SUBURBAN PROPANE PARTNERS LP - 10-K Annual Report

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

FORM 10-K

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended September 26, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 16 OF THE
SECURITIES EXCHANGE ACT OF 1934

for the transition period from ______ to ______

Commission File Number: 1-14222

SUBURBAN PROPANE PARTNERS, L.P.
-------------------------------
(Exact name of registrant as specified in its charter)

Delaware 22-3410353
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

240 Route 10 West, Whippany, NJ 07981
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(Address of principal executive office) (Zip Code)

(973) 887-5300
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(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered

Common Units New York Stock Exchange
- --------------------------------------------------------------------------------
Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for each shorter period that the Registrant
was required to file such reports), and (2) had been subject to such filing
requirements for the past 90 days. Yes X No
-- --

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K [X ].

The aggregate market value as of December 17, 1998 of the Registrant's Common
Units held by non-affiliates of the Registrant, based on the reported closing
price of such units on the New York Stock Exchange on such date ($18.06/unit),
was approximately $388,710,800. December 17, 1998 there were outstanding
21,562,500 Common Units and 7,163,750 Subordinated Units.

Documents Incorporated by Reference: None

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

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

PART II
ITEM 5. MARKET FOR THE REGISTRANT'S UNITS AND
RELATED UNITHOLDER MATTERS................................. 8

ITEM 6. SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA........... 9
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.............. 10
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK................................................ 17
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA................ 18
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE........................ 18

PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT......... 19
ITEM 11. EXECUTIVE COMPENSATION..................................... 22
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT............................................. 26
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS............. 28

PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND
REPORTS ON FORM 8-K........................................ 29

Signatures.......................................................... 30

DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
- -----------------------------------------------

THIS ANNUAL REPORT ON FORM 10-K 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. IMPORTANT FACTORS THAT COULD CAUSE
ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE DISCUSSED IN SUCH FORWARD-LOOKING
STATEMENTS ("CAUTIONARY STATEMENTS") INCLUDE, AMONG OTHER THINGS: THE IMPACT OF
WEATHER CONDITIONS ON THE DEMAND FOR PROPANE; FLUCTUATIONS IN THE UNIT COST OF
PROPANE; THE ABILITY OF THE PARTNERSHIP TO COMPETE WITH OTHER SUPPLIERS OF
PROPANE AND OTHER ENERGY SOURCES; THE ABILITY OF THE PARTNERSHIP TO RETAIN
CUSTOMERS; THE IMPACT OF ENERGY EFFICIENCY AND TECHNOLOGY ADVANCES ON THE DEMAND
FOR PROPANE; THE ABILITY OF MANAGEMENT TO CONTINUE TO CONTROL EXPENSES; THE
IMPACT OF REGULATORY DEVELOPMENTS ON THE PARTNERSHIP'S BUSINESS, INCLUDING THE
RESOLUTION OF FINAL RULE HM-225 (49 CFR 171.5) PROMULGATED BY THE RESEARCH AND
SPECIAL PROGRAMS ADMINISTRATION OF THE U.S. DEPARTMENT OF TRANSPORTATION; THE
IMPACT OF LEGAL PROCEEDINGS ON THE PARTNERSHIP'S BUSINESS; AND, IF THE PROPOSED
RECAPITALIZATION OF THE PARTNERSHIP DISCUSSED BELOW IS COMPLETED, THE IMPACT OF
THE ADDITIONAL DEBT AT THE OPERATING PARTNERSHIP LEVEL AND THE IMPACT OF THE
REPLACEMENT OF A THIRD PARTY DISTRIBUTION SUPPORT ARRANGEMENT WITH ALTERNATIVE
SUPPORT FROM THE PARTNERSHIP. ALL SUBSEQUENT WRITTEN AND ORAL FORWARD-LOOKING
STATEMENTS ATTRIBUTABLE TO SUBURBAN OR PERSONS ACTING ON ITS BEHALF ARE
EXPRESSLY QUALIFIED IN THEIR ENTIRETY BY SUCH CAUTIONARY STATEMENTS.

PART I

ITEM 1. BUSINESS.
=========

GENERAL
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Suburban Propane Partners, L.P. (the "Partnership"), a publicly traded
Delaware limited partnership is engaged, through subsidiaries, in the retail and
wholesale marketing of propane and related appliances and services. The
Partnership believes it is the third largest retail marketer of propane in the
United States, serving more than 700,000 active residential, commercial,
industrial and agricultural customers from more than 340 customer service
centers in over 40 states. The Partnership's operations are concentrated in the
east and west coast regions of the United States. The retail propane sales
volume of the Partnership was approximately 530 million gallons during the
fiscal year ended September 26, 1998. Based on industry statistics, the
Partnership believes that its retail propane sales volume constitutes
approximately 6% of the domestic retail market for propane.

The Partnership conducts its business principally through its subsidiary,
Suburban Propane, L.P. (the "Operating Partnership"), a Delaware limited
partnership. The Partnership and the Operating Partnership were formed in 1995
to acquire and operate the propane business and assets of Suburban Propane, a
division of Quantum Chemical Corporation (the "Predecessor Company"), then owned
by Hanson PLC ("Hanson"). The Predecessor Company had been continuously engaged
in the retail propane business since 1928 and had been owned by Quantum since
1983. In addition, Suburban Sales and Service, Inc. (the "Service Company"), a
subsidiary of the Operating Partnership, was formed to acquire and operate the
service work and appliance and propane equipment parts businesses of the
Predecessor Company. The Partnership, the Operating Partnership and the Service
Company are collectively referred to hereinafter as the "Partnership Entities."
The Partnership Entities commenced operations on March 5, 1996 upon consummation
of an initial public offering of Common Units representing limited partner
interests in the Partnership, the private placement of $425 million aggregate
principal amount of Senior Notes and the transfer of all the propane assets
(excluding the net accounts receivable balance) of the Predecessor Company to
the Operating Partnership and Service Company.

Suburban Propane GP, Inc. (the "General Partner") is a wholly-owned
subsidiary of Millennium Petrochemicals Inc., ("Millennium Petrochemicals") and
serves as the general partner of the Partnership and the Operating Partnership.
Both the General Partner and Millennium Petrochemicals are indirect wholly-owned
subsidiaries of Millennium Chemicals Inc. ("Millennium") which was formed as a
result of Hanson's demerger in October 1996. Millennium Petrochemicals was
formerly named Quantum Chemical Corporation ("Quantum"). The General Partner
holds a 1% general partner interest in the Partnership and a 1.0101% general
partner interest in the Operating Partnership. In addition, the General Partner
owns a 24.4% limited partner interest and a special limited partner interest in
the Partnership. The limited partner interest is evidenced by 7,163,750
Subordinated Units and the special limited partner interest is evidenced by
220,000 Additional Partnership Units ("APUs"). The General Partner has delegated
to the Partnership's Board of Supervisors all management powers over the
business and affairs of the Partnership Entities that the General Partner
possesses under applicable law.

PROPOSED RECAPITALIZATION
- -------------------------

On November 30, 1998, the Partnership announced a proposed recapitalization
of the Partnership (the "Recapitalization"), pursuant to which, the Partnership
will, among other things, redeem all 7,163,750 outstanding Subordinated Units
and all 220,000 outstanding APUs, all of which are owned by the General Partner,
for a total price of $69 million, subject to adjustment. In connection with the
Recapitalization, the Partnership's Distribution Support Agreement with the
General Partner will be terminated and replaced with a $21.6 million liquidity

arrangement established by the Partnership consisting of either a deposit in
certain highly liquid securities or a letter of credit with a reputable bank or
a combination of both. The redemption price will be funded from the proceeds of
a new $150 million credit facility to be entered into by the Operating
Partnership with a syndicate of banks, together with other available cash
resources. See "Liquidity and Capital Resources" in Item 9 of this Annual Report
for a discussion of the Operating Partnership's new credit facility.

In addition, the General Partner will sell its entire general partner
interests in the Partnership and the Operating Partnership, including its
incentive distribution rights in the Partnership ("IDRs"), to Suburban Energy
Services Group LLC, a new entity owned by senior management of the Partnership
(the "Successor General Partner"), for a total price of $6 million and the
Successor General Partner will assume the rights and duties of the General
Partner under the partnership agreements of the Partnership and the Operating
Partnership and will be substituted as the new general partner of the
Partnership and the Operating Partnership. In connection with the
recapitalization and the substitution of the General Partner, the IDRs will be
amended to eliminate the second and third target incentive distribution rights
of the new General Partner with respect to distributions in excess of the
Minimum Quarterly Distribution to the holders ("Common Unitholders") of common
units ("Common Units")and the new General Partner, thereby increasing the rights
of Common Unitholders to distributions of available cash in excess of the
Minimum Quarterly Distribution and the Board of Supervisors will have the right
to convert IDRs to Common Units after the fifth anniversary of the closing of
the Recapitalization. The Partnership Agreement and the Operating Partnership
Agreement will be amended to permit and effect the Recapitalization and the
substitution of the general partner.

The Recapitalization and the substitution of the general partner were
approved by the Partnership's Board of Supervisors upon the recommendation of
its elected supervisors acting as a Special Committee. Consummation of the
Recapitalization is subject to certain conditions, including the approval of the
Partnership's public Common Unitholders and senior noteholders. A Special
Meeting of Common Unitholders will be scheduled to vote on the Recapitalization
in 1999. It cannot be predicted with certainty when the Recapitalization will be
complete, but the Partnership hopes to complete it in the second or third
quarter of the 1999 fiscal year. For additional information regarding the
Recapitalization, please see the Partnership's Preliminary Proxy Statement,
filed with the Securities and Exchange Commission on December 23, 1998.

BUSINESS STRATEGY
- -----------------

The Partnership's strategy is to expand its operations and increase its
retail market share in selected markets both through the acquisition of other
propane distributors and through internal growth. Although acquisitions have
contributed to its growth, the Partnership believes that the current market
prices for propane distributors are greater than the cost to grow internally
through improved customer retention and marketing. As a result, the Partnership
has focused on internal growth. Acquisitions during fiscal 1998 included 5
propane distributors for total consideration of $4.0 million compared to 5
propane distributors acquired in fiscal 1997 for total consideration of $1.7
million and 17 propane distributors acquired during fiscal 1996 for total
consideration of $31.7 million.

The Partnership plans to continue to pursue internal growth by acquiring
new customers, retaining existing customers and by selling additional products
and services to its customers. The Partnership employs a nationwide sales
organization and has a comprehensive customer retention program. By retaining
more of its existing customers and continuing to seek new customers, the
Partnership believes it can increase its customer base and improve its
profitability.

The Partnership evaluates possible acquisition candidates which are
generally local propane distributors as to the potential return on investment
after considering synergies which may result from incorporating such
acquisitions into the Partnership's infrastructure. The Partnership has and will
continue to evaluate non-propane related acquisitions which management believes
would provide an attractive return on investment.

INDUSTRY BACKGROUND AND COMPETITION
- -----------------------------------

Propane, a by-product of natural gas processing and petroleum refining, is
a clean-burning energy source recognized for its transportability and ease of
use relative to alternative forms of stand-alone energy sources. Retail propane
use falls into three broad categories: (i) residential and commercial
applications, (ii) industrial applications and (iii) agricultural uses. In the
residential and commercial markets, propane is used primarily for space heating,
water heating, clothes drying and cooking. Industrial customers primarily use
propane as a motor fuel burned in internal combustion engines that power
over-the-road vehicles, forklifts and stationary engines, to fire furnaces, as a
cutting gas and in other process applications. In the agricultural market,
propane is primarily used for tobacco curing, crop drying, poultry brooding and
weed control. In its wholesale operations, the Partnership sells propane
principally to large industrial end-users and other propane distributors.

Propane is extracted from natural gas or oil wellhead gas at processing
plants or separated from crude oil during the refining process. Propane is
normally transported and stored in a liquid state under moderate pressure or
refrigeration for ease of handling in shipping and distribution. When the
pressure is released or the temperature is increased, it is usable as a
flammable gas. Propane is colorless and odorless; an odorant is added to allow
its detection. Propane is clean burning, producing negligible amounts of
pollutants when consumed.

Based upon information provided by the Energy Information Agency, propane
accounts for approximately three to four percent of household energy consumption
in the United States. Propane competes primarily with electricity, natural gas
and fuel oil as an energy source, principally on the basis of price,
availability and portability.

Propane is more expensive than natural gas on an equivalent BTU basis in
locations served by natural gas, but serves as an alternative to natural gas in
rural and suburban areas where natural gas is unavailable or portability of
product is required. Historically, the expansion of natural gas into traditional
propane markets has been inhibited by the capital costs required to expand
pipeline and retail distribution systems. Although the extension of natural gas
pipelines tends to displace propane distribution in areas affected, the
Partnership believes that new opportunities for propane sales arise as more
geographically remote neighborhoods are developed. Propane is generally less
expensive to use than electricity for space heating, water heating, clothes
drying and cooking. Due to the current geographical diversity of the
Partnership's operations, fuel oil has not been a significant competitor. In
addition, propane and fuel oil compete to a lesser extent as a result of the
cost of converting from one to the other.

In addition to competing with alternative energy sources, the Partnership
competes with other companies engaged in the retail propane distribution
business. Competition in the propane industry is highly fragmented and generally
occurs on a local basis with other large full-service multi-state propane
marketers, thousands of smaller local independent marketers and farm
cooperatives. Based on industry publications, the Partnership believes that the
10 largest retailers, including the Partnership, account for approximately 33%
of the total retail sales of propane in the United States, and that no single
marketer has a greater than 10% share of the total retail market in the United
States. Based on industry statistics, the Partnership believes that its retail
sales volume constitutes approximately 6% of the domestic retail market for
propane. Most of the Partnership's retail distribution branches compete with
five or more marketers or distributors. Each retail distribution outlet operates
in its own competitive environment because retail marketers tend to locate in
close proximity to customers in order to lower the cost of providing service.
The typical retail distribution outlet generally has an effective marketing
radius of approximately 50 miles although in certain rural areas the marketing
radius may be extended by a satellite office.

PRODUCTS, SERVICES AND MARKETING
- --------------------------------

The Partnership distributes propane through a nationwide retail
distribution network consisting of more than 340 customer service centers in
over 40 states. The Partnership's operations are concentrated in the east and

west coast regions of the United States. In fiscal 1998, the Partnership served
more than 700,000 active customers. Approximately two-thirds of the
Partnership's retail propane volume has historically been sold during the
six-month peak heating season from October through March, as many customers use
propane for heating purposes. Typically, customer service centers are found in
suburban and rural areas where natural gas is not readily available. Generally,
such locations consist of an office, appliance showroom, warehouse and service
facilities, with one or more 18,000 to 30,000 gallon storage tanks on the
premises. Most of the Partnership's residential customers receive their propane
supply pursuant to an automatic delivery system which eliminates the customer's
need to make an affirmative purchase decision. From its customer service
centers, the Partnership also sells, installs and services equipment related to
its propane distribution business, including heating and cooking appliances and,
at some locations, propane fuel systems for motor vehicles.

The Partnership sells propane primarily to six markets: residential,
commercial, industrial (including engine fuel), agricultural, other retail users
and wholesale. Approximately 71.0% of the gallons sold by the Partnership in
fiscal 1998 were to retail customers (26.8% to residential customers, 17.8% to
commercial customers, 10.4% to industrial customers (including 8.2% to engine
fuel customers), 4.7% to agricultural customers and 11.3% to other retail users)
and approximately 29.0% were for hedging activities and wholesale customers.
Sales to residential customers in fiscal 1998 accounted for approximately 54% of
the Partnership's gross profit on propane sales, reflecting the higher-margin
nature of this segment of the market. No single customer accounted for 10% or
more of the Partnership's revenues during fiscal year 1998.

Retail deliveries of propane are usually made to customers by means of
bobtail and rack trucks. Propane is pumped from the bobtail truck, which
generally holds 2,200 gallons of propane, into a stationary storage tank on the
customer's premises. The capacity of these tanks ranges from approximately 100
gallons to approximately 1,200 gallons, with a typical tank having a capacity of
300 to 400 gallons. The Partnership also delivers propane to retail customers in
portable cylinders, which typically have a capacity of 5 to 35 gallons. When
these cylinders are delivered to customers, empty cylinders are picked up for
replenishment at the Partnership's distribution locations or are refilled in
place. The Partnership also delivers propane to certain other bulk end users of
propane in larger trucks known as transports (which have an average capacity of
approximately 9,000 gallons). End users receiving transport deliveries include
industrial customers, large-scale heating accounts, such as local gas utilities
which use propane as a supplemental fuel to meet peak load deliverability
requirements, and large agricultural accounts which use propane for crop drying.
Propane is generally transported from refineries, pipeline terminals, storage
facilities (including the Partnership's storage facilities in Hattiesburg,
Mississippi and Elk Grove, California), and coastal terminals to the
Partnership's customer service centers by a combination of common carriers,
owner-operators and railroad tank cars. (See Item 2.)

In its wholesale operations, the Partnership principally sells propane to
large industrial end-users and other propane distributors. This market segment
includes customers who use propane to fire furnaces, as a cutting gas and in
other process applications. Due to the low margin nature of the wholesale market
as compared to the retail market, the Partnership has reduced its emphasis on
wholesale marketing, and as such wholesale gallons during fiscal 1998 have
decreased.

PROPANE SUPPLY
- --------------

The Partnership's propane supply is purchased from over 90 oil companies
and natural gas processors at more than 190 supply points located in the United
States and Canada. The Partnership also makes purchases on the spot market. The
Partnership purchased over 96% of its propane supplies from domestic suppliers
during fiscal 1998. Most of the propane purchased by the Partnership in fiscal
1998 was purchased pursuant to one year agreements subject to annual renewal,
but the percentage of contract purchases may vary from year to year as
determined by the Partnership. Supply contracts generally provide for pricing in

accordance with posted prices at the time of delivery or the current prices
established at major storage points, and some contracts include a pricing
formula that typically is based on such market prices. Some of these agreements
provide maximum and minimum seasonal purchase guidelines. The Partnership uses a
number of interstate pipelines, as well as railroad tank cars and delivery
trucks to transport propane from suppliers to storage and distribution
facilities.

Supplies of propane from the Partnership's sources historically have been
readily available. In the fiscal year ended September 26, 1998, Exxon
Corporation ("Exxon") and Shell Oil Company ("Shell") provided approximately 14%
and 13%, respectively, of the Partnership's total domestic propane supply. The
Partnership believes that, if supplies from either Exxon or Shell were
interrupted, it would be able to secure adequate propane supplies from other
sources without a material disruption of its operations. Aside from Exxon or
Shell, no single supplier provided more than 10% of the Partnership's total
domestic propane supply in the fiscal year ended September 26, 1998. See Item 7
for a discussion of the Partnership's evaluation of its suppliers' readiness for
Year 2000 compliance in the information services area.

The Partnership's product procurement and price risk management group seeks
to reduce the effect of price volatility on the Partnership's product costs and
to help insure the availability of propane during periods of short supply. The
Partnership is currently a party to propane futures transactions on the New York
Mercantile Exchange and to forward contracts with various third parties to
purchase and sell product at fixed prices in the future. These activities are
monitored by management through enforcement of the Partnership's Commodity
Trading Policy. See Item 7A of this Report.

The Partnership operates large storage facilities in Mississippi and
California and smaller storage facilities in other locations and has rights to
use storage facilities in additional locations. The Partnership's storage
facilities allow the Partnership to buy and store large quantities of propane
during periods of low demand, which generally occur during the summer months.
The Partnership believes its storage facilities help ensure a more secure supply
of propane during periods of intense demand or price instability.

TRADEMARKS AND TRADENAMES
- -------------------------

The Partnership utilizes a variety of trademarks and tradenames which it
owns, including "Suburban Propane(R)". The Partnership regards its trademarks,
tradenames and other proprietary rights as valuable assets and believes that
they have significant value in the marketing of its products.

GOVERNMENT REGULATION
- ---------------------

The Partnership is subject to various federal, state and local
environmental, health and safety laws and regulations. Generally, these laws
impose limitations on the discharge of pollutants and establish standards for
the handling of solid and hazardous wastes. These laws include the Resource
Conservation and Recovery Act, the Comprehensive Environmental Response,
Compensation and Liability Act ("CERCLA"), the Clean Air Act, the Occupational
Safety and Health Act, the Emergency Planning and Community Right to Know Act,
the Clean Water Act and comparable state statutes. CERCLA, also known as the
"Superfund" law, imposes joint and several liability without regard to fault or
the legality of the original conduct on certain classes of persons that are
considered to have contributed to the release or threatened release of a
"hazardous substance" into the environment. Propane is not a hazardous substance
within the meaning of CERCLA, however, the Partnership owns real property where
such hazardous substances may exist.

Pursuant to the 1990 amendments to the Clean Air Act, risk management plans
must be implemented at the Partnership's customer service centers by June 22,
1999. The Partnership anticipates that all of its customer service centers will
be in compliance with the risk management plan requirement by or before the
aforementioned deadline.

