Star Group Partners, L.P.

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Star Gas Partners, L.P. Reports Fiscal 2016 Second Quarter Results

STAMFORD, Conn., May 04, 2016 (GLOBE NEWSWIRE) -- Star Gas Partners, L.P. (the "Partnership" or "Star") (NYSE:SGU), a home energy distributor and services provider, today announced financial results for its fiscal 2016 second quarter and the six-month period ended March 31, 2016.

Three Months Ended March 31, 2016 Compared to Three Months Ended March 31, 2015
For the fiscal 2016 second quarter Star reported a 39.4 percent decrease in total revenue to $462.0 million, compared with $762.3 million in the prior-year period, due to a decline in wholesale product costs of 39.0 percent and a 22.2 percent decrease in total volume.

Home heating oil and propane volume for the fiscal 2016 second quarter declined by 52.7 million gallons, or 25.1 percent, to 157.1 million gallons versus the prior-year period, 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 for the twelve months ended March 31, 2016. Temperatures in Star's geographic areas of operation for the fiscal 2016 second quarter were 26.3 percent warmer than the fiscal 2015 second quarter and 12.3 percent warmer than normal, as reported by the National Oceanic and Atmospheric Administration.

During the fiscal 2016 second quarter, net income decreased by $20.5 million, or 27.1 percent, to $55.2 million primarily due to the impact of warmer weather.

Adjusted EBITDA declined by $39.0 million, or 30.5 percent, to $88.7 million during the fiscal 2016 second quarter, as the impact of acquisitions, lower service costs and reduced operating expenses in the base business were more than offset by the impact on Adjusted EBITDA of the decrease in volume attributable to the 26.3 percent warmer weather.

"As was the case earlier this fiscal year, the second quarter did not provide the colder weather we hoped would materialize," said Steven J. Goldman, Star Gas Partners' Chief Executive Officer. "In addition, the year-over-year comparison was even more pronounced given that 2015's second quarter was nearly 20 percent colder than normal. Nevertheless, we maintained our focus on managing costs, increasing margins, and looking for appropriate acquisitions to expand our customer base, having completed two small transactions this year. While fiscal 2016 has been challenging in many respects due to the warm weather, Star has taken the correct steps to service our customers while preparing for better times ahead." 

Six Months Ended March 31, 2016 Compared to Six Months Ended March 31, 2015
For the six months ended March 31, 2016, Star reported a 38.1 percent decrease in total revenue to $0.8 billion, versus $1.3 billion in the prior-year period, due to a decline in wholesale product costs of 39.2 percent and a decrease in total volume of 21.2 percent, which was slightly offset by higher per gallon gross profit margins.

Home heating oil and propane volume for the first half of fiscal 2016 decreased by 80.1 million gallons, or 25.2 percent, to 237.2 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 for the twelve months ended March 31, 2016. Temperatures in Star's geographic areas of operation for the first half of fiscal 2016 were 26.6 percent warmer than the prior-year's comparable period and 20.4 percent warmer than normal, as reported by the National Oceanic and Atmospheric Administration.

Net income decreased by $24.0 million, or 26.3 percent, to $67.3 million as warmer weather more than offset higher per gallon home heating oil and propane margins and the impact of acquisitions.

Adjusted EBITDA decreased by $48.2 million, or 27.9 percent, to $124.7 million, as the impact of higher home heating oil and propane per gallon margins, acquisitions, lower operating expense in the base business, lower service and installation costs and a $12.5 million credit recorded in the first quarter of 2016 under Star's weather insurance contract were more than offset by the impact on Adjusted EBITDA of the decline in volume attributable to 26.6 percent warmer weather.

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, multi-employer pension plan withdrawal expense, 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 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, 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.

The method of calculating Adjusted EBITDA may not be consistent with that of other companies, and EBITDA and Adjusted EBITDA both have limitations as an analytical tool and so should not be considered in isolation but 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 tomorrow, May 5, 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.

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 services and sells heating and air conditioning equipment to its home heating oil and propane customers and to a lesser extent, provides these offerings 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, operating throughout the Northeast and Mid-Atlantic. 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, 2015 and under the heading "Risk Factors" in our Quarterly Report on Form 10-Q (the "Form 10-Q") for the fiscal Quarter ended March 31, 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-Q and 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
CONDENSED CONSOLIDATED BALANCE SHEETS
 
   March 31,  September 30,
(in thousands)  2016   2015 
   (unaudited)  
ASSETS     
Current assets    
 Cash and cash equivalents $  146,614   $  100,508 
 Receivables, net of allowance of $6,025 and $6,713, respectively    126,865     89,230 
 Inventories    45,560     55,671 
 Fair asset value of derivative instruments    1     935 
 Weather hedge contract receivable    12,500     -  
 Current deferred tax assets, net    37,460     37,832 
 Prepaid expenses and other current assets    27,171     25,135 
 Total current assets    396,171     309,311 
      
Property and equipment, net    68,855     68,123 
Goodwill    212,676     211,045 
Intangibles, net    103,487     107,317 
Deferred charges and other assets, net    12,832     11,236 
 Total assets $  794,021  $  707,032 
      
LIABILITIES AND PARTNERS' CAPITAL    
Current liabilities    
 Accounts payable $  23,301  $  25,322 
 Fair liability value of derivative instruments    7,989     12,819 
 Current maturities of long-term debt    10,000     10,000 
 Accrued expenses and other current liabilities    149,816     107,745 
 Unearned service contract revenue    50,353     44,419 
 Customer credit balances    63,154     78,207 
 Total current liabilities    304,613     278,512  
      
Long-term debt    87,500      90,000 
Long-term deferred tax liabilities, net    29,982     21,524 
Other long-term liabilities    25,821     27,110 
      
