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Star Gas Partners, L.P. Reports Fiscal 2013 Third Quarter Results

STAMFORD, Conn., Aug. 7, 2013 (GLOBE NEWSWIRE) -- Star Gas Partners, L.P. (the "Partnership" or "Star") (NYSE:SGU), a home energy distributor and services provider specializing in heating oil, today announced financial results for its fiscal 2013 third quarter and the nine-month period ended June 30, 2013.

Three Months Ended June 30, 2013 Compared to Three Months Ended June 30, 2012

For the fiscal 2013 third quarter Star reported a 12.9 percent increase in total revenue to $262.5 million, compared with $232.5 million in the prior-year period. The higher revenue was primarily due to an increase in home heating oil and propane volume, which rose by 7.6 million gallons, or 21.7 percent, to 42.7 million gallons, as the impact of colder temperatures and the additional volume provided by acquisitions more than offset the impact of net customer attrition, conservation and other factors. Temperatures in Star's geographic areas of operation for the fiscal 2013 third quarter were 27.4 percent colder than the fiscal 2012 third quarter and 4.1 percent warmer than normal, as reported by the National Oceanic and Atmospheric Administration.

During the fiscal 2013 third quarter, Star's net loss decreased by $4.2 million to $7.6 million largely due to the impact of a favorable change in the fair value of derivative instruments.

The Adjusted EBITDA loss decreased by $0.8 million to $3.4 million during the fiscal 2013 third quarter as the impact of colder temperatures and higher heating oil and propane per-gallon margins more than offset the impact of net customer attrition, conservation and other factors.

"We were pleased with the favorable results this quarter, reflecting both colder weather as well as our ongoing expansion initiatives," said Dan Donovan, Star Gas Partners' Chief Executive Officer. "While volume climbed 21.7 percent due to cooler temperatures, our installation and service revenue rose nearly six percent as we continued to focus on broadening our offerings. We also remained focused on organic growth within our propane operations.

"As previously noted, we recently closed on two acquisitions in the New York area and are now in active discussions with a number of other potential opportunities. We also acquired 1.7 million common units this quarter as part of our ongoing unit repurchase program. In addition, following the end of the quarter, Star's Board of Directors authorized the repurchase of an additional 1.9 million units under our current repurchase plan, restoring the balance available for purchase to 3.0 million units. Since starting our unit repurchase initiative several years ago, we have acquired a total of 17.8 million units – testimony to our strong belief in Star's future and the importance of enhancing unitholder value."

Nine Months Ended June 30, 2013 Compared to Nine Months Ended June 30, 2012

For the nine months ended June 30, 2013 Star reported an 18.2 percent increase in total revenue to $1.6 billion, versus $1.3 billion in the prior-year period. The higher revenue was primarily due to an increase in home heating oil and propane volume, which rose by 47.5 million gallons, or 18.5 percent, to 304.2 million gallons, as the impact of colder temperatures and the additional volume provided by acquisitions more than offset the impact of net customer attrition, conservation and other factors. Temperatures in Star's geographic areas of operation for the first nine months of fiscal 2013 were 22.3 percent colder than the prior-year's comparable period and 4.1 percent warmer than normal, as reported by the National Oceanic and Atmospheric Administration.

Net income increased by $12.2 million to $43.8 million as the impact of colder weather on operating results was partially offset by the impact of an unfavorable non-cash change in the fair value of derivative instruments of $5.1 million. In addition, net income for the nine months ended June 30, 2012 was positively impacted by a $12.5 million benefit recorded under Star's weather hedge contract.

Adjusted EBITDA increased by $25.5 million, or 34.0 percent, to $100.3 million as the impact of 22.3 percent colder temperatures, acquisitions, and the favorable impact of the storm "Sandy" on motor fuel sales and service and installation revenue more than offset the volume decline in the base business attributable to net customer attrition, conservation and other factors such as the impact of Sandy on home heating oil and propane volume. Deliveries of home heating oil and propane were less than expected for certain customers who were without power for several weeks subsequent to Sandy, and Star's operating costs also increased due to this storm. In addition, during the nine months ended June 30, 2012 the Partnership recorded a $12.5 million benefit under its weather hedge contract due to the abnormally warm weather in fiscal 2012. During the nine months ended June 30, 2013 the Partnership did not record a similar benefit under its weather hedge contract.

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, 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 ability to generate cash sufficient to pay interest on our indebtedness and to make distributions to our partners;
  • our operating performance and return on invested capital as compared to those of other companies in the retail distribution of refined petroleum products, without regard to financing methods and capital structure; 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 each of EBITDA and Adjusted EBITDA has its limitations as an analytical tool, should not be considered in isolation and should be viewed 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 tomorrow, August 8, 2013, at 11:00 a.m. Eastern Time. The conference call dial-in number is 888-335-0893 or 970-315-0470 (for international callers). A webcast is also available at www.star-gas.com/events.cfm and www.vcall.com.

About Star Gas Partners, L.P.

Star Gas Partners, L.P. is the nation's largest retail distributor of home heating oil, based upon sales volume, operating throughout the Northeast and Mid-Atlantic. 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, 2012 and under the heading "Risk Factors" in our Quarterly Report on Form 10-Q (the "Form 10-Q") for the fiscal Quarter ended June 30, 2013. 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 and Form 10-K. 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.

