• Star Group, L.P. Reports Fiscal 2022 First Quarter Results

    Source: Nasdaq GlobeNewswire / 02 Feb 2022 16:30:00   America/New_York

    STAMFORD, Conn., Feb. 02, 2022 (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 2022 first quarter ended December 31, 2021.

    Three Months Ended December 31, 2021 Compared to the Three Months Ended December 31, 2020
    For the fiscal 2022 first quarter, Star reported a 30.8 percent increase in total revenue to $488.3 million compared with $373.3 million in the prior-year period, reflecting an increase in selling prices in response to higher wholesale product costs partially offset by a decrease in total volume sold.

    The volume of home heating oil and propane sold during the fiscal 2022 first quarter decreased by 2.5 million gallons, or 2.8 percent, to 87.0 million gallons as the additional volume provided from acquisitions and other factors was reduced by the impact of warmer weather and net customer attrition. Temperatures in Star's geographic areas of operation for the fiscal 2022 first quarter were 6.3 percent warmer than during the fiscal 2021 first quarter and 18.6 percent warmer than normal, as reported by the National Oceanic and Atmospheric Administration.

    Star’s net income declined by $23.4 million in the quarter, to $14.5 million, primarily due to an unfavorable non-cash change in the fair value of derivative instruments of $30.8 million, partially offset by a decrease in income tax expense of $9.0 million. 

    First quarter Adjusted EBITDA decreased by $0.9 million, or 1.9 percent, to $44.5 million, as the impact from the decline in home heating oil and propane volume and higher operating expenses (including a $1.8 million unfavorable change in the impact from the Company’s weather hedge) more than offset an increase in home heating oil and propane per gallon margins. As of December 31, 2021, Star recorded a benefit of $2.2 million under its weather hedging contract (versus $4.0 million in the prior-year period), reducing delivery and branch expense. The final benefit (if any) for fiscal 2022 may be lower or higher depending on the accumulation of actual heating degree-days recorded in the period January 1, 2022 through March 31, 2022; thus far, temperatures recorded for January 2022 have been colder than expected.

    “Despite temperatures that were 6.3 percent warmer than last year and 18.6 percent warmer than normal, negatively affecting demand, I’m pleased with our overall results in the quarter which included solid margin management and expense control as well as improved customer retention,” said Jeff Woosnam, Star Group’s President and Chief Executive Officer. “We also continued to make progress with our acquisition program during the period, adding three heating oil dealers that brought with them approximately 3.0 million gallons of annual product sales. It’s too early to say how fiscal 2022 will play out, but we were encouraged to see much colder weather in January and believe we are well positioned to address whatever challenges or opportunities might present themselves for the remainder of the heating season.”

    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 3, 2022. The webcast will be accessible on the company’s website, at www.stargrouplp.com, and the telephone number for the conference call is 888-346-3470 (or 412-317-5169 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; cyber-attacks; inflation; global supply chain issues; labor shortages; 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, 2021. 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,
    (in thousands) 2021   2021 
    ASSETS (unaudited)   
    Current assets   
    Cash and cash equivalents$21,239  $4,767 
    Receivables, net of allowance of $4,662 and $4,779, respectively 178,774   99,680 
    Inventories 77,735   61,183 
    Fair asset value of derivative instruments 16,603   26,222 
    Prepaid expenses and other current assets 44,932   30,140 
    Total current assets 339,283   221,992 
    Property and equipment, net 100,788   99,123 
    Operating lease right-of-use assets 95,873   95,839 
    Goodwill 254,198   253,398 
    Intangibles, net 92,777   95,474 
    Restricted cash 250   250 
    Captive insurance collateral 69,482   69,933 
    Deferred charges and other assets, net 18,103   17,854 
    Total assets$970,754  $853,863 
    LIABILITIES AND PARTNERS' CAPITAL   
    Current liabilities   
    Accounts payable$52,225  $37,291 
    Revolving credit facility borrowings 123,682   8,618 
    Current maturities of long-term debt 13,000   17,621 
    Current portion of operating lease liabilities 16,467   16,446 
    Accrued expenses and other current liabilities 126,588   121,221 
    Unearned service contract revenue 69,773   56,972 
    Customer credit balances 72,864   86,828 
    Total current liabilities 474,599   344,997 
    Long-term debt 89,183   92,385 
    Long-term operating lease liabilities 84,226   84,019 
    Deferred tax liabilities, net 28,439   29,014 
    Other long-term liabilities 18,948   25,244 
    Partners' capital   
    Common unitholders 292,139   295,063 
    General partner (2,963)  (2,821)
    Accumulated other comprehensive loss, net of taxes (13,817)  (14,038)
    Total partners' capital 275,359   278,204 
    Total liabilities and partners' capital$970,754  $853,863 
        

