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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] Annual Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the fiscal year ended September 27, 2003

                         24, 2005
[    ] 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
(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.)

                                

Delaware
22-3410353
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
240 Route 10 West
Whippany, NJ 07981
(973) 887-5300
                   (Address,
(Address, including zip code, and telephone number,
including area code, of registrant'sregistrant’s principal executive offices)
Securities registered pursuant to Section 12(b) of the Act:

      Title of each class             Name of each exchange on which registered
         Common Units                             New York Stock Exchange


Title of each class
Name of each exchange on which registered
Common Units
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 [X]         No [    ]
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Securities Act.     Yes [    ]         No [X]
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 [X]     No [    ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant'sregistrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this form 10-K. [X]

[    ]
Indicate by check mark whether registrant is an accelerated filer (as defined in Rule 12b-2 of the Securities Exchange Act of 1934).     Yes [X]         No [    ]
Indicate by check mark whether registrant is a shell company (as defined in Rule 12b-2 of the Securities Exchange Act of 1934).     Yes [    ]         No [X]
The aggregate market value as of November 21, 2003March 25, 2005 of the registrant'sregistrant’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 ($31.1734.31 per unit), was approximately $847,035,000.  As of  November  21,  2003 there were
27,266,767 Common Units outstanding.

$1,038,846,000.
Documents Incorporated by Reference:    None
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Portions of Part III from the Proxy Statement to be filed in connection with the registrant’s 2006 tri-annual meeting.


SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES
INDEX TO ANNUAL REPORT ON FORM 10-K

                                   PART I                                   Page
                                                                            ----

ITEM     1. BUSINESS......................................................... 1
ITEM     2. PROPERTIES....................................................... 7
ITEM     3. LEGAL PROCEEDINGS................................................ 8
ITEM     4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.............. 8

                                     PART II

ITEM     5. MARKET FOR THE REGISTRANT'S UNITS AND RELATED
            UNITHOLDER MATTERS............................................... 9
ITEM     6. SELECTED FINANCIAL DATA..........................................10
ITEM     7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
            FINANCIAL CONDITION AND RESULTS OF OPERATIONS....................13
ITEM     7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
            MARKET RISK......................................................26

ITEM     8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA......................28
ITEM     9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
            ACCOUNTING AND FINANCIAL DISCLOSURE..............................31
ITEM     9A.CONTROLS AND PROCEDURES..........................................31


                                    PART III

ITEM     10.DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT...............32
ITEM     11.EXECUTIVE COMPENSATION...........................................35
ITEM     12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
            AND MANAGEMENT...................................................40
ITEM     13.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS...................41
ITEM     14.PRINCIPAL ACCOUNTING FEES AND SERVICES...........................41

                                     PART IV

ITEM     15.EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND
            REPORTS ON FORM 8-K..............................................42


Signatures...................................................................43


Page
PART I
ITEM 1.
BUSINESS
1
ITEM 2.
PROPERTIES
9
ITEM 3.
LEGAL PROCEEDINGS
10
ITEM 4.
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
10
PART II
ITEM 5.
MARKET FOR THE REGISTRANT’S UNITS, RELATED UNITHOLDER MATTERS AND ISSUER PURCHASES OF UNITS
11
ITEM 6.
SELECTED FINANCIAL DATA
12
ITEM 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
15
ITEM 7A.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
35
ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
37
ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
40
ITEM 9A.
CONTROLS AND PROCEDURES
40
ITEM 9B.
OTHER INFORMATION
41
PART III
ITEM 10.
DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
42
ITEM 11.
EXECUTIVE COMPENSATION
42
ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
42
ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
42
ITEM 14.
PRINCIPAL ACCOUNTING FEES AND SERVICES
42
PART IV
ITEM 15.
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
43
SIGNATURES
44
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
- -----------------------------------------------

This Annual Report on Form 10-K contains forward-looking statements ("(‘‘Forward-Looking Statements"Statements’’) as defined in the Private Securities Litigation Reform Act of 1995 and Section 27A of the Securities Act of 1933, as amended, relating to the  Partnership's future business expectations and predictions and financial condition and results of operations.operations of Suburban Propane Partners, L.P. (the ‘‘Partnership’’). Some of these statements can be identified by the use of forward-looking terminology such as "prospects,"  "outlook,"  "believes,"  "estimates,"  "intends,"  "may,"  "will,"
"should," "anticipates," "expects"‘‘prospects,’’ ‘‘outlook,’’ ‘‘believes,’’ ‘‘estimates,’’ ‘‘intends,’’ ‘‘may,’’ ‘‘will,’’ ‘‘should,’’ ‘‘anticipates,’’ ‘‘expects’’ or "plans"‘‘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"Statements’’). The risks and uncertainties and their impact on the Partnership's
operationsPartnership’s results include, but are not limited to, the following risks:
• 
The impact of weather conditions on the demand for propane, fuel oil and other refined fuels, natural gas and electricity;
• 
Fluctuations in the unit cost of propane, fuel oil and other refined fuels and natural gas, and the impact of price increases on customer conservation;




o    The impact of weather conditions on the demand for propane;
o    Fluctuations in the unit cost of propane;
o    The ability of the  Partnership to compete with other  suppliers of propane
     and other energy  sources;  o The impact on propane  prices and supply from
     the political  and economic  instability  of the oil producing  nations and
     other general economic conditions;
o    The ability of the Partnership to retain customers;
o    The impact of energy  efficiency and technology  advances on the demand for
     propane;
o    The ability of management to continue to control expenses;
o    The impact of regulatory developments on the Partnership's business;
o    The impact of legal proceedings on the Partnership's business;
o    The  Partnership's  ability to implement  its  expansion  strategy into new
     business lines and sectors;
o    The Partnership's ability to integrate acquired businesses successfully.

• 
The ability of the Partnership to compete with other suppliers of propane, fuel oil and other energy sources;
• 
The impact on the price and supply of propane, fuel oil and other refined fuels from the political, military or economic instability of the oil producing nations, global terrorism and other general economic conditions;
• 
The ability of the Partnership to continue to realize, or to realize fully, within the expected timeframe, the expected cost savings and synergies from the Agway Acquisition (as defined below);
• 
The ability of the Partnership to acquire and maintain reliable transportation for its propane, fuel oil and other refined fuels;
• 
The ability of the Partnership to retain customers;
• 
The impact of energy efficiency and technology advances on the demand for propane and fuel oil;
• 
The ability of management to continue to control expenses, including the results of our recent field realignment initiative;
• 
The impact of changes in applicable statutes and government regulations, or their interpretations, including those relating to the environment and global warming and other regulatory developments on the Partnership’s business;
• 
The impact of legal proceedings on the Partnership’s business;
• 
The Partnership’s ability to implement its expansion strategy into new business lines and sectors; and
• 
The Partnership’s ability to integrate acquired businesses successfully.
Some of these Forward-Looking Statements are discussed in more detail in "Management's‘‘Management’s Discussion and Analysis of Financial Condition and Results of Operations"Operations’’ in this Annual Report. On different occasions, the Partnership or its representatives have made or may make Forward-Looking Statements in other filings that the Partnership makes with the Securities and Exchange Commission in(‘‘SEC’’), press releases or in oral statements made by or with the approval of one of itsthe Partnership’s authorized executive officers. Readers are cautioned not to place undue reliance on Forward-Looking or Cautionary Statements, which reflect management's
opinionsmanagement’s view only as of the date hereof.made. The Partnership undertakes no obligation to update any Forward-Looking Statement or Cautionary Statement. 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.


PART I
ITEM 1. BUSINESS

GENERAL

     
Development of Business
Suburban Propane Partners, L.P. (the "Partnership"‘‘Partnership’’), a publicly traded Delaware limited partnership, is principally  engaged,  through its operating
partnershipa nationwide marketer and subsidiaries,distributor of a diverse array of products to meet the energy needs of our customers. We specialize in propane, fuel oil and other refined fuels, as well as the marketing of natural gas and electricity in deregulated markets. To complement our core marketing and distribution operations, we install and service a variety of home comfort equipment, particularly in the retailareas of heating, ventilation and wholesale  marketing of propane
and related  appliances,  parts and  services.  Basedair conditioning (‘‘HVAC’’). We believe, based on LP/Gas Magazine dated February 2003, we believe2005, that we are the third largest retail marketer of propane in the United States, measured by retail gallons sold in the year 2004. As of September 24, 2005, we were serving approximately 750,000the energy needs of more than 1,000,000 active residential, commercial, industrial and agricultural customers through approximately 320370 customer service centers in 4030 states as of September 27, 2003. Our  operations are  concentratedlocated primarily in the east and west coast regions of the United States. OurWe sold approximately 516.0 million gallons of propane to retail propane sales volume was  approximately  491.5customers and 244.5 million gallons of fuel oil and other refined fuels during the year ended September 27, 2003.  In  addition,24, 2005. Together with our predecessor companies, we sold  approximately  31.7 million
gallons ofhave been continuously engaged in the retail propane at wholesale to large industrial  end-users and other propane
distributors during the fiscal year. Based on industry  statistics  contained in
2001 Sales of Natural Gas Liquids and Liquefied  Refinery Gases, as published by
the American  Petroleum  Institute in November 2002, our sales volume  accounted
for approximately 4.4% of the domestic retail market for propane during the year
2001.

     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"‘‘Operating Partnership’’)., and its direct and indirect subsidiaries. Our general partner is Suburban Energy Services Group LLC (the "General  Partner"‘‘General Partner’’), a Delaware limited liability company ownedmajority-owned by members of our senior management. The General Partner owns a combined 1.71%1.54% general partner interest in the Partnership and the Operating Partnership and the Partnership owns all of the limited partnership interests in the Operating Partnership.  The  Partnership  and
Subsidiaries of the Operating Partnership commenced operations on March 5, 1996 upon consummation of
an  initial  public  offering  of  common  units  representing  limited  partner
interests in the Partnership  ("Common Units") and the private placement of $425
million aggregate principal amount of Senior Notes.include Suburban Sales and Service, Inc. (the "Service  Company"‘‘Service Company’’), which conducts a portion of the Partnership’s service work and appliance and parts businesses. Additionally, on January 5, 2001, Suburban Holdings, Inc., a subsidiary of the Operating Partnership, was formed at that time to operatehold the service  work and  appliance  and  propane
equipment parts businessesstock of the Partnership.

     Other  subsidiaries  of the Operating  Partnership  include Gas Connection, Inc. (doing  business as(d/b/a HomeTown Hearth & Grill), Suburban @ Home, ("Suburban @
Home"),Inc. and Suburban Franchising, Inc. ("Suburban Franchising"). HomeTown Hearth & Grill sells and installs natural gas and propane gas grills, fireplaces and related accessories and supplies through twelvethirteen retail stores in the south, northeast and northwest regions as of September 27, 2003;24, 2005. Suburban @ Home sells, installs, services and repairs a full range of heating  and air  conditioning
products  through five retail  locations in the south,  northeast  and northwest
regions as of September 27, 2003; andHVAC products. Suburban Franchising creates and develops propane related franchising business opportunities.
On December 23, 2003, we acquired substantially all of the assets and operations of Agway Energy Products, LLC, Agway Energy Services, Inc. and Agway Energy Services PA, Inc. (collectively referred to as ‘‘Agway Energy’’) pursuant to an asset purchase agreement dated November 10, 2003 (the ‘‘Agway Acquisition’’). Agway Energy was a leading regional marketer of propane, fuel oil, gasoline and diesel fuel primarily in New York, Pennsylvania, New Jersey and Vermont, as well as a marketer of natural gas and electricity in New York and Pennsylvania. With the Agway Acquisition, we transformed our business from a marketer of a single fuel into one that provides multiple energy solutions, with expansion into the marketing and distribution of fuel oil and other refined fuels, as well as the marketing of natural gas and electricity. The total cost of the Agway Acquisition, including the purchase price of $205.0 million (net of a working capital adjustment paid to the Partnership of $1.0 million), $2.7 million for non-compete agreements with certain members of the management of Agway Energy and $3.5 million in transaction related costs, was approximately $211.2 million.
On November 21, 2003, Suburban Heating Oil Partners, LLC, a subsidiary of HomeTown Hearth & Grill, was formed to acquire and operate the fuel oil and other refined fuels and HVAC businesses and assets of Agway Energy. In addition, Agway Energy Services, LLC, also a subsidiary of HomeTown Hearth & Grill, was formed to acquire and operate the natural gas and electricity marketing business of Agway Energy.
Suburban Energy Finance Corporation, a direct wholly-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 unsecured 6.875% senior notes due December 2013, a portion of which was used to finance the Agway Acquisition. Suburban Energy Finance Corporation has nominal assets and conducts no business operations.
In this Annual Report, unless otherwise indicated, the terms "Partnership,"
"we," "us,"‘‘Partnership,’’ ‘‘we,’’ ‘‘us,’’ and "our"‘‘our’’ are used to refer to Suburban Propane Partners, L.P. or to Suburban Propane Partners, L.P. and its consolidated subsidiaries, including the Operating Partnership. The Partnership, the Operating Partnership and the Service Company 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 Securities and Exchange Commission ("SEC"(‘‘SEC’’). The publicYou may read and copy any materials that we file with the SEC at the SEC'sSEC’s Public Reference Room at 450 Fifth Street, N. W., Washington, D.C. 20549. The  publicYou may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. Any information filed by us is also available on the SEC'sSEC’s EDGAR database at www.sec.gov.
Upon written request or through a link from our website at www.suburbanpropane.com, we will provide, without charge, copies of our Annual Report on Form 10-K for the fiscal year ended September 27, 2003,24, 2005, 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 1
SEC. Requests should be directed to: Suburban Propane Partners, L.P., Investor Relations, P.O. Box 206, Whippany, New Jersey 07981-0206.

RECENT DEVELOPMENTS

     On November 10,  2003,  we entered into an asset  purchase  agreement  (the
"Purchase  Agreement") to acquire substantially all of the assets and operations
of Agway Energy  Products,  LLC, Agway Energy Services PA, Inc. and Agway Energy
Services,  Inc.  (collectively "Agway Energy"), all of which entities are wholly
owned  subsidiaries  of Agway,  Inc.,  for $206.0  million  in cash,  subject to
certain purchase price adjustments.  Agway Energy, based in Syracuse,  New York,
is a leading regional  marketer of propane,  fuel oil,  gasoline and diesel fuel
primarily in New York,  Pennsylvania,  New Jersey and  Vermont.  Based on LP/Gas
Magazine dated February 2003,  Agway Energy is the eighth largest retail propane
marketer in the United States,  operating through approximately 139 distribution
and  sales  centers.  Agway  Energy  is also one of the  leading  marketers  and
distributors  of fuel oil in the  northeast  region  of the  United  States.  To
complement its core marketing and delivery  business,  Agway Energy installs and
services a wide variety of home comfort  equipment,  particularly in the area of
heating,  ventilation and air conditioning ("HVAC").  Additionally,  to a lesser
extent,  Agway  Energy  markets  natural  gas and  electricity  in New  York and
Pennsylvania.  For its fiscal year ended June 30, 2003, Agway Energy served more
than  400,000  active  customers  across all of its lines of  business  and sold
approximately  106.3 million gallons of propane and approximately  356.8 million
gallons  of  fuel  oil,  gasoline  and  diesel  fuel  to  retail  customers  for
residential, commercial and agricultural applications. See additional discussion
in Note 15 to the  Consolidated  Financial  Statements  included  in this Annual
Report.

     Agway Energy is comprised of three wholly-owned subsidiaries of Agway, Inc.
Agway,  Inc.  is  presently  a  debtor-in-possession  under  Chapter  11 of  the
Bankruptcy  Code in a bankruptcy  proceeding  pending  before the United  States
Bankruptcy Court for the Northern District of New York (the "Bankruptcy Court").
Agway Energy is not a Chapter 11 debtor.  The Purchase  Agreement was filed with
the Bankruptcy  Court and on November 24, 2003,  the  Bankruptcy  Court approved
Agway,  Inc.'s  motion to  establish  bid  procedures  for the  sale.  Under the
Bankruptcy  Court order,  we were  officially  designated  the "stalking  horse"
bidder in a process in which  additional  bids for the Agway  Energy  assets and
business  operations  are being  solicited  for a specified  period of time.  An
auction is currently  scheduled for December 18, 2003. If we are the  successful
bidder at the auction,  the closing on the sale under the Purchase  Agreement is
expected to occur shortly  following the  conclusion of the auction  process and
upon receipt of necessary regulatory  approvals.  There can be no assurance that
we will  ultimately be the  successful  bidder at the auction or will be able to
consummate the acquisition of Agway Energy.

     In line with our business  strategy,  this  acquisition,  once consummated,
will expand our presence in the northeast  retail propane market.  Additionally,
Agway Energy's  extensive  presence in the northeast fuel oil delivery  business
expands our product  offerings in the  attractive  northeast  energy  market and
provides an  opportunity  to leverage  our  existing  management  expertise  and
technology to enhance operational efficiencies within the Agway Energy business.
The HVAC  business  of Agway  Energy is more  mature  than our  Suburban  @ Home
operations and is expected to provide an opportunity to accelerate the growth in
this  business,  as well as to  enhance  the  overall  service  offering  to our
existing customer base in the northeast.

BUSINESS STRATEGY

     
Our Strategy
Our business strategy is to deliver increasing value to our unitholders through initiatives, both internal and external, that are geared toward achieving sustainable profitable growth and increased quarterly distributions. The following are key elements of our strategy:
Internal Focus on Growth, Customer Service and Improving Operating Efficiency.We pursue this business  strategy through a combination of (i) an internal focus on enhancing  customer  service,  growing and  retaining  our customer  base and
improving the efficiency of operations  and, (ii)  acquisitions of businesses to
complement or supplement our core propane operations.



                                       2


     Over the past several years, we have focusedinternally on improving the efficiency of our existing operations, andmanaging our cost structure, strengtheningexpanding our balance  sheetcustomer base and distribution  coverage and building a platform for growth. We continue to pursue
internal growth of our existing  propane  operations and to foster the growth of
related retail and service  operations that can benefit from our  infrastructure
and  national   presence.   We  investincreasing customer retention through enhanced customer service. Through investments in   enhancements   to our technology infrastructure, we continue to increaseseek to improve operating efficiencies, particularly in the areas of routing, forecasting customer usage, inventory control and customer tracking. During fiscal 2005, we took additional steps to develop  marketing
programsmore fully integrate our operations in the northeast to achieve the synergies anticipated from the Agway Acquisition. Additionally, during the fourth quarter of fiscal 2005 we initiated plans to consolidate and incentive compensation  arrangements focusedrealign our field operations and management, including consolidating regions from nineteen to ten and streamlining our operating footprint within the ten regions. These initiatives are expected to generate further efficiencies and cost saving opportunities at the field operating level.
Additionally, we set clear objectives to focus our employees on seeking new customers and retaining existing customers by providing world-class customer service. We believe that customer satisfaction is a critical factor in the growth and retention.success of our operations. ‘‘Our Business is Customer Satisfaction’’ is one of our core operating philosophies. We measure and reward the success of our customer service centers based on a combination of profitability of the individual customercustomers service center, net customer growth and satisfaction  statistics  and asset utilization measures.  Additionally,
Selective Acquisitions of Complementary Businesses or Assets. Externally, we  continuously  evaluate our existing  facilities to
identify opportunities to optimize our return on assets by selectively divesting
operations  in slower  growing  markets  and seek to reinvest  in markets  that
present more opportunities for growth.

     In addition toextend our internal growth  strategies,  we have evaluated  several
acquisition  opportunities  both within the propane sector,  as well as in other
energy-related  businesses  in  an  effort  to  acceleratepresence or diversify our overall  growth
strategy.product offerings through selective acquisitions. Our acquisition strategy is to focus on businesses with a relatively steady cash flow that will either extend our presence in strategically attractive propane  markets, complement our existing network  of  propane
operationsbusiness segments or provide an opportunity to diversify our operations with other energy-related assets. InWhile we are active in this regard,  as further discussed above,area, we believe
thatare also very patient and deliberate in evaluating acquisition candidates. During the pending  acquisitionfirst quarter of fiscal 2004, we completed the assets of Agway Energy wouldAcquisition, which significantly enhanceenhanced our position in the northeast propane market and expanddiversified our product and
service offerings to further supportinclude the marketing and distribution of fuel oil and other refined fuels, as well as the marketing of natural gas and electricity. In addition, the Agway Acquisition brought us many skilled and experienced service personnel for our overallHVAC segment.

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 fully exploit the growth objectives.

INDUSTRY BACKGROUND AND COMPETITION

     and profit potential of all of our assets.
Business Segments
Our principal operations are managed and evaluated in five business segments: Propane, Fuel Oil and Other Refined Fuels, Natural Gas & Electricity, HVAC and All Other. These business segments are described below. See Note 18 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-burningclean burning energy source recognized for its transportability and ease of use relative to alternative forms of stand-alone energy sources. Retail
propanePropane use falls into three broad categories:  (i)  residential and commercial
applications,  (ii) industrial  applications and (iii) agricultural uses. 
• 
residential and commercial applications;
• 
industrial applications; and
• 
agricultural uses.
In the residential and commercial markets, propane is used primarily for space heating, water heating, clothes drying and cooking. Industrial customers use propane generally as a motor fuel burned in  internal  combustion  engines  thatto 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. PropaneIt 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, itpropane becomes a flammable gas that is colorless and odorless, withalthough an odorant is added to allow for its detection. Propane is clean burning and, when consumed, produces only negligible amounts of pollutants.

     Based upon information
Product Distribution and Marketing
We distribute propane through a nationwide retail distribution network consisting of approximately 370 customer service centers in 30 states as of September 24, 2005. Our operations are concentrated in the east and west coast regions of the United States. In fiscal 2005, we serviced approximately 830,000 active propane customers. Typically, customer service centers are located in suburban and rural areas where natural gas is not readily available. Generally, these customer service centers consist of an office, appliance showroom, warehouse and service facilities, with one or more 18,000 to 30,000 gallon storage tanks on the premises. Most of our residential customers receive their propane supply through an automatic delivery system that eliminates the customer’s need to make an affirmative purchase decision. From our customer service centers, we also sell, install and service equipment related to our propane distribution business, including heating and cooking appliances, hearth products and supplies and, at some locations, propane fuel systems for motor vehicles.
We sell propane primarily to six customer markets: residential, commercial, industrial (including engine fuel), agricultural, other retail users and wholesale. Approximately 92% of the propane gallons sold by us in fiscal 2005 were to retail customers: 44% to residential customers, 31% to commercial customers, 9% to industrial customers, 6% to agricultural customers and 10% to other retail users. The balance of approximately 8% of the propane gallons sold by us in fiscal 2005 was for risk management activities and wholesale customers. Sales to residential customers in fiscal 2005 accounted for approximately 61% of our margins on retail propane sales, reflecting the higher-margin nature of the residential market. No single customer accounted for 10% or more of our propane revenues during fiscal 2005.

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 ranging from 2,125 gallons to 2,975 gallons of propane, into a stationary storage tank on the customer’s 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 customer’s 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.
In our wholesale operations, we principally sell propane to large industrial end users and other propane distributors. The wholesale market includes customers who use propane to fire furnaces, as a cutting gas and in other process applications.  Due to the low margin nature of the wholesale market as compared to the retail market, we have reduced our emphasis on wholesale marketing over the last several years.
Supply
Our propane supply is purchased from approximately 71 oil companies and natural gas processors at approximately 125 supply points located in the United States and Canada. We make purchases primarily under one-year agreements that are subject to annual renewal, and also purchase propane on the spot market. Supply contracts generally provide for pricing in accordance with posted prices at the time of delivery or the current prices established at major storage points, and some contracts include a pricing formula that typically is based on prevailing market prices. Some of these agreements provide maximum and minimum seasonal purchase guidelines. Propane is generally transported from refineries, pipeline terminals, storage facilities (including our storage facilities in Elk Grove, California and Tirzah, South Carolina) 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 2006. During fiscal 2005, Dynegy Liquids Marketing and Trade (‘‘Dynegy’’) and Enterprise Products Operating L.P. (‘‘Enterprise’’) provided approximately 17% and 10%, respectively, of our total domestic propane purchases. Aside from these two suppliers, no single supplier provided more than 10% of our total domestic propane supply during fiscal 2005. The availability of our propane supply is dependent on several factors, including the severity of winter weather and the price and availability of competing fuels, such as natural gas and fuel oil. We believe that if supplies from Dynegy or Enterprise were interrupted, we would be able to secure adequate propane supplies from other sources without a material disruption of our operations. Nevertheless, the cost of acquiring such propane might be higher and, at least on a short-term basis, margins could be affected. Approximately 98% of our total propane purchases were from domestic suppliers in fiscal 2005.
We seek to reduce the effect of propane price volatility on our product costs and to help ensure the availability of propane during periods of short supply. We are currently a party to propane futures transactions on the New York Mercantile Exchange (‘‘NYMEX’’) and to forward and option contracts with various third parties to purchase and sell product at fixed prices in the future. These activities are monitored by our senior management through enforcement of our Hedging and Risk Management Policy. See Item 7A of this Annual Report.
We own and operate large propane storage facilities in California and South Carolina. We also operate smaller storage facilities in other locations and have rights to use storage facilities in additional locations. These storage facilities enable us to buy and store large quantities of propane during periods of low demand and lower prices, which generally occur during the National Propane Gas Associationsummer months. This practice helps

ensure a more secure supply of propane during periods of intense demand or price instability. As of September 24, 2005, the majority of our storage capacity in California and South Carolina was leased to third parties.
Competition
According to the Energy Information Administration, propane accounts for approximately 4% of household energy consumption in the United States. This level has not changed materially over the previous two decades. As an energy source, propane competes primarily with electricity,  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 basis in locations serviced by natural gas, but it is an alternative to natural gas in rural and suburban areas where natural gas is unavailable or portability of product is required. Historically, the expansion of natural gas into traditional propane markets has been inhibited by the capital costs required to expand pipeline and retail distribution systems. Although the recent extension of natural gas pipelines to previously unserved geographic areas tends to displace propane distribution in those areas, affected,we believe new opportunities for propane sales have been arising as new neighborhoods are developed in geographically remote areas.  Propane
We also have some relative advantages over suppliers of other energy sources. For example, propane is generally less expensive to use than electricity for space heating, water heating, clothes drying and cooking. Fuel oil has not been a significant competitor due to the current geographical diversity of our operations, and propane and fuel oil compete to a lesser extentare not significant competitors because of the cost of converting 3
from one to the other.
In addition to competing with suppliers of other energy sources, or energy,  weour propane operations compete with other retail propane distributors. Competition  in theThe 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 20012003 Sales of Natural Gas Liquids and LiquifiedLiquefied Refinery Gases, as published by the American Petroleum Institute in November  2002,February 2005, and LP/Gas Magazine dated February 2003,2005, the ten largest retailers, including us, account for approximately 29%33% of the total retail sales of propane in the United States, and no single marketer has a greater than 10% share of the total retail propane market in the United States and our sales volume accounted for  approximately  4.4% of the
domestic  retail market for propane  during 2001.States. Most of our customer service centers compete with five or more marketers or distributors. However, 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 rural areas the marketing radius may be extended by a satellite office.

PRODUCTS, SERVICES AND MARKETING

     
Fuel Oil and Other Refined Fuels
We market and distribute propane  through a nationwide  retail  distribution  network
consisting  offuel oil, diesel fuel, kerosene and gasoline to approximately 320 customer  service  centers in 40 states as of
September 27, 2003. Our operations are  concentrated180,000 residential and commercial customers in the east and west coast
regionsnortheast region. We commenced operations in this business segment as a result of the United States. InAgway Acquisition and, accordingly, our results for fiscal 2003, we serviced  approximately 750,000
active  customers.  2004 include this segment from the date of the Agway Acquisition (December 23, 2003). Sales of fuel oil and other refined fuels for fiscal 2005 amounted to 244.5 million gallons. During fiscal 2005, sales of fuel oil to residential customers, principally for home heating, represented 40% of total refined fuel gallons sold. Fuel oil has a more limited use, compared to propane, for space and water heating in residential and commercial buildings.
Approximately two-thirds74% of our retail  propane  volume has
historically  been sold during the six month peak  heating  season from  October
through March,  as many customers use propane for heating  purposes.  Typically,
customer service centers are found in suburban and rural areas where natural gas
is not  readily  available.  Generally,  such  locations  consist  of an office,
appliance showroom, warehouse and service facilities, with one or more 18,000 to
30,000 gallon storage tanks on the premises.  Most of our residentialfuel oil customers receive their propane  supply  pursuant tofuel oil under an automatic delivery system that
eliminateswithout the customer's needcustomer having to make an affirmative purchase decision. FromThese deliveries are scheduled through computer technology, based upon each customer’s historical consumption patterns and prevailing weather conditions. Additionally, as is common practice in the industry, we offer our customer  service  centers,  we also sell,  installcustomers a budget payment plan whereby the customer’s estimated annual fuel oil purchases and service equipment
relatedcontracts are paid for in a series of estimated equal monthly payments over a twelve-month period. During fiscal 2005, approximately 70% of our fuel oil sales were made to individual customers under a fuel oil ceiling

program (the ‘‘Ceiling Program’’) which pre-established a maximum price per gallon over a twelve-month period. While our propane  distribution  business,  including  heatingstrategy was to enter into derivative instruments in the form of futures and cooking
appliances,  hearth products and supplies and, at some  locations,  propane fuel
systems for motor vehicles.

     We sell propane primarily to six customer markets: residential, commercial,
industrial  (including  engine  fuel),  agricultural,  other  retail  users  and
wholesale.  Approximately  94%options traded on the NYMEX covering a majority of the fuel oil we expected to sell to customers under the fuel oil Ceiling Program in an effort to protect the margins under the program, we evaluated the costs of such hedge protection and elected not to hedge February through April deliveries under this program. After evaluating the costs to adequately hedge the fuel oil Ceiling Program in the current commodity price environment, we decided to discontinue offering the fuel oil Ceiling Program after the fiscal 2005 heating season.
Deliveries of fuel oil are usually made to customers by means of tankwagon trucks, which have capacities ranging from 2,500 gallons soldto 3,000 gallons of fuel oil. 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 us in fiscal 2003 werethe customer. The capacity of customer storage tanks ranges from approximately 275 gallons to retail customers: 41% to residential customers, 30% to commercial customers, 10%
to industrial  customers,  6% to agricultural  customers and 13% to other retail
users.  The balance of approximately 6% of the gallons sold by us in fiscal 2003
was for risk management activities and wholesale customers. Sales to residential
customers  in fiscal  2003  accounted  for  approximately  59% of our margins on
propane sales, reflecting the higher-margin nature of the residential market.1,000 gallons. No single customer accounted for 10% or more of our fuel oil revenues during fiscal 2003.

     Retail  deliveries  of propane are usually  made to  customers  by means of
bobtail  and rack  trucks.  Propane  is  pumped  from the  bobtail  truck,  with
capacities  ranging  from 2,125  gallons to 2,975  gallons  of  propane,  into a
stationary  storage  tank on the  customer's  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.  2005.
Supply
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
of propane 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   supplementalobtain fuel to  meet  peak  load
deliverability  requirements,  and large agricultural  accounts that use propane
for crop drying.  Propane is generally  transported  from  refineries,  pipeline
terminals,  storage  facilities  (including our storage facilities in Elk Grove,
California and Tirzah,  South Carolina),  and coastal  terminals to our customer
service  centers  by a  combination  of  common  carriers,  owner-operators  and
railroad tank cars. See additional discussion in Item 2 of this Annual Report.



                                       4


     In  our  wholesale  operations,   we  principally  sell  propane  to  large
industrial  end-usersoil and other propane  distributors.  Therefined fuels in either pipeline, truckload or tankwagon quantities, and have contracts with certain pipeline and terminal operators for the right to temporarily store fuel oil at more than 14 terminal facilities we do not own. We have arrangements with certain suppliers of fuel oil, which provide open access to fuel oil at specific terminals throughout the northeast. Additionally, a portion of our purchases of fuel oil are made at local wholesale market
includes  customers  who use propane to fire  furnaces,  as a cutting gas andterminal racks. In most cases, the supply contracts do not establish the price of fuel oil in other process applications. Due to the low margin nature of the wholesaleadvance; rather, prices are typically established based upon market
as compared to the retail market,  we have  selectively  reduced our emphasis on
wholesale  marketing  over the last few years.  Accordingly,  sales of wholesale
gallons  during fiscal 2003  decreased in comparison to fiscal 2002,  which also
decreased from fiscal 2001.

PROPANE SUPPLY

     Our propane  supply is purchased  from nearly 70 oil  companies and natural
gas processors at  approximately  180 supply points located in the United States
and Canada.  We make  purchases  primarily  under one-year  agreements  that are
subject to annual renewal, but also purchase propane on the spot market.  Supply
contracts  generally provide for pricing in accordance with posted prices at the time of delivery plus or minus a differential to market for transportation and volume discounts. We purchase fuel oil from nearly 33 suppliers at approximately 75 supply points. While fuel oil supply is more susceptible to longer periods of constraint than propane, we believe that our supply arrangements will provide us with sufficient supply sources. Although we make no assurance regarding the currentavailability of supplies of fuel oil in the future, we currently expect to be able to secure adequate supplies during fiscal 2006.
Competition
The fuel oil industry is a mature industry with total demand expected to remain relatively flat to moderately declining. The fuel oil industry is highly fragmented, characterized by a large number of relatively small, independently owned and operated local distributors. We compete with other fuel oil distributors offering a broad range of services and prices, from full service distributors to those that solely offer the delivery service. We have developed a wide range of sales programs and service offerings for our fuel oil customer base in an attempt to be viewed as a full service energy provider and to build customer loyalty. For instance, like most companies in the fuel oil business, we provide home heating equipment repair service through our HVAC segment 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 & Electricity
We market natural gas and electricity through our wholly owned subsidiary Agway Energy Services LLC (‘‘AES’’) in the deregulated markets of New York and Pennsylvania primarily to residential and small commercial customers. Historically, local utility companies provided their customers with all three aspects of electric and natural gas service: generation, transmission and distribution. However, under deregulation, public utility commissions in several states are licensing energy service companies, such as AES, to act as alternative suppliers of the commodity to end consumers. In essence, we make arrangements for the supply of electricity or natural gas to specific delivery points. The local utility companies continue to distribute electricity and natural gas on their distribution systems. The business strategy of this business 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.

As of September 24, 2005, we were serving nearly 77,000 natural gas and electricity customers in New York and Pennsylvania. During fiscal 2005, we sold approximately 5.9 million dekatherms of natural gas and 558.3 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 and direct mail initiatives. Most local utility companies have established billing service arrangements whereby customers receive a single bill from the local utility company which includes transmission charges from the local utility company, as well as product charges for the amount of natural gas or electricity provided by AES and utilized by the customer. We have arrangements with several local utility companies that provide billing and collection services for a fee. Under these arrangements, we are paid by the local utility company for all or a portion of customer billings after a specified number of days following the customer billing with no further recourse to AES.
Supply of natural gas is arranged through annual supply agreements with major national wholesale suppliers. Pricing under the annual natural gas supply contracts is based on posted market prices at major storage points,the time of delivery, and some contracts include a pricing formula that typically is based on prevailing market prices. SomeThe majority of these  agreements  provide maximum and minimum  seasonal
purchase  guidelines.  We use a  number  of  interstate  pipelines,our electricity requirements are purchased through the New York Independent System Operator (‘‘NYISO’’) under an annual supply agreement, as well as railroad tank carspurchase arrangements through other national wholesale suppliers on the open market. Electricity pricing under the NYISO agreement is based on local market indices at the time of delivery. Competition is primarily with local utility companies, as well as other marketers of natural gas and delivery  trucks to transport  propane from  suppliers to
storageelectricity providing similar alternatives as AES.
HVAC
We sell, install and service all types of whole-house heating and cooling products, air cleaners, humidifiers, de-humidifiers, hearth products and space heaters. We also offer services such as duct cleaning, air balancing and energy audits. Our supply needs are filled through supply arrangements with several large regional equipment manufacturers and distribution facilities.

     Historically, suppliescompanies. Competition in this business segment is primarily with small, local HVAC providers and contractors, as well as, to a lesser extent, other regional service providers.
All Other
The All other business segment is comprised of propanethe activities from our supply sources have been readily
available.  Although we make no assurance regardingHomeTown Hearth & Grill and Suburban Franchising subsidiaries.
Seasonality
The retail propane and fuel oil distribution businesses, as well as the availabilitynatural gas marketing business, are seasonal because of suppliesthe primary use of propanethese fuels for heating in the  future,  we  currently  expect to be able to secure  adequate
supplies during fiscal 2004.  During fiscal 2003,  Dynegy Liquids  Marketingresidential and Trade ("Dynegy") and Enterprise Products Operating L.P.  ("Enterprise") providedcommercial buildings. Historically, approximately 21% and 13%,  respectively,two-thirds of our total domesticretail propane supply.volume is sold during the six-month peak heating season from October through March. The availabilityfuel 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, supplyfuel 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 dependent  on  several  factors,
includingdirectly 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 the price and  availability  of
competing  fuels such as natural gas consumption, while sustained colder than normal temperatures will tend to result in greater use.

Trademarks and heating  oil.  We  believe  that,  if
supplies from Dynegy or Enterprise were interrupted,  we would be able to secure
adequate  propane  supplies from other sources without a material  disruption of
our operations. Nevertheless, the cost of acquiring such propane might be higher
and, at least on a short-term basis, margins could be affected. Aside from these
two suppliers,  no single supplier  provided more than 10% of our total domestic
propane  supply fiscal 2003.  During that year,  approximately  98% of our total
propane purchases were from domestic suppliers.

     We seek to reduce the effect of propane  price  volatility  on our  product
costs and to help ensure the  availability  of propane  during  periods of short
supply. We are currently a party to propane futures transactions on the New York
Mercantile  Exchange  and to forward and option  contracts  with  various  third
parties to  purchase  and sell  product  at fixed  prices in the  future.  These
activities  are monitored by our senior  management  through  enforcement of our
commodity  trading policy.  See additional  discussion in Item 7A of this Annual
Report.

     We  operate  large  propane  storage  facilities  in  California  and South
Carolina. We also operate smaller storage facilities in other locations and have
rights to use storage  facilities in additional  locations.  As of September 27,
2003, the majority of the storage  capacity in California and South Carolina was
leased to third parties. Our storage facilities enable us to buy and store large
quantities  of propane  during  periods of low  demand and lower  prices,  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.

TRADEMARKS AND TRADENAMES

     Tradenames
We utilize a variety of trademarks and tradenames owned by us, including "Suburban‘‘Suburban Propane,"  "Gas’’ ‘‘Gas Connection,"’’ ‘‘HomeTown Hearth & Grill,’’ ‘‘Suburban @ Home’’ and "Suburban  @ Home."‘‘Suburban Energy Services.’’ Additionally, in connection with the Agway Acquisition, we acquired rights to certain trademarks and tradenames, including ‘‘Agway Propane,’’ ‘‘Agway’’ and ‘‘Agway Energy Products’’ in connection with the distribution of petroleum-based fuel and sales and service of HVAC equipment. We regard our trademarks, tradenames and other proprietary rights as valuable assets and believe that they have significant value in the marketing of our products.




                                       5



GOVERNMENT REGULATION; ENVIRONMENTAL AND SAFETY MATTERS

     products and services.
Government Regulation; Environmental and Safety Matters
We are subject to various federal, state and local environmental, health and safety laws and regulations. Generally, these laws impose limitations on the discharge of pollutants and establish standards for the handling of solid and hazardous wastes and can require the investigation and cleanup of environmental contamination. These laws include the Resource Conservation and Recovery Act, the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"(‘‘CERCLA’’), the Clean Air Act, the Occupational Safety and Health Act, the Emergency Planning and Community Right to Know Act, the Clean Water Act and comparable state statutes. CERCLA, also known as the "Superfund"‘‘Superfund’’ law, imposes joint and several liability without regard to fault or the legality of the original conduct on certain classes of persons that are considered to have contributed to the release or threatened release of a "hazardous substance"‘‘hazardous substance’’ into the environment. Propane is not a hazardous substance within the meaning of CERCLA. However, we own real property at locations where such hazardous substances may existbe 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 by the Environmental Protection Agency (‘‘EPA’’) as a potentially responsible party (‘‘PRP’’) under CERCLA 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.
With the Agway Acquisition, we acquired certain properties and assets, including fuel oil tanks and gasoline stations, that are subject to extensive federal, state and local environmental laws and regulations, including investigation and remediation of contaminated soil and groundwater, transportation of hazardous materials, other environmental protection measures and health and safety matters. Based on a review of certain Phase I Environmental Site Assessments and, at certain sites, groundwater and/or soil sample analysis, we identified that certain of these properties had either known or probable environmental exposure, some of which are currently in varying stages of investigation, remediation or monitoring. Under the agreement for the Agway Acquisition, the seller deposited $15.0 million of the total purchase price into an escrow account to be used to fund our remediation costs at the acquired properties pursuant to claims made during the first three years following the closing date. Subject to amounts withheld with respect to any pending claims made prior to the third anniversary of the closing date of the Agway Acquisition, any remaining escrowed funds will be remitted to the seller at the end of the three-year period.
During fiscal 2004, based on our best estimate of future costs for environmental investigations, remediation and ongoing monitoring activities associated with properties acquired in the Agway Acquisition with either known or probable environmental exposures, an environmental reserve in the amount of $13.8 million was established in purchase accounting. We established a corresponding environmental escrow asset in the amount of $13.8 million related to the future reimbursement from escrowed funds for environmental spending. We are unable to predict, however, whether this amount will be sufficient to address the known and any currently unknown contamination at the acquired properties. As of September 24, 2005, the remaining environmental reserve and corresponding environmental escrow asset amounted to approximately $5.8 million and $6.2 million, respectively. The environmental reserves are recorded on an undiscounted basis.
Estimating the extent of our responsibility at a particular site, and the method and ultimate cost of remediation of that site, requires making numerous assumptions. As a result, the ultimate cost to

remediate any site may differ from current estimates. However, we believe that our past experience provides a reasonable basis for estimating these liabilities. As additional information becomes available, estimates are adjusted as necessary. While we do not anticipate that any such adjustment would be material to our financial statements, the result of ongoing or future environmental studies or other factors could alter this expectation and require recording additional liabilities. We currently cannot determine whether we will incur additional liabilities or the extent or amount of any such liabilities.
National Fire Protection Association Pamphlets No.Pamphlet Nos. 54 and No. 58, which establish rules and procedures governing the safe handling of propane, or comparable regulations, have been adopted, in whole, in part or with state addenda, as the industry standard for propane storage, distribution and equipment installation and operation in all of the states in which we operate. In some states these laws are administered by state agencies, and in others they are administered on a municipal level. Pamphlet No. 58 has adopted storage tank valve retrofit requirements due to be completecompleted by June 2011. AWe have a program is in place to meet this deadline.
National Fire Protection Association Pamphlet Nos. 30, 30A, 31, 385 and 395, which establish rules and procedures governing the deadline.

     safe handling of distillates (fuel oil, kerosene and diesel fuel) and gasoline, or comparable regulations, have been adopted, in whole, in part or with state addenda, as the industry standard for fuel oil, kerosene, diesel fuel and gasoline storage, distribution and equipment installation/operation in all of the states in which we operate. In some states these laws are administered by state agencies and in others they are administered on a municipal level.
With respect to the transportation of propane, distillates and gasoline by truck, we are subject to regulations promulgated under the Federal Motor Carrier Safety Act. These regulations cover the transportation of hazardous materials and are administered by the United States Department of Transportation or similar state agency.agencies. We conduct ongoing training programs to help ensure that our operations are in compliance with applicable safety regulations. We maintain various permits that are necessary to operate some of our facilities, some of which may be material to our operations. We believe that the procedures currently in effect at all of our facilities for the handling, storage and distribution of propane, distillates and gasoline are consistent with industry standards and are in compliance, in all material respects, with applicable laws and regulations.

     The Department of  Transportation  has established  regulations  addressing
emergency  discharge control issues. The regulations,  which became effective as
of July 1,  1999,  required  us to modify  the  inspection  and  record  keeping
procedures  for our cargo tank  vehicles.  A schedule of compliance is set forth
within the  regulations.  We have  implemented  the required  discharge  control
systems  and  comply,  in  all  material   respects,   with  current  regulatory
requirements.

     
Future developments, such as stricter environmental, health or safety laws and regulations thereunder, could affect our operations. We do not anticipate that the cost of our compliance with environmental, health and safety laws and regulations, including CERCLA, as currently in effect and applicable to known sites will have a material adverse effect on our financial condition or results of operations. To the extent that there arewe discover any environmental liabilities presently unknown to us or environmental, health or safety laws or regulations are made more stringent, however, there can be no assurance that our financial condition or results of operations will not be materially and adversely affected.

EMPLOYEES

     
Employees
As of September 27, 2003,24, 2005, we had approximately 2,9734,079 full time employees, of whom 285368 were engaged in general and administrative activities (including fleet maintenance), 29 were engaged in transportation and product supply activities and 2,6593,682 were customer service center employees. As of September 27,
2003,  14524, 2005, 104 of our employees were represented by 108 different local chapters of labor unions. We believe that our relations with both our union and non-union employees are satisfactory. From time to time, we hire temporary workers to meet peak seasonal demands.




                                       6
ITEM 2. PROPERTIES
As of September 27,  2003,24, 2005, we owned approximately 70%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 and a 60 million gallon underground propane storage cavern in Tirzah, South Carolina. 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 27, 2003,24, 2005, we had a fleet of seven27 transport truck tractors, of which we owned five,9, and 251252 railroad tank cars, all of which we leased.owned two. In addition, as of September 27,
200324, 2005 we used 1,148had 1,233 bobtail and rack trucks, of which we owned approximately 27%24%, 241 fuel oil tankwagons, of which we owned approximately 61%, and 1,3391,958 other delivery and service vehicles, of which we owned approximately 29%32%. Vehicles that areWe lease the vehicles we do not owned by us are leased.own. As of September 27, 2003,24, 2005, we also owned approximately 771,679842,675 customer propane storage tanks with typical capacities of 100 to 500 gallons, 37,370183,820 customer propane storage tanks with typical capacities of over 500 gallons and 137,682248,475 portable propane cylinders with typical capacities of five to ten gallons.



                                       7
ITEM 3. LEGAL PROCEEDINGS

LITIGATION

     
Litigation
Our operations are subject to all operating hazards and risks normally incidental to handling, storing and delivering combustible liquids such as propane. As a result, we have been, and will continue to be, a defendant in various legal proceedings and litigation arising in the ordinary course of business. We are self-insured for general and product, workers'workers’ compensation and automobile liabilities up to predetermined amounts above which third party insurance applies. We believe that the self-insured retentions and coverage we maintain are reasonable and prudent. Although any litigation is inherently uncertain, based on past experience, the information currently available to us, and the amount of our self-insurance reserves for known and unasserted self-insurance claims (which was approximately $28.6$46.5 million at September 27,
2003)24, 2005), we do not believe that these 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 our cash flow. For the portion of our estimated self-insurance liability that exceeds our deductibles, we record a corresponding asset related to the amount of the liability to be covered by insurance (which was approximately $10.0 million at September 24, 2005).
On May 23, 2001,October 21, 2004 the jury in the trial of Heritage Propane Partners, L.P. ("Heritage")  amendedv. SCANA et al. returned a complaint  itunanimous verdict in our favor on all claims pending against us by Heritage Propane Partners, L.P. (‘‘Heritage’’). Following our Operating Partnership’s 1999 acquisition of the propane assets of SCANA Corporation (‘‘SCANA’’), Heritage had filed on  November  30,  1999brought an action in the South Carolina Court of Common Pleas Fifth Judicial Circuit,for Richland County against SCANA Corporation  ("SCANA")for breach of contract and Cornerstone Ventures, L.P.  ("Cornerstone") to name our Operating Partnership as
a defendant (Heritage v. SCANA et al., Civil Action 0l-CP-40-3262).  Third party
insurancefraud and the self-insurance  reserves referenced above do not apply to this
action. The amended complaint alleges, among other things, that SCANA breached a
contract for the sale of propane assets and asserts claims against our Operating Partnership for wrongfultortious interference with contract and tortious interference with prospective advantagecontract. After the jury returned a verdict against SCANA, the Court conducted a separate bench trial on our cross-claims against SCANA for indemnification, in which we sought to recover our defense costs. The Court granted judgment on our cross-claims against SCANA and civil
conspiracy for allegedly  interfering with Heritage's  prospective contract with
SCANA.  Heritage  claimsawarded us a total of approximately $2.6 million. However, on November 17, 2005, the Court granted SCANA’s motion to vacate the judgment in our favor. SCANA claimed that, at the time that the order was entered, the Court lacked jurisdiction over our cross-claims because SCANA had appealed the jury verdict against it, thereby divesting the Court of jurisdiction over matters that could be affected by SCANA’s appeal. SCANA further claimed that if the judgment against it is entitledvacated on appeal, it would have no liability to recover its alleged lost profits
inus for our defense costs. We have requested that the amountCourt modify the November 17, 2005 order vacating the award of $125.0  million  and that all  defendants  are  jointly  and
severally  liable to it for such  amount.  Our  Operating  Partnership  moved to
dismiss the claims asserted  against it for failure to state a claim. On October
24, 2001,  the court denied our  Operating  Partnership's  motion to dismiss the
amended complaint.

     On  February  6, 2003,  the  plaintiffs  in Heritage v. SCANA et al filed a
motion  to  amend  its  complaint  to  assert   additional  claims  against  all
defendants, including three new claims against our Operating Partnership: aiding
and abetting;  misappropriation;  and unjust  enrichment.  The court has granted
this  motion.  On May 5,  2003,  our  Operating  Partnership  filed a motion for
summary  judgement  to dismiss the claims  asserted  against it in the  original
complaint filed against our Operating  Partnership.  We withdrew this motion for
strategic reasons butfees; we intend to re-file it at a later date.  However,  we cannot
predictseek further reconsideration of that order and to seek to have the outcomeaward of this motion for summary  judgement.  Discovery is ongoing
between all parties to the lawsuit.  We do not anticipate  that this matter will
be tried  before the Spring of 2004.  We  believe  that the claims and  proposed
additional  claims against our Operating  Partnership  are without merit and are
defending the action  vigorously.  If this matter  proceeds to trial,  we cannot
predict  the  outcome of this  trial,  or , if the trial is before a jury,  what
verdict the jury ultimately may reach.


fees reinstated.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.





