Star Group Partners, L.P.

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Star Gas Partners, L.P. Reports Fiscal 2010 First Quarter Results

STAMFORD, Conn., Feb 3, 2010 (GlobeNewswire via COMTEX News Network) -- 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 2010 first quarter, the three-month period ended December 31, 2009.

For the fiscal 2010 first quarter, Star reported a 13.4 percent decrease in total revenues to $348.8 million, compared with total revenues of $402.9 million in the year ago period, due to a decline in home heating oil volume of 13.0 percent and lower selling prices.

Home heating oil volume for the fiscal 2010 first quarter decreased 14.2 million gallons to 95.4 million gallons due to the impacts of warmer temperatures, net customer attrition and conservation. Temperatures in Star's geographic areas of operations for the fiscal 2010 first quarter were 5.0 percent warmer than the fiscal 2009 first quarter and 2.2 percent warmer than normal, as reported by the National Oceanic Atmospheric Administration.

During the three-month period ended December 31, 2009, operating income increased $34.0 million to $26.6 million.

The Partnership reported net income of $12.0 million, a $20.0 million increase versus the fiscal 2009 first quarter, reflecting a favorable change in the fair value of derivative instruments of $40.2 million and lower operating expenses of $11.0 million (including lower delivery and branch, depreciation, and amortization expenses, along with increased net service gross profit), partially offset by an increase in non-cash deferred income tax expense of $9.3 million and lower product gross profit of $17.3 million. During the first quarter of fiscal 2009, Star recorded a gain of $3.5 million in connection with repurchase of a portion of its Senior Notes, the Partnership did not repurchase any of its Notes during the first quarter of fiscal 2010.

Adjusted EBITDA decreased $8.8 million to $26.7 million, as compared to $35.5 million for the three months ended December 31, 2008.

"As expected, our adjusted EBITDA for the first quarter of fiscal 2010 declined as both temperatures and home heating oil per gallon margins normalized," said Dan Donovan, Star Gas Partners Chief Executive Officer. "However, we were pleased that our ongoing effort to reduce losses and improve net customer attrition has gained some traction. We applaud all our employees in the field and the office who remain committed to providing superior customer service, leading to these strong results.

"As previously announced, we have increased our quarterly distribution by 7.4 percent and are happy to report that the Partnership will pay a distribution of $0.0725 per common unit on February 12, 2010 to holders of record February 4, 2010. In addition, on February 19, 2010, we expect to complete the redemption of $50 million of our Senior Notes, saving the Partnership approximately $5 million in interest annually. We continue to evaluate our capital structure and, to date, have repurchased 4.9 million common units out of 7.5 million authorized. Given our strong balance sheet, we continue to take the appropriate steps to increase shareholder value and improve the Partnership's long-term financial performance."

EBITDA and Adjusted EBITDA (Non-GAAP Financial Measures)

EBITDA (Earnings before net interest expense, income taxes, depreciation and amortization) and Adjusted EBITDA are non-GAAP financial measures that are used as supplemental financial measures by management and external users of our financial statements, such as investors, commercial banks and research analysts, to assess:

  --  our compliance with certain financial covenants included in our debt
      agreements;
  --  our financial performance without regard to financing methods, capital
      structure, income taxes or historical cost basis;
  --  our ability to generate cash sufficient to pay interest on our
      indebtedness and to make distributions to our partners;
  --  our operating performance and return on invested capital as compared to
      those of other companies in the retail distribution of refined petroleum
      products business, without regard to financing methods and capital
      structure; and
  --  the viability of acquisitions and capital expenditure projects and the
      overall rates of return of alternative investment opportunities.


