Suburban Propane Partners, L.P. Announces Solid First Quarter Earnings Following Distribution Increase

By: Suburban Cylinder Express | 0 Shares 147 Reads

WHIPPANY, N.J., Feb. 7 // PRNewswire-FirstCall // -- Suburban Propane Partners, L.P. (the "Partnership") (NYSE: SPH), a nationwide distributor of propane gas, fuel oil and refined fuels and related products and services, as well as a marketer of natural gas and electricity, today announced improved earnings for the three months ended December 29, 2007 over the prior year quarter. Net income amounted to $85.4 million, or $2.61 per Common Unit, compared to $54.7 million, or $1.70 per Common Unit, in the prior year quarter. Earnings before interest, taxes, depreciation and amortization ("EBITDA") for the first quarter of fiscal 2008 amounted to $102.6 million, an increase of $30.8 million compared to $71.8 million in the prior year quarter.

As previously reported, during the first quarter of fiscal 2008 the Partnership closed on the sale of its Tirzah, South Carolina underground propane storage cavern and associated 62-mile pipeline which generated net proceeds of $53.7 million and reported a gain of $43.7 million. Additionally, as reported throughout most of fiscal 2007, favorable market conditions impacting the supply and pricing structure for propane and fuel oil provided additional margin opportunities during the first and second quarters of fiscal 2007, of which approximately $11.7 million of incremental margin opportunities were realized in the first quarter of the prior year. These favorable market conditions and resulting incremental margin opportunities were not present during the fiscal 2008 first quarter.

In announcing these results, Chief Executive Officer Mark A. Alexander said, "Despite a challenging operating environment characterized by unprecedented high commodity prices, coupled with extreme market volatility, these results exceeded our expectations. We have come through this challenging quarter in great shape, and our financial position is stronger than ever."

During the first quarter, average posted prices for propane and heating oil increased 58.2% and 46.2%, respectively. From a weather perspective, while the average heating degree days in our service territories for the three months ended December 29, 2007 were 92% of normal compared to 87% of normal in the prior year first quarter, the pattern was such that temperatures started the quarter significantly warmer than normal and progressed into December with temperatures that were close to normal.

Retail propane gallons sold in the first quarter of fiscal 2008 decreased 9.9 million gallons, or 8.1%, to 111.9 million gallons compared to 121.8 million gallons in the prior year quarter. Sales of fuel oil and refined fuels decreased 4.9 million gallons, or 17.2%, to 23.6 million gallons during the first quarter of fiscal 2008 compared to 28.5 million gallons in the prior year quarter. Lower volumes in both segments were attributable to ongoing customer conservation resulting from the historically high commodity prices, the significantly warmer than normal temperatures to start the quarter, as well as, to a lesser extent, the affects of eliminating certain lower margin accounts which occurred throughout much of the prior year.

Revenues of $425.1 million increased $27.2 million, or 6.8%, compared to the prior year first quarter as lower volumes were offset by higher average selling prices associated with higher product costs. Cost of products sold increased $46.8 million, or 20.3%, to $277.7 million in the first quarter of fiscal 2008 compared to the prior year first quarter primarily resulting from the dramatic rise in product costs. Cost of products sold in the first quarter of fiscal 2008 included a $2.7 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) loss in the prior year quarter.

Combined operating and general and administrative expenses of $88.5 million for the first quarter of fiscal 2008 improved $8.1 million, or 8.4%, compared to the prior year quarter as a result of savings in payroll and benefit related expenses and in vehicle expenditures. Net interest expense decreased $0.8 million, or 8.7%, to $8.4 million in the first quarter of fiscal 2008 as a result of additional interest earned on higher levels of invested cash. As has been the case since April 2006, there were no borrowings under the Partnership's working capital facility as seasonal working capital needs have been funded through increased cash flow from operations.

On January 24, 2008, the Partnership announced that its Board of Supervisors declared the sixteenth increase (since the Partnership's recapitalization in 1999) in the Partnership's quarterly distribution from $0.75 to $0.7625 per Common Unit for the three months ended December 29, 2007. On an annualized basis, this increased distribution rate equates to $3.05 per Common Unit, an increase of $0.05 per Common Unit, or 10.9% compared to the first quarter of fiscal 2007. The $0.7625 per Common Unit distribution will be paid on February 12, 2008 to Common Unitholders of record as of February 5, 2008.

