Suburban Propane Partners L.P. Reports Operating Results (10-K)
Suburban Propane Partners L.p. has a market cap of $1.94 billion; its shares were traded at around $55 with a P/E ratio of 15.3 and P/S ratio of 1.7. The dividend yield of Suburban Propane Partners L.p. stocks is 6.2%.SPH is in the portfolios of Jim Simons of Renaissance Technologies LLC, Mario Gabelli of GAMCO Investors.
Highlight of Business Operations:Suburban Energy Finance Corporation, a direct wholly-owned subsidiary of the Partnership, was formed on November 26, 2003 to serve as co-issuer, jointly and severally with the Partnership, of the Partnerships unsecured 6.875% senior notes due December 2013 (all of which were repurchased by the Partnership on March 23, 2010) and, subsequently, of the Partnerships unsecured 7.375% senior notes issued on March 23, 2010 and due March 15, 2020. Suburban Energy Finance Corporation has nominal assets and conducts no business operations.
We sell propane primarily to six customer markets: residential, commercial, industrial (including engine fuel), agricultural, other retail users and wholesale. Approximately 97% of the propane gallons sold by us in fiscal 2010 were to retail customers: 45% to residential customers, 28% to commercial customers, 7% to industrial customers, 5% to agricultural customers and 15% to other retail users. The balance of approximately 3% of the propane gallons sold by us in fiscal 2010 was for risk management activities and wholesale customers. No single customer accounted for 10% or more of our propane revenues during fiscal 2010.
Historically, supplies of propane have been readily available from our supply sources. Although we make no assurance regarding the availability of supplies of propane in the future, we currently expect to be able to secure adequate supplies during fiscal 2011. During fiscal 2010, Targa Liquids Marketing and Trade (Targa) and Enterprise Products Operating L.P. (Enterprise) provided approximately 19% and 11% of our total propane purchases, respectively. The availability of our propane supply is dependent on several factors, including the severity of winter weather and the price and availability of competing fuels, such as natural gas and fuel oil. We believe that if supplies from Targa or Enterprise were interrupted, we would be able to secure adequate propane supplies from other sources without a material disruption of our operations. Nevertheless, the cost of acquiring such propane might be higher and, at least on a short-term basis, margins could be affected. Approximately 95% of our total propane purchases were from domestic suppliers in fiscal 2010.
In addition to competing with suppliers of other energy sources, our propane operations compete with other retail propane distributors. The retail propane industry is highly fragmented and competition generally occurs on a local basis with other large full-service multi-state propane marketers, thousands of smaller local independent marketers and farm cooperatives. Based on industry statistics contained in 2008 Sales of Natural Gas Liquids and Liquefied Refinery Gases, as published by the American Petroleum Institute in December 2009, and LP/Gas Magazine dated February 2010, the ten largest retailers, including us, account for approximately 38% of the total retail sales of propane in the United States. For fiscal years 2010 and 2009, no single marketer had a greater than 10% share of the total retail propane market in the United States. For fiscal year 2008 one marketer had more than a 10% share of the total retail propane market in the United States. Most of our customer service centers compete with five or more marketers or distributors. However, each of our customer service centers operates in its own competitive environment because retail marketers tend to locate in close proximity to customers in order to lower the cost of providing service. Our typical customer service center has an effective marketing radius of approximately 50 miles, although in certain rural areas the marketing radius may be extended by one or more satellite offices.
We market and distribute fuel oil, kerosene, diesel fuel and gasoline to approximately 55,000 residential and commercial customers in the northeast region of the United States. Sales of fuel oil and refined fuels for fiscal 2010 amounted to 43.2 million gallons. Approximately 67% of the fuel oil and refined fuels gallons sold by us in fiscal 2010 were to residential customers, principally for home heating, 4% were to commercial customers, 1% were to agricultural and 4% to other users. Sales of diesel and gasoline accounted for the remaining 24% of total volumes sold in this segment during fiscal 2010. Fuel oil has a more limited use, compared to propane, for space and water heating in residential and commercial buildings. We sell diesel fuel and gasoline to commercial and industrial customers for use primarily to propel motor vehicles.
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