Star Group, L.P. (the "Company" or "Star") (NYSE:SGU), a home
energy distributor and services provider, today announced financial
results for its fiscal 2022 second quarter ended March 31, 2022.
Three Months Ended March 31, 2022
Compared to the Three Months Ended March 31, 2021For the
fiscal 2022 second quarter, Star reported a 29.5 percent increase
in total revenue to $782.5 million compared with $604.1 million in
the prior-year period, reflecting an increase in selling prices in
response to higher wholesale product costs, partially offset by a
decrease in total volume sold.
The volume of home heating oil and propane sold
during the fiscal 2022 second quarter decreased by 8.7 million
gallons, or 5.5 percent, to 148.9 million gallons as the additional
volume provided from acquisitions and colder weather was reduced by
net customer attrition and other factors. Volume was lower by
approximately 3.5 million gallons, or 2.2%, as more deliveries than
usual were made in the prior quarter in anticipation of potential
labor shortages due to a surge of the Omicron variant of COVID-19.
Temperatures in Star's geographic areas of operation for the fiscal
2022 second quarter were 3.0 percent colder than during the fiscal
2021 second quarter but 3.7 percent warmer than normal, as reported
by the National Oceanic and Atmospheric Administration.
Star’s net income declined by $3.8 million in
the quarter, to $81.4 million, primarily due to a decrease in
Adjusted EBITDA of $12.0 million, partially offset by a favorable
change in the fair value of derivative instruments of $9.4
million.
Second quarter Adjusted EBITDA decreased by
$12.0 million, to $107.7 million, compared to the three months
ended March 31, 2021, as the impact from a decline in home heating
oil and propane volume and higher operating expenses more than
offset an increase in home heating oil and propane per gallon
margins. Operating expenses rose by $6.2 million, or 5.8%, due to
the additional costs associated with acquisitions and an increase
in the base business ($4.2 million) largely due to higher credit
card fees and bad debt expense as sales in the base business
increased 27.7% driven by higher product costs. In addition, for
the three months ended March 31, 2022 Star recorded a charge of
$1.1 million under its weather hedge program versus a charge of
$0.5 million for the prior year’s second quarter. This $1.1 million
charge partially offset the prior $2.2 million benefit (due to
warmer temperatures) recorded for the quarter ended December 31,
2021.
“The second quarter was quite challenging due to
extreme volatility in the wholesale cost of home heating oil, which
varied between $2.36 and $4.44 per gallon during the period. Our
working capital needs rose substantially, and we accessed $100
million of our seasonal working capital line, which increased our
revolving credit facility to a total of $400 million, and such
rapidly-changing conditions impacted our ability to provide the
bottom line results we would have otherwise expected.” said Jeff
Woosnam, Star Group’s President and Chief Executive Officer. “We
believe we took the right steps to mitigate these headwinds as much
as possible while actively working to manage net customer
attrition. Adjusted EBITDA, however, was reduced by lower volumes
and higher operating expenses reflecting the impact of increased
product cost and associated expenditures.
“In addition, during the quarter, Star purchased
one oil dealer and, in April, purchased another, adding
approximately 5.5 million gallons, in aggregate, of annual volume,
continuing a strategy that strengthens our footprint and broadens
our brand portfolio. Overall, we believe the second quarter put us
in a good position for the remainder of fiscal 2022, even as we
remain vigilant monitoring and addressing inflationary pressures
across many aspects of our business.”
Six Months Ended March 31, 2022 Compared
to the Six Months Ended March 31, 2021For the six months
ended March 31, 2022, Star reported a 30.0 percent increase in
total revenue to $1.3 billion compared with $1.0 billion in the
prior-year period, reflecting an increase in selling prices in
response to higher wholesale product costs, partially offset by a
decrease in total volume sold.
The volume of home heating oil and propane sold
during the first six months of fiscal 2022 period decreased by 11.2
million gallons, or 4.5 percent, to 235.9 million gallons as the
additional volume provided from acquisitions was more than offset
by warmer temperatures, net customer attrition and other factors.
Temperatures in Star's geographic areas of operation fiscal
year-to-date were 0.5 percent warmer than during the prior-year
period and 9.6 percent warmer than normal, as reported by the
National Oceanic and Atmospheric Administration.
Star’s net income declined by $27.2 million for
the first six months of fiscal 2022, to $95.9 million, primarily
due to an unfavorable $21.4 million change in the fair value of
derivative instruments and a decrease in Adjusted EBITDA of $12.9
million, partially offset by lower income tax expense of $8.3
million.
