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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended March 30, 2002
Commission File Number: 1-14222
SUBURBAN PROPANE PARTNERS, L.P.
-------------------------------
(Exact name of registrant as specified in its charter)
Delaware 22-3410353
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
240 Route 10 West
Whippany, NJ 07981
(973) 887-5300
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
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 [ ]
As of May 7, 2002, 24,631,287 Common Units were outstanding.
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SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES
INDEX TO FORM 10-Q
PART I Page
----
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
Consolidated Balance Sheets as of March 30, 2002 and
September 29, 2001........................................... 1
Consolidated Statements of Operations for the three months
ended March 30, 2002 and March 31, 2001...................... 2
Consolidated Statements of Operations for the six months
ended March 30, 2002 and March 31, 2001...................... 3
Consolidated Statements of Cash Flows for the six months
ended March 30, 2002 and March 31, 2001...................... 4
Consolidated Statement of Partners' Capital for the six
months ended March 30, 2002.................................. 5
Notes to Consolidated Financial Statements................... 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS................ 11
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK.................................................. 17
PART II
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K............................. 19
Signatures............................................................ 20
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
- -----------------------------------------------
THIS QUARTERLY REPORT ON FORM 10-Q CONTAINS FORWARD-LOOKING STATEMENTS WITHIN
THE MEANING OF SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED,
RELATING TO THE PARTNERSHIP'S FUTURE BUSINESS EXPECTATIONS AND PREDICTIONS AND
FINANCIAL CONDITION AND RESULTS OF OPERATIONS. THESE FORWARD-LOOKING STATEMENTS
INVOLVE CERTAIN RISKS AND UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO
DIFFER MATERIALLY FROM THOSE DISCUSSED OR IMPLIED IN SUCH FORWARD-LOOKING
STATEMENTS ("CAUTIONARY STATEMENTS"). THE RISKS AND UNCERTAINTIES AND THEIR
IMPACT ON THE PARTNERSHIP'S 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 THE ABILITY OF THE PARTNERSHIP TO COMPETE WITH OTHER SUPPLIERS OF PROPANE AND
OTHER ENERGY SOURCES;
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 LINES
OF BUSINESS AND TO INTEGRATE ACQUIRED BUSINESSES SUCCESSFULLY.
ALL SUBSEQUENT WRITTEN AND ORAL FORWARD-LOOKING STATEMENTS ATTRIBUTABLE TO THE
PARTNERSHIP OR PERSONS ACTING ON ITS BEHALF ARE EXPRESSLY QUALIFIED IN THEIR
ENTIRETY BY SUCH CAUTIONARY STATEMENTS.
SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
March 30, September 29,
2002 2001
----------- -------------
ASSETS
Current assets:
Cash and cash equivalents ................................ $ 44,296 $ 36,494
Accounts receivable, less allowance for doubtful accounts
of $3,064 and $3,992, respectively .................... 69,257 42,702
Inventories .............................................. 40,124 41,891
Prepaid expenses and other current assets ................ 8,983 3,252
--------- ---------
Total current assets ............................. 162,660 124,339
Property, plant and equipment, net ........................... 337,395 344,374
Goodwill, net ................................................ 243,430 243,789
Other intangible assets, net ................................. 1,719 1,990
Other assets ................................................. 8,078 8,514
--------- ---------
Total assets .................................... $ 753,282 $ 723,006
========= =========
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable ......................................... $ 39,152 $ 38,685
Accrued employment and benefit costs ..................... 16,906 29,948
Current portion of long-term borrowings .................. -- 42,500
Accrued insurance ........................................ 8,270 7,860
Customer deposits and advances ........................... 14,617 23,217
Accrued interest ......................................... 8,784 8,318
Other current liabilities ................................ 7,687 11,575
--------- ---------
Total current liabilities ...................... 95,416 162,103
Long-term borrowings ......................................... 472,709 430,270
Postretirement benefits obligation ........................... 34,476 34,521
Accrued insurance ............................................ 16,737 17,881
Accrued pension liability .................................... 15,080 13,703
Other liabilities ............................................ 5,356 5,579
--------- ---------
Total liabilities ............................. 639,774 664,057
--------- ---------
Commitments and contingencies
Partners' capital:
Common Unitholders (24,631 units issued and outstanding) 160,288 105,549
General Partner ........................................ 3,025 1,888
Deferred compensation .................................. (11,567) (11,567)
Common Units held in trust, at cost .................... 11,567 11,567
Unearned compensation .................................. (2,528) (1,211)
Accumulated other comprehensive (loss) ................. (47,277) (47,277)
--------- ---------
Total partners' capital ...................... 113,508 58,949
--------- ---------
Total liabilities and partners' capital ...... $ 753,282 $ 723,006
========= =========
The accompanying notes are an integral part of these consolidated financial
statements.
SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per unit amounts)
(unaudited)
Three Months Ended
-----------------------
March 30, March 31,
2002 2001
---------- ----------
Revenues
Propane ................................................... $ 212,739 $ 332,727
Other ..................................................... 23,148 22,166
--------- ---------
235,887 354,893
Costs and expenses
Cost of products sold ..................................... 96,645 201,149
Operating ................................................. 59,755 66,954
General and administrative ................................ 8,109 9,236
Depreciation and amortization ............................. 7,406 10,019
Gain on sale of storage facility .......................... (6,768) --
--------- ---------
165,147 287,358
Income before interest expense and provision for income taxes 70,740 67,535
Interest expense, net ....................................... 8,649 10,265
--------- ---------
Income before provision for income taxes .................... 62,091 57,270
Provision for income taxes .................................. 190 94
--------- ---------
Net income .................................................. $ 61,901 $ 57,176
========= =========
General Partner's interest in net income .................... $ 1,373 $ 1,081
--------- ---------
Limited Partners' interest in net income .................... $ 60,528 $ 56,095
========= =========
Basic net income per unit ................................... $ 2.46 $ 2.28
--------- ---------
Weighted average number of units outstanding - basic ........ 24,631 24,631
--------- ---------
Diluted net income per unit ................................. $ 2.45 $ 2.28
--------- ---------
Weighted average number of units outstanding - diluted ...... 24,659 24,644
--------- ---------
The accompanying notes are an integral part of these consolidated financial
statements.
SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per unit amounts)
(unaudited)
Six Months Ended
-----------------------
March 30, March 31,
2002 2001
---------- ----------
Revenues
Propane ................................................... $ 366,595 $ 601,186
Other ..................................................... 51,156 49,635
--------- ---------
417,751 650,821
Costs and expenses
Cost of products sold ..................................... 176,589 370,287
Operating ................................................. 117,407 133,176
General and administrative ................................ 15,316 17,442
Depreciation and amortization ............................. 14,992 19,605
Gain on sale of storage facility .......................... (6,768) --
--------- ---------
317,536 540,510
Income before interest expense and provision for income taxes 100,215 110,311
Interest expense, net ....................................... 17,373 20,253
--------- ---------
Income before provision for income taxes .................... 82,842 90,058
Provision for income taxes .................................. 328 165
--------- ---------
Net income .................................................. $ 82,514 $ 89,893
========= =========
General Partner's interest in net income .................... $ 1,763 $ 1,735
--------- ---------
Limited Partners' interest in net income .................... $ 80,751 $ 88,158
========= =========
Basic net income per unit ................................... $ 3.28 $ 3.61
--------- ---------
Weighted average number of units outstanding - basic ........ 24,631 24,397
--------- ---------
Diluted net income per unit ................................. $ 3.27 $ 3.61
--------- ---------
Weighted average number of units outstanding - diluted ...... 24,658 24,406
--------- ---------
The accompanying notes are an integral part of these consolidated financial
statements.
SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Six Months Ended
---------------------
March 30, March 31,
2002 2001
--------- ---------
Cash flows from operating activities:
Net income .................................................. $ 82,514 $ 89,893
Adjustments to reconcile net income to net cash
provided by operations:
Depreciation ........................................... 14,079 14,259
Amortization ........................................... 913 5,346
(Gain) on disposal of property, plant and
equipment, net ....................................... (276) (892)
(Gain) on sale of storage facility ..................... (6,768) --
Changes in assets and liabilities, net of dispositions:
(Increase) in accounts receivable ...................... (26,620) (49,681)
Decrease in inventories ................................ 1,725 2,035
(Increase) in prepaid expenses and
other current assets ................................. (5,731) (645)
Increase/(decrease) in accounts payable ................ 880 (13,982)
(Decrease)/increase in accrued employment
and benefit costs .................................... (12,661) 5,762
Increase in accrued interest ........................... 466 325
(Decrease) in other accrued liabilities ................ (12,139) (14,164)
Net change in other noncurrent assets and liabilities .. (260) (863)
-------- --------
Net cash provided by operating activities ......... 36,122 37,393
-------- --------
Cash flows from investing activities:
Capital expenditures ....................................... (9,576) (9,502)
Proceeds from sale of property, plant and equipment, net ... 9,592 1,437
-------- --------
Net cash provided by/(used in) investing activities 16 (8,065)
-------- --------
Cash flows from financing activities:
Long-term debt (repayments) ................................ -- (44,019)
Short-term debt borrowings, net ............................ -- 750
Credit agreement expenses .................................. -- (730)
Net proceeds from public offering .......................... -- 47,079
Partnership distributions .................................. (28,336) (26,889)
-------- --------
Net cash (used in) financing activities ........... (28,336) (23,809)
-------- --------
Net increase in cash and cash equivalents ........................ 7,802 5,519
Cash and cash equivalents at beginning of period ................. 36,494 11,645
-------- --------
Cash and cash equivalents at end of period ....................... $ 44,296 $ 17,164
======== ========
Supplemental disclosure of cash flow information:
Cash paid for interest ....................................... $ 17,077 $ 19,922
======== ========
The accompanying notes are an integral part of these consolidated financial
statements.
SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF PARTNERS' CAPITAL
(in thousands)
(unaudited)
Accumulated
Common Other Total
Number of Common General Deferred Units in Unearned Comprehensive Partners'
Common Units Unitholders Partner Compensation Trust Compensation (Loss) Capital
------------ ----------- ------- ------------ -------- ------------ ------------- --------
Balance at September 29, 2001 24,631 $ 105,549 $ 1,888 $(11,567) $11,567 $(1,211) $(47,277) $58,949
Net income .................... 80,751 1,763 82,514
Comprehensive income ..........
Partnership distributions ..... (27,710) (626) (28,336)
Grants issued under Restricted
Unit Plan, net of forfeitures 1,698 (1,698) --
Amortization of Compensation
Deferral Plan ............... 112 112
Amortization of Restricted
Unit Plan, net of forfeitures 269 269
------------ ----------- ------- ------------ -------- ------------ ------------- --------
Balance at March 30, 2002 ..... 24,631 $ 160,288 $ 3,025 $(11,567) $11,567 $(2,528) $ (47,277) $113,508
============ =========== ======= ============ ======== ============ ============= ========
Comprehensive
Income
-------------
Balance at September 29, 2001
Net income .................... $ 82,514
-------------
Comprehensive income .......... $ 82,514
=============
Partnership distributions .....
Grants issued under Restricted
Unit Plan, net of forfeitures
Amortization of Compensation
Deferral Plan ...............
Amortization of Restricted
Unit Plan, net of forfeitures
-------------
Balance at March 30, 2002 .....
=============
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)
(unaudited)
1. BASIS OF PRESENTATION
---------------------
PRINCIPLES OF CONSOLIDATION. The consolidated financial statements include the
accounts of Suburban Propane Partners, L.P. (the "Partnership"), its partners
and its indirect subsidiaries. All significant intercompany transactions and
accounts have been eliminated. The accompanying consolidated financial
statements are unaudited and have been prepared in accordance with the rules and
regulations of the Securities and Exchange Commission. They include all
adjustments that the Partnership considers necessary for a fair statement of the
results for the interim periods presented. Such adjustments consist only of
normal recurring items, unless otherwise disclosed. These financial statements
should be read in conjunction with the Partnership's Annual Report on Form 10-K
for the fiscal year ended September 29, 2001, including management's discussion
and analysis of financial condition and results of operations contained therein.
Due to the seasonal nature of the Partnership's propane business, the results of
operations for interim periods are not necessarily indicative of the results to
be expected for a full year.
FISCAL PERIOD. The Partnership's fiscal periods end on the Saturday nearest the
end of the quarter.
USE OF ESTIMATES. The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Significant estimates have been made by management in the
areas of insurance and litigation reserves, 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.
RECLASSIFICATIONS. Certain prior period amounts have been reclassified to
conform with the current period presentation.
2. INVENTORIES
-----------
Inventories are stated at the lower of cost or market. Cost is determined using
a weighted average method for propane and a standard cost basis for appliances,
which approximates average cost. Inventories consist of the following:
March 30, September 29,
2002 2001
----------- -------------
Propane ................................ $31,396 $33,080
Appliances ............................. 8,728 8,811
------- -------
$40,124 $41,891
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3. NET INCOME PER UNIT
-------------------
Basic net income per limited partner unit is computed by dividing net income,
after deducting the General Partner's approximate 2% interest, by the weighted
average number of outstanding Common Units. Diluted net income per limited
partner unit is computed by dividing net income, after deducting the General
Partner's approximate 2% interest, by the weighted average number of outstanding
Common Units and time vested Restricted Units granted under the 2000 Restricted
Unit Plan. In computing diluted net income per unit, weighted average units
outstanding used to compute basic net income per unit were increased by 28,037
units and 26,932 units for the three and six months ended March 30, 2002,
respectively, and 12,976 units and 8,774 units for the three and six months
ended March 31, 2001, respectively, to reflect the potential dilutive effect of
the time vested Restricted Units outstanding using the treasury stock method.
