Q3 2024 Suburban Propane Partners LP Earnings Call

August 8, 2024

Operator: Good morning, ladies and gentlemen, and welcome to the Suburban Propane Partners' third quarter earnings conference call. At this time, all lines are in listen-only mode.

Good morning, ladies and gentlemen, and welcome to the suburban propane partners third quarter earnings Conference call. At this time all lines are in listen only mode. Following the presentation, we will conduct a question and answer session.

Operator: Following the presentation, we will conduct a question-and-answer session. If, in any time during this call, you require immediate assistance, please press star zero for the operator.

If at any time during this call you require immediate assistance. Please press star zero for the operator. This call is being recorded on Thursday August eight 2024, I would now like to turn the conference over to Davin, Dambrosio, Vice President and Treasurer. Please go ahead.

Operator: This call is being recorded on Thursday, August 8th, 2024.

Daven Dambrosio: I would now like to turn the conference over to Daven Dambrosio, Vice President and Treasurer. Please go ahead.

Daven Dambrosio: Great, thank you, Chris. Good morning, and thank you for joining us for our fiscal 2024 third quarter earnings conference call. I'm here with Mike Stivala, our President and Chief Executive Officer, Mike Kuglin, our Chief Financial Officer, and Steve Boyd, our Chief Operating Officer. This morning we will review our third quarter financial results, along with our current outlook for the business.

Operator: Great. Thank you, Chris.

Great. Thank you Chris Good morning, and thank you for joining us for our fiscal 2024 third quarter earnings Conference call.

Operator: Thank you, Chris. Good morning and thank you for joining us for our fiscal 2024 third quarter earnings conference call. I'm here with Mike Stivala, our President and Chief Executive Officer, Mike Kuglin, our Chief Financial Officer, and Steve Boyd, our Chief Operating Officer. This morning, we will review our third quarter financial results, along with our current outlook for the business. Once we've concluded our prepared remarks, we will open the session to questions.

Davin: Chris, good morning, and thank you for joining us for our fiscal 2024 third quarter earnings conference call. I'm here with Mike Stivala, our President and Chief Executive Officer, Mike Kuglin, our Chief Financial Officer, and Steve Boyd, our Chief Operating Officer.

Operator: Good morning, and thank you for joining us for our fiscal 2024 third quarter earnings conference call. I'm here with Mike Stivala, our President and Chief Executive Officer, Mike Kuglin, our Chief Financial Officer, and Steve Boyd, our Chief Operating Officer. This morning, we will review our third quarter financial results, along with our current outlook for the business, which can be viewed on our website at suburbanpropane.com. All subsequent written and oral forward looking statements made tribunal to the partnership or persons acting on behalf of are expressly qualified in their entirety by such cautionary stance.

Speaker Change: I'm here with Mike <unk>, our President and Chief Executive Officer, Mike.

Operator: Mike <unk>, our Chief Financial Officer, and Steve Boyd, Our Chief operating Officer. This morning, We will review our third quarter financial results along with our current outlook for the business.

Davin: This morning, we will review our third-quarter financial results along with our current outlook for the business. Once we've concluded our prepared remarks, we will open the session to questions. Our 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, financial condition, and results of operations. These forward-looking statements involve certain risks and uncertainties.

Daven Dambrosio: Once we've concluded our prepared remarks, we will open the session to questions.

Operator: Once we've concluded our prepared remarks, we will open the session to questions.

Daven Dambrosio: Our conference call contains four looking statements within the meeting of Section 21 E of the Securities Exchange Act of 1934, as amended, relating to the partnership's future business expectations and predictions, financial condition, and results of operations. These four looking statements involve certain risks and uncertainties. We have listed some of the important factors could could cause actual results to differ materially from those discussed in such a way. We will look forward looking statements, which will refer to as cautionary statements, in our earnings press release, which can be viewed on our website at suburbanpropein.com. All subsequent written and oral forward-looking statements, trivial to the partnership or persons acting on behalf of our, are expressly qualified in their entirety by such cautionary statements.

Operator: Our 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, financial condition, and results of operations. These forward-looking statements involve certain risks and uncertainties. We 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 our earnings press releases, which can be viewed on our website at suburbanpropane.com.

Davin: We 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 our earnings press release, which can be viewed on our website at suburbanpropane.com. All subsequent written and oral forward looking statements made by the partnership or persons acting on behalf of the partnership are expressly qualified in their entirety by such cautionary stance. Our annual report on Form 10-K for the fiscal year ended September 30, 2023, and Form 10-Q for the period ended June 29, 2024, which will be filed by the end of business today, contain additional disclosure regarding forward-looking statements and risk factors.

Operator: Our conference call contains forward looking statements within the meaning of section 21 E of.

Operator: Of the Securities Exchange Act of $19 34 as amended.

Operator: Relating to the partnerships future business expectations, and predictions financial condition and results of operations.

Operator: These forward looking statements involve certain risks and uncertainties. We 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 our earnings press release, which can be viewed on our website at suburban propane dot com.

Operator: Tom.

Operator: All subsequent written and oral forward-looking statements attributable to the partnership or persons acting on behalf of the partnership are expressly qualified in their entirety by such cautionary stance. Our annual report on Form 10-K for the fiscal year ended September 30, 2023, and Form 10-Q for the period ended June 29, 2024, which will be filed by the end of business today, contain additional disclosure regarding forward-looking statements and risk factors. Copies may be obtained by contacting the partnership or the SEC.

Operator: All subsequent written and oral forward looking statements attributable to the partnership or persons acting on behalf of.

Operator: Are expressly qualified in their entirety by such cautionary statements.

Daven Dambrosio: Our annual report on Form 10-K for the fiscal year ended September 30th, 2023, and Form 10-Q for the period ended June 29th, 2024, which will be filed by the end of business today, contain additional disclosure regarding forward-looking statements and risk factors. Copies may be obtained by contacting the partnership or the SEC.

Operator: Our annual report on Form 10-K for the fiscal year ended September 32023, and Form 10-Q for the period ended June 29, 2024, which will be filed by the end of business today contain additional disclosures regarding forward looking statements and risk factors copies may be obtained by contacting the partnership or.

Operator: The SEC.

Daven Dambrosio: Certain non-GAAP measures will be discussed on this call. We have provided 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. Form 8-K will be available through a link in the Investor Relations section of our website.

Operator: Certain non-GAAP measures will be discussed on this call. We have provided 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.

Operator: Certain non-GAAP measures will be discussed on this call. We have provided a description of those measures, as well as a discussion of why we believe this information to be useful, in our Form 8K, which was filed with the SEC this morning. Form 8K will be available through a link in the Investor Relations section of our website. At this time, I'd like to turn the call over to Mike Stivala for some opening remarks. Mike.

Operator: Form 8-K will be available through a link in the Investor Relations section of our website.

Michael Stivala: At this time, I'd like to turn the call over to Mike Stovall for some opening remarks. Thanks, Daven. Good morning. Thank you all for joining us today. The fiscal 2024-3rd quarter presented significantly warmer than normal weather, and in many areas extreme heat, which followed a winter heating season that was 9% warmer than normal and lacked sustained cool temperatures in the critical months for heat-related demand. Average temperature for our fiscal 2024-3rd quarter were 14% warmer than normal, unlike the prior year-3rd quarter, which benefited from colder average temperatures that generated a late burst of demand from our residential customer base.

Davin: Copies may be obtained by contacting the partnership or the SEC. Additionally, certain non-GAAP measures will be discussed on this call. We have provided a description of those measures as well as a discussion of why we believe this information to be useful in our Form 8K, which was furnished to the SEC this morning. Form 8K will be available through a link in the investor relations section of our website. At this time, I'd like to turn the call over to Mike Stivala for some opening remarks. Okay, Mike?