National Fire Protection Association Pamphlets No. 54 and No. 58, which
establish rules and procedures governing the safe handling of propane, or

comparable regulations, have been adopted as the industry standard in all of the
states in which the Partnership operates. In some states these laws are
administered by state agencies, and in others they are administered on a
municipal level. With respect to the transportation of propane by truck, the
Partnership is subject to regulations promulgated under the Federal Motor
Carrier Safety Act. These regulations cover the transportation of hazardous
materials and are administered by the United States Department of
Transportation. The Partnership conducts ongoing training programs to help
ensure that its operations are in compliance with applicable safety regulations.
The Partnership maintains various permits that are necessary to operate some of
its facilities, some of which may be material to its operations. The Partnership
believes that the procedures currently in effect at all of its facilities for
the handling, storage and distribution of propane are consistent with industry
standards and are in compliance in all material respects with applicable laws
and regulations.

The Research and Special Programs Administration ("RSPA") of the U.S.
Department of Transportation has recently promulgated Final Rule HM-225 (49 CFR
171.5) which adopts temporary operating requirements for cargo tank motor
vehicles used to transport propane (the "Final Rule"). The Final Rule, which
became effective on August 16, 1997, effectively requires that such vehicles be
equipped with remote control equipment capable of shutting off the flow of
propane in the event of a break in the vehicle's delivery hose or piping. The
Final Rule also contains a statement that a pre-existing RSPA regulation
(Hazardous Materials Regulation 177.834(i)) requires operators of cargo tank
vehicles to maintain an "unobstructed view" of the vehicle itself when making
deliveries to customer tanks. This new interpretation espoused by RSPA regarding
the unobstructed view requirement would require either two operators being in
attendance during most customer deliveries or one attendant remaining at a
mid-point between the cargo tank vehicle and the customer tank, a practice that
the Partnership and the propane industry consider to be unsafe.

The Partnership and four other major propane marketers have filed suit in
the U.S. District Court for the Western District of Missouri challenging the
RSPA Final Rule on the basis that it was promulgated in an arbitrary and
capricious manner and in violation of the Administrative Procedure Act. In March
1998, the plaintiffs obtained a preliminary injunction staying and postponing
the effective date of the Final Rule as it applies to bobtail trucks and any
enforcement of RSPA's interpretation of Hazardous Materials Regulation
177.834(i). The National Propane Gas Association, the industry's trade
association, has also filed a suit challenging the Final Rule in the U.S.
District Court for the Northern District of Texas. In July 1998, RSPA announced
the establishment of an advisory committee for a negotiated rule making
regarding the matters addressed in the Final Rule. The Partnership cannot yet
predict the outcome of the aforementioned suits and negotiated rulemaking
proceeding.

Future developments, such as stricter environmental, health or safety laws
and regulations thereunder, could affect Partnership operations. It is not
anticipated that the Partnership's compliance with or liabilities under
environmental, health and safety laws and regulations, including CERCLA, will
have a material adverse effect on the Partnership. To the extent that there are
any environmental liabilities unknown to the Partnership or environmental,
health or safety laws or regulations are made more stringent, there can be no
assurance that the Partnership's results of operations will not be materially
and adversely affected.

EMPLOYEES
- ---------

As of September 26, 1998 the Partnership had 3,217 full time employees, of
whom 319 were general and administrative (including fleet maintenance
personnel), 25 were transportation and product supply and 2,873 were customer
service center employees. Approximately 181 of such employees are represented
by 9 different local chapters of labor unions. The Partnership believes that its
relations with both its union and non-union employees are satisfactory. From
time to time, the Partnership hires temporary workers to meet peak seasonal
demands.

ITEM 2. PROPERTIES.
===========

The Partnership currently owns approximately 70% of its customer service
center and satellite locations that it operates and leases the balance of its
retail locations from third parties. In addition, the Partnership owns and
operates a 187 million gallon underground storage facility in Hattiesburg,
Mississippi, and a 22 million gallon refrigerated, above-ground storage facility
in Elk Grove, California.

The transportation of propane requires specialized equipment. The trucks
and railroad tank cars utilized for this purpose carry specialized steel tanks
that maintain the propane in a liquefied state. As of September 26, 1998, the
Partnership had a fleet of approximately 5 transport truck tractors, of which 4
are owned by the Partnership, and 617 railroad tank cars, of which approximately
2% are owned by the Partnership. In addition, the Partnership utilizes
approximately 1,700 bobtail and rack trucks, of which approximately 73% are
owned by the Partnership and approximately 1,675 other delivery and service
vehicles, of which approximately 58% are owned by the Partnership. Vehicles that
are not owned by the Partnership are leased. As of September 26, 1998, the
Partnership owned approximately 944,000 customer storage tanks with typical
capacities of 100 to 500 gallons and approximately 93,000 portable cylinders
with typical capacities of 5 to 10 gallons.

The Partnership believes that it has satisfactory title to or valid rights
to use all of its material properties and, although some of such properties are
subject to liabilities and leases and, in certain cases, liens for taxes not yet
due and payable and immaterial encumbrances, easements and restrictions, the
Partnership does not believe that any such burdens will materially interfere
with the continued use of such properties by the Partnership in its business,
taken as a whole.

ITEM 3. LEGAL PROCEEDINGS.
==================

LITIGATION
- ----------

A number of personal injury, property damage and product liability suits
are pending or threatened against the Partnership. In general, these lawsuits
have arisen in the ordinary course of the Partnership's business and involve
claims for actual damages, and in some cases, punitive damages. The Partnership
is self-insured for general and product, workers' compensation and automobile
liabilities up to predetermined amounts above which third party insurance
applies. These self-insurance reserves include provisions for losses related to
pending or threatened litigation. Although any litigation is inherently
uncertain, based on past experience, the information currently available to it,
the availability of insurance coverage and the amount of its self-insurance
reserves for known and unasserted self-insurance claims (which was approximately
$21.4 million at September 26, 1998), the Partnership does not believe that
these pending or threatened litigation matters will have a material adverse
effect on its results of operations or its financial condition.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
====================================================

There were no matters submitted to a vote of security holders of the
Partnership, through the solicitation of proxies or otherwise, during the fourth
fiscal quarter of the year ended September 26, 1998.

PART II

ITEM 5. MARKET FOR THE REGISTRANT'S UNITS AND RELATED UNITHOLDER MATTERS.
=================================================================

The Common Units, representing limited partner interests in the
Partnership, are listed and traded on the New York Stock Exchange under the
symbol SPH. As of December 3, 1998, there were 1,047 registered Common
Unitholders of record. The following table sets forth, for the periods
indicated, the high and low sale prices per Common Unit, as reported on the New
York Stock Exchange, and the amount of cash distributions paid per Common Unit.

Common Unit Price Range
Cash
High Low Distribution Paid
---- --- -----------------
1997 Fiscal Year
- ----------------
First Quarter $21.88 $18.75 $0.50
Second Quarter 20.63 17.75 0.50
Third Quarter 18.75 17.00 0.50
Fourth Quarter 20.19 18.06 0.50

1998 Fiscal Year
- ----------------
First Quarter $20.56 $15.38 $0.50
Second Quarter 20.00 17.50 0.50
Third Quarter 19.50 18.00 0.50
Fourth Quarter 20.00 17.56 0.50

1999 Fiscal Year
- ----------------
First Quarter (through December 17, 1998) $19.94 $17.13 $ -

There is no established public trading market for the Partnership's
Subordinated Units, representing limited partner interests, all of which are
held by the General Partner.

The Partnership makes quarterly distributions to its partners in an
aggregate amount equal to its Available Cash (as defined) for such quarter.
Available Cash generally means all cash on hand at the end of the fiscal quarter
plus all additional cash on hand as a result of borrowings and purchases of APUs
subsequent to the end of such quarter less cash reserves established by the
Board of Supervisors in its reasonable discretion for future cash requirements.

The Partnership is a publicly traded limited partnership that is not
subject to federal income tax. Instead, Unitholders are required to report their
allocable share of the Partnership's earnings or loss, regardless of whether the
Partnership makes distributions.

ITEM 6. SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA.
=================================================

The following table presents selected condensed consolidated historical
and pro forma financial data (which are unaudited) of the Partnership and the
Predecessor Company. The selected condensed consolidated historical data is
derived from the audited financial statements of the Partnership and Predecessor
Company. The dollar amounts in the table below, except per Unit data, are in
thousands.

Partnership (a) Predecessor Company
-------------------------------------------------------------------------------
Pro Forma |
Year March 5, | October 1,
Year Ended Year Ended Ended (b) 1996 | 1995 Year Ended
---------- ---------- --------- through | through --------------------
Sept 26, Sept 27, Sept 28, Sept 28,| March 4, Sept 30, October 1,
1998 1997 1996 1996 | 1996 1995 1994
---- ---- ---- ---- | ---- ---- ----
Statement of |
Operations Data |
|
Revenues................$ 667,287 $ 771,131 $ 707,946 $ 323,947 | $ 383,999 $633,620 $677,767
Gross Profit............ 340,847 334,336 330,254 150,746 | 179,508 314,724 347,227
Depreciation and |
Amortization............ 36,531 37,307 35,862 21,046 | 14,816 34,055 34,300
Restructuring Charge.... - 6,911 2,340 2,340 | - - -
Operating Income |
(Loss).................. 68,814 47,763 58,332 (3,464)| 61,796 55,544 75,490
Interest Expense, |
Net..................... 30,614 33,979 31,197 17,171 | - - -
Provision for |
Income Taxes............ 35 190 250 147 | 28,147 25,299 33,644
Net Income (Loss)....... 38,165 13,594 26,885 (20,782)| 33,649 30,245 41,846
Net Income (Loss) |
per Unit (c)............$ 1.30 $ 0.46 $ 0.92 $ (0.71)|
Balance Sheet Data |
(end of period) |
Current Assets..........$ 132,781 $ 104,361 $ 120,692 $ 120,692 | $ 78,846 $ 88,566
Total Assets............ 729,565 745,634 776,651 776,651 | 705,686 724,280
Current Liabilities..... 91,550 96,701 101,826 101,826 | 69,872 74,555
Long-term Debt.......... 427,897 427,970 428,229 428,229 | - -
Other Long-term |
Liabilities............. 62,318 79,724 81,917 81,917 | 77,579 90,173
Predecessor |
Equity.................. | 558,235 559,552
Partners' Capital - |
General Partner......... 24,488 12,830 3,567 3,286 |
Partners' Capital - |
Limited Partners........ 123,312 128,409 174,790 161,393 |
Statement of |
Cash Flows Data |
Cash Provided by |
(Used in) |
Operating Activities..$ 70,073 $ 58,848 $ 59,196 $ 62,961 | $ (3,765) $ 53,717 $ 77,067
Investing Activities..$ 2,900 $ (20,709) $ (52,414) $ (30,449)| $(21,965) $ (22,317) $ (16,126)
Financing Activities..$ (32,490) $ (37,734) $ 12,013 $ (13,786)| $ 25,799 $ (31,562) $ (68,093)
Other Data |
EBITDA (d)..............$ 105,345 $ 85,070 $ 94,194 $ 17,582 | $ 76,612 $ 89,599 $ 109,790
Capital Expenditures(e). |
Maintenance and growth..$ 12,617 $ 24,888 $ 25,885 $ 16,089 | $ 9,796 $ 21,359 $ 17,839
Acquisitions............$ 4,041 $ 1,880 $ 28,529 $ 15,357 | $ 13,172 $ 5,817 $ 1,448
Retail Propane |
Gallons Sold............ 529,796 540,799 566,900 257,029 | 309,871 527,269 568,809

Notes:
- ------

(a) The Partnership acquired the propane business and assets of the Predecessor
Company on March 5, 1996 (the Closing Date). There are no material
differences in the basis of assets and liabilities between the Partnership
and the Predecessor Company.

(b) The pro forma financial and operating information for the year ended
September 28, 1996 was derived from the historical statement of operations
of the Predecessor Company for the period October 1, 1995 through March 4,
1996 and the consolidated statement of operations of the Partnership from
March 5, 1996 to September 28, 1996. The pro forma financial and operating
information was prepared to reflect the effects of the Partnership
formation as if it had been completed in its entirety as of the beginning
of the period presented.

Significant pro forma adjustments reflected in the financial and operating
information include the following:

1. For the year ended September 28, 1996, an adjustment to interest expense
to reflect the interest expense associated with the Senior Notes and Bank
Credit Facilities.

2. For the year ended September 28, 1996, the elimination of the provision
for income taxes, as income taxes will be borne by the partners and not the
Partnership, except for corporate income taxes related to the Service
Company.

3. The Partnership's management estimates that the incremental costs of
operating as a stand-alone entity during the year ended September 28, 1996
would have approximated the management fee paid to an affiliate of Hanson.
These incremental costs are estimated to be $1,290 for the year ended
September 28, 1996.

(c) Net income (loss) per Unit is computed by dividing the limited partners'
interest in net income (loss) by the number of Units outstanding.

(d) Defined as operating income plus depreciation and amortization. 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 nor superior to generally accepted accounting principles
but provides additional information for evaluating the Partnership's
ability to pay the Minimum Quarterly Distribution.

(e) The Partnership's capital expenditures fall generally into three
categories: (i) maintenance expenditures, which include expenditures for
repair and replacement of property, plant and equipment, (ii) growth
capital expenditures which include new propane tanks and other equipment to
facilitate expansion of the Partnership's customer base and operating
capacity; and (iii) acquisition capital expenditures, which include
expenditures related to the acquisition of retail propane operations and a
portion of the purchase price allocated to intangibles associated with such
acquired businesses.

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

The following is a discussion of the historical and pro forma financial
condition and results of operations of the Partnership and the Predecessor
Company. The discussion should be read in conjunction with the historical and
pro forma consolidated financial statements and notes thereto included elsewhere
in this Form 10-K. Since the Operating Partnership and Service Company account
for substantially all of the assets, revenues and earnings of the Partnership, a
separate discussion of the Partnership's results of operations from other
sources is not presented.

GENERAL
- -------

The Partnership is engaged in the retail, wholesale marketing and trading
of propane and related sales of appliances and services. The Partnership
believes it is the third largest retail marketer of propane in the United
States, serving more than 700,000 active residential, commercial, industrial and
agricultural customers from more than 340 customer service centers in over 40
states. The Partnership's annual retail propane sales volume were approximately
530 million, 541 million and 567 million gallons during the fiscal years ended
September 26, 1998, September 27, 1997 and September 28, 1996, respectively.

The retail propane business of the Partnership consists principally of
transporting propane purchased on the contract and spot markets, primarily from
major oil companies, to its retail distribution outlets and then to storage
tanks located on the customers' premises. In the residential and commercial
markets, propane is primarily used for space heating, water heating, clothes
drying and cooking purposes. Industrial customers primarily use propane as a
motor fuel burned in internal combustion engines that power over-the-road
vehicles, forklifts and stationary engines, to fire furnaces, as a cutting gas
and in other process applications. In the agricultural market, propane is
primarily used for tobacco curing, crop drying, poultry brooding and weed
control. In its wholesale operations, the Partnership sells propane principally
to large industrial end-users and other propane distributors.

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 prices
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.

SELECTED QUARTERLY FINANCIAL DATA
- ---------------------------------
(in thousands)

Due to the seasonality of the retail propane business, first and second
quarter revenues, gross profit and earnings are consistently greater than the
comparable third and fourth quarter results. The following presents the
Partnership's selected quarterly financial data for the two years ended
September 26, 1998.

Fiscal year ended September 26, 1998 (unaudited)(in thousands)

First Quarter Second Quarter Third Quarter Fourth Quarter Fiscal 1998
------------- -------------- ------------- -------------- -----------

Revenues $204,886 $230,429 $125,109 $106,863 $667,287
Gross Profit 99,229 115,078 67,535 59,005 340,847
Operating Income (Loss) 35,025 44,757 (2,925) (8,043) 68,814
Net Income (Loss) 26,901 37,011 (10,235) (15,512) 38,165
EBITDA 44,317 53,930 6,154 944 105,345
Retail Gallons Sold 158,278 180,139 100,735 90,644 529,796

Fiscal year ended September 27, 1997 (unaudited)(in thousands)

First Quarter Second Quarter Third Quarter Fourth Quarter Fiscal 1997
------------- -------------- ------------- -------------- -----------
Revenues $246,028 $277,631 $132,363 $115,109 $771,131
Gross Profit 97,934 114,487 64,885 57,030 334,336
Operating Income (Loss) 25,900 39,459 (10,953) (6,643) 47,763
Net Income (Loss) 17,338 30,281 (19,181) (14,844) 13,594
EBITDA 35,181 48,647 (1,611) 2,853 85,070
Retail Gallons Sold 158,996 183,307 102,899 95,597 540,799

RESULTS OF OPERATIONS
=====================

FISCAL YEAR 1998 COMPARED TO FISCAL YEAR 1997
- ---------------------------------------------

REVENUES. Revenues decreased $103.8 million or 13.5% to $667.3 million in
fiscal 1998 compared to $771.1 million in fiscal 1997. The decrease is primarily
attributable to lower product costs which resulted in lower selling prices and,
to a lesser extent, a decrease in retail gallons sold.

Overall, higher nationwide inventories of propane, coupled with warmer than
normal temperatures during the winter of fiscal 1998, resulted in a significant
decrease in the cost of propane when compared to the winter of fiscal 1997.
Temperatures during fiscal 1998 were 4% warmer than normal and 4% warmer than
fiscal 1997, as reported by National Oceanic and Atmospheric Administration
("NOAA"), which is attributable to the El Nino weather phenomenon. Temperatures
during January and February of the fiscal 1998 heating season were the warmest
on record according to the NOAA which began keeping records over 100 years ago.

Retail gallons sold decreased 2.0% or 11.0 million gallons to 529.8 million
gallons in fiscal 1998 as compared to 540.8 million gallons in the prior year.
Wholesale gallons and gallons sold for hedging purposes increased 17.5% or 32.3
million gallons to 216.8 million gallons resulting from the Partnership's
expansion of its product procurement and price risk management activities. The
decline in retail gallons sold is principally attributable to warmer
temperatures principally during the winter heating season in all areas of the
Partnership's operations.

GROSS PROFIT. Gross profit increased $6.5 million or 1.9% to $340.8 million
in fiscal 1998 compared to $334.3 million in the prior year. The increase
principally resulted from overall higher average propane unit margins and the
expansion of the Partnership's product procurement and price risk management
activities, including hedging transactions, partially offset by reduced volume
of retail propane gallons sold.

OPERATING EXPENSES. Operating expenses decreased $6.9 million or 3.3% to
$202.9 million in fiscal year 1998 compared to $209.8 million in the prior year.
The decrease is primarily attributable to the continued favorable impact of
restructuring activities undertaken during 1997, principally lower payroll and
benefit costs.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased $5.0 million or 15.3% to $37.6 million in
fiscal 1998 compared to $32.6 million in the prior year. The increase is
primarily attributable to a $1.4 million write-off of certain impaired
information systems assets, an increase in professional consulting services,
primarily in the information systems area, and a $2.0 million charge related to
insurance claims for which insurance coverage was denied.

OPERATING INCOME AND EBITDA. Results for the fiscal year 1998 include a
$5.1 million gain from the sale of an investment in the Dixie Pipeline Co. and a
$1.8 million write-off of certain impaired assets. Results for the prior year
period include a restructuring charge of $6.9 million. Excluding these one-time
items from both periods, operating income increased 19.7% or $10.8 million to
$65.5 million compared to $54.7 million in the prior period. EBITDA, excluding
the one-time items from both periods, increased 10.9% or $10.0 million to $102.0
million compared to $92.0 million in the prior period.

The improvement in operating income and EBITDA is primarily attributable to
higher overall gross profit and lower operating expenses partially offset by
higher selling, general and administrative expenses. 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 on
ability to service debt obligations) but provides additional information for
evaluating the Partnership's ability to distribute the Minimum Quarterly
Distribution.

INTEREST EXPENSE. Net interest expense decreased $3.4 million to $30.6
million in fiscal 1998 compared with $34.0 million in the prior year. The
decrease is attributable to higher interest income on significantly increased
cash investments in fiscal 1998 resulting from higher net income, proceeds from
the sale of the Partnership's investment in the Dixie Pipeline Co. and, to a
lesser extent, improved working capital management and lower product costs.

FISCAL YEAR 1997 COMPARED TO FISCAL YEAR 1996
- ---------------------------------------------

The Partnership acquired the propane business and assets of the Predecessor
Company on March 5, 1996. Solely for purposes of comparing the results of
operations of the Partnership for the year ended September 27, 1997 with those
of the Partnership and the Predecessor Company for the prior year period, the
statement of operations data for the year ended September 28, 1996 is comprised
of the combined statements of operations of the Predecessor Company for the
period October 1, 1995 to March 4, 1996 and of the Partnership for the period
March 5, 1996 to September 28, 1996.

