Suburban Propane Partners, L.P. Stock

Hello, and thank you for standing by. My name is Lacey, and I will be your conference operator today. At this time, I would like to welcome everyone to the Suburban Propane Partners Third Quarter Earnings Conference Call. [Operator Instructions] I would now like to turn the call over to Davin D'Ambrosio, Vice President and Treasurer. Please go ahead, sir.

Thank you, Lacey. Good morning, and thank you for joining us for our fiscal 2026 third quarter earnings conference call. I'm here with Mike Stivala, our President and Chief Executive Officer; Mike Kuglin, Chief Financial Officer; and Alex Centeno, Senior Vice President of Operations. This morning, we will review our third quarter results, along with our current outlook for the business. Once we've concluded our prepared remarks, we will open the session to questions.

Our conference call contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, related to the partnership's future business expectations and predictions, financial condition and results of operations. These forward-looking statements involve certain risks and uncertainties. We have listed some of the important factors that could cause actual results to differ materially from those discussed in such forward-looking statements, which are referred to as cautionary statements in our earnings press release, which can be viewed on our website at suburbanpropane.com. All subsequent written and oral forward-looking statements attributable to the partnership or persons acting on its behalf are expressly qualified in their entirety by such cautionary statements.

Our Form 10-Q for the quarter period ended June 27, 2026, which will be filed by the end of business today, contains additional disclosures regarding forward-looking statements and risk factors. Copies may be obtained by contacting the partnership or the SEC. Certain non-GAAP measures will be discussed on this call. We have provided a description of those measures as well as a discussion of why we believe this information to be useful in our Form 8-K, which was furnished to the SEC this morning. The Form 8-K will be available through a link in the Investor Relations section of our website.

At this time, I will turn the call over to Mike Stivala for some opening remarks. Mike?

Thanks, Davin. Good morning and thank you all for joining us today. Following a solid first half, we experienced sustained cold weather in the eastern half of the United States and extremely warm weather in the West. The third quarter started out slow. Near-record warm temperatures across our footprint during the shoulder month of April reduced heat-related demand, while residential customer tank levels entering the third quarter were elevated due to the timing of deliveries in the second quarter when demand was particularly strong. Despite the slow start, volumes for the quarter benefited from continued growth in our counter-seasonal customer base, which substantially offset the impact of warmer weather as volumes in both May and June exceeded prior year levels. As always, our operating personnel did an outstanding job delivering exceptional customer service to our customers, managing selling prices in a rising and volatile commodity price environment, and maintaining discipline over operating costs.

In our renewable natural gas operations, average daily RNG injection for the third quarter was essentially flat compared to the prior year as increases in manure-based D3 injections were offset by lower food waste D5 injection. However, revenues from RNG injection benefited from higher prices for environmental attributes, including a 31% year-over-year increase in California LCFS credit prices and an 8% year-over-year increase in D3 RIN prices. Subsequent to the end of the third quarter, we placed our new anaerobic digester facility in Upstate New York into service, which is expected to add approximately 100,000 MMBtu of annual D3 RNG injection. And following the completion of our RNG upgrade project at our Columbus, Ohio biogas facility, we expect to be injecting pipeline quality RNG from that facility during the fourth quarter, which is expected to add another nearly 200,000 MMBtu of annual D5 RNG injection. As a result, we will enter fiscal year 2027 with all 3 of our RNG facilities operational and an anticipated level of annual injection in the range of 750,000 to 800,000 MMBtu.

We are also focused on opportunities for organic growth and production through continued capacity optimization and increased feedstock intake. During the quarter, we also recognized a benefit of $1.1 million from production tax credits earned under Section 45Z of the Inflation Reduction Act for D3 injections at our Stanfield, Arizona facility. The facility's significant negative carbon intensity score of approximately negative 380, together with compliance with the prevailing wage and apprenticeship requirements allows us to maximize the available credit value under the regulations. With the facility in Upstate New York now online, we expect to earn additional PTCs from RNG injection at that facility in addition to investment tax credits on the capital deployed for construction of the facility.

With the New York facility now online and our Ohio facility soon to be online, we will have completed the major capital investments for our existing RNG facilities. As we have stated on a number of occasions, since owning this portfolio of assets, we have been focused on stabilizing production at our Arizona facility, where we had some operational challenges in the early years of ownership, driving operational excellence across the platform, improving plant design to increase the conversion of feedstock to RNG, deploying capital for the new facility in New York and the upgrade equipment in Ohio and building the team to support the long-term growth of the platform. These initiatives were undertaken during a period when environmental credit prices were significantly depressed, with California LCFS credits declining into the low $40 range due to the buildup of excess credits in the market. As we get ready to enter fiscal 2027 with all 3 facilities online, we are encouraged to see credit prices continuing to improve following regulatory actions taken in California that are driving more aggressive emissions targets and helping to rebalance the market. We believe this improving price environment presents a good tailwind for revenue enhancement in our RNG platform.

With all of these efforts over the past 3-plus years, we have also maintained our focus on strengthening the balance sheet and allocating capital in a disciplined manner. Following the strong first half performance, cash flow generation in the fiscal third quarter benefited from the seasonal collection of receivables. During the quarter, we used excess cash flows supplemented by proceeds from the issuance of common units under our ATM equity sales program to reduce debt by more than $36 million.

In a moment, I'll come back with some closing remarks. However, at this point, I'll turn the call over to Mike Kuglin to discuss the third quarter results in more detail. Mike?

Thanks, Mike, and good morning, everyone. To be consistent with previous reporting as I discuss our third quarter results, I'm excluding the impact of unrealized mark-to-market adjustments on our commodity hedges, which resulted in unrealized gain of $700,000 in the third quarter of fiscal 2026 compared to unrealized loss of $2.9 million in the prior year third quarter, along with certain other noncash items. Given the seasonal nature of our business, we typically experience a net loss in the third quarter of our fiscal year. With that said, adjusted net loss for the third quarter was $17.7 million or $0.27 per common unit compared to adjusted net loss of $10.8 million or $0.17 per common unit in the prior year. Adjusted EBITDA for the third quarter was $18 million compared to $27 million in the prior year. Retail propane gallons sold in the third quarter were 70.6 million gallons, a decrease of 1.8% compared to the prior year, primarily due to the impact of seasonably warm weather in April on heat-related demand, which substantially offset the customer base growth in our agricultural, industrial and national accounts customer segments.

