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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 December 31, 2021

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 January 31, 2022, the registrant had 37,677,441 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 December 31, 2021 (unaudited) and September 30, 2021

 

3

Condensed Consolidated Statements of Operations (unaudited) for the three months ended December 31, 2021 and December 31, 2020

 

4

Condensed Consolidated Statements of Comprehensive Income (Loss) (unaudited) for the three months ended December 31, 2021 and December 31, 2020

 

5

Condensed Consolidated Statement of Partners’ Capital (unaudited) for the three months ended December 31, 2021 and December 31, 2020

 

6

Condensed Consolidated Statements of Cash Flows (unaudited) for the three months ended December 31, 2021 and December 31, 2020

 

7

Notes to Condensed Consolidated Financial Statements (unaudited)

 

8-19

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

 

20-32

Item 3 - Quantitative and Qualitative Disclosures About Market Risk

 

33

Item 4 - Controls and Procedures

 

33

Part II Other Information:

 

34

Item 1 - Legal Proceedings

 

34

Item 1A - Risk Factors

 

34

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

 

34

Item 6 - Exhibits

 

35

Signatures

 

36

 

2


 

Part I. FINANCIAL INFORMATION

Item 1.

Condensed Consolidated Financial Statements

STAR GROUP, L.P. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

 

 

 

December 31,

 

 

September 30,

 

 

 

2021

 

 

2021

 

(in thousands)

 

(unaudited)

 

 

 

 

 

ASSETS

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

21,239

 

 

$

4,767

 

   Receivables, net of allowance of $4,662 and $4,779, respectively

 

 

178,774

 

 

 

99,680

 

Inventories

 

 

77,735

 

 

 

61,183

 

Fair asset value of derivative instruments

 

 

16,603

 

 

 

26,222

 

Prepaid expenses and other current assets

 

 

44,932

 

 

 

30,140

 

Total current assets

 

 

339,283

 

 

 

221,992

 

Property and equipment, net

 

 

100,788

 

 

 

99,123

 

Operating lease right-of-use assets

 

 

95,873

 

 

 

95,839

 

Goodwill

 

 

254,198

 

 

 

253,398

 

Intangibles, net

 

 

92,777

 

 

 

95,474

 

Restricted cash

 

 

250

 

 

 

250

 

Captive insurance collateral

 

 

69,482

 

 

 

69,933

 

Deferred charges and other assets, net

 

 

18,103

 

 

 

17,854

 

Total assets

 

$

970,754

 

 

$

853,863

 

LIABILITIES AND PARTNERS’ CAPITAL

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

Accounts payable

 

$

52,225

 

 

$

37,291

 

Revolving credit facility borrowings

 

 

123,682

 

 

 

8,618

 

Current maturities of long-term debt

 

 

13,000

 

 

 

17,621

 

Current portion of operating lease liabilities

 

 

16,467

 

 

 

16,446

 

Accrued expenses and other current liabilities

 

 

126,588

 

 

 

121,221

 

Unearned service contract revenue

 

 

69,773

 

 

 

56,972

 

Customer credit balances

 

 

72,864

 

 

 

86,828

 

Total current liabilities

 

 

474,599

 

 

 

344,997

 

Long-term debt

 

 

89,183

 

 

 

92,385

 

Long-term operating lease liabilities

 

 

84,226

 

 

 

84,019

 

Deferred tax liabilities, net

 

 

28,439

 

 

 

29,014

 

Other long-term liabilities

 

 

18,948

 

 

 

25,244

 

Partners’ capital

 

 

 

 

 

 

 

 

Common unitholders

 

 

292,139

 

 

 

295,063

 

General partner

 

 

(2,963

)

 

 

(2,821

)

Accumulated other comprehensive loss, net of taxes

 

 

(13,817

)

 

 

(14,038

)

Total partners’ capital

 

 

275,359

 

 

 

278,204

 

Total liabilities and partners’ capital

 

$

970,754

 

 

$

853,863

 

 

See accompanying notes to condensed consolidated financial statements.

