Star Group, L.P. (the "Company" or "Star") (NYSE:SGU), a home
energy distributor and services provider, today announced financial
results for the fiscal 2018 second quarter and six months ended
March 31, 2018.
Three Months Ended March 31, 2018
Compared to the Three Months Ended March 31, 2017
For the fiscal 2018 second quarter, Star
reported a 28.6 percent increase in revenue to
$684.0 million compared with revenue of $532.1 million in
the prior-year period, largely due to a 20.0 percent increase in
wholesale per-gallon product costs and 16.3 percent higher total
volume sold.
The volume of home heating oil and propane sold
during the fiscal 2018 second quarter increased by 25.9 million
gallons, or 16.8 percent, to 180.1 million gallons, as the impact
of colder temperatures and acquisitions was partially offset by net
customer attrition and other factors. Temperatures in Star's
geographic areas of operation for the fiscal 2018 second quarter
were 7.8 percent colder than during the fiscal 2017 second quarter
but 5.5 percent warmer than normal, as reported by the National
Oceanic and Atmospheric Administration.
Net income rose by $15.1 million, or 38.0
percent, to $54.8 million due to an increase in Adjusted EBITDA,
discussed below, of $16.6 million and the impact of the Tax Cuts
and Jobs Act enacted into law on December 22, 2017 on the Company’s
effective tax rate, which decreased to 33.8 percent from 40.7
percent in the prior-year period.
Adjusted EBITDA increased by $16.6 million,
or 18.8 percent, to $104.8 million in the second quarter of
fiscal 2018. The higher Adjusted EBITDA was primarily a result of
the additional volume sold due to colder temperatures, higher home
heating oil and propane margins, the additional Adjusted EBITDA
provided by acquisitions, and a $1.2 million credit under the
Company’s weather hedge contract that partially offset higher
operating costs in the base business. The Company had previously
recorded a charge of $3.1 million in the fiscal quarter ended
December 31, 2017 for the aforementioned weather hedge contract, in
anticipation of continued cold weather, but this was reduced by
$1.2 million as temperatures during the fiscal second quarter were
warmer than the payment threshold. The extremely cold weather
conditions experienced in late December 2017 and early January
2018, when temperatures were, at times, 45.0 percent colder than
normal, increased the demand for service and resulted in higher
delivery costs as well as certain branch expenses. The deliveries
made and service provided during this period necessitated premium
labor rates and increased staffing levels. In addition to these
costs and normal increases in salaries, benefits and other items,
operating expenses were also higher due to an increase in fixed
costs and insurance expense as well as, reflecting the increase in
sales, greater credit card usage and higher bad debt expense.
"Star’s second quarter was as challenging and
unpredictable as the first, impacting both overall demand as well
as bottom line results,” said Steven J. Goldman, Star Group’s Chief
Executive Officer. “While temperatures in our geographic areas of
operation were 7.8 percent colder than last year, this comparison
masks the high levels of volatility we experienced – as January’s
early cold snap and several nor'easters in March offset relatively
warm periods in-between. Such extreme variability made deliveries
and service arduous, and Star needed to respond through increased
staffing and longer hours – which, combined with other related
expenses – drove higher operating costs. Overall I believe we
handled the unusual weather to the best of our ability.
“Separately, I’m pleased to announce that we
recently added to our stock repurchase plan and bought 1.9 million
units between February and April 2018 at an average price of $9.49
per unit. We also, in April, completed one heating oil acquisition
in Pennsylvania, paying $13.0 million for the long-term assets.
This latest addition to Star strengthens our footprint in an
existing area, and we see more opportunities for acquisitions going
forward that can augment our organic expansion initiatives and
bolster top-line growth.”
Six Months Ended March 31, 2018 Compared
to the Six Months Ended March 31, 2017
Star reported a 22.3 percent increase in revenue
to $1.1 billion for the six months ended March 31, 2018, versus
$0.9 billion in the prior-year period, due to 19.0 percent higher
wholesale per-gallon product costs and an 11.2 percent increase in
total volume sold. Home heating oil and propane volume for the
first half of fiscal 2018 increased by 29.8 million gallons, or
11.7 percent, to 283.5 million gallons, as the additional volume
provided by colder temperatures and acquisitions was slightly
offset by net customer attrition in the base business for the
twelve months ended March 31, 2018. Temperatures in Star's
geographic areas of operation for the first half of fiscal 2018
were 6.9 percent colder than the prior-year's comparable period but
5.6 percent warmer than normal, as reported by the National Oceanic
and Atmospheric Administration.
