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Suburban Propane Partners, L.P. Announces Third Quarter Results Following Twenty-Sixth Distribution Increase

WHIPPANY, N.J., Aug 05, 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 results for its third quarter ended June 26, 2010.

Consistent with the seasonal nature of the propane and fuel oil businesses, the Partnership typically experiences a net loss in the third quarter. Net loss for the three months ended June 26, 2010, narrowed to $6.6 million, or $0.19 per Common Unit, compared to a net loss of $7.4 million, or $0.23 per Common Unit, in the prior year third quarter. Net loss for the quarter included a non-cash charge of $1.8 million to accelerate depreciation expense on certain assets taken out of service. Earnings before interest, taxes, depreciation and amortization ("EBITDA") for the third quarter of fiscal 2010 amounted to $9.4 million, compared to $11.5 million in the prior year quarter. Adjusted EBITDA (as defined and reconciled below) was $9.1 million for the third quarter of fiscal 2010, compared to $17.7 million in the prior year third quarter.

In announcing these results, President and Chief Executive Officer Michael J. Dunn, Jr., said, "The operating challenges experienced during the first half of fiscal 2010 persisted into the third quarter as sales volumes continued to be negatively affected by the weak economy and an extremely warm weather pattern. Nonetheless, our employees deserve credit for managing costs, driving operating efficiencies and delivering solid results in the midst of these challenges. In addition, during the third quarter we closed on our third acquisition this fiscal year, expanding our service territory in strategic markets where we already have a strong presence. We funded these acquisitions, as well as all of our working capital needs, with cash on hand and we ended the quarter with more than $170 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 seventeenth consecutive increase in our quarterly distribution rate (twenty-sixth since the recapitalization in 1999) to $0.845 per Common Unit, or $3.38 annualized, which represents 2.4% growth compared to the prior year third quarter."

Retail propane gallons sold in the third quarter of fiscal 2010 decreased 5.2 million gallons, or 8.5%, to 56.0 million gallons compared to 61.2 million gallons in the prior year third quarter. Sales of fuel oil and other refined fuels decreased 3.1 million gallons, or 32.0%, to 6.6 million gallons during the third quarter of fiscal 2010 compared to 9.7 million gallons in the prior year third quarter. The decrease in volumes was primarily attributable to the ongoing weak economy. In addition, while not typically a factor impacting volumes for the third quarter, the Partnership experienced extreme warmer than normal temperatures throughout much of its service territories that began in March 2010 and carried into the third quarter of fiscal 2010, particularly in the northeast. Average temperatures in the northeast region of the United States were approximately 30% warmer than normal for the third quarter of fiscal 2010.

Revenues of $198.1 million increased $13.7 million, or 7.4%, compared to the prior year third quarter, primarily due to higher average selling prices associated with higher average product costs, offset to an extent by the lower volumes sold. Average posted prices for propane and fuel oil were 49.2% and 35.5% higher, respectively, compared to the prior year third quarter. Cost of products sold for the third quarter of fiscal 2010 of $106.6 million increased $19.1 million, or 21.8%, compared to $87.5 million in the prior year third quarter. Cost of products sold in the third quarter of fiscal 2010 included a $0.3 million unrealized (non-cash) gain attributable to the mark-to-market adjustment for derivative instruments used in risk management activities, compared to a $6.1 million unrealized (non-cash) loss in the prior year quarter; these unrealized gains and losses are excluded from Adjusted EBITDA for both periods in the table below.

Combined operating and general and administrative expenses of $82.0 million for the third quarter of fiscal 2010 were $3.4 million, or 4.0%, lower than the prior year third quarter, primarily due to lower variable compensation attributable to lower earnings, continued operating efficiencies at the field level, lower bad debt expense and savings in insurance costs.

Net interest expense decreased $3.3 million, or 32.7%, as a result of lower outstanding debt during the third quarter of fiscal 2010 compared to the prior year third quarter due to the $183.0 million debt reduction in the second half of fiscal 2009. 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 third quarter of fiscal 2010 with more than $170.0 million of cash.

On July 26, 2010, the Partnership announced that its Board of Supervisors declared the twenty-sixth increase (since the Partnership's recapitalization in 1999) in the Partnership's quarterly distribution from $0.84 to $0.845 per Common Unit for the three months ended June 26, 2010. On an annualized basis, this increased distribution rate equates to $3.38 per Common Unit, an increase of $0.02 per Common Unit from the previous distribution rate, and an increase of 2.4% compared to the third quarter of fiscal 2009. The $0.845 per Common Unit distribution will be paid on August 10, 2010 to Common Unitholders of record as of August 3, 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 or acquire new 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 Nine Months Ended June 26, 2010 and June 27, 2009
                   (in thousands, except per unit amounts)
                                 (unaudited)




                                                Three Months Ended
                                                ------------------
                                         June 26,              June 27,
                                           2010                  2009
                                        ---------             ---------

    Revenues
      Propane                             $155,538              $139,571
      Fuel oil and refined fuels            20,090                23,091
      Natural gas and electricity           13,608                12,147
      All other                              8,834                 9,563
                                             -----                 -----
                                           198,070               184,372

    Costs and expenses
      Cost of products sold                106,627                87,463
      Operating                             68,634                72,295
      General and administrative            13,386                13,108
      Depreciation and amortization          8,868                 7,713
                                             -----                 -----
                                           197,515               180,579

