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Star Group, L.P. Reports Fiscal 2017 Fourth Quarter and Full Year Results

By GlobeNewswire,  December 06, 2017, 04:15:00 PM EDT


STAMFORD, Conn., Dec. 06, 2017 (GLOBE NEWSWIRE) -- Star Group, L.P. (the "Company" or "Star") (NYSE:SGU), a home energy distributor and services provider, today filed its fiscal 2017 annual report on Form 10-K with the SEC and announced financial results for the fiscal 2017 fourth quarter and year ended September 30, 2017.

Three Months Ended September 30, 2017 Compared to Three Months Ended September 30, 2016

For the fiscal 2017 fourth quarter, Star reported a 12.0 percent increase in total revenue to $181.6 million, compared with $162.1 million in the prior-year period. The revenue growth reflects higher selling prices - in response to an increase in wholesale product costs of 24.4 cents per gallon - greater service and installation sales, and an increase in home heating oil and propane volume sold. Home heating oil and propane volume sold rose by 2.0 million gallons, or 9.7 percent, to 22.6 million gallons largely due to the additional sales volume provided from acquisitions. Home heating oil and propane margins declined by approximately 4.3 cents per gallon in the base business (excluding acquisitions) compared to the fourth quarter of fiscal 2016 largely due to lower per gallon margins on sales to price-protected customers which were impacted, in part, by the increase in wholesale product costs.

During the fiscal 2017 fourth quarter, Star's net loss decreased by $1.3 million to a loss of $17.7 million, as the favorable impact of a non-cash change in the fair value of derivative instruments of $11.1 million more than offset $7.8 million of higher delivery and branch expense, including an increase in insurance costs of $2.9 million compared to the prior year period.

The Company's Adjusted EBITDA loss for the fiscal 2017 fourth quarter increased by $8.0 million, to a loss of $29.2 million, primarily due to higher operating expenses in the base business of $6.1 million, an Adjusted EBITDA loss of $0.7 million attributable to acquisitions, and the impact from lower per gallon margins of $1.0 million. Operating expenses in the base business rose due to higher insurance costs of $2.7 million and an increase in spending attributable to additional staffing in the areas of information technology, customer service, operations management, and sales and marketing. Legal and professional fees were also $0.7 million higher in the fourth quarter of 2017 versus the prior-year period, primarily related to expenses associated with the Company's election to be treated as a corporation, instead of a partnership, for federal income tax purposes (commonly referred to as a "check-the-box" election) and amendments to the Company's partnership agreement to give effect to such change in income tax classification, including expenses associated with holding a special unitholder meeting to seek unitholder approval of the check-the-box election and corresponding amendments to the Company's partnership agreement. Adjusted EBITDA is a non-GAAP financial measure (see reconciliation below) that should not be considered as an alternative to net income (as an indicator of operating performance) or as an alternative to cash flow (as a measure of liquidity or ability to service debt obligations) but provides additional information for evaluating the Company's ability to pay distributions.

Fiscal Year Ended September 30, 2017 Compared to Fiscal Year Ended September 30, 2016

Star reported a 14.0 percent increase in total revenue to $1.3 billion, versus $1.2 billion in the prior-year period, due to higher selling prices - in response to higher wholesale product costs of 26.4 cents per gallon - an increase in total volume sold of 4.1 percent, and higher air conditioning installation and service sales.

Home heating oil and propane volume sold increased by 14.4 million gallons, or 4.8 percent, to 316.9 million gallons, as the additional sales volume provided from acquisitions and colder weather was only partially offset by net customer attrition and other factors. Temperatures in Star's geographic areas of operation for fiscal 2017 were 7.0 percent colder than last year's comparable period but 12.4 percent warmer than normal as reported by the National Oceanic and Atmospheric Administration.

Net income decreased by $18.0 million, or 40.1 percent, to $26.9 million as the positive impact from colder temperatures and acquisitions was more than offset by an unfavorable, non-cash change in the fair value of derivative instruments of $16.0 million, the absence of a $12.5 million credit as was recorded in fiscal 2016 under the Company's weather hedge contract, and an increase in spending largely due to additional staffing in the areas of information technology, customer service, operations management, and sales and marketing and other expense increases. 

Adjusted EBITDA decreased by $14.7 million, or 15.4 percent, to $81.0 million as the impact of higher home heating oil and propane volume sold and slightly better home heating oil and propane per gallon margins were more than offset by the absence of a $12.5 million credit as was recorded in fiscal 2016 under the Company's weather hedge contract, lower service and installations gross profit, and additional costs related to staffing in the areas of information technology, customer service, operations management, and sales and marketing and other expense increases.