Net income increased by $27.0 million, or 46.5
percent, to $85.0 million due to a $12.7 million increase in
Adjusted EBITDA, as discussed below, and a $13.7 million decrease
in income tax expense as a result of the aforementioned Tax Cuts
and Jobs Act.
Adjusted EBITDA increased by $12.7 million,
or 10.7 percent, to $132.2 million for the six months ended
March 31, 2018. The increase in Adjusted EBITDA primarily resulted
from the additional volume sold in the base business due largely to
the impact of colder temperatures, higher home heating oil and
propane margins, and the additional Adjusted EBITDA provided by
acquisitions, partially offset by higher operating costs in the
base business and a $1.9 million charge related to the
Company’s weather hedge contract, as previously discussed.
The extremely cold weather conditions experienced in late
December 2017 and early January 2018, when temperatures were, at
times, 45.0 percent colder than normal, increased the demand for
service and resulted in higher delivery costs as well as certain
branch expenses. The deliveries made and service provided during
this period necessitated premium labor rates and increased staffing
levels. In addition to these costs and normal increases in
salaries, benefits, and other items, operating expenses were also
higher due to an increase in fixed costs and insurance expense as
well as, reflecting the increase in sales, greater credit card
usage and higher bad debt expense.
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:Members of Star's
management team will host a webcast and conference call at 11:00
a.m. Eastern Time on May 3, 2018. 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 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 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 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, 2017.
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.
(financials follow)
|
STAR GROUP, L.P. AND SUBSIDIARIES |
CONSOLIDATED BALANCE SHEETS |
|
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
September 30, |
|
|
|
2018 |
|
|
|
2017 |
|
(in thousands) |
|
(unaudited) |
|
|
ASSETS |
|
|
Current
assets |
|
|
|
|
Cash and
cash equivalents |
|
$ |
35,429 |
|
|
$ |
52,458 |
|
Receivables, net of allowance of $8,443 and $5,540,
respectively |
|
|
263,939 |
|
|
|
96,603 |
|
Inventories |
|
|
59,726 |
|
|
|
59,596 |
|
Fair
asset value of derivative instruments |
|
|
6,711 |
|
|
|
5,932 |
|
Prepaid
expenses and other current assets |
|
|
28,235 |
|
|
|
26,652 |
|
Total
current assets |
|
|
394,040 |
|
|
|
241,241 |
|
Property
and equipment, net |
|
|
79,761 |
|
|
|
79,673 |
|
Goodwill |
|
|
225,978 |
|
|
|
225,915 |
|
Intangibles, net |
|
|
95,874 |
|
|
|
105,218 |
|
Restricted cash |
|
|
250 |
|
|
|
250 |
|
Captive
insurance collateral |
|
|
45,141 |
|
|
|
11,777 |
|
Deferred
charges and other assets, net |
|
|
10,980 |
|
|
|
9,843 |
|
Total
assets |
|
$ |
852,024 |
|
|
$ |
673,917 |
|
LIABILITIES AND PARTNERS’ CAPITAL |
|
|
|
|
Current liabilities |
|
|
|
|
Accounts
payable |
|
$ |
34,379 |
|
|
$ |
26,739 |
|
Revolving
credit facility borrowings |
|
|
115,002 |
|
|
|
- |
|
Fair
liability value of derivative instruments |
|
|
- |
|
|
|
289 |
|
Current
maturities of long-term debt |
|
|
10,000 |
|
|
|
10,000 |
|
Accrued
expenses and other current liabilities |
|
|
122,564 |
|
|
|
108,449 |
|
Unearned
service contract revenue |
|
|
62,283 |
|
|
|
60,133 |
