A Master Limited Partnership since 1996, Suburban Propane Partners, L.P. (NYSE: SPH) has been
in the customer service business since its founding in 1928. Headquartered in Whippany, New
Jersey, Suburban Propane is managed for long-term sustainability and growth. Suburban
Propane is a nationwide marketer and distributor of a diverse array of energy-related products;
specializing in propane, renewable propane, renewable natural gas, fuel oil and refined fuels, as
well as marketing natural gas and electricity in deregulated markets and producing and
investing in low carbon fuel alternatives.
With approximately 3,200 full-time employees, Suburban Propane maintains business
operations in 42 states, providing dependable service to approximately 1 million residential,
commercial, industrial, governmental and agricultural customers through approximately 700
locations. According to Department of Energy statistics, approximately five percent of U.S.
households depend on propane as their primary energy source for space heating. Propane is a
versatile, portable, abundantly available, clean-burning, environmentally safe liquid gas with 100
percent of Suburban Propane’s supply sourced from North American producers.
As one of the largest retail marketers of propane in the United States, Suburban Propane had
retail propane sales of 378.3 million gallons in its fiscal year 2024. In 2022, Suburban Propane
launched its wholly-owned subsidiary, Suburban Renewable Energy, LLC (“Suburban Renewable
Energy”), to serve as the platform for its investments in innovative, renewable energy
technologies and businesses as part of its long-term strategic growth plan. Over the past three
years, Suburban Renewable Energy has deployed over $300 million on capital investments and
acquisitions to build out an interconnected portfolio of renewable energy alternatives focused in
the areas of lower carbon intensity propane, renewable natural gas and hydrogen.
Partnership Profile
Suburban Propane has a proud legacy of being a trusted provider of energy to local communities across the United States for more than 95
years. As we look back on fiscal year 2024, while our core propane business faced unseasonably warm temperatures during the peak winter
heating months, which reduced customer demand, we maintained our focus on the things that we can control -- namely, keeping safety as
our highest priority, providing exceptional service to our customers, managing selling prices and controlling expenses. In addition, the benefits
from our customer base growth and retention initiatives, combined with recent high-quality propane business acquisitions, contributed to net
positive customer base growth that helped offset some of the shortfall in heat-related demand that we experienced this year. Adjusted
EBITDA for fiscal year 2024 was $250.0 million, compared to $275.0 million in the prior year.
Despite the challenging weather, Suburban Propane continued to advance our long-term strategic growth initiatives; investing in the growth
of our core propane business, while fostering the expansion of our portfolio of renewable energy alternatives. To highlight a few of our key
accomplishments in fiscal year 2024:
We invested over $14.0 million on propane acquisitions in three strategic markets, and subsequent to the end of fiscal year 2024, we closed
on a larger propane acquisition to expand our presence in New Mexico and Arizona -- investing another $53.0 million;
We deployed nearly $14.0 million in capital to enhance the operating performance of our renewable natural gas (RNG) production facility in
Stanfield, Arizona, and to advance our capital projects for RNG upgrade equipment at our Columbus, Ohio facility and the construction of
our anaerobic digester in upstate New York;
We are a leader in offering lower carbon renewable propane alternatives for our customers by securing additional contracts for
incremental renewable propane gallons as they come online in 2025, and by being the only propane distributor in the United States that is
delivering low carbon Propane+rDME to forklift customers in southern California; and
We also continued to support our unconsolidated subsidiaries, Oberon Fuels and Independence Hydrogen, as they make progress toward
scaling their respective platforms.
As society continues to seek alternative energy solutions for lowering greenhouse gas (GHG) emissions across all aspects of the economy,
there is an increased recognition of the benefits of propane as an immediate and long-term solution in the energy transition because of its
versatility in serving so many applications, its clean attributes and its proven reputation as a truly on-demand energy source. In line with our
Go Green with Suburban Propane corporate pillar, we are continuing to advocate for the role of propane in lowering GHG emissions, while
investing in innovative renewable energy technologies and businesses that can produce an even greater impact in the future. We are taking a
measured and disciplined approach in the execution of our long-term strategic growth plans, while also staying focused on maintaining a
strong balance sheet, which provides support for our long-term sustainability as an organization and access to capital to fund opportunistic
growth.
Under our SuburbanCares corporate pillar, Suburban Propane reaffirmed our long-standing partnership with the American Red Cross by
joining their prestigious Annual Disaster Giving Program (ADGP), comprising 77 large companies, enabling partners to provide sustained
support for year-round disaster relief efforts. The ADGP allows Suburban Propane to engage its employees in various ways; including
preparedness initiatives, rapid response support, and recovery efforts for affected communities. This was especially impactful in the aftermath
of Hurricanes Helene and Milton, which delivered historic devastation, particularly in western North Carolina and Florida, where Suburban
Propane has a very strong market presence.
The foundation of our ongoing success continues to be rooted in our approximately 3,200 dedicated employees at Suburban Propane, and
their hard work and unwavering focus on the safety and comfort of our customers and the communities we serve. Our SuburbanCares
platform also encompasses our commitment to the career development of our employees, and to the military veterans community and their
families through our “Heroes Hired Here” program. Additionally, we are proud to have gained significant accolades for our 2024 initiatives by
being recognized as a Top Company for Women to Work in Transportation by the Women in Trucking Association; one of the Best Employers
for Veterans for 2024 by Military Times; a bronze award winner for the Anthem Awards for our grassroots efforts in the community; and as a
finalist in the Corporate Impact category of the S&P Global Energy Awards for the fourth time in the past five years.
In closing, Suburban Propane is uniquely positioned to support our customers and local communities on the journey to a lower carbon energy
future, given our core competencies in safety, customer service, and logistics expertise, as a critical link in the local distribution of energy. There
are many that believe the future arrives by completely disrupting the status quo and establishing a new paradigm; by pushing electrification
as the sole solution to reducing GHG emissions. Suburban Propane has long contended that the world needs an all-of-the-above approach
that leverages the best available technologies for the applications to meet the growing energy needs of society in a resilient, affordable and
sustainable way. Suburban Propane provides solutions today, in the form of traditional, renewable, and blended propane that has immediate
benefits to lowering the carbon footprint across many applications, and we are continuing to invest in new, even lower carbon intensity energy
solutions that will shape the future. Our legacy is built on safety, customer service, and reliability…our future is being shaped by innovation. Our
sustainability efforts are not just about environmental responsibility; they are about investing in communities, creating opportunities for our
people and enhancing long-term value for you – our valued Unitholders. Thank you for your continued trust and support.
Sincerely,
Michael A. Stivala
President and Chief Executive Officer
Suburban Propane Partners, L.P.
Letter to Unitholders
Suburban
Propane
remains
steadfast
in
its
commitment to promoting the versatile, affordable,
low carbon intensity, and clean air qualities of
propane as one key solution in lowering greenhouse
gas emissions across multiple sectors. We are proud
to lead the propane industry in the transition to a
low carbon future through substantial investments
in next-generation renewable energy products and
solutions. Our Go Green with Suburban Propane
corporate pillar encompasses our dual approach of
advocacy and innovation for the future.
Recent advancements in technologies for producing
propane from renewable sources, alongside efforts
to reduce the carbon intensity of traditional propane,
and our investments in an interconnected portfolio
of renewable energy assets and businesses highlight
our Go Green with Suburban Propane corporate
pillar. This commitment underscores our dedication
to investing in innovative solutions that contribute to
a sustainable energy future. With a more than 95-
year legacy as a trusted provider of energy and
exceptional customer service, we aim to lead the
transition to renewable energy in a manner that
delivers
value
to
our
customers,
Unitholders,
employees, and the communities we serve, ensuring
our continued long-term success in a carbon-
constrained world.
Go Green with Suburban Propane:
Serving communities today, leading the
way to a sustainable tomorrow.
Advancing Our Corporate Environmental, Social,
and Governance (ESG) Initiatives:
The Three Pillars of the Suburban Propane Experience
Suburban Propane has a long history of an unwavering dedication to
safety and exceptional customer service, rooted in a family-oriented
culture since its founding in 1928. Our SuburbanCares corporate pillar
underscores our commitment to philanthropy through a national
partnership
with
the
American
Red
Cross,
local
community
sponsorships, and employee-focused initiatives that foster a positive
workplace culture and provide opportunities for our employees to
give back to the local communities in which they live and work.
In fiscal year 2024, we collaborated with numerous organizations
supporting communities facing disadvantages by providing essential
resources
like
food,
personal
care
items
and
housing.
Our
commitment extends to military veterans through our “Heroes Hired
Here” initiative, offering employment advantages and volunteer
opportunities, while our partnership with the American Red Cross has
facilitated blood drives, fire-safety programs, and disaster relief efforts,
positively impacting those in need.
SuburbanCares: SuburbanCares about our people and
the communities we serve.
Advancing Our Corporate Environmental, Social,
and Governance (ESG) Initiatives:
The Three Pillars of the Suburban Propane Experience
This corporate pillar showcases Suburban Propane’s more
than 95-year legacy and our unwavering commitment to
the highest safety standards, providing customers with the
peace of mind that comes from the flexibility, reliability,
and dependability in doing business with us. We are
dedicated to delivering the highest quality service to our
customers and the local communities we serve, while
striving to adhere to the strictest ethical and safety
standards in every interaction.
We continuously refine our business model to enhance the
customer experience, ensuring that each interaction
exemplifies our dedication to excellence. This commitment
is supported by significant investments in advanced
training programs for our employees and the integration of
innovative technologies to optimize service delivery. By
adhering
to
the
highest
standards
of
operational
excellence, we cultivate customer relationships based on
trust and dependability, solidifying our position as a leader
in the energy sector.
Suburban Commitment: Reflecting on our almost 100-year legacy of
excellence, prioritizing safety, reliability, and customer service.
THIS PAGE IS INTENTIONALLY LEFT BLANK
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 28, 2024
☐ 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
22-3410353
(State or other jurisdiction of
(I.R.S. Employer
incorporation or organization)
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
Trading Symbol
Name of exchange on which registered
Common Units
SPH
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 every Interactive Data File required to be submitted 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 such files). Yes
☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging
growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule
12b-2 of the Exchange Act.
Large accelerated filer
☒ Accelerated filer
☐ Emerging growth company
☐
Non-accelerated filer
☐ Smaller reporting company
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or
revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control
over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued
its audit report. ☒
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing
reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive- based compensation received by
any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
The aggregate market value as of March 28, 2024 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 ($20.43 per unit), was approximately $1,307,964,000. As of November 25, 2024, there were
64,490,096 Common Units of Suburban Propane Partners, L.P. outstanding.
Documents Incorporated by Reference: None
Total number of pages (excluding Exhibits): 144
SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES
INDEX TO ANNUAL REPORT ON FORM 10-K
Page
PART I
ITEM 1.
BUSINESS ...........................................................................................................................................................
1
ITEM 1A.
RISK FACTORS .................................................................................................................................................. 15
ITEM 1B.
UNRESOLVED STAFF COMMENTS ............................................................................................................... 33
ITEM 1C.
CYBERSECURITY ............................................................................................................................................. 33
ITEM 2.
PROPERTIES ....................................................................................................................................................... 34
ITEM 3.
LEGAL PROCEEDINGS ..................................................................................................................................... 35
ITEM 4.
MINE SAFETY DISCLOSURES ........................................................................................................................ 35
PART II
ITEM 5.
MARKET FOR THE REGISTRANT’S COMMON UNITS, RELATED UNITHOLDER MATTERS AND
ISSUER PURCHASES OF UNITS ................................................................................................................. 36
ITEM 6.
[RESERVED] ....................................................................................................................................................... 36
ITEM 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS ................................................................................................................................................ 36
ITEM 7A.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK ..................................... 47
ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA ..................................................................... 50
ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE .......................................................................................................................... 51
ITEM 9A.
CONTROLS AND PROCEDURES ..................................................................................................................... 51
ITEM 9B.
OTHER INFORMATION .................................................................................................................................... 52
ITEM 9C.
DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS .................... 52
PART III
ITEM 10.
DIRECTORS, EXECUTIVE OFFICERS AND PARTNERSHIP GOVERNANCE........................................... 53
ITEM 11.
EXECUTIVE COMPENSATION ........................................................................................................................ 60
ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED UNITHOLDER MATTERS ......................................................................................................... 97
ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE ... 98
ITEM 14.
PRINCIPAL ACCOUNTANT FEES AND SERVICES...................................................................................... 99
PART IV
ITEM 15.
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES ........................................................................... 100
ITEM 16.
FORM 10-K SUMMARY .................................................................................................................................... 100
SIGNATURES.................................................................................................................................................................................... 104
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, capital expenditures, strategic alternatives, project
developments, 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,” “could,” “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 that could impact the Partnership’s results include, but are not limited to, the following:
•
The impact of weather conditions on the demand for propane, renewable propane, fuel oil and other refined fuels, natural gas,
renewable natural gas (“RNG”) and electricity;
•
The impact of climate change and potential climate change legislation on the Partnership and demand for propane, fuel oil and other
refined fuels, natural gas, RNG and electricity;
•
Volatility in the unit cost of propane, renewable propane, fuel oil and other refined fuels, natural gas, RNG 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, renewable propane, fuel oil, RNG 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, including hostilities in the Middle East, Russian military action in Ukraine, global terrorism and other
general economic conditions, including the economic instability resulting from natural disasters;
•
The ability of the Partnership to acquire and maintain sufficient volumes of, and the costs to the Partnership of acquiring, reliably
transporting and storing, propane, renewable propane, fuel oil and other refined fuels;
•
The ability of the Partnership to attract and retain employees and key personnel to support the growth of our business;
•
The ability of the Partnership to retain customers or acquire new customers;
•
The impact of customer conservation, energy efficiency, general economic conditions and technology advances on the demand for
propane, fuel oil and other refined fuels, natural gas, RNG and electricity;
•
The ability of management to continue to control expenses and manage inflationary increases in fuel, labor and other operating costs;
•
Risks related to the Partnership’s renewable fuel projects and investments, including the willingness of customers to purchase fuels
generated by the projects, the permitting, financing, construction, development and operation of supporting facilities, the Partnership’s
ability to generate a sufficient return on its renewable fuel projects, the Partnership’s dependence on third-party partners to help
manage and operate renewable fuel investment projects, and increased regulation and dependence on government funding for
commercial viability of renewable fuel investment projects;
•
The generation and monetization of environmental attributes produced by the Partnership’s renewable fuel projects, changes to
legislation and/or regulations concerning the generation and monetization of environmental attributes and pricing volatility in the
open markets where environmental attributes are traded;
•
The impact of changes in applicable statutes and government regulations, or their interpretations, including those relating to the
environment and climate change, permitting, human health and safety laws and regulations, derivative instruments, the sale or
marketing of propane and renewable propane, fuel oil and other refined fuels, natural gas, RNG and electricity, including the impact
of recently adopted and proposed changes to New York law, and other regulatory developments that could impose costs and liabilities
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 risks and proceedings on the Partnership’s business;
•
The impact of operating hazards that could adversely affect the Partnership’s reputation and its operating results to the extent not
covered by insurance;
•
The Partnership’s ability to make strategic acquisitions, successfully integrate them and realize the expected benefits of those
acquisitions;
•
The ability of the Partnership and any third-party service providers on which it may rely for support or services to continue to combat
cybersecurity threats to their respective and shared networks and information technology;
•
Risks relating to the Partnership’s plans to diversify its business;
•
The impact of current conditions in the global capital, credit and environmental attribute markets, and general economic pressures;
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. Reference is also made to the risk factors discussed in Item 1A of 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.
1
PART I
ITEM 1.
BUSINESS
Development of Business
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,
renewable propane, renewable natural gas (“RNG”), fuel oil and refined fuels, as well as the marketing of natural gas and electricity in
deregulated markets and production of and investing in low-carbon fuel alternatives. 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 2024, that we are the third-largest retail marketer of propane in the United States, measured
by retail gallons sold in calendar year 2023. As of September 28, 2024, we were serving the energy needs of approximately 1.0 million
residential, commercial, industrial and agricultural customers through approximately 700 locations in 42 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 378.3 million gallons of propane and 16.9 million gallons of fuel oil and refined fuels to
retail customers during the year ended September 28, 2024. 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 (as amended, 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.
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; Suburban Sales and Service, Inc., which conducts a portion of our service work and appliance and
parts business; and Suburban Renewable Energy, LLC (“Suburban Renewable Energy”), which serves as the platform for our
investments in innovative renewable energy technologies and businesses. Our fuel oil and refined fuels, natural gas and electricity,
services and renewable energy 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.
On December 28, 2022, Suburban Renewable Energy acquired a platform of RNG production assets (the “RNG Acquisition”)
from Equilibrium Capital Group (“Equilibrium”), a leading sustainability-driven asset management firm. The RNG platform includes
the following: (1) a large-scale RNG production facility in Stanfield, Arizona that is currently operating and includes seven anaerobic
digesters, manure rights from approximately 55,000 dairy cattle and an interconnect with an interstate pipeline and (2) an operating
facility in Columbus, Ohio that is currently receiving tipping fees from several large food and beverage providers for processing food
waste into fertilizer and biogas, and has an active development project to upgrade the biogas into RNG for sale.
During fiscal 2022, Suburban Renewable Energy acquired a 25% equity interest in Independence Hydrogen, Inc. (“IH”), a veteran-
owned and operated, privately held company developing a gaseous hydrogen ecosystem to deliver locally sourced hydrogen to local
markets, with a primary focus on material handling and backup power applications. Also in fiscal 2022, Suburban Renewable Energy
entered into an agreement to construct, own and operate a new biodigester system with Adirondack Farms, a family dairy farm located
in Clinton County, New York (“Adirondack Farms”) for the production of RNG. Construction of the assets began during fiscal 2023,
and is expected to be completed by the second half of the 2025 calendar year.
During fiscal 2020, our Operating Partnership acquired a 38% equity interest in Oberon Fuels, Inc. (“Oberon”), which is a
development-stage producer of low carbon renewable dimethyl ether (“rDME”) transportation fuel. Oberon is focused on the research
and development of practical and affordable pathways to zero-emission transportation through its proprietary production process.
Oberon’s rDME fuel is a low carbon, zero-soot alternative to petroleum diesel, and when blended with propane can significantly reduce
the carbon intensity (“CI”) of propane. Additionally, rDME is a carrier for hydrogen, making it easy to deliver this renewable fuel for
the growing hydrogen fuel cell industry.
2
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 no 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
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 print copies of any materials that we file with the SEC 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 28, 2024, 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
The Three Pillars of the Suburban Propane Experience. We execute the foregoing strategy within the framework of our three
corporate pillars:
•
Go Green with Suburban Propane: our commitment to advancing the clean air and low-carbon benefits of traditional
propane, and to invest in innovative technologies to bring the next generation of renewable energy solutions to market in
support of the energy transition;
•
SuburbanCares: our devotion to the safety, well-being and career development of our people, and our philanthropic activities
to be a critical positive contributor in the local communities we serve and in our national partnership with the American Red
Cross; and
•
Suburban Commitment to Excellence: our value proposition for our customers, employees and the communities we serve
and, in particular, the reliability, dependability and flexibility in our commitment to excellence in safety and customer service.
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. In advancing this strategy, we consider the interests of our employees, customers
and the communities in which we operate, as exemplified by our three corporate pillars; Go Green with Suburban Propane,
SuburbanCares, and Suburban Commitment to Excellence. The following are key elements of our strategy:
Strategic Investments in the Continued Build Out of Our Renewable Energy Platform. The economy-wide energy transition to
a low-carbon world offers an opportunity for us to realize top-line organic growth through advancing the significant air quality and
climate benefits of traditional propane, and through continued investments in the next generation of even cleaner and lower CI renewable
energy products. This dual approach has driven our engagement in particularly hard to abate segments, including heavy duty
transportation and rural heating and cooking. Through our RNG Acquisition, strategic investments in Oberon and IH, our collaboration
with Adirondack Farms, and collaborations with key participants in the renewable energy sector, we have begun to develop an
interconnected portfolio of renewable energy assets that are focused on the distribution of renewable fuels, including hydrogen and
RNG. These investments and partnerships allow us to leverage our logistics expertise as local distributors of energy, support the
country’s clean energy transition, and helps position the company for long-term growth and sustainability. As a company with an over
95-year legacy of being a trusted and reliable provider of energy and exceptional customer service, our goal is to lead the propane
industry in the transition to a renewable energy future that provides value to our customers, Unitholders, employees, and the communities
we serve in a way that ensures that we can thrive in a carbon constrained world for many more years to come.
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.
3
Selective Acquisitions of Complementary Businesses or Assets. We supplement our organic customer base growth and retention
initiatives with selective acquisitions of high-quality propane businesses in strategic markets, as well as identifying and fostering new
market expansion efforts to establish or extend our presence and expand market share. Our acquisition strategy is to focus on businesses
with a relatively steady or predictable 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 patient, disciplined and deliberate in evaluating both
traditional and renewable energy acquisition opportunities.
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, customer support, managing our cost structure, improving our
customer mix, and hardening our cybersecurity defenses. 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, customer onboarding and support, inventory and fixed assets control, cash management and
customer tracking. We will continue to pursue operational efficiencies while staying focused on providing exceptional service to our
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.
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
As described below, 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. See the Notes to the Consolidated Financial Statements included
in this Annual Report for financial information about our business segments.
Propane
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:
•
residential, commercial and government applications;
•
industrial applications; and
•
agricultural uses.
In the residential, commercial and government 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 non-toxic, clean burning and, when consumed, produces
virtually no particulate matter. In addition, our equity investment in Oberon is included within the propane segment.
Product Distribution and Marketing
We distribute propane and renewable propane through a nationwide retail distribution network consisting of approximately 700
locations in 42 states as of September 28, 2024. 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 28, 2024, we serviced
approximately 950,000 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. Approximately 60% of our residential customers
receive their propane supply through an automatic delivery system. These deliveries are scheduled through proprietary 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
4
heating and cooking appliances to customers who purchase propane from us and, at some locations, sell propane fuel systems for motor
vehicles.
We sell propane primarily to seven customer markets: residential, commercial, industrial (including engine fuel), government,
agricultural, other retail users and wholesale. Approximately 96% of our propane gallons sold in fiscal 2024 were to retail customers:
42% of those propane gallons to residential customers, 39% to commercial customers, 9% to industrial customers, 6% to government
customers and 4% to agricultural customers. The balance of approximately 4% of our propane gallons sold in fiscal 2024 were for risk
management activities and wholesale customers. No single customer accounted for 10% or more of our propane revenues during fiscal
2024.
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.
Supply
Our propane supply is purchased from approximately 40 wholesalers at approximately 135 supply points located throughout 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. 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 2025. During
fiscal 2024, Energy Transfer LP (“ET”), which acquired Crestwood Equity Partners L.P., and Targa Liquids Marketing and Trade LLC
(“Targa”) provided approximately 30% and 15% of our total propane purchases, respectively. No other single supplier accounted for
10% or more of our propane purchases in fiscal 2024. 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 ET or Targa 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 82% of our total propane purchases were from domestic suppliers
and 100% came from North America in fiscal 2024.
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 enter into propane forward options and swap agreements with 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 Elk Grove, California. We also operate smaller storage facilities in other
locations throughout the United States 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 28,
2024, the storage capacity at our facility in Elk Grove, California was leased to third parties.
Competition
According to the U.S. Census Bureau’s 2023 American Community Survey, propane ranks as the third 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
5
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, and in some territories, geological and activist challenges. 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. Although the 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.
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 source to the other.
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 the 2022 Annual Retail Propane Sales Report, as published by the Propane Education & Research Council in
October 2023, and LP/Gas Magazine dated February 2023, the ten largest retailers, including us, account for approximately 32% of 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 at
any point in time.
Fuel Oil and Refined Fuels
Product Distribution and Marketing
We market and distribute fuel oil, kerosene, diesel fuel and gasoline to approximately 27,000 residential and commercial
customers primarily in the northeast region of the United States. Sales of fuel oil and refined fuels for fiscal 2024 amounted to 16.9
million gallons. Approximately 63% of the fuel oil and refined fuels gallons sold by us in fiscal 2024 were to residential customers,
principally for home heating, 7% were to commercial customers, and 9% to other users. Sales of diesel and gasoline accounted for the
remaining 21% of total volumes sold in this segment during fiscal 2024. 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 50% of our fuel oil customers receive their fuel oil under an automatic delivery system. These deliveries are
scheduled through proprietary 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 heating equipment to customers who purchase fuel oil from us.
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 and refined fuels revenues during fiscal
2024.
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 13 terminal facilities that 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
6
for transportation and volume discounts. We purchase fuel oil from approximately 20 suppliers at approximately 45 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 2025.
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 are a full-service energy provider and have developed a wide range of sales programs
and service offerings for our fuel oil customer base that are intended to build customer loyalty. For instance, 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.
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, the local utility companies distribute electricity and natural gas
on their distribution systems and we arrange for the supply of electricity or natural gas to specific delivery points. 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 approximately 28,000 natural gas and electricity customers in New York and Pennsylvania. AES’s customer base has
been adversely impacted by several state regulations that make some customers ineligible to shop in the deregulated energy market,
require that certain customers be returned to default utility service, as well as other restrictions on how prospective customers can be
contacted. Specifically, an Order from the New York Public Service Commission (“NY PSC”) regarding low-income consumers went
into effect in 2018 and requires that all energy service companies (“ESCOs”) stop serving certain low-income consumers. Similar orders
also went into effect in Pennsylvania in 2019. In December 2019, the NY PSC issued an Order that imposed product, pricing, and other
requirements on ESCOs (“Second Reset Order”). AES was specifically and solely exempted from complying with the criteria
concerning product offerings during the pendency of further rulemaking proceedings. In September 2020, the NY PSC issued another
Order reaffirming the Second Reset Order, including the exemption that allows AES to maintain its existing business model in New
York while rulemaking proceedings continue. While AES is exempt from the restrictive pricing measures of the order, it is still subject
to rules that restrict marketing to prospective customers. Separately, the State of New York issued a State of Emergency Order in March
of 2020 due to the COVID-19 pandemic. Under New York law, telemarketers are prevented from making cold sales calls during states
of emergency. As a result, AES halted cold call telemarketing activities in New York in March 2020. While the New York State of
Emergency Order for COVID-19 ended in June 2021, other states of emergency were issued in NY and remain in effect. AES has
adjusted its marketing programs accordingly.
The State of New York amended Section 349-d of the New York General Business Law (“GBL”) effective on March 18, 2024,
to require that energy service companies that operate in the state, such as AES in connection with its natural gas and electricity business,
first obtain written consent from the customer before any change in commodity prices can be charged to the customer. To date, the
amended statute has not had a material negative impact on AES, but the Partnership continues to assess the impact that the GBL
amendment may have in the future on its natural gas and electricity business. In addition, the NY PSC has issued notice of rulemaking
for amendments to its Uniform Business Practices (“UBP”), that will apply to AES and other energy supply companies that operate in
the state. The proposed UBP amendments, if adopted, will require AES to provide notice each month to its customers that includes a
historical comparison between the rates charged by AES and what the customer would have paid had they remained with their existing
utility. The Partnership anticipates that the additional notice requirements mandated by the NY PSC could have a negative effect on
customer retention for energy supply companies, which could have an adverse impact on our business and operations.
7
During fiscal 2024, we sold approximately 1.1 million dekatherms of natural gas and 135.7 million kilowatt hours of electricity
through the natural gas and electricity segment. Approximately 88% 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, direct mail initiatives, and digital marketing campaigns. Most local utility companies that AES is actively
marketing 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 supply 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 receivables risk to AES.
Supply of natural gas is arranged through annual supply agreements with major national wholesale suppliers. Wholesale pricing
under annual natural gas supply contracts is based on posted market prices at the time of contracting. Our electricity requirements are
purchased through the New York Independent System Operator (“NYISO”) and PJM Interconnection (“PJM”). Other requirements,
such as renewable energy credits, are purchased through supply agreements, or on the open market. Electricity pricing under the NYISO
and PJM agreements are based on local market indices at the time of contracting. 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 and fuel oil businesses. Our supply needs are filled through supply arrangements with several large regional
equipment manufacturers and distribution companies. Competition in this business 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 and refined fuels business segments. Additionally, we
have entered into arrangements with third-party service providers to complement and, in certain instances, supplement our existing
service capabilities. Our platform of RNG businesses and the equity investment in IH are included within “all other”.
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.
Trademarks and Tradenames
We rely primarily on a combination of trademark, patent, trade secret and copyright laws, as well as contractual provisions with
employees and third parties, to establish and protect our intellectual property rights. We utilize a variety of trademarks and tradenames
owned by us, including “Suburban Propane,” “Suburban Renewables” and “Agway Energy Services” and related marks or designs
incorporating related logos such as “Agway Energy Guard” and other marks such as:
8
All of the trademarks and tradenames used by Suburban Propane and Agway Energy Services are registered (or have applications
pending and recently allowed for registration) with the U.S. Patent and Trademark Office. We regard our trademarks, patents,
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
Our operations are subject to numerous federal, state and local environmental, health and safety laws and regulations. Generally,
these laws and regulations impose limitations on the discharge of hazardous materials, pollutants and contaminants and establish
standards for the handling, transportation, distribution, treatment, storage and disposal of hazardous materials, pollutants, contaminants
and solid and hazardous wastes, which may require the investigation, assessment, cleanup, or monitoring of, or compensation for,
environmental impacts, including natural resource damages. Notably, these laws include the federal Comprehensive Environmental
Response, Compensation, and Liability Act (“CERCLA”); Resource Conservation and Recovery Act (“RCRA”); Clean Air Act; Clean
Water Act; National Environmental Policy Act, and their implementing regulations, as well as comparable state laws and regulations.
Additionally, there are environmental laws and regulations specific to the sale of electricity and natural gas in the retail energy market
by AES. Under the various laws and regulations to which we are subject, we must maintain various permits and comply with various
monitoring and reporting requirements.
We own real property at locations where hazardous materials, pollutants and contaminants 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 applicable laws and at sites with above ground 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.
As of September 28, 2024, we had accrued environmental liabilities of $1.3 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, relating to 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 environmental liabilities or the extent or amount
of any such liabilities, or the extent to which such additional liabilities would be subject to any contractual indemnification protections.
Certain rules and procedures imposed by the National Fire Protection Association (“NFPA”), as well as comparable state laws
and regulations, govern the safe handling of propane and establish industry standards for propane storage, distribution and equipment
installation and operation in all of the states in which we operate. In some states, these laws and regulations are administered by state
agencies, and in others they are administered on a municipal level.
9
The NFPA’s rules and procedures, as well as comparable state laws and regulations govern the safe handling of distillates (fuel
oil, kerosene and diesel fuel) and gasoline and establish industry standards 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 and
regulations are administered by state agencies and in others they are administered on a municipal level.
With respect to the transportation of propane, distillates and gasoline by truck, we are subject to laws and regulations that cover
the transportation of hazardous materials and are administered, respectively, by the Federal Motor Carrier Safety Administration and
the Pipeline and Hazardous Materials Safety Administration of the United States Department of Transportation (“DOT”), or comparable
state agencies. We conduct ongoing training programs to help ensure that our operations comply with these and other applicable safety
laws and regulations. We maintain various permits that are necessary to operate our equipment and facilities, some of which may be
material to our operations. In compliance with the DOT’s pipeline safety regulations for “jurisdictional” propane systems that serve
multiple customers, we provide training and written instruction for our employees, provide customers with periodic public awareness
notices and safety information, have established written procedures to minimize the hazards resulting from gas pipeline emergencies
and keep records of inspections.
Our operations are subject to workplace safety standards under the Federal Occupational Safety and Health Act of 1970 (“OSHA”)
and comparable state laws that regulate the protection of worker health and safety. Compliance with these standards is monitored
through required workplace injury and illness recordkeeping, and reporting. We believe that our operations comply, in all material
respects, with applicable worker health and safety standards. We are also subject to laws and regulations governing the security of
hazardous materials, including propane, under the Federal Homeland Security Act of 2002, as administered by the Department of
Homeland Security (“DHS”). The DHS promulgated the Chemical Facility Anti-Terrorism Standards (“CFATS”) to identify and secure
chemical facilities that present the greatest security risk using a risk-based tiering structure. We have a number of facilities registered
with the DHS, now referred to as the “Cybersecurity and Infrastructure Security Agency” or “CISA”.
Currently, we have submitted all required Top-Screens as defined by CISA and have developed approved Site Security Plans for
our regulated or “tiered” facilities. Less than 5% of our facilities are designated as tiered facilities. We expect to continue to incur
minor costs associated with administrative controls and enhanced cyber and physical security measures for those tiered facilities that
are subject to ongoing compliance activity.
In 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 four other greenhouse gases (“GHGs”) threaten the public health and welfare
of current and future generations. Based on these findings, the EPA has implemented regulations to restrict emissions of GHGs from
certain industries and require reporting by certain regulated entities. In 2009, the EPA also adopted the Greenhouse Gas Reporting Rule
that requires reporting of greenhouse gas data and other relevant information from large GHG emission sources, fuel and industrial gas
suppliers, and CO2 injection sites in the United States. While the Partnership is not a regulated entity and propane is not a greenhouse
gas, these regulations impact both our core business, as well as the retail sale of electricity and natural gas by AES.
In June 2022, the U.S. Supreme Court issued a decision in West Virginia v. EPA, which did not preclude, but instead limited the
EPA’s ability to regulate GHGs absent clear congressional authorization. The Court determined that the EPA’s emission reduction
measures requiring an industry-wide shift in electricity production from coal- and natural gas-fired power plants to renewable power
sources require specific congressional authorization, which had not been given under the Clean Air Act.
Nonetheless, current EPA leadership has prioritized climate change mitigation measures and has implemented regulations
requiring significant reductions in GHG emissions. Changes in the White House in the next presidential administration and EPA
administration may result in changes to the EPA’s prioritization of climate change mitigation. The EPA is also prioritizing
environmental justice issues, which may impact how the agency addresses environmental and climate change matters. We cannot predict
the impact of future changes to the EPA’s prioritization of climate change mitigation or the impact of future GHG legislation or
regulations on our business, financial conditions or operations in the future.
Regardless of what happens at the federal level, numerous states and municipalities have begun to adopt laws and policies to
regulate, reduce and require disclosure of GHG emissions. These regulatory actions could require us to incur increased expenses or lost
revenue. We cannot predict when, or in what form, additional climate change laws and regulations will be enacted, and what effect such
laws and regulations may have on our business, financial condition or operations in the future. These current and prospective local, state,
and federal laws and regulations have sparked a shift in our industry toward the next generation of clean energy. We are an industry
leader in this regard by making strategic investments so we can be positioned to have an adequate clean energy supply as these laws and
regulations become operative or require deeper emission reductions. For example, we have taken a 38% equity stake in Oberon, a
producer of low carbon rDME transportation fuel, a 25% equity stake in IH, a veteran-owned and operated start-up company developing
a low CI gaseous hydrogen ecosystem, acquired anaerobic digester facilities in Columbus, Ohio and Stanfield, Arizona through the
RNG Acquisition that produce RNG and we entered into an agreement to produce RNG at Adirondack Farms. We have also executed
10
agreements to purchase and distribute renewable propane, which offers a low CI alternative to traditional propane, gasoline or diesel.
We are committed to increasing the availability of blends of traditional propane with rDME and/or renewable propane, renewable
propane, hydrogen, and RNG in the coming years.
Our investments in Oberon and IH, as well as our anaerobic digesters, are expected to result in the production of rDME, hydrogen,
and RNG, respectively, all of which, along with renewable propane, are products that present an opportunity to generate environmental
attributes. The monetization of these environmental attributes occurs under several state and federal programs. At the federal level those
programs include: the renewable fuel standard program (“RFS”), which was authorized under the Energy Policy Act of 2005 and
expanded through the Energy Independence and Security Act of 2007, and the Inflation Reduction Act of 2022 (the “Inflation Reduction
Act”) that was signed into law in 2022. The RFS mandates the use of renewable fuel in the transportation fuel sector, while the Inflation
Reduction Act includes tax credits and other incentives intended to combat climate change by advancing decarbonization and promoting
increased investment in renewable and low CI energy. At the state level, transportation fuel programs include: the California Low
Carbon Fuel Standard (“CA LCFS”), the Oregon Clean Fuels Program (“OR CFP”), and the Washington Clean Fuel Standard (“WA
CFS”). These states also have GHG reduction programs: the California Cap-and-Trade Program; the Oregon Climate Protection
Program; and the Washington Cap-and-Invest Program.
The RFS is administered by the EPA and requires the production and use of specific volumes with the goal of: increasing energy
security by reducing dependence on foreign oil, establishing domestic biofuel industries, and improving environmental quality by
reducing GHG emissions. The RFS seeks to achieve these goals by mandating that transportation fuels contain a minimum volume of
renewable fuel. To enforce compliance, the EPA uses a credit system based on a biofuel’s renewable identification number (“RIN”).
The amount of RIN credits (“RINs”) generated by each biofuel depends on the process and feedstock used to create the specific biofuel.
There is a market for RINs and as we produce RFS-compliant biofuel we expect to generate RINs, which can be sold in the open market.
Crop-based renewable fuel has the largest market-share, resulting in all RIN values being subjected to some extent or another to global
agricultural commodity prices as well as the gasoline and diesel markets.
The Inflation Reduction Act is administered by multiple federal agencies including the EPA, U.S. Department of Energy (“DOE”)
and the Internal Revenue Service of the U.S. Department of the Treasury (“IRS”). The goals of the Inflation Reduction Act include
incentivizing the development and production of renewable energy. As of the fiscal year ended September 28, 2024, the EPA, DOE,
and IRS had issued guidance on some aspects of the implementation of the Inflation Reduction Act, but additional relevant guidance,
including a suite of regulations implementing various clean energy tax provisions, is still forthcoming. We cannot speculate on exactly
how the Inflation Reduction Act will continue to be implemented; however, the Act does contain numerous incentives for the production
of clean energy for which certain of our renewable energy products, as well as those produced by Oberon and IH, are expected to qualify.
These incentives include grants, loan guaranties, development funding, investment tax credits, and production tax credits.
At the state level, the CA LCFS, OR CFP, and WA CFS (collectively “LCFS Programs”) are administered by state agencies and
have the goal of reducing GHG emissions from the transportation sector by lowering the CI of transportation fuels. While there are
differences in the CA LCFS, OR CFP, and WA CFS, all LCFS Programs seek to achieve their goals through annual reductions in a
baseline where low CI transportation fuels that are below the baseline generate LCFS Program credits (“LCFS Credits”). In addition to
our renewable energy product offerings, as well as those produced by Oberon and IH, traditional propane, when used as an engine fuel
in LCFS Program states, also qualifies for LCFS Credits. As we sell LCFS Program compliant fuels, we generate LCFS Credits. There
are individual state LCFS Credit markets under the various LCFS Programs, and we can sell our LCFS Credits in these respective open
markets.
Also at the state level, the California Cap-and-Trade Program, the Oregon Climate Protection Program, and the Washington Cap-
and-Invest Program (collectively “Cap-and-Trade Programs”) are administered by state agencies and generally establish a declining
limit on major sources of GHG emissions throughout each respective state. While there are differences in the Cap-and-Trade Programs,
all incorporate fuel suppliers, requiring them to purchase or generate carbon offset credits to compensate for the GHG emissions created
by their business operations. The import or sale of renewable fuel helps emitters meet their obligations.
The climate change regulatory landscape is highly complex and continuously evolving. The further adoption or expansion of
federal, state or local climate change law or regulatory programs to reduce emissions of GHGs and disclose our GHG emissions and
climate-related financial risks could require us to incur increased capital and operating costs, with resulting impact on product price. We
cannot predict whether, or in what form, climate change legislation provisions and renewable energy standards may be enacted, and
what effect such regulation may have on our business, financial condition or operations in the future. In addition, a consequence of
climate change is increased volatility in seasonal temperatures. It is difficult to predict how the market for our products will be affected
by increased temperature volatility, or increased temperatures generally, although if there is an overall trend of unseasonably warmer
temperatures in the winter months, it could adversely affect our business.
11
Future developments, such as stricter environmental, health or safety laws and regulations, could affect our operations. We do not
anticipate that the cost of our compliance with environmental, health and safety laws and regulations, including RCRA and CERCLA,
as currently in effect and applicable to known sites will have a material adverse effect on our financial condition or results of operations.
However, there can be no assurance that our financial condition or operations will not be materially adversely affected by future
discovery of presently unknown environmental liabilities or future environmental regulations.
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.
See the Risk Factor entitled “The ability of AES to acquire and retain retail natural gas and electricity customers is highly
competitive, price sensitive and may be impacted by changes in state regulations” for a description of certain regulatory and litigation
impacts on our AES business.
ESG Strategy and Initiatives
We are committed to delivering safe, reliable, affordable, and low CI energy to our customers and the local communities we
serve. We have made significant progress on our environmental, social and governance (“ESG”) initiatives, which accelerated with
the launch of our Three Pillars of the Suburban Propane Experience in June 2019. The three essential pillars are: i) Go Green with
Suburban Propane, ii) SuburbanCares, and iii) Suburban Commitment to Excellence. We identified these three critical corporate
pillars to emphasize our ongoing commitment to excellence for the safety and comfort of our customers, our dedication to the safety
and career development of our employees, our philanthropic efforts to give back to the communities we serve, our work to advocate
for the inherent environmental advantages of using propane as a clean energy solution, our focus on supporting the sustainability needs
of our customers and our ongoing strategic efforts to invest in and develop innovative solutions to help lead the way to lower GHG
emissions. We are committed to implementing business strategies using a holistic approach to doing what is best for our customers,
employees, the communities we serve and our investors. Effective ESG management for us supports our goal to create long-term
value for our Unitholders and to support the interests of all stakeholders. Our Board of Supervisors takes an active role in overseeing
the management of risks facing Suburban, including those impacted by ESG issues.
In support of our efforts to successfully manage and grow our business, we will continue to identify ways to include more ESG
initiatives in our strategies that support our customers, employees, investors, and the communities we serve, including initiatives that
support our three-pillars strategic plan. Advancing our focus on ESG initiatives will allow for increased engagement across our
business and help us to continue to identify and meet the evolving expectations of our customers, employees, investors, and other
stakeholders.
Environmental Initiatives
Our Go Green with Suburban Propane corporate pillar encompasses our commitment and efforts to promote the versatile,
affordable, low CI and clean air benefits of traditional propane as one solution that can contribute to our customers achieving their
sustainability goals and our efforts to contribute to the goals of reducing the nation’s carbon footprint and having a positive effect on
climate change. Traditional propane is an alternative fuel under the Clean Air Act Amendments. Propane can offer immediate
reductions in carbon emissions and immediate improvements in air quality over other traditional fuels, particularly in the transportation
sector. Propane is non-toxic and emits 60% to 70% fewer smog producing hydrocarbons than gasoline and diesel. Several states have
implemented low-carbon fuel standards that recognize the environmental benefits of using propane to power over-the-road vehicles
and forklifts. Through our dedicated sales efforts, we are actively promoting the use of propane in the transportation sector, and for
the last three fiscal years, we sold an average of nearly 30 million gallons of propane annually to the over-the-road vehicle and forklift
markets.
With advancements in new technologies for the production of propane from renewable sources, as well as other technological
advances to reduce the CI of traditional propane, our Go Green with Suburban Propane corporate pillar also underscores our
commitment to invest in innovative solutions that can contribute to a sustainable energy future. Starting in fiscal year 2020, the
Partnership made great strides in advancing our strategic growth initiatives through our Go Green with Suburban Propane corporate
pillar. Specifically, we contracted for the supply of over 10.0 million gallons annually of renewable propane, to meet customer demand
12
for a renewable energy source. In support of our long-term strategic growth initiative to build out a comprehensive renewable energy
platform, we acquired a 38% equity stake in Oberon, a 25% equity stake in IH, committed to building a dairy waste anaerobic digester
in upstate New York for the production of RNG, and purchased anaerobic digesters operating in Columbus, Ohio and Stanfield,
Arizona. Through our investment in Oberon, we have brought to market a new blended product Propane+rDME. This new product is
a blend of traditional propane and rDME and has a lower CI than the traditional propane product. We are collaborating with Oberon
and others to support continued development efforts to commercialize a Propane+rDME blended product, and have the exclusive right
to market and sell Oberon’s rDME in North America.
Our Go Green with Suburban Propane logo, as well as several other marks that we highlight in our Trademarks and Tradenames
discussion have been registered with the United States Patent and Trademark office in support of our efforts to build a renewable
energy platform. As part of our commitment to innovating for a sustainable energy future, and in further support of our strategic
growth initiatives to build out a renewable energy platform, the Partnership created an executive-level position in fiscal 2021 (reporting
directly to our President and Chief Executive Officer) entitled Vice President, Strategic Initiatives – Renewable Energy. This position
focuses on identifying, analyzing and developing opportunities within the renewable energy space for potential future acquisitions,
partnerships or collaborative arrangements that support the Partnership’s efforts to grow its overall business through investment in,
and development of, innovative solutions that will help pave the way to lowering GHG emissions.