4. ADOPTION OF NEW ACCOUNTING STANDARD
-----------------------------------
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"). SFAS 142 modifies the financial accounting 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 result
of the adoption of SFAS 142, amortization expense for the three and six months
ended March 30, 2002 decreased by $1,854 and $3,708, respectively, compared to
the three and six months ended March 31, 2001, respectively, due to the lack of
amortization expense related to goodwill. Aside from this change in accounting
for goodwill, no other change in accounting for intangible assets was required
as a result of the adoption of SFAS 142 based on the nature of the Partnership's
intangible assets. In accordance with SFAS 142, the Partnership completed its
transitional impairment review and, as the fair values of identified reporting
units exceed the respective carrying values, goodwill is not considered impaired
as of the date of adoption of SFAS 142.
The following table reflects the effect of the adoption of SFAS 142 on net
income and net income per unit as if SFAS 142 had been in effect for the periods
presented:
Three Months Ended Six Months Ended
----------------------- -----------------------
March 30, March 31, March 30, March 31,
2002 2001 2002 2001
---------- ---------- ---------- ----------
Net income:
As reported ............ $ 61,901 $ 57,176 $ 82,514 $ 89,893
Goodwill amortization .. -- 1,854 -- 3,708
---------- ---------- ---------- ----------
As adjusted ............ $ 61,901 $ 59,030 $ 82,514 $ 93,601
========== ========== ========== ==========
Basic net income per unit:
As reported ............ $ 2.46 $ 2.28 $ 3.28 $ 3.61
Goodwill amortization .. -- 0.07 -- 0.15
---------- ---------- ---------- ----------
As adjusted ............ $ 2.46 $ 2.35 $ 3.28 $ 3.76
========== ========== ========== ==========
Diluted net income per unit:
As reported ............ $ 2.45 $ 2.28 $ 3.27 $ 3.61
Goodwill amortization .. -- 0.07 -- 0.15
---------- ---------- ---------- ----------
As adjusted ............ $ 2.45 $ 2.35 $ 3.27 $ 3.76
========== ========== ========== ==========
Other intangible assets at March 30, 2002 and September 29, 2001 consist
primarily of non-compete agreements with a gross carrying amount of $4,440 and
$4,540, respectively, and accumulated amortization of $2,721 and $2,550,
respectively. These non-compete agreements are amortized under the straight-line
method over the periods of the agreements, ending periodically between fiscal
years 2002 and 2011. Aggregate amortization expense related to other intangible
assets for the three and six months ended March 30, 2002 was $126 and $252,
respectively, and for the three and six months ended March 31, 2001 was $143 and
$293, respectively.
Aggregate amortization expense related to other intangible assets for each of
the five succeeding fiscal years as of March 30, 2002 is as follows:
Fiscal Year
-----------
Remainder of 2002 $ 244
2003 426
2004 360
2005 303
2006 232
For the six months ended March 30, 2002, the carrying amount of goodwill
decreased by $359 as a result of the sale of certain assets during the period.
5. DISTRIBUTIONS OF AVAILABLE CASH
-------------------------------
The Partnership makes distributions to its partners approximately 45 days after
the end of each fiscal quarter in an aggregate amount equal to its Available
Cash for each respective quarter. Available Cash, as defined in the Amended and
Restated Partnership Agreement, generally means all cash on hand at the end of
the fiscal quarter less the amount of cash reserves established by the Board of
Supervisors in its reasonable discretion for future cash requirements of the
Partnership.
On April 25, 2002, the Partnership declared a quarterly distribution of $.5625
per Common Unit, or $2.25 on an annualized basis, for the second quarter of
fiscal 2002 payable on May 14, 2002 to holders of record on May 7, 2002. This
quarterly distribution includes incentive distribution rights payable to the
General Partner to the extent the quarterly distribution exceeds $.55 per Common
Unit.
6. LONG-TERM BORROWINGS
--------------------
Long-term borrowings consist of the following:
March 30, September 29,
2002 2001
------------- -------------
7.54% Senior Notes due June 30, 2011 ......... $425,000 $425,000
Note payable, 8%, due in annual installments
through 2006 ............................ 2,048 2,048
Amounts outstanding under Acquisition Facility
of Revolving Credit Agreement ........... 46,000 46,000
Other long-term liabilities .................. 72 129
------------- -------------
473,120 473,177
Less: current portion ........................ 411 42,907
------------- -------------
$472,709 $430,270
============= =============
On March 5, 1996, the Operating Partnership issued $425,000 of Senior Notes with
an annual interest rate of 7.54%. The Operating Partnership's obligations under
the Senior Note Agreement are unsecured and rank on an equal and ratable basis
with the Operating Partnership's obligations under the Revolving Credit
Agreement. The Senior Notes will mature June 30, 2011, and require semiannual
interest payments which commenced June 30, 1996. Under the terms of the Senior
Note Agreement, the Operating Partnership is obligated to pay the principal on
the Senior Notes in equal annual payments of $42,500 starting July 1, 2002. On
April 19, 2002, the Partnership executed a Note Purchase Agreement that
refinances the first annual principal payment of $42,500 through a private
placement of 10-year senior notes due June, 2012. The new senior notes have been
priced at a fixed rate of 7.37%, with funding to take place on June 28, 2002.
Accordingly, the Partnership has classified the first annual payment of $42,500
as long-term borrowings in the accompanying Consolidated Balance Sheet as of
March 30, 2002.
7. 2000 RESTRICTED UNIT PLAN
-------------------------
During fiscal 2002, the Partnership awarded 66,298 Restricted Units under the
2000 Restricted Unit Plan at an aggregate value of $1,765 to 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 Common Units by the award
recipients 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. Upon award of Restricted Units, the
unamortized unearned compensation value is shown as a reduction to partners'
capital. The unearned compensation is amortized ratably to expense over the
restricted periods.
8. COMMITMENTS AND CONTINGENCIES
-----------------------------
The Partnership is self-insured for general and product, workers' compensation
and automobile liabilities up to predetermined amounts above which third party
insurance applies. At March 30, 2002 and September 29, 2001, the Partnership had
accrued insurance liabilities of $25,007 and $25,741, respectively, representing
the total estimated losses under these self-insurance programs. These
liabilities represent the gross estimated losses as no claims or lawsuits,
individually or in the aggregate, were estimated to exceed the Partnership's
deductibles on its insurance policies.
The Partnership is also involved in various legal actions that 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's financial position or future
results of operations, after considering its self-insurance liability for known
and unasserted self-insurance claims.
9. RECENTLY ISSUED ACCOUNTING STANDARDS
------------------------------------
In July 2001, the Financial Accounting Standards Board ("FASB") issued SFAS No.
143, "Accounting for Asset Retirement Obligations" ("SFAS 143"), which requires
that the fair value of a liability for an asset retirement obligation be
recognized in the period in which it is incurred and the associated asset
retirement costs be capitalized as part of the carrying amount of the long-lived
asset. Accretion expense and depreciation expense related to the liability and
capitalized asset retirement costs, respectively, would be recorded in
subsequent periods. SFAS 143 is effective for fiscal years beginning after June
15, 2002. The Partnership is currently in the process of evaluating the impact
of SFAS 143 and does not anticipate that adoption of this standard will have a
material impact, if any, on its consolidated financial position, results of
operations or cash flows.
In October 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets" ("SFAS 144"). SFAS 144 applies to all long-lived
assets, including discontinued operations, and provides guidance on the
measurement and recognition of impairment charges for assets to be held and
used, assets to be abandoned and assets to be disposed of by sale. SFAS 144
supersedes SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to Be Disposed Of." SFAS 144 is effective for fiscal years
beginning after December 15, 2001. The provisions of this standard are to be
applied prospectively. The Partnership is currently in the process of evaluating
the impact of SFAS 144 and does not anticipate that adoption of this standard
will have a material impact on its consolidated financial position, results of
operations or cash flows.
10. SALE OF STORAGE FACILITY
------------------------
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 $8,000, resulting in a gain on
sale of approximately $6,768.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following is a discussion of the financial condition and results of
operations of the Partnership as of and for the three and six months ended March
30, 2002. The discussion should be read in conjunction with the historical
consolidated financial statements and notes thereto included in the Annual
Report on Form 10-K for the most recent fiscal year ended September 29, 2001.
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
- -----------------------------------------------
THIS QUARTERLY REPORT ON FORM 10-Q CONTAINS FORWARD-LOOKING STATEMENTS
WITHIN THE MEANING OF SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED, RELATING TO THE PARTNERSHIP'S FUTURE BUSINESS EXPECTATIONS AND
PREDICTIONS AND FINANCIAL CONDITION AND RESULTS OF OPERATIONS. THESE
FORWARD-LOOKING STATEMENTS INVOLVE CERTAIN RISKS AND UNCERTAINTIES THAT COULD
CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE DISCUSSED OR IMPLIED IN
SUCH FORWARD-LOOKING STATEMENTS ("CAUTIONARY STATEMENTS"). THE RISKS AND
UNCERTAINTIES AND THEIR IMPACT ON THE PARTNERSHIP'S 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 THE ABILITY OF THE PARTNERSHIP TO COMPETE WITH OTHER SUPPLIERS OF PROPANE AND
OTHER ENERGY SOURCES;
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 LINES
OF BUSINESS AND TO INTEGRATE ACQUIRED BUSINESSES SUCCESSFULLY.
ALL SUBSEQUENT WRITTEN AND ORAL FORWARD-LOOKING STATEMENTS ATTRIBUTABLE TO
THE PARTNERSHIP OR PERSONS ACTING ON ITS BEHALF ARE EXPRESSLY QUALIFIED IN THEIR
ENTIRETY BY SUCH CAUTIONARY STATEMENTS.
PRODUCT COSTS
The retail propane business is a "margin-based" business where the level of
profitability 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. Propane unit cost changes
can occur rapidly over a short period of time and can impact retail margins.
There is no assurance that the Partnership will be able to pass on product cost
increases fully, particularly when product costs increase rapidly.
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 the Partnership's retail propane volume is sold
during the six month peak heating season of October through March. Consequently,
sales and operating profits are concentrated in the Partnership's first and
second fiscal quarters. Cash flows from operations, therefore, are greatest
during the second and third fiscal quarters when customers pay for propane
purchased during the winter heating season. To the extent necessary, the
Partnership 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 customers of the Partnership rely
heavily on propane as a heating fuel. Accordingly, the volume of propane sold is
directly affected by the severity of the winter weather which can vary
substantially from year to year.
RESULTS OF OPERATIONS
- ---------------------
THREE MONTHS ENDED MARCH 30, 2002 COMPARED TO THREE MONTHS ENDED MARCH 31, 2001
- -------------------------------------------------------------------------------
REVENUES. Revenues decreased 33.5%, or $119.0 million, to $235.9 million
for the three months ended March 30, 2002 compared to $354.9 million for the
three months ended March 31, 2001. This decrease is principally due to a
decrease in average selling prices, coupled with a decrease in retail volumes
sold. Average selling prices declined as a result of a significant decline in
the commodity price of propane which began in March 2001 and continued
throughout the second quarter of fiscal 2002. Average propane selling prices
were approximately 27% lower during the three months ended March 30, 2002 as
compared to the prior year quarter. The decrease in volume is primarily
attributable to the unusually warm weather conditions, which began in the first
quarter of fiscal 2002 and continued throughout the majority of the second
quarter, as well as, to a lesser extent, the impact of the current economic
downturn on commercial and industrial customers.
Retail gallons sold decreased 8.9%, or 16.5 million gallons, to 168.6
million gallons, compared to 185.1 million gallons in the prior year quarter.
Temperatures nationwide were 10% warmer than normal during the three month
period ended March 30, 2002, which was 9% warmer than the prior year quarter, as
reported by the National Oceanic and Atmospheric Administration ("NOAA"). The
increase in temperatures was greatest during January and February when the
heating season is normally at its peak.
Revenue from other sources; including sales of appliances, related parts
and services, of $23.1 million for the three months ended March 30, 2002 was
comparable to other revenue in the prior year quarter of $22.2 million.
OPERATING EXPENSES. Operating expenses decreased 10.7%, or $7.2 million, to
$59.8 million for the three months ended March 30, 2002 compared to $67.0
million for the three months ended March 31, 2001. The decrease in operating
expenses is principally attributable to our ability to reduce costs amidst
declining volumes resulting from management's ongoing initiatives to shift costs
from fixed to variable, primarily in the areas of employee compensation and
benefits. In addition, the lower fuel cost environment has had a favorable
impact on the cost of operating our fleet. Operating expenses in the second
quarter of fiscal 2002 include a $3.4 million unrealized gain attributable to
the mark-to-market adjustment on derivative instruments, compared to a $2.9
million unrealized gain in the prior year quarter (see Item 3 Quantitative and
Qualitative Disclosures About Market Risk for information on our policies
regarding the accounting for derivative instruments).
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
decreased 12.0%, or $1.1 million, to $8.1 million for the three months ended
March 30, 2002 compared to $9.2 million for the three months ended March 31,
2001, again attributable to management's cost containment efforts particularly
in the areas of employee compensation and benefits.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense
decreased 26.0%, or $2.6 million, to $7.4 million compared to $10.0 million in
the prior year quarter as a result of our decision to early adopt Statement of
Financial Accounting Standards ("SFAS") No. 142, "Goodwill and Other Intangible
Assets" ("SFAS 142") effective September 30, 2001 (the beginning of fiscal
2002), which eliminates the requirement to amortize goodwill and certain
intangible assets. If SFAS 142 had been in effect last year, fiscal 2001 second
quarter net income would have increased by $1.9 million. Refer to "Adoption of
New Accounting Standard" below for further information on the adoption of SFAS
142.
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 increased $3.2 million to $70.7 million in the
three months ended March 30, 2002 compared to $67.5 million in the prior year
quarter. Earnings before interest, taxes, depreciation and amortization
("EBITDA") increased $0.6 million, or 0.8%, to $78.2 million in the three months
ended March 30, 2002. The improvement in income before interest expense and
income taxes and in EBITDA over the prior year quarter reflects the impact of
the 8.9% lower retail volumes sold attributable to the unseasonably warm weather
conditions; offset by the approximate 10.9% lower combined operating and general
and administrative expenses described above, as well as the impact of the gain
on the sale of our Hattiesburg, Mississippi storage facility.
