• Star Group, L.P. Reports Fiscal 2023 Second Quarter Results

    Source: Nasdaq GlobeNewswire / 03 May 2023 15:30:01   America/Chicago

    STAMFORD, Conn., May 03, 2023 (GLOBE NEWSWIRE) -- Star Group, L.P. (the "Company" or "Star") (NYSE:SGU), a home energy distributor and services provider, today announced financial results for its fiscal 2023 second quarter ended March 31, 2023.

    Three Months Ended March 31, 2023 Compared to the Three Months Ended March 31, 2022
    For the fiscal 2023 second quarter, Star reported a 5.7 percent decline in revenue to $737.6 million compared with $782.5 million in the prior-year period, reflecting a decrease in total volume sold, partially offset by the impact of acquisitions and other factors.

    The volume of home heating oil and propane sold during the fiscal 2023 second quarter decreased by 27.8 million gallons, or 18.7 percent, to 121.1 million gallons as the additional volume provided from acquisitions and other factors was more than offset by the impact of extremely warm weather and net customer attrition. Temperatures in Star's geographic areas of operation for the fiscal 2023 second quarter were 18.7 percent warmer than during the fiscal 2022 second quarter and 21.6 percent warmer than normal, as reported by the National Oceanic and Atmospheric Administration. The second quarter of fiscal 2023 was also the warmest such period in over 100 years within the New York City metropolitan area.

    Star’s net income declined by $19.3 million in the quarter, to $62.0 million, primarily due to an unfavorable change in the fair value of derivative instruments of $20.6 million, a $2.3 million increase in interest expense, and lower Adjusted EBITDA of $5.5 million, partially offset by an $8.6 million decrease in income tax expense.

    Second quarter Adjusted EBITDA decreased by $5.5 million, to $102.2 million, compared to the three months ended March 31, 2022, as the decline in home heating oil and propane volume more than offset an increase in per gallon margins and a $14.0 million higher benefit recorded under the Company’s weather hedge program. For the three months ended March 31, 2023, the Company recorded a benefit of $12.9 million under its weather hedge – reflecting warmer temperatures – versus a charge of $1.1 million for the three months ended March 31, 2022.

    “As the largest provider of home heating oil in the nation, our business is highly dependent on weather – which negatively impacted us this quarter,” said Jeff Woosnam, Star Group’s President and Chief Executive Officer. “To put this in perspective, not only were temperatures 21.6 percent warmer than normal, but the period was also the warmest in New York City in 123 years; year-to-date, it was the fourth warmest period on record in this key market. While there is nothing we can do to influence mother nature, we are adept at mitigating, to the extent possible, unusual weather swings like this – managing costs and working capital and adjusting short-term investment decisions. At the same time, our weather hedge program has provided an important buffer under such conditions, as has our disciplined approach to controlling operating expenses even in the face of certain inflationary pressures. As we navigate through the remainder of fiscal 2023 I remain confident in our ability to provide the best possible customer experience and bottom line results.”

    Six Months Ended March 31, 2023 Compared to the Six Months Ended March 31, 2022
    For the six months ended March 31, 2023, Star reported a 9.0 percent increase in total revenue to $1.4 billion compared with $1.3 billion 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 first six months of fiscal 2023 decreased by 25.6 million gallons, or 10.8 percent, to 210.3 million gallons as the additional volume provided from acquisitions was more than offset by warmer temperatures, net customer attrition and other factors. Temperatures in Star’s geographic areas of operation fiscal year-to-date were 6.9 percent warmer than during the prior-year period and 15.7 percent warmer than normal, as reported by the National Oceanic and Atmospheric Administration.

    Star’s net income declined by $20.3 million for the first six months of fiscal 2023, to $75.6 million, primarily due to an unfavorable change in the fair value of derivative instruments of $24.9 million, a $4.4 million increase in interest expense, and lower Adjusted EBITDA of $0.9 million, partially offset by an $9.0 million decrease in income tax expense. 

