Star Group, L.P. (the "Company" or "Star") (NYSE:SGU), a home
energy distributor and services provider, today announced financial
results for the fiscal 2020 fourth quarter and year ended September
30, 2020.
Three Months Ended
September 30, 2020 Compared to the Three
Months Ended September 30,
2019For the fiscal 2020 fourth quarter, Star reported a
22.3 percent decrease in total revenue to $183.3 million compared
with $235.9 million in the prior-year period, reflecting a decline
in selling prices in response to lower wholesale product costs and
a decrease in total volume sold.
The volume of home heating oil and propane sold
during the fiscal 2020 fourth quarter decreased by 2.9 million
gallons, or 13.2 percent, to 19.0 million gallons due to net
customer attrition, summertime staffing levels, the timing of
certain non winter deliveries and other factors. The volume of
other petroleum products sold decreased by 4.6 million gallons, or
10.4 percent, to 39.6 million gallons due to a decline in motor
fuel sales, reflecting the impact of COVID-19 on overall economic
activity, and the loss of certain accounts.
Star’s net loss declined by $3.7 million in the
quarter, to $30.2 million, due to a $1.6 million decrease in the
Company’s Adjusted EBITDA loss (a non-GAAP measure defined below)
and a $5.1 million favorable non-cash change in the fair value of
derivative instruments. The positive impact from these factors was
partially offset by a non-cash charge of $5.7 million relating to
the sale of certain non-strategic assets, completed in October
2020.
The fourth quarter Adjusted EBITDA loss
decreased by $1.6 million, to $27.3 million, due to an
increase in home heating oil and propane margins, a $1.5 million
improvement in net service and installation profitability, and $3.7
million lower operating expenses, partially offset by the impact
from lower volumes sold.
“I’m pleased to announce that, in the face of
many economic uncertainties this year, Star Group finished fiscal
2020 with solid performance, well positioned for the future,” said
Jeff Woosnam, Star Group’s President and Chief Executive Officer.
“For the full year, Adjusted EBITDA rose 37 percent, to $130.3
million, reflecting $46.4 million of lower operating expenses in
the base business, higher heating oil and propane margins, and
increased service profitability. These results – in the middle of
an ongoing pandemic – clearly demonstrate the value of our services
and excellent, dedicated staff. I appreciate everything that’s gone
into Star’s performance these past four quarters, which includes a
significant reduction in net customer attrition from the prior
year’s higher levels. With everything we’ve done to improve service
and streamline the business, I feel confident the Company is
prepared and can react appropriately to any new challenges as we
begin fiscal 2021.”
Fiscal Year
Ended September 30,
2020 Compared to
Fiscal Year Ended
September 30,
2019Star reported a 16.3 percent decrease
in total revenue to $1.5 billion for fiscal 2020 compared with
revenue of $1.8 billion in the prior-year period, largely due to
lower average selling prices in response to a decline in wholesale
product costs and a 9.3 percent decrease in total volume sold.
The volume of home heating oil and propane sold
decreased by 31.9 million gallons, or 9.2 percent, to 313.6 million
gallons, as the impact from acquisitions was more than offset by
warmer weather, net customer attrition, and other factors.
Temperatures in Star's geographic areas of operation were 6.0
percent warmer than during the prior-year period and 10.2 percent
warmer than normal, as reported by the National Oceanic and
Atmospheric Administration. The volume of other petroleum products
sold decreased by 15.6 million gallons, or 9.3 percent, to
151.8 million gallons, as the additional volume provided by
acquisitions of 9.2 million gallons was more than offset by lower
wholesale sales (due to warmer weather) and a reduction in motor
fuel sales reflecting, in part, the impact of COVID-19 on economic
activity, and the loss of certain accounts.
Net income increased by $38.3 million, to $55.9
million, due to an increase in Adjusted EBITDA of $35.0 million and
a favorable non-cash change in the fair value of derivative
instruments of $22.4 million.
