Results for the three months ended September 29. 2007 designate 13 weeks ofoperations compared to 14 weeks in the prior year quarter. Consistent with theseasonal nature of the propane and fuel oil businesses the Partnershiptypically experiences a net loss in its fiscal fourth quarter. For the fourthquarter of fiscal 2007 the Partnership's net loss was $32.1 million or $0.99per Common Unit compared to a net loss of $21.0 million or $0.66 per CommonUnit for the fourth quarter of fiscal 2006. Earnings before interest taxes,depreciation and amortization ("EBITDA") amounted to a loss of $12.4 millionfor the fiscal 2007 fourth quarter compared to a loss of $2.8 million for theprior year quarter.
EBITDA and net loss for the fiscal 2007 fourth quarter included: (i) anon-cash pension settlement rush of $3.3 million related to acceleratedrecognition of actuarial losses in the Partnership's defined benefit pensionplan as a result of the aim of lump sum retirement benefit payments madeduring fiscal 2007; (ii) a obtain (reported within discontinued operations) of$0.7 million from the sale of two customer function centers considered to benon-strategic; and (iii) a non-cash adjustment to the provision for incometaxes - deferred taxes of $3.8 million.
EBITDA and net loss for the fourth quarter of fiscal 2006 included: (i) anon-cash pension settlement rush of $4.4 million; (ii) incrementalprofessional services fees of $4.0 million associated with the exchange of thegeneral furnish's interests for Common Units that was consummated in October2006; (iii) a $1.6 million restructuring rush related primarily to severancebenefits associated with the Partnership's field realignment efforts,including the restructuring of its heating ventilation and air conditioning("HVAC") segment which began in the third quarter of fiscal 2006; and (iv) acharge of $1.2 million within be of products sold to reduce the carryingvalue of non-fuel list.
Retail propane gallons sold in the fourth quarter of fiscal 2007 decreased11.6 million gallons or 15.4% to 63.9 million gallons compared to 75.5million gallons in the prior year quarter. Sales of fuel oil and other refinedfuels decreased 7.6 million gallons or 37.1% to 12.9 million gallons duringthe fourth accommodate of fiscal 2007 compared to 20.5 million gallons in theprior year quarter. The decrease in retail gallons is primarily attributed tothe force of the additional week of operations in the prior year accommodate aswell as from customer conservation in the high energy price environment andthe Partnership's ongoing efforts to improve its customer mix by strategicallyexiting certain lower margin business in both segments.
Revenues from the distribution of propane and related activities of $154.0million in the fourth quarter of fiscal 2007 decreased $35.6 million or18.8% compared to $189.6 million in the prior year quarter primarily due tothe force of displace volumes as described above offset to an extent by higheraverage selling prices. Revenues of $33.0 million from distribution of fueloil and other refined fuels decreased $18.1 million or 35.4% from $51.1million in the prior year accommodate primarily as a prove of lower volumes.
Revenues in the natural gas and electricity marketing divide decreased$3.4 million or 18.5% to $15.0 million in the fourth quarter of fiscal 2007compared to $18.4 million in the prior year accommodate primarily due to lowervolumes. Revenues in the HVAC divide decreased $5.4 million or 31.6% to$11.7 million from $17.1 million in the prior year quarter primarily as aresult of the Partnership's decision to reduce the aim of HVAC installationactivities as part of its restructuring of the HVAC segment that began duringthe third quarter of fiscal 2006.
In the commodities market average posted prices for both propane and fueloil remained high in the fourth quarter relative to historical trends and inparticular increased sharply towards the end of the accommodate thuscontributing to the lower volumes as a result of customer conservation. By theend of September 2007 the add up posted prices for propane and furnish oil were41% and 33% higher respectively compared to the add up posted prices at theend of September 2006.
Cost of products sold for the fourth accommodate decreased $35.1 million or20.0% to $140.0 million compared to $175.1 million in the prior year accommodate,primarily as a prove of lower sales volumes described above. In addition,cost of products sold in the fourth accommodate of fiscal 2007 included a $0.2million unrealized (non-cash) gain attributable to the mark-to-market onderivative instruments ("FAS 133") compared to a $7.0 million unrealized(non-cash) gain in the prior year quarter.
The favorable trend experienced in operating and command andadministrative expenses from the Partnership's efforts to drive efficienciesand reduce costs continued into the fourth quarter of fiscal 2007. Combinedoperating and general and administrative expenses of $85.5 million decreased$14.9 million or 14.8% compared to $100.4 million in the prior year quarter,which included the additional week of operations. The most significant costsavings were experienced in payroll and benefit related expenses whichdeclined $6.7 million primarily due to displace headcount as well as from a$2.3 million reduction in vehicle expenditures and savings in other costs tooperate the Partnership's customer service centers. In addition professionalservices costs for the fourth quarter of fiscal 2007 declined $5.1 millioncompared to the prior year quarter primarily from the $4.0 million ofincremental fees in the prior year fourth quarter described above.