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

     Three Months
    Ended December 31,
    (in thousands, except per unit data - unaudited) 2021   2020 
    Sales:   
    Product$411,265  $300,332 
    Installations and services 77,005   72,988 
    Total sales 488,270   373,320 
    Cost and expenses:   
    Cost of product 274,594   172,147 
    Cost of installations and services 74,048   69,303 
    (Increase) decrease in the fair value of derivative instruments 13,403   (17,395)
    Delivery and branch expenses 88,989   80,687 
    Depreciation and amortization expenses 8,448   7,957 
    General and administrative expenses 6,676   6,241 
    Finance charge income (512)  (406)
    Operating income 22,624   54,786 
    Interest expense, net (2,058)  (1,851)
    Amortization of debt issuance costs (239)  (247)
    Income before income taxes 20,327   52,688 
    Income tax expense 5,838   14,828 
    Net income$14,489  $37,860 
    General Partner's interest in net income 122   296 
    Limited Partners' interest in net income$14,367  $37,564 
        
        
    Per unit data (Basic and Diluted):   
    Net income available to limited partners$0.37  $0.89 
    Dilutive impact of theoretical distribution of earnings 0.05   0.15 
    Basic and diluted income per Limited Partner Unit:$0.32  $0.74 
        
    Weighted average number of Limited Partner units outstanding (Basic and Diluted) 38,789   42,246 
        

    SUPPLEMENTAL INFORMATION
    STAR GROUP, L.P. AND SUBSIDIARIES

    RECONCILIATION OF EBITDA AND ADJUSTED EBITDA
    (Unaudited)

     Three Months
    Ended December 31,
    (in thousands) 2021   2020 
    Net income$14,489  $37,860 
    Plus:   
    Income tax expense 5,838   14,828 
    Amortization of debt issuance costs 239   247 
    Interest expense, net 2,058   1,851 
    Depreciation and amortization 8,448   7,957 
    EBITDA 31,072   62,743 
    (Increase) / decrease in the fair value of derivative instruments 13,403   (17,395)
    Adjusted EBITDA 44,475   45,348 
    Add / (subtract)   
    Income tax expense (5,838)  (14,828)
    Interest expense, net (2,058)  (1,851)
    Recovery for losses on accounts receivable (288)  (476)
    Increase in accounts receivables (78,794)  (62,989)
    Increase in inventories (16,388)  (7,177)
    Decrease in customer credit balances (14,504)  (8,987)
    Change in deferred taxes (684)  3,601 
    Change in other operating assets and liabilities 8,214   20,358 
    Net cash used in operating activities$(65,865) $(27,001)
    Net cash used in investing activities$(7,034) $(35,903)
    Net cash provided by financing activities$89,371  $24,840 
        
        
    Home heating oil and propane gallons sold 87,000   89,500 
    Other petroleum products 39,300   37,700 
    Total all products 126,300   127,200 
        


    CONTACT: 
    Star Group, L.P.Chris Witty
    Investor RelationsDarrow Associates
    203/328-7310646/438-9385 or cwitty@darrowir.com

    Source: Star Group, L.P.


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