REVENUES. Revenues increased $63.2 million or 8.9% to $771.1 million in
fiscal 1997 compared to $707.9 million in fiscal 1996. The increase is primarily
attributable to higher average retail and wholesale selling prices resulting
from higher propane product costs. Retail gallons sold decreased 4.6% or 26.1
million gallons to 540.8 million gallons in fiscal 1997 compared to 566.9
million gallons in the prior year, while wholesale gallons sold decreased 2.4%
or 4.5 million gallons to 184.5 million gallons compared to 189.0 million in the
prior year. The decrease in gallons sold is primarily due to warmer temperatures
during the winter heating season in all areas of the Partnership's operations.

GROSS PROFIT. Gross profit increased $4.1 million or 1.2% to $334.3 million
in fiscal 1997 compared to $330.3 million in the prior year. The increase
principally resulted from higher average retail propane unit margins partially
offset by reduced volumes of propane sold.

OPERATING EXPENSES. Operating expenses increased $6.4 million or 3.1% to
$209.8 million in fiscal year 1997 compared to $203.4 million in the prior year.
The increase was due to higher payroll, bad debt and equipment and vehicle
leasing costs.

RESTRUCTURING CHARGES. Fiscal 1997 results reflect a restructuring charge
of $6.9 million compared to a $2.3 million restructuring charge in fiscal 1996.
In fiscal 1997, after evaluating certain long-term cost reduction strategies and
organizational changes, the Partnership reorganized its product procurement and
logistics group, redesigned its fleet and maintenance, field and corporate
office organizations, and identified facilities to be closed and impaired assets
whose carrying amounts would not be recovered. In connection with this effort,
the Partnership recorded a $6.9 million restructuring charge, comprised of
severance, employee benefit and facility closure costs of $5.1 million, and an
impaired asset charge of $1.8 million.

In fiscal 1996, the Partnership reorganized its corporate office and
terminated certain employees. As a result of this action, the Partnership
recorded a $2.3 million restructuring charge, comprised of severance and
employee benefit costs.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses, including the management fee charged to the Predecessor
Company and excluding restructuring charges, increased $2.3 million or 7.5% to
$32.6 million in fiscal 1997 compared to $30.3 million in the prior year. The
increase was principally due to higher expenditures for professional consulting
services (primarily information systems) and expansion of customer satisfaction
programs.

OPERATING INCOME AND EBITDA. Operating income, excluding the restructuring
charges, decreased $6.0 million or 9.9% to $54.7 million in fiscal 1997 compared
to $60.7 million in the prior year. EBITDA, excluding the restructuring charges,
decreased $4.5 or 4.7% to $92.0 million. The decrease is primarily attributable
to higher operating, selling, general and administrative expenses partially
offset by higher overall retail margins. 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) but provides additional information for evaluating the
Partnership's ability to pay the Minimum Quarterly Distribution.

INTEREST EXPENSE. Net interest expense increased $16.8 million to $34.0
million in fiscal 1997 compared to $17.2 million in fiscal 1996. The increase is
principally due to the issuance of $425.0 million in Senior Notes in connection
with the Partnership's initial public offering in March 1996.

RISK MANAGEMENT
- ---------------

The Partnership engages in hedging transactions to reduce the effect of
price volatility on its product costs and to help ensure the availability of
propane during periods of short supply. The Partnership is currently a party to
propane futures contracts on the New York Mercantile Exchange and enters into
agreements to purchase and sell propane at fixed prices in the future. These
activities are monitored by management through enforcement of the Partnership's
Commodity Trading Policy. Hedging does not always result in increased product
margins and the Partnership does not consider hedging activities to be material
to operations or liquidity for the years ended September 26, 1998 and September
27, 1997. For additional information, see Item 7A of this Report.

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. In fiscal 1998,
net cash provided by operating activities increased $11.2 million to $70.1
million compared to $58.8 million in fiscal 1997. The increase is primarily due
to an increase in net income, exclusive of non-cash items, of $11.2 million.
Changes in operating assets and liabilities reflect decreases in accounts
receivable of $2.3 million, inventories of $6.3 million and accounts payable of
$3.5 million principally due to the lower cost of propane. These decreases were
partially offset by an increase in accrued employment and benefit costs of $6.6
million reflecting higher performance-related payroll accruals and an increase
in deferred credits and other non-current liabilities of $3.0 million.

Net cash provided by investing activities was $2.9 million in fiscal 1998,
reflecting $12.6 million in capital expenditures (including $6.0 million for
maintenance expenditures and $6.6 million to support the growth of operations)
and $4.0 million of payments for acquisitions, offset by net proceeds of $6.5
million from the sale of property, plant and equipment and $13.1 million from
the sale of the investment in the Dixie Pipeline Co. Net cash used in investing
activities was $20.7 million in fiscal 1997, consisting of capital expenditures
of $24.9 million (including $13.3 million for maintenance expenditures and $11.6
million to support the growth of operations) and acquisition payments of $1.9
million, offset by proceeds from the sale of property and equipment of $6.1
million. The decrease in cash used for capital expenditures of $12.3 million in
fiscal 1998, when compared to the prior year, is primarily due to reductions in
new customer equipment purchases and new vehicle purchases, as the Partnership
has elected to lease new vehicles rather than purchase new vehicles.

For fiscal year 1997, net cash provided by operating activities decreased
$0.3 million or 0.6% to $58.8 million compared to $59.2 million for fiscal year
1996. Cash provided by operating activities during fiscal 1997 reflects
increases in cash from accounts receivable of $23.1 million, prepaid and other
current assets of $4.9 million and inventories of $11.8 million principally due
to lower sales volumes and a resulting decline in propane purchases. These
increases were offset by an aggregate decrease in accounts payable, accrued
interest and accrued employment and benefit costs of $37.9 million and $4.3
million of cash expenditures incurred in connection with the Partnership's
restructuring.

Net cash used in investing activities was $52.4 million for fiscal year
1996, reflecting $25.9 million in capital expenditures and $28.5 million of
payments for acquisitions offset by net proceeds of $2.0 million from the sale
of property, plant and equipment.

In March 1996, the Operating Partnership issued $425.0 million aggregate
principal amount of Senior Notes with an interest rate of 7.54%. The Senior
Notes mature June 30, 2011. The Senior Note Agreement requires that the
principal be paid in equal annual payments of $42.5 million starting June 30,
2002.

The Partnership has available a $25.0 million acquisition facility and a
$75.0 million working capital facility. Borrowings under the Bank Credit
Facilities bear interest at a rate based upon either LIBOR plus a margin, First
Union National Bank's prime rate or the Federal Funds rate plus 1/2 of 1%. An
annual fee ranging from .20% to .25% based upon certain financial tests is
payable quarterly whether or not borrowings occur. The Bank Credit Facilities,
which expire on September 30, 2000, are unsecured on an equal and ratable basis
with the Operating Partnership's obligations under the Senior Notes. At
September 26, 1998 and September 27, 1997, there were no amounts outstanding
under the Bank Credit Facilities.

The Senior Note Agreement and the Bank Credit Facilities contain various
restrictive and affirmative covenants applicable to the Operating Partnership,
include (a) maintenance of certain financial tests, (b) restrictions on the
incurrence of additional indebtedness, and (c) restrictions on certain liens,
investments, guarantees, loans, advances, payments, mergers, consolidations,
distributions, sales of assets and other transactions. The Operating Partnership
was in compliance with all covenants and terms as of September 26, 1998.

As a result of lower than anticipated earnings for fiscal 1997 and the
costs associated with the restructuring efforts, the Partnership utilized $22.0
million of cash proceeds available under the Distribution Support Agreement
between the Partnership and the General Partner in connection with the payment
of the Minimum Quarterly Distribution on the Common Units with respect to the
third and fourth fiscal quarters of 1997. The Partnership did not utilize
proceeds available under the Distribution Support Agreement with respect to the
funding of the Minimum Quarterly Distributions for fiscal 1998. The Distribution
Support Agreement provides for a maximum of approximately $44.0 million in cash

in return for APUs ($22.0 million of which has been utilized) to support the
Partnership's Minimum Quarterly Distributions to holders of Common Units through
March 31, 2001. The Partnership has not made a distribution on its Subordinated
Units since the first fiscal quarter of 1997 and does not intend to make a
distribution to the Subordinated Unitholder prior to consummation of the
proposed Recapitalization.

The Partnership will make distributions in an amount equal to all of its
Available Cash approximately 45 days after the end of each fiscal quarter to
holders of record on the applicable record dates. The Partnership has made
distributions to holders of its Common Units for each of the quarters in fiscal
1998.

The Partnership's anticipated cash requirements for fiscal 1999 include
maintenance and growth capital expenditures of approximately $15.0 million for
the repair and replacement of property, plant and equipment and approximately
$32.0 million of interest payments on the Senior Notes. In addition, the
Partnership intends to pay approximately $44.0 million in Minimum Quarterly
Distributions to its Common Unitholders and in distributions to its General
Partner during fiscal 1999. Based on its current cash position, available Bank
Credit Facilities and expected cash from operating activities, the Partnership
expects to have sufficient funds to meet these obligations for fiscal 1999, as
well as all of its current obligations and working capital needs during fiscal
1999.

In connection with the proposed Recapitalization, the Operating Partnership
has obtained a commitment letter dated October 30, 1998 from The Bank of New
York providing for a new bank credit facility allowing for borrowings of up to
$150.0 million. The Recapitalization will be funded by borrowings under this
facility as well as internally generated funds. Pursuant to the terms of the
commitment letter, borrowings under this facility will bear interest at a rate
based upon LIBOR plus a margin or The Bank of New York's prime rate plus a
margin. The facility will mature upon the earlier of (a) five years from the
date of closing and (b) March 31, 2002 if on or before March 31, 2002, the
Senior Notes have not been amended to provide that no principal payments are due
thereunder prior to June 30, 2003. The Partnership and all present and future
domestic subsidiaries of the Operating Partnership will guarantee the repayment
of all amounts due under the facility; provided, however, that the Service
Company will not be required to guarantee the facility for so long as its EBITDA
does not exceed certain levels. The facility will be secured by certain owned
and later-acquired assets of the Partnership, the Operating Partnership and its
subsidiary guarantors and will rank equally with the Operating Partnership's
obligations under the Senior Notes.

READINESS FOR YEAR 2000
- -----------------------

The following disclosure is being made pursuant to the Year 2000 Readiness
and Disclosure Act of 1998.

Many information technology ("IT") and non-information technology
("non-IT") systems in use throughout the world today may not be able to properly
interpret date related data from the year 1999 into the year 2000 (the "Y2K"
issue). As a result, the Y2K issue could have adverse consequences upon the
operations and information processing of many companies, including the
Partnership.

In the second half of 1997, the Partnership began to identify the Y2K
exposure of its IT systems by focusing upon those systems and applications it
considered critical to its ability to operate its business, supply propane to
its customers, and accurately account for those services. The critical systems
identified were the retail/sales, the human resources/payroll and the general
ledger/financial accounting systems. Based upon the reasonable assurances of the
software developers and vendors, the Partnership believes that it has replaced
the human resources/payroll and the general ledger/financial accounting systems
with Y2K compliant versions. In addition, the Partnership has retained the
services of a third party vendor to assist in the remediation of its
retail/sales system, as well as the majority of the programs supporting this
system. The Partnership anticipates that these critical systems will be Y2K
compliant.

The Partnership has also developed and is currently implementing a
comprehensive Y2K project plan to identify and address both its non-critical IT
and non-IT systems that could potentially be impacted by Y2K. In conjunction
with this plan and in an effort to improve its business efficiency, the

Partnership made the decision to replace all its computer hardware and PC-based
computer software, as well as to migrate the majority of its network-based
software to a server environment. According to the reasonable representations of
the manufacturers, software developers and vendors, all of the newly purchased
IT hardware and PC software are functionally Y2K compliant with some minor
issues outstanding.

The Partnership is in the process of assessing the non-IT systems utilized
by its field locations to determine the Y2K compliance of those systems. With
limited exceptions which are being addressed, the safety related devices at the
Partnership's field locations do not incorporate electronic components and, as
such, do not require Y2K remediation. The Partnership does not believe that the
failure of any of its non-IT systems at any field location would have a material
adverse impact upon it.

As of December 17, 1998, the Partnership has incurred approximately $0.3
million to address its Y2K issues. It is currently estimated that the
Partnership will spend between $1.5 and $2.0 million to complete its Y2K
compliance program. This figure does not include the amounts spent to upgrade
and replace computer hardware and PC-based software. The Partnership does not
view the foregoing costs as having a material impact upon its overall financial
position and has not delayed or eliminated any other scheduled computer upgrades
or replacements due to the Y2K compliance project.

In addition to testing the individual systems, the Partnership anticipates
conducting an overall IT system Y2K compliance test by May 1999. The Partnership
is developing a formal Y2K contingency plan that is to be in place prior to June
30, 1999, which will be based upon its overall disaster recovery plan. At this
time, the Partnership anticipates that its Y2K contingency plan will be based
upon manual processes and procedures.

While propane itself is not date-dependent, the supply, transportation and
consumption of propane is dependent upon third parties, beyond the control of
the Partnership, which may have systems potentially impacted by the Y2K issue.
The Partnership has contacted the vendors/suppliers identified as being
significant to its business and is currently reviewing the responses it has
received, if any, to evaluate whether these third parties are or will be Y2K
compliant in a timely manner. The Partnership believes that by obtaining these
responses, it will be able to minimize any potential business interruption
arising out of Y2K's impact upon these vendors/suppliers. Further, although the
Y2K failure of any one customer will not have a materially adverse effect upon
the Partnership, if a significant percentage of either its customers and/or
vendors/suppliers fail in achieving Y2K compliance, the Y2K issue may have an
adverse material impact upon the Partnership's operations.

Although the Partnership currently anticipates that its internal mission
critical IT and non-IT systems will be Y2K compliant, it has taken steps to
identify and mitigate Y2K compliance issues with its vendors/suppliers and
customers and has begun to work on a Y2K contingency plan, the failure of a
mission critical IT or non-IT system or the combined failure of
vendors/suppliers and/or customers to achieve Y2K compliance could have a
material adverse impact on the Partnership's operations and financial condition.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
==========================================================

As of September 26, 1998, the Partnership was party to propane forward
contracts with various third parties and futures traded on the New York
Mercantile Exchange ("NYMEX"). Such contracts provide that the Partnership sell
or acquire propane at a fixed price at fixed future dates. 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 for purposes other than trading 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 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
contracts traded with brokers of the NYMEX require daily cash settlements in
margin accounts. Forward contracts are generally settled at the expiration of
the contract term.

CREDIT RISK
- -----------

Futures contracts are guaranteed by the NYMEX and as a result have minimal
credit risk. The Partnership is subject to credit risk with forward 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 September 26, 1998 was
performed. Based on this analysis, hypothetical 10% and 25% adverse changes in
market prices for each of the future months for which a future and/or forward
contract exists indicate potential losses in future earnings of $1.8 million and
$4.5 million, respectively, as of September 26, 1998.

The above hypothetical change does not reflect the worst case scenario.
Actual results may be significantly different depending on market conditions and
the composition of the open position portfolio.

As of December 17, 1998, the posted price of propane at Mont Belvieu, Texas
(a major storage point) was 21 cents per gallon as compared to 26 cents per
gallon at September 28, 1998, representing a 19% decline. Such decline is
attributable to factors including warmer weather patterns, high national propane
inventory levels and decreases in the market price of crude oil.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
============================================

The Partnership's Consolidated Financial Statements and the Reports of
Independent Accountants thereon and the Supplementary Financial Information
listed on the accompanying Index to Financial Statement Schedules are included
herein. See Item 7 for Selected Quarterly Financial Data.

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

None.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
===================================================

PARTNERSHIP MANAGEMENT
- ----------------------

The Partnership Agreement provides that all management powers over the
business and affairs of the Partnership are exclusively vested in its Board of
Supervisors and, subject to the direction of the Board of Supervisors, the
officers of the Partnership. No Unitholder has any management power over the
business and affairs of the Partnership or actual or apparent authority to enter
into contracts on behalf of, or to otherwise bind, the Partnership. Three
independent Elected Supervisors, two Appointed Supervisors and two Management
Supervisors serve on the Board of Supervisors pursuant to the terms of the
Partnership Agreement.

The three Elected Supervisors serve on the Audit Committee with the
authority to review, at the request of the Board of Supervisors, specific
matters as to which the Board of Supervisors believes there may be a conflict of
interest in order to determine if the resolution of such conflict proposed by
the Board of Supervisors is fair and reasonable to the Partnership. Any matters
approved by the Audit Committee will be conclusively deemed to be fair and
reasonable to the Partnership, approved by all partners of the Partnership and
not a breach by the General Partner or the Board of Supervisors of any duties
they may owe the Partnership or the Unitholders. In addition, the Audit
Committee will review external financial reporting of the Partnership, will
recommend engagement of the Partnership's independent accountants and will
review the Partnership's procedures for internal auditing and the adequacy of
the Partnership's internal accounting controls.

PARTNERSHIP MANAGEMENT FOLLOWING RECAPITALIZATION
- -------------------------------------------------

The Amended Partnership Agreements to be adopted in connection with the
Recapitalization will provide that, immediately following the closing of the
Recapitalization, the size of the Board of Supervisors will be reduced from
seven to five by eliminating the positions of the two supervisors now appointed
by management. As as result, if the Recapitalization is approved, there will be
three Elected Supervisors and two Appointed Supervisors and the Elected
Supervisors will hold a majority of seats on the Board of Supervisors. The
Elected Supervisors are expected to continue to be John Hoyt Stookey, Harold R.
Logan and Dudley C. Mecum. The Appointed Supervisors are expected to be Mark A.
Alexander, President and Chief Executive Officer of the Partnership, and Michael
J. Dunn, Jr., Senior Vice President of the Partnership. Messrs. Alexander and
Dunn currently serve as the two Supervisors appointed by the management of the
Partnership under the Partnership Agreement. The three Elected Supervisors will
continue to serve on the Audit Committee.

BOARD OF SUPERVISORS AND EXECUTIVE OFFICERS OF THE PARTNERSHIP
- --------------------------------------------------------------

The following table sets forth certain information with respect to the
members of the Board of Supervisors and executive officers of the Partnership as
of December 3, 1998. Officers are elected for one-year terms and Supervisors are
elected or appointed for three-year terms.

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

Mark A. Alexander............ 40 President and Chief Executive Officer;
Member of the Board of Supervisors
(Management Supervisor)
Michael J. Dunn, Jr.......... 49 Senior Vice President - Member of the
Board of Supervisors(Management Supervisor)

Anthony M. Simonowicz........ 48 Vice President and Chief Financial Officer
Michael M. Keating........... 45 Vice President -- Human Resources and
Administration
Kevin T. McIver.............. 44 Vice President, General Counsel and
Secretary
Thomas A. Nunan.............. 65 Vice President -- Sales
Edward J. Grabowiecki....... 36 Controller and Chief Accounting Officer
George H. Hempstead, III..... 55 Member of the Board of Supervisors
(Appointed Supervisor)
John E. Lushefski............ 43 Member of the Board of Supervisors
(Appointed Supervisor)
John Hoyt Stookey............ 68 Member of the Board of Supervisors
(Chairman and Elected Supervisor)
Harold R. Logan, Jr.......... 54 Member of the Board of Supervisors
(Elected Supervisor)
Dudley C. Mecum.............. 63 Member of the Board of Supervisors
(Elected Supervisor)

Mr. Alexander serves as President and Chief Executive Officer of the
Partnership and as a Management Supervisor of the Board of Supervisors. Prior to
October 1, 1996, he served as Executive Vice Chairman and Chief Executive
Officer of the Partnership. Mr. Alexander was Senior Vice President -- Corporate
Development of Hanson Industries (Hanson's management division in the United
States) from 1995 until March 4, 1996, where he was responsible for mergers and
acquisitions, real estate and divestitures, and was Vice President of
Acquisitions from 1989 to 1995. He was an Associate Director of Hanson from 1993
and a Director of Hanson Industries from June 1995 until March 4, 1996. Mr.
Alexander is also a Director of the National Propane Gas Association.

Mr. Dunn serves as Senior Vice President and Management Supervisor of the
Partnership. Mr. Dunn was Vice President -- Procurement and Logistics of the
Partnership from March 1997 until August 1998. Prior to joining the Partnership,
Mr. Dunn was Vice President of Commodity Trading for Goldman Sachs & Company,
New York, NY since 1981.

Mr. Simonowicz serves as Vice President and Chief Financial Officer of the
Partnership. Mr. Simonowicz was Vice President -- Business Development of the
Partnership from March 1996 to March 1997. Mr. Simonowicz was Vice President --
Business Development of Suburban Propane from September 1995 until March 1996
and was Director -- Financial Planning and Analysis from 1991 to September 1995.
Mr. Simonowicz was employed as Controller at Lifecodes Corporation (a genetic
identification and research company), then a subsidiary of Quantum, from 1989 to
1991.

