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Suburban Propane Partners, L.P. Announces Second Quarter Results

May 3, 2012

WHIPPANY, N.J., May 3, 2012 /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 second quarter ended March 24, 2012. Net income amounted to $49.6 million, or $1.39 per Common Unit, compared to $100.3 million, or $2.82 per Common Unit, in the prior year second quarter. Earnings before interest, taxes, depreciation and amortization (“EBITDA”) for the second quarter of fiscal 2012 amounted to $63.3 million, compared to $115.7 million in the prior year second quarter.

Net income and EBITDA for the fiscal 2012 second quarter included a $2.1 million non-cash charge from a loss on disposal of an asset in the Partnership’s natural gas and electricity business, as well as a $0.5 million loss on debt extinguishment associated with the previously announced amended and restated credit agreement completed in January 2012. Net income and EBITDA for the fiscal 2011 second quarter included a $2.0 million charge for severance costs associated with the realignment of the Partnership’s field operations initiated during that quarter. Excluding the effects of these charges for the fiscal 2012 and 2011 second quarters, as well as the unrealized (non-cash) mark-to-market adjustments on derivative instruments used in risk management activities in both quarters, Adjusted EBITDA amounted to $65.9 million for the fiscal 2012 second quarter, compared to Adjusted EBITDA of $113.6 million in the prior year second quarter.

In announcing these results, President and Chief Executive Officer Michael J. Dunn, Jr., said, “Our results for the second quarter of fiscal 2012 reflect the impact on sales volumes from record warm temperatures throughout most of the country during the three-month period from January to March 2012, which has been reported as the warmest on record, capped off by the warmest March on record in the contiguous United States. The lack of cold weather in this year’s heating season has clearly presented additional challenges for the industry, beyond the impact of customer conservation, high commodity prices and the economy. While we cannot control the weather, the strength of our balance sheet and cash position continues to provide us with adequate liquidity to withstand the negative impact on operating cash flow from the lower volumes. We continued to fund all of our working capital requirements without the need to borrow under our revolving credit facility and we ended the quarter with over $96 million of cash on hand.”

Mr. Dunn added, “Our field personnel remain focused on delivering the highest quality customer service to our existing customers while, at the same time, pursuing initiatives to grow our customer base. In addition, we continue to pursue opportunities to drive efficiencies and streamline our cost structure.”

Mr. Dunn concluded, “With the recent announcement of our agreement to acquire the retail propane operations of Inergy, L.P., we are working toward refining a detailed integration plan to begin implementing immediately upon closing of the acquisition, which is subject to certain government approvals and is expected to occur in our fiscal 2012 fourth quarter. We look forward to welcoming the employees of Inergy Propane as we work together to combine the best practices of both companies, leveraging our investments in people and technology across the expanded geography and customer base, creating growth opportunities for our employees and our unitholders.”

Retail propane gallons sold in the second quarter of fiscal 2012 decreased approximately 24.1 million gallons, or 21.1%, to 89.9 million gallons compared to 114.0 million gallons in the prior year second quarter. Sales of fuel oil and other refined fuels decreased approximately 5.6 million gallons, or 34.6%, to 10.6 million gallons during the second quarter of fiscal 2012 compared to 16.2 million gallons in the prior year second quarter. The most significant factor impacting volumes in both segments during the second quarter of fiscal 2012 was the record warm weather throughout the quarter, which added to the effects of an unseasonably warm first quarter of fiscal 2012, across the Partnership’s service territories. The fiscal 2012 second quarter was the warmest on record for the contiguous United States, according to the National Oceanic and Atmospheric Administration, which has been keeping records since 1895. Average temperatures (as measured by heating degree days) across all of the Partnership’s service territories for the second quarter of fiscal 2012 were 16% warmer than normal and 17% warmer than the prior year second quarter. In the Partnership’s northeast and southeast service areas, average temperatures for the second quarter of fiscal 2012 were 23% and 25% warmer, respectively, when compared to the prior year second quarter.

Revenues of $357.6 million decreased $106.5 million, or 22.9%, compared to the prior year second quarter, primarily due to lower volumes sold and, to a lesser extent, lower average selling prices in the propane segment attributable to lower wholesale propane costs. Although average posted prices for propane during the fiscal 2012 second quarter were 9.8% lower compared to the prior year second quarter, commodity prices have remained high relative to historical levels. Average posted prices for fuel oil were 12.3% higher compared to the prior year second quarter.

Cost of products sold for the second quarter of fiscal 2012 of $208.4 million decreased $51.4 million, or 19.8%, compared to $259.8 million in the prior year second quarter. Cost of products sold in the prior year second quarter included a $4.1 million unrealized (non-cash) gain attributable to the mark-to-market adjustment for derivative instruments used in risk management activities which is excluded from Adjusted EBITDA in the table below. The mark-to-market adjustment for the fiscal 2012 second quarter was de minimis.

Combined operating and general and administrative expenses of $85.5 million for the second quarter of fiscal 2012 were $1.1 million, or 1.3%, lower than the prior year second quarter, primarily due to continued savings in payroll and benefit related expenses and lower variable compensation attributable to lower earnings.

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 second quarter of fiscal 2012 with approximately $96 million of cash. On April 19, 2012, the Partnership announced that its Board of Supervisors had declared a quarterly distribution of $0.8525 per Common Unit for the three months ended March 24, 2012. On an annualized basis, this distribution rate equates to $3.41 per Common Unit. The $0.8525 per Common Unit distribution will be paid on May 8, 2012 to Common Unitholders of record as of May 1, 2012.