EBITDA should not be considered as an alternative to net income (as an
indicator of operating performance) or as an alternative to cash flow (as a
measure of liquidity or ability to service debt obligations) and is not in
accordance with or superior to generally accepted accounting principles, but
provides additional information for evaluating our ability to distribute our
quarterly distributions. Because EBITDA excludes some, but not all, items that
affect net income and this measure may vary among companies, the EBITDA data
presented above may not be comparable to similarly titled measures of other
companies.
INTEREST EXPENSE. Net interest expense decreased $1.6 million, or 15.5%, to
$8.7 million for the three months ended March 30, 2002 compared to $10.3 million
in the prior year quarter. This decrease is primarily attributable to reductions
in average amounts outstanding under our Revolving Credit Agreement and, to a
lesser extent, lower average interest rates. There were no outstanding
borrowings under the working capital facility of the Revolving Credit Agreement
during the second quarter of fiscal 2002 compared to $7.3 million at the end of
the prior year quarter.
SIX MONTHS ENDED MARCH 30, 2002 COMPARED TO SIX MONTHS ENDED MARCH 31, 2001
- ---------------------------------------------------------------------------
REVENUES. Revenues decreased 35.8%, or $233.0 million, to $417.8 million
for the six months ended March 30, 2002 compared to $650.8 million for the six
months ended March 31, 2001. This decrease is principally due to a decrease in
average selling prices, as well as a decrease in retail volumes sold as compared
to the same period in the prior fiscal year. Propane selling prices averaged 22%
lower during the six months ended March 30, 2002 compared to the prior year
period, as a result of lower costs of propane supply. The decrease in volumes is
primarily attributable to the significantly warmer weather conditions through
the first six months of fiscal 2002 compared to the comparable period in the
prior year.
Retail gallons sold decreased 16.2%, or 56.4 million gallons, to 292.6
million gallons for the six months ended March 30, 2002, compared to 349.0
million gallons in the prior year period. Temperatures nationwide were 13%
warmer than normal during the six month period as compared to 5% colder than
normal in the prior year period, or 17% warmer conditions year-over-year, as
reported by the NOAA. The wide swing in temperatures was particularly felt
during the peak heating months of November 2001 through February 2002.
Revenue from other sources; including sales of appliances, related parts
and services, of $51.2 million for the six months ended March 30, 2002 was
comparable to other revenue in the prior year quarter of $49.6 million.
OPERATING EXPENSES. Operating expenses decreased 11.9%, or $15.8 million,
to $117.4 million for the six months ended March 30, 2002 compared to $133.2
million for the six months ended March 31, 2001. Operating expenses in the first
six months of fiscal 2002 include a $6.1 million unrealized gain attributable to
the mark-to-market adjustment on derivative instruments, compared to a $1.8
million unrealized gain in the prior year period (see Item 3 Quantitative and
Qualitative Disclosures About Market Risk for information on our policies
regarding the accounting for derivative instruments). Exclusive of this
mark-to-market impact, the decrease in operating expenses is principally
attributable to our ability to reduce costs amidst declining volumes resulting
from management's ongoing initiatives to shift costs from fixed to variable,
primarily in the areas of employee compensation and benefits. In addition, we
experienced lower bad debt expense during fiscal 2002 compared to the prior year
period, as well as lower fuel costs for operating our fleet from lower natural
gas prices in fiscal 2002.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
decreased 12.1%, or $2.1 million, to $15.3 million for the six months ended
March 30, 2002 compared to $17.4 million for the six months ended March 31,
2001, again attributable to management's cost containment efforts particularly
in the areas of employee compensation and benefits.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense
decreased 23.5%, or $4.6 million, to $15.0 million for the six months ended
March 30, 2002 compared to $19.6 million in the prior year period as a result of
our decision in fiscal 2002 to early adopt SFAS 142. If SFAS 142 had been in
effect last year, net income for the six months ended March 31, 2001 would have
increased by $3.7 million. Refer to "Adoption of New Accounting Standard" below
for further information on the adoption of SFAS 142.
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 $10.1 million to $100.2 million in
the six months ended March 30, 2002 compared to $110.3 million for the prior
year period. EBITDA decreased $14.7 million, or 11.3%, to $115.2 million. The
declines in income before interest expense and income taxes and in EBITDA are
primarily attributable to lower retail volumes sold, partially offset by the
impact of lower operating and general and administrative expenses described
above, as well as the impact of the gain on the sale of our Hattiesburg,
Mississippi storage facility.
EBITDA should not be considered as an alternative to net income (as an
indicator of operating performance) or as an alternative to cash flow (as a
measure of liquidity or ability to service debt obligations) and is not in
accordance with or superior to generally accepted accounting principles but
provides additional information for evaluating our ability to distribute our
quarterly distributions. Because EBITDA excludes some, but not all, items that
affect net income and this measure may vary among companies, the EBITDA data
presented above may not be comparable to similarly titled measures of other
companies.
INTEREST EXPENSE. Net interest expense decreased $2.9 million, or 14.3%, to
$17.4 million for the six months ended March 30, 2002 compared to $20.3 million
in the prior year period. This decrease is primarily attributable to reductions
in average amounts outstanding under our Revolving Credit Agreement and, to a
lesser extent, lower average interest rates. There were no outstanding
borrowings under the working capital facility of the Revolving Credit Agreement
during the first six months of fiscal 2002 compared to $26.0 million at the end
of the first quarter of fiscal 2001 and $7.3 million at the end of the second
quarter of fiscal 2001.
LIQUIDITY AND CAPITAL RESOURCES
Due to the seasonal nature of the propane business, cash flows from
operating activities are greater during the winter and spring seasons as
customers pay for propane purchased during the heating season. For the six
months ended March 30, 2002, net cash provided by operating activities was $36.1
million compared to cash provided by operating activities of $37.4 million for
the six months ended March 31, 2001. The decrease of $1.3 million was primarily
due to lower net income of $18.1 million, after adjusting for non-cash items in
both periods (depreciation, amortization and gains on disposal of assets),
partly offset by favorable changes in working capital in comparison to the prior
year period.
Net cash provided by investing activities during the six months ended March
30, 2002 consists of net proceeds from the sale of property, plant and equipment
of $9.6 million (including net cash proceeds of $8.0 million resulting from the
sale of our propane storage facility in Hattiesburg, Mississippi), offset by
capital expenditures of $9.6 million (including $5.8 million for maintenance
expenditures and $3.8 million to support the growth of operations). Net cash
used in investing activities was $8.1 million during the six months ended March
31, 2001 consisting of capital expenditures of $9.5 million (including $1.4
million for maintenance expenditures and $8.1 million to support the growth of
operations), offset by net proceeds from the sale of property, plant and
equipment of $1.4 million.
Net cash used in financing activities for the six months ended March 30,
2002 was $28.3 million, reflecting Partnership distributions. Net cash used in
financing activities for the six months ended March 31, 2001 was $23.8 million,
reflecting $26.9 million in Partnership distributions and $44.0 million of net
repayments of amounts outstanding under the Revolving Credit Agreement,
partially offset by $47.1 million in net proceeds received from the public
offering of 2.4 million Common Units which was completed in November 2000.
On March 5, 1996, we issued $425.0 million of Senior Notes with an annual
interest rate of 7.54%. Our obligations under the Senior Note Agreement are
unsecured and rank on an equal and ratable basis with our obligations under the
Revolving Credit Agreement. The Senior Notes will mature June 30, 2011, and
require semiannual interest payments which commenced June 30, 1996. Under the
terms of the Senior Note Agreement, the Operating Partnership is obligated to
pay the principal on the Senior Notes in equal annual payments of $42.5 million
starting July 1, 2002. On April 19, 2002, we executed a Note Purchase Agreement
that refinances the first annual principal payment of $42.5 million through a
private placement of 10-year senior notes due June, 2012. The new senior notes
have been priced at a fixed rate of 7.37%, with funding to take place on June
28, 2002. Accordingly, we have classified the first annual payment of $42.5
million as long-term borrowings in our Consolidated Balance Sheet as of March
30, 2002.
We will make distributions in an amount equal to all of our Available Cash,
as defined in the Amended and Restated Partnership Agreement, approximately 45
days after the end of each fiscal quarter to holders of record on the applicable
record dates. The Board of Supervisors reviews the level of Available Cash on a
quarterly basis based upon information provided by management. During each of
the first two quarters of fiscal 2002, we made distributions to our Common
Unitholders of $.5625 per Common Unit. These quarterly distributions include
Incentive Distribution Rights ("IDRs") payable to the General Partner to the
extent the quarterly distribution exceeds $.55 per Common Unit. The IDRs
represent an incentive for the General Partner (which is owned by the management
of the Partnership) to increase the distributions to Common Unitholders in
excess of the $.55 per Common Unit. With regard to the first $.55 of the Common
Unit distribution paid in each of the first two quarters, 98.11% of the
Available Cash was distributed to the Common Unitholders and 1.89% was
distributed to the General Partner. With regard to the balance of $.0125 of the
Common Unit distributions paid, 85% of the Available Cash was distributed to the
Common Unitholders and 15% was distributed to the General Partner.
On April 25, 2002, we declared a quarterly distribution of $.5625 per
Common Unit, or $2.25 on an annualized basis, for the second quarter of fiscal
2002 payable on May 14, 2002 to holders of record on May 7, 2002.
As discussed above, the results of operations for the first six months of
fiscal 2002 were adversely impacted by unseasonably warm weather nationwide, as
weather was 13% warmer than normal and 17% warmer than the prior year period.
However, our ability to manage our cost structure, coupled with our success in
monetizing the Hattiesburg, Mississippi storage facility, which was considered a
non-strategic asset, helped mitigate the negative impact that warmer weather
conditions may have had on our results of operations and cash flow. Even with
near record warm temperatures nationwide during the first six months of fiscal
2002, we effectively managed our cash flow during the peak heating season
without the need to utilize our working capital facility under the Revolving
Credit Agreement. While the remainder of our fiscal year is typically less
dependent on weather patterns, the seasonal nature of the propane business is
such that lower revenues and lower net income is anticipated during the period
from April through September of each year. Based on our current estimate of our
cash position, availability under the Revolving Credit Agreement (unused
borrowing capacity under the working capital facility of $75.0 million at March
30, 2002) and expected cash from operating activities, we expect to have
sufficient funds to meet our current and future obligations.
LONG-TERM DEBT OBLIGATIONS AND OTHER COMMITMENTS
Long-term debt obligations and future minimum rental commitments under
noncancelable operating lease agreements as of March 30, 2002 are due as follows
(amounts in thousands):
Remainder Fiscal
of Fiscal Fiscal Fiscal Fiscal 2006 and
2002 2003 2004 2005 thereafter Total
-------- -------- -------- -------- ---------- --------
Long-term debt ........................................ $ 354 $ 88,941 $ 42,911 $ 42,939 $297,975 $473,120
Operating leases ...................................... 11,274 19,921 16,474 11,931 21,424 81,024
Total long-term debt obligations
-------- -------- -------- -------- -------- --------
and lease commitments ........................... $ 11,628 $108,862 $ 59,385 $ 54,870 $319,399 $554,144
======== ======== ======== ======== ======== ========
Additionally, we have standby letters of credit in the aggregate amount of
$29.8 million, in support of our casualty insurance coverage and certain lease
obligations, which expire on March 1, 2003.
RELATED PARTY TRANSACTION
The Partnership's general partner, Suburban Energy Services Group LLC (the
"General Partner"), acquired the general partner interests from a predecessor
general partner on May 26, 1999 for $6.0 million (the "GP Loan") which was
borrowed under a private placement with Mellon Bank N.A. ("Mellon"). As of March
30, 2002, the balance outstanding under the GP Loan was $0.8 million.
Upon the occurrence and continuance of an event of default, as defined in
the GP Loan, Mellon has the right to cause the Partnership to purchase the note
evidencing the GP Loan (the "GP Note"). The Partnership has agreed to maintain
borrowing availability under its Revolving Credit Agreement sufficient to enable
the Partnership to repurchase the GP Note in these circumstances. The GP Loan
will also cross-default to the obligations of the Partnership under its
Revolving Credit Agreement. Upon a GP Loan default, the Partnership also has the
right to purchase the GP Note from Mellon.
If the Partnership elects or is required to purchase the GP Note from
Mellon, the Partnership has the right, exercisable in its sole discretion
pursuant to the Compensation Deferral Plan established for the members of the
Successor General Partner, to cause up to all of the Common Units deposited in
the trust (amounting to $11.6 million as of March 30, 2002 and September 29,
2001) related to the Compensation Deferral Plan to be forfeited and cancelled
(and to cause all of the related distributions to be forfeited), regardless of
the amount paid by the Partnership to purchase the GP Note.
ADOPTION OF NEW ACCOUNTING STANDARD
Effective September 30, 2001, the beginning of our 2002 fiscal year, we
elected to early adopt the provisions of SFAS 142. SFAS 142 modifies the
financial accounting 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 result of the adoption of SFAS 142, amortization
expense for the three and six months ended March 30, 2002 decreased by $1.9
million and $3.7 million, respectively, compared to the three and six months
ended March 31, 2001, respectively, as a result of the lack of amortization
expense related to goodwill. Aside from this change in accounting for goodwill,
no other change in accounting for intangible assets was required as a result of
the adoption of SFAS 142 based on the nature of our intangible assets. In
accordance with SFAS 142, we completed a transitional impairment review and, as
the fair values of identified reporting units exceed the respective carrying
values, goodwill is not considered impaired as of the date of adoption of SFAS
142.
RECENTLY ISSUED ACCOUNTING STANDARDS
In July 2001, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 143, "Accounting for Asset Retirement Obligations" ("SFAS 143"), which
requires that the fair value of a liability for an asset retirement obligation
be recognized in the period in which it is incurred and the associated asset
retirement costs be capitalized as part of the carrying amount of the long-lived
asset. Accretion expense and depreciation expense related to the liability and
capitalized asset retirement costs, respectively, would be recorded in
subsequent periods. SFAS 143 is effective for fiscal years beginning after June
15, 2002. We are currently in the process of evaluating the impact of SFAS 143
and do not anticipate that adoption of this standard will have a material
impact, if any, on its consolidated financial position, results of operations or
cash flows.
