Suburban Propane Partners Earnings Call NUGGETS: Wholesale Propane Pricing Environment, Blending Locations with Inergy

On Thursday, Suburban Propane Partners LP (NYSE:SPH) reported its third quarter earnings and discussed the following topics in its earnings conference call. Take a look.

Wholesale Propane Pricing Environment

Gabriel Moreen – Bank of America Merrill Lynch: Congrats on closing the transaction. Just Mike you said you’re comfortable with that $50 million number, still I’m wondering just for our purposes in terms of trying to model that out just will that be, you think that will be realized evenly over the next three years or is that going to be front or back end loaded just curious, if there is any timing color on that?

Michael J. Dunn, Jr. – President and CEO: Probably more back end loaded. However, we’ll start realizing synergies with next year’s fiscal year.

Gabriel Moreen – Bank of America Merrill Lynch: Then on the wholesale propane pricing environment, I know you had mentioned the potential benefit to margins going forward, just curious what you’re seeing out there from competitors in terms of their pricing strategies, what you see in real time and maybe what do you think they will do going forward and then also maybe a related question, given the decline in wholesale propane pricing do you think that will allow you to maybe be a little bit more aggressive in terms of volumes and new business given how much more benign that pricing environment has gotten?

Michael J. Dunn, Jr. – President and CEO: Lower prices don’t necessarily mean you’re going to improve your margins, okay. So, the answer to your aggressive nature has to keep margins in line. As far as a little bit of opportunity with respect to margins today, yeah, we’ve realized some as has the rest of the industry, but the industry is extremely competitive, and obviously very, very fragmented and with this past winter, people are still looking at their wounds and looking to deliver gallon. So, I’m not expecting any significant or material upside as a result of change in prices. You also have to keep in mind too, Gabe that natural gas is a potential competitor as more of its found.

Blending Locations with Inergy

Ronald Londe – Wells Fargo Securities: Congratulations on the acquisition, guys. Question here again on the potential number of blends that you have with Inergy’s service locations, can you give us a feel for how many locations that you have in total and how many of those locations you think might be blended together to help attain $50 million cost savings?

Michael J. Dunn, Jr. – President and CEO: $50 million, first of all, a significant part of it does come from the field, but a lot of it has to come – a lot of it will also come from the move from the decentralized environment to a more centralized environment. But as far as blends are concerned, we have in excess of 100 and it will probably be a two or three step process. It’s going to take time because we want to do it right and we want to be fair to everyone. But you will obviously take care of the obvious blends and then we’ll begin to expand the geography as we’ve done with Suburban and then we’ll address the non-shared environment, which is 11 states as we sit today with respect to the process. So, as I said, it’s a two to three-year process. We’re very confident that $50 million in synergies is achievable, but it comes in multiple directions, not just from blends.

Ronald Londe – Wells Fargo Securities: Also you mentioned the potential for using equity to help reduce – I assume reduce some of the debt. Can you give us some idea of size and timing of that?

Gabriel Moreen – Bank of America Merrill Lynch: Congrats on closing the transaction. Just Mike you said you’re comfortable with that $50 million number, still I’m wondering just for our purposes in terms of trying to model that out just will that be, you think that will be realized evenly over the next three years or is that going to be front or back end loaded just curious, if there is any timing color on that?

Michael J. Dunn, Jr. – President and CEO: Probably more back end loaded. However, we’ll start realizing synergies with next year’s fiscal year.

Gabriel Moreen – Bank of America Merrill Lynch: Then on the wholesale propane pricing environment, I know you had mentioned the potential benefit to margins going forward, just curious what you’re seeing out there from competitors in terms of their pricing strategies, what you see in real time and maybe what do you think they will do going forward and then also maybe a related question, given the decline in wholesale propane pricing do you think that will allow you to maybe be a little bit more aggressive in terms of volumes and new business given how much more benign that pricing environment has gotten?

Michael J. Dunn, Jr. – President and CEO: Lower prices don’t necessarily mean you’re going to improve your margins, okay. So, the answer to your aggressive nature has to keep margins in line. As far as a little bit of opportunity with respect to margins today, yeah, we’ve realized some as has the rest of the industry, but the industry is extremely competitive, and obviously very, very fragmented and with this past winter, people are still looking at their wounds and looking to deliver gallon. So, I’m not expecting any significant or material upside as a result of change in prices. You also have to keep in mind too, Gabe that natural gas is a potential competitor as more of its found.