SPH - Earnings call transcript Q4 2017 | Suburban Propane Partners, L.P.

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Operator

Ladies and gentlemen, thank you for standing-by. Welcome to Suburban Propane's Fourth Quarter 2017 Financial Results Conference Call. At this time, all participant lines are in a listen-only mode. Later, there will be an opportunity for your questions, instructions will be given at that time. [Operator Instructions] As a reminder, today's conference call is being recorded. business forward-looking Securities the as of Exchange to Partnership's contains XXE of amended, operations. call and the the predictions, of Act future conference statements and meaning within Section relating financial This condition and results expectations of XXXX These certain involve statements and uncertainties. forward-looking risks earnings The statements are from release, that in those website. press cause Partnership such of in referred results viewed actual forward-looking company's factors listed important some which to discussed cautionary as to its has statements, be the can the could differ which materially on All Partnership by subsequent written and such are oral its entirety forward-looking statements statements. attributable or to acting expressly the cautionary the persons qualified in behalf on and like turn would this over Treasurer. I At President the to time, to now conference Vice Davin D'Ambrosio, ahead. Please go

Davin D'Ambrosio

Thank you conference good morning fiscal you, us this quarter Thank our earnings XXXX full-year morning, joining everyone. for for fourth and and call. Lia

Joining Chief fiscal Boyd, current me Officer; we the Mike financial Chief Executive for are The and Officer. our Kuglin, Financial will along with our results Officer; full-year outlook Chief business. and morning, review Accounting fourth Stivala, President this Chief Operating morning quarter Officer XXXX and and Mike our our Steve

we've session concluded remarks, As usual, open the prepared once will to we our questions.

would before statements. has explained reemphasize like about started, However, getting what I forward-looking quickly to the operator

or Certain measures on XX, be by these may discussed XXXX, which obtained SEC. Form discussed our of information this XXXX. on including will statements forward-looking in is those non-GAAP Partnership Copies the for to XX, our SEC contained year be from filings, of ended Additional factors be call. November the September materially that results could filed the will actual differ in Partnership's contacting fiscal filings the cause XX-K

the measures, We be to information have why which provided this believe in we description discussion morning. this of was useful, our to furnished those SEC X-K, as well Form a of as a

suburbanpropane.com. website At be Mike? opening to like remarks. this section to investor turn through on link over point, the some at the a relations Form for X-K in call I’d available will our Stivala Mike

Mike Stivala

thank had challenges, record winter like some taking Davin. fiscal season Fiscal of year with cold moment this unprecedented result for on ended second the all XXXX provide then us the more joining no was by shortage on challenging heating limited to very warm than of as of start fiscal new XXXX a a morning. reflect starting I consecutive fiscal Thanks, year. and a that bit thoughts heating the And that you this season, a just to weather. burst

initiatives. and Through XXXX, implementing retention the for focus executing can they another customer an Throughout am storms. our had X the control. and year, the efficiencies, of through and on In our of the in were the coming winter of the all, people repeat their of service our challenging I service it effects And of exemplary addition, toward business warm many measures out on of hurricanes driving customer customers the on aftermath base X growth so the impacted very in Irma. Nonetheless, our end adapted Harvey our Category fiscal record the our and we particular proud fiscal cost of territories resiliency XXXX, things preparation in were continued meet by and containment a model challenges evident to was of in prepared year, we focus and devastating keeping managing scenario. and

$XX had We Along fiscal operating with some year of half, notable the reported improvement million, initiatives. we earnings, we we increase second a another will As meaningful adjusted strategic long-term support in seasonal last were improvement reported million which and growth XXXX $XX first million of compared that X% ahead through $XX in for in $XXX EBITDA a with improvement to a was performance half achievements deliver result, counter million to year. able provide earnings. a our further of in the our more or the

the million. advantage due second XXXX, continued extending due reduction interest low requirement X.XXX% maturities by the we previous approximately senior of new notes notes, annual refinance of rate during our Specifically, to and our XXXX, providing with environment issuance senior quarter, took a interest in X.XXX% a $X

to our all We years. have past now leverage We effectively flexibility debt over proactively our financial bank senior revolving the worked facility long liquidity. with our added to credit and through three XXXX provide in refinanced group of managing and amend extended our with ourselves dated September

fiscal geographic new pattern expanded acquire three positive we not served base territories need by our continued was in for outlook of previously amendment felt our covenants without in-light prudent not in reach We measure it the suburban sustained other proactive we And remain based trends. Although our growth weather us necessary and a compliance the business, our with warm to XXXX. for into retention this to businesses. the on was customer

