sgu-10q_20190630.htm

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2019

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

Commission File Number: 001-14129

 

STAR GROUP, L.P.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

06-1437793

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

 

 

9 West Broad Street

Stamford, Connecticut

06902

(Address of principal executive office)

 

 

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

 

N/A

(Former name, former address and former fiscal year, if changed since last report)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Common Unit

 

SGU

 

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

Accelerated filer

 

 

 

 

Non- accelerated filer

Smaller reporting company

 

 

 

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.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  

 

At July 30, 2019, the registrant had 49,280,628 Common Units outstanding.

 

 

 

 


STAR GROUP, L.P. AND SUBSIDIARIES

INDEX TO FORM 10-Q

 

 

 

Page

Part I Financial Information

 

 

Item 1 - Condensed Consolidated Financial Statements

 

3

Condensed Consolidated Balance Sheets as of June 30, 2019 (unaudited) and September 30, 2018

 

3

Condensed Consolidated Statements of Operations (unaudited) for the three and nine months ended June 30, 2019 and June 30, 2018

 

4

Condensed Consolidated Statements of Comprehensive Income (Loss) (unaudited) for the three and nine months ended June 30, 2019 and June 30, 2018

 

5

Condensed Consolidated Statement of Partners’ Capital (unaudited) for the three and nine months ended June 30, 2019 and June 30, 2018

 

6-7

Condensed Consolidated Statements of Cash Flows (unaudited) for the nine months ended June 30, 2019 and June 30, 2018

 

8

Notes to Condensed Consolidated Financial Statements (unaudited)

 

9-24

Item 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

25-42

Item 3 - Quantitative and Qualitative Disclosures About Market Risk

 

43

Item 4 - Controls and Procedures

 

43

Part II Other Information:

 

44

Item 1 - Legal Proceedings

 

44

Item 1A - Risk Factors

 

44

Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds

 

44

Item 6 - Exhibits

 

45

Signatures

 

46

 

2


Part I. FINANCIAL INFORMATION

Item 1.

Condensed Consolidated Financial Statements

STAR GROUP, L.P. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

 

 

 

June 30,

 

 

September 30,

 

 

 

2019

 

 

2018

 

(in thousands)

 

(unaudited)

 

 

 

 

 

ASSETS

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

5,717

 

 

$

14,531

 

Receivables, net of allowance of $11,244 and $8,002, respectively

 

 

167,292

 

 

 

132,668

 

Inventories

 

 

57,478

 

 

 

56,377

 

Fair asset value of derivative instruments

 

 

-

 

 

 

17,710

 

Prepaid expenses and other current assets

 

 

35,610

 

 

 

35,451

 

Total current assets

 

 

266,097

 

 

 

256,737

 

Property and equipment, net

 

 

97,468

 

 

 

87,618

 

Goodwill

 

 

247,341

 

 

 

228,436

 

Intangibles, net

 

 

110,322

 

 

 

98,444

 

Restricted cash

 

 

250

 

 

 

250

 

Captive insurance collateral (1)

 

 

57,841

 

 

 

45,419

 

Deferred charges and other assets, net

 

 

17,625

 

 

 

13,067

 

Total assets

 

$

796,944

 

 

$

729,971

 

LIABILITIES AND PARTNERS’ CAPITAL

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

Accounts payable

 

$

28,254

 

 

$

35,796

 

Revolving credit facility borrowings

 

 

70,500

 

 

 

1,500

 

Fair liability value of derivative instruments

 

 

2,418

 

 

 

-

 

Current maturities of long-term debt

 

 

10,000

 

 

 

7,500

 

Accrued expenses and other current liabilities

 

 

145,558

 

 

 

116,436

 

Unearned service contract revenue

 

 

60,560

 

 

 

60,700

 

Customer credit balances

 

 

38,229

 

 

 

61,256

 

Total current liabilities

 

 

355,519

 

 

 

283,188

 

Long-term debt

 

 

84,399

 

 

 

91,780

 

Deferred tax liabilities, net

 

 

14,069

 

 

 

21,206

 

Other long-term liabilities

 

 

25,382

 

 

 

24,012

 

Partners’ capital

 

 

 

 

 

 

 

 

Common unitholders

 

 

335,958

 

 

 

329,129

 

General partner

 

 

(1,522

)

 

 

(1,303

)

Accumulated other comprehensive loss, net of taxes

 

 

(16,861

)

 

 

(18,041

)

Total partners’ capital

 

 

317,575

 

 

 

309,785

 

Total liabilities and partners’ capital

 

$

796,944

 

 

$

729,971

 

 

 

(1)

See Note 2 – Summary of Significant Accounting Policies – Captive Insurance Collateral.  