Operator: Our annual report on Form 10-K for the fiscal year ended September 30, 2023, and Form 10-Q for the period ended June 29, 2024, which will be filed by the end of business today, contain additional disclosure regarding forward-looking statements and risk factors. Additionally, certain non-GAAP measures will be discussed on this call. We have provided a description of those measures, as well as a discussion of why we believe this information to be useful, in our Form 8K, which was furnished to the SEC this morning. Form 8K will be available through a link in the investor relations section of our website. At this time, I'd like to turn the call over to Mike Stivala for some opening remarks.

Mike Stivala: At this time I'd like to turn the call over to Mike Steve Olive for some opening remarks, Mike. Thanks.

Michael Stivala: Thanks, Davin, and good morning. Thank you all for joining us today.

Mike Stivala: Thanks Devin.

Mike Stivala: Thank you all for joining us today.

Michael Stivala: The fiscal 2024 third quarter presented significantly warmer than normal weather and, in many areas, extreme heat, which followed a winter heating season that was 9% warmer than normal and lacked sustained cool temperatures in the critical months for heat-related demands. All the warm weather negatively impacted Overall volumes for the third quarter were 8.6% lower than the prior year third quarter. However, as we have consistently demonstrated in the past, our field operations personnel continue to do an excellent job managing selling prices and leveraging our efficient operating model to help manage costs.

Michael Stivala: The fiscal 2024 third quarter presented significantly warmer than normal weather and, in many areas, extreme heat, which followed a winter heating season that was 9% warmer than normal and lacked sustained cool temperatures in the critical months for heat-related demands. Average temperatures for our fiscal 2024 third quarter were 14 percent warmer than normal, unlike the prior year third quarter, which benefited from colder average temperatures that generated a late burst of demand from our residential customer base.

Mike Stivala: The fiscal 2024 third quarter presented significantly warmer than normal weather and in many areas extreme heat, which followed a winter heating season that was 9% warmer than normal and lacks sustained cool temperatures in the critical months for heat related demand.

Michael Stivala: Average temperature for our fiscal 2020 for third quarter were 14% warmer than normal. Unlike the prior year third quarter, which benefited from colder average temperatures that generated a late burst of demand from our residential customer base.

Michael Stivala: While the warm weather negatively impacted customer demand for heating purposes in the third quarter, we benefited from growth in our counter seasonal customer base. Overall volumes for the third quarter were 8.6% lower than the prior year-3rd quarter. As we have consistently demonstrated in the past, our field operations personnel continue to do an excellent job managing selling prices and leveraging our efficient operating model to help manage costs, which help mitigate the impact of warmer weather on earnings. For the quarter, adjusted EBITDA was $27 million, a decrease of $6 million from the prior year 3rd quarter, but in line with our expectations for this shoulder period despite the warmer weather.

Michael Stivala: All the warm weather negatively impacted Customer Demand for Heating Purposes in the third quarter. However, we benefited from growth in our counter-seasonal customer base. Overall volumes for the third quarter were 8.6% lower than the prior year third quarter.

Michael Stivala: While the warm weather negatively impacted.

Michael Stivala: Customer demand for heating purposes in the third quarter, we benefited from growth in our counter seasonal customer base.

Michael Stivala: Overall volumes for the third quarter were eight 6% lower than the prior year third quarter.

Michael Stivala: As we have consistently demonstrated in the past, our field operations personnel continue to do an excellent job managing selling prices and leveraging our efficient operating model to help manage costs, which helped mitigate the impact of warmer weather on earnings. For the quarter, adjusted EBITDA was $27 million, a decrease of $6 million from the prior year third quarter but in line with our expectations for this shoulder period, despite the warmer weather. In our Renewable Natural Gas operations, during the third quarter, we continued to drive operational excellence, increase feedstock intake and production levels, and grow revenue opportunities.

Michael Stivala: As we have consistently demonstrated in the past, our field operations personnel continue to do an excellent job managing selling prices and leveraging our efficient operating model to help manage costs, which helps mitigate the impact of warmer weather on earnings. For the quarter, adjusted EBITDA was $27 million, a decrease of $6 million from the prior year's third quarter but in line with our expectations for this shoulder period, despite the warmer weather, in our Renewable Natural Gas operation.

Michael Stivala: As we have consistently demonstrated in the past our field operations personnel continues to do an excellent job managing selling prices and leveraging our efficient operating model to help manage costs, which.

Michael Stivala: Which helped mitigate the impact of warmer weather on earnings.

Michael Stivala: For the quarter adjusted EBITDA was $27 million, a decrease of $6 million from the prior year third quarter, but in line with our expectations for this shoulder period, despite the warmer weather.

Michael Stivala: In our renewable natural gas operations, during the 3rd quarter we continue to drive operational excellence, increase feedstock intake and production levels, and grow revenue opportunities. In fact, the operational enhancements we have implemented have resulted in an increase in feedstocks processed and higher levels of R&G injection at our Stanfield facility, reaching a daily peak injection level as high as 1,500 MMVTUs in the quarter. R&G injection for the quarter as a whole average around 1,000 MMVTUs per day, as the facility did experience extended periods of limited injection resulting from power outages from severe storms in the area.

Michael Stivala: In fact, the operational enhancements we have implemented have resulted in an increase in feedstocks processed and higher levels of daily RNG injection at our Stanfield facility, reaching a daily peak injection level of as high as 1,500 MMBTUs in the quarter. However, RNG injection for the quarter as a whole averaged around 1,000 mmBtu per day, as the facility did experience extended periods of limited injection resulting from power outages from severe storm

Michael Stivala: And our renewable natural gas operations during the third quarter, we continued to drive operational excellence increased feedstock intake and production levels and grow revenue opportunities in fact, the operational enhancements. We have implemented have resulted in an increase in feedstocks processed and higher levels of daily <unk>.

Michael Stivala: During the third quarter, we continued to drive operational excellence, increase feedstock intake and production levels, and grow revenue opportunities. In fact, the operational enhancements we have implemented have resulted in an increase in feedstocks processed and higher levels of daily RNG injection at our Stanfield facility, reaching a daily peak injection level as high as 1,500 MMBTUs in the quarter. RNG injection for the quarter as a whole averaged around 1,000 mmVTUs per day, as the facility did experience extended periods of limited injection resulting from power outages from severe storms in the area.

Michael Stivala: <unk> injection at our Stanfield facility reached.

Speaker Change: Reaching a daily peak injection level as high as 500 <unk> to use in the quarter.

Speaker Change: RMG injection for the quarter as a whole averaged around 1000 <unk> per day as the facility did experience extended periods of limited injection, resulting from power outages from severe storms in the area.

Michael Stivala: In addition, revenues in the facility have been adversely impacted by lower prices for California LCFS credits and, to a lesser extent, lower benchmark natural gas prices, but benefited from higher D3 RIN values. Both the Stanfield and Columbus facilities reported higher revenues from tipping fees, resulting from increased intake of food, beverage, and other waste feedstocks compared to the prior year 3rd quarter. Additionally, during 3rd quarter, we utilized excess cash flow to acquire two small retail propane businesses in strategic markets in Florida and Nevada for a total investment of nearly $13 million, and we also repaid ten and a half million dollars outstanding debt under our revolving credit facility.

Michael Stivala: In addition, revenues at the facility have been adversely impacted by lower prices for California LCFS credits and, to a lesser extent, lower benchmark natural gas prices, but they benefited from higher D3 RIN values. Both the Stanfield and Columbus facilities reported higher revenues from tipping fees resulting from higher intakes of food, beverage, and other waste feedstocks compared to the prior year third quarter. Additionally, during the third quarter, we utilized excess cash flow to acquire two small retail propane businesses in strategic markets in Florida and Nevada for a total investment of nearly $13 million.