With respect to the weather, average temperatures across our service territories during the third quarter were 17% warmer than normal and 3% warmer than the prior year third quarter. For the month of April, average temperatures were 24% warmer than normal and 11% warmer than April 2025 and ranked as the second warmest April on record.

From a commodity perspective, U.S. propane inventories remained strong during the quarter, with June 2026 inventory levels approximately 21% above both June 2025 and historical averages for this time of the year. Despite elevated inventory levels, posted propane prices were volatile and traded between $0.70 and $0.90 per gallon basis Mont Belvieu due to geopolitical tensions in the Middle East and strong export demand. Overall, average wholesale prices for the quarter increased 3.6% compared to the prior year third quarter. In early part of the fourth quarter, wholesale prices have generally been in the $0.70 to $0.75 per gallon range, which is flat compared to the same time last year.

Excluding the impact of the mark-to-market adjustments on our commodity hedges that I mentioned earlier, total gross margins for the third quarter were $159.6 million, a decrease of 2.4% compared to the prior year, primarily due to lower volumes sold as propane unit margins remained steady.

With respect to expenses, combined operating and G&A expenses of $141.4 million for the third quarter were $5.2 million or 3.8% higher than the prior year. The increase was primarily attributable to higher payroll and benefit-related expenses and higher fuel and vehicle maintenance costs, partially offset by lower variable compensation costs and a benefit of $1.1 million from production tax credits earned for the current year quarter from RNG injections. Operating expenses for the third quarter of fiscal 2025 include a $2 million gain from insurance recovery related to Hurricane Helene, reduced prior year operating expenses and a pension settlement charge of $500,000, which was excluded from adjusted EBITDA.

Net interest expense of $18.8 million for the third quarter was flat to the prior year as lower benchmark interest rates on borrowings under our revolving credit facility were offset by a higher interest rate for a tranche of senior notes that were refinanced in the first quarter of fiscal 2026.

Total capital spending for the quarter was $21.4 million, which included $15.1 million of growth capital. Capital spending increased $6.8 million compared to the prior year, primarily due to the construction efforts at our Columbus, Ohio and Upstate New York RNG facilities. On a year-to-date basis, our total growth CapEx for our RNG facilities was $28.7 million, and our full year capital spending estimate for the existing RNG projects is approximately $35 million, which is at the low end of the previously communicated range of $35 million to $40 million.

Turning to our balance sheet. During the third quarter, we utilized cash flows from operating activities and net proceeds of $6.6 million from the issuance of common units under our ATM program to repay $36.2 million of borrowings under the revolver. Our consolidated leverage ratio for the trailing 12-month period ended June 2026 was 4.35x, which is flat compared to June 2025. With a significant portion of capital spending on the RNG platform launch complete, we expect to generate increasing financial flexibility. We will remain focused on utilizing excess cash flows and proceeds received from the ATM program to further strengthen the balance sheet and as opportunities arise to fund strategic growth.

With that, I'll turn the call back to Michael.

Thanks, Mike. As announced on July 23, our Board of Supervisors declared a quarterly distribution of $0.325 per common unit in respect of our third quarter of fiscal 2026. That equates to an annualized rate of $1.30 per common unit. Our quarterly distribution will be paid on August 11 to our unitholders of record as of August 4. Our distribution coverage continues to remain very strong at 2.07x for the trailing 12 months ended June 2026.

So just to close it out, through the first 9 months, fiscal 2026 has been another great year for Suburban Propane as our personnel in the eastern half of our propane operations did an amazing job responding to a surge in demand from some of the most sustained cold weather and harsh storms that we've seen during the heart of the heating season in over a decade, while our teams in the West continue to focus on the areas they can control, growing our customer base and managing expenses. And with all 3 of our RNG production facilities approaching full operations, the platform has benefited from our efforts to drive operational and safety discipline, production stability and capacity optimization plans, all at a time in which we see tailwinds for the RNG platform in the form of improving environmental credit pricing, continued regulatory support for clean energy production pathways and exponential growth in power demand.

Taken together, the strength and stability of our core propane business, combined with the investments we have made to build a renewable energy platform, position Suburban Propane for long-term growth as we continue to support the evolution of energy to a lower carbon future and approach our 100-year anniversary in 2028.

Finally, I want to take a moment to thank the more than 3,200 employees at Suburban Propane for their hard work and unwavering focus on the safety and comfort of our customers and the communities we serve. Thank you all for everything you do all day. As always, we appreciate your support and attention this morning and would now like to open the call up for questions. And Lacey, could you help us with that?

[Operator Instructions] There are no questions at this time.

Okay. Thank you, Lacey. Again, thank you all for joining us, and I hope you enjoy the rest of your summer. And as always, please be safe. We'll talk to you in November.

Ladies and gentlemen, this concludes today's conference call. You may now disconnect.

Thank you for standing by. At this time, I would like to welcome everyone to the Suburban Propane Second Quarter Earnings Conference Call. [Operator Instructions] I would now like to turn the conference over to Davin D'Ambrosio, Vice President and Treasurer. The floor is yours.

Morgan, thank you. Good morning, everyone. Thank you for joining us this morning for our fiscal 2026 second quarter earnings conference call. Joining me this morning are Mike Stivala, our President and Chief Executive Officer; Mike Kuglin, Chief Financial Officer; and Alex Centeno, Senior Vice President of Operations.

This morning, we will review our second quarter financial results, along with our current outlook for the business. Once we've concluded our prepared remarks, we will open the session to questions. Our conference call contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934 as amended, relating to the partnership's future business expectations and predictions and financial condition and results of operations.

These forward-looking statements involve certain risks and uncertainties. We have listed some of the important factors that could cause actual results to differ materially from those discussed in such forward-looking statements, which are referred to as cautionary statements in our earnings press release, which can be viewed on our website at suburbanpropane.com. All subsequent written and oral forward-looking statements attributable to the partnership or persons acting on its behalf are expressly qualified in their entirety by such cautionary statements.

