sph-def14a_20180515.htm

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the Securities

Exchange Act of 1934

 

Filed by the Registrant

 

 

    Filed by a Party other than the Registrant

Check the appropriate box:

     ☐   Preliminary Proxy Statement

     ☐   Confidential, for Use of the Commission Only (as permitted by rule 14a-6(e)(2))

     ☒   Definitive Proxy Statement

     ☐   Definitive Additional Materials

     ☐   Soliciting Material Pursuant to §240.14a-12

SUBURBAN PROPANE PARTNERS, L.P.

(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

     ☒No fee required.

     ☐Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

 

(1)

Title of each class of securities to which transaction applies:

 

 

(2)

Aggregate number of securities to which transaction applies:

 

 

(3)

Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):

 

 

(4)

Proposed maximum aggregate value of transaction:

 

 

(5)

Total fee paid:

 

     ☐      Fee paid previously with preliminary materials.

    

Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

 

(1)

Amount Previously Paid:

 

 

(2)

Form, Schedule or Registration Statement No.:

 

 

(3)

Filing Party:

 

 

(4)

Date Filed:

 

 

 

 


 

 

Suburban Propane®

 

One Suburban Plaza 240 Route 10 West P.O. Box 206 Whippany, NJ 07981-0206

Office 973-887-5300

http://www.suburbanpropane.com

Michael A. Stivala

President and Chief Executive Officer

March 20, 2018

Dear Fellow Suburban Propane Unitholder:

You are cordially invited to attend the Tri-Annual Meeting of the Limited Partners of Suburban Propane Partners, L.P. to be held on Tuesday, May 15, 2018, beginning at 9:00 a.m. at our executive offices at 240 Route 10 West, Whippany, New Jersey.

Whether or not you plan to attend in person, it is important that your units be represented at the meeting. You may vote on the matters that come before the meeting by completing the enclosed proxy card and returning it in the envelope provided.  Alternatively, you may also vote over the Internet or by telephone.

Attendance at the Tri-Annual Meeting will be open to holders of record of common units as of the close of business on March 19, 2018.  I look forward to greeting those of you who will be able to attend.

 

Sincerely yours,

Michael A. Stivala

President and Chief Executive Officer

 

 


 

SUBURBAN PROPANE PARTNERS, L.P.

NOTICE OF TRI-ANNUAL MEETING

May 15, 2018

The Tri-Annual Meeting of the Limited Partners of Suburban Propane Partners, L.P. (“Suburban”) will be held at 9:00 a.m. on Tuesday, May 15, 2018, at our executive offices at 240 Route 10 West, Whippany, New Jersey, for the following purposes:

1.

To elect eight Supervisors to three-year terms;

2.

To ratify our independent registered public accounting firm for our 2018 fiscal year;

3.

To approve Suburban’s 2018 Restricted Unit Plan, authorizing the issuance of up to 1,800,000 Common Units pursuant to awards granted under the Plan;

4.

To provide our Limited Partners with the opportunity to cast an advisory vote on the compensation of our named executive officers;

5.

To consider any other matters that may properly come before the meeting.

Only holders of record of common units as of the close of business on March 19, 2018 are entitled to notice of, and to vote at, the meeting.

 

By Order of the Board of Supervisors,

 

Paul Abel

Senior Vice President, Secretary & General Counsel

 

March 20, 2018

IMPORTANT

Your vote is important. Whether or not you expect to attend the meeting in person, we urge you to complete and return the enclosed proxy card at your earliest convenience in the postage-paid envelope provided, or vote using the Internet or by telephone.

 

 

 


 

TABLE OF CONTENTS

 

 

 

Page

QUESTIONS AND ANSWERS ABOUT THE TRI-ANNUAL MEETING

 

1

PROPOSAL 1 – ELECTION OF SUPERVISORS

 

5

NOMINEES FOR ELECTION AS SUPERVISORS

 

5

Vote Required and Recommendation of the Board of Supervisors

 

8

EXECUTIVE OFFICERS OF SUBURBAN

 

8

PARTNERSHIP GOVERNANCE

 

9

Board Committees

 

10

Supervisor Nominations and Criteria for Board Membership

 

12

Attendance at Meetings

 

13

Unitholder Communications with the Board of Supervisors

 

13

Section 16(a) Beneficial Ownership Reporting Compliance

 

13

Code of Ethics and Code of Business Conduct and Ethics

 

13

Corporate Governance Guidelines

 

14

NYSE Annual CEO Certification

 

14

REPORT OF THE AUDIT COMMITTEE

 

14

COMPENSATION DISCUSSION AND ANALYSIS

 

15

Compensation Governance

 

15

Executive Compensation Philosophy

 

18

Components of Compensation

 

20

REPORT OF THE COMPENSATION COMMITTEE

 

36

ADDITIONAL INFORMATION REGARDING EXECUTIVE COMPENSATION

 

37

SUPERVISORS’ COMPENSATION

 

46

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

 

47

PROPOSAL 2 – RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
FOR 2018 FISCAL YEAR

 

48

Principal Accountant Fees and Services

 

49

Vote Required and Recommendation of the Board of Supervisors

 

49

PROPOSAL 3 – APPROVAL OF THE 2018 RESTRICTED UNIT PLAN, AUTHORIZING THE
ISSUANCE OF UP TO 1,800,000 COMMON UNITS PURSUANT TO AWARDS GRANTED
UNDER THE PLAN

 

49

Reasons for the Proposal

 

49

Summary of the Material Terms of the 2018 Restricted Unit Plan

 

50

Securities Authorized For Issuance Under the 2009 Restricted Unit Plan

 

53

Vote Required and Recommendation of the Board of Supervisors

 

55

PROPOSAL 4 – ADVISORY VOTE ON EXECUTIVE COMPENSATION

 

54

Vote Required and Recommendation of the Board of Supervisors

 

55

APPENDICES

 

56

Appendix A

 

A-1

 

 

 


 

SUBURBAN PROPANE PARTNERS, L.P.

240 Route 10 West

Whippany, New Jersey 07981-0206

PROXY STATEMENT

QUESTIONS AND ANSWERS ABOUT THE TRI-ANNUAL MEETING

This Proxy Statement (which, together with a form of proxy, is being mailed or otherwise made available to Unitholders on or about April 2, 2018) is being furnished to holders of Common Units of Suburban Propane Partners, L.P., which we refer to as “Suburban,” “we,” or “our,” in connection with the solicitation of proxies by the Board of Supervisors of Suburban, which we refer to as the “Board,” for use at Suburban’s Tri-Annual Meeting of Limited Partners and any continuations, postponements or adjournments thereof, which we refer to as the “Meeting.”

Q:

When and where is the Meeting?

A: The Meeting will be held at 9:00 a.m. on Tuesday, May 15, 2018, at our executive offices at 240 Route 10 West, Whippany, New Jersey.

Q:

What is the purpose of the Meeting?

A: At the Meeting, holders of Common Units, whom we refer to as “Unitholders,” will be asked to consider and vote on the following four proposals:

 

PROPOSAL NO. 1 – To elect eight Supervisors to three-year terms, which we refer to as the “Election Proposal.”

 

PROPOSAL NO. 2 – To ratify our independent registered public accounting firm for our 2018 fiscal year, which we refer to as the “Accountant Ratification Proposal.”

 

PROPOSAL NO. 3 – To approve Suburban’s 2018 Restricted Unit Plan, which we refer to as the “Plan,” authorizing the issuance of up to 1,800,000 Common Units pursuant to awards granted under the Plan, which we refer to as the “Restricted Unit Plan Proposal.”

 

PROPOSAL NO. 4 – To provide our Unitholders with the opportunity to cast an advisory vote on the compensation of our named executive officers, which we refer to as the “Say-on-Pay Proposal.”

Q:

How does the Board recommend I vote on the proposals?

A: The Board unanimously recommends a vote FOR each of its nominees for Supervisor, approval of the Accountant Ratification Proposal, approval of the Restricted Unit Plan Proposal and approval of the Say-on-Pay Proposal.

Q:

How will voting on any other business be conducted?

A: The Board of Supervisors does not know of any business to be considered at the Meeting other than the proposals described in this Proxy Statement. However, if any other business is properly presented, your signed proxy card gives authority to the persons named in the proxy to vote on these matters at their discretion.

Q:

Who is entitled to vote?

A: Each holder of Common Units as of the close of business on March 19, 2018, which we refer to as the “Record Date,” is entitled to vote at the Meeting.

Q:

How many Common Units may be voted?

A: As of the Record Date, 61,393,674 Common Units were outstanding. Each Common Unit entitles its holder to one vote.

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Q:

What is a “quorum”?

A: There must be a quorum for the Meeting to be held. A quorum will be present if a majority of the outstanding Common Units as of the Record Date is represented in person, or by proxy, at the Meeting. If you submit a properly executed proxy card, even if you mark WITHHOLD or ABSTAIN, then you will be considered part of the quorum.

Q:

What vote is required to approve the proposals?

A:

 

PROPOSAL NO. 1 – Under the Third Amended and Restated Agreement of Limited Partnership (as amended) of Suburban, which we refer to as the “MLP Agreement,” the affirmative vote of holders of a plurality of the Common Units represented in person, or by proxy, at the Meeting is required to elect each Supervisor.

 

PROPOSAL NO. 2 – Under the MLP Agreement, the affirmative vote of a majority of Common Units entitled to vote at the Meeting and present, whether in person or by proxy, is required to approve the Accountant Ratification Proposal.

 

PROPOSAL NO. 3 – Under the rules of the New York Stock Exchange, which we refer to as the “NYSE,” the affirmative vote of a majority of the votes cast by the Unitholders, whether in person or by proxy, is required to approve the Restricted Unit Plan Proposal.

 

PROPOSAL NO. 4 – Under the MLP Agreement, the affirmative vote of a majority of Common Units entitled to vote at the Meeting and present, whether in person or by proxy, is required to approve the Say-on-Pay Proposal.

Q:

How are withholds, abstentions and broker non-votes counted for the proposals?

A: For the Election Proposal, Supervisors are elected by a plurality of FOR votes.  Accordingly, a proxy card marked as WITHHOLD and a broker non-vote will not count towards the plurality required to elect a Supervisor.  For the Restricted Unit Plan Proposal, a proxy card marked ABSTAIN has the same effect as a vote AGAINST such proposal, but a broker non-vote is not counted in the tally of votes FOR or AGAINST such proposal and does not affect the voting results for such proposal.  For each of the Accountant Ratification Proposal and Say-on-Pay Proposal, a proxy card marked ABSTAIN has the same effect as a vote AGAINST such proposal, but a broker non-vote is not counted as entitled to vote at the Meeting and does not affect the voting results for such proposal.

Q:

How do I vote?

A: You may vote by any one of three different methods:

 

In Writing.  You can vote by marking, signing and dating the enclosed proxy card and returning it in the enclosed envelope.

 

By Telephone and Internet.   You can vote your proxies by touchtone telephone from the USA, US territories or Canada, or through the Internet. Please follow the instructions on the enclosed proxy card.

 

In Person.  You can vote by attending the Meeting.

Common Units represented by properly executed proxies that are not revoked will be voted in accordance with the instructions shown on the proxy card. If you return your signed proxy card but do not give instructions as to how you wish to vote, your Common Units will be voted FOR each Supervisor nominee and each of the Accountant Ratification Proposal, the Restricted Unit Plan Proposal and the Say-on-Pay Proposal.

Our Board of Supervisors urges Unitholders to complete, date, sign and return the accompanying proxy card, or to submit a proxy by telephone or over the Internet by following the instructions included with your proxy card, or, in the event you hold your Common Units through a broker or other nominee, by following the separate voting instructions received from your broker or nominee. Your broker or nominee may provide proxy

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submission through the Internet or by telephone. Please contact your broker or nominee to determine how to vote.

Q:

What do I do if I want to change my vote?

A: You have the right to revoke your proxy at any time before the Meeting by:

 

Notifying our Company Secretary;

 

Voting in person; or

 

Returning a later-dated proxy card.

Attendance at the Meeting will not, in and of itself, revoke your proxy.

Q:

What does it mean if I receive more than one proxy card?

A: If your Common Units are registered differently and/or are in more than one account, you will receive more than one proxy card. Please mark, sign, date and return all of the proxy cards you receive to ensure that all of your Common Units are voted. We encourage you to have all accounts registered in the same name and address (whenever possible). You can accomplish this by contacting our transfer agent, Computershare, P.O. Box 505000, Louisville, KY 40233 (mail), Computershare, 462 South 4th Street, Suite 1600, Louisville, KY 40202 (overnight delivery), www.computershare.com/investor or telephone 781-575-2724. The hearing impaired may contact Computershare at TDD 800-952-9245.

Q:

What do I do if my Common Units are held in “street name”?

A: If your Common Units are held in the name of your broker, a bank or other nominee, that party will give you instructions about how to vote your Common Units.

Q:

Who will count the votes?

A: Representatives of Computershare Trust Company, N.A., our transfer agent and an independent tabulator, will count the votes and act as the inspector of election.

Q:

Who is bearing the cost of this proxy solicitation?

