Star Gas: Star Group, L.P. Reports Fiscal 2019 Third Quarter Results

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

STAMFORD, Conn., July 31, 2019 (GLOBE NEWSWIRE) -- Star Group, L.P. (the "Company" or "Star") (NYSE:SGU), a home energy distributor and services provider, today announced financial results for the fiscal 2019 third quarter and nine months ended June 30, 2019.

Three Months Ended June 30, 2019 Compared to the Three Months Ended June 30, 2018

For the fiscal 2019 third quarter, Star reported a 13.4 percent decrease in total revenue to $283.4 million compared with revenue of $327.4 million in the prior-year period, largely due to a decline in home heating oil and propane volume sold.

The volume o f home heating oil and propane sold during the fiscal 2019 third quarter decreased by 17.6 million gallons, or 32.2 percent, to 36.9 million gallons due to the impact of warmer temperatures, net customer attrition and other factors. Temperatures in Star's geographic areas of operation for the fiscal 2019 third quarter were 21.5 percent warmer than during the fiscal 2018 third quarter and 20.6 percent warmer than normal, as reported by the National Oceanic and Atmospheric Administration. Volume of other petroleum products sold increased by 6.3 million gallons, or 17.4 percent, to 42.3 million, due largely to acquisitions.

Star’s net loss rose by $15.1 million, to $23.1 million, in the fiscal 2019 third quarter due to a non-cash unfavorable change in the fair value of derivative instruments of $9.1 million and an increase in the Company’s Adjusted EBITDA loss of $11.7 million, as described below, partially offset by a higher tax benefit. During the fiscal 2019 third quarter, a $1.6 million non-cash charge was recorded related to a change in the fair value of derivative instruments versus a $7.5 million credit recorded during the third quarter of fiscal 2018.

The Adjusted EBITDA loss widened by $11.7 million, to $20.1 million, as the additional Adjusted EBITDA provided by acquisitions of $0.9 million was more than offset by a $12.6 million increase in the Adjusted EBITDA loss within the base business. The impact from lower volumes sold in the base business, due largely to warmer temperatures as well as other factors, more than offset the impact from higher home heating oil and propane margins and lower total operating expenses in the base business. Contributing to the favorable change in operating costs was a reduction in concierge expenses of $1.5 million.

“As the year progresses we continue to take a hard look at cost controls and additional efficiency improvements,” said Jeffrey M. Woosnam, Star Group’s President and Chief Executive Officer. “I’m pleased to report that Star’s team has identified areas where we can further enhance the business and overall financial results, focusing on our core capabilities. The reduction of net attrition remains at the forefront, and we are cautiously optimistic about better performance heading into fiscal 2020. We also recently completed a sizable acquisition in Maryland that brought with it roughly 29,000 customers and annual volume of 20 million gallons spread across home heating oil, propane, and motor fuel. Such transactions help strengthen our primary markets and, combined with appropriate business execution, lay the foundation for solid operating results going forward, given normal weather conditions.”

Nine Months Ended June 30, 2019 Compared to the Nine Months Ended June 30, 2018

Star reported a 4.8 percent increase in total revenue to $1.5 billion for the nine months ended June 30, 2019 compared with revenue of $1.4 billion in the prior-year period, largely due to higher average selling prices.

The volume of home heating oil and propane sold decreased by 14.4 million gallons, or 4.3 percent, to 323.6 million gallons, as the impact from acquisitions and slightly colder weather was more than offset by net customer attrition and other factors. Temperatures in Star's geographic areas of operation were 0.8 percent colder than during the prior year but 3.9 percent warmer than normal, as reported by the National Oceanic and Atmospheric Administration. Volume of other petroleum products sold increased by 26.4 million gallons, or 27.3 percent, to 123.2 million gallons, due largely to acquisitions.

Net income decreased by $25.4 million, or 33.0 percent, to $51.5 million as the impact from a non-cash unfavorable change in the fair value of derivative instruments of $26.6 million and an increase in net interest expense of $2.0 million, more than offset lower income tax expense and a slight increase in Adjusted EBITDA of $0.4 million, as described below. Regarding the non-cash change in the fair value of derivative instruments, during fiscal 2019 a non-cash charge of $19.3 million was recorded versus a non-cash credit of $7.3 million during fiscal 2018.

