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CST: 20/07/2019 05:11:31   

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

79 Days ago

STAMFORD, Conn., May 01, 2019 (GLOBE NEWSWIRE) -- Star Group, L.P. (the "Company" or "Star") (NYSE:SGU), a home energy distributor and services provider, today announced financial results for the fiscal 2019 second quarter and six months ended March 31, 2019.

Three Months Ended March 31, 2019 Compared to the Three Months Ended March 31, 2018
For the fiscal 2019 second quarter, Star reported a 2.3 percent increase in total revenue to $699.6 million compared with revenue of $684.0 million in the prior-year period, primarily due to higher wholesale per-gallon product costs.

The volume of home heating oil and propane sold during the fiscal 2019 second quarter decreased by 6.8 million gallons, or 3.8 percent, to 173.3 million gallons, as the impact of colder temperatures and acquisitions was more than offset by net customer attrition, a year-over-year delivery scheduling variance, and other factors. Temperatures in Star's geographic areas of operation for the fiscal 2019 second quarter were 2.9 percent colder than during the fiscal 2018 second quarter but 2.6 percent warmer than normal, as reported by the National Oceanic and Atmospheric Administration. The aforementioned delivery scheduling variance year-over-year reflects the fact that the volume of home heating oil and propane delivered in the second quarter of fiscal 2018 was positively impacted by the extremely cold weather experienced near the end of that year’s fiscal first quarter (ended December 31, 2017). Volume of other petroleum products sold in the second quarter of fiscal 2019 increased by 8.9 million gallons, or 29.6 percent, to 39.0 million, largely due to acquisitions.

Net income increased by $17.5 million, or 32.0 percent, to $72.3 million in the fiscal 2019 second quarter as a non-cash favorable change in the fair value of derivative instruments of $25.0 million more than offset a decline in Adjusted EBITDA of $5.3 million, described below. Regarding the favorable change in the fair value of derivative instruments, during the second quarter of fiscal 2019 a non-cash gain of $13.4 million was recorded while, in the second quarter of fiscal 2018, a non-cash charge of $11.6 million was recorded. The Company also benefited from a decline in its effective income tax rate to 28.8 percent for the second quarter of fiscal 2019 from 33.8 percent during the second quarter of fiscal 2018.

Adjusted EBITDA decreased by $5.3 million, or 5.1%, to $99.5 million in the fiscal 2019 second quarter as the additional Adjusted EBITDA provided by acquisitions of $3.4 million was more than offset by an $8.7 million decline in Adjusted EBITDA within the base business. The impact of colder temperatures and higher home heating oil and propane margins in the base business more than offset greater total operating expenses and the impact of the previously-described delivery scheduling volume variance, improving year-over-year Adjusted EBITDA by $0.7 million prior to the following exceptional items: i) $3.8 million due to implementation of a new revenue recognition accounting standard (the majority of which is expected to be reversed by the end of fiscal 2019); ii) $2.1 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 $0.6 million net Adjusted EBITDA loss associated with the Company’s concierge program, which was greatly curtailed this past January; and v) $1.3 million of expense tied to an increase in the amount due under Star’s weather hedge contracts.

“With a new management team now in place, I am pleased to reaffirm our commitment to being the most reputable firm in the home energy services space and providing long-term returns to our shareholders,” said Jeffrey M. Woosnam, Star Group’s President and Chief Executive Officer. “Rich Ambury, Jeff Hammond, Joe McDonald and I – along with our talented team here at Star – are ready to take the Company to the next level in terms of growth, quality service, and market presence. That said, the second quarter was negatively impacted by greater-than-expected net customer attrition due to our decision not to renew certain low-margin accounts, credit issues and, lastly, the price of home heating oil and propane. We are dedicated to limiting the loss of customers as much as possible.

“In the coming months, we will be evaluating all of Star’s operations to determine our best path forward and align the organization with core strategic objectives. While accomplishing a great deal over the past decade, we need to focus on improved business execution so that we remain the premier energy services provider we are today – strengthening customer satisfaction, reducing attrition, streamlining our operations where appropriate, and utilizing technology to effectively compete. We believe these actions will position Star to continue as a major force in the industry for years to come.”

Six Months Ended March 31, 2019 Compared to the Six Months Ended March 31, 2018
Star reported a 10.1 percent increase in total revenue to $1.2 billion compared with revenue of $1.1 billion in the prior-year period, reflecting higher wholesale per-gallon product costs and an increase in total volume sold.

