Star Gas Partners, L.P. Reports Fiscal 2017 Second Quarter Results

STAMFORD, Conn., May 03, 2017 (GLOBE NEWSWIRE) -- Star Gas Partners, L.P. (the "Partnership" or "Star") (NYSE:SGU), a home energy distributor and services provider, today announced financial results for its fiscal 2017 second quarter and the six-month period ended March 31, 2017.

Three Months Ended March 31, 2017 Compared to Three Months Ended March 31, 2016
Star reported a 15.2 percent increase in total revenue to $532.1 million, compared with $462.0 million in the prior-year period, largely due to an increase in wholesale product costs of 34.0 percent.

Home heating oil and propane volume for the fiscal 2017 second quarter declined by 2.9 million gallons, or 1.9 percent, to 154.2 million gallons versus the prior-year period, as the additional volume provided by acquisitions was more than offset by net customer attrition in the base business for the twelve months ended March 31, 2017. Temperatures in Star's geographic areas of operation for the fiscal 2017 second quarter were approximately equal to the fiscal 2016 second quarter and 12.6 percent warmer than normal, as reported by the National Oceanic and Atmospheric Administration.

During the fiscal 2017 second quarter, net income decreased by $15.5 million, or 28.1 percent, to $39.7 million primarily due to a non-cash unfavorable change in the fair value of derivative instruments of $26.8 million.

Adjusted EBITDA decreased by $0.5 million, or 0.6 percent, to $88.2 million during the fiscal 2017 second quarter, as the impact of higher home heating oil and propane margins, along with acquisitions, virtually offset the decline in home heating oil and propane volume, an increase in the gross profit loss from services and installations, and increases in certain operating expenses.

"The second quarter of fiscal 2017 was one of solid performance, as the weather was nearly identical within our operating footprint year-over-year," said Steven J. Goldman, Star Gas Partners' Chief Executive Officer. "We continued to make several small acquisitions, invest in our people, and expand organically this year, while focusing on additional customer development initiatives to improve retention and our overall quality of service. With winter now largely behind us, we look forward to spending the coming months working to further broaden and diversify our core operations while managing costs to strengthen Star’s long-term financial outlook.”

Six Months Ended March 31, 2017 Compared to Six Months Ended March 31, 2016
Star reported a 17.3 percent increase in total revenue to $0.9 billion, versus $0.8 billion in the prior-year period, due to an increase in wholesale product costs of 24.3 percent and an increase in total volume of 6.2 percent.

Home heating oil and propane volume for the first half of fiscal 2017 increased by 16.5 million gallons, or 7.0 percent, to 253.7 million gallons, as the additional volume provided by colder temperatures and acquisitions was slightly offset by net customer attrition in the base business for the twelve months ended March 31, 2017. Temperatures in Star's geographic areas of operation for the first half of fiscal 2017 were 11.3 percent colder than the prior-year's comparable period and 11.9 percent warmer than normal, as reported by the National Oceanic and Atmospheric Administration.

Net income decreased by $9.3 million, or 13.8 percent, to $58.0 million as the positive impact from colder temperatures and acquisitions was more than offset by a non-cash unfavorable change in the fair value of derivative instruments of $12.7 million and the absence of a $12.5 million credit that was recorded in the first quarter of 2016 under the Partnership’s weather hedge contract.

Adjusted EBITDA decreased by $5.2 million, or 4.2 percent, to $119.4 million, as the impact of higher home heating oil and propane volume was more than offset by the absence of a $12.5 million credit that was recorded in the first quarter of 2016 under the Partnership’s weather hedge contract, higher marketing and customer service costs, lower service and installations gross profit, and lower home heating oil and propane margins.

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, 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: Star Gas management will host a conference call and webcast Thursday, May 4, 2017 at 11:00 a.m. Eastern Time. The conference call dial-in number 877-327-7688 or 412-317-5112 (for international callers). A webcast is also available at www.star-gas.com/events.cfm.

About Star Gas Partners, L.P.
Star Gas Partners, 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 Partnership also sells and services heating and air conditioning equipment to its home heating oil and propane customers and, to a lesser extent, to customers outside of its home heating oil and propane customer base. In certain of Star's marketing areas, the Partnership provides home security and plumbing services primarily to its home heating oil and propane customer base. Star also sells diesel fuel, gasoline and home heating oil on a delivery only basis. 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 Partnership's SEC filings at www.sec.gov and by visiting Star's website at www.star-gas.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 Partnership'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 Partnership 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, 2016. Important factors that could cause actual results to differ materially from the Partnership'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 Partnership or persons acting on its behalf are expressly qualified in their entirety by the Cautionary Statements. Unless otherwise required by law, the Partnership 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 GAS PARTNERS, L.P. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
March 31, September 30,
(in thousands) 2017 2016
(unaudited)
ASSETS
Current assets
Cash and cash equivalents $ 52,895 $ 139,188
Receivables, net of allowance of $6,137 and $4,419, respectively 188,594 78,650
Inventories 45,516 45,894
Fair asset value of derivative instruments - 3,987
Prepaid expenses and other current assets 26,951 27,139
Total current assets 313,956 294,858
Property and equipment, net 75,010 70,410
Goodwill 213,881 212,760
Intangibles, net 93,752 97,656
Deferred tax assets, net - 5,353
Restricted cash 250 -
Investments 11,552 -
Deferred charges and other assets, net 9,946 11,074
Total assets $ 718,347 $ 692,111
LIABILITIES AND PARTNERS’ CAPITAL
Current liabilities
Accounts payable $ 30,627 $ 25,690
Fair liability value of derivative instruments 1,754 2,285
Current maturities of long-term debt 10,000 16,200
Accrued expenses and other current liabilities 138,509 103,855
Unearned service contract revenue 58,929 56,971
Customer credit balances 31,646 84,921
Total current liabilities 271,465 289,922
Long-term debt 70,567 75,441
Deferred tax liabilities, net 2,200 -
Other long-term liabilities 25,728 25,255
Partners’ capital
Common unitholders 368,955 322,771
General partner (440) (516)
Accumulated other comprehensive loss, net of taxes (20,128) (20,762)
Total partners’ capital 348,387 301,493
Total liabilities and partners’ capital $ 718,347 $ 692,111

