Attached files

file filename
8-K - FORM 8-K - SUBURBAN PROPANE PARTNERS LPd391996d8k.htm
EX-99.1 - EX-99.1 - SUBURBAN PROPANE PARTNERS LPd391996dex991.htm

Exhibit 99.2

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION OF SUBURBAN

On August 1, 2012 (the “Acquisition Date”), the Partnership completed the acquisition of the sole membership interest in Inergy Propane, LLC, including certain wholly-owned subsidiaries of Inergy Propane, LLC, and the assets of Inergy Sales and Service, Inc. (“Inergy Sales”). The acquired interests and assets are collectively referred to as “Inergy Propane.” As of the Acquisition Date, Inergy Propane consisted of the former retail propane assets and operations of Inergy, L.P. (“Inergy”).

The acquisition of Inergy Propane (the “Inergy Propane Acquisition”) was consummated pursuant to a definitive agreement dated April 25, 2012, as amended on June 15, 2012, July 6, 2012 and July 19, 2012 with Inergy, Inergy GP, LLC and Inergy Sales (the “Contribution Agreement”). Prior to the Acquisition Date, Inergy Propane transferred its interest in certain subsidiaries, as well as all of its rights and interests in the assets and properties of its wholesale propane supply, marketing and distribution business, and its rights and interest in the assets and properties of its West Coast natural gas liquids business, to Inergy. These assets were not included as part of the Inergy Propane business at the time of the transfer of the membership interests in Inergy Propane to the Partnership and were not part of the Inergy Propane Acquisition. On the Acquisition Date, Inergy Propane and its remaining wholly-owned subsidiaries acquired became subsidiaries of the Partnership. The results of operations of Inergy Propane will be included in the Partnership’s results of operations beginning on the Acquisition Date.

Upon contribution, transfer, assignment, and delivery of the acquired interests and acquired assets to Suburban, Suburban issued and delivered to Inergy and Inergy Sales, as consideration in connection with the Inergy Propane Acquisition, an aggregate of 14,200,422 newly issued common units (the “Equity Consideration”). The Equity Consideration consists of (i) the “Initial Equity Consideration” which is equal to 13,892,587 Suburban common units, and (ii) the “Additional Equity Consideration” which is equal to 307,835 Suburban common units determined by dividing (a) the Inergy Cash Consideration of $13.1 million (as defined below) by (b) $42.50, rounded to the nearest whole Suburban common unit. Inergy Sales will distribute any and all Suburban common units it received in connection with the Inergy Propane Acquisition to Inergy. Thereafter, in connection with the Inergy Propane Acquisition and pursuant to the Contribution Agreement, Inergy will distribute ninety-nine percent (99%) of any and all Equity Consideration received to its unitholders and will retain one percent (1%) of any and all Equity Consideration.

Pursuant to the Contribution Agreement, Suburban and its wholly-owned subsidiary Suburban Energy Finance Corp. commenced a private offer to exchange (the “Exchange Offers”) any and all of the outstanding unsecured 7% Senior Notes due 2018 (the “2018 Inergy Notes”) and 6 7/8% Senior Notes due 2021 (the “2021 Inergy Notes”, and together with the 2018 Inergy Notes, the “Inergy Notes”) issued by Inergy and Inergy Finance Corp., which had an aggregate principal amount outstanding of $1,200.0 million, for a combination of up to $1,000.0 million in aggregate principal amount of new unsecured 7 1/2% Senior Notes due 2018 and 7 3/8% Senior Notes due 2021, respectively, issued by Suburban and Suburban Energy Finance Corp. (collectively, the “SPH Notes”) and up to $200.0 million in cash to be paid to tendering noteholders (the “Exchange Offer Cash Consideration”).

