View:
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 7, 2007
STAR GAS PARTNERS, L.P.
(Exact name of registrant as specified in its charter)
Delaware 001-14129 06-1437793
(State or other (Commission File (IRS Employer
jurisdiction of Number) Identification No.)
incorporation)
2187 Atlantic Street, Stamford, CT 06902
(Address of principal executive (Zip Code)
offices)
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 December 7, 2007, Star Gas Partners, L.P., a Delaware partnership (the
"Partnership"), issued a press release announcing its financial results for its
fiscal fourth quarter ending September 30, 2007. 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 December
7, 2007.
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: Kestrel Heat, LLC (General Partner)
By: /s/ Richard F. Ambury
------------------------------------------
Name: Richard F. Ambury
Title: Chief Financial Officer
Principal Financial Officer
Date: December 7, 2007
Exhibit 99.1
Star Gas Partners, L.P. Reports
Seasonal Fourth Quarter Loss and Fiscal 2007 Results
STAMFORD, Conn.--(BUSINESS WIRE)--Dec. 7, 2007--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 the fiscal year ended September 30,
2007 and its fiscal 2007 fourth quarter, a non-heating season period.
In addition, Star announced that it completed two acquisitions during
the fiscal 2007 fourth quarter. During the full fiscal 2007 period,
Star acquired seven retail heating oil dealers with approximately
19,400 home heating oil customers and several thousand plumbing
customers. Because these acquisitions were completed after the heating
season, they did not affect fiscal year 2007 results in a material
way.
For the fiscal year ended September 30, 2007, compared to the
fiscal year ended September 30, 2006
Star reported a 2.3 percent decrease in revenues to $1,267.2
million, compared to $1,296.5 million, as increases in selling prices
were more than offset by a decline in product sales due to lower
volume.
Home heating oil volume declined 13.3 million gallons, or 3.4
percent, to 376.6 million gallons, as 3.1 percent colder temperatures
were more than offset by the impact of net customer attrition and
other factors. For fiscal 2007, Star lost (excluding gains from
acquisitions) 5.0 percent of its home heating oil customer base, an
improvement from fiscal 2006 in which Star lost 6.6 percent of its
home heating oil customer base.
Total gross profit increased by $3.7 million, as the impact of an
expansion in home heating oil margins of 2.8 cents and an improvement
in service and installation profitability of $3.7 million more than
offset the impact of lower sales volume.
Total operating expenses (delivery, branch, general and
administrative) decreased by $9.9 million, or 4.3 percent, largely due
to lower insurance expense of $4.7 million and other expense
reductions of $5.0 million.
Operating income increased $78.3 million to $55.1 million. The
majority of this increase relates to the favorable non-cash change in
the fair value of derivative instruments of $61.3 million. The balance
of the change, or $17.0 million, was largely due to lower operating
costs of $9.9 million, an improvement in service and installation
profitability of $3.7 million and lower depreciation and amortization
expense of $3.4 million.
For fiscal 2006, Star recorded a $6.6 million non-cash loss on the
early redemption and conversion of our 10.25% senior notes.
Net interest expense decreased $9.7 million, or 45.6 percent, to
$11.5 million due to lower average debt outstanding of approximately
$63.3 million and higher invested cash balances.
Net income increased $92.5 million to $38.2 million, due to a
$78.3 million increase in operating income, lower net interest expense
of $9.7 million and the non-recurrence of a $6.6 million loss on the
redemption of debt recorded in fiscal 2006, reduced by higher income
tax expense of $1.5 million and a $1.1 million charge relating to the
sale of the propane segment in fiscal 2005.
Adjusted EBITDA increased by $13.5 million to $68.4 million, as an
increase in Adjusted EBITDA in the base business was slightly reduced
by the expected summertime losses from acquisitions. In fiscal 2007,
we were able to increase our per gallon margins and reduce our
operating expenses, which more than offset the impact of lower sales
volume and resulted in an increase in Adjusted EBITDA. Adjusted EBITDA
is a non-GAAP financial measure (see below reconciliation) that 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). Management
believes the presentation of Adjusted EBITDA is relevant and useful
because it allows investors to view the Partnership's performance in a
manner similar to the method management uses, adjusted for non- cash
items (such as changes in the fair value of derivative instruments and
losses on redemption of debt) and makes it easier to compare its
results with other companies that have different financing and capital
structures. In addition, certain of Star's financial covenants in its
material debt documents are calculated using Adjusted EBITDA.