Mr. Keating serves as Vice President -- Human Resources and Administration
of the Partnership. Mr. Keating was Director of Human Resources at Hanson
Industries from 1993 to July 1996 and was Director of Human Resources and
Corporate Personnel at Quantum from 1989 to 1993.

Mr. McIver serves as Vice President, General Counsel and Secretary of the
Partnership. He served as General Counsel and Secretary of the Partnership from
March 1996 to August 1996. Mr. McIver was General Counsel of Suburban Propane
from October 1994 until March 1996 and was chief counsel of Suburban Propane
from 1984.

Mr. Nunan serves as Vice President -- Sales of the Partnership. Mr. Nunan
was Vice President -- Sales of Suburban Propane from October 1990 until March
1996. He is currently a director and member of the Executive Committee of the
National Propane Gas Association. Mr. Nunan is also a director of the Propane
Education and Research Council and a director of the Propane Vehicle Council.

Mr. Grabowiecki is the Controller and Chief Accounting Officer of the
Partnership. Mr. Grabowiecki served as Director of Accounting Services of the
Partnership from January 1996 to September 1996. Prior to joining the
Partnership, Mr. Grabowiecki was a regional controller for Discovery Zone, Inc.
from June 1993 to January 1996. Mr. Grabowiecki held several positions at Ernst
& Young from 1984 to 1993, including Senior Manager from 1992 to 1993.

Mr. Hempstead serves as an Appointed Supervisor of the Partnership. He is
also Vice President and Secretary and a Director of the General Partner. He has
served as Senior Vice President, Law and Administration of Millennium since
October 1996, as Senior Vice President, Law and Administration of Hanson
Industries from June 1995 to September 1996 as well as Senior Vice President and
General Counsel of Hanson Industries from 1993 to 1995 and General Counsel of
Hanson Industries from 1982 to 1993. He was an Associate Director of Hanson from
1990 to September 1996 and a Director of Hanson Industries from 1986 to
September 1996. He joined Hanson Industries in 1976.

Mr. Lushefski serves as an Appointed Supervisor of the Partnership. He is
also a Vice President and Director of the General Partner. He has served as
Senior Vice President and Chief Financial Officer of Millennium since October
1996. He was Senior Vice President and Chief Financial Officer of Hanson
Industries from June 1995 until October 1996. He was Vice President and Chief
Financial Officer of Peabody Holding Company, a Hanson subsidiary, from January
1991 to May 1995 and Vice President and Controller of Hanson Industries from
1990 to 1991. He originally joined Hanson Industries in 1985.

Mr. Stookey is an Elected Supervisor and Chairman of the Board of
Supervisors of the Partnership. He was the non-executive Chairman and a director
of Quantum from the time it was acquired by Hanson on September 30, 1993 to
October 31, 1995. From 1986 to September 30, 1993, he was the Chairman,
President and Chief Executive Officer of Quantum. He is also a director of
United States Trust Company of New York, ACX Technologies, Inc. and Cyprus Amax
Minerals Company.

Mr. Logan is an Elected Supervisor of the Partnership. Mr. Logan is
Executive Vice President - Finance and Treasurer as well as a Director of
TransMontaigne Inc. (a holding company formed to operate and purchase companies
engaged in the marketing and distribution of petroleum products). From 1987 to
1995 he served as Senior Vice President of Finance and a Director of Associated
Natural Gas Corporation (an independent gatherer and marketer of natural gas,
natural gas liquids and crude oil which in 1994 was acquired by Panhandle
Eastern Corporation). Mr. Logan is also a director of Snyder Oil Corporation (an
oil and gas exploration and production company) and Union Bankshares Ltd. (a
commercial bank).

Mr. Mecum is an Elected Supervisor. Mr. Mecum is a Managing Director of
Capricorn Holdings, LLC (a sponsor of and investor in leveraged buyouts). He was
Chairman of Mecum Associates Inc. (management consultants) from June 1996 to
June 1997. Mr. Mecum was a partner of G.L. Ohrstrom & Co. (a sponsor of and
investor in leveraged buyouts) from 1989 to June, 1996. He is also a director of
CITIGROUP, Travelers P&C Corp., Lyondell Chemical Company, Dyncorp, Vicorp
Restaurants, Inc., Metris Industries, Inc. and CCC Information Systems Inc.

ITEM 11. EXECUTIVE COMPENSATION
======================

SUMMARY COMPENSATION TABLE
- --------------------------

The following table sets forth a summary of all compensation awarded or
paid to or earned by the chief executive officer and the four other most highly
compensated executive officers of the Partnership in fiscal 1998. Mr. Dunn
assumed the position of Senior Vice President and Management Supervisor of the
Board of Supervisors in July 1998.

Long Term Compensation
----------------------
Restricted
Annual Compensation Unit Awards(2) All
------------------- ------------ Other
Name and Principal Position Year Salary ($) Bonus(1) ($) $ Units (#) Compensation(4)
- --------------------------- ---- ---------- ---------- - --------- -------------

Mark A. Alexander 1998 381,250 381,528 0 0 78,686
President and Chief Executive Officer 1997 375,000 100,000 1,953,000 97,561 18,756
1996 196,538 20,417 3,000,000 146,341 1,610

Michael J. Dunn, Jr. 1998 178,000 153,177 0 0 36,891
Sr. Vice President 1997 150,000 30,038 900,000 48,780 14,500

Anthony M. Simonowicz 1998 154,000 100,000 0 0 36,324
Vice President and Chief Financial Officer 1997 138,000 24,000 539,000 29,268 13,349
1996 120,000 6,000 400,000 19,512 125,500 (5)

Kevin T. McIver 1998 146,000 73,153 0 0 17,161
Vice President and General Counsel 1997 145,000 19,333 251,000 13,415 4,350
1996 138,000 6,210 325,000 15,854 143,140 (5)

Thomas A. Nunan 1998 145,000 72,500 0 (3) 0 (3) 16,775
Vice President - Sales 1997 145,000 19,358 0 0 9,850
1996 135,000 17,542 0 0 102,000 (5)

(1) Bonuses are reported for the year earned, regardless of the year paid.
(2) The aggregate dollar value of Restricted Unit Awards was computed by
multiplying the number of Restricted Units granted by the closing market price
on the date of grant. The Restricted Units are subject to a bifurcated vesting
procedure such that: (i) 25% of the units vest over time with one-third vesting
at the end of each third, fifth and seventh anniversaries from the date of grant
in equal amounts (or upon a "change of control" of the Partnership); and the
remaining 75% vest automatically upon, and in the same proportion as, the
conversion of the Subordinated Units to Common Units, which conversion cannot
commence prior to April 1999 under the Partnership Agreement (or upon a "change
of control" of the Partnership). Until such Restricted Units vest, their holders
will not be entitled to any distributions or allocations of income and loss, nor
shall they have any voting or other rights with respect to such Common Units. At
September 26, 1998, the number of Restricted Units and the aggregate value
thereof (calculated at a per Unit price of $19.188, the closing price of Common
Unit on September 25, 1998 as reported on the New York Stock Exchange) were
243,902 ($4,679,991) for Mr. Alexander, 48,780 ($935,990) for Mr. Dunn, 48,780
($935,990) for Mr. Simonowicz, and 29,269 ($561,614) for Mr. McIver.
(3) In lieu of participation in the Restricted Unit Plan, Mr. Nunan is entitled,
subject to certain conditions, to receive cash payments of $221,030 in March
1999, $141,610 in March 2000 and $131,132 in March 2001.
(4) These amounts include the following:
a. Health and welfare payments for Messrs. Alexander, Dunn, Simonowicz and
Nunan. Mr. McIver does not participate in the plan.

b. Vehicle Allowances for Messrs. Alexander, Dunn, Simonowicz and McIver.
c. Matching contributions under the Suburban Retirement Savings and
Investment Plan for Messrs. Alexander, Dunn, Simonowicz, Nunan and
McIver.
(5) For fiscal year 1996, amounts for Messrs. Simonowicz, McIver and Nunan
include success fees paid in connection with the Partnership's initial public
offering.

RETIREMENT BENEFITS
- -------------------

The following table sets forth the annual benefits upon retirement
at age 65 in 1998, without regard to statutory maximums, for various
combinations of final average earnings and lengths of service which may be
payable to Messrs. Alexander, Dunn, Simonowicz, McIver and Nunan under the
Pension Plan for Eligible Employees of Suburban Propane, L.P. and Subsidiaries
and the Suburban Propane Company Supplemental Executive Retirement Plan. Each
such plan has been assumed by the Partnership and each such person will be
credited for service earned under such plan to date. Messrs. Alexander, Dunn,
Simonowicz, McIver and Nunan have 2 years, 1 year, 9 years, 15 years and 10
years service under the plans.

PENSION PLAN
ANNUAL BENEFIT FOR YEARS OF CREDITED SERVICE SHOWN (1),(2),(3),(4)
Average
Earnings 5 Yrs. 10 Yrs. 15 Yrs. 20 Yrs. 25 Yrs. 30 Yrs. 35 Yrs.
- -------- ------ ------- ------- ------- ------- ------- -------
$100,000 8,070 16,141 24,211 32,282 40,352 48,422 56,493
$200,000 16,820 33,641 50,461 67,282 84,102 100,922 117,743
$300,000 25,570 51,141 76,711 102,282 127,852 153,422 178,993
$400,000 34,320 68,641 102,961 137,282 171,602 205,922 240,243
$500,000 43,070 86,141 129,211 172,282 215,352 258,422 301,493

(1) The Plans' definition of earnings consists of base pay only.
(2) Annual Benefits are computed on the basis of straight life annuity amounts.
The pension benefit is calculated as follows:
the sum of (a) plus (b) multiplied by (c) where (a) is that portion of
final average earnings up to 125% of social security Covered
Compensation times 1.4% and (b) is that portion of final average
earnings in excess of 125% of social security Covered Compensation
times 1.75% and (c) is credited service up to maximum of 35 years.
(3) Effective January 1, 1998, the Plan was amended to a cash balance benefit
formula for current and future Plan participants. Initial account balances
were established based upon the actuarial equivalent value of the accrued
12/31/97 Prior Plan benefit. Annual interest credits and pay-based credits
will be credited to this account. The 1998 pay-based credits for Messrs.
Alexander, Dunn, Simonowicz, McIver and Nunan are 2.5%, 1.5%, 2.0%, 7.0% and
2.0% respectively. Participants as of 12/31/97 will receive the greater of
the cash balance benefit and the Prior Plan benefit through the year 2002.
(4) In addition, a supplemental cash balance account was established equal to
the value of certain benefits related to retiree medical and vacation
benefits. An initial account value was determined for those active employees
who were eligible for retiree medical coverage as of April 1, 1998 equal to
$415 multiplied by years of benefit service (maximum of 35 years). Future
pay-based credits and interest are credited to this account. The 1998
pay-based credits for Messrs. Alexander, Dunn, Simonowicz, McIver, and Nunan
are 2.0%, 0.0%, 0.0%, 2.0% and 4.0% respectively. This account is payable in
addition to the "grandfathered benefit calculations".

In addition, certain additional retirement and life insurance benefits are
payable to Mr. McIver pursuant to two Suburban Propane executive plans that were
in effect prior to Quantum's acquisition of Suburban Propane in 1983. Under the

Suburban Propane Deferred Compensation Plan, Mr. McIver is entitled, subject to
certain conditions set forth in the Plan, which include remaining in the
Partnership's employ until retirement, to receive a retirement supplement of
approximately $21,000 per year for a ten-year period subsequent to retirement.
Under the Suburban Propane Executive Death Benefit Plan, $100,000 of life
insurance proceeds, on an after tax basis, are payable to Mr. McIver's estate,
subject to the terms and conditions of the Plan, which include remaining in the
employ of the Partnership until retirement.

SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
- --------------------------------------

The Partnership has adopted a non-qualified, unfunded supplemental
retirement plan known as the Supplemental Executive Retirement Plan. The purpose
of the Plan is to provide certain executive officers with a level of retirement
income from the Partnership, without regard to statutory maximums. Under the
Plan, a participant's annual benefit, assuming retirement at age 65, is equal to
(a) 1.4% of the participant's Average Final Compensation not in excess of 125%
of Covered Compensation plus (b) 1.75% of the participant's Average Compensation
in excess of 125% of Covered Compensation times (c) the participant's years of
benefit service with the Partnership (not to exceed 35) minus (d) the Pension
Offset. The defined terms in this paragraph will have the same meanings as in
the Plan or in the Partnership's Qualified Retirement Plan. Messrs. Alexander,
Dunn and Simonowicz currently participate in this Plan.

RESTRICTED UNIT PLAN
- --------------------

The Partnership has adopted a restricted unit plan (the "Restricted Unit
Plan") for executives, managers and Elected Supervisors of the Partnership. The
summary of the Restricted Unit Plan contained herein does not purport to be
complete and is qualified in its entirety by reference to the Restricted Unit
Plan, which has been filed as an exhibit to the Partnership's Registration
Statement on Form S-1 (Registration No. 33-80605).

Rights to acquire authorized but unissued Common Units of the Partnership
with an aggregate value of $15.0 million are available under the Restricted Unit
Plan for purposes of calculating the value of these Unit grants, a value of
$20.50 (the initial public offering price of the Common Units) has been
utilized. As of September 26, 1998, rights to acquire Common Units with an
aggregate value of $12.7 million have been granted, subject to the vesting
conditions described below and subject to other customary terms and conditions,
as follows: (i) rights to acquire Common Units with an aggregate value of $5.0
million have been allocated to Mr. Alexander, (ii) rights to acquire Common
Units with an aggregate value of $6.8 million were allocated to other
participants in the Plan who are officers or managers of the Partnership's
business, as determined by the Board of Supervisors or a compensation committee
thereof, and (iii) rights to acquire Common Units with an aggregate value of
$0.9 million were allocated among the three Elected Supervisors.

The right to acquire the remaining $2.3 million of the $15.0 million
aggregate value of Available Units have been reserved and may be allocated or
issued in the future to executives and managers on such terms and conditions
(including vesting conditions) as are described below or as the Board of
Supervisors, or a compensation committee thereof, shall determine. Without the
consent of the General Partner, such awards to executives or managers cannot be
made to prior award recipients except on terms and conditions substantially
identical to the awards previously received. Each Elected Supervisor
subsequently appointed or elected will receive rights to acquire Common Units
with a value of $0.3 million on the same terms and conditions as those granted
to the three initial Elected Supervisors.

The Units are subject to a bifurcated vesting procedure such that (i)
twenty-five percent of the Units will vest over time (or upon a "change of
control" of the Partnership as defined in the Restricted Unit Plan, if earlier)
with one-third of such units vesting at the end of the third, fifth and seventh
anniversaries from the date of grant, and (ii) the remaining seventy-five

percent of the Units will vest automatically upon, and in the same proportions
as, the conversion of the Subordinated Units to Common Units (or upon a "change
of control" of the Partnership as defined in the Restricted Unit Plan, if
earlier). The proposed Recapitalization and related sale of the General Partner
interests will constitute a change of control under the Plan, resulting in
vesting of all outstanding Units.

Upon vesting in accordance with the terms and conditions of the Restricted
Unit Plan, Common Units allocated to a plan participant will be issued to such a
participant. Until such allocated, but unissued, Common Units have vested and
have been issued to a participant, such participant shall not be entitled to any
distributions or allocations of income or loss and shall not have any voting or
other rights in respect of such Common Units.

The issuance of the Common Units pursuant to the Restricted Unit Plan is
intended to serve as a means of incentive compensation for performance and not
primarily as an opportunity to participate in the equity appreciation in respect
of the Common Units. Therefore, no consideration will be payable by the plan
participants upon vesting and issuance of the Common Units.

LONG-TERM INCENTIVE PLAN
- ------------------------

The Partnership has adopted a non-qualified, unfunded long-term incentive
plan for officers and key employees, effective October 1, 1997. Awards are based
on a percentage of base pay and are subject to the achievement of certain
performance contingencies, including the Partnership's ability to earn
sufficient funds and make cash distributions on its common and subordinated
units with respect to each fiscal year. Awards vest over time with one-third
vesting at the end of years three, four, and five from the award date.

Long-Term Incentive Plan awards earned in fiscal year 1998 are:

Performance or
Other Period
Award Until Maturation Potential Awards Under Plan
Name FY 1998 or Payout Threshold Target Maximum
- ---- ------- --------- --------- ------ -------

Mark A. Alexander $57,230 3-5 Years $ 0 $57,230 $114,460
Michael J. Dunn, Jr. 23,970 3-5 Years 0 23,970 47,940
Anthony M. Simonowicz 15,015 3-5 Years 0 15,015 30,030
Kevin T. McIver 10,950 3-5 Years 0 10,950 21,900
Thomas A. Nunan 10,875 3-5 Years 0 10,875 21,750

EMPLOYMENT AGREEMENTS
- ---------------------

The Partnership entered into an employment agreement (the "Employment
Agreement") with Mr. Alexander ("Executive") which became effective March 5,
1996 and was amended October 23, 1997. The summary of such Employment Agreement
contained herein does not purport to be complete and is qualified in its
entirety by reference to the Employment Agreement.

Mr. Alexander's Employment Agreement has an initial term of three years but
automatically renews for successive one-year periods, unless earlier terminated
by the Partnership or by Mr. Alexander or otherwise terminated in accordance
with the Employment Agreement. The Employment Agreement for Mr. Alexander
provides for an annual base salary of $380,000 as of September 26, 1998. In
addition, Mr. Alexander may earn a bonus up to 100% of annual base salary (the
"Maximum Annual Bonus") for services rendered based upon certain performance

criteria. The Employment Agreement also provides for the opportunity to
participate in benefit plans made available to other senior executives and
senior managers of the Partnership, including the Restricted Unit Plan. The
Partnership also provides Mr. Alexander with term life insurance with a face
amount equal to three times his annual base salary.

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

SEVERANCE PROTECTION PLAN FOR KEY EXECUTIVES
- --------------------------------------------

The Partnership has adopted a Severance Protection Plan which provides the
Partnership's officers and key employees with employment protection for one year
following a "change of control" as defined in the Plan. This plan provides for
severance payments equal to sixty-five weeks of base pay and target bonus
for such officers and key employees following a change of control and
termination of employment. Pursuant to Severance Protection Agreements, Messrs.
Dunn, Simonowicz and McIver, as executive officers of the Partnership, have
been granted severance protection payments of 78 weeks of base pay and target
bonuses following a change in control and termination of employment in lieu of
participation in the Severance Protection Plan.

COMPENSATION OF SUPERVISORS
- ---------------------------

Mr. Stookey receives annual compensation of $75,000 for his services to the
Partnership. The other two Elected Supervisors receive $15,000 per year, plus
$1,000 per meeting of the Board of Supervisors or committee thereof attended. In
addition, each Elected Supervisor participates in the Restricted Unit Plan and
has received Unit Awards with a value of $0.3 million. All Elected Supervisors
receive reimbursement of reasonable out-of-pocket expenses incurred in
connection with meetings of the Board of Supervisors. The Partnership does not
expect to pay any additional remuneration to its employees (or employees of any
of its affiliates) or employees of the General Partner or any of its affiliates
for serving as members of the Board of Supervisors.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN COMPENSATION
DECISIONS
- ---------------------------------------------------------------------------

Compensation of the executive officers of the Partnership is determined by
the Compensation Committee of its Board of Supervisors. The Compensation
Committee is comprised of Messrs. Stookey, Logan and Hempstead who are not
officers or employees of the Partnership.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
===============================================================

The following table sets forth certain information as of December 17, 1998
regarding the beneficial ownership of Common and Subordinated Units by each
person or group known by the Partnership (based upon filings under Section 13(d)
or (g) under The Securities Exchange Act of 1934) to own beneficially more than

5% thereof, each member of the Board of Supervisors, each executive officer
named in the Summary Compensation table and all members of the Board of
Supervisors and executive officers as a group. Except as set forth in the notes
to the table, the business address of each person in the table is c/o the
Partnership, 240 Route 10 West, Whippany, New Jersey 07981-0206. Each individual
or entity listed below has sole voting and investment power over the Units
reported, except as noted below.

Suburban Propane, L.P.
- ----------------------

Name Amount and nature of Percent
Title of Class of Beneficial Owner Beneficial Ownership of Class
- -------------- ------------------- -------------------- --------
Common Units Mark A. Alexander 20,000 .093%
Michael J. Dunn, Jr. 0 --
Anthony M. Simonowicz 2,000 .009%
Thomas A. Nunan 2,500 .012%
Kevin T. McIver 1,000 .005%
Edward J. Grabowiecki 200 .001%
George H. Hempstead, III(a)(b) 0 --
John E. Lushefski (a)(b) 0 --
John Hoyt Stookey 10,000 .046%
Harold R. Logan, Jr. 2,500 .012%
Dudley C. Mecum 1,000 .005%
All Members of the Board
of Supervisors and Executive
Officers as a Group (12 persons) 39,200 .182%

Subordinated Units Suburban Propane GP, Inc.(c) 7,163,750(d) 100.0%

As executive officers of Millennium, Messrs. Hempstead and
Lushefski have shared voting and investment power over the
Subordinated Units. Messrs. Hempstead and Lushefski disclaim
beneficial ownership of the Subordinated Units.

