NEWS RELEASE
Contact: Robert M. Plante
SUBURBAN Vice President & Chief Financial Officer
PROPANE P.O. Box 206, Whippany, NJ 07981-0206
Phone: 973-503-9252
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FOR IMMEDIATE RELEASE
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SUBURBAN PROPANE PARTNERS, L.P. ANNOUNCES RECORD SECOND QUARTER
EARNINGS AND DECLARES A QUARTERLY DISTRIBUTION OF $0.60 PER COMMON UNIT
WHIPPANY, N.J., APRIL 22, 2004 -- Suburban Propane Partners, L.P. (NYSE:SPH), a
marketer of propane gas, heating oil and related products and services
nationwide, today reported record earnings for the second quarter of fiscal 2004
ended March 27, 2004. Its Board of Supervisors also declared the previously
announced increase in the quarterly distribution from $0.5875 per Common Unit to
$0.60 per Common Unit -- $2.40 per Common Unit annualized.
The second quarter of fiscal 2004 ended March 27, 2004 is the first full quarter
that includes the results from the acquisition of substantially all of the
assets and operations of Agway Energy. Net income for the three months ended
March 27, 2004 of $92.6 million, or $2.97 per Common Unit, increased $34.3
million, or 58.8%, compared to the prior year quarter of $58.3 million, or $2.31
per Common Unit. Earnings before interest, taxes, depreciation and amortization
("EBITDA") increased $38.6 million, or 52.2%, to $112.6 million for the three
months ended March 27, 2004 compared to $74.0 million in the prior year quarter.
EBITDA and net income for the second quarter of fiscal 2004 were favorably
impacted by the net result of certain significant items, mainly relating to (i)
a $14.2 million gain from the sale of ten customer service centers in Texas,
Oklahoma, Missouri and Kansas considered to be non-strategic, compared to a $2.4
million gain from the sale of five customer service centers during the second
quarter of fiscal 2003; (ii) a non-cash charge of $5.6 million included within
cost of products sold relating to purchase accounting for the Agway Energy
acquisition; and, (iii) a $2.2 million restructuring charge related to the
Partnership's initial efforts to integrate certain management and back office
functions of Agway Energy.
Temperatures nationwide, as reported by the National Oceanic and Atmospheric
Administration ("NOAA"), averaged 3% warmer than normal in the second quarter of
fiscal 2004 compared to 2% colder than normal in the prior year quarter, or 5%
warmer temperatures year-over-year. Retail propane gallons sold in the second
quarter of fiscal 2004 increased 36.9 million gallons, or 20.2%, to 219.9
million gallons compared to 183.0 million gallons in the prior year quarter,
primarily as a result of the addition of the Agway Energy operations in the
northeast. Sales of heating oil and other refined fuels amounted to 110.6
million gallons during the second quarter of fiscal 2004. Revenues for the three
months ended March 27, 2004 amounted to $574.6 million, an increase of $286.9
million compared to revenues in the prior year quarter of $287.7 million. The
increase in revenue results from increased propane volumes, as described above,
coupled with higher average selling prices on propane volumes as a result of
higher propane costs during the quarter compared to the prior year quarter.
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Additionally, with the acquisition of Agway Energy, revenues for the second
quarter of fiscal 2004 were favorably impacted by the addition of heating oil
and other refined fuels, as well as increased service activities.
Combined operating and general and administrative expenses of $127.2 million
were $52.3 million, or 69.8%, above the prior year quarter of $74.9 million.
Operating expenses in the second quarter of fiscal 2004 included a $1.1 million
unrealized (non-cash) gain attributable to the mark-to-market on derivative
instruments ("FAS 133"), compared to a $0.4 million unrealized loss attributable
to FAS 133 in the prior year period. The increase in combined operating and
general and administrative expenses is primarily attributable to the addition of
the Agway Energy operations, as well as increased professional services and
travel expenses associated with integration activities during the quarter. In
addition, higher employee compensation and benefit related expenses associated
with the increased business activities and higher profit levels and higher
pension and insurance costs were experienced during the second quarter of fiscal
2004 compared to the prior year quarter. As was the case in this second fiscal
quarter, the Partnership expects to incur additional restructuring charges and
other costs to integrate the combined operations during the third and fourth
quarters of fiscal 2004 in order to achieve the anticipated synergies from the
Agway Energy acquisition.
Depreciation and amortization expense increased $2.4 million, or 35.3%, to $9.2
million as a result of the impact of the tangible and intangible assets
acquired. Net interest expense increased $1.9 million, or 21.3%, to $10.8
million in the second quarter of fiscal 2004 compared to $8.9 million in the
prior year quarter. The increase in net interest expense is a result of the net
impact of the addition of $175.0 million of 6.875% senior notes associated with
financing for the acquisition of Agway Energy, offset by $42.5 million lower
amounts outstanding under our 7.54% senior notes.
In announcing these results, President and Chief Executive Officer Mark A.
Alexander said, "We are extremely pleased with these record results achieved
during the first full quarter of operation following our December 2003
acquisition of Agway Energy. This record performance provides an initial
indicator of the potential opportunity and added strength of the combined
operations. To mark this successful beginning, we are pleased to reaffirm our
previously announced distribution increase, the eighth such increase since the
Partnership's recapitalization five years ago."
