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Star Gas Partners, L.P. Reports Fiscal 2016 Fourth Quarter and Full Year Results

STAMFORD, Conn., Dec. 07, 2016 (GLOBE NEWSWIRE) -- Star Gas Partners, L.P. (the "Partnership" or "Star") (NYSE:SGU), a home energy distributor and services provider, today filed its fiscal 2016 annual report on Form 10-K with the SEC and announced financial results for the fiscal 2016 fourth quarter and year ended September 30, 2016.

Three Months Ended September 30, 2016 Compared to Three Months Ended September 30, 2015
For the fiscal 2016 fourth quarter, Star reported a 3.0 percent decrease in total revenue to $162.1 million, compared with $167.2 million in the prior-year period. The lower revenue reflects a decrease in selling prices in response to a decline in wholesale product costs, which more than offset an increase in service and installation sales. Home heating oil and propane volume sold decreased slightly, as the impact of net customer attrition for fiscal 2016 more than offset the additional volume provided from acquisitions.

During the fiscal 2016 fourth quarter, Star's net loss decreased by $26.2 million to a loss of $19.1 million. In the fourth quarter of fiscal 2015, the Partnership recorded a non-cash charge of $17.8 million related to a multi-employer pension plan and a charge of $7.3 million related to the redemption and refinancing of the Partnership's $125 million principal amount of 8.875 percent Senior Notes due 2017. The absence of similar charges during the fourth quarter of fiscal 2016, a favorable change in the fair value of derivative instruments of $12.1 million, a reduction in the Adjusted EBITDA loss of $1.9 million and lower interest expense of $1.3 million all contributed to the lower net loss.

The Partnership's Adjusted EBITDA loss for the fiscal 2016 fourth quarter decreased by $1.9 million, to a loss of $21.2 million, as the impact of lower operating expenses and higher service and installation gross profit was largely offset by a decline in home heating oil and propane per gallon margins. Adjusted EBITDA is a non-GAAP financial measure (see reconciliation below) 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 pay distributions.

Fiscal Year Ended September 30, 2016 Compared to Fiscal Year Ended September 30, 2015
Star reported a 30.6 percent decrease in total revenue to $1.2 billion, versus $1.7 billion in the prior-year period, due to a decrease in volume and the impact of lower selling prices in response to a decline in wholesale product costs. Home heating oil and propane volume sold decreased by 80.3 million gallons, or 21.0 percent, to 302.5 million gallons, as the additional volume provided by acquisitions was more than offset by the impact of warmer temperatures and net customer attrition in the base business of 5.3 percent. Temperatures in Star's geographic areas of operation were 21.6 percent warmer than the prior-year's comparable period and 17.8 percent warmer than normal, as reported by the National Oceanic and Atmospheric Administration.

Net income increased by $7.4 million to $44.9 million in fiscal 2016 due to the impact of higher home heating oil and propane margins, acquisitions, a favorable change in the fair value of derivative instruments of $22.4 million and the absence of the previously mentioned 2015 fourth quarter charges in fiscal 2016, all of which more than offset the impact of warmer weather and net customer attrition.

Adjusted EBITDA decreased by $44.8 million, or 31.9 percent, to $95.7 million as the impact of slightly higher home heating oil and propane per gallon margins, lower operating expenses in the base business, lower service and installation costs and the $12.5 million credit recorded in the first quarter of 2016 under Star's weather insurance contract were more than offset by the impact of the decline in volume attributable to 21.6 percent warmer weather and net customer attrition.

"As we do each December, we look back at the fiscal year and assess how Star performed given the various operating challenges we encountered," said Steve Goldman, Star Gas Partners' Chief Executive Officer. "Fiscal 2016 was certainly a period in which we faced one overwhelming obstacle — weather — that was 21.6 percent warmer than in the prior year, negatively affecting demand. Lower prices obviously had a dramatic impact on revenue as well. Sales fell by nearly a third, as did Adjusted EBITDA, the latter off record levels in fiscal 2015. However, as with every other year, we took these challenges head on — fueling our ongoing efforts to ensure our operations were as streamlined as possible and our customer service processes the best they could be.

"We completed four small acquisitions this year, and one just recently in Michigan, which continued to expand our geographic footprint, while also investing in organically growing our propane operations and other ancillary services. In addition, we repurchased 1.4 million common units in connection with our existing repurchase plan, as we remain committed to delivering value to our long-term investors. As we turn the corner on fiscal 2017, we believe the Partnership is well positioned to handle whatever the next twelve months bring and look forward to again delivering the type of operating performance that our unit holders have come to expect."