A: The Board of Supervisors is soliciting your proxy on behalf of Suburban.  We are bearing the cost of soliciting proxies for the Meeting. Georgeson LLC has been retained to assist in the distribution of proxy materials, and the solicitation of votes, and will be paid a customary fee for its services totaling approximately $11,000, plus reasonable out-of-pocket expenses. In addition to using the mail, our Supervisors, officers and employees may solicit proxies by telephone, personal interview or otherwise. They will not receive additional compensation for this activity, but may be reimbursed for their reasonable out-of-pocket expenses. We will reimburse brokerage houses and other custodians, nominees and fiduciaries for reasonable out-of-pocket expenses for forwarding proxy and solicitation materials to Unitholders.

Q:

Will the independent registered public accountants attend the Meeting?

A: Representatives of PricewaterhouseCoopers LLP, our independent registered public accounting firm, are expected to attend the Meeting, will have an opportunity to make a statement if they desire to do so and will be available to respond to appropriate questions.

Q:

Does Suburban’s proxy confer discretionary authority to vote on Unitholder proposals at the Meeting?

A: With respect to any Unitholder proposal submitted outside of Rule 14a-8 promulgated under the Securities Exchange Act of 1934, as amended, which we refer to as the “Exchange Act,” and for which we did not receive notice by a reasonable time before the date of this proxy statement, Suburban’s proxy confers discretionary authority on the

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persons being appointed as proxies to vote on such proposal.

Q:

When are the Unitholder proposals for the next meeting of Unitholders due?

A: We presently expect that our next Tri-Annual Meeting will be held in May 2021. If a Unitholder intends to present any proposals for inclusion in Suburban’s proxy statement in accordance with Rule 14a-8 for consideration at Suburban’s 2021 Tri-Annual Meeting, the proposal must be received at Suburban’s principal executive offices by December 10, 2020.

In accordance with the MLP Agreement, if a Unitholder intends, at the 2021 Tri-Annual Meeting, to nominate a person for election to the Board of Supervisors, the Unitholder must deliver notice thereof to the Board of Supervisors not earlier than the close of business on the 120th day before, and not later than the close of business on the 90th day before, the date of the 2021 Tri-Annual Meeting. A different notice deadline will apply for the nomination of persons for election to the Board of Supervisors if the date of the 2021 Tri-Annual Meeting is not publicly announced by Suburban more than 100 days prior to the date of such meeting. Such deadline, and the procedures that a Unitholder must follow to nominate a person for election to the Board of Supervisors, are further described below under the heading “Supervisor Nominations and Criteria for Board Meetings – Unitholder Nominations.”

Q:

Where and when will I be able to find the voting results?

A: In addition to announcing the results at the Meeting, we will post the results on our web site at www.suburbanpropane.com within two days after the Meeting. You will also be able to find the results in our Current Report on Form 8-K that we will file with the Securities and Exchange Commission within four business days following conclusion of the Meeting.

Q:

How can I obtain an additional copy of Suburban’s 2017 Annual Report on Form 10-K?

A: We will provide an additional copy of our 2017 Annual Report on Form 10-K, including the financial statements and financial statement schedule filed therewith, without charge, upon written request to Investor Relations, Suburban Propane Partners, L.P., 240 Route 10 West, P.O. Box 206, Whippany, New Jersey 07981-0206. We will furnish a requesting Unitholder with any exhibit not contained therein upon payment of a reasonable fee, which fee shall be limited to our reasonable expenses in furnishing such exhibit.

Q:

Who can I contact for further information?

A: If you need assistance in voting your Common Units, please call the firm assisting us in the solicitation of proxies for the Meeting:

1290 Avenue of the Americas, 9th Floor

New York, NY 10104

 

In the US, call Toll Free: 888-680-1525

Outside of the US, call: 781-575-2137

Q:

What can I do if I and another Unitholder with whom I live want to receive two copies of this proxy statement?

A: In order to reduce our printing and postage costs, Unitholders who share a single address will receive only one copy of this proxy statement at that address unless we have received instructions to the contrary from any Unitholder at that address. However, if a Unitholder residing at such an address wishes to receive a separate copy of this proxy statement or of future proxy statements (as applicable), he or she may contact Investor Relations, Suburban Propane Partners, L.P., P.O. Box 206, Whippany, New Jersey 07981-0206. We will deliver separate copies of this proxy statement promptly upon written or oral request. If you are a Unitholder receiving multiple copies of our proxy statement, you can request to receive only one copy by contacting us in the same manner. If you own your Common Units through a bank, broker or other Unitholder of record, you may request additional or fewer copies of this proxy statement by

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contacting the Unitholder of record.

Q:

Why did I receive a notice in the mail regarding Internet availability of proxy materials instead of a full set of proxy materials?

A: Pursuant to rules adopted by the Securities and Exchange Commission, we have elected to furnish this proxy statement and other proxy materials to certain Unitholders on the Internet rather than by mailing paper copies.  If you received an Important Notice Regarding the Availability of Proxy Materials, which we refer to as a “Notice,” in the mail, you will not receive a paper copy of these materials unless you expressly request to receive a paper copy.  All Unitholders have the ability to access this proxy statement and other proxy materials on the Internet.  Instructions on how to do so, or on how to request a paper copy, may be found in the Notice.  In addition, Unitholders may request to receive these materials in printed form by mail on an ongoing basis.  The Notice will also instruct you on how you may vote your Common Units, including how you may vote over the Internet.

IMPORTANT NOTICE REGARDING THE AVAILABILITY
OF PROXY MATERIALS FOR THE MEETING

This Proxy Statement and the accompanying Annual Report to Unitholders are available at www.envisionreports.com/sph (for registered Unitholders) or http://www.edocumentview.com/sph (for Unitholders whose Common Units are held in “street name”).

If you plan on attending the Meeting to vote in person, directions to our headquarters are printed on the accompanying proxy card.  For additional directions, please call 973-887-5300.

ELECTION OF SUPERVISORS

(Proposal No. 1 on the Proxy Card)

Pursuant to the MLP Agreement, Unitholders are entitled to elect all members of the Board of Supervisors, which we refer to as “Supervisors,” who are nominated at the Meeting.  John D. Collins, a Supervisor last elected at our 2015 Tri-Annual Meeting, died in May 2017.  Acting on the recommendation of its Nominating/Governance Committee, and pursuant to authority granted to the Board by the MLP Agreement, at its meeting on January 24, 2018 our Board decided to nominate the eight current Supervisors for re-election at the Meeting and eliminate the Board seat formerly held by Mr. Collins by reducing the Board size to eight members.

The eight nominees for Supervisors, all of whom are currently serving as Supervisors, are described below (as of March 19, 2018). If elected, all nominees are expected to serve until the 2021 Tri-Annual Meeting and until their successors are duly elected. Although the Board does not anticipate that any of the persons named below will be unable to stand for election, if for any reason a nominee becomes unavailable for election, the persons named in the form of proxy have advised that they will vote for such substitute nominee as the Board may propose. In accordance with our Corporate Governance Guidelines and Principles (described more fully below) and the rules of the New York Stock Exchange, we have affirmatively determined that our Board of Supervisors is currently composed of a majority of independent directors, and that the following nominees are independent: Harold R. Logan, Jr., John Hoyt Stookey, Jane Swift, Lawrence C. Caldwell, Matthew J. Chanin, Terence J. Connors and William M. Landuyt.

NOMINEES FOR ELECTION AS SUPERVISORS

 

Harold R. Logan, Jr.

Age 73

Mr. Logan has served as a Supervisor since March 1996 and was elected as Chairman of the Board of Supervisors in January 2007.  Mr. Logan is a Co-Founder and, from 2006 to the present has been serving as a Director, of Basic Materials and Services LLC, an investment company that has invested in companies that provide specialized infrastructure services and materials for the pipeline construction industry and the sand/silica industry.  From 2003 to September 2006, Mr. Logan was a Director and Chairman of the Finance Committee of the Board of Directors of TransMontaigne Inc., which provided logistical services (i.e. pipeline, terminaling and marketing) to producers and end-users of refined petroleum products.  From 1995 to 2002, Mr. Logan was Executive Vice President/Finance, Treasurer and a Director of TransMontaigne Inc.  From 1987 to 1995, Mr. Logan served as Senior Vice President – Finance and a Director of Associated Natural Gas Corporation, an independent gatherer and marketer of natural gas, natural gas liquids and crude oil.  Mr. Logan is also a Director of InfraREIT, Inc., Cimarex Energy Co. and Hart

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Energy Publishing LLP, and, through May 2017, was a Director of Graphic Packaging Holding Company.

Over the past forty years, Mr. Logan’s education, investment banking/venture capital experience and business/financial management experience have provided him with a comprehensive understanding of business and finance.  Most of Mr. Logan’s business experience has been in the energy industry, both in investment banking and as a senior financial officer and director of publicly-owned energy companies.  Mr. Logan’s expertise and experience have been relevant to his responsibilities of providing oversight and advice to the managements of public companies, and is of particular benefit in his role as our Chairman.  Since 1996, Mr. Logan has been a director of ten public companies and has served on audit, compensation and governance committees.

 

John Hoyt StookeyAge 88

Mr. Stookey has served as a Supervisor since March 1996.  He was Chairman of the Board of Supervisors from March 1996 through January 2007.  From 1986 until September 1993, he was the Chairman, President and Chief Executive Officer of Quantum Chemical Corporation, a predecessor of Suburban.  He served as non-executive Chairman and a Director of Quantum from its acquisition by Hanson plc, a global diversified industrial conglomerate, in September 1993 until October 1995, at which time he retired.  Since then, Mr. Stookey has served as a trustee of a number of non-profit organizations, including founding and serving as non-executive Chairman of Per Scholas Inc. (a non-profit organization dedicated to training inner city individuals to become computer and software technicians), The Berkshire Choral Festival and Landmark Volunteers and also currently serves on the Board of Directors of The Clark Foundation and The Robert Sterling Clark Foundation and as a Life Trustee of the Boston Symphony Orchestra.

 

Mr. Stookey’s qualifications to sit on our Board include his extensive experience as Chief Executive Officer of four corporations (including a predecessor of Suburban) and his many years of service as a director of publicly-owned corporations and non-profit organizations.

 

Jane Swift

Age 53

Ms. Swift has served as a Supervisor since April 2007. In January 2018, Ms. Swift was appointed Executive Chair of Ultimate Medical Academy, a not-for-profit healthcare educational institution with a national presence. From August 2011 through April 2017, Ms. Swift served as the CEO of Middlebury Interactive Languages, LLC, a marketer of world language products.  From 2010 through July 2011, she served as Senior Vice President – ConnectEDU Inc., a private education technology company.  In 2007, Ms. Swift founded WNP Consulting, LLC, a provider of expert advice and guidance to early stage education companies.  From 2003 to 2006 she was a General Partner at Arcadia Partners, a venture capital firm focused on the education industry. Ms. Swift also provides consulting services to various clients.  She has previously served on the boards of K12, Inc., Animated Speech Company, The Young Writers Project and Sally Ride Science Inc. Ms. Swift currently serves on several not-for-profit boards and advisory boards, including School of Leadership Afghanistan, Vote, Run, Lead, Teachers of Tomorrow and eDynamic Learning. Prior to joining Arcadia, Ms. Swift served for fifteen years in Massachusetts state government, becoming Massachusetts’ first woman governor in 2001.

Ms. Swift’s qualifications to sit on our Board include her strong skills in public policy and government relations and her extensive knowledge of regulatory matters arising from her fifteen years in state government.

 

Lawrence C. Caldwell

Age 71

Mr. Caldwell has served as a Supervisor since November 2012. He was a Co-Founder of New Canaan Investments, Inc., which we refer to as “NCI”, a private equity investment firm, where he was one of three senior officers of the firm from 1988 to 2005. NCI was an active “fix and build” investor in packaging, chemicals, and automotive components companies. Mr. Caldwell held a number of board directorships and senior management positions in these companies until he retired in 2005. The largest of these companies was Kerr Group, Inc., a plastic closure and bottle company where Mr. Caldwell served as Director for eight years and Chief Financial Officer for six years. From 1985 to 1988, Mr. Caldwell was head of acquisitions for Moore McCormack Resources, Inc., an oil and gas exploration, shipping, and construction materials company. Mr. Caldwell is currently a director of Magnuson Products, LLC, a private company which manufactures specialty engine components for automotive original equipment manufacturers and aftermarket. Mr. Caldwell also currently serves on the Board of Trustees and as Chairman of the Investment and Finance Committee of Historic Deerfield, and on the Board of Directors and as Chairman of the Finance Committee of

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the Leventhal Map Center; both of which non-profit institutions focus on enriching educational programs for K-12 children locally and nationwide.

Mr. Caldwell's qualifications to sit on our Board include over forty years of successful investing in and managing of a broad range of public and private businesses in a number of different industries. This experience has encompassed both turnaround situations, and the building of companies through internal growth and acquisitions.

 

Matthew J. Chanin

Age 63

Mr. Chanin has served as a Supervisor since November 2012. He was Senior Managing Director of Prudential Investment Management, a subsidiary of Prudential Financial, Inc., from 1996 until his retirement in January 2012, after which he continued to provide consulting services to Prudential until December 2016. He headed Prudential’s private fixed income business, chaired an internal committee responsible for strategic investing and was a principal in Prudential Capital Partners, the firm’s mezzanine investment business.  He currently provides consulting services to two clients, and, until October 2017, served as a Director of two private companies that were in Prudential Capital Partners funds’ portfolios.