|
Customer
credit balances |
|
|
24,587 |
|
|
|
66,723 |
|
Total
current liabilities |
|
|
368,815 |
|
|
|
272,333 |
|
Long-term debt |
|
|
60,836 |
|
|
|
65,717 |
|
Deferred
tax liabilities, net |
|
|
33,500 |
|
|
|
6,140 |
|
Other
long-term liabilities |
|
|
22,613 |
|
|
|
23,659 |
|
Partners’ capital |
|
|
|
|
Common
unitholders |
|
|
385,909 |
|
|
|
325,762 |
|
General
partner |
|
|
(743 |
) |
|
|
(929 |
) |
Accumulated other comprehensive loss, net of taxes |
|
|
(18,906 |
) |
|
|
(18,765 |
) |
Total
partners’ capital |
|
|
366,260 |
|
|
|
306,068 |
|
Total
liabilities and partners’ capital |
|
$ |
852,024 |
|
|
$ |
673,917 |
|
|
|
|
|
|
|
STAR GROUP, L.P. AND
SUBSIDIARIES |
CONSOLIDATED STATEMENTS OF
OPERATIONS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31, |
|
Six Months Ended
March 31, |
(in thousands, except per unit data -
unaudited) |
|
|
2018 |
|
|
|
2017 |
|
|
|
2018 |
|
|
|
2017 |
|
Sales: |
|
|
|
|
|
|
|
|
Product |
|
$ |
622,962 |
|
|
$ |
475,485 |
|
|
$ |
989,696 |
|
|
$ |
791,776 |
|
Installations and services |
|
|
61,069 |
|
|
|
56,567 |
|
|
|
131,169 |
|
|
|
124,394 |
|
Total
sales |
|
|
684,031 |
|
|
|
532,052 |
|
|
|
1,120,865 |
|
|
|
916,170 |
|
Cost and
expenses: |
|
|
|
|
|
|
|
|
Cost of
product |
|
|
403,293 |
|
|
|
288,941 |
|
|
|
646,073 |
|
|
|
488,534 |
|
Cost of
installations and services |
|
|
64,659 |
|
|
|
58,426 |
|
|
|
134,214 |
|
|
|
124,913 |
|
(Increase) decrease in the fair value of derivative
instruments |
|
|
11,609 |
|
|
|
12,442 |
|
|
|
209 |
|
|
|
3,891 |
|
Delivery
and branch expenses |
|
|
106,605 |
|
|
|
92,214 |
|
|
|
197,809 |
|
|
|
173,347 |
|
Depreciation and amortization expenses |
|
|
7,703 |
|
|
|
6,726 |
|
|
|
15,444 |
|
|
|
13,287 |
|
General
and administrative expenses |
|
|
6,221 |
|
|
|
5,556 |
|
|
|
12,872 |
|
|
|
11,909 |
|
Finance
charge income |
|
|
(1,532 |
) |
|
|
(1,285 |
) |
|
|
(2,295 |
) |
|
|
(1,980 |
) |
Operating
income |
|
|
85,473 |
|
|
|
69,032 |
|
|
|
116,539 |
|
|
|
102,269 |
|
Interest
expense, net |
|
|
(2,383 |
) |
|
|
(1,712 |
) |
|
|
(4,470 |
) |
|
|
(3,499 |
) |
Amortization of debt issuance costs |
|
|
(307 |
) |
|
|
(324 |
) |
|
|
(616 |
) |
|
|
(636 |
) |
Income
before income taxes |
|
|
82,783 |
|
|
|
66,996 |
|
|
|
111,453 |
|
|
|
98,134 |
|
Income
tax expense |
|
|
28,005 |
|
|
|
27,292 |
|
|
|
26,493 |
|
|
|
40,155 |
|
Net
income |
|
$ |
54,778 |
|
|
$ |
39,704 |
|
|
$ |
84,960 |
|
|
$ |
57,979 |
|
General
Partner’s interest in net income |
|
|
319 |
|
|
|
233 |
|
|
|
494 |
|
|
|
338 |
|
Limited
Partners’ interest in net income |
|
$ |
54,459 |
|
|
$ |
39,471 |
|
|
$ |
84,466 |
|
|
$ |
57,641 |
|
|
|
|
|
|
|
|
|
|
Per unit data (Basic
and Diluted): |
|
|
|
|
|
|
|
|
Net income available to
limited partners |
|
$ |
0.98 |
|
|
$ |
0.71 |
|
|
$ |
1.51 |
|
|
$ |
1.03 |
|
Dilutive impact
of theoretical distribution of earnings under FASB ASC
260-10-45-60 |
|
|
0.17 |
|
|
|
0.12 |
|
|
|
0.25 |
|
|
|
0.16 |
|
Limited
Partner’s interest in net income under FASB ASC 260-10-45-60 |
$ |
0.81 |
|
|
$ |
0.59 |
|
|
$ |
1.26 |
|
|
$ |
0.87 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number
of Limited Partner units outstanding (Basic and Diluted) |
|
|
55,642 |
|
|
|
55,888 |
|
|
|
55,766 |
|
|
|
55,888 |
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL INFORMATION |
|
STAR GROUP, L.P. AND SUBSIDIARIES |
RECONCILIATION OF EBITDA AND ADJUSTED
EBITDA |
(Unaudited) |
|
|
|
|
|
|
