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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) February 6, 2006
STAR GAS PARTNERS, L.P.
(Exact name of registrant as specified in its charter)
Delaware 011-14129 06-1437793
(State or other jurisdiction of (Commission File Number) (IRS Employer
incorporation) Identification No.)
2187 Atlantic Street, Stamford, CT 06902
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (203) 328-7310
Not Applicable
(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):
|_| Written communications pursuant to Rule 425 under the Securities Act
(17 CFR 230.425)
|_| Soliciting material pursuant to Rule 14a-12 under the Exchange Act
(17 CFR 240.14a-12)
|_| Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
|_| Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
ITEM 2.02. RESULTS OF OPERATIONS AND FINANCIAL CONDITION
On February 6, 2006, Star Gas Partners, L.P., a Delaware partnership (the
"Partnership"), issued a press release announcing its financial results for its
fiscal first quarter ending December 31, 2005. A copy of the press release is
furnished within this report as Exhibit 99.1.
The information in this report is being furnished, and is not deemed as "filed"
for purposes of Section 18 of the Securities Exchange Act of 1934, as amended,
and shall not be deemed incorporated by reference in any filings under the
Securities Act of 1933, as amended, unless specifically stated so therein.
ITEM 7.01. REGULATION FD DISCLOSURE
ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS
Exhibit 99.1 A copy of the Star Gas Partners, L P. Press Release dated
February 6, 2006
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/ Richard F. Ambury
------------------------------------------
Name: Richard F. Ambury
Title: Chief Financial Officer
Principal Financial & Accounting Officer
Date: February 6, 2006
Exhibit 99.1
Star Gas Partners, L.P. Reports Fiscal 2006 First Quarter Results
STAMFORD, Conn.--(BUSINESS WIRE)--Feb. 6, 2006--Star Gas Partners,
L.P. (the "Partnership" or "Star") (NYSE: SGU, SGH), a home energy
distributor and services provider specializing in heating oil, today
announced financial results for its fiscal 2006 first quarter. On
December 17, 2004, the Partnership sold its propane segment and the
historical results of the propane segment is accounted for as
discontinued operations in the Partnership's financial statements.
For the fiscal 2006 first quarter, Star reported an 18.2 percent
increase in total revenues to $414.4 million, compared to total
revenues of $350.7 million in the year ago period, as higher selling
prices more than offset a reduction in sales of home heating oil.
Average wholesale home heating oil product costs increased 27.9
percent to $1.75 per gallon for the fiscal 2006 first quarter,
compared to $1.37 for the prior year period. Home heating oil volume
for the fiscal 2006 first quarter declined 7.7 percent year-over-year,
from 142.3 million gallons to 131.3 million gallons.
The home heating oil volume decline was due almost entirely to net
customer attrition. For the fiscal 2006 first quarter, Star lost
approximately 7,200 accounts (net), or 1.6 percent of its home heating
oil customer base, as compared to the fiscal 2005 first quarter in
which Star lost 2,000 accounts (net), or 0.4 percent of its customer
base. For the twelve months ended December 31, 2005, Star's net
customer attrition rate was 8.3 percent, which compares to 7.1
percent, 6.4 percent and 1.5 percent for fiscal 2005, fiscal 2004 and
fiscal 2003, respectively.
Home heating oil per gallon margins for the fiscal 2006 first
quarter rose by 21.2 cents per gallon, versus the corresponding 2005
period due largely to an increase in the margins realized on sales to
price protected customers when compared to the unusually low margins
experienced during the fiscal 2005 first quarter and the Partnership's
decision in the fourth quarter of fiscal 2005 and continuing into
fiscal 2006 to maintain reasonable profit margins in spite of
competitors' aggressive pricing tactics. Also contributing to the
expansion in home heating oil per gallon margins was the favorable
market conditions experienced during the fiscal 2006 first quarter as
the wholesale cost of home heating oil declined following the numerous
hurricanes in Florida and the Gulf Coast, compared to the fiscal 2005
first quarter in which the wholesale cost of home heating oil spiked
during the quarter. During the fiscal 2006 first quarter, the
Partnership was able to decrease its variable selling prices at a
slower rate than the decline in the wholesale cost of home heating
oil. We are expecting higher per gallon margins for the remainder of
fiscal 2006 versus the period from January 1, 2005 to September 30,
2005, but we do not expect a 21.2 cents per gallon increase. The net
loss from service improved by $2.6 million from a loss of $4.8 million
(3.4 cents per gallon) for the fiscal 2005 first quarter to a $2.2
million loss (1.7 cents per gallon) for the fiscal 2006 first quarter.
