sph-8k_20180809.htm

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15 (d) of the

Securities Exchange Act of 1934

Date of Report (Date of earliest event reported)

August 9, 2018

Commission File Number: 1-14222

 

SUBURBAN PROPANE PARTNERS, L.P.

(Exact name of registrant as specified in its charter)

 

 

Delaware

 

22-3410353

(State or Other Jurisdiction

 

(IRS Employer

of Incorporation)

 

Identification No.)

 

240 Route 10 West

Whippany, New Jersey 07981

(973) 887-5300

(Registrant’s Telephone Number, Including Area Code)

N/A

(Former Name or Former Address, if Changed Since Last Report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Indicate by check mark whether the registrant is an emerging growth company as defined in as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).

 

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

 

 

 


 

ITEM 2.02.  RESULTS OF OPERATIONS AND FINANCIAL CONDITION

The following information, including Exhibit 99.1 attached hereto, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

On August 9, 2018, the Partnership issued a press release (the “Press Release”) describing its Fiscal 2018 Third Quarter Financial Results. A copy of the Press Release has been furnished as Exhibit 99.1 to this Current Report.

Within the Press Release, we reference net income before deducting interest expense, income taxes, depreciation and amortization (“EBITDA”) which is considered a non-GAAP financial measure.  Additionally, we discuss EBITDA excluding the unrealized net gain or loss from mark-to-market activity for derivative instruments and certain other items (“Adjusted EBITDA”). Our calculations of EBITDA and Adjusted EBITDA are presented in the Press Release furnished as Exhibit 99.1 to this Current Report.

We provide these non-GAAP financial measures because we believe that they provide the investment community with supplemental measures of operating performance.  In addition, we believe that these non-GAAP financial measures provide useful information to investors and industry analysts to evaluate our operating results.  

We also reference gross margins, computed as revenues less cost of products sold as those amounts are reported on the consolidated financial statements. Since cost of products sold does not include depreciation and amortization expense, the gross margin we reference is considered a non-GAAP financial measure.  Given the nature of our business, the level of profitability in the retail propane, fuel oil, and natural gas and electricity businesses is largely dependent on the difference between retail sales price and product cost.  Therefore, we discuss gross margins in order to provide investors and industry analysts with useful information to facilitate their understanding of the impact of the commodity prices on profitability.

ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS

(d) Exhibits.

 

99.1

 

Press Release of Suburban Propane Partners, L.P. dated August 9, 2018, describing the Fiscal 2018 Third Quarter Financial Results.

 


 

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

August 9, 2018

 

SUBURBAN PROPANE PARTNERS, L.P.

 

 

 

 

 

 

 

By:

 

/s/ MICHAEL A. KUGLIN

 

 

Name:

 

Michael A. Kuglin

 

 

Title:

 

Chief Financial Officer & Chief Accounting Officer

 

 

sph-ex991_6.htm

Exhibit 99.1

 

 

 

 

 

 

News Release

Contact: Michael A. Kuglin

Chief Financial Officer

& Chief Accounting Officer

P.O. Box 206, Whippany, NJ 07981-0206

Phone: 973-503-9252

 

FOR IMMEDIATE RELEASE

 

Suburban Propane Partners, L.P.

Announces Third Quarter Earnings

 

Whippany, New Jersey, August 9, 2018 -- 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 30, 2018.

 

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 2018 was $16.6 million, or $0.27 per Common Unit, compared to a net loss of $29.7 million, or $0.48 per Common Unit, in the prior year third quarter.  Excluding the effects of unrealized (non-cash) mark-to-market adjustments on derivative instruments in both years, adjusted earnings before interest, taxes, depreciation and amortization (Adjusted EBITDA, as defined and reconciled below) increased $9.1 million, or 42.5%, to $30.5 million for the third quarter of fiscal 2018.

 

In announcing these results, President and Chief Executive Officer Michael A. Stivala said, “Building off our solid performance through the first half of fiscal 2018, cooler average temperatures provided a tailwind for customer demand into the early part of the fiscal third quarter. I am extremely proud of the efforts of all our employees – meeting the increased demand with an unwavering commitment to delivering outstanding service to our customers, solid margin management and continued expense control. As a result, we reported an increase of $9.1 million, or 42.5%, in our Adjusted EBITDA for the third quarter of fiscal 2018 and, through the first nine months of the fiscal year, Adjusted EBITDA of nearly $286.0 million was more than $42.0 million, or 17.3%, higher than the comparable prior year period.”

