10-Q 1 sph-20220625.htm 10-Q 10-Q
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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 25, 2022

 

 

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 1, 2022, there were 62,986,862 Common Units of Suburban Propane Partners, L.P. outstanding.

 

 


Table of Contents

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 25, 2022 and September 25, 2021

 

1

 

 

 

 

 

 

 

Condensed Consolidated Statements of Operations for the three months ended June 25, 2022 and June 26, 2021

 

2

 

 

 

 

 

 

 

Condensed Consolidated Statements of Operations for the nine months ended June 25, 2022 and June 26, 2021

 

3

 

 

 

 

 

 

 

Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended June 25, 2022 and June 26, 2021

 

4

 

 

 

 

 

 

 

Condensed Consolidated Statements of Cash Flows for the nine months ended June 25, 2022 and June 26, 2021

 

5

 

 

 

 

 

 

 

Condensed Consolidated Statements of Partners’ Capital for the three months ended June 25, 2022
and June 26, 2021

 

6

 

 

 

 

 

 

 

Condensed Consolidated Statements of Partners’ Capital for the nine months ended June 25, 2022
and June 26, 2021

 

7

 

 

 

 

 

 

 

Notes to Condensed Consolidated Financial Statements

 

8

 

 

 

 

 

ITEM 2.

 

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

24

 

 

 

 

 

ITEM 3.

 

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

35

 

 

 

 

 

ITEM 4.

 

CONTROLS AND PROCEDURES

 

36

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

PART II. OTHER INFORMATION

 

37

 

 

 

 

 

ITEM 1.

 

LEGAL PROCEEDINGS

 

37

 

 

 

 

 

ITEM 1A.

 

RISK FACTORS

 

37

 

 

 

 

 

ITEM 2.

 

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

37

 

 

 

 

 

ITEM 3.

 

DEFAULTS UPON SENIOR SECURITIES

 

37

 

 

 

 

 

ITEM 4.

 

MINE SAFETY DISCLOSURES

 

37

 

 

 

 

 

ITEM 5.

 

OTHER INFORMATION

 

37

 

 

 

 

 

ITEM 6.

 

EXHIBITS

 

38

 

 

 

 

 

SignaturEs

 

39

 

 

 


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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 that could impact 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;
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 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;
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, including the Russia/Ukraine conflict, 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 attract and retain employees and key personnel to support the growth of our business;
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 and manage inflationary increases in fuel, labor and other operating costs;
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 and any third-party service providers on which it may rely for support or services to continue to combat cybersecurity threats to its 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.”

 


Table of Contents

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 25, 2021. 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 25,

 

 

September 25,

 

 

 

2022

 

 

2021

 

ASSETS

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

7,066

 

 

$

5,808

 

Accounts receivable, less allowance for doubtful accounts of $5,760 and
   $
3,332, respectively

 

 

95,377

 

 

 

71,372

 

Inventories

 

 

66,325

 

 

 

61,802

 

Other current assets

 

 

46,001

 

 

 

41,126

 

Total current assets

 

 

214,769

 

 

 

180,108

 

Property, plant and equipment, net

 

 

560,464

 

 

 

569,130

 

Operating lease right-of-use assets

 

 

138,540

 

 

 

129,999

 

Goodwill

 

 

1,106,627

 

 

 

1,107,026

 

Other intangible assets, net

 

 

34,107

 

 

 

39,263

 

Other assets

 

 

60,888

 

 

 

26,204

 

Total assets

 

$

2,115,395

 

 

$

2,051,730

 

 

 

 

 

 

 

 

LIABILITIES AND PARTNERS’ CAPITAL

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

34,480

 

 

$

39,169

 

Accrued employment and benefit costs

 

 

35,461

 

 

 

40,814

 

Customer deposits and advances

 

 

82,565

 

 

 

111,727

 

Operating lease liabilities

 

 

32,104

 

 

 

30,878

 

Other current liabilities

 

 

57,878

 

 

 

64,558

 

Total current liabilities

 

 

242,488

 

 

 

287,146

 

Long-term borrowings

 

 

1,078,700

 

 

 

1,118,014

 

Accrued insurance

 

 

55,166

 

 

 

49,424

 

Operating lease liabilities

 

 

105,494

 

 

 

98,532

 

Other liabilities

 

 

67,694

 

 

 

73,193

 

Total liabilities

 

 

1,549,542

 

 

 

1,626,309

 

Commitments and contingencies

 

 

 

 

 

 

Partners’ capital:

 

 

 

 

 

 

Common Unitholders (62,975 and 62,538 units issued and outstanding at
   June 25, 2022 and September 25, 2021, respectively)