The volume of home heating oil and propane sold during the first half of fiscal 2019 increased by 3.1 million gallons, or 1.1 percent, to 286.6 million gallons, as the impact of colder temperatures and acquisitions was largely offset by net customer attrition and other factors. Temperatures in Star's geographic areas of operation for the first six months of fiscal 2019 were 4.0 percent colder than during the prior year comparable period but 1.8 percent warmer than normal, as reported by the National Oceanic and Atmospheric Administration. Volume of other petroleum products sold increased by 20.2 million gallons, or 33.3 percent, to 80.9 million gallons, largely due to acquisitions.

Net income decreased by $10.3 million, or 12.1 percent, to $74.6 million as a non-cash unfavorable change in the fair value of derivative instruments of $17.4 million and a higher effective income tax rate was partially offset by an increase in Adjusted EBITDA of $12.1 million, described below. Regarding the unfavorable change in the fair value of derivative instruments, during the first half of fiscal 2019 a non-cash charge of $17.6 million was recorded versus a non-cash charge of $0.2 million during the first half of fiscal 2018. The Company also recorded a $3.7 million income tax benefit during the six months ended March 31, 2018 to reflect the impact of the Tax Cuts and Jobs Act, which lowered its effective income tax rate during that period to 23.8 percent. The effective income tax rate for the first half of fiscal 2019, in contrast, was 28.8 percent.

Adjusted EBITDA for the six months increased by $12.1 million, or 9.2 percent, to $144.3 million year-over-year. Acquisitions provided $5.1 million of the increase in Adjusted EBITDA while, in the base business, Adjusted EBITDA rose by $7.0 million. The impact of colder temperatures and higher home heating oil and propane margins in the base business more than offset greater total operating expenses, improving year-over-year Adjusted EBITDA by $17.5 million prior to the following exceptional items: i) $3.2 million due to the implementation of a new revenue recognition accounting standard (the majority of which is expected to be reversed by the end of fiscal 2019); ii) $2.6 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 $3.0 million 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 tied 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 on May 2, 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. 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.

 
(financials follow)
 
 
 
STAR GROUP, L.P. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
 
    March 31,   September 30,
    2019   2018
(in thousands)   (unaudited)    
ASSETS    
Current assets        
Cash and cash equivalents   $   16,372     $   14,531  
Receivables, net of allowance of $9,804 and $8,002, respectively       286,997         132,668  
Inventories       60,119         56,377  
Fair asset value of derivative instruments       -         17,710  
Prepaid expenses and other current assets       32,288         35,451  
Total current assets       395,776         256,737  
Property and equipment, net       89,346         87,618  
Goodwill       239,294         228,436  
Intangibles, net       89,489         98,444  
Restricted cash       250         250  
Captive insurance collateral       54,148         45,419  
Deferred charges and other assets, net       18,539         13,067  
Total assets   $   886,842     $   729,971  
LIABILITIES AND PARTNERS’ CAPITAL        
Current liabilities        
Accounts payable   $   33,459     $   35,796  
Revolving credit facility borrowings        115,000         1,500  
Fair liability value of derivative instruments       1,518         -  
Current maturities of long-term debt       10,000         7,500  
Accrued expenses and other current liabilities       157,524         116,436  
Unearned service contract revenue       63,718         60,700  
Customer credit balances       22,781         61,256  
Total current liabilities       404,000         283,188  
Long-term debt       86,857         91,780  
Deferred tax liabilities, net       15,872         21,206  
Other long-term liabilities       24,692         24,012  
Partners’ capital        
Common unitholders       373,748         329,129  
General partner       (1,146 )       (1,303 )
Accumulated other comprehensive loss, net of taxes       (17,181 )       (18,041 )
Total partners’ capital       355,421         309,785  
Total liabilities and partners’ capital   $   886,842     $   729,971  
         

 

