclassified into earnings during
the same period in which the hedged item affects earnings. The mark-to-market gains or losses on ineffective portions of cash flow
hedges are recognized in earnings immediately. Changes in the fair value of derivative instruments that are not designated as cash
flow hedges, and that do not meet the normal purchase and normal sale exemption, are recorded within earnings as they occur. Cash
flows associated with derivative instruments are reported as operating activities within the consolidated statement of cash flows.
Interest Rate Risk. A portion of the Partnership’s borrowings bear interest at prevailing interest rates based upon, at the Operating
Partnership’s option, LIBOR plus an applicable margin or the base rate, defined as the higher of the Federal Funds Rate plus ½ of 1%
or the agent bank’s prime rate, or LIBOR plus 1%, plus the applicable margin. The applicable margin is dependent on the level of the
Partnership’s total leverage (the ratio of total debt to income before deducting interest expense, income taxes, depreciation and
amortization (“EBITDA”)). Therefore, the Partnership is subject to interest rate risk on the variable component of the interest rate.
The Partnership manages part of its variable interest rate risk by entering into interest rate swap agreements. The interest rate swaps
have been designated as, and are accounted for as, cash flow hedges. The fair value of the interest rate swaps are determined using an
income approach, whereby future settlements under the swaps are converted into a single present value, with fair value being based on
the value of current market expectations about those future amounts. Changes in the fair value are recognized in OCI until the hedged
item is recognized in earnings. However, due to changes in the underlying interest rate environment, the corresponding value in OCI
is subject to change prior to its impact on earnings.
Valuation of Derivative Instruments. The Partnership measures the fair value of its exchange-traded options and futures contracts
using quoted market prices found on the New York Mercantile Exchange (the “NYMEX”) (Level 1 inputs); the fair value of its swap
contracts using quoted forward prices, and the fair value of its interest rate swaps using model-derived valuations driven by observable
projected movements of the 3-month LIBOR (Level 2 inputs); and the fair value of its over-the-counter options contracts using Level
3 inputs. The Partnership’s over-the-counter options contracts are valued based on an internal option model. The inputs utilized in the
model are based on publicly available information as well as broker quotes. The significant unobservable inputs used in the fair value
measurements of the Partnership’s over-the-counter options contracts are interest rate and market volatility.
Long-Lived Assets.
Property, plant and equipment. Property, plant and equipment are stated at cost. Expenditures for maintenance and routine repairs are
expensed as incurred while betterments are capitalized as additions to the related assets and depreciated over the asset’s remaining useful
life. The Partnership capitalizes costs incurred in the acquisition and modification of computer software used internally, including
consulting fees and costs of employees dedicated solely to a specific project. At the time assets are retired, or otherwise disposed of, the
asset and related accumulated depreciation are removed from the accounts, and any resulting gain or loss is recognized within operating
expenses. Depreciation is determined under the straight-line method based upon the estimated useful life of the asset as follows:
Buildings
Building and land improvements
Transportation equipment
Storage facilities
Office equipment
Tanks and cylinders
Computer software
40 Years
20 Years
3-15 Years
7-30 Years
5-10 Years
10-40 Years
3-7 Years
The weighted average estimated useful life of the Partnership’s storage facilities and tanks and cylinders is approximately 20 years
and 28 years, respectively.
The Partnership reviews the recoverability of long-lived assets when circumstances occur that indicate that the carrying value of an
asset may not be recoverable. Such circumstances include a significant adverse change in the manner in which an asset is being used,
current operating losses combined with a history of operating losses experienced by the asset or a current expectation that an asset will
F-10
be sold or otherwise disposed of before the end of its previously estimated useful life. Evaluation of possible impairment is based on
the Partnership’s ability to recover the value of the asset from the future undiscounted cash flows expected to result from the use and
eventual disposition of the asset. If the expected undiscounted cash flows are less than the carrying amount of such asset, an
impairment loss is recorded as the amount by which the carrying amount of an asset exceeds its fair value. The fair value of an asset
will be measured using the best information available, including prices for similar assets or the result of using a discounted cash flow
valuation technique.
Goodwill. Goodwill represents the excess of the purchase price over the fair value of net assets acquired. Goodwill is subject to an
impairment review at a reporting unit level, on an annual basis as of the end of fiscal July of each year, or when an event occurs or
circumstances change that would indicate potential impairment.
The Partnership has the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to
a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, after assessing
the totality of events or circumstances, an entity determines it is not more likely than not that the fair value of a reporting unit is less
than its carrying amount, then performing the two-step impairment test is unnecessary. However, if an entity concludes otherwise,
then it is required to perform the first step of the two-step impairment test.
Under the two-step impairment test, the Partnership assesses the carrying value of goodwill at a reporting unit level based on an
estimate of the fair value of the respective reporting unit. Fair value of the reporting unit is estimated using discounted cash flow
analyses taking into consideration estimated cash flows in a ten-year projection period and a terminal value calculation at the end of
the projection period. If the fair value of the reporting unit exceeds its carrying value, the goodwill associated with the reporting unit
is not considered to be impaired. If the carrying value of the reporting unit exceeds its fair value, an impairment loss is recognized to
the extent that the carrying amount of the associated goodwill, if any, exceeds the implied fair value of the goodwill.
Other Intangible Assets. Other intangible assets consist of customer relationships, tradenames, non-compete agreements and leasehold
interests. Customer relationships and tradenames are amortized under the straight-line method over the estimated period for which the
assets are expected to contribute to the future cash flows of the reporting entities to which they relate, ending periodically between
fiscal years 2016 and 2023. Non-compete agreements are amortized under the straight-line method over the periods of the related
agreements. Leasehold interests are amortized under the straight-line method over the shorter of the lease term or the useful life of the
related assets, through fiscal 2025.
Accrued Insurance. Accrued insurance represents the estimated costs of known and anticipated or unasserted claims for self-insured
liabilities related to general and product, workers’ compensation and automobile liability. Accrued insurance provisions for
unasserted claims arising from unreported incidents are based on an analysis of historical claims data. For each claim, the Partnership
records a provision up to the estimated amount of the probable claim utilizing actuarially determined loss development factors applied
to actual claims data. The Partnership maintains insurance coverage such that its net exposure for insured claims is limited to the
insurance deductible, claims above which are paid by the Partnership’s insurance carriers. For the portion of the estimated liability
that exceeds insurance deductibles, the Partnership records an asset related to the amount of the liability expected to be covered by
insurance.
Pension and Other Postretirement Benefits. The Partnership estimates the rate of return on plan assets, the discount rate used to
estimate the present value of future benefit obligations and the expected cost of future health care benefits in determining its annual
pension and other postretirement benefit costs. In October 2014, the Society of Actuaries (“SOA”) issued new mortality tables (RP-
2014) and a new mortality improvement scale (MP-2014). The Partnership uses SOA and other actuarial life expectancy information
when developing the annual mortality assumptions for the pension and postretirement benefit plans, which are used to measure net
periodic benefit costs and the obligation under these plans.
Customer Deposits and Advances. The Partnership offers different payment programs to its customers including the ability to
prepay for usage and to make equal monthly payments on account under a budget payment plan. The Partnership establishes a
liability within customer deposits and advances for amounts collected in advance of deliveries.
Income Taxes. As discussed in Note 1, the Partnership structure consists of two limited partnerships, the Partnership and the
Operating Partnership, and the Corporate Entities. For federal income tax purposes, as well as for state income tax purposes in the
majority of the states in which the Partnership operates, the earnings attributable to the Partnership and the Operating Partnership are
included in the tax returns of the Common Unitholders. As a result, except for certain states that impose an income tax on
partnerships, no income tax expense is reflected in the Partnership’s consolidated financial statements relating to the earnings of the
Partnership and the Operating Partnership. The earnings attributable to the Corporate Entities are subject to federal and state income
tax. Net earnings for financial statement purposes may differ significantly from taxable income reportable to Common Unitholders as
a result of differences between the tax basis and financial reporting basis of assets and liabilities and the taxable income allocation
requirements under the Partnership Agreement.
F-11
Income taxes for the Corporate Entities are provided based on the asset and liability approach to accounting for income taxes. Under
this method, deferred tax assets and liabilities are recognized for the expected future tax consequences of differences between the
carrying amounts and the tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are
expected to reverse. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period
when the change is enacted. A valuation allowance is recorded to reduce the carrying amounts of deferred tax assets when it is more
likely than not that the full amount will not be realized.
Loss Contingencies. In the normal course of business, the Partnership is involved in various claims and legal proceedings. The
Partnership records a liability for such matters when it is probable that a loss has been incurred and the amounts can be reasonably
estimated. The liability includes probable and estimable legal costs to the point in the legal matter where the Partnership believes a
conclusion to the matter will be reached. When only a range of possible loss can be established, the most probable amount in the
range is accrued. If no amount within this range is a better estimate than any other amount within the range, the minimum amount in
the range is accrued.
Asset Retirement Obligations. Asset retirement obligations apply to legal obligations associated with the retirement of long-lived
assets that result from the acquisition, construction, development and/or the normal operation of a long-lived asset. The Partnership
has recognized asset retirement obligations for certain costs to remove and properly dispose of underground and aboveground fuel oil
storage tanks and contractually mandated removal of leasehold improvements.
The Partnership records a liability at fair value for the estimated cost to settle an asset retirement obligation at the time that liability is
incurred, which is generally when the asset is purchased, constructed or leased. The Partnership records the liability, which is referred
to as the asset retirement obligation, when it has a legal obligation to incur costs to retire the asset and when a reasonable estimate of
the fair value of the liability can be made. If a reasonable estimate cannot be made at the time the liability is incurred, the Partnership
records the liability when sufficient information is available to estimate the liability’s fair value.
Unit-Based Compensation. The Partnership recognizes compensation cost over the respective service period for employee services
received in exchange for an award of equity or equity-based compensation based on the grant date fair value of the award. The
Partnership measures liability awards under an equity-based payment arrangement based on remeasurement of the award’s fair value
at the conclusion of each interim and annual reporting period until the date of settlement, taking into consideration the probability that
the performance conditions will be satisfied.
Costs and Expenses. The cost of products sold reported in the consolidated statements of operations represents the weighted average
unit cost of propane, fuel oil and refined fuels, as well as the cost of natural gas and electricity sold, including transportation costs to
deliver product from the Partnership’s supply points to storage or to the Partnership’s customer service centers. Cost of products sold
also includes the cost of appliances, equipment and related parts sold or installed by the Partnership’s customer service centers
computed on a basis that approximates the average cost of the products. Unrealized (non-cash) gains or losses from changes in the
fair value of commodity derivative instruments that are not designated as cash flow hedges are recorded in each reporting period
within cost of products sold. Cost of products sold is reported exclusive of any depreciation and amortization as such amounts are
reported separately within the consolidated statements of operations.