Adjusted EBITDA is calculated as earnings from continuing operations before net interest expense, income taxes, depreciation and amortization, (increase) decrease in the fair value of derivatives, gain or loss on debt redemption, goodwill impairment, and other non-cash and non-operating charges. Management believes the presentation of this measure is relevant and useful because it allows investors to view the Partnership's performance in a manner similar to the method management uses, and makes it easier to compare its results with other companies that have different financing and capital structures. In addition, this measure is consistent with the manner in which the Partnership's debt covenants in its material debt agreements are calculated. Both the Partnership's 10.25% Senior Note agreement and its bank credit facility contain covenants that restrict equity distributions, acquisitions, and the amount of debt it can incur. Under the most restrictive of these covenants, which is found in the bank credit facility, the agent bank could step in and control all cash transactions for the Partnership if we failed to comply with the minimum availability or the fixed charge coverage ratio. The Partnership is required to maintain either availability (borrowing base less amounts borrowed and letters of credit issued) of $43.5 million (15% of the maximum facility size) or a fixed charge coverage ratio of 1.1 (Adjusted EBITDA being a significant component of this calculation). This method of calculating Adjusted EBITDA may not be consistent with that of other companies and should be viewed in conjunction with measurements that are computed in accordance with GAAP.

Each of EBITDA and Adjusted EBITDA has its limitations as an analytical tool, and it should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP. Some of the limitations of EBITDA and Adjusted EBITDA are:

  --  EBITDA and Adjusted EBITDA do not reflect our cash used for capital
      expenditures;
  --  Although depreciation and amortization are non-cash charges, the assets
      being depreciated or amortized often will have to be replaced and EBITDA
      and Adjusted EBITDA do not reflect the cash requirements for such
      replacements;
  --  EBITDA and Adjusted EBITDA do not reflect changes in, or cash
      requirements for, our working capital requirements;
  --  EBITDA and Adjusted EBITDA do not reflect the cash necessary to make
      payments of interest or principal on our indebtedness; and
  --  EBITDA and Adjusted EBITDA do not reflect the cash required to pay
      taxes.


REMINDER: Star Gas management will host a conference call and webcast tomorrow at 11:00 a.m. (ET). Conference call dial-in is 888-208-1332 or 913-312-0658 (for international callers). A webcast is also available at www.star-gas.com/events.cfm and at www.vcall.com.

About Star Gas Partners, L.P.

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 unit holders 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; 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 Quarterly Report on Form 10-Q for the fiscal quarter ended December 31, 2009 and its Annual Report on Form 10-K for the year ended September 30, 2009, 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.

  STAR GAS PARTNERS, L.P. AND SUBSIDIARIES
  CONDENSED CONSOLIDATED BALANCE SHEETS

                                     December    September
                                        31,         30,
  (in thousands)                       2009         2009
  --------------------------------  -----------  ---------
                                    (unaudited)
  ASSETS
  Current assets
   Cash and cash equivalents            $98,671   $195,160
   Receivables, net of allowance
    of $6,848 and $6,267,
    respectively                        133,518     58,854
   Inventories                           72,023     62,636
   Fair asset value of derivative
    instruments                          19,796     14,676
   Current deferred tax asset, net       32,067     30,135
   Prepaid expenses and other
    current assets                       24,780     15,437
                                    -----------  ---------

    Total current assets                380,855    376,898
                                    -----------  ---------

  Property and equipment, net            37,727     37,494
  Long-term portion of accounts
   receivables                              644        504
  Goodwill                              182,942    182,942
  Intangibles, net                       18,396     20,468
  Long-term deferred tax asset,
   net                                   24,851     36,265
  Deferred charges and other
   assets, net                            9,001      9,555
                                    -----------  ---------

   Total assets                        $654,416   $664,126
                                    ===========  =========

  LIABILITIES AND PARTNERS'
   CAPITAL
  Current liabilities
   Accounts payable                     $25,217    $17,103
   Fair liability value of
    derivative instruments                1,696        665
   Accrued expenses and other
    current liabilities                  68,350     64,446
   Unearned service contract
    revenue                              45,408     37,121

   Customer credit balances              52,363     74,153
                                    -----------  ---------

    Total current liabilities           193,034    193,488
                                    -----------  ---------

  Long-term debt                        133,059    133,112
  Other long-term liabilities            31,570     31,192

  Partners' capital
   Common unitholders                   322,366    332,340
   General partner                          341        309
   Accumulated other comprehensive
    income (loss), net of taxes        (25,954)   (26,315)
                                    -----------  ---------

    Total partners' capital             296,753    306,334
                                    -----------  ---------
   Total liabilities and partners'
    capital                            $654,416   $664,126
                                    ===========  =========

  STAR GAS PARTNERS, L.P. AND SUBSIDIARIES
  CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

