Washington, D.C. 20549

Form 8-K


Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event Reported): December 6, 2018  

(Exact Name of Registrant as Specified in Charter)

(State or Other Jurisdiction of Incorporation)(Commission File Number)(I.R.S. Employer Identification Number)


9 West Broad Street, Suite 310, Stamford, CT 06902
(Address of Principal Executive Offices) (Zip Code)

(203) 328-7310
(Registrant's telephone number, including area code)

Not Applicable
(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 [   ]  Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 [   ]  Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 [   ]  Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 [   ]  Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))


Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2). Emerging growth company [   ]


If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [   ]


Item 2.02. Results of Operations and Financial Condition.

On December 6, 2018, Star Group, L.P., a Delaware partnership, issued a press release announcing its financial results for the fiscal fourth quarter ended September 30, 2018.  A copy of the press release is furnished within this report as Exhibit 99.1.

The information in this report is being furnished and is not deemed as "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and shall not be deemed incorporated by reference in any filings under the Securities Act of 1933, as amended, unless specifically stated so therein.

Item 7.01. Regulation FD Disclosure.


Item 9.01. Financial Statements and Exhibits.

Exhibit 99.1   A copy of the Star Group, L.P. Press Release dated December 6, 2018.


Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

By: Kestrel Heat, LLC (General Partner)
Date: December 6, 2018By: /s/ Richard F. Ambury        
  Richard F. Ambury
  Chief Financial Officer
Principal Financial Officer



Star Group, L.P. Reports Fiscal 2018 Fourth Quarter and Full Year Results

STAMFORD, Conn., Dec. 06, 2018 (GLOBE NEWSWIRE) -- Star Group, L.P. (the "Company" or "Star") (NYSE:SGU), a home energy distributor and services provider, today filed its fiscal 2018 annual report on Form 10-K with the SEC and announced financial results for the fiscal 2018 fourth quarter and year ended September 30, 2018.

Three Months Ended September 30, 2018 Compared to Three Months Ended September 30, 2017
For the fiscal 2018 fourth quarter, Star reported a 26.5 percent increase in total revenue to $229.6 million, compared with $181.6 million in the prior-year period. The revenue growth reflected higher selling prices – in response to an increase in wholesale product cost of $0.4582 per gallon – greater service and installation sales, and an increase in total volume sold. The volume variance was driven by higher sales of other petroleum products, which rose by 12.8 million gallons, or 44.8 percent, to 41.5 million gallons largely due to acquisitions. Sales volume of home heating oil and propane declined by 3.4 million gallons, or 15.2 percent, to 19.2 million gallons as the additional sales volume from acquisitions of 0.7 million gallons was more than offset by net customer attrition (3.2 percent for fiscal 2018) and other factors such as the timing of deliveries between quarters. Home heating oil and propane margins rose in the base business (i.e., excluding acquisitions) and net service profitability improved, reducing the impact of the home heating oil and propane volume decline. Total gross profit in the base business fell by $1.8 million, or 4.3 percent, which was less than the 18.3 percent decline in base business home heating oil and propane volume.

During the fourth quarter of fiscal 2018, the Company sold its small home security business and recorded a pre-tax gain of $7.0 million after expenses.

Star's net loss increased by $3.8 million, to a loss of $21.5 million, as the gain on sale of the Company’s security business was more than offset by the Adjusted EBITDA loss, as described below.

The Company's Adjusted EBITDA loss for the fiscal 2018 fourth quarter increased by $8.4 million, to $37.6 million, due to an Adjusted EBITDA loss of $1.7 million attributable to acquisitions largely completed after the heating season and an increase in the base business Adjusted EBITDA loss of $6.7 million.  In the base business, total gross profit declined by $1.8 million, as previously noted, due to the reduction in home heating oil and propane volume partially mitigated by higher home heating oil and propane margins. Expansion of the Company’s service initiatives, including a concierge program, resulted in higher operating costs of $1.6 million, and bad debt expense was higher by $1.0 million due to an increase in the Company’s reserve for doubtful accounts. In addition, Star took a charge of $0.5 million for severance during the quarter and incurred $0.6 million of rebranding expense. The build-out of certain departments, training for office personnel and delivery drivers, and inflationary pressures accounted for the balance of the increase in the Adjusted EBITDA loss.

Adjusted EBITDA is a non-GAAP financial measure (see reconciliation below) that should not be considered as an alternative to net income (as an indicator of operating performance) or as an alternative to cash flow (as a measure of liquidity or ability to service debt obligations) but provides additional information for evaluating the Company’s ability to pay distributions.

"Having faced numerous unusual factors earlier in the year, we ended fiscal 2018 with mixed performance during the fourth quarter,” said Steven J. Goldman, Star’s Chief Executive Officer. “While revenue rose due to higher volumes of other petroleum products, bottom line results were negatively impacted by delivery timing, increased expenses, and by businesses acquired during the non-heating season. During the quarter, we also sold off a small security unit for a net gain of $7.0 million due to the changing landscape of this industry and increasing capital requirements to remain competitive.

