Star Group, L.P. (the "Company" or "Star") (NYSE:SGU), a home
energy distributor and services provider, today announced financial
results for its fiscal 2023 second quarter ended March 31, 2023.
Three Months Ended March 31, 2023
Compared to the Three Months Ended March 31, 2022For the
fiscal 2023 second quarter, Star reported a 5.7 percent decline in
revenue to $737.6 million compared with $782.5 million in the
prior-year period, reflecting a decrease in total volume sold,
partially offset by the impact of acquisitions and other
factors.
The volume of home heating oil and propane sold
during the fiscal 2023 second quarter decreased by 27.8 million
gallons, or 18.7 percent, to 121.1 million gallons as the
additional volume provided from acquisitions and other factors was
more than offset by the impact of extremely warm weather and net
customer attrition. Temperatures in Star's geographic areas of
operation for the fiscal 2023 second quarter were 18.7 percent
warmer than during the fiscal 2022 second quarter and 21.6 percent
warmer than normal, as reported by the National Oceanic and
Atmospheric Administration. The second quarter of fiscal 2023 was
also the warmest such period in over 100 years within the New York
City metropolitan area.
Star’s net income declined by $19.3 million in
the quarter, to $62.0 million, primarily due to an unfavorable
change in the fair value of derivative instruments of $20.6
million, a $2.3 million increase in interest expense, and lower
Adjusted EBITDA of $5.5 million, partially offset by an $8.6
million decrease in income tax expense.
Second quarter Adjusted EBITDA decreased by $5.5
million, to $102.2 million, compared to the three months ended
March 31, 2022, as the decline in home heating oil and propane
volume more than offset an increase in per gallon margins and a
$14.0 million higher benefit recorded under the Company’s weather
hedge program. For the three months ended March 31, 2023, the
Company recorded a benefit of $12.9 million under its weather hedge
– reflecting warmer temperatures – versus a charge of $1.1 million
for the three months ended March 31, 2022.
“As the largest provider of home heating oil in
the nation, our business is highly dependent on weather – which
negatively impacted us this quarter,” said Jeff Woosnam, Star
Group’s President and Chief Executive Officer. “To put this in
perspective, not only were temperatures 21.6 percent warmer than
normal, but the period was also the warmest in New York City in 123
years; year-to-date, it was the fourth warmest period on record in
this key market. While there is nothing we can do to influence
mother nature, we are adept at mitigating, to the extent possible,
unusual weather swings like this – managing costs and working
capital and adjusting short-term investment decisions. At the same
time, our weather hedge program has provided an important buffer
under such conditions, as has our disciplined approach to
controlling operating expenses even in the face of certain
inflationary pressures. As we navigate through the remainder of
fiscal 2023 I remain confident in our ability to provide the best
possible customer experience and bottom line results.”
Six Months Ended March 31, 2023 Compared
to the Six Months Ended March 31, 2022For the six months
ended March 31, 2023, Star reported a 9.0 percent increase in total
revenue to $1.4 billion compared with $1.3 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 2023 decreased by 25.6
million gallons, or 10.8 percent, to 210.3 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 6.9 percent warmer than during the prior-year
period and 15.7 percent warmer than normal, as reported by the
National Oceanic and Atmospheric Administration.
Star’s net income declined by $20.3 million for
the first six months of fiscal 2023, to $75.6 million, primarily
due to an unfavorable change in the fair value of derivative
instruments of $24.9 million, a $4.4 million increase in interest
expense, and lower Adjusted EBITDA of $0.9 million, partially
offset by an $9.0 million decrease in income tax expense.
Year-to-date Adjusted EBITDA decreased by $0.9
million, to $151.2 million, compared to the prior-year period as a
decline in home heating oil and propane volume more than offset an
increase in per gallon margins and an $11.4 million higher benefit
recorded under the Company’s weather hedge. As of March 31, 2023,
the Company had recorded a benefit of $12.5 million under its
weather hedge program versus a benefit of $1.1 million for the
first six months of fiscal 2022.