Our annual report on Form 10-K for the fiscal year ended September 27, 2025, and our Form 10-Q for the period ended March 28, 2026, which will be filed by the end of business today, contain additional disclosure regarding forward-looking statements and risk factors. Copies may be obtained by contacting the partnership or the SEC. Certain non-GAAP measures will be discussed on this call. We have provided a description of why these measures as well as a discussion of why we believe this information to be useful in our Form 8-K, which was furnished to the SEC this morning.

Form 8-K will be available through a link in the Investor Relations section of our website. At this point, I will turn the call over to Mike Stivala for some opening remarks. Mike?

Thanks, Davin. Good morning. Thank you all for joining us today. The fiscal 2026 second quarter was another solid quarter for Suburban Propane. Our core propane business performed extremely well in a very challenging heating season. We made great progress stabilizing production and advancing our expansion projects in our renewable natural gas business. And with our excess cash flows from operations, we continued to reduce our total outstanding debt.

With respect to our propane operations, this year's heating season was a tale of two halves. The eastern half of our footprint experienced some of the most sustained colder temperatures in the heart of the heating season than we've experienced in decades, along with several harsh winter storms.

Our Western half, on the other hand, reported near record warm temperatures throughout most of the winter. Where we got weather, customer demand surged and our teams worked tirelessly to safely and reliably meet the needs of our customers, many times in some very harsh weather with challenging road conditions. Volumes in our Eastern territories were approximately 3% higher than the prior year second quarter on average heating degree days that were 3% colder than the same period.

In the West, volumes were approximately 10% lower on average heating degree days that were 17% warmer. As always, our operating personnel were well prepared to manage the surge in demand in our Eastern markets, supplemented by resources redeployed from certain locations in our Western territories to provide the additional support, and I am so proud of how our teams responded to meet our customers' needs under these conditions while also maintaining their focus on our customer base growth and retention initiatives.

In addition to solid volume performance, we effectively managed selling prices amid a volatile commodity price environment influenced in March by the conflict in the Middle East while also maintaining disciplined expense control. In our renewable natural gas operations, average daily D3 RNG injection during the second quarter of fiscal 2026 increased 16% compared to the prior sequential quarter and more than 12% compared to the prior year second quarter, driven by improved facility uptime and the benefits of our capital investments and process improvements that we have implemented since our acquisition of our anaerobic digester facility in Stanfield, Arizona.

Additionally, with our new anaerobic digester facility in Upstate New York and our gas upgrading system at our facility in Columbus, Ohio, both of which remain on schedule for completion during the second half of fiscal 2026, we expect to add approximately 200,000 MMBtus of annual production to our RNG platform. We are also pursuing opportunities to increase feedstock intake for both manure and food waste at the Stanfield facility in order to take advantage of additional production capacity at the plant.

While environmental credit values, particularly California LCFS prices have been depressed over the past couple of years, we are encouraged by the regulatory steps taken by the California Air Resources Board to create a better balance in the supply-demand equation for environmental credits, which is starting to favorably impact LCFS credit values. We were also pleased to see the Treasury release draft regulations in February 2026 that favorably addressed ambiguities in previous guidance related to the eligibility to earn production tax credits or PTCs under Section 45Z of the Internal Revenue Code as promulgated in the Inflation Reduction Act.

The One Big Beautiful Bill Act also extended the window for PTCs by two years until December 2029. During the second quarter of fiscal 2026, we recognized $3.5 million of PTCs earned on D3 RNG injections at our Stanfield facility for the period from January 2025 through March 2026, and we continue to earn PTCs on production going forward. As D3 production at our Upstate New York facility comes online, we expect to be eligible to earn PTCs for RNG injected from that facility as well.

So for the second quarter of fiscal 2026, adjusted EBITDA of $175.3 million was essentially flat to the prior year. And combined with our fiscal first quarter results, adjusted EBITDA totaled $258.7 million for the first half of the fiscal year. That's an increase of $8.4 million or 3.4% compared to the first two quarters of the prior year. And with another quarter of strong operating performance and with capital expenditures for our RNG facilities that are nearing completion, we used excess cash flow generated during the second quarter to reduce our total outstanding debt by more than $64 million. We remain disciplined in our capital allocation, balancing investments in the growth of our core propane business and renewable energy platform with preserving balance sheet strength and flexibility in support of our long-term strategic growth initiatives and for enhancing unitholder value. In a moment, I'll come back for some closing remarks. However, let me turn the call over to Mike Kuglin to discuss the second quarter results in more detail. Mike?

Thanks, Mike, and good morning, everyone. To be consistent with previous reporting, as I discuss our second quarter results and exclude the impact of unrealized mark-to-market adjustments on our commodity hedges, which resulted in unrealized loss of $1.4 million for the second quarter compared to an unrealized gain of $700,000 in the prior year second quarter. Excluding these and certain other noncash items, adjusted net income for the second quarter was $139.3 million or $2.09 per common unit compared to adjusted net income of $136.9 million or $2.11 per common unit in the prior year second quarter.

Adjusted EBITDA for the second quarter was $175.3 million, which was flat compared to the prior year second quarter. Retail propane gallons sold in the second quarter were 161.6 million gallons, essentially unchanged compared to the prior year as the impact of colder temperatures across much of the eastern half of the country on heat-related demand, together with contributions from our recent acquisitions were offset by considerably warmer temperatures in the western half. With respect to the weather, average temperatures across our service territories during the second quarter were 6% warmer than normal and 1% warmer than the prior year.

In the eastern half of the U.S., average temperatures were slightly warmer than normal and 3% colder than the prior year second quarter, whereas average temperatures in the West were 22% warmer than normal and 17% warmer than the prior year second quarter. From a commodity perspective, propane inventory levels in the U.S. experienced a seasonal decline during the second quarter, but remained well above historical averages for this time of year. At the end of the second quarter, U.S. propane inventories were at 77 million barrels, which were 75% higher than March 2025 levels and 47% higher than the five-year average for March. Given the increase in inventories and other factors, average wholesale propane prices for the quarter of $0.69 per gallon, basis Mont Belvieu decreased 23% compared to the prior year second quarter.

