Star Group Partners, L.P.

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Star Gas Partners, L.P. Reports Fiscal 2017 First Quarter Results

STAMFORD, Conn., Feb. 01, 2017 (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 2017 first quarter, the three-month period ended December 31, 2016.

For the fiscal 2017 first quarter Star reported a 20.4 percent increase in total revenue to $384.1 million, compared with revenue of $319.1 million in the prior-year period, largely due to a weather related increase in home heating oil and propane volume and an increase in wholesale per gallon product costs of 10.7 percent. The impact of these items was partially offset by a decline in home heating oil and propane per gallon margins.

Home heating oil and propane volume for the fiscal 2017 first quarter increased by 19.4 million gallons, or 24.3 percent, to 99.5 million gallons, as the impact of colder temperatures was somewhat offset by net customer attrition and other factors. Temperatures in Star's geographic areas of operation for the fiscal 2017 first quarter were 33.6 percent colder than during the fiscal 2016 first quarter but 10.7 percent warmer than normal, as reported by the National Oceanic and Atmospheric Administration.

Net income increased $6.2 million, or 51.6 percent, to $18.3 million, as the impact of colder temperatures and a favorable change in the fair value of derivative instruments of $14.1 million was partially offset by the impact of lower home heating oil and propane margins, the absence of a $12.5 million credit recorded under the Partnership's weather hedge contract (as was recorded in fiscal 2016), and an increase in income tax expense of $3.4 million.

Adjusted EBITDA decreased by $4.7 million, or 13.1 percent, to $31.2 million as the increase in volume attributable to 33.6 percent colder weather was more than offset by the impact of lower home heating oil and propane per gallon margins and the absence of a $12.5 million credit under the Partnership's weather hedge contract as was recorded during the prior year's fiscal first quarter. While the Partnership's weather hedge contract covers the period from November 1 through March 31, taken as a whole, the extreme temperatures -- 32.7 percent warmer than normal — experienced during the three months ended December 31, 2015 resulted in the Partnership recording the full benefit under its weather hedge contract during this period. The Partnership did not adjust or record any additional weather hedge benefit during the quarter ended March 31, 2016, when temperatures were 12.3 percent warmer than normal.

"We got off to a great start this year and were pleased to see temperatures in the first quarter rebound nicely from fiscal 2016, when temperatures were much higher than normal across our operations," said Steven J. Goldman, Star Gas Partners' Chief Executive Officer. "In part due to the colder weather, an increased demand for service, and a more responsive approach to managing margins, we were able to post a net gain in customer accounts during the period — which reflects well on the efforts of our employees as well as the strength of our brands. We also acquired three small businesses in the quarter, including the one in Michigan previously announced, as we continue our drive to expand and diversify our overall operating footprint."

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 but 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, February 2, 2017 at 11:00 a.m. Eastern Time. The conference call dial-in number 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-Q. 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
      
   December 31, September 30,
(in thousands)  2016   2016 
   (unaudited)  
ASSETS    
Current assets    
 Cash and cash equivalents  $  37,076  $  139,188 
 Receivables, net of allowance of $4,699 and $4,419, respectively     155,161     78,650 
 Inventories     62,299     45,894 
 Fair asset value of derivative instruments    11,177     3,987 
 Prepaid expenses and other current assets     30,650     27,139 
 Total current assets     296,363     294,858 
      
Property and equipment, net     74,080     70,410 
Goodwill     213,733     212,760 
Intangibles, net     96,563     97,656 
Deferred tax assets, net    1,196     5,353 
Restricted cash    250     -  
Investments    11,478     -  
Deferred charges and other assets, net     11,107     11,074 
 Total assets  $  704,770  $  692,111 
      
