Ladies and gentlemen, thank you for standing by. Welcome to the Suburban Propane's First Quarter 2014 Financial Results. At this time, all participants are in a listen-only mode. Later we will conduct a question and answer session. Instructions will be given at that time (Operator Instructions). And as a reminder, this call is being recorded.

I’ll now read the Safe Harbor statement. This conference call contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934 as amended, relating to the Partnership’s future business expectations and predictions and financial condition and results of operation.

These forward-looking statements involve certain risks and uncertainties.

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 the earnings press release, which can be viewed on the company's website.

All subsequent written and oral forward-looking statements attributable to the Partnership or persons acting on its behalf are expressly qualified in their entirety by such cautionary statements. I would now like to turn the conference now to Davin D’Ambrosio. Please go ahead..

Thanks Linda and good morning everyone. Welcome to Suburban’s fiscal 2014 first quarter results conference call. I’m Davin D’Ambrosio, Vice President and Treasurer at Suburban.

Joining me this morning is Mike Dunn, President and Chief Executive Officer; Michael Stivala, our Chief Financial Officer and Mark Wienberg, our Vice President of Operational Support and Analysis.

The purpose of today’s call is to review our first quarter financial results along with our current outlook for the business including an update on the status of our integration efforts with regards to the Inergy Propane acquisition that was completed on August 1, 2012.

As usual, once we’ve concluded our prepared remarks, we will open the session to questions. However, before getting started, I would like to reemphasize what the operator has just explained about forward-looking statements.

Additional information about factors that could cause actual results to differ materially from those discussed in forward-looking statements is contained in the Partnership’s SEC filings, including its Form 10-K for the fiscal year ended September 28, 2013 and its Form 10-Q for the period ended December 28, 2013, which will be filed by the end of business today.

Copies of these filings may be obtained by contacting the Partnership or the SEC. Certain non-GAAP measures will be discussed on this call. We have provided a description of 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.

The Form 8-K can be accessed through a link on our website suburbanpropane.com. At this point, I will turn the call over to Mike Dunn for some opening remarks.

Mike?.

Thanks, Davin, and thanks everyone for joining us this morning. After a slow start to the fiscal 2014 heating season, driven by significantly warmer than normal temperatures through November, colder than normal temperatures arrived in December and our volumes aptly responded.

As we approach the end of December, we along with the industry began to see some indications of tightening supply, rising wholesale prices and patchy logistics issues, particularly in the Mid-Continent region.

The colder than average temperatures have persisted into the early part of the second quarter in most parts of the country and the supply and logistics challenges as well as the rising price environment have intensified.

I am extremely proud of the hard work and dedication on the part of all of our employees as they continue their tireless pursuit of customer satisfaction in light of these headwinds. I will comment a little further on the supply situation before the end of our remarks.

With all that said, we are very pleased with our results for the first quarter of fiscal 2014 with propane volumes ahead of last year’s first quarter by 2.6% and a slight improvement in adjusted EBITDA. Our overall financial position remains strong with the steps we took in fiscal 2013.

Our leverage has significantly improved since the funding of the Inergy Propane acquisition on August 1, 2012. And with more than $55 million of cash on hand and more than $253 million available under our bank facility, we have more than ample liquidity to address our working capital requirements for the remainder of the heating season.

In a moment I will comment on our outlook for the remainder of the fiscal year and give you an overall update on our integration efforts. However, at this point, I’d like to turn the call over to Mike Stivala to discuss our first quarter results in more detail.

Mike?.

Thanks Mike and good morning everyone. As I discuss our first quarter results, I am excluding the impact of a $300,000 unrealized non-cash loss applicable to FAS 133 accounting and that compares to an unrealized loss of 3.6 million in the prior year first quarter.

Adjusted EBITDA which also excludes integration-related costs of $2.5 million in the fiscal 2014 first quarter and $1 million in the prior year first quarter totalled $117.7 million for the first quarter of fiscal 2014, a slight increase compared to $117.5 million in the prior year.

Net income totalled $58.4 million or $0.97 per common unit for the first quarter of fiscal 2014 compared to net income of $54 million or $0.94 per common unit in the prior year first quarter.