We present information about our commitment to sustainable and environmentally sound practices on the “Go Green” page on
our website, which may be accessed at www.suburbanpropane.com/suburban-propane-experience/go-green. The information included
on our “Go Green” page is not intended to be incorporated by reference into this Annual Report.
Social Initiatives
For nearly a century, our legacy has been defined by an unwavering commitment to safety and exceptional customer service.
Since our humble beginnings as a family-owned business in 1928, we have fostered a culture that is deeply rooted in the communities
we serve across the nation.
At the heart of our mission is the SuburbanCares initiative, which underscores our dedication to philanthropy and community
engagement. Our ongoing partnership with the American Red Cross and our active participation in local sponsorships and events
reflect our passion for making a positive impact. We pride ourselves on creating a workplace that prioritizes employee well-being and
community involvement, supported by our motto: “SuburbanCares about our people and the communities we serve.”
In fiscal year 2024, we intensified our efforts to collaborate with organizations that provide crucial support to families in need,
particularly in underserved areas. This year, our targeted critical areas, including food insecurity, homelessness, poverty, deployed
military service members, and equitable education for children. Through our SuburbanCares efforts, we partnered to deliver vital
services, from sustainable food distribution aiding in hunger relief, to aiding in the construction of shelters. Volunteers assembled
hundreds of hygiene kits for individuals facing hardships and created educational materials for over 3,000 teachers across 135 schools
and childcare centers. Additionally, they distributed thousands of pounds of food and prepared over 500 care packages for deployed
military personnel, each accompanied by handwritten letters from employees. Furthermore, we maintain a strong commitment to our
troops and veterans through our Heroes Hired Here program, which offers meaningful employment opportunities and encourages
employee volunteering at community events.
Together with the American Red Cross, we have organized sickle cell-focused blood drives, fire safety programs, and disaster
relief efforts, all aimed at improving the lives of those facing challenges. Our focus for 2025 remains steadfast: to uplift our
communities, support our employees, and foster a culture of care that transcends our business operations.
Safety
Embedded in our culture and the Partnership’s mission statement is our commitment to safety. We believe that the safety and
well-being of our employees, customers, and communities is of the utmost importance. Safety is a top priority for our business and
we continue to invest in programs, technology, and training to improve safety throughout our operations. We believe that the
achievement of superior safety performance is both an important short-term and long-term strategic initiative in supporting our business
and managing our operations.
Human Capital Management
Our Board, and our management, consider effective talent development and human capital management to be critical components
to the Partnership’s continued success. Our Board is involved in leadership development and actively oversees the Partnership’s
succession planning process, which includes periodic reviews of our talent management strategies, leadership pipeline and succession
planning for key executive positions. Our Board oversees the process of succession planning and the Compensation Committee of our
Board implements programs to compensate, retain and motivate key talent.
13
In further support of our SuburbanCares corporate pillar, and our commitment to building a diverse and inclusive culture, we
have developed many employee-focused initiatives to support employee career development and hiring, such as our “Steer Your
Career” program, which encourages and supports employees to further their education and enhance their knowledge and skills to
prepare them for expanded opportunities and responsibilities; our “Heroes Hired Here” program, in which we take pride in our efforts
to attract and employ military veterans in recognition and appreciation of the values, leadership, dedication and unique skills that they
bring to the Partnership, and support provided to their family members; and our “Apprentice Program,” which provides company-paid,
on-the-job training for apprentices to develop their careers and provides them with the necessary skills and tools to prepare them for a
successful career within the Partnership.
Governance Initiatives
The Board believes that sound corporate governance practices and policies provide an important framework to assist the Board in
fulfilling its duty to Unitholders. Our corporate governance practices and policies, which are periodically reassessed, are reflected in
our committee charters, Code of Business Conduct and Ethics, and our Corporate Governance Guidelines & Principles. A copy of each
is available from our website at www.suburbanpropane.com.
The Partnership was one of the first publicly traded partnerships to eliminate the “incentive distribution rights” of its general
partner, which we completed in 2006. This removed the potential for conflicts of interest between our general partner and limited
partners, and simplified our capital structure. The general partner of both the Partnership and our 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 us or our Operating Partnership. Accordingly, and unlike many publicly traded
partnerships, the Partnership is controlled by our Unitholders through the independently elected Board.
Governance Highlights
Highlights that demonstrate our commitment to sound corporate governance include:
•
Supervisor and Committee Independence
o
Seven of our eight Supervisors are independent, as of September 28, 2024;
o
Our Audit, Compensation and Nominating/Governance Committees are fully independent; and
o
Independent Supervisors chair each of our Committees.
•
Board Leadership and Engagement
o
An independent Supervisor chairs our Board;
o
Independent Supervisors conduct executive sessions at meetings without the presence of members of management;
and
o
Supervisors attended more than 75% of the total number of meetings of the Board and of the Committees of the Board
on which such Supervisor served in fiscal 2024.
•
Board Evaluations and Effectiveness
o
Our Board conducts annual self-assessments to evaluate Board and Committee effectiveness, and identify
opportunities for improving our Board and Committee operations.
•
Clawback, Insider Trading and Anti-Hedging Policies
o
Performance-based incentive awards or payments for our officers are subject to both our Dodd-Frank Clawback Policy
and our Incentive Compensation Recoupment Policy, which permit the Partnership to recoup incentive compensation
in the event of a material restatement of financial results, or other events that negatively impact the Partnership,
including fraudulent or intentional misconduct that results in an adverse impact on our financial performance; and
o
Our Insider Trading Policy prohibits our Supervisors, executive officers and certain other key employees from
engaging in insider trading, or in hedging transactions or derivative investments involving the Partnership’s equity
securities.
•
Share Ownership
o
Our Equity Holding Policy establishes guidelines for the level of equity holdings in the Partnership that Supervisors
and our executive officers are expected to maintain;
o
Supervisors are required to hold Common Units, the value of which is equivalent to 4x the cash portion of their annual
retainer (including additional fees to Committee chairs) no later than the measurement date next following the second
anniversary of the date upon which the Supervisor joined the Board;
o
Our CEO is required to hold Common Units, the value of which is equivalent to 5x base salary; and
o
Other named executive officers are required to hold Common Units, the value of which is equivalent to 2.5x to 3x
their base salary, depending upon their position.
14
Board Diversity Highlights
Our Supervisors have extensive and diverse experience relevant to our business and strategy that enhances the knowledge of our
Board and the insight that they provide the Partnership, including significant experience in the following industries:
•
Retail distribution of energy and other products;
•
Energy infrastructure and logistics;
•
Energy consulting;
•
Original equipment manufacturing;
•
Public policy and government relations;
•
Mergers and acquisitions;
•
Investment banking and financial management; and
•
Business assurance.
Our Supervisors also currently hold, or have held, a diverse range of leadership positions, including:
•
Chairman;
•
President;
•
Vice-President;
•
Chief Executive Officer;
•
Chief Financial Officer;
•
State governor;
•
General external auditor; and
•
Business owner/entrepreneur.
If a vacancy on our Board arises, then our Nominating/Governance Committee is instructed by its charter to consider candidates
from various disciplines and diverse backgrounds that optimally enhance the current mix of talent and experience on the Board. While
industry-specific expertise is an essential component of our Board’s oversight of the Partnership, we consider all aspects of a candidate’s
qualifications and skills in the context of the Partnership’s needs, with a view to creating a Board with a diversity of experience and
perspectives; including diversity with respect to race, gender, age, background and areas of expertise. We also benefit from the
viewpoints of supervisors with expertise outside of our industry and our Nominating/Governance Committee includes, and has any
search firm that it may engage include, women and minority candidates in the pool from which the Nominating/Governance Committee
selects supervisor candidates. Our current slate of seven independent Supervisors has 43% of Supervisors that identify as diverse in
gender, race or ethnicity.
Safety and Ethics Hotline
It is the Partnership’s policy to encourage the communication of bona fide concerns relating to the lawful and ethical conduct of
its business, and its audit and accounting procedures or related matters. It is also the policy of the Partnership to protect those who
communicate their bona fide concerns from any retaliation for such reporting. All employees, customers, vendors and other stakeholders
can communicate concerns by calling our Safety and Ethics Hotline, which is hosted by a third party to maintain confidentiality and
anonymity when requested. Our senior leadership team, along with our Audit Committee, review matters reported through the Safety
and Ethics Hotline. Confidential and anonymous mechanisms for reporting concerns are also available and described in our Code of
Business Conduct and Ethics.
Cybersecurity
The Partnership’s cybersecurity program is based upon the National Institute of Standards of Technology (“NIST”) Cybersecurity
Framework. Our program is comprehensive in scope and covers all of the Partnership’s general corporate Information Technology
(“IT”) systems, as well as operational technology systems supporting our business and the technology systems used by our third-party
service providers. Our senior leadership team, along with our Audit Committee, receive regular and recurring program updates, metrics,
and roadmaps to promote the effectiveness of the program and the alignment with the Partnership’s business objectives. Our program
and controls are periodically reviewed and tested by independent third parties to enable the Partnership to employ industry best practices.
See also Item 1C, below.
Employees
As of September 28, 2024, we had 3,098 full time employees, of whom 612 were engaged in general and administrative activities
(including fleet maintenance), 73 were engaged in transportation and product supply activities and 2,413 were customer service center
15
employees, as well as 113 part time employees. As of September 28, 2024, 55 of our employees were represented by eight different
local chapters of labor unions. We believe that our relations with both our union and non-union employees are satisfactory. In addition,
we hire temporary workers to meet peak seasonal demands.
ITEM 1A.
RISK FACTORS
The following is a cautionary discussion of the most significant risks, uncertainties and assumptions that we believe are significant
to our business and should be considered carefully in conjunction with all of the other information set forth in this Annual Report on
Form 10-K. The risks described below are not an exhaustive list of all of the risks that we face. The risks described below are organized
by category of risks to the Partnership, but are not necessarily listed by order of priority or materiality. In addition to the factors
discussed elsewhere in this Annual Report on Form 10-K, the factors described in this item could, individually or in the aggregate,
cause our actual results to differ materially from those described in any forward-looking statements. Should unknown risks or
uncertainties materialize or underlying assumptions prove inaccurate, actual results could materially differ from past results and/or
those anticipated, estimated or projected. Achievement of future results is subject to risks, uncertainties and potentially inaccurate
assumptions. In this case, the trading price of our Common Units could decline and you might lose part or all of the value in our
Common Units. Investing in our Common Units involves a high degree of risk. Past financial performance may not be a reliable
indicator of future performance and historical trends should not be used to anticipate results or trends in future periods. 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.
RISK FACTORS SUMMARY
Below is a summary of material factors that make an investment in our Common Units speculative or risky:
Risks Related to our Business:
•
reduced demand for propane, renewable propane, fuel oil and other refined fuels, natural gas, renewable natural gas
(“RNG”), and electricity (combined, “our products”) due to weather conditions;
•
the potential effects of climate change;
•
increased costs and reduced demand for our products and services due to climate change legislation;
•
deterioration of general economic and other external conditions;
•
disruption of our supply chain;
•
sudden increases in our products and transportation costs;
•
customer conservation and reduced demand due to price changes;
•
the highly competitive nature of the retail propane and fuel oil businesses;
•
reduced demand due to energy efficiency, economic conditions, technological advances and legislative bans;
•
attracting and retaining qualified employees or finding, developing and retaining key employees;
•
dependency on our senior management and other key personnel;
•
conflict, political unrest and other hostilities in regions affecting the economy and the price and availability of our products;
•
the conflicts in Ukraine and the Middle East and related price volatility and geopolitical instability;
•
governmental regulation and associated costs related to permitting and environmental, health and safety compliance;
•
acquiring and retaining retail natural gas and electricity customers;
•
costs associated with lawsuits, investigations or increases in legal reserves;
•
making acquisitions on economically acceptable terms and effectively integrating such acquisitions;
•
current conditions in the global capital and credit markets, and general economic pressures;
•
credit and regulatory risk resulting from derivative contracts;
•
adverse impacts on our renewable fuel investments;
•
a prolonged environment of low prices or reduced demand for RNG;
•
the availability or value of environmental attributes and tax credits due to state or federal regulations;
•
the performance of our newly constructed, renovated or developed anaerobic digester facilities;
•
reliance on gas pipelines that we do not own or control;
•
growth and diversification plans may not be successful or could expose us to new risks;
•
reliance on particular management information systems and communication networks;
•
cybersecurity breaches of our systems and information technology or those of our third-party vendors; and
•
compliance with data privacy and security laws, rules and regulations that are subject to change and interpretation.
16
Risks Related to our Indebtedness and Access to Capital:
•
current and future debt obligations limiting our financial flexibility;
•
operating results and generation of cash flows are subject to our ability to continue to control expenses; and
•
disruptions in the capital and credit markets, including the availability and costs of debt and equity issuances.
Risks Related to our Common Units:
•
fluctuations in cash distributions due to our performance and other external factors;
•
limited voting rights of Unitholders;
•
the difficulties of a third party acquiring us even if beneficial to our Unitholders;
•
the lack of limited liability for our Unitholders in some circumstances;
•
liability of our Unitholders to repay distributions in some circumstances; and
•
future dilution and additional taxable income being allocated to each Unitholder.
Tax Risks to our Unitholders:
•
tax treatment as a partnership for U.S. federal income tax purposes;
•
legislative, judicial or administrative changes and differing interpretations of tax treatment of partnerships;
•
potential audit adjustments to our income tax returns for prior tax years by the IRS;
•
successful IRS contests of the U.S. federal income tax positions we take;
•
tax liability exceeding cash distributions on Common Units;
•
adverse tax consequences for tax-exempt organizations and foreign investors;
•
limitations on the ability of a Unitholder to deduct its share of our losses;
•
tax gain or loss on the disposition of Common Units being different than expected;
•
inaccuracy or lack of timeliness in our reporting of partnership tax information;
•
the IRS challenging our treatment of each purchaser of our Common Units as having the same tax benefits;
•
the IRS challenging our treatment of how we prorate our items of income, gain, loss and deduction;
•
negative tax consequences due to defaults on debt or sales of assets;
•
state, local and other tax considerations; and
•
the potential consequences of a Unitholder loaning Common Units to a “short seller” to cover a short sale.
RISKS RELATED TO OUR BUSINESS
Because weather conditions may adversely affect demand for our products, our results of operations and financial condition are
vulnerable to warm winters and natural disasters.
Weather conditions have a significant impact on the demand for our products, 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 and
length of the winter months. 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. Weather conditions can vary substantially from year to year in the regions
in which we operate, which could significantly impact the demand for our products and our financial performance and condition. The
agricultural demand for propane is also affected by the weather, as dry or warm weather during the harvest season may reduce the
demand for propane used in some crop drying applications for which we service.
Actual weather conditions can vary substantially from year to year, significantly affecting our financial performance. For example,
average temperatures in our service territories were 10% warmer than normal for fiscal 2024, 8% warmer than normal for fiscal 2023
and 10% warmer than normal for fiscal 2022, as measured by the number of heating degree days reported by the National Oceanic and
Atmospheric Administration. This trend of warmer than normal temperatures has had, and if it continues, could continue to have, a
negative impact on our financial performance by reducing demand for our product in the future. 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 regions. 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.
17
If the frequency or magnitude of significant weather conditions or natural disasters such as floods, droughts, wildfires, hurricanes,
blizzards or earthquakes increase, as a result of climate change or for other reasons, our results of operations and our financial
performance could be negatively impacted by the extent of damage to our facilities or to our customers’ residential homes and business
structures, or of disruption to the supply or delivery of the products we sell.
The potential effects of climate change may affect our business, operations, supply chain and customers, which could adversely
impact our financial condition and results of operations.
Shifts and fluctuations in weather patterns and other environmental conditions, including temperature and precipitation levels,
may affect consumer demand for our energy products and services. In addition, the potential physical effects of climate change, such
as increased frequency and severity of storms, floods and other climatic events, could disrupt our operations and supply chain, and cause
us to incur significant costs in preparing for or responding to these effects. These or other meteorological changes could lead to increased
operating costs, capital expenses or supply costs. Our customers may also experience the physical impacts of climate change and may
incur significant costs in preparing for or responding to these potential impacts, including increasing the mix and resiliency of their
energy solutions and supply, which may adversely impact their ability to pay for our products and services or decrease demand for our
products and services. The impact of any one or all of the foregoing factors may adversely affect our financial condition and results of
operations.
The adoption of climate change legislation could negatively impact our operations and result in increased operating costs and
reduced demand for the products and services we provide.
The U.S. Environmental Protection Agency (“EPA”) issued an Endangerment Finding under the federal Clean Air Act, which
determined that emissions of greenhouse gases (“GHG”), such as carbon dioxide, present an endangerment to public health and the
environment because emissions of such gases may be contributing to the warming of the earth’s atmosphere, volatility in seasonal
temperatures, increased frequency and severity of storms, floods and other climatic changes. Based on these findings, the EPA has
begun adopting and implementing regulations to restrict emissions of GHGs from certain industries and require reporting by certain
regulated facilities.
EPA leadership through 2024 has prioritized climate change mitigation measures and has implemented regulations requiring
significant reductions in GHG emissions. Changes in the White House and EPA administration may result in changes to the EPA’s
prioritization of climate change mitigation measures. EPA is also prioritizing environmental justice issues, which may impact how the
agency addresses environmental and climate change matters and effects on communities facing disadvantages. We cannot predict the
impact of future changes to the EPA’s prioritization of climate change mitigation or the impact of future GHG legislation or regulations
on our business, financial condition or operations in the future.
Numerous states, municipalities and regulators have also adopted or proposed laws, regulations and policies on climate change,
including GHG emission reduction targets and climate disclosure. For example, in July 2019, the Climate Leadership and Community
Protection Act was signed into law in New York, establishing a statewide climate action framework which includes a target to reduce
net GHG emissions to 85% of 1990 levels by 2050. With respect to disclosure, in March 2024, the SEC adopted climate-change related
disclosure rules requiring disclosure of Scope 1 and Scope 2 GHG emissions (but not Scope 3 GHG emissions as originally proposed)
and mandating independent attestation as to such disclosures. The SEC’s rules are subject to multiple legal challenges, which have been
consolidated in the U.S. Court of Appeals Eighth Circuit, and on April 4, 2024, the SEC voluntarily stayed the effective date of the
legislation pending judicial resolution of the lawsuits filed. Some states are also beginning to propose or adopt their own climate change
disclosure requirements that, if implemented, would require significant time and expense to collect and prepare the disclosure
requirements. For example, in October 2023, California became the first state to pass its own far-reaching mandatory disclosure bills
which require any entity doing business in California that meets certain annual revenue thresholds to annually disclose publicly and
provide independent third-party attestation on its Scope 1 and Scope 2 GHG emissions beginning in 2026 for the prior fiscal year, and
on its value chain (Scope 3) GHG emissions beginning in 2027, and biennially disclose its climate-related financial risk beginning in
2026. Similar to the SEC rulemaking, the California climate disclosure legislation is also subject to pending legal challenges in federal
court in the Northern District Court of California.
The adoption of federal, state or local climate change legislation or regulatory programs to reduce emissions of GHGs and comply
with disclosure obligations could require us to incur increased capital and operating costs, with resulting impact on product price and
demand. We cannot predict when or in what form climate change legislation provisions and renewable energy standards may be enacted
and what the impact of any such legislation or standards may have on our business, financial conditions or operations in the future. 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 changes in regulations or increased temperature volatility, although if there is an overall trend
of warmer winter temperatures, it could adversely affect our business.
18
The generation and monetization of environmental attributes and available tax credits or other incentives resulting from our
investments in Oberon and IH, our construction and operation of anaerobic digesters through our wholly owned subsidiary, Suburban
Renewable Energy, LLC, and our sale of renewable propane, are contingent on several state and federal programs, including the federal
Renewable Fuel Standard program (“RFS”), the Inflation Reduction Act, the Infrastructure Investment and Jobs Act, the California Low
Carbon Fuel Standard (“CA LCFS”), the Oregon Clean Fuels Program (“OR CFP”), and the Washington Clean Fuel Standard (“WA
CFS”). A number of other states are also considering the adoption of low carbon fuel standards, with New Mexico authorizing a Clean
Transportation Fuel Standard that will go into effect by June 1, 2026. New legislation, changes to the enabling legislation, changes in
governmental guidance and/or changes in the regulations implementing those programs could change, or eliminate, the availability and
value of a biofuel’s renewable identification number (“RIN”) or Low Carbon Fuel Standard credit (“LCFS Credit”), as well as
investment tax credits and production tax credits currently available under the Inflation Reduction Act. Additionally, the markets where
RINs and LCFS Credits are traded, have experienced volatility over past years and may experience continued volatility in the future.
There is increasing interest at the federal, state, and local level to further reduce GHG emissions by promoting electrification,
incentivizing the production of renewable energy and disincentivizing the use of fossil fuels. While our emerging renewable energy
platform may benefit from additional incentives for the growth of renewable energy, our sale of propane, fuel oil and refined fuels, and
natural gas may experience significant negative impact from the restrictions placed on the use of fossil fuels. We cannot predict what
impact changes to existing federal, state, or local programs designed to reduce GHG emissions and address climate change may have
on our business. Nor can we predict what impact the creation of future federal, state, and local programs designed to reduce GHG
emissions and address climate change will have on our business.
The federal, state and local climate change regulatory landscape is highly complex and rapidly and continuously evolving. Failure
to comply with these regulations and any future laws and regulations designed to reduce GHG emissions and address climate change,
could result in the imposition of higher costs, penalties, fines, or restrictions on our operations. We cannot predict the impact these and
future regulations, and the unattainability, reduction or elimination of government and economic incentives could have on our business,
financial conditions or results of operation.
Deterioration of general economic and other external conditions have harmed and could continue to harm our business and results
of operations.
Our business and results of operations have been, and may continue to be, adversely affected by changes in national or global
economic and other external conditions, including inflation, interest rates, availability of capital markets, consumer spending rates,
unemployment rates, energy availability and costs, the negative impacts caused by pandemics and public health crises, geopolitical
conflict and the effects of governmental initiatives to manage economic conditions.
Volatility in financial markets and deterioration of national and global economic conditions have impacted, and may again impact,
our business and operations in a variety of ways, including as follows:
•
our customers may reduce their discretionary spending, or may forego certain purchases altogether, during economic
downturns, and may reduce or delay their payments for our products as a result of significant unemployment or an inability
to operate or make payments;
•
if volatile or negative economic conditions continue to impact our customers, it could lead to customer conservation efforts
and increases in customer payment default rates or related challenges in collecting on accounts receivable;
•
if a significant percentage of our workforce is unable to work, including because of illness or government travel restrictions,
our operations may be negatively impacted;
•
decreased demand in the residential, commercial, industrial, government, agricultural or wholesale markets may adversely
affect the market for our products and the performance of our business;
•
volatility in commodity and other input costs could substantially impact our result of operations;
•
if our indebtedness increases, or our consolidated EBITDA declines, it could adversely affect our liquidity and lead to
increased risks of default under our credit agreement;
•
it may become more costly or difficult to obtain debt or equity financing to fund investment opportunities, or to refinance
our debt in the future, in each case on terms and within a time period acceptable to us; and
•
climate change, environmental, social and corporate governance issues and uncertainty regarding regulation of such matters
may increase our operating costs, impact our access to capital markets and potentially reduce the value of, or demand for,
our products.
Disruption of our supply chain could have an adverse impact on our business and our operating results.
Damage or disruption to our supply chain, including third-party production or transportation and distribution capabilities, due to
weather, including any potential effects of climate change, natural disasters, fires or explosions, terrorism, pandemics, strikes,
geopolitical conflict, government action, economic and operational considerations of producers and refineries, or other reasons beyond
19
our control or the control of our suppliers and business partners, could impair our ability to acquire sufficient supplies of the products
we sell.
We have actively monitored and managed supply chain and logistical (including transport) issues and disruptions in the past.
Although we source our propane, fuel oil and refined fuels and natural gas from a broad group of suppliers, restrictions on businesses
or volatility in the economy or supply chain could cause global supply, logistics and transport of these fuels to become constrained,
which may cause the price to increase and/or adversely affect our ability to acquire adequate supplies to meet customer demand. The
disruptions to the global economy over the past several years have impeded global supply chains, resulting in longer lead times and
increased freight expenses in general. We have taken steps to minimize the impact of these increased costs by working closely with our
suppliers and customers, and strategically managing our purchasing functions and logistics in delivering our products and services.
Despite the actions we have undertaken to minimize the impacts from disruptions to the global economy, there can be no assurances
that unforeseen future events in the global supply chain, our ability to deliver our products and services or the costs associated therewith,
will not have a material adverse effect on our business, financial condition and results of operations.
Sudden increases in our costs to acquire and transport our products 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, or
inflationary conditions, 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 prices. 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,
including the severity and length of winter weather, natural disasters, the price and availability of competing alternative energy sources,
competing demands for the products (including for export) and infrastructure (including highway, rail, pipeline and refinery) constraints,
general inflationary pressures or delays in shipping availability, backlogs at shipping ports or other points of entry and lack of available
trucking or other shipping means. 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 may be materially higher at least on a short-term basis.
Because we may not be able to pass on to our customers immediately, or in full, all increases in our wholesale and transportation costs
of our products, these increases could reduce our profitability. Due to high inflation in the United States in recent years, we have
experienced higher commodity, transportation and labor costs and increased cost of tanks and other equipment, which have impacted
our profitability in recent periods; while inflationary pressures have decreased in recent periods, additional periods of high inflation
could negatively impact 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 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.
High prices for propane, fuel oil and other refined fuels and natural gas can lead to customer conservation, resulting in reduced
demand for our products.
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. Heightened levels of uncertainty related to the ongoing geopolitical conflicts
around the world may lead to additional economic sanctions by the United States and the international community and could further
disrupt financial and commodities markets. 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
with high product costs for propane, fuel oil and other refined fuels and natural gas, our selling prices generally increase. High prices
can lead to customer conservation, resulting in reduced demand for our products. Higher commodity, transportation and labor costs due
to inflationary conditions in recent periods have impacted wholesale prices and caused certain customers to reduce their consumption
of energy, which had a negative impact on our sales and profitability during those periods. Future periods of high inflation could also
have a negative impact.
20
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 or attract 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 perceived uncertainty
about 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 areas that previously depended upon
propane or fuel oil. Propane and fuel oil compete to a lesser extent with each other due to the cost of converting from one source 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. We also anticipate
that the renewable energy market will be increasingly competitive, which could impact our ability to meet our long-term strategic growth
initiatives.
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 well-run retail distributors, open new customer service centers, acquire or attract new customers and retain
existing customers. We can give no assurance that we will be able to acquire other retail distributors, open new customer service centers,
or add new customers or retain existing customers.
Energy efficiency, general economic conditions, technological advances and legislative bans have affected and may continue to
affect demand for propane, fuel oil and natural gas by our retail customers.
The national trend toward increased conservation and technological advances, including installation of improved insulation and
other advancements in building materials, as well as the development of more efficient furnaces and other heating and energy sources,
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, perceived uncertainty about 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 economic weakness may adversely affect our volumes sold, which, in turn, may
adversely affect our financial condition and results of operations. In addition, in an effort to reduce GHG emissions and promote
electrification, a growing number of state and local governments in the regions in which we operate have passed, or may be considering,
bans on the use of gas in residential and commercial buildings, which may also adversely affect demand for propane, fuel oil and natural
gas, which, in turn, may adversely affect our financial condition and results of operations.
While such restrictions could have an adverse impact on the demand for certain of our products in those jurisdictions, they may
have a favorable impact on our emerging renewable energy products. Additionally, there are also many states that have passed laws
that prohibit local governments from restricting gas use in buildings. We cannot predict how many other states and localities will adopt
similar laws either restricting or prohibiting the restriction of gas used in residential or commercial buildings. We also cannot predict
whether similar restrictions will be expanded to other fossil-based fuels, and what the impact will be on our financial condition and
results of operations.
We may not be able to attract and retain qualified employees or find, develop and retain key employees to support and grow our
business, which may adversely affect our business and results of operations.
Like most companies in the markets in which we operate, we are continuously challenged in attracting, developing and retaining
a sufficient number of qualified employees to operate our businesses throughout our operating geographies, particularly with regard to
our driver and technician positions. Our industry in general, as well as the overall trucking industry, is currently experiencing a shortage
of qualified drivers and technicians that is exacerbated by several factors, including:
21
•
an overall market where high driver turnover exists due to an increased number of alternative employment opportunities;
•
increased competition for drivers and technicians in the industry, which impacts compensation for those positions; and
•
a changing workforce demographic with a lack of younger employees who are qualified to join or replace more tenured
drivers and technicians as they retire.
We may also have difficulty recruiting and retaining new employees beyond our driver and technician positions with adequate
qualifications and experience. The challenge of hiring new employees at times is further exacerbated by the rural nature of our business,
which provides for a smaller pool of skilled employee candidates who meet our hiring criteria and the licensing and qualification
requirements that may exist for certain types of positions such as our driver and technician positions. If we are unable to continue to
attract and retain a sufficient number of new employees or retain existing employees with the technical skills upon which our business
depends, we may be forced to adjust our compensation packages to pay higher wages, or offer other benefits that might impact our cost
of labor, or force us at times to operate with fewer employees and face difficulties in meeting delivery demands for our customers, in
particular during times of higher demand as a result of prolonged periods of cold weather or otherwise, any of which could adversely
affect our profitability and results of operations.
We are dependent on our senior management and other key personnel.
Our success depends on our senior management team and other key personnel with technical skills upon which our business
depends and our ability to effectively identify, attract, retain and motivate high quality employees, and replace those who retire or resign.
We believe that we have an experienced and highly qualified senior management team and the loss of service of any one or more of
these key personnel could have a significant adverse impact on our operations and our future profitability. Failure to retain and motivate
our senior management team and to hire, retain and develop other important personnel could generally impact other levels of our
management and operations, ability to execute our strategies and adversely affect our business and results of operations.
The risk of terrorism, political unrest and the current hostilities in the Middle East or other energy producing regions, including
Russian military action in Ukraine, has adversely affected, and may continue to 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 hostilities, and military action in the Middle East or other energy producing regions could
likely lead to increased volatility in 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 impact our revenues or restrict our future growth. Instability in the financial markets as a result of terrorism or
military conflict could also affect our ability to raise capital. The ongoing geopolitical conflicts around the world, including in Ukraine
and in the Middle East, have caused, and could intensify, volatility in the price and supply of natural gas, oil, and propane and other
refined fuels. 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.
The conflicts in Ukraine and in the Middle East and related price volatility and geopolitical instability could negatively impact our
business.
Since February 2022, Russia has continued significant military action against Ukraine. Since October 2023, with the launch of
the Israel-Hamas war, there has been increased hostilities in the Middle East. These geopolitical conflicts have caused, and could
intensify, volatility in the price and supply of propane, fuel oil and other refined fuels and natural gas. The extent and duration of the
military action, economic sanctions and resulting market disruptions have been and could continue to be significant and could potentially
have a substantial negative impact on the global economy and/or our business for an unknown period of time. To the extent that the
Russian military action in Ukraine or the Israel-Hamas war continues and related price volatility and geopolitical instability continue,
and to the extent that military action intensifies in those regions or in other parts of the world, which may further increase volatility in
the price and supply of propane, fuel oil and other refined fuels and natural gas, our business and results of operations could be adversely
impacted.
22
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 range of federal, state and local laws and regulations related to environmental, health and safety
matters; including those concerning, among other things, the investigation and remediation of contaminated soil, groundwater and other
environmental resources, the transportation of hazardous materials and guidelines and other mandates with regard to the health and
safety of our employees and customers. 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 and equipment, some of which are
material to our operations. There can be no assurance that we have been, or will 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 contamination, could result in significant
expenditures, including the need 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.
The ability of AES to acquire and retain retail natural gas and electricity customers is highly competitive, price sensitive and may be
impacted by changes in state regulations.
The deregulated retail natural gas and electricity industries in which AES participates are highly competitive. New York has
instituted significant regulation of these industries, and other states have changed business rules to provide further protections to
consumers. An Order from the NY PSC regarding low income consumers went into effect in 2018 and required that all ESCOs stop
serving low-income consumers. As a result, AES returned approximately 8,400 of our customers to local utility service. A Reset Order
issued by the NY PSC in 2016 attempted to impose rules that would have allowed the NY PSC to regulate ESCO pricing, which was
subsequently challenged and struck down by the New York Supreme Court. On appeal, the New York State Court of Appeals issued a
ruling in 2019 that held that the NY PSC cannot regulate ESCO pricing, but does have the ability to restrict an ESCO’s access to the
utility distribution system if the NY PSC determines that an ESCO’s pricing is not “just and reasonable.” In December 2019, the NY
PSC issued a Second Reset Order that imposed product, pricing, and other requirements on ESCOs. AES was specifically and solely
exempted from complying with the criteria concerning product offerings during the pendency of further rulemaking proceedings. In
September 2020, the NY PSC issued another Order reaffirming the Second Reset Order, including the exemption that allows AES to
maintain its existing business model in New York while rulemaking proceedings continue.
The State of New York amended Section 349-d of the New York General Business Law (“GBL”) effective on March 18, 2024,
to require that energy service companies that operate in the state, such as AES in connection with its natural gas and electricity business,
first obtain written consent from the customer before any change in commodity prices can be charged to the customer. To date, the
amended statute has not had a material negative impact on AES, but the Partnership continues to assess the impact that the GBL
amendment may have in the future on its natural gas and electricity business. In addition, the NY PSC has issued notice of rulemaking
for amendments to its Uniform Business Practices (“UBP”), that will apply to AES and other energy supply companies that operate in
the state. The proposed UBP amendments, if adopted, will require AES to provide notice each month to its customers that includes a
historical comparison between the rates charged by AES and what the customer would have paid had they remained with their existing
utility. We anticipate that the additional notice requirements mandated by the NY PSC could have a negative effect on customer
retention for energy supply companies, which could have an adverse impact on our business and operations.
These industries have also seen an increase in the number of class action lawsuits brought against retailers and relating to their
pricing policies and practices. Two such lawsuits were commenced against AES in 2017 and 2018, involving New York and
Pennsylvania customers, respectively. AES filed motions to dismiss both actions on procedural and substantive grounds. The United
States District Court for the Western District of Pennsylvania granted AES’s motion and dismissed the plaintiff’s complaint with
prejudice, finding that AES did not breach its contract or defraud customers. In August of 2020, the Third Circuit Court of Appeals
affirmed the dismissal of plaintiff’s complaint. In the New York action, the United States District Court for the Northern District of
New York granted AES’ dismissal motion in part in October 2018, but allowed plaintiff’s statutory consumer fraud and breach of
contract causes of action to proceed. The complaint alleged a number of claims under various consumer statutes and common law in
New York regarding pricing offered to electricity customers in the state. The case was ultimately dismissed by the District Court and
the dismissal was affirmed by the Second Circuit Court of Appeals in December 2023.
23
Costs associated with lawsuits, investigations or increases in legal reserves that we establish based on our assessment of contingent
liabilities could adversely affect our operating results to the extent not covered by insurance.
Our operations expose us to various claims, lawsuits and other legal proceedings that arise in and outside of the ordinary course
of our business. We may be subject to complaints and/or litigation involving our customers, employees and others with whom we
conduct business, including claims for bodily injury, death and property damage related to operating hazards and risks normally
associated with handling, storing and delivering combustible liquids such as propane, fuel oil and other refined fuels or claims based on
allegations of discrimination, wage and hourly pay disputes, and various other claims as a result of other aspects of our business. We
could be subject to substantial costs and/or adverse outcomes from such complaints or litigation, which could have a material adverse
effect on our financial condition, cash flows or results of operations.
From time to time, our Partnership and/or other companies in the segments in which we operate may be reviewed or investigated
by government regulators, which could lead to tax assessments, enforcement actions, fines and penalties or the assertion of private
litigation claims. It is not possible to predict with certainty the outcome of claims, investigations and lawsuits, and we could in the
future incur judgments, taxes, fines or penalties, or enter into settlements of lawsuits or claims that could have an adverse impact on our
financial condition or results of operations. 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, that these
levels of insurance will be available at economical prices in the future, or that all legal matters that arise will be covered by our insurance
programs.
As required by accounting principles generally accepted in the United States (“GAAP”), we establish reserves based on our
assessment of actual or potential loss contingencies, including contingencies related to legal claims asserted against us. Subsequent
developments may affect our assessment and estimates of such loss contingencies and require us to make payments in excess of our
reserves, which could have an adverse effect on our financial condition or results of operations.
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. In contrast to the propane and fuel oil industries, the
renewable energy industry is rapidly growing, and we expect the renewable energy industry to continue to grow rapidly for the next
several years. As a result, we may engage in strategic transactions involving the acquisition of, or investment in, other retail propane
and fuel oil distributors, other energy-related businesses or other related cross-functional lines of business, including renewable energy
technologies and businesses as part of our long-term strategic growth initiatives.
The competition for propane, fuel oil, and renewable energy acquisitions is intense and we can make no assurance that we will be
able to successfully acquire other businesses on economically acceptable terms or at all, or, if we do, that we can integrate and operate
those acquired businesses effectively or in a way to realize the expected benefits of such transactions within the anticipated timeframe,
or at all, such as cost savings, synergies, tax benefits, sales and growth opportunities. In addition, the integration of an acquired business
may result in material unanticipated challenges, expenses, liabilities or competitive responses, including:
•
a failure to implement our strategy for a particular strategic transaction, including successfully integrating the acquired
business into our existing infrastructure, or a failure to realize value from a strategic investment;
•
inconsistencies between our standards, procedures and policies and those of the acquired business;
•
costs or inefficiencies associated with the integration of our operational and administrative systems;
•
an increased scope and complexity of our operations, as well as those of our strategic investments, which could require
significant attention from management and could impose constraints on our operations, as well of those of our strategic
investments, or other projects;
•
unforeseen expenses, delays or conditions, including required regulatory or other third party approvals or consents, or
provisions in contracts with third-parties that could limit our flexibility to take certain actions;
•
unexpected or unforeseen capital expenditures associated with acquired businesses or assets to maintain business in the
ordinary course;
•
our ability to continue to monetize certain environmental and/or tax attributes or benefits that may be produced through our
renewable energy acquisitions or assets;
24
•
an inability to retain the customers, employees, suppliers and/or business partners of the acquired business or generate new
customers or revenue opportunities through a strategic transaction;
•
the costs of compliance with local or federal laws and regulations and the implementation of compliance processes, as well
as the assumption of unexpected liabilities, litigation, penalties or other enforcement actions; and
•
higher than expected costs arising due to unforeseen changes in tax, trade, environmental, labor, safety, payroll or pension
policies.
Any one of these factors could result in delays, increased costs or decreases in the amount of expected revenues related to
combining the businesses or derived from a strategic transaction and could adversely impact our financial condition or 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. Conditions in the global capital
and credit markets, as well as general economic pressures, including high inflation and temporary or prolonged recessionary conditions,
could impact consumer and/or business confidence and increase market volatility, which could negatively affect business activity
generally. This situation, 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, any disruptions in the United States residential mortgage market (as a result of changes in tax laws or
otherwise) 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 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. Transactional, margin, capital, recordkeeping,
reporting, clearing and other requirements imposed on parties to derivatives transactions as a result of legislation 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.
Our renewable fuel investments are subject to a number of risks, including the willingness of customers to adopt these fuels, the
financing, construction and development of facilities, our ability to generate a sufficient return on our investments, our dependence
on third-party partners, increased or changing regulation, and dependence on government incentives for commercial viability.
We have expanded our Go Green with Suburban Propane corporate pillar with our investments in renewable and low-carbon
energy sources offered through our investments in Oberon and IH, our agreement to build an anaerobic digester at Adirondack Farms,
our purchase of RNG production and distribution assets through SuburbanRNG – Columbus and SuburbanRNG – Stanfield and our
sales of renewable propane. The success of these businesses and investments is subject to a number of factors and risks, including
unpredictability and uncertainty as to the willingness of customers in their intended markets to adopt the use of these fuels, which will
be dependent upon perceptions about the benefits of these fuels relative to other alternative fuels; increases, decreases or volatility in
demand; on-site operational constraints such as the availability of feedstock or the reliable operation of anaerobic digesters with respect
to production of renewable fuels; use and prices of crude oil, gasoline and other fuels and energy sources; and the adoption or expansion
of government policies, programs, funding or incentives in favor of these or alternative fuels.
We may also face increasing competition from other companies seeking to produce fuels from alternative sources. If we are
unable to establish feedstock supplies and production and sales channels that allow us to offer comparable products at attractive prices,
we may not be able to compete effectively with these companies.
The success of our existing and future investments in our renewable energy platform will depend on our ability to successfully
develop, market and distribute the specific renewable energy products. In addition, the acquisition, financing, construction, development
and operation of these projects involves numerous risks, including:
•
the ability to obtain financing for a project on acceptable terms or at all;
•
difficulties in identifying, obtaining, and permitting suitable sites for new projects;
•
failure to obtain all necessary rights to land access and use;
25
•
inaccuracy of assumptions with respect to the cost and schedule for completing construction;
•
project delays, including delays in deliveries or increases in the price of labor, equipment or feedstock;
•
on-site operational issues relating to the availability of feedstock for the anaerobic digesters or other issues relating to the
reliable production of projectable quantities of renewable natural gas; labor shortages; and
•
legal challenges by local populations, permitting and other regulatory issues, license revocation and changes in legal
requirements.
We will compete with other companies and private equity sponsors for acquisition opportunities, which may increase our costs or
cause us to refrain from making acquisitions. We are constructing a natural gas upgrade system at SuburbanRNG – Columbus that
requires capital expenditures and there is no guarantee that the project will be completed on time or on budget, and our operations could
be adversely affected by disruptions or delays which could have a negative impact on revenues and operations. The development of
these products may also be negatively affected by production risks resulting from mechanical breakdowns, faulty technology,
competitive markets, labor shortages or changes to the laws and regulations that mandate the use of renewable energy sources, and the
other regulatory risks discussed above under the caption, “The adoption of climate change legislation could negatively impact our
operations and result in increased operating costs and reduced demand for the products and services we provide.”
A prolonged environment of low prices or reduced demand for RNG could have an adverse effect on our long-term business
prospects, financial condition and results of renewable operations.
Long-term RNG prices may fluctuate substantially due to factors outside of our control, including the market price of
environmental attributes, which have historically been a very volatile market and influenced by numerous factors including global
commodity markets. If we are unable to renew or replace an off-take agreement for a project for a certain volume of RNG produced, we
would be subject to the risks associated with selling that volume of RNG produced at then-current market prices. We may be required
to make such sales at a time when the market prices for natural gas, RNG, or environmental attributes as a whole or in the regions where
those volumes are produced, are depressed. If this were to occur, we would be subject to the volatility of market prices and be unable to
predict our revenues from such volumes, and the sales prices for such RNG may be lower than what we could sell the RNG for under
an alternative off-take agreement.
A decline in prices for certain fuels or reduced government incentives for renewable energy sources, or RNG specifically, could
make our renewable investments less cost-competitive on an overall basis. Slow growth or a long-term reduction in overall demand for
energy could have a material adverse effect on our business strategy and could, in turn, have an adverse effect on our long-term business
prospects, financial condition and results of renewable energy operations.
The generation and monetization of environmental attributes by our renewable natural gas assets are subject to state and federal
regulations and potential changes in law that could negatively impact the availability or value of environmental attributes in the
future.
The generation and monetization of the environmental attributes resulting from our renewable natural gas assets and our sale of
renewable propane are contingent on several state and federal programs; including the RFS, the Inflation Reduction Act, the
Infrastructure Investment and Jobs Act, CA LCFS, OR CFP, and WA CFS. A number of other states are also considering adoption of
low carbon fuel standards, with New Mexico authorizing a Clean Transportation Fuel Standard that will go into effect by June 1, 2026.
New legislation, changes to the enabling legislation and/or changes in the regulations implementing those programs, and/or the issuance
of new regulations or other governmental guidance, could impact, or eliminate the availability and value of RINs and LCFS Credits,
and/or the investment tax credits and production tax credits available under the Inflation Reduction Act. Current regulatory proposals
under consideration for the CA LCFS could adversely impact the assessment of carbon intensity (“CI”) for fuel produced outside of the
state and perhaps even effectively curtail qualifying deliveries into the state. Additionally, the markets where RINs and LCFS Credits
are traded, have experienced significant volatility in the past and continued volatility in the future may adversely impact the value of
RINs and LCFS Credits sold by us. The price for all credits is impacted by global markets for feedstocks, such as crops and used
cooking oil, as well as global markets for crude oil, making the RIN market historically volatile. Currently, income from RIN and LCFS
Credits is not material to our results of operations; however, as we continue to invest in the build-out of our renewable energy platform,
we anticipate increased RIN and LCFS Credits income, as well as financial benefits from investment tax credits and production tax
credits.
