Star Group Partners, L.P.

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

STAMFORD, Conn., July 31, 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 third quarter and the nine-month period ended June 30, 2017.

Three Months Ended June 30, 2017 Compared to Three Months Ended June 30, 2016

Star reported a 3.5 percent increase in total revenue to $225.8 million, compared with $218.2 million in the prior-year period, as higher air conditioning installation and service sales and the impact from an increase in wholesale product costs and higher per gallon margins were somewhat offset by a decline in total volume sold.
    
Home heating oil and propane volume for the fiscal 2017 third quarter declined by 4.2 million gallons versus the prior-year period, or 9.4 percent, to 40.5 million gallons, as the additional volume provided by acquisitions was more than offset by the impact of warmer weather and by net customer attrition in the base business for the twelve months ended June 30, 2017. Temperatures in Star's geographic areas of operation, for the fiscal 2017 third quarter, were 19.7 percent warmer than the fiscal 2016 third quarter and 17.6 percent warmer than normal, as reported by the National Oceanic and Atmospheric Administration.

During the fiscal 2017 third quarter, the net loss widened by $10.1 million to $13.3 million largely due to the after-tax impact of an unfavorable non-cash change in the fair value of derivative instruments of $14.4 million.

Star’s Adjusted EBITDA loss increased by $1.5 million, to $9.3 million, as the additional gross profit provided by higher home heating oil and propane margins and a slight improvement in service and installation profitability was more than offset by the decline in home heating oil and propane volume and an increase in certain operating expenses.

"While experiencing warmer weather and lower volumes in the third quarter versus fiscal 2016, the impact was muted during this non-heating season as we focused on margins and improving Star’s service offerings,” said Steven J. Goldman, Star Gas Partners’ Chief Executive Officer. “Only a portion of Star’s customer base receives oil or propane deliveries in the spring, but we saw growth in other areas such as air conditioning installations. We also continued investing for the future through additional staffing across customer service, information technology, operations, and sales – all crucial to our plans to grow the business and strengthen customer satisfaction. The Partnership remains on sound footing as we approach the end of fiscal 2017.”

Nine Months Ended June 30, 2017 Compared to Nine Months Ended June 30, 2016
Star reported a 14.3 percent increase in total revenue to $1.1 billion, versus $1.0 billion in the prior-year period, due to an increase in wholesale product costs of $0.2668 per gallon, an increase in total volume of 3.9 percent, and higher air conditioning installation and service sales.

Home heating oil and propane volume increased by 12.4 million gallons, or 4.4 percent, to 294.3 million gallons, as the additional volume provided from acquisitions and colder weather was offset by net customer attrition and other factors. Temperatures in Star's geographic areas of operation, for the first nine months of fiscal 2017, were 7.0 percent colder than last year’s comparable period but 12.4 percent warmer than normal.

Net income decreased by $19.4 million, or 30.3 percent, to $44.6 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 $27.1 million, the absence of a $12.5 million credit as was recorded in the first quarter of 2016 under the Partnership’s weather hedge contract, and an increase in spending largely due to additional staffing in the areas of information technology, customer service, operations management and sales and marketing. 

Adjusted EBITDA decreased by $6.7 million, or 5.7 percent, to $110.2 million as the impact of higher home heating oil and propane volume and slightly better home heating oil and propane margins were more than offset by the absence of a $12.5 million credit as was recorded in the first quarter of 2016 under the Partnership’s weather hedge contract, lower service and installations gross profit, and additional expense related to staffing in the areas of information technology, customer service, operations management and sales and marketing.

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 on Tuesday, August 1, 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.

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
CONDENSED CONSOLIDATED BALANCE SHEETS
           
      June 30,   September 30,
(in thousands)     2017       2016  
      (unaudited)    
ASSETS        
Current assets        
  Cash and cash equivalents   $ 94,574     $ 139,188  
  Receivables, net of allowance of $6,577 and $4,419, respectively     116,646       78,650  
  Inventories     42,422       45,894  
  Fair asset value of derivative instruments     -       3,987  
  Prepaid expenses and other current assets     24,409       27,139  
  Total current assets     278,051       294,858  
           
Property and equipment, net     74,491       70,410  
Goodwill     215,262       212,760  
Intangibles, net     94,520       97,656  
Deferred tax assets, net     255       5,353  
Restricted cash     250       -  
Investments     11,686       -  
Deferred charges and other assets, net     9,782       11,074  
  Total assets   $ 684,297     $ 692,111  
           
LIABILITIES AND PARTNERS’ CAPITAL        
Current liabilities        
  Accounts payable   $ 20,354     $ 25,690  
  Fair liability value of derivative instruments     4,760       2,285  
  Current maturities of long-term debt     10,000       16,200  
  Accrued expenses and other current liabilities     130,776       103,855  
  Unearned service contract revenue     55,759       56,971  
  Customer credit balances     40,340       84,921  
  Total current liabilities     261,989       289,922  
           
Long-term debt     68,155       75,441  
Other long-term liabilities     25,082       25,255  
           
Partners’ capital        
  Common unitholders     349,554       322,771  
  General partner     (672)       (516)  
  Accumulated other comprehensive loss, net of taxes     (19,811)       (20,762)  
  Total partners’ capital     329,071       301,493  
  Total liabilities and partners’ capital   $ 684,297     $ 692,111  
           

 

