Good day and welcome to the Suburban Propane Fiscal 2020 Full Year and Fourth Quarter Results Conference Call. All the participants will be in a listen-only mode. [Operator Instructions] After today's presentation there will be an opportunity to ask questions. [Operator Instructions] Please note this event 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 these important factors that could cause actual results to differ materially from those discussed in such forward-looking statements, which are referred to as cautionary statements in its earnings press release, which can be viewed on the Company’s website.

All subsequent written and oral forward-looking statements attributable to the partnership’s persons acting on its behalf are expressly qualified in their entirety by such cautionary statements. I’d like now to turn the conference over to Davin D’Ambrosio, Vice President and Treasurer. Please go ahead..

Thanks, Matt. Good morning, everyone. Thank you for joining us this morning for our fourth quarter and fiscal 2020 full year earnings 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 Chief Operating Officer.

This morning we will review our fourth quarter and fiscal 2020 full year financial results along with the current outlook for the business. As usual, once we’ve concluded our prepared remarks, we will open the session to questions.

Our Annual Report on Form 10-K for the fiscal year ended September 26, 2020 which contains additional disclosure regarding forward-looking statements and risk factors will be filed on or about November 25. Once filed, copies may be obtained on the investor overview page of the Partnership’s website at suburbanpropane.com.

Whereby visiting the Partnership’s filings with the SEC. Certain non-GAAP measures will be discussed on this call. We have provided a description of those measures, as well as the discussion of why we believe this information to be useful in our Form 8-K, which was furnished to the SEC this morning.

The Form 8-K will be available on the Investor Relations section of our website. At this point, I will turn the call over to Mike Stivala for some opening remarks. Mike..

Great. Thanks, Davin, and thank you all for joining us this morning. We're extremely proud to report another strong quarter to close out fiscal 2020. Adjusted EBITDA was $5.5 million, that's an improvement of $6.8 million compared to a loss of $1.3 million in the prior year fourth quarter.

When combined with a strong third quarter performance, our adjusted EBITDA of $37.7 million for the second half of fiscal 2020 exceeded the prior year’s second half performance by nearly $20 million and represents the strongest second half results in our history.

For the full year, adjusted EBITDA of $253.7 million was $21.4 million or 7.8% lower than the prior year as a result of unseasonably warm temperatures during the fiscal 2020 heating season.

In fact, during the peak winter heating months from December through February, average temperatures were 14% warmer than normal and on par with the warmest temperatures on record for those months. Aside from the weather as we all know, there's been no shortage of challenges facing our business and the nation as a whole this past year.

From the unprecedented health and economic crisis that started in March from COVID-19 to the wildfires in our West Coast operations and hurricanes in the Southeast, this was one heck of a year.

In the face of all these unbelievable challenges, I'm so proud of the resiliency and dedication of the 3,200 employees at team Suburban Propane for following the guidance and new business protocols to help protect their health and safety while also staying focused on delivering the essential services that our customers and local communities count on.

As an organization, we continue to stay focused on executing our long-term strategic growth initiatives, and in particular advancing our three pillars of the Suburban Propane experience corporate initiatives.

In our commitment to excellence pillar, we invested in new technology for our drivers and service technicians to drive incremental operating efficiencies and enhance the overall customer experience. We adapted our business model and operating protocols to ensure safe, seamless, and outstanding service to our customers when they needed us most.

In our SuburbanCares pillar, we expanded our efforts to support the American Red Cross through our National Partnership, and especially during this crisis. With a shortage of blood and limited opportunities to host blood drives, we work closely with the Red Cross for a call to action.

In addition, in the early stages of the pandemic, we had countless proud moments when we were called upon to support frontline activities by providing vital temporary heat and power generation for makeshift testing tents, hospital sites, shelters, and food distribution centers.

We also partnered with a number of major regional food service brands to provide meals to frontline healthcare workers and first responders in multiple locations throughout our operating territory.

I'm proud to say that our efforts have been recognized by S&P Platts as a finalist in their 2020 Corporate Social Responsibility category, which will be decided in December.

Finally, in our Go Green pillar, we continue to advocate for the versatile, portable, cost effective, and clean burning attributes of propane as a contributor to the goals of reducing the nation's carbon footprint and greenhouse gas emissions. We've also invested in innovative new solutions for bringing even cleaner versions of propane to the market.

