Star Group, L.P. (the "Company" or "Star") (NYSE:SGU), a home
energy distributor and services provider, today announced financial
results for its fiscal 2020 first quarter, the three month period
ended December 31, 2019.
For the fiscal 2020 first quarter, Star reported
a 4.9 percent decrease in total revenue to $508.9
million compared with revenue of $535.0 million in
the prior-year period, primarily due to a 4.3 percent decline in
total volume sold as well as lower wholesale per-gallon product
costs.
The volume of home heating oil and propane sold
during the fiscal 2020 first quarter decreased by 6.2 million
gallons, or 5.5 percent, to 107.1 million gallons, as the
additional volume provided by acquisitions was more than offset by
warmer temperatures, net customer attrition and other factors.
Temperatures in Star's geographic areas of operation for the fiscal
2020 first quarter were 2.4 percent warmer than during the fiscal
2019 first quarter and 2.3 percent warmer than normal, as reported
by the National Oceanic and Atmospheric Administration.
Net income increased by $25.4 million,
to $27.8 million, largely due to a non-cash favorable
change in the fair value of derivative instruments of $37.5
million. During the first quarter of fiscal 2020, a non-cash gain
of $6.4 million was recorded as product costs increased;
conversely, during the first quarter of fiscal 2019, a non-cash
charge of $31.1 million was recorded as product
costs declined.
Adjusted EBITDA increased by $0.2 million,
or 0.5 percent, to $45.1 million. While acquisitions provided
$2.8 million of Adjusted EBITDA, Adjusted EBITDA in the base
business declined by $2.6 million as the impact of lower volume
sold – reflecting net customer attrition and slightly warmer
weather – and a $1.1 million increase in the amount due under the
Company’s weather hedge program more than offset a slight increase
in home heating oil and propane per gallon margins and lower
operating expenses. During the weather hedge period (November
1-December 31, 2019), colder temperatures necessitated a charge of
$3.0 million, even though temperatures for the entire first quarter
were 2.4% warmer year-over-year due to October 2019 being more than
30% warmer than October 2018. However, warmer temperatures in
January, 2020 have resulted in a complete reversal of this charge
under the guidelines of the weather hedge.
“Fiscal 2020 has already brought with it some
interesting weather trends, challenges, and opportunities for the
Company,” said Jeff Woosnam, Star Group’s President and Chief
Executive Officer. “While November and December were cold enough to
necessitate a charge against our weather hedge contract, the warmer
temperatures for the entire quarter resulted in lower demand.
However, we continued our focus on increasing operating efficiency
and customer retention. I’m proud of the many steps taken over the
past year to improve service and reduce costs, which resulted in
$12.3 million of lower operating expenses in the base business – a
huge accomplishment for the Company. At the same time, we completed
one small acquisition that brought with it approximately one
million gallons of annualized volume, and we are assessing other
potential transactions that may be attractive to the Company. While
January started off warmer than last year, we remain prepared for
normal, fluctuating weather patterns as we proceed through the rest
of the heating season.”
As noted previously, on December 4, 2019 the
Company entered into a fifth amended and restated revolving credit
facility agreement with a bank syndicate that enables the Company
to borrow up to $300 million ($450 million during the heating
season) on a revolving line of credit and provides for a $130
million five-year senior secured term loan, up from
$100 million prior to the fifth amendment. Proceeds from the
new term loan were used to repay the outstanding balance of the
existing term loan of $90 million and $40 million of the revolving
credit facility. The new credit facility allows for greater
financial flexibility, particularly with regard to potential
acquisitions.
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, net
other income, 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 analytical tools
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 tomorrow, February 4, 2020.