STAR GAS PARTNERS, L.P. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 30, September 30,
(in thousands) 2013 2012
(unaudited)
ASSETS
Current assets
Cash and cash equivalents $ 44,382 $ 108,091
Receivables, net of allowance of $11,225 and $6,886, respectively 152,558 88,267
Inventories 49,084 47,465
Fair asset value of derivative instruments -- 5,004
Current deferred tax assets, net 18,425 25,844
Prepaid expenses and other current assets 22,545 26,848
Total current assets 286,994 301,519
Property and equipment, net 49,673 52,608
Goodwill 201,119 201,103
Intangibles, net 68,464 74,712
Deferred charges and other assets, net 7,883 9,405
Total assets $ 614,133 $ 639,347
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities
Accounts payable $ 15,122 $ 22,583
Fair liability value of derivative instruments 4,081 453
Accrued expenses and other current liabilities 98,544 78,518
Unearned service contract revenue 41,436 40,799
Customer credit balances 33,335 85,976
Total current liabilities 192,518 228,329
Long-term debt 124,434 124,357
Long-term deferred tax liabilities, net 6,120 8,436
Other long-term liabilities 14,293 18,080
Partners' capital
Common unitholders 302,208 286,819
General partner 151 97
Accumulated other comprehensive loss, net of taxes (25,591) (26,771)
Total partners' capital 276,768 260,145
Total liabilities and partners' capital $ 614,133 $ 639,347

(tables follow)

STAR GAS PARTNERS, 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) 2013 2012 2013 2012
Sales:
Product $ 208,862 $ 181,751 $ 1,396,281 $ 1,172,628
Installations and service 53,662 50,725 167,907 150,914
Total sales 262,524 232,476 1,564,188 1,323,542
Cost and expenses:
Cost of product 163,515 146,034 1,091,918 921,931
Cost of installations and service 44,102 39,892 152,661 136,617
(Increase) decrease in the fair value of derivative instruments 1,910 11,225 6,428 1,362
Delivery and branch expenses 53,798 46,760 205,507 176,230
Depreciation and amortization expenses 4,328 4,608 13,007 12,066
General and administrative expenses 4,557 4,008 13,809 13,927
Operating income (loss) (9,686) (20,051) 80,858 61,409
Interest expense (3,547) (3,435) (10,998) (10,716)
Interest income 1,696 1,538 4,978 3,474
Amortization of debt issuance costs (415) (486) (1,325) (1,145)
Income (loss) before income taxes (11,952) (22,434) 73,513 53,022
Income tax expense (benefit) (4,364) (10,645) 29,670 21,398
Net income (loss) $ (7,588) $ (11,789) $ 43,843 $ 31,624
General Partner's interest in net income (loss) (41) (62) 237 166
Limited Partners' interest in net income (loss) $ (7,547) $ (11,727) $ 43,606 $ 31,458
Per unit data (Basic and Diluted):
Net income (loss) available to limited partners $ (0.13) $ (0.19) $ 0.73 $ 0.51
Dilutive impact of theoretical distribution of earnings under FASB ASC 260-10-45-60 -- -- 0.10 0.05
Limited Partner's interest in net income (loss) under FASB ASC 260-10-45-60 $ (0.13) $ (0.19) $ 0.63 $ 0.46
Weighted average number of Limited Partner units outstanding (Basic and Diluted) 59,370 61,024 59,918 62,236
SUPPLEMENTAL INFORMATION
STAR GAS PARTNERS, L.P. AND SUBSIDIARIES
RECONCILIATION OF EBITDA AND ADJUSTED EBITDA
Three Months Ended
June 30,
(in thousands) 2013 2012
Net loss $ (7,588) $ (11,789)
Plus:
Income tax benefit (4,364) (10,645)
Amortization of debt issuance cost 415 486
Interest expense, net 1,851 1,897
Depreciation and amortization 4,328 4,608
EBITDA (5,358) (15,443)
(Increase) / decrease in the fair value of derivative instruments 1,910 11,225
Adjusted EBITDA (3,448) (4,218)
Add / (subtract)
Income tax expense 4,364 10,645
Interest expense, net (1,851) (1,897)
Provision for losses on accounts receivable 1,611 615
Decrease in accounts receivables 136,636 89,323
(Increase) decrease in inventories (7,334) 8,952
Increase in customer credit balances 9,670 20,605
Change in deferred taxes (4,359) (9,273)
Decrease in weather hedge contract receivable -- 12,500
Change in other operating assets and liabilities (25,550) (10,393)
Net cash provided by operating activities $ 109,739 $ 116,859
Net cash used in investing activities $ (1,551) $ (12,971)
Net cash used in financing activities $ (74,374) $ (37,709)
Home heating oil and propane gallons sold 42,700 35,100
SUPPLEMENTAL INFORMATION
STAR GAS PARTNERS, L.P. AND SUBSIDIARIES
RECONCILIATION OF EBITDA AND ADJUSTED EBITDA
Nine Months Ended
June 30,
(in thousands) 2013 2012
Net income $ 43,843 $ 31,624
Plus:
Income tax expense 29,670 21,398
Amortization of debt issuance cost 1,325 1,145
Interest expense, net 6,020 7,242
Depreciation and amortization 13,007 12,066
EBITDA 93,865 73,475
(Increase) / decrease in the fair value of derivative instruments 6,428 1,362
Adjusted EBITDA 100,293 74,837
Add / (subtract)
Income tax expense (29,670) (21,398)
Interest expense, net (6,020) (7,242)
Provision for losses on accounts receivable 7,814 6,864
Increase in accounts receivables (71,929) (21,831)
(Increase) decrease in inventories (1,585) 45,067
Decrease in customer credit balances (52,719) (15,697)
Change in deferred taxes 4,292 13,657
Change in other operating assets and liabilities 17,894 6,842
Net cash provided by (used in) operating activities $ (31,630) $ 81,099
Net cash used in investing activities $ (3,644) $ (41,515)
Net cash used in financing activities $ (28,435) $ (35,141)
Home heating oil and propane gallons sold 304,200 256,700

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