Star Group, L.P. (the "Company" or "Star") (NYSE:SGU), a home
energy distributor and services provider, today announced financial
results for its fiscal 2023 first quarter, the three month period
ended December 31, 2022.
Three Months Ended December 31, 2022
Compared to the Three Months Ended December 31, 2021For
the fiscal 2023 first quarter, Star reported a 32.8 percent
increase in total revenue to $648.2 million compared with $488.3
million in the prior-year period, reflecting higher selling prices.
The volume of home heating oil and propane sold during the fiscal
2023 first quarter increased by 2.2 million gallons, or 2.5
percent, to 89.2 million gallons, reflecting colder weather and the
impact of acquisitions, more than offsetting net customer attrition
and other factors. Temperatures in Star's geographic areas of
operation for the three months ended December 31, 2022 were 14.9%
colder than the three months ended December 31, 2021 but 6.6%
warmer than normal, as reported by the National Oceanic and
Atmospheric Administration.
Star’s net income decreased by $1.0 million in
the quarter, to $13.5 million, primarily due to an unfavorable non
cash change in the fair value of derivative instruments of $4.2
million and a $2.2 million increase in interest expense, partially
offset by an increase in Adjusted EBITDA of $4.6 million and a $0.3
million decrease in income tax expense.
The Company reported first quarter Adjusted
EBITDA (a non-GAAP measure defined below) of $49.1 million, an
increase of $4.6 million, reflecting higher sales volume of
home heating oil and propane and an increase in home heating oil
and propane per-gallon margins, more than offsetting higher
operating costs.
“The first quarter of fiscal 2023 was somewhat
unusual in that one month – October – saw temperatures which were
130% colder than in the prior-year period,” Jeff Woosnam, Star
Group’s President and Chief Executive Officer. “However, this is
typically a transitional month, with a lower overall impact on
volume sold, and it also falls outside of our weather hedge
contract. The rest of the quarter’s weather was only slightly
colder than fiscal 2022, resulting in a $0.4 million charge under
our weather hedge contract.
“Notably, we experienced nice growth in net
customers this quarter, with a net gain of 1.7% – the best such
performance in years. We were well-positioned to take advantage of
certain temporary market conditions during the quarter with regards
to physical supply. We believe our ongoing efforts at
improving the customer experience, combined with the reputation of
our brands as being among the most reliable and trusted within the
markets we serve, also contributed to net account growth during the
quarter. At the same time, we acquired two heating oil dealers that
are expected to add roughly 1.5 million gallons of oil and other
petroleum products annually to the Company.”
EBITDA and Adjusted EBITDA (Non-GAAP
Financial Measures)EBITDA (Earnings from continuing
operations before net interest expense, income taxes, depreciation
and amortization) and Adjusted EBITDA (Earnings from continuing
operations before net interest expense, income taxes, depreciation
and amortization, (increase) decrease in the fair value of
derivatives, other income (loss), net, multiemployer pension plan
withdrawal charge, gain or loss on debt redemption, goodwill
impairment, and other non-cash and non-operating charges) are
non-GAAP financial measures that are used as supplemental financial
measures by management and external users of the Company’s
financial statements, such as investors, commercial banks and
research analysts, to assess Star’s position with regard to the
following:
- compliance with certain financial
covenants included in our debt agreements;
- financial performance without
regard to financing methods, capital structure, income taxes or
historical cost basis;
- operating performance and return on
invested capital compared to those of other companies in the retail
distribution of refined petroleum products, without regard to
financing methods and capital structure;
- ability to generate cash sufficient
to pay interest on our indebtedness and to make distributions to
our partners; and
- the viability of acquisitions and
capital expenditure projects and the overall rates of return of
alternative investment opportunities.
The method of calculating Adjusted EBITDA may
not be consistent with that of other companies, and EBITDA and
Adjusted EBITDA both have limitations as analytical tools and so
should not be viewed in isolation but in conjunction with
measurements that are computed in accordance with GAAP. Some of the
limitations of EBITDA and Adjusted EBITDA are as follows:
- EBITDA and Adjusted EBITDA do not
reflect cash used for capital expenditures;
- although depreciation and
amortization are non-cash charges, the assets being depreciated or
amortized often will have to be replaced and EBITDA and Adjusted
EBITDA do not reflect the cash requirements for such
replacements;
- EBITDA and Adjusted EBITDA do not
reflect changes in, or cash requirements for, working capital;
- EBITDA and Adjusted EBITDA do not
reflect the cash necessary to make payments of interest or
principal on indebtedness; and
- EBITDA and Adjusted EBITDA do not
reflect the cash required to pay taxes.
