UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

SUBURBAN PROPANE PARTNERS, L.P.

(Exact name of registrant as specified in its charter)

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

240 Route 10 West
Whippany, NJ 07981
(973) 887-5300
(Address, including zip code, and telephone number,
including area code, of registrant’s principal executive offices)

Securities registered pursuant to Section 12(b) of the Act:

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

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes þ No o

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No þ

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

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer þ		Accelerated filer o		Non-accelerated filer o		Smaller reporting company o
				(do not check if a smaller reporting company)

Indicate by check mark whether registrant is a shell company (as defined in Rule 12b-2 of the Securities Exchange Act of 1934). Yes o No þ

The aggregate market value as of March 28, 2008 of the registrant’s Common Units held by non-affiliates of the registrant, based on the reported closing price of such units on the New York Stock Exchange on such date ($37.88 per unit), was approximately $1,239,638,000.

Documents Incorporated by Reference: None		Total number of pages (excluding Exhibits): 134

 

 

SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES

INDEX TO ANNUAL REPORT ON FORM 10-K

		Page
PART I
ITEM 1. BUSINESS			1
ITEM 1A. RISK FACTORS			11
ITEM 1B. UNRESOLVED STAFF COMMENTS			19
ITEM 2. PROPERTIES			20
ITEM 3. LEGAL PROCEEDINGS			20
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS			20
PART II
ITEM 5. MARKET FOR THE REGISTRANT’S COMMON UNITS, RELATED UNITHOLDER MATTERS AND ISSUER PURCHASES OF UNITS			21
ITEM 6. SELECTED FINANCIAL DATA			22
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS			26
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK			48
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA			51
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE			54
ITEM 9A. CONTROLS AND PROCEDURES			54
ITEM 9B. OTHER INFORMATION			55
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND PARTNERSHIP GOVERNANCE			56
ITEM 11. EXECUTIVE COMPENSATION			61
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED UNITHOLDER MATTERS			88
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE			90
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES			91
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES			92
SIGNATURES			93
Exhibit 10.1
Exhibit 10.5
Exhibit 21.1
Exhibit 23.1
Exhibit 31.1
Exhibit 31.2
Exhibit 32.1
Exhibit 32.2

DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K contains forward-looking statements (“Forward-Looking Statements”) as defined in the Private Securities Litigation Reform Act of 1995 and Section 27A of the Securities Act of 1933, as amended, relating to future business expectations and predictions and financial condition and results of operations of Suburban Propane Partners, L.P. (the “Partnership”). Some of these statements can be identified by the use of forward-looking terminology such as “prospects,” “outlook,” “believes,” “estimates,” “intends,” “may,” “will,” “should,” “anticipates,” “expects” or “plans” or the negative or other variation of these or similar words, or by discussion of trends and conditions, strategies or risks and uncertainties. These Forward-Looking Statements involve certain risks and uncertainties that could cause actual results to differ materially from those discussed or implied in such Forward-Looking Statements (statements contained in this Annual Report identifying such risks and uncertainties are referred to as “Cautionary Statements”). The risks and uncertainties and their impact on the Partnership’s results include, but are not limited to, the following risks:

•		The impact of weather conditions on the demand for propane, fuel oil and other refined fuels, natural gas and electricity;
•		Volatility in the unit cost of propane, fuel oil and other refined fuels and natural gas, the impact of the Partnership’s hedging and risk management activities, and the adverse impact of price increases on volumes as a result of customer conservation;
•		The ability of the Partnership to compete with other suppliers of propane, fuel oil and other energy sources;
•		The impact on the price and supply of propane, fuel oil and other refined fuels from the political, military or economic instability of the oil producing nations, global terrorism and other general economic conditions;
•		The ability of the Partnership to acquire and maintain reliable transportation for its propane, fuel oil and other refined fuels;
•		The ability of the Partnership to retain customers;
•		The impact of customer conservation, energy efficiency and technology advances on the demand for propane and fuel oil;
•		The ability of management to continue to control expenses;
•		The impact of changes in applicable statutes and government regulations, or their interpretations, including those relating to the environment and global warming and other regulatory developments on the Partnership’s business;
•		The impact of legal proceedings on the Partnership’s business;
•		The impact of operating hazards that could adversely affect the Partnership’s operating results to the extent not covered by insurance;
•		The Partnership’s ability to make strategic acquisitions and successfully integrate them; and
•		The impact of current conditions in the global capital and credit markets, and general economic pressures.

Some of these Forward-Looking Statements are discussed in more detail in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Annual Report. On different occasions, the Partnership or its representatives have made or may make Forward-Looking Statements in other filings with the Securities and Exchange Commission (“SEC”), press releases or oral statements made by or with the approval of one of the Partnership’s authorized executive officers. Readers are cautioned not to place undue reliance on Forward-Looking Statements, which reflect management’s view only as of the date made. The Partnership undertakes no obligation to update any Forward-Looking Statement or Cautionary Statement, except as required by law. All subsequent written and oral Forward-Looking Statements attributable to the Partnership or persons acting on its behalf are expressly qualified in their entirety by the Cautionary Statements in this Annual Report and in future SEC reports. For a more complete discussion of specific factors which could cause actual results to differ from those in the Forward-Looking Statements or Cautionary Statements, see ‘‘Risk Factors’’ in this Annual Report.

PART I

ITEM 1. BUSINESS

Development of Business

Suburban Propane Partners, L.P. (the “Partnership”), a publicly traded Delaware limited partnership, is a nationwide marketer and distributor of a diverse array of products meeting the energy needs of our customers. We specialize in the distribution of propane, fuel oil and refined fuels, as well as the marketing of natural gas and electricity in deregulated markets. In support of our core marketing and distribution operations, we install and service a variety of home comfort equipment, particularly in the areas of heating and ventilation. We believe, based on LP/Gas Magazine dated February 2008, that we are the fourth largest retail marketer of propane in the United States, measured by retail gallons sold in the year 2007. As of September 27, 2008, we were serving the energy needs of more than 900,000 active residential, commercial, industrial and agricultural customers through approximately 300 locations in 30 states located primarily in the east and west coast regions of the United States, including Alaska. We sold approximately 386.2 million gallons of propane to retail customers and 76.5 million gallons of fuel oil and refined fuels during the year ended September 27, 2008. Together with our predecessor companies, we have been continuously engaged in the retail propane business since 1928.

We conduct our business principally through Suburban Propane, L.P., a Delaware limited partnership, which operates our propane business and assets (the “Operating Partnership”), and its direct and indirect subsidiaries. Our general partner, and the general partner of our Operating Partnership, is Suburban Energy Services Group LLC (the “General Partner”), a Delaware limited liability company. Since October 19, 2006, the General Partner has had no economic interest in either the Partnership or the Operating Partnership other than as a holder of 784 Common Units of the Partnership. Prior to October 19, 2006, the General Partner was majority-owned by senior management of the Partnership and owned an approximate combined 1.75% general partner interest in the Partnership and the Operating Partnership.

On October 19, 2006, the Partnership, the Operating Partnership and the General Partner consummated an Exchange Agreement by and among the parties dated July 27, 2006 (the “Exchange Agreement”), pursuant to which the Partnership issued 2,300,000 Common Units to the General Partner in exchange for the cancellation of the General Partner’s incentive distribution rights (“IDRs”), the economic interest in the Partnership included in the general partner interest therein and the economic interest in the Operating Partnership included in the general partner interest therein (the “GP Exchange Transaction”). Pursuant to a Distribution, Release and Lockup Agreement dated July 27, 2006 by and among the Partnership, the Operating Partnership, the General Partner and the then individual members of the General Partner (the “Distribution Agreement”), the Common Units received by the General Partner (other than 784 Common Units that will remain in the General Partner) were distributed to the then members of the General Partner in exchange for their interests in the General Partner.

In addition to the GP Exchange Transaction, the Partnership adopted the Third Amended and Restated Agreement of Limited Partnership (the “Partnership Agreement”), which amended the Previous Partnership Agreement to, among other things, effectuate the GP Exchange Transaction. Under the Partnership Agreement, the General Partner will continue to be the general partner of both the Partnership and the Operating Partnership, but its general partner interests will have no economic value (which means that such general partner interests do not entitle the holder thereof to any cash distributions of either partnership, or to any cash payment upon the liquidation of either partnership, or any other economic rights in either partnership). Following the GP Exchange Transaction and the consummation of the Distribution Agreement, the sole member of the General Partner is the Chief Executive Officer of the Partnership and the General Partner holds 784 Common Units received in the GP Exchange Transaction. The Partnership continues to own all of the limited partner interests in the Operating Partnership, with 0.1% thereof held through a limited liability company, wholly-owned (directly and indirectly) by the Partnership. Additionally, under the Partnership Agreement no incentive distribution rights are outstanding and no provisions for future incentive distribution rights are contained in the Partnership Agreement. The Common Units represent 100% of the limited partner interests in the Partnership.

Subsidiaries of the Operating Partnership include Suburban Sales and Service, Inc. (the “Service Company”), which conducts a portion of the Partnership’s service work and appliance and parts businesses. The Service Company is the sole member of Gas Connection, LLC (d/b/a HomeTown Hearth & Grill), and Suburban Franchising, LLC. HomeTown Hearth & Grill sells and installs natural gas and propane gas grills, fireplaces and related accessories and supplies through four retail stores in the northwest and northeast regions as of September 27, 2008. Suburban Franchising creates and develops propane related franchising business opportunities.

On December 23, 2003, we acquired substantially all of the assets and operations of Agway Energy Products, LLC, Agway Energy Services, Inc. and Agway Energy Services PA, Inc. (collectively referred to as “Agway Energy”) pursuant to an asset purchase agreement dated November 10, 2003 (the “Agway Acquisition”). With the Agway Acquisition, we transformed our business from a marketer of a single fuel into one that provides multiple energy solutions, with expansion into the marketing and distribution of fuel oil and refined fuels, as well as the marketing of natural gas and electricity. Our fuel oil and refined fuels, natural gas and electricity and services businesses are structured as corporate entities (collectively referred to as Corporate Entities) and, as such, are subject to corporate level income tax.

Suburban Energy Finance Corporation, a direct wholly-owned subsidiary of the Partnership, was formed on November 26, 2003 to serve as co-issuer, jointly and severally with the Partnership, of the Partnership’s unsecured 6.875% senior notes due December 2013. Suburban Energy Finance Corporation has nominal assets and conducts no business operations.

In this Annual Report, unless otherwise indicated, the terms “Partnership,” “we,” “us,” and “our” are used to refer to Suburban Propane Partners, L.P. or to Suburban Propane Partners, L.P. and its consolidated subsidiaries, including the Operating Partnership. The Partnership, the Operating Partnership and the Service Company commenced operations in March 1996 in connection with the Partnership’s initial public offering of Common Units.

We currently file Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and current reports on Form 8-K with the SEC. You may read and receive copies of any materials that we file with the SEC at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. Any information filed by us is also available on the SEC’s EDGAR database at www.sec.gov.

Upon written request or through a link from our website at www.suburbanpropane.com, we will provide, without charge, copies of our Annual Report on Form 10-K for the year ended September 27, 2008, each of the Quarterly Reports on Form 10-Q, current reports filed or furnished on Form 8-K and all amendments to such reports as soon as is reasonably practicable after such reports are electronically filed with or furnished to the SEC. Requests should be directed to: Suburban Propane Partners, L.P., Investor Relations, P.O. Box 206, Whippany, New Jersey 07981-0206.

Our Strategy

Our business strategy is to deliver increasing value to our Unitholders through initiatives, both internal and external, that are geared toward achieving sustainable profitable growth and increased quarterly distributions. The following are key elements of our strategy:

Internal Focus on Driving Operating Efficiencies, Right-Sizing Our Cost Structure and Enhancing Our Customer Mix. We focus internally on improving the efficiency of our existing operations, managing our cost structure and improving our customer mix. Through investments in our technology infrastructure, we continue to seek to improve operating efficiencies and the return on assets employed. Beginning at the end of fiscal 2005 and continuing throughout much of fiscal 2007, we implemented specific plans to streamline our operating footprint and management structure, eliminate redundant functions and assets through enhanced operating efficiencies, and refocus our service activities on offerings to support our existing customer base within our core operating segments. While the majority of the specific initiatives under these plans were executed by the end of fiscal 2007, our focus on operating efficiencies and on our cost structure is an ongoing process. Our internal efforts are particularly focused in the areas of route optimization, forecasting customer usage, inventory control, cash management and customer tracking.

In addition, we continually evaluate our customer base and, in particular, focus on customers that provide a proper return. In that regard, our efforts to strategically exit certain lower margin business in both our propane and fuel oil and refined fuels segments has resulted in a reduction in volumes sold, yet has had a favorable impact on overall segment profitability.

Growing Our Customer Base by Improving Customer Retention and Acquiring New Customers. We set clear objectives to focus our employees on seeking new customers and retaining existing customers by providing world-class customer service. We believe that customer satisfaction is a critical factor in the growth and success of our operations. “Our Business is Customer Satisfaction” is one of our core operating philosophies. We measure and reward our customer service centers based on a combination of profitability of the individual customer service center and net customer growth.

Selective Acquisitions of Complementary Businesses or Assets. Externally, we seek to extend our presence or diversify our product offerings through selective acquisitions. Our acquisition strategy is to focus on businesses with a relatively steady cash flow that will extend our presence in strategically attractive markets, complement our existing business segments or provide an opportunity to diversify our operations with other energy-related assets. While we are active in this area, we are also very patient and deliberate in evaluating acquisition candidates. There were no acquisitions completed during fiscal 2008, 2007 or 2006 as we focused internally on driving efficiencies, reducing costs and integrating the operations of Agway Energy which were acquired in fiscal 2004. However, during fiscal 2007 we completed a non-cash transaction in which we disposed of nine customer service centers considered to be in markets that were non-strategic to our operations in exchange for three customer service centers located in Alaska, thus expanding our presence in this strategically attractive market.

Selective Disposition of Non-Strategic Assets. We continuously evaluate our existing facilities to identify opportunities to optimize our return on assets by selectively divesting operations in slower growing markets, generating proceeds that can be reinvested in markets that present greater opportunities for growth. Our objective is to fully exploit the growth and profit potential of all of our assets. In that regard, on October 2, 2007 we completed the sale of our Tirzah, South Carolina underground granite propane storage cavern, and associated 62-mile pipeline, for approximately $53.7 million in net proceeds which have been reinvested in the business.

Business Segments

We manage and evaluate our operations in six segments, four of which are reportable segments: Propane, Fuel Oil and Refined Fuels, Natural Gas and Electricity and Services. These business segments are described below. See the Notes to the Consolidated Financial Statements included in this Annual Report for financial information about our business segments.

Propane

Propane is a by-product of natural gas processing and petroleum refining. It is a clean burning energy source recognized for its transportability and ease of use relative to alternative forms of stand-alone energy sources. Propane use falls into three broad categories:

	•		residential and commercial applications;
	•		industrial applications; and
	•		agricultural uses.

In the residential and commercial markets, propane is used primarily for space heating, water heating, clothes drying and cooking. Industrial customers use propane generally as a motor fuel to power over-the-road vehicles, forklifts and stationary engines, to fire furnaces, as a cutting gas and in other process applications. In the agricultural market, propane is primarily used for tobacco curing, crop drying, poultry brooding and weed control.

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

Product Distribution and Marketing

We distribute propane through a nationwide retail distribution network consisting of approximately 300 locations in 30 states as of September 27, 2008. Our operations are concentrated in the east and west coast regions of the United States, including Alaska. In fiscal 2008, we serviced approximately 745,000 active propane customers. Typically, our customer service centers are located in suburban and rural areas where natural gas is not readily available. Generally, these customer service centers consist of an office, appliance showroom, warehouse and service facilities, with one or more 18,000 to 30,000 gallon storage tanks on the premises. Most of our residential customers receive their propane supply through an automatic delivery system that eliminates the customer’s need to make an affirmative purchase decision. These deliveries are scheduled through computer technology, based upon each customer’s historical consumption patterns and prevailing weather conditions. Additionally, as is common practice in the industry, we offer our customers a budget payment plan whereby the customer’s estimated annual propane purchases and service contracts are paid for in a series of estimated equal monthly payments over a twelve-month period. From our customer service centers, we also sell, install and service equipment to customers who purchase propane from us including heating and cooking appliances, hearth products and supplies and, at some locations, propane fuel systems for motor vehicles.

We sell propane primarily to six customer markets: residential, commercial, industrial (including engine fuel), agricultural, other retail users and wholesale. Approximately 95% of the propane gallons sold by us in fiscal 2008 were to retail customers: 43% to residential customers, 32% to commercial customers, 9% to industrial customers, 6% to agricultural customers and 10% to other retail users. The balance of approximately 5% of the propane gallons sold by us in fiscal 2008 was for risk management activities and wholesale customers. Sales to residential customers in fiscal 2008 accounted for approximately 63% of our margins on retail propane sales, reflecting the higher-margin nature of the residential market. No single customer accounted for 10% or more of our propane revenues during fiscal 2008.

Retail deliveries of propane are usually made to customers by means of bobtail and rack trucks. Propane is pumped from bobtail trucks, which have capacities ranging from 2,125 gallons to 2,975 gallons of propane, into a stationary storage tank on the customers’ premises. The capacity of these storage tanks ranges from approximately 100 gallons to approximately 1,200 gallons, with a typical tank having a capacity of 300 to 400 gallons. As is common in the propane industry, we own a significant portion of the storage tanks located on our customers’ premises. We also deliver propane to retail customers in portable cylinders, which typically have a capacity of 5 to 35 gallons. When these cylinders are delivered to customers, empty cylinders are refilled in place or transported for replenishment at our distribution locations. We also deliver propane to certain other bulk end users in larger trucks known as transports, which have an average capacity of approximately 9,000 gallons. End users receiving transport deliveries include industrial customers, large-scale heating accounts, such as local gas utilities that use propane as a supplemental fuel to meet peak load delivery requirements, and large agricultural accounts that use propane for crop drying.

In our wholesale operations, we principally sell propane to large industrial end users and other propane distributors. The wholesale market includes customers who use propane to fire furnaces, as a cutting gas and in other process applications. Due to the low margin nature of the wholesale market as compared to the retail market, we have reduced our emphasis on wholesale marketing over the last several years.