At the expiration of the Exchange Offers, Suburban had received tenders from holders representing approximately 98.09% of the total outstanding principal amount of the 2018 Inergy Notes, and tenders from holders representing approximately 99.74% of the total outstanding principal amount of the 2021 Inergy Notes. Based on the results of the Exchange Offers, the Exchange Offer Cash Consideration due to tendering noteholders was $184.7 million. Pursuant to the Contribution Agreement, the Partnership was required to provide Inergy with Additional Equity Consideration for the amount of Inergy Notes not tendered in the Exchange Offers, which amounted to $13.1 million (the “Inergy Cash Consideration”)

Pursuant to the Contribution Agreement, Suburban paid $65.0 million in aggregate cash consent payments to tendering Inergy noteholders in connection with the Exchange Offers and Inergy paid $36.5 million to Suburban in cash at the Acquisition Date.

The preliminary fair value of the purchase price for Inergy Propane is $1,896.9 million, consisting of: (i) $1,000.0 million in aggregate principal amount of newly issued SPH Notes with a fair value of $1,075.0 million, and $184.8 million in cash to Inergy noteholders pursuant to the Exchange Offers; (ii) $65.0 million in cash to the Inergy noteholders for the consent payments pursuant to the Consent Solicitations; (iii) new Suburban common units with a fair value of $590.0 million, which were distributed to Inergy and Inergy Sales, all but $5.9 million of which will subsequently be distributed by Inergy to its unitholders; and (iv) less $17.9 million of net cash received from Inergy at the Acquisition Date pursuant to the Contribution Agreement, which includes the $36.5 million discussed in the preceding paragraph, net of amounts owed to Inergy by the Partnership at the Acquisition Date.

On April 25, 2012, we entered into a commitment letter (the “Bank Commitment Letter”) with certain of our lenders who are party to our existing credit agreement pursuant to which such lenders committed to provide (i) in the aggregate, subject to the satisfaction of certain conditions precedent, up to $250.0 million senior secured 364-day incremental term loan facility (the “364-Day Facility”) and (ii) an increase in the aggregate, subject to the satisfaction of certain conditions precedent, of our existing revolving credit facility under the Credit Agreement from $250.0 million to $400.0 million (the “Commitment Increase”). On the Acquisition Date we drew $225.0 million on the 364-Day Facility, which, together with available cash, was used for the purposes of paying (i) the Exchange Offer Cash Consideration, (ii) costs and fees related to the Exchange Offers, and (iii) costs and expenses related to the Inergy Propane Acquisition. We intend to repay such borrowings with an equity financing in the future, subject to market conditions. The following pro forma financial information reflects borrowings of $225.0 million under the 364-Day Facility.


The following unaudited pro forma condensed combined financial information of Suburban has been prepared to illustrate the effect of the Inergy Propane Acquisition on us and has been prepared for informational purposes only. The unaudited pro forma condensed combined financial information is based upon the historical consolidated financial statements and notes thereto of Suburban and Inergy Propane and should be read in conjunction with the:

 

   

audited annual financial statements and accompanying notes of Suburban Propane Partners, L.P. included in the Annual Report on Form 10-K for the fiscal year ended September 24, 2011, and the unaudited condensed consolidated financial statements and accompanying notes included in the Quarterly Report on Form 10-Q for the quarterly period ended June 23, 2012, as amended; and

 

   

audited historical financial statements and accompanying notes of Inergy Propane, LLC as of September 30, 2011 and 2010, and for each of the three years in the period ended September 30, 2011, which is included in Suburban’s Current Report on Form 8-K dated May 3, 2012, and the unaudited interim historical financial statements and accompanying notes for the nine months ended June 30, 2012 and 2011, which is included in Suburban’s Current Report on Form 8-K dated August 6, 2012, in which this financial information has also been filed.