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 750,000 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, 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 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 24, 2011 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 Six Months Ended March 24, 2012 and March 26, 2011
                                                                                (in thousands, except per unit amounts)
                                                                                              (unaudited)

                                    Three Months Ended                     Six Months Ended
                                    ------------------                     ----------------
                                      March 24, 2012                                                      March 26, 2011              March 24, 2012           March 26, 2011
                                      --------------                                                      --------------              --------------           --------------

    Revenues
      Propane                                          $283,759                                                             $358,309                 $524,115                 $617,710
      Fuel oil and refined fuels                         43,748                                                               63,518                   74,729                  101,920
      Natural gas and electricity                        21,708                                                               32,689                   39,759                   51,657
      All other                                           8,411                                                                9,586                   18,909                   21,122
                                                          -----                                                                -----                   ------                   ------
                                                        357,626                                                              464,102                  657,512                  792,409

    Costs and expenses
      Cost of products sold                             208,401                                                              259,832                  391,975                  446,336
      Operating                                          71,293                                                               76,007                  137,235                  145,084
      General and administrative                         14,158                                                               10,576                   26,453                   24,781
      Severance charges                                       -                                                                2,000                        -                    2,000
      Depreciation and amortization                       7,649                                                                8,454                   15,434                   16,634
                                                          -----                                                                -----                   ------                   ------
                                                        301,501                                                              356,869                  571,097                  634,835

    Operating income                                     56,125                                                              107,233                   86,415                  157,574
    Loss on debt extinguishment                             507                                                                    -                      507
    Interest expense, net                                 6,425                                                                6,819                   13,263                   13,665
                                                          -----                                                                -----                   ------                   ------

    Income before (benefit from)
     provision for income taxes                          49,193                                                              100,414                   72,645                  143,909
    (Benefit from) provision for
     income taxes                                          (380)                                                                  98                     (160)                     464
                                                           ----                                                                  ---                     ----                      ---

    Net income                                          $49,573                                                             $100,316                  $72,805                 $143,445
                                                        =======                                                             ========                  =======                 ========

    Net income per Common Unit -
     basic                                                $1.39                                                                $2.82                    $2.05                    $4.04
                                                          =====                                                                =====                    =====                    =====
    Weighted average number of
     Common Units outstanding -
     basic                                               35,600                                                               35,513                   35,588                   35,494
                                                         ------                                                               ------                   ------                   ------

    Net income per Common Unit -
     diluted                                              $1.38                                                                $2.81                    $2.03                    $4.02
                                                          =====                                                                =====                    =====                    =====
    Weighted average number of
     Common Units outstanding -
     diluted                                             35,839                                                               35,757                   35,808                   35,717
                                                         ------                                                               ------                   ------                   ------

    Supplemental Information:
    EBITDA (a)                                          $63,267                                                             $115,687                 $101,342                 $174,208
    Adjusted EBITDA (a)                                 $65,852                                                             $113,564                 $104,975                 $173,658
    Retail gallons sold:
                                                         89,941                                                              114,034                  164,220                  200,320
    Propane
                                                         10,565                                                               16,249                   18,260                   27,642
    Refined fuels
    Capital expenditures:
                                                         $3,366                                                               $2,719                   $5,227                   $5,236
    Maintenance
                                                           $596                                                               $2,935                   $4,140                   $6,181
    Growth
                   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,
                   loss on debt
                   extinguishment,
                   loss on asset
                   disposal and
                   severance
                   charges.  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
    (a)            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          Six Months Ended
                                            ------------------          ----------------
                                              March 24, 2012                             March 26, 2011           March 24, 2012          March 26, 2011
                                              --------------                             --------------           --------------          --------------

     Net income                                                $49,573                                  $100,316                 $72,805                 $143,445
     Add:
       (Benefit from) provision for income
        taxes                                                     (380)                                       98                    (160)                     464
       Interest expense, net                                     6,425                                     6,819                  13,263                   13,665
       Depreciation and amortization                             7,649                                     8,454                  15,434                   16,634
                                                                 -----                                     -----                  ------                   ------
     EBITDA                                                     63,267                                   115,687                 101,342                  174,208
       Unrealized (non-cash) (gains)
        losses on changes in fair value of
        derivatives                                                  -                                    (4,123)                  1,048                   (2,550)
       Loss on debt extinguishment                                 507                                         -                     507                        -
       Loss on asset disposal                                    2,078                                         -                   2,078                        -
       Severance charges                                             -                                     2,000                       -                    2,000
                                                                   ---                                     -----                     ---                    -----
     Adjusted EBITDA                                            65,852                                   113,564                 104,975                  173,658
     Add / (subtract):
       Benefit from (provision for) income
        taxes                                                      380                                       (98)                    160                     (464)
       Interest expense, net                                    (6,425)                                   (6,819)                (13,263)                 (13,665)
       Unrealized (non-cash) gains
        (losses) on changes in fair value
        of derivatives                                               -                                     4,123                  (1,048)                   2,550
       Severance charges                                             -                                    (2,000)                      -                   (2,000)
       (Gain) on disposal of property,
        plant and equipment, net                                  (179)                                   (2,612)                   (211)                  (2,911)
       Compensation cost recognized under
        Restricted Unit Plans                                    1,147                                     1,067                   2,350                    2,399
       Changes in working capital and other
        assets and liabilities                                 (18,404)                                  (52,529)                (75,915)                (109,729)
                                                               -------                                   -------                 -------                 --------

      Net cash provided by operating
      activities                                               $42,371                                   $54,696                 $17,048                  $49,838
                                                               =======                                   =======                 =======                  =======

    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.


Source: PR Newswire