Supply

Our propane supply is purchased from approximately 55 oil companies and natural gas processors at approximately 115 supply points located in the United States and Canada. We make purchases primarily under one-year agreements that are subject to annual renewal, and also purchase propane on the spot market. Supply contracts generally provide for pricing in accordance with posted prices at the time of delivery or the current prices established at major storage points, and some contracts include a pricing formula that typically is based on prevailing market prices. Some of these agreements provide maximum and minimum seasonal purchase guidelines. Propane is generally transported from refineries, pipeline terminals, storage facilities (including our storage facility in Elk Grove, California) and coastal terminals to our customer service centers by a combination of common carriers, owner-operators and railroad tank cars. See Item 2 of this Annual Report.

Historically, supplies of propane have been readily available from our supply sources. Although we make no assurance regarding the availability of supplies of propane in the future, we currently expect to be able to secure adequate supplies during fiscal 2009. During fiscal 2008, Targa Liquids Marketing and Trade (“Targa”) provided approximately 19% of our total propane purchases. Aside from this supplier, no single supplier provided more than 10% of our total propane supply during fiscal 2008. The availability of our propane supply is dependent on several factors, including the severity of winter weather and the price and availability of competing fuels, such as natural gas and fuel oil. We believe that if supplies from Targa were interrupted, we would be able to secure adequate propane supplies from other sources without a material disruption of our operations. Nevertheless, the cost of acquiring such propane might be higher and, at least on a short-term basis, margins could be affected. Approximately 95% of our total propane purchases were from domestic suppliers in fiscal 2008.

We seek to reduce the effect of propane price volatility on our product costs and to help ensure the availability of propane during periods of short supply. We are currently a party to propane futures transactions on the New York Mercantile Exchange (“NYMEX”) and to forward and option contracts with various third parties to purchase and sell product at fixed prices in the future. These activities are monitored by our senior management through enforcement of our Hedging and Risk Management Policy. See Items 7 and 7A of this Annual Report.

We own and operate a large propane storage facility in California. We also operate smaller storage facilities in other locations and have rights to use storage facilities in additional locations (including our former facility in Tirzah, South Carolina). These storage facilities enable us to buy and store large quantities of propane particularly during periods of low demand, which generally occur during the summer months. This practice helps ensure a more secure supply of propane during periods of intense demand or price instability. As of September 27, 2008, the majority of our storage capacity in California was leased to third parties. On October 2, 2007, we completed the sale of our Tirzah, South Carolina underground granite propane storage cavern, and associated 62-mile pipeline.

Competition

According to the Energy Information Administration, propane accounts for approximately 4% of household energy consumption in the United States. This level has not changed materially over the previous two decades. As an energy source, propane competes primarily with natural gas, electricity and fuel oil, principally on the basis of price, availability and portability.

Propane is more expensive than natural gas on an equivalent British Thermal Unit basis in locations serviced by natural gas, but it is an alternative to natural gas in rural and suburban areas where natural gas is unavailable or portability of product is required. Historically, the expansion of natural gas into traditional propane markets has been inhibited by the capital costs required to expand pipeline and retail distribution systems. Although the recent extension of natural gas pipelines to previously unserved geographic areas tends to displace propane distribution in those areas, we believe new opportunities for propane sales have been arising as new neighborhoods are developed in geographically remote areas.

We also have some relative advantages over suppliers of other energy sources. For example, propane is generally less expensive to use than electricity for space heating, water heating, clothes drying and cooking. Fuel oil has not been a significant competitor due to the current geographical diversity of our operations, and propane and fuel oil are not significant competitors because of the cost of converting from one to the other.

In addition to competing with suppliers of other energy sources, our propane operations compete with other retail propane distributors. The retail propane industry is highly fragmented and competition generally occurs on a local basis with other large full-service multi-state propane marketers, thousands of smaller local independent marketers and farm cooperatives. Based on industry statistics contained in 2006 Sales of Natural Gas Liquids and Liquefied Refinery Gases, as published by the American Petroleum Institute in December 2007, and LP/Gas Magazine dated February 2008, the ten largest retailers, including us, account for approximately 43% of the total retail sales of propane in the United States. During fiscal year 2008, one marketer had more than a 10% share of the total retail propane market in the United States. For fiscal years 2007 and 2006, no single marketer had a greater than 10% share of the total retail propane market in the United States. Most of our customer service centers compete with five or more marketers or distributors. However, each of our customer service centers operates in its own competitive environment because retail marketers tend to locate in close proximity to customers in order to lower the cost of providing service. Our typical customer service center has an effective marketing radius of approximately 50 miles, although in certain rural areas the marketing radius may be extended by a satellite office.

Fuel Oil and Refined Fuels

Product Distribution and Marketing

We market and distribute fuel oil, kerosene, diesel fuel and gasoline to approximately 90,000 residential and commercial customers in the northeast region of the United States. Sales of fuel oil and refined fuels for fiscal 2008 amounted to 76.5 million gallons. Approximately 65% of the fuel oil and refined fuels gallons sold by us in fiscal 2008 were to residential customers, principally for home heating, 4% were to commercial customers, 1% were to agricultural and 4% to other users. Fuel oil has a more limited use, compared to propane, for space and water heating in residential and commercial buildings. We sell diesel fuel and gasoline to commercial and industrial customers for use primarily to propel motor vehicles. Due to the low margin nature of the diesel fuel and gasoline businesses, at the end of fiscal 2005 we made a decision to reduce our emphasis on these activities and, in certain instances, exited the business. Sales of diesel and gasoline accounted for the remaining 26% of total volumes sold in this segment during fiscal 2008.

Approximately 61% of our fuel oil customers receive their fuel oil under an automatic delivery system without the customer having to make an affirmative purchase decision. These deliveries are scheduled through computer technology, based upon each customer’s historical consumption patterns and prevailing weather conditions. Additionally, as is common practice in the industry, we offer our customers a budget payment plan whereby the customer’s estimated annual fuel oil purchases and service contracts are paid for in a series of estimated equal monthly payments over a twelve-month period. From our customer service centers, we also sell, install and service equipment to customers who purchase fuel oil from us including heating appliances.

Deliveries of fuel oil are usually made to customers by means of tankwagon trucks, which have capacities ranging from 2,500 gallons to 3,000 gallons. Fuel oil is pumped from the tankwagon truck into a stationary storage tank that is located on the customer’s premises, which is owned by the customer. The capacity of customer storage tanks ranges from approximately 275 gallons to approximately 1,000 gallons. No single customer accounted for 10% or more of our fuel oil revenues during fiscal 2008.

Supply

We obtain fuel oil and other refined fuels in either pipeline, truckload or tankwagon quantities, and have contracts with certain pipeline and terminal operators for the right to temporarily store fuel oil at more than 13 terminal facilities we do not own. We have arrangements with certain suppliers of fuel oil, which provide open access to fuel oil at specific terminals throughout the northeast. Additionally, a portion of our purchases of fuel oil are made at local wholesale terminal racks. In most cases, the supply contracts do not establish the price of fuel oil in advance; rather, prices are typically established based upon market prices at the time of delivery plus or minus a differential for transportation and volume discounts. We purchase fuel oil from more than 20 suppliers at approximately 60 supply points. While fuel oil supply is more susceptible to longer periods of supply constraint than propane, we believe that our supply arrangements will provide us with sufficient supply sources. Although we make no assurance regarding the availability of supplies of fuel oil in the future, we currently expect to be able to secure adequate supplies during fiscal 2009.

Competition

The fuel oil industry is a mature industry with total demand expected to remain relatively flat to moderately declining. The fuel oil industry is highly fragmented, characterized by a large number of relatively small, independently owned and operated local distributors. We compete with other fuel oil distributors offering a broad range of services and prices, from full service distributors to those that solely offer the delivery service. We have developed a wide range of sales programs and service offerings for our fuel oil customer base in an attempt to be viewed as a full service energy provider and to build customer loyalty. For instance, like most companies in the fuel oil business, we provide home heating equipment repair service to our fuel oil customers through our services segment on a 24-hour a day basis. The fuel oil business unit also competes for retail customers with suppliers of alternative energy sources, principally natural gas, propane and electricity.

Natural Gas and Electricity

We market natural gas and electricity through our wholly-owned subsidiary Agway Energy Services, LLC (“AES”) in the deregulated markets of New York and Pennsylvania primarily to residential and small commercial customers. Historically, local utility companies provided their customers with all three aspects of electric and natural gas service: generation, transmission and distribution. However, under deregulation, public utility commissions in several states are licensing energy service companies, such as AES, to act as alternative suppliers of the commodity to end consumers. In essence, we make arrangements for the supply of electricity or natural gas to specific delivery points. The local utility companies continue to distribute electricity and natural gas on their distribution systems. The business strategy of this business segment is to expand its market share by concentrating on growth in the customer base and expansion into other deregulated markets that are considered strategic markets.

We serve nearly 71,000 natural gas and electricity customers in New York and Pennsylvania. During fiscal 2008, we sold approximately 4.1 million dekatherms of natural gas and 493.1 million kilowatt hours of electricity through the natural gas and electricity segment. Approximately 80% of our customers were residential households and the remainder was small commercial and industrial customers. New accounts are obtained through numerous marketing and advertising programs, including telemarketing and direct mail initiatives. Most local utility companies have established billing service arrangements whereby customers receive a single bill from the local utility company which includes distribution charges from the local utility company, as well as product charges for the amount of natural gas or electricity provided by AES and utilized by the customer. We have arrangements with several local utility companies that provide billing and collection services for a fee. Under these arrangements, we are paid by the local utility company for all or a portion of customer billings after a specified number of days following the customer billing with no further recourse to AES.

Supply of natural gas is arranged through annual supply agreements with major national wholesale suppliers. Pricing under the annual natural gas supply contracts is based on posted market prices at the time of delivery, and some contracts include a pricing formula that typically is based on prevailing market prices. The majority of our electricity requirements are purchased through the New York Independent System Operator (“NYISO”) under an annual supply agreement, as well as purchase arrangements through other national wholesale suppliers on the open market. Electricity pricing under the NYISO agreement is based on local market indices at the time of delivery. Competition is primarily with local utility companies, as well as other marketers of natural gas and electricity providing similar alternatives as AES.

Services

We sell, install and service all types of whole-house heating products, air cleaners, humidifiers, de-humidifiers, hearth products and space heaters to the customers of our propane, fuel oil, natural gas and electricity products. We also offer services such as duct cleaning, air balancing and energy audits to those customers. Our supply needs are filled through supply arrangements with several large regional equipment manufacturers and distribution companies. Competition in this business segment is primarily with small, local heating and ventilation providers and contractors, as well as, to a lesser extent, other regional service providers. During the third quarter of fiscal 2006, we initiated plans to restructure our service offerings and eliminated certain stand-alone installation activities. See the Notes to the consolidated financial statements in this Annual Report. The focus of our ongoing service offerings are in support of the service needs of our existing customer base within our propane, refined fuels and natural gas and electricity business segments. Additionally, we have entered into arrangements with third-party service providers to complement and, in certain instances, supplement our existing service capabilities.

All Other

Activities from our HomeTown Hearth & Grill and Suburban Franchising subsidiaries comprise the all other business caption.

Seasonality

The retail propane and fuel oil distribution businesses, as well as the natural gas marketing business, are seasonal because the primary use of these fuels is for heating residential and commercial buildings. Historically, approximately two-thirds of our retail propane volume is sold during the six-month peak heating season from October through March. The fuel oil business tends to experience greater seasonality given its more limited use for space heating and approximately three-fourths of our fuel oil volumes are sold between October and March. Consequently, sales and operating profits are concentrated in our first and second fiscal quarters. Cash flows from operations, therefore, are greatest during the second and third fiscal quarters when customers pay for product purchased during the winter heating season. We expect lower operating profits and either net losses or lower net income during the period from April through September (our third and fourth fiscal quarters).

Weather conditions have a significant impact on the demand for our products, in particular propane, fuel oil and natural gas, for both heating and agricultural purposes. Many of our customers rely heavily on propane, fuel oil or natural gas as a heating source. Accordingly, the volume sold is directly affected by the severity of the winter weather in our service areas, which can vary substantially from year to year. In any given area, sustained warmer than normal temperatures will tend to result in reduced propane, fuel oil and natural gas consumption, while sustained colder than normal temperatures will tend to result in greater consumption.

Trademarks and Tradenames

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

Government Regulation; Environmental and Safety Matters

We are subject to various federal, state and local environmental, health and safety laws and regulations. Generally, these laws impose limitations on the discharge of pollutants and establish standards for the handling of solid and hazardous wastes and can require the investigation and cleanup of environmental contamination. These laws include the Resource Conservation and Recovery Act, the Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”), the Clean Air Act, the Occupational Safety and Health Act, the Emergency Planning and Community Right to Know Act, the Clean Water Act and comparable state statutes. CERCLA, also known as the “Superfund” law, imposes joint and several liability without regard to fault or the legality of the original conduct on certain classes of persons that are considered to have contributed to the release or threatened release of a “hazardous substance” into the environment. Propane is not a hazardous substance within the meaning of CERCLA, whereas fuel oil is considered a hazardous substance. We own real property at locations where such hazardous substances may be present as a result of prior activities.

We expect that we will be required to expend funds to participate in the remediation of certain sites, including sites where we have been designated by the Environmental Protection Agency as a potentially responsible party under CERCLA and at sites with aboveground and underground fuel storage tanks. We will also incur other expenses associated with environmental compliance. We continually monitor our operations with respect to potential environmental issues, including changes in legal requirements and remediation technologies.

With the Agway Acquisition, we acquired certain surplus properties with either known or probable environmental exposure, some of which are currently in varying stages of investigation, remediation or monitoring. Additionally, we identified that certain active sites acquired contained environmental conditions which required further investigation, future remediation or ongoing monitoring activities. The environmental exposures included instances of soil and/or groundwater contamination associated with the handling and storage of fuel oil, gasoline and diesel fuel.

As of September 27, 2008, we had accrued environmental liabilities of $1.6 million representing the total estimated future liability for remediation and monitoring.

Estimating the extent of our responsibility at a particular site, and the method and ultimate cost of remediation of that site, requires making numerous assumptions. As a result, the ultimate cost to remediate any site may differ from current estimates, and will depend, in part, on whether there is additional contamination, not currently known to us, at that site. However, we believe that our past experience provides a reasonable basis for estimating these liabilities. As additional information becomes available, estimates are adjusted as necessary. While we do not anticipate that any such adjustment would be material to our financial statements, the result of ongoing or future environmental studies or other factors could alter this expectation and require recording additional liabilities. We currently cannot determine whether we will incur additional liabilities or the extent or amount of any such liabilities.

National Fire Protection Association (“NFPA”) Pamphlet Nos. 54 and 58, which establish rules and procedures governing the safe handling of propane, or comparable regulations, have been adopted, in whole, in part or with state addenda, as the industry standard for propane storage, distribution and equipment installation and operation in all of the states in which we operate. In some states these laws are administered by state agencies, and in others they are administered on a municipal level. Pamphlet No. 58 has adopted storage tank valve retrofit requirements due to be completed by June 2011 or later depending on when each state adopts the 2001 edition of NFPA Pamphlet No. 58. We have a program in place to meet this deadline.

NFPA Pamphlet Nos. 30, 30A, 31, 385 and 395, which establish rules and procedures governing the safe handling of distillates (fuel oil, kerosene and diesel fuel) and gasoline, or comparable regulations, have been adopted, in whole, in part or with state addenda, as the industry standard for fuel oil, kerosene, diesel fuel and gasoline storage, distribution and equipment installation/operation in all of the states in which we sell those products. In some states these laws are administered by state agencies and in others they are administered on a municipal level.

With respect to the transportation of propane, distillates and gasoline by truck, we are subject to regulations promulgated under the Federal Motor Carrier Safety Act. These regulations cover the transportation of hazardous materials and are administered by the United States Department of Transportation or similar state agencies. We conduct ongoing training programs to help ensure that our operations are in compliance with applicable safety regulations. We maintain various permits that are necessary to operate some of our facilities, some of which may be material to our operations. We believe that the procedures currently in effect at all of our facilities for the handling, storage and distribution of propane, distillates and gasoline are consistent with industry standards and are in compliance, in all material respects, with applicable laws and regulations.

The Department of Homeland Security (“DHS”) has published regulations under 6 CFR Part 27 Chemical Facility Anti-Terrorism Standards. Our facilities are registered with the DHS – we have 468 facilities determined to be “Not a High Risk Chemical Facility” and 16 facilities determined to be Tier 4 (lowest level of security risk). These 16 facilities are currently being reviewed for Security Vulnerability Assessment submission, which is due by December 30, 2008. Because our facilities are currently operating under the security programs developed under guidelines issued by the Department of Transportation, Department of Labor and Environmental Protection Agency, we do not anticipate that we will incur significant costs in order to comply with these DHS regulations.

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

Employees

As of September 27, 2008, we had 2,985 full time employees, of whom 430 were engaged in general and administrative activities (including fleet maintenance), 45 were engaged in transportation and product supply activities and 2,510 were customer service center employees. As of September 27, 2008, 96 of our employees were represented by 8 different local chapters of labor unions. We believe that our relations with both our union and non-union employees are satisfactory. From time to time, we hire temporary workers to meet peak seasonal demands.

ITEM 1A. RISK FACTORS

You should carefully consider the specific risk factors set forth below as well as the other information contained or incorporated by reference in this Annual Report. Some factors in this section are Forward-Looking Statements. See ‘‘Disclosure Regarding Forward-Looking Statements’’ above.

Risks Inherent in the Ownership of Our Common Units

Cash distributions are not guaranteed and may fluctuate with our performance and other external factors.

Cash distributions on our Common Units are not guaranteed, and depend primarily on our cash flow and our cash on hand. Because they are not dependent on profitability, which is affected by non-cash items, our cash distributions might be made during periods when we record losses and might not be made during periods when we record profits.

The amount of cash we generate may fluctuate based on our performance and other factors, including:

	•		the impact of the risks inherent in our business operations, as described below;
	•		required principal and interest payments on our debt and restrictions contained in our debt instruments;
	•		issuances of debt and equity securities;
	•		our ability to control expenses;
	•		fluctuations in working capital;
	•		capital expenditures; and
	•		financial, business and other factors, a number of which will be beyond our control.

Our Partnership Agreement gives our Board of Supervisors broad discretion in establishing cash reserves for, among other things, the proper conduct of our business. These cash reserves will affect the amount of cash available for distributions.

We have substantial indebtedness. Our debt agreements may limit our ability to make distributions to Unitholders, as well as our financial flexibility.

