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Star Group, L.P. Reports Fiscal 2021 First Quarter Results

/EIN News/ -- STAMFORD, Conn., Feb. 03, 2021 (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 2021 first quarter ended December 31, 2020.

Three Months Ended December 31, 2020 Compared to the Three Months Ended December 31, 2019
For the fiscal 2021 first quarter, Star reported a 26.6 percent decrease in total revenue to $373.3 million compared with $508.9 million in the prior-year period, reflecting a decline in selling prices in response to lower wholesale product costs and a decrease in total volume sold.

The volume of home heating oil and propane sold during the fiscal 2021 first quarter decreased by 17.6 million gallons, or 16.4 percent, to 89.5 million gallons due to the impact of warmer weather, net customer attrition, and other factors. Temperatures in Star's geographic areas of operation for the fiscal 2021 first quarter were 13.5 percent warmer than during the fiscal 2020 first quarter and 15.5 percent warmer than normal, as reported by the National Oceanic and Atmospheric Administration.

Star’s net income rose by $10.1 million in the quarter, to $37.9 million, primarily due to a favorable change in the fair value of derivative instruments of $11.0 million, and lower depreciation and amortization expense of $1.1 million, partially offset by an increase in income tax expense of $3.0 million. 

First quarter Adjusted EBITDA improved by $0.3 million, to $45.3 million, as the impact of higher per gallon home heating oil and propane margins, $16.3 million of lower operating expenses (including a $7.0 million favorable change in the impact from the Company’s weather hedge), and a $1.1 million improvement in net service and installation profitability more than offset the impact from a decrease in volume of home heating oil and propane sold. As of December 31, 2020, Star recorded a benefit of $4.0 million under its weather hedging contract, reducing delivery and branch expense. The final benefit (if any) for fiscal 2021 may be lower or higher depending on the accumulation of actual heating degree-days recorded in the period January 1, 2021 through March 31, 2021. Temperatures recorded for January 2021 were warmer than normal.

“We began fiscal 2021 well positioned even in the face of a pandemic,” said Jeff Woosnam, Star Group’s President and Chief Executive Officer. “While the impact from COVID-19 on the heating season has been muted, our performance reflects 13.5 percent warmer weather within our footprint – dampening demand for home heating oil and propane. However, we maintained our focus on cost discipline and customer service while acquiring two propane dealers in late December that will add, in aggregate, roughly 7 million gallons of product annually. We also repurchased 2.6 million common units during the quarter as part of our ongoing unit repurchase plan. As we navigate through the remainder of fiscal 2021, we are confident in our ability to continue providing the best possible customer experience and strong bottom line results during the quarters to come.”

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, other income (loss), net, 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 the Company’s financial statements, such as investors, commercial banks and research analysts, to assess Star’s position with regard to the following:

  • compliance with certain financial covenants included in our debt agreements;
  • financial performance without regard to financing methods, capital structure, income taxes or historical cost basis;
  • 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;
  • 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 as follows:

  • EBITDA and Adjusted EBITDA do not reflect 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, working capital;
  • EBITDA and Adjusted EBITDA do not reflect the cash necessary to make payments of interest or principal on 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 tomorrow, February 4, 2021. 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. We believe 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 and Mid-Atlantic 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 severity and duration of the novel coronavirus, or COVID-19, pandemic, the pandemic’s impact on the U.S. and global economies, the timing, scope and effectiveness of federal, state and local governmental responses to the pandemic, the effect of weather conditions on our financial performance; the price and supply of the products that 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 current and future governmental regulations, including climate change, environmental, health and safety regulations; the ability to attract and retain employees; customer creditworthiness; counterparty creditworthiness; marketing plans; potential cyber-attacks; 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, 2020. 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 Company’s Form 10-K and our Quarterly Reports on Form 10-Q. Currently, one of the most significant factors, however, is the potential adverse effect of the pandemic of the novel coronavirus, or COVID-19, on the financial condition, results of operations, cash flows and performance of the Company and its customers and counterparties and the global economy and financial markets. The extent to which COVID-19 impacts us and our customers will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of the pandemic, the actions taken to contain the pandemic or mitigate its impact, and the direct and indirect economic effects of the pandemic and containment measures, among others. 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
CONDENSED CONSOLIDATED BALANCE SHEETS