 

3


 

STAR GROUP, L.P. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

 

 

 

Three Months

Ended December 31,

 

(in thousands, except per unit data - unaudited)

 

2021

 

 

2020

 

Sales:

 

 

 

 

 

 

 

 

Product

 

$

411,265

 

 

$

300,332

 

Installations and services

 

 

77,005

 

 

 

72,988

 

Total sales

 

 

488,270

 

 

 

373,320

 

Cost and expenses:

 

 

 

 

 

 

 

 

Cost of product

 

 

274,594

 

 

 

172,147

 

Cost of installations and services

 

 

74,048

 

 

 

69,303

 

(Increase) decrease in the fair value of derivative instruments

 

 

13,403

 

 

 

(17,395

)

Delivery and branch expenses

 

 

88,989

 

 

 

80,687

 

Depreciation and amortization expenses

 

 

8,448

 

 

 

7,957

 

General and administrative expenses

 

 

6,676

 

 

 

6,241

 

Finance charge income

 

 

(512

)

 

 

(406

)

Operating income

 

 

22,624

 

 

 

54,786

 

Interest expense, net

 

 

(2,058

)

 

 

(1,851

)

Amortization of debt issuance costs

 

 

(239

)

 

 

(247

)

Income before income taxes

 

 

20,327

 

 

 

52,688

 

Income tax expense

 

 

5,838

 

 

 

14,828

 

Net income

 

$

14,489

 

 

$

37,860

 

General Partner’s interest in net income

 

 

122

 

 

 

296

 

Limited Partners’ interest in net income

 

$

14,367

 

 

$

37,564

 

 

 

 

 

 

 

 

 

 

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

 

$

0.32

 

 

$

0.74

 

Weighted average number of Limited Partner units outstanding:

 

 

 

 

 

 

 

 

Basic and Diluted

 

 

38,789

 

 

 

42,246

 

 

(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 December 31,

 

(in thousands - unaudited)

 

2021

 

 

2020

 

Net income

 

$

14,489

 

 

$

37,860

 

Other comprehensive income:

 

 

 

 

 

 

 

 

Unrealized gain on pension plan obligation

 

 

224

 

 

 

235

 

Tax effect of unrealized gain on pension plan obligation

 

 

(45

)

 

 

(64

)

Unrealized loss on captive insurance collateral

 

 

(612

)

 

 

(340

)

Tax effect of unrealized loss on captive insurance collateral

 

 

129

 

 

 

72

 

Unrealized gain on interest rate hedges

 

 

718

 

 

 

332

 

Tax effect of unrealized gain on interest rate hedges

 

 

(193

)

 

 

(88

)

Total other comprehensive income

 

 

221

 

 

 

147

 

Total comprehensive income

 

$

14,710

 

 

$

38,007

 

See accompanying notes to condensed consolidated financial statements.

 

5


 

STAR GROUP, L.P. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF PARTNERS’ CAPITAL

 

 

 

Three Months Ended December 31, 2021

 

 

 

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, 2021

 

 

39,046

 

 

 

326

 

 

$

295,063

 

 

$

(2,821

)

 

$

(14,038

)

 

$

278,204

 

Net income

 

 

 

 

 

 

 

 

14,367

 

 

 

122

 

 

 

 

 

 

14,489

 

Unrealized gain on pension plan obligation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

224

 

 

 

224

 

Tax effect of unrealized gain on pension plan obligation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(45

)

 

 

(45

)

Unrealized loss on captive insurance collateral

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(612

)

 

 

(612

)

Tax effect of unrealized loss on captive insurance collateral

 

 

 

 

 

 

 

 

 

 

 

 

 

 

129

 

 

 

129

 

Unrealized gain on interest rate hedges

 

 

 

 

 

 

 

