SPH - Earnings call transcript Q2 2019 | Suburban Propane Partners, L.P.

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Operator

Ladies and gentlemen, thank you for standing by. Welcome to Suburban Propane Partners LP Fiscal 2019 Second Quarter Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. This conference call contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934 as amended, relating to the partnership's future business expectations and predictions and financial condition and results of operations. These forward-looking statements involve certain risks and uncertainties. referred some to important discussed release, differ forward-looking which listed cause that in which has statements statements, results cautionary on actual materially are website. can partnership be of earnings the factors the could such in viewed The its as Company's press to from those their persons its behalf are All subsequent statements forward-looking on oral such attributable to statements. qualified acting in entirety written and the by cautionary partnership or expressly now to now D'Ambrosio, to like the conference I'd ahead. go Davin turn please

Davin D'Ambrosio

Thank us and call. good quarter fiscal for you morning Stacy conference everyone. this XXXX you Thank earnings our joining morning for second

Chief Joining me we will Officer. our Officer; Officer Executive Chief for This second this Chief review Financial along results, business. quarter outlook are our morning and current Chief President and with Operating and Kuglin, the Officer; our our Stivala, morning, Mike Accounting financial Mike Boyd, Steve

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

Our and contacting today, Certain fiscal annual partnership March which additional report both on by forward-looking by regarding September and will or factors. period this be Form the XX, for our XX, ended XXXX, filed the the ended year of XX-Q end business Copies Form be obtained XX-K for be the disclosure risk SEC. discussed will non-GAAP may measures statements on contains the XXXX call.

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

over suburbanpropane.com. would Investor website be remarks. for link the section Relations of turn to At through some Stivala point, at a opening this will X-K Mike Mike? I available the call Form our in

Mike Stivala

solid quarter morning, carried joining to in from report second Despite and prior very improvement you quarter started December nearly resulting thank slow second we million better the through the of demand majority our customer us Thanks territories, EBITDA service the of to part start of pleased year in today. in average January warmer that adjusted for the Good quarter. in another are $X with temperatures Davin. weather to driven the a all vast compared an

of the and For year. XXXX were both of January month January, XX% average normal prior than warmer the temperatures

temperatures and March in demand cooler responded. in service of arrived territories, as our However, majority February the customer

west December, run continue propane cash million quarter. customers during acquisition performance, to nimble improvement and did the us While pattern effectively management, average be highest On erratic to months there at heating two in whole above with we prior the this days those $XX were heating more our normal. heating and as a some from were the Therefore, margin near XXXX and significant was service quality coast borrowings the or swings excess demand much nearly look you temperatures. in compared outstanding we the average, EBITDA outstanding to when the to the degree weather for fiscal adapt territory season heating under year, at degree we of an days through January and shoulder days February such All end revolver contributing the much model said, our April. and concentrated XXXX more business in picked the well a job manpower the and in allows months, which degree to in expense fiscal the With versus late which operating of in operations personnel in used generate reduce concentrated by of planning, December levels communities half serve. ensuring more to also being with of adjusted to our primarily that solid flow business again our were flexible October, while variability, the March our funding and up March first

to closer goal business for our on a our some a growth times, level focused of positioning than back while and remain also closing I'll for long-term less to continue In strategic on metric we initiatives executing reducing remarks. to our our success. So target of four moment, debt come

like Mike quarter results point turn Kuglin the I'd However, Mike? the at second discuss to over call to detail. to in this more