The historical consolidated financial information has been adjusted in the following unaudited pro forma condensed combined financial statements to give pro forma effect to events that are (1) directly attributable to the Inergy Propane Acquisition and related financing, (2) factually supportable, and (3) with respect to the statements of operations, are expected to have a continuing impact on the combined results of Suburban. The unaudited pro forma condensed combined statements of operations have been prepared assuming the Inergy Propane Acquisition had been completed on September 26, 2010, the first day of Suburban’s 2011 fiscal year. The unaudited pro forma condensed combined balance sheet has been prepared assuming the Inergy Propane Acquisition had been completed on June 23, 2012, the last day of Suburban’s 2012 third fiscal quarter. The unaudited pro forma condensed combined financial information has been adjusted with respect to certain aspects of the Inergy Propane Acquisition to reflect:

 

   

the consummation of the Inergy Propane Acquisition;

 

   

exclusion of historical assets and liabilities of Inergy Propane, LLC not acquired or assumed as part of the Inergy Propane Acquisition and changes in certain revenues and expenses resulting from the exclusion of these assets and liabilities;

 

   

re-measurement of the assets and liabilities of Inergy Propane (as disclosed in more detail below) to record their preliminary estimated fair values at the Acquisition Date of the closing of the Inergy Propane Acquisition and adjustment of certain expenses resulting therefrom;

 

   

additional indebtedness, including, but not limited to, debt issuance costs and interest expense, incurred in connection with the exchange of Inergy Notes for the SPH Notes;

 

   

additional indebtedness, including, but not limited to, debt issuance costs and interest expense incurred in connection with borrowing under the 364-Day Facility;

 

   

no tax adjustments were made as Suburban is a publicly traded master limited partnership and has no substantial federal or state income tax liability.

The unaudited pro forma condensed combined financial information was prepared in accordance with the acquisition method of accounting. The pro forma information presented, including allocation of the purchase price, is based on preliminary estimates of fair values of assets acquired and liabilities assumed in connection with the Inergy Propane Acquisition. These preliminary estimates are based on available information and certain assumptions that may be revised as additional information becomes available.

The final purchase price allocation for the Inergy Propane Acquisition will be dependent upon the finalization of asset and liability valuations, which may depend in part on prevailing market rates and conditions. Any final adjustments may be materially different from the preliminary estimates, and may result in a change to the unaudited pro forma condensed combined financial information presented herein.

We believe that the assumptions used to derive the unaudited pro forma condensed combined financial information are reasonable given the information available; however, such assumptions are subject to change and the effect of any such change could be material. The unaudited pro forma condensed combined financial information is presented for informational purposes only and is not intended to represent or be indicative of the consolidated results of operations that would have been reported had the Inergy Propane Acquisition been completed as of or for the periods presented, nor are they necessarily indicative of future results.

 

2


SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES

UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET

AS OF JUNE 23, 2012 (*)

(in thousands)

 

     Historical
Suburban
Propane
Partners, L.P.
(2)
     Historical
Inergy  Propane,
LLC
(3)
     Elimination of
Assets Not
Acquired and
Liabilities  Not
Assumed
(4)
    Reclassifications
(5)
    Financing
Activities
    Other Pro  Forma
Adjustments
        Pro Forma
Combined
 

ASSETS

                  

Current assets:

                  

Cash and cash equivalents

   $ 115,804       $ 3,500       $ 4,685      $ —        $ (40,984   $ —        (6)   $ 83,005   

Accounts receivable, less allowance for doubtful accounts

     62,478         111,100         (68,268         —            105,310   

Inventories

     52,331         79,000         (40,922         —            90,409   

Assets from price risk management activities

     —           40,600         (40,600         —            —     

Other current assets

     18,555         8,800         (6,886       3,594        —        (7)     24,063   
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

     

 

 

 

Total current assets

     249,168         243,000         (151,991     —          (37,390     —            302,787   

Property, plant and equipment, net

     327,212         638,200         (177,426         153,324      (8)     941,310   

Other intangible assets, net

     13,913         298,200         (4,473         86,822      (9)     394,462   

Receivable from Inergy Midstream, L.P.

