SUBURBAN PROPANE PARTNERS LP

On February 6, 2019, the Operating Partnership acquired the propane assets and operations of a propane retailer operating in strategic markets on the west coast for $12,000, including $800 for non-compete consideration, plus working capital acquired. As of March 30, 2019, $10,575 was paid and the remainder of the purchase price will be funded in accordance with the terms of the asset purchase and non-compete agreements.  The acquisition was consummated pursuant to the Partnership’s strategic growth initiatives.  The purchase price allocation and results of operations of the acquired business were not material to the Partnership’s condensed consolidated financial position and statement of operations.

Retail propane gallons sold in the second quarter of fiscal 2019 were 165.2 million gallons, 2.6% lower than the prior year second quarter.  According to the National Oceanic and Atmospheric Administration, average temperatures (as measured by heating degree days) across all of the Partnership’s service territories for the second quarter of fiscal 2019 were 3% warmer than normal, and 3% cooler than the prior year second quarter.  The increase in heating degree days compared to the prior year was concentrated in February and March, as heating degree days for those months were near or above normal.

Revenues in the second quarter of fiscal 2019 of $504.4 million decreased $31.9 million, or 5.9%, compared to the prior year second quarter, primarily due to lower volumes sold, coupled with lower retail selling prices associated with lower wholesale product costs.  Average posted propane prices (basis Mont Belvieu, Texas) were 20.8% lower than the prior year second quarter.  Cost of products sold for the second quarter of fiscal 2019 of $201.5 million decreased $45.1 million, or 18.3%, compared to the prior year, primarily due to lower volumes sold and lower wholesale product costs.  Cost of products sold included an $8.5 million unrealized (non-cash) gain attributable to the mark-to-market adjustment for derivative instruments used in risk management activities, compared to a $3.7 million unrealized (non-cash) loss in the prior year second quarter.  These unrealized gains and losses were excluded from Adjusted EBITDA for both periods in the table below.

During the second quarter of fiscal 2019, the Partnership repaid approximately $39.3 million under its Revolving Credit Facility from operating cash flows, which reduced outstanding borrowings under that facility to $143.5 million as of March 30, 2019.  The increase in Adjusted EBITDA and the debt repayment during the second quarter resulted in the Partnership’s Total Consolidated Leverage Ratio improving to 4.32x as of March 30, 2019.  

Weather-driven customer demand got off to a slow start in the second quarter of fiscal 2019 as warmer than normal average temperatures at the end of the first quarter carried over into the month of January.  Average temperatures (as measured in heating degrees days) for the month of January 2019 were 10% warmer than both normal and January 2018. However, as cooler temperatures arrived in February and March of 2019 in the majority of our service territories, customer demand responded.  Overall, average temperatures across all of our service territories during the second quarter of fiscal 2019 were 3% warmer than normal and 3% cooler than the prior year second quarter.  The increase in heating degree days compared to the prior year was concentrated in the months of February and March, as heating degree days for those months were near or above normal.