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 third quarter ended June 30, 2023.
Three Months Ended June 30, 2023
Compared to the Three Months Ended June 30, 2022For the
fiscal 2023 third quarter, Star reported a 31.7 percent decline in
revenue, to $300.1 million, compared with $439.1 million in the
prior-year period, reflecting a decrease in total volume sold and a
decrease in average selling prices.
The volume of home heating oil and propane sold
during the fiscal 2023 third quarter decreased by 10.6 million
gallons, or 26.2 percent, to 30.1 million gallons due to the impact
of warmer weather, net customer attrition and other factors.
Temperatures in Star's geographic areas of operation for the fiscal
2023 third quarter were 12.3 percent warmer than during the fiscal
2022 third quarter and 19.4 percent warmer than normal, as reported
by the National Oceanic and Atmospheric Administration.
Star’s net loss increased by $13.3 million in
the quarter, to $23.9 million, primarily due an increase in
Adjusted EBITDA loss of $11.8 million, an unfavorable change in the
fair value of derivative instruments of $6.6 million and a $0.8
million increase in interest expense, partially offset by a $5.5
million increase in income tax benefit.
Third quarter Adjusted EBITDA loss increased by
$11.8 million, to $22.9 million, compared to the three months ended
June 30, 2022, as the decline in home heating oil and propane
volume more than offset an increase in per gallon margins.
“While the weather this quarter was much warmer
than anticipated, we have maintained our focus on customer
retention and providing excellent service,” said Jeff Woosnam, Star
Group’s President and Chief Executive Officer. “Year-to-date,
temperatures were the third warmest on record over the past 123
years in the New York City metropolitan area, impacting overall
results. However, we are in a very strong position from a liquidity
standpoint given that product costs are down approximately $0.60
per gallon year-over-year. In addition, we have approximately $57
million in cash on the balance sheet, as well as approximately $218
million of availability under our bank agreement to fund growth,
and a modest leverage ratio in a year that’s been extremely mild.
We are making the most of the non-heating season – investigating
possible acquisitions, working on home HVAC repairs and upgrades,
controlling operating expenses, and preparing for colder days
ahead. As we near the end of fiscal 2023, we believe the Company is
well positioned for whatever weather comes our way.”
Nine Months Ended June 30, 2023 Compared
to the Nine Months Ended June 30, 2022For the nine months
ended June 30, 2023, Star reported nearly flat revenue
year-over-year of $1.7 billion, reflecting a decrease in total
volume sold, nearly offset by an increase in selling prices in
response to higher wholesale product costs.
The volume of home heating oil and propane sold
during the first nine months of fiscal 2023 decreased by 36.3
million gallons, or 13.1 percent, to 240.4 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 7.7 percent warmer than during the prior-year
period and 16.3 percent warmer than normal, as reported by the
National Oceanic and Atmospheric Administration.
Star’s net income declined by $33.6 million for
the first nine months of fiscal 2023, to $51.7 million, primarily
due to an unfavorable change in the fair value of derivative
instruments of $31.5 million, lower Adjusted EBITDA of $12.8
million and a $5.2 million increase in interest expense, partially
offset by a $14.6 million decrease in income tax expense.
Year-to-date Adjusted EBITDA decreased by $12.8
million, to $128.3 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.