26
There is increasing interest at the federal, state, and local level to further regulate GHG emissions by incentivizing the production
of renewable energy and disincentivizing the use of fossil fuels and in some cases, force the electrification of several aspects of the
economy. There are also efforts to electrify our economy, including goals and mandates at the federal and state level for auto
manufacturers to produce, and for governments to acquire, zero-emission vehicles in the upcoming years. Cap and Trade, or Cap and
Invest, programs that put a price on carbon emissions have been adopted in California, Oregon and Washington state, and are being
developed in other states like New York. The CA LCFS, OR CFP and WA CFS incentivize production of renewable electricity for
transportation fuel use. Given the ongoing development of such programs, including legal and administrative challenges, there is great
uncertainty about the future value of environmental attributes and the regulatory impact of these programs. There is also market
uncertainty around the calculation and verification of CI scoring for projects, with some lobbying for government programs to disallow
“book and claim” accounting for projects or ignoring the carbon-negative emission calculations associated with the capture of methane
for renewable natural gas in GHG lifecycle accounting methodologies where the renewable natural gas is ultimately used as a fuel with
emissions at the final point of fuel production or use. While our emerging renewable energy platform may benefit from additional
incentives for the growth of renewable energy, it is possible, especially in the short term, that such growth will be outweighed by
regulatory uncertainty and restrictions placed on our sale of propane, fuel oil and refined fuels, and natural gas. We cannot predict what
impact changes to existing federal, state, or local programs designed to reduce GHG emissions and address climate change may have
on our business. Nor can we predict what impact the creation of future federal, state, and local programs designed to reduce GHG
emissions and address climate change will have on our business.
The Inflation Reduction Act of 2022 provided certain tax incentives related to RNG. While we anticipate obtaining certain of
those incentives for certain facilities, the availability of those incentives is subject to guidance issued by the U.S. Department of the
Treasury and the IRS that potentially may be unfavorable with respect to RNG facilities, as well as possible unfavorable federal
legislative changes to such incentives. Federal legislation has been introduced to extend certain tax incentives related to RNG while
other efforts have been made to repeal provisions of the Inflation Reduction Act of 2022. The outcome of the 2024 election creates
additional uncertainty, and we cannot predict what impact (whether positive or negative) it may have on our business.
In addition, potential tax legislation, including to address the expiration of many provisions of the Tax Cuts and Jobs Act of 2017
may result in changes to the federal income tax code beyond the provisions enacted or amended by the Inflation Reduction Act of 2022.
Those changes potentially may impact the value of tax incentives related to RNG or may otherwise impact our tax positions.
Certain of our anaerobic digester facilities are newly constructed, are under construction or renovation, or are in development and
may not perform as we expect.
Our anaerobic digester operations located at Adirondack Farms in New York, and at SuburbanRNG – Columbus, are, respectively
under construction and upgrading to produce RNG and are expected to begin production in calendar year 2025. Our expectations of the
operating performance of our Adirondack Farms facility are based on assumptions and estimates made without the benefit of an operating
history at that location. Our expectations with respect to our new and developing projects, and related estimates and assumptions, are
based on limited or previous operating histories. The ability of these facilities to meet our performance expectations is subject to the
risks inherent in newly constructed RNG production facilities or renovation of such facilities, including delays or problems in
construction, labor shortages, weather conditions, availability of reliable power supply, degradation of equipment in excess of our
expectations, system failures, and outages, interruptions in feedstock supply for the digesters due to operational constraints or changes,
fluctuations in demand and/or changes in circumstances that impact the supply of feedstock to the facilities. The failure of these facilities
to perform as we expect could have an adverse effect on our business, financial condition, results of renewable operations and cash
flows.
We rely on gas pipelines that we do not own or control and are subject to quality standards and regulations that may restricted or
negatively impact our ability to deliver RNG and we may either incur additional costs or forego revenues.
We depend on gas pipelines owned and operated by others to deliver the RNG that we produce, or will produce, at our anaerobic
digester facilities. A failure in the operation of the distribution channel could cause delays in the delivery of RNG that we produce,
additional costs to distribute and the potential for the loss of revenues. The distribution channel is also subject to changes in pipeline
gas quality standards or other regulatory changes that may also limit our ability to transport RNG on pipelines for delivery to third
parties or increase the costs of processing RNG to allow for such deliveries.
27
Our plans for growth and diversification may not be successful or could expose our business to new risks.
We continue to seek to strategically diversify and grow our business. Our diversification efforts into the renewable and low CI
energy markets or other industries may require additional investments in personnel, equipment and operational infrastructure, and there
is no assurance that we will be able to sufficiently grow our presence in these markets. Our growth and diversification efforts will
require coordinated efforts across the Partnership and continued enhancements to our current operating infrastructure. If the cost of
making these changes increases, or if our efforts are unsuccessful, we may not realize anticipated benefits and our future earnings may
be adversely affected. Moreover, if we are able to successfully diversify into the renewable or low-carbon energy markets, our business
may be exposed to new risks associated with these markets, which could adversely affect our future earnings and growth.
We face risks related to our reliance on particular management information systems and communication networks to effectively
manage all aspects of our business.
We depend heavily on the performance and availability of our management information systems and those of our third-party
vendors, websites and network infrastructure to attract and retain customers, process orders, manage inventory and accounts receivable
collections, maintain distributor and customer information, maintain cost-efficient operations, assist in delivering our products on a
timely basis and otherwise conduct our business. We have centralized our information systems and we rely on third-party
communications service and system providers to provide technology services and link our systems with the business locations these
systems were designed to serve. Any failure or disruption in the availability or operation of those management information systems,
loss of employees knowledgeable about such systems, termination of our relationship with one or more of these key third-party providers
or failure to continue to modify such systems effectively as our business expands could create negative publicity that damages our
reputation or otherwise adversely impact our ability to manage our business effectively. We may experience system interruptions or
disruptions for a variety of reasons, including as the result of network failures, power outages, cyber attacks, employee errors, software
errors, an unusually high volume of visitors attempting to access our systems, or localized conditions such as fire, explosions or power
outages or broader geographic events such as earthquakes, storms, floods, epidemics, strikes, acts of war, civil unrest or terrorist acts.
Because we are dependent in part on third-party vendors for the implementation and maintenance of certain aspects of our information
systems and because some of the causes of information system interruptions may be outside of our control, we may not be able to remedy
such interruptions in a timely manner, or at all. Our information systems’ business continuity plans and insurance programs seek to
mitigate such risks, but they cannot fully eliminate the risks as a failure or disruption could be experienced in any of our information
systems.
We face risks related to cybersecurity breaches of our systems and information technology and those of our third-party vendors.
Cybersecurity threats to network and data security are becoming increasingly diverse and sophisticated. As threats become more
frequent, intense and sophisticated, the costs of proactive defensive measures may increase as we seek to continue to protect our
information systems, websites, and network. The advancement of artificial intelligence (“AI”) and large language models has given rise
to additional vulnerabilities and potential entry points for cyber threats. With generative AI tools, threat actors may have additional
tools to automate breaches or persistent attacks, evade detection, or generate sophisticated phishing emails. Despite our efforts to comply
with applicable cybersecurity requirements and mitigate risks of cybersecurity threats, we cannot be certain that our security measures
will definitively prevent, contain, or detect all cybersecurity breaches or other instructions from malware currently in existence or
developed in the future. While we have in place security procedures, such as business continuity plans or disaster recovery protocols,
our continuous investments in and updates to information security programs cannot guarantee the prevention of adverse impacts due to
cybersecurity threats and data breaches, which could result in significant harm to our business, reputation, and operations.
We endeavor to design and implement various security measures to provide safeguards for confidential information, including
personally identifiable information, and conduct personnel training to mitigate the risk of cybersecurity threats. Our outsourcing
agreements with third-party service providers that access, store, or process our data and/or proprietary information generally require that
they utilize adequate security systems to protect our confidential information. However, advances and changes in technologies could
render our information systems and security measures, or those used by our third-party service providers, vulnerable to a breach or other
exploitation. Risks of cybersecurity incidents caused by malicious third parties using sophisticated, targeted methods to circumvent
firewalls, encryption, and other security defenses, including hacking, viruses, malicious software, ransomware, phishing attacks, denial
of service attacks and other attempts to capture, disrupt or gain unauthorized access to data are rapidly evolving and could lead to
disruptions in our information systems, websites, or other data processing systems and unauthorized disclosure, deletion or modification
of confidential or other protected information. In addition, dependence upon automated systems may further increase the risks that
operational system flaws, employee tampering, or manipulation of those systems will result in data losses that are difficult to detect or
recoup. To the extent customer data is hacked or misappropriated, we could be subject to liability to impacted persons. Any successful
efforts by individuals to infiltrate, break into, disrupt, damage or otherwise steal from us or our third-party service providers’ security
or information systems could expose us to increased costs, litigation expenses, regulatory actions, fines and penalties, or other liabilities
that could adversely impact our financial condition or results of operations.
28
We are subject to laws, rules, regulations and policies regarding data privacy and security, and may be subject to additional related
laws and regulations in jurisdictions in which we operate. Many of these laws and regulations are subject to change and
interpretation, and could result in claims, changes to our business practices, monetary penalties, increased cost of operations or
other harm to our business.
We are subject to a variety of federal, state and local laws, directives, rules and policies relating to privacy and the collection,
protection, use, retention, security, disclosure, transfer and other processing of personal data and other data. The regulatory framework
for data privacy and security is continuously developing and, as a result, interpretation and implementation standards and enforcement
practices are likely to remain uncertain for the foreseeable future. Additionally, new laws, amendments to or interpretations of existing
laws, regulations, standards and other obligations both federally and on a state by state basis may require us to incur additional costs
and restrict our business operations, and may require us to change how we use, collect, store, transfer or otherwise process certain types
of personal information and to implement new processes to comply with those laws and our customers’ exercise of their rights
thereunder. These laws also are not uniform, as certain laws may be more stringent or broader in scope, or offer greater individual
rights, with respect to sensitive and personal information, and such laws may differ from each other, which may complicate compliance
efforts. Compliance in the event of a widespread data breach may be costly. Any failure or perceived failure by us or our third-party
service providers to comply with any applicable federal or state law, rule, regulation, industry standard, policy, certification or order
relating to data privacy and security, or any compromise of security that results in the theft, unauthorized access, acquisition, use,
disclosure, or misappropriation of personal data or other customer data, could result in significant awards, fines, civil and/or criminal
penalties or judgments, proceedings or litigation by governmental agencies or customers, including class action privacy litigation in
certain jurisdictions and negative publicity and reputational harm, one or all of which could have an adverse effect on our reputation,
business, financial condition and results of operations.
RISKS RELATED TO OUR INDEBTEDNESS AND ACCESS TO CAPITAL
We face risks related to our current and future debt obligations that may limit our ability to make distributions to Unitholders, as
well as our financial flexibility.
As of September 28, 2024, our long-term debt consisted of $350.0 million in aggregate principal amount of 5.875% senior notes
due March 1, 2027, $650.0 million in aggregate principal amount of 5.0% senior notes due June 1, 2031, $80.6 million in aggregate
principal amount of 5.5% green bonds due October 1, 2028 through October 1, 2033 (“Green Bonds”) and $151.0 million outstanding
under our $500.0 million 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
the senior notes, the senior secured revolving credit facility or the Green Bonds. 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 amount of distributions that our subsidiary WOF SW GGP 1, LLC (“SuburbanRNG
– Stanfield”) may make to us is limited by the Green Bonds. The revolving credit facility and the senior notes both contain various
restrictive and affirmative covenants applicable to us, the Operating Partnership and its subsidiaries, 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:
•
requiring our consolidated interest coverage ratio, as defined therein, to be not less than 2.5 to 1.0 as of the end of any fiscal
quarter;
•
prohibiting our total consolidated leverage ratio, as defined therein, from being greater than 5.75 to 1.0 as of the end of any
fiscal quarter; and
•
prohibiting the senior secured consolidated leverage ratio, as defined therein, of the Operating Partnership from being greater
than 3.25 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 28, 2024.
The Green Bonds contain various restrictive and affirmative covenants applicable to SuburbanRNG – Stanfield, 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 Green Bonds contain a financial covenant
requiring SuburbanRNG – Stanfield’s debt service coverage ratio, as defined therein, to be not less than 1.25 to 1.00 for any fiscal
quarter. SuburbanRNG – Stanfield is in compliance with all covenants and terms of the Green Bonds as of September 28, 2024.
29
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,
including, but not limited to, the risks discussed elsewhere in this section. 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.
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 and length of weather conditions during the peak heating season, customer energy
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
any negative impact on our profitability and cash flow from these factors.
Disruptions in the capital and credit markets, including the availability and cost of debt and equity issuances for liquidity
requirements, may adversely affect our ability to meet long-term commitments and our ability to hedge effectively, any of which
could adversely affect our results of operations, cash flows and financial condition.
We rely on our ability to access the capital and credit markets at rates and terms reasonable to us. A disruption in the capital and
credit markets or increased volatility could impair our ability to access capital and credit markets at rates and terms acceptable to us or
at all. This could limit our ability to refinance long-term debt at or in advance of maturities or could force us to access capital and credit
markets at rates or terms normally considered to be unreasonable, any of which could adversely affect our results of operations, cash
flows and financial condition.
RISKS RELATED TO OUR COMMON UNITS
Cash distributions are not guaranteed and may fluctuate with our performance and other external factors.
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 directly 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 of which may 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.
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.
30
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 us 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.
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 them at the time that they became a limited partner if the liabilities could not be determined from the partnership
agreement.
Our limited partner interest and Unitholders’ percentage of ownership may be diluted in the future 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 above or on a parity with the
Common Units, each Unitholder’s partnership interest will be diluted proportionately, and the amount of cash distributed on each
Common Unit and the market price of Common Units could decrease. Similarly, our Unitholders’ percentage of ownership may be
diluted in the future due to equity issuances or equity awards that we have granted or will grant to our supervisors, officers and
employees. In addition, we have engaged in and may continue to undertake acquisitions financed in part through public or private
offerings of securities, or other arrangements. 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, or other equity securities, 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.
31
TAX RISKS TO OUR UNITHOLDERS
Our tax treatment depends on our status as a partnership for U.S. federal income tax purposes. The 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 net
income at the corporate tax rate, which is currently a maximum of 21%, and would likely pay additional state and local income and
franchise 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.
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.
If the IRS makes audit adjustments to our income tax returns, it (and some states) may collect any resulting taxes (including any
applicable penalties and interest) directly from the Partnership, in which case cash available to service debt or to pay distributions
to our Unitholders, could be substantially reduced.
If the IRS makes audit adjustments to our income tax returns, it may collect any resulting taxes (including any applicable penalties
and interest) directly from us. We will generally have the ability to allocate any such tax liability to our current and former Unitholders
in accordance with their interests in us during the year under audit. However, we may not be able to (or may not choose to) so allocate
that tax liability, and may not be able to (or may choose not to) similarly allocate state income or similar tax liability resulting from
adjustments in states in which we do business in the year under audit or in the adjustment year; instead, we may pay the tax. Accordingly,
our current Unitholders may bear some or all of the audit adjustment, even if such Unitholders did not own units during the tax year
under audit. If we make payments of taxes, penalties and interest resulting from audit adjustments, cash available to service debt or to
make distributions to our Unitholders could be substantially reduced.
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.
32
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 them. Further, a tax-exempt
entity with more than one unrelated trade or business (including by attribution from an investment in a partnership such as ours that is
engaged in one or more unrelated trades or businesses) is required to compute the unrelated business taxable income of such tax-exempt
entity separately with respect to each such trade or business (including for purposes of determining any net operating loss deduction).
As a result, it may not be possible for tax-exempt entities to utilize losses from an investment in our partnership to offset unrelated
business taxable income from another unrelated trade or business and vice versa.
Cash distributions paid to foreign persons will be reduced by withholding taxes at the highest applicable effective U.S. tax rate,
and foreign persons will be required to file U.S. federal tax returns and pay tax on their share of our taxable income allocated to them.
Upon the sale, exchange or other disposition of a common unit of a publicly traded partnership by a foreign person, the transferee is
generally required to withhold 10% of the amount realized on such sale, exchange or other disposition if any portion of the gain on such
sale, exchange or other disposition would be treated as effectively connected with a U.S. trade or business. Beginning in 2023, the IRS
has clarified the broker is generally responsible for withholding 10% of the gross proceeds upon sale of an investment in a publicly
traded partnership by a foreign investor. Distributions to foreign persons may also be subject to additional withholding of 10% under
these rules to the extent a portion of a distribution is attributable to an amount in excess of our cumulative net income that has not
previously been distributed.
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
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 U.S.
Treasury regulations. A successful IRS challenge to those positions could adversely affect the amount of tax benefits available to a
Unitholder or result in a tax imposed upon us and borne by current Unitholders even if such Unitholder did not own units during the tax
33
year under audit. A successful IRS challenge also could affect the timing of 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. U.S. Treasury regulations 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.
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.
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 lending a partnership interest is not tax free, 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.
ITEM 1B.
UNRESOLVED STAFF COMMENTS
None.
ITEM 1C.
CYBERSECURITY
Cybersecurity Risk Management and Strategy
Our cybersecurity strategy prioritizes detection, analysis and response to known, anticipated or unexpected threats as well as
effective management of security risks and resiliency, with the goal of preventing, or mitigating, any cybersecurity incidents. Our
processes for managing cybersecurity risks include the use of technical security controls, policy enforcement mechanisms, monitoring
systems, employee training, contractual arrangements, tools and related services from third-party providers, and management oversight
to assess, identify and manage material risks from cybersecurity threats. We utilize risk-based controls in seeking to protect our
information, information regarding our customers, vendors, employees, and other third-parties, our information systems, our business
operations, and our products and related services. We have adopted security-control principles based on the National Institute of
34
Standards of Technology (“NIST”) Cybersecurity Framework. Our program is comprehensive in scope and covers all of our general
corporate Information Technology (“IT”) systems, as well as operational technology systems supporting our businesses. When engaging
third-party service providers, we also evaluate the sufficiency of the security of the technology systems used by our third-party service
providers. Our senior leadership team, along with the Audit Committee of our Board of Supervisors, receive regular and recurring
program updates, metrics, and roadmaps to assist us in overseeing and promoting the effectiveness of the program and its alignment
with our business objectives. Our program and controls are periodically reviewed and tested by independent third-parties to enable us
to employ industry best practices.
Our cybersecurity risk management program includes an incident response plan (“IRP”). Our IRP provides us with a plan for
identifying, responding to, reporting and remediating cybersecurity incidents. Our IRP has been established to reduce or minimize the
impact of cybersecurity incidents on our networks, IT systems, users or business processes. Our Information Services Breach Response
Team (“ISBRT”) takes a central role in developing and maintaining our incident response framework in coordination with our
Cybersecurity Response Team (“CRT”) that is dedicated to proactively addressing and managing potential breaches and incidents to
ensure that our cybersecurity defenses are well designed and managed. Our Incident Management Team (“IMT”) handles the response
process for all cybersecurity incidents.
Our cybersecurity risk management program and strategy also includes:
•
a continuous vulnerability management process to monitor and identify threats in our environment, including our IT
networks and legacy systems, that could potentially have a materially adverse impact on our critical systems, information
protection and broader enterprise IT environment;
•
the use of reputable cybersecurity consultants and other experienced third-party experts to enhance our cybersecurity
posture, assist us in evaluating risks, conduct security assessments and provide guidance so we can maintain a posture of
continual enhancement of our cybersecurity risk management program and strategy;
•
continuous and updated cybersecurity awareness training for our employees, incident response personnel and senior
management; and
•
a risk management process for critical third-party service providers and vendors that includes due diligence in the selection
of third-parties and vendors and the periodic monitoring thereof to ensure that they adhere to applicable cybersecurity
standards.
Cybersecurity Governance
Our Board of Supervisors is responsible for overseeing our enterprise risk relative to cybersecurity governance through the Audit
Committee of the Board, with specific responsibility for overseeing cybersecurity threats, among other things. Our CRT is led by the
Senior Vice President of Information Services (“SVP, Information Services”), who reports to the Partnership’s CEO and is responsible
for assessing and managing material cybersecurity risks and threats, in coordination with the ISBRT and the IMT, and regularly reports
to the Audit Committee with regard to the Partnership’s cybersecurity governance efforts. The SVP, Information Services has served
in this role since 2014, and has more than 27 years of experience in various roles involving managing cybersecurity functions, developing
cybersecurity strategies to protect privacy, customer safety and intellectual property, and developing key capabilities such as product
security engineering, risk management and cybersecurity governance.
The ISBRT, CRT, IMT and the Audit Committee of the Board all play a role in the monitoring, prevention, mitigation, detection
and remediation of cybersecurity incidents through their management and oversight of, and participation in, the cybersecurity risk
management and strategy processes described above. As of the date of this Annual Report, we are not aware of any risks of, or actual,
cybersecurity incidents that have materially affected or are reasonably likely to materially affect us, including our business strategy,
results of operations, or financial condition and that are required to be reported in this Annual Report. For further discussion of the risks
associated with cybersecurity incidents, see the cybersecurity risk factor in the section entitled “Item 1A. Risk Factors” in this Annual
Report.
ITEM 2.
PROPERTIES
As of September 28, 2024, we owned approximately 74% 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, above ground 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 28, 2024, we had a fleet of 9 transport truck
tractors, of which we owned 3, and 33 railroad tank cars, of which we owned none. In addition, as of September 28, 2024 we had 1,108
bobtail and rack trucks, of which we owned 8%, 94 fuel oil tankwagons, of which we owned 13%, and 1,236 other delivery and service
35
vehicles, of which we owned 19%. We lease the vehicles we do not own. As of September 28, 2024, we also owned approximately
812,000 customer propane storage tanks with typical capacities of 100 to 500 gallons, 53,000 customer propane storage tanks with
typical capacities of over 500 gallons and 232,000 portable propane cylinders with typical capacities of five to ten gallons.
ITEM 3.
LEGAL PROCEEDINGS
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. Our natural gas and electricity business was sued in
a putative class action suit in the Northern District of New York. The complaint alleged a number of claims under various consumer
statutes and common law in New York and Pennsylvania regarding pricing offered to electricity customers in those states. The case was
dismissed by the district court and the dismissal was affirmed by the Second Circuit Court of Appeals in December 2023. 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.
36
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 25, 2024, there were 429 Unitholders of record (based on
the number of record holders and nominees for those Common Units held in street name).
On October 24, 2024, we announced that our Board of Supervisors declared a quarterly distribution of $0.325 per Common
Unit for the three months ended September 28, 2024. This quarterly distribution rate equates to an annualized rate of $1.30
per Common Unit.
(b)
Not applicable.
(c)
None.
ITEM 6.
[RESERVED]
ITEM 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following is a discussion and analysis of our financial condition and results of operations, seen from our perspective, 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. Management currently considers the following events, trends,
and uncertainties to be most important to understanding our financial condition and operating performance:
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.
During fiscal 2024, the wholesale cost of propane generally trended lower than the prior year during the first half of the year, but
generally trended higher than the prior year during the second half, resulting in average wholesale costs for the full year being essentially
flat. Consistent with our established practice, we adjusted customer pricing as market conditions allowed. According to the Energy
Information Administration, U.S. propane inventory levels at the end of September 2024 were 97.8 million barrels, which was 3.6%
less than September 2023 levels and 5.5% more than the five-year average for September.
37
Seasonality
The retail propane and fuel oil distribution businesses, as well as the retail 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.
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, crude oil, natural gas and electricity 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, fuel oil, natural gas and electricity 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 six members of management and reporting to our Audit Committee, through enforcement of our Hedging and
Risk Management Policy.
Inflation and Other Cost Increases
We are experiencing increased inflation in the costs of various goods and services we use to operate our business, including
volatile wholesale costs for the products we distribute. Although we have not experienced significant disruptions with securing the
products we sell, inflationary factors and competition for resources across the supply chain has resulted in increased costs in a wide
variety of areas, including labor, transportation costs, operating costs and the cost of capital expansion projects, tanks and other
equipment. These and other factors may continue to impact our product costs, expenses, and capital expenditures, and could continue
to have an impact on consumer demand as consumers manage the impact of inflation on their resources.
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
38
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 and diverse customer
base, which is comprised of approximately 1.0 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. We use the Society of Actuaries’ mortality scale (MP-2021) 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.
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, we are unable to
determine the timing of the payment of the future withdrawal liability, or additional future withdrawal liability, if any.
Accrued Insurance. Our accrued insurance represents the estimated costs of known and anticipated or unasserted claims for
incidents related to general and product, workers’ compensation and automobile liabilities. For each claim, we record a provision up to
the estimated amount of the probable claim utilizing actuarially determined loss development factors applied to actual claims data. Our
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 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.
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.
39
Results of Operations and Financial Condition
Fiscal year 2024 included 52 weeks of operations compared to 53 weeks reported in the prior year.
Net income for fiscal 2024 was $74.2 million, or $1.15 per Common Unit, compared to $123.8 million, or $1.94 per Common
Unit, in fiscal 2023.
Adjusted earnings before interest, taxes, depreciation and amortization (Adjusted EBITDA, as defined and reconciled below) was
$250.0 million for fiscal 2024, compared to $275.0 million in the prior year.
Retail propane gallons sold in fiscal 2024 of 378.3 million gallons decreased 4.6% compared to the prior year, primarily due to
unseasonably warm and inconsistent temperatures throughout the heating season, particularly during the most critical months (December
through February) for heat-related demand, with only a brief burst of extremely cold temperatures in mid-January. In addition, the
additional week of operations in the prior fiscal year accounted for approximately 5.5 million gallons of the year-over-year decline in
volumes. Average temperatures (as measured by heating degree days) across all of our service territories for fiscal 2024 were 10%
warmer than normal and 2% warmer than the prior year.
Average propane prices (basis Mont Belvieu, Texas) for fiscal 2024 were flat compared to the prior year. Total gross margins of
$805.0 million in fiscal 2024 decreased $34.1 million, or 4.1%, compared to the prior year. Gross margins included unrealized losses
attributable to the mark-to-market adjustment for derivative instruments used in risk management activities of $14.6 million and $3.7
million in fiscal 2024 and fiscal 2023, respectively. These non-cash adjustments, which were reported in cost of products sold, were
excluded from Adjusted EBITDA for both periods. Excluding the impact of the unrealized mark-to-market adjustments, gross margin
for fiscal 2024 decreased $23.2 million, or 2.7%, compared to the prior year, primarily due to lower propane volumes sold, partially
offset by higher propane unit margins and higher margin contribution from the RNG operations. Excluding the impact of the unrealized
mark-to-market adjustments, propane unit margins for fiscal 2024 increased $0.02 per gallon, or 1.3%, compared to the prior year.
Combined operating and general and administrative expenses of $566.8 million for fiscal 2024 decreased $2.9 million, or 0.5%,
compared to the prior year. Pension settlement charges of $0.6 million reported in operating expenses during fiscal 2024, and
acquisition-related costs of $4.7 million reported within general and administrative expenses during fiscal 2023 were excluded from
Adjusted EBITDA. Excluding these items, combined operating and general administrative expenses increased $1.2 million, or 0.2%,
compared to the prior year, primarily due to higher payroll and benefit-related costs, and higher self-insurance costs, substantially offset
by lower volume-related variable operating costs and lower variable compensation.
In addition to mitigating the effects of unseasonably warm temperatures during the peak winter heating months with strong selling
price management and controlling expenses, we succeeded in accomplishing a number of significant goals in fiscal 2024 as we continued
to execute on our long-term strategic growth initiatives. The following highlights a few noteworthy accomplishments for fiscal 2024:
•
We acquired three well-run retail propane businesses in Florida, Nevada and Texas for total consideration of $14.3 million
during fiscal 2024; and in early fiscal 2025, we acquired a high-quality propane business that expanded our service territories
in New Mexico and Arizona for total consideration of $53 million;
•
We continued to foster the growth of our green market expansion efforts, and increased the number of active expansions in
different parts of the country from nine in fiscal 2023 to eighteen in fiscal 2024;
•
We made additional investments in Oberon Fuels, Inc. (“Oberon”) to support the commercialization of rDME as a blend
with propane or as a precursor to hydrogen production. We are the only retailer in the United States delivering low carbon
Propane+rDME, which we are currently delivering at a 4% blend level to certain forklift customers in southern California,
while also seeing successful test results at a 10% blend level;
•
We deployed capital to enhance the efficiency and operating performance of our RNG production facility in Stanfield,
Arizona, which resulted in increased RNG production levels – reaching a daily peak of 1,535 MMBtu. RNG injection for
the fiscal year averaged 1,049 MMBtu per day, representing an increase of 20% compared to the prior year;
•
We deployed $14.0 million of growth capital expenditures for the installation of RNG upgrade equipment at our Columbus,
Ohio facility, and advanced engineering and construction activities for our anaerobic digester in upstate New York;
•
We continued to focus on our renewable energy platform, part of which is to offer a lower carbon renewable propane
alternative for customers to maintain their existing propane infrastructure, while lowering their overall carbon footprint. We
secured additional contracts for incremental renewable propane gallons as they come online in 2025; and
40
•
We also received outside recognition for outstanding performance on a number of fronts:
We were recognized as a Top Company for Women to Work in Transportation by the Women in Trucking Association
for our culture that fosters gender diversity and career development opportunities;
For the second year in a row, we were named one of the Best Employers for Veterans for 2024 by Military Times in
recognition of our commitment to supporting service members, veterans, and their families;
For the fourth year in a row, we are one of ten finalists in the Energy Transition – liquid gases category of the S&P
Global Energy Awards for our strategic investments in renewable energy; and
Our SuburbanCares platform has received several prestigious awards; including as a finalist in the Corporate Impact
category of the S&P Global Energy Awards for the fourth time in five years.
Total debt outstanding as of September 2024 increased $19.0 million compared to September 2023. The Consolidated Leverage
Ratio, as defined in our credit agreement, for fiscal 2024 was 4.76x.
On October 24, 2024, we announced that our Board of Supervisors declared a quarterly distribution of $0.325 per Common Unit
for the three months ended September 28, 2024. This quarterly distribution rate equates to an annualized rate of $1.30 per Common
Unit. The distribution was paid on November 12, 2024 to Common Unitholders of record as of November 5, 2024.
As we look ahead to fiscal 2025, our anticipated cash requirements include: (i) maintenance and growth capital expenditures of
approximately $40.0 million for the propane segment; (ii) capital expenditures of approximately $39.5 million to support the
construction and development efforts for our renewable energy platform; (iii) approximately $74.2 million of interest and income tax
payments; and (iv) approximately $83.9 million of distributions to Unitholders, based on the current annualized rate of $1.30 per
Common Unit. Based on our liquidity position, which includes availability of funds under the revolving credit facility and expected
cash flow from operating activities, we expect to have sufficient funds to meet our current and future obligations.
Our RNG production facilities are diversified across feedstocks, geographies and revenue streams, and complements Suburban
Renewable Energy’s ongoing activity to construct, own and operate an RNG facility at Adirondack Farms in upstate New York. The
RNG Acquisition in fiscal 2023 enhanced and increases Suburban Renewable Energy’s presence in RNG production and distribution.
RNG can be produced from multiple organic waste streams, including agricultural and food waste, helping to reduce methane emissions,
while offering a lower carbon solution as a drop-in replacement for traditional natural gas. This scalable platform complements our
existing portfolio of renewable energy assets, both as a stand-alone RNG distributor, or using RNG as a pathway to hydrogen or rDME
production. Suburban Propane has a proud legacy of being a trusted provider of energy to local communities for more than 95 years.
Leveraging the strength and stability of our core propane business, we are positioning ourselves for sustainable long-term growth by
investing in the clean energy economy of the future as society transitions to lower carbon alternatives, while also fostering the growth
of our core propane business.
Fiscal Year 2024 Compared to Fiscal Year 2023
Revenues
(Dollars and gallons in thousands)
Percent
Fiscal
Fiscal
Increase
Increase
2024
2023
(Decrease) (Decrease)
Revenues
Propane
$ 1,150,034 $ 1,232,138
$
(82,104 )
(6.7)%
Fuel oil and refined fuels
73,783
92,127
(18,344 )
(19.9)%
Natural gas and electricity
25,877
31,160
(5,283 )
(17.0)%
All other
77,478
73,769
3,709
5.0%
Total revenues
$ 1,327,172 $ 1,429,194
$ (102,022 )
(7.1)%
Retail gallons sold
Propane
378,258
396,393
(18,135 )
(4.6)%
Fuel oil and refined fuels
16,861
19,103
(2,242 )
(11.7)%
As discussed above, average temperatures (as measured in heating degree days) across all of our service territories for fiscal 2024
were 10% warmer than normal, and 2% warmer than the prior year. The fiscal 2024 heating season was characterized by an inconsistent
weather pattern and unseasonably warm temperatures throughout much of our service territories, particularly during the most critical
winter months (December through February) for heat-related demand, with only a brief burst of cooler weather in mid-
January. Following these inconsistent weather patterns and a lack of sustained cool temperatures during the winter, unseasonably warm
41
weather continued into the spring season. The unseasonably warm and inconsistent weather pattern during much of fiscal 2024 adversely
impacted heat-related demand.
Revenues from the distribution of propane and related activities of $1,150.0 million for fiscal 2024 decreased $82.1 million, or
6.7%, compared to $1,232.1 million for the prior year, primarily due to lower volumes sold and lower average retail selling prices
associated with lower wholesale costs. Retail propane gallons sold decreased 18.1 million gallons, or 4.6%, to 378.3 million gallons,
resulting in a decrease in revenues of $55.8 million. The additional week of operations in the prior fiscal year accounted for
approximately 5.5 million gallons of the year-over-year decline in volumes. Average propane selling prices for fiscal 2024 decreased
2.2% compared to the prior year, reflecting lower average wholesale costs, resulting in a $25.1 million decrease in revenues. Included
within the propane segment are revenues from risk management activities of $11.5 million for fiscal 2024, which decreased $1.2 million
primarily due to a lower notional amount of hedging contracts used in risk management activities that were settled physically.
Revenues from the distribution of fuel oil and refined fuels of $73.8 million for fiscal 2024 decreased $18.3 million, or 19.9%,
from $92.1 million for the prior year, primarily due to lower volumes sold and lower average selling prices. Fuel oil and refined fuels
gallons sold decreased 2.2 million gallons, or 11.7%, resulting in a $10.7 million decrease in revenues. Average selling prices for fuel
oil and refined fuels decreased 9.9%, resulting in a $7.6 million decrease in revenues.
Revenues in our natural gas and electricity segment decreased $5.3 million, or 17.0%, to $25.9 million in fiscal 2024 compared
to $31.2 million in the prior year, resulting from lower volumes sold, primarily due to the impact of warmer weather and a lower
customer base, coupled with lower natural gas selling prices (reflective of lower average wholesale costs).
Revenues in our all other segment of $77.5 million were $3.7 million, or 5.0%, higher than in the prior year, primarily due to the
full year impact of the RNG Acquisition which closed at the beginning of our fiscal 2023 second quarter. Revenues from the RNG
business primarily consist of sales of RNG and the associated environmental attributes, tipping fees charged to third parties for various
waste feedstocks and sales of digestate which is a byproduct of the anaerobic digestion process.
Cost of Products Sold
(Dollars in thousands)
Fiscal
Fiscal
Percent
2024
2023
(Decrease) (Decrease)
Cost of products sold
Propane
$ 443,596
$ 489,808
$
(46,212)
(9.4 )%
Fuel oil and refined fuels
49,714
65,572
(15,858)
(24.2 )%
Natural gas and electricity
13,782
19,100
(5,318)
(27.8 )%
All other
15,104
15,651
(547)
(3.5 )%
Total cost of products sold
$ 522,196
$ 590,131
$
(67,935)
(11.5 )%
As a percent of total revenues
39.3%
41.3%
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, and 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, as well as, in
certain instances, forecasted purchases of propane, fuel oil, natural gas and electricity. In addition, we sell propane, fuel oil, natural gas
and electricity 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. At expiration, the derivative contracts are settled by the delivery of the
product to the respective party or are settled by the payment to the respective party of a net amount equal to the difference between the
then market price and the fixed contract price or option exercise price. 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 or delivered as it pertains to fixed price contracts (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.
42
From a commodity perspective, average posted propane prices (basis Mont Belvieu, Texas) and fuel oil prices during fiscal 2024
were 0.2% higher than the prior year and 13.2% lower than the prior year, respectively. The net change in the fair value of derivative
instruments during the fiscal year resulted in unrealized non-cash losses of $14.6 million and $3.7 million reported in cost of products
sold in fiscal 2024 and 2023, respectively, resulting in a year-over-year increase of $10.9 million in cost of products sold, all of which
was reported in the propane segment.
Cost of products sold associated with the distribution of propane and related activities of $443.6 million for fiscal 2024 decreased
$46.2 million, or 9.4%, compared to the prior year. Lower average wholesale costs during much of fiscal 2024 contributed to a $29.6
million decrease in cost of products sold, while lower volumes sold contributed to a $21.3 million decrease. Included within the propane
segment are costs from other propane activities which decreased $6.2 million compared to the prior year primarily due to a lower notional
amount of hedging contracts used in risk management activities that were settled physically, as well as the net increase of $10.9 million
resulting from the mark-to-market adjustments on derivative instruments in both periods discussed above.
Cost of products sold associated with our fuel oil and refined fuels segment of $49.7 million for fiscal 2024 decreased $15.9
million, or 24.2%, compared to the prior year. Lower average wholesale costs and lower volumes sold contributed decreases of $8.5
million and $7.4 million, respectively.
Cost of products sold in our natural gas and electricity segment of $13.8 million for fiscal 2024 decreased $5.3 million, or 27.8%,
compared to the prior year, due to lower average wholesale costs, as well as lower usage from warmer weather and a lower customer
base.
Operating Expenses
(Dollars in thousands)
Fiscal
Fiscal
Percent
2024
2023
(Decrease) (Decrease)
Operating expenses
$ 476,857
$ 478,058
$
(1,201)
(0.3 )%
As a percent of total revenues
35.9%
33.4%
All costs of operating our retail distribution and appliance sales and service operations, as well as the RNG production facilities,
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
and RNG production facilities.
Operating expenses of $476.9 million for fiscal 2024 decreased $1.2 million, or 0.3%, compared to $478.1 million in the prior
year, primarily due to lower volume-related variable operating costs, lower variable compensation and one less week of operations in
fiscal 2024, partially offset by higher self-insurance costs and a full year of operating costs associated with our RNG production facilities
that were acquired during fiscal 2023.
General and Administrative Expenses
(Dollars in thousands)
Fiscal
Fiscal
Percent
2024
2023
(Decrease) (Decrease)
General and administrative expenses
$
89,894
$
91,574
$
(1,680)
(1.8 )%
As a percent of total revenues
6.8%
6.4%
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 $89.9 million for fiscal 2024 decreased $1.7 million, or 1.8%, compared to $91.6 million
in the prior year, primarily due to $4.7 million in professional fees and expenses incurred last year related to our RNG Acquisition, as
well as lower variable compensation and one less week in fiscal 2024, offset to an extent by higher payroll and benefit related costs and
other inflationary increases.
43
Depreciation and Amortization
(Dollars in thousands)
Fiscal
Fiscal
Percent
2024
2023
Increase
Increase
Depreciation and amortization
$
66,975
$
62,582
$
4,393
7.0%
As a percent of total revenues
5.0%
4.4%
Depreciation and amortization expense of $67.0 million in fiscal 2024 increased $4.4 million, or 7.0%, from $62.6 million in the
prior year, primarily as a result of depreciation and amortization from the tangible and intangible assets from the RNG Acquisition at
the beginning of our second quarter of the prior year, partially offset by one less week in fiscal 2024.
Interest Expense, net
(Dollars in thousands)
Fiscal
Fiscal
Percent
2024
2023
Increase
Increase
Interest expense, net
$
74,590
$
73,393
$
1,197
1.6%
As a percent of total revenues
5.6%
5.1%
Net interest expense of $74.6 million for fiscal 2024 increased $1.2 million, or 1.6%, from $73.4 million in the prior year, primarily
due to the impact of higher benchmark interest rates for borrowings under our Revolving Credit Facility and a higher average level of
outstanding borrowings under that facility to fund the RNG Acquisition, as well as the impact of $80.6 million in Green Bonds assumed
in the RNG Acquisition. This was all partially offset by one less week in fiscal 2024. See Liquidity and Capital Resources below for
additional discussion.
Loss on Debt Extinguishment
In connection with the refinancing of our previous revolving credit facility during the second quarter of fiscal 2024, we recognized
a non-cash charge of $0.2 million to write-off a portion of unamortized debt origination costs.
Net Income and Adjusted EBITDA
Net income for fiscal 2024 amounted to $74.2 million, or $1.15 per Common Unit, compared to $123.8 million, or $1.94 per
Common Unit, in fiscal 2023. Earnings before interest, taxes, depreciation and amortization (“EBITDA”) for fiscal 2024 amounted to
$216.5 million, compared to $260.4 million for fiscal 2023.
Net income and EBITDA for fiscal 2024 included (i) a $18.1 million loss on our equity investments in unconsolidated affiliates;
(ii) a $0.6 million pension settlement charge; and (iii) a $0.2 million loss on debt extinguishment. Net income and EBITDA for fiscal
2023 included (i) a $6.3 million loss on our equity investments in unconsolidated affiliates; and (ii) $4.7 million in professional fees and
expenses related to the RNG Acquisition. 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 decreased to $250.0 million for fiscal 2024, compared to
Adjusted EBITDA of $275.0 million for fiscal 2023.
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.
44
The following table sets forth our calculations of EBITDA and Adjusted EBITDA:
(Dollars in thousands)
Year Ended
September 28, September 30,
2024
2023
Net income
$
74,174 $
123,752
Add:
Provision for income taxes
734
668
Interest expense, net
74,590
73,393
Depreciation and amortization
66,975
62,582
EBITDA
216,473
260,395
Unrealized non-cash losses on changes in fair value of derivatives
14,598
3,671
Equity in losses of unconsolidated affiliates
18,119
6,264
Pension settlement charge
638
—
Loss on debt extinguishment
215
—
Acquisition-related costs
—
4,695
Adjusted EBITDA
$
250,043 $
275,025
We also reference gross margins, computed as revenues less cost of products sold as those amounts are reported on the
consolidated financial statements. Our management uses gross margin as a supplemental measure of operating performance and we are
including it as we believe that it provides our investors and industry analysts with additional information that we determined is useful
to evaluate our operating results. As cost of products sold does not include depreciation and amortization expense, the gross margin we
reference is considered a non-GAAP financial measure.
Fiscal Year 2023 Compared to Fiscal Year 2022
We are omitting from this section our discussion of the earliest of the three years of financial information included in this Annual
Report. The discussion for fiscal year 2023 compared to fiscal year 2022 can be found in “Management’s Discussion and Analysis of
Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended September
30, 2023, which was filed with the SEC on November 22, 2023.
Liquidity and Capital Resources
Analysis of Cash Flows
Operating Activities. Net cash provided by operating activities for fiscal 2024 amounted to $160.6 million, a decrease of $64.7
million compared to the prior year. The decrease was primarily due to lower operating income and an increase in working capital
compared to the prior year, which stemmed from a smaller decline in the wholesale cost of propane compared to the sharp decline in
the prior year.
Investing Activities. Net cash used in investing activities of $81.6 million for fiscal 2024 consisted of capital expenditures of $59.4
million (including approximately $38.5 million to support the growth of operations and $20.9 million for maintenance expenditures),
$12.9 million used in the acquisition of three retail propane businesses, $12.2 million used to fund additional investments in Oberon, IH
and another privately held start-up entity, partially offset by approximately $2.9 million in proceeds from the sale of property, plant and
equipment. See Part IV, Note 4 of this Annual Report in relation to these transactions.
Net cash used in investing activities of $170.6 million for fiscal 2023 consisted of the RNG Acquisition (net of cash acquired and
Green Bonds assumed) of $108.3 million, capital expenditures of $44.9 million (including approximately $25.2 million to support the
growth of operations and $19.7 million for maintenance expenditures), $7.5 million used in the acquisition of a retail propane business,
a $3.1 million investment in a privately held start-up entity (plus direct transaction costs) and additional investments in Oberon, partially
offset by approximately $4.4 million in proceeds from the sale of property, plant and equipment.
Financing Activities. Net cash used in financing activities of $72.5 million for fiscal 2024 reflected $83.1 million paid for the
quarterly distributions to Common Unitholders at a rate of $0.325 per Common Unit paid in respect of the fourth quarter of fiscal 2023
and first three quarters of fiscal 2024, $19.0 million in net borrowings under our Revolving Credit Facility, which were used to fund the
acquisitions and investments noted above, $3.7 million in debt origination costs related to the refinancing of our Credit Agreement in
March 2024 and other financing activities of $4.7 million.
45
Net cash used in financing activities of $44.6 million for fiscal 2023 reflected $82.4 million paid for the quarterly distributions to
Common Unitholders at a rate of $0.325 per Common Unit paid in respect of the fourth quarter of fiscal 2022 and first three quarters of
fiscal 2023, $42.4 million in net borrowings under our Revolving Credit Facility, which were used to fund the acquisitions and
investments, and other financing activities of $4.6 million.
Summary of Long-Term Debt Obligations and Revolving Credit Lines
As of September 28, 2024, our long-term debt consisted of $350.0 million in aggregate principal amount of 5.875% Senior Notes
due March 1, 2027, $650.0 million in aggregate principal amount of 5.0% Senior Notes due June 1, 2031, $80.6 million in aggregate
principal amount of 5.5% Green Bonds due October 1, 2028 through October 1, 2033 and $151.0 million outstanding under our $500.0
million senior secured revolving credit facility (“Revolving Credit Facility”) provided by our credit agreement. See Part IV, Note 10 of
this Annual Report.