Now new customer as ahead a look assuming year, under of average our weather weather pattern in-line a and customer trends expectations a scenarios is assessment set have expectation performed XX-year estimates, demand we more volume thorough that a we heating degree on varying fiscal with have and to days. demand based

volume it We cost demand level flexibility to good the this manage with plan as down warrants. of to a weather is extent our those maintaining manpower and but ramp colder warm good of than trends, protection our believe weather to developed the or normalizes to cash flow opportunity a while continued is to have needs and levels, or infrastructure downside normal. up plan upside extent balance driven provides as weather We meet

financial initiatives. our remarks. in in later, past importantly for provide to have on October the balance our distribution little to order growth. and on quarters, will goals enhanced our strength flexibility best XXXX the some liquidity The distribution profitable announced our business cash is debt, annual focus enhance sheet of stated restoring closing the annualized reduction provide our for growth excess one long-term several coverage, XX% fiscal we As position to reduce reduce I’ll requirements, by XX provide support to more A for

full-year to in over more I’ll Kuglin, and point, this the results discuss Mike to it Mike? detail. quarter at turn fourth However,

Mike Kuglin

morning Mike, of our little remarks. start and good by quarter end I’ll fourth full-year Thanks towards results focusing the on a color give and everyone. my on the

First, I’ll XXXX out that point fiscal included in operations, of XX-weeks year. XX-weeks prior the to compared

an fiscal which the line of consistent a $X.X the extra you expenses. compared on in impact adjustments gain non-cash the to While had am instruments risk resulted operations used $X.X once with million not in and XXXX, I unrealized incremental an of volumes unrealized year material in million week effect To mark-to-market in fiscal excluding loss XXXX impact derivative margins, of in of to be positive the fiscal reporting, bottom factor the previous on year. management unrealized activities, prior of was

pension $XXX,XXX. the Additionally, settlement $X.X pension $X.X matter, of XXXX and million from of debt a withdrawal, in $X million on million employees propane, a our Net net million, multi-employer of of charge acquired plan, income acquisition debt a liability XXXX $X.X loss certain assets operations for related charge, and our pension covering EBITDA income of $X settlement loss to energy include extinguishment and to voluntary charge in and million in charge extinguishment segment, product $X.X the certain fiscal of settlement a of sale propane related a the EBITDA and market include a gain for a fiscal million. XXXX non-strategic

an as these compared million income instruments per have Excluding unit, mark-to-market in adjustments common $X.XX items, as amounted unit would both $XX.X on net increase common or fiscal unrealized per XXXX $X.XX the or year. the EBITDA or well year. years, XXXX in derivative for to million compared $XX $XX.X of Adjusted million fiscal for to $XXX the to X%, million, to prior prior amounted

prior year higher XX% gallons, volume gallons, territories essentially margin normal, operating year. warmer sold all cooler year. compared a XXXX sold, to XXX.X ongoing Our of fuels results prior and temperatures and focus an the X% increase fiscal the the management, and X achieving service than savings. fuel efficiencies, solid our flat the refined Average and of Retail of were Partnership million prior for for X.X%, in million propane on Sales from fiscal were to of the oil cost across year. million XXXX were gallons gallons XX.X than other benefited

season, of each weeks heating period warm with in unseasonably all throughout first territories, weather final of the its the experienced the of much second the three service during of nearly quarters. we colder During and weather arriving

during challenging the second Our the less volumes to during heating performance dependent impacted the but lack prior winter heating for season weather purposes, pattern weather were solid customer volume year. our demand compared was half of negatively by resulting

the nearly for earlier, higher combined compared XX% of fiscal XX% commodity million year. prices average excluding margins both the Overall, wholesale the million the With to higher impact For to the increased growing fuel of primarily of X%, for higher and prior $XXX.X unit as the decline year increased on than prior strength higher flat to items from year. prices sold market. to the were during inventory were the began propane significantly year the prior I XXXX average average respect gross domestic volumes operating due expenses, compared Total year, XXXX to prior expenses or margins. that oil mentioned perspective, $XX fiscal prices were export a levels and periods, and propane G&A than