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, August 3, 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, including alternative methods for heating and cooling
residences. 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 |
|
|
|
June 30, |
|
September 30, |
(in
thousands) |
|
2023 |
|
2022 |
ASSETS |
|
(unaudited) |
|
|
Current assets |
|
|
|
|
Cash and cash equivalents |
|
$ |
57,146 |
|
|
$ |
14,620 |
|
Receivables, net of allowance of $12,551 and $7,755,
respectively |
|
|
139,301 |
|
|
|
138,252 |
|
Inventories |
|
|
53,590 |
|
|
|
83,557 |
|
Fair asset value of derivative instruments |
|
|
— |
|
|
|
16,823 |
|
Prepaid expenses and other current assets |
|
|
28,680 |
|
|
|
32,016 |
|
Assets held for sale |
|
|
— |
|
|
|
2,995 |
|
Total current assets |
|
|
278,717 |
|
|
|
288,263 |
|
Property and equipment, net |
|
|
103,498 |
|
|
|
107,744 |
|
Operating lease right-of-use assets |
|
|
89,840 |
|
|
|
93,435 |
|
Goodwill |
|
|
254,354 |
|
|
|
254,110 |
|
Intangibles, net |
|
|
73,272 |
|
|
|
84,510 |
|
Restricted cash |
|
|
250 |
|
|
|
250 |
|
Captive insurance collateral |
|
|
68,351 |
|
|
|
66,662 |
|
Deferred charges and other assets, net |
|
|
16,068 |
|
|
|
17,501 |
|
Total assets |
|
$ |
884,350 |
|
|
$ |
912,475 |
|
LIABILITIES AND PARTNERS' CAPITAL |
|
|
|
|
Current liabilities |
|
|
|
|
Accounts payable |
|
$ |
29,010 |
|
|
$ |
49,061 |
|
Revolving credit facility borrowings |
|
|
198 |
|
|
|
20,276 |
|
Fair liability value of derivative instruments |
|
|
10,398 |
|
|
|
183 |
|
Current maturities of long-term debt |
|
|
16,500 |
|
|
|
12,375 |
|
Current portion of operating lease liabilities |
|
|
17,617 |
|
|
|
17,211 |
|
Accrued expenses and other current liabilities |
|
|
135,267 |
|
|
|
125,561 |
|
Unearned service contract revenue |
|
|
63,446 |
|
|
|
62,858 |
|
Customer credit balances |
|
|
78,315 |
|
|
|
93,555 |
|
Total current liabilities |
|
|
350,751 |
|
|
|
381,080 |
|
Long-term debt |
|
|
135,394 |
|
|
|
151,709 |
|
Long-term operating lease liabilities |
|
|
77,323 |
|
|
|
81,385 |
|
Deferred tax liabilities, net |
|
|
15,731 |
|
|
|
25,620 |
|
Other long-term liabilities |
|
|
16,342 |
|
|
|
14,766 |
|
Partners’ capital |
|
|
|
|
Common unitholders |
|
|
307,199 |
|
|
|
277,177 |
|
General partner |
|
|
(4,103 |
) |
|
|
(3,656 |
) |
Accumulated other comprehensive loss, net of taxes |
|
|
(14,287 |
) |
|
|
(15,606 |
) |
Total partners’ capital |
|
|
288,809 |
|
|
|
257,915 |
|
Total liabilities and partners’ capital |
|
$ |
884,350 |
|
|
$ |
912,475 |
|
|
|
|
|
|
|
STAR GROUP,
L.P. AND SUBSIDIARIESCONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS |
|
|
|
Three MonthsEnded June 30, |
|
Nine Months Ended June 30, |
(in
thousands, except per unit data - unaudited) |
|
2023 |
|
2022 |
|
2023 |
|
2022 |
|
|
|
|
|
|
|
|
|
Sales: |
|
|
|
|
|
|
|
|
Product |
|
$ |
223,565 |
|
|
$ |
358,236 |
|
|
$ |
1,462,706 |
|
|
$ |
1,481,963 |
|
