Company Quick10K Filing
Suburban Propane Partners
Price23.81 EPS1
Shares62 P/E22
MCap1,485 P/FCF7
Net Debt1,236 EBIT69
TEV2,721 TEV/EBIT39
TTM 2019-09-28, in MM, except price, ratios
10-Q 2020-12-26 Filed 2021-02-04
10-K 2020-09-26 Filed 2020-11-25
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 2020-11-12
8-K 2020-11-10
8-K 2020-10-22
8-K 2020-10-22
8-K 2020-08-06
8-K 2020-07-23
8-K 2020-07-23
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

SPH 10Q Quarterly Report

Part I. Financial Information
Item 1. Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II. Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
EX-31.1 sph-ex311_9.htm
EX-31.2 sph-ex312_7.htm
EX-32.1 sph-ex321_8.htm
EX-32.2 sph-ex322_6.htm

Suburban Propane Partners Earnings 2020-12-26

Balance SheetIncome StatementCash Flow
3.02.41.81.20.60.02012201420172020
Assets, Equity
1.00.80.60.30.1-0.12012201420172020
Rev, G Profit, Net Income
0.20.10.0-0.1-0.2-0.32012201420172020
Ops, Inv, Fin

sph-10q_20201226.htm
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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 December 26, 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 February 1, 2021, there were 62,522,183 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 December 26, 2020 and September 26, 2020

 

1

 

 

 

 

 

 

 

Condensed Consolidated Statements of Operations for the three months ended December 26, 2020 and December 28, 2019

 

2

 

 

 

 

 

 

 

Condensed Consolidated Statements of Comprehensive Income for the three months ended December 26, 2020 and December 28, 2019

 

3

 

 

 

 

 

 

 

Condensed Consolidated Statements of Cash Flows for the three months ended December 26, 2020 and December 28, 2019

 

4

 

 

 

 

 

 

 

Condensed Consolidated Statements of Partners’ Capital for the three months ended December 26, 2020
and December 28, 2019

 

5

 

 

 

 

 

 

 

Notes to Condensed Consolidated Financial Statements

 

6

 

 

 

 

 

ITEM 2.

 

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

 

21

 

 

 

 

 

ITEM 3.

 

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

29

 

 

 

 

 

ITEM 4.

 

CONTROLS AND PROCEDURES

 

31

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

PART II. OTHER INFORMATION

 

32

 

 

 

 

 

ITEM 1.

 

LEGAL PROCEEDINGS

 

32

 

 

 

 

 

ITEM 1A.

 

RISK FACTORS

 

32

 

 

 

 

 

ITEM 2.

 

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

32

 

 

 

 

 

ITEM 3.

 

DEFAULTS UPON SENIOR SECURITIES

 

32

 

 

 

 

 

ITEM 4.

 

MINE SAFETY DISCLOSURES

 

32

 

 

 

 

 

ITEM 5.

 

OTHER INFORMATION

 

32

 

 

 

 

 

ITEM 6.

 

EXHIBITS

 

33

 

 

 

 

 

SignaturEs

 

34

 

 

 


Table of Contents

 

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;

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 26, 2020.  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.

 

 

 

 


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PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

(unaudited)

 

 

 

December 26,

 

 

September 26,

 

 

 

2020

 

 

2020

 

ASSETS

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

5,313

 

 

$

3,140

 

Accounts receivable, less allowance for doubtful accounts of $4,369 and

   $4,473, respectively

 

 

106,913

 

 

 

55,441

 

Inventories

 

 

56,383

 

 

 

46,869

 

Other current assets

 

 

19,931

 

 

 

10,508

 

Total current assets

 

 

188,540

 

 

 

115,958

 

Property, plant and equipment, net

 

 

590,012

 

 

 

597,454

 

Operating lease right-of-use assets

 

 

125,841

 

 

 

119,594

 

Goodwill

 

 

1,107,026

 

 

 

1,103,781

 

Other intangible assets, net

 

 

72,911

 

 

 

84,140

 

Other assets

 

 

25,941

 

 

 

26,326

 

Total assets

 

$

2,110,271

 

 

$

2,047,253

 

LIABILITIES AND PARTNERS’ CAPITAL

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

55,573

 

 

$

31,985

 

Accrued employment and benefit costs

 

