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 second quarter and six months ended
March 31, 2021.
Three Months Ended March 31, 2021
Compared to the Three Months Ended March 31, 2020For the
fiscal 2021 second quarter, Star reported an 11.2 percent increase
in total revenue to $604.1 million compared with $543.1 million in
the prior-year period, reflecting greater volumes sold.
The volume of home heating oil and propane sold
during the fiscal 2021 second quarter increased by 21.4 million
gallons, or 15.7 percent, to 157.6 million gallons as colder
temperatures, acquisitions and other factors more than offset the
impact of net customer attrition. Temperatures in Star's geographic
areas of operation for the fiscal 2021 second quarter were 16.2
percent colder than during the fiscal 2020 second quarter but 8.6
percent warmer than normal, as reported by the National Oceanic and
Atmospheric Administration.
Star’s net income rose by $26.8 million in the
quarter, to $85.2 million, due to a favorable change in the fair
value of derivative instruments of $19.9 million, a $12.9 million
increase in Adjusted EBITDA, and lower depreciation and
amortization expense of $0.8 million, partially offset by an
increase in income tax expense of $7.5 million.
Second quarter Adjusted EBITDA improved by
$12.9 million, to $119.7 million, as the impact of higher
home heating oil and propane volumes more than offset a $13.6
million decline in the Company’s benefit recorded from the weather
hedge and an increase in total operating expenses of $2.7 million.
For the three months ended of March 31, 2021, Star recorded a $0.5
million charge under its weather hedging contract, increasing
delivery and branch expense; this slightly offset the $4.0 million
benefit booked in the quarter ended December 31, 2020. By
comparison, in the prior-year period – the three months ended March
31, 2020 – the Company (due to warmer weather) recorded a weather
hedge benefit of $13.1 million.
“Although temperatures in the second quarter
were 8.6% warmer than normal, they were 16.2% colder than the same
period last year, driving overall improved performance while the
pandemic ran its course,” said Jeff Woosnam, Star Group’s President
and Chief Executive Officer. “The volume of home heating oil and
propane rose, as did net income and Adjusted EBITDA, and we
continued to focus on customer service and operating fundamentals.
In addition, during the quarter, Star purchased two small oil
dealers and, in April, purchased another, adding approximately six
million gallons, in aggregate, of annual volume. With these
acquisitions we have now closed five transactions since the
beginning of the fiscal year, equating to some 13 million gallons
of product annually.”
Six Months Ended March 31, 2021 Compared
to the Six Months Ended March 31, 2020For the first half
of fiscal 2021, Star reported a 7.1 percent decrease in total
revenue to $1.0 billion compared with $1.1 billion in the
prior-year period, reflecting the impact of lower selling prices,
even as volumes rose, largely attributable to a decrease in product
cost.
The volume of home heating oil and propane sold
during the first six months of fiscal 2021 increased by 3.8 million
gallons, or 1.5 percent, to 247.1 million gallons, as cooler
temperatures, acquisitions and other factors more than offset the
impact of net customer attrition. Temperatures in Star's geographic
areas of operation for the first half of fiscal 2021 were 2.9
percent colder than during the prior year comparable period but
11.4 percent warmer than normal, as reported by the National
Oceanic and Atmospheric Administration.
Net income rose by $36.9 million, or 42.8
percent, to $123.0 million due to a favorable change in the fair
value of derivative instruments of $30.9 million, a $13.1 million
increase in Adjusted EBITDA, and lower depreciation and
amortization expense of $1.9 million, partially offset by an
increase in income tax expense of $10.5 million.
Adjusted EBITDA increased by $13.1 million, or
8.6 percent, to $165.1 million. The impact of slightly higher home
heating oil and propane volumes, an increase in home heating oil
and propane margins, and lower total operating expenses of $6.6
million more than offset a $6.7 million decline in the Company’s
benefit recorded from the weather hedge, reflecting colder weather
in fiscal 2021.