year of from as $XX.X to year offset under and increase offset on fiscal compared tank related in higher, for was a higher lower and were Continued uncollectable capital the to our refinancing attributable accounts fuel marginally million, operate was compared the the prices to savings provisions an to for million incremental note our interest higher Net earnings. for the and compensation a spending refurbishment result was Total $XX.X accounts activities cost decrease savings receivable, with prior of higher $XX.X vehicles a of of revolver. as our expense acquired. million, variable interest borrowings senior payroll associated due savings expenses on potential higher and of to impact the commodity level from benefit a primarily year, reduced by by headcount representing fleet, XXXX prior

XXXX net quarter. that Turning compared year of of to our the $X.XX million, million, reported we fourth quarter. operations, $XX.X $X.XX loss a the of business, loss per the Consistent prior fourth quarter fiscal reported our fourth $XX.X net being the in prior or of quarter to for in of fourth XXXX, year. seasonality compared fourth common quarter to common of said, net unit we or results. fiscal with With XX-weeks The XX-weeks unit loss the included per in typically

under the of results, activities XXXX, the used in I adjustments compared quarter. As impact of unrealized fiscal quarterly in the non-cash unrealized mark-to-market instruments million to derivative in result prior excluding an discussed the in gain quarter fourth $XXX,XXX gain a $X year risk would I management am fourth unrealized

fourth the XXXX included referenced charges, fiscal of in for EBITDA they quarter full-year Additionally, XXXX to and pension net settlement loss relation a the non-cash and results.

or these of common to the the $XXX,XXX, net margin XX.X XX.X%, or quarter compared of and for to for to million levels week fourth million, to million during quarter. customer benefitted volumes $X a gallons, primarily $XX.X deliveries, higher fiscal per million the was to propane higher XXXX nearly of of year, fourth prior deliveries our in million lower the year. temperatures million and a in fourth was customer quarter amounted margins common fiscal volumes or our per Volumes customer margins. respect XXXX both week due higher expenses. compared EBITDA year. additional additional fiscal levels. a higher fourth increase Total or inventory quarter loss compared from fourth from combined earlier of variable With settlement increased lower the I prices. sold compensation the Fiscal million associated pattern In unit, of quarter. unit XX.X%, impact the compared insurance excluding and the prior mentioned the of timing operations, in with the $XX Excluding quarter, management mix year the gross sold $X.XX prior to XXXX other Adjusted on the which an benefited prudent of to of quarter third to the loss created year, from weather XXXX of items, the to general higher representing commodity the fiscal gallons compared during unit X.X%, Unit impact fourth of charges $X residential of in the result XXXX margins that prior average due words, primarily for warm and the an rising and inventory fourth Retail operations G&A $XXX.X expenses, heading spring improvement of rapidly to fiscal into of increased $XX.X prior earnings, of due higher period quarter of pension XXXX expenses of the $X.XX operating quarters,

adjusted balance $XXX total of historically our end we Turning outstanding, which to revolver during fiscal fiscal leverage of fiscal XXXX. to full million, June million the under XXXX increase XXXX. in to EBITDA quarter our From the have a $XXX.X additional sheet, during an have and the in metrics, that of compared leverage perspective, improvement $XX.X the million overall year XXXX, we fourth borrowings at held September and borrowings contributed includes the

X.X our of end we in requirements our of threshold remains of the X.XX threshold the times prior compared well effect under elevated, fiscal with the While leverage are amended historical ratio to levels XXXX, times. X.XX the to debt At amendment. and within leverage times the covenant

X.XX ending X.XX and to to for commencing ending XXXX. the with XXXX will June quarter quarter of the threshold leverage quarter through consolidated fiscal ending and maximum returned current the times reminder, X.X to down times XXXX, remain times stepped a September December As

we in leverage As we have stated the the three target times in mid-to-upper continue past, debt-to-EBITDA.

the requirements to forward, and to contribute distribution leverage. will cash our efforts reduce the our to Going reduce reduction annualized

have position, upcoming the working under borrowing to seasons. heating Back needs we our For to you fund capacity ample for the anticipated revolver Mike. capital liquidity

