SPH 8-K
Suburban Propane Partners LP (SPH)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
CURRENT REPORT
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Securities Exchange Act of 1934
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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):
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities registered pursuant to Section 12(b) of the Act:
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Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
ITEM 2.02. RESULTS OF OPERATIONS AND FINANCIAL CONDITION
The following information, including Exhibit 99.1 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 November 14, 2024, the Partnership issued a press release (the “Press Release”) describing its Fiscal 2024 Full Year and Fourth 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.
ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS
(d) Exhibits.
99.1 |
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104 |
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Cover Page Interactive Data File (embedded within the Inline XBRL document). |
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.
November 14, 2024 |
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SUBURBAN PROPANE PARTNERS, L.P. |
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By: |
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/s/ MICHAEL A. KUGLIN |
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Name: |
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Michael A. Kuglin |
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Title: |
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Chief Financial Officer |
Exhibit 99.1
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News Release Contact: Michael A. Kuglin Chief Financial Officer P.O. Box 206, Whippany, NJ 07981-0206 Phone: 973-503-9252 |
FOR IMMEDIATE RELEASE
Suburban Propane Partners, L.P.
Announces Full Year and Fourth Quarter Results
Whippany, New Jersey, November 14, 2024 -- Suburban Propane Partners, L.P. (NYSE:SPH), today announced earnings for its full year and fourth quarter ended September 28, 2024.
Fiscal Year 2024 Results
Fiscal year 2024 included 52 weeks of operations compared to 53 weeks reported in the prior year.
Net income for fiscal 2024 was $74.2 million, or $1.15 per Common Unit, compared to $123.8 million, or $1.94 per Common Unit, in fiscal 2023.
Adjusted earnings before interest, taxes, depreciation and amortization (Adjusted EBITDA, as defined and reconciled below) was $250.0 million for fiscal 2024, compared to $275.0 million in the prior year.
In announcing these results, President and Chief Executive Officer Michael A. Stivala, said, “Fiscal year 2024 was characterized by unseasonably warm temperatures during the peak winter heating months that continued into the third quarter, with periods of extreme heat in certain parts of the country. Despite the challenging weather, propane volumes were down just 3% compared to the prior year, excluding the impact of the additional week of operations in fiscal 2023 -- with volumes benefitting from our organic customer base growth and retention initiatives, particularly in our counter-seasonal customer segments, and from the acquisition of three well-run propane businesses in strategic markets. As always, our operating personnel remain focused on the things that we can control -- safely delivering outstanding service when our customers need us most, effectively managing selling prices, and controlling expenses.”
Mr. Stivala continued, “In our renewable natural gas (“RNG”) operations, we deployed capital to enhance the efficiency and operating performance of our RNG production facility in Stanfield, Arizona, which resulted in increased RNG production levels -- reaching a daily peak RNG injection as high as 1,535 MMBtu. RNG injection for the fiscal year averaged 1,049 MMBtu per day, representing an increase of 20% compared to the prior year. Notwithstanding those operating improvements, revenues from RNG injection were negatively influenced by lower prices for environmental attributes under the California Low Carbon Fuel Standard and the impact of power outages and severe storms in the area that delayed production. During fiscal year 2024, we also continued to make progress on our capital improvement plans for the installation of RNG upgrade equipment at our Columbus, Ohio facility and with the construction of our anaerobic digester facility located at Adirondack Farms in upstate New York. We expect construction for both facilities to be completed in the second half of calendar 2025.”
Concluding his remarks, Mr. Stivala stated, “While the fiscal 2024 heating season presented headwinds as a result of unseasonably warm weather, we continue to advance our long-term strategic growth initiatives -- fostering the growth of our core propane operations, steering operational excellence in our RNG business, and driving innovation in additional low carbon renewable energy alternatives, while maintaining a disciplined approach to the deployment of capital as we continue to foster the strength of the balance sheet. Subsequent to the end of fiscal 2024, we acquired a well-run propane business in strategic markets in New Mexico and Arizona for total consideration of $53.0 million, inclusive of non-compete payments.”
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Retail propane gallons sold in fiscal 2024 of 378.3 million gallons decreased 4.6% compared to the prior year, primarily due to unseasonably warm and inconsistent temperatures throughout the heating season, particularly during the most critical months (December through February) for heat-related demand, with only a brief burst of extremely cold temperatures in mid-January. In addition, the additional week of operations in the prior fiscal year accounted for approximately 5.5 million gallons of the year-over-year decline in volumes. Average temperatures (as measured by heating degree days) across all of the Partnership’s service territories for fiscal 2024 were 10% warmer than normal and 2% warmer than the prior year.