Mr. Alexander added, "Our financial strength and focus on operating efficiencies at all levels of the organization are contributing factors toward our ability to effectively manage through this challenging operating environment. On the strength of these operating results, and our financial position, we continue to deliver increased value to our Unitholders with the most recent increase in our annualized distribution rate to $3.05 per Common Unit, a growth rate of 10.9% year-over-year."

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 approximately 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 customer conservation, energy efficiency and technology advances on the demand for propane and fuel oil;
-- 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 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;
-- The Partnership's ability to make strategic acquisitions and successfully integrate them.

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, 2007 and other periodic reports filed with the United States Securities and Exchange Commission. 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.



               Suburban Propane Partners, L.P. and Subsidiaries

                    Consolidated Statements of Operations

      For the Three Months Ended December 29, 2007 and December 30, 2006

                   (in thousands, except per unit amounts)

                                 (unaudited)



                                                       Three Months Ended

                                                 December 29,     December 30,

                                                     2007              2006

    Revenues

      Propane                                      $307,325          $285,800

      Fuel oil and refined fuels                     78,035            68,870

      Natural gas and electricity                    23,983            22,745

      Services                                       14,472            18,459

      All other                                       1,294             2,034

                                                    425,109           397,908



    Costs and expenses

      Cost of products sold                         277,715           230,874

      Operating                                      79,343            83,675

      General and administrative                      9,203            12,902

      Restructuring charges and severance costs           -               385

      Depreciation and amortization                   7,059             7,010

                                                    373,320           334,846



    Income before interest expense and

     provision for income taxes                      51,789            63,062

    Interest expense, net                             8,388             9,216



    Income before provision for income taxes         43,401            53,846

    Provision for income taxes

      Current                                           402               762

      Deferred                                        1,277                 -

    Income from continuing operations                41,722            53,084

    Discontinued operations:

      Gain on disposal of discontinued operations    43,707             1,002

      Income from discontinued operations                 -               568



    Net income                                      $85,429           $54,654



    Income from continuing operations per

     Common Unit - basic                              $1.27             $1.65

    Discontinued operations                            1.34              0.05

    Net income per Common Unit - basic                $2.61             $1.70

    Weighted average number of Common

     Units outstanding - basic                       32,707            32,193



    Income from continuing operations per

     Common Unit - diluted                            $1.27             $1.64

    Discontinued operations                            1.33              0.05

    Net income per Common Unit - diluted              $2.60             $1.69

    Weighted average number of Common

     Units outstanding - diluted                     32,908            32,376



    Supplemental Information:

    EBITDA (a)                                     $102,555           $71,768

    Retail gallons sold:

      Propane                                       111,937           121,764

      Refined fuels                                  23,594            28,498

    Capital expenditures:

      Maintenance                                    $2,111            $2,133

      Growth                                         $4,475            $6,019



    (a) EBITDA represents net income before deducting interest expense, income

        taxes, depreciation and amortization.   Our management uses EBITDA as

        a measure of liquidity and we are including it because we believe that

        it provides 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 EBITDA as the

        performance target.  Moreover, our revolving credit agreement requires

        us to use EBITDA as a component in calculating our leverage and

        interest coverage ratios.  EBITDA is not a recognized term under

        generally accepted accounting principles ("GAAP") and should not be

        considered as an alternative to net income or net cash used in

        operating activities determined in accordance with GAAP.  Because

        EBITDA as determined by us excludes some, but not all, items that

        affect net income, it may not be comparable to EBITDA or similarly

        titled measures used by other companies.



    The following table sets forth (i) our calculations of EBITDA and (ii) a

reconciliation of EBITDA, as so calculated, to our net cash used in operating

activities:







                                                      Three Months Ended

                                                  December 29,    December 30,

                                                      2007             2006



    Net income                                      $85,429          $54,654

    Add:

      Provision for income taxes -

       current and deferred                           1,679              762

      Interest expense, net                           8,388            9,216

      Depreciation and amortization -

       continuing operations                          7,059            7,010

      Depreciation and amortization -

       discontinued operations                            -              126

    EBITDA                                          102,555           71,768

    Add / (subtract):

      Provision for income taxes - current             (402)            (762)

      Interest expense, net                          (8,388)          (9,216)

      Compensation cost recognized under

       Restricted Unit Plan, net of forfeitures         (67)           1,297

      Gain on disposal of property,

       plant and equipment, net                      (1,429)            (247)

      Gain on disposal of discontinued operations   (43,707)          (1,002)

      Changes in working capital and

       other assets and liabilities                 (90,515)         (67,731)



    Net cash used in operating activities          $(41,953)         $(5,893)

    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.