Good day, and welcome to the Suburban Propane Partners, L.P. Fiscal 2021 Full Year and Fourth Quarter Results Conference Call. [Operator Instructions] Please note, this event is being recorded. This 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. The partnership has 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 its earnings press release, which can be viewed on the company's website. 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. I would now like to turn the conference over to Davin D'Ambrosio, Vice President and Treasurer. Please go ahead.

Thank you, Sarah. Good morning, everyone. Thank you for joining us this morning for our fourth quarter and fiscal 2021 full year earnings conference call. Joining me this morning are Mike Stivala, our President and Chief Executive Officer; Mike Kuglin, our Chief Financial Officer and Chief Accounting Officer; and Steve Boyd, our Chief Operating Officer. This morning, we will review our fourth quarter and fiscal 2021 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 annual report on Form 10-K for the fiscal year ended September 25, 2021, which contains additional disclosure regarding forward-looking statements and risk factors will be filed on or about November 24. Once filed, copies may be obtained on the investor overview page of the partnership's website at suburbanpropane.com or by visiting the partnership's filings 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 last night. Form 8-K is available on 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, everyone. Thank you for joining us today. First, on this Veterans Day, let me start by wishing all military veterans and of course, their families for their service and sacrifices to protect our freedoms. At Suburban Propane, through our SuburbanCares corporate pillar, we have a deep commitment to our military veterans community and are committed to hiring our Great American Heroes through our Heroes Hired Here program. Let me jump into some thoughts on the fiscal year we just ended and conclude at the end of our call on some reflection as we enter a new fiscal year. The fiscal year 2021 was another outstanding year for Suburban Propane. Customer demand was strong throughout much of the year from a combination of solid heat-related demand during the second quarter, normalizing demand in the commercial industrial customer sectors from the easing of COVID-19 restrictions and increased economic activity and positive momentum in our customer base growth and retention initiatives generating incremental new customer activity. The increased demand drove propane volumes higher by more than 4%. Our operating personnel did an exceptional job meeting and exceeding the needs of our customers while continuing to adhere to our enhanced COVID-19 health and safety protocols, maintaining their focus on the highest standards for safety in all of their daily activities and managing margins in a volatile commodity price environment. All of these positive factors contributed to a $22 million or nearly 9% improvement in adjusted EBITDA from $253.7 million last year to $275.7 million in fiscal 2021. In addition to the strong earnings, let me also take a moment to highlight a number of other significant accomplishments for Suburban Propane during fiscal 2021. First, we utilized excess cash flows to reduce debt by nearly $88 million, bringing our total leverage…

Thanks, Mike, and good morning, everyone. I'll start by focusing on our full year results and give a little 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 $43.1 million in fiscal 2021 compared to an unrealized loss of $400,000 in the prior year. The contracts associated with the open commodity hedges at the end of fiscal 2021 are expected to mature over the course of the fiscal 2022 heating season, and the valuation of the hedges is subject to change as commodity prices fluctuate. In addition to the unrealized adjustments on our hedges, I'm also excluding certain other noncash adjustments in both years as well as a loss in debt extinguishment resulted in the refinancing of our 2024 and 2025 senior notes and a $4.3 million charge recorded in the fourth quarter of 2021 related to the partnership's withdrawal from a multi-employer pension plan. We have included each of these items and a reconciliation of net income to adjusted EBITDA and in the press release and our public filings. Excluding these items, net income for fiscal 2021 was $101.9 million or $1.62 per common unit compared to $62.3 million or $1 per common unit in the prior year. Adjusted EBITDA for fiscal 2021 increased $22 million or 8.7% to $275.7 million compared to $253.7 million in the prior year. As Mike indicated, the improvement in earnings was driven by several key factors, including an increase in volumes sold, unit margin expansion and operating efficiencies that contributed to lower expenses on a per gallon basis. Retail propane gallons sold in fiscal 2021 were 419.8 million gallons, which was 4.2% higher than the…