Although average propane prices for the second quarter were lower than the prior year, prices have evolved and have recently begun to rise due to the conflict in Iran and the resulting disruption in global energy markets. At the end of February, just before the start of the conflict, spot propane prices were in the mid-$0.60 per gallon range, whereas most recently, spot prices have risen to the $0.90 per gallon range. Excluding the impact of the noncash mark-to-market adjustments on our commodity hedges that I mentioned earlier, total gross margins of $345.1 million for the second quarter increased $500,000 compared to the prior year second quarter, primarily due to a slight increase in propane unit margins of $0.03 per gallon or 1.7%.

As Mike mentioned, following the publication of proposed treasury regulations in February 2026, which provided sufficient clarity for us to conclude that the production and sales of our RNG qualified for production tax credits under Section 45Z, we recognized $3.5 million of PTCs earned on D3 RNG injections at our Stanfield, Arizona facility for the period from January 2025 through March 2026. The benefit was reported as a reduction to operating expenses and included a catch-up adjustment of $2 million for credits related to fiscal 2025 and $800,000 related to the first quarter of fiscal 2026.

With that said, combined operating and G&A expenses of $169.5 million for the quarter were flat compared to the prior year second quarter as higher payroll and benefit-related expenses along with higher fuel and vehicle maintenance costs, driven by elevated activity levels to meet stronger customer demand in the Eastern territories and an increase in accruals for self-insurance matters were offset by the recognition of production tax credits and a $2.9 million insurance recovery related to the partial settlement of certain claims associated with our RNG acquisition in December 2022.

Net interest expense of $19.7 million for the quarter decreased 4.2% compared to the prior year second quarter, resulting from a lower level of average outstanding borrowings under our revolving credit facility and lower benchmark interest rates on revolver borrowings. Total capital spending for the quarter of $24.7 million was $5.4 million higher than the prior year second quarter, primarily due to the construction efforts at our Columbus, Ohio and Upstate New York RNG facilities.

On a year-to-date basis, our total growth CapEx for our RNG facilities totaled $19 million, and our full-year capital spending estimate for the existing projects is $35 million to $40 million. Turning to our balance sheet. During the second quarter, we utilized excess cash flows from operating activities to repay $64.3 million of borrowings under the revolver.

Our consolidated leverage ratio for the trailing 12-month period ended March 2026 improved to 4.34x compared to 4.54x for March 2025 with an increase in adjusted EBITDA of $6 million and total debt reduction of $32.3 million. We have now moved through our historically high period of seasonal working capital needs into the fiscal quarters we expect to generate excess cash flows. We will continue to remain focused on utilizing excess cash flows to strengthen the balance sheet as opportunities arise to fund strategic growth, including the remaining growth capital for our RNG platform.

We have more than ample borrowing capacity under our revolver to support our capital expansion plans and ongoing strategic growth initiatives. With that, I'll turn the call back to Mike.

Thanks, Mike. As announced on April 23, our Board of Supervisors declared our quarterly distribution of $0.325 per common unit in respect of our second quarter of fiscal 2026. That equates to an annualized rate of $1.30 per common unit. Our quarterly distribution will be paid on May 12 to our unitholders of record as of May 5. Our distribution coverage continues to remain strong at 2.2x for the trailing 12-month period ended March 2026.

So just a few closing remarks. The management team here at Suburban Propane has been together for decades now. We've built our core propane business to be recognized as best-in-class with our hyperlocal operating model. As evidenced by our performance in this year's heating season, our business and our outstanding personnel are very well situated to adapt and handle whatever weather conditions come our way. When others in our industry may struggle to keep up in high demand scenarios, our hard-working and dedicated teams across the country rise to the occasion.

I'm super proud of their efforts in the face of some very challenging operating conditions this past winter. They've also done a great job executing on our customer base growth and retention initiatives, especially meeting growing demand for propane in certain unique applications, such as EV charging stations, powering port equipment, power generation for data center construction, backup power generation and multipurpose agricultural uses. We're also proud of our expanded sponsorship with NASCAR and Speedway Motorsports as the official propane of NASCAR, which has given us the opportunity to showcase the power and versatility of propane in a very high-performance setting at 28 races throughout virtually every weekend of the NASCAR Cup Series.

In the meantime, we have taken a measured and disciplined approach towards the execution of our long-term strategic growth plans as we continue to build out a renewable energy platform to support the evolving clean energy needs of our customers. As I mentioned in my opening remarks, we've been focused on stabilizing production levels, building a team and increasing the scale of our RNG platform, a process that we call suburbanizing the platform to deliver the same operational discipline and excellence that we have been known for within the propane space.

We have made tremendous progress, and we believe that the market for RNG is still in the early stages with tailwinds that will provide positive support for long-term growth potential given the ultra-low carbon qualities and its blending or drop-in replacement capabilities with traditional natural gas. And as we are coming up on our 100-year anniversary in 2028, we view the build-out of our renewable energy platform as truly long-term strategic investments to help set Suburban Propane up for its next century of success.

In closing, I want to once again thank the more than 3,300 dedicated employees of Suburban Propane for their unwavering commitment to safety and outstanding customer service during a very challenging winter heating season and during a time when our customers needed us most. Thank you. As always, we appreciate your support and attention this morning, and we'll now open the call for questions. And Morgan, if you could help us with that.

[Operator Instructions] It appears there are no questions at this time. I would like to turn the conference back over to Mike Stivala for any further remarks.

Great. Thanks, Morgan, and thank you all again for joining us. I hope you have a great summer. We look forward to talking to you again in August as we close out our third quarter results. So thank you again, and please be safe.

This concludes today's call. Thank you for attending. You may now disconnect and have a wonderful rest of your day.

Thank you for standing by. My name is Tina, and I will be your conference operator today. At this time, I would like to welcome everyone to the Golub Capital BDC Earnings Call -- I apologize, Suburban Propane Partners Financial Call. [Operator Instructions] It is now my pleasure to turn the call over to Davin D'Ambrosio, Vice President and Treasurer. You may begin.

Great. Thank you, Tina. This is Davin D'Ambrosio, Vice President and Treasurer, and good morning, everyone, and thank you for joining us this morning for our fiscal 2026 first quarter earnings conference call. I'm here with Mike Stivala, our President and Chief Executive Officer; Mike Kuglin, Chief Financial Officer; and Alex Centeno, Senior Vice President of Operations.