We are leading the way in the propane industry towards solutions that can help put us on a pathway to carbon neutrality. We advanced these efforts in two ways in fiscal 2020.

First, we arranged for the supply of approximately 1 million gallons of renewable propane produced from waste fats and oils to meet customer demand for renewable energy, and in turn to help advance their low carbon initiatives.

Second, we acquired a 39% equity stake in Oberon Fuels development stage producer of a low carbon transportation fuel, which when blended with propane can significantly reduce the carbon intensity of propane.

With this investment, Suburban Propane will have the exclusive rights to market and sell Oberon produced fuel, known as dimethyl ether or DME for short, in North America.

Finally, we invested our excess cash flow in a balanced way by reducing total debt by nearly $19 million and investing $23.4 million in two midsized propane acquisitions in strategic markets in California and Georgia.

So despite the many challenges, fiscal 2020 was a very successful year for Suburban Propane, and we continue to manage this business for a long-term sustainability and growth. A little later, I will provide some closing remarks.

However, at this point, I'll turn the call over to Mike Kuglin who will discuss our full year and fourth quarter results in more detail. Mike. .

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

To be consistent with previous reporting, and excluding the impact of unrealized non-cash mark-to-market adjustments on our commodity hedges, which resulted in an unrealized loss of $400,000 in fiscal 2020, compared to an unrealized loss of $8 million in the prior year.

Additionally, fiscal 2020 included a $1.1 million pension settlement charge and $100,000 loss on debt extinguishment. Excluding these items, net income for fiscal 2020 amounted to $62.3 million or $1 per common unit, compared to $76.6 million or $1.24 per common unit in the prior year.

Adjusted EBITDA for fiscal 2020 amounted to $253.7 million compared to $275 million in the prior year. As Mike indicated, decrease in earnings was essentially driven by the negative impact of extremely warm weather during the most critical months for heat-related customer demand.

Despite the headwinds from COVID that followed the warm heating season, we’ve reported a $19 million increase in adjusted EBITDA in the second half of fiscal year, more than doubling last year’s second half results.

While the health and economic crisis from COVID had a varying impact on customer demand and volume sold during the fiscal year, it did not materially impact bottom line earnings. This was achieved in large part by the swift and comprehensive actions we took to realign our workforce to the evolving customer demand.

As we mentioned last quarter, there was still a fair amount of uncertainty about the future impact from the economic slowdown resulting from COVID, but we will continue to adapt our business and take steps to help mitigate the potential negative consequences of lower demand to the extent we’ve experienced prolonged softness in the economy.

Retail propane gallons sold in fiscal 2020 were 402.9 million gallons, which was 5.6% lower than the prior year, primarily due to warmer than normal temperatures during the most critical months for heat-related demand.

All average temperatures across our service territories for fiscal 2020 were 10% warmer than normal and 4% warmer than the prior year. Average temperatures during the peak demand month of December through February were 14% warmer than normal on par with the warmest temperatures on record and 7% warmer than the prior year.

In the commodity markets, wholesale propane prices trended lower throughout much of the year, reflecting higher U.S. inventory levels as production outpaced domestic demand and exports. Overall, average wholesale prices for the year are $0.44 cents per gallon, basis Mont Belvieu mobility, which was 28% lower than the prior year.

Notwithstanding the year-over-year decline, prices have been range bound in the $0.45 to $0.55 per gallon range since about mid-May. Total gross margins of $725.3 million for fiscal 2020 decreased $28.4 million or 3.8% compared to the prior year, primarily due to lower propane volumes, partially offset by our average unit margins.

Overall, propane unit margins increased $3.50 per gallon or 2.2% compared to the prior year due to solid margin management and declining product cost environment.

With respect to expenses, combined operating and G&A expenses decreased $7.2 million or 1.5% compared to the prior year, primarily due to lower volume related variable operating costs and lower variable compensation.

The savings also reflected the operational plans that we developed and implemented in the third quarter to address the different customer demand scenarios resulting from COVID-19, including a temporary reduction to our manpower.

The savings from these actions were partially offset by an increase in accruals for self insurance liabilities and reserves for potential doubtful accounts.

Net interest expense of $74.7 million for fiscal 2020 decreased $1.9 million or 2.5% compared to the prior year, primarily due to lower average outstanding borrowings under our revolver coupled with a decrease in benchmark interest rates on revolver borrowings.