APUs Suburban Propane GP, Inc. (c) 220,000(d) 100.0%

General Partner
Interest Suburban Propane GP, Inc. (c) 2% 100.0%

(a) The business address of such Supervisor is c\o Millenium Chemicals Inc.,
230 Half Mile Road, Red Bank, New Jersey 07701.

(b) Pursuant to the Recapitalization Agreement, Messrs. Hempstead and Lushefski
will resign as Supervisors effective as of the Closing of the
Recapitalization.

(c) Suburban Propane GP, Inc. is the General Partner and is an indirect
wholly-owned subsidiary of Millenium Chemicals Inc. The business address of
Suburban Propane GP, Inc. is 230 Half Mile Road, Red Bank, New Jersey
07701.

(d) Will be redeemed in the Recapitalization.

If the Recapitalization is completed, the Subordinated Units and the APUs
will be redeemed and the general partner interest in the Partnership currently
held by Suburban Propane GP, Inc. will be sold to Suburban Energy Services Group
LLC, a new entity owned by senior management of the Partnership.

BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
- -----------------------------------------

Section 16(a) of the Exchange Act requires the Partnership's directors and
executive officers to file initial reports of ownership and reports of changes
in ownership of the Company's Common Units with the Securities and Exchange
Commission. Directors and executive officers are required to furnish the
Partnership with copies of all Section 16(a) forms that they file. Based on a
review of these filings, the Partnership believes that all such filings were
made timely during the 1998 fiscal year.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
===============================================

RIGHTS OF THE GENERAL PARTNER
- -----------------------------

The General Partner owns all of the Subordinated Units, representing an
aggregate 24.4% limited partner interest in the Partnership. Millennium
Petrochemicals owns 100% of the capital stock of the General Partner. Through
the General Partner's ability, as general partner, to control the election of
the two Appointed Supervisors of the Partnership, its right as general partner
to approve certain Partnership actions, its ownership of all of the outstanding
Subordinated Units and its right to vote the Subordinated Units as a separate
class on certain matters, the General Partner and its affiliates have the
ability to exercise significant influence regarding management of the
Partnership.

DISTRIBUTION SUPPORT AGREEMENT
- ------------------------------

The Partnership and the General Partner have entered into the Distribution
Support Agreement which is intended to enhance the Partnership's ability to make
the Minimum Quarterly Distribution on the Common Units during the Subordination
Period. Pursuant to the Distribution Support Agreement, the General Partner has
agreed to contribute cash, in exchange for APUs to enable the Partnership to
distribute the Minimum Quarterly Distribution up to a maximum of approximately
$44.3 million. Through December 3, 1998, the General Partner has contributed a
total of $22.0 million to the Partnership and received 220,000 APUs in
consideration thereof. Millennium (the "APU Guarantor") has agreed pursuant to
the Distribution Support Agreement to guarantee the General Partner's APU
contribution obligation. The Unitholders have no independent right separate and
apart from the Partnership to enforce the General Partner's or the APU
Guarantor's obligations under the Distribution Support Agreement. The
Distribution Support Agreement will be terminated upon consummation of the
proposed Recapitalization and will be replaced with a $21.6 million liquidity
arrangement established by the Partnership consisting of either a deposit in
certain highly liquid securities or a letter of credit with a reputable bank or
a combination of both. See "Proposed Recapitalization in Item 1 of this Report".

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
===============================================================

(a) 1. Financial Statements

See "Index to Financial Statements" set forth on page F-1.

2. Financial Statement Schedule.

See "Index to Financial Statement Schedule" set forth on page S-1.

3. Exhibits

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

Management Contracts and Compensatory Plans and Arrangements

- Employment Agreement dated as of March 5, 1996 between the
Operating Partnership and Mr. Alexander (filed as Exhibit 10.6 to
the Partnership's Current Report on Form 8-K filed on April 29,
1996).

- First Amendment to Employment Agreement dated as of March 5, 1996
between the Operating Partnership and Mr. Alexander entered into
as of October 23, 1997 (filed as Exhibit 10.7 to the
Partnership's Annual Report on Form 10-K for the fiscal year
ended September 27, 1997).

- The Partnership's 1996 Restricted Unit Plan (filed as Exhibit
10.8 to the Partnership's Current Report on Form 8-K filed on
April 29, 1996).

- Form of Unit Grant Agreement pursuant to the Partnership's 1996
Restricted Unit Plan (filed as Exhibit 10.9 to the Partnership's
Current Report on Form 8-K filed on April 29, 1996).

- The Partnership's Supplemental Executive Retirement Plan (filed
as Exhibit 10.11 to the Partnership's Annual Report on Form 10-K
for the fiscal year ended September 28, 1996).

- The Partnership's Severance Protection Plan dated September 1996
(filed as Exhibit 10.12 to the Partnership's Annual Report on
Form 10-K for the fiscal year ended September 28, 1996).

(b) Reports on Form 8-K

Report on Form 8-K dated December 3, 1998 announcing the
Partnership's Recapitalization Plan.

SIGNATURES
----------

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

Suburban Propane Partners, L.P.

By: /s/ MARK A. ALEXANDER
--------------------------
Mark A. Alexander
President, Chief Executive Officer and
Management Supervisor

Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:

Signature Title Date
--------- ----- ----

/s/ MICHAEL J. DUNN, JR. Management Supervisor December 23, 1998
- -------------------------
(Michael J. Dunn, Jr.)

/s/ GEORGE H. HEMPSTEAD, III Appointed Supervisor December 23, 1998
- ------------------------------
(George H. Hempstead, III)

/s/ JOHN E. LUSHEFSKI Appointed Supervisor December 23, 1998
- -----------------------
(John E. Lushefski)

/s/ JOHN HOYT STOOKEY Elected Supervisor December 23, 1998
- -----------------------
(John Hoyt Stookey)

/s/ HAROLD R. LOGAN, JR. Elected Supervisor December 23, 1998
- --------------------------
(Harold R. Logan, Jr.)

/s/ DUDLEY C. MECUM Elected Supervisor December 23, 1998
- ---------------------
(Dudley C. Mecum)

/s/ ANTHONY M. SIMONOWICZ Vice President and Chief December 23, 1998
- --------------------------- Financial Officer of Suburban
(Anthony M. Simonowicz) Propane Partners, L.P.

/s/ EDWARD J. GRABOWIECKI Controller and Chief December 23, 1998
- --------------------------- Accounting Officer of Suburban
(Edward J. Grabowiecki) Propane Partners, L.P.

INDEX TO EXHIBITS

The exhibits listed on this Exhibit Index are filed as part of this report.
Exhibits required to be filed by Item 601 of Regulation S-K which are not listed
are not applicable.

Exhibit
Number Description
------ -----------

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

* 3.1 Amended and Restated Agreement of Limited Partnership of the
Partnership dated as of March 4, 1996.

* 3.2 Amended and Restated Agreement of Limited Partnership of the
Operating Partnership dated as of March 4, 1996.

*** 10.1 Amended and Restated Credit Agreement dated as of September
30, 1997 among the Operating Partnership, First Union National
Bank, as administrative agent, and certain banks.

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

* 10.3 Contribution, Conveyance and Assumption Agreement dated as of
March 4, 1996 among the Partnership, the Operating
Partnership, Quantum, the General Partner and the Service
Company.

* 10.4 Computer Services Agreement dated as of March 5, 1996 between
Quantum and the Operating Partnership.

* 10.5 Distribution Support Agreement dated as of March 5, 1996
among the Partnership, the General Partner and Millennium.

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

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

* 10.8 The Partnership's 1996 Restricted Unit Plan.

* 10.9 Form of Unit Grant Agreement pursuant to the Partnership's
1996 Restricted Unit Plan.

E-1

Exhibit
Number Description
------ -----------

** 10.11 The Partnership Supplemental Executive Retirement Plan
(effective as of March 5, 1996).

** 10.12 The Partnership's Severance Protection Plan dated September
1996.

*****10.13 Suburban Propane L.P. Long-Term Incentive Program.

** 21.1 Listing of Subsidiaries of the Partnership.

*****23.1 Consent of Independent Accountants.

*****27.1 Financial Data Schedule.

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

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

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

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

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

*****Filed herewith.

E-2

EXHIBIT 10.13
Long-Term Incentive Plan

SUBURBAN PROPANE, L.P.

LONG TERM INCENTIVE PROGRAM

(As Adopted Effective October 1, 1997)

SUBURBAN PROPANE, L.P.
LONG TERM INCENTIVE PLAN

1. PURPOSE
-------
The purpose of this Plan is to strengthen Suburban Propane, L.P., and
its parent Suburban Propane Partners, L.P., Delaware limited partnerships
(collectively, the "PARTNERSHIP"), by providing an incentive to certain
Participants (as hereinafter defined), and thereby encouraging them to devote
their abilities and industry to the success of the Partnership's business
enterprise in such a manner as to maximize the Partnership's value and ability
to pay distributions to holders of its Common Units and Subordinated Units. It
is intended that this purpose be achieved by extending to certain Participants
an added long-term incentive for continued service to the Partnership, and for
high levels of performance and unusual efforts which enhance the Partnership's
value by offering incentives to effect such results.

2. DEFINITIONS.
------------
For purposes of this Plan, capitalized terms shall have the following
meanings:
2.1 "AWARD" means a cash amount earned by a Participant pursuant to
Section 5.
2.2 "BENEFICIARY" means a Participant's beneficiary pursuant to Section 10.
2.3 "BOARD" means the Board of Supervisors of the Partnership.
2.4 "CAUSE" means, unless otherwise provided in an Agreement, (i) in the
case of an employee of Suburban Propane, L.P. (a) the Participant's gross
negligence or willful misconduct in the performance of his duties, (b) the
Participant's willful or grossly negligent failure to perform his duties, (c)
the breach by the Participant of any written covenants to Suburban Propane,
L.P., (d) dishonest, fraudulent or unlawful behavior by the Participant (whether
or not in conjunction with employment) or the Participant being subject to a
judgment, order or decree (by consent or otherwise) by any governmental or
regulatory authority which restricts his ability to engage in the business
conducted by the Partnership, or any of their affiliates or (e) willful or
reckless breach by the Participant of any policy adopted by the Partnership
concerning conflicts of interest, standards of business conduct or fair
employment practices or procedures with respect to compliance with applicable
laws, and (ii) in the case of an Elected Supervisor, the commission of an act of
fraud or intentional misrepresentation or an act of embezzlement,
misappropriation or conversion of assets or opportunities of the Partnership or
any of its affiliates.

2.5 "CHANGE IN CAPITALIZATION" means any increase or reduction in the
number of Common Units, or any change (including, but not limited to, a change
in value)in the Common Units, change in the percentage ownership interest of the
Partnership attributable to the Common Units or exchange of Common Units for a
different number or kind of units or other securities of the Partnership, by
reason of a reclassification, recapitalization, merger, consolidation,
reorganization, spin-off, split-up, issuance of warrants or rights or other
convertible securities, unit distribution, unit split or reverse unit split,
cash dividends, property dividend, combination or exchange of units, repurchase
of units, change in corporate structure or otherwise.

2.6 "CHANGE OF CONTROL" means the occurrence during the term of the Plan
of:

(a) an acquisition (other than directly from the Partnership)of Common
Units, Subordinated Units or voting equity interests of the Partnership
("VOTING SECURITIES") by any "PERSON" (as the term person is used for purposes
of Section 13(d) or 14(d) of the Securities Exchange Act of 1934, as amended
(the "EXCHANGE ACT"), other than the Partnership or any of its affiliates,
immediately after which such person has "BENEFICIAL OWNERSHIP" (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of more than twenty
five percent (25%) of the combined voting power of the Partnership's then
outstanding Units; provided, however, that in determining whether a Change of
Control has occurred, Units which are acquired in a Non-Control Acquisition (as
hereinafter defined) shall not constitute an acquisition which would cause a
Change of Control. A "NON-CONTROL ACQUISITION" shall mean an acquisition by (i)
an employee benefit plan (or a trust forming a part thereof) maintained by (A)
the Partnership or (B) any corporation, partnership or other person of which a
majority of its voting power or its voting equity securities or equity interest
is owned, directly or indirectly, by the Partnership (for purposes of this
definition, a "SUBSIDIARY"), (ii) the Partnership or its Subsidiaries, or (iii)
any Person in connection with a "NON-CONTROL TRANSACTION" (as hereinafter
defined); or
(b) approval by the partners of the Partnership of (A) a merger,
consolidation or reorganization involving the Partnership, unless (x) the
holders of Units immediately before such merger, consolidation or
reorganization own, directly or indirectly immediately following such merger,
consolidation or reorganization, at least sixty percent (60%) of the combined
voting power of the outstanding Units of the entity resulting from such merger,
consolidation or reorganization (the "SURVIVING ENTITY") in substantially the
same proportion as their ownership of the Units immediately before such merger,
consolidation or reorganization, and (y) no person or entity (other than the
Partnership, any Subsidiary, any employee benefit plan (or any trust forming a
part thereof) maintained by Suburban Propane, L.P., the Partnership, the
Surviving Entity, or any Person who, immediately prior to such merger,
consolidation or reorganization had Beneficial Ownership of more than twenty
five percent (25%) of then outstanding Units), has Beneficial Ownership of more
than twenty five percent (25%) of the combined voting power of the Surviving
Entity's then outstanding voting securities; (B) a complete liquidation or
dissolution of the Partnership or (C) the sale or other disposition of 50% or
more of the net assets of the Partnership to any person (other than a transfer
to a Subsidiary). A transaction described in clauses (x) or (y) of subsection
(A) hereof shall be referred to as a "NON-CONTROL TRANSACTION."

Notwithstanding the foregoing, a Change of Control shall not be deemed to occur
solely because any Person (the "SUBJECT PERSON") acquired Beneficial Ownership
of more than the permitted amount of the outstanding Voting Securities as a
result of the acquisition of Voting Securities by the Partnership which, by
reducing the number of Voting Securities outstanding, increases the proportional
number of Units Beneficially Owned by the Subject Person, provided that if a
Change of Control would occur (but for the operation of this sentence) as a
result of the acquisition of Voting Securities by the Partnership, and after
such acquisition by the Partnership, the Subject Person becomes the Beneficial
Owner of any additional Voting Securities which increases the percentage of the
then outstanding Voting Securities Beneficially Owned by the Subject Person,
then a Change of Control shall occur.

2.7 "COMMITTEE" means the Compensation Committee of the Board.

2.8 "COMMON UNIT" means the common units representing limited partnership
interests of the Partnership.

2.9 "COMPENSATION DEFERRAL PLAN" means the Suburban Propane Compensation
Deferral Plan.

2.10 "CONSOLIDATED CASH PROVIDED BY OPERATING ACTIVITIES" shall have the
same meaning as such term is reported in the Partnership's consolidated
financial statements for each quarterly period filed on Form 10-Q or Annual
Report filed on Form 10-K with the Securities and Exchange Commission.

2.11 "DISABILITY" shall have the same meaning that such term (or similar
term) has under the long-term disability plan in which the Participant is
covered.

2.12 "EFFECTIVE DATE" shall mean October 1, 1997.

2.13 "ELECTED SUPERVISORS" has the meaning set forth in the Partnership
Agreement and includes, on the Effective Date, John Hoyt Stookey, Harold R.
Logan, Jr. and Dudley C. Mecum.

2.14 "FISCAL YEAR" means the fiscal year of October 1 to September 30,
adopted by the Partnership, or any other fiscal year adopted by the Partnership.

2.15 "GENERAL PARTNER" has the meaning set forth in the Partnership
Agreement.

2.16 "GOOD REASON" means in the case of an employee of Suburban Propane,
L.P., (a) any failure by Suburban Propane, L.P. to comply in any material
respect with the compensation provisions of a written employment agreement
between the Participant and Suburban Propane, L.P., (b)a material adverse change
in the Participant's title without his consent, or (c) the assignment to the
Participant, without his consent, of duties and responsibilities materially
inconsistent with his level of responsibility as an executive officer.

2.17 "PARTICIPANT" means an employee of the Partnership designated by
the Committee to participate in the Plan.

2.18 "PARTNERSHIP" means Suburban Propane, L.P. and Suburban Propane
Partners, L.P., Delaware limited partnerships, and their successors.

2.19 "PARTNERSHIP AGREEMENT" means the Amended and Restated Agreement
of Limited Partnership of the Partnership.

2.20 "PLAN" means this Suburban Propane, L.P. Long Term Incentive Program.

2.21 "QUARTERLY TARGET AWARD" means the Award each Participant is eligible
to earn for each respective quarter of a Fiscal Year.

2.22 "SUBORDINATED UNITS" means the subordinated units representing
subordinated limited partnership interests of the Partnership.

2.23 "UNITS" means, collectively, the Common Units and the Subordinated
Units.

2.24 "VESTED AMOUNT" means the portion of a Participant's Award which is
non-forfeitable.

2.25 "CAPITAL EXPENDITURES" shall have the same meaning as such term is
reported in the Partnership's consolidated financial statements for each
quarterly period filed on Form 10-Q or Annual Report filed on Form 10-K with the
Securities and Exchange Commission.

3. Participation.
--------------
Only those Participants designated from time to time by the
Committee shall participate in the Plan and receive Awards hereunder.

4. Administration.
---------------

4.1 The Plan shall be administered by the Committee, which shall hold
meetings at such times as may be necessary for the proper administration of the
Plan. The Committee shall keep minutes of its meetings. A quorum shall consist
of not less than two members of the Committee and a majority of a quorum may
authorize any action. Any decision or determination reduced to writing and
signed by a majority of all of the members of the Committee shall be as fully
effective as if made by a majority vote at a meeting duly called and held. No
member of the Committee shall be liable for any action, failure to act,
determination or interpretation made in good faith with respect to this Plan or
any transaction hereunder, except for liability arising from his or her own
willful misfeasance, gross negligence or reckless disregard of his or her
duties. The Partnership hereby agrees to indemnify each member of the Committee
for all costs and expenses and, to the extent permitted by applicable law, any
liability incurred in connection with defending against, responding to,
negotiating for the settlement of or otherwise dealing with any claim, cause of
action or dispute of any kind arising in connection with any actions in
administering this Plan or in authorizing or denying authorization for any
transaction hereunder.

4.2 Subject to the express terms and conditions set forth herein, the
Committee shall have the power, from time to time to:
(a) select those Participants to whom Awards shall be granted;
(b) construe and interpret the Plan and the Awards and establish,
amend and revoke rules and regulations for the administration of the Plan,
including, but not limited to, correcting any defect or supplying any omission,
or reconciling any inconsistency in the Plan, in the manner and to the extent it
shall deem necessary or advisable so that the Plan complies with applicable law
and otherwise to make the Plan fully effective.
(c) exercise its discretion with respect to the powers and rights
granted to it as set forth in the Plan; and
(d) generally, exercise such powers and perform such acts as it
deems necessary or advisable to promote the best interests of the Partnership
with respect to the Plan.

4.3 The Committee's decisions, actions determinations and
interpretations shall be final and binding upon the Partnership, all
Participants, Beneficiaries, equity holders of the Partnership and any other
person.

4.4 In the event of any Change in Capitalization or in the event of
any special distribution to the holders of Common Units, the Committee may, but
shall not be obligated to make such equitable adjustments in the performance
criteria, the Target Awards or other aspects of the Plan, as the Committee
determines are necessary and appropriate.

5. Awards.
-------

5.1 OVERVIEW. Section 5.2 establishes a Target Award for each
Participant for each Fiscal Year.
Section 5.3 establishes two performance criteria for a
Participant to earn an Award. The first criterion is that Consolidated Net
Income equals or exceeds the Minimum Quarterly Distributions paid on the Common
Units. The second criterion is that Consolidated Net Income, less the
distributions paid on the Common Units, shall equal or exceed the amount
necessary to pay [full] distributions on the Subordinated Units. Compliance with
the performance criteria shall be measured quarterly during a Fiscal Year.

If the performance criteria for a Fiscal Year have been met in
whole or in part, then under Section 6 the Award shall vest in three equal
annual installments commencing on the first day of the first month of the third
Fiscal Year following the performance year.
Under Section 7, any vested Award shall be paid to a
Participant in three equal annual installments commencing in the first quarter
of the Fiscal Year in which such Award vested.

5.2 TARGET AWARDS. For each Participant, the Committee shall
establish a Target Award for a Fiscal Year equal to a designated percentage of
such Participant's base salary at the start of such Fiscal Year. For any fiscal
quarter, the Target Award shall be equal to 25% of the Target Award for the
Fiscal Year.