Speaker Change: In addition revenues in the facility have been adversely impacted by lower prices for California <unk> credits.

Speaker Change: To a lesser extent lower benchmark natural gas prices, but benefited from higher D. Three RIN values.

Michael Stivala: Both the Stanfield and Columbus facilities reported higher revenues from tipping fees resulting from an increased intake of food, beverage, and other waste feedstocks compared to the prior year third quarter. As I mentioned on last quarter's earnings call, we expect both facilities to be completed in the second half of calendar 2025.

Michael Stivala: Both the Stanfield and Columbus facilities reported higher revenues from tipping fees, resulting from increased intake of food beverage and other waste feedstocks compared to the prior year third quarter.

Michael Stivala: Additionally, during the third quarter, we utilized excess cash flow to acquire two small retail propane businesses in strategic markets in Florida, and Nevada for a total investment of nearly $13 million and we also repaid $10 $5 million of outstanding debt under our revolving credit facility.

Michael Stivala: And we also repaid $10.5 million of outstanding debt under our revolving credit facility. We also continue to advance our capital improvement plans for the installation of R&G upgrade equipment at our Stanfield facility, our Columbus, Ohio facility, and the construction of our anaerobic digester facility at Adirondack Farms in upstate New York. As I mentioned on last quarter's earnings call, we expect both facilities to be completed in the second half of calendar 2025. Therefore, despite the challenges resulting from warm weather in fiscal 2024, we continue to execute on our long-term strategic growth plans, which include investing in the growth of our core propane business and building out our renewable energy platform, while maintaining a disciplined approach to deploying additional capital in order to foster the growth and strength of the balance sheet. In a moment, I'll come back for some closing remarks. However, at this point, I'd like to turn the call over to Mike Kuglin to discuss the third quarter in more detail.

Michael Stivala: And we also repaid $10.5 million of outstanding debt under our revolving credit facility. We also continue to advance our capital improvement plans for the installation of R&G upgrade equipment at our Stanfield, our Columbus, Ohio facility and the construction of our anaerobic digester facility at Adirondack Farms in upstate New York. As I mentioned on last quarter's earnings call, we expect both facilities to be completed in the second half of calendar 2025. Therefore, despite the challenges resulting from warm weather and fiscal 2024, we continue to execute on our long term strategic growth plans, which include investing in the growth of our core propane business and building out our renewable energy platform, while maintaining a disciplined approach to deploying additional capital in order to foster the growth and strength of the balance. In a moment, I'll come back for some closing remarks. However, at this point, I'd like to turn the call over to Mike Kuglin to discuss the third quarter in more detail.

Michael Stivala: We also continued to advance our capital improvement plans for the installation of R&G upgrade equipment at our Stanfield or Columbus, Ohio facility and the construction of our anaerobic digestive facility at Adirondack Farms in upstate New York. As I mentioned on last quarter's earnings call, we expect both facilities to be completed in the second half of calendar 2025. Therefore, despite the challenges resulting from warm weather and fiscal 2024, we continue to execute on our long-term strategic growth plans, which include investing in the growth of our core propane business and building out our renewable energy platform while maintaining a disciplined approach to deploying additional capital in order to foster the growth and strength of the balance sheet.

Michael Stivala: We also continued to advance our capital improvement plans for the installation of Orange upgrade equipment at our Stanfield, Our Columbus, Ohio facility and the construction of our anaerobic digestion facility at Adirondack farms in upstate New York.

Michael Stivala: As I mentioned on last quarter's earnings call. We expect both facilities to be completed in the second half of calendar 2025.

Speaker Change: Therefore, despite the challenges resulting from warm weather in fiscal 2024, we continue to execute on our long term strategic growth plans, which include investing in the growth of our core propane business and building out our renewable energy platform, while maintaining a disciplined approach to deploying additional capital in order to foster the growth.

Michael Stivala: And strength of the balance sheet.

Michael Stivala: In a moment, I'll come back for some closing remarks.

Michael Stivala: In a moment I'll come back for some closing remarks. However at this point I'd like to turn the call over to Mike Coogan to discuss the third quarter in more detail.

Michael Kuglin: However, at this point, I'd like to turn the call over to Mike Kuhlen to discuss the 3rd quarter in more detail. Thanks, Mike, and good morning, everyone. To be consistent with previous reporting, I'd like to discuss our 3rd quarter results. I'm excluding the impact of unrealized marked market adjustments on our commodity hedges, which resulted in an unrealized loss of approximately $3 million in the 3rd quarter of fiscal 2024 and fiscal 2023. Along with certain other non-cash items and acquisition-related transaction costs.

Michael Kuglin: Thanks Mike, and good morning everyone. To be consistent with previous reporting, as I discuss our third-quarter results, I'm excluding the impact of unrealized mark-to-market adjustments on our commodity hedges, which resulted in an unrealized loss of approximately three million dollars in the third quarter of fiscal 2024 and fiscal 2023, along with certain other non-cash items and acquisition-related transaction costs. Given the seasonal nature of our business, we typically experience a net loss in the third quarter of our fiscal year.

Michael Kuglin: Thanks Mike, and good morning everyone. To be consistent with previous reporting where I discussed our third quarter results, I'm excluding the impact of unrealized mark-to-market adjustments on our commodity hedges, which resulted in an unrealized loss of approximately three million dollars in the third quarter of fiscal 2024 and fiscal 2023, along with certain other non-cash items and acquisition-related transaction costs. Given the seasonal nature of our business, we typically experience a net loss in the third quarter of our fiscal year.

Speaker Change: Thanks, Mike and good morning, everyone to be consistent with previous reporting as I discuss our third quarter results I'm, excluding the impact of unrealized mark to market adjustments on our commodity hedges, which resulted in an unrealized loss of approximately $3 million in the third quarter of fiscal 2024 and fiscal 2023.

Michael Stivala: Hi.

Michael Stivala: Along with certain other noncash items and acquisition related transaction costs.

Michael Kuglin: us. Given the seasonal nature of our business, we typically experience a net loss in the third quarter of our fiscal year. With that said, the net loss for the third quarter was $8 million, or $0.12 per common unit. Compared to a net loss of $1.5 million or $0.02 per common unit in the prior year. The state-related demand resulting from a continuation of an seasonally warm weather, but benefited from unit Mars expansion, controlling operating expenses and greater contribution from our orange operations. Retail profile gallons sold in the third quarter were 71.7 million gallons, which was 8.6% lower than a prior year, primarily due to warmer weather across most of our operating footprint.

Michael Stivala: Given the seasonal nature of our business, we typically experience a net loss in the third quarter of our fiscal year.

Michael Kuglin: With that said, the net loss for the third quarter was $8 million, or $0.12 per common unit, compared to a net loss of $1.5 million, or $0.02 per common unit, in the prior year. Adjusted EBITDA for the third quarter was $27 million, compared to $33 million in the prior year.

Michael Stivala: With that said the net loss for the third quarter was $8 million or <unk> 12 per common unit.

Michael Stivala: Compared to a net loss of $1 5 million or <unk> <unk> per common unit in the prior year.

Michael Stivala: Adjusted EBITDA for the third quarter was $27 million, compared to $33 million in the prior year. Average temperatures, as measured in heat and degree days, were 14% warmer than normal and 10% warmer than the prior year's third quarter. From a commodity perspective, wholesale propane prices were somewhat range-bound during the quarter but generally trended lower. However, the pace of the decline trailed the sharp decline experienced in the prior year and resulted in average wholesale prices increasing 11.5% compared to the prior year's third quarter.

Michael Stivala: Adjusted EBITDA for the third quarter was $27 million compared to $33 million in the prior year.