Installations and services |
|
|
76,556 |
|
|
|
80,865 |
|
|
|
223,219 |
|
|
|
227,951 |
|
Total sales |
|
|
300,121 |
|
|
|
439,101 |
|
|
|
1,685,925 |
|
|
|
1,709,914 |
|
Cost and
expenses: |
|
|
|
|
|
|
|
|
Cost of product |
|
|
169,097 |
|
|
|
291,236 |
|
|
|
1,054,457 |
|
|
|
1,058,164 |
|
Cost of installations and services |
|
|
66,596 |
|
|
|
70,560 |
|
|
|
211,450 |
|
|
|
214,744 |
|
(Increase) decrease in the fair value of derivative
instruments |
|
|
(1,036 |
) |
|
|
(7,669 |
) |
|
|
19,622 |
|
|
|
(11,881 |
) |
Delivery and branch expenses |
|
|
83,075 |
|
|
|
83,914 |
|
|
|
276,953 |
|
|
|
280,389 |
|
Depreciation and amortization expenses |
|
|
7,684 |
|
|
|
8,067 |
|
|
|
23,147 |
|
|
|
24,596 |
|
General and administrative expenses |
|
|
6,065 |
|
|
|
6,251 |
|
|
|
19,619 |
|
|
|
18,829 |
|
Finance charge income |
|
|
(1,774 |
) |
|
|
(1,762 |
) |
|
|
(4,857 |
) |
|
|
(3,300 |
) |
Operating income (loss) |
|
|
(29,586 |
) |
|
|
(11,496 |
) |
|
|
85,534 |
|
|
|
128,373 |
|
Interest
expense, net |
|
|
(3,365 |
) |
|
|
(2,635 |
) |
|
|
(12,602 |
) |
|
|
(7,422 |
) |
Amortization
of debt issuance costs |
|
|
(245 |
) |
|
|
(222 |
) |
|
|
(832 |
) |
|
|
(698 |
) |
Income (loss) before income taxes |
|
$ |
(33,196 |
) |
|
$ |
(14,353 |
) |
|
$ |
72,100 |
|
|
$ |
120,253 |
|
Income tax
expense (benefit) |
|
|
(9,290 |
) |
|
|
(3,766 |
) |
|
|
20,426 |
|
|
|
34,972 |
|
Net income (loss) |
|
$ |
(23,906 |
) |
|
$ |
(10,587 |
) |
|
$ |
51,674 |
|
|
$ |
85,281 |
|
General Partner’s interest in net income (loss) |
|
|
(216 |
) |
|
|
(93 |
) |
|
|
468 |
|
|
|
726 |
|
Limited
Partners’ interest in net income (loss) |
|
$ |
(23,690 |
) |
|
$ |
(10,494 |
) |
|
$ |
51,206 |
|
|
$ |
84,555 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per unit
data (Basic and Diluted): |
|
|
|
|
|
|
|
|
Net income
(loss) available to limited partners |
|
$ |
(0.67 |
) |
|
$ |
(0.29 |
) |
|
$ |
1.43 |
|
|
$ |
2.24 |
|
Dilutive
impact of theoretical distribution of earnings |
|
|
— |
|
|
|
— |
|
|
|
0.20 |
|
|
|
0.36 |
|
Basic and
diluted income (loss) per Limited Partner Unit: |
|
$ |
(0.67 |
) |
|
$ |
(0.29 |
) |
|
$ |
1.23 |
|
|
$ |
1.88 |
|
|
|
|
|
|
|
|
|
|
Weighted
average number of Limited Partner units outstanding (Basic and
Diluted) |
|
|
35,603 |
|
|
|
36,781 |
|
|
|
35,725 |
|
|
|
37,739 |
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL
INFORMATIONSTAR GROUP, L.P. AND
SUBSIDIARIESRECONCILIATION OF EBITDA AND ADJUSTED
EBITDA(Unaudited) |
|
|
|
Three Months Ended June 30, |
(in
thousands) |
|
2023 |
|
2022 |
Net loss |
|
$ |
(23,906 |
) |
|
$ |
(10,587 |
) |
Plus: |
|
|
|
|
Income tax benefit |
|
|
(9,290 |
) |
|
|
(3,766 |
) |
Amortization of debt issuance costs |
|
|
245 |
|
|
|
222 |
|
Interest expense, net |
|
|
3,365 |
|
|
|
2,635 |
|
Depreciation and amortization |
|
|
7,684 |
|
|
|
8,067 |
|
EBITDA |
|
|
(21,902 |
) |
|
|
(3,429 |
) |
(Increase) / decrease in the fair value of derivative