                                       8

PART II

ITEM 5. MARKET FOR THE REGISTRANT'S
ITEM 5.
MARKET FOR THE REGISTRANT’S UNITS, AND 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"(‘‘NYSE’’) under the symbol SPH. As of November 21, 2003,28, 2005, there were 982890 Common Unitholders of record. The following table presents, for the periods indicated, the high and low sales prices per Common Unit, as reported on the NYSE, and the amount of quarterly cash distributions declared and paid per Common Unit with respect to each quarter.

                          Common Unit Price Range
                          ------------------------          Cash Distribution
                             High           Low                   Paid
                          -----------  -----------          -----------------

      Fiscal 2002
      -----------
      First Quarter          $ 27.99       $ 24.50               $ 0.5625
      Second Quarter           28.40         24.36                 0.5625
      Third Quarter            28.25         25.59                 0.5750
      Fourth Quarter           28.49         20.00                 0.5750

      Fiscal 2003
      -----------
      First Quarter          $ 28.49       $ 24.60               $ 0.5750
      Second Quarter           29.60         26.90                 0.5750
      Third Quarter            29.89         27.40                 0.5875
      Fourth Quarter           30.95         27.91                 0.5875


     

 
Common Unit Price Range
Cash Distribution
Paid per Common Unit
 
High
Low
Fiscal 2004
 
 
 
 
 
 
 
 
 
First Quarter
$
32.49
 
$
28.75
 
$
0.5875
 
Second Quarter
 
34.50
 
 
31.05
 
 
0.6000
 
Third Quarter
 
33.97
 
 
27.60
 
 
0.6125
 
Fourth Quarter
 
35.50
 
 
32.00
 
 
0.6125
 
Fiscal 2005
 
 
 
 
 
 
 
 
 
First Quarter
$
35.70
 
$
30.00
 
$
0.6125
 
Second Quarter
 
36.00
 
 
33.45
 
 
0.6125
 
Third Quarter
 
35.70
 
 
31.55
 
 
0.6125
 
Fourth Quarter
 
37.40
 
 
25.39
 
 
0.6125
 
We make quarterly distributions to our partners in an aggregate amount equal to our Available Cash (as defined in theour Second Amended and Restated Partnership Agreement) with respect to such quarter. Available Cash generally means all cash on hand at the end of the fiscal quarter plus all additional cash on hand as a result of borrowings subsequent to the end of such quarter less cash reserves established by the Board of Supervisors in its reasonable discretion for future cash requirements.
We are a publicly traded limited partnership and, other than certain corporate subsidiaries, we are not subject to federal income tax. Instead, Unitholders are required to report their allocable share of our earnings or loss, regardless of whether we make distributions.




                                       9
(b) 
Not applicable.
(c) 
None.

ITEM 6. SELECTED FINANCIAL DATA
The following table presents our selected consolidated historical financial data. The selected consolidated historical financial data is derived from our audited consolidated financial statements.  Thestatements, certain of which are included elsewhere in this Annual Report. All amounts in the table below, except per unit data, are in thousands.

 
Year Ended
 
September 24,
2005
September 25,
2004 (a)
September 27,
2003
September 28,
2002
September 29,
2001
Statement of Operations Data
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenues
$
1,620,234
 
$
1,307,254
 
$
735,075
 
$
635,122
 
$
890,349
 
Costs and expenses
 
1,548,436
 
 
1,231,356
 
 
655,225
 
 
552,341
 
 
796,507
 
Restructuring costs (b)
 
2,775
 
 
2,942
 
 
—
 
 
—
 
 
—
 
Impairment of goodwill (c)
 
656
 
 
3,177
 
 
—
 
 
—
 
 
—
 
Gain on sale of storage facility
 
—
 
 
—
 
 
—
 
 
(6,768
) 
 
—
 
Income before interest expense, loss on debt extinguishment and provision for income taxes (d)
 
68,367
 
 
69,779
 
 
79,850
 
 
89,549
 
 
93,842
 
Loss on debt extinguishment (e)
 
36,242
 
 
—
 
 
—
 
 
—
 
 
—
 
Interest expense, net
 
40,374
 
 
40,832
 
 
33,629
 
 
35,325
 
 
39,596
 
Provision for income taxes
 
803
 
 
3
 
 
202
 
 
703
 
 
375
 
(Loss) income from continuing operations (d)
 
(9,052
) 
 
28,944
 
 
46,019
 
 
53,521
 
 
53,871
 
Discontinued operations:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gain on sale of customer service centers (f)
 
976
 
 
26,332
 
 
2,483
 
 
—
 
 
—
 
(Loss) income from discontinued customer service centers
 
—
 
 
(972
) 
 
167
 
 
3
 
 
(361
) 
Net (loss) income (d)
 
(8,076
) 
 
54,304
 
 
48,669
 
 
53,524
 
 
53,510
 
(Loss) income from continuing operations per Common Unit – basic
 
(0.29
) 
 
0.96
 
 
1.77
 
 
2.12
 
 
2.15
 
Net (loss) income per Common Unit – basic ( g)
 
(0.26
) 
 
1.79
 
 
1.87
 
 
2.12
 
 
2.14
 
Net (loss) income per Common Unit – diluted (g)
 
(0.26
) 
 
1.78
 
 
1.86
 
 
2.12
 
 
2.14
 
Cash distributions declared per unit
$
2.45
 
$
2.41
 
$
2.33
 
$
2.28
 
$
2.20
 
Balance Sheet Data (end of period)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
14,411
 
$
53,481
 
$
15,765
 
$
40,955
 
$
36,494
 
Current assets
 
236,803
 
 
252,894
 
 
98,912
 
 
116,789
 
 
124,339
 
Total assets
 
965,597
 
 
992,007
 
 
670,559
 
 
700,146
 
 
723,006
 
Current liabilities, excluding short-term borrowings and current portion of long-term borrowings
 
194,987
 
 
202,024
 
 
94,802
 
 
98,606
 
 
119,196
 
Total debt
 
575,295
 
 
515,915
 
 
383,826
 
 
472,769
 
 
473,177
 
Other long-term liabilities
 
119,199
 
 
105,950
 
 
107,853
 
 
109,485
 
 
71,684
 
Partners' capital – Common Unitholders
 
159,199
 
 
238,880
 
 
165,950
 
 
103,680
 
 
105,549
 
Partner's capital – General Partner
$
(1,779
) 
$
852
 
$
1,567
 
$
1,924
 
$
1,888
 
Statement of Cash Flows Data
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash provided by (used in)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating activities
$
39,005
 
$
93,065
 
$
57,300
 
$
68,775
 
$
101,838
 
Investing activities
 
(24,631
) 
 
(196,557
) 
 
(4,859
) 
 
(6,851
) 
 
(17,907
) 
Financing activities
$
(53,444
) 
$
141,208
 
$
(77,631
) 
$
(57,463
) 
$
(59,082
) 
Other Data
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Depreciation and amortization (h)
$
37,762
 
$
36,743
 
$
27,520
 
$
28,355
 
$
36,496
 
EBITDA (i)
 
107,105
 
 
131,882
 
 
110,020
 
 
117,907
 
 
129,977
 
Capital expenditures – maintenance and growth (j)
 
29,301
 
 
26,527
 
 
14,050
 
 
17,464
 
 
23,218
 
Acquisitions
$
—
 
$
211,181
 
$
—
 
$
—
 
$
—
 
Retail gallons sold
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Propane
 
516,040
 
 
537,330
 
 
491,451
 
 
455,988
 
 
524,728
 
Fuel oil and refined fuels
 
244,536
 
 
220,469
 
 
—
 
 
—
 
 
—
 



                                                                                    Year Ended 
(a)
                                                       ----------------------------------------------------------------------------
                                                       September       September       September       September       September
                                                        27,
Includes the results from our acquisition of substantially all of the assets and operations of Agway Energy from December 23, 2003, 28, 2002        29, 2001      30, 2000 the date of acquisition.
(b)      25, 1999
                                                        --------        --------        --------      ------------     ---------
STATEMENT OF OPERATIONS DATA

Revenues                                                  $ 771,679       $ 665,105       $ 931,536       $ 841,304       $ 620,207
Costs
During fiscal 2005, we incurred $2.8 million in restructuring charges associated primarily with severance costs from an internal realignment of our field operations. During fiscal 2004, we incurred $2.9 million in restructuring charges to integrate our assets, employees and expenses                                          691,662         582,321         838,055         770,332         547,579
Recapitalization costs operations with Agway Energy assets, employees and operations.
(c)                                        -               -               -               -          18,903
Gain
During fiscal 2005, we recorded a non-cash charge of $0.7 million related to the impairment of goodwill in our HVAC segment. During fiscal 2004, we recorded a non-cash charge of $3.2 million related to impairment of goodwill for one of our reporting units acquired in fiscal 1999.
(d)
These amounts include, in addition to the gain on sale of assets                                            -               -               -        (10,328)               -
Gaincustomer service centers and the gain on sale of storage facility, -         (6,768)               -               -               -
Income before interest expensegains from the disposal of property, plant and income taxes  (d)                                     80,017          89,552          93,481          81,300          53,725
Interest expense, net                                        33,629          35,325          39,596          42,534          31,218
Provisionequipment of $2.0 million for income taxes                                      202             703             375             234              68
Income from continuing operations (d)                        46,186          53,524          53,510          38,532          22,439
Discontinued operations:
     fiscal 2005, $0.7 million for fiscal 2004, $0.6 million for fiscal 2003, $0.5 million for fiscal 2002 and $3.8 million for fiscal 2001.
(e)
During fiscal 2005, we incurred a one-time charge of $36.2 million as a result of our debt refinancing to reflect the loss on debt extinguishment associated with a prepayment premium of $32.0 million and the write-off of $4.2 million of unamortized bond issuance costs associated with the previously outstanding senior notes.
(f)
Gain on sale of customer service centers (e)             2,483               -               -               -               -
Net income (d)                                               48,669          53,524          53,510          38,532          22,439
Incomefor fiscal 2005 of $1.0 million reflects the finalization of certain purchase price adjustments with the buyer of the customer service centers sold during fiscal 2004. Gain on sale of customer service centers for fiscal 2004 of $26.3 million reflects the sale of 24 customer service centers for net cash proceeds of approximately $39.4 million. Gain on sale of customer service centers for fiscal 2003 of $2.5 million reflects the sale of nine customer service centers for net cash proceeds of approximately $7.2 million. The gains on sale have been accounted for within discontinued operations pursuant to Statement of Financial Accounting Standards (‘‘SFAS’’) No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." Prior period results of operations attributable to the customer service centers sold in fiscal 2004 have been reclassified to remove financial results from continuing operations. Prior period results of operations per Common
       Unit - basic                                            1.78            2.12            2.14            1.70            0.83
Netattributable to the customer service centers sold in fiscal 2003 were not significant and, as such, results prior to fiscal 2003 were not reclassified to remove financial results from continuing operations.
(g)
Basic net (loss) income per Common Unit - basic (f)                         1.87            2.12            2.14            1.70            0.83
Netis computed by dividing net (loss) income, after deducting our general partner's interest, by the weighted average number of outstanding Common Units. Diluted net income per Common Unit - diluted (f)                       1.86            2.12            2.14            1.70            0.83
Cash distributions declared per unit                         $ 2.33          $ 2.28          $ 2.20          $ 2.11          $ 2.03

BALANCE SHEET DATA (END OF PERIOD)
Cashis computed by dividing net income, after deducting our general partner's interest, by the weighted average number of outstanding Common Units and cash equivalents                                  $ 15,765        $ 40,955        $ 36,494        $ 11,645         $ 8,392
Current assets                                               98,912         116,789         124,339         122,160          78,637
Total assets                                                665,630         700,146         723,006         771,116         659,220
Current liabilities, excluding current portion of
     long-term borrowings                                    94,802          98,606         119,196         124,585          99,953
Total debt                                                  383,826         472,769         473,177         524,095         430,687
Other long-term liabilities                                 102,924         109,485          71,684          60,607          60,194
Partners' capital - Common Unitholders                      165,950         103,680         105,549          58,474          66,342
Partner's capital - General Partner                         $ 1,567         $ 1,924         $ 1,888         $ 1,866         $ 2,044

STATEMENT OF CASH FLOWS DATA
Cash provided by/(used in)
   Operating activities                                    $ 57,300        $ 68,775       $ 101,838        $ 59,467        $ 81,758
   Investing activities                                      (4,859)         (6,851)        (17,907)        (99,067)        (12,241)
   Financing activities                                   $ (77,631)      $ (57,463)      $ (59,082)       $ 42,853       $(120,944)

OTHER DATA
time vested restricted units granted under our 2000 Restricted Unit Plan.
(h)
Depreciation and amortization (g)                          $ 27,520        $ 28,355        $ 36,496        $ 37,032        $ 34,453
EBITDA (h)                                                  110,020         117,907         129,977         118,332          88,178
Capital expenditures (i)
   Maintenanceexpense for fiscal 2002 and growth                                    14,050          17,464          23,218          21,250          11,033
   Acquisitions                                                 $ -             $ -             $ -        $ 98,012         $ 4,768
Retail propane gallons sold                                 491,451         455,988         524,728         523,975         524,276


subsequent fiscal years reflects our adoption of SFAS No. 142, ‘‘Goodwill and Other Intangible Assets’’ (‘‘SFAS 142’’) as of September 30, 2001 (the beginning of our 2002 fiscal year). SFAS 142 eliminated the requirement to amortize goodwill and certain intangible assets. Amortization expense for fiscal 2002 reflects approximately $7.4 million lower amortization expense compared to fiscal 2001 as a result of the elimination of amortization expense associated with goodwill.



                                       10



(a)  Our 2000 fiscal year contained 53 weeks.  All other fiscal years  contained
     52 weeks.

(b)  Includes  the  results  from  our  November  1999  acquisition  of  certain
     subsidiaries of SCANA Corporation, accounted for under the purchase method,
     from the date of acquisition.

(c)  We   incurred   expenses   of  $18.9   million  in   connection   with  the
     recapitalization  transaction  described  in  Note  1 to  the  consolidated
     financial  statements  included  in  this  Annual  Report.  These  expenses
     included  $7.6  million   representing  cash  expenses  and  $11.3  million
     representing  non-cash charges  associated with the accelerated  vesting of
     restricted Common Units.

(d)  These  amounts  include,  in addition to the gain on sale of assets and the
     gain on sale of storage  facility,  gains from the  disposal  of  property,
     plant and  equipment  of $0.6  million for fiscal  2003,  $0.5  million for
     fiscal 2002, $3.8 million for fiscal 2001, $1.0 million for fiscal 2000 and
     $0.6 million for fiscal 1999.

(e)  Gain on sale of customer  service centers consists of nine customer service
     centers we sold during fiscal 2003 for total cash proceeds of approximately
     $7.2  million.  We recorded a gain on sale of  approximately  $2.5 million,
     which has been  accounted for within  discontinued  operations  pursuant to
     Statement of Financial  Accounting  Standards ("SFAS") No. 144, "Accounting
     for the Impairment or Disposal of Long-Lived  Assets." Prior period results
     of operations  attributable to these nine customer service centers were not
     significant and, as such,  prior period results have not been  reclassified
     to remove financial results from continuing operations.

(f)  Basic net income per Common Unit is computed by dividing net income,  after
     deducting our general partner's interest, by the weighted average number of
     outstanding Common Units. Diluted net income per Common Unit is computed by
     dividing net income,  after deducting our general partner's  approximate 2%
     interest,  by the weighted  average number of outstanding  Common Units and
     time vested restricted units granted under our 2000 Restricted Unit Plan.

(g)  Depreciation and amortization expense for the year ended September 28, 2002
     reflects our early adoption of SFAS No. 142, "Goodwill and Other Intangible
     Assets"  ("SFAS 142") as of September  30, 2001 (the  beginning of our 2002
     fiscal year).  SFAS 142 eliminates the requirement to amortize goodwill and
     certain  intangible  assets.   Amortization  expense  for  the  year  ended
     September 28, 2002 reflects  approximately  $7.4 million lower amortization
     expense  compared to the year ended  September  29, 2001 as a result of the
     elimination of amortization expense associated with goodwill.

(h)  
(i)
EBITDA represents net income before deducting interest expense, loss on debt extinguishment, income taxes, depreciation and amortization. Our management uses EBITDA as a measure of liquidity and we are including it because we believe that it provides our investors and industry analysts with additional information to evaluate our ability to meet our debt service obligations and to pay our quarterly distributions to holders of our Common Units. Moreover, our revolving credit agreement requires us to use EBITDA as a component in calculating our leverage and interest coverage ratios. EBITDA is not a recognized term under generally accepted accounting principles (‘‘GAAP’’) and should not be considered as an alternative to net income or net cash provided by operating activities determined in accordance with GAAP. Because EBITDA as determined by us excludes some, but not all, items that affect net income, it may not be comparable to EBITDA or similarly titled

measures used by other companies. The following table sets forth (i) our calculation of EBITDA and (ii) a reconciliation of EBITDA, as so calculated, to our net cash provided by operating activities (amounts in thousands):

 
Fiscal 2005
Fiscal 2004
Fiscal 2003
Fiscal 2002
Fiscal 2001
Net (loss) income
$
(8,076
) 
$
54,304
 
$
48,669
 
$
53,524
 
$
53,510
 
Add:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Provision for income taxes
 
803
 
 
3
 
 
202
 
 
703
 
 
375
 
Loss on debt extinguishment
 
36,242
 
 
—
 
 
—
 
 
—
 
 
—
 
Interest expense, net
 
40,374
 
 
40,832
 
 
33,629
 
 
35,325
 
 
39,596
 
Depreciation and amortization
 
37,762
 
 
36,743
 
 
27,520
 
 
28,355
 
 
36,496
 
EBITDA
 
107,105
 
 
131,882
 
 
110,020
 
 
117,907
 
 
129,977
 
Add (subtract):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Provision for income taxes
 
(803
) 
 
(3
) 
 
(202
) 
 
(703
) 
 
(375
) 
Loss on debt extinguishment
 
(36,242
) 
 
—
 
 
—
 
 
—
 
 
—
 
Interest expense, net
 
(40,374
) 
 
(40,832
) 
 
(33,629
) 
 
(35,325
) 
 
(39,596
) 
Gain on disposal of property, plant and equipment, net
 
(2,043
) 
 
(715
) 
 
(636
) 
 
(546
) 
 
(3,843
) 
Gain on sale of customer service centers
 
(976
) 
 
(26,332
) 
 
(2,483
) 
 
—
 
 
—
 
Gain on sale of storage facility
 
—
 
 
—
 
 
—
 
 
(6,768
) 
 
—
 
Changes in working capital and other assets and liabilities
 
12,338
 
 
29,065
 
 
(15,770
) 
 
(5,790
) 
 
15,675
 
Net cash provided by (used in)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating activities
$
39,005
 
$
93,065
 
$
57,300
 
$
68,775
 
$
101,838
 
Investing activities
$
(24,631
) 
$
(196,557
) 
$
(4,859
) 
$
(6,851
) 
$
(17,907
) 
Financing activities
$
(53,444
) 
$
141,208
 
$
(77,631
) 
$
(57,463
) 
$
(59,082
) 
(j)
Our capital expenditures fall generally into two categories: (i) maintenance expenditures, which include expenditures for repair and replacement of property, plant and equipment; and (ii) growth capital expenditures which include new propane tanks and other equipment to facilitate expansion of our customer base and operating capacity.

ITEM 7. 
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following is a discussion of our financial condition and results of operations, which should be read in conjunction with our historical consolidated financial statements and notes thereto included elsewhere in this Annual Report.
Disclosure Regarding Forward-Looking Statements
This Annual Report on Form 10-K contains Forward-Looking Statements as defined in the Private Securities Litigation Reform Act of 1995 and Section 27A of the Securities Act of 1933, as amended, relating to future business expectations and predictions and financial condition and results of operations of the Partnership. Some of these statements can be identified by the use of forward-looking terminology such as ‘‘prospects,’’ ‘‘outlook,’’ ‘‘believes,’’ ‘‘estimates,’’ ‘‘intends,’’ ‘‘may,’’ ‘‘will,’’ ‘‘should,’’ ‘‘anticipates,’’ ‘‘expects’’ or ‘‘plans’’ or the negative or other variation of these or similar words, or by discussion of trends and conditions, strategies or risks and uncertainties. These Forward-Looking Statements involve certain risks and uncertainties that could cause actual results to differ materially from those discussed or implied in such Forward-Looking Statements (statements contained in this Annual Report identifying such risks and uncertainties are referred to as ‘‘Cautionary Statements’’). The risks and uncertainties and their impact on the Partnership’s results include, but are not limited to, the following risks:
• 
The impact of weather conditions on the demand for propane, fuel oil and other refined fuels, natural gas and electricity;
• 
Fluctuations in the unit cost of propane, fuel oil and other refined fuels and natural gas, and the impact of price increases on customer conservation;
• 
The ability of the Partnership to compete with other suppliers of propane, fuel oil and other energy sources;
• 
The impact on the price and supply of propane, fuel oil and other refined fuels from the political, military or economic instability of the oil producing nations, global terrorism and other general economic conditions;
• 
The ability of the Partnership to continue to realize, or to realize fully, within the expected timeframe, the expected cost savings and synergies from the Agway Acquisition (as defined below);
• 
The ability of the Partnership to acquire and maintain reliable transportation for its propane, fuel oil and other refined fuels;
• 
The ability of the Partnership to retain customers;
• 
The impact of energy efficiency and technology advances on the demand for propane and fuel oil;
• 
The ability of management to continue to control expenses, including the results of our recent field realignment initiative;
• 
The impact of changes in applicable statutes and government regulations, or their interpretations, including those relating to the environment and global warming and other regulatory developments on the Partnership’s business;
• 
The impact of legal proceedings on the Partnership’s business;
• 
The Partnership’s ability to implement its expansion strategy into new business lines and sectors; and
• 
The Partnership’s ability to integrate acquired businesses successfully.
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. 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.
The following are factors that regularly affect our operating results and financial condition:
Product Costs
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 product cost. The unit cost of our products, particularly propane and fuel oil, is subject to volatile changes as a result of product supply or other market conditions, including, but not limited to, economic and political factors impacting crude oil and natural gas supply or pricing. Product cost changes 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 cost increases fully or immediately, particularly when product costs increase rapidly. Therefore, average retail sales prices can vary significantly from year to year as product costs fluctuate with propane, fuel oil, crude oil and natural gas commodity market conditions. In addition, in periods of sustained higher commodity prices, as was experienced in fiscal 2005, retail sales volumes may be negatively impacted by customer conservation efforts.
Seasonality
The retail propane and fuel oil distribution businesses, as well as the natural gas marketing business, are seasonal because of the primary use 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 Partnership interests in the first and fourth fiscal quarters.
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 use.
Risk Management
Product supply contracts are generally one-year agreements subject to annual renewal and generally permit suppliers to charge posted market prices (plus transportation costs) at the time of delivery or the current prices established at major delivery points. Since rapid increases in the cost of propane or fuel oil may not be immediately passed on to retail customers, such increases could reduce profitability. During fiscal 2005, approximately 70% of our fuel oil volumes were sold to individual customers under agreements pre-establishing a maximum price per gallon over a twelve-month period (the ‘‘Ceiling Program’’). While our strategy was to enter into derivative instruments in the form of futures and options traded on the NYMEX covering a majority of the fuel oil we expected to sell to customers under the

Ceiling Program in an effort to protect the margins under the program, we evaluated the costs of such hedge protection and elected not to hedge February through April deliveries under this program. After evaluating the costs to adequately hedge the Ceiling Program in the current commodity price environment, we decided to discontinue offering the Ceiling Program after the fiscal 2005 heating season.
We engage in risk management activities to reduce the effect of price volatility on our product costs and to help ensure the availability of product during periods of short supply. We are currently a party to propane and fuel oil futures contracts traded on the NYMEX and enter into forward and option agreements with third parties to purchase and sell propane at fixed prices in the future. Risk management activities are monitored by an internal Commodity Risk Management Committee, made up of five members of management, through enforcement of our Hedging and Risk Management Policy and reported to our Audit Committee. Risk management transactions may not always result in increased product margins. See Item 7A of this Annual Report.
Critical Accounting Policies and Estimates
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 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 legal reserves, environmental reserves, allowances for doubtful accounts, asset valuation assessments and valuation of derivative instruments. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Any effects on our business, financial position or results of operations resulting from revisions to these estimates are recorded in the period in which the facts that give rise to the revision become known to us.
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. We believe that the following are our critical accounting policies:
Revenue Recognition. We recognize revenue from the sale of propane, fuel oil and other refined fuels at the time product is delivered to the customer. Revenue from the sale of appliances and equipment is recognized at the time of sale or when installation is complete, as applicable. Revenue from repairs, maintenance and other service activities is recognized upon completion of the service. Revenue from HVAC service contracts is recognized ratably over the service period. Revenue from our natural gas and electricity business is recognized based on customer usage as determined by meter readings, plus an amount for natural gas and electricity delivered but unbilled at the end of each accounting period.
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.
Pension and Other Postretirement Benefits. We estimate the rate of return on plan assets, the discount rate to estimate the present value of future benefit obligations and the cost of future health care benefits in determining our annual pension and other postretirement benefit costs. In accordance with GAAP, actual results that differ from our assumptions are accumulated and amortized over future periods and therefore, generally affect our recognized expense and recorded obligation in such future periods. 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 obligations and our future expense. See ‘‘Pension Plan Assets and Obligations’’ below for additional disclosure regarding pension benefits.
Self-Insurance Reserves. Our accrued insurance reserves represent the estimated costs of known and anticipated or unasserted claims under our general and product, workers’ compensation and automobile insurance policies. Accrued insurance provisions for unasserted claims arising from unreported incidents are based on an analysis of historical claims data. For each claim, we record a self-insurance provision up to the estimated amount of the probable claim utilizing actuarially determined loss development factors applied to actual claims data. We maintain insurance coverage wherein our net exposure for insured claims is limited to the insurance deductible, claims above which are paid by our insurance carriers. For the portion of our estimated self-insurance liability that exceeds our deductibles, we record an asset related to the amount of the liability expected to be covered by insurance.
Environmental Reserves. We establish reserves for environmental exposures when it is probable that a liability has been incurred and the amount of the liability can be reasonably estimated based upon our best estimate of costs associated with environmental remediation and ongoing monitoring activities. Accrued environmental reserves are exclusive of claims against third parties, and an asset is established where contribution or reimbursement from such third parties has been agreed and we are reasonably assured of receiving such contribution or reimbursement. Environmental reserves are not discounted.
Goodwill Impairment Assessment. We assess the carrying value of goodwill at a reporting unit level, at least annually, 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.
Derivative Instruments and Hedging Activities. See Item 7A of this Annual Report for information about accounting for derivative instruments and hedging activities.
Executive Summary of Results of Operations and Financial Condition
Fiscal 2005 presented a very challenging operating environment resulting from the combination of an erratic weather pattern and highly volatile commodity prices. While nationwide average temperatures, as reported by the National Oceanic and Atmospheric Administration (‘‘NOAA’’), were 7% warmer than normal in both fiscal 2005 and fiscal 2004, significantly warmer than normal temperatures during the critical months of the fiscal 2005 heating season (November 2004 through February 2005) had a significant negative impact on both propane and fuel oil volumes. Average temperatures during these critical months were 9% warmer than normal. In addition to the impact that warmer weather typically has on volumes, the combination of warm weather and high energy prices has led to increased customer conservation efforts.
In the commodities markets, the average posted prices of propane and fuel oil began a precipitous rise in September 2004, which continued to unprecedented levels during the heating season and continued with a counter-seasonal trend through the end of fiscal 2005, particularly in the fuel oil markets. Average posted prices of propane and fuel oil during fiscal 2005 increased 26% and 54%, respectively, compared to average posted prices in fiscal 2004. While propane margins remained strong, margin opportunities and therefore profitability in our refined fuels segment were severely restricted during the fiscal 2005 heating season as a result of our inability to pass on fully the rise in fuel oil prices due to our Ceiling Program, coupled with our decision not to hedge February through April 2005 deliveries under the Ceiling Program. Due to the extreme market volatility for fuel oil, the costs to hedge, in relation to the expected margins under this program, became prohibitive. The lost margin opportunity from this fuel oil Ceiling Program had the most significant negative impact on our financial results for fiscal 2005 accounting for an estimated impact of $21.5 million on the year-over-year comparison of operating margins in the fuel oil and refined fuels segment. After evaluating the costs to adequately hedge this program in the current price environment, management decided to discontinue offering the fuel oil Ceiling Program after the fiscal 2005 heating season.
In light of warmer weather and customer conservation efforts, retail propane gallons sold in fiscal 2005 decreased 21.3 million gallons, or 4.0%, to 516.0 million gallons from 537.3 million gallons in fiscal

2004. Sales of fuel oil and other refined fuels increased 24.0 million gallons, or 10.9%, to 244.5 million gallons, compared to 220.5 million gallons in the prior fiscal year. The negative impact of warm weather and high energy prices on volumes was partially offset by a full twelve months of Agway Energy operations in fiscal 2005 compared to nine months in fiscal 2004.
For fiscal 2005, we reported a net loss of $8.1 million, or ($0.26) per Common Unit, a decrease of $62.4 million, compared to net income of $54.3 million, or $1.79 per Common Unit, in fiscal 2004. We reported earnings before interest, loss on debt extinguishment, taxes, depreciation and amortization (‘‘EBITDA’’) of $107.1 million for fiscal 2005, a decrease of $24.8 million, or 18.8%, compared to $131.9 million in fiscal 2004.
In addition to the negative impact on our financial results from the fuel oil Ceiling Program, EBITDA and net loss for fiscal 2005 were unfavorably impacted by $3.5 million and $40.9 million, respectively, as a result of certain significant items relating mainly to (i) a $36.2 million loss on debt extinguishment recorded in the third quarter associated with our debt refinancing; (ii) a $2.8 million restructuring charge attributable primarily to severance associated with the realignment of our field operations; (iii) a $0.7 million charge attributable to impairment of goodwill associated with our HVAC segment; (iv) a $0.8 million charge included within amortization expense attributable to the impairment of other intangible assets in our HVAC segment; and (v) $0.4 million included within depreciation expense attributable to impairment of assets affected by the field realignment.
By comparison, EBITDA and net income for fiscal 2004 included the net favorable impact of $8.6 million and $7.6 million, respectively, from certain significant items mainly related to (i) a $26.3 million gain from the sale of 24 customer service centers in the northern and southern central regions of the United States considered to be non-strategic; (ii) a non-cash charge of $6.3 million included within cost of products sold related to the settlement of futures contracts which were marked-to-market under purchase accounting for the Agway Acquisition; (iii) a non-cash pension settlement charge of $5.3 million related to accelerated recognition of actuarial losses in our defined benefit pension plan; (iv) a non-cash charge of $3.2 million attributable to impairment of goodwill related to a small business acquired in 1999; (v) a $2.9 million restructuring charge related to integrating certain field management and back office functions in the northeast; and (vi) a non-cash charge of $1.0 million included within depreciation expense attributable to the write-down of assets to be disposed of as a result of our efforts to integrate certain northeast operations.
While the continued high price environment had a negative impact on our volumes as a result of customer conservation efforts and on the profitability of our refined fuels segment, our propane segment generated solid results despite the challenging environment. Profitability of our propane segment increased $3.5 million, or 2.4%, in fiscal 2005 compared to the prior year. Additionally, during the second half of fiscal 2005, we took positive steps to add financial flexibility and drive further efficiencies throughout our operations, highlighted by the successful completion of our debt refinancing and, more recently, the reorganization of our field operations to streamline our operating footprint and leverage our system infrastructure. In connection with our field realignment, we eliminated approximately 85 positions and have begun to consolidate customer service centers for further cost savings.
As we look ahead to fiscal 2006, with the continued integration of the Agway Energy operations, the operating efficiencies expected from our internal reorganization and the steps already taken to eliminate the fuel oil Ceiling Program, we believe we are well positioned for significant earnings growth in fiscal 2006. Our anticipated cash requirements for fiscal 2006 include: (i) maintenance and growth capital expenditures of approximately $30.0 million; (ii) approximately $40.0 million of interest payments; and, (iii) assuming distributions remain at the current level, approximately $76.6 million of distributions to Common Unitholders and the General Partner. The projected level of capital expenditures for fiscal 2006 is approximately $10.0 million higher than our expected annual level of capital spending in subsequent years, primarily as a result of anticipated spending on system enhancements and facility integration. Additionally, as our field realignment efforts continue into fiscal 2006 we may incur additional restructuring or asset impairment charges. Based on our current estimate of our cash position, availability under the Revolving Credit Agreement (unused borrowing capacity under the working capital facility of $76.3 million at November 28, 2005) and expected cash flow from operating activities, we expect to have sufficient funds to meet our current and future obligations.

Results of Operations
Fiscal Year 2005 Compared to Fiscal Year 2004
Revenues
(Dollars in thousands)

 
Fiscal 2005
Fiscal 2004
Increase
Percent
Increase
Revenues
 
 
 
 
 
 
 
 
 
 
 
 
Propane
$
969,943
 
$
856,109
 
$
113,834
 
 
13.3
% 
Fuel oil and refined fuels
 
431,223
 
 
281,682
 
 
149,541
 
 
53.1
% 
Natural gas and electricity
 
102,803
 
 
68,452
 
 
34,351
 
 
50.2
% 
HVAC
 
106,115
 
 
92,072
 
 
14,043
 
 
15.3
% 
All other
 
10,150
 
 
8,939
 
 
1,211
 
 
13.5
% 
Total revenues
$
1,620,234
 
$
1,307,254
 
$
312,980
 
 
23.9
% 
Total revenues increased $313.0 million, or 23.9%, to $1,620.2 million for the year ended September 24, 2005 compared to $1,307.3 million for the year ended September 25, 2004 driven primarily by a significant increase in average selling prices in line with higher product costs, the inclusion of the Agway Energy operations for a full twelve months in fiscal 2005 compared to nine months in the prior year, offset to an extent by the impact on volumes from warmer weather. Retail sales volumes in our propane and fuel oil segments were negatively impacted by a combination of warmer than normal average nationwide temperatures, as well as the impact of customer conservation efforts from the significant rise in energy costs. As reported by NOAA, average nationwide temperatures in both fiscal 2005 and 2004 were 7% warmer than normal. However, the fiscal 2005 heating season presented a very erratic weather pattern with significantly warmer than normal temperatures during the critical months of the heating season (November 2004 through February 2005) offset somewhat by a burst of cold weather in March 2005. Average nationwide temperatures were 9% warmer than normal during these critical months in fiscal 2005.
Revenues in our propane segment of $969.9 million for the year ended September 24, 2005 increased $113.8 million, or 13.3%, compared to $856.1 million in the prior year. This increase is the result of higher average selling prices in line with higher commodity prices, offset to an extent by lower retail sales volumes attributable to the combination of warmer weather and customer conservation. Retail propane gallons sold decreased 21.3 million gallons, or 4.0%, to 516.0 million gallons in fiscal 2005 from 537.3 million gallons in the prior year. Average retail selling prices increased approximately 16.8% as a result of sustained higher commodity prices for propane. The average posted price of propane during fiscal 2005 increased approximately 26% compared to the average posted prices in the prior year. Additionally, included within the propane segment are revenues from wholesale and risk management activities of $37.0 million for the year ended September 24, 2005 which decreased $6.0 million, or 14.0%, compared to the prior year.
Revenues from the distribution of fuel oil and other refined fuels of $431.2 million for the year ended September 24, 2005 increased $149.5 million, or 53.1%, from $281.7 million in the prior year from a combination of increased volumes and significantly higher selling prices. Sales of fuel oil and other refined fuels amounted to 244.5 million gallons during fiscal 2005 compared to 220.5 million gallons in the prior year, an increase of 24.0 million gallons, or 10.9%, primarily reflecting the impact of the Agway Energy operations for a full twelve months in fiscal 2005 compared to nine months in the prior year, offset to an extent by the impact of warm weather and customer conservation. In addition, during the fourth quarter of fiscal 2004, we exited certain lower margin low sulfur diesel and gasoline businesses, thus negatively impacting the volume comparison year-over-year. Average fuel oil posted prices increased even more dramatically than propane prices throughout fiscal 2005 reaching unprecedented levels into the third and fourth quarters. For the year, average posted price of fuel oil increased 54% compared to the average posted prices in fiscal 2004. Average fuel oil selling prices increased approximately 28.6% as we were unable to pass on fully the significant rise in the commodity prices as a result of the fuel oil Ceiling Program (see below for the impact on cost of products sold).

Revenues in our natural gas and electricity segment for the year ended September 24, 2005 increased $34.4 million, or 50.2%, to $102.8 million compared to $68.5 million in the prior year. The increase is primarily attributable to higher average selling prices for both natural gas and electricity in line with higher product costs, as well as the impact of a full twelve months of operations in fiscal 2005. Revenues in our HVAC segment increased 15.3%, to $106.1 million in fiscal 2005 compared to $92.1 million in the prior year. The increase in HVAC revenues reflects the impact of a full twelve months from the Agway Energy operations, offset to an extent by lower service and installation activities during the last nine months of fiscal 2005 compared to the prior year.
Cost of Products Sold
(Dollars in thousands)

 
Fiscal 2005
Fiscal 2004
Increase/
(Decrease)
Percent Increase/
(Decrease)
Cost of products sold
 
 
 
 
 
 
 
 
 
 
 
 
Propane
$
545,649
 
$
453,869
 
$
91,780
 
 
20.2
% 
Fuel oil and refined fuels
 
383,032
 
 
223,362
 
 
159,670
 
 
71.5
% 
Natural gas and electricity
 
90,461
 
 
59,950
 
 
30,511
 
 
50.9
% 
HVAC
 
42,650
 
 
36,267
 
 
6,383
 
 
17.6
% 
All other
 
5,456
 
 
5,581
 
 
(125
) 
 
(2.2
%) 
Total cost of products sold
$
1,067,248
 
$
779,029
 
$
288,219
 
 
37.0
% 
As a percent of total revenues
 
65.9
% 
 
59.6
% 
 
 
 
 
 
 
The cost of products sold reported in the consolidated statements of operations represents the weighted average unit cost of propane and fuel oil sold, as well as the cost of natural gas and electricity, 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. Cost of products sold is reported exclusive of any depreciation and amortization; these amounts are reported separately within the consolidated statements of operations.
Cost of products sold increased $288.2 million, or 37.0%, to $1,067.2 million for the year ended September 24, 2005 compared to $779.0 million in the prior year. The increase results primarily from higher commodity prices for propane and fuel oil, coupled with the full year impact of the Agway Energy operations. Cost of products sold associated with the distribution of propane and related activities of $545.6 million increased $91.8 million, or 20.2%, compared to the prior year. Higher propane prices resulted in a $112.3 million increase in cost of products sold during fiscal 2005 compared to the prior year, partially offset by the 4.0% decline in propane volumes which had an impact of $15.9 million. Lower wholesale and risk management activities, noted above, decreased cost of products sold by $3.7 million compared to the prior year.
Cost of products sold associated with our fuel oil and refined fuels segment of $383.0 million for the year ended September 24, 2005 increased $159.7 million, or 71.5%, compared to the prior year. The impact of the unprecedented high commodity prices increased cost of products sold by $134.6 million during fiscal 2005 compared to the prior year and the increased volumes had an impact of $24.3 million. Cost of products sold in the prior year also included a $6.3 million non-cash charge associated with the settlement of futures contracts that were acquired in the Agway Acquisition. As the underlying futures and option contracts were settled, the derivative assets were charged to cost of products sold as an offset to the realized gains from contract settlement. The impact on cost of products sold represented a non-cash charge resulting from the application of purchase accounting on derivative instruments acquired.
While revenues increased 53.1%, margin opportunities and therefore profitability in our fuel oil and refined fuels segment were significantly restricted during our second and third quarters of fiscal 2005 as a result of our fuel oil Ceiling Program. We were unable in the prevailing high price environment to pass on fully the rise in fuel oil prices due to the restrictions of our fuel oil Ceiling Program, which

pre-established a maximum price per gallon, coupled with our decision not to hedge this pricing program for the February through April deliveries when confronted with unprecedented costs to properly hedge the program during that period. The lost margin opportunity from this fuel oil Ceiling Program had the most significant negative impact on our financial results for fiscal 2005 accounting for an estimated impact of $21.5 million on the year-over-year comparison of operating margins in the fuel oil and refined fuels segment. After evaluating the costs to adequately hedge this program in the current price environment, management decided to discontinue offering the fuel oil Ceiling Program after the fiscal 2005 heating season. Cost of products sold as a percentage of revenues in our fuel oil and refined fuels segment increased from 79.2% during fiscal 2004 to 88.4% in fiscal 2005 primarily as a result of our inability to pass on fully the unprecedented rise in fuel oil prices, coupled with the fact that February through April 2005 deliveries under the Ceiling Program were not hedged as the costs to hedge continued to be prohibitive due to market volatility.
In addition, the increase in revenues attributable to our natural gas and electricity and HVAC business segments had a $30.5 million and $6.4 million impact, respectively, on cost of products sold for the year ended September 24, 2005 compared to the prior year. Higher natural gas and electricity costs and higher volumes were the main attributes for the increase in our natural gas and electricity segment.
For the year ended September 24, 2005, cost of products sold represented 65.9% of revenues compared to 59.6% in the prior year. This increase results primarily from the impact of the fuel oil operations described above, as well as the continued impact of product mix with a full year of the non-propane Agway Energy operations.
Operating Expenses
(Dollars in thousands)

 
Fiscal 2005
Fiscal 2004
Increase
Percent
Increase
Operating expenses
$
396,235
 
$
361,696
 
$
34,539
 
 
9.5
% 
As a percent of total revenues
 
24.5
% 
 
27.7
% 
 
 
 
 
 
 
All costs of operating our retail distribution and appliance sales and service operations are reported within operating expenses in the consolidated statements of operations. These operating expenses include the compensation and benefits of field and direct operating support personnel, costs of operating and maintaining our vehicle fleet, overhead and other costs of our purchasing, training and safety departments and other direct and indirect costs of our customer service centers. Changes in the fair value of derivative instruments that are not designated as hedges are recorded in current period earnings within operating expenses.
Operating expenses of $396.2 million for the year ended September 24, 2005 increased $34.5 million, or 9.5%, compared to $361.7 million in the prior year. Operating expenses for fiscal 2005 include a $2.5 million unrealized (non-cash) loss representing the net change in fair values of derivative instruments during the period, compared to a $4.5 million unrealized loss in the prior year (see Item 7A in this Annual Report for information on our policies regarding the accounting for derivative instruments). In addition to the non-cash impact of changes in the fair value of derivative instruments, the most significant impact on operating expenses was the increase in employee, vehicle and facility costs reflecting a full year of Agway Energy operations, offset to an extent by expense savings attributable to synergies in our northeast operations and continued expense management, particularly in light of lower operating results. Additionally, fiscal 2004 operating expenses included a $5.3 million non-cash pension charge in order to accelerate the recognition of a portion of unrecognized actuarial losses in our defined benefit pension plan. The accelerated recognition of these losses was recorded in accordance with SFAS No. 88 ‘‘Employers’ Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination Benefits’’ (‘‘SFAS 88’’) as a result of an increase in the level of lump sum benefit payments made to retirees or terminated individuals during fiscal 2004 compared to prior years.
Operating expenses in fiscal 2005 increased primarily in the following areas: (i) employee compensation and benefit costs increased a net $21.1 million related to the impact of the Agway Energy

operations, partially offset by lower variable compensation from lower earnings; (ii) costs to operate our fleet increased $6.6 million primarily from higher fuel costs; (iii) operating costs at our customer service centers increased $12.6 million as a result of the full year inclusion of the Agway Energy operations; and, (iv) $1.0 million higher bad debt expense associated with the high energy price environment. These increases were offset to an extent by $4.8 million lower pension costs as a result of the non-cash settlement charge included in fiscal 2004 operating expenses described above.
General and Administrative Expenses
(Dollars in thousands)

 
Fiscal 2005
Fiscal 2004
Decrease
Percent
Decrease
General and administrative expenses
$
47,191
 
$
53,888
 
$
(6,697
) 
 
(12.4
%) 
As a percent of total revenues
 
2.9
% 
 
4.1
% 
 
 
 
 
 
 
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 $47.2 million for the year ended September 24, 2005 were $6.7 million, or 12.4%, lower compared to $53.9 million in fiscal 2004. The decrease was primarily attributable to a $7.7 million decline in compensation and benefit related expenses attributable to lower variable compensation in line with lower earnings, as well as the elimination of $4.2 million of costs incurred in fiscal 2004 in connection with transition services obtained on an interim basis following the Agway Acquisition and savings in other expense categories. These savings were offset somewhat by a $6.0 million increase in professional services fees associated primarily with our first-time compliance with the requirements of Section 404 of the Sarbanes-Oxley Act.
Restructuring Costs and Impairment of Goodwill. For the year ended September 24, 2005, we recorded a restructuring charge of $2.8 million related primarily to employee termination costs incurred as a result of actions taken during fiscal 2005. Specifically, during the fourth quarter of fiscal 2005 we approved and initiated a plan of reorganization to realign our field operations. This realignment is expected to generate further efficiencies, realize operating synergies and reduce costs at the field operating level. The restructuring charge consists primarily of costs associated with severance and other employee benefits for approximately 85 positions eliminated under the plan. During fiscal 2004, we recorded a $2.9 million restructuring charge for severance and other exit costs associated with vacating duplicative facilities and contract terminations in connection with the integration of Agway Energy operations and management.
Additionally, during fiscal 2005 we recorded a non-cash charge of $0.7 million related to the impairment of goodwill associated with our HVAC segment as a result of our annual assessment of the anticipated future cash flows from that segment. During fiscal 2004, as a result of continued losses in one of our reporting units in our All Other segment acquired in fiscal 1999, we recorded a non-cash charge of $3.2 million related to goodwill impairment.
Depreciation and Amortization
(Dollars in thousands)

 
Fiscal 2005
Fiscal 2004
Increase
Percent
Increase
Depreciation and amortization
$
37,762
 
$
36,743
 
$
1,019
 
 
2.8
% 
As a percent of total revenues
 
2.3
% 
 
2.8
% 
 
 
 
 
 
 
Depreciation and amortization expense for the year ended September 24, 2005 increased $1.0 million, or 2.8%, compared to the prior year primarily as a result of a full year of depreciation and amortization on the tangible and intangible assets acquired in the Agway Acquisition. Depreciation and amortization expense in fiscal 2005 included a $0.4 million asset impairment charge associated with steps

taken in the fourth quarter to realign our field operations, compared to a $1.0 million asset impairment charge in the prior year. In addition, fiscal 2005 included a non-cash charge of $0.8 million attributable to an impairment in the value of tradenames associated with our HVAC segment which were acquired in the Agway Acquisition.
Interest Expense
(Dollars in thousands)

 
Fiscal 2005
Fiscal 2004
Decrease
Percent
Decrease
Interest expense, net
$
40,374
 
$
40,832
 
$
(458
) 
 
(1.1
%) 
As a percent of total revenues
 
2.5
% 
 
3.1
% 
 
 
 
 
 
 
Net interest expense decreased $0.5 million, or 1.1%, to $40.4 million in fiscal 2005. The fiscal 2004 interest expense included a one-time fee of $1.9 million related to financing commitments for the Agway Acquisition. Interest expense in fiscal 2005 increased $1.4 million as a result of the net effect of a full year of interest on debt used to finance the December 2003 Agway Acquisition, offset to an extent by lower average interest rates due to our debt refinancing on March 31, 2005.
Discontinued Operations. As part of our overall business strategy, we continually monitor and evaluate our existing operations to identify opportunities to optimize return on assets employed by selectively consolidating or divesting operations in slower growing or non-strategic markets. In line with that strategy, during fiscal 2004, we sold 24 customer service centers for net cash proceeds of $39.4 million. We recorded a gain on sale of $26.3 million during fiscal 2004. During fiscal 2005, we recorded a gain on sale of $1.0 million to reflect the finalization of certain purchase price adjustments with the buyer of the customer service centers sold in fiscal 2004. Gains on sale have been accounted for within discontinued operations in accordance with SFAS 144.
Net (Loss) Income and EBITDA. We reported a net loss of $8.1 million for the year ended September 24, 2005 compared to net income of $54.3 million in the prior year. Reported EBITDA for fiscal 2005 of $107.1 million decreased $24.8 million, or 18.8%, compared to $131.9 million in the prior year. EBITDA and net loss for fiscal 2005 were unfavorably impacted by $3.5 million and $40.9 million, respectively, as a result of certain significant items relating mainly to (i) a $36.2 million loss on debt extinguishment recorded in the third quarter associated with our debt refinancing; (ii) a $2.8 million restructuring charge attributable primarily to severance associated with the realignment of our field operations; (iii) a $0.7 million charge attributable to impairment of goodwill associated with our HVAC segment; (iv) a $0.8 million charge included within amortization expense attributable to the impairment of other intangible assets in our HVAC segment; and (v) $0.4 million included within depreciation expense attributable to impairment of assets affected by the field realignment. In addition to the non-recurring items impacting fiscal 2005 results, the most significant negative impact on earnings was from the approximate $21.5 million impact on margin opportunities in our fuel oil business from the Ceiling Program. Income before interest expense, loss on debt extinguishment and income taxes in our propane and natural gas and electricity segments improved $3.5 million and $2.3 million, respectively.
By comparison, EBITDA and net income for fiscal 2004 included the net favorable impact of $8.6 million and $7.6 million, respectively, from the following significant items: (i) a $26.3 million gain from the sale of 24 customer service centers in the northern and southern central regions of the United States considered to be non-strategic; (ii) a non-cash charge of $6.3 million included within cost of products sold related to the settlement of futures contracts which were marked-to-market under purchase accounting for the Agway Acquisition; (iii) a non-cash pension settlement charge of $5.3 million related to accelerated recognition of actuarial losses in our defined benefit pension plan; (iv) a non-cash charge of $3.2 million attributable to impairment of goodwill related to a small business acquired in 1999; (v) a $2.9 million restructuring charge related to integrating certain field management and back office functions in the northeast; and (vi) a non-cash charge of $1.0 million included within depreciation expense attributable to the write-down of assets to be disposed of as a result of our efforts to integrate certain northeast operations.
EBITDA represents net income before deducting interest expense, loss on debt extinguishment, income taxes, depreciation and amortization. Our management uses EBITDA as a measure of liquidity

and we are including it because we believe that it provides our investors and industry analysts with additional information to evaluate our ability to meet our debt service obligations and to pay our quarterly distributions to holders of our Common Units. Moreover, our senior note agreements and our revolving credit agreement requireRevolving Credit Agreement requires us to use EBITDA as a component in calculating our leverage and interest coverage ratios. EBITDA is not a recognized term under generally accepted accounting
     principles  ("GAAP")GAAP and should not be considered as an alternative to net income or net cash provided by operating activities determined in accordance with GAAP. Because EBITDA as determined by us excludes some, but not all, items that affect net income, it may not be comparable to EBITDA or similarly titled measures used by other companies. The following table sets forth (i) our calculation of EBITDA and (ii) a reconciliation of EBITDA, as so calculated, to our net cash provided by operating activities
     (amountsactivities:
(Dollars in thousands):


                                       11

                                                        Fiscal          Fiscal          Fiscal          Fiscal           Fiscal
                                                         2003            2002            2001            2000             1999
                                                      ------------- --------------- ---------------  --------------  ---------------


      Net income                                          $ 48,669        $ 53,524        $ 53,510        $ 38,532         $ 22,439
      Add:
          Provision for income taxes                           202             703             375             234               68
          Interest expense, net                             33,629          35,325          39,596          42,534           31,218
          Depreciation and amortization                     27,520          28,355          36,496          37,032           34,453
                                                      ------------- --------------- ---------------  --------------  ---------------
      EBITDA                                               110,020         117,907         129,977         118,332           88,178
                                                      ------------- --------------- ---------------  --------------  ---------------
      Add/(subtract):
          Provision for income taxes                          (202)           (703)           (375)           (234)             (68)
          Interest expense, net                            (33,629)        (35,325)        (39,596)        (42,534)         (31,218)
          Gain on disposal of property, plant and
               equipment, net                                 (636)           (546)         (3,843)        (11,313)            (578)
          Gain on sale of customer service centers          (2,483)              -               -               -                -
          Gain on sale of storage facility                       -          (6,768)              -               -                -
          Changes in working capital and other
               assets and liabilities                      (15,770)         (5,790)         15,675          (4,784)          25,444
                                                      ------------- --------------- ---------------  --------------  ---------------
      Net cash provided by/(used in)
          Operating activities                            $ 57,300        $ 68,775       $ 101,838        $ 59,467         $ 81,758
                                                      ============= =============== ===============  ==============  ===============
          Investing activities                            $ (4,859)       $ (6,851)      $ (17,907)      $ (99,067)       $ (12,241)
                                                      ============= =============== ===============  ==============  ===============
          Financing activities                           $ (77,631)      $ (57,463)      $ (59,082)       $ 42,853       $ (120,944)
                                                      ============= =============== ===============  ==============  ===============





(i)  Our  capital  expenditures  fall  generally  into  three  categories:   (i)
     maintenance  expenditures,   which  include  expenditures

 
Year Ended
 
September 24,
2005
September 25,
2004
Net (loss) income
$
(8,076
) 
$
54,304
 
Add:
 
 
 
 
 
 
Provision for income taxes
 
803
 
 
3
 
Loss on debt extinguishment
 
36,242
 
 
—
 
Interest expense, net
 
40,374
 
 
40,832
 
Depreciation and amortization
 
37,762
 
 
36,743
 
EBITDA
 
107,105
 
 
131,882
 
Add (subtract):
 
 
 
 
 
 
Provision for income taxes
 
(803
) 
 
(3
) 
Loss on debt extinguishment
 
(36,242
) 
 
—
 
Interest expense, net
 
(40,374
) 
 
(40,832
) 
Gain on disposal of property, plant and equipment, net
 
(2,043
) 
 
(715
) 
Gain on sale of customer service centers
 
(976
) 
 
(26,332
) 
Changes in working capital and other assets and liabilities
 
12,338
 
 
29,065
 
Net cash provided by (used in)
 
 
 
 
 
 
Operating activities
$
39,005
 
$
93,065
 
Investing activities
$
(24,631
) 
$
(196,557
) 
Financing activities
$
(53,444
) 
$
141,208
 
Fiscal Year 2004 Compared to Fiscal Year 2003
Revenues
(Dollars in thousands)

 
Fiscal 2004
Fiscal 2003
Increase
Percent
Increase
Revenues
 
 
 
 
 
 
 
 
 
 
 
 
Propane
$
856,109
 
$
680,840
 
$
175,269
 
 
25.7
% 
Fuel oil and refined fuels
 
281,682
 
 
—
 
 
281,682
 
 
100
% 
Natural gas and electricity
 
68,452
 
 
—
 
 
68,452
 
 
100
% 
HVAC
 
92,072
 
 
46,938
 
 
45,134
 
 
96.2
% 
All other
 
8,939
 
 
7,297
 
 
1,642
 
 
22.5
% 
Total revenues
$
1,307,254
 
$
735,075
 
$
572,179
 
 
77.8
% 
Total revenues increased $572.2 million, or 77.8%, to $1,307.3 million for repair  and
     replacement  of  property,   plant  and  equipment;   (ii)  growth  capital
     expenditures  which  include  new  propane  tanks  and other  equipmentthe year ended September 25, 2004 compared to facilitate expansion of our customer base and operating capacity; and (iii)
     acquisition capital expenditures, which include expenditures related to$735.1 million for the acquisition  of propane and other  retail  operations  and a portion of the
     purchase price allocated to intangible assets associated with such acquired
     businesses.