Total operating expenses (delivery, branch, general and
administrative) decreased by $15.5 million, to $65.8 million for the
fiscal 2006 first quarter as compared to $81.3 million for the prior
year's quarter. This decrease was due to lower bridge and financing
expenses of $10.4 million, a reduction in marketing expenses of $3.7
million, staff reductions of $0.9 million and the decrease in certain
variable operating expenses directly associated with the 7.7% decline
in home heating oil volume estimated to be $2.1 million. Directors and
officer's liability insurance expense was higher by $0.5 million for
the fiscal 2006 first quarter versus the corresponding 2005 period and
compensation expense relating to unit appreciation rights was higher
by $2.1 million. (In the fiscal 2005 first quarter, the decline in the
unit price for senior subordinated units resulted in reversing
previously recorded expenses of $2.1 million.)
In the fiscal 2006 first quarter, operating income increased $41.4
million to $20.4 million, as compared to an operating loss of $21.0
million for the fiscal 2005 first quarter. This increase was due to an
increase in product gross profit margin of $22.7 million, improvements
in net service and installation profitability of $2.6 million, lower
bridge and financing expenses of $10.4 million and a reduction in
marketing expenses of $3.7 million.
Star's income (loss) from continuing operations during the fiscal
2006 first quarter increased $87.5 million to $12.9 million, as
compared to a loss from continuing operations of $74.6 million during
the fiscal 2005 first quarter. This increase was due to the $41.4
million increase in operating income, lower interest expense of $3.3
million and higher interest income of $0.5 million. The
quarter-to-quarter comparison was also favorably impacted by the $42.1
million loss on redemption of debt recorded in the three months ended
December 31, 2004.
For the three months ended December 31, 2005, net income declined
by $61.9 million, to $12.5 million, as compared to $74.4 million in
net income for the three months ended December 31, 2004 as an $87.5
million increase in income from continuing operations and a $4.6
million increase in income from discontinued operations in the 2006
first fiscal quarter were more than offset by a $153.6 million gain on
the sale of the propane segment recorded in the year ago period.
For the three months ended December 31, 2005, EBITDA increased
$82.9 million, to $28.9 million, as compared to an EBITDA loss of
$54.0 million for the three months ended December 31, 2004. This
increase was due to an increase in product gross profit of $22.7
million, an improvement in net service profitability of $2.6 million,
lower bridge and financing expenses of $10.4 million and a reduction
in marketing expenses of $3.7 million. The quarter-to-quarter
comparison was also favorably impacted by a $42.1 million loss on the
redemption of debt that was recorded in the three months ended
December 31, 2004. 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.
Average temperatures in Star's geographic areas of operations for
January 2006 were 29.3 percent warmer than January 2005. Star
estimates that home heating oil volume declined by 32.4 percent from
88.5 million gallons for January 2005 to an estimated 59.9 million
gallons for January 2006. The estimated impact of the decline in
volume is anticipated to result in a reduction in operating income of
approximately $14.0 million for the month of January 2006 when
compared to January 2005, before estimated proceeds from weather
insurance. Based on estimates of accumulated degree days from November
1, 2005 to January 31, 2006, Star estimates that it would receive
approximately $5.5 million under its weather insurance policy, which
will partially offset the impact of the warmer weather experienced in
January 2006. If February 2006 is colder than the 10-year average, the
projected proceeds under the policy would be reduced and could be
zero.
