Q1 2022 Suburban Propane Partners LP Earnings Call
Speaker 1: Good morning and welcome to the suburban Cropain Partners first quarter earnings conference call. All participants will be in a list knowing mode. Should you need a significance? Please signal a conference specialist by pressing the start key followed by zero. After today's presentation, there will be an opportunity to ask questions.
Good morning, and welcome to the suburban propane partners first quarter earnings Conference call.
All participants will be in a listen only mode should you need assistance. Please signal a conference specialist by pressing the star followed by zero.
After todays presentation, there will be an opportunity to ask questions.
Speaker 1: To ask a question, you may press star than one on your test phone. To withdraw your question, please press star than two. Please note, this event is...
To ask a question you May Press Star then one on your touch Time's up.
To withdraw your question. Please press Star then two.
Please note this event is being recorded.
Speaker 1: This conference call contains four of the constituents within the Union of Section 21, E of the Securities Exchange Act of 1934, as amended relating to the partnerships, future business expectations and predictions and financial conditions and results of operation.
This conference call contains forward looking statements within the meaning of section 21 of the Securities Exchange Act of 934 as amended relating to the partnerships future business expectations and predictions and financial condition and results of operations. These forward looking statements involve certain risks and uncertainties.
Speaker 1: The four-looking statement involves certain risks and uncertainties. The partnership has listed some of the important factors that could cause actual result to different material from those discussed in such four-looking statements, which I'll refer to as cautionary statements in its uninspressed release, which can be viewed on the company's website.
The partnership has 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.
Speaker 1: fall subject to written and oral, forwarded statements attributable to the partnership of persons acting on its behalf are expressly qualified in their entirety by this questionnaire statement.
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.
Speaker 1: I would now like to turn the conference over to Daven, the Inversio Vice President and Treasurer. Please go ahead.
I would now like to turn the conference over to Davin, Dambrosio, Vice President and Treasurer. Please go ahead.
Speaker 2: Thanks, Chad. Good morning, everyone. Thank you for joining us this morning for our fiscal 2022 First Quarter Erning Council.
Thanks, Chad good morning, everyone. Thank you for joining us this morning for our fiscal 2022 first quarter earnings Conference call Joy.
Speaker 2: Joining me this morning are Mike Stavalla, our president and chief executive.
Joining me this morning are Mike <unk>, our president and Chief Executive Officer.
Speaker 2: Mike Cuglin, our Chief Financial Officer, and Chief Accounting Officer. And Steve Boyd.
Mike <unk>, our Chief Financial Officer, and Chief Accounting Officer, and Steve Boyd, Our Chief operating officer.
Speaker 2: This morning we will review our first quarter financial result, along with our current outlook for the...
This morning, we will review our first quarter financial results, along with our current outlook for the business.
Speaker 2: Once we've concluded our prepared remarks, we will open the session to close.
Once we've concluded our prepared remarks, we will open the session for questions.
Speaker 2: Our annual report on Form 10K for the fiscal year ended September 25th, 2001, and Form 10Q for the period ended December 25th, 2021, which will be filed by the end of this today. Contained disclosures regarding forward-looking statements and risk factors. Copy's may be obtained by contacting.
Our annual report on Form 10-K for the fiscal year ended September 25, 25, 2001 and Form 10-Q for the period ended December 25, 2021, which will be filed by the end of business today.
<unk> disclosures regarding forward looking statements and risk factors copies may be obtained by contacting the partnership or FCC.
Speaker 2: Sir, non- GAAP measures will be discussed on this call. We have provided a description of those measures, as well as the discussion of why we believe this information to be...
Our non-GAAP measures will be discussed on this call. We provide a description of those measures as well as a discussion of why we believe this information to be useful in our form 8-K, which was furnished to the SEC. This morning.
Speaker 2: in our form 8K, which was furnished to the SEC.
Speaker 2: Form AK will be available through a link in the Investor Relations section of our website at suburbanpropein.com.
The form 8-K will be available through a link in the Investor Relations section of our website at suburban propane dot com.
Speaker 2: At this point, I'll turn the call over to Mike Stavall for some of my remarks. Mike?
At this point I will turn the call over to Mike <unk> for some opening remarks, Mike.
Speaker 3: Great thanks, Daven. And good morning. Thank you all for joining us today.
Great. Thanks, Devin and good morning, Thank you all for joining us today.
Speaker 3: We're very pleased to deliver another solid quarter with an increase in adjusted EBITDA of more than 8% compared to the prior year first quarter.