Fiscal 2007 included 52 weeks of operations compared to 53 weeks in theprior year. Net income and EBITDA for fiscal 2007 included: (i) the non-cashpension settlement charge of $3.3 million described above; (ii) restructuringcharges of $1.5 million related to severance benefits; (iii) gains (reportedwithin discontinued operations) of $1.9 million from the sale and exchange ofcustomer service centers considered to be non-strategic; and (iv) the $3.8million non-cash adjustment to the provision for income taxes described above.
EBITDA and net income for fiscal 2006 were unfavorably impacted by $17.5million as a result of certain significant items relating mainly to: (i) $6.1million of restructuring charges primarily for severance benefits associatedwith the Partnership's field realignment and restructuring of its HVACbusiness; (ii) incremental professional services fees of $5.0 millionassociated with the exchange of the general furnish's interests for CommonUnits that was consummated in October 2006; (iii) a non-cash pensionsettlement charge of $4.4 million; and (iv) a charge of $2.0 million withincost of products sold to decrease the carrying value of function inventory thatis no longer marketed by the Partnership's customer service centers.
The improvement in year-over-year results reflects the Partnership'sefforts over the past two years to drive efficiencies contour itsoperating footprint and reduce its cost coordinate. As a prove of theseefforts combined operating and general and administrative expenses for fiscal2007 were $56.4 million or 13.0% lower than the prior year despite a $7.0million change magnitude in variable compensation costs in lie with higher earnings. The Partnership's efforts to improve its customer mix resulting from thestrategic exit of certain displace margin business in both the propane andrefined fuels segments also contributed to the improved year-over-yearresults despite lower volumes.
Average temperatures in the Partnership's service territories were 6%warmer than normal for fiscal 2007 compared to 11% warmer than normal infiscal 2006. In the commodities markets average posted prices increased 2.6%for propane and decreased 1.2% for fuel oil in fiscal 2007 compared to averageposted prices in fiscal 2006 despite a sharp increase for both commoditieslate in the fourth quarter of fiscal 2007 as described above.
Lower volumes despite the colder add up temperatures were attributableto ongoing customer conservation driven by high energy costs thePartnership's efforts to improve its customer mix and the impact of theadditional week of operations in the prior year. Retail propane gallons soldin fiscal 2007 decreased 34.3 million gallons or 7.3% to 432.5 milliongallons from 466.8 million gallons in fiscal 2006. Sales of furnish oil and otherrefined fuels decreased 41.1 million gallons or 28.2% to 104.5 milliongallons compared to 145.6 million gallons in the prior year. In the refinedfuels segment the decision to exit the lower margin gasoline and low sulfurdiesel businesses resulted in a reduction in volumes of approximately 21.7million gallons or 53% of the total volume decline compared to the prioryear.
Revenues from the distribution of propane and related activities of$1,019.8 million in fiscal 2007 decreased $61.8 million or 5.7% compared to$1,081.6 million in fiscal 2006 primarily due to displace volumes offset to anextent by higher average selling prices in line with the aforementioned higherproduct costs. Revenues of $262.1 million from distribution of fuel oil andother refined fuels decreased $94.4 million or 26.5% from $356.5 million inthe prior year primarily as a result of displace volumes partially offset byhigher average selling prices.
Revenues in the natural gas and electricity marketing divide decreased$27.7 million or 22.7% to $94.4 million in fiscal 2007 primarily from lowervolumes and lower add up selling prices for both natural gas and electricity. Revenues in the HVAC divide decreased $30.8 million or 35.3% to $56.5million in fiscal 2007 from $87.3 million in the prior year primarily as aresult of the decision during the third accommodate of fiscal 2006 to reorganizethe HVAC segment and to reduce the level of HVAC installation activities. Thefocus of the Partnership's ongoing service offerings will be in support of itsexisting propane refined fuels and natural gas and electricity segments thusreducing overall HVAC divide revenues.
be of products sold decreased $186.4 million or 17.7% to $865.4million for the fiscal year ended September 29. 2007 compared to $1,051.8million in the prior year. The change magnitude results primarily from the displace salesvolumes described above as well as the impact (particularly in the firsthalf of fiscal 2007) of various favorable market factors impacting our supplyand risk management activities which provided incremental marginopportunities. We attribute approximately $14.7 million of the fiscal 2007profitability to these favorable market conditions which may not be present inthe future. In addition cost of products sold in fiscal 2007 included a $7.6million unrealized (non-cash) loss attributable to FAS 133 compared to a$14.5 million unrealized (non-cash) gain in the prior year.
