Suburban Propane Partners, L.P. Announces Full Year and Fourth Quarter Results
WHIPPANY, N.J. // PRNewswire-FirstCall // -- Suburban Propane Partners, L.P. (NYSE: SPH), a nationwide distributor of propane gas, fuel oil and related products and services, as well as a marketer of natural gas and electricity, today announced results for its fourth quarter and fiscal year ended September 26, 2009.
Fiscal Year 2009 Results
Net income for fiscal 2009 amounted to $165.2 million, or $4.99 per Common Unit, an increase of $10.3 million, or 6.6%, compared to net income of $154.9 million, or $4.72 per Common Unit, in fiscal 2008. Earnings before interest, taxes, depreciation and amortization ("EBITDA") increased $14.1 million, or 6.3%, to $236.3 million in fiscal 2009 compared to $222.2 million for fiscal 2008. Net income and EBITDA for fiscal 2009 included a loss on debt extinguishment of $4.6 million associated with the debt tender offer completed during the fourth quarter of fiscal 2009. Net income and EBITDA for fiscal 2008 included a gain (reported within discontinued operations) of $43.7 million from the Partnership's sale of its Tirzah, South Carolina underground propane storage cavern and associated 62-mile pipeline. Therefore, excluding the effects of these significant items on the Partnership's earnings for both periods, adjusted EBITDA increased $62.4 million, or 35.0%, in fiscal 2009 compared to the prior year.
In addition to the increased earnings, fiscal 2009 included several notable achievements for the Partnership, including: (i) a $185 million reduction in total debt; (ii) the refinancing of the Partnership's revolving credit facility to a new four-year facility on favorable terms relative to an otherwise challenging credit market; (iii) an upgrade to the Partnership's credit ratings by both Moody's Investors Service and Standard & Poor's; (iv) the successful issuance of 2.4 million Common Units, the proceeds of which were used to fund a portion of the debt reduction; and, (v) an increase of $0.10 per Common Unit, or 3.1%, in the annualized distribution rate compared to the end of fiscal 2008. The Partnership ended fiscal 2009 with $163.2 million of cash on hand, an increase of $25.5 million compared to the end of fiscal 2008, despite the use of cash for a portion of the debt reduction.
In announcing these results, President and Chief Executive Officer Michael J. Dunn, Jr., said, "In an obviously challenging business environment resulting from the prolonged recession, our employees maintained their focus on prudent management of our cost structure, maximizing the return on assets employed, while delivering excellent customer service. We are very proud of the accomplishments we were able to achieve, not only with the 35% year-over-year increase in adjusted EBITDA, but with the many other steps taken during the year to further strengthen our balance sheet and position the Partnership for growth in the challenging times ahead. Finally, we are pleased to share this year's successes with our valued Unitholders as evidenced by our previously announced 14(th) consecutive increase in our annualized distribution rate which, at $3.32 per Common Unit, represents a growth rate of 3.1% compared to the end of the prior year."
Revenues of $1,143.2 million decreased $431.0 million, or 27.4%, compared to $1,574.2 million in the prior year, primarily as a result of a decline in average selling prices associated with lower commodity prices and, to a lesser extent, lower sales volumes. Retail propane gallons sold for fiscal 2009 decreased 42.3 million gallons, or 11.0%, to 343.9 million gallons from 386.2 million gallons in fiscal 2008. Sales of fuel oil and other refined fuels decreased 19.1 million gallons, or 25.0%, to 57.4 million gallons compared to 76.5 million gallons in the prior year. Overall average temperatures in the Partnership's service territories for fiscal 2009 were 5% colder than the prior year. The favorable volume impact from the colder average temperatures was more than offset by declines in commercial and industrial volumes resulting from the recession and, to a lesser extent, continued customer conservation.