Mr. Chanin’s qualifications to sit on our Board include 35 years of investment experience with a focus on highly structured private placements in companies in a broad range of industries, with a particular focus on energy companies.  He has previously served on the audit committee of a public company board and the compensation committee for a private company board.  Mr. Chanin has earned an MBA and is a Chartered Financial Analyst.

 

Terence J. Connors

Age 63

Mr. Connors has served as a Supervisor since January 1, 2017.  Mr. Connors retired in September 2015 from KPMG LLP after nearly forty years in public accounting. Prior to joining KPMG in 2002 he was a partner with another large international accounting firm. During his career, he served as a senior audit and global lead partner for numerous public companies, including Fortune 500 companies. At KPMG he was a Professional Practice Partner, SEC Reviewing Partner and was elected to serve as a member of KPMG’s board of directors (2011-2015), where he chaired the Audit, Finance & Operations Committee. Mr. Connors currently serves as a director and audit committee chairman of FS Credit Real Estate Income Trust, Inc., a commercial mortgage nontraded real estate investment trust, and of Cardone Industries, Inc., one of the largest privately-held automotive parts remanufacturers in the world. Mr. Connors also serves as a trustee of St. Joseph’s Preparatory School in Philadelphia.

Mr. Connors’ qualifications to sit on our Board, and serve as Chairman of its Audit Committee, include his extensive experience as a lead audit partner for numerous public companies across a variety of industries, which enables him to provide helpful insights to the Board in connection with its oversight of financial, accounting and internal control matters.

 

William M. Landuyt

Age 62

Mr. Landuyt has served as a Supervisor since January 1, 2017.  Since 2003, Mr. Landuyt has served as a Managing Director at Charterhouse Equity Partners, LLC, a private equity firm with a focus on build-ups, management buyouts, and growth capital investments primarily in the business services and healthcare services sectors, and has served on the Boards of Directors of a number of portfolio companies of that firm.  From 1996 to 2003, Mr. Landuyt served as Chairman of the Board, President and Chief Executive Officer of Millennium Chemicals, Inc., which we refer to as “Millennium”, and from 1983 to 1996 he served in several senior executive positions with Hanson Industries, the US subsidiary of Hanson plc, which we refer to as “Hanson,” including Vice President and Chief Financial Officer and ultimately Director, President and Chief Executive Officer.  Hanson and Millennium were both previous owners of Suburban or its predecessor through 1996 and 1999, respectively.  He joined Hanson after spending six years as a Certified Public Accountant and auditor at Price Waterhouse & Co., where he rose to the position of Senior Manager.  Mr. Landuyt has previously served on the Boards of Directors (including their Audit and Compensation Committees) of public companies, including Bethlehem Steel Corp., MxEnergy Holdings, Inc., a leading retail marketer of natural gas and electricity contracts, and Top Image Systems, Inc.  Mr. Landuyt is also the Co-Founder and Executive Director of Celtic Charms, Inc., a non-profit therapeutic horsemanship center serving people with physical and cognitive disabilities and disorders.

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Mr. Landuyt’s qualifications to sit on our Board include forty years of financial and executive management experience for both public and private companies, including extensive experience with mergers and acquisitions and corporate governance.  Additionally, his specific responsibility for supervision of Suburban’s predecessors, as well as his subsequent board-level involvement in the distribution, petrochemical and retail energy sectors through Charterhouse’s investments in those sectors, gives Mr. Landuyt extensive expertise in areas directly relevant to our business.

 

Michael A. Stivala

Age 48

Mr. Stivala has served as our President since April 2014 and as our Chief Executive Officer since September 2014.  Mr. Stivala has served as a Supervisor since November 2014.  From November 2009 until March 2014 he was our Chief Financial Officer, and, before that, our Chief Financial Officer and Chief Accounting Officer since October 2007.  Prior to that he was our Controller and Chief Accounting Officer since May 2005 and Controller since December 2001.  Before joining Suburban, he held several positions with PricewaterhouseCoopers LLP, an international accounting firm, most recently as Senior Manager in the Assurance practice.

Mr. Stivala’s qualifications to sit on our Board include his sixteen years of experience in the propane industry, including as our current President and Chief Executive Officer and, before that, as our Chief Financial Officer for almost seven years, which day to day leadership roles have provided him with intimate knowledge of our operations.

Vote Required and Recommendation of the Board of Supervisors

Under the MLP Agreement, the affirmative vote of holders of a plurality of the Common Units represented in person or by proxy at the Meeting is required to elect each Supervisor. The Board of Supervisors unanimously recommends a vote FOR the election of each of the above nominees.

EXECUTIVE OFFICERS OF SUBURBAN

The following table sets forth certain information with respect to our executive officers as of March 19, 2018. Officers are appointed by the Board of Supervisors for one-year terms.

 

Name

 

Age

 

Position With Suburban

Michael A. Stivala

 

48

 

President and Chief Executive Officer;

 

 

 

 

          Member of the Board of Supervisors

Michael A. Kuglin

 

48

 

Chief Financial Officer & Chief Accounting Officer

Steven C. Boyd

 

53

 

Chief Operating Officer

Paul Abel

 

64

 

Senior Vice President, General Counsel and Secretary

Douglas T. Brinkworth

 

56

 

Senior Vice President – Product Supply, Purchasing & Logistics

Neil E. Scanlon

 

52

 

Senior Vice President – Information Services

Daniel S. Bloomstein

 

45

 

Vice President and Controller

A. Davin D’Ambrosio

 

54

 

Vice President and Treasurer

Keith P. Onderdonk

 

53

 

Vice President – Operational Support

Michael A. Schueler

 

51

 

Vice President – Product Supply

Sandra N. Zwickel

 

51

 

Vice President – Human Resources

 

For Mr. Stivala’s biographical information, see “Nominees for Election as Supervisors” above.

Mr. Kuglin has served as our Chief Financial Officer & Chief Accounting Officer since September 2014 and was our Vice President – Finance and Chief Accounting Officer from April 2014 through September 2014.  Prior to that he served as our Vice President and Chief Accounting Officer since November 2011, our Controller and Chief Accounting Officer since November 2009 and our Controller since October 2007.  For the eight years prior to joining Suburban he held several financial and managerial positions with Alcatel-Lucent, a global communications solutions provider.  Prior to Alcatel-Lucent, Mr. Kuglin held several positions with the international accounting firm PricewaterhouseCoopers LLP, most recently as Manager in the Assurance practice.  Mr. Kuglin is a Certified Public Accountant and a member of the American Institute of Certified Public Accountants.

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Mr. Boyd has served as our Chief Operating Officer since October 2017 and before that was our Senior Vice President Operations (September 2015 – October 2017) and our Senior Vice President – Field Operations since April 2014. Previously he was our Vice President – Field Operations (formerly Vice President – Operations) since October 2008, our Southeast and Western Area Vice President since March 2007, Managing Director – Area Operations since November 2003 and Regional Manager – Northern California since May 1997.  Mr. Boyd held various managerial positions with our predecessors from 1986 through 1996.

Mr. Abel has served as our General Counsel and Secretary since June 2006, was additionally made a Vice President in October 2007 and a Senior Vice President in April 2014.  Prior to joining Suburban, Mr. Abel served as senior in-house legal counsel (including as a General Counsel) for several technology companies.

Mr. Brinkworth has served as our Senior Vice President – Product Supply, Purchasing & Logistics since April 2014 and was previously our Vice President – Product Supply (formerly Vice President – Supply) since May 2005. Mr. Brinkworth joined Suburban in April 1997 after a nine year career with Goldman Sachs and, since joining Suburban, has served in various positions in the product supply area.

Mr. Scanlon became our Senior Vice President – Information Services in April 2014, after serving as our Vice President – Information Services since November 2008.  Prior to that he served as our Assistant Vice President – Information Services since November 2007, Managing Director – Information Services from November 2002 to November 2007 and Director – Information Services from April 1997 until November 2002.  Prior to joining Suburban, Mr. Scanlon spent several years with JP Morgan & Co., most recently as Vice President – Corporate Systems and earlier held several positions with Andersen Consulting, an international systems consulting firm, most recently as Manager.

Mr. Bloomstein joined Suburban as our Controller in April 2014 and was promoted to Vice President and Controller in October 2017.  For the ten years prior to joining Suburban, he held several executive financial and accounting positions with The Access Group, a network of professional services companies, and with Dow Jones & Company, Inc., a global news and financial information company.  Mr. Bloomstein started his career with the international accounting firm PricewaterhouseCoopers LLP, working his way to the level of Manager in the Assurance practice.  Mr. Bloomstein is a Certified Public Accountant and a member of the American Institute of Certified Public Accountants.

Mr. D’Ambrosio has served as our Treasurer since November 2002 and was additionally made a Vice President in October 2007.  He served as our Assistant Treasurer from October 2000 to November 2002 and as Director of Treasury Services from January 1998 to October 2000.  Mr. D’Ambrosio joined Suburban in May 1996 after ten years in the commercial banking industry.

Mr. Onderdonk has served as our Vice President – Operational Support since November 2015 and before that was our Assistant Vice President – Financial Planning and Analysis since November 2013.  Prior to that, he served as our Managing Director, Financial Planning and Analysis from November 2010 to November 2013.  Mr. Onderdonk joined Suburban in September 2001 after fourteen years in the consumer products industry.

Mr. Schueler has served as our Vice President – Product Supply since October 2017 and before that was our Managing Director – Product Supply since November 2013.  Mr. Schueler joined Suburban as Director – Product Resources in July 2005 following a nine-year career at Public Service Enterprise Group and prior to that, eight years at Kraft Foods.

Ms. Zwickel has served as our Vice President – Human Resources since November 2013.  Prior to that, she was our Assistant Vice President – Human Resources since April 2011 and earlier held several roles in our Legal Department (including Assistant General Counsel from October 2009 to April 2011 and Counsel from October 2002 to October 2009), where she was responsible for, among other things, providing legal counsel on employment issues.  Ms. Zwickel joined Suburban in June 1999 after eight years in the private practice of law.

PARTNERSHIP GOVERNANCE

The MLP Agreement provides that all management powers over our business and affairs are exclusively vested in our Board of Supervisors and, subject to the direction of the Board of Supervisors, our officers.  No Unitholder has any management power over our business and affairs or actual or apparent authority to enter into contracts on behalf of or otherwise to bind us.

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Board Committees

The Board has three standing committees: an Audit Committee, a Compensation Committee and a Nominating/Governance Committee.  

Audit Committee

Four Supervisors, who are not officers or employees of Suburban or its subsidiaries, currently serve on the Audit Committee with authority to review, approve or ratify, at the request of the Board, specific matters as to which the Board believes there may be a conflict of interest, or which may be required to be disclosed pursuant to Item 404(a) of Regulation S-K adopted by the Securities and Exchange Commission, in order to determine if the resolution or course of action in respect of such conflict proposed by the Board is fair and reasonable to us. Under the MLP Agreement, any matter that receives the “Special Approval” of the Audit Committee (i.e., approval by a majority of the members of the Audit Committee) is conclusively deemed to be fair and reasonable to us, is deemed approved by all of our partners and shall not constitute a breach of the MLP Agreement or any duty stated or implied by law or equity as long as the material facts known to the party having the potential conflict of interest regarding that matter were disclosed to the Audit Committee at the time it gave Special Approval. The Audit Committee also assists the Board in fulfilling its oversight responsibilities relating to (a) integrity of Suburban’s financial statements and internal control over financial reporting; (b) Suburban’s compliance with applicable laws, regulations and its code of conduct; (c) independence and qualifications of the independent registered public accounting firm; (d) performance of the internal audit function and the independent registered public accounting firm; and (e) accounting complaints.

Our Board has adopted a written charter for the Audit Committee, which is reviewed periodically to ensure that it meets all applicable legal and NYSE listing requirements. A copy of our Audit Committee Charter is available without charge from our website at www.suburbanpropane.com or upon written request directed to: Investor Relations, Suburban Propane Partners, L.P., P.O. Box 206, Whippany, New Jersey 07981-0206.

The Board has determined that all four current members of the Audit Committee, Lawrence C. Caldwell, Terence J. Connors (its Chairman), William M. Landuyt and Jane Swift, are independent and (with the exception of Ms. Swift) are audit committee financial experts within the meaning of the NYSE corporate governance listing standards and in accordance with Rule 10A-3 of the Exchange Act, Item 407 of Regulation S-K and Suburban’s criteria for Supervisor independence set forth under “Partnership Governance – Supervisor Independence” below as of the date of this Proxy Statement.

The Audit Committee met nine times during fiscal 2017.

Compensation Committee

The Compensation Committee reviews the performance of, and sets the compensation for, all executives. It also approves the design of executive compensation programs. In addition, the Compensation Committee participates in executive succession planning and management development. The committee met five times during fiscal 2017. Its current members are Matthew J. Chanin (its Chairman), Harold R. Logan, Jr. and John Hoyt Stookey, all of whom are independent in accordance with our Corporate Governance Guidelines and Principles and the rules of the NYSE.  

Our Board has adopted a Compensation Committee Charter. A copy of our Compensation Committee Charter is available without charge from our website at www.suburbanpropane.com or upon written request directed to: Investor Relations, Suburban Propane Partners, L.P., P.O. Box 206, Whippany, New Jersey 07981-0206.