Partners' capital    
 Common unitholders     368,009     312,713 
 General partner    (121)    (283)
 Accumulated other comprehensive loss, net of taxes    (21,783)    (22,544)
 Total partners' capital    346,105     289,886 
 Total liabilities and partners' capital $  794,021  $  707,032 
           


STAR GAS PARTNERS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 
   Three Months Ended Six Months Ended
   March 31, March 31,
(in thousands, except per unit data - unaudited)  2016   2015   2016   2015 
          
Sales:        
 Product $  404,340  $  706,004  $  657,290  $  1,141,016 
 Installations and services    57,685     56,305     123,790     120,510 
 Total sales    462,025     762,309     781,080     1,261,526 
Cost and expenses:        
 Cost of product    219,864     462,815      369,966     772,064 
 Cost of installations and services     58,858     60,362     121,770     121,045 
 (Increase) decrease in the fair value of derivative instruments    (14,324)    (12,631)    (8,788)    (4,341)
 Delivery and branch expenses    90,509     106,107     154,703     184,941 
 Depreciation and amortization expenses    6,725     6,217     13,491     12,375 
 General and administrative expenses    5,088      6,861     11,508     12,917 
 Finance charge income    (1,014)    (1,517)    (1,535)    (2,343)
 Operating income    96,319     134,095     119,965     164,868 
Interest expense, net    (1,891)    (3,816)    (3,750)    (7,276)
Amortization of debt issuance costs    (315)    (403)    (627)     (803)
 Income before income taxes    94,113     129,876     115,588     156,789 
Income tax expense    38,904     54,189     48,321     65,548 
 Net income $  55,209  $  75,687  $  67,267  $  91,241 
 General Partner's interest in net income    313     428     381     516 
Limited Partners' interest in net income $  54,896  $  75,259  $  66,886  $  90,725 
           
 Per unit data (Basic and Diluted):        
 Net income available to limited partners $  0.96  $  1.31  $  1.17  $  1.58 
 Dilutive impact of theoretical distribution of earnings under FASB ASC 260-10-45-60    0.17     0.23     0.19     0.27 
 Limited Partner's interest in net income under FASB ASC 260-10-45-60 $  0.79  $  1.08  $  0.98  $  1.31 
           
 Weighted average number of Limited Partner units outstanding (Basic and Diluted)    57,242     57,282     57,262     57,288 


SUPPLEMENTAL INFORMATION
 
STAR GAS PARTNERS, L.P. AND SUBSIDIARIES
RECONCILIATION OF EBITDA AND ADJUSTED EBITDA
(Unaudited)
 
  Three Months Ended
March 31,
(in thousands)   2016   2015 
     
Net income $  55,209  $  75,687 
Plus:    
Income tax expense    38,904     54,189 
Amortization of debt issuance cost    315     403 
Interest expense, net    1,891     3,816 
Depreciation and amortization    6,725     6,217 
EBITDA    103,044      140,312 
     
(Increase) / decrease in the fair value of derivative instruments    (14,324)    (12,631)
Adjusted EBITDA    88,720     127,681 
     
Add / (subtract)    
Income tax expense    (38,904)    (54,189)
Interest expense, net    (1,891)    (3,816)
Provision for losses on accounts receivable    188     3,331 
Increase in accounts receivables    (15,515)    (87,368)
Decrease in inventories    19,307     17,214 
Decrease in customer credit balances    (25,644)    (36,447)
Change in deferred taxes    7,686      7,546 
Change in other operating assets and liabilities    37,089     43,068 
Net cash provided by operating activities $  71,036  $  17,020 
     
Net cash used in investing activities $  (2,045) $  (2,902)
     
Net cash used in financing activities $  (9,267) $  (5,097)
     
Home heating oil and propane gallons sold    157,100      209,800 
Other petroleum products    27,100     26,800 
Total all products    184,200     236,600 


SUPPLEMENTAL INFORMATION
 
STAR GAS PARTNERS, L.P. AND SUBSIDIARIES
RECONCILIATION OF EBITDA AND ADJUSTED EBITDA
(Unaudited)
 
  Six Months Ended
March 31,
(in thousands)   2016   2015 
     
Net income $  67,267  $  91,241 
Plus:    
Income tax expense    48,321     65,548 
Amortization of debt issuance cost    627     803 
Interest expense, net    3,750     7,276 
Depreciation and amortization    13,491     12,375 
EBITDA    133,456     177,243 
      
(Increase) / decrease in the fair value of derivative instruments   (8,788)    (4,341)
Adjusted EBITDA    124,668     172,902 
     
Add / (subtract)    
Income tax expense    (48,321)    (65,548)
Interest expense, net    (3,750)    (7,276)
Provision for losses on accounts receivable    (448)    3,567 
Increase in accounts receivables    (37,778)    (145,609)
Decrease in inventories    10,243     8,581 
Decrease in customer credit balances    (15,217)    (42,309)
Change in deferred taxes    8,295     7,776 
Increase in weather hedge contract receivable    (12,500)    -  
Change in other operating assets and liabilities     49,043     71,516 
Net cash provided by operating activities $  74,235  $  3,600 
     
Net cash used in investing activities $  (12,843) $   (4,586)
     
Net cash used in financing activities $  (15,286) $  (10,886)
     
Home heating oil and propane gallons sold    237,200     317,300 
Other petroleum products    54,400     52,700 
Total all products    291,600     370,000 


CONTACT:

Star Gas Partners

Investor Relations

203/328-7310

Chris WittyDarrow Associates

646/438-9385 or cwitty@darrowir.com

Source: Star Gas Partners, L.P.

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