Star Gas Partners Chief Executive Officer Dan Donovan, stated, "We
are pleased with the recent success of our acquisition program, which
added 19,400 home heating oil customers in fiscal 2007, and almost
totally offset customers lost through net attrition."
Mr. Donovan, continued, "We have seen all-time record home heating
oil prices since the end of fiscal 2007. To counteract this
challenging industry environment, our entire organization continues to
focus on offering our valued customers excellence in all facets of our
service and also keeping the Partnership's operating expenses under
control. The difficult market conditions may also present increased
opportunities for Star to make additional acquisitions."
For the three months ended September 30, 2007, compared to the
three months ended September 30, 2006
Star reported a 9.2 percent decrease in total revenues to $137.6
million, compared to total revenues of $151.5 million in the year-ago
period, as the impact of higher selling prices was more than offset by
a 15.9 percent reduction in home heating oil volume. Selling prices
were higher during the quarter due to the increase in the wholesale
cost of home heating oil. The home heating oil volume decline was due
to warmer temperatures in September and other factors.
Total gross profit declined by $7.8 million due to a reduction in
home heating oil margins of 9.9 cents per gallon, lower sales volume
and lower service and installation gross profit. During the fourth
quarter of fiscal 2006, Star took advantage of favorable conditions in
the home heating oil spot market, which resulted in an expansion of
its per gallon margin. Star's management believes the home heating oil
margins realized in the fourth quarter of fiscal 2007 are more
representative of typical summertime margins.
Total operating expenses (delivery, branch, general and
administrative) decreased by $2.8 million, or 6.1 percent, to $42.8
million.
The Partnership's operating loss decreased by $12.7 million to a
$30.0 million loss, as compared to an operating loss of $42.7 million,
as a favorable change in the fair value of derivatives of $17.3
million and lower operating costs (including depreciation and
amortization) of $3.3 million, were partially offset by lower gross
profit of $7.8 million.
The net loss decreased by $12.8 million to a $33.1 million loss,
as compared to a net loss of $45.9 million, primarily due to a $12.7
million increase in operating income, lower net interest expense of
$0.8 million and an increase in the income tax benefit of $0.4
million, reduced by a $1.1 million adjustment to sale of discontinued
operations.
The Adjusted EBITDA loss increased by $5.0 million to $21.6
million, due to lower per gallon gross profit margins ($2.5 million),
an expected loss from acquisitions ($0.8 million) and the impact of
lower volume and other factors ($1.7 million). Adjusted EBITDA is a
non-GAAP financial measure (see below reconciliation) that 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). Management
believes the presentation of Adjusted EBITDA is relevant and useful
because it allows investors to view the Partnership's performance in a
manner similar to the method management uses, adjusted for non cash
items (such as changes in the fair value of derivative instruments and
losses on redemption of debt) and makes it easier to compare its
results with other companies that have different financing and capital
structures. In addition, certain of Star's financial covenants in its
material debt documents are calculated using Adjusted EBITDA.
