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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934
Date of report (Date of earliest event reported) April 30, 2003
STAR GAS PARTNERS, L.P.
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(Exact name of registrant as specified in its charter)
Delaware 33-98490 06-1437793
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(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
2187 Atlantic Street, Stamford, CT 06902
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (203) 328-7310
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Not Applicable
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(Former name or former address, if changed since last report.)
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
Exhibit 99.1 A copy of the Press Release dated April 30, 2003
ITEM 9. REGULATION FD DISCLOSURE
The following information is being provided under Item 12:
On April 30, 2003, Star Gas Partners, L.P., a Delaware partnership (the
"Partnership"), issued an earnings release describing results of operations for
its fiscal six and three month periods ended March 31, 2002 and March 31, 2003.
A copy of the Partnership's Press Release has been furnished as Exhibit 99.1 to
this Current Report.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
STAR GAS PARTNERS, L.P.
By: Star Gas LLC (General Partner)
By: /s/ James Bottiglieri
-----------------------
Name: James Bottiglieri
Title: Vice President
Date: April 30, 2003
Exhibit 99.1
Star Gas Partners, L.P. Reports Record 2003 Second Quarter
Results, Declares Regular Common Unit Distribution and a
Significant Increase in Senior Subordinated Unit Distribution
STAMFORD, Conn.--(BUSINESS WIRE)--April 30, 2003--Star Gas
Partners, L.P. (the "Partnership" or "Star") (NYSE:SGU) (NYSE:SGH), a
diversified home energy distributor and services provider specializing
in heating oil, propane, natural gas and electricity, today reported
record results for the fiscal 2003 second quarter and the six months
ended March 31, 2003.
Star also declared its $0.575 per unit Minimum Quarterly
Distribution on all units for the quarter ended March 31, 2003,
increasing its quarterly distribution on its Senior Subordinated Units
(SGH) from $0.25 per unit to $0.575 per unit, reinstating the
distribution at that level on its Junior Subordinated and General
Partner Units, and maintaining its regular quarterly distribution on
its common units (SGU). The distribution on all units will be payable
on May 15, 2003 to unitholders of record on May 13, 2003.
For the three months ended March 31, 2003, Star's sales increased
62.6% to a record $668.8 million, versus $411.3 million in the second
quarter of fiscal 2002. This significant rise in sales resulted from a
weather-related 28% volume increase as well as higher energy prices.
Star's volume increase resulted from both the impact of colder
temperatures as compared to last year on weather sensitive customers,
as well as the Partnership's acquisition program. Net income increased
38.1% for the three months ended March 31, 2003 to $83.2 million, from
$60.2 million for the three months ended March 31, 2002 as a result of
improved operating income, partially offset by higher income taxes in
the second quarter of fiscal 2003. Diluted net income per limited
partner unit increased 21.1%, or $.44 per unit, to $2.53 per unit in
the second quarter of fiscal 2003, compared to $2.09 per unit in the
second quarter of fiscal 2002, as a result of the net income growth
partially being offset by a higher number of outstanding units.
Operating income for the three months ended March 31, 2003
increased 40.5% to approximately $96.0 million, from approximately
$68.3 million in the fiscal 2002 second quarter. This was primarily
due to the volume increase mentioned above and the impact of ten
acquisitions consummated since January 1, 2002.
EBITDA for the three months ended March 31, 2003 increased 31.2%
to $108.7 million, versus $82.8 million in the fiscal 2002 second
quarter.
For the six months ended March 31, 2003, sales increased 51% to a
record $1.1 billion, compared to $697.5 million in the same period in
fiscal 2002, due to both volume expansion and higher energy prices.
Net income for the period increased to $99.2 million. Income before
cumulative effect of change in accounting principle (adoption of SFAS
No. 142) increased 43.8% to $103.1 million, from $71.7 million in the
comparable period in fiscal 2002. This increase was primarily
attributable to the operating income increase, offset by higher income
taxes. Diluted net income per limited partner unit increased to $3.02
per unit. Income before the cumulative effect of the change in
accounting principle for the adoption of SFAS No. 142 increased per
unit by 22.6% to $3.14, versus $2.56 in the comparable period in
fiscal 2002, reflecting the increase in income, offset by an increase
in units outstanding.
Operating income for the six months ended March 31, 2003 increased
38.7% over the comparable period in 2002 due primarily to a) volume
increasing by approximately 28% due to colder temperatures; b) cost
savings associated with the initial impact of the Petro Division's
Business Process Redesign Improvement Program; c) 14 acquisitions
consummated since October 1, 2001; and, d) a slight increase in
per-gallon gross profit margins notwithstanding the historically high
energy prices. In addition, the six-month operating income increase
was mitigated by weather insurance, which provided the Partnership
with $9.0 million of proceeds in the first six months of fiscal 2002,
and had approximately $1.0 million higher premiums in the six months
ended March 31, 2003 than the first six months of fiscal 2002.
