August 1, 2016 - 4:01 PM EDT
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Star Gas Partners, L.P. Reports Fiscal 2016 Third Quarter Results

STAMFORD, Conn., Aug. 01, 2016 (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 2016 third quarter and the nine-month period ended June 30, 2016.

Three Months Ended June 30, 2016 Compared to Three Months Ended June 30, 2015
Star reported an 11.2 percent decrease in total revenue to $218.2 million, compared with $245.6 million in the prior-year period, largely due to a decline in per gallon wholesale product costs.

Home heating oil and propane volume sold increased by 0.2 million gallons, to 44.7 million gallons, as the additional volume provided from acquisitions largely mitigated the impact of net customer attrition in the base business. While temperatures in Star's geographic areas of operation for the fiscal 2016 third quarter were 31.9 percent colder than the fiscal 2015 third quarter and 2.4 percent colder than normal, this did not lead to a significant increase in home heating oil and propane volume sold as only a portion of Star’s customer base normally receives deliveries during the spring.

Star’s net loss decreased by $5.1 million, or 61.3 percent, to $3.2 million primarily due to the after tax impact of a favorable change in the fair value of derivative instruments of $5.9 million as well as lower interest expense of $1.8 million.

Adjusted EBITDA loss declined by $1.5 million, or 16.3 percent, to $7.8 million primarily due to lower service costs and operating expenses in the base business, partially offset by the decrease in volume attributable to net customer attrition for the twelve months ended June 30, 2016. The net impact of acquisitions on Adjusted EBITDA loss was minimal.

"The third quarter, a non-heating period for Star, is typically one in which we begin to focus on plans for the upcoming fiscal year through training, business development and performance improvement initiatives,” said Steven J. Goldman, Star Gas Partners’ Chief Executive Officer. “Fiscal 2016 has been no different. We continued to look at attractive acquisition candidates and consummated one transaction that helped expand our footprint along the East Coast. As we approach the end of our fiscal year, I’m happy with how well the Partnership has performed even in an unusually warm nine-month period.”

Nine Months Ended June 30, 2016 Compared to Nine Months Ended June 30, 2015
Star reported a 33.7 percent decrease in total revenue to $1.0 billion, versus $1.5 billion last year, due to a decline in wholesale product costs of 37.0 percent and a decrease in total volume sold of 17.0 percent.

Home heating oil and propane volume sold decreased by 79.8 million gallons, or 22.1 percent, to 281.9 million gallons, as the additional volume provided by acquisitions was more than offset by the impact of warmer temperatures and net customer attrition in the base business for the twelve months ended June 30, 2016. Temperatures in Star's geographic areas of operation were 21.6 percent warmer than the prior-year's comparable period and 17.8 percent warmer than normal, as reported by the National Oceanic and Atmospheric Administration.

Net income declined by $18.9 million, or 22.7 percent, to $64.0 million, as the warmer weather more than offset higher per gallon home heating oil and propane margins and the impact of acquisitions.

Adjusted EBITDA decreased by $46.7 million, or 28.6 percent, to $116.9 million as the impact of higher home heating oil and propane per gallon margins, acquisitions, lower operating expenses and lower service and installation costs in the base business as well as a $12.5 million credit recorded under Star's weather insurance contract were more than offset by the impact on Adjusted EBITDA of the decline in home heating oil and propane volume sold attributable to 21.6 percent warmer weather.

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, multi-employer pension plan withdrawal expense, 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 EBITDA and Adjusted EBITDA both have limitations as an analytical tool and so should not be considered 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 tomorrow, August 2, 2016, at 11:00 a.m. Eastern Time. The conference call dial-in number is 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 services and sells 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 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, 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, 2015 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, 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 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.


(financials follow) 

      
 STAR GAS PARTNERS, L.P. AND SUBSIDIARIES 
 CONSOLIDATED BALANCE SHEETS 
      
      
   June 30, September 30,
(in thousands)  2016   2015 
   (unaudited)  
ASSETS    
Current assets    
 Cash and cash equivalents  $  171,156  $  100,508 
 Receivables, net of allowance of $5,589 and $6,713, respectively     87,977     89,230 
 Inventories     42,451     55,671 
 Fair asset value of derivative instruments    4,260     935 
 Current deferred tax assets, net    37,460     37,832 
 Prepaid expenses and other current assets     24,183     25,135 
   Total current assets     367,487     309,311 
          
Property and equipment, net     68,339     68,123 
Goodwill     212,676     211,045 
Intangibles, net     101,006     107,317 
Deferred charges and other assets, net     12,521     11,236 
 Total assets  $  762,029  $  707,032 
      
LIABILITIES AND PARTNERS’ CAPITAL    
Current liabilities    
 Accounts payable  $  22,680  $  25,322 
 Fair liability value of derivative instruments    927     12,819 
 Current maturities of long-term debt    15,000     10,000 
 Accrued expenses and other current liabilities    122,932     107,745 
 Unearned service contract revenue     46,088     44,419 
 Customer credit balances     76,405     78,207 
   Total current liabilities     284,032     278,512 
      
Long-term debt    80,000     90,000 
Long-term deferred tax liabilities, net    35,253     21,524 
Other long-term liabilities     25,492     27,110 
      
Partners’ capital    
 Common unitholders     358,928     312,713 
 General partner     (273)    (283)
 Accumulated other comprehensive loss, net of taxes    (21,403)    (22,544)
   Total partners’ capital     337,252     289,886 
 Total liabilities and partners’ capital  $  762,029  $  707,032 
      

 