This morning, we will review our first quarter financial results, along with our current outlook for the business. Once we've concluded our prepared remarks, we will open the session to questions. Our conference call contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934 as amended, relating to the partnership's future business expectations and predictions and financial condition and results of operations.

These forward-looking statements involve certain risks and uncertainties. We have listed some of the important factors that could cause actual results to differ materially from those discussed in such forward-looking statements, which are referred to as cautionary statements in our earnings press release, which can be viewed on our website at suburbanpropane.com. All subsequent written and oral forward-looking statements attributable to the partnership or persons acting on behalf of the partnership are expressly qualified in their entirety by such cautionary statements.

Our annual report on Form 10-K for the fiscal year ended September 27, 2025, and Form 10-Q for the period ended December 27, 2025, which will be filed by the end of business today, contain additional disclosures regarding forward-looking statements and risk factors. Copies may be obtained by contacting the partnership or the SEC. Certain non-GAAP measures will be discussed on this call. We have provided a description of those measures as well as a discussion of why we believe this information to be useful in our Form 8-K, which was furnished to the SEC this morning. The Form 8-K will be available through a link in the Investor Relations section of our website.

At this point, I will turn the call over to Mike Stivala for some opening remarks. Mike?

Thanks, Davin, and good morning. I apologize for the confusion from the operator. You are listening to the Suburban Propane first quarter earnings conference call. So thanks for joining us today. The fiscal 2026 heating season is off to a great start with a surge of colder weather in our Northeast, Mid-Atlantic and Midwest operating territories during November and more importantly, December 2025 that drove heat-related demand, which more than offset warmer average temperatures in the West and incremental volumes in the prior year first quarter resulting from Hurricanes Helene and Milton.

Our operating personnel have already endured some significant challenges with harsh weather conditions that have persisted into the fiscal second quarter, and I'm extremely proud of the hard work and dedication of our local teams for their preparation and commitment to the safety and comfort of our customers and local communities. The boost in heat-related demand, along with continued positive trends from our customer base growth and retention initiatives, enabled us to deliver an increase of more than 4% in volumes sold compared to the prior year first quarter, and an increase of $8.1 million or nearly 11% in adjusted EBITDA for the quarter.

In our renewable natural gas operations, average daily RNG injection in the first quarter increased both sequentially and year-over-year, driven by the operational enhancements implemented at our Stanfield, Arizona facility, which are resulting in both improved uptime at the facility and increased conversion of feedstock to RNG injection. We also started the commissioning process for our newly constructed anaerobic digester facility in Upstate New York during December 2025 and made substantial progress on the construction of the gas upgrade equipment at our existing anaerobic digester facility in Columbus, Ohio.

The RNG capital projects are on track for completion towards the end of the second fiscal quarter with RNG injection scheduled to begin in the second half of the fiscal year. With the great start to the fiscal year, we remain focused on delivering outstanding performance while also advancing our long-term strategic growth plans with the previously announced acquisition of 2 well-run propane businesses in California, investing $24 million, progressing our capital projects to grow RNG production, investing nearly $7 million in growth CapEx in the quarter and strategically refinancing our 2027 senior notes at an attractive rate and a 10-year maturity. Therefore, we continue to focus on disciplined investment in growth while maintaining balance sheet strength and flexibility.

In a moment, I'll come back for some closing remarks. However, at this point, I'll turn the call over to Mike Kuglin to discuss the first quarter results in more detail. Mike?

Thanks, Mike, and good morning, everyone. To be consistent with previous reporting, as I discuss our first quarter results, I'm excluding the impact of unrealized mark-to-market adjustments on our commodity hedges, which resulted in an unrealized gain of $930,000 in the first quarter compared to an unrealized gain of $3.6 million in the prior year first quarter.

Excluding these and certain other noncash items, we've identified a reconciliation of net income to adjusted EBITDA in the press release. Net income for the first quarter was $46.6 million or $0.70 per common unit compared to net income of $38 million or $0.59 per common unit in the prior year. Adjusted EBITDA for the first quarter was $83.4 million, an increase of $8.1 million or 10.8% compared to the prior year.

Retail propane gallons sold totaled 110.2 million gallons for the first quarter, an increase of 4.2% compared to the prior year. The increase was driven by colder temperatures across much of the eastern half of the U.S., which boosted heat-related demand as well as positive contributions from organic customer base growth and our recent propane acquisitions. These factors more than offset the impact of considerably warmer temperatures in the western half of the country and incremental volumes in the prior year first quarter in the aftermath of Hurricane Helene and Milton in the Southeast.

With respect to the weather, average temperatures during the first quarter were 6% warmer than normal and 6% colder than the prior year first quarter. In the eastern half of the U.S., average temperatures were in line with normal and 12% cooler than the prior year first quarter, whereas average temperatures in the West were 24% warmer than normal and 11% warmer than the prior year first quarter.

From a commodity perspective, average wholesale propane prices for the first quarter were $0.66 per gallon based on Mont Belvieu, representing a 14% decrease compared to the prior year first quarter. According to the most recent report from the Energy Information Administration, U.S. propane inventories totaled 89 million barrels at the end of last week, which was 34% higher than a year ago and 28% above historical averages for this time of the year.

While domestic demand and the recent blast of cold weather in the East could impact inventories, wholesale propane prices remain in the $0.60 per gallon range compared to $0.90 per gallon range a year ago.

Excluding the impact of the mark-to-market adjustments on our commodity hedges, total gross margin for the first quarter was $238.6 million, an increase of $16.1 million or 7.2% compared to the prior year. The improvement was driven by higher propane volumes sold, coupled with an increase in propane unit margins of $0.08 per gallon or 4% and to a lesser extent, higher contribution from RNG operations due to increased RNG injection.

With respect to expenses, combined operating and G&A expenses increased $5 million or 3.4% compared to the prior year first quarter. The increase was primarily due to higher payroll and benefit-related costs, overtime and other variable operating costs to support the increased activities associated with the incremental customer demand plus higher variable compensation expense associated with the increase in earnings.

