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Suburban Propane Partners, L.P. Announces Third Quarter Earnings

WHIPPANY, N.J., Aug. 3, 2017 /PRNewswire/ -- 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 third quarter ended June 24, 2017.

Consistent with the seasonal nature of the propane and fuel oil businesses, the Partnership typically experiences a net loss in the third quarter of its fiscal year.  Net loss for the third quarter of fiscal 2017 was $29.7 million, or $0.48 per Common Unit, compared to a net loss of $29.6 million, or $0.49 per Common Unit, in the prior year third quarter. 

Net loss and earnings before interest, taxes, depreciation and amortization ("EBITDA") for the third quarter of fiscal 2016 included a $9.8 million gain from the sale of certain assets and operations in a non-strategic market of the propane segment, partially offset by a $6.6 million charge related to the Partnership's voluntary full withdrawal from a multi-employer pension plan covering certain employees acquired in the Inergy Propane acquisition. Excluding the effects of the foregoing items in the prior year and unrealized (non-cash) mark-to-market adjustments on derivative instruments in both years, Adjusted EBITDA (as defined and reconciled below) increased to $21.4 million for the third quarter of fiscal 2017 from $18.4 million in the prior year third quarter.

In announcing these results, President and Chief Executive Officer Michael A. Stivala said, "We are very pleased to report an increase in our Adjusted EBITDA by $3.0 million, or 16.4%, compared to the prior year third quarter. These results are a testament to our solid operating platform and the ability of our people to focus on the things within their control -- providing exceptional customer service in every market we serve, prudently managing margins, driving cost savings through operating efficiencies, and concentrating on our growth and retention initiatives."

Retail propane gallons sold in the third quarter of fiscal 2017 of 77.7 million gallons decreased 2.5 million gallons, or 3.1%, compared to the prior year third quarter. Sales of fuel oil and other refined fuels decreased approximately 0.5 million gallons, compared to the prior year. Although weather during the third quarter typically has less of an impact on volumes sold than it does during the heating season, volumes in the third quarter of fiscal 2017 were adversely impacted by warmer than normal temperatures, particularly during the month of April where average temperatures across all of the Partnership's service territories (as measured by heating degree days) were 23% warmer than normal and 12% warmer than April 2016, according to the National Oceanic and Atmospheric Administration.  From an overall weather perspective, average temperatures across all of the Partnership's service territories  for the third quarter of fiscal 2017 were 18% warmer than normal and 9% warmer than the prior year third quarter. 

Revenues in the third quarter of fiscal 2017 of $222.9 million increased $17.8 million, or 8.7%, compared to the prior year third quarter, primarily due to higher retail selling prices associated with higher wholesale product costs, offset to an extent by lower volumes sold. Average propane prices (basis Mont Belvieu, Texas) and fuel oil prices were 27.9% and 8.6% higher than the prior year third quarter, respectively. Cost of products sold for the third quarter of fiscal 2017 of $92.1 million increased $16.6 million, or 22.0%, compared to the prior year third quarter, primarily due to higher wholesale product costs. Cost of products sold included a $0.7 million unrealized (non-cash) loss attributable to the mark-to-market adjustment for derivative instruments used in risk management activities, compared to a $0.1 million unrealized (non-cash) loss in the prior year third quarter. These unrealized losses are excluded from Adjusted EBITDA for both periods in the table below. 

Combined operating and general and administrative expenses of $110.0 million for the third quarter of fiscal 2017 were $7.8 million, or 6.6%, lower than the prior year third quarter, primarily due to lower payroll and benefit-related expenses attributable to a reduced headcount, and the charge recorded in the prior year third quarter for the multi-employer pension plan withdrawal discussed above.  

Depreciation and amortization expense of $31.8 million decreased $0.5 million, or 1.4%, compared to the prior year third quarter. Net interest expense of $18.5 million decreased $0.1 million compared to the prior year third quarter. During the third quarter of fiscal 2017, the Partnership funded a portion of its cash needs with $11.3 million of incremental borrowings under its revolving credit facility.

As previously reported, the Partnership took proactive steps during the third quarter of fiscal 2017 to further strengthen its liquidity position by securing an amendment to its revolving credit facility. Under this amendment, the maximum consolidated leverage ratio was increased from 5.50 to 5.95 starting with the recently concluded quarter stepping down over time to the pre-amendment level of 5.50 by the fiscal quarter ending December 2018.  For the recently concluded quarter, the actual consolidated leverage ratio was 5.19, which was below both the 5.95 maximum in effect and the 5.50 maximum in effect prior to this amendment.

As previously announced on July 20, 2017, the Partnership's Board of Supervisors has declared a quarterly distribution of $0.8875 per Common Unit for the three months ended June 24, 2017.  The distribution is payable on August 8, 2017 to Common Unitholders of record as of August 1, 2017.

Mr. Stivala stated, "As we reported at the end of the second quarter of fiscal 2017, our goals as we plan for fiscal 2018 include restoring our balance sheet strength to provide a better path toward long-term profitable growth. We also indicated that we would be undertaking a thorough assessment of customer demand trends and expectations under varying weather scenarios, following record warm winters in the past two seasons. As a result, pending finalization of our business plans for fiscal 2018, at its meeting on August 1, 2017 our Board of Supervisors discussed reducing the distribution level by up to 33% beginning with the quarterly distribution to be paid in November 2017 in respect of the fourth quarter of fiscal 2017.   A final decision on the amount of the reduction in the distribution level will not be made until the Board meets again in October to declare the fourth quarter distribution."

