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

Brian Brungardt - Stifel Michael Gyure - Janney Sharon Lui - Wells Fargo.

Ladies and gentlemen, thank you for standing by, and welcome to the Fourth Quarter 2016 Financial Results Conference Call. [Operator Instructions] As a reminder today's conference call is being recorded. I'll begin today's conference call with 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 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 disclosed in such forward-looking statements, which are referred to as cautionary statements in its earnings press release which can be viewed on the Company's website.

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. And at this time, we'll turn the conference over to our first speaker, Vice President and Treasurer, Davin D'Ambrosio..

Thank you, Nick and good morning everyone. Welcome to Suburban's fourth quarter and fiscal 2016 full year results conference call. Joining me this morning are Mike Stivala, our President and Chief Executive Officer; Mike Kuglin, Chief Financial Officer and Chief Accounting Officer; and Steve Boyd, our Senior Vice President of Operations.

On today's call we will review our fourth quarter and fiscal 2016 full year results, along with our current outlook for the business. As usual, once we've concluded IR 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 our Form 10-K for the fiscal year ended September 24, 2016 which will be filed on November 23.

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.

Form 8-K will be available through a link in the Investor Relations section of our website at suburbanpropane.com. At this point, I will turn the call over to Mike Stivala for some opening remarks..

Thanks, Davin and thanks everyone for joining us this morning. As we have reported throughout much of this past fiscal year, the 2015-2016 heating season has been reported as the warmest winter on record.

Our results for fiscal 2016 reflected the challenging operating environment driven by the record warm temperatures and their impacts on customer demand for heating needs and therefore our earnings for the year.

Nonetheless we relied on our flexible cost structure and the strength of our balance sheet to help mitigate some of the effects of the lower volumes. Additionally during this past year, we had some notable achievements that will further enhance our operational efficiencies and provide added support for our long-term strategic growth initiatives.

Specifically during the first quarter we acquired the assets and operations of Propane USA for $45 million which expanded our presence in the South Florida market already a very strong market for us and what's provided us with an opportunity to apply our operating model to enhance overall returns.

We took proactive steps to further improve our liquidity position with the opportunistic refinancing of our revolving credit facility which was scheduled to mature in January 2017.

With very strong support we received from our bank group we were able to improve our cost of capital, extend the maturity until 2021 and increase our available borrowing capacity by $100 million.

We extended our reach in certain strategic markets that were not previously served by our existing footprint and we made further refinement through our business model to streamline our operational activities, reduce our cost structure and enhance our position in several markets.

These are all steps that set us up both financially and operationally to further support the stability of our platform and to help to achieve the next phase of growth for Suburban Propane and our Unitholders.

A little later I'll provide some closing remarks however at this point I'll turn it over to Mike Kuglin to discuss our full-year and fourth quarter results in little more detail.

Mike?.

Thanks Mike, and good morning everyone. I'll start by focusing on our full-year results, give a little color on the fourth quarter together in my remarks.

To be consistent with previous reporting, I'm excluding the impact of unrealized non-cash mark-to-market adjustments on derivative instruments used in risk management activities which resulted in unrealized loss of $1.2 million in fiscal 2016 compared to an unrealized gain of $1.9 million in fiscal 2015.

Additionally net income and EBITDA for fiscal 2016 included several charges are excluded from the calculation of adjusted EBITDA.

Specifically a $9.8 million gain from the sale of certain assets and operations in a non-strategic market of the propane segment; a $6.6 million charge related to the Partnership's voluntary full withdrawal for a multi-employer pension plan covering certain employees acquired in the 2012 acquisitions of Inergy Propane; a $3 million charge related to the settlement of product liability matter; a pension settlement charge of $2 million; and a loss on debt extinguishment of $300,000 associated with refinancing under revolver.

Net income and EBITDA for fiscal 2015 include a loss on debt extinguishment of $15.1 million associated with refinancing of our 2020 senior notes, $11.5 million in expenses related to integration of Inergy Propane, $11.3 million charge voluntary partial withdraw from the legacy Inergy Propane multi-employer pension plan and a pension settlement charge of $2 million.

Excluding these items as well as the unrealized mark-to-market adjustments on derivative instruments in both years, net income for fiscal 2016 would have amounted to $17.8 million or $0.29 per common unit compared to $122.4 million or $2.02 per common unit in the prior year.