Retail propane gallons sold in the first quarter of fiscal 2014 increased 4 million gallons or 2.6% into 157.9 million gallons from 153.9 million gallons in the prior year first quarter. Sales of fuel oil and other refined fuels declined 1.9 million gallons to 14 million gallons compared to 15.9 million gallons in the prior year first quarter.

As Mike mentioned, we had a slow start to this year’s heating season with average temperatures through November that were 8% warmer than normal and 5% warmer than the first two months of last year’s first quarter.

For the month of December, average temperatures were 6% colder than normal and as a result, for the quarter, average temperatures across our service territories were reported as normal and 9% colder than the prior year first quarter. Volumes responded nicely when the colder temperatures arrived.

In the commodity markets, average posted prices for propane of $1.20 per gallon basis Mont Belvieu for the first quarter of fiscal 2014 were $0.31 or 35% higher than the prior year first quarter. While the average posted prices for fuel oil of $2.99 per gallon were $0.06 lower than the prior year first quarter.

On a sequential basis, propane posted prices were 16.4% higher and fuel oil was 1.8% lower than the fiscal 2013 fourth quarter.

The rising propane price trend accelerated significantly towards the latter part of the first quarter of fiscal 2014 as a result of the onset of the supply and logistics issues across the industry that Mike touched on earlier.

In fact, average posted prices for the month of December 2013 were 59% higher compared to December of 2012 basis Mont Belvieu. Average posted prices at other key supply points increased at an even greater rate.

Total gross margins of $245.8 million for the first quarter of fiscal 2014 were $3.4 million lower than the prior year first quarter of 249.2 million, primarily due to the higher commodity prices offset to an extent by the higher propane volumes.

Overall, propane unit margins were slightly lower as a result of the dramatic rise in wholesale propane costs.

Combined operating and G&A expenses of $130.6 million for the first quarter of fiscal 2014 were $2.2 million or 1.7% lower than the prior year first quarter, or 3.7 million or 3% lower if you exclude the integration-related costs that I mentioned earlier from both periods.

Savings were primarily attributable to lower payroll and benefit-related expenses resulting from the realization of synergies as well as lower general insurance and professional services fees, offset to an extent by higher overtime and vehicle maintenance expenses.

As for bad debts, we remain diligent about managing our receivables, especially considering the current high commodity price environment. During the quarter, bad debt expense was slightly higher when compared to the prior year first quarter.

However, bad debt expense as a percentage of revenues remains consistent with historical levels and our ageing profile continues to be strong. Net interest expense of 21.2 million was $3.4 million lower than the prior year first quarter, a direct result of the repayment of 157 million of 7 3/8 senior notes in August 2013.

Depreciation and amortization expense of $34.8 million were 4.3 million higher than the prior year first quarter, primarily due to the acceleration of depreciation expense on assets taken out of service as a result of our integration efforts. Total capital spending for the quarter was 9.3 million, which included 3.4 million of maintenance capital.

Turning to our balance sheet, we ended the first quarter with 55 million of cash on hand and more than 250 million of availability under our revolver.

Despite the increased size of the organization and the significant increase in working capital needs this heating season, resulting from higher commodity price environment, we continued to fund all working capital requirements with cash on hand without the need to borrow from our revolver.

We have more than ample liquidity to fund our increased working capital requirements and any incremental capital expenditures associated with our integration efforts. That will ramp up significantly during the remainder of the fiscal year. Now I’d like to turn the call back to Mike for some closing remarks..

Thanks Mike. As announced on January 23rd, our Board of Supervisors declared a quarterly distribution of $0.8750 per common unit in respect of our first quarter of fiscal 2014, which equates to an annualized rate of $3.50 per common unit. Our quarterly distribution will be paid on February 11th to our unitholders of record as of February the 4th.

Also, as announced on January 23rd were several executive level promotions, which are in line with our planned management succession. This group which has been together on average more than 10 years will support Mike Stivala in his new role as President effective April the 1st.

I am extremely confident that this leadership team has the knowledge and experience to continue to drive the operational excellence that has helped define the culture of Suburban Propane, while at the same time continuing to pursue continued growth opportunities in line with our stated business strategy.

As for an update on our integration efforts, we indicated on our last call that we are taking a short pause in order to maintain our operating focus on serving our customers throughout the heating season. We will resume our field integration and system conversion efforts in the March timeframe.