Mike Stivala

Thanks, Mike.

have while respect equates our in of Supervisors October distribution of past to of rate two of paid to unit model propane to our as proud $X.XX X. been Board trends XX a warm experienced on common release, years As the declared earnings and continued of deliver operational scenario. focus for customer November personnel announced quarterly quarterly have adapted that to fiscal repeat the common XX we an in to unit our meaningful distribution our our In the press weather challenging the and whole, a which of per ability closing, certainly XXXX, per industry as holders contributed quarter we our business fourth demand are improvement it’s excellence. annualized fiscal way the was This in November of to the That testament unit. in operations X.XX on our our a record

our to period softness, caused to two-year of has demand driven weather fund cash balance to sheet this our stretch While needs. us

the effectively balance debt and our We to sheet provide to insulate of tranche these sustained the our softness, annual to excess managing rate, weather cash have initiatives. and long-dated debt, our improves taken the or as steps to with our These extent demand business strength. steps costs, weather through possibility cash from for distribution the refinancing Adjusting driven in reduce make investments normal, closer capital reduction and of in-line help steps restore the requirements last help will the and spending. strategic flow will

valued growth these before, take also have our the managing we stated and business, will us unit holders. position best steps a we view and phase long-term for next of As on Suburban this Propane for

efforts and challenging our year Propane and of delivering employees for their meaningful to improvements facets Lia, I’d as support appreciate now all up open would Finally, through And and with we Suburban always, managing you and us like mind this for of attention again business. dedicated all would the to helping questions. that. in morning, once call thank the like of another And your

Operator

Our go first Instructions] line with Raymond of Ben is the Please [Operator ahead. from James. Brownlow question

Ben Brownlow

the good question. Hi taking Thanks for morning.

X% a settlement, would a modestly in in the pension On and frame jump to model, around, can in have bring I’m that but would back side, what just good if year-over-year, arms or to problem additional help would employees OpEx a be the see you me the that out in OpEx of know look you year-over-year kind just demand, I need volume, that get you XX% leverage you growth significant or have, if you expense up know seasonal if pretty growth you just trying to my like? potential

Mike Stivala

model of Next XX-year off historical budget year, we the the average.

to up go the at looking would rate you expect current expenses year-over-year. So, year's expense

weather an numbers of we items those flat, in that off charge to certainly I would the that but… volumes, anticipated budgeting are to mentioned during would would our settlement the our this you manpower, operating pension and in an we support expect in combined were With year expenses. that indicate G&A a you remarks the increase headcount scenario So, but expect prepared took headcount expenses that increase respect other the

Mike Kuglin

to we necessary think as other I to remarks of thing the meet expenses will savings. the up cost managing we needed, for ramp attention prepared paying a how our and Yes, business but continue years, and manage we the as in demand couple we the to and I Ben have up you certainly model incremental yes, is, so talked will efficiencies times in about adapted your, is for manageable, us noticed the over think flex

higher increase see we as bit because we of down I I see little expect will expenses other in to a bring find to year So, wouldn't certainly but us that get the higher volumes would progresses. as an surprised opportunities be demand, of expenses,

Ben Brownlow

Okay.

like even feel expenses an So, opportunity here growth? you to expense actually is you assuming there from still churn are though

Mike Stivala

for year-out what looking the we pretty track next with extracting I record, efficiencies I mean, day, always our the successful long-term every and that’s that will look and do year. if we’ve expect in efficiencies. to continue at We’re year-in you been

Ben Brownlow

what that how then volume? - And extra contribution can was you the us, much great. Okay you week do give quantify propane to of

Mike Stivala

X gallons. million Approximately

Ben Brownlow

X one that and side the cost well? us on more much through you Okay, value as that’s me, cogs how give goods that the flowed of then propane non-cash that million, fair helpful. from And propane a adjustment has on derivative can just

Mike Stivala

fuel the oil really amount in very segment, essentially nearly segment. in It’s the modest is propane

Ben Brownlow

cost fourth and Great. of year? quarter in for probably the have the Okay. the And propane you do

Mike Stivala

see that you the the but I in full the XX-K with You year, I we me. do well [indiscernible] - have Ben, won’t when file reporting it have see actually that it don’t will

to it want you offline, provide number. happy am call me the If I

Ben Brownlow

you. thank great, Okay,

Operator

of Lui to with we Fargo. line Next, Sharon the Wells go go ahead. Please

Sharon Lui

morning. good Hi,

Mike Stivala

Good morning, Sharon.

