WHIPPANY, N.J., May 5 /PRNewswire-FirstCall/ -- Suburban Propane Partners, L.P. (the "Partnership") (NYSE: SPH), a marketer of propane gas, fuel oil and related products and services nationwide, today announced its results for the three months ended March 26, 2005.
Net income for the second quarter of fiscal 2005 was $65.5 million, or $1.91 per Common Unit, compared to net income of $92.6 million, or $2.68 per Common Unit, for the second quarter of fiscal 2004, a decrease of $27.1 million, or 29.3%. Earnings before interest, taxes, depreciation and amortization ("EBITDA") of $85.2 million decreased $27.4 million, or 24.3%, compared to $112.6 million for the prior year quarter.
Net income and EBITDA for the prior year quarter included the net favorable impact of $6.4 million from certain significant items, mainly related to (i) a $14.2 million gain from the sale of ten customer service centers in Texas, Oklahoma, Missouri and Kansas considered to be non- strategic; (ii) a non-cash charge of $5.6 million included within cost of products sold related to the settlement of futures contracts which were marked-to-market under purchase accounting for our December 2003 Agway Energy acquisition; and, (iii) a $2.2 million restructuring charge related to integration of certain back office functions and operations in the northeast.
Results for the fiscal 2005 second quarter were unfavorably affected by the combination of an erratic weather pattern and a highly volatile commodity environment. As reported by the National Oceanic and Atmospheric Administration, average temperatures in the Partnership's service territories for the second quarter of fiscal 2005 were 4% warmer than normal compared to 1% warmer than normal in the prior year quarter. Significantly warmer than normal temperatures during January and February 2005 (the most critical months of the heating season) were somewhat offset by a burst of cold weather in March 2005. Average temperatures across the Partnership's service areas in January 2005 were 8% warmer than normal, compared to 2% colder than normal in January 2004.
In the commodities markets, the average posted prices of propane and fuel oil during the second quarter of fiscal 2005 increased 17% and 47%, respectively, compared to the average posted prices in the prior year quarter. The combined effects of warm weather and high energy prices continued to impact residential and commercial volumes. As a result, retail propane gallons sold in the second quarter of fiscal 2005 decreased 20.8 million gallons, or 9.5%, to 199.1 million gallons from 219.9 million gallons in the prior year quarter. Sales of fuel oil and other refined fuels amounted to 92.9 million gallons during the second quarter of fiscal 2005 compared to 104.2 million gallons in the prior year quarter, a decrease of 10.8%.
Revenues from the distribution of propane and related activities of $360.8 million in the second quarter of fiscal 2005 increased $7.2 million, or 2.0%, compared to $353.6 million in the prior year quarter, primarily due to the impact of higher average selling prices in line with the aforementioned significantly higher product costs, offset to an extent by the impact of 9.5% lower volumes. During the second quarter of fiscal 2005, fuel oil prices experienced unprecedented high levels and extreme volatility. Revenues from the distribution of fuel oil and other refined fuels of $158.0 million in the second quarter of fiscal 2005 increased $10.0 million, or 6.8%, from $148.0 million in the prior year quarter. Margin opportunities in our refined fuels segment were significantly restricted as a result of a pricing program that pre-established a maximum price per gallon. Our practice is to hedge a significant portion of the expected volumes under this program. However, the cost to hedge this pricing program for the February and March period became prohibitive as a result of the significant market volatility.
Results for the second quarter of fiscal 2005 were favorably impacted by a 9.8% increase in revenues from the marketing of natural gas and electricity in deregulated markets, which increased to $39.3 million from $35.8 million in the prior year quarter as a result of higher natural gas volumes and higher average selling prices. Revenues in our HVAC segment declined 2.5%, to $27.1 million during the second quarter of fiscal 2005 compared to $27.8 million in the prior year quarter.