Average propane prices (basis Mont Belvieu, Texas) for fiscal 2024 were flat compared to the prior year. Total gross margins of $805.0 million in fiscal 2024 decreased $34.1 million, or 4.1%, compared to the prior year. Gross margins included unrealized losses attributable to the mark-to-market adjustment for derivative instruments used in risk management activities of $14.6 million and $3.7 million in fiscal 2024 and fiscal 2023, respectively. These non-cash adjustments, which were reported in cost of products sold, were excluded from Adjusted EBITDA for both periods. Excluding the impact of the unrealized mark-to-market adjustments, gross margin for fiscal 2024 decreased $23.2 million, or 2.7%, compared to the prior year, primarily due to lower propane volumes sold, partially offset by higher propane unit margins and higher margin contribution from the RNG operations. Excluding the impact of the unrealized mark-to-market adjustments, propane unit margins for fiscal 2024 increased $0.02 per gallon, or 1.3%, compared to the prior year.
Combined operating and general and administrative expenses of $566.8 million for fiscal 2024 decreased $2.9 million, or 0.5%, compared to the prior year. Pension settlement charges of $0.6 million reported in operating expenses during fiscal 2024, and acquisition-related costs of $4.7 million reported within general and administrative expenses during fiscal 2023 were excluded from Adjusted EBITDA. Excluding these items, combined operating and general administrative expenses increased $1.2 million, or 0.2% in fiscal 2024, primarily due to higher payroll and benefit-related costs, and higher self-insurance costs, substantially offset by lower volume-related variable operating costs and lower variable compensation.
During fiscal 2024, in support of its long-term strategic goals, the Partnership acquired three well-run retail propane businesses for total consideration of $14.3 million, made additional investments in Oberon Fuels and Independence Hydrogen, and deployed $14.0 million of growth capital expenditures to advance the construction activities at its RNG production facilities. Total debt outstanding as of September 2024 increased $19.0 million compared to September 2023. The Consolidated Leverage Ratio, as defined in the Partnership’s credit agreement, for fiscal 2024 was 4.76x.
Fourth Quarter of Fiscal Year 2024 Results
Consistent with the seasonal nature of the propane business, the Partnership typically reports a net loss for its fiscal fourth quarter. The fourth quarter of fiscal 2024 included 13 weeks of operations, compared to 14 weeks in the prior year fourth quarter. Net loss for the fourth quarter of fiscal 2024 was $44.6 million, or $0.69 per Common Unit, compared to a net loss of $20.9 million, or $0.33 per Common Unit, in fiscal 2023. Net loss for the fourth quarter of fiscal 2024 included a $6.5 million unrealized loss attributable to the mark-to-market adjustment for derivative instruments used in risk management activities, compared to a $17.5 million unrealized gain in the prior year. As noted above, these non-cash adjustments, which were reported in cost of products sold, were excluded from Adjusted EBITDA for both periods. Adjusted EBITDA for the fourth quarter of fiscal 2024 was $0.8 million, compared to $3.0 million in the fourth quarter of fiscal 2023. Retail propane gallons sold of 59.7 million gallons for the fourth quarter of fiscal 2024 decreased 8.1% compared to the prior year fourth quarter. Excluding the impact of the additional week of operations in the fourth quarter of fiscal 2023, propane volumes were flat compared to the prior year.
As previously announced on October 24, 2024, the Partnership’s Board of Supervisors declared a quarterly distribution of $0.325 per Common Unit for the three months ended September 28, 2024. On an annualized basis, this distribution rate equates to $1.30 per Common Unit. The distribution was paid on November 12, 2024 to Common Unitholders of record as of November 5, 2024.
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About Suburban Propane Partners, L.P.
Suburban Propane Partners, L.P. (“Suburban Propane”) is a publicly traded master limited partnership listed on the New York Stock Exchange. Headquartered in Whippany, New Jersey, Suburban Propane has been in the customer service business since 1928 and is a nationwide distributor of propane, renewable propane, renewable natural gas (“RNG”), fuel oil and related products and services, as well as a marketer of natural gas and electricity and producer of and investor in low carbon fuel alternatives, servicing the energy needs of approximately 1 million residential, commercial, governmental, industrial and agricultural customers through approximately 700 locations across 42 states. Suburban Propane is supported by three core pillars: (1) Suburban Commitment – showcasing Suburban Propane’s over 95-year legacy, and ongoing commitment to the highest standards for dependability, flexibility, and reliability that underscores Suburban Propane’s commitment to excellence in customer service; (2) SuburbanCares – highlighting continued dedication to giving back to local communities across Suburban Propane’s national footprint; and (3) Go Green with Suburban Propane – promoting the clean burning and versatile nature of propane and renewable propane as a bridge to a green energy future and investing in the next generation of innovative, renewable energy alternatives. For additional information on Suburban Propane, please visit www.suburbanpropane.com.