EBITDA and Adjusted EBITDA (Non-GAAP Financial Measures)
EBITDA (Earnings from continuing operations before net interest expense, income taxes, depreciation and amortization) and Adjusted EBITDA (Earnings from continuing operations before net interest expense, income taxes, depreciation and amortization, (increase) decrease in the fair value of derivatives, multiemployer pension plan withdrawal charge, gain or loss on debt redemption, goodwill impairment, and other non-cash and non-operating charges) 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 operating performance and return on invested capital compared to those of other companies in the retail distribution of refined petroleum products, without regard to financing methods and capital structure;
  • our ability to generate cash sufficient to pay interest on our indebtedness and to make distributions to our partners; and
  • the viability of acquisitions and capital expenditure projects and the overall rates of return of alternative investment opportunities.

The method of calculating Adjusted EBITDA may not be consistent with that of other companies, and EBITDA and Adjusted EBITDA both have limitations as analytical tools and so should not be viewed in isolation and should be viewed in conjunction with measurements that are computed in accordance with 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 Thursday, December 8, 2016, at 11:00 a.m. Eastern Time. The conference call dial-in number is 877-327-7688 or 412-317-5112 (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 a full service provider specializing in the sale of home heating products and services to residential and commercial customers to heat their homes and buildings. The Partnership also sells and services heating and air conditioning equipment to its home heating oil and propane customers and, to a lesser extent, to customers outside of its home heating oil and propane customer base. In certain of Star's marketing areas, the Partnership provides home security and plumbing services primarily to its home heating oil and propane customer base. Star also sells diesel fuel, gasoline and home heating oil on a delivery only basis. Star is the nation's largest retail distributor of home heating oil based upon sales volume. Including its propane locations, Star serves customers in the more northern and eastern states within the Northeast, Central and Southeast U.S. regions. 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 the products we sell; 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 governmental regulations, including environmental, health and safety regulations; the ability to attract and retain employees; customer creditworthiness; counterparty creditworthiness; marketing plans; general economic conditions and new technology. 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. These risks and uncertainties include, but are not limited to, those set forth under the heading "Risk Factors" and "Business Strategy" in our Annual Report on Form 10-K (the "Form 10-K") for the fiscal year ended September 30, 2016. 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 Form 10-K. 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.

(financials follow)

 

 STAR GAS PARTNERS, L.P. AND SUBSIDIARIES 
 CONSOLIDATED BALANCE SHEETS 
      
      
   September 30, September 30,
(in thousands)  2016   2015 
      
ASSETS    
Current assets    
 Cash and cash equivalents $  139,188  $  100,508 
 Receivables, net of allowance of $4,419 and $6,713, respectively    78,650     89,230 
 Inventories    45,894     55,671 
 Fair asset value of derivative instruments    3,987     935 
 Prepaid expenses and other current assets    27,139     25,135 
   Total current assets    294,858     271,479 
      
Property and equipment, net    70,410     68,123 
Goodwill    212,760     211,045 
Intangibles, net    97,656     107,317 
Deferred tax assets, net    5,353     16,308 
Deferred charges and other assets, net    11,933     11,236 
 Total assets $  692,970  $  685,508 
      
LIABILITIES AND PARTNERS' CAPITAL    
Current liabilities    
 Accounts payable $  25,690  $  25,322 
 Fair liability value of derivative instruments    2,285     12,819 
 Current maturities of long-term debt    16,200     10,000 
 Accrued expenses and other current liabilities    103,855     107,745 
 Unearned service contract revenue    56,971     44,419 
 Customer credit balances    84,921     78,207 
   Total current liabilities    289,922     278,512 
      
Long-term debt    76,300     90,000 
Other long-term liabilities    25,255     27,110 
      
Partners' capital    
 Common unitholders    322,771     312,713 
 General partner    (516)    (283)
 Accumulated other comprehensive loss, net of taxes    (20,762)    (22,544)
   Total partners' capital    301,493     289,886 
 Total liabilities and partners' capital $  692,970  $  685,508 


 


STAR GAS PARTNERS, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
          
          
   Three Months Ended Twelve Months Ended
   September 30, September 30,
(in thousands, except per unit data)  2016   2015   2016   2015 
    (unaudited)  (unaudited)    
Sales:        
 Product $  97,495  $  105,678  $  911,014  $  1,431,585 
 Installations and services    64,569     61,483     250,324     242,706 
   Total sales    162,064     167,161     1,161,338     1,674,291 
Cost and expenses:        
 Cost of product    66,297     72,514     539,831     977,631 
 Cost of installations and services    53,968     52,126     229,010     225,957 
 (Increase) decrease in the fair value of derivative instruments    1,854     13,943     (18,217)    4,187 
 Delivery and branch expenses    57,738     59,509     276,493     309,025 
 Depreciation and amortization expenses    6,571     6,351     26,530     24,930 
 General and administrative expenses    5,841     6,818     23,366     25,908 
 Multiemployer pension plan withdrawal charge  -     17,796   -     17,796 
 Finance charge income    (599)    (714)    (3,079)    (4,756)
   Operating income (loss)    (29,606)    (61,182)    87,404     93,613 
Interest expense, net    (2,004)    (3,292)    (7,485)    (14,059)
Amortization of debt issuance costs    (313)    (609)    (1,247)    (1,818)
Loss on redemption of debt  -     (7,345)  -     (7,345)
 Income (loss) before income taxes    (31,923)    (72,428)    78,672     70,391 
Income tax expense (benefit)    (12,828)    (27,102)    33,738     32,835 
 Net income (loss) $  (19,095) $  (45,326) $  44,934  $  37,556 
   General Partner's interest in net income (loss)    (110)    (257)    252     212 
Limited Partners' interest in net income (loss) $  (18,985) $  (45,069) $  44,682  $  37,344 
          