      
 STAR GAS PARTNERS, L.P. AND SUBSIDIARIES  
 CONSOLIDATED STATEMENTS OF OPERATIONS  
          
   Three Months Ended Nine Months Ended
   June 30, June 30,
(in thousands, except per unit data - unaudited)  2016   2015   2016   2015 
          
Sales:        
 Product  $  156,229  $  184,891  $  813,519  $  1,325,907 
 Installations and services     61,965     60,713     185,755     181,223 
   Total sales     218,194     245,604     999,274     1,507,130 
Cost and expenses:                
 Cost of product     103,568     133,053     473,534     905,117 
 Cost of installations and services     53,272     52,786     175,042     173,831 
 (Increase) decrease in the fair value of derivative instruments    (11,283)    (5,415)    (20,071)    (9,756)
 Delivery and branch expenses     64,052     64,575     218,755     249,516 
 Depreciation and amortization expenses     6,468     6,204     19,959     18,579 
 General and administrative expenses     6,017     6,173     17,525     19,090 
 Finance charge income    (945)    (1,699)    (2,480)    (4,042)
   Operating income (loss)    (2,955)    (10,073)    117,010     154,795 
Interest expense, net    (1,731)    (3,491)    (5,481)    (10,767)
Amortization of debt issuance costs     (307)    (406)    (934)    (1,209)
 Income (loss) before income taxes     (4,993)    (13,970)    110,595     142,819 
Income tax expense (benefit)    (1,755)    (5,611)    46,566     59,937 
 Net income (loss) $  (3,238) $  (8,359) $  64,029  $  82,882 
   General Partner’s interest in net income (loss)    (19)    (47)    362     469 
Limited Partners’ interest in net income (loss) $  (3,219) $  (8,312) $  63,667  $  82,413 
          
 Per unit data (Basic and Diluted):        
 Net income (loss) available to limited partners $  (0.06) $  (0.15) $  1.11  $  1.44 
   Dilutive impact of theoretical distribution of earnings under
  FASB ASC 260-10-45-60 
    -      -      0.16     0.23 
 Limited Partner’s interest in net income (loss) under FASB ASC 260-10-45-60 $  (0.06) $  (0.15) $  0.95  $  1.21 
          
          
 Weighted average number of Limited Partner units outstanding (Basic and Diluted)    57,188     57,282     57,237     57,286 
          


 
SUPPLEMENTAL INFORMATION
 
STAR GAS PARTNERS, L.P. AND SUBSIDIARIES
RECONCILIATION OF EBITDA AND ADJUSTED EBITDA
 
  Three Months Ended
June 30,
(in thousands)   2016   2015 
     
Net loss $  (3,238) $  (8,359)
Plus:    
Income tax benefit    (1,755)    (5,611)
Amortization of debt issuance cost     307     406 
Interest expense, net     1,731     3,491 
Depreciation and amortization     6,468     6,204 
EBITDA    3,513     (3,869)
     
(Increase) / decrease in the fair value of derivative instruments    (11,283)    (5,415)
Adjusted EBITDA    (7,770)    (9,284)
     
Add / (subtract)    
Income tax benefit    1,755     5,611 
Interest expense, net     (1,731)    (3,491)
Provision for losses on accounts receivable    308     1,495 
Decrease in accounts receivables    38,425     127,879 
Decrease in inventories    3,159     4,110 
Increase in customer credit balances    13,191     15,714 
Change in deferred taxes    5,004     822 
Decrease in weather hedge contract receivable    12,500     -  
Change in other operating assets and liabilities    (28,891)    (50,285)
Net cash provided by operating activities $  35,950  $  92,571 
         
Net cash used in investing activities $  (2,913) $  (1,498)
         
Net cash used in financing activities $  (8,495) $  (5,552)
         
Home heating oil and propane gallons sold    44,700     44,500 
Other petroleum products    27,200     23,400 
    Total all products    71,900     67,900 
 

 

 
SUPPLEMENTAL INFORMATION
 
STAR GAS PARTNERS, L.P. AND SUBSIDIARIES
RECONCILIATION OF EBITDA AND ADJUSTED EBITDA
(Unaudited)
 
  Nine Months Ended
June 30,
(in thousands)   2016   2015 
     
Net income $  64,029  $  82,882 
Plus:    
Income tax expense    46,566     59,937 
Amortization of debt issuance cost     934     1,209 
Interest expense, net     5,481     10,767 
Depreciation and amortization     19,959     18,579 
EBITDA    136,969     173,374 
     
(Increase) / decrease in the fair value of derivative instruments    (20,071)    (9,756)
Adjusted EBITDA    116,898     163,618 
     
Add / (subtract)    
Income tax expense    (46,566)    (59,937)
Interest expense, net     (5,481)    (10,767)
Provision for losses on accounts receivable    (140)    5,062 
(Increase) decrease in accounts receivables    647     (17,730)
Decrease in inventories    13,402     12,691 
Decrease in customer credit balances    (2,026)    (26,595)
Change in deferred taxes    13,299     8,598 
Change in other operating assets and liabilities    20,152     21,231 
Net cash provided by operating activities $  110,185  $  96,171 
         
Net cash used in investing activities $  (15,756) $  (6,084)
         
Net cash used in financing activities $  (23,781) $  (16,438)
         
Home heating oil and propane gallons sold    281,900     361,700 
Other petroleum products    81,600     76,000 
    Total all products    363,500     437,700 
 
CONTACT:
Star Gas Partners
Investor Relations
203/328-7310
Chris Witty 
Darrow Associates
646/438-9385 or [email protected]

Source: GlobeNewswire (August 1, 2016 - 4:01 PM EDT)

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