All other costs of operating the Partnership’s retail propane, fuel oil and refined fuels distribution and appliance sales and service
operations, as well as the natural gas and electricity marketing business, are reported within operating expenses in the consolidated
statements of operations. These operating expenses include the compensation and benefits of field and direct operating support
personnel, costs of operating and maintaining the vehicle fleet, overhead and other costs of the purchasing, training and safety
departments and other direct and indirect costs of operating the Partnership’s customer service centers.
All costs of back office support functions, including compensation and benefits for executives and other support functions, as well as
other costs and expenses to maintain finance and accounting, treasury, legal, human resources, corporate development and the
information systems functions are reported within general and administrative expenses in the consolidated statements of operations.
Net Income Per Unit. Computations of basic income per Common Unit are performed by dividing net income by the weighted
average number of outstanding Common Units, and vested (and unissued) restricted units granted under the Partnership’s Restricted
Unit Plans, as defined below, to retirement-eligible grantees. Computations of diluted income per Common Unit are performed by
dividing net income by the weighted average number of outstanding Common Units and unissued restricted units granted under the
Restricted Unit Plans. In computing diluted net income per Common Unit, weighted average units outstanding used to compute basic
net income per Common Unit were increased by 256,794, 269,867 and 222,419 units for fiscal 2015, 2014 and 2013, respectively, to
reflect the potential dilutive effect of the unvested restricted units outstanding using the treasury stock method.
Comprehensive Income. The Partnership reports comprehensive income (the total of net income and all other non-owner changes in
partners’ capital) within the consolidated statement of comprehensive income. Other comprehensive income includes unrealized gains
F-12
and losses on derivative instruments accounted for as cash flow hedges and reclassifications of realized losses on cash flow hedges
into earnings, amortization of net actuarial losses and prior service credits into earnings and changes in the funded status of pension
and other postretirement benefit plans, and net actuarial losses recognized in earnings associated with pension settlements.
Reclassifications and Revisions. Certain prior period amounts have been reclassified to conform with the current period
presentation.
Recently Issued Accounting Pronouncements. In April 2015, the Financial Accounting Standards Board (“FASB”) issued
Accounting Standard Update (“ASU”) 2015-03, “Simplifying the Presentation of Debt Issuance Costs” (“ASU 2015-03”). This
update requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction
from the carrying amount of that debt liability, consistent with the presentation of original issue debt discounts. ASU 2015-03 is
effective for the first interim period within annual reporting periods beginning after December 15, 2015, which will be the
Partnership’s first quarter of fiscal year 2017. In August 2015, the FASB issued ASU No. 2015-15, which provides additional
guidance related to the presentation and subsequent measurement of debt issuance costs related to line-of-credit arrangements. An
entity may present debt issuance costs as an asset and subsequently amortize the deferred debt issuance costs ratably over the term of
the line-of-credit arrangement, regardless of whether there are any outstanding borrowings. Other than the reclassification of existing
unamortized debt issuance costs on the balance sheet, the adoption of ASU 2015-03 will have no impact on the Partnership’s
operations or cash flows.
In May 2014, the FASB issued ASU 2014-09 “Revenue from Contracts with Customers” (“ASU 2014-09”). This update provides a
principles-based approach to revenue recognition, requiring revenue recognition to depict the transfer of goods or services to
customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or
services. The ASU provides a five-step model to be applied to all contracts with customers. The five steps are to identify the
contract(s) with the customer, identify the performance obligations in the contract, determine the transaction price, allocate the
transaction price to the performance obligations in the contract and recognize revenue when each performance obligation is satisfied.
On July 9, 2015, the FASB finalized a one-year deferral of the effective date of ASU 2014-09. The revenue standard is therefore
effective for the first interim period within annual reporting periods beginning after December 15, 2017, which will be the
Partnership’s first quarter of fiscal year 2019. Early adoption as of the original effective date is permitted. ASU 2014-09 can be
applied either retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initially applying
the update recognized at the date of the initial application along with additional disclosures. While the Partnership is still in the
process of evaluating the potential impact of ASU 2014-09, it does not expect the adoption of ASU 2014-09 will have a material
impact on the Partnership’s results of operations, financial position or cash flows.
3.
Distributions of Available Cash
The Partnership makes distributions to its partners no later than 45 days after the end of each fiscal quarter in an aggregate amount
equal to its Available Cash for such quarter. Available Cash, as defined in the Partnership Agreement, generally means all cash on
hand at the end of the respective fiscal quarter less the amount of cash reserves established by the Board of Supervisors in its
reasonable discretion for future cash requirements. These reserves are retained for the proper conduct of the Partnership’s business,
the payment of debt principal and interest and for distributions during the next four quarters.
The following summarizes the quarterly distributions per Common Unit declared and paid in respect of each of the quarters in the
three fiscal years in the period ended September 26, 2015:
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
$
Fiscal
2015
Fiscal
2014
Fiscal
2013
0.8750 $
0.8875
0.8875
0.8875
0.8750 $
0.8750
0.8750
0.8750
0.8750
0.8750
0.8750
0.8750
F-13
4.
Selected Balance Sheet Information
Inventories consist of the following:
Propane, fuel oil and refined fuels and natural gas
Appliances
As of
September 26, September 27,
2015
2014
$
$
45,918 $
1,768
47,686 $
89,470
1,495
90,965
The Partnership enters into contracts for the supply of propane, fuel oil and natural gas. Such contracts generally have a term of one
year subject to annual renewal, with purchase quantities specified at the time of order and costs based on market prices at the date of
delivery.
Property, plant and equipment consist of the following:
As of
September 26, September 27,
Land and improvements
Buildings and improvements
Transportation equipment
Storage facilities
Equipment, primarily tanks and cylinders
Computer Systems
Construction in progress
Less: accumulated depreciation
$
2015
195,430 $
104,998
58,650
110,033
833,479
51,039
7,177
1,360,806
(579,748 )
781,058 $
$
2014
201,353
103,751
64,254
110,586
823,478
49,904
3,420
1,356,746
(529,920 )
826,826
Depreciation expense for fiscal 2015, 2014 and 2013 amounted to $75,920, $78,921 and $72,353, respectively.
5. Goodwill and Other Intangible Assets
The Partnership’s fiscal 2015 and fiscal 2014 annual goodwill impairment review resulted in no adjustments to the carrying amount of
goodwill.
The carrying values of goodwill assigned to the Partnership’s operating segments are as follows:
Balance as of September 26, 2015 and September 27, 2014
Goodwill
Accumulated adjustments
$ 1,075,091 $
—
$ 1,075,091 $
10,900 $
(6,462 )
4,438 $
7,900 $ 1,093,891
(6,462 )
7,900 $ 1,087,429
—
Propane
Fuel oil and
refined fuels
Natural gas and
electricity
Total
F-14
Other intangible assets consist of the following:
Customer relationships
Non-compete agreements
Tradenames
Other
Less: accumulated amortization
Customer relationships
Non-compete agreements
Tradenames
Other
As of
September 26, September 27,
2015
471,829 $
27,815
3,482
1,967
505,093
(173,823 )
(19,337 )
(3,069 )
(1,075 )
(197,304 )
307,789 $
$
$
2014
466,959
26,815
3,482
1,967
499,223
(122,411 )
(13,962 )
(2,573 )
(984 )
(139,930 )
359,293
Aggregate amortization expense related to other intangible assets for fiscal 2015, 2014 and 2013 was $57,374, $57,478 and $58,031,
respectively. Aggregate amortization expense for each of the five succeeding fiscal years related to other intangible assets held as of
September 26, 2015 is estimated as follows: 2016 - $54,780; 2017 - $53,495; 2018 - $53,135; 2019 - $52,112; and 2020 - $51,127.
6.
Income Taxes
For federal income tax purposes, as well as for state income tax purposes in the majority of the states in which the Partnership
operates, the earnings attributable to the Partnership and the Operating Partnership are not subject to income tax at the partnership
level. With the exception of those states that impose an entity-level income tax on partnerships, the taxable income or loss attributable
to the Partnership and to the Operating Partnership, which may vary substantially from the income (loss) before income taxes reported
by the Partnership in the consolidated statement of operations, are includable in the federal and state income tax returns of the
Common Unitholders. The aggregate difference in the basis of the Partnership’s net assets for financial and tax reporting purposes
cannot be readily determined as the Partnership does not have access to each Common Unitholder’s basis in the Partnership.
As described in Note 1 and Note 2, the earnings of the Corporate Entities are subject to corporate level federal and state income tax.
However, based upon past performance, the Corporate Entities are currently reporting an income tax provision composed primarily of
minimum state income taxes. A full valuation allowance has been provided against the deferred tax assets based upon an analysis of
all available evidence, both negative and positive at the balance sheet date, which, taken as a whole, indicates that it is more likely
than not that sufficient future taxable income will not be available to utilize the assets. Management’s periodic reviews include,
among other things, the nature and amount of the taxable income and expense items, the expected timing of when assets will be used
or liabilities will be required to be reported and the reliability of historical profitability of businesses expected to provide future
earnings. Furthermore, management considered tax-planning strategies it could use to increase the likelihood that the deferred tax
assets will be realized.
The income tax provision of all the legal entities included in the Partnership’s consolidated statement of operations, which is
composed primarily of state income taxes in the few states that impose taxes on partnerships and minimum state income taxes on the
Corporate Entities, consists of the following:
Year Ended
September 26, September 27, September 28,
2014
2013
2015
Current
Federal
State and local
Deferred
$
$
23 $
677
700
—
700 $
10 $
757
767
—
767 $
26
581
607
—
607
F-15
The provision for income taxes differs from income taxes computed at the United States federal statutory rate as a result of the
following:
Year Ended
September 26, September 27, September 28,
2014
2013
2015
Income tax provision at federal statutory tax rate
Impact of Partnership income not subject to
federal income taxes
Permanent differences
Change in valuation allowance
State income taxes
Other
Provision for income taxes - current
$
29,768 $
33,346 $
27,792
(32,148 )
(38,919 )
210
2,181
253
436
700 $
86
5,458
(60 )
856
767 $
(35,187 )
71
9,771
(1,135 )
(705 )
607
$
The components of net deferred taxes and the related valuation allowance using currently enacted tax rates are as follows:
Deferred tax assets:
Net operating loss carryforwards
Allowance for doubtful accounts
Inventory
Intangible assets
Deferred revenue
Derivative instruments
AMT credit carryforward
Other accruals
Total deferred tax assets
Deferred tax liabilities:
Derivative instruments
Intangible assets
Property, plant and equipment
Total deferred tax liabilities
Net deferred tax assets
Valuation allowance
Net deferred tax assets
7.
