Suburban Propane Partners Earnings 2020-06-27

Balance Sheet	Income Statement	Cash Flow
Assets, Equity	Rev, G Profit, Net Income	Ops, Inv, Fin

sph-10q_20200627.htm

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒

Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended June 27, 2020

☐

Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission File Number: 1-14222

SUBURBAN PROPANE PARTNERS, L.P.

(Exact name of registrant as specified in its charter)

Delaware	22-3410353
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)

240 Route 10 West

Whippany, NJ 07981

(973) 887-5300

(Address, including zip code, and telephone number,

including area code, of registrant’s principal executive offices)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading Symbol		Name of exchange on which registered
Common Units		SPH		New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		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. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

At August 3, 2020, there were 62,146,403 Common Units of Suburban Propane Partners, L.P. outstanding.

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SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES

INDEX TO FORM 10-Q

		Page
	PART I. FINANCIAL INFORMATION	1

ITEM 1.	FINANCIAL STATEMENTS (UNAUDITED)	1

	Condensed Consolidated Balance Sheets as of June 27, 2020 and September 28, 2019	1

	Condensed Consolidated Statements of Operations for the three months ended June 27, 2020 and June 29, 2019	2

	Condensed Consolidated Statements of Operations for the nine months ended June 27, 2020 and June 29, 2019	3

	Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended June 27, 2020 and June 29, 2019	4

	Condensed Consolidated Statements of Cash Flows for the nine months ended June 27, 2020 and June 29, 2019	5

	Condensed Consolidated Statements of Partners’ Capital for the three months ended June 27, 2020 and June 29, 2019	6

	Condensed Consolidated Statements of Partners’ Capital for the nine months ended June 27, 2020 and June 29, 2019	7

	Notes to Condensed Consolidated Financial Statements	8

ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	25

ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	36

ITEM 4.	CONTROLS AND PROCEDURES	38



	PART II. OTHER INFORMATION	39

ITEM 1.	LEGAL PROCEEDINGS	39

ITEM 1A.	RISK FACTORS	39

ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	40

ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	40

ITEM 4.	MINE SAFETY DISCLOSURES	40

ITEM 5.	OTHER INFORMATION	40

ITEM 6.	EXHIBITS	41

SignaturEs		42

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DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements (“Forward-Looking Statements”) as defined in the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, relating to future business expectations and predictions and financial condition and results of operations of Suburban Propane Partners, L.P. (the “Partnership”). Some of these statements can be identified by the use of forward-looking terminology such as “prospects,” “outlook,” “believes,” “estimates,” “intends,” “may,” “will,” “should,” “could,” “anticipates,” “expects” or “plans” or the negative or other variation of these or similar words, or by discussion of trends and conditions, strategies or risks and uncertainties. These Forward-Looking Statements involve certain risks and uncertainties that could cause actual results to differ materially from those discussed or implied in such Forward-Looking Statements (statements contained in this Quarterly Report identifying such risks and uncertainties are referred to as “Cautionary Statements”). The risks and uncertainties and their impact on the Partnership’s results include, but are not limited to, the following risks:

•	The impact of weather conditions on the demand for propane, fuel oil and other refined fuels, natural gas and electricity;

•

The impact of the COVID-19 pandemic and the corresponding government response, including the impact across the Partnership’s businesses on demand and operations, as well as on the operations of the Partnership’s suppliers, customers and other business partners, and the effectiveness of the Partnership’s actions taken in response to these risks;

•	Volatility in the unit cost of propane, fuel oil and other refined fuels, natural gas and electricity, the impact of the Partnership’s hedging and risk management activities, and the adverse impact of price increases on volumes sold 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, including the economic instability resulting from natural disasters such as pandemics, including the COVID-19 pandemic;

•	The ability of the Partnership to acquire sufficient volumes of, and the costs to the Partnership of acquiring, transporting and storing, propane, fuel oil and other refined fuels;

•	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, fuel oil and other refined fuels, natural gas and electricity;

•	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 climate change, derivative instruments and other regulatory developments on the Partnership’s business;

•	The impact of changes in tax laws that could adversely affect the tax treatment of the Partnership for 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 ability of the Partnership to continue to combat cybersecurity threats to our networks and information technology;

•	The impact of current conditions in the global capital and credit markets, and general economic pressures;

•	The operating, legal and regulatory risks the Partnership may face; 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 most recent Annual Report under “Risk Factors.”

