Company: SPH
Filing Date: 2025-02-06
Form Type: 10-Q
Source: 0000950170-25-015135
Chunk: 37

Company: SUBURBAN PROPANE PARTNERS LP
Filing Date: 2025-02-06
Form: 10-Q
Item: Part I, Item 1
Chunk 37
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 2023 levels and 9.0% higher than the five-year average for December.  Despite these higher inventory levels, average posted propane prices (basis Mont Belvieu, Texas) increased 14.9% compared to the prior year first quarter.

Seasonality

The retail propane and fuel oil distribution businesses, as well as the retail natural gas marketing business, are seasonal because these fuels are primarily used for heating in residential and commercial buildings.  Historically, approximately two‑thirds of our retail propane volume is sold during the six-month peak heating season from October through March. The fuel oil business tends to experience greater seasonality given its more limited use for space heating and approximately three-fourths of our fuel oil volumes are sold between October and March.  Consequently, sales and operating profits are concentrated in our first and second fiscal quarters.  Cash flows from operations, therefore, are greatest during the second and third fiscal quarters when customers pay for product purchased during the winter heating season.  We expect lower operating profits and either net losses or lower net income during the period from April through September (our third and fourth fiscal quarters).  To the extent necessary, we will reserve cash from the second and first quarters for distribution to holders of our Common Units in the fourth quarter and the following fiscal year first quarter.

 23

Weather

Weather conditions have a significant impact on the demand for our products, in particular propane, fuel oil and natural gas, for both heating and agricultural purposes.  Many of our customers rely heavily on propane, fuel oil or natural gas as a heating source.  Accordingly, the volume sold is directly affected by the severity of the winter weather in our service areas, which can vary substantially from year to year.  In any given area, sustained warmer than normal temperatures will tend to result in reduced propane, fuel oil and natural gas consumption, while sustained colder than normal temperatures will tend to result in greater consumption.

Hedging and Risk Management Activities

We engage in hedging and risk management activities to reduce the effect of price volatility on our product costs and to ensure the availability of product during periods of short supply.  We enter into propane forward, options and swap agreements with third parties, and use futures and options contracts traded on the New York Mercantile Exchange (“NYMEX”) to purchase and sell propane, fuel oil, crude oil, natural gas and electricity at fixed prices in the future.  The majority of the futures, forward and options agreements are used to hedge price risk associated with propane and fuel oil