Sharon Lui

guys or completed to maybe pretty strategic can share a your maybe initiatives you you maybe you key some review as findings result? just your business, if So, expensive undertake a that plan wondering of of specific

Mike Stivala

I looking so Sharon volume starting really at is main the think just there. the Well, thing expectations,

record experienced. we’ve our what indicative couple is years dramatic that the temperatures, past So, volume so effect is and of of that experienced warming warm we’ve

our that normal can the of believe So, scenario. is we more in a achieve what reported years for that we’ve couple reflective don't volume of we past

So, what warm thing with with the kind now cautious kind you somewhat on of is what do starts the of of what weather created. being one past demand years two challenging we’re expect, destruction customer has demand that

winters And in that about keep the line that’s more scenario XX-year talked we’ve has our why in that it average around days, heating average so of with record three is business warm planning XXXX. XXXX, and degree and XX-year the of volume XXXX, mind in a with

average we at that degree days. the period XX% somewhere around when is that degree XX-year of the average look So, days the normal XX-year heating normal imply for heating XX-year that would

kind around that felt being expenses expectations though rest we level well the our best of you planning go manpower our to flexible So, as to that of that of we know way was to terms volume structure the that down in necessary also weather that’s but the of cost maintain have. volume, expectations and able deliver nature P&L of the then

relying little rolls to the we part-time have, to demand more, a demand other ourselves more little that but of help some are we to on is, as ramp-up bit continuing them little a bit to employees those back we up that we always for we adapted our we in folks them things permanent are bring many brought and challenge seasonal if being and So, rely or expense off without manage doesn't then a able either as on to profile. to them the it’s easier don't have show roll on, if of demand be have

XXXX difference our expense plan volume what planning, what we be are for just think figuring - our out the that So, profile I for was main then around should Sharon volume.

customer two manage, scenario. XX-year to average performs demand, we in back weather comes that and you to we prepared when that of anything this years to our able even close we’re a that Keep to to very something planning XX% would would that again. also will, weather to let XX% three-peat XX%, above ramp-up in deliver around different a normal we that days, our comfortable have the and demand insulate well if as have to presumably obviously closer demand a you’ve we’re and Now, prepared It’s can ready you we’re feel business to past all and we’re get in will that be we averaged lower around and the heating alone result normal. we if normal, degree the expenses, mind, normal then lot there be meet and to or pattern manpower blueprint and see that welcome business being so that’s the a is repeat a that more if how of from the

Sharon Lui

of it other anticipate and similar maintenance me terms even in terms looking questions your very then sounds the of versus be the helpful an I year, one the and next like in spending more do capital outlook at CapEx? conservative approach it you you’re XX. the average growth of be, in of to XX-year definitely guess for would for peers taking terms That’s

Mike Stivala

to next would increase the year I expect in volumes. additional anticipation it of

be CapEx what maybe would would be like. million expected So, lines $XX a the probably of volumes the number more along

Sharon Lui

isolate to way the Any fourth impact of Great. Okay. the hurricanes I quarter? guess the in

Mike Kuglin

did but material. our support incur additional material. facilities, nothing We needs, associated some with Not demand some the manpower to costs

Mike Stivala

higher after and storm, have did would the higher an some storm, I it’s then of of had demand obvious probably I mean a guess, effect but expenses. - Sharon. loss, a had you and you the level I before say you

that demand not bit So, little bit if of time otherwise I we would a experienced it’s a in more a period. wash would say actually than have

Sharon Lui

Okay, thank you.

Mike Stivala

Thank you.

Operator

with to Citigroup. Next, line the of we Please go Mirek ahead. Zak go

Mirek Zak

guys. morning good Hi

Mike Stivala

Hi Mirek.