Net interest expense of $19.8 million for the quarter was flat compared to the prior year as the impact of higher average outstanding borrowings under our revolving credit facility was offset by lower benchmark interest rates on those borrowings.

Total capital spending for the quarter was $19.8 million, of which $13 million was in support of our propane operations and $6.8 million for RNG growth projects. Full year capital spending estimate for the RNG project remains unchanged at $30 million to $35 million, with spending concentrated in the first and second quarters.

And turning to our balance sheet. Given the seasonal nature of our business, we typically borrow under our revolving credit facility during the first quarter to fund a portion of our seasonal working capital needs. With that said, during the first quarter, we borrowed $115.4 million under our revolver and used net proceeds of $3.1 million from the issuance of common units under our ATM equity program to fund our seasonal working capital needs, growth capital expenditures for the partnership projects, along with the cost associated with refinancing of our senior notes and the 2 propane acquisitions that Mike mentioned earlier.

Our consolidated leverage ratio for the trailing 12-month period ended December 2025 improved to 4.57x compared to 4.99x for the trailing 12-month period ended December 2024. Our working capital needs typically peak towards the end of the heating season, late February or early March time frame, after which we expect to generate excess cash flows. We will continue to remain focused on utilizing excess cash flows to strengthen the balance sheet as opportunities arise to fund strategic growth. We have more than ample borrowing capacity under our revolver to fund our remaining working capital needs for the heating season as well as to support our growth capital and ongoing strategic growth initiatives.

With that, I'll turn it back to Mike.

Thanks, Mike. As announced on January 22, our Board of Supervisors declared our quarterly distribution of $0.325 per common unit in respect of our first quarter of fiscal 2026. That equates to an annualized rate of $1.30 per common unit. Our quarterly distribution will be paid on February 10 to our unitholders of record as of February 3. Our distribution coverage continues to remain strong at 2.19x for the trailing 12-month period ended December 2025.

So just a few final thoughts. As colder weather and extreme storms have swept across much of the eastern half of the country in recent weeks, our operations personnel are well prepared and working tirelessly to safely meet customer demand. The foundation of our ongoing success continues to be rooted in our more than 3,200 dedicated employees at Suburban Propane. Their unwavering focus on the safety and comfort of our customers and the communities we serve and the commitment to delivering outstanding customer service truly sets us apart. I want to take a moment to thank them for their exceptional efforts during these sustained cold and extreme weather conditions.

In closing, our business is very well positioned, both operationally and financially to meet increased demand from a more normalized winter heating season while continuing to drive operational enhancements and executing on our long-term strategic growth plans. We remain committed to growing our core propane business while leveraging our core competencies as trusted local distributors of energy to grow the markets for alternative, lower carbon renewable fuels well into the future. And we continue to be patient and disciplined in executing our growth plans to ensure we maintain a strong balance sheet to support both sustainability and provide flexibility to be opportunistic.

As always, we appreciate your support and attention this morning. And now we'll open it up for questions. And Tina, would you mind helping us with that?

[Operator Instructions] And with no questions in queue, I will hand the call back over to Davin for closing remarks.

Great. Thank you, Tina. I appreciate everybody's attention. We look forward to talking to you again in May following the end of our second quarter. And as I always say to our employees here, please be safe out there.

Thank you again for joining us today. This does conclude today's conference call. You may now disconnect.

Thank you for standing by, and welcome to the Suburban Propane Partners Fourth Quarter and Fiscal Year-End Earnings Conference Call. [Operator Instructions] I'd now like to turn the call over to Davin D'Ambrosio, Vice President and Treasurer. You may begin.

Thank you, Rob. Good morning, everyone. Thank you for joining us this morning for our fiscal 2025 Fourth Quarter and Full Year Earnings Conference Call. I'm here with Mike Stivala, our President and Chief Executive Officer; Mike Kuglin, Chief Financial Officer; and Alex Centeno, our Senior Vice President of Operations.

This morning, we will review our fourth -- fiscal 2025 fourth quarter and full year financial results, along with our current outlook for the business. Once we've concluded our prepared remarks, we will open the session to questions. Our conference call contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, relating to the partnership's future business expectations and predictions and financial condition and results of operations.

These forward-looking statements involve certain risks and uncertainties. We have listed some of the important facts -- factors that could cause actual results to differ materially from those discussed in such forward-looking statements, which are referred to as cautionary statements in our earnings press release, which can be viewed on our website at suburbanpropane.com.

All subsequent written and oral forward-looking statements attributable to the partnership or persons acting on its behalf are expressly qualified in their entirety by such cautionary statements. Our annual report on Form 10-K for the fiscal year ended September 27, 2025, which contains additional disclosure regarding forward-looking statements and risk factors will be filed on or about November 26.

Once filed, copies will be obtained by contacting the partnership or the SEC. Certain non-GAAP measures will be discussed on this call. We have provided a description of those measures as well as a discussion of why we believe this information to be useful in our Form 8-K, which was furnished to the SEC this morning. Form 8-K will be available through a link in the Investor Relations section of our website. At this time, I will turn the call over to Mike Stivala for some opening remarks. Mike?

Thanks, Davin, and thank you all for joining us today.

Fiscal 2025 was another outstanding year for Suburban Propane. In our core propane business, propane demand was strong as a result of sustained period of more normal winter weather in the heart of our footprint from mid-December through February, the most critical months for heat-related demand as well as strong demand in our Southeast operations in the aftermath of Hurricanes Helene and Milton in the first fiscal quarter and incremental volumes from our acquisition of a well-run propane business in our Southwest territory, which we closed in November 2024.

I'm extremely proud of how our field personnel at every level worked tirelessly to meet the surge in demand when our customers needed us most, while also opportunistically taking on new business when some of our competitors were unable to keep up. This was a real testament to the preparation by our operations teams and the flexibility of our operating model to ramp up when demand dictates.

And with safety as our highest priority, what's even more impressive is how our employees performed during a prolonged stretch of very high activity levels and some harsh operating conditions while not compromising on our highest standards for safety.

As a result, propane volumes for the fiscal 2025 increased nearly 6% compared to the prior year. Strong volumes, combined with effective margin management during a rising commodity price environment and good expense discipline contributed to a $28 million or 11.2% increase in adjusted EBITDA compared to the prior year.