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 energy provider specializing in the
sale of home heating oil and propane to residential and commercial
customers primarily within the Northeast, Central and Southeast
United States. The Company also sells gasoline and diesel fuel as
well as installs, maintains, and repairs various heating and air
conditioning equipment; to a lesser extent, it provides these
ancillary services outside its product customer base, including
service contracts for natural gas and other heating systems. Star
is the nation's largest retail distributor of home heating oil
based upon sales volume. 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 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 future governmental regulations, including climate
change, environmental, health and safety regulations; the ability
to attract and retain employees; customer credit worthiness;
counterparty credit worthiness; potential cyber-attacks; 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, 2019. 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
CONDENSED CONSOLIDATED BALANCE SHEETS |
|
|
|
December 31, |
|
September 30, |
|
|
|
2019 |
|
|
|
2019 |
|
(in thousands) |
|
(unaudited) |
|
|
ASSETS |
|
|
Current assets |
|
|
|
|
Cash and cash equivalents |
|
$ |
14,542 |
|
|
$ |
4,899 |
|
Receivables, net of allowance of $8,499 and $8,378,
respectively |
|
|
205,038 |
|
|
|
120,245 |
|
Inventories |
|
|
80,261 |
|
|
|
64,788 |
|
Fair asset value of derivative instruments |
|
|
1,247 |
|
|
|
— |
|
Prepaid expenses and other current assets |
|
|
38,909 |
|
|
|
36,898 |
|
Total current assets |
|
|
339,997 |
|
|
|
226,830 |
|
Property and equipment, net |
|
|
96,512 |
|
|
|
98,239 |
|
Operating lease right-of-use assets |
|
|
103,492 |
|
|
|
— |
|
Goodwill |
|
|
244,574 |
|
|
|
244,574 |
|
Intangibles, net |
|
|
103,537 |
|
|
|
107,688 |
|
Restricted cash |
|
|
250 |
|
|
|
250 |
|
Captive insurance collateral |
|
|
62,703 |
|
|
|
58,490 |
|
Deferred charges and other assets, net |
|
|
18,083 |
|
|
|
16,635 |
|
Total assets |
|
$ |
969,148 |
|
|
$ |
752,706 |
|
LIABILITIES AND PARTNERS’ CAPITAL |
|
|
|
|
Current liabilities |
|
|
|
|
Accounts payable |
|
$ |
47,302 |
|
|
$ |
33,973 |
|
Revolving credit facility borrowings |
|
|
112,688 |
|
|
|
24,000 |
|
Fair liability value of derivative instruments |
|
|
1,893 |
|
|
|
8,262 |
|
Current maturities of long-term debt |
|
|
9,750 |
|
|
|
9,000 |
|
Current portion of operating lease liabilities |
|
|
20,202 |
|
|
|
— |
|
Accrued expenses and other current liabilities |
|
|
132,837 |
|
|
|
120,839 |
|
Unearned service contract revenue |
|
|
70,087 |
|
|
|
61,213 |
|
Customer credit balances |
|
|
52,766 |
|
|
|
68,270 |
|
Total current liabilities |
|
|
447,525 |
|
|
|
325,557 |
|
Long-term debt |
|
|
119,525 |
|
|
|
120,447 |
|
Long-term operating lease liabilities |
|
|
88,707 |
|
|
|
— |
|
Deferred tax liabilities, net |
|
|
21,655 |
|
|
|
20,116 |
|
Other long-term liabilities |
|
|
20,838 |
|
|
|
25,746 |
|
Partners’ capital |
|
|
|
|
|
|
|
|
Common unitholders |
|
|
289,268 |
|
|
|
279,709 |
|
General partner |
|
|
(1,991 |
) |
|
|
(1,968 |
) |
Accumulated other comprehensive loss, net of taxes |
|
|
(16,379 |
) |
|
|
(16,901 |
) |
Total partners’ capital |
|
|
270,898 |
|
|
|
260,840 |
|
Total liabilities and partners’ capital |
|
$ |
969,148 |
|
|
$ |
752,706 |
|
|
|
|
|
|
STAR GROUP, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS |
|
|
|
Three Months Ended December 31, |
(in thousands, except per unit data -