Combined operating and general and administrative expenses of $122.6 million decreased $2.2 million, or 1.8%, compared to the prior year quarter of $124.8 million. The decrease in combined operating and general and administrative expenses is primarily attributable to the effect of lower compensation and benefit related expenses, offset to an extent by increased professional services expenses associated with the compliance requirements of the Sarbanes-Oxley Act of 2002 and higher costs to operate the Partnership's fleet. Operating expenses in the fiscal 2005 second quarter include a $2.8 million unrealized (non-cash) loss attributable to the mark-to-market on derivative instruments ("FAS 133"), compared to a $1.1 million unrealized (non-cash) gain in the prior year quarter attributable to FAS 133.
Depreciation and amortization expense of $9.2 million remained unchanged from the prior year quarter, while net interest expense of $10.5 million decreased $0.3 million, or 2.8%, from $10.8 million in the prior year quarter as a result of the repayment in the fourth quarter of fiscal 2004 of $42.5 million principal amount of the Partnership's 7.54% senior notes.
As previously announced, on March 31, 2005 (shortly after the end of the second quarter of fiscal 2005) the Partnership completed the refinancing of $297.5 million outstanding aggregate principal amount of 7.54% senior notes due 2011 and $42.5 million outstanding aggregate principal amount of 7.37% senior notes due 2012 (the "Refinancing"). The Refinancing replaced the annual cash requirement of $42.5 million for principal amortization under the 7.54% senior notes and the 7.37% senior notes with a $125.0 million five-year term loan facility and $250.0 million of 6.875% senior notes due 2013, significantly extending the Partnership's debt maturities and eliminating refinancing risk over the next five years. The Refinancing is also expected to reduce the Partnership's annual interest expense for at least the next five years.
In announcing these results, President and Chief Executive Officer Mark A. Alexander said, "The near record warm weather in January, combined with an environment of unprecedented volatility in the commodities markets, made it a difficult and challenging quarter for us. We are proud of the entire Suburban team for the way they responded by keeping their attention squarely focused on delivering value and satisfaction to our customers. Even during these challenging times, we continued to take steps to strengthen our financial position and improve our financial flexibility, including through the refinancing of our senior notes."
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 1,000,000 residential, commercial, industrial and agricultural customers through more than 370 customer service centers in 30 states.
Suburban Propane Partners, L.P. and Subsidiaries
Consolidated Statements of Operations
For the Three and Six Months Ended March 26, 2005 and March 27, 2004
(in thousands, except per unit amounts)
(unaudited)
Three Months Ended Six Months Ended
March 26, March 27, March 26, March 27,
2005 2004 2005 2004
Revenues
Propane $360,830 $353,618 $619,613 $546,758
Fuel oil and refined
fuels 157,963 147,952 266,223 151,355
Natural gas and
electricity 39,265 35,770 61,753 37,498
HVAC 27,104 27,750 59,274 43,602
All other 2,207 2,234 4,552 3,683
587,369 567,324 1,011,415 782,896
Costs and expenses
Cost of products sold 380,515 342,558 653,955 449,978
Operating 110,379 107,454 206,045 167,903
General and
administrative 12,207 17,392 23,175 27,894
Restructuring costs - 2,179 - 2,179
Depreciation and
amortization 9,198 9,223 18,317 16,452
512,299 478,806 901,492 664,406
Income before interest
expense and provision
for income taxes 75,070 88,518 109,923 118,490
Interest expense, net 10,480 10,770 20,343 20,481
Income before provision for
income taxes 64,590 77,748 89,580 98,009
Provision for income taxes 109 83 198 166
Income from continuing
operations 64,481 77,665 89,382 97,843
Discontinued operations:
Gain on sale of customer
service centers 976 14,205 976 14,205
Income from discontinued
customer service centers - 690 - 603
Net income $65,457 $92,560 $90,358 $112,651
General Partner's interest
in net income $2,034 $2,616 $2,808 $3,124
Limited Partners' interest
in net income $63,423 $89,944 $87,550 $109,527
Income from continuing
operations per Common Unit
- basic (a) $1.89 $2.26 $2.66 $3.03
Discontinued operations $0.02 $0.42 $0.03 $0.44
Net income per Common Unit
- basic (a) $1.91 $2.68 $2.69 $3.47
Weighted average number of
Common Units outstanding
- basic 30,277 30,257 30,273 28,942
Income from continuing
operations per Common Unit
- diluted (a) $1.88 $2.25 $2.65 $3.02
Discontinued operations $0.02 $0.42 $0.02 $0.43
Net income per Common Unit
- diluted (a) $1.90 $2.67 $2.67 $3.45
Weighted average number of
Common Units outstanding
- diluted 30,405 30,372 30,414 29,053
Supplemental Information:
EBITDA (b) $85,244 $112,636 $129,216 $149,750
Retail gallons sold:
Propane 199,124 219,945 340,904 351,862
Fuel oil and refined
fuels 92,886 104,157 158,792 112,215
(a) Computations of earnings per Common Unit reflect the adoption of
Emerging Issues Task Force ("EITF") consensus 03-6 "Participating
Securities and the Two-Class Method Under FAS 128" ("EITF 03-6") which
requires, among other things, the use of the two-class method
of computing earnings per unit when participating securities exist.