We're very pleased to deliver another solid quarter with an increase in adjusted EBITDA of more than 8% compared to the prior year first quarter.
Speaker 3: Coming into the first quarter of fiscal 2022, the propane industry was faced with highly publicized concerns over lower US inventories, significantly higher base commodity prices across the entire energy slate, and an expectation that consumers could be facing much higher costs to eat their homes and businesses in the impending heating season.
Coming into the first quarter of fiscal 2022, the propane industry was faced with highly publicized concerns over lower U S inventories significantly higher base commodity prices across the entire energy slate and an expectation that consumers could be facing much higher costs to ease their homes and businesses.
And the impending heating season.
Speaker 3: In fact, heading into the 2021-2022 heating season, US profanimentaries were reported at around 20% below the five-year average for that time of year.
In fact heading into the 2021 and 2022 heating season U S. Propane inventories were reported at around 20% below the five year average for that time of year.
Speaker 3: and spot protein prices were at their highest level for November since 2011.
And spot propane prices were at their highest level for November since 2011.
Speaker 3: However, as our first quarter progressed, a combination of lower than average crop drying demand in the agricultural sector, lower export activity, and near record warm temperatures in the month of December 2021, which muted heat-related demand, all contributed to a near-normalization of U.S. propane inventories, and a pullback in propane prices by about 33% from their peak levels.
However, as our first quarter progressed, a combination of lower than average crop drying demand in the agricultural sector.
Lower export activity and near record warm temperatures in the month of December 2021, which muted heat related demand.
All contributed to a near normalization of U S propane inventories and a pullback in propane prices by about 33% from their peak levels.
Speaker 3: At suburban propane, we were able to offset the impact of lower heat-related demand during the first quarter. And certain inflationary factors driving higher operating costs with effective selling price management and a prudent hedging and risk management strategy in a very volatile commodity price environment.
At suburban propane, we were able to offset the impact of lower heat related demand during the first quarter and certain inflationary factors driving higher operating costs with effective selling price management, and a prudent hedging and risk management strategy.
Very volatile commodity price environment.
Speaker 3: The improvement in earnings is also a testament to the hard work and dedication of our operations personnel in maintaining their focus on delivering outstanding service to our customers while continuing to contend with the challenges of operating the business through the COVID-19 pandemic.
The improvement in earnings is also a testament to the hard work and dedication of our operations personnel and maintaining their focus on delivering outstanding service to our customers, while continuing to contend with the challenges of operating the business through the COVID-19 pandemic.
Speaker 3: and also reflects the positive results from our customer-based growth and retention initiatives.
And also reflects the positive results from our customer base growth and retention initiatives.
Speaker 3: In a moment, I'll come back for some closing remarks, including our outlook for the rest of the year. However, at this point, I'd like to turn the call over to Mike Puglin to discuss the first-core results in more detail. Mike. Thanks, Mike.
In a moment I'll come back for some closing remarks, including our outlook for the rest of the year. However at this point I'd like to turn the call over to Mike equivalent to discuss the first quarter results in more detail Mike.
Thanks, Mike and good morning, everyone.
Speaker 2: To be consistent with previous reporting, as I discussed, our first quarter results.
To be consistent with previous reporting.
As I discuss our first quarter results I'm, excluding the impact of unrealized mark to market adjustments on our commodity hedges, which resulted in an unrealized loss of $33 $5 million for the first quarter.
Speaker 4: including the impact of unrealized market adjustments on our commodity hedges, which resulted in an unrealized loss of $33.5 million in the first quarter, compared to an unrealized gain of $4.9 million in the prior year.
Compared to an unrealized gain of $4 9 million in the prior year.
Speaker 4: This large unrealized loss of marked-marked adjustments on our commodity hedges primarily reflects the reversal of previously reported unrealized gains at the end of the prior fiscal year.
This large unrealized loss from mark to market adjustments on our commodity hedges primarily reflects the reversal of previously reported unrealized gains at the end of the prior fiscal year.
Speaker 4: portion of those unrealized gains were realized during the first quarter of the fiscal 2022.
There's a portion of those unrealized gains were realized during the first quarter of fiscal 2022.
Speaker 4: including these items as well as the non-cash equity and earnings over our fuel.
Excluding these items as well as the noncash equity earnings over our fuels, which is unconsolidated affiliates net income for the first quarter was $55 4 million or 88 cents per common unit.
Speaker 4: which is an uncostalidad affiliate that income for the first quarter was $55.4 million for ADA Central County Units.