Mike Kuglin

loss Thanks good previous instruments and our results, consistent noncash morning discuss impact reporting, am in which second quarter of as prior activities, Mike unrealized I an year. compared the of in an and second be resulted $X.X management million mark-to-market quarter everyone. in adjustments the To I risk unrealized the to fiscal excluding derivative with $X.X of million gain XXXX used of in unrealized

is XXXX net compared of prior income Retail days becoming the to or to prior XXXX year. $XXX.X an gallons second the $X the income unit, the for million net $XXX.X average year. all of the of per Overall, than quarter fiscal EBITDA temperatures of by warmer items, approximately for second these million million X% service for year. which common the second territories were unit in of propane year. fiscal fiscal X.X% $X.XX of XXX.X than amounted million prior normal the Adjusted to Excluding lower as second measured cooler degree or $X.XX the million, our improvement X% $XXX heating sold gallons, than quarter increased XXXX prior were to quarter across quarter compared in a and

the than fiscal prior Mike was more much XXXX the weather erratic indicated, despite averages, as However, year. these pattern

of higher the $X.XX impacted mid-Atlantic, by the Overall, regions. throughout compared the primarily propane southeast of into slightly In lower $X.XX year, Belvieu quarter XXXX. quarter. to as volumes for the and significantly set prior the gallon wholesale prior to second propane prices quarter margins, of in per heading commodity Mont negatively our million quarter temperatures unit first markets, $X basis particularly due second January, gallon, and average prices stable, XXXX, fairly the the southwest per from were than than the second range million were in across wholesale resulting of was and by XX% stayed $X.XX the gross fiscal warmer the for such, lack the quarter the As $XXX.X second increased volume for margins of warm fiscal momentum which demand December Total XX% lower quarter, are lower sold. customer to primarily year

the outstanding of more impact credit interest level lower benchmark to the under in compared of compared Excluding earlier, impact to marginally propane year, mark-to-market at compared to compared spending approximately per prior With that offset this increased to G&A expenses, down at X.X% last $X.XX mentioned that the the margins quarter flat essentially prior the by operating respect year, Total end debt level unit of non-cash rates facility $X.X debt year. increased prior the lower to of the substantially million second compensation prior year. expenses of marketing, in for decrease capital or Net the data as trends of quarter, borrowings average an variable the I second and $X.X in insurance end were quarter gallon bad claims the higher year quarter adjustments $XX fact, and borrowings, from year was second combined million, and initiatives. of fiscal was a XXXX, by million were and by than offset costs in for of million. higher favorable increase total revolving to spending and $XX.X advertising and the expense the interest expense to amounted

million, $XX.X a strategically addition, in located was propane which total operating quarter. In completed the of the for paid $XX price we our Mike acquisition territory West purchase of during as indicated, of business million Coast a

through of repayment cash million of business acquisition and to high flow. now working solid management the Looking period price during our year-to-date needs pattern, QX. needs, debt end over control working performance, higher resulted effective were growth our expenses. ample sheet, at maintaining earnings improving weather compared repayments seasonal and despite the of second earnings $XX erratic unit operating fiscal ratio we of historically resulted adjusted EBITDA the to The capital million capital selling debt leverage for our quarter, the propane turning X.XX the the our volume and during and the year. increased moved fund funded We’ve expenditures, The to half from by strategic driven And combination at to performance, prior margins, times liquidity challenges quarter, the balance $X of of increase in our consolidate first capital an and initiatives. our the from from XXXX tight the

within than X covenant less metric are requirements Back We times. our our improving debt and you, to well leverage remain Mike. focused to on

Mike Stivala

Thanks, Mike.

record of May in fiscal equates May April unit, unit XXXX announced of As as our quarter unit paid that our of X. of per $X.XX $X.XX be will Supervisors declared our XXth common Board of and press annualized quarterly holders XX quarterly the second per our our the distribution on in rate of to an to respect of release, common distribution

January, of and operations of arrive, an ideal not the while exceed few conditions when the cooler the a did weather customers. meet weather our months were pattern, final our to and during responded critical demand warmer and expectations Just remarks, that prepared demand weather well given December personnel customer

and to control, Given in line invest an base stated our and expenses as seek pipeline goals, small strong with times, coverage time, continue we cash of robust. make our propane good attractive customer have And also cash distributable based earnings resulted things in to managing flow managing pleased and our businesses all distribution improvement At X.XX can approximately opportunities. well were initiatives more intense cash that's growth said, transformative potential strides strong debt using XX our we flow markets flow. propane in We to continued with our month of continue strategic with retention we excess solid driving we acquisitions in to as and adjusted focus excess as to are that margins on to in remains the generation we and and on efficiencies. our EBITDA financial larger as deliver position of strengthen same reduce the trailing

