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8-K - FORM 8-K - SUBURBAN PROPANE PARTNERS LP | c16541e8vk.htm |
Exhibit 99.1
News Release Contact: Michael Stivala Chief Financial Officer P.O. Box 206, Whippany, NJ 07981-0206 Phone: 973-503-9252 |
FOR IMMEDIATE RELEASE
Suburban Propane Partners, L.P. Announces
Second Quarter Results
Second Quarter Results
Whippany, New Jersey, May 5, 2011 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 26, 2011.
Net income amounted to $100.3 million, or $2.82 per Common Unit, compared to $98.4 million, or
$2.78 per Common Unit, in the prior year second quarter. Earnings before interest, taxes,
depreciation and amortization (EBITDA) for the second quarter of fiscal 2011 amounted to $115.7
million, compared to $112.5 million in the prior year second quarter.
Net income and EBITDA for the fiscal 2011 second quarter included a $2.0 million charge for
severance costs associated with a realignment of the Partnerships field operations initiated
during the quarter. Net income and EBITDA for the fiscal 2010 second quarter included a $9.5
million loss on debt extinguishment associated with the senior note refinancing completed during
March 2010. Excluding the effects of the loss on debt extinguishment from the fiscal 2010 second
quarter, 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 $111.6 million for
the fiscal 2011 second quarter, compared to Adjusted EBITDA of $123.7 million in the prior year
second quarter.
In announcing these results, President and Chief Executive Officer Michael J. Dunn, Jr., said,
The business climate in the industry continues to be challenging. Weakness in the economy,
coupled with inflation in the energy sector, has impacted customer buying habits and continues to
put pressure on volumes and margins. Nonetheless, our proven ability to effectively manage our
cost base and drive efficiencies has helped to offset a significant portion of the lower overall
gross margins. Despite the lower earnings, our balance sheet remains strong as we ended the
quarter with approximately $137 million of cash on hand.
Mr. Dunn added, With the negative macroeconomic factors continuing to impact the industry as a
whole, we recently announced an internal realignment of our field management structure and regional
operating footprint. This realignment represents the next evolution of organizational change that
is made possible as a result of our technology infrastructure, coupled with the talent within our
organization. The steps taken are intended to put our people in the best position to drive growth
in our customer base, streamline support functions in our operations to drive further operating
efficiencies and continue our focus on delivering superior customer service all activities that
are in line with our strategy of delivering sustainable, profitable growth.
Retail propane gallons sold in the second quarter of fiscal 2011 decreased approximately 10.5
million gallons, or 8.4%, to 114.0 million gallons compared to 124.5 million gallons in the prior
year second quarter. Sales of fuel oil and other refined fuels decreased approximately 2.2 million
gallons, or 12.0%, to 16.2 million gallons during the second quarter of fiscal 2011 compared to
18.4 million gallons in the prior year second quarter. While sales volumes benefitted from colder
average temperatures in many parts of the Partnerships service territories, sales volumes were
negatively impacted by customer conservation from historically high commodity prices and ongoing
weakness in the economy. Average temperatures across the Partnerships service territories for the
second quarter of fiscal 2011 were 1% colder than normal, compared to 3% warmer than normal in the
prior year second quarter.
Revenues of $464.1 million decreased $5.1 million, or 1.1%, compared to the prior year second
quarter, primarily due to lower volumes sold offset to an extent by higher average selling prices
attributable to higher base commodity prices. Average posted prices for propane and fuel oil were
11.8% and 37.3% higher, respectively, compared to the prior year second quarter as commodity prices
rose to their highest levels in over two years, dating back to the unprecedented levels reached in
the latter half of fiscal 2008. Cost of products sold for the second quarter of fiscal 2011 of
$259.8 million increased approximately $11.3 million, or 4.5%, compared to $248.5 million in the
prior year second quarter. Cost of products sold in the second quarter of fiscal 2011 included a
$4.1 million unrealized (non-cash) gain attributable to the mark-to-market adjustment for
derivative instruments used in risk management activities, compared to a $1.7 million unrealized
(non-cash) loss in the prior year second quarter; these unrealized losses are excluded from
Adjusted EBITDA for both periods in the table below.
Combined operating and general and administrative expenses of $86.6 million for the second quarter
of fiscal 2011 were $12.2 million, or 12.3%, lower than the prior year second quarter, primarily
due to lower variable compensation attributable to lower earnings, and continued savings in payroll
and field related expenses, offset to an extent by higher vehicle fuel costs to operate our fleet.
Depreciation and amortization expense of $8.5 million increased $1.4 million, or 19.7%, primarily
due to the impact of prior year acquisitions.
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 2011 with
$136.9 million of cash. On April 21, 2011, 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
26, 2011. On an annualized basis, this distribution rate equates to $3.41 per Common Unit, or 1.5%
higher than the distribution rate at the end of the second quarter of fiscal 2010. The $0.8525 per
Common Unit distribution will be paid on May 10, 2011 to Common Unitholders of record as of May 3,
2011.