Adjusted EBITDA increased by $0.4 million, or 0.3 percent, to $124.2 million. Acquisitions provided $5.4 million of Adjusted EBITDA while, in the base business, Adjusted EBITDA decreased by $5.0 million. The impact of higher home heating oil and propane margins in the base business more than offset a decline in home heating oil and propane volume and an increase in total operating expenses, improving year-over-year Adjusted EBITDA by $4.5 million prior to the following items: i) $3.3 million due to the implementation of a revenue recognition accounting standard (the majority of which is expected to be reversed by the end of fiscal 2019); ii) $3.0 million of higher legal and professional expenses; iii) a charge of $1.5 million related to the discontinued use of a tank monitoring system; iv) a $1.5 million increase in the net Adjusted EBITDA loss associated with the Company’s concierge program, which was greatly curtailed this past January; and v) $0.2 million of expense related to an increase in the amount due under Star’s weather hedge contracts.

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, net other income, 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:

Members of Star's management team will host a webcast and conference call at 11:00 a.m. Eastern Time tomorrow, August 1, 2019. The webcast will be accessible on the company’s website, at www.stargrouplp.com, and the telephone number for the conference call is 877-327-7688 (or 412-317-5112 for international callers).

About Star Group, L.P.

Star Group, 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 Company also sells and services heating and air conditioning equipment to its home heating oil and propane customers and, to a lesser extent, provides these offerings to customers outside of its home heating oil and propane customer base. In certain of Star's marketing areas, the Company provides plumbing services, primarily to its home heating oil and propane customer base. Star also sells diesel, gasoline and home heating oil on a delivery only basis. We believe 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 Company's SEC filings at www.sec.gov and by visiting Star's website at www.stargrouplp.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 Company’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 Company 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, 2018. Important factors that could cause actual results to differ materially from the Company’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 Company or persons acting on its behalf are expressly qualified in their entirety by the Cautionary Statements. Unless otherwise required by law, the Company 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.

CONTACT:

Chris Witty

Investor Relations

Darrow Associates

203/328-7310

646/438-9385 or cwitty@darrowir.com

STAR GROUP, L.P. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

June 30,

September 30,

(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

Captive insurance collateral

  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

CONSOLIDATED STATEMENTS OF OPERATIONS

Ended June 30,

(in thousands, except per unit data - unaudited)

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

Limited Partners’ interest in net income (loss)

  (22,948

  (7,956

  51,223

  76,510

Per unit data (Basic and Diluted):

Net income (loss) available to limited partners

  (0.46

  (0.15

  1.00

  1.39

Dilutive impact of theoretical distribution of earnings under FASB ASC 260-10-45-60

  0.14

  0.21

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

  0.86

  1.18

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

  49,943

  53,938

  51,431

  55,157

SUPPLEMENTAL INFORMATION

RECONCILIATION OF EBITDA AND ADJUSTED EBITDA

(Unaudited)

Net loss

Income tax benefit

  2,967

  2,186

  (21,708

  (876

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

  (20,078

  (8,391

Add / (subtract)

  10,055

  3,416

Provision for losses on accounts receivable

  3,532

  2,222

Decrease in accounts receivables

  124,456

  84,026

Decrease in inventories

  5,699

  12,498

Increase in customer credit balances

  12,299

  5,681

Change in deferred taxes

  (1,871

  2,387

Change in other operating assets and liabilities

  (26,442

  (9,359

Net cash provided by operating activities

  104,683

  90,294

Net cash used in investing activities

  (53,268

  (23,242

Net cash used in financing activities

  (62,070

  (93,058

Home heating oil and propane gallons sold

  36,900

  54,500

Other petroleum products

  42,300

  36,000

Total all products

  79,200

  90,500

  1,034

  8,677

  6,656

  104,960

  131,107

  124,228

  123,801

  (20,157

  (23,077

  8,500

  5,687

Increase in accounts receivables

  (34,793

  (86,504

  1,958

  12,390

Decrease in customer credit balances

  (26,177

  (36,503

  (11,206

  29,641

  28,646

  11,240

  62,322

  30,019

  (80,578

  (64,459

Net cash provided by (used in) financing activities

  9,442

  (8,595

  323,600

  338,000

  123,200

  96,800

  446,800

  434,800

 Source: Star Group, L.P.

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

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