The aggregate amounts of long-term debt maturities subsequent to September 28, 2024 are as follows: fiscal 2025: $-0-; fiscal
2026: $-0-; fiscal 2027: $501.0 million ; fiscal 2028: $-0-; fiscal 2029: $11.7 million ; and thereafter: $718.9 million.
Total Consolidated Leverage Ratio. Total Consolidated Leverage Ratio, as defined by our credit agreement, represents total
indebtedness as of the balance sheet date minus unrestricted cash and cash equivalents in an amount not to exceed $25.0 million, divided
by Adjusted EBITDA calculated on a trailing twelve-month basis plus non-cash compensation costs recognized under our Restricted
Unit Plans for the same period, and other items. The measurement of the Total Consolidated Leverage Ratio for the fiscal years ended
September 28, 2024 and September 30, 2023 was as follows:
(Dollars in thousands)
Fiscal
Fiscal
2024
2023
Total debt
$
1,231,645
$
1,212,645
Less: cash and cash equivalents (1)
(3,219 )
Total debt, less cash and cash equivalents
$
1,228,426
Adjusted EBITDA
$
250,043
$
275,025
Compensation costs recognized under Restricted Unit Plans
8,191
8,260
Other
—
168
Adjusted EBITDA for use in calculation
$
258,234
$
283,453
Total Consolidated Leverage Ratio
4.76 x
4.28 x
(1) Effective with the execution of the Credit Agreement on March 15, 2024, total debt for the Total Consolidated Leverage Ratio
covenant is net of unrestricted cash and cash equivalents in an amount not to exceed $25.0 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
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.
46
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. We made
contribution payments to the defined benefit pension plan of $4.0 million, $4.0 million and $3.3 million in fiscal 2024, fiscal 2023 and
fiscal 2022, respectively. As of September 28, 2024 and September 30, 2023, the plan’s projected benefit obligation exceeded the fair
value of plan assets by $12.6 million and $18.0 million, respectively. The net liability recognized in the consolidated financial statements
for the defined benefit pension plan decreased by $5.4 million during fiscal 2024, which was primarily attributable to the contributions
made during the year, as well as the return on plan assets. During fiscal 2025, we expect to contribute approximately $4.0 million to
the defined benefit pension plan.
Our investment policies and strategies, as set forth in the Investment Management Policy and Guidelines, are monitored by a
Benefits Committee comprised of five 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. For purposes of measuring the projected benefit obligation as of September 28,
2024 and September 30, 2023, we used a discount rate of 4.625% and 5.50%, respectively, reflecting current market rates for debt
obligations of a similar duration to our pension obligations. 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.
During fiscal 2024, lump sum pension settlement payments of $3.9 million exceeded the interest and service cost components of
the net periodic pension cost of $3.2 million. As a result, we recorded a non-cash settlement charge of $0.6 million during fiscal 2024,
in order to accelerate recognition of a portion of cumulative unamortized losses. Similarly, during fiscal 2022, lump sum pension
settlement payments of $3.3 million exceeded the interest and service cost components of the net periodic pension cost of $2.2 million.
As a result, we recorded a non-cash settlement charge of $0.8 million during fiscal 2022, also in order to accelerate recognition of a
portion of cumulative unamortized losses. 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.
We also provide postretirement health care and life insurance benefits for certain retired employees. Partnership employees hired
prior to July 1993 and who retired prior to March 1998 are eligible for postretirement health care and life insurance benefits if they
reached a specified retirement age while working for the Partnership. Effective March 31, 1998, we froze participation in the
postretirement health care benefit plan, with no new retirees eligible to participate in the plan. 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. 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.
Contractual and Other Obligations
The following table summarizes payments due under our known contractual and other obligations as of September 28, 2024:
(Dollars in thousands)
Fiscal
Fiscal
Fiscal
Fiscal
Fiscal
Fiscal
2030 and
2025
2026
2027
2028
2029
thereafter
Long-term debt obligations
$
—
$
—
$
501,000
$
—
$
11,707
$
718,938
Interest payments
73,236
70,838
50,552
36,935
36,614
74,885
Operating lease obligations (a)
42,971
37,440
26,926
21,417
14,891
23,474
Self-insurance obligations (b)
13,562
10,783
8,275
5,823
3,274
15,682
Pension contributions (c)
4,000
4,000
4,000
1,500
—
—
Other obligations (d)
27,513
11,632
6,027
8,501
2,023
14,883
Total
$
161,282
$
134,693
$
596,780
$
74,176
$
68,509
$
847,862
47
(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 $3.3 million, $2.8 million, $2.2 million, $1.5 million, $0.8 million and $3.8 million for each of the next five fiscal years and
thereafter, respectively, and are included in other assets on the consolidated balance sheet.
(c)
Amounts represent estimated funding contributions for our pension plan.
(d)
These amounts are included in our consolidated balance sheet and primarily include payments for postretirement and incentive
benefits, as well as other contractual obligations.
Additionally, we have standby letters of credit in the aggregate amount of $30.9 million, in support of retention levels under our
casualty insurance programs and certain lease obligations, which expire periodically through April 30, 2025.
Operating Leases
We lease certain property, plant and equipment for various periods under noncancelable operating leases, including 87% of our
vehicle fleet, approximately 26% of our customer service centers and portions of our information systems equipment. Rental expense
under operating leases was $44.3 million, $41.7 million and $41.0 million for fiscal 2024, 2023 and 2022, respectively. Future minimum
rental commitments under noncancelable operating lease agreements as of September 28, 2024 are presented in the table above.
Guarantees
Certain of our operating leases, primarily those for transportation equipment with remaining lease periods scheduled to expire
periodically through fiscal 2032, 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 $42.7 million. The fair
value of residual value guarantees for outstanding operating leases was de minimis as of September 28, 2024 and September 30, 2023.
Recently Issued/Adopted Accounting Pronouncements
See Part IV, Note 2 of this Annual Report.
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 help ensure the availability of product during periods of high demand. In addition, we sell propane, fuel oil, natural gas
48
and electricity 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. We do not use derivative instruments for speculative or 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
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, SOFR,
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 SOFR plus 1%, plus the applicable margin. The applicable margin is dependent on the level of our total consolidated leverage (the
total ratio of debt to consolidated EBITDA). Therefore, we are subject to interest rate risk on the variable component of the interest
rate. From time to time, we enter into interest rate swap agreements to manage a part of our variable interest rate risk. The interest rate
swaps are designated as cash flow hedges. 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 28, 2024, we were not party to any interest rate swap
agreement.
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.
49
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.
The fair value of open positions as of September 28, 2024.
B.
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 28, 2024, indicates an increase in potential future net losses of $3.2 million. See also Item 7A of this
Annual Report. 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.
50
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 2024
Revenues
$
365,834
$
498,087
$
254,610
$
208,641
$
1,327,172
Costs of products sold
153,053
190,120
94,400
84,623
522,196
Operating income (loss)
48,748
136,860
8,190
(22,548)
171,250
Net income (loss)
24,454
111,500
(17,191)
(44,589)
74,174
Net income (loss) per Common Unit - basic (a)
$
0.38
$
1.73
$
(0.27) $
(0.69) $
1.15
Net income (loss) per Common Unit - diluted (a)
$
0.38
$
1.72
$
(0.27) $
(0.69) $
1.14
Cash provided by (used in):
Operating activities
(12,775 )
75,149
61,433
36,778
160,585
Investing activities
(13,914 )
(16,820 )
(29,252)
(21,658)
(81,644)
Financing activities
30,614
(57,152 )
(31,806)
(14,157)
(72,501)
EBITDA (b)
$
59,288
$
148,176
$
17,860
$
(8,851) $
216,473
Adjusted EBITDA (b)
$
75,232
$
147,022
$
27,035
$
754
$
250,043
Retail gallons sold
Propane
106,545
140,243
71,737
59,733
378,258
Fuel oil and refined fuels
5,256
6,992
2,645
1,968
16,861
Fiscal 2023
Revenues
$
397,470
$
526,501
$
278,628
$
226,595
$
1,429,194
Costs of products sold
182,653
231,608
110,446
65,424
590,131
Operating income
62,315
125,679
14,866
3,989
206,849
Net income (loss)
45,394
104,477
(5,261)
(20,858)
123,752
Net income (loss) per Common Unit - basic (a)
$
0.71
$
1.63
$
(0.08) $
(0.33) $
1.94
Net income (loss) per Common Unit - diluted (a)
$
0.71
$
1.62
$
(0.08) $
(0.33) $
1.92
Cash provided by (used in):
Operating activities
6,272
99,122
61,998
57,847
225,239
Investing activities
(14,391 )
(123,104 )
(19,640)
(13,502)
(170,637)
Financing activities
10,097
35,866
(41,616)
(48,975)
(44,628)
EBITDA (b)
$
75,119
$
140,637
$
29,253
$
15,386
$
260,395
Adjusted EBITDA (b)
$
90,042
$
148,957
$
33,024
$
3,002
$
275,025
Retail gallons sold
Propane
108,764
144,149
78,474
65,006
396,393
Fuel oil and refined fuels
5,563
7,742
3,354
2,444
19,103
(a)
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.
(b)
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
51
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:
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
Total
Year
Fiscal 2024
Net income (loss)
$
24,454
$
111,500
$
(17,191) $
(44,589) $
74,174
Add:
Provision for income taxes
249
32
243
210
734
Interest expense, net
18,192
19,919
18,429
18,050
74,590
Depreciation and amortization
16,393
16,725
16,379
17,478
66,975
EBITDA
59,288
148,176
17,860
(8,851)
216,473
Unrealized non-cash losses (gains) on changes
in fair value of derivatives
10,786
(5,868 )
3,161
6,519
14,598
Equity in losses of unconsolidated affiliates
5,158
4,499
5,464
2,998
18,119
Pension settlement charge
—
—
550
88
638
Loss on debt extinguishment
—
215
—
—
215
Adjusted EBITDA
$
75,232
$
147,022
$
27,035
$
754
$
250,043
Fiscal 2023
Net income (loss)
$
45,394
$
104,477
$
(5,261) $
(20,858) $
123,752
Add:
(Benefit from) provision for income taxes
(48 )
225
244
247
668
Interest expense, net
15,994
19,871
18,733
18,795
73,393
Depreciation and amortization
13,779
16,064
15,537
17,202
62,582
EBITDA
75,119
140,637
29,253
15,386
260,395
Unrealized non-cash losses (gains) on changes
in fair value of derivatives
13,706
4,501
2,960
(17,496)
3,671
Equity in losses of unconsolidated affiliates
282
413
457
5,112
6,264
Acquisition-related costs
935
3,406
354
—
4,695
Adjusted EBITDA
$
90,042
$
148,957
$
33,024
$
3,002
$
275,025
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 28, 2024. Based on this evaluation,
the Partnership’s principal executive officer and principal financial officer concluded that as of September 28, 2024, such disclosure
controls and procedures were effective to provide the reasonable assurance level described above.
52
Changes in Internal Control Over Financial Reporting
There have not been any changes in the Partnership’s 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 28, 2024 that have materially affected or are reasonably likely to
materially affect its internal control over financial reporting.
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 28, 2024. 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 28, 2024, the
Partnership’s internal control over financial reporting was effective.
Our independent registered public accounting firm, PricewaterhouseCoopers LLP, issued an attestation report dated November
27, 2024 on the effectiveness of our internal control over financial reporting, which is included herein.
ITEM 9B.
OTHER INFORMATION
During the fiscal quarter ended September 28, 2024, our supervisors and executive officers (as defined in Rule 16a-1 under the
Securities Exchange Act of 1934, as amended), adopted or terminated the following Rule 10b5-1 trading arrangements or non-Rule
10b5-1 trading arrangements (each as defined in Item 408(a) and (c) of Regulation S-K):
•
On August 13, 2024, Matthew J. Chanin, the Chairman of our Board of Supervisors and Chair of the
Nominating/Governance Committee of our Board, entered into a Rule 10b5-1 Plan. Mr. Chanin’s plan provides for the sale
of a maximum of 10,000 Common Units, and expires on May 30, 2025, or upon the earlier completion of all authorized
transactions under the plan.
ITEM 9C.
DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
None.
53
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 management power over
our business and affairs or actual or apparent authority to enter into contracts on behalf of or otherwise to bind the Partnership. Under
the current Partnership Agreement, members of our Board of Supervisors are elected by the Unitholders for three-year terms.
All eight of our current Supervisors, namely Amy M. Adams, Matthew J. Chanin, Terence J. Connors, William M. Landuyt,
Harold R. Logan Jr., Rommel M. Oates, Michael A. Stivala and Jane Swift, were elected to their current three-year terms at the Tri-
Annual Meeting of our Unitholders held on May 21, 2024.
Three Supervisors, who are not officers or employees of the Partnership or its subsidiaries, currently serve on the Audit
Committee with authority to review, approve or ratify, 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) the 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) the
Partnership’s major financial risk exposure and the steps management has taken to monitor and mitigate such risks (including ESG,
artificial intelligence and cybersecurity); (iv) review and approval of related person transactions; (v) the engagement, independence,
qualifications and compensation of the internal audit function and independent registered public accounting firm; (vi) the performance
of the internal audit function and the independent registered public accounting firm; and (vii) financial reporting and accounting
complaints.
The Board of Supervisors has determined that all three current members of the Audit Committee, namely Messrs. Terence J.
Connors (its Chair), William M. Landuyt and Rommel M. Oates, are independent and are 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. Matthew J. Chanin, Chairman of the Board, presides at 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.
54
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 27, 2024. Officers are appointed by the Board of Supervisors for one-year terms and Supervisors (other than
those elected by the Board to fill vacancies) are elected by the Unitholders for three-year terms.
Name
Age
Position With the Partnership
Michael A. Stivala ................................
55
President and Chief Executive Officer; Member of the Board of Supervisors
Michael A. Kuglin ................................
54
Chief Financial Officer
Steven C. Boyd* ...................................
60
Chief Operating Officer
Douglas T. Brinkworth .........................
63
Senior Vice President – Product Supply, Purchasing & Logistics
Alejandro Centeno ................................
52
Senior Vice President – Operations
Neil E. Scanlon .....................................
59
Senior Vice President – Information Services
Daniel S. Bloomstein ............................
51
Vice President, Controller and Chief Accounting Officer
Francesca Cleffi ....................................
54
Vice President – Human Resources
M. Douglas Dagan ................................
45
Vice President, Strategic Initiatives – Renewable Energy
Elmer Dante ..........................................
64
Vice President – Tax
A. Davin D’Ambrosio ...........................
60
Vice President and Treasurer
Bryon L. Koepke ...................................
52
Vice President – General Counsel and Secretary
Keith P. Onderdonk ..............................
60
Vice President – Operational Support
Craig Palleschi ......................................
44
Vice President – Renewable Natural Gas Operations
Nandini Sankara ....................................
45
Vice President – Marketing and Brand Strategy
Michael A. Schueler*............................
58
Vice President – Product Supply
Matthew J. Chanin ................................
70
Member of the Board of Supervisors (Board Chair and Chair of
Nominating/Governance Committee)
Amy M. Adams .....................................
59
Member of the Board of Supervisors
Terence J. Connors ...............................
70
Member of the Board of Supervisors (Chair of the Audit Committee)
William M. Landuyt..............................
69
Member of the Board of Supervisors
Harold R. Logan, Jr. ..............................
80
Member of the Board of Supervisors
Rommel M. Oates .................................
45
Member of the Board of Supervisors
Jane Swift ..............................................
59
Member of the Board of Supervisors (Chair of the Compensation Committee)
* Retiring on January 1, 2025.
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
currently serves on the Board of Directors of Independence Hydrogen Inc., in which we currently own a 25% equity stake; Nu:ionic
Technologies Inc., in which we own a minority equity stake; and Oberon Fuels, Inc., in which we currently own a 38% equity stake. In
addition, Mr. Stivala is the Chairperson of the New Jersey Regional Council of the American Red Cross and a member of the Global
Industry Council of the World LPG Association.
Mr. Stivala’s qualifications to sit on our Board include his 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 seven years, which day-to-day leadership roles
have provided him with intimate knowledge of our operations.
Mr. Kuglin has served as our Chief Financial Officer since September 2014, and was our Vice President – Finance and Chief
Accounting Officer from April 2014 through September 2014, and served as our Chief Accounting Officer until November 2023. 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. Steven Boyd has served as our Chief Operating Officer since October 2017 and before that was our Senior Vice President –
Operations (September 2015-October 2017) and 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
55
President since March 2007, Managing Director – Area Operations since November 2003 and Regional Manager – Northern California
since May 1997. Mr. Steven 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. Centeno became our Senior Vice President – Operations in November 2024, after serving as our Vice President – Operations
since August 2023. Prior to that, he was General Manager of our Midwest Region since June 2017. Prior to that, Mr. Centeno served
as Region Operations Manager of our Mid-Atlantic Region since December 2015 and Area Sales and Business Development Manager
since April 2014. Prior to joining the Partnership in July 2007 as a CSC Manager through our Professional Development Program, Mr.
Centeno spent 13 years in various management roles in the retail industry.
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. Bloomstein joined the Partnership as its Controller in April 2014 and was promoted to Vice President and Controller in
October 2017. In November 2023, he was appointed Chief Accounting Officer. 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 practice. Mr.
Bloomstein is a Certified Public Accountant and a member of the American Institute of Certified Public Accountants.
Ms. Cleffi has served as our Vice President – Human Resources since November 2020. Prior to that appointment, she served as
our Managing Director – Human Resources since June 2020 and before that she served as our Managing Director – Compensation,
Talent Management and Operational Human Resources since October 2017. Prior to that, Ms. Cleffi served as our Director –
Compensation and Talent Management from October 2007 to October 2017. Ms. Cleffi joined the Partnership’s corporate predecessor
in October 1992 and has held various positions in the human resources area since that time.
Mr. Dagan has served as our Vice President, Strategic Initiatives – Renewable Energy since March 2021. Prior to joining the
Partnership, he was a senior associate at the law firm of Bevan, Mosca, & Giuditta, P.C., and the Director of Public Affairs and
Government Relations for the firm’s affiliate, bmgstrategies, since 2018. Prior to that, Mr. Dagan was engaged in the practice of law at
the Law Practice of M. Douglas Dagan since 2013. Mr. Dagan’s practice over his career has focused on advising companies on the
development of renewable energy projects, environmental management, advocating for environmental and renewable energy policies,
and supporting climate change strategies and initiatives.
Mr. Dante has served as our Vice President – Tax since November 2024. Prior to that appointment, he was our Assistant Vice
President – Tax since November 2007. Prior to that, he served as our Assistant Controller since November 2003. Prior to that, Mr.
Dante served as Director of the Partnership’s Tax Department since June 1998 and in various other management positions within the
Tax Department since joining the Partnership’s corporate predecessor in June 1989.
Mr. D’Ambrosio has served as our Treasurer since November 2002 and was promoted to 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. Koepke has served as our Vice President – General Counsel and Secretary since October 2019, after serving as our Vice
President – Deputy General Counsel and Assistant Secretary since March 2019. For the nineteen years prior to joining the Partnership,
Mr. Koepke served as Senior Vice President, Chief Securities Counsel for Avis Budget Group, Inc., from October 2011 until joining
the Partnership and prior to that as Corporate Counsel – Securities for Caterpillar Inc. and as a senior attorney advisor for the U.S.
Securities and Exchange Commission. Mr. Koepke also serves as a member of the Board of Directors for the Association of Corporate
Counsel New Jersey.
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
56
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.
Mr. Palleschi has served as our Vice President – Renewable Natural Gas Operations since November 2023. Prior to that
appointment, he was our Assistant Vice President – Renewable Natural Gas Operations since November 2022. Prior to that, Mr.
Palleschi served as Director – Product Supply since 2020 and in various other management positions within the Partnership since joining
the Partnership in 2006. Mr. Palleschi is also a founding member and President of the Sparta Benevolent Society, a non-profit
organization located in Sparta, NJ.
Ms. Sankara has served as our Vice President – Marketing & Brand Strategy since November 2021 and before that was our
Assistant Vice President – Marketing & Brand Strategy since May 2017. Prior to joining Suburban Propane, she held several leadership
positions in her career, including Global Customer Experience, Market Intelligence, and Product Management with Sealed Air
Corporation from September 2011 to December 2016. Prior to that, Ms. Sankara served as the Director and Head of Marketing & Brand
with Aetna from April 2009 to September 2011. Ms. Sankara also served in several global marketing positions with Pitney Bowes from
January 2001 to December 2009.
Mr. Schueler has served as our Vice President – Product Supply since October 2017 and before that was our Managing Director
– Product Supply since November 2013. Mr. Schueler joined the Partnership as Director – Product Resources in July 2005 following a
nine-year career at Public Service Enterprise Group and prior to that, eight years at Kraft Foods.
Mr. Chanin has served as a Supervisor since November 2012 and was elected as Chairman of the Board of Supervisors effective
January 1, 2021. He was Senior Managing Director of Prudential Investment Management, a subsidiary of Prudential Financial, Inc.,
from 1996 until his retirement in January 2012, after which he continued to provide consulting services to Prudential until December
2016. He headed Prudential’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 and, until October 2017, served as a Director of two
private companies that were in the fund portfolios of Prudential Capital Partners.
Mr. Chanin’s qualifications to sit on our Board, and serve as Chairman of the Board and Chair of its Nominating/Governance
Committee, 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 the compensation committee for a private company board. Mr. Chanin has earned an MBA and is a Chartered Financial
Analyst.
Ms. Adams has served as a Supervisor since May 2023. Since March 2023, Ms. Adams has served as Vice President of
Government Partnerships and Funding at Cummins Inc., where she focuses on private-public collaboration building in the zero emissions
space. Prior to that, Ms. Adams served as Vice President, Fuel Cell and Hydrogen Technologies, overseeing Cummins’ hydrogen
investments and partnerships. Ms. Adams has worked for Cummins Inc. since January 1995 and has served in several senior leadership
positions within the company that enabled her to build an extensive background in emerging energy solutions, including hydrogen fuel
cell and electrolyzer technologies, strategic growth and market development initiatives and launching new generations of emission
solutions in Cummins’ global markets. Ms. Adams has led complex businesses on three continents, enabling her to build a truly global
perspective. From 1988 to 1995, Ms. Adams served in various management positions within Ameritech Corporation (now known as
AT&T Teleholdings Inc.). Since 2020, Ms. Adams has served on the Management Board of the Hydrogen Council, a global CEO-led
initiative aimed at fostering the clean energy transition and from 2021-2023 she served as a co-chair of the Council. Ms. Adams also
serves on the Board of the Fuel Cell and Hydrogen Energy Association (FCHEA). From 2018 until September 2024, Ms. Adams also
served as a National Board Member for Girls Inc., a non-profit organization that encourages and mentors young women as they work to
navigate economic, gender and social barriers.
Ms. Adams’ qualifications to sit on our Board include her extensive corporate experience and background in managing emerging
energy solutions, including an extensive understanding of hydrogen-based technologies, which enables her to provide helpful insights
to the Board in connection with its oversight of the Partnership’s renewable energy investments and assets and the Partnership’s strategic
plans for developing its renewable energy platform.
Mr. Connors has served as a Supervisor since January 2017. Mr. Connors retired in September 2015 from KPMG LLP after
nearly forty years in public accounting. Prior to joining KPMG in 2002, he was a partner with another large international accounting
firm. During his career, he served as a senior audit and global lead partner for numerous public companies, including Fortune 500
companies. At KPMG, he was a professional practice partner, SEC Reviewing Partner and was elected to serve as a member of KPMG’s
board of directors (2011-2015), where he chaired the Audit, Finance & Operations Committee. Mr. Connors currently serves as a director
and audit committee chair of FS Credit Real Estate Income Trust, Inc., a commercial mortgage nontraded real estate investment trust,
and AdaptHealth Corp., a leading provider of home healthcare equipment and services in the United States. He previously served as a
57
director and audit committee chair of Cardone Industries, Inc., one of the largest privately-held automotive parts remanufacturers in the
world.
Mr. Connors’ qualifications to sit on our Board, and serve as Chair of its Audit Committee, include his extensive experience as a
lead audit partner for numerous public companies across a variety of industries, which enables him to provide helpful insights to the
Board in connection with its oversight of financial, accounting and internal control matters.
Mr. Landuyt has served as a Supervisor since January 1, 2017. Since 2003, Mr. Landuyt has served as a Managing Director at
Charterhouse Strategic Partners, LLC, and its predecessors (“Charterhouse”), private equity firms with a focus on build-ups,
management buyouts, and growth capital investments primarily in the business services and healthcare services sectors, and has served
on the Boards of Directors of a number of portfolio companies of those firms. From 1996 to 2003, Mr. Landuyt served as Chairman of
the Board, President and Chief Executive Officer of Millennium Chemicals, Inc. (“Millennium”), and from 1983 to 1996 he served as
Finance Director of Hanson plc and several other senior executive positions with Hanson Industries, the U.S. subsidiary of Hanson plc
(collectively, “Hanson,”), including Vice President and Chief Financial Officer and ultimately Director, President and Chief Executive
Officer. Hanson and Millennium were both previous owners of the Partnership or its predecessor through 1996 and 1999, respectively.
He joined Hanson after spending six years as a Certified Public Accountant and auditor at Price Waterhouse & Co., where he rose to
the position of Senior Manager. Mr. Landuyt has previously served on the Boards of Directors (including their Audit and Compensation
Committees) of public companies, including Bethlehem Steel Corp., MxEnergy Holdings, Inc., a leading retail marketer of natural gas
and electricity contracts, and Top Image Systems, Inc. Mr. Landuyt is also the Co-Founder and Executive Director of Celtic Charms,
Inc., a non-profit therapeutic horsemanship center previously engaged in serving people with physical and cognitive disabilities and
disorders and now serving as a retirement home for Celtic Charms’ equines.
Mr. Landuyt’s qualifications to sit on our Board include over forty years of financial and executive management experience for
both public and private companies, including extensive experience with mergers and acquisitions and corporate governance.
Additionally, his specific responsibility for supervision of the Partnership’s predecessors, as well as his subsequent board-level
involvement in the distribution, petrochemical and retail energy sectors gives Mr. Landuyt extensive expertise in areas directly relevant
to the business of the Partnership.
Mr. Logan has served as a Supervisor since March 1996 and served as Chairman of the Board of Supervisors from January 2007
until December 31, 2020. Mr. Logan co-founded, and from 2006 to May 2018 served as a Director of Basic Materials and Services
LLC, an investment company that, until it went inactive in May 2018, 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 Hart Energy Publishing LLP, and, through October 2021
was a Director of Cimarex Energy Co. prior to its merger with Cabot Oil & Gas Corp.; through May 2019, was a Director of InfraREIT,
Inc., which was acquired by Oncor Electric Delivery Company LLC and Sempra Energy in May 2019; and through May 2017, was a
Director of Graphic Packaging Holding Company.
Over the past forty plus 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 a Supervisor. Since 1996, Mr. Logan has been a
director of ten public companies and has served on audit, compensation and governance committees.
Mr. Oates has served as a Supervisor since May 2023. In 2015, Mr. Oates founded and currently serves as the Chairman and
Chief Executive Officer of Oates Energy Solutions LLC, a privately-owned energy and technology value creation services company.
Since 2020, Mr. Oates has also served as Chief Executive Officer of Refinery Calculator Inc., which is a global refining, energy,
chemicals, emissions and hydrogen market intelligence cloud-based software and data platform. From 2015 to 2018, Mr. Oates served
in several executive leadership roles in sales, marketing and commercial development within True North Venture Partners (an Ahearn,
Walton, Cox family limited partnership entity), as well as within one of their portfolio companies, Aquahydrex Pty Ltd. From 2008 to
2015, Mr. Oates held several leadership positions within Praxair Inc. (now Linde PLC), most recently as Global Director of Hydrogen
and Carbon Monoxide product management, where he was accountable for the overall profitability management functions for large-
scale hydrogen pipeline and storage assets, as well as carbon monoxide, liquid methane, methanol and formalin business units. From
2000 to 2003, Mr. Oates founded and operated Oates Consulting Company, where he consulted on hydrogen storage business
development. Since 2022, Mr. Oates has served as an independent director of the Board of Directors, as well as a member of the
Nominating, Governance and Sustainability Committee of its Board of Directors for Summit Midstream Corporation, which owns,
58
develops and operates midstream energy infrastructure assets in the continental United States. Since 2014, Mr. Oates has also served
as a Board member for the International Association of Hydrogen Energy and has secured over 16 hydrogen technology, purification
and storage patents.
Mr. Oates’s qualifications to sit on our Board include his extensive understanding of energy markets, renewable energy solutions,
and over two decades of experience in hydrogen commercial and technical market development, which enables him to provide helpful
insights to the Board in connection with its oversight of the Partnership’s renewable energy investments and assets and the Partnership’s
strategic plans for developing its renewable energy platform.
Ms. Swift has served as a Supervisor since April 2007. In November 2023, Ms. Swift was appointed President of Education at
Work, a not-for-profit educational institution, which is part of the Strada Education Foundation and partners with industry and higher
education institutions to prepare students for current and future careers through a work-based learning model. From July 2022 until
October 2023, Ms. Swift served as an Operating Partner for Vistria Group, a private investment firm operating at the intersection of
purpose and profit. Ms. Swift previously served as President and Executive Director of LearnLaunch Institute, a not-for-profit
educational institution in Boston, Massachusetts; as Executive Chair of Ultimate Medical Academy, a not-for-profit healthcare
educational institution with a national presence; as the CEO of Middlebury Interactive Languages, LLC, a marketer of world language
products; as Senior Vice President at ConnectEDU Inc., a private education technology company; as the founder of WNP Consulting,
LLC, a provider of expert advice and guidance to early stage education companies; and as a General Partner at Arcadia Partners, a
venture capital firm focused on the education industry. Ms. Swift served for fifteen years in Massachusetts state government, becoming
Massachusetts’ first woman governor in 2001. In July 2022, Ms. Swift became the founder and President of Cobble Hill Farm Education
& Rescue Center, which is a non-profit organization that provides animal rescue and education programs. In October 2023, Ms. Swift
was appointed to the National Association Governing Board and currently serves as a member of the George W. Bush Institute Advisory
Council, the Innovation Advisory Council of Boston College High School’s Shields Center for Innovation and as an advisor to
companies within the Vistria Group’s education portfolio. She has previously served on the boards of both public and private companies
in the education space, including K12, Inc., Animated Speech Company, Sally Ride Science Inc., Teachers of Tomorrow and eDynamics
Learning.
Ms. Swift’s qualifications to sit on our Board, and serve as Chair of its Compensation Committee, include her strong experience
in public policy and government, and her extensive knowledge of regulatory matters arising from her fifteen years in state government.
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 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 and a Clawback Policy,
as well as a Policy on Insider Trading. 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. A copy of our Policy on
Insider Trading is filed as an exhibit to this Annual Report on Form 10-K.
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
The Compensation Committee reviews the performance of, and sets the compensation for, all of the Partnership’s executives. It
also approves the design of executive compensation programs. In addition, the Compensation Committee participates in executive
succession planning and management development. Four Supervisors, who are not officers or employees of the Partnership or its
59
subsidiaries, currently serve on the Compensation Committee. The Board of Supervisors has determined that all four current members
of the Compensation Committee, namely Jane Swift (its Chair), Amy M. Adams, Matthew J. Chanin and Harold R. Logan, Jr. are
independent.
During fiscal 2024 and fiscal 2023, the Compensation Committee independently retained Willis Towers Watson, a human
resources consulting firm, to assist the Compensation Committee in developing certain components of the compensation packages for
the Partnership’s executive officers. See Item 11 of this Annual Report, below.
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.
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; identifies and
recommends to the Board, the individual members of the Board to serve as members of the various committees of the Board; develops
and recommends to the Board changes to the Partnership’s Corporate Governance Guidelines & Principles when appropriate; and
oversees the evaluation of the Board and its committees. The Committee’s current members are Matthew J. Chanin (its Chair), Amy
M. Adams, Terence J. Connors, William M. Landuyt, Harold R. Logan, Jr., Rommel M. Oates and Jane Swift, all of whom are
independent in accordance with our Corporate Governance Guidelines & Principles and the rules of the NYSE.
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 2023, our Chief Executive Officer, Michael A. Stivala,
submitted his Annual CEO Certification to the NYSE without qualification.
Delinquent Section 16(a) Reports
None.
60
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
Position
Michael A. Stivala
President and Chief Executive Officer
Michael A. Kuglin
Chief Financial Officer
Steven C. Boyd*
Chief Operating Officer
Douglas T. Brinkworth
Senior Vice President, Product Supply, Purchasing and Logistics
Neil E. Scanlon
Senior Vice President, Information Services
* As previously announced on December 5, 2023, Mr. Boyd will retire as Chief Operating Officer on January 1, 2025.
Key Topics Covered in our CD&A
The following table summarizes the main areas of focus in our 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 and Phantom Equity Plan
Distribution Equivalent Rights 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 oversees our general compensation philosophy in
consultation with our President and Chief Executive Officer, and supplements that by seeking advice, best practices and benchmarking
from outside compensation consultants on an as needed basis.
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 awards under our annual cash bonus plan, awards under our Long-Term Incentive Plan, grants
under our Restricted Unit Plan and Phantom Equity Plan, and grants under our Distribution Equivalent Rights Plan, as well
as all other executive compensation policies and programs;
61
•
Approving, administering and interpreting the compensation plans that constitute each component of our executive officers’
compensation packages;
•
Engaging consultants, when appropriate, to provide independent, third-party advice on executive officer-related
compensation, including benchmarking data;
•
Planning for anticipated and unexpected leadership changes by engaging in a continual process of management succession
planning; and
•
Reviewing human capital management matters with respect to the Partnership, which may include, but are not limited to,
the development, attraction, motivation and retention of personnel; employee diversity and inclusion; workplace
environment and culture; and internal communications programs.
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, grants of awards under our Restricted Unit Plan and Phantom Equity Plan, and other adjustments to the compensation
packages of the executive officers, other than for himself, to the Committee based on market conditions, the Partnership’s performance
and individual performance. When recommending individual pay adjustments for the executive officers, our President and Chief
Executive Officer presents the Committee with information comparing each executive officer’s current compensation to relevant
benchmark data for comparable positions.
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 executive officers’ current base salaries, total cash
compensation opportunities and total direct compensation to the data provided in the Mercer benchmarking database, which is derived
from a proprietary database of surveys from over 2,738 organizations and 1,163 positions that may or may not include similarly-sized
national propane marketers. The use of the Mercer database provides a broad base of compensation benchmarking information for
companies of a size similar to that of the Partnership. There was no formal consultancy role played by Mercer. 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 benchmarking data from the Mercer database, the Committee has utilized, since fiscal 2013, the services
of Willis Towers Watson (“WTW”), a human resource consulting firm, in developing compensation packages for each of our named
executive officers and our other executive officers. Because the Committee has followed an informal policy of only considering
increases to executive base salaries every two years, the Committee commissions WTW to update their benchmarking study every two
years. The Committee has also engaged the services of WTW in evaluating other aspects of executive compensation packages on a
periodic basis, including the design of incentive compensation plans and other perquisites. WTW benchmarks the base salaries, total
cash compensation opportunities and total direct compensation of our executive officers in comparison to comparable positions, using
market data for similarly-sized companies which were collected by WTW from multiple survey sources across several industries,
inclusive of other energy companies in the United States. The Committee engaged WTW in 2021 to provide benchmarking data in
reviewing and establishing executive compensation for fiscal 2022 and for fiscal 2023, and again in 2023 to evaluate executive
compensation for fiscal 2024 and for fiscal 2025.
Our Unitholders: Say-on-Pay
At their May 21, 2024 Tri-Annual Meeting, our Unitholders overwhelmingly approved an advisory resolution approving executive
compensation (commonly referred to as “Say-on-Pay”). As a result, the Committee determined that no major revisions of its executive
compensation practices were required. However, it remains the Committee’s practice to periodically evaluate its compensation practices
for possible improvement. The following represents the 2024 Say-on-Pay voting results:
For
Against
Abstain
Broker Non-Votes
28,169,102
1,699,005
649,145
19,900,979
62
The Annual Compensation Decision Making Process
Fiscal 2024 Committee Meetings
The Committee usually holds three regularly-scheduled meetings during the fiscal year: one in October or November, one in
January and one in July, and may meet at other times during the year as warranted. During fiscal 2024, the Committee chose to meet in
November, January, and July. The Committee finalized the fiscal 2024 compensation packages for our named executive officers at its
November 7, 2023 meeting.
As in past fiscal years and as referred to above, the Committee was provided with a comprehensive analysis of each executive
officer’s past and current compensation - including benchmarking data for comparison - to enable it to assess and determine each
executive officer’s compensation package for fiscal 2024. Prior to making its decisions regarding each named executive officer’s fiscal
2023 compensation package, the Committee reviewed the total cash compensation opportunity that was provided to each named
executive officer during the previously completed fiscal year compared to the total mean cash compensation opportunity for the parallel
position in the Mercer benchmarking database and to the recommendations and benchmarking data provided by WTW in advance of
the November 7, 2023 Committee meeting.
Our Approach to Setting Compensation Packages
Although the Committee has adopted an informal policy of considering adjustments to the base salaries of our named executive
officers every two years (unless specific circumstances warrant adjustments at a different time), each year the Committee conducts a
review of the compensation packages of all of our executive officers. As described below, our executive compensation philosophy
emphasizes pay-for-performance in allocating components of total compensation, which supports the informal policy of only adjusting
base pay every other year. In reviewing and determining the compensation packages of our named executive officers, the Committee
considers a number of factors related 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. As a result of this informal policy,
because fiscal 2022 was the last year for which the Committee considered base salary adjustments, during their November 7, 2023
meeting, the Committee considered and approved fiscal 2024 adjustments to the base salaries of our named executive officers.
The benchmarking data reviewed by the Committee is just one of a number of factors considered in making executive
compensation decisions, but, in some cases, is not necessarily the most persuasive factor. The Committee compared total cash
compensation opportunities (comprising base salary, annual cash bonuses and distribution equivalent rights payments) to the 50th
percentile of total cash compensation opportunity for the parallel positions in both the Mercer benchmarking database and the market
data provided by WTW. The Committee compared the total direct compensation, which includes the total cash compensation
opportunity plus long-term incentives (inclusive of cash-settled long-term incentives and grants under the Restricted Unit and Phantom
Equity Plans) to the 75th percentile of the Mercer benchmarking database and the WTW benchmarking study. The Committee seeks to
establish an overall compensation package for each of our executive officers that provides a competitive base salary, the opportunity to
earn annual cash incentives based on annual performance targets, with the goal of establishing a total cash compensation opportunity
that reflects the 50th percentile of the relevant benchmark data. The annual total cash compensation opportunity is supplemented with
targeted long-term incentive opportunities, in the form of long-term performance-based awards under our Long-Term Incentive Plan
and grants of awards under our Restricted Unit Plan and Phantom Equity Plan, to establish the target total direct compensation for each
executive officer.
Compensation Peer Group
The Committee bases its benchmarking on the market data, provided by Mercer and WTW, derived from companies of a size
similar 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 different economic
environments and have different ownership structures which may influence the comparability of compensation data for executive officer
positions. This benchmarking approach has been in place for a number of years.
63
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-term and long-term interests of our executive officers with those of our Unitholders.
We accomplish these objectives by providing our executive officers with compensation packages that incorporate a competitive
base salary combined with the opportunity to earn both short-term and long-term cash incentives based on the achievement of short-
term and long-term performance objectives under a pay-for-performance compensation philosophy. Recognizing that certain external
factors, such as the severity and unpredictability of winter weather patterns, may have a significant influence on annual financial
performance in any given year, the Committee evaluates additional factors in determining the amount of incentive compensation earned.
We also provide our executive officers with equity-based compensation opportunities that are intended to align their interests with those
of our Unitholders. Various components of compensation provided to our executive officers are specifically linked to either short-term
or long-term performance measures, and encourage equity ownership in the Partnership. 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.
64
The principal components of the compensation we provide to our named executive officers are as follows:
Component
Purpose
Features
Base Salary
• To reward individual performance,
experience and scope of responsibility
• To be competitive with market pay
practices
• Reviewed and approved annually
• Market benchmarked
• Mean market salary data is considered in
determining reasonable levels
Annual cash
incentive
• To drive and reward the delivery of
financial and operating performance
during a particular fiscal year
• Paid in cash
• Based on annual EBITDA
performance compared to budgeted
EBITDA and other qualitative factors
Cash-settled
long-term
incentives
• To ensure alignment of our executive
officers' interests with the long-term
interests of our Unitholders
• To reward activities and practices that
are conducive to sustainable, profitable
growth and long-term value creation
• To attract and retain skilled individuals
• Participants are selected by the
Committee
• 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 and other
qualitative factors
Restricted units
• To retain the services of the recipient
over the vesting period
• To further align the long-term interests
of the recipient with the long-term
interests of our Unitholders through
encouragement of equity ownership
• To mitigate potential shortfalls in
total cash compensation of our
executive officers when compared
to benchmarked total cash compensation
• To provide an adequate compensation
package in connection with an
internal promotion
• To reward outstanding performance
• Participants are selected by the
Committee
• 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
Phantom units
• To retain the services of the recipient
over the vesting period
• To further align the long-term interests
of the recipient with the long-term
interests of our Unitholders through
encouragement of behaviors that may
enhance the value of our Common Units
• To provide an adequate compensation
package in connection with an
internal promotion
• To reward outstanding performance
• Participants are selected by the
Committee
• 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 cash
Distribution
equivalent rights
• To drive and reward behaviors that lead
to distribution sustainability and growth
• To further align the interests of the
recipients with the interests of our
Unitholders
• To encourage our executives to retain
their holdings of our Common Units by
providing them with funds to settle the
income and FICA taxes on their vested
restricted units
• Participants are selected by the
Committee
• Paid in cash
• Payments are made after
quarterly distributions are paid to
Unitholders and based on the number of
Participants' unvested restricted
and phantom units
65
We align the short-term and long-term interests of our named executive officers with the short-term and long-term interests of our
Unitholders by:
•
Providing our named 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 named executive officers to implement activities and practices
conducive to sustainable, profitable growth;
•
Providing our named executive officers with restricted units and phantom units in order to encourage the retention of the
participating executive officers and to align their interests with those of our Unitholders by offering an opportunity to
increase their equity ownership in the Partnership, (in the case of restricted units), while simultaneously encouraging
behaviors conducive to the long-term appreciation of our Common Units; and
•
Providing our named executive officers with distribution equivalent rights to encourage behaviors conducive to distribution
sustainability and growth.
Pay Mix
Under our compensation structure, each named executive officer’s “total cash compensation opportunity” consists of a mix of
base salary, annual cash bonus, the eligibility to participate in our Long-Term Incentive Plan for the potential to earn cash-settled long-
term incentives, grants of phantom units under our Phantom Equity Plan, and distribution equivalent rights payments. In addition to the
total cash compensation opportunity, each named executive officer is eligible to receive grants of restricted units under our Restricted
Unit Plan, which, when combined with the total cash compensation opportunity, represents our named executive officers’ “total direct
compensation opportunity.” This “mix” varies depending on his or her position, and the level of influence and line of sight to the
activities that can help achieve the incentive targets. The base salary for each executive officer is the only fixed component of
compensation, and the Restricted Unit Plan awards are the only non-cash compensation component. The annual cash bonuses and cash-
settled long-term incentive compensation, are 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, the Committee considers it crucial to emphasize
the performance-based elements of the total cash compensation opportunities provided to them. Therefore, during fiscal 2024, 59% of
our President and CEO’s and at least 38% of our other named executive officers’ total cash compensation opportunity was performance-
based under our annual cash bonus and long-term incentive plans, neither of which provide for guaranteed minimum payments.
In reviewing and establishing compensation packages for our named executive officers for fiscal 2024, at its meeting on November
7, 2023, the Committee considered and approved base salary adjustments for our named executive officers, after reviewing and taking
into consideration the study provided by WTW, as well as the 2023 Mercer benchmark database. Specifically, both data sources were
used to consider and approve base salary adjustments, as well as the target grant values of the non-cash Restricted Unit Plan and the
cash-settled Phantom Equity Plan that were awarded to our named executive officers and certain other executive officers as part of their
overall compensation packages for fiscal 2024.