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Some of these Forward-Looking Statements are discussed in more detail in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Quarterly Report. Reference is also made to the risk factors discussed in Item 1A of our Annual Report on Form 10-K for the fiscal year ended September 28, 2019, and Item 1A of Part II of this Quarterly Report. On different occasions, the Partnership or its representatives have made or may make Forward-Looking Statements in other filings with the SEC, press releases or oral statements made by or with the approval of one of the Partnership’s authorized executive officers. 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 or Cautionary Statement, except as required by law. All subsequent written and oral Forward-Looking Statements attributable to the Partnership or persons acting on its behalf are expressly qualified in their entirety by the Cautionary Statements in this Quarterly Report and in future SEC reports.

Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

(unaudited)

	June 27,			September 28,
	2020			2019
ASSETS
Current assets:
Cash and cash equivalents	$	4,186		$	2,441
Accounts receivable, less allowance for doubtful accounts of $5,673 and $2,573, respectively		65,425			59,340
Inventories		42,001			45,036
Other current assets		15,617			16,623
Total current assets		127,229			123,440
Property, plant and equipment, net		607,628			627,207
Operating lease right-of-use assets (See Notes 2 and 8)		115,945			—
Goodwill		1,103,781			1,098,085
Other intangible assets, net		98,343			128,437
Other assets		22,042			21,179
Total assets	$	2,074,968		$	1,998,348
LIABILITIES AND PARTNERS’ CAPITAL
Current liabilities:
Accounts payable	$	29,422		$	34,085
Accrued employment and benefit costs		26,957			34,688
Customer deposits and advances		74,015			97,854
Operating lease liabilities (See Notes 2 and 8)		24,935			—
Other current liabilities		51,909			49,503
Total current liabilities		207,238			216,130
Long-term borrowings		1,224,771			1,227,057
Accrued insurance		53,862			51,514
Operating lease liabilities (See Notes 2 and 8)		90,552			—
Other liabilities		76,377			79,817
Total liabilities		1,652,800			1,574,518
Commitments and contingencies
Partners’ capital:
Common Unitholders (62,133 and 61,735 units issued and outstanding at June 27, 2020 and September 28, 2019, respectively)		445,831			450,016
Accumulated other comprehensive loss		(23,663	)		(26,186	)
Total partners’ capital		422,168			423,830
Total liabilities and partners’ capital	$	2,074,968		$	1,998,348

The accompanying notes are an integral part of these condensed consolidated financial statements.

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SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per unit amounts)

(unaudited)

	Three Months Ended
	June 27,			June 29,
	2020			2019
Revenues
Propane	$	179,049		$	183,052
Fuel oil and refined fuels		11,702			12,921
Natural gas and electricity		6,099			7,527
All other		10,056			10,712
		206,906			214,212
Costs and expenses
Cost of products sold		59,689			78,596
Operating		96,086			97,804
General and administrative		17,098			16,445
Depreciation and amortization		29,153			30,151
		202,026			222,996
Operating income (loss)		4,880			(8,784	)
Interest expense, net		18,474			18,906
Other, net		1,878			1,176
(Loss) before provision for income taxes		(15,472	)		(28,866	)
Provision for income taxes		106			175
Net (loss)	$	(15,578	)	$	(29,041	)
Net (loss) per Common Unit - basic	$	(0.25	)	$	(0.47	)
Weighted average number of Common Units outstanding - basic		62,345			62,009
Net (loss) per Common Unit - diluted	$	(0.25	)	$	(0.47	)
Weighted average number of Common Units outstanding - diluted		62,345			62,009

The accompanying notes are an integral part of these condensed consolidated financial statements.

