U.S. Markets closed

Star Group, L.P. Reports Fiscal 2019 Third Quarter Results

STAMFORD, Conn., July 31, 2019 (GLOBE NEWSWIRE) -- Star Group, L.P. (the "Company" or "Star") (SGU), a home energy distributor and services provider, today announced financial results for the fiscal 2019 third quarter and nine months ended June 30, 2019.

Three Months Ended June 30, 2019 Compared to the Three Months Ended June 30, 2018
For the fiscal 2019 third quarter, Star reported a 13.4 percent decrease in total revenue to $283.4 million compared with revenue of $327.4 million in the prior-year period, largely due to a decline in home heating oil and propane volume sold.

The volume of home heating oil and propane sold during the fiscal 2019 third quarter decreased by 17.6 million gallons, or 32.2 percent, to 36.9 million gallons due to the impact of warmer temperatures, net customer attrition and other factors. Temperatures in Star's geographic areas of operation for the fiscal 2019 third quarter were 21.5 percent warmer than during the fiscal 2018 third quarter and 20.6 percent warmer than normal, as reported by the National Oceanic and Atmospheric Administration. Volume of other petroleum products sold increased by 6.3 million gallons, or 17.4 percent, to 42.3 million, due largely to acquisitions.

Star’s net loss rose by $15.1 million, to $23.1 million, in the fiscal 2019 third quarter due to a non-cash unfavorable change in the fair value of derivative instruments of $9.1 million and an increase in the Company’s Adjusted EBITDA loss of $11.7 million, as described below, partially offset by a higher tax benefit. During the fiscal 2019 third quarter, a $1.6 million non-cash charge was recorded related to a change in the fair value of derivative instruments versus a $7.5 million credit recorded during the third quarter of fiscal 2018.

The Adjusted EBITDA loss widened by $11.7 million, to $20.1 million, as the additional Adjusted EBITDA provided by acquisitions of $0.9 million was more than offset by a $12.6 million increase in the Adjusted EBITDA loss within the base business. The impact from lower volumes sold in the base business, due largely to warmer temperatures as well as other factors, more than offset the impact from higher home heating oil and propane margins and lower total operating expenses in the base business. Contributing to the favorable change in operating costs was a reduction in concierge expenses of $1.5 million.

“As the year progresses we continue to take a hard look at cost controls and additional efficiency improvements,” said Jeffrey M. Woosnam, Star Group’s President and Chief Executive Officer. “I’m pleased to report that Star’s team has identified areas where we can further enhance the business and overall financial results, focusing on our core capabilities. The reduction of net attrition remains at the forefront, and we are cautiously optimistic about better performance heading into fiscal 2020. We also recently completed a sizable acquisition in Maryland that brought with it roughly 29,000 customers and annual volume of 20 million gallons spread across home heating oil, propane, and motor fuel. Such transactions help strengthen our primary markets and, combined with appropriate business execution, lay the foundation for solid operating results going forward, given normal weather conditions.”

Nine Months Ended June 30, 2019 Compared to the Nine Months Ended June 30, 2018
Star reported a 4.8 percent increase in total revenue to $1.5 billion for the nine months ended June 30, 2019 compared with revenue of $1.4 billion in the prior-year period, largely due to higher average selling prices.

The volume of home heating oil and propane sold decreased by 14.4 million gallons, or 4.3 percent, to 323.6 million gallons, as the impact from acquisitions and slightly colder weather was more than offset by net customer attrition and other factors. Temperatures in Star's geographic areas of operation were 0.8 percent colder than during the prior year but 3.9 percent warmer than normal, as reported by the National Oceanic and Atmospheric Administration. Volume of other petroleum products sold increased by 26.4 million gallons, or 27.3 percent, to 123.2 million gallons, due largely to acquisitions.

Net income decreased by $25.4 million, or 33.0 percent, to $51.5 million as the impact from a non-cash unfavorable change in the fair value of derivative instruments of $26.6 million and an increase in net interest expense of $2.0 million, more than offset lower income tax expense and a slight increase in Adjusted EBITDA of $0.4 million, as described below. Regarding the non-cash change in the fair value of derivative instruments, during fiscal 2019 a non-cash charge of $19.3 million was recorded versus a non-cash credit of $7.3 million during fiscal 2018.