As of September 27, 2008, we had total outstanding borrowings of $535.0 million, including $425.0 million of senior notes issued by the Partnership and our wholly-owned subsidiary, Suburban Energy Finance Corporation, and $110.0 million of borrowings outstanding under the Operating Partnership’s term loan. The payment of principal and interest on our debt will reduce the cash available to make distributions on our Common Units. In addition, we will not be able to make any distributions to our Unitholders if there is, or after giving effect to such distribution, there would be, an event of default under the indenture governing the senior notes. The amount of distributions that the Partnership makes to its Unitholders is limited by the senior notes, and the amount of distributions that the Operating Partnership may make to the Partnership is limited by the revolving credit facility. The amount and terms of our debt may also adversely affect our ability to finance future operations and capital needs, limit our ability to pursue acquisitions and other business opportunities and make our results of operations more susceptible to adverse economic and industry conditions. In addition to our outstanding indebtedness, we may in the future require additional debt to finance acquisitions or for general business purposes; however, credit market conditions may impact our ability to access such financing. If we are unable to access needed financing or to generate sufficient cash from operations, we may be required to abandon certain projects or curtail capital expenditures. Additional debt, where it is available, could result in an increase in our leverage. Our ability to make principal and interest payments depends on our future performance, which is subject to many factors, some of which are beyond our control.

Unitholders have limited voting rights.

A Board of Supervisors manages our operations. Our Unitholders have only limited voting rights on matters affecting our business, including the right to elect the members of our Board of Supervisors every three years.

It may be difficult for a third party to acquire us, even if doing so would be beneficial to our Unitholders.

Some provisions of our Partnership Agreement may discourage, delay or prevent third parties from acquiring us, even if doing so would be beneficial to our Unitholders. For example, our Partnership Agreement contains a provision, based on Section 203 of the Delaware General Corporation Law, that generally prohibits the Partnership from engaging in a business combination with a 15% or greater Unitholder for a period of three years following the date that person or entity acquired at least 15% of our outstanding Common Units, unless certain exceptions apply. Additionally, our Partnership Agreement sets forth advance notice procedures for a Unitholder to nominate a Supervisor to stand for election, which procedures may discourage or deter a potential acquiror from conducting a solicitation of proxies to elect the acquiror’s own slate of Supervisors or otherwise attempting to obtain control of the Partnership. These nomination procedures may not be revised or repealed, and inconsistent provisions may not be adopted, without the approval of the holders of at least 66-2/3% of the outstanding Common Units. These provisions may have an anti-takeover effect with respect to transactions not approved in advance by our Board of Supervisors, including discouraging attempts that might result in a premium over the market price of the Common Units held by our Unitholders.

Unitholders may not have limited liability in some circumstances.

A number of states have not clearly established limitations on the liabilities of limited partners for the obligations of a limited partnership. Our Unitholders might be held liable for our obligations as if they were general partners if:

	•		a court or government agency determined that we were conducting business in the state but had not complied with the state’s limited partnership statute; or
	•		Unitholders’ rights to act together to remove or replace the General Partner or take other actions under our Partnership Agreement are deemed to constitute ‘‘participation in the control’’ of our business for purposes of the state’s limited partnership statute.

Unitholders may have liability to repay distributions.

Unitholders will not be liable for assessments in addition to their initial capital investment in the Common Units. Under specific circumstances, however, Unitholders may have to repay to us amounts wrongfully returned or distributed to them. Under Delaware law, we may not make a distribution to Unitholders if the distribution causes our liabilities to exceed the fair value of our assets. Liabilities to partners on account of their partnership interests and nonrecourse liabilities are not counted for purposes of determining whether a distribution is permitted. Delaware law provides that a limited partner who receives a distribution of this kind and knew at the time of the distribution that the distribution violated Delaware law will be liable to the limited partnership for the distribution amount for three years from the distribution date. Under Delaware law, an assignee who becomes a substituted limited partner of a limited partnership is liable for the obligations of the assignor to make contributions to the partnership. However, such an assignee is not obligated for liabilities unknown to him at the time he or she became a limited partner if the liabilities could not be determined from the partnership agreement.

If we issue additional limited partner interests or other equity securities as consideration for acquisitions or for other purposes, the relative voting strength of each Unitholder will be diminished over time due to the dilution of each Unitholder’s interests and additional taxable income may be allocated to each Unitholder.

Our Partnership Agreement generally allows us to issue additional limited partner interests and other equity securities without the approval of our Unitholders. Therefore, when we issue additional Common Units or securities ranking on a parity with the Common Units, each Unitholder’s proportionate partnership interest will decrease, and the amount of cash distributed on each Common Unit and the market price of Common Units could decrease. The issuance of additional Common Units will also diminish the relative voting strength of each previously outstanding Common Unit. In addition, the issuance of additional Common Units will, over time, result in the allocation of additional taxable income, representing built-in gains at the time of the new issuance, to those Common Unitholders that existed prior to the new issuance.

Risks Inherent in our Business Operations

Since weather conditions may adversely affect demand for propane, fuel oil and other refined fuels and natural gas, our results of operations and financial condition are vulnerable to warm winters.

Weather conditions have a significant impact on the demand for propane, fuel oil and other refined fuels and natural gas for both heating and agricultural purposes. Many of our customers rely heavily on propane, fuel oil or natural gas as a heating source. The volume of propane, fuel oil and natural gas sold is at its highest during the six-month peak heating season of October through March and is directly affected by the severity of the winter. Typically, we sell approximately two-thirds of our retail propane volume and approximately three-fourths of our retail fuel oil volume during the peak heating season.

Actual weather conditions can vary substantially from year to year, significantly affecting our financial performance. For example, average temperatures in our service territories were 6% warmer than normal for the year ended September 27, 2008 compared to 6% warmer than normal temperatures in fiscal 2007 and 11% warmer than normal temperatures in fiscal 2006, as reported by the National Oceanic and Atmospheric Administration (‘‘NOAA’’). Furthermore, variations in weather in one or more regions in which we operate can significantly affect the total volume of propane, fuel oil and other refined fuels and natural gas we sell and, consequently, our results of operations. Variations in the weather in the northeast, where we have a greater concentration of higher margin residential accounts and substantially all of our fuel oil and natural gas operations, generally have a greater impact on our operations than variations in the weather in other markets. We can give no assurance that the weather conditions in any quarter or year will not have a material adverse effect on our operations, or that our available cash will be sufficient to pay principal and interest on our indebtedness and distributions to Unitholders.

Sudden increases in the price of propane, fuel oil and other refined fuels and natural gas due to, among other things, our inability to obtain adequate supplies from our usual suppliers, may adversely affect our operating results.

Our profitability in the retail propane, fuel oil and refined fuels and natural gas businesses is largely dependent on the difference between our product cost and retail sales price. Propane, fuel oil and other refined fuels and natural gas are commodities, and the unit price we pay is subject to volatile changes in response to changes in supply or other market conditions over which we have no control, including the severity of winter weather and the price and availability of competing alternative energy sources. In general, product supply contracts permit suppliers to charge posted prices at the time of delivery or the current prices established at major supply points, including Mont Belvieu, Texas, and Conway, Kansas. In addition, our supply from our usual sources may be interrupted due to reasons that are beyond our control. As a result, the cost of acquiring propane, fuel oil and other refined fuels and natural gas from other suppliers might be materially higher at least on a short-term basis. Since we may not be able to pass on to our customers immediately, or in full, all increases in our wholesale cost of propane, fuel oil and other refined fuels and natural gas, these increases could reduce our profitability. We engage in transactions to manage the price risk associated with certain of our product costs from time to time in an attempt to reduce cost volatility and to help ensure availability of product during periods of short supply. We can give no assurance that future volatility in propane, fuel oil and natural gas supply costs will not have a material adverse effect on our profitability and cash flow, or that our available cash will be sufficient to pay principal and interest on our indebtedness and distributions to our Unitholders.

Because of the highly competitive nature of the retail propane and fuel oil businesses, we may not be able to retain existing customers or acquire new customers, which could have an adverse impact on our operating results and financial condition.

The retail propane and fuel oil industries are mature and highly competitive. We expect overall demand for propane to remain relatively constant over the next several years, while we expect the overall demand for fuel oil to be relatively flat to moderately declining during the same period. Year-to-year industry volumes of propane and fuel oil are expected to be primarily affected by weather patterns and from competition intensifying during warmer than normal winters, as well as from the impact of a sustained higher commodity price environment on customer conservation.

Propane and fuel oil compete in the alternative energy sources market with electricity, natural gas and other existing and future sources of energy, some of which are, or may in the future be, less costly for equivalent energy value. For example, natural gas is a significantly less expensive source of energy than propane and fuel oil. As a result, except for some industrial and commercial applications, propane and fuel oil are generally not economically competitive with natural gas in areas where natural gas pipelines already exist. The gradual expansion of the nation’s natural gas distribution systems has made natural gas available in many areas that previously depended upon propane or fuel oil. Propane and fuel oil compete to a lesser extent with each other due to the cost of converting from one to the other.

In addition to competing with other sources of energy, our propane and fuel oil businesses compete with other distributors principally on the basis of price, service, availability and portability. Competition in the retail propane business is highly fragmented and generally occurs on a local basis with other large full-service multi-state propane marketers, thousands of smaller local independent marketers and farm cooperatives. Our fuel oil business competes with fuel oil distributors offering a broad range of services and prices, from full service distributors to those offering delivery only. Generally, our existing fuel oil customers, unlike our existing propane customers, own their own tanks. As a result, the competition for these customers is more intense than in our propane business, where our existing customers seeking to switch distributors may face additional transition costs and delays.

As a result of the highly competitive nature of the retail propane and fuel oil businesses, our growth within these industries depends on our ability to acquire other retail distributors, open new customer service centers, add new customers and retain existing customers. We believe our ability to compete effectively depends on reliability of service, responsiveness to customers and our ability to control expenses in order to maintain competitive prices.

Energy efficiency, general economic conditions and technological advances have affected and may continue to affect demand for propane and fuel oil by our retail customers.

The national trend toward increased conservation and technological advances, including installation of improved insulation and the development of more efficient furnaces and other heating devices, has adversely affected the demand for propane and fuel oil by our retail customers which, in turn, has resulted in lower sales volumes to our customers. In addition, recent economic conditions may lead to additional conservation by retail customers to further reduce their heating costs, particularly during periods of sustained higher commodity prices as has been the case over the past three fiscal years. Future technological advances in heating, conservation and energy generation may adversely affect our financial condition and results of operations.

Current conditions in the global capital and credit markets, and general economic pressures may adversely affect our financial position and results of operations.

Our business and operating results are materially affected by worldwide economic conditions. Current conditions in the global capital and credit markets and general economic pressures have led to declining consumer and business confidence, increased market volatility and widespread reduction of business activity generally. As a result of this turmoil, coupled with increasing energy prices, our customers may experience cash flow shortages which may lead to delayed or cancelled plans to purchase our products, and affect the ability of our customers to pay for our products. In addition, disruptions in the U.S. residential mortgage market, increases in mortgage foreclosure rates and failures of lending institutions may adversely affect retail customer demand for our products (in particular, products used for home heating and home comfort equipment) and our business and results of operations.

Our operating results and ability to generate sufficient cash flow to pay principal and interest on our indebtedness, and to pay distributions to Unitholders, may be affected by our ability to continue to control expenses.

The propane and fuel oil industries are mature and highly fragmented with competition from other multi-state marketers and thousands of smaller local independent marketers. Demand for propane and fuel oil is expected to be affected by many factors beyond our control, including, but not limited to, the severity of weather conditions during the peak heating season, customer conservation driven by high energy costs and other economic factors, as well as technological advances impacting energy efficiency. Accordingly, our propane and fuel oil sales volumes and related gross margins may be negatively affected by these factors beyond our control. Our operating profits and ability to generate sufficient cash flow may depend on our ability to continue to control expenses in line with sales volumes. We can give no assurance that we will be able to continue to control expenses to the extent necessary to reduce the effect on our profitability and cash flow from these factors.

The risk of terrorism and political unrest and the current hostilities in the Middle East may adversely affect the economy and the price and availability of propane, fuel oil and other refined fuels and natural gas.

Terrorist attacks and political unrest and the current hostilities in the Middle East may adversely impact the price and availability of propane, fuel oil and other refined fuels and natural gas, as well as our results of operations, our ability to raise capital and our future growth. The impact that the foregoing may have on our industry in general, and on us in particular, is not known at this time. An act of terror could result in disruptions of crude oil or natural gas supplies and markets (the sources of propane and fuel oil), and our infrastructure facilities could be direct or indirect targets. Terrorist activity may also hinder our ability to transport propane, fuel oil and other refined fuels if our means of supply transportation, such as rail or pipeline, become damaged as a result of an attack. A lower level of economic activity could result in a decline in energy consumption, which could adversely affect our revenues or restrict our future growth. Instability in the financial markets as a result of terrorism could also affect our ability to raise capital. Terrorist activity and hostilities in the Middle East could likely lead to increased volatility in prices for propane, fuel oil and other refined fuels and natural gas. We have opted to purchase insurance coverage for terrorist acts within our property and casualty insurance programs, but we can give no assurance that our insurance coverage will be adequate to fully compensate us for any losses to our business or property resulting from terrorist acts.

Our financial condition and results of operations may be adversely affected by governmental regulation and associated environmental and health and safety costs.

Our business is subject to a wide range of federal, state and local laws and regulations related to environmental and health and safety matters including those concerning, among other things, the investigation and remediation of contaminated soil and groundwater and transportation of hazardous materials. These requirements are complex, changing and tend to become more stringent over time. In addition, we are required to maintain various permits that are necessary to operate our facilities, some of which are material to our operations. There can be no assurance that we have been, or will be, at all times in complete compliance with all legal, regulatory and permitting requirements or that we will not incur significant costs in the future relating to such requirements. Violations could result in penalties, or the curtailment or cessation of operations.

Moreover, currently unknown environmental issues, such as the discovery of additional contamination, may result in significant additional expenditures, and potentially significant expenditures also could be required to comply with future changes to environmental laws and regulations or the interpretation or enforcement thereof. Such expenditures, if required, could have a material adverse effect on our business, financial condition or results of operations.

We are subject to operating hazards and litigation risks that could adversely affect our operating results to the extent not covered by insurance.

Our operations are subject to all operating hazards and risks normally associated with handling, storing and delivering combustible liquids such as propane, fuel oil and other refined fuels. As a result, we have been, and are likely to continue to be, a defendant in various legal proceedings and litigation arising in the ordinary course of business. We are self-insured for general and product, workers’ compensation and automobile liabilities up to predetermined amounts above which third-party insurance applies. We cannot guarantee that our insurance will be adequate to protect us from all material expenses related to potential future claims for personal injury and property damage or that these levels of insurance will be available at economical prices, nor that all legal matters that arise will be covered by our insurance programs.

If we are unable to make acquisitions on economically acceptable terms or effectively integrate such acquisitions into our operations, our financial performance may be adversely affected.

The retail propane and fuel oil industries are mature. We foresee only limited growth in total retail demand for propane and flat to moderately declining retail demand for fuel oil. With respect to our retail propane business, because of the long-standing customer relationships that are typical in our industry, the inconvenience of switching tanks and suppliers and propane’s higher cost relative to other energy sources, such as natural gas, it may be difficult for us to acquire new retail propane customers except through acquisitions. As a result, we expect the success of our financial performance to depend, in part, upon our ability to acquire other retail propane and fuel oil distributors or other energy-related businesses and to successfully integrate them into our existing operations and to make cost saving changes. The competition for acquisitions is intense and we can make no assurance that we will be able to acquire other propane and fuel oil distributors or other energy-related businesses on economically acceptable terms or, if we do, to integrate the acquired operations effectively.

Tax Risks to Unitholders

Our tax treatment depends on our status as a partnership for federal income tax purposes. The Internal Revenue Service (“IRS”) could treat us as a corporation, which would substantially reduce the cash available for distribution to Unitholders.

The anticipated after-tax economic benefit of an investment in our Common Units depends largely on our being treated as a partnership for federal income tax purposes. We believe that, under current law, we will be classified as a partnership for federal income tax purposes. We have not requested, and do not plan to request, a ruling from the IRS on this or any other tax matter affecting us. The IRS may adopt positions that differ from the positions we take. In addition, current law may change so as to cause us to be treated as a corporation for federal income tax purposes or otherwise subject us to entity-level federal income taxation. In the past, members of Congress have proposed substantive changes to the current federal income tax laws that affect certain publicly-traded partnerships and legislation that would eliminate partnership tax treatment for certain publicly-traded partnerships. Any modification to the U.S. tax laws and interpretations thereof may or may not be applied retroactively. Although no legislation is currently pending that would affect our tax treatment as a partnership, we are unable to predict whether any such changes or other proposals will ultimately be enacted. If we were treated as a corporation for federal income tax purposes, we would be required to pay tax on our income at corporate tax rates (currently a maximum of U.S. federal rate of 35%) and likely would be required to pay state income tax at varying rates. Because a tax would be imposed upon us as a corporation, our cash available for distribution to our Unitholders would be substantially reduced. Therefore, our treatment as a corporation would result in a material reduction in the anticipated cash flow and after-tax return to our Unitholders, likely causing a substantial reduction in the value of our Common Units. In addition, because of widespread state budget deficits and other reasons, several states are evaluating ways to subject partnerships to entity-level taxation through the imposition of state income, franchise and other forms of taxation. Any such changes could negatively impact our ability to make distributions and also impact the value of an investment in our Common Units.

A successful IRS contest of the federal income tax positions we take may adversely affect the market for our Common Units, and the cost of any IRS contest will reduce our cash available for distribution to our Unitholders.

We have not requested a ruling from the IRS with respect to our treatment as a partnership for federal income tax purposes or any other matter affecting us. The IRS may adopt positions that differ from the positions we take. It may be necessary to resort to administrative or court proceedings to sustain some or all of the positions we take. A court may not agree with the positions we take. Any contest with the IRS may materially and adversely impact the market for our Common Units and the price at which they trade. In addition, our costs of any contest with the IRS will be borne indirectly by our Unitholders because the costs will reduce our cash available for distribution.

A Unitholder’s tax liability could exceed cash distributions on its Common Units.

Because our Unitholders are treated as partners to whom we allocate taxable income which could be different in amount than the cash we distribute, a Unitholder is required to pay federal income taxes and, in some cases, state and local income taxes on its allocable share of our income, even if it receives no cash distributions from us. We cannot guarantee that a Unitholder will receive cash distributions equal to its allocable share of our taxable income or even the tax liability to it resulting from that income.

Ownership of Common Units may have adverse tax consequences for tax-exempt organizations and foreign investors.

