Star Group, L.P. (the "Company" or "Star") (NYSE:SGU), a home
energy distributor and services provider, today announced financial
results for the fiscal 2021 first quarter ended December 31, 2020.
Three Months Ended December 31, 2020
Compared to the Three Months Ended December 31, 2019For
the fiscal 2021 first quarter, Star reported a 26.6 percent
decrease in total revenue to $373.3 million compared with $508.9
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 2021 first quarter decreased by 17.6 million
gallons, or 16.4 percent, to 89.5 million gallons due to the impact
of warmer weather, net customer attrition, and other factors.
Temperatures in Star's geographic areas of operation for the fiscal
2021 first quarter were 13.5 percent warmer than during the fiscal
2020 first quarter and 15.5 percent warmer than normal, as reported
by the National Oceanic and Atmospheric Administration.
Star’s net income rose by $10.1 million in the
quarter, to $37.9 million, primarily due to a favorable change in
the fair value of derivative instruments of $11.0 million, and
lower depreciation and amortization expense of $1.1 million,
partially offset by an increase in income tax expense of $3.0
million.
First quarter Adjusted EBITDA improved by
$0.3 million, to $45.3 million, as the impact of higher
per gallon home heating oil and propane margins, $16.3 million of
lower operating expenses (including a $7.0 million favorable change
in the impact from the Company’s weather hedge), and a $1.1 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. As of December 31, 2020, Star recorded a benefit of
$4.0 million under its weather hedging contract, reducing delivery
and branch expense. The final benefit (if any) for fiscal 2021 may
be lower or higher depending on the accumulation of actual heating
degree-days recorded in the period January 1, 2021 through
March 31, 2021. Temperatures recorded for January 2021
were warmer than normal.
“We began fiscal 2021 well positioned even in
the face of a pandemic,” said Jeff Woosnam, Star Group’s President
and Chief Executive Officer. “While the impact from COVID-19 on the
heating season has been muted, our performance reflects 13.5
percent warmer weather within our footprint – dampening demand for
home heating oil and propane. However, we maintained our focus on
cost discipline and customer service while acquiring two propane
dealers in late December that will add, in aggregate, roughly
7 million gallons of product annually. We also repurchased 2.6
million common units during the quarter as part of our ongoing unit
repurchase plan. As we navigate through the remainder of fiscal
2021, we are confident in our ability to continue providing the
best possible customer experience and strong bottom line results
during the quarters to come.”
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, other income (loss), net, 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 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;
- 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, February 4, 2021. 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 and Mid-Atlantic 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 Company’s Form 10-K and our Quarterly Reports on
Form 10-Q. 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
SUBSIDIARIESCONDENSED CONSOLIDATED BALANCE
SHEETS
|
|
December 31, |
|
September 30, |
|
|
|
2020 |
|
|
|
2020 |
|
(in thousands) |
|
(unaudited) |
|
|
ASSETS |
|
|
Current assets |
|
|
|
|
Cash and cash equivalents |
|
$ |
18,847 |
|
|
$ |
56,911 |
|
Receivables, net of allowance of $5,185 and $6,121,
respectively |
|
|
147,011 |
|
|
|
83,594 |
|
Inventories |
|
|
56,902 |
|
|
|
50,256 |
|
Fair asset value of derivative instruments |
|
|
5,197 |
|
|
|
— |
|
Prepaid expenses and other current assets |
|
|
38,478 |
|
|
|
29,554 |
|
Assets held for sale |
|
|
— |
|
|
|
6,030 |
|
Total current assets |
|
|
266,435 |
|
|
|
226,345 |
|
Property and equipment, net |
|
|
98,332 |
|
|
|
93,495 |
|
Operating lease right-of-use assets |
|
|
100,222 |
|
|
|
99,776 |
|
Goodwill |
|
|
255,425 |
|
|
|
240,327 |
|
Intangibles, net |
|
|
103,440 |
|
|
|
90,293 |
|
Restricted cash |
|
|
250 |
|
|
|
250 |
|
Captive insurance collateral |
|
|
69,988 |
|
|
|
69,787 |
|
Deferred charges and other assets, net |
|
|
19,322 |
|
|
|
18,343 |
|
Total assets |
|
$ |
913,414 |
|
|
$ |
838,616 |
|
LIABILITIES AND PARTNERS' CAPITAL |
|
|
|
|
Current liabilities |
|
|
|
|
Accounts payable |
|
$ |
41,924 |
|
|
$ |
30,827 |
|
Liabilities held for sale |
|
|
— |
|
|
|
1,265 |
|
Revolving credit facility borrowings |
|
|
59,341 |
|
|
|
— |
|
Fair liability value of derivative instruments |
|
|
— |
|
|
|
11,437 |
|
Current maturities of long-term debt |
