Suburban Propane(US:SPH)2025-11-26 14:14Business Operations - Suburban Propane sold approximately 400.5 million gallons of propane and 16.5 million gallons of fuel oil and refined fuels to retail customers during the year ended September 27, 2025[11]. - The company serves approximately 1.0 million customers through about 750 locations across 42 states, with operations mainly on the east and west coasts and parts of the Midwest and Alaska[11]. - Approximately 93% of propane gallons sold in fiscal 2025 were to retail customers, with 43% to residential, 39% to commercial, and 8% to industrial customers[32]. - Sales of fuel oil and refined fuels amounted to 16.5 million gallons in fiscal 2025, with 66% sold to residential customers[43]. - During fiscal 2025, approximately 1.1 million dekatherms of natural gas and 121.5 million kilowatt hours of electricity were sold, with 88% of customers being residential households[53]. - The retail propane industry is highly fragmented, with the ten largest retailers accounting for approximately 35% of total retail sales in the U.S.[41]. - Approximately two-thirds of retail propane volume is sold during the peak heating season from October through March[57]. - The fuel oil business experiences greater seasonality, with approximately three-fourths of volumes sold between October and March[57]. Renewable Energy Initiatives - In fiscal 2022, Suburban Renewable Energy acquired a platform of RNG production assets, including a facility in Arizona and a project in Ohio, expected to come online in the first half of fiscal 2026[14]. - Suburban Renewable Energy also acquired a 25% equity interest in Independence Hydrogen, Inc., focusing on developing a hydrogen ecosystem for local markets[15]. - The company aims to achieve sustainable profitable growth through strategic investments in renewable energy products and technologies[21]. - The company is committed to advancing clean air and low-carbon benefits of traditional propane while investing in innovative renewable energy solutions[22]. - The company is committed to increasing the availability of renewable liquid fuels, including renewable propane and RNG, in the coming years[73]. - The Renewable Fuel Standard (RFS) mandates the use of renewable fuel in the transportation sector, with the company expecting to generate RINs from RFS-compliant biofuel production[75]. - The Inflation Reduction Act includes tax credits and incentives for renewable energy production, which may benefit the company's renewable energy products[76]. - The company has executed agreements to purchase and distribute renewable propane, offering a low carbon intensity alternative to traditional fuels[74]. - In fiscal year 2025, the company exceeded 2.0 million gallons of renewable propane sales, primarily in California's transportation and forklift markets[87]. - The company contracted for the supply of over 10.0 million gallons annually of renewable propane to meet customer demand[87]. - The company has invested in a dairy waste anaerobic digester in upstate New York for the production of RNG and purchased anaerobic digesters in Columbus, Ohio, and Stanfield, Arizona[87]. Financial Performance and Risks - The company has accrued environmental liabilities of $1.1 million as of September 27, 2025, representing estimated future remediation and monitoring costs[63]. - The company anticipates ongoing compliance costs related to environmental regulations, but does not expect these to materially affect financial conditions[80]. - The company’s financial performance is vulnerable to disruptions in the capital and credit markets, affecting liquidity and investment opportunities[127]. - The potential for increased volatility in commodity and input costs could substantially impact operational results[127]. - Supply chain disruptions could adversely impact the company's ability to acquire sufficient supplies of products, potentially affecting financial results[128]. - The company has experienced increased freight expenses and longer lead times due to global supply chain disruptions, which may continue to affect operations[129]. - High inflation in the U.S. has led to increased commodity, transportation, and labor costs, negatively impacting profitability[130]. - The retail propane and fuel oil industries are expected to see relatively flat to moderately declining demand over the next several years due to competition and weather patterns[135]. - The company faces intense competition from other energy sources, particularly natural gas, which is currently less expensive than propane and fuel oil[136]. - The ongoing geopolitical conflicts, including the situation in Ukraine and the Middle East, have caused volatility in the price and supply of propane and fuel oil, potentially impacting business operations[144]. Regulatory and Compliance Issues - The company is required to disclose climate-related financial risks by January 1, 2026, under California's SB 261[79]. - The California climate disclosure legislation requires entities meeting certain revenue thresholds to disclose Scope 1 and Scope 2 GHG emissions starting in 2026, impacting operational costs[122]. - Government regulations related to environmental and health and safety matters could lead to significant costs and operational challenges for the company[148]. - Current regulatory proposals could adversely impact the assessment of carbon intensity for fuel produced outside of California, affecting the value of RINs and LCFS Credits[170]. Employee and Community Engagement - As of September 27, 2025, the company had 3,190 full-time employees, with 2,476 in customer service centers[108]. - The company intensified efforts in fiscal year 2024 to collaborate with organizations supporting underserved communities, focusing on issues like food insecurity and education[91]. - The company has been recognized as a "Top Company for Women to Work in Transportation" for two consecutive years and ranked among the "Elite 30" in 2025[97]. - The Board of Supervisors was honored with the Small Company Board of the Year award in fiscal year 2025 for high standards of governance[104]. Safety and Environmental Commitment - The company maintains a strong commitment to safety, investing in programs and technology to improve safety throughout its operations[93]. - The company is actively monitoring potential environmental issues and compliance with various federal and state regulations[62]. - The company is positioned to benefit from state-level programs aimed at reducing greenhouse gas emissions, such as the California Low Carbon Fuel Standard[77]. Debt and Financial Obligations - As of September 27, 2025, the company has long-term debt totaling $350.0 million in 5.875% senior notes due March 1, 2027, $650.0 million in 5.0% senior notes due June 1, 2031, $80.6 million in 5.5% green bonds due October 1, 2028 through October 1, 2033, and $149.2 million outstanding under a $500.0 million senior secured revolving credit facility[182]. - The company’s ability to make distributions to Unitholders is limited by its debt obligations, including covenants that restrict additional indebtedness and certain transactions[182]. - The Green Bonds previously required a debt service coverage ratio of not less than 1.00 to 1.00, which the company did not comply with for several fiscal quarters, leading to potential events of default[183]. - The company obtained waivers from the holders of the Green Bonds for non-compliance with the debt service coverage ratio, allowing continued operations without immediate default[186]. Market and Economic Conditions - Economic conditions, including inflation and consumer spending rates, have adversely affected business performance and may continue to do so[126]. - Increased costs and reduced demand for products may arise from climate change effects, including severe weather events and shifts in consumer behavior[119]. - A significant percentage of the workforce being unable to work due to external conditions could negatively impact operations[127]. - The company is challenged in attracting and retaining qualified employees, particularly drivers and technicians, which may affect operational efficiency[141]. - The company faces risks related to cybersecurity breaches, which could lead to significant harm to its business and operations[178].