5.3 PERFORMANCE CRITERIA. There shall be two performance criteria
for a Participant to be entitled to an Award as follows:
(a) For any fiscal quarter of the Partnership, consolidated cash
provided by operating activities less capital expenditures on a rolling four
quarter basis, equals or exceeds the Minimum Quarterly Distribution on Common
Units with respect to such quarterly periods and provided that such Minimum
Quarterly Distributions have been paid to Common Unitholders.
(b) For any fiscal quarter of the Partnership, consolidated cash
provided by operating activities less capital expenditures on a rolling four
quarter basis, equals or exceeds the Minimum Quarterly Distribution on Common
Units and Subordinated Units with respect to such quarterly periods and provided
that such Minimum Quarterly Distributions have been paid to the Common and
Subordinated Unitholders.
Each performance criterion shall be weighted equally. If both criteria
are met for a fiscal quarter, the Quarterly Target Award shall be earned. If
only one criterion is met, only 50% of the Quarterly Target Award shall be
earned. If neither criterion is met for such fiscal quarter, no Quarterly Target
Award shall be earned for such quarter.

6. VESTING.
--------
Subject to Sections 9.1 and 9.2, if an Award is earned for a Fiscal
Year, then a percentage of such Award shall vest as follows:

Vested on First Day of: Percentage Vested:
----------------------- ------------------
third Fiscal Year following 33 1/3%
the Fiscal Year for which
Award is earned

fourth Fiscal Year following 33 1/3%
the Fiscal Year for which
Award is earned

fifth Fiscal Year following 33 1/3%
the Fiscal Year for which
Award is earned

7. PAYMENTS.
---------
One-third of a vested Award shall be paid to a Participant in the first
quarter of the Fiscal Year such award becomes vested and one-third of the Vested
Amount shall be paid to a Participant in the first quarter of each of the next
two succeeding Fiscal Years.
All payments shall be made on a date determined by the Committee.

8. DEFERRAL.
---------
Participants of this Plan who are also participants in the
Partnership's Compensation Deferral Plan can elect to defer any or all of the
payments hereunder in accordance with the Compensation Deferral Plan.

9. OTHER PROVISIONS APPLICABLE TO VESTING.
---------------------------------------
9.1 CHANGE OF CONTROL. Notwithstanding anything in this Plan to the
contrary, upon a Change of Control, all earned Awards shall become fully vested
and non-forfeitable and shall be paid to a Participant within thirty (30) days
after the Change in Control.
9.2 FORFEITURE. Subject to Sections 9.1, 9.3 and 9.4, Awards which
have not yet vested shall lapse and be forfeited upon the occurrence of either
of the following events: (a) termination of the Participant's employment or
participation in the Plan for any reason, except as provided in Section 9.3 and
9.4; (b) any attempted or completed transfer, sale, pledge, hypothecation, or
assignment (a "Transfer") by the Participant of an Award. The Committee may
accelerate the vesting of Awards at any time for any reason with the consent of
the General Partner.
9.3 DISABILITY OR DEATH. Notwithstanding the provisions of Section
9.2, if a Participant's employment terminates as a result of Disability or
death, an earned Award for such Participant shall vest in accordance with
Sections 6 and 9.1 and shall be paid in accordance with Section 7.
9.4 TERMINATION WITHOUT CAUSE OR FOR GOOD REASON. In the event a
Participant's employment by the Partnership is terminated by the Partnership
without Cause or by the Participant for Good Reason, the Awards shall vest upon
the next succeeding scheduled vesting date pursuant to Section 6 or pursuant to
Section 9.1.

10. BENEFICIARIES.
--------------
A Participant may at any time and from time to time prior to death
designate one or more Beneficiaries to receive any payments to be made following
the Participant's death. If no such designation is on file with the Partnership
at the time of a Participant's death, the Participant's Beneficiary shall be the
beneficiary or beneficiaries named in the beneficiary designation most recently
filed by the Participant with the Partnership. If the Participant has not
effectively designated a beneficiary, or if no beneficiary so designated has
survived the Participant, the Participant's Beneficiary shall be the
Participant's surviving spouse, or, if no spouse has survived the Participant,
the estate of the deceased Participant. If an individual Beneficiary cannot be
located for a period of one year following the Participant's death, despite mail
notification to the Beneficiary's last known address, and if the Beneficiary has
not made a written claim for benefits within such period to the Committee, the

Beneficiary shall be treated as having predeceased the Participant. The
Committee may require such proof of death and such evidence of the right of any
person to receive all or part of the benefit of a deceased Participant as the
Committee may consider to be appropriate. The Committee may rely upon any
direction by the legal representatives of the estate of a deceased Participant,
without liability to any other person.

11. TERMINATION AND AMENDMENT OF THE PLAN.
--------------------------------------
The Plan shall terminate on the day preceding the tenth anniversary of
the Effective Date and no Award may be earned thereafter. The Board may sooner
terminate the Plan and the Board may at any time and from time to time amend,
terminate, modify or suspend the Plan or any Agreement; PROVIDED, HOWEVER, that
no such amendment, modification, suspension or termination shall impair or
adversely affect any Awards theretofore earned under the Plan, except with the
consent of the Participant, nor shall any amendment, modification, suspension or
termination deprive any Participant of any Awards which he or she may have
acquired through or as a result of the Plan.

12. NON-EXCLUSIVITY OF THE PLAN.
----------------------------
The adoption of the Plan by the Board shall not be construed as
amending, modifying or rescinding any previously approved incentive arrangement
or as creating any limitations on the power of the Board to adopt such other
incentive arrangements as it may deem desirable, including, without limitation,
the granting of options to acquire the Units, and such arrangements may be
either applicable generally or only in specific cases.

13. LIMITATIONS OF LIABILITY.
-------------------------
As illustrative of the limitation of liability of the Partnership, but
not intended to be exhaustive thereof, nothing in the Plan shall be construed
to:
(a) give any person any right to earn an Award other than at the sole
discretion of the Committee;
(b) give any person any rights whatsoever with respect to the Awards
except as specifically provided in the Plan;
(c) limit in any way the right of the Partnership to terminate the
employment of any person at any time; or
(d) be evidence of any agreement or understanding, express or
implied, that the Partnership will employ any person at any particular rate of
compensation or for any particular period of time.

14. REGULATIONS AND OTHER APPROVALS; GOVERNING LAW.
-----------------------------------------------
14.1 Except as to matters of federal law, this Plan and the rights of
all persons claiming hereunder shall be construed and determined in accordance
with laws of the State of New Jersey without giving effect to conflicts of law
principles.
14.2 Except as provided in Section 10 hereof the Board may make such
changes to the Plan or an Agreement as may be necessary or appropriate to comply
with the rules and regulations of any government authority.

15. WITHHOLDING OF TAXES.
---------------------
At such times as a Participant recognizes taxable income, (a "TAXABLE
EVENT"), the Partnership shall withhold an amount equal to the federal, state
and local income taxes and other amounts as may be required by law to be
withheld by the Partnership in connection with the Taxable Event.

16. NO REQUIRED SEGREGATION OF ASSETS.
----------------------------------
Neither the Partnership nor any subsidiary shall be required to
segregate any assets that may at any time be represented by Awards made pursuant
to the Plan.

17. RIGHT OF DISCHARGE RESERVED.
----------------------------
Neither the Plan nor any Award shall guarantee any Employee continued
employment with the Partnership or a subsidiary or guarantee the grant of future
Awards.

18. NATURE OF PAYMENTS.
-------------------
All Awards made pursuant to the Plan are in consideration of services
for the Partnership or the subsidiaries. The Awards constitute a special
incentive payment to the Participant and shall not be taken into account as
compensation for purposes of any of the employee benefit plans of the
Partnership or any subsidiary except as may be determined by the Committee.

19. CONSTRUCTION OF PLAN.
---------------------
The captions used in this Plan are for convenience only and shall not
be construed in interpreting the Plan. Whenever the context so requires, the
masculine shall include the feminine and neuter, and the singular shall also
include the plural, and conversely.

20. SEVERABILITY.
-------------
If any provision of the Plan shall be held unlawful or otherwise
invalid or unenforceable in whole or in part, the unlawfulness, invalidity or
unenforceability shall not affect any other provision of the Plan or part
thereof, each of which shall remain in full force and effect.

INDEX TO FINANCIAL STATEMENTS

SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES

Page
----

Reports of Independent Accountants..................................... F-2
Consolidated Balance Sheets-September 26, 1998 and September 27, 1997.. F-4
Consolidated Statements of Operations -
Years Ended September 26, 1998, September 27, 1997
and September 28, 1996 (Combined)................................... F-5
March 5, 1996 through September 28, 1996
October 1, 1995 through March 4, 1996 (Predecessor)
Consolidated Statements of Cash Flows -
Years Ended September 26, 1998, September 27, 1997
and September 28, 1996 (Combined).................................. F-7
March 5, 1996 through September 28, 1996 and
October 1, 1995 through March 4, 1996 (Predecessor)
Consolidated Statements of Partners' Capital -
Years Ended September 26, 1998 and September 27, 1997
March 5, 1996 through September 28, 1996............................. F-9
Notes to Consolidated Financial Statements............................. F-10

F-1

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Supervisors and Unitholders of
Suburban Propane Partners, L.P.

In our opinion, the consolidated financial statements listed in the
indices referred to under Item 14(a) 1 and 2 and appearing on pages F-1 and S-1
present fairly, in all material respects, the financial position of Suburban
Propane Partners, L.P. and its subsidiaries (the "Partnership") at September 26,
1998 and September 27, 1997, and the results of its operations and its cash
flows for the years then ended and the period March 5, 1996 to September 28,
1996, in conformity with generally accepted accounting principles. These
financial statements are the responsibility of the Partnership's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.

PricewaterhouseCoopers LLP
Florham Park, NJ
December 8, 1998

F-2

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Shareholder
Quantum Chemical Corporation

In our opinion, the financial statements listed in the indices referred to
under Item 14(a) 1 and 2 and appearing on pages F-1 and S-1 present fairly, in
all material respects, the Suburban Propane division of Quantum Chemical
Corporation results of operations and cash flows for the period October 1, 1995
to March 4, 1996, in conformity with generally accepted accounting principles.
These financial statements are the responsibility of the Company's management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.

Price Waterhouse LLP
Florham Park, NJ
October 21, 1996

F-3

SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(in thousands)

September 26, September 27,
1998 1997
------------ -------------
ASSETS
Current assets:
Cash and cash equivalents ...................... $ 59,819 $ 19,336
Accounts receivable, less allowance for doubtful
accounts of $2,382 and $2,682, respectively 39,134 45,927
Inventories .................................... 29,962 31,915
Prepaid expenses and other current assets ...... 3,866 7,183
--------- ---------
Total current assets ...................... 132,781 104,361
Property, plant and equipment, net .................. 343,828 364,347
Net prepaid pension cost ............................ 34,556 48,598
Goodwill and other intangible assets, net ........... 214,782 219,017
Other assets ........................................ 3,618 9,311
--------- ---------
Total assets .............................. $ 729,565 $ 745,634
========= =========

LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable ............................... $ 31,315 $ 37,785
Accrued employment and benefit costs ........... 20,926 19,957
Accrued insurance .............................. 4,830 5,280
Customer deposits and advances ................. 16,241 12,795
Accrued interest ............................... 8,198 8,306
Other current liabilities ...................... 10,040 12,578
--------- ---------
Total current liabilities ................. 91,550 96,701
Long-term debt ...................................... 427,897 427,970
Postretirement benefits obligation .................. 35,980 51,123
Accrued insurance ................................... 16,574 18,468
Other liabilities ................................... 9,764 10,133
--------- ---------
Total liabilities ......................... 581,765 604,395
--------- ---------

Partners' capital:
Common Unitholders ............................. 84,847 100,476
Subordinated Unitholder ........................ 49,147 39,835
General Partner ................................ 24,488 12,830
Unearned compensation .......................... (10,682) (11,902)
--------- ---------

Total partners' capital ................... 147,800 141,239
--------- ---------
Total liabilities and partners' capital ... $ 729,565 $ 745,634
========= =========

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

F-4

SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES

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

Year Ended
-----------------------------------------------

September 28,
September 26, September 27, 1996
1998 1997 (Combined)
------------ ------------ -------------

Revenues
Propane ........................................ $ 598,599 $ 700,767 $ 641,679
Other .......................................... 68,688 70,364 66,267
--------- --------- ---------
667,287 771,131 707,946
--------- --------- ---------

Costs and expenses
Cost of sales .................................. 326,440 436,795 377,692
Operating ...................................... 202,946 209,799 203,426
Depreciation and amortization .................. 36,531 37,307 35,862
Selling, general and administrative
expenses ..................................... 37,646 32,556 29,004
Gain on sale of investment in Dixie Pipeline Co. (5,090) -- --
Management fee ................................. -- -- 1,290
Restructuring charge ........................... -- 6,911 2,340
--------- --------- ---------
598,473 723,368 649,614
--------- --------- ---------

Income before interest expense and
income taxes .................................... 68,814 47,763 58,332
Interest expense, net ............................. 30,614 33,979 17,171
--------- --------- ---------
Income before provision for income taxes .......... 38,200 13,784 41,161
Provision for income taxes ........................ 35 190 28,294
--------- --------- ---------
Net income ..................................... $ 38,165 $ 13,594 $ 12,867
========= ========= =========

General Partner's interest in net income ..........$ 763 $ 272
--------- ---------
Limited Partners' interest in net income ..........$ 37,402 $ 13,322
========= =========
Basic and diluted net income per Unit .............$ 1.30 $ 0.46
========= =========
Weighted average number of Units outstanding ...... 28,726 28,726
--------- ---------

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

F-5

SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES

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

October 1, 1995 October 1, 1995
through March 5, 1996 through
September 28, 1996 through March 4, 1996
(Combined) September 28, 1996 (Predecessor)
------------------ ------------------ -------------

Revenues

Propane ............................... $ 641,679 $ 289,058 $ 352,621
Other ................................. 66,267 34,889 31,378
--------- --------- ---------
707,946 323,947 383,999

Costs and expenses
Cost of sales ......................... 377,692 173,201 204,491
Operating ............................. 203,426 114,436 88,990
Depreciation and amortization ......... 35,862 21,046 14,816
Selling, general and administrative
expenses ............................. 29,004 16,388 12,616
Management fee ........................ 1,290 -- 1,290
Restructuring charge .................. 2,340 2,340 --
--------- --------- ---------
649,614 327,411 322,203

Income (loss) before interest expense
and income taxes ......................... 58,332 (3,464) 61,796
Interest expense, net ...................... 17,171 17,171 --
--------- --------- ---------
Income (loss) before provision
for income taxes ......................... 41,161 (20,635) 61,796
Provision for income taxes ................. 28,294 147 28,147
--------- --------- ---------
Net income (loss) ..................... $ 12,867 $ (20,782) $ 33,649
========= ========= =========

General Partner's interest in net loss ..... $ (416)
---------
Limited Partners' interest in net loss ..... $ (20,366)
=========
Basic and diluted net loss per Unit ........ $ (0.71)
=========
Weighted average number of Units outstanding 28,726
---------

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

F-6

SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)

Year Ended
--------------------------------------------
September 26, September 27, September 28,
1998 1997 1996
(Combined)
--------------------------------------------
Cash flows from operating activities:

Net income ................................................................ $ 38,165 $ 13,594 $ 12,867
Adjustments to reconcile net income to net cash provided by operations:
Depreciation ......................................................... 29,166 29,718 28,920
Amortization ......................................................... 7,365 7,589 6,942
Restructuring charge ................................................. -- 6,911 2,340
(Gain) on disposal of equipment ...................................... (5,090) -- --
(Gain) on disposal of property, plant and equipment .................. (1,391) (774) (241)
Changes in operating assets and liabilities, net of acquisitions and
dispositions:
Decrease/(increase) in accounts receivable ........................... 6,793 9,094 (13,976)
Decrease/(increase) in inventories ................................... 1,953 8,258 (3,510)
Decrease/(increase) in prepaid expenses and
other current assets ............................................... 3,317 (616) (5,565)
(Decrease)/increase in accounts payable .............................. (6,470) (2,945) 18,432
Increase/(decrease) in accrued employment
and benefit costs .................................................. 1,595 (5,031) 3,414
(Decrease)/increase in accrued interest .............................. (108) 84 8,222
Increase/(decrease) in other accrued liabilities ..................... 458 (112) 5,417
Other noncurrent assets ................................................... (2,853) (1,138) (2,872)
Deferred credits and other noncurrent liabilities ......................... (2,827) (5,784) (1,194)
--------- --------- ---------
Net cash provided by operating activities ............................. 70,073 58,848 59,196
--------- --------- ---------

Cash flows from investing activities:
Capital expenditures ...................................................... (12,617) (24,888) (25,885)
Acquisitions .............................................................. (4,041) (1,880) (28,529)
Proceeds from the sale of investment ...................................... 13,090 -- --
Proceeds from the sale of property, plant
and equipment .......................................................... 6,468 6,059 2,000
--------- --------- ---------
Net cash provided by (used in) investing activities .................... 2,900 (20,709) (52,414)
--------- --------- ---------
Cash flows from financing activities:
Cash activity with parent, net ............................................ -- -- 25,799
Proceeds from settlement with former parent ............................... -- -- 5,560
Proceeds from debt placement .............................................. -- -- 425,000
Proceeds from Common Unit offering ........................................ -- -- 413,569
Debt placement and credit agreement expenses .............................. -- -- (6,224)
Proceeds from General Partner APU contribution ............................ 12,000 10,000 --
Cash distribution to General Partner ...................................... -- -- (832,345)
Debt repayment ............................................................ (260) (299) --
Partnership distribution .................................................. (44,230) (47,435) (19,346)
--------- --------- ---------
Net cash (used in) provided by financing activities .................... (32,490) (37,734) 12,013
--------- --------- ---------
Net increase in cash and cash equivalents ...................................... 40,483 405 18,795
Cash and cash equivalents at beginning of period ............................... 19,336 18,931 136
--------- --------- ---------
Cash and cash equivalents at end of period ..................................... $ 59,819 $ 19,336 $ 18,931
========= ========= =========

Supplemental disclosure of cash flow information:
Cash paid for interest ................................................... $ 32,659 $ 32,836 $ 10,550
========= ========= =========

Non-cash investing and financing activities
Assets acquired by incurring note payable ................................ $ 250 $ -- $ 3,528
========= ========= =========

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

F-7

SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)

October 1, 1995 October 1, 1995
through March 5, 1996 through
September 28, 1996 through March 4, 1996
(Combined) September 28, 1996 (Predecessor)
---------- ------------------ -------------

Cash flows from operating activities:

Net income (loss) .................................... $ 12,867 $ (20,782) $ 33,649
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operations:
Depreciation .................................... 28,920 16,887 12,033
Amortization .................................... 6,942 4,159 2,783
Restructuring charge ............................ 2,340 2,340 --
(Gain) on disposal of property, plant
and equipment ................................ (241) (156) (85)
Changes in operating assets and liabilities,
net of acquisitions and dispositions:
(Increase)/decrease in accounts receivable ....... (13,976) 42,667 (56,643)
(Increase)/decrease in inventories ............... (3,510) (6,339) 2,829
(Increase) in prepaid expenses
and other current assets ...................... (5,565) (3,691) (1,874)
Increase in accounts payable .................... 18,432 9,097 9,335
Increase in accrued employment
and benefit costs .............................. 3,414 1,111 2,303
Increase in accrued interest .................... 8,222 8,222 --
Increase/(decrease) in other accrued liabilities 5,417 8,947 (3,530)
Other noncurrent assets .............................. (2,872) (1,669) (1,203)
Deferred credits and other noncurrent liabilities .... (1,194) 2,168 (3,362)
--------- --------- ----------
Net cash provided by (used in) operating activities 59,196 62,961 (3,765)
--------- --------- ----------
Cash flows from investing activities:
Capital expenditures ................................. (25,885) (16,089) (9,796)
Acquisitions ......................................... (28,529) (15,357) (13,172)
Proceeds from the sale of property, plant
and equipment ...................................... 2,000 997 1,003
--------- --------- ----------
Net cash used in investing activities ............. (52,414) (30,449) (21,965)
--------- --------- ----------
Cash flows from financing activities:
Cash activity with parent, net ....................... 25,799 -- 25,799
Proceeds from settlement with former parent .......... 5,560 5,560 --
Proceeds from debt placement ......................... 425,000 425,000 --
Proceeds from Common Unit offering ................... 413,569 413,569 --
Debt placement and credit agreement expenses ......... (6,224) (6,224) --
Cash distribution to General Partner ................. (832,345) (832,345) --
Partnership distribution ............................. (19,346) (19,346) --
--------- --------- ----------
Net cash provided by (used in) financing activities 12,013 (13,786) 25,799
--------- --------- ----------
Net increase in cash and cash equivalents ................. 18,795 18,726 69
Cash and cash equivalents at beginning of period .......... 136 205 136
--------- --------- ----------
Cash and cash equivalents at end of period ................ $ 18,931 $ 18,931 $ 205
========= ========= ==========