unaudited) |
|
|
2019 |
|
|
|
2018 |
|
Sales: |
|
|
|
|
Product |
|
$ |
432,688 |
|
|
$ |
458,707 |
|
Installations and services |
|
|
76,257 |
|
|
|
76,320 |
|
Total sales |
|
|
508,945 |
|
|
|
535,027 |
|
Cost and expenses: |
|
|
|
|
|
|
|
|
Cost of product |
|
|
287,673 |
|
|
|
306,226 |
|
Cost of installations and services |
|
|
73,669 |
|
|
|
74,317 |
|
(Increase) decrease in the fair value of derivative
instruments |
|
|
(6,417 |
) |
|
|
31,039 |
|
Delivery and branch expenses |
|
|
96,726 |
|
|
|
102,673 |
|
Depreciation and amortization expenses |
|
|
9,050 |
|
|
|
7,745 |
|
General and administrative expenses |
|
|
6,506 |
|
|
|
7,815 |
|
Finance charge income |
|
|
(713 |
) |
|
|
(851 |
) |
Operating income |
|
|
42,451 |
|
|
|
6,063 |
|
Interest expense, net |
|
|
(2,679 |
) |
|
|
(2,516 |
) |
Amortization of debt issuance costs |
|
|
(235 |
) |
|
|
(259 |
) |
Income before income taxes |
|
|
39,537 |
|
|
|
3,288 |
|
Income tax expense |
|
|
11,782 |
|
|
|
973 |
|
Net income |
|
$ |
27,755 |
|
|
$ |
2,315 |
|
General Partner’s interest in net income |
|
|
192 |
|
|
|
15 |
|
Limited Partners’ interest in net income |
|
$ |
27,563 |
|
|
$ |
2,300 |
|
|
|
|
|
|
Per unit data (Basic and Diluted): |
|
|
|
|
Net income available to limited partners |
|
$ |
0.58 |
|
|
$ |
0.04 |
|
Dilutive impact of theoretical distribution of earnings under FASB
ASC 260-10-45-60 |
|
|
0.09 |
|
|
|
— |
|
Basic and diluted income per Limited Partner Unit: |
|
$ |
0.49 |
|
|
$ |
0.04 |
|
|
|
|
|
|
Weighted average number of Limited Partner units outstanding (Basic
and Diluted) |
|
|
47,266 |
|
|
|
52,905 |
|
|
|
|
|
|
SUPPLEMENTAL INFORMATION STAR GROUP,
L.P. AND SUBSIDIARIES |
|
RECONCILIATION OF EBITDA AND ADJUSTED EBITDA
(Unaudited) |
|
|
|
Three Months Ended December 31, |
(in thousands) |
|
|
2019 |
|
|
|
2018 |
|
Net income |
|
$ |
27,755 |
|
|
$ |
2,315 |
|
Plus: |
|
|
|
|
|
|
|
|
Income tax expense |
|
|
11,782 |
|
|
|
973 |
|
Amortization of debt issuance cost |
|
|
235 |
|
|
|
259 |
|
Interest expense, net |
|
|
2,679 |
|
|
|
2,516 |
|
Depreciation and amortization |
|
|
9,050 |
|
|
|
7,745 |
|
EBITDA |
|
|
51,501 |
|
|
|
13,808 |
|
(Increase) / decrease in the fair value of derivative
instruments |
|
|
(6,417 |
) |
|
|
31,039 |
|
Adjusted EBITDA |
|
|
45,084 |
|
|
|
44,847 |
|
Add / (subtract) |
|
|
|
|
|
|
|
|
Income tax expense |
|
|
(11,782 |
) |
|
|
(973 |
) |
Interest expense, net |
|
|
(2,679 |
) |
|
|
(2,516 |
) |
Provision for losses on accounts receivable |
|
|
1,010 |
|
|
|
1,529 |
|
Increase in accounts receivables |
|
|
(85,745 |
) |
|
|
(95,743 |
) |
Increase in inventories |
|
|
(15,427 |
) |
|
|
(20,187 |
) |
Decrease in customer credit balances |
|
|
(15,898 |
) |
|
|
(14,120 |
) |
Change in deferred taxes |
|
|
1,336 |
|
|
|
(616 |
) |
Change in other operating assets and liabilities |
|
|
32,510 |
|
|
|
24,888 |
|
Net cash used in operating activities |
|
$ |
(51,591 |
) |
|
$ |
(62,891 |
) |
Net cash used in investing activities |
|
$ |
(7,663 |
) |
|
$ |
(8,112 |
) |
Net cash provided by financing activities |
|
$ |
68,897 |
|
|
$ |
80,261 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home heating oil and propane gallons sold |
|
|
107,100 |
|
|
|
113,300 |
|
Other petroleum products |
|
|
41,400 |
|
|
|
41,900 |
|
Total all products |
|
|
148,500 |
|
|
|
155,200 |
|
|
|
|
|
|
|
|
|
|
CONTACT: |
|
Star Group, L.P.Investor Relations 203/328-7310 |
Chris WittyDarrow Associates646/438-9385 or
cwitty@darrowir.com |
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