The two-class method is an earnings allocation formula that computes
earnings per unit for each class of common unit and participating
security according to distributions declared and the participating
rights in undistributed earnings, as if all of the earnings were
distributed to the limited partners and the general partner. The
earnings per Common Unit computations for all periods presented
reflect the application of EITF 03-6. Computation of earnings per
common unit under EITF 03-6 resulted in a negative impact of $0.18
and $0.20 per Common Unit for the three and six months ended March 26,
2005, respectively, and $0.29 and $0.31 for the three and six months
ended March 27, 2004, respectively, compared to the computation under
FAS 128.
(b) EBITDA represents net income before deducting interest expense, income
taxes, depreciation and amortization. Our management uses
EBITDA as a measure of liquidity and we are including it because we
believe that it provides 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. Moreover, certain of our debt agreements require
us to use EBITDA as a component in calculating our leverage
and interest coverage ratios. EBITDA is not a recognized term 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, as determined by us, excludes some, but
not all, items that affect net income, it may not be
comparable to EBITDA or similarly titled measures used by other
companies. The following table sets forth (i) our calculation
of EBITDA and (ii) a reconciliation of EBITDA, as so calculated, to
our net cash provided by operating activities:
Three Months Ended Six Months Ended
March 26, March 27, March 26, March 27,
2005 2004 2005 2004
Net income $65,457 $92,560 $90,358 $112,651
Add:
Provision for income taxes 109 83 198 166
Interest expense, net 10,480 10,770 20,343 20,481
Depreciation and
amortization 9,198 9,223 18,317 16,452
EBITDA 85,244 112,636 129,216 149,750
Add (subtract):
Provision for income taxes (109) (83) (198) (166)
Interest expense, net (10,480) (10,770) (20,343) (20,481)
Gain on disposal of
property, plant and
equipment, net (860) (79) (1,067) (161)
Gain on sale of customer
service centers (976) (14,205) (976) (14,205)
Changes in working capital
and other assets
and liabilities (65,288) (75,726) (128,728) (91,403)
Net cash provided by
(used in)
Operating activities $7,531 $11,773 $(22,096) $23,334
Investing activities $(5,035) $15,355 $(12,944) $(199,640)
Financing activities $(1,443) $(18,348) $(1,539) $221,967
SOURCE Suburban Propane Partners, L.P.
-0- 05/05/2005
/CONTACT: Robert M. Plante, Vice President & Chief Financial Officer of
Suburban Propane Partners, L.P., +1-973-503-9252 /
/Company News On-Call: http://www.prnewswire.com/comp/112074.html /
/Web site: http://suburbanpropane.com /
(SPH)
CO: Suburban Propane Partners, L.P.
ST: New Jersey
IN: OIL REA
SU: ERN CCA ERP
AS
-- NYTH019 --
4841 05/05/2005 07:30 EDT http://www.prnewswire.com