                                       12




ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
        RESULTS OF OPERATIONS

     The  following is a discussion  of our  financial  condition and results of
operations, which should be read in conjunction with our historical consolidated
financial statements and notes thereto included elsewhere in this Annual Report.
Since our Operating  Partnership and Service  Company account for  substantially
all of our assets,  revenues and earnings,  a separate  discussion of results of
operations from our other subsidiaries is not presented.

DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

     This Annual  Report on Form 10-K  contains  Forward-Looking  Statements  as
defined in the Private Securities  Litigation Reform Act of 1995 relating to our
future business expectations and predictions and financial condition and results
of  operations.  Some  of  these  statements  can be  identifiedyear ended September 27, 2003 driven primarily by the use of
forward-looking   terminology  such  as  "prospects,"   "outlook,"   "believes,"
"estimates,"  "intends,"  "may," "will," "should,"  "anticipates,"  "expects" or
"plans" or the  negative or other  variation  of these or similar  words,  or by
discussion  of trends and  conditions,  strategies  or risks and  uncertainties.
These  Forward-Looking  Statements  involve certain risks and uncertainties that
could cause actual results to differ  materially from those discussed or implied
in such Cautionary  Statements.  The risks and uncertainties and their impact on
our operations include, but are not limited to, the following risks:

o    The impact of weather conditions on the demand for propane;
o    Fluctuations in the unit cost of propane;
o    Our ability to compete  with other  suppliers  of propane and other  energy
     sources;
o    The impact on propane  prices and supply from the  political  and  economic
     instability  of the  oil  producing  nations  and  other  general  economic
     conditions;
o    Our ability to retain customers;
o    The impact of energy  efficiency and technology  advances on the demand for
     propane;
o    The ability of management to continue to control expenses;
o    The impact of regulatory developments on our business;
o    The impact of legal proceedings on our business;
o    Our ability to implement our expansion strategy into new business lines and
     sectors;
o    Our ability to integrate acquired businesses successfully.

     On different  occasions,  we or our  representatives  have made or may make
Forward-Looking  Statements in other filings that we make with the SEC, in press
releases  or in  oral  statements  made by or with  the  approval  of one of our
authorized executive officers. Readers are cautioned not to place undue reliance
on Forward-Looking or Cautionary Statements, which reflect management's opinions
only  as  of  the  date  hereof.  We  undertake  no  obligation  to  update  any
Forward-Looking  or  Cautionary  Statement.  All  subsequent  written  and  oral
Forward-Looking  Statements  attributable  to us or persons acting on our behalf
are expressly  qualified in their entirety by the Cautionary  Statements in this
Annual Report and in future SEC reports.

The  following  are factors  that  regularly  affect our  operating  results and
financial condition:

PRODUCT COSTS

     The level of  profitability  in the  retail  propane  business  is  largely
dependent on the  difference  between  retail sales price and product cost.  The
unit cost of  propane  is  subject  to  volatile  changes as a result of product
supply or other market conditions,  including,  but not limited to, economic and
political factors impacting crude oil and natural gas supply or pricing. Propane
unit cost  changes 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
cost increases  fully or immediately,  particularly  when product costs increase
rapidly. Therefore, average retail sales prices can vary



                                       13
Agway



significantly  from year to year as product costs fluctuate with propane,  crude
oil and natural gas commodity market conditions.

SEASONALITY

     The retail propane  distribution  business is seasonal because of propane's
primary use 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.  Consequently,  sales
and operating  profits are concentrated
Acquisition. Revenues in our first and second fiscal quarters.
Cash flows from operations,  therefore, are greatest duringpropane segment of $856.1 million for the second and third
fiscal  quarters  when  customers  pay for propane  purchased  during the winter
heating  season.  Lower  operating  profits  and  either net lossesyear ended September 25, 2004 increased $175.3 million, or lower net
income  during the period  from April  through  September  (our third and fourth
fiscal  quarters) are expected.  To the extent  necessary,  we will reserve cash
from the second and third quarters for  distribution to Unitholders in the first
and fourth fiscal quarters.

WEATHER

     Weather  conditions have a significant impact on the demand for propane for
both heating and  agricultural  purposes.  Many of our customers rely heavily on
propane as a heating fuel.  Accordingly,  the volume of propane 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  use,
while sustained  colder-than-normal  temperatures will tend to result in greater
propane use.

RISK MANAGEMENT

     Product  supply  contracts are  generally  one-year  agreements  subject to
annual  renewal and  generally  permit  suppliers to charge posted market prices
(plus  transportation  costs)  at the time of  delivery  or the  current  prices
established  at major  delivery  points.  Since rapid  increases  in the cost of
propane may not be  immediately  passed on to retail  customers,  such increases
could reduce profit margins.  We engage in risk management  activities to reduce
the  effect of price  volatility  on our  product  costs and to help  ensure the
availability of propane during periods of short supply. We are currently a party
to propane  futures  contracts  traded on the New York  Mercantile  Exchange and
enter into forward and option agreements with third parties to purchase and sell
propane at fixed prices in the future. Risk management  activities are monitored
by management  through  enforcement of our Commodity Trading Policy and reported
to our Audit  Committee.  Risk management  transactions may not always result in
increased product margins.  See additional discussion in Item 7A of this  Annual
Report.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

     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 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  legal  reserves,  allowance  for  doubtful
accounts, asset valuation assessment and valuation of derivative instruments. We
base our estimates on  historical  experience  and on various other  assumptions
that are believed to be reasonable under the circumstances, the results of which
form the basis for  making  judgments  about the  carrying  values of assets and
liabilities that are not readily apparent from other sources. Any effects on our
business,  financial position or results of operations  resulting from revisions
to these estimates are recorded in the period in which the facts that



                                       14


give rise to the revision become known to us.

     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. We believe that
the following are our critical accounting policies:

REVENUE  RECOGNITION.  We recognize revenue from the sale of propane at the time
product is delivered to the customer.  Revenue from the sale of  appliances  and
equipment is recognized at the time of sale or when installation is complete, as
applicable.  Revenue from repair and  maintenance  activities is recognized upon
completion of the service.

ALLOWANCE 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  allowance  for doubtful  accounts  using a
specific reserve for known or anticipated  uncollectible  accounts, as well as a
general  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.

PENSION AND OTHER  POSTRETIREMENT  BENEFITS.  We estimate  the rate of return on
plan assets,  the discount rate to estimate the present value of future  benefit
obligations  and the cost of future  health  care  benefits in  determining  our
annual  pension and other  postretirement  benefit  costs.  In  accordance  with
generally accepted  accounting  principles,  actual results that differ from our
assumptions  are  accumulated  and amortized  over future periods and therefore,
generally affect our recognized  expense and recorded  obligation in such future
periods.  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  obligations and our
future  expense.  See "Pension  Plan  Assets"  below for  additional  disclosure
regarding pension and other postretirement benefits.

SELF-INSURANCE  RESERVES. Our accrued insurance reserves represent the estimated
costs of known and  anticipated  or  unasserted  claims  under our  general  and
product,  workers'  compensation  and  automobile  insurance  policies.  Accrued
insurance provisions for unasserted claims arising from unreported incidents are
based on an analysis of  historical  claims  data.  For each claim,  we record a
self-insurance provision up to the estimated amount of the probable claim or the
amount of the deductible,  whichever is lower,  utilizing actuarially determined
loss development factors applied to actual historical claims data.

GOODWILL  IMPAIRMENT  ASSESSMENT.  We assess the carrying value of goodwill at a
reporting unit level, at least annually,  based on an estimate of the fair value
of the respective  reporting unit. Fair value of the reporting unit is estimated
using either (i) a market value approach  taking into  consideration  the quoted
market price of our Common Units;  or (ii)  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.

DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES. See Item 7A of this Annual Report
for additional  information  about  accounting for  derivative  instruments  and
hedging activities.




                                       15




RESULTS OF OPERATIONS

FISCAL YEAR 2003 COMPARED TO FISCAL YEAR  2002
- ----------------------------------------------

     REVENUES. Revenues increased 16.0%25.7%, or $106.6 million, to $771.7 million in
fiscal 2003 compared to $665.1  million in fiscal  2002.  Revenues  from retail
propane  activities  increased  $130.0  million,  or 24.3%, to $664.2 million in
fiscal 2003 compared to $534.2$680.8 million in the prior year. This increase wasis the result of an  increase  in  averagehigher retail and wholesale propane selling  prices,sales volumes, coupled with an increase in retail gallons sold. Propaneaverage selling prices averaged 15.9%in line with higher in
fiscal 2003 comparedcommodity prices for propane. Despite nationwide average temperatures, as reported by NOAA, that were 7% warmer than normal and 8% warmer than the prior year, retail propane gallons sold increased 45.8 million gallons, or 9.3%, to 537.3 million gallons for the year ended September 25, 2004. The increase is primarily attributable to the prior yearaddition of Agway Energy volumes from December 23, 2003, partially offset by the effect of the warmer temperatures. Average selling prices increased approximately 12.5% as a result of steadily  increasing costssustained higher commodity prices for propane. The average posted price of propane throughout the first half ofduring fiscal 2003 which remained higher during
the second half of the year. Retail gallons sold2004 increased 35.5 million gallons,
or 7.8%,  to 491.5  million  gallons in fiscal 2003approximately 23% compared to 456.0  million
gallons in fiscal 2002 due primarily to colderthe average temperatures  experienced
in parts of our service  area,  particularly  during the six month peak  heating
season from October 2002 through March 2003.

     Temperatures   nationwide,   as  reported  by  the  National   Oceanic  and
Atmospheric  Administration  ("NOAA"),  averaged 1% colder than normal in fiscal
2003 compared to 13% warmer than normal  temperaturesposted prices in the prior year, or 14%
colder conditions year-over-year.  The coldest weather conditions, however, were
experienced  inyear. Additionally, included within the eastern and central  regions of the United  States.  In the
west,  average  temperatures  were 10% warmer than normal  during  fiscal  2003,
compared to 7% warmer  than  normal  during the prior  year.  In  addition,  our
volumes continue to be affected by the impact of a continued  economic recession
on customer buying habits.

     Revenuespropane segment are revenues from wholesale and risk management activities of $16.6$43.0 million for the year ended September 25, 2004 which increased $26.4 million, compared to the prior year.
Revenue contribution from our fuel oil and other refined fuels and our natural gas and electricity segments amounted to $281.7 million and $68.5 million, respectively, for the year ended September 25, 2004 from the addition of Agway Energy since December 23, 2003. Total fuel oil and other refined fuel gallons sold in fiscal 2003  decreased  $19.52004 amounted to 220.5 million or 54.0%,gallons. Revenues from our HVAC service and installation activities, as well as from sales of HVAC equipment and related parts, of $92.1 million for the year ended September 25, 2004 increased $45.1 million compared to revenues of $36.1
million in the prior year, primarily as a resultdue to the addition of lower  volumes  sold in the
wholesale  market in line with our  strategy to reduce our emphasis on wholesale
activities.  Revenue  from other  sources,  including  sales of  appliances  and
related  parts and  services,  of $90.9  million in fiscal 2003  decreased  $3.9
million,  or 4.1%, compared to other revenue in the prior year of $94.8 million.
The decrease in other revenues was primarily attributable to lower revenues from
service and installations.

     COST  OF  PRODUCTS  SOLD.  The  cost  of  products  sold  reported  in  the
consolidated  statements of operations represents the weighted average unit cost
of propane  sold,  including  transportation  costs to deliver  product from our
supply points to storage or to our customer  service  centers.  Agway Energy.
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.  Cost of  products  sold is  reported  exclusive  of any
depreciation and amortization as such amounts are reported separately within the
consolidated statements of operations.

     Products Sold
(Dollars in thousands)

 
Fiscal 2004
Fiscal 2003
Increase
Percent
Increase
Cost of products sold
 
 
 
 
 
 
 
 
 
 
 
 
Propane
$
453,869
 
$
332,132
 
$
121,737
 
 
36.7
% 
Fuel oil and refined fuels
 
223,362
 
 
—
 
 
223,362
 
 
100
% 
Natural gas and electricity
 
59,950
 
 
—
 
 
59,950
 
 
100
% 
HVAC
 
36,267
 
 
22,035
 
 
14,232
 
 
64.6
% 
All other
 
5,581
 
 
4,415
 
 
1,166
 
 
26.4
% 
Total cost of products sold
$
779,029
 
$
358,582
 
$
420,447
 
 
117.3
% 
As a percent of total revenues
 
59.6
% 
 
48.8
% 
 
 
 
 
 
 
Cost of products sold increased $87.7$420.4 million or 30.3%, to $376.8$779.0 million in fiscal  2003for the year ended September 25, 2004 compared to $289.1$358.6 million in the prior year. The increase results primarily from a $93.0 million impact from the  aforementioned increase in retail propane volumes sold, as well as the commodity  priceaddition of propane  resulting infuel oil and other refined fuel sales volumes, which had a 39.4% increase incombined impact of $246.2 million on the average
unityear-over-year comparison of cost of products sold. Higher commodity prices for propane induring fiscal 20032004 also increased cost of products sold by $65.9 million compared to the prior year, coupled with the
aforementioned increase in retail volumes sold resulting in an increase of $17.0
million;  offset by a $21.2  million  decrease from the decline inyear. Increased wholesale and risk management activities, described  above.noted above, increased cost of products sold by $26.7 million compared to the prior year.
Cost of products sold for the year ended September 25, 2004 also included a $6.3 million non-cash charge associated with the settlement of futures contracts that were acquired in the Agway Acquisition. As the underlying futures and option contracts were settled, the derivative assets were charged to cost of products sold as an offset to the realized gains from contract settlement. The impact on cost of products sold represents a non-cash charge resulting from the application of purchase accounting on derivative instruments acquired. In fiscal 2003,addition, the increase in revenues attributable to our natural gas and electricity and HVAC business segments had a $60.0 million and $14.2 million impact, respectively, on cost of products sold in the year ended September 25, 2004 compared to the prior year.
For the year ended September 25, 2004, cost of products sold represented 48.8%59.6% of revenues compared to 43.5%48.8% in the prior year. TheThis increase inresults primarily from the costdifferent mix of products sold

during fiscal 2004 as a result of the additional product offerings from the Agway Energy operations. Generally, the prices for fuel oil and other refined fuels as a percentage of product revenues relates
primarilytend to steadily  increasingbe between 20% and 30% higher than propane costs are as a percentage of propane duringrevenues.
Operating Expenses
(Dollars in thousands)

 
Fiscal 2004
Fiscal 2003
Increase
Percent
Increase
Operating expenses
$
361,696
 
$
232,462
 
$
129,234
 
 
55.6
% 
As a percent of total revenues
 
27.7
% 
 
31.6
% 
 
 
 
 
 
 
Operating expenses of $361.7 million for the first half of
fiscal 2003 which remained higher during the second half of fiscal 2003year ended September 25, 2004 increased $129.2 million, or 55.6%, compared to steadily declining product costs$232.5 million in the prior year. OPERATING EXPENSES.  All costs of operating our retail propane distribution
and  appliance  sales and  service  operations  are  reported  within  operating
expenses in the consolidated statements of operations.  These operating expenses
include the  compensation  and  benefits of field and direct  operating  support
personnel,  costs of operating and maintaining  our vehicle fleet,  overhead and
other costs of our purchasing,  training and safety departments and other direct
and indirect costs of our customer service centers. Operating expenses increased
7.1%,  or $16.6  million,  to $250.7  million infor fiscal 2003  compared to $234.1
million in fiscal 2002. Operating expenses in fiscal 20032004 include a $1.5$4.5 million unrealized (non-cash) loss representing the net change in fair 16
values of derivative instruments during the period, compared to a $5.4$1.5 million unrealized (non-cash)  gainloss in the prior year (see Item 7A - Quantitative  and  Qualitative
Disclosures  About Market Riskin this Annual Report for information on our policies regarding the accounting for derivative instruments). In addition to the $6.9 million non-cash impact of changes in the fair value of derivative instruments, year-over-year,the most significant impact on operating expenses was the impact on employee, vehicle and facility costs from the addition of the Agway Energy operations. Additionally, fiscal 2004 operating expenses include a $5.3 million non-cash pension charge in order to accelerate the recognition of a portion of unrecognized actuarial losses in our defined benefit pension plan. The accelerated recognition of these losses was a result of an increase in the level of lump sum benefit payments made to retirees or terminated individuals during fiscal 2004 compared to prior years.
Operating expenses in fiscal 2004 increased $9.7primarily in the following areas: (i) employee compensation and benefit costs increased $51.6 million primarily  resulting from (i) $2.3
millionrelated to an increase in field personnel and increased pension costs,earnings; (ii) $2.2 million higher insurance costs, (iii)
$2.1 million  higher costs to operate our fleet primarily  from  increased fuel$9.2 million; (iii) operating costs and (iv) $0.9at our customer service centers increased $42.0 million higher employee compensation and benefits to support
the increased sales volume. In addition,  we experienced $2.1 million higher bad
debt expense as a result of the significant  increaseaddition of the Agway Energy operations; (iv) pension costs increased $7.4 million primarily as a result of the $5.3 million non-cash charge described above; (iv) insurance costs increased $13.2 million; and, (v) medical costs increased $2.9 million.
General and Administrative Expenses
(Dollars in the commodity price of
propane  resulting in higher prices to our  customers,  higher sales volumes and
general economic conditions.

     GENERAL AND ADMINISTRATIVE  EXPENSES.  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.   thousands)

 
Fiscal 2004
Fiscal 2003
Increase
Percent
Increase
General and administrative expenses
$
53,888
 
$
36,661
 
$
17,227
 
 
47.0
% 
As a percent of total revenues
 
4.1
% 
 
5.0
% 
 
 
 
 
 
 
General and administrative expenses of $53.9 million for the year ended September 25, 2004 were $17.2 million, or 47.0%, higher compared to $36.7 million forin fiscal 2003 were $5.9 million,  or
19.2%,  higher than fiscal 2002  expenses of $30.8  million.2003. The increase was primarily attributable to the impact of $2.8$10.4 million higher employee compensation and benefit related costs as a result of higher earnings and increased overall headcount, as well as $1.2$4.2 million higherrelated to transition services fees paid to Agway, Inc. for back office support provided subsequent to the Agway Acquisition. In addition, we incurred anticipated increases in marketing, professional services and travel expenses during fiscal 2004 associated with our efforts to acquire Agway Energy during the first quarter and in connection with our integration efforts during the remainder of fiscal 2004.
Restructuring Costs and Impairment of Goodwill. During fiscal 2004, we recorded a $2.9 million restructuring charge for severance and other exit costs associated with vacating duplicative facilities and contract terminations in connection with the integration of Agway Energy operations and management. While the majority of restructuring and integration activities were completed by the end of fiscal 2004, there may be additional charges in fiscal 2005 as we continue to finalize our operating footprint in the current year period.

     DEPRECIATION  AND  AMORTIZATION.   northeast. Additionally, during the third quarter of fiscal 2004, as a result of continued losses in one of our reporting units acquired in fiscal 1999, we recorded a non-cash charge of $3.2 million related to goodwill impairment.

Depreciation and Amortization
(Dollars in thousands)

 
Fiscal 2004
Fiscal 2003
Increase
Percent
Increase
Depreciation and amortization
$
36,743
 
$
27,520
 
$
9,223
 
 
33.5
% 
As a percent of total revenues
 
2.8
% 
 
3.7
% 
 
 
 
 
 
 
Depreciation and amortization expense decreased  $0.9increased 33.5% to $36.7 million or 3.2%,for the year ended September 25, 2004 compared to $27.5 million for the prior year, primarily as a result of the additional depreciation and amortization associated with the acquired tangible and intangible assets from the Agway Acquisition. In addition, depreciation expense for fiscal 2004 included a $1.0 million non-cash charge related to assets abandoned as a result of our facility integration efforts in fiscal 2003,the northeast.
Interest Expense
(Dollars in thousands)

 
Fiscal 2004
Fiscal 2003
Increase
Percent
Increase
Interest expense, net
$
40,832
 
$
33,629
 
$
7,203
 
 
21.4
% 
As a percent of total revenues
 
3.1
% 
 
4.6
% 
 
 
 
 
 
 
Net interest expense increased $7.2 million, or 21.4%, to $40.8 million for the year ended September 25, 2004, compared to $28.4$33.6 million in fiscal 2002.

     GAIN ON SALE OF STORAGE  FACILITY.  On January 31, 2002 (thethe prior year. The increase results primarily from the net impact of the addition of $175.0 million of 6.875% senior notes associated with financing for the Agway Acquisition, offset by a reduction in amounts outstanding under our 7.54% senior notes due to repayment of the second annual principal payment of $42.5 million during the fourth quarter of fiscal 2002),2003 and of the third annual principal payment of $42.5 million during the fourth quarter of fiscal 2004, in both cases using cash on hand. In addition, we incurred a one-time fee of $1.9 million related to financing commitments for the Agway Acquisition during the first quarter of fiscal 2004 which is included within fiscal 2004 interest expense.
Discontinued Operations. During fiscal 2004, we sold our 170 million  gallon  propane  storage  facility in
Hattiesburg,  Mississippi,  which was considered a non-strategic  asset,24 customer service centers for net cash proceeds of $8.0 million, resulting in$39.4 million. We recorded a gain on sale of approximately $6.8$26.3 million during fiscal 2004. During fiscal 2003, we sold nine customer service centers for net cash proceeds of $7.2 million and recorded a gain on sale of $2.5 million. INCOME BEFORE INTEREST  EXPENSE AND INCOME TAXES ANDGains on sale have been accounted for within discontinued operations in accordance with SFAS 144.
Net Income and EBITDA.  Income before
interest  expense and Net income taxes  decreased $9.6of $54.3 million for the year ended September 25, 2004 increased $5.6 million, or 10.7%11.5%,  to $80.0
million in fiscal  2003 compared to $89.6$48.7 million in the prior year. Earnings
before interest,  taxes,  depreciation and amortization  ("EBITDA")  amountedWe reported record EBITDA of $131.9 million for the year ended September 25, 2004, compared to $110.0  million for fiscal 2003 compared to $117.9 million for the prior year, a
declinean increase of $7.9$21.9 million, or 6.7%19.9%. The decline inNet income before interest expense
and income  taxes and in EBITDA over the prior year  reflects the impact of 7.8%
higher retail  volumes sold,  offsetfor fiscal 2004 were favorably impacted by the $6.9 million  unfavorable  impactnet result of mark-to-market activity on derivative instruments year-over-year included within
operating  expenses,certain significant items, mainly relating to: (i) the $6.8$26.3 million gain onfrom the sale of our  Hattiesburg,
Mississippi  storage  facility  impacting  prior  year  results24 customer service centers considered to be non-strategic, primarily located in the northern and southern central regions of the higher
combined operating and general and administrative  expenses (described above) in
support  of  higher  business  activity.  Additionally,  theUnited States, compared to a $2.5 million gain
reported from the sale of nine customer service centers during fiscal 2003,
reported2003; (ii) the non-cash charge of $6.3 million included within discontinuedcost of products sold relating to the settlement of futures contracts which were marked-to-market under purchase accounting for the Agway Acquisition; (iii) the non-cash pension charge of $5.3 million related to accelerated recognition of actuarial losses as a result of the level of lump sum benefit payments in fiscal 2004; (iv) the non-cash charge of $3.2 million attributable to the impairment of goodwill related to a small business acquired in 1999; (v) the $2.9 million restructuring charge related to our efforts to integrate certain management and back office functions of Agway Energy; and, (vi) the non-cash charge of $1.0 million included within depreciation expense attributable to the write-down of assets to be disposed of as a result of the blending of field operations in the northeast. These significant items had a favorablenet positive impact of $6.1 million and $5.1 million on fiscal 2003
EBITDA.the year-over-year comparison of EBITDA representsand net income, before  deducting  interest  expense,  income
taxes, depreciation and amortization. respectively, for the year ended September 25, 2004.
Our management uses EBITDA as a measure of liquidity and we are including it because we believe that it provides our investors and industry analysts with additional information to evaluate our ability to

meet our debt service obligations and to pay our quarterly distributions to holders of our Common Units. Moreover, our senior  note
agreements  and our  revolving  credit  agreement  requireRevolving Credit Agreement requires us to use EBITDA as a component in calculating our leverage and interest coverage ratios. EBITDA is not a recognized term under generally accepted  accounting  principles  ("GAAP")GAAP and should not be considered as an alternative to net income or net cash provided by operating activities determined in accordance with GAAP. Because EBITDA as determined by us excludes some, but not all, items that affect net income, it may not be comparable to EBITDA or similarly titled measures used by other companies. The following table sets forth (i) our calculation of EBITDA and (ii) a reconciliation of EBITDA, as so calculated, to our net cash provided by operating activities (amountsactivities:
(Dollars in thousands):




                                       17



                                                                                                   Year Ended
                                                                                   -------------------------------------------
                                                                                    September 27,            September 28,
                                                                                         2003                    2002
                                                                                   ------------------      -------------------


      Net income                                                                             $ 48,669                $ 53,524
      Add:
          Provision for income taxes                                                              202                     703
          Interest expense, net                                                                33,629                  35,325
          Depreciation and amortization                                                        27,520                  28,355
                                                                                   ------------------      -------------------
      EBITDA                                                                                  110,020                 117,907
                                                                                   ------------------      -------------------
      Add/(subtract):
          Provision for income taxes                                                             (202)                   (703)
          Interest expense, net                                                               (33,629)                (35,325)
          Gain on disposal of property, plant and equipment, net                                 (636)                   (546)
          Gain on sale of customer service centers                                             (2,483)                      -
          Gain on sale of storage facility                                                          -                  (6,768)
          Changes in working capital and other assets and liabilities                         (15,770)                 (5,790)
                                                                                   ------------------      -------------------
      Net cash provided by/(used in)
          Operating activities                                                               $ 57,300                $ 68,775
                                                                                   ==================      ===================
          Investing activities                                                               $ (4,859)               $ (6,851)
                                                                                   ==================      ===================
          Financing activities                                                              $ (77,631)              $ (57,463)
                                                                                   ==================      ===================




     INTEREST EXPENSE.  Net interest expense decreased $1.7 million, or 4.8%, to
$33.6  million in fiscal 2003  compared  to $35.3  million in fiscal  2002.  The
decrease in interest  expense reflects the positive steps taken by us during the
third quarter

 
Year Ended
 
September 25,
2004
September 27,
2003
Net income
$
54,304
 
$
48,669
 
Add:
 
 
 
 
 
 
Provision for income taxes
 
3
 
 
202
 
Interest expense, net
 
40,832
 
 
33,629
 
Depreciation and amortization
 
36,743
 
 
27,520
 
EBITDA
 
131,882
 
 
110,020
 
Add (subtract):
 
 
 
 
 
 
Provision for income taxes
 
(3
) 
 
(202
) 
Interest expense, net
 
(40,832
) 
 
(33,629
) 
Gain on disposal of property, plant and equipment, net
 
(715
) 
 
(636
) 
Gain on sale of customer service centers
 
(26,332
) 
 
(2,483
) 
Changes in working capital and other assets and liabilities
 
29,065
 
 
(15,770
) 
Net cash provided by (used in)
 
 
 
 
 
 
Operating activities
$
93,065
 
$
57,300
 
Investing activities
$
(196,557
) 
$
(4,859
) 
Financing activities
$
141,208
 
$
(77,631
) 
Liquidity and Capital Resources
Analysis of fiscal 2003 to lower our overall leverage, which resulted in an
$88.9 million  reduction in debt,  coupled with lower average  interest rates on
outstanding borrowings under our Revolving Credit Agreement during the first and
second quarters of fiscal 2003.

     DISCONTINUED  OPERATIONS.  As part of our  overall  business  strategy,  we
continually   monitor  and  evaluate  our   existing   operations   to  identify
opportunities  that will allow us to optimize  our return on assets  employed by
selectively   consolidating  or  divesting   operations  in  slower  growing  or
non-strategic markets. In line with that strategy, we sold nine customer service
centers  during  fiscal  2003 for total  cash  proceeds  of  approximately  $7.2
million.  We recorded a gain on sale of  approximately  $2.5 million,  which has
been  accounted  for within  discontinued  operations  pursuant to SFAS No. 144,
"Accounting for the Impairment or Disposal of Long-Lived Assets."

FISCAL YEAR 2002 COMPARED TO FISCAL YEAR 2001
- ---------------------------------------------

     REVENUES.  Revenues  of $665.1  million  in fiscal  2002  decreased  $266.4
million,  or 28.6%,  compared to $931.5  million in fiscal 2001.  Revenues  from
retail propane activities  decreased $219.2 million, or 29.1%, to $534.2 million
in fiscal  2002  compared to $753.4  million in fiscal  2001.  This  decrease is
principally due to a decrease in average selling prices, coupled with a decrease
in retail gallons sold.  Average  selling prices declined 18.4% as a result of a
significant decline in the commodity price of propane in fiscal 2002 compared to
the prior year. Retail gallons sold decreased 13.1%, or 68.7 million gallons, to
456.0 million gallons in fiscal 2002 compared to 524.7 million gallons in fiscal
2001. The decrease in volume was attributable to record warm weather  conditions
which were most dramatic during the peak heating months of October through March
of  fiscal  2002 as well as, to a lesser  extent,  the  impact  of the  economic
recession on commercial and industrial customers' buying habits.

     Nationwide  temperatures  during fiscal 2002 were 13% warmer than normal as
compared to temperatures  that were 2% colder than normal during fiscal 2001, as
reported by NOAA.  During the peak heating  months of October 2001 through March
2002,  temperatures  nationwide  were 13% warmer  than  normal as compared to 5%
colder than normal in the comparable period in fiscal 2001, as reported by NOAA.
Volumes from the components of our customer mix that are less weather  sensitive
declined approximately 12% year-over-year.



                                       18


     Revenues from  wholesale and risk  management  activities  decreased  $50.1
million,  or 58.1%, to $36.1 million in fiscal 2002 compared to $86.2 million in
fiscal 2001. A less volatile  commodity  price  environment  for propane  during
fiscal  2002  compared  to fiscal  2001  resulted  in  reduced  risk  management
activities  and lower  volumes  in the  wholesale  market.  Revenue  from  other
sources,  including sales of appliances and related parts and services, of $94.8
million in fiscal  2002  increased  $2.9  million,  or 3.2%,  over  fiscal  2001
revenues of $91.9 million.

     COST OF PRODUCTS SOLD. Cost of products sold decreased  $221.2 million,  or
43.3%,  to $289.1  million in fiscal 2002  compared to $510.3  million in fiscal
2001.  The decrease  results  primarily  from a $125.1  million  impact from the
aforementioned  decrease in the commodity price of propane  resulting in a 36.3%
decrease  in the average  unit cost of propane  during  fiscal 2002  compared to
fiscal 2001. This is coupled with the aforementioned  decrease in retail volumes
sold resulting in a decrease of $51.9 million, and a $45.4 million decrease from
the decline in wholesale and risk  management  activities  described  above.  In
fiscal 2002,  cost of products sold  represented  43.5% of revenues  compared to
54.8%  in the  prior  year.  The  decrease  in the  cost of  products  sold as a
percentage of revenues relates primarily to steadily decreasing costs of propane
during fiscal 2002.

     OPERATING EXPENSES. Cash Flows
Operating expenses decreased 9.5%, or $24.6 million, to
$234.1  million  in fiscal  2002  compared  to $258.7  million  in fiscal  2001.
Operating  expenses for the year ended September 28, 2002 include a $5.4 million
unrealized  (non-cash)  gain  representing  the net  change  in fair  values  of
derivative  instruments  not  designated  as hedges,  compared to a $3.1 million
unrealized  loss  in  fiscal  2001  (see  Item  7A of  this  Annual  Report  for
information on our policies regarding the accounting for derivative  instruments
and hedging  activities).  In addition to the $8.5 million favorable impact from
changes in the fair value of derivative  instruments  year-over-year,  operating
expenses  decreased  $16.1 million,  or 6.3%,  principally  attributable  to our
ability  to  reduce  costs  amidst  declining  volumes  resulting  from  ongoing
initiatives  to shift costs from fixed to  variable,  primarily  in the areas of
employee  compensation  and  benefits.  The  lower  compensation  costs of $10.5
million were offset,  in part, by a $4.0 million  increase in medical and dental
costs in  fiscal  2002  compared  to the  prior  year.  Additionally,  operating
expenses were  favorably  impacted by a $4.2 million  decrease in provisions for
doubtful accounts and $3.0 million lower costs of operating our fleet, including
maintenance and fuel costs,  in fiscal 2002 compared to fiscal 2001.  Provisions
for doubtful  accounts  were higher in fiscal 2001  primarily as a result of the
generally higher selling price environment  driven by the higher average propane
costs.

     GENERAL AND ADMINISTRATIVE  EXPENSES.  General and administrative  expenses
decreased  $1.7  million,  or 5.2%,  to $30.8 million in fiscal 2002 compared to
$32.5  million in fiscal  2001,  again  attributable  to a decrease  in employee
compensation  and benefit  costs of $4.3  million,  as well as to a $1.6 million
decrease in fees for  professional  services,  partly  offset by a $1.3  million
increase in telecommunication costs.

     DEPRECIATION  AND  AMORTIZATION.   Depreciation  and  amortization  expense
decreased  22.2%,  or $8.1 million,  to $28.4 million in fiscal 2002 compared to
$36.5  million in the prior year  primarily as a result of our decision to early
adopt SFAS 142  effective  September  30, 2001 (the  beginning of fiscal  2002),
which  eliminated the  requirement to amortize  goodwill and certain  intangible
assets.  If SFAS 142 had been in effect  at the  beginning  of the  prior  year,
fiscal 2001 net income would have improved by $7.4 million.

     GAIN ON SALE OF STORAGE  FACILITY.  On January  31,  2002,  we sold our 170
million gallon propane storage facility in Hattiesburg,  Mississippi,  which was
considered  a  non-strategic  asset,  for net  cash  proceeds  of $8.0  million,
resulting in a gain on sale of approximately $6.8 million.

     INCOME BEFORE INTEREST  EXPENSE AND INCOME TAXES AND EBITDA.  Income before
interest  expense and income taxes  decreased  4.2%, or $3.9  million,  to $89.6
million  compared to $93.5 million in the prior year.  Earnings before interest,
taxes,  depreciation  and  amortization  ("EBITDA")  decreased  9.3%,  or  $12.1
million,  to $117.9  million in fiscal 2002  compared  to $130.0  million in the
prior year. The decreases in income before interest expense and



                                       19


income taxes and in EBITDA  reflect the impact of the 13.1% lower retail volumes
sold  in  fiscal  2002   attributable  to   unseasonably   warm  heating  season
temperatures  and the economy;  partially  offset by (i) the $26.3  million,  or
9.0%,  decrease in combined  operating and general and  administrative  expenses
described  above,  (ii) the impact of the $6.8  million  gain on the sale of our
Hattiesburg,  Mississippi  storage  facility  and (iii) the impact on  operating
expenses of changes in the fair value of derivative instruments described above.
In addition,  if SFAS 142 had been in effect at the beginning of the prior year,
fiscal 2001 income before interest  expense and income taxes would have improved
by $7.4 million.

     EBITDA  represents net income before  deducting  interest  expense,  income
taxes, depreciation and amortization. Our management uses EBITDA as a measure of
liquidity  and we are  including  it  because we believe  that it  provides  our
investors and industry  analysts  with  additional  information  to evaluate our
ability  to  meet  our  debt  service  obligations  and  to  pay  our  quarterly
distributions  to  holders  of our  Common  Units.  Moreover,  our  senior  note
agreements  and our  revolving  credit  agreement  require us to use EBITDA as a
component in calculating our leverage and interest  coverage  ratios.  EBITDA is
not a recognized term under generally accepted  accounting  principles  ("GAAP")
and  should  not be  considered  as an  alternative  to net  income  or net cash
provided by operating  activities  determined in accordance  with GAAP.  Because
EBITDA as determined  by us excludes  some,  but not all,  items that affect net
income,  it may not be comparable to EBITDA or similarly titled measures used by
other  companies.  The following  table sets forth (i) our calculation of EBITDA
and (ii) a reconciliation of EBITDA, as so calculated,  to our net cash provided
by operating activities (amounts in thousands):



                                                                                           Year Ended
                                                                             ------------------------------------------
                                                                               September 28,            September 29,
                                                                                    2002                    2001
                                                                             -----------------        -----------------


      Net income                                                                      $ 53,524                $ 53,510
      Add:
          Provision for income taxes                                                       703                     375
          Interest expense, net                                                         35,325                  39,596
          Depreciation and amortization                                                 28,355                  36,496
                                                                             -----------------        -----------------
      EBITDA                                                                           117,907                 129,977
                                                                             -----------------        -----------------
      Add/(subtract):
          Provision for income taxes                                                      (703)                   (375)
          Interest expense, net                                                        (35,325)                (39,596)
          Gain on disposal of property, plant and equipment, net                          (546)                 (3,843)
          Gain on sale of storage facility                                              (6,768)                      -
          Changes in working capital and other assets and liabilities                   (5,790)                 15,675
                                                                             -----------------        -----------------
      Net cash provided by/(used in)
          Operating activities                                                        $ 68,775               $ 101,838
                                                                             =================        =================
          Investing activities                                                        $ (6,851)              $ (17,907)
                                                                             =================        =================
          Financing activities                                                       $ (57,463)              $ (59,082)
                                                                             =================        =================





     INTEREST INCOME AND INTEREST EXPENSE. Net interest expense decreased 10.9%,
or $4.3  million,  to $35.3  million in fiscal 2002 compared to $39.6 million in
the prior year. This decrease is primarily attributable to reductions in average
amounts outstanding during fiscal 2002 under our Revolving Credit Agreement,  as
well as lower average interest rates.




                                       20




LIQUIDITY AND CAPITAL RESOURCESActivities. Due to the seasonal nature of the propane business,and fuel oil businesses, cash flows from operating activities are greater during the winter and spring seasons, our second and third fiscal quarters, as customers pay for propane purchased during the heating season. In fiscal 2003, netNet cash provided by operating activities decreased  $11.5for the year ended September 24, 2005 amounted to $39.0 million, a decrease of $54.1 million, or 16.7%58.1%, compared to $57.3$93.1 million in fiscal 2003 compared to
$68.8 million in fiscal 2002. The decrease is primarily due to lower net income,
including lower non-cash items (principally depreciation, amortization and gains
on asset disposals),  as well as the impact of increased  investment in accounts
receivable and inventories  resulting from higher commodity prices and increased
business  activity  during  fiscal 2003 compared to fiscal 2002 due to generally
colder average temperatures.

     In fiscal 2002, net cash provided by operating  activities  decreased $33.0
million, or 32.4%, to $68.8 million in fiscal 2002 compared to $101.8 million in
fiscal 2001.prior year. The decrease was primarily dueattributable to lower net income, including lower
non-cash  items  (principally  depreciation,  amortization  and  gains  on asset
disposals),  as well as the impact of unfavorable  changesa $65.3 million increased investment in working capital in comparison to the prior year, principally  reflectingparticularly in increased accounts receivable balances as a result of the significant rise in commodity prices, coupled with $8.1 million lower compensationincome, after adjusting for non-cash items in both periods (depreciation, amortization, loss on debt extinguishment and benefit accruals,gains on disposal of assets and customer service centers); offset to an extent by lower inventories.an increase in other long-term assets and liabilities of $19.3 million. The continued high commodity price environment in both propane and fuel oil has resulted in a significant increase in average selling prices and, in turn, higher receivable balances in relation to the prior year, as well as higher average inventory costs.
In fiscal 2004, net cash provided by operating activities increased $35.8 million, or 62.5%, to $93.1 million, compared to $57.3 million in fiscal 2003. The increase was primarily due to improved net income, as well as a decrease in net working capital investment compared to the prior year. Net working capital decreased primarily as a result of an increase in customer prepayments and deposits under our budget payment programs, particularly in our fuel oil and other refined fuels segment. Under these budget

payment programs, customers pay equal monthly installments beginning in June or July for the upcoming heating season based on each customer’s historical usage patterns.
Investing Activities.    Net cash used in investing activities was $4.9of $24.6 million in fiscal  2003,
reflecting  $14.1 million infor the year ended September 24, 2005 consisted of capital expenditures of $29.3 million (including $4.7$10.7 million for maintenance expenditures and $9.4 million to support the growth of operations)
offset by net proceeds of $9.2 million  from the sale of assets  (including  net
proceeds of $7.2 million from the sale of nine customer  service  centers).  Net
cash used in investing  activities  was $6.9 million in fiscal 2002,  reflecting
$17.5 million in capital  expenditures  (including $13.0 million for maintenance
expenditures and $4.5 million to support the growth of operations) offset by net
proceeds of $10.6  million  from the sale of assets  (including  net proceeds of
$8.0  million  resulting  from  the  sale of our  propane  storage  facility  in
Hattiesburg,  Mississippi).  Net cash  used in  investing  activities  was $17.9
million  in fiscal  2001,  reflecting  $23.2  million  in  capital  expenditures
(including  $6.5  million  for  maintenance  expenditures  and $16.7$18.6 million to support the growth of operations), offset by net proceeds of $5.3$4.7 from the sale of property, plant and equipment. Capital spending in fiscal 2005 increased $2.8 million, or 10.6%, compared to fiscal 2004 primarily as a result of our facility integration efforts in the northeast, as well as additional spending on information technology in connection with the integration of Agway Energy.
Net cash used in investing activities of $196.6 million for the year ended September 25, 2004 consisted of the net impact of the $211.2 million total cost of the Agway Acquisition partially offset by net proceeds of $39.4 million from the sale of customer service centers during fiscal 2004 and net proceeds of $1.8 million from the sale of property, plant and equipment. Additionally, capital expenditures were $26.5 million (including $7.4 million for maintenance expenditures and $19.1 million to support the growth of operations) for fiscal 2004. Capital spending in fiscal 2004 increased $12.4 million, or 87.9%, compared to fiscal 2003 primarily as a result of our facility integration efforts in the northeast, as well as additional spending on information technology in connection with the integration of Agway Energy.
Financing Activities.Net cash used in financing activities for fiscal 2003 was $77.6the year ended September 24, 2005 of $53.4 million reflecting  (i)reflects the paymentimpact of the March 31, 2005 debt refinancing which included the early retirement of $340.0 million of private placement senior notes and a related prepayment premium of $32.0 million, offset by net proceeds of $373.0 million, net of a discount, from the issuance of an additional $250.0 million of 6.875% senior notes due 2013 (bringing the total principal amount of such notes to $425.0 million) and borrowings of $125.0 million under our quarterly  distributions  to  our  Common
Unitholdersnew Term Loan (see Summary of Long-Term Debt Obligations and our  General  Partner  amounting  to  $60.1Revolving Credit Lines below). In addition, we had borrowings of $26.8 million  (ii) the
repayment of all outstanding  borrowings under our Revolving Credit Agreement amountingin order to $46.0fund increased working capital needs during the heating season, offset by $4.2 million (iii)in fees associated with closing of the March 31, 2005 debt refinancing and the Third Amended and Restated Credit Agreement in October 2004. Quarterly distributions to holders of our Common Units and the General Partner at a rate $0.6125 per Common Unit for each quarter of fiscal 2005 amounted to $76.6 million.
Net cash provided by financing activities for the year ended September 25, 2004 was $141.2 million as a result of: (i) net proceeds of $169.1 million from the issuance of $175.0 million aggregate principal amount of 6.875% senior notes due 2013, a portion of which was used to fund a portion of the Agway Acquisition; and, (ii) net proceeds of $87.6 million from a public offering of approximately 3.0 million Common Units (including full exercise of the underwriters’ over-allotment option) during December 2003 to fund a portion of the Agway Acquisition; offset by: (i) the payment of a total of $72.5 million for our quarterly distributions of $0.5875 per Common Unit during each of the first two quarters of fiscal 2004, $0.60 per Common Unit during the third quarter of fiscal 2004 and $0.6125 per Common Unit during the fourth quarter of fiscal 2004; and, (ii) the repayment of the secondthird annual principal paymentinstallment of $42.5 million due under the 1996 Senior Note Agreement (which was terminated as a result of the Refinancing).
Summary of Long-Term Debt Obligations and (iv)Revolving Credit Lines
On October 20, 2004, our Operating Partnership executed the payment of $0.8 millionThird Amended and Restated Credit Agreement (the ‘‘Revolving Credit Agreement’’), which replaced the Second Amended and Restated Credit Agreement then due to expire in fees associated with the renewal and extension of ourMay 2006. The Revolving Credit Agreement during May 2003. The $88.9extended the maturity to October 20, 2008 and provided available credit of $150.0 million reduction in debt
during  fiscal  2003 was  funded  throughthe form of a combination  of cash  provided  by
operations  and the net  proceeds  of  $72.2$75.0 million from a  follow-on  public
offering of  approximately  2.6 million Common Units (including full exercise of
the  underwriters'  over-allotment  option) which was completed during the third
quarter of fiscal 2003.  Net cash used in financing  activities  for fiscal 2002
was $57.5 million,  primarily reflecting the payment of quarterly  distributions
to our Common  Unitholders and our General  Partner.  Net cash used in financing
activities for fiscal 2001 was $59.1 million,  reflecting  repayments  under our
Operating  Partnership's  Revolving  Credit  Agreement,  as amended and restated
effective January 29, 2001 (the "Revolving Credit  Agreement"),  including a net
repayment of $44.0 million borrowed under the SCANA  Acquisition  facility and a
net repayment of $6.5 million  borrowed under the netrevolving working capital facility, of which $15.0 million could be used to issue letters of credit, and $54.5a separate $75.0 million for  paymentletter of quarterly  distributions  to  our  Common
Unitholderscredit facility. The Second Amended and our General  Partner,  partly  offset by net  proceeds of $47.1
million  from a public  offering of  approximately  2.4 million  Common Units in
October 2000.