|
Three Months Ended
March 31, |
(in thousands) |
|
|
2018 |
|
|
|
2017 |
|
Net
income |
|
$ |
54,778 |
|
|
$ |
39,704 |
|
Plus: |
|
|
|
|
Income
tax expense |
|
|
28,005 |
|
|
|
27,292 |
|
Amortization of debt issuance cost |
|
|
307 |
|
|
|
324 |
|
Interest
expense, net |
|
|
2,383 |
|
|
|
1,712 |
|
Depreciation and amortization |
|
|
7,703 |
|
|
|
6,726 |
|
EBITDA |
|
|
93,176 |
|
|
|
75,758 |
|
(Increase) / decrease in the fair value of derivative
instruments |
|
|
11,609 |
|
|
|
12,442 |
|
Adjusted
EBITDA |
|
|
104,785 |
|
|
|
88,200 |
|
Add / (subtract) |
|
|
|
|
Income
tax expense |
|
|
(28,005 |
) |
|
|
(27,292 |
) |
Interest
expense, net |
|
|
(2,383 |
) |
|
|
(1,712 |
) |
Provision for losses on accounts receivable |
|
|
3,154 |
|
|
|
1,494 |
|
Increase
in accounts receivables |
|
|
(74,337 |
) |
|
|
(34,786 |
) |
Decrease
in inventories |
|
|
11,778 |
|
|
|
16,890 |
|
Decrease
in customer credit balances |
|
|
(27,890 |
) |
|
|
(31,068 |
) |
Change
in deferred taxes |
|
|
29,994 |
|
|
|
3,180 |
|
Change
in other operating assets and liabilities |
|
|
(14,135 |
) |
|
|
14,724 |
|
Net cash
provided by operating activities |
|
$ |
2,961 |
|
|
$ |
29,630 |
|
Net cash
used in investing activities |
|
$ |
(3,326 |
) |
|
$ |
(4,983 |
) |
Net cash
provided by (used in) financing activities |
|
$ |
14,655 |
|
|
$ |
(8,828 |
) |
|
|
|
|
|
Home heating oil and
propane gallons sold |
|
|
180,100 |
|
|
|
154,200 |
|
Other petroleum
products |
|
|
30,100 |
|
|
|
26,500 |
|
Total all products |
|
|
210,200 |
|
|
|
180,700 |
|
|
|
|
|
|
|
SUPPLEMENTAL INFORMATION |
|
STAR GROUP, L.P. AND SUBSIDIARIES |
RECONCILIATION OF EBITDA AND ADJUSTED
EBITDA |
(Unaudited) |
|
|
|
|
|
|
|
Six Months Ended
March 31, |
(in thousands) |
|
|
2018 |
|
|
|
2017 |
|
Net
income |
|
$ |
84,960 |
|
|
$ |
57,979 |
|
Plus: |
|
|
|
|
Income
tax expense |
|
|
26,493 |
|
|
|
40,155 |
|
Amortization of debt issuance cost |
|
|
616 |
|
|
|
636 |
|
Interest
expense, net |
|
|
4,470 |
|
|
|
3,499 |
|
Depreciation and amortization |
|
|
15,444 |
|
|
|
13,287 |
|
EBITDA |
|
|
131,983 |
|
|
|
115,556 |
|
(Increase) / decrease in the fair value of derivative
instruments |
|
|
209 |
|
|
|
3,891 |
|
Adjusted
EBITDA |
|
|
132,192 |
|
|
|
119,447 |
|
Add / (subtract) |
|
|
|
|
Income
tax expense |
|
|
(26,493 |
) |
|
|
(40,155 |
) |
Interest
expense, net |
|
|
(4,470 |
) |
|
|
(3,499 |
) |
Provision for losses on accounts receivable |
|
|
3,465 |
|
|
|
1,525 |
|
Increase
in accounts receivables |
|
|
(170,530 |
) |
|
|
(111,631 |
) |
(Increase) decrease in inventories |
|
|
(108 |
) |
|
|
642 |
|
Decrease
in customer credit balances |
|
|
(42,184 |
) |
|
|
(53,873 |
) |
Change
in deferred taxes |
|
|
27,254 |
|
|
|
7,121 |
|
Change
in other operating assets and liabilities |
|
|
20,599 |
|
|
|
44,547 |
|
Net cash
used in operating activities |
|
$ |
(60,275 |
) |
|
$ |
(35,876 |
) |
Net cash
used in investing activities |
|
$ |
(41,217 |
) |
|
$ |
(26,779 |
) |
Net cash
provided by (used in) financing activities |
|
$ |
84,463 |
|
|
$ |
(23,388 |
) |
|
|
|
|
|
Home heating oil and
propane gallons sold |
|
|
283,500 |
|
|
|
253,700 |
|
Other petroleum
products |
|
|
60,700 |
|
|
|
55,900 |
|
Total all products |
|
|
344,200 |
|
|
|
309,600 |
|
|
|
|
|
|
CONTACT:Star Group, L.P.Investor
Relations203/328-7310
Chris Witty Darrow
Associates646/438-9385 or cwitty@darrowir.com
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