Year-to-date Adjusted EBITDA decreased by $12.9
million, to $152.2 million, compared to the prior-year period as a
decline in home heating oil and propane volume and an increase in
operating expenses more than offset an increase in home heating oil
and propane per gallon margins. Operating expenses rose by $14.9
million due to the additional costs associated with acquisitions
($3.0 million) and an increase in the base business ($9.6 million)
due in part to due to higher credit card fees and bad debt expense
($3.5 million) as sales in the base business increased 27.8% driven
by higher product costs and a $2.3 million reduction in the weather
insurance benefit. The remaining expenses in the base business
increased by $6.1 million, or 3.4% due to expected wage, benefit
and other increases. As of March 31, 2022 Star recorded a benefit
of $1.1 million under its weather hedge program versus a benefit of
$3.4 million in the prior-year period, reflecting warmer
temperatures during the fiscal 2021 weather hedge timeframe.
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, May 5, 2022. The webcast will be
accessible on the company’s website, at www.stargrouplp.com, and
the telephone number for the conference call is 888-346-3470 (or
412-317-5169 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 impact of geopolitical
events, such as the crisis in the Ukraine, on wholesale product
cost volatility, 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; cyber-attacks; inflation; global
supply chain issues; labor shortages; 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, 2021. 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. 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, |
|
|
2022 |
|
|
|
2021 |
|
(in
thousands) |
(unaudited) |
|
|
ASSETS |
|
|
Current assets |
|
|
|
Cash and cash equivalents |
$ |
17,682 |
|
|
$ |
4,767 |
|
Receivables, net of allowance of $6,781 and $4,779,
respectively |
|
262,738 |
|
|
|
99,680 |
|
Inventories |
|
79,698 |
|
|
|
61,183 |
|
Fair asset value of derivative instruments |
|
37,777 |
|
|
|
26,222 |
|
Prepaid expenses and other current assets |
|
64,310 |
|
|
|
30,140 |
|
Total current assets |
|
462,205 |
|
|
|
221,992 |
|
Property and
equipment, net |
|
101,456 |
|
|
|
99,123 |
|
Operating
lease right-of-use assets |
|
96,076 |
|
|
|
95,839 |
|
Goodwill |
|
254,842 |
|
|
|
253,398 |
|
Intangibles,
net |
|
89,601 |
|
|
|
95,474 |
|
Restricted
cash |
|
250 |
|
|
|
250 |
|
Captive
insurance collateral |
|
67,511 |
|
|
|
69,933 |
|
Deferred
charges and other assets, net |
|
18,201 |
|
|
|
17,854 |
|
Total assets |
$ |
1,090,142 |
|
|
$ |
853,863 |
|
LIABILITIES AND PARTNERS' CAPITAL |
|
|
|
Current liabilities |
|
|
|
Accounts payable |
$ |
53,098 |
|
|
$ |
37,291 |
|
Revolving credit facility borrowings |
|
185,723 |
|
|
|
8,618 |
|
Current maturities of long-term debt |
|
13,000 |
|
|
|
17,621 |
|
Current portion of operating lease liabilities |
|
16,717 |
|
|
|
16,446 |
|
Accrued expenses and other current liabilities |
|
157,093 |
|
|
|
121,221 |
|
Unearned service contract revenue |
|
66,801 |
|
|
|
56,972 |
|
Customer credit balances |
|
36,542 |
|
|
|
86,828 |
|
Total current liabilities |
|
528,974 |
|
|
|
344,997 |
|
Long-term
debt |
|