from normal contrast, cooler the on blast in and in The out comment brief to a heat related of benefited month average unusually the outlook. end for arrived late time the March weather contributed quarter significantly March strong month and toward than April, of In that of throughout of strong cold fizzled a were experienced Just demand XXXX which April that the year. experienced the warmer third year XXXX. prior temperatures lasted temperatures

than than a normal, temperatures warmer our In year. last month average were April of perspective, day XX% territories heating April degree XX% the XXXX all across normal compared fact, of colder of in to service for from

weather has The on the season. impact contributed While third it during of sold than and impact third volumes the quarter strong April operating the resulting less overall an demand does for performance during cooler the quarter. last weather heating typically on to

communities more in continuing efforts appreciation their focused during Propane service to another I'd than express your always, providing for we X,XXX employees support my And gratitude local to winter. to and Lastly, base like exceptional appreciate and morning. as challenging attention for deep our of customer remain and Suburban the on this

if I'd open a up us give mind like with the to Now And call you questions. Stacy, hand wouldn't that. for

Operator

our And Instructions] Raymond first go ahead. [Operator James. question to will Sure. with Ben go Please Brownlow

Ben Brownlow

Hey, good morning, guys.

Mike Stivala

morning, Good Ben.

Ben Brownlow

in was to saw versus relative about just On decline the to the of maintained, demand. progress operating OpEx variable was efficiency you – structural Can way variability any of that you the kind Any the in expenses component? quantify especially that well are around – initiatives? talk

Mike Stivala

efficiencies remarks. There as our my for opportunities drive I opening continually in manpower is mentioned and which briefly planning Yes. activities, look that's definitely through we to

costs savings. job, we that additional We that some component expenses the managing the we vehicle our so variable continue of that good that costs. had fixed to from and higher the perspective, slightly higher during those a activities do were year you some overtime headcount, what little part saw the sort comes for offset and and was drives what lot of in a did And higher, see compensation managing that's the earnings given otherwise, fuel of with the most a

expenses So and that offset variable savings for the fixed expenses. most some part, little

Ben Brownlow

And increase half? do the G&A, with that in Okay. level you to the second in off expect

Mike Kuglin

the back to back Yes. that in expect in quarter. flat for in the the The year expenses mostly marketing first I'd half drove year. expenses the of half incur second roughly be G&A of half prior the to the and advertising the will initiatives increases the in including

Ben Brownlow

guys. Great. Thanks

Mike Stivala

Thanks, Ben.

Operator

to go Tonet JP Morgan. Jeremy with Please ahead. We'll go

Charlie Barber

Good morning, guys. This is Charlie on…

Mike Stivala

Charlie. Hey,

Charlie Barber

what M&A, versus you wondering, I opportunities on about maybe pipeline market robust your to you? had your you you about if territories, and share level territory. acquisition a just in to maybe regions on more those the Coast but in I and that noted could be see talk might was West others more why start attractive high wanted you so certain

Mike Stivala

Yes.

our of every seeing actually activity fair we're of So one a territories. in amount virtually

the on East West We have some on Coast, Coast, some down Southeast. the the opportunities some in

the And across so it is really Charlie. Board,

the typically for that and traditionally we good as the have to add our foster to As and business on well-run we robust markets they effectively our an way. look believe in integrate to attractive execute can we mix you quality that we like I when look good we the is very that to businesses, market relationships into have us those be know, said pipeline for is businesses to come bring and on best our that in eye the we we able deals would be those do position management

part that not is concentrated though take we will a well-run of at. list really nice it's a it particular the pretty So country, any businesses in one run a very good

Charlie Barber

what business after in have in you been What now guess, sort another? you do of margin cost? improvement of What – sort seen able streamlining have I you of to in terms What historically? one place going your of terms you typically And put on do typically of economics versus see? see hurdles

