Star Gas Partners, L.P. Reports Fiscal 2010 Second Quarter Results
STAMFORD, Conn., May 10, 2010 (GlobeNewswire via COMTEX News Network) -- Star Gas Partners, L.P. (the "Partnership" or "Star") (NYSE:SGU), a home energy distributor and services provider specializing in heating oil, today announced financial results for its fiscal 2010 second quarter and the six-month period ended March 31, 2010. Star also announced the acquisition of Champion Energy Corporation ("Champion") for $50.2 million plus working capital, which is estimated to be $11.3 million. Star purchased the stock of Champion with cash on hand.
In commenting on this acquisition, Star Gas Partners Chief Executive Officer Mr. Donovan stated, "We are very excited with the acquisition of Champion and look forward to working with their 300 motivated and dedicated employees. Champion serves over 45,000 residential and commercial home heating oil customers in markets where we currently operate and, for their fiscal year ended June 30, 2009, had sales of $151.5 million, generating $9.5 million of Adjusted EBITDA and net income of $1.5 million. During this time, Champion sold 35.2 million gallons of residential home heating oil, 4.1 million gallons of commercial home heating oil, and 8.9 million gallons of other petroleum products. We believe Champion is an excellent fit for Star and are eager to work with their management team. Champion's companies are all local operations whose employees take great pride in the home heating services they have been offering their customers for many years. Under the Star banner, we expect these operations to continue following the same tradition of excellence in customer service."
For the fiscal 2010 second quarter, Star reported a 6.0 percent increase in total revenues to $551.7 million, compared to total revenues of $520.5 million in the year ago period, as an increase in home heating oil selling prices more than offset a decline in home heating oil volume. Selling prices rose in response to an increase in wholesale product cost.
Home heating oil volume for the fiscal 2010 second quarter decreased 19.1 million gallons, to 156.8 million gallons due to the impact of warmer temperatures and net customer attrition. Temperatures in Star's geographic areas of operations for the fiscal 2010 second quarter were 8.4 percent warmer than the fiscal 2009 second quarter and were 6.3 percent warmer than normal.
Operating income decreased $35.8 million to $75.1 million largely due to an unfavorable non cash change in the fair value of derivatives of $37.6 million.
The Partnership reported net income of $40.5 million, a $68.1 million decrease versus the fiscal 2009 second quarter, largely due to an unfavorable change in the fair value of derivative instruments of $37.6 million, an increase in deferred income taxes of $26.6 million, a decrease in current tax expense of $1.4 million and a reduction in income relating to repurchasing the Partnership's Senior Notes of $7.3 million.
Adjusted EBITDA decreased $0.7 million to $74.0 million, as compared to $74.7 million for the three months ended March 31, 2009.
EBITDA and Adjusted EBITDA are non-GAAP (Generally Accepted Accounting Principles) financial measures which are explained below in greater detail under "EBITDA and Adjusted EBITDA (non-GAAP Financial Measures)." Please refer to the Supplemental Information included in this news release for reconciliations of these non-GAAP financial measures to their most directly comparable GAAP financial measures for the three and six months ended March 31, 2010 and 2009 for Star, and for the twelve months ended June 30, 2009 for Champion.
In commenting on Star's second quarter results, Mr. Donovan added, "We continued to focus on customer retention this quarter and achieved EBITDA almost equivalent to that of last year. Given the warm weather, particularly in March, which was 25 percent warmer than March 2009, these results speak to our high level of service and sound financial management. These are qualities that not only serve our unitholders but also attract the best acquisition candidates, such as Champion."
For the six months ended March 31, 2010, Star reported a 2.5 percent decrease in total revenues to $900.6 million, compared to total revenues of $923.4 million in the year-ago period, as a reduction in home heating oil volume was partially offset by higher selling prices.
Home heating oil volume decreased 33.3 million gallons to 252.2 million gallons, due to the impact of warmer temperatures and net customer attrition.
Temperatures in Star's geographic areas of operations for the six months ended March 31, 2010 were 7.1 percent warmer than the six months ended March 31, 2009 and approximately 4.7 percent warmer than normal. The higher temperatures were largely due to a warming trend that began in March 2010 and continued into April 2010; temperatures in April 2010 were 29 percent warmer than in April 2009.