Michael Kuglin: As Mike mentioned, our earnings for the quarter were impacted by lower heat-related demand, resulting from a continuation of unseasonably warm weather, but we benefited from unit margin expansion, controlling operating expenses, and greater contribution from our R&G operations. Retail propane gallons sold in the third quarter were 71.7 million gallons, which was 8.6% lower than a prior year, primarily due to warmer weather across most of our operating footprint. Average temperatures, as measured in heat and degree days, were 14% warmer than normal and 10% warmer than the prior year's third quarter.

Michael Kuglin: As Mike mentioned, our earnings for the quarter were impacted by lower heat-related demand resulting from a continuation of unseasonably warm weather, but we benefited from unit margin expansion, controlling operating expenses, and greater contribution from our R&G operations. Retail propane gallons sold in the third quarter were 71.7 million gallons, which was 8.6% lower than the prior year, primarily due to warmer weather across most of our operating footprint. Average temperatures, as measured in heat and degree days, were 14% warmer than normal and 10% warmer than the prior year's third quarter.

Michael Stivala: Mike mentioned, our earnings for the quarter were impacted by lower heat related demand, resulting from a continuation of a seasonally warm weather, but benefited from unit margin expansion controlling operating expenses and greater contribution from our Orangey operations.

Michael Stivala: Retail propane gallons sold in the third quarter were $71 7 million gallons, which was eight 6% lower than the prior year, primarily due to warmer weather across most of our operating footprint.

Michael Kuglin: Average temperatures, as measured in heat and degree days, were 14% warmer than normal and 10% warmer than the prior year third quarter. From a commodity perspective, wholesale propane prices were somewhat range-bound during the quarter, but generally trended lower. However, the pace of the decline trailed the sharp decline experienced in the prior year, resulting in average wholesale prices increasing 11.5% compared to the prior year third quarter. At the end of the third quarter, the nation's propane inventories were at 75.8 million barrels, which was 7% lower than June 2023 levels, but remained elevated compared to historical averages for this time of the year.

Michael Stivala: Average temperatures as measured in degree days were 14% warmer than normal and 10% warmer than the prior year third quarter.

Michael Kuglin: From a commodity perspective, wholesale propane prices were somewhat range-bound during the quarter but generally trended lower. However, the pace of the decline trailed the sharp decline experienced in the prior year and resulted in average wholesale prices increasing 11.5% compared to the prior year third quarter. Gates is Mont Belvieu.

Michael Kuglin: From a commodity perspective, wholesale propane prices were somewhat range-bound during the quarter but generally trended lower. However, the pace of the decline trailed the sharp decline experienced in the prior year, resulting in average wholesale prices increasing 11.5% compared to the prior year third quarter. Gates, Montbellevue.

Michael Stivala: From a commodity perspective.

Michael Stivala: Sell propane prices were somewhat range bound during the quarter, but generally trended lower however, the pace of the decline trailed the sharp decline experienced in the prior year.

Michael Stivala: <unk>, an average wholesale prices, increasing 11, 5% compared to the prior year third quarter.

Michael Stivala: Gates is Mont Belvieu, as well as lower variable compensation and cost savings and efficiencies realized in our R&G operations. Total capital spending for the quarter of $14.7 million was $5.3 million higher than the prior year, primarily due to growth capital from advancing our construction efforts at our Columbus and Adirondack facilities but also spending on propane dispensers and cylinders to support growth within our commercial customer base and the timing of fleet purchases.

Speaker Change: Mont Belvieu.

Michael Kuglin: At the end of the third quarter, the nation's propane inventories were at 75.8 million barrels, which was 7% lower than June 2023 levels, or remain elevated compared to historical averages for this time of the year. Excluding the impact of the market-to-market adjustments on our commodity hedges that I mentioned earlier, the total gross margin of $163.4 million for the third quarter decreased $7.8 million, or 4.5%, compared to the prior year, primarily due to lower volume sold, partially offset by higher unit margins and higher margin contribution from our R&G business.

Michael Kuglin: At the end of the third quarter, the nation's propane inventories were at 75.8 million barrels, which was 7% lower than June 2023 levels but remain elevated compared to historical averages for this time of the year. Excluding the impact of the mark-to-market adjustments on our commodity hedges that I mentioned earlier, the total gross margin of $163.4 million for the third quarter decreased $7.8 million, or 4.5%, compared to the prior year, primarily due to lower volume sold, partially offset by higher unit margins and higher margin contribution from our R&G business.

Speaker Change: At the end of the third quarter, an atheist appropriate inventories were at $75 8 million barrels, which was 7% lower than June 2023 levels.

Speaker Change: I remain elevated compared to historical averages for this time of the year.

Michael Kuglin: Excluding the impact of the market market adjustments on our commodity hedges that I mentioned earlier, total growth margin of 163.4 million dollars for the third quarter decreased 7.8 million dollars, or 4.5%, compared to the prior year, primarily due to lower volume sold, partial set by higher unit margins and higher margin contribution from our orangey business. Open unit margins for the third quarter increase 7 cents per gallon, or 3.8%, compared to the prior year. With respect to expenses, combined operating and gene expenses of 135.1 million dollars for the third quarter decrease 2.3 million dollars or 1.7% compared to the prior year, primarily due to lower variable operating costs, which includes fuel costs, overtime, and other costs that flex with volume sold.

Michael Stivala: Excluding the impact of the mark to market adjustments on our commodity hedges as I mentioned earlier total gross margin of $163 4 million for the third quarter decreased $7 8 million or four 5% compared to the prior year, primarily due to lower volume sold partially offset by <unk> <unk>.

Michael Stivala: Higher unit margins and higher margin contribution from our R&D business.

Michael Kuglin: Open unit margins for the third quarter increased $0.07 per gallon, or 3.8%, compared to the prior year. With respect to expenses, combined operating and G&A expenses of $135.1 million for the third quarter decreased $2.3 million, or 1.7%, compared to the prior year, primarily due to lower variable operating costs, which includes fuel costs, overtime, and other costs that flex with volume sold, as well as lower variable compensation and cost savings and efficiencies realized in our R&G operations. Partially offsetting those savings was an increase in self-insurance accruals for a legal matter that was settled during the quarter.

Michael Kuglin: Open unit margins for the third quarter increased 7 cents per gallon, or 3.8%, compared to the prior year. With respect to expenses, combined operating and G&A expenses of $135.1 million for the third quarter decreased $2.3 million, or 1.7%, compared to the prior year, primarily due to lower variable operating costs, which includes fuel costs, overtime, and other costs that flex with volume sold, as well as lower variable compensation and cost savings and efficiencies realized in our R&G operations.

Michael Stivala: Broken unit margins for the third quarter increased seven cents per gallon or three 8% compared to the prior year.

Michael Stivala: With respect to expenses combined operating and G&A expenses of $135 $1 million for the third quarter decreased $2 $3 million or one 7% compared to the prior year, primarily due to lower variable operating costs, which includes fuel costs overtime and other costs.

Speaker Change: That flex with volume sold.

Michael Kuglin: As well as lower variable compensation and cost savings and efficiencies realized in our orangey operations. Our schedule of setting those savings was an increase in self-insurance accruals for a legal matter that was settled during the quarter. An interest expense of 18.4 million dollars for the third quarter was marginally lower than the prior year, as savings for a lower level of average outstanding borrowings under our revolving credit facility were all set by higher benchmark interest rates for borrowings under the revolver. The total capital spending for the quarter of 14.7 million dollars was 5.3 million dollars higher than the prior year, primarily due to growth capital, advancing our construction efforts at our Columbus and Adironduct facilities.

Michael Stivala: As well as lower variable compensation and cost savings and efficiencies realized in our R&D operations.

Michael Kuglin: Partially offsetting those savings was an increase in self-insurance accruals for a legal matter that was settled during the quarter. Net interest expense of $18.4 million for the third quarter was marginally lower than the prior year as savings from a lower level of average outstanding borrowings under a revolving credit facility were offset by higher benchmark interest rates for borrowings under the revolver.