We remain on schedule to have fully converted all of Inergy’s operating systems to our single system platform and to have made substantial progress on adopting our operating model throughout the entire footprint by this time next year.

Although we delivered some of the incremental cost savings during our first quarter, we anticipate realizing the bulk of the incremental $15 million of synergies in the second half of fiscal 2014.

Finally, we remain on target to achieve a total of $50 million in synergies over a three year period from the acquisition date that we initially set as our goal.

Finally, looking ahead to the remainder of fiscal 2014, colder than normal average temperatures have persisted in many parts of the country, the West Coast being an exception where unseasonably warm temperatures have refused to go away. As mentioned earlier, here are some of the factors contributing to the supply and logistics issues.

We had higher demand from crop drying in the fall, led to lower propane inventories to start the heating season.

Pipeline maintenance, shutting down certain key lines, reduced railcar and transport truck capacity to deliver propane as a result of the proliferation of shale gas in the Northern regions of the country, higher winter demand as a result of sustained record cold temperatures in several parts of the country, increased amounts of propane being exported to Europe, Asia and Latin America, less Canadian imports due to pipeline and refinery maintenance as well as colder Canadian temperatures creating higher local demand.

These issues along with others have given rise to extraordinary increases in posted prices, ongoing supply disruptions at several pickup points and most recently, national media attention.

While we are not immune to these challenges, we have taken and continue to take particular measures to manage our inventory levels to ensure that we make every effort to provide an acceptable level of service to our customer base during these most irregular times.

It is in periods like these that our vendor relationships, scale, financial strength and centralized approach to the product supply and dispatching functions all provide an added advantage to help us manage through what certainly feels like one of the more challenging heating season this industry has seen in decades.

Once again, I would like to acknowledge and thank the ongoing efforts of the more than 4000 employees of Suburban Propane who remain focused on providing exceptional customer service to our customer base in what is shaping up to be a very challenging heating season.

And as always, we appreciate your support and attention this morning and we’d now like to open the call up for questions.

Linda, can you help us?.

Yes. (Operator Instructions). And we will begin with the line of Theresa Chen with Barclays Capital. Please go ahead..

Good morning..

Good morning, how are you Theresa?.

Doing well, thank you..

Good..

I just had a question on your thoughts on the net effect on EBITDA for this winter season versus last year.

I mean factoring in colder temperatures resulting in higher volume and also the volatility in price, what do you think about that?.

Well we don’t typically give guidance Theresa, however, I can – I think with where we are in the calendar, I think our performance will be better than last year..

Okay great. And then Mike, I remember you had said previously that in regards to M&A, there are a lot of people who are willing to sell out there but just not at any reasonable price points.

Now given the recent developments in the market, I imagine it’s a lot more difficult for independent smaller operators to manage their price volatility and inventory challenges. And when you have size on your side, you have better leverage with suppliers and certainly economies of scale.

Do you think that the recent developments have ripened any M&A opportunities for you?.

I don’t think we’ll be able to answer that question definitively until the end of the heating season. We also had to keep something in mind, I mean not that it’s – and this is just a general statement and I don’t want it to be interpreted as a broad statement.

You do have a lot and you’re right, you do have a lot of the mom n pops that are struggling with this heating season and when you buy one of these businesses, you’re buying a customer base. So the big question is going to be how intact is that customer base after this winter..

Okay, that’s a great point and bringing me to the next question, which is on the customer base front, as customers get much higher bills and see the prices come through, do you think that people will opt to shop around even though I’m sure that’s the going price anywhere? But do you think competitors will offer incentives? Do you think there will be any churn there?.

Yes, probably. I mean churn is – I mean as far as this industry is concerned, we always look at our customer base in terms of net gains and net losses and churn is unfortunately a fact of life that the industry has to deal with.

And with the supply situation the way it is right now, needless to say, we’re not as aggressive as we would normally be in bringing in new customers at this stage because we’re more focused on taking care of our existing customer base.

The other nuance is that a lot of people in this industry are very short term thinkers and they are pricing product in some cases using their on hand costs as a basis for their selling price calculation as opposed to their replacement costs which in some markets could be a significant disparity in value.

And what the customer doesn’t realize is that that price point is probably only good for one delivery at which point in time then that customer will be priced off of replacement costs. So you do see a little bit of that.