 

22,953

 

 

 

35,214

 

Customer deposits and advances

 

 

93,422

 

 

 

104,427

 

Operating lease liabilities

 

 

27,822

 

 

 

26,436

 

Other current liabilities

 

 

52,822

 

 

 

46,454

 

Total current liabilities

 

 

252,592

 

 

 

244,516

 

Long-term borrowings

 

 

1,240,881

 

 

 

1,210,176

 

Accrued insurance

 

 

53,380

 

 

 

57,542

 

Operating lease liabilities

 

 

97,524

 

 

 

92,668

 

Other liabilities

 

 

82,732

 

 

 

79,970

 

Total liabilities

 

 

1,727,109

 

 

 

1,684,872

 

Commitments and contingencies

 

 

 

 

 

 

 

 

Partners’ capital:

 

 

 

 

 

 

 

 

Common Unitholders (62,522 and 62,146 units issued and outstanding at

   December 26, 2020 and September 26, 2020, respectively)

 

 

408,345

 

 

 

388,157

 

Accumulated other comprehensive loss

 

 

(25,183

)

 

 

(25,776

)

Total partners’ capital

 

 

383,162

 

 

 

362,381

 

Total liabilities and partners’ capital

 

$

2,110,271

 

 

$

2,047,253

 

 

 

 

 

 

 

 

 

 

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

 

 

 

December 26,

 

 

December 28,

 

 

 

2020

 

 

2019

 

Revenues

 

 

 

 

 

 

 

 

Propane

 

$

268,624

 

 

$

285,425

 

Fuel oil and refined fuels

 

 

15,750

 

 

 

25,891

 

Natural gas and electricity

 

 

6,876

 

 

 

8,721

 

All other

 

 

13,941

 

 

 

13,841

 

 

 

 

305,191

 

 

 

333,878

 

Costs and expenses

 

 

 

 

 

 

 

 

Cost of products sold

 

 

103,379

 

 

 

118,600

 

Operating

 

 

97,979

 

 

 

106,876

 

General and administrative

 

 

18,130

 

 

 

19,274

 

Depreciation and amortization

 

 

28,017

 

 

 

29,274

 

 

 

 

247,505

 

 

 

274,024

 

Operating income

 

 

57,686

 

 

 

59,854

 

Interest expense, net

 

 

18,135

 

 

 

19,072

 

Other, net

 

 

1,078

 

 

 

978

 

Income before provision for (benefit from) income taxes

 

 

38,473

 

 

 

39,804

 

Provision for (benefit from) income taxes

 

 

496

 

 

 

(359

)

Net income

 

$

37,977

 

 

$

40,163

 

Net income per Common Unit - basic

 

$

0.61

 

 

$

0.65

 

Weighted average number of Common Units outstanding - basic

 

 

62,544

 

 

 

62,142

 

Net income per Common Unit - diluted

 

$

0.61

 

 

$

0.64

 

Weighted average number of Common Units outstanding - diluted

 

 

62,741

 

 

 

62,414

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

December 26,

 

 

December 28,

 

 

 

2020

 

 

2019

 

Net income

 

$

37,977

 

 

$

40,163

 

Amortization of net actuarial losses and prior service

   credits into earnings

 

 

593

 

 

 

541

 

Other comprehensive income

 

 

593

 

 

 

541

 

Total comprehensive income

 

$

38,570

 

 

$

40,704

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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)

 

 

 

Three Months Ended

 

 

 

December 26,

 

 

December 28,

 

 

 

2020

 

 

2019

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net income

 

$

37,977

 

 

$

40,163

 

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

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

28,017

 

 

 

29,274

 

Compensation costs recognized under Restricted Unit Plans

 

 

2,358

 

 

 

2,562

 

Other, net

 

 

724

 

 

 

(261

)

Changes in assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(51,472

)

 

 

(63,999

)

Inventories

 

 

(9,514

)

 

 

(7,355

)

Other current and noncurrent assets

 

 

(14,889

)

 

 

(4,094

)

Accounts payable

 

 

23,831

 

 

 

41,585

 

Accrued employment and benefit costs

 

 

(12,261

)

 

 

(10,713

)

Customer deposits and advances

 

 

(11,005

)

 

 

(13,801

)