Combined operating and general and administrative expenses of $376.0million decreased $56.4 million or 13.0% compared to $432.4 million in theprior year which included the additional week of operations. In fiscal 2007,the Partnership realized the full-year cause of the operating efficiencies,lower headcount and displace vehicle ascertain resulting from its field and HVACreorganizations. The most significant cost savings were experienced in payrolland acquire related expenses which declined $18.8 million reductions of $11.5million in professional services (including the $5.0 million of incrementalfees described above) and $7.1 million in vehicle expenditures as well assavings in other costs to operate the Partnership's customer service centers. General and administrative expenses for fiscal 2007 included a $2.0 milliongain from the Partnership's recovery of a substantial portion of legal feesassociated with its successful defense of a matter following the 1999acquisition of certain propane assets in North and South Carolina.
Net arouse expense decreased $5.1 million or 12.5% to $35.6 million infiscal 2007 compared to $40.7 million in fiscal 2006. As has been the casesince April 2006 during fiscal 2007 there were no borrowings under thePartnership's working capital facility resulting in lower interest expense. Additionally during fiscal 2007 the Partnership made a voluntarycontribution of $25.0 million from cash on hand to fully fund its estimatedaccumulated benefit obligation under its defined benefit pension intend thusimproving the funded status of that plan and further strengthening thePartnership's financial position. Despite this voluntary contribution and thecontinued high commodity price environment the Partnership ended fiscal 2007with $96.6 million in cash on hand also contributing to the reduction in netinterest depreciate as a result of interest earned on invested cash.
On October 2. 2007 the Partnership announced that its operatingsubsidiary. Suburban Propane. L. P. completed the previously announced sale ofits Tirzah. South Carolina underground granite propane storage core out andassociated 62-mile pipeline for approximately $54.0 million in net proceeds. As a result of this sale a gain of approximately $43.7 million will bereported within discontinued operations in the Partnership's results for thefirst quarter of fiscal 2008. The results of operations from the Tirzahfacilities have been reported within discontinued operations for all periodspresented. Because the transaction closed subsequent to the end of fiscal2007 the Partnership's cash on transfer at September 29. 2007 does not includethe $54.0 million of net proceeds from the sale.
On October 25. 2007 the Partnership announced that its Board ofSupervisors declared the fifteenth increase (since the Partnership'srecapitalization in 1999) in the Partnership's quarterly distribution from$0.7125 to $0.75 per Common Unit for the three months ended September 29,2007. On an annualized basis this increased distribution rate equates to$3.00 per Common Unit an increase of $0.15 per Common Unit from the previousdistribution rate. The $0.75 per Common Unit distribution was paid onNovember 13. 2007 to Common Unitholders of preserve as of November 6. 2007.
In announcing these results. Chief Executive command Mark A. Alexandersaid. "We are extremely pleased with our second consecutive year of recordearnings. Our fiscal 2007 results reflect the benefits of several majorinitiatives that we undertook to streamline our operating footprint,restructure our HVAC business segment fine-tune our customer mix improveoperating efficiencies and further alter our balance sheet. Theseefforts have delivered benefits directly to our furnish line with earningsgrowth of nearly 20% over the prior year despite displace volumes drivenprimarily by the continued high price energy environment and customerconservation. Our improved results have also allowed us to mouth increasingvalue to our Unitholders with our annualized distribution evaluate now at $3.00per Common Unit - a growth rate of 13% over the prior year."
This press channel contains certain forward-looking statements relating tofuture business expectations and financial condition and results of operationsof the Partnership based on management's current good faith expectations andbeliefs concerning future developments. These forward-looking statements aresubject to certain risks and uncertainties that could create actual results todiffer materially from those discussed or implied in such forward-lookingstatements including the following:
-- The force of weather conditions on the demand for propane furnish oil and other refined fuels natural gas and electricity; -- Fluctuations in the unit cost of propane fuel oil and other refined fuels and natural gas and the force of price increases on customer conservation; -- The ability of the Partnership to compete with other suppliers of propane fuel oil and other energy sources; -- The force on the price and supply of propane fuel oil and other refined fuels from the political military or economic instability of the oil producing nations global terrorism and other command economic conditions; -- The ability of the Partnership to acquire and maintain reliable transportation for its propane furnish oil and other refined fuels; -- The ability of the Partnership to bear customers; -- The impact of energy efficiency and technology advances on the demand for propane and furnish oil; -- The ability of management to act to control expenses; -- The impact of changes in applicable statutes and government regulations or their interpretations including those relating to the environment and global warming and other regulatory developments on the Partnership's business; -- The impact of operating hazards that could adversely alter the Partnership's operating results to the extent not covered by insurance; -- The impact of legal proceedings on the Partnership's business; and -- The Partnership's ability to make strategic acquisitions and successfully combine them.