In October 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets" ("SFAS 144"). SFAS 144 applies to
all long-lived assets, including discontinued operations, and provides guidance
on the measurement and recognition of impairment charges for assets to be held
and used, assets to be abandoned and assets to be disposed of by sale. SFAS 144
supersedes SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to Be Disposed Of". SFAS 144 is effective for fiscal years
beginning after December 15, 2001. The provisions of this standard are to be
applied prospectively. We are currently in the process of evaluating the impact
of SFAS 144 and do not anticipate that adoption of this standard will have a
material impact on our consolidated financial position, results of operations or
cash flows.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As of March 30, 2002, the Partnership was party to propane forward and
option contracts with various third parties and futures traded on the New York
Mercantile Exchange (the "NYMEX"). Futures and forward contracts require that
the Partnership sell or acquire propane at a fixed price at fixed future dates.
An option contract allows, but does not require, its holder to buy or sell
propane at a specified price during a specified time period; the writer of an
option contract must fulfill the obligation of the option contract, should the
holder choose to exercise the option. At expiration, the contracts are settled
by the delivery of propane to the respective party or are settled by the payment
of a net amount equal to the difference between the then current price of
propane and the fixed contract price. The contracts are entered into in
anticipation of market movements and to manage and hedge exposure to fluctuating
propane prices as well as to help ensure the availability of propane during
periods of high demand.
Market risks associated with the trading of futures, options and forward
contracts are monitored daily for compliance with the Partnership's trading
policy which includes volume limits for open positions. Open inventory positions
are reviewed and managed daily as to exposures to changing market prices.
MARKET RISK
The Partnership is subject to commodity price risk to the extent that
propane market prices deviate from fixed contract settlement amounts. Futures
traded with brokers of the NYMEX require daily cash settlements in margin
accounts. Forward and option contracts are generally settled at the expiration
of the contract term either by physical delivery or through a net settlement
mechanism.
CREDIT RISK
Futures are guaranteed by the NYMEX and as a result have minimal credit
risk. The Partnership is subject to credit risk with forward and option
contracts to the extent the counterparties do not perform. The Partnership
evaluates the financial condition of each counterparty with which it conducts
business and establishes credit limits to reduce exposure to credit risk of
non-performance.
SENSITIVITY ANALYSIS
In an effort to estimate the exposure of unfavorable market price
movements, a sensitivity analysis of open positions as of March 30, 2002 was
performed. Based on this analysis, a hypothetical 10% adverse change in market
prices for each of the future months for which an option, futures and/or forward
contract exists indicates a potential loss in future earnings of $1.7 million
and $1.1 million as of March 30, 2002 and March 31, 2001, respectively. See also
Item 7A of the Partnership's Annual Report on Form 10-K for the fiscal year
ended September 29, 2001.
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 at any given point in time.
DERIVATIVE INSTRUMENTS
The Partnership accounts for its derivative instruments in accordance with
the provisions of SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities" ("SFAS 133"), as amended by SFAS No. 137 and SFAS No. 138.
As of March 30, 2002, the Partnership's derivative instruments do not qualify,
and are therefore not designated, as hedges under SFAS 133. Accordingly,
derivative instruments are recorded as assets or liabilities based on their fair
value and any subsequent changes in fair values of these instruments are
recorded in income. At March 30, 2002, the fair value of derivative instruments
described above resulted in derivative assets of $2.5 million and derivative
liabilities of $0.5 million. The unrealized gain reflected in operating expenses
for the three and six month periods ended March 30, 2002 amounted to $3.4
million and $6.1 million, respectively, compared to $2.9 million and $1.8
million for the three and six month periods ended March 31, 2001, respectively.
Fair values for forward and futures contracts are derived from quoted market
prices for similar instruments traded on the NYMEX.
PART II
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10(a) Amendment No. 4 to the Note Agreement dated March 21, 2002 for
the 7.54% Senior Notes due June 30, 2011.
10(b) Guarantee Agreement dated as of April 11, 2002 provided by four
direct subsidiaries of Suburban Propane, L.P.
10(c) Intercreditor Agreement dated March 21, 2002 between First Union
National Bank, the Banks under the Company's Amended and Restated
Credit Agreement and the Noteholders of the Company's 7.54% Senior
Notes due June 30, 2011.
10(d) First Amendment to Amended and Restated Credit Agreement dated
as of April 3, 2002 between Suburban Propane, L.P., Wachovia Bank,
National Association, as Administrative Agent, Fleet National Bank, as
Syndication Agent, The Bank of New York, ABN Amro Bank N.V. and Mizuho
Corporate Bank, LTD.
(b) Reports on Form 8-K
The Partnership furnished a Form 8-K to the Securities and Exchange
Commission on April 11, 2002 incorporating a press release announcing
the Partnership's Quarterly Earnings Conference Call.
Other items under Part II are not applicable.
SIGNATURES
Pursuant to the requirements 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.
May 13, 2002 /s/ ROBERT M. PLANTE
- ----------- --------------------
Date Robert M. Plante
Vice President - Finance and Treasurer
(Principal Financial Officer)
May 13, 2002 /s/ MICHAEL A. STIVALA
- ----------- ----------------------
Date Michael A. Stivala
Controller
(Principal Accounting Officer)
Exhibit 10(a)
-------------
AMENDMENT NO. 4
to Note Agreement for
7.54% Senior Notes due 2011
SUBURBAN PROPANE, L.P.
March 21, 2002
To each of the Holders of the 7.54% Senior Notes due 2011 of Suburban Propane,
L.P.
Ladies and Gentlemen:
Suburban Propane, L.P. (the "Company") has heretofore issued its 7.54%
Senior Notes due June 30, 2011 (the "Notes") in the aggregate principal amount
of $425,000,000 under and pursuant to the Note Agreement, dated as of February
28, 1996, among the Company and the original purchasers of the Notes, as amended
by Amendment No. 1 dated May 5, 1998, Amendment No. 2 dated March 29, 1999 and
Amendment No. 3 dated December 6, 2000 (such agreement, as so amended, the "Note
Agreement"). Terms used herein which are defined in the Note Agreement are used
herein as so defined.
Paragraph 5L of the Note Agreement prohibits subsidiaries of the Company
from providing any guarantees of Parity Debt until an Intercreditor Agreement is
executed. In 1997, the Company renegotiated its then existing credit agreement
(which stated that guarantees to the lenders thereunder had been delivered by
certain Subsidiaries) and, at that time, the five Subsidiaries listed below (the
"Nameholder Subsidiaries") mistakenly provided guarantees to the lenders with
regard to the Company borrowings under the 1997 credit agreement. These
guarantees should not have been provided by the Nameholder Subsidiaries because
there was no Intercreditor Agreement. Also, under the provisions of paragraph 5L
of the Note Agreement, any Subsidiary that provides a guarantee is required to
provide the same guarantee to the holders of the Notes, which was not done. The
Nameholder Subsidiaries presently have no operations, revenue or income and
during the term that the Notes have been outstanding, have not had any
operations, revenue or income. The Nameholder Subsidiaries are:
Suburban Propane Gas Corporation
Pargas, Inc.
Vangas, Inc.
Plateau, Inc.
In December 2000, in conjunction with the Company's creation of new operating
subsidiaries, the Company provided both the lenders under its existing Credit
Agreement guarantees and holders of the Notes Subsidiary Guarantees of these
Subsidiaries:
Suburban @ Home, Inc.
Gas Connection, Inc.
Suburban Franchising, Inc.
Suburban Holdings, Inc.
In consideration of the amendments and waivers set forth below, the Company
proposes to provide the holders of the Notes Subsidiary Guarantees from the
Nameholder Subsidiaries.
In connection with the foregoing the Company is requesting certain
amendments to, and waivers under and in respect of, the Note Agreement and,
subject to the terms and provisions hereof, each undersigned holder of Notes is
agreeable thereto. Accordingly, the Company agrees with you as follows:
1. Amendments and Waivers.
----------------------
(a) PARAGRAPH 5L. Paragraph 5L of the Note Agreement is deleted
in its entirety and the following substituted therefor:
5L. SUBSIDIARY GUARANTORS. Upon any Person (other than, so long
as it does not enter into any Guarantee in respect of Parity
Debt, a foreign Person and Suburban Sales & Service, Inc.)
becoming a Restricted Subsidiary of the Company, the Company will
cause each Restricted Subsidiary to execute and deliver a
Subsidiary Guarantee.
(b) DEFINITIONS--CREDIT AGREEMENT. The definition of Credit
Agreement contained in paragraph 10B is deleted in its entirety and
the following substituted therefor:
"CREDIT AGREEMENT" shall mean the Amended and Restated Credit
Agreement, dated as of January 29, 2001, First Union National
Bank as administrative agent, the several banks and other
financial institutions from time to time party thereto,
evidencing the Acquisition Facility and the Revolving Credit
Facility, as the same may be replaced, extended, renewed,
amended, supplemented or otherwise modified from time to time in
accordance with the terms thereof and hereof.
(c) DEFINITIONS--INTERCREDITOR AGREEMENT. The definition of
Intercreditor Agreement contained in paragraph 10B is deleted in its
entirety and the following substituted therefor:
"INTERCREDITOR AGREEMENT" shall mean the agreement entered into
among the Required Holders, the lenders under the Credit
Agreement and the other financial institutions which are at the
time parties thereto, in the form of Exhibit D to this Agreement.
(d) DEFINITIONS--INTERCREDITOR AGREEMENT EFFECTIVE DATE. The
definition of Intercreditor Agreement Effective Date contained in
paragraph 10B is deleted in its entirety.
(e) DEFINITIONS--PERMITTED PARITY GUARANTEE. The definition of
Permitted Parity Guarantee contained in paragraph 10B is deleted in
its entirety and the following substituted therefor:
"PERMITTED PARITY GUARANTEE" shall mean a Guarantee in favor of
Parity Debt which is subject to the Intercreditor Agreement and
which contains substantially the same terms and conditions as the
Subsidiary Guarantee referred to herein.
(f) FORM OF SUBSIDIARY GUARANTEE. The form of Subsidiary
Guarantee attached to the Note Agreement as Exhibit C is deleted in
its entirety and the form of Subsidiary Guarantee attached hereto as
Annex A is substituted therefor.
(g) INTERCREDITOR AGREEMENT. The Intercreditor Agreement attached
hereto as Annex B shall be attached to the Note Agreement as Exhibit D
thereto.
(h) WAIVER. Upon the effectiveness of this Amendment No. 4, any
Event of Default that may have occurred as a result of Restricted
Subsidiaries of the Company having delivered Subsidiary Guarantees and
guarantees of Parity Debt in the absence of an Intercreditor Agreement
having been executed is hereby waived.
2. EFFECTIVENESS. The waivers under and the amendments to the Note
Agreement set forth above shall become effective upon (i) receipt by Willkie
Farr & Gallagher, on behalf of the holders of the Notes, of counterparts of this
letter executed by the Company and the Required Holders, (ii) receipt by Willkie
Farr & Gallagher, on behalf of the holders of the Notes, of the Intercreditor
Agreement executed by the Required Holders and each of the Banks (as defined
therein), (iii) the delivery to each holder of Notes of Subsidiary Guarantees
executed by the Nameholder Subsidiaries and (iv) the payment by the Company to
each holder of Notes of the fee specified in its letter to the holders of Notes,
dated February 12, 2002. The Company represents and warrants to the holders of
the Notes that except with respect to the waiver set forth herein no Default or
Event of Default exists (nor will any such Default or Event of Default exist
after giving effect to the effectiveness of this Agreement) and that in
connection with this solicitation of the consents of the holders of the Notes it
is in compliance with the provisions of paragraph 11C of the Note Agreement. The
Company shall give notice of the effectiveness hereof to all of the holders of
the Notes as provided in the Note Agreement.
3. NOTE AGREEMENT. The Note Agreement, as amended hereby, is and shall
continue to be in full force and effect and is hereby in all respects ratified
and confirmed. Except as expressly modified and amended hereby, all of the
terms, provisions and conditions of the Note Agreement shall remain unchanged
and in full force and effect. On and after the effective date of the waivers
under, and the amendments to, the Note Agreement set forth above, each reference
in the Note Agreement and the Notes shall mean and be a reference to the Note
Agreement as amended hereby.
4. COUNTERPARTS. This letter agreement may be executed in any number
of counterparts and by any combination of the parties hereto in separate
counterparts, each of which counterparts shall be an original and all of which
taken together shall constitute one and the same agreement.
[Balance of this page is blank. Next page is the signature page]
[Signature Page to Amendment No. 4]
If you are in agreement with the foregoing, please sign the form of
acceptance on an enclosed counterpart of this letter and return the same to us
(subject to effectiveness as aforesaid).
SUBURBAN PROPANE, L.P.
By:
-------------------------------------
Robert M. Plante
Vice President - Finance and Treasurer
The foregoing letter
is hereby accepted:
- -----------------------------------
(Name of Institution)
By:
-------------------------------
Title:
Certificate #
---------------------
Exhibit 10(b)
-------------
GUARANTEE AGREEMENT (this "Guarantee") dated as of April 11, 2002,
made by each of the subsidiaries listed on Schedule 1 hereto (each such
subsidiary individually, a "Guarantor" and collectively, the "Guarantors") each
of which is a direct or indirect subsidiary of Suburban Propane, L.P., a
Delaware limited partnership, to and for the benefit of the Beneficiaries (as
defined below).
Suburban Propane, L.P. (the "Borrower") has entered into a Note
Agreement dated as of February 28, 1996 (as amended, modified, supplemented or
waived, the "Note Agreement"), with each of the Purchasers named therein (each
such party and its successors and assigns, other than the Borrower, a
"Beneficiary" and, collectively, the "Beneficiaries");
Each Guarantor has benefited and will benefit from the funds made
available by the Purchasers under the Note Agreement.
