EX-99.1 2 d721638dex991.htm EX-99.1 EX-99.1

Exhibit 99.1

 

LOGO   

News Release

Contact: Michael Stivala

President

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

Phone: 973-503-9252

 

FOR IMMEDIATE RELEASE

Suburban Propane Partners, L.P.

Announces Second Quarter Earnings

Whippany, New Jersey, May 8, 2014 — 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 29, 2014.

Net income for the second quarter of fiscal 2014 was $149.5 million, or $2.47 per Common Unit, compared to net income of $129.5 million, or $2.26 per Common Unit, in the prior year second quarter. Earnings before interest, taxes, depreciation and amortization (“EBITDA”) for the second quarter of fiscal 2014 amounted to $204.3 million, compared to $185.3 million in the prior year second quarter.

Net income and EBITDA for the second quarter of fiscal 2014 and 2013 included expenses of $2.2 million and $2.7 million, respectively, related to the ongoing integration of Inergy Propane. Excluding the effects of these charges, as well as the unrealized (non-cash) mark-to-market adjustments on derivative instruments in both quarters, Adjusted EBITDA (as defined and reconciled below) amounted to $206.3 million for the second quarter of fiscal 2014, an increase of $15.6 million, or 8.2%, compared to Adjusted EBITDA of $190.7 million in the prior year second quarter.

In announcing these results, President Michael A. Stivala said, “While this year’s heating season was one of the most challenging this industry has experienced in decades, resulting from the widely reported, industry-wide supply and logistics issues; rapidly rising wholesale prices; harsh winter storms and, in many parts of the country, sustained colder than normal temperatures, our people met the challenge. We are extremely proud of the efforts of all of our employees, who worked tirelessly, while continuing to stay focused on the comfort and safety of our customer base. This improvement in year-over-year operating performance is a testament to their hard work and dedication.”

Retail propane gallons sold in the second quarter of fiscal 2014 increased 3.4 million gallons, or 1.6%, to 213.7 million gallons from 210.3 million gallons in the prior year second quarter. Sales of fuel oil and other refined fuels decreased 0.6 million gallons, to 22.6 million gallons compared to 23.2 million gallons in the prior year second quarter. According to the National Oceanic and Atmospheric Administration, average temperatures (as measured by heating degree days) across all of the Partnership’s service territories for the second quarter of fiscal 2014 were 9% colder than normal and 11% colder than the prior year second quarter. However, the weather pattern was characterized by considerably colder than normal temperatures in the Partnership’s service territories in the east and midwest regions, whereas the Partnership’s service territories in the west experienced unseasonably warm temperatures throughout the quarter. In fact, average temperatures in the western territories were 16% warmer than normal and 17% warmer than the prior year second quarter which negatively impacted volumes sold in those territories. Additionally, the supply and logistics issues that plagued the entire industry throughout much of the quarter, coupled with rising wholesale product costs, weighed on volumes for the fiscal 2014 second quarter.


Revenues of $873.8 million increased $195.3 million, or 28.8%, compared to the prior year second quarter, primarily due to higher retail selling prices associated with significantly higher wholesale product costs and, to a lesser extent, an increase in retail propane volumes sold. Average posted propane prices for the second quarter of fiscal 2014 were 51.1% higher than the prior year second quarter, basis Mont Belvieu, Texas, and, at other supply points, posted prices increased at an even greater rate. Average posted prices for fuel oil for the second quarter of fiscal 2014 were 1.0% lower than the prior year second quarter. Cost of products sold for the second quarter of fiscal 2014 of $517.2 million increased $170.2 million, or 49.0%, compared to $347.0 million in the prior year second quarter, primarily due to higher wholesale propane costs and, to a lesser extent, higher propane volumes sold. In addition to the dramatic increase in posted propane prices, cost of products sold increased due to higher transportation costs associated with extraordinary measures taken by the Partnership to ensure that adequate propane supplies were delivered to its customer service centers to meet customer demand. Cost of products sold for the second quarter of fiscal 2014 also 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 $2.6 million unrealized (non-cash) loss in the prior year second 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 $152.2 million for the second quarter of fiscal 2014 were $6.1 million, or 4.2%, higher than the prior year second quarter, primarily due to higher overtime and vehicle expenses associated with increased activity, as well as increased variable compensation attributable to higher earnings. Depreciation and amortization expense of $33.3 million increased $2.0 million, or 6.3%, primarily due to the acceleration of depreciation expense on assets taken out of service as a result of integration activities. Net interest expense of $21.2 million decreased $3.1 million, or 12.8%, due to the reduction of $157.3 million in long-term borrowings during the fourth quarter of fiscal 2013.

Chief Executive Officer, Michael J. Dunn, Jr., added, “Overall, we are very pleased with these results, particularly in light of the operating challenges faced. While the increased activity and operating challenges resulted in higher variable operating expenses, we continue to achieve our anticipated synergies from the integration of Inergy Propane. Now, with the heating season behind us, we have resumed our integration activities, which includes, among other things, finalizing our system conversions, further refinements to our operating model and routing activities and enhanced employee training. By the end of this fiscal year, we expect to be substantially completed with our systems and physical blending activities, and as we enter the new fiscal year, we will begin to fine-tune our combined operating platform.”