                                            Three Months Ended
                                                December31,
                                           ---------------------

  (in thousands, except per unit data)        2009        2008
  ---------------------------------------  -----------  --------

  Sales:
    Product                                   $301,765  $354,267

    Installations and service                   47,054    48,583
                                           -----------  --------
     Total sales                               348,819   402,850
  Cost and expenses:
    Cost of product                            214,515   249,706
    Cost of installations and service           45,672    48,782
    (Increase) decrease in the fair value
     of derivative instruments                 (3,392)    36,854
    Delivery and branch expenses                56,822    63,571
    Depreciation and amortization
     expenses                                    3,535     6,043

    General and administrative expenses          5,053     5,260
                                           -----------  --------

     Operating income (loss)                    26,614   (7,366)
                                           -----------  --------
  Interest expense                             (4,270)   (5,019)
  Interest income                                  394     1,092
  Amortization of debt issuance costs            (656)     (592)

  Gain (loss) on redemption of debt                 --     3,522
                                           -----------  --------
    Income (loss) before income taxes           22,082   (8,363)

  Income tax expense (benefit)                  10,077     (352)
                                           -----------  --------

    Net income (loss)                          $12,005  $(8,011)
                                           ===========  ========
     General Partner's interest in net
      income (loss)                                 54      (35)
                                           -----------  --------
  Limited Partners' interest in net
   income (loss)                               $11,951  $(7,976)
                                           ===========  ========

    Per unit data (Basic and Diluted):
    Net income (loss) available to
     limited partners                            $0.16   $(0.11)
    Less dilutive impact of theoretical
     distribution of earnings under
    FASB ASC 260-10-45-60 (EITF 03-06)            0.01        --
                                           -----------  --------
    Limited Partner's interest in net
     income (loss) under FASB ASC
     260-10-45-60                                $0.15   $(0.11)
                                           ===========  ========


                                           -----------  --------
    Weighted average number of Limited
     Partner units outstanding (Basic and
     Diluted)                                   72,661    75,774
                                           ===========  ========

  SUPPLEMENTAL INFORMATION
  STAR GAS PARTNERS, L.P. AND SUBSIDIARIES
  RECONCILIATION OF EBITDA AND ADJUSTED EBITDA


                                      Three Months Ended
                                         December 31,
                                     --------------------

  (in thousands)                        2009       2008
                                     ---------  ---------

  Net income (loss)                    $12,005   $(8,011)
  Plus:
  Income tax expense (benefit)          10,077      (352)
  Amortization of debt issuance
   cost                                    656        592
  Interest expense, net                  3,876      3,927

  Depreciation and amortization          3,535      6,043
                                     ---------  ---------
  EBITDA                                30,149      2,199

  (Increase) / decrease in the fair
   value of derivative instruments     (3,392)     36,854

  Gain on redemption of debt                --    (3,522)
                                     ---------  ---------
  Adjusted EBITDA                       26,757     35,531

  Add / (subtract)
  Income tax (expense) benefit        (10,077)        352
  Interest expense, net                (3,876)    (3,927)
  Provision for losses on accounts
   receivable                            2,148      2,868
  Increase in accounts receivables    (76,952)   (54,998)
  Increase in inventories              (9,387)   (21,029)
  Increase (decrease) in customer
   credit balances                    (21,790)      8,713
  Change in deferred taxes               9,482         --
  Change in other operating assets
   and liabilities                      10,708     12,299
                                     ---------  ---------
  Net cash provided by (used in)
   operating activities              $(72,987)  $(20,191)
                                     =========  =========


                                     ---------  ---------
  Net cash used in investing
   activities                         $(1,555)   $(4,004)
                                     =========  =========


                                     ---------  ---------
  Net cash used in financing
   activities                        $(21,947)   $(6,400)
                                     =========  =========

  Home heating oil gallons sold         95,400    109,600

  (unaudited)

This news release was distributed by GlobeNewswire, www.globenewswire.com

SOURCE: Star Gas Partners, L.P.

CONTACT:  Star Gas Partners
Investor Relations
203/328-7310
Darrow Associates
Chris Witty
646/438-9385
cwitty@darrowir.com

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