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News2019-02-27T18:24:31-04:00
Suburban Propane Partners, L.P. Announces Full Year and Fourth Quarter Results

WHIPPANY, N.J.Nov. 12 /PRNewswire-FirstCall/ -- Suburban Propane Partners, L.P. (NYSE: SPH), a nationwide distributor of propane gas, fuel oil and related products and services, as well as a marketer of natural gas and electricity, today announced results for its fourth quarter and fiscal year ended September 26, 2009.

 

Fiscal Year 2009 Results

 

Net income for fiscal 2009 amounted to $165.2 million, or $4.99 per Common Unit, an increase of $10.3 million, or 6.6%, compared to net income of $154.9 million, or $4.72 per Common Unit, in fiscal 2008. Earnings before interest, taxes, depreciation and amortization ("EBITDA") increased $14.1 million, or 6.3%, to $236.3 million in fiscal 2009 compared to $222.2 million for fiscal 2008. Net income and EBITDA for fiscal 2009 included a loss on debt extinguishment of $4.6 million associated with the debt tender offer completed during the fourth quarter of fiscal 2009. Net income and EBITDA for fiscal 2008 included a gain (reported within discontinued operations) of $43.7 million from the Partnership's sale of its Tirzah, South Carolina underground propane storage cavern and associated 62-mile pipeline. Therefore, excluding the effects of these significant items on the Partnership's earnings for both periods, adjusted EBITDA increased $62.4 million, or 35.0%, in fiscal 2009 compared to the prior year.

 

In addition to the increased earnings, fiscal 2009 included several notable achievements for the Partnership, including: (i) a $185 million reduction in total debt; (ii) the refinancing of the Partnership's revolving credit facility to a new four-year facility on favorable terms relative to an otherwise challenging credit market; (iii) an upgrade to the Partnership's credit ratings by both Moody's Investors Service and Standard & Poor's; (iv) the successful issuance of 2.4 million Common Units, the proceeds of which were used to fund a portion of the debt reduction; and, (v) an increase of $0.10 per Common Unit, or 3.1%, in the annualized distribution rate compared to the end of fiscal 2008. The Partnership ended fiscal 2009 with $163.2 million of cash on hand, an increase of $25.5 million compared to the end of fiscal 2008, despite the use of cash for a portion of the debt reduction.

 

In announcing these results, President and Chief Executive Officer Michael J. Dunn, Jr., said, "In an obviously challenging business environment resulting from the prolonged recession, our employees maintained their focus on prudent management of our cost structure, maximizing the return on assets employed, while delivering excellent customer service. We are very proud of the accomplishments we were able to achieve, not only with the 35% year-over-year increase in adjusted EBITDA, but with the many other steps taken during the year to further strengthen our balance sheet and position the Partnership for growth in the challenging times ahead. Finally, we are pleased to share this year's successes with our valued Unitholders as evidenced by our previously announced 14(th) consecutive increase in our annualized distribution rate which, at $3.32 per Common Unit, represents a growth rate of 3.1% compared to the end of the prior year."

 

Revenues of $1,143.2 million decreased $431.0 million, or 27.4%, compared to $1,574.2 million in the prior year, primarily as a result of a decline in average selling prices associated with lower commodity prices and, to a lesser extent, lower sales volumes. Retail propane gallons sold for fiscal 2009 decreased 42.3 million gallons, or 11.0%, to 343.9 million gallons from 386.2 million gallons in fiscal 2008. Sales of fuel oil and other refined fuels decreased 19.1 million gallons, or 25.0%, to 57.4 million gallons compared to 76.5 million gallons in the prior year. Overall average temperatures in the Partnership's service territories for fiscal 2009 were 5% colder than the prior year. The favorable volume impact from the colder average temperatures was more than offset by declines in commercial and industrial volumes resulting from the recession and, to a lesser extent, continued customer conservation.

 

In the commodities markets, average posted prices for propane and fuel oil during fiscal 2009 were 51.7% and 46.1% lower, respectively, compared to fiscal 2008. Cost of products sold declined $499.0 million, or 48.0%, to $540.4 million in fiscal 2009 compared to $1,039.4 million in the prior year. The sharp decline in commodity prices, particularly during the first half of fiscal 2009, compared to the historically high commodity prices reached during fiscal 2008, resulted in a reduction in product costs that outpaced the decline in average selling prices. In addition, during fiscal 2008 the Partnership reported realized losses from its risk management activities that were not fully offset by sales of the physical product, resulting in a $10.8 million reduction to cost of products sold in fiscal 2009 compared to the prior year. Cost of products sold for fiscal 2009 and fiscal 2008 included a $1.7 million and $1.8 million unrealized (non-cash) gain, respectively, attributable to the mark-to-market adjustment for derivative instruments used in risk management activities.