EBITDA for the six months ended March 31, 2003 increased $27.6
million to $147.1 million. Included in EBITDA was a charge of $3.9
million for the cumulative effect of change in accounting principle
for the adoption of SFAS No. 142.
Star also reported that on April 8, 2003 it purchased the SICO
Heating Oil Company of Mount Joy, Pennsylvania. SICO had 19,000
customers and 15.5 million gallons of annual volume.
The Partnership's heating oil division (Petro) announced today
that, as part of its ongoing Business Process Redesign Improvement
Program, it will be reducing administrative staff by approximately
19%, or 225 individuals over the next six months. In connection with
this reduction, Star anticipates paying $2.7 million of severance and
other related costs for the remainder of fiscal 2003, but expects to
benefit from estimated annual compensation savings of $4.4 million
beginning in fiscal 2004. This action is part of a comprehensive
program to capitalize on Petro's unique size in the highly fragmented
heating oil industry and to access technology in order to operate both
more efficiently and with a higher degree of customer sensitivity. The
Program, which has developed and evolved over the past five years, is
anticipated to cost the Partnership $25.9 million in total upon
completion in the fourth quarter of fiscal 2004. Approximately $2.0
million of this amount was expensed in fiscal 2002, while
approximately $6.9 million, including the severance costs discussed
above, represents costs expected to be expensed in fiscal 2003. The
Program also involves $15.1 of technology investment, of which $8.3
million has already been purchased. In fiscal 2004, $1.9 million of
additional items will be expensed. Upon its completion, it is
anticipated that the Program will enhance operating income by
approximately $15.0 million on an annual basis, of which $9 million is
expected to be realized in 2004 with the remainder in 2005 and 2006.
While it is hoped that these levels of savings will be realized, there
can be no assurance that these amounts will actually be forthcoming,
nor that other events will not offset the expected benefits.
In commenting on this performance, Chairman Irik P. Sevin
indicated: "We are obviously extremely pleased with this past winter's
performance. Although last year's very warm weather makes comparisons
easy, it is gratifying that the Partnership was able to translate the
colder temperatures into very attractive financial results. While
weather was significantly colder than last heating season,
temperatures were only 8.5% colder than normal in Star's areas of
operations during the six months ended March 31, 2003, as reported by
the National Oceanic and Atmospheric Administration. In addition to
these favorable results, we are especially pleased with two major
developments. First, was the major advance we took in Petro's ongoing
Business Redesign Process Improvement Program. The concept of
capitalizing on Petro's unique size by accessing technology and
developing a more efficient organizational structure began over five
years ago. This evolved into Petro's President, Angelo Catania,
forming a team 15 months ago to develop an action plan to realize this
concept. This Plan called for Petro to utilize a modern call center
and centralized dispatch techniques similar to those employed by many
operationally excellent companies in similar industries. Not only will
this hopefully increase efficiency and further improve our product,
but these moves will enable us to take advantage of the heating oil
industry's fractionalized configuration to build a brand image to grow
both organically and through acquisitions. While a highly detailed
plan has been developed to execute this strategy over a reasonable
timeframe, we realize that the ultimate benefits may not equal those
anticipated and that unexpected events may impact our success.
"Second, has been the significant improvement in Star's capital
structure. As a result of the three equity offerings consummated in
fiscal 2002, and a $200 million Rule 144A Senior Notes Offering in
February 2003, Star is well financed. As of March 31, 2003, the
Partnership had $36 million of cash available for the Business Process
Redesign Improvement Program and acquisitions, $75 million of
unutilized Bank Growth Facilities and Star has provided for all of its
fiscal year 2003 debt maturities."
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.