Investment in Common Units by certain tax-exempt entities and foreign persons raises issues specific to them. For example, virtually all of our taxable income allocated to organizations exempt from federal income tax, including individual retirement accounts and other retirement plans, will be unrelated business taxable income and thus will be taxable to the Unitholder. Distributions to foreign persons will be reduced by withholding taxes at the highest applicable effective tax rate, and foreign persons will be required to file United States federal tax returns and pay tax on their share of our taxable income. Tax-exempt entities and foreign persons should consult their own tax advisors before investing in our Common Units.

There are limits on a Unitholder’s deductibility of losses.

In the case of taxpayers subject to the passive loss rules (generally, individuals and closely held corporations), any losses generated by us will only be available to offset our future income and cannot be used to offset income from other activities, including other passive activities or investments. Unused losses may be deducted when the Unitholder disposes of its entire investment in us in a fully taxable transaction with an unrelated party. A Unitholder’s share of our net passive income may be offset by unused losses from us carried over from prior years, but not by losses from other passive activities, including losses from other publicly-traded partnerships.

Tax shelter registration could increase the risk of a potential audit by the IRS.

We registered as a ‘‘tax shelter’’ under the law in effect at the time of our initial public offering and were assigned tax shelter registration number 96080000050. The issuance of a tax shelter registration number to us does not indicate that a Common Unit investment in us or the claimed tax benefits have been reviewed, examined or approved by the IRS.

The tax gain or loss on the disposition of Common Units could be different than expected.

A Unitholder who sells Common Units will recognize a gain or loss equal to the difference between the amount realized, including its share of our nonrecourse liabilities, and its adjusted tax basis in the Common Units. Prior distributions in excess of cumulative net taxable income allocated to a Common Unit which decreased a Unitholder’s tax basis in that Common Unit will, in effect, become taxable income if the Common Unit is sold at a price greater than the Unitholder’s tax basis in that Common Unit, even if the price is less than the original cost of the Common Unit. A portion of the amount realized, if the amount realized exceeds the Unitholder’s adjusted basis in that Common Unit, will likely be characterized as ordinary income. Furthermore, should the IRS successfully contest some conventions used by us, a Unitholder could recognize more gain on the sale of Common Units than would be the case under those conventions, without the benefit of decreased income in prior years.

Reporting of partnership tax information is complicated and subject to audits.

We furnish each Unitholder with a Schedule K-1 that sets forth its allocable share of income, gains, losses and deductions. In preparing these schedules, we use various accounting and reporting conventions and adopt various depreciation and amortization methods. We cannot guarantee that these conventions will yield a result that conforms to statutory or regulatory requirements or to administrative pronouncements of the IRS. Further, our income tax return may be audited, which could result in an audit of a Unitholder’s income tax return and increased liabilities for taxes because of adjustments resulting from the audit.

We treat each purchaser of our Common Units as having the same tax benefits without regard to the actual Common Units purchased. The IRS may challenge this treatment, which could adversely affect the value of the Common Units.

Because we cannot match transferors and transferees of Common Units and because of other reasons, uniformity of the economic and tax characteristics of the Common Units to a purchaser of Common Units of the same class must be maintained. To maintain uniformity and for other reasons, we have adopted certain depreciation and amortization conventions which may be inconsistent with Treasury Regulations. A successful IRS challenge to those positions could adversely affect the amount of tax benefits available to a Unitholder. It also could affect the timing of these tax benefits or the amount of gain from the sale of Common Units, and could have a negative impact on the value of our Common Units or result in audit adjustments to a Unitholder’s income tax return.

Unitholders may have negative tax consequences if we default on our debt or sell assets.

If we default on any of our debt obligations, our lenders will have the right to sue us for non-payment. This could cause an investment loss and negative tax consequences for Unitholders through the realization of taxable income by Unitholders without a corresponding cash distribution. Likewise, if we were to dispose of assets and realize a taxable gain while there is substantial debt outstanding and proceeds of the sale were applied to the debt, Unitholders could have increased taxable income without a corresponding cash distribution.

The sale or exchange of 50% or more of our Common Units during any twelve-month period will result in a deemed termination (and reconstitution) of the Partnership for federal income tax purposes which would cause Unitholders to be allocated an increased amount of taxable income.

We will be deemed to have terminated (and reconstituted) for federal income tax purposes if there is a sale or exchange of 50% or more of the total interests in our Common Units within a twelve-month period. Were this to occur, it would, among other things, result in the closing of our taxable year for all Unitholders and could result in a deferral of depreciation deductions allowable in computing our taxable income. This would result in Unitholders being allocated an increased amount of taxable income.

There are state, local and other tax considerations for our Unitholders.

In addition to United States federal income taxes, Unitholders will likely be subject to other taxes, such as state and local taxes, unincorporated business taxes and estate, inheritance or intangible taxes that are imposed by the various jurisdictions in which we do business or own property, even if the Unitholder does not reside in any of those jurisdictions. A Unitholder will likely be required to file state and local income tax returns and pay state and local income taxes in some or all of the various jurisdictions in which we do business or own property and may be subject to penalties for failure to comply with those requirements. It is the responsibility of each Unitholder to file all United States federal, state and local income tax returns that may be required of such Unitholder.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTIES

As of September 27, 2008, we owned approximately 77% of our customer service center and satellite locations and leased the balance of our retail locations from third parties. We own and operate a 22 million gallon refrigerated, aboveground propane storage facility in Elk Grove, California. Effective October 2, 2007, we sold our 57.5 million gallon underground propane storage cavern in Tirzah, South Carolina. Additionally, we own our principal executive offices located in Whippany, New Jersey.

The transportation of propane requires specialized equipment. The trucks and railroad tank cars utilized for this purpose carry specialized steel tanks that maintain the propane in a liquefied state. As of September 27, 2008, we had a fleet of 14 transport truck tractors, of which we owned three, and 21 railroad tank cars, of which we owned one. In addition, as of September 27, 2008 we had 912 bobtail and rack trucks, of which we owned approximately 42%, 149 fuel oil tankwagons, of which we owned approximately 57%, and 1,182 other delivery and service vehicles, of which we owned approximately 52%. We lease the vehicles we do not own. As of September 27, 2008, we also owned approximately 756,752 customer propane storage tanks with typical capacities of 100 to 500 gallons, 159,253 customer propane storage tanks with typical capacities of over 500 gallons and 252,764 portable propane cylinders with typical capacities of five to ten gallons.

ITEM 3. LEGAL PROCEEDINGS

Litigation

Our operations are subject to all operating hazards and risks normally incidental to handling, storing and delivering combustible liquids such as propane. As a result, we have been, and will continue to be, a defendant in various legal proceedings and litigation arising in the ordinary course of business. We are self-insured for general and product, workers’ compensation and automobile liabilities up to predetermined amounts above which third party insurance applies. We believe that the self-insured retentions and coverage we maintain are reasonable and prudent. Although any litigation is inherently uncertain, based on past experience, the information currently available to us, and the amount of our self-insurance reserves for known and unasserted self-insurance claims (which was approximately $73.0 million at September 27, 2008), we do not believe that these pending or threatened litigation matters, or known claims or known contingent claims, will have a material adverse effect on our results of operations, financial condition or cash flow. For the portion of our estimated self-insurance liability that exceeds our deductibles, we record a corresponding asset related to the amount of the liability covered by insurance (which was approximately $38.8 million at September 27, 2008).

During the first quarter of fiscal 2009, we agreed to settle a litigation involving alleged product liability for approximately $30.0 million. This settlement will be finalized once certain required procedural activities are completed in various jurisdictions, which is expected to occur in the first quarter of fiscal 2009. The matter was covered by insurance above the level of our insurance deductible. As a result of this settlement, in which we denied any liability, we increased the portion of our estimated self-insurance liability that exceeded the insurance deductible and established a corresponding asset of $30.0 million as of September 27, 2008 to accrue for the settlement and subsequent reimbursement from our third party insurance carrier.

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

None.

PART II

ITEM 5.	MARKET FOR THE REGISTRANT’S COMMON UNITS, RELATED UNITHOLDER MATTERS AND ISSUER PURCHASES OF UNITS

(a) Our Common Units, representing limited partner interests in the Partnership, are listed and traded on the New York Stock Exchange (“NYSE”) under the symbol SPH. As of November 24, 2008, there were 754 Common Unitholders of record. The following table presents, for the periods indicated, the high and low sales prices per Common Unit, as reported on the NYSE, and the amount of quarterly cash distributions declared and paid per Common Unit in respect of each quarter.

										Cash Distribution
		Common Unit Price Range								Declared per
		High				Low				Common Unit
Fiscal 2008
First Quarter		$	48.50			$	40.00			$	0.7625
Second Quarter			42.43				34.00				0.7750
Third Quarter			42.60				37.88				0.8000
Fourth Quarter			39.59				33.13				0.8050
Fiscal 2007
First Quarter		$	39.15			$	33.12			$	0.6875
Second Quarter			44.22				35.11				0.7000
Third Quarter			49.58				43.96				0.7125
Fourth Quarter			49.50				38.70				0.7500

We make quarterly distributions to our partners in an aggregate amount equal to our Available Cash (as defined in our Partnership Agreement as adopted effective October 19, 2006, as amended) with respect to such quarter. Available Cash generally means all cash on hand at the end of the fiscal quarter plus all additional cash on hand as a result of borrowings subsequent to the end of such quarter less cash reserves established by the Board of Supervisors in its reasonable discretion for future cash requirements.

We are a publicly traded limited partnership and, other than certain corporate subsidiaries, we are not subject to federal income tax. Instead, Unitholders are required to report their allocable share of our earnings or loss, regardless of whether we make distributions.

(b) Not applicable.

(c) None.

ITEM 6. SELECTED FINANCIAL DATA

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

		Year Ended
		September 27,				September 29,				September 30,				September 24,				September 25,
		2008				2007				2006 (a)				2005				2004 (b)
Statement of Operations Data
Revenues		$	1,574,163			$	1,439,563			$	1,657,130			$	1,615,555			$	1,301,943
Costs and expenses			1,424,035				1,273,482				1,521,316				1,546,531				1,229,578
Restructuring charges and severance costs (c)			—				1,485				6,076				2,775				2,942
Impairment of goodwill (d)			—				—				—				656				3,177
Income before interest expense, loss on debt extinguishment and provision for income taxes (e)			150,128				164,596				129,738				65,593				66,246
Loss on debt extinguishment (f)			—				—				—				36,242				—
Interest expense, net			37,052				35,596				40,680				40,374				40,832
Provision for income taxes			1,903				5,653				764				803				3
Income (loss) from continuing operations (e)			111,173				123,347				88,294				(11,826	)			25,411
Discontinued operations:
Gain on disposal of discontinued operations (g)			43,707				1,887				—				976				26,332
Income from discontinued operations			—				2,053				2,446				2,774				2,561
Net income (loss)			154,880				127,287				90,740				(8,076	)			54,304
Income (loss) from continuing operations per Common Unit — basic			3.39				3.79				2.76				(0.38	)			0.84
Net income (loss) per Common Unit — basic (h)			4.72				3.91				2.84				(0.26	)			1.79
Net income (loss) per Common Unit — diluted (h)			4.70				3.89				2.83				(0.26	)			1.78
Cash distributions declared per unit		$	3.09			$	2.76			$	2.48			$	2.45			$	2.39
Balance Sheet Data (end of period)
Cash and cash equivalents		$	137,698			$	96,586			$	60,571			$	14,411			$	53,481
Current assets			359,551				295,874				235,351				236,803				252,894
Total assets			1,035,713				988,881				945,566				959,305				988,323
Current liabilities, excluding short-term borrowings and current portion of long-term borrowings			223,615				206,011				191,195				193,401				198,907
Total debt			531,772				548,538				548,304				575,295				515,915
Other long-term liabilities			60,250				68,055				105,366				114,493				105,383
Partners’ capital — Common Unitholders			264,231				208,230				170,151				159,199				238,880
Partner’s (deficit) capital — General Partner		$	—			$	—			$	(1,969	)		$	(1,779	)		$	852
Statement of Cash Flows Data
Cash provided by (used in)
Operating activities		$	120,517			$	145,957			$	170,321			$	39,005			$	93,065
Investing activities			36,630				(19,689	)			(19,092	)			(24,631	)			(196,557	)
Financing activities		$	(116,035	)		$	(90,253	)		$	(105,069	)		$	(53,444	)		$	141,208
Other Data
Depreciation and amortization — continuing operations		$	28,394			$	28,790			$	32,653			$	37,260			$	36,236
Depreciation and amortization — discontinued operations			—				452				498				502				507
EBITDA and Adjusted EBITDA (i)			222,229				197,778				165,335				107,105				131,882
Capital expenditures — maintenance and growth (j)			21,819				26,756				23,057				29,301				26,527
Acquisitions		$	—			$	—			$	—			$	—			$	211,181
Retail gallons sold (k)
Propane			386,222				432,526				466,779				516,040				537,330
Fuel oil and refined fuels			76,515				104,506				145,616				244,536				220,469

		Fiscal				Fiscal				Fiscal				Fiscal				Fiscal
		2008				2007				2006				2005				2004
Net income (loss)		$	154,880			$	127,287			$	90,740			$	(8,076	)		$	54,304
Add:
Provision for income taxes			1,903				5,653				764				803				3
Interest expense, net			37,052				35,596				40,680				40,374				40,832
Depreciation and amortization
Continuing operations			28,394				28,790				32,653				37,260				36,236
Discontinued operations			—				452				498				502				507
EBITDA			222,229				197,778				165,335				70,863				131,882
Loss on debt extinguishment			—				—				—				36,242				—
Adjusted EBITDA			222,229				197,778				165,335				107,105				131,882
Add (subtract):
Provision for income taxes — current			(626	)			(1,853	)			(764	)			(803	)			(3	)
Loss on debt extinguishment			—				—				—				(36,242	)			—
Interest expense, net			(37,052	)			(35,596	)			(40,680	)			(40,374	)			(40,832	)
Compensation cost recognized under Restricted Unit Plan			2,156				3,014				2,221				1,805				1,171
Gain on disposal of property, plant and equipment, net			(2,252	)			(2,782	)			(1,000	)			(2,043	)			(715	)
Gain on disposal of discontinued operations			(43,707	)			(1,887	)			—				(976	)			(26,332	)
Pension settlement charge			—				3,269				4,437				—				5,337
Changes in working capital and other assets and liabilities			(20,231	)			(15,986	)			40,772				10,533				22,557
Net cash provided by operating activities		$	120,517			$	145,957			$	170,321			$	39,005			$	93,065

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

The following is a discussion of our financial condition and results of operations, which should be read in conjunction with our consolidated financial statements and notes thereto included elsewhere in this Annual Report.

Executive Overview

The following are factors that regularly affect our operating results and financial condition. In addition, our business is subject to the risks and uncertainties described in Item 1A of this Annual Report.

Product Costs and Supply

The level of profitability in the retail propane, fuel oil, natural gas and electricity businesses is largely dependent on the difference between retail sales price and product cost. The unit cost of our products, particularly propane, fuel oil and natural gas, is subject to volatility as a result of product supply or other market conditions, including, but not limited to, economic and political factors impacting crude oil and natural gas supply or pricing. We enter into product supply contracts that are generally one-year agreements subject to annual renewal, and we also purchase product on the open market. We attempt to reduce our exposure to volatile product costs by short-term pricing arrangements, rather than long-term fixed price supply arrangements. Our propane supply contracts typically provide for pricing based upon index formulas using the posted prices established at major supply points such as Mont Belvieu, Texas, or Conway, Kansas (plus transportation costs) at the time of delivery. In certain instances, and when market conditions (relating to our supply arrangements and risk management activities) are favorable, as was the case in the propane and fuel oil markets during the first half of fiscal 2007, we are able to purchase product under our supply arrangements at a discount to the spot market. However, such favorable market conditions and margin opportunities were not present in fiscal 2008. Rather, very challenging market conditions in fiscal 2008, characterized by an extreme rise in commodity prices (particularly during the third quarter) coupled with lower volumes resulted in the recognition of realized losses under our hedging and risk management activities which were not fully offset by the sales of the physical inventory as more fully described under “Hedging and Risk Management Activities” below.

To supplement our annual purchase requirements, we may utilize forward fixed price purchase contracts to acquire a portion of the propane that we resell to our customers, which allows us to manage our exposure to unfavorable changes in commodity prices and to assure adequate physical supply. The percentage of contract purchases, and the amount of supply contracted for under forward contracts at fixed prices, will vary from year to year based on market conditions.

Product cost changes can occur rapidly over a short period of time and can impact profitability. There is no assurance that we will be able to pass on product cost increases fully or immediately, particularly when product costs increase rapidly. Therefore, average retail sales prices can vary significantly from year to year as product costs fluctuate with propane, fuel oil, crude oil and natural gas commodity market conditions. In addition, in periods of sustained higher commodity prices, as has been experienced over the past several fiscal years, retail sales volumes have been negatively impacted by customer conservation efforts.

Seasonality

The retail propane and fuel oil distribution businesses, as well as the natural gas marketing business, are seasonal because of the primary use for heating in residential and commercial buildings. Historically, approximately two-thirds of our retail propane volume is sold during the six-month peak heating season from October through March. The fuel oil business tends to experience greater seasonality given its more limited use for space heating and approximately three-fourths of our fuel oil volumes are sold between October and March. Consequently, sales and operating profits are concentrated in our first and second fiscal quarters. Cash flows from operations, therefore, are greatest during the second and third fiscal quarters when customers pay for product purchased during the winter heating season. We expect lower operating profits and either net losses or lower net income during the period from April through September (our third and fourth fiscal quarters). To the extent necessary, we will reserve cash from the second and third quarters for distribution to holders of our Common Units in the first and fourth fiscal quarters.

Weather

Weather conditions have a significant impact on the demand for our products, in particular propane, fuel oil and natural gas, for both heating and agricultural purposes. Many of our customers rely heavily on propane, fuel oil or natural gas as a heating source. Accordingly, the volume sold is directly affected by the severity of the winter weather in our service areas, which can vary substantially from year to year. In any given area, sustained warmer than normal temperatures will tend to result in reduced propane, fuel oil and natural gas consumption, while sustained colder than normal temperatures will tend to result in greater consumption.