Adjusted EBITDA for fiscal 2016 was $223 million, compared to $334 million of fiscal 2015. As Mike indicated record warm weather during the heating season was really the story for fiscal 2016. As a result retail propane gallon sold in fiscal 2016 of 414.8 million gallon decreased 65.5 million gallons or 13.7% compared to the prior year.

Sales of fuel oil and other refined fuels of 30.9 million gallons decreased 11 million gallons or 26.3% compared to the prior year.

The unseasonably warm weather was persistent as temperatures were warmer than normal and the prior year throughout mostly heating seasons with the critical month of December 2015 report as a warmer sun record, in the months of February and March of 2016 each ranking in a top eight warmest months of all time.

Our average temperatures were warmer than the prior year in nearly all of our service territories. California experienced cooler weather compared to the prior year which contributed to a 13% increase in propane volume sold in that market.

Overall our average temperatures across all of our service territories were 17% warmer than normal and 15% warmer than the prior year. From a commodity perspective, propane prices were some of awful during the year with wholesale prices trading in a range between $0.30 and $0.57 a gallon.

Despite that moment propane prices remained lower relative to historical levels as the nation's inventory remained high. Overall average propane prices for fiscal 2016 were 18.4% lower than the prior year and average crude oil prices were 31% lower than the prior year.

Total gross margins of $685.3 million for fiscal 2016 were $136.4 million or 16.6% lower than the prior year primarily due to lower volume sold. Unit margins were slightly lower than prior year as a result of lower mix of fee-related volumes.

Combined operating and G&A expenses of $462.3 million for fiscal 2016 were $25.4 million or 5.2% lower than the prior year as we leveraged our flexible cost structure to reduce expenses. In addition, we made further refinements to our operating model to drive operating efficiencies that resulted in reduced headcount and vehicle count.

Total capital spending for the year was $38.4 million compared to $41.2 million in the prior year of which $21.8 million accounted for growth capital in both periods.

The $2.8 million reduction in maintenance CapEx was primarily due to lower tank refurbishment costs and the completion of Inergy Propane integration related activities in the prior year. Turning to our fourth quarter results. Due to the seasonality of our business we typically report a net loss in the fourth quarter.

With that being said, we report a net loss of $60.2 million or $0.99 per common unit for the fourth quarter of fiscal 2016 compared to a net loss of $67.1 million or $1.11 per common unit in the prior year.

As I discussed in quarterly results, I'm excluding the impact of unrealized non-cash mark-to-market adjustments on derivate instruments used in risk management activities, which resulted in $815,000 unrealized gain in the fourth quarter of fiscal 2016, compared to a $180,000 unrealized loss in the prior year fourth quarter.

Additionally net loss and EBITDA for the fourth quarter of fiscal 2016 included a pension settlement charge of $2 million.

Net loss and EBITDA for the fourth quarter of fiscal 2015 included $6.4 million in expenses related to the integration of Inergy Propane, $11.3 million charge related to the voluntary partial withdraw by multi-employer pension plan and the $2 million pension settlement charge there referenced in relation to the full year results.

Excluding these items and the effect of the unrealized non-cash mark-to-market adjustments on derivative instruments in both quarters, net loss for the fourth quarter of fiscal 2016 was $59 million or $0.97 per common unit compared to $47.2 million or $0.78 per common unit in the prior year.

Adjusted EBITDA for the fourth quarter of fiscal 2016 was a loss of $7.6 million compared to earnings of $6.7 million in the prior year. Retail propane gallons sold in the fourth quarter of fiscal 2016 amounted to 63.2 million gallons, a decrease of 7.7% compared to prior year.

Volumes in the fourth quarter were negatively impacted by warm temperatures in the month of September, which were 26% warmer than September 2015, as well as timing of customer deliveries as the cooler start to the Spring of 2016 resulted in higher deliveries in our fiscal third quarter was created higher customer inventory levels that began to our fiscal fourth quarter.

Total gross margins of $103.3 million for the fourth quarter fiscal 2016 were 11.7% lower than the prior year fourth quarter, primarily due to lower volume sold.

In addition margins in the prior year fourth quarter benefited from lower-price inventory coming into the quarter as a result of the rapidly declining commodity price environment in fiscal 2015. With respect to expenses, combined operating and G&A expenses of $110.9 million were essentially flat compared to prior fourth quarter.

Savings in payroll expenses from reduced headcount and vehicle expenses from a lower vehicle count were offset by an increase in reserves for general liability matters and higher professional services fees to support strategic initiatives.