Speaker 4: a pair of genetic income of $33.4 million for 53 times per common unit in the prior year.
Compared to net income of $33 4 million or 53 cents per common unit in the prior year.
Speaker 4: adjusted EBITDA of $86.5 million with first quarter improved by $6.5 million or 8.1% compared to the prior year for first quarter.
Adjusted EBITDA of $86 $5 million for the first quarter.
Approved by $6 5 million or eight 1% compared to the prior year first quarter.
Speaker 4: As Mike mentioned, the improvement in earnings was driven by several factors, but most significantly from...
As Mike mentioned the improvement in earnings was driven by several factors.
But most significantly from solid margin management.
Speaker 4: favorable impact of commodity hedges that mature during the period and the benefits from continuous positive trends and customer-based growth.
Abel impact commodity hedges that matured during the period and.
And the benefits from continued positive trends in customer base growth.
Speaker 4: factors more than all set lower heat related customer demand and inflationary pressure plus much of our operating and general administrative spend.
These factors more than offset lower heat related customer demand and inflationary pressure across much of our operating and general and administrative expenses.
Speaker 4: Retail protein gallon sold in the first quarter were 105.3 million gallons, which was 5.7% lower than a prior year.
Retail propane gallons sold in the first quarter.
$105 3 million gallons, which was five 7% lower than the prior year.
Speaker 4: Fimes sold were negatively impacted by widespread and steedled bework temperatures, especially during the critical month of December .
Volume sold were negatively impacted by widespread and Stephen will be warm temperatures.
Especially during the critical month of December .
Speaker 4: as well as from lower demand for outdoor temperature, and lower agricultural demand for crop drying, given the low moisture.
As well as from lower demand for outdoor temporary heat.
Lower agricultural demand for crop giant given the low moisture content.
Speaker 4: The first quarter was 16% warmer than normal, and 3% warmer than a prior year for a quarter. So what does the public must have for a total grade? ever its timbre
With respect to the weather average temperatures for the first quarter were 16% warmer than normal and 3% warmer than the prior year first quarter.
Average temperatures during the month of December 2021, which is the most critical months for heat related demand in the first quarter was 14% warmer than normal and 5% warmer in December 2020.
Speaker 4: critical month for equally as a demand in the first quarter was 14% warmer than normal and 5% warmer than December .
Speaker 4: from a commodity perspective, as we reported in our last call, both self-propeung prices were elevated coming into fiscal 2022.
From a commodity.
City perspective, as we reported in our last call wholesale propane prices were elevated coming into fiscal 2022.
Speaker 4: Tinoeterize for the first six weeks of the quarter is a nascent inventory levels for tracking well below historical averages for that time of the year.
Continue to rise for the first six weeks of the quarter is <unk> inventory levels were tracking well below historical averages for that time of the year.
Speaker 4: However, as Mike mentioned, as we progress through the quarter, inventory levels improve through the solid production of pacing soft domestic demand. And that's like pullback and that's
However, as Mike mentioned as we progressed through the quarter inventory levels improved due to solid production outpacing soft domestic demand and a slight pullback in exports.
Speaker 4: for all average toll sell prices for the first quarter, where $1.25 per gallon faces Montpell View, which was nearly 120% higher than the prior year first quarter, and 7% higher.
Overall average wholesale prices for the first quarter were $1 25 per gallon basis Mont Belvieu.
Which was nearly 120% higher than the prior year first quarter.
And 7% higher than the prior sequential quarter.
Speaker 4: including the impact of the marked market adjustments on our commodity hedges that I mentioned earlier. Total gross margin of $212.6 million for the first quarter increased $15.6 million for 7.9% compared to the prior year.
Excluding the impact of the mark to market adjustments on our commodity hedges that I mentioned earlier.
<unk> gross margin of $212 6 million for the first quarter increased $15 6 million or seven 9%.
<unk> to the prior year.
Speaker 4: The improvement in gross margin was driven by effective selling price management during a volatile commodity price environment.
The improvement in gross margin was driven by effective selling price management during a volatile commodity price environment.
Speaker 4: and a fairble impact on commodity hedges that matured during the period.
The favorable impact of commodity hedges that matured during the period.
Speaker 4: Consistent with patch practices, our hedging and risk management activities are intended to reduce the effect of price volatility associated with forecast and purchases of propane and propane sold in a
Consistent with past practices, our hedging and risk management activities are intended to reduce the effects of price volatility associated with forecasted purchases of propane and propylene sold on a fixed price basis.
