Form 8-K SUBURBAN PROPANE PARTNER For: May 05

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15 (d) of the

Securities Exchange Act of 1934

Date of Report (Date of earliest event reported)

May 5, 2016

Commission File Number: 1-14222

 

SUBURBAN PROPANE PARTNERS, L.P.

(Exact name of registrant as specified in its charter)

 

 

 

240 Route 10 West

Whippany, New Jersey 07981

(973) 887-5300

(Registrant’s Telephone Number, Including Area Code)

N/A

(Former Name or Former Address, if Changed Since Last Report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

 

 

 

 

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ITEM 2.02.  RESULTS OF OPERATIONS AND FINANCIAL CONDITION

The following information, including the exhibit attached hereto, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

On May 5, 2016, Suburban Propane Partners, L.P. issued a press release (the “Press Release”) describing its Fiscal 2016 Second Quarter Financial Results.  A copy of the Press Release has been furnished as Exhibit 99.1 to this Current Report.

Within the Press Release, we reference net income before deducting interest expense, income taxes, depreciation and amortization (“EBITDA”) which is considered a non-GAAP financial measure.  Additionally, we discuss EBITDA excluding the unrealized net gain or loss from mark-to-market activity for derivative instruments and certain other items (“Adjusted EBITDA”).  Our calculations of EBITDA and Adjusted EBITDA are presented in the Press Release furnished as Exhibit 99.1 to this Current Report.

We provide these non-GAAP financial measures because we believe that they provide the investment community with supplemental measures of operating performance.  In addition, we believe that these non-GAAP financial measures provide useful information to investors and industry analysts to evaluate our operating results.  

We also reference gross margins, computed as revenues less cost of products sold as those amounts are reported on the consolidated financial statements.  Since cost of products sold does not include depreciation and amortization expense, the gross margin we reference is considered a non-GAAP financial measure.  Given the nature of our business, the level of profitability in the retail propane, fuel oil, and natural gas and electricity businesses is largely dependent on the difference between retail sales price and product cost.  Therefore, we discuss gross margins in order to provide investors and industry analysts with useful information to facilitate their understanding of the impact of the commodity prices on profitability.

 

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ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS

(d) Exhibits.

 

 

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

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EXHIBITS

 

 

Exhibit 99.1

 

 

FOR IMMEDIATE RELEASE

Suburban Propane Partners, L.P.

Announces Second Quarter Earnings

 

Whippany, New Jersey, May 5, 2016 -- 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 second quarter ended March 26, 2016.

 

Net income for the second quarter of fiscal 2016 was $92.0 million, or $1.51 per Common Unit, compared to net income of $136.6 million, or $2.26 per Common Unit, in the prior year second quarter.

 

Net income and EBITDA for the second quarter of fiscal 2016 included a loss on debt extinguishment of $0.3 million.  Net income and EBITDA for the second quarter of fiscal 2015 included a loss on debt extinguishment of $15.1 million and $2.1 million in expenses related to the integration of Inergy Propane.  Excluding the effects of the foregoing items and unrealized (non-cash) mark-to-market adjustments on derivative instruments in both periods, Adjusted EBITDA (as defined and reconciled below) amounted to $145.1 million for the second quarter of fiscal 2016, compared to Adjusted EBITDA of $214.3 million in the prior year second quarter.

 

In announcing these results, President and Chief Executive Officer Michael A. Stivala said, “Our results for the second quarter of fiscal 2016 reflect the challenging operating environment stemming from record warm temperatures during this year’s heating season that adversely impacted customer demand during the quarter.  The flexible nature of our cost structure and the strength of our balance sheet helped mitigate some of the short-term, weather-driven earnings shortfall.  Despite the lower earnings, we continued to fund all of our working capital requirements without the need to borrow under our revolving credit facility and we ended the quarter with approximately $59.0 million of cash on hand.”    