The following table summarizes each of the components of total cash compensation as a percentage of each named executive
officer’s total cash compensation opportunity for fiscal 2024, as well as the total cash compensation opportunity and the non-cash
Restricted Unit Plan, and cash-settled Phantom Equity Plan, grants each as a percentage of the total direct compensation opportunity for
fiscal 2024:
Name
Base Salary
Cash Bonus
Target
Cash-Settled
Long-Term
Incentive
Cash-Settled
Phantom
Equity
Plan Grants
Distribution
Equivalent
Rights
Total Cash
Compensation
Opportunity
as a
Percentage of
Total Direct
Compensation
Non-Cash
Restricted Unit
Plan Grants as a
Percentage of
Total Direct
Compensation
Michael A. Stivala
28%
34%
25%
7%
6%
80%
20%
Michael A. Kuglin
28%
22%
17%
25%
8%
82%
18%
Steven C. Boyd
27%
22%
16%
27%
8%
81%
19%
Douglas T. Brinkworth
27%
22%
16%
27%
8%
81%
19%
Neil E. Scanlon
27%
22%
16%
27%
8%
81%
19%
66
Total Direct Compensation for Our President and Chief Executive Officer
Mr. Stivala has been the Partnership’s President and Chief Executive Officer since September 2014, and has navigated the
Partnership through an extraordinarily challenging operating environment during his tenure, while also beginning to shift the strategic
focus of the Partnership toward the building of a renewable energy platform. The Committee reviews the total direct compensation
opportunity for our President and Chief Executive Officer on an annual basis, comparing his total cash compensation opportunity and
total direct compensation opportunity to relevant benchmark data, and has established a compensation philosophy to target a range of
45% to 50% of his total direct compensation to be “at risk” under the Committee’s pay-for-performance philosophy.
At its November 7, 2023 meeting, the Committee reviewed a detailed benchmarking analysis of the components of total direct
compensation for our President and Chief Executive Officer prepared by WTW while making decisions regarding Mr. Stivala’s fiscal
2024 compensation package. The Committee acknowledged that there was a significant shortfall in the total cash compensation
opportunity for Mr. Stivala compared to the 50th percentile of the benchmark total cash compensation opportunity, as well as in
comparison of the total direct compensation opportunity compared to the 75th percentile of the relevant benchmark, and made
adjustments to his base salary in order to help close the gap on the perceived shortfall to the relevant benchmark As a result of the
adjustments, Mr. Stivala’s total cash compensation opportunity for fiscal 2024 was reflective of the 50th percentile for the relevant
benchmark, and the percentage of “at risk” compensation for fiscal 2024 was 47%.
The following table summarizes the total direct compensation opportunity for our President and Chief Executive Officer for fiscal
2024 and fiscal 2023:
Components of Total Direct Compensation
Fiscal 2024
Total Direct
Compensation
Fiscal 2023
Total Direct
Compensation
Base Salary
$
910,000 $
820,000
Annual Bonus Target %
120 %
120%
Annual Bonus Target $
$
1,092,000 $
984,000
Distribution Equivalent Rights Payments
$
165,407 $
156,532
Total Cash Compensation Opportunity
$
2,167,407 $
1,960,532
LTIP Target $
$
819,000 $
738,000
Restricted Unit Plan Award $
$
813,968 $
629,526
Phantom Equity Plan Award $
$
236,200 $
190,000
Total Direct Compensation Opportunity
$
4,036,575 $
3,518,058
Performance-Based % of Total Direct Compensation
Opportunity
47 %
49%
Components of Compensation
Base Salary
Consistent with the process outlined in the section above titled “The Annual Compensation Decision Making Process,” at its
November 7, 2023 meeting, the Committee followed its informal policy of considering adjustments to the base salaries of our named
executive officers every two years (unless specific circumstances were deemed by the Committee to necessitate a base salary adjustment)
and, as a result, the Committee considered and approved fiscal 2024 base salary adjustments for our named executive offices.
The following base salaries were in effect during fiscal 2024 and fiscal 2023 for our named executive officers:
Name
Fiscal 2024
Base Salary
Fiscal 2023
Base Salary
Michael A. Stivala
$
910,000
$
820,000
Michael A. Kuglin
$
495,000
$
450,000
Steven C. Boyd
$
500,000
$
460,000
Douglas T. Brinkworth
$
445,000
$
400,000
Neil E. Scanlon
$
390,000
$
350,000
The base salaries paid to our named executive officers in fiscal 2024, fiscal 2023 and fiscal 2022 are reported in the column titled
“Salary” in the Summary Compensation Table below.
67
Annual Cash Bonus Plan
The Committee uses the annual cash bonus plan (which falls within the SEC’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 certain hourly and salaried
employees; including our named executive officers. Payments, if any, are based on the attainment of EBITDA targets for the particular
fiscal year, in accordance with an annual budget approved by our Board of Supervisors at the beginning of the fiscal year, and other
qualitative factors that we refer to below as a “scorecard-based component.”
Components of Annual Cash Bonus Plan
Definitions
Actual EBITDA: represents net income before deducting interest expense, income taxes, depreciation and amortization.
Actual Adjusted EBITDA: represents Actual EBITDA adjusted for various items, including, but not limited to: unrealized non-
cash gains or losses on changes in the fair value of derivative instruments; gains or losses on sale of businesses; acquisition and
integration-related costs; multi-employer pension plan withdrawal charges; pension settlement charges; earnings and losses from our
unconsolidated affiliates; 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.
The annual cash bonus plan contains two separate measurement components as follows:
•
Performance-based component in which Actual Adjusted EBITDA is compared to Budgeted EBITDA; and
•
Scorecard-based component in which up to an additional 35% of the target cash bonus may be awarded by the Committee,
as an enhancement to the performance-based component, based on their evaluation of several qualitative scorecard items
that include the following: key safety statistics compared to the prior year, customer base trends compared to the prior
year, advancement of our Go Green with Suburban Propane corporate pillar and sustainability initiatives, and, in the
case of our named executive officers, achievement of corporate and individual goals. The Committee uses its discretion
regarding how much weight to place on any one, or several, of the qualitative scorecard items in determining the amount,
if any, of the scorecard-based component to award in any fiscal year.
68
The following table sets forth the percentages of target cash bonuses participants will earn under the performance-based
component of the annual cash bonus plan at various levels of Actual Adjusted EBITDA in relation to Budgeted EBITDA:
Performance-Based Component
Actual Adjusted EBITDA as a % of
Budgeted EBITDA
% of Target Cash Bonus Earned
Maximum
120% and above
120%
119%
119%
118%
118%
117%
117%
116%
116%
115%
115%
114%
114%
113%
113%
112%
112%
111%
111%
110%
110%
109%
109%
108%
108%
107%
107%
106%
106%
105%
105%
104%
104%
103%
103%
102%
102%
101%
101%
Target
100%
100%
99%
98%
98%
96%
97%
94%
96%
92%
95%
90%
94%
88%
93%
86%
92%
84%
91%
82%
90%
80%
89%
77%
88%
74%
87%
71%
86%
68%
85%
65%
84%
62%
83%
59%
82%
56%
81%
53%
Entry
80%
50%
Below 80%
0%
69
Fiscal 2024 Annual Cash Bonus
For fiscal 2024, our Budgeted EBITDA was $281.0 million. Our Actual Adjusted EBITDA was such that each of our executive
officers earned 77% of his or her target cash bonus for the performance-based component of the annual cash bonus plan. During the
previous two fiscal years, our Actual Adjusted EBITDA was such that each of our named executive officers earned 100% and 106% of
his target cash bonus for fiscal 2023 and fiscal 2022, respectively. Additionally, for fiscal 2024, fiscal 2023 and fiscal 2022, based on
the Committee’s evaluation of the qualitative scorecard-based components discussed above, the Committee awarded each of our named
executive officers 0%, 25% and 24%, respectively, of the target cash bonuses for the scorecard-based component of the annual cash
bonus plan. Accordingly, each of our named executive officers earned a total annual cash bonus of 77%, 125% and 130% of his target
cash bonus for fiscal 2024, 2023 and 2022, respectively. Annual cash bonuses, if earned, are paid in the first quarter of the following
fiscal year.
The fiscal 2024 target cash bonus established for each named executive officer and the actual cash bonuses earned by each of
them during fiscal 2024 are summarized as follows:
Name
Fiscal 2024 Target
Cash Bonus as a
Percentage of Base
Salary
Fiscal 2024
Target Cash
Bonus
Fiscal 2024 Actual
Cash Bonus
Earned at 77%
Michael A. Stivala
120%
$
1,092,000
$
840,840
Michael A. Kuglin
80%
$
396,000
$
304,920
Steven C. Boyd
80%
$
400,000
$
308,000
Douglas T. Brinkworth
80%
$
356,000
$
274,120
Neil E. Scanlon
80%
$
312,000
$
240,240
The Use of Discretion
The Committee retains the right to exercise its broad discretionary powers to decrease or increase the annual cash bonus paid to a
particular named executive officer, upon the recommendation of our President and Chief Executive Officer, or to the named executive
officers as a group, when the Committee determines that an adjustment is warranted. The Committee did not exercise this authority in
fiscal 2024, fiscal 2023 or fiscal 2022.
If the Committee were to exercise its discretionary authority, any such discretionary bonuses provided to our named executive
officers would be reported in the column titled “Bonus” in the Summary Compensation table below. The bonus payments earned by
our named executive officers under the annual cash bonus plan for fiscal 2024, fiscal 2023 and fiscal 2022 are reported in the column
titled “Non-Equity Incentive Plan Compensation” in the Summary Compensation Table below.
Long-Term Incentive Plan
As result of a study completed by WTW, the Committee adopted our 2021 Long-Term Incentive Plan (the “LTIP”) to complement
the annual cash bonus plan, which focuses on our short-term performance goals. The LTIP is a cash-settled phantom unit plan that is
designed to motivate our executive officers to focus on our long-term financial goals and operating and strategic objectives. Under the
LTIP, performance is assessed over a three-year measurement period and, as such, at the beginning of each fiscal year, there are three
active award cycles. For example, at the beginning of fiscal 2024 the active award cycles included: the fiscal 2022 award, which started
at the beginning of fiscal 2022 and ended at the conclusion of fiscal 2024; the fiscal 2023 award, which started at the beginning of fiscal
2023 and will end at the conclusion of fiscal 2025; and the fiscal 2024 award, which started at the beginning of fiscal 2024 and will end
at the conclusion of fiscal 2026. Beginning with the fiscal 2022 LTIP Award, in order to determine if a payment is earned under the
LTIP, performance is evaluated using two separate measurement components: (i) 50% weight based on the level of average distributable
cash flow, as defined in the LTIP, of the Partnership over the three-year measurement period (the “Average Distributable Cash Flow”);
and (ii) 50% weight based on the achievement of certain operating and strategic objectives, set by the Committee, over the three-year
measurement period (the “Operating/Strategic Objectives Component”), as further described below.
Performance Conditions for the LTIP
When approving an award, at the beginning of that particular award’s three-year measurement period, the Committee will establish
a performance scale that will measure the Average Distributable Cash Flow component for the three-year measurement period. The
target threshold for each fiscal year’s award cycle will represent a level of Average Distributable Cash Flow that reflects approximately
5% growth compared to the average distributable cash flow for the three years preceding the beginning of the respective award cycle,
or some other target threshold, as determined by the Committee. For purposes of establishing the potential payout percentage for the
Average Distributable Cash Flow component, the performance scale provides for a minimum threshold for Average Distributable Cash
Flow that is approximately twenty percent (20%) below the target threshold and a maximum threshold that is approximately ten percent
(10%) above the target threshold. For each $4 million decline in Average Distributable Cash Flow from the target threshold, the payout
70
percentage opportunity decreases by five percent (5%) to an entry level threshold payout of 50%. For each $2 million increase in
Average Distributable Cash Flow above the target threshold, the payout percentage opportunity increases by five percent (5%) to a
maximum threshold payout of 150%. For illustrative purposes, the following table provides the potential payout percentages associated
with various levels of Average Distributable Cash Flow for the three-year measurement period of the fiscal 2022 award, which ended
at the end of fiscal 2024:
Average Distributable Cash
Flow Performance Scale for the
Three-Year Measurement
Period (thousands)
Payout Percentage
Maximum Threshold
$
215,000
150%
213,000
145%
211,000
140%
209,000
135%
207,000
130%
205,000
125%
203,000
120%
201,000
115%
199,000
110%
197,000
105%
Target Threshold
195,000
100%
191,000
95%
187,000
90%
183,000
85%
179,000
80%
175,000
75%
171,000
70%
167,000
65%
163,000
60%
159,000
55%
Entry Level Threshold
$
155,000
50%
The target thresholds for Average Distributable Cash Flow, established by the Committee for the fiscal 2023 award cycle and the
fiscal 2024 award cycle were $202,000 and $207,000, respectively.
The Committee also established specific operating and strategic objectives (“Operating/Strategic Objectives”) for the component
of the LTIP that will measure the Partnership’s performance in achieving such Operating/Strategic Objectives for the three-year
measurement period. At the end of the three-year measurement period, the Committee will evaluate the Partnership’s performance
compared to the Operating/Strategic Objectives set at the beginning of the three-year measurement period to determine the amount, if
any, of the Operating/Strategic Objectives component to award. The following are the Operating/Strategic Objectives set by the
Committee for the fiscal 2022 and fiscal 2023 awards:
1. Achievement of target consolidated leverage ratio between 3.5x and 4.0x (taking into account any appropriate adjustments
for business combinations);
2. Customer base growth;
3. Relative performance in absolute total return to Unitholders compared to the Alerian MLP Index; and
4. Advancements in the Partnership’s Go Green with Suburban Propane initiative and other strategic growth initiatives.
The following are the Operating/Strategic Objectives set by the Committee for the fiscal 2024 award:
1. Achievement of target consolidated leverage ratio between 3.5x and 4.0x (while making strategic investments in acquisitions);
2. Customer base growth;
3. Relative performance in absolute total return to Unitholders compared to the Alerian MLP Index; and
4. Performance against our long-term strategic plan.
71
The Committee will use its discretion regarding how much weight to place on any one, or several, of the Operating/Strategic
Objectives in determining the amount to award, if any, of the Operating/Strategic Objectives component as follows:
Percentage of
Operating/Strategic Objectives
Component Earned
Maximum Threshold
150%
125%
Target Threshold
100%
75%
Entry Level Threshold
50%
Grant Process
At the beginning of each fiscal year, LTIP phantom unit awards are granted as a Committee-approved percentage of each named
executive officer’s salary. In accordance with the terms of the LTIP, at the beginning of each the three-year measurement period, the
number of each named executive officer’s unvested LTIP phantom unit award was calculated by dividing their target LTIP amount
(representing 75% of that named executive officer’s target cash bonus under the annual cash bonus plan) by the average of the closing
prices of our Common Units for the twenty days preceding the beginning of the three-year measurement period.
Cash Payments
For awards granted under the LTIP, our named executive officers, as well as the other LTIP participants (all of whom are key
employees), will, at the end of the three-year measurement period, receive cash payments equal to: (i) the quantity of the participant’s
unvested phantom units that become vested phantom units at the conclusion of the three-year measurement period based on the
applicable percentage earned under the respective plan multiplied by (ii) the average of the closing prices of our Common Units for the
twenty days preceding the conclusion of the three-year measurement period, plus the sum of the distributions that would have inured to
one of our outstanding Common Units during the three-year measurement period.
The fiscal 2022 award cycle concluded at the end of fiscal 2024. Our Average Distributable Cash Flow for the three-year
measurement period for the fiscal 2022 award cycle was such that each of our executive officers earned 85% of the Average Distributable
Cash Flow component. Additionally, for the fiscal 2022 award cycle, based on the Committee’s evaluation of the Operating/Strategic
Objectives components discussed above, the Committee awarded each of our named executive officers 50% of the target payout for that
component of the LTIP.
The actual payments to be made to each named executive officer in fiscal 2025 for the fiscal 2022 LTIP award cycle, which ended
at the end of fiscal 2024, are summarized as follows:
Name
Fiscal 2022 LTIP Award Cycle
Actual Cash Payments Earned
Michael A. Stivala
$
706,344
Michael A. Kuglin
$
258,426
Steven C. Boyd
$
264,157
Douglas T. Brinkworth
$
229,712
Neil E. Scanlon
$
200,998
Retirement Provision
The retirement provision applies to all LTIP participants who have been employed by the Partnership for ten years and have
attained age 55. 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. At the conclusion of fiscal 2024, this retirement provision applied to awards held by
Mr. Stivala, Mr. Boyd, Mr. Brinkworth and Mr. Scanlon.
72
Outstanding Awards under the LTIP
The following are the quantities of unvested LTIP phantom units granted to our named executive officers during fiscal 2024 and
fiscal 2023 that will be used to calculate cash payments at the end of the respective award’s three-year measurement period:
Fiscal 2024 Award
Fiscal 2023 Award
Michael A. Stivala
55,261
44,693
Michael A. Kuglin
20,040
16,351
Steven C. Boyd
20,242
16,715
Douglas T. Brinkworth
18,016
14,534
Neil E. Scanlon
15,789
12,718
The grant date values based on the target outcomes of the awards under the LTIP granted during fiscal 2024, fiscal 2023 and
fiscal 2022 are reported in the column titled “Unit Awards” in the Summary Compensation Table below.
Restricted Unit Plan
At their May 15, 2018 Tri-Annual Meeting, our Unitholders approved the adoption of our 2018 Restricted Unit Plan (the “RUP”).
Upon adoption, this plan authorized the issuance of 1,800,000 Common Units to our named executive officers, managers, other
employees and to members of our Board of Supervisors. At their May 18, 2021 and May 21, 2024 Tri-Annual Meetings, our Unitholders
authorized the issuance of an additional 1,725,000 and 2,650,000 Common Units, respectively, under the RUP. At the conclusion of
fiscal 2024, there were 2,889,830 restricted units remaining available under the RUP for future awards.
Grant Process
All restricted unit awards are approved by the Committee. Because individual circumstances differ, the Committee has not
adopted a formulaic approach to making restricted unit awards. Although the reasons for granting an award can vary, the general
objective of granting an award to a recipient 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 restricted unit 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 named executive officers and other key employees, the Committee
considers, without limitation:
•
The named 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 named executive officer or key employee for whom the award is
being considered;
•
The value of similar equity awards to named executive officers of similarly sized companies; 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 named executive officers, the Committee considers the
existing level of outstanding unvested restricted unit awards held by our named executive officers.
The Committee generally approves awards under our 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.
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. Upon vesting, restricted
units are automatically converted into our Common Units, with full voting rights and rights to receive distributions.
73
Vesting Schedule
The standard vesting schedule of all of our outstanding RUP awards is one third of each award 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, subject to the limitations set forth in the RUP, and described above, with respect to
restricted units awarded under that plan. Unvested awards are subject to forfeiture in certain circumstances, as defined in the RUP
document. The RUP places a five percent (5%) limit on the number of units then authorized for issuance that may (a) be awarded with
a vesting schedule other than the standard vesting schedule, and (b) subject to certain limited exceptions, have their vesting accelerated
to a date prior to the twelve-month anniversary of the effective date of their grant.
Outstanding Awards under the RUP
At its November 7, 2023 meeting, the Committee approved a grant of restricted units to each of our named executive officers. In
determining these fiscal 2024 awards for our named executive officers, the Committee relied upon information provided by the Mercer
benchmarking database and recommendations by WTW to conclude that these awards were necessary to remediate shortfalls perceived
by the Committee in the cash compensation opportunities provided by the Partnership to these executives, as well as in recognition of
their individual achievements throughout fiscal 2023. The Committee uses restricted unit awards to satisfy a perceived need to balance
cash compensation with equity (or non-cash) compensation, and to encourage our named executive officers, and other key employees,
to have an equity stake in the Partnership, thereby further aligning the economic interests of our named executive officers with the
economic interests of our Unitholders.
The following table summarizes the RUP awards granted to our named executive officers at the Committee’s November 7, 2023
meeting:
Name
Grant Date
Quantity
Michael A. Stivala
November 15, 2023
55,523
Michael A. Kuglin
November 15, 2023
26,445
Steven C. Boyd
November 15, 2023
29,384
Douglas T. Brinkworth
November 15, 2023
26,445
Neil E. Scanlon
November 15, 2023
23,507
The aggregate grant date fair values of RUP awards made during fiscal 2024, fiscal 2023 and fiscal 2022, were computed in
accordance with accounting principles generally accepted in the United States of America, and are reported in the column titled “Unit
Awards” in the Summary Compensation Table below.
Retirement Provisions
The RUP contains retirement provisions that provide for the issuance of Common Units (six months and one day after the
retirement date of qualifying participants) relating to 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 one year;
•
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 the end of fiscal 2024, the retirement provisions applied to Mr. Stivala, Mr. Boyd, Mr. Brinkworth and Mr. Scanlon.
2022 Phantom Equity Plan
At its November 8, 2022 meeting, the Committee adopted our 2022 Phantom Equity Plan (the “PEP”) as a component of our long-
term compensation, based on an analysis of market practices of different components of total compensation prepared by WTW. The
adoption of the PEP was recommended by WTW to provide an additional component of long-term compensation that has similar
characteristics of our RUP, but that provides for cash settlement. In adopting the PEP, the Committee’s intent is to provide a reasonable
mixture of both cash and non-cash equity-based compensation as components of long-term compensation.
Grant Process
The grant process, and the decision-making process for the granting of phantom equity units, for the PEP are identical to that of
our RUP (described above). The Committee will generally approve awards under our PEP at its first meeting each fiscal year following
74
the availability of the financial results for the prior fiscal year; however, the Committee reserves the right to grant awards at other times
of the year, particularly when the need arises to grant awards because of promotions and new hires.
Upon vesting, phantom equity units are automatically converted into cash, the value of which is equal to the average of the highest
and lowest trading prices of our Common Units on the trading day immediately preceding the date of issuance.
Vesting Schedule
The standard vesting schedule of all of our outstanding PEP awards will be one third of each award on each of the first three
anniversaries of the award grant date, subject to continuous employment or service from the grant date through the applicable payment
date. The Committee retains the ability to deviate, at its discretion, from the normal vesting schedule with respect to particular PEP
awards. Unvested awards are subject to forfeiture in certain circumstances, as defined in the PEP document and the applicable award
agreements. The change in control vesting provisions under the PEP are described in more detail below.
Outstanding Awards under the PEP
At its November 7, 2023 meeting, in tandem with RUP awards, the Committee approved PEP awards for each of our named
executive officers. The following table summarizes the phantom equity units granted to our named executive officers at the Committee’s
November 7, 2023 meeting:
Name
Grant Date
Quantity
Michael A. Stivala*
November 15, 2023
13,881
Michael A. Kuglin
November 15, 2023
26,445
Steven C. Boyd
November 15, 2023
29,384
Douglas T. Brinkworth
November 15, 2023
26,445
Neil E. Scanlon
November 15, 2023
23,507
*Note: Mr. Stivala’s PEP grant is for fewer units than the other named executive officers because the Committee determined that
as President & CEO, he should receive more equity units under the RUP and fewer phantom units under the PEP.
The grant date values based on the target outcomes of the awards under the PEP granted during fiscal 2024, fiscal 2023 and fiscal
2022 are reported in the column titled “Unit Awards” in the Summary Compensation Table below.
Retirement Provisions
The PEP document contains retirement provisions that provide for the vesting of phantom units six months and one day after the
retirement date of qualifying participants who meet all three of the following conditions on his or her retirement date:
•
The unvested award has been held by the grantee for at least one year;
•
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 the end of fiscal 2024, the retirement provisions applied to Mr. Stivala, Mr. Boyd, Mr. Brinkworth and Mr. Scanlon.
For those who meet the conditions set forth in the retirement provisions of the PEP, the cash payment shall be equal to the average
of the highest and lowest trading prices of our Common Units on the trading day immediately preceding the vesting date.
Distribution Equivalent Rights Plan
At its January 17, 2017 meeting, the Committee adopted a Distribution Equivalent Rights Plan (the “DER Plan”) as a component
of executive compensation based on data provided by WTW that indicated a DER Plan aligned with industry norms (77% of other
publicly traded partnerships and 92% of a sample of broader energy/utility companies, at that time, provided such plans to their
executives in one form or another). The Committee adopted the DER Plan because the cash compensation resulting from the DER Plan
would help, in certain instances, to lessen the gap between the total compensation paid to some of our named executive officers and the
benchmark compensation data. Additionally, the Committee intends for the DER Plan to provide our named executive officers with a
reasonable balance between performance-based and non-performance-based cash opportunities and to assist our named executive
officers to obtain funds to settle the taxes on equity-based compensation (i.e., taxes generated when restricted units vest). Most
importantly, the Committee believes that this form of compensation further aligns the interests of our named executive officers with the
interests of our Unitholders because it provides an incentive for the types of behaviors that lead to distribution sustainability and growth.
At their November 8, 2022 meeting, the Committee amended the DER Plan to make unvested phantom units awarded under the PEP
75
eligible for payments under the DER Plan. This became effective with the first distribution that was declared by the Board of Supervisors
during calendar year 2023.
The executive officers of the Partnership (as defined in the DER Plan document) are eligible for a distribution equivalent right
(“DER”) award under the DER Plan at the discretion of the Committee. Once awarded, a DER entitles the grantee to a cash payment
each time our Board of Supervisors declares a cash distribution on our Common Units, but only after such distribution is paid to the
Unitholders. The DER cash payments are equal to the amounts calculated by multiplying (A) the number of unvested restricted units
that have been previously awarded to such grantees under the RUP plus, beginning with fiscal 2023, the number of unvested phantom
units that have been previously awarded to such grantees under the PEP, which are held by these grantees on the record date of the
distribution, by (B) the amount of the declared distribution per Common Unit. The form of award agreement under the DER Plan
expressly provides that the Committee retains the right to cancel, in whole or in part, any DER after its award, with or without cause.
DERs also automatically terminate on the first to occur of: (a) the termination of the grantee’s employment with us or our subsidiary
(except for those situations when such termination does not result in the forfeiture of the unvested restricted units then held by the
grantee), (b) the vesting, termination or forfeiture of all unvested restricted units under the RUP and unvested phantom units under the
PEP then held by the grantee, or (c) the grantee becoming employed by us or our subsidiary in a role other than as an executive officer.
Pursuant to the terms of the DER Plan, DERs, and cash payments thereunder, are considered to be “incentive compensation” for purposes
of our incentive compensation recoupment policy described below.
At its January 17, 2017 meeting, the Committee granted DERs under the DER Plan to all of our named executive officers. The
following table summarizes the DER payments made to our named executive officers during fiscal 2024:
Name
Payment Amount
Michael A. Stivala
$
165,407
Michael A. Kuglin
$
131,850
Steven C. Boyd
$
139,491
Douglas T. Brinkworth
$
131,850
Neil E. Scanlon
$
117,534
The DER Plan payments made to our named executive officers during fiscal 2024, fiscal 2023, and fiscal 2022 are reported in the
column titled “Non-Equity Incentive Plan Compensation” in the Summary Compensation Table below.
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 formula rather than the final average pay formula that was in effect prior to January 1, 1998 (the “Cash Balance Plan”).
The cash balance formula was designed to evenly spread the growth of a participant’s earned retirement benefit throughout his or her
career rather than the final average pay formula, 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 Cash Balance 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 Cash Balance Plan to cease future
service and pay-based credits on behalf of the participants and, from that point on, participants’ benefits have increased only because of
interest credits. Of our named executive officers, only Mr. Boyd, Mr. Brinkworth and Mr. Scanlon participate in the Cash Balance Plan.
The changes in the actuarial value, if any, relative to Mr. Boyd’s, Mr. Brinkworth’s and Mr. Scanlon’s participation in the Cash
Balance Plan during fiscal 2024, fiscal 2023 and fiscal 2022 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 our 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.” Under the 401(k) Plan, 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 2024, fiscal 2023 and fiscal 2022, 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 other exempt employees of the
76
Partnership. Amounts deferred by our named executive officers under the 401(k) Plan during fiscal 2024, fiscal 2023 and fiscal 2022
are included in the column titled “Salary” in the Summary Compensation Table below.
Our 401(k) Plan provides a match of $0.50 for every dollar contributed up to 6% of each participant’s total base pay, up to a
maximum compensation limit of $345,000 for calendar year 2024, $330,000 for calendar year 2023, and $305,000 for calendar year
2022. If, however, Actual Adjusted EBITDA is 115% or more than Budgeted EBITDA, each participant will receive a match of $1 for
every dollar contributed up to 6% of each participant’s total base pay, up to the applicable maximum compensation limits. For fiscal
2024, fiscal 2023 and fiscal 2022, the performance conditions that provide for more than the $0.50 match were not met.
The matching contributions made on behalf of our named executive officers for fiscal 2024, fiscal 2023 and fiscal 2022 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.
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. Because these plans are offered on the same basis as is provided to
other employees, we have not reported the costs of these benefits incurred on behalf of our named executive officers in the Summary
Compensation Table below.
Perquisites
Perquisites represent a minor component of our executive officers’ compensation. Each of our 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 our named executive officers in fiscal
2024.
Name
Tax
Preparation
Services
Employer
Provided
Vehicle
Physical
Michael A. Stivala
$
— $
20,969
$
3,150
Michael A. Kuglin
$
— $
21,683
$
3,350
Steven C. Boyd
$
3,750 $
10,743
$
—
Douglas T. Brinkworth
$
3,900 $
20,533
$
3,550
Neil E. Scanlon
$
3,750 $
18,826
$
3,350
Perquisite-related costs for fiscal 2024, fiscal 2023 and fiscal 2022 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
Partnership to provide named executive officers 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 named executive officers 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 and
the employee’s level, the Partnership may make exceptions to this general policy.
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
77
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 severance protection
following a change of control, which we refer to as the “Executive Special Severance Plan.” During fiscal 2024, fiscal 2023, and fiscal
2022, our Executive Special Severance Plan covered all of our executive officers, including our named executive officers.
Based on the results of the benchmarking study performed by WTW, at its November 12, 2019 meeting, the Committee approved
the Executive Special Severance Plan, which became effective January 1, 2020. The Executive Special Severance Plan is intended to
provide double-trigger severance benefits to our named executive officers and certain other senior employees of the Partnership in the
event that their employment is terminated by us without “cause” or by the participant for “good reason” (as defined in the Executive
Special Severance Plan) during the six-month period prior to, or upon or within the 24-month period following, a change of control
(defined as described below). Under the Executive Special Severance Plan, a participant is entitled to receive a lump sum cash payment
equal to one fifty-second (1/52nd) of the sum of the participant’s base salary plus target bonus, multiplied by the number of severance
weeks available to the participant. The number of severance weeks for each of our named executive officers is 156. In addition to cash
severance, participants are also entitled to receive continued health coverage, a pro-rata bonus for the year of termination and
outplacement services. Participants must execute a release of claims, inclusive of an 18-month non-competition, non-solicitation and
non-disparagement covenant as a condition of receiving severance payments under the plan.
Under the RUP, upon a change of control, without regard to whether a participant’s employment is terminated, all unvested awards
granted under the plan will vest immediately and become distributable to the participants. Under the PEP, without regard to whether a
participant’s employment is terminated, all unvested phantom awards granted under the plan will vest immediately and the participants
shall be paid amounts equal to the number of phantom units held by a particular participant multiplied by the average of the highest and
lowest trading prices of our Common Units on the trading day immediately preceding the date on which the change of control occurred.
In addition, under the LTIP, upon a change of control and without regard to whether a participant’s employment is terminated, all
outstanding, unvested phantom unit 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 LTIP, an amount equal to the cash value of 150% of a participant’s
unvested phantom units under the respective outstanding LTIP award, plus a sum equal to 150% 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 participant.
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 Affiliates (as that term is defined in the provisions of the various plans), or any
employee benefit plan maintained by us, the Operating Partnership or any of our Affiliates, 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 Affiliates, 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.
Risk Mitigation Policies
Equity Holding Policy
Effective April 22, 2010, the Committee adopted an Equity Holding Policy, as amended on November 11, 2015 and November
13, 2018, which established guidelines for the level of Partnership equity holdings that members of the Board and our executive officers
are expected to maintain.
78
The Partnership’s equity holding requirements for the specified positions were as follows during fiscal 2024:
Position
Amount
Member of the Board of Supervisors
4 x Annual Fee
President and Chief Executive Officer
5 x Base Salary
Chief Financial Officer
3 x Base Salary
Chief Operating Officer
3 x Base Salary
Senior Vice President
2.5 x Base Salary
Vice President
1.5 x Base Salary
Assistant Vice President
1 x Base Salary
Managing Director
1 x Base Salary
As of the January 2, 2024 measurement date, all of our executive officers, including our named executive officers, as well as 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.
The Partnership also maintains a policy that prohibits our executive officers and our Board of Supervisors from engaging in insider
trading or buying or selling hedging instruments or derivative securities, or from otherwise engaging in transactions, that are designed
to hedge or offset any decrease in the market value of our equity securities.
Incentive Compensation Recoupment Policy
We have a longstanding Incentive Compensation Recoupment Policy that permits the Committee to seek reimbursement from
certain executives of the Partnership of incentive compensation (i.e., payments made pursuant to the annual cash bonus plan, the Long-
Term Incentive Plan, the Restricted Unit Plan, the Phantom Equity Plan and the Distribution Equivalent Rights 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 were not personally responsible 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 “Corporate
Governance” tab.
Clawback Policy
At its November 7, 2023 meeting, the Committee adopted a Dodd-Frank Clawback Policy that is effective as of December 1, 2023
in response to the SEC having adopted new rules that require stock exchanges to update their listing standards for registrants to adopt
compliant clawback rules that were mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act. Pursuant to this
new rule, the NYSE, on which our units are traded, updated its listing standards effective as of October 2, 2023 to require issuers to
adopt a clawback policy by December 1, 2023 that standardizes the requirements for the mandatory recovery of incentive-based
compensation that is erroneously awarded to executive officers within the past three fiscal years due to material financial misstatements.
The Dodd-Frank Clawback Policy is available on our website at www.suburbanpropane.com under the “Corporate Governance”
tab.
Policies and Practices Related to the Grant of Certain Equity Awards Close in Time to the Release of Material Nonpublic Information
We do not grant unit options, unit appreciation rights, or similar option-like instruments and, as such, do not have any policy or
practice in place on the timing of awards of options, stock appreciation rights, or similar option-like instruments in relation to the
disclosure of material non-public information. If in the future we anticipate granting unit options, unit appreciation rights, or similar
option-like instruments, we may determine to establish a policy regarding how the Board of Supervisors determines when to grant such
awards and how the Board of Supervisors or Compensation Committee will take material nonpublic information into account when
determining the timing and terms of such awards.
79
Report of the Compensation Committee
The Compensation Committee has reviewed and discussed with management this CD&A. Based on its review and discussions
with management, the Committee recommended to the Board of Supervisors that this CD&A be included in this Annual Report on Form
10-K for fiscal 2024.
The Compensation Committee:
Jane Swift, Chair
Amy Adams
Matthew Chanin
Harold R. Logan, Jr.
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 28, 2024, September 30, 2023 and September 24, 2022:
Name
Year
Salary (1)
Bonus (2)
Unit Awards (3)
Non-Equity
Incentive Plan
Compensation
(4)
Change in
Pension Value
and
Nonqualified
Deferred
Compensation
Earnings (5)
All Other
Compensation
(6)
Total
(a)
(b)
(c)
(d)
(e)
(g)
(h)
(i)
(j)
Michael A. Stivala
2024
$ 910,000
$
—
$ 2,084,686
$ 1,006,247
$
—
$
34,469
$ 4,035,402
President and Chief Executive Officer
2023
$ 820,000
$
—
$ 1,731,829
$ 1,386,532
$
—
$
30,143
$ 3,968,504
2022
$ 820,000
$
—
$ 1,671,147
$ 1,438,291
$
—
$
30,563
$ 3,960,001
Michael A. Kuglin
2024
$ 495,000
$
—
$ 1,212,840
$
436,770
$
—
$
35,383
$ 2,179,993
Chief Financial Officer
2023
$ 450,000
$
—
$ 1,051,371
$
574,580
$
—
$
30,967
$ 2,106,918
2022
$ 450,000
$
—
$
959,314
$
582,975
$
—
$
33,232
$ 2,025,521
Steven C. Boyd
2024
$ 500,000
$
—
$ 1,309,715
$
447,491
$
25,220
$
25,605
$ 2,308,031
Chief Operating Officer
2023
$ 460,000
$
—
$ 1,058,791
$
584,580
$
—
$
24,851
$ 2,128,222
2022
$ 460,000
$
—
$
966,847
$
593,375
$
—
$
22,969
$ 2,043,191
Douglas Brinkworth
2024
$ 445,000
$
—
$ 1,174,946
$
405,970
$
—
$
39,095
$ 2,065,011
Senior Vice President -
2023
$ 400,000
$
—
$ 1,014,285
$
523,275
$
—
$
35,235
$ 1,972,795
Product Supply, Purchasing and Logistics
2022
$ 400,000
$
—
$
921,635
$
527,453
$
—
$
34,664
$ 1,883,752
Neil E. Scanlon
2024
$ 390,000
$
—
$ 1,040,191
$
357,774
$
13,974
$
37,038
$ 1,838,977
Senior Vice President -
2023
$ 350,000
$
—
$
887,503
$
462,570
$
—
$
36,157
$ 1,736,230
Information Services
2022
$ 350,000
$
—
$
842,618
$
470,855
$
—
$
32,734
$ 1,696,207
(1)
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, LTIP awards, RUP and PEP awards and DER Plan payments), refer to the subheading titled “Components of
Compensation” in the CD&A above.
(2)
This column is reserved for discretionary cash bonuses that are not based on any performance criteria. During fiscal years 2024, 2023 and 2022, the Committee
did not provide our named executive officers with non-performance related bonus payments. For more information, refer to the subheading titled “Annual Cash
Bonus Plan” in the CD&A above.
(3)
The amounts reported in this column represent the aggregate grant date fair value, computed in accordance with ASC Topic 718, of restricted unit awards made
during fiscal years 2024, 2023 and 2022, the 2024 and 2023 aggregate grant date fair value of phantom equity awards and the aggregate grant date fair value of
awards made in fiscal years 2024, 2023, and 2022 under the LTIP, based on the target outcome with respect to satisfaction of the performance conditions. These
amounts were calculated in accordance with US GAAP for financial reporting purposes based on the assumptions described in Part IV, Note 11 of this Annual
Report, but disregarding estimates of forfeiture. For the LTIP awards granted in fiscal 2024, assuming the highest level of performance conditions were achieved,
the amounts for Messrs. Stivala, Kuglin, Boyd, Brinkworth and Scanlon would be $1,551,777, $562,734, $568,416, $505,894, and $443,366, respectively. Because
the amounts of actual LTIP payments are predicated on the satisfaction of performance conditions, these amounts are not indicative of payments our named
executive officers will ultimately receive under the LTIP at the end of the applicable measurement period. The actual payments earned by our named executive
officers for the 2022 LTIP awards (the measurement period of which concluded at the end of fiscal 2024) are reported in the “Equity Vested Table for 2024”
below. The specific details regarding these plans are provided in the preceding CD&A under the subheadings “Restricted Unit Plan,” “Phantom Equity Plan,”
and “Long-Term Incentive Plan.” The breakdown for each plan with respect to each named executive officer is as follows:
80
Plan Name
Mr. Stivala
Mr. Kuglin
Mr. Boyd
Mr. Brinkworth
Mr. Scanlon
2024
RUP
$
813,968
$
387,684
$
430,771
$
387,684
$
344,614
PEP
236,200
450,000
500,000
450,000
400,000
LTIP
1,034,518
375,156
378,944
337,262
295,577
Total
$
2,084,686
$
1,212,840
$
1,309,715
$
1,174,946
$
1,040,191
2023
RUP
$
629,526
$
397,602
$
397,602
$
397,602
$
347,903
PEP
190,000
320,000
320,000
320,000
280,000
LTIP
912,303
333,769
341,189
296,683
259,600
Total
$
1,731,829
$
1,051,371
$
1,058,791
$
1,014,285
$
887,503
2022
RUP
$
744,247
$
620,202
$
620,202
$
620,202
$
578,864
LTIP
926,900
339,112
346,645
301,433
263,754
Total
$
1,671,147
$
959,314
$
966,847
$
921,635
$
842,618
(4)
The fiscal 2024, fiscal 2023 and fiscal 2022 amounts of each named executive officer’s earnings under the annual cash bonus plan and the DER Plan are presented
in the table that follows. For more information regarding the performance measures of the annual cash bonus plan, please refer to the subheading titled “Annual
Cash Bonus Plan,” and the “Distribution Equivalent Rights Plan” section for information regarding the DER Plan in the CD&A.
2024
Mr. Stivala
Mr. Kuglin
Mr. Boyd
Mr. Brinkworth
Mr. Scanlon
Annual Cash Bonus
$
840,840
$
304,920
$
308,000
$
274,120
$
240,240
DER Payments
165,407
131,850
139,491
131,850
117,534
Total
$
1,006,247
$
436,770
$
447,491
$
405,970
$
357,774
2023
Mr. Stivala
Mr. Kuglin
Mr. Boyd
Mr. Brinkworth
Mr. Scanlon
Annual Cash Bonus
$
1,230,000
$
450,000
$
460,000
$
400,000
$
350,000
DER Payments
156,532
124,580
124,580
123,275
112,570
Total
$
1,386,532
$
574,580
$
584,580
$
523,275
$
462,570
2022
Mr. Stivala
Mr. Kuglin
Mr. Boyd
Mr. Brinkworth
Mr. Scanlon
Annual Cash Bonus
$
1,279,200
$
468,000
$
478,400
$
416,000
$
364,000
DER Payments
159,091
114,975
114,975
111,453
106,855
Total
$
1,438,291
$
582,975
$
593,375
$
527,453
$
470,855
(5)
Mr. Stivala and Mr. Kuglin do not participate in the Cash Balance Plan. The present values of benefits accrued on behalf of Mr. Boyd, Mr., Brinkworth, and Mr.
Scanlon decreased during fiscal 2023 and fiscal 2022 due to increases in both the discount rate and the PPA lump sum segment rates. Under the disclosure rules,
negative values are not shown in the table. For fiscal 2024, the present values of benefits accrued on behalf of Mr. Boyd and Mr. Scanlon increased by the amounts
reported in the table above. However, the present value of benefits accrued on behalf of Mr. Brinkworth decreased during fiscal 2024 because he had already
attained age 62 as of September 30, 2024 (beyond the date on which he was first eligible for unreduced early retirement benefits); this was partially offset by a
decrease in lump sum interest rates and the discount rate. The present value of Mr. Brinkworth’s accrued benefit decreased by $1,628 during fiscal 2024, and in
accordance with disclosure rules, the negative value is not shown in the table. The decreases in present values during fiscal 2023 were as follows: $9,802 for Mr.
Boyd, $5,539 for Mr. Brinkworth and $5,894 for Mr. Scanlon. The decreases in present values during fiscal 2022 were as follows: $76,514 for Mr. Boyd, $37,749
for Mr. Brinkworth and $44,780 for Mr. Scanlon.
(6)
The amounts reported in this column consist of the following:
Fiscal 2024
Type of Compensation
Mr. Stivala
Mr. Kuglin
Mr. Boyd
Mr. Brinkworth
Mr. Scanlon
401(k) Match
$
10,350
$
10,350
$
10,350
$
10,350
$
10,350
Value of Annual Physical Examination
3,150
3,350
—
3,550
3,350
Value of Partnership Provided Vehicles
20,969
21,683
10,743
20,533
18,826
Tax Preparation Services
—
—
3,750
3,900
3,750
Cash Balance Plan Administrative Fees
—
—
762
762
762
Total
$
34,469
$
35,383
$
25,605
$
39,095
$
37,038
Fiscal 2023
Type of Compensation
Mr. Stivala
Mr. Kuglin
Mr. Boyd
Mr. Brinkworth
Mr. Scanlon
401(k) Match
$
9,900
$
9,900
$
9,900
$
9,900
$
9,900
Value of Annual Physical Examination
—
—
—
3,550
3,150
Value of Partnership Provided Vehicles
20,243
21,067
10,589
17,623
18,745
Tax Preparation Services
—
—
3,600
3,400
3,600
Cash Balance Plan Administrative Fees
—
—
762
762
762
Total
$
30,143
$
30,967
$
24,851
$
35,235
$
36,157
81
Fiscal 2022
Type of Compensation
Mr. Stivala
Mr. Kuglin
Mr. Boyd
Mr. Brinkworth
Mr. Scanlon
401(k) Match
$
9,150
$
9,150
$
9,150
$
9,150
$
9,150
Value of Annual Physical Examination
3,150
3,150
—
3,550
—
Value of Partnership Provided Vehicles
18,263
20,932
9,057
18,002
18,822
Tax Preparation Services
—
—
4,000
3,200
4,000
Cash Balance Plan Administrative Fees
—
—
762
762
762
Total
$
30,563
$
33,232
$
22,969
$
34,664
$
32,734
Note: Column (f) was omitted from the Summary Compensation Table because we do not grant options to our employees.