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 4, 2023. 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. 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 the impact of
geopolitical events, such as the war in the Ukraine, and its impact
on wholesale product cost volatility, the price and supply of the
products that we sell, our ability to purchase sufficient
quantities of product to meet our customer’s needs, rapid increases
in levels of inflation approaching 40-year highs, uncertain
economic conditions, the consumption patterns of our customers, our
ability to obtain satisfactory gross profit margins, the effect of
weather conditions on our financial performance, our ability to
obtain new customers and retain existing customers, our ability to
make strategic acquisitions, the impact of litigation, natural gas
conversions, the impact of the novel coronavirus, or COVID-19,
pandemic and future global health pandemics, on US and global
economies, 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 credit worthiness, counterparty credit
worthiness, marketing plans, cyber-attacks, increases in interest
rates, global supply chain issues, labor shortages 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, 2022.
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, |
(in thousands) |
|
|
2023 |
|
|
|
2022 |
|
ASSETS |
|
(unaudited) |
|
|
Current assets |
|
|
|
|
Cash and cash equivalents |
|
$ |
22,085 |
|
|
$ |
14,620 |
|
Receivables, net of allowance of $10,795 and $7,755,
respectively |
|
|
259,099 |
|
|
|
138,252 |
|
Inventories |
|
|
71,732 |
|
|
|
83,557 |
|
Fair asset value of derivative instruments |
|
|
— |
|
|
|
16,823 |
|
Weather hedge contract receivable |
|
|
12,500 |
|
|
|
— |
|
Prepaid expenses and other current assets |
|
|
30,025 |
|
|
|
32,016 |
|
Assets held for sale |
|
|
— |
|
|
|
2,995 |
|
Total current assets |
|
|
395,441 |
|
|
|
288,263 |
|
Property and equipment, net |
|
|
105,559 |
|
|
|
107,744 |
|
Operating lease right-of-use assets |
|
|
90,325 |
|
|
|
93,435 |
|
Goodwill |
|
|
254,354 |
|
|
|
254,110 |
|
Intangibles, net |
|
|
77,538 |
|
|
|
84,510 |
|
Restricted cash |
|
|
250 |
|
|
|
250 |
|
Captive insurance collateral |
|
|
68,175 |
|
|
|
66,662 |
|
Deferred charges and other assets, net |
|
|
15,508 |
|
|
|
17,501 |
|
Total assets |
|
$ |
1,007,150 |
|
|
$ |
912,475 |
|
LIABILITIES AND PARTNERS' CAPITAL |
|
|
|
|
Current liabilities |
|
|
|
|
Accounts payable |
|
$ |
41,026 |
|
|
$ |
49,061 |
|
Revolving credit facility borrowings |
|
|
69,936 |
|
|
|
20,276 |
|
Fair liability value of derivative instruments |
|
|
11,516 |
|
|
|
183 |
|
Current maturities of long-term debt |
|
|
16,500 |
|
|
|
12,375 |
|
Current portion of operating lease liabilities |
|
|
17,248 |
|
|
|
17,211 |
|
Accrued expenses and other current liabilities |
|
|
162,999 |
|
|
|
125,561 |
|
Unearned service contract revenue |
|
|
71,363 |
|
|
|
62,858 |
|
Customer credit balances |
|
|
52,032 |
|
|
|
93,555 |
|
Total current liabilities |
|
|
442,620 |
|
|
|
381,080 |
|
Long-term debt |
|
|
139,459 |
|
|
|
151,709 |
|