85,734 |
|
|
|
92,385 |
|
Long-term
operating lease liabilities |
|
84,182 |
|
|
|
84,019 |
|
Deferred tax
liabilities, net |
|
33,705 |
|
|
|
29,014 |
|
Other
long-term liabilities |
|
17,193 |
|
|
|
25,244 |
|
Partners' capital |
|
|
|
Common unitholders |
|
357,020 |
|
|
|
295,063 |
|
General partner |
|
(2,524 |
) |
|
|
(2,821 |
) |
Accumulated other comprehensive loss, net of taxes |
|
(14,142 |
) |
|
|
(14,038 |
) |
Total partners' capital |
|
340,354 |
|
|
|
278,204 |
|
Total liabilities and partners' capital |
$ |
1,090,142 |
|
|
$ |
853,863 |
|
|
|
|
|
STAR GROUP, L.P. AND
SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS
|
Three MonthsEnded March 31, |
|
Six MonthsEnded March 31, |
(in thousands, except per unit data -
unaudited) |
|
2022 |
|
|
|
2021 |
|
|
|
2022 |
|
|
|
2021 |
|
Sales: |
|
|
|
|
|
|
Product |
$ |
712,462 |
|
|
$ |
539,371 |
|
|
$ |
1,123,727 |
|
|
$ |
839,703 |
|
Installations and services |
|
70,081 |
|
|
|
64,744 |
|
|
|
147,086 |
|
|
|
137,732 |
|
Total sales |
|
782,543 |
|
|
|
604,115 |
|
|
|
1,270,813 |
|
|
|
977,435 |
|
Cost and
expenses: |
|
|
|
|
|
|
Cost of product |
|
492,334 |
|
|
|
313,552 |
|
|
|
766,928 |
|
|
|
485,699 |
|
Cost of installations and services |
|
70,136 |
|
|
|
64,361 |
|
|
|
144,184 |
|
|
|
133,664 |
|
(Increase) decrease in the fair value of derivative
instruments |
|
(17,615 |
) |
|
|
(8,224 |
) |
|
|
(4,212 |
) |
|
|
(25,619 |
) |
Delivery and branch expenses |
|
107,486 |
|
|
|
100,942 |
|
|
|
196,475 |
|
|
|
181,629 |
|
Depreciation and amortization expenses |
|
8,081 |
|
|
|
8,268 |
|
|
|
16,529 |
|
|
|
16,225 |
|
General and administrative expenses |
|
5,902 |
|
|
|
6,320 |
|
|
|
12,578 |
|
|
|
12,561 |
|
Finance charge income |
|
(1,026 |
) |
|
|
(799 |
) |
|
|
(1,538 |
) |
|
|
(1,205 |
) |
Operating income |
|
117,245 |
|
|
|
119,695 |
|
|
|
139,869 |
|
|
|
174,481 |
|
Interest
expense, net |
|
(2,729 |
) |
|
|
(2,136 |
) |
|
|
(4,787 |
) |
|
|
(3,987 |
) |
Amortization
of debt issuance costs |
|
(237 |
) |
|
|
(243 |
) |
|
|
(476 |
) |
|
|
(490 |
) |
Income before income taxes |
|
114,279 |
|
|
|
117,316 |
|
|
|
134,606 |
|
|
|
170,004 |
|
Income tax
expense |
|
32,900 |
|
|
|
32,152 |
|
|
|
38,738 |
|
|
|
46,980 |
|
Net income |
$ |
81,379 |
|
|
$ |
85,164 |
|
|
$ |
95,868 |
|
|
$ |
123,024 |
|
General Partner's interest in net income |
|
697 |
|
|
|
681 |
|
|
|
819 |
|
|
|
977 |
|
Limited
Partners' interest in net income |
$ |
80,682 |
|
|
$ |
84,483 |
|
|
$ |
95,049 |
|
|
$ |
122,047 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per unit
data (Basic and Diluted): |
|
|
|
|
|
|
Net income
available to limited partners |
$ |
2.14 |
|
|
$ |
2.09 |
|
|
$ |
2.49 |
|
|
$ |
2.95 |
|
Dilutive
impact of theoretical distribution of earnings |
|
0.39 |
|
|
|
0.38 |
|
|
|
0.44 |
|
|
|
0.52 |
|
Basic and
diluted income per Limited Partner Unit: |
$ |
1.75 |
|
|
$ |
1.71 |
|
|
$ |
2.05 |
|
|
$ |
2.43 |
|
|
|
|
|
|
|
|
Weighted
average number of Limited Partner units outstanding (Basic and
Diluted) |
|
37,634 |
|
|
|
40,382 |
|
|
|
38,218 |
|
|
|
41,324 |
|
|
|
|
|
|
|
|
SUPPLEMENTAL
INFORMATIONSTAR GROUP, L.P. AND
SUBSIDIARIESRECONCILIATION OF EBITDA AND ADJUSTED
EBITDA(Unaudited)
|
Three
MonthsEnded March 31, |
(in thousands) |