Mirek Zak

winter levels? last the play conservation this out $X you all, any propane relative increase seeing you these prices the are at most to almost a margins Have at so seen seeing year? you impacting far, in gallon recently season, that are How customer

Mike Stivala

Mirek. are price not commodity of year managing No were environment. - successful - pretty in always so of going you the area the around season, into closer beginning in you're you an you this $X.XX heating I know, margins now conservation that’s time not a that to of as see Certainly, mean, we’re commodity in or tremendous last where $X, we going kick in any a frankly. still amount at

I a think then, far prices higher up see we price here see from any seen effect before behavior, need to customer go dramatic manage environment. we quite a as to effect you bit negative as of ability from a the margins, and haven't our

Mirek Zak

Okay. seeing And at around expectations any or relatively point, historically more out smaller your acquisitions levels plan M&A or do less at similar you this continue opportunities to you are what are there?

Mike Stivala

relatively The same. opportunities are the

We have are we acquisitions evaluating. a that propane currently handful of small

outside propane, flexibility we be to to looking in gives - continue couple with than to initiatives. but along continue of behind going are further the financial balance then and other are years us, pursue us our strategic of past active particularly opportunities the strength, restoring to others, sheet at Some the getting

on active deals small looking have for currently in on will we propane radar growth a are we that front, continue opportunities screen. So, few the but to be M&A our just

Mirek Zak

propane, you you are and opportunities mentioned how outside talking broad Okay, of there?

Mike Stivala

Mirek. Same our in that been has in strategy space historical

what at. at disciplined we're and patient very looking are We

a businesses can business that’s relatively less of generating can weather flows business, volatility. capital earnings help but dependent this that little compliment We’re and capability needs cash that the sort cash stable supplemental business, has for the fund of that some business less use that dependent the perhaps of with to propane of looking weather

Mirek Zak

me. all Okay. Great, is That thanks. from

Mike Stivala

you. Thank

Operator

have Please And line from Janney question a the Montgomery Scott. Mike from Gyure ahead. we of go

Mike Gyure

you’re targeting Yes, release, thanks, as as you’re bit and morning potential in a you what what as far initiatives mentioned guys. initiatives talk your base press customer about, as or XXXX and maybe for the retention going far XXXX, are good maybe current up growth Can customer versus little maybe there? doing, goals you what

Mike Stivala

trend, are continuing you trend continuing I Well, our improve. to think positive been our have goals to trends know

customers throughout in to continuous front new going accounts we door, the growth on retention here side, is we and initiative the continue and do wanted our all the it such that improvement sit to not provide business service the to making the is which side, is to value highest that that and sure number, with continue total of I'm a they So, to have coming target of which us. both level

those locations so, of integration that on time equation from both our years it’s to deliver service, to to quality us highest And taken one and us, are now in we It’s some best as now of customer working acquisition. put we we under the the that brand, six going behind have one people activity one our sides starts of just the answer of removed level energy and bring and energy into way phone. all handling are position we messaging, all our with philosophy, and we’re how making typical that them in investments that

on invest the energy, and aligned efforts folks retention suburban just to the get to now the the in better continuing towards growth. we��re to bit energy and make efforts in a handling better steps we’re taken old time better of of those in way, and positive of fully little our to pays that in all and speed regard retention it’s so, terms our customer off And people

progress both we good So, towards make of stay continue terms in growth. as of trends, will to positive that sides equation

Mike Gyure

year? spending give guess I than it, your if did capital you I more or be for maybe missed maybe expectation, for directionally, you XXXX And, thought this would it

Mike Stivala

XX at next mentioned expectation Yes, the is million I earlier for year.

Mike Gyure

much. Okay, Thanks great. very

Mike Stivala

Mike. Thanks, Sure.

Operator

may you continue. no have questions, we other And

Mike Stivala

hope Okay. you. season Thank all speaking Well of and in holiday you forward our great, with you February great early well quarter we thank have you XXXX. after everybody. look I first to a

Operator

after gentlemen, for this AM conference Ladies midnight. XX:XX digitized and is through tomorrow Eastern replay at today Time available

AT&T You may conference for any the for for your does access time Thank That participation of enter using today. X-XXX-XXX-XXXX the replay Teleconference. you code access and your service XXXXXX. conclude at by calling and

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Suburban Propane Partners (SPH) 16 Nov 172017 Q4 Earnings call transcript