Turning to our balance sheet, as a result of the impact of the record warm heating season on earnings our leverage at the end of fiscal 2016 remains elevated compared to historical levels, but is within our debt covenant requirement of 5.5 times debt to EBITDA.

Going forward a return to a more normal weather pattern would bring our leverage profile more in line with our target of mid-to-upper 3 times. From a liquidity perspective, we had fiscal year with more than $37 million of cash on hand and ample borrowing capacity under our revolver to fund working capital needs. Back to you Mike..

Thanks Mike. As announced in our October, 20 press release, our Board of Supervisors declared our quarterly distribution of $0.8875 per common unit in respect of the fourth quarter of fiscal 2016 that equates to an annualized rate of $3.55 per common unit.

The quarterly distribution was paid on November 8 to our unit holders of record as of November 1. In closing as we reflect on the year that just passed unfortunately these extreme warm weather scenario was come around it was so often.

This is why our approach towards managing our balance sheet and our unique operating philosophy has historically been a differentiator for us in managing through challenging times.

The streamline and efficient nature of our operating model coupled with the flexible nature of our cost structure and the strength of our balance sheet allow us to be nimble in a year like this past year in which so much customer demand is reduced due to the weather.

If these characteristics that also provide support for our ability to sustain our cash distribution and meet all of our cash needs despite the short-term weather driven earnings shortfall. As I've stated before the fundamentals of our business haven't changed, we are well-positioned to continue to focus on the next phase of growth.

We remain active in the pursuit of our strategic initiatives and believe that opportunities will become available both within the propane space, as well as in other energy-related sectors that can complement or supplement our current cash flow profile.

Our stated criteria for evaluating acquisition targets has remained consistent, and we will continue to remain patient and disciplined in our approach.

Finally I'm extremely proud of all of our Suburban Propane employees that have effectively navigate the challenges of the record warm heating season while maintaining focus on the things they can control providing unsurpassed customer service, adhering to the highest level of safety standards and attracting and retaining customers across all customer segments.

With fiscal 2016 now in the rearview mirror, we're excited about the opportunity to build on the momentum of our recent accomplishments and continuing to exceed our customers' expectations in every market we serve. As always we appreciate your support and attention this morning. I would now like to open the call up for questions.

And Nick, if you could give us a hand with that..

[Operator Instructions] Our first question today will come from the line of Brian Brungardt with Stifel. Please go ahead..

Good morning guys. You mentioned the fourth quarter was impacted initially with customers entering the quarter and higher inventory levels. And it looks like fewer heating degree days in October compared to last year as well.

Any color where customer inventories were in early fiscal first quarter or if we should expect another inventory impact in the current quarter?.

No, I think look with such little demand from last year, our delivery levels were obviously down. So I think as weather starts to pick up and all expectations or forecasts at this point show an improvement in weather is coming. So as soon as that weather picks up, I think the customer inventory issues will be behind us..

Got you. And then last question; I will jump back in Q2. You mentioned in the past that calendar third quarter is kind of a time of year smaller businesses are potentially up for sale.

Any success during the quarter with hitting that targeted list you have?.

No, we didn’t close on any propane acquisitions in the fiscal fourth quarter. Actually the period where you have the most potential activity is more coming out of the heating season. As we’re starting up getting into the heating season here we're - the acquisition pipeline is a little bit lighter than it has been in the past.

So the short answer is no, Brian, we have closed on any propane acquisition this quarter..

Thank you very much guys..

Next we’ll take a question from Jeremy Tonet with JPMorgan..

Good morning. This is Charlie for Jeremy. First question, on the cost front, it seems like OpEx continues to come down a bit. I know you've mentioned headcount, vehicle counts and - in reducing, helping to kind of lower those operational in SG&A cost.

Just trying to understand if there are any other costs that we should think about and kind of how sustainable some of them are and maybe what other lenders are might be to pull down the road on that need there..

This is Mike Kuglin. So with respect to the actions that we took in fiscal 2016, like a rise to a reduction in our headcount and vehicle count, those actions will start to give rise to permanent savings that would carry forward to next year.

But the other thing, think about of course our flexible costs structure, a good portion of our operating expenses are variable based, which gives the ability to flex our cost down and event to weather does not cooperate, which is like you experienced what you saw in fiscal 2016..

Okay.

So that will allow you to given the flexibility that allow you to keep up with demand given arise or fallen to help and try and mitigate anything correct?.