 
STAR GROUP, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
 
    Three Months
Ended March 31,
  Six Months
Ended March 31,
(in thousands, except per unit data - unaudited)   2019   2018   2019   2018
Sales:                
Product   $   637,400     $   622,962     $   1,096,107     $   989,696  
Installations and services       62,182         61,069         138,502         131,169  
Total sales       699,582         684,031         1,234,609         1,120,865  
Cost and expenses:                
Cost of product       415,639         403,293         721,865         646,073  
Cost of installations and services       65,394         64,659         139,711         134,214  
(Increase) decrease in the fair value of derivative instruments       (13,401 )       11,609         17,638         209  
Delivery and branch expenses       110,684         106,605         213,357         197,809  
Depreciation and amortization expenses       7,858         7,703         15,603         15,444  
General and administrative expenses       9,849         6,221         17,664         12,872  
Finance charge income       (1,443 )       (1,532 )       (2,294 )       (2,295 )
Operating income       105,002         85,473         111,065         116,539  
Interest expense, net       (3,194 )       (2,383 )       (5,710 )       (4,470 )
Amortization of debt issuance costs       (244 )       (307 )       (503 )       (616 )
Income before income taxes       101,564         82,783         104,852         111,453  
Income tax expense       29,239         28,005         30,212         26,493  
Net income   $   72,325     $   54,778     $   74,640     $   84,960  
General Partner’s interest in net income       454         319         469         494  
Limited Partners’ interest in net income   $   71,871     $   54,459     $   74,171     $   84,466  
                 
Basic and diluted income per Limited Partner Unit:   $   1.15     $   0.81     $   1.19     $   1.26  
Weighted average number of Limited Partner units outstanding:                
Basic and Diluted       51,427         55,642         52,174         55,766  
                 


 
SUPPLEMENTAL INFORMATION
STAR GROUP, L.P. AND SUBSIDIARIES
 
RECONCILIATION OF EBITDA AND ADJUSTED EBITDA
(Unaudited)
 
    Three Months
Ended March 31,
(in thousands)   2019   2018
Net income   $   72,325     $   54,778  
Plus:        
Income tax expense       29,239         28,005  
Amortization of debt issuance cost       244         307  
Interest expense, net       3,194         2,383  
Depreciation and amortization       7,858         7,703  
EBITDA       112,860         93,176  
(Increase) / decrease in the fair value of derivative instruments       (13,401 )       11,609  
Adjusted EBITDA       99,459         104,785  
Add / (subtract)        
Income tax expense       (29,239 )       (28,005 )
Interest expense, net       (3,194 )       (2,383 )
Provision for losses on accounts receivable       3,439         3,154  
Increase in accounts receivables       (63,506 )       (74,337 )
Decrease in inventories       16,446         11,778  
Decrease in customer credit balances       (24,356 )       (27,890 )
Change in deferred taxes       (8,719 )       29,994  
Change in other operating assets and liabilities       30,200         (14,135 )
Net cash provided by operating activities   $   20,530     $   2,961  
Net cash used in investing activities   $   (19,198 )   $   (3,326 )
Net cash (used in) provided by financing activities   $   (8,749 )   $   14,655  
         
         
Home heating oil and propane gallons sold       173,300         180,100  
Other petroleum products       39,000         30,100  
  Total all products       212,300         210,200  
         

 

 
SUPPLEMENTAL INFORMATION
STAR GROUP, L.P. AND SUBSIDIARIES
 
RECONCILIATION OF EBITDA AND ADJUSTED EBITDA
(Unaudited)
 
    Six Months
Ended March 31,
(in thousands)   2019   2018
Net income   $   74,640     $   84,960  
Plus:        
Income tax expense       30,212         26,493  
Amortization of debt issuance cost       503         616  
Interest expense, net       5,710         4,470  
Depreciation and amortization       15,603         15,444  
EBITDA       126,668         131,983  
(Increase) / decrease in the fair value of derivative instruments       17,638         209  
Adjusted EBITDA       144,306         132,192  
Add / (subtract)        
Income tax expense       (30,212 )       (26,493 )
Interest expense, net       (5,710 )       (4,470 )
Provision for losses on accounts receivable       4,968         3,465  
Increase in accounts receivables       (159,249 )       (170,530 )
Increase in inventories       (3,741 )       (108 )
Decrease in customer credit balances       (38,476 )       (42,184 )
Change in deferred taxes       (9,335 )       27,254  
Change in other operating assets and liabilities       55,088         20,599  
Net cash used in operating activities   $   (42,361 )   $   (60,275 )
Net cash used in investing activities   $   (27,310 )   $   (41,217 )
Net cash provided by financing activities   $   71,512     $   84,463  
         
         
Home heating oil and propane gallons sold       286,600         283,500  
Other petroleum products       80,900         60,700  
  Total all products       367,500         344,200  
         

CONTACT:
Star Group, L.P.
Investor Relations 
203/328-7310 

Chris Witty 
Darrow Associates
646/438-9385 or cwitty@darrowir.com 

Source: Star Group, L.P.

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