Suburban Propane Partners, L.P. Announces Third Quarter Results Following Twenty-Sixth Distribution Increase

WHIPPANY, N.J., Aug. 5 /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 results for its third quarter ended June 26, 2010.

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 26, 2010, narrowed to $6.6 million, or $0.19 per Common Unit, compared to a net loss of $7.4 million, or $0.23 per Common Unit, in the prior year third quarter. Net loss for the quarter included a non-cash charge of $1.8 million to accelerate depreciation expense on certain assets taken out of service. Earnings before interest, taxes, depreciation and amortization ("EBITDA") for the third quarter of fiscal 2010 amounted to $9.4 million, compared to $11.5 million in the prior year quarter.  Adjusted EBITDA (as defined and reconciled below) was $9.1 million for the third quarter of fiscal 2010, compared to $17.7 million in the prior year third quarter.

In announcing these results, President and Chief Executive Officer Michael J. Dunn, Jr., said, "The operating challenges experienced during the first half of fiscal 2010 persisted into the third quarter as sales volumes continued to be negatively affected by the weak economy and an extremely warm weather pattern.  Nonetheless, our employees deserve credit for managing costs, driving operating efficiencies and delivering solid results in the midst of these challenges. In addition, during the third quarter we closed on our third acquisition this fiscal year, expanding our service territory in strategic markets where we already have a strong presence.  We funded these acquisitions, as well as all of our working capital needs, with cash on hand and we ended the quarter with more than $170 million of cash on the balance sheet."

Mr. Dunn added, "On the strength of these earnings and cash flows, we are pleased to deliver our seventeenth consecutive increase in our quarterly distribution rate (twenty-sixth since the recapitalization in 1999) to $0.845 per Common Unit, or $3.38 annualized, which represents 2.4% growth compared to the prior year third quarter."

Retail propane gallons sold in the third quarter of fiscal 2010 decreased 5.2 million gallons, or 8.5%, to 56.0 million gallons compared to 61.2 million gallons in the prior year third quarter. Sales of fuel oil and other refined fuels decreased 3.1 million gallons, or 32.0%, to 6.6 million gallons during the third quarter of fiscal 2010 compared to 9.7 million gallons in the prior year third quarter. The decrease in volumes was primarily attributable to the ongoing weak economy.  In addition, while not typically a factor impacting volumes for the third quarter, the Partnership experienced extreme warmer than normal temperatures throughout much of its service territories that began in March 2010 and carried into the third quarter of fiscal 2010, particularly in the northeast. Average temperatures in the northeast region of the United States were approximately 30% warmer than normal for the third quarter of fiscal 2010.  

Revenues of $198.1 million increased $13.7 million, or 7.4%, compared to the prior year third quarter, primarily due to higher average selling prices associated with higher average product costs, offset to an extent by the lower volumes sold. Average posted prices for propane and fuel oil were 49.2% and 35.5% higher, respectively, compared to the prior year third quarter. Cost of products sold for the third quarter of fiscal 2010 of $106.6 million increased $19.1 million, or 21.8%, compared to $87.5 million in the prior year third quarter. Cost of products sold in the third quarter of fiscal 2010 included a $0.3 million unrealized (non-cash) gain attributable to the mark-to-market adjustment for derivative instruments used in risk management activities, compared to a $6.1 million unrealized (non-cash) loss in the prior year quarter; these unrealized gains and losses are excluded from Adjusted EBITDA for both periods in the table below.

Combined operating and general and administrative expenses of $82.0 million for the third quarter of fiscal 2010 were $3.4 million, or 4.0%, lower than the prior year third quarter, primarily due to lower variable compensation attributable to lower earnings, continued operating efficiencies at the field level, lower bad debt expense and savings in insurance costs.

Net interest expense decreased $3.3 million, or 32.7%, as a result of lower outstanding debt during the third quarter of fiscal 2010 compared to the prior year third quarter due to the $183.0 million debt reduction in the second half of fiscal 2009. Once again, the Partnership funded all working capital requirements with cash on hand without the need to borrow under its working capital facility and ended the third quarter of fiscal 2010 with more than $170.0 million of cash.

On July 26, 2010, the Partnership announced that its Board of Supervisors declared the twenty-sixth increase (since the Partnership's recapitalization in 1999) in the Partnership's quarterly distribution from $0.84 to $0.845 per Common Unit for the three months ended June 26, 2010. On an annualized basis, this increased distribution rate equates to $3.38 per Common Unit, an increase of $0.02 per Common Unit from the previous distribution rate, and an increase of 2.4% compared to the third quarter of fiscal 2009. The $0.845 per Common Unit distribution will be paid on August 10, 2010 to Common Unitholders of record as of August 3, 2010.

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 or acquire new 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, derivative instruments and other regulatory developments on the Partnership's business;
• The impact of changes in tax regulations that could adversely affect the tax treatment of the Partnership for federal income tax purposes;
• 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 26, 2009 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.

SOURCE Suburban Propane Partners, L.P.