Long-Term Borrowings
Long-term borrowings consist of the following:
7.375% senior notes, due March 15, 2020, net of
unamortized discount of $-0- and $1,183, respectively
7.375% senior notes, due August 1, 2021, including
unamortized premium of $19,927 and $22,688,
respectively
5.5% senior notes, due June 1, 2024
5.75% senior notes, due March 1, 2025
Revolving Credit Facility, due January 5, 2017
F-16
Year Ended
September 26, September 27,
2015
2014
$
$
55,033 $
340
395
—
1,241
—
1,086
1,718
59,813
142
312
5,314
5,768
54,045
(54,045 )
— $
51,321
1,371
433
122
1,524
71
1,086
2,060
57,988
—
—
6,124
6,124
51,864
(51,864 )
—
As of
September 26, September 27,
2015
2014
$
—
$
248,817
366,107
525,000
250,000
100,000
$ 1,241,107 $
368,868
525,000
—
100,000
1,242,685
Senior Notes.
2018 Senior Notes and 2021 Senior Notes
On August 1, 2012, the Partnership and its 100%-owned subsidiary, Suburban Energy Finance Corp., issued $496,557 in aggregate
principal amount of unregistered 7.5% senior notes due October 1, 2018 (the “2018 Senior Notes”) and $503,443 in aggregate
principal amount of unregistered 7.375% senior notes due August 1, 2021 (the “2021 Senior Notes”) in a private placement in
connection with the Inergy Propane Acquisition. Based on market rates for similar issues, the 2018 Senior Notes and 2021 Senior
Notes were valued at 106.875% and 108.125%, respectively, of the principal amount, on the Acquisition Date as they were issued in
exchange for Inergy’s outstanding notes, not for cash. The 2021 Senior Notes require semi-annual interest payments in February and
August. On December 19, 2012, the Partnership completed an offer to exchange its then-outstanding unregistered 7.5% senior notes
due 2018 and 7.375% senior notes due 2021 for an equal principal amount of 7.5% senior notes due 2018 and 7.375% senior notes due
2021, respectively, that have been registered under the Securities Act of 1933, as amended.
On August 2, 2013, the Partnership repurchased, pursuant to an optional redemption, $133,400 of its 2021 Senior Notes using net
proceeds from the May 2013 public offering and net proceeds from the underwriters’ exercise of their over-allotment option to
purchase additional Common Units. In addition, on August 6, 2013, the Partnership repurchased $23,863 of 2021 Senior Notes in a
private transaction using cash on hand.
On May 27, 2014, the Partnership repurchased and satisfied and discharged all of its 2018 Senior Notes with net proceeds from the
issuance of the 2024 Senior Notes, as defined below, and cash on hand pursuant to a tender offer and redemption during the third
quarter of fiscal 2014. In connection with this tender offer and redemption, the Partnership recognized a loss on the extinguishment of
debt of $11,589 consisting of $31,633 for the redemption premium and related fees, as well as the write-off of $5,230 and ($25,274) in
unamortized debt origination costs and unamortized premium, respectively.
The 2021 Senior Notes are redeemable, at the Partnership’s option, in whole or in part, at any time on or after August 1, 2016, in each
case at the redemption prices described in the table below, together with any accrued and unpaid interest to date of the redemption.
Year
2016
2017
2018
2019 and thereafter
Percentage
103.688%
102.459%
101.229%
100.000%
2020 Senior Notes
On March 23, 2010, the Partnership and its 100%-owned subsidiary, Suburban Energy Finance Corp., completed a public offering of
$250,000 in aggregate principal amount of 7.375% senior notes due March 15, 2020 (the “2020 Senior Notes”). The 2020 Senior
Notes were issued at 99.136% of the principal amount and required semi-annual interest payments in March and September.
On February 25, 2015, the Partnership repurchased and satisfied and discharged all of its previously outstanding 2020 Senior Notes
with net proceeds from the issuance of the 2025 Senior Notes, as defined below, and cash on hand pursuant to a tender offer a nd
redemption during the second quarter of fiscal 2015. In connection with this tender offer and redemption, the Partnership recognized a
loss on the extinguishment of debt of $15,072 consisting of $11,124 for the redemption premium and related fees, as well as the write-
off of $2,855 and $1,093 in unamortized debt origination costs and unamortized discount, respectively.
2024 Senior Notes
On May 27, 2014, the Partnership and its 100%-owned subsidiary, Suburban Energy Finance Corp., completed a public offering of
$525,000 in aggregate principal amount of 5.5% senior notes due June 1, 2024 (the “2024 Senior Notes”). The 2024 Senior Notes
were issued at 100% of the principal amount and require semi-annual interest payments in June and December. The net proceeds from
the issuance of the 2024 Senior Notes, along with cash on hand, were used to repurchase and satisfy and discharge all of the 2018
Senior Notes.
F-17
The 2024 Senior Notes are redeemable, at the Partnership’s option, in whole or in part, at any time on or after June 1, 2019, in each
case at the redemption prices described in the table below, together with any accrued and unpaid interest to the date of the redemption.
Year
2019
2020
2021
2022 and thereafter
Percentage
102.750%
101.833%
100.917%
100.000%
2025 Senior Notes
On February 25, 2015, the Partnership and its 100%-owned subsidiary, Suburban Energy Finance Corp., completed a public offering
of $250,000 in aggregate principal amount of 5.75% senior notes due March 1, 2025 (the “2025 Senior Notes”). The 2025 Senior
Notes were issued at 100% of the principal amount and require semi-annual interest payments in March and September. The net
proceeds from the issuance of the 2025 Senior Notes, along with cash on hand, were used to repurchase and satisfy and discharge all
of the 2020 Senior Notes.
The 2025 Senior Notes are redeemable, at the Partnership’s option, in whole or in part, at any time on or after March 1, 2020, in each
case at the redemption prices described in the table below, together with any accrued and unpaid interest to the date of the redemption.
Year
2020
2021
2022
2023 and thereafter
Percentage
102.875%
101.917%
100.958%
100.000%
The Partnership’s obligations under the 2021 Senior Notes, 2024 Senior Notes and 2025 Senior Notes (collectively, the “Senior
Notes”) are unsecured and rank senior in right of payment to any future subordinated indebtedness and equally in right of payment
with any future senior indebtedness. The Senior Notes are structurally subordinated to, which means they rank effectively behind, any
debt and other liabilities of the Operating Partnership. The Partnership is permitted to redeem some or all of the Senior Notes at
redemption prices and times as specified in the indentures governing the Senior Notes. The Senior Notes each have a change of
control provision that would require the Partnership to offer to repurchase the notes at 101% of the principal amount repurchased, if a
change of control, as defined in the indenture, occurs and is followed by a rating decline (a decrease in the rating of the notes by either
Moody’s Investors Service or Standard and Poor’s Rating Group by one or more gradations) within 90 days of the consummation of
the change of control.
Credit Agreement
The Operating Partnership has an amended and restated credit agreement entered into on January 5, 2012, as amended on August 1,
2012 and May 9, 2014 (collectively, the “Amended Credit Agreement”) that provides for a five-year $400,000 revolving credit facility
(the “Revolving Credit Facility”), of which $100,000 was outstanding as of September 26, 2015 and September 27, 2014.
Borrowings under the Revolving Credit Facility may be used for general corporate purposes, including working capital, capital
expenditures and acquisitions. The Operating Partnership has the right to prepay any borrowings under the Revolving Credit Facility,
in whole or in part, without penalty at any time prior to maturity.
The amendment and restatement of the credit agreement on January 5, 2012 amended the previous credit agreement to, among other
things, extend the maturity date from June 25, 2013 to January 5, 2017, reduce the borrowing rate and commitment fees, and amend
certain affirmative and negative covenants.
The amendment on August 1, 2012 also amended certain restrictive and affirmative covenants applicable to the Operating Partnership
and the Partnership, as well as certain financial covenants, including (a) requiring the Partnership’s consolidated interest coverage
ratio, as defined in the amendment, to be not less than 2.5 to 1.0 as of the end of any fiscal quarter; (b) prohibiting the total
consolidated leverage ratio, as defined in the amendment, of the Partnership from being greater than 4.75 to 1.0 as of the end of any
fiscal quarter (or 5.0 to 1.0 during an acquisition period as defined in the agreement). The amendment on May 9, 2014 made certain
technical amendments with respect to agreements related to debt refinancing.
The Partnership acts as a guarantor with respect to the obligations of the Operating Partnership under the Amended Credit Agreement
pursuant to the terms and conditions set forth therein. The obligations under the Amended Credit Agreement are secured by liens on
F-18
substantially all of the personal property of the Partnership, the Operating Partnership and their subsidiaries, as well as mortgages on
certain real property.
Borrowings under the Revolving Credit Facility of the Amended Credit Agreement bear interest at prevailing interest rates based
upon, at the Operating Partnership’s option, LIBOR plus the applicable margin or the base rate, defined as the higher of the Federal
Funds Rate plus ½ of 1%, the agent bank’s prime rate, or LIBOR plus 1%, plus in each case the applicable margin. The applicable
margin is dependent upon the Partnership’s ratio of total debt to EBITDA on a consolidated basis, as defined in the Revolving Credit
Facility. As of September 26, 2015, the interest rate for the Revolving Credit Facility was approximately 2.5%. The interest rate and
the applicable margin will be reset at the end of each calendar quarter.
In connection with the Amended Credit Agreement, the Operating Partnership entered into an interest rate swap agreement with a
notional amount of $100,000, an effective date of June 25, 2013 and a termination date of January 5, 2017. Under this interest rate
swap agreement, the Operating Partnership will pay a fixed interest rate of 1.63% to the issuing lender on the notional principal
amount outstanding, and the issuing lender will pay the Operating Partnership a floating rate, namely LIBOR, on the same notional
principal amount. The interest rate swap has been designated as a cash flow hedge.
As of September 26, 2015, the Partnership had standby letters of credit issued under the Revolving Credit Facility in the aggregate
amount of $46,183 which expire periodically through April 3, 2016. Therefore, as of September 26, 2015 the Partnership had
available borrowing capacity of $253,817 under the Revolving Credit Facility.
The Amended Credit Agreement and the Senior Notes both contain various restrictive and affirmative covenants applicable to the
Operating Partnership and the Partnership, respectively, including (i) restrictions on the incurrence of additional indebtedness, and (ii)
restrictions on certain liens, investments, guarantees, loans, advances, payments, mergers, consolidations, distributions, sales of assets
and other transactions. Under the Amended Credit Agreement and the indentures governing the Senior Notes, the Operating
Partnership and the Partnership are generally permitted to make cash distributions equal to available cash, as defined, as of the end of
the immediately preceding quarter, if no event of default exists or would exist upon making such distributions, and with respect to the
indentures governing the Senior Notes, the Partnership’s consolidated fixed charge coverage ratio, as defined, is greater than 1.75 to 1.