REMINDER: Star Gas management will host a conference call and
webcast today at 11:00 a.m. (ET). Conference call dial-in is
800/603-3143 or 706/634-8769 (international callers). Please note the
conference ID# is 26522078. A webcast is also available at
www.star-gas.com/MediaList.cfm 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 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 effect strategic acquisitions or redeploy
assets, the impact of litigation, the continuing residual impact of
the business process redesign project and our ability to address
issues related to that project, our ability to contract for our
current and future supply needs, 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, the ability to attract and retain employees, customer
credit worthiness, counter party credit worthiness 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, 2007, 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
CONSOLIDATED BALANCE SHEETS
Years Ended
September 30,
-------------------
(in thousands) 2007 2006
- -------------------------------------------------- --------- ---------
ASSETS
Current assets
Cash and cash equivalents $112,886 $ 91,121
Receivables, net of allowance of $7,645 and
$6,532, respectively 78,923 87,393
Inventories 85,968 75,859
Fair asset value of derivative instruments 14,510 3,766
Prepaid expenses and other current assets 28,216 37,741
--------- ---------
Total current assets 320,503 295,880
--------- ---------
Property and equipment, net 41,721 42,377
Long-term portion of accounts receivables 1,362 3,513
Goodwill 181,496 166,522
Intangibles, net 48,468 61,007
Deferred charges and other assets, net 8,554 10,899
Long-term assets held for sale - 1,010
--------- ---------
Total assets $602,104 $581,208
========= =========
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities
Accounts payable $ 18,797 $ 21,544
Fair liability value of derivative instruments 5,312 13,790
Current maturities of long-term debt - 96
Accrued expenses and other current liabilities 65,444 62,651
Unearned service contract revenue 37,219 36,634
Customer credit balances 71,109 73,863
--------- ---------
Total current liabilities 197,881 208,578
--------- ---------
Long-term debt 173,941 174,056
Other long-term liabilities 13,951 25,249
Partners' capital
Common unitholders 232,895 194,818
General partner (129) (293)
Accumulated other comprehensive income (loss) (16,435) (21,200)
--------- ---------
Total partners' capital 216,331 173,325
--------- ---------
Total liabilities and partners' capital $602,104 $581,208
========= =========
STAR GAS PARTNERS, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended Twelve Months Ended
September 30, September 30,
------------------- -----------------------
(in thousands, except per
unit data) 2007 2006 2007 2006
- -------------------------- --------- --------- ----------- -----------
Sales:
Product $ 94,381 $105,924 $1,088,610 $1,109,332
Installations and
service 43,174 45,572 178,565 187,180
--------- --------- ----------- -----------
Total sales 137,555 151,496 1,267,175 1,296,512
Cost and expenses:
Cost of product 74,848 79,672 804,928 825,694
Cost of installations
and service 41,465 42,746 176,947 189,214
(Increase) decrease in
the fair value of
derivative instruments 1,340 18,601 (15,664) 45,677
Delivery and branch
expenses 39,197 41,579 199,090 205,037
Depreciation and
amortization expenses 7,073 7,570 28,995 32,415
General and
administrative expenses 3,607 4,025 17,768 21,673
--------- --------- ----------- -----------
Operating income (loss) (29,975) (42,697) 55,111 (23,198)
Interest expense (5,167) (5,003) (20,448) (26,288)
Interest income 2,597 1,674 8,923 5,085
Amortization of debt
issuance costs (570) (570) (2,282) (2,438)
Loss on redemption of debt - - - (6,603)
--------- --------- ----------- -----------
Income (loss) from
continuing operations
before income taxes (33,115) (46,596) 41,304 (53,442)
Income tax expense
(benefit) (1,090) (681) 2,002 477
--------- --------- ----------- -----------
Income (loss) from
continuing operations (32,025) (45,915) 39,302 (53,919)
Loss on sale of
discontinued operations,
net of income taxes (1,061) - (1,061) -
--------- --------- ----------- -----------
Income (loss) before
cumulative effect of
change in accounting
principles (33,086) (45,915) 38,241 (53,919)
Cumulative effect of
change in accounting
principles -- change in
inventory pricing method - - - (344)
--------- --------- ----------- -----------
Net income (loss) $(33,086) $(45,915) $ 38,241 $ (54,263)
========= ========= =========== ===========
General Partner's
interest in net income
(loss) (141) (200) 164 (160)
--------- --------- ----------- -----------
Limited Partners' interest
in net income (loss) $(32,945) $(45,715) $ 38,077 $ (54,103)
========= ========= =========== ===========
Basic and diluted income
(loss) per Limited
Partner Unit:
Continuing operations $ (0.42) $ (0.60) $ 0.51 $ (1.01)
Loss on sale of
discontinued operations (0.01) - (0.01) -
Cumulative effect of
change in accounting
principle - - - (0.01)
--------- --------- ----------- -----------
Net income (loss) $ (0.43) $ (0.60) $ 0.50 $ (1.02)
========= ========= =========== ===========
Weighted average number of
Limited Partner units
outstanding:
Basic 75,774 75,774 75,774 52,944
========= ========= =========== ===========
Diluted 75,774 75,774 75,774 52,944
========= ========= =========== ===========
SUPPLEMENTAL INFORMATION
The Partnership uses EBITDA and adjusted EBITDA as measures of
liquidity and they are being included because the Partnership believes
that they provide investors and industry analysts with additional
information to evaluate the Partnership's ability to pay quarterly
distributions. EBITDA and adjusted EBITDA are not recognized terms
under generally accepted accounting principles ("GAAP") and should not
be considered as an alternative to net income/(loss) or net cash
provided by operating activities determined in accordance with GAAP.
