Star Group Partners, L.P.

Star Group, L.P.

<< Back

Star Group, L.P. Reports Fiscal 2020 Second Quarter Results

STAMFORD, Conn., May 04, 2020 (GLOBE NEWSWIRE) -- Star Group, L.P. (the "Company" or "Star") (NYSE:SGU), a home energy distributor and services provider, today announced financial results for the fiscal 2020 second quarter and six months ended March 31, 2020.

Three Months Ended March 31, 2020 Compared to the Three Months Ended March 31, 2019
For the fiscal 2020 second quarter, Star reported a 22.4 percent decrease in total revenue to $543.1 million compared with $699.6 million in the prior-year period, primarily due to the impact of lower volumes sold and reduced selling prices. The decline in selling prices was largely attributable to a decrease in product cost.

The volume of home heating oil and propane sold during the fiscal 2020 second quarter decreased by 37.1 million gallons, or 21.4 percent, to 136.2 million gallons, as the positive impact from acquisitions was more than offset by warmer temperatures, net customer attrition, and other factors. Temperatures in Star's geographic areas of operation for the fiscal 2020 second quarter were 18.2 percent warmer than during the fiscal 2019 second quarter and 21.2 percent warmer than normal, as reported by the National Oceanic and Atmospheric Administration.

Net income decreased by $13.9 million, or 19.2 percent, to $58.4 million in the fiscal 2020 second quarter as a non-cash unfavorable change in the fair value of derivative instruments of $25.1 million more than offset an increase in Adjusted EBITDA of $7.4 million, as described below. The unfavorable change in the fair value of derivative instruments was the result of recording, a non-cash charge of $11.7 million during the second quarter of fiscal 2020 while, in the second quarter of fiscal 2019, a non-cash credit of $13.4 million was recorded.

Adjusted EBITDA rose by $7.4 million, or 7.5 percent, to $106.9 million. Acquisitions provided $4.9 million of Adjusted EBITDA, while Adjusted EBITDA in the base business increased by $2.5 million, as the impact from lower volumes sold, due to 18.2% warmer weather, and net customer attrition were largely offset by higher per gallon home heating oil and propane margins, $20.0 million lower operating expenses in the base business, a favorable change in the amount due under the Company’s weather hedge of $13.1 million, and an improvement in net service and installation profitability of $3.2 million.  The sharp decrease in product cost in the second fiscal quarter of 2020 combined with the Company’s weighted average product costing method also favorably impacted product gross profit by $6.9 million and the Company anticipates that product gross profit will be reduced by a similar amount over future periods as the effects of the price declines are weighted into the average costing calculations.

“As we cross the midpoint of fiscal 2020, the Company is managing through a number of unforeseen challenges related to the current pandemic,” said Jeff Woosnam, Star Group’s President and Chief Executive Officer. “The outbreak of COVID-19 has clearly had an impact on the way we do business – largely from a safety and logistical standpoint – but I’m pleased to report that we still posted solid results for the quarter. Gross margins rose, helped by falling oil prices, operating costs were reduced $20.0 million year-over-year, and net customer attrition declined – testimony to our attention to detail and continued focus on improving the customer experience. Our performance was also impressive given that temperatures were 18.2 percent warmer than last year, and our weather hedge worked as anticipated – resulting in a $10.1 million credit for fiscal 2020. We remain committed to serving our customers and believe Star is well positioned to navigate through unchartered territory in the months to come, for which we greatly thank our dedicated and hardworking employees.”

Six Months Ended March 31, 2020 Compared to the Six Months Ended March 31, 2019
Star reported a 14.8 percent decrease in total revenue to $1.1 billion compared with $1.2 billion in the prior-year period, reflecting the impact of lower volumes sold and reduced selling prices. The decline in selling prices was largely attributable to a decrease in product cost.

The volume of home heating oil and propane sold during the first half of fiscal 2020 decreased by 43.3 million gallons, or 15.1 percent, to 243.3 million gallons, as the positive impact from acquisitions was offset by warmer temperatures, net customer attrition and other factors. Temperatures in Star's geographic areas of operation for the first six months of fiscal 2020 were 11.6 percent warmer than during the prior year comparable period and 13.8 percent warmer than normal, as reported by the National Oceanic and Atmospheric Administration.

Net income increased by $11.5 million, or 15.4 percent, to $86.2 million due to a non-cash favorable change in the fair value of derivative instruments of $12.4 million and an increase in Adjusted EBITDA of $7.7 million, as described below.

Adjusted EBITDA increased by $7.7 million, or 5.3 percent to $152.0 million. Acquisitions provided $8.0 million of Adjusted EBITDA, while Adjusted EBITDA in the base business decreased by $0.3 million as the impact from lower volumes sold (reflecting 11.6% warmer weather and net customer attrition) was largely offset by higher per gallon home heating oil and propane margins, $32.1 million lower operating expenses in the base business, a favorable change in the amount due under the Company’s weather hedge of $12.2 million, and an improvement in the net service and installation profitability of $2.9 million.  The sharp decrease in product costs in the second fiscal quarter of 2020 combined with the Company’s weighted average product costing method also favorably impacted product gross profit by $6.9 million and the Company anticipates that product gross profit will be reduced by a similar amount over future periods as the effects of the price declines are weighted into the average costing calculations.