 

 

 

 

 

 

 

718

 

 

 

718

 

Tax effect of unrealized gain on interest rate hedges

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(193

)

 

 

(193

)

Distributions

 

 

 

 

 

 

 

 

(5,526

)

 

 

(264

)

 

 

 

 

 

(5,790

)

Retirement of units

 

 

(1,104

)

 

 

 

 

 

(11,765

)

 

 

 

 

 

 

 

 

(11,765

)

Balance as of December 31, 2021 (unaudited)

 

 

37,942

 

 

 

326

 

 

$

292,139

 

 

$

(2,963

)

 

$

(13,817

)

 

$

275,359

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended December 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, 2020

 

 

43,328

 

 

 

326

 

 

$

273,283

 

 

$

(2,506

)

 

$

(14,957

)

 

$

255,820

 

Net income

 

 

 

 

 

 

 

 

37,564

 

 

 

296

 

 

 

 

 

 

37,860

 

Unrealized gain on pension plan obligation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

235

 

 

 

235

 

Tax effect of unrealized gain on pension plan obligation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(64

)

 

 

(64

)

Unrealized loss on captive insurance collateral

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(340

)

 

 

(340

)

Tax effect of unrealized loss on captive insurance collateral

 

 

 

 

 

 

 

 

 

 

 

 

 

 

72

 

 

 

72

 

Unrealized gain on interest rate hedges

 

 

 

 

 

 

 

 

 

 

 

 

 

 

332

 

 

 

332

 

Tax effect of unrealized gain on interest rate hedges

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(88

)

 

 

(88

)

Distributions

 

 

 

 

 

 

 

 

(5,702

)

 

 

(237

)

 

 

 

 

 

(5,939

)

Retirement of units

 

 

(2,591

)

 

 

 

 

 

(25,272

)

 

 

 

 

 

 

 

 

(25,272

)

Balance as of December 31, 2020 (unaudited)

 

 

40,737

 

 

 

326

 

 

$

279,873

 

 

$

(2,447

)

 

$

(14,810

)

 

$

262,616

 

See accompanying notes to condensed consolidated financial statements.

 

 

6


 

STAR GROUP, L.P. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

 

 

 

Three Months

Ended December 31,

 

(in thousands - unaudited)

 

2021

 

 

2020

 

Cash flows provided by (used in) operating activities:

 

 

 

 

 

 

 

 

Net income

 

$

14,489

 

 

$

37,860

 

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

   operating activities:

 

 

 

 

 

 

 

 

(Increase) decrease in fair value of derivative instruments

 

 

13,403

 

 

 

(17,395

)

Depreciation and amortization

 

 

8,687

 

 

 

8,204

 

Recovery for losses on accounts receivable

 

 

(288

)

 

 

(476

)

Change in deferred taxes

 

 

(684

)

 

 

3,601

 

Change in weather hedge contracts

 

 

(2,188

)

 

 

(3,955

)

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Increase in receivables

 

 

(78,794

)

 

 

(62,989

)

Increase in inventories

 

 

(16,388

)

 

 

(7,177

)

Increase in other assets

 

 

(16,767

)

 

 

(5,651

)

Increase in accounts payable

 

 

15,442

 

 

 

12,325

 

Decrease in customer credit balances

 

 

(14,504

)

 

 

(8,987

)

Increase in other current and long-term liabilities

 

 

11,727

 

 

 

17,639

 

Net cash used in operating activities

 

 

(65,865

)

 

 

(27,001

)

Cash flows provided by (used in) investing activities:

 

 

 

 

 

 

 

 

Capital expenditures

 

 

(3,787

)

 

 

(4,680

)

Proceeds from sales of fixed assets

 

 

254

 

 

 

60

 

Proceeds from sale of propane assets

 

 

 

 

 

6,093

 

Purchase of investments

 

 

(175

)

 

 

(303

)

Acquisitions

 

