WHIPPANY, N.J., May 10 /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 earnings for the three months ended March 31, 2007 over the prior
year quarter. Net income for the three months ended March 31, 2007 amounted
to $105.9 million, or $3.24 per Common Unit, an increase of $21.9 million,
or 26.1%, compared to the prior year quarter of $84.0 million, or $2.44 per
Common Unit. Earnings before interest, taxes, depreciation and amortization
("EBITDA") increased $19.2 million, or 18.5%, to $123.1 million for the
three months ended March 31, 2007 compared to $103.9 million in the prior
year quarter.
Colder average nationwide temperatures, an improved customer mix and
the full-year effect of the operating efficiencies, lower headcount and
lower vehicle count from the prior year field and HVAC reorganization were
the main factors contributing to the improvement in year-over-year
quarterly earnings. For the second quarter, combined operating and general
and administrative expenses were $12.1 million, or 10.4%, lower than the
prior year quarter, despite a $5.0 million increase in variable
compensation costs in line with higher earnings.
Heating degree days in the Partnership's service territories were 98%
of normal for the three months ended March 31, 2007 compared to 88% of
normal temperatures in the prior year quarter. Retail propane gallons sold
in the second quarter of fiscal 2007 decreased 2.0 million gallons, or
1.2%, to 166.8 million gallons compared to 168.8 million gallons in the
prior year quarter. Sales of fuel oil and refined fuels decreased 10.7
million gallons, or 19.6%, to 44.0 million gallons during the second
quarter of fiscal 2007 compared to 54.7 million gallons in the prior year
quarter.
Lower volumes, despite the colder average temperatures, were
attributable to the Partnership's efforts to improve its customer mix,
particularly in its refined fuels segment and in the commercial and
industrial propane customer base, coupled with customer conservation from
continued high energy prices. In the refined fuels segment, the decision to
exit the lower margin gasoline and low sulfur diesel businesses resulted in
a reduction in volumes of approximately 4.7 million gallons, or 43.9% of
the total volume decline compared to the prior year quarter.
In the commodities markets, while average posted prices of both propane
and fuel oil began the quarter on the downward trend that started in the
first quarter of fiscal 2007, prices steadily increased from the middle of
February through the end of the quarter. For the quarter, average posted
prices of propane increased 2.4% compared to the prior year second quarter
and fuel oil prices declined 5.1% compared to the prior year second
quarter.
Revenues from the distribution of propane and related activities of
$392.2 million in the second quarter of fiscal 2007 increased $5.6 million,
or 1.4%, compared to $386.6 million in the prior year quarter, primarily
due to higher average selling prices from a higher concentration of
residential volumes and higher product costs. Revenues of $111.2 million
from distribution of fuel oil and refined fuels decreased $22.4 million, or
16.8%, from $133.6 million in the prior year quarter, primarily as a result
of the aforementioned lower volumes, partially offset by higher average
selling prices.
Revenues in the natural gas and electricity marketing segment decreased
$9.6 million, or 20.8%, to $36.5 million in the second quarter of fiscal
2007 compared to $46.1 million in the prior year quarter, primarily from
lower electricity volumes and lower average selling prices for natural gas.
Revenues in the Partnership's HVAC segment decreased 34.4% to $14.7 million
from $22.4 million in the prior year quarter as a result of the decision
during the third quarter of fiscal 2006 to reorganize the HVAC segment and
to reduce the level of HVAC installation activities.
Cost of products sold decreased $41.6 million, or 11.3%, to $327.3
million for the three months ended March 31, 2007 compared to $368.9
million in the prior year quarter. The decrease results primarily from the
lower sales volumes, described above, combined with lower product costs
from lower commodity prices and various favorable market factors impacting
our supply and risk management activities. In addition, cost of products
sold in the second quarter of fiscal 2007 included a $6.6 million
unrealized (non-cash) loss attributable to the mark-to-market on derivative
instruments ("FAS 133"), compared to a $0.6 million unrealized (non-cash)
loss in the prior year quarter.
