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 8, 2019
Commission File Number: 1-14222
SUBURBAN PROPANE PARTNERS, L.P.
(Exact name of registrant as specified in its charter)
Delaware |
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22-3410353 |
(State or Other Jurisdiction |
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(IRS Employer |
of Incorporation) |
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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))
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
Trading Symbol |
Name of exchange on which registered |
Common Units |
SPH |
New York Stock Exchange |
Indicate by check mark whether the registrant is an emerging growth company 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 8, 2019, the Partnership issued a press release (the “Press Release”) describing its Fiscal 2019 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
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 8, 2019 |
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SUBURBAN PROPANE PARTNERS, L.P. |
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By: |
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/s/ MICHAEL A. KUGLIN |
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Name: |
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Michael A. Kuglin |
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Title: |
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Chief Financial Officer & Chief Accounting Officer |
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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 Results
Whippany, New Jersey, August 8, 2019 -- 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 29, 2019.
Consistent with the seasonal nature of its businesses, the Partnership typically experiences a net loss in the third quarter of its fiscal year. Net loss for the third quarter of fiscal 2019 was $29.0 million, or $0.47 per Common Unit, compared to a net loss of $16.6 million, or $0.27 per Common Unit, in the 2018 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) amounted to $20.1 million for the third quarter of fiscal 2019, compared to $30.5 million in the prior year third quarter.
In announcing these results, President and Chief Executive Officer Michael A. Stivala said, “We were very pleased to deliver another solid quarter, roughly in line with our expectations for this counter-seasonal period. During the quarter, we made good strides on our stated strategic goals, utilizing excess cash flows in a balanced way to strengthen the balance sheet and invest in growth. Specifically, we reduced debt by more than $16 million and invested $11 million in two high quality propane acquisitions in strategic markets. From an earnings perspective, the third quarter of fiscal 2018 benefited from unusually strong heat-related customer demand resulting from an extended winter season with significantly colder than normal average temperatures throughout the month of April 2018. By contrast, the fiscal 2019 third quarter was more reflective of traditional counter-seasonal customer activity. Our operations personnel continue to do an outstanding job delivering exceptional service to our customers, effectively managing pricing in a declining commodity price environment and focusing on our customer base growth and retention initiatives.”
Mr. Stivala added, “We also launched a brand refresh during the quarter. The new brand elements emphasize our commitment to excellence for the comfort and safety of our customers, our devotion to the safety and career development of our dedicated employees, our philanthropic efforts to give back to the communities we serve through our SuburbanCares initiative and the inherent environmental benefits of using propane as a clean energy source for a sustainable future.”
Retail propane gallons sold in the third quarter of fiscal 2019 of 73.8 million gallons decreased 8.3% compared to the prior year third quarter. Volumes in the third quarter of fiscal 2019 were negatively impacted by significantly warmer temperatures during the month of April, whereas volumes in April 2018 benefited from considerably cooler temperatures that resulted in unusually strong heat-related demand. Average temperatures (as measured by heating degree days) for April 2019 were 17% warmer than normal and 33% warmer than April 2018. Overall, average temperatures across all of the Partnership’s service territories for the third quarter of fiscal 2019 were 12% warmer than normal and 8% warmer than the prior year third quarter.
Revenues in the third quarter of fiscal 2019 of $214.2 million decreased $27.7 million, or 11.5%, compared to the prior year third quarter, primarily due to lower propane volumes sold combined with lower retail selling prices associated with lower wholesale product costs. Average propane prices (basis Mont Belvieu, Texas) for the third quarter of fiscal 2019 decreased 36.4% compared to the prior year third quarter. Cost of products sold for the third quarter of fiscal 2019 of $78.6 million decreased $16.8 million, or 17.6%, compared to the prior year third quarter, primarily due to lower
1
wholesale product costs and lower propane volumes sold. Cost of products sold included a $0.1 million unrealized (non-cash) gain attributable to the mark-to-market adjustment for derivative instruments used in risk management activities, compared to a $3.8 million unrealized (non-cash) gain 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 $114.2 million for the third quarter of fiscal 2019 increased $3.2 million, or 2.9%, compared to the prior year third quarter, primarily due to an increase in accruals for self-insured product liabilities and higher payroll and benefit-related costs.
During the third quarter of fiscal 2019, the Partnership closed on two acquisitions of well-run propane operations, located in strategic markets, for a total purchase price of $10.9 million and reduced debt by $16.3 million. As a result of the debt repayment, outstanding borrowings under the revolving credit facility were reduced to $127.2 million at the end of the third quarter and the Consolidated Leverage Ratio was 4.41x as of June 2019. Through the first nine months of fiscal 2019, the Partnership has completed three acquisitions, investing nearly $23.0 million in support of its strategic growth initiatives.
As previously announced on July 25, 2019, the Partnership’s Board of Supervisors has declared a quarterly distribution of $0.60 per Common Unit for the three months ended June 29, 2019. The distribution is payable on August 13, 2019 to Common Unitholders of record as of August 6, 2019.
