Suburban Propane's CEO Discusses F2Q2012 Results - Earnings Call Transcript

Suburban Propane Partners LP (SPH)

F2Q2012 Results Earnings Call

May 3, 2012 9:00 AM ET

Executives

Davin D’Ambrosio – Vice President and Treasurer

Mike Dunn – President and CEO

Mike Stivala – Chief Financial Officer

Analysts

Gabriel Moreen – Bank of America-Merrill Lynch

Presentation

Operator

Ladies and gentlemen, thank you for holding. Welcome to the Second Quarter 2012 Results Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Instructions will be given at that time. (Operator Instructions)

As a reminder, the conference call 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 risks and uncertainties. The Partnership have listed some of the important factors that could cause actual results to differ materially from those discussed in such forward-looking statements, which are referred to as cautionary statements in its earnings press release which can be viewed on the company’s website. All subsequent written and oral forward-looking statements attributable to the Partnership or persons acting on its behalf are expressly qualified in their entirety by such cautionary statements.

At this time, I would now like to turn the conference over to your host, Mr. Davin D'Ambrosio. Please go ahead, sir.

Davin D'Ambrosio

Thank you, [Eddie], and good morning, everyone. Welcome to Suburban’s fiscal 2012 second quarter results conference call. I’m Davin D’Ambrosio, Vice President and Treasurer at Suburban. Joining me this morning is Mike Dunn, President and Chief Executive Officer; and Mike Stivala, our Chief Financial Officer. The purpose of today’s call is to review our second quarter financial results, along with our current outlook for the business. As usual, once we’ve concluded our prepared remarks, we will open the session to questions.

However, before getting started, I would like to reemphasize what the operator has just explained about forward-looking statements. Additional information about factors that could cause actual results to differ materially from those discussed in forward-looking statements is contained in the Partnership’s SEC filings, including its Form 10-K for the fiscal year ended September 24, 2011 and its Form 10-Q for the period ended March 24, 2012, which will be filed by the end of business today. Copies of these filings may be obtained by contacting the Partnership or the SEC.

Certain non-GAAP measures will be discussed on this call. We have provided a description of these measures as well as the discussion why we believe this information to be useful in our Form 8-K furnished to the SEC this morning. The Form 8-K can be accessed through a link on our website at suburbanpropane.com.

Additionally, today we have filed the Form 8-K in connection with the previously announced acquisition of the Inergy LP’s retail propane business and assets. The Form 8-K will include audited financial statements of Inergy Propane LLC through the fiscal year ended September 30, 2011, and the unaudited financial statements as of -- and for the six months ended March 31, 2012 as well as unaudited pro forma condensed combined financial statements to reflect the Inergy Propane acquisition.

At this point, I’d like to get the call started by turning it over to Mike Dunn for some opening remarks. Mike?

Mike Dunn

Thanks, Davin, and thanks everyone for joining us this morning. Results for the second quarter of fiscal 2012 were significantly affected by record warm temperatures across most of the country and in particular, our service territories.

In fact, the period from January through March 2012 was reported by [Noah] as being the warmest on record in the record in the contiguous United States, capped off by the warmest March on record. These record warm temperatures follow the considerably warmer than normal temperatures experienced in the fiscal 2012 first quarter, making the fiscal 2012 heating season one of the most challenging six month periods faced by the industry.

That being said, the steps we have taken over the past several years to streamline our operating platform drive operating efficiencies and strengthen our balance sheet, helped us navigate through this very challenging period.

Additionally, our patience and discipline over the years put us in the position to make the recent announcement of our agreement to acquire the retail propane assets and operations of Inergy LP for approximately $1.8 billion. Once completed, this acquisition effectively doubles the size of Suburban and expands our geographic reach into 11 new states.

These transactions supports our growth strategy as we look to leverage our technology platform and combine the talent and resources and best practices of the two organizations in order to drive significant operating synergies.

In a moment, I will comment more on our thoughts regarding this exciting opportunity. However, at this point, I would like to turn the call over to Mike Stivala to discuss our second quarter results in more detail. Mike?

Mike Stivala

Thanks Mike and good morning everyone. As we discuss our second quarter results to be consistent with our previous reporting, I’m excluding the impact of unrealized non-cash mark-to-market adjustments from derivative instruments used in risk management activities under FAS 133 accounting, which resulted in a de minimus amount in the second quarter of fiscal 2012, compared to an unrealized gain of $4.1 million in the prior second quarter.

Additionally, net income and EBITDA for the fiscal 2012 second quarter included $2.1 million non-cash charge for the write-off of capitalized cost associated with an abandoned software project for our natural gas and electric segment as well as the $500,000 loss on debt extinguishment associated with the amendment of our revolving credit facility which was completed in January 2012.

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