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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) December 4, 2003
STAR GAS PARTNERS, L.P.
(Exact name of registrant as specified in its charter)
Delaware 33-98490 06-1437793
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
2187 Atlantic Street, Stamford, CT 06902
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (203) 328-7300
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Not Applicable
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(Former name or former address, if changed since last report.)
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
Exhibit 99.1 A copy of the Press Release dated December 4, 2003
ITEM 9. REGULATION FD DISCLOSURE
ITEM 12. RESULTS OF OPERATIONS AND FINANCIAL CONDITION
On December 4, 2003, Star Gas Partners, L.P., a Delaware partnership (the
"Partnership"), issued a press release describing its financial results for its
fourth quarter and year ended September 30, 2003. A copy of the Partnership's
press release has been furnished as Exhibit 99.1 to this Current Report on Form
8-K.
The information in this report shall not be treated as "filed" for purposes of
the Securities Exchange Act of 1934, as amended.
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: December 4, 2003
EXHIBIT 99.1
Star Gas Partners, L.P. Reports 2003 Fiscal Fourth Quarter and
Year End Results, Announces Ten Acquisitions in Fiscal 2003
STAMFORD, Conn.--(BUSINESS WIRE)--Dec. 4, 2003--Star Gas Partners,
L.P. (the "Partnership" or "Star") (NYSE: SGU, SGH), a diversified
home energy distributor and services provider specializing in heating
oil, propane, natural gas and electricity, today reported results for
the fiscal 2003 fourth quarter and the year ended September 30, 2003.
Star also reported that since July 1, 2003 it has completed the
purchase of three heating oil and propane companies with 47,000
customers. During fiscal 2003, Star acquired ten retail distributors
with over 100,000 customers and 112 million gallons of annual volume.
For the fiscal 2003 fourth quarter, Star's sales rose 26% to a
record $175 million, as compared to $139 million in the fourth quarter
of fiscal 2002. This significant increase was primarily due to higher
energy prices, as well as a 10% volume increase resulting from the
contribution of 14 acquisitions made since July 1, 2002.
Star's fiscal fourth quarter is a non-heating period, and the
operating loss increased from $43.5 million in 2002 to $50.4 million
in 2003 primarily due to $8.7 million of items associated with: a)
$4.5 million of reorganization expenses related to the previously
announced heating oil division's Business Process Improvement Program;
b) the impact of acquisitions that are expected to be accretive on a
full-year basis but, as anticipated, generated fourth quarter
operating losses; and, c) the current period expense associated with
the increased value of previously granted equity-based compensation
that had declined in fiscal 2002. In addition, results were impacted
by lower depreciation and amortization of $0.8 million.
The fiscal 2003 fourth quarter net loss increased to $61.1 million
from $53.0 million in the same period in fiscal 2002 due to the items
that impacted the increased operating loss as well as $2.0 million in
higher net interest costs largely associated with debt incurred to
finance Star's acquisition program; these were slightly offset by
lower income tax expense of $1.0 million. Diluted net loss per limited
partner unit, which includes the above referenced costs, rose to $1.82
per unit in the fourth quarter of fiscal 2003, from $1.70 per unit in
the fourth quarter of fiscal 2002.
Fiscal 2003 sales increased 43% to a record $1.5 billion, compared
to $1.0 billion in fiscal 2002, due both to volume expansion and
higher energy prices. Operating income for fiscal 2003 increased 85%
to $48.6 million, from $26.3 million in fiscal 2002. This was due
primarily to: a) an approximate 23% rise in volume largely driven by
colder temperatures; b) the contribution from the 12 acquisitions
consummated in fiscal 2002 that had a full year's positive impact on
Star's results in fiscal 2003; c) approximately a 1 cent per gallon
gross profit margin increase, notwithstanding historically high energy
prices; and, d) $5.9 million in lower depreciation and amortization
expense largely due to the impact of SFAS 142. Fiscal 2003 operating
income was negatively impacted by approximately $20.6 million
resulting from: a) $9.4 million of reorganization expenses related to
the previously announced heating oil division's Business Process
Improvement Program; b) expense associated with the increase in value
in fiscal 2003 of previously granted equity-based compensation that
had declined in fiscal 2002; and, c) fiscal 2003 acquisitions
consummated largely after the heating season, whereby partial year
results had a negative effect on annual performance. In addition,
management estimates that the implementation of a more efficient
delivery scheduling process, which lowered volume in fiscal 2003 by
approximately 10 million gallons, resulted in lower operating income
of approximately $3.8 million.