Nominating/Governance Committee

The Nominating/Governance Committee participates in Board succession planning and development and identifies individuals qualified to become Board members, recommends to the Board the persons to be nominated for election as Supervisors at any Tri-Annual Meeting of the Unitholders and the persons (if any) to be elected by the Board to fill any vacancies on the Board, develops and recommends to the Board changes to Suburban’s Corporate Governance Guidelines and Principles when appropriate, and oversees the evaluation of the Board.  The committee met two times during fiscal 2017. Its members are Lawrence C. Caldwell, Matthew J. Chanin, Terence J. Connors, William M. Landuyt, Harold R.

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Logan, Jr. (its Chairman), John Hoyt Stookey and Jane Swift, all of whom are independent in accordance with our Corporate Governance Guidelines and Principles and the rules of the NYSE.  

Our Board has adopted a Nominating/Governance Committee Charter.  A copy of our Nominating/Governance Committee Charter is available without charge from our website at www.suburbanpropane.com or upon written request directed to: Investor Relations, Suburban Propane Partners, L.P., P.O. Box 206, Whippany, New Jersey 07981-0206.

Supervisor Nominations and Criteria for Board Membership

To fulfill its responsibility to recruit nominees for election as Supervisors, the Nominating/Governance Committee reviews the composition of the Board to determine the qualifications and areas of expertise needed to further enhance the composition of the Board and works with management in attracting candidates with those qualifications. Our Corporate Governance Guidelines and Principles set forth the following minimum qualifications for our Supervisors, who are nominated in accordance with the procedures set forth in the MLP Agreement:

1.   Integrity. Individuals must be of personal and professional integrity and ethical character, who recognize and value these qualities in others.

2.    Absence of Conflicts of Interest. In addition to meeting the independence standards set forth elsewhere in the Guidelines, a Supervisor should not have any interests that would materially impair his or her ability to (i) exercise independent judgment or (ii) otherwise discharge the fiduciary duties owed as a supervisor to Suburban and its unitholders.

3.    Fair and Equal Representation. A Supervisor must be able to represent fairly and equally the long-term interests of all of Suburban's unitholders without favoring or advancing any particular unitholder or other constituency of Suburban.

4.    Achievement. A Supervisor must have demonstrated achievement in one or more fields of business, professional, or governmental endeavor.

5.    Oversight. A Supervisor is expected to have sound judgment, borne of management or policy-making experience (which may be as an advisor or consultant), that demonstrates an ability to function effectively in an oversight role (including an inquisitive and rigorous manner of monitoring).

6.    Experience and Business Understanding. A Supervisor should have relevant or relatable expertise and experience, and be able to offer advice and guidance to management based on that expertise and experience. In addition, he/she must have a general appreciation regarding key issues facing public companies of a size and operational scope similar to Suburban, including:

 

corporate governance concerns;

 

regulatory obligations of a public issuer;

 

strategic business planning; and

 

basic concepts of corporate finance.

7.    Available Time. A Supervisor must have sufficient time available to devote to the affairs of the Board, be fully prepared to devote such time, and be physically and mentally capable of devoting such time. It is expected that each candidate will be available and able to attend substantially all meetings of the Board and any committees on which he/she will serve, as well as Suburban’s tri-annual and special meetings of unitholders, after taking into consideration his/her other business and professional commitments, including service on the boards of other companies. The Board should include at least some supervisors who are committed to service on the Board for an extended period of time.

8.    Diversity. The Board seeks an appropriate diversity of personal and professional background, experience,

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expertise, and perspective among Supervisors. Board Supervisors should be able to cooperate with other Board members and contribute to the collegiality of the Board.

In addition, the Nominating/Governance Committee considers the number of other boards of public companies on which a candidate serves.

Unitholder Nominations

Unitholders may nominate candidates for Supervisors in accordance with the following procedures set forth in the MLP Agreement. Any Unitholder (or group of Unitholders) that beneficially owns 10% or more of the outstanding Common Units is entitled to nominate one or more individuals to stand for election as Supervisors at a Tri-Annual Meeting by providing written notice thereof to the Board of Supervisors not more than 120 days and not less than 90 days prior to the date of such Tri-Annual Meeting; provided, however, that in the event that the date of the Tri-Annual Meeting was not publicly announced by Suburban by mail, press release or otherwise more than 100 days prior to the date of such meeting, such notice, to be timely, must be delivered to the Board of Supervisors not later than the close of business on the 10th day following the date on which the date of the Tri-Annual Meeting was announced. The notice must set forth (i) the name and address of the Unitholder(s) making the nomination or nominations, (ii) the number of Common Units beneficially owned by such Unitholder(s), (iii) such information regarding the nominee(s) proposed by the Unitholder(s) as would be required to be included in a proxy statement relating to the solicitation of proxies for the election of Supervisors filed pursuant to the proxy rules of the Securities and Exchange Commission had the nominee(s) been nominated or intended to be nominated to the Board of Supervisors, (iv) the written consent of each nominee to serve as a member of the Board of Supervisors if so elected and (v) a certification that such nominee(s) qualify as Supervisor(s). Unitholder nominees whose nominations comply with these procedures and who meet the minimum criteria for Board membership, as outlined above, will be evaluated by the Nominating/Governance Committee in the same manner as the Committee’s nominees.

Supervisor Independence

The Corporate Governance Guidelines and Principles adopted by the Board of Supervisors (and available on our website at www.suburbanpropane.com) set forth that a Supervisor is deemed to be lacking a material relationship to Suburban and is therefore independent if the following criteria are satisfied:

1.

Within the past three years, the Supervisor:

 

a.

has not been employed by Suburban and has not received more than $100,000 per year in direct compensation from Suburban, other than Supervisor and committee fees and pension or other forms of deferred compensation for prior service;

 

b.

has not provided significant advisory or consultancy services to Suburban, and has not been affiliated with a company or a firm that has provided such services to Suburban in return for aggregate payments during any of the last three fiscal years of Suburban in excess of the greater of 2% of the other company’s consolidated gross revenues or $1 million;

 

c.

has not been a significant customer or supplier of Suburban and has not been affiliated with a company or firm that has been a customer or supplier of Suburban and has neither made to Suburban nor received from Suburban payments during any of the last three fiscal years of Suburban in excess of the greater of 2% of the other company’s consolidated gross revenues or $1 million;

 

d.

has not been employed by or affiliated with an internal or external auditor that within the past three years provided services to Suburban; and

 

e.

has not been employed by another company where any of Suburban’s current executives serve on that company’s compensation committee;

2.

The Supervisor is not a spouse, parent, sibling, child, mother- or father-in-law, son- or daughter-in- law or brother- or sister-in-law of a person having a relationship described in 1. above nor shares a residence with such person;

3.

The Supervisor is not affiliated with a tax-exempt entity that within the past 12 months received significant

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contributions from Suburban (contributions of the greater of 2% of the entity’s consolidated gross revenues or $1 million are considered significant); and

4.

The Supervisor does not have any other relationships with Suburban or with members of senior management of Suburban that the Board determines to be material.

Attendance at Meetings

Unitholder Meetings

It is the policy of the Board of Supervisors that all Supervisors should attend Suburban’s Unitholder meetings. All seven of the then Supervisors attended the Tri-Annual Meeting of Unitholders on May 13, 2015.

Board and Committee Meetings

The Board held 6 meetings in fiscal 2017. Each Supervisor attended at least 75% of the total number of meetings of the Board and of the Committees of the Board on which such Supervisor served in fiscal 2017. Mr. Logan, Chairman of the Board, presides at the regularly scheduled executive sessions of the non- management Supervisors, all of whom are independent, held as part of the meetings of the Board.

Unitholder Communications with the Board of Supervisors

Unitholders who wish to communicate directly with the Board as a group may do so by writing to the Suburban Board of Supervisors, c/o Company Secretary, Suburban Propane Partners, L.P., P.O. Box 206, Whippany, New Jersey 07981-0206. Unitholders may also communicate directly with individual Supervisors by addressing their correspondence accordingly.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Act, as amended, requires our Supervisors, executive officers and holders of 10 percent or more of our Common Units to file initial reports of ownership and reports of changes in ownership of our Common Units with the Securities and Exchange Commission. Supervisors, executive officers and 10 percent Unitholders are required to furnish Suburban with copies of all Section 16(a) forms that they file. Based on a review of these filings, we believe that all such filings were timely made during fiscal 2017.

Code of Ethics and Code of Business Conduct and Ethics

We have adopted a Code of Ethics that applies to our principal executive officer, principal financial officer, controller, or persons performing similar functions, and a Code of Business Conduct and Ethics that applies to all of our employees, officers and Supervisors. Copies of our Code of Ethics and our Code of Business Conduct and Ethics are available without charge from our website at www.suburbanpropane.com or upon written request directed to: Investor Relations, Suburban Propane Partners, L.P., P.O. Box 206, Whippany, New Jersey 07981-0206. Any amendments to, or waivers from, provisions of our Code of Ethics or our Code of Business Conduct and Ethics that apply to our principal executive officer, principal financial officer and principal accounting officer will be posted on our website.

Corporate Governance Guidelines

We have adopted Corporate Governance Guidelines and Principles in accordance with the NYSE corporate governance listing standards in effect as of the date of this Proxy Statement. Copies of our Corporate Governance Guidelines and Principles are available without charge from our website at www.suburbanpropane.com or upon written request directed to: Investor Relations, Suburban Propane Partners, L.P., P.O. Box 206, Whippany, New Jersey 07981-0206.

NYSE Annual CEO Certification

The NYSE requires the Chief Executive Officer of each listed company to submit a certification indicating that the

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company is not in violation of the Corporate Governance listing standards of the NYSE on an annual basis. Our Chief Executive Officer submits his Annual CEO Certification to the NYSE each December.  In December 2017, Mr. Stivala submitted his Annual CEO Certification for our 2017 fiscal year to the NYSE without qualification.

REPORT OF THE AUDIT COMMITTEE

This report by the Audit Committee is required by the rules of the Securities and Exchange Commission pursuant to paragraph (d)(3) of Regulation S-K Item 407. It shall not be deemed to be soliciting material,or to be filedwith the Commission, nor shall such information be incorporated by reference into any future filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that Suburban specifically incorporates it by reference in such filing.

In accordance with the provisions of its written charter, the Audit Committee assists the Board of Supervisors in fulfilling its responsibility for oversight of (a) the integrity of Suburban’s financial statements and internal control over financial reporting; (b) Suburban’s compliance with applicable laws, regulations, and its code of conduct; (c) independence and qualifications of the independent registered public accountants; (d) the performance of the internal audit function and the independent registered public accountants; and (e) accounting complaints. Management of Suburban is responsible for the preparation, integrity and objectivity of Suburban’s financial statements in accordance with generally accepted accounting principles and for establishing and maintaining a system of internal accounting and disclosure controls. PricewaterhouseCoopers LLP, Suburban’s independent registered public accounting firm, audits the annual financial statements prepared by management, expresses an opinion as to whether those financial statements fairly present, in all material respects, the financial position, results of operations and cash flows of Suburban in conformity with accounting principles generally accepted in the United States of America and discusses with the Audit Committee any issues they believe should be raised. The independent registered public accounting firm also annually audits the effectiveness of internal control over financial reporting.

The Audit Committee has reviewed and discussed the audited consolidated financial statements set forth in Suburban’s Annual Report on Form 10-K for the fiscal year ended September 30, 2017 with management. The Audit Committee also discussed with PricewaterhouseCoopers LLP those matters required to be discussed under Public Company Accounting Oversight Board Auditing Standard No. 16, Communications with Audit Committees.

The Audit Committee received the written disclosures and letter from PricewaterhouseCoopers LLP required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountant's communications with the audit committee concerning independence, and has discussed with PricewaterhouseCoopers LLP the independence of that firm.

Based on the review and discussions referred to above, the Audit Committee recommended to the Board of Supervisors that Suburban’s audited consolidated financial statements be included in Suburban’s Annual Report on Form 10-K for the fiscal year ended September 30, 2017, filed with the Securities and Exchange Commission.

Respectfully submitted by the members of the Audit Committee of the Board of Supervisors.

Terence J. Connors, Chairman Lawrence C. Caldwell

William M. Landuyt

Jane Swift

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COMPENSATION DISCUSSION AND ANALYSIS

This Compensation Discussion and Analysis explains our executive compensation philosophy, policies and practices with respect to those executive officers of Suburban identified below to whom we refer as our “named executive officers”:

 

Name

 

Position

Michael A. Stivala

 

President and Chief Executive Officer

Michael A. Kuglin

 

Chief Financial Officer and Chief Accounting Officer

Steven C. Boyd

 

Chief Operating Officer*

Douglas T. Brinkworth

 

Senior Vice President Product Supply, Purchasing and Logistics

Paul Abel

 

Senior Vice President, General Counsel and Secretary

 

*

At its October 25, 2017 meeting, the Board of Supervisors approved the promotion of Mr. Boyd from Senior Vice President Operations to Chief Operating Officer.

