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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2023

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-14129

STAR GROUP, L.P.

(Exact Name of Registrant as Specified in its Charter)

Delaware

06-1437793

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

 

 

9 West Broad Street

Stamford, Connecticut

06902

(Address of principal executive office)

(Zip Code)

 

Registrant’s telephone number, including area code: (203) 328-7310

 

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Common Units

 

SGU

 

New York Stock Exchange

Common Unit Purchase Rights

 

N/A

 

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

 

 

 

 

Non- accelerated filer

Smaller reporting company

 

 

 

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No ☒

At April 30, 2023, the registrant had 35,602,552 Common Units outstanding.

 

 

 


STAR GROUP, L.P. AND SUBSIDIARIES

INDEX TO FORM 10-Q

 

 

Page

Part I Financial Information

 

 

Item 1 - Condensed Consolidated Financial Statements

 

3

Condensed Consolidated Balance Sheets as of March 31, 2023 (unaudited) and September 30, 2022

 

3

Condensed Consolidated Statements of Operations (unaudited) for the three and six months ended March 31, 2023 and March 31, 2022

 

4

Condensed Consolidated Statements of Comprehensive Income (Loss) (unaudited) for the three and six months ended March 31, 2023 and March 31, 2022

 

5

Condensed Consolidated Statement of Partners’ Capital (unaudited) for the three and six months ended March 31, 2023 and March 31, 2022

 

6-7

Condensed Consolidated Statements of Cash Flows (unaudited) for the six months ended March 31, 2023 and March 31, 2022

 

8

Notes to Condensed Consolidated Financial Statements (unaudited)

 

9-21

Item 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

22-39

Item 3 - Quantitative and Qualitative Disclosures About Market Risk

 

40

Item 4 - Controls and Procedures

 

40

Part II Other Information:

 

41

Item 1 - Legal Proceedings

 

41

Item 1A - Risk Factors

 

41

Item 2 - Purchase of Equity Securities by Issuer

 

41

Item 3 - Defaults Upon Senior Securities

 

41

Item 4 - Mine Safety Disclosures

 

41

Item 5 - Other Information

 

41

Item 6 - Exhibits

 

42

Signatures

 

43

2


Part I. FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

STAR GROUP, L.P. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

 

 

 

March 31,

 

 

September 30,

 

 

 

2023

 

 

2022

 

(in thousands)

 

(unaudited)

 

 

 

 

ASSETS

 

 

 

 

Current assets

 

 

 

 

 

 

Cash and cash equivalents

 

$

22,085

 

 

$

14,620

 

   Receivables, net of allowance of $10,795 and $7,755, respectively

 

 

259,099

 

 

 

138,252

 

Inventories

 

 

71,732

 

 

 

83,557

 

Fair asset value of derivative instruments

 

 

 

 

 

16,823

 

Weather hedge contract receivable

 

 

12,500

 

 

 

 

Prepaid expenses and other current assets

 

 

30,025

 

 

 

32,016

 

Assets held for sale

 

 

 

 

 

2,995

 

Total current assets

 

 

395,441

 

 

 

288,263

 

Property and equipment, net

 

 

105,559

 

 

 

107,744

 

Operating lease right-of-use assets

 

 

90,325

 

 

 

93,435

 

Goodwill

 

 

254,354

 

 

 

254,110

 

Intangibles, net

 

 

77,538

 

 

 

84,510

 

Restricted cash

 

 

250

 

 

 

250

 

Captive insurance collateral

 

 

68,175

 

 

 

66,662

 

Deferred charges and other assets, net

 

 

15,508

 

 

 

17,501

 

Total assets

 

$

1,007,150

 

 

$

912,475

 

LIABILITIES AND PARTNERS’ CAPITAL

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

Accounts payable

 

$

41,026

 

 

$

49,061

 

Revolving credit facility borrowings

 

 

69,936

 

 

 

20,276

 

Fair liability value of derivative instruments

 

 

11,516

 

 

 

183

 

Current maturities of long-term debt

 

 

16,500

 

 

 

12,375

 

Current portion of operating lease liabilities

 

 

17,248

 

 

 

17,211

 

Accrued expenses and other current liabilities

 

 

162,999

 

 

 

125,561

 

Unearned service contract revenue

 

 

71,363

 

 

 

62,858

 

Customer credit balances

 

 

52,032

 

 

 

93,555

 

Total current liabilities

 

 

442,620

 

 

 

381,080

 

Long-term debt

 

 

139,459

 

 

 

151,709

 

Long-term operating lease liabilities

 

 

78,109

 

 

 

81,385

 

Deferred tax liabilities, net

 

 

13,392

 

 

 

25,620

 

Other long-term liabilities

 

 

15,395

 

 

 

14,766

 

Partners’ capital

 

 

 

 

 

 

Common unitholders

 

 

336,674

 

 

 

277,177

 

General partner

 

 

(3,553

)

 

 

(3,656

)

Accumulated other comprehensive loss, net of taxes

 

 

(14,946

)

 

 

(15,606

)

Total partners’ capital

 

 

318,175

 

 

 

257,915

 

Total liabilities and partners’ capital

 

$

1,007,150

 

 

$

912,475

 

See accompanying notes to condensed consolidated financial statements.

