SEC Filing - Star Group, L.P.

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10-Q

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

☐ 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

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.

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.

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.

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.

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