     —           100         (100         —            —     

Goodwill

     277,651         336,500         (379         546,319      (10)     1,160,091   

Other assets

     28,120         2,100         (1,351       14,850        —        (11)     43,719   
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

     

 

 

 

Total assets

   $ 896,064       $ 1,518,100       $ (335,720   $ —        $ (22,540   $ 786,465        $ 2,842,369   
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

     

 

 

 

LIABILITIES AND PARTNERS’ CAPITAL/ MEMBER’S EQUITY

                  

Current liabilities:

                  

Accounts payable

   $ 26,309       $ 89,000       $ (88,836   $ (155   $ —        $ —          $ 26,318   

Accrued employment and benefit costs

     12,371         —           —          3,652          —            16,023   

Customer deposits and advances

     36,634         34,900         8        3,844          —            75,386   

Short-term borrowings and current portion of long-term borrowings

     —           4,000         (88     (3,912     225,000        —        (12)     225,000   

Liabilities from price risk management activities

     —           13,500         (13,500         —            —     

Other current liabilities

     35,770         32,900         (19,953     (3,429       9,927      (13)     55,215   
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

     

 

 

 

Total current liabilities

     111,084         174,300         (122,369     —          225,000        9,927          397,942   

Long-term borrowings

     348,331         12,000         (1,874     (10,126     1,075,043        —        (14)     1,423,374   

Accrued insurance

     43,604         —           —              —            43,604   

Other liabilities

     55,515         14,100         (14,100     10,126          —            65,641   
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

     

 

 

 

Total liabilities

     558,534         200,400         (138,343     —          1,300,043        9,927          1,930,561   
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

     

 

 

 

Partners’ capital/member’s equity

     337,530         1,317,700             574,278        (1,317,700   (15)     911,808   
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

     

 

 

 

Total liabilities and partners’ capital/member’s equity

   $ 896,064       $ 1,518,100       $ (138,343   $ —        $ 1,874,321      $ (1,307,773     $ 2,842,369   
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

     

 

 

 

 

(*) Suburban Propane Partners, L.P. uses a 52/53 week fiscal year which ends on the last Saturday in September and its fiscal quarters are generally 13 weeks in duration. Inergy Propane, LLC uses a fiscal year end which ends on September 30. Accordingly, the third fiscal quarter ended on June 23, 2012 for Suburban and June 30, 2012 for Inergy Propane.

 

3


SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

FOR THE NINE MONTHS ENDED JUNE 23, 2012 (*)

(in thousands, except per unit amounts)

 

    Historical
Suburban
Propane
Partners, L.P.
(2)
    Historical Inergy
Propane, LLC
(3)
    Elimination of
Assets Not
Acquired and
Liabilities Not
Assumed

(4)
    Reclassifications
(5)
    Financing
Activities
    Other Pro
Forma
Adjustments
    Pro Forma
Combined
 

Revenues

             

Propane

  $ 666,796      $ 1,132,300      $ (530,224   $ —        $ —        $ —        $ 1,268,872   

Fuel oil and other refined fuels

    92,262        —          —          96,328          —          188,590   

Other

    78,055        402,500        (258,858     (96,328       —          125,369   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    837,113        1,534,800        (789,082     —          —          —          1,582,831   

Costs and expenses

             

Cost of products sold

    480,751        1,162,600        (726,328         —          917,023   

Operating and administrative expenses

    242,835        217,900        (31,101     (3,700       —          425,934   

Acquisition-related charges

    5,950        —          —          3,700          (9,650 ) (16)      —     

Loss on disposal of assets

    —          5,800        (20         —          5,780   

Depreciation and amortization

    23,906        87,500        (34,188         15,929  (17)      93,147   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    753,442        1,473,800        (791,637     —          —          6,279        1,441,884   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

    83,671        61,000        2,555        —          —          (6,279     140,947   