3


STAR GROUP, L.P. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

 

 

Three Months
Ended March 31,

 

 

Six Months
Ended March 31,

 

(in thousands, except per unit data - unaudited)

2023

 

2022

 

 

2023

 

 

2022

 

Sales:

 

 

 

 

 

 

 

 

 

 

Product

$

669,212

 

$

712,462

 

 

$

1,239,141

 

 

$

1,123,727

 

Installations and services

 

68,405

 

 

70,081

 

 

 

146,663

 

 

 

147,086

 

Total sales

 

737,617

 

 

782,543

 

 

 

1,385,804

 

 

 

1,270,813

 

Cost and expenses:

 

 

 

 

 

 

 

 

 

 

Cost of product

 

466,267

 

 

492,334

 

 

 

885,360

 

 

 

766,928

 

Cost of installations and services

 

68,311

 

 

70,136

 

 

 

144,854

 

 

 

144,184

 

(Increase) decrease in the fair value of derivative instruments

 

3,022

 

 

(17,615

)

 

 

20,658

 

 

 

(4,212

)

Delivery and branch expenses

 

95,942

 

 

107,486

 

 

 

193,878

 

 

 

196,475

 

Depreciation and amortization expenses

 

7,626

 

 

8,081

 

 

 

15,463

 

 

 

16,529

 

General and administrative expenses

 

6,698

 

 

5,902

 

 

 

13,554

 

 

 

12,578

 

Finance charge income

 

(1,764

)

 

(1,026

)

 

 

(3,083

)

 

 

(1,538

)

Operating income

 

91,515

 

 

117,245

 

 

 

115,120

 

 

 

139,869

 

Interest expense, net

 

(4,963

)

 

(2,729

)

 

 

(9,237

)

 

 

(4,787

)

Amortization of debt issuance costs

 

(258

)

 

(237

)

 

 

(587

)

 

 

(476

)

Income before income taxes

 

86,294

 

 

114,279

 

 

 

105,296

 

 

 

134,606

 

Income tax expense

 

24,253

 

 

32,900

 

 

 

29,716

 

 

 

38,738

 

Net income

$

62,041

 

$

81,379

 

 

$

75,580

 

 

$

95,868

 

General Partner’s interest in net income

 

562

 

 

697

 

 

 

684

 

 

 

819

 

Limited Partners’ interest in net income

$

61,479

 

$

80,682

 

 

$

74,896

 

 

$

95,049

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted income per Limited Partner Unit (1):

$

1.42

 

$

1.75

 

 

$

1.74

 

 

$

2.05

 

Weighted average number of Limited Partner units outstanding:

 

 

 

 

 

 

 

 

 

 

Basic and Diluted

 

35,653

 

 

37,634

 

 

 

35,786

 

 

 

38,218

 

 

(1) See Note 15 - Earnings Per Limited Partner Unit.

See accompanying notes to condensed consolidated financial statements.

4


STAR GROUP, L.P. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

 

 

 

Three Months
Ended March 31,

 

 

Six Months
Ended March 31,

 

(in thousands - unaudited)

 

2023

 

2022

 

 

2023

 

 

2022

 

Net income

 

$

62,041

 

$

81,379

 

 

$

75,580

 

 

$

95,868

 

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

Unrealized gain on pension plan obligation

 

 

382

 

 

224

 

 

 

762

 

 

 

448

 

Tax effect of unrealized gain on pension plan obligation

 

 

(104

)

 

(61

)

 

 

(201

)

 

 

(106

)

Unrealized gain (loss) on captive insurance collateral

 

 

775

 

 

(2,062

)

 

 

1,130

 

 

 

(2,674

)

Tax effect of unrealized gain (loss) on captive insurance collateral

 

 

(164

)

 

435

 

 

 

(238

)

 

 

564

 

Unrealized gain (loss) on interest rate hedges

 

 

(704

)

 

1,549

 

 

 

(1,081

)

 

 

2,267

 

Tax effect of unrealized gain (loss) on interest rate hedges

 

 

186

 

 

(410

)

 

 

288

 

 

 

(603

)

Total other comprehensive income (loss)

 

 

371

 

 

(325

)

 

 

660

 

 

 

(104

)

Total comprehensive income

 

$

62,412

 

$

81,054

 

 

$

76,240

 

 

$

95,764

 

See accompanying notes to condensed consolidated financial statements.

