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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 June 30, 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 July 31, 2020, the registrant had 43,741,226 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, 2020 (unaudited) and September 30, 2019

 

3

Condensed Consolidated Statements of Operations (unaudited) for the three and nine months ended June 30, 2020 and June 30, 2019

 

4

Condensed Consolidated Statements of Comprehensive Income (Loss) (unaudited) for the three and nine months ended June 30, 2020 and June 30, 2019

 

5

Condensed Consolidated Statement of Partners’ Capital (unaudited) for the three and nine months ended June 30, 2020 and June 30, 2019

 

6-7

Condensed Consolidated Statements of Cash Flows (unaudited) for the nine months ended June 30, 2020 and June 30, 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

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

 

41

Item 6 - Exhibits

 

42

Signatures

 

43

 

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,

 

 

 

2020

 

 

2019

 

(in thousands)

 

(unaudited)

 

 

 

 

 

ASSETS

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

66,718

 

 

$

4,899

 

Receivables, net of allowance of $8,757 and $8,378, respectively

 

 

111,915

 

 

 

120,245

 

Inventories

 

 

43,699

 

 

 

64,788

 

Prepaid expenses and other current assets

 

 

28,464

 

 

 

36,898

 

Total current assets

 

 

250,796

 

 

 

226,830

 

Property and equipment, net

 

 

94,826

 

 

 

98,239

 

Operating lease right-of-use assets

 

 

100,765

 

 

 

 

Goodwill

 

 

244,574

 

 

 

244,574

 

Intangibles, net

 

 

93,518

 

 

 

107,688

 

Restricted cash

 

 

250

 

 

 

250

 

Captive insurance collateral

 

 

69,607

 

 

 

58,490

 

Deferred charges and other assets, net

 

 

17,788

 

 

 

16,635

 

Total assets

 

$

872,124

 

 

$

752,706

 

LIABILITIES AND PARTNERS’ CAPITAL

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

Accounts payable

 

$

25,081

 

 

$

33,973

 

Revolving credit facility borrowings

 

 

 

 

 

24,000

 

Fair liability value of derivative instruments

 

 

10,495

 

 

 

8,262

 

Current maturities of long-term debt

 

 

13,000

 

 

 

9,000

 

Current portion of operating lease liabilities

 

 

19,391

 

 

 

 

Accrued expenses and other current liabilities

 

 

153,591

 

 

 

120,839

 

Unearned service contract revenue

 

 

58,121

 

 

 

61,213

 

Customer credit balances

 

 

50,127

 

 

 

68,270

 

Total current liabilities

 

 

329,806

 

 

 

325,557

 

Long-term debt

 

 

112,975

 

 

 

120,447

 

Long-term operating lease liabilities

 

 

86,680

 

 

 

 

Deferred tax liabilities, net

 

 

19,153

 

 

 

20,116

 

Other long-term liabilities

 

 

22,235

 

 

 

25,746

 

Partners’ capital

 

 

 

 

 

 

 

 

Common unitholders

 

 

319,522

 

 

 

279,709

 

General partner

 

 

(2,041

)

 

 

(1,968

)

Accumulated other comprehensive loss, net of taxes

 

 

(16,206

)

 

 

(16,901

)

Total partners’ capital

 

 

301,275

 

 

 

260,840

 

Total liabilities and partners’ capital

 

$

872,124

 

 

$

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 June 30,

 

 

Nine Months

Ended June 30,

 

(in thousands, except per unit data - unaudited)

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Sales:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Product

 

$

165,182

 

 

$

210,657

 

 

$

1,079,145

 

 

$

1,306,764

 

Installations and services

 

 

66,973

 

 

 

72,719

 

 

 

205,018

 

 

 

211,221

 

Total sales

 

 

232,155

 

 

 

283,376

 

 

 

1,284,163

 

 

 

1,517,985

 

Cost and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of product

 

 

93,264

 

 

 

155,055

 

 

 

666,287

 

 

 

876,920

 

Cost of installations and services

 

 

54,732

 

 

 

62,130

 

 

 

189,674

 

 

 

201,841

 

(Increase) decrease in the fair value of derivative instruments

 

 

(3,279

)

 

 

1,630

 

 

 

1,974

 

 

 

19,268

 

Delivery and branch expenses

 

 

72,756

 

 

 

82,669

 

 

 

254,945

 

 

 

296,026

 

Depreciation and amortization expenses

 

 

8,447

 

 

 

8,225

 

 

 

26,586

 

 

 

23,828

 

General and administrative expenses

 

 

6,954

 

 

 

5,472

 

 

 

18,882

 

 

 

23,136

 

Finance charge income

 

 

(1,217

)

 

 

(1,872

)

 

 

(3,251

)

 

 