Contributions to defined benefit pension plan

 

 

 

 

 

(1,015

)

Other current and noncurrent liabilities

 

 

10,468

 

 

 

3,266

 

Net cash provided by operating activities

 

 

4,234

 

 

 

15,612

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Capital expenditures

 

 

(5,812

)

 

 

(13,039

)

Investment in and acquisition of businesses

 

 

(6,078

)

 

 

(21,049

)

Proceeds from sale of property, plant and equipment

 

 

676

 

 

 

862

 

Net cash (used in) investing activities

 

 

(11,214

)

 

 

(33,226

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Proceeds from borrowings under revolving credit facility

 

 

93,900

 

 

 

129,700

 

Repayments of borrowings under revolving credit facility

 

 

(63,700

)

 

 

(68,700

)

Partnership distributions

 

 

(18,644

)

 

 

(37,041

)

Other, net

 

 

(2,403

)

 

 

(2,869

)

Net cash provided by financing activities

 

 

9,153

 

 

 

21,090

 

Net increase in cash and cash equivalents

 

 

2,173

 

 

 

3,476

 

Cash and cash equivalents at beginning of period

 

 

3,140

 

 

 

2,441

 

Cash and cash equivalents at end of period

 

$

5,313

 

 

$

5,917

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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 December 26, 2020

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other

 

 

Total

 

 

 

Number of

 

 

Common

 

 

Comprehensive

 

 

Partners’

 

 

 

Common Units

 

 

Unitholders

 

 

(Loss)

 

 

Capital

 

Balance, beginning of period

 

 

62,146

 

 

$

388,157

 

 

$

(25,776

)

 

$

362,381

 

Net Income

 

 

 

 

 

 

37,977

 

 

 

 

 

 

 

37,977

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

593

 

 

 

593

 

Partnership distributions

 

 

 

 

 

 

(18,644

)

 

 

 

 

 

 

(18,644

)

Common Units issued under Restricted Unit Plans

 

 

376

 

 

 

(1,503

)

 

 

 

 

 

 

(1,503

)

Compensation costs recognized under Restricted Unit Plans

 

 

 

 

 

 

2,358

 

 

 

 

 

 

 

2,358

 

Balance, end of period

 

 

62,522

 

 

$

408,345

 

 

$

(25,183

)

 

$

383,162

 

 

 

 

Three Months Ended December 28, 2019

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other

 

 

Total

 

 

 

Number of

 

 

Common

 

 

Comprehensive

 

 

Partners’

 

 

 

Common Units

 

 

Unitholders

 

 

(Loss)

 

 

Capital

 

Balance, beginning of period

 

 

61,735

 

 

$

450,124

 

 

$

(26,186

)

 

$

423,938

 

Net Income

 

 

 

 

 

 

40,163

 

 

 

 

 

 

 

40,163

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

541

 

 

 

541

 

Partnership distributions

 

 

 

 

 

 

(37,041

)

 

 

 

 

 

 

(37,041

)

Common Units issued under Restricted Unit Plans

 

 

335

 

 

 

(1,729

)

 

 

 

 

 

 

(1,729

)

Compensation costs recognized under Restricted Unit Plans

 

 

 

 

 

 

2,562

 

 

 

 

 

 

 

2,562

 

Balance, end of period

 

 

62,070

 

 

$

454,079

 

 

$

(25,645

)

 

$

428,434

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

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SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except unit and per unit amounts)

(unaudited)

1.

Partnership Organization and Formation

Suburban Propane Partners, L.P. (the “Partnership”) is a publicly traded Delaware limited partnership principally engaged, through its operating partnership and subsidiaries, in the retail marketing and distribution of propane, fuel oil and refined fuels, as well as the marketing of natural gas and electricity in deregulated markets.  In addition, to complement its core marketing and distribution businesses, the Partnership services a wide variety of home comfort equipment, particularly for heating and ventilation.  The publicly traded limited partner interests in the Partnership are evidenced by common units traded on the New York Stock Exchange (“Common Units”), with 62,522,016 Common Units outstanding at December 26, 2020.  The holders of Common Units are entitled to participate in distributions and exercise the rights and privileges available to limited partners under the Third Amended and Restated Agreement of Limited Partnership (the “Partnership Agreement”), as amended.  Rights and privileges under the Partnership Agreement include, among other things, the election of all members of the Board of Supervisors and voting on the removal of the general partner.

