Star Gas Partners, L.P. Reports Fiscal 2017 Third Quarter Results

The following excerpt is from the company's SEC filing.

STAMFORD, Conn., July 31, 2017 (GLOBE NEWSWIRE) -- Star Gas Partners, L.P. (the "Partnership" or "Star") (NYSE:SGU), a home energy distributor and services provider, today announced financial results for its fiscal 2017 third quarter and the nine-month period ended June 30, 2017.

Three Months Ended June 30, 2017 Compared to Three Months Ended June 30, 2016

Star reported a 3.5 percent increase in total revenue to $225.8 million, compared with $218.2 million in the prior-year period, as higher air conditioning installation and service sales and the impact from an increase in wholesale product costs a nd higher per gallon margins were somewhat offset by a decline in total volume sold.

Home heating oil and propane volume for the fiscal 2017 third quarter declined by 4.2 million gallons versus the prior-year period, or 9.4 percent, to 40.5 million gallons, as the additional volume provided by acquisitions was more than offset by the impact of warmer weather and by net customer attrition in the base business for the twelve months ended June 30, 2017. Temperatures in Star's geographic areas of operation, for the fiscal 2017 third quarter, were 19.7 percent warmer than the fiscal 2016 third quarter and 17.6 percent warmer than normal, as reported by the National Oceanic and Atmospheric Administration.

During the fiscal 2017 third quarter, the net loss widened by $10.1 million to $13.3 million largely due to the after-tax impact of an unfavorable non-cash change in the fair value of derivative instruments of $14.4 million.

Star’s Adjusted EBITDA loss increased by $1.5 million, to $9.3 million, as the additional gross profit provided by higher home heating oil and propane margins and a slight improvement in service and installation profitability was more than offset by the decline in home heating oil and propane volume and an increase in certain operating expenses.

"While experiencing warmer weather and lower volumes in the third quarter versus fiscal 2016, the impact was muted during this non-heating season as we focused on margins and improving Star’s service offerings,” said Steven J. Goldman, Star Gas Partners’ Chief Executive Officer. “Only a portion of Star’s customer base receives oil or propane deliveries in the spring, but we saw growth in other areas such as air conditioning installations. We also continued investing for the future through additional staffing across customer service, information technology, operations, and sales – all crucial to our plans to grow the business and strengthen customer satisfaction. The Partnership remains on sound footing as we approach the end of fiscal 2017.”

Nine Months Ended June 30, 2017 Compared to Nine Months Ended June 30, 2016

Star reported a 14.3 percent increase in total revenue to $1.1 billion, versus $1.0 billion in the prior-year period, due to an increase in wholesale product costs of $0.2668 per gallon, an increase in total volume of 3.9 percent, and higher air conditioning installation and service sales.

Home heating oil and propane volume increased by 12.4 million gallons, or 4.4 percent, to 294.3 million gallons, as the additional volume provided from acquisitions and colder weather was offset by net customer attrition and other factors. Temperatures in Star's geographic areas of operation, for the first nine months of fiscal 2017, were 7.0 percent colder than last year’s comparable period but 12.4 percent warmer than normal.

Net income decreased by $19.4 million, or 30.3 percent, to $44.6 million as the positive impact from colder temperatures and acquisitions was more than offset by a non-cash unfavorable change in the fair value of derivative instruments of $27.1 million, the absence of a $12.5 million credit as was recorded in the first quarter of 2016 under the Partnership’s weather hedge contract, and an increase in spending largely due to additional staffing in the areas of information technology, customer service, operations management and sales and marketing. 

Adjusted EBITDA decreased by $6.7 million, or 5.7 percent, to $110.2 million as the impact of higher home heating oil and propane volume and slightly better home heating oil and propane margins were more than offset by the absence of a $12.5 million credit as was recorded in the first quarter of 2016 under the Partnership’s weather hedge contract, lower service and installations gross profit, and additional expense related to staffing in the areas of information technology, customer service, operations management and sales and marketing.

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, 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:

our compliance with certain financial covenants included in our debt agreements;

our financial performance without regard to financing methods, capital structure, income taxes or historical cost basis;

our operating performance and return on invested capital compared to those of other companies in the retail distribution of refined petroleum products, without regard to financing methods and capital structure;

our ability to generate cash sufficient to pay interest on our indebtedness and to make distributions to our partners; and

the viability of acquisitions and capital expenditure projects and the overall rates of return of alternative investment opportunities.

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:

EBITDA and Adjusted EBITDA do not reflect our cash used for capital expenditures;

Although depreciation and amortization are non-cash charges, the assets being depreciated or amortized often will have to be replaced and EBITDA and Adjusted EBITDA do not reflect the cash requirements for such replacements;

EBITDA and Adjusted EBITDA do not reflect changes in, or cash requirements for, our working capital requirements;

EBITDA and Adjusted EBITDA do not reflect the cash necessary to make payments of interest or principal on our indebtedness; and

EBITDA and Adjusted EBITDA do not reflect the cash required to pay taxes.

REMINDER

: Star Gas management will host a conference call and webcast on Tuesday, August 1, 2017 at 11:00 a.m. Eastern Time. The conference call dial-in number 877-327-7688 or 412-317-5112 (for international callers). A webcast is also available at www.star-gas.com.

