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Suburban Propane Partners, L.P. Announces Second Quarter Results Following Twenty-Fifth Distribution Increase

WHIPPANY, N.J., May 6, 2010 /PRNewswire via COMTEX/ --Suburban Propane Partners, L.P. (NYSE: SPH), a nationwide distributor of propane, fuel oil and related products and services, as well as a marketer of natural gas and electricity, today announced earnings for its second quarter ended March 27, 2010. Net income amounted to $98.4 million, or $2.78 per Common Unit, compared to $114.9 million, or $3.50 per Common Unit, in the prior year quarter. Earnings before interest, taxes, depreciation and amortization ("EBITDA") for the second quarter of fiscal 2010 amounted to $112.5 million, compared to $132.3 million in the prior year quarter.

Net income and EBITDA for the fiscal 2010 second quarter included a loss on debt extinguishment of $9.5 million associated with the senior note refinancing completed during March 2010. Therefore, excluding the effect of the loss on debt extinguishment on the Partnership's fiscal 2010 second quarter earnings and unrealized (non-cash) mark-to-market adjustments for derivative instruments used in risk management activities, Adjusted EBITDA amounted to $123.7 million, compared to Adjusted EBITDA of $142.0 million in the prior year quarter. The second quarter of fiscal 2010 was characterized by continued adverse affects of the weak economy, an erratic weather pattern and a volatile commodity price environment. The prior year second quarter benefitted from a sharp drop in commodity prices which, as reported throughout the prior year, resulted in higher gross margins.

In announcing these results, President and Chief Executive Officer Michael J. Dunn, Jr., said, "The current operating environment continues to present challenges in managing volumes and margins. However, thanks to a flexible cost structure and an efficient operating platform we are very pleased to deliver Adjusted EBITDA that was ahead of our expectations for the quarter. In addition to these solid results, during the quarter we took proactive steps to further strengthen our balance sheet by successfully accessing the capital markets and extending the maturity on $250.0 million of senior debt until March 2020 at attractive rates. And, even with funding our peak seasonal working capital needs entirely from cash on hand, we ended the quarter with more than $140.0 million of cash on the balance sheet."

Mr. Dunn added, "On the strength of these earnings and cash flows, we are pleased to deliver our sixteenth consecutive increase in our quarterly distribution rate (twenty-fifth since the recapitalization in 1999) to $0.84 per Common Unit, or $3.36 annualized, which represents more than 3% growth over the prior year second quarter."

Retail propane gallons sold in the second quarter of fiscal 2010 decreased 10.0 million gallons, or 7.5%, to 124.5 million gallons compared to 134.5 million gallons in the prior year quarter. Sales of fuel oil and other refined fuels decreased 5.7 million gallons, or 23.7%, to 18.4 million gallons during the second quarter of fiscal 2010 compared to 24.1 million gallons in the prior year quarter. The weak economy continues to negatively affect sales volumes, particularly in the Partnership's non-residential customer base, which accounted for 63% of the overall decline in propane sales volumes. Additionally, while average temperatures across the Partnership's service territories for the second quarter of fiscal 2010 were 3% warmer than both normal and the prior year second quarter, average temperatures in the Partnership's northeast and western territories were approximately 6% warmer than both normal and the prior year quarter, which also contributed to the decline in sales volumes.

Revenues of $469.2 million increased $24.0 million, or 5.4%, compared to the prior year quarter, primarily due to higher average selling prices in line with higher average product costs, offset to an extent by the lower volumes sold. Average posted prices for propane and fuel oil were 84.4% and 52.3% higher, respectively, compared to the prior year second quarter. Cost of products sold for the second quarter of fiscal 2010 of $248.5 million increased $40.2 million, or 19.3%, compared to $208.3 million in the prior year quarter. Cost of products sold in the second quarter of fiscal 2010 included a $1.7 million unrealized (non-cash) loss attributable to the mark-to-market adjustment for derivative instruments used in risk management activities, compared to a $9.7 million unrealized (non-cash) loss in the prior year quarter; these unrealized losses are excluded from Adjusted EBITDA for both periods in the table below.