Suburban Propane, L.P. (the “Operating Partnership”), a Delaware limited partnership, is the Partnership’s operating subsidiary formed to operate the propane business and assets.  In addition, Suburban Sales & Service, Inc. (the “Service Company”), a subsidiary of the Operating Partnership, was formed to operate the service work and appliance and parts businesses of the Partnership.  The Operating Partnership, together with its direct and indirect subsidiaries, accounts for substantially all of the Partnership’s assets, revenues and earnings.  The Partnership, the Operating Partnership and the Service Company commenced operations in March 1996 in connection with the Partnership’s initial public offering.

The general partner of both the Partnership and the Operating Partnership is Suburban Energy Services Group LLC (the “General Partner”), a Delaware limited liability company, the sole member of which is the Partnership’s Chief Executive Officer.  Other than as a holder of 784 Common Units that will remain in the General Partner, the General Partner does not have any economic interest in the Partnership or the Operating Partnership.

The Partnership’s fuel oil and refined fuels, natural gas and electricity and services businesses are structured as either limited liability companies that are treated as corporations or corporate entities (collectively referred to as the “Corporate Entities”) and, as such, are subject to corporate level U.S. income tax.

Suburban Energy Finance Corp., a direct 100%-owned subsidiary of the Partnership, was formed on November 26, 2003 to serve as co-issuer, jointly and severally with the Partnership, of the Partnership’s senior notes.

 

2.

Basis of Presentation

Principles of Consolidation.  The condensed consolidated financial statements include the accounts of the Partnership, the Operating Partnership and all of its direct and indirect subsidiaries.  All significant intercompany transactions and account balances have been eliminated.  The Partnership consolidates the results of operations, financial condition and cash flows of the Operating Partnership as a result of the Partnership’s 100% limited partner interest in the Operating Partnership.

The accompanying condensed consolidated financial statements are unaudited and have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”).  They include all adjustments that the Partnership considers necessary for a fair statement of the results of operations, financial position and cash flows for the interim periods presented.  Such adjustments consist only of normal recurring items, unless otherwise disclosed.  These financial statements should be read in conjunction with the financial statements included in the Partnership’s Annual Report on Form 10-K for the fiscal year ended September 26, 2020.  Due to the seasonal nature of the Partnership’s operations, the results of operations for interim periods are not necessarily indicative of the results to be expected for a full year.

 

Fiscal Period.  The Partnership uses a 52/53 week fiscal year which ends on the last Saturday in September.  The Partnership’s fiscal quarters are generally thirteen weeks in duration.  When the Partnership’s fiscal year is 53 weeks long, the corresponding fourth quarter is fourteen weeks in duration.

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Revenue Recognition.  Revenue is recognized by the Partnership when goods or services promised in a contract with a customer have been transferred, and no further performance obligation on that transfer is required, in an amount that reflects the consideration expected to be received.  Performance obligations are determined and evaluated based on the specific terms of the arrangements and the distinct products and services offered.  Due to the nature of the retail business of the Partnership, there are no remaining or unsatisfied performance obligations as of the end of the reporting period, except for tank rental agreements, maintenance service contracts, fixed price contracts and budgetary programs, as described below.  The performance obligation associated with sales of propane, fuel oil and refined fuels is met at the time product is delivered to the customer.  Revenue from the sale of appliances and equipment is recognized at the time of sale or when installation is complete, as defined by the performance obligations included within the related customer contract.  Revenue from repairs, maintenance and other service activities is recognized upon completion of the service.  Revenue from the sale of natural gas and electricity is recognized based on customer usage as determined by meter readings for amounts delivered, an immaterial amount of which may be unbilled at the end of each accounting period.

The Partnership defers the recognition of revenue for annually billed tank rent, maintenance service contracts, fixed price contracts and budgetary programs where customer consideration is received at the start of the contract period, establishing contract liabilities which are disclosed as customer deposits and advances on the condensed consolidated balance sheets.  Deliveries to customers enrolled in budgetary programs that exceed billings to those customers establish contract assets which are included in accounts receivable on the condensed consolidated balance sheets.  The Partnership ratably recognizes revenue over the applicable term for tank rent and maintenance service agreements, which is generally one year, and at the time of delivery for fixed price contracts and budgetary programs.  