|
2022 |
|
|
|
2021 |
|
Net
income |
$ |
81,379 |
|
|
$ |
85,164 |
|
Plus: |
|
|
|
Income tax
expense |
|
32,900 |
|
|
|
32,152 |
|
Amortization
of debt issuance costs |
|
237 |
|
|
|
243 |
|
Interest
expense, net |
|
2,729 |
|
|
|
2,136 |
|
Depreciation
and amortization |
|
8,081 |
|
|
|
8,268 |
|
EBITDA |
|
125,326 |
|
|
|
127,963 |
|
(Increase) /
decrease in the fair value of derivative instruments |
|
(17,615 |
) |
|
|
(8,224 |
) |
Adjusted
EBITDA |
|
107,711 |
|
|
|
119,739 |
|
Add
/ (subtract) |
|
|
|
Income tax
expense |
|
(32,900 |
) |
|
|
(32,152 |
) |
Interest
expense, net |
|
(2,729 |
) |
|
|
(2,136 |
) |
Provision
for losses on accounts receivable |
|
2,455 |
|
|
|
732 |
|
Increase in
accounts receivables |
|
(86,269 |
) |
|
|
(40,998 |
) |
Increase in
inventories |
|
(1,660 |
) |
|
|
(2,475 |
) |
Decrease in
customer credit balances |
|
(36,409 |
) |
|
|
(34,434 |
) |
Change in
deferred taxes |
|
5,229 |
|
|
|
9,022 |
|
Change in
other operating assets and liabilities |
|
4,996 |
|
|
|
15,176 |
|
Net cash
(used in) provided by operating activities |
$ |
(39,576 |
) |
|
$ |
32,474 |
|
Net cash
used in investing activities |
$ |
(6,469 |
) |
|
$ |
(4,059 |
) |
Net cash
provided by (used in) financing activities |
$ |
42,488 |
|
|
$ |
(38,379 |
) |
|
|
|
|
|
|
|
|
Home heating
oil and propane gallons sold |
|
148,900 |
|
|
|
157,600 |
|
Other
petroleum products |
|
36,300 |
|
|
|
35,700 |
|
Total all products |
|
185,200 |
|
|
|
193,300 |
|
|
|
|
|
SUPPLEMENTAL
INFORMATIONSTAR GROUP, L.P. AND
SUBSIDIARIESRECONCILIATION OF EBITDA AND ADJUSTED
EBITDA(Unaudited)
|
Six
MonthsEnded March 31, |
(in thousands) |
|
2022 |
|
|
|
2021 |
|
Net
income |
$ |
95,868 |
|
|
$ |
123,024 |
|
Plus: |
|
|
|
Income tax
expense |
|
38,738 |
|
|
|
46,980 |
|
Amortization
of debt issuance costs |
|
476 |
|
|
|
490 |
|
Interest
expense, net |
|
4,787 |
|
|
|
3,987 |
|
Depreciation
and amortization |
|
16,529 |
|
|
|
16,225 |
|
EBITDA |
|
156,398 |
|
|
|
190,706 |
|
(Increase) /
decrease in the fair value of derivative instruments |
|
(4,212 |
) |
|
|
(25,619 |
) |
Adjusted
EBITDA |
|
152,186 |
|
|
|
165,087 |
|
Add
/ (subtract) |
|
|
|
Income tax
expense |
|
(38,738 |
) |
|
|
(46,980 |
) |
Interest
expense, net |
|
(4,787 |
) |
|
|
(3,987 |
) |
Provision
for losses on accounts receivable |
|
2,167 |
|
|
|
256 |
|
Increase in
accounts receivables |
|
(165,063 |
) |
|
|
(103,987 |
) |
Increase in
inventories |
|
(18,048 |
) |
|
|
(9,652 |
) |
Decrease in
customer credit balances |
|
(50,913 |
) |
|
|
(43,421 |
) |
Change in
deferred taxes |
|
4,545 |
|
|
|
12,623 |
|
Change in
other operating assets and liabilities |
|
13,210 |
|
|
|
35,534 |
|
Net cash
(used in) provided by operating activities |
$ |
(105,441 |
) |
|
$ |
5,473 |
|
Net cash
used in investing activities |
$ |
(13,503 |
) |
|
$ |
(39,962 |
) |
Net cash
provided by (used in) financing activities |
$ |
131,859 |
|
|
$ |
(13,539 |
) |
|
|
|
|
|
|
|
|
Home heating
oil and propane gallons sold |
|
235,900 |
|
|
|
247,100 |
|
Other
petroleum products |
|
75,600 |
|
|
|
73,400 |
|
Total all products |
|
311,500 |
|
|
|
320,500 |
|
|
|
|
|
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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