STAR GAS PARTNERS, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended Six Months Ended
March 31, March 31,
(in thousands, except per unit data - unaudited) 2017 2016 2017 2016
Sales:
Product $ 475,485 $ 404,340 $ 791,776 $ 657,290
Installations and services 56,567 57,685 124,394 123,790
Total sales 532,052 462,025 916,170 781,080
Cost and expenses:
Cost of product 288,941 219,864 488,534 369,966
Cost of installations and services 58,426 58,858 124,913 121,770
(Increase) decrease in the fair value of derivative instruments 12,442 (14,324) 3,891 (8,788)
Delivery and branch expenses 92,214 90,509 173,347 154,703
Depreciation and amortization expenses 6,726 6,725 13,287 13,491
General and administrative expenses 5,556 5,088 11,909 11,508
Finance charge income (1,285) (1,014) (1,980) (1,535)
Operating income 69,032 96,319 102,269 119,965
Interest expense, net (1,712) (1,891) (3,499) (3,750)
Amortization of debt issuance costs (324) (315) (636) (627)
Income before income taxes 66,996 94,113 98,134 115,588
Income tax expense 27,292 38,904 40,155 48,321
Net income $ 39,704 $ 55,209 $ 57,979 $ 67,267
General Partner’s interest in net income 233 313 338 381
Limited Partners’ interest in net income $ 39,471 $ 54,896 $ 57,641 $ 66,886
Per unit data (Basic and Diluted):
Net income available to limited partners $ 0.71 $ 0.96 $ 1.03 $ 1.17
Dilutive impact of theoretical distribution of earnings under
FASB ASC 260-10-45-60
0.12 0.17 0.16 0.19
Limited Partner’s interest in net income under FASB ASC 260-10-45-60 $ 0.59 $ 0.79 $ 0.87 $ 0.98
Weighted average number of Limited Partner units outstanding (Basic and Diluted) 55,888 57,242 55,888 57,262


SUPPLEMENTAL INFORMATION
STAR GAS PARTNERS, L.P. AND SUBSIDIARIES
RECONCILIATION OF EBITDA AND ADJUSTED EBITDA
(Unaudited)
Three Months Ended
March 31,
(in thousands) 2017 2016
Net income $ 39,704 $ 55,209
Plus:
Income tax expense 27,292 38,904
Amortization of debt issuance cost 324 315
Interest expense, net 1,712 1,891
Depreciation and amortization 6,726 6,725
EBITDA 75,758 103,044
(Increase) / decrease in the fair value of derivative instruments 12,442 (14,324)
Adjusted EBITDA 88,200 88,720
Add / (subtract)
Income tax expense (27,292) (38,904)
Interest expense, net (1,712) (1,891)
Provision for losses on accounts receivable 1,494 188
Increase in accounts receivables (34,786) (15,515)
Decrease in inventories 16,890 19,307
Decrease in customer credit balances (31,068) (25,644)
Change in deferred taxes 3,180 7,686
Change in other operating assets and liabilities 14,724 37,089
Net cash provided by operating activities $ 29,630 $ 71,036
Net cash used in investing activities $ (4,983) $ (2,045)
Net cash used in financing activities $ (8,828) $ (9,267)
Home heating oil and propane gallons sold 154,200 157,100
Other petroleum products 26,500 27,100
Total all products 180,700 184,200

SUPPLEMENTAL INFORMATION
STAR GAS PARTNERS, L.P. AND SUBSIDIARIES
RECONCILIATION OF EBITDA AND ADJUSTED EBITDA
(Unaudited)
Six Months Ended
March 31,
(in thousands) 2017 2016
Net income $ 57,979 $ 67,267
Plus:
Income tax expense 40,155 48,321
Amortization of debt issuance cost 636 627
Interest expense, net 3,499 3,750
Depreciation and amortization 13,287 13,491
EBITDA 115,556 133,456
(Increase) / decrease in the fair value of derivative instruments 3,891 (8,788)
Adjusted EBITDA 119,447 124,668
Add / (subtract)
Income tax expense (40,155) (48,321)
Interest expense, net (3,499) (3,750)
Provision (recovery) for losses on accounts receivable 1,525 (448)
Increase in accounts receivables (111,631) (37,778)
Decrease in inventories 642 10,243
Decrease in customer credit balances (53,873) (15,217)
Change in deferred taxes 7,121 8,295
Increase in weather hedge contract receivable - (12,500)
Change in other operating assets and liabilities 44,547 49,043
Net cash provided by (used in) operating activities $ (35,876) $ 74,235
Net cash used in investing activities $ (26,779) $ (12,843)
Net cash used in financing activities $ (23,388) $ (15,286)
Home heating oil and propane gallons sold 253,700 237,200
Other petroleum products 55,900 54,400
Total all products 309,600 291,600


CONTACT: Star Gas Partners Investor Relations 203/328-7310 Chris Witty Darrow Associates 646/438-9385 or cwitty@darrowir.com

Source:Star Gas Partners, L.P.