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, net other income, 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 analytical tools 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:
Members of Star's management team will host a webcast and conference call at 11:00 a.m. Eastern Time tomorrow, May 5, 2020. The webcast will be accessible on the company’s website, at www.stargrouplp.com, and the telephone number for the conference call is 877-327-7688 (or 412-317-5112 for international callers).

About Star Group, L.P.
Star Group, L.P. is a full service energy provider specializing in the sale of home heating oil and propane to residential and commercial customers primarily within the Northeast, Central and Southeast United States. The Company also sells gasoline and diesel fuel as well as installs, maintains, and repairs various heating and air conditioning equipment; to a lesser extent, it provides these ancillary services outside its product customer base, including service contracts for natural gas and other heating systems. Star is the nation's largest retail distributor of home heating oil based upon sales volume. Additional information is available by obtaining the Company's SEC filings at www.sec.gov and by visiting Star's website at www.stargrouplp.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 our expectations or beliefs concerning future events that involve risks and uncertainties, including those associated with the severity and duration of the novel coronavirus, or COVID-19, pandemic, the pandemic’s impact on the U.S. and global economies, the timing, scope and effectiveness of federal, state and local governmental responses to the pandemic, the effect of weather conditions on our financial performance, the price and supply of the products that 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 current and future governmental regulations, including climate change, environmental, health, and safety regulations, the ability to attract and retain employees, customer credit worthiness, counterparty credit worthiness, marketing plans, potential cyber-attacks, 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 Company 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, 2019. Important factors that could cause actual results to differ materially from the Company’s expectations ("Cautionary Statements") are disclosed in this news release and in the Form 10-Q. Currently, one of the most significant factors, however, is the potential adverse effect of the pandemic of the novel coronavirus, or COVID-19, on the financial condition, results of operations, cash flows and performance of the Company and its customers and counterparties and the global economy and financial markets. The extent to which COVID-19 impacts us and our customers will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of the pandemic, the actions taken to contain the pandemic or mitigate its impact, and the direct and indirect economic effects of the pandemic and containment measures, among others. All subsequent written and oral forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by the Cautionary Statements. Unless otherwise required by law, the Company 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.                 

CONTACT:    
Star Group, L.P.    Chris Witty
Investor Relations      Darrow Associates
203/328-7310    646/438-9385 or cwitty@darrowir.com 

(financials follow)

STAR GROUP, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS

    March 31,   September 30,
      2020       2019  
(in thousands)   (unaudited)    
ASSETS        
Current assets        
Cash and cash equivalents   $ 10,301     $ 4,899  
Receivables, net of allowance of $9,017 and $8,378, respectively     187,091       120,245  
Inventories     52,826       64,788  
Prepaid expenses and other current assets     43,319       36,898  
Total current assets     293,537       226,830  
Property and equipment, net     95,204       98,239  
Operating lease right-of-use assets     103,672        
Goodwill     244,574       244,574  
Intangibles, net     98,245       107,688  
Restricted cash     250       250  
Captive insurance collateral     65,776       58,490  
Deferred charges and other assets, net     17,823       16,635  
Total assets   $ 919,081     $ 752,706  
LIABILITIES AND PARTNERS’ CAPITAL        
Current liabilities        
Accounts payable   $ 23,898     $ 33,973  
Revolving credit facility borrowings     24,043       24,000  
Fair liability value of derivative instruments     14,017       8,262  
Current maturities of long-term debt     13,000       9,000  
Current portion of operating lease liabilities     19,567        
Accrued expenses and other current liabilities     158,989       120,839  
Unearned service contract revenue     65,176       61,213  
Customer credit balances     36,202       68,270  
Total current liabilities     354,892       325,557  
Long-term debt     116,188       120,447  
Long-term operating lease liabilities     89,373        
Deferred tax liabilities, net     20,229       20,116  
Other long-term liabilities     22,444       25,746  
Partners’ capital        
Common unitholders     334,968       279,709  
General partner     (1,792 )     (1,968 )
Accumulated other comprehensive loss, net of taxes     (17,221 )     (16,901 )
Total partners’ capital     315,955       260,840  
Total liabilities and partners’ capital   $ 919,081     $ 752,706  
         