Adjusted EBITDA increased by $35.0 million,
or 36.7 percent, to $130.3 million. Recent acquisitions
provided $9.3 million of Adjusted EBITDA, while Adjusted EBITDA in
the base business increased by $25.7 million. In the base business,
the impact of 6.6 cents higher per gallon home heating oil and
propane margins, $46.4 million lower operating expenses (reflecting
reduced volumes and various streamlining initiatives), a $12.2
million favorable change in the impact from the Company’s weather
hedge, and a $5.3 million improvement in net service and
installation profitability more than offset the impact from a
decrease in volume of home heating oil and propane sold and the
decline in Star’s motor fuel business. With regard to the Company’s
weather hedge, warmer temperatures during the fiscal 2020 winter
hedge period (November through March) resulted in fewer degree days
and, per the terms of Star’s weather hedge contracts, the
collection of $10.1 million. By contrast, the third quarter of
fiscal 2020 was colder than normal and resulted in the Company
selling more volume than anticipated. If the additional degree days
in the third quarter had occurred during the winter hedge period,
the payout would have been less than $2.0 million.
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, other
income (loss), net, 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 the Company’s
financial statements, such as investors, commercial banks and
research analysts, to assess Star’s position with regard to the
following:
- compliance with certain financial
covenants included in our debt agreements;
- financial performance without
regard to financing methods, capital structure, income taxes or
historical cost basis;
- 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;
- 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 as follows:
- EBITDA and Adjusted EBITDA do not
reflect 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, working capital
requirements;
- EBITDA and Adjusted EBITDA do not
reflect the cash necessary to make payments of interest or
principal on 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, December 8, 2020. 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 InformationThis
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 severity and duration of the novel coronavirus, or COVID-19,
pandemic, the pandemic’s impact on the U.S. and global economies,
the timing, scope and effectiveness of federal, state and local
governmental responses to the pandemic, the effect of weather
conditions on our financial performance; the price and supply of
the products that 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
current and future governmental regulations, including climate
change, environmental, health and safety regulations; the ability
to attract and retain employees; customer creditworthiness;
counterparty creditworthiness; marketing plans; potential
cyber-attacks; 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, 2020. 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, the Form 10-K and our Quarterly
Report on Form 10-Q for the quarter ended June 30, 2020. Currently,
one of the most significant factors, however, is the potential
adverse effect of the pandemic of the novel coronavirus, or