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 12:00
p.m. Eastern Time tomorrow, May 6, 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
|
|
March
31, |
|
September
30, |
|
|
|
2021 |
|
|
|
2020 |
|
(in
thousands) |
|
(unaudited) |
|
|
ASSETS |
|
|
Current assets |
|
|
|
|
Cash and cash equivalents |
|
$ |
8,883 |
|
|
$ |
56,911 |
|
Receivables, net of allowance of $5,797 and $6,121,
respectively |
|
|
187,457 |
|
|
|
83,594 |
|
Inventories |
|
|
59,139 |
|
|
|
50,256 |
|
Fair asset value of derivative instruments |
|
|
11,416 |
|
|
|
– |
|
Prepaid expenses and other current assets |
|
|
40,821 |
|
|
|
29,554 |
|
Assets held for sale |
|
|
– |
|
|
|
6,030 |
|
Total current assets |
|
|
307,716 |
|
|
|
226,345 |
|
Property and
equipment, net |
|
|
97,929 |
|
|
|
93,495 |
|
Operating
lease right-of-use assets |
|
|
96,310 |
|
|
|
99,776 |
|
Goodwill |
|
|
253,199 |
|
|
|
240,327 |
|
Intangibles,
net |
|
|
102,479 |
|
|
|
90,293 |
|
Restricted
cash |
|
|
250 |
|
|
|
250 |
|
Captive
insurance collateral |
|
|
69,653 |
|
|
|
69,787 |
|
Deferred
charges and other assets, net |
|
|
18,726 |
|
|
|
18,343 |
|
Total assets |
|
$ |
946,262 |
|
|
$ |
838,616 |
|
LIABILITIES AND PARTNERS CAPITAL |
|
|
|
|
Current liabilities |
|
|
|
|
Accounts payable |
|
$ |
35,341 |
|
|
$ |
30,827 |
|
Liabilities held for sale |
|
|
– |
|
|
|
1,265 |
|
Revolving credit facility borrowings |
|
|
35,000 |
|
|
|
– |
|
Fair liability value of derivative instruments |
|
|
– |
|
|
|
11,437 |
|
Current maturities of long-term debt |
|
|
13,000 |
|
|
|
13,000 |
|
Current portion of operating lease liabilities |
|
|
18,588 |
|
|
|
19,139 |
|
Accrued expenses and other current liabilities |
|
|
159,880 |
|
|
|
127,286 |
|
Unearned service contract revenue |
|
|
63,929 |
|
|
|
58,430 |
|
Customer credit balances |
|
|
40,257 |
|
|
|
83,471 |
|
Total current liabilities |
|
|
365,995 |
|
|
|
344,855 |
|
Long-term
debt |
|
|
103,408 |
|
|
|
109,805 |
|
Long-term
operating lease liabilities |
|
|
83,444 |
|
|
|
85,908 |
|
Deferred tax
liabilities, net |
|
|
30,074 |
|
|
|
17,227 |
|
Other
long-term liabilities |
|
|
26,065 |
|
|
|
25,001 |
|
Partners capital |
|
|
|
|
Common unitholders |
|
|
353,793 |
|
|
|
273,283 |
|
General partner |
|
|
(1,991 |
) |
|
|
(2,506 |
) |
Accumulated other comprehensive loss, net of taxes |
|
|
(14,526 |
) |
|
|
(14,957 |
) |
Total partners capital |
|
|
337,276 |
|
|
|
255,820 |
|
Total liabilities and partners capital |
|
$ |
946,262 |
|
|
$ |
838,616 |
|
|
|
|
|
|
STAR GROUP, L.P. AND
SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS
|
|
Three Months Ended March 31, |
|
Six Months Ended March 31, |
(in
thousands, except per unit data - unaudited) |
|
|
2021 |
|
|
|
2020 |
|
|
|
2021 |
|
|
|
2020 |
|
Sales: |
|
|
|
|
|
|
|
|
Product |
|
$ |
539,371 |
|
|
$ |
481,275 |
|
|
$ |
839,703 |
|
|
$ |
913,963 |
|
Installations and services |
|
|