The Partnership's quarterly distribution of $0.60 per Common Unit for the three
months ended March 27, 2004 will be payable on May 11, 2004, to Common
Unitholders of record as of May 4, 2004.
Suburban Propane Partners, L.P. is a publicly traded Master Limited Partnership
listed on the New York Stock Exchange. Headquartered in Whippany, New Jersey,
Suburban has been in the customer service business since 1928. The Partnership
serves the energy needs of approximately 1,100,000 residential, commercial,
industrial and agricultural customers through more than 400 customer service
centers in 35 states.
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SUBURBAN PROPANE PARTNERS, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND SIX MONTHS ENDED MARCH 27, 2004 AND MARCH 29, 2003
(IN THOUSANDS, EXCEPT PER UNIT AMOUNTS)
(UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED
MARCH 27, 2004 MARCH 29, 2003 MARCH 27, 2004 MARCH 29, 2003
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Revenues
Propane and refined fuels $ 463,512 $ 266,423 $ 650,712 $ 439,730
Other (a) 111,066 21,231 144,535 47,164
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574,578 287,654 795,247 486,894
Costs and expenses
Cost of products sold 346,736 142,231 457,035 234,712
Operating 109,840 64,709 172,594 123,234
General and administrative 17,392 10,149 27,894 19,170
Restructuring costs 2,179 - 2,179 -
Depreciation and amortization 9,223 6,800 16,452 13,773
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485,370 223,889 676,154 390,889
Income before interest expense and provision
for income taxes 89,208 63,765 119,093 96,005
Interest expense, net 10,770 8,876 20,481 17,732
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Income before provision for income taxes 78,438 54,889 98,612 78,273
Provision for income taxes 83 37 166 167
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Income from continuing operations 78,355 54,852 98,446 78,106
Discontinued operations:
Gain on sale of customer service centers 14,205 2,404 14,205 2,404
Income from discontinued customer service centers - 1,050 - 1,050
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Net income $ 92,560 $ 58,306 $ 112,651 $ 81,560
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General Partner's interest in net income $ 2,616 $ 1,484 $ 3,124 $ 2,075
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Limited Partners' interest in net income $ 89,944 $ 56,822 $ 109,527 $ 79,485
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Income from continuing operations per Common Unit - basic $ 2.52 $ 2.17 $ 3.31 $ 3.09
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Net income per Common Unit - basic $ 2.97 $ 2.31 $ 3.78 $ 3.23
========= ========= ========= =========
Weighted average number of Common Units outstanding - basic 30,257 24,631 28,942 24,631
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Income from continuing operations per Common Unit - diluted $ 2.51 $ 2.16 $ 3.29 $ 3.08
========= ========= ========= =========
Net income per Common Unit - diluted $ 2.96 $ 2.30 $ 3.77 $ 3.22
========= ========= ========= =========
Weighted average number of Common Units outstanding - diluted 30,372 24,692 29,053 24,688
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Supplemental Information:
EBITDA (b) $ 112,636 $ 74,019 $ 149,750 $ 113,232
Retail gallons sold:
Propane 219,945 182,956 351,862 322,890
Refined fuels 110,580 - 112,451 -
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(a) Other revenues principally represent amounts generated from the sales of
appliances, parts and related services.
(b) EBITDA represents net income before deducting interest expense, income
taxes, depreciation and amortization. Our management uses EBITDA as a
measure of liquidity and we are including it because we believe that it
provides our investors and industry analysts with additional information to
evaluate our ability to meet our debt service obligations and to pay our
quarterly distributions to holders of our Common Units. Moreover, our senior
note agreements and our revolving credit agreement require us to use EBITDA
as a component in calculating our leverage and interest coverage ratios.
EBITDA is not a recognized term under generally accepted accounting
principles ("GAAP") and should not be considered as an alternative to net
income or net cash provided by operating activities determined in accordance
with GAAP. Because EBITDA, as determined by us, excludes some, but not all,
items that affect net income, it may not be comparable to EBITDA or
similarly titled measures used by other companies. The following table sets
forth (i) our calculation of EBITDA and (ii) a reconciliation of EBITDA, as
so calculated, to our net cash provided by operating activities:
THREE MONTHS ENDED SIX MONTHS ENDED
MARCH 27, 2004 MARCH 29, 2003 MARCH 27, 2004 MARCH 29, 2003
-------------- -------------- -------------- --------------
Net income $ 92,560 $ 58,306 $ 112,651 $ 81,560
Add:
Provision for income taxes 83 37 166 167
Interest expense, net 10,770 8,876 20,481 17,732
Depreciation and amortization 9,223 6,800 16,452 13,773
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EBITDA 112,636 74,019 149,750 113,232
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Add / (subtract):
Provision for income taxes (83) (37) (166) (167)
Interest expense, net (10,770) (8,876) (20,481) (17,732)
(Gain) / loss on disposal of property, plant
and equipment, net (79) 26 (161) (320)
Gain on sale of customer service centers (14,205) (2,404) (14,205) (2,404)
Changes in working capital and other assets
and liabilities (75,477) (47,740) (91,154) (69,243)
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Net cash provided by operating activities $ 12,022 $ 14,988 $ 23,583 $ 23,366
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Net cash provided by / (used in) investing activities $ 14,204 $ 3,235 $ (200,791) $ 674
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Net cash (used in) / provided by financing activities $ (17,446) $ (14,533) $ 222,869 $ (29,124)
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