Accordingly, in consideration of the foregoing, and for other good and
valuable consideration the receipt and adequacy of which are hereby
acknowledged, each Guarantor hereby agrees with and for the benefit of the
Beneficiaries, as follows:
ARTICLE I.
Definitions
-----------
Unless the context shall otherwise require, capitalized terms used but
not defined herein shall have the meanings assigned to them in the Note
Agreement.
ARTICLE II.
The Guarantee
-------------
SECTION 2.01. GUARANTOR. Each Guarantor hereby unconditionally and
irrevocably guarantees to the Beneficiaries, jointly with the other Guarantors
and severally, as primary obligor together with the Borrower and not merely as
surety, the due and punctual performance and payment of the aggregate
outstanding principal amount of, the interest on, and the Yield-Maintenance
Amount, if any, payable with respect to, the Notes. All payments by each
Guarantor shall be in immediately available dollars and shall be made to the
Beneficiaries in accordance with the Purchaser Schedule to the Note Agreement.
This is a continuing guarantee and each and every default in the payment of
Notes shall give rise to a separate cause of action hereunder, and separate
suits may be brought hereunder as each cause of action arises.
SECTION 2.02. PAYMENT OF NOTES. In furtherance of the foregoing and not in
limitation of any other right which the Beneficiaries may have at law or in
equity against any Guarantor by virtue hereof, upon failure of the Borrower to
make any payment on any Note when and as the same shall become due, whether at
maturity, by prepayment, acceleration or otherwise, each Guarantor hereby
promises to, and will, upon receipt of written demand by any of the
Beneficiaries, forthwith pay, or cause to be paid, to the Beneficiaries, in
cash, the aggregate outstanding principal amount of, the interest on, and the
Yield-Maintenance Amount, if any, payable with respect to, the Notes of the
Borrower to the Beneficiaries then due.
SECTION 2.03. SUBORDINATION AND SUBROGATION. Upon any payment by any
Guarantor to the Beneficiaries hereunder, all rights of each Guarantor against
the Borrower arising as a result thereof shall in all respects be subordinate
and junior in right of payment to the prior indefeasible payment in full of the
principal of, the interest on, and the Yield-Maintenance Amount, if any, payable
with respect to, the Notes and, if any payment shall be made to any Guarantor on
account of such rights prior to the indefeasible payment in full of the
principal of, the interest on, and the Yield-Maintenance Amount, if any, payable
with respect to, the Notes, such payment shall forthwith be paid to the
Beneficiaries pro rata as a prepayment of Notes. Upon any payment by any
Guarantor to the Beneficiaries hereunder, subject to the indefeasible payment in
full of the principal of, the interest on, and the Yield-Maintenance Amount, if
any, payable with respect to, the Notes, each Guarantor shall be subrogated to
the rights of the Beneficiaries to receive payments on the Notes.
SECTION 2.04. WAIVERS AND AGREEMENTS. (a) Each Guarantor waives notice of
acceptance of this Guarantee and also waives presentation to, demand of payment
from and protest to the Borrower of any of the Notes, as well as notice of
protest for nonpayment and all other formalities. The obligation of each
Guarantor hereunder shall not be affected by (i) the failure of any of the
Beneficiaries to assert any claim or demand or to enforce any right or remedy
against the Borrower, any Guarantor or any other person under the Note Agreement
or otherwise; (ii) any refinancing, refunding, extension or renewal of any of
the Notes; (iii) any rescission, waiver, amendment or modification of any of the
terms or provisions of this Guarantee, the Note Agreement or any other agreement
or instrument; (iv) the release of any other person that may become liable in
respect of the Notes; (v) any default, failure or delay, willful or otherwise,
in the performance of or payment on the Notes; or (vi) any other act or omission
or delay to do any other act which might in any manner or to any extent vary the
risk of any Guarantor or which would otherwise operate as a discharge of any
Guarantor or any other person as a matter of law.
(b) Each Guarantor agrees that this Guarantee constitutes a guarantee
of payment when due and not of collection and waives any right to require that
any resort be had by any of the Beneficiaries to any security held for payment
of the Notes. The Beneficiaries, in their sole discretion, shall have the right
to proceed first and directly against any Guarantor.
(c) The Guarantee of each Guarantor hereunder shall not be subject to
any reduction, limitation, impairment or termination for any reason, including,
without limitation, any claim of waiver, release, surrender, alteration or
compromise, and shall not be subject to any defense, counterclaim or termination
whatsoever by reason of the invalidity, illegality or unenforceability of the
Notes or otherwise.
(d) Each Guarantor waives notice of and hereby consents to any
agreements or arrangements whatsoever by the Beneficiaries with any other person
pertaining to the Notes, including, without limitation, agreements and
arrangements for payment, extension, subordination, composition, arrangement,
discharge or release of the whole or any part of the Notes, or for compromise,
whether by way of acceptance of part payment or otherwise, and the same shall in
no way impair any Guarantor's liability hereunder. Nothing shall discharge or
satisfy the liability of any Guarantor hereunder except the full performance and
payment of the aggregate outstanding principal amount of, the interest on, and
the Yield-Maintenance Amount, if any, payable with respect to, the Notes.
(e) Except as permitted under the Note Agreement, each Guarantor shall
not consolidate with or merge into any other person (other than the Borrower) or
sell, lease, transfer or assign to any person (other than the Borrower) or
otherwise dispose of (whether in one transaction or a series of transactions)
assets representing all or substantially all the assets of any Guarantor and its
subsidiaries (whether now owned or hereafter acquired).
SECTION 2.05. REINSTATEMENT UPON BANKRUPTCY. Each Guarantor further agrees
that this Guarantee shall continue to be effective or be reinstated, as the case
may be, if at any time any payment on any Note is rescinded or must otherwise be
restored by any of the Beneficiaries upon the bankruptcy or reorganization of
the Borrower or otherwise.
SECTION 2.06. SUCCESSORS AND ASSIGNS. Each reference herein to the
Beneficiaries shall be deemed to include each of their successors or permitted
assigns under the Note Agreement, in whose favor the provisions of this
Guarantee shall also inure. Except as permitted under the Note Agreement, each
Guarantor shall not assign or transfer any of its rights or obligations
hereunder without - the prior written consent of the Required Holders.
ARTICLE III.
Representations and Warranties
------------------------------
Each of the Guarantors represents and warrants as to itself that all
representations and warranties relating to it contained in the Note Agreement
are true and correct.
ARTICLE IV.
Miscellaneous
-------------
SECTION 4.01. NOTICES. Except as specifically provided elsewhere herein,
notices and other communications provided for herein shall be in writing and
shall be delivered or mailed (or, if by telecopy equipment of the sending party,
delivered by such equipment) addressed:
(a) if to any Guarantor, in all cases to it
In care of Suburban Propane, L.P.
240 Route 10 West
P.O. Box 206
Whippany, NJ 07981
Telecopy: 201-515-5994
Attention of Robert M. Plante, Vice President & Treasurer
(b) if to any Beneficiary, in all cases to it at the addresses and to
the attention of the persons specified in the Purchaser Schedule to the Note
Agreement
with a copy to:
Willkie Farr & Gallagher 787 7th Avenue New York, NY
10019 Telecopy: 212-728-8111
Attention of Robert Stebbins, Esq.
All notices and other communications given hereunder shall be deemed
to have been given on the date of receipt if delivered by hand or overnight
courier service or sent by telecopy equipment of the sender with confirmation
acknowledged, or on the date five Business Days after dispatch by certified or
registered mail if mailed, in each case delivered, sent or mailed (properly
addressed) as provided in this Section 4.01 or in accordance with the latest
unrevoked direction from a Guarantor given in accordance with this Section 4.01.
SECTION 4.02. AMENDMENTS. Neither this Guarantee nor any provision hereof
may be amended or modified except pursuant to an agreement or agreements in
writing entered into by any Guarantor and the Beneficiaries, acting at the
direction of (a) all the Beneficiaries, in the case of any amendment or
modification of any provision of Article II hereof or this Section 4.02 or (b)
the Required Holders in the case of any other amendment or modification. This
Guarantee may not be terminated, and no Guarantor may be released hereunder,
except pursuant to a writing executed by the Beneficiaries, acting at the
direction of the Required Holders.
SECTION 4.03. GOVERNING LAW; SUBMISSION TO JURISDICTION. (a) THIS AGREEMENT
SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF
NEW YORK.
(b) Each Guarantor irrevocably submits to the nonexclusive
jurisdiction of any New York State or Federal court sitting in the Borough of
Manhattan, The City of New York, over any suit, action or proceeding arising out
of or relating to this Guarantee or any other document contemplated hereby,
irrevocably waives and agrees not to assert, by way of motion, as a defense or
otherwise, any claim that it is not subject to the jurisdiction of any such
court, any objection that it may now or hereafter have to the laying of the
venue of any such suit, action or proceeding brought in any such court and any
claim that any such suit, action or proceeding brought in any such court has
been brought in an inconvenient forum.
(c) Each Guarantor agrees, to the fullest extent it may effectively do
so under applicable law, that a judgment in any suit, action or proceeding of
the nature referred to in paragraph (b) above brought in any such court shall be
conclusive and binding upon the Guarantor and may be enforced in the courts of
the United States of America or the State of New York (or any other courts the
jurisdiction of which any Guarantor is or may be subject) by a suit upon such
judgment.
(d) Each Guarantor consents to process being served in any suit,
action or proceeding of the nature referred to in paragraph (b) by mailing a
copy thereof by registered or certified mail, postage prepaid, return receipt
requested, to the address of the Guarantor, as set forth or referred to in
Section 4.01. Each Guarantor agrees that such service (i) shall be deemed in
every respect effective service of process upon the Guarantor in any such suit,
action or proceeding and (ii) shall, to the fullest extent permitted by law, be
taken and held to be valid personal service upon and personal delivery to the
Guarantor.
(e) Nothing in this Section 4.03 shall affect the right of any
Beneficiary to serve process in any manner permitted by law, or limit any right
any Beneficiary may have to bring proceedings against any Guarantor in the
courts of any jurisdiction or to enforce in any lawful manner a judgment
obtained in one jurisdiction in any other jurisdiction.
SECTION 4.04. SURVIVAL OF AGREEMENTS, REPRESENTATIONS AND WARRANTIES, ETC.
All warranties, representations and covenants made by each Guarantor herein
shall be considered to have been relied upon by the Beneficiaries and shall
survive the issuance and sale of the Notes as contemplated in the Note Agreement
regardless of any investigation made by the Beneficiaries or on their behalf and
shall continue in full force and effect so long as any Note due or to become due
hereunder or under the Note Agreement is outstanding.
SECTION 4.05. SEVERABILITY. In case any one or more of the provisions
contained in this Guarantee shall be invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining provisions
contained herein or therein shall not in any way be affected or impaired
thereby. Each Guarantor and each Beneficiary shall endeavor in good-faith
negotiations to replace the invalid, illegal or unenforceable provisions with
valid provisions the economic effect of which comes as close as possible to that
of the invalid, illegal or unenforceable provisions.
SECTION 4.06. SECTION HEADINGS. The section headings used herein are for
convenience of reference only, are not part of this Guarantee and are not to
affect the construction of or be taken into consideration in interpreting this
Guarantee.
SECTION 4.07. WAIVER OF JURY TRIAL. Each Guarantor hereby waives, to the
fullest extent permitted by applicable law, any right it may have to a trial by
jury in respect of any litigation directly or indirectly arising out of, under
or in connection with this Guarantee.
IN WITNESS WHEREOF, each Guarantor has caused this Guarantee to be duly
executed by its duly authorized officer as of the day and year first above
written.
Suburban Propane Gas Corporation
By: Robert M. Plante
----------------------------------------
Name: Robert M. Plante
Title: Vice President, Finance & Treasurer
Pargas, Inc.
By: Robert M. Plante
----------------------------------------
Name: Robert M. Plante
Title: Vice President, Finance & Treasurer
Vangas, Inc.
By: Robert M. Plante
----------------------------------------
Name: Robert M. Plante
Title: Vice President, Finance & Treasurer
Plateau, Inc.
By: Robert M. Plante
----------------------------------------
Name: Robert M. Plante
Title: Vice President, Finance & Treasurer
SCHEDULE 1
Suburban Propane Gas Corporation
Pargas, Inc.
Vangas, Inc.
Plateau, Inc.
Exhibit 10(c)
-------------
INTERCREDITOR AGREEMENT
INTERCREDITOR AGREEMENT dated as of March 21, 2002 by and among (i) First
Union National Bank as Administrative Agent (in such capacity, the
"ADMINISTRATIVE AGENT") under the Amended and Restated Credit Agreement, dated
as of January 29, 2001, among the Administrative Agent, the several banks and
other financial institutions from time to time party thereto (the "BANKS"), and
Suburban Propane, L.P., a Delaware limited partnership (the "COMPANY") (said
agreement as from time to time amended, restated, supplemented or otherwise
modified and in effect being herein called the "BANK AGREEMENT"), (ii) the Banks
which have executed the signature pages hereof or which have otherwise become
parties hereto in the manner provided in Section 13 hereof, (iii) the holders
from time to time (the "NOTEHOLDERS") of the Company's 7.54% Senior Notes due
June 30, 2011 originally issued in the aggregate principal amount of
$425,000,000 (the "SENIOR NOTES") under the Note Agreement dated as of February
28, 1996 (as from time to time amended and in effect being herein called the
"NOTE AGREEMENT") which have executed the signature pages hereof or which have
otherwise become parties hereto in the manner provided in Section 14 hereof, and
(iv) the Parity Debtholders (as defined below) under one or more credit, loan or
note agreements, indentures or other financing instruments with the Company and
such Parity Debtholders (or a trustee or agent or similar person acting for such
Parity Debtholders) (as such agreements, indentures or instruments from time to
time shall from time to time be amended, restated, supplemented or otherwise
modified and in effect being herein called the "PARITY DEBT AGREEMENTS"), which
Parity Debtholders have become parties hereto in the manner provided in Section
15 hereof (the Banks, the Administrative Agent, the Noteholders and the Parity
Debtholders being herein sometimes collectively called the "LENDERS" and
individually called a "LENDER").