     On March 5, 1996,  pursuant to a Senior Note  Agreement  (the "1996  Senior
Note  Agreement"),  we issued  $425.0  million of senior notes (the "1996 Senior
Notes") with an annual interest rate of 7.54%.  Our  obligations  under the 1996
Senior Note  Agreement are unsecured and rank on an equal and ratable basis with
our  obligations  under the 2002 Senior Note Agreement and the RevolvingRestated Credit Agreement discussed below. Under the terms of the 1996 Senior Note Agreement, we
became  obligated to pay the  principal on the 1996 Senior Notes in equal annual
payments of $42.5 million  starting July 1, 2002, with the last such payment due
June 30, 2011. On July 1,



                                       21


2002,  we received  net  proceeds of $42.5  million  from the  issuance of 7.37%
Senior Notes due June,  2012 (the "2002 Senior Notes") and used the funds to pay
the first annual  principal  payment of $42.5  million due under the 1996 Senior
Note Agreement.  Our obligations  under the agreement  governing the 2002 Senior
Notes (the "2002 Senior Note  Agreement") are unsecured and rank on an equal and
ratable basis with our obligations  under the 1996 Senior Note Agreement and the
Revolving  Credit  Agreement.  Rather than refinance the second annual principal
payment of $42.5 million due under the 1996 Senior Note Agreement, we elected to
repay this principal payment on June 30, 2003.

     Our previous  Revolving  Credit  Agreement,  which provided a $75.0 million working capital facility and a $50.0$25.0 million acquisition facility, was scheduled
to mature on May 31, 2003. On May 8, 2003,  we completedfacility. In connection with the Second  Amended and
Restated Credit Agreement (the "Revolving  Credit  Agreement") which extends the
previous Revolving Credit Agreement, until Mayour permitted leverage ratio (the ratio of total debt to EBITDA) was reduced from a ratio of 5.0 to 1 to a ratio of less than 4.5 to 1.
On March 31, 2006.2005, we completed a refinancing (the ‘‘Refinancing’’) of our Operating Partnership’s $297.5 million outstanding principal amount of 1996 Senior Notes due 2011 and $42.5 million outstanding

principal amount of 2002 Senior Notes due 2012 (collectively, the ‘‘Redeemed Notes’’). Under the Refinancing, we issued $250.0 million of additional notes under the indenture governing our 2003 Senior Notes and received proceeds of approximately $246.9 million, net of a $2.0 million discount on sale and related underwriter fees. In addition, our Operating Partnership entered into the first amendment to the Revolving Credit Agreement to provide, among other things, for a five-year $125.0 million term loan facility (the ‘‘Term Loan’’). The total net proceeds of approximately $371.9 million from the issuance of additional senior notes under the indenture governing the 2003 Senior Notes and from the $125.0 million of borrowings under the Term Loan, together with cash of approximately $7.3 million, were used to prepay the Redeemed Notes, including a prepayment premium of approximately $32.0 million and interest accrued on the Redeemed Notes of approximately $6.4 million from the last interest payment date through the date of redemption.
The Redeemed Notes required an annual principal repayment of $42.5 million through 2012. The Refinancing replaced the annual cash requirement for principal amortization with the $125.0 million five-year Term Loan due 2010 and the $250.0 million of additional 2003 Senior Notes due 2013, significantly extending our debt maturities and eliminating refinancing risk associated with the amortization of the Redeemed Notes. The Refinancing is expected to reduce our annual interest expense for at least the next five years. We recorded a one-time charge of $36.2 million for the year ended September 24, 2005 as a result of the Refinancing to reflect the loss on debt extinguishment associated with the prepayment premium of $32.0 million and the write-off of $4.2 million of unamortized bond issuance costs associated with the Redeemed Notes.
As a result of the Refinancing, we eliminated our requirement under the Redeemed Notes to maintain a leverage ratio and an interest coverage ratio without adding a comparable financial covenant under the 2003 Senior Notes. As a result of the first amendment to the Revolving Credit Agreement, our Operating Partnership’s permitted leverage ratio was reduced from a ratio of 4.5 to 1 to a ratio of less than 4.0 to 1 and the interest coverage ratio (the ratio of EBITDA to interest expense) was amended to require maintenance of a ratio of greater than 2.5 to 1 on a consolidated basis. The Revolving Credit Agreement provides aand the 2003 Senior Notes both contain various restrictive and affirmative covenants applicable to our Operating Partnership and us, 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. We were in compliance with all covenants and terms of all of our debt agreements as of September 24, 2005 and as of the end of each fiscal quarter for all periods presented.
On August 26, 2005, we completed the second amendment to the Revolving Credit Agreement pursuant to which the lenders (i) eliminated the stand-alone $75.0 million letter of credit facility and combined that credit with the existing revolving working capital facility; (ii) increased the revolving working capital facility by an additional $25.0 million, thereby raising the amount of the working capital facility from $75.0 million to $175.0 million (including the $75.0 million from the former stand-alone letter of credit facility); (iii) extended the revolving credit facility’s expiration date to match the March 31, 2010 maturity date of the $125.0 million Term Loan; and, an acquisition(iv) amended certain other terms to effect the foregoing. All other terms and conditions under the Revolving Credit Agreement remained the same. As of September 24, 2005, there was $26.8 million outstanding under the working capital facility of $25.0 million.  the Revolving Credit Agreement that was used to fund working capital requirements.
The 2003 Senior Notes mature on December 15, 2013, and require semi-annual interest payments that began on June 15, 2004. We are permitted to redeem some or all of the 2003 Senior Notes any time on or after December 15, 2008, at redemption prices specified in the indenture governing the 2003 Senior Notes. In addition, embedded within the 2003 Senior Notes is a change of control provision that would require us to offer to repurchase the notes at 101% of the principal amount repurchased, if the holders of the notes elected to exercise the right of repurchase.
Borrowings under the Revolving Credit Agreement, including the Term Loan, bear interest at a rate based upon either LIBOR plus a margin,or Wachovia National Bank's prime rate, plus, in each case, the applicable margin or the Federal Funds rate plus 1/2 of 1%. An annual facility fee ranging from 0.375% to 0.50%, based upon certain financial tests, is payable quarterly whether or not borrowings occur.  These terms are  substantially the
same as the terms under the previous  Revolving Credit Agreement.  

In connection with the completionTerm Loan, our Operating Partnership also entered into an interest rate swap contract with a notional amount of $125.0 million with the issuing lender. Effective March 31, 2005 through March 31, 2010, our Operating Partnership will pay a fixed interest rate of 4.66% to the issuing lender on notional principal amount of $125.0 million, effectively fixing the LIBOR portion of the interest rate at 4.66%. In return, the issuing lender will pay to our Operating Partnership a floating rate, namely LIBOR, on the same notional principal amount. The applicable margin above LIBOR, as defined in the Revolving Credit Agreement, we repaid $21.0 millionis not included in, and will be paid in addition to, this fixed interest rate of outstanding  borrowings  under the Revolving  Credit  Agreement.  On June 19,
2003,  we repaid the  remaining  outstanding  balance of $25.0 million under the
Revolving  Credit  Agreement.  As of September 27, 2003 there were no borrowings
outstanding  under the  Revolving  Credit  Agreement.  As of September 28, 2002,
$46.0 million was  outstanding  under the  acquisition  facility of the previous
Revolving  Credit  Agreement  and there  were no  borrowings  under the  working
capital facility.

     The 1996 Senior Note  Agreement,  the 2002  Senior Note  Agreement  and the
Revolving Credit Agreement contain various restrictive and affirmative covenants
applicable to our Operating  4.66%.
Partnership including (a)  maintenance of certain
financial  tests,  including,  but not limited to, a leverage ratio of less than
5.0 to 1 and an interest  coverage  ratio in excess of 2.5 to 1 using  EBITDA in
such ratio  calculations,  (b)  restrictions  on the  incurrence  of  additional
indebtedness,  and (c) restrictions on certain liens,  investments,  guarantees,
loans, advances,  payments,  mergers,  consolidations,  distributions,  sales of
assets and other transactions.  During December 2002, we amended the 1996 Senior
Note  Agreement  to (i)  eliminate an adjusted  net worth  financial  test to be
consistent with the 2002 Senior Note Agreement and Revolving  Credit  Agreement,
and (ii)  require a leverage  ratio of less than 5.25 to 1 when the  underfunded
portion of our pension  obligations is used in the  computation of the ratio. We
were in compliance with all covenants and terms of all of our debt agreements as
of  September  27,  2003 and at the end of each  fiscal  quarter for all periods
presented.

     Distributions
We will make distributions in an amount equal to all of our Available Cash, as defined in theour Second Amended and Restated Partnership Agreement (the ‘‘Partnership Agreement’’), approximately 45 days after the end of each fiscal quarter to holders of record on the applicable record dates. TheOur Board of Supervisors reviews the level of Available Cash on a quarterly basis based upon information provided by management. During each of the first three  quarters  of fiscal 2003,2005, we paid quarterly distributions to our Common Unitholders of $0.5750$0.6125 per Common Unit. On July 24,
2003,  the Board of  Supervisors  declared a $0.05  annualized  increase  in the
quarterly  distribution from $0.5750 per Common Unit to $0.5875 per Common Unit,
or $2.35 on an annualized basis, for the third quarter of fiscal 2003, which was
paid on August 12, 2003. On October 23, 2003, the20, 2005, our Board of Supervisors declared a quarterly distribution of $0.5875$0.6125 per Common Unit forin respect of the fourth quarter of fiscal 2003,2005, which was paid on November 10,  20038, 2005 to holders of record on November 3, 2003.

     1, 2005.
Quarterly distributions include Incentive Distribution Rights ("IDRs"(‘‘IDRs’’) payable to the General Partner to the extent the quarterly distribution exceeds $0.55 per Common Unit. The IDRs represent an incentive for the General Partner (which is ownedmajority-owned by our  management)senior management of the Partnership) to increase the distributions to Common Unitholders in excess of the $0.55 per Common Unit. With regard to the first $0.55 of the Common Unit distribution, 98.29%98.46% of the Available Cash is distributed to the Common Unitholders and 1.71%1.54% is distributed to the General Partner



                                       22


(98.11% and 1.89%,  respectively,  prior to our June 2003 public offering).Partner. With regard to the balance of the Common Unit distributions paid, 85% of the Available Cash is distributed to the Common Unitholders and 15% is distributed to the General Partner.

     As discussed  above,  the results of  operations  for the fiscal year ended
September  27,  2003 were  impacted by  generally  colder  average  temperatures
compared  to  fiscal  2002  across  much of the  United  States,  a  challenging
commodity price
Pension Plan Assets and supply environment and the sustained economic recession. Our
results of operations were favorably impacted by a return to more normal weather
patterns, particularly in the east, and our continued focus on managing our cost
structure; despite the negative effects of unseasonably warm weather in the west
and the economy. In addition,  our product supply and risk management activities
helped to ensure  adequate  supply and to mitigate  the impact of propane  price
volatility during a period of uncertainty  surrounding the situation in Iraq and
other oil producing nations. We took several steps during fiscal 2003 to further
strengthen  our  balance  sheet and  improve our  leverage,  highlighted  by the
successful completion during the third quarter of a follow-on public offering of
approximately  2.6 million  Common Units and the  repayment of $88.9  million of
debt.  The lower debt  levels  resulted  in  approximately  $2.0  million  lower
interest expense in fiscal 2003 compared to the prior year.

     Our anticipated cash  requirements for fiscal 2004 include  maintenance and
growth capital  expenditures of  approximately  $19.0 million for the repair and
replacement  of property,  plant and equipment,  approximately  $30.0 million of
interest  payments  on the 1996  Senior  Notes,  the 2002  Senior  Notes and the
Revolving Credit Agreement and a principal  payment of $42.5 million due on June
30,  2004  under  the  1996  Senior  Note  Agreement.   In  addition,   assuming
distributions  remain  at  the  current  level,  we  will  be  required  to  pay
approximately  $65.8  million in  distributions  to Common  Unitholders  and the
General  Partner during fiscal 2004.  Based on our current  estimate of our cash
position,  availability  under the Revolving Credit Agreement  (unused borrowing
capacity  under the working  capital  facility of $69.5 million at September 27,
2003)  and  expected  cash  flow from  operating  activities,  we expect to have
sufficient funds to meet our current and future obligations.

     In connection with the pending  acquisition of the assets and operations of
Agway Energy,  we expect to close the acquisition upon completion of the auction
process, final approval of the acquisition by the Bankruptcy Court and necessary
regulatory  approvals.  At present,  we plan to fund the $206.0 million purchase
price  and  related   acquisition   costs  and  expenses  with  capital  markets
financings.  In the  interim,  we have  obtained a commitment  from  established
investment banking  institutions to provide a $210.0 million 364-day facility to
fund all or a portion of the purchase  price.  If we draw on this  facility,  it
would bear interest at a floating  rate and, at our option,  may be converted at
maturity into a 9-year term loan.  If the facility were drawn,  we would seek to
arrange for other  permanent  financing  to repay the  facility at our  earliest
opportunity,   possibly  through  one  or  more  offerings  of  equity  or  debt
securities.  Following consummation of the acquisition,  we believe that we will
have sufficient cash flow from operating  activities and availability  under our
Revolving Credit Agreement to fund the incremental cash requirements and to fund
incremental  working  capital  needs  of  the  Agway  Energy  business  for  the
forseeable future.

PENSION PLAN ASSETS

     Obligations
While our pension asset portfolio has experienced significantly improved asset returns inover the past three fiscal 2003,years, the funded status of our defined benefit pension plan continues to be impactedaffected by the negative impact of the low interest rate environment affectingon the actuarial value of the projected benefit obligations, as well as the cumulative impact of prior losses particularly during fiscal 2002 and fiscal 2001. As a result,  theThe projected benefit obligation as of September 27, 200324, 2005 exceeded the market value of pension plan assets by $42.1$40.2 million, which improved $11.1an increase of $5.2 million compared to the $53.2$35.0 million underfunded position at the end of the prior year.  The
improvement in the funded status  compared to fiscal 2002 has also resulted in a
favorable   adjustment  of  $5.0  million  to  accumulated  other  comprehensive
(loss)/income,  a component  of  partners'  capital,  at the end of fiscal 2003.
Therefore, the cumulative reduction to



                                       23


partners' capital amounted to $80.1 million on the consolidated balance sheet at
September 27, 2003 compared to the  cumulative  reduction of $85.1 million as of
September  28,  2002.   The  cumulative   reduction  to  partners'   capital  is
attributable to the level of unrealized losses experienced on our pension assets
over the past  three  years and  represent  non-cash  charges  to our  partners'
capital  with no impact on the results of  operations  for the fiscal year ended
September  27,  2003.  
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 theour benefit obligations, effective January 1, 2003, all future service credits were eliminated. For  purposes of computingTherefore, eligible participants will receive interest credits only toward their ultimate defined benefit under the actuarial  valuation of projecteddefined benefit obligations,  we reduced the discount rate assumption from 6.75% as of September
28,  2002 to 6.0% as of  September  27,  2003 to reflect an  estimate of current
market  expectations  related  to long term  interest  rates.  Additionally,  we
reduced the expected  long-term  rate of return on plan assets  assumption  from
8.5% as of  September  28, 2002 to 7.75% as of  September  27, 2003 based on the
current  investment  mix of our pension asset  portfolio and  historical  asset
performance.plan. There were no minimum funding requirements for the defined benefit pension plan during fiscal 2003,  20022005, 2004 or 2001.2003. However, in an effort to proactively address our funded status, we elected to make a  voluntary contribution  of $10.0  millioncontributions to our defined benefit pension plan of $15.1 million and $10.0 million during the
fourth quarter offiscal 2004 and fiscal 2003, thus improving our funded status.  Thisrespectively. These voluntary contribution,contributions, coupled with improved asset returns in our pension asset portfolio during fiscal 2005, fiscal 2004 and fiscal 2003, partially offset the negative effects on the funded status of further declines in the interest rate environment.
In addition, during fiscal 2004 lump sum benefit payments to either terminated or retired individuals of $12.3 million exceeded the interest cost component of the net periodic pension cost. As a result, pursuant to SFAS 88 we recorded a non-cash settlement charge of $5.3 million in order to accelerate recognition of a portion of cumulative unrecognized losses in the defined benefit pension plan. These unrecognized losses were previously accumulated as a reduction to partners’ capital and were being amortized to expense as part of our net periodic pension cost in accordance with SFAS No. 87 ‘‘Employers’ Accounting for Pensions.’’ As of September 24, 2005, the cumulative reduction to partners’

capital decreased to $75.7 million, compared to $76.9 million at the end of fiscal 2004, primarily as a result of continued strength in our asset portfolio returns, offset to an extent by lower benchmark interest rates. The cumulative reduction to partners’ capital is attributable to the level of unrealized losses experienced on our pension assets over the past several years and represents non-cash charges to our partners’ capital with no impact on the results of operations for the year ended September 24, 2005. Additional pension settlement charges may be required in future periods depending on the level of lump sum benefit payments.
There can be no assurancesassurance that future declines in capital markets, or interest rates, will not have an adverse impact on our results of operations or cash flow. LONG-TERM DEBT OBLIGATIONS AND OPERATING LEASE OBLIGATIONS

CONTRACTUAL OBLIGATIONS

     For purposes of computing the actuarial valuation of projected benefit obligations, we reduced the discount rate assumption from 5.50% as of September 25, 2004 to 5.25% as of September 24, 2005 to reflect current market expectations related to long-term interest rates and the projected duration of our pension obligations based on a benchmark index with similar characteristics as the expected cash flow requirements of our defined benefit pension plan over the long-term. Additionally, for purposes of the computation of the periodic pension cost for fiscal 2005, 2004 and 2003 we assumed declining long-term rates of return on plan assets of 7.50%, 7.75% and 8.50%, respectively, based on the investment mix of our pension asset portfolio, historical asset performance and expectations for future performance. There are currently no minimum funding requirements projected for fiscal 2006 and, based on information provided by our actuaries, we do not project any minimum funding requirements until fiscal 2009.
We also provide postretirement health care and life insurance benefits for certain retired employees. Partnership employees who were hired prior to July 1993 and retired prior to March 1998 are eligible for such benefits if they reached a specified retirement age while working for the Partnership. Effective January 1, 2000, we terminated our postretirement benefit plan for all eligible employees retiring after March 1, 1998. All active and eligible employees who were to receive benefits under the postretirement plan subsequent to March 1, 1998 were provided a settlement by increasing their accumulated benefits under the defined benefit pension plan noted above. Our postretirement health care and life insurance benefit plans are unfunded.
Long-Term Debt Obligations and Operating Lease Obligations
Contractual Obligations
Long-term debt obligations and future minimum rental commitments under noncancelable operating lease agreements as of September 27, 200324, 2005 are due as follows (amountsfollows:
(Dollars in thousands):



                                Fiscal           Fiscal           Fiscal           Fiscal           2008 and
                                 2004             2005             2006             2007           thereafter          Total
                            ----------------  --------------   -------------   ---------------   ---------------   --------------


Long-term debt                     $ 42,911        $ 42,940        $ 42,975          $ 42,500         $ 212,500         $ 383,826
Operating leases                     17,796          12,868           9,959             5,860             6,410            52,893
    Total long-term debt
      obligations and       ----------------  --------------   -------------   ---------------   ---------------   --------------
      lease commitments            $ 60,707        $ 55,808        $ 52,934          $ 48,360         $ 218,910         $ 436,719
                            ================  ==============   =============   ===============   ===============   ==============

 
Fiscal 2006
Fiscal 2007
Fiscal 2008
Fiscal 2009
2010 and
thereafter
Total
Long-term debt
$
27,225
 
$
—
 
$
—
 
$
—
 
$
548,070
 
$
575,295
 
Operating leases
 
20,295
 
 
15,096
 
 
10,688
 
 
5,856
 
 
5,814
 
 
57,749
 
Total long-term debt obligations and lease commitments
$
47,520
 
$
15,096
 
$
10,688
 
$
5,856
 
$
553,884
 
$
633,044
 
Additionally, we have standby letters of credit in the aggregate amount of $35.4$53.0 million, in support of retention levels under our casualty insurance programs and certain lease obligations, which expire on March 1, 2004.

OFF-BALANCE SHEET ARRANGEMENTS

OPERATING LEASES

     periodically through October 25, 2006.
Off-Balance Sheet Arrangements
Operating Leases
We lease certain property, plant and equipment for various periods under noncancelable operating leases, including allthe majority of our railroad tank cars, approximately 70%69% of our vehicle fleet, approximately 30%26% of our customer service centers and portions of our information systems equipment.

Rental expense under operating leases was $28.6 million, $27.3 million and $24.3 million $24.0  millionfor fiscal years 2005, 2004 and $23.4
million for the years ended September 27, 2003, September 28, 2002 and September
29, 2001, respectively. Future minimum rental commitments under noncancelable operating lease agreements as of September 27,  200324, 2005 are presented in the immediately preceding table.



                                       24




GUARANTEES

     Financial Accounting Standards Board ("FASB") Financial  Interpretation No.
45,  "Guarantor's   Accounting  and  Disclosure   Requirements  for  table above.
Guarantees
Including  Indirect  Guarantees of Indebtedness of Others," expands the existing
disclosure  requirements for guarantees and requires  recognition of a liability
for the fair  value of  guarantees  issued  after  December  31,  2002.  
We have residual value guarantees associated with certain of our operating leases, related primarily to transportation equipment, with remaining lease periods scheduled to expire periodically through fiscal 2009.2012. Upon completion of the lease period, we guarantee that the fair value of the equipment will equal or exceed the guaranteed amount, or we will pay the lessor the difference. Although the fair value of equipment at the end of its lease term has historically exceeded the guaranteed amounts, the maximum potential amount of aggregate future payments we could be required to make under these leasing arrangements, assuming the equipment is deemed worthless at the end of the lease term, is approximately $14.4$18.1 million. Of this amount, the fair value of residual value guarantees for operating leases entered into after December 31, 2002 was $2.1
million which is reflected in other liabilities, with a corresponding amount included within other assets in the accompanying consolidated balance sheet totaling $6.3 million and $3.7 million as of September 27, 2003.

RECENTLY ISSUED ACCOUNTING STANDARDS

     24, 2005 and September 25, 2004, respectively.
Recently Issued Accounting Standards
In June  2002,March 2005, the Financial Accounting Standards Board (‘‘FASB’’) issued FASB issued  SFASInterpretation No. 146,  "Accounting47, ‘‘Accounting for Costs
Associated  with Exit or Disposal  Activities"  ("SFAS 146"Conditional Asset Retirement Obligations’’ (‘‘FIN 47’’). SFAS 146FIN 47 clarifies the term conditional asset retirement obligation as a legal obligation to retire an asset when the timing and/or method of settlement are conditional on a future event that may or may not be within the control of the entity. FIN 47 also requires companiesan entity to recognize costs  associateda liability for the fair value of the conditional asset retirement obligation if the fair value of the liability can be reasonably estimated. FIN 47 is effective beginning with exit or disposal  activities when
they are incurred rather than at the date of a commitment to an exit or disposal
plan.Partnership’s fiscal year ending September 30, 2006. The provisions of SFAS 146 are effective for exit or disposal  activities
initiated after December 31, 2002. We will applyPartnership is currently evaluating the provisions of this standard
on an ongoing basis, as applicable.

     In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133 on
Derivative  InstrumentsFIN 47 and Hedging  Activities"  ("SFAS 149").  SFAS 149 amends
SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities" and
clarifies  financial  accounting  and  reporting  for  derivative   instruments,
including  certain  derivative  instruments  embedded in other contracts and for
hedging  activities.  This  statement  is, in general,  effective  for contracts
entered  into or modified  after June 30,  2003,  and for hedging  relationships
designated  after June 30, 2003.  Thecurrently believes that adoption of this  standard didwill not have a material impacteffect on our consolidatedits financial position, results of operations or cash flows.
In May  2003,December 2004, the FASB issued a revised SFAS No. 150,  "Accounting  for  Certain
Financial  Instruments  with  Characteristics  of both  Liabilities  and Equity"
("123, ‘‘Share-Based Payment’’ (‘‘SFAS 150"123R’’). SFAS 150  establishes  standards123R is a revision of SFAS No. 123 ‘‘Accounting for Stock-Based Compensation’’ and supersedes APB Opinion No. 25 ‘‘Accounting for Stock Issued to Employees’’. SFAS 123R requires a public entity to measure the classificationcost of employee services received in exchange for an award of equity instruments based on the grant date fair value of the award. SFAS 123R eliminates the alternative of using the APB Opinion No. 25 intrinsic value method of accounting that was provided for in SFAS No. 123 as originally issued and
measurement  of  certain  financial  instruments  with  characteristics  of both
liabilities  and  equity.  It requires that an  issuer  classify  athe compensation cost relating to share-based payment transactions be recognized in the financial instrument  that is  within  its  scope  as a  liability  (or an  asset  in some
circumstances).  Many  of  these  instruments  were  previously  required  to be
classified as equity.  This  statementstatements. SFAS 123R is effective for  financialbeginning with the Partnership’s fiscal year ending September 30, 2006. The Partnership has historically recognized unearned compensation associated with awards of equity instruments entered into or modified  after May 31, 2003, and otherwise is effective for our
fourth  quarter in fiscal  2003.  Theratably to expense over the vesting period (see Note 10). Accordingly, adoption of this  standard didSFAS 123R is not expected to have a
materialan impact on ourthe Partnership’s consolidated financial position, results of operationsoperation or cash flows.

     In January 2003, the FASB issued FASB Interpretation No. 46, "Consolidation
of Variable  Interest  Entities"  ("FIN 46"),  an  interpretation  of Accounting
Research Bulletin No. 51, "Consolidated  Financial Statements." FIN 46 addresses
consolidation by business  enterprises of variable  interest  entities that meet
certain  characteristics.   The  consolidation  requirements  of  FIN  46  apply
immediately to variable  interest  entities  created after January 31, 2003. The
consolidation  requirements  apply to variable  interest entities created before
February 1, 2003 in the first fiscal year or interim period



                                       25



beginning after June 15, 2003.  However,  in October 2003, the FASB deferred the
effective date for applying  certain  provisions of FIN 46 and in November 2003,
issued an exposure  draft which would amend  certain  provisions of FIN 46. As a
result of the latest exposure draft, we are currently  evaluating the impact, if
any, that FIN 46 or any future amendment may have on our financial  position and
results of operations.




















                                       26




ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     
ITEM 7A. 
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As of September 27, 2003,24, 2005, we were a party to propane  forwardexchange-traded futures and option contracts, forward contracts and in certain instances, over-the-counter options (collectively ‘‘derivative instruments’’) to manage the price risk associated with various  third  partiesfuture purchases of the commodities used in our operations, principally propane and futures  traded  on the New  York
Mercantile Exchange (the "NYMEX").fuel oil. Futures and forward contracts require that we sell or acquire propane or fuel oil at a fixed price 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; 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 propanethe product to the respective party or are settled by the payment of a net amount equal to the difference between the then current price of propane and the fixed contract price. The contracts are entered into in anticipation of market movements and to manage and hedge exposure to fluctuating prices of propane prices,and fuel oil, as well as to help ensure the availability of propaneproduct during periods of high demand.
Market risks  associated  with the trading of futures,  options and forward
contracts  are  monitored  daily for  compliance  with our trading  policy which
includes volume limits for open positions. Open inventory positions are reviewed
and managed daily as to exposures to changing market prices.

MARKET RISK

     Risk
We are subject to commodity price risk to the extent that propane or fuel oil market prices deviate from fixed contract settlement amounts. Futures traded with brokers onof the NYMEX require daily cash settlements in margin accounts. Forward and option contracts are generally settled at the expiration of the contract term either by physical delivery or through a net settlement mechanism. CREDIT RISK

     Market risks associated with the trading of futures, options and forward contracts 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
Futures and fuel oil options are guaranteed by the NYMEX and, as a result, have minimal credit risk. We are subject to credit risk with forward and option 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 credit risk of non-performance.

DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

     
Interest Rate Risk
A portion of our long-term borrowings bear interest at a variable rate based upon either LIBOR or Wachovia National Bank's prime rate, plus an applicable margin depending on the level of our total leverage. Therefore, we are subject to interest rate risk on the variable component of the interest rate. We manage our interest rate risk by entering into interest rate swap agreements. On March 31, 2005, we entered into a $125.0 million interest rate swap contract in conjunction with the new Term Loan facility under the Revolving Credit Agreement. The interest rate swap is being accounted for under SFAS 133 and has been designated as a cash flow hedge. Changes in the fair value of the interest rate swap are recognized in other comprehensive (loss)/income (‘‘OCI’’) until the hedged item is recognized in earnings. At September 24, 2005, the fair value of the interest rate swap was $1.3 million and was included within other liabilities.
Derivative Instruments and Hedging Activities
We account for derivative instruments in accordance with the provisions of SFAS No. 133, "Accounting‘‘Accounting for Derivative Instruments and Hedging Activities,"’’ as amended by SFAS No. 137, SFAS No. 138 and SFAS No. 149.149 (‘‘SFAS 133’’). All derivative instruments are reported on the balance sheet, within other current assets or other current liabilities, at their fair values. Fair values for forward contracts and futures are derived from quoted market prices for similar instruments traded on the NYMEX. On the date that futures, forward and option contracts are entered into, we make a determination as to whether the derivative instrument qualifies for designation as a hedge. Prior to
March 31, 2002, we determined that ourChanges in the fair value of derivative instruments did not qualifyare recorded each period in current period earnings or OCI, depending on whether a derivative instrument is designated as hedgesa hedge and, as such,if it is, the changes in fair  values  were  recorded  in income.
Beginning with contracts entered into subsequent to March 31, 2002, a portiontype of the derivative instruments entered into have been designated and qualify as cash
flow hedges.hedge. For derivative instruments

designated as cash flow hedges, we formally assess, both at the hedge contract'scontract’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 accumulated  other  comprehensive
(loss)/income  ("OCI")OCI to the extent effective and reclassified into cost of products sold during the same period in which the hedged item affects earnings. The mark-to-market gains or losses on ineffective portions of hedges are recognized in cost of products sold immediately.
Changes in the fair value of derivative instruments that are not designated as hedges are recorded in current period earnings.  Fair values for forwardearnings within operating expenses. A portion of our option contracts are not classified as hedges and, futuresas such, changes in the fair value of these derivative instruments are derived from
quoted market prices for similar instruments traded onrecognized within operating expenses as they occur. The value of certain option contracts that do qualify as hedges and are designated as cash flow hedges under SFAS 133 have two components of value: time value and intrinsic value. The intrinsic value is the NYMEX.




                                       27
value by which the option is in the money (i.e., the amount by which the value of the commodity exceeds the exercise or ‘‘strike’’ price of the option). The remaining amount of option value is attributable to time value. We do not include the time value of option contracts in our assessment of hedge effectiveness and, therefore, record changes in the time value component of the options currently in earnings.
At September 27, 2003,24, 2005, the fair value of derivative instruments described above resulted in derivative assets of $0.6 million included within prepaid expenses and other current assets and derivative liabilities of $1.7$7.9 million included within other current liabilities. For the year ended September 27, 200324, 2005 operating expenses include unrealized (non-cash) losses of $1.5$2.5 million compared to unrealized (non-cash) gainslosses of $5.4$4.5 million for the year ended September 28,
2002,25, 2004, attributable to the change in the fair value of derivative instruments not designated as hedges. AtAs of September 27, 2003,24, 2005, there were no unrealized gains on derivative
instruments  designated  as cash flow hedges in the amount of $1.1  million wereor losses attributable to commodity hedging transaction included in OCI and are expected to be recognized in earnings during the next 12
months as the hedged transactions occur.  However,  due to the volatility of the
commodities market, the corresponding value in OCI is subject to change prior to
its impact on earnings.

SENSITIVITY ANALYSIS

     within OCI.
Sensitivity Analysis
In an effort to estimate our exposure to unfavorable market price changes in propane or fuel oil related to our open positions under derivative instruments, we developed a model that incorporates the following data and assumptions:

     A.   The actual fixed  contract price of open positions as of September 27,
          2003 for each of the future periods.

     B.   The estimated  future market prices for futures and forward  contracts
          as of September 27, 2003 as derived from the NYMEX for traded  propane
          futures for each of the future periods.

     C.   The market prices determined in B. above were adjusted  adversely by a
          hypothetical  10% change in the future  periods  and  compared  to the
          fixed contract settlement amounts in A. above to project the potential
          negative   impact  on  earnings  that  would  be  recognized  for  the
          respective scenario.

     
A. 
The actual fixed contract price of open positions as of September 24, 2005 for each of the future periods.
B. 
The estimated future market prices for futures and forward contracts as of September 24, 2005 as derived from the NYMEX for traded propane or fuel oil futures for each of the future periods.
C. 
The market prices determined in B. above were adjusted adversely by a hypothetical 10% change in the future periods and compared to the fixed contract settlement 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 each of the future months for which a future, forward and/or option contract exists indicate either a reduction in potential future gains or potential  losses in future  earnings of $3.3 million
and $0.7$3.0 million as of September 27, 2003 and September 28, 2002, respectively.24, 2005. The above hypothetical change does not reflect the worst case scenario. Actual results may be significantly different depending on market conditions and the composition of the open position portfolio. As of September 27, 2003, our open position portfolio  reflected a net long
position (purchase) aggregating $19.2 million.

     The average posted price of propane on November 21, 2003September 24, 2005 at Mont Belvieu, Texas (a major storage point) was 55.63  cents$1.1638 per gallon as compared to 50.75
cents$0.8225 per gallon on September 27, 2003, representing25, 2004. The average posted price of fuel oil on September 24, 2005 at Linden, New Jersey was $1.909 per gallon as compared to $1.36 per gallon on September 25, 2004. Since the end of fiscal 2005, both propane and fuel oil average posted prices have declined approximately 15% to $0.9788 per gallon and $1.614 per gallon, respectively, on November 28, 2005.
As of September 24, 2005, our open position portfolio reflected a 9.6% increase.




                                       28
net short position (sell contracts) aggregating $22.3 million.





ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     
ITEM 8. 
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Our Consolidated Financial Statements and the Report of Independent AuditorsRegistered Public Accounting Firm thereon and the Supplemental Financial Information listed on the accompanying Index to Financial Statement Schedule are included herein.

SELECTED QUARTERLY FINANCIAL DATA

     
Selected Quarterly Financial Data
Due to the seasonality of the retail propane business, 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 2005
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenues
$
424,046
 
$
587,369
 
$
327,180
 
$
281,639
 
$
1,620,234
 
Income (loss) before interest expense, loss on debt extinguishment and provision for income taxes (a)
 
34,853
 
 
75,070
 
 
(13,589
) 
 
(27,967
) 
 
68,367
 
Income (loss) from continuing operations (a)
 
24,901
 
 
64,481
 
 
(59,912
) 
 
(38,522
) 
 
(9,052
) 
Discontinued operations:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gain on sale of customer service centers (b)
 
—
 
 
976
 
 
—
 
 
—
 
 
976
 
Net income (loss) (a)
 
24,901
 
 
65,457
 
 
(59,912
) 
 
(38,522
) 
 
(8,076
) 
Income (loss) from continuing operations per common
unit – basic
 
0.77
 
 
1.89
 
 
(1.92
) 
 
(1.23
) 
 
(0.29
) 
Net income (loss) per common unit – basic (c)
 
0.77
 
 
1.91
 
 
(1.92
) 
 
(1.23
) 
 
(0.26
) 
Net income (loss) per common unit – diluted (c)
 
0.77
 
 
1.90
 
 
(1.92
) 
 
(1.23
) 
 
(0.26
) 
Cash provided by (used in)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating activities
 
(29,627
) 
 
7,531
 
 
44,383
 
 
16,718
 
 
39,005
 
Investing activities
 
(7,909
) 
 
(5,035
) 
 
(6,182
) 
 
(5,505
) 
 
(24,631
) 
Financing activities
 
(96
) 
 
(1,443
) 
 
(43,895
) 
 
(8,010
) 
 
(53,444
) 
EBITDA (e)
$
43,972
 
$
85,244
 
$
(4,393
) 
$
(17,718
) 
$
107,105
 
Retail gallons sold
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Propane
 
141,780
 
 
199,124
 
 
98,008
 
 
77,128
 
 
516,040
 
Fuel oil and refined fuels
 
65,906
 
 
92,886
 
 
48,468
 
 
37,276
 
 
244,536
 
Fiscal 2004 (d)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenues
$
215,572
 
$
567,324
 
$
279,694
 
$
244,664
 
$
1,307,254
 
Income (loss) before interest expense and income taxes (a)
 
29,972
 
 
88,518
 
 
(14,057
) 
 
(34,654
) 
 
69,779
 
Income (loss) from continuing operations (a)
 
20,178
 
 
77,665
 
 
(24,321
) 
 
(44,578
) 
 
28,944
 
Discontinued operations:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gain on sale of customer service centers (b)
 
—
 
 
14,205
 
 
619
 
 
11,508
 
 
26,332
 
(Loss) income from discontinued customer service centers
 
(87
) 
 
690
 
 
(635
) 
 
(940
) 
 
(972
) 
Net income (loss) (a)
 
20,091
 
 
92,560
 
 
(24,337
) 
 
(34,010
) 
 
54,304
 
Income (loss) from continuing operations per common
unit – basic
 
0.70
 
 
2.26
 
 
(0.78
) 
 
(1.43
) 
 
0.96
 
Net income (loss) per common unit – basic (c)
 
0.70
 
 
2.68
 
 
(0.78
) 
 
(1.09
) 
 
1.79
 
Net income (loss) per common unit – diluted (c)
 
0.70
 
 
2.67
 
 
(0.78
) 
 
(1.09
) 
 
1.78
 
Cash provided by (used in)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating activities
 
11,561
 
 
11,773
 
 
77,902
 
 
(8,171
) 
 
93,065
 
Investing activities
 
(214,995
) 
 
15,355
 
 
(4,464
) 
 
7,547
 
 
(196,557
) 
Financing activities
 
240,315
 
 
(18,348
) 
 
(19,093
) 
 
(61,666
) 
 
141,208
 
EBITDA (e)
$
37,114
 
$
112,636
 
$
(4,896
) 
$
(12,972
) 
$
131,882
 
Retail gallons sold
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Propane
 
131,917
 
 
219,945
 
 
99,492
 
 
85,976
 
 
537,330
 
Fuel oil and refined fuels
 
8,058
 
 
104,157
 
 
60,298
 
 
47,956
 
 
220,469
 



                                                        First           Second          Third           Fourth          Total
                                                       Quarter         Quarter         Quarter         Quarter           Year
                                                     -------------- --------------- --------------- --------------- ---------------
Fiscal 2003
- -----------

Revenues                                                 $ 204,469       $ 295,435       $ 146,171       $ 125,604       $ 771,679
Income/(loss) before interest
   expense
(a)
These amounts include, in addition to the gain on sale of customer service centers, gains from the disposal of property, plant and income taxes (a)                             32,240          64,815          (3,598)        (13,440)         80,017
Income/(loss) from continuing operations (a)                23,254          55,902         (12,014)        (20,956)         46,186
Discontinued operations:
     equipment of $2.0 million for fiscal 2005 and $0.7 million for fiscal 2004.
(b)
Gain on sale of customer service centers (b)                -           2,404              79               -           2,483
Net income/(loss) (a)                                       23,254          58,306         (11,935)        (20,956)         48,669
Income/(loss) from continuing operations per
     common unit - basic                                      0.92            2.21           (0.47)          (0.75)           1.78
Net income/(loss) per  common
   unit - basic (c)                                           0.92            2.31           (0.47)          (0.75)           1.87
Net income/(loss) per common
   unit - diluted (c)                                         0.92            2.30           (0.47)          (0.75)           1.86
Cash provided by/(used in):
   Operating activities                                      8,378          14,988          45,557         (11,623)         57,300
   Investing activities                                     (2,561)          3,235          (1,205)         (4,328)         (4,859)
   Financing activities                                    (14,591)        (14,533)         10,655         (59,162)        (77,631)

EBITDA (d)                                                $ 39,213        $ 74,019         $ 3,198        $ (6,410)      $ 110,020
Retail gallonsrecorded in the second quarter of fiscal 2005 reflects a $1.0 million finalization of certain purchase price adjustments with the buyer of the customer service centers sold 139,934         182,956          89,600          78,961         491,451

Fiscal 2002
- -----------
Revenues                                                 $ 181,864       $ 235,887       $ 137,635       $ 109,719       $ 665,105
Gain on sale of storage facility                                 -           6,768               -               -           6,768
Income/(loss) before interest
   expense and income taxes (a)                             29,805          71,071          (2,499)         (8,825)         89,552
Net income/(loss) (a)                                       20,613          61,901         (11,028)        (17,962)         53,524
Net income/(loss) per  common
   unit - basic (c)                                           0.82            2.46           (0.44)          (0.71)           2.12
Net income/(loss) per common
   unit - diluted (c)                                         0.82            2.45           (0.44)          (0.71)           2.12
Cash provided by/(used in):
   Operating activities                                      3,421          32,701          29,906           2,747          68,775
   Investing activities                                     (4,018)          4,034          (3,213)         (3,654)         (6,851)
   Financing activities                                    (14,168)        (14,168)        (14,186)        (14,941)        (57,463)

EBITDA (d)                                                $ 37,061        $ 78,146         $ 4,549        $ (1,849)      $ 117,907
Retail gallons sold                                        123,958         168,621          86,730          76,679         455,988





(a)  These amounts include,  in addition to the gain on sale of customer service
     centers and the gain on sale of storage  facility,  gains from the disposal
     of property,  plant and  equipment of $0.6 million for fiscal 2003 and $0.5
     million for fiscal 2002.



                                       29


(b)  Gain on sale of customer  service centers consists of five customer service
     centers we sold  during the  second  quarter of fiscal  2003 for total cash
     proceeds of approximately $5.6 million and four customer service centers we
     sold  during the third  quarter of fiscal  2003 for total cash  proceeds of
     approximately  $1.6  million.  We recorded a gain on sale in the second and
     third   quarters  of   approximately   $2.4   million  and  $0.1   million,
     respectively,  which have been accounted for within discontinued operations
     pursuant  to SFAS  144,  "Accounting  for the  Impairment  or  Disposal  of
     Long-Lived  Assets."  Prior period  results of operations  attributable  to
     these nine  customer  service  centers were not  significant  and, as such,
     prior period results have not been reclassified to remove financial results
     from continuing operations.

(c)  Basic net income per Common Unit is computed by dividing net income,  after
     deducting our general partner's interest, by the weighted average number of
     outstanding Common Units. Diluted net income per Common Unit is computed by
     dividing net income,  after deducting our general partner's  approximate 2%
     interest,  by the weighted  average number of outstanding  Common Units and
     time vested restricted units granted under our 2000 Restricted Unit Plan.

(d)  EBITDA  represents net  income/(loss)  before deducting  interest  expense,
     income taxes, depreciation and amortization.  Our management uses EBITDA as
     a measure of liquidity  and we are  including it because we believe that it
     provides our investors and industry analysts with additional information to
     evaluate  our ability to meet our debt service  obligations  and to pay our
     quarterly  distributions  to  holders of our Common  Units.  Moreover,  our
     senior note agreements and our revolving credit agreement require us to use
     EBITDA as a component in  calculating  our  leverage and interest  coverage
     ratios. EBITDA is not a recognized term under generally accepted accounting
     principles  ("GAAP") and should not be considered as an  alternative to net
     income/(loss)  or net cash provided by operating  activities  determined in
     accordance with GAAP. Because EBITDA as determined by us excludes some, but
     not all, items that affect net  income/(loss),  it may not be comparable to
     EBITDA or similarly titled measures used by other companies.  The following
     table sets forth (i) our calculation of EBITDA and (ii) a reconciliation of
     EBITDA, as so calculated,  to our net cash provided by operating activities
     (amounts in thousands):






                                                          First          Second            Third          Fourth           Total
                                                         Quarter         Quarter          Quarter         Quarter           Year
                                                     -------------- --------------- --------------- --------------- ---------------
Fiscal 2003
- -----------

Net income / (loss)                                     $ 23,254        $ 58,306        $ (11,935)      $ (20,956)        $ 48,669
Add:
    Provision / (benefit) for income taxes                   130              37              (64)             99              202
    Interest expense, net                                  8,856           8,876            8,480           7,417           33,629
    Depreciation and amortization                          6,973           6,800            6,717           7,030           27,520
                                                 ---------------- --------------- ---------------- --------------- ----------------
EBITDA                                                    39,213          74,019            3,198          (6,410)         110,020
                                                 ---------------- --------------- ---------------- --------------- ----------------
Add / (subtract):
    (Provision) / benefit for income taxes                  (130)            (37)              64             (99)            (202)
    Interest expense, net                                 (8,856)         (8,876)          (8,480)         (7,417)         (33,629)
    Gain on disposal of property, plant and
         equipment, net                                     (346)             26             (166)           (150)            (636)in fiscal 2004. Gain on sale of customer service centers -          (2,404)             (79)              -           (2,483)
    Changesfor fiscal 2004 reflects the sale of ten customer service centers during the second quarter for net cash proceeds of approximately $22.9 million, one customer service center we sold during the third quarter for net cash proceeds of approximately $0.9 million and 13 customer service centers we sold during the fourth quarter for net cash proceeds of approximately $15.6 million. We recorded a gain on sale in working capitalthe second, third and fourth quarters of fiscal 2004 of approximately $14.1 million, $0.6 million and $11.6 million, respectively. Gains on sale of assets have been accounted for within discontinued operations pursuant to SFAS 144.
(c)
Basic net income (loss) per Common Unit is computed by dividing net income (loss), after deducting our general partner's interest, by the weighted average number of outstanding Common Units. Diluted net income per Common Unit is computed by dividing net income, after deducting our general partner's approximate 3.1% interest, by the weighted average number of outstanding Common Units and time vested restricted units granted under our 2000 Restricted Unit Plan. On March 31, 2004, the Emerging Issues Task Force (‘‘EITF’’) reached a consensus under EITF 03-6 ‘‘Participating Securities and the Two-Class Method Under FAS 128’’ (‘‘EITF 03-6’’) which requires, among other things, the use of the two-class method of computing earnings per unit when participating securities exist. The two-class method is an earnings allocation formula that computes earnings per unit for each class of Common Unit and participating security according to distributions declared and participation rights in undistributed earnings, as if all of the earnings were distributed to the limited partners and the general partner (inclusive of the IDRs which are considered participating securities for purposes of the application of EITF 03-6). We adopted EITF 03-6 at the end of fiscal 2004; however, the application of its consensus on the computation of our net income per Common Unit for the years ended September 24, 2005 or September 25, 2004 did not have any impact on annual net income per Common Unit. The requirements of EITF 03-6 do not apply to the computation of net income per Common Unit in periods in which a net loss is reported. Net income and income from continuing operations per Common Unit presented in this table for the first and second quarters of fiscal 2005 and 2004 reflect the impact of the application of EITF 03-6.
(d)
Includes the results from our acquisition of substantially all of the assets and liabilities (21,503)        (47,740)          51,020           2,453          (15,770)
                                                 ---------------- --------------- ---------------- --------------- ----------------
Netof Agway Energy from December 23, 2003, the date of acquisition.
(e)
EBITDA represents net income/(loss) before deducting interest expense, loss on debt extinguishment, income taxes, depreciation and amortization. Our management uses EBITDA as a measure of liquidity and we are including it because we believe that it provides our investors and industry analysts with additional information to evaluate our ability to meet our debt service obligations and to pay our quarterly distributions to holders of our Common Units. Moreover, our revolving credit agreement requires us to use EBITDA as a component in calculating our leverage and interest coverage ratios. EBITDA is not a recognized term under GAAP and should not be considered as an alternative to net income/(loss) or net cash provided by/(used in) Operatingoperating activities $ 8,378        $ 14,988         $ 45,557       $ (11,623)        $ 57,300
                                                 ================ =============== ================ =============== ================
    Investing activities                                $ (2,561)        $ 3,235         $ (1,205)       $ (4,328)        $ (4,859)
                                                 ================ =============== ================ =============== ================
    Financing activities                               $ (14,591)      $ (14,533)        $ 10,655       $ (59,162)       $ (77,631)
                                                 ================ =============== ================ =============== ================





                                       30



                                                          First          Second            Third          Fourth           Total
                                                         Quarter         Quarter          Quarter         Quarter           Year
                                                     -------------- --------------- --------------- --------------- ---------------
Fiscal 2002
- -----------

Net income / (loss)                                    $ 20,613        $ 61,901        $ (11,028)      $ (17,962)        $ 53,524
Add:
    Provision for income taxes                              138             190              190             185              703
    Interest expense,determined in accordance with GAAP. Because EBITDA as determined by us excludes some, but not all, items that affect net 9,054           8,980            8,339           8,952           35,325
    Depreciationincome/(loss), it may not be comparable to EBITDA or similarly titled measures used by other companies. The following table sets forth (i) our calculation of EBITDA and amortization                         7,256           7,075            7,048           6,976           28,355

                                                ---------------- --------------- ---------------- --------------- ----------------(ii) a reconciliation of EBITDA, 37,061          78,146            4,549          (1,849)         117,907
                                                ---------------- --------------- ---------------- --------------- ----------------
Add / (subtract):
    Provision for income taxes                             (138)           (190)            (190)           (185)            (703)
    Interest expense,as so calculated, to our net                                (9,054)         (8,980)          (8,339)         (8,952)         (35,325)
    Gain on disposal of property, plant and
         equipment, net                                     (13)           (263)              63            (333)            (546)
    Gain on sale of storage facility                          -          (6,768)               -               -           (6,768)
    Changes in working capital and other
         assets and liabilities                         (24,435)        (29,244)          33,823          14,066           (5,790)
                                                ---------------- --------------- ---------------- --------------- ----------------
Net cash provided by/(used in) Operatingoperating activities $ 3,421        $ 32,701         $ 29,906         $ 2,747         $ 68,775
                                                ================ =============== ================ =============== ================
    Investing activities                               $ (4,018)        $ 4,034         $ (3,213)       $ (3,654)        $ (6,851)
                                                ================ =============== ================ =============== ================
    Financing activities                              $ (14,168)      $ (14,168)       $ (14,186)      $ (14,941)       $ (57,463)
                                                ================ =============== ================ =============== ================
(amounts in thousands):




                                       31





ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE

     
Fiscal 2005
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
Total
Year
Net income (loss)
$
24,901
 
$
65,457
 
$
(59,912
) 
$
(38,522
) 
$
(8,076
) 
Add:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Provision for income taxes
 
89
 
 
109
 
 
138
 
 
467
 
 
803
 
Loss on debt extinguishment
 
—
 
 
—
 
 
36,242
 
 
—
 
 
36,242
 
Interest expense, net
 
9,863
 
 
10,480
 
 
9,943
 
 
10,088
 
 
40,374
 
Depreciation and amortization
 
9,119
 
 
9,198
 
 
9,196
 
 
10,249
 
 
37,762
 
EBITDA
 
43,972
 
 
85,244
 
 
(4,393
) 
 
(17,718
) 
 
107,105
 
Add (subtract):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Provision for income taxes
 
(89
) 
 
(109
) 
 
(138
) 
 
(467
) 
 
(803
) 
Loss on debt extinguishment
 
—
 
 
—
 
 
(36,242
) 
 
—
 
 
(36,242
) 
Interest expense, net
 
(9,863
) 
 
(10,480
) 
 
(9,943
) 
 
(10,088
) 
 
(40,374
) 
Gain on disposal of property, plant and equipment, net
 
(207
) 
 
(860
) 
 
(821
) 
 
(155
) 
 
(2,043
) 
Gain on sale of customer service centers
 
—
 
 
(976
) 
 
—
 
 
—
 
 
(976
) 
Changes in working capital and other assets and liabilities
 
(63,440
) 
 
(65,288
) 
 
95,920
 
 
45,146
 
 
12,338
 
Net cash provided by (used in)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating activities
$
(29,627
) 
$
7,531
 
$
44,383
 
$
16,718
 
$
39,005
 
Investing activities
$
(7,909
) 
$
(5,035
) 
$
(6,182
) 
$
(5,505
) 
$
(24,631
) 
Financing activities
$
(96
) 
$
(1,443
) 
$
(43,895
) 
$
(8,010
) 
$
(53,444
) 

Fiscal 2004
First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
Total
Year
Net income (loss)
$
20,091
 
$
92,560
 
$
(24,337
) 
$
(34,010
) 
$
54,304
 
Add:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Provision (benefit) for income taxes
 
83
 
 
83
 
 
(283
) 
 
120
 
 
3
 
Interest expense, net
 
9,711
 
 
10,770
 
 
10,547
 
 
9,804
 
 
40,832
 
Depreciation and amortization
 
7,229
 
 
9,223
 
 
9,177
 
 
11,114
 
 
36,743
 
EBITDA
 
37,114
 
 
112,636
 
 
(4,896
) 
 
(12,972
) 
 
131,882
 
Add (subtract):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(Provision) benefit for income taxes
 
(83
) 
 
(83
) 
 
283
 
 
(120
) 
 
(3
) 
Interest expense, net
 
(9,711
) 
 
(10,770
) 
 
(10,547
) 
 
(9,804
) 
 
(40,832
) 
(Gain) loss on disposal of property, plant and
equipment, net
 
(82
) 
 
(79
) 
 
8
 
 
(562
) 
 
(715
) 
Gain on sale of customer service centers
 
—
 
 
(14,205
) 
 
(619
) 
 
(11,508
) 
 
(26,332
) 
Changes in working capital and other assets and liabilities
 
(15,677
) 
 
(75,726
) 
 
93,673
 
 
26,795
 
 
29,065
 
Net cash provided by (used in)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating activities
$
11,561
 
$
11,773
 
$
77,902
 
$
(8,171
) 
$
93,065
 
Investing activities
$
(214,995
) 
$
15,355
 
$
(4,464
) 
$
7,547
 
$
(196,557
) 
Financing activities
$
240,315
 
$
(18,348
) 
$
(19,093
) 
$
(61,666
) 
$
141,208
 

ITEM 9. 
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9A.
CONTROLS AND PROCEDURES
DISCLOSURE CONTROLS AND PROCEDURES

     Our  management,  including our principal  executive  officer and principal
financial officer,  have evaluated the effectiveness of our "disclosurePROCEDURES.    The Partnership maintains disclosure controls and procedures"procedures (as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934) asthat are designed to provide reasonable assurance that information required to be disclosed in the Partnership’s filings under the Securities Exchange Act of September  27,  2003.  Based  on1934 is recorded, processed, summarized and reported within the periods specified in the rules and forms of the SEC and that such evaluation,  ourinformation is accumulated and communicated to the Partnership’s management, including its principal executive officer and principal financial officer, have  concluded  that as appropriate, to allow timely decisions regarding required disclosure.
On December 1, 2005, before filing this Annual Report, the Partnership completed an evaluation under the supervision and with the participation of September 27, 2003,  suchthe 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 areas of September 24, 2005. Based on this evaluation, the Partnership’s principal executive officer and principal financial officer concluded that the Partnership’s disclosure controls and procedures were effective forat the purposereasonable assurance level as of ensuring that materialSeptember 24, 2005.
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING.    Due to the deployment of various initiatives, including the implementation of new information requiredtechnology systems during fiscal 2005, we modified many of our internal controls over financial reporting during the quarter ended September 24, 2005. This modification of internal control over financial reporting was made to be in this Annual
Report is made  knownalign our internal controls with the implementation of our new technology initiatives, principally related to them by others on a timely  basis.  our natural gas and electricity segment. Management continues to monitor these changes, as well as conducting an ongoing process of reviewing and evaluating our internal control over financial reporting.
There have not been anyno other changes in our internal control over financial reporting (as defined in Rule 13a-15(f)13(a)–15(f) of the Securities Exchange Act of 1934) during the quarter endingended September 27, 200324, 2005, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. 32
Management’s Report on Internal Control over Financial Reporting is included below.
MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING. Management of the Partnership is responsible for establishing and maintaining adequate internal control over financial reporting. The Partnership's internal control over financial reporting is designed to provide reasonable assurance as to the reliability of the Partnership's financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
The Partnership’s management has assessed the effectiveness of the Partnership’s internal control over financial reporting as of September 24, 2005. 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.’’ 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 of 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 24, 2005, the Partnership’s internal control over financial reporting was effective.