Speaker 4: commodity hedges that matured during the first quarter of fiscal 2022 were principally comprised of that long positions purchased in fiscal 2021.
The commodity hedges that matured during the first quarter of fiscal 2022 were principally.
Comprised of net long positions purchased in fiscal 2021.
Speaker 4: favorably impacted from this difficult rise, commodity price.
Were favorably impacted from a significant rise in commodity prices.
Speaker 4: expect expenses by an operating and gene expenses of $125.5 million for the first quarter, increased $4 million or 8.1% compared to the prior year, primarily due to higher payroll and benefit related expenses and higher vehicles.
With.
Respect to expenses combined operating and G&A expenses of $125 5 million for the first quarter increased $9 4 million or.
Or eight 1% compared to the prior year.
Due to higher payroll and benefit related expenses and higher vehicle lease and operating costs.
Speaker 4: Compatration of benefit costs, along with vehicle and other offering costs, have all experienced some inflationary effects in the competitive environment for qualified people.
Compensation and benefit costs, along with vehicle and other operating costs have all experienced some inflationary effects and the competitive environment for qualified people.
Speaker 4: as well as broader impact on energy, steel, vehicles, and other parts.
As well as broader impacts on energy steel vehicles and other costs.
Yes.
Speaker 4: Then interest expense of $15.3 million for the first quarter was $2.8 million or 15.6% lower than a prior year resulted in the refinancing of two tranches of senior notes at lower rates and at their quarter of the prior fiscal year as well as a lower average level
Net interest expense of $15 $3 million for the first quarter was $2 8 million or 15, 6% lower than the prior year, resulting from the refinancing of two tranches of senior notes at lower rates in the third quarter of the prior fiscal year.
As well as a lower average level of outstanding debt.
Speaker 4: total capital spending for the quarter of $10.7 million, plus $4.9 million higher than the prior year.
Total capital spending for the quarter of $10 $7 million was $4 $9 million higher than the prior year.
Speaker 4: Capital spending during the quarter includes the acquisition of several properties to support the Greenfield expansion efforts in various growth markets.
Capital spending during the quarter includes the acquisition of several properties to support Greenfield expansion efforts in various growth markets.
Speaker 4: as well as tank and cylinder purchases to support customer growth.
As well as tank and cylinder purchases to support customer growth.
And turning to our balance sheet.
Speaker 4: Given the seasonal nature of our business, we typically borrow and or revolve in credit facility during the first quarter to help fund a portion of our seasonal work in capital need.
Given the seasonal nature of our business, we typically borrow under our revolving credit facility. During the first quarter to help fund a portion of our seasonal working capital needs.
Speaker 4: With that said, we borrowed approximately $44 million under the revolver, during the first quarter, which is comparable to historical levels, but slightly higher than the prior year first quarter, with the impact of higher commodity price.
With that said, we borrowed approximately $44 million under the revolver during the first quarter, which is comparable to historical levels, but slightly higher than the prior year first quarter due to the impact of higher commodity prices.
Speaker 4: Despite the borrowings to fund a working capital requirement, our total debt outstanding as of December 2021 was $73 million lower in December 2020, given the significant reduction in debt during the prior fiscal year.
Despite the borrowings to fund our working capital requirements. Our total debt outstanding as of December 2021 was $73 million lower than December 2020, given the significant reduction in debt during the prior fiscal year.
Speaker 4: Right now in the first quarter, our Constellate Leverd ratio, for the Trilling 12 Month period, was 4.02 times.
Again in the first quarter, our consolidated leverage ratio for the trailing 12 month period was four two times.
Speaker 4: which is roughly flat to well be reported for physical 2021 and our flex is significant improvement from where we ended the prior year for a quarter. It is certainly well within our debt governor requirement of 5.75.
Which is roughly flat to what we reported for fiscal 2021.
In our flex a significant improvement from where we ended the prior year first quarter.
Certainly well within our debt covenant requirement of 575 times.
Speaker 4: Our working capital needs typically peak towards the end of the heating season, late February or early March time frame, after which we expect to continue generating excess cash.
Our working capital needs typically peak towards the end of the heating season the.
Late February or early March time frame after which we expect to continue generating excess cash flows.
Speaker 4: We will continue to remain focused on utilizing access cash flows to further strengthen the balance sheet and as opportunities arise to fund strategic growth.
We will continue to remain focused on utilizing excess cash flows to further strengthen the balance sheet.
And as opportunities arise to fund strategic growth.
Speaker 4: We have more than ample barring capacity under our revolver to fund our remaining working capital needs for heating season, as well as to support our strategic growth initiatives.