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SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per unit amounts)

(unaudited)

	Nine Months Ended
	June 27,			June 29,
	2020			2019
Revenues
Propane	$	812,160		$	937,468
Fuel oil and refined fuels		69,095			83,428
Natural gas and electricity		25,018			38,527
All other		35,566			36,270
		941,839			1,095,693
Costs and expenses
Cost of products sold		328,407			462,703
Operating		313,550			305,367
General and administrative		49,808			54,938
Depreciation and amortization		87,715			90,845
		779,480			913,853
Operating income		162,359			181,840
Loss on debt extinguishment		109			—
Interest expense, net		56,722			58,041
Other, net		3,835			3,527
Income before (benefit from) provision for income taxes		101,693			120,272
(Benefit from) provision for income taxes		(253	)		578
Net income	$	101,946		$	119,694
Net income per Common Unit - basic	$	1.64		$	1.93
Weighted average number of Common Units outstanding - basic		62,248			61,963
Net income per Common Unit - diluted	$	1.63		$	1.92
Weighted average number of Common Units outstanding - diluted		62,628			62,262

The accompanying notes are an integral part of these condensed consolidated financial statements.

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SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

(unaudited)

	Three Months Ended						Nine Months Ended
	June 27,			June 29,			June 27,		June 29,
	2020			2019			2020		2019
Net (loss) income	$	(15,578	)	$	(29,041	)	$	101,946	$	119,694
Other comprehensive income:
Amortization of net actuarial losses and prior service credits into earnings		541			552			1,623		1,656
Recognition in earnings of net actuarial loss for pension settlement		900			—			900		—
Other comprehensive income		1,441			552			2,523		1,656
Total comprehensive (loss) income	$	(14,137	)	$	(28,489	)	$	104,469	$	121,350

The accompanying notes are an integral part of these condensed consolidated financial statements.

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SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

	Nine Months Ended
	June 27,			June 29,
	2020			2019
Cash flows from operating activities:
Net income	$	101,946		$	119,694
Adjustments to reconcile net income to net cash provided by operations:
Depreciation and amortization		87,715			90,845
Pension settlement charge		900			—
Loss on debt extinguishment		109			—
Compensation costs recognized under Restricted Unit Plans		7,084			8,855
Other, net		1,012			647
Changes in assets and liabilities:
Accounts receivable		(5,518	)		(6,594	)
Inventories		3,285			18,691
Other current and noncurrent assets		(10,362	)		3,318
Accounts payable		(1,186	)		(11,122	)
Accrued employment and benefit costs		(7,731	)		(4,234	)
Customer deposits and advances		(23,839	)		(48,537	)
Contributions to defined benefit pension plan		(2,030	)		(4,335	)
Other current and noncurrent liabilities		17,599			(1,125	)
Net cash provided by operating activities		168,984			166,103
Cash flows from investing activities:
Capital expenditures		(26,115	)		(24,283	)
Acquisitions of businesses		(21,971	)		(18,865	)
Proceeds from sale of property, plant and equipment		2,515			4,627
Net cash (used in) investing activities		(45,571	)		(38,521	)
Cash flows from financing activities:
Proceeds from borrowings under revolving credit facility		447,300			322,700
Repayments of borrowings under revolving credit facility		(451,100	)		(339,100	)
Issuance costs associated with long-term borrowings		(2,665	)		—
Partnership distributions		(111,562	)		(110,841	)
Other, net		(3,641	)		(3,007	)
Net cash (used in) financing activities		(121,668	)		(130,248	)
Net increase (decrease) in cash and cash equivalents		1,745			(2,666	)
Cash and cash equivalents at beginning of period		2,441			5,164
Cash and cash equivalents at end of period	$	4,186		$	2,498

The accompanying notes are an integral part of these condensed consolidated financial statements.