Net income decreased $48.1 million to $52.5 million largely due to an increase in deferred income tax expense of $35.8 million and a $10.9 million reduction in income related to repurchasing the Partnership's Senior Notes.
Adjusted EBITDA decreased $9.5 million to $100.7 million for the six months ended March 31, 2010, as the decline in home heating oil volume more than offset the positive impacts of higher per gallon margins and lower operating expenses.
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 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 ability to generate cash sufficient to pay interest on our
indebtedness and to make distributions to our partners;
-- our operating performance and return on invested capital as compared to
those of other companies in the retail distribution of refined petroleum
products business, without regard to financing methods and capital
structure; and
-- the viability of acquisitions and capital expenditure projects and the
overall rates of return of alternative investment opportunities.
Adjusted EBITDA is calculated as earnings from continuing operations before net interest expense, income taxes, depreciation and amortization, (increase) decrease in the fair value of derivatives, gain or loss on debt redemption, goodwill impairment, and other non-cash and non-operating charges. Management believes the presentation of this measure is relevant and useful because it allows investors to view the Partnership's performance in a manner similar to the method management uses, and makes it easier to compare its results with other companies that have different financing and capital structures. In addition, this measure is consistent with the manner in which the Partnership's debt covenants in its material debt agreements are calculated. Both the Partnership's 10.25 percent Senior Note agreement and its bank credit facility contain covenants that restrict equity distributions, acquisitions, and the amount of debt it can incur. Under the most restrictive of these covenants, which is found in the bank credit facility, the agent bank could step in and control all cash transactions for the Partnership if we failed to comply with the minimum availability or the fixed charge coverage ratio. The Partnership is required to maintain either availability (borrowing base less amounts borrowed and letters of credit issued) of $43.5 million or a fixed charge coverage ratio of 1.1 to 1.0 (Adjusted EBITDA being a significant component of this calculation). This method of calculating Adjusted EBITDA may not be consistent with that of other companies and should be viewed in conjunction with measurements that are computed in accordance with GAAP.
Each of EBITDA and Adjusted EBITDA has its limitations as an analytical tool, and it should not be considered in isolation or as a substitute for analysis of our results as reported under 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 Gas management will host a webcast and conference call Tuesday, May 11 at 11:00 a.m. (ET). The webcast is available at http://www.star-gas.com/MediaList.cfm and at www.vcall.com. The Conference call dial-in is 888-335-0893 (or 970-315-0470 for international callers).
About Star Gas Partners, L.P.
Star Gas Partners, L.P., is the nation's largest retail distributor of home heating oil. Additional information is available by obtaining the Partnership's SEC filings at www.sec.gov and by visiting Star's website at www.star-gas.com, where unitholders 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 Partnership'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 home heating oil, the consumption patterns of our customers, our ability to obtain satisfactory gross profit margins, our ability to obtain new accounts and retain existing accounts, our ability to make strategic acquisitions, the impact of litigation, natural gas conversions, future union relations and the outcome of current and future union negotiations, the impact of current and future environmental, health and safety regulations, customer creditworthiness, counterparty creditworthiness, marketing plans and general economic conditions. All statements other than statements of historical facts included in this news release are forward-looking statements. Although the Partnership believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to have been correct. Important factors that could cause actual results to differ materially from the Partnership's expectations ("Cautionary Statements") are disclosed in this news release and in the Partnership's quarterly report on form 10Q for the quarter ended March 31, 2010 and its Annual Report on Form 10-K for the year ended September 30, 2009, including without limitation and in conjunction with the forward-looking statements included in this news release. All subsequent written and oral forward-looking statements attributable to the Partnership or persons acting on its behalf are expressly qualified in their entirety by the Cautionary Statements. Unless otherwise required by law, the Partnership 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.