The Partnership and the Operating Partnership were in compliance with all covenants and terms of the Senior Notes and the Amended
Credit Agreement as of September 26, 2015.
Debt origination costs representing the costs incurred in connection with the placement of, and the subsequent amendment to, long-
term borrowings are capitalized within other assets and amortized on a straight-line basis over the term of the respective debt
agreements. During fiscal 2015, the Partnership recognized charges of $2,855 to write-off unamortized debt origination costs
associated with the tender offer and redemption of its 2020 Senior Notes. During fiscal 2014, the Partnership recognized charges of
$5,230 to write-off unamortized debt origination costs associated with the tender offer and redemption of its 2018 Senior Notes.
Other assets at September 26, 2015 and September 27, 2014 include debt origination costs with a net carrying amount of $18,458 and
$21,023, respectively.
The aggregate amounts of long-term debt maturities subsequent to September 26, 2015 are as follows: fiscal 2016: $-0-; fiscal 2017:
$100,000; fiscal 2018: $-0-; fiscal 2019: $-0-; fiscal 2020: $-0-; and thereafter: $1,121,180.
8.
Unit-Based Compensation Arrangements
As described in Note 2, the Partnership recognizes compensation cost over the respective service period for employee services
received in exchange for an award of equity, or equity-based compensation, based on the grant date fair value of the award. The
Partnership measures liability awards under an equity-based payment arrangement based on re-measurement of the award’s fair value
at the conclusion of each interim and annual reporting period until the date of settlement, taking into consideration the probability that
the performance conditions will be satisfied.
Restricted Unit Plans. In fiscal 2000 and fiscal 2009, the Partnership adopted the Suburban Propane Partners, L.P. 2000 Restricted
Unit Plan and 2009 Restricted Unit Plan, as amended (collectively, the “Restricted Unit Plans”), respectively, which authorizes the
issuance of Common Units to executives, managers and other employees and members of the Board of Supervisors of the Partnership.
At their Tri-Annual Meeting on May 13, 2015, the Partnership’s Common Unitholders approved the authorization of an additional
1,200,000 Common Units of the Partnership to be available for grant pursuant to the 2009 Restricted Unit Plan. The total number of
Common Units authorized for issuance under the Restricted Unit Plans was 3,102,122 as of September 26, 2015. In accordance with
an August 6, 2013 amendment to the Restricted Unit Plans, unless otherwise stipulated by the Compensation Committee of the
Partnership’s Board of Supervisors on or before the grant date, all restricted unit awards granted after the date of the amendment will
vest 33.33% on each of the first three anniversaries of the award grant date. Prior to the August 6, 2013 amendment, unless otherwise
stipulated by the Compensation Committee of the Partnership’s Board of Supervisors on or before the grant date, restricted units
F-19
issued under the Restricted Unit Plans vest over time with 25% of the Common Units vesting at the end of each of the third and fourth
anniversaries of the grant date and the remaining 50% of the Common Units vesting at the end of the fifth anniversary of the grant
date. The Restricted Unit Plans participants are not eligible to receive quarterly distributions on, or vote, their respective restricted
units until vested. Restricted units cannot be sold or transferred prior to vesting. The value of the restricted unit is established by the
market price of the Common Unit on the date of grant, net of estimated future distributions during the vesting period. Restricted units
are subject to forfeiture in certain circumstances as defined in the Restricted Unit Plans. Compensation expense for the unvested
awards is recognized ratably over the vesting periods and is net of estimated forfeitures.
The following is a summary of activity in the Restricted Unit Plans:
Outstanding September 29, 2012
Granted
Forfeited
Issued
Outstanding September 28, 2013
Granted
Forfeited
Issued
Outstanding September 27, 2014
Granted
Forfeited
Issued
Outstanding September 26, 2015
Weighted Average
Grant Date Fair
Value Per Unit
Units
442,851 $
200,933
(3,497 )
(112,660 )
527,627
256,273
(3,119 )
(85,854 )
694,927
154,403
(7,607 )
(214,324 )
627,399 $
32.68
23.42
(32.15 )
(32.01 )
29.30
37.43
(28.39 )
(31.23 )
32.07
37.59
(31.04 )
(36.68 )
31.87
As of September 26, 2015, unrecognized compensation cost related to unvested restricted units awarded under the Restricted Unit
Plans amounted to $5,211. Compensation cost associated with the unvested awards is expected to be recognized over a weighted-
average period of 1.2 years. Compensation expense for the Restricted Unit Plans for fiscal 2015, 2014 and 2013 was $8,611, $7,390
and $3,888, respectively.
Long-Term Incentive Plans. The Partnership has a non-qualified, unfunded long-term incentive plan for officers and key employees
(the “LTIP”) which provides for payment, in the form of cash, of an award of equity-based compensation at the end of a three-year
performance period. For the fiscal 2013 and 2012 awards, the level of compensation earned under the LTIP is based on the market
performance of the Partnership’s Common Units on the basis of total return to Unitholders (“TRU”) compared to the TRU of a
predetermined peer group consisting solely of other master limited partnerships, approved by the Compensation Committee of the
Board of Supervisors, over the same three-year performance period. On August 6, 2013, the Compensation Committee of the
Partnership’s Board of Supervisors adopted the 2014 Long-Term Incentive Plan of the Partnership (“2014 LTIP”) as a replacement for
the prior LTIP. As a result, for the fiscal 2014 award, the level of compensation earned under the 2014 LTIP is based on the average
distribution coverage ratio over the three-year measurement period. The average distribution coverage ratio is calculated as the
Partnership’s average distributable cash flow, as defined in the 2014 LTIP, for each of the three years in the measurement period,
subject to certain adjustments as set forth in the 2014 LTIP, divided by the amount of annualized cash distributions to be paid by the
Partnership, based on the annualized cash distribution rate at the beginning of the measurement period. Compensation expense, which
includes adjustments to previously recognized compensation expense for current period changes in the fair value of unvested awards,
for fiscal 2015, 2014 and 2013 was $1,814, $120 and $1,439, respectively. The cash payouts in fiscal 2015, 2014 and 2013, which
related to the fiscal 2012, 2011 and 2010 awards, were $-0- for all three periods.
9.
Employee Benefit Plans
Defined Contribution Plan. The Partnership has an employee Retirement Savings and Investment Plan (the “401(k) Plan”) covering
most employees. Employer matching contributions relating to the 401(k) Plan are a percentage of the participating employees’
elective contributions. The percentage of the Partnership’s contributions are based on a sliding scale depending on the Partnership’s
achievement of annual performance targets. These contributions totaled $1,844, $1,848 and $1,915 for fiscal 2015, 2014 and 2013,
respectively.
F-20
Defined Pension and Retiree Health and Life Benefits Arrangements
Pension Benefits. The Partnership has a noncontributory defined benefit pension plan which was originally designed to cover all
eligible employees of the Partnership who met certain requirements as to age and length of service. Effective January 1, 1998, the
Partnership amended its defined benefit pension plan to provide benefits under a cash balance formula as compared to a final average
pay formula which was in effect prior to January 1, 1998. Effective January 1, 2000, participation in the defined benefit pension plan
was limited to eligible existing participants on that date with no new participants eligible to participate in the plan. On September 20,
2002, the Board of Supervisors approved an amendment to the defined benefit pension plan whereby, effective January 1, 2003, future
service credits ceased and eligible employees receive interest credits only toward their ultimate retirement benefit.
Contributions, as needed, are made to a trust maintained by the Partnership. Contributions to the defined benefit pension plan are
made by the Partnership in accordance with the Employee Retirement Income Security Act of 1974 minimum funding standards plus
additional amounts made at the discretion of the Partnership, which may be determined from time to time. There were no minimum
funding requirements for the defined benefit pension plan for fiscal 2015, 2014 or 2013. During the last decade, cash balance plans
came under increased scrutiny which resulted in litigation pertaining to the cash balance feature and the Internal Revenue Service
(“IRS”) issued additional regulations governing these types of plans. In fiscal 2010, the IRS completed its review of the Partnership’s
defined benefit pension plan and issued a favorable determination letter pertaining to the cash balance formula. However, there can be
no assurances that future legislative developments will not have an adverse effect on the Partnership’s results of operations or cash
flows.
Retiree Health and Life Benefits. The Partnership provides postretirement health care and life insurance benefits for certain retired
employees. Partnership employees hired prior to July 1993 are eligible for postretirement life insurance benefits if they reach a
specified retirement age while working for the Partnership. Partnership employees hired prior to July 1993 and who retired prior to
March 1998 are eligible for postretirement health care benefits if they reached a specified retirement age while working for the
Partnership. Effective January 1, 2000, the Partnership terminated its postretirement health care benefit plan for all eligible employees
retiring after March 1, 1998. All active employees who were eligible to receive health care benefits under the postretirement plan
subsequent to March 1, 1998, were provided an increase to their accumulated benefits under the cash balance pension plan. The
Partnership’s postretirement health care and life insurance benefit plans are unfunded. Effective January 1, 2006, the Partnership
changed its postretirement health care plan from a self-insured program to one that is fully insured under which the Partnership pays a
portion of the insurance premium on behalf of the eligible participants.
The Partnership recognizes the funded status of pension and other postretirement benefit plans as an asset or liability on the balance
sheet and recognizes changes in the funded status in other comprehensive income (loss) in the year the changes occur. The
Partnership uses the date of its consolidated financial statements as the measurement date of plan assets and obligations.
F-21
Projected Benefit Obligation, Fair Value of Plan Assets and Funded Status. The following tables provide a reconciliation of the
changes in the benefit obligations and the fair value of the plan assets for fiscal 2015 and 2014 and a statement of the funded status for
both years. Under the Partnership’s cash balance defined benefit pension plan, the accumulated benefit obligation and the projected
benefit obligation are the same.