Supplemental disclosure of cash flow information:
Cash paid for interest ................................ $ 10,550 $ 10,550 $ --
========= ========= ==========

Non-cash investing and financing activities
Assets acquired by incurring note payable ............. $ 3,528 $ 3,528 $ --
========= ========= ==========

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

F-8

SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL
(in thousands)

Unearned Total
Number of Units General Compensation Partners'
Common Subordinated Common Subordinated Partner Restricted Units Capital
------ ------------ ------- ------------ ------- ---------------- ---------

Balance at March 5, 1996 ........ -- -- -- -- -- -- --

Contribution in connection with
formation of the Partnership and
issuance of Common Units ........ 21,562 7,164 $ 150,488 $ 49,890 $ 4,089 $ 204,467

Partnership distribution ........ (14,239) (4,720) (387) (19,346)

Grants under Restricted Unit Plan 8,330 $ (8,330) --

Amortization of Restricted
Unit compensation ............... 340 340

Net Loss ........................ -- -- (15,296) (5,070) (416) -- (20,782)
------- ------------ ------- ------------ ------- ---------------- ---------

Balance at September 28, 1996 ... 21,562 7,164 129,283 40,100 3,286 (7,990) 164,679

Grants under Restricted Unit Plan 4,313 (4,313) --

Partnership distribution ........ (43,125) (3,582) (728) (47,435)

Amortization of Restricted
Unit compensation ............... 401 401

APU contribution (100 Units) .... 10,000 10,000

Net Income ...................... -- -- 10,005 3,317 272 -- 13,594
------- ------------ ------- ------------ ------- ---------------- ----------

Balance at September 27, 1997 ... 21,562 7,164 100,476 39,835 12,830 (11,902) 141,239

Net grants forfeited under
Restricted Unit Plan ............ (594) 594 --

Partnership distribution ........ (43,125) (1,105) (44,230)

Amortization of Restricted
Unit compensation ............... 626 626

APU contribution (120 Units) .... 12,000 12,000

Net Income ...................... -- -- 28,090 9,312 763 -- 38,165
------- ------------ --------- ------------ ------- ---------------- ----------

Balance at September 26, 1998 ... 21,562 7,164 $ 84,847 $ 49,147 $24,488 $ (10,682) $ 147,800
======= ============ ========= ============ ======= ================ ==========

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

F-9

SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 26, 1998
(Dollars in thousands)

1. PARTNERSHIP ORGANIZATION AND FORMATION
- ------------------------------------------

Suburban Propane Partners, L.P. (the "Partnership") was formed on December 19,
1995 as a Delaware limited partnership. The Partnership and its subsidiary,
Suburban Propane, L.P. (the "Operating Partnership"), were formed to acquire and
operate the propane business and assets of Suburban Propane, a division of
Quantum Chemical Corporation (the "Predecessor Company"). In addition, Suburban
Sales & Service, Inc. (the "Service Company"), a subsidiary of the Operating
Partnership, was formed to acquire and operate the service work and appliance
and parts businesses of the Predecessor Company. The Partnership, the Operating
Partnership and the Service Company are collectively referred to hereinafter as
the "Partnership Entities". The Partnership Entities commenced operations on
March 5, 1996 (the "Closing Date") upon consummation of an initial public
offering of 18,750,000 Common Units representing limited partner interests in
the Partnership (the "Common Units"), the private placement of $425,000
aggregate principal amount of Senior Notes due 2011 issued by the Operating
Partnership (the "Senior Notes") and the transfer of all the propane assets
(excluding the net accounts receivable balance) of the Predecessor Company to
the Operating Partnership and the Service Company. On March 25, 1996, the
underwriters of the Partnership's initial public offering exercised an
over-allotment option to purchase an additional 2,812,500 Common Units.

Suburban Propane GP, Inc. (the "General Partner") is a wholly-owned subsidiary
of Millennium Petrochemicals Inc., ("Millennium Petrochemicals"), formerly
Quantum Chemical Corporation ("Quantum") and serves as the general partner of
the Partnership and the Operating Partnership. Both the General Partner and
Millennium Petrochemicals are indirect wholly-owned subsidiaries of Millennium
Chemicals Inc. ("Millennium") which was formed as a result of Hanson PLC's (the
"Parent Company") demerger in October 1996. The General Partner holds a 1%
general partner interest in the Partnership and a 1.0101% general partner
interest in the Operating Partnership. In addition, the General Partner owns a
24.4% limited partner interest and a special limited partner interest in the
Partnership. The limited partner interest is evidenced by 7,163,750 Subordinated
Units and the special limited partner interest is evidenced by Additional
Partnership Units ("APUs") (See Note 4 Distributions of Available Cash). The
General Partner has delegated to the Partnership's Board of Supervisors all
management powers over the business and affairs of the Partnership Entities that
the General Partner possesses under applicable law (See Note 14 Subsequent
Event).

The Partnership Entities are, and the Predecessor Company was, engaged in the
retail and wholesale marketing of propane and related appliances and services.
The Partnership believes it is the third largest retail marketer of propane in
the United States, serving more than 700,000 active residential, commercial,
industrial and agricultural customers from more than 340 customer service
centers in over 40 states. The Partnership's operations are concentrated in the
east and west coast regions of the United States. The retail propane sales
volume of the Partnership was approximately 530 million gallons during the
fiscal year ended September 26, 1998. Based on industry statistics, the
Partnership believes that its retail propane sales volume constitutes
approximately 6% of the domestic retail market for propane.

2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- -----------------------------------------------------------------------

BASIS OF PRESENTATION. The consolidated financial statements present the
consolidated financial position, results of operations and cash flows of the
Partnership Entities and the Predecessor Company. All significant intercompany
transactions and accounts have been eliminated.

FISCAL PERIOD. The Partnership and the Predecessor Company's fiscal year ends on
the last Saturday nearest to September 30. Because the Partnership commenced
operations on the Closing Date, the accompanying statements of operations and
cash flows present the consolidated results of operations and cash flows of the
Partnership for the fiscal years ended

F-10

September 26, 1998 and September 27, 1997 and the period March 5, 1996 to
September 28, 1996, and the results of operations and cash flows of the
Predecessor Company for the period October 1, 1995 to March 4, 1996. Solely for
purposes of comparing the results of operations of the Partnership and the
Predecessor Company for the years ended September 26, 1998, September 27, 1997
and September 28, 1996, the statement of operations for the year ended September
28, 1996 is comprised of the combined statements of operations of the
Predecessor Company for the period October 1, 1995 to March 4, 1996 and the
Partnership for the period March 5, 1996 to September 28, 1996.

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

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

FINANCIAL INSTRUMENTS. The Partnership routinely uses propane futures and
forward contracts to reduce the risk of future price fluctuations and to help
ensure supply during periods of high demand. Gains and losses on futures and
forward contracts designated as hedges are deferred and recognized in cost of
sales as a component of the product cost for the related hedged transaction. In
the Consolidated Statement of Cash Flows, cash flows from qualifying hedges are
classified in the same category as the cash flows from the items being hedged.
Net realized gains and losses for fiscal years 1998 and 1997 and unrealized
gains and losses on open positions as of September 26, 1998 and September 27,
1997, respectively, were not material.

REVENUE RECOGNITION. Sales of propane are recognized at the time product is
shipped or delivered to the customer. Revenue from the sale of propane,
appliances and equipment is recognized at the time of sale or installation.
Revenue from repairs and maintenance is recognized upon completion of the
service.

INVENTORIES. Inventories are stated at the lower of cost or market. Cost is
determined using a weighted average method for propane and a specific
identification basis for appliances.

PROPERTY, PLANT AND EQUIPMENT. Property, plant and equipment are stated at cost.
Depreciation is determined for related groups of assets under the straight-line
method based upon their estimated useful lives as follows:

Buildings 40 Years
Building and land improvements 10-20 Years
Transportation equipment 5-30 Years
Storage facilities 30 Years
Equipment, primarily tanks and cylinders 3-40 Years

Expenditures for maintenance and routine repairs are expensed as incurred.

F-11

GOODWILL AND OTHER INTANGIBLE ASSETS. Goodwill and other intangible assets are
comprised of the following:

September 26, September 27,
1998 1997
------------- -------------

Goodwill $237,812 $235,439
Debt origination costs 6,224 6,224
Other, principally noncompete agreements 5,076 4,514
-------- --------
249,112 246,177
Less: accumulated amortization 34,330 27,160
-------- --------
$214,782 $219,017
======== ========

Goodwill represents the excess of the purchase price over the fair value of net
assets acquired and is being amortized on a straight-line basis over forty years
from the date of acquisition.

Debt origination costs represent the costs incurred in connection with the
placement of the $425,000 of Senior Notes which is being amortized on a
straight-line basis over 15 years.

The Partnership periodically evaluates goodwill for impairment by calculating
the anticipated future cash flows attributable to its operations. Such expected
cash flows, on an undiscounted basis, are compared to the carrying values of the
tangible and intangible assets, and if impairment is indicated, the carrying
value of goodwill is adjusted. In the opinion of management, no impairment of
goodwill exists.

ACCRUED INSURANCE. Accrued insurance represents the estimated costs of known and
anticipated or unasserted claims under the Partnership's general and product,
workers' compensation and automobile insurance policies. Accrued insurance
provisions for unasserted claims arising from unreported incidents are based on
an analysis of historical claims data. For each claim, the Partnership records a
self-insurance provision up to the estimated amount of the probable claim or the
amount of the deductible, whichever is lower. Claims are generally settled
within 5 years of origination.

INCOME TAXES. As discussed in Note 1, the Partnership Entities consist of two
limited partnerships, the Partnership and the Operating Partnership, and one
corporate entity, the Service Company. For federal and state income tax
purposes, the earnings attributable to the Partnership and Operating Partnership
are included in the tax returns of the individual partners. As a result, no
recognition of income tax expense has been reflected in the Partnership's
consolidated financial statements relating to the earnings of the Partnership
and Operating Partnership. The earnings attributable to the Service Company are
subject to federal and state income taxes. Accordingly, the Partnership's
consolidated financial statements reflect income tax expense related to the
Service Company's earnings. Net earnings for financial statement purposes may
differ significantly from taxable income reportable to Unitholders as a result
of differences between the tax basis and financial reporting basis of assets and
liabilities and the taxable income allocation requirements under the Partnership
Agreement.

For federal income tax purposes, the Predecessor Company was included in the
consolidated tax return of a United States affiliate of the Parent Company. The
Predecessor Company's tax assets, liabilities, expenses and benefits result from
the tax effect of its transactions determined as if the Predecessor Company
filed a separate income tax return. The Predecessor Company's income taxes were
paid by an affiliate of the Parent Company in which income tax expense was
credited through an intercompany account.

Income taxes are provided based on the provisions of Financial Accounting
Standards Board ("FASB") Statement of Financial Accounting Standards ("SFAS")
No. 109, "Accounting for Income Taxes", which requires recognition of deferred
tax assets and liabilities for the expected future tax consequences of events
that have been included in the financial statements and tax returns in different
years. Under this method, deferred income tax assets and liabilities are
determined based on the difference between the financial statement and tax bases
of assets and liabilities using enacted tax rates in effect for the year in
which the differences are expected to reverse.

F-12

UNIT-BASED COMPENSATION. The Partnership accounts for Unit-based compensation in
accordance with Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees", and related interpretations and makes the pro forma
information disclosures required under the provisions of SFAS No. 123,
"Accounting for Stock-Based Compensation". Upon issuance of Units under the
plan, unearned compensation equivalent to the market value of the restricted
Units is charged at the date of grant. The unearned compensation is amortized
ratably over the restricted periods. The unamortized unearned compensation value
is shown as a reduction of partners' capital in the accompanying consolidated
balance sheet.

NET INCOME (LOSS) PER UNIT. SFAS No. 128, "Earnings per Share" ("Statement No.
128"), issued in February 1997 and effective for financial statements for
periods ending after December 15, 1997, establishes and simplifies standards for
computing and presenting earnings per share. Statement No. 128 requires
restatement of all prior-period earnings per share data presented. Basic net
income (loss) per limited partner Unit is computed by dividing net income
(loss), after deducting the General Partner's 2% interest, by the weighted
average number of outstanding Common Units and Subordinated Units. Diluted net
income (loss) per limited partner Unit is computed by dividing net income
(loss), after deducting the General Partner's 2% interest, by the weighted
average number of outstanding Common Units and Subordinated Units and the
weighted average number of Restricted Units granted under the Restricted Unit
Award Plan which vest over time (See Note 8 Restricted Unit Plan).

NEW ACCOUNTING STANDARDS. In June 1997, FASB issued SFAS No. 130, "Reporting
Comprehensive Income" ("Statement No. 130"). Statement No. 130 requires entities
to report comprehensive income (the total of net income and all other non-owner
changes in partners' capital) either below net income in the statement of
operations, in a separate statement of comprehensive income or within the
statement of partners' capital. This standard is effective for the Partnership's
1999 fiscal year. Adoption of Statement No. 130 will not have an impact on the
financial statements.

In January 1998, FASB issued SFAS No. 132, "Employers' Disclosures about
Pensions and Other Postretirement Benefits" ("Statement No. 132"). Statement No.
132 standardizes the disclosure requirements for pensions and other
postretirement benefits, and requires additional information on changes in
benefit obligations and fair values of plan assets. It does not change the
measurement or recognition of pensions or other postretirement benefits. This
standard is effective for the Partnership's 1999 fiscal year. Management is
currently evaluating its impact on the Partnership's financial statements.

In June 1998, FASB issued SFAS No. 133, "Accounting for Derivative Instruments
and Hedging Activities" ("Statement No. 133"). Statement No. 133 requires
entities to record derivatives as assets or liabilities on the balance sheet and
to measure them at fair value. This standard is effective for the Partnership's
2000 fiscal year. Management is currently evaluating the impact this statement
may have on the Partnership's financial statements.

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

3. SUPPLEMENTAL UNAUDITED PRO FORMA FINANCIAL INFORMATION
- ---------------------------------------------------------

The following unaudited pro forma condensed consolidated statement of operations
for the year ended September 28, 1996 was derived from the historical statement
of operations of the Predecessor Company for the period October 1, 1995 through
March 4, 1996 and the consolidated statement of operations of the Partnership
from March 5, 1996 through September 28, 1996. The unaudited pro forma condensed
consolidated statement of operations was prepared to reflect the effects of the
Partnership formation as if it had been completed in its entirety as of October
1, 1995. However, the statement does not purport to present the results of
operations of the Partnership had the Partnership formation actually been
completed as of the beginning of the period presented. In addition, the
unaudited pro forma condensed consolidated financial statement of operations is
not necessarily indicative of the results of future operations of the
Partnership.

F-13

Pro Forma
September 28, 1996
------------------
Revenues
Propane .................................... $641,679
Other ...................................... 66,267
------
707,946
-------
Cost and Expenses
Cost of sales .............................. 377,692
Operating .................................. 203,426
Depreciation and amortization .............. 35,862
Selling, general and administrative expenses 29,004
Management fee ............................. 1,290
Restructuring charge ....................... 2,340
-----
649,614
-------

Income before interest expense and income taxes . 58,332
Interest expense, net ........................... 31,197
------
Income before provision for income taxes ........ 27,135
Provision for income taxes ...................... 250
---
Net income ...................................... $ 26,885
========

General Partner's interest in net income ........ $ 538
--------
Limited Partners' interest in net income ........ $ 26,347
========
Net income per Unit ............................. $ 0.92
========
Weighted average number of Units outstanding .... 28,726
======

Significant pro forma adjustments reflected in the above data include the
following:

a. An adjustment to interest expense to reflect the interest expense
associated with the Senior Notes and Bank Credit Facilities.

b. The elimination of the provision for income taxes, as income taxes will be
borne by the partners and not the Partnership, except for corporate income
taxes related to the Service Company.

c. The Partnership's management estimates that the incremental costs of
operating as a stand-alone entity would have approximated the management
fee paid to an affiliate of Hanson PLC. These incremental costs are
estimated to be $1,290 for the year ended September 28, 1996.

4. DISTRIBUTIONS OF AVAILABLE CASH
- ----------------------------------

The Partnership makes distributions to its partners with respect to each fiscal
quarter of the Partnership in an aggregate amount equal to its Available Cash
for such quarter. Available Cash generally means, with respect to any fiscal
quarter of the Partnership, all cash on hand at the end of such quarter less the
amount of cash reserves established by the Board of Supervisors in its
reasonable discretion for future cash requirements. These reserves are retained
for the proper conduct of the Partnership's business, the payment of debt
principal and interest and for distributions during the next four quarters.
Distributions by the Partnership in an amount equal to 100% of its Available
Cash will generally be made 98% to the Common and Subordinated Unitholders and
2% to the General Partner, subject to the payment of incentive distributions in
the event Available Cash exceeds the Minimum Quarterly Distribution ($.50) on
all Units. To the extent there is sufficient Available Cash, the holders of
Common Units have the right to receive the Minimum Quarterly Distribution, plus
any arrearages, prior to the distribution of Available Cash to holders of
Subordinated Units. Common Units will not accrue

F-14

arrearages for any quarter after the Subordination Period (as defined below) and
Subordinated Units will not accrue any arrearages with respect to distributions
for any quarter.

The Subordination Period will generally extend until the first day of any
quarter beginning after March 31, 2001 in respect of which (a) distributions of
Available Cash from Operating Surplus on the Common Units and the Subordinated
Units with respect to each of the three consecutive four-quarter periods
immediately preceding such date equaled or exceeded the sum of the Minimum
Quarterly Distribution on all of the outstanding Common Units and Subordinated
Units during such periods, (b) the Adjusted Operating Surplus generated during
each of the three consecutive four-quarter periods immediately preceding such
date equaled or exceeded the sum of the Minimum Quarterly Distribution on all of
the outstanding Common Units and Subordinated Units and related distribution on
the General Partner interest in the Partnership during such periods, and (c)
there are no outstanding Common Unit Arrearages. Upon expiration of the
Subordination Period, all remaining Subordinated Units will convert into Common
Units on a one-for-one basis and will thereafter participate pro rata with the
other Common Units in distributions of Available Cash.

In accordance with the Distribution Support Agreement among the Partnership, the
General Partner and Millennium, to enhance the Partnership's ability to
distribute the Minimum Quarterly Distribution on the Common Units, the General
Partner has agreed to contribute to the Partnership cash in exchange for APUs.
This obligation to purchase APUs remains in effect through March 31, 2001. The
General Partner's maximum contribution obligation is $43,600 or 436,000 APUs,
and is limited to the number of Common Units issued on the initial public
offering date plus Common Units issued in connection with the related
underwriters over-allotment option exercised in full (i.e., 21,562,500 Common
Units). Issuance of additional Common Units will not cause an increase in the
General Partner's maximum contribution obligation. A wholly-owned subsidiary of
Millennium has unconditionally guaranteed the General Partner's APU contribution
obligation. Millennium is a Securities and Exchange Commission registrant which
files periodic reports. Millennium's annual report on Form 10-K for the fiscal
year ended December 31, 1997 has been filed (Commission File Number 1-12091).

The APUs represent non-voting, limited partner Partnership interests with a
stated value per unit of $100. The APUs are not entitled to cash distributions
or allocations of any items of Partnership income, gain, loss, deduction or
credit. The APUs are subject to quarterly mandatory redemption, in whole or in
part, by the Partnership pursuant to the order of priority for distributions
from Available Cash. During the Subordination Period, the APUs may only be
redeemed after distributions of Available Cash have been made on the Minimum
Quarterly Distribution on outstanding Common Units (including any arrearages),
the related distribution on the General Partner interest (including any unpaid
amounts of prior quarters), and the current quarter's Minimum Quarterly
Distribution on outstanding Subordinated Units. After the Subordination Period,
the APUs may only be redeemed after distributions of Available Cash have been
made on the current quarter's Minimum Quarterly Distribution on outstanding
Common Units and the current quarter's related distribution on the General
Partner interest. Upon dissolution of the Partnership, to the extent possible,
the APUs will be redeemed only after the Common and Subordinated Unitholders and
the General Partner have received Unrecovered Capital, as defined by the
Partnership Agreement (See Note 14 Subsequent Event).

In November 1997, the General Partner contributed $12,000 to the Partnership in
exchange for 120,000 APUs. The proceeds were used to enhance the Partnership's
ability to distribute the Minimum Quarterly Distribution to Common Unitholders
with respect to the fourth fiscal quarter of 1997. The General Partner also
contributed $10,000 to the Partnership in exchange for 100,000 APUs for the year
ended September 27, 1997, which was also used to enhance the Partnership's
ability to distribute the Minimum Quarterly Distribution to Common Unitholders
with respect to the third fiscal quarter of 1997. No proceeds were utilized
under the Distribution Support Agreement with respect to fiscal year 1998.

As of September 26, 1998, $22,000 of cash proceeds remain available under the
Distribution Support Agreement.