Because EBITDA and adjusted EBITDA as determined by the Partnership
excludes some, but not all of the items that affect net income/(loss),
it may not be comparable to EBITDA and adjusted EBITDA or similarly
titled measures used by other companies. The following tables set
forth (i) the calculation of EBITDA and adjusted EBITDA and (ii) a
reconciliation of EBITDA and adjusted EBITDA, as so calculated, to
cash provided by operating activities.
STAR GAS PARTNERS, L.P. AND SUBSIDIARIES
RECONCILIATION OF EBITDA AND ADJUSTED EBITDA
Three Months Ended
September 30,
(in thousands) 2007 2006
- -------------------------------------------------- --------- ---------
Income (loss) from continuing operations $(32,025) $(45,915)
Plus:
Income tax expense (benefit) (1,090) (681)
Amortization of debt issuance cost 570 570
Interest expense, net 2,570 3,329
Depreciation and amortization 7,073 7,570
--------- ---------
EBITDA from continuing operations (22,902) (35,127)
(Increase) / decrease in the fair value of
derivative instruments 1,340 18,601
--------- ---------
Adjusted EBITDA(a) (21,562) (16,526)
Add / (subtract)
- --------------------------------------------------
Income tax expense 1,090 681
Interest expense, net (2,570) (3,329)
Provision for losses on accounts receivable 263 (205)
Gain on sales of fixed assets, net (108) (149)
Change in operating assets and liabilities 18,521 45,736
--------- ---------
Net cash provided by (used in) operating
activities $ (4,366) $ 26,208
========= =========
Three Months Ended
September 30,
(in thousands) 2007 2006
- -------------------------------------------------- --------- ---------
Home heating oil gallons sold (millions) 25,383 30,181
========= =========
(a)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,
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 and
investors measure its overall performance and liquidity, including its
ability to pay quarterly equity distributions, service its long-term
debt and other fixed obligations and fund its capital expenditures and
working capital requirements. Certain of Star's financial covenants in
its material debt documents are calculated using Adjusted EBITDA. 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.
SUPPLEMENTAL INFORMATION
- ----------------------------------------------------------------------
STAR GAS PARTNERS, L.P. AND SUBSIDIARIES
RECONCILIATION OF EBITDA AND ADJUSTED EBITDA
Twelve Months Ended
September 30,
(in thousands) 2007 2006
- ------------------------------------------------- --------- ---------
Income (loss) from continuing operations $ 39,302 $(53,919)
Plus:
Income tax expense (benefit) 2,002 477
Amortization of debt issuance cost 2,282 2,438
Interest expense, net 11,525 21,203
Depreciation and amortization 28,995 32,415
--------- ---------
EBITDA from continuing operations 84,106 2,614
(Increase) / decrease in the fair value of
derivative instruments (15,664) 45,677
Loss on redemption of debt - 6,603
--------- ---------
Adjusted EBITDA(a) 68,442 54,894
Add / (subtract)
- -------------------------------------------------
Income tax expense (2,002) (477)
Interest expense, net (11,525) (21,203)
Provision for losses on accounts receivable 5,726 6,105
Gain on sales of fixed assets, net (864) (956)
Change in operating assets and liabilities (8,662) (19,999)
--------- ---------
Net cash provided by operating activities $ 51,115 $ 18,364
========= =========
Twelve Months Ended
September 30,
(in thousands) 2007 2006
- ------------------------------------------------- --------- ---------
Home heating oil gallons sold (millions) 376,645 389,921
========= =========
(a)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,
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 and
investors measure its overall performance and liquidity, including its
ability to pay quarterly equity distributions, service its long-term
debt and other fixed obligations and fund its capital expenditures and
working capital requirements. Certain of Star's financial covenants in
its material debt documents are calculated using Adjusted EBITDA. 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.
CONTACT: Star Gas Partners
Investor Relations, 203-328-7310
or
Jaffoni & Collins Incorporated
Robert Rinderman or Steven Hecht, 212-835-8500
SGU@jcir.com