    Income before loss on debt
     extinguishment, interest expense
     and
      provision for income taxes               555                 3,793
    Loss on debt extinguishment                  -                     -
    Interest expense, net                    6,808                10,068
                                             -----                ------

    (Loss) income before provision for
     income taxes                           (6,253)               (6,275)
    Provision for income taxes                 363                 1,160
                                               ---                 -----

    Net (loss) income                      $(6,616)              $(7,435)
                                           =======               =======

    Net (loss) income per Common Unit -
     basic                                  $(0.19)               $(0.23)
                                            ======                ======
    Weighted average number of Common
     Units outstanding -basic               35,383                32,859
                                            ------                ------

    Net (loss) income per Common Unit -
     diluted                                $(0.19)               $(0.23)
                                            ======                ======
    Weighted average number of Common
     Units outstanding -diluted             35,383                32,859
                                            ------                ------


    Supplemental Information:
    EBITDA (a)                              $9,423               $11,506
    Adjusted EBITDA (a)                     $9,142               $17,654
    Retail gallons sold:
      Propane                               56,037                61,212
      Refined fuels                          6,631                 9,677
    Capital expenditures:
      Maintenance                           $2,935                $2,725
      Growth                                  $606                $2,788









                                                      Nine Months Ended
                                                      -----------------
                                               June 26,             June 27,
                                                 2010                 2009
                                              ---------            ---------

    Revenues
      Propane                                   $758,410             $750,392
      Fuel oil and refined fuels                 120,648              142,420
      Natural gas and electricity                 59,311               66,521
      All other                                   30,296               33,579
                                                  ------               ------
                                                 968,665              992,912

    Costs and expenses
      Cost of products sold                      505,452              469,952
      Operating                                  221,629              236,206
      General and administrative                  47,381               45,671
      Depreciation and amortization               23,094               21,867
                                                  ------               ------
                                                 797,556              773,696

    Income before loss on debt
     extinguishment, interest expense and
      provision for income taxes                 171,109              219,216
    Loss on debt extinguishment                    9,473                    -
    Interest expense, net                         20,599               28,913
                                                  ------               ------

    (Loss) income before provision for income
     taxes                                       141,037              190,303
    Provision for income taxes                       890                2,184
                                                     ---                -----

    Net (loss) income                           $140,147             $188,119
                                                ========             ========

    Net (loss) income per Common Unit - basic      $3.96                $5.73
                                                   =====                =====
    Weighted average number of Common Units
     outstanding -basic                           35,362               32,849
                                                  ------               ------

    Net (loss) income per Common Unit -
     diluted                                       $3.94                $5.70
                                                   =====                =====
    Weighted average number of Common Units
     outstanding -diluted                         35,588               33,026
                                                  ------               ------


    Supplemental Information:
    EBITDA (a)                                  $184,730             $241,083
    Adjusted EBITDA (a)                         $199,062             $241,915
    Retail gallons sold:
      Propane                                    270,474              294,771
      Refined fuels                               38,067               50,518
    Capital expenditures:
      Maintenance                                 $6,907               $6,383
      Growth                                      $6,084               $7,453





    (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 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 (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
                                                June 26,       June 27,
                                                  2010           2009
                                               ---------      ---------

     Net (loss) income                            $(6,616)       $(7,435)
     Add:
       Provision for income taxes                     363          1,160
       Interest expense, net                        6,808         10,068
       Depreciation and amortization                8,868          7,713
                                                    -----          -----
     EBITDA                                         9,423         11,506
       Unrealized (non-cash) (gains) losses on
        changes in fair value of derivatives         (281)         6,148
       Loss on debt extinguishment                      -              -
                                                      ---            ---
     Adjusted EBITDA                                9,142         17,654
     Add / (subtract):
       (Provision for) income taxes                  (363)          (240)
       Interest expense, net                       (6,808)       (10,068)
       Unrealized (non-cash) gains (losses) on
        changes in fair value of derivatives          281         (6,148)
       Compensation cost recognized under
        Restricted Unit Plan                        1,136            644
       Loss (gain) on disposal of property,
        plant and equipment, net                      283           (147)
       Changes in working capital and other
        assets and liabilities                     68,722         62,851
                                                   ------         ------

     Net cash provided by operating activities    $72,393        $64,546
                                                  =======        =======




                                                Nine Months Ended
                                                June 26,      June 27,
                                                  2010          2009
                                               ---------     ---------

     Net (loss) income                           $140,147      $188,119
     Add:
       Provision for income taxes                     890         2,184
       Interest expense, net                       20,599        28,913
       Depreciation and amortization               23,094        21,867
                                                   ------        ------
     EBITDA                                       184,730       241,083
       Unrealized (non-cash) (gains) losses on
        changes in fair value of derivatives        4,859           832
       Loss on debt extinguishment                  9,473             -
                                                    -----           ---
     Adjusted EBITDA                              199,062       241,915
     Add / (subtract):
       (Provision for) income taxes                  (890)         (804)
       Interest expense, net                      (20,599)      (28,913)
       Unrealized (non-cash) gains (losses) on
        changes in fair value of derivatives       (4,859)         (832)
       Compensation cost recognized under
        Restricted Unit Plan                        3,153         1,885
       Loss (gain) on disposal of property,
        plant and equipment, net                      149          (770)
       Changes in working capital and other
        assets and liabilities                    (46,292)       11,017
                                                  -------        ------

     Net cash provided by operating activities   $129,724      $223,498
                                                 ========      ========



    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.