Forward-Looking Statements
This press release contains certain forward-looking statements relating to future business expectations, capital expenditures, strategic investments, project developments 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:
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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, 2023 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 Twelve Months Ended September 28, 2024 and September 30, 2023
(in thousands, except per unit amounts)
(unaudited)
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Three Months Ended |
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Twelve Months Ended |
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September 28, 2024 |
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September 30, 2023 |
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September 28, 2024 |
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September 30, 2023 |
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Revenues |
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Propane |
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$ |
179,067 |
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$ |
191,160 |
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$ |
1,150,034 |
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$ |
1,232,138 |
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Fuel oil and refined fuels |
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7,336 |
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9,774 |
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73,783 |
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92,127 |
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Natural gas and electricity |
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5,349 |
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5,688 |
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25,877 |
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31,160 |
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All other |
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16,889 |
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19,973 |
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77,478 |
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73,769 |
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208,641 |
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226,595 |
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1,327,172 |
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1,429,194 |
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Costs and expenses |
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Cost of products sold |
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84,623 |
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65,424 |
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522,196 |
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590,131 |
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Operating |
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110,594 |
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118,260 |
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476,857 |
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478,058 |
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General and administrative |
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18,494 |
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21,720 |
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89,894 |
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91,574 |
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Depreciation and amortization |
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17,478 |
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17,202 |
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66,975 |
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62,582 |
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231,189 |
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222,606 |
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1,155,922 |
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1,222,345 |
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Operating (loss) income |
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(22,548 |
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3,989 |
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171,250 |
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206,849 |
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Loss on debt extinguishment |
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— |
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— |
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215 |
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— |
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Interest expense, net |
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18,050 |
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18,795 |
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74,590 |
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73,393 |
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Other, net |
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3,781 |
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5,805 |
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21,537 |
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9,036 |
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(Loss) income before provision for income taxes |
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(44,379 |
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(20,611 |
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74,908 |
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124,420 |
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Provision for income taxes |
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210 |
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247 |
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734 |
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668 |
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Net (loss) income |
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$ |
(44,589 |
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$ |
(20,858 |
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$ |
74,174 |
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$ |
123,752 |
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Net (loss) income per Common Unit - basic |
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$ |
(0.69 |
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$ |
(0.33 |
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$ |
1.15 |
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$ |
1.94 |
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Weighted average number of Common Units |
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64,403 |
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63,920 |
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64,306 |
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63,835 |
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Net (loss) income per Common Unit - diluted |
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$ |
(0.69 |
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$ |
(0.33 |
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$ |
1.14 |
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$ |
1.92 |
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Weighted average number of Common Units |
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64,403 |
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63,920 |
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64,841 |
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64,441 |
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Supplemental Information: |
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EBITDA (a) |
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$ |
(8,851 |
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$ |
15,386 |
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$ |
216,473 |
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$ |
260,395 |
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Adjusted EBITDA (a) |
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$ |
754 |
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$ |
3,002 |
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$ |
250,043 |
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$ |
275,025 |
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Retail gallons sold: |
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Propane |
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59,733 |
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65,006 |
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378,258 |
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396,393 |
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Refined fuels |
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1,968 |
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2,444 |
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16,861 |
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19,103 |
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Capital expenditures: |
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Maintenance |
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$ |
4,891 |
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$ |
3,687 |
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$ |
20,903 |
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$ |
19,755 |
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Growth |
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$ |
14,165 |
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$ |
7,876 |
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$ |
38,526 |
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$ |
25,194 |
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(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 and other items, as applicable, as provided in the table below. Our management uses EBITDA and Adjusted EBITDA as supplemental measures of operating performance and we are including them because we believe that they provide our investors and industry analysts with additional information that we determined is useful to evaluate our operating results.
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:
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Three Months Ended |
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Twelve Months Ended |
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September 28, 2024 |
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September 30, 2023 |
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September 28, 2024 |
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September 30, 2023 |
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Net (loss) income |
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$ |
(44,589 |
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$ |
(20,858 |
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$ |
74,174 |
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$ |
123,752 |
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Add: |
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Provision for income taxes |
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210 |
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247 |
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734 |
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668 |
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Interest expense, net |
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18,050 |
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18,795 |
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74,590 |
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73,393 |
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Depreciation and amortization |
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17,478 |
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17,202 |
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66,975 |
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62,582 |
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EBITDA |
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(8,851 |
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15,386 |
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216,473 |
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260,395 |
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Unrealized non-cash losses (gains) on changes in fair value of derivatives |
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6,519 |
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(17,496 |
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14,598 |
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3,671 |
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Pension settlement charge |
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88 |
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— |
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638 |
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— |
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Equity in losses of unconsolidated affiliates |
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2,998 |
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5,112 |
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18,119 |
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6,264 |
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Loss on debt extinguishment |
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— |
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— |
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215 |
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— |
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Acquisition-related costs |
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— |
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— |
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— |
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4,695 |
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Adjusted EBITDA |
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$ |
754 |
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$ |
3,002 |
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$ |
250,043 |
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$ |
275,025 |
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We also reference gross margins, computed as revenues less cost of products sold as those amounts are reported on the consolidated financial statements. Our management uses gross margin as a supplemental measure of operating performance and we are including it as we believe that it provides our investors and industry analysts with additional information that we determined is useful to evaluate our operating results. As cost of products sold does not include depreciation and amortization expense, the gross margin we reference is considered a non-GAAP financial measure.
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 SEC. Such report, once filed, will be available on the public EDGAR electronic filing system maintained by the SEC.
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