Davin D'Ambrosio - VP and Treasurer Mike Stivala - President and CEO Mike Kuglin - Chief Accounting Officer and CFO.

Analysts:.

Welcome to Suburban Propane's Fourth Quarter and Full Year Fiscal Results Conference Call. At this time all participants are in listen-only mode. Later we'll conduct a question-and-answer session. Instructions will be given at that time. [Operator Instructions]. As a reminder, this conference call is being recorded.

This conference call contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934 as amended, relating to the Partnership's future business expectations and predictions and financial condition and results of operations. These forward-looking statements involve 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 its earnings press release, which can be viewed on the company's web site.

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 over to our host, Mr. Davin D'Ambrosio. Please go ahead..

Thank you and good morning everyone. Welcome to Suburban's fourth quarter and fiscal 2014 full year results conference call. I'm Davin D'Ambrosio, Vice President and Treasurer at Suburban.

Joining me this morning is Mike Stivala, our President and Chief Executive Officer; Mark Wienberg, our Chief Operating Officer; and Mike Kuglin, our Chief Financial Officer and Chief Accounting Officer.

On today's call we will review our fourth quarter and fiscal 2014 full year 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'd like to just 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 our Form 10-K for the fiscal year ended September 27, 2014, which will be filed on or about November 26, 2014.

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 will be available through a link in the Investor Relations section of our web site at www.suburbanpropane.com. At this point I will turn the call over to Mike Stivala for some opening remarks.

Mike?.

Thanks Davin and thank you everyone for joining us this morning. While fiscal 2014 presented no shortage of challenges as a result of industry-wide supply logistics issues, harsh winter storms, a sudden and prolonged spike in wholesale propane prices, and unseasonably warm temperatures impacting our West Coast operations.

Through our efforts to drive synergies from the combined platform and the extraordinary efforts by our employees to provide the level of service that our customers have come to expect, we achieved nearly 3% growth in adjusted EBITDA.

Additionally, we made significant progress, not only in our integration efforts, but also in executing our strategic financing initiatives. To highlight a few key accomplishments during fiscal 2014, we completed our system conversions and much of the physical blending activities associated with the integration of Inergy Propane.

We have installed our operating model across the entire platform, and have migrated to one common brand. We achieved our targeted year two synergies of $15 million, and we successfully refinanced our previous 7.5% senior notes due 2018 with new 5.5% senior notes due 2024.

This effectively extended maturities on this portion of our debt, by six years, and reduced our cash interest requirement by more than $8 million annually, and we have successfully transitioned the leadership of the partnership in accordance with the Board approved succession plans, just to mention a few.

As we begin a new fiscal year, the third full fiscal year following the Inergy Propane acquisition.

We are well positioned both operationally and financially, to continue to focus on our customer growth initiatives, continue to refine our operating platform to maximize the efficiencies from the combined business, and continue to pursue further growth opportunities. A little later, I will provide some closing remarks.

However at this point, I will turn it over to Mike Kuglin to discuss our full year and fourth quarter results in a little more detail.

Mike?.

Thanks Mike and good morning everyone. I will start by focusing on our full year results, and give a little color on the fourth quarter towards the end of my remarks. For fiscal 2014, we reported net income of $94.5 million or $1.56 per common unit, compared to $78.8 million or $1.35 per common unit for fiscal 2013.

To be consistent with previous reporting, I am excluding the impact of unrealized non-cash mark-to-market adjustments on derivative instruments using risk management activities, which resulted in unrealized gain of $300,000 in fiscal 2014, compared to the unrealized loss of $4.3 million in fiscal 2013.

Additionally, net income and EBITDA for fiscal 2014 include a loss and debt extinguishment of $11.6 million associated with the refinancing of our 2018 senior notes, and $12.3 million in expenses related to our ongoing integration of Inergy Propane.

That income and EBITDA for fiscal 2013, with a loss on debt extinguishment of $2.1 million associated with redemption of $157 million of debt, a $7 million charge for the voluntary withdrawal for multi-employer pension plans covering certain employees acquired in the Inergy Propane acquisition; and integration related costs of $10.6 million.

Therefore, excluding these items as well as unrealized mark-to-market adjustments on derivative instruments in both years, net income for fiscal 2014 improved to $118.1 million or $1.95 per common unit, compared to $102.8 million or $1.76 per common unit in the prior year.

Adjusted EBITDA for fiscal 2014 was $338.5 million, an increase of $9.2 million compared to $329.3 million for fiscal 2013. Retail propane gallons sold at fiscal 2014 of 530.7 million gallons decreased by 3.9 million gallons, compared to 534.6 million gallons in the prior year.

Sales of our fuel oil and other refined fuels decreased 4.6 million gallons to 49.1 million gallons, compared to 53.7 million gallons in the prior year. According to NOAA, average temperatures across all of our service territories for fiscal 2013 were 3% colder than normal, and 7% colder than the prior year.

However, the weather pattern during the peak winter heating season was characterized by considerably colder than normal temperatures in our Eastern and Midwestern service territories, and sustain warmer than normal temperatures in our western territories.

Average temperatures in our western territories during this past winter heating season were 11% warmer than normal, and 6% warmer than the comparable period in the prior year, which negatively impacted volumes sold in those territories. In the regions where weather was colder than normal, our sales volumes responded.

However, even in those areas, volumes sold during fiscal 2014 were adversely affected by a combination of factors, including supply constraints resulting from industry-wide supply shortages and logistics issues, customer conservation attributable to the significant rise of wholesale propane prices, and our efforts to manage higher than normal customer fuel balances.

In the commodities markets, propane prices were extremely volatile during fiscal 2014, as a result of the supply and logistics issues and started late in the first quarter and continued throughout most of the second quarter. For the year, average posted prices for propane were 24.8% higher than the prior year.

