Suburban Propane Partners LP has recently released its 10-K report, offering a detailed insight into the company's operations and financial performance. The company, founded in 1945 and based in Whippany, New Jersey, is primarily engaged in the retail marketing and distribution of propane, renewable propane, fuel oil, and refined fuels in the United States. It operates through four segments: Propane, Fuel Oil and Refined Fuels, Natural Gas and Electricity, and All Other. The Propane segment is involved in the retail distribution of propane for various uses, including as a motor fuel, for heating, cooking, and agricultural purposes. The Fuel Oil and Refined Fuels segment distributes fuel oil, diesel, kerosene, and gasoline to residential and commercial customers, primarily for heating purposes. The Natural Gas and Electricity segment markets natural gas and electricity to residential and commercial customers in deregulated energy markets in New York and Pennsylvania. The All Other segment sells, installs, and services a range of home comfort equipment.
In the 10-K report, the company's management discussed several factors that regularly affect its operating results and financial condition. These include product costs and supply, seasonality, weather conditions, hedging and risk management activities, inflation and other cost increases, and the At-the-Market Equity Program.
The level of profitability in the retail propane, fuel oil, natural gas, and electricity businesses is largely dependent on the difference between retail sales price and the costs to acquire and transport products. The company's product costs, particularly for propane, fuel oil, and natural gas, are subject to volatility due to supply and demand dynamics, economic and political factors, and market conditions. Suburban Propane Partners LP utilizes forward fixed price purchase contracts and hedging strategies to manage its exposure to unfavorable changes in commodity prices and ensure an adequate physical supply.
The retail propane and fuel oil distribution businesses, as well as the retail natural gas marketing business, are seasonal due to their primary use for heating in residential and commercial buildings. The company experiences greater seasonality in the fuel oil business, with a significant portion of its fuel oil volumes sold between October and March.
Weather conditions have a significant impact on the demand for the company's products, particularly propane, fuel oil, and natural gas, for both heating and agricultural purposes. The volume sold is directly affected by the severity of winter weather in its service areas.
Suburban Propane Partners LP engages in hedging and risk management activities to reduce the effect of price volatility on its product costs and to ensure the availability of products during periods of short supply. The company enters into propane forward, options, and swap agreements with third parties, and uses futures and options contracts traded on the New York Mercantile Exchange to purchase and sell propane, fuel oil, crude oil, natural gas, and electricity at fixed prices in the future.
The company is also experiencing increased inflation in the costs of various goods and services it uses to operate its business, including volatile wholesale costs for the products it distributes. To address this, Suburban Propane Partners LP entered into an Equity Distribution Agreement to issue and sell its Common Units representing limited partner interests in the Partnership, with an aggregate offering amount of up to $100.0 million. The net proceeds from the sales of Common Units pursuant to the Equity Distribution Agreement are intended to support the company's ongoing pursuit of opportunistic growth and accelerate debt reduction.
Additionally, the 10-K report outlines the critical accounting policies and estimates used by the company, including allowances for doubtful accounts, pension and other postretirement benefits, accrued insurance, and loss contingencies. These estimates are based on historical experience and various other assumptions and affect the reported amounts of assets and liabilities, as well as the reported amounts of revenues and expenses during the reporting period. Management has reviewed these critical accounting estimates and related disclosures with the Audit Committee of the Board of Supervisors. Today the company's shares have moved 1.37% to a price of $19.24. For more information, read the company's full 10-K submission here.