“For fiscal 2018 as a whole we completed six acquisitions that brought, in aggregate, approximately 17,000 new accounts to Star across several product categories – home heating oil and propane, other petroleum products, and various services. Such transactions, along with our continued investment in business development, are designed to increase the bond with our customers and improve Star’s long-term operating performance. Given the unexpected nature of this past year – with extreme weather volatility – we know the importance of being prepared for every possibility.” 

Fiscal Year Ended September 30, 2018 Compared to Fiscal Year Ended September 30, 2017
Star reported a 26.8 percent increase in total revenue to $1.7 billion, versus $1.3 billion in the prior-year period, due to both higher selling prices – in response to higher wholesale product costs and an increase in total volume sold.

Home heating oil and propane volume rose by 40.3 million gallons, or 12.7 percent, to 357.2 million gallons, as the additional volume provided from acquisitions and colder weather more than offset the impact of net customer attrition and other factors. Temperatures in Star's geographic areas of operation for fiscal 2018 were 9.0 percent colder than last year’s comparable period but 4.7 percent warmer than normal, as reported by the National Oceanic and Atmospheric Administration. While warmer than normal in aggregate, the fiscal year included extreme weather anomalies – including times when temperatures were nearly 50% colder than normal.

Net income increased by $28.6 million, or 106.3 percent, to $55.5 million due to an increase in Adjusted EBITDA of $5.2 million (discussed below), a favorable change in the fair value of derivative instruments of $9.2 million, the gain on sale from the security business ($7.0 million), and a reduction in the Company’s effective tax rate from 43.1 percent to 12.0 percent, primarily due to the impact of the recently-enacted lower federal statuary rate.

Adjusted EBITDA increased by $5.2 million, or 6.4 percent, to $86.2 million.  The increase in Adjusted EBITDA was primarily provided by acquisitions of $4.9 million (which included an Adjusted EBITDA loss for acquisitions completed after the heating season of $0.8 million). In the base business, the additional volume sold, reflecting the impact of colder temperatures, and higher home heating oil and propane margins was reduced by higher operating costs in the base business and a $1.9 million charge under the Company’s weather hedge contract, as temperatures were colder than the payment threshold during contract period. The extreme cold weather conditions experienced in late December 2017 and early January 2018 not only increased demand for service calls but also drove an increase in direct delivery expense as well as many other branch expenses. Certain December and January deliveries were made at premium labor rates, and the unusual weather conditions necessitated increased staffing levels for delivery and office personnel to handle the tremendous influx of customer inquiries regarding the status of their delivery or service call. In addition to these costs and normal increases in salaries, benefits, and other items, delivery and branch expenses were also higher due to an increase in fixed costs, an increase in insurance expense, greater credit card usage and higher bad debt expense, reflecting the increase in sales, rebranding expense, severance costs, and expansion of the Company’s concierge service program.

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 financial measures by management and external users of our financial statements, such as investors, commercial banks and research analysts, to assess:

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:

Members of Star's management team will host a webcast and conference call at 11:00 a.m. Eastern Time on December 6, 2018. 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 provider specializing in the sale of home heating products and services to residential and commercial customers to heat their homes and buildings. The Company also sells and services 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 Company provides plumbing services primarily to its home heating oil and propane customer base. Star also sells diesel, 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 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 the Company’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 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, 2018. 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. 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.

(financials follow)


  Three Months Ended
 September 30,
 Twelve Months Ended
 September 30,
  2018 2017 2018 2017
(in thousands, except per unit data) (unaudited) (unaudited)    
Product $158,227  $114,769  $1,404,370  $1,065,076 
Installations and services  71,391   66,815   273,467   258,479 
Total sales  229,618   181,584   1,677,837   1,323,555 
Cost and expenses:        
Cost of product  125,563   82,584   957,843   675,386 
Cost of installations and services  60,668   56,533   256,652   239,670 
(Increase) decrease in the fair value of derivative instruments  (4,102)  (9,219)  (11,408)  (2,193)
Delivery and branch expenses  76,459   65,547   357,580   306,534 
Depreciation and amortization expenses  8,190   7,177   31,575   27,882 
General and administrative expenses  5,461   6,854   24,227   24,998 
Finance charge income  (967)  (766)  (4,700)  (4,054)
Operating income (loss)  (41,654)  (27,126)  66,068   55,332 
Interest expense, net  (2,060)  (1,657)  (8,716)  (6,775)
Amortization of debt issuance costs  (254)  (309)  (1,288)  (1,281)
Other income, net  7,043      7,043    
Income (loss) before income taxes  (36,925)  (29,092)  63,107   47,276 
Income tax expense (benefit)  (15,475)  (11,345)  7,602   20,376 
Net income (loss) $(21,450) $(17,747) $55,505  $26,900 
General Partner’s interest in net income (loss)  (131)  (103)  314   156 
Limited Partners’ interest in net income (loss) $(21,319) $(17,644) $55,191  $26,744 
Per unit data (Basic and Diluted):        
Net income (loss) available to limited partners $(0.40) $(0.32) $1.01  $0.48 
Dilutive impact of theoretical distribution of earnings under FASB ASC 260-10-45-60        0.12   0.02 
Limited Partner’s interest in net income (loss) under FASB ASC 260-10-45-60 $(0.40) $(0.32) $0.89  $0.46 
Weighted average number of Limited Partner units outstanding (Basic and Diluted)  53,371   55,888   54,764   55,888 