About Star Gas Partners, L.P.

Star Gas Partners, 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 Partnership also sells and services heating and air conditioning equipment to its home heating oil and propane customers and, to a lesser extent, to customers outside of its home heating oil and propane customer base. In certain of Star's marketing areas, the Partnership provides home security and plumbing services primarily to its home heating oil and propane customer base. Star also sells diesel fuel, 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 Partnership's SEC filings at www.sec.gov and by visiting Star's website at www.star-gas.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 Partnership'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 Partnership 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, 2016. Important factors that could cause actual results to differ materially from the Partnership'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 Partnership or persons acting on its behalf are expressly qualified in their entirety by the Cautionary Statements. Unless otherwise required by law, the Partnership 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)

STAR GAS PARTNERS, L.P. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

September 30,

(in thousands)

(unaudited)

ASSETS

Current assets

Cash and cash equivalents

94,574

139,188

Receivables, net of allowance of $6,577 and $4,419, respectively

116,646

78,650

Inventories

42,422

45,894

Fair asset value of derivative instruments

Prepaid expenses and other current assets

24,409

27,139

Total current assets

278,051

294,858

Property and equipment, net

74,491

70,410

Goodwill

215,262

212,760

Intangibles, net

94,520

97,656

Deferred tax assets, net

Restricted cash

Investments

11,686

Deferred charges and other assets, net

11,074

Total assets

684,297

692,111

LIABILITIES AND PARTNERS’ CAPITAL

Current liabilities

Accounts payable

20,354

25,690

Fair liability value of derivative instruments

Current maturities of long-term debt

10,000

16,200

Accrued expenses and other current liabilities

130,776

103,855

Unearned service contract revenue

55,759

56,971

Customer credit balances

40,340

84,921

Total current liabilities

261,989

289,922

Long-term debt

68,155

75,441

Other long-term liabilities

25,082

25,255

Partners’ capital

Common unitholders

349,554

322,771

General partner

Accumulated other comprehensive loss, net of taxes

(19,811

(20,762

Total partners’ capital

329,071

301,493

Total liabilities and partners’ capital

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per unit data - unaudited)

Sales:

Product

158,531

156,229

950,307

813,519

Installations and services

67,270

61,965

191,664

185,755

Total sales

225,801

218,194

1,141,971

999,274

Cost and expenses:

Cost of product

104,268

103,568

592,802

473,534

Cost of installations and services

58,224

53,272

183,137

175,042

(Increase) decrease in the fair value of derivative instruments

(11,283

(20,071

Delivery and branch expenses

67,640

64,052

240,987

218,755

Depreciation and amortization expenses

20,705

19,959

General and administrative expenses

18,144

17,525

Finance charge income

(1,308

(3,288

(2,480

Operating income (loss)

(2,955

82,458

117,010

Interest expense, net

(1,619

(1,731

(5,118

(5,481

Amortization of debt issuance costs

Income (loss) before income taxes

(21,766

(4,993

76,368

110,595

Income tax expense (benefit)

(8,434

(1,755

31,721

46,566

Net income (loss)

(13,332

(3,238

44,647

64,029

General Partner’s interest in net income (loss)

Limited Partners’ interest in net income (loss)

(13,253

(3,219

44,388

63,667

Per unit data (Basic and Diluted):

Net income (loss) available to limited partners

Dilutive impact of theoretical distribution of earnings under

  FASB ASC 260-10-45-60

Limited Partner’s interest in net income (loss) under FASB ASC 260-10-45-60

Weighted average number of Limited Partner units outstanding (Basic and Diluted)

55,888

57,188

57,237

SUPPLEMENTAL INFORMATION

RECONCILIATION OF EBITDA AND ADJUSTED EBITDA

(Unaudited)

(in thousands)

Net loss

Income tax benefit

(12,393

(Increase) / decrease in the fair value of derivative instruments

(9,258

(7,770

Add / (subtract)

Provision for losses on accounts receivable

Decrease in accounts receivables

71,107

38,425

Decrease in inventories

Increase in customer credit balances

13,191

Change in deferred taxes

(2,670

Decrease in weather hedge contract receivable

12,500

Change in other operating assets and liabilities

(18,879

(28,891

Net cash provided by operating activities

59,086

35,950

Net cash used in investing activities

(8,376

(2,913

Net cash used in financing activities

(8,967

(8,495

Home heating oil and propane gallons sold

40,500

44,700

Other petroleum products

27,500

27,200

Total all products

68,000

71,900

103,163

136,969

110,189

116,898

(31,721

(46,566

Provision (recovery) for losses on accounts receivable

(Increase) decrease in accounts receivables

(40,524

13,402

Decrease in customer credit balances

(45,757

(2,026

13,299

25,668

20,152

23,210

110,185

(35,219

(15,756

(32,355

(23,781

294,300

281,900

83,400

81,600

377,700

363,500

CONTACT:

Investor Relations

203/328-7310

Chris Witty

Darrow Associates

646/438-9385 or cwitty@darrowir.com

The above information was disclosed in a filing to the SEC. To see the filing, click here.

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