Management’s assessment of the effectiveness of the Partnership's internal control over financial reporting as of September 24, 2005 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which appears in the ‘‘Report of Independent Registered Public Accounting Firm’’ on page F-2 of this Annual Report.
ITEM 9B. 
OTHER INFORMATION
None.

PART III
ITEM 10.    DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

PARTNERSHIP MANAGEMENT

     Our Second Amended
The information to be included under the caption ‘‘Election of Supervisors’’ and Restated  Partnership  Agreement  (the  "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‘‘Information Concerning the Board of  Supervisors,  our officers.  No Unitholder  has any  management
power over our  business  and affairs or actual or apparent  authorityBoard Committees’’ in the Partnership's definitive proxy statement to enter
into contracts on behalf of, or to otherwise bind, us. Three independent Elected
Supervisors  and two  Appointed  Supervisors  serve onbe filed with the Board of  SupervisorsSEC pursuant to the terms of the Partnership Agreement.  The Elected Supervisors are
voted  on by the  Unitholders  to  serve a term of three  years.  The  Appointed
Supervisors are appointed by our General Partner.

     The  three  Elected  Supervisors  serve  on the  Audit  Committee  with the
authority  to  review,  at the  request  of the Board of  Supervisors,  specific
matters as to which the Board of Supervisors believes there may be a conflict of
interest in order to determine if the  resolution of such  conflict  proposed by
the Board of  Supervisors  is fair and  reasonable to us. Under the  Partnership
Agreement,  any matters  approved by the Audit  Committee  will be  conclusively
deemed to be fair and reasonable to us,  approved by all of our partners and not
a breach by our General  Partner or the Board of  Supervisors of any duties they
may owe us or the Unitholders. The primary function of the Audit Committee is to
assist the Board of  Supervisors  in fulfilling  its oversight  responsibilities
relating to the establishment of accounting  policies;  preparation of financial
statements;  integrity of financial reporting;  compliance with applicable laws,
regulations and policies;  independence  and performance of the internal auditor
and  independent  accountants  and  findings  of both the  internal  auditor and
independent accountants.

     The Board of Supervisors has determined that all three members of the Audit
Committee,  John Hoyt  Stookey,  Harold R. Logan,  Jr. and Dudley C. Mecum,  are
audit committee financial experts and are independent of management,  as defined
in Item 7(d)(3)(iv) of Schedule 14A.

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
21, 2003. Officers are elected for one-year terms and Supervisors are elected or
appointed for three-year terms.



                                                                   Position With the
     Name                                    Age                   Partnership
- ----------------------------------------    -----      ---------------------------------------------------------

Mark A. Alexander.......................     45        President and Chief Executive Officer;  Member of the
                                                         Board of Supervisors (Appointed Supervisor)
Michael J. Dunn, Jr.....................     54        Senior Vice President - Corporate Development;
                                                         Member of the Board of Supervisors (Appointed Supervisor)
David R. Eastin.........................     45        Senior Vice President and Chief Operating Officer
Robert M. Plante........................     55        Vice President and Chief Financial Officer
Jeffrey S. Jolly........................     51        Vice President and Chief Information Officer
Michael M. Keating......................     50        Vice President - Human Resources and Administration
Janice G. Meola.........................     37        Vice President, General Counsel and Secretary
A. Davin D'Ambrosio.....................     39        Treasurer
Michael A. Stivala......................     34        Controller
John Hoyt Stookey.......................     73        Member of the Board of Supervisors
                                                         (Chairman and Elected Supervisor)
Harold R. Logan, Jr.....................     59        Member of the Board of Supervisors  (Elected Supervisor)
Dudley C. Mecum.........................     68        Member of the Board of Supervisors  (Elected Supervisor)
Mark J. Anton...........................     77        Supervisor Emeritus




                                       33


     Mr.  Alexander  has served as President and Chief  Executive  Officer since
October 1996 and as an Appointed  Supervisor  since March 1996. He was Executive
Vice Chairman and Chief Executive  Officer from March through October 1996. From
1989 until  joining  the  Partnership,  Mr.  Alexander  was an officer of Hanson
Industries (the United States management  division of Hanson plc), most recently
Senior Vice President - Corporate  Department.  Mr. Alexander serves as Chairman
of the Board of Managers of the General Partner. He is a member of the Executive
Committee of the National Propane Gas Association.

     Mr.  Dunn has served as Senior  Vice  President  since June 1998 and became
Senior Vice  President - Corporate  Development  in November  2002. Mr. Dunn has
served as an  Appointed  Supervisor  since July 1998.  He was Vice  President  -
Procurement  and  Logistics  from March  1997  until June 1998.  From 1983 until
joining the  Partnership,  Mr. Dunn was Vice President of Commodity  Trading for
the investment  banking firm of Goldman Sachs & Company.  Mr. Dunn serves on the
Board of Managers of the General Partner.

     Mr. Eastin has served as Chief Operating  Officer since May 1999 and became
a  Senior  Vice  President  in  November  2000.  From  1992  until  joining  the
Partnership,  Mr. Eastin held various executive  positions with Star Gas Propane
LP, most recently as Vice President - Operations. Mr. Eastin serves on the Board
of Managers of the General Partner.

     Mr.  Plante has served as a Vice  President  since  October 1999 and became
Vice  President  and Chief  Financial  Officer  in  November  2003.  He was Vice
President - Finance from March 2001 until November 2003 and Treasurer from March
1996 through  October  2002.  Mr. Plante held various  financial and  managerial
positions with predecessors of the Partnership from 1977 until 1996.

     Mr. Jolly has served as Vice President and Chief Information  Officer since
May 1999. He was Vice President - Information  Services from July 1997 until May
1999. From May 1993 until joining the Partnership,  Mr. Jolly was Vice President
- - Information Systems at The Wood Company, a food services company.

     Mr.   Keating  has  served  as  Vice   President  -  Human   Resources  and
Administration  since  July 1996.  He  previously  held  senior  human  resource
positions at Hanson Industries and Quantum Chemical Corporation  ("Quantum"),  a
predecessor of the Partnership.

     Mr.  D'Ambrosio  became  Treasurer in November 2002. He served as 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.

     Ms. Meola has served as Vice President, General Counsel and Secretary since
November  2003.  From May 1999 until  November 2003, Ms. Meola served as General
Counsel and Secretary.  She was Counsel from July 1998 to May 1999 and Associate
Counsel from September 1996, when she joined the Partnership, until July 1998.

     Mr. Stivala has served as Controller  since December 2001.  From 1991 until
joining the Partnership,  he held several positions with  PricewaterhouseCoopers
LLP, most recently as Senior Manager in the Assurance practice. Mr. Stivala is a
Certified Public Accountant and a member of the American  Institute of Certified
Public Accountants.

     Mr.  Stookey has served as an Elected  Supervisor and Chairman of the Board
of  Supervisors  since March 1996.  From 1986 until  September  1993, he was the
Chairman,  President  and Chief  Executive  Officer  of  Quantum  and  served as
non-executive  Chairman and a director of Quantum from its acquisition by Hanson
plc in  September  1993 until  October  1995.  Mr.  Stookey  is a  non-executive
Chairman of Per Scholas Inc.



                                       34




     Mr.  Logan has served as an Elected  Supervisor  since March 1996.  He is a
Director  and  Chairman of the Finance  Committee  of the Board of  Directors of
TransMontaigne   Inc.,  which  provides  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 of 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 The  Houston
Exploration  Company,  Graphic  Packaging,  Inc. and Rivington Capital Advisors,
LLC.

     Mr. Mecum has served as an Elected  Supervisor since June 1996. He has been
a managing  director of  Capricorn  Holdings,  LLC (a sponsor of and investor in
leveraged  buyouts) since June 1997. Mr. Mecum was a partner of G.L.  Ohrstrom &
Co. (a sponsor of and investor in leveraged buyouts) from 1989 to June 1996. Mr.
Mecum is a director of  Lyondell,  Dyncorp,  CitiGroup  and Mrs.  Fields  Famous
Brands, Inc.

     Mr.  Anton has served as  Supervisor  Emeritus of the Board of  Supervisors
since  January  1999.  He is a former  President,  Chief  Executive  Officer and
Chairman of the Board of  Directors  of  Suburban  Propane  Gas  Corporation,  a
predecessor  of the  Partnership,  and a  former  Executive  Vice  President  of
Quantum.

BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

     Section  16(a)Regulation 14A of the Exchange Act requires  our  directors  and  executive
officers  to file  initial  reports  of  ownership  and  reports  of  changes in ownership  of our Common  Unitsconnection with the Securities  and  Exchange  Commission.
Directors,  executive  officers  and ten  percent2006 tri-annual meeting of Common Unitholders are  required to
furnishof the Partnership with copies of all Section 16(a) forms that they file.
Based on a review of these  filings,  we believe that all such filings were made
timely during fiscal 2003.

CODE OF ETHICS

     We have adopted a code of ethics that applies to our senior executive team,
including our  principal  executive  officer,  principal  financial  officer and
principal accounting officer. Copies of our code of ethics are 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 this code of ethics that apply to our principal executive officer,  principal
financial  officer  and  principal  accounting  officer  will be  posted  on our
website.



                                       35
(the ‘‘Proxy Statement’’) is incorporated herein by reference.
ITEM 11.    EXECUTIVE COMPENSATION

SUMMARY COMPENSATION TABLE

     
The following  table sets forth a summary of all  compensation  awarded or
paidinformation to or earned by our chief executive  officer and our four other most highly
compensated  executive  officers for services  rendered to us during each of the
last three fiscal years.




                                                                      Annual Compensation
                                                                  --------------------------         LTIP           All Other
Name and Principal Position                         Year            Salary          Bonus(1)        Payout       Compensation(2)
- ---------------------------                         ----          ----------        --------        -------      ---------------

Mark A. Alexander                                   2003          $450,000          $192,150              -          $167,037
President and Chief Executive Officer               2002           450,000           157,500         25,382           158,513
                                                    2001           450,000           450,000          7,141           166,371

Michael J. Dunn, Jr.                                2003           280,000           101,626         27,403            95,695
Sr. Vice President - Corporate Development          2002           275,000            81,813         12,135            85,956
                                                    2001           260,000           221,000          3,414            89,321

David R. Eastin                                     2003           265,000            96,182              -            91,721
Senior Vice President and                           2002           260,000            77,350          2,018            81,984
  Chief Operating Officer                           2001           240,000           204,000              -            84,362

Robert M. Plante                                    2003           180,000            46,116              -            39,038
Vice President and Chief Financial Officer          2002           175,000            45,625          3,807            32,938
                                                    2001           150,000            75,000          1,071            35,169

Jeffrey S. Jolly                                    2003           182,500            38,964         10,366            50,443
Vice President and Chief Information Officer        2002           177,500            31,063          4,600            41,414
                                                    2001           170,000            85,000          1,294            47,660




(1)  Bonuses are reported for the year earned, regardless of the year paid.

(2)  For Mr.  Alexander,  this amount  includes the following:  $3,000be included under the Retirement Savings and Investment Plan; $1,200caption ‘‘Executive Compensation’’ in administrative feesthe Proxy Statement is incorporated herein by reference.
ITEM 12. 
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information to be included under the Cash  Balance  Pension  Plan;  $135,000  awarded  under  the  Long-Term
     Incentive  Plan;caption ‘‘Security Ownership of Certain Beneficial Owners and $27,837 for  insurance.  For Mr.  Dunn,  this amount
     includes the following:  $3,000 under the Retirement Savings and Investment
     Plan;  $1,200 in  administrative  fees under the Cash Balance Pension Plan;
     $71,400  awarded  under the  Long-Term  Incentive  Plan;  and  $20,095  for
     insurance. For Mr. Eastin, this amount includes the following: $3,000 under
     the Retirement  Savings and Investment Plan; $1,200 in administrative  fees
     under the Cash Balance  Pension Plan;  $67,575  awarded under the Long-Term
     Incentive  Plan;  and $19,946 for insurance.  For Mr.  Plante,  this amount
     includes the following:  $2,700 under the Retirement Savings and Investment
     Plan;  $1,200 in  administrative  fees under the Cash Balance Pension Plan;
     $32,400  awarded  under  the  Long-Term  Incentive  Plan;  and  $2,738  for
     insurance. For Mr. Jolly, this amount includes the following:  $2,738 under
     the Retirement  Savings and Investment Plan; $1,200 in administrative  fees
     under the Cash Balance  Pension Plan;  $27,375  awarded under the Long-Term
     Incentive Plan; and $19,130 for insurance.






                                       36




RETIREMENT BENEFITS

     The following  table sets forth the annual  benefits upon retirement at age
65 in 2003, without regard to statutory  maximums,  for various  combinations of
final  average  earnings and lengths of service  which may be payable to Messrs.
Alexander,  Dunn,  Eastin,  Plante and Jolly under the Pension Plan for Eligible
Employees of the Operating  Partnership and its Subsidiaries and/or the Suburban
Propane Company Supplemental  Executive Retirement Plan. Each such plan has been
assumed by the  Partnership  and each such person  will be credited  for service
earned  under such plan to date.  Messrs.  Alexander,  Dunn,  and Eastin  have 7
years,  6 years  and 4  years,  respectively,  under  both  plans.  For  vesting
purposes,  however,  Mr.  Alexander  has 19  years  combined  service  with  the
Partnership  and his prior service with Hanson  Industries.  Messrs.  Plante and
Jolly have 26 years and 6 years, respectively,  under the Pension Plan. Benefits
under the Pension Plan are limited to IRS statutory maximums for defined benefit
plans. Currently, the statutory maximum for defined benefit plan is $200,000.




                                            Pension Plan
                        Annual Benefit for Years of Credited Service Shown (1,2,3,4,5,6)
Average
Earnings                 5 Yrs.       10 Yrs.        15 Yrs.       20 Yrs.      25 Yrs.       30 Yrs.       35 Yrs.
- --------                 ------       -------        -------       -------      -------       -------       -------

    $100,000              7,888        15,775         23,663        31,551       39,438        47,326        55,214
    $200,000             16,638        33,275         49,913        66,551       83,188        99,826       116,464
    $300,000             25,388        50,775         76,163       101,551      126,938       152,326       177,714
    $400,000             34,138        68,275        102,413       136,551      170,688       204,826       238,964
    $500,000             42,888        85,775        128,663       171,551      214,438       257,326       300,214



1    The Plans' definition of earnings consists of base pay only.

2    Annual Benefits are computed on the basis of straight life annuity amounts.
     The pension  benefit is calculated as the sum of (a) plus (b) multiplied by
     (c) where  (a) is that  portion  of final  average  earnings  up to 125% of
     social security Covered  Compensation times 1.4% and (b) is that portion of
     final  average  earnings  in  excess  of 125% of  social  security  Covered
     Compensation  times 1.75% and (c) is credited service up to a maximum of 35
     years.

3    Effective  January 1, 1998, the Plan was amended to a cash balance  benefit
     formula for current and future Plan participants.  Initial account balances
     were established  based upon the actuarial  equivalent value of the accrued
     December 31, 1997 prior plan benefit. Annual interest credits and pay-based
     credits will be credited to this account.  The 2002  pay-based  credits for
     Messrs.  Alexander,  Dunn,  Eastin,  Plante and Jolly are 3.0%, 2.0%, 1.5%,
     10.0% and 2.0%,  respectively.  Participants  as of December  31, 1997 will
     receive the greater of the cash balance  benefit and the prior plan benefit
     through  the year 2002.  The Plan was  amended  effective  January 1, 2000.
     Pursuant  to this  amendment,  individuals  who are hired or  rehired on or
     after January 1, 2000 are not eligible to participateManagement’’ in the Plan.

4    In addition,  a supplemental  cash balance account was established equal to
     the value of  certain  benefits  related to retiree  medical  and  vacation
     benefits.  An  initial  account  value  was  determined  for  those  active
     employees  who were  eligible for retiree  medical  coverage as of April 1,
     1998 equal to $415  multipliedProxy Statement is incorporated herein by years of benefit  service  (maximum of 35
     years). Future pay-based credits and interest are credited to this account.
     The 2002 pay-based credits for Messrs. Alexander,  Dunn, Eastin, Plante and
     Jolly are 2.0%, 0.0%, 0.0%, 2.0% and 0.0%, respectively.

5    Effective January 1, 2003, all future pay-based credits as determined under
     the cash  balance  benefit  formula  were  discontinued.  Interest  credits
     continue to be applied  based on the five-year  U.S.  Treasury bond rate in
     effect during the preceding November, plus one percent.

6    Effective January 1, 2003 the annual benefits accrued by Messrs. Alexander,
     Dunn and Eastin pursuant to the Supplemental  Executive Retirement Plan (in
     excess of the  statutory  limitations  governing the Pension Plan) were, in
     the aggregate, approximately $100,000.





                                       37




SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

     We have adopted a  non-qualified,  unfunded  supplemental  retirement  plan
known as the Supplemental Executive Retirement Plan (the "SERP"). The purpose of
the SERP is to provide  certain  executive  officers  with a level of retirement
income  from  us,  without  regard  to  statutory  maximums,  including  the IRS
limitation  for defined  benefit plans.  Effective  January 1, 1998, the Pension
Plan for Eligible Employees of Suburban Propane, L.P. (the "Qualified Plan") was
amended and restated as a cash balance plan.  In light of the  conversion of the
Qualified Plan to a cash balance formula, the SERP has been amended and restated
effective  January  1,  1998.  The  annual  Retirement  Benefit  under  the SERP
represents the amount of Annual Benefits that the participants in the SERP would
otherwise be eligible to receive,  calculated  using the same pay based  credits
described under the Retirement Benefits section above,  applied to the amount of
Annual  Compensation that exceeds the IRS statutory maximums for defined benefit
plans which is currently $200,000. Messrs. Alexander, Dunn, and Eastin currently
participate in the SERP.

     Effective  January 1, 2003, the SERP was discontinued with a frozen benefit
determined  for  Messrs.  Alexander,  Dunn and  Eastin.  Provided  that the SERP
requirements  are met, Mr.  Alexander will receive a monthly  benefit of $6,031,
Mr. Dunn will receive a monthly benefit of $347.30 and Mr. Eastin will receive a
monthly benefit of $1,053.18.  In the event of a change in control involving the
Partnership,  the SERP will terminate effective on the close of business 30 days
following the change in control.  Each  participant  will be deemed  retired and
will have his  benefit  determined  as of the date the plan is  terminated  with
payment of the benefit no later than 90 days after the change in  control.  Each
participant  will receive a lump sum payment  equivalent to the present value of
each  participant's  benefit payable under this plan utilizing the lesser of the
prime rate of interest as published in the Wall Street Journal as of the date of
the change of control or one percent,  which ever is less,  as the discount rate
to determine the present value of accrued benefit.

LONG-TERM INCENTIVE PLAN

     We have adopted a  non-qualified,  unfunded  long-term  incentive  plan for
officers and key employees,  effective  October 1, 1997 (the "LTIP").  Payout of
the LTIP will follow the normal vesting schedule of each participant. Awards are
based on a percentage of base pay and are subject to the  achievement of certain
performance  criteria,  including our ability to earn sufficient  funds and make
cash  distributions on our Common Units with respect to each fiscal year. Awards
vest over time with one-third vesting at the beginning of years three, four, and
five from the award date. We will terminate  this plan  effective  September 30,
2004.  Effective  October  1,  2002 we  adopted  a new  non-qualified,  unfunded
long-term  incentive plan for officers and key employees.  The new plan measures
our  performance  as  Total  Return  to  Unitholders   ("TRU")   relative  to  a
predetermined   peer  group,   primarily   composed  of  other  Master   Limited
Partnerships,  approved  by our  Compensation  Committee.  Awards are granted in
three year performance cycles based on a quartile ranking of TRU compared to the
peer group.  Target awards for each participant are a percentage of base salary.
Long-Term Incentive Plan awards earned in fiscal 2003 were as follows:



                                          Performance or
                                           Other Period
                               Award     Until Maturation              Potential Awards Under Plan
Name                          FY 2003       or Payout            Threshold         Target         Maximum
- ----                          -------       ---------            ---------         ------         -------


Mark A. Alexander             $135,000        3-5  Years           $  0            $135,000       $135,000
Michael J. Dunn, Jr.            71,400        3-5  Years              0              71,400         71,400
David R. Eastin                 67,575        3-5  Years              0              67,575         67,575
Robert M. Plante                32,400        3-5  Years              0              32,400         32,400
Jeffrey S. Jolly                27,375        3-5  Years              0              27,375         27,375




                                       38




EMPLOYMENT AGREEMENT

     We entered into an employment  agreement (the "Employment  Agreement") with
Mr. Alexander,  which became effective March 5, 1996 and was amended October 23,
1997 and April 14, 1999.

     Mr.  Alexander's  Employment  Agreement had an initial term of three years,
and  automatically  renews  for  successive  one-year  periods,  unless  earlier
terminated by us or by Mr. Alexander or otherwise  terminated in accordance with
the Employment  Agreement.  The Employment  Agreement for Mr. Alexander provides
for an annual base salary of $450,000 as of September  28, 2002 and provides for
Mr.  Alexander  to earn a bonus up to 100% of annual base  salary (the  "Maximum
Annual Bonus") for services  rendered based upon certain  performance  criteria.
The  Employment  Agreement  also provides for the  opportunity to participate in
benefit plans made available to our other senior executives and senior managers.
We also provide Mr.  Alexander with term life insurance with a face amount equal
to three times his annual base salary.

     For the purposes of this section  "change of control"  means the occurrence
during the employment  term of: (i) an acquisition of our Common Units or voting
equity interests by any person other than the  Partnership,  the General Partner
or any of our affiliates  immediately after which such person  beneficially owns
more than 25% of the combined voting power of our then outstanding units: unless
such acquisition was made by (a) us or our subsidiaries, or any employee benefit
plan maintained by us, our Operating Partnership or any of our subsidiaries,  or
(b) by any person in a transaction  where (A) the existing  holders prior to the
transaction  own at least 60% of the voting  power of the entity  surviving  the
transaction  and (B) none of the  Unitholders  other than the  Partnership,  our
subsidiaries,  any  employee  benefit  plan  maintained  by  us,  our  Operating
Partnership,  or the surviving entity, or the existing  beneficial owner of more
than 25% of the  outstanding  units  owns more than 25% of the  combined  voting
power of the surviving entity (such transaction,  Non-Control Transaction): (ii)
approval  by  our  partners  of  (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 50% or  more of our  net  assets  to any  person  (other  than a
transfer to a subsidiary).

     If a "change of  control" of the  Partnership  occurs and within six months
prior  thereto or at any time  subsequent to such change of control we terminate
the Executive's  employment  without "cause" or the Executive resigns with "good
reason" or the Executive  terminates his employment  during the six month period
commencing  on  the  six  month  anniversary  and  ending  on the  twelve  month
anniversary of a "change of control", then Mr. Alexander will be entitled to (i)
a lump sum  severance  payment  equal to three  times the sum of his annual base
salary in effect as of the date of termination and the Maximum Annual Bonus, and
(ii)  medical  benefits for three years from the date of such  termination.  The
Employment  Agreement  provides that if any payment received by Mr. Alexander is
subject to the 20% federal excise tax under Section 4999 of the Internal Revenue
Code,  the payment  will be grossed up to permit Mr.  Alexander  to retain a net
amount on an after-tax basis equal to what he would have received had the excise
tax not been payable.

     Mr.  Alexander also  participates  in the SERP,  which provides  retirement
income  which  could  not be  provided  under our  qualified  plans by reason of
limitations contained in the Internal Revenue Code.

SEVERANCE PROTECTION PLAN FOR KEY EMPLOYEES

     Our officers and key  employees  are provided  with  employment  protection
following a "change of  control"  (the  "Severance  Protection  Plan").  For the
purposes of this section  "change of control"  means the  occurrence  during the
employment  term of: (i) an  acquisition  of our Common  Units or voting  equity
interests by any person other than the  Partnership,  our General Partner or any
of their affiliates  immediately after which such person  beneficially owns more
than 25% of the combined voting power of our then outstanding units: unless such
acquisition was made by (a) us or our subsidiaries, or any employee benefit plan
maintained by us, our Operating  Partnership or any of our subsidiaries,  or (b)
by any  person in a  transaction  where (A) the  existing  holders  prior to the
transaction  own at least 60% of the voting  power of the entity  surviving  the
transaction and (B) none of the



                                       39


Unitholders other than the Partnership,  our subsidiaries,  any employee benefit
plan maintained by us, our Operating  Partnership,  or the surviving  entity, or
the existing  beneficial  owner of more than 25% of the  outstanding  units owns
more  than 25% of the  combined  voting  power  of the  surviving  entity  (such
transaction a "Non-Control  Transaction"):  (ii) approval by our partners of (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 50% or more of our net
assets to any person (other than a transfer to a subsidiary).

     The Severance  Protection  Plan provides for  severance  payments  equal to
sixty-five  (65) weeks of base pay and target  bonuses for such officers and key
employees  following a "change of control" and  termination of employment.  This
group comprises  approximately  forty-three (43) individuals.  Pursuant to their
severance protection agreements,  Messrs. Dunn, Eastin, Plante and Jolly, as our
executive  officers,   have  been  granted  severance   protection  payments  of
seventy-eight  (78) weeks of base pay and target bonuses  following a "change in
control" and termination of employment in lieu of participation in the Severance
Protection  Plan.  Our  Compensation   Committee  has  also  granted   severance
protection payments of seventy-eight (78) weeks to four other executive officers
who do not participate in the Severance Protection Plan.

COMPENSATION  COMMITTEE  INTERLOCKS AND INSIDER  PARTICIPATION  IN  COMPENSATION
DECISIONS

     Compensation  of our executive  officers is determined by the  Compensation
Committee of our Board of Supervisors.  The Compensation  Committee is comprised
of Messrs. Stookey, Mecum and Logan, none of whom are our officers or employees.

COMPENSATION OF SUPERVISORS

     Mr.  Stookey,  who is the  Chairman of the Board of  Supervisors,  receives
annual  compensation of $75,000 for his services to us. Mr. Logan and Mr. Mecum,
the other two  Elected  Supervisors,  receive  $50,000  per year and Mr. Mark J.
Anton, who serves as Supervisor Emeritus, receives $15,000 per year. All Elected
Supervisors  and the Supervisor  Emeritus  receive  reimbursement  of reasonable
out-of-pocket  expenses  incurred in  connection  with  meetings of the Board of
Supervisors.  We do not pay any  additional  remuneration  to our  employees (or
employees of any of our  affiliates) or employees of our General  Partner or any
of its affiliates for serving as members of the Board of Supervisors.




                                       40




ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The following table sets forth certain  information as of November 21, 2003
regarding the  beneficial  ownership of Common Units and Incentive  Distribution
Rights by each member of the Board of Supervisors,  each executive officer named
in the Summary  Compensation  table, all members of the Board of Supervisors and
executive  officers  as a group and each person or group known by us (based upon
filings under Section 13(d) or (g) under The Securities Exchange Act of 1934) to
own beneficially  more than 5% thereof.  Except as set forth in the notes to the
table,  the business  address of each  individual  or entity in the table is c/o
Suburban  Propane  Partners,  L.P.,  240  Route 10 West,  Whippany,  New  Jersey
07981-0206 and each  individual or entity has sole voting and  investment  power
over the Common Units reported.



SUBURBAN PROPANE, L.P.
- ----------------------
                                                                       Amount and Nature of               Percent
Title of Class             Name of Beneficial Owner                    Beneficial Ownership               of Class
- --------------             ------------------------                    --------------------               --------


Common Units               Mark A. Alexander (a)                                 29,000                        *
                           Michael J. Dunn, Jr. (a)                                   0                        -
                           David R. Eastin                                       11,000                        -
                           Robert M. Plante                                      12,262                        -
                           Jeffrey S. Jolly                                       3,000                        -

                           John Hoyt Stookey                                     11,519                        *
                           Harold R. Logan, Jr.                                  15,064                        *
                           Dudley C. Mecum                                        5,634                        *
                           Mark J. Anton (b)                                      4,600                        *
                           All Members of the Board
                           of Supervisors and Executive
                           Officers as a Group (13 persons)                      92,079                        *

                           Goldman, Sachs & Co. (c)                           1,709,003                     6.3%
                           85 Broad Street                                 Common Units
                           New York, NY   10004

Incentive Distribution     Suburban Energy Services
Rights                     Group LLC                                                N/A                      N/A




* Less than 1%.

(a)  Excludes the  following  numbers of Common Units as to which the  following
     individuals  deferred  receipt as described  below; Mr. Alexander - 243,902
     and Mr. Dunn - 48,780.  These Common Units are held in trust  pursuant to a
     Compensation  Deferral  Plan,  and Mr.  Alexander and Mr. Dunn will have no
     voting  or  investment  power  over  these  Common  Units  until  they  are
     distributed  by the  trust.  Mr.  Alexander  and Mr.  Dunn have  elected to
     receive  the  quarterly  cash   distributions   on  these  deferred  units.
     Notwithstanding the foregoing,  if a "change of control" of the Partnership
     occurs (as defined in the Compensation  Deferral Plan), all of the deferred
     Common Units (and related  distributions)  held in the trust  automatically
     become distributable to the members.
(b)  Mr. Anton shares voting and  investment  power over 3,600 Common Units with
     his wife and over 1,000 Common Units with Lizmar  Partners,  L.P., a family
     owned limited partnership of which he is its general partner.
(c)  Holder reports having shared voting power with respect to all of the Common
     Units and shared dispositive power with respect to all of the Common Units.




                                       41
reference.
ITEM 13.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     None.


The information to be included under the caption ‘‘Executive Compensation — Certain Relationships and Related Transactions’’ in the Proxy Statement is incorporated herein by reference.
ITEM 14.    PRINCIPAL ACCOUNTING FEES AND SERVICES
The following  table sets forthinformation to be included under the aggregate fees for services  related to
fiscal years 2003caption ‘‘Principal Accounting Fees and 2002 provided by PricewaterhouseCoopers LLP, our principal
accountants.

                                          Fiscal                 Fiscal
                                           2003                   2002
                                    --------------------    -------------------

      Audit Fees (a)                     $ 599,000              $ 474,000
      Audit-Related Fees (b)               206,000                 12,000
      Tax Fees (c)                         590,000                772,600
      All Other Fees (d)                     --                   179,900



(a)  Audit Fees represent fees billed for professional services rendered for the
     audit of our  annual  financial  statements  and  review  of our  quarterly
     financial statements,  and audit services provided in connection with other
     statutory or regulatory  filings,  including  services  related to our June
     2003 public  offering of Common Units.

(b)  Audit-Related  Fees represent fees billed for assurance services related to
     the audit of our  financial  statements.  The amount  shown for fiscal 2003
     consists  primarily  of services  related to current and future  compliance
     with the provisions of the Sarbanes-Oxley Act of 2002. The amount shown for
     fiscal 2002 consists of services  related to the  stand-alone  audit of the
     financial  statements  of Suburban  Energy  Service  Group LLC, our General
     Partner.  In addition to these  amounts,  fees for services  related to the
     audits  of the  Partnership's  defined  benefit  pension  plan and  defined
     contribution plan financial statements,  paid by the individual plans, were
     $31,000 and $29,500 for the fiscal 2003 and 2002 audits, respectively.

(c)  Tax Fees represent fees for professional services related to tax reporting,
     compliance and transaction services assistance.

(d)  All Other Fees  represent  fees for services  provided to us not  otherwise
     includedServices’’ in the categories above. The amount shown for fiscal 2002 consists
     primarily of services related to operational control reviews.

     The Audit Committee of the Board of Supervisors has adopted a formal policy
concerning  the approval of audit and  non-audit  services to be providedProxy Statement is incorporated herein by the
principal accountant,  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 2003 and reviewed all audit
and non-audit services for fiscal 2002.




                                       42
reference.

PART IV
ITEM 15.    EXHIBITS AND FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a) The following documents are filed as part of this Report:

     1.   (i) Financial Statements

          
(a) 
The following documents are filed as part of this Annual Report:
1. 
Financial Statements
See "Index‘‘Index to Financial Statements"Statements’’ set forth on page F-1.

          (ii) Supplemental
2. 
Financial Statement Schedule
See ‘‘Index to Financial Information

          Balance Sheet Information of Suburban Energy Services Group LLC

          See "Index to Supplemental Financial Information"Statement Schedule’’ set forth on page F-24.

     2. Financial Statement Schedule

          S-1.
3. 
Exhibits
See "Index‘‘Index to Financial Statement Schedule"Exhibits’’ set forth on page S-1.

     3. Exhibits

          See "Index to Exhibits" set forth on page E-1.

(b)  Reports on Form 8-K

     No reports were filed on form 8-K.






                                       43

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:     December 2, 2003              By: /s/ MARK A. ALEXANDER
                                            --------------------------------
                                            Mark A. Alexander
                                            President, Chief Executive Officer
                                            and Appointed Supervisor



SUBURBAN PROPANE PARTNERS, L.P.
Date:   December 5, 2005    
By:    /s/ MARK A. ALEXANDER
           Mark A. Alexander
           Chief Executive Officer and
           Appointed 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
         ---------                                   -----                                          ----


/s/ MICHAEL J. DUNN, JR                              Senior Vice 
/s/ MARK A. ALEXANDER
Chief Executive Officer and Appointed Supervisor
December 5, 2005
(MarkA. Alexander)
/s/ MICHAEL J. DUNN, JR.
President - Corporate              and Appointed Supervisor
December 2, 2003
- ---------------------------------                     Development
     (Michael5, 2005
(Michael J. Dunn, Jr.)                           Suburban Propane Partners, L.P.
                                                      Appointed Supervisor


/s/ JOHN HOYT STOOKEY                                
/S/ JOHN HOYT STOOKEY
Chairman and Elected Supervisor
December 2, 2003
- ---------------------------------
     (John5, 2005
(John Hoyt Stookey)

/s/ HAROLD 
/s/ HAROLD R. LOGAN, JR. LOGAN, JR.                             
Elected Supervisor
December 2, 2003
- ---------------------------------
     (Harold5, 2005
(Harold R. Logan, Jr.)

/s/ DUDLEY
/s/ DUDLEY C. MECUM
Elected Supervisor
December 5, 2005
(Dudley C. MECUM                                  Elected Supervisor                             December 2, 2003
- ---------------------------------
     (Dudley C. Mecum)

/s/ ROBERT M. PLANTE                                 
/s/ ROBERT M. PLANTE
Vice President and December 2, 2003
- ---------------------------------                     Chief Financial Officer
     (Robert
December 5, 2005
(Robert M. Plante)                               Suburban Propane Partners, L.P.


/s/ MICHAEL
/s/ MICHAEL A. STIVALA
Controller and Chief Accounting Officer
December 5, 2005
(Michael A. STIVALA                               Controller                                     December 2, 2003
- ---------------------------------                      Suburban Propane Partners, L.P.
     (Michael A. Stivala)





                                       44

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
       ------         -----------

D        2.1          Recapitalization Agreement dated as of November 27,
                      1998 by and among the Partnership, the Operating
                      Partnership, the General Partner, Millennium and Suburban
                      Energy Services Group LLC.

E        3.1          Second Amended and Restated Agreement of Limited
                      Partnership of the Partnership dated as of May 26, 1999.

E        3.2          Second Amended and Restated Agreement of Limited
                      Partnership of the Operating Partnership dated as
                      of May 26, 1999.

A       10.3          Note Agreement dated as of February 28, 1996 among certain
                      investors and the Operating Partnership relating to $425
                      million aggregate principal amount of 7.54% Senior Notes
                      due June 30, 2011.

K       10.4          Amendment No. 1 to the Note Agreement dated May 13,
                      1998 among certain investors and the Operating Partnership
                      relating to $425 million aggregate principal amount of
                      7.54% Senior Notes due June 30, 2011.

K       10.5          Amendment No. 2 to the Note Agreement dated March 29,
                      1999 among certain investors and the Operating Partnership
                      relating to $425 million aggregate principal amount of
                      7.54% Senior Notes due June 30, 2011.

K       10.6          Amendment No. 3 to the Note Agreement dated December
                      6, 2000 among certain investors and the Operating
                      Partnership relating to $425 million aggregate principal
                      amount of 7.54% Senior Notes due June 30, 2011.

I       10.7          Amendment No. 4 to the Note Agreement dated March 21,
                      2002 among certain investors and the Operating Partnership
                      relating to $425 million aggregate principal amount of
                      7.54% Senior Notes due June 30, 2011.

K       10.8          Amendment No. 5 to the Note Agreement dated November
                      20, 2002 among certain investors and the Operating
                      Partnership relating to $425 million aggregate principal
                      amount of 7.54% Senior Notes due June 30, 2011.


                                      E-1

Exhibit
Number
Description
2.1
Recapitalization Agreement dated as of November 27, 1998 by and among the Partnership, the Operating Partnership, the General Partner, Millennium and Suburban Energy Services Group LLC. (Incorporated by reference to Exhibit 2.1 to the Partnership’s Current Report on Form 8-K filed December 3, 1998).
3.1
Second Amended and Restated Agreement of Limited Partnership of the Partnership dated as of May 26, 1999. (Incorporated by reference to the Partnership’s Proxy Statement filed pursuant to Section 14(a) of the Securities Exchange Act of 1934 on April 22, 1999).
3.2
Second Amended and Restated Agreement of Limited Partnership of the Operating Partnership dated as of May 26, 1999. (Incorporated by reference to the Partnership’s Proxy Statement filed pursuant to Section 14(a) of the Securities Exchange Act of 1934 on April 22, 1999).
4.1
Indenture, dated as of December 23, 2003, between Suburban Propane Partners, L.P., Suburban Energy Finance Corp. and The Bank of New York, as Trustee (including Form of Senior Global Exchange Note). (Incorporated by reference to Exhibit 10.28 to the Partnership’s Quarterly Report on Form 10-Q For the fiscal quarter ended December 27, 2003).
4.2
Exchange and Registration Rights Agreement, dated December 23, 2003 among Suburban Propane Partners, L.P., Suburban Energy Finance Corp., Wachovia Capital Markets, LLC and Goldman, Sachs & Co. (Incorporated by reference to Exhibit 4.1 to the Partnership’s registration statement on Form S-4 dated December 19, 2003).
4.3
Exchange and Registration Rights Agreement, dated March 31, 2005 among Suburban Propane Partners, L.P., Suburban Energy Finance Corp., Wachovia Capital Markets, LLC and Goldman, Sachs & Co. (Incorporated by reference to Exhibit 4.1 to the Partnership’s Current Report of Form 8-K filed April 1, 2005).
10.1
Employment Agreement dated as of March 5, 1996 between the Operating Partnership and Mr. Alexander. (Incorporated by reference to Exhibit 10.13 to the Partnership’s Current Report on Form 8-K filed April 29, 1996).
10.2
First Amendment to Employment Agreement dated as of March 5, 1996 between the Operating Partnership and Mr. Alexander entered into as of October 23, 1997. (Incorporated by reference to Exhibit 10.13 to the Partnership’s Current Report on Form 8-K filed April 29, 1996).
10.3
Second Amendment to Employment Agreement dated as of March 5, 1996 between the Operating Partnership and Mr. Alexander entered into as of April 14, 1999. (Incorporated by reference to Exhibit 10.15 to the Partnership’s Annual Report on Form 10-K for the fiscal year ended September 27, 1997).
10.4
Form of Third Amendment to Employment Agreement dated as of March 5, 1996 between the Operating Partnership and Mr. Alexander, entered into November 2, 2005 (filed herewith).
10.5
Suburban Propane Partners, L.P. 2000 Restricted Unit Plan. (Incorporated by reference to Exhibit 10.16 to the Partnership’s Annual Report on Form 10-K for the fiscal year ended September 30, 2000).




I       10.9          Guaranty Agreement dated as of April 11, 2002
                      provided by four direct subsidiaries of Suburban Propane,
                      L.P. for the 7.54% Senior Notes due June 30, 2011.

I       10.10         Intercreditor Agreement dated March 21, 2002 between
                      First Union National Bank, the Lenders under the Operating
                      Partnership's Amended and Restated Credit Agreement and
                      the Noteholders of the Operating Partnership's 7.54%
                      Senior Notes due June 30, 2011.

J       10.11         Note Agreement dated as of April 19, 2002 among certain
                      investors and the Operating Partnership relating to $42.5
                      million aggregate principal amount of 7.37% Senior Notes
                      due June 30, 2012.

J       10.12         Guaranty Agreement dated as of July 1, 2002 provided by
                      certain subsidiaries of Suburban Propane, L.P. for the
                      7.37% Senior Notes due June 30, 2012.

A       10.13         Employment Agreement dated as of March 5, 1996 between the
                      Operating Partnership and Mr. Alexander.

C       10.14         First Amendment to Employment Agreement dated as of
                      March 5, 1996 between the Operating Partnership and
                      Mr. Alexander entered into as of October 23, 1997.

F       10.15         Second Amendment to Employment Agreement dated as of
                      March 5, 1996 between the Operating Partnership and Mr.
                      Alexander entered into as of April 14, 1999.

A       10.16         The Partnership's 1996 Restricted Unit Plan.

G       10.17         Suburban Propane Partners, L.P. 2000 Restricted Unit Plan.

B       10.18         The Partnership's Severance Protection Plan dated
                      September 1996.

K       10.19         Suburban Propane L.P. Long-Term Incentive Plan as
                      amended and restated effective October 1, 1999.

F       10.20         Benefits Protection Trust dated May 26, 1999 by and
                      between Suburban Propane Partners, L.P.
                      and First Union National Bank.

F       10.21         Compensation Deferral Plan of Suburban Propane Partners,
                      L.P. and Suburban Propane, L.P. dated May 26, 1999.

H       10.22         First Amendment to the Compensation Deferral Plan of
                      Suburban Propane Partners, L.P. and Suburban Propane, L.P.
                      dated November 5, 2001.

H       10.23         Amended and Restated Supplemental Executive
                      Retirement Plan of the Partnership (effective as of
                      January 1, 1998).

H       10.24         Amended and Restated Retirement Savings and
                      Investment Plan of Suburban Propane (effective as of
                      January 1, 1998).

K       10.25         Amendment No. 1 to the Retirement Savings and Investment
                      Plan of Suburban Propane (effective January 1, 2002).

L       10.26         Second Amended and Restated Credit Agreement dated
                      May 8, 2003.

M       10.27         First Amendment to Second Amended and Restated Credit
                      Agreement dated November 4, 2003.


                                       E-2

Exhibit
Number
Description
10.6
The Partnership’s Severance Protection Plan dated September 1996. (Incorporated by reference to Exhibit 10.18 to the Partnership’s Annual Report on Form 10-K for the fiscal year ended September 28, 1996).
10.7
Form of Amendment to Suburban Propane Severance Protection Plan for Key Employees, adopted November 2, 2005 (filed herewith).
10.8
Suburban Propane, L.P. Long Term Incentive Plan, as amended and restated effective October 1, 1999. (Incorporated by reference to Exhibit 10.19 to the Partnership’s Annual Report on Form 10-K for the fiscal year ended September 28, 2002).
10.9
Form of Amendment to Suburban Propane, L.P. Long Term Incentive Program, adopted November 2, 2005 (filed herewith).
10.10
Suburban Propane L.P. 2003 Long Term Incentive Plan. (Incorporated by reference to Exhibit 10.7 to the Partnership’s Annual Report on Form 10-K for the fiscal year ended September 25, 2004).
10.11
Benefits Protection Trust dated May 26, 1999 by and between Suburban Propane Partners, L.P. and First Union National Bank. (Incorporated by reference to the Partnership’s Quarterly Report on Form 10-Q for the fiscal quarter ended June 26, 1999).
10.12
Compensation Deferral Plan of Suburban Propane Partners, L.P. and Suburban Propane, L.P. amended and restated as of January 1, 2004. (Incorporated by reference to Exhibit 10. 9 to the Partnership’s Annual Report on Form 10-K for the fiscal year ended September 25, 2004).
10.13
Form of Amendment to Compensation Deferral Plan of Suburban Propane Partners, L.P. and Suburban Propane, L.P., adopted November 2, 2005 (filed herewith).
10.14
Amended and Restated Supplemental Executive Retirement Plan of the Partnership (effective as of January 1, 1998). (Incorporated by reference to Exhibit 10.23 to the Partnership’s Annual Report on Form 10-K for the fiscal year ended September 29, 2001).
10.15
Amended and Restated Retirement Savings and Investment Plan of Suburban Propane effective as of January 1, 1998). (Incorporated by reference to Exhibit 10.24 to the Partnership’s Annual Report on Form 10-K for the fiscal year ended September 29, 2001).
10.16
Amendment No. 1 to the Retirement Savings and Investment Plan of Suburban Propane (effective January 1, 2002). (Incorporated by reference to Exhibit 10.25 to the Partnership’s Annual Report on Form 10-K for the fiscal year ended September 28, 2002).
10.17
Third Amended and Restated Credit Agreement dated October 20, 2004, as amended by the First Amendment thereto dated March 17, 2005, as further amended by the Second Amendment thereto dated August 25, 2005. (Incorporated by reference to the Partnership’s Current Report on Form 8-K filed August 29, 2005).
10.18
First Amendment to the Third Amended and Restated Credit Agreement dated as of March 11, 2005 (Incorporated by reference to Exhibit 10.1 to the Partnership’s Current Report on Form 8-K filed April 1, 2005).