Hedging and Risk Management Activities

We engage in hedging and risk management activities to reduce the effect of price volatility on our product costs and to ensure the availability of product during periods of short supply. We enter into propane forward and option agreements with third parties, and use fuel oil futures and option contracts traded on the New York Mercantile Exchange (“NYMEX”), to purchase and sell propane and fuel oil at fixed prices in the future. The majority of the futures, forward and option agreements are used to hedge price risk associated with propane and fuel oil physical inventory, as well as, in certain instances, forecasted purchases of propane or fuel oil. Forward contracts are generally settled physically at the expiration of the contract and futures are generally settled in cash at the expiration of the contract. Although we use derivative instruments to reduce the effect of price volatility associated with priced physical inventory and forecasted transactions, we do not use derivative instruments for speculative trading purposes. Risk management activities are monitored by an internal Commodity Risk Management Committee, made up of five members of management and reporting to our Auditing Committee, through enforcement of our Hedging and Risk Management Policy.

As a result of various market factors during the first half of fiscal 2007, particularly commodity price volatility during the first four months of the fiscal year, we experienced additional margin opportunities due to favorable pricing under certain supply arrangements and from our hedging and risk management activities. These market conditions generated additional operating profit of approximately $14.7 million during fiscal 2007 compared to fiscal 2008. Supply and risk management transactions may not always result in increased product margins and there can be no assurance that the favorable market conditions that contributed to incremental margin during the first half of fiscal 2007 will be present in the future in order to provide the additional margin opportunities. Very different and challenging factors existed in fiscal 2008. In fact, as a result of the rise in commodity prices in fiscal 2008, particularly during the third quarter, we realized losses under our futures positions utilized to hedge price risk associated with a portion of our priced physical inventory. Under our hedging and risk management strategy, realized gains or losses on futures contracts will typically offset losses or gains on the physical inventory once the product is sold to customers at market prices. However, as a result of lower than expected volumes primarily attributable to customer conservation, the timing was such that these losses were not fully offset by sales of the physical product. Accordingly, our risk management activities had a negative effect on earnings of approximately $10.8 million during fiscal 2008 as a result of realized losses on futures contracts that were not fully offset by sales of physical product. See Item 7A of this Annual Report for a further discussion of risk management activities.

Critical Accounting Policies and Estimates

Our significant accounting policies are summarized in Note 2, “Summary of Significant Accounting Policies,” included within the Notes to Consolidated Financial Statements section elsewhere in this Annual Report.

Certain amounts included in or affecting our consolidated financial statements and related disclosures must be estimated, requiring management to make certain assumptions with respect to values or conditions that cannot be known with certainty at the time the financial statements are prepared. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. We are also subject to risks and uncertainties that may cause actual results to differ from estimated results. Estimates are used when accounting for depreciation and amortization of long-lived assets, employee benefit plans, self-insurance and litigation reserves, environmental reserves, allowances for doubtful accounts, asset valuation assessments and valuation of derivative instruments. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Any effects on our business, financial position or results of operations resulting from revisions to these estimates are recorded in the period in which the facts that give rise to the revision become known to us. Management has reviewed these critical accounting estimates and related disclosures with the Audit Committee of our Board of Supervisors. We believe that the following are our critical accounting estimates:

Allowances for Doubtful Accounts. We maintain allowances for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments. We estimate our allowances for doubtful accounts using a specific reserve for known or anticipated uncollectible accounts, as well as an estimated reserve for potential future uncollectible accounts taking into consideration our historical write-offs. If the financial condition of one or more of our customers were to deteriorate resulting in an impairment in their ability to make payments, additional allowances could be required. As a result of our large customer base, which is comprised of more than 900,000 customers, no individual customer account is material. Therefore, while some variation to actual results occurs, historically such variability has not been material. Schedule II, Valuation and Qualifying Accounts, provides a summary of the changes in our allowances for doubtful accounts during the period.

Pension and Other Postretirement Benefits. We estimate the rate of return on plan assets, the discount rate used to estimate the present value of future benefit obligations and the expected cost of future health care benefits in determining our annual pension and other postretirement benefit costs. While we believe that our assumptions are appropriate, significant differences in our actual experience or significant changes in market conditions may materially affect our pension and other postretirement benefit obligations and our future expense. See “Liquidity and Capital Resources – Pension Plan Assets and Obligations” below for additional disclosure regarding pension benefits.

With other assumptions held constant, an increase of 100 basis points in the discount rate would have an estimated favorable impact of $0.3 million on net pension and postretirement benefit costs and an increase of 100 basis points in the expected rate of return assumption would have an estimated favorable impact of $1.5 million on net pension and postretirement benefit costs. With other assumptions held constant, a decrease of 100 basis points in the discount rate would have an estimated unfavorable impact of $0.2 million on net pension and postretirement benefit costs and a decrease of 100 basis points in the expected rate of return assumption would have an estimated unfavorable impact of $1.5 million on net pension and postretirement benefit costs.

Self-Insurance Reserves. Our accrued insurance reserves represent the estimated costs of known and anticipated or unasserted claims under our general and product, workers’ compensation and automobile insurance policies. Accrued insurance provisions for unasserted claims arising from unreported incidents are based on an analysis of historical claims data. For each claim, we record a self-insurance provision up to the estimated amount of the probable claim utilizing actuarially determined loss development factors applied to actual claims data. Our self-insurance provisions are susceptible to change to the extent that actual claims development differs from historical claims development. We maintain insurance coverage wherein our net exposure for insured claims is limited to the insurance deductible, claims above which are paid by our insurance carriers. For the portion of our estimated self-insurance liability that exceeds our deductibles, we record an asset related to the amount of the liability expected to be paid by the insurance companies. Historically, we have not experienced significant variability in our actuarial estimates for claims incurred but not reported. Accrued insurance provisions for reported claims are reviewed at least quarterly, and our assessment of whether a loss is probable and/or reasonably estimable is updated as necessary. Due to the inherently uncertain nature of, in particular, product liability claims, the ultimate loss may differ materially from our estimates. However, because of the nature of our insurance arrangements, those material variations historically have not, nor are they expected in the future to have, a material impact on our results of operations or financial position.

Derivative Instruments and Hedging Activities. See Item 7A of this Annual Report for information about accounting for derivative instruments and hedging activities.

Results of Operations and Financial Condition

Fiscal 2008 presented a challenging operating environment characterized by a volatile commodity price environment, continued customer conservation, relatively mild temperatures during the peak winter heating season and a general slowdown in the economy. However, the steps taken by us over the past several years to streamline our operating platform, drive operational efficiencies and reduce costs have helped to mitigate the potential negative effect on our operating results and financial position from these external factors. Net income for fiscal 2008 amounted to $154.9 million, or $4.72 per Common Unit, an increase of $27.6 million, or 21.7%, compared to net income of $127.3 million, or $3.91 per Common Unit, in fiscal 2007. EBITDA (as defined and reconciled below) increased $24.4 million, or 12.3%, to $222.2 million in fiscal 2008 compared to $197.8 million for fiscal 2007.

From a cash flow perspective, despite the sustained period of high commodity prices, we continue to fund working capital requirements from cash on hand and have not borrowed under our working capital facility since April 2006. In the current period of uncertainty surrounding the credit markets, we ended fiscal 2008 in a strong cash position with more than $137.6 million of cash on hand, which we expect will provide sufficient liquidity to fund our ongoing operations for the foreseeable future without an immediate need to access the capital markets. Based on our financial strength, our fiscal 2008 earnings and our confidence in our operating platform, on October 23, 2008, our Board of Supervisors increased the annualized distribution rate by $0.02 per Common Unit to $3.22 per Common Unit, an increase of 7.3% compared to the annualized distribution rate of $3.00 at the end of fiscal 2007.

Revenues of $1,574.2 million increased $134.6 million, or 9.4%, compared to the prior year due to higher average selling prices associated with higher product costs, partially offset by lower volumes. Retail propane gallons sold for fiscal 2008 decreased 46.3 million gallons, or 10.7%, to 386.2 million gallons from 432.5 million gallons in fiscal 2007. Sales of fuel oil and other refined fuels decreased 28.0 million gallons, or 26.8%, to 76.5 million gallons compared to 104.5 million gallons in the prior year. Lower volumes in both segments were attributable to ongoing customer conservation resulting from historically high commodity prices, warmer average temperatures during the peak heating months from October 2007 through March 2008 and, to a lesser extent, the effects of eliminating certain lower margin accounts. Average heating degree days in our service territories were 94% of normal for fiscal 2008 and flat compared to the prior year; however, the winter heating season of fiscal 2008 was warmer than the comparable prior year period, particularly in the northeast where average heating degree days were 7% below normal and the prior year, thus contributing to the lower volumes.

In the commodities markets, average posted prices for propane and fuel oil during fiscal 2008 were 48.6% and 63.8% higher, respectively, compared to fiscal 2007. Costs of products sold increased $174.0 million, or 20.1%, to $1,039.4 million in fiscal 2008 compared to $865.4 million in the prior year, primarily resulting from the rise in commodity prices. As reported throughout much of the prior year, favorable market conditions impacting the supply and pricing structure for propane and fuel oil provided approximately $14.7 million of incremental margin opportunities in fiscal 2007, which were not present in fiscal 2008. In addition, with the dramatic rise in commodity prices, particularly during the third quarter of fiscal 2008, we reported realized losses from risk management activities that were not fully offset by sales of the physical product, resulting in a negative effect of approximately $10.8 million on fiscal 2008 earnings. Costs of products sold for fiscal 2008 also included a $1.8 million unrealized (non-cash) gain attributable to the mark-to-market on certain risk management activities, compared to a $7.6 million unrealized (non-cash) loss in the prior year.

The favorable trend experienced in operating and general and administrative expenses resulting from our efforts to drive efficiencies and reduce costs continued throughout fiscal 2008. Combined operating and general and administrative expenses of $356.2 million decreased $23.1 million, or 6.1%, compared to $379.3 million in the prior year. The most significant cost savings were experienced in payroll and benefit related expenses resulting from a lower headcount and lower variable compensation in line with lower earnings, once adjusted for the significant items described below. In addition, we achieved a modest reduction in costs to operate our fleet as a result of a lower vehicle count and route efficiencies, which more than offset the impact of a dramatic rise in diesel costs.

Net income and EBITDA for fiscal 2008 included a gain (reported within discontinued operations) of $43.7 million from the sale of our Tirzah, South Carolina underground propane storage cavern and associated 62-mile pipeline, which occurred during October 2007. Net income and EBITDA for fiscal 2007 included (i) a non-cash pension settlement charge of $3.3 million to accelerate the recognition of actuarial losses in our defined benefit pension plan as a result of the level of lump sum retirement benefit payments made during fiscal 2007; (ii) severance charges of $1.5 million related to positions eliminated in fiscal 2007; (iii) a $2.0 million gain from the recovery of a substantial portion of legal fees associated with our successful defense of a matter following the 1999 acquisition of certain propane assets in North and South Carolina; and (iv) gains (reported within discontinued operations) of $1.9 million from the sale and exchange of customer service centers considered to be non-strategic.

As we look ahead to fiscal 2009, our anticipated cash requirements include: (i) maintenance and growth capital expenditures of approximately $25.0 million; (ii) approximately $38.4 million of interest and income tax payments; and (iii) assuming distributions remain at the current level, approximately $105.6 million of distributions to Common Unitholders. Based on our current cash position, availability under the Revolving Credit Agreement (unused borrowing capacity under the working capital facility of $119.2 million at September 27, 2008) and expected cash flow from operating activities, we expect to have sufficient funds to meet our current and future obligations. Based on our current forecast of working capital requirements for fiscal 2009, we currently do not expect to borrow under the working capital facility in fiscal 2009.

Fiscal Year 2008 Compared to Fiscal Year 2007

Revenues

(Dollars in thousands)														Percent
		Fiscal				Fiscal				Increase /				Increase /
		2008				2007				(Decrease)				(Decrease)
Revenues
Propane		$	1,132,950			$	1,019,798			$	113,152			11.1%
Fuel oil and refined fuels			288,078				262,076				26,002			9.9%
Natural gas and electricity			103,745				94,352				9,393			10.0%
Services			44,393				56,519				(12,126)			(21.5%)
All other			4,997				6,818				(1,821)			(26.7%)
Total revenues		$	1,574,163			$	1,439,563			$	134,600			9.4%

Total revenues increased $134.6 million, or 9.4%, to $1,574.2 million for the year ended September 27, 2008 compared to $1,439.6 million for the year ended September 29, 2007, due to higher average selling prices associated with higher product costs, partially offset by lower volumes. Volumes in our propane, fuel oil and refined fuels and natural gas and electricity segments were lower in fiscal 2008 compared to the prior year primarily due to ongoing customer conservation resulting from the historically high commodity prices, proactive steps to manage customer credit risk, warmer weather in our service territories during the peak heating months and, to a lesser extent, the effects of eliminating certain lower margin accounts which occurred throughout much of the prior year. From a weather perspective, average heating degree days in our service territories were 94% of normal for fiscal 2008 and flat compared to the prior year; however, the winter heating season of fiscal 2008 was warmer than the comparable prior year period, particularly in the northeast where average heating degree days were 7% below normal and the prior year, thus having a negative effect on volumes.

Revenues from the distribution of propane and related activities of $1,133.0 million for the year ended September 27, 2008 increased $113.2 million, or 11.1%, compared to $1,019.8 million for the year ended September 29, 2007, primarily due to higher average selling prices, partially offset by lower volumes. Retail propane gallons sold in fiscal 2008 decreased 46.3 million gallons, or 10.7%, to 386.2 million gallons from 432.5 million gallons in the prior year. The average posted price of propane during fiscal 2008 increased 48.6% compared to the average posted prices in the prior year, while our average propane selling prices during fiscal 2008 increased approximately 27.0% compared to the prior year. Additionally, revenues from wholesale and other propane activities for the year ended September 27, 2008 decreased $13.2 million compared to the prior year.

Revenues from the distribution of fuel oil and refined fuels of $288.1 million for the year ended September 27, 2008 increased $26.0 million, or 9.9%, from $262.1 million in the prior year, primarily due to higher average selling prices, partially offset by lower volumes. Fuel oil and refined fuels gallons sold in fiscal 2008 decreased 28.0 million gallons, or 26.8%, to 76.5 million gallons from 104.5 million gallons in the prior year. Lower volumes in our fuel oil and refined fuels segment were attributable to the impact of ongoing customer conservation from continued high energy prices combined with our decision to exit certain lower margin diesel and gasoline businesses. Our decision to exit the majority of our low sulfur diesel and gasoline businesses resulted in a reduction in volumes in the fuel oil and refined fuels segment of approximately 9.7 million gallons, or 34.5% of the total volume decline in fiscal 2008 compared to the prior year. The average posted price of fuel oil during fiscal 2008 increased approximately 63.8% compared to the average posted prices in the prior year, while our average selling prices in our fuel oil and refined fuels segment increased approximately 47.4% compared to the prior year period.

Revenues in our natural gas and electricity segment increased $9.3 million, or 10.0%, to $103.7 million for the year ended September 27, 2008 compared to $94.4 million in the prior year as a result of higher average selling prices for both electricity and natural gas, partially offset by lower electricity and natural gas volumes. Revenues in our services segment decreased 21.5% to $44.4 million in fiscal 2008 from $56.5 million in the prior year as a result of the decision to reduce the level of certain installation activities. The focus of our ongoing service offerings are in support of our existing core commodity segments.

Cost of Products Sold

(Dollars in thousands)														Percent
		Fiscal				Fiscal				Increase /				Increase /
		2008				2007				(Decrease)				(Decrease)
Cost of products sold
Propane		$	689,921			$	573,305			$	116,616			20.3%
Fuel oil and refined fuels			247,310				194,213				53,097			27.3%
Natural gas and electricity			87,600				77,116				10,484			13.6%
Services			12,530				16,847			(4,317)					(25.6%)
All other			2,075				3,937			(1,862)				(47.3%)
Total cost of products sold		$	1,039,436			$	865,418			$	174,018			20.1%
As a percent of total revenues		66.0%				60.1%

The cost of products sold reported in the consolidated statements of operations represents the weighted average unit cost of propane and fuel oil sold, as well as the cost of natural gas and electricity, including transportation costs to deliver product from our supply points to storage or to our customer service centers. Cost of products sold also includes the cost of appliances and related parts sold or installed by our customer service centers computed on a basis that approximates the average cost of the products. Unrealized (non-cash) gains or losses from changes in the fair value of derivative instruments that are not designated as cash flow hedges are recorded within cost of products sold. Cost of products sold excludes depreciation and amortization; these amounts are reported separately within the consolidated statements of operations.

Cost of products sold in fiscal 2008 included a $1.8 million unrealized (non-cash) gain representing the net unrealized change in the fair value of derivative instruments during the period, compared to a $7.6 million unrealized (non-cash) loss in the prior year resulting in a decrease of $9.4 million in cost of products sold for the year ended September 27, 2008 compared to the prior year.

Cost of products sold associated with the distribution of propane and related activities of $689.9 million increased $116.6 million, or 20.3%, compared to the prior year. Higher average propane costs resulted in an increase of $189.8 million in cost of products sold during fiscal 2008 compared to the prior year. The impact of the sharp increase in commodity prices was partially offset by lower propane volumes which resulted in a $55.8 million decrease in cost of products sold during fiscal 2008 compared to the prior year. Lower wholesale and other propane revenues, noted above, decreased cost of products sold by approximately $14.2 million compared to the prior year. In addition, the portion of the total net change in the fair value of derivative instruments associated with the propane segment during fiscal 2008, noted above, resulted in a $3.2 million decrease in cost of products sold compared to the prior year.

Cost of products sold associated with our fuel oil and refined fuels segment of $247.3 million increased $53.1 million, or 27.3%, compared to the prior year. Higher average fuel oil costs resulted in an increase of $101.8 million in cost of products sold during fiscal 2008 compared to the prior year period. This increase was partially offset by lower fuel oil sales volumes, which resulted in a $53.3 million decrease in cost of products sold during fiscal 2008 compared to the prior year. In addition, as described above, risk management activities during fiscal 2008 resulted in a $10.8 million increase in cost of products sold compared to the prior year as a result of realized losses on futures contracts that were not fully offset by sales of physical product. The portion of the total net change in the fair value of derivative instruments associated with the fuel oil and refined fuels segment during the period resulted in a $6.2 million decrease in cost of products sold compared to the prior year.

Cost of products sold in our natural gas and electricity segment of $87.6 million increased $10.5 million, or 13.6%, compared to the prior year due to higher average electricity costs and, to a lesser extent, natural gas costs. Cost of products sold in our services segment of $12.5 million decreased $4.3 million, or 25.6%, compared to the prior year primarily due to lower sales volumes.