Commenting on the Partnership's operating results, Star Gas
Partners Chief Executive Officer Joseph P. Cavanaugh, stated, "This
has been a very eventful quarter for the Partnership. I am very
pleased with our performance. I believe it demonstrates we have an
extremely capable organization that can meet the operating challenges
that face us every day. We still have obstacles to overcome, including
the continued effects of net customer attrition, but we are
positioning the Partnership for future success. The approval of the
proposed recapitalization is the next important step on the path to
that success."
Strategic Recapitalization
Star recently commenced mailing its proxy materials in conjunction
with the proposed strategic recapitalization first announced on
December 5, 2005. Star's board of directors and its senior management
support the recapitalization and urge all unitholders to vote IN FAVOR
OF THE PROPOSALS.
If approved by unitholders of record, the recapitalization
proposals would result in, among other things:
-- Strengthening of Star 's balance sheet, helping it to meet
liquidity and capital requirements, and allowing the
Partnership to operate more efficiently with less debt.
-- Quarterly distributions to commence accruing at a rate of
$0.27 per year, beginning in October 2008.
-- Should the proposed recapitalization not be approved, it
is unlikely that Star unitholders would receive any
distributions in the foreseeable future.
-- Allowing the Partnership to resume strategic acquisitions of
home heating oil distributors.
-- Common unitholders being offered rights to purchase additional
SGU common units.
-- These valuable rights will allow common unitholders to
purchase additional units at $2.00 per unit - which is
below the trading price of the common units as of the day
of this release.
-- Resolution of a significant disagreement with certain of
Star's senior noteholders that could have a material adverse
effect on the Partnership's ability to continue as a going
concern.
REMINDER: Star Gas management will host a conference call and
webcast today at 1:00 p.m. (ET). Conference call dial-in is
800/847-8137 or 212/341-7097 (international callers). A webcast is
also available at www.star-gas.com and at www.vcall.com
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 and by visiting Star's
website at www.star-gas.com.
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 approval of the recapitalization; the effect of
weather conditions on our financial performance; anticipated proceeds
from weather insurance; 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 customers
and retain existing customers; our ability to effect strategic
acquisitions or redeploy underperforming assets; the ultimate
disposition of excess proceeds from the sale of the propane segment
should the recapitalization not be consummated; the impact of
litigation; the ongoing impact of the business process redesign
project at the heating oil segment and our ability to address issues
related to that project; 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; and marketing plans. 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 Annual Report on Form 10-K for the
year ended September 30, 2005 and its Quarterly Report on Form 10-Q
for the fiscal quarter ended December 31, 2005, 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
(in thousands)
Sept. 30, Dec. 31,
2005 2005
--------- ---------
ASSETS
Current assets
Cash and cash equivalents $ 99,148 $ 9,217
Receivables, net of allowance of $8,433 and
$9,665, respectively 89,703 182,252
Inventories 52,461 66,122
Prepaid expenses and other current assets 70,120 62,806
Current assets held for sale - 1,629
--------- ---------
Total current assets 311,432 322,026
--------- ---------
Property and equipment, net 50,022 47,152
Long-term portion of accounts receivables 3,788 2,643
Goodwill 166,522 166,522
Intangibles, net 82,345 73,233
Deferred charges and other assets, net 15,152 14,832
Assets held for sale - 7,770
--------- ---------
Total assets $ 629,261 $ 634,178
========= =========
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities
Accounts payable $ 19,780 $ 22,275
Working capital facility borrowings 6,562 33,251
Current maturities of long-term debt 796 754
Accrued expenses 56,580 67,334
Unearned service contract revenue 36,602 40,739
Customer credit balances 65,287 47,837
Current liabilities associated with assets held
for sale - 6,126
--------- ---------
Total current liabilities 185,607 218,316
--------- ---------
Long-term debt 267,417 267,339
Other long-term liabilities 31,129 31,756
Partners' capital (deficit)
Common unitholders 144,312 155,437
Subordinated unitholders (8,930) (7,638)
General partner (3,936) (3,823)
Accumulated other comprehensive income (loss) 13,662 (27,209)
--------- ---------
Total partners' capital 145,108 116,767
--------- ---------
Total liabilities and partners' capital $ 629,261 $ 634,178
========= =========
STAR GAS PARTNERS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per unit data) Three Months Ended
December 31,
--------------------
2004 2005
--------- ---------
Sales:
Product $ 297,119 $ 358,869
Installations and service 53,575 55,512
--------- ---------
Total sales 350,694 414,381
Cost and expenses:
Cost of product 222,903 261,972
Cost of installations and service 58,375 57,695
Delivery and branch expenses 65,480 59,426
Depreciation and amortization expenses 9,122 8,485
General and administrative expenses 15,842 6,366
--------- ---------
Operating income (loss) (21,028) 20,437
Interest expense (10,875) (7,540)
Interest income 383 858
Amortization of debt issuance costs (715) (631)
Loss on redemption of debt (42,082) -
--------- ---------
Income (loss) from continuing operations
before income taxes (74,317) 13,124
Income tax expense 331 250
--------- ---------
Income (loss) from continuing operations (74,648) 12,874
Loss from discontinued operations, net of income
taxes (4,552) -
Gain on sale of discontinued operations, net of
income taxes 153,644 -
--------- ---------
Income before cumulative effect of changes in
accounting principles 74,444 12,874
Cumulative effect of changes in accounting
principles - change in inventory pricing
method - (344)
--------- ---------
Net income $ 74,444 $ 12,530
========= =========
General Partner's interest in net income $ 672 $ 113
--------- ---------
Limited Partners' interest in net income $ 73,772 $ 12,417
========= =========
Basic and Diluted Income (Loss) per Limited
Partner Unit:
Continuing operations $ (2.07) $ 0.36
Discontinued operations (0.13) -
Gain on sale of discontinued operations 4.26 -
--------- ---------
Income before cumulative effect of changes
in accounting principles 2.06 0.36
Cumulative effect of changes in accounting
principles - (0.01)
--------- ---------
Net income $ 2.06 $ 0.35
--------- ---------
Weighted average number of Limited Partner units
outstanding:
Basic 35,756 35,903
========= =========
Diluted 35,756 35,903
========= =========
SUPPLEMENTAL INFORMATION
STAR GAS PARTNERS, L.P. AND SUBSIDIARIES
RECONCILIATION OF EBITDA
Three Months Ended
December 31,
--------------------
2004 2005
--------------------
(in thousands)
Income (loss) from continuing operations $ (74,648) $ 12,874
Plus:
Income tax expense 331 250
Amortization of debt issuance costs 715 631
Interest expense, net 10,492 6,682
Depreciation and amortization expense 9,122 8,485
--------- ---------
EBITDA (53,988)(a) 28,922
Add/(subtract)
Income tax expense (331) (250)
Interest expense, net (10,492) (6,682)
Unit compensation expense (2,094) -
Provision for losses on accounts receivable 1,721 1,977
Unrealized loss on derivative instruments 3,941 1,089
Loss on redemption of debt 42,082 -
(Gain) loss on sales of fixed assets, net (73) 427
Change in operating assets and liabilities (132,661) (137,932)
--------- ---------
Net cash used in operating activities $(151,895) $(112,449)
========= =========
(a) Includes one-time expenses of $42.1 million to early debt
redemption.
Three Months
Ended
December 31,
--------------------
2004 2005
--------- ---------
Home heating oil gallons sold (millions) 142.3 131.3
CONTACT: Star Gas Partners
Investor Relations
203-328-7310
or
Jaffoni & Collins Incorporated
Robert Rinderman, Steven Hecht
212-835-8500 or SGU@jcir.com