STAR GAS PARTNERS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 
      Three Months Ended   Nine Months Ended
      June 30,   June 30,
(in thousands, except per unit data - unaudited)     2017       2016       2017       2016  
                   
Sales:                
  Product   $ 158,531     $ 156,229     $ 950,307     $ 813,519  
  Installations and services     67,270       61,965       191,664       185,755  
  Total sales     225,801       218,194       1,141,971       999,274  
Cost and expenses:                
  Cost of product     104,268       103,568       592,802       473,534  
  Cost of installations and services     58,224       53,272       183,137       175,042  
  (Increase) decrease in the fair value of derivative instruments     3,135       (11,283)       7,026       (20,071)  
  Delivery and branch expenses     67,640       64,052       240,987       218,755  
  Depreciation and amortization expenses     7,418       6,468       20,705       19,959  
  General and administrative expenses     6,235       6,017       18,144       17,525  
  Finance charge income     (1,308)       (945)       (3,288)       (2,480)  
  Operating income (loss)     (19,811)       (2,955)       82,458       117,010  
Interest expense, net     (1,619)       (1,731)       (5,118)       (5,481)  
Amortization of debt issuance costs     (336)       (307)       (972)       (934)  
  Income (loss) before income taxes     (21,766)       (4,993)       76,368       110,595  
Income tax expense (benefit)     (8,434)       (1,755)       31,721       46,566  
  Net income (loss)   $ (13,332)     $ (3,238)     $ 44,647     $ 64,029  
  General Partner’s interest in net income (loss)     (79)       (19)       259       362  
Limited Partners’ interest in net income (loss)   $ (13,253)     $ (3,219)     $ 44,388     $ 63,667  
                   
  Per unit data (Basic and Diluted):                
  Net income (loss) available to limited partners   $ (0.24)     $ (0.06)     $ 0.79     $ 1.11  
  Dilutive impact of theoretical distribution of earnings under
  FASB ASC 260-10-45-60
    -       -       0.09       0.16  
  Limited Partner’s interest in net income (loss) under FASB ASC 260-10-45-60   $ (0.24)     $ (0.06)     $ 0.70     $ 0.95  
                   
                   
  Weighted average number of Limited Partner units outstanding (Basic and Diluted)     55,888       57,188       55,888       57,237  
                   

 

SUPPLEMENTAL INFORMATION
 
STAR GAS PARTNERS, L.P. AND SUBSIDIARIES
RECONCILIATION OF EBITDA AND ADJUSTED EBITDA
 
(Unaudited)
 
    Three Months Ended
June 30,
(in thousands)     2017       2016  
         
Net loss   $ (13,332)     $ (3,238)  
Plus:        
Income tax benefit     (8,434)       (1,755)  
Amortization of debt issuance cost     336       307  
Interest expense, net     1,619       1,731  
Depreciation and amortization     7,418       6,468  
EBITDA     (12,393)       3,513  
         
(Increase) / decrease in the fair value of derivative instruments   3,135       (11,283)  
Adjusted EBITDA     (9,258)       (7,770)  
         
Add / (subtract)        
Income tax benefit     8,434       1,755  
Interest expense, net     (1,619)       (1,731)  
Provision for losses on accounts receivable     736       308  
Decrease in accounts receivables     71,107       38,425  
Decrease in inventories     3,119       3,159  
Increase in customer credit balances     8,116       13,191  
Change in deferred taxes     (2,670)       5,004  
Decrease in weather hedge contract receivable     -       12,500  
Change in other operating assets and liabilities     (18,879)       (28,891)  
Net cash provided by operating activities   $ 59,086     $ 35,950  
         
Net cash used in investing activities   $ (8,376)     $ (2,913)  
         
Net cash used in financing activities   $ (8,967)     $ (8,495)  
Home heating oil and propane gallons sold     40,500       44,700  
Other petroleum products     27,500       27,200  
Total all products     68,000       71,900  
         

 

SUPPLEMENTAL INFORMATION
STAR GAS PARTNERS, L.P. AND SUBSIDIARIES
RECONCILIATION OF EBITDA AND ADJUSTED EBITDA
 
(Unaudited)
 
    Nine Months Ended
June 30,
(in thousands)     2017       2016  
         
Net income   $ 44,647     $ 64,029  
Plus:        
Income tax expense     31,721       46,566  
Amortization of debt issuance cost     972       934  
Interest expense, net     5,118       5,481  
Depreciation and amortization     20,705       19,959  
EBITDA     103,163       136,969  
         
(Increase) / decrease in the fair value of derivative instruments     7,026       (20,071)  
Adjusted EBITDA     110,189       116,898  
         
Add / (subtract)        
Income tax expense     (31,721)       (46,566)  
Interest expense, net     (5,118)       (5,481)  
Provision (recovery) for losses on accounts receivable     2,261       (140)  
(Increase) decrease in accounts receivables     (40,524)       647  
Decrease in inventories     3,761       13,402  
Decrease in customer credit balances     (45,757)       (2,026)  
Change in deferred taxes     4,451       13,299  
Change in other operating assets and liabilities     25,668       20,152  
Net cash provided by operating activities   $ 23,210     $ 110,185  
         
Net cash used in investing activities   $ (35,219)     $ (15,756)  
         
Net cash used in financing activities   $ (32,355)     $ (23,781)  
         
Home heating oil and propane gallons sold     294,300       281,900  
Other petroleum products     83,400       81,600  
Total all products     377,700       363,500  
         

 

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

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

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