Key Topics Covered in this Compensation and Discussion Analysis

The following table summarizes the main areas of focus in this Compensation and Discussion Analysis:

 

Compensation Governance

Participants in the Compensation Process

The Annual Compensation Decision Making Process

Risk Mitigation Policies

Executive Compensation Philosophy

Overview

Pay Mix

Components of Compensation

Base Salary

Annual Cash Bonus Plan

Long-Term Incentive Plan

Restricted Unit Plan

Distribution Equivalent Rights Plan

Benefits and Perquisites

Impact of Accounting and Tax Treatments of Executive Compensation

 

Compensation Governance

Participants in the Compensation Process

Role of the Compensation Committee

The Compensation Committee of our Board of Supervisors, which we hereafter refer to as the “Committee,”  is responsible for overseeing our executive compensation program.  In accordance with its charter, available on our website at www.suburbanpropane.com, the Committee ensures that the compensation packages provided to our executive officers are designed in accordance with our compensation philosophy.  The Committee reviews and approves the compensation packages of our managing directors, assistant vice presidents, vice presidents, senior vice presidents, and our named executive officers. The Committee establishes and oversees our general compensation philosophy in consultation with our President and Chief Executive Officer.  

Among other duties, the Committee has overall responsibility for:

 

Reviewing and approving the compensation of our President and Chief Executive Officer, our Chief Financial Officer, and our other executive officers;

 

Reporting to the Board of Supervisors any and all decisions regarding compensation changes for our President and Chief Executive Officer and our other executive officers;

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Evaluating and approving our annual cash bonus plan, Long-Term Incentive Plan, grants under our Restricted Unit Plan, and grants under our Distribution Equivalent Rights Plan, as well as all other executive compensation policies and programs;  

 

Administering and interpreting the compensation plans that constitute each component of our executive officers’ compensation packages; and

 

Engaging consultants, when appropriate, to provide independent, third-party advice on executive officer-related compensation.

Role of the President and Chief Executive Officer

The role of our President and Chief Executive Officer in the executive compensation process is to recommend individual pay adjustments, grants of restricted units under our Restricted Unit Plan(s) and other adjustments to the compensation packages of the executive officers, other than for himself, to the Committee based on market conditions, our company performance, and individual performance.  When recommending individual pay adjustments for the executive officers, Mr. Stivala, our President and Chief Executive Officer, presents the Committee with information comparing each executive officer’s current compensation to the mean compensation figures for comparable positions included in benchmarking data utilized by the Committee.

Role of Outside Consultants

Prior to each Committee meeting at which executive compensation packages are reviewed, members of the Committee are provided with benchmarking data from the Mercer Human Resource Consulting, Inc., which we hereafter refer to as “Mercer,” database for comparison.  The Committee’s sole use of the Mercer database is to compare and contrast our executives’ current base salaries and total direct compensation to the data provided in the Mercer benchmarking database, which is derived from a proprietary database of surveys from over 3,000 organizations and approximately 1,500 positions that may or may not include similarly-sized national propane marketers.  The use of the Mercer database provides a broad base of compensation benchmarking information for companies of similar size to Suburban.  There was no formal consultancy role played by Mercer.  Therefore, prior to the Committee’s meetings, neither the Committee members nor our President and Chief Executive Officer met with representatives from Mercer.  

In addition to using the benchmarking data from the Mercer benchmarking database, the Committee has utilized, since fiscal 2013, the services of Willis Towers Watson, which we hereafter refer to as “WTW,” a human resources consulting firm, formerly known as Towers Watson & Co.  In developing the fiscal 2016 compensation packages for each of our named executive officers, the Committee retained the services of WTW to benchmark the base salaries and total direct compensation of our executive officers compared to comparable positions, using market data for similarly-sized companies which was developed by WTW from multiple survey sources across several industries, inclusive of other energy companies in the United States.  In developing the fiscal 2017 compensation packages for our executive officers, the Committee did not engage the services of WTW; instead, the Committee utilized and relied upon the benchmark data provided by WTW for our fiscal 2016 executive compensation packages.  The Committee did, however, engage WTW for recommendations on the design of a new Distribution Equivalent Rights Plan, adopted at the Committee’s January 17, 2017 meeting.

Our Unitholders:  Say-on-Pay

At their 2015 Tri-Annual Meeting, our Unitholders overwhelmingly approved an advisory resolution approving executive compensation (commonly referred to as “Say-on-Pay”).  As a result, the Committee has determined that no major revisions of its executive compensation practices are required. The following represents the 2015 Say-on-Pay voting results:

 

For

 

 

Against

 

 

Abstain

 

 

Broker Non-Votes

 

 

28,802,659

 

 

 

1,712,622

 

 

 

613,603

 

 

 

22,303,948

 

The Committee periodically evaluates its compensation practices for possible improvement.  Our Unitholders will have another opportunity to cast an advisory vote on the compensation of our named executive officers at the Meeting. See Proposal 4 – “Advisory Vote on Executive Compensation” below.

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The Annual Compensation Decision Making Process

Fiscal 2017 Committee Meetings

The Committee holds three regularly-scheduled meetings during the fiscal year: one in October or November, one in January and one in July, and may meet at other times during the year as warranted.  With the exception of approving the Distribution Equivalent Rights Plan at its January 17, 2017 meeting, the Committee finalized the fiscal year 2017 compensation packages for each of our named executive officers at its November 14, 2016 meeting.

As in past fiscal years and as referred to above, the Committee was provided with a comprehensive analysis of each senior executive’s past and current compensation - including benchmarking data for comparison - to enable it to assess and determine each executive’s compensation package for fiscal 2017.  The Committee considered a number of factors in establishing the fiscal 2017 executive compensation packages, including, but not limited to, experience, scope of responsibility and individual performance.  

Prior to making its decisions regarding each named executive officer’s fiscal 2017 compensation package, the Committee reviewed the total cash compensation opportunity that was provided to each named executive officer during the previously completed fiscal year.  At that time, “total cash compensation opportunity” consisted of base salary, an annual cash bonus, and cash settled long-term incentives; and has since been updated to include payments under a Distribution Equivalent Rights Plan that began in February 2017.  The Committee then compared each named executive officer’s total cash compensation opportunity to the total mean cash compensation opportunity for the parallel position in the Mercer database.  In addition, the Committee reutilized the benchmark data provided by WTW for establishing our executives’ fiscal 2016 compensation referenced above under “Role of Outside Consultants.”  The Committee then based its final decisions on both the fiscal 2016 recommendations made by WTW and on the information contained in the Mercer benchmarking database.

Our Approach to Setting Compensation Packages

In reviewing and determining the compensation packages of our named executive officers, the Committee considers a number of factors related to each executive, including, but not limited to, years of experience in current position, scope and level of responsibility, influence over Suburban’s affairs and individual performance.  The relative importance assigned to each of these factors by the Committee may differ from executive to executive and from year to year.  As a result, different weights may be given to different components of compensation among each of our named executive officers.

As previously stated, the Committee is provided with benchmarking data for comparison.  This benchmarking data is just one of a number of factors considered by the Committee, but is not necessarily the most determinative factor.  The Committee compares total cash compensation opportunities, comprising base salary and annual cash bonuses, as well as total direct compensation (which includes opportunities under our Long-Term Incentive Plan, Restricted Unit Plan, and, subsequent to the Committee’s meeting of January 17, 2017, our Distribution Equivalent Rights Plan) to the total mean cash compensation opportunity and total direct compensation opportunity for the parallel position in the benchmark information reviewed.

Compensation Peer Group

The Committee bases its benchmarking on a broad base of companies of similar size to Suburban, and does not rely solely on a peer group of other propane marketers.  The Committee takes this approach because it believes that the proximity of our headquarters to New York City and the need to realistically compete for skilled executives in an environment shared by numerous other enterprises seeking similarly skilled employees requires a broader review of the market.  Furthermore, similarly-sized propane marketers (of which there are only two) compete for executives in different economic environments. This benchmarking approach has been in place for a number of years.

The compensation packages of the named executive officers of Ferrellgas Partners, L.P. and AmeriGas Partners, L.P. were included in the benchmarking study provided by WTW for fiscal 2016 and was reviewed by the Committee as part of its decision-making process in establishing executive compensation for fiscal 2016 and fiscal 2017.  

17


 

Risk Mitigation Policies

Equity Holding Policy

Effective April 22, 2010, the Committee adopted an Equity Holding Policy, as amended on November 11, 2015, which established guidelines for the level of Suburban equity holdings that members of the Board and our executive officers are expected to maintain.  

Our equity holding requirements for the specified positions are currently as follows:

 

Position

 

Amount

Member of the Board of Supervisors

 

3 x Annual Fee

President and Chief Executive Officer

 

5 x Base Salary

Chief Financial Officer

 

3 x Base Salary

Chief Operating Officer

 

3 x Base Salary

Senior Vice President

 

2.5 x Base Salary

Vice President

 

1.5 x Base Salary

Assistant Vice President

 

1 x Base Salary

Managing Director

 

1 x Base Salary

As of the January 2, 2018 measurement date, all of our executive officers, including our named executive officers, as well as the members of our Board of Supervisors, were in compliance with our Equity Holding Policy.  

The Equity Holding Policy can be accessed through a link on our website at www.suburbanpropane.com under the “Investors” tab.

Incentive Compensation Recoupment Policy

Upon recommendation by the Committee, on April 25, 2007, the Board of Supervisors adopted an Incentive Compensation Recoupment Policy that permits the Committee to seek reimbursement from certain of our executives of incentive compensation (i.e., payments made pursuant to the annual cash bonus plan and the Long-Term Incentive Plan) paid to those executives in connection with any fiscal year for which there is a significant restatement of our published financial statements triggered by a material accounting error, which results in less favorable results than those originally reported.  Such reimbursement can be sought from executives even if they were not personally responsible for the restatement.  In addition to the foregoing, if the Committee determines that any fraud or intentional misconduct by an executive was a contributing factor to Suburban having to make a significant restatement, then the Committee is authorized to take appropriate action against such executive, including disciplinary action, up to, and including, termination, and requiring reimbursement of all, or any part, of the compensation paid to that executive in excess of that executive’s base salary, including cancellation of any unvested restricted units.  

The Incentive Compensation Recoupment Policy is available on our website at www.suburbanpropane.com under the “Investors” tab.

Executive Compensation Philosophy

Overview

Our executive compensation program is underpinned by two core objectives:

 

To attract and retain talented executives who have the skills and experience required to achieve our goals; and  

 

To align the short-term and long-term interests of our executive officers with those of our Unitholders.

We accomplish these objectives by providing our executive officers with compensation packages that provide a competitive base salary combined with the opportunity to earn both short-term and long-term cash incentives based on the achievement of short-term and long-term performance objectives under a pay-for-performance compensation philosophy.  Recognizing that certain external factors, such as the severity and unpredictability of winter weather

18


 

patterns, may have a significant influence on annual financial performance in any given year, the Committee evaluates additional factors in determining the amount of incentive compensation earned.  The various components of compensation provided to our executive officers are specifically linked to either short-term or long-term performance measures, and encourage equity ownership in Suburban.  Therefore, our executive compensation packages are designed to achieve our overall goal of sustainable, profitable growth by rewarding our executive officers for behaviors that facilitate our achievement of this goal.

The principal components of the compensation we provide to our named executive officers are as follows:

 

Component

 

Purpose

 

Features

Base Salary

 

• To reward individual performance,

   experience and scope of responsibility

• To be competitive with market pay

   practices

 

• Reviewed and approved annually

• Market benchmarked

• Mean market salary data is considered in

    determining levels

Annual cash incentive

 

• To drive and reward the delivery of

   financial and operating performance

   during a particular fiscal year

 

• Paid in cash

• Based on annual EBITDA

    performance compared to budgeted

    EBITDA and other qualitative factors

Long-term incentives

 

• To ensure alignment of our executives'

    interests with the long-term interests

    of our Unitholders

• To reward activities and practices that

    are conducive to sustainable, profitable

    growth and long-term value creation

• To attract and retain skilled individuals

 

• Participants are selected by the

   Committee

• Annual awards of phantom units settled

   in cash

• Measured over a three-year period based

    on the level of our average distributable

    cash flow over such three-year

    measurement period

Restricted units

 

• To retain the services of the recipient

    over the vesting period

• To further align the long-term interests

    of the recipient with the long-term

    interests of our Unitholders through

    encouragement of equity ownership

• To mitigate potential shortfalls

    in total cash compensation of our

    executive officers when compared

    to benchmarked total cash compensation

• To provide an adequate compensation

    package in connection with an

    internal promotion

• To reward outstanding performance

 

• Participants are selected by the

   Committee

• No pre-determined frequency or amounts

   of awards

• Plan provides the Committee flexibility

    to respond to different facts and

    circumstances

• Awards normally vest in equal thirds on

    the first three anniversaries of the

    date of grant

• Awards are settled in Common Units

Distribution Equivalent Rights

 

• To drive and reward behaviors that lead

    to distribution sustainability and growth

• To further align the interests of the

    recipients with the interests of our

    Unitholders

• To encourage our executives to retain

    their holdings of our Common Units by

    providing them with funds to settle the

    income and FICA taxes on their vested

    restricted units

 

• Participants are selected by the

   Committee

• Paid in cash

• Payments are made upon a

    distribution to Unitholders and

    based on the number of Participants'

    unvested restricted units

• Plan provides the Committee with the

    flexibility to provide additional

    incentives to specified individuals

 

19


 

We align the short-term and long-term interests of our named executive officers with the short-term and long-term interests of our Unitholders by:

 

Providing our named executive officers with an annual incentive target that encourages them to achieve or exceed targeted financial results and operating performance for a particular fiscal year;

 

Providing a long-term incentive plan that encourages our named executive officers to implement activities and practices conducive to sustainable, profitable growth;

 

Providing our named executive officers with restricted units in order to encourage the retention of the participating executive officers and their equity ownership in Suburban, while simultaneously encouraging behaviors conducive to the long-term appreciation of our Common Units; and

 

Providing our named executive officers with distribution equivalent rights to encourage behaviors conducive to distribution sustainability and growth.