Thanks, Mike. As announced in our October 21 press release, our Board of Supervisors declared our quarterly distribution of $0.325 per common unit in respect of the fourth quarter of fiscal 2021, and that equates to an annualized rate of $1.30 per common unit. The quarterly distribution was paid on November 9 to our unitholders of record as of November 2. So just a few thoughts on the current environment for propane. There's certainly been a lot of attention regarding the supply and pricing environment across the energy slate and specifically for propane as we head into a new heating season. And those concerns are real. Prices are up, inventories are down. Some good news, though. Over the past 3 weeks, propane has seen its best inventory build for this time of year since 2008. Production has increased slightly and exports pulled back about 15% from their peak levels over the summer. Where inventory levels were more than 20% lower than the 5-year average just a few weeks ago, they are now trending about 15% below the 5-year average. Given the inventory situation, spot propane prices are at their highest level for November since 2011. Therefore, there is a good reason for some of the concern over the trajectory of propane prices and the potential for regional supply constraints as we head into the heating season, but a lot will ultimately depend on the severity and sustainability of winter weather. That said, the current outlook for the upcoming winter calls for variations in different regions of the country, but generally cooler-than-average temperatures compared to last year's heating season. We are planning accordingly while also working with our customers on ways to help insulate their energy bills from the potential for higher prices. Given our scale, supply and logistics model and…

[Operator Instructions] Our first question will come from Ned Baramov with Wells Fargo.

I'll start with one on capital allocation. As you approach your 3.5x leverage target, are there any discussions with the Board on potential distribution increases or unit buyback plans that you could share?

Well, first, thanks, Ned, for the time this morning and your question. Look, obviously, we had a long conversation in July and made the decision to increase the distribution $0.10 on an annualized basis. We look at it every quarter. Right now, we still have some work to do relative to bringing our leverage down to our 3.5x target. But we also have a lot of strategic opportunities in the build-out of our renewable energy platform. So a lot will depend on what strategic initiatives materialize over the course of the coming months and how much of our excess cash flow we can allocate to funding those acquisitions without the need to borrow. Those are good opportunities for us to really leverage the strength of our balance sheet, leverage the strength of our cash flow generating capacity to fund our strategic growth, which has a heavy influence of building out a renewable energy platform. And I think that will provide long-term growth opportunities for suburban and our unitholders and ultimately lead to distribution growth down the road.

Got it. That's great. And then I guess, could you provide additional details on these strategic initiatives, specifically, do these relate to potential increases in your ownership in Oberon? Or are you referring to other assets when you talk about energy transition opportunities?

Yes. It's a little bit of both, Ned. Oberon is -- we've done a lot of work with them over the course of the last year. We have made additional investments in Oberon to support the business and to support moving forward with building out more capacity down the road for producing renewable DME from clean sources and significantly reducing the carbon intensity in the transportation sector. So it's a little bit of further investments in Oberon. And also, we've been clear that we're really evaluating all renewable energy technologies. And we're sort of looking more for small Oberon like investment opportunities where we can help foster a business that maybe is on the precipice of commercializing a real renewable product that can be a game changer in whatever component of the energy slate, whether it's natural gas, heating oil, propane, we're very close to a lot of different small start-up like companies that can use the benefit of our size and scale financial capacity, back office support to help them mature and get to a point of real commercialization similar to the activity that we've already proven with Oberon.

That's great. And then I guess, shifting gears to your core business. Could you provide an update on the propane M&A market? Has there been a change in how you think about acquisitions, the multiples you're willing to pay for assets and then, I guess, the asking prices of potential sellers?

Yes. So propane is our bread and butter and that helps generate the free cash flow that will allow us to have more capital to invest in renewable energy businesses. So we will continue to look for opportunities to make strategic investments to continue to grow the propane business. We also are doing an excellent job of organically growing our customer base, and we see opportunities to continue to do that, both through just new customer activities and tank sets, but also fostering some of the greenfield market expansions that we have actively been pursuing in different markets throughout the country. And certainly, we'll be very selective for the potential for M&A. I would say, over the past couple of years, the M&A market has -- in propane has really experienced an expansion in multiples that honestly doesn't make a lot of sense. And I think our opportunities are to continue to be disciplined, be in the game and look to find good strategic businesses that we can buy at a reasonable multiple, but we're going to maintain our discipline because our -- we see a lot of growth opportunity to begin to transform this business into a bigger percentage of renewable energy as the entire country is transitioning into more renewable fuels. So I think it's a long way to say we have a great business. We're going to continue to look to grow the business. We have multiple ways of doing that, which we're having great success at. We will look to be strategic but disciplined, and we'll look to utilize excess cash flow to pay down debt and fund our strategic initiatives.

[Operator Instructions] There are no further questions. This concludes our question-and-answer session. I would like to turn the conference back over ...

Thank you, Sarah. Thank you all for joining us again today, and I wish you all a very happy holiday season. We look forward to talking to you again in February after our first quarter results, and please be safe.

The conference has now concluded. To access a replay of this event, please dial (877) 344-7529 or (412) 317-0088 and when prompted, enter the code 10160600. Thank you for attending today's presentation. You may now disconnect.