 Per unit data (Basic and Diluted):        
 Net income (loss) available to limited partners $  (0.34) $  (0.79) $  0.78  $  0.65 
   Dilutive impact of theoretical distribution of earnings under
     FASB ASC 260-10-45-60
  -   -     0.08     0.06 
 Limited Partners' interest in net income (loss) under FASB ASC 260-10-45-60 $  (0.34) $  (0.79) $  0.70  $  0.59 
          
          
 Weighted average number of Limited Partner units outstanding (Basic and Diluted)    56,382     57,282     57,022     57,285 


 


STAR GAS PARTNERS, L.P. AND SUBSIDIARIES
 RECONCILIATION OF EBITDA AND ADJUSTED EBITDA
(Unaudited)
 
   Three Months Ended
September 30,
(in thousands)     2016   2015 
      
Net loss   $  (19,095) $  (45,326)
Plus:     
Income tax benefit      (12,828)    (27,102)
Amortization of debt issuance cost      313     609 
Interest expense, net      2,004     3,292 
Depreciation and amortization      6,571     6,351 
EBITDA      (23,035)    (62,176)
      
(Increase) / decrease in the fair value of derivative instruments    1,854     13,943 
Multiemployer pension plan withdrawal charge    -     17,796 
Loss on redemption of debt    -     7,345 
Adjusted EBITDA      (21,181)    (23,092)
      
Add / (subtract)     
Income tax benefit      12,828     27,102 
Interest expense, net      (2,004)    (3,292)
Multiemployer pension plan withdrawal charge    -     (17,796)
Recovery of losses on accounts receivable      (499)    (1,324)
Decrease in accounts receivables      10,318     47,871 
Increase in inventories      (3,423)    (8,365)
Increase in customer credit balances      8,516     30,587 
Change in deferred taxes      (3,629)    (12,699)
Change in other operating assets and liabilities      (9,154)    1,690 
Net cash provided by (used in) operating activities   $  (8,228) $  40,682 
      
Net cash used in investing activities   $  (3,875) $  (24,301)
      
Net cash used in financing activities   $  (19,865) $  (38,521)
      
Home heating oil and propane gallons sold      20,600     21,100 
Other petroleum products      27,900     25,300 
Total all products      48,500     46,400 
      


 


 

SUPPLEMENTAL INFORMATION
 
STAR GAS PARTNERS, L.P. AND SUBSIDIARIES
 RECONCILIATION OF EBITDA AND ADJUSTED EBITDA
(Unaudited)
 
  Twelve Months Ended
September 30,
(in thousands)   2016   2015 
     
Net income $  44,934  $  37,556 
Plus:    
Income tax expense    33,738     32,835 
Amortization of debt issuance cost    1,247     1,818 
Interest expense, net    7,485     14,059 
Depreciation and amortization    26,530     24,930 
EBITDA    113,934     111,198 
     
(Increase) / decrease in the fair value of derivative instruments   (18,217)    4,187 
Multiemployer pension plan withdrawal charge  -     17,796 
Loss on redemption of debt  -     7,345 
Adjusted EBITDA    95,717     140,526 
     
Add / (subtract)    
Income tax expense    (33,738)    (32,835)
Interest expense, net    (7,485)    (14,059)
Multiemployer pension plan withdrawal charge    -      (17,796)
(Recovery) provision for losses on accounts receivable    (639)    3,738 
Decrease in accounts receivables    10,965     30,141 
Decrease in inventories    9,979     4,326 
Increase in customer credit balances    6,490     3,992 
Change in deferred taxes    9,670     (4,101)
Change in other operating assets and liabilities    10,998     22,921 
Net cash provided by operating activities $  101,957  $  136,853 
     
Net cash used in investing activities $  (19,631) $  (30,385)
     
Net cash used in financing activities $  (43,646) $  (54,959)
     
Home heating oil and propane gallons sold    302,500     382,800 
Other petroleum products    109,500     101,400 
Total all products    412,000     484,200 
     

 

 

 

CONTACT:
Star Gas Partners
Investor Relations
203/328-7310

Chris Witty        
Darrow Associates
646/438-9385 or cwitty@darrowir.com

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