"We accomplished a good deal this fiscal year, and not just operationally," said Steven J. Goldman, Star Group's Chief Executive Officer. "Total heating oil and propane volume sold rose to 317 million gallons, boosted by slightly colder weather, while we invested in critical areas such as information technology, service, and sales to help increase client retention as well as support our organic growth initiatives. Net customer attrition improved to 1.5 percent from 5.1 percent in fiscal 2016 - reflecting both higher gains as well as lower losses. I'm really proud of this track record as we head into the busy winter season.

"In addition, we recently announced that our unitholders approved the Company's check-the-box election at a special unitholder meeting held on October 25, 2017. This new income tax classification will allow the Company to save on administrative expense going forward while potentially broadening its base of interested institutional investors. We also changed our name to Star Group, L.P. to better reflect the full scope of products and services we offer. Overall, we believe these developments position us well for the future - one in which Star provides a growing complement of home comfort solutions to its customers across the U.S."

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's management will host a conference call and webcast tomorrow, December 7, 2017, at 11:00 a.m. Eastern Time. The conference call dial-in number is 1-877-327-7688 or 1-412-317-5112 (for international callers). A webcast is also available at http://www.stargrouplp.com/events-and-presentations.

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 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 Company's SEC filings at www.sec.gov and by visiting Star's website at www.stargrouplp.com.

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, 2017. 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-K. 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
         
         
    September 30,   September 30,
(in thousands)     2017       2016  
         
ASSETS        
Current assets        
Cash and cash equivalents   $ 52,458     $ 139,188  
Receivables, net of allowance of $5,540 and $4,419, respectively     96,603       78,650  
Inventories     59,596       45,894  
Fair asset value of derivative instruments     5,932       3,987  
Prepaid expenses and other current assets     26,652       27,139  
Total current assets     241,241       294,858  
         
Property and equipment, net     79,673       70,410  
Goodwill     225,915       212,760  
Intangibles, net     105,218       97,656  
Deferred tax assets, net     -       5,353  
Restricted cash     250       -  
Investments     11,777       -  
Deferred charges and other assets, net     9,843       11,074  
Total assets   $ 673,917     $ 692,111  
         
LIABILITIES AND PARTNERS' CAPITAL        
Current liabilities        
Accounts payable   $ 26,739     $ 25,690  
Fair liability value of derivative instruments     289       2,285  
Current maturities of long-term debt     10,000       16,200  
Accrued expenses and other current liabilities     108,449       103,855  
Unearned service contract revenue     60,133       56,971  
Customer credit balances     66,723       84,921  
Total current liabilities     272,333       289,922  
         
Long-term debt     65,717       75,441  
Deferred tax liabilities, net     6,140       -  
Other long-term liabilities     23,659       25,255  
         
Partners' capital        
Common unitholders     325,762       322,771  
General partner     (929 )     (516 )
Accumulated other comprehensive loss, net of taxes     (18,765 )     (20,762 )
Total partners' capital     306,068       301,493  
Total liabilities and partners' capital   $ 673,917     $ 692,111  
         

  

 
STAR GROUP, L.P. AND SUBSIDIARIES 
CONSOLIDATED STATEMENTS OF OPERATIONS 
                   
    Three Months Ended   Twelve Months Ended  
    September 30,   September 30,  
(in thousands, except per unit data)     2017       2016       2017       2016    
    (unaudited)   (unaudited)          
Sales:                  
Product   $ 114,769     $ 97,495     $ 1,065,076     $ 911,014    
Installations and services     66,815       64,569       258,479       250,324    
Total sales     181,584       162,064       1,323,555       1,161,338    
Cost and expenses:                  
Cost of product     82,584       66,297       675,386       539,831    
Cost of installations and services     56,533       53,968       239,670       229,010    
(Increase) decrease in the fair value of derivative instruments     (9,219 )     1,854       (2,193 )     (18,217 )  
Delivery and branch expenses     65,547       57,738       306,534       276,493    
Depreciation and amortization expenses     7,177       6,571       27,882       26,530    
General and administrative expenses     6,854       5,841       24,998       23,366    
Finance charge income     (766 )     (599 )     (4,054 )     (3,079 )  
Operating income (loss)     (27,126 )     (29,606 )     55,332       87,404    
Interest expense, net     (1,657 )     (2,004 )     (6,775 )     (7,485 )  
Amortization of debt issuance costs     (309 )     (313 )     (1,281 )     (1,247 )  
Income (loss) before income taxes     (29,092 )     (31,923 )     47,276       78,672    
Income tax expense (benefit)     (11,345 )     (12,828 )     20,376       33,738    
Net income (loss)   $ (17,747 )   $ (19,095 )   $ 26,900     $ 44,934    
General Partner's interest in net income (loss)     (103 )     (110 )     156       252    
Limited Partners' interest in net income (loss)   $ (17,644 )   $ (18,985 )   $ 26,744     $ 44,682    
                   