Michael Stivala: Partially offsetting those savings was an increase in self insurance accruals for a legal matter that was settled during the quarter.

Michael Kuglin: Net interest expense of $18.4 million for the third quarter was marginally lower than the prior year as savings from a lower level of average outstanding borrowings under a revolving credit facility were offset by higher benchmark interest rates for borrowings under the revolver. Total capital spending for the quarter of $14.7 million was $5.3 million higher than the prior year, primarily due to growth capital from advancing our construction efforts at our Columbus and Adirondack facilities, as well as spending on propane dispensers and cylinders to support growth within our commercial customer base and the timing of fleet purchases.

Michael Stivala: Net interest expense of $18 $4 million for the third quarter was marginally lower than the prior year as savings by lower level of average outstanding borrowings under our revolving credit facility were offset by higher benchmark interest rates for borrowings under the revolver.

Michael Kuglin: Total capital spending for the quarter of $14.7 million was $5.3 million higher than the prior year, primarily due to growth capital from advancing our construction efforts at our Columbus and Adirondack facilities, but also spending on propane dispensers and cylinders to support growth within our commercial customer base, and the timing of fleet purchases. While we continue to make progress with construction efforts at our R&G facilities, the level of CAPEX spending in the current fiscal year will be below the low end of the range that we have previously discussed, primarily due to timing.

Michael Stivala: Total capital spending for the quarter of $14 7 million was $5 $3 million higher than the prior year.

Michael Stivala: Primarily due to growth capital from advancing our construction efforts at our Columbus, and Adirondack facilities at all spending on propane dispensers and cylinders to support growth within our commercial customer base and the timing of fleet purchases.

Michael Kuglin: It was all spending on propane dispensers and cylinders to support growth within our commercial customer base and the timing of fleet purchase. Propane Partners LP propane operations are expected to be consistent with historical levels, which is between 40 and 45 million dollars. Turning to our balance sheet, during the third quarter, we repaid 10 and a half million dollars of borrowings under the revolver, with cash flows from operating activities, and our Consolidial Leverage Ratio for a trailing 12 month period ended June 2024 was 4.68 times. Although the leverage metric remains elevated relative to our historical levels following the orange acquisition, and from the impact of the warm weather unearnings, we remain well within our deck covenant requirement of 5.75 times, and continue to make progress on strengthening the balance sheet with that repayment from excess cash flows.

Michael Kuglin: While we continue to make progress with construction efforts at our R&G facilities, the level of CAPEX spending in the current fiscal year will be below the low end of the range that we have previously discussed, primarily due to timing. Our current estimate for capital spending for the R&G projects is expected to range between $10 to $20 million in fiscal 2024 and between $35 to $45 million in fiscal 2025. Our annual CAPEX estimates for our propane operations are expected to be consistent with historical levels, which is between $40 and $45 million.

Michael Stivala: We continue to make progress with construction efforts at our R&D facilities the level of Capex spending in the current fiscal year will be below the low end of the range that we have previously discussed primarily due to timing.

Michael Stivala: Our current estimate for capital spending for the R&G projects is expected to range between $10 to $20 million in fiscal 2024 and between $35 to $45 million in fiscal 2025. Our annual CAPEX estimates for our propane operations are expected to be consistent with historical levels, which is between $40 and $45 million. Turning to our balance sheet, during the third quarter, we repaid $10.5 million of borrowings under the revolver with cash flows from operating activities, and our consolidated leverage ratio for a trailing 12-month period ended June 2024 was 4.68 times.

Michael Kuglin: Our current estimate for capital spending for the orangey projects is expected to range between 10 to 20 million dollars in fiscal 2024 and between 35 to 45 million dollars in fiscal 2025. Our annual CapEx estimates for our propane operations are expected to be consistent with historical levels, which is between $40 and $45 million. Turning to our balance sheet, during the third quarter, we repaid $10.5 million of borrowings under the revolver with cash flows from operating activities and our consolidated leverage ratio for a trailing 12-month period ended June 2024 was 4.68 times.

Michael Stivala: Our current estimate for capital spending for the guarantee projects is expected to range between $10 million to $20 million in fiscal 2024 and between $35 million to $45 million in fiscal 2025.

Michael Stivala: Our annual Capex estimates for our propane operations are expected to be consistent with historical levels, which is between 40 and $45 million.

Michael Kuglin: Turning to our balance sheet, during the third quarter, we repaid $10.5 million of borrowings under the revolver with cash flows from operating activities, and our consolidated leverage ratio for a trailing 12-month period ended June 2024 was 4.68 times. However, the leverage metric remains elevated relative to our historical levels following the R&G acquisition. From the Impact of the Warm Weather on Earnings, We remain well within our debt covenant requirement of 5.75 times and continue to make progress on strengthening the balance sheet with debt repayment from excess cash flows.

Michael Stivala: Turning to our balance sheet during the third quarter, we repaid $10 $5 million of borrowings under the revolver with cash flows from operating activities and our consolidated leverage ratio for a trailing 12 month period ended June 2024 was $4 six to eight times.

Michael Kuglin: Although the leverage metric remains elevated relative to our historical levels following the Orangey acquisition, from the Impact of the Warm Weather on Earnings, we remain well within our debt covenant requirement of 5.75 times and continue to make progress on strengthening the balance sheet with debt repayment from excess cash flows. We will continue to remain focused on utilizing EXAS cash flows to fund the planned growth capital within our R&G platform, as well as to strengthen the balance, and as opportunities arise, to fund strategic growth of our core propane business and our renewable energy portfolio.

Michael Stivala: Although the leverage metric remains elevated relative to our historical levels following the R&G acquisition, as we continue to focus on the execution of our long-term strategic goals, we will also stay focused on maintaining a strong balance sheet.

Michael Stivala: Although the leverage metric remains elevated relative to historical levels. Following the <unk> acquisition and from the impact of the warm weather on earnings.

Michael Stivala: Well within our debt covenant requirement of 575 times and continue to make progress on strengthening the balance sheet with debt repayment from excess cash flows.

Michael Kuglin: We will continue to remain focused on utilizing excess cash flows to fund the playing growth capital, within our orange platform, as well as to strengthen the balance sheet, and, as opportunities arise, to fund strategic growth of our core propane business and our renewable energy portfolio. We have more than ample borrowing capacity, under our revolver, to support our capitalist mansion plans and on growing strategic growth initiatives.

Michael Kuglin: We will continue to remain focused on utilizing excess cash flows to fund the planned growth capital within our R&G platform, as well as to strengthen the balance sheet, and as opportunities arise to fund strategic growth of our core propane business and our renewable energy portfolio. We have more than ample ball-rank capacity under our revolver to support our capital expansion plans and ongoing strategic growth initiatives. As we continue to focus on the execution of our long-term strategic goals, we will also stay focused on maintaining a strong balance sheet. With that, I'll turn the call back to Mike.

Michael Stivala: We will continue to remain focused on utilizing excess cash flows to fund the planned growth capital within our R&D platform as well as to strengthen the balance sheet and as opportunities arise.

Michael Stivala: Fund strategic growth of our core propane business and our renewable energy portfolio.

Michael Kuglin: We have more than ample ball rank capacity under our revolver to support our capital expansion plans and ongoing strategic growth initiatives. As we continue to focus on the execution of our long-term strategic goals, we will also stay focused on maintaining a strong balance. With that, I'll turn the call back to Mike.

Michael Stivala: More than ample borrowing capacity under our revolver to support our capital expansion plans and ongoing strategic growth initiatives.

Michael Kuglin: As we continue to focus on the execution of our long-term strategic goals, we will also stay focused on maintaining a strong balance sheet, with that alternative call back to Mike.