Reconciliation of benefit obligations:
Benefit obligation at beginning of year
Interest cost
Actuarial loss (gain)
Lump sum benefits paid
Ordinary benefits paid
Benefit obligation at end of year
Reconciliation of fair value of plan assets:
Fair value of plan assets at beginning of year
Actual return on plan assets
Employer contributions
Lump sum benefits paid
Ordinary benefits paid
Fair value of plan assets at end of year
Funded status:
Funded status at end of year
Amounts recognized in consolidated balance sheets
consist of:
Net amount recognized at end of year
Less: current portion
Noncurrent benefit liability
Amounts not yet recognized in net periodic benefit cost
and included in accumulated other comprehensive
income (loss):
Actuarial net (loss) gain
Prior service credits
Net amount recognized in accumulated other
comprehensive (loss) income
Pension Benefits
Retiree Health and Life Benefits
2015
2014
2015
2014
149,836 $
5,128
5,239
(5,777 )
(7,519 )
146,907
148,631 $
5,774
8,459
(5,401 )
(7,627 )
149,836 $
16,954 $
575
(1,281 )
—
(954 )
15,294 $
17,754
645
(278 )
—
(1,167 )
16,954
117,771 $
(172 )
—
(5,777 )
(7,519 )
104,303 $
120,776 $
10,023
—
(5,401 )
(7,627 )
117,771 $
— $
—
954
—
(954 )
— $
—
—
1,167
—
(1,167 )
—
$
$
$
$
$
(42,604 ) $
(32,065 ) $
(15,294 ) $
(16,954 )
$
$
(42,604 ) $
—
(42,604 ) $
(32,065 ) $
—
(32,065 ) $
(15,294 ) $
1,025
(14,269 ) $
(16,954 )
1,276
(15,678 )
$
(52,836 ) $
—
(49,034 ) $
—
4,865 $
399
3,780
889
$
(52,836 )
$
(49,034 )
$
5,264
$
4,669
The amounts in accumulated other comprehensive loss as of September 26, 2015 that are expected to be recognized as components of
net periodic benefit costs during fiscal 2016 are expenses of $5,218 and credits of ($698) for pension and other postretirement
benefits, respectively.
Plan Assets. The Partnership’s investment policies and strategies, as set forth in the Investment Management Policy and Guidelines,
are monitored by a Benefits Committee comprised of six members of management. The Partnership employs a liability driven
investment strategy, which seeks to increase the correlation of the plan’s assets and liabilities to reduce the volatility of the plan’s
funded status. This strategy has resulted in an asset allocation that is largely comprised of investments in funds of fixed income
securities. The target asset mix is as follows: (i) fixed income securities portion of the portfolio should range between 80% and 90%;
and (ii) equity securities portion of the portfolio should range between 10% and 20%.
F-22
The following table presents the actual allocation of assets held in trust as of:
Fixed income securities
Equity securities
September 26,
2015
September 27,
2014
86%
14%
100%
85%
15%
100%
The Partnership’s valuations include the use of the funds’ reported net asset values for commingled fund investments. Commingled
funds are valued at the net asset value of its underlying securities. The valuation of the assets held by the commingled funds are based
on observable market data using level 1 and 2 inputs within the fair value framework. The assets of the defined benefit pension plan
have no significant concentration of risk and there are no restrictions on these investments.
The following table describes the measurement of the Partnership’s pension plan assets by asset category as of:
Short term investments (1)
$
99 $
1,500
September 26,
2015
September 27,
2014
Equity securities: (1) (2)
Domestic
International
Fixed income securities (1) (3)
5,264
8,923
6,370
10,916
$
90,017
104,303 $
98,985
117,771
(1)
(2)
(3)
Includes funds which are not publicly traded and are valued at the net asset value of the units provided by the fund issuer.
Includes funds which invest primarily in a diversified portfolio of publicly traded U.S. and Non-U.S. common stock.
Includes funds which invest primarily in publicly traded and non-publicly traded, investment grade corporate bonds, U.S.
government bonds and asset-backed securities.
Projected Contributions and Benefit Payments. The Partnership expects to contribute approximately $700 to the defined benefit
pension plan during fiscal 2016. Estimated future benefit payments for both pension and retiree health and life benefits are as follows:
Fiscal Year
$
2016
2017
2018
2019
2020
2021 through 2025
Pension
Benefits
Retiree Health and
Life Benefits
31,031 $
11,103
11,901
10,585
10,098
44,296
1,025
959
900
838
765
2,863
Estimated future pension benefit payments assumes that age 65 or older active and non-active eligible participants in the pension plan
that had not received a benefit payment prior to fiscal 2016 will elect to receive a benefit payment in fiscal 2016. In addition, for all
periods presented, estimated future pension benefit payments assumes that participants will elect a lump sum payment in the fiscal
year that the participant becomes eligible to receive benefits.
F-23
Effect on Operations. The following table provides the components of net periodic benefit costs included in operating expenses for
fiscal 2015, 2014 and 2013:
2015
Pension Benefits
2014
2013
2015
2014
2013
Retiree Health and Life Benefits
Interest cost
Expected return on plan assets
Amortization of prior service credit
Settlement charge
Recognized net actuarial loss (gain)
Net periodic benefit costs
$
$
5,128 $
(4,913 )
—
2,000
4,522
6,737 $
5,774 $
(5,102 )
—
—
4,492
5,164 $
5,229 $
(5,281 )
—
—
5,285
5,233 $
575 $
—
(490 )
—
(196 )
(111 ) $
645 $
—
(490 )
—
(181 )
(26 ) $
594
—
(490 )
—
—
104
During fiscal 2015, lump sum pension settlement payments to either terminated or retired individuals amounted to $5,777, which
exceeded the settlement threshold (combined service and interest costs of net periodic pension cost) of $5,128 for fiscal 2015, and as a
result, the Partnership was required to recognize a non-cash settlement charge of $2,000 during fiscal 2015. The non-cash charge was
required to accelerate recognition of a portion of cumulative unamortized losses in the defined benefit pension plan. During fiscal
2014 and 2013, the amount of the pension benefit obligation settled through lump sum payments did not exceed the settlement
threshold; therefore, a settlement charge was not required to be recognized in either of those fiscal years.
Actuarial Assumptions. The assumptions used in the measurement of the Partnership’s benefit obligations as of September 26, 2015
and September 27, 2014 are shown in the following table:
Weighted-average discount rate
Average rate of compensation increase
Health care cost trend
Pension Benefits
2015
2014
Retiree Health and Life
Benefits
2015
2014
3.875 %
n/a
n/a
3.875 %
n/a
n/a
3.500 %
n/a
7.100 %
3.500 %
n/a
7.120 %
The assumptions used in the measurement of net periodic pension benefit and postretirement benefit costs for fiscal 2015, 2014 and
2013 are shown in the following table:
2015
Pension Benefits
2014
2013
2015
2014
2013
Retiree Health and Life Benefits
Weighted-average discount rate
Average rate of compensation increase
Weighted-average expected long-term
rate of return on plan assets
Health care cost trend
3.875 %
n/a
4.375 %
n/a
3.500 %
n/a
3.500 %
n/a
3.750 % 3.000 %
n/a
n/a
4.900 %
n/a
4.900 %
n/a
4.500 %
n/a
n/a
7.120 %
n/a
n/a
7.330 % 7.530 %
The discount rate assumption takes into consideration current market expectations related to long-term interest rates and the projected
duration of the Partnership’s pension obligations based on a benchmark index with similar characteristics as the expected cash flow
requirements of the Partnership’s defined benefit pension plan over the long-term. The expected long-term rate of return on plan assets
assumption reflects estimated future performance in the Partnership’s pension asset portfolio considering the investment mix of the
pension asset portfolio and historical asset performance. The expected return on plan assets is determined based on the expected long-
term rate of return on plan assets and the market-related value of plan assets. The market-related value of pension plan assets is the
fair value of the assets. Unrecognized actuarial gains and losses in excess of 10% of the greater of the projected benefit obligation and
the market-related value of plan assets are amortized over the expected average remaining service period of active employees expected
to receive benefits under the plan.
The 7.10% increase in health care costs assumed at September 26, 2015 is assumed to decrease gradually to 4.50% in fiscal 2040 and
to remain at that level thereafter. An increase or decrease of the assumed health care cost trend rates by 1.0% in each year would have
no material impact to the Partnership’s benefit obligation as of September 26, 2015 nor the aggregate of service and interest
components of net periodic postretirement benefit expense for fiscal 2015. The Partnership has concluded that the prescription drug
benefits within the retiree medical plan do not entitle the Partnership to an available Medicare subsidy.
Multi-Employer Pension Plans. As a result of the Inergy Propane Acquisition, the Partnership contributes to multi-employer
pension plans (“MEPPs”) in accordance with various collective bargaining agreements covering union employees. As one of the
F-24
many participating employers in these MEPPs, the Partnership is responsible with the other participating employers for any plan
underfunding. During fiscal 2013, the Partnership established an accrual of $7,000 for its estimated obligation to certain MEPPs due
to the Partnership’s voluntary partial withdrawal from one such MEPP and full withdrawal from four MEPPs. During fiscal 2015, the
Partnership accrued $11,300 for its further voluntary partial withdrawal from the aforementioned MEPP. As of September 26, 2015
and September 27, 2014, the Partnership’s estimated obligation to these MEPPs was $18,041 and $6,880, respectively. Due to the
uncertainty regarding future factors that could impact the withdrawal liability, the Partnership is unable to determine the timing of the
payment of the future withdrawal liability, or additional future withdrawal liability, if any.
The Partnership’s contributions to a particular MEPP are established by the applicable collective bargaining agreements (“CBAs”);
however, the required contributions may increase based on the funded status of an MEPP and legal requirements of the Pension
Protection Act of 2006 (the “PPA”), which requires substantially underfunded MEPPs to implement a funding improvement plan
(“FIP”) or a rehabilitation plan (“RP”) to improve their funded status. Factors that could impact funded status of an MEPP include,
without limitation, investment performance, changes in the participant demographics, decline in the number of contributing
employers, changes in actuarial assumptions and the utilization of extended amortization provisions.
While no multi-employer pension plan that the Partnership contributed to is individually significant to the Partnership, the table below
discloses the MEPPs to which the Partnership contributes. The financial health of a MEPP is indicated by the zone status, as defined
by the PPA, which represents the funded status of the plan as certified by the plan's actuary. Plans in the red zone are less than 65%
funded, the yellow zone are between 65% and 80% funded, and green zone are at least 80% funded. Total contributions made by the
Partnership to multi-employer pension plans for the fiscal year ended September 26, 2015 are shown below.
Pension Fund
New England Teamsters &
Trucking Industry Pension Fund (a)
Local 282 Pension Trust (b)
Teamsters Industrial Employees
Pension Fund (c)
Other (d)
EIN/Pension PPA Zone Status
Plan Number 2015
04-6372430 Red
2014
Red
FIP/RP Status 2015
Implemented $ 584 $ 616 $ 562
2013
Contributions
2014
11-6245313 Green Green
n/a
269
336
22-6099363 Green Green
n/a
200
185
284
179
Contributions
greater than
5% of Total
Plan
No
Expiration
Contributions date of CBA
April 2016 -
March 2017
August
2019
June 2017
Yes
No
20
137
$ 1,073 $ 1,168 $ 1,162
31
No
n/a
(a) Based on most recent available valuation information for plan year ended September 2014.
(b) Based on most recent available valuation information for plan year ended February 2014.
(c) Based on most recent available valuation information for plan year ended December 2014.
(d)
Includes the MEPPs from which the Partnership withdrew in fiscal 2013.