Loss on debt extinguishment

    (507     —          —              —          (507

Interest expense, net

    (19,742     (1,000     148          (58,423     —    (18)      (79,017

Other income

    —          1,400        (1,244         —          156   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income before (benefit from) provision for income taxes

    63,422        61,400        1,459        —          (58,423     (6,279     61,579   

(Benefit from) provision for income taxes

    (60     (100     (20         —          (180
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

  $ 63,482      $ 61,500      $ 1,479      $ —        $ (58,423   $ (6,279   $ 61,759   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income per Common Unit—basic

  $ 1.78                $ 1.24   
 

 

 

             

 

 

 

Weighted average number of units outstanding—basic

    35,616                14,201  (15)      49,817   
 

 

 

             

 

 

 

Income per Common Unit—diluted

  $ 1.77                $ 1.24   
 

 

 

             

 

 

 

Weighted average number of units outstanding—diluted

    35,794                14,201  (15)      49,995   
 

 

 

             

 

 

 

 

(*) Suburban Propane Partners, L.P. uses a 52/53 week fiscal year which ends on the last Saturday in September and its fiscal quarters are generally 13 weeks in duration. Inergy Propane, LLC uses a fiscal year end which ends on September 30. Accordingly, the third fiscal quarter ended on June 23, 2012 for Suburban and June 30, 2012 for Inergy Propane.

 

4


SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

FOR THE YEAR ENDED SEPTEMBER 24, 2011 (*)

(in thousands, except per unit amounts)

 

    Historical
Suburban
Propane
Partners, L.P.
(2)
    Historical Inergy
Propane, LLC
(3)
    Elimination of
Assets Not
Acquired and
Liabilities Not
Assumed

(4)
    Reclassifications
(5)
    Financing
Activities
    Other Pro
Forma
Adjustments
    Pro Forma
Combined
 

Revenues

             

Propane

  $ 929,492      $ 1,461,900      $ (602,294   $ —        $ —        $ —        $ 1,789,098   

Fuel oil and other refined fuels

    139,572        —          —          128,300          —          267,872   

Other

    121,488        486,800        (294,082     (128,300       —          185,906   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    1,190,552        1,948,700        (896,376     —          —          —          2,242,876   

Costs and expenses

             

Cost of products sold

    678,719        1,424,100        (822,250         —          1,280,569   

Operating and administrative expenses

    330,977        285,800        (28,713         —          588,064   

Severance charge

    2,000        —          —              —          2,000   

Loss on disposal of assets

    —          10,800        113            —          10,913   

Depreciation and amortization

    35,628        117,200        (42,700         18,809  (17)      128,937   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    1,047,324        1,837,900        (893,550     —          —          18,809        2,010,483   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

    143,228        110,800        (2,826     —          —          (18,809     232,393   

Interest expense, net

    (27,378     (1,500     100          (77,897     —    (18)      (106,675

Other income

    —          200        —              —          200   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income before provision for income taxes

    115,850        109,500        (2,726     —          (77,897     (18,809     125,918   

Provision for income taxes

    884        500        (100         —          1,284   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

  $ 114,966      $ 109,000      $ (2,626   $ —        $ (77,897   $ (18,809   $ 124,634   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income per Common Unit—basic

  $ 3.24                $ 2.51   
 

 

 

             

 

 

 

Weighted average number of units outstanding—basic

    35,525                14,201  (15)      49,726   
 

 

 

             

 

 

 

Income per Common Unit—diluted

  $ 3.22                $ 2.50   
 

 

 

             

 

 

 

Weighted average number of units outstanding—diluted

    35,723                14,201  (15)      49,924   
 

 

 

             

 

 

 

 

(*) Suburban Propane Partners, L.P. uses a 52/53 week fiscal year which ends on the last Saturday in September and its fiscal quarters are generally 13 weeks in duration. Inergy Propane, LLC uses a fiscal year end which ends on September 30.