F-15

5. RELATED PARTY TRANSACTIONS
- -----------------------------

The Predecessor Company was provided management, treasury, insurance, employee
benefits, tax and accounting services by an affiliate of the former Parent
Company. As consideration for the services provided by the affiliate, the
Predecessor Company was charged an annual management fee based on a percentage
of revenue. In the opinion of management, the management fee allocation
represented a reasonable estimate of the cost of services provided by the
affiliate on behalf of the Predecessor Company. However, the fee was not
necessarily indicative of the level of expenses which might have been incurred
by the Predecessor Company operating on a stand-alone basis. Management fees for
the period October 1, 1995 to March 4, 1996 were $1,290.

The Predecessor Company was provided computerized information services by
Quantum under an agreement. Charges related to these services, included in
selling, general and administrative expenses in the accompanying statement of
operations, were $148 for the period October 1, 1995 to March 4, 1996.

Pursuant to a Computer Services Agreement (the "Services Agreement") dated as of
the Closing Date between Millennium Petrochemicals and the Partnership,
Millennium Petrochemicals permitted the Partnership to utilize Millennium
Petrochemicals' mainframe computer for the generation of customer bills, reports
and information regarding the Partnership's retail sales. The Services Agreement
was terminated effective April 3, 1998 at which time the Partnership began
utilizing the services of an unrelated third party provider. For the years ended
September 26, 1998 and September 27, 1997 and the seven months ended September
28, 1996, the Partnership incurred expenses of $202, $384 and $218,
respectively, under the Services Agreement.

6. SELECTED BALANCE SHEET INFORMATION
- --------------------------------------

Inventories consist of:

September 26, September 27,
1998 1997
------------- -------------

Propane $ 25,248 $ 27,753
Appliances 4,714 4,162
----- -----
$ 29,962 $ 31,915
======== ========

The Partnership enters into contracts to buy propane for supply purposes. Such
contracts generally have terms of less than one year, with propane costs based
on market prices at the date of delivery.

Property, plant and equipment consist of:

September 26, September 27,
1998 1997
------------- -------------

Land and improvements $ 28,425 $ 29,345
Buildings and improvements 47,937 46,785
Transportation equipment 56,126 56,532
Storage facilities 24,386 24,008
Equipment, primarily tanks and cylinders 328,623 323,382
------- -------
485,497 480,052
Less: accumulated depreciation 141,669 115,705
------- -------
$343,828 $364,347
======== ========

F-16

7. LONG-TERM DEBT AND BANK CREDIT FACILITIES
- ---------------------------------------------

Long-term debt consists of:
September 26, September 27,
1998 1997
------------- -------------

Senior Notes, 7.54%, due June 30, 2011 $425,000 $425,000
Note payable, 8%, due in annual
installments through 2006 2,947 3,229
Other long-term liabilities 273 -
-------- --------
428,220 428,229
Less: current portion 323 259
-------- --------
$427,897 $427,970
======== ========

On the Closing Date, 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 will rank on an equal and
ratable basis with the Operating Partnership's obligations under the Bank Credit
Facilities discussed below. The Senior Notes will mature June 30, 2011, and
require semiannual interest payments which commenced June 30, 1996. The Note
Agreement requires that the principal be paid in equal annual payments of
$42,500 starting June 30, 2002.

The Bank Credit Facilities consist of a $75,000 working capital facility and a
$25,000 acquisition facility. The Operating Partnership's obligations, under the
Bank Credit Facilities are unsecured on an equal and ratable basis with the
Operating Partnership's obligations under the Senior Notes. Borrowings under the
Bank Credit Facilities bear interest at a rate based upon either LIBOR plus a
margin, First Union National Bank's prime rate or the Federal Funds rate plus
1/2 of 1%. An annual fee ranging from .20% to .25% based upon certain financial
tests is payable quarterly whether or not borrowings occur. As of September 26,
1998, such fee was .25%. The Bank Credit Facilities expire September 30, 2000.

No amounts were outstanding under the Bank Credit Facilities as of September 26,
1998 and September 27, 1997.

Based on the current rates offered to the Partnership for debt of the same
remaining maturities, the carrying value of the Partnership's long-term debt
approximates its fair market value.

The Senior Note Agreement and Bank Credit Facilities contain various restrictive
and affirmative covenants applicable to the Operating Partnership, including (a)
maintenance of certain financial tests, (b) restrictions on the incurrence of
additional indebtedness, and (c) restrictions on certain liens, investments,
guarantees, loans, advances, payments, mergers, consolidations, distributions,
sales of assets and other transactions.

For the years ended September 26, 1998 and September 27, 1997, interest expense
was $32,746 and $34,330, respectively.

8. RESTRICTED UNIT PLAN
- ------------------------

In 1996, the Partnership adopted the 1996 Restricted Unit Award Plan (the
"Restricted Unit Plan") which authorizes the issuance of Common Units with an
aggregate value of $15,000 (731,707 Common Units valued at the initial public
offering price of $20.50 per Unit) to executives, managers and Elected
Supervisors of the Partnership. Units issued under the Restricted Unit Plan are
subject to a bifurcated vesting procedure such that (a) twenty-five percent of
the issued Units will vest over time with one-third of such units vesting at the
end of each of the third, fifth and seventh anniversaries of the issuance date,
and (b) the remaining seventy-five percent of the Units will vest automatically
upon, and in the same proportions as, the conversion of Subordinated Units to
Common Units. Restricted Unit Plan participants are not eligible

F-17

to receive quarterly distributions or vote their respective Units until vested.
Restrictions generally limit the sale or transfer of the Units during the
restricted periods. The value of the Restricted Unit is established by the
market price of the Common Unit at the date of grant. Restricted Units are
subject to forfeiture in certain circumstances as defined in the Restricted Unit
Plan.

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

Units Value Per Unit
------- --------------

OUTSTANDING, MARCH 5, 1996 -- --

Awarded .............. 388,533 $ 20.50
--------- --------------

OUTSTANDING, SEPTEMBER 28, 1996 388,533 $ 20.50

Awarded .............. 364,634 $18.41 - $21.63
Forfeited ............ (119,019) $ 20.50
--------- ---------------

OUTSTANDING, SEPTEMBER 27, 1997 634,148 $18.41 - $21.63

Awarded .............. 97,556 $ 19.91
Forfeited ............ (109,893) $18.41 - $21.63
--------- ---------------

OUTSTANDING, SEPTEMBER 26, 1998 621,811 $18.41 - $21.63
========= ===============

For the years ended September 26, 1998 and September 27, 1997 and the seven
months ended September 28, 1996, the Partnership amortized $626, $401 and $340
respectively, of unearned compensation.

9. PENSION PLANS AND OTHER POSTRETIREMENT BENEFITS
- ---------------------------------------------------

DEFINED BENEFIT PLANS
- ---------------------

Effective January 1, 1998, the Partnership, in connection with its overall
restructuring efforts to implement long-term cost reduction strategies, modified
certain employee benefit plans.

In this regard, the Partnership amended its noncontributory defined benefit
pension plan to provide for a cash balance format as compared to a final average
format which was in effect prior to January 1, 1998. The Partnership also
terminated its postretirement benefit plan for all eligible employees retiring
after March 1, 1998. All active and eligible employees who were to receive
benefits under the postretirement plan subsequent to March 1, 1998, were
provided a settlement by increasing their accumulated benefits under the cash
balance pension plan.

The Partnership has accounted for the restructuring of the above-noted benefit
plans as a reduction in the postretirement plan benefit obligation (retaining
only the obligation related to employees retired on or before March 1, 1998) and
as a corresponding decrease in the net prepaid pension cost with a net
difference of $300, after costs associated with such restructuring, being
recognized as a gain in the accompanying statement of operations for the year
ended September 26, 1998.

The Partnership has a noncontributory defined benefit pension plan covering all
eligible employees of the Partnership who have met certain requirements as to
age and length of service. Contributions are made to a trust maintained by the
Partnership.

F-18

The trust's assets consist primarily of common stock, fixed income securities
and real estate. Contributions to the defined benefit plan are made by the
Partnership in accordance with the Employee Retirement Income Security Act of
1974 minimum funding standards plus additional amounts which may be determined
from time-to-time.

The following table sets forth the plan's actuarial assumptions:

September 26, September 27,
1998 1997
------------- -------------

Weighted-average discount rate 6.50% 7.25%
Average rate of compensation increase 3.50% 4.25%
Weighted-average expected long-term rate of
return on plan assets 9.0% 9.0%

The following table sets forth the plan's funded status and net prepaid pension
cost:

September 26, September 27,
1998 1997
------------- -------------
Actuarial present value of benefit obligation
Vested benefit obligation $149,102 $137,872
Non-vested benefit obligation 6,523 6,142
----- -----
Accumulated benefit obligation $155,625 $144,014
======== ========
Projected benefit obligation $178,785 $161,700
Plan assets at fair value 179,090 198,594
------- -------

Plan assets in excess of projected
benefit obligation 305 36,894
Unrecognized prior service cost (1,933) (1,067)
Unrecognized net loss 36,184 12,771
------ ------
Net prepaid pension cost $34,556 $48,598
======= =======

The net periodic pension expense/(income) includes the following:

Period Period
Year Ended Year Ended March 5,1996 October 1, 1995 to
September 26, September 27, to September 28, March 4, 1996
1998 1997 1996 (Predecessor)
------------- ------------- ---------------- ------------------

Service cost-benefits earned
during the period $ 5,038 $ 4,504 $ 2,616 $ 1,869
Interest cost on projected benefit
obligation 11,698 10,364 5,748 4,106

Actual return on plan assets (2,760) (41,491) (10,233) (7,310)
Net amortization and deferral (14,326) 25,540 310 221
Plan amendment 14,392 - - -
--------- --------- --------- ---------
Net periodic pension expense/(income) $ 14,042 $ (1,083) $ (1,559) $ (1,114)
========== ========= ========= =========

F-19

DEFINED CONTRIBUTION PENSION PLAN
- ---------------------------------

The Partnership has a defined contribution plan covering most employees.
Contributions and costs are a percent of the participating employees'
compensation. These amounts totaled $1,923, $1,828, $1,103 and $788 for the
years ended September 26, 1998 and September 27, 1997, the seven months ended
September 28, 1996 and the five months ended March 4, 1996, respectively.

POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
- -------------------------------------------

The Partnership provides postretirement health care and life insurance benefits
for certain retired employees. Partnership employees hired prior to July 1993
and that retired prior to March 1998 are eligible for such benefits if they
reached a specified retirement age while working for the Partnership.

The Partnership does not fund its postretirement benefit plan. The following
table presents the plan's accrued postretirement benefit cost included in the
accompanying balance sheets at September 26, 1998 and September 27, 1997:

September 26, September 27,
1998 1997
------------- -------------

Retirees $ 39,168 $ 40,315
Fully eligible active plan participants 824 7,639
Other active plan participants 1,455 18,797
--------- ---------

Accumulated postretirement benefit obligation 41,447 66,751
Unrecognized net loss (8,153) (11,550)
Unrecognized prior service cost 5,823 -
--------- ---------
Accrued postretirement benefit cost 39,117 55,201
Less: current portion 3,137 4,078
--------- ---------

Noncurrent liability $ 35,980 $ 51,123
========= =========

The net periodic postretirement benefit (income)/expense includes the following
components:

Period Period
Year Ended Year Ended March 5,1996 October 1, 1995 to
September 26, September 27, to September 28, March 4, 1996
1998 1997 1996 (Predecessor)
------------- ------------- ---------------- ------------------

Service cost $ 474 $ 811 $ 473 $ 338
Interest cost 2,645 3,074 918 656
Net amortization and deferral (352) - - -
Plan amendment (15,367) - - -
----------- ----------- ----------- -----------

Net periodic postretirement
benefit (income)/expense $ (12,600) $ 3,885 $ 1,391 $ 994
=========== =========== =========== ===========

The accumulated postretirement benefit obligation was based on a 9% and 10%
increase in the cost of covered health care benefits for 1998 and 1997,
respectively. This rate is assumed to decrease gradually to 4.5% in 2003 and to
remain at that level thereafter. Increasing the assumed health care cost trend
rates by 1.0% in each year would increase the Partnership's

F-20

accumulated postretirement benefit obligation as of September 26, 1998 by $1,220
and the aggregate of service and interest components of net periodic
postretirement benefit cost for the year ended September 26, 1998 by $80.

The weighted-average discount rate used in determining the accumulated
postretirement benefit obligation was 6.5% and 7.5% at September 26, 1998 and
September 27, 1997, respectively.

10. RESTRUCTURING CHARGE
- -------------------------

In fiscal 1997, the Partnership announced that it was evaluating certain
long-term cost reduction strategies and organizational changes. As a result of
this effort, the Partnership reorganized its product procurement and logistics
group, redesigned its fleet and maintenance, field and corporate office
organizations, and identified facilities to be closed and impaired assets whose
carrying amounts would not be recovered. In support of this effort in June 1997,
the Partnership recorded a restructuring charge of $6,911, which included the
following:

Severance, other employee benefits and facility closure costs $5,076
Impaired asset write-down 1,835
------
$6,911
======

In fiscal 1996, the Partnership reorganized its corporate office and terminated
certain employees. As a result of this action, the Partnership recorded a $2,340
restructuring charge, comprised of severance and employee benefit costs.

At September 26, 1998, no accruals related to the restructuring charges remain.
For the year, cash expenditures totaled $3,131.

11. PREDECESSOR EQUITY
- -----------------------

The predecessor equity account reflects the Predecessor Company's activity
between an affiliate of the former Parent Company for the period October 1, 1995
to March 4, 1996.

An analysis of the predecessor equity is as follows:

Period October 1,
1995 to March 4,
1996
-----------------

Beginning balance $558,235
Net income 33,649
--------
Cash transfers, net (26,236)
Amounts paid or accrued by parent on behalf of the
Predecessor Company, net 52,035
Cash activity with parent, net 25,799
--------
Ending balance $617,683
========

The predecessor equity account was non-interest bearing with no repayment terms
and included $449,749 in intercompany payables at March 4, 1996.

12. INCOME TAXES
- ----------------

As discussed in Note 2, the Partnership's earnings for federal and state income
tax purposes is included in the tax returns of the individual partners.
Accordingly, no recognition has been given to income taxes in the accompanying
financial

F-21

statements of the Partnership except for earnings of the Service Company which
are subject to federal and state income taxes. The information presented below
relates to the Predecessor Company.

The provision for income taxes consists of the following:

Period October 1,
1995 to March 4,
1996
----------------

Current:
Federal $20,516
State 5,809
-------
26,325
Deferred 1,822
-------

Total provision for income taxes $28,147
=======

A reconciliation of the statutory federal tax rate to the Predecessor Company's
effective tax rate follows:

Period October 1,
1995 to March 4,
1996
----------------
Statutory federal tax rate 35.0%
Difference in tax rate due to:
State income taxes, net of federal income tax benefit 6.0%
Goodwill 4.1%
Other, net 0.5%
-----
Effective tax rate 45.6%
=====

13. COMMITMENTS AND CONTINGENCIES
- ---------------------------------

COMMITMENTS
- -----------

The Partnership leases certain property, plant and equipment for various periods
under noncancelable leases. Rental expense under operating leases was $16,993,
$14,995, $7,844 and $5,603 for the years ended September 26, 1998 and September
27, 1997, the seven months ended September 28, 1996 and the five months ended
March 4, 1996, respectively.

Future minimum rental commitments under noncancelable operating lease agreements
as of September 26, 1998 are as follows:

Fiscal Year
-----------
1999 $11,659
2000 5,317
2001 4,112
2002 2,459
2003 and thereafter 2,152

CONTINGENCIES
- -------------

As discussed in Note 2, the Partnership is self-insured for general and product,
workers' compensation and automobile liabilities up to predetermined amounts
above which third party insurance applies. At September 26, 1998 and September
27,
F-22

1997, accrued insurance liabilities amounted to $21,404 and $23,748,
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 and its insurance policies.

The Partnership is also involved in various legal actions which have arisen in
the normal course of business, including those relating to commercial
transactions and product liability. It is the opinion of management, 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.

14. SUBSEQUENT EVENT
- ---------------------

On November 27, 1998, the Partnership Entities entered into a Recapitalization
Agreement with Millennium, the General Partner and Suburban Energy Services
Group LLC, an entity newly formed by the Partnership's management. Under the
terms of the Agreement, the Partnership will purchase Millennium's 24.4%
subordinated partner interest evidenced by 7,163,750 Subordinated Units and
retire such units. In addition, the requirement for the Partnership to repay
$22,000 in outstanding APUs under the Distribution Support Agreement will be
eliminated. The existing Distribution Support Agreement will be replaced with an
alternative support arrangement provided by the Partnership. The aggregate
redemption price to be paid to Millennium will be $69,000 which is expected to
be primarily funded from the proceeds of a new senior secured credit facility to
be entered into with a syndicate of banks.

Concurrent with the execution of the Recapitalization Agreement, Suburban Energy
Services Group LLC, ("Successor General Partner") entered into a Purchase
Agreement with Millennium and the General Partner whereby the General Partner
agreed to sell to the Successor General Partner for $6,000 the General Partner
interest in the Partnership Entities.

The consummation of the transactions is subject to certain conditions described
in the Recapitalization and Purchase Agreements, including the approval of a
majority of the Partnership's Common Unitholders and senior noteholders.

F-23

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

Page
----
Schedule II Valuation and Qualifying Accounts for the years ended
September 26, 1998 and September 27, 1997, the period
March 5, 1996 through September 28, 1996 and October 1,
1995 through March 4, 1996 S-2

S-1

Schedule II

SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES

VALUATION AND QUALIFYING ACCOUNTS
(in thousands)

Balance at Charged Deductions Balance
Beginning to Cost / Other (Amounts at End
of Period Expenses Additions Charged Off) of Period
--------- -------- --------- ------------ ---------

October 1, 1995 to March 4, 1996
- --------------------------------

Allowance for doubtful accounts .......... $ 3,162 $ 1,510 $ -- $ (1,510) $ 3,162
======= ======= ======= ======== =======

Accumulated amortization:
Goodwill ............................... $12,559 $ 2,714 $ -- $ -- $15,273
Other intangibles ...................... $ 70 $ 69 $ -- $ -- $ 139
------- ------- ------- -------- -------
Total .................. $12,629 $ 2,783 $ -- $ -- $15,412
======= ======= ======= ======== =======

March 5, 1996 to September 28, 1996
- -----------------------------------

Allowance for doubtful accounts .......... $ 3,162 $ 1,790 $ -- $ (1,640) $ 3,312
======= ======= ======= ======== =======

Accumulated amortization:
Goodwill ............................... $15,273 $ 3,716 $ -- $ -- $18,989
Other intangibles ...................... $ 139 $ 443 $ -- $ -- $ 582
------- ------- ------- -------- -------
Total .................. $15,412 $ 4,159 $ -- $ -- $19,571
======= ======= ======= ======== =======

Restructuring reserves.................... $ -- $ 2,340 $ -- $ -- $ 2,340
======= ======= ======= ======== =======

Year Ended September 27, 1997
- -----------------------------

Allowance for doubtful accounts .......... $ 3,312 $ 4,569 $ -- $ (5,199) $ 2,682
======= ======= ======= ======== =======

Accumulated amortization:
Goodwill ............................... $18,989 $ 6,644 $ -- $ -- $25,633
Other intangibles ...................... $ 582 $ 945 $ -- $ -- $ 1,527
------- ------- ------- -------- -------
Total .................. $19,571 $ 7,589 $ -- $ -- $27,160
======= ======= ======= ======== =======

Restructuring reserves.................... $ 2,340 $ 6,911 $ -- $ (4,685) $ 4,566
======= ======= ======= ======== =======

Year Ended September 26, 1998
- -----------------------------

Allowance for doubtful accounts .......... $ 2,682 $ 2,642 $ -- $ (2,942) $ 2,382
======= ======= ======= ======== =======

Accumulated amortization:
Goodwill ............................... $25,633 $ 6,134 $ -- $ -- $31,767
Other intangibles ...................... $ 1,527 $ 1,036 $ -- $ -- $ 2,563
------- ------- ------- -------- -------
Total .................. $27,160 $ 7,170 $ -- $ -- $34,330
======= ======= ======= ======== =======

Restructuring reserves.................... $ 4,566 $ -- $ -- $ (4,566) $ --
======= ======= ======= ======== =======

S-2

EXHIBIT 23.1
------------

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (No. 333-10197) of Suburban Propane Partners, L.P. of our
reports dated December 8, 1998 and October 21, 1996 appearing on pages F-2 and
F-3 of this Annual Report on Form 10-K. We also consent to the application of
such reports to the Financial Statement Schedule listed under Item 14(a) 2 of
this Form 10-K when such schedule is read in conjunction with the financial
statements referred to in our reports. The audits referred to in such reports
also included this schedule.

PricewaterhouseCoopers LLP
Florham Park, NJ
December 21, 1998