Additionally, the Partnership contributes to certain multi-employer plans that provide health and welfare benefits and defined annuity
plans. Contributions to those plans were $1,817, $1,897 and $2,040 for fiscal 2015, fiscal 2014 and fiscal 2013, respectively.
10. Financial Instruments and Risk Management
Cash and Cash Equivalents. The fair value of cash and cash equivalents is not materially different from their carrying amount
because of the short-term maturity of these instruments.
Derivative Instruments and Hedging Activities. The Partnership measures the fair value of its exchange-traded commodity-related
options and futures contracts using Level 1 inputs, the fair value of its commodity-related swap contracts and interest rate swaps using
Level 2 inputs and the fair value of its over-the-counter commodity-related options contracts using Level 3 inputs. The Partnership’s
over-the-counter options contracts are valued based on an internal option model. The inputs utilized in the model are based on
publicly available information, as well as broker quotes.
F-25
The following summarizes the fair value of the Partnership’s derivative instruments and their location in the consolidated balance
sheets as of September 26, 2015 and September 27, 2014, respectively:
Asset Derivatives
Derivatives not designated as hedging
instruments:
Commodity-related derivatives
Liability Derivatives
Derivatives designated as hedging
instruments:
Interest rate swap
Derivatives not designated as hedging
instruments:
Commodity-related derivatives
As of September 26, 2015
Location
Fair Value
As of September 27, 2014
Location
Fair Value
Other current assets
Other assets
$
7,013 Other current assets
$
485 Other assets
$
7,498
$
3,924
62
3,986
Location
Fair Value
Location
Fair Value
Other current liabilities $
Other liabilities
1,112 Other current liabilities $
200 Other liabilities
$
1,312
$
Other current liabilities $
Other liabilities
$
— Other current liabilities $
2,567 Other liabilities
2,567
$
1,257
283
1,540
1,527
53
1,580
The following summarizes the reconciliation of the beginning and ending balances of assets and liabilities measured at fair value on a
recurring basis using significant unobservable inputs:
Beginning balance of over-the-counter options
Beginning balance realized during the period
Contracts purchased during the period
Change in the fair value of outstanding contracts
Ending balance of over-the-counter options
Fair Value Measurement Using Significant
Unobservable Inputs (Level 3)
Fiscal 2015
Fiscal 2014
Assets
Liabilities
Assets
Liabilities
$
$
1,512 $
(1,450 )
2,067
652
2,781 $
— $
—
347
—
347 $
1,847 $
(1,166 )
1,145
(314 )
1,512 $
—
—
—
—
—
As of September 26, 2015 and September 27, 2014, the Partnership’s outstanding commodity-related derivatives had a weighted
average maturity of approximately seven and four months, respectively.
The effect of the Partnership’s derivative instruments on the consolidated statements of operations for fiscal 2015, 2014 and 2013 are
as follows:
Derivatives in Cash Flow Hedging Relationships
Interest rate swaps:
Fiscal 2015
Fiscal 2014
Fiscal 2013
Amount of Gains
(Losses)
Recognized in OCI
(Effective Portion)
Gains (Losses) Reclassified from
Accumulated OCI into Income
(Effective Portion)
Location
Amount
$
$
$
(1,159 ) Interest expense $
(1,388 )
(518 ) Interest expense $
(1,406 )
584 Interest expense $
(2,465 )
F-26
Derivatives Not Designated as Hedging Instruments
Commodity-related derivatives:
Location of Gains (Losses)
Recognized in Income
Amount
Fiscal 2015
Fiscal 2014
Fiscal 2013
Cost of products sold
Cost of products sold
Cost of products sold
$
$
$
1,855
306
(4,318 )
The following table presents the fair value of the Partnership’s recognized derivative assets and liabilities on a gross basis and
amounts offset on the consolidated balance sheets subject to enforceable master netting arrangements or similar agreements:
Asset Derivatives
Commodity-related derivatives
Interest rate swap
Liability Derivatives
Commodity-related derivatives
Interest rate swap
Asset Derivatives
Commodity-related derivatives
Interest rate swap
Liability Derivatives
Commodity-related derivatives
Interest rate swap
As of September 26, 2015
Net amounts
presented in the
Gross amounts Effects of netting balance sheet
$
$
$
$
13,063 $
740
13,803 $
(5,565 ) $
(740 )
(6,305 ) $
8,132 $
2,052
10,184 $
(5,565 ) $
(740 )
(6,305 ) $
7,498
—
7,498
2,567
1,312
3,879
As of September 27, 2014
Net amounts
presented in the
Gross amounts Effects of netting balance sheet
$
$
$
$
9,533 $
2,139
11,672 $
(5,547 ) $
(2,139 )
(7,686 ) $
7,127 $
3,679
10,806 $
(5,547 ) $
(2,139 )
(7,686 ) $
3,986
—
3,986
1,580
1,540
3,120
The Partnership had $553 and $-0- posted cash collateral as of September 26, 2015 and September 27, 2014, respectively, with its
brokers for outstanding commodity-related derivatives.
Concentrations. The Partnership’s principal customers are residential and commercial end users of propane and fuel oil and refined
fuels served by 700 locations in 41 states. No single customer accounted for more than 10% of revenues during fiscal 2015, 2014 or
2013 and no concentration of receivables exists as of September 26, 2015 or September 27, 2014.
During fiscal 2015, Crestwood Midstream Partners L.P., Enterprise Products Partners L.P. and Targa Liquids Marketing and Trade
LLC provided approximately 20%, 13% and 12% of the Partnership’s total propane purchases, respectively. No other single supplier
accounted for more than 10% of the Partnership’s propane purchases in fiscal 2015. The Partnership believes that, if supplies from
any of these suppliers were interrupted, it would be able to secure adequate propane supplies from other sources without a material
disruption of its operations.
Credit Risk. Exchange-traded futures and options contracts are traded on and guaranteed by the NYMEX and as a result, have
minimal credit risk. Futures contracts traded with brokers of the NYMEX require daily cash settlements in margin accounts. The
Partnership is subject to credit risk with over-the-counter swaps and options contracts entered into with various third parties to the
extent the counterparties do not perform. The Partnership evaluates the financial condition of each counterparty with which it
F-27
conducts business and establishes credit limits to reduce exposure to credit risk based on non-performance. The Partnership does not
require collateral to support the contracts.
Bank Debt and Senior Notes. The fair value of the Revolving Credit Facility approximates the carrying value since the interest rates
are adjusted quarterly to reflect market conditions. Based upon quoted market prices, the fair value of the Partnership’s 2021 Senior
Notes, 2024 Senior Notes and 2025 Senior Notes was $363,922, $498,750 and $241,250, respectively, as of September 26, 2015.
11. Commitments and Contingencies
Commitments. The Partnership leases certain property, plant and equipment, including portions of the Partnership’s vehicle fleet, for
various periods under noncancelable leases. Rental expense under operating leases was $32,737, $31,849 and $33,036 for fiscal 2015,
2014 and 2013, respectively.
Future minimum rental commitments under noncancelable operating lease agreements as of September 26, 2015 are as follows:
2016
2017
2018
2019
2020
2021 and thereafter
Fiscal Year
Minimum Lease
Payments
$
22,422
16,894
13,404
10,038
7,857
7,876
Contingencies.
Self-Insurance. As described in Note 2, the Partnership is self-insured for general and product, workers’ compensation and automobile
liabilities up to predetermined amounts above which third party insurance applies. At September 26, 2015 and September 27, 2014,
the Partnership had accrued liabilities of $57,083 and $62,450, respectively, representing the total estimated losses under these self-
insurance programs. For the portion of the estimated liability that exceeds insurance deductibles, the Partnership records an asset
within other assets (or prepaid expenses and other current assets, as applicable) related to the amount of the liability expected to be
covered by insurance which amounted to $15,783 and $18,410 as of September 26, 2015 and September 27, 2014, respectively.
Legal Matters. The Partnership’s operations are subject to operating hazards and risks normally incidental to handling, storing and
delivering combustible liquids such as propane. The Partnership has been, and will continue to be, a defendant in various legal
proceedings and litigation as a result of these operating hazards and risks, and as a result of other aspects of its business. Although
any litigation is inherently uncertain, based on past experience, the information currently available to the Partnership, and the amount
of its accrued insurance liabilities, the Partnership does not believe that currently pending or threatened litigation matters, or known
claims or known contingent claims, will have a material adverse effect on its results of operations, financial condition or cash flow.
12. Guarantees
The Partnership has residual value guarantees associated with certain of its operating leases, related primarily to transportation
equipment, with remaining lease periods scheduled to expire periodically through fiscal 2022. Upon completion of the lease period,
the Partnership guarantees that the fair value of the equipment will equal or exceed the guaranteed amount, or the Partnership will pay
the lessor the difference. Although the fair value of equipment at the end of its lease term has historically exceeded the guaranteed
amounts, the maximum potential amount of aggregate future payments the Partnership could be required to make under these leasing
arrangements, assuming the equipment is deemed worthless at the end of the lease term, was $14,397 as of September 26, 2015. The
fair value of residual value guarantees for outstanding operating leases was de minimis as of September 26, 2015 and September 27,
2014.
F-28
13. Amounts Reclassified Out of Accumulated Other Comprehensive Income
The following table summarizes amounts reclassified out of accumulated other comprehensive (loss) income for the years ended
September 26, 2015, September 27, 2014 and September 28, 2013:
Year Ended
September 26, September 27, September 28,
2014
2013
2015
Cash Flow Hedges
Balance, beginning of period
Other comprehensive income before reclassifications:
Unrealized (losses) gains
Reclassifications to earnings:
Realized losses (a)
Other comprehensive income
Balance, end of period
Pension Benefits
Balance, beginning of period
$
(1,540 ) $
(2,428 ) $
(5,477 )
(1,159 )
(518 )
584
1,388
229
(1,311 ) $
1,406
888
(1,540 ) $
2,465
3,049
(2,428 )
$
$
(49,034 ) $
(49,987 ) $
(59,398 )
Other comprehensive income before reclassifications:
Net change in funded status of benefit plan
(10,324 )
(3,539 )
4,126
Reclassifications to earnings:
Recognition of net actuarial loss for pension
settlement (b)
Amortization of net loss (b)
Other comprehensive (loss) income
Balance, end of period
2,000
4,522
(3,802 )
(52,836 ) $
—
4,492
953
(49,034 ) $
—
5,285
9,411
(49,987 )
$
Postretirement Benefits
Balance, beginning of period
Other comprehensive income before reclassifications:
Net change in plan obligation
Reclassifications to earnings:
Amortization of prior service credits (b)
Amortization of net gain (b)
Other comprehensive income (loss)
Balance, end of period
Accumulated Other Comprehensive Income (Loss)
Balance, beginning of period
Other comprehensive income before reclassifications
Recognition of net actuarial loss for pension settlement
Reclassifications to earnings
Other comprehensive (loss) income
Balance, end of period
$
4,669 $
5,062 $
3,768
1,281
278
1,784
(490 )
(196 )
595
5,264 $
(490 )
(181 )
(393 )
4,669 $
(490 )
—
1,294
5,062
(45,905 ) $
(10,202 )
2,000
5,224
(2,978 )
(48,883 ) $
(47,353 ) $
(3,779 )
—
5,227
1,448
(45,905 ) $
(61,107 )
6,494
—
7,260
13,754
(47,353 )
$
$
$
(a) Reclassification of realized losses on cash flow hedges are recognized in interest expense.