 

Combined operating and general and administrative expenses of $361.8 million increased $5.6 million, or 1.6%, compared to $356.2 million in the prior year, primarily due to higher variable compensation associated with higher earnings, partially offset by continued savings in payroll and vehicle expenses attributable to further operating efficiencies and lower diesel costs, as well as lower bad debt expense.

 

Net interest expense increased $1.2 million, or 3.2%, to $38.3 million in fiscal 2009 compared to $37.1 million in fiscal 2008 as a result of lower interest income earned on invested cash. With the $175 million debt tender offer which was completed on September 9, 2009, the Partnership has reduced its interest expense requirement by approximately $12.0 million on an annualized basis beginning in fiscal 2010. As has been the case since April 2006, during fiscal 2009 there were no borrowings under the Partnership's revolving credit facility to support working capital needs, as such needs continue to be funded from cash on hand.

 

 

Fourth Quarter 2009 Results

 

Consistent with the seasonal nature of the propane and fuel oil businesses, the Partnership typically reports a net loss in its fiscal fourth quarter. For the fourth quarter of fiscal 2009, the Partnership's net loss was $22.9 million, or $0.67 per Common Unit, compared to a net loss of $11.3 million, or $0.35 per Common Unit, for the fourth quarter of fiscal 2008. EBITDA for the fourth quarter of fiscal 2009 amounted to a loss of $4.7 million compared to EBITDA of $5.4 million in the prior year quarter. Results for the fiscal 2009 fourth quarter included the aforementioned $4.6 million loss on debt extinguishment.

 

Retail propane gallons sold in the fourth quarter of fiscal 2009 decreased 7.5 million gallons, or 13.3%, to 49.1 million gallons compared to 56.6 million gallons in the prior year quarter. Sales of fuel oil and other refined fuels decreased 2.0 million gallons, or 22.5%, to 6.9 million gallons during the fourth quarter of fiscal 2009 compared to 8.9 million gallons in the prior year quarter. With the highest concentration of non-residential business typically reported in the Partnership's fiscal fourth quarter, lower volumes in both segments were attributable primarily to declines in commercial and industrial volumes resulting from the recession and, to a lesser extent, continued customer conservation.

 

The fiscal 2008 fourth quarter EBITDA benefited from the partial recovery of realized losses from risk management activities reported in the third quarter of fiscal 2008, which resulted in increased margins of approximately $3.7 million, thus negatively affecting the quarter-over-quarter earnings comparison. Cost of products sold for the fourth quarter of fiscal 2009 and fiscal 2008 included a $2.5 million and $2.1 million unrealized (non-cash) gain, respectively, attributable to the mark-to-market adjustment for derivative instruments used in risk management activities. Combined operating and general and administrative expenses of $79.9 million declined $3.2 million, or 3.9%, compared to the prior year quarter as a result of lower payroll and benefit related costs, lower vehicle costs (primarily fuel) and lower bad debt expense.

 

 

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 and other regulatory developments on the
        Partnership's business;
    --  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 27, 2008 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 Twelve Months Ended
                   September 26, 2009 and September 27, 2008
                    (in thousands, except per unit amounts)
                                    (unaudited)

                          Three Months Ended         Twelve Months Ended
                      --------------------------- --------------------------
                      September 26, September 27, September 26, September 27,
                           2009          2008          2009         2008
                      ------------  ------------  ------------- -------------
    Revenues
      Propane             $113,620      $186,250      $864,012    $1,132,950
      Fuel oil
       and refined
       fuels                17,176        40,469       159,596       288,078
      Natural gas and
       electricity          10,311        19,052        76,832       103,745
      All other              9,135        10,710        42,714        49,390
                            ------        ------        ------        ------
                           150,242       256,481     1,143,154     1,574,163

    Costs and expenses
      Cost of products
       sold                 70,433       167,990       540,385     1,039,436
      Operating             68,561        72,576       304,767       308,071
      General and
       administrative       11,373        10,502        57,044        48,134
      Depreciation and
       amortization          8,476         7,069        30,343        28,394
                            ------        ------        ------        ------
                           158,843       258,137       932,539     1,424,035