COVID-19, on the financial condition, results of operations, cash
flows and performance of the Company and its customers and
counterparties and the global economy and financial markets. The
extent to which COVID-19 impacts us and our customers will depend
on future developments, which are highly uncertain and cannot be
predicted with confidence, including the scope, severity and
duration of the pandemic, the actions taken to contain the pandemic
or mitigate its impact, and the direct and indirect economic
effects of the pandemic and containment measures, among others. 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.
(financials follow)
|
|
STAR GROUP,
L.P. AND SUBSIDIARIESCONSOLIDATED BALANCE
SHEETS |
|
|
|
September
30, |
|
September
30, |
|
|
|
2020 |
|
|
|
2019 |
|
(in
thousands) |
|
|
|
|
ASSETS |
|
|
|
|
|
|
|
|
Current assets |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
56,911 |
|
|
$ |
4,899 |
|
Receivables, net of allowance of $6,121 and $8,378,
respectively |
|
|
83,594 |
|
|
|
120,245 |
|
Inventories |
|
|
50,256 |
|
|
|
64,788 |
|
Prepaid expenses and other current assets |
|
|
29,554 |
|
|
|
36,898 |
|
Assets held for sale |
|
|
6,030 |
|
|
|
-- |
|
Total current assets |
|
|
226,345 |
|
|
|
226,830 |
|
Property and
equipment, net |
|
|
93,495 |
|
|
|
98,239 |
|
Operating
lease right-of-use assets |
|
|
99,776 |
|
|
|
-- |
|
Goodwill |
|
|
240,327 |
|
|
|
244,574 |
|
Intangibles,
net |
|
|
90,293 |
|
|
|
107,688 |
|
Restricted
cash |
|
|
250 |
|
|
|
250 |
|
Captive
insurance collateral |
|
|
69,787 |
|
|
|
58,490 |
|
Deferred
charges and other assets, net |
|
|
18,343 |
|
|
|
16,635 |
|
Total assets |
|
$ |
838,616 |
|
|
$ |
752,706 |
|
LIABILITIES AND PARTNERS' CAPITAL |
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
|
Accounts payable |
|
|
30,827 |
|
|
$ |
33,973 |
|
Liabilities held for sale |
|
|
1,265 |
|
|
|
-- |
|
Revolving credit facility borrowings |
|
|
-- |
|
|
|
24,000 |
|
Fair liability value of derivative instruments |
|
|
11,437 |
|
|
|
8,262 |
|
Current maturities of long-term debt |
|
|
13,000 |
|
|
|
9,000 |
|
Current portion of operating lease liabilities |
|
|
19,139 |
|
|
|
-- |
|
Accrued expenses and other current liabilities |
|
|
127,286 |
|
|
|
120,839 |
|
Unearned service contract revenue |
|
|
58,430 |
|
|
|
61,213 |
|
Customer credit balances |
|
|
83,471 |
|
|
|
68,270 |
|
Total current liabilities |
|
|
344,855 |
|
|
|
325,557 |
|
Long-term
debt |
|
|
109,805 |
|
|
|
120,447 |
|
Long-term
operating lease liabilities |
|
|
85,908 |
|
|
|
-- |
|
Deferred tax
liabilities, net |
|
|
17,227 |
|
|
|
20,116 |
|
Other
long-term liabilities |
|
|
25,001 |
|
|
|
25,746 |
|
Partners' capital |
|
|
|
|
|
|
|
|
Common unitholders |
|
|
273,283 |
|
|
|
279,709 |
|
General partner |
|
|
(2,506 |
) |
|
|
(1,968 |
) |
Accumulated other comprehensive loss, net of taxes |
|
|
(14,957 |
) |
|
|
(16,901 |
) |
Total partners' capital |
|
|
255,820 |
|
|
|
260,840 |
|
Total liabilities and partners' capital |
|
$ |
838,616 |
|
|
$ |
752,706 |
|
|
|
|
|
|
|
|
|
|
STAR GROUP, L.P. AND
SUBSIDIARIESCONSOLIDATED STATEMENTS OF
OPERATIONS |
|
|
|
Three Months Ended September 30, |
|
Twelve Months Ended September 30, |