STAR GAS PARTNERS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
September
March 31, 30,
(in thousands) 2010 2009
--------------------------------- ----------- ----------
(unaudited)
ASSETS
Current assets
Cash and cash equivalents $ 53,573 $ 195,160
Receivables, net of allowance
of $9,017 and $6,267,
respectively 188,495 58,854
Inventories 60,200 62,636
Fair asset value of derivative
instruments 11,771 14,676
Current deferred tax asset, net 19,785 30,135
Prepaid expenses and other
current assets 19,956 15,437
----------- ----------
Total current assets 353,780 376,898
----------- ----------
Property and equipment, net 37,324 37,494
Long-term portion of accounts
receivables 671 504
Goodwill 183,065 182,942
Intangibles, net 16,324 20,468
Long-term deferred tax asset, net 10,318 36,265
Deferred charges and other
assets, net 7,673 9,555
----------- ----------
Total assets $ 609,155 $ 664,126
=========== ==========
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities
Accounts payable $ 17,136 $ 17,103
Revolving credit facility
borrowings 19,094 --
Fair liability value of
derivative instruments 1,356 665
Accrued expenses and other
current liabilities 67,178 64,446
Unearned service contract
revenue 40,745 37,121
Customer credit balances 21,055 74,153
----------- ----------
Total current liabilities 166,564 193,488
----------- ----------
Long-term debt 82,827 133,112
Other long-term liabilities 31,185 31,192
Partners' capital
Common unitholders 353,686 332,340
General partner 486 309
Accumulated other comprehensive
income (loss), net of taxes (25,593) (26,315)
----------- ----------
Total partners' capital 328,579 306,334
----------- ----------
Total liabilities and partners'
capital $ 609,155 $ 664,126
=========== ==========
STAR GAS PARTNERS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended Six Months Ended
March 31, March 31,
-------------------- ----------------------
(in thousands, except per unit data -
unaudited) 2010 2009 2010 2009
--------------------------------------- -------- ---------- ---------- ----------
Sales:
Product $510,713 $ 478,762 $ 812,478 $ 833,029
Installations and service 41,019 41,738 88,073 90,321
-------- ---------- ---------- ----------
Total sales 551,732 520,500 900,551 923,350
Cost and expenses:
Cost of product 361,713 323,705 576,228 573,411
Cost of installations and service 42,517 44,561 88,189 93,343
(Increase) decrease in the fair value
of derivative instruments (4,702) (42,262) (8,094) (5,408)
Delivery and branch expenses 67,872 71,597 124,694 135,168
Depreciation and amortization
expenses 3,561 6,066 7,096 12,109
General and administrative expenses 5,646 5,953 10,699 11,213
-------- ---------- ---------- ----------
Operating income 75,125 110,880 101,739 103,514
Interest expense (3,885) (4,349) (8,155) (9,368)
Interest income 935 1,196 1,329 2,288
Amortization of debt issuance costs (672) (576) (1,328) (1,168)
Gains (losses) on redemption of debt (1,132) 6,218 (1,132) 9,740
-------- ---------- ---------- ----------
Income before income taxes 70,371 113,369 92,453 105,006
Income tax expense 29,836 4,702 39,913 4,350
-------- ---------- ---------- ----------
Net income $40,535 $ 108,667 $ 52,540 $ 100,656
======== ========== ========== ==========
General Partner's interest in net
income 187 466 241 431
-------- ---------- ---------- ----------
Limited Partners' interest in net
income $40,348 $ 108,201 $ 52,299 $ 100,225
======== ========== ========== ==========
Per unit data (Basic and Diluted):
Net income available to limited
partners $0.57 $ 1.43 $ 0.73 $ 1.32
Dilutive impact of theoretical
distribution of earnings under
FASB ASC 260-10-45-60 (EITF 03-06) 0.09 0.26 0.11 0.24
-------- ---------- ---------- ----------
Limited Partner's interest in net
income under FASB
ASC 260-10-45-60 $0.48 $ 1.17 $ 0.62 $ 1.08
======== ========== ========== ==========
-------- ---------- ---------- ----------
Weighted average number of Limited
Partner units outstanding
(Basic and Diluted) 70,302 75,774 71,494 75,774
======== ========== ========== ==========
SUPPLEMENTAL INFORMATION
STAR GAS PARTNERS, L.P. AND SUBSIDIARIES