Pay Mix

Under our compensation structure, each named executive officer’s “total cash compensation opportunity” consists of a mix of base salary, cash bonus, cash-settled long-term incentives, and distribution equivalent rights payments.  This “mix” varies depending on his or her position.  The base salary for each executive officer is the only fixed component of compensation.  All other cash compensation, including annual cash bonuses and long-term incentive compensation, is variable in nature as it is dependent upon achievement of certain performance measures.  

In allocating among these components, in order to align the interests of our senior executive officers - the executive officers having the greatest ability to influence our performance - with the interests of our Unitholders, we consider it crucial to emphasize the performance-based elements of the total compensation opportunities that we provide to them.  Therefore, during fiscal 2017, the total cash compensation opportunity for our senior executive officers, including our named executive officers, was at least 48% performance-based under our annual cash bonus and long-term incentive plans, neither of which provide for minimum payments.

The following table summarizes each of these components as a percentage of each named executive officer’s total cash compensation opportunity for fiscal 2017:

 

 

 

Base Salary

 

 

Cash Bonus

Target

 

 

Long-Term

Incentive

 

Distribution

Equivalent

Rights

 

Michael A. Stivala

 

36%

 

 

36%

 

 

18%

 

10%

 

Michael A. Kuglin

 

41%

 

 

33%

 

 

16%

 

10%

 

Steven C. Boyd

 

41%

 

 

33%

 

 

16%

 

10%

 

Douglas T. Brinkworth

 

41%

 

 

33%

 

 

16%

 

10%

 

Paul Abel

 

42%

 

 

32%

 

 

16%

 

10%

 

 

Components of Compensation

Base Salary

Using the process explained in the section above titled “The Annual Compensation Decision Making Process,” at its November 14, 2016 meeting, the Committee increased Mr. Kuglin’s base salary to $330,000, in recognition of his performance throughout the year and to bridge a perceived shortfall between his former base salary and the benchmark salaries for similar positions. The Committee did not make any adjustments to the base salaries of our other named executive officers.

20


 

The following base salaries were in effect during fiscal 2017 and fiscal 2016 for our named executive officers:

 

 

 

Fiscal 2017

Base Salary

 

 

Fiscal 2016

Base Salary

 

Michael A. Stivala

 

$

500,000

 

 

$

500,000

 

Michael A. Kuglin

 

$

330,000

 

 

$

310,000

 

Steven C. Boyd

 

$

330,000

 

 

$

330,000

 

Douglas T. Brinkworth

 

$

310,000

 

 

$

310,000

 

Paul Abel

 

$

300,000

 

 

$

300,000

 

 

At its October 24, 2017 meeting, the Committee approved the following base salaries for fiscal 2018, taking into account recommendations made by WTW at the request of the Committee:

 

 

 

Fiscal 2018

Base Salary

 

Michael A. Stivala

 

$

550,000

 

Michael A. Kuglin

 

$

365,000

 

Steven C. Boyd

 

$

365,000

 

Douglas T. Brinkworth

 

$

335,000

 

Paul Abel

 

$

325,000

 

The base salaries paid to our named executive officers in fiscal 2017, fiscal 2016 and fiscal 2015 are reported in the column titled “Salary” in the Summary Compensation Table below.

Annual Cash Bonus Plan

The Committee uses the annual cash bonus plan (which falls within the Securities and Exchange Commission’s definition of a “Non-Equity Incentive Plan” for the purposes of the Summary Compensation Table and otherwise) to provide a cash incentive award to certain hourly and salaried  employees, including our named executive officers, for the attainment of EBITDA targets for the particular fiscal year, in accordance with the annual budget approved by our Board of Supervisors at the beginning of the fiscal year.

Performance Condition

The sole metric measures Actual Adjusted EBITDA relative to Budgeted EBITDA.  

Definitions

Actual EBITDA: represents net income before deducting interest expense, income taxes, depreciation and amortization.

Actual Adjusted EBITDA: represents Actual EBITDA adjusted for various items; including, but not limited to, unrealized (non-cash) gains or losses on changes in the fair value of derivative instruments; gains or losses on sale of business; acquisition and integration-related costs; multi-employer pension plan withdrawal charges; pension settlement charges; and losses on debt extinguishment.  

Budgeted EBITDA: represents our target budgeted EBITDA developed using a bottom-up process factoring in reasonable growth targets from the prior year’s performance, while at the same time attempting to reach a balance between a target that is reasonably achievable, yet not certain.

21


 

Based on a determination made by the Committee at its January 22, 2014 meeting, following a review of recommendations made by WTW, which had been engaged by the Committee for that purpose, our named executive officers currently have the opportunity to earn between 50% and 120% of their target cash bonuses under this plan, depending upon the relationship of our Actual Adjusted EBITDA compared to Budgeted EBITDA in accordance with the following table:

 

 

 

Actual Adjusted

EBITDA as a % of

Budgeted EBITDA

 

 

% of Target Cash

Bonus Earned

 

Maximum

 

120% and above

 

 

 

120

%

 

 

 

119

%

 

 

119

%

 

 

 

118

%

 

 

118

%

 

 

 

117

%

 

 

117

%

 

 

 

116

%

 

 

116

%

 

 

 

115

%

 

 

115

%

 

 

 

114

%

 

 

114

%

 

 

 

113

%

 

 

113

%

 

 

 

112

%

 

 

112

%

 

 

 

111

%

 

 

111

%

 

 

 

110

%

 

 

110

%

 

 

 

109

%

 

 

109

%

 

 

 

108

%

 

 

108

%

 

 

 

107

%

 

 

107

%

 

 

 

106

%

 

 

106

%

 

 

 

105

%

 

 

105

%

 

 

 

104

%

 

 

104

%

 

 

 

103

%

 

 

103

%

 

 

 

102

%

 

 

102

%

 

 

 

101

%

 

 

101

%

Target

 

 

100

%

 

 

100

%

 

 

 

99

%

 

 

98

%

 

 

 

98

%

 

 

96

%

 

 

 

97

%

 

 

94

%

 

 

 

96

%

 

 

92

%

 

 

 

95

%

 

 

90

%

 

 

 

94

%

 

 

85

%

 

 

 

93

%

 

 

82.5

%

 

 

 

92

%

 

 

80

%

 

 

 

91

%

 

 

77.5

%

 

 

 

90

%

 

 

75

%

 

 

 

89

%

 

 

70

%

 

 

 

88

%

 

 

65

%

 

 

 

87

%

 

 

60

%

 

 

 

86

%

 

 

55

%

Entry

 

 

85

%

 

 

50

%

 

 

Below 85%

 

 

 

0

%

Fiscal 2017 Annual Cash Bonus

For fiscal 2017, our Budgeted EBITDA was $340.0 million.  Our Actual Adjusted EBITDA was such that each of our executive officers earned 0% of his or her target cash bonus.  During the previous two fiscal years, our Actual Adjusted EBITDA was such that each of our named executive officers earned 0% and 90% of their target cash bonus for fiscal 2016 and fiscal 2015, respectively.

22


 

The fiscal 2017 target cash bonuses established for each named executive officer and the actual cash bonuses earned by each of them during fiscal 2017 are summarized as follows:

 

Name

 

Fiscal 2017

Target Cash

Bonus as a

Percentage of

Base Salary

 

 

Fiscal 2017

Target Cash Bonus

 

 

Fiscal 2017

Actual Cash Bonus Earned

at 0%

 

Michael A. Stivala

 

100%

 

 

$

500,000

 

 

$

 

Michael A. Kuglin

 

80%

 

 

$

264,000

 

 

$

 

Steven C. Boyd

 

80%

 

 

$

264,000

 

 

$

 

Douglas T. Brinkworth

 

80%

 

 

$

248,000

 

 

$

 

Paul Abel

 

75%

 

 

$

225,000

 

 

$

 

The Use of Discretion

Although our annual cash bonus plan is generally administered in accordance with pre-approved terms for a particular fiscal year, the Committee retains the right to exercise its broad discretionary powers to decrease or increase the annual cash bonus paid to a particular named executive officer, upon the recommendation of our President and Chief Executive Officer, or to the named executive officers as a group, when the Committee determines that an adjustment is warranted.  In fiscal 2016 and fiscal 2015, no discretionary adjustments were made to the annual cash bonuses earned by our named executive officers.  

For fiscal 2017, at its October 24, 2017 meeting, the Committee used its discretionary authority to award each of our named executives officers 30% of their target bonus, in recognition of Suburban’s operational and financial accomplishments in fiscal 2017, despite a more challenging operating environment and weather pattern compared to fiscal 2016.  In navigating through the second consecutive record warm winter heating season, our management set specific goals and took proactive actions to deliver a meaningful improvement in Actual Adjusted EBITDA and other performance metrics compared to the prior year.  Additionally, the Committee’s decision to grant a discretionary cash bonus for fiscal 2017 was for retention purposes – to avoid having two consecutive years in which bonus payments were not paid as a result of unseasonably warm weather.  The discretionary payments approved by the Committee were as follows:

 

Name

 

Fiscal 2017

Discretionary

Cash Bonus

Payments

Michael A. Stivala

 

$

150,000

 

 

Michael A. Kuglin

 

$

79,200

 

 

Steven C. Boyd

 

$

79,200

 

 

Douglas T. Brinkworth

 

$

74,400

 

 

Paul Abel

 

$

67,500

 

 

 

The discretionary bonuses provided to our named executive officers for fiscal 2017 are reported in the column titled “Bonus” in the Summary Compensation table below.  The bonus payments earned by our named executive officers under the annual cash bonus program for fiscal 2015 are reported in the column titled “Non-Equity Incentive Plan Compensation” in the Summary Compensation Table below.

23


 

At its October 24, 2017 meeting, the Committee also approved the following fiscal 2018 target cash bonuses:

 

Name

 

Fiscal 2018 Target

Cash Bonus as a

Percentage of

Base Salary

 

 

Fiscal 2018 Target

Cash Bonus

 

Michael A. Stivala

 

100%

 

 

$

550,000

 

Michael A. Kuglin

 

80%

 

 

$

292,000

 

Steven C. Boyd

 

80%

 

 

$

292,000

 

Douglas T. Brinkworth

 

80%

 

 

$

268,000

 

Paul Abel

 

80%

 

 

$

260,000

 

 

As a result of the impact that the past two consecutive years of record warm winter heating seasons have had on the ability of our employees, including our named executive officers, to earn a cash incentive bonus under the existing annual cash bonus plan, the Committee engaged WTW to review and suggest possible modifications to that plan to help mitigate its predominant dependence on weather-related factors.  After reviewing several recommendations made by WTW for potential modifications to the plan at its July 2017 meeting, the Committee (at its October 24, 2017 meeting) approved two separate modifications to the plan.  First, the annual cash bonus plan will now contain two separate measurement components as follows:

 

i)

Actual Adjusted EBITDA compared to Budgeted EBITDA, similar to the annual cash bonus plan that was in effect for fiscal 2017; and,

 

ii)

Scorecard-based component in which up to 35% of the target cash bonus may be awarded by the Committee, as an enhancement to the performance-based component, based on their evaluation of several qualitative scorecard items that include the following: key safety statistics compared to the prior year, customer base trends compared to the prior year, Actual Adjusted EBITDA compared to the prior year, distributable cash flow compared to the prior year, and, in the case of our named executive officers,  achievement of corporate and individual goals.  The Committee will use its discretion regarding how much weight to place on any one, or several, of the qualitative scorecard items in determining the amount, if any, of the scorecard-based component to award.  

24


 

Second, the Committee lowered the “entry threshold” for the performance-based component under the plan from 85% to 80% and retained the 50% payout of the performance-based component at the entry threshold. The 80% entry threshold was intended to create a more symmetrical performance zone within the plan, such that both the maximum threshold and the entry threshold will take effect at a 20% differential from the target level.  The following table reflects the approved modifications to the annual cash bonus plan:

 

Performance-Based Component

 

 

 

Actual Adjusted

EBITDA as a % of

Budgeted EBITDA

 

 

% of Target Cash

Bonus Earned

 

Maximum

 

120% and above

 

 

 

120

%

 

 

 

119

%

 

 

119

%

 

 

 

118

%

 

 

118

%

 

 

 

117

%

 

 

117

%

 

 

 

116

%

 

 

116

%

 

 

 

115

%

 

 

115

%

 

 

 

114

%

 

 

114

%

 

 

 

113

%

 

 

113

%

 

 

 

112

%

 

 

112

%

 

 

 

111

%

 

 

111

%

 

 

 

110

%

 

 

110

%

 

 

 

109

%

 

 

109

%

 

 

 

108

%

 

 

108

%

 

 

 

107

%

 

 

107

%

 

 

 

106

%

 

 

106

%

 

 

 

105

%

 

 

105

%

 

 

 

104

%

 

 

104

%

 

 

 

103

%

 

 

103

%

 

 

 

102

%

 

 

102

%

 

 

 

101

%

 

 

101

%

Target

 

 

100

%

 

 

100

%

 

 

 

99

%

 

 

98

%

 

 

 

98

%

 

 

96

%

 

 

 

97

%

 

 

94

%

 

 

 

96

%

 

 

92

%

 

 

 

95

%

 

 

90

%

 

 

 

94

%

 

 

88

%

 

 

 

93

%

 

 

86

%

 

 

 

92

%

 

 

84

%

 

 

 

91

%

 

 

82

%

 

 

 

90

%

 

 

80

%

 

 

 

89

%

 

 

77

%

 

 

 

88

%

 

 

74

%

 

 

 

87

%

 

 

71

%

 

 

 

86

%

 

 

68

%

 

 

 

85

%

 

 

65

%

 

 

 

84

%

 

 

62

%

 

 

 

83

%

 

 

59

%

 

 

 

82

%

 

 

56

%

 

 

 

81

%

 

 

53

%

Entry

 

 

80

%

 

 

50

%

 

 

Below 80%

 

 

 

0

%

 

These modifications to the annual cash bonus plan are effective starting with our 2018 fiscal year.  

