Suburban Propane Partners, L.P. Announces Third Quarter Earnings Following Twenty-Second Distribution Increase

WHIPPANY, N. J., Aug. 6 // PRNewswire-FirstCall // -- 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 27, 2009.

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 27, 2009, narrowed to $7.4 million, or $0.23 per Common Unit, compared to a net loss of $13.7 million, or $0.42 per Common Unit, in the prior year third quarter. Earnings before interest, taxes, depreciation and amortization ("EBITDA") for the third quarter of fiscal 2009 amounted to $11.5 million, compared to $2.8 million in the prior year quarter. Adjusted EBITDA (as defined and reconciled below) was $17.7 million for the third quarter of fiscal 2009, an increase of $19.6 million compared to a loss of $1.9 million in the prior year third quarter.

The improvement in Adjusted EBITDA for the third quarter of fiscal 2009 compared to the prior year third quarter was driven primarily by higher operating margins, expense reductions gained through operating efficiencies and the absence of $14.5 million in realized losses from risk management activities that occurred in the third quarter of fiscal 2008 at the height of last year's rise in commodity prices. The economic recession continued to negatively affect sales volumes in the propane and refined fuels segments, especially in the commercial and industrial sectors, which account for a greater concentration of sales volumes after the heating season. With the increased level of earnings during the first three quarters of fiscal 2009 compared to the first three quarters of the prior year, coupled with lower working capital requirements from the generally lower commodity price environment, the Partnership ended the third quarter of fiscal 2009 with $256.1 million of cash on hand.

Retail propane gallons sold in the third quarter of fiscal 2009 decreased 10.2 million gallons, or 14.3%, to 61.2 million gallons compared to 71.4 million gallons in the prior year third quarter. Sales of fuel oil and other refined fuels decreased 2.9 million gallons, or 23.3%, to 9.7 million gallons during the third quarter of fiscal 2009 compared to 12.6 million gallons in the prior year third quarter. Lower volumes in both segments were primarily attributed to declines in commercial and industrial volumes resulting from the recession and, to a lesser extent, continued customer conservation.

In announcing the third quarter results, Chief Executive Officer Mark A. Alexander said, " The challenging economy and business environment notwithstanding, we achieved some significant accomplishments during our fiscal 2009 third quarter. In addition to reporting an increase in Adjusted EBITDA of nearly $20 million compared to the prior year third quarter, we successfully refinanced our previous revolving credit facility, which was due to expire in March 2010, with a $250 million, four-year secured credit facility. We also reduced our indebtedness by $8 million and still ended the quarter with more than $256 million of cash on the balance sheet."

The Partnership's President and CEO-elect, Michael J. Dunn, Jr. added, "These accomplishments point out the importance of our efficient operating platform, flexible cost structure and strong balance sheet. We will continue to build upon these strengths and diligently pursue our long-term strategies for growth. We are extremely pleased to pass along the latest quarterly distribution increase to our valued Unitholders - our 13(th) consecutive and 22(nd) since the 1999 recapitalization - representing a growth rate of 3.1% over the prior year third quarter."

Revenues of $184.4 million decreased $121.1 million, or 39.6%, compared to the prior year third quarter, primarily as a result of a decline in average selling prices associated with lower commodity prices and, to a lesser extent, lower sales volumes. Average posted prices for propane and fuel oil were 57.2% and 56.0% lower, respectively, compared to the prior year third quarter. Cost of products sold decreased $125.5 million, or 58.9%, to $87.5 million in the third quarter of fiscal 2009 compared to $213.0 million in the prior year third quarter, primarily due to the decline in commodity prices and the $14.5 million in realized losses from risk management activities in the prior year third quarter. Cost of products sold in the third quarter of fiscal 2009 included a $6.1 million unrealized (non-cash) loss attributable to the mark-to-market adjustment for derivative instruments used in risk management activities, compared to a $4.7 million unrealized (non-cash) gain in the prior year third quarter.

Combined operating and general and administrative expenses of $85.4 million for the third quarter of fiscal 2009 were $4.3 million, or 4.8%, lower than the prior year third quarter, primarily due to continued savings in payroll and vehicles expenses, partially offset by higher variable compensation attributable to higher earnings.

Net interest expense increased $0.6 million, or 6.3%, to $10.1 million in the third quarter of fiscal 2009 compared to $9.5 million in the prior year third quarter as a result of lower interest income earned on invested cash and a non-cash charge of $0.4 million related to the refinancing of the Partnership's previous revolving credit agreement.

As previously announced, on June 26, 2009 the Partnership's operating subsidiary, Suburban Propane, L.P., successfully completed a new $250.0 million senior secured credit facility. The new four-year Revolving Credit Facility provides for $250.0 million of revolving lines of credit to replace the Partnership's previous revolving credit agreement, which consisted of a $175.0 million working capital facility and a separate $108.0 million term loan, both of which were set to mature in March 2010. At closing the Partnership borrowed $100.0 million under the Revolving Credit Facility and, along with cash on hand, repaid the $108.0 million previously outstanding on its term loan facility. The Partnership ended the third quarter of fiscal 2009 with $256.1 million of cash on the balance sheet.