64,744 |
|
|
|
61,788 |
|
|
|
137,732 |
|
|
|
138,045 |
|
Total sales |
|
|
604,115 |
|
|
|
543,063 |
|
|
|
977,435 |
|
|
|
1,052,008 |
|
Cost and
expenses: |
|
|
|
|
|
|
|
|
Cost of product |
|
|
313,552 |
|
|
|
285,350 |
|
|
|
485,699 |
|
|
|
573,023 |
|
Cost of installations and services |
|
|
64,361 |
|
|
|
61,273 |
|
|
|
133,664 |
|
|
|
134,942 |
|
(Increase) decrease in the fair value of derivative
instruments |
|
|
(8,224 |
) |
|
|
11,670 |
|
|
|
(25,619 |
) |
|
|
5,253 |
|
Delivery and branch expenses |
|
|
100,942 |
|
|
|
85,463 |
|
|
|
181,629 |
|
|
|
182,189 |
|
Depreciation and amortization expenses |
|
|
8,268 |
|
|
|
9,089 |
|
|
|
16,225 |
|
|
|
18,139 |
|
General and administrative expenses |
|
|
6,320 |
|
|
|
5,422 |
|
|
|
12,561 |
|
|
|
11,928 |
|
Finance charge income |
|
|
(799 |
) |
|
|
(1,321 |
) |
|
|
(1,205 |
) |
|
|
(2,034 |
) |
Operating income |
|
|
119,695 |
|
|
|
86,117 |
|
|
|
174,481 |
|
|
|
128,568 |
|
Interest
expense, net |
|
|
(2,136 |
) |
|
|
(2,756 |
) |
|
|
(3,987 |
) |
|
|
(5,435 |
) |
Amortization
of debt issuance costs |
|
|
(243 |
) |
|
|
(253 |
) |
|
|
(490 |
) |
|
|
(488 |
) |
Income before income taxes |
|
|
117,316 |
|
|
|
83,108 |
|
|
|
170,004 |
|
|
|
122,645 |
|
Income tax
expense |
|
|
32,152 |
|
|
|
24,700 |
|
|
|
46,980 |
|
|
|
36,482 |
|
Net income |
|
$ |
85,164 |
|
|
$ |
58,408 |
|
|
$ |
123,024 |
|
|
$ |
86,163 |
|
General Partners interest in net income |
|
|
681 |
|
|
|
409 |
|
|
|
977 |
|
|
|
601 |
|
Limited
Partners interest in net income |
|
$ |
84,483 |
|
|
$ |
57,999 |
|
|
$ |
122,047 |
|
|
$ |
85,562 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per unit
data (Basic and Diluted): |
|
|
|
|
|
|
|
|
Net income
available to limited partners |
|
$ |
2.09 |
|
|
$ |
1.25 |
|
|
$ |
2.95 |
|
|
$ |
1.83 |
|
Dilutive
impact of theoretical distribution of earnings |
|
|
0.38 |
|
|
|
0.22 |
|
|
|
0.52 |
|
|
|
0.31 |
|
Basic and
diluted income per Limited Partner Unit: |
|
$ |
1.71 |
|
|
$ |
1.03 |
|
|
$ |
2.43 |
|
|
$ |
1.52 |
|
|
|
|
|
|
|
|
|
|
Weighted
average number of Limited Partner units outstanding (Basic and
Diluted) |
|
|
40,382 |
|
|
|
46,244 |
|
|
|
41,324 |
|
|
|
46,760 |
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL
INFORMATIONSTAR GROUP, L.P. AND
SUBSIDIARIESRECONCILIATION OF EBITDA AND ADJUSTED
EBITDA(Unaudited)
|
|
Three Months
Ended March 31, |
(in
thousands) |
|
|
2021 |
|
|
|
2020 |
|
Net
income |
|
$ |
85,164 |
|
|
$ |
58,408 |
|
Plus: |
|
|
|
|
Income tax
expense |
|
|
32,152 |
|
|
|
24,700 |
|
Amortization
of debt issuance costs |
|
|
243 |
|
|
|
253 |
|
Interest
expense, net |
|
|
2,136 |
|
|
|
2,756 |
|
Depreciation
and amortization |
|
|
8,268 |
|
|
|
9,089 |
|
EBITDA |
|
|
127,963 |
|
|
|
95,206 |
|
(Increase) /
decrease in the fair value of derivative instruments |
|
|
(8,224 |
) |
|
|
11,670 |
|
Adjusted
EBITDA |
|
|
119,739 |
|
|
|
106,876 |
|
Add
/ (subtract) |
