STAMFORD, CT (December 10, 2008) -- Star Gas Partners, L.P. (the "Partnership" or "Star") (NYSE: SGU), a home energy distributor and services provider specializing in heating oil, today announced financial results for its fiscal 2008 fourth quarter and the twelve-month period ended September 30, 2008.
Three months ended September 30, 2008 compared to three months ended September 30, 2007
The Partnership reported a 20.5 percent increase in total revenue to $165.8 million, as an increase in home heating oil selling prices was partially offset by a decline in home heating oil volume. Home heating oil volume declined by 2.7 million gallons to 22.7 million gallons due to the elimination of low margin/unprofitable commercial accounts, conservation and net customer attrition.
Total gross profit increased $10.4 million due to higher home heating oil gross profit margins and an improvement in service profitability.
Operating income decreased $59.7 million to a loss of $89.7 million, as an unfavorable $70.1 million non-cash change in the fair value of derivatives was partially offset by a $10.4 million increase in gross profit. Operating expenses were unchanged at $49.9 million.
The net loss increased $58.8 million to $91.9 million, due largely to the increase in the non-cash change in the fair value of derivatives.
The Adjusted EBITDA loss decreased $9.5 million to $12.0 million, as the impact of higher per gallon margins and an improvement in service profitability more than offset the decline in home heating oil volume. Adjusted EBITDA is a non-GAAP financial measure (see below reconciliation) that should not be considered as an alternative to net income (as an indicator of operating performance) or as an alternative to cash flow (as a measure of liquidity or ability to service debt obligations), but provides additional information for evaluating the Partnership's ability to make the Minimum Quarterly Distribution. The Partnership is not required to begin accruing the Minimum Quarterly Distribution until February 2009, for the quarter ending December 31, 2008.
Star Gas Partners Chief Executive Officer, Daniel P. Donovan, stated, "Last quarter we discussed the challenges of operating our business in the face of tremendous recent heating oil price volatility - mostly to the upside, with wholesale prices increasing approximately $2.00 per gallon over a twelve-month time-frame. Since then, ironically, we have had the challenges of the opposite effect - extreme volatility to the downside, with prices falling approximately 60 percent since mid-summer.
"Despite the extreme price movements in both directions, I'm pleased to note that our entire organization has done an excellent job of pulling together and helping us manage through this time of unprecedented volatility. From Star's customer service representatives to our hard-working field personnel, all have been focused on offering our valued customers the highest quality service," stated Mr. Donovan.
Fiscal year ended September 30, 2008 compared to fiscal year ended September 30, 2007
The Partnership reported a 21.8 percent increase in total revenue to $1.5 billion, as an increase in home heating oil selling prices was reduced by a decrease in home heating oil volume. Home heating oil volume decreased by 25.5 million gallons to 351.1 million gallons, as the additional volume provided by acquisitions was more than offset by the effects of net customer attrition, conservation, slightly warmer temperatures and other factors.
Operating income decreased $51.8 million to $3.3 million, due to an unfavorable non-cash change in the fair value of derivative instruments of $41.2 million and an increase in total operating expenses (including depreciation, amortization) of $10.6 million. Operating expenses rose largely due to an increase in the reserve for doubtful accounts ($6.2 million), the additional expenses associated with stand-alone acquisitions and the absence of a weather insurance benefit. During fiscal 2007, the Partnership recorded a benefit of
$4.3 million under its weather insurance contract due to warmer than normal temperatures during the weather insurance contract period. The Partnership did not record any benefit under its weather insurance contract in fiscal 2008.
Net income declined $51.6 million to a loss of $13.4 million.
Adjusted EBITDA decreased $12.9 million to $55.5 million, as the additional EBITDA provided from acquisitions and higher per gallon home heating oil margins was more than offset by the reduction in EBITDA attributable to the impacts of the decline in home heating oil volume, higher bad debt expense and the absence of any weather insurance benefits.
Mr. Donovan, concluded, "Looking back at fiscal 2008, we once again achieved a reduction in Star's net customer attrition level, lowering it to 4.4 percent, compared to 5.0 percent in fiscal 2007. To help offset the loss of customers, we have continued to focus on making selective, opportunistic acquisitions that meet management's strict criteria. Accordingly, over the past 12 months we acquired eight home heating oil dealers, plus a home security business, adding an approximate 9,500 additional customers."
REMINDER: Star Gas management will host a free webcast open to the general public and a conference call on December 11, 2008 at 11:00 a.m. (ET). The webcast is available at http://www.star-gas.com/MediaList.cfm. The conference call dial-in is 212/231-2925.
Star Gas Partners, L.P., is the nation's largest retail distributor of home heating oil. Additional information is available by obtaining the Partnership's SEC filings at www.sec.gov and by visiting Star's website at www.star-gas.com where unitholders may request a hard copy of Star's complete audited financial statements free of charge.
Forward Looking Information
This news release includes "forward-looking statements" which represent the Partnership's expectations or beliefs concerning future events that involve risks and uncertainties, including those associated with the effect of weather conditions on our financial performance; the price and supply of home heating oil; the consumption patterns of our customers; our ability to obtain satisfactory gross profit margins; our ability to obtain new customers and retain existing customers; our ability to make strategic acquisitions; the impact of litigation; the continuing residual impact of the business process redesign project and our ability to address issues related to that project; our ability to contract for our current and future supply needs; natural gas conversions; future union relations and the outcome of current and future union negotiations; the impact of future environmental, health and safety regulations; the ability to attract and retain employees; customer creditworthiness; counterparty creditworthiness; marketing plans; and general economic conditions. All statements other than statements of historical facts included in this news release are forward-looking statements. Without limiting the foregoing, the words "believe," "anticipate," "plan," "expect," "seek," "estimate" and similar expressions are intended to identify forward-looking statements. Although the Partnership believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to be correct and actual results may differ materially from those projected as a result of certain risks and uncertainties. Important factors that could cause actual results to differ materially from the Partnership's expectations ("Cautionary Statements") are disclosed in this news release and in the Partnership's Annual Report on Form 10-K for the year ended September 30, 2008, including without limitation and in conjunction with the forward-looking statements included in this news release. 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 the Cautionary Statements. Unless otherwise required by law, the Partnership undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise after the date of this news release.
Robert Rinderman, Norberto Aja
Jaffoni & Collins Incorporated
212/835-8500 or SGU@jcir.com