Combined operating and general and administrative expenses of $104.5
million decreased $12.1 million, or 10.4%, compared to the prior year
quarter of $116.6 million, despite the aforementioned $5.0 million increase
in variable compensation costs in line with the higher earnings. The most
significant cost savings were experienced in payroll and benefit related
expenses which declined $6.1 million, as well as from a $3.1 million
reduction in vehicle expenditures, $2.6 million lower bad debt expense and
savings in other costs to operate the Partnership's customer service
centers.
Depreciation and amortization expense decreased $1.3 million, or 14.6%,
to $7.6 million. Net interest expense decreased $1.6 million, or 14.7%, to
$9.3 million in the second quarter of fiscal 2007. During the second
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. The Partnership ended the second
quarter of fiscal 2007 in a strong cash position with more than $88 million
in cash on the balance sheet. On April 26, 2007, the Partnership announced
that its Board of Supervisors approved a voluntary pension contribution of
approximately $25.0 million in order to fully fund the Partnership's
accumulated benefit obligation under its defined benefit pension plan. The
Partnership believes that this contribution will substantially reduce, if
not eliminate, future funding requirements. The Partnership expects to make
this voluntary contribution during its third quarter of fiscal 2007 from
cash on hand.
Net income and EBITDA for the second quarter of fiscal 2007 also
included a $1.1 million charge related to severance benefits provided to
individuals terminated during the quarter, compared to a $1.5 million
restructuring charge in the prior year second quarter.
On April 26, 2007, the Partnership also announced the thirteenth
increase in its quarterly distribution since 1999, from $0.6875 to $0.70
per Common Unit, or $2.80 per Common Unit on an annualized basis, in
respect of the second quarter of fiscal 2007. This increase equates to
$0.05 per Common Unit on an annualized basis and is payable on May 15, 2007
to Common Unitholders of record on May 8, 2007.
In announcing these results, Chief Executive Officer Mark A. Alexander
said, "The combination of improvements in our cost structure, increased
operating efficiencies and a return to a more 'normal' winter has
translated into a 21.0% increase in year-over-year earnings for the first
half of fiscal 2007. On the strength of these earnings and increased cash
flow, we increased our quarterly distribution to $0.70 per Common Unit, or
$2.80 per Common Unit on an annualized basis, an increase of 14% since the
second quarter of the prior year. Our operating personnel remain focused on
providing quality customer service and continuing to identify additional
operating efficiencies within our core businesses in order to provide
further sustainable, profitable growth opportunities 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.
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 30, 2006 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 and Six Months Ended March 31, 2007 and March 25, 2006
(in thousands, except per unit amounts)
(unaudited)
Three Months Ended Six Months Ended
March 31, March 25, March 31, March 25,
2007 2006 2007 2006
Revenues
Propane $392,243 $386,610 $679,122 $696,902
Fuel oil and refined fuels 111,215 133,567 180,085 238,872
Natural gas and electricity 36,455 46,111 59,200 84,054
HVAC 14,671 22,416 33,130 53,643
All other 1,534 2,239 3,568 4,935
556,118 590,943 955,105 1,078,406
Costs and expenses
Cost of products sold 327,347 368,856 558,221 684,699
Operating 88,848 99,527 172,908 199,788
General and administrative 15,693 17,114 28,595 31,330
Restructuring and other costs 1,100 1,497 1,485 1,497
Depreciation and amortization 7,570 8,898 14,706 17,109
440,558 495,892 775,915 934,423
Income before interest expense
and provision for income taxes 115,560 95,051 179,190 143,983
Interest expense, net 9,322 10,939 18,538 21,506
Income before provision for
income taxes 106,238 84,112 160,652 122,477
Provision for income taxes 378 83 1,140 233
Income from continuing operations 105,860 84,029 159,512 122,244