We have more than ample borrowing capacity under our revolver to fund our remaining working capital need for heating season, as well support our strategic growth initiatives.
Back to you Mike.
Speaker 3: Thanks Mike. As announced on January 20th, our Board of Supervisors declared our quarterly distribution of 32 and a half cents per common unit in respect of our first quarter of fiscal 2022, which equates to an annualized rate of $1.30 per common unit. Our quarterly distribution will be paid on February 8th to our unit holders of record as of February 1st.
Thanks, Mike.
As announced on January 20th our board of Supervisors declared our quarterly distribution of $32.05 per common unit in respect of our first quarter of fiscal 2022, which equates to an annualized rate of $1 30 per common unit, our quarterly distribution will be paid on February 8th to our unit holders of record as of February one.
Speaker 3: Our distribution coverage continues to remain strong at 2.6 times based on our trailing 12-month Distributable Caselo at the end of the quarter.
Our distribution coverage continues to remain strong at two six times based on our trailing 12 month distributable cash flow at the end of the quarter.
Speaker 3: Looking ahead, while weather at the beginning of this year's heating season was unseasonably warm, particularly in the month of December , much of the heating season is still ahead. In fact, weather in the early part of our fiscal second quarter has shifted to more seasonable and in many parts of the country colder than normal temperatures.
Looking ahead.
While weather at the beginning of this year's heating season was unseasonably warm, particularly in the month of December much of the heating season is still ahead in fact weather in the early part of our fiscal second quarter has shifted to more seasonable and in many parts of the country colder than normal temperatures.
Speaker 3: With the arrival of colder temperatures and increased heating demand, Popeye and Prices have started to rise, increasing more than 15% in just the past three weeks.
With the arrival of colder temperatures and increased heating demand propane prices have started to rise increasing more than 15% in just the past three weeks.
Speaker 3: Our people and our operating platform are extremely well positioned to respond to the increasing customer demand.
Our people and our operating platform are extremely well positioned to respond to the increasing customer demand.
Speaker 3: while adhering to the highest standards for safety, including our continuing protocols associated with COVID-19.
While adhering to the highest standards for safety, including our continuing protocols associated with COVID-19.
Speaker 3: I'm very proud of how our people have continued to be resilient in the face of the ongoing challenges from the pandemic, whether in their personal lives or as a result of changes in how we operate.
I'm very proud of how our people have continued to be resilient in the face of the ongoing challenges from the pandemic whether in their personal lives or as a result of changes in how we operate.
Speaker 3: They remain dedicated to writing outstanding service to our customers and local communities, especially when they need us most.
They remain dedicated to providing outstanding service to our customers and local communities, especially when they need us most.
Speaker 3: On the strategic front, we continue to make progress, along with our minority-owned subsidiary, Oberon Fuels, toward the commercialization of low-carbon renewable dimethyl ether, which as a blend with propane, will significantly reduce its carbon intensity.
On the strategic front.
We continue to make progress along with our minority owned subsidiary over on fuels towards the commercialization of low carbon renewable dimethyl ether.
As a blend with propane will significantly reduce its carbon intensity.
Speaker 3: Our initial focus is to offer the blended product in the fourth lift and over the road auto gas mark.
Our initial focus is to offer the blended product in the forklift and over the road auto gas markets.
Speaker 3: And as we talk to existing and prospective customers, we have received some very positive interest for this new product.
And as we've talked to existing and prospective customers. We have received some very positive interest for this new product.
Speaker 3: And we have recently begun to construct the blending infrastructure needed to support future handling and sale of the new product.
And we have recently begun to construct the blending infrastructure needed to support future handling and sale of the new product.
Speaker 3: In addition to fostering our investment over on, we continue to seek additional investment opportunities in other exciting new technologies. As we look to execute on our stated strategic goal of building out a renewable energy platform.
In addition to fostering our investment overall, we continue to seek additional investment opportunities and other exciting new technologies as we look to execute on our stated strategic goal of building out a renewable energy platform.
Speaker 3: given our long legacy of being a trusted energy provider to local communities.
Given our long legacy of being a trusted energy provider to local communities.
Speaker 3: We are very well situated and excited to support the country's energy transition to a sustainable energy future.
We are very well situated and excited to support the country's energy transition to a sustainable energy future.
Speaker 3: both given the clean qualities of propane as a destination fuel.
Both given the clean qualities of propane.
As a destination fuel.