M       21.1          Listing of Subsidiaries of the Partnership.

M       23.1          Consent of Independent Accountants.

M       31.1          Certification of the President and Chief Executive
                      Officer Pursuant to 18 U.S.C. Section 1350, as Adopted
                      Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

M       31.2          Certification of the Vice President and Chief
                      Financial Officer Pursuant to 18 U.S.C. Section
                      1350, as Adopted Pursuant to Section 302 of the
                      Sarbanes-Oxley Act of 2002.

M       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.

M       32.2          Certification of the Vice President and Chief
                      Financial Officer Pursuant to 18 U.S.C. Section 1350, as
                      Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act
                      of 2002.

- --------------------------------------------------------------------------------

A        Incorporated by reference to the same numbered Exhibit to the
         Partnership's Current Report on Form 8-K filed April 29, 1996.

B        Incorporated by reference to the same numbered Exhibit to the
         Partnership's Annual Report on Form 10-K for the fiscal year ended
         September 28, 1996.

C        Incorporated by reference to the same numbered Exhibit to the
         Partnership's Annual Report on Form 10-K for the fiscal year ended
         September 27, 1997.

D        Incorporated by reference to Exhibit 2.1 to the Partnership's Current
         Report on Form 8-K filed December 3, 1998.

E        Incorporated by reference to the Partnership's Proxy Statement filed
         pursuant to Section 14(a) of the Securities Exchange Act of 1934 on
         April 22, 1999.

F        Incorporated by reference to the Partnership's Quarterly Report on Form
         10-Q for the fiscal quarter ended June 26, 1999.

G        Incorporated by reference to Exhibit 10.16 to the Partnership's Annual
         Report on Form 10-K for the fiscal year ended September 30, 2000.

H        Incorporated by reference to the same numbered Exhibit to the
         Partnership's Annual Report on Form 10-K for the fiscal year ended
         September 29, 2001.

I        Incorporated by reference to the Partnership's Quarterly Report on Form
         10-Q for the fiscal quarter ended March 30, 2002.

J        Incorporated by reference to the Partnership's Quarterly Report on Form
         10-Q for the fiscal quarter ended June 29, 2002.



                                       E-3

Exhibit
Number
Description
10.19
Second Amendment to the Third Amended and Restated Credit Agreement dated as of August 26, 2005 (Incorporated by reference to the Partnership’s Current Report on Form 8-K filed August 29, 2005).
10.20
Asset Purchase Agreement by and Among Agway Energy Products, LLC, Agway Energy Services, Inc., Agway Energy Services PA, Inc., Agway, Inc. and Suburban Propane, L.P., dated as of November 10, 2003 (incorporated by reference to Exhibit 10.28 to the Partnership's Current Report on Form 8-K filed December 5, 2003).
14.1
Code of Ethics. (Incorporated by reference to Exhibit 14.1 to the Partnership’s Annual Report on Form 10-K for the fiscal year ended September 25, 2004).
21.1
Subsidiaries of Suburban Propane Partners, L.P. (incorporated by reference to Exhibit 21.1 of the Partnership’s Annual Report on Form 10-K for the year ended September 25, 2004).
23.1
Consent of Independent Registered Public Accounting Firm. (Filed herewith).
31.1
Certification of the Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (Filed herewith).
31.2
Certification of the Vice President and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (Filed herewith).
32.1
Certification of the Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (Filed herewith).
32.2
Certification of the Vice President and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (Filed herewith).



K        Incorporated by reference to the same numbered Exhibit to the
         Partnership's Annual Report on Form 10-K for the fiscal year ended
         September 28, 2002.

L        Incorporated by reference to the same numbered Exhibit to the
         Partnership's Quarterly Report on Form 10-Q for the fiscal quarter
         ended March 29, 2003.

M        Filed herewith.











                                      E-4
INDEX TO FINANCIAL STATEMENTS
SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES




                                                                            Page
                                                                            ----


Page
Report of Independent Registered Public Accounting Firm
F-2
Consolidated Balance Sheets –
As of September 24, 2005 and September 25, 2004
F-4
Consolidated Statements of Operations –
Years Ended September 24, 2005, September 25, 2004 and September 27, 2003
F-5
Consolidated Statements of Cash Flows –
Years Ended September 24, 2005, September 25, 2004 and September 27, 2003
F-6
Consolidated Statements of Partners’ Capital –
Years Ended September 24, 2005, September 25, 2004 and September 27, 2003
F-7
Notes to Consolidated Financial Statements
F-8

Report of Independent Auditors...............................................F-2

Consolidated Balance Sheets -
  As of September 27, 2003 and September 28, 2002............................F-3

Consolidated Statements of Operations -
  Years Ended September 27, 2003, September 28, 2002 and
  September 29, 2001.........................................................F-4

Consolidated Statements of Cash Flows -
  Years Ended September 27, 2003, September 28, 2002 and
  September 29, 2001.........................................................F-5

Consolidated Statements of Partners' Capital -
  Years Ended September 27, 2003, September 28, 2002 and
  September 29, 2001.........................................................F-6

Notes to Consolidated Financial Statements...................................F-7




                                      F-1








                         REPORT OF INDEPENDENT AUDITORS






Registered Public Accounting Firm
To the Board of Supervisors and Unitholders of
Suburban Propane Partners, L.P.:
We have completed an integrated audit of Suburban Propane Partners, L.P.’s 2005 consolidated financial statements and of its internal control over financial reporting as of September 24, 2005 and audits of its 2004 and 2003 consolidated financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Our opinions, based on our audits, are presented below.
Consolidated financial statements and financial statement schedule
In our opinion, the consolidated financial statements listed in the index appearing under Item 15.(a)1.(i)15(a)(1) present fairly, in all material respects, the financial position of Suburban Propane Partners, L.P. and its subsidiaries (the
"Partnership")  at September 27, 200324, 2005 and September 28, 200225, 2004, and the results of their operations and their cash flows for each of the three fiscal years in the period ended September 27,  200324, 2005 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the index appearing under Item 15.(a)2.15(a)(2) presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. These financial statements and financial statement schedule are the responsibility of the Partnership's management; ourPartnership’s management. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits. We conducted our audits of these statements in accordance with auditingthe standards generally  accepted inof the United States of America,  whichPublic Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit of financial statements includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
Internal control over financial reporting
Also, in our opinion, management’s assessment, included in Management’s Report on Internal Control Over Financial Reporting appearing under Item 9A, that Suburban Propane Partners, L.P. maintained effective internal control over financial reporting as of September 24, 2005 based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), is fairly stated, in all material respects, based on those criteria. Furthermore, in our opinion, the Partnership maintained, in all material respects, effective internal control over financial reporting as of September 24, 2005, based on criteria established in Internal Control – Integrated Framework issued by the COSO. The Partnership’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express opinions on management’s assessment and on the effectiveness of the Partnership’s internal control over financial reporting based on our audit. We conducted our audit of internal control over financial reporting in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. An audit of internal control over financial reporting includes obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we consider necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinions.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to

permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ PRICEWATERHOUSECOOPERS LLP
PricewaterhouseCoopers LLP
Florham Park, NJ
October 23, 2003



                                      F-2
New Jersey
December 5, 2005

SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
                                 (in
(in thousands)





                                                                                      September           September
                                                                                      27, 2003             28, 2002
                                                                                   ----------------    -----------------

ASSETS
Current assets:

    Cash and cash equivalents                                                             $ 15,765             $ 40,955
    Accounts receivable, less allowance for doubtful  accounts
       of $2,519 and $1,894, respectively                                                   36,437               33,002
    Inventories                                                                             41,510               36,367
    Prepaid expenses and other current assets                                                5,200                6,465
                                                                                   ----------------    -----------------
            Total current assets                                                            98,912              116,789
Property, plant and equipment, net                                                         312,790              331,009
Goodwill                                                                                   243,236              243,260
Other intangible assets, net                                                                 1,035                1,474
Other assets                                                                                 9,657                7,614
                                                                                   ----------------    -----------------
             Total assets                                                                $ 665,630            $ 700,146
                                                                                   ================    =================


LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
    Accounts payable                                                                      $ 26,204             $ 27,412
    Accrued employment and benefit costs                                                    20,798               21,430
    Current portion of long-term borrowings                                                 42,911               88,939
    Accrued insurance                                                                        7,810                8,670
    Customer deposits and advances                                                          23,958               26,125
    Accrued interest                                                                         7,457                8,666
    Other current liabilities                                                                8,575                6,303
                                                                                   ----------------    -----------------
              Total current liabilities                                                    137,713              187,545
Long-term borrowings                                                                       340,915              383,830
Postretirement benefits obligation                                                          33,435               33,284
Accrued insurance                                                                           20,829               18,299
Accrued pension liability                                                                   42,136               53,164
Other liabilities                                                                            6,524                4,738
                                                                                   ----------------    -----------------
               Total liabilities                                                           581,552              680,860
                                                                                   ----------------    -----------------

Commitments and contingencies

Partners' capital:
      Common Unitholders (27,256 and 24,631 units issued and outstanding at
            September 27, 2003 and September 28, 2002, respectively)                       165,950              103,680
      General Partner                                                                        1,567                1,924
      Deferred compensation                                                                 (5,795)             (11,567)
      Common Units held in trust, at cost                                                    5,795               11,567
      Unearned compensation                                                                 (2,171)              (1,924)
      Accumulated other comprehensive loss                                                 (81,268)             (84,394)
                                                                                   ----------------    -----------------
                Total partners' capital                                                     84,078               19,286
                                                                                   ----------------    -----------------
                Total liabilities and partners' capital                                  $ 665,630            $ 700,146
                                                                                   ================    =================



The accompanying notes are an integral part of these consolidated financial
statements.





                                      F-3


               SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES

                    CONSOLIDATED STATEMENTS OF OPERATIONS
                   (in thousands, except per unit amounts)


                                                                                           Year Ended
                                                                       -------------------------------------------------------
                                                                       September           September            September
                                                                       27, 2003             28, 2002            29, 2001
                                                                       -------------    ----------------      ----------------

Revenues
  Propane                                                              $     680,741    $        570,280      $       839,607
  Other                                                                       90,938              94,825               91,929
                                                                       -------------    ----------------      ----------------
                                                                             771,679             665,105              931,536

Costs and expenses
  Cost of products sold                                                      376,783             289,055              510,313
  Operating                                                                  250,698             234,140              258,735
  General and administrative                                                  36,661              30,771               32,511
  Depreciation and amortization                                               27,520              28,355               36,496
  Gain on sale of storage facility                                                 -              (6,768)                   -
                                                                       -------------    ----------------      ----------------
                                                                             691,662             575,553              838,055
                                                                       -------------    ----------------      ----------------

Income before interest expense and provision for income taxes                 80,017              89,552               93,481
Interest income                                                                 (334)               (600)                (414)
Interest expense                                                              33,963              35,925               40,010
                                                                       -------------    ----------------      ----------------

Income before provision for income taxes                                      46,388              54,227               53,885
Provision for income taxes                                                       202                 703                  375
                                                                       -------------    ----------------      ----------------

Income from continuing operations                                             46,186              53,524               53,510
Discontinued operations (Note 14):
  Gain on sale of customer service centers                                     2,483                   -                    -
                                                                       -------------    ----------------      ----------------

Net income                                                             $      48,669    $         53,524      $        53,510
                                                                       =============    ================      ================

General Partner's interest in net income                               $       1,193    $          1,362      $         1,048
                                                                       -------------    ----------------      ----------------
Limited Partners' interest in net income                               $      47,476    $         52,162      $        52,462
                                                                       =============    ================      ================

Income per Common Unit - basic
  Income from continuing operations                                    $        1.78    $           2.12      $          2.14
  Discontinued operations                                                       0.09                   -                    -
                                                                       -------------    ----------------      ----------------
  Net income                                                           $        1.87    $           2.12      $          2.14
                                                                       -------------    ----------------      ----------------
Weighted average number of Common Units outstanding - basic                   25,359              24,631               24,514
                                                                       -------------    ----------------      ----------------

Income per Common Unit - diluted
  Income from continuing operations                                    $        1.77    $           2.12      $          2.14
  Discontinued operations                                                       0.09                   -                    -
                                                                       -------------    ----------------      ----------------
  Net income                                                           $        1.86    $           2.12      $          2.14
                                                                       -------------    ----------------      ----------------
Weighted average number of Common Units outstanding - diluted                 25,495              24,665               24,530
                                                                       -------------    ----------------      ----------------




The accompanying notes are an integral part of these consolidated financial
statements.






                                      F-4



               SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)



                                                                                           Year Ended
                                                                       -------------------------------------------------------
                                                                        September           September            September
                                                                        27, 2003             28, 2002            29, 2001
                                                                       ----------------  -----------------   -----------------
Cash flows from operating activities:

     Net income                                                        $       48,669    $         53,524    $          53,510
     Adjustments to reconcile net income to net cash
      provided by operations:
          Depreciation expense                                                 27,097              27,857               28,517
          Amortization of intangible assets                                       423                 498                7,979
          Amortization of debt origination costs                                1,291               1,338                2,006
          Amortization of unearned compensation                                   863                 985                  440
          Gain on disposal of property, plant and
            equipment, net                                                       (636)               (546)              (3,843)
          Gain on sale of customer service centers                             (2,483)                  -                    -
          Gain on sale of storage facility                                          -              (6,768)                   -
     Changes in assets and liabilities, net of dispositions:
          (Increase)/decrease in accounts receivable                           (4,101)              9,635               18,601
          (Increase)/decrease in inventories                                   (5,339)              5,402                 (260)
          Decrease/(increase) in prepaid expenses and
             other current assets                                                 576              (2,526)               1,699
          Decrease in accounts payable                                         (1,208)            (10,862)             (21,109)
          (Decrease)/increase in accrued employment
             and benefit costs                                                   (632)             (8,518)              10,969
          (Decrease)/increase in accrued interest                              (1,209)                348                  147
          (Decrease)/increase in other accrued liabilities                     (1,825)             (1,153)               4,635
          (Increase)/decrease in other noncurrent assets                       (2,506)               (439)               1,194
          Decrease in other noncurrent liabilities                             (1,680)                  -               (2,647)
                                                                       ----------------  -----------------   -----------------
               Net cash provided by operating activities                       57,300              68,775              101,838
                                                                       ----------------  -----------------   -----------------
Cash flows from investing activities:
      Capital expenditures                                                    (14,050)            (17,464)             (23,218)
      Proceeds from sale of property, plant and equipment, net                  1,994               2,625                5,311
      Proceeds from sale of customer service centers, net                       7,197                   -                    -
      Proceeds from sale of storage facility, net                                   -               7,988                    -
                                                                       ----------------  -----------------   -----------------
               Net cash used in investing activities                           (4,859)             (6,851)             (17,907)
                                                                       ----------------  -----------------   -----------------
Cash flows from financing activities:
      Long-term debt repayments                                               (88,939)               (408)             (44,428)
      Short-term debt repayments, net                                               -                   -               (6,500)
      Credit agreement expenses                                                  (826)                  -                 (730)
      Net proceeds from issuance of Common Units                               72,186                   -               47,079
      Partnership distributions                                               (60,052)            (57,055)             (54,503)
                                                                       ----------------  -----------------   -----------------
               Net cash used in financing activities                          (77,631)            (57,463)             (59,082)
                                                                       ----------------  -----------------   -----------------
Net (decrease)/increase in cash and cash equivalents                          (25,190)              4,461               24,849
Cash and cash equivalents at beginning of year                                 40,955              36,494               11,645
                                                                       ----------------  -----------------   -----------------
Cash and cash equivalents at end of year                                       15,765              40,955               36,494
                                                                       ================  =================   =================
Supplemental disclosure of cash flow information:
    Cash paid for interest                                             $       33,635    $         34,134    $          37,774
                                                                       ================  =================   =================
    Non-cash adjustment for minimum pension liability                  $       (4,938)   $         37,800    $          47,277
                                                                       ================  =================   =================





The accompanying notes are an integral part of these consolidated financial
statements.




                                      F-5


                SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES

                  CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL
                                 (in thousands)

                                                                                                       Accumu-
                                                                                                       lated
                                                                                                       Other
                                                                                                       Compre-
                                  Number of                          Deferred     Common    Unearned   hensive     Total    Compre-
                                   Common       Common    General     Compen-   Units Held  Compen-    (Loss)/   Partners'  hensive
                                    Units     Unitholders Partner     sation     in Trust    sation    Income     Capital   Income
                                    -----     -------------------     ------     --------    ------    ------     -------   ------


Balance at September 30, 2000       22,278   $ 58,474    $ 1,866   $ (11,567)  $ 11,567     $ (640)   $ 2,129   $ 61,829
Net income                                     52,462      1,048                                                  53,510    $53,510
Other comprehensive income:
   Unrealized holding loss                                                                             (1,046)    (1,046)    (1,046)
  Less: Reclassification
    adjustment for gains
    included in net income                                                                             (1,083)    (1,083)    (1,083)
   Minimum pension liability
     adjustment                                                                                       (47,277)   (47,277)   (47,277)
                                                                                                                            --------
Comprehensive income                                                                                                        $ 4,104
                                                                                                                            ========
Partnership distributions                     (53,477)    (1,026)                                                (54,503)
Sale of Common Units under
  public offering, net of
  offering expenses                  2,353     47,079                                                             47,079
Grants issued under Restricted
  Unit Plan, net of forfeitures                 1,011                                       (1,011)                    -
Amortization of Compensation
  Deferral Plan                                                                                212                   212
Amortization of Restricted
  Unit Plan, net of forfeitures                                                                228                   228
                                 ---------  ---------  ---------    --------   --------   --------   --------  ---------

Balance at September  29, 2001      24,631    105,549      1,888     (11,567)    11,567     (1,211)   (47,277)    58,949
Net income                                     52,162      1,362                                                  53,524    $53,524
Other comprehensive income:
  Net unrealized gains on cash
    flow hedges                                                                                           838        838        838
  Less: Reclassification of
      realized gains on cash
      flow hedges into earnings                                                                          (155)      (155)      (155)
  Minimum pension liability
    adjustment                                                                                        (37,800)   (37,800)   (37,800)
                                                                                                                           --------
Comprehensive income                                                                                                       $ 16,407
                                                                                                                           ========
Partnership distributions                     (55,729)    (1,326)                                                (57,055)
Grants issued under Restricted
  Unit Plan, net of forfeitures                 1,698                                       (1,698)                    -
Amortization of Compensation
  Deferral Plan                                                                                382                   382
Amortization of Restricted
  Unit Plan, net of forfeitures                                                                603                   603
                                 ---------  ---------  ---------    --------   --------   --------   --------  ---------

Balance at September 28, 2002       24,631    103,680      1,924     (11,567)    11,567     (1,924)   (84,394)    19,286
Net income                                     47,476      1,193                                                  48,669    $48,669
Other comprehensive income:
  Net unrealized losses on cash
     flow hedges                                                                                       (1,129)    (1,129)    (1,129)
  Less: Reclassification of
      realized gains on cash
      flow hedges into earnings                                                                          (683)      (683)      (683)
  Minimum pension liability
     adjustment                                                                                         4,938      4,938      4,938
                                                                                                                           --------
Comprehensive income                                                                                                       $ 51,795
                                                                                                                           ========
Partnership distributions                     (58,502)    (1,550)                                                (60,052)
Sale of Common Units under
  public offering, net of
  offering expenses                  2,625     72,186                                                             72,186
Distribution of Common Units
  held in trust                                                        5,772     (5,772)                               -
Grants issued under Restricted
  Unit Plan, net of forfeitures                 1,110                                       (1,110)                    -
Amortization of Restricted
  Unit Plan, net of forfeitures                                                                863                   863
                                 ---------  ---------  ---------    --------   --------   --------   --------  ---------

Balance at September 27, 2003       27,256  $ 165,950  $   1,567    $ (5,795)  $  5,795   $ (2,171)  $(81,268) $  84,078
                                 =========  =========  =========    ========   ========   ========   ========  =========


 
September 24,
2005
September 25,
2004
ASSETS
 
 
Current assets:
 
 
 
 
 
 
Cash and cash equivalents
$
14,411
 
$
53,481
 
Accounts receivable, less allowance for doubtful accounts of $9,965 and $7,896, respectively
 
109,918
 
 
91,000
 
Inventories
 
80,565
 
 
64,141
 
Prepaid expenses and other current assets
 
31,909
 
 
44,272
 
Total current assets
 
236,803
 
 
252,894
 
Property, plant and equipment, net
 
399,985
 
 
406,702
 
Goodwill
 
281,359
 
 
282,015
 
Other intangible assets, net
 
20,685
 
 
25,582
 
Other assets
 
26,765
 
 
24,814
 
Total assets
$
965,597
 
$
992,007
 
LIABILITIES AND PARTNERS' CAPITAL
 
 
 
 
 
 
Current liabilities:
 
 
 
 
 
 
Accounts payable
$
63,569
 
$
60,664
 
Accrued employment and benefit costs
 
20,291
 
 
25,152
 
Short-term borrowings
 
26,750
 
 
—
 
Current portion of long-term borrowings
 
475
 
 
42,940
 
Accrued insurance
 
11,505
 
 
12,724
 
Customer deposits and advances
 
62,099
 
 
61,265
 
Accrued interest
 
10,975
 
 
10,067
 
Other current liabilities
 
26,548
 
 
32,152
 
Total current liabilities
 
222,212
 
 
244,964
 
Long-term borrowings
 
548,070
 
 
472,975
 
Postretirement benefits obligation
 
31,058
 
 
31,616
 
Accrued insurance
 
34,952
 
 
25,517
 
Accrued pension liability
 
40,206
 
 
35,035
 
Other liabilities
 
12,983
 
 
13,782
 
Total liabilities
 
889,481
 
 
823,889
 
Commitments and contingencies
 
 
 
 
 
 
Partners' capital:
 
 
 
 
 
 
Common Unitholders (30,279 and 30,257 units issued and outstanding at September 24, 2005 and September 25, 2004, respectively)
 
159,199
 
 
238,880
 
General Partner
 
(1,779
) 
 
852
 
Deferred compensation
 
(5,887
) 
 
(5,778
) 
Common Units held in trust, at cost
 
5,887
 
 
5,778
 
Unearned compensation
 
(4,355
) 
 
(3,845
) 
Accumulated other comprehensive loss
 
(76,949
) 
 
(67,769
) 
Total partners' capital
 
76,116
 
 
168,118
 
Total liabilities and partners' capital
$
965,597
 
$
992,007
 
The accompanying notes are an integral part of these consolidated financial statements.

                                      F-6


SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES

                   NOTES TO 
CONSOLIDATED FINANCIAL STATEMENTS (dollars OF OPERATIONS
(in thousands, except per unit amounts)

1.   PARTNERSHIP ORGANIZATION

 
Year Ended
 
September 24,
2005
September 25,
2004
September 27,
2003
Revenues
 
 
 
 
 
 
 
 
 
Propane
$
969,943
 
$
856,109
 
$
680,840
 
Fuel oil and refined fuels
 
431,223
 
 
281,682
 
 
—
 
Natural gas and electricity
 
102,803
 
 
68,452
 
 
—
 
HVAC
 
106,115
 
 
92,072
 
 
46,938
 
Other
 
10,150
 
 
8,939
 
 
7,297
 
 
 
1,620,234
 
 
1,307,254
 
 
735,075
 
Costs and expenses
 
 
 
 
 
 
 
 
 
Cost of products sold
 
1,067,248
 
 
779,029
 
 
358,582
 
Operating
 
396,235
 
 
361,696
 
 
232,462
 
General and administrative
 
47,191
 
 
53,888
 
 
36,661
 
Restructuring costs (Note 7)
 
2,775
 
 
2,942
 
 
—
 
Impairment of goodwill (Note 6)
 
656
 
 
3,177
 
 
—
 
Depreciation and amortization
 
37,762
 
 
36,743
 
 
27,520
 
 
 
1,551,867
 
 
1,237,475
 
 
655,225
 
Income before interest expense, loss on debt extinguishment and provision for income taxes
 
68,367
 
 
69,779
 
 
79,850
 
Loss on debt extinguishment
 
36,242
 
 
—
 
 
—
 
Interest income
 
(310
) 
 
(429
) 
 
(334
) 
Interest expense
 
40,684
 
 
41,261
 
 
33,963
 
(Loss) income before provision for income taxes
 
(8,249
) 
 
28,947
 
 
46,221
 
Provision for income taxes
 
803
 
 
3
 
 
202
 
(Loss) income from continuing operations
 
(9,052
) 
 
28,944
 
 
46,019
 
Discontinued operations (Note 17):
 
 
 
 
 
 
 
 
 
Gain on sale of customer service centers
 
976
 
 
26,332
 
 
2,483
 
(Loss) income from discontinued service centers
 
—
 
 
(972
) 
 
167
 
Net (loss) income
$
(8,076
) 
$
54,304
 
$
48,669
 
General Partner's interest in net (loss) income
$
(251
) 
$
1,310
 
$
1,193
 
Limited Partners' interest in net (loss) income
$
(7,825
) 
$
52,994
 
$
47,476
 
(Loss) income per Common Unit – basic
 
 
 
 
 
 
 
 
 
(Loss) income from continuing operations
$
(0.29
) 
$
0.96
 
$
1.77
 
Discontinued operations
 
0.03
 
 
0.83
 
 
0.10
 
Net (loss) income
$
(0.26
) 
$
1.79
 
$
1.87
 
Weighted average number of Common Units outstanding – basic
 
30,276
 
 
29,599
 
 
25,359
 
(Loss) income per Common Unit – diluted
 
 
 
 
 
 
 
 
 
(Loss) income from continuing operations
$
(0.29
) 
$
0.96
 
$
1.76
 
Discontinued operations
 
0.03
 
 
0.82
 
 
0.10
 
Net (loss) income
$
(0.26
) 
$
1.78
 
$
1.86
 
Weighted average number of Common Units outstanding – diluted
 
30,276
 
 
29,705
 
 
25,495
 
The accompanying notes are an integral part of these consolidated financial statements.

SUBURBAN PROPANE PARTNERS, L.P. AND FORMATION

SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)

 
Year Ended
 
September 24,
2005
September 25,
2004
September 27,
2003
Cash flows from operating activities:
 
 
 
 
 
 
 
 
 
Net (loss) income
$
(8,076
) 
$
54,304
 
$
48,669
 
Adjustments to reconcile net income to net cash provided by operations:
 
 
 
 
 
 
 
 
 
Depreciation expense
 
32,865
 
 
33,344
 
 
27,097
 
Amortization of intangible assets
 
4,897
 
 
3,399
 
 
423
 
Amortization of debt origination costs
 
1,514
 
 
1,421
 
 
1,291
 
Amortization of unearned compensation
 
1,806
 
 
1,171
 
 
863
 
Amortization of discount on long-term borrowings
 
117
 
 
—
 
 
—
 
Gain on disposal of property, plant and equipment, net
 
(2,043
) 
 
(715
) 
 
(636
) 
Gain on sale of customer service centers
 
(976
) 
 
(26,332
) 
 
(2,483
) 
Pension settlement charge
 
—
 
 
5,337
 
 
—
 
Impairment of goodwill
 
656
 
 
3,177
 
 
—
 
Loss on debt extinguishment
 
36,242
 
 
—
 
 
—
 
Changes in assets and liabilities, net of businesses acquired and of dispositions:
 
 
 
 
 
 
 
 
 
(Increase)/decrease in accounts receivable
 
(18,918
) 
 
10,047
 
 
(4,101
) 
(Increase) in inventories
 
(16,424
) 
 
(10,677
) 
 
(5,339
) 
Decrease/(increase) in prepaid expenses and other current assets
 
4,315
 
 
(13,155
) 
 
576
 
Increase/(decrease) in accounts payable
 
3,326
 
 
17,603
 
 
(1,208
) 
(Decrease)/increase in accrued employment and benefit costs
 
(4,861
) 
 
1,024
 
 
(632
) 
Increase/(decrease) in accrued interest
 
908
 
 
2,610
 
 
(1,209
) 
(Decrease)/increase in other accrued liabilities
 
(5,989
) 
 
20,233
 
 
(1,825
) 
(Increase)/decrease in other noncurrent assets
 
(3,552
) 
 
619
 
 
(7,435
) 
Increase/(decrease) in other noncurrent liabilities
 
13,198
 
 
(10,345
) 
 
3,249
 
Net cash provided by operating activities
 
39,005
 
 
93,065
 
 
57,300
 
Cash flows from investing activities:
 
 
 
 
 
 
 
 
 
Capital expenditures
 
(29,301
) 
 
(26,527
) 
 
(14,050
) 
Acquisition of Agway Energy, net of cash acquired
 
—
 
 
(211,181
) 
 
—
 
Proceeds from sale of property, plant and equipment
 
4,670
 
 
1,799
 
 
1,994
 
Proceeds from sale of customer service centers, net
 
—
 
 
39,352
 
 
7,197
 
Net cash used in investing activities
 
(24,631
) 
 
(196,557
) 
 
(4,859
) 
Cash flows from financing activities:
 
 
 
 
 
 
 
 
 
Long-term debt repayments
 
(340,440
) 
 
(42,911
) 
 
(88,939
) 
Long-term debt issuance, net of discount
 
372,953
 
 
175,000
 
 
—
 
Short-term borrowings
 
26,750
 
 
—
 
 
—
 
Expenses associated with debt agreements
 
(4,175
) 
 
(5,947
) 
 
(826
) 
Prepayment premium associated with debt extinguishment
 
(31,980
) 
 
—
 
 
—
 
Net proceeds from issuance of Common Units
 
—
 
 
87,566
 
 
72,186
 
Partnership distributions
 
(76,552
) 
 
(72,500
) 
 
(60,052
) 
Net cash (used in)/provided by financing activities
 
(53,444
) 
 
141,208
 
 
(77,631
) 
Net (decrease)/increase in cash and cash equivalents
 
(39,070
) 
 
37,716
 
 
(25,190
) 
Cash and cash equivalents at beginning of year
 
53,481
 
 
15,765
 
 
40,955
 
Cash and cash equivalents at end of year
 
14,411
 
 
53,481
 
 
15,765
 
Supplemental disclosure of cash flow information:
 
 
 
 
 
 
 
 
 
Cash paid for interest
$
42,457
 
$
35,252
 
$
33,635
 
Non-cash adjustment for minimum pension liability
$
(1,242
) 
$
2,096
 
$
(4,938
) 
The accompanying notes are an integral part of these consolidated financial statements.

SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF PARTNERS’ CAPITAL
(in thousands)

Number of
Common
Units
Common
Unitholders
General
Partner
Deferred
Compensation
Common
Units
Held in
Trust
Unearned
Compensation
Accumulated
Other
Comprehensive
(Loss)/Income
Total
Partners'
Capital
Comprehensive
Income/(Loss)
Balance at September 28 , 2002
24,631
$
103,680
$
1,924
$
(11,567
) 
$
11,567
$
(1,924
) 
$
(84,394
) 
$
19,286
Net income
47,476
1,193
48,669
$
48,669
Other comprehensive income:
Net unrealized losses on cash flow hedges
(1,129
) 
(1,129
) 
(1,129
) 
Less: Reclassification of realized gains on cash flow hedges into earnings
(683
) 
(683
) 
(683
) 
Minimum pension liability adjustment
4,938
4,938
4,938
Comprehensive income
$
51,795
Partnership distributions
(58,502
) 
(1,550
) 
(60,052
) 
Sale of Common Units under public offering, net of offering expenses
2,625
72,186
72,186
Distribution of Common Units held in trust
5,772
(5,772
) 
—
Grants issued under Restricted
Unit Plan, net of forfeitures
1,110
(1,110
) 
—
Amortization of Restricted
Unit Plan, net of forfeitures
863
863
Balance at September 27 , 2003
27,256
165,950
1,567
(5,795
) 
5,795
(2,171
) 
(81,268
) 
84,078
Net income
52,994
1,310
54,304
$
54,304
Other comprehensive income:
Net unrealized gains on cash flow hedges
9,129
9,129
9,129
Less: Reclassification of realized losses on cash flow hedges into earnings
1,129
1,129
1,129
Non-cash pension settlement charge
5,337
5,337
5,337
Minimum pension liability adjustment
(2,096
) 
(2,096
) 
(2,096
) 
Comprehensive income
$
67,803
Partnership distributions
(70,475
) 
(2,025
) 
(72,500
) 
Sale of Common Units under public offering, net of offering expenses
2,990
87,566
87,566
Common Units issued under
Restricted Unit Plan
11
Common Units distributed into trust
(159
) 
159
—
Distribution of Common Units held in trust
176
(176
) 
—
Grants issued under Restricted Unit Plan, net of forfeitures
2,845
(2,845
) 
—
Amortization of Restricted Unit Plan, net of forfeitures
1,171
1,171
Balance at September 25, 2004
30,257
238,880
852
(5,778
) 
5,778
(3,845
) 
(67,769
) 
168,118
Net loss
(7,825
) 
(251
) 
(8,076
) 
$
(8,076
) 
Other comprehensive income/(loss):
Net unrealized losses on cash flow hedges
(1,293
) 
(1,293
) 
(1,293
) 
Less: Reclassification of realized gains on cash flow hedges into earnings
(9,129
) 
(9,129
) 
(9,129
) 
Minimum pension liability adjustment
1,242
1,242
1,242
Comprehensive loss
$
(17,256
) 
Partnership distributions
(74,172
) 
(2,380
) 
(76,552
) 
Common Units issued under
Restricted Unit Plan
22
Common Units distributed into trust
(109
) 
109
—
Grants issued under Restricted Unit Plan, net of forfeitures
2,316
(2,316
) 
—
Amortization of Restricted Unit Plan, net of forfeitures
1,806
1,806
Balance at September 24, 2005
30,279
$
159,199
$
(1,779
) 
$
(5,887
) 
$
5,887
$
(4,355
) 
$
(76,949
) 
$
76,116
The accompanying notes are an integral part of these consolidated financial statements.

SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per unit amounts)
1. 
Partnership Organization and Formation
Suburban Propane Partners, L.P. (the "Partnership"‘‘Partnership’’) was formed on December 19,
1995 asis a publicly traded Delaware limited partnership.  The  Partnershippartnership principally engaged, through its operating partnership and its subsidiary,
Suburban Propane, L.P. (the "Operating Partnership"), were formed to acquire and
operate  the propane  business  and assets of  Suburban  Propane,  a division of
Quantum Chemical Corporation (the "Predecessor Company"). In addition,  Suburban
Sales & Service,  Inc.  (the "Service  Company"),  a subsidiary of the Operating
Partnership,  was formed to acquire and operate the service  work and  appliance
and parts businesses of the Predecessor Company. The Partnership,  the Operating
Partnership and the Service Company  commenced  operations on March 5, 1996 upon
consummation  of  an  initial  public   offering  of  21,562,500   common  units
representing  limited partner interestssubsidiaries, in the Partnership (the "Common Units"),retail marketing and distribution of propane, fuel oil and other refined fuels, as well as the private placementmarketing of $425,000 aggregate principal amount of Senior Notes due
2011 issued by the Operating  Partnership and the transfer of all of the propane
assets  (excluding  the net  accounts  receivable  balance)  of the  Predecessor
Company to the Operating Partnership and the Service Company.

On January 5, 2001,  Suburban  Holdings,  Inc.,  a subsidiary  of the  Operating
Partnership,  was formed to hold the stock of Gas Connection,  Inc.,  Suburban @
Home, Inc. and Suburban Franchising,  Inc. Gas Connection,  Inc. (d/b/a HomeTown
Hearth  &  Grill)  sells  and  installs natural gas and propane  gas  grills,
fireplaceselectricity in deregulated markets. In addition, to complement its core marketing and related  accessoriesdistribution businesses, the Partnership installs and supplies;  Suburban @ Home, Inc. sells,
installs,  services and  repairs a full rangewide variety of home comfort equipment, particularly for heating, ventilation and air conditioning products;  and Suburban  Franchising,  Inc. creates and develops propane related
franchising business opportunities.  The Partnership, the Operating Partnership,
the  Service  Company,   Suburban  Holdings,   Inc.  and  its  subsidiaries  are
collectively referred to hereinafter as the "Partnership Entities."

From March 5, 1996 through May 26, 1999,  Suburban Propane GP, Inc. (the "Former
General Partner"(‘‘HVAC’’),  a wholly-owned  indirect subsidiary of Millennium Chemicals,
Inc.,  served  as the  general  partner  of the  Partnership  and the  Operating
Partnership  owning a 1%  general  partner  interest  in the  Partnership  and a
1.0101% general partner interest in the Operating Partnership.  In addition, the
Former  General  Partner owned a 24.4%  limited  partner  interest  evidenced by
7,163,750  Subordinated  Units and a special  limited  partner  interest  in the
Partnership.

On  May  26,  1999,   the   Partnership   completed  a   recapitalization   (the
"Recapitalization")  which included the redemption of the Subordinated Units and
special  limited  partner  interest  from the Former  General  Partner,  and the
substitution of Suburban  Energy  Services Group LLC (the "General  Partner") as
the  new  general  partner  of the  Partnership  and the  Operating  Partnership
following the General Partner's purchase of the combined 2.0101% general partner
interests for $6,000 in cash. The General Partner is owned by senior  management
of the Partnership  and,  following the public  offerings  discussed in Note 13,
owns a combined  1.71%  general  partner  interest  in the  Partnership  and the
Operating Partnership.. The limited partner interests in the Partnership are evidenced by Common Unitscommon units traded on the New York Stock Exchange.Exchange (‘‘Common Units’’), with 30,279,059 Common Units outstanding at September 24, 2005. The limited partners are entitled to participate in distributions and exercise the rights and privileges available to limited partners under the Second Amended and Restated Agreement of Limited Partners (the ‘‘Partnership Agreement’’), such as the election of three of the five members of the Board of Supervisors and vote 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, Entities are engagedthe Operating Partnership and the Service Company commenced operations in March 1996 in connection with the Partnership’s initial public offering.
The general partner of both the Partnership and the Operating Partnership is Suburban Energy Services Group LLC (the ‘‘General Partner’’), a Delaware limited liability company. The General Partner is majority-owned by senior management of the Partnership and owns a combined 1.54% general partner interest in the retailPartnership and wholesale  marketingthe Operating Partnership. The General Partner appoints two of the five members of the Board of Supervisors.
On January 5, 2001, Suburban Holdings, Inc., a subsidiary of the Operating Partnership, was formed to hold the stock of Gas Connection, Inc. (d/b/a HomeTown Hearth & Grill), Suburban @ Home, Inc. and Suburban Franchising, Inc. HomeTown Hearth & Grill sells and installs natural gas and propane gas grills, fireplaces and related appliancesaccessories and services.   supplies. Suburban @ Home sells, installs, services and repairs a full range of HVAC products. Suburban Franchising creates and develops propane related franchising business opportunities.
On November 21, 2003, Suburban Heating Oil Partners, LLC, a subsidiary of HomeTown Hearth & Grill, was formed to acquire and operate the fuel oil and other refined fuels and HVAC assets and businesses of Agway Energy acquired on December 23, 2003 (see Note 3). In addition, Agway Energy Services, LLC, also a subsidiary of HomeTown Hearth & Grill, was formed to acquire and operate the natural gas and electricity marketing business of Agway Energy.
Suburban Energy Finance Corporation, a direct wholly-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 6.875% senior notes due in 2013 (see Note 9).
The Partnership serves approximately   750,000more than 1,000,000 active residential, commercial, industrial and agricultural customers from approximately 320370 customer service centers in 4030 states. The Partnership'sPartnership’s operations are concentrated in the east and west coast regions of the United States. No single customer accounted for 10% or F-7
more of the Partnership'sPartnership’s revenues during fiscal 2003,  20022005, 2004 or 2001.2003. During fiscal 2003, 20022005, 2004 and 2001,2003, three suppliers provided approximately 42%33%, 49%36% and 47%42%, respectively, of the Partnership'sPartnership’s total domestic propane supply. The Partnership believes that, if supplies from any of these three suppliers were interrupted, it would be able to secure adequate propane supplies from other sources without a material disruption of its operations.

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION.

2. 
Summary of Significant Accounting Policies
Principles of Consolidation. The consolidated financial statements include the accounts of the Partnership Entities.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'sPartnership’s 98.9899% limited partner interest in the Operating Partnership and its ability to influence control over the major operating and financial decisions through the powers of the Board of Supervisors provided for in the Second   Amended  and  Restated   Agreement  of  Limited
Partnership.

FISCAL PERIOD.Partnership Agreement.
Fiscal Period. The Partnership'sPartnership’s fiscal year ends on the last Saturday nearest to September 30.

REVENUE  RECOGNITION.
Revenue Recognition. Sales of propane, fuel oil and other refined fuels are recognized at the time product is delivered to the customer. Revenue from the sale of appliances and equipment is recognized at the time of sale or when installation is complete, as applicable. Revenue from repairrepairs, maintenance and maintenanceother service activities is recognized upon completion of the service. USE OF ESTIMATES.Revenue from HVAC service contracts is recognized ratably over the service period. Revenue from the natural gas and electricity business is recognized based on customer usage as determined by meter readings, plus an amount for natural gas and electricity delivered but unbilled at the end of each accounting period.
Use of Estimates. The preparation of financial statements in conformity with generally accepted accounting principles (‘‘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 insurance and litigation reserves, environmental reserves, pension and other postretirement benefit liabilities and costs, valuation of derivative instruments, depreciation and amortization of long-lived assets, asset valuation assessment, as well as the allowance for doubtful accounts. Actual results could differ from those estimates, making it reasonably possible that a change in these estimates could occur in the near term.

CASH AND CASH  EQUIVALENTS.
Cash and Cash Equivalents. The Partnership considers all highly liquid debt instruments purchased with an original maturity of three months or less to be cash equivalents. The carrying amount approximates fair value because of the short maturity of these instruments.

INVENTORIES.
Inventories. Inventories are stated at the lower of cost or market. Cost is determined using a weighted average method for propane, fuel oil and other refined fuels and natural gas, and a standard cost basis for appliances, which approximates average cost.

DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES.
Derivative Instruments and Hedging Activities. The Partnership is exposed to the
impactenters into a combination of market fluctuations in the commodity price of propane. The Partnership
routinely  uses  commodityexchange-traded futures  forward and option contracts, forward contracts and in certain instances, over-the-counter options (collectively, ‘‘derivative instruments’’) to hedge its
commoditymanage the price risk associated with future purchases of the commodities used in its operations, principally propane and fuel oil, as well as to ensure supply during periods of high demand. All derivative instruments are reported on the balance sheet, within other current assets or other current liabilities, at their fair values.values pursuant to Statement of Financial Accounting Standards (‘‘SFAS’’) No. 133, ‘‘Accounting for Derivative Instruments and Hedging Activities,’’ as amended by SFAS Nos. 137, 138 and 149 (‘‘SFAS 133’’). On the date that futures, forward and option contracts are entered into, the Partnership makes a determination as to whether the derivative instrument qualifies for designation as a hedge. Prior to March  31,  2002,Changes in the Partnership  determined  that itsfair value of derivative instruments did not qualifyare recorded each period in current period earnings or other comprehensive income (loss) (‘‘OCI’’), depending on whether a derivative instrument is designated as hedgesa hedge and, as such,if so, the changes in
fair values were  recorded in income.  Beginning  with  contracts  entered  into
subsequent to March 31, 2002, a portiontype of the  derivative  instruments  entered
into by the  Partnership  have been  designated and qualify as cash flow hedges.hedge. For derivative instruments designated as cash flow hedges, the Partnership formally assesses, both at the hedge contract'scontract’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 accumulated  other  comprehensive
(loss)/incomeOCI to the extent effective and reclassified into cost of products sold 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 used to hedge future purchases are recognized in cost of products  soldoperating expenses immediately. Changes in the fair value of derivative instruments that are not designated as hedges are recorded F-8
in current period earnings within operating expenses.

LONG-LIVED ASSETS.expenses and reclassified to cost of products sold once realized.

A portion of the Partnership’s option contracts are not classified as hedges and, as such, changes in the fair value of these derivative instruments are recognized within operating expenses as they occur. The value of certain option contracts that do qualify as hedges and are designated as cash flow hedges under SFAS 133 have two components of value: time value and intrinsic value. The intrinsic value is the value by which the option is in the money (i.e., the amount by which the value of the commodity exceeds the exercise or ‘‘strike’’ price of the option). The remaining amount of option value is attributable to time value. The Partnership does not include the time value of option contracts in its assessment of hedge effectiveness and, therefore, records changes in the time value component of the options currently in earnings.
Market risks associated with the trading of futures, options and forward contracts are monitored daily for compliance with the Partnership’s Hedging and Risk Management Policy which includes volume limits for open positions. Open inventory positions are also reviewed and managed daily as to exposures to changing market prices.
A portion of the Partnership’s long-term borrowings bear interest at a variable rate based upon either LIBOR or Wachovia National Bank's prime rate, plus an applicable margin depending on the level of the Partnership’s total leverage. Therefore, the Partnership is subject to interest rate risk on the variable component of the interest rate. The Partnership manages part of its variable interest rate risk by entering into interest rate swap agreements. On March 31, 2005, the Partnership entered into a $125,000 interest rate swap contract in conjunction with the new Term Loan facility under the Revolving Credit Agreement (see Note 9). The interest rate swap is being accounted for under SFAS 133 and the Partnership has designated the interest rate swap as a cash flow hedge. Changes in the fair value of the interest rate swap are recognized in OCI until the hedged item is recognized in earnings. At September 24, 2005, the fair value of the interest rate swap amounted to $1,293 and is included within other liabilities.
Long-Lived Assets. Long-lived assets include:

PROPERTY, PLANT AND EQUIPMENT.
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'sasset’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 for related groups of assets under the straight-line method based upon their estimated useful lives as follows:

     Buildings                                                  40 Years
     Building and land improvements                          10-40 Years
     Transportation equipment                                 4-30 Years
     Storage facilities                                         20 Years
     Equipment, primarily tanks and cylinders                 3-40 Years
     Computer software                                         3-7 Years


Buildings
40 Years
Building and land improvements
10-40 Years
Transportation equipment
4-30 Years
Storage facilities
7-40 Years
Equipment, primarily tanks and cylinders
3-40 Years
Computer software
3-7 Years
The Partnership reviews the recoverability of long-lived assets when circumstances occur that indicate that the carrying value of an asset group may not be recoverable. Such circumstances include a significant adverse change in the manner in which an asset group is being used, current operating losses combined with a history of operating losses experienced by the asset group or a current expectation that an asset group 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'sPartnership’s ability to recover the value of the asset group from the future undiscounted cash flows expected to result from the use and eventual disposition of the asset group. 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 group exceeds its fair value. The fair value of an asset group will be measured using the best information available, including prices for similar assets or the result of using a discounted cash flow valuation technique.

GOODWILL.
Goodwill. Goodwill represents the excess of the purchase price over the fair value of net assets acquired. Effective September 30, 2001, the beginning of the
Partnership's  2002  fiscal  year,  the  Partnership  elected to early adopt the
provisions  of  Statement of Financial  Accounting  Standards  ("SFAS") No. 142,
"Goodwill and Other Intangible Assets" ("SFAS 142"). As a result of the adoption
of SFAS 142, goodwill is no longer amortized to expense, ratherGoodwill is subject to an impairment review at a reporting unit level, on an annual basis in August of each

year, or when an event occurs or circumstances change that would indicate potential impairment. 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 either (i) a
market  value  approach  taking into  consideration  the quoted  market price of
Common Units; or (ii)  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. OTHER  INTANGIBLE   ASSETS.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 exceeds the implied fair value of the goodwill.
Other Intangible Assets. Other intangible assets consist primarily  of non-compete agreements whichand acquired leasehold interests, customer lists and tradenames. Non-compete agreements are amortized under the straight-line method over the periods of the related agreements, ending periodically between fiscal years 20042006 and 2011.

ACCRUED INSURANCE.2010. 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. Customer lists 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 2006 and 2019.
Accrued Insurance. Accrued insurance represents the estimated costs of known and anticipated or unasserted claims under the Partnership'sPartnership’s general and product, workers'workers’ compensation and automobile insurance policies. Accrued insurance provisions for unasserted claims arising from unreported incidents are based on an analysis of historical claims data. For each claim, the Partnership records a self-insurance provision up to the estimated amount of the probable claim or the
amount of the deductible,  whichever is lower,  utilizing actuarially determined loss



                                      F-9
 development factors applied to actual claims data. The Partnership maintains insurance coverage wherein our 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 self-insurance 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. Claims are generally settled within 5 years of origination.

INCOME TAXES.
Environmental Reserves. The Partnership establishes reserves for environmental exposures when it is probable that a liability has been incurred and the amount of the liability can be reasonably estimated based upon the Partnership’s best estimate of costs associated with environmental remediation and ongoing monitoring activities. Accrued environmental reserves are exclusive of claims against third parties, and an asset is established where contribution or reimbursement from such third parties has been agreed and the Partnership is reasonably assured of receiving such contribution or reimbursement. Environmental reserves are not discounted.
Income Taxes. As discussed in Note 1, the Partnership Entities  consiststructure consists of two limited partnerships, the Partnership and the Operating Partnership, and fiveseveral corporate entities.entities (the ‘‘Corporate Entities’’). For federal andincome 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 individual partners. As a result, no recognition of income tax expense has been reflected in the Partnership'sPartnership’s consolidated financial statements relating to the earnings of the Partnership and the Operating Partnership. The earnings attributable to the corporate entitiesCorporate Entities are subject to federal and state income taxes. Accordingly, the Partnership'sPartnership’s consolidated financial statements reflect income tax expense related to certain states that require income tax at the corporate entities' earnings.level, as well as for the earnings of the Corporate Entities. 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  entitiesCorporate 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.