    Year-to-date Adjusted EBITDA decreased by $0.9 million, to $151.2 million, compared to the prior-year period as a decline in home heating oil and propane volume more than offset an increase in per gallon margins and an $11.4 million higher benefit recorded under the Company’s weather hedge. As of March 31, 2023, the Company had recorded a benefit of $12.5 million under its weather hedge program versus a benefit of $1.1 million for the first six months of fiscal 2022.

    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, May 4, 2023. 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. 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 the impact of geopolitical events, such as the war in the Ukraine, and its impact on wholesale product cost volatility, the price and supply of the products that we sell, our ability to purchase sufficient quantities of product to meet our customer’s needs, rapid increases in levels of inflation approaching 40-year highs, uncertain economic conditions, the consumption patterns of our customers, our ability to obtain satisfactory gross profit margins, the effect of weather conditions on our financial performance, our ability to obtain new customers and retain existing customers, our ability to make strategic acquisitions, the impact of litigation, natural gas conversions, the impact of the novel coronavirus, or COVID-19, pandemic and future global health pandemics, on US and global economies, 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 credit worthiness, counterparty credit worthiness, marketing plans, cyber-attacks, increases in interest rates, global supply chain issues, labor shortages 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, 2022. 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. 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

     
      March 31, September 30,
    (in thousands)  2023   2022 
    ASSETS (unaudited)  
    Current assets    
    Cash and cash equivalents $22,085  $14,620 
    Receivables, net of allowance of $10,795 and $7,755, respectively  259,099   138,252 
    Inventories  71,732   83,557 
    Fair asset value of derivative instruments     16,823 
    Weather hedge contract receivable  12,500    
    Prepaid expenses and other current assets  30,025   32,016 
    Assets held for sale     2,995 
    Total current assets  395,441   288,263 
    Property and equipment, net  105,559   107,744 
    Operating lease right-of-use assets  90,325   93,435 
    Goodwill  254,354   254,110 
    Intangibles, net  77,538   84,510 
    Restricted cash  250   250 
    Captive insurance collateral  68,175   66,662 
    Deferred charges and other assets, net  15,508   17,501 
    Total assets $1,007,150  $912,475 
    LIABILITIES AND PARTNERS' CAPITAL    
    Current liabilities    
    Accounts payable $41,026  $49,061 
    Revolving credit facility borrowings  69,936   20,276 
    Fair liability value of derivative instruments  11,516   183 
    Current maturities of long-term debt  16,500   12,375 
    Current portion of operating lease liabilities  17,248   17,211 
    Accrued expenses and other current liabilities  162,999   125,561 
    Unearned service contract revenue  71,363   62,858 
    Customer credit balances  52,032   93,555 
    Total current liabilities  442,620   381,080 
    Long-term debt  139,459   151,709 
    Long-term operating lease liabilities  78,109   81,385 
    Deferred tax liabilities, net  13,392   25,620 
    Other long-term liabilities  15,395   14,766 
    Partners' capital    
    Common unitholders  336,674   277,177 
    General partner  (3,553)  (3,656)
    Accumulated other comprehensive loss, net of taxes  (14,946)  (15,606)
    Total partners' capital  318,175   257,915 
    Total liabilities and partners' capital $1,007,150  $912,475 
         


    STAR GROUP, L.P. AND SUBSIDIARIES
    CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
     
      Three Months
    Ended March 31,
     Six Months
    Ended March 31,
    (in thousands, except per unit data - unaudited)  2023   2022   2023   2022 
             
    Sales:        
    Product $669,212  $712,462  $1,239,141  $1,123,727 
    Installations and services  68,405   70,081   146,663   147,086 
    Total sales  737,617   782,543   1,385,804   1,270,813 
    Cost and expenses:        
    Cost of product  466,267   492,334   885,360   766,928 
    Cost of installations and services  68,311   70,136   144,854   144,184 
    (Increase) decrease in the fair value of derivative instruments  3,022   (17,615)  20,658   (4,212)
    Delivery and branch expenses  95,942   107,486   193,878   196,475 
    Depreciation and amortization expenses  7,626   8,081   15,463   16,529 
    General and administrative expenses  6,698   5,902   13,554   12,578 
    Finance charge income  (1,764)  (1,026)  (3,083)  (1,538)
    Operating income  91,515   117,245   115,120   139,869 
    Interest expense, net  (4,963)  (2,729)  (9,237)  (4,787)
    Amortization of debt issuance costs  (258)  (237)  (587)  (476)
    Income before income taxes  86,294   114,279   105,296   134,606 
    Income tax expense  24,253   32,900   29,716   38,738 
    Net income $62,041  $81,379  $75,580  $95,868 
    General Partner's interest in net income  562   697   684   819 
    Limited Partners' interest in net income $61,479  $80,682  $74,896  $95,049 
             