In addition to the higher earnings, we had a number of key accomplishments in fiscal 2025 in support of our long-term strategic growth initiatives. Just to highlight a few. We acquired and integrated a well-run propane business in strategic markets in New Mexico and Arizona for a total consideration of approximately $53 million. Subsequent to the end of fiscal '25, just in October of 2025, we further invested in the growth of our core propane business with the acquisition of 2 high-quality businesses in attractive markets in California for a total consideration of $24 million.

We created a dedicated sales and business development team focused on specific propane verticals that are less weather sensitive and present opportunities for growth as the advantage of propane become a bigger part of the conversation. These verticals include opportunities in material handling, agriculture, power generation and over-the-road vehicles.

We continue to identify and foster new market expansion opportunities to establish and extend our presence in certain attractive markets. We secured incremental supply of renewable propane and exceeded 2 million gallons of renewable propane sales focused primarily in the California market, coupled with expansion into the Florida and Virginia markets to meet customer demand for a renewable alternative.

We entered into a multiyear partnership with NASCAR and Speedway Motorsports, making Suburban Propane the official propane partner of NASCAR and Speedway Motorsports, reflecting the reliability of our national presence and demonstrating the power and versatility of propane at one of America's top spectator sports.

In our RNG operations, we continue to implement several operational improvements at our Stanfield, Arizona facility to stabilize and grow RNG production, enhance safety protocols, modify feedstock intake practices and improve our overall plant efficiency to strengthen the long-term performance and returns of the facility, while also advancing the capital projects at our Columbus, Ohio and Upstate New York facilities, both of which are expected to come online in the first half of fiscal 2026.

We also expanded our RNG management team with dedicated safety, construction and compliance personnel to bring more expertise in-house. And focusing on our balance sheet, we launched an At-the-Market equity program to sell up to $100 million of newly issued Common Units, raising $23.5 million in net proceeds from the sale of 1.3 million Common Units at attractive prices during fiscal 2025.

Proceeds from the ATM program are being used to support our ongoing pursuit of opportunistic growth and to accelerate debt reduction. During the year, using excess cash flows and proceeds from the ATM program, we deployed nearly $53 million for propane acquisitions, over $25 million for our growth projects in the RNG business and reduced our overall debt by nearly $2 million.

With the increased earnings and slightly lower outstanding debt, we ended fiscal 2025 with a leverage ratio of 4.29x, a significant improvement from 4.76x at the end of the prior year. In addition to the strong operating and financial performance, during fiscal 2025, we embarked on a multiyear technology modernization initiative that will simplify the way we operate, consolidate our systems platform and improve the tools we use to serve our customers, delivering a better experience for both our employees and our customers. This initiative will not change our personalized hyperlocal business model that sets Suburban Propane apart as best-in-class operators within the propane industry.

So fiscal 2025 was a very successful year for Suburban Propane, both in terms of our financial performance and from executing on our long-term strategic growth plans while remaining patient and disciplined to maintain financial flexibility through a strong balance sheet. A little later, I'll provide some closing remarks.

However, at this point, I'll turn the call over to Mike Kuglin, who will discuss our full year and fourth quarter results in more detail. Mike?

Thanks, Mike, and good morning, everyone. I'll start by focusing on our full year results, then give some color on the fourth quarter toward the end of my remarks.

To be consistent with previous reporting, I'm excluding the impact of unrealized noncash mark-to-market adjustments on our commodity hedges, which resulted in an unrealized gain of $2.4 million in fiscal 2025 compared to an unrealized loss of $14.6 million in the prior year, along with certain other noncash items we've identified in the reconciliation of net income to adjusted EBITDA in the press release.

Including these items, net income for fiscal 2025 was $128.4 million or $1.97 per Common Unit compared to $107.7 million or $1.68 per Common Unit in the prior year. Adjusted EBITDA for fiscal 2025 was $278 million, an increase of $28 million or 11.2% compared to the prior year.

Retail propane gallons sold in fiscal 2025 were 400.5 million gallons, an increase of 5.9% compared to the prior year. The volume increase was driven by sustained widespread cold temperatures during the most critical months for heat-related demand, increased demand for backup power generation and other applications, the aftermath of Hurricanes Helen and Milton, continued growth in our counterseasonal national accounts business and incremental volumes from our recent propane acquisitions.

With respect to the weather, average temperatures for fiscal 2025 were 9% warmer than normal and 4% cooler than the prior year. During January and February, average temperatures were comparable to normal and 13% colder than the same period last year. From a commodity perspective, average wholesale propane prices for fiscal 2025 were $0.79 per gallon basis Mont Belvieu, which was 5.8% higher than the prior year.

According to the most recent report from the Energy Information Administration, U.S. propane inventories at the end of last week were 106 million barrels, which was 6% higher than a year ago and 13% higher than historical averages for this time of year. Given the strength in inventories, wholesale propane prices have trended down from the end of the fiscal year and are currently in the $0.60 range compared to the $0.80 range at the same time last year.

Excluding the impact of the mark-to-market adjustments on our commodity hedges that I mentioned earlier, total gross margin of $866.4 million for fiscal 2025 increased $46.8 million or 5.7% compared to the prior year, primarily due to higher propane volumes sold and higher propane unit margins.

Excluding the impact of the unrealized mark-to-market adjustments, propane unit margins for fiscal 2025 increased $0.02 per gallon or 1% with margin expansion experienced across all customer categories. In our RNG operations, average daily RNG injection for the fiscal year was approximately 13% lower compared to the prior year, primarily due to downtime experience several operational improvement projects designed to enhance future RNG production as well as multiple power outages and extremely cold ambient air temperatures in the Arizona area during the winter that impacted anaerobic digestion.

While we remain focused on executing controllable operational improvements, revenues at the Stanfield facility continue to face headwinds from lower prices, both California and LCFS credits, Federal D3 RINs. California LCFS credit prices remain depressed relative to historical levels, though average prices for fiscal 2025 increased 2.5% compared to the prior year. We are encouraged to see the finalization of amendments to the LCFS program implemented by CARB made effective as of July 1, 2025, which accelerated carbon reduction targets and aim to create a better balance in the LCFS credit bank.