 

5


NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

(in thousands of dollars, except per unit data)

Note 1. The unaudited pro forma condensed combined financial information was prepared based on the preliminary valuation of the purchase price of $1,896,860 and allocation to the identifiable assets acquired and liabilities assumed. The purchase price was determined and allocated for accounting purposes as follows:

 

Consideration:

  

Cash consideration to Inergy noteholders pursuant to the Exchange Offers

   $ 184,761   

Cash consideration to Inergy noteholders for consent payment pursuant to the Consent Solicitations

     65,000   

SPH Notes issued to Inergy noteholders (par value of $1,000,000)

     1,075,042   

Initial Equity Consideration (see Note 15)

     577,237   

Additional Equity Consideration (see Note 15)

     12,791   

Cash received from Inergy pursuant to the Contribution Agreement

     (17,971
  

 

 

 
   $ 1,896,860   
  

 

 

 

Preliminary purchase price allocation:

  

Current assets

   $ 91,009   

Property, plant and equipment

     614,098   

Other intangible assets

     380,549   

Goodwill

     882,439   

Other assets

     749   

Current liabilities

     (61,858

Non-current liabilities

     (10,126
  

 

 

 
   $ 1,896,860   
  

 

 

 

Pursuant to the Contribution Agreement, the cash consideration for Inergy Propane is subject to adjustment for the working capital of Inergy Propane.

In addition, on the Acquisition Date, Inergy provided Suburban with cash in an amount equal to the amount of accrued and unpaid interest on the Inergy Notes through the Acquisition Date, which Suburban distributed to the Inergy noteholders participating in the Exchange Offers on the Acquisition Date.

Note 2. Represents the historical consolidated results of operations and financial position of Suburban.

Note 3. Represents the historical consolidated results of operations and financial position of Inergy Propane, LLC.

Note 4. Reflects the elimination of the historical consolidated results of operations, assets and liabilities of Inergy Propane not to be acquired by Suburban.

Note 5. Reflects reclassifications of amounts included on Inergy Propane’s financial statements to conform to Suburban’s presentation.

 

6


Note 6. Reflects pro forma adjustments to cash and cash equivalents as follows:

 

Gross proceeds from borrowings under 364-Day Facility

   $ 225,000   

Cash received from Inergy pursuant to the Contribution Agreement

     17,971   

Cash payments to Inergy noteholders pursuant to the Exchange Offers

     (184,761

Cash payments to Inergy noteholders for consent payment pursuant to the consent solicitations

     (65,000

Payment of debt origination costs

     (18,444

Payment of acquisition-related costs

     (15,750
  

 

 

 
   $ (40,984
  

 

 

 

Note 7. Reflects pro forma adjustments to record estimated debt issuance costs in conjunction with the 364-Day Facility.

Note 8. Reflects pro forma adjustments to record property, plant and equipment at estimated fair value as follows:

 

To record estimated fair value of Inergy Propane property, plant and equipment

   $ 614,098   

Eliminate historical net book value of Inergy Propane property, plant and equipment

     (460,774
  

 

 

 
   $ 153,324   
  

 

 

 

Note 9. Reflects pro forma adjustments to record other intangible assets at estimated fair value as follows:

 

Allocation of purchase price to customer relationships

   $ 363,000   

Allocation of purchase price to tradenames

     2,200   

Allocation of purchase price to non-competes

     15,349   

Eliminate historical cost of Inergy Propane’s other intangible assets

     (293,727
  

 

 

 
   $ 86,822   
  

 

 

 

Note 10. Reflects pro forma adjustments to remove Inergy Propane’s historical goodwill of $336,121 and to record goodwill of $882,439 representing the excess of the net purchase price over the preliminary fair values of the net assets acquired and liabilities assumed. Such goodwill principally comprises buyer-specific synergies and assembled workforce.

Note 11. Reflects pro forma adjustments to record estimated debt issuance costs in conjunction with the issuance of $1,000,000 in aggregate principal amount of SPH Notes.

