WHIPPANY, N.J.,// PRNewswire-FirstCall // -- Suburban Propane Partners, L.P. (the "Partnership") (NYSE: SPH), a nationwide marketer of propane gas, fuel oil and related products and services, today announced improved results for the three months ended June 30, 2007 over the prior year quarter.
Consistent with the seasonal nature of the propane and fuel oil businesses, the Partnership typically experiences a net loss in the third quarter. Net loss for the three months ended June 30, 2007, amounted to $1.1 million, or $0.03 per Common Unit, an improvement of $9.4 million, or 89.5%, compared to a net loss of $10.5 million, or $0.33 per Common Unit, in the prior year quarter. Earnings before interest, taxes, depreciation and amortization ("EBITDA") increased $8.2 million, or 115.5%, to $15.3 million for the three months ended June 30, 2007 compared to $7.1 million in the prior year quarter.
These increased results reflect the continued operational efficiencies and cost savings achieved through the Partnership's efforts over the past two years to streamline its operating footprint and reduce its cost structure. As a result of these efforts, combined operating and general and administrative expenses for the fiscal 2007 third quarter were $12.0 million, or 11.8%, lower than the prior year quarter.
Retail propane gallons sold in the third quarter of fiscal 2007 decreased 8.7 million gallons, or 9.8%, to 80.0 million gallons compared to 88.7 million gallons in the prior year quarter. Sales of fuel oil and refined fuels decreased 7.5 million gallons, or 28.2%, to 19.1 million gallons during the third quarter of fiscal 2007 compared to 26.6 million gallons in the prior year quarter. Lower volumes in both segments were attributable to ongoing customer conservation in the high energy price environment, as well as the Partnership's efforts to improve its customer mix by exiting lower margin business. In the commodities markets, compared to the prior year third quarter, average posted prices of propane increased 7.7% and fuel oil posted prices declined 3.4%.
Revenues from the distribution of propane and related activities of $189.7 million in the third quarter of fiscal 2007 decreased $8.8 million, or 4.4%, compared to $198.5 million in the prior year quarter. Revenues of $49.0 million from distribution of fuel oil and other refined fuels decreased $17.5 million, or 26.3%, from $66.5 million in the prior year quarter. The decrease in revenues in both segments is primarily due to the aforementioned lower volumes, partially offset by higher average selling prices.
Revenues in the natural gas and electricity marketing segment of $20.2 million in the third quarter of fiscal 2007 increased $0.5 million, or 2.5%, compared to $19.7 million in the prior year quarter. Revenues in the Partnership's HVAC segment of $11.7 million decreased $4.8 million, or 29.1%, compared to $16.5 million in the prior year quarter as a result of the Partnership's efforts to reduce the level of HVAC activities and focus on its core operating segments.
Cost of products sold decreased $24.8 million, or 12.9%, to $167.2 million for the three months ended June 30, 2007, compared to $192.0 million in the prior year quarter, primarily as a result of lower sales volumes described above. In addition, cost of products sold in the third quarter of fiscal 2007 included a $0.2 million unrealized (non-cash) loss attributable to the mark- to-market on derivative instruments ("FAS 133"), compared to a $1.0 million unrealized (non-cash) gain in the prior year quarter.
Combined operating and general and administrative expenses of $90.0 million decreased $12.0 million, or 11.8%, compared to the prior year quarter of $102.0 million. The most significant cost savings were experienced in payroll and benefit related expenses which declined $5.0 million, as well as from a $1.5 million reduction in vehicle expenditures, $0.9 million lower bad debt expense and savings in other costs to operate the Partnership's customer service centers. In addition, professional services costs for the third quarter of fiscal 2007 declined $1.8 million compared to the prior year quarter.
Depreciation and amortization expense decreased $0.4 million, or 5.1%, to $7.4 million. Net interest expense decreased $1.1 million, or 11.3%, to $8.6 million in the third quarter of fiscal 2007 compared to $9.7 million in the prior year quarter. During the third quarter of fiscal 2007, and as has been the case since April 2006, there were no borrowings under the Partnership's working capital facility resulting in lower interest expense. Additionally, during the third quarter of fiscal 2007 the Partnership made a voluntary pension contribution of approximately $20.0 million from cash on hand, in order to fully fund the Partnership's estimated accumulated benefit obligation under its defined benefit pension plan. Even after this voluntary contribution, the Partnership ended the third quarter of fiscal 2007 in a strong cash position with approximately $107.0 million in cash on hand, also contributing to the reduction in net interest expense as a result of interest earned on invested cash.
On July 26, 2007, the Partnership announced the fourteenth increase in its quarterly distribution since 1999 from $0.70 to $0.7125 per Common Unit, or $2.85 per Common Unit on an annualized basis, in respect of the third quarter of fiscal 2007. This increased quarterly distribution is payable on August 14, 2007 to Common Unitholders of record on August 7, 2007.