REMINDER:Members of Star's
management team will host a webcast and conference call at 11:00
a.m. Eastern Time tomorrow, February 2, 2023. The webcast will be
accessible on the company’s website, at www.stargrouplp.com, and
the telephone number for the conference call is 888-346-3470 (or
412-317-5169 for international callers).
About Star Group, L.P.Star
Group, L.P. is a full service provider specializing in the sale of
home heating products and services to residential and commercial
customers to heat their homes and buildings. The Company also sells
and services heating and air conditioning equipment to its home
heating oil and propane customers and, to a lesser extent, provides
these offerings to customers outside of its home heating oil and
propane customer base. Star also sells diesel, gasoline and home
heating oil on a delivery only basis. We believe Star is the
nation's largest retail distributor of home heating oil based upon
sales volume. Including its propane locations, Star serves
customers in the more northern and eastern states within the
Northeast and Mid-Atlantic U.S. regions. Additional information is
available by obtaining the Company's SEC filings at www.sec.gov and
by visiting Star's website at www.stargrouplp.com, where unit
holders may request a hard copy of Star’s complete audited
financial statements free of charge.
Forward Looking InformationThis
news release includes "forward-looking statements" which represent
the Company’s expectations or beliefs concerning future events that
involve risks and uncertainties, including the impact of
geopolitical events, such as the war in the Ukraine, and its impact
on wholesale product cost volatility, the price and supply of the
products that we sell, our ability to purchase sufficient
quantities of product to meet our customer’s needs, rapid increases
in levels of inflation approaching 40-year highs, uncertain
economic conditions, the consumption patterns of our customers, our
ability to obtain satisfactory gross profit margins, the effect of
weather conditions on our financial performance, our ability to
obtain new customers and retain existing customers, our ability to
make strategic acquisitions, the impact of litigation, natural gas
conversions, the impact of the novel coronavirus, or COVID-19,
pandemic and future global health pandemics, on US and global
economies, future union relations and the outcome of current and
future union negotiations, the impact of current and future
governmental regulations, including climate change, environmental,
health, and safety regulations, the ability to attract and retain
employees, customer credit worthiness, counterparty credit
worthiness, marketing plans, cyber-attacks, increases in interest
rates, global supply chain issues, labor shortages and new
technology. All statements other than statements of historical
facts included in this news release are forward-looking statements.
Without limiting the foregoing, the words "believe," "anticipate,"
"plan," "expect," "seek," "estimate" and similar expressions are
intended to identify forward-looking statements. Although the
Company believes that the expectations reflected in such
forward-looking statements are reasonable, it can give no assurance
that such expectations will prove to be correct and actual results
may differ materially from those projected as a result of certain
risks and uncertainties. These risks and uncertainties include, but
are not limited to, those set forth under the heading "Risk
Factors" and "Business Strategy" in our Annual Report on Form 10-K
(the "Form 10-K") for the fiscal year ended September 30, 2022.
Important factors that could cause actual results to differ
materially from the Company’s expectations ("Cautionary
Statements") are disclosed in this news release and in the
Company’s Form 10-K and our Quarterly Reports on Form 10-Q. All
subsequent written and oral forward-looking statements attributable
to the Company or persons acting on its behalf are expressly
qualified in their entirety by the Cautionary Statements. Unless
otherwise required by law, the Company 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.