Right. We had a pretty extensive seasonal part-time workforce for which we staff up when we see weather coming and to extent weather does not look like it's going to cooperate such as we’re seeing the early part of the 2016, 2017 heating season. It is managed that how you levels and how you staff up..

Right, okay. That's helpful. And then just secondly on the last call you touched on a bit, just in the last call you mentioned that in terms of M&A that can have targeted list of quality businesses and that you currently have a few in your backlogs.

Just wondering if what that backlog looks like right now in regards to core or non-core if you're looking to trying down the road, cut exposure to the effects of I'd say adverse weather that sort of thing, just wondering any development or update there?.

When we a talk about a pipeline of backlog that's more on a propane side and so that backlog is typically going to be a handful of businesses throughout the country.

We're in 41 states, so we - our folks in the field have their eye on good businesses in each of their territories and that backlog list at any given time is handful to maybe a few more or a few less and as it relates to non-propane acquisitions there is not a pipeline if you will.

We're constantly evaluating opportunities that fit our strategic criteria that was laid out for the market which is very simple. The three criteria that we use in evaluating opportunities is businesses that have relatively stable cash flow profile, that have a visible growth trajectory and that have quality management team that can join the business.

So as far as non-propane that's how we evaluate each individual circumstance, but at this point that there's nothing in the "backlog" for non-profane activities..

Okay, great. Thank you. That's it for me..

We have a question from Michael Gyure with Janney. Please go ahead..

Can you guys talk a little bit, I guess maybe strategically, and how you think about the distribution in light of -- let's assume that, like you have pointed out, last year's winter was very warm. And maybe the winter the year before was a little bit more normalized.

If we have, let's say, other winter going through this year that is maybe in between those two, what would you look to do? I guess if you are short on the EBITDA, the ability to cover the distribution, would you lever up a little bit more to your limit of 55? Would you use some of the excess cash? Or I guess what's the thinking there?.

Well, I think first of all Mike you have to put the 2015, 2016 heating season into proper context. This was a dramatic weather event, okay. And these things as I said in my opening remarks they do come around every so often.

History has shown that it's highly unlikely that you would have a repeat in weather pattern like that and frankly all indications at this point would suggest that this year's heating season is going to be much more seasonable than we experienced last year.

But nonetheless I think as we've always talked about this is why you need to have flexibility and the ability to be nimble in the propane space meaning for Suburban in particular you need to have good liquidity of strong balance sheet and a flexible cost structure that can react as you start to get visibility to what the weather pattern is shaping up to be.

And Mike Kuglin shared with you some of that - some of the flexible nature of our cost structure earlier.

Those things are real and so while we look back on this past year it's a disappointment because there was virtually zero weather, when you're talking weather stats that are in the range of you 18% to 20% warmer than normal that is effectively no weather.

So when you asked the question about categorizing the coming winter as somewhere between '16 and fiscal '15 that’s a significant improvement in weather, whether it’s - even if it doesn’t go all way back to normal that’s a significant improvement in weather trends that will translate into a significant improvement in earnings.

And so when we look at the earnings profile going forward, one, some of the steps that Mike talked about earlier about the permanent savings that we did from the steps we took in 2016, those are real costs that won’t come back, okay, so there will be a natural improvement in our cost structure.

Two, even a small improvement in weather is going to bring volumes back up and even better improvement in weather is going to have a much more dramatic effect on volumes for the year.

So when we look out for this year and we look at our cash needs, even if you had the worst-case scenario, which was a repeat, we feel as though the steps that we took has put us in even a better position to be able to manage through that situation.

And as I said earlier on occasions are - we’re going to be in a much better situation from a weather perspective this year, anyway. I’ll say it has been a slow start for the first five weeks of the quarter but December is ready around the corner and all indications are that December is going to much more seasonable.

In particular when you compare it to the last two December's where - December of 2015 was 27% warmer than normal and December of 2014 was 15% warmer than normal. So the ability to be better than that is I think something that we see on that the forecast would indicate.

So bringing it back to your base of your question, which is our cash distribution, like I said at the end of my remarks, this year’s affect of weather is short-term in nature. It doesn’t change who we are. It doesn’t change the fundamentals of our business.

It doesn’t change the strength of our balance sheet and even just a slight return to normal are not even normal, will have a significant impact on our earnings profile, and that will bring our leverage right back to our traditional level of below four times. And so when you say what would we have to borrow up to our covenant threshold.