 

Mr. Stivala added, “During the second quarter, we took steps to further strengthen our liquidity position with the opportunistic refinancing of our revolving credit facility which was scheduled to mature in January 2017.  We received excellent support from our bank group and, despite challenging conditions in the credit markets, the new facility improves our cost of capital, further extends our debt maturities until 2021, and increases our available borrowing capacity in support of our long-term growth initiatives.”

 

Retail propane gallons sold in the second quarter of fiscal 2016 decreased 38.1 million gallons, or 19.1%, to 161.6 million gallons compared to 199.7 million gallons in the prior year second quarter.  Sales of fuel oil and other refined fuels decreased 6.6 million gallons, to 13.3 million gallons compared to 19.9 million gallons in the prior year second quarter.  According to the National Oceanic and Atmospheric Administration, the winter of 2015-16 was the warmest on record in the contiguous United States.  Average temperatures (as measured by heating degree days) across all of the Partnership’s service territories for the second quarter of fiscal 2016 were 13% warmer than normal and 20% warmer than the prior year second quarter.  Therefore, the period from October 2015 through March 2016 experienced heating degree days that were 18% warmer than normal and 19% warmer than the comparable prior year period.

 

Revenues of $404.1 million decreased $195.3 million, or 32.6%, compared to the prior year second quarter, primarily due to lower retail propane and fuel oil volumes sold and lower average retail selling prices associated with lower wholesale product costs.  Average posted propane prices (basis Mont Belvieu, Texas) and fuel oil prices were 27.0% and 40.2% lower than the prior year second quarter, respectively.  Cost of products sold for the second quarter of fiscal 2016 of $137.0 million decreased $116.7 million, or 46.0%, compared to $253.7 million in the prior year second quarter, primarily due to lower wholesale product costs and lower volumes sold.  Cost of products sold for the second quarter of fiscal 2016 included a $0.7 million unrealized (non-cash) loss attributable to the mark-to-market adjustment for derivative instruments used in risk management activities, compared to a $7.4 million unrealized (non-cash) loss in the prior year second quarter.  These unrealized losses are excluded from Adjusted EBITDA for both periods in the table below.  

 

Combined operating and general and administrative expenses of $122.8 million for the second quarter of fiscal 2016 were $18.1 million, or 12.8%, lower than the prior year second quarter, primarily due to savings in payroll and benefit related expenses from a

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lower headcount, as well as lower volume-related variable costs and continued operating efficiencies.  Net interest expense of $18.9 million decreased $0.9 million, or 4.4%, primarily due to savings from the refinancing of certain of the Partnership’s senior notes completed in the second quarter of fiscal 2015.  

 

Mr. Stivala concluded, “With the heating season now behind us, our employees are well positioned to focus on fine tuning our operating model to drive further efficiencies, and on continuing to execute on our customer base management initiatives through new customer growth and delivering superior service in every market we serve.  Our fundamentals remain strong and we will continue to pursue our strategic growth initiatives.”

 

As previously announced on April 21, 2016, the Partnership’s Board of Supervisors had declared a quarterly distribution of $0.8875 per Common Unit for the three months ended March 26, 2016.  On an annualized basis, this distribution rate equates to $3.55 per Common Unit.  The distribution is payable on May 10, 2016 to Common Unitholders of record as of May 3, 2016.

 

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 1.1 million residential, commercial, industrial and agricultural customers through 700 locations in 41 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:

  

 

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 26, 2015 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.  

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Suburban Propane Partners, L.P. and Subsidiaries

Consolidated Statements of Operations

For the Three and Six Months Ended March 26, 2016 and March 28, 2015

(in thousands, except per unit amounts)

(unaudited)

 

 

(more)

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EBITDA and Adjusted EBITDA are not recognized terms under accounting principles generally accepted in the United States of America (“US GAAP”) and should not be considered as an alternative to net income or net cash provided by operating activities determined in accordance with US 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 our calculations of EBITDA and Adjusted EBITDA:

 

 

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.

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