Grants of Plan Based Awards Table for Fiscal 2024
The following table sets forth certain information concerning grants of awards made to each named executive officer during the
fiscal year ended September 28, 2024:
Plan
Grant
Approval
Units
Underlying
Equity
Incentive
Plan
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
Name
Name
Date
Date
Awards (6)
Target Maximum
Target Maximum or Units Awards (7)
(a)
(b)
(d)
(e)
(g)
(h)
(i)
(l)
Michael A. Stivala
RUP (1) 15 Nov 23 7 Nov 23
55,523
$ 813,968
Bonus (2)
1 Oct 23
7 Nov 23
$1,092,000 $1,692,600
LTIP (3)
1 Oct 23
7 Nov 23
55,261
$ 1,034,518
$ 1,551,777
DER (4) 17 Jan 17 17 Jan 17
$ 165,407
PEP (5) 15 Nov 23 7 Nov 23
13,881 $ 236,200
Michael A. Kuglin
RUP (1) 15 Nov 23 7 Nov 23
26,445
$ 387,684
Bonus (2)
1 Oct 23
7 Nov 23
$ 396,000 $ 613,800
LTIP (3)
1 Oct 23
7 Nov 23
20,040
$ 375,156
$ 562,734
DER (4)
17 Jan 17 17 Jan 17
$ 131,850
PEP (5)
15 Nov 23 7 Nov 23
26,445
$ 450,000
Steven C. Boyd
RUP (1) 15 Nov 23 7 Nov 23
29,384
$ 430,771
Bonus (2)
1 Oct 23
7 Nov 23
$ 400,000 $ 620,000
LTIP (3)
1 Oct 23
7 Nov 23
20,242
$ 378,944
$ 568,416
DER (4) 17 Jan 17 17 Jan 17
$ 139,491
PEP (5) 15 Nov 23 7 Nov 23
29,384 $ 500,000
Douglas T. Brinkworth
RUP (1) 15 Nov 23 7 Nov 23
26,445
$ 387,684
Bonus (2)
1 Oct 23
7 Nov 23
$ 356,000 $ 551,800
LTIP (3)
1 Oct 23
7 Nov 23
18,016
$ 337,262
$ 505,894
DER (4)
17 Jan 17 17 Jan 17
$ 131,850
PEP (5)
15 Nov 23 7 Nov 23
26,445
$ 450,000
Neil E. Scanlon
RUP (1) 15 Nov 23 7 Nov 23
23,507
$ 344,614
Bonus (2)
1 Oct 23
7 Nov 23
$ 312,000 $ 483,600
LTIP (3)
1 Oct 23
7 Nov 23
15,789
$ 295,577
$ 443,366
DER (4) 17 Jan 17 17 Jan 17
$ 117,534
PEP (5) 15 Nov 23 7 Nov 23
23,507 $ 400,000
(1)
The quantities reported on these lines represents awards granted under the RUP. RUP awards 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). Under the RUP, if a recipient has held an unvested award for at least one year, 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 and one day 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. Currently, Mr. Stivala, Mr. Boyd, Mr. Brinkworth and Mr. Scanlon satisfy the age and tenure criteria of the
RUP’s retirement provisions. A discussion of the general terms of the RUP, and the facts and circumstances considered by the Committee in authorizing these
fiscal 2023 awards to our named executive officers, is included in the CD&A under the subheading “Restricted Unit Plan.”
(2)
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 CD&A under the subheading “Annual Cash Bonus Plan.” Actual amounts earned by the named executive officers for fiscal 2024
were equal to 77% 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 77% of the “Target” awards were earned by our named executive officers during fiscal 2024, 77% of the
“Target” amounts reported under column (d) have been reported in the Summary Compensation Table above.
82
(3)
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 LTIP, 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 2024 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 the first day of fiscal 2024) of our Common Units at the beginning of fiscal 2024, and (ii) the
estimated distributions over the course of the award’s three-year measurement period at the then current annualized distribution rate of $1.30 per Common Unit.
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 CD&A under the subheading “Long-Term Incentive Plan.”
(4)
Amounts reported on these lines represent DER Plan payments made during the fiscal year. Detailed descriptions of the DER Plan and the calculation of the
payments are included in the CD&A under the subheading “Distribution Equivalent Rights Plan.”
(5)
The PEP is a phantom equity unit plan that is settled in cash. Upon vesting of phantom equity units, payments to participants are calculated by multiplying the
number of vested phantom equity units by the average of the highest and lowest trading prices on the trading day immediately preceding the vesting date. Under
the PEP, if a recipient has held an unvested award for at least one year, 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 and one day 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. Currently,
Mr. Stivala, Mr. Boyd, Mr. Brinkworth and Mr. Scanlon satisfy the age and tenure criteria of the PEP’s retirement provisions. Detailed descriptions of the plan
are included in the CD&A under the subheading “Phantom Equity Plan.”
(6)
This column is frequently used when non-equity incentive plan awards are denominated in units; in this case, the numbers reported represent the LTIP phantom
units and phantom equity units each named executive officer was awarded under the LTIP and the PEP, respectively, during fiscal 2024. The amounts in the
“Estimated Future Payments Under Equity Incentive Plan Awards” column are based on the probable outcome with respect to satisfaction of the performance
conditions of the LTIP and calculated in accordance with US GAAP for financial reporting purposes based on the assumptions described in Note 11 of the Notes
to Consolidated Financial Statements included in this Annual Report, but disregarding estimates of forfeiture. For purposes of this table, the numbers that appear
in column (c) are the products of the multiplication of the number of phantom units granted to our named executive officers under the PEP during fiscal 2024 by
the average of the highest and lowest trading prices of our Common Units on the grant date. Because the PEP awards do not vary because of performance
measurements, we have reported only a target payment. The actual payments will be based on the fair market value of our Common Units on the vesting date.
(7)
The dollar amounts reported in this column represent the aggregate fair value of RUP awards on the grant date, based on the assumptions described in Note 11 of
the Notes to Consolidated Financial Statements included in this Annual Report, but disregarding estimates of forfeiture. The fair value shown may not be indicative
of the value realized in the future upon vesting because of 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.
Outstanding Equity Awards at Fiscal Year End 2024 Table
The following table sets forth certain information concerning outstanding equity awards under our RUP, LTIP and PEP unit
awards for each named executive officer as of September 28, 2024:
Stock Awards
Name
Number of
Shares or Units
of Stock That
Have Not
Vested (1)
Market Value
of
Shares or Units
of Stock That
Have Not
Vested (2)
Equity Incentive
Plan Awards:
Number of
Unearned
Shares, Units or
Other Rights
that Have Not
Vested (3)
Equity
Incentive
Plan Awards:
Market or
Payout Value of
Unearned
Shares, Units or
Other Rights
That Have Not
Vested (4)
(a)
(g)
(h)
(i)
(j)
Michael A. Stivala
105,614 $
1,872,536
121,576 $
2,476,895
Michael A. Kuglin
61,940 $
1,098,196
75,874 $
1,462,244
Steven C. Boyd
64,879 $
1,150,305
79,379 $
1,526,207
Douglas T. Brinkworth
61,940 $
1,098,196
72,033 $
1,381,794
Neil E. Scanlon
55,496 $
983,944
63,422 $
1,216,122
(1)
The figures reported in this column represent the total quantity of each of our named executive officer’s unvested RUP awards.
83
The following is a schedule of when the RUP awards reported in column (g) above will vest:
Name
Number of RUP
Awards That
Have Not Vested
Number That
Will Vest on
November 15,
2024
Number That
Will Vest on
November 15,
2025
Number That
Will Vest on
November 15,
2026
Michael A. Stivala
105,614
53,117
33,990
18,507
Michael A. Kuglin
61,940
34,532
18,593
8,815
Steven C. Boyd
64,879
35,512
29,367
*
—
Douglas T. Brinkworth
61,940
34,532
18,593
8,815
Neil E. Scanlon
55,496
31,270
16,391
7,835
* Mr. Boyd’s remaining units will vest six months and one day following his retirement date of January 1, 2025.
(2)
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 27, 2024, the last trading day of fiscal 2024.
(3)
The amounts reported in this column represent the quantities of phantom units that underlie the outstanding and unvested fiscal
2024 and fiscal 2023 awards under the LTIP and the quantities of phantom equity units that underlie the outstanding PEP awards.
For more information on the LTIP, refer to the subheading “Long-Term Incentive Plan” in the CD&A. For more information on
the PEP, refer to the subheading “Phantom Equity Plan” in the CD&A.
(4)
The amounts reported in this column include the estimated future target payouts of the fiscal 2024 and fiscal 2023 awards granted
under the LTIP. These amounts were computed by multiplying the quantities of the unvested phantom units included in column
(i) by the average of the closing prices of our Common Units for the twenty business days preceding September 28, 2024 (in
accordance with the LTIP’s valuation methodology), and by adding to the product of that calculation the product of each year’s
underlying phantom units multiplied by the sum of the distributions that are estimated to inure to an outstanding Common Unit
during each award’s three-year measurement period. Because of the variability of the trading prices of our Common Units, 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:
Mr. Stivala
Mr. Kuglin
Mr. Boyd
Mr. Brinkworth
Mr. Scanlon
Amount of Fiscal 2024 Phantom LTIP Units
55,261
20,040
20,242
18,016
15,789
Value of Fiscal 2024 Phantom LTIP Units
$
941,924
$
341,582
$
345,025
$
307,083
$
269,124
Estimated Distributions over Measurement
Period
$
215,518
$
78,156
$
78,944
$
70,262
$
61,577
Amount of Fiscal 2023 Phantom LTIP Units
44,693
16,351
16,715
14,534
12,718
Value of Fiscal 2023 Phantom LTIP Units
$
761,792
$
278,703
$
284,907
$
247,732
$
216,778
Estimated Distributions over Measurement
Period
$
174,303
$
63,769
$
65,189
$
56,683
$
49,600
The amounts reported in this column also include the estimated future target payout of phantom equity unit awards granted under
the PEP. These amounts were computed by multiplying phantom equity units included in column (i) by the average of the highest and
lowest trading prices of our Common Units on September 27, 2024, the last trading day of our fiscal year. Because of the variability of
the trading prices of our Common Units, actual payments may vary. The following charts provide a schedule of the phantom equity
units and the dates on which they will vest:
Name
Number of PEP
Awards That
Have Not Vested
Value of Phantom
Equity Plan Units
on September 28,
2024
Michael A. Stivala
21,622
$
383,358
Michael A. Kuglin
39,483
$
700,034
Steven C. Boyd
42,422
$
752,142
Douglas T. Brinkworth
39,483
$
700,034
Neil E. Scanlon
34,915
$
619,043
84
Name
Number of PEP
Awards That
Have Not Vested
Number That
Will Vest on
November 15,
2024
Number That
Will Vest on
November 15,
2025
Number That
Will Vest on
November 15,
2026
Michael A. Stivala
21,622
8,498
8,497
4,627
Michael A. Kuglin
39,483
15,334
15,334
8,815
Steven C. Boyd
42,422
16,314
26,108
*
—
Douglas T. Brinkworth
39,483
15,334
15,334
8,815
Neil E. Scanlon
34,915
13,541
13,539
7,835
*Mr. Boyd’s remaining units will vest six months and one day following his retirement date of January 1, 2025.
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 2024 Table” because we do not grant options to our employees.
Equity Vested Table for Fiscal 2024
Awards under the RUP are settled in Common Units upon vesting. Awards under the LTIP, a phantom unit plan, and the PEP are
settled in cash. The following two tables set forth certain information concerning the vesting of awards under our RUP and our PEP,
and the vesting of the fiscal 2024 award under our LTIP for each named executive officer during the fiscal year ended September 28,
2024:
Restricted Unit Plan
Unit Awards
Name
Number of
Common Units
Acquired on
Vesting
Value Realized on
Vesting (1)
Michael A. Stivala
58,706
$
1,003,873
Michael A. Kuglin
40,779
$
697,321
Steven C. Boyd
40,779
$
697,321
Douglas T. Brinkworth
39,775
$
680,153
Neil E. Scanlon
37,490
$
641,079
(1)
The value realized is equal to the average value of our Common Units on the vesting date, multiplied by the number of restricted
units that vested.
Phantom Equity Plan
Unit Awards
Name
Number of
Phantom Units
that Vested in
Fiscal 2024
Cash Realized on
Vesting (1)
Michael A. Stivala
3,871
$
66,194
Michael A. Kuglin
6,519
$
111,475
Steven C. Boyd
6,519
$
111,475
Douglas T. Brinkworth
6,519
$
111,475
Neil E. Scanlon
5,705
$
97,556
(1)
The cash realized is equal to the average value of our Common Units on the vesting date, multiplied by the number of phantom
equity units that vested.
85
Long-Term Incentive Plan - Fiscal 2022 Award (2)
Cash Awards
Name
Number of
Phantom Units
Cashed Out on
Vesting (3)
Value Realized on
Vesting (4)
Michael A. Stivala
48,436
$
706,344
Michael A. Kuglin
17,721
$
258,426
Steven C. Boyd
18,114
$
264,157
Douglas T. Brinkworth
15,752
$
229,712
Neil E. Scanlon
13,783
$
200,998
(2)
The fiscal 2022 award’s three-year measurement period concluded on September 28, 2024.
(3)
In accordance with the formula described in the CD&A 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. The Partnership’s
Average Distributable Cash Flow, over the three-year measurement period of the fiscal 2022 award, was such that the participants,
including our named executive officers, earned 85% of their target payment amounts for this 50% component. For the other 50%
component, measured on the achievement of operating and strategic objectives, the participants earned 50% of their target payment
amounts. For more information, refer to the subheading “Long-Term Incentive Plan” in the CD&A.
Retirement Benefits Table for Fiscal 2024
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 28, 2024:
Name
Plan Name
Number of Years
Credited Service
Present Value
of Accumulated
Benefit
Payments
During Last
Fiscal Year
Michael A. Stivala (1)
LTIP (3)
N/A
$
2,159,456
$
—
RUP (4)
N/A
$
888,113
$
—
PEP (5)
N/A
$
137,248
$
—
Michael A. Kuglin (1)
N/A
N/A
$
—
$
—
Steven C. Boyd
Cash Balance Plan (2)
15
$
269,808
$
—
LTIP (3)
N/A
$
798,438
$
—
RUP (4)
N/A
$
629,326
$
—
PEP (5)
N/A
$
231,164
$
—
Douglas T. Brinkworth
Cash Balance Plan (2)
6
$
157,536
$
—
LTIP (3)
N/A
$
703,226
$
—
RUP (4)
N/A
$
629,326
$
—
PEP (5)
N/A
$
231,164
$
—
Neil E. Scanlon
Cash Balance Plan (2)
6
$
133,455
$
—
LTIP (3)
N/A
$
615,815
$
—
RUP (4)
N/A
$
567,165
$
—
PEP (5)
N/A
$
202,264
$
—
(1)
Because Mr. Stivala and Mr. Kuglin 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 CD&A.
(3)
On September 28, 2024, Mr. Kuglin was the only named executive officer who did not met the retirement criteria of the LTIP.
For the others who have meet the retirement criteria of the LTIP, outstanding but unvested awards under the LTIP become fully
vested. However, payouts of these 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 2024 and 2023 awards. The numbers reported
on these lines represent the target payout of Mr. Stivala’s, Mr. Boyd’s, Mr. Brinkworth’s and Mr. Scanlon’s outstanding fiscal
2024 and 2023 awards under the LTIP. Because the ultimate payout, if any, is predicated on the trading prices of the Partnership’s
86
Common Units at the end of the three-year measurement period and the relative distributions paid during the respective three-year
measurement period, the value reported is not indicative of the value that could be realized, if any, in the future upon vesting.
(4)
On September 28, 2024, Mr. Stivala, Mr. Boyd, Mr. Brinkworth and Mr. Scanlon met the age and tenure requirements of the
retirement provisions of the RUP. These figures were calculated by multiplying the awards that met the holding requirements of
the retirement provisions of the RUP by the average of the highest and lowest trading prices of our Common Units on September
27, 2024. At the conclusion of fiscal 2024, taking into consideration the one-year holding requirement of the retirement provisions
of the RUP, 50,091 of Mr. Stivala’s, 35,495 of Mr. Boyd’s, 35,495 of Mr. Brinkworth’s and 31,989 of Mr. Scanlon’s unvested
awards were covered under the retirement provisions of the RUP. For participants who meet the retirement criteria, upon
retirement, their outstanding RUP awards that have been held for a year or more are issued as Common Units six months and one
day after their retirement date. For more information on the Restricted Unit Plan and the retirement provisions therein, refer to
the subheading “Restricted Unit Plan” in the CD&A.
(5)
On September 28, 2024, Mr. Stivala, Mr. Boyd, Mr. Brinkworth and Mr. Scanlon met the age and tenure requirements of the
retirement provisions of the PEP. At the conclusion of fiscal 2024, taking into consideration the one-year holding requirement of
the retirement provisions of the PEP, 7,741 of Mr. Stivala’s, 13,038 of Mr. Boyd’s, 13,038 of Mr. Brinkworth’s and 11,408 of
Mr. Scanlon’s unvested awards were covered under the retirement provisions of the PEP. For participants who meet the retirement
criteria, upon retirement, their outstanding PEP awards that have been held for a year or more are settled as cash six months and
one day after their retirement date. For more information on the PEP and the retirement provisions therein, refer to the subheading
“Phantom Equity Plan” in the CD&A.
87
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 Executive Special Severance Plan, the LTIP, the RUP and the PEP for the circumstances listed in the table
assuming a September 28, 2024 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 Severance Compensation (1) (2) (3) (4)
$
—
$
—
$
910,000
$
6,006,000
Accelerated Vesting of Fiscal 2024, 2023 and
2022 LTIP Awards @ 150% (5)
—
—
—
4,359,374
Accelerated Vesting of Outstanding RUP Awards (6)
1,872,536
1,872,536
888,113
1,872,536
Accelerated Vesting of Outstanding PEP Awards (7)
383,358
383,358
137,248
383,358
Medical Benefits (3)
—
—
34,079
51,119
Total
$
2,255,894
$
2,255,894
$
1,969,440
$
12,672,387
Michael A. Kuglin
Cash Severance Compensation (1) (2) (3) (4)
$
—
$
—
$
495,000
$
2,673,000
Accelerated Vesting of Fiscal 2024, 2023 and
2022 LTIP Awards @ 150% (5)
—
—
—
1,590,023
Accelerated Vesting of Outstanding RUP Awards (6)
1,098,196
1,098,196
—
1,098,196
Accelerated Vesting of Outstanding PEP Awards (7)
700,034
700,034
—
700,034
Medical Benefits (3)
—
—
30,311
45,466
Total
$
1,798,230
$
1,798,230
$
525,311
$
6,106,719
Steven C. Boyd
Cash Severance Compensation (1) (2) (3) (4)
$
—
$
—
$
500,000
$
2,700,000
Accelerated Vesting of Fiscal 2024, 2023 and
2022 LTIP Awards @ 150% (5)
—
—
—
1,618,655
Accelerated Vesting of Outstanding RUP Awards (6)
1,150,305
1,150,305
629,326
1,150,305
Accelerated Vesting of Outstanding PEP Awards (7)
752,142
752,142
231,164
752,142
Medical Benefits (3)
—
—
31,005
46,507
Total
$
1,902,447
$
1,902,447
$
1,391,495
$
6,267,609
Douglas T. Brinkworth
Cash Severance Compensation (1) (2) (3) (4)
$
—
$
—
$
445,000
$
2,403,000
Accelerated Vesting of Fiscal 2024, 2023 and
2022 LTIP Awards @ 150% (5)
—
—
—
1,418,924
Accelerated Vesting of Outstanding RUP Awards (6)
1,098,196
1,098,196
629,326
1,098,196
Accelerated Vesting of Outstanding PEP Awards (7)
700,034
700,034
231,164
700,034
Medical Benefits (3)
—
—
30,592
45,888
Total
$
1,798,230
$
1,798,230
$
1,336,082
$
5,666,042
Neil E. Scanlon
Cash Severance Compensation (1) (2) (3) (4)
$
—
$
—
$
390,000
$
2,106,000
Accelerated Vesting of Fiscal 2024, 2023 and
2022 LTIP Awards @ 150% (5)
—
—
—
1,242,269
Accelerated Vesting of Outstanding RUP Awards (6)
983,944
983,944
567,165
983,944
Accelerated Vesting of Outstanding PEP Awards (7)
619,043
619,043
202,264
619,043
Medical Benefits (3)
—
—
30,180
45,269
Total
$
1,602,987
$
1,602,987
$
1,189,609
$
4,996,525
(1)
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.
88
(2)
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 named executive 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 substantially 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. In regard to a termination of employment without cause or resignation
with good reason in connection to a change of control event, we will provide our named executive officers with eighteen months
of insurance coverage.
(4)
Each of our named executive officers will receive 156 weeks of base pay plus a sum equal to their annual target cash bonus divided
by 52 and multiplied by 156 in accordance with the terms of the Executive Special Severance Plan in the event of a termination
without cause or a resignation with good reason in connection to a change of control. For more information on the Executive
Special Severance Plan, refer to the subheading “Change of Control” in the CD&A.
(5)
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 occurred at the conclusion of fiscal 2024, payments would have been equal to 150% of the
cash value of a participant’s unvested phantom units plus a sum equal to 150% of a participant’s unvested phantom 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
28, 2024, the fiscal 2024, fiscal 2023 and fiscal 2022 awards would have been subject to this treatment. For more information,
refer to the subheading “Long-Term Incentive Plan” in the CD&A.
In the event of death, the inability to continue employment because of 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)
The RUP provides for the vesting of all unvested awards held by a participant at the time of his or her death or at the time he or
she becomes permanently disabled. The units shall be issued as Common Units six months and one day following the participant’s
date of death or the date on which his or her employment was terminated as a result of the disability.
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 unvested restricted unit awards held by such recipient will be forfeited. Because some of Mr.
Stivala’s, Mr. Boyd’s, Mr. Brinkworth’s and Mr. Scanlon’s unvested awards were subject to the retirement provisions on the last
day of fiscal 2024, if Mr. Stivala, Mr. Boyd, Mr. Brinkworth or Mr. Scanlon had been terminated without cause on September 28,
2024, 50,091 of Mr. Stivala’s, 35,495 of Mr. Boyd’s, 35,495 of Mr. Brinkworth’s and 31,989 of Mr. Scanlon’s RUP awards would
have vested in accordance with the retirement provisions of the RUP.
In the event of a change of control, as defined in the 2018 Restricted Unit Plan 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.
(7)
The PEP provides for the vesting of all unvested awards held by a participant at the time of his or her death or at the time he or
she becomes permanently disabled. The awards shall vest six months and one day following the participant’s date of death or the
date on which his or her employment was terminated as a result of the disability. Because some of Mr. Stivala’s, Mr. Boyd’s, Mr.
Brinkworth’s and Mr. Scanlon’s unvested PEP awards were subject to the retirement provisions on the last day of fiscal 2024, if
Mr. Stivala, Mr. Boyd, Mr. Brinkworth or Mr. Scanlon had been terminated without cause on September 28, 2024, 7,741 of Mr.
Stivala’s, 13,038 of Mr. Boyd’s, 13,038 of Mr. Brinkworth’s and 11,408 of Mr. Scanlon’s PEP awards would have vested in
accordance with the retirement provisions of the PEP.
In the event of a change of control, as defined in the 2022 Phantom Equity Plan document, all unvested PEP 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.
89
CEO PAY RATIO
As required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and SEC rules, we are
providing the following information about the relationship of the annual total compensation of our employees and the annual total
compensation of Mr. Stivala, our President and Chief Executive Officer (the “CEO”):
For fiscal 2024, our last completed fiscal year:
•
the annual total compensation of the employee identified at median of our company (other than our CEO), was $61,670;
and
•
the annual total compensation of the CEO for purposes of determining the CEO Pay Ratio was $4,035,402.
Based on this information, for fiscal 2024, the ratio of the annual total compensation of Mr. Stivala, our President and Chief
Executive Officer, to the median of the annual total compensation of all employees was estimated to be 65 to 1.
This pay ratio is a reasonable estimate calculated in a manner consistent with Item 402(u) of Regulation S-K based on our payroll
and employment records and the methodology described below. The SEC rules for identifying the median compensated employee and
calculating the pay ratio based on that employee’s annual total compensation allow companies to adopt a variety of methodologies, to
apply certain exclusions, and to make reasonable estimates and assumptions that reflect their compensation practices. As such, the pay
ratio reported by other companies may not be comparable to the pay ratio reported above, as other companies may have different
employment and compensation practices and may utilize different methodologies, exclusions, estimates and assumptions in calculating
their own pay ratios.
To identify the median of the annual total compensation of all our employees, as well as to determine the annual total compensation
of the “median employee,” the methodology and the material assumptions, adjustments, and estimates that we used were as follows:
We determined that, as of August 15, 2024, our employee population consisted of approximately 3,283 individuals. We selected
August 15, 2024, which is within the last three months of fiscal 2024, as the date upon which we would identify the “median employee”
to allow sufficient time to identify the median employee.
To identify the “median employee” from our employee population, we collected all W-2 wages paid to each employee during the
twelve-month period ending on August 15, 2024. This included each employee’s actual base salary and any overtime, any cash bonuses,
the value of any RUP awards that vested during the period, and any other miscellaneous forms of W-2-related compensation added to
our employees’ earnings record during the period. In making this determination, we annualized the salaries of all newly hired permanent
employees during this period.
After we identified our median employee, we calculated such employee’s annual total compensation for fiscal 2024 utilizing the
same methodology used to determine the CEO’s compensation, resulting in annual total compensation of $61,670.
PAY VERSUS PERFORMANCE
As a result of the rules adopted by the SEC under the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item
402(v) of Regulation S-K (“PvP Rules”), we are providing the following information regarding the relationship between “compensation
actually paid” to our President and Chief Executive Officer (our Principal Executive Officer or “PEO”) and average “compensation
actually paid” to our other named executive officers (our “Non-PEO NEOs”) and certain metrics of our financial performance for the
last years, in each case, calculated in accordance with the PvP Rules. Pursuant to the PVP Rules, in determining the “compensation
actually paid” to our named executive officers, we are required to make various adjustments to amounts that have been reported in the
Summary Compensation Table for those fiscal years. The term “compensation actually paid” refers to the definition of such term under
the PvP Rules and does not reflect compensation actually earned, realized, or received by our named executive officers. The table below
summarizes compensation values previously reported in our Summary Compensation Table and the adjusted values required in this
section for fiscal years 2024, 2023, 2022, and 2021. Note that compensation for Non-PEO NEOs is reported as an average.
90
Pay Versus Performance
Value of Initial Fixed $100
Investment Based Made on
September 26, 2020 (3):
Year
Summary
Compensation
Table Total
for Mike
Stivala, our
PEO
Compensation
Actually Paid
to Mike
Stivala, Our
PEO (1)
Average
Summary
Compensation
Table Total
for Our Non-
PEO Named
Executive
Officers (2)
Average
Compensation
Actually Paid
to Our Non-
PEO Named
Executive
Officers (1)
Suburban
Propane
Partners, LP
Total
Unitholder
Return
Alerian MLP
Index Total
Shareholder
Return
Net
Income/(Loss)
(in Thousands)
Partnership
Adjusted
EBITDA (in
Thousands) (4)
2024
$ 4,035,402
$ 4,067,902
$ 2,098,003
$ 2,197,469
$
64.16
$
168.82
$
74,174
$
250,043
2023
$ 3,968,504
$ 3,692,734
$ 1,986,041
$ 1,925,749
$
37.86
$
133.07
$
123,752
$
275,025
2022
$ 3,960,001
$ 4,414,143
$ 1,912,168
$ 2,171,310
$
25.33
$
85.85
$
139,708
$
291,026
2021
$ 3,115,247
$ 3,381,847
$ 1,680,771
$ 1,824,677
$
10.68
$
68.97
$
122,793
$
275,680
(1)
Compensation Actually Paid (“CAP”) is equal to the Summary Compensation Table total value of the period shown with
adjustments for equity awards
(2)
For each fiscal year, our PEO and Non-PEO named executive officers were as follows:
Year
PEO
Non-PEO NEO
Non-PEO NEO
Non-PEO NEO
Non-PEO NEO
2024
M. Stivala
M. Kuglin
S. Boyd
D. Brinkworth
N. Scanlon
2023
M. Stivala
M. Kuglin
S. Boyd
D. Brinkworth
N. Scanlon
2022
M. Stivala
M. Kuglin
S. Boyd
D. Brinkworth
N. Scanlon
2021
M. Stivala
M. Kuglin
S. Boyd
D. Brinkworth
N. Scanlon
(3)
We have calculated total unitholder/shareholder return (“TSR”) in a manner consistent with the SEC stock performance graph
disclosure requirements over the cumulative period covered in the disclosure (i.e., for 2021, the table represents the TSR over
fiscal 2021, the TSR for 2022 represents the cumulative TSR over fiscal 2020 and fiscal 2021, etc.). The peer group used for
comparison is the Alerian MLP Index. The TSR amounts reported for the Common Units of the Partnership and the Alerian MLP
Index demonstrate the performance of a base amount of $100 invested on September 26, 2020, through the end of each of our
three reported fiscal years.
(4)
As defined in the “Management's Discussion and Analysis of Financial Condition and Results of Operations” section of our
Annual Report on Form 10-K in the section titled “Net Income and Adjusted EBITDA.”
91
“Compensation Actually Paid” to our named executive officers represents the “Total” compensation in the Summary
Compensation Table for the applicable fiscal year, as adjusted as follows:
Fiscal 2024
Fiscal 2023
Fiscal 2022
Fiscal 2021
Adjustment
PEO
Average for
Non-PEO
Named
Executive
Officers
PEO
Average for
Non-PEO
Named
Executive
Officers
PEO
Average for
Non-PEO
Named
Executive
Officers
PEO
Average for
Non-PEO
Named
Executive
Officers
Deduction for amounts reported
under the “Unit Awards” column of
the Summary Compensation Table
$ (2,084,686)
$ (1,184,423)
$ (1,731,829 )
$ (1,002,988 )
$ (1,671,147 )
$ (922,604)
$ (1,429,420)
$ (821,574)
Deduction for change in the actuarial
present values reported under the
“Change in Pension Value” column
of the Summary Compensation
Table. (a)
$
—
$
(9,799)
$
—
$
—
$
—
$
—
$
—
$
—
Change in value of RUP awards
granted during prior fiscal year that
vested during this fiscal year,
determined as of the vesting date. (b)
$
81,601
$
55,191
$
11,406
$
7,657
$
28,985
$
17,221
$
109,125
$
65,983
Change of ASC 718 fair value of
LTIP awards granted during prior
fiscal years that vested during this
fiscal year, determined as of the
vesting date. (c)
$
(57,675)
$
(24,485)
$
(56,157 )
$
(26,026 )
$
49,933
$
24,634
$
65,359
$
32,443
Change of ASC 718 fair value of PEP
awards granted during prior fiscal
years that vested during this fiscal
year, determined as of the vesting
date. (d)
$
4,703
$
7,673
$
—
$
—
$
—
$
—
$
—
$
—
Year-end ASC 718 fair value of RUP
awards granted during this fiscal
year. (e)
$
897,438
$
427,444
$
670,710
$
410,336
$
830,703
$
680,713
$
976,117
$
589,745
Year-end ASC 718 fair value of LTIP
awards granted during this fiscal
year. (f)
$
735,146
$
233,980
$
717,249
$
243,089
$
992,181
$
334,766
$
403,555
$
199,090
Year-end ASC 781 fair value of PEP
awards granted during this fiscal
year. (g)
$
246,110
$
468,874
$
184,457
$
300,957
$
—
$
—
$
—
$
—
Change of ASC 718 fair value of
RUP awards granted during prior
fiscal years, that remained
outstanding at the end of this fiscal
year. (e)
$
148,351
$
102,442
$
77,171
$
56,754
$
144,605
$
87,175
$
84,524
$
49,931
Change of ACS 718 fair value of
LTIP awards granted during prior
fiscal years, that remained
outstanding at the end of this fiscal
year. (h)
$
47,230
$
(734)
$ (148,777 )
$
(50,071 )
$
78,882
$
37,237
$
57,340
$
28,288
Change of ACS fair 718 of PEP
awards granted during prior fiscal
years, that remained outstanding at
the end of this fiscal year. (d)
$
14,282
$
23,303
$
—
$
—
$
—
$
—
$
—
$
—
Total Adjustments
$
32,500
$
99,466
$ (275,770 )
$
(60,292 )
$
454,142
$
259,142
$
266,600
$
143,906
(a)
Three of our named executive officers, Mr. Boyd, Mr. Brinkworth, and Mr. Scanlon, participate in our now-closed to new
participants pension plan. During fiscal years 2021, 2022 and 2023, the negative changes in pension values were not included in
the Summary Compensation Table.
(b)
Represents the change in the market value of the restricted units granted under the RUP between the November 15th vesting date
of each fiscal year reported and the market value of those same units at the end of the previous fiscal year. The following table
provides the market values on the November 15th vesting date for each of the fiscal years reported. For more information, please
refer to the section titled “Restricted Unit Plan” in our CD&A.
Fiscal Year
Vesting Date Value
2024
$
17.10
2023
$
15.90
2022
$
15.31
2021
$
16.65
92
(c)
Represents the changes in the market values, between the end of the prior fiscal year and the end of the current fiscal year, of
LTIP awards that completed their respective three-year measurement periods at the end of each of the fiscal years reported. The
changes in values include dividend equivalents accrued throughout the year. For purposes of the LTIP, market value is the average
of the closing prices of our units for the twenty trading days preceding the final day of each fiscal year reported. The following
table provides the market values that were used to calculate payments made to our named executive officers and the percentage
of the payment they actually earned. For more information, please refer to the section titled “Long-Term Incentive Plan” in our
CD&A.
Fiscal Year
Fiscal Year During
Which Award was
Granted
Vesting Date Value
Percentage Applied to
Market Value Based on
Financial Performance
Over Three-Year
Measurement Period
Percentage Earned
Based on Scorecard Goal
Attainment
2024
2022
$
17.70
85%
50%
2023
2021
$
14.82
105%
100%
2022
2020
$
16.51
110%
N/A
2021
2019
$
15.24
150%
N/A
(d)
The fiscal 2024 PEP awards vested at a value of $17.10 per PEP unit. For more information, please refer to the section titled
“2022 Phantom Equity Plan” in our CD&A.
(e)
Because awards under this plan vest in thirds (the first third on the first anniversary of the grant date; the second third on the
second anniversary of the grant date; and the final third on the third anniversary of the grant date) and because distributions are
not paid on behalf of or accrued on behalf of unvested restricted units, the market value of each outstanding tranche was calculated
by subtracting the present value of the estimated distributions over the course of each tranche’s remaining vesting period from the
fair value of an outstanding Common Unit of the Partnership at the conclusion of each fiscal year reported.
(f)
For fiscal years 2021, 2022, and 2023, these figures represent the values of LTIP awards granted during the fiscal years reported
as if payments were earned at 100%. For the award granted during fiscal year 2024, the figure represents the value of the LTIP
award as if a payment were earned at 65% for the financial performance portion and at 75% for the scorecard goal attainment
portion. The values include distribution equivalents accrued throughout the year. For purposes of the LTIP, market value is the
average of the closing prices of our units for the twenty trading days preceding the final day of each fiscal year reported. The
following table provides the market values that were used to calculate payments for our named executive officers and our
assumption regarding the percentage of the LTIP payout that they would have earned if the three-year measurement period had
concluded at the end of the fiscal year reported. For more information, please refer to the section titled “Long-Term Incentive
Plan” in our CD&A.
Fiscal Year
Fiscal Year in Which the Measurement
Period for this Year’s Award will End
Per Phantom Unit Fair Value at the End of
the Fiscal Year Reported
2024
2026
$
17.70
2023
2025
$
14.82
2022
2024
$
16.51
2021
2023
$
15.24
(g)
Because the PEP is settled in cash and because the plan does not provide for distribution equivalents, the values used for fiscal
2023 were calculated by multiplying outstanding awards by $15.89, the value of an outstanding SPH Common Unit at the end of
fiscal 2023. Fiscal 2023 was the first year during which PEP awards were granted to our named executive officers. The values
used for fiscal 2024 were calculated by multiplying outstanding awards by $17.73, the value of an outstanding SPH Common Unit
at the end of fiscal 2024.
(h)
Represents the values of LTIP awards granted in prior fiscal years, but remained outstanding at the end of the fiscal years reported.
The values include distribution equivalents accrued throughout the fiscal years reported. For purposes of the LTIP, market value
is the average of the closing prices of our units for the twenty trading days preceding the final day of each fiscal year reported.
The following table provides the market values that were used to calculate payments for our named executive officers and our
assumption regarding the percentage of the LTIP payout that they would have earned if the three-year measurement period had
concluded at the end of the fiscal year reported. For more information, please refer to the section titled “Long-term Incentive
Plan” in our CD&A.
93
Fiscal Year
Fiscal Year During
Which Outstanding
Award Granted in a
Prior Fiscal Year
Remained Outstanding
at the End of this Fiscal
Year was Granted
Value at the End of this
Fiscal Year
Percentage that Would
Be Applied to Market
Value Based on
Financial Performance if
the End of this Fiscal
Year Had Been the End
of the Three-Year
Measurement Period
Percentage Earned
Based on Scorecard Goal
Attainment if the End of
this Fiscal Year Had
Been the End of the
Three-Year
Measurement Period
2024
2023
$
17.70
65%
75%
2023
2022
$
14.82
100%
100%
2022
2021
$
16.51
120%
100%
2021
2020
$
15.24
104%
N/A
For the fiscal year ended September 28, 2024, the most important financial performance measures used to link compensation
actually paid to our named executive officers to company performance are Adjusted EBITDA, distributable cash flow, and total
unitholder return. Payments under our Annual Cash Bonus Plan were determined, for the most part, by Adjusted EBITDA; LTIP
payments were determined, for the most part, by distributable cash flow; and the value of compensation realized by our named executive
officers when they are issued Common Units when their restricted units vest is inextricably linked to the performance of our Common
Units.
Important Financial Performance Measures
Adjusted EBITDA
Distributable Cash Flow
Total Unitholder Return
The following graph compares the compensation actually paid to our PEO and the average of the compensation actually paid to
our remaining named executive officers with our Adjusted EBITDA.
94
Compensation Actually Paid Versus Adjusted EBITDA
Fiscal 2021
Fiscal 2022
Fiscal 2023
Fiscal 2024
Compensation Actually Paid to PEO
$
3,381,847
$
4,414,143
$
3,692,734
$
4,067,902
Average Compensation Actually Paid to
Non-PEO named executive officers
$
1,824,677
$
2,171,310
$
1,925,749
$
2,197,469
Adjusted EBITDA (in millions $)
$
276
$
291
$
275
$
250
The following graph compares the compensation actually paid to our PEO and the average of the compensation actually paid to
our remaining named executive officers with our distributable cash flow.
Compensation Actually Paid Versus Distributable Cash Flow
Fiscal 2021
Fiscal 2022
Fiscal 2023
Fiscal 2024
Compensation Actually Paid to PEO
$
3,381,847
$
4,414,143
$
3,692,734
$
4,067,902
Average Compensation Actually Paid to
Non-PEO named executive officers
$
1,824,677
$
2,171,310
$
1,925,749
$
2,197,469
Distributable Cash Flow (in millions $)
$
184
$
192
$
197
$
184
The Average Distributable Cash Flow, as defined above, of the Partnership for the three-year measurement periods ending in
fiscal 2021, 2022, 2023 and 2024 was $183.8 million, $192.1 million, $197.1 million and $183.8 million, respectively.
95
The following graph compares the compensation actually paid to our PEO and the average of the compensation actually paid to
our remaining named executive officers to the total unitholder return performance of our Common Units with the total shareholder return
of the Alerian MLP Index, the peer group we selected for comparison. The total return to our Unitholders and the Alerian MLP Index’s
total return reflects cumulative returns and assumes that $100 was invested on September 26, 2020 and that all distributions or dividends
were reinvested on a quarterly basis.
Compensation Actually Paid Versus Total Unitholder Return
Fiscal 2021
Fiscal 2022
Fiscal 2023
Fiscal 2024
Compensation Actually Paid to PEO
$
3,381,847
$
4,414,143
$
3,692,734
$
4,067,902
Average Compensation Actually Paid to
Non-PEO named executive officers
$
1,824,677
$
2,171,310
$
1,925,749
$
2,197,469
Our Total Unitholder Return ($)
$
10.68
$
25.33
$
37.86
$
64.16
Our Peer Group's Total Shareholder
Return
$
68.97
$
85.85
$
133.07
$
168.82
96
SUPERVISORS’ COMPENSATION
The following table sets forth the compensation of the non-employee members of the Board of Supervisors of the Partnership
during fiscal 2024.
Supervisor
Fees Earned
or
Paid in
Cash (1)
Unit
Awards (2)
Total
Matthew J. Chanin
$
135,000
$
—
$
135,000
Lawrence C. Caldwell*
$
47,500
$
19,720
$
67,220
Terence J. Connors
$
115,000
$
—
$
115,000
William M. Landuyt
$
95,000
$
—
$
95,000
Harold R. Logan Jr.
$
95,000
$
—
$
95,000
Jane Swift
$
110,000
$
—
$
110,000
Amy M. Adams
$
95,000
$
—
$
95,000
Rommel M. Oates
$
95,000
$
—
$
95,000
*Mr. Caldwell retired on May 20, 2024.
(1)
This includes amounts earned for fiscal 2024, including quarterly retainer installments for the fourth quarter of 2024 that were
paid in November 2024. Because his May 21, 2024 retirement as a member of our Board of Supervisors, the cash payments
reported for Mr. Caldwell is for his attendance at the January and April board meetings.
(2)
At the end of fiscal 2024, Mr. Chanin held 9,563 unvested restricted units, Messieurs Connors, Landuyt, Logan and Ms. Swift
each held 7,438 unvested restricted units, Mr. Caldwell held 8,438 unvested restricted units, and Ms. Adams and Mr. Oates each
held 17,338 unvested restricted units. In accordance with its policy established on November 7, 2014, the Committee awarded
Mr. Caldwell with 1,000 restricted units in recognition of his meritorious service to the Partnership. For this award, the Committee
waived the holding requirements of the Plan’s retirement provisions. All of the unvested units held by Mr. Caldwell on the date
of his retirement will be issued to him as Common Units of the Partnership six months and one day following the date of his
retirement.
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. As the Chairman of the Board of Supervisors, Mr. Chanin receives an annual cash retainer of
$135,000, payable in quarterly installments of $33,750 each. Each of the other non-employee Supervisors receives an annual cash
retainer of $95,000 each, payable in quarterly installments of $23,750. As Chair of the Compensation Committee, Ms. Swift receives
an additional annual cash retainer of $15,000, payable in quarterly installments of $3,750 each. As Chair of the Audit Committee, Mr.
Connors receives an additional annual cash retainer of $20,000, payable in quarterly installments of $5,000 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.
Restricted Unit Plan. Each non-employee Supervisor is eligible to participate in our RUP and PEP. All awards vest in
accordance with the provisions of the plan documents (see the CD&A sections titled “Restricted Unit Plan” and “Phantom Equity Plan”
for a description of the vesting schedules). Upon vesting, the RUP awards are settled by issuing Common Units and the PEP awards
are settled in cash, the value of which is based on the value of Common Units at the time of vesting.
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 2024 for each Supervisor.
97
ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
UNITHOLDER MATTERS
The following table sets forth certain information as of November 25, 2024 regarding the beneficial ownership of Common Units
by (a) each person or group known to Suburban, 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
Amount and Nature
of Beneficial
Ownership (1)
Percent of Class (2)
ALPS Advisers Inc. and its advised entities (a)
11,216,937
17.4%
Global X Management Company LLC (b)
3,344,151
5.2%
Michael A. Stivala (c)
211,056
*
Michael A. Kuglin (d)
134,454
*
Steven C. Boyd (e)
169,229
*
Douglas T. Brinkworth (d)
115,712
*
Neil Scanlon (f)
123,831
*
Matthew J. Chanin (g)
65,694
*
Harold R. Logan, Jr. (h)
37,015
*
Jane Swift (h)
31,135
*
Terence J. Connors (h)
50,583
*
William M. Landuyt (h)
61,083
*
Amy M. Adams (i)
8,670
*
Rommel M. Oates (j)
8,670
*
All Members of the Board of Supervisors and
Executive Officers, as a group (27 persons) (k)
1,520,571
2.4%
(1)
With the exception of the 11,216,937 units held by ALPS Advisers, Inc. and its advised entities (of which the Partnership has no
knowledge, see note (a) below); the 3,344,151 units held by Global X Management Company LLC (of which the Partnership has
no knowledge, see note (b) below); and 784 units held by the General Partner (see note (c) below), the above listed units may be
held in brokerage accounts where they are pledged as security.
(2)
Based upon 64,490,096 Common Units outstanding on November 25, 2024.
* Less than 1%.
(a)
Based on an amended Schedule 13G dated November 11, 2024 filed by ALPS Advisors, Inc. and Alerian MLP ETF, which
indicates that as of September 30, 2024, ALPS Advisors, Inc. and Alerian MLP ETF each have the shared power to vote or to
direct the vote of 11,216,937 Common Units and the shared power to dispose or to direct the disposition of 11,216,937 Common
Units. The 13G indicates that ALPS Advisors, Inc. may be deemed to be a beneficial owner of these Common Units for purposes
of Rule 13d-3 because it and 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
ALPS Advisors, Inc. and Alerian MLP ETF is 1290 Broadway, Suite 1000, Denver, CO 80203.