Adjusted EBITDA increased by $0.4 million, or 0.3 percent, to $124.2 million. Acquisitions provided $5.4 million of Adjusted EBITDA while, in the base business, Adjusted EBITDA decreased by $5.0 million. The impact of higher home heating oil and propane margins in the base business more than offset a decline in home heating oil and propane volume and an increase in total operating expenses, improving year-over-year Adjusted EBITDA by $4.5 million prior to the following items: i) $3.3 million due to the implementation of a revenue recognition accounting standard (the majority of which is expected to be reversed by the end of fiscal 2019); ii) $3.0 million of higher legal and professional expenses; iii) a charge of $1.5 million related to the discontinued use of a tank monitoring system; iv) a $1.5 million increase in the net Adjusted EBITDA loss associated with the Company’s concierge program, which was greatly curtailed this past January; and v) $0.2 million of expense related to an increase in the amount due under Star’s weather hedge contracts.

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 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 tomorrow, August 1, 2019. 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 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, 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 Information
This 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, 2018. 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.

CONTACT:    
Star Group, L.P.   Chris Witty
Investor Relations   Darrow Associates
203/328-7310   646/438-9385 or cwitty@darrowir.com
     



STAR GROUP, L.P. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

    June 30,   September 30,  
     2019    2018  
(in thousands)   (unaudited)      
ASSETS      
Current assets          
Cash and cash equivalents   $   5,717     $   14,531    
Receivables, net of allowance of $11,244 and $8,002, respectively       167,292         132,668    
Inventories       57,478         56,377    
Fair asset value of derivative instruments       -         17,710    
Prepaid expenses and other current assets       35,610         35,451    
Total current assets       266,097         256,737    
Property and equipment, net       97,468         87,618    
Goodwill       247,341         228,436    
Intangibles, net       110,322         98,444    
Restricted cash       250         250    
Captive insurance collateral       57,841         45,419    
Deferred charges and other assets, net       17,625         13,067    
Total assets   $   796,944     $   729,971    
LIABILITIES AND PARTNERS’ CAPITAL          
Current liabilities          
Accounts payable   $   28,254     $   35,796    
Revolving credit facility borrowings        70,500         1,500    
Fair liability value of derivative instruments       2,418         -    
Current maturities of long-term debt       10,000         7,500    
Accrued expenses and other current liabilities       145,558         116,436    
Unearned service contract revenue       60,560         60,700    
Customer credit balances       38,229         61,256    
Total current liabilities       355,519         283,188    
Long-term debt       84,399         91,780    
Deferred tax liabilities, net       14,069         21,206    
Other long-term liabilities       25,382         24,012    
Partners’ capital          
Common unitholders       335,958         329,129    
General partner       (1,522 )       (1,303 )  
Accumulated other comprehensive loss, net of taxes       (16,861 )       (18,041 )  
Total partners’ capital       317,575         309,785    
Total liabilities and partners’ capital   $   796,944     $   729,971    
               

 

STAR GROUP, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS


    Three Months
Ended June 30,
  Nine Months
Ended June 30,
 
(in thousands, except per unit data - unaudited)   2019   2018   2019   2018  
Sales:                  
Product   $   210,657     $   256,447     $   1,306,764     $   1,246,143    
Installations and services       72,719         70,907         211,221         202,076    
Total sales       283,376         327,354         1,517,985         1,448,219    
Cost and expenses:                  
Cost of product       155,055         186,207         876,920         832,280    
Cost of installations and services       62,130         61,770         201,841         195,984    
(Increase) decrease in the fair value of derivative instruments       1,630         (7,515 )       19,268         (7,306 )  
Delivery and branch expenses       82,669         83,312         296,026         281,121    
Depreciation and amortization expenses       8,225         7,941         23,828         23,385    
General and administrative expenses       5,472         5,894         23,136         18,766    
Finance charge income       (1,872 )       (1,438 )       (4,166 )       (3,733 )  
Operating income (loss)       (29,933 )       (8,817 )       81,132         107,722    
Interest expense, net       (2,967 )       (2,186 )       (8,677 )       (6,656 )  
Amortization of debt issuance costs       (253 )       (418 )       (756 )       (1,034 )  
Income (loss) before income taxes       (33,153 )       (11,421 )       71,699         100,032    
Income tax expense (benefit)       (10,055 )       (3,416 )       20,157         23,077    
Net income (loss)   $   (23,098 )   $   (8,005 )   $   51,542     $   76,955    
General Partner’s interest in net income (loss)       (150 )       (49 )       319         445    
Limited Partners’ interest in net income (loss)   $   (22,948 )   $   (7,956 )   $   51,223     $   76,510    
                   