 

 

581,922

 

 

 

443,005

 

Accumulated other comprehensive loss

 

 

(16,069

)

 

 

(17,584

)

Total partners’ capital

 

 

565,853

 

 

 

425,421

 

Total liabilities and partners’ capital

 

$

2,115,395

 

 

$

2,051,730

 

 

 

 

 

 

 

 

 

 

 

 

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

 

1


Table of Contents

SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per unit amounts)

(unaudited)

 

 

 

Three Months Ended

 

 

 

June 25,

 

 

June 26,

 

 

 

2022

 

 

2021

 

Revenues

 

 

 

 

 

 

Propane

 

$

260,634

 

 

$

208,689

 

Fuel oil and refined fuels

 

 

19,274

 

 

 

11,314

 

Natural gas and electricity

 

 

7,547

 

 

 

5,835

 

All other

 

 

12,877

 

 

 

12,247

 

 

 

 

300,332

 

 

 

238,085

 

Costs and expenses

 

 

 

 

 

 

Cost of products sold

 

 

140,930

 

 

 

83,056

 

Operating

 

 

109,081

 

 

 

102,016

 

General and administrative

 

 

21,541

 

 

 

17,756

 

Depreciation and amortization

 

 

14,009

 

 

 

27,254

 

 

 

 

285,561

 

 

 

230,082

 

Operating income

 

 

14,771

 

 

 

8,003

 

Loss on debt extinguishment

 

 

 

 

 

16,029

 

Interest expense, net

 

 

15,004

 

 

 

16,737

 

Other, net

 

 

2,031

 

 

 

1,085

 

(Loss) before provision for income taxes

 

 

(2,264

)

 

 

(25,848

)

Provision for income taxes

 

 

271

 

 

 

173

 

Net (loss)

 

$

(2,535

)

 

$

(26,021

)

Net (loss) per Common Unit - basic

 

$

(0.04

)

 

$

(0.41

)

Weighted average number of Common Units outstanding - basic

 

 

63,284

 

 

 

62,755

 

Net (loss) per Common Unit - diluted

 

$

(0.04

)

 

$

(0.41

)

Weighted average number of Common Units outstanding - diluted

 

 

63,284

 

 

 

62,755

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

2


Table of Contents

SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per unit amounts)

(unaudited)

 

 

 

Nine Months Ended

 

 

 

June 25,

 

 

June 26,

 

 

 

2022

 

 

2021

 

Revenues

 

 

 

 

 

 

Propane

 

$

1,108,572

 

 

$

958,641

 

Fuel oil and refined fuels

 

 

83,741

 

 

 

59,075

 

Natural gas and electricity

 

 

31,165

 

 

 

23,461

 

All other

 

 

40,356

 

 

 

39,337

 

 

 

 

1,263,834

 

 

 

1,080,514

 

Costs and expenses

 

 

 

 

 

 

Cost of products sold

 

 

576,299

 

 

 

418,002

 

Operating

 

 

334,229

 

 

 

309,183

 

General and administrative

 

 

64,962

 

 

 

57,866

 

Depreciation and amortization

 

 

44,356

 

 

 

82,617

 

 

 

 

1,019,846

 

 

 

867,668

 

Operating income

 

 

243,988

 

 

 

212,846

 

Loss on debt extinguishment

 

 

 

 

 

16,029

 

Interest expense, net

 

 

45,557

 

 

 

52,964

 

Other, net

 

 

4,395

 

 

 

3,745

 

Income before provision for income taxes

 

 

194,036

 

 

 

140,108

 

Provision for income taxes

 

 

171

 

 

 

936

 

Net income

 

$

193,865

 

 

$

139,172

 

Net income per Common Unit - basic

 

$

3.07

 

 

$

2.22

 

Weighted average number of Common Units outstanding - basic

 

 

63,200

 

 

 

62,685

 

Net income per Common Unit - diluted

 

$

3.04

 

 

$

2.20

 

Weighted average number of Common Units outstanding - diluted

 

 

63,833

 

 

 

63,150

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

3


Table of Contents

SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

(unaudited)

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

 

June 25,

 

 

June 26,

 

June 25,

 

 

June 26,

 

 

 

2022

 

 

2021

 

2022

 

 

2021

 

Net (loss) income

 

$

(2,535

)

 

$

(26,021

)

$

193,865

 

 

$

139,172

 

Other comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

Amortization of net actuarial losses and prior service
   credits into earnings

 

 

293

 

 

 

593

 

 

881

 

 

 

1,779

 

Recognition in earnings of net actuarial loss for pension
   settlement

 

 