For the year ended September 27, 2008, total cost of products sold represented 66.0% of revenues compared to 60.1% in the prior year. This increase was primarily attributable to the significant increase in product costs which we were not able to fully pass on to customers, as well as the favorable market conditions discussed above that contributed approximately $14.7 million of incremental margin opportunities in the prior year that were not present in fiscal 2008 and the negative effect of higher commodity prices on our risk management activities which resulted in $10.8 million of realized losses during the second half of fiscal 2008 that were not fully offset by sales of physical product.

Operating Expenses

(Dollars in thousands)		Fiscal				Fiscal								Percent
		2008				2007				Decrease				Decrease
Operating expenses		$	308,071			$	322,852			$	(14,781)				(4.6%)
As a percent of total revenues		19.6%				22.4%

All costs of operating our retail distribution and appliance sales and service operations are reported within operating expenses in the consolidated statements of operations. These operating expenses include the compensation and benefits of field and direct operating support personnel, costs of operating and maintaining our vehicle fleet, overhead and other costs of our purchasing, training and safety departments and other direct and indirect costs of operating our customer service centers.

Operating expenses of $308.1 million for the year ended September 27, 2008 decreased $14.8 million, or 4.6%, compared to $322.9 million in the prior year as a result of our continued efforts to drive operational efficiencies and reduce costs across all operating segments. Payroll and benefit related expenses declined $18.8 million due to lower headcount, as well as lower variable compensation associated with lower earnings in fiscal 2008 compared to the prior year. In addition, vehicle expenditures decreased $0.6 million compared to the prior year, despite a significant increase in the cost of diesel fuel, as a result of a lower vehicle count enabled by ongoing routing efficiencies. Savings from payroll and benefit related expenses and vehicle expenditures were partially offset by higher bad debt expense and increased costs to operate our customer service centers in the high energy price environment.

General and Administrative Expenses

(Dollars in thousands)		Fiscal				Fiscal								Percent
		2008				2007				Decrease				Decrease
General and administrative expenses		$	48,134			$	56,422			$	(8,288)				(14.7%)
As a percent of total revenues			3.1%				3.9%

All costs of our back office support functions, including compensation and benefits for executives and other support functions, as well as other costs and expenses to maintain finance and accounting, treasury, legal, human resources, corporate development and the information systems functions are reported within general and administrative expenses in the consolidated statements of operations.

General and administrative expenses of $48.1 million for the year ended September 27, 2008 decreased $8.3 million, or 14.7%, compared to $56.4 million during the prior year. The decrease was primarily attributable to a reduction in variable compensation resulting from lower earnings in fiscal 2008 compared to the prior year and the reduction of compensation costs recognized under certain long-term incentive plans.

Restructuring Charges and Severance Costs

We did not record any restructuring charges for the year ended September 27, 2008. For the year ended September 29, 2007, we recorded a charge of $1.5 million primarily related to employee termination costs incurred as a result of further refinements to our plan to restructure our services segment.

Depreciation and Amortization

(Dollars in thousands)		Fiscal				Fiscal								Percent
		2008				2007				Decrease				Decrease
Depreciation and amortization		$	28,394			$	28,790			$	(396)				(1.4%)
As a percent of total revenues			1.8%				2.0%

Depreciation and amortization expense of $28.4 million for the year ended September 27, 2008 was relatively unchanged compared to the prior year.

Interest Expense, net

(Dollars in thousands)		Fiscal				Fiscal								Percent
		2008				2007				Increase				Increase
Interest expense, net		$	37,052			$	35,596			$	1,456			4.1%
As a percent of total revenues			2.4%			2.5%

Net interest expense increased $1.5 million, or 4.1%, to $37.1 million for the year ended September 27, 2008, compared to $35.6 million in the prior year as a result of lower market interest rates for short-term investments, which contributed to less interest income earned. As has been the case since April 2006, there were no borrowings under our working capital facility as seasonal working capital needs have been funded through cash on hand and cash flow from operations. We ended fiscal 2008 in a strong cash position with $137.7 million in cash on the consolidated balance sheet.

Discontinued Operations

On October 2, 2007, the Operating Partnership completed the sale of its Tirzah, South Carolina underground granite propane storage cavern, and associated 62-mile pipeline, for approximately $53.7 million in cash, after taking into account certain adjustments. As part of the agreement, we entered into a long-term storage arrangement, not to exceed 7 million propane gallons, with the purchaser of the cavern that will enable us to continue to meet the needs of our retail operations, consistent with past practices. As a result of this sale, we reported a $43.7 million gain on disposal of discontinued operations during the first quarter of fiscal 2008. The results of operations from the Tirzah facilities have been reported within discontinued operations on the consolidated statements of operations for fiscal 2007 and the assets and liabilities have been classified as held for sale on the consolidated balance sheet as of September 29, 2007.

During the first quarter of fiscal 2007, in a non-cash transaction, we disposed of nine customer service centers considered to be non-strategic in exchange for three customer service centers of another company located in Alaska. We reported a $1.0 million gain within discontinued operations during the first quarter of fiscal 2007 for the amount by which the fair value of assets relinquished exceeded the carrying value of the assets relinquished. During fiscal 2007 we also sold three customer service centers for net cash proceeds of $1.3 million and reported a gain on sale within discontinued operations of $0.9 million.

Net Income and EBITDA

We reported net income of $154.9 million, or $4.72 per Common Unit, for the year ended September 27, 2008 compared to net income of $127.3 million, or $3.91 per Common Unit, in the prior year. EBITDA for fiscal 2008 of $222.2 million increased $24.4 million, or 12.3%, compared to EBITDA of $197.8 million in the prior year.

Net income and EBITDA for fiscal 2008 included a gain (reported within discontinued operations) of $43.7 million from our sale of its Tirzah, South Carolina underground storage cavern and associated 62-mile pipeline. By comparison, net income and EBITDA for fiscal 2007 included (i) the non-cash pension settlement charge of $3.3 million; (ii) severance costs of $1.5 million related to positions eliminated; (iii) a gain of $2.0 million from the recovery of a substantial portion of legal fees associated with the successful defense of a matter following the 1999 acquisition of certain propane assets in North and South Carolina; (iv) gains (reported within discontinued operations) of $1.9 million from the sale and exchange of customer service centers considered to be non-strategic; and (v) a non-cash adjustment to the provision for income taxes of $3.8 million.

EBITDA represents net income before deducting interest expense, income taxes, depreciation and amortization. Our management uses EBITDA as a measure of liquidity and we disclose it because we believe that it provides our investors and industry analysts with additional information to evaluate our ability to meet our debt service obligations and to pay our quarterly distributions to holders of our Common Units. In addition, certain of our incentive compensation plans covering executives and other employees utilize EBITDA as the performance target. We use this non-GAAP financial measure in order to assist industry analysts and investors in assessing our liquidity on a year-over-year basis. Moreover, our revolving credit agreement requires us to use EBITDA as a component in calculating our leverage and interest coverage ratios. EBITDA is not a recognized term under GAAP and should not be considered as an alternative to net income or net cash provided by operating activities determined in accordance with GAAP. Because EBITDA as determined by us excludes some, but not all, items that affect net income, it may not be comparable to EBITDA or similarly titled measures used by other companies.

The following table sets forth (i) our calculations of EBITDA and (ii) a reconciliation of EBITDA, as so calculated, to our net cash provided by operating activities:

(Dollars in thousands)		Year Ended
		September 27,				September 29,
		2008				2007
Net income		$	154,880			$	127,287
Add:
Provision for income taxes			1,903				5,653
Interest expense, net			37,052				35,596
Depreciation and amortization — continuing operations			28,394				28,790
Depreciation and amortization — discontinued operations			—				452
EBITDA			222,229				197,778
Add (subtract):
Provision for income taxes — current			(626)				(1,853)
Interest expense, net			(37,052)				(35,596)
Compensation cost recognized under Restricted Unit Plan			2,156				3,014
Gain on disposal of property, plant and equipment, net			(2,252)				(2,782)
Gain on disposal of discontinued operations			(43,707)				(1,887)
Pension settlement charge			—				3,269
Changes in working capital and other assets and liabilities			(20,231)				(15,986)
Net cash provided by operating activities		$	120,517			$	145,957

Fiscal Year 2007 Compared to Fiscal Year 2006

Fiscal 2007 included 52 weeks of operations compared to 53 weeks in the prior year, which has affected operating results for all categories discussed below.

Revenues

(Dollars in thousands)		Fiscal				Fiscal								Percent
		2007				2006				Decrease				Decrease
Revenues
Propane		$	1,019,798			$	1,081,573			$	(61,775)				(5.7%)
Fuel oil and refined fuels			262,076				356,531				(94,455)				(26.5%)
Natural gas and electricity			94,352				122,071				(27,719)				(22.7%)
Services			56,519				87,258				(30,739)				(35.2%)
All other			6,818				9,697				(2,879)				(29.7%)
Total revenues		$	1,439,563			$	1,657,130			$	(217,567)				(13.1%)

Total revenues decreased $217.6 million, or 13.1%, to $1,439.6 million for the year ended September 29, 2007 compared to $1,657.1 million for the year ended September 30, 2006, driven primarily by lower volumes in each of our operating segments, offset to an extent by the higher average selling prices. As reported by NOAA, average temperatures in our service territories were 6% warmer than normal for fiscal 2007 compared to 11% warmer than normal temperatures in fiscal 2006. Lower volumes, despite the colder average temperatures compared to the prior year, were attributed to ongoing customer conservation driven by high energy costs, our ongoing efforts to improve our customer mix by exiting certain lower margin accounts, as well as the impact of the additional week of operations in the prior year.

Revenues from the distribution of propane and related activities of $1,019.8 million for the year ended September 29, 2007 decreased $61.8 million, or 5.7%, compared to $1,081.6 million in the prior year, primarily due to lower volumes, offset to an extent by higher average selling prices. Retail propane gallons sold in fiscal 2007 decreased 34.3 million gallons, or 7.3%, to 432.5 million gallons from 466.8 million gallons in the prior year. Propane volumes sold were negatively affected by customer conservation efforts, and our effort to focus on higher margin residential customers. Average propane selling prices increased 5.1% year-over-year as a result of higher commodity prices for propane and a more favorable customer mix. The average posted price of propane during fiscal 2007 increased 2.6% compared to the average posted prices in the prior year. Additionally, included within the propane segment are revenues from wholesale and risk management activities of $44.8 million for the year ended September 29, 2007, which decreased $29.6 million, or 39.8%, compared to the prior year primarily due to lower risk management activity in the continued high price environment.

Revenues from the distribution of fuel oil and refined fuels of $262.1 million for the year ended September 29, 2007 decreased $94.5 million, or 26.5%, from $356.5 million in the prior year. Fuel oil and refined fuels gallons sold in fiscal 2007 decreased 41.1 million gallons, or 28.2%, to 104.5 million gallons compared to 145.6 million gallons in the prior year. Lower volumes in our fuel oil and refined fuels segment were attributable primarily to our continued efforts to exit certain lower margin gasoline and low sulfur diesel businesses which resulted in an approximate decrease of 21.7 million gallons, or 53% of the total volume decline compared to the prior year. Average selling prices in our fuel oil and refined fuels segment increased 2.4% as a result of the decreased emphasis on lower priced gasoline and diesel businesses. The average posted price of fuel oil during fiscal 2007 decreased 1.2% compared to the average posted prices in the prior year, yet increased sharply during September 2007 compared to the prior year.

Revenues in our natural gas and electricity marketing segment decreased $27.7 million, or 22.7%, to $94.4 million in fiscal 2007 primarily from lower volumes and lower average selling prices for both natural gas and electricity. Revenues in our services segment declined 35.2%, to $56.5 million during fiscal 2007 compared to $87.3 million in the prior year, primarily as a result of the decision during the third quarter of fiscal 2006 to reorganize the services segment and to reduce the level of stand alone installation activities. The focus of our ongoing service offerings are in support of our existing propane, refined fuels and natural gas and electricity segments, thus reducing overall services segment revenues.

Cost of Products Sold

(Dollars in thousands)		Fiscal				Fiscal								Percent
		2007				2006				Decrease				Decrease
Cost of products sold
Propane		$	573,305			$	635,365			$	(62,060)				(9.8%)
Fuel oil and refined fuels			194,213				272,052				(77,839)				(28.6%)
Natural gas and electricity			77,116				102,687				(25,571)				(24.9%)
Services			16,847				35,972				(19,125)				(53.2%)
All other			3,937				5,721				(1,784)				(31.2%)
Total cost of products sold		$	865,418			$	1,051,797			$	(186,379)				(17.7%)
As a percent of total revenues			60.1%				63.5%

Cost of products sold decreased $186.4 million, or 17.7%, to $865.4 million for the year ended September 29, 2007, compared to $1,051.8 million in the prior year. The decrease results primarily from the lower sales volumes described above, as well as the impact of various favorable market factors impacting our supply and risk management activities which provided incremental margin opportunities in fiscal 2007. We attribute approximately $14.7 million of the fiscal 2007 margins to these favorable market conditions that may not be present in the future. Additionally, cost of products sold for fiscal 2007 included a $7.6 million unrealized (non-cash) loss representing the net change in fair values of derivative instruments under SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities,” as amended (“SFAS 133”), compared to a $14.5 million unrealized (non-cash) gain in the prior year (see Item 7A of this Annual Report for information on our policies regarding the accounting for derivative instruments).

Cost of products sold associated with the distribution of propane and related activities of $573.3 million decreased $62.1 million, or 9.8%, compared to the prior year. Lower sales volumes resulted in a $41.3 million decrease in cost of products sold during fiscal 2007 compared to the prior year, partially offset by higher commodity prices which had an unfavorable impact of $0.7 million compared to the prior year. In addition, the impact of mark-to-market adjustments for derivative instruments under SFAS 133 resulted in a $3.8 million increase in cost of products sold as fiscal 2007 included a $1.9 million unrealized (non-cash) loss, compared to a $1.9 million unrealized (non-cash) gain in the prior year. Wholesale and risk management activities resulted in a $25.6 million decrease in cost of products sold compared to the prior year due to lower risk management activities.

Cost of products sold associated with our fuel oil and refined fuels segment of $194.2 million decreased $77.8 million, or 28.6%, compared to the prior year. Lower sales volumes and lower commodity prices resulted in a decrease in cost of products sold of $80.4 million and $15.8 million, respectively, during fiscal 2007 compared to the prior year. These declines were partially offset by the impact of mark-to-market adjustments for derivative instruments under SFAS 133, which resulted in a $18.3 million increase in cost of products sold as fiscal 2007 included a $5.7 million unrealized (non-cash) loss, compared to a $12.6 million unrealized (non-cash) gain in the prior year.

Cost of products sold in our natural gas and electricity segment of $77.1 million decreased $25.6 million, or 24.9%, compared to prior year primarily due to lower revenues.

Cost of products sold in our services segment of $16.8 million decreased $19.1 million, or 53.2%, compared to prior year primarily due to lower revenues and a charge of $3.5 million in fiscal 2006 to reduce the carrying value of service inventory that is no longer actively marketed by our customer service centers.

For the year ended September 29, 2007, total cost of products sold represented 60.1% of revenues compared to 63.5% in the prior year, primarily as a result of an improved customer mix from our decision to exit certain lower margin customers in both the propane and fuel oil and refined fuels segments, as well as the impact of various favorable market factors impacting our supply and risk management activities and the lower services activities.

Operating Expenses

(Dollars in thousands)		Fiscal				Fiscal								Percent
		2007				2006				Decrease				Decrease
Operating expenses		$	322,852			$	373,305			$	(50,453)				(13.5%)
As a percent of total revenues			22.4%				22.5%

Operating expenses of $322.9 million for the year ended September 29, 2007 decreased $50.5 million, or 13.5%, compared to $373.3 million in the prior year, which included an additional week of operations. In fiscal 2007, we realized the full-year effect of the operating efficiencies, lower headcount and lower vehicle count resulting from our field and services reorganizations that began at the end of the third quarter of fiscal 2005 and continued into the beginning of fiscal 2007. The most significant cost savings were experienced in payroll and benefit related expenses which declined $28.5 million, as well as a decrease of $7.1 million in vehicle expenditures and savings in other costs of $16.5 million to operate our customer service centers. These cost savings were offset to an extent by a $2.7 million increase in variable compensation resulting from the improved earnings in fiscal 2007 compared to the prior year. In addition, fiscal 2007 operating expenses include a non-cash pension settlement charge of $3.3 million, which was $1.1 million lower than the prior year charge of $4.4 million, in order to accelerate the recognition of a portion of unrecognized actuarial losses in our defined benefit pension plan as a result of the level of lump sum retirement benefit payments made during each of the respective fiscal years.

General and Administrative Expenses

(Dollars in thousands)		Fiscal				Fiscal								Percent
		2007				2006				Decrease				Decrease
General and administrative expenses		$	56,422			$	63,561			$	(7,139)				(11.2%)
As a percent of total revenues			3.9%				3.8%

General and administrative expenses of $56.4 million for the year ended September 29, 2007 were $7.1 million, or 11.2%, lower compared to $63.6 million in fiscal 2006. The decrease was primarily attributable to a $5.0 million reduction in professional services fees incurred in the prior year associated with the GP Exchange Transaction consummated on October 19, 2006, as well as $4.4 million in higher costs incurred in the prior year associated with our field realignment effort. The reduction in professional services fees also includes a $2.0 million gain from our recovery of a substantial portion of legal fees associated with our successful defense of a matter following the 1999 acquisition of certain propane assets in North and South Carolina. These cost savings were offset to an extent by a $4.3 million increase in variable compensation resulting from the improved earnings in fiscal 2007 compared to the prior year.

Restructuring Charges and Severance Costs

For the year ended September 29, 2007, we recorded a charge of $1.5 million related to severance costs incurred associated with positions eliminated during fiscal 2007 unrelated to a specific plan of restructuring. For the year ended September 30, 2006, we recorded a restructuring charge of $6.1 million related primarily to severance costs incurred to effectuate our field realignment and services restructuring initiatives during fiscal 2006.

Depreciation and Amortization

(Dollars in thousands)		Fiscal				Fiscal								Percent
		2007				2006				Decrease				Decrease
Depreciation and amortization		$	28,790			$	32,653			$	(3,863)				(11.8%)
As a percent of total revenues			2.0%				2.0%

Depreciation and amortization expense for the year ended September 29, 2007 decreased $3.9 million, or 11.8%, compared to the prior year primarily as a result of lower amortization expense on intangible assets that have been fully amortized, coupled with lower depreciation from asset retirements. Fiscal 2006 depreciation and amortization expense included a $1.1 million asset impairment charge associated with our field realignment efforts, as well as the write-down of certain assets.