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SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF PARTNERS’ CAPITAL

(in thousands)

(unaudited)

	Three Months Ended June 27, 2020
						Accumulated
						Other			Total
	Number of		Common			Comprehensive			Partners’
	Common Units		Unitholders			(Loss)			Capital
Balance, beginning of period		62,073	$	496,426		$	(25,104	)	$	471,322
Net loss				(15,578	)					(15,578	)
Other comprehensive income							541			541
Partnership distributions				(37,279	)					(37,279	)
Common Units issued under Restricted Unit Plans		60		—						—
Recognition in earnings of net actuarial loss for pension settlement							900			900
Compensation costs recognized under Restricted Unit Plans				2,262						2,262
Balance, end of period		62,133	$	445,831		$	(23,663	)	$	422,168

Three Months Ended June 29, 2019

Accumulated

Other

Total

Number of

Common

Comprehensive

Price	23.81	EPS	1
Shares	62	P/E	22
MCap	1,485	P/FCF	7
Net Debt	1,236	EBIT	69
TEV	2,721	TEV/EBIT	39
TTM 2019-09-28, in MM, except price, ratios

10-Q	2020-06-27	Filed 2020-08-06
10-Q	2020-03-28	Filed 2020-05-07
10-Q	2019-12-28	Filed 2020-02-06
10-K	2019-09-28	Filed 2019-11-27
10-Q	2019-06-29	Filed 2019-08-08
10-Q	2019-03-30	Filed 2019-05-09
10-Q	2018-12-29	Filed 2019-02-07
10-K	2018-09-29	Filed 2018-11-21
10-Q	2018-06-30	Filed 2018-08-09
10-Q	2018-03-31	Filed 2018-05-10
10-Q	2017-12-30	Filed 2018-02-08
10-K	2017-09-30	Filed 2017-11-22
10-Q	2017-06-24	Filed 2017-08-03
10-Q	2017-03-25	Filed 2017-05-04
10-Q	2016-12-24	Filed 2017-02-02
10-K	2016-09-24	Filed 2016-11-23
10-Q	2016-06-25	Filed 2016-08-04
10-Q	2016-03-26	Filed 2016-05-05
10-Q	2015-12-26	Filed 2016-02-04
10-K	2015-09-26	Filed 2015-11-25
10-Q	2015-06-27	Filed 2015-08-06
10-Q	2015-03-28	Filed 2015-05-07
10-Q	2014-12-27	Filed 2015-02-05
10-K	2014-09-27	Filed 2014-11-26
10-Q	2014-06-28	Filed 2014-08-07
10-Q	2014-03-29	Filed 2014-05-08
10-Q	2013-12-28	Filed 2014-02-06
10-K	2013-09-28	Filed 2013-11-27
10-Q	2013-06-29	Filed 2013-08-08
10-Q	2013-03-30	Filed 2013-05-09
10-Q	2012-12-29	Filed 2013-02-07
10-K	2012-09-29	Filed 2012-11-28
10-Q	2012-06-23	Filed 2012-08-02
10-Q	2012-03-24	Filed 2012-05-03
10-Q	2011-12-24	Filed 2012-02-02

8-K	2020-08-06	Earnings, Exhibits
8-K	2020-07-23	Regulation FD, Other Events, Exhibits
8-K	2020-07-23	Regulation FD, Other Events, Exhibits
8-K	2020-05-07
8-K	2020-04-23
8-K	2020-04-23
8-K	2020-03-05
8-K	2020-02-06
8-K	2020-01-23
8-K	2020-01-23
8-K	2019-11-14
8-K	2019-11-13
8-K	2019-10-24
8-K	2019-10-24
8-K	2019-08-08
8-K	2019-07-25
8-K	2019-07-25
8-K	2019-05-09
8-K	2019-04-25
8-K	2019-04-25
8-K	2019-03-20
8-K	2019-02-07
8-K	2019-01-24
8-K	2019-01-24
8-K	2018-11-15
8-K	2018-11-01
8-K	2018-10-25
8-K	2018-08-09
8-K	2018-07-26
8-K	2018-07-23
8-K	2018-05-15
8-K	2018-05-15
8-K	2018-05-10
8-K	2018-04-26
8-K	2018-04-26
8-K	2018-02-08
8-K	2018-01-25
8-K	2018-01-25
8-K	2018-01-24

EX-31.1	sph-ex311_6.htm
EX-31.2	sph-ex312_8.htm
EX-32.1	sph-ex321_7.htm
EX-32.2	sph-ex322_9.htm

SPH 10Q Quarterly Report

Suburban Propane Partners Earnings 2020-06-27