    (Loss) income
     before interest
     expense, loss on
     debt extinguishment
     and provision for
     (benefit from)
     income taxes           (8,601)       (1,656)      210,615       150,128
    Loss on debt
     extinguishment          4,624             -         4,624             -
    Interest expense, net    9,354         9,722        38,267        37,052
                            ------        ------        ------        ------

    (Loss) income before
     provision for
     (benefit from)
     income taxes          (22,579)      (11,378)      167,724       113,076
    Provision for
     (benefit from)
     income taxes              302           (53)        2,486         1,903
                            ------        ------        ------        ------
    (Loss) income from
     continuing operations (22,881)      (11,325)      165,238       111,173
                            ------        ------        ------        ------
    Discontinued operations:
      Gain on disposal of
       discontinued
       operations                -             -             -        43,707
                            ------        ------        ------        ------

    Net (loss) income     $(22,881)     $(11,325)     $165,238      $154,880
                          ========      ========      ========      ========

    (Loss) income from
     continuing
     operations per
     Common Unit - basic    $(0.67)       $(0.35)        $4.99         $3.39
    Discontinued
     operations                  -             -             -          1.33
                            ------        ------        ------        ------
    Net (loss) income per
     Common Unit - basic    $(0.67)       $(0.35)        $4.99         $4.72
                            ======        ======         =====         =====
    Weighted average
     number of
     Common Units
     outstanding - basic    33,982        32,788        33,134        32,783
                            ------        ------        ------        ------

    (Loss) income from
     continuing
     operations per
     Common Unit
     - diluted              $(0.67)       $(0.35)        $4.96         $3.37
    Discontinued
     operations                  -             -             -          1.33
                            ------        ------        ------        ------
    Net (loss) income per
     Common Unit
     - diluted              $(0.67)       $(0.35)        $4.96         $4.70
                            ======        ======         =====         =====
    Weighted average
     number of Common
     Units outstanding
     - diluted              33,982        32,788        33,315        32,950
                            ------        ------        ------        ------
    Supplemental Information:
    EBITDA (a)             $(4,749)       $5,413      $236,334      $222,229
    Adjusted EBITDA (a)    $(7,293)       $3,325      $234,621      $220,465
    Retail gallons sold:
      Propane               49,123        56,613       343,894       386,222
      Refined fuels          6,863         8,872        57,381        76,515
    Capital expenditures:
      Maintenance           $5,820        $3,438       $12,203       $12,045
      Growth                $2,181        $1,080        $9,634        $9,774


    (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.  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         Twelve Months Ended
                      --------------------------- --------------------------
                      September 26, September 27, September 26, September 27,
                           2009         2008          2009          2008
                      ------------  ------------  ------------- -------------
      Net (loss) income  $(22,881)    $(11,325)    $165,238       $154,880
      Add:
       Provision for
        (benefit from)
        income taxes -
        current and
        deferred              302          (53)       2,486          1,903
       Interest expense,
        net                 9,354        9,722       38,267         37,052
       Depreciation and
         amortization       8,476        7,069       30,343         28,394
                            -----        -----       ------         ------
      EBITDA               (4,749)       5,413      236,334        222,229
       Unrealized
       (non-cash)
        gains on changes
        in fair value
        of derivatives     (2,544)      (2,088)      (1,713)        (1,764)
                           ------       ------       ------         ------
      Adjusted EBITDA      (7,293)       3,325      234,621        220,465
      Add / (subtract):
       (Provision for)
         benefit from income
         taxes - current     (297)          53       (1,101)          (626)
       Interest expense,
        net                (9,354)      (9,722)     (38,267)       (37,052)
       Loss on debt
         extinguishment     4,624            -        4,624              -
       Unrealized (non-cash)
        gains on changes
        in fair value of
        derivatives         2,544        2,088        1,713          1,764
       Compensation cost
        recognized under
        Restricted Unit Plan  511          653        2,396          2,156
       Loss (gain) on
        disposal of
        property, plant
        and equipment, net    120         (431)        (650)        (2,252)
        Gain on disposal of
         discontinued
         operations             -            -            -        (43,707)
        Changes in working
         capital and
         other assets and
         liabilities       32,198       67,563       43,215        (20,231)
                           ------       ------       ------        -------

      Net cash provided
       by operating
       activities         $23,053      $63,529     $246,551       $120,517
                          =======      =======     ========       ========

    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 Annual Report on Form 10-K 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.

Michael Stivala, Chief Financial Officer & Chief Accounting Officer, +1-973-503-9252