Note 12. Reflects borrowings under the 364-Day Facility.

Note 13. Reflects pro forma adjustments to record other current liabilities at estimated fair value as follows:

 

To record estimated fair value of Inergy Propane other current liabilities

   $ 19,445   

Eliminate historical cost of Inergy Propane’s other curent liabilities

     (9,518
  

 

 

 
   $ 9,927   
  

 

 

 

Note 14. Reflects the issuance of $1,000,000 in aggregate principal amount of SPH Notes with an aggregate fair value of $1,075,043.

 

7


Note 15. Reflects total pro forma adjustments to partners’ capital accounts as follows:

 

     Suburban
Common Units
(in thousands)
     Suburban
Common
Unitholders /
Member’s Equity
 

Elimination of historical Inergy Propane member’s capital

      $ (1,317,700

Issuance of Suburban common units (Initial Equity Consideration)

     13,893         577,237   

Issuance of Suburban common units (Additional Equity Consideration)

     308         12,791   

Acquisition-related costs

        (15,750
  

 

 

    

 

 

 
     14,201       $ (743,422
  

 

 

    

 

 

 

In accordance with the Contribution Agreement, the number of Suburban common units issued to Inergy and Inergy Sales as Initial Equity Consideration in the aggregate is determined by dividing $600,000 by the average of the high and low sales prices of Suburban’s common units for the twenty consecutive trading days ending on the day prior to the execution of the Contribution Agreement, which was determined to be $43.1885, resulting in 13,893 common units. The number of additional units issued to Inergy as Additional Equity Consideration is determined by dividing the Inergy Cash Consideration by $42.50. The Inergy Cash Consideration was $13,083, which results in the issuance of 308 additional common units.

The pro forma adjustment regarding the 14,201 Suburban common units issued to Inergy and Inergy Sales was determined based on the reported closing price of a Suburban common unit on the New York Stock Exchange on July 31, 2012, which was the last reported closing price prior to the Acquisition Date.

Note 16. Reflects pro forma adjustments for the removal of direct incremental acquisition-related costs reflected in the historical statement of operations for the Inergy Propane Acquisition.

Note 17. Reflects pro forma adjustments to depreciation and amortization expense as follows:

 

     For the nine
months ended
June 30, 2012
    For the year
ended September
24, 2011
 

Eliminate historical depreciation and amortization expense of Inergy Propane

   $ (53,312   $ (74,500

Depreciation and amortization expense reflecting preliminary allocation of the purchase price:

    

Depreciation expense on property, plant and equipment (5 to 40 years)

     39,301        53,389   

Amortization expense of customer list intangibles (10 years)

     27,225        36,300   

Amortization expense of non-compete agreement intangibles (5 years)

     2,302        3,070   

Amortization expense of tradename intangibles (4 years)

     413        550   
  

 

 

   

 

 

 
   $ 15,929      $ 18,809   
  

 

 

   

 

 

 

 

8


Note 18. Reflects pro forma adjustments to interest expense as follows:

 

     For the nine
months ended
June 30, 2012
     For the year
ended September
24, 2011
 

Interest on SPH Notes, net of premium

   $ 48,314       $ 64,419   

Interest on borrowings under 364-Day Facility

     5,906         7,875   

Amortization of debt issuance costs

     4,203         5,603   
  

 

 

    

 

 

 
   $ 58,423       $ 77,897   
  

 

 

    

 

 

 

Borrowing under the 364-Day Facility bears interest at prevailing interest rates based upon 3-month LIBOR, which was approximately 0.5% as of August 1, 2012, plus 300 basis points. Accordingly, interest expense on borrowing of $225,000 for the full term of the 364-Day Facility would approximate $7,875 using an interest rate of 3.5%. If the 3-month LIBOR increased or decreased by 12.5 basis points from the rate as of August 1, 2012, annual interest expense would increase or decrease by $281.

 

9