Long-term operating lease liabilities |
|
|
78,109 |
|
|
|
81,385 |
|
Deferred tax liabilities, net |
|
|
13,392 |
|
|
|
25,620 |
|
Other long-term liabilities |
|
|
15,395 |
|
|
|
14,766 |
|
Partners' capital |
|
|
|
|
Common unitholders |
|
|
336,674 |
|
|
|
277,177 |
|
General partner |
|
|
(3,553 |
) |
|
|
(3,656 |
) |
Accumulated other comprehensive loss, net of taxes |
|
|
(14,946 |
) |
|
|
(15,606 |
) |
Total partners' capital |
|
|
318,175 |
|
|
|
257,915 |
|
Total liabilities and partners' capital |
|
$ |
1,007,150 |
|
|
$ |
912,475 |
|
|
|
|
|
|
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) |
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
|
|
|
|
|
|
|
|
|
Sales: |
|
|
|
|
|
|
|
|
Product |
|
$ |
669,212 |
|
|
$ |
712,462 |
|
|
$ |
1,239,141 |
|
|
$ |
1,123,727 |
|
Installations and services |
|
|
68,405 |
|
|
|
70,081 |
|
|
|
146,663 |
|
|
|
147,086 |
|
Total sales |
|
|
737,617 |
|
|
|
782,543 |
|
|
|
1,385,804 |
|
|
|
1,270,813 |
|
Cost and expenses: |
|
|
|
|
|
|
|
|
Cost of product |
|
|
466,267 |
|
|
|
492,334 |
|
|
|
885,360 |
|
|
|
766,928 |
|
Cost of installations and services |
|
|
68,311 |
|
|
|
70,136 |
|
|
|
144,854 |
|
|
|
144,184 |
|
(Increase) decrease in the fair value of derivative
instruments |
|
|
3,022 |
|
|
|
(17,615 |
) |
|
|
20,658 |
|
|
|
(4,212 |
) |
Delivery and branch expenses |
|
|
95,942 |
|
|
|
107,486 |
|
|
|
193,878 |
|
|
|
196,475 |
|
Depreciation and amortization expenses |
|
|
7,626 |
|
|
|
8,081 |
|
|
|
15,463 |
|
|
|
16,529 |
|
General and administrative expenses |
|
|
6,698 |
|
|
|
5,902 |
|
|
|
13,554 |
|
|
|
12,578 |
|
Finance charge income |
|
|
(1,764 |
) |
|
|
(1,026 |
) |
|
|
(3,083 |
) |
|
|
(1,538 |
) |
Operating income |
|
|
91,515 |
|
|
|
117,245 |
|
|
|
115,120 |
|
|
|
139,869 |
|
Interest expense, net |
|
|
(4,963 |
) |
|
|
(2,729 |
) |
|
|
(9,237 |
) |
|
|
(4,787 |
) |
Amortization of debt issuance costs |
|
|
(258 |
) |
|
|
(237 |
) |
|
|
(587 |
) |
|
|
(476 |
) |
Income before income taxes |
|
|
86,294 |
|
|
|
114,279 |
|
|
|
105,296 |
|
|
|
134,606 |
|
Income tax expense |
|
|
24,253 |
|
|
|
32,900 |
|
|
|
29,716 |
|
|
|
38,738 |
|
Net income |
|
$ |
62,041 |
|
|
$ |
81,379 |
|
|
$ |
75,580 |
|
|
$ |
95,868 |
|
General Partner's interest in net income |
|
|
562 |
|
|
|
697 |
|
|
|
684 |
|
|
|
819 |
|
Limited Partners' interest in net income |
|
$ |
61,479 |
|
|
$ |
80,682 |
|
|
$ |
74,896 |
|
|
$ |
95,049 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per unit data (Basic and Diluted): |
|
|
|
|
|
|
|
|
Net income available to limited partners |
|
$ |
1.72 |
|
|
$ |
2.14 |
|
|
$ |
2.09 |
|
|
$ |
2.49 |
|
Dilutive impact of theoretical distribution of earnings |
|
|
0.30 |
|
|
|
0.39 |
|
|
|
0.35 |
|
|
|
0.44 |
|
Basic and diluted income per Limited Partner Unit: |
|
$ |
1.42 |
|
|
$ |
1.75 |
|
|
$ |
1.74 |
|
|
$ |
2.05 |
|
|
|
|
|
|
|
|
|
|
Weighted average number of Limited Partner units outstanding(Basic
and Diluted) |
|
|
35,653 |
|
|
|
37,634 |
|
|
|
35,786 |
|
|
|
38,218 |
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL INFORMATIONSTAR GROUP, L.P.