Interest Expense, net

(Dollars in thousands)		Fiscal				Fiscal								Percent
		2007				2006				Decrease				Decrease
Interest expense, net		$	35,596			$	40,680			$	(5,084)				(12.5%)
As a percent of total revenues			2.5%				2.5%

Net interest expense decreased $5.1 million, or 12.5%, to $35.6 million in fiscal 2007. During fiscal 2007, there were no borrowings under our working capital facility as seasonal working capital needs have been funded through improved cash flow and cash on hand, resulting in lower interest expense. In the prior year period, average borrowings under our working capital facility amounted to $13.4 million with a peak borrowing level of $84.0 million. Additionally, as a result of increased cash on hand, interest income on invested cash has increased compared to the prior year, thus reducing net interest expense.

Discontinued Operations

During the first quarter of fiscal 2007, in a non-cash transaction, we completed a transaction in which we disposed of nine customer service centers considered to be non-strategic in exchange for three customer service centers of another company located in Alaska. We reported a $1.0 million gain within discontinued operations in the first quarter of fiscal 2007 for the amount by which the fair value of assets relinquished exceeded the carrying value of the assets relinquished. As part of our overall business strategy, we continually monitor and evaluate existing operations in order to identify opportunities to optimize return on assets by selectively divesting operations in slower growing or non-strategic markets. During fiscal 2007, we also sold three customer service centers for net cash proceeds of $1.3 million and recorded a gain on sale of $0.9 million which has been accounted for in accordance with SFAS 144.

Net Income and EBITDA

We reported net income of $127.3 million, or $3.91 per Common Unit, for the year ended September 29, 2007 compared to net income of $90.7 million, or $2.84 per Common Unit, in the prior year. EBITDA for fiscal 2007 of $197.8 million increased $32.5 million, or 19.7%, compared to EBITDA of $165.3 million in the prior year.

Net income and EBITDA for fiscal 2007 included (i) the non-cash pension settlement charge of $3.3 million; (ii) severance costs of $1.5 million related to positions eliminated; (iii) a gain of $2.0 million from the recovery of a substantial portion of legal fees associated with the successful defense of a matter following the 1999 acquisition of certain propane assets in North and South Carolina; (iv) gains (reported within discontinued operations) of $1.9 million from the sale and exchange of customer service centers considered to be non-strategic; and (v) a non-cash adjustment to the provision for income taxes – deferred taxes of $3.8 million.

By comparison, EBITDA and net income for fiscal 2006 were unfavorably impacted by $17.5 million and $18.6 million, respectively, as a result of certain significant items relating mainly to (i) $6.1 million of restructuring charges primarily related to severance benefits associated with our field realignment and the restructuring of our services business; (ii) incremental professional services fees of $5.0 million associated with the GP Exchange Transaction consummated on October 19, 2006; (iii) a non-cash pension settlement charge of $4.4 million; (iv) a charge of $2.0 million within cost of products sold to reduce the carrying value of service inventory that will no longer be marketed by our customer service centers; and (v) $1.1 million included within depreciation and amortization expense attributable to impairment of assets affected by the field realignment.

The following table sets forth (i) our calculations of EBITDA and (ii) a reconciliation of EBITDA, as so calculated, to our net cash provided by operating activities:

(Dollars in thousands)		Year Ended
		September 29,				September 30,
		2007				2006
Net income		$	127,287			$	90,740
Add:
Provision for income taxes			5,653				764
Interest expense, net			35,596				40,680
Depreciation and amortization — continuing operations			28,790				32,653
Depreciation and amortization — discontinued operations			452				498
EBITDA			197,778				165,335
Add (subtract):
Provision for income taxes — current			(1,853)				(764)
Interest expense, net			(35,596)				(40,680)
Compensation cost recognized under Restricted Unit Plan			3,014				2,221
Gain on disposal of property, plant and equipment, net			(2,782)				(1,000)
Gain on disposal of discontinued operations			(1,887)				—
Pension settlement charge			3,269				4,437
Changes in working capital and other assets and liabilities			(15,986)				40,772
Net cash provided by operating activities		$	145,957			$	170,321

Liquidity and Capital Resources

Analysis of Cash Flows

Operating Activities. Net cash provided by operating activities for the year ended September 27, 2008 amounted to $120.5 million, a decrease of $25.5 million compared to $146.0 million in the prior year. The decrease was attributable to a $21.2 million decrease in earnings, after adjusting for non-cash items in both periods (deprecation, amortization, compensation costs recognized under our Restricted Unit Plan, gains on disposal of assets, pension settlement charges and deferred tax provision) and a $29.3 million increased investment in working capital, partially offset by a $25.0 million voluntary contribution to our defined benefit pension plan made in fiscal 2007. No pension contributions were made during fiscal 2008.

Net cash provided by operating activities for the year ended September 29, 2007 amounted to $146.0 million, a decrease of $24.3 million compared to $170.3 million in the prior year. The decrease was attributable to a $41.7 million increase in working capital and a $15.0 million increase in voluntary contributions to our defined benefit pension plan compared to the prior year, partially offset by $32.4 million in increased earnings, after adjusting for non-cash items in both periods (depreciation, amortization compensation costs recognized under our Restricted Unit Plan, gains on disposal of assets, pension settlement charges and deferred tax provision). The fiscal 2007 voluntary pension plan contribution of $25.0 million was made to fully fund our estimated accumulated benefit obligation, thus substantially reducing, if not eliminating, our future funding requirements.

Investing Activities. Net cash provided by investing activities of $36.6 million for the year ended September 27, 2008 consisted of the net proceeds from the sale of discontinued operations of $53.7 million and the net proceeds from the sale of property, plant and equipment of $4.7 million, partially offset by capital expenditures of $21.8 million (including $12.0 million for maintenance expenditures and $9.8 million to support the growth of operations). Capital spending in fiscal 2008 decreased $5.0 million, or 18.7%, compared to fiscal 2007 primarily as a result of lower spending on tanks and information technology as much of the incremental spending on our field realignment efforts has been incurred.

Net cash used in investing activities of $19.7 million for the year ended September 29, 2007 consisted of capital expenditures of $26.8 million (including $10.0 million for maintenance expenditures and $16.8 million to support the growth of operations), offset by net proceeds of $5.8 million from the sale of property, plant and equipment and proceeds from the sale of certain customer service centers of $1.3 million. Capital spending in fiscal 2007 increased $3.7 million, or 16.0%, compared to fiscal 2006 primarily as a result of spending on information technology to finalize the integration of systems from the Agway Acquisition, as well as the timing of capital spending for our field realignment efforts, particularly to integrate certain customer service center locations.

Financing Activities. Net cash used in financing activities for the year ended September 27, 2008 of $116.0 million reflects $101.0 million in quarterly distributions to Common Unitholders at a rate of $0.75 per Common Unit in respect of the fourth quarter of fiscal 2007, at a rate of $0.7625 per Common Unit in respect of the first quarter of fiscal 2008, at a rate of $0.775 per Common Unit in respect of the second quarter of fiscal 2008 and at a rate of $0.80 per Common Unit in respect of the third quarter of fiscal 2008, as well as a prepayment of $15.0 million to reduce amounts outstanding under our term loan. There were no borrowings under our working capital facility during fiscal 2008, nor have there been any borrowings since April 2006.

Net cash used in financing activities for the year ended September 29, 2007 of $90.3 million reflects quarterly distributions to Common Unitholders at a rate of $0.6625 per Common Unit in respect of the fourth quarter of fiscal 2006, at a rate of $0.6875 per Common Unit in respect of the first quarter of fiscal 2007, at a rate of $0.70 per Common Unit in respect of the second quarter of fiscal 2007 and at a rate of $0.7125 per Common Unit in respect of the third quarter of fiscal 2007.

Summary of Long-Term Debt Obligations and Revolving Credit Lines

Our long-term borrowings and revolving credit lines consist of $425.0 million in 6.875% senior notes due December 2013 (the “2003 Senior Notes”) and a Revolving Credit Agreement at the Operating Partnership level which provides a five-year $125.0 million term loan due March 31, 2010 (the “Term Loan”) and a separate working capital facility which provides available credit up to $175.0 million. On September 26, 2008 we made a prepayment of $15.0 million on the Term Loan thereby reducing the amount outstanding to $110.0 million. There were no outstanding borrowings under the working capital facility as of September 27, 2008 and there have been no borrowings under our working capital facility since April 2006. We have standby letters of credit issued under the working capital facility of the Revolving Credit Agreement in the aggregate amount of $55.8 million in support of retention levels under our self-insurance programs and certain lease obligations which expire periodically through October 25, 2009. Therefore, as of September 27, 2008 we had available borrowing capacity of $119.2 million under the working capital facility of the Revolving Credit Agreement. Additionally, under the Revolving Credit Agreement our Operating Partnership is authorized to incur additional indebtedness of up to $10.0 million in connection with capital leases and up to $20.0 million in short-term borrowings during the period from December 1 to April 1 in each fiscal year in order to meet working capital needs during periods of peak demand, if necessary. Because of our cash position, operating results and cash flow, we did not make any such short-term borrowings during fiscal 2008.

The 2003 Senior Notes mature on December 15, 2013 and require semi-annual interest payments. We are permitted to redeem some or all of the 2003 Senior Notes any time on or after December 15, 2008 at redemption prices specified in the indenture governing the 2003 Senior Notes. In addition, the 2003 Senior Notes have a change of control provision that would require us to offer to repurchase the notes at 101% of the principal amount repurchased, if the holders of the notes elected to exercise the right of repurchase. Borrowings under the Revolving Credit Agreement, including the Term Loan, bear interest at a rate based upon LIBOR plus an applicable margin. An annual facility fee ranging from 0.375% to 0.50%, based upon certain financial tests, is payable quarterly whether or not borrowings occur.

In connection with the Term Loan, our Operating Partnership also entered into an interest rate swap contract with a notional amount of $125.0 million with the issuing lender. In connection with the $15.0 million prepayment of the Term Loan on September 26, 2008, we also amended the interest rate swap contract to reduce the notional amount by $15.0 million. From an original borrowing date of March 31, 2005 through March 31, 2010, our Operating Partnership paid or will pay a fixed interest rate of 4.66% to the issuing lender on the notional principal amount outstanding, effectively fixing the LIBOR portion of the interest rate at 4.66%. In return, the issuing lender paid or will pay to our Operating Partnership a floating rate, namely LIBOR, on the same notional principal amount. The applicable margin above LIBOR, as defined in the Revolving Credit Agreement, will be paid in addition to this fixed interest rate of 4.66%.

Under the Revolving Credit Agreement, our Operating Partnership must maintain a leverage ratio (the ratio of total debt to EBITDA) of less than 4.0 to 1 and an interest coverage ratio (the ratio of EBITDA to interest expense) of greater than 2.5 to 1 at the Partnership level. Under the 2003 Senior Note indenture, we are generally permitted to make cash distributions equal to Available Cash, as defined, as of the end of the immediately preceding quarter, if no event of default exists or would exist upon making such distributions, and our consolidated fixed charge coverage ratio, as defined, is greater than 1.75 to 1. Under the Revolving Credit Agreement, as long as no default exists or would result, the Partnership is permitted to make cash distributions not more frequently than quarterly in an amount not to exceed Available Cash, as defined, for the immediately preceding fiscal quarter. The Revolving Credit Agreement and the 2003 Senior Notes both contain various restrictive and affirmative covenants applicable to our Operating Partnership and us, respectively. These covenants include (i) restrictions on the incurrence of additional indebtedness and (ii) restrictions on certain liens, investments, guarantees, loans, advances, payments, mergers, consolidations, distributions, sales of assets and other transactions. We were in compliance with all covenants and terms of all of our debt agreements as of September 27, 2008 and September 29, 2007.

Under the Revolving Credit Agreement, proceeds from the sale, transfer or other disposition of any asset of the Operating Partnership, other than the sale of inventory in the ordinary course of business, in excess of $15 million must be used to acquire productive assets within twelve months of receipt of the proceeds. Any proceeds not used within twelve months of receipt to acquire productive assets must be used to prepay the outstanding principal of the Term Loan. As noted above, we prepaid $15.0 million of the Term Loan on September 26, 2008 with the remaining available proceeds from the sale of our Tirzah storage facility that were not expected to be used to acquire productive assets within twelve months of receipt. An additional $2.0 million prepayment was made on November 10, 2008, representing the remaining amount to be prepaid from the net proceeds from the Tirzah Sale.

While we do not expect to utilize our working capital facility to fund our ongoing operational needs for the foreseeable future, we have performed an evaluation of the financial institutions supporting our Revolving Credit Agreement in order to assess their ability to provide capital under the working capital facility, if necessary. Our Revolving Credit Agreement is supported by a diverse group of thirteen financial institutions. Management believes that we maintain strong relationships with the financial institutions within our current bank group and, to the extent necessary, will have sufficient access to the unused portion of the working capital facility ($119.2 million as of September 27, 2008 after considering outstanding letters of credit). Our Revolving Credit Agreement matures in March 2010 and we will begin the process of renewing the agreement during the second quarter of fiscal 2009.

Partnership Distributions

We are required to make distributions in an amount equal to all of our Available Cash, as defined in the Partnership Agreement, as amended, no more than 45 days after the end of each fiscal quarter to holders of record on the applicable record dates. Available Cash, as defined in the Partnership Agreement, generally means all cash on hand at the end of the respective fiscal quarter less the amount of cash reserves established by the Board of Supervisors in its reasonable discretion for future cash requirements. These reserves are retained for the proper conduct of our business, the payment of debt principal and interest and for distributions during the next four quarters. The Board of Supervisors reviews the level of Available Cash on a quarterly basis based upon information provided by management.

On October 23, 2008, we announced a quarterly distribution of $0.805 per Common Unit, or $3.22 on an annualized basis, in respect of the fourth quarter of fiscal 2008 payable on November 10, 2008 to holders of record on November 3, 2008. This quarterly distribution included an increase of $0.005 per Common Unit, or $0.02 per Common Unit on an annualized basis, from the previous quarterly distribution rate representing the nineteenth increase since our recapitalization in 1999 and a 7.3% increase in the quarterly distribution rate since the fourth quarter of the prior year.

Pension Plan Assets and Obligations

Our defined benefit pension plan was frozen to new participants effective January 1, 2000 and, in furtherance of our effort to minimize future increases in our benefit obligations, effective January 1, 2003, all future service credits were eliminated. Therefore, eligible participants will receive interest credits only toward their ultimate defined benefit under the defined benefit pension plan. There were no minimum funding requirements for the defined benefit pension plan during fiscal 2008, 2007 or 2006. However, we made voluntary contributions of $25.0 million and $10.0 million to the defined benefit pension plan during fiscal 2007 and fiscal 2006, respectively, thereby taking proactive steps to improve the funded status of the plan. As of September 27, 2008 and September 29, 2007, the fair value of plan assets exceeded the projected benefit obligation of the defined benefit pension plan by $0.1 million and $5.5 million, respectively, which was recognized on the balance sheet as an asset. Although the projected benefit obligation under the defined benefit pension plan remained fully funded as of September 27, 2008, the funded status declined $5.4 million compared to the prior year due to negative returns on plan assets during fiscal 2008, which were attributable to the negative performance of the markets where the plan’s assets are invested (domestic fixed income securities market, as well as the domestic and international equity markets), offset to a considerable degree by a reduction in the present value of the benefit obligation due to a general increase in market interest rates.

Our investment policies and strategies, as set forth in the Investment Management Policy and Guidelines, are monitored by a Benefits Committee comprised of five members of management. During fiscal 2007, the Benefits Committee proposed and the Board of Supervisors approved contributions to the plan in order to fully fund the projected benefit obligation and changed the plan’s asset allocation to reduce investment risk and more closely match the expected returns on plan assets to the future cash requirements of the plan. The implementation of this strategy resulted in a $25.0 million voluntary contribution in fiscal 2007 from cash on hand and changed the asset allocation to reflect a greater concentration of fixed income securities.

At the end of fiscal 2007, we adopted SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans – An Amendment of FASB Statements No. 87, 88, 106 and 132R” (“SFAS 158”), which requires companies to recognize the funded status of pension and other postretirement benefit plans as an asset or liability on sponsoring employers’ balance sheets and to recognize changes in the funded status in comprehensive income (loss) in the year the changes occur. This adoption resulted in a $48.0 million reduction to the prepaid pension asset and a $5.0 million decrease to accrued postretirement liability, with the resulting $43.0 million reduction in our net assets recorded as an adjustment to accumulated other comprehensive loss.

During fiscal 2007, lump sum benefit payments of $10.8 million exceeded the combined service and interest costs of the net periodic pension cost. As a result, pursuant to SFAS No. 88 “Employers’ Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination Benefits,” we recorded a non-cash settlement charge of $3.3 million in order to accelerate recognition of a portion of cumulative unrecognized losses in the defined benefit pension plan. These unrecognized losses were previously accumulated as a reduction to partners’ capital and were being amortized to expense as part of our net periodic pension cost in accordance with SFAS No. 87 “Employers’ Accounting for Pensions.” During fiscal 2008, the amount of the pension benefit obligation settled through lump sum payments was $6.7 million, which did not exceed the settlement threshold of $8.7 million; therefore, a settlement charge was not required to be recognized for fiscal 2008. Additional pension settlement charges may be required in future periods depending on the level of lump sum benefit payments made in future periods.

There can be no assurance that future declines in capital markets, or interest rates, will not have an adverse impact on our results of operations or cash flow. However, with the fully funded status of the plan, coupled with the shift in investment strategy to a higher concentration of fixed income securities, we expect over the long-term that the returns on plan assets should largely fund the annual interest on the accumulated benefit obligation thus maintaining a fully funded status. For purposes of measuring our projected benefit obligations, we increased the discount rate from 6.00% as of September 29, 2007 to 7.625% as of September 27, 2008, reflecting current market rates for debt obligations of a similar duration to our pension obligations. For purposes of computing net periodic pension cost for fiscal 2008, 2007 and 2006, our assumed long-term rate of return on plan assets was 6.00%, 8.00% and 8.00%, respectively, based on the investment mix of our pension asset portfolio, historical asset performance and expectations for future performance. The reduced expected return assumption for fiscal 2008 relative to prior years reflects the shift in asset mix away from equities and into fixed income investments, which was implemented in early fiscal 2008.