WITNESSETH:
WHEREAS, payment of certain obligations of the Company to the Banks and the
Administrative Agent arising under or in connection with the Bank Agreement from
time to time may be guaranteed by one or more subsidiaries of the Company
(herein sometimes collectively called the "BANK GUARANTORS" and individually
called a "BANK GUARANTOR") pursuant to one or more guaranty agreements in favor
of the Banks and the Administrative Agent (as amended, restated, supplemented or
otherwise modified and in effect from time to time, the "BANK GUARANTIES");
WHEREAS, payment of the obligations of the Company to the Noteholders
arising under or in connection with the Note Agreement and the Senior Notes from
time to time may be guaranteed by one or more subsidiaries of the Company
(herein sometimes collectively called the "NOTE GUARANTORS" and individually
called a "NOTE GUARANTOR") pursuant to one or more guaranty agreements in favor
of the Noteholders (as amended, restated, supplemented or otherwise modified and
in effect from time to time, the "NOTE GUARANTIES");
WHEREAS, payment of the obligations of the Company to holders of
indebtedness ("PARITY DEBTHOLDERS") which may be from time to time incurred by
the Company in compliance with the provisions of the Bank Agreement and the Note
Agreement may be guaranteed by one or more subsidiaries of the Company (herein
sometimes collectively called the "PARITY DEBT GUARANTORS" and individually
called a "PARITY DEBT GUARANTOR"; the Bank Guarantors, the Note Guarantors and
the Parity Guarantors being herein collectively called the "GUARANTORS" and
individually called a "GUARANTOR") pursuant to one or more guaranty agreements
in favor of the Parity Debtholders (as amended, restated, supplemented or
otherwise modified and in effect from time to time, the "PARITY DEBT
GUARANTIES"; the Bank Guaranties, the Note Guaranties and the Parity Debt
Guaranties being herein collectively called the "SUBJECT GUARANTIES" and
individually called a "SUBJECT GUARANTY" and the Bank Agreement, Note Agreement
and Senior Notes and the Parity Debt Agreements are herein collectively called
the "COMPANY LOAN DOCUMENTS");
WHEREAS, under applicable law and the terms of the Subject Guaranties, one
or more of the Lenders may, to the extent authorized or permitted by law, be
entitled to set-off, appropriate and apply any deposits (general or special
(except trust and escrow accounts), time or demand, including without limitation
indebtedness evidenced by certificates of deposit, in each case whether matured
or unmatured) and any other indebtedness at any time held or owing by such
Lender to or for the credit or account of the Guarantors, against and on account
of liabilities of the Guarantors under the Guaranties benefiting such Lender
(such rights, including any right to receive a lien on amounts previously
subject to such rights and to recover such amounts after the commencement of any
action under any applicable bankruptcy, insolvency or other similar law are
collectively referred to herein as the "SET-OFF RIGHTS");
WHEREAS, the obligations of the Guarantors under the Subject Guaranties in
respect of (i) the Note Agreement and the Senior Notes, (ii) the Bank Agreement
and (iii) the Parity Debt Agreements are intended to rank pari passu one with
the other; and
WHEREAS, the Lenders have agreed to become parties to this Agreement so as
to evidence the agreement between the Lenders with respect to certain payments
that may be received by the Lenders under or in connection with the Subject
Guaranties;
NOW, THEREFORE, in consideration of the premises and the mutual agreements
herein contained, the Noteholders, the Administrative Agent and the Banks (and
any Parity Debtholders becoming parties hereto in the manner provided in Section
15), hereby agree as follows:
1. If any Lender shall obtain any payment or other recovery (whether
voluntary or involuntary) on account of its Subject Guaranty or Subject
Guaranties, including any amount received on account of the exercise of any
Set-Off Rights (such Lender, a "RECOVERING LENDER"), in excess of its
Proportionate Share of payments then or thereafter obtained by all Lenders with
respect to the Subject Guaranties, such Lender shall purchase from the other
Lenders such participation(s) in the indebtedness of the Company held by such
other Lenders pursuant to the Company Loan Documents as shall be necessary to
cause such purchasing Lender to share such payment or other recovery ratably,
based on Proportionate Shares, with such selling Lenders; PROVIDED, HOWEVER,
that if all or any portion of such payment or other recovery is thereafter
recovered from, or must otherwise be restored by, such purchasing Lender, the
purchase shall be rescinded, and each selling Lender shall repay to the
purchasing Lender the purchase price, to the ratable extent of such recovery in
proportion to the amount received by such selling Lender, together with an
amount equal to such selling Lender's ratable share (according to the proportion
of (x) the amount of such selling Lender's required repayment to the purchasing
Lender to (y) the total amount so recovered from the purchasing Lender) of any
interest or other amount paid or payable by the purchasing Lender in respect of
the total amount so recovered. Upon the written request of any Recovering Lender
(which request shall include a certificate as to the amount of indebtedness owed
at such time by the Company to the Recovering Lender under the Company Loan
Documents), each other Lender shall promptly certify in writing to the
Recovering Lender as to the amount of amount of indebtedness owed at such time
by the Company to such Lender under the Company Loan Documents.
The term "PROPORTIONATE SHARE", as used herein, shall mean at any time for
each Lender a fraction (a) the numerator of which is the aggregate amount of the
indebtedness of the Company held by such Lender at such time pursuant to the
Company Loan Documents and (b) the denominator of which is the aggregate amount
of the indebtedness of the Company held by all Lenders at such time pursuant to
the Company Loan Documents.
2. Each of the Company and each Guarantor, by signing a copy of this
Agreement, agrees that each Lender so purchasing a participation from another
Lender pursuant to Section 1 hereof may, to the fullest extent permitted by law,
exercise all its rights of payment (including Set-Off Rights) with respect to
such participation as fully as if such Lender were the direct creditor of the
Company and such Guarantor in the amount of such participation. The Company
agrees to cause each Subsidiary that issues a Subject Guaranty to execute a
counterpart of a Consent and Agreement in substantially the form thereof
attached as Annex A hereto.
3. If under any applicable bankruptcy, insolvency or other similar law, any
Lender possesses a secured claim, or receives a secured claim in lieu of a
setoff to which Section 1 or 2 hereof applies, such Lender shall exercise its
rights in respect of such secured claim in a manner consistent with the rights
of the other Lenders in accordance with Section 1 hereof.
4. This Agreement shall in all respects be a continuing, absolute,
unconditional and irrevocable agreement, and shall remain in full force and
effect until all obligations of the Company and the Guarantors to the Lenders
shall have been satisfied in full and all obligations of all Lenders to the
other Lenders arising hereunder shall have been satisfied in full. Each Lender
agrees that this Agreement shall continue to be effective or be reinstated, as
the case may be, if at any time any payment (in whole or in part) of any of the
obligations of the Company or any of the Guarantors is rescinded or must
otherwise be restored by any Lender, upon the insolvency, bankruptcy or
reorganization of the Company or any of the Company and the Guarantors or
otherwise, as though such payment had not been made.
5. This Agreement shall be binding upon, and inure to the benefit of and be
enforceable by, the Lenders, each of their respective successors, transferees
and assigns and each person or entity that purchases a participation in the
indebtedness of the Company or any Guarantor held by a Lender pursuant to the
Company Loan Documents. Without limiting the generality of the foregoing
sentence, any Lender may assign or otherwise transfer (in whole or in part) to
any other person or entity the obligations of the Company or any of the
Guarantors to such Lender under any of the Company Loan Documents, and such
other person or entity shall thereupon become vested with all rights and
benefits, and become subject to all the obligations, in respect thereof granted
to or imposed upon such Lender under this Agreement.
6. None of the provisions of this Agreement shall inure to the benefit of
the Company, any of the Guarantors or, except as provided in Section 5 hereof,
any other person other than the Lenders; consequently, the Company, the
Guarantors and any and all other persons shall not be entitled to rely upon, or
to raise as a defense, in any manner whatsoever, the provisions of this
Agreement or the failure of any Lender to comply with such provisions.
7. This Agreement and the provisions hereof may be amended, waived,
modified, changed, discharged or terminated only in accordance with (except as
otherwise specifically provided for in Section 13, 14 or 15) a written
instrument executed by the Administrative Agent on behalf of itself and the
Required Lenders (as defined in the Bank Agreement) under the Bank Agreement and
the Required Holders (as defined in the Note Agreement) under the Note Agreement
and, as to any particular Parity Debt Agreement, Parity Debtholders holding a
majority of the obligations outstanding at such time under such Parity Debt
Agreement.
8. All notices and other communications provided to any Lender under this
Agreement shall be in writing or by facsimile and addressed, delivered or
transmitted to such party at its address or facsimile number set forth on
Schedule I hereto or at such other address or facsimile number as may be
designated by such party in a notice to the other parties hereto (which, in the
case of each Parity Debtholder becoming a party hereto in the manner provided in
Section 15 shall be initially as specified on the Instrument of Accession
(Parity Debt) executed by such Parity Debtholder, PROVIDED that any notice that
is provided to the Administrative Agent shall constitute notice to all of the
Banks. Any notice, if mailed and properly addressed with postage prepaid or if
properly addressed and sent by pre-paid courier service, shall be deemed given
when received; any notice, if transmitted by facsimile, shall be deemed given
when transmitted if actually received, and the burden of proving receipt shall
be on the transmitting party.
9. No failure or delay on the part of any Lender in exercising any power or
right under this Agreement shall operate as a waiver thereof, nor shall any
single or partial exercise of any such power or right preclude any other or
further exercise thereof or the exercise of any other power or right. The
remedies herein provided are cumulative and not exclusive of any remedies
provided by law.
10. Whenever possible each provision of this Agreement shall be interpreted
in such manner as to be effective and valid under applicable law, but if any
provision of this Agreement shall be prohibited by or invalid under such law,
such provision shall be ineffective to the extent of such prohibition or
invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Agreement.
11. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE INTERNAL LAWS OF THE STATE OF NEW YORK. THIS AGREEMENT CONSTITUTES THE
ENTIRE UNDERSTANDING BETWEEN THE PARTIES HERETO WITH RESPECT TO THE SUBJECT
MATTER HEREOF AND SUPERSEDES ANY PRIOR AGREEMENTS, WRITTEN OR ORAL, WITH RESPECT
THERETO.
12. This Agreement may be executed in any number of counterparts and by any
combination of the parties hereto in separate counterparts (including by
telecopy), each of which counterparts shall be an original and all of which when
taken together shall constitute one and the same agreement.
13. Any Bank which is not one of the original parties hereto by purchasing
any loans under the Bank Agreement shall be subject to all the provisions hereof
and entitled to the benefits hereof. Any transferee Bank shall execute and
deliver an Instrument of Accession (Banks) substantially in the form of Annex B
hereto and shall deliver a copy thereof to all the other Lenders at the time
parties hereto, but no such execution and delivery shall be required as a
pre-condition to becoming a Bank hereunder and being subject to the provisions
hereof and receiving the benefits hereof.
14. Each Noteholder (regardless of whether such Noteholder is a signatory
hereto) shall be subject to all the provisions hereof and entitled to the
benefits hereof. Any transferee Noteholder shall execute and deliver an
Instrument of Accession (Senior Notes) substantially in the form of Annex C
hereto and shall deliver a copy thereof to all the other Lenders at the time
parties hereto, but no such execution and delivery shall be required as a
pre-condition to becoming a Noteholder hereunder and being subject to the
provisions hereof and receiving the benefits hereof.
15. Any Parity Debtholder may become a party hereto and be subject to all
the provisions hereof and entitled to the benefits hereof if such Parity
Debtholder shall execute and deliver an Instrument of Accession (Parity Debt)
substantially in the form of Annex D hereto and shall deliver a copy thereof to
all the other Lenders at the time parties hereto.
[Signature page to Intercreditor Agreement]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written by their duly authorized officers.
FIRST UNION NATIONAL BANK,
as Administrative Agent and as a Bank
By: Joe K. Dancy
----------------------------------------------
Name: Joe K. Dancy
Title: Vice President
FLEET NATIONAL BANK
By: Stephen J. Hoffman
----------------------------------------------
Name: Stephan J. Hoffman
Title: Vice President
THE BANK OF NEW YORK
By: Ernest Fung
----------------------------------------------
Name: Ernest Fung
Title: Vice President
ABN AMRO BANK N.V.
By: James S. Kreitler
----------------------------------------------
Name: James S. Kreitler
Title: Group Vice President
By: Henry Sosa
----------------------------------------------
Name: Henry Sosa
Title: Assistant Vice President
MIZUHO CORPORATE BANK, LTD
By: Toru Maeda
----------------------------------------------
Name: Toru Maeda
Title: General Manager
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
By: Brian N. Thomas
----------------------------------------------
Name: Brian N. Thomas
Title: Vice President
[Signature page to Intercreditor Agreement]
THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
By: Jeffrey J. Lueken
----------------------------------------------
Name: Jeffrey J. Lueken
Title: Its Authorized Representative
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
By:
----------------------------------------------
Name:
Title:
MELLON BANK, N.A. AS TRUSTEE FOR AT&T MASTER
PENSION TRUST
(as directed by John Hancock Mutual Life Insurance
Company)
By:
----------------------------------------------
Name:
Title:
JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY
By:
----------------------------------------------
Name:
Title:
TEACHERS INSURANCE AND ANNUITY ASSOCIATION
OF AMERICA
By:
----------------------------------------------
Name:
Title:
[Signature page to Intercreditor Agreement]
IDS LIFE INSURANCE COMPANY
By:
----------------------------------------------
Name:
Title:
AMERICAN CENTURION LIFE ASSURANCE COMPANY
By:
----------------------------------------------
Name:
Title:
AMERICAN ENTERPRISE LIFE INSURANCE COMPANY
By:
----------------------------------------------
Name:
Title:
AMERICAN PARTNERS LIFE INSURANCE COMPANY
By:
----------------------------------------------
Name:
Title:
LIFE INVESTORS INSURANCE COMPANY OF AMERICA
By:
----------------------------------------------
Name:
Title:
PFL LIFE INSURANCE COMPANY
By:
----------------------------------------------
Name:
Title:
[Signature page to Intercreditor Agreement]
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE
UNITED STATES
By: Robert Bayer
----------------------------------------------
Name: Robert Bayer
Title: Investment Officer
THE EQUITABLE OF COLORADO, INC.