instruments |
|
|
(1,036 |
) |
|
|
(7,669 |
) |
Adjusted EBITDA |
|
|
(22,938 |
) |
|
|
(11,098 |
) |
Add / (subtract) |
|
|
|
|
Income tax benefit |
|
|
9,290 |
|
|
|
3,766 |
|
Interest expense, net |
|
|
(3,365 |
) |
|
|
(2,635 |
) |
Provision for losses on accounts receivable |
|
|
3,742 |
|
|
|
3,097 |
|
Decrease in accounts receivables |
|
|
116,224 |
|
|
|
72,459 |
|
Decrease (increase) in inventories |
|
|
18,142 |
|
|
|
(1,924 |
) |
Increase in customer credit balances |
|
|
26,283 |
|
|
|
12,416 |
|
Change in deferred taxes |
|
|
2,095 |
|
|
|
3,292 |
|
Change in other operating assets and liabilities |
|
|
(32,925 |
) |
|
|
(5,365 |
) |
Net cash provided by operating activities |
|
$ |
116,548 |
|
|
$ |
74,008 |
|
Net cash used in investing activities |
|
$ |
(1,481 |
) |
|
$ |
(11,267 |
) |
Net cash used in financing activities |
|
$ |
(80,006 |
) |
|
$ |
(71,459 |
) |
|
|
|
|
|
|
|
|
|
|
Home heating oil and propane gallons sold |
|
|
30,100 |
|
|
|
40,700 |
|
Other petroleum products |
|
|
35,900 |
|
|
|
38,100 |
|
Total all products |
|
|
66,000 |
|
|
|
78,800 |
|
|
|
|
|
|
|
SUPPLEMENTAL
INFORMATIONSTAR GROUP, L.P. AND
SUBSIDIARIESRECONCILIATION OF EBITDA AND ADJUSTED
EBITDA(Unaudited) |
|
|
|
Nine Months Ended June 30, |
(in
thousands) |
|
2023 |
|
2022 |
Net income |
|
$ |
51,674 |
|
|
$ |
85,281 |
|
Plus: |
|
|
|
|
Income tax expense |
|
|
20,426 |
|
|
|
34,972 |
|
Amortization of debt issuance costs |
|
|
832 |
|
|
|
698 |
|
Interest expense, net |
|
|
12,602 |
|
|
|
7,422 |
|
Depreciation and amortization |
|
|
23,147 |
|
|
|
24,596 |
|
EBITDA |
|
|
108,681 |
|
|
|
152,969 |
|
(Increase) / decrease in the fair value of derivative
instruments |
|
|
19,622 |
|
|
|
(11,881 |
) |
Adjusted EBITDA |
|
|
128,303 |
|
|
|
141,088 |
|
Add / (subtract) |
|
|
|
|
Income tax expense |
|
|
(20,426 |
) |
|
|
(34,972 |
) |
Interest expense, net |
|
|
(12,602 |
) |
|
|
(7,422 |
) |
Provision for losses on accounts receivable |
|
|
8,510 |
|
|
|
5,264 |
|
Increase in accounts receivables |
|
|
(8,540 |
) |
|
|
(92,604 |
) |
Decrease (increase) in inventories |
|
|
29,751 |
|
|
|
(19,972 |
) |
Decrease in customer credit balances |
|
|
(15,485 |
) |
|
|
(38,497 |
) |
Change in deferred taxes |
|
|
(10,284 |
) |
|
|
7,837 |
|
Change in other operating assets and liabilities |
|
|
3,488 |
|
|
|
7,845 |
|
Net cash provided by (used in) operating activities |
|
$ |
102,715 |
|
|
$ |
(31,433 |
) |
Net cash used in investing activities |
|
$ |
(5,580 |
) |
|
$ |
(24,770 |
) |
Net cash (used in) provided by financing activities |
|
$ |
(54,609 |
) |
|
$ |
60,400 |
|
|
|
|
|
|
|
|
|
|
|
Home heating oil and propane gallons sold |
|
|
240,400 |
|
|
|
276,700 |
|
Other petroleum products |
|
|
104,700 |
|
|
|
113,700 |
|
Total all products |
|
|
345,100 |
|
|
|
390,400 |
|
|
|
|
|
|
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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