Suburban Propane(SPH) - 2021 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Financial Statements (Unaudited) Presents the unaudited condensed consolidated financial statements for the quarterly period ended March 27, 2021 Condensed Consolidated Balance Sheets Total assets increased to $2.13 billion while total liabilities decreased, resulting in higher partners' capital Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 27, 2021 | September 26, 2020 | | :--- | :--- | :--- | | Total current assets | $229,843 | $115,958 | | Total assets | $2,128,734 | $2,047,253 | | Total current liabilities | $237,509 | $244,516 | | Long-term borrowings | $1,172,786 | $1,210,176 | | Total liabilities | $1,633,386 | $1,684,872 | | Total partners' capital | $495,348 | $362,381 | Condensed Consolidated Statements of Operations Net income significantly increased for the three and six-month periods ending March 27, 2021, driven by higher revenues Statement of Operations - Three Months Ended (in thousands) | Metric | March 27, 2021 | March 28, 2020 | | :--- | :--- | :--- | | Total Revenues | $537,238 | $401,055 | | Operating Income | $147,157 | $97,625 | | Net Income | $127,216 | $77,361 | | Net Income per Common Unit - basic | $2.03 | $1.24 | Statement of Operations - Six Months Ended (in thousands) | Metric | March 27, 2021 | March 28, 2020 | | :--- | :--- | :--- | | Total Revenues | $842,429 | $734,933 | | Operating Income | $204,843 | $157,479 | | Net Income | $165,193 | $117,524 | | Net Income per Common Unit - basic | $2.64 | $1.89 | Condensed Consolidated Statements of Cash Flows Net cash from operations increased, while investing cash use decreased and financing cash use increased for the six months ended March 27, 2021 Cash Flow Summary - Six Months Ended (in thousands) | Cash Flow Activity | March 27, 2021 | March 28, 2020 | | :--- | :--- | :--- | | Net cash provided by operating activities | $101,829 | $91,319 | | Net cash (used in) investing activities | $(19,305) | $(40,106) | | Net cash (used in) financing activities | $(78,935) | $(48,459) | | Net increase in cash and cash equivalents | $3,589 | $2,754 | Notes to Condensed Consolidated Financial Statements Provides detailed notes on accounting policies, acquisitions, debt structure, and segment performance - The Partnership is primarily engaged in the retail marketing and distribution of propane, fuel oil, and refined fuels, with propane accounting for the substantial majority of assets, revenues, and earnings[30][31] - On November 12, 2020, the Partnership acquired the assets of a propane retailer in North Carolina for $7.685 million. It also made strategic investments in Oberon Fuels, a producer of renewable dimethyl ether (rDME), to support its 'Go Green' initiatives[51][52] Long-Term Borrowings as of March 27, 2021 (in thousands) | Instrument | Principal Amount | | :--- | :--- | | 5.5% senior notes, due 2024 | $525,000 | | 5.75% senior notes, due 2025 | $250,000 | | 5.875% senior notes, due 2027 | $350,000 | | Revolving Credit Facility | $56,200 | | Subtotal | $1,181,200 | Segment Revenues - Six Months Ended (in thousands) | Segment | March 27, 2021 | March 28, 2020 | | :--- | :--- | :--- | | Propane | $749,952 | $633,111 | | Fuel oil and refined fuels | $47,761 | $57,393 | | Natural gas and electricity | $17,626 | $18,919 | | Total Reportable Segments | $814,739 | $709,423 | Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses key operating factors, financial results, liquidity, and capital resources for the period Executive Overview Highlights the operational impacts of the COVID-19 pandemic, product cost volatility, and business seasonality - The COVID-19 pandemic led to lower revenues from certain commercial and industrial customers due to operational curtailments, though residential demand increased due to stay-at-home initiatives[121] - Average posted propane prices (Mont Belvieu) were 142.8% higher in the second quarter of fiscal 2021 compared to the prior year's second quarter, driven by lower U.S. inventory levels[125] - The business is highly seasonal, with approximately two-thirds of retail