 

See accompanying notes to condensed consolidated financial statements.

 

3


STAR GROUP, L.P. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

 

 

 

Three Months

Ended June 30,

 

 

Nine Months

Ended June 30,

 

(in thousands, except per unit data - unaudited)

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Sales:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Product

 

$

210,657

 

 

$

256,447

 

 

$

1,306,764

 

 

$

1,246,143

 

Installations and services

 

 

72,719

 

 

 

70,907

 

 

 

211,221

 

 

 

202,076

 

Total sales

 

 

283,376

 

 

 

327,354

 

 

 

1,517,985

 

 

 

1,448,219

 

Cost and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of product

 

 

155,055

 

 

 

186,207

 

 

 

876,920

 

 

 

832,280

 

Cost of installations and services

 

 

62,130

 

 

 

61,770

 

 

 

201,841

 

 

 

195,984

 

(Increase) decrease in the fair value of derivative instruments

 

 

1,630

 

 

 

(7,515

)

 

 

19,268

 

 

 

(7,306

)

Delivery and branch expenses

 

 

82,669

 

 

 

83,312

 

 

 

296,026

 

 

 

281,121

 

Depreciation and amortization expenses

 

 

8,225

 

 

 

7,941

 

 

 

23,828

 

 

 

23,385

 

General and administrative expenses

 

 

5,472

 

 

 

5,894

 

 

 

23,136

 

 

 

18,766

 

Finance charge income

 

 

(1,872

)

 

 

(1,438

)

 

 

(4,166

)

 

 

(3,733

)

Operating income (loss)

 

 

(29,933

)

 

 

(8,817

)

 

 

81,132

 

 

 

107,722

 

Interest expense, net

 

 

(2,967

)

 

 

(2,186

)

 

 

(8,677

)

 

 

(6,656

)

Amortization of debt issuance costs

 

 

(253

)

 

 

(418

)

 

 

(756

)

 

 

(1,034

)

Income (loss) before income taxes

 

 

(33,153

)

 

 

(11,421

)

 

 

71,699

 

 

 

100,032

 

Income tax expense (benefit)

 

 

(10,055

)

 

 

(3,416

)

 

 

20,157

 

 

 

23,077

 

Net income (loss)

 

$

(23,098

)

 

$

(8,005

)

 

$

51,542

 

 

$

76,955

 

General Partner’s interest in net income (loss)

 

 

(150

)

 

 

(49

)

 

 

319

 

 

 

445

 

Limited Partners’ interest in net income (loss)

 

$

(22,948

)

 

$

(7,956

)

 

$

51,223

 

 

$

76,510

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted income (loss) per Limited Partner Unit (1):

 

$

(0.46

)

 

$

(0.15

)

 

$

0.86

 

 

$

1.18

 

Weighted average number of Limited Partner units outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and Diluted

 

 

49,943

 

 

 

53,938

 

 

 

51,431

 

 

 

55,157

 

 

(1)

See Note 15 - Earnings Per Limited Partner Unit.

See accompanying notes to condensed consolidated financial statements.

 

4


STAR GROUP, L.P. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

 

 

 

Three Months

Ended June 30,

 

 

Nine Months

Ended June 30,

 

(in thousands - unaudited)

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Net income (loss)

 

$

(23,098

)

 

$

(8,005

)

 

$

51,542

 

 

$

76,955

 

Other comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized gain on pension plan obligation (1)

 

 

455

 

 

 

448

 

 

 

1,366

 

 

 

1,344

 

Tax effect of unrealized gain on pension plan obligation

 

 

(124

)

 

 

(120

)

 

 

(373

)

 

 

(422

)

Unrealized gain (loss) on captive insurance collateral

 

 

666

 

 

 

(220

)

 

 

1,960

 

 

 

(1,151

)

Tax effect of unrealized gain (loss) on captive insurance collateral

 

 

(140

)

 

 

46

 

 

 

(416

)

 

 

242

 

Unrealized loss on interest rate hedges

 

 

(733

)

 

 

 

 

 

(1,845

)

 

 

 

Tax effect of unrealized loss on interest rate hedges

 

 

196

 

 

 

 

 

 

488

 

 

 

 

Total other comprehensive income

 

 

320

 

 

 

154

 

 

 

1,180

 

 

 

13

 

Total comprehensive income (loss)

 

$

(22,778

)

 

$

(7,851

)

 

$

52,722

 

 

$

76,968

 

 

(1)

This item is included in the computation of net periodic pension cost.    

See accompanying notes to condensed consolidated financial statements.