On July 23, 2009, the Partnership announced that its Board of Supervisors declared the twenty-second increase (since the Partnership's recapitalization in 1999) in the Partnership's quarterly distribution from $0.815 to $0.825 per Common Unit for the three months ended June 27, 2009. On an annualized basis, this increased distribution rate equates to $3.30 per Common Unit, an increase of $0.04 per Common Unit from the previous distribution rate, and an increase of 3.1% compared to the third quarter of fiscal 2008. The $0.825 per Common Unit distribution will be paid on August 11, 2009 to Common Unitholders of record as of August 4, 2009.

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 900,000 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;
  • Volatility in the unit cost of propane, fuel oil and other refined fuels and natural gas, 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;
  • 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 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; and
  • The impact of current conditions in the global capital and credit markets, and general economic pressures.

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 27, 2008 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, 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 27, 2009 and June
28, 2008
(in thousands, except per unit amounts)
(unaudited)



Three Months Ended Nine Months Ended
------------------ -----------------
June 27, June 28, June 27, June 28,
2009 2008 2009 2008
--------- -------- -------- --------

Revenues
Propane $139,571 $216,999 $750,392 $946,700
Fuel oil and refined fuels 23,091 55,262 142,420 247,609
Natural gas and electricity 12,147 22,507 66,521 84,693
Services 8,321 9,184 30,574 34,752
All other 1,242 1,524 3,005 3,928
-------- -------- -------- --------
184,372 305,476 992,912 1,317,682

Costs and expenses
Cost of products sold 87,463 212,974 469,952 871,446
Operating 72,295 76,455 236,206 235,495
General and administrative 13,108 13,268 45,671 37,632
Depreciation and amortization 7,713 7,159 21,867 21,325
-------- -------- -------- --------
180,579 309,856 773,696 1,165,898

Income (loss) before interest
expense and provision for
(benefit from) income taxes 3,793 (4,380) 219,216 151,784
Interest expense, net 10,068 9,524 28,913 27,330
-------- -------- -------- --------

(Loss) income before provision
for (benefit from) income taxes (6,275) (13,904) 190,303 124,454
Provision for (benefit from)
income taxes 1,160 (157) 2,184 1,956
-------- -------- -------- --------
(Loss) income from
continuing operations (7,435) (13,747) 188,119 122,498
-------- -------- -------- --------
Discontinued operations:
Gain on disposal of
discontinued operations - - - 43,707
-------- -------- -------- --------

Net (loss) income $(7,435) $(13,747) $188,119 $166,205
======== ======== ======== ========

(Loss) income from continuing
operations per Common
Unit - basic $(0.23) $(0.42) $5.73 $3.74
Discontinued operations - - - 1.34
-------- -------- -------- --------
Net (loss) income per
Common Unit - basic $(0.23) $(0.42) $5.73 $5.08
======== ======== ======== ========
Weighted average number of
Common Units
outstanding - basic 32,859 32,725 32,849 32,719
-------- -------- -------- --------

(Loss) income from
continuing operations
per Common Unit - diluted $(0.23) $(0.42) $5.70 $3.72
Discontinued operations - - - 1.33
-------- -------- -------- --------
Net (loss) income per
Common Unit - diluted $(0.23) $(0.42) $5.70 $5.05
======== ======== ======== ========
Weighted average number of
Common Units
outstanding - diluted 32,859 32,725 33,026 32,941
-------- -------- -------- --------


Supplemental Information:
EBITDA (a) $11,506 $2,779 $241,083 $216,816
Adjusted EBITDA (a) $17,654 $(1,916) $241,915 $217,139
Retail gallons sold:
Propane 61,212 71,420 294,771 329,609
Refined fuels 9,677 12,614 50,518 67,643
Capital expenditures:
Maintenance $2,725 $3,463 $6,383 $8,607
Growth $2,788 $2,754 $7,453 $8,694


(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. 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 generally accepted accounting
principles ("GAAP") and should not be considered as an alternative
to net income or net cash provided by operating activities determined
in accordance with 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 Nine Months Ended
------------------ -----------------
June 27, June 28, June 27, June 28,
2009 2008 2009 2008
-------- -------- -------- --------

Net (loss) income $(7,435) $(13,747) $188,119 $166,205
Add:
Provision for (benefit
from) income taxes -
current and deferred 1,160 (157) 2,184 1,956
Interest expense, net 10,068 9,524 28,913 27,330
Depreciation and
amortization 7,713 7,159 21,867 21,325
------- ------- ------- -------
EBITDA 11,506 2,779 241,083 216,816
Unrealized (non-cash)
losses (gains) on changes
in fair value of
derivatives 6,148 (4,695) 832 323
------- ------- ------- -------
Adjusted EBITDA 17,654 (1,916) 241,915 217,139
Add / (subtract):
Provision for income
taxes - current (240) (87) (804) (679)
Interest expense, net (10,068) (9,524) (28,913) (27,330)
Unrealized (non- cash)
(losses) gains on changes
in fair value of
derivatives (6,148) 4,695 (832) (323)
Compensation cost
recognized under
Restricted Unit Plan 644 817 1,885 1,503
Gain on disposal of
property, plant and
equipment, net (147) (109) (770) (1,821)
Gain on disposal of
discontinued operations - - - (43,707)
Changes in working capital
and other assets and
liabilities 62,851 54,725 11,017 (87,794)
------- ------- ------- -------

Net cash provided by
operating activities $64,546 $48,601 $223,498 $56,988
======= ======= ======== =======


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.




SOURCE Suburban Propane Partners, L.P.

###

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