Speaker 3: but also through our efforts to identify and invest in other innovative solutions to lower greenhouse gas emissions across multiple corners of the energy sector.
But also through our efforts to identify and invest in other innovative solutions to lower greenhouse gas emissions across multiple corners of the energy sector.
Speaker 3: And finally, I'd like to once again thank all of the more than 3,100 employees at suburban propane for their unwavering focus on the safety and comfort of our customers and the communities we serve.
And finally I'd like to once again, thank all of the more than 3100 employees at suburban propane for their unwavering focus on the safety and comfort of our customers and the communities we serve.
Speaker 3: And as always, we appreciate your support, attention, and sworn. And we'll now open the call to questions and chat. If you wouldn't mind helping us with that.
And as always we appreciate your support and attention this morning.
We'll now open the call to questions Chad, if you wouldn't mind, helping us with that.
Speaker 1: Certainly. We will now begin the question and answer session. To ask the question, you may press star than one on your touchtone thumb. If you're using the speaker phone, please pick up your handset before pressing the key.
Certainly we will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone.
If youre using a speakerphone please pick up your handset before pressing.
Speaker 1: To withdraw your question, please press star then two.
To withdraw your question. Please press Star then two.
Speaker 1: At this time, we will pause momentarily to assemble our rust.
At this time, we will pause momentarily to assemble our roster.
Speaker 1: And the first question will come from Med Baramore with Wells Fargo. Please go ahead.
And the first question will come from mid Furthermore, with Wells Fargo.
Please go ahead.
Speaker 5: Hi, good morning. Thanks for taking the question. Good morning. Could you provide more details on the acquisition of properties in UMark, if you noted in your prepared remarks? And more specifically, do you anticipate additional spending in these areas?
Hi, good morning, Thanks for taking the question.
Good morning could you provide.
Could you provide more details on the acquisition of properties in your markets.
You noted in your prepared remarks.
More specifically do you anticipate additional spending in these areas.
Speaker 3: So we've talked a lot about not only...
So we've talked a lot about not only.
Speaker 3: being somewhat active in the propane M&A market, but even more importantly identifying very strategic markets across the United States where we may not have a big enough presence or maybe we don't have a presence at all that's just outside of our current delivery radius, but that has...
Being somewhat active in the propane M&A market, but but even more importantly.
Identifying very strategic markets across the United States, where we may not have a big enough presence or maybe we don't have a presence at all that's just outside of our current delivery radius, but that has experienced.
Speaker 3: experienced strategic growth opportunities because of maybe population migration or just changing behaviors in that particular market where we believe that our service capability belongs in that market to serve the customers.
Strategic growth opportunities because of maybe population migration or.
Just changing behaviors in that particular market, where we believe that our service capability.
Belongs in that market to serve the customers and so we have a number of greenfield expansions across.
Speaker 3: And so we have a number of greenfield expansions across.
Speaker 3: many different parts of the country and the acquisitions of properties.
Many different parts of the country and the acquisitions of properties was.
Speaker 3: was to obviously build out the infrastructure to support those local markets with storage.
Obviously built out the infrastructure to support those local markets with storage.
Speaker 3: and a depot to house our trucks and people that are going to go after those new markets.
In a depot too.
How is our trucks and people that are going to go after those new markets.
Speaker 3: As far as future spending, most of the spending for the active greenfields that we have going on right now is pretty much behind us in terms of
As far as future spending most of the spending for the active greenfields that we have going on right now is pretty much behind us in terms of.
Speaker 3: buying up properties and the necessary assets to get started in those markets.
Buying up properties and the necessary assets to get started in those markets from here. The cost is really just getting out there and marketing.
Speaker 3: From here, the cost is really just getting out there and marketing the great suburban propane brand to those markets.
Great suburban propane brand to those markets.
Speaker 5: Got it. That's helpful. And then, second question, could you talk about inflationary effects on your combined OPEX and SG&A, and do you expect additional increases for the remainder of fiscal 2022?
Got it that's helpful and then.
Second question could you talk about.
Inflationary effects on your combined Opex and SG&A and do you expect additional increases for the remainder of the remainder of fiscal 2022.
Speaker 3: Well, certainly there's no shortage of publicity on the impact that driver shortages is having across any business that
Well certainly there is no shortage of publicity on the impact that driver shortages is having across any any business that.
Speaker 3: requires CDL drivers like our business. In fact, I was driving in this morning and the New Jersey Transit bus had a drive for us with a $6,000 signing bonus. So a bit of a sign of just how competitive the landscape is for qualified drivers. So that's obviously been a bit of an inflationary impact for us. We've had some of the highest.