Total capital spending for the year was $32.5 million, representing a decrease of $2.5 million compared to the prior year due to a lower level of spending on tanks and vehicles as well as investments in new technologies utilized by our field personnel in the prior year.

Total capital spending along with the two acquisitions and investment in Oberon Fuels that Mike mentioned in his opening remarks were funded with cash flows from operating activities. And turning to our fourth quarter results, consistent with the seasonality of our business, we typically report a net loss for the fourth quarter.

With that being said, we reported a net loss of $41.2 million or $0.66 per common unit an improvement of 20% compared to the prior year.

Excluding the impact of unrealized non-cash mark-to- market adjustments on our commodity hedges, which resulted in a $700,000 unrealized gain in the fourth quarter of fiscal 2020 compared to an $800,000 unrealized loss in the prior year, adjusted EBITDA for the fourth quarter of fiscal 2020 amounted to $5.5 million, reflecting an improvement of $6.8 million compared to a loss of $1.3 million in the prior year.

The improvement was earnings is primarily driven by solid residential volumes and expense savings resulting from the operational plans that will be implemented to address lower demand resulting from COVID-19 that I mentioned earlier.

Total gross margins decreased $2.7 million or 2.3%, mainly due to lower commercial and industrial volumes sold as a result of the economic slowdown. Combined operating and G&A expenses decreased $9.3 million or 8.2% due to lower payroll and benefit-related costs, lower vehicle repairs and maintenance costs, and a decrease in travel.

Turning to our balance sheet, as Mike mentioned, we've repaid $19 million in revolver borrowings during the fiscal year with cash flows from operating activities.

As a result, outstanding borrowings under the revolver were reduced to $94.6 million at the end of fiscal 2020, and the consolidated leverage ratio improved from 4.83 times at the end of the third quarter to 4.64 times at the end of fiscal 2020.

Despite the elevated level of the leverage metric, which is primarily due to the impact of weather on earnings, we remain well within our debt covenant requirements and continue to be focused on utilizing excess cash flows in a balanced fashion to strengthen the balance sheet and invest in strategic growth.

From a liquidity position, with ample borrowing capacity under our revolver to fund anticipated working capital needs for the upcoming heating season and to support our strategic growth initiatives. With that, I'll turn it back to Mike..

Thanks, Mike. As announced in our October 22 press release, our Board of Supervisors declared our quarterly distribution of $0.30 per common unit in respect to the fourth quarter of fiscal 2020, which equates to an annualized rate of $1.20 per common unit. The quarterly distribution was paid on November 10, to our unit holders record as of November 3.

As discussed at the end of our fiscal third quarter, the decision to reduce the distribution rate was the result of a thorough assessment of the potential for shifting demand patterns as a result of the economic uncertainties associated with COVID-19, as well as to provide an incremental $75 million of excess cash flow to accelerate our debt reduction efforts in order to get to our target leverage between 3.5 times and 4 times while also providing enhanced financial flexibility to support our strategic growth initiatives.

With the successful end of fiscal 2020, we are very well positioned to carry that momentum into fiscal 2021. We will continue to focus on strengthening our balance sheet.

Our distribution coverage at the current rate is well above 2 times providing excess cash flow to continue to reduce debt and invest in our strategic growth and diversification initiatives, which we have already begun with our investments in a renewable energy platform.

Our field operations are doing an excellent job with our customer base growth and retention initiatives, and we are continuing to see a shift in customer demand patterns with more and more residential demand from remote working arrangements as well as improving customer -- commercial demand trends, resulting from the gradual reopening of the economy and efforts to adjust to more outdoor activities.

We expect to continue to see some softness in commercial and industrial demand until we see a real turnaround in the economy, but much of that softness is expected to be matched with higher residential demand, particularly if we get weather.

Finally, I want to thank the more than 3,200 employees of Suburban Propane for their efforts in helping make fiscal 2020 a successful year in spite of the significant headwinds. Of course, I hope you and your families remain safe and healthy during these unprecedented times. And wish everyone a very happy holiday season.

We appreciate your support and attention and would now like to open the call for questions.

And Matt, would you mind helping us with that?.

Great. Thanks, Matt, and thank you, everybody. We're certainly proud of where we are. We're very focused on starting 2020 strong. We have a lot of momentum in our back, and we look forward to talking to you again after our first quarter performance in February of 2021. In the meantime, stay healthy, stay safe, and have a happy holiday season. Thank you..

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect..