Davin D'Ambrosio - Vice President and Treasurer Mike Stivala - President and Chief Executive Officer Mike Kuglin - Chief Financial Officer and Chief Accounting Officer

Gabe Moreen - Bank of America Brian Brungardt - Stifel Mike Gyure - Janney Montgomery Scott Sharon Lui - Wells Fargo

Ladies and gentlemen, thank you for standing by and welcome to the Suburban Propane's Second Quarter 2017 Financial Results Conference Call. [Operator Instructions] And now I will read the Safe Harbor statement. 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 operation. 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. Please go ahead, sir. Davin D'Ambrosio: [Technical difficulty] Second quarter earnings conference call. Joining me this morning is Mike Stivala, President and Chief Executive Officer; Mike Kuglin, our Chief Financial Officer and Chief Accounting Officer; and Steve Boyd, our Senior Vice President of Operations. The purpose of today’s call is to review our second quarter financial results along with our current outlook for the business. As usual, once we have concluded our prepared remarks, we will open the session to questions. However, before getting started, I would like to briefly reemphasize what the operator has just explained about forward-looking statements. Additional information about factors that could cause actual results to differ materially from those discussed in forward-looking statements is contained in the Partnership's SEC filings, including its Form 10-K for the fiscal year ended September 24, 2016, and its Form 10-Q for the period ended March 25, 2017, which will be filed by the end of business today. Copies of these filings 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 furnished to the SEC this morning. The Form 8-K can be accessed through a link on our website at suburbanpropane.com. At this point, I would like to turn the call over to Mike Stivala for some opening remarks. Mike?

Great. Thanks, Davin, and thank you all for joining us this morning. The fiscal 2017 hearing season as a whole shaped up to be essentially comparable to last years’ record warm winter. And in many parts of the country average temperatures were significantly warmer than last year. Looking at our first and second quarters combined, the heating degree day index was reported at 14% warmer than normal and that compares to the prior year which was 18% warmer than normal. However, the weather pattern in this year’s heating season was much more challenging than last year. The 2016, 2017 heating season consisted of record warm temperatures in each of the first two months of the first and second quarters and two separate three weeks stretches of cold weather towards the end of both December and March. The second quarter itself was reported at 15% warmer than normal and 2% warmer than the prior year’s second quarter. And in some of our service territories particularly in the Mid-west and southeast average temperature was much as 30% warmer than normal and 16% warmer than the prior year. This two year stretch of record warm weather has been unprecedented period for the industry and has had an obvious effect on customer demand for heating purposes. As we’ve stated throughout this extended stretch of record warm temperatures the fundamentals of our business continue to be sound, meaning we have a flexible operating model which allows us to be nimble. We can see to manage and control our costs and capital spending, our field personnel have done an excellent job managing margins during evolvement of commodity price environment and our customer base has benefitted from our growth and retention initiatives. In fact with the short burst of colder weather experienced in the latter parts of December and March, our volumes and earnings responded strongly as expected, which is a testament to the strength and readiness of our platform. All that being said, we are pleased to report an improvement of $10 million or nearly 5% in adjusted EBITDA for the first half of fiscal 2017 compared to the prior year despite the more challenging weather scenario. Let me make a few comments on our balance sheet liquidity. Certainly this unprecedented back-to-back record warm winter scenario has stretched our balance sheet temporarily due to lower earnings coupled with higher borrowings to fund our cash needs. Nonetheless, conservative balance sheet management has always been a core philosophy of ours, one that has served us well in managing through challenging environments in the past as well as through this prolonged stretch of record warm weather. We are committed to maintaining a strong balance sheet. And let me highlight a couple of proactive steps we have already taken to reduce interest costs and provide added flexibility. First, during the quarter we took advantage of the continued low interest rate environment to refinance our previous 7 3/8% Senior Notes which were due to mature in 2021 with a new issuance of 5 7/8% Senior Notes due 2027. This refinancing extended the maturity on $350 million of senior debt by nearly six years and reduces our annual interest cost by approximately $5 million. Second, as announced in our press release this morning, we proactively worked with our bank group to amend our revolving credit facility to provide ourselves with added flexibility for the next 15 months in managing our leverage and liquidity. We received strong support from our bank group which is a testament to their confidence and our operating philosophy and business fundamentals. The amendment provides added cushion under the consolidated leverage test by increasing the maximum leverage threshold from the current level of 5.5 times to 5.95 times starting with the fiscal quarter ending June 2017. Through each of the fiscal quarters ending June 2018 stepping down to five and three quarter times for the quarter ending September 2018 until returning for the current threshold commencing with the quarter ending December 2018. Now let me emphasize this amendment was not necessary in order for Suburban Propane to remain in compliance with our current covenant threshold based on our outlook for the business. Nonetheless, we felt it was a prudent measure that will give us added flexibility to support our cash needs through the remainder of this fiscal year, provide us with added liquidity to continue to invest in the long term growth of Suburban and allow us to gain visibility into next year’s heating season at added flexibility that makes good sense and didn’t cost us much. In a moment, I’ll come back for some closing remarks, however at this point, I’d like to turn the call to Mike Kuglin to discuss our second quarter results and some more detail. Mike?

Thanks, Mike and good morning everyone. Now let me start by providing the details of our second quarter results and then add a little context to the year-to-date results that Mike referenced in his opening remarks. To be consistent with previous reporting, as I discussed our second quarter results, I am excluding the impact of unrealized non-cash, mark-to market adjustments on derivative instruments used in risk management activities, which resulted in an unrealized gain of $2.5 million in the second quarter of fiscal 2017 compared to an unrealized loss of $739,000 in the prior year. Additionally, net income and EBITDA for the second quarter of fiscal 2017, included a loss and debt extinguishment of $1.6 million associated with the refinancing of our 2021 Senior Notes compared to a $292,000 on debt extinguishment in the prior year associated with the refinancing of our revolving credit facility. Excluding these items, net income for the second quarter of fiscal 2017 would have amounted to $87.9 million, or $1.44 per common unit compared to net income of $93 million or $1.53 per common unit in the prior year’s second quarter. Adjusted EBITDA for the second quarter of fiscal 2017 amounted to $138 million compared to $145.1 million in the prior year. As Mike indicated record warm weather was once again the story for both the first and second quarters of fiscal 2017. In fact, the 2016, 2017 winter is now considered the second warmest on record. As a result of this challenging weather pattern and resulting lack of customer demand for heating purposes, retail propane gallons sold in the second quarter of fiscal 2017 of 153.9 million gallons decreased 7.7 million gallons, or 4.8%, compared to the prior year. Sales of fuel oil and other refined fuels in the second quarter of fiscal 2017 of 13 million gallons decreased 2.3% compared to the prior year. Similar to the first quarter the first two months of the second quarter were reported as record warm, and in certain markets temperatures were dramatically warmer than normal. Only our North East and West Coast regions experienced somewhat favorable weather for the quarter compared to the prior year. Overall, average temperature across all of our service territories for the second quarter of fiscal 2017 were 15% warmer than normal and 2% warmer than the prior year. When colder temperatures arrived in mid-March – end of the quarter, our volumes responded strongly. In the commodity markets, the rallying of propane prices have started in the first quarter continued into the early part of the second quarter and created a volatile and challenging environment. Posted prices basis Mount Bellevue reached a high of $0.93 per gallon in early February before settling back down around $0.61 per gallon at the end of the quarter. The average posted price for the quarter was $0.72 per gallon compared to $0.38 per gallon in the prior year second quarter, an increase of nearly 85%. Total gross margins of $260.6 million for the second quarter of fiscal 2017 were $7.2 million or 2.7% lower than the prior year primarily due to lower volume sold. Unit margins for the second quarter were flat to the prior year. With respect to expenses, combined operating and G&A expenses of $122.6 million were essentially flat to the prior year. Savings from initiatives taken last year to reduce our fixed cost including reduced payroll and vehicle account were offset by higher reserves associated with our general insurance, higher fuel cost to operate our fleet and higher bad debt expense as a result of higher commodity prices. Net interest expense of $17.5 million for the second quarter of fiscal 2017 decreased $1.4 million primarily due to savings from the refinancing for the partnerships previously outstanding 2021 Senior Notes that Mike mentioned earlier. Total capital spending for the second quarter of fiscal 2017 amounted to $10.4 million, including $3 million of maintenance capital compared to total CapEx of $11.8 million in the prior-year. Looking at the year-to-date performance, as Mike mentioned four of the six months were reported as record warm. Despite a more challenging weather pattern, propane volume of 272.5 million gallons were slightly ahead for the prior year. Gross margins of $459.3 million were $6.9 million or 1.5% higher than the prior year while operating and G&A expenses of $237 million were 1.3% below the prior year. Adjusted EBITDA for the first half was $222.3 million which was $10 million or nearly 5% higher than the prior year. In addition to the improvement in adjusted EBITDA our distributable cash flow in the first half of fiscal 2017 benefitted from savings, interest expense of $1.4 million have lower capital expenditures which were $7.5 million or 30% less in than the comparable period in the prior year. Turning to our balance sheet, we have now moved through our stores the high period of seasonal working capital needs [Indiscernible] quarter we funded working capital, capital expenditures and costs associated with our senior note refinancing from operating cash flow and $26.4 million of borrowings on our revolver. We ended the second quarter with total borrowings of $129.3 million on our revolver which includes the typical $100 million that we have historically held outstanding. Mike was going to address the proactive amendment to our revolving credit facility, so I won’t comment further on that other than to once again say thank you to our bank group for the full support provided. While our leverage profile continue to be elevated compared to our historical range given the impact on earnings from the sustained record warm temperatures. The outlook for the current year leads us to believe that we have continued to be within the covenant threshold in effect prior to repeat what Mike has already said, this amendment provides us with added cushion, flexibility and liquidity. Back to you, Mike.

Thanks, Mike. As announced in our April 20 press release, our Board of Supervisors declared our quarterly distribution of $0.8875 per common unit in respect to our second quarter of fiscal 2017 that equates to an annualized rate of $3.55 per common unit. The quarterly distribution will be paid on May 7 to our unit holders of record as of May 02. There is no doubt that this unprecedented back-to-back stretch of record warm weather has presented many challenges for operating personnel and has stretched our balance sheet. However, our operating our flexible operating model unwavering focus on delivering exceptional customer service and the strength of our balance sheet coming into this two year period when our consolidated leverage was at 3.6 times based on the level of earnings for fiscal 2015. These are all attributes that have helped us navigate the challenges. As we have stated in the past, a return to a more normal weather pattern will increase customer demand, improve our earnings profile and naturally begin to bring our leverage metrics closer to our target levels. This was evident when we did experience some amount of normal weather in the latter parts of both December and March of this fiscal year as customer demand surged and our earnings responded. We are also proud of our ability to improve our adjusted EBITDA on a year-to-date basis in what was considered an even less favorable weather pattern compared to last year and believe that the amendment to our revolver is a prudent step in giving us added flexibility and liquidity. We’ve always been known for our conservative approach to managing our balance sheet and as I stated in my opening remarks, we remain committed to maintaining a strong balance sheet. Over the course of the next several months as we prepare our business for next year’s heating season, we will be challenging ourselves to think about our business a little differently, particularly as we look to gauge customer demand in light of the recent warm weather trends. And not just the past two winters, but a warming trend that we have experienced over the last decade, all with the goals of providing adequate cushion against the potential for future weather driven demand softness and adding flexibility for continued investment in our long term growth initiatives. Beyond the steps already taken to help improve earnings and provide added liquidity, we will be evaluating additional measures to help restore our balance sheet strength, improve our distribution coverage and further enhance our liquidity position. We continue to manage this business for the long term and balance sheet strength is key to our long term success. Finally, let me take this time to thank the more than 3400 employees of Suburban Propane for maintaining their focus on the safety and comfort of our customers, on our customer base growth and retention initiatives and on managing the things they can control throughout this extended challenging operating environment. And as always, we appreciate your support and attention this morning. I would now like to open the call up for questions and David if you would mind helping me with that.

Yes. And our first question comes from the line of Gabe Moreen with Bank of America. Please go ahead.

Morning guys. Mike, maybe I can follow up on the last comments you just made in terms of thinking about the business differently and giving yourself more cushion. Can you just talk about I guess in terms of priorities, does that mean capital raised, does that mean real value hitting distribution, cost savings or scaling the business if you just maybe talk about I guess ranking those in sort of four digits you are looking at things.

Yes thanks, Gabe. Look, we’ve always had a reputation for being excellent and efficient operators in the industry and obviously that we’ve always been good stewards of our balance sheet and the fundamentals of this business continue to be sound. So the path of the challenges that we’ve had the past two years have certainly caused us to step back and think about our business. For example, one of the expectations for demand in light of the recent weather trends to the extent of continued warm weather, what should our operating model and our cost structure look like, the balance flexibility while ensuring our platform continues to be able to deliver the high level of service that our customers deserve, what’s the right target leverage, what the right target distribution coverage to provide adequate cushion to space the potential for further softness and demand, other non-strategic assets that could make sense to monetize and it’s all part of just running a business for the long term. These are the obvious questions that we should be asking ourselves, and you touched on all of them. So, I guess clearly the most important thing would be is if we can get a return to more normal weather that would help increase customer demand, improve the earnings and naturally begin to reduce leverage. So in the end the strong balance sheet supports our growth and helps insulate the business from weather driven demand volatility. And so there’s a number of things that we can do to help achieve our long term objectives and as you stated, you rattled off a bunch of things and I think we’ll be evaluating all aspects of our business to help improve all of our key performance metrics.

Mike, do you think you need to do that. You obviously [Indiscernible] a covenant even if you don’t think you need it, you’ve given yourself breathing room I think in terms of maybe getting yourself to next winter to see if you actually get some [summons] of where they are showing up, do you think you need to revaluate things before you get to next winter or you are willing to say, let’s get to next winter and maybe hopefully hoping an [Indiscernible] third in a row, hopefully warm weather.

Well certainly a third in a row weather changes a lot of things in terms of demand and I think the whole industry would have to sort of step back and revaluate the weather demand. So, but for us I think we’ll take a hard look at our business every year at this time, okay. This is our budget season. We take the summer and step back and revaluate the business, so I don’t think this is anything overly new Gabe. I think as you said that the revolver amendment that we did certainly provides a lot of flexibility to gain visibility and to next years’ heating season, but we’re going to be going through all of this over the course of the next several months, just so that we are prepared and it’s not a reactive move just because weather didn’t show up. We want to be proactive and be prepared for call it the worst case scenario which we thought last year, worst case scenario was a repeat weather, well now we’ve lived through that and frankly we are extremely proud of our performance through that, okay. If you look at our metrics through this prolonged stretch to be able to report a modest increase in volumes sold year-over-year through the first half of the year and a 5% improvement in adjusted EBITDA and what we consider to be a more challenging environment I think that speaks to the quality of our people and the quality of our operating platform and frankly that our customer base continues to be well intact. So, we are built for the long term. We have many opportunities for further growth ahead of us, we are going to continue to position the balance sheet for the next phase of growth and as I mentioned in the opening remarks, we will think about business a little bit differently so that we are prepared to be proactive as opposed to reactive as the new heating season approaches.

Thanks Mike. And then I guess sort of related to that when you think about I guess building inventory going into next season, can you just talk about I guess or help us frame are you going to be trying to build less inventory, what you think you may need to draw and use from a working capital perspective kind of going into winter heating season?

No, I don’t think we are going to look at the preparation for next year’s heating season from a supply perspective any differently than we always do. We contract for annual contracts with our suppliers. We have excellent relationships with all of our suppliers and we generally take delivery of the product and price the product at the time of delivery. We will typically contract as we’ve always said about 70% of our annual needs under one year supply arrangements so I don’t expect that that will change dramatically. And certainly we’re sort of in a period right now where the overall inventory levels of propane in the country are sort of well below that 20% below the five year average for this time of the year. So I think the – if we start to see a significant increase in weather demand, weather driven demand, next heating season if we go in with lower inventories in the country you could be in for some price shocks if you will. So we’ll be thinking about that and what the impact that that might have on customer demand just from a conservation perspective, but other than that planning for our supply isn’t going to change working capital needs and liquidity, we don’t have any concern with that particularly with the cushion that we just gave ourselves with this revolver, so, nothing dramatic Gabe.

All right, good luck. Thanks Mike.

Our next question comes from the line of Brian Brungardt of Stifel. Please go ahead sir.

Yes, good morning guys.

Hey Brian.

I guess to keep on this credit facility, could you provide some color as to what led to the drop of $26 million in the quarter as if memory serves me correctly you did not draw on the revolver this time last year and the volumes sold [Indiscernible] declined year-over-year?

Yes Brian, it’s Mike Kuglin. So we drew about $30 million during the first half of the year. Of the $30 million $17 was used to fund the refinancing of the 2021 Senior Notes, and the remainder was used to fund what capital and CapEx. If you look at the working capital year-over-year our working capital increased about $11 million year-over-year as a result of the rising commodity prices. As I mentioned earlier propane prices were up 85% year-over-year so that gave rise to an increase in the investment working capital so those were the pieces – to the $30 million.

Got it. And then switching gears here a little bit. Following the second consecutive record warm winters here, just curious on where you see the competitive landscape a peer of yours recently discussed targeting market share at the expense of pricing potentially. Meanwhile, I imagine there were some competitors which may be facing more difficult decisions than perhaps you guys following this most recent winter.

Yes, I think for us we control, we can control okay, and that’s what I talked about is we know how to manage the business and run the business for the long term. We are value driven supplier to our customers and our key go-to-market strategy is to make sure that our customers understand the value proposition that we bring to them and we are not necessarily going to compete on price. You’re right. I think in this industry generally what when you see this kind of demand disruption from weather historically a lot of players in the industry sort of revert to price just to bring volume back in and so that’s nothing new that this industry hasn’t experienced for decades. And so, I think what I mentioned earlier about our customer base remaining intact is really a testament to all of the investments that we’ve made in technology and in training our personnel to interface with our customer base in a positive way so that when those priced challenges come to the forefront we are very well positioned to be able to defend our value proposition and continue to keep our customers happy and frankly to grow our customer base. So we will prefer that price competition wasn’t so stringent in that regard but we are very very well prepared for it and we are confident in our value proposition.

Thanks for the color. That’s all I had.

Thanks Brian.

[Operator Instructions] Our next question comes from the line of Mike Gyure with Janney Montgomery Scott. Please go ahead sir.

Yes can you guys talk a little bit on your capital spending for maybe the backhalf of the year and kind of what you are looking at as far as maintenance on the growth side and maybe specifically on the growth side what projects you are looking at I assume they are in propane, but maybe expand on that a little bit?

I would say there is nothing significant if you were to look at the first half of the year, it’s probably a fair indication as to what you could expect for the back half of the year.

And from a growth perspective most of our growth comes from new customer activity. So that’s really just going to depend on that activity and I expect to see something comparable to as Mike said to what we experienced in the first half.

Great. And then maybe I know you don’t a whole lot about the natural gas and electricity side of your business but that looks like a good quarter there, can you talk a bit about the trends you are seeing in that business and I guess what you are thinking maybe longer term?

Yes, we’ve done a really nice job of growing that business, part of that is extending into new markets. We’ve always been a marketer in New York and Pennsylvania stronger in New York or bigger in New York if you will than in Pennsylvania but we’ve been in Pennsylvania since we started this business a couple of decades ago. And we are now expanding into more utility territories in Pennsylvania and that has generated customer growth. We are also a pretty unique marketer in that space in both New York and Pennsylvania in terms of our value proposition and the value added services that we provide to our customers and so that has served us well in continuing to maintain and in some instances do a nice job growing our customer base. So as we get into the summer that business also has some counter seasonality because of the electricity side of the equation. So if we get a warm summer I guess you could expect more activity for cooling.

Great. Thanks guys.

Sure. Thanks Mike.

Our next question comes from the line of Sharon Lui with Wells Fargo. Please go ahead.

Hi, good morning.

Hi, Sharon.

Hi. So I guess similar to your competitor higher vehicles fuel cost impacted our back stream in the quarter. Just wondering if you can just touch on your approach of managing such cost especially in a warm weather environment?

Yes, we don’t have a specific hedging program in place to hedge our diesel for our trucks, Sharon. So what we do as most trucking companies if you will or distribution companies and the majority of our competitors in the industry we do have a fuel surcharge that helps us recover some of the incremental impact from that in our business. So when you are looking at the CapEx line that you are seeing an increase in there but there’s also some revenue from fuel surcharge as well.

Okay. And then I guess with regards to the credit facility, how should we factor in I guess the incremental cost for the amendment and maybe if you could just touch on what your leverage metrics were for the quarter?

With respect to the cost, we did add additional tier for when for if the leverage ratio gets above 5.5 times which we are currently not modeling. So I would not expect a significant increase or an increase at all if you will with respect to the cost, certainly it’s going to depend on the amount of borrowings that we had outstanding, but the savings that we just realized the result of the refinancing of the 2021Senior Notes would certainly more than offset any incremental cost associated with elevated levels of borrowing.

Yes and I think that was a great indicator from our banks that this was a fairly simple amendment, there was no push back that we needed to [increase the adders] to LIBOR for our current leverage structural’s other than if we do get to a point where we exceed our 5.5 times threshold which is what our current or maximum requirement was that’s the only time that higher cost kick in and our current, we ended the quarter with about 5.2 times leverage. So we had plenty cushion to our threshold to 5.5 anyway, and so that was a slight increase from where we were last year which was around 5.1 times.

Okay, great. And I guess the last question just an update on views on M&A uptake for acquisitions.

Yes, I mean look this year has been challenging in a sense that it’s challenging to manage through that kind of a business and the impact that that has [constructing] the balance sheet but that has not changed our focus on continuing to look for growth opportunities and in particular acquisition opportunities we have a couple of things that we are continuing to look at right now in the propane space and I think that’s another reason why the added liquidity and flexibility under the revolver will help, because as I said a couple of times this morning this environment has unfortunately stretched the balance sheet but it hasn’t changed the our focus. So....

Okay, great. Thank you.

Thank you, Sharon.

And there are no further questions.

All right, great. Well thank you Davin for your help this morning and thank you all for joining us again and we look forward to our discussions again in August following our third quarter results.

Ladies and gentlemen, this conference will be available for replay today beginning at 11:00 AM. You may access this replay by dialing 1-800-475-6701 or for long distance 320-365-3844. The access code to listen to the replay is 422527 and the primary phone number to access the replay is 1-800-475-6701. That does conclude our conference for today. Thank you again for using the AT&T executive teleconference service. You may now disconnect.