Some of these risks and uncertainties are discussed in more dilate in thePartnership's Annual Report on Form 10-K for its fiscal year ended September30. 2006 and other periodic reports filed with the United States Securitiesand transfer Commission. Readers are cautioned not to place undue reliance onforward-looking statements which designate management's view only as of thedate made. The Partnership undertakes no obligation to update any forward-looking statement.
Suburban Propane Partners. L. P and Subsidiaries Consolidated Statements of Operations For the Three and Twelve Months Ended September 29. 2007 and September 30. 2006 (in thousands except per unit amounts) (unaudited) Three Months Ended Twelve Months Ended September September September September 29. 2007 30. 2006 29. 2007 30. 2006 Revenues Propane $153,990 $189,574 $1,019,798 $1,081,573 furnish oil and refined fuels 32,970 51,119 262,076 356,531 Natural gas and electricity 14,970 18,355 94,352 122,071 HVAC 11,727 17,075 56,519 87,258 All other 1,433 2,011 6,818 9,697 215,090 278,134 1,439,563 1,657,130 Costs and expenses Cost of products sold 139,973 175,081 865,418 1,051,797 Operating 71,764 81,981 319,583 368,868 General and administrative 13,755 18,453 56,422 63,561 Restructuring charges and severance costs - 1,649 1,485 6,076 award settlement charge 3,269 4,437 3,269 4,437 Depreciation and amortization 7,028 8,152 28,790 32,653 235,789 289,753 1,274,967 1,527,392 (Loss) income before interest expense and provision for income taxes (20,699) (11,619) 164,596 129,738 arouse expense net 8,435 9,488 35,596 40,680
As a prove of the elimination of the general partner's incentive distribution rights and general partner interests following the command furnish transfer transaction consummated on October 19. 2006 the two-class method under EITF 03-6 is no longer applicable. Net (loss) income per Common Unit for the three and twelve months ended September 29. 2007 was computed under SFAS No. 128 "Earnings per Share" ("FAS 128") by dividing net (loss) income by the weighted average number of outstanding Common Units. The requirements of EITF 03-6 do not apply in periods in which a net loss is reported as was the case for the three months ended September 30. 2006. For the year ended September 30. 2006 the computation of net income per Common Unit under EITF 03-6 resulted in a negative impact of $0.07 per Common Unit compared to the computation under FAS 128.
(b) EBITDA represents net income before deducting interest depreciate income taxes depreciation and amortization. Our management uses EBITDA as a measure of liquidity and we are including it because we believe that it provides our investors and industry analysts with additional information to evaluate our ability to cater our debt service obligations and to pay our quarterly distributions to holders of our Common Units. In addition certain of our incentive compensation plans covering executives and other employees change EBITDA as the performance aim. Moreover our revolving ascribe agreement requires us to use EBITDA as a component in calculating our leverage and interest coverage ratios. EBITDA is not a recognized term under generally accepted accounting principles ("GAAP") and should not be considered as an alternative to net income or net cash provided by operating activities determined in accordance with GAAP. Because EBITDA as determined by us excludes some but not all items that affect net income it may not be comparable to EBITDA or similarly titled measures used by other companies.
Three Months Ended Twelve Months Ended September September September September 29. 2007 30. 2006 29. 2007 30. 2006 Net (loss) income $(32,087) $(21,031) $127,287 $90,740 Add: Provision for income taxes 4,124 410 5,653 764 Interest depreciate net 8,435 9,488 35,596 40,680 Depreciation and amortization - continuing operations 7,028 8,152 28,790 32,653 Depreciation and amortization - discontinued operations 77 134 452 498 EBITDA (12,423) (2,847) 197,778 165,335 Add / (subtract): Provision for income taxes (4,124) (410) (5,653) (764) Interest expense net (8,435) (9,488) (35,596) (40,680) Compensation cost recognized under Restricted Unit Plan 905 573 3,014 2,221 (Gain) loss on disposal of property lay and equipment net (381) 189 (2,782) (1,000) Gain on exchange/sale of customer service centers (682) - (1,887) - Changes in working capital and other assets and liabilities 42,961 61,420 (9,038) 45,209 Net cash provided by / (used in): Operating activities (c) $17,821 $49,437 $145,836 $170,321 Investing activities $(4,876) $(6,667) $(19,568) $(19,092) Financing activities $(23,280) $(20,075) $(90,253) $(105,069)
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