25


 

Long-Term Incentive Plan

To complement the annual cash bonus plan, which focuses on our short-term financial goals, the Long-Term Incentive Plan, which we hereafter refer to as the “LTIP,” is a phantom unit plan that is designed to motivate our executive officers to focus on our long-term financial goals.  

Performance Condition

Under the LTIP, performance is assessed based on the level of our distribution coverage ratio over a three-year measurement period, which we refer to as “Distribution Coverage Ratio.”  This ratio will be calculated (as shown below) by dividing our Average Distributable Cash Flow generated during an outstanding award’s three-year measurement period by a Baseline Cash Flow set on the initial grant date of the award.  The Committee adopted this measure for LTIP awards because our ability to support future cash distributions, and to demonstrate distribution growth, is essential to successfully attracting and retaining investors, making it an important long-term performance metric.

Average Distributable Cash Flow  

(Average Actual Adjusted EBITDA less maintenance capital expenditures, cash interest expense and other adjustments)

Baseline Cash Flow

(Total # of Common Units outstanding at beginning of the three-year measurement period times the then annualized distribution rate)

Definitions

Distributable Cash Flow: represents Actual Adjusted EBITDA for a particular fiscal year less maintenance capital expenditures, cash interest expense, and the provision for income taxes for the same fiscal year.

Actual Adjusted EBITDA: represents the same definition as Actual Adjusted EBITDA under the annual cash bonus plan.  

Average Distributable Cash Flow: represents average distributable cash flow for each of the three years in a particular award’s three-year measurement period, plus the product of the number of Common Units outstanding at the beginning of the three-year measurement period and the annual differences between the per Common Unit annualized distribution rate at the beginning of the three-year measurement period and the actual per Common Unit distributions paid during each of those three years.  

Baseline Cash Flow: represents the total number of Common Units outstanding at the beginning of the three-year measurement period multiplied by the then per Common Unit annualized distribution rate.

The following table summarizes the performance targets and associated level of vesting that applies to awards made under the LTIP prior to November 14, 2016 based on the achievement level of the Distribution Coverage Ratio:

 

Distribution Coverage Ratio

 

% of Award Earned

 

1.50 or higher (Maximum)

 

150%

 

1.20 (Target)

 

100%

 

1.00 (Entry)

 

50%

 

Less than 1.00

 

0%

 

 

26


 

Between entry and target performance, for every additional 0.01 increase in the Distribution Coverage Ratio, an additional 2.5% of the award is earned.  Between target and maximum performance, awards are earned according to the following schedule:

 

Distribution Coverage

Ratio

 

% of Award Earned

 

 

Distribution Coverage

Ratio

 

% of Award Earned

 

1.50 or higher

 

150.0%

 

 

1.34

 

123.4%

 

1.49

 

148.4%

 

 

1.33

 

121.7%

 

1.48

 

146.8%

 

 

1.32

 

120.0%

 

1.47

 

145.1%

 

 

1.31

 

118.4%

 

1.46

 

143.4%

 

 

1.30

 

116.7%

 

1.45

 

141.8%

 

 

1.29

 

115.0%

 

1.44

 

140.1%

 

 

1.28

 

113.4%

 

1.43

 

138.4%

 

 

1.27

 

111.7%

 

1.42

 

136.7%

 

 

1.26

 

110.0%

 

1.41

 

135.1%

 

 

1.25

 

108.4%

 

1.40

 

133.4%

 

 

1.24

 

106.7%

 

1.39

 

131.7%

 

 

1.23

 

105.0%

 

1.38

 

130.1%

 

 

1.22

 

103.3%

 

1.37

 

128.4%

 

 

1.21

 

101.7%

 

1.36

 

126.7%

 

 

1.20

 

100.0%

 

1.35

 

125.1%

 

 

 

 

 

 

 

 

At its meeting on November 14, 2016, the Committee amended the LTIP to revise the performance targets and associated level of vesting that applies to awards made under the LTIP on or after September 25, 2016.  The following table summarizes the performance targets and associated level of vesting, based on the achievement level of the Distribution Coverage Ratio:

 

Distribution Coverage Ratio

 

% of Award Earned

 

1.25 or higher (Maximum)

 

150%

 

1.10 (Target)

 

100%

 

1.00 (Entry)

 

50%

 

Less than 1.00

 

0%

 

 

As a result of this amendment, between entry and target performance, for every additional 0.01 increase in the Distribution Coverage Ratio, an additional 5% of the award will be earned.  Between target and maximum performance, awards will be earned according to the following schedule:

 

Distribution Coverage Ratio

 

% of Award Earned

 

1.25 or higher

 

150.0%

 

1.24

 

146.7%

 

1.23

 

143.3%

 

1.22

 

140.0%

 

1.21

 

136.7%

 

1.20

 

133.3%

 

1.19

 

130.0%

 

1.18

 

126.7%

 

1.17

 

123.3%

 

1.16

 

120.0%

 

1.15

 

116.7%

 

1.14

 

113.3%

 

1.13

 

110.0%

 

1.12

 

106.7%

 

1.11

 

103.3%

 

1.10

 

100.0%

 

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This amendment to the LTIP did not lower the minimum required Distribution Coverage Ratio for participants to earn an entry-level award.  The Committee’s decision to reduce the target-level and maximum-level award thresholds was intended to strike a better balance between an award that is reasonably achievable, yet not assured.  

Grant Process

At the beginning of each fiscal year, LTIP unit awards are granted as a Committee-approved percentage of each named executive officer’s salary.  In accordance with the terms of the LTIP, at the beginning of each three-year measurement period, the number of each named executive officer’s unvested LTIP phantom unit awards is calculated by dividing his target LTIP amount (representing 50% of that named executive officer’s target cash bonus under the annual cash bonus plan) by the average of the closing prices of our Common Units for the twenty days preceding the beginning of the three-year measurement period.  

Cash Payments

For awards granted under the LTIP, our named executive officers, as well as the other LTIP participants (all of whom are key employees), will, at the end of the three-year measurement period, receive cash payments equal to:

 

The quantity of the participant’s phantom units multiplied by the average of the closing prices of our Common Units for the twenty days preceding the conclusion of the three-year measurement period;  

 

The quantity of the participant’s phantom units multiplied by the sum of the distributions that would have inured to one of our outstanding Common Units during the three-year measurement period; and

 

The sum of the products of the two preceding calculations multiplied by the applicable percentage corresponding to the Distribution Coverage Ratio illustrated in the applicable preceding table (based on the fiscal year for which the award was granted).

The grant date values based on the target outcomes of the awards under the LTIP granted during fiscal 2017, fiscal 2016 and fiscal 2015 are reported in the column titled “Unit Awards” in the Summary Compensation Table below.  

Outstanding Awards under the LTIP

The following are the quantities of unvested LTIP phantom units granted to our named executive officers during fiscal 2017 and fiscal 2016 that will be used to calculate cash payments at the end of each award’s respective three-year measurement period (i.e., at the end of fiscal 2019 for the fiscal 2017 awards and at the end of fiscal 2018 for the fiscal 2016 awards):

 

 

 

Fiscal 2017 Award

 

 

Fiscal 2016 Award

 

Michael A. Stivala

 

 

7,559

 

 

 

7,095

 

Michael A. Kuglin

 

 

3,991

 

 

 

3,519

 

Steven C. Boyd

 

 

3,991

 

 

 

3,746

 

Douglas T. Brinkworth

 

 

3,749

 

 

 

3,519

 

Paul Abel

 

 

3,402

 

 

 

3,193

 

 

At its meeting on October 24, 2017, the Committee granted the following quantities of unvested LTIP phantom units to our named executive officers for fiscal 2018.  These quantities will be used to calculate cash payments, if earned, at the end of this award’s three-year measurement period (i.e., at the end of fiscal 2020).

 

 

 

Fiscal 2018 Award

 

Michael A. Stivala

 

 

11,181

 

Michael A. Kuglin

 

 

5,936

 

Steven C. Boyd

 

 

5,936

 

Douglas T. Brinkworth

 

 

5,448

 

Paul Abel

 

 

5,286

 

 

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Vesting of the LTIP Awards

The three-year measurement period of the fiscal 2015 awards ended simultaneously with the conclusion of fiscal 2017.  Our Distribution Coverage Ratio was below the entry threshold for the three-year measurement period.  As such, no payments were earned relative to the fiscal 2015 awards.  Similarly, given the impact of the two consecutive record warm winter heating seasons on the level of Distributable Cash Flow for fiscal 2016 and fiscal 2017, it is anticipated that, under the normative provisions of the LTIP, participants will not earn a cash payout for either of the other two outstanding award cycles (i.e., the fiscal 2016 award that will end at the conclusion of fiscal 2018 and the fiscal 2017 award that will end at the conclusion of fiscal 2019).  Accordingly, during fiscal 2017 the Committee engaged WTW to review and suggest possible modifications to the LTIP design in order to help mitigate its predominant dependence on weather-related factors.  At its meeting on July 18, 2017, the Committee reviewed a number of alternatives provided by WTW, but decided that, given the long-term nature of the LTIP, modifications to mitigate the impacts of unseasonably warm weather were not warranted since they would require introducing significant subjectivity into the LTIP design. However, in an effort to continue to incent management for the remainder of the fiscal 2017 award, the Committee decided that it would exercise its discretionary authority under the LTIP to make a retroactive adjustment to the Baseline Cash Flow calculation of the fiscal 2017 award.  Therefore, at a special telephonic meeting on September 27, 2017, the Committee approved a retroactive adjustment to the Baseline Cash Flow calculation of the fiscal 2017 award to reflect the annualized distribution rate to be approved by the Board of Supervisors at its October 2017 meeting in respect of the fourth quarter of fiscal 2017, as if that were the annualized distribution rate in effect since the beginning of fiscal 2017.  In addition, in light of the retroactive nature of this adjustment to the calculation, the Committee elected to cap the maximum potential amount that can be earned by the LTIP participants for the fiscal 2017 award at 120% of the target payment amounts.    

Retirement Provision

The retirement provision applies to all LTIP participants who have been employed by Suburban for ten years and have attained age 55.  A retirement-eligible participant’s outstanding awards under the LTIP will vest as of the retirement-eligible date, but will remain subject to the same three-year measurement period for purposes of determining the eventual cash payment, if any, at the conclusion of the remaining measurement period.  Mr. Brinkworth and Mr. Abel are our only named executive officers to whom this retirement provision applied at the conclusion of fiscal 2017.  

2009 Restricted Unit Plan

At their July 22, 2009 Tri-Annual Meeting, our Unitholders approved the adoption of our 2009 Restricted Unit Plan, which we refer to as the “2009 RUP,” effective August 1, 2009.  Upon adoption, this plan authorized the issuance of 1,200,000 Common Units to our named executive officers, managers, other employees and to the members of our Board of Supervisors.  On May 13, 2015, following approval by our Unitholders at their 2015 Tri-Annual Meeting, we adopted an amendment to this plan which increased the number of Common Units authorized for issuance under this plan by 1,200,000 for a total of 2,400,000.  At the conclusion of fiscal 2017, there remained 855,830 restricted units available under the 2009 RUP for future awards.  (As a result of both new awards made, and previously granted awards forfeited, in fiscal 2018, there remained 444,058 restricted units available under the 2009 RUP for future awards as of March 19, 2018.) Until the 2009 RUP terminates on July 31, 2019, the Committee will continue to make grants under the 2009 RUP, so long as restricted units remain available under that plan, if the 2018 Restricted Unit Plan is approved by our Unitholders (see Proposal No. 3 – “Approval of the 2018 Restricted Unit Plan, Authorizing the Issuance of up to 1,800,000 Common Units Pursuant to Awards Granted Under the Plan,” below).

When the Committee authorizes an award of restricted units, the unvested units underlying an award do not provide the grantee with voting rights and do not receive distributions or accrue rights to distributions during the vesting period.  

Grant Process

All 2009 RUP awards are approved by the Committee.  Because individual circumstances differ, the Committee has not adopted a formulaic approach to making 2009 RUP awards.  Although the reasons for granting an award can vary, the general objective of granting an award to a recipient is to retain the services of the recipient over the vesting period while, at the same time, providing the type of motivation that further aligns the long-term interests of the recipient with the long-term interests of our Unitholders.  The reasons for which the Committee grants 2009 RUP awards include, but are not limited to, the following:

 

To attract skilled and capable candidates to fill vacant positions;

29


 

 

To retain the services of an employee;

 

To provide an adequate compensation package to accompany an internal promotion; and

 

To reward outstanding performance.