 

(3,326

)

 

 

(37,073

)

Net cash used in investing activities

 

 

(7,034

)

 

 

(35,903

)

Cash flows provided by (used in) financing activities:

 

 

 

 

 

 

 

 

Revolving credit facility borrowings

 

 

115,064

 

 

 

59,341

 

Term loan repayments

 

 

(7,871

)

 

 

(3,250

)

Distributions

 

 

(5,790

)

 

 

(5,939

)

Unit repurchases

 

 

(11,765

)

 

 

(25,272

)

Customer retainage payments

 

 

(267

)

 

 

(29

)

Payments of debt issue costs

 

 

 

 

 

(11

)

Net cash provided by financing activities

 

 

89,371

 

 

 

24,840

 

Net (decrease) increase in cash, cash equivalents, and restricted cash

 

 

16,472

 

 

 

(38,064

)

Cash, cash equivalents, and restricted cash at beginning of period

 

 

5,017

 

 

 

57,161

 

Cash, cash equivalents, and restricted cash at end of period

 

$

21,489

 

 

$

19,097

 

 

See accompanying notes to condensed consolidated financial statements.

 

7


 

STAR GROUP, L.P. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1) Organization

Star Group, L.P. (“Star,” the “Company,” “we,” “us,” or “our”) is a full service provider specializing in the sale of home heating and air conditioning products and services to residential and commercial home heating oil and propane customers. The Company has one reportable segment for accounting purposes.  We also sell diesel fuel, gasoline and home heating oil on a delivery only basis, and in certain of our marketing areas, we provide plumbing services primarily to our home heating oil and propane customer base. We believe we are the nation’s largest retail distributor of home heating oil based upon sales volume.

The Company is organized as follows:

 

Star is a limited partnership, which at December 31, 2021, had outstanding 37.9 million Common Units (NYSE: “SGU”), representing a 99.1% limited partner interest in Star, and 0.3 million general partner units, representing a 0.9% general partner interest in Star. Our general partner is Kestrel Heat, LLC, a Delaware limited liability company (“Kestrel Heat” or the “general partner”). The Board of Directors of Kestrel Heat (the “Board”) is appointed by its sole member, Kestrel Energy Partners, LLC, a Delaware limited liability company (“Kestrel”).  Although Star is a partnership, it is taxed as a corporation and its distributions to unitholders are treated as taxable dividends.

 

Star owns 100% of Star Acquisitions, Inc. (“SA”), a Minnesota corporation that owns 100% of Petro Holdings, Inc. (“Petro”). SA and its subsidiaries are subject to Federal and state corporate income taxes. Star’s operations are conducted through Petro and its subsidiaries. Petro is primarily a Northeast and Mid-Atlantic U.S. region retail distributor of home heating oil and propane that at December 31, 2021 served approximately 428,200 full service residential and commercial home heating oil and propane customers and 73,000 customers on a delivery only basis. We also sell gasoline and diesel fuel to approximately 26,800 customers. We install, maintain, and repair heating and air conditioning equipment and to a lesser extent provide these services outside our heating oil and propane customer base including approximately 18,700 service contracts for natural gas and other heating systems.

 

Petroleum Heat and Power Co., Inc. (“PH&P”) is a wholly owned subsidiary of Star. PH&P is the borrower and Star is the guarantor of the fifth amended and restated credit agreement’s $130 million five-year senior secured term loan and the $300 million ($450 million during the heating season of December through April of each year) revolving credit facility, both due December 4, 2024. (See Note 11—Long-Term Debt and Bank Facility Borrowings)

2) Summary of Significant Accounting Policies

 

Basis of Presentation

The Consolidated Financial Statements include the accounts of Star and its subsidiaries. All material intercompany items and transactions have been eliminated in consolidation.

