WHIPPANY, N.J., Aug. 9, 2018 /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 third quarter ended June 30, 2018.

Consistent with the seasonal nature of the propane and fuel oil businesses, the Partnership typically experiences a net loss in the third quarter of its fiscal year. Net loss for the third quarter of fiscal 2018 was $16.6 million, or $0.27 per Common Unit, compared to a net loss of $29.7 million, or $0.48 per Common Unit, in the prior year 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) increased $9.1 million, or 42.5%, to $30.5 million for the third quarter of fiscal 2018.

In announcing these results, President and Chief Executive Officer Michael A. Stivala said, "Building off our solid performance through the first half of fiscal 2018, cooler average temperatures provided a tailwind for customer demand into the early part of the fiscal third quarter. I am extremely proud of the efforts of all our employees – meeting the increased demand with an unwavering commitment to delivering outstanding service to our customers, solid margin management and continued expense control. As a result, we reported an increase of $9.1 million, or 42.5%, in our Adjusted EBITDA for the third quarter of fiscal 2018 and, through the first nine months of the fiscal year, Adjusted EBITDA of nearly $286.0 million was more than $42.0 million, or 17.3%, higher than the comparable prior year period."

Mr. Stivala concluded, "With the significant improvement in earnings, coupled with repayment of $23.0 million in outstanding borrowings under our revolver from operating cash flows during the quarter, our leverage profile continues to improve and trend closer to our target range of less than 4.0x. We are very well positioned, both operationally and financially, to continue to pursue our strategic growth initiatives."

Retail propane gallons sold in the third quarter of fiscal 2018 of 80.5 million gallons increased 3.6% compared to the prior year third quarter. Although weather during the third quarter typically has less of an impact on volumes sold than it does during the heating season, volumes in the third quarter of fiscal 2018 were positively impacted by cooler temperatures, particularly during the month of April. Average temperatures across all of the Partnership's service territories (as measured by heating degree days) for the third quarter of fiscal 2018 were 14% cooler than the prior year third quarter, although still 4% warmer than normal.

Revenues in the third quarter of fiscal 2018 of $241.9 million increased $19.0 million, or 8.5%, compared to the prior year third quarter, primarily due to higher propane volumes sold combined with higher retail selling prices associated with higher wholesale product costs. Average propane prices (basis Mont Belvieu, Texas) and fuel oil prices were 38.8% and 42.0% higher than the prior year third quarter, respectively. Cost of products sold for the third quarter of fiscal 2018 of $95.4 million increased $3.3 million, or 3.6%, compared to the prior year third quarter, primarily due to higher wholesale product costs, and to a lesser extent, higher propane volumes sold. Cost of products sold included a $3.8 million unrealized (non-cash) gain attributable to the mark-to-market adjustment for derivative instruments used in risk management activities, compared to a $0.7 million unrealized (non-cash) loss 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 $112.2 million for the third quarter of fiscal 2018 increased $2.2 million, or 2.0%, compared to the prior year third quarter, primarily due to higher variable operating costs to support higher demand and higher vehicle fuel costs.

Depreciation and amortization expense of $31.3 million decreased $0.6 million, or 1.8%, compared to the prior year third quarter. Net interest expense of $19.5 million increased $1.0 million, or 5.5%, compared to the prior year third quarter, primarily due to the rise in benchmark interest rates. With the increase in Adjusted EBITDA and the debt repayment during the third quarter, the Partnership's Consolidated Leverage Ratio improved to 4.35x as of June 30, 2018.

During the third quarter of fiscal 2018, the Partnership closed on the acquisition of a well-run propane operation located in a strategic market for a total purchase price of $11.9 million, which was funded with cash.

As previously announced on July 26, 2018, the Partnership's Board of Supervisors has declared a quarterly distribution of $0.60 per Common Unit for the three months ended June 30, 2018. The distribution is payable on August 14, 2018 to Common Unitholders of record as of August 7, 2018.

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 668 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, natural gas and electricity, the impact of the Partnership's hedging and risk management activities, and the adverse impact of price increases on volumes sold 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 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;
  • 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;
  • 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;
  • 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 30, 2017 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 Nine Months Ended June 30, 2018 and June 24, 2017

(in thousands, except per unit amounts)

(unaudited)

Three Months Ended

Nine Months Ended

June 30, 2018

June 24, 2017

June 30, 2018

June 24, 2017

Revenues

Propane

$

205,400

$

188,406

$

990,344

$

843,519

Fuel oil and refined fuels

15,400

12,886

82,414

69,612

Natural gas and electricity

10,403

11,923

43,942

44,229

All other

10,733

9,680

34,795

33,420

241,936

222,895

1,151,495

990,780

Costs and expenses

Cost of products sold

95,392

92,094

507,223

402,726

Operating

97,519

97,070

310,132

306,839

General and administrative

14,705

12,968

49,685

40,179

Depreciation and amortization

31,259

31,825

94,593

95,756

238,875

233,957

961,633

845,500

Loss on sale of business

4,823

Operating income (loss)

3,061

(11,062)

185,039

145,280

Loss on debt extinguishment

1,567

Interest expense, net

19,512

18,502

58,428

54,820

(Loss) income before provision for (benefit from) income
taxes

(16,451)

(29,564)

126,611

88,893

Provision for (benefit from) income taxes

144

152

(749)

308

Net (loss) income

$

(16,595)

$

(29,716)

$

127,360

$

88,585

Net (loss) income per Common Unit - basic

$

(0.27)

$

(0.48)

$

2.07

$

1.45

Weighted average number of Common Units

outstanding - basic

61,598

61,290

61,542

61,227

Net income per Common Unit - diluted

$

(0.27)

$

(0.48)

$

2.06

$

1.44

Weighted average number of Common Units

outstanding - diluted

61,598

61,290

61,780

61,410

Supplemental Information:

EBITDA (a)

$

34,320

$

20,763

$

279,632

$

239,469

Adjusted EBITDA (a)

$

30,514

$

21,418

$

285,876

$

243,744

Retail gallons sold:

Propane

80,491

77,712

375,201

350,188

Refined fuels

5,138

5,243

27,905

27,251

Capital expenditures:

Maintenance

$

2,185

$

2,299

$

10,071

$

8,429

Growth

$

5,509

$

2,500

$

15,776

$

13,575

(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 other items, as applicable, as provided in the table below. Our management uses EBITDA and Adjusted EBITDA as supplemental measures of operating performance and we are including them because we believe that they provide our investors and industry analysts with additional information that we determined is useful to evaluate our operating results.

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:

Three Months Ended

Nine Months Ended

June 30, 2018

June 24, 2017

June 30, 2018

June 24, 2017

Net (loss) income

$

(16,595)

$

(29,716)

$

127,360

$

88,585

Add:

Provision for (benefit from) income taxes

144

152

(749)

308

Interest expense, net

19,512

18,502

58,428

54,820

Depreciation and amortization

31,259

31,825

94,593

95,756

EBITDA

34,320

20,763

279,632

239,469

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

(3,806)

655

1,421

2,708

Loss on debt extinguishment

1,567

Loss on sale of business

4,823

Adjusted EBITDA

$

30,514

$

21,418

$

285,876

$

243,744

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.

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SOURCE Suburban Propane Partners, L.P.

For more information: Michael A. Kuglin, Chief Financial Officer, & Chief Accounting Officer, P.O. Box 206, Whippany, NJ 07981-0206, Phone: 973-503-9252