STAR GAS PARTNERS, L.P. REPORTS FISCAL 2002 FOURTH QUARTER AND YEAR-END RESULTS AND ANNOUNCES FOUR ACQUISITIONS
For the fiscal 2002 fourth quarter ended September 30, 2002, volume grew 12.5% due to the Partnership’s acquisition program, and net loss per Limited Partner unit improved 22% compared to the same period in the prior year. The fiscal fourth quarter is a non-heating season period when summer operating losses generally increase as the Partnership grows. Notwithstanding this seasonality, Star’s EBITDA improved $1.3 million, due to a 2.3 cent per gallon improvement in gross profit margins and $4.7 million of expense and revenue improvements, offsetting increased insurance and business process reengineering expenses.
The fourth quarter seasonal net loss improved $0.48 per Limited Partner unit from a loss of $2.18 per Limited Partner unit for the three months ended September 30, 2001, to a loss of $1.70 per unit in the same period in fiscal 2002. This significant improvement was primarily the result of an increased number of units outstanding in a loss period and to a lesser extent from the impact of the reduced EBITDA loss.
Despite the abnormally warm weather, for the twelve-month period ended September 30, 2002, volume grew 6% compared to fiscal 2001, due to Star’s acquisition program, which increased volume by 24%, offset by abnormal weather that was 18% warmer than the same period a year ago. In addition, the unprecedented weather during the fiscal 2002 heating season was the warmest in 107 years, and temperatures were 6% higher than the next warmest heating season in the century. These conditions were especially pronounced in Star’s markets, which experienced the warmest conditions in the nation.
Despite the weather, EBITDA declined only 3.2% from $85.0 million to $82.3 million, as the Partnership offset the gross profit weather impact by reducing operating expenses and increasing gross profit margins in addition to receiving $7.1 million of net proceeds from weather insurance. The incremental EBITDA generated from the Partnership’s acquisition program was also a major reason for the slight decline as compared to the prior year.
In Fiscal 2002, Star reported a $0.38 net loss per Limited Partner unit, compared to a $0.23 net loss per Limited Partner unit in fiscal 2001. This increase in Star’s net loss, considering the impact of the extraordinary warm weather conditions, was due to the accretive benefits of Star’s acquisition program, as well as an increased number of units outstanding, which in combination largely offset the effect of the extraordinary weather.
In commenting on Star’s operating performance, Chairman Irik P. Sevin indicated, “The Partnership's 12.5% quarterly volume increase underscores the impact of our disciplined acquisition program, which on an annual basis, helped drive a 37% increase in EBITDA, and contributed approximately $0.40 per Limited Partner unit in accretion. We also achieved noteworthy success with our base business operating improvement program, which resulted in expense reductions this past winter, as well as a number of other initiatives that reduced costs and increased operating income at Star's base business.
"While growth is an important element of our strategy, as a Master Limited Partnership, we must maintain the stability of our cash flow for the benefit of our unitholders, and we believe weather insurance is an important part of that program. With that in mind, in August 2002, the Partnership announced the purchase of $20.0 million of weather insurance for the 2002 – 2003 heating season, as well as a base of $12.5 million of insurance for each year from 2004 – 2007. We are very pleased that weather in October and November to date has been relatively cool in our operating regions, but we still believe that weather insurance should be part of our long-term strategy for cash flow stabilization.
"Although we are disappointed with the effects the unprecedented weather had on our fiscal 2002 operating results, we are very pleased with our ability to cut the weather’s impact on our results in half and the very positive results of our disciplined acquisition program. In addition, we are also pleased with the continuing progress our heating oil division’s business process improvement task force has made on capitalizing on our unique size in the home heating oil industry to operate more cost effectively and with greater customer sensitivity as well as with the consistent growth in our propane division, in which EBITDA, net income and distributable cash flow all grew in spite of the weather, making it an outstanding performer among its peer group.”
Mr. Sevin further commented, “We believe Star's strategy of maintaining a balanced capital structure is in the long-term interest of our unitholders. With that in mind, we successfully completed three equity issues during fiscal 2002, enabling us to fund acquisitions, reduce debt and maintain our investment grade BBB credit rating from Fitch Investors Services.”
Star Gas Partners, L.P., is a leading distributor of home heating oil, propane and deregulated natural gas and electricity. The Partnership is the nation's largest retail distributor of home heating oil and the nation's seventh largest retail propane distributor. Star, through its wholly owned subsidiary Total Gas & Electric, also sells natural gas and electricity in the Northeast, Mid-Atlantic and Florida.
This news announcement contains certain forward-looking information that is subject to certain risks and uncertainties as indicated from time to time in the Partnership’s 10-K, 10-Q, 8-K and other filings with the Securities and Exchange Commission. Included risks and uncertainties are the effects of the weather on the Partnership’s financial results, competitive and propane and heating oil pricing pressures and other factors impacting the propane, home heating oil, natural gas and electricity distribution industries.