(financials follow)
STAR GROUP,
L.P. AND SUBSIDIARIES |
CONSOLIDATED
BALANCE SHEETS |
|
|
|
December 31, |
|
September 30, |
(in
thousands) |
|
2022 |
|
2022 |
ASSETS |
|
(unaudited) |
|
|
Current assets |
|
|
|
|
Cash and cash equivalents |
|
$ |
22,591 |
|
|
$ |
14,620 |
|
Receivables, net of allowance of $8,400 and $7,755,
respectively |
|
|
253,004 |
|
|
|
138,252 |
|
Inventories |
|
|
112,058 |
|
|
|
83,557 |
|
Fair asset value of derivative instruments |
|
|
2,904 |
|
|
|
16,823 |
|
Prepaid expenses and other current assets |
|
|
35,111 |
|
|
|
32,016 |
|
Assets held for sale |
|
|
— |
|
|
|
2,995 |
|
Total current assets |
|
|
425,668 |
|
|
|
288,263 |
|
Property and
equipment, net |
|
|
106,672 |
|
|
|
107,744 |
|
Operating
lease right-of-use assets |
|
|
93,696 |
|
|
|
93,435 |
|
Goodwill |
|
|
254,354 |
|
|
|
254,110 |
|
Intangibles,
net |
|
|
81,772 |
|
|
|
84,510 |
|
Restricted
cash |
|
|
250 |
|
|
|
250 |
|
Captive
insurance collateral |
|
|
67,222 |
|
|
|
66,662 |
|
Deferred
charges and other assets, net |
|
|
17,010 |
|
|
|
17,501 |
|
Total assets |
|
$ |
1,046,644 |
|
|
$ |
912,475 |
|
LIABILITIES AND PARTNERS' CAPITAL |
|
|
|
|
Current liabilities |
|
|
|
|
Accounts payable |
|
$ |
70,927 |
|
|
$ |
49,061 |
|
Revolving credit facility borrowings |
|
|
136,574 |
|
|
|
20,276 |
|
Fair liability value of derivative instruments |
|
|
4,720 |
|
|
|
183 |
|
Current maturities of long-term debt |
|
|
16,500 |
|
|
|
12,375 |
|
Current portion of operating lease liabilities |
|
|
17,439 |
|
|
|
17,211 |
|
Accrued expenses and other current liabilities |
|
|
120,152 |
|
|
|
125,561 |
|
Unearned service contract revenue |
|
|
74,705 |
|
|
|
62,858 |
|
Customer credit balances |
|
|
79,100 |
|
|
|
93,555 |
|
Total current liabilities |
|
|
520,117 |
|
|
|
381,080 |
|
Long-term
debt |
|
|
143,522 |
|
|
|
151,709 |
|
Long-term
operating lease liabilities |
|
|
81,387 |
|
|
|
81,385 |
|
Deferred tax
liabilities, net |
|
|
24,465 |
|
|
|
25,620 |
|
Other
long-term liabilities |
|
|
14,780 |
|
|
|
14,766 |
|
Partners' capital |
|
|
|
|
Common unitholders |
|
|
281,516 |
|
|
|
277,177 |
|
General partner |
|
|
(3,826 |
) |
|
|
(3,656 |
) |
Accumulated other comprehensive loss, net of taxes |
|
|
(15,317 |
) |
|
|
(15,606 |
) |
Total partners' capital |
|
|
262,373 |
|
|
|
257,915 |
|
Total liabilities and partners' capital |
|
$ |
1,046,644 |
|
|
$ |
912,475 |
|
|
|
|
|
|
STAR GROUP,
L.P. AND SUBSIDIARIES |
CONSOLIDATED
STATEMENTS OF OPERATIONS |
|
|
|
Three MonthsEnded December 31, |
(in
thousands, except per unit data - unaudited) |
|
2022 |
|
2021 |
Sales: |
|
|
|
|
Product |
|
$ |
569,929 |
|
|
$ |
411,265 |
|
Installations and services |
|
|
78,258 |
|
|
|
77,005 |
|
Total sales |
|
|
648,187 |
|
|
|
488,270 |
|
Cost and
expenses: |
|
|
|
|
Cost of product |
|
|
419,093 |
|
|
|
274,594 |
|
Cost of installations and services |
|
|
76,543 |
|
|
|
74,048 |
|
(Increase) decrease in the fair value of derivative
instruments |
|
|
17,636 |
|
|
|
13,403 |
|
Delivery and branch expenses |