(b)
Based on a Schedule 13G dated November 14, 2024 filed by Global X Management Company LLC, which indicates that as of
September 30, 2024, Global X Management Company LLC has the sole power to vote or to direct the vote of 3,344,151 Common
Units and the sole power to retain or dispose of Common Units for which certain investment companies registered under Section
8 of the Investment Company Act of 1940 managed by Global X Management Company LLC have the right to receive
distributions from, or the proceeds from the sale of, these Common Units. We make no representation as to the accuracy or
completeness of the information reported. The address of Global X Management Company LLC is 605 3rd Avenue, 43rd Floor,
New York, NY 10158.
(c)
Includes 784 Common Units held by the General Partner, of which Mr. Stivala is the sole member. Excludes 100,143 unvested
restricted units, none of which will vest in the 60-day period following November 25, 2024.
(d)
Excludes 51,614 unvested restricted units, none of which will vest in the 60-day period following November 25, 2024.
(e)
Excludes 29,367 unvested restricted units, none of which will vest in the 60-day period following November 25, 2024.
(f)
Excludes 45,743 unvested restricted units, none of which will vest in the 60-day period following November 25, 2024.
(g)
Excludes 17,482 unvested restricted units, none of which will vest in the 60-day period following November 25, 2024.
98
(h)
Excludes 13,112 unvested restricted units, none of which will vest in the 60-day period following November 25, 2024.
(i)
Excludes 30,450 unvested restricted units, none of which will vest in the 60-day period following November 25, 2024.
(j)
Excludes 37,510 unvested restricted units, none of which will vest in the 60-day period following November 25, 2024.
(k)
Inclusive of the unvested restricted units referred to in footnotes (c), (d), (e), (f), (g), (h), (i) and (j) above, the reported number of
units excludes 744,668 unvested restricted units, of which none will vest in the 60-day period following November 25, 2024.
Securities Authorized for Issuance Under the Restricted Unit Plans
The following table sets forth certain information, as of September 28, 2024, 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.
Plan Category
Number of
Common Units to
be issued upon
vesting of
restricted units
(a)
Weighted-
average grant
date fair value
per restricted
unit
(b)
Number of
restricted units
remaining
available for
future issuance
under the
Restricted Unit
Plan (excluding
securities
reflected in
column (a))
(c)
Equity compensation plans approved by security
holders (1)
1,100,278 (2)$
13.37
2,889,830
Equity compensation plans not approved by
security holders
—
—
—
Total
1,100,278
$
13.37
2,889,830
(1)
Relates to the Restricted Unit Plans.
(2)
Represents number of restricted units that, as of September 28, 2024, had been granted under the Restricted Unit Plans but had
not yet vested.
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.
has not been employed by the Partnership and has not received more than $120,000 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;
b.
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;
c.
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
99
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;
d.
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
e.
has not been employed by another company where any of the Partnership’s current executives serve on that company’s
compensation committee;
2.
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, and does not share a residence with (other than a domestic employee), a person that has (i) received more than $120,000 from
the Partnership, (ii) is an executive officer of the Partnership or the entities identified in (1)(a) through (1)(c) or (1)(e) above, or
(iii) is a partner of an internal or external auditor of the Partnership, or is employed by such auditor and personally worked on the
Partnership’s audit within the past three years;
3.
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
4.
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.
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.
ITEM 14.
PRINCIPAL ACCOUNTANT FEES AND SERVICES
The following table sets forth the aggregate fees for services related to fiscal years 2024 and 2023 provided by
PricewaterhouseCoopers LLP, our independent registered public accounting firm.
Fiscal
2024
Fiscal
2023
Audit Fees (a)
$
2,494,000
$
2,325,000
Tax Fees (b)
954,000
933,067
All Other Fees (c)
2,000
5,400
Total
$
3,450,000
$
3,263,467
(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 2024 and fiscal 2023.
100
PART IV
ITEM 15.
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a)
The following documents are filed as part of this Annual Report:
1.
Financial Statements
The consolidated financial statements of the registrant listed in the “Index to Financial Statements” on page F-1 together with the
reports of PricewaterhouseCoopers LLP (PCAOB ID 238), independent auditors, are filed as part of this Annual Report.
2.
Financial Statement Schedule
See “Index to Financial Statement Schedule” set forth on page S-1.
3.
Exhibits
See “Index to Exhibits”. Each management contract or compensatory plan or arrangement is identified with a “#”.
ITEM 16.
FORM 10-K SUMMARY
None.
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
Description
3.1
Third Amended and Restated Agreement of Limited Partnership of the Partnership dated as of October 19, 2006
(Incorporated by reference to Exhibit 3.1 to the Partnership’s Current Report on Form 8-K filed October 19, 2006).
3.2
First Amendment to the Third Amended and Restated Agreement of Limited Partnership of the Partnership, dated July 31,
2007 (Incorporated by reference to Exhibit 3.1 to the Partnership’s Current Report on Form 8-K filed August 2, 2007).
3.3
Second Amendment to the Third Amended and Restated Agreement of Limited Partnership of the Partnership, dated
January 24, 2018 (Incorporated by reference to Exhibit 3.1 to the Partnership’s Current Report on Form 8-K filed January
24, 2018).
3.4
Third Amendment to the Third Amended and Restated Agreement of Limited Partnership of the Partnership, dated
November 11, 2020 (Incorporated by reference to Exhibit 3.1 to the Partnership’s Current Report on Form 8-K filed
November 16, 2020).
3.5
Third Amended and Restated Agreement of Limited Partnership of the Operating Partnership dated as of October 19, 2006
(Incorporated by reference to Exhibit 3.2 to the Partnership’s Current Report on Form 8-K filed October 19, 2006).
3.6
First Amendment to the Third Amended and Restated Agreement of Limited Partnership of the Operating Partnership,
dated June 24, 2009 (Incorporated by reference to Exhibit 10.2 to the Partnership’s Current Report on Form 8-K filed June
30, 2009).
3.7
Second Amendment to the Third Amended and Restated Agreement of Limited Partnership of the Operating Partnership,
dated January 24, 2018 (Incorporated by reference to Exhibit 3.2 to the Partnership’s Current Report on Form 8-K filed
January 24, 2018).
3.8
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).
3.9
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).
4.1
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).
101
4.2
Third Supplemental Indenture, dated as of February 14, 2017, to the Indenture, dated as of May 27, 2014, relating to the
5.875% Senior Notes due 2027, 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 14, 2017).
4.3
Indenture, dated as of May 24, 2021, relating to the 5.000% Senior Notes due 2031, 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 21, 2021).
10.1
Suburban Propane Partners, L.P. 2009 Restricted Unit Plan, effective August 1, 2009 (incorporated by reference to Exhibit
99.1 to the Partnership’s Registration Statement on Form S-8 filed July 24, 2009), as amended on November 13, 2012
(incorporated by reference to Exhibit 99.2 to the Partnership’s Current Report on Form 8-K filed November 14, 2012),
August 6, 2013 (incorporated by reference to Exhibit 99.2 to the Partnership’s Current Report on Form 8-K Filed August
8, 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). #
10.2
Amended and Restated 2018 Restricted Unit Plan of Suburban Propane Partners, L.P. (Incorporated by reference to Exhibit
10.1 to the Partnership’s Current Report on Form 8-K filed on May 18, 2021). #
10.3
Suburban Propane, L.P. Severance Protection Plan (Incorporated by reference to Exhibit 10.12 to the Partnership’s Annual
Report on Form 10-K filed on December 24, 1996), as amended on January 24, 2008 (Incorporated by reference to Exhibit
10.3 to the Partnership’s Quarterly Report on Form 10-Q filed February 7, 2007), January 20, 2009 (Incorporated by
reference to Exhibit 10.8 to the Partnership’s Annual Report on Form 10-K filed November 25, 2009) and November 10,
2009 (Incorporated by reference to Exhibit 10.8 to the Partnership’s Annual Report on Form 10-K filed on November 25,
2009). #
10.4
Suburban Propane, L.P. Executive Special Severance Plan, effective January 1, 2020. (Incorporated by reference to Exhibit
10.1 to the Partnership’s Current Report on Form 8-K filed on November 19, 2019). #
10.5
Suburban Propane, L.P. 2014 Long-Term Incentive Plan, effective October 1, 2013 (Incorporated by reference to Exhibit
99.1 to the Partnership’s Current Report on Form 8-K filed on August 7, 2013), as amended on November 14, 2016
(incorporated by reference to Exhibit 99.2 to the Partnership’s Current Report on Form 8-K filed on November 16, 2016),
January 22, 2019 (Incorporated by reference to Exhibit 10.1 to the Partnership’s Quarterly Report on Form 10-Q filed
February 7, 2019) and November 12, 2019. (Incorporated by reference to Exhibit 10.5 to the Partnership’s Annual Report
on Form 10-K filed on November 27, 2019). #
10.6
Suburban Propane, L.P. 2021 Long-Term Incentive Plan, effective September 27, 2020 (Incorporated by reference to
Exhibit 10.1 to the Partnership’s Current Report on Form 8-K filed November 16, 2020), as amended on February 5, 2022
(Incorporated by reference to Exhibit 10.1 to the Partnership’s Quarterly Report on Form 10-Q filed February 23, 2022).
#
10.7
Suburban Propane Partners, L.P. 2022 Phantom Equity Plan, effective November 8, 2022 (Incorporated by reference to
Exhibit 10.1 to the Partnership’s Current Report on Form 8-K filed November 15, 2022). #
10.7.1
Form of Phantom Equity Award Agreement (Incorporated by reference to Exhibit 10.2 to the Partnership’s Current Report
on Form 8-K filed November 15, 2022). #
10.8
Amended and Restated Retirement Savings and Investment Plan of Suburban Propane (effective as of January 1, 2013).
(Incorporated by reference to Exhibit 10.4 to the Partnership’s Annual Report on Form 10-K filed on November 23, 2016).
#
10.9
First Amendment to the Retirement Savings and Investment Plan of Suburban Propane (effective January 1, 2015).
(Incorporated by reference to Exhibit 10.5 to the Partnership’s Annual Report on Form 10-K filed on November 23, 2016).
#
10.10
Second Amendment to the Retirement Savings and Investment Plan of Suburban Propane (effective January 1, 2016).
(Incorporated by reference to Exhibit 10.6 to the Partnership’s Annual Report on Form 10-K filed on November 23, 2016).
#
10.11
Third Amendment to the Retirement Savings and Investment Plan of Suburban Propane (effective August 1, 2016).
(Incorporated by reference to Exhibit 10.7 to the Partnership’s Annual Report on Form 10-K filed on November 22, 2017).
#
10.12
Fourth Amendment to the Retirement Savings and Investment Plan of Suburban Propane (effective January 1, 2017).
(Incorporated by reference to Exhibit 10.8 to the Partnership’s Annual Report on Form 10-K filed on November 22, 2017).
#
102
10.13
Fifth Amendment to the Retirement Savings and Investment Plan of Suburban Propane (effective April 1, 2018).
(Incorporated by reference to Exhibit 10.2 to the Partnership’s Quarterly Report on Form 10-Q filed on August 9, 2018).
#
10.14
Sixth Amendment to the Retirement Savings and Investment Plan of Suburban Propane (effective January 1, 2019).
(Incorporated by reference to Exhibit 10.4 to the Partnership’s Quarterly Report on Form 10-Q filed on August 8, 2019).
#
10.15
Suburban Propane Partners, L.P. Distribution Equivalent Rights Plan, effective January 17, 2017, as amended November
8, 2022 (Incorporated by reference to Exhibit 10.3 to the Partnership’s Current Report on Form 8-K filed November 15,
2022). #
10.16
Third Amendment to the Pension Plan for Eligible Employees of Suburban Propane, L.P. and Subsidiaries (effective June
1, 2017). (Incorporated by reference to Exhibit 10.10 to the Partnership’s Annual Report on Form 10-K filed on November
22, 2017). #
10.17
Fourth Amendment to the Pension Plan for Eligible Employees of Suburban Propane, L.P. and Subsidiaries (effective
January 1, 2019). (Incorporated by reference to Exhibit 10.3 to the Partnership’s Quarterly Report on Form 10-Q filed
February 7, 2019). #
10.18
Fifth Amendment to the Pension Plan for Eligible Employees of Suburban Propane, L.P. and Subsidiaries (effective
January 1, 2019 and October 1, 2019, as applicable). (Incorporated by reference to Exhibit 10.16 to the Partnership’s
Annual Report on Form 10-K filed on November 27, 2019). #
10.19
Sixth Amendment to the Pension Plan for Eligible Employees of Suburban Propane, L.P. and Subsidiaries (effective
December 20, 2019). (Incorporated by reference to Exhibit 10.1 to the Partnership’s Quarterly Report on Form 10-Q filed
February 6, 2020). #
10.20
Seventh Amendment to the Pension Plan for Eligible Employees of Suburban Propane, L.P. and Subsidiaries (effective
January 1, 2016). (Incorporated by reference to Exhibit 10.19 to the Partnership's Annual Report on Form 10-K filed on
November Filed on November 24, 2021). #
10.21
Third 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 March 5, 2020. (Incorporated by reference to Exhibit
10.1 to the Partnership’s Current Report on Form 8-K filed on March 5, 2020).
10.22
First Amendment to the Third Amended and Restated Credit Agreement among Suburban Propane, L.P., the Partnership
and Bank of America, N.A., as Administrative Agent, and the Lender parties thereto, dated December 27, 2022.
(Incorporated by reference to Exhibit 10.1 to the Partnership’s Quarterly Report on Form 10-Q filed on February 2, 2023.
10.23
Fourth Amended and Restated Credit Agreement (Incorporated by reference to Exhibit 10.1 to the Partnership's Current
Report on Form 8-K filed on March 18, 2024).
10.24
Amended and Restated 2018 Restricted Unit Plan of Suburban Propane Partners, L.P. (Incorporated by reference to
Exhibit 10.1 to the Partnership’s Current Report on Form 8-K filed May 22, 2024).
19.1
Suburban Propane Partners, L.P. and its Subsidiaries Policy on Insider Trading (Filed herewith).
21.1
Subsidiaries of Suburban Propane Partners, L.P. (Filed herewith).
23.1
Consent of PricewaterhouseCoopers LLP. (Filed herewith).
31.1
Certification of the President and Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
(Filed herewith).
31.2
Certification of the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (Filed herewith).
32.1
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. (Furnished herewith).
32.2
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. (Furnished herewith).
97.1
Dodd-Frank Clawback Policy, effective as of December 1, 2023. (Incorporated by reference to Exhibit 97.1 to the
Partnership's Annual Report on Form 10-K filed on November 22, 2023).
99.1
Equity Holding Policy for Supervisors and Executives of Suburban Propane Partners, L.P., as amended on November 10,
2015 and as further amended on November 13, 2018. (Incorporated by reference to Exhibit 99.1 to the Partnership’s Annual
Report on Form 10-K filed on November 21, 2018).
99.2
Five-Year Performance Graph (Furnished herewith).
103
101.INS
Inline XBRL Instance Document
101.SCH
Inline XBRL Taxonomy Extension Schema Document
101.CAL
Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF
Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB
Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE
Inline XBRL Taxonomy Extension Presentation Linkbase Document
104
Cover Page Interactive Data File (embedded in the Inline XBRL document).
104
SIGNATURES
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.
SUBURBAN PROPANE PARTNERS, L.P.
Date: November 27, 2024
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
Date
By: /s/ MICHAEL A. STIVALA
President, Chief Executive
November 27, 2024
(Michael A. Stivala)
Officer and Supervisor
By: /s/ MATTHEW J. CHANIN
Chairman and Supervisor
November 27, 2024
(Matthew J. Chanin)
By: /s/ HAROLD R. LOGAN, JR.
Supervisor
November 27, 2024
(Harold R. Logan, Jr.)
By: /s/ JANE SWIFT
Supervisor
November 27, 2024
(Jane Swift)
By: /s/ TERENCE J. CONNORS
Supervisor
November 27, 2024
(Terence J. Connors)
By: /s/ WILLIAM M. LANDUYT
Supervisor
November 27, 2024
(William M. Landuyt)
By: /s/ AMY M. ADAMS
Supervisor
November 27, 2024
(Amy M. Adams)
By: /s/ ROMMEL M. OATES
Supervisor
November 27, 2024
(Rommel M. Oates)
By: /s/ MICHAEL A. KUGLIN
Chief Financial Officer
November 27, 2024
(Michael A. Kuglin)
By: /s/ DANIEL S. BLOOMSTEIN
Vice President, Controller and
November 27, 2024
(Daniel S. Bloomstein)
Chief Accounting Officer
F-1
INDEX TO FINANCIAL STATEMENTS
SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES
Page
Report of Independent Registered Public Accounting Firm ...........................................................................................................
F-2
Consolidated Balance Sheets – As of September 28, 2024 and September 30, 2023 .....................................................................
F-4
Consolidated Statements of Operations – Years Ended September 28, 2024, September 30, 2023 and September 24, 2022 ........
F-5
Consolidated Statements of Comprehensive Income – Years Ended September 28, 2024, September 30, 2023 and September
24, 2022 .....................................................................................................................................................................................
F-6
Consolidated Statements of Cash Flows – Years Ended September 28, 2024, September 30, 2023 and September 24, 2022 ......
F-7
Consolidated Statements of Partners’ Capital – Years Ended September 28, 2024, September 30, 2023 and September 24, 2022
...................................................................................................................................................................................................
F-8
Notes to Consolidated Financial Statements ...................................................................................................................................
F-9
F-2
Report of Independent Registered Public Accounting Firm
To the Board of Supervisors and Unitholders
of Suburban Propane Partners, L.P.
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of Suburban Propane Partners, L.P. and its subsidiaries (the
“Partnership”) as of September 28, 2024 and September 30, 2023, and the related consolidated statements of operations, of
comprehensive income, of partners’ capital and of cash flows for each of the three years in the period ended September 28, 2024,
including the related notes and financial statement schedule listed in the index appearing under Item 15(a)(2) (collectively referred to as
the “consolidated financial statements”). We also have audited the Partnership's internal control over financial reporting as of September
28, 2024, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of
the Partnership as of September 28, 2024 and September 30, 2023, and the results of its operations and its cash flows for each of the
three years in the period ended September 28, 2024 in conformity with accounting principles generally accepted in the United States of
America. Also in our opinion, the Partnership maintained, in all material respects, effective internal control over financial reporting as
of September 28, 2024, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.
Basis for Opinions
The Partnership's management is responsible for these consolidated financial statements, 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 under Item 9A. Our responsibility is to express opinions on the
Partnership’s consolidated financial statements and on the Partnership's internal control over financial reporting based on our audits. We
are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required
to be independent with respect to the Partnership in accordance with the U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits
to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to
error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the
consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures
included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits
also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall
presentation of the consolidated financial statements. 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.
Definition and Limitations of Internal Control over Financial Reporting
A Partnership’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 Partnership’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
Partnership; (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 Partnership are being made only
in accordance with authorizations of management and directors of the Partnership; and (iii) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or disposition of the Partnership’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.
F-3
Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements
that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are
material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The
communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole,
and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the
accounts or disclosures to which it relates.
Accrued Insurance
As described in Notes 2 and 14 to the consolidated financial statements, the Partnership had accrued insurance liabilities of
approximately $58 million as of September 28, 2024, which represents the estimated costs of known and anticipated or unasserted
claims for incidents related to general and product, workers’ compensation and automobile liabilities. 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 historical claims data. The Partnership is self-insured for these liabilities up to predetermined amounts above which third party
insurance applies. 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 within other assets related to the amount of the liability expected to be covered
by insurance, which amounted to approximately $14 million as of September 28, 2024.
The principal considerations for our determination that performing procedures relating to accrued insurance is a critical audit matter
are there was significant judgment by management in determining the estimate of net exposure for estimated costs of known and
anticipated or unasserted claims for self-insured liabilities arising from incidents related to general and product, workers’ compensation,
and automobile liabilities. This in turn led to a high degree of auditor judgment, subjectivity, and effort in performing procedures and
evaluating audit evidence relating to these determinations and management’s significant assumption for loss development factors. In
addition, the audit effort involved the use of professionals with specialized skill and knowledge to assist in performing these procedures
and evaluating the audit evidence obtained.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion
on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to management’s
accrued insurance calculation, including controls over the determination of loss development factors. These procedures also included,
among others, testing management’s process for determining the net exposure for estimated costs of known and anticipated or unasserted
claims for self-insured liabilities arising from incidents related to general and product, workers’ compensation, and automobile liabilities
and management’s significant assumption for loss development factors. This included testing the completeness and accuracy of
underlying data used by management. Evaluating management’s significant assumption related to loss development factors involved
evaluating the historical claims data utilized by management in estimating the costs of known and anticipated or unasserted claims.
Professionals with specialized skill and knowledge were used to assist in the evaluation of the appropriateness of the actuarial methods
used by management and the reasonableness of management’s significant assumption for loss development factors used to estimate
costs of known and anticipated or unasserted claims.
Florham Park, New Jersey
November 27, 2024
We have served as the Partnership’s auditor since 1995.
F-4
SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)
September 28,
September 30,
2024
2023
ASSETS
Current assets:
Cash and cash equivalents
$
3,219
$
3,514
Accounts receivable, less allowance for doubtful accounts of $4,707 and
$4,449, respectively
66,444
67,687
Inventories
55,430
61,828
Other current assets
32,451
30,973
Total current assets
157,544
164,002
Property, plant and equipment, net
653,985
646,054
Operating lease right-of-use assets
140,243
142,940
Goodwill
1,151,252
1,148,776
Other intangible assets, net
74,512
80,553
Other assets
95,225
88,150
Total assets
$
2,272,761
$
2,270,475
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable
$
41,058
$
40,043
Accrued employment and benefit costs
40,371
45,138
Accrued insurance
12,510
11,550
Customer deposits and advances
126,570
127,311
Operating lease liabilities
35,616
33,562
Accrued interest
15,949
16,856
Other current liabilities
34,048
33,358
Total current liabilities
306,122
307,818
Long-term borrowings
1,210,326
1,188,210
Accrued insurance
45,560
49,632
Operating lease liabilities
103,797
108,495
Other liabilities
59,896
69,964
Total liabilities
1,725,701
1,724,119
Commitments and contingencies
Partners' capital:
Common Unitholders (64,072 and 63,521 units issued and outstanding at
September 28, 2024 and September 30, 2023, respectively)
553,207
557,023
Accumulated other comprehensive loss
(6,147)
(10,667)
Total partners' capital
547,060
546,356
Total liabilities and partners' capital
$
2,272,761
$
2,270,475
The accompanying notes are an integral part of these consolidated financial statements.
F-5
SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per unit amounts)
Year Ended
September 28,
September 30,
September 24,
2024
2023
2022
Revenues
Propane
$
1,150,034
$
1,232,138
$
1,313,556
Fuel oil and refined fuels
73,783
92,127
95,157
Natural gas and electricity
25,877
31,160
39,511
All other
77,478
73,769
53,241
1,327,172
1,429,194
1,501,465
Costs and expenses
Cost of products sold
522,196
590,131
712,123
Operating
476,857
478,058
442,411
General and administrative
89,894
91,574
81,756
Depreciation and amortization
66,975
62,582
58,848
1,155,922
1,222,345
1,295,138
Operating income
171,250
206,849
206,327
Loss on debt extinguishment
215
—
—
Interest expense, net
74,590
73,393
60,658
Other, net
21,537
9,036
5,532
Income before provision for income taxes
74,908
124,420
140,137
Provision for income taxes
734
668
429
Net income
$
74,174
$
123,752
$
139,708
Net income per Common Unit - basic
$
1.15
$
1.94
$
2.21
Weighted average number of Common Units outstanding - basic
64,306
63,835
63,212
Net income per Common Unit - diluted
$
1.14
$
1.92
$
2.18
Weighted average number of Common Units outstanding - diluted
64,841
64,441
64,018
The accompanying notes are an integral part of these consolidated financial statements.
F-6
SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
Year Ended
September 28,
September 30,
September 24,
2024
2023
2022
Net income
$
74,174
$
123,752
$
139,708
Other comprehensive income:
Amortization of net actuarial gains and prior service credits into
earnings and net change in funded status of benefit plans
3,882
1,929
4,148
Recognition in earnings of net actuarial loss for pension settlement
638
—
840
Other comprehensive income
4,520
1,929
4,988
Total comprehensive income
$
78,694
$
125,681
$
144,696
The accompanying notes are an integral part of these consolidated financial statements.
F-7
SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Year Ended
September 28,
September 30,
September 24,
2024
2023
2022
Cash flows from operating activities:
Net income
$
74,174
$
123,752
$
139,708
Adjustments to reconcile net income to net cash provided by operations:
Depreciation and amortization
66,975
62,582
58,848
Equity in losses of unconsolidated affiliates
18,119
6,264
2,614
Compensation costs recognized under Restricted Unit Plans
8,191
8,260
11,253
Pension settlement charge
638
—
840
Loss on debt extinguishment
215
—
—
Other, net
4,058
1,517
357
Changes in assets and liabilities:
Accounts receivable
1,302
15,080
(7,095)
Inventories
6,578
5,138
(4,824)
Other current and noncurrent assets
(2,754)
6,112
(5,373)
Accounts payable
1,065
(206)
(4,335)
Accrued employment and benefit costs
(5,227)
1,519
2,277
Accrued insurance
(3,112)
(2,883)
(2,059)
Customer deposits and advances
(741)
(281)
15,865
Contributions to defined benefit pension plan
(4,000)
(4,000)
(3,330)
Other current and noncurrent liabilities
(4,896)
2,385
15,801
Net cash provided by operating activities
160,585
225,239
220,547
Cash flows from investing activities:
Capital expenditures
(59,429)
(44,949)
(44,352)
Investments in and acquisitions of businesses
(25,152)
(130,124)
(56,083)
Proceeds from sale of property, plant and equipment
2,937
4,436
5,150
Proceeds from sale of business
—
—
850
Net cash (used in) investing activities
(81,644)
(170,637)
(94,435)
Cash flows from financing activities:
Proceeds from borrowings under revolving credit facility
626,000
525,700
386,600
Repayments of borrowings under revolving credit facility
(607,000)
(483,300)
(429,000)
Issuance costs associated with long-term borrowings
(3,744)
—
—
Partnership distributions
(83,090)
(82,383)
(81,725)
Other, net
(4,667)
(4,645)
(3,695)
Net cash (used in) financing activities
(72,501)
(44,628)
(127,820)
Net increase (decrease) in cash, cash equivalents and restricted cash
6,440
9,974
(1,708)
Cash, cash equivalents and restricted cash at beginning of period
14,074
4,100
5,808
Cash, cash equivalents and restricted cash at end of period
$
20,514
$
14,074
$
4,100
Less: restricted cash
17,295
10,560
—
Cash and cash equivalents, end of period
$
3,219
$
3,514
$
4,100
Supplemental disclosure of cash flow information:
Cash paid for interest
$
73,552
$
67,529
$
59,198
The accompanying notes are an integral part of these consolidated financial statements.
F-8
SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF PARTNERS’ CAPITAL
(in thousands)
Accumulated
Other
Total
Number of
Common
Comprehensive
Partners'
Common Units
Unitholders
(Loss)
Capital
Balance at September 25, 2021
62,538
$
443,005
$
(17,584) $
425,421
Net income
139,708
—
139,708
Amortization of net actuarial gains and prior service credits into
earnings and net change in funded status of benefit plans
—
4,148
4,148
Partnership distributions
(81,725)
—
(81,725)
Common Units issued under Restricted Unit Plans
449
(2,115)
—
(2,115)
Recognition in earnings of net actuarial loss for pension settlement
—
840
840
Compensation costs recognized under Restricted Unit Plans
11,253
—
11,253
Balance at September 24, 2022
62,987
$
510,126
$
(12,596) $
497,530
Net income
123,752
—
123,752
Amortization of net actuarial gains and prior service credits into
earnings and net change in funded status of benefit plans
—
1,929
1,929
Partnership distributions
(82,383)
—
(82,383)
Common Units issued under Restricted Unit Plans
534
(2,732)
—
(2,732)
Compensation costs recognized under Restricted Unit Plans
8,260
—
8,260
Balance at September 30, 2023
63,521
$
557,023
$
(10,667) $
546,356
Net income
74,174
—
74,174
Amortization of net actuarial gains and prior service credits into
earnings and net change in funded status of benefit plans
—
3,882
3,882
Partnership distributions
(83,090)
—
(83,090)
Common Units issued under Restricted Unit Plans
551
(3,091)
—
(3,091)
Recognition in earnings of net actuarial loss for pension settlement
—
638
638
Compensation costs recognized under Restricted Unit Plans
8,191
—
8,191
Balance at September 28, 2024
64,072
$
553,207
$
(6,147) $
547,060
The accompanying notes are an integral part of these consolidated financial statements.
F-9
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, renewable propane, renewable natural gas
(“RNG”), fuel oil and refined fuels, as well as the marketing of natural gas and electricity in deregulated markets and producer of and
investor in low-carbon fuel alternatives. 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 64,071,854
Common Units outstanding at September 28, 2024. 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.
Suburban Renewable Energy, LLC (“Suburban Renewable Energy”) is a wholly owned subsidiary of the Operating Partnership that was
formed in January 2022. Suburban Renewable Energy serves as the platform for the Partnership’s investments in innovative, renewable
energy technologies and businesses.
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, services, and renewable energy 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 federal and state 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.
The Partnership serves approximately 1.0 million residential, commercial, industrial and agricultural customers through approximately
700 locations in 42 states. The Partnership’s 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. No single customer accounted for 10% or more of the
Partnership’s revenues during fiscal 2024, 2023 or 2022.
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 significant 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, as was the case for fiscal 2023, the
corresponding fourth quarter is 14 weeks in duration. Fiscal 2024 and 2022 included 52 weeks of operations.
F-10
Revenue Recognition. The Partnership recognizes revenue pursuant to the requirements of Financial Accounting Standards Board
(“FASB”) Topic 606 – Revenue from Contracts with Customers (“Topic 606”) and all related amendments. Topic 606 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.
Revenue is recognized by the Partnership when goods or services promised in a contract with a customer have been transferred, and no
further performance obligation on that transfer is required, in an amount that reflects the consideration expected to be received.
Performance obligations are determined and evaluated based on the specific terms of the arrangements and the distinct products and
services offered. Due to the nature of the retail business of the Partnership, there are no remaining or unsatisfied performance obligations
as of the end of the reporting period, except for tank rental agreements, maintenance service contracts, fixed price contracts and
budgetary programs, as described below. The performance obligation associated with sales of propane, fuel oil and refined fuels is met
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 defined by the performance obligations included within the related customer contract. Revenue from
repairs, maintenance and other service activities is recognized upon completion of the service. Revenue from the sale of natural gas and
electricity is recognized based on customer usage as determined by meter readings for amounts delivered, an immaterial amount of
which may be unbilled at the end of each accounting period.
The Partnership defers the recognition of revenue for annually billed tank rent, maintenance service contracts, fixed price contracts and
budgetary programs where customer consideration is received at the start of the contract period, establishing contract liabilities which
are disclosed as customer deposits and advances on the consolidated balance sheets. Deliveries to customers enrolled in budgetary
programs that exceed billings to those customers establish contract assets which are included in accounts receivable on the consolidated
balance sheets. The Partnership ratably recognizes revenue over the applicable term for tank rent and maintenance service agreements,
which is generally one year, and at the time of delivery for fixed price contracts and budgetary programs.
The Partnership incurs incremental direct costs, such as commissions to its salesforce, to obtain certain contracts. These costs are
expensed as incurred, consistent with the practical expedients issued by the FASB, since the expected amortization period is one year
or less. The Partnership generally determines selling prices based on, among other things, the current weighted average cost and the
current replacement cost of the product at the time of delivery, plus an applicable margin. Except for tank rental agreements,
maintenance service contracts, fixed price contracts and budgetary programs, customer payments for the satisfaction of a performance
obligation are due upon receipt.
Revenues from the Partnership’s renewable energy platform, as described further in Note 4, “Investments in and Acquisitions and
Dispositions of Businesses,” consist of in-take and off-take revenues. In-take revenues are generated from tipping fees charged to third
parties who deliver feedstocks, including food and beverage waste, to the Partnership’s facilities. These feedstocks, as well as manure
from dairy cattle, are then anaerobically digested and converted into RNG and fertilizer. Off-take revenues are generated through the
sale of RNG and the related environmental attributes, including renewable identification numbers (“RINs”) and low carbon fuel standard
(“LCFS”) credits that are generated from the production and distribution of RNG, and revenues generated from the sales of fertilizers
and other byproducts produced in the RNG production process. Revenues from the Partnership’s renewable energy platform are reported
within the “all other” segment (refer to Note 17, “Segment Information” for more information).
In-take revenues are recognized at the point in time when the feedstocks are delivered to the Partnership because that is when the
performance obligations have been satisfied. Off-take revenues are recognized at the point in time when the Partnership delivers the
RNG to the customer because that is when the performance obligations have been satisfied.
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
F-11
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 RNG revenue recognition,
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. The Partnership uses Society of Actuaries 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. 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, Cash Equivalents and Restricted Cash. The Partnership considers all highly liquid instruments purchased with an original
maturity of three months or less to be cash equivalents. In accordance with the indenture, as amended, and loan agreement, as amended,
governing the Green Bonds assumed in the RNG Acquisition (see Notes 4 and 10), the Partnership is required to maintain certain funds
in various accounts that are held with a third-party trustee for debt service and other purposes. The amounts deposited in those accounts
are considered Restricted Cash and is reported within other current assets (or other assets, as applicable). The balance classified as
short-term included accounts for which the cash will be used within one year, and are related to interest payments as well as operating
and maintenance activities for the RNG facility in Arizona. The balance classified as long-term represented cash held in a debt service
fund for future debt repayments on the Green Bonds for which the first debt redemption payment is due on October 1, 2028. Refer to
Note 6, “Selected Balance Sheet Information” for a reconciliation of cash, cash equivalents, and restricted cash. The carrying amount
approximates fair value because of the short-term 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, fuel oil, electricity and natural gas 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 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.
F-12
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, Secured Overnight Financing Rate (“SOFR”) 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 SOFR 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”), as adjusted pursuant to the Credit Agreement). Therefore, the Partnership is
subject to interest rate risk on the variable component of the interest rate. From time to time, the Partnership manages part of its variable
interest rate risk by entering into interest rate swap agreements. The Partnership did not enter into any interest rate swap agreements
during fiscal 2024, 2023 or 2022.
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 SOFR (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
40 Years
Building and land improvements
20 Years
Transportation equipment
3-10 Years
Storage facilities
7-30 Years
Machinery and equipment
10-15 Years
Office equipment
5-10 Years
Tanks and cylinders
10-40 Years
Computer software
3-7 Years
The weighted average estimated useful life of the Partnership’s storage facilities and tanks and cylinders is approximately 25 years and
29 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 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.
F-13
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 impairment test is unnecessary. However, if an entity concludes otherwise, then it is required
to perform an impairment test.
Under the 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 and supply relationships, tradenames, non-compete agreements and
leasehold interests. Customer and supply 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 2025 and 2035. 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 incidents
related to general and product, workers’ compensation and automobile liability. 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 is self-insured for these liabilities up to predetermined amounts above which third party insurance applies. 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. The Partnership uses Society of Actuaries mortality tables (Pri-2012), mortality
improvement scales (MP-2021) 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.
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.
F-14
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 above ground 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, 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 and the renewable energy businesses, 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
and RNG facilities.
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 535,017, 606,454 and 805,033 units for fiscal 2024, 2023 and 2022, 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
and losses on derivative instruments accounted for as cash flow hedges and reclassifications of realized gains and 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.
Recently Issued Accounting Pronouncements. In November 2023, the FASB issued Accounting Standards Update (“ASU”) 2023-
07, “Segment Reporting: Improvements to Reportable Segment Disclosures” (“Topic 280”). This update will require public entities to
F-15
disclose significant segment expenses that are regularly provided to the chief operating decision maker and included within segment
profit and loss. The standard is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years
beginning after December 15, 2024, with early adoption permitted. Topic 280 will first be effective for the Partnership’s fiscal 2025
annual report and should be applied retrospectively to all prior periods presented in the financial statements. The Partnership does not
expect ASU 2023-07 will have a material impact on the Partnership's consolidated financial statements.
In December 2023, the FASB issued ASU 2023-09, “Income Taxes: Improvements to Income Tax Disclosures” (“Topic 740”). This
update requires disclosure of specific categories and disaggregation of information in the income tax rate reconciliation table. Topic
740 also requires disclosure of disaggregated information related to income taxes paid, income or loss from continuing operations before
income tax expense or benefit, and income tax expense or benefit from continuing operations. The requirements of Topic 740 are
effective for annual periods beginning after December 15, 2024, which will be the Partnership’s fiscal 2026 annual report. Early
adoption is permitted and the amendments should be applied on a prospective basis with retrospective application also being permitted.
The Partnership is assessing the effect of this update on its consolidated financial statements and related disclosures.
SEC Climate Disclosures. In March 2024, the SEC issued final rules to require disclosures about certain climate-related information
in registration statements and annual reports. In April 2024, the SEC issued an order to stay the rules pending the completion of judicial
review of multiple petitions challenging the rules. The rules will, if implemented as issued by the SEC, require disclosure of, among
other things, material climate-related risks, how the Partnership’s Board of Supervisors and management oversee and manage such risks,
and the actual and potential material impacts of such risks to the Partnership. The rules also require disclosure about material climate-
related targets and goals, greenhouse gas (“GHG”) emissions from operations owned or controlled (Scope 1) and purchased energy used
in owned or controlled operations (Scope 2), and the financial impact of severe weather events and other natural conditions. Currently,
it is uncertain whether the SEC’s new climate-related disclosure rules will withstand pending and future legal challenges. If the rules
are ultimately implemented, the Partnership will apply them prospectively with certain disclosures beginning in its fiscal 2026 annual
report. The Partnership is assessing the effect of these rules on its consolidated financial statements and related disclosures.
3.
Disaggregation of Revenue
The following table disaggregates revenue for each customer type. See Note 17, “Segment Information” for more information on
segment reporting wherein it is disclosed that the Partnership’s Propane, Fuel Oil and Refined Fuels and Natural Gas and Electricity
reportable segments generated approximately 87%, 6% and 2%, respectively, of the Partnership’s revenue from its reportable segments
for all periods presented. The propane segment contributes the majority of the Partnership’s revenue and the concentration of revenue
by customer type for the propane segment is not materially different from the consolidated revenue.
Year Ended
September 28,
September 30,
September 24,
2024
2023
2022
Retail
Residential
$
706,768
$
771,783
$
798,784
Commercial
372,828
393,482
435,015
Industrial
120,985
130,656
136,257
Government
61,396
65,489
66,035
Agricultural
36,568
40,971
45,259
Wholesale
28,627
26,813
20,115
Total revenues
$
1,327,172
$
1,429,194
$
1,501,465
The Partnership recognized $84,687, $64,508 and $75,149 of revenue during fiscal 2024, fiscal 2023 and fiscal 2022, respectively, for
annually billed tank rent, maintenance service contracts, fixed price contracts and budgetary programs where customer consideration
was received at the start of the contract period and which was included in contract liabilities as of the beginning of each respective
period. Contract assets of $3,901 and $4,844 relating to deliveries to customers enrolled in budgetary programs that exceeded billings
to those customers were included in accounts receivable as of September 28, 2024 and September 30, 2023, respectively.
4.
Investments in and Acquisitions and Dispositions of Businesses
On December 28, 2022, Suburban Renewable Energy acquired a platform of RNG production assets (the “RNG Acquisition”) from
Equilibrium Capital Group (“Equilibrium”), a leading sustainability-driven asset management firm.
F-16
The purchase price of $190,000 for the two operating facilities, along with potential contingent consideration primarily based upon the
future economic performance of the acquired RNG assets, consisted of the following:
Consideration paid at closing
$
110,348
Assumption of debt and accrued interest
81,717
Total
192,065
Less: estimated cash and working capital
(2,065)
Total purchase price
$
190,000
The consolidated balance sheets reflect the allocation of the purchase price to the assets acquired and liabilities assumed. The following
table summarizes the fair value of the assets acquired and liabilities assumed as of December 28, 2022:
Assets acquired:
Cash and cash equivalents
$
1,560
Accounts receivable
4,150
Other current assets
178
Current assets acquired
5,888
Property, plant & equipment
91,490
Other intangibles
48,024
Goodwill
31,759
Other assets
13,372
Total assets acquired
190,533
Liabilities assumed:
Accounts payable
$
(6,122)
Other current liabilities
(1,969)
Long-term debt
(65,776)
Other noncurrent liabilities
(6,318)
Total liabilities assumed
(80,185)
Total net assets acquired
$
110,348
The fair values assigned to the acquired tangible assets were derived using a combination of the income approach, the market approach
and the cost approach. Significant judgments used in valuing tangible assets include estimated reproduction or replacement cost, useful
lives of assets, estimated selling prices, costs to complete and reasonable profit. Included in Other noncurrent liabilities is the fair value
of the potential contingent consideration Equilibrium could earn based on a multiple of EBITDA and the monetization of environmental
attributes that will be measured during calendar years 2025 through 2027.
The fair values assigned to the acquired intangible assets were determined through the use of the income approach, specifically the relief
from royalty method, multi-period excess earnings method and the cost approach. The Partnership believes the assumptions are
representative of those a market participant would use in estimating fair value. The intangible assets represent customer relationships
and favorable supply contracts of $42,924 and $5,100, respectively, with a weighted average useful life of approximately 12 years. The
goodwill generated from this acquisition will be deductible for federal income tax purposes, and was reduced by $500 following the
initial preliminary allocation for cash received from Equilibrium associated with the RNG Acquisition.
The following table presents unaudited pro forma combined financial information as if the aforementioned acquisition had occurred on
September 26, 2021, the first day of the Partnership’s 2022 fiscal year:
Year Ended
September 30,
September 24,
2023
2022
Revenues
$
1,433,124
$
1,518,982
Net income
113,644
116,838
This unaudited pro forma financial information does not include anticipated changes in market approach or synergies expected from
operating the acquired facilities under the Partnership’s oversight. Accordingly, the pro forma results are not necessarily indicative of
either future results of operations or results that might have been achieved had the acquisition been completed by September 26, 2021.
For fiscal 2024 and 2023, transaction costs directly related to the acquisition included in the pro forma combined results were $0 and
$4,695, respectively.
F-17
Suburban Renewable Energy owns a 25% equity stake in Independence Hydrogen, Inc. (“IH”) based in Ashburn, Virginia. IH is a
veteran-owned and operated, privately held company developing a gaseous hydrogen ecosystem to deliver locally sourced hydrogen to
local markets, with a primary focus on material handling and backup power applications. During fiscal 2024, the Operating Partnership
purchased a secured convertible note issued by IH.
During the third quarter of fiscal 2022, Suburban Renewable Energy announced an agreement to construct, own and operate a new
biodigester system with Adirondack Farms, a family dairy farm located in Clinton County, New York, for the production of RNG.
Construction of the assets began during the first quarter of fiscal 2023, and is expected to be completed during the second half of calendar
2025.
The Operating Partnership owns a 38% equity stake in Oberon Fuels, Inc. (“Oberon”) based in San Diego, California and has also
purchased certain secured convertible notes issued by Oberon. Oberon, a development-stage producer of low-carbon, renewable
dimethyl ether (“rDME”) transportation fuel, is focused on the research and development of practical and affordable pathways to zero-
emission transportation through its proprietary production process. Oberon’s rDME fuel is a low-carbon, zero-soot alternative to
petroleum diesel, and when blended with propane can significantly reduce the carbon intensity of propane. Additionally, rDME is a
carrier for hydrogen, making it easy to deliver this renewable fuel for the growing hydrogen fuel cell vehicle industry. The Operating
Partnership purchased secured convertible notes issued by Oberon during each of fiscal 2024, fiscal 2023 and fiscal 2022.
These strategic investments were made to support the Partnership’s Go Green with Suburban Propane corporate pillar, which focuses
on advocating for the clean-burning and versatile nature of propane and renewable propane as a solution to a lower carbon future and
investing in innovative, renewable energy alternatives to lower GHG emissions. The investments in IH and Oberon are being accounted
for under the equity method of accounting and were included in “Other assets” within the consolidated balance sheets, and the
Partnership’s equity in their losses were included in “Other, net” within the consolidated statements of operations.
On February 17, 2022, the Operating Partnership sold certain assets and operations in a non-strategic market of its propane segment for
$850, resulting in a gain of $363 that was recognized during the second quarter of fiscal 2022. The corresponding net assets and results
of operations were not material to the Partnership’s consolidated results of operations, financial position and cash flows.
Pursuant to the Partnership’s strategic growth initiatives, the Operating Partnership acquired the propane assets and operations of various
propane retailers in each of the last three fiscal years, as well as made additional investments in Oberon and IH, as summarized below.
The purchase price allocations and results of operations of the acquired businesses were not material to the Partnership’s consolidated
financial position and statement of operations.
Fiscal Year
Total consideration (1)
2024
$
26,361
(2)
2023
$
19,651
(3)
2022
$
26,707
(4)
(1)
Total consideration includes non-compete consideration, which will be paid over the respective non-compete periods subject
to compliance with the terms of the respective agreements, investments in the Partnership's equity-method investees, and
excludes working capital adjustments.