Per unit data (Basic and Diluted):                  
Net income (loss) available to limited partners   $ (0.32 )   $ (0.34 )   $ 0.48     $ 0.78    
Dilutive impact of theoretical distribution of earnings under FASB ASC 260-10-45-60     -       -       0.02       0.08    
Limited Partner's interest in net income (loss) under FASB ASC 260-10-45-60   $ (0.32 )   $ (0.34 )   $ 0.46     $ 0.70    
                   
                   
Weighted average number of Limited Partner units outstanding (Basic and Diluted)     55,888       56,382       55,888       57,022    
                   

 

SUPPLEMENTAL INFORMATION 



 STAR GROUP, L.P. AND SUBSIDIARIES

RECONCILIATION OF EBITDA AND ADJUSTED EBITDA



(Unaudited)
     
    Three Months Ended

September 30,  
(in thousands)      2017       2016  
         
Net loss   $   (17,747 )   $   (19,095 )
Plus:        
Income tax benefit       (11,345 )       (12,828 )
Amortization of debt issuance cost        309         313  
Interest expense, net        1,657         2,004  
Depreciation and amortization        7,177         6,571  
EBITDA       (19,949 )       (23,035 )
         
(Increase) / decrease in the fair value of derivative instruments     (9,219 )       1,854  
Adjusted EBITDA       (29,168 )       (21,181 )
         
Add / (subtract)        
Income tax benefit       11,345         12,828  
Interest expense, net        (1,657 )       (2,004 )
Recovery of losses on accounts receivable       (622 )       (499 )
Decrease in accounts receivables       20,680         10,318  
Increase in inventories       (14,359 )       (3,423 )
Increase in customer credit balances       22,672         8,516  
Change in deferred taxes       5,683         (3,629 )
Change in other operating assets and liabilities       (16,726 )       (9,154 )
Net cash used in operating activities   $   (2,152 )   $   (8,228 )
         
Net cash used in investing activities   $   (31,162 )   $   (3,875 )
         
Net cash used in financing activities   $   (8,802 )   $   (19,865 )
         
Home heating oil and propane gallons sold       22,600         20,600  
Other petroleum products       28,700         27,900  
Total all products       51,300         48,500  
         



         
SUPPLEMENTAL INFORMATION



STAR GROUP, L.P. AND SUBSIDIARIES

RECONCILIATION OF EBITDA AND ADJUSTED EBITDA



(Unaudited)
         
    Twelve Months Ended

September 30,  
(in thousands)      2017       2016  
         
Net income   $ 26,900     $ 44,934  
Plus:        
Income tax expense     20,376       33,738  
Amortization of debt issuance cost     1,281       1,247  
Interest expense, net     6,775       7,485  
Depreciation and amortization     27,882       26,530  
EBITDA     83,214       113,934  
         
(Increase) / decrease in the fair value of derivative instruments   (2,193 )     (18,217 )
Adjusted EBITDA     81,021       95,717  
         
Add / (subtract)        
Income tax expense     (20,376 )     (33,738 )
Interest expense, net     (6,775 )     (7,485 )
Provision (recovery) for losses on accounts receivable     1,639       (639 )
(Increase) decrease in accounts receivables     (19,844 )     10,965  
(Increase) decrease in inventories     (10,598 )     9,979  
(Decrease) increase in customer credit balances     (23,085 )     6,490  
Change in deferred taxes     10,134       9,670  
Change in other operating assets and liabilities     8,942       10,998  
Net cash provided by operating activities   $ 21,058     $ 101,957  
         
Net cash used in investing activities   $ (66,381 )   $ (19,631 )
         
Net cash used in financing activities   $ (41,157 )   $ (43,646 )
         
Home heating oil and propane gallons sold     316,900       302,500  
Other petroleum products     112,100       109,500  
Total all products     429,000       412,000  
 

CONTACT:

Star Group

Investor Relations

203/328-7310

Chris Witty

Darrow Associates

646/438-9385 or cwitty@darrowir.com

Source: Star Group, L.P.

This article appears in: News Headlines

Referenced Stocks: SGU


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