Michael Stivala: As we continue to focus on the execution of our long term strategic goals. We will also stay focused on maintaining a strong balance sheet.

Michael Stivala: With that I'll turn the call back to Mike.

Michael Stivala: Thanks, Mike. As announced on July 25th, our Board of Supervisors declared our quarterly distribution of 32.5 cents per common unit in respect of our third quarter of fiscal 2024, which equates to an annualized rate of $1.30 per common unit. Our quarterly distribution will be paid on August 13th to our unit holders of record as of August 6th. Our distribution coverage continues to remain healthy at 1.91 times for the trailing 12 months ended June 2024.

Speaker Change: Thanks, Mike.

Michael Stivala: As announced on July 25th, our Board of Supervisors declared our quarterly distribution of 32.5 cents per common unit in respect of our third quarter of fiscal 2024, which equates to an annualized rate of $1.30 per common unit. Our quarterly distribution will be paid on August 13th to our unit holders of record as of August 6th.

Speaker Change: As announced on July 25, our board of Supervisors declared our quarterly distribution of $32.05 per common unit in respect of our third quarter of fiscal 2024, which equates to an annualized rate of $1 30 per common unit, our quarterly distribution will be paid on August 13th to unitholders of record as of August six.

Michael Stivala: Our quarterly distribution will be paid on August 13th to our unit holders of record as of August 6th. Our distribution coverage continues to remain healthy at 1.91 times for the trailing 12 months ended June 2024. Just to reflect a moment on our results through the first nine months of fiscal 2024 and the state of the business. Overall, performance through the first nine months was certainly affected by the lack of heat-related customer demand throughout the vast majority of the heating season and into the third quarter. Propane volumes decreased by 3.9% compared to the same nine-month period last year, despite heating degree days that were at times significantly warmer than the prior year.

Michael Stivala: Our distribution coverage continues to remain healthy at 1.91 times for the trailing 12 months ended June 2024. Just to reflect a moment on our results through the first nine months of fiscal 2024 and the state of the business. Overall, performance through the first nine months was certainly affected by the lack of heat-related customer demand throughout the vast majority of the heating season and into the third quarter. Propane volumes decreased by 3.9% compared to the same nine-month period last year, despite heating degree days that were at times significantly warmer than the prior year.

Michael Stivala: Our distribution coverage continues to remain healthy at 1.91 times for the trailing 12 months ended June 2024. Just to reflect on our results through the first nine months of fiscal 2024 and the state of the business. Overall, performance through the first nine months was certainly affected by the lack of heat-related customer demand throughout the vast majority of the heating season and into the third quarter. Propane volumes decreased by 3.9% compared to the same nine-month period last year, despite heating degree days that were at times significantly warmer than the prior year.

Michael Stivala: Our distribution coverage continues to remain healthy at 1.91 times for the trailing 12 months ended June 2024.

Michael Stivala: Just to reflect a moment on our results through the first nine months of fiscal 2024 and the state of the business. Overall, performance through the first nine months was certainly affected by the lack of heat-related customer demand throughout the vast majority of the heating season and into the third quarter. Propane volumes decreased by 3.9 percent compared to the same nine-month period last year, despite heating degree days that were at times significantly warmer than the prior year. Our management team has managed through these warm weather scenarios many times in the past, and our experience and best-in-class business model, coupled with some growth in our non-weather dependent customer segments, helped to mitigate the effects on the bottom line.

Michael Stivala: Just to reflect a moment on our results through the first nine months of fiscal 2024, and the state of the business.

Michael Stivala: Overall performance through the first nine months was certainly affected by the lack of heat related customer demand throughout the vast majority of the heating season and into the third quarter.

Michael Stivala: Propane volumes decreased by three 9% compared to the same nine month period last year. Despite heating degree days that were at times significantly warmer than the prior year.

Michael Stivala: Our management team has managed through these warm weather scenarios many times in the past, and our experience and best-in-class business model, coupled with some growth in our non-weather-dependent customer segment, help to mitigate the effects on the bottom line. Meanwhile, our core propane business remains strong. In fact, even with the weather-related earnings shortfall compared to the prior year, our excess cash flows and strong liquidity position provide capital to continue to invest in growth opportunities in both our core propane business and our renewable energy platform.

Michael Stivala: Our management team has managed through this warm weather scenarios many times in the past and our experienced and best in class business model, coupled with some growth in our non weather dependent customer segments helped to mitigate the effects on the bottom line our core propane business remains strong in fact, even with the weather related earnings.

Michael Stivala: Our core propane business remains strong. In fact, even with the weather-related earnings shortfall compared to the prior year. Our excess cash flows in strong liquidity position provide capital to continue to invest in growth opportunities in both our core propane business and our renewable energy plant.

Michael Stivala: Short fall compared to the prior year.

Michael Stivala: Our excess cash flows and strong liquidity position provide capital to continue to invest in growth opportunities in both our core propane business and our renewable energy platform while also investing in the build out of an interconnected renewable energy platform for the long-term growth of suburban propane. As we have stated in the past, we manage this business for the long term and are making strategic investments to set the business up for the next 95 years. Finally, I want to take this opportunity to thank the more than 3200 employees at Suburban Propane for their hard work and unwavering focus on the safety and comfort of our customers and the communities we serve.

Michael Stivala: Our excess cash flows and strong liquidity position.

Michael Stivala: <unk> capital to continue to invest in growth opportunities in both our core propane business and our renewable energy platform.

Michael Stivala: As society continues to seek alternatives for lowering carbon intensity across all aspects of the economy, we are starting to see increased recognition and momentum building for the benefits of propane as an immediate and long-term solution in the energy transition. In line with our Go Green with Suburban Propane corporate pillar, we are continuing to foster the growth of our core propane business through advocacy and innovation, while also investing in the build out of an interconnected renewable energy platform for the long-term growth of suburban propane.

Michael Stivala: As society continues to seek alternatives for lowering carbon intensity across all aspects of the economy. We are starting to see increased recognition and momentum building for the benefits of propane as an immediate.

Michael Stivala: Award Award Award Award Award Award Award Award Award Award Award Award Award Award Award Award Award Award Award Award Award Award Award Award Award Award Award Award Award Award Award Award Award Award Award Award Award Award Award Award Award Award Award Award Award Award Award Award Award Award Award Award Award Award Award Award Award Award Award Award Award Award Award Award Award Award Award Award Award Award Award Award Award Award Award Award Award Award Award Award Award Award Award Award Award Award Award Award Award Award Award Award Award Award Award Award Award Award Award Award Award Award Award Award Award Award Award Award Award Award Award Award Award Award Award We are investing in the build out of an interconnected renewable energy platform for the long term growth of Suburban Propane.

Speaker Change: And as a long term solution in the energy transition.

Michael Stivala: In line with our go Green with suburban propane corporate pillar, we are continuing to foster the growth of our core propane business through advocacy and innovation, while also investing in the build out of an interconnected renewable energy platform.

Operator: Good morning ladies and gentlemen and welcome to the Suburban Propane Partners third quarter earnings conference call. At this time all lines are in listen only mode. Following the presentation we will conduct a question and answer session.

Michael Stivala: For the long term growth for suburban propane.

Operator: If in any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on Thursday August 8th, 2024.

Michael Stivala: As we have stated in the past, we manage this business for the long term and are making strategic investments to set the business up for the next 95 years.

Michael Stivala: As we have stated in the past, we manage this business for the long term and are making strategic investments to set the business up for the next 95 years, with some of the softness in the broader economy, challenging geopolitical events, and volatility in the stock market. The continued strength of our distribution coverage and focus on balance sheet strength should provide our unit holders with a level of comfort in the long-term sustainability of suburban propane in an otherwise uncertain market.