The answer is, no. That little bit of earnings improvement even will have a significant effect on leverage and cushion with respect to our current covenant threshold. So we do view the cash distribution as something that we’re here to provide a level of stability and we’re here to grow the business to build and grow distributions.

And so that's our task and when you go through a year like this that the weather certainly didn’t help, you deal with it and that’s why as I say, we’re built for that.

So we're happy to have that year behind us and we’re happy to be in a position that we are today to be able to now take on a brand-new challenge of the heating season to come and our people are very excited about the prospect of the coming fiscal year..

Great, thanks very much..

Next we’ll take questions from line of Sharon Lui with Wells Fargo..

Hi, good morning. Just to follow up on your commentary about coverage, just want to I guess ask a question specifically to the debt metrics. If you can just provide details on what the ratio was for this past quarter.

And I guess in light of the warmer weather experience to date this quarter, what is your confidence level in terms of staying within the covenant thresholds? And what are some of the options that you have to mitigate that risk?.

Yes, when we look at our threshold at the end of September, our leverage was about 5.2. And so that gives us plenty of cushion to our covenant level of 5.5, and as I just answered the earlier question about the first quarter, a combination of lower expenses and improvement in weather.

And again like I said you do have to take this year’s weather into context, and that starts with the first quarter where we’re - you’re going to be comparing against two past December’s that had virtually no weather.

So yes, the first five weeks of the quarter here, we were sort of that the - sort of in a range of 20% to 25% warmer than normal but you don’t make the quarter based on October weather. December is really that the start of the real meat of the heating season.

So when you ask about our confidence level, our confidence level is extremely high of that we have plenty of cushions on our balance sheet and even a slight improvement in earnings just enhances that cushion that much. If you think about it a $5 million improvement in earnings adds $25 million, $30 million of cushion.

So it’s not it’s not something that we’re concerned about Sharon..

Okay, thank you. And just a question on the G&A expense. If you could just talk about the year-over-year variance excluding some nonrecurring items..

Yes, Sharon it’s Mike Kuglin. So G&A for the year, excluding the items for which other item that we really called out within our adjusted EBITDA was in the prior year, which impacted the integration expenses impact the G&A. And the current year there weren't any items that we excluded from the calculation of adjusted EBITDA they would be normalized.

So G&A is down about 8% year-over-year. In much of that to say - but much of that decline was attributable to lower variable compensation associated with lower earnings..

Okay. And I think in your release, you mentioned higher professional services as well as general liability.

Where are those items I guess reported? Is it in operating expenses or in G&A?.

It’s a mix. So in the aggregate, we didn’t disclose the number. But there was a mix and there was an equal mix that impacted both operating and G&A. Those numbers are included in the expenses and that’s included in the calculation of adjusted EBITDA. Those numbers are not part of or excluded out in the measurement of adjusted EBITDA, but it impactful..

Okay.

But you I guess classify this as sort of like the recurring item?.

I would classify them as items that would not be recurring, but the purpose is trying to normalize numbers..

Okay.

So would you be able to quantify the amount with that material?.

No, I’d say in the aggregate we’re looking at about $6 million..

Okay, great. Thanks for the help..

Thank you. Next we have a follow-up from Brian Brungardt with Stifel..

Hi guys. To expand on your commentary from the last couple questions, it looks like the western part of the US in particular is forecasting to be significantly colder than average in December.

Could you remind me of the general geographic mix of your propane volumes sold on average?.

In California it’s about 20%..

And then I guess relative to the Northeast and Southeast with the Propane USA?.

So the Northeast is about 35% and then Southeast is about 35% as well, which includes – and then the....

So the Northeast is about 35% and then Southeast is about 35% as well, which includes Midwest and the west of the rest..

Thank you very much guys..

Thank you, speakers. At this time there are no further questions in queue..

All right, great. Thank you, Nick. And thank you all for joining us today. We look forward to talking to you after our first quarter results in early February. Have a great holiday season..

Thank you. Today's conference call was recorded and is available for replay starting today at 11 AM and running through tomorrow at midnight. You may access the AT&T playback service 24 hours a day by calling 1-800-475-6701 and enter the access code of 404355. And the number again is 1-800-475-6701 with an access code of 404355.

That does conclude our conference for today. Thank you very much for your participation and for using AT&T executive teleconferencing. You may now disconnect..