 

Mr. Stivala concluded, “With the significant improvement in earnings, coupled with repayment of $23.0 million in outstanding borrowings under our revolver from operating cash flows during the quarter, our leverage profile continues to improve and trend closer to our target range of less than 4.0x.  We are very well positioned, both operationally and financially, to continue to pursue our strategic growth initiatives.”

 

Retail propane gallons sold in the third quarter of fiscal 2018 of 80.5 million gallons increased 3.6% compared to the prior year third quarter. 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 2018 were positively impacted by cooler temperatures, particularly during the month of April.  Average temperatures across all of the Partnership’s service territories (as measured by heating degree days) for the third quarter of fiscal 2018 were 14% cooler than the prior year third quarter, although still 4% warmer than normal.  

 

Revenues in the third quarter of fiscal 2018 of $241.9 million increased $19.0 million, or 8.5%, compared to the prior year third quarter, primarily due to higher propane volumes sold combined with higher retail selling prices associated with higher wholesale product costs.  Average propane prices (basis Mont Belvieu, Texas) and fuel oil prices were 38.8% and 42.0% higher than the prior year third quarter, respectively. Cost of products sold for

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the third quarter of fiscal 2018 of $95.4 million increased $3.3 million, or 3.6%, compared to the prior year third quarter, primarily due to higher wholesale product costs, and to a lesser extent, higher propane volumes sold. Cost of products sold included a $3.8 million unrealized (non-cash) gain attributable to the mark-to-market adjustment for derivative instruments used in risk management activities, compared to a $0.7 million unrealized (non-cash) loss in the prior year third quarter. These unrealized mark-to-market adjustments are excluded from Adjusted EBITDA for both periods in the table below.  

 

Combined operating and general and administrative expenses of $112.2 million for the third quarter of fiscal 2018 increased $2.2 million, or 2.0%, compared to the prior year third quarter, primarily due to higher variable operating costs to support higher demand and higher vehicle fuel costs.  

 

Depreciation and amortization expense of $31.3 million decreased $0.6 million, or 1.8%, compared to the prior year third quarter. Net interest expense of $19.5 million increased $1.0 million, or 5.5%, compared to the prior year third quarter, primarily due to the rise in benchmark interest rates. With the increase in Adjusted EBITDA and the debt repayment during the third quarter, the Partnership’s Consolidated Leverage Ratio improved to 4.35x as of June 30, 2018.

 

During the third quarter of fiscal 2018, the Partnership closed on the acquisition of a well-run propane operation located in a strategic market for a total purchase price of $11.9 million, which was funded with cash.      

 

As previously announced on July 26, 2018, the Partnership’s Board of Supervisors has declared a quarterly distribution of $0.60 per Common Unit for the three months ended June 30, 2018.  The distribution is payable on August 14, 2018 to Common Unitholders of record as of August 7, 2018.

 

 

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 1.0 million residential, commercial, industrial and agricultural customers through 668 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;

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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 30, 2017 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.  

 

# # #

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Suburban Propane Partners, L.P. and Subsidiaries

Consolidated Statements of Operations

For the Three and Nine Months Ended June 30, 2018 and June 24, 2017

(in thousands, except per unit amounts)

(unaudited)

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

June 30, 2018

 

 

June 24, 2017

 

 

June 30, 2018

 

 

June 24, 2017

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Propane

 

$

205,400

 

 

$

188,406

 

 

$

990,344

 

 

$

843,519

 

Fuel oil and refined fuels

 

 

15,400

 

 

 

12,886

 

 

 

82,414

 

 

 

69,612

 

Natural gas and electricity

 

 

10,403

 

 

 

11,923

 

 

 

43,942

 

 

 

44,229

 

All other

 

 

10,733

 

 

 

9,680

 

 

 

34,795

 

 

 

33,420

 

 

 

 

