Company: SPH
Filing Date: 2025-02-06
Form Type: 10-Q
Source: 0000950170-25-015135
Chunk: 36

Company: SUBURBAN PROPANE PARTNERS LP
Filing Date: 2025-02-06
Form: 10-Q
Item: Part I, Item 1
Chunk 36
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4.

Executive Overview

The following are factors that regularly affect our operating results and financial condition.  Our business is subject to the risks and uncertainties described in Item 1A included in the Annual Report on Form 10-K for the fiscal year ended September 28, 2024 and in this Quarterly Report.  Management currently considers the following events, trends, and uncertainties to be most important to understanding our financial condition and operating performance:  

Product Costs and Supply

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 our costs to acquire and transport products.  The unit cost of our products, particularly propane, fuel oil and natural gas, is subject to volatility as a result of supply and demand dynamics or other market conditions, including, but not limited to, economic and political factors impacting crude oil and natural gas supply or pricing.  We enter into product supply contracts that are generally one-year agreements subject to annual renewal, and also purchase product on the open market.  We attempt to reduce price risk by pricing product on a short-term basis.  Our propane supply contracts typically provide for pricing based upon index formulas using the posted prices established at major supply points such as Mont Belvieu, Texas, or Conway, Kansas (plus transportation costs) at the time of delivery.

To supplement our annual purchase requirements, we may utilize forward fixed price purchase contracts to acquire a portion of the propane that we resell to our customers, which allows us to manage our exposure to unfavorable changes in commodity prices and to assure adequate physical supply.  The percentage of contract purchases, and the amount of supply contracted for under forward contracts at fixed prices, will vary from year to year based on market conditions.

Changes in our costs to acquire and transport products can occur rapidly over a short period of time and can impact profitability.  There is no assurance that we will be able to pass on product acquisition and transportation cost increases fully or immediately, particularly when such costs increase rapidly.  Therefore, average retail sales prices can vary significantly from year to year as our costs fluctuate with the propane, fuel oil, crude oil and natural gas commodity markets and infrastructure conditions.  In addition, periods of sustained higher commodity and/or transportation prices can lead to customer conservation, resulting in reduced demand for our product.

According to the Energy Information Administration, U.S. propane inventory levels at the end of December 2024 were 85.0 million barrels, which was 2.9% higher than December