RECONCILIATION OF EBITDA AND ADJUSTED EBITDA
(Unaudited)
Three Months Ended
March 31,
------------------------
(in thousands) 2010 2009
----------------------------------- ----------- -----------
Net income $ 40,535 $ 108,667
Plus:
Income tax expense 29,836 4,702
Amortization of debt issuance cost 672 576
Interest expense, net 2,950 3,153
Depreciation and amortization 3,561 6,066
----------- -----------
EBITDA from continuing operations 77,554 123,164
(Increase) / decrease in the fair
value of derivative instruments (4,702) (42,262)
(Gains) / losses on redemption of
debt 1,132 (6,218)
----------- -----------
Adjusted EBITDA 73,984 74,684
Add / (subtract)
Income tax expense (29,836) (4,702)
Interest expense, net (2,950) (3,153)
Provision for losses on accounts
receivable 3,334 4,018
Increase in accounts receivables (58,338) (16,585)
Decrease in inventories 11,823 26,427
Decrease in customer credit
balances (31,308) (45,105)
Change in deferred taxes 26,306 --
Change in other operating assets
and liabilities 3,924 17,966
----------- -----------
Net cash provided by (used in)
operating activities $ (3,061) $ 53,550
=========== ===========
----------- -----------
Net cash used in investing
activities $ (1,077) $ (837)
=========== ===========
----------- -----------
Net cash used in financing
activities $ (40,960) $ (25,008)
=========== ===========
Home heating oil gallons sold 156,800 175,900
SUPPLEMENTAL INFORMATION
STAR GAS PARTNERS, L.P. AND SUBSIDIARIES
RECONCILIATION OF EBITDA AND ADJUSTED EBITDA
(Unaudited)
Six Months Ended
March 31,
------------------------
(in thousands) 2010 2009
----------------------------------- ----------- -----------
Net income $ 52,540 $ 100,656
Plus:
Income tax expense 39,913 4,350
Amortization of debt issuance cost 1,328 1,168
Interest expense, net 6,826 7,080
Depreciation and amortization 7,096 12,109
----------- -----------
EBITDA from continuing operations 107,703 125,363
(Increase) / decrease in the fair
value of derivative instruments (8,094) (5,408)
(Gains) / losses on redemption of
debt 1,132 (9,740)
----------- -----------
Adjusted EBITDA 100,741 110,215
Add / (subtract)
Income tax expense (39,913) (4,350)
Interest expense, net (6,826) (7,080)
Provision for losses on accounts
receivable 5,482 6,886
Increase in accounts receivables (135,290) (71,583)
Decrease in inventories 2,436 5,398
Decrease in customer credit
balances (53,098) (36,392)
Change in deferred taxes 35,788 --
Change in other operating assets
and liabilities 14,632 30,265
----------- -----------
Net cash provided by (used in)
operating activities $ (76,048) $ 33,359
=========== ===========
----------- -----------
Net cash used in investing
activities $ (2,632) $ (4,841)
=========== ===========
----------- -----------
Net cash used in financing
activities $ (62,907) $ (31,408)
=========== ===========
Home heating oil gallons sold 252,200 285,500
SUPPLEMENTAL INFORMATION
CHAMPION ENERGY CORPORATION
RECONCILIATION OF EBITDA AND ADJUSTED EBITDA
(Unaudited)
Twelve
Months
Ended
June 30,
(in thousands) 2009
-------------------------------- ----------
Net income $ 1,492
Plus:
Income tax benefit (543)
Amortization of deferred charges 1,247
Interest expense, net 4,327
Depreciation and amortization 3,017
----------
EBITDA from continuing
operations 9,540
(Increase) / decrease in the
fair value of derivative
instruments --
(Gains) / losses on redemption
of debt --
----------
Adjusted EBITDA 9,540
Add / (subtract)
Income tax benefit 543
Interest expense, net (4,327)
Decrease in accounts receivables 5,052
Decrease in inventories 255
Change in deferred taxes (874)
Change in other operating assets
and liabilities (2,742)
----------
Net cash provided by operating
activities $ 7,447
==========
----------
Net cash used in investing
activities $ (1,063)
==========
----------
Net cash used in financing
activities $ (7,006)
==========
This news release was distributed by GlobeNewswire, www.globenewswire.com
SOURCE: Star Gas Partners, L.P.
CONTACT: Star Gas Partners Investor Relations 203/328-7310 Darrow Associates Chris Witty 646/438-9385 cwitty@darrowir.com
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