|
|
13,000 |
|
|
|
13,000 |
|
Current portion of operating lease liabilities |
|
|
19,200 |
|
|
|
19,139 |
|
Accrued expenses and other current liabilities |
|
|
133,713 |
|
|
|
127,286 |
|
Unearned service contract revenue |
|
|
68,063 |
|
|
|
58,430 |
|
Customer credit balances |
|
|
74,626 |
|
|
|
83,471 |
|
Total current liabilities |
|
|
409,867 |
|
|
|
344,855 |
|
Long-term debt |
|
|
106,606 |
|
|
|
109,805 |
|
Long-term operating lease liabilities |
|
|
86,419 |
|
|
|
85,908 |
|
Deferred tax liabilities, net |
|
|
20,908 |
|
|
|
17,227 |
|
Other long-term liabilities |
|
|
26,998 |
|
|
|
25,001 |
|
Partners' capital |
|
|
|
|
Common unitholders |
|
|
279,873 |
|
|
|
273,283 |
|
General partner |
|
|
(2,447 |
) |
|
|
(2,506 |
) |
Accumulated other comprehensive loss, net of taxes |
|
|
(14,810 |
) |
|
|
(14,957 |
) |
Total partners' capital |
|
|
262,616 |
|
|
|
255,820 |
|
Total liabilities and partners' capital |
|
$ |
913,414 |
|
|
$ |
838,616 |
|
|
|
|
|
|
STAR GROUP, L.P. AND
SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS
|
|
Three Months EndedDecember 31, |
|
(in thousands, except per unit data -
unaudited) |
|
|
2020 |
|
|
|
2019 |
|
|
Sales: |
|
|
|
|
|
Product |
|
$ |
300,332 |
|
|
$ |
432,688 |
|
|
Installations and services |
|
|
72,988 |
|
|
|
76,257 |
|
|
Total sales |
|
|
373,320 |
|
|
|
508,945 |
|
|
Cost and expenses: |
|
|
|
|
|
Cost of product |
|
|
172,147 |
|
|
|
287,673 |
|
|
Cost of installations and services |
|
|
69,303 |
|
|
|
73,669 |
|
|
(Increase) decrease in the fair value of derivative
instruments |
|
|
(17,395 |
) |
|
|
(6,417 |
) |
|
Delivery and branch expenses |
|
|
80,687 |
|
|
|
96,726 |
|
|
Depreciation and amortization expenses |
|
|
7,957 |
|
|
|
9,050 |
|
|
General and administrative expenses |
|
|
6,241 |
|
|
|
6,506 |
|
|
Finance charge income |
|
|
(406 |
) |
|
|
(713 |
) |
|
Operating income |
|
|
54,786 |
|
|
|
42,451 |
|
|
Interest expense, net |
|
|
(1,851 |
) |
|
|
(2,679 |
) |
|
Amortization of debt issuance costs |
|
|
(247 |
) |
|
|
(235 |
) |
|
Income before income taxes |
|
|
52,688 |
|
|
|
39,537 |
|
|
Income tax expense |
|
|
14,828 |
|
|
|
11,782 |
|
|
Net income |
|
$ |
37,860 |
|
|
$ |
27,755 |
|
|
General Partner's interest in net income |
|
|
296 |
|
|
|
192 |
|
|
Limited Partners' interest in net income |
|
$ |
37,564 |
|
|
$ |
27,563 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per unit data (Basic and Diluted): |
|
|
|
|
|
Net income available to limited partners |
|
$ |
0.89 |
|
|
$ |
0.58 |
|
|
Dilutive impact of theoretical distribution of earnings |
|
|
0.15 |
|
|
|
0.09 |
|
|
Basic and diluted income per Limited Partner Unit: |
|
$ |
0.74 |
|
|
$ |
0.49 |
|
|
|
|
|
|
|
|
Weighted average number of Limited Partner units outstanding (Basic
and Diluted) |
|
|
42,246 |
|
|
|
47,266 |
|
|
|
|
|
|
|
|
SUPPLEMENTAL
INFORMATIONSTAR GROUP, L.P. AND
SUBSIDIARIESRECONCILIATION OF EBITDA AND ADJUSTED
EBITDA(Unaudited)
|
|
Three Months EndedDecember 31, |
(in thousands) |
|
|
2020 |
|
|
|
2019 |
|
Net income |
|
$ |
37,860 |
|
|
$ |
27,755 |
|
Plus: |
|
|
|
|
Income tax expense |
|
|
14,828 |
|
|
|
11,782 |
|
Amortization of debt issuance costs |
|
|
247 |
|
|
|
235 |
|
Interest expense, net |
|
|
1,851 |
|
|
|
2,679 |
|
Depreciation and amortization |
|
|
7,957 |
|
|
|
9,050 |
|
EBITDA |
|
|
62,743 |
|
|
|
51,501 |
|
(Increase) / decrease in the fair value of derivative
instruments |
|
|
(17,395 |
) |
|
|
(6,417 |
) |
Adjusted EBITDA |
|
|
45,348 |
|
|
|
45,084 |
|
Add / (subtract) |
|
|
|
|
Income tax expense |
|
|
(14,828 |
) |
|
|
(11,782 |
) |
Interest expense, net |
|
|
(1,851 |
) |
|
|
(2,679 |
) |
(Recovery) provision for losses on accounts receivable |
|
|
(476 |
) |
|
|
1,010 |
|
Decrease in accounts receivables |
|
|
(62,989 |
) |
|
|
(85,745 |
) |
Decrease in inventories |
|
|
(7,177 |
) |
|
|
(15,427 |
) |
Increase in customer credit balances |
|
|
(8,987 |
) |
|
|
(15,898 |
) |
Change in deferred taxes |
|
|
3,601 |
|
|
|
1,336 |
|
Change in other operating assets and liabilities |
|
|
20,358 |
|
|
|
32,510 |
|
Net cash used in operating activities |
|
$ |
(27,001 |
) |
|
$ |
(51,591 |
) |
Net cash used in investing activities |
|
$ |
(35,903 |
) |
|
$ |
(7,663 |
) |
Net cash provided by financing activities |
|
$ |
24,840 |
|
|
$ |
68,897 |
|
|
|
|
|
|
|
|
|
|
|
Home heating oil and propane gallons sold |
|
|
89,500 |
|
|
|
107,100 |
|
Other petroleum products |
|
|
37,700 |
|
|
|
41,400 |
|
Total all products |
|
|
127,200 |
|
|
|
148,500 |
|
|
|
|
|
|
Source: Star Group, L.P.
|
|
CONTACT: |
|
Star Group, L.P. |
Chris Witty |
Investor Relations |
Darrow Associates |
203/328-7310 |
646/438-9385 or cwitty@darrowir.com |
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