The Partnership incurs incremental direct costs, such as commissions to its salesforce, to obtain certain contracts.  These costs are expensed as incurred, consistent with the practical expedients issued by the FASB, since the expected amortization period is one year or less.  The Partnership generally determines selling prices based on, among other things, the current weighted average cost and the current replacement cost of the product at the time of delivery, plus an applicable margin.  Except for tank rental agreements, maintenance service contracts, fixed price contracts and budgetary programs, customer payments for the satisfaction of a performance obligation are due upon receipt.

Fair Value Measurements.  The Partnership measures certain of its assets and liabilities at fair value, which is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants – in either the principal market or the most advantageous market.  The principal market is the market with the greatest level of activity and volume for the asset or liability.

The common framework for measuring fair value utilizes a three-level hierarchy to prioritize the inputs used in the valuation techniques to derive fair values.  The basis for fair value measurements for each level within the hierarchy is described below with Level 1 having the highest priority and Level 3 having the lowest.

Level 1: Quoted prices in active markets for identical assets or liabilities.

Level 2: Quoted prices in active markets for similar assets or liabilities; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs are observable in active markets.

Level 3: Valuations derived from valuation techniques in which one or more significant inputs are unobservable.

Business Combinations.  The Partnership accounts for business combinations using the acquisition method and accordingly, the assets and liabilities of the acquired entities are recorded at their estimated fair values at the acquisition date.  Goodwill represents the excess of the purchase price over the fair value of the net assets acquired, including the amount assigned to identifiable intangible assets.  The primary drivers that generate goodwill are the value of synergies between the acquired entities and the Partnership, and the acquired assembled workforce, neither of which qualifies as an identifiable intangible asset.  Identifiable intangible assets with finite lives are amortized over their useful lives.  The results of operations of acquired businesses are included in the condensed consolidated financial statements from the acquisition date.  The Partnership expenses all acquisition-related costs as incurred.

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Use of Estimates.  The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“US GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Estimates have been made by management in the areas of self-insurance and litigation reserves, pension and other postretirement benefit liabilities and costs, valuation of derivative instruments, depreciation and amortization of long-lived assets, asset impairment assessments, tax valuation allowances, allowances for doubtful accounts, and purchase price allocation for acquired businesses.  The Partnership uses Society of Actuaries life expectancy information when developing the annual mortality assumptions for the pension and postretirement benefit plans, which are used to measure net periodic benefit costs and the obligation under these plans.  Actual results could differ from those estimates, making it reasonably possible that a material change in these estimates could occur in the near term.

Recently Adopted Accounting Pronouncements. On the first day of fiscal 2021, the Partnership adopted the guidance under Accounting Standards Update (“ASU”) ASU 2017-04 “Simplifying the Test for Goodwill Impairment” (“Topic 350”). This update eliminated the requirement to perform a hypothetical purchase price allocation to measure goodwill impairment.  In testing goodwill for impairment, an entity may elect to utilize a qualitative assessment to evaluate whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount.  If the qualitative assessment indicates that goodwill impairment is more likely than not, an entity should perform its annual or interim goodwill impairment test by comparing the fair value of a reporting unit to its carrying amount and recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit's fair value, not to exceed the total amount of goodwill allocated to the reporting unit. The initial adoption of Topic 350 did not have an impact on the Partnership’s condensed consolidated financial statements.

On the first day of fiscal 2021, the Partnership adopted the guidance under ASU 2016-13 “Financial Instruments - Measurement of Credit Losses on Financial Instruments” (“Topic 326”), including the related amendments thereto.  The new guidance introduced an approach based on expected losses rather than incurred losses to estimate credit losses on certain types of financial instruments including, but not limited to, trade and other receivables, held-to-maturity debt securities, loans and net investments in leases. The Partnership adopted the guidance under Topic 326 using a modified retrospective transition approach for all financial instruments existing at, or entered into after, the date of initial application. The adoption of Topic 326 did not have a material impact on the Partnership’s condensed consolidated financial statements.

3.