5


STAR GROUP, L.P. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF PARTNERS’ CAPITAL

 

 

 

Three Months Ended March 31, 2023

 

 

 

Number of Units

 

 

 

 

 

 

 

 

Accum. Other

 

 

Total

 

(in thousands - unaudited)

 

Common

 

 

General
Partner

 

 

Common

 

 

General
Partner

 

 

Comprehensive
Income (Loss)

 

 

Partners’
Capital

 

Balance as of December 31, 2022

 

 

35,681

 

 

 

326

 

 

$

281,516

 

 

$

(3,826

)

 

$

(15,317

)

 

$

262,373

 

Net income

 

 

 

 

 

 

 

 

61,479

 

 

 

562

 

 

 

 

 

 

62,041

 

Unrealized gain on pension plan obligation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

382

 

 

 

382

 

Tax effect of unrealized gain on pension plan obligation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(104

)

 

 

(104

)

Unrealized gain on captive insurance collateral

 

 

 

 

 

 

 

 

 

 

 

 

 

 

775

 

 

 

775

 

Tax effect of unrealized gain on captive insurance collateral

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(164

)

 

 

(164

)

Unrealized loss on interest rate hedges

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(704

)

 

 

(704

)

Tax effect of unrealized loss on interest rate hedges

 

 

 

 

 

 

 

 

 

 

 

 

 

 

186

 

 

 

186

 

Distributions

 

 

 

 

 

 

 

 

(5,442

)

 

 

(289

)

 

 

 

 

 

(5,731

)

Retirement of units

 

 

(78

)

 

 

 

 

 

(879

)

 

 

 

 

 

 

 

 

(879

)

Balance as of March 31, 2023 (unaudited)

 

 

35,603

 

 

 

326

 

 

$

336,674

 

 

$

(3,553

)

 

$

(14,946

)

 

$

318,175

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31, 2022

 

 

 

Number of Units

 

 

 

 

 

 

 

 

Accum. Other

 

 

Total

 

(in thousands - unaudited)

 

Common

 

 

General
Partner

 

 

Common

 

 

General
Partner

 

 

Comprehensive
Income (Loss)

 

 

Partners’
Capital

 

Balance as of December 31, 2021

 

 

37,942

 

 

 

326

 

 

$

292,139

 

 

$

(2,963

)

 

$

(13,817

)

 

$

275,359

 

Net income

 

 

 

 

 

 

 

 

80,682

 

 

 

697

 

 

 

 

 

 

81,379

 

Unrealized gain on pension plan obligation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

224

 

 

 

224

 

Tax effect of unrealized gain on pension plan obligation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(61

)

 

 

(61

)

Unrealized loss on captive insurance collateral

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,062

)

 

 

(2,062

)

Tax effect of unrealized loss on captive insurance collateral

 

 

 

 

 

 

 

 

 

 

 

 

 

 

435

 

 

 

435

 

Unrealized gain on interest rate hedges

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,549

 

 

 

1,549

 

Tax effect of unrealized gain on interest rate hedges

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(410

)

 

 

(410

)

Distributions

 

 

 

 

 

 

 

 

(5,384

)

 

 

(258

)

 

 

 

 

 

(5,642

)

Retirement of units

 

 

(992

)

 

 

 

 

 

(10,417

)

 

 

 

 

 

 

 

 

(10,417

)

Balance as of March 31, 2022 (unaudited)

 

 

36,950

 

 

 

326

 

 

$

357,020

 

 

$

(2,524

)

 

$

(14,142

)

 

$

340,354

 

See accompanying notes to condensed consolidated financial statements.

 

6


STAR GROUP, L.P. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF PARTNERS’ CAPITAL

 

 

 

Six Months Ended March 31, 2023

 

 

 

Number of Units

 

 

 

 

 

 

 

 

Accum. Other

 

 

Total

 

(in thousands - unaudited)

 

Common

 

 

General
Partner

 

 

Common

 

 

General
Partner

 

 

Comprehensive
Income (Loss)

 

 

Partners’
Capital

 

Balance as of September 30, 2022

 

 

36,092

 

 

 

326

 

 

$

277,177

 

 

$

(3,656

)

 

$

(15,606

)

 

$

257,915

 

Net income

 

 

 

 

 

 

 

 

74,896

 

 

 

684

 

 

 

 

 

 

75,580

 

Unrealized gain on pension plan obligation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

762

 

 

 

762

 

Tax effect of unrealized gain on pension plan obligation