Net income for fiscal 2003 was $0.2 million compared, to an $11.2
million net loss in fiscal 2002. Income before the cumulative effect
of the change in accounting principle for the adoption of SFAS No.
142, relating to accounting for goodwill and other intangibles, rose
to $4.1 million, from the $11.2 million loss in fiscal 2002. The
fiscal 2003 net income increase was primarily attributable to improved
weather conditions, the full year's effect of acquisitions made in
fiscal 2002, increased margins, and lower depreciation and
amortization expense. These factors more than offset the impact of
expenses relating to previously granted equity, reorganization costs,
partial year results from fiscal 2003 acquisitions, higher income tax
expense and the effect of SFAS No. 142. Fiscal 2003 diluted net income
per limited partner unit, which included the above referenced costs,
was $0.01 per unit, compared to a $0.38 per unit loss in fiscal 2002.
Income per limited partner unit before the cumulative effect of the
change in accounting principles for the adoption of SFAS No. 142
increased to $0.12 per unit, versus the $0.38 per unit loss in fiscal
2002.
Star also announced that during the three months ended September
30, 2003 the Partnership acquired three heating oil and propane
companies consisting of approximately 47,000 customers, which are
expected to add 53 million gallons of annual volume. The total
acquisition price for these three purchases was $39 million,
representing a 5.2x anticipated EBITDA multiple. The largest
acquisition was the previously announced Ultramar New England Home
Energy business, a unit of Valero Energy Corporation (NYSE: VLO). The
other two companies were Cincinnati Propane of Cincinnati, Ohio and
Humphrey Oil of Tiverton, Rhode Island.
In fiscal 2003 the Partnership acquired ten heating oil and
propane companies with over 100,000 customers, representing 112
million gallons of volume, with a purchase price of approximately $76
million; this represents a 5.2x anticipated EBITDA multiple. In
keeping with Star's balanced financing strategy, $34.2 million of the
aggregate purchase amount was financed through a common unit offering
in August 2003.
Commenting on this performance, Chairman Irik P. Sevin stated,
"This fiscal year's EBITDA, which includes a charge of $3.9 million
for the cumulative effect of a change in accounting principle for the
adoption of SFAS 142, increased 14% to $97.7 million. This was
especially gratifying given that it was achieved despite the $24
million impact of the following items: a) the heating oil division's
Business Process Improvement Program; b) costs associated with the
value of previously granted equity; c) the impact of the heating oil
division's delivery rescheduling initiative; and, d) the post-heating
season impact of acquisitions made during the year."
Mr. Sevin went on to note that, "We are also excited with the
continued success of Star's very active but disciplined acquisition
program and the Business Process Improvement Program. Over the past
two years, Star has continued to successfully execute its strategy of
buying small and mid-sized heating oil and propane companies,
purchasing 22 companies with an average 6 million gallons, at an
average 5.4x EBITDA multiple."
The heating division's Business Process Improvement Program was
designed to capitalize on Petro's unique size in the highly fragmented
heating oil industry by accessing 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,
took a major step towards completion this past April with the 19%
reduction in administrative staff and the reconfiguring of Petro into
a functionally specialized organization. The $9.4 million
reorganization costs in fiscal 2003 are part of an overall $28.1
million program, of which $1.6 million remains to be spent in fiscal
2004. Management expects this entire Program to enhance operating
income by approximately $15.0 million on an annual basis, of which
$8.4 million is expected to be realized in 2004.
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, realized savings from the Business Process
Improvement Program and other factors impacting the propane, home
heating oil, natural gas and electricity distribution industries.