Combined operating and general and administrative expenses of $98.8 million for the second quarter of fiscal 2010 were $5.8 million, or 5.5%, lower than the prior year quarter, primarily due to lower variable compensation attributable to lower earnings and continued savings in vehicle expenses and insurance costs. Net interest expense decreased $2.8 million, or 29.8%, as a result of lower outstanding debt during the second quarter of fiscal 2010 compared to the prior year quarter due to the $183.0 million debt reduction in the second half of fiscal 2009. Additionally, during the second quarter of fiscal 2010, the Partnership took proactive steps to further enhance its capital structure by extending the maturity on $250.0 million of senior notes until March 2020. On March 23, 2010, the Partnership announced the successful completion of the issuance of $250.0 million of 7 3/8% senior notes maturing in March 2020 to replace the previously existing 6 7/8% senior notes that were set to mature in December 2013. Once again, the Partnership funded all working capital requirements with cash on hand without the need to borrow under its working capital facility and ended the second quarter of fiscal 2010 with more than $140.0 million of cash.

On April 22, 2010, the Partnership announced that its Board of Supervisors declared the twenty-fifth increase (since the Partnership's recapitalization in 1999) in the Partnership's quarterly distribution from $0.835 to $0.84 per Common Unit for the three months ended March 27, 2010. On an annualized basis, this increased distribution rate equates to $3.36 per Common Unit, an increase of $0.02 per Common Unit from the previous distribution rate, and an increase of 3.1% compared to the second quarter of fiscal 2009. The $0.84 per Common Unit distribution will be paid on May 11, 2010 to Common Unitholders of record as of May 4, 2010.

Suburban Propane Partners, L.P. is a publicly-traded master limited partnership listed on the New York Stock Exchange. Headquartered in Whippany, New Jersey, Suburban has been in the customer service business since 1928. The Partnership serves the energy needs of approximately 850,000 residential, commercial, industrial and agricultural customers through more than 300 locations in 30 states.

This press release contains certain forward-looking statements relating to future business expectations and financial condition and results of operations of the Partnership, based on management's current good faith expectations and beliefs concerning future developments. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those discussed or implied in such forward-looking statements, including the following:

  • 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, derivative instruments and other regulatory developments on the Partnership's business;
  • The impact of changes in tax regulations that could adversely affect the tax treatment of the Partnership for federal income tax purposes;
  • 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;
  • The impact of current conditions in the global capital and credit markets, and general economic pressures; and
  • Other risks referenced from time to time in filings with the Securities and Exchange Commission ("SEC") and those factors listed or incorporated by reference into the Partnership's Annual Report under "Risk Factors."

Some of these risks and uncertainties are discussed in more detail in the Partnership's Annual Report on Form 10-K for its fiscal year ended September 26, 2009 and other periodic reports filed with the SEC. 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, except as otherwise required by law.



                Suburban Propane Partners, L.P. and Subsidiaries
                      Consolidated Statements of Operations
      For the Three and Six Months Ended March 27, 2010 and March 28, 2009
                     (in thousands, except per unit amounts)
                                   (unaudited)


                              Three Months Ended        Six Months Ended
                             --------------------     --------------------
                              March         March      March         March
                               27,           28,        27,           28,
                               2010          2009       2010          2009
                             ------        ------     ------        ------
    Revenues
      Propane               $369,341      $336,913   $602,872      $610,821
      Fuel oil and refined
       fuels                  61,311        65,138    100,558       119,329
      Natural gas and
       electricity            28,841        32,093     45,703        54,374
      All other                9,670        11,081     21,462        24,016
                               -----        ------     ------        ------
                             469,163       445,225    770,595       808,540
    Costs and expenses
      Cost of products sold  248,459       208,259    398,825       382,489
      Operating               78,508        86,848    152,995       163,911
      General and
       administrative         20,257        17,793     33,995        32,563
      Depreciation and
       amortization            7,142         7,131     14,226        14,154
                               -----         -----     ------        ------
                             354,366       320,031    600,041       593,117

    Income before loss on
     debt extinguishment,
     interest expense and
     provision for income
     taxes                   114,797       125,194    170,554       215,423
    Loss on debt
     extinguishment            9,473             -      9,473             -
    Interest expense, net      6,608         9,442     13,791        18,845
                               -----         -----     ------        ------

    Income before
     provision for income
     taxes                    98,716       115,752    147,290       196,578
    Provision for income
     taxes                       328           886        527         1,024
                                 ---           ---        ---         -----