Michael Stivala: As we have stated in the past we manage this business for the long term and are making strategic investments to set the business up for the next 95 years.

Daven Dambrosio: I would now like to turn the conference over to Daven Dambrosio, Vice President and Treasurer. Please go ahead. Great, thank you Chris. Good morning and thank you for joining us for our fiscal 2024 third quarter earnings conference call. I'm here with Mike Stivala, our President and Chief Executive Officer, Mike Kuglin, our Chief Financial Officer and Steve Boyd, our Chief Operating Officer. This morning we will review our third quarter financial results along with our current outlook for the business.

Michael Stivala: And with some of the softness in the broader economy, challenging geopolitical events and volatility in the stock market, the continued strength of our distribution coverage and focus on balance sheet strength should provide our unit holders with a level of comfort in the long-term sustainability of Suburban Propane in an otherwise uncertain market.

Speaker Change: And with some of the softness in the broader economy.

Speaker Change: Challenging geopolitical events and volatility in the stock market the.

Michael Stivala: The continued strength of our distribution coverage and focus on balance sheet strength should provide our unitholders with a level of comfort in the long term sustainability of suburban propane in an otherwise uncertain market.

Michael Stivala: Finally, I want to take this opportunity to thank the more than 3200 employees at Suburban Propane for their hard work and unwavering focus on the safety and comfort of our customers and the communities we serve. Thank you for all that you do every day. And, as always, we appreciate your support and attention this morning. And now, I'll turn the call over to Chris to see if we have any questions. Chris, do you want to help us? Thank you. Ladies and gentlemen, we will now begin the question and answer session.

Michael Stivala: Finally, I want to take this opportunity to thank the more than 3,200 employees at Suburban Propane for their hard work and unwavering focus on the safety and comfort of our customers and the communities we serve. Thank you for all that you do every day. And, as always, we appreciate your support and attention this morning. And now, I'll turn the call over to Chris to see if we have any questions. Chris, do you want to help us? Thank you. Ladies and gentlemen, we will now begin the question and answer session.

Michael Stivala: Finally, I want to take this opportunity to thank the more than 3200 employees at suburban propane for their hard work and unwavering focus on the safety and comfort of our customers and the communities we serve.

Daven Dambrosio: Once we've concluded our prepared remarks we will open the session to questions. Our conference call contains four looking statements within the meeting of Section 21 E of the Securities Exchange Act of 1934 as amended relating to the partnership's future business expectations and predictions, financial condition and results of operations. These four looking statements involve certain risk and uncertainties. We have listed some of the important factors could could cause actual results to differ materially from those discussed in such a way.

Speaker Change: Thank you for all that you do every day.

Chris: And, as always, we appreciate your support and attention this morning, and now I'll turn the call over to Chris to see if we have any questions. Chris, do you want to help us?

Michael Stivala: Thank you for all that you do every day. And, as always, we appreciate your support and attention this morning. And now, I'll turn the call over to Chris to see if we have any questions. Chris, would you like to help us? Thank you. Ladies and gentlemen, we will now begin our question and answer session.

Michael Stivala: And as always we appreciate your support and attention. This morning, and now I'll turn the call over to Chris to see if we have any questions. Chris do you want to help us.

Chris: Thank you, ladies and gentlemen. We will now begin the question and answer session. Should you have a question, please press star followed by one on your touch-tone phone. You will hear a three-tone prompt acknowledging your request, and your questions will be pulled in the order they are received. Should you wish to decline from the polling process, please press star followed by two. If you are using a speaker phone, please lift a handset before pressing any keys. One moment, please, for your first question. Again, as a reminder, should you have a question, please press star one on your touch-tone phone.

Chris: Thank you ladies and gentlemen, we will now begin the question and answer session should you have a question. Please press star followed by one on your Touchtone phone.

Operator: Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star followed by 1 on your touch-tone phone. You will hear a three-tone prompt acknowledging your request, and your questions will be answered in the order they are received. Should you wish to decline from the polling process, please press star followed by 2. If you are using a speakerphone, please lift the handset before pressing any keys. One moment, please, for your first question. Again, as a reminder, should you have a question, please press star 1 on your touchtone phone. There are no questions at this time. Please proceed.

Operator: Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star followed by 1 on your touchtone phone. You will hear a three-tone prompt acknowledging your request, and your questions will be answered in the order they are received. Should you wish to decline from the polling process, please press star followed by two. If you are using a speakerphone, please lift the handset before pressing any keys. One moment, please, for your first question. Again, as a reminder, should you have a question, please press star 1 on your touchtone phone. There are no questions at this time. Please proceed.

Chris: You will hear three total profit acknowledging our request and your questions will be pulled in the order they are received.

Operator: Should you wish to decline from the polling process, please press star followed by 2. If you are using a speakerphone, please lift the handset before pressing any keys. Again, as a reminder, should you have a question, please press star 1 on your touchtone phone.

Chris: Should you wish to decline from the polling process. Please press star followed by two.

Daven Dambrosio: We will look forward looking statements which will refer to as cautionary statements in our earnings press release, which can be viewed on our website at suburbanpropein.com. All subsequent written and oral forward looking statements, trivial to the partnership or persons acting on behalf of our expressly qualified in their entirety by such cautionary statements. Our annual report on Form 10 K for the fiscal year ended September 30th, 2023, and Form 10Q for the period ended June 29th, 2024, which will be filed by the end of business today, contain additional disclosure regarding forward looking statements and risk factors.

Chris: If you are using a speaker phone please lift the handset before pressing any keys.

Chris: Please for your first question.

Speaker Change: Again as a reminder, should you have a question. Please press star one on your Touchtone phone.

Chris: There are no questions at this time. Please proceed.

Michael Stivala: Great, thank you Chris. Again, we look forward to speaking with you again at the end of our fiscal year in November. I wish you all a good end to the summer, and, as always, be safe.

Operator: Great, thank you Chris. Again, we look forward to speaking with you again at the end of our fiscal year in November. I wish you all a good end to the summer and, as always, be safe.

Chris: Thank you, Chris. Again, thank you all for joining us. We look forward to speaking with you again at the end of our fiscal year in November.

Operator: Great. Thank you Chris again, thank you all for joining us.

Operator: Look forward to speaking with you again at the end of our fiscal year in November.

Daven Dambrosio: Copies may be obtained by contacting the partnership or the SEC. Certain non-GAP measures will be discussed on this call. We have provided description of those measures as well as a discussion of why we believe this information to be useful in our Form 8K, which was furnished to the SEC this morning. Form 8K will be available through a link in the investor relations section of our website.

Chris: I wish you all a good end to the summer, and please, as always, be safe.

Operator: I wish you all a good end to the summer and please as always be safe.

Operator: Thank you, ladies and gentlemen.

Operator: Thank you. Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.

Operator: Thank you. Ladies and gentlemen, this concludes your conference call for today. We thank you for participating.

Speaker Change: Thank you ladies and gentlemen. This concludes your conference call for today, we thank you for participating and ask that you. Please disconnect your lines.

Operator: This concludes your conference call for today. We thank you for participating, and as you please disconnect your lines.

Operator: Yeah.

Michael Stivala: At this time, I'd like to turn the call over to Mike Stovall for some opening remarks. Thanks, Daven. Good morning. Thank you all for joining us today. The fiscal 2024-3rd quarter presented significantly warmer than normal weather, and in many areas extreme heat, which followed a winter heating season that was 9% warmer than normal, and lacked sustained cool temperatures in the critical months for heat-related demand. Average temperature for our fiscal 2024-3rd quarter were 14% warmer than normal, unlike the prior year-3rd quarter, which benefited from colder average temperatures that generated a late burst of demand from our residential customer base.