<unk>.
Requires.
CDL drivers like our business and in fact I was driving in this morning, and the New Jersey Transit bus had a drive for us with a $6000 signing bonus.
A bit of a sign of just how competitive.
The landscape is for qualified drivers.
That's obviously been a bit of.
And inflationary impact for US we've had some of the highest.
Speaker 3: increases in compensation than we've experienced in several years, which is great. And we're able to retain in a lot of cases, attract good quality drivers, but it is, had a bigger expense. And everything else from steel for our tanks and the average cost of buying new trucks.
Increases in compensation.
Than we've experienced in several years, which is great.
And we're able to retain in lot of cases attract good quality drivers, but it is at a bigger expense.
And everything else from steel.
For our tanks and.
The average cost of buying new trucks is all up whether it's because of the supply chain.
Speaker 3: is all up, whether it's because of supply chain challenges or just because of the price of the base commodities like spiel. The cost of buying those products is up. And then obviously, it's been well published.
<unk> or just because of the price of the base commodities like steel.
The cost of buying those products is up and then obviously.
Well publicized fuel costs gasoline and diesel.
Speaker 3: fuel costs, gasoline and diesel, which we need to get our trucks on the road is up significantly. So those are some of the sort of more meaningful inflationary impacts that we're experiencing, some of which will be permanently embedded in our cost structure.
Which we need to.
Get our trucks on the road is up significantly so those are some of the.
Sort of more meaningful inflationary impacts that we're experiencing some of which will be permanently embedded in our cost structure, others will depend on how things settle out over the coming months.
Speaker 3: will depend on how things settle out with the coming months or a year.
Or a year.
Speaker 3: But the good thing is is that I think as you've seen, we've done a great job of managing the business, both from the perspective of keeping our operating platform pretty lean. We've always gotten credit for being one of the most-
<unk>.
But the good thing is is that I think as you've seen we've done a great job of managing the business.
Both from the perspective of.
Keeping our operating platform pretty lean.
We've always gotten credit for being one of the most efficient operators in the industry and I think in an environment like this.
Speaker 3: efficient operators in the industry and I think in an environment like this.
Speaker 3: Our nimble platform is disabled too.
Our nimble platform is able to.
Speaker 3: continue to operate while others may struggle in this kind of an environment. And as well as our selling price management, we've done a great job in a very, very challenging commodity environment and a very competitive environment at the propane industry always is. We've done a great job of maintaining a good focus on our selling price management to be able to ensure that our margins are appropriately...
Continue to operate while.
While others may struggle in this kind of an environment and as well as our selling price management.
We've done a great job in a very very challenging commodity environment in a very competitive environment as the propane industry always as we've done a great job of maintaining a good focus on.
On our selling price management to be able to ensure that our margins are appropriately.
Speaker 3: at a point to cover the increase in cost to the business. That's great.
At a point to cover the increase in cost to the business.
That's great. Thanks for all the color that's all I had.
Great. Thank you.
Speaker 1: And once again, if you have a question, please press star then one.
And once again, if you have a question. Please press Star then one.
Okay.
Speaker 1: Again, once again, person starvin' one, or allow you to ask a question.
And again once again Christmas Sullivan, one will allow you to ask a question.
Speaker 1: And we do have a question and that comes from James Spicer with TV Securities. Please go ahead.
And we do have a question and that comes from James Spicer with TD Securities. Please go ahead.
Speaker 6: Hi, good morning. You guys have done a great job of reducing leverage over the past year or so. Can you just remind us what your target is on the leverage side and how you think about the priorities between continued leveraging versus investments back in the business versus dividend increase?
Yeah, Hi, good morning.
You guys have done a great job.
Reducing leverage over the past.
Year. So can you just.
Remind us what your target is on the leverage side.
And how you think.
Think about the priorities between continued deleveraging versus.
Investments back into the business versus dividend increases.
Speaker 3: So our stated goal is to get our leverage metric down into the mid three times. You know, we ended fiscal 2021 just under four with the increased borrowings for working capital in the first quarter that ticked up slightly just over four as we get out of the peak working capital. We'll be back down below four as the year progressed.
So our stated goal is to get our leverage metric down into the mid three times.
We ended fiscal 2021.
Just under four.
With the increased borrowings for working capital in the first quarter that ticked up slightly to just over four.
As we get out of the peak working capital will be back down below four as the as the year progresses.
Speaker 3: and with our operating platform and
And with our with our operating platform and.