(2)
Includes three acquisitions of propane retailers located in Florida, Nevada, and Texas.
(3)
Includes one acquisition of a propane retailer located in Washington.
(4)
Includes one acquisition of a propane retailer located in New Mexico.
5.
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.
F-18
The following summarizes the quarterly distributions per Common Unit declared and paid in respect of each of the quarters in the last
three fiscal years:
Fiscal
Fiscal
Fiscal
2024
2023
2022
First Quarter
$
0.3250
$
0.3250
$
0.3250
Second Quarter
0.3250
0.3250
0.3250
Third Quarter
0.3250
0.3250
0.3250
Fourth Quarter
0.3250
0.3250
0.3250
6.
Selected Balance Sheet Information
Cash, Cash Equivalents and Restricted Cash. Restricted cash consists of amounts deposited in various bank accounts held by a
trustee, as required for operating, maintenance and debt service purposes, all of which is stipulated in the loan agreement under the
indenture to the Green Bonds. The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported
within the consolidated balance sheets that aggregates to the total shown on the consolidated statements of cash flows:
As of
September 28, September 30,
2024
2023
Cash and cash equivalents
$
3,219 $
3,514
Restricted cash included in other current assets
9,355
2,392
Restricted cash included in other assets (noncurrent)
7,940
8,168
Total cash, cash equivalents, and restricted cash shown on the
consolidated statements of cash flows
$
20,514 $
14,074
Inventories. Inventories consist of the following:
As of
September 28, September 30,
2024
2023
Propane, fuel oil and refined fuels and natural gas
$
52,284 $
58,565
Appliances
3,146
3,263
$
55,430 $
61,828
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. Property, plant and equipment consist of the following:
As of
September 28, September 30,
2024
2023
Land and improvements
$
195,601 $
195,179
Buildings and improvements
133,019
130,373
Transportation equipment
26,306
23,145
Storage facilities
122,308
120,948
Machinery and equipment
77,841
77,207
Tanks and cylinders
965,187
943,860
Computer software
54,988
54,458
Construction in progress
30,806
9,488
1,606,056
1,554,658
Less: accumulated depreciation
(952,071)
(908,604 )
$
653,985 $
646,054
Depreciation expense for fiscal 2024, 2023 and 2022 amounted to $54,681, $51,676 and $51,276, respectively.
F-19
7.
Goodwill and Other Intangible Assets
The Partnership’s fiscal 2024 and fiscal 2023 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:
Propane
Fuel oil and
refined fuels
Natural gas
and
electricity
All other
Total
Balance as of September 30, 2023
Goodwill
$ 1,105,179 $
10,900
$
7,900
$
31,259
$ 1,155,238
Accumulated adjustments
—
(6,462 )
—
—
(6,462)
$ 1,105,179 $
4,438
$
7,900
$
31,259
$ 1,148,776
Fiscal 2024 Activity
Goodwill acquired (1)
$
2,476 $
—
$
—
$
—
$
2,476
Balance as of September 28, 2024
Goodwill
$ 1,107,655 $
10,900
$
7,900
$
31,259
$ 1,157,714
Accumulated adjustments
—
(6,462 )
—
—
(6,462)
$ 1,107,655 $
4,438
$
7,900
$
31,259
$ 1,151,252
Other intangible assets consist of the following:
As of
September 28, September 30,
2024
2023
Customer relationships (1)
$
577,486 $
572,347
Non-compete agreements (1)
41,955
40,840
Other
7,067
7,067
626,508
620,254
Less: accumulated amortization
Customer relationships
(513,053)
(502,436)
Non-compete agreements
(36,000)
(35,011)
Other
(2,943)
(2,254)
(551,996)
(539,701)
$
74,512 $
80,553
(1) Reflects the impact from acquisitions (See Note 4).
Aggregate amortization expense related to other intangible assets for fiscal 2024, 2023 and 2022 was $12,294, $10,906 and $7,572,
respectively. Aggregate amortization expense for each of the five succeeding fiscal years related to other intangible assets held as of
September 28, 2024 is estimated as follows: 2025: $9,512; 2026: $8,756; 2027: $8,756; 2028: $8,358; and 2029: $7,454.
8.
Leases
The Partnership leases certain property, plant and equipment, including portions of its vehicle fleet, for various periods under
noncancelable leases, all of which were determined to be operating leases. The Partnership determines if an agreement contains a lease
at inception based on the Partnership’s right to the economic benefits of the leased assets and its right to direct the use of the leased
asset. Right-of-use assets represent the Partnership’s right to use an underlying asset, and right-of-use liabilities represent the
Partnership’s obligation to make lease payments arising from the lease. Right-of-use assets and liabilities are recognized at the lease
commencement date based on the present value of the lease payments over the lease term. As most of the Partnership’s leases do not
provide an implicit rate, the Partnership uses its estimated incremental borrowing rate based on the information available at the
commencement date, adjusted for the lease term, to determine the present value of the lease payments. This rate is calculated based on
a collateralized rate for the specific leasing activities of the Partnership.
Some leases include one or more options to renew at the Partnership’s discretion, with renewal terms that can extend the lease from one
to fifteen additional years. The renewal options are included in the measurement of the right-of-use assets and lease liabilities if the
Partnership is reasonably certain to exercise the renewal options. Short-term leases are leases having an initial term of twelve months
F-20
or less. The Partnership recognizes expenses for short-term leases on a straight-line basis and does not record a lease asset or lease
liability for such leases.
The Partnership has residual value guarantees associated with certain of its operating leases, related primarily to transportation
equipment. See Note 15, “Guarantees” for more information.
The Partnership does not have any material lease obligations that were signed, but not yet commenced as of September 28, 2024.
Quantitative information on the Partnership’s lease population for fiscal 2024 is as follows:
Year Ended
September 28,
2024
September 30,
2023
Lease expense
$
44,264
$
41,733
Other information:
Cash payments for operating leases
44,456
42,062
Right-of-use assets obtained in exchange for new operating
lease liabilities
28,786
41,742
Weighted-average remaining lease term
5.5 years
5.6 years
Weighted-average discount rate
6.2%
5.9%
The following table summarizes future minimum lease payments under non-cancelable operating leases as of September 28, 2024:
Fiscal Year
Operating Leases
2025
$
42,971
2026
37,440
2027
26,926
2028
21,417
2029
14,891
2030 and thereafter
23,450
Total future minimum lease payments
$
167,095
Less: interest
(27,682)
Total lease obligations
$
139,413
9.
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, “Partnership Organization and Formation,” the earnings of the Corporate Entities are subject to U.S. corporate
level 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 (with
the exception of certain net operating loss carryforwards (“NOLs”) that arose after 2017) 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 that are 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.
NOLs generated by the Corporate Entities beginning in 2018 may be carried forward indefinitely. The Corporate Entities generated a
taxable loss during the 2022 and 2021 tax years, which resulted in a $295 and $638 deferred tax benefit recorded during the first quarter
of fiscal 2023 and fiscal 2022, respectively.
F-21
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 28, September 30, September 24,
2024
2023
2022
Current
Federal
$
6
$
8
$
10
State and local
728
955
1,057
734
963
1,067
Deferred
—
(295)
(638)
$
734
$
668
$
429
The provision for income taxes differs from income taxes computed at the U.S. federal statutory rate as a result of the following:
Year Ended
September 28, September 30, September 24,
2024
2023
2022
Income tax provision at federal statutory tax rate
$
15,731
$
26,128
$
29,429
Impact of Partnership income not subject to
federal income taxes
(20,245)
(31,604)
(30,851)
Permanent differences
135
104
131
Change in valuation allowance
4,725
6,721
1,174
State income taxes
449
(552)
717
Other
(61)
(129)
(171)
Provision for income taxes - current and deferred
$
734
$
668
$
429
The components of net deferred taxes and the related valuation allowance using currently enacted tax rates are as follows:
Year Ended
September 28, September 30,
2024
2023
Deferred tax assets:
Net operating loss carryforwards
$
55,785 $
48,910
Allowance for doubtful accounts
272
246
Inventory
873
766
Deferred revenue
486
519
Other accruals
4,026
2,717
Total deferred tax assets
61,442
53,158
Deferred tax liabilities:
Intangible assets
278
208
Property, plant and equipment
8,949
5,460
Total deferred tax liabilities
9,227
5,668
Net deferred tax assets
52,215
47,490
Valuation allowance
(50,888)
(46,163 )
Net deferred tax assets
$
1,327 $
1,327
F-22
10.
Long-Term Borrowings
Long-term borrowings consist of the following:
As of
September 28,
September 30,
2024
2023
5.875% senior notes, due March 1, 2027
$
350,000 $
350,000
5.00% senior notes, due June 1, 2031
650,000
650,000
5.50% Green Bonds due October 1, 2028 through October 1, 2033,
net of unaccreted fair value adjustment of $12,478 and $13,879
68,167
66,766
Revolving Credit Facility, due March 15, 2029
151,000
132,000
Subtotal
1,219,167
1,198,766
Less: unamortized debt issuance costs
(8,841)
(10,556)
$ 1,210,326 $
1,188,210
Senior Notes
2027 Senior Notes
On February 14, 2017, the Partnership and its 100%-owned subsidiary, Suburban Energy Finance Corp., completed a public offering of
$350,000 in aggregate principal amount of 5.875% senior notes due March 1, 2027 (the “2027 Senior Notes”). The 2027 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 2027 Senior Notes, along with borrowings under the Revolving Credit Facility, were used to repurchase, satisfy
and discharge all of the Partnership’s then-outstanding 7.375% senior notes due in 2021.
The 2027 Senior Notes are redeemable, at the Partnership’s option, in whole or in part, at any time on or after March 1, 2022, 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
Percentage
2024
100.979%
2025 and thereafter
100.000%
2031 Senior Notes
On May 24, 2021, the Partnership and its 100%-owned subsidiary, Suburban Energy Finance Corp., completed a private offering of
$650,000 in aggregate principal amount of 5.0% senior notes due June 1, 2031 (the “2031 Senior Notes”) to “qualified institutional
buyers,” as defined in Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”), and non-U.S. persons outside the
United States under Regulation S under the Securities Act. The 2031 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 2031 Senior Notes, along with
borrowings under the Revolving Credit Facility, were used to repurchase, satisfy and discharge all of the Partnership’s then-outstanding
5.5% senior notes due in 2024 and 5.75% senior notes due in 2025.
The 2031 Senior Notes are redeemable, at the Partnership’s option, in whole or in part, at any time on or after June 1, 2026, in each case
at the redemption prices described below, together with any accrued and unpaid interest to the date of the redemption.
Year
Percentage
2026
102.500%
2027
101.667%
2028
100.833%
2029 and thereafter
100.000%
F-23
The Partnership’s obligations under the 2027 Senior Notes and 2031 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
indentures governing the terms of the Senior Notes, 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.
Green Bonds
On December 28, 2022, the Partnership assumed the loan agreement under the Indentures of Trust, issued by The Industrial Development
Authority of the County of Pinal (“Green Bonds”) from Equilibrium in conjunction with the RNG Acquisition. The proceeds of the
Green Bonds, which bear interest at 5.5%, were loaned to and used by Equilibrium to construct the RNG production facility in Arizona
and are secured by all of the assets at that location. The Green Bonds have a par value of $80,645 and require semi-annual interest
payments in April and October. Principal payments begin on October 1, 2028 and continue annually through October 1, 2033. The
Green Bonds were initially recorded at fair value at the time of the RNG Acquisition and are being accreted to par value over the term
of the bonds using the effective interest method.
Credit Agreement
On March 15, 2024, the Partnership and the Operating Partnership entered into a Fourth Amended and Restated Credit Agreement (the
“Credit Agreement”) that provides for a $500,000 revolving credit facility (the “Revolving Credit Facility”), of which $151,000 and
$132,000 was outstanding as of September 28, 2024 and September 30, 2023, respectively. The Revolving Credit Facility matures on
the earlier of (i) the date that is ninety-one (91) days prior to maturity of the 2027 Senior Notes (unless the notes have been refinanced
prior to such date) and (ii) March 15, 2029. At the time of the execution of the Credit Agreement, $187,900 was outstanding under the
Operating Partnership’s revolving credit facility of the previous credit agreement, which was rolled into the Revolving Credit Facility
under the Credit Agreement. The Credit Agreement amends and restates the previous amended and restated credit agreement dated
March 5, 2020. 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. In connection with the execution of the Credit Agreement,
the Partnership recognized a non-cash charge of $215 to write-off a portion of unamortized debt origination costs of the previous credit
agreement.
The Credit Agreement contains certain restrictive and affirmative covenants applicable to the Operating Partnership, its subsidiaries and
the Partnership, as well as certain financial covenants, including (a) requiring the Partnership’s Consolidated Interest Coverage Ratio,
as defined in the Credit Agreement, 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 Credit Agreement, of the Partnership from being greater than 5.75 to 1.0, and (c) prohibiting the Senior
Secured Consolidated Leverage Ratio, as defined in the Credit Agreement, of the Operating Partnership from being greater than 3.25 to
1.0 as of the end of any fiscal quarter.
The Partnership and certain subsidiaries of the Operating Partnership act as guarantors with respect to the obligations of the Operating
Partnership under the Credit Agreement pursuant to the terms and conditions set forth therein. The obligations under the 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.
As of September 28, 2024, borrowings under the Revolving Credit Facility bear interest at prevailing interest rates based upon, at the
Operating Partnership’s option, SOFR plus the Applicable Rate, or the base rate, defined as the higher of the Federal Funds Rate plus
½ of 1%, the administrative agent bank’s prime rate, or SOFR plus 1%, plus in each case the Applicable Rate. The Applicable Rate is
dependent upon the Partnership’s Total Consolidated Leverage Ratio. As of September 28, 2024, the weighted average interest rate for
borrowings under the Revolving Credit Facility was approximately 7.80%. The interest rate and the Applicable Rate will be reset
following the end of each calendar quarter.
As of September 28, 2024, the Partnership had standby letters of credit issued under the Revolving Credit Facility of $30,887 which
expire periodically through April 30, 2025.
F-24
The Credit Agreement and the Senior Notes both contain various restrictive and affirmative covenants applicable to the Operating
Partnership, its subsidiaries 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 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 Credit Agreement
as of September 28, 2024.
Debt origination costs representing the costs incurred in connection with the placement of, and the subsequent amendment to, the Credit
Agreement are capitalized within other assets and amortized on a straight-line basis over the term of the Credit Agreement. During
fiscal 2024, the Partnership recognized a charge of $215 to write-off unamortized debt origination costs and capitalized $3,744 in costs
incurred in connection with the amendment to the Credit Agreement. Debt origination costs associated with the Partnership’s Senior
Notes are reflected as a direct deduction from the carrying amount of such debt and amortized on a straight-line basis over the terms of
the respective Senior Notes. Other assets at September 28, 2024 and September 30, 2023 include debt origination costs associated with
the Credit Agreement with a net carrying amount of $3,237 and $903, respectively.
The aggregate amounts of long-term debt maturities subsequent to September 28, 2024 are as follows: fiscal 2025: $-0-; fiscal 2026: $-
0-; fiscal 2027: $501,000; fiscal 2028: $-0-; fiscal 2029: $11,707; and thereafter: $718,938.
11.
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 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.
Restricted Unit Plan. At the Partnership’s Tri-Annual Meeting held on May 15, 2018, the Unitholders approved and the Partnership
adopted the Suburban Propane Partners, L.P. 2018 Restricted Unit Plan (the “Restricted Unit Plan”) authorizing the issuance of up to
1,800,000 Common Units to executives, managers and other employees and members of the Board of Supervisors of the Partnership.
The Restricted Unit Plan was amended and restated to authorize the issuance of an additional 1,725,000 and 2,650,000 Common Units
by approval of the Unitholders at the Partnership’s Tri-Annual Meetings held on May 18, 2021 and May 21, 2024, respectively, for a
total of 6,175,000 Common Units. Unless otherwise determined by the Compensation Committee of the Partnership’s Board of
Supervisors (the “Compensation Committee”) on or before the grant date, one-third of all outstanding awards under the Restricted Unit
Plan will vest on each of the first three anniversaries of the award grant date. Participants in the Restricted Unit Plan 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 each 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 Plan. 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 Plan:
Weighted Average
Grant Date Fair
Units
Value Per Unit
Outstanding September 25, 2021
1,231,863 $
15.26
Awarded
884,658
12.97
Forfeited
(12,845)
(13.88)
Vested (1)
(587,447)
(16.32)
Outstanding September 24, 2022
1,516,229
13.52
Awarded
571,732
13.45
Forfeited
(15,552)
(13.15)
Vested (1)
(706,047)
(14.59)
Outstanding September 30, 2023
1,366,362
12.94
Awarded
466,625
14.77
Forfeited
(1,470)
(18.44)
Vested (1)
(731,239)
(13.47)
Outstanding September 28, 2024
1,100,278 $
13.37
F-25
(1)
During fiscal 2024, 2023 and 2022, the Partnership withheld 180,787, 171,840 and 138,039 Common Units, respectively, from
participants for income tax withholding purposes for those executive officers of the Partnership whose shares of restricted units
vested during the period.
As of September 28, 2024, unrecognized compensation cost related to unvested restricted units awarded under the Restricted Unit Plan
amounted to $2,300. 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 Plan for fiscal 2024, 2023 and 2022 was $8,191, $8,260 and $11,253,
respectively.
Phantom Equity Plan. At its November 8, 2022 meeting, the Compensation Committee adopted the Phantom Equity Plan (the “PEP”)
to incentivize behaviors that will lead to the creation of long-term value for the Partnership’s Unitholders by functioning as a cash-
settled corollary plan to the Partnership’s Restricted Unit Plan. The executive officers of the Partnership, the members of the Board, and
other employees of the Partnership are eligible for awards of phantom units under the PEP. Unless otherwise stipulated by the
Compensation Committee, the standard vesting schedule for awards under the PEP will be one-third of each award on each of the first
three anniversaries of the award grant date, subject to continuous employment or service from the grant date through the applicable
payment date. Unvested awards are subject to forfeiture in certain circumstances, as defined in the PEP document and the applicable
award agreements. Upon vesting, phantom units are automatically converted into cash equal to the average of the highest and lowest
trading prices of the Partnership’s Common Units on the vesting date.
Compensation expense, which includes adjustments to previously recognized compensation expense for current period changes in the
fair value of unvested awards, for fiscal 2024 and fiscal 2023 was $7,297 and $3,668, respectively. As of September 28, 2024 and
September 30, 2023, the Partnership had a liability within accrued employment and benefit costs (or other liabilities, as applicable) of
$9,019 and $3,668, respectively.
Distribution Equivalent Rights Plan. On January 17, 2017, the Partnership adopted the Distribution Equivalent Rights Plan (the “DER
Plan”), as amended on November 8, 2022, which gives the Compensation Committee discretion to award distribution equivalent rights
(“DERs”) to executive officers of the Partnership. Once awarded, DERs entitle the grantee to a cash payment each time the Board of
Supervisors declares a cash distribution on the Partnership’s Common Units, which cash payment will be equal to an amount calculated
by multiplying the number of unvested restricted units and unvested phantom units which are held by the grantee on the record date of
the distribution, by the amount of the declared distribution per Common Unit. Compensation expense recognized under the DER Plan
was $1,475, $1,344 and $1,189 for fiscal 2024, 2023 and 2022, respectively.
Long-Term Incentive Plan. On November 10, 2020, the Partnership adopted the 2021 Long-Term Incentive Plan (the “LTIP”). The
LTIP is a non-qualified, unfunded, long-term incentive plan for executive officers and key employees that provides for payment, in the
form of cash, of an award of equity-based compensation at the end of a three-year performance period. The LTIP document governs the
terms and conditions of the outstanding awards with the level of compensation earned being based on the Partnership’s average
distributable cash flow over the three-year measurement period. The level of compensation earned under the fiscal 2021 award was
evaluated using two separate measurement components: (i) 75% weight based on the level of average distributable cash flow of the
Partnership over the three-year measurement period; and (ii) 25% weight based on the achievement of certain operating and strategic
objectives, set by the Compensation Committee, over that award’s three-year measurement period. The level of compensation earned
under the fiscal 2022 award and awards thereafter, is also evaluated using two separate measurement components: (i) 50% weight based
on the level of average distributable cash flow of the Partnership over the three-year measurement period; and (ii) 50% weight based on
the achievement of certain operating and strategic objectives, set by the Compensation Committee for that award’s three-year
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 2024, 2023 and 2022 was $3,573, $3,771, and $6,112, respectively. The cash payout in fiscal
2024, which related to the fiscal 2021 award, was $4,405; the cash payout in fiscal 2023, which related to the fiscal 2020 award, was
$3,129; and the cash payout in fiscal 2022, which related to the fiscal 2019 award, was $3,985.
12.
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 represent a match of $0.50 on up to 6% of eligible
compensation contributed with the opportunity to earn an additional performance-based matching contribution if certain annual fiscal
performance targets are achieved. These contribution costs were $4,280, $4,493 and $4,059 for fiscal 2024, 2023 and 2022, respectively.
F-26
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. Contributions of $4,000, $4,000 and
$3,330 were made by the Partnership in fiscal 2024, 2023 and 2022, respectively. In fiscal 2010, the Internal Revenue Service 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 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. Partnership employees hired prior to July
1993 and who retired prior to January 1998 are eligible for life insurance benefits if they reached a specified retirement age while
working for the Partnership. Effective January 1, 2017, the Partnership terminated postretirement life insurance benefits to all retirees
that retired after December 31, 1997. Effective March 31, 1998, the Partnership froze participation in its postretirement health care
benefit plan, with no new retirees eligible to participate in the plan. 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.
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 2024 and 2023 and a statement of the funded status for
F-27
both years. Under the Partnership’s cash balance defined benefit pension plan, the accumulated benefit obligation and the projected
benefit obligation are the same.
Pension Benefits
Retiree Health and Life
Benefits
2024
2023
2024
2023
Reconciliation of benefit obligations:
Benefit obligation at beginning of year
$
69,372
$
75,851
$
2,871
$
3,712
Interest cost
3,129
3,306
143
166
Actuarial loss (gain)
2,012
(1,670)
(164)
(463)
Lump sum benefits paid
(3,917)
(2,639)
—
—
Ordinary benefits paid
(5,191)
(5,476)
(322)
(412)
Prior service credits
—
—
—
(132)
Benefit obligation at end of year
$
65,405
$
69,372
$
2,528
$
2,871
Reconciliation of fair value of plan assets:
Fair value of plan assets at beginning of year
$
51,340
$
55,091
$
—
$
—
Actual return on plan assets
6,526
364
—
—
Employer contributions
4,000
4,000
322
412
Lump sum benefits paid
(3,917)
(2,639)
—
—
Ordinary benefits paid
(5,191)
(5,476)
(322)
(412)
Fair value of plan assets at end of year
$
52,758
$
51,340
$
—
$
—
Funded status:
Funded status at end of year
$
(12,647) $
(18,032) $
(2,528) $
(2,871)
Amounts recognized in consolidated balance sheets
consist of:
Net amount recognized at end of year
$
(12,647) $
(18,032) $
(2,528) $
(2,871)
Less: current portion
—
—
342
422
Noncurrent benefit liability
$
(12,647) $
(18,032) $
(2,186) $
(2,449)
Amounts not yet recognized in net periodic benefit cost
and included in accumulated other comprehensive
income (loss):
Actuarial net (loss) gain
$
(9,809) $
(15,190) $
3,556
$
4,133
Prior service credits
—
—
106
390
Net amount recognized in accumulated other
comprehensive (loss) income
$
(9,809) $
(15,190) $
3,662
$
4,523
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 five 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%.
The following table presents the actual allocation of assets held in trust as of:
September 28,
September 30,
2024
2023
Fixed income securities
85%
85%
Equity securities
15%
15%
100%
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 assets of the defined benefit pension plan have no significant
concentration of risk and there are no restrictions on these investments.
F-28
The following table describes the measurement of the Partnership’s pension plan assets by asset category as of:
September 28,
September 30,
2024
2023
Short term investments (1)
$
1,466 $
1,474
Equity securities: (1) (2)
Domestic
2,855
2,766
International
4,975
4,781
Fixed income securities (1) (3)
43,462
42,319
$
52,758
$
51,340
(1)
Includes funds which are not publicly traded and are valued at the net asset value of the units provided by the fund issuer.
(2)
Includes funds which invest primarily in a diversified portfolio of publicly traded U.S. and Non-U.S. common stock.
(3)
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 $4,000 to the defined benefit
pension plan during fiscal 2025. Estimated future benefit payments for both pension and retiree health and life benefits are as follows:
Pension
Retiree Health and
Fiscal Year
Benefits
Life Benefits
2025
$
18,845
$
342
2026
6,185
299
2027
5,752
259
2028
5,347
222
2029
5,036
188
2030 through 2034
19,107
552
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 2025 will elect to receive a benefit payment in fiscal 2025. 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.
Effect on Operations. The following table provides the components of net periodic benefit costs included in operating expenses for
fiscal 2024, 2023 and 2022:
Pension Benefits
Retiree Health and Life Benefits
2024
2023
2022
2024
2023
2022
Interest cost
$
3,129
$
3,306
$
2,459
$
143
$
166
$
81
Expected return on plan assets
(1,260)
(1,355 )
(1,392)
—
—
—
Amortization of prior service credit
—
—
—
(284)
(498 )
(498)
Settlement charge
638
—
840
—
—
—
Recognized net actuarial loss (gain)
1,489
1,927
2,467
(741)
(775 )
(725)
Net periodic benefit costs
$
3,996
$
3,878
$
4,374
$
(882) $
(1,107 ) $
(1,142)
During fiscal 2024, fiscal 2023 and fiscal 2022, lump sum pension settlement payments to either terminated or retired individuals
amounted to $3,917, $2,639 and $3,332, respectively. The settlement threshold (combined service and interest costs of net periodic
pension cost) for these three years were $3,129, $3,306 and $2,459, respectively. In fiscal 2024 and fiscal 2022, lump sum pension
settlement payments exceeded the respective settlement thresholds, which required the Partnership to recognize non-cash settlement
charges of $638 and $840, respectively. The non-cash charges were required to accelerate recognition of a portion of cumulative
unamortized losses in the defined benefit pension plan.
F-29
Actuarial Assumptions. The assumptions used in the measurement of the Partnership’s benefit obligations as of September 28, 2024
and September 30, 2023 are shown in the following table:
Pension Benefits
Retiree Health and Life
Benefits
2024
2023
2024
2023
Weighted-average discount rate
4.625%
5.500%
4.250%
5.375%
Average rate of compensation increase
n/a
n/a
n/a
n/a
The assumptions used in the measurement of net periodic pension benefit and postretirement benefit costs for fiscal 2024, 2023 and
2022 are shown in the following table:
Pension Benefits
Retiree Health and Life Benefits
2024
2023
2022
2024
2023
2022
Weighted-average discount rate
5.500%
5.125 %
2.500%
5.375%
4.875%
1.750%
Average rate of compensation increase
n/a
n/a
n/a
n/a
n/a
n/a
Weighted-average expected long-term
rate of return on plan assets
2.950%
2.950 %
2.150%
n/a
n/a
n/a
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.
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 28, 2024 nor the aggregate of service and interest components of net periodic
postretirement benefit expense for fiscal 2024. 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 acquisition of the retail propane assets of Inergy, the Partnership contributes 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, the Partnership is responsible with the other participating employers for any
plan underfunding. As of September 28, 2024 and September 30, 2023, the Partnership’s estimated obligation for MEPP established
withdrawals was $20,026 and $21,398, 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 a 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 a 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.
F-30
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 years ended September 28, 2024, September 30, 2023 and September 24,
2022 are shown below.
PPA Zone Status
Contributions
Contributions
greater than
5% of
Expiration
Pension Fund
EIN/Pension
Plan Number
2024
2023
FIP/RP
Status
2024
2023
2022
Total Plan
Contributions
date of
CBA
Local 282 Pension Trust (1)
11-6245313
Green
Green
n/a
$ 269
$ 301
$ 295
No
August 2029
Western Conference of Teamsters
Pension Plan (1)
91-6145047
Green
Green
n/a
29
18
19
No
February 2024
$ 298
$ 319
$ 314
(1)
Based on most recent available valuation information for plan year ended December 2023.
Additionally, the Partnership contributes to certain multi-employer plans that provide health and welfare benefits and defined annuity
plans. Contributions to those plans were $892, $881 and $1,045 for fiscal 2024, 2023 and 2022, respectively.
13.
Financial Instruments and Risk Management
Cash, Cash Equivalents and Restricted Cash. The Partnership considers all highly liquid instruments purchased with an original
maturity of three months or less to be cash equivalents. In accordance with the indenture, as amended, and loan agreement, as amended,
governing the Green Bonds assumed in the RNG Acquisition (see Notes 4 and 10), the Partnership is required to maintain certain funds
in various accounts that are held with a third-party trustee for debt service and other purposes. The amounts deposited in those accounts
is considered Restricted Cash and is reported within other current assets (or other assets, as applicable). The balance classified as short-
term included accounts for which the cash will be used within one year, and are related to interest payments as well as operating and
maintenance activities for the RNG facility in Arizona. The balance classified as long-term represented cash held in a debt service fund
for future debt repayments on the Green Bonds for which the first debt redemption payment is due on October 1, 2028. Refer to Note
6, “Selected Balance Sheet Information” for a reconciliation of cash, cash equivalents, and restricted cash. The carrying amount
approximates fair value 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.
The following summarizes the fair value of the Partnership’s derivative instruments and their location in the consolidated balance sheets
as of September 28, 2024 and September 30, 2023, respectively:
As of September 28, 2024
As of September 30, 2023
Asset Derivatives
Location
Fair Value
Location
Fair Value
Derivatives not designated as hedging
instruments:
Commodity-related derivatives
Other current assets
$
4,122
Other current assets
$
18,538
Other assets
769
Other assets
8
$
4,891
$
18,546
Liability Derivatives
Location
Fair Value
Location
Fair Value
Derivatives not designated as hedging
instruments:
Commodity-related derivatives
Other current liabilities
$
5,744
Other current liabilities
$
2,427
Other liabilities
—
Other liabilities
4,784
$
5,744
$
7,211
F-31
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:
Fair Value Measurement Using Significant
Unobservable Inputs (Level 3)
Fiscal 2024
Fiscal 2023
Assets
Liabilities
Assets
Liabilities
Beginning balance of over-the-counter options
$
—
$
806
$
222
$
3,408
Beginning balance realized during the period
—
(806)
(194)
(2,475)
Contracts purchased during the period
1,475
193
—
—
Change in the fair value of outstanding contracts
—
—
(28)
(127)
Ending balance of over-the-counter options
$
1,475
$
193
$
—
$
806
As of September 28, 2024 and September 30, 2023, the Partnership’s outstanding commodity-related derivatives had a weighted average
maturity of approximately three and six months, respectively.
The effect of the Partnership’s derivative instruments on the consolidated statements of operations for fiscal 2024, 2023 and 2022 are
as follows:
Unrealized Gains (Losses) Recognized in Income
Derivatives Not Designated as Hedging Instruments
Location
Amount
Commodity-related derivatives:
Fiscal 2024
Cost of products sold
$
(14,598 )
Fiscal 2023
Cost of products sold
$
(3,671 )
Fiscal 2022
Cost of products sold
$
(27,929 )
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:
As of September 28, 2024
Net amounts
presented in the
Gross amounts
Effects of netting
balance sheet
Asset Derivatives
Commodity-related derivatives
$
13,649
$
(8,758) $
4,891
$
13,649
$
(8,758) $
4,891
Liability Derivatives
Commodity-related derivatives
$
14,502
$
(8,758) $
5,744
$
14,502
$
(8,758) $
5,744
As of September 30, 2023
Net amounts
presented in the
Gross amounts
Effects of netting
balance sheet
Asset Derivatives
Commodity-related derivatives
$
35,339
$
(16,793) $
18,546
$
35,339
$
(16,793) $
18,546
Liability Derivatives
Commodity-related derivatives
$
24,004
$
(16,793) $
7,211
$
24,004
$
(16,793) $
7,211
The Partnership had $6,439 and $-0- posted cash collateral as of September 28, 2024 and September 30, 2023, respectively, with its
brokers for outstanding commodity-related derivatives.
F-32
Concentrations. The Partnership’s principal customers are residential and commercial end users of propane and fuel oil and refined
fuels served by approximately 700 locations in 42 states. No single customer accounted for more than 10% of revenues during fiscal
2024, 2023 or 2022 and no concentration of receivables exists as of September 28, 2024 or September 30, 2023.
During fiscal 2024, Energy Transfer LP and Targa Liquids Marketing, provided approximately 30% and 15% 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
2024. 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 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, Senior Notes and Green Bonds. 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
2027 Senior Notes and 2031 Senior Notes was $350,056 and $606,099, respectively, as of September 28, 2024. The fair value of the
Green Bonds is based upon a valuation model (a Level 3 input), which was $72,264 as of September 28, 2024.
14.
Commitments and Contingencies
Commitments. The Partnership leases certain property, plant and equipment, including portions of its vehicle fleet, for various periods
under noncancelable leases.
Contingencies
Accrued Insurance. The Partnership is self-insured for general and product, workers’ compensation and automobile liabilities up to
predetermined amounts above which third party insurance applies. As of September 28, 2024 and September 30, 2023, the Partnership
had accrued liabilities of $58,070 and $61,182, respectively, representing the total estimated losses for known and anticipated or
unasserted general and product, workers’ compensation and automobile claims. 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 $14,340 and $15,448 as of September 28,
2024 and September 30, 2023, 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.
The State of New York amended Section 349-d of the New York General Business Law (“GBL”) effective on March 18, 2024, to require
that energy service companies that operate in the state, such as AES in connection with its natural gas and electricity business, first
obtain written consent from the customer before any change in commodity prices can be charged to the customer. To date, the amended
statute has not had a material negative impact on AES, but the Partnership continues to assess the impact that the GBL amendment may
have in the future on its natural gas and electricity business. In addition, the New York Public Service Commission (“NY PSC”) has
issued notice of rulemaking for amendments to its Uniform Business Practices (“UBP”), that will apply to AES and other energy supply
companies that operate in the state. The proposed UBP amendments, if adopted, will require AES to provide notice each month to its
customers that includes a historical comparison between the rates charged by AES and what the customer would have paid had they
remained with their existing utility. The Partnership anticipates that the additional notice requirements mandated by the NY PSC could
have a negative effect on customer retention for energy supply companies.
15.
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 2032. 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,
F-33
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 $42,708 as of September 28, 2024. The
fair value of residual value guarantees for outstanding operating leases was de minimis as of September 28, 2024 and September 30,
2023.
16.
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 28, 2024, September 30, 2023 and September 24, 2022:
Year Ended
September 28, September 30, September 24,
2024
2023
2022
Pension Benefits
Balance, beginning of period
$
(15,190) $
(17,797) $
(23,303)
Other comprehensive income before reclassifications:
Net change in funded status of benefit plan
3,254
680
2,199
Reclassifications to earnings:
Recognition of net actuarial loss for pension
settlement (1)
638
—
840
Amortization of net loss (1)
1,489
1,927
2,467
Other comprehensive income (loss)
5,381
2,607
5,506
Balance, end of period
$
(9,809) $
(15,190) $
(17,797)
Postretirement Benefits
Balance, beginning of period
$
4,523
$
5,201
$
5,719
Other comprehensive income before reclassifications:
Prior service credits
—
132
—
Net change in plan obligation
164
463
705
Reclassifications to earnings:
Amortization of prior service credits (1)
(284)
(498)
(498)
Amortization of net gain (1)
(741)
(775)
(725)
Other comprehensive (loss) income
(861)
(678)
(518)
Balance, end of period
$
3,662
$
4,523
$
5,201
Accumulated Other Comprehensive Income (Loss)
Balance, beginning of period
$
(10,667) $
(12,596) $
(17,584)
Other comprehensive income before reclassifications
3,418
1,275
2,904
Recognition of net actuarial loss for pension settlement
638
—
840
Reclassifications to earnings
464
654
1,244
Other comprehensive (loss) income
4,520
1,929
4,988
Balance, end of period
$
(6,147) $
(10,667) $
(12,596)
(1) These amounts are included in the computation of net periodic benefit cost. See Note 12, “Employee Benefit Plans.”
17.
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 and renewable propane to residential, commercial,
industrial, agricultural and government customers and, to a lesser extent, wholesale distribution to large industrial end users. In the
F-34
residential, commercial and government 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. In addition, the Partnership's equity investment in Oberon is included within
the propane segment.
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. In addition, the Partnership's
platform of RNG businesses and the equity investment in IH are included within “all other.”
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 28, September 30, September 24,
2024
2023
2022
Revenues:
Propane
$ 1,150,034
$ 1,232,138
$ 1,313,556
Fuel oil and refined fuels
73,783
92,127
95,157
Natural gas and electricity
25,877
31,160
39,511
All other
77,478
73,769
53,241
Total revenues
$ 1,327,172
$ 1,429,194
$ 1,501,465
Operating income (loss):
Propane
$
316,209
$
351,162
$
337,377
Fuel oil and refined fuels
6,202
5,932
6,711
Natural gas and electricity
7,159
6,046
6,598
All other
(30,828)
(32,866)
(21,982)
Corporate
(127,492)
(123,425)
(122,377)
Total operating income
171,250
206,849
206,327
Reconciliation to net income:
Loss on debt extinguishment
215
—
—
Interest expense, net
74,590
73,393
60,658
Other, net
21,537
9,036
5,532
Provision for income taxes
734
668
429
Net income
$
74,174
$
123,752
$
139,708
Depreciation and amortization:
Propane
$
48,232
$
47,392
$
50,053
Fuel oil and refined fuels
1,289
1,674
1,693
Natural gas and electricity
—
3
21
All other
10,883
7,978
179
Corporate
6,571
5,535
6,902
Total depreciation and amortization
$
66,975
$
62,582
$
58,848
F-35
As of
September 28, September 30,
2024
2023
Assets:
Propane
$ 1,912,465 $ 1,924,304
Fuel oil and refined fuels
43,579
46,341
Natural gas and electricity
10,248
11,255
All other
250,445
239,691
Corporate
56,024
48,884
Total assets
$ 2,272,761 $ 2,270,475
18.
Subsequent Events
On November 6, 2024, the Operating Partnership acquired the propane assets and operations of a propane retailer headquartered in New
Mexico for $53,000, including $4,000 for non-compete consideration, plus working capital acquired.
This acquisition was consummated pursuant to the Partnership’s strategic growth initiatives.
S-1
INDEX TO FINANCIAL STATEMENT SCHEDULE
SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES
Page
Schedule II Valuation and Qualifying Accounts – Years Ended September 28, 2024, September 30, 2023 and September 24,
2022 .....................................................................................................................................................................
S-2
S-2
SCHEDULE II
SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
(in thousands)
Balance at
Beginning of Period
Charged (credited) to
Costs and Expenses
Other Additions Deductions (a)
Balance at
End of Period
Year Ended September 24, 2022
Allowance for doubtful accounts
$
3,332
$
4,433
$
—
$
(2,943) $
4,822
Valuation allowance for deferred
tax assets
38,268
1,174
—
—
39,442
Year Ended September 30, 2023
Allowance for doubtful accounts
$
4,822
$
2,834
$
—
$
(3,207) $
4,449
Valuation allowance for deferred
tax assets
39,442
6,721
—
—
46,163
Year Ended September 28, 2024
Allowance for doubtful accounts
$
4,449
$
3,965
$
—
$
(3,707) $
4,707
Valuation allowance for deferred
tax assets
46,163
4,725
—
—
50,888
(a)
Represents amounts that did not impact earnings.
Exhibit 21.1
SUBSIDIARIES OF SUBURBAN PROPANE PARTNERS, L.P.
(as of November 27, 2024)
SUBURBAN ADK RNG, LLC (Delaware)
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 PROPERTY HOLDINGS, LLC (Delaware)
SUBURBAN RENEWABLE ENERGY, LLC (Delaware)
CENTRAL OHIO BIOENERGY, LLC (Ohio) (d/b/a/ SuburbanRNG-Columbus)
WOF SW GGP 1, LLC (Delaware) (d/b/a SuburbanRNG-Stanfield)
Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the incorporation by reference in the Registration Statements on Form S-4 (No. 333-228760) and Form S-8 (Nos.
333-279607, 333-256285, 333-224975, 333-204559 and 333-160768) of Suburban Propane Partners, L.P. of our report dated November
27, 2024 relating to the financial statements, financial statement schedule and the effectiveness of internal control over financial
reporting, which appears in this Form 10-K.
Florham Park, New Jersey
November 27, 2024
Exhibit 31.1
Certification of the President and Chief Executive Officer
Pursuant to Section 302
of the Sarbanes-Oxley Act of 2002
I, Michael A. Stivala, certify that:
1.
I have reviewed this Annual Report on Form 10-K of Suburban Propane Partners, L.P.;
2.
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;
3.
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;
4.
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 27, 2024
By: /s/ MICHAELA. STIVALA
Michael A. Stivala
President and Chief Executive Officer
Exhibit 31.2
Certification of the Chief Financial Officer
Pursuant to Section 302
of the Sarbanes-Oxley Act of 2002
I, Michael A. Kuglin, certify that:
1.
I have reviewed this Annual Report on Form 10-K of Suburban Propane Partners, L.P.;
2.
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;
3.
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;
4.
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 27, 2024
By: /s/ MICHAEL A. KUGLIN
Michael A. Kuglin
Chief Financial Officer
Exhibit 32.1
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
In connection with the Annual Report of Suburban Propane Partners, L.P. (the “Partnership”) on Form 10-K for the period ended
September 28, 2024 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 27, 2024
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.
Exhibit 32.2
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
In connection with the Annual Report of Suburban Propane Partners, L.P. (the “Partnership”) on Form 10-K for the period ended
September 28, 2024 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Michael A. Kuglin,
Chief Financial 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
November 27, 2024
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.
Exhibit 99.2
FIVE-YEAR PERFORMANCE GRAPH 1
The following graph compares the performance of our Common Units with the performance of the NYSE Composite Index and the
Alerian MLP Index for the period of the five fiscal years commencing September 28, 2019. The graph assumes that at the beginning of
the period, $100 was invested in each of (1) our Common Units, (2) the NYSE Composite Index and (3) the Alerian MLP Index, 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.
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 Propane Board and
Executive Management
BOARD OF SUPERVISORS
Matthew J. Chanin (Chairman)**
Harold Logan, Jr.**
Jane Swift**
EXECUTIVE MANAGEMENT
TRANSFER AGENT/
UNITHOLDER RECORDS
Computershare Investor Services
INVESTOR INFORMATION
Copies of Annual Reports, Interim Reports and other
publications are available without charge from
Suburban Propane.
UNITHOLDER INFORMATION
Exchange Listing
Suburban Propane Partners, L.P. common
units are listed on the New York Stock
Exchange under the ticker symbol SPH.
Terence Connors*
William M. Landuyt*
Amy M. Adams**
Rommel Oates*
Michael A. Stivala
and Audit Committee
** Member of Nominating/Governance Committee
and Compensation Committee
It is anticipated that K-1’s will be available on our website and
mailed to each Unitholder in late February 2025.
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
* Member of Nominating/Governance Committee
MICHAEL A. STIVALA
President and Chief Executive Officer
MICHAEL A. KUGLIN
Chief Financial Officer
STEVEN C. BOYD
Chief Operating Officer
DOUGLAS T. BRINKWORTH
Senior Vice President, Product Supply,
Purchasing and Logistics
ALEJANDRO CENTENO
Senior Vice President, Operations
NEIL E. SCANLON
Senior Vice President, Information Services
DANIEL S. BLOOMSTEIN
Vice President, Controller and Chief Accounting Officer
FRANCESCA CLEFFI
Vice President, Human Resources
M.DOUGLAS DAGAN
Vice President, Strategic Initiatives - Renewable Energy
A.DAVIN D’AMBROSIO
Vice President and Treasurer
ELMER DANTE
Vice President, Tax
BRYON KOEPKE
Vice President, General Counsel and Secretary
KEITH P. ONDERDONK
Vice President, Operational Support
CRAIG PALLESCHI
Vice President, Renewable Natural Gas
NANDINI SANKARA
Vice President, Marketing and Brand Strategy
MICHAEL SCHUELER
Vice President, Product Supply
Computershare Investor Services
By Mail:
Computershare Investor Services
P.O. Box 505005
Louisville, KY 40233-5005
United States of America
By Overnight Delivery:
Computershare Investor Services
462 South 4th Street, Suite 1600
Louisville, KY 40202
United States of America
Telephone: +1 781-575-2724
Email: resolution@computershare.com
Suburban Propane Partners, L.P.
One Suburban Plaza
240 Route 10 West • P.O. Box 206
Whippany, NJ 07981-0206
suburbanpropane.com
AK
TX
LA
MS
AL
GA
FL
AR
TN
SC
NC
VA
WV
OH
KY
IN
IL
MI
WI
MO
IA
MN
NY
PA
MD
DE
NJ
MA
CT RI
VTNH ME
WA
OR
ID
MT
CA
NV
UT
WY
AZ
CO
NM
SD
NE
KS
OK
ND