    Net income               $98,388      $114,866   $146,763      $195,554
                             =======      ========   ========      ========

    Net income per Common
     Unit -basic               $2.78         $3.50      $4.15         $5.96
                               =====         =====      =====         =====
    Weighted average
     number of Common
     Units outstanding -
     basic                    35,343        32,847     35,332        32,832
                              ------        ------     ------        ------

    Net income per Common
     Unit - diluted            $2.76         $3.48      $4.12         $5.93
                               =====         =====      =====         =====
    Weighted average
     number of Common
     Units outstanding -
     diluted                  35,622        33,051     35,581        32,996
                              ------        ------     ------        ------

    Supplemental
     Information:
    EBITDA (a)              $112,466      $132,325   $175,307      $229,577
    Adjusted EBITDA (a)     $123,671      $142,015   $189,920      $224,261
    Retail gallons sold:
      Propane                124,457       134,512    214,438       233,559
      Refined fuels           18,381        24,125     31,436        40,841
    Capital expenditures:
      Maintenance             $2,821        $2,029     $3,972        $3,658
      Growth                  $2,137        $1,849     $5,478        $4,665


    (a)  EBITDA represents net income before deducting interest expense,
         income taxes, depreciation and amortization.   Adjusted EBITDA
         represents EBITDA excluding the unrealized net gain or loss on mark-
         to-market activity for derivative instruments and loss on debt
         extinguishment.  Our management uses EBITDA and Adjusted EBITDA as
         measures of liquidity and we are including them because we believe
         that they provide 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 Adjusted EBITDA as the
         performance target.  Moreover, our revolving credit agreement
         requires us to use Adjusted EBITDA as a component in calculating our
         leverage and interest coverage ratios.  EBITDA and Adjusted EBITDA
         are not recognized terms under generally accepted accounting
         principles ("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 and Adjusted
         EBITDA as determined by us excludes some, but not all, items that
         affect net income, they may not be comparable to EBITDA and Adjusted
         EBITDA or similarly titled measures used by other companies.


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

                           Three Months Ended             Six Months Ended
                          --------------------         ---------------------
                          March         March          March          March
                            27,           28,            27,           28,
                           2010          2009           2010           2009
                          ------        ------         ------         ------

    Net income           $98,388      $114,866        $146,763      $195,554
    Add:
      Provision for
       income taxes          328           886             527         1,024
      Interest
       expense, net        6,608         9,442          13,791        18,845
      Depreciation and
       amortization        7,142         7,131          14,226        14,154
                           -----         -----          ------        ------
    EBITDA               112,466       132,325         175,307       229,577
      Unrealized (non-
       cash) losses
       (gains) on
       changes in fair
       value of
       derivatives         1,732         9,690           5,140        (5,316)
      Loss on debt
       Extinguishment      9,473             -           9,473             -
                           -----           ---           -----           ---
    Adjusted EBITDA      123,671       142,015         189,920       224,261
    Add / (subtract):
      (Provision for)
       income taxes         (328)         (426)           (527)         (564)
      Interest
       expense, net       (6,608)       (9,442)        (13,791)      (18,845)
      Unrealized (non-
       cash) (losses)
       gains on
       changes in fair
       value of
       derivatives        (1,732)       (9,690)         (5,140)        5,316
      Compensation
       cost recognized
       under Restricted
       Unit Plan           1,025           672           2,017         1,241
      Loss (gain) on
       disposal of
       property, plant
       and equipment,
       net                   293          (393)           (134)         (623)
      Changes in
       working capital
       and other
       assets and
       liabilities       (44,264)       11,212        (115,014)      (51,834)
                         -------        ------        --------       -------

    Net cash provided
     by operating
     activities          $72,057      $133,948         $57,331      $158,952
                         =======      ========         =======      ========


    The unaudited financial information included in this document is
    intended only as a summary provided for your convenience, and should
    be read in conjunction with the complete consolidated financial
    statements of the Partnership (including the Notes thereto, which
    set forth important information) contained in its Quarterly Report
    on Form 10-Q to be filed by the Partnership with the United States
    Securities and Exchange Commission ("SEC").  Such report, once
    filed, will be available on the public EDGAR electronic filing
    system maintained by the SEC.



SOURCE Suburban Propane Partners, L.P.