Star Group Partners, L.P.

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

STAMFORD, Conn., May 03, 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 second quarter and the six-month period ended March 31, 2017.

Three Months Ended March 31, 2017 Compared to Three Months Ended March 31, 2016
Star reported a 15.2 percent increase in total revenue to $532.1 million, compared with $462.0 million in the prior-year period, largely due to an increase in wholesale product costs of 34.0 percent.

Home heating oil and propane volume for the fiscal 2017 second quarter declined by 2.9 million gallons, or 1.9 percent, to 154.2 million gallons versus the prior-year period, as the additional volume provided by acquisitions was more than offset by net customer attrition in the base business for the twelve months ended March 31, 2017. Temperatures in Star's geographic areas of operation for the fiscal 2017 second quarter were approximately equal to the fiscal 2016 second quarter and 12.6 percent warmer than normal, as reported by the National Oceanic and Atmospheric Administration.

During the fiscal 2017 second quarter, net income decreased by $15.5 million, or 28.1 percent, to $39.7 million primarily due to a non-cash unfavorable change in the fair value of derivative instruments of $26.8 million.

Adjusted EBITDA decreased by $0.5 million, or 0.6 percent, to $88.2 million during the fiscal 2017 second quarter, as the impact of higher home heating oil and propane margins, along with acquisitions, virtually offset the decline in home heating oil and propane volume, an increase in the gross profit loss from services and installations, and increases in certain operating expenses.

"The second quarter of fiscal 2017 was one of solid performance, as the weather was nearly identical within our operating footprint year-over-year," said Steven J. Goldman, Star Gas Partners' Chief Executive Officer. "We continued to make several small acquisitions, invest in our people, and expand organically this year, while focusing on additional customer development initiatives to improve retention and our overall quality of service. With winter now largely behind us, we look forward to spending the coming months working to further broaden and diversify our core operations while managing costs to strengthen Star's long-term financial outlook."

Six Months Ended March 31, 2017 Compared to Six Months Ended March 31, 2016
Star reported a 17.3 percent increase in total revenue to $0.9 billion, versus $0.8 billion in the prior-year period, due to an increase in wholesale product costs of 24.3 percent and an increase in total volume of 6.2 percent.

Home heating oil and propane volume for the first half of fiscal 2017 increased by 16.5 million gallons, or 7.0 percent, to 253.7 million gallons, as the additional volume provided by colder temperatures and acquisitions was slightly offset by net customer attrition in the base business for the twelve months ended March 31, 2017. Temperatures in Star's geographic areas of operation for the first half of fiscal 2017 were 11.3 percent colder than the prior-year's comparable period and 11.9 percent warmer than normal, as reported by the National Oceanic and Atmospheric Administration.

Net income decreased by $9.3 million, or 13.8 percent, to $58.0 million as the positive impact from colder temperatures and acquisitions was more than offset by a non-cash unfavorable change in the fair value of derivative instruments of $12.7 million and the absence of a $12.5 million credit that was recorded in the first quarter of 2016 under the Partnership's weather hedge contract.

Adjusted EBITDA decreased by $5.2 million, or 4.2 percent, to $119.4 million, as the impact of higher home heating oil and propane volume was more than offset by the absence of a $12.5 million credit that was recorded in the first quarter of 2016 under the Partnership's weather hedge contract, higher marketing and customer service costs, lower service and installations gross profit, and lower home heating oil and propane margins.

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, May 4, 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.

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 
      
      
   March 31, September 30,
(in thousands)  2017   2016 
   (unaudited)  
ASSETS    
Current assets    
 Cash and cash equivalents  $  52,895  $  139,188 
 Receivables, net of allowance of $6,137 and $4,419, respectively    188,594     78,650 
 Inventories     45,516     45,894 
 Fair asset value of derivative instruments    -      3,987 
 Prepaid expenses and other current assets     26,951     27,139 
   Total current assets     313,956     294,858 
      
Property and equipment, net     75,010     70,410 
Goodwill     213,881     212,760 
Intangibles, net     93,752     97,656 
Deferred tax assets, net    -      5,353 
Restricted cash    250     -  
Investments    11,552     -  
Deferred charges and other assets, net     9,946     11,074 
 Total assets  $  718,347  $  692,111 
      
LIABILITIES AND PARTNERS' CAPITAL    
Current liabilities    
 Accounts payable  $  30,627  $  25,690 
 Fair liability value of derivative instruments    1,754     2,285 
 Current maturities of long-term debt    10,000     16,200 
 Accrued expenses and other current liabilities    138,509     103,855 
 Unearned service contract revenue     58,929     56,971 
 Customer credit balances     31,646     84,921 
   Total current liabilities     271,465     289,922 
      
Long-term debt    70,567     75,441 
Deferred tax liabilities, net    2,200     -  
Other long-term liabilities     25,728     25,255 
      
Partners' capital    
 Common unitholders     368,955     322,771 
 General partner     (440)    (516)
 Accumulated other comprehensive loss, net of taxes    (20,128)    (20,762)
   Total partners' capital     348,387     301,493 
 Total liabilities and partners' capital  $  718,347  $  692,111 
      

 