We also provide postretirement health care and life insurance benefits for certain retired employees. Partnership employees who were hired prior to July 1993 and retired prior to March 1998 are eligible for health care benefits if they reached a specified retirement age while working for the Partnership. Partnership employees hired prior to July 1993 are eligible for postretirement life insurance benefits if they reach a specified retirement age while working for the Partnership. Effective January 1, 2000, we terminated our postretirement health care benefit plan for all eligible employees retiring after March 1, 1998. All active and eligible employees who were to receive health care benefits under the postretirement plan subsequent to March 1, 1998 were provided an increase to their accumulated benefits under the defined benefit pension plan. Our postretirement health care and life insurance benefit plans are unfunded. Effective January 1, 2006, we changed its postretirement health care plan from a self-insured program to one that is fully insured under which we pay a portion of the insurance premium on behalf of the eligible participants.

Long-Term Debt Obligations and Operating Lease Obligations

Contractual Obligations

The following table summarizes payments due under our known contractual obligations as of September 27, 2008.

(Dollars in thousands)																		Fiscal
		Fiscal				Fiscal				Fiscal				Fiscal				2013 and
		2009				2010				2011				2012				thereafter				Total
Long-term debt obligations		$	2,000			$	108,000			$	—			$	—			$	425,000			$	535,000
Future interest payments			34,853				33,303				29,219				29,219				43,828				170,422
Operating lease obligations (a)			13,286				10,409				7,767				5,732				8,452				45,646
Postretirement benefits obligations			1,923				1,879				1,820				1,755				8,637				16,014
Self-insurance obligations (b)			41,404				8,558				6,166				4,281				12,624				73,033
Other contractual obligations			1,151				5,834				1,068				253				4,971				13,277
Total		$	94,617			$	167,983			$	46,040			$	41,240			$	503,512			$	853,392

Additionally, we have standby letters of credit in the aggregate amount of $55.8 million, in support of retention levels under our casualty insurance programs and certain lease obligations, which expire periodically through October 25, 2009.

Operating Leases

We lease certain property, plant and equipment for various periods under noncancelable operating leases, including approximately 52% of our vehicle fleet, approximately 23% of our customer service centers and portions of our information systems equipment. Rental expense under operating leases was $17.7 million, $19.6 million and $27.2 million for fiscal 2008, 2007 and 2006, respectively. Future minimum rental commitments under noncancelable operating lease agreements as of September 27, 2008 are presented in the table above.

Off-Balance Sheet Arrangements

Guarantees

Certain of our operating leases, primarily those for transportation equipment with remaining lease periods scheduled to expire periodically through fiscal 2015, contain residual value guarantee provisions. Under those provisions, we guarantee that the fair value of the equipment will equal or exceed the guaranteed amount upon completion of the lease period, or we will pay the lessor the difference between fair value and the guaranteed amount. Although the fair value of equipment at the end of its lease term has historically exceeded the guaranteed amounts, the maximum potential amount of aggregate future payments we could be required to make under these leasing arrangements, assuming the equipment is deemed worthless at the end of the lease term, is approximately $16.1 million. The fair value of residual value guarantees for outstanding operating leases was de minimis as of September 27, 2008 and September 29, 2007.

Recently Issued Accounting Standards

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS 157”). SFAS 157 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. It also establishes a fair value hierarchy that prioritizes information used in developing assumptions when pricing an asset or liability. SFAS 157 is effective for fiscal years beginning after November 15, 2007, which is our 2009 fiscal year, which began on September 28, 2008. In February of 2008, the FASB provided an elective one-year deferral of the provisions of SFAS 157 for nonfinancial assets and nonfinancial liabilities that are only measured at fair value on a non-recurring basis. The adoption of SFAS 157 did not have a material effect on our consolidated financial position, results of operations and cash flows.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities” (“SFAS 159”). Under SFAS 159, entities may elect to measure specified financial instruments and warranty and insurance contracts at fair value on a contract-by-contract basis, with changes in fair value recognized in earnings each reporting period. SFAS 159 is effective for fiscal years beginning after November 15, 2007, which is our 2009 fiscal year, which began on September 28, 2008. We did not elect the fair value measurement option; accordingly, the adoption of SFAS 159 did not have a material impact on our consolidated financial position, results of operations and cash flows

In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements – an Amendment of ARB No. 51” (“SFAS 160”). SFAS 160 establishes accounting and reporting standards for noncontrolling interests in an entity’s subsidiary and alters the way the consolidated income statement is presented. SFAS 160 is effective for fiscal years beginning on or after December 15, 2008, which will be our 2010 fiscal year beginning September 27, 2009. As of September 27, 2008, all of our subsidiaries were wholly-owned; accordingly, the adoption of SFAS 160 should not have any impact on our consolidated financial position, results of operations and cash flows.

Also in December 2007, the FASB issued a revised SFAS No. 141 “Business Combinations” (“SFAS 141R”). Among other things, SFAS 141R requires an entity to recognize acquired assets, liabilities assumed and any noncontrolling interest at their respective fair values as of the acquisition date, clarifies how goodwill involved in a business combination is to be recognized and measured, and requires the expensing of acquisition-related costs as incurred. SFAS 141R is effective for business combinations entered into in fiscal years beginning on or after December 15, 2008, which will be our 2010 fiscal year beginning September 27, 2009, with early adoption prohibited.

In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities – an Amendment of FASB Statement No. 133” (“SFAS 161”). SFAS 161 requires enhanced disclosures about an entity’s objectives for using derivative instruments and related hedged items, how those derivative instruments are accounted for under SFAS 133 and how derivative instruments and related hedged items affect an entity’s financial position, financial performance and cash flows. SFAS 161 is effective for financial statements for interim or annual periods beginning on or after November 15, 2008, which will be the second quarter of our 2009 fiscal year beginning December 28, 2008. Because it is only a disclosure standard, the adoption of SFAS 161 will not have a material effect on our consolidated financial position, results of operations and cash flows.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Commodity Price Risk

We enter into product supply contracts that are generally one-year agreements subject to annual renewal, and also purchase product on the open market. Our propane supply contracts typically provide for pricing based upon index formulas using the posted prices established at major supply points such as Mont Belvieu, Texas, or Conway, Kansas (plus transportation costs) at the time of delivery. In addition, to supplement our annual purchase requirements, we may utilize forward fixed price purchase contracts to acquire a portion of the propane that we resell to our customers, which allows us to manage our exposure to unfavorable changes in commodity prices and to ensure adequate physical supply. The percentage of contract purchases, and the amount of supply contracted for under forward contracts at fixed prices, will vary from year to year based on market conditions. In certain instances, and when market conditions are favorable as was the case in the propane and fuel oil markets during the first half of fiscal 2007, we are able to purchase product under our supply arrangements at a discount to the market.

Product cost changes can occur rapidly over a short period of time and can impact profitability. We attempt to reduce commodity price risk by pricing product on a short-term basis. The level of priced, physical product maintained in storage facilities and at our customer service centers for immediate sale to our customers will vary depending on several factors, including, but not limited to, price, availability of supply, and demand for a given time of the year. Typically, our on hand priced position does not exceed more than four to eight weeks of our supply needs depending on the time of the year. In the course of normal operations, we routinely enter into contracts such as forward priced physical contracts for the purchase or sale of propane and fuel oil that, under SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities,” as amended (“SFAS 133”), qualify for and are designated as normal purchase or normal sale contracts. Such contracts are exempted from the fair value accounting requirements of SFAS 133 and are accounted for at the time product is purchased or sold under the related contract.

Under our hedging and risk management strategies, we enter into a combination of exchange-traded futures and option contracts, forward contracts and, in certain instances, over-the-counter options (collectively, “derivative instruments”) to manage the price risk associated with priced, physical product and with future purchases of the commodities used in our operations, principally propane and fuel oil, as well as to ensure the availability of product during periods of high demand. We do not use derivative instruments for speculative or trading purposes. Futures and forward contracts require that we sell or acquire propane or fuel oil at a fixed price for delivery at fixed future dates. An option contract allows, but does not require, its holder to buy or sell propane or fuel oil at a specified price during a specified time period. However, the writer of an option contract must fulfill the obligation of the option contract, should the holder choose to exercise the option. At expiration, the contracts are settled by the delivery of the product to the respective party or are settled by the payment of a net amount equal to the difference between the then current price and the fixed contract price or option exercise price. To the extent that we utilize derivative instruments to manage exposure to commodity price risk and commodity prices move adversely in relation to the contracts, we could suffer losses on those derivative instruments when settled. Conversely, if prices move favorably, we could realize gains. Under our hedging and risk management strategy, realized gains or losses on futures contracts will typically offset losses or gains on the physical inventory once the product is sold to customers at market prices.

As a result of various market factors during the first half of fiscal 2007, particularly commodity price volatility during the first four months of the fiscal year, we experienced additional margin opportunities due to favorable pricing under certain supply arrangements and from our hedging and risk management activities. These market conditions generated additional operating profit of approximately $14.7 million from incremental margin opportunities in fiscal 2007, which were not present in fiscal 2008.

With the dramatic rise in commodity prices in fiscal 2008, particularly during the third quarter, we reported realized losses from our risk management activities that were not fully offset by sales of physical product, resulting in a negative effect on earnings of approximately $10.8 million during fiscal 2008. As a result of continued market volatility, we made a decision under our risk management strategy to unwind all of our short futures positions during the third quarter of fiscal 2008.

Market Risk

We are subject to commodity price risk to the extent that propane or fuel oil market prices deviate from fixed contract settlement amounts. Futures traded with brokers of the NYMEX require daily cash settlements in margin accounts. Forward and option contracts are generally settled at the expiration of the contract term either by physical delivery or through a net settlement mechanism. Market risks associated with futures, options and forward contracts are monitored daily for compliance with our Hedging and Risk Management Policy which includes volume limits for open positions. Open inventory positions are reviewed and managed daily as to exposures to changing market prices.

Credit Risk

Futures and fuel oil options are guaranteed by the NYMEX and, as a result, have minimal credit risk. We are subject to credit risk with over-the-counter, forward and propane option contracts to the extent the counterparties do not perform. We evaluate the financial condition of each counterparty with which we conduct business and establish credit limits to reduce exposure to the risk of non-performance by our counterparties.

Interest Rate Risk

A portion of our long-term borrowings bear interest at a variable rate based upon LIBOR plus an applicable margin depending on the level of our total leverage. Therefore, we are subject to interest rate risk on the variable component of the interest rate. We manage our interest rate risk by entering into an interest rate swap agreement. On March 31, 2005, we entered into a $125.0 million interest rate swap contract in conjunction with the Term Loan facility under the Revolving Credit Agreement. On September 26, 2008, we amended the interest rate swap contract to reduce the notional amount by $15.0 million, representing the amount of the Term Loan prepaid on that date. The interest rate swap is being accounted for under SFAS 133 and has been designated as a cash flow hedge. Changes in the fair value of the interest rate swap are recognized in other comprehensive income (“OCI”) until the hedged item is recognized in earnings. At September 27, 2008, the fair value of the interest rate swap was $3.2 million representing an unrealized loss and is included within other liabilities with a corresponding debit in accumulated other comprehensive loss.

Derivative Instruments and Hedging Activities

Pursuant to SFAS 133, all of our derivative instruments are reported on the balance sheet, within other current assets or other current liabilities, at their fair values. On the date that futures, forward and option contracts are entered into, we make a determination as to whether the derivative instrument qualifies for designation as a hedge. Changes in the fair value of derivative instruments are recorded each period in current period earnings or OCI, depending on whether a derivative instrument is designated as a hedge and, if so, the type of hedge. For derivative instruments designated as cash flow hedges, we formally assess, both at the hedge contract’s inception and on an ongoing basis, whether the hedge contract is highly effective in offsetting changes in cash flows of hedged items. Changes in the fair value of derivative instruments designated as cash flow hedges are reported in OCI to the extent effective and reclassified into cost of products sold, or interest expense depending on the item being hedged, during the same period in which the hedged item affects earnings. The mark-to-market gains or losses on ineffective portions of cash flow hedges used to hedge future purchases are immediately recognized in cost of products sold. Changes in the fair value of derivative instruments that are not designated as cash flow hedges, and that do not meet the normal purchase and normal sale exemption under SFAS 133, are recorded within cost of products sold as they occur.

At September 27, 2008, the fair value of derivative instruments described above resulted in derivative assets (unrealized gains) of $5.0 million included within prepaid expenses and other current assets and derivative liabilities (unrealized losses) of $0.5 million included within other current liabilities. Cost of products sold included unrealized (non-cash) gains in the amount of $1.8 million for the year ended September 27, 2008 compared to unrealized (non-cash) losses of $7.6 million for the year ended September 29, 2007, attributable to the change in fair value of derivative instruments not designated as cash flow hedges.

Sensitivity Analysis

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

	A.		The actual fixed contract price of open positions as of September 27, 2008 for each of the future periods.
	B.		The estimated future market prices for futures and forward contracts as of September 27, 2008 as derived from the NYMEX for traded propane or fuel oil futures for each of the future periods.
	C.		The market prices determined in B. above were adjusted adversely by a hypothetical 10% change in the future periods and compared to the fixed contract settlement amounts in A. above to project the potential negative impact on earnings that would be recognized for the respective scenario.

Based on the sensitivity analysis described above, the hypothetical 10% adverse change in market prices for each of the future months for which a future or option contract exists indicates either future losses or a reduction in potential future gains of $1.8 million as of September 27, 2008. The above hypothetical change does not reflect the worst case scenario. Actual results may be significantly different depending on market conditions and the composition of the open position portfolio. The average posted price of propane on September 27, 2008 at Mont Belvieu, Texas (a major storage point) was $1.433 per gallon as compared to $1.341 per gallon on September 29, 2007. The average posted price of fuel oil on September 27, 2008 at Linden, New Jersey was $2.8636 per gallon as compared to $2.2379 per gallon on September 29, 2007.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Our Consolidated Financial Statements and the Report of Independent Registered Public Accounting Firm thereon listed on the accompanying Index to Financial Statements (see page F-1) and the Supplemental Financial Information listed on the accompanying Index to Financial Statement Schedule (see page S-1) are included herein.

Selected Quarterly Financial Data

Due to the seasonality of the retail propane business, our first and second quarter revenues and earnings are consistently greater than third and fourth quarter results. The following presents our selected quarterly financial data for the last two fiscal years (unaudited; in thousands, except per unit amounts).

		First				Second				Third				Fourth				Total
		Quarter				Quarter				Quarter				Quarter				Year
Fiscal 2008
Revenues		$	425,109			$	587,097			$	305,476			$	256,481			$	1,574,163
Cost of products sold			277,715				380,757				212,974				167,990				1,039,436
Income (loss) before interest expense and provision for income taxes (a)			51,789				104,375				(4,380	)			(1,656	)			150,128
Income (loss) from continuing operations (a)			41,722				94,523				(13,747	)			(11,325	)			111,173
Discontinued operations:
Gain on disposal of discontinued operations (b)			43,707				—				—				—				43,707
Net income (loss) (a)			85,429				94,523				(13,747	)			(11,325	)			154,880
Net income (loss) from continuing operations per common unit — basic (d)			1.27				2.89				(0.42	)			(0.35	)			3.39
Net income (loss) per common unit — basic (d)			2.61				2.89				(0.42	)			(0.35	)			4.72
Net income (loss) per common unit — diluted (d)			2.60				2.87				(0.42	)			(0.35	)			4.70
Cash (used in) provided by
Operating activities			(41,953	)			50,340				48,601				63,529				120,517
Investing activities			48,875				(3,553	)			(5,419	)			(3,273	)			36,630
Financing activities			(24,539	)			(24,953	)			(25,362	)			(41,181	)			(116,035	)
EBITDA (e)		$	102,555			$	111,482			$	2,779			$	5,413			$	222,229
Retail gallons sold
Propane			111,937				146,252				71,420				56,613				386,222
Fuel oil and refined fuels			23,594				31,435				12,614				8,872				76,515
Fiscal 2007 (f)
Revenues		$	397,908			$	555,111			$	271,454			$	215,090			$	1,439,563
Cost of products sold			230,874				327,347				167,224				139,973				865,418
Income (loss) before interest expense and provision for income taxes (a)			63,062				114,972				7,261				(20,699	)			164,596
Income (loss) from continuing operations (a)			53,084				105,272				(1,751	)			(33,258	)			123,347
Discontinued operations:
Gain on disposal of discontinued operations (b)			1,002				—				203				682				1,887
Income from discontinued operations (c)			568				588				408				489				2,053
Net income (loss) (a)			54,654				105,860				(1,140	)			(32,087	)			127,287
Net income (loss) from continuing operations per common unit — basic (d)			1.65				3.22				(0.05	)			(1.02	)			3.79
Net income (loss) per common unit — basic (d)			1.70				3.24				(0.03	)			(0.99	)			3.91
Net income (loss) per common unit — diluted (d)			1.69				3.22				(0.03	)			(0.99	)			3.89
Cash (used in) provided by
Operating activities			(5,893	)			87,120				46,788				17,942				145,957
Investing activities			(6,663	)			(2,048	)			(5,981	)			(4,997	)			(19,689	)
Financing activities			(21,637	)			(22,464	)			(22,872	)			(23,280	)			(90,253	)
EBITDA (e)		$	71,768			$	123,130			$	15,303			$	(12,423	)		$	197,778
Retail gallons sold
Propane			121,764				166,796				80,042				63,924				432,526
Fuel oil and refined fuels			28,498				43,997				19,144				12,867				104,506

		First				Second				Third				Fourth				Total
Fiscal 2008		Quarter				Quarter				Quarter				Quarter				Year
Net income (loss)		$	85,429			$	94,523			$	(13,747	)		$	(11,325	)		$	154,880
Add:
Provision for (benefit from) income taxes			1,679				434				(157	)			(53	)			1,903
Interest expense, net			8,388				9,418				9,524				9,722				37,052
Depreciation and amortization			7,059				7,107				7,159				7,069				28,394
EBITDA			102,555				111,482				2,779				5,413				222,229
Add (subtract):
(Provision for) benefit from income taxes — current			(402	)			(190	)			(87	)			53				(626	)
Interest expense, net			(8,388	)			(9,418	)			(9,524	)			(9,722	)			(37,052	)
Compensation cost recognized under Restricted Unit Plan			(67	)			753				817				653				2,156
Gain on disposal of property, plant and equipment, net			(1,429	)			(283	)			(109	)			(431	)			(2,252	)
Gain on disposal of discontinued operations			(43,707	)			—				—				—				(43,707	)
Changes in working capital and other assets and liabilities			(90,515	)			(52,004	)			54,725				67,563				(20,231	)
Net cash (used in) provided by operating activities		$	(41,953	)		$	50,340			$	48,601			$	63,529			$	120,517