In the commodities markets, average posted prices for propane and fuel oil during fiscal 2009 were 51.7% and 46.1% lower, respectively, compared to fiscal 2008. Cost of products sold declined $499.0 million, or 48.0%, to $540.4 million in fiscal 2009 compared to $1,039.4 million in the prior year. The sharp decline in commodity prices, particularly during the first half of fiscal 2009, compared to the historically high commodity prices reached during fiscal 2008, resulted in a reduction in product costs that outpaced the decline in average selling prices. In addition, during fiscal 2008 the Partnership reported realized losses from its risk management activities that were not fully offset by sales of the physical product, resulting in a $10.8 million reduction to cost of products sold in fiscal 2009 compared to the prior year. Cost of products sold for fiscal 2009 and fiscal 2008 included a $1.7 million and $1.8 million unrealized (non-cash) gain, respectively, attributable to the mark-to-market adjustment for derivative instruments used in risk management activities.
Combined operating and general and administrative expenses of $361.8 million increased $5.6 million, or 1.6%, compared to $356.2 million in the prior year, primarily due to higher variable compensation associated with higher earnings, partially offset by continued savings in payroll and vehicle expenses attributable to further operating efficiencies and lower diesel costs, as well as lower bad debt expense.
Net interest expense increased $1.2 million, or 3.2%, to $38.3 million in fiscal 2009 compared to $37.1 million in fiscal 2008 as a result of lower interest income earned on invested cash. With the $175 million debt tender offer which was completed on September 9, 2009, the Partnership has reduced its interest expense requirement by approximately $12.0 million on an annualized basis beginning in fiscal 2010. As has been the case since April 2006, during fiscal 2009 there were no borrowings under the Partnership's revolving credit facility to support working capital needs, as such needs continue to be funded from cash on hand.
Fourth Quarter 2009 Results
Consistent with the seasonal nature of the propane and fuel oil businesses, the Partnership typically reports a net loss in its fiscal fourth quarter. For the fourth quarter of fiscal 2009, the Partnership's net loss was $22.9 million, or $0.67 per Common Unit, compared to a net loss of $11.3 million, or $0.35 per Common Unit, for the fourth quarter of fiscal 2008. EBITDA for the fourth quarter of fiscal 2009 amounted to a loss of $4.7 million compared to EBITDA of $5.4 million in the prior year quarter. Results for the fiscal 2009 fourth quarter included the aforementioned $4.6 million loss on debt extinguishment.
Retail propane gallons sold in the fourth quarter of fiscal 2009 decreased 7.5 million gallons, or 13.3%, to 49.1 million gallons compared to 56.6 million gallons in the prior year quarter. Sales of fuel oil and other refined fuels decreased 2.0 million gallons, or 22.5%, to 6.9 million gallons during the fourth quarter of fiscal 2009 compared to 8.9 million gallons in the prior year quarter. With the highest concentration of non-residential business typically reported in the Partnership's fiscal fourth quarter, lower volumes in both segments were attributable primarily to declines in commercial and industrial volumes resulting from the recession and, to a lesser extent, continued customer conservation.
The fiscal 2008 fourth quarter EBITDA benefited from the partial recovery of realized losses from risk management activities reported in the third quarter of fiscal 2008, which resulted in increased margins of approximately $3.7 million, thus negatively affecting the quarter-over-quarter earnings comparison. Cost of products sold for the fourth quarter of fiscal 2009 and fiscal 2008 included a $2.5 million and $2.1 million unrealized (non-cash) gain, respectively, attributable to the mark-to-market adjustment for derivative instruments used in risk management activities. Combined operating and general and administrative expenses of $79.9 million declined $3.2 million, or 3.9%, compared to the prior year quarter as a result of lower payroll and benefit related costs, lower vehicle costs (primarily fuel) and lower bad debt expense.