STAR GAS PARTNERS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND OTHER DATA
(in thousands, except per unit data)
(unaudited)
Three Months Ended
September 30,
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2003 2002
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Sales $174,728 $138,825
Costs and expenses:
Cost of sales 129,328 98,737
Operating expenses 81,600 68,534
Depreciation and amortization expenses 14,179 15,010
------------------
Operating loss (50,379) (43,456)
Interest expense, net 10,861 8,833
Amortization of debt issuance costs 633 411
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Loss before income taxes (61,873) (52,700)
Income tax expense (benefit) (735) 251
------------------
Net loss $(61,138)$(52,951)
==================
General Partner's interest in net loss $(611) $(606)
==================
Limited Partners' interest in net loss $(60,527)$(52,345)
==================
Limited Partner's interest in net loss per Limited
Partner unit:
Basic $(1.82) $(1.70)
==================
Diluted $(1.82) $(1.70)
==================
Basic weighted average number of
Limited Partner units outstanding 33,271 30,762
==================
Diluted number of Limited Partner units 33,271 30,762
==================
Supplementary Data:
Retail propane gallons sold 24,021 21,930
Home heating oil gallons sold 42,576 38,574
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Total gallons sold 66,597 60,504
==================
EBITDA (a) $(36,200)$(28,446)
==================
(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 or 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 loss $(61,138)$(52,951)
Plus:
Income tax expense (benefit) (735) 251
Amortization of debt issuance costs 633 411
Interest expense, net 10,861 8,833
Depreciation and amortization 14,179 15,010
------------------
EBITDA $(36,200)$(28,446)
==================
STAR GAS PARTNERS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND OTHER DATA
(in thousands, except per unit data)
Fiscal Years Ended
September 30,
----------------------
2003 2002
----------------------
Sales $1,463,748 $1,025,058
Costs and expenses:
Cost of sales 1,010,347 661,978
Operating expenses 351,634 277,707
Depreciation and amortization expenses 53,160 59,049
----------------------
Operating income 48,607 26,324
Interest expense, net 40,583 37,502
Amortization of debt issuance costs 2,232 1,447
Loss on redemption of debt 179 -
----------------------
Income (loss) before income taxes and
cumulative effect of change in
accounting principle 5,613 (12,625)
Income tax expense (benefit) 1,500 (1,456)
----------------------
Income (loss) before cumulative effect of
change in accounting principle 4,113 (11,169)
Cumulative effect of change in accounting
principle for
adoption of SFAS No. 142 3,901 -
----------------------
Net income (loss) $212 $(11,169)
======================
General Partner's interest in net income (loss) $2 $(116)
======================
Limited Partners' interest in net income (loss) $210 $(11,053)
======================
Limited Partners' interest in net income (loss)
per Limited Partner unit:
Basic $.01 $(.38)
======================
Diluted $.01 $(.38)
======================
Basic weighted average number of
Limited Partner units outstanding 32,659 28,790
======================
Diluted number of Limited Partner units 32,767 28,790
======================
Supplementary Data:
Retail propane gallons sold 166,768 140,324
Home heating oil gallons sold 567,024 457,749
----------------------
Total gallons sold 733,792 598,073
======================
EBITDA (a) $97,685 $85,373
======================
(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 or 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 (loss) $212 $(11,169)
Plus:
Income tax expense (benefit) 1,500 (1,456)
Amortization of debt issuance costs 2,232 1,447
Interest expense, net 40,581 37,502
Depreciation and amortization 53,160 59,049
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EBITDA $97,685 $85,373
=================
STAR GAS PARTNERS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
September 30,
-----------------------
2003 2002
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ASSETS
Current assets
Cash and cash equivalents $10,111 $61,481
Receivables, net of allowance of $9,560 and
$8,282, respectively 105,639 83,452
Inventories 42,391 39,453
Prepaid expenses and other current assets 52,968 37,815
-----------------------
Total current assets 211,109 222,201
-----------------------
Property and equipment, net 262,301 241,892
Long-term portion of accounts receivables 7,145 6,672
Goodwill 278,857 264,551
Intangibles, net 201,784 193,370
Deferred charges and other assets, net 14,414 15,080
-----------------------
Total Assets $975,610 $943,766
=======================
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities
Accounts payable $31,026 $20,360
Working capital facility borrowings 12,000 26,195
Current maturities of long-term debt 22,847 72,113
Accrued expenses 83,197 69,444
Unearned service contract revenue 32,036 30,549
Customer credit balances 77,558 70,583
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Total current liabilities 258,664 289,244
-----------------------
Long-term debt 499,341 396,733
Other long-term liabilities 27,829 25,525
Partners' Capital
Common unitholders 210,636 242,696
Subordinated unitholders (56) 3,105
General partner (3,083) (2,710)
Accumulated other comprehensive loss (17,721) (10,827)
-----------------------
Total Partners' capital 189,776 232,264
-----------------------
Total Liabilities and Partners' Capital $975,610 $943,766
=======================
CONTACT: Star Gas Partners
Richard F. Ambury, 203-328-7310
or
Jaffoni & Collins Incorporated
Robert L. Rinderman / Purdy Tran, 212-835-8500
SGU@jcir.com