propane volume sold during the peak heating season from October through March[126] Results of Operations and Financial Condition Financial performance improved significantly in Q2 and H1 fiscal 2021, driven by cooler weather and higher propane volumes Q2 FY2021 vs Q2 FY2020 Performance | Metric | Q2 FY2021 | Q2 FY2020 | Change | | :--- | :--- | :--- | :--- | | Net Income | $127.2M | $77.4M | +64.3% | | Adjusted EBITDA | $172.0M | $130.6M | +31.7% | | Retail Propane Gallons Sold | 169.1M | 145.1M | +16.5% | - Average temperatures in Q2 FY2021 were 9% cooler than the prior year's second quarter, contributing to increased heat-related demand[133] Adjusted EBITDA Reconciliation - Three Months Ended (in thousands) | Line Item | March 27, 2021 | March 28, 2020 | | :--- | :--- | :--- | | Net income | $127,216 | $77,361 | | EBITDA | $172,921 | $125,825 | | Adjusted EBITDA | $172,038 | $130,648 | Adjusted EBITDA Reconciliation - Six Months Ended (in thousands) | Line Item | March 27, 2021 | March 28, 2020 | | :--- | :--- | :--- | | Net income | $165,193 | $117,524 | | EBITDA | $257,546 | $213,975 | | Adjusted EBITDA | $252,059 | $216,022 | Liquidity and Capital Resources The Partnership maintains strong liquidity with increased operating cash flow and sufficient borrowing capacity - Net cash provided by operating activities for the first half of fiscal 2021 increased by $10.5 million compared to the prior year, primarily due to higher earnings[176] - During the first half of fiscal 2021, the Partnership made net repayments of $38.4 million under the Revolving Credit Facility and paid $37.4 million in distributions to Common Unitholders[179] - As of March 27, 2021, available borrowing capacity under the Revolving Credit Facility was $390.2 million[182] - A quarterly distribution of $0.30 per Common Unit was announced on April 22, 2021, payable in May 2021[185] Quantitative and Qualitative Disclosures About Market Risk Outlines the Partnership's exposure to commodity price and interest rate risks and its hedging strategies - The Partnership's primary market risk is commodity price volatility for propane and fuel oil. This risk is managed through supply contracts and derivative instruments (futures, options, swaps) to hedge physical inventory and fixed-price sales contracts[190][192][194] - Interest rate risk is associated with variable-rate borrowings under the Revolving Credit Facility, which are based on LIBOR plus an applicable margin[197] - A sensitivity analysis as of March 27, 2021, estimated that a hypothetical 10% adverse change in market prices for open derivative instruments would result in a decrease in potential future net gains of $2.7 million[200] Controls and Procedures Management confirms the effectiveness of disclosure controls and procedures as of March 27, 2021 - The Partnership's principal executive officer and principal financial officer concluded that disclosure controls and procedures were effective as of March 27, 2021[203] - There were no material changes in the Partnership's internal control over financial reporting during the quarter ended March 27, 2021[204] PART II. OTHER INFORMATION Legal Proceedings Reports no new or material legal proceedings for the period - None[207] Risk Factors Refers to the detailed risk factors disclosed in the Partnership's most recent Annual Report on Form 10-K - The report refers to the risk factors disclosed in the Partnership's Annual Report on Form 10-K for the fiscal year ended September 26, 2020[208] Unregistered Sales of Equity Securities and Use of Proceeds Reports the withholding of Common Units from executives to satisfy tax obligations on vested restricted units - During the three months ended March 27, 2021, a total of 2,052 Common Units were withheld from executive officers for income tax purposes related to the vesting of restricted units[209] Exhibits Lists the exhibits filed with the report, including required CEO and CFO certifications - Exhibits filed with the report include CEO and CFO certifications under Sections 302 and 906 of the Sarbanes-Oxley Act, along with Inline XBRL documents[216]