Disaggregation of Revenue

The following table disaggregates revenue for each customer type.  See Note 18, “Segment Information” for more information on segment reporting wherein it is disclosed that the Partnership’s Propane, Fuel Oil and Refined Fuels and Natural Gas and Electricity reportable segments generated approximately 88%, 5% and 3%, respectively, of the Partnership’s revenue from its reportable segments for all periods presented.  The propane segment contributes the majority of the Partnership’s revenue and the concentration of revenue by customer type for the propane segment is not materially different from the consolidated revenue.

 

 

Three Months Ended

 

 

December 26,

 

 

December 28,

 

 

2020

 

 

2019

 

Retail

 

 

 

 

 

 

 

Residential

$

174,711

 

 

$

196,886

 

Commercial

 

79,440

 

 

 

83,335

 

Industrial

 

25,795

 

 

 

26,599

 

Agricultural

 

11,138

 

 

 

12,895

 

Government

 

11,900

 

 

 

14,149

 

Wholesale

 

2,207

 

 

 

14

 

Total revenues

$

305,191

 

 

$

333,878

 

 

The Partnership recognized $32,419 and $32,676 of revenue during the three months ended December 26, 2020 and December 28, 2019, respectively, for annually billed tank rent, maintenance service contracts, fixed price contracts and budgetary programs where customer consideration was received at the start of the contract period, and which was included in contract liabilities as of the beginning of each respective period. Contract assets of $6,102 and $4,700 relating to deliveries to customers enrolled in budgetary programs that exceeded billings to those customers were included in accounts receivable as of December 26, 2020 and September 26, 2020, respectively.

 

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4.

Investments in and Acquisition of Businesses

On November 12, 2020, the Operating Partnership acquired the propane assets and operations of a propane retailer headquartered in North Carolina for $7,685, including $1,250 for non-compete consideration, plus working capital acquired.  As of December 26, 2020, $5,300 was paid and the remainder of the purchase price will be funded in accordance with the terms of the asset purchase and non-compete agreements. This acquisition was consummated pursuant to the Partnership’s strategic growth initiatives.  The preliminary purchase price allocation and results of operations of the acquired business was not material to the Partnership’s condensed consolidated financial position and statement of operations.

On September 17, 2020, the Operating Partnership purchased a 39% equity stake in Oberon Fuels, Inc. (“Oberon”) based in San Diego, California and also purchased a secured convertible note issued by Oberon.  Oberon, a development-stage producer of low carbon, renewable dimethyl ether (“rDME”) transportation fuel, is focused on the research and development of practical and affordable pathways to zero-emission transportation through its proprietary production process. These investments were made in line with the Partnership’s green initiatives focused on innovative solutions to reduce greenhouse gas emissions. The equity investment in Oberon is being accounted for under the equity method of accounting.

During the first quarter of fiscal 2021, the Operating Partnership purchased an additional secured convertible note issued by Oberon as they reached certain development milestones as stated in the agreement.

 

5.

Financial Instruments and Risk Management

Cash and Cash Equivalents.  The Partnership considers all highly liquid instruments purchased with an original maturity of three months or less to be cash equivalents.  The carrying amount approximates fair value because of the short-term maturity of these instruments.

Derivative Instruments and Hedging Activities

Commodity Price Risk.  Given the retail nature of its operations, the Partnership maintains a certain level of priced physical inventory to help ensure its field operations have adequate supply commensurate with the time of year.  The Partnership’s strategy is to keep its physical inventory priced relatively close to market for its field operations.  The Partnership enters into a combination of exchange-traded futures and option contracts and, in certain instances, over-the-counter options and swap contracts (collectively, “derivative instruments”) to hedge price risk associated with propane and fuel oil physical inventories, as well as future purchases of propane or fuel oil used in its operations and to help ensure adequate supply during periods of high demand.  In addition, the Partnership sells propane and fuel oil to customers at fixed prices, and enters into derivative instruments to hedge a portion of its exposure to fluctuations in commodity prices as a result of selling the fixed price contracts.  Under this risk management strategy, realized gains or losses on derivative instruments will typically offset losses or gains on the physical inventory once the product is sold or delivered as it pertains to fixed price contracts.  All of the Partnership’s derivative instruments are reported on the condensed consolidated balance sheet at their fair values.  In addition, in the course of normal operations, the Partnership routinely enters into contracts such as forward priced physical contracts for the purchase or sale of propane and fuel oil that qualify for and are designated as normal purchase or normal sale contracts.  Such contracts are exempted from the fair value accounting requirements and are accounted for at the time product is purchased or sold under the related contract.  The Partnership does not use derivative instruments for speculative trading purposes.  Market risks associated with derivative instruments are monitored daily for compliance with the Partnership’s Hedging and Risk Management Policy which includes volume limits for open positions.  Priced on-hand inventory is also reviewed and managed daily as to exposures to changing market prices.

