Suburban Propane Partners, L.P. (NYSE:SPH) Q4 2019 Earnings Conference Call - Final Transcript

Nov 14, 2019 • 09:00 am ET

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Suburban Propane Partners, L.P. (NYSE:SPH) Q4 2019 Earnings Conference Call - Final Transcript

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Q & A
Executive
Michael A. Stivala

to say that acquisitions are an additional way to grow, we did three good quality acquisitions. We're happy to say we just closed another one last week and we have a couple more that we're -- we've been working on. So there's a good pipeline of good quality businesses that we can fold into our mix and welcome to the Suburban Propane family.

Analyst
Charles Barber

I guess, along those lines, as you look to target other opportunities, as we think about next year with leverage at 4.3, what are you looking to? Is that a good leverage target? And how do -- I guess, how do you balance that with growth opportunities?

Executive
Michael A. Stivala

Yes. Certainly, it's a great leverage target, particularly when you compare it to our peers in the propane industry. So we have full comfort in running our business at that level. As you know, we've been here for a long time running this business and we generally have -- always had a balance sheet-first mentality, meaning we run the business with a strong balance sheet, we're conservative in our nature. So we do have a stated target of getting below 4 times on a leverage profile perspective and we can achieve that through a balance of growing EBITDA and investing in reducing the balance sheet with excess cash. I think this year was a great example of that. We had $50 million and we bought three businesses and spent $20 million of that excess cash funding those acquisitions and we had $30 million of debt reduction.

So, I think that's a great balance and -- but as far as living at 4.3, we're fully comfortable at that level. We're well within our covenant requirements. And as I said, as has been the case for many, many years, it puts Suburban Propane as the strongest balance sheet profile among our peers.

Analyst
Charles Barber

Great. That's it for me.

Executive
Michael A. Stivala

Great. Thanks a lot.

Operator
Operator

[Operator Instructions] We'll go to the [Phonetic] line of Sharon Lui with Wells Fargo. Please go ahead.

Analyst
Sharon Lui

Hey, good morning there.

Executive
Michael A. Stivala

Hi, Sharon.

Analyst
Sharon Lui

I guess, historically, the expansion of like gas utilities and the grid has eroded some of the propane demand out there. I just wonder, has the outlook changed a bit, given all the regulatory hurdles pipelines have faced, I guess, especially in the Northeast? Have you seen that impact demand for propane at all?

Executive
Michael A. Stivala

Yes. I think, first of all, natural gas expansion has occurred for decades and propane has always found a way to continue to maintain a good solid market share for the heating market because generally expansion also represents population growth and expansion of communities outside of the main lines where natural gas will run anyway. So, while natural gas expansion has always been a challenge or risk, a potential risk for the industry, the industry has always done a good job of maintaining a good share.

As far as now, I think you're absolutely right. I think you're starting to see a lot more