The financial information included herein is unaudited; however, such information reflects all adjustments (consisting solely of normal recurring adjustments), which are, in the opinion of management, necessary for the fair statement of financial condition and results for the interim periods. Due to the seasonal nature of the Company’s business, the results of operations and cash flows for the three-month period ended December 31, 2021 are not necessarily indicative of the results to be expected for the full year.

These interim financial statements of the Company have been prepared in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”) for interim financial information and Rule 10-01 of Regulation S-X of the U.S. Securities and Exchange Commission (the “SEC”) and should be read in conjunction with the financial statements included in the Company’s Annual Report on Form 10-K for the year ended September 30, 2021.

Comprehensive Income

Comprehensive income is comprised of Net income and Other comprehensive income. Other comprehensive income consists of the unrealized gain on amortization on the Company’s pension plan obligation for its two frozen defined benefit pension plans, unrealized loss on available-for-sale investments, unrealized gain on interest rate hedges and the corresponding tax effects.

8


Cash, Cash Equivalents, and Restricted Cash

The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents. At December 31, 2021, the $21.5 million of cash, cash equivalents, and restricted cash on the Condensed Consolidated Statements of Cash Flows is composed of $21.2 million of cash and cash equivalents and $0.3 million of restricted cash. At September 30, 2021, the $5.0 million of cash, cash equivalents, and restricted cash on the Condensed Consolidated Statements of Cash Flows is composed of $4.8 million of cash and cash equivalents and $0.3 million of restricted cash. Restricted cash represents deposits held by our captive insurance company that are required by state insurance regulations to remain in the captive insurance company as cash.

Fair Value Valuation Approach

The Company uses valuation approaches that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible. The Company determines fair value based on assumptions that market participants would use in pricing an asset or liability in the principal or most advantageous market. When considering market participant assumptions in fair value measurements, the following fair value hierarchy distinguishes between observable and unobservable inputs, which are categorized in one of the following levels:

 

Level 1 inputs: Unadjusted quoted prices in active markets for identical assets or liabilities accessible to the reporting entity at the measurement date.

 

Level 2 inputs: Other than quoted prices included in Level 1 inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability.

 

Level 3 inputs: Unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at measurement date.

Captive Insurance Collateral

The captive insurance collateral is held by our captive insurance company in an irrevocable trust as collateral for certain workers’ compensation and automobile liability claims.  The collateral is required by a third party insurance carrier that insures per claim amounts above a set deductible. If we did not deposit cash into the trust, the third party carrier would require that we issue an equal amount of letters of credit.  Due to the expected timing of claim payments, the nature of the collateral agreement with the carrier, and our captive insurance company’s source of other operating cash, the collateral is not expected to be used to pay obligations within the next twelve months.

Unrealized gains and losses, net of related income taxes, are reported as accumulated other comprehensive gain (loss), except for losses from impairments which are determined to be other-than-temporary. Realized gains and losses, and declines in value judged to be other-than-temporary on available-for-sale securities are included in the determination of net income and are included in Interest expense, net, at which time the average cost basis of these securities are adjusted to fair value.

Weather Hedge Contract

To partially mitigate the adverse effect of warm weather on cash flows, the Company has used weather hedge contracts for a number of years. Weather hedge contracts are recorded in accordance with the intrinsic value method defined by the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 815-45-15 Derivatives and Hedging, Weather Derivatives (EITF 99-2). The premium paid is included in the caption “Prepaid expenses and other current assets” in the accompanying balance sheets and amortized over the life of the contract, with the intrinsic value method applied at each interim period.