  Three Months Ended
September 30,
(in thousands)  2018 2017
Net loss $(21,450) $(17,747)
Income tax benefit  (15,475)  (11,345)
Amortization of debt issuance cost  254   309 
Interest expense, net  2,060   1,657 
Depreciation and amortization  8,190   7,177 
EBITDA  (26,421)  (19,949)
(Increase) / decrease in the fair value of derivative instruments  (4,102)  (9,219)
Other income, net  (7,043)  - 
Adjusted EBITDA  (37,566)  (29,168)
Add / (subtract)    
Income tax benefit  15,475   11,345 
Interest expense, net  (2,060)  (1,657)
Provision (recovery) for losses on accounts receivable  596   (622)
Change in deferred taxes  (14,956)  5,683 
Decrease in receivables  49,355   20,680 
Increase  in inventories  (8,213)  (14,359)
Increase in customer credit balances  29,940   22,672 
Change in other operating assets and liabilities  (5,130  (16,726)
Net cash provided by (used in) operating activities $27,441  $(2,152)
Net cash used in investing activities $(793) $(31,162)
Net cash used in financing activities $(21,540) $(8,802)
Home heating oil and propane gallons sold  19,200   22,600 
Other petroleum products  41,500   28,700 
Total all products  60,700   51,300 



  Twelve Months Ended
September 30,
(in thousands)  2018
Net income $55,505  $26,900 
Income tax expense  7,602   20,376 
Amortization of debt issuance cost  1,288   1,281 
Interest expense, net  8,716   6,775 
Depreciation and amortization  31,575   27,882 
EBITDA  104,686   83,214 
(Increase) / decrease in the fair value of derivative instruments  (11,408)  (2,193)
Other income, net  (7,043)  - 
Adjusted EBITDA  86,235   81,021 
Add / (subtract)    
Income tax expense  (7,602)  (20,376)
Interest expense, net  (8,716)  (6,775)
Provision for losses on accounts receivable  6,283   1,639 
Change in deferred taxes  14,685   10,134 
Increase in receivables  (37,149)  (19,844)
Decrease (increase)  in inventories  4,177   (10,598)
Decrease in customer credit balances  (6,563)  (23,085)
Change in other operating assets and liabilities  6,110   8,942 
Net cash provided by operating activities $57,460  $21,058 
Net cash used in investing activities $(65,252) $(66,381)
Net cash used in financing activities $(30,135) $(41,157)
Home heating oil and propane gallons sold  357,200   316,900 
Other petroleum products  138,300   112,100 
Total all products    495,500     429,000 


  September 30,
(in thousands) 2018
Current assets    
Cash and cash equivalents $14,531  $52,458 
Receivables, net of allowance of $8,002 and $5,540, respectively  132,668   96,603 
Inventories  56,377   59,596 
Fair asset value of derivative instruments  17,710   5,932 
Prepaid expenses and other current assets  35,451   26,652 
Total current assets  256,737   241,241 
Property and equipment, net  87,618   79,673 
Goodwill  228,436   225,915 
Intangibles, net  98,444   105,218 
Restricted cash  250   250 
Investments  45,419   11,777 
Deferred charges and other assets, net  13,067   9,843 
Total assets $729,971  $673,917 
Current liabilities    
Accounts payable $35,796  $26,739 
Revolving credit facility borrowings  1,500    
Fair liability value of derivative instruments     289 
Current maturities of long-term debt  7,500   10,000 
Accrued expenses and other current liabilities  116,436   108,449 
Unearned service contract revenue  60,700   60,133 
Customer credit balances  61,256   66,723 
Total current liabilities  283,188   272,333 
Long-term debt  91,780   65,717 
Deferred tax liabilities, net  21,206   6,140 
Other long-term liabilities  24,012   23,659 
Partners’ capital    
Common unitholders  329,129   325,762 
General partner  (1,303)  (929)
Accumulated other comprehensive loss, net of taxes  (18,041)  (18,765)
Total partners’ capital  309,785   306,068 
Total liabilities and partners’ capital $729,971  $673,917 

Star Group
Investor Relations

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