AND SUBSIDIARIES |
|
RECONCILIATION OF EBITDA AND ADJUSTED
EBITDA(Unaudited) |
|
|
|
Three MonthsEnded March 31, |
(in thousands) |
|
|
2023 |
|
|
|
2022 |
|
Net income |
|
$ |
62,041 |
|
|
$ |
81,379 |
|
Plus: |
|
|
|
|
Income tax expense |
|
|
24,253 |
|
|
|
32,900 |
|
Amortization of debt issuance costs |
|
|
258 |
|
|
|
237 |
|
Interest expense, net |
|
|
4,963 |
|
|
|
2,729 |
|
Depreciation and amortization |
|
|
7,626 |
|
|
|
8,081 |
|
EBITDA |
|
|
99,141 |
|
|
|
125,326 |
|
(Increase) / decrease in the fair value of derivative
instruments |
|
|
3,022 |
|
|
|
(17,615 |
) |
Adjusted EBITDA |
|
|
102,163 |
|
|
|
107,711 |
|
Add / (subtract) |
|
|
|
|
Income tax expense |
|
|
(24,253 |
) |
|
|
(32,900 |
) |
Interest expense, net |
|
|
(4,963 |
) |
|
|
(2,729 |
) |
Provision for losses on accounts receivable |
|
|
3,722 |
|
|
|
2,455 |
|
Increase in accounts receivables |
|
|
(9,600 |
) |
|
|
(86,269 |
) |
Decrease (increase) in inventories |
|
|
40,326 |
|
|
|
(1,660 |
) |
Decrease in customer credit balances |
|
|
(27,068 |
) |
|
|
(36,409 |
) |
Change in deferred taxes |
|
|
(11,155 |
) |
|
|
5,229 |
|
Change in other operating assets and liabilities |
|
|
9,736 |
|
|
|
4,996 |
|
Net cash provided by (used in) operating activities |
|
$ |
78,908 |
|
|
$ |
(39,576 |
) |
Net cash used in investing activities |
|
$ |
(2,013 |
) |
|
$ |
(6,469 |
) |
Net cash (used in) provided by financing activities |
|
$ |
(77,401 |
) |
|
$ |
42,488 |
|
|
|
|
|
|
|
|
|
|
|
Home heating oil and propane gallons sold |
|
|
121,100 |
|
|
|
148,900 |
|
Other petroleum products |
|
|
33,200 |
|
|
|
36,300 |
|
Total all products |
|
|
154,300 |
|
|
|
185,200 |
|
|
|
|
|
|
SUPPLEMENTAL INFORMATIONSTAR GROUP, L.P.
AND SUBSIDIARIES |
|
|
|
RECONCILIATION OF EBITDA AND ADJUSTED
EBITDA(Unaudited) |
|
|
|
|
|
Six MonthsEnded March 31, |
|
(in thousands) |
|
|
2023 |
|
|
|
2022 |
|
|
Net income |
|
$ |
75,580 |
|
|
$ |
95,868 |
|
|
Plus: |
|
|
|
|
|
Income tax expense |
|
|
29,716 |
|
|
|
38,738 |
|
|
Amortization of debt issuance costs |
|
|
587 |
|
|
|
476 |
|
|
Interest expense, net |
|
|
9,237 |
|
|
|
4,787 |
|
|
Depreciation and amortization |
|
|
15,463 |
|
|
|
16,529 |
|
|
EBITDA |
|
|
130,583 |
|
|
|
156,398 |
|
|
(Increase) / decrease in the fair value of derivative
instruments |
|
|
20,658 |
|
|
|
(4,212 |
) |
|
Adjusted EBITDA |
|
|
151,241 |
|
|
|
152,186 |
|
|
Add / (subtract) |
|
|
|
|
|
Income tax expense |
|
|
(29,716 |
) |
|
|
(38,738 |
) |
|
Interest expense, net |
|
|
(9,237 |
) |
|
|
(4,787 |
) |
|
Provision for losses on accounts receivable |
|
|
4,768 |
|
|
|
2,167 |
|
|
Increase in accounts receivables |
|
|
(124,764 |
) |
|
|
(165,063 |
) |
|
Decrease (increase) in inventories |
|
|
11,609 |
|
|
|
(18,048 |
) |
|
Decrease in customer credit balances |
|
|
(41,768 |
) |
|
|
(50,913 |
) |
|
Change in deferred taxes |
|
|
(12,379 |
) |
|
|
4,545 |
|
|
Change in other operating assets and liabilities |
|
|
36,413 |
|
|
|
13,210 |
|
|
Net cash used in operating activities |
|
$ |
(13,833 |
) |
|
$ |
(105,441 |
) |
|
Net cash used in investing activities |
|
$ |
(4,099 |
) |
|
$ |
(13,503 |
) |
|
Net cash provided by financing activities |
|
$ |
25,397 |
|
|
$ |
131,859 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home heating oil and propane gallons sold |
|
|
210,300 |
|
|
|
235,900 |
|
|
Other petroleum products |
|
|
68,800 |
|
|
|
75,600 |
|
|
Total all products |
|
|
279,100 |
|
|
|
311,500 |
|
|
|
|
|
|
|
|
CONTACT: |
|
Star Group, L.P.Investor Relations203/328-7310 |
Chris WittyDarrow Associates646/438-9385 or
cwitty@darrowir.com |
Star (NYSE:SGU)
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