 

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As previously announced on April 24, 2014, the Partnership’s Board of Supervisors has declared a quarterly distribution of $0.8750 per Common Unit for the three months ended March 29, 2014. On an annualized basis, this distribution rate equates to $3.50 per Common Unit. The $0.8750 per Common Unit distribution is payable on May 13, 2014 to Common Unitholders of record as of May 6, 2014.

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 more than 1.2 million residential, commercial, industrial and agricultural customers through more than 750 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 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 cost savings expected from the Partnership’s acquisition of the retail operations formerly owned by Inergy, L.P. (the “Inergy Propane Acquisition”) may not be fully realized or realized within the expected timeframe;

 

    The revenue gained by the Partnership from the Inergy Propane Acquisition may be lower than expected;

 

    The costs of integrating the business acquired in the Inergy Propane Acquisition into the Partnership’s existing operations may be greater than expected;

 

    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;

 

    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;

 

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    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 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, including, but not limited to, Inergy Propane;

 

    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 28, 2013 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 Six Months Ended March 29, 2014 and March 30, 2013

(in thousands, except per unit amounts)

(unaudited)

 

     Three Months Ended      Six Months Ended  
     March 29,
2014
     March 30,
2013
     March 29,
2014
     March 30,
2013
 

Revenues

           

Propane

   $ 728,504       $ 540,537       $ 1,167,098       $ 933,322   

Fuel oil and refined fuels

     93,722         92,795         147,990         154,941   

Natural gas and electricity

     39,083         29,732         57,399         48,121   

All other

     12,463         15,362         27,341         32,745   
  

 

 

    

 

 

    

 

 

    

 

 

 
     873,772         678,426         1,399,828         1,169,129   

Costs and expenses

           

Cost of products sold

     517,198         346,999         797,724         592,099   

Operating

     131,731         126,371         245,044         241,307   

General and administrative

     20,517         19,763         37,852         37,595   

Depreciation and amortization

     33,282         31,316         68,109         61,843   
  

 

 

    

 

 

    

 

 

    

 

 

 
     702,728         524,449         1,148,729         932,844   

Operating income

     171,044         153,977         251,099         236,285   

Interest expense, net

     21,226         24,343         42,433         48,899   
  

 

 

    

 

 

    

 

 

    

 

 

 

Income before provision for income taxes

     149,818         129,634         208,666         187,386   

Provision for income taxes

     271         150         448         282   
  

 

 

    

 

 

    

 

 

    

 

 

 

Net income

   $ 149,547       $ 129,484       $ 208,218       $ 187,104   
  

 

 

    

 

 

    

 

 

    

 

 

 

Net income per Common Unit - basic

   $ 2.47       $ 2.26       $ 3.45       $ 3.27   
  

 

 

    

 

 

    

 

 

    

 

 

 

Weighted average number of Common Units outstanding - basic

     60,425         57,185         60,409         57,169   
  

 

 

    

 

 

    

 

 

    

 

 

 

Net income per Common Unit - diluted

   $ 2.46       $ 2.25       $ 3.43       $ 3.26   
  

 

 

    

 

 

    

 

 

    

 

 

 

Weighted average number of Common Units outstanding - diluted

     60,692         57,441         60,668         57,392   
  

 

 

    

 

 

    

 

 

    

 

 

 

Supplemental Information:

           

EBITDA (a)

   $ 204,326       $ 185,293       $ 319,208       $ 298,128   

Adjusted EBITDA (a)

   $ 206,269       $ 190,668       $ 323,977       $ 308,141   

Retail gallons sold:

           

Propane

     213,689         210,314         371,547         364,247   

Refined fuels

     22,617         23,223         36,614         39,108   

Capital expenditures:

           

Maintenance

   $ 2,770       $ 2,404       $ 7,805       $ 3,838   

Growth

   $ 2,263       $ 3,729       $ 6,552       $ 9,056   

(more)


(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 certain other items, as applicable, as provided in the table below. 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.

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 29,
2014
    March 30,
2013
    March 29,
2014
    March 30,
2013
 

Net income

   $ 149,547      $ 129,484      $ 208,218      $ 187,104   

Add:

        

Provision for income taxes

     271        150        448        282   

Interest expense, net

     21,226        24,343        42,433        48,899   

Depreciation and amortization

     33,282        31,316        68,109        61,843   
  

 

 

   

 

 

   

 

 

   

 

 

 

EBITDA

     204,326        185,293        319,208        298,128   

Unrealized (non-cash) (gains) losses on changes in fair value of derivatives

     (291     2,646        (1     6,260   

Integration-related costs

     2,234        2,729        4,770        3,753   
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA

     206,269        190,668        323,977        308,141   

Add / (subtract):

        

Provision for income taxes

     (271     (150     (448     (282

Interest expense, net

     (21,226     (24,343     (42,433     (48,899

Unrealized (non-cash) gains (losses) on changes in fair value of derivatives

     291        (2,646     1        (6,260

Integration-related costs

     (2,234     (2,729     (4,770     (3,753

(Gain) on disposal of property, plant and equipment, net

     (282     (323     (519     (2,590

Compensation cost recognized under Restricted Unit Plans

     1,951        1,173        3,589        2,413   

Changes in working capital and other assets and liabilities

     (168,272     (89,224     (259,010     (114,807
  

 

 

   

 

 

   

 

 

   

 

 

 

Net cash provided by operating activities

   $ 16,226      $ 72,426      $ 20,387      $ 133,963   
  

 

 

   

 

 

   

 

 

   

 

 

 

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.