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 800,000
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
managements 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 Partnerships 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 Partnerships 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 Partnerships business; |
| The impact of operating hazards that could adversely affect the Partnerships operating
results to the extent not covered by insurance; |
| The Partnerships 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
Partnerships Annual Report under Risk Factors. |
Some of these risks and uncertainties are discussed in more detail in the Partnerships Annual
Report on Form 10-K for its fiscal year ended September 25, 2010 and other periodic reports filed
with the SEC. Readers are cautioned not to place undue reliance on forward-looking statements,
which reflect managements 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 26, 2011 and March 27, 2010
(in thousands, except per unit amounts)
(unaudited)
Consolidated Statements of Operations
For the Three and Six Months Ended March 26, 2011 and March 27, 2010
(in thousands, except per unit amounts)
(unaudited)
Three Months Ended | Six Months Ended | |||||||||||||||
March 26, 2011 | March 27, 2010 | March 26, 2011 | March 27, 2010 | |||||||||||||
Revenues |
||||||||||||||||
Propane |
$ | 358,309 | $ | 369,341 | $ | 617,710 | $ | 602,872 | ||||||||
Fuel oil and refined fuels |
63,518 | 61,311 | 101,920 | 100,558 | ||||||||||||
Natural gas and electricity |
32,689 | 28,841 | 51,657 | 45,703 | ||||||||||||
All other |
9,586 | 9,670 | 21,122 | 21,462 | ||||||||||||
464,102 | 469,163 | 792,409 | 770,595 | |||||||||||||
Costs and expenses |
||||||||||||||||
Cost of products sold |
259,832 | 248,459 | 446,336 | 398,825 | ||||||||||||
Operating |
76,007 | 78,508 | 145,084 | 152,995 | ||||||||||||
General and administrative |
10,576 | 20,257 | 24,781 | 33,995 | ||||||||||||
Severance charges |
2,000 | | 2,000 | | ||||||||||||
Depreciation and amortization |
8,454 | 7,142 | 16,634 | 14,226 | ||||||||||||
356,869 | 354,366 | 634,835 | 600,041 | |||||||||||||
Operating income |
107,233 | 114,797 | 157,574 | 170,554 | ||||||||||||
Loss on debt extinguishment |
| 9,473 | | 9,473 | ||||||||||||
Interest expense, net |
6,819 | 6,608 | 13,665 | 13,791 | ||||||||||||
Income before provision for income taxes |
100,414 | 98,716 | 143,909 | 147,290 | ||||||||||||
Provision for income taxes |
98 | 328 | 464 | 527 | ||||||||||||
Net income |
$ | 100,316 | $ | 98,388 | $ | 143,445 | $ | 146,763 | ||||||||
Net income per Common Unit basic |
$ | 2.82 | $ | 2.78 | $ | 4.04 | $ | 4.15 | ||||||||
Weighted average number of Common Units outstanding basic |
35,513 | 35,343 | 35,494 | 35,332 | ||||||||||||
Net income per Common Unit diluted |
$ | 2.81 | $ | 2.76 | $ | 4.02 | $ | 4.12 | ||||||||
Weighted average number of Common Units outstanding diluted |
35,757 | 35,622 | 35,717 | 35,581 | ||||||||||||
Supplemental Information: |
||||||||||||||||
EBITDA (a) |
$ | 115,687 | $ | 112,466 | $ | 174,208 | $ | 175,307 | ||||||||
Adjusted EBITDA (a) |
$ | 111,564 | $ | 123,671 | $ | 171,658 | $ | 189,920 | ||||||||
Retail gallons sold: |
||||||||||||||||
Propane |
114,034 | 124,457 | 200,320 | 214,438 | ||||||||||||
Refined fuels |
16,249 | 18,381 | 27,642 | 31,436 | ||||||||||||
Capital expenditures: |
||||||||||||||||
Maintenance |
$ | 2,719 | $ | 2,821 | $ | 5,236 | $ | 3,972 | ||||||||
Growth |
$ | 2,935 | $ | 2,137 | $ | 6,181 | $ | 5,478 |
(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 loss on debt
extinguishment. 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 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 26, 2011 | March 27, 2010 | March 26, 2011 | March 27, 2010 | |||||||||||||
Net income |
$ | 100,316 | $ | 98,388 | $ | 143,445 | $ | 146,763 | ||||||||
Add: |
||||||||||||||||
Provision for income taxes |
98 | 328 | 464 | 527 | ||||||||||||
Interest expense, net |
6,819 | 6,608 | 13,665 | 13,791 | ||||||||||||
Depreciation and amortization |
8,454 | 7,142 | 16,634 | 14,226 | ||||||||||||
EBITDA |
115,687 | 112,466 | 174,208 | 175,307 | ||||||||||||
Unrealized (non-cash) (gains) losses on changes in fair
value of derivatives |
(4,123 | ) | 1,732 | (2,550 | ) | 5,140 | ||||||||||
Loss on debt extinguishment |
| 9,473 | | 9,473 | ||||||||||||
Adjusted EBITDA |
111,564 | 123,671 | 171,658 | 189,920 | ||||||||||||
Add / (subtract): |
||||||||||||||||
Provision for income taxes |
(98 | ) | (328 | ) | (464 | ) | (527 | ) | ||||||||
Interest expense, net |
(6,819 | ) | (6,608 | ) | (13,665 | ) | (13,791 | ) | ||||||||
Unrealized (non-cash) gains (losses) on changes in fair
value of derivatives |
4,123 | (1,732 | ) | 2,550 | (5,140 | ) | ||||||||||
Compensation cost recognized under Restricted Unit Plans |
1,067 | 1,025 | 2,399 | 2,017 | ||||||||||||
(Gain) loss on disposal of property, plant and equipment, net |
(2,612 | ) | 293 | (2,911 | ) | (134 | ) | |||||||||
Changes in working capital and other assets and liabilities |
(52,529 | ) | (44,264 | ) | (109,729 | ) | (115,014 | ) | ||||||||
Net cash provided by operating activities |
$ | 54,696 | $ | 72,057 | $ | 49,838 | $ | 57,331 | ||||||||
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.