STAR GROUP, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

    Three Months
Ended March 31,
  Six Months
Ended March 31,
(in thousands, except per unit data - unaudited)     2020       2019       2020       2019  
Sales:                
Product   $ 481,275     $ 637,400     $ 913,963     $ 1,096,107  
Installations and services     61,788       62,182       138,045       138,502  
Total sales     543,063       699,582       1,052,008       1,234,609  
Cost and expenses:                
Cost of product     285,350       415,639       573,023       721,865  
Cost of installations and services     61,273       65,394       134,942       139,711  
(Increase) decrease in the fair value of derivative instruments     11,670       (13,401 )     5,253       17,638  
Delivery and branch expenses     85,463       110,684       182,189       213,357  
Depreciation and amortization expenses     9,089       7,858       18,139       15,603  
General and administrative expenses     5,422       9,849       11,928       17,664  
Finance charge income     (1,321 )     (1,443 )     (2,034 )     (2,294 )
Operating income     86,117       105,002       128,568       111,065  
Interest expense, net     (2,756 )     (3,194 )     (5,435 )     (5,710 )
Amortization of debt issuance costs     (253 )     (244 )     (488 )     (503 )
Income before income taxes     83,108       101,564       122,645       104,852  
Income tax expense     24,700       29,239       36,482       30,212  
Net income   $ 58,408     $ 72,325     $ 86,163     $ 74,640  
General Partner’s interest in net income     409       454       601       469  
Limited Partners’ interest in net income   $ 57,999     $ 71,871     $ 85,562     $ 74,171  
                 
Per unit data (Basic and Diluted):                
Net income (loss) available to limited partners   $ 1.25     $ 1.40     $ 1.83     $ 1.42  
Dilutive impact of theoretical distribution of earnings under FASB ASC 260-10-45-60     0.22       0.25       0.31       0.23  
Basic and diluted income per Limited Partner Unit:   $ 1.03     $ 1.15     $ 1.52     $ 1.19  
                 
Weighted average number of Limited Partner units outstanding (Basic and Diluted)     46,244       51,427       46,760       52,174  
                 

SUPPLEMENTAL INFORMATION
STAR GROUP, L.P. AND SUBSIDIARIES

RECONCILIATION OF EBITDA AND ADJUSTED EBITDA

(Unaudited)

    Three Months
Ended March 31,
(in thousands)     2020       2019  
Net income   $ 58,408     $ 72,325  
Plus:        
Income tax expense     24,700       29,239  
Amortization of debt issuance costs     253       244  
Interest expense, net     2,756       3,194  
Depreciation and amortization     9,089       7,858  
EBITDA     95,206       112,860  
(Increase) / decrease in the fair value of derivative instruments     11,670       (13,401 )
Adjusted EBITDA     106,876       99,459  
Add / (subtract)        
Income tax expense     (24,700 )     (29,239 )
Interest expense, net     (2,756 )     (3,194 )
Provision for losses on accounts receivable     2,193       3,439  
Decrease (increase) in accounts receivables     16,183       (63,506 )
Decrease in inventories     27,435       16,446  
Decrease in customer credit balances     (16,564 )     (24,356 )
Change in deferred taxes     (1,114 )     (8,719 )
Change in other operating assets and liabilities     (5,087 )     30,200  
Net cash provided by operating activities   $ 102,466     $ 20,530  
Net cash used in investing activities   $ (5,534 )   $ (19,198 )
Net cash used in financing activities   $ (101,173 )   $ (8,749 )
         
         
Home heating oil and propane gallons sold     136,200       173,300  
Motor fuel and other petroleum products     36,600       39,000  
Total all products     172,800       212,300  
         

SUPPLEMENTAL INFORMATION
STAR GROUP, L.P. AND SUBSIDIARIES

RECONCILIATION OF EBITDA AND ADJUSTED EBITDA

(Unaudited)

    Six Months
Ended March 31,
(in thousands)     2020       2019  
Net income   $ 86,163     $ 74,640  
Plus:        
Income tax expense     36,482       30,212  
Amortization of debt issuance costs     488       503  
Interest expense, net     5,435       5,710  
Depreciation and amortization     18,139       15,603  
EBITDA     146,707       126,668  
(Increase) / decrease in the fair value of derivative instruments     5,253       17,638  
Adjusted EBITDA     151,960       144,306  
Add / (subtract)        
Income tax expense     (36,482 )     (30,212 )
Interest expense, net     (5,435 )     (5,710 )
Provision for losses on accounts receivable     3,203       4,968  
Increase in accounts receivables     (69,562 )     (159,249 )
Decrease (increase) in inventories     12,008       (3,741 )
Decrease in customer credit balances     (32,462 )     (38,476 )
Change in deferred taxes     222       (9,335 )
Change in other operating assets and liabilities     27,423       55,088  
Net cash provided by (used in) operating activities   $ 50,875     $ (42,361 )
Net cash used in investing activities   $ (13,197 )   $ (27,310 )
Net cash (used in) provided by financing activities   $ (32,276 )   $ 71,512  
         
         
Home heating oil and propane gallons sold     243,300       286,600  
Motor fuel and other petroleum products     78,000       80,900  
Total all products     321,300       367,500  
         

STAR.jpg

Source: Star Group, L.P.

Copyright 2000 - 2020 Star Group, L.P.   |   Disclaimer