For fiscal 2022, the Company has entered into weather hedge contracts.  Under these contracts, we are entitled to receive a payment if the total number of degree days within the hedge period is less than the prior ten year average. The hedge period runs from November 1 through March 31, taken as a whole, for each respective fiscal year. The “Payment Thresholds,” or strikes, are set at various levels for fiscal 2022. The maximum that the Company can receive is $12.5 million per year. In addition, for fiscal 2022 we are obligated to make an annual payment capped at $5.0 million if degree days exceed the Payment Threshold.  For fiscal 2021, we had weather hedge contracts with similar payment thresholds and terms.  The temperatures experienced during the three months ended December 31, 2021 and December 31, 2020 were warmer than the strikes in the weather hedge contracts. As a result we recorded a receivable at December 31, 2021 and December 31, 2020 of $2.2 million and $4.0 million, respectively and reduced delivery and branch expense by a corresponding amount.

9


New England Teamsters and Trucking Industry Pension Fund (“the NETTI Fund”) Liability

As of December 31, 2021, we had $0.2 million and $16.4 million balances included in the captions “Accrued expenses and other current liabilities” and “Other long-term liabilities,” on our Condensed Consolidated Balance Sheet representing the remaining balance of the NETTI Fund withdrawal liability.  As of September 30, 2021, we had $0.2 million and $16.5 million balances reflected in these categories respectively. Based on the borrowing rates currently available to the Company for long-term financing of a similar maturity, the fair value of the NETTI Fund withdrawal liability as of December 31, 2021 and September 30, 2021 was $25.7 million and $25.8 million, respectively. We utilized Level 2 inputs in the fair value hierarchy of valuation techniques to determine the fair value of this liability.

Recently Adopted Accounting Pronouncements

The Company did not adopt new standards in the first quarter of fiscal 2022 that have a material impact on its consolidated financial statements and related disclosures.

Recently Issued Accounting Pronouncements

In October 2021, the FASB issued ASU No. 2021-08, Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which requires accounting for contract assets and liabilities from contracts with customers in a business combination to be accounted for in accordance with ASC No. 606.  The standard is effective for fiscal years beginning after December 15, 2022.  The Company has not determined the timing of adoption, but does not expect ASU 2021-08 to have a material impact on its consolidated financial statements and related disclosures.

3) Revenue Recognition

The following disaggregates our revenue by major sources for the three months ended December 31, 2021 and December 31, 2020:

 

 

Three Months

Ended December 31,

 

(in thousands)

 

2021

 

 

2020

 

Petroleum Products:

 

 

 

 

 

 

 

 

Home heating oil and propane

 

$

305,723

 

 

$

240,812

 

Other petroleum products

 

 

105,542

 

 

 

59,520

 

   Total petroleum products

 

 

411,265

 

 

 

300,332

 

Installations and Services:

 

 

 

 

 

 

 

 

Equipment installations

 

 

33,069

 

 

 

30,060

 

Equipment maintenance service contracts

 

 

26,977

 

 

 

26,868

 

Billable call services

 

 

16,959

 

 

 

16,060

 

   Total installations and services

 

 

77,005

 

 

 

72,988

 

   Total Sales

 

$

488,270

 

 

$

373,320

 

 

Deferred Contract Costs 

We recognize an asset for incremental commission expenses paid to sales personnel in conjunction with obtaining new residential customer product and equipment maintenance service contracts. We defer these costs only when we have determined the commissions are, in fact, incremental and would not have been incurred absent the customer contract. Costs to obtain a contract are amortized and recorded ratably as delivery and branch expenses over the period representing the transfer of goods or services to which the assets relate.  Costs to obtain new residential product and equipment maintenance service contracts are amortized as expense over the estimated customer relationship period of approximately five years.  Deferred contract costs are classified as current or non-current within “Prepaid expenses and other current assets” and “Deferred charges and other assets, net,” respectively.  At December 31, 2021, the amount of deferred contract costs included in “Prepaid expenses and other current assets” and “Deferred charges and other assets, net” was $3.5 million and $6.1 million, respectively.  At September 30, 2021, the amount of deferred contract costs included in “Prepaid expenses and other current assets” and “Deferred charges and other assets, net” was $3.4 million and $5.7 million, respectively.  For each of the three months ended December 31, 2021 and 2020 we recognized expense of $1.0 million associated with the amortization of deferred contract costs within “Delivery and branch expenses” in the Condensed Consolidated Statement of Operations. 