    December 31,   September 30,
      2020       2020  
(in thousands)   (unaudited)    
ASSETS    
Current assets        
Cash and cash equivalents   $ 18,847     $ 56,911  
Receivables, net of allowance of $5,185 and $6,121, respectively     147,011       83,594  
Inventories     56,902       50,256  
Fair asset value of derivative instruments     5,197        
Prepaid expenses and other current assets     38,478       29,554  
Assets held for sale           6,030  
Total current assets     266,435       226,345  
Property and equipment, net     98,332       93,495  
Operating lease right-of-use assets     100,222       99,776  
Goodwill     255,425       240,327  
Intangibles, net     103,440       90,293  
Restricted cash     250       250  
Captive insurance collateral     69,988       69,787  
Deferred charges and other assets, net     19,322       18,343  
Total assets   $ 913,414     $ 838,616  
LIABILITIES AND PARTNERS' CAPITAL        
Current liabilities        
Accounts payable   $ 41,924     $ 30,827  
Liabilities held for sale           1,265  
Revolving credit facility borrowings     59,341        
Fair liability value of derivative instruments           11,437  
Current maturities of long-term debt     13,000       13,000  
Current portion of operating lease liabilities     19,200       19,139  
Accrued expenses and other current liabilities     133,713       127,286  
Unearned service contract revenue     68,063       58,430  
Customer credit balances     74,626       83,471  
Total current liabilities     409,867       344,855  
Long-term debt     106,606       109,805  
Long-term operating lease liabilities     86,419       85,908  
Deferred tax liabilities, net     20,908       17,227  
Other long-term liabilities     26,998       25,001  
Partners' capital        
Common unitholders     279,873       273,283  
General partner     (2,447 )     (2,506 )
Accumulated other comprehensive loss, net of taxes     (14,810 )     (14,957 )
Total partners' capital     262,616       255,820  
Total liabilities and partners' capital   $ 913,414     $ 838,616  
         

STAR GROUP, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

    Three Months Ended
December 31,
 
(in thousands, except per unit data - unaudited)     2020       2019    
Sales:          
Product   $ 300,332     $ 432,688    
Installations and services     72,988       76,257    
Total sales     373,320       508,945    
Cost and expenses:          
Cost of product     172,147       287,673    
Cost of installations and services     69,303       73,669    
(Increase) decrease in the fair value of derivative instruments     (17,395 )     (6,417 )  
Delivery and branch expenses     80,687       96,726    
Depreciation and amortization expenses     7,957       9,050    
General and administrative expenses     6,241       6,506    
Finance charge income     (406 )     (713 )  
Operating income     54,786       42,451    
Interest expense, net     (1,851 )     (2,679 )  
Amortization of debt issuance costs     (247 )     (235 )  
Income before income taxes     52,688       39,537    
Income tax expense     14,828       11,782    
Net income   $ 37,860     $ 27,755    
General Partner's interest in net income     296       192    
Limited Partners' interest in net income   $ 37,564     $ 27,563    
           
           
Per unit data (Basic and Diluted):          
Net income available to limited partners   $ 0.89     $ 0.58    
Dilutive impact of theoretical distribution of earnings     0.15       0.09    
Basic and diluted income per Limited Partner Unit:   $ 0.74     $ 0.49    
           
Weighted average number of Limited Partner units outstanding (Basic and Diluted)     42,246       47,266    
           

SUPPLEMENTAL INFORMATION
STAR GROUP, L.P. AND SUBSIDIARIES

RECONCILIATION OF EBITDA AND ADJUSTED EBITDA
(Unaudited)

    Three Months Ended
December 31,
(in thousands)     2020       2019  
Net income   $ 37,860     $ 27,755  
Plus:        
Income tax expense     14,828       11,782  
Amortization of debt issuance costs     247       235  
Interest expense, net     1,851       2,679  
Depreciation and amortization     7,957       9,050  
EBITDA     62,743       51,501  
(Increase) / decrease in the fair value of derivative instruments     (17,395 )     (6,417 )
Adjusted EBITDA     45,348       45,084  
Add / (subtract)        
Income tax expense     (14,828 )     (11,782 )
Interest expense, net     (1,851 )     (2,679 )
(Recovery) provision for losses on accounts receivable     (476 )     1,010  
Decrease in accounts receivables     (62,989 )     (85,745 )
Decrease in inventories     (7,177 )     (15,427 )
Increase in customer credit balances     (8,987 )     (15,898 )
Change in deferred taxes     3,601       1,336  
Change in other operating assets and liabilities     20,358       32,510  
Net cash used in operating activities   $ (27,001 )   $ (51,591 )
Net cash used in investing activities   $ (35,903 )   $ (7,663 )
Net cash provided by financing activities   $ 24,840     $ 68,897  
         
         
Home heating oil and propane gallons sold     89,500       107,100  
Other petroleum products     37,700       41,400  
Total all products     127,200       148,500  
         

        

 Source: Star Group, L.P.

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

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