UNIT-BASED COMPENSATION.

Unit-Based Compensation. The Partnership accounts for unit-based compensation in accordance with Accounting Principles Board Opinion No. 25, "Accounting‘‘Accounting for Stock Issued to Employees"Employees’’, and related interpretations. Upon award of restricted units under the Partnership'sPartnership’s 2000 Restricted Unit Plan, unearned compensation equivalent to the market price of the Restricted Units on the date of grant is established as a reduction of partners'partners’ capital. The unearned compensation is amortized ratably to expense over the restricted periods. The Partnership follows the disclosure only provision of SFAS No. 123, "Accounting‘‘Accounting for Stock-Based Compensation" ("Compensation’’ (‘‘SFAS 123"123’’). Pro forma net income and net income per Common Unit under the fair value method of accounting for Restricted Units under SFAS 123 would be the same as reported net income and net income per Common Unit.

COSTS AND EXPENSES.
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 other refined fuels, as well as the cost of natural gas and electricity sold, including transportation costs to deliver product from the Partnership'sPartnership’s supply points to storage or to the Partnership'sPartnership’s customer service centers. Cost of products sold also includes the cost of appliances, equipment and related parts sold or installed by the Partnership'sPartnership’s customer service centers computed on a basis that approximates the average cost of the products. 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'sPartnership’s retail propane, fuel oil and other refined fuels distribution and appliance sales and service operations are reported within operating expenses in the consolidated statements of operations. These operating expenses include the compensation and benefits of field and direct operating support personnel, costs of operating and maintaining the vehicle fleet, overhead and other costs of the purchasing, training and safety departments and other direct and indirect costs of the Partnership'sPartnership’s customer service centers.
All costs of back office support functions, including compensation and benefits for executives and other support functions, as well as other costs and expenses to maintain finance and accounting, treasury, legal, human resources, corporate development and the information systems functions are reported within general and administrative expenses in the consolidated statements of operations.




                                      F-10




NET INCOME PER UNIT.
Net Income Per Unit. Basic net income per Common Unit, for each of the periods presented, is computed by dividing net income, after deducting the General Partner'sPartner’s approximate 2%3.1% interest, by the weighted average number of outstanding Common Units. Diluted net income per Common Unit is computed by dividing net income, after deducting the General Partner'sPartner’s approximate 2%3.1% interest, by the weighted average number of outstanding Common Units and time vested Restricted Units granted under the 2000 Restricted Unit Plan. Diluted net loss per Common Unit for the year ended September 24, 2005 does not include 134,471 Restricted Units as their effect would be anti-dilutive. In computing diluted net income per Common Unit, weighted average units outstanding used to compute basic net income per Common Unit were increased by 136,000  units and 34,000105,711 units for the yearsyear ended September 27,
2003 and September  28, 2002,  respectively,25, 2004 to reflect the potential dilutive effect of the time vested Restricted Units outstanding using the treasury stock method. Net income is allocated to the Common Unitholders and the General Partner in accordance with their respective Partnership ownership interests, after giving effect to any priority income allocations for incentive distributions allocated to the General Partner.

COMPREHENSIVE INCOME.
Computations of earnings per Common Unit are performed in accordance with Emerging Issues Task Force (‘‘EITF’’) consensus 03-6 ‘‘Participating Securities and the Two-Class Method Under FAS 128’’ (‘‘EITF 03-6’’), when applicable. EITF 03-6 requires, among other things, the use of the two-class method of computing earnings per unit when participating securities exist. The two-class method is an earnings allocation formula that computes earnings per unit for Common Units and participating securities according to distributions declared and participation rights in undistributed earnings, as if all of the earnings were distributed to limited partners and the general partner (inclusive of the incentive distribution rights of the General Partner which are considered participating securities for purposes of the application of EITF 03-6). EITF 03-6 was adopted by the Partnership at the end of fiscal 2004. However, the requirements of EITF 03-6 do not apply to the computation of net income (loss) per Common Unit in periods in which a net loss is reported and therefore did not have any impact on annual net loss per Common Unit for the year ended September 24, 2005. In addition, the application of EITF 03-6 on the

computation of our net income per Common Unit for the year ended September 25, 2004 did not have any impact on annual net income per Common Unit. EITF 03-6 may have an impact on the computation of net income per Common Unit on a quarterly basis, depending on the level of net income in relation to distributions declared.
Comprehensive Income. The Partnership reports comprehensive (loss)/income (the total of net income and all other non-owner changes in partners'partners’ capital) within the consolidated statement of partners'partners’ capital. Comprehensive (loss)/income includes unrealized gains and losses on derivative instruments accounted for as cash flow hedges and minimum pension liability adjustments.

RECENTLY ISSUED  ACCOUNTING  STANDARDS.
Recently Issued Accounting Standards. In June 2002,March 2005, the Financial Accounting Standards Board (the "FASB"‘‘FASB’’) issued SFASFASB Interpretation No. 146,  "Accounting47, ‘‘Accounting for Costs
Associated  with Exit or Disposal  Activities"  ("SFAS 146"Conditional Asset Retirement Obligations’’ (‘‘FIN 47’’). SFAS 146FIN 47 clarifies the term conditional asset retirement obligation as a legal obligation to retire an asset when the timing and/or method of settlement are conditional on a future event that may or may not be within the control of the entity. FIN 47 also requires companiesan entity to recognize costs  associateda liability for the fair value of the conditional asset retirement obligation if the fair value of the liability can be reasonably estimated. FIN 47 is effective beginning with exit or disposal  activities when
they are incurred rather than at the date of a commitment to an exit or disposal
plan.Partnership’s fiscal year ending September 30, 2006. The Partnership is currently evaluating the provisions of SFAS 146 are effective for exit or disposal  activities
initiated  after  December 31, 2002.  The  provisions  of this  standardFIN 47 and currently believes that adoption will be
applied by the Partnership on an ongoing basis, as applicable.

In April 2003,  the FASB issued SFAS No. 149,  "Amendment  of  Statement  133 on
Derivative  Instruments and Hedging  Activities"  ("SFAS 149").  SFAS 149 amends
SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities" and
clarifies  financial  accounting  and  reporting  for  derivative   instruments,
including  certain  derivative  instruments  embedded in other  contracts.  This
statement is effective  for  contracts  entered into or modified  after June 30,
2003, and for hedging relationships designated after June 30, 2003. The adoption
of  this  standard  did not have a material impacteffect on the   Partnership's
consolidatedits financial position, results of operations or cash flows.
In May 2003,December 2004, the FASB issued a revised SFAS No. 150,  "Accounting  for Certain  Financial
Instruments with  Characteristics  of both Liabilities and Equity" ("123, ‘‘Share-Based Payment’’ (‘‘SFAS 150"123R’’). SFAS 150 establishes standards123R is a revision of SFAS No. 123 ‘‘Accounting for Stock-Based Compensation’’ and supersedes APB Opinion No. 25 ‘‘Accounting for Stock Issued to Employees’’. SFAS 123R requires a public entity to measure the classificationcost of employee services received in exchange for an award of equity instruments based on the grant date fair value of the award. SFAS 123R eliminates the alternative of using the APB Opinion No. 25 intrinsic value method of accounting that was provided for in SFAS No. 123 as originally issued and measurement of certain
financial  instruments with  characteristics  of both liabilities and equity. It requires that an issuer classify athe compensation cost relating to share-based payment transactions be recognized in the financial instrument that is within its scope
as a liability (or an asset in some  circumstances).  Many of these  instruments
were previously required to be classified as equity. This statementstatements. SFAS 123R is effective for  financialbeginning with the Partnership’s fiscal year ending September 30, 2006. The Partnership has historically recognized unearned compensation associated with awards of equity instruments entered into or modified  after May 31,  2003,  and
otherwise is effective forratably to expense over the Partnership's  fourth quarter in fiscal 2003. Thevesting period (see Note 10). Accordingly, adoption of this  standard didSFAS 123R is not expected to have a materialan impact on the Partnership'sPartnership’s consolidated financial position, results of operationsoperation or cash flows.

     In January 2003, the FASB issued FASB Interpretation No. 46, "Consolidation
of Variable  Interest  Entities"  ("FIN 46"),  an  interpretation  of Accounting
Research Bulletin No. 51, "Consolidated  Financial Statements." FIN 46 addresses
consolidation by business  enterprises of variable  interest  entities that meet
certain  characteristics.   The  consolidation  requirements  of  FIN  46  apply
immediately to variable  interest  entities  created after January 31, 2003. The
consolidation  requirements  apply to variable  interest entities created before
February 1, 2003 in the first fiscal year or interim period beginning after June
15, 2003.  However,  in October 2003,  the FASB deferred the effective  date for
applying certain provisions



                                      F-11


of FIN 46 and in  November  2003,  issued an  exposure  draft  which would amend
certain  provisions  of FIN 46. As a result of the latest  exposure  draft,  the
Partnership  is  currently  evaluating  the impact,  if any,  that FIN 46 or any
future amendment may have on its financial position and results of operations.


RECLASSIFICATIONS.
Reclassifications. Certain prior period amounts have been reclassified to conform with the current period presentation.

3.   DISTRIBUTIONS OF AVAILABLE CASH

3. 
Acquisition of Agway Energy
On December 23, 2003, the Partnership acquired substantially all of the assets and operations of Agway Energy Products, LLC, Agway Energy Services, Inc. and Agway Energy Services PA, Inc. (collectively referred to as ‘‘Agway Energy’’) pursuant to an asset purchase agreement dated November 10, 2003 (the ‘‘Agway Acquisition’’). Agway Energy was a leading regional marketer of propane, fuel oil, gasoline and diesel fuel primarily in New York, Pennsylvania, New Jersey and Vermont. To complement its core marketing and delivery business, Agway Energy also installed and serviced a wide variety of home comfort equipment, particularly in the areas of HVAC. The Agway Acquisition was consistent with the Partnership’s business strategy of prudently pursuing acquisitions of retail propane distributors and other energy-related businesses that can complement or supplement its core propane operations. The Agway Acquisition also expanded the Partnership’s presence in the northeast energy market. The total cost of the Agway Acquisition, including the purchase price of $205,055 (net of a working capital adjustment paid to the Partnership of $945), $2,650 for non-compete agreements with certain members of the management of Agway Energy and $3,500 in transaction related costs, was approximately $211,205.
The Agway Acquisition was financed with net proceeds of $87,566 from the issuance of 2,990,000 Common Units in December 2003 (see Note 16) and a portion of the net proceeds from the offering of unsecured 6.875% senior notes (see Note 9). The results of Agway Energy have been included in the Partnership’s consolidated financial statements from the date of the Agway Acquisition. The cost of the Agway Acquisition was allocated to the assets acquired and liabilities assumed according to estimated fair values as follows:


Net current assets
$
        31,241
 
Property, plant and equipment
 
112,187
 
Intangible assets
 
28,046
 
Goodwill
 
41,956
 
Other assets, principally environmental escrow asset (see Note 14)
 
13,750
 
Deferred tax assets
 
21,519
 
Deferred tax asset valuation allowance
 
(21,519
) 
Severance and other restructuring costs
 
(2,225
) 
Environmental reserve (see Note 14)
 
(13,750
) 
Total cost of Agway Acquisition
$
211,205
 
The following unaudited pro forma information presents the results of operations of the Partnership as if the Agway Acquisition had occurred at the beginning of the periods presented. The pro forma information, however, is not necessarily indicative of the results of operations assuming the Agway Acquisition had occurred at the beginning of the periods presented, nor is it necessarily indicative of future results.

 
Year Ended
 
September 25,
2004
September 27,
2003
As reported
 
 
 
 
 
 
Revenues
$
1,307,254
 
$
735,075
 
Income from continuing operations
 
28,944
 
 
46,019
 
Income from continuing operations per Common Unit – basic
$
0.96
 
$
1.77
 
Pro Forma
 
 
 
 
 
 
Revenues
$
1,475,579
 
$
1,424,552
 
Income from continuing operations
 
33,235
 
 
56,302
 
Income from continuing operations per Common Unit – basic
$
1.10
 
$
2.17
 
The as reported and pro forma income from continuing operations for the year ended September 25, 2004 above includes the restructuring charge of $2,942 as further described in Note 7 below, the $5,337 non-cash pension settlement charge described in Note 12 below and the $3,177 non-cash charge for the impairment of goodwill described in Note 6 below. These charges were not reflected in the pro forma results for the year ended September 27, 2003.
4. 
Distributions of Available Cash
The Partnership makes distributions to its partners approximately 45 days after the end of each fiscal quarter of the Partnership in an aggregate amount equal to its Available Cash for such quarter. Available Cash, as defined in the Second
Amended and Restated 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'sPartnership’s business, the payment of debt principal and interest and for distributions during the next four quarters. Distributions by the Partnership in an amount equal to 100% of its Available Cash will generally be made 98.29%98.46% to the Common Unitholders and 1.71%1.54% to the General Partner, subject to the payment of incentive distributions to the General Partner to the extent the quarterly distributions exceed a target distribution of $0.55 per Common Unit.
As defined in the Second Amended and Restated Partnership Agreement, the General Partner has certain Incentive Distribution Rights ("IDRs"(‘‘IDRs’’) which represent an incentive for the General Partner to increase distributions to Common Unitholders in excess of the target quarterly distribution of $0.55 per Common Unit. With regard to the first $0.55 of quarterly distributions paid in any given quarter, 98.29%98.46% of the Available Cash is distributed to the Common Unitholders and 1.71%1.54% is distributed to the General Partner (98.11%(98.29% and 1.71%, respectively, prior to the December 2003 public offering and 98.11% and 1.89%, respectively, prior to the June 2003 public offering described in Note 13)16). With regard to the balance of quarterly distributions in excess of the $0.55 per Common Unit target distribution, 85% of the Available Cash is distributed to the Common Unitholders and 15% is distributed to the General Partner.

The following summarizes the quarterly distributions per Common Unit declared and paid in respect of each of the quarters in the three fiscal years in the period ended September 27, 2003:



                                      September 27,        September 28,               September 29,
                                          2003                     2002                    2001
                                   --------------------    ---------------------    --------------------


      First Quarter                           $ 0.5750                 $ 0.5625                $ 0.5375
      Second Quarter                            0.5750                   0.5625                  0.5500
      Third Quarter                             0.5875                   0.5750                  0.5500
      Fourth Quarter                            0.5875                   0.5750                  0.5625

24, 2005:

 
September 24,
2005
September 25,
2004
September 27,
2003
First Quarter
$
0.6125
 
$
0.5875
 
$
0.5750
 
Second Quarter
 
0.6125
 
 
0.6000
 
 
0.5750
 
Third Quarter
 
0.6125
 
 
0.6125
 
 
0.5875
 
Fourth Quarter
 
0.6125
 
 
0.6125
 
 
0.5875
 
On October 23,  2003,19, 2005, the PartnershipBoard of Supervisors declared a quarterly distribution of $0.5875$0.6125 per Common Unit or $2.35 on an annualized basis, forin respect of the fourth quarter of fiscal 2003  that2005, which was paid on November 10,  20038, 2005 to holders of record on November 3, 2003.1, 2005. This quarterly distribution includes incentive distributions payable to the General Partner to the extent the quarterly distribution exceeds $0.55 per Common Unit.



                                      F-12


4.   ADOPTION OF NEW ACCOUNTING STANDARD

Effective  September 30, 2001,  the beginning
5. 
Selected Balance Sheet Information
Inventories consist of the Partnership's  2002 fiscalfollowing:

 
September 24,
2005
September 25,
2004
Propane and refined fuels
$
66,383
 
$
50,286
 
Natural gas
 
3,267
 
 
2,003
 
Appliances and related parts
 
10,915
 
 
11,852
 
 
$
80,565
 
$
64,141
 
The Partnership enters into contracts to buy propane, fuel oil and natural gas for supply purposes. Such contracts generally have one year terms subject to annual renewal, with costs based on market prices at the Partnership  elected to early adopt the provisionsdate of SFAS 142 which
modifies  the  financial   accountingdelivery.
Property, plant and reporting  for  goodwill  and  other
intangible   assets,   including  the  requirement  that  goodwill  and  certain
intangible  assets no longer be  amortized.  This new standard  also  requires a
transitional  impairment  review for goodwill,  as well as an annual  impairment
review,  to be performed on a reporting unit basis.  As a resultequipment consist of the adoption
of SFAS  142,  amortizationfollowing:

 
September 24,
2005
September 25,
2004
Land and improvements
$
31,698
 
$
30,811
 
Buildings and improvements
 
76,746
 
 
77,119
 
Transportation equipment
 
40,257
 
 
43,529
 
Storage facilities
 
81,333
 
 
82,665
 
Equipment, primarily tanks and cylinders
 
436,918
 
 
424,174
 
Computer software
 
27,083
 
 
21,224
 
Construction in progress
 
9,954
 
 
10,088
 
 
 
703,989
 
 
689,610
 
Less: accumulated depreciation
 
304,004
 
 
282,908
 
 
 
399,985
 
 
406,702
 
Depreciation expense for the years ended September 24, 2005, September 25, 2004 and September 27, 2003 amounted to $32,865, $33,344 and $27,097, respectively. Depreciation expense for the year ended September 28,  2002
decreased  by $7,416  compared24, 2005 included a non-cash charge of $425 related to an impairment of assets as a result of a realignment of the Partnership’s field operations in the fourth quarter of fiscal 2005 (see Note 7). Depreciation expense for the year ended September 29, 2001 due to the
lack25, 2004 included a non-cash charge of amortization  expense$1,000 related to goodwill.  Aside from this change in
accounting for goodwill, no other change in accounting for intangiblea write-down of assets was
requiredabandoned as a result of facility integration efforts in the adoptionPartnership’s northeast operations following the Agway Acquisition. As of SFAS 142  based onSeptember 24, 2005, the naturePartnership had approximately $5,099 of assets held for sale which were included in property, plant and equipment and are being actively marketed.

6. 
Goodwill and Other Intangible Assets
Goodwill represents the excess of the Partnership's  intangible  assets.purchase price over the fair value of net assets acquired. In accordance with SFAS No. 142, ‘‘Goodwill and Other Intangible Assets’’ (‘‘SFAS 142’’), goodwill is not amortized to expense. Rather, goodwill is subject to an impairment review at a reporting unit level, on an annual basis in August of each year, or when an event occurs or circumstances change that would indicate potential impairment. As a result of the Partnership
completed  itsestimated discounted cash flows in the annual impairment review, and,the Partnership recorded a non-cash charge of $656 for the impairment of goodwill associated with its HVAC segment for the year ended September 24, 2005. During fiscal 2004, as a result of continued losses in one of the fair values of  identifiedPartnership’s reporting units exceededacquired in fiscal 1999, the respective  carrying values,value of goodwill was not
considered to be fully impaired aswhen applying the discounted cash flow valuation analysis. Accordingly, the Partnership recorded a non-cash charge of September 27, 2003 nor as$3,177 within the consolidated statement of September 28, 2002.

The  following  table  reflects  the effect of the  adoption  of SFAS 142 on net
income and net income per Common  Unit as if SFAS 142 had been in effectoperations related to goodwill impairment for the periods presented:




                                                      September 27,            September 28,           September 29,
                                                          2003                     2002                    2001
                                                      -------------            -------------           -------------
      Net income:

          As reported                                   $ 48,669                 $ 53,524                $ 53,510
          Goodwill amortization                                -                        -                   7,416
                                                      -------------            -------------           -------------
          As adjusted                                   $ 48,669                 $ 53,524                $ 60,926
                                                      =============            =============           =============
      Basic net income per Common Unit:
          As reported                                   $   1.87                 $   2.12                $   2.14
          Goodwill amortization                                -                        -                    0.29
                                                      -------------            -------------           -------------
          As adjusted                                   $   1.87                 $   2.12                $   2.43
                                                      =============            =============           =============

      Diluted net income per Common Unit:
          As reported                                   $   1.86                 $   2.12                $   2.14
          Goodwill amortization                                -                        -                    0.29
                                                      -------------            -------------           -------------
          As adjusted                                   $   1.86                 $   2.12                $   2.43
                                                      =============            =============           =============

year ended September 25, 2004.
The changes in the carrying amount of goodwill for the year ended September 24, 2005 are as follows:

 
Propane
Fuel Oil and
Refined
Fuels
Natural Gas
and
Electricity
HVAC
All Other
Total
Balance as of September 27, 2003
$
240,059
 
$
—
 
$
—
 
$
—
 
$
3,177
 
$
243,236
 
Acquired goodwill
 
22,500
 
 
10,900
 
 
7,900
 
 
656
 
 
—
 
 
41,956
 
Goodwill impairment charge recognized
 
 
 
 
 
 
 
 
 
 
 
 
 
(3,177
) 
 
(3,177
) 
Balance as of September 25, 2004
$
262,559
 
$
10,900
 
$
7,900
 
$
656
 
$
—
 
$
282,015
 
Goodwill impairment charge recognized
 
—
 
 
—
 
 
—
 
 
(656
) 
 
—
 
 
(656
) 
Balance as of September 24, 2005
$
262,559
 
$
10,900
 
$
7,900
 
$
—
 
$
—
 
$
281,359
 
Other intangible assets, at September  27, 2003 and  September 28, 2002the majority of which were acquired in the Agway Acquisition, consist
primarily of non-compete  agreements  with a gross carrying amount of $3,608 and
$4,240,  respectively,  and  accumulated  amortization  of  $2,573  and  $2,766,
respectively. These non-compete agreements are amortized under the straight-line
method over the periods of the agreements,  ending  periodically  between fiscal
years 2004 and 2011. following:

 
September 24,
2005
September 25,
2004
Customer lists
$
19,866
 
$
19,866
 
Tradenames
 
2,531
 
 
3,513
 
Non-compete agreements
 
4,956
 
 
5,467
 
Other
 
1,967
 
 
1,967
 
 
 
29,320
 
 
30,813
 
Less: accumulated amortization
 
8,635
 
 
5,231
 
 
$
20,685
 
$
25,582
 
Aggregate amortization expense related to other intangible assets for the years ended September 24, 2005, September 25, 2004 and September 27, 2003 was $4,897, $3,399 and $423, respectively. Amortization expense for the year ended September 28, 2002 and September
29, 2001 was $423, $498 and $563, respectively.24, 2005 included a non-cash charge of $810 attributable to an impairment in the value of tradenames associated with the HVAC segment which were acquired in the Agway Acquisition. Aggregate amortization expense related to other intangible assets for each of the five succeeding fiscal years as of September 27, 200324, 2005 is as follows: 2004 -
$352; 2005 - $299; 2006 - $228;– $2,587; 2007 - $76– $2,036; 2008 – $1,999, 2009 – $1,995 and 2008 - $40.

                                      F-13
2010-$1,965.
7. 
Restructuring Costs
For the year ended September 27,  2003,24, 2005, the Partnership recorded a restructuring charge of $2,775 within the consolidated statements of operations related primarily to employee termination costs incurred as a result of actions taken during fiscal 2005. Specifically, during the fourth quarter of fiscal 2005 the Partnership approved and initiated a plan of reorganization to realign the field operations in an effort to streamline the operating footprint and leverage the system infrastructure to achieve additional operational efficiencies and reduce costs. As a result of this field realignment, the Partnership recorded a restructuring charge of $2,150 during the fourth quarter of fiscal 2005 associated with severance and other employee benefits for approximately 85 positions eliminated under the plan.

During fiscal 2004, in connection with the initial integration of certain management and back office functions of Agway Energy, the Partnership’s management approved and initiated plans to restructure the operations of both the Partnership and Agway Energy. Restructuring charges of $2,942 related to plans that had an impact on the assets, employees and operations of the Partnership were recorded in the statement of operations for fiscal 2004 when specific decisions were approved and costs associated with such activities were incurred. Severance and other restructuring or relocation costs associated with assets, employees and operations of Agway Energy in the amount of $2,225 were recorded as liabilities assumed in the purchase business combination and resulted in an increase to goodwill (see Note 3).
The components of remaining restructuring charges are as follows:

 
Reserve at
September 25,
2004
Charges
Through
September 24,
2005
Utilization
Through
September 24,
2005
Reserve at
September 24,
2005
Charges expensed:
 
 
 
 
 
 
 
 
 
 
 
 
Severance and other employee costs
$
715
 
$
2,625
 
$
(1,669
) 
$
1,671
 
Other exit costs
 
—
 
 
150
 
 
—
 
 
150
 
Total
$
715
 
$
2,775
 
$
(1,669
) 
$
1,821
 
Charges recorded in purchase accounting:
 
 
 
 
 
 
 
 
 
 
 
 
Severance and other employee costs
$
139
 
$
—
 
$
(139
) 
$
—
 
Relocation costs
 
235
 
 
—
 
 
(116
) 
 
119
 
Other exit costs
 
1,000
 
 
—
 
 
(699
) 
 
301
 
Total
$
1,374
 
$
—
 
$
(954
) 
$
420
 
The $2,241 in restructuring and other exit costs as of September 24, 2005 is expected to be paid over the course of the next twelve months.
8.    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 corporate level income tax. Rather, the taxable income or loss, which may vary substantially from the net carrying  amountincome or net loss reported by the Partnership in the consolidated statement of goodwill
decreased by $24operations, is includable in the federal and state income tax returns of the individual partners. 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 information regarding each partner’s tax attributes in the Partnership. The earnings of the Corporate Entities that do not qualify under the Internal Revenue Code for partnership status are subject to federal and state income taxes. The Partnership’s fuel oil and other refined fuels, natural gas and electricity and HVAC business segments are structured as Corporate Entities and, as such, are subject to corporate level income tax.
The income tax provision/(benefit) of the Partnership consists of the following:

 
September 24,
2005
September 25,
2004
September 27,
2003
Current
 
 
 
 
 
 
 
 
 
Federal
$
(6
) 
$
(302
) 
$
10
 
State and local
 
809
 
 
305
 
 
192
 
Deferred
 
—
 
 
—
 
 
—
 
 
$
803
 
$
3
 
$
202
 
The federal income tax benefits reported for fiscal 2005 and 2004 result from a refund of prior taxes paid.

The provision for income taxes differs from income taxes computed at the United States federal statutory rate as a result of the salefollowing:

 
September 24,
2005
September 25,
2004
September 27,
2003
Income tax provision at federal statutory tax rate
$
(2,546
) 
$
19,006
 
$
17,105
 
Impact of Partnership income not subject to federal income taxes
 
(10,710
) 
 
(27,477
) 
 
(20,221
) 
Permanent differences
 
(1,632
) 
 
1,135
 
 
—
 
Change in valuation allowance
 
14,888
 
 
7,336
 
 
3,362
 
State income taxes
 
809
 
 
305
 
 
192
 
Other, net
 
(6
) 
 
(302
) 
 
(236
) 
Provision for income taxes
$
803
 
$
3
 
$
202
 
The components of certainnet deferred taxes and the related valuation allowance as of September 24, 2005 and September 25, 2004 using current enacted tax rates are as follows:

 
September 24,
2005
September 25,
2004
Deferred tax assets:
 
 
 
 
 
 
Net operating loss carryforwards
$
45,524
 
$
30,409
 
Allowance for doubtful accounts
 
1,946
 
 
1,097
 
Inventory
 
531
 
 
860
 
Amortization of intangible assets
 
557
 
 
531
 
Depreciation
 
48
 
 
—
 
Derivative instruments
 
1,777
 
 
301
 
Severance and other exit costs
 
375
 
 
473
 
Other accruals
 
740
 
 
1,301
 
Total deferred tax assets
 
51,498
 
 
34,972
 
Deferred tax liabilities:
 
 
 
 
 
 
Depreciation
 
—
 
 
261
 
Total deferred tax liabilities
 
—
 
 
261
 
Net deferred tax assets
 
51,498
 
 
34,711
 
Valuation allowance
 
(51,498
) 
 
(34,711
) 
Net deferred tax assets
$
—
 
$
—
 
In order to fully realize the net deferred tax assets, during the period.

5.   SELECTED BALANCE SHEET INFORMATION

Inventories consistCorporate Entities will need to generate future taxable income. A valuation allowance is provided when it is more likely than not that some portion or all of the following:

                                    September 27,            September 28,
                                         2003                    2002
                                 ---------------------    --------------------

      Propane                                $ 34,033                $ 28,799
      Appliances                                7,477                   7,568
                                 ---------------------    --------------------
                                             $ 41,510                $ 36,367
                                 =====================    ====================



The Partnership  enters into contracts to buy propane for supply purposes.  Such
contracts generally have one year terms subject to annual renewal,  with propane
costs  based on  market  prices  atdeferred tax assets will not be realized. Based upon the datelevel of delivery.  Property,  plantcurrent taxable income and equipment consistprojections of future taxable income of the following:



                                                         September 27,            September 28,
                                                              2003                    2002
                                                      ---------------------    --------------------


      Land and improvements                                       $ 27,134                $ 28,043
      Buildings and improvements                                    59,543                  57,245
      Transportation equipment                                      36,677                  46,192
      Storage facilities                                            59,554                  59,069
      Equipment, primarily tanks and cylinders                     370,494                 362,001
      Computer software                                             12,122                   3,806
      Construction in progress                                       2,531                  11,935
                                                      ---------------------    --------------------
                                                                   568,055                 568,291
      Less: accumulated depreciation                               255,265                 237,282
                                                      ---------------------    --------------------
                                                                 $ 312,790               $ 331,009
                                                      =====================    ====================




Depreciation  expenseCorporate Entities over the periods which deferred tax assets are expected to be deductible, management believes that it is more likely than not that the Partnership will not realize the full benefit of its deferred tax assets as of September 24, 2005 and September 25, 2004. Of the total valuation allowance as of September 24, 2005, $21,519 was established through purchase accounting for the years endedAgway Acquisition in December 2003. To the extent that a reversal of a portion of the valuation allowance is warranted in the future, the reversal will be recorded as a reduction of goodwill with no impact on the deferred tax provision.
As of September 27, 2003, September 28, 200224, 2005, the Partnership had tax loss carryforwards for federal income tax reporting purposes of approximately $124,639 which are available to offset future federal taxable income and September 29, 2001 amounted to $27,097, $27,857expire between 2011 and $28,517, respectively.

6.   LONG-TERM BORROWINGS

Long-term2025.

9.    Short-Term and Long-Term Borrowings
Short-term and long-term borrowings consist of the following:



                                      F-14

 
September 24,
2005
September 25,
2004
Senior Notes, 6.875%, due December 15, 2013, net of unamortized discount of $1,930
$
423,070
 
$
175,000
 
Term Loan, 6.29% to 7.16%, due March 31, 2010
 
125,000
 
 
—
 
Senior Notes, 7.54%, redeemed March 31, 2005
 
—
 
 
297,500
 
Senior Notes, 7.37%, redeemed March 31, 2005
 
—
 
 
42,500
 
Note payable , 8%, due in annual installments through 2006
 
475
 
 
915
 
Short-term borrowings under Revolving Credit Agreement
 
26,750
 
 
—
 
 
 
575,295
 
 
515,915
 
Less: current portion
 
27,225
 
 
42,940
 
 
$
548,070
 
$
472,975
 
On March 31, 2005, the Partnership completed a refinancing (the ‘‘Refinancing’’) of all of the outstanding principal amount of the Operating Partnership’s 1996 Senior Notes and the 2002 Senior Notes (as defined below). Under the Refinancing, the Partnership issued $250,000 of additional notes under the indenture governing the 2003 Senior Notes (see below) and received proceeds of approximately $246,875, net of a $2,047 discount on sale and related underwriter fees. In addition, the Operating Partnership entered into an amendment to its Revolving Credit Agreement (see below) to provide, among other things, for a five-year $125,000 term loan facility (the ‘‘Term Loan’’). The total net proceeds of approximately $371,875 from the Refinancing, together with cash of approximately $7,335, were used to prepay $297,500 outstanding principal amount of 1996 Senior Notes and $42,500 outstanding principal amount of 2002 Senior Notes (collectively, the ‘‘Redeemed Notes’’), including a prepayment premium of approximately $31,980, interest accrued on the Redeemed Notes of approximately $6,391 from the last interest payment date through the date of redemption and related costs associated with the Refinancing.
The Redeemed Notes required an annual principal repayment of $42,500 through 2012. The Refinancing replaced the annual cash requirement for principal amortization with the $125,000 five-year Term Loan due 2010 and the $250,000 of senior notes due 2013 issued under the indenture governing the 2003 Senior Notes, significantly extending the Partnership’s debt maturities and eliminating refinancing risk associated with the amortization of the Redeemed Notes. The Refinancing is expected to reduce the Partnership’s annual interest expense for at least the next five years. The Partnership recorded a one-time charge of approximately $36,242 for the year ended September 24, 2005 as a result of the Refinancing to reflect the loss on debt extinguishment associated with the prepayment premium and the write-off of $4,262 of unamortized bond issuance costs associated with retirement of the Redeemed Notes.
On December 23, 2003, the Partnership and its subsidiary Suburban Energy Finance Corporation issued $175,000 aggregate principal amount of Senior Notes (the ‘‘2003 Senior Notes’’) with an annual interest rate of 6.875%. On March 31, 2005, in conjunction with the Refinancing, the Partnership and Suburban Energy Finance Corporation issued $250,000 additional senior notes under the indenture governing the 2003 Senior Notes through a debt offering under Rule 144A and Regulation S of the Securities Act of 1933. On September 23, 2005, pursuant to a registration rights agreement, the Partnership exchanged the $250,000 senior notes that were issued on March 31, 2005 in the Refinancing with $250,000 senior notes that were registered with the SEC. The Partnership’s obligations under the 2003 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 2003 Senior Notes are structurally subordinated to, which means they rank effectively behind, any senior debt and other liabilities of the Operating Partnership. The 2003 Senior Notes mature on December 15, 2013, and require semi-annual interest payments that began on June 15, 2004. The Partnership is permitted to redeem some or all of the 2003 Senior Notes any time on or after December 15, 2008, at redemption prices specified in the indenture governing the 2003 Senior Notes. In addition, in the event of a change of control of the Partnership, as defined in the indenture governing the 2003 Senior Notes, the Partnership must offer to repurchase the



                                                                               September 27,            September 28,
                                                                                    2003                    2002
                                                                            ---------------------    --------------------


      Senior Notes, 7.54%, due June 30, 2011                                           $ 340,000               $ 382,500
      Senior Notes, 7.37%, due June 30, 2012                                              42,500                  42,500
      Note payable, 8%, due in annual installments through 2006                            1,322                   1,698
      Amounts outstanding under Acquisition Facility
           of Revolving Credit Agreement                                                       -                  46,000
      Other long-term liabilities                                                              4                      71
                                                                            ---------------------    --------------------
                                                                                         383,826                 472,769
      Less: current portion                                                               42,911                  88,939
                                                                            ---------------------    --------------------
                                                                                       $ 340,915               $ 383,830
                                                                            =====================    ====================

notes at 101% of the principal amount repurchased, if the holders of the notes exercise the right of repurchase. The 2003 Senior Notes contain certain restrictions applicable to the Partnership and certain of its subsidiaries with respect to (i) the incurrence of additional indebtedness; and, (ii) liens, investments, guarantees, loans, advances, payments, mergers, consolidations, distributions, sales of assets and other transactions.
On March 5, 1996, pursuant to a Senior Note  Agreement  (the "1996  Senior Note
Agreement")senior note agreement, the Operating Partnership issued $425,000 of Senior Notes (the "1996‘‘1996 Senior Notes"Notes’’) with an annual interest rate of 7.54%. The Operating
Partnership's obligations under the 1996 Senior Note Agreement are unsecured and
rank on an equal and ratable basis with the Operating Partnership's  obligations
under  the  2002  Senior  Note  Agreement  and the  Revolving  Credit  Agreement
discussed  below.  The 1996 Senior Notes willwere scheduled to mature June 30, 2011, and require
semiannualrequired semi-annual interest payments which commenced June 30, 1996. Theand obligated the Operating Partnership to repay the principal on the 1996 Senior Note
Agreement  requires  that the  principal  be paidNotes in equal annual paymentsinstallments of $42,500 startingwhich started on July 1, 2002. Pursuant toThe first annual principal payment was refinanced on July 1, 2002 and the Partnership's  intentionsecond and third annual principal payments were made on July 1, 2003 and 2004. The remaining outstanding principal amount of the 1996 Senior Notes of $297,500 was redeemed in full on March 31, 2005. On July 1, 2002, the Operating Partnership received $42,500 from the issuance of 7.37% Senior Notes due June 30, 2012 (the ‘‘2002 Senior Notes’’) in order to refinance the first annual principal payment of $42,500 under the 1996 Senior Notes. The 2002 Senior Notes were redeemed in full on March 31, 2005.
On October 20, 2004, the Operating Partnership executed on April 19, 2002 a Note
Purchasethe Third Amended and Restated Credit Agreement for the private  placement of 10-year 7.37% Senior Notes due
June  30,  2012  (the "2002  Senior  Note  Agreement").  On July 1,  2002,  the
Partnership  received  $42,500  from the  issuance of the Senior Notes under the
2002 Senior Note Agreement and used the funds to pay the first annual  principal
payment of $42,500  due under the 1996  Senior  Note  Agreement.  The  Operating
Partnership's obligations under the 2002 Senior Note Agreement are unsecured and
rank on an equal and ratable basis with the Operating Partnership's  obligations
under the 1996 Senior Note Agreement and the ‘‘Revolving Credit Agreement.  Rather
than refinance the second annual principal payment of $42,500 due under the 1996
Senior Note Agreement,  the Partnership  elected to repay this principal payment
on June 30, 2003.

The Partnership's previous Revolving Credit Agreement,  which provided a $75,000
working capital facility and a $50,000  acquisition  facility,  was scheduled to
mature on May 31, 2003.  On May 8, 2003,  the  Partnership  completedAgreement’’), replacing the Second Amended and Restated Credit Agreement (the "Revolving  Credit  Agreement") which extendswould have expired in May 2006. On March 31, 2005 in conjunction with the previousRefinancing, the Operating Partnership executed the first amendment to the Revolving Credit Agreement until  Mayto provide, among other things, for the Term Loan due March 31, 2006.2010. The Revolving Credit Agreement, providesas amended, was scheduled to expire on October 20, 2008 and in addition to the Term Loan provided available credit of $150,000 in the form of a $75,000 revolving working capital facility and a separate $75,000 letter of credit facility. On August 26, 2005, the Partnership completed the second amendment to the Revolving Credit Agreement which, among other things, extended the maturity date to March 31, 2010 to coincide with the maturity of the Term Loan, eliminated the stand-alone $75,000 letter of credit facility and combined that credit with the existing revolving working capital facility and increased the available revolving borrowing capacity by an acquisitionadditional $25,000, thereby raising the amount of the working capital facility to $175,000 (including the $75,000 from the former stand-alone letter of $25,000. credit facility). The increased borrowing capacity will provide additional financial flexibility to support the Partnership’s growth strategies, particularly in the current high commodity price environment. All other terms and conditions under the Revolving Credit Agreement remained the same.
Borrowings under the Revolving Credit Agreement, including the Term Loan, bear interest at a rate based upon either LIBOR plus a margin,or Wachovia National Bank's prime rate, plus, in each case, the applicable margin or the Federal Funds rate plus 1/2 of 1%. An annual facility fee ranging from .375%0.375% to .50%0.50%, based upon certain financial tests, is payable quarterly whether or not borrowings occur. These terms are  substantially the
same as the termsAs of September 24, 2005, there was $26,750 outstanding under the previous  Revolving Credit Agreement.  In connection
with the completionworking capital facility of the Revolving Credit Agreement that was used to fund working capital requirements.
In connection with the Term Loan, the Operating Partnership repaid
$21,000also entered into an interest rate swap contract with a notional amount of outstanding borrowings under$125,000 with the issuing lender. Effective March 31, 2005 through March 31, 2010, the Operating Partnership will pay a fixed interest rate of 4.66% to the issuing lender on notional principal amount of $125,000, effectively fixing the LIBOR portion of the interest rate at 4.66%. In return, the issuing lender will pay to the Operating Partnership a floating rate, namely LIBOR, on the same notional principal amount. The applicable margin above LIBOR, as defined in the Revolving Credit Agreement.  On June
19, 2003, the Partnership  repaid the remaining  outstanding  balanceAgreement, is not included in, and will be paid in addition to this fixed interest rate of $25,000
under the  Revolving  Credit  Agreement.  As of September 27, 2003 there were no
borrowings outstanding under the Revolving Credit Agreement. As of September 28,
2002,  $46,000 was outstanding  under the  acquisition  facility4.66%. The fair value of the previousinterest rate swap amounted to $1,293 at September 24, 2005 and is included in other liabilities with a corresponding amount included within OCI.
The Revolving Credit Agreement and there  were no  borrowings  under the working
capital facility.

As of September 27, 2003 the  Partnership  had  borrowing  capacity of $75,000
under the working capital facility and $25,000 under the acquisition facility of
the Revolving  Credit  Agreement.  The weighted average interest rate associated
with borrowings under the Revolving Credit Agreement was 3.42%,  3.67% and 6.98%
for fiscal 2003, 2002 and 2001, respectively.



                                      F-15


The 1996 Senior Note Agreement, the 2002 Senior Note Agreement and the Revolving
Credit  AgreementNotes both contain various restrictive and affirmative covenants applicable to the Operating Partnership;Partnership and the Partnership, respectively, including (a)  maintenance of certain
financial tests,  including,  but not limited to, a leverage ratio less than 5.0
to 1 and an interest  coverage ratio in excess of 2.50 to 1, (b)(i) restrictions on the incurrence of additional indebtedness, and (c)(ii) restrictions on certain liens, investments, guarantees, loans, advances, payments, mergers, consolidations, distributions, sales of assets and other transactions. During
December  2002,As a result of the Refinancing, the Partnership amendedeliminated the 1996 Senior Note Agreementrequirement to (i)
eliminatemaintain a leverage ratio and an adjusted net worth  financial  test to be consistentinterest coverage ratio associated with the 2002Redeemed Notes without

adding comparable financial covenants under the 2003 Senior Note  Agreement  andNotes. Under the Revolving Credit Agreement, and (ii)  requirethe Operating Partnership is required to maintain a leverage ratio of less than 5.254.0 to 1. In addition, the Operating Partnership is required to maintain an interest coverage ratio of greater than 2.5 to 1 when  the  underfunded  portion  of the
Partnership's  pension  obligations is used in the computation of the ratio.on a consolidated basis. The Partnership wasand the Operating Partnership were in compliance with all covenants and terms of the 19962003 Senior Note  Agreement,  the  2002  Senior  Note  AgreementNotes and the Revolving Credit Agreement as of September 27, 2003.

24, 2005.
Debt origination costs representing the costs incurred in connection with the placement of, and the subsequent amendment to, the Partnership'sPartnership’s Senior Notes and Revolving Credit Agreement were capitalized within other assets and are being amortized on a straight-line basis over the term of the respective debt agreements. Other assets at September 27, 200324, 2005 and September 28, 200225, 2004 include debt origination costs with a net carrying amount of $5,960$8,848 and $5,926,$10,506, respectively. Aggregate amortization expense related to deferred debt origination costs included within interest expense for the years ended September 24, 2005, September 25, 2004 and September 27, 2003 September  28, 2002was $1,514, $1,421 and September  29, 2001 was $1,291, $1,338 and
$2,006, respectively.
The aggregate amounts of long-term debt maturities subsequent to September 27,
200324, 2005 are as follows: 2004 - $42,911;  2005 - $42,940;  2006 - $42,975;– $27,225; 2007 -
$42,500;– $0; 2008 - $42,500;– $0; 2009 – $0; and, thereafter - $170,000.




                                      F-16




7.   RESTRICTED UNIT PLANS

thereafter-$548,070.
10.    Restricted Unit Plans
In November 2000, the Partnership adopted the Suburban Propane Partners, L.P. 2000 Restricted Unit Plan (the "2000‘‘2000 Restricted Unit Plan"Plan’’) which authorizes the issuance of Common Units with an aggregate value of $10,000 (487,804 Common Units valued at the initial public offering price of $20.50 per unit) to executives, managers and other employees of the Partnership. Restricted Units issued under the 2000 Restricted Unit Plan vest over time with 25% of the Common Units vesting at the end of each of the third and fourth anniversaries of the issuance date and the remaining 50% of the Common Units vesting at the end of the fifth anniversary of the issuance date. The 2000 Restricted Unit Plan participants are not eligible to receive quarterly distributions or vote their respective Restricted Units until vested. Restrictions also limit the sale or transfer of the units during the restricted periods. The value of the Restricted Unit is established by the market price of the Common Unit at the date of grant. Restricted Units are subject to forfeiture in certain circumstances as defined in the 2000 Restricted Unit Plan.
Following is a summary of activity in the 2000 Restricted Unit Plan:

 
Units
Weighted Average
Grant Date
Fair Value Per Unit
Outstanding September 28, 2002
 
111,986
 
$
24.19
 
Awarded
 
44,288
 
 
27.74
 
Forfeited
 
(5,726
) 
 
(20.66
) 
Outstanding September 27, 2003
 
150,548
 
$
25.37
 
Awarded
 
115,730
 
 
30.64
 
Forfeited
 
(27,560
) 
 
(25.46
) 
Issued
 
(10,605
) 
 
(20.66
) 
Outstanding September 25, 2004
 
228,113
 
$
28.25
 
Awarded
 
94,239
 
 
33.20
 
Forfeited
 
(26,282
) 
 
(30.92
) 
Issued
 
(22,292
) 
 
(24.77
) 
Outstanding September 24, 2005
 
273,778
 
$
29.17
 
During the years ended September 24, 2005, September 25, 2004 and September 27, 2003, the Partnership amortized $1,806, $1,171 and $863, respectively, of unearned compensation associated with the 2000 Restricted Unit Plan, net of forfeitures.

11.    Compensation Deferral Plan
In 1996, the Partnership adopted the 1996 Restricted Unit Award Plan (the "1996‘‘1996 Restricted Unit Plan"Plan’’) which authorized the issuance of Common Units with an aggregate value of $15,000 (731,707 Common Units valued at the initial public offering price of $20.50 per unit) to executives, managers and Elected Supervisors of the Partnership. According to the change of control provisions of the 1996 Restricted Unit Plan, all outstanding Restricted Units on the closing date of the Recapitalization in May 1999 vested and converted into Common Units. At the date of the Recapitalization, individuals who became members of the General Partner surrendered receipt of 553,896 Common Units, representing substantially all of their vested Restricted Units, in exchange for the right to participate in a new  compensation  deferral  plan of the  Partnership  and the
Operating Partnership (see Note 8, Compensation Deferral Plan).

Following is a summary of activity in the Restricted Unit Plans:



                                                                      Weighted Average
                                                                      Grant Date Fair
                                                   Units               Value Per Unit
                                             ------------------    -----------------------


      OUTSTANDING SEPTEMBER 29, 2001                    48,960                    $ 20.66
      Awarded                                           66,298                      26.63
      Forfeited                                         (3,272)                    (20.66)
                                             ------------------    -----------------------
      OUTSTANDING SEPTEMBER 28, 2002                   111,986                      24.19
      Awarded                                           44,288                      27.74
      Forfeited                                         (5,726)                    (20.66)
                                             ------------------    -----------------------
      OUTSTANDING SEPTEMBER 27, 2003                   150,548                    $ 25.37
                                             ==================    =======================




During the years ended September 27, 2003,  September 28, 2002 and September 29,
2001, the Partnership amortized $863, $603 and $228,  respectively,  of unearned
compensation associated with the 2000 Restricted Unit Plan, net of forfeitures.

8.   COMPENSATION DEFERRAL PLAN

Plan.
Effective May 26, 1999, in connection with the Partnership'sPartnership’s Recapitalization, the Partnership adopted the Compensation Deferral Plan (the "Deferral  Plan"‘‘Deferral Plan’’) which provided for eligible employees of the Partnership to defer receipt of all or a portion of the vested Restricted Units granted under the 1996 Restricted Unit Plan in exchange for the right to participate in and receive certain payments under the Deferral Plan.  The  Deferral  Plan also  allows  eligible
employees  to  defer  receipt  of  Common  Units  subsequently  granted  by  the
Partnership under the Deferral Plan. The Partnership  granted Common Units under
the Deferral Plan only once during  fiscal 2000.  The Common Units granted under
the  Deferral  Plan  and  related  Partnership  distributions  were  subject  to
forfeiture  provisions such that (a) 100% of the Common Units would be forfeited
if the grantee ceased to be



                                      F-17


employed prior to the third anniversary of the  Recapitalization,  (b) 75% would
be forfeited if the grantee  ceased to be employed  after the third  anniversary
but prior to the fourth anniversary of the Recapitalization and (c) 50% would be
forfeited if the grantee ceased to be employed after the fourth  anniversary but
prior  to  the  fifth  anniversary  of  the  Recapitalization.   All  forfeiture
provisions  lapsed in August of 2002.  Upon  issuance of Common  Units under the
Deferral  Plan,  unearned  compensation  equivalent  to the market  value of the
Common Units at the date of grant is  recorded.  The  unearned  compensation  is
amortized in accordance  with the Deferral  Plan's  forfeiture  provisions.  The
unamortized  unearned  compensation  value is shown as a reduction  of partners'
capital in the accompanying consolidated balance sheets. Senior management of the Partnership surrendered 553,896 Common Units, at the date of the Recapitalization, into the Deferral Plan. The Partnership deposited into a trust on behalf of these individuals 553,896 Common Units. During fiscal 2000, certain members of management deferred receipt of an additional 42,925 Common Units granted under the Deferral Plan, with a fair value of $19.91 per Common Unit at the date of grant, by depositing the units into the trust.
In January 2003, in accordance with the terms of the Deferral Plan, 297,310 of the deferred units were distributed to the members of the General Partner and may now be voted and/orare freely traded. Certain members of management elected to further defer receipt of their deferred units (totaling 299,511 Common Units) until January 2008. During fiscal 2005, an additional 3,272 Common Units with a fair value of $109 were deposited into the Deferral Plan on behalf of individuals electing to defer receipt of Common Units vested under the 2000 Restricted Unit Plan. During fiscal 2004, 5,310 Common Units were deposited into the Deferral Plan and 7,490 Common Units were distributed out of the Deferral Plan, resulting in a net reduction of $17 in the deferred compensation liability and a corresponding reduction in the value of Common Units held in trust, both within partners’ capital.
As of September 27, 200324, 2005 and September 28, 2002,25, 2004, there were 299,511300,603 and 596,821297,331 Common Units, respectively, held in trust under the Deferral Plan. The value of the Common Units deposited in the trust and the related deferred compensation liability in the amount of $5,795$5,887 and $11,567$5,778 as of September 27, 200324, 2005 and September 28, 2002,25, 2004, respectively, are reflected in the accompanying condensed  consolidated balance sheets as components of partners'partners’ capital. DuringOn November 2, 2005, the second quarter of fiscal 2003, the  Partnership  recorded a
$5,772  reduction in the deferred  compensation  liability  and a  corresponding
reduction  in the valueDeferral Plan was amended to, among other things, disallow any additional deferrals of Common Units held ininto the trust both  within  partners'
capital, relatedsubsequent to December 31, 2004.
12.    Employee Benefit Plans
Defined Contribution Plan. The Partnership has a defined contribution plan covering most employees. Employer contributions and costs are a percent of the participating employees’ compensation, subject to the valueachievement of Common Units distributed fromannual performance targets of the trust.