LIABILITIES AND PARTNERS' CAPITAL    
Current liabilities    
 Accounts payable  $  45,578  $  25,690 
 Fair liability value of derivative instruments    486     2,285 
 Current maturities of long-term debt    10,000     16,200 
 Accrued expenses and other current liabilities    107,304     103,855 
 Unearned service contract revenue     64,813     56,971 
 Customer credit balances     62,583     84,921 
 Total current liabilities    290,764     289,922 
      
Long-term debt    73,008     75,441 
Other long-term liabilities     26,772     25,255 
      
Partners' capital    
 Common unitholders     335,212     322,771 
 General partner     (542)    (516)
 Accumulated other comprehensive loss, net of taxes    (20,444)    (20,762)
 Total partners' capital    314,226     301,493 
 Total liabilities and partners' capital  $  704,770  $  692,111 

 

STAR GAS PARTNERS, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
      
   Three Months Ended
   December 31,
(in thousands, except per unit data - unaudited)  2016   2015 
      
Sales:    
 Product  $  316,291  $  252,950 
 Installations and services     67,827     66,105 
 Total sales     384,118     319,055 
Cost and expenses:    
 Cost of product     199,593     150,102 
 Cost of installations and services     66,487     62,912 
 (Increase) decrease in the fair value of derivative instruments    (8,551)    5,536 
 Delivery and branch expenses     81,133     64,194 
 Depreciation and amortization expenses     6,561     6,766 
 General and administrative expenses     6,353     6,420 
 Finance charge income    (695)    (521)
 Operating income    33,237     23,646 
Interest expense, net    (1,787)    (1,859)
Amortization of debt issuance costs     (312)    (312)
 Income before income taxes     31,138     21,475 
Income tax expense    12,863     9,417 
 Net income $  18,275  $  12,058 
 General Partner's interest in net income    105     68 
Limited Partners' interest in net income $  18,170  $  11,990 
      
 Per unit data (Basic and Diluted):    
 Net income available to limited partners $  0.33  $  0.21 
 Dilutive impact of theoretical distribution of earnings under FASB ASC 260-10-45-60     0.05     0.02 
 Limited Partner's interest in net income under FASB ASC 260-10-45-60 $  0.28  $  0.19 
          
 Weighted average number of Limited Partner units outstanding (Basic and Diluted)  55,888   57,281 


SUPPLEMENTAL INFORMATION
STAR GAS PARTNERS, L.P. AND SUBSIDIARIES
RECONCILIATION OF EBITDA AND ADJUSTED EBITDA
(Unaudited)
 
  Three Months Ended
December 31,
(in thousands)   2016   2015 
     
Net income $  18,275  $  12,058 
Plus:    
Income tax expense    12,863     9,417 
Amortization of debt issuance cost     312     312 
Interest expense, net     1,787     1,859 
Depreciation and amortization     6,561     6,766 
EBITDA    39,798     30,412 
     
(Increase) / decrease in the fair value of derivative instruments    (8,551)    5,536 
Adjusted EBITDA    31,247     35,948 
     
Add / (subtract)    
Income tax expense    (12,863)    (9,417)
Interest expense, net     (1,787)    (1,859)
Provision (recovery) for losses on accounts receivable    31     (636)
Increase in accounts receivables    (76,845)    (22,263)
Increase in inventories    (16,248)    (9,064)
Increase (decrease) in customer credit balances    (22,805)    10,427 
Change in deferred taxes    3,941     609 
Increase in weather hedge contract receivable    -      (12,500)
Change in other operating assets and liabilities    29,823     11,954 
Net cash provided by (used in) operating activities $  (65,506) $  3,199 
     
Net cash used in investing activities $  (21,796) $  (10,798)
     
Net cash used in financing activities $  (14,560) $  (6,019)
     
     
Home heating oil and propane gallons sold    99,500     80,100 
Other petroleum products    29,400     27,300 
Total all products    128,900     107,400 
 

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

Chris Witty
Darrow Associates
646/438-9385 or cwitty@darrowir.com
Source: Star Gas Partners, L.P.

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