By: Robert Bayer
----------------------------------------------
Name: Robert Bayer
Title: Investment Officer
NEW YORK LIFE INSURANCE COMPANY
By: R. Edward Ferguson
----------------------------------------------
Name: R. Edward Ferguson
Title: Investment President
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
By: New York Life Investment Management LLC,
its Investment Manager
By: R. Edward Ferguson
----------------------------------------------
Name: R. Edward Ferguson
Title: Investment President
MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY
By:
----------------------------------------------
Name:
Title:
[Signature page to Intercreditor Agreement]
THE MUTUAL LIFE INSURANCE COMPANY OF NEW YORK
By:
----------------------------------------------
Name:
Title:
MONY LIFE INSURANCE COMPANY OF AMERICA
By:
----------------------------------------------
Name:
Title:
PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY
By: Paul M. Chute
----------------------------------------------
Name: Paul M. Chute
Title: Managing Director
SUN LIFE ASSURANCE COMPANY OF CANADA
By: John N. Whelihan
----------------------------------------------
Name: John N. Whelihan
Title: Vice President - for President
By: James M.A. Anderson
----------------------------------------------
Name: James M.A. Anderson
Title: Vice President - for Secretary
RELISTAR LIFE INSURANCE COMPANY
By:
----------------------------------------------
Name:
Title:
[Signature page to Intercreditor Agreement]
NORTHWESTERN NATIONAL LIFE INSURANCE COMPANY
By:
----------------------------------------------
Name:
Title:
NORTHERN LIFE INSURANCE COMPANY
By:
----------------------------------------------
Name:
Title:
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY,
By: Delaware Lincoln Investment Management,
Inc., its Attorney-In-Fact
By:
----------------------------------------------
Name:
Title:
LINCOLN NATIONAL INCOME FUND, INC.
By: Delaware Lincoln Investment Management,
Inc., its Attorney-In-Fact
By:
----------------------------------------------
Name:
Title:
FIRST PENN-PACIFIC LIFE INSURANCE COMPANY
By: Delaware Lincoln Investment Management,
Inc., its Attorney-In-Fact
By:
----------------------------------------------
Name:
Title:
[Signature page to Intercreditor Agreement]
LINCOLN NATIONAL REASSURANCE COMPANY
By: Delaware Lincoln Investment Management,
Inc., its Attorney-In-Fact
By:
----------------------------------------------
Name:
Title:
SECURITY-CONNECTICUT LIFE INSURANCE COMPANY
By: Delaware Lincoln Investment Management,
Inc., its Attorney-In-Fact
By:
----------------------------------------------
Name:
Title:
LINCOLN-SECURITY LIFE INSURANCE COMPANY
By: Delaware Lincoln Investment Management,
Inc., its Attorney-In-Fact
By:
----------------------------------------------
Name:
Title:
ASSET ALLOCATION AS AGENT FOR GUARANTEE TRUST
ANNUITY INSURANCE COMPANY
By: Kathy R. Lange
----------------------------------------------
Name: Kathy R. Lange
Title: Authorized Signatory
[Signature page to Intercreditor Agreement]
ASSET ALLOCATION AS AGENT FOR FRONTIER INSURANCE
COMPANY
By: Kathy R. Lange
----------------------------------------------
Name: Kathy R. Lange
Title: Authorized Signatory
ASSET ALLOCATION AS AGENT FOR CSA FRATERNAL LIFE
INSURANCE COMPANY
By: Kathy R. Lange
----------------------------------------------
Name: Kathy R. Lange
Title: Authorized Signatory
ASSET ALLOCATION AS AGENT FOR OZARK NATIONAL LIFE
INSURANCE COMPANY
By: Kathy R. Lange
----------------------------------------------
Name: Kathy R. Lange
Title: Authorized Signatory
ASSET ALLOCATION AS AGENT FOR PHYSICIANS LIFE
ANNUITY INSURANCE COMPANY
By: Kathy R. Lange
----------------------------------------------
Name: Kathy R. Lange
Title: Authorized Signatory
ASSET ALLOCATION AS AGENT FOR PHYSICIANS MUTUAL
INSURANCE COMPANY
By: Kathy R. Lange
----------------------------------------------
Name: Kathy R. Lange
Title: Authorized Signatory
[Signature page to Intercreditor Agreement]
OZARK NATIONAL LIFE INSURANCE
COMPANY
By: S. Alan Weber
----------------------------------------------
Name: S. Alan Weber
Title: Exec. V.P. & Treasurer
JP MORGAN CHASE BANK
By:
----------------------------------------------
Name:
Title:
ASSET ALLOCATION AS AGENT FOR AMERICAN COMMUNITY
INSURANCE COMPANY
By: Kathy R. Lange
----------------------------------------------
Name: Kathy R. Lange
Title: Authorized Signatory
ASSET ALLOCATION AS AGENT FOR KANAWHA INSURANCE
COMPANY
By: Kathy R. Lange
----------------------------------------------
Name: Kathy R. Lange
Title: Authorized Signatory
ASSET ALLOCATION AS AGENT FOR CENTRAL REASSURANCE
EQUITABLE INSURANCE COMPANY
By: Kathy R. Lange
----------------------------------------------
Name: Kathy R. Lange
Title: Authorized Signatory
ASSET ALLOCATION AS AGENT FOR FARMERS HOME MUTUAL
INSURANCE COMPANY
By: Kathy R. Lange
----------------------------------------------
Name: Kathy R. Lange
Title: Authorized Signatory
[Signature page to Intercreditor Agreement]
ASSET ALLOCATION AS AGENT FOR WESTERN HOME MUTUAL
INSURANCE COMPANY
By: Kathy R. Lange
----------------------------------------------
Name: Kathy R. Lange
Title: Authorized Signatory
ASSET ALLOCATION AS AGENT FOR GOPHER STATE MUTUAL
INSURANCE COMPANY
By: Kathy R. Lange
----------------------------------------------
Name: Kathy R. Lange
Title: Authorized Signatory
ASSET ALLOCATION AS AGENT FOR PIONEER INSURANCE
COMPANY
By: Kathy R. Lange
----------------------------------------------
Name: Kathy R. Lange
Title: Authorized Signatory
ASSET ALLOCATION AS AGENT FOR UNITED TEACHER
ASSOCIATE INSURANCE COMPANY
By: Kathy R. Lange
----------------------------------------------
Name: Kathy R. Lange
Title: Authorized Signatory
ASSET ALLOCATION AS AGENT FOR CENTRAL STATES
HEALTH & LIFE COMPANY OF OMAHA
By: Kathy R. Lange
----------------------------------------------
Name: Kathy R. Lange
Title: Authorized Signatory
[Signature page to Intercreditor Agreement]
NATIONWIDE LIFE & ANNUITY INSURANCE COMPANY
By: Joseph P. Young
----------------------------------------------
Name: Joseph P. Young
Title: Fixed Income Securities
NATIONWIDE LIFE INSURANCE COMPANY
By: Joseph P. Young
----------------------------------------------
Name: Joseph P. Young
Title: Fixed Income Securities
PROTECTIVE LIFE INSURANCE COMPANY
By:
----------------------------------------------
Name:
Title:
By:
----------------------------------------------
Name:
Title:
SECURITY BENEFIT LIFE INSURANCE COMPANY
By: Chris Phalen
----------------------------------------------
Name: Chris Phalen
Title: Assistant Vice President
GREAT SOUTHERN LIFE INSURANCE CO.
By:
----------------------------------------------
Name:
Title:
[Signature page to Intercreditor Agreement]
NATIONAL LIFE INSURANCE COMPANY
By:
----------------------------------------------
Name:
Title:
THE OHIO NATIONAL LIFE INSURANCE COMPANY
By:
----------------------------------------------
Name:
Title:
BENEFICIAL LIFE INSURANCE COMPANY
By:
----------------------------------------------
Name:
Title:
By:
----------------------------------------------
Name:
Title:
CLARICA LIFE INSURANCE COMPANY
By: Constance L. Keller
----------------------------------------------
Name: Constance L. Keller
Title: Executive Director, Private Placements
WASHINGTON SQUARE ADVISORS
By:
----------------------------------------------
Name:
Title:
[Signature page to Intercreditor Agreement]
TMG LIFE INSURANCE COMPANY
By:
----------------------------------------------
Name:
Title:
By:
----------------------------------------------
Name:
Title:
JOHN HANCOCK LIFE INSURANCE COMPANY
By: Eileen M. Forde
----------------------------------------------
Name: Eileen M. Forde
Title: Authorized Signatory
JOHN HANCOCK VARIABLE INSURANCE COMPANY
By: Eileen M. Forde
----------------------------------------------
Name: Eileen M. Forde
Title: Authorized Signatory
INVESTORS PARTNER LIFE INSURANCE COMPANY
By: Eileen M. Forde
----------------------------------------------
Name: Eileen M. Forde
Title: Authorized Signatory
MELLON BANK, N.A., solely in its capacity as
Trustee for The Bell Atlantic Master Trust (as
directed by John Hancock Life Insurance Company),
and not in its individual capacity
By:
----------------------------------------------
Name:
Title:
[Signature page to Intercreditor Agreement]
ANNEX A
CONSENT AND AGREEMENT
Each of the undersigned hereby consents to the provisions of the foregoing
Intercreditor Agreement and the transactions contemplated thereby and
specifically agrees to the provisions of Section 2 of the Intercreditor
Agreement. Each of the undersigned agrees to notify each Lender promptly upon
its becoming aware of any payment to, or setoff or obtaining of a secured claim
by, the other Lenders contemplated by the foregoing Intercreditor Agreement.
Dated: March 21, 2002
SUBURBAN PROPANE, L.P.
By: Robert M. Plante
-------------------------------------------
Name: Robert M. Plante
Title: Vice President, Finance & Treasurer
SUBURBAN PROPANE GAS CORPORATION
By: Robert M. Plante
-------------------------------------------
Name: Robert M. Plante
Title: Vice President, Finance & Treasurer
PARGAS, INC.
By: Robert M. Plante
-------------------------------------------
Name: Robert M. Plante
Title: Vice President, Finance & Treasurer
VANGAS, INC.
By: Robert M. Plante
-------------------------------------------
Name: Robert M. Plante
Title: Vice President, Finance & Treasurer
A-1
PLATEAU, INC.
By: Robert M. Plante
-------------------------------------------
Name: Robert M. Plante
Title: Vice President, Finance & Treasurer
SUBURBAN @ HOME, INC.
By: Robert M. Plante
-------------------------------------------
Name: Robert M. Plante
Title: Vice President, Finance & Treasurer
GAS CONNECTION, INC.
By: Robert M. Plante
-------------------------------------------
Name: Robert M. Plante
Title: Vice President, Finance & Treasurer
SUBURBAN FRANCHISING, INC.
By: Robert M. Plante
-------------------------------------------
Name: Robert M. Plante
Title: Vice President, Finance & Treasurer
SUBURBAN HOLDINGS, INC.
By: Robert M. Plante
-------------------------------------------
Name: Robert M. Plante
Title: Vice President, Finance & Treasurer
A-2
ANNEX B
-------
INSTRUMENT OF ACCESSION (BANKS)
With the intention of becoming a "Lender" for the purposes and within the
meaning of the Intercreditor Agreement, dated as of March 21, 2002, a copy of
which being annexed hereto (the "INTERCREDITOR AGREEMENT"), the undersigned
hereby consents and agrees to be bound by the terms and provisions of the
Intercreditor Agreement to the same extent and with the same effect as if the
undersigned had executed and delivered the same as one of the original parties
thereto as a Lender in respect of the Bank Guaranties (as defined in the
Intercreditor Agreement) which have been executed for the benefit of the Banks.
The address of the undersigned for purposes of notices given under the
Intercreditor Agreement is set forth below.
Dated: ____________ __, 20__
[NAME OF BANK]
By:
----------------------------------------------
Name:
Title:
Address for Notices:
--------------------
----------------------------------------------
----------------------------------------------
----------------------------------------------
Telecopy:
B-1
ANNEX C
-------
INSTRUMENT OF ACCESSION (SENIOR NOTES)
With the intention of becoming a "Lender" for the purposes and within the
meaning of the Intercreditor Agreement, dated as of March 21, 2002, a copy of
which being annexed hereto (the "INTERCREDITOR AGREEMENT"), the undersigned
hereby consents and agrees to be bound by the terms and provisions of the
Intercreditor Agreement to the same extent and with the same effect as if the
undersigned had executed and delivered the same as one of the original parties
thereto as a Lender in respect of the Senior Notes referred to therein and the
Note Guaranties (as defined in the Intercreditor Agreement) which have been
executed for the benefit of the holders of the Senior Notes. The address of the
undersigned for purposes of notices given under the Intercreditor Agreement is
set forth below.