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 850,000 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;
- 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 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 27, 2008 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 Twelve Months Ended
September 26, 2009 and September 27, 2008
(in thousands, except per unit amounts)
(unaudited)
Three Months Ended Twelve Months Ended
--------------------------- --------------------------
September 26, September 27, September 26, September 27,
2009 2008 2009 2008
------------ ------------ ------------- -------------
Revenues
Propane $113,620 $186,250 $864,012 $1,132,950
Fuel oil
and refined
fuels 17,176 40,469 159,596 288,078
Natural gas and
electricity 10,311 19,052 76,832 103,745
All other 9,135 10,710 42,714 49,390
------ ------ ------ ------
150,242 256,481 1,143,154 1,574,163
Costs and expenses
Cost of products
sold 70,433 167,990 540,385 1,039,436
Operating 68,561 72,576 304,767 308,071
General and
administrative 11,373 10,502 57,044 48,134
Depreciation and
amortization 8,476 7,069 30,343 28,394
------ ------ ------ ------
158,843 258,137 932,539 1,424,035
(Loss) income
before interest
expense, loss on
debt extinguishment
and provision for
(benefit from)
income taxes (8,601) (1,656) 210,615 150,128
Loss on debt
extinguishment 4,624 - 4,624 -
Interest expense, net 9,354 9,722 38,267 37,052
------ ------ ------ ------
(Loss) income before
provision for
(benefit from)
income taxes (22,579) (11,378) 167,724 113,076
Provision for
(benefit from)
income taxes 302 (53) 2,486 1,903
------ ------ ------ ------
(Loss) income from
continuing operations (22,881) (11,325) 165,238 111,173
------ ------ ------ ------
Discontinued operations:
Gain on disposal of
discontinued
operations - - - 43,707
------ ------ ------ ------
Net (loss) income $(22,881) $(11,325) $165,238 $154,880
======== ======== ======== ========
(Loss) income from
continuing
operations per
Common Unit - basic $(0.67) $(0.35) $4.99 $3.39
Discontinued
operations - - - 1.33
------ ------ ------ ------
Net (loss) income per
Common Unit - basic $(0.67) $(0.35) $4.99 $4.72
====== ====== ===== =====
Weighted average
number of
Common Units
outstanding - basic 33,982 32,788 33,134 32,783
------ ------ ------ ------
(Loss) income from
continuing
operations per
Common Unit
- diluted $(0.67) $(0.35) $4.96 $3.37
Discontinued
operations - - - 1.33
------ ------ ------ ------
Net (loss) income per
Common Unit
- diluted $(0.67) $(0.35) $4.96 $4.70
====== ====== ===== =====
Weighted average
number of Common
Units outstanding
- diluted 33,982 32,788 33,315 32,950
------ ------ ------ ------
Supplemental Information:
EBITDA (a) $(4,749) $5,413 $236,334 $222,229
Adjusted EBITDA (a) $(7,293) $3,325 $234,621 $220,465
Retail gallons sold:
Propane 49,123 56,613 343,894 386,222
Refined fuels 6,863 8,872 57,381 76,515
Capital expenditures:
Maintenance $5,820 $3,438 $12,203 $12,045
Growth $2,181 $1,080 $9,634 $9,774
(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 Twelve Months Ended
--------------------------- --------------------------
September 26, September 27, September 26, September 27,
2009 2008 2009 2008
------------ ------------ ------------- -------------
Net (loss) income $(22,881) $(11,325) $165,238 $154,880
Add:
Provision for
(benefit from)
income taxes -
current and
deferred 302 (53) 2,486 1,903
Interest expense,
net 9,354 9,722 38,267 37,052
Depreciation and
amortization 8,476 7,069 30,343 28,394
----- ----- ------ ------
EBITDA (4,749) 5,413 236,334 222,229
Unrealized
(non-cash)
gains on changes
in fair value
of derivatives (2,544) (2,088) (1,713) (1,764)
------ ------ ------ ------
Adjusted EBITDA (7,293) 3,325 234,621 220,465
Add / (subtract):
(Provision for)
benefit from income
taxes - current (297) 53 (1,101) (626)
Interest expense,
net (9,354) (9,722) (38,267) (37,052)
Loss on debt
extinguishment 4,624 - 4,624 -
Unrealized (non-cash)
gains on changes
in fair value of
derivatives 2,544 2,088 1,713 1,764
Compensation cost
recognized under
Restricted Unit Plan 511 653 2,396 2,156
Loss (gain) on
disposal of
property, plant
and equipment, net 120 (431) (650) (2,252)
Gain on disposal of
discontinued
operations - - - (43,707)
Changes in working
capital and
other assets and
liabilities 32,198 67,563 43,215 (20,231)
------ ------ ------ -------
Net cash provided
by operating
activities $23,053 $63,529 $246,551 $120,517
======= ======= ======== ========
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 Annual Report on Form 10-K 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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