You’re not necessarily seeing customers leaving you, but you’re having customers challenge your pricing when they do in fact look around..

That’s great color. Thank you very much..

You’re very welcome..

All right. And next we will go to the line of Shneur Gershuni with UBS. Please go ahead..

Good morning guys..

Good morning..

Good morning Shneur..

Just kind of wanted to follow up on some of the previous questions. With one third of the next quarter now behind us, we’ve had a big spike in demand as well as pricing.

Yet, would you be able to sort of expand on how margins are reacting to that? Are you being asked to wear some of the price increase and also Suburban’s ability to get propane to their customers given some of the press that’s out there with people facing shortages?.

Yeah, we – December began with a ramp up in prices and then in January obviously we saw a lot more of it as holes became bigger. The – this is a three part question – as far as margins are concerned, I think that we are doing the best we can with respect to pricing and trying to pass on as much of the added costs as possible.

However, in some markets, on an intraday basis we have seen price changes as high as $0.30-$0.35 which is near impossible to just pass that on, particularly for that day’s delivery. As far as supply is concerned, our product supply group is working very closely with our supplier and counterparts and doing a good job.

But most importantly, our field personnel are doing a wonderful job in rationing product where they have to to make sure that we are giving our customer base as I mentioned, an acceptable level of service as we go through this difficult period of time.

Now unfortunately one also has to realize that when you get into that rationing mindset, your operating costs tend to drift a little higher. Okay. So that obviously will have a bit of an impact as we look back on the first six months of this fiscal year..

Great. Thank you for that color. And as a follow up question, I was wondering if you can talk about the fuel oil volumes. They appear to have been down year-over-year given kind of a flat to colder start to the year basically..

The fuel oil business is – our fuel oil business is, if you want to just understand it is heating oil is fine. As a matter of fact, its volumes were reasonably flat. When you look at the total picture, it’s the refined fuels which is a business line that we’re aggressively reducing our position on.

That’s where you’re seeing the shortfall for the most part..

And you’re reducing that just because of margin and so forth or?.

Yes, yes, pretty much. I mean they are not getting into a whole lot of detail. Yes, that’s the answer. The other thing you also have to keep in mind too is a lot of fuel oil customers buy their product in August and September as habit and our volumes in September were pretty good with respect to heating oil.

So they should be coming close to a refill during the Feb-March period which should have an impact on volumes as well..

Thank you very much. I appreciate the color..

You’re welcome..

All right. And next we will go to the line of Gabe Moreen with Bank of America. Please go ahead..

Good morning guys..

Good morning Gabe..

Hey Gabe..

Two questions from me. One is I know you don’t have a wholesale marketing arm per se but you had sort of mentioned the geographical dispersion between things are being a lot tamer on the West Coast versus a lot of other regions out there propane wise.

Has there been any opportunity for you to sell inventory that you’ve had let’s say on the West Coast where perhaps you’re not seeing outsized demand? Are there areas in the country where there is more demand for your own customers or from others?.

No. We’re not in the wholesale business, as you correctly said and anything that’s in transit that may have been headed to the West Coast, we redirected to the Mid-Continent..

Got it. And then second question I guess is on bad debt expense. I know Mike’s mentioned that your ageing profile so far seems as it’s been historically.

I’m just kind of wondering process wise sort of when your receivables aged since you got to potentially write them off? You’re thinking about accruing for bad debt expense this upcoming quarter given the pricing environment overall and whether more bad debt expense is something that could potentially show up in the third and fourth quarter, again, given the unprecedented pricing environment?.

Gabe, I think it’s obviously something that you have to pay attention to and something that we’re going to be managing very, very closely. The reality is we haven’t seen any signs of deterioration in the level of write offs. Our write offs have typically been less than half a percentage of revenues.

And that goes back for as long as I can remember frankly and so I don’t – we haven’t see any deterioration in that at this stage and there is nothing to suggest that we’ll see an increase in that level of write offs. But obviously when you’re staring at prices that are upwards of 30, 40% higher, it’s something you’ve got to pay close attention to..

Got it. Thanks Mike..

Sure..

All right. And next we will go to the line of Darren Horowitz with Raymond James. Please go ahead..