241,936

 

 

 

222,895

 

 

 

1,151,495

 

 

 

990,780

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Costs and expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of products sold

 

 

95,392

 

 

 

92,094

 

 

 

507,223

 

 

 

402,726

 

Operating

 

 

97,519

 

 

 

97,070

 

 

 

310,132

 

 

 

306,839

 

General and administrative

 

 

14,705

 

 

 

12,968

 

 

 

49,685

 

 

 

40,179

 

Depreciation and amortization

 

 

31,259

 

 

 

31,825

 

 

 

94,593

 

 

 

95,756

 

 

 

 

238,875

 

 

 

233,957

 

 

 

961,633

 

 

 

845,500

 

Loss on sale of business

 

 

 

 

 

 

 

 

4,823

 

 

 

 

Operating income (loss)

 

 

3,061

 

 

 

(11,062

)

 

 

185,039

 

 

 

145,280

 

Loss on debt extinguishment

 

 

 

 

 

 

 

 

 

 

 

1,567

 

Interest expense, net

 

 

19,512

 

 

 

18,502

 

 

 

58,428

 

 

 

54,820

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Loss) income before provision for (benefit from) income taxes

 

 

(16,451

)

 

 

(29,564

)

 

 

126,611

 

 

 

88,893

 

Provision for (benefit from) income taxes

 

 

144

 

 

 

152

 

 

 

(749

)

 

 

308

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net (loss) income

 

$

(16,595

)

 

$

(29,716

)

 

$

127,360

 

 

$

88,585

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net (loss) income per Common Unit - basic

 

$

(0.27

)

 

$

(0.48

)

 

$

2.07

 

 

$

1.45

 

Weighted average number of Common Units

outstanding - basic

 

 

61,598

 

 

 

61,290

 

 

 

61,542

 

 

 

61,227

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income per Common Unit - diluted

 

$

(0.27

)

 

$

(0.48

)

 

$

2.06

 

 

$

1.44

 

Weighted average number of Common Units

outstanding - diluted

 

 

61,598

 

 

 

61,290

 

 

 

61,780

 

 

 

61,410

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Supplemental Information:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EBITDA (a)

 

$

34,320

 

 

$

20,763

 

 

$

279,632

 

 

$

239,469

 

Adjusted EBITDA (a)

 

$

30,514

 

 

$

21,418

 

 

$

285,876

 

 

$

243,744

 

Retail gallons sold:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Propane

 

 

80,491

 

 

 

77,712

 

 

 

375,201

 

 

 

350,188

 

Refined fuels

 

 

5,138

 

 

 

5,243

 

 

 

27,905

 

 

 

27,251

 

Capital expenditures:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Maintenance

 

$

2,185

 

 

$

2,299

 

 

$

10,071

 

 

$

8,429

 

Growth

 

$

5,509

 

 

$

2,500

 

 

$

15,776

 

 

$

13,575

 

(more)

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(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 30, 2018

 

 

June 24, 2017

 

 

June 30, 2018

 

 

June 24, 2017

 

Net (loss) income

 

$

(16,595

)

 

$

(29,716

)

 

$

127,360

 

 

$

88,585

 

Add:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Provision for (benefit from) income taxes

 

 

144

 

 

 

152

 

 

 

(749

)

 

 

308

 

Interest expense, net

 

 

19,512

 

 

 

18,502

 

 

 

58,428

 

 

 

54,820

 

Depreciation and amortization

 

 

31,259

 

 

 

31,825

 

 

 

94,593

 

 

 

95,756

 

EBITDA

 

 

34,320

 

 

 

20,763

 

 

 

279,632

 

 

 

239,469

 

Unrealized (non-cash) (gains) losses on changes in

   fair value of derivatives

 

 

(3,806

)

 

 

655

 

 

 

1,421

 

 

 

2,708

 

Loss on debt extinguishment

 

 

 

 

 

 

 

 

 

 

 

1,567

 

Loss on sale of business

 

 

 

 

 

 

 

 

4,823

 

 

 

 

Adjusted EBITDA

 

$

30,514

 

 

$

21,418

 

 

$

285,876

 

 

$

243,744

 

 

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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