(4,166

)

Operating income (loss)

 

 

498

 

 

 

(29,933

)

 

 

129,066

 

 

 

81,132

 

Interest expense, net

 

 

(2,308

)

 

 

(2,967

)

 

 

(7,743

)

 

 

(8,677

)

Amortization of debt issuance costs

 

 

(241

)

 

 

(253

)

 

 

(729

)

 

 

(756

)

Income (loss) before income taxes

 

 

(2,051

)

 

 

(33,153

)

 

 

120,594

 

 

 

71,699

 

Income tax expense (benefit)

 

 

(2,005

)

 

 

(10,055

)

 

 

34,477

 

 

 

20,157

 

Net income (loss)

 

$

(46

)

 

$

(23,098

)

 

$

86,117

 

 

$

51,542

 

General Partner’s interest in net income (loss)

 

 

(1

)

 

 

(150

)

 

 

600

 

 

 

319

 

Limited Partners’ interest in net income (loss)

 

$

(45

)

 

$

(22,948

)

 

$

85,517

 

 

$

51,223

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

$

 

 

$

(0.46

)

 

$

1.55

 

 

$

0.86

 

Weighted average number of Limited Partner units outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and Diluted

 

 

45,246

 

 

 

49,943

 

 

 

46,253

 

 

 

51,431

 

 

(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 June 30,

 

 

Nine Months

Ended June 30,

 

(in thousands - unaudited)

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Net income (loss)

 

$

(46

)

 

$

(23,098

)

 

$

86,117

 

 

$

51,542

 

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized gain on pension plan obligation (1)

 

 

455

 

 

 

455

 

 

 

1,365

 

 

 

1,366

 

Tax effect of unrealized gain on pension plan obligation

 

 

(127

)

 

 

(124

)

 

 

(385

)

 

 

(373

)

Unrealized gain on captive insurance collateral

 

 

986

 

 

 

666

 

 

 

1,029

 

 

 

1,960

 

Tax effect of unrealized gain on captive insurance collateral

 

 

(207

)

 

 

(140

)

 

 

(214

)

 

 

(416

)

Unrealized loss on interest rate hedges

 

 

(126

)

 

 

(733

)

 

 

(1,508

)

 

 

(1,845

)

Tax effect of unrealized loss on interest rate hedges

 

 

34

 

 

 

196

 

 

 

408

 

 

 

488

 

Total other comprehensive income

 

 

1,015

 

 

 

320

 

 

 

695

 

 

 

1,180

 

Total comprehensive income (loss)

 

$

969

 

 

$

(22,778

)

 

$

86,812

 

 

$

52,722

 

 

(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, 2020

 

 

 

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, 2020

 

 

45,622

 

 

 

326

 

 

$

334,968

 

 

$

(1,792

)

 

$

(17,221

)

 

$

315,955

 

Net loss

 

 

 

 

 

 

 

 

(45

)

 

 

(1

)

 

 

 

 

 

(46

)

Unrealized gain on pension plan obligation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

455

 

 

 

455

 

Tax effect of unrealized gain on pension plan obligation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(127

)

 

 

(127

)

Unrealized gain on captive insurance collateral

 

 

 

 

 

 

 

 

 

 

 

 

 

 

986

 

 

 

986

 

Tax effect of unrealized gain on captive insurance collateral

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(207

)

 

 

(207

)

Unrealized loss on interest rate hedges

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(126

)

 

 

(126

)

Tax effect of unrealized loss on interest rate hedges

 

 

 

 

 

 

 

 

 

 

 

 

 

 

34

 

 

 

34

 

Distributions

 

 

 

 

 

 

 

 

(5,988

)

 

 

(248

)

 

 

 

 

 

(6,236

)

Retirement of units (1)

 

 

(1,155

)

 

 

 

 

 

(9,413

)

 

 

 

 

 

 

 

 

(9,413

)

Balance as of June 30, 2020 (unaudited)

 

 

44,467

 

 

 

326

 

 

$

319,522

 

 

$

(2,041

)

 

$

(16,206

)

 

$

301,275

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

(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, 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

 

 

 

 

 

 

 

 

85,517

 

 

 

600

 

 

 

 

 

 

86,117

 

Unrealized gain on pension plan obligation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,365

 

 

 

1,365

 

Tax effect of unrealized gain on pension plan obligation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(385

)

 

 

(385

)

Unrealized gain on captive insurance collateral

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,029

 

 

 

1,029

 

Tax effect of unrealized gain on captive insurance collateral

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(214

)

 

 

(214

)

Unrealized loss on interest rate hedges

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,508

)

 

 

(1,508

)

Tax effect of unrealized loss on interest rate hedges

 

 

 

 

 

 

 

 

 

 

 

 

 

 

408