|
|
97,936 |
|
|
|
88,989 |
|
Depreciation and amortization expenses |
|
|
7,837 |
|
|
|
8,448 |
|
General and administrative expenses |
|
|
6,856 |
|
|
|
6,676 |
|
Finance charge income |
|
|
(1,319 |
) |
|
|
(512 |
) |
Operating income |
|
|
23,605 |
|
|
|
22,624 |
|
Interest
expense, net |
|
|
(4,274 |
) |
|
|
(2,058 |
) |
Amortization
of debt issuance costs |
|
|
(329 |
) |
|
|
(239 |
) |
Income before income taxes |
|
|
19,002 |
|
|
|
20,327 |
|
Income tax
expense |
|
|
5,463 |
|
|
|
5,838 |
|
Net income |
|
$ |
13,539 |
|
|
$ |
14,489 |
|
General Partner's interest in net income |
|
|
122 |
|
|
|
122 |
|
Limited
Partners' interest in net income |
|
$ |
13,417 |
|
|
$ |
14,367 |
|
|
|
|
|
|
|
|
|
|
|
Per unit
data (Basic and Diluted): |
|
|
|
|
Net income
available to limited partners |
|
$ |
0.37 |
|
|
$ |
0.37 |
|
Dilutive
impact of theoretical distribution of earnings |
|
|
0.04 |
|
|
|
0.05 |
|
Basic and
diluted income per Limited Partner Unit: |
|
$ |
0.33 |
|
|
$ |
0.32 |
|
|
|
|
|
|
Weighted
average number of Limited Partner units outstanding (Basic and
Diluted) |
|
|
35,916 |
|
|
|
38,789 |
|
|
|
|
|
|
SUPPLEMENTAL INFORMATION |
STAR GROUP,
L.P. AND SUBSIDIARIES |
|
RECONCILIATION OF EBITDA AND ADJUSTED
EBITDA |
(Unaudited) |
|
|
|
Three
MonthsEnded December 31, |
(in
thousands) |
|
2022 |
|
2021 |
Net income |
|
$ |
13,539 |
|
|
$ |
14,489 |
|
Plus: |
|
|
|
|
Income tax
expense |
|
|
5,463 |
|
|
|
5,838 |
|
Amortization
of debt issuance costs |
|
|
329 |
|
|
|
239 |
|
Interest
expense, net |
|
|
4,274 |
|
|
|
2,058 |
|
Depreciation
and amortization |
|
|
7,837 |
|
|
|
8,448 |
|
EBITDA |
|
|
31,442 |
|
|
|
31,072 |
|
(Increase) /
decrease in the fair value of derivative instruments |
|
|
17,636 |
|
|
|
13,403 |
|
Adjusted
EBITDA |
|
|
49,078 |
|
|
|
44,475 |
|
Add /
(subtract) |
|
|
|
|
Income tax
expense |
|
|
(5,463 |
) |
|
|
(5,838 |
) |
Interest
expense, net |
|
|
(4,274 |
) |
|
|
(2,058 |
) |
Provision
(recovery) for losses on accounts receivable |
|
|
1,046 |
|
|
|
(288 |
) |
Increase in
accounts receivables |
|
|
(115,164 |
) |
|
|
(78,794 |
) |
Increase in
inventories |
|
|
(28,717 |
) |
|
|
(16,388 |
) |
Decrease in
customer credit balances |
|
|
(14,700 |
) |
|
|
(14,504 |
) |
Change in
deferred taxes |
|
|
(1,224 |
) |
|
|
(684 |
) |
Change in
other operating assets and liabilities |
|
|
26,677 |
|
|
|
8,214 |
|
Net cash
used in operating activities |
|
$ |
(92,741 |
) |
|
$ |
(65,865 |
) |
Net cash
used in investing activities |
|
$ |
(2,086 |
) |
|
$ |
(7,034 |
) |
Net cash
provided by financing activities |
|
$ |
102,798 |
|
|
$ |
89,371 |
|
|
|
|
|
|
|
|
|
|
|
Home heating
oil and propane gallons sold |
|
|
89,200 |
|
|
|
87,000 |
|
Other
petroleum products |
|
|
35,600 |
|
|
|
39,300 |
|
Total all products |
|
|
124,800 |
|
|
|
126,300 |
|
|
|
|
|
|
CONTACT: |
|
|
Star Group, L.P. Investor Relations203/328-7310 |
|
Chris WittyDarrow Associates646/438-9385 or
cwitty@darrowir.com |
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