Since the amendment were finalized in June 2025, LCFS credit prices have increased over 30%. Conversely, average Federal D3 RIN prices for fiscal 2025 decreased 25% compared to the prior year.

With respect to expenses, combined operating and G&A expenses increased $23.7 million or 4.2% compared to the prior year. The increase was primarily due to higher payroll and benefit-related expenses, overtime and other variable operating costs to support the increased activities associated with incremental customer demand as well as higher variable compensation expense associated with the increase in earnings and costs related to the technology initiative that Mike mentioned earlier.

Net interest expense of $76.3 million for fiscal 2025 increased $1.7 million compared to the prior year due to higher average outstanding borrowings under our revolving credit facility, partially offset by lower benchmark interest rates. Total capital spending for fiscal 2025 of $72 million was $12.5 million higher than the prior year, primarily due to advancing construction efforts at our RNG facilities in Columbus, Ohio and Upstate New York.

For fiscal 2026, capital spending for our propane operations is expected to be consistent with historical levels, which is between $40 million to $45 million and CapEx for the RNG projects is expected to range between $30 million to $50 million -- excuse me, $30 million to $35 million with the spending concentrated in the first half of the fiscal year.

We expect capital spending at our RNG facility in Upstate New York to qualify for investment tax credit under the Inflation Reduction Act at a rate of 30%, which equates to a range of $7 million to $9 million of tax credits, which could be earned and monetized when the assets placed into service.

Turning to our results for the fourth quarter of fiscal 2025. Consistent with the seasonality of our business, we typically report a net loss in the fourth quarter. With that said, excluding the effect of certain noncash items in both years, we reported a net loss of $35.7 million for the fourth quarter or $0.54 per Common Unit, which was flat compared to the prior year. Adjusted EBITDA for the fourth quarter was $700,000, which was also essentially flat compared to the prior year.

Retail propane gallons sold during the fourth quarter increased 1.8% compared to the prior year. Total gross margin increased $5.3 million or 4% compared to the prior year, primarily due to higher volumes sold and higher unit margins. Combined operating and G&A expenses increased $5.8 million or 4.5%, primarily due to higher volume-related variable operating costs, higher variable compensation and costs related to our technology initiative.

Excluded from adjusted EBITDA for the fourth quarter of fiscal 2025 is an impairment charge of approximately $6 million to fully write down the carrying value of our investment in an early-stage energy technology company as well as income from the reversal of an earn-out reserve associated with the RNG acquisition. The earn-out was contingent upon the acquired assets achieving a certain EBITDA threshold over a certain period.

During the fourth quarter, we determined that the contingent consideration would not be earned. These noncash items were reported within other net statement of operations.

Turning to our balance sheet. During the fiscal year, we utilized a combination of cash flows from operating activities and net proceeds of $23.5 million in the issuance of Common Units under the ATM program to fund the propane acquisition for a total consideration of $53 million, growth capital expenditures of $25.5 million to advance the construction activities at our RNG production facilities and repayment of outstanding borrowings under our revolving credit facility of $1.8 million.

With the improvement in earnings and debt reduction, our consolidated leverage ratio for fiscal 2025 improved to 4.29x. We have more than ample borrowing capacity under our revolver to support the completion of our planned capital expansion projects as well as our ongoing strategic growth initiatives. As we continue to focus on the execution of our long-term strategic goals, we also stay focused on maintaining a strong balance sheet.

With that, I'll turn it back to Mike.

Thanks, Mike. As announced in our October 23 press release, our Board of Supervisors declared our quarterly distribution of $0.325 per Common Unit in respect to the first -- fourth quarter of fiscal 2025. That equates to an annualized rate of $1.30 per Common Unit. The quarterly distribution was paid yesterday, November 12, due to the Federal Reserve closing on the 11th for Veterans Day to our unitholders of record as of November 4.

Our distribution coverage continues to remain healthy at 2.13x for the trailing 12 months ended September 2025. I also want to take a moment to thank and honor our great American veterans for their service, including so many that are part of the Suburban Propane family now that we just passed Veterans Day.

So just a few closing remarks regarding our long-term strategy. Our long-term strategic growth plan remains to foster the growth of our core propane business while making strategic investments in lower carbon renewable energy alternatives through our Suburban renewable energy subsidiary, leveraging our core competencies in safety, customer service and logistics, especially in the localized energy distribution markets.

The energy evolution is a long journey, one that requires a pragmatic and balanced approach to identifying and fostering energy solutions that can lower greenhouse gas emissions and our country's overall carbon footprint. It requires solutions that can deliver energy that is reliable, affordable and sustainable. We have definitely seen a shift in the conversation that is benefiting the propane industry by recognizing propane's versatile, affordable, on-demand nature and its clean qualities as an immediate and long-term solution to helping lower the carbon footprint.

We are very well positioned to take advantage of this growing respect for propane given our operational and financial strength and stability. We are also maintaining our focus on innovation to ensure that Suburban Propane continues to be regarded as a trusted local distributor of energy for decades to come. That innovation includes our advancements in delivering renewable propane and renewable natural gas as direct drop-in replacements for their traditional energy equivalents.

The energy evolution is in the early innings. The investments we have made have been very measured and focused on long-term growth and sustainability. It is great to see a more pragmatic approach toward the energy evolution and also great to see a supportive regulatory and policy framework that contemplates a more deliberate and inclusive environment to drive down emissions over time and with an all-of-the-above philosophy for energy solutions.

We're very excited to be starting a new heating season, and our people and platform are very well prepared to handle whatever this year's weather dictates.

With that, I want to thank our more than 3,300 employees for helping make fiscal 2025 another outstanding year for Suburban Propane and for their unwavering commitment to safety for our customers, our employees and the communities we serve. And as always, I hope you and your families remain safe and healthy, and I wish everyone a very happy holiday season. We appreciate your support.

We'd now like to open the call up for questions. And Rob, if you could help us with that.

[Operator Instructions] And we have no questions. I will now turn the call back over to Mike Stivala for some final closing comments.

Great. Thank you, Rob. I think we said enough. We're excited about the new year, and we look forward to talking to everybody after our first quarter in February, and please have a safe and happy holiday season. Thank you.

This concludes today's conference call. Thank you for your participation. You may now disconnect.