STAR GAS PARTNERS, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND OTHER DATA
(in thousands, except per unit data)
Three Months Ended
March 31,
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2002 2003
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Sales $ 411,285 $ 668,820
Costs and expenses:
Cost of sales 251,982 459,261
Operating expenses 76,466 100,678
Depreciation and amortization expenses 14,509 12,885
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Operating income 68,328 95,996
Interest expense, net 9,757 10,638
Amortization of debt issuance costs 307 554
Loss on redemption of debt - 181
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Income before income taxes 58,264 84,623
Income tax expense (benefit) (1,952) 1,460
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Net income $ 60,216 $ 83,163
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General Partner's interest in net income $ 681 $ 832
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Limited Partners' interest in net income $ 59,535 $ 82,331
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Net income per Limited Partner Unit:
Basic $ 2.09 $ 2.54
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Diluted $ 2.09 $ 2.53
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Basic weighted average number of
Limited Partner units outstanding 28,506 32,453
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Diluted number of Limited Partner units 28,506 32,561
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Supplementary Data:
Retail propane gallons sold 56,151 69,522
Home heating oil gallons sold 215,591 277,086
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Total gallons sold 271,742 346,608
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EBITDA (a) $ 82,837 $ 108,700
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(a) EBITDA should not be considered as an alternative to net income
(as an indicator of operating performance) or as an alternative to
cash flow (as a measure of liquidity on ability to service debt
obligations), but provides additional information for evaluating
the Partnership's ability to make the Minimum Quarterly
Distribution. EBITDA is calculated as follows:
Net income $ 60,216 $ 83,163
Plus:
Income tax expense (benefit) (1,952) 1,460
Amortization of debt issuance costs 307 554
Interest expense, net 9,757 10,638
Depreciation and amortization 14,509 12,885
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EBITDA $ 82,837 $ 108,700
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STAR GAS PARTNERS, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND OTHER DATA
(in thousands, except per unit data)
Six Months Ended
March 31,
----------------------------
2002 2003
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Sales $ 697,508 $ 1,053,800
Costs and expenses:
Cost of sales 436,229 714,608
Operating expenses 141,833 188,041
Depreciation and amortization expenses 29,012 25,733
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Operating income 90,434 125,418
Interest expense, net 19,901 19,008
Amortization of debt issuance costs 619 991
Loss on redemption of debt - 181
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Income before income taxes and
cumulative effect of change in
accounting principle 69,914 105,238
Income tax expense (benefit) (1,805) 2,135
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Income before cumulative effect of
change in accounting principle 71,719 103,103
Cumulative effect of change in accounting
principle for adoption of SFAS No. 142 - (3,901)
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Net income $ 71,719 $ 99,202
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General Partner's interest in net income $ 820 $ 992
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Limited Partners' interest in net income $ 70,899 $ 98,210
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Net income per Limited Partner Unit:
Basic $ 2.57 $ 3.03
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Diluted $ 2.56 $ 3.02
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Basic weighted average number of
Limited Partner units outstanding 27,623 32,452
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Diluted number of Limited Partner units 27,686 32,560
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Supplementary Data:
Retail propane gallons sold 95,840 122,139
Home heating oil gallons sold 346,650 444,476
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Total gallons sold 442,490 566,615
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EBITDA (a) $ 119,446 $ 147,069
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(a) EBITDA should not be considered as an alternative to net income
(as an indicator of operating performance) or as an alternative to
cash flow (as a measure of liquidity on ability to service debt
obligations), but provides additional information for evaluating
the Partnership's ability to make the Minimum Quarterly
Distribution. EBITDA is calculated as follows:
Net income $ 71,719 $ 99,202
Plus:
Income tax expense (benefit) (1,805) 2,135
Amortization of debt issuance costs 619 991
Interest expense, net 19,901 19,008
Depreciation and amortization 29,012 25,733
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EBITDA $ 119,446 $ 147,069
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STAR GAS PARTNERS, L.P. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)
Sept. 30, March 31,
2002 2003
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ASSETS
Current assets
Cash and cash equivalents $ 61,481 $ 69,142
Receivables, net of allowance of $8,282
and $11,428, respectively 83,452 260,101
Inventories 39,453 56,826
Prepaid expenses and other current
assets 37,815 39,020
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Total current assets 222,201 425,089
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Property and equipment, net 241,892 239,275
Long-term portion of accounts receivables 6,672 6,892
Goodwill 264,551 260,650
Intangibles, net 193,370 180,219
Deferred charges and other assets, net 15,080 14,192
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Total Assets $ 943,766 $ 1,126,317
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LIABILITIES AND PARTNERS' CAPITAL
Current liabilities
Accounts payable $ 20,360 $ 53,520
Working capital facility borrowings 26,195 135,600
Current maturities of long-term debt 72,113 23,759
Accrued expenses 69,444 78,408
Unearned service contract revenue 30,549 27,655
Customer credit balances 70,583 18,125
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Total current liabilities 289,244 337,067
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Long-term debt 396,733 470,301
Other long-term liabilities 25,525 27,340
Partners' capital
Common unitholders 242,696 297,200
Subordinated unitholders 3,105 12,942
General partner (2,710) (1,718)
Accumulated other comprehensive loss (10,827) (16,815)
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Total Partners' capital 232,264 291,609
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Total Liabilities and Partners'
Capital $ 943,766 $ 1,126,317
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CONTACT: Star Gas Partners, L.P., Stamford
Richard F. Ambury, 203/328-7310
or
Jaffoni & Collins Incorporated, New York
Robert L. Rinderman or Purdy Tran, 212/835-8500
SGU@jcir.com