(b) These amounts are included in the computation of net periodic benefit cost. See Note 9, “Employee Benefit Plans”.
14. Public Offerings
On May 17, 2013, the Partnership sold 2,700,000 Common Units in a public offering at a price of $48.16 per Common Unit, realizing
proceeds of $124,684, net of underwriting commissions and other offering expenses. On May 22, 2013, following the underwriters’
exercise of their over-allotment option, the Partnership sold an additional 405,000 Common Units at $48.16 per Common Unit,
generating additional proceeds of $18,760, net of underwriting commissions. The net proceeds from the offering, including the net
F-29
proceeds from the underwriters’ exercise of their over-allotment option, were used to redeem $133,400 of the Partnership’s 2021
Senior Notes in August 2013.
15. Segment Information
The Partnership manages and evaluates its operations in four operating segments, three of which are reportable segments: Propane,
Fuel Oil and Refined Fuels and Natural Gas and Electricity. The chief operating decision maker evaluates performance of the
operating segments using a number of performance measures, including gross margins and income before interest expense and
provision for income taxes (operating profit). Costs excluded from these profit measures are captured in Corporate and include
corporate overhead expenses not allocated to the operating segments. Unallocated corporate overhead expenses include all costs of
back office support functions that are reported as general and administrative expenses within the consolidated statements of
operations. In addition, certain costs associated with field operations support that are reported in operating expenses within the
consolidated statements of operations, including purchasing, training and safety, are not allocated to the individual operating
segments. Thus, operating profit for each operating segment includes only the costs that are directly attributable to the operations of
the individual segment. The accounting policies of the operating segments are otherwise the same as those described in the summary
of significant accounting policies in Note 2.
The propane segment is primarily engaged in the retail distribution of propane to residential, commercial, industrial and agricultural
customers and, to a lesser extent, wholesale distribution to large industrial end users. In the residential and commercial markets,
propane is used primarily for space heating, water heating, cooking and clothes drying. Industrial customers use propane generally as a
motor fuel burned in internal combustion engines that power over-the-road vehicles, forklifts and stationary engines, to fire furnaces
and as a cutting gas. In the agricultural markets, propane is primarily used for tobacco curing, crop drying, poultry brooding and weed
control.
The fuel oil and refined fuels segment is primarily engaged in the retail distribution of fuel oil, diesel, kerosene and gasoline to
residential and commercial customers for use primarily as a source of heat in homes and buildings.
The natural gas and electricity segment is engaged in the marketing of natural gas and electricity to residential and commercial
customers in the deregulated energy markets of New York and Pennsylvania. Under this operating segment, the Partnership owns the
relationship with the end consumer and has agreements with the local distribution companies to deliver the natural gas or electricity
from the Partnership’s suppliers to the customer.
Activities in the “all other” category include the Partnership’s service business, which is primarily engaged in the sale, installation and
servicing of a wide variety of home comfort equipment, particularly in the areas of heating and ventilation.
F-30
The following table presents certain data by reportable segment and provides a reconciliation of total operating segment information to
the corresponding consolidated amounts for the periods presented:
Year Ended
September 26, September 27, September 28,
2014
2015
2013
Revenues:
Propane
Fuel oil and refined fuels
Natural gas and electricity
All other
Total revenues
Operating income (loss):
Propane
Fuel oil and refined fuels
Natural gas and electricity
All other
Corporate
Total operating income
Reconciliation to net income:
Loss on debt extinguishment
Interest expense, net
Provision for income taxes
Net income
Depreciation and amortization:
Propane
Fuel oil and refined fuels
Natural gas and electricity
All other
Corporate
Total depreciation and amortization
Assets:
Propane
Fuel oil and refined fuels
Natural gas and electricity
All other
Corporate
Total assets
$ 1,176,980 $ 1,606,840 $ 1,357,102
208,957
79,432
58,115
$ 1,416,979 $ 1,938,257 $ 1,703,606
127,495
66,865
45,639
194,684
87,093
49,640
$
$
$
$
280,761 $
7,621
14,614
(25,409 )
(99,829 )
177,758
295,916 $
2,473
10,818
(25,644 )
(93,437 )
190,126
287,473
(2,799 )
11,565
(26,483 )
(92,780 )
176,976
15,072
77,634
700
84,352 $
11,589
83,261
767
94,509 $
2,144
95,427
607
78,798
110,728 $
3,885
8
288
18,385
133,294 $
106,491 $
5,429
46
699
23,734
136,399 $
104,533
4,634
198
638
20,381
130,384
As of
September 26, September 27,
2015
2014
$ 2,209,343 $
58,077
13,253
2,888
202,169
$ 2,485,730 $
2,365,320
69,360
13,992
3,342
157,349
2,609,363
F-31
INDEX TO FINANCIAL STATEMENT SCHEDULE
SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES
Schedule II Valuation and Qualifying Accounts – Years Ended September 26, 2015, September 27, 2014
and September 28, 2013 ...................................................................................................................................
Page
S-2
S-1
SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
(in thousands)
SCHEDULE II
Year Ended September 28, 2013
Balance at
Beginning of Period
Charged (credited) to
Costs and Expenses
Other Additions
Deductions (a)
Balance at
End of Period
Allowance for doubtful accounts
$
Valuation allowance for deferred tax assets
4,347 $
36,635
6,717 $
9,771
- $
-
(4,278 ) $
-
6,786
46,406
Year Ended September 27, 2014
$
Allowance for doubtful accounts
Valuation allowance for deferred tax assets
6,786 $
46,406
11,933 $
5,458
- $
-
(7,597 ) $
-
11,122
51,864
Year Ended September 26, 2015
Allowance for doubtful accounts
$
Valuation allowance for deferred tax assets
11,122 $
51,864
(397 ) $
2,181
- $
-
(7,205 ) $
-
3,520
54,045
(a) Represents amounts that did not impact earnings.
S-2
SUBSIDIARIES OF SUBURBAN PROPANE PARTNERS, L.P.
(as of November 23, 2015)
Exhibit 21.1
SUBURBAN LP HOLDING, INC. (Delaware)
SUBURBAN LP HOLDING, LLC (Delaware)
SUBURBAN PROPANE, L. P. (Delaware)
SUBURBAN SALES & SERVICE, INC. (Delaware)
GAS CONNECTION, LLC (Oregon)
SUBURBAN FRANCHISING, LLC (Nevada)
SUBURBAN ENERGY FINANCE CORP. (Delaware)
SUBURBAN HEATING OIL PARTNERS, LLC (Delaware) (d/b/a Suburban Propane)
AGWAY ENERGY SERVICES, LLC (Delaware)
SUBURBAN BUTLER MONROE STREET PROPERTY, LLC (Delaware)
SUBURBAN CHAMBERSBURG FIFTH AVENUE PROPERTY, LLC (Delaware)
SUBURBAN ELLENBURG DEPOT PROPERTY, LLC (Delaware)
SUBURBAN GETTYSBURG PROPERTY, LLC (Delaware)
SUBURBAN LEWISTOWN PROPERTY, LLC (Delaware)
SUBURBAN MA SURPLUS PROPERTY, LLC (Delaware)
SUBURBAN NEW MILFORD SMITH STREET PROPERTY, LLC (Delaware)
SUBURBAN NJ PROPERTY ACQUISITIONS, LLC (Delaware)
SUBURBAN NJ SURPLUS PROPERTY, LLC (Delaware)
SUBURBAN NY PROPERTY ACQUISITIONS, LLC (Delaware)
SUBURBAN NY SURPLUS PROPERTY, LLC (Delaware)
SUBURBAN PA PROPERTY ACQUISITIONS, LLC (Delaware)
SUBURBAN PA SURPLUS PROPERTY, LLC (Delaware)
SUBURBAN SODUS PROPERTY, LLC (Delaware)
SUBURBAN TEMPLE PROPERTY, LLC (Delaware)
SUBURBAN TOWANDA PROPERTY, LLC (Delaware)
SUBURBAN VERBANK PROPERTY, LLC (Delaware)
SUBURBAN VINELAND PROPERTY, LLC (Delaware)
SUBURBAN VT PROPERTY ACQUISITIONS, LLC (Delaware)
SUBURBAN WALTON PROPERTY, LLC (Delaware)
SUBURBAN WASHINGTON PROPERTY, LLC (Delaware)
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the incorporation by reference in the Registration Statements on Form S-3 (No. 333-195864) and Form S-8
(Nos. 333-204559 and 333-160768) of Suburban Propane Partners, L.P. of our report dated November 25, 2015 relating to the
financial statements, financial statement schedule, and the effectiveness of internal control over financial reporting, which appears in
this Form 10-K.
Exhibit 23.1
PricewaterhouseCoopers LLP
Florham Park, New Jersey
November 25, 2015
Certification of the President and Chief Executive Officer Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
Exhibit 31.1
I, Michael A. Stivala, certify that:
1.
2.
3.
4.
I have reviewed this Annual Report on Form 10-K of Suburban Propane Partners, L.P.;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading
with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods
presented in this report;
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in
Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under
our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is
made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this
report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the
registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;
and
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant’s auditors and the audit committee of the registrant’s Board of Supervisors:
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial
information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant’s internal control over financial reporting.
November 25, 2015
By: /s/ MICHAELA. STIVALA
Michael A. Stivala
President and Chief Executive Officer
Certification of the Chief Financial Officer
Pursuant to Section 302
of the Sarbanes-Oxley Act of 2002
Exhibit 31.2
I, Michael A. Kuglin, certify that:
1.
2.
3.
4.
I have reviewed this Annual Report on Form 10-K of Suburban Propane Partners, L.P.;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading
with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods
presented in this report;
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in
Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under
our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is
made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this
report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the
registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;
and
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant’s auditors and the audit committee of the registrant’s Board of Supervisors:
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial
information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant’s internal control over financial reporting.