Mike Stivala

It's every deal different, Board, over you're looking slightly the Yes. all is every base Charlie, different. at is customer that

Some putting expand a allows already will might business, a investment radius buy have initiatives, direct commercial are higher our bigger and good some and market. that that fold expansion a of some market a to identified of slightly into our we market some some territories, have efforts residential some that of we've be quality to the at us that our of current that's a into splash to into find a support look in will by accelerate delivery the our market in that existing higher business, outside make where business we've businesses that of market concentration industrial business we started concentration

little of at the deals we and of So dynamics differently. pricing deal of a every are each look those different

valuing some and attractive Some way look synergies have than we mix than all and those others customer more a have will bit at more the little that businesses. others into factor

Charlie Barber

There's That's and is I leverage sheet, remarks, me one where then the balance from what's the helpful. right more in opening hear the on on revolver Thanks. didn't capacity now? sorry,

Mike Stivala

effectively have the on And which Yes. quarter leverage. X.XX about at is $XXX our capacity revolver ended under full We million. we

Charlie Barber

Perfect. Thanks guys.

Mike Stivala

Thank you.

Operator

Lui [Operator Instructions] Please And with we'll Sharon ahead. Wells Fargo. go to go

Sharon Lui

Hi. Good morning, gentlemen.

Mike Stivala

Sharon. Hi,

Sharon Lui

I had propane wondering margins if was benefit yet. the just have prices any lower on your

Mike Stivala

margins. in XX-Q remarks the We we see our in good job do this it a saw you'll think, in Well, I managing press you release it the on, prepared morning. had later and in

in margins were Our quarter. up second about $X.XX the

reflective So it's in we've the not of say you year. yet of also in significant. environment It's pretty certainly quarter than cost marginal, first but and I fairly last think experienced lower quarter second that slightly was as stable, the

we the it, what we I quarter, sustainable. in second think feel we good probably it's So saw about feel pretty

Sharon Lui

on MLP, in MLP – your Okay, some great. peers? if touch your changes corporate of as And the just you sector your a view propane structure maybe can all the including then on given

Mike Stivala

we Look are. we feel where about good

of been always we've one know, the you As unique MLPs.

for of originally rid with, We altogether all were than the structure the a XXXX when we governance that get structure was in in of were one MLPs changed we or were to the more because We our which has begin went XXXX, really Corp., IDRs. public corporate looked non-traditional way GP MLP. an first more C like one eliminated to nothing of really the back So and us.

the or so mind unit GP. individuals any with governed more are really a we of any through one than individual So holders group in one

unit at And it step sort the the holders eliminate aligned of just So so interests by structure IDRs, XXXX is further in eliminate taking space the our MLP Suburban is an the anomaly the the GP, been forefront. always of this because governance in clean. to

felt MLP. underneath uniquely goes say the no even peers there we've as MLP, world traded are more we is so separately major would I utility. our positioned that So always where a subsidiary And of through be an now, be rather a longer one will public will the assuming

that that And for should of that think I trading by are sustainable. we're strong seeking deferred So balance at quality you're tax distribution good that investors is pretty today, talking coverage, is and very protected good yield you where strong look distribution north yield. a very board feel still if sheet should well XX%

cash advantage, a through when and marketplace stable generating in right is fairly markets. now oriented the that's We feel good and that see think pretty flow I volatility about that the high the uncertainty the those provides you all good business. darn opportunity investment circulating investment pretty income tax Suburban Propane the seeking yielding for

Sharon Lui

you. Thank

Mike Stivala

you. Thank

Operator

[Operator Instructions] in queue. At continue. no are this time there questions Please

Mike Stivala

thank summer appreciate hope quarter forward third And following I safe our today. I talking the in start Stacy. again you for help a We to us. Thanks, have Great. joining early you. you look you again to all your results. season. Thank August to

Operator

for Executive and your Thank Thank conference your you conclude you, Teleconference. does for gentlemen. and participation ladies for That AT&T today. using

You may now disconnect.

Suburban Propane Partners (SPH) 9 May 192019 Q2 Earnings call transcript