             
    Per unit data (Basic and Diluted):        
    Net income available to limited partners $1.72  $2.14  $2.09  $2.49 
    Dilutive impact of theoretical distribution of earnings  0.30   0.39   0.35   0.44 
    Basic and diluted income per Limited Partner Unit: $1.42  $1.75  $1.74  $2.05 
             
    Weighted average number of Limited Partner units outstanding
    (Basic and Diluted)
      35,653   37,634   35,786   38,218 
             


    SUPPLEMENTAL INFORMATION
    STAR GROUP, L.P. AND SUBSIDIARIES
     
    RECONCILIATION OF EBITDA AND ADJUSTED EBITDA
    (Unaudited)
     
      Three Months
    Ended March 31,
    (in thousands)  2023   2022 
    Net income $62,041  $81,379 
    Plus:    
    Income tax expense  24,253   32,900 
    Amortization of debt issuance costs  258   237 
    Interest expense, net  4,963   2,729 
    Depreciation and amortization  7,626   8,081 
    EBITDA  99,141   125,326 
    (Increase) / decrease in the fair value of derivative instruments  3,022   (17,615)
    Adjusted EBITDA  102,163   107,711 
    Add / (subtract)    
    Income tax expense  (24,253)  (32,900)
    Interest expense, net  (4,963)  (2,729)
    Provision for losses on accounts receivable  3,722   2,455 
    Increase in accounts receivables  (9,600)  (86,269)
    Decrease (increase) in inventories  40,326   (1,660)
    Decrease in customer credit balances  (27,068)  (36,409)
    Change in deferred taxes  (11,155)  5,229 
    Change in other operating assets and liabilities  9,736   4,996 
    Net cash provided by (used in) operating activities $78,908  $(39,576)
    Net cash used in investing activities $(2,013) $(6,469)
    Net cash (used in) provided by financing activities $(77,401) $42,488 
         
         
    Home heating oil and propane gallons sold  121,100   148,900 
    Other petroleum products  33,200   36,300 
    Total all products  154,300   185,200 
         

            

    SUPPLEMENTAL INFORMATION
    STAR GROUP, L.P. AND SUBSIDIARIES
     
      
    RECONCILIATION OF EBITDA AND ADJUSTED EBITDA
    (Unaudited)
     
      
      Six Months
    Ended March 31,
     
    (in thousands)  2023   2022  
    Net income $75,580  $95,868  
    Plus:     
    Income tax expense  29,716   38,738  
    Amortization of debt issuance costs  587   476  
    Interest expense, net  9,237   4,787  
    Depreciation and amortization  15,463   16,529  
    EBITDA  130,583   156,398  
    (Increase) / decrease in the fair value of derivative instruments  20,658   (4,212) 
    Adjusted EBITDA  151,241   152,186  
    Add / (subtract)     
    Income tax expense  (29,716)  (38,738) 
    Interest expense, net  (9,237)  (4,787) 
    Provision for losses on accounts receivable  4,768   2,167  
    Increase in accounts receivables  (124,764)  (165,063) 
    Decrease (increase) in inventories  11,609   (18,048) 
    Decrease in customer credit balances  (41,768)  (50,913) 
    Change in deferred taxes  (12,379)  4,545  
    Change in other operating assets and liabilities  36,413   13,210  
    Net cash used in operating activities $(13,833) $(105,441) 
    Net cash used in investing activities $(4,099) $(13,503) 
    Net cash provided by financing activities $25,397  $131,859  
          
          
    Home heating oil and propane gallons sold  210,300   235,900  
    Other petroleum products  68,800   75,600  
    Total all products  279,100   311,500  
          


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

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