9.   PENSION PLANS AND OTHER POSTRETIREMENT BENEFITS

DEFINED  BENEFIT PLAN.Partnership. These contributions totaled $183, $1,261 and $1,305 for the years ended September 24, 2005, September 25, 2004 and September 27, 2003, respectively.
Pension Benefits and Retiree Health and Life Benefits.
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 noncontributory defined benefit pension plan to provide for a cash balance format as compared to a final average pay format which was in effect prior to January 1, 1998. The cash balance format is designed to evenly spread the growth of a participant'sparticipant’s earned retirement benefit throughout his/her career as compared to the final average pay format, under which a greater portion of employee benefits were earned toward the latter stages of one'sone’s career. Effective January 1, 2000, participation in the noncontributory defined benefit pension plan was

limited to eligible participants in existence 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 will now receive interest credits only toward their ultimate retirement benefit.
Contributions, as needed, are made to a trust maintained by the Partnership. The trust'strust’s assets consist primarily of common stock,domestic and international mutual funds, as well as fixed income securities and
real estate.securities. 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 which may be determined from time to time. There were no minimum funding requirements for the defined benefit pension plan for fiscal 2003,  20022005, 2004 or 2001.2003. Recently, there has been increased scrutiny over cash balance defined benefit pension plans and resulting litigation regarding such plans sponsored by other companies. These developments may result in legislative changes impacting cash balance defined benefit pension plans in the future. While no such legislative changes have been adopted, and if adopted the impact on the Partnership'sPartnership’s defined benefit pension plan is not certain, there can be no assurances that future legislative developments will not have an adverse effect on the Partnership'sPartnership’s results of operations or cash flows.



                                      F-18




DEFINED  CONTRIBUTION  PLAN. The  Partnership  has a defined  contribution  plan
covering most employees.  Employer  contributions
Retiree Health and costs are a percent of the
participating  employees'  compensation,  subject to the  achievement  of annual
performance targets of the Partnership. These contributions totaled $1,305, $947
and $4,560 for the years  ended  September  27,  2003,  September  28,  2002 and
September 29, 2001, respectively.

POSTRETIREMENT   BENEFITS  OTHER  THAN  PENSIONS.Life Benefits. The Partnership provides postretirement health care and life insurance benefits for certain retired employees. Partnership employees hired prior to July 1993 and that retired prior to March 1998 are eligible for such benefits if they reached a specified retirement age while working for the Partnership. Effective January 1, 2000, the Partnership terminated its postretirement benefit plan for all eligible employees retiring after March 1, 1998. All active and eligible employees who were to receive benefits under the postretirement plan subsequent to March 1, 1998, were provided a settlement by increasing their accumulated benefits under the cash balance pension plan noted above. The Partnership  does not fund itsPartnership’s postretirement health care and life insurance benefit plans.plans are unfunded.
Projected Benefit Obligation, Fair Value of Plan Assets and Funded Status. The following table  providestables provide a reconciliation of the changes in the benefit obligations and the fair value of the plan assets for each of the years ended September 27, 200324, 2005 and September 28, 200225, 2004 and a statement of the funded status for both years:


                                                                                                                    Other
                                                                 Pension Benefits                      Postretirement Benefits
                                                     ---------------------------------------  -------------------------------------
                                                           2003                 2002                2003                 2002
                                                     ------------------   ------------------  ------------------   ----------------
RECONCILIATION OF BENEFIT OBLIGATIONS:

Benefit obligation at beginning of year                  $ 174,698            $ 167,187            $ 41,136             $ 37,559
Service cost                                                   629                4,445                  17                   16
Interest cost                                               11,376               11,581               2,641                2,574
Actuarial loss/(gain)                                        4,066                8,700              (4,115)               3,852
Curtailment gain                                                 -               (1,812)                  -                    -
Benefits paid                                              (16,593)             (15,403)             (2,497)              (2,865)
                                                     --------------       ------------------  ------------------   ----------------
Benefit obligation at end of year                        $ 174,176            $ 174,698            $ 37,182             $ 41,136
                                                     ==============       ==================  ==================   ================


RECONCILIATION OF FAIR VALUE OF PLAN ASSETS:
Fair value of plan assets at beginning of year           $ 121,534            $ 143,116                 $ -                  $ -
Actual return on plan assets                                17,099               (6,179)                  -                    -
Employer contributions                                      10,000                    -               2,497                2,865
Benefits paid                                              (16,593)             (15,403)             (2,497)              (2,865)
                                                     --------------       ------------------  ------------------   ----------------
Fair value of plan assets at end of year                 $ 132,040            $ 121,534                 $ -                  $ -
                                                     ==============       ==================  ==================   ================


FUNDED STATUS:
Funded status at end of year                             $ (42,136)           $ (53,164)          $ (37,182)           $ (41,136)
Unrecognized prior service cost                                  -                    -              (2,306)              (3,026)
Net unrecognized actuarial losses                           80,139               85,077               3,603                8,060
Accumulated other comprehensive (loss)                     (80,139)             (85,077)                  -                    -
                                                     --------------       ------------------  ------------------   ----------------
Accrued benefit liability                                  (42,136)             (53,164)            (35,885)             (36,102)
Less: Current portion                                            -                    -               2,450                2,818
                                                     --------------       ------------------  ------------------   ----------------
Non-current benefit liability                            $ (42,136)           $ (53,164)          $ (33,435)           $ (33,284)
                                                     ==============       ==================  ==================   ================
years using an end of year measurement date:

 
Pension Benefits
Retiree Health and Life
Benefits
 
2005
2004
2005
2004
Reconciliation of benefit obligations:
 
 
 
 
 
 
 
 
 
 
 
 
Benefit obligation at beginning of year
$
177,056
 
$
174,176
 
$
35,506
 
$
37,182
 
Service cost
 
—
 
 
—
 
 
18
 
 
18
 
Interest cost
 
9,107
 
 
9,765
 
 
1,783
 
 
2,138
 
Actuarial loss/(gain)
 
12,025
 
 
13,415
 
 
(1,377
) 
 
(956
) 
Settlement payments
 
(8,251
) 
 
(12,288
) 
 
—
 
 
—
 
Benefits paid
 
(7,858
) 
 
(8,012
) 
 
(2,257
) 
 
(2,876
) 
Benefit obligation at end of year
$
182,079
 
$
177,056
 
$
33,673
 
$
35,506
 
Reconciliation of fair value of plan assets:
 
 
 
 
 
 
 
 
 
 
 
 
Fair value of plan assets at beginning of year
$
142,021
 
$
132,040
 
$
—
 
$
—
 
Actual return on plan assets
 
15,961
 
 
15,181
 
 
—
 
 
—
 
Employer contributions
 
—
 
 
15,100
 
 
2,257
 
 
2,876
 
Settlement payments
 
(8,251
) 
 
(12,288
) 
 
—
 
 
—
 
Benefits paid
 
(7,858
) 
 
(8,012
) 
 
(2,257
) 
 
(2,876
) 
Fair value of plan assets at end of year
$
141,873
 
$
142,021
 
$
—
 
$
—
 


 
Pension Benefits
Retiree Health and Life
Benefits
 
2005
2004
2005
2004
Reconciliation of benefit obligations:
 
 
 
 
 
 
 
 
 
 
 
 
Funded status:
 
 
 
 
 
 
 
 
 
 
 
 
Funded status at end of year
$
(40,206
) 
$
(35,035
) 
$
(33,673
) 
$
(35,506
) 
Unrecognized prior service cost
 
—
 
 
—
 
 
(865
) 
 
(1,585
) 
Net unrecognized actuarial losses
 
75,656
 
 
76,898
 
 
1,269
 
 
2,646
 
Net amount recognized at end of year
$
35,450
 
$
41,863
 
$
(33,269
) 
$
(34,445
) 
Amounts recognized in consolidated balance sheets consist of:
 
 
 
 
 
 
 
 
 
 
 
 
Prepaid benefit cost
$
—
 
$
—
 
$
—
 
$
—
 
Accrued benefit liability
 
(40,206
) 
 
(35,035
) 
 
(33,269
) 
 
(34,445
) 
Accumulated other comprehensive (loss)
 
75,656
 
 
76,898
 
 
—
 
 
—
 
Net amount recognized at end of year
$
35,450
 
$
41,863
 
 
(33,269
) 
 
(34,445
) 
Less: Current portion
 
 
 
 
 
 
 
2,211
 
 
2,829
 
Non-current benefit liability
 
 
 
 
 
 
$
(31,058
) 
$
(31,616
) 
The funded statuschange in accumulated other comprehensive (loss) attributable to a favorable movement in the minimum pension liability for the year ended September 24, 2005 was $1,242. During fiscal 2004, lump sum benefit payments to either terminated or retired individuals amounted to $12,288. The lump sum benefit payments exceeded the interest cost component of the Partnership'snet periodic pension cost of $9,765 and, as a result, the Partnership was required to recognize a non-cash settlement charge of $5,337 during the fourth quarter of fiscal 2004, pursuant to SFAS 88 ‘‘Employers’ Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination Benefits.’’ The non-cash charge was required to accelerate recognition of a portion of cumulative unrecognized losses in the defined benefit pension plan continuesplan. These unrecognized losses were previously accumulated as a reduction to be impacted by the turbulentpartners’ capital markets  affecting the market value(cumulative reduction of our
pension asset portfolio and by the low interest rate  environment  affecting the
actuarial value$80,139 as of the projected benefit  obligations.  In an effortend of the 2003 fiscal year) and were being amortized to minimize
future increasesexpense as part of the Partnership’s net periodic pension cost in the pension plan



                                      F-19


benefit obligations, theaccordance with SFAS 87 ‘‘Employers’ Accounting for Pensions.’’
The Partnership adopted an amendmentmade voluntary contributions of $15,100 and $10,000 to the defined benefit pension plan which ceased future service credits effective January 1, 2003. This
amendment  resulted  in a  curtailment  gain of $1,093  included  within the net
periodic  pension  cost for the year ended  September  28,  2002.  Additionally,
during fiscal 2004 and 2003, the Partnership made a voluntary  contribution of $10,000 to
the plan,respectively, thereby taking proactive steps to improve the funded status of the plan and reduce the minimum pension liability.
Plan Asset Allocation. The following table presents the allocation of assets held in trust:

 
September 24, 2005
Actual Allocation
September 25, 2004
Actual Allocation
Common stock
 
42
% 
 
42
% 
Corporate bonds
 
0
% 
 
8
% 
Government bonds
 
0
% 
 
12
% 
Mutual funds
 
55
% 
 
30
% 
Cash and cash equiva lents
 
3
% 
 
8
% 
 
 
100
% 
 
100
% 
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 seven members of management. The investment objective related to the defined benefit pension plan assets is to maximize total return with strong emphasis on the preservation of capital. The target asset mix is as follows: (i) the domestic equity portfolio should range between 40% and 60%; (ii) the international equity portfolio should range between 5% and 25%; and, (iii) the fixed income portion of the portfolio should range between 20% and 50%.

Projected Contributions and Benefit Payments. There are no projected minimum funding requirements under the Partnership’s defined benefit pension plan for fiscal 2006. The Partnership estimates that retiree health and life benefit contributions will be $2,959 for fiscal 2006. Estimated future benefit payments for both pension and retiree health and life benefits are as follows:

Fiscal Year
Pension
Benefits
Retiree Health
and Life Benefits
2006
$
17,940
 
$
2,959
 
2007
 
14,695
 
 
2,921
 
2008
 
14,725
 
 
2,868
 
2009
 
14,974
 
 
2,810
 
2010
 
14,838
 
 
2,734
 
2011 through 2015
 
68,985
 
 
12,950
 
Effect on Operations. The following table provides the components of net periodic benefitpension costs included in operating expenses for the years ended September 27, 200324, 2005, September 25, 2004 and September 28, 2002:


                                                                                                       Other
                                                     Pension Benefits                         Postretirement Benefits
                                           -------------------------------------         ---------------------------------
                                              2003                 2002                  2003                  2002
                                             ------------       ---------------       ---------------      ---------------

      Service cost                                 $ 629               $ 4,445                  $ 17                  $ 16
      Interest cost                               11,376                11,581                 2,641                 2,574
      Expected return on plan assets             (12,161)              (14,974)                    -                     -
      Amortization of prior service cost               -                  (210)                 (720)                 (720)
      Curtailment gain                                 -                (1,093)                    -                     -
      Recognized net actuarial loss                4,066                 1,912                   342                    41
                                             ------------       ---------------       ---------------      ---------------
      Net periodic benefit cost                  $ 3,910               $ 1,661               $ 2,280               $ 1,911
                                             ============       ===============       ===============      ===============



Pension benefit expense was $113 (consisting of service cost of $5,024, interest
cost of $11,034,  expected return on plan assets of $15,735 and  amortization of
prior service cost of $210) and other  postretirement  benefit costs were $2,341
(consisting of service cost of $123,  interest cost of $2,794,  amortization  of
prior service cost of $721 and  recognized  net actuarial  loss of $145) for the
year ended  September 29, 2001.27, 2003:

 
Pension Benefits
Retiree Health and Life Benefits
 
2005
2004
2003
2005
2004
2003
Service cost
$
—
 
$
—
 
$
629
 
$
18
 
$
18
 
$
17
 
Interest cost
 
9,107
 
 
9,765
 
 
11,376
 
 
1,783
 
 
2,138
 
 
2,641
 
Expected return on plan assets
 
(9,335
) 
 
(9,848
) 
 
(12,161
) 
 
—
 
 
—
 
 
—
 
Amortization of prior service cost
 
—
 
 
—
 
 
—
 
 
(720
) 
 
(720
) 
 
(720
) 
Settlement charge
 
—
 
 
5,337
 
 
—
 
 
—
 
 
—
 
 
—
 
Recognized net actuarial loss
 
6,641
 
 
5,986
 
 
4,066
 
 
—
 
 
—
 
 
342
 
Net periodic benefit costs
$
6,413
 
$
11,240
 
$
3,910
 
$
1,081
 
$
1,436
 
$
2,280
 
Actuarial Assumptions. The assumptions used in the measurement of the Partnership'sPartnership’s benefit obligations as of September 24, 2005 and September 25, 2004 are shown in the following table:


                                                                                                       Other
                                                     Pension Benefits                         Postretirement Benefits
                                           -------------------------------------         ---------------------------------
                                               September             September             September             September
                                                27, 2003             28, 2002              27, 2003              28, 2002
                                           ---------------      ----------------         --------------       ------------

Weighted-average discount rate                   6.00%                 6.75%                 6.00%                 6.75%
Average rate of compensation increase              n/a                 3.50%                     -                     -
Weighted-average expected long-term
     rate of return on plan assets               7.75%                 8.50%                     -                     -


 
Pension Benefits
Retiree Health and Life
Benefits
 
2005
2004
2005
2004
Weighted-average discount rate
 
5.25
% 
 
5.50
% 
 
5.25
% 
 
5.25
% 
Average rate of compensation increase
 
n/a
 
 
n/a
 
 
n/a
 
 
n/a
 
The following  assumptions  were used in the measurement of periodic pension and postretirement benefit costs for the Partnership's
benefit obligations as ofyears ended September 29, 2001:  weighted-average24, 2005, September 25, 2004 and September 27, 2003 are shown in the following table:

 
Pension Benefits
Retiree Health and Life Benefits
 
2005
2004
2003
2005
2004
2003
Weighted-average discount rate
 
5.50
% 
 
6.00
% 
 
6.75
% 
 
5.25
% 
 
6.00
% 
 
6.75
% 
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
 
7.50
% 
 
7.75
% 
 
8.50
% 
 
n/a
 
 
n/a
 
 
n/a
 
Health care cost trend
 
n/a
 
 
n/a
 
 
n/a
 
 
11.00
% 
 
11.50
% 
 
13.00
% 
The discount rate assumption takes into consideration current market expectations related to long-term interest rates and the projected duration of 7.25%,  average  ratethe Partnership’s pension obligations based on a benchmark index with similar characteristics as the expected cash flow requirements of compensation  increase  of 3.50% and  weighted-average
expectedthe Partnership’s defined benefit pension plan over the long-term. The long-term rate of return on plan assets of 9.50%.  The  accumulated
postretirement  benefit  obligation  was based on a 13%  increaseassumption reflects estimated future performance in the costPartnership’s pension asset portfolio considering the investment mix of covered  health care  benefits at  September  27, 2003the pension asset portfolio and a 12% increase in the
cost of covered  health care benefits at September 28, 2002. historical asset performance.
The 13%11.00% increase in health care costs assumed at September 27, 200324, 2005 is assumed to decrease gradually to 5.00% in fiscal 2013 and to remain at that level thereafter. Increasing the assumed health care cost trend rates by 1.0% in each year would increase the Partnership'sPartnership’s benefit obligation as of September 27, 2003 24, 2005

by approximately $1,354$967 and the aggregate of service and interest components of net periodic postretirement benefit expense for the year ended September 27,  200324, 2005 by approximately $105.$60. Decreasing the assumed health care cost trend rates by 1.0% in each year would decrease the Partnership'sPartnership’s benefit obligation as of September 27,  200324, 2005 by approximately $1,222$855 and the aggregate of service and interest components of net periodic postretirement benefit expense for the year ended September 27, 200324, 2005 by approximately $94.


                                      F-20




10.  FINANCIAL INSTRUMENTS

DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES.$54. The Partnership has concluded that the prescription drug benefits within the retiree medical plan will not qualify for a Medicare subsidy available under recent legislation.
13.    Financial Instruments
Derivative Instruments and Hedging Activities. The Partnership purchases propane and refined fuels at various prices that are eventually sold to its customers, exposing the Partnership to market fluctuations in the price of propane.these commodities. A control environment has been established which includes policies and procedures for risk assessment and the approval, reporting and monitoring of derivative instruments and hedging activities. The Partnership closely monitors the potential impacts of commodity price changes and, where appropriate, utilizes commodity futures, forward and option contracts to hedge its commodity price risk, to protect margins and to ensure supply during periods of high demand. Derivative instruments are used to hedge a portion of the Partnership'sPartnership’s forecasted purchases for no more than one year in the future. SFAS No. 133 "Accounting for Derivative  InstrumentsThere were no unrealized gains or losses associated with the Partnership’s commodity price hedging activities included in OCI as of September 24, 2005.
For the years ended September 24, 2005, September 25, 2004 and Hedging Activities," as
amended by SFAS No. 137, SFAS No. 138 and SFAS No. 149 ("SFAS 133") requires all
derivatives   (with   certain   exceptions),   whether   designated  in  hedging
relationships or not, to be recorded on the  consolidated  balance sheet at fair
value. SFAS 133 requires that changesSeptember 27, 2003, operating expenses included unrealized losses in the derivative  instrument's fair value
be recognized  currently in earnings unless specific hedge  accounting  criteria
are met. Special accounting for qualifying  hedges,  either fair value hedges or
cash flow  hedges,  allows a  derivative's  gainsamount of $2,497, $4,523 and losses to offset  related
results on the hedged item in the statement of  operations,  and requires that a
company   formally   document,   designate  and  assess  the   effectiveness  of
transactions  that receive hedge  accounting.  Fair value hedges are  derivative
financial instruments that hedge the exposure$1,500, respectively, attributable to changes in the fair value of derivative instruments not designated as hedges. In connection with the Agway Acquisition, the Partnership acquired certain futures and option contracts that were identified as hedges of future purchases of fuel oil and propane with a fair value of $6,327 which were recorded as derivative assets at fair value in purchase accounting. As the underlying futures and option contracts were settled during fiscal 2004, the derivative assets were charged to cost of products sold as an assetoffset to the realized gains from contract settlement. The impact on cost of products sold represented a non-cash charge resulting from the application of purchase accounting on derivative instruments acquired. For the year ended September 25, 2004, the Partnership recorded a non-cash charge of $6,327 within cost of products sold related to contracts settled during the period.
In addition, borrowings under the Term Loan bear interest at a variable rate based upon either LIBOR or liability orWachovia National Bank's prime rate, plus an identified portion thereof attributableapplicable margin depending on the level of the Operating Partnership’s total leverage. Therefore, the Partnership is subject to a particular
risk.  Cash flow  hedges are  derivative  financial  instruments  that hedgeinterest rate risk on the exposure  to  variability  in  expected  future  cash  flows  attributable  to a
particular risk.

Sincevariable component of the interest rate. On March 31, 2002,2005, the Partnership's  futuresPartnership entered into an interest rate swap agreement in order to manage its interest rate risk. The interest rate swap is being accounted for under SFAS 133 and forward  contracts qualify
and havehas been designated as a cash flow hedges  and,  as such,  the  effective
portions  of  changeshedge. Changes in the fair value of these  derivative  instruments  are
recorded in other comprehensive (loss)/income ("OCI") andthe interest rate swap are recognized in cost
of products  sold whenOCI until the hedged item impactsis recognized in earnings. As of September 27,
2003,24, 2005, an unrealized gains on derivative  instruments designated as cash flow hedges
in the amountloss of $1,129 were$1,293 was included in OCI attributable to the interest rate swap agreement and areis expected to be recognized in earnings during  the next 12 months as the hedged  forecasted  transactions
occur.interest on the Term Loan impacts earnings through March 31, 2010. However, due to changes in the volatility  of  the  commodities  market,interest rate environment, the corresponding value in OCI is subject to change prior to its impact on earnings.

Option contracts are not classified as hedges and, as such,  changes in the fair
value of these derivative  instruments are recognized within operating  expenses
in the consolidated statement of operations as they occur.  Additionally,  prior
to March 31, 2002,  the  Partnership's  futures and forward  contracts  were not
designated  as  cash  flow  hedges  and  the  changes  in fair  value  of  these
instruments  were  recognized in earnings as they  occurred.  For the year ended
September 27, 2003,  operating expenses included unrealized losses in the amount
of $1,500 compared to unrealized gain in the amount of $5,356 for the year ended
September  28,  2002,  attributable  to changes in the fair value of  derivative
instruments not designated as hedges.

CREDIT  RISK.
Credit Risk. The Partnership'sPartnership’s principal customers are residential and commercial end users of propane and refined fuels served by approximately 320370 customer service centers in 4030 states. No single customer accounted for more than 10% of revenues during fiscal 2003, 20022005, 2004 or 20012003 and no concentration of receivables exists at the end of fiscal 20032005 or 2002.

2004.
Futures contracts are traded on and guaranteed by the New York MerchantileMercantile Exchange ("NYMEX"(‘‘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 forward and option 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.



                                      F-21



FAIR VALUE OF FINANCIAL INSTRUMENTS.
Fair Value of Financial Instruments. The fair value of cash and cash equivalents are not materially different from their carrying amounts because of the short-term nature of these instruments. The fair value of the Revolving Credit Agreement approximates the carrying value since the interest rates are periodically adjusted to reflect market conditions. Based on the current rates offered to the Partnership for debt of the same remaining maturities, the carrying value of the Partnership'sPartnership’s Senior Notes approximates their fair market value.

11.  COMMITMENTS AND CONTINGENCIES

14.    Commitments and Contingencies
Commitments. The Partnership leases certain property, plant and equipment, including portions of the Partnership'sPartnership’s vehicle fleet, for various periods under noncancelable leases. Rental expense under operating leases was $24,337, $24,005$28,559, $27,315 and $23,354$24,337 for the years ended September 24, 2005, September 25, 2004 and September 27, 2003, September  28, 2002 and
September 29, 2001, respectively.
Future minimum rental commitments under noncancelable operating lease agreements as of September 27, 200324, 2005 are as follows:
Fiscal Year
     -----------
     2004                                                $ 17,796
     2005                                                  12,868
     2006                                                   9,959
     2007                                                   5,860
     2008 and thereafter                                    6,410

CONTINGENCIES.

2006
$20,295
2007
15,096
2008
10,688
2009
5,856
2010 and thereafter
5,814
Contingencies. As discussed in Note 2, the Partnership is self-insured for general and product, workers'workers’ compensation and automobile liabilities up to predetermined amounts above which third party insurance applies. At September 27,  200324, 2005 and September 28,  2002,25, 2004, the Partnership had accrued insurance liabilities of $28,639$46,457 and $26,969,$38,241, respectively, representing the total estimated losses under these self-insurance programs. The Partnership is also involved in various legal actions which have arisen in the normal course of business, including those relating to commercial transactions and product liability. Management believes, based on the advice of legal counsel, that the ultimate resolution of these matters will not have a material adverse effect on the Partnership'sPartnership’s financial position or future results of operations, after considering its self-insurance liability for known and unasserted self-insurance claims. For the portion of the estimated self-insurance 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 $10,046 and $2,941 as of September 24, 2005 and September 25, 2004, respectively.
The Partnership is subject to various federal, state and local environmental, health and safety laws and regulations. Generally, these laws impose limitations on the discharge of pollutants and establish standards for the handling of solid and hazardous wastes. These laws include the Resource Conservation and Recovery Act, the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"(‘‘CERCLA’’), the Clean Air Act, the Occupational Safety and Health Act, the Emergency Planning and Community Right to Know Act, the Clean Water Act and comparable state statutes. CERCLA, also known as the "Superfund"‘‘Superfund’’ law, imposes joint and several liability without regard to fault or the legality of the original conduct on certain classes of persons that are considered to have contributed to the release or threatened release of a "hazardous substance"‘‘hazardous substance’’ into the environment. Propane is not a hazardous substance within the meaning of CERCLA. However, the Partnership owns real property where such hazardous substances may exist.
The Partnership is also subject to various laws and governmental regulations concerning environmental matters and expects that it will be required to expend funds to participate in the remediation of certain sites, including sites where it has been designated by the Environmental Protection Agency (‘‘EPA’’) as a potentially responsible party (‘‘PRP’’) under CERCLA and at sites with above ground and underground fuel storage tanks.
With the Agway Acquisition, the Partnership acquired certain properties and assets, including fuel oil tanks and gasoline stations, that are subject to extensive federal, state and local environmental laws and

regulation, including investigation and remediation of contaminated soil and groundwater, transportation of hazardous materials, other environmental protection measures and health and safety matters. Based on a review of certain Phase I Environmental Site Assessments and, at certain sites, groundwater and/or soil sample analysis, the Partnership identified that certain of these properties had either known or probable environmental exposure, some of which are currently in varying stages of investigation, remediation or monitoring. Under the agreement for the Agway Acquisition, the seller was required to deposit $15,000 from the total purchase price into an escrow account to be used to fund remediation costs at the acquired properties. The escrowed funds will be used to fund environmental costs and expenses during the first three years following the closing date of the Agway Acquisition. Subject to amounts withheld with respect to any pending claims made prior to the third anniversary of the closing date of the Agway Acquisition, any remaining escrowed funds will be remitted to the seller at the end of the three-year period.
Based on the Partnership’s best estimate of future costs for environmental investigations, remediation and ongoing monitoring activities associated with acquired properties with either known or probable environmental exposures an environmental reserve in the amount of $13,750 was established in purchase accounting. The Partnership established a corresponding environmental escrow asset in the amount of $13,750 related to the future reimbursement from escrowed funds for environmental spending. As of September 24, 2005 and September 25, 2004, the environmental reserve amounted to $5,768 and $11,500, respectively, and the corresponding environmental escrow asset amounted to $6,151 and $11,500, respectively. The environmental reserves are recorded on an undiscounted basis.
Estimating the extent of the Partnership’s responsibility for a particular site and the method and ultimate cost of remediation of that site requires a number of assumptions and estimates on the part of management. As a result, the ultimate outcome of remediation of the sites may differ from current estimates. As additional information becomes available, estimates will be adjusted as necessary. Based on information currently available, and taking into consideration the level of the environmental reserve and the environmental escrow discussed above, management believes that any liability that may ultimately result from changes in current estimates will not have a material impact on the results of operations, financial position or cash flows of the Partnership.
Future developments, such as stricter environmental, health or safety laws and regulations thereunder, could affect Partnership operations. The Partnership anticipates that compliance with or liabilities under environmental, health and safety laws and regulations, including CERCLA, will not have a material adverse effect on the Partnership. To the extent that there are any environmental liabilities unknown to the Partnership or environmental, health or safety laws or regulations are made more stringent, there can be no assurance that the Partnership'sPartnership’s results of operations will not be materially and adversely affected.




                                      F-22


12.  GUARANTEES

FASB Financial  Interpretation  No. 45,  "Guarantor's  Accounting and Disclosure
Requirements for
15.    Guarantees  Including  Indirect  Guarantees of Indebtedness of
Others,"  expands  the  existing  disclosure  requirements  for  guarantees  and
requires  recognition  of a liability  for the fair value of  guarantees  issued
after  December  31,  2002.  
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 2010.2012. Upon completion of the lease period, the Partnership guarantees that the fair value of the equipment will equal or exceed the guaranteed amount, or the Partnership will pay the lessor the difference. Although the fair value of equipment at the end of its lease term has historically exceeded the guaranteed amounts, the maximum potential amount of aggregate future payments the Partnership could be required to make under these leasing arrangements, assuming the equipment is deemed worthless at the end of the lease term, is approximately $14,355.$18,121. Of this amount, the fair value of residual value guarantees for operating leases entered into after December 31, 2002 was $2,067$6,292 and $3,684 as of September 24, 2005 and September 25, 2004, respectively, which is reflected in other liabilities, with a corresponding amount included within other assets, in the accompanying consolidated balance sheet assheets.
16.    Public Offerings
On December 16, 2003, the Partnership sold 2,600,000 Common Units in a public offering at a price of September 27, 2003.

13.  PUBLIC OFFERINGS

$30.90 per Common Unit realizing proceeds of $76,026, net of underwriting commissions and other offering expenses. On December 23, 2003, following the underwriters’ full exercise of their over-allotment option, the Partnership sold an additional 390,000 Common Units at $30.90 per Common Unit, generating

additional net proceeds of $11,540. The aggregate net proceeds of $87,566 were used to fund a portion of the purchase price for the Agway Acquisition. These transactions increased the total number of Common Units outstanding to 30,256,767. As a result of the Public Offering, the combined General Partner interest in the Partnership was reduced from 1.71% to 1.54% while the Common Unitholder interest in the Partnership increased from 98.29% to 98.46%.
On June 18, 2003, the Partnership sold 2,282,500 Common Units in a public offering at a price of $29.00 per Common Unit realizing proceeds of $62,879, net of underwriting commissions and other offering expenses. On June 26, 2003, following the underwriters'underwriters’ full exercise of their over-allotment option, the Partnership sold an additional 342,375 Common Units at $29.00 per Common Unit, generating additional net proceeds of $9,307. The aggregate net proceeds of $72,186 were used for general partnership purposes, including working capital and the repayment of outstanding borrowings under the Revolving Credit Agreement and the second annual principal payment of $42,500 due under the 1996 Senior Note Agreement on June 30, 2003. These transactions increased the total number of Common Units outstanding to 27,256,162. As a result of the Public Offering, the combined general partnerGeneral Partner interest in the Partnership was reduced from 1.89% to 1.71% while the Common Unitholder interest in the Partnership increased from 98.11% to 98.29%.

On October 17, 2000, the
17.    Discontinued Operations and Disposition
The Partnership sold  2,175,000  Common Units in a public
offering at a price of $21.125 per Common  Unit  realizing  proceeds of $43,500,
net of  underwriting  commissions and other offering  expenses.  On November 14,
2000, following the underwriter's partial exercise ofcontinuously evaluates its over-allotment option,
the  Partnership  sold an  additional  177,700  Common  Units at the same price,
generating  additional  net proceeds of $3,600.  The  aggregate  net proceeds of
$47,100 were applied to reduce the  Partnership's  outstanding  Revolving Credit
Agreement  borrowings.  These transactions  increased the total number of Common
Units outstanding to 24,631,287.

14.  DISCONTINUED OPERATIONS AND DISPOSITION

In line  with the  Partnership's  strategy  of  divestingexisting operations  in slower
growing or  non-strategic  markets  in an effort to identify opportunities to optimize the return on assets employed and selectively divests operations in slower growing or non-strategic markets and seeks to reinvest in markets that are considered to present more opportunities for growth. In line with that strategy, during fiscal 2004, the Partnership sold 24 customer service centers for net cash proceeds of $39,352. The Partnership recorded a gain on sale of $26,332 during fiscal 2004 which was accounted for within discontinued operations in accordance with SFAS No. 144, ‘‘Accounting for the Impairment or Disposal of Long-Lived Assets’’ (‘‘SFAS 144’’). During fiscal 2005, the Partnership finalized certain purchase price adjustments with the buyer of these customer service centers and recorded an additional gain on sale of $976. The individual captions on the consolidated statements of operations for the years ended September 25, 2004 and September 27, 2003 exclude the results from these discontinued operations, which were part of the Partnership’s propane segment.
During fiscal 2003, the Partnership sold nine customer service centers, during  fiscal  2003which were part of the Partnership’s propane segment, for net cash proceeds of approximately $7,197. The Partnership recorded a gain on sale of approximately  $2,483 during fiscal 2003 which has beenwas accounted for within discontinued operations pursuant to SFAS No. 144,  "Accounting  for144.
18.    Segment Information
The Partnership manages and evaluates its operations in five reportable segments: Propane, Fuel Oil and Refined Fuels, Natural Gas and Electricity, HVAC and All Other. The chief operating decision maker evaluates performance of the Impairment  or  Disposaloperating segments using a number of Long-Lived
Assets." Prior period resultsperformance measures, including gross margins and 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 in the consolidated statements of operations. In addition, certain costs associated with field operations support that are reported in operating expenses in the consolidated statements of operations, attributable to these nine customer
service centers wereincluding purchasing, training and safety, are not significant and, as such, prior period results have not
been reclassified to remove financial results from continuing operations.

On January 31, 2002, the Partnership sold its 170 million gallon propane storage
facility in  Hattiesburg,  Mississippi,  which was  considered  a  non-strategic
asset,  for net cash proceeds of  approximately  $7,988,  resulting in a gain on
sale of approximately $6,768.



                                      F-23


15.  SUBSEQUENT EVENT

On November  10, 2003,  the  Partnership  announced  that it had entered into an
asset purchase agreement (the "Purchase Agreement") to acquire substantially all
of the assets of Agway Energy Products,  LLC, Agway Energy Services PA, Inc. and
Agway Energy Services,  Inc.  (collectively  "Agway  Energy"),  all of which are
wholly  owned  subsidiaries  of Agway,  Inc.,  for total cash  consideration  of
approximately  $206,000,  subject to certain purchase price adjustments.  Agway,
Inc. is presently a debtor-in-possession under Chapter 11 of the Bankruptcy Code
pending before the United States  Bankruptcy Court for the Northern  District of
New York.  Agway Energy is not a Chapter 11 debtor.  The Purchase  Agreement was
filed with the United  States  Bankruptcy  Court and on November 24,  2003,  the
Bankruptcy  Court approved Agway,  Inc.'s motion to establish bid procedures for
the sale. In addition,  the transaction  has been approved by the  Partnership's
Board of  Supervisors.  Closing  on the sale  under the  Purchase  Agreement  is
subjectallocated to the approval byindividual operating segments. Thus, operating profit for each operating segment includes only the United  States  Bankruptcy  Court  following  the
conclusion of an auction process,costs that are directly attributable to be conducted  pursuant to the jurisdiction
of the Bankruptcy Court, and is subject to regulatory approvals. The transaction
will be accounted for using the purchase method of accounting.

Under the terms of the Purchase Agreement, the Partnership would purchase all of the operations of Agway  Energy,  including 139the individual segment. The accounting policies of the operating segments are the same as those described in the summary of significant accounting policies in Note 2.
The propane segment is primarily engaged in the retail distribution of propane to residential, commercial, industrial and sales centersagricultural customers and, to a lesser extent, wholesale distribution to large industrial end users. In the residential and commercial markets, propane is used primarily for space heating, water heating, cooking and clothes drying. Industrial customers use propane generally as a motor fuel burned in internal combustion engines that power over-the-road vehicles, forklifts and stationary engines, to fire

furnaces and as a cutting gas. In the agricultural markets, propane is primarily used for tobacco curing, crop drying, poultry brooding and weed control.
The fuel oil and refined fuels segment is primarily engaged in the retail distribution of fuel oil, diesel, kerosene and gasoline to residential and commercial customers for use primarily as a source of heat in homes and buildings.
The natural gas and electricity segment is engaged in the marketing of natural gas and electricity to residential and commercial customers in the deregulated energy markets of New York Pennsylvania, New Jersey and Vermont. Agway Energy, basedPennsylvania. 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.
The HVAC segment is engaged in Syracuse,  New York, marketsthe sale, installation and distributes propane,  fuel oil, gasoline and
diesel fuels and installs and servicesservicing of a wide variety of home comfort equipment and parts, particularly in the areaareas of heating, ventilation and air conditioning.  For
The All other business segment is comprised of the activities from our HomeTown Hearth & Grill and Suburban Franchising subsidiaries.
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 24,
2005
September 25,
2004
September 27,
2003
Revenues:
 
 
 
 
 
 
 
 
 
Propane
$
969,943
 
$
856,109
 
$
680,840
 
Fuel oil and refined fuels
 
431,223
 
 
281,682
 
 
—
 
Natural gas and electricity
 
102,803
 
 
68,452
 
 
—
 
HVAC
 
106,115
 
 
92,072
 
 
46,938
 
All other
 
10,150
 
 
8,939
 
 
7,297
 
Total revenues
$
1,620,234
 
$
1,307,254
 
$
735,075
 
Income (loss) before interest expense, loss on debt extinguishment and provision for income taxes:
 
 
 
 
 
 
 
 
 
Propane
$
147,468
 
$
143,933
 
$
133,278
 
Fuel oil and refined fuels
 
(6,474
) 
 
14,911
 
 
—
 
Natural gas and electricity
 
6,463
 
 
4,154
 
 
—
 
HVAC
 
(12,423
) 
 
(2,686
) 
 
(4,281
) 
All other
 
(3,802
) 
 
(8,125
) 
 
(3,460
) 
Corporate
 
(62,865
) 
 
(82,408
) 
 
(45,687
) 
Total income before interest expense, loss on debt extinguishment and provision for income taxes
 
68,367
 
 
69,779
 
 
79,850
 
Reconciliation to income from continuing operations
 
 
 
 
 
 
 
 
 
Interest expense, net
 
40,374
 
 
40,832
 
 
33,629
 
Loss on debt extinguishment
 
36,242
 
 
—
 
 
—
 
Provision for income taxes
 
803
 
 
3
 
 
202
 
(Loss) income from continuing operations
$
(9,052
) 
$
28,944
 
$
46,019
 
Depreciation and amortization:
 
 
 
 
 
 
 
 
 
Propane
$
25,393
 
$
26,347
 
$
22,908
 
Fuel oil and refined fuels
 
4,802
 
 
4,302
 
 
—
 
Natural gas and electricity
 
967
 
 
555
 
 
—
 
HVAC
 
1,509
 
 
640
 
 
80
 
All other
 
281
 
 
343
 
 
383
 
Corporate
 
4,810
 
 
4,556
 
 
4,149
 
Total depreciation and amortization
$
37,762
 
$
36,743
 
$
27,520
 

 
As of
 
September 24,
2005
September 25,
2004
Assets
 
 
 
 
 
 
Propane
$
735,094
 
$
720,645
 
Fuel oil and refined fuels
 
124,232
 
 
121,386
 
Natural gas and electricity
 
30,294
 
 
26,630
 
HVAC
 
15,590
 
 
20,715
 
All other
 
4,990
 
 
4,941
 
Corporate
 
143,378
 
 
185,671
 
Eliminations
 
(87,981
) 
 
(87,981
) 
Total assets
$
965,597
 
$
992,007
 
Income (loss) before interest expense, loss on debt extinguishment and provision for income taxes for the HVAC segment for the year ended June 30,  2003 Agway  Energy  provided  service to more than  400,000
customers  across all linesSeptember 24, 2005 included the non-cash charge of business$656 for goodwill impairment (see Note 6). In addition, depreciation and sold  approximately  106.3  million
gallons of propane and 356.8  million  gallons of fuel oil,  gasoline and diesel
fuel  to  retail   customers  for   residential,   commercial,   industrial  and
agricultural  applications.  While the Purchase  Agreement has been reviewed and
accepted by the Bankruptcy Court, there can be no assurance that the Partnership
will ultimately be the successful bidder at the auction.







                                      F-24




                   INDEX TO SUPPLEMENTAL FINANCIAL INFORMATION

                       SUBURBAN ENERGY SERVICES GROUP LLC




                                                                            Page
                                                                            ----

Report of Independent Auditors............................................. F-25

Balance Sheets
     As of September 27, 2003 and September 28, 2002....................... F-26

Notes to Balance Sheets.................................................... F-27














                                      F-25








                         REPORT OF INDEPENDENT AUDITORS






To the Stockholders of
Suburban Energy Services Group LLC:

In our opinion,  the accompanying balance sheets present fairly, in all material
respects,  the  financial  position of  Suburban  Energy  Services  Group LLC at
September  27,  2003  and  September  28,  2002 in  conformity  with  accounting
principles  generally accepted in the United States of America.  These financial
statements   are  the   responsibility   of  the   Company's   management;   our
responsibility  is to express an opinion on these financial  statements based on
our audits.  We conducted  our audits of these  statements  in  accordance  with
auditing  standards  generally  accepted in the United States of America,  which
require that we plan and perform the audit to obtain reasonable  assurance about
whether the balance sheets are free of material misstatement.  An audit includes
examining,  on a test basis,  evidence supporting the amounts and disclosures in
the balance  sheets,  assessing the accounting  principles  used and significant
estimates  made  by  management,   and  evaluating  the  overall  balance  sheet
presentation.  We believe  that our audits  provide a  reasonable  basis for our
opinion.





PricewaterhouseCoopers LLP
Florham Park, NJ
October 23, 2003








                                      F-26




                       SUBURBAN ENERGY SERVICES GROUP LLC

                                 BALANCE SHEETS




                                                                                  September           September
                                                                                  27, 2003             28, 2002
                                                                               ----------------    -----------------

ASSETS
Current assets:

    Cash and cash equivalents                                                          $ 2,886              $ 4,363
                                                                               ----------------    -----------------
            Total current assets                                                         2,886                4,363
Investment in Suburban Propane Partners, L.P.                                        1,566,483            1,924,003
Goodwill, net                                                                        3,112,560            3,112,560
                                                                               ----------------    -----------------
             Total assets                                                          $ 4,681,929          $ 5,040,926
                                                                               ================    =================



LIABILITIES AND STOCKHOLDERS' EQUITY
               Total liabilities                                                             -                    -
                                                                               ----------------    -----------------

Stockholders' equity
      Common stock, $1 par value, 2,000 shares issued and outstanding                    2,000                2,000
      Additional paid in capital                                                     1,853,333            3,405,108
      Retained earnings                                                              2,826,596            1,633,818
                                                                               ----------------    -----------------
                Total stockholders' equity                                           4,681,929            5,040,926
                                                                               ----------------    -----------------
                Total liabilities and stockholders' equity                         $ 4,681,929          $ 5,040,926
                                                                               ================    =================



The accompanying notes are an integral part of these balance sheets.



                                      F-27




                       SUBURBAN ENERGY SERVICES GROUP LLC

                             NOTES TO BALANCE SHEETS

1.   ORGANIZATION AND FORMATION

Suburban  Energy  Services  Group LLC (the  "Company") was formed on October 26,
1998 as a limited  liability  company pursuant to the Delaware Limited Liability
Company Act. The Company was formed to purchase the general partner interests in
Suburban Propane Partners,  L.P. (the  "Partnership")  from Suburban Propane GP,
Inc. (the "Former  General  Partner"),  a  wholly-owned  indirect  subsidiary of
Millennium  Chemicals Inc., and become the successor general partner. On May 26,
1999, the Company purchased a 1% general partner interest in the Partnership and
a 1.0101%  general  partner  interest in Suburban  Propane,  L.P., the Operating
Partnership.

The Partnership is a  publicly-traded  master limited  partnership  whose common
units are listed on the New York Stock Exchange and is engaged in the retail and
wholesale marketing of propane and related appliances and services.  As a result
of two public  offerings  by the  Partnership  on October  17, 2000 and June 18,
2003,  the  Company's  interest in the  Partnership  was  reduced to .701%.  The
Company's interest in Suburban Propane, L.P. was not affected.

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ACCOUNTING  PERIOD.  The Company's  accounting  period ends on the last Saturday
nearest to September 30.

USE OF ESTIMATES.  The  preparation of financial  statements in conformity  with
generally accepted  accounting  principles requires management to make estimates
and assumptions  that affect the reported  amounts of assets and liabilities and
disclosure of  contingent  assets and  liabilities  at the date of the financial
statements  and the  reported  amounts  of  revenues  and  expenses  during  the
reporting period. Actual results could differ from those estimates.

CASH  AND CASH  EQUIVALENTS.  The  Company  considers  all  highly  liquid  debt
instruments  purchased  with an original  maturity of three months or less to be
cash  equivalents.  The carrying amount  approximates  fair value because of the
short maturity of these instruments.

INVESTMENT IN SUBURBAN PROPANE  PARTNERS,  L.P. As previously noted, the Company
acquired a combined 2% general  partner  interest in the  Partnership  which was
subsequently reduced to 1.71%. The Company accounts for its investment under the
equity method of accounting  whereby the Company  recognizes in income its share
of net income of Suburban Propane Partners,  L.P. consolidated net income (loss)
and reduces its investment  balance to the extent of  partnership  distributions
the Company receives from Suburban Propane Partners, L.P.

GOODWILL.  Goodwill  represents the excess of the purchase priceamortization expense for the general
partner  interests inHVAC segment for the Partnership  overyear ended September 24, 2005 reflects the carrying  valuenon-cash charge of $810 for the General
Partner's  capital account  reflectedimpairment of other

intangible assets (see Note 6). Income (loss) before interest expense, loss on the books of Suburban Propane Partners,
L.P. on the date of acquisition.

The Company  tests  goodwill for  impairment on an annual basis using a two-step
impairment  test.  The first step  compares the fair value of the Company to the
carrying value of the company.  If the carrying value of the Company exceeds the
fair value of the Company, a second step is performed comparing the implied fair
value of the  Company  with the  carrying  amount of the  Company's  goodwill to
determine  the amount of goodwill  impairment,  if any.  Based on the  Company's
annual  goodwill  impairment  test,  goodwill was not considered  impaired as of
September 27, 2003.





                                      F-28


INCOME TAXES. For Federaldebt extinguishment and state income tax purposes, the earnings and losses
attributable  to the Company are  included in the tax returns of the  individual
stockholders.  As a result, no recognition of income taxes has been reflected infor the accompanying balance sheets.


RECENTLY ISSUED ACCOUNTING STANDARDS.  In January 2003,All other segment for the Financial Accounting
Standards Board ("FASB") issued FASB  Interpretation  No. 46,  "Consolidation of
Variable Interest Entities" ("FIN 46"), an interpretation of Accounting Research
Bulletin  No.  51,  "Consolidated   Financial   Statements."  FIN  46  addresses
consolidation by business  enterprises of variable  interest  entities that meet
certain  characteristics.   The  consolidation  requirements  of  FIN  46  apply
immediately to variable  interest  entities  created after January 31, 2003. The
consolidation  requirements  apply to variable  interest entities created before
February 1, 2003 inyear ended September 25, 2004 included the first fiscal year or interim period beginning after June
15, 2003.  However,  in October 2003,  the FASB deferred the effective  date$3,177 non-cash charge for applying certain  provisions of FIN 46 and in November 2003,  issued an exposure
draft which would amend certain  provisions of FIN 46. As a result of the latest
exposure draft, the Company is currently evaluating the impact, if any, that FIN
46 or any future amendment may have on its financial position.





                                      F-29
goodwill impairment.

INDEX TO FINANCIAL STATEMENT SCHEDULE
SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES




                                                                            Page
                                                                            ----


Page
Schedule II
Valuation and Qualifying Accounts – Years Ended September 24, 2005, September 25, 2004 and September 27, 2003
S-2

SCHEDULE II    Valuation and Qualifying Accounts - Years Ended
               September 27, 2003, September 28, 2002 and
               September 29, 2001........................................... S-2























                                      S-1
SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
                                 (in
(in thousands)

 
Balance at
Beginning of
Period
Charged to
Costs
and Expenses
Other
Additions
Deductions
Balance
at End
of Period
Year Ended September 27, 2003
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Allowance for doubtful accounts
$
1,894
 
$
3,315
 
$
—
 
$
(2,690
) 
$
2,519
 
Year Ended September 25, 2004 (a)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Allowance for doubtful accounts
$
2,519
 
$
9,128
 
$
2,966
 
$
(6,717
) 
$
7,896
 
Year Ended September 24, 2005
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Allowance for doubtful accounts
$
7,896
 
$
9,289
 
$
—
 
$
(7,220
) 
$
9,965
 


                                             Balance at       Charged                                         Balance
                                             Beginning      to Costs and       
(a)
Other at End
                                             of Period        Expenses       Additions       Deductions      of Period
                                            -------------   -------------   -------------   -------------   -------------

YEAR ENDED SEPTEMBER 29, 2001


Allowanceadditions for the year ended September 25, 2004 reflects allowances for doubtful accounts $ 2,975         $ 5,328             $ -        $ (4,311)        $ 3,992
                                            =============   =============   =============   =============   =============



YEAR ENDED SEPTEMBER 28, 2002

Allowance for doubtfulassociated with the acquisition of Agway Energy. Additionally, the increase in charges and deductions during fiscal 2004 was primarily attributable to the impact of increased sales and related accounts $ 3,992         $ 1,147             $ -        $ (3,245)        $ 1,894
                                            =============   =============   =============   =============   =============



YEAR ENDED SEPTEMBER 27, 2003

Allowance for doubtful accounts                  $ 1,894         $ 3,315             $ -        $ (2,690)        $ 2,519
                                            =============   =============   =============   =============   =============

receivable from the Agway Energy operations.






                                      S-2