|
|
|
|
Income tax
expense |
|
|
(32,152 |
) |
|
|
(24,700 |
) |
Interest
expense, net |
|
|
(2,136 |
) |
|
|
(2,756 |
) |
Provision
for losses on accounts receivable |
|
|
732 |
|
|
|
2,193 |
|
(Increase)
decrease in accounts receivables |
|
|
(40,998 |
) |
|
|
16,183 |
|
(Increase)
decrease in inventories |
|
|
(2,475 |
) |
|
|
27,435 |
|
Decrease in
customer credit balances |
|
|
(34,434 |
) |
|
|
(16,564 |
) |
Change in
deferred taxes |
|
|
9,022 |
|
|
|
(1,114 |
) |
Change in
other operating assets and liabilities |
|
|
15,176 |
|
|
|
(5,087 |
) |
Net cash
provided by operating activities |
|
$ |
32,474 |
|
|
$ |
102,466 |
|
Net cash
used in investing activities |
|
$ |
(4,059 |
) |
|
$ |
(5,534 |
) |
Net cash
used in financing activities |
|
$ |
(38,379 |
) |
|
$ |
(101,173 |
) |
|
|
|
|
|
|
|
|
|
|
Home heating
oil and propane gallons sold |
|
|
157,600 |
|
|
|
136,200 |
|
Other
petroleum products |
|
|
35,700 |
|
|
|
36,600 |
|
Total all
products |
|
|
193,300 |
|
|
|
172,800 |
|
|
|
|
|
|
SUPPLEMENTAL
INFORMATIONSTAR GROUP, L.P. AND
SUBSIDIARIESRECONCILIATION OF EBITDA AND ADJUSTED
EBITDA(Unaudited)
|
|
Six Months
Ended March 31, |
(in
thousands) |
|
|
2021 |
|
|
|
2020 |
|
Net
income |
|
$ |
123,024 |
|
|
$ |
86,163 |
|
Plus: |
|
|
|
|
Income tax
expense |
|
|
46,980 |
|
|
|
36,482 |
|
Amortization
of debt issuance costs |
|
|
490 |
|
|
|
488 |
|
Interest
expense, net |
|
|
3,987 |
|
|
|
5,435 |
|
Depreciation
and amortization |
|
|
16,225 |
|
|
|
18,139 |
|
EBITDA |
|
|
190,706 |
|
|
|
146,707 |
|
(Increase) /
decrease in the fair value of derivative instruments |
|
|
(25,619 |
) |
|
|
5,253 |
|
Adjusted
EBITDA |
|
|
165,087 |
|
|
|
151,960 |
|
Add
/ (subtract) |
|
|
|
|
Income tax
expense |
|
|
(46,980 |
) |
|
|
(36,482 |
) |
Interest
expense, net |
|
|
(3,987 |
) |
|
|
(5,435 |
) |
Provision
for losses on accounts receivable |
|
|
256 |
|
|
|
3,203 |
|
Increase in
accounts receivables |
|
|
(103,987 |
) |
|
|
(69,562 |
) |
(Increase)
decrease in inventories |
|
|
(9,652 |
) |
|
|
12,008 |
|
Decrease in
customer credit balances |
|
|
(43,421 |
) |
|
|
(32,462 |
) |
Change in
deferred taxes |
|
|
12,623 |
|
|
|
222 |
|
Change in
other operating assets and liabilities |
|
|
35,534 |
|
|
|
27,423 |
|
Net cash
provided by operating activities |
|
$ |
5,473 |
|
|
$ |
50,875 |
|
Net cash
used in investing activities |
|
$ |
(39,962 |
) |
|
$ |
(13,197 |
) |
Net cash
used in financing activities |
|
$ |
(13,539 |
) |
|
$ |
(32,276 |
) |
|
|
|
|
|
|
|
|
|
|
Home heating
oil and propane gallons sold |
|
|
247,100 |
|
|
|
243,300 |
|
Other
petroleum products |
|
|
73,400 |
|
|
|
78,000 |
|
Total all
products |
|
|
320,500 |
|
|
|
321,300 |
|
|
|
|
|
|
Source: Star Group, L.P.
CONTACT:Star Group, L.P.Investor
Relations203/328-7310
Chris WittyDarrow Associates646/438-9385 or
cwitty@darrowir.com
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