 

5


STAR GROUP, L.P. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF PARTNERS’ CAPITAL

 

 

 

Three Months Ended June 30, 2019

 

 

 

Number of Units

 

 

 

 

 

 

 

 

 

 

Accum. Other

 

 

Total

 

(in thousands - unaudited)

 

Common

 

 

General

Partner

 

 

Common

 

 

General

Partner

 

 

Comprehensive

Income (Loss)

 

 

Partners’

Capital

 

Balance as of March 31, 2019

 

 

50,302

 

 

 

326

 

 

$

373,748

 

 

$

(1,146

)

 

$

(17,181

)

 

$

355,421

 

Net loss

 

 

 

 

 

 

 

 

(22,948

)

 

 

(150

)

 

 

 

 

 

(23,098

)

Unrealized gain on pension plan obligation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

455

 

 

 

455

 

Tax effect of unrealized gain on pension plan obligation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(124

)

 

 

(124

)

Unrealized gain on captive insurance collateral

 

 

 

 

 

 

 

 

 

 

 

 

 

 

666

 

 

 

666

 

Tax effect of unrealized gain on captive insurance collateral

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(140

)

 

 

(140

)

Unrealized loss on interest rate hedges

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(733

)

 

 

(733

)

Tax effect of unrealized loss on interest rate hedges

 

 

 

 

 

 

 

 

 

 

 

 

 

 

196

 

 

 

196

 

Distributions

 

 

 

 

 

 

 

 

(6,265

)

 

 

(226

)

 

 

 

 

 

(6,491

)

Retirement of units (1)

 

 

(885

)

 

 

 

 

 

(8,577

)

 

 

 

 

 

 

 

 

(8,577

)

Balance as of June 30, 2019 (unaudited)

 

 

49,417

 

 

 

326

 

 

$

335,958

 

 

$

(1,522

)

 

$

(16,861

)

 

$

317,575

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended June 30, 2018

 

 

 

Number of Units

 

 

 

 

 

 

 

 

 

 

Accum. Other

 

 

Total

 

(in thousands - unaudited)

 

Common

 

 

General

Partner

 

 

Common

 

 

General

Partner

 

 

Comprehensive

Income (Loss)

 

 

Partners’

Capital

 

Balance as of March 31, 2018

 

 

54,607

 

 

 

326

 

 

$

385,909

 

 

$

(743

)

 

$

(18,906

)

 

$

366,260

 

Net loss

 

 

 

 

 

 

 

 

(7,956

)

 

 

(49

)

 

 

 

 

 

(8,005

)

Unrealized gain on pension plan obligation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

448

 

 

 

448

 

Tax effect of unrealized gain on pension plan obligation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(120

)

 

 

(120

)

Unrealized loss on captive insurance collateral

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(220

)

 

 

(220

)

Tax effect of unrealized loss on captive insurance collateral

 

 

 

 

 

 

 

 

 

 

 

 

 

 

46

 

 

 

46

 

Distributions

 

 

 

 

 

 

 

 

(6,344

)

 

 

(191

)

 

 

 

 

 

(6,535

)

Retirement of units (1)

 

 

(1,089

)

 

 

 

 

 

(10,515

)

 

 

 

 

 

 

 

 

(10,515

)

Balance as of June 30, 2018 (unaudited)

 

 

53,518

 

 

 

326

 

 

$

361,094

 

 

$

(983

)

 

$

(18,752

)

 

$

341,359

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)

See Note 4 – Common Unit Repurchase and Retirement.

See accompanying notes to condensed consolidated financial statements.

6


STAR GROUP, L.P. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF PARTNERS’ CAPITAL

 

 

 

Nine Months Ended June 30, 2019

 

 

 

Number of Units

 

 

 

 

 

 

 

 

 

 

Accum. Other

 

 

Total

 

(in thousands - unaudited)

 

Common

 

 

General

Partner

 

 

Common

 

 

General

Partner

 

 

Comprehensive

Income (Loss)

 

 

Partners’

Capital

 

Balance as of September 30, 2018

 

 

53,088

 

 

 

326

 

 

$

329,129

 

 

$

(1,303

)

 

$

(18,041

)

 

$

309,785

 

Impact of adoption of ASU No. 2014-09

 

 

 

 

 

 

 

 

9,164

 

 

 

60

 

 

 

 

 

 

9,224

 

Net income

 

 

 

 

 

 

 

 

51,223

 

 

 

319

 

 

 

-

 

 

 

51,542

 

Unrealized gain on pension plan obligation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,366

 

 

 

1,366

 

Tax effect of unrealized gain on pension plan obligation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(373

)

 

 

(373

)

Unrealized gain on captive insurance collateral

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,960

 