Discontinued operations:
Gain on exchange of customer
service centers - - 1,002 -
Net income $105,860 $84,029 $160,514 $122,244
General Partner's interest in net
income $- $2,715 $- $3,902
Limited Partners' interest in net
income $105,860 $81,314 $160,514 $118,342
Income from continuing operations
per Common Unit - basic (a) $3.24 $2.44 $4.92 $3.59
Discontinued operations $- $- $0.03 $-
Net income per Common Unit -
basic (a) $3.24 $2.44 $4.95 $3.59
Weighted average number of Common
Units outstanding - basic 32,673 30,313 32,433 30,306
Income from continuing operations
per Common Unit - diluted (a) $3.22 $2.43 $4.90 $3.58
Discontinued operations $- $- $0.03 $-
Net income per Common Unit -
diluted (a) $3.22 $2.43 $4.93 $3.58
Weighted average number of Common
Units outstanding - diluted 32,844 30,438 32,585 30,416
Supplemental Information:
EBITDA (b) $123,130 $103,949 $194,898 $161,092
Retail gallons sold:
Propane 166,796 168,847 288,560 302,658
Refined fuels 43,997 54,699 72,495 98,515
Capital expenditures:
Maintenance $1,889 $2,310 $4,022 $4,071
Growth $3,158 $2,366 $9,177 $6,795
(a) Computations of earnings per Common Unit for the three and six months
ended March 25, 2006 reflected the application of Emerging Issues Task
Force ("EITF") consensus 03-6 "Participating Securities and the Two-
Class Method Under FAS 128" ("EITF 03-6") which requires, among other
things, the use of the two-class method of computing earnings per unit
when participating securities exist. The two-class method is an
earnings allocation formula that computes earnings per unit for each
class of common unit and participating security according to
distributions declared and the participating rights in undistributed
earnings, as if all of the earnings were distributed to the limited
partners and the general partner (inclusive of the incentive
distribution rights of the general partner which were considered
participating securities for purposes of the two-class method).
As a result of the elimination of the general partner's incentive
distribution rights and general partner interests following the
general partner exchange transaction consummated on October 19, 2006,
the two-class method under EITF 03-06 is no longer applicable. Net
income per Common Unit for the three and six months ended March 31,
2007 was computed under SFAS No. 128 "Earnings per Share" ("FAS 128")
by dividing net income by the weighted average number of outstanding
Common Units. Computation of net income per Common Unit under EITF
03-6 resulted in a negative impact of $0.24 and $0.31 per Common Unit
for the three and six months ended March 25, 2006, respectively,
compared to the computation under FAS 128.
(b) 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 provided by
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 provided
by operating activities:
Three Months Ended Six Months Ended
March 31, March 25, March 31, March 25,
2007 2006 2007 2006
Net income $105,860 $84,029 $160,514 $122,244
Add:
Provision for income taxes 378 83 1,140 233
Interest expense, net 9,322 10,939 18,538 21,506
Depreciation and amortization 7,570 8,898 14,706 17,109
EBITDA 123,130 103,949 194,898 161,092
Add / (subtract):
Provision for income taxes (378) (83) (1,140) (233)
Interest expense, net (9,322) (10,939) (18,538) (21,506)
Compensation cost recognized
under Restricted Unit Plan (137) 561 1,160 1,176
Gain on disposal of property,
plant and equipment, net (1,815) (577) (2,062) (621)
Gain on exchange of customer
service centers - - (1,002) -
Changes in working capital and
other assets and liabilities (24,358) (29,143) (92,089) (85,072)
Net cash provided by / (used in):
Operating activities $87,120 $63,768 $81,227 $54,836
Investing activities $(2,048) $(3,303) $(8,711) $(9,241)
Financing activities $(22,464) $(60,411) $(44,101) $(43,323)
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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Related links:
http://suburbanpropane.com/
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CONTACT:
Michael Stivala, Controller & Chief
Accounting Officer, of Suburban Propane Partners, L.P.,
+1-973-503-9252
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