Michael Stivala: While the warm weather negative impacted customer demand for heating purposes in the third quarter, we benefited from growth in our counter seasonal customer base. Overall volumes for the third quarter were 8.6% lower than the prior year-3rd quarter, as we have consistently demonstrated in the past, our field operations personnel continue to do an excellent job managing selling prices and leveraging our efficient operating model to help manage costs which help mitigate the impact of warmer weather on earnings.

Michael Stivala: For the quarter, adjusted EBITDA was $27 million, a decrease of $6 million from the prior year 3rd quarter, but in line with our expectations for this shoulder period despite the warmer weather. In our renewable natural gas operations, during the 3rd quarter we continue to drive operational excellence, increase feedstock intake and production levels and grow revenue opportunities. In fact, the operational enhancements we have implemented have resulted in an increase in feedstocks processed and higher levels of R&G injection at our stanfield facility, reaching a daily peak injection level as high as 1,500 MMVTUs in the quarter.

Michael Stivala: R&G injection for the quarter as a whole average around 1,000 MMVTUs per day as the facility did experience extended periods of limited injection resulting from power outages from severe storms in the area. In addition, revenues in the facility have been adversely impacted by lower prices for California LCFS credits and to a lesser extent lower benchmark natural gas prices, but benefited from higher D3 RIN values. Both the stanfield and Columbus facilities reported higher revenues from tipping fees, resulting from increased intake of food beverage and other waste feedstocks compared to the prior year 3rd quarter.

Michael Stivala: Additionally, during 3rd quarter we utilized excess cash flow to acquire two small retail propane businesses in strategic markets in Florida and Nevada for a total investment of nearly $13 million and we also repaid ten and a half million dollars about standing debt under our revolving credit facility. We also continued to advance our capital improvement plans for the installation of R&G upgrade equipment at our stanfield or Columbus Ohio facility and the construction of our anaerobic digestive facility at Adirondack Farms in upstate New York.

Michael Stivala: As I mentioned on last quarter's earnings call, we expect both facilities to be completed in the second half of calendar 2025. Therefore, despite the challenges resulting from warm weather and fiscal 2024, we continue to execute on our long-term strategic growth plans, which include investing in the growth of our core propane business and building out our renewable energy platform while maintaining a discipline approach to deploying additional capital in order to foster the growth and strength of the balance sheet.

Michael Stivala: In a moment, I'll come back for some closing remarks.

Michael Kuglin: However, at this point, I'd like to turn the call over to Mike Kuhlen to discuss the 3rd quarter in more detail. Thanks Mike and good morning everyone. To be consistent with previous reporting, I'd like to discuss our 3rd quarter results. I'm excluding the impact of unrealized marked market adjustments on our commodity hedges, which resulted in an unrealized loss of approximately $3 million in the 3rd quarter of fiscal 2024 and fiscal 2023.

Michael Kuglin: Along with certain other non-cash items and acquisition related transaction costs, us. Given the seasonal nature of our business, we typically experience a net loss in the third quarter of our fiscal year. With that said, the net loss for the third quarter was $8 million or $12 cents per common unit. Compared to a net loss of $1.5 million or $2 cents per common unit in the prior year. The state-related demand resulting from a continuation of an seasonally warm weather, but benefited from unit Mars expansion, controlling operating expenses and greater contribution from our orange operations.

Michael Kuglin: Retail profile gallons sold in the third quarter were 71.7 million gallons, which was 8.6% lower than a prior year, primarily due to warmer weather across most of our operating footprint. Average temperatures, as measured in heat and degree days, were 14% warmer than normal and 10% warmer than the prior year third quarter. From a commodity perspective, wholesale propane prices were somewhat range bound during the quarter, but generally trended lower. However, the pace of the decline, trailed the sharp decline experienced in the prior year, resulted in average wholesale prices increasing 11.5% compared to the prior year third quarter.

Michael Kuglin: At the end of the third quarter, the nation's propane inventories were at 75.8 million barrels, which was 7% lower than June 2023 levels, but remained elevated compared to historical averages for this time of the year. Excluding the impact of the market market adjustments on our commodity hedges that I mentioned earlier, total growth margin of 163.4 million dollars for the third quarter, decreased 7.8 million dollars or 4.5% compared to the prior year, primarily due to lower volume sold, partial set by higher unit margins and higher margin contribution from our orangey business.

Michael Kuglin: Open unit margins for the third quarter increase 7 cents per gallon or 3.8% compared to the prior year. With respect to expenses, combined operating and gene expenses of 135.1 million dollars for the third quarter, decrease 2.3 million dollars or 1.7% compared to the prior year, primarily due to lower variable operating costs, which includes fuel costs, overtime and other costs that flex with volume sold. As well as lower variable compensation and cost savings and efficiencies realized in our orangey operations.

Michael Kuglin: Our schedule of setting those savings was an increase in self-insurance accruals for a legal matter that was settled during the quarter. An interest expense of 18.4 million dollars for the third quarter was marginally lower than the prior year as savings for a lower level of average outstanding borrowings under our revolving credit facility were all set by higher benchmark interest rates for borrowings under the revolver. The total capital spending for the quarter of 14.7 million dollars was 5.3 million dollars higher than the prior year, primarily due to growth capital, advancing our construction efforts at our Columbus and Adironduct facilities.

Michael Kuglin: Although the leverage metric remains elevated relative to our historical levels following the orange acquisition, and from the impact of the warm weather unearnings, we remain well within our deck covenant requirement of 5.75 times, and continue to make progress on strengthening the balance sheet with that repayment from excess cash flows. We will continue to remain focused on utilizing excess cash flows to fund the playing growth capital, within our orange platform, as well as to strengthen the balance sheet, and as opportunities arise to fund strategic growth of our core propane business and our renewable energy portfolio. We have more than ample borrowing capacity, under our revolver, to support our capitalist mansion plans and on growing strategic growth initiatives.

Michael Stivala: Our management team has managed through these warm weather scenarios many times in the past, and our experience and best-in-class business model, coupled with some growth in our non-weather dependent customer segments, helped to mitigate the effects on the bottom line. Our core propane business remains strong. In fact, even with the weather-related earnings shortfall compared to the prior year. Our excess cash flows in strong liquidity position provide capital to continue to invest in growth opportunities in both our core propane business and our renewable energy plant.

Michael Stivala: [inaudible] We are investing in the build out of an interconnected renewable energy platform for the long term growth of Suburban Propane. As we have stated in the past, we manage this business for the long term and are making strategic investments to set the business up for the next 95 years.

Michael Stivala: And with some of the softness in the broader economy, challenging geopolitical events and volatility in the stock market, the continued strength of our distribution coverage and focus on balance sheet strength should provide our unit holders with a level of comfort in the long term sustainability of Suburban Propane in an otherwise uncertain market.

Michael Stivala: And as always, we appreciate your support and attention this morning and now I'll turn the call over to Chris to see if we have any questions.

Chris: Chris, do you want to help us? Thank you, ladies and gentlemen, we will now begin the question and answer session.

Chris: Should you have a question, please press star followed by one on your touch tone phone. You will hear a three-tone prompt acknowledging your request and your questions will be pulled in the order they are received.

Chris: Should you wish to decline from the polling process, please press star followed by two. If you are using a speaker phone, please lift a handset before pressing any keys. One moment please for your first question. Again, as a reminder, should you have a question, please press star one on your touch tone phone.

Michael Stivala: There are no questions at this time. Please proceed. Thank you, Chris. Again, thank you all for joining us. We look forward to speaking with you again at the end of our fiscal year in November. I wish you all a good end to the summer and please, as always, be safe.

Operator: Thank you, ladies and gentlemen.

Operator: This concludes your conference call for today. We thank you for participating and as you please disconnect your lines.

Q3 2024 Suburban Propane Partners LP Earnings Call

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