 

10


 

Contract Liability Balances

The Company has contract liabilities for advanced payments received from customers for future oil deliveries (primarily amounts received from customers on “smart pay” budget payment plans in advance of oil deliveries) and obligations to service customers with equipment maintenance service contracts.  Contract liabilities are recognized straight-line over the service contract period, generally one year or less.  As of December 31, 2021 and September 30, 2021 the Company had contract liabilities of $139.1 million and $141.6 million, respectively.  During the three months ended December 31, 2021, the Company recognized $73.0 million of revenue that was included in the September 30, 2021 contract liability balance.  During the three months ended December 31, 2020 the Company recognized $70.2 million of revenue that was included in the September 30, 2020 contract liability balance.

Receivables and Allowance for Doubtful Accounts

Accounts receivables from customers are recorded at the invoiced amounts. Finance charges may be applied to trade receivables that are more than 30 days past due, and are recorded as finance charge income.

The allowance for doubtful accounts is the Company’s estimate of the amount of trade receivables that may not be collectible. The allowance is determined at an aggregate level by grouping accounts based on certain account criteria and its receivable aging. The allowance is based on both quantitative and qualitative factors, including historical loss experience, historical collection patterns, overdue status, aging trends, current and future economic conditions. The Company has an established process to periodically review current and past due trade receivable balances to determine the adequacy of the allowance. No single statistic or measurement determines the adequacy of the allowance. The total allowance reflects management’s estimate of losses inherent in its trade receivables at the balance sheet date. Different assumptions or changes in economic conditions could result in material changes to the allowance for doubtful accounts.

Changes in the allowance for credit losses are as follows:

 

(in thousands)

Credit Loss Allowance

 

Balance at September 30, 2021

$

4,779

 

Current period provision

 

(288

)

Write-offs, net and other

 

171

 

Balance as of December 31, 2021

$

4,662

 

 

4) Common Unit Repurchase and Retirement

In July 2012, the Board adopted a plan to repurchase certain of the Company’s Common Units that was amended in fiscal 2018 (the “Repurchase Plan”).  Through August 2020, the Company had repurchased approximately 14.4 million Common Units under the Repurchase Plan.  In August 2020, the Board authorized an increase of the number of Common Units that remained available for the Company to repurchase from 2.0 million to a total of 6.0 million, of which 4.9 million were available for repurchase in open market transactions and 1.1 million were available for repurchase in privately-negotiated transactions. There is no guarantee of the number of units that will be purchased under the Repurchase Plan and the Company may discontinue purchases at any time. The Repurchase Plan does not have a time limit. The Board may also approve additional purchases of units from time to time in private transactions. The Company’s repurchase activities take into account SEC safe harbor rules and guidance for issuer repurchases. All of the Common Units purchased under the Repurchase Plan will be retired.

Under the Company’s fifth amended and restated credit agreement dated December 4, 2019, in order to repurchase Common Units, we must maintain Availability (as defined in the fifth amended and restated credit agreement) of $52.5 million, 15.0% of the facility size of $350 million (assuming the non-seasonal aggregate commitment is outstanding) on a historical pro forma and forward-looking basis, and a fixed charge coverage ratio of not less than 1.15 measured as of the date of repurchase.  The Company was in compliance with this covenant through December 31, 2021.

11


The following table shows repurchases under the Repurchase Plan:

 

(in thousands, except per unit amounts)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Period

 

Total Number of

Units Purchased

 

 

Average Price

Paid per Unit (a)

 

 

Total Number of

Units Purchased as Part of Publicly Announced Plans or Programs

 

 

Maximum Number

of Units that May

Yet Be Purchased

 

 

Fiscal year 2012 to 2021 total

 

 

21,979

 

 

$

8.60

 

 

 

17,504