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!8

 

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 March 31, 2020

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 April 30, 2020, the registrant had 45,197,331 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 March 31, 2020 (unaudited) and September 30, 2019

 

3

Condensed Consolidated Statements of Operations (unaudited) for the three and six months ended March 31, 2020 and March 31, 2019

 

4

Condensed Consolidated Statements of Comprehensive Income (Loss) (unaudited) for the three and six months ended March 31, 2020 and March 31, 2019

 

5

Condensed Consolidated Statement of Partners’ Capital (unaudited) for the three and six months ended March 31, 2020 and March 31, 2019

 

6-7

Condensed Consolidated Statements of Cash Flows (unaudited) for the six months ended March 31, 2020 and March 31, 2019

 

8

Notes to Condensed Consolidated Financial Statements (unaudited)

 

9-22

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

 

23-39

Item 3 - Quantitative and Qualitative Disclosures About Market Risk

 

40

Item 4 - Controls and Procedures

 

40

Part II Other Information:

 

41

Item 1 - Legal Proceedings

 

41

Item 1A - Risk Factors

 

41-42

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

 

42

Item 6 - Exhibits

 

43

Signatures

 

44

 

2


Part I. FINANCIAL INFORMATION

Item 1.

Condensed Consolidated Financial Statements

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

 

 

See accompanying notes to condensed consolidated financial statements.

 

3


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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

$

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

 

 

(1)

See Note 16 - 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 March 31,

 

 

Six Months

Ended March 31,

 

(in thousands - unaudited)

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Net income

 

$

58,408

 

 

$

72,325

 

 

$

86,163

 

 

$

74,640

 

Other comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized gain on pension plan obligation (1)

 

 

455

 

 

 

457

 

 

 

910

 

 

 

911

 

Tax effect of unrealized gain on pension plan obligation

 

 

(133

)

 

 

(125

)

 

 

(258

)

 

 

(249

)

Unrealized gain on captive insurance collateral

 

 

107

 

 

 

905

 

 

 

43

 

 

 

1,294

 

Tax effect of unrealized gain on captive insurance collateral

 

 

(15

)

 

 

(194

)

 

 

(7

)

 

 

(276

)

Unrealized loss on interest rate hedges

 

 

(1,716

)

 

 

(367

)

 

 

(1,382

)

 

 

(1,112

)

Tax effect of unrealized loss on interest rate hedges

 

 

460

 

 

 

95

 

 

 

374

 

 

 

292

 

Total other comprehensive income (loss)

 

 

(842

)

 

 

771

 

 

 

(320

)

 

 

860

 

Total comprehensive income

 

$

57,566

 

 

$

73,096

 

 

$

85,843

 

 

$

75,500

 

 

(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 March 31, 2020

 

 

 

Number of Units

 

 

 

 

 

 

 

 

 

 

Accum. Other

 

 

Total

 

(in thousands - unaudited)

 

Common

 

 

General

Partner

 

 

Common

 

 

General

Partner

 

 

Comprehensive

Income (Loss)

 

 

Partners’

Capital

 

Balance as of December 31, 2019

 

 

46,404

 

 

 

326

 

 

$

289,268

 

 

$

(1,991

)

 

$

(16,379

)

 

$

270,898

 

Net income

 

 

 

 

 

 

 

 

57,999

 

 

 

409

 

 

 

 

 

 

58,408

 

Unrealized gain on pension plan obligation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

455

 

 

 

455

 

Tax effect of unrealized gain on pension plan obligation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(133

)

 

 

(133

)

Unrealized gain on captive insurance collateral

 

 

 

 

 

 

 

 

 

 

 

 

 

 

107

 

 

 

107

 

Tax effect of unrealized gain on captive insurance collateral

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(15

)

 

 

(15

)

Unrealized loss on interest rate hedges

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,716

)

 

 

(1,716

)

Tax effect of unrealized loss on interest rate hedges

 

 

 

 

 

 

 

 

 

 

 

 

 

 

460

 

 

 

460

 

Distributions

 

 

 

 

 

 

 

 

(5,788

)

 

 

(210

)

 

 

 

 

 

(5,998

)

Retirement of units (1)

 

 

(782

)

 

 

 

 

 

(6,511

)

 

 

 

 

 

 

 

 

(6,511

)

Balance as of March 31, 2020 (unaudited)

 

 

45,622

 

 

 

326

 

 

$

334,968

 

 

$

(1,792

)

 

$

(17,221

)

 

$

315,955

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31, 2019

 

 

 

Number of Units

 

 

 

 

 

 

 

 

 

 

Accum. Other

 

 

Total

 

(in thousands - unaudited)

 

Common

 

 

General

Partner

 

 

Common

 

 

General

Partner

 

 

Comprehensive

Income (Loss)

 

 

Partners’

Capital

 

Balance as of December 31, 2018

 

 

52,489

 

 

 

326

 

 

$

328,633

 

 

$

(1,416

)

 

$

(17,952

)

 

$

309,265

 

Net income

 

 

 

 

 

 

 

 

71,871

 

 

 

454

 

 

 

 

 

 

72,325

 

Unrealized gain on pension plan obligation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

457

 

 

 

457

 

Tax effect of unrealized gain on pension plan

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(125

)

 

 

(125

)

Unrealized gain on captive insurance collateral

 

 

 

 

 

 

 

 

 

 

 

 

 

 

905

 

 

 

905

 

Tax effect of unrealized gain on captive insurance collateral

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(194

)

 

 

(194

)

Unrealized loss on interest rate hedges

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(367

)

 

 

(367

)

Tax effect of unrealized loss on interest rate hedges

 

 

 

 

 

 

 

 

 

 

 

 

 

 

95

 

 

 

95

 

Distributions

 

 

 

 

 

 

 

 

(6,120

)

 

 

(184

)

 

 

 

 

 

(6,304

)

Retirement of units (1)

 

 

(2,187

)

 

 

 

 

 

(20,636

)

 

 

 

 

 

 

 

 

(20,636

)

Balance as of March 31, 2019 (unaudited)

 

 

50,302

 

 

 

326

 

 

$

373,748

 

 

$

(1,146

)

 

$

(17,181

)

 

$

355,421

 

(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

 

 

 

Six Months Ended March 31, 2020

 

 

 

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, 2019

 

 

47,685

 

 

 

326

 

 

$

279,709

 

 

$

(1,968

)

 

$

(16,901

)

 

$

260,840

 

Net income

 

 

 

 

 

 

 

 

85,562

 

 

 

601

 

 

 

 

 

 

86,163

 

Unrealized gain on pension plan obligation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

910

 

 

 

910

 

Tax effect of unrealized gain on pension plan obligation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(258

)

 

 

(258

)

Unrealized gain on captive insurance collateral

 

 

 

 

 

 

 

 

 

 

 

 

 

 

43

 

 

 

43

 

Tax effect of unrealized gain on captive insurance collateral

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(7

)

 

 

(7

)

Unrealized loss on interest rate hedges

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,382

)

 

 

(1,382

)

Tax effect of unrealized loss on interest rate hedges

 

 

 

 

 

 

 

 

 

 

 

 

 

 

374

 

 

 

374

 

Distributions