 

 

1,960

 

Tax effect of unrealized gain on captive insurance collateral

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(416

)

 

 

(416

)

Unrealized loss on interest rate hedges

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,845

)

 

 

(1,845

)

Tax effect of unrealized loss on interest rate hedges

 

 

 

 

 

 

 

 

 

 

 

 

 

 

488

 

 

 

488

 

Distributions

 

 

 

 

 

 

 

 

(18,610

)

 

 

(598

)

 

 

 

 

 

(19,208

)

Retirement of units (1)

 

 

(3,671

)

 

 

 

 

 

(34,948

)

 

 

 

 

 

 

 

 

(34,948

)

Balance as of June 30, 2019 (unaudited)

 

 

49,417

 

 

 

326

 

 

$

335,958

 

 

$

(1,522

)

 

$

(16,861

)

 

$

317,575

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended June 30, 2018

 

 

 

Number of Units

 

 

 

 

 

 

 

 

 

 

Accum. Other

 

 

Total

 

(in thousands - unaudited)

 

Common

 

 

General

Partner

 

 

Common

 

 

General

Partner

 

 

Comprehensive

Income (Loss)

 

 

Partners’

Capital

 

Balance as of September 30, 2017

 

 

55,888

 

 

 

326

 

 

$

325,762

 

 

$

(929

)

 

$

(18,765

)

 

$

306,068

 

Net income

 

 

 

 

 

 

 

 

76,510

 

 

 

445

 

 

 

 

 

 

76,955

 

Unrealized gain on pension plan obligation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,344

 

 

 

1,344

 

Tax effect of unrealized gain on pension plan obligation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(422

)

 

 

(422

)

Unrealized loss on captive insurance collateral

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,151

)

 

 

(1,151

)

Tax effect of unrealized loss on captive insurance collateral

 

 

 

 

 

 

 

 

 

 

 

 

 

 

242

 

 

 

242

 

Distributions

 

 

 

 

 

 

 

 

(18,640

)

 

 

(499

)

 

 

 

 

 

(19,139

)

Retirement of units (1)

 

 

(2,370

)

 

 

 

 

 

(22,538

)

 

 

 

 

 

 

 

 

(22,538

)

Balance as of June 30, 2018 (unaudited)

 

 

53,518

 

 

 

326

 

 

$

361,094

 

 

$

(983

)

 

$

(18,752

)

 

$

341,359

 

(1)

See Note 4 – Common Unit Repurchase and Retirement.

See accompanying notes to condensed consolidated financial statements.

 

7


STAR GROUP, L.P. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

 

 

 

Nine Months

Ended June 30,

 

(in thousands - unaudited)

 

2019

 

 

2018

 

Cash flows provided by (used in) operating activities:

 

 

 

 

 

 

 

 

Net income

 

$

51,542

 

 

$

76,955

 

Adjustment to reconcile net income to net cash provided by (used in)

   operating activities:

 

 

 

 

 

 

 

 

(Increase) decrease in fair value of derivative instruments

 

 

19,268

 

 

 

(7,306

)

Depreciation and amortization

 

 

24,584

 

 

 

24,419

 

Provision for losses on accounts receivable

 

 

8,500

 

 

 

5,687

 

Change in deferred taxes

 

 

(11,206

)

 

 

29,641

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Increase in receivables

 

 

(34,793

)

 

 

(86,504

)

Decrease in inventories

 

 

1,958

 

 

 

12,390

 

(Increase) decrease in other assets

 

 

9,156

 

 

 

(2,938

)

Increase (decrease) in accounts payable

 

 

(7,570

)

 

 

5,078

 

Decrease in customer credit balances

 

 

(26,177

)

 

 

(36,503

)

Increase in other current and long-term liabilities

 

 

27,060

 

 

 

9,100

 

Net cash provided by operating activities

 

 

62,322

 

 

 

30,019

 

Cash flows provided by (used in) investing activities:

 

 

 

 

 

 

 

 

Capital expenditures

 

 

(8,235

)

 

 

(8,682

)

Proceeds from sales of fixed assets

 

 

1,040

 

 

 

325

 

Purchase of investments (1)

 

 

(10,576

)

 

 

(34,840

)

Acquisitions

 

 

(62,807

)

 

 

(21,262

)

Net cash used in investing activities

 

 

(80,578

)

 

 

(64,459

)

Cash flows provided by (used in) financing activities:

 

 

 

 

 

 

 

 

Revolving credit facility borrowings

 

 

139,331

 

 

 

160,104

 

Revolving credit facility repayments

 

 

(70,331

)

 

 

(118,604

)

Term loan repayments

 

 

(5,000

)