Company: SPH
Filing Date: 2025-02-06
Form Type: 10-Q
Source: 0000950170-25-015135
Chunk: 150

Company: SUBURBAN PROPANE PARTNERS LP
Filing Date: 2025-02-06
Form: 10-Q
Item: Part I, Item 8
Chunk 150
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 market for our field operations.  Consistent with past practices, we principally utilize futures and/or options contracts traded on the NYMEX to mitigate the price risk associated with our priced physical inventory, as well as, in certain instances, forecasted purchases of propane, fuel oil, natural gas and electricity.  In addition, we sell propane, fuel oil, natural gas and electricity to customers at fixed prices, and enter into derivative instruments to hedge a portion of our exposure to fluctuations in commodity prices as a result of selling the fixed price contracts.  At expiration, the derivative contracts are settled by the delivery of the product to the respective party or are settled by the payment to the respective party of a net amount equal to the difference between the then market price and the fixed contract price or option exercise price.  Under this risk management strategy, realized gains or losses on futures or options contracts, which are reported in cost of products sold, will typically offset losses or gains on the physical inventory once the product is sold or delivered as it pertains to fixed price contracts (which may or may not occur in the same accounting period).  We do not use futures or options contracts, or other derivative instruments, for speculative trading purposes.  Unrealized non-cash gains or losses from changes in the fair value of derivative instruments that are not designated as cash flow hedges are recorded within cost of products sold.  Cost of products sold excludes depreciation and amortization; these amounts are reported separately within the condensed consolidated statements of operations.

In the commodities markets, average posted propane prices (basis Mont Belvieu, Texas) were 14.9% higher than the prior year first quarter, and average fuel oil prices 21.6% lower than the prior year first quarter.  The net change in the fair value of derivative instruments resulted in a $3.6 million unrealized non-cash gain in the first quarter of fiscal 2025, compared to a $10.8 million unrealized non-cash loss in the prior year first quarter, resulting in a net decrease of $14.4 million in cost of products sold year-over-year, of which $14.0 million was reported within the propane segment and $0.4 million was reported within the natural gas and electricity segment.  These unrealized mark-to-market adjustments are excluded from Adjusted EBITDA for both periods.

Cost of products sold associated with the distribution of propane and related activities of $129.7 million increased $2.0 million, or 1.5%, compared