(in thousands, except per unit data) |
|
|
2020 |
|
|
|
2019 |
|
|
|
2020 |
|
|
|
2019 |
|
|
|
(unaudited) |
|
(unaudited) |
|
|
|
|
Sales: |
|
|
|
|
|
|
|
|
Product |
|
$ |
106,881 |
|
|
$ |
159,281 |
|
|
$ |
1,186,026 |
|
|
$ |
1,466,045 |
|
Installations and services |
|
|
76,414 |
|
|
|
76,606 |
|
|
|
281,432 |
|
|
|
287,827 |
|
Total sales |
|
|
183,295 |
|
|
|
235,887 |
|
|
|
1,467,458 |
|
|
|
1,753,872 |
|
Cost and expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of product |
|
|
72,427 |
|
|
|
121,639 |
|
|
|
738,714 |
|
|
|
998,559 |
|
Cost of installations and services |
|
|
64,050 |
|
|
|
65,766 |
|
|
|
253,724 |
|
|
|
267,607 |
|
(Increase) decrease in the fair value of derivative
instruments |
|
|
781 |
|
|
|
5,845 |
|
|
|
2,755 |
|
|
|
25,113 |
|
Delivery and branch expenses |
|
|
68,428 |
|
|
|
73,007 |
|
|
|
323,373 |
|
|
|
369,033 |
|
Depreciation and amortization expenses |
|
|
8,037 |
|
|
|
9,073 |
|
|
|
34,623 |
|
|
|
32,901 |
|
General and administrative expenses |
|
|
6,190 |
|
|
|
5,278 |
|
|
|
25,072 |
|
|
|
28,414 |
|
Finance charge income |
|
|
(520 |
) |
|
|
(939 |
) |
|
|
(3,771 |
) |
|
|
(5,105 |
) |
Operating income (loss) |
|
|
(36,098 |
) |
|
|
(43,782 |
) |
|
|
92,968 |
|
|
|
37,350 |
|
Interest expense, net |
|
|
(1,959 |
) |
|
|
(2,487 |
) |
|
|
(9,702 |
) |
|
|
(11,164 |
) |
Amortization of debt issuance costs |
|
|
(270 |
) |
|
|
(276 |
) |
|
|
(999 |
) |
|
|
(1,032 |
) |
Other income (loss), net |
|
|
(5,724 |
) |
|
|
-- |
|
|
|
(5,724 |
) |
|
|
-- |
|
Income (loss) before income taxes |
|
|
(44,051 |
) |
|
|
(46,545 |
) |
|
|
76,543 |
|
|
|
25,154 |
|
Income tax expense (benefit) |
|
|
(13,852 |
) |
|
|
(12,640 |
) |
|
|
20,625 |
|
|
|
7,517 |
|
Net income (loss) |
|
$ |
(30,199 |
) |
|
$ |
(33,905 |
) |
|
$ |
55,918 |
|
|
$ |
17,637 |
|
General Partner's interest in net income (loss) |
|
|
(223 |
) |
|
|
(224 |
) |
|
|
377 |
|
|
|
95 |
|
Limited Partners' interest in net income (loss) |
|
$ |
(29,976 |
) |
|
$ |
(33,681 |
) |
|
$ |
55,541 |
|
|
$ |
17,542 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per unit data (Basic and Diluted): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) available to limited partners |
|
$ |
(0.68 |
) |
|
$ |
(0.69 |
) |
|
$ |
1.22 |
|
|
$ |
0.35 |
|
Dilutive impact of theoretical distribution of earnings |
|
|
-- |
|
|
|
-- |
|
|
|
0.15 |
|
|
|
-- |
|
Basic and diluted income (loss) per Limited Partner Unit: |
|
$ |
(0.68 |
) |
|
$ |
(0.69 |
) |
|
$ |
1.07 |
|
|
$ |
0.35 |
|
|
|
|
|
|
|
|
|
|
Weighted average number of Limited Partner units outstanding (Basic
and Diluted) |
|
|
43,875 |
|
|
|
48,986 |
|
|
|
45,656 |
|
|
|
50,814 |
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL INFORMATIONSTAR GROUP, L.P. AND
SUBSIDIARIES |
|
RECONCILIATION OF EBITDA AND ADJUSTED
EBITDA(Unaudited) |
|
|
|
Three Months Ended September 30, |
(in thousands) |
|
|
2020 |
|
|
|
2019 |
|
Net loss |
|
$ |
(30,199 |
) |
|
$ |
(33,905 |
) |
Plus: |
|
|
|
|
|
|
|
|
Income tax benefit |
|
|
(13,852 |
) |
|
|
(12,640 |
) |
Amortization of debt issuance costs |
|
|
270 |
|
|
|
276 |
|
Interest expense, net |
|
|
1,959 |
|
|
|
2,487 |
|
Depreciation and amortization |
|
|
8,037 |
|
|
|
9,073 |
|
EBITDA |
|
|
(33,785 |
) |
|
|
(34,709 |
) |