November 25, 2015
By: /s/ MICHAEL A. KUGLIN
Michael A. Kuglin
Chief Financial Officer and Chief Accounting Officer
Certification of the President and Chief Executive Officer Pursuant to
18 U.S.C. Section 1350,
as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
Exhibit 32.1
In connection with the Annual Report of Suburban Propane Partners, L.P. (the “Partnership”) on Form 10-K for the period ended
September 26, 2015 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Michael A. Stivala,
President and Chief Executive Officer of the Partnership, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the
Sarbanes-Oxley Act of 2002, that to my knowledge:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of
operations of the Partnership.
By: /s/ MICHAEL A. STIVALA
Michael A. Stivala
President and Chief Executive Officer
November 25, 2015
This certification shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act,
except as shall be expressly set forth by specific reference in such a filing.
Certification of the Chief Financial Officer
Pursuant to 18 U.S.C. Section 1350,
as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
Exhibit 32.2
In connection with the Annual Report of Suburban Propane Partners, L.P. (the “Partnership”) on Form 10-K for the period ended
September 26, 2015 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Michael A. Kuglin,
Chief Financial Officer and Chief Accounting Officer of the Partnership, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to
§ 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of
operations of the Partnership.
By: /s/ MICHAEL A. KUGLIN
Michael A. Kuglin
Chief Financial Officer and Chief Accounting Officer
November 25, 2015
This certification shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act,
except as shall be expressly set forth by specific reference in such a filing.
Suburban Propane Partners, L.P.
Equity Holding Policy for Supervisors and Executives
(Effective April 22, 2010)
As Amended on November 10, 2015
Exhibit 99.1
Suburban Propane Partners, L.P., and its affiliates, collectively referred to herein as the “Partnership”,
partially compensates its Supervisors and Executives with equity-based awards under the Partnership’s
Restricted Unit Plans (collectively referred to herein as the “RUP”). Utilizing equity as an integral
component of its compensation program is an expression of the Partnership’s goal of aligning its
Supervisors’ and its Executives’ economic interests with those of its Common Unitholders. In accord with
this goal, Supervisors and Executives are expected to maintain a significant long-term equity interest in the
Partnership. This Equity Holding Policy establishes the guidelines for the levels of equity Holdings (as
defined below) that Supervisors and Executives are expected to maintain.
1. Effective Date: The effective date of this policy is April 22, 2010. The first Measurement Date (as
defined below) shall be January 3, 2011.
2. Covered Individuals. The following individuals are covered by this Equity Holding Policy: the
Partnership’s Supervisors, Chief Executive Officer, President, Chief Operating Officer, Chief Financial
Officer, Chief Development Officer, any employee serving as a Managing Director, Assistant Vice
President, Vice President, Senior Vice President or Executive Vice President, and any person hereafter
holding a position with equivalent responsibilities to one or more of the foregoing positions, regardless of
how designated.
3. General Rule. During the period that a Covered Individual is employed by the Partnership (or serves on
its Board of Supervisors), that Covered Individual is required to maintain Holdings in the Partnership with
a Value (calculated as defined below) equal to the following multiple of base salary, as applicable:
Member of the Board of Supervisors
Position
Amount
3 x Annual Fee (including additional fees to
committee chairpersons)
Chief Executive Officer
President
Chief Operating Officer
Chief Financial Officer
Chief Development Officer
Executive Vice President
Senior Vice President
Vice President
Assistant Vice President
Managing Director
5 x Base Salary
5 x Base Salary
3 x Base Salary
3 x Base Salary
3 x Base Salary
3 x Base Salary
2.5 x Base Salary
1.5 x Base Salary
1 x Base Salary
1 x Base Salary
If a Covered Individual holds more than one position in the above table, he or she need only comply with
the Holding requirement of the position with the highest applicable multiple.
4. Value. In order to calculate the Value of a Covered Individual’s Holdings, the total number of units in
the Covered Individual’s Holdings as of the Measurement Date shall be multiplied by the per-unit value as
of that Measurement Date. The per-unit value shall be defined as the average of the Partnership’s Common
Unit closing prices for the twenty business days preceding the Measurement Date.
5. Holdings. The Holdings of a Covered Individual include all of the following:
I. Common Units owned outright (whether certificated, book-entry, or held in street name), including
shares owned jointly with a spouse (including domestic partners under state law).
II. Common Units owned (whether certificated, book-entry, or held in street name) separately by a
spouse (including domestic partners under state law) and/or children under the age of 21 that share
the Covered Individual’s household.
III. Common Units held in the Covered Individual’s individual retirement account.
IV. Common Units held in a private foundation or charitable trust, in each case established by the
Covered Individual and where the Covered Individual serves as a trustee or director.
V. Unvested RUP grants held by the Covered Individual.
Compliance with this Equity Holding Policy will be measured annually on the first business day following
January 1st of each year (the “Measurement Date”). As soon as practical following each Measurement Date,
the CEO will report on the status of compliance with this policy by all Covered Individuals to the
Compensation Committee of the Board at its next meeting.
6. Time to Comply. Current Supervisors and Executives who are Covered Individuals on the Effective Date
of this policy shall be in compliance with this policy as soon as practical but no later than the first
Measurement Date provided for above. Newly elected Supervisors, new hires who become Covered
Individuals upon commencement of their employment with the Partnership, and persons promoted to a
position which makes them Covered Individuals (or which increases their applicable multiple pursuant to
the table in Paragraph 3 above) shall be in compliance with this policy as soon as practical but no later than
the Measurement Date next following the second anniversary of the date upon which such Covered
Individual became subject to this policy. If a Supervisor’s fees are increased, or if an Executive receives a
base salary increase, such Covered Individuals shall adjust their equity holding levels accordingly by the
Measurement Date next following the sixth month anniversary of the effective date of such increase.
Covered Individuals are expected to make steady progress towards meeting the applicable Holdings
requirement throughout the periods referred to above.
7. Impact of Falling Below the Equity Holdings Guidelines. If on any Measurement Date it is determined
that a Covered Individual’s Holdings have fallen below the applicable Value level specified above, that
Covered Individual will have until the next Measurement Date to cure the deficiency. While the deficiency
remains, that Covered Individual is not permitted to sell or transfer Partnership Common Units. If the
deficiency has not been cured by the next Measurement Date, the Compensation Committee of the Board
will take such actions as the Committee believes appropriate, in its discretion.
8. Exceptions. Other than for situations deemed to be hardship cases by the Compensation Committee of
the Board or a significant drop in the trading price of the Partnership’s Common Units as described below,
there will be no exceptions to this policy. Hardship cases include those situations in which compliance with
this policy would place a severe financial hardship on a Covered Individual or prevent a Covered
Individual from complying with a court order, such as in the case of a divorce settlement. Once the
Committee determines that a hardship case exists, the Covered Individual will work with the Partnership’s
Senior Vice President (or other person designated by the Committee) to develop an alternative equity
holding policy that reflects the intention of the equity ownership guidelines contained herein, taking into
account the hardship situation. Additionally, under circumstances in which the trading price of the
Partnership’s Common Units has dropped by more than 50% between one Measurement Date and the next
for reasons beyond the Partnership’s reasonable control, the Senior Vice President (or other person
designated by the Committee) will develop an alternative equity holding policy for all Covered Individuals.
Any alternative equity holding policy proposed under this paragraph shall be subject to the approval of the
Compensation Committee of the Board.
9. SEC Compliance. These guidelines do not replace any of the other applicable policies or rules for
compliance with U.S. securities laws.
10. Amendment. The Compensation Committee of the Board shall administer, and may amend, this policy
and grant hardship exceptions at its discretion.
FIVE-YEAR PERFORMANCE GRAPH 1
Exhibit 99.2
The following graph compares the performance of our Common Units with the performance of the S&P 500 Index, the Alerian MLP
Index and a peer group index for the period of the five fiscal years commencing September 26, 2010. The graph assumes that at the
beginning of the period, $100 was invested in each of (1) our Common Units, (2) the S&P 500 Index, (3) the Alerian MLP Index, and
(4) the peer group, and that all distributions or dividends were reinvested.
We do not believe that any published industry or line-of-business index accurately reflects our business. Accordingly, we have
created a special peer group index consisting of other propane-marketing companies whose common units are publicly traded on the
New York Stock Exchange. The peer group is composed of the following companies: Amerigas Partners, L.P. and Ferrellgas Partners,
L.P.
1 The performance graph shall not be deemed incorporated by reference by any general statement incorporating by reference this
Annual Report on Form 10-K into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as
amended, except to the extent that Suburban specifically incorporates this information by reference in such filing, and shall not
otherwise be deemed filed under such Acts.
Suburban Board &
Executive Management
Executive
Management
Michael A. Stivala
President and Chief Executive Officer
Michael A. Kuglin
Chief Financial Officer and
Chief Accounting Officer
Mark Wienberg
Chief Development Officer
Paul Abel
Senior Vice President,
General Counsel and Secretary
Steven C. Boyd
Senior Vice President, Operations
Douglas T. Brinkworth
Senior Vice President, Product Supply,
Purchasing and Logistics
Michael M. Keating
Senior Vice President
Neil E. Scanlon
Senior Vice President, Information Services
A. Davin D’Ambrosio
Vice President and Treasurer
Keith P. Onderdonk
Vice President, Operational Support
Sandra N. Zwickel
Vice President, Human Resources
Daniel S. Bloomstein
Controller
Board of Supervisors
Harold Logan, Jr. (Chairman)**
Lawrence C. Caldwell*
Matthew J. Chanin**
John D. Collins*
John Hoyt Stookey**
Jane Swift*
Michael A. Stivala
* Member of Nominating/Governance Committee and Audit Committee
** Member of Nominating/Governance Committee and Compensation
Committee
Investor Information
Copies of Annual Reports, Interim Reports and other publications are
available without charge from Suburban Propane.
Refer to our website for:
• Company news, including the scheduling of analyst calls
• Earnings releases
• K-1’s
Suburban Propane Partners, L.P.
Investor Relations
P.O. Box 206
Whippany, New Jersey 07981-0206
Telephone: 973-503-9252
www.suburbanpropane.com
Telephone number for K-1 inquiries: 1-888-878-0708
It is anticipated that K-1’s will be available on our website and mailed to each
Unitholder in late February 2016.
Unitholder Information
Exchange Listing
Suburban Propane Partners, L.P. common units are
listed on the New York Stock Exchange under the ticker
symbol SPH.
Transfer Agent/
Unitholder Records
Computershare Investor Services
BY MAIL:
Computershare Investor Services
P.O. Box 30170
College Station, TX 77842-3170
United States of America
BY OVERNIGHT DELIVERY:
Computershare Investor Services
211 Quality Circle, Suite 210
College Station, TX 77845
United States of America
Telephone: +1 781-575-2724
Web Address: www.computershare.com
Suburban Propane Partners, L.P.
One Suburban Plaza
240 Route 10 West • P.O. Box 206
Whippany, NJ 07981-0206
www.suburbanpropane.com