 STAR GAS PARTNERS, L.P. AND SUBSIDIARIES 
 CONSOLIDATED STATEMENTS OF OPERATIONS 
          
   Three Months Ended Six Months Ended
   March 31, March 31,
(in thousands, except per unit data - unaudited)  2017   2016   2017   2016 
          
Sales:        
 Product  $  475,485  $  404,340  $  791,776  $  657,290 
 Installations and services     56,567     57,685     124,394     123,790 
   Total sales     532,052     462,025     916,170     781,080 
Cost and expenses:        
 Cost of product     288,941     219,864     488,534     369,966 
 Cost of installations and services     58,426     58,858     124,913     121,770 
 (Increase) decrease in the fair value of derivative instruments    12,442     (14,324)    3,891     (8,788)
 Delivery and branch expenses     92,214     90,509     173,347     154,703 
 Depreciation and amortization expenses     6,726     6,725     13,287     13,491 
 General and administrative expenses     5,556     5,088     11,909     11,508 
 Finance charge income    (1,285)    (1,014)    (1,980)    (1,535)
   Operating income    69,032     96,319     102,269     119,965 
Interest expense, net    (1,712)    (1,891)    (3,499)    (3,750)
Amortization of debt issuance costs     (324)    (315)    (636)    (627)
 Income before income taxes     66,996     94,113     98,134     115,588 
Income tax expense    27,292     38,904     40,155     48,321 
 Net income $  39,704  $  55,209  $  57,979  $  67,267 
   General Partner's interest in net income    233     313     338     381 
Limited Partners' interest in net income $  39,471  $  54,896  $  57,641  $  66,886 
          
 Per unit data (Basic and Diluted):        
 Net income available to limited partners $  0.71  $  0.96  $  1.03  $  1.17 
   Dilutive impact of theoretical distribution of earnings under
  FASB ASC 260-10-45-60 
    0.12     0.17     0.16     0.19 
 Limited Partner's interest in net income under FASB ASC 260-10-45-60 $  0.59  $  0.79  $  0.87  $  0.98 
          
          
 Weighted average number of Limited Partner units outstanding (Basic and Diluted)    55,888     57,242     55,888     57,262 
          


SUPPLEMENTAL INFORMATION 
  
STAR GAS PARTNERS, L.P. AND SUBSIDIARIES 
RECONCILIATION OF EBITDA AND ADJUSTED EBITDA 
  
(Unaudited) 
  Three Months Ended
March 31,
 
(in thousands)   2017   2016  
      
Net income $  39,704  $  55,209  
Plus:     
Income tax expense    27,292     38,904  
Amortization of debt issuance cost     324     315  
Interest expense, net     1,712     1,891  
Depreciation and amortization     6,726     6,725  
EBITDA    75,758     103,044  
      
(Increase) / decrease in the fair value of derivative instruments   12,442     (14,324) 
Adjusted EBITDA    88,200     88,720  
      
Add / (subtract)     
Income tax expense    (27,292)    (38,904) 
Interest expense, net     (1,712)    (1,891) 
Provision for losses on accounts receivable    1,494     188  
Increase in accounts receivables    (34,786)    (15,515) 
Decrease in inventories    16,890     19,307  
Decrease in customer credit balances    (31,068)    (25,644) 
Change in deferred taxes    3,180     7,686  
Change in other operating assets and liabilities    14,724     37,089  
Net cash provided by operating activities $  29,630  $  71,036  
      
Net cash used in investing activities $  (4,983) $  (2,045) 
      
Net cash used in financing activities $  (8,828) $  (9,267) 
      
Home heating oil and propane gallons sold    154,200     157,100  
Other petroleum products    26,500     27,100  
Total all products    180,700     184,200  
                        

 

 
SUPPLEMENTAL INFORMATION
 
STAR GAS PARTNERS, L.P. AND SUBSIDIARIES
RECONCILIATION OF EBITDA AND ADJUSTED EBITDA
 
(Unaudited)
  Six Months Ended
March 31,
(in thousands)   2017   2016 
     
Net income $  57,979  $  67,267 
Plus:    
Income tax expense    40,155     48,321 
Amortization of debt issuance cost     636     627 
Interest expense, net     3,499     3,750 
Depreciation and amortization     13,287     13,491 
EBITDA    115,556     133,456 
     
(Increase) / decrease in the fair value of derivative instruments   3,891     (8,788)
Adjusted EBITDA    119,447     124,668 
     
Add / (subtract)    
Income tax expense    (40,155)    (48,321)
Interest expense, net     (3,499)    (3,750)
Provision (recovery) for losses on accounts receivable    1,525     (448)
Increase in accounts receivables    (111,631)    (37,778)
Decrease in inventories    642     10,243 
Decrease in customer credit balances    (53,873)    (15,217)
Change in deferred taxes    7,121     8,295 
Increase in weather hedge contract receivable    -      (12,500)
Change in other operating assets and liabilities    44,547     49,043 
Net cash provided by (used in) operating activities $  (35,876) $  74,235 
     
Net cash used in investing activities $  (26,779) $  (12,843)
     
Net cash used in financing activities $  (23,388) $  (15,286)
     
Home heating oil and propane gallons sold    253,700     237,200 
Other petroleum products    55,900     54,400 
Total all products    309,600     291,600 
 


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

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

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