On the date that derivative instruments are entered into, other than those designated as normal purchases or normal sales, the Partnership makes a determination as to whether the derivative instrument qualifies for designation as a hedge.  Changes in the fair value of derivative instruments are recorded each period in current period earnings or other comprehensive income (“OCI”), depending on whether the derivative instrument is designated as a hedge and, if so, the type of hedge.  For derivative instruments designated as cash flow hedges, the Partnership formally assesses, both at the hedge contract’s inception and on an ongoing basis, whether the hedge contract is highly effective in offsetting changes in cash flows of hedged items.  Changes in the fair value of derivative instruments designated as cash flow hedges are reported in OCI to the extent effective and reclassified into earnings during the same period in which the hedged item affects earnings.  The mark-to-market gains or losses on ineffective portions of cash flow hedges are recognized in earnings immediately.  Changes in the fair value of derivative instruments that are not designated as cash flow hedges, and that do not meet the normal purchase and normal sale exemption, are recorded within earnings as they occur.  Cash flows associated with derivative instruments are reported as operating activities within the condensed consolidated statement of cash flows.

Interest Rate Risk.  A portion of the Partnership’s borrowings bear interest at prevailing interest rates based upon, at the Operating Partnership’s option, LIBOR plus an applicable margin or the base rate, defined as the higher of the Federal Funds Rate plus ½ of 1% or the agent bank’s prime rate, or LIBOR plus 1%, plus the applicable margin.  The applicable margin is dependent on the level of the Partnership’s total leverage (the ratio of total debt to income before deducting interest expense, income taxes, depreciation and amortization (“EBITDA”)).  Therefore, the Partnership is subject to interest rate risk on the variable component of the interest rate.  

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From time to time, the Partnership manages part of its variable interest rate risk by entering into interest rate swap agreements.  The Partnership did not enter into any interest rate swap agreements during the first quarter of fiscal 2021 or in fiscal 2020.

Valuation of Derivative Instruments.  The Partnership measures the fair value of its exchange-traded options and futures contracts using quoted market prices found on the New York Mercantile Exchange (the “NYMEX”) (Level 1 inputs); the fair value of its swap contracts using quoted forward prices, and the fair value of its interest rate swaps using model-derived valuations driven by observable projected movements of the 3-month LIBOR (Level 2 inputs); and the fair value of its over-the-counter options contracts using Level 3 inputs.  The Partnership’s over-the-counter options contracts are valued based on an internal option model.  The inputs utilized in the model are based on publicly available information as well as broker quotes.  The significant unobservable inputs used in the fair value measurements of the Partnership’s over-the-counter options contracts are interest rate and market volatility.

The following summarizes the fair value of the Partnership’s derivative instruments and their location in the condensed consolidated balance sheets as of December 26, 2020 and September 26, 2020, respectively:

 

 

 

As of December 26, 2020

 

 

As of September 26, 2020

 

Asset Derivatives

 

Location

 

Fair Value

 

 

Location

 

Fair Value

 

Derivatives not designated as

   hedging instruments:

 

 

 

 

 

 

 

 

 

 

 

 

Commodity-related derivatives

 

Other current assets

 

$

5,729

 

 

Other current assets

 

$

1,066

 

 

 

Other assets

 

 

198

 

 

Other assets

 

 

461

 

 

 

 

 

$

5,927

 

 

 

 

$

1,527

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liability Derivatives

 

Location

 

Fair Value

 

 

Location

 

Fair Value

 

Derivatives not designated as

   hedging instruments:

 

 

 

 

 

 

 

 

 

 

 

 

Commodity-related derivatives

 

Other current liabilities

 

$

2,704

 

 

Other current liabilities

 

$