Good morning guys. Mike, I just have one question. I want to go back to a comment that you made about the Mid-Continent market, and I’m just curious to your outlook. A lot of the numbers that we’ve run and I think there is a growing consensus that past due inventories for propane could be below 4 million barrels by the end of March.

And obviously as you said, there have been a lot of disconnects between pipe capacity and some terminal and railcar issues and prices at the rack are soaring at 80 or 100 terminals there.

So I’m wondering, from your perspective, how you see that situation getting resolved and more importantly, what impact you think that might have on the Conway to Belvieu spread..

Well I mean it’s going to be difficult to talk about the spread so much as the real availability of inventory. The Conway situation got way out of hand for a period during the middle of January. And it’s pricing relative to Belvieu today is still in the move. For example, posting price as of January 30th was $2.98 versus Belvieu $1.57.

I mean I don’t think it could get any wider quite frankly. I think with respect to the Mid-Continent area, the focal point is that. So needless to say, supply is headed in that direction.

Now that is the one part of our geography where we are being selective in how we fill customers with respect to what they need versus what we’re prepared to give them. But like I said earlier, we are communicating this with our customer base and so far, knock on wood, everything’s been working out.

But I think from a – when you look at an arbitrate situation, we’re really not focusing on any of that, at least at this stage in time. We’re trying to buy as much as we can or move as much as we can into that area so that we can get back to a more normal state..

Do you think based on where the spread is currently, is the spread wide enough to kind of pull that incremental barrel away from the export market and get it up into the Mid-Continent? Because from our perspective, I guess the only other relief that you might have is if winter moderated in that area or you started to see some pretty substantial conservation in the residential market.

And I don’t know if that’s happening, is it?.

Well it is. I mean a lot of those things are happening. As far as the export community is concerned, I mean that arbitrate is pretty wide as you well know. But I will say that there has been divergence of product going down into the Southern part, moving into the Conway market..

Thanks Mike..

So I – assume some of that was exported – planned for export..

Thank you..

You’re welcome..

(Operator Instructions) And we will go to the line of Sharon Lui at Wells Fargo Securities. Please go ahead..

Hi, good morning..

Hi Sharon..

Hi, most of my questions have been asked, but I guess given the potential for LPG exports to continue to ramp and future supply dislocations, I was wondering has there been a change in terms of how you want to structure your supply agreements going forward?.

It doesn’t have anything really to do with structuring our supply agreements any differently. I think what we will do is we’ll take a look again, as I said, is how these six months kind of finishes up and we may not be as dependent on rail perhaps as we’ve been in the past. And we’ll have to see what that means.

But I think from a general supply contracting perspective, quite frankly, we’re pleased with what we’ve been doing, how we’ve been doing it. It’s just the dependence on rail may become a little less of a focus than has been the case in the past..

Okay, but nothing in terms of how pricing is structured, meaning on time of delivery versus locking in prices?.

No, we’re not going to start speculating. You certainly can assume that what’s happened this year is the new norm and unless six or seven years down the road from now, we look back and say it has become the new norm, I don’t think we’re going to get into fixed pricing contracts in advance of a winter..

Okay. And maybe you can provide some color on the performance of some of the sites that you have been able to integrate before the heating season and how they fared during this challenging market..

Yeah. I mean actually, the middle part of the country is – we didn’t – Suburban prior to the acquisition wasn’t – we weren’t in that marketplace.

So I can honestly say that the Mid-Continent has operated quite nicely using a combination of their expertise and I mean that being legacy Inergy expertise, coupled with our central support focus and they’re actually doing a great job.

As far as the North East is concerned, a lot of the blending activity quite frankly has been relatively seamless as we go through this process. So our managing directors and general managers in the field are doing a great job communicating and following through to make sure that our customer is our primary focus..

Great. Thank you..

You’re welcome..

All right. And there are no further questions..

Well thank you Linda and again, thanks everyone and we look forward to our next call..

Ladies and gentlemen, this conference will be available for replay after 11 AM Eastern today through February 7, 2014 at midnight. You may access the AT&T replay system at any time by dialing 1-800-475-6701 and entering the access code 316658. Once again, that number is 1-800-475-6701 and the access code is 316658.

That does conclude your conference for today. Thank you for your participation. You may now disconnect..