Speaker 3: the earnings potential of the business, you know, we're going to be able to generate anywhere from $70 to $100 million of excess cash flow. And, you know, that will determine on the best use of that cash based on.
Sure.
The earnings potential of the business, we're going to be able to generate anywhere from $70 million to $100 million of excess cash flow.
And that will we'll determine.
On the best use of that cash based on what opportunities are available to us obviously, we have a.
Speaker 3: what opportunities are available to us. Obviously, we have a goal to continue to invest in renewable energy technologies, and we're very active right now in seeking different opportunities in different sectors of renewable energy that some of them may or may not.
Our goal to continue to invest in renewable energy technologies.
And we're very active right now in seeking different opportunities in different sectors of renewable energy that.
Some of them may may or may not.
Speaker 3: pan out, but we're very active in educating ourselves on the different sectors within Renewable and some of those opportunities.
Pan out, but we're very active in educating ourselves on the different sectors within renewable.
And if some of those opportunities manifest themselves and then we have the flexibility and the benefit frankly of <unk>.
Speaker 3: manifest themselves and then we have the flexibility of and the benefit frankly of having excess cash flow to be able to fund.
Having excess cash flow to be able to fund acquisitions.
Speaker 3: acquisitions without the need to borrow perhaps.
Without the need to borrow perhaps.
Speaker 3: And then to the extent that we don't invest in those types of acquisitions or propane acquisitions, then whatever excess cash flow is available will go towards reducing debt.
And then to the extent that we.
We we don't invest in those.
Those types of acquisitions or propane acquisitions, then whatever excess cash flow is available we will go towards reducing debt.
Speaker 3: to get closer to our goal. And certainly as we grow the business with some of the investments that we're making in interesting new technologies.
To get closer to our goal.
And certainly as we grow the business with some of the investments that we're making in an interesting new technologies that will give us more opportunity to generate incremental cash flow down the road that will be available for raising distributions. Obviously, we know we're here to create value for our unit holder.
Speaker 3: It'll give us more opportunity to generate incremental cash flow down the road that will be available for raising distributions. Obviously we know we're here to create value for our unit holders. We can do that in a number of ways. And...
<unk>.
We can do that in a number of ways, including.
Speaker 3: strengthening the balance sheet, positioning ourselves to be very strategic in how we deploy capital towards our strategic goals of building out a renewable platform while also continuing to generate excess cash flow in the propane business.
Strengthening the balance sheet positioning ourselves to be very strategic in how we deploy capital towards our strategic goals of building out our renewable platform. While also continuing to generate excess cash flow in the propane business and growing the propane business frankly so.
Speaker 3: and growing the propane business frankly. So we're focused on all tenants.
So we're focused on all tenants.
Speaker 3: of that and as we execute, we'll have more opportunity to continue to look at distribution policy.
That and.
And as that as we execute we will have more opportunity to continue to look at the distribution policy.
Speaker 6: Okay, great. That's very helpful. And just one more if I could. I know you're 2027 notes are callable and March. Have you guys thought it all about timing on a refund?
Okay great.
Very helpful and just one more if I could I know you are at 2027 notes are callable callable in March have you guys thought at all about the timing on that refinancing.
Speaker 4: Yeah, I mean, if you look at our history, we've always been pretty active with refinance in the bond at the appropriate time.
Yes, I mean, if you look at our history, we've always been pretty active with refinancing the bonds at the appropriate time. So it's something that we'll continue to look at but we certainly are not going to foreshadow when we are going to possibly do that.
Speaker 4: something that we'll continue to look at, but we certainly are not going to foreshadow when we are calling to.
Yes, I understand thanks very much.
Thanks James.
Speaker 1: Ladies and gentlemen, this concludes our question and intercession. I would like to turn a conference back up with Mike Stavala for any closing remarks.
Ladies and gentlemen, this concludes our question and answer session I would like to turn the conference back over to Mike <unk> for any closing remarks.
Speaker 3: Great, thank you Chad and thank you all for joining us again. I hope you all stay safe and warm and we look forward to talking with you again after our second quarter earnings in early May. So thank you again. Appreciate your time.
Great. Thank you Chad and thank you all for joining US again, I hope you all stay safe and warm and we look forward to talking with you again after our second quarter earnings.
In.
In early May so thank you again I appreciate your time.
Speaker 1: And thank you, sir. The conference has now concluded. Thank you for attending today's presentation. You may now close to that.
Okay. Thank you Sir the conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Speaker 7: We Qu R we that C?
Okay.
[music].