634

 

 

 

142

 

 

634

 

 

 

712

 

Other comprehensive income

 

 

927

 

 

 

735

 

 

1,515

 

 

 

2,491

 

Total comprehensive (loss) income

 

$

(1,608

)

 

$

(25,286

)

$

195,380

 

 

$

141,663

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

4


Table of Contents

SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES
 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

 

 

 

Nine Months Ended

 

 

 

June 25,

 

 

June 26,

 

 

 

2022

 

 

2021

 

Cash flows from operating activities:

 

 

 

 

 

 

Net income

 

$

193,865

 

 

$

139,172

 

Adjustments to reconcile net income to net cash provided by operations:

 

 

 

 

 

 

Depreciation and amortization

 

 

44,356

 

 

 

82,617

 

Pension settlement charge

 

 

634

 

 

 

712

 

Loss on debt extinguishment

 

 

 

 

 

16,029

 

Compensation costs recognized under Restricted Unit Plans

 

 

8,422

 

 

 

7,524

 

Other, net

 

 

2,061

 

 

 

2,749

 

Changes in assets and liabilities:

 

 

 

 

 

 

Accounts receivable

 

 

(24,005

)

 

 

(19,256

)

Inventories

 

 

(4,523

)

 

 

(3,966

)

Other current and noncurrent assets

 

 

(14,581

)

 

 

(27,483

)

Accounts payable

 

 

(4,620

)

 

 

4,167

 

Accrued employment and benefit costs

 

 

(5,523

)

 

 

(1,997

)

Customer deposits and advances

 

 

(29,162

)

 

 

(28,611

)

Contributions to defined benefit pension plan

 

 

(2,220

)

 

 

(5,255

)

Other current and noncurrent liabilities

 

 

6,432

 

 

 

14,375

 

Net cash provided by operating activities

 

 

171,136

 

 

 

180,777

 

Cash flows from investing activities:

 

 

 

 

 

 

Capital expenditures

 

 

(33,304

)

 

 

(21,759

)

Investment in and acquisition of businesses

 

 

(36,366

)

 

 

(8,316

)

Proceeds from sale of business

 

 

850

 

 

 

 

Proceeds from sale of property, plant and equipment

 

 

4,492

 

 

 

2,267

 

Net cash (used in) investing activities

 

 

(64,328

)

 

 

(27,808

)

Cash flows from financing activities:

 

 

 

 

 

 

Proceeds from long-term borrowings

 

 

 

 

 

650,000

 

Repayments of long-term borrowings

 

 

 

 

 

(786,333

)

Proceeds from borrowings under revolving credit facility

 

 

270,200

 

 

 

385,501

 

Repayments of borrowings under revolving credit facility

 

 

(310,800

)

 

 

(328,721

)

Issuance costs associated with long-term borrowings

 

 

 

 

 

(10,778

)

Partnership distributions

 

 

(61,255

)

 

 

(56,159

)

Other, net

 

 

(3,695

)

 

 

(3,614

)

Net cash (used in) financing activities

 

 

(105,550

)

 

 

(150,104

)

Net increase in cash and cash equivalents

 

 

1,258

 

 

 

2,865

 

Cash and cash equivalents at beginning of period

 

 

5,808

 

 

 

3,140

 

Cash and cash equivalents at end of period

 

$

7,066

 

 

$

6,005

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

5


Table of Contents

SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF PARTNERS’ CAPITAL

(in thousands)

(unaudited)

 

 

 

Three Months Ended June 25, 2022

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

Other

 

 

Total

 

 

 

Number of

 

 

Common

 

 

Comprehensive

 

 

Partners’

 

 

 

Common Units

 

 

Unitholders

 

 

(Loss)

 

 

Capital

 

Balance, beginning of period

 

 

62,968

 

 

$

602,145

 

 

$

(16,996

)

 

$

585,149

 

Net (loss)

 

 

 

 

 

(2,535

)

 

 

 

 

 

(2,535

)

Other comprehensive income

 

 

 

 

 

 

 

 

927

 

 

 

927

 

Partnership distributions

 

 

 

 

 

(20,466

)

 

 

 

 

 

(20,466

)

Common Units issued under Restricted Unit Plans

 

 

7

 

 

 

(35

)

 

 

 

 

 

(35

)

Compensation costs recognized under Restricted Unit Plans

 

 

 

 

 

2,813

 

 

 

 

 

 

2,813

 

Balance, end of period

 

 

62,975

 

 

$

581,922

 

 

$

(16,069

)

 

$

565,853

 

 

 

 

Three Months Ended June 26, 2021

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

Other

 

 

Total