Per unit data (Basic and Diluted):                  
Net income (loss) available to limited partners   $   (0.46 )   $   (0.15 )   $   1.00     $   1.39    
Dilutive impact of theoretical distribution of earnings under FASB ASC 260-10-45-60       -         -         0.14         0.21    
Limited Partner's interest in net income (loss) under FASB ASC 260-10-45-60   $   (0.46 )   $   (0.15 )   $   0.86     $   1.18    
                   
Weighted average number of Limited Partner units outstanding (Basic and Diluted)       49,943         53,938         51,431         55,157    
                       

 

SUPPLEMENTAL INFORMATION
STAR GROUP, L.P. AND SUBSIDIARIES

RECONCILIATION OF EBITDA AND ADJUSTED EBITDA
(Unaudited)

 

    Three Months
Ended June 30,
(in thousands)    2019    2018
Net loss   $   (23,098 )   $   (8,005 )
Plus:        
Income tax benefit       (10,055 )       (3,416 )
Amortization of debt issuance cost       253         418  
Interest expense, net       2,967         2,186  
Depreciation and amortization       8,225         7,941  
EBITDA loss       (21,708 )       (876 )
(Increase) / decrease in the fair value of derivative instruments       1,630         (7,515 )
Adjusted EBITDA loss       (20,078 )       (8,391 )
Add / (subtract)        
Income tax benefit       10,055         3,416  
Interest expense, net       (2,967 )       (2,186 )
Provision for losses on accounts receivable       3,532         2,222  
Decrease in accounts receivables       124,456         84,026  
Decrease in inventories       5,699         12,498  
Increase in customer credit balances       12,299         5,681  
Change in deferred taxes       (1,871 )       2,387  
Change in other operating assets and liabilities       (26,442 )       (9,359 )
Net cash provided by operating activities   $   104,683     $   90,294  
Net cash used in investing activities   $   (53,268 )   $   (23,242 )
Net cash used in financing activities   $   (62,070 )   $   (93,058 )
         
         
Home heating oil and propane gallons sold       36,900         54,500  
Other petroleum products       42,300         36,000  
Total all products       79,200         90,500  
         


SUPPLEMENTAL INFORMATION
STAR GROUP, L.P. AND SUBSIDIARIES

RECONCILIATION OF EBITDA AND ADJUSTED EBITDA
(Unaudited)

 

    Nine Months
Ended June 30,
 
(in thousands)     2019       2018    
Net income   $   51,542     $   76,955    
Plus:          
Income tax expense       20,157         23,077    
Amortization of debt issuance cost       756         1,034    
Interest expense, net       8,677         6,656    
Depreciation and amortization       23,828         23,385    
EBITDA       104,960         131,107    
(Increase) / decrease in the fair value of derivative instruments       19,268         (7,306 )  
Adjusted EBITDA       124,228         123,801    
Add / (subtract)          
Income tax expense       (20,157 )       (23,077 )  
Interest expense, net       (8,677 )       (6,656 )  
Provision for losses on accounts receivable       8,500         5,687    
Increase in accounts receivables       (34,793 )       (86,504 )  
Decrease in inventories       1,958         12,390    
Decrease in customer credit balances       (26,177 )       (36,503 )  
Change in deferred taxes       (11,206 )       29,641    
Change in other operating assets and liabilities       28,646         11,240    
Net cash provided by operating activities   $   62,322     $   30,019    
Net cash used in investing activities   $   (80,578 )   $   (64,459 )  
Net cash provided by (used in) financing activities   $   9,442     $   (8,595 )  
               
         
Home heating oil and propane gallons sold       323,600         338,000    
Other petroleum products       123,200         96,800    
Total all products       446,800         434,800    
               

 

 Source: Star Group, L.P.