Commodity prices rose sharply during much of the heating season and declined steadily thereafter to settle on $1.04 per gallon at the end of September 2014 basis Mont Belvieu, compared to $1.05 per gallon a year earlier. Today, spot propane is trading around $0.85 a gallon.

With respect to fuel oil, average prices for the fiscal year were 2.1% lower than the prior year. Total gross margins of $857.2 million for fiscal 2014 were $11.2 million higher than the prior year of $846 million, primarily due to slightly higher unit margins.

Combined operating and G&A expenses of $531 million were $3.3 million lower than the prior year, primarily due to operating efficiencies and synergies realized, as a result of the continuing integration of Inergy Propane, including lower payroll benefit related expenses attributable to reduced headcount and lower vehicle expenses attributable to the reduction of vehicles in our fleet.

Savings of payroll and vehicle expenses were substantially offset by higher over time and vehicle maintenance expenses attributable to increased activity and harsh winter weather conditions, and our East and Midwest service territories, as well as a $7.6 million increase of bad debt expense, primarily due to higher average customer balances, stemming from higher selling prices and greater customer consumption during the heating season.

Overall, bad debt expense as a percentage of revenues from fiscal 2014, was relatively consistent with our historical experience. Capital spending for the year totaled $30 million, which included $18.2 million of maintenance capital.

Turning to our fourth quarter results; due to seasonality of our business, we typically report a net loss in the fourth quarter.

With that being said, we reported a net loss of $54.7 million or $0.90 per common unit for the fourth quarter of fiscal 2014, compared with a net loss of $63.1 million or $1.05 per common unit in the prior year fourth quarter.

As I discuss the quarterly results, I am excluding the impact of unrealized non-cash mark-to-market adjustments on derivative instruments used in risk management activities, which result in a $400,000 unrealized loss in the fourth quarter of fiscal 2014 compared to a $2 million unrealized gain in the prior year fourth quarter.

Additionally, net income and EBITDA for the fourth quarter of fiscal 2014 included $3.2 million in expenses related to the ongoing integration of Inergy Propane.

Net income and EBITDA for the fourth quarter of fiscal 2013 included $4.6 million in expenses related to integration of Inergy Propane; a $1 million charge related to the voluntary withdraw from multi-employer pension plans, and a loss in debt extinguishment of $2.1 million.

Therefore, excluding these items and the effects of unrealized mark-to-market adjustments on derivative instruments in both quarters, net loss for the fourth quarter of fiscal 2014 improved to $51.1 million or $0.84 per common unit, compared to $57.4 million or $0.95 per common unit in the prior year fourth quarter.

Adjusted EBITDA for the fourth quarter of fiscal 2014 improved to $4.5 million compared to $1.9 million for the fourth quarter of fiscal 2013. Retail propane gallons sold in the fourth quarter of fiscal 2014 amounted to 76 million gallons, a decrease of 2.3 million gallons compared to 78.3 million gallons in the prior year fourth quarter.

Sales of fuel oil and other refined fuels decreased 28 million gallons to 5.5 million gallons in the fiscal 2014 fourth quarter. The decline in volumes was primarily driven by lower activity in our non-residential segment, offset to extend by an increase in residential volumes sold.

Total gross margins of $120.2 million for the fiscal 2014 fourth quarter were essentially flat, compared to the prior year fourth quarter. Combined operating and G&A expenses decreased $4.8 million to $118.8 million, primarily due to synergies realized from our integration efforts, partially offset by higher bad debt expense.

Our accounts receivable balance at the end of fiscal 2014 fourth quarter was marginally higher than September 2013 levels, which reflect significant progress during the fourth quarter, as a result of strong cash collections during the period. Turning to our balance sheet; we ended the fiscal year with $92.6 million of cash on hand.

This balance reflects the use of $12.5 million to fund a portion of our debt refinancing that was completed in the third quarter, and a slightly higher investment in working capital, given higher receivable balances and higher levels of inventory heading into the upcoming heating season.

Our overall liquidity position remains strong, with cash on hand and the availability of approximately $255 million under our revolving credit facility. Back to you, Mike..

Thanks Mike. Just a brief comment on our quarterly distribution; as announced in our October 23rd press release, our Board of Supervisors declared our quarterly distribution of $0.8750 per common unit in respect of the fourth quarter of fiscal 2014. This equates to an annualized rate of $3.50 per common unit.

The quarterly distribution was paid on November 10 to our common unitholders of record as of November the 3rd.

As for the status of our ongoing integration of Inergy Propane, as I outlined earlier, we successfully completed our year two integration plans, and we remain on schedule for achieving our stated goal of $50 million in synergies over the first three years.

As we head into fiscal 2015, we were very well positioned to leverage the strength of this combined platform. As I highlighted in my opening remarks, we are now operating under one common model, one common system and one culture.

We still have work to do, as we continue to fine tune our operating model and cost structure, in order to maximize the operating efficiencies and earnings potential of the combined enterprise, as well as continuing to invest in our people, so that they remain in the best position to deliver the highest quality customer service.

In the meantime, we continue to look for acquisition opportunities to further enhance unitholder value.

Lastly, I would be remiss and not acknowledging the efforts of all of our employees at all levels of the organization, who work tirelessly throughout this unique and challenging year to successfully execute our aggressive integration goals, while maintaining their focus on providing quality customer service.

These accomplishments were a true testament to the level of commitment and talent of our employee base; and as always, we appreciate your support and attention this morning, and would now like to open the call up for questions.

Greg, could you give us a hand with that?.

[Operator Instructions]. And at this time, there are no questions..

Okay. Well thank you Greg for your assistance today, and thank you all and we will see you in February. Thank you..

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