In determining the quantity of restricted units to grant to named executive officers and other key employees, the Committee considers, without limitation:

 

The named executive officer’s or key employee’s scope of responsibility, performance and contribution to meeting our objectives;

 

The total cash compensation opportunity provided to the named executive officer or key employee for whom the award is being considered;

 

The value of similar equity awards to named executive officers of similarly sized companies; and

 

The current value of an equivalent quantity of outstanding Common Units.

In addition, in establishing the level of restricted units to grant to our named executive officers, the Committee considers the existing level of outstanding unvested 2009 RUP awards held by our named executive officers.  

The Committee generally approves awards under the 2009 RUP at its first meeting each fiscal year following the availability of the financial results for the prior fiscal year; however, occasionally the Committee grants awards at other times of the year, particularly when the need arises to grant awards because of promotions and new hires.  

Upon vesting, restricted units are automatically converted into our Common Units, with full voting rights and rights to receive distributions.  

Vesting Schedule

2009 RUP awards granted prior to August 6, 2013 vest as follows: 25% on each of the third and fourth anniversaries of the grant date and the remaining 50% on the fifth anniversary of the grant date.

At its August 6, 2013 meeting, after its review of recommendations made by WTW, the Committee amended the 2009 RUP to revise the standard vesting schedule of awards granted thereafter to one third on each of the first three anniversaries of the award grant date.  The Committee retains the ability to deviate, at its discretion, from the normal vesting schedule with respect to particular 2009 RUP awards.  The Committee amended the plan in order to make its vesting schedule comparable to those of similar plans offered by other companies.  Unvested awards are subject to forfeiture in certain circumstances, as defined in the 2009 RUP.

Retirement Provision

The 2009 RUP contains a retirement provision that provides for the vesting (six months and one day after the retirement date of qualifying participants) of unvested awards held by a retiring participant who meets all three of the following conditions on his or her retirement date:

 

The unvested award has been held by the grantee for at least six months;

 

The grantee is age 55 or older; and

 

The grantee has worked for us or one of our predecessors for at least 10 years.

Mr. Brinkworth and Mr. Abel are our only named executive officers to whom this retirement provision applied at the end of fiscal 2017.  

Outstanding Awards under the 2009 RUP

At its November 14, 2016 meeting, in order to continue to further align the interests of our named executive officers with those of our Unitholders, the Committee approved a grant of restricted units to each of our named executive officers.  In determining these fiscal 2017 awards for our named executive officers, the Committee relied upon information provided by the Mercer database to conclude that these awards were necessary to remediate shortfalls

30


 

perceived by the Committee in the cash compensation opportunities provided by Suburban to these executives, as well as in recognition of their individual achievements throughout fiscal 2016.  The Committee uses 2009 RUP awards to satisfy a perceived need to balance cash compensation with equity (or non-cash) compensation, and to encourage our named executive officers, and other key employees, to have an equity stake in Suburban, thereby further aligning the economic interests of our named executive officers with the economic interests of our Unitholders.

The following table summarizes the 2009 RUP awards granted to our named executive officers at the Committee’s November 14, 2016 meeting:

 

Name

 

Grant Date

 

Quantity

 

Michael A. Stivala

 

November 15, 2016

 

 

31,864

 

Michael A. Kuglin

 

November 15, 2016

 

 

20,075

 

Steven C. Boyd

 

November 15, 2016

 

 

15,932

 

Douglas T. Brinkworth

 

November 15, 2016

 

 

15,932

 

Paul Abel

 

November 15, 2016

 

 

15,932

 

 

The aggregate grant date fair values of 2009 RUP awards made during fiscal 2017, fiscal 2016 and fiscal 2015, computed in accordance with accounting principles generally accepted in the United States of America, are reported in the column titled “Unit Awards” in the Summary Compensation Table below.

At its October 24, 2017 meeting, the Committee granted the following 2009 RUP awards to our named executive officers:

 

Name

 

Grant Date

 

Quantity

 

Michael A. Stivala

 

November 15, 2017

 

 

38,767

 

Michael A. Kuglin

 

November 15, 2017

 

 

26,168

 

Steven C. Boyd

 

November 15, 2017

 

 

26,168

 

Douglas T. Brinkworth

 

November 15, 2017

 

 

25,199

 

Paul Abel

 

November 15, 2017

 

 

23,260

 

 

The Committee granted these awards in order to further align the economic interests of named executive officers with the economic interests our Common Unitholders.

At the Meeting, our Unitholders will be asked to approve a new 2018 Restricted Unit Plan, with provisions substantially similar to the 2009 RUP, authorizing the issuance of up to 1,800,000 Common Units pursuant to awards granted under this Plan.  See Proposal No. 3 – “Approval of the 2018 Restricted Unit Plan, Authorizing the Issuance of up to 1,800,000 Common Units Pursuant to Awards Granted Under the Plan” below.

Distribution Equivalent Rights Plan

At the beginning of fiscal 2017, the Committee engaged the services of WTW to evaluate the merits of establishing a Distribution Equivalent Rights Plan (the “DER Plan”) as a new component of executive compensation.  The data provided by WTW suggested that the proposed DER Plan would be aligned with industry norms (77% of other publicly traded partnerships and 92% of a sample of broader energy/utility companies provide such plans to their executives in one form or another).  The Committee adopted the DER Plan on January 17, 2017 because the cash compensation resulting from the DER Plan would help, in certain instances, to lessen the gap between the total compensation paid to some of our named executive officers and the benchmark compensation data.  Additionally, the Committee believes that the new DER Plan will provide our named executive officers with a reasonable balance between performance-based and non-performance based cash opportunities and will assist our named executive officers to obtain funds to settle the taxes on equity based compensation (i.e., taxes generated when restricted units vest).  Most importantly, the Committee believes that this form of compensation further aligns the interests of our named executive officers with the interests of our Unitholders because it provides an incentive for the types of behaviors that lead to distribution sustainability and growth.  

Our named executive officers (as defined in the DER Plan) are eligible for a distribution equivalent right, which we refer to as a “DER,” award under the DER Plan at the discretion of the Committee.  Once awarded, a DER entitles the

31


 

grantee to a cash payment each time our Board of Supervisors declares a cash distribution on our Common Units, which cash payment is equal to the amount calculated by multiplying (A) the number of unvested restricted units that have been previously awarded to the grantee under any of our restricted unit plans and which are held by the grantee on the record date of the distribution, by (B) the amount of the declared distribution per Common Unit. The form of award agreement under the DER Plan expressly provides that the Committee retains the right to cancel, in whole or in part, any DER after its award, with or without cause.  DERs also automatically terminate on the first to occur of: (a) the termination of the grantee’s employment with us or our subsidiary (except for those situations when such termination does not result in the forfeiture of the unvested restricted units then held by the grantee), (b) the vesting, termination or forfeiture of all unvested restricted units then held by the grantee, or (c) the grantee becoming employed by us or our subsidiary in a role other than as a named executive officer. Pursuant to the terms of the DER Plan, DERs, and cash payments thereunder, are considered to be “incentive compensation” for purposes of our incentive compensation recoupment policy described above.  

At its January 17, 2017 meeting, the Committee granted DERs under the DER Plan to all of our named executive officers.  The following table summarizes the DER payments made to our named executive officers during fiscal 2017:

 

Name

 

Payment Amount

 

Michael A. Stivala

 

$

135,570

 

Michael A. Kuglin

 

$

80,571

 

Steven C. Boyd

 

$

72,749

 

Douglas T. Brinkworth

 

$

72,749

 

Paul Abel

 

$

69,542

 

 

The DER Plan payments made to our named executive officers during fiscal 2017 are reported in the column titled “Non-Equity Incentive Plan Compensation” in the Summary Compensation Table below.

Benefits and Perquisites

Pension Plan

We sponsor a noncontributory defined benefit pension plan that was originally designed to cover all of our eligible employees who met certain criteria relative to age and length of service.  Effective January 1, 1998, we amended the plan in order to provide for a cash balance format rather than the final average pay format that was in effect prior to January 1, 1998 (the “Cash Balance Plan”).  The cash balance format is designed to evenly spread the growth of a participant’s earned retirement benefit throughout his or her career rather than the final average pay format, under which a greater portion of a participant’s benefits were earned toward the latter stages of his or her career.  Effective January 1, 2000, we amended the Cash Balance Plan to limit participation in this plan to existing participants and no longer admit new participants to the plan.  On January 1, 2003, we amended the Cash Balance Plan to cease future service and pay-based credits on behalf of the participants and, from that point on, participants’ benefits have increased only because of interest credits. Effective June 1, 2017, we amended the Cash Balance Plan to provide eligible terminated vested participants with a limited-time opportunity, which expired in August 2017, to elect immediate distribution of their benefits in the form of a single lump sum.  Of our named executive officers, only Mr. Boyd and Mr. Brinkworth participate in the Cash Balance Plan.  

The changes in the actuarial value relative to Mr. Boyd’s and Mr. Brinkworth’s participation in the Cash Balance Plan during fiscal 2017, fiscal 2016 and fiscal 2015 are reported in the column titled “Change in Pension Value and Nonqualified Deferred Compensation Earnings” in the Summary Compensation Table below.

Deferred Compensation

All employees, including the named executive officers, who satisfy certain service requirements, are eligible to participate in our IRC Section 401(k) Plan, which we refer to as the “401(k) Plan,” in which participants may defer a portion of their eligible cash compensation up to the limits established by law.  We offer the 401(k) Plan to attract and retain talented employees by providing them with a tax-advantaged opportunity to save for retirement.  

For fiscal 2017, all of our named executive officers participated in the 401(k) Plan.  The benefits provided to our named executive officers under the 401(k) Plan are provided on the same basis as to Suburban’s other exempt

32


 

employees.  Amounts deferred by our named executive officers under the 401(k) Plan during fiscal 2017, fiscal 2016 and fiscal 2015 are included in the column titled “Salary” in the Summary Compensation Table below.

Prior to fiscal 2017, if certain performance criteria shown below were met, we would match our employee-participants’ contributions up to 6% of their base salary up to the maximum compensation limit of $265,000 for calendar years 2016 and 2015, at a rate determined based on the performance-based scale that follows:

 

If We Meet This Percentage of Budgeted EBITDA (a)

 

The Participating Employee Will Receive this

Matching Contribution for the Year

 

115% or higher

 

100%

 

100% to 114%

 

50%

 

90% to 99%

 

25%

 

Less than 90%

 

0%

 

 

 

(a)

For purposes of the 401(k) Plan, the definition of the term “Budgeted EBITDA” is identical to that of “Budgeted EBITDA” discussed under the heading title “Annual Cash Bonus Plan” above.

During fiscal 2016, Actual Adjusted EBITDA (as discussed under the heading titled “Annual Cash Bonus Plan” above), when applied to the 401(k) Plan, was such that matching contributions were not earned; however, the Committee exercised its discretionary authority under the Plan to provide participants, including our named executive officers, with matching contributions equal to 25% of their calendar year 2016 contributions that did not exceed 6% of their total base pay, up to a maximum annual compensation limit of $265,000 for 2016. During fiscal 2015, Actual Adjusted EBITDA, when applied to the 401(k) Plan, was such that participants earned matching contributions equal to 25% of their calendar year 2015 contributions that did not exceed 6% of their total base pay, up to a maximum compensation limit of $265,000 for 2015.

On January 18, 2017, our Board of Supervisors approved an amendment to the 401(k) Plan, effective for fiscal year 2017 and all subsequent years, that provides a match of $0.50 for every dollar contributed up to 6% of each participant’s total base pay, up to a maximum compensation limit of $270,000 for calendar year 2017. If, however, Actual Adjusted EBITDA is 115% or more than Budgeted EBITDA, each participant will receive a match of $1 for every dollar contributed up to 6% of each participant’s total base pay, up to a maximum compensation limit of $270,000 for calendar year 2017.  The Board approved this amendment in order to make the compensation programs we offer to our employees more competitive.  For fiscal 2017, the performance conditions that provide for more than the $0.50 match were not met.

The matching contributions made on behalf of our named executive officers for fiscal 2017, fiscal 2016, and fiscal 2015 are reported in the column titled “All Other Compensation” in the Summary Compensation Table below.

Other Benefits

Each named executive officer is eligible to participate in all of our other employee benefit plans, such as the medical, dental, group life insurance and disability plans, on the same basis as other exempt employees.  These benefit plans are offered to attract and retain talented employees by providing them with competitive benefits.

There are no post-termination or other special rights provided to any named executive officer to participate in these benefit programs other than the right to participate in such plans for a fixed period of time following termination of employment, on the same basis as is provided to other exempt employees, as required by law.  

The costs of all such benefits incurred on behalf of our named executive officers in fiscal 2017, fiscal 2016 and fiscal 2015 are reported in the column titled “All Other Compensation” in the Summary Compensation Table below.

Perquisites

Perquisites represent a minor component of our executive officers’ compensation.  Each of the named executive officers is eligible for tax preparation services, a company-provided vehicle, and an annual physical.  

The following table summarizes both the value and the utilization of these perquisites by the named executive officers

33


 

in fiscal 2017.

 

Name

 

Tax Preparation

Services

 

 

Employer

Provided

Vehicle

 

 

Physical

 

Michael A. Stivala

 

$

 

 

$

16,561

 

 

$

2,950

 

Michael A. Kuglin