STAR GAS PARTNERS, L.P. REPORTS FISCAL 2004 SECOND QUARTER RESULTS
STAR GAS PARTNERS, L.P. REPORTS FISCAL 2004 SECOND QUARTER RESULTS
April 29, 2004
For the three months ended March 31, 2004, Star's volume increased approximately 1% to 352 million gallons, versus 349 million gallons in the second quarter of fiscal 2003. This increase is primarily attributable to the effect of Star's acquisition of 11 companies since January 1, 2003, which more than offset the negative impact of changes in delivery scheduling, temperatures that were warmer in the second quarter of 2004 than the colder weather experienced in the comparable prior year period and net customer losses. Notwithstanding the effect of Star's acquisition program and 1.5 cents per gallon higher heating oil and propane gross profit margins, operating income declined by $0.3 million to $93.4 million. This was due to $1.8 million in higher depreciation and amortization expense, as well as the effect of warmer weather, delivery patterns and account losses.
Net income for the three months ended March 31, 2004 declined to $80.7 million, from $83.2 million in the comparable period last year. This was primarily due to lower income from discontinued operations, relating to the Partnership's Total Gas & Electric subsidiary, which was sold on March 31, 2004, an increase in interest expense, as well as from the slight decline in operating income. Diluted net income per limited partner unit declined to $2.27 per unit in the fiscal 2004 second quarter from $2.53 in the comparable period in fiscal 2003 due to the decline in net income as well as the increased number of units outstanding used to finance Star's acquisition program and improve its capital structure.
During the quarter, the Partnership raised $73.6 million by issuing $35.0 million of its Senior Notes due 2013, at a premium to par for total proceeds of $38.6 million, and by selling 1.495 million common units for $35.0 million. The proceeds from these financings were used to repay amounts outstanding under the Partnership's acquisition facilities and to fund all scheduled debt amortizations for fiscal 2004. As a result of these financings, the Partnership had $96.6 million available under its revolving acquisition facilities as of March 31, 2004.
Star also reported that on March 30, 2004, it purchased Tri-County Fuel Oil of Perth Amboy, NJ. Tri-County had 1,650 customers and 1.5 million gallons of annual volume.
For the six months ended March 31, 2004, volume increased 2% to 583 million gallons, versus 571 million gallons in the same period in fiscal 2003, despite 5% warmer temperatures than last year. This was due to the effect of the 13 companies acquired since October 1, 2003. Operating income for the six months ended March 31, 2004 increased approximately $0.4 million to $124.6 million, from $124.2 million in the comparable period in 2003. This increase was due primarily to Star's acquisition program and an approximate 1.0 cent per gallon increase in per gallon gross profit margins. Higher depreciation and amortization of $3.5 million largely relating to acquisitions reduced these increases.
Net income for the period increased approximately $0.8 million to $100.0 million, from $99.2 million in the comparable period in fiscal 2003. This was primarily due to the aforementioned operating income increase, as well as the adoption in fiscal 2003 of SFAS No. 142 relating to accounting for goodwill and other intangibles, which reduced fiscal 2003 first half net income by $3.9 million, offset by increased interest expense in fiscal 2004. Diluted net income per limited partner unit declined from $3.02 in the first six months of fiscal 2003, to $2.86 in the comparable period in fiscal 2004, due to an increase in the number of units outstanding relating to the Partnerships acquisition program and its improved capital structure.
In commenting on this performance, Chairman Irik P. Sevin stated: "We are pleased by a) Star's continued aggressive, yet disciplined acquisition program; b) the initial benefits from the Petro Division's Business Process Redesign Program; and, c) the excellent performance of the propane division, which has successfully integrated nine acquisitions since October 1, 2003, while at the same time improving base business operations. In addition, Star's capital raising activities has improved its financial flexibility."
Mr. Sevin went on to note: "While we achieved certain benefits from the Petro Division's Business Process Redesign Program, they were not as significant as we had expected in this, the first year of its execution. However, we now have the foundation of a platform, which we believe will enable us to capitalize on Petro's unique size to build a brand in the highly fragmented home heating oil industry. This should enable us to eventually grow internally as well as through acquisitions. We are also pleased with having sold, for a slight gain, our TG&E subsidiary, which we believe did not fit with the Partnership's long-term strategy."
Star Gas Partners, L.P., is a leading distributor of home heating oil and propane. The Partnership is the nation's largest retail distributor of home heating oil and the nation's seventh largest retail propane distributor. Additional information is available at www.star-gas.com.
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 and other factors impacting the propane and home heating oil distribution industries.
