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Investments in and Acquisitions of Businesses | 9 Months Ended
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Jun. 24, 2023
Business Combinations [Abstract] |
Investments in and Acquisitions of Businesses | 4. Investments in and Acquisitions of Businesses On December 28, 2022, Suburban Renewable Energy acquired a platform of RNG production assets from Equilibrium Capital Group (“Equilibrium”), a leading sustainability-driven asset management firm. In addition, the parties formed a partnership to serve as a long-term growth platform for the identification, development and operation of additional RNG projects, including an existing pipeline of identified RNG projects that are in various stages of development (the “RNG Acquisition”). The purchase price of $190,000 for the two operating facilities, along with potential contingent consideration primarily based upon the future economic performance of the acquired RNG assets, consisted of the following:
Consideration paid at closing |  | $ | 110,348 |
Assumption of debt and accrued interest |  |  | 81,717 |
Total |  |  | 192,065 |
Less: estimated cash and working capital |  |  | (2,065 | )
Total purchase price |  | $ | 190,000 |
The RNG platform includes the following: (1) a large-scale RNG production facility in Stanfield, Arizona that is currently operating and includes seven anaerobic digesters, manure rights from approximately 55,000 dairy cattle and an interconnect with an interstate pipeline; (2) an operating facility in Columbus, Ohio that is currently receiving tipping fees from several large food and beverage providers for processing food waste into fertilizer and biogas, and has an active development project to upgrade the biogas into RNG for sale; (3) rights of first offer for a third RNG facility in the Midwest that is currently being developed by Equilibrium; and (4) the creation of a joint venture to invest in and develop approximately $155,000 of future RNG projects, of which Suburban Renewable Energy will own approximately 70% and Equilibrium will own approximately 30% once such projects are fully funded. The condensed consolidated balance sheet at June 24, 2023 reflects a preliminary allocation of the purchase price to the assets acquired and liabilities assumed. The following table summarizes the fair value of the assets acquired and liabilities assumed as of December 28, 2022:
Assets acquired: |  |  |
Cash and cash equivalents |  | $ | 1,560 |
Accounts receivable |  |  | 4,150 |
Other current assets |  |  | 178 |
Current assets acquired |  |  | 5,888 |
Property, plant & equipment |  |  | 91,490 |
Other intangibles |  |  | 48,024 |
Goodwill |  |  | 31,759 |
Other assets |  |  | 13,372 |
Total assets acquired |  |  | 190,533 |
Liabilities assumed: |  |  |
Accounts payable |  | $ | (6,122 | )
Other current liabilities |  |  | (1,969 | )
Long-term debt |  |  | (65,776 | )
Other noncurrent liabilities |  |  | (6,318 | )
Total liabilities assumed |  |  | (80,185 | )
Total net assets acquired |  | $ | 110,348 |
The fair values assigned to the acquired tangible assets were derived using a combination of the income approach, the market approach and the cost approach. Significant judgments used in valuing tangible assets include estimated reproduction or replacement cost, useful lives of assets, estimated selling prices, costs to complete and reasonable profit. Included in Other noncurrent liabilities is the fair value of the potential contingent consideration Equilibrium could earn based on a multiple of earnings before deducting interest expense, income taxes, depreciation and amortization (“EBITDA”) that is earned for the two-year period from January 1, 2024 through December 31, 2025 once EBITDA exceeds a certain minimum threshold; the maximum earnout potential is capped at $45,000, and would be paid in fiscal 2026, if earned. The fair values assigned to the acquired intangible assets were determined through the use of the income approach, specifically the relief from royalty method, multi-period excess earnings method and the cost approach. The Partnership believes the assumptions are representative of those a market participant would use in estimating fair value. The intangible assets represent customer relationships and favorable supply contracts of $42,924 and $5,100, respectively, with a weighted average useful life of approximately 12 years. The goodwill generated from this acquisition will be deductible for federal income tax purposes and was reduced by $500 following the initial preliminary allocation for cash received from Equilibrium associated with the RNG Acquisition. The following table presents unaudited pro forma combined financial information as if the aforementioned acquisition had occurred on September 26, 2021, the first day of the Partnership’s 2022 fiscal year:
|  | Three Months Ended |  |  | Nine Months Ended |
|  | June 24, |  |  | June 25, |  |  | June 24, |  |  | June 25, |
|  | 2023 |  |  | 2022 |  |  | 2023 |  |  | 2022 |
Revenues |  | $ | 278,628 |  |  | $ | 306,326 |  |  | $ | 1,206,529 |  |  | $ | 1,277,522 |
Net income |  |  | (5,261 | ) |  |  | (4,962 | ) |  |  | 134,531 |  |  |  | 176,494 |
This unaudited pro forma financial information does not include anticipated changes in market approach or synergies expected from operating the acquired facilities under the Partnership’s oversight. Accordingly, the pro forma results are not necessarily indicative of either future results of operations or results that might have been achieved had the acquisition been completed by September 26, 2021. For the three and nine months ended June 24, 2023, transaction costs directly related to the acquisition included in the pro forma combined results were $354 and $4,695, respectively. Suburban Renewable Energy owns a 25% equity stake in Independence Hydrogen, Inc. (“IH”) based in Ashburn, VA. IH is a veteran-owned and operated, privately held company developing a gaseous hydrogen ecosystem to deliver locally sourced hydrogen to local markets, with a primary focus on material handling and backup power applications. During the third quarter of fiscal 2022, Suburban Renewable Energy announced an agreement to construct, own and operate a new biodigester system with Adirondack Farms, a family dairy farm located in Clinton County, New York, for the production of RNG. Construction of the assets began during the first quarter of fiscal 2023, and is expected to be completed within 18-24 months. The Operating Partnership owns a 38% equity stake in Oberon Fuels, Inc. (“Oberon”) based in San Diego, California and has also purchased certain secured convertible notes issued by Oberon. Oberon, a development-stage producer of low-carbon, renewable dimethyl ether (“rDME”) transportation fuel, is focused on the research and development of practical and affordable pathways to zero-emission transportation through its proprietary production process. Oberon’s rDME fuel is a low-carbon, zero-soot alternative to petroleum diesel, and when blended with propane can significantly reduce the carbon intensity of propane. Additionally, rDME is a carrier for hydrogen, making it easy to deliver this renewable fuel for the growing hydrogen fuel cell vehicle indust ry. During the first nine months fiscal 2023, the Operating Partnership purchased four additional secured convertible notes issued by Oberon. The aforementioned RNG Acquisition, investments and partnerships were made in line with the Partnership’s Go Green with Suburban Propane corporate pillar, which focuses on advocating for the clean-burning and versatile nature of propane and renewable propane as a solution to a lower carbon future and investing in innovative, renewable energy alternatives to lower greenhouse gas (“GHG”) emissions. The investments in IH and Oberon are being accounted for under the equity method of accounting and were included in “Other assets” within the condensed consolidated balance sheets, and the Partnership’s equity in their earnings were included in “Other, net” within the condensed consolidated statements of operations. On May 18, 2023, the Operating Partnership acquired the propane assets and operations of a propane retailer headquartered in Washington for $8,450, including $650 for non-compete consideration, plus working capital acquired. As of June 24, 2023, $7,400 was paid and the remainder of the purchase price will be funded in accordance with the terms of the asset purchase and non-compete agreements. This acquisition was consummated pursuant to the Partnership’s strategic growth initiatives for the core propane business. The preliminary purchase price allocation and results of operations of the acquired business was not material to the Partnership’s condensed consolidated financial position and statement of operations.

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