Mr. Stivala concluded, "This has been, and continues to be, a deliberate and thorough process to evaluate the business under many different circumstances, all with the goal of best positioning the business for long-term profitable growth, starting with a return to strong financial metrics.  A reduction in the annualized distribution would enhance our distribution coverage ratio, provide excess liquidity to reduce leverage and, more importantly, provide enhanced financial flexibility to support our growth initiatives."

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 1.1 million residential, commercial, industrial and agricultural customers through 675 locations in 41 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, natural gas and electricity, the impact of the Partnership's hedging and risk management activities, and the adverse impact of price increases on volumes sold 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 sufficient volumes of, and the costs to the Partnership of acquiring, transporting and storing, propane, fuel oil and other refined fuels;
  • 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 or acquire new customers;
  • The impact of customer conservation, energy efficiency and technology advances on the demand for propane, fuel oil and other refined fuels, natural gas and electricity;
  • 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 climate change, derivative instruments and other regulatory developments on the Partnership's business;
  • The impact of changes in tax laws that could adversely affect the tax treatment of the Partnership for 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;
  • The operating, legal and regulatory risks the Partnership may face; 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 24, 2016 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 Nine Months Ended June 24, 2017 and June 25, 2016
(in thousands, except per unit amounts)
(unaudited)










Three Months Ended



Nine Months Ended




June 24,

2017



June 25,

2016



June 24,

2017



June 25,

2016


Revenues

















Propane


$

188,406



$

172,322



$

843,519



$

752,013


Fuel oil and refined fuels



12,886




12,459




69,612




61,961


Natural gas and electricity



11,923




10,596




44,229




38,232


All other



9,680




9,722




33,420




32,890





222,895




205,099




990,780




885,096



















Costs and expenses

















Cost of products sold



92,094




75,497




402,726




305,012


Operating



97,070




103,316




306,839




315,747


General and administrative



12,968




14,547




40,179




45,253


Depreciation and amortization



31,825




32,288




95,756




97,076





233,957




225,648




845,500




763,088



















Gain on sale of business



-




9,769




-




9,769


Operating (loss) income



(11,062)




(10,780)




145,280




131,777


Loss on debt extinguishment



-




-




1,567




292


Interest expense, net



18,502




18,638




54,820




56,383



















(Loss) income before provision for income taxes



(29,564)




(29,418)




88,893




75,102


Provision for income taxes



152




180




308




423



















Net (loss) income


$

(29,716)



$

(29,598)



$

88,585



$

74,679



















Net (loss) income per Common Unit - basic


$

(0.48)



$

(0.49)



$

1.45



$

1.23


Weighted average number of Common Units

outstanding - basic



61,290




61,004




61,227




60,947



















Net (loss) income per Common Unit - diluted


$

(0.48)



$

(0.49)



$

1.44



$

1.22


Weighted average number of Common Units

outstanding - diluted



61,290




61,004




61,410




61,127




































Supplemental Information:

















EBITDA (a)


$

20,763



$

21,508



$

239,469



$

228,561


Adjusted EBITDA (a)


$

21,418



$

18,395



$

243,744



$

230,689


Retail gallons sold:

















Propane



77,712




80,184




350,188




351,545


Refined fuels



5,243




5,771




27,251




27,632


Capital expenditures:

















Maintenance


$

2,299



$

3,186



$

8,429



$

13,703


Growth


$

2,500



$

4,370



$

13,575



$

18,558




































(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 other items, as applicable, as provided in the table below. Our management uses
EBITDA and Adjusted EBITDA as supplemental measures of operating performance and we are including them
because we believe that they provide our investors and industry analysts with additional information that we
determined is useful to evaluate our operating results.

EBITDA and Adjusted EBITDA are not recognized terms under accounting principles generally accepted in the United States of America ("US GAAP") and should not be considered as an alternative to net income or net cash provided by operating activities determined in accordance with US 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 our calculations of EBITDA and Adjusted EBITDA:



Three Months Ended



Nine Months Ended




June 24,

2017



June 25,

2016



June 24,

2017



June 25,

2016


Net (loss) income


$

(29,716)



$

(29,598)



$

88,585



$

74,679


Add:

















Provision for income taxes



152




180




308




423


Interest expense, net



18,502




18,638




54,820




56,383


Depreciation and amortization



31,825




32,288




95,756




97,076


EBITDA



20,763




21,508




239,469




228,561


Unrealized (non-cash) losses on changes in
    
fair value of derivatives



655




56




2,708




2,005


Loss on debt extinguishment



-




-




1,567




292


Gain on sale of business



-




(9,769)




-




(9,769)


Multi-employer pension plan withdrawal charge



-




6,600




-




6,600


Product liability settlement



-




-




-




3,000


Adjusted EBITDA


$

21,418



$

18,395



$

243,744



$

230,689


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.

 

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SOURCE Suburban Propane Partners, L.P.

Michael A. Kuglin, Chief Financial Officer & Chief Accounting Officer, P.O. Box 206, Whippany, NJ 07981-0206, Phone: 973-503-9252