(Increase) / decrease in the fair value of derivative
instruments |
|
|
781 |
|
|
|
5,845 |
|
Other loss (income), net |
|
|
5,724 |
|
|
|
-- |
|
Adjusted EBITDA |
|
|
(27,280 |
) |
|
|
(28,864 |
) |
Add / (subtract) |
|
|
|
|
|
|
|
|
Income tax benefit |
|
|
13,852 |
|
|
|
12,640 |
|
Interest expense, net |
|
|
(1,959 |
) |
|
|
(2,487 |
) |
Provision for losses on accounts receivable |
|
|
(1,115 |
) |
|
|
1,041 |
|
Decrease in accounts receivables |
|
|
29,621 |
|
|
|
44,930 |
|
Increase in inventories |
|
|
(6,547 |
) |
|
|
(8,264 |
) |
Increase in customer credit balances |
|
|
33,312 |
|
|
|
29,792 |
|
Change in deferred taxes |
|
|
(2,390 |
) |
|
|
6,080 |
|
Change in other operating assets and liabilities |
|
|
(18,123 |
) |
|
|
(19,808 |
) |
Net cash provided by operating activities |
|
$ |
19,371 |
|
|
$ |
35,060 |
|
Net cash used in investing activities |
|
$ |
(9,423 |
) |
|
$ |
(1,588 |
) |
Net cash used in financing activities |
|
$ |
(19,755 |
) |
|
$ |
(34,290 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home heating oil and propane gallons sold |
|
|
19,000 |
|
|
|
21,900 |
|
Other petroleum products |
|
|
39,600 |
|
|
|
44,200 |
|
Total all products |
|
|
58,600 |
|
|
|
66,100 |
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL INFORMATIONSTAR GROUP, L.P. AND
SUBSIDIARIES |
|
RECONCILIATION OF EBITDA AND ADJUSTED
EBITDA(Unaudited) |
|
|
|
Twelve Months Ended September 30, |
(in thousands) |
|
|
2020 |
|
|
|
2019 |
|
Net income |
|
$ |
55,918 |
|
|
$ |
17,637 |
|
Plus: |
|
|
|
|
|
|
|
|
Income tax expense |
|
|
20,625 |
|
|
|
7,517 |
|
Amortization of debt issuance costs |
|
|
999 |
|
|
|
1,032 |
|
Interest expense, net |
|
|
9,702 |
|
|
|
11,164 |
|
Depreciation and amortization |
|
|
34,623 |
|
|
|
32,901 |
|
EBITDA |
|
|
121,867 |
|
|
|
70,251 |
|
(Increase) / decrease in the fair value of derivative
instruments |
|
|
2,755 |
|
|
|
25,113 |
|
Other loss (income), net |
|
|
5,724 |
|
|
|
-- |
|
Adjusted EBITDA |
|
|
130,346 |
|
|
|
95,364 |
|
Add / (subtract) |
|
|
|
|
|
|
|
|
Income tax expense |
|
|
(20,625 |
) |
|
|
(7,517 |
) |
Interest expense, net |
|
|
(9,702 |
) |
|
|
(11,164 |
) |
Provision for losses on accounts receivable |
|
|
3,441 |
|
|
|
9,541 |
|
Decrease in accounts receivables |
|
|
34,366 |
|
|
|
10,137 |
|
Decrease (increase) in inventories |
|
|
14,588 |
|
|
|
(6,306 |
) |
Increase in customer credit balances |
|
|
14,775 |
|
|
|
3,615 |
|
Change in deferred taxes |
|
|
(3,544 |
) |
|
|
(5,126 |
) |
Change in other operating assets and liabilities |
|
|
12,023 |
|
|
|
8,838 |
|
Net cash provided by operating activities |
|
$ |
175,668 |
|
|
$ |
97,382 |
|
Net cash used in investing activities |
|
$ |
(28,141 |
) |
|
$ |
(82,166 |
) |
Net cash used in financing activities |
|
$ |
(95,515 |
) |
|
$ |
(24,848 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home heating oil and propane gallons sold |
|
|
313,600 |
|
|
|
345,500 |
|
Other petroleum products |
|
|
151,800 |
|
|
|
167,400 |
|
Total all products |
|
|
465,400 |
|
|
|
512,900 |
|
|
|
|
|
|
Source: Star Group, L.P.
|
|
CONTACT:Star Group, L.P. Investor Relations203/328-7310 |
Chris Witty Darrow Associates646/438-9385 or
cwitty@darrowir.com |
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