In announcing these results, Chief Executive Officer Mark A. Alexander said, "These excellent results point to the success we've had with streamlining our cost structure and driving efficiencies. With the improvements in our cash flow, we continue to fund our working capital requirements from cash on hand and, at the same time, strengthen our already solid cash position. During the third quarter, we also used available cash to make a voluntary contribution of $20.0 million to fully fund the estimated accumulated benefit obligation under our pension plan." Mr. Alexander added, "With the most recent $0.05 per Common Unit increase in our annualized distribution rate, we have delivered 12% distribution growth since the third quarter of fiscal 2006. In addition, on July 31, 2007 our Board of Supervisors established a goal of continuing to increase distributions for the foreseeable future, in line with our operating performance, with a target distribution coverage ratio of 1.2 times, after considering maintenance capital expenditures. As we head into the fourth quarter we look forward to finishing the year in strong fashion, providing unparalleled service to our customers and increasing value to our unitholders."
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 1,000,000 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;
-- Fluctuations in the unit cost of propane, fuel oil and other refined
fuels and natural gas, and the impact of price increases on 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;
-- The impact of energy efficiency and technology advances on the demand
for propane and fuel oil;
-- The ability of management to continue to control expenses including the
results of our field and HVAC realignment initiative;
-- The impact of changes in applicable statutes and government
regulations, or their interpretations, including those relating to the
environment and global warming and other regulatory developments 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 impact of legal proceedings on the Partnership's business; and
-- The Partnership's ability to integrate acquired businesses
successfully.
Suburban Propane Partners, L.P. and Subsidiaries
Consolidated Statements of Operations
For the Three and Nine Months Ended June 30, 2007 and June 24, 2006
(in thousands, except per unit amounts)
(unaudited)
Three Months Ended Nine Months Ended
June 30, June 24, June 30, June 24,
2007 2006 2007 2006
Revenues
Propane $189,668 $198,505 $868,790 $895,407
Fuel oil and refined fuels 49,021 66,540 229,106 305,412
Natural gas and electricity 20,182 19,662 79,382 103,716
HVAC 11,662 16,540 44,792 70,183
All other 1,817 2,751 5,385 7,686
272,350 303,998 1,227,455 1,382,404
Costs and expenses
Cost of products sold 167,224 192,017 725,445 876,716
Operating 77,439 88,183 248,862 287,971
General and administrative 12,587 13,778 42,667 45,108
Restructuring charges and
severance costs - 2,930 1,485 4,427
Depreciation and amortization 7,431 7,756 22,137 24,865
264,681 304,664 1,040,596 1,239,087
Income (loss) before interest
expense and provision
for income taxes 7,669 (666) 186,859 143,317
Interest expense, net 8,623 9,686 27,161 31,192
(Loss) income before provision
for income taxes (954) (10,352) 159,698 112,125
Provision for income taxes 389 121 1,529 354
(Loss) income from continuing
operations (1,343) (10,473) 158,169 111,771
Discontinued operations:
Gain on exchange/sale of
customer service centers 203 - 1,205 -
Net (loss) income $(1,140) $(10,473) $159,374 $111,771
General Partner's interest in
net (loss) income $- $(391) $- $3,511
Limited Partners' interest in
net (loss) income $(1,140) $(10,082) $159,374 $108,260
(Loss) income from continuing
operations per Common Unit -
basic (a) $(0.04) $(0.33) $4.86 $3.37
Discontinued operations $0.01 $- $0.04 $-
Net (loss) income per Common
Unit - basic (a) $(0.03) $(0.33) $4.90 $3.37
Weighted average number of
Common Units outstanding -
basic 32,674 30,314 32,514 30,309
(Loss) income from continuing
operations per Common Unit -
diluted (a) $(0.04) $(0.33) $4.84 $3.35
Discontinued operations $0.01 $- $0.04 $-
Net (loss) income per Common
Unit - diluted (a) $(0.03) $(0.33) $4.88 $3.35
Weighted average number of
Common Units outstanding -
diluted 32,674 30,314 32,675 30,431
Supplemental Information:
EBITDA (b) $15,303 $7,090 $210,201 $168,182
Retail gallons sold:
Propane 80,042 88,661 368,602 391,319
Refined fuels 19,144 26,563 91,639 125,078
Capital expenditures:
Maintenance $2,799 $2,968 $6,821 $7,039
Growth $3,726 $1,469 $12,903 $8,264
The following table sets forth (i) our calculations of EBITDA and (ii) a
reconciliation of EBITDA, as so calculated, to our net cash provided by
operating activities:
Three Months Ended Nine Months Ended
June 30, June 24, June 30, June 24,
2007 2006 2007 2006
Net (loss) income $(1,140) $(10,473) $159,374 $111,771
Add:
Provision for income taxes 389 121 1,529 354
Interest expense, net 8,623 9,686 27,161 31,192
Depreciation and amortization 7,431 7,756 22,137 24,865
EBITDA 15,303 7,090 210,201 168,182
Add / (subtract):
Provision for income taxes (389) (121) (1,529) (354)
Interest expense, net (8,623) (9,686) (27,161) (31,192)
Compensation cost recognized
under Restricted Unit Plan 949 472 2,109 1,648
Gain on disposal of property,
plant and equipment, net (339) (568) (2,401) (1,189)
Gain on exchange/sale of
customer service centers (203) - (1,205) -
Changes in working capital and
other assets and liabilities 40,090 68,861 (51,999) (16,211)
Net cash provided by / (used in):
Operating activities $46,788 $66,048 $128,015 $120,884
Investing activities $(5,981) $(3,184) $(14,692) $(12,425)
Financing activities $(22,872) $(41,671) $(66,973) $(84,994)
A Residential & commercial propane delivery service franchise.