Dated: ____________ __, 20__
[NAME OF HOLDER OF SENIOR NOTES]
By:
----------------------------------------------
Name:
Title:
Address for Notices:
--------------------
----------------------------------------------
----------------------------------------------
----------------------------------------------
Telecopy:
ANNEX D
-------
INSTRUMENT OF ACCESSION (PARITY DEBT)
With the intention of becoming a "Lender" for the purposes and within the
meaning of the Intercreditor Agreement, dated as of March 21, 2002, a copy of
which being annexed hereto (the "INTERCREDITOR AGREEMENT"), the undersigned
hereby consents and agrees to be bound by the terms and provisions of the
Intercreditor Agreement to the same extent and with the same effect as if the
undersigned had executed and delivered the same as one of the original parties
thereto as a Lender in respect of the Parity Debt Agreement (as defined in the
Intercreditor Agreement and as more particularly described below) referred to
therein and the Parity Debt Guaranties (as defined in the Intercreditor
Agreement and as more particularly described below) which have been executed for
the benefit of the holders of the obligations issued under such Parity Debt
Agreement. The address of the undersigned for purposes of notices given under
the Intercreditor Agreement is set forth below.
Dated: ____________ __, 20__
NAME OF PARITY DEBTHOLDER]
By:
----------------------------------------------
Name:
Title:
Address for Notices:
--------------------
----------------------------------------------
----------------------------------------------
----------------------------------------------
Telecopy:
Description of Parity Debt Agreement, Parity Debt
Obligations and Parity Debt Guaranties:
Herein shall be set forth a reasonably detailed description of the Parity Debt
Agreement, including a specific and detailed description of the obligations
issued thereunder, the Parity Debt Guaranties and the identity of the Parity
Debt Guarantors.
Exhibit 10(d)
-------------
FIRST AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT
--------------------------------------------------------
THIS FIRST AMENDMENT to the Amended and Restated Credit Agreement referred
to below (this "AMENDMENT") is made and entered as of April 3, 2002 with an
Effective Date as of the date determined pursuant to SECTION 3 hereof, by and
among SUBURBAN PROPANE, L.P., a limited partnership organized under the laws of
the State of Delaware (the "BORROWER"), the Lenders party to the Credit
Agreement referred to below and WACHOVIA BANK, NATIONAL ASSOCIATION (f/k/a First
Union National Bank), as Administrative Agent for the Lenders thereunder.
STATEMENT OF PURPOSE
--------------------
The Borrower and Lenders have entered into that certain Amended and
Restated Credit Agreement dated as of January 29, 2001 (as amended hereby and as
further amended, restated, supplemented or otherwise modified prior to the date
hereof, the "CREDIT AGREEMENT"), pursuant to which the Lenders have extended
certain credit facilities to the Borrower.
The Borrower has requested that the Lenders amend certain provisions of the
Credit Agreement and consent to the execution of an intercreditor agreement with
the holders of the Senior Notes, as more particularly described herein and the
Administrative Agent and the Required Lenders have agreed to do so, but only
upon the terms and conditions set forth below in this Amendment.
NOW THEREFORE, for good cause and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto agree as follows:
SECTION 1. DEFINITIONS. All capitalized terms used and not defined in this
Amendment shall have the meanings assigned thereto in the Credit Agreement.
SECTION 2. AMENDMENTS TO THE CREDIT AGREEMENT.
(a) SECTION 1.1 (Definitions) of the Credit Agreement is hereby amended by
adding the following defined terms in correct alphabetical order:
"SENIOR NOTE PAYMENTS" means the required annual
principal payments on the Senior Notes set forth in and
pursuant to the terms of Section 4A of the Senior Note
Agreement.
"SWAP AGREEMENT" means any (a) Hedging Agreement, (b)
forward rate agreement, (c) forward foreign exchange
agreement, (d) currency swap agreement, (e) cross-currency
rate swap agreement, (f) currency option agreement or (g)
other agreement or arrangement, in each case, designed to
alter the risks of any Person arising from fluctuations in
interest rates or currency values and any confirming letter
executed pursuant to such agreement, all as amended,
restated, supplemented or otherwise modified from time to
time.
"SWAP OBLIGATIONS" means all payment and other
existing and future obligations owing by the Borrower to any
Lender or the Administrative Agent under any Swap Agreement
to which a Lender or the Administrative Agent is a party
which is permitted under this Agreement.
(b) SECTION 1.1 (Definitions) of the Credit Agreement is hereby further
amended by deleting the existing definition for the following defined terms in
their entirety and inserting the following in lieu thereof:
"HEDGING AGREEMENT" means any (a) interest rate swap
agreement, (b) interest rate cap agreement, (c) interest
rate floor agreement, (d) interest rate collar agreement,
(e) interest rate option or (f) other agreement, in each
case, entered into with the intent to protect the Borrower
against fluctuations in interest rates of existing or
expected issuances of Indebtedness and entered into as a
bona fide hedging agreement and not for purposes of
investment or speculation and any confirming letter executed
pursuant to such agreement, all as amended, restated,
supplemented or otherwise modified from time to time.
(c) Section 1.1 (Definitions) of the Credit Agreement is hereby further
amended as follows:
(i) by deleting clause (i) of the definition of "Indebtedness" in its
entirety and inserting in lieu thereof, "(i) all obligations of such Person
with respect to Swap Agreements and Commodity Hedging Agreements (valued at
the termination value thereof computed in accordance with a method approved
by the International Swap Dealers Association and agreed to by such Person
in the applicable Swap Agreement or Commodity Hedging Agreement, if any)";
and
(ii) by deleting clause (c) of the definition of "Obligations" in its
entirety and inserting in lieu thereof, "(c) all Swap Obligations".
(d) SECTION 4.11 (Crediting of Payments and Proceeds) of the Credit
Agreement is hereby amended by inserting the phrase, "and any Swap Obligations
(including any termination payments and any accrued and unpaid interest
thereon)" after the term "Reimbursement Obligation" in the eleventh line of such
section.
(e) Clause (c) of SECTION 10.1 (Indebtedness) of the Credit Agreement is
hereby amended by adding the phrase "and any Refinancing Note Agreement" after
the term "Senior Note Agreement."
(f) Clause (d) of SECTION 10.1 (Indebtedness) of the Credit Agreement is
hereby amended by replacing the semicolon at the end of such clause with a
period and adding the following sentence:
"Notwithstanding anything contained in this Section 10.1(d)
to the contrary, the Borrower may incur Indebtedness in the
form of Refinancing Notes the net proceeds of which are used
to refinance the Senior Note Payments; PROVIDED that (i) the
aggregate principal amount of such notes shall not exceed
the principal amount of the Senior Note Payments being
refinanced thereby, (ii) such notes shall mature not earlier
than the date that is two years after the Termination Date,
and (iii) such notes would not violate the provisions of the
Senior Note Agreement or any Refinancing Note Agreement at
the time in effect;"
(g) SECTION 10.1 (Indebtedness) of the Credit Agreement is hereby further
amended by (i) deleting the "and" at the end of the clause (n) thereof, (ii)
re-lettering clause (o) thereof to be clause (p), and (iii) inserting the
following new clause (o) to such section:
" (o) Indebtedness incurred in connection with Swap
Agreements (other than Hedging Agreements permitted pursuant
to Section 10.1(b)) in an aggregate amount not to exceed
$15,000,000 (valued at the termination value thereof
computed in accordance with a method approved by the
International Swap Dealers Association and agreed to by such
Person in the applicable Swap Agreement, if any) on any date
of determination; and"
(h) Clause (d) of SECTION 10.4 (Investments, Loans and Acquisitions) of the
Credit Agreement is hereby amended by replacing the term "Hedging Agreements"
with the term "Swap Agreements."
(i) Clause (a) of SECTION 11.2 (Remedies) of the Credit Agreement is hereby
amended by adding the phrase "(other than Swap Obligations)" after each of the
two occurrences of the defined term "Obligations."
(j) Clause (a) of SECTION 13.6 (Binding Arbitration; Waiver of Jury Trial)
of the Credit Agreement is hereby amended by replacing the phrase "any Hedging
Agreement that is a Loan Document" with the phrase "any Swap Agreement with any
Lender" in the last sentence of such clause.
SECTION 3. CONDITIONS TO EFFECTIVENESS. This Amendment shall become
effective on the date that each of the following conditions has been satisfied
(the "EFFECTIVE DATE"):
(a) This Amendment shall have been duly authorized, executed and delivered
to the Administrative Agent by the Borrower and the Required Lenders.
(b) The Borrower shall have delivered to the Administrative Agent Amendment
No. 4 to the Senior Note Agreement, dated March 21, 2002 (the "NOTE AMENDMENT")
executed by the Borrower and the Required Holders (as defined in the Senior Note
Agreement), in form and substance satisfactory to the Administrative Agent,
providing a waiver of all existing defaults or events of default under the
Senior Note Agreement arising from the breach of paragraph 5L of the Senior Note
Agreement (and any defaults or events of default related to such breach) and the
Borrower shall be in compliance with all requirements of such amendment, waiver
or consent.
(c) The Borrower shall have delivered to the holders of the Notes (with
copies to the Administrative Agent) duly executed Subsidiary Guarantees (as
defined in the Senior Note Agreement) from each of the Nameholder Subsidiaries
(as defined in the Note Amendment) in accordance with the terms of the Senior
Note Agreement.
(d) The Borrower shall have delivered to the Administrative Agent and the
holders of the Notes copies of the Intercreditor Agreement (as defined in the
Senior Note Agreement) executed by the Required Holders, the Lenders and the
Borrower substantially in the form of EXHIBIT A hereto.
SECTION 4. LIMITED AMENDMENT AND CONSENT. Except as expressly amended
hereby, the Credit Agreement and each other Loan Document shall continue to be,
and shall remain, in full force and effect. This Amendment shall not be deemed
(a) to be a waiver of, or consent to, or a modification or amendment of, any
other term or condition of, or Default or Event of Default under, the Credit
Agreement or any other Loan Document or (b) to prejudice any other right or
remedies to which the Administrative Agent or the Lenders may now have or may
have in the future under or in connection with the Credit Agreement or the Loan
Documents or any of the instruments or agreements referred to therein, as the
same may be amended, restated or otherwise modified from time to time. This
document is part of the Credit Agreement and constitutes a Loan Document
thereunder.
SECTION 5. REPRESENTATIONS AND WARRANTIES/NO DEFAULT. By its execution
hereof, the Borrower hereby certifies that that as of the date hereof and, after
giving effect to the amendments in SECTION 2 hereof, (a) each of the
representations and warranties set forth in the Credit Agreement and the other
Loan Documents is true and correct as of the date hereof as if fully set forth
herein (other than representations and warranties which speak as of a specific
date pursuant to the Credit Agreement, which representations and warranties
shall have been true and correct as of such specific dates) and (ii) no Default
or Event of Default has occurred and is continuing.
SECTION 6. EXPENSES. The Borrowers shall pay all reasonable out-of-pocket
expenses of the Administrative Agent in connection with the preparation,
execution and delivery of this Amendment, including without limitation the
reasonable fees and disbursements of counsel for the Administrative Agent.
SECTION 7. GOVERNING LAW. This Amendment shall be governed by and construed
in accordance with the laws of the State of New York.
SECTION 8. COUNTERPARTS. This Amendment may be executed in separate
counterparts, each of which when executed and delivered is an original but all
of which taken together constitute one and the same instrument.
SECTION 9. FAX TRANSMISSION. A facsimile, telecopy or other reproduction of
this Amendment may be executed by one or more parties hereto, and an executed
copy of this Amendment may be delivered by one or more parties hereto by
facsimile or similar instantaneous electronic transmission device pursuant to
which the signature of or on behalf of such party can be seen, and such
execution and delivery shall be considered valid, binding and effective for all
purposes. At the request of any party hereto, all parties hereto agree to
execute an original of this Amendment as well as any facsimile, telecopy or
other reproduction hereof.
[Signature Pages Follow]
[First Amendment to Amended and Restated Credit Agreement -
Suburban Propane, L.P.]
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their duly authorized officers, all as of the day and year first
written above.
BORROWER AND GUARANTORS:
SUBURBAN PROPANE, L.P., as Borrower
By: Robert M. Plante
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Name: Robert M. Plante
Title: Vice President, Finance & Treasurer
SUBURBAN PROPANE GAS CORPORATION, as Guarantor
By: Robert M. Plante
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Name: Robert M. Plante
Title: Vice President, Finance & Treasurer
PARGAS, INC., as Guarantor
By: Robert M. Plante
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Name: Robert M. Plante
Title: Vice President, Finance & Treasurer
VANGAS, INC., as Guarantor
By: Robert M. Plante
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Name: Robert M. Plante
Title: Vice President, Finance & Treasurer
PLATEAU, INC., as Guarantor
By: Robert M. Plante
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Name: Robert M. Plante
Title: Vice President, Finance & Treasurer
GAS CONNECTION, INC., as Guarantor
By: Robert M. Plante
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Name: Robert M. Plante
Title: Vice President, Finance & Treasurer
[Signature Pages Continue]
SUBURBAN @ HOME, INC., as Guarantor
By: Robert M. Plante
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Name: Robert M. Plante
Title: Vice President, Finance & Treasurer
SUBURBAN HOLDINGS, INC., as Guarantor
By: Robert M. Plante
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Name: Robert M. Plante
Title: Vice President, Finance & Treasurer
SUBURBAN FRANCHISING, INC., as Guarantor
By: Robert M. Plante
-------------------------------------------
Name: Robert M. Plante
Title: Vice President, Finance & Treasurer
[Signature Pages Continue]
ADMINISTRATIVE AGENT AND LENDERS:
WACHOVIA BANK, NATIONAL ASSOCIATION, as
Administrative Agent, as Lender, as Swingline
Lender and as Issuing Lender
By: Joe K. Dancy
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Name: Joe K. Dancy
Title: Vice President
FLEET NATIONAL BANK,
as Syndication Agent and as Lender
By: Stephen J. Hoffman
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Name: Stephen J. Hoffman
Title: Vice President
THE BANK OF NEW YORK, as Lender
By: Ernest Fung
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Name: Ernest Fung
Title: Vice President
ABN AMRO BANK N.V., as Lender
By: James S. Kreitler
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Name: James S. Kreitler
Title: Group Vice President
By: Henry Sosa
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Name: Henry Sosa
Title: Assistant Vice President
MIZUHO CORPORATE BANK, LTD, as Lender
By: Toru Maeda
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Name: Toru Maeda
Title: General Manager