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 approximately 700 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:
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The impact of weather conditions on the demand for propane, fuel oil and other refined fuels, natural gas and electricity; |
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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 as a result of customer conservation; |
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The ability of the Partnership to compete with other suppliers of propane, fuel oil and other energy sources; |
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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; |
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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; |
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The ability of the Partnership to acquire and maintain reliable transportation for its propane, fuel oil and other refined fuels; |
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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; |
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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 climate change, derivative instruments and other regulatory developments on the Partnership’s business; |
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The impact of changes in tax laws that could adversely affect the tax treatment of the Partnership for income tax purposes; |
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The impact of legal proceedings on the Partnership’s business; |
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The impact of operating hazards that could adversely affect the Partnership’s operating results to the extent not covered by insurance; |
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The impact of current conditions in the global capital and credit markets, and general economic pressures; |
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The operating, legal and regulatory risks the Partnership may face; and |
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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 29, 2018 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 29, 2019 and June 30, 2018
(in thousands, except per unit amounts)
(unaudited)
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Three Months Ended |
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Nine Months Ended |
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June 29, 2019 |
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June 30, 2018 |
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June 29, 2019 |
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June 30, 2018 |
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Revenues |
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Propane |
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$ |
183,052 |
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$ |
205,400 |
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$ |
937,468 |
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$ |
990,344 |
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Fuel oil and refined fuels |
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12,921 |
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15,400 |
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83,428 |
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82,414 |
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Natural gas and electricity |
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7,527 |
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10,403 |
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38,527 |
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43,942 |
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All other |
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10,712 |
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10,733 |
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36,270 |
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34,795 |
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214,212 |
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241,936 |
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1,095,693 |
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1,151,495 |
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Costs and expenses |
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Cost of products sold |
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78,596 |
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95,392 |
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462,703 |
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507,223 |
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Operating |
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97,804 |
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96,347 |
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305,367 |
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306,614 |
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General and administrative |
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16,445 |
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14,705 |
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54,938 |
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49,685 |
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Depreciation and amortization |
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30,151 |
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31,259 |
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90,845 |
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94,593 |
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222,996 |
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237,703 |
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913,853 |
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958,115 |
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Loss on sale of business |
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— |
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— |
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— |
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4,823 |
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Operating (loss) income |
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(8,784 |
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4,233 |
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181,840 |
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188,557 |
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Interest expense, net |
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18,906 |
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19,512 |
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58,041 |
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58,428 |
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Other, net |
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1,176 |
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1,172 |
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3,527 |
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3,518 |
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(Loss) income before provision for (benefit from) income taxes |
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(28,866 |
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(16,451 |
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120,272 |
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126,611 |
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Provision for (benefit from) income taxes |
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175 |
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144 |
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578 |
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(749 |
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Net (loss) income |
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$ |
(29,041 |
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$ |
(16,595 |
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$ |
119,694 |
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$ |
127,360 |
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Net (loss) income per Common Unit - basic |
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$ |
(0.47 |
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$ |
(0.27 |
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$ |
1.93 |
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$ |
2.07 |
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Weighted average number of Common Units outstanding - basic |
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62,009 |
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61,598 |
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61,963 |
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61,542 |
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Net (loss) income per Common Unit - diluted |
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$ |
(0.47 |
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$ |
(0.27 |
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$ |
1.92 |
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$ |
2.06 |
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Weighted average number of Common Units outstanding - diluted |
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62,009 |
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61,598 |
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62,262 |
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61,780 |
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Supplemental Information: |
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EBITDA (a) |
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$ |
20,191 |
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$ |
34,320 |
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$ |
269,158 |
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$ |
279,632 |
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Adjusted EBITDA (a) |
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$ |
20,053 |
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$ |
30,514 |
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$ |
276,410 |
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$ |
285,876 |
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Retail gallons sold: |
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Propane |
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73,785 |
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80,491 |
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363,079 |
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375,201 |
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Refined fuels |
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4,331 |
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5,138 |
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26,707 |
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27,905 |
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Capital expenditures: |
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Maintenance |
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$ |
3,862 |
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$ |
2,185 |
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$ |
11,318 |
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$ |
10,071 |
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Growth |
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$ |
3,869 |
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$ |
5,509 |
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$ |
12,965 |
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$ |
15,776 |
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(more)
4
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:
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Three Months Ended |
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Nine Months Ended |
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June 29, 2019 |
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June 30, 2018 |
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June 29, 2019 |
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June 30, 2018 |
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Net (loss) income |
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$ |
(29,041 |
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$ |
(16,595 |
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$ |
119,694 |
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$ |
127,360 |
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Add: |
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Provision for (benefit from) income taxes |
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175 |
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144 |
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578 |
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(749 |
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Interest expense, net |
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18,906 |
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19,512 |
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58,041 |
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58,428 |
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Depreciation and amortization |
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30,151 |
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31,259 |
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90,845 |
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94,593 |
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EBITDA |
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20,191 |
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34,320 |
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269,158 |
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279,632 |
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Unrealized (non-cash) (gains) losses on changes in fair value of derivatives |
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(138 |
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(3,806 |
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7,252 |
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1,421 |
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Loss on sale of business |
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— |
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— |
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— |
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4,823 |
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Adjusted EBITDA |
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$ |
20,053 |
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$ |
30,514 |
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$ |
276,410 |
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$ |
285,876 |
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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.
5
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