Star Group, L.P. (the "Company" or "Star") (NYSE:SGU), a home
energy distributor and services provider, today announced financial
results for its fiscal 2024 first quarter, the three month period
ended December 31, 2023.
Three Months Ended December 31, 2023
Compared to the Three Months Ended December 31, 2022For
the fiscal 2024 first quarter, Star reported an 18.5 percent
decrease in total revenue to $528.1 million compared with $648.2
million in the prior-year period, reflecting both a decline in
volume sold and lower selling prices for petroleum products. The
volume of home heating oil and propane sold during the fiscal 2024
first quarter decreased by 9.1 million gallons, or 10.2 percent, to
80.1 million gallons, as the additional volume provided from
acquisitions and other factors was more than offset by the impact
of warmer weather and net customer attrition. Temperatures in
Star's geographic areas of operation for the three months ended
December 31, 2023 were 9.6 percent warmer than the three months
ended December 31, 2022 and 13.8 percent warmer than normal, as
reported by the National Oceanic and Atmospheric Administration.
Selling prices decreased largely due to a decline in wholesale
product cost of $0.6605 per gallon, or 19.7 percent.
Star’s net income decreased by $0.6 million in
the quarter, to $13.0 million, as an unfavorable non-cash change in
the fair value of derivative instruments of $1.4 million and higher
depreciation and amortization expense of $0.6 million more than
offset lower interest expense of $1.1 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 $49.0 million,
virtually unchanged from the prior year’s period, as an increase in
home heating oil and propane per-gallon margins, higher service and
installation profitability and lower operating costs almost
entirely offset the decline in home heating oil and propane volume
of 10.2 percent.
“The beginning of fiscal 2024 has provided both
challenges and opportunities, which we believe we have navigated
well,” Jeff Woosnam, Star Group’s President and Chief Executive
Officer. “While product costs declined, providing relief to
customers, warmer temperatures resulted in lower demand and, thus,
reduced overall volumes. New customer additions were also down from
the extraordinary levels we experienced during the first quarter of
fiscal 2023, due in part to the mild weather but also the result of
much different market conditions, resulting in lower lead activity.
However, by employing strong cost discipline, a weather hedge
benefit, and achieving higher per-gallon margins, Adjusted EBITDA
was nearly equivalent to the prior-year period. In addition, we
closed on two strategic acquisitions after the end of the quarter,
in February. Both are located on Long Island and further strengthen
our presence in that market.”
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 8, 2024. 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 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, 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 and electrification
of heating systems, pandemic and future global health pandemics,
recessionary economic conditions, 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,
global supply chain issues, labor shortages and new technology,
including alternative methods for heating and cooling residences.
All statements other than statements of historical facts included
in this Report including, without limitation, the statements under
“Management’s Discussion and Analysis of Financial Condition and
Results of Operations” and elsewhere herein, 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 we believe that the expectations reflected in such
forward-looking statements are reasonable, we can give no assurance
that such expectations will prove to be correct. 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, 2023.
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
SUBSIDIARIESCONDENSED CONSOLIDATED
BALANCE SHEETS |
|
|
|
December 31, |
|
September 30, |
(in thousands) |
|
2023 |
|
2023 |
ASSETS |
|
(unaudited) |
|
|
Current assets |
|
|
|
|
Cash and cash equivalents |
|
$ |
19,925 |
|
|
$ |
45,191 |
|
Receivables, net of allowance of $8,074 and $8,375,
respectively |
|
|
187,122 |
|
|
|
114,079 |
|
Inventories |
|
|
84,033 |
|
|
|
56,463 |
|
Fair asset value of derivative instruments |
|
|
— |
|
|
|
10,660 |
|
Prepaid expenses and other current assets |
|
|
38,409 |
|
|
|
28,308 |
|
Total current assets |
|
|
329,489 |
|
|
|
254,701 |
|
Property and equipment, net |
|
|
105,158 |
|
|
|
105,404 |
|
Operating lease right-of-use assets |
|
|
87,725 |
|
|
|
90,643 |
|
Goodwill |
|
|
262,347 |
|
|
|
262,103 |
|
Intangibles, net |
|
|
73,969 |
|
|
|
76,306 |
|
Restricted cash |
|
|
250 |
|
|
|
250 |
|
Captive insurance collateral |
|
|
72,020 |
|
|
|
70,717 |
|
Deferred charges and other assets, net |
|
|
13,981 |
|
|
|
15,354 |
|
Total assets |
|
$ |
944,939 |
|
|
$ |
875,478 |
|
LIABILITIES AND PARTNERS’ CAPITAL |
|
|
|
|
Current liabilities |
|
|
|
|
Accounts payable |
|
$ |
45,881 |
|
|
$ |
35,609 |
|
Revolving credit facility borrowings |
|
|
51,877 |
|
|
|
240 |
|
Fair liability value of derivative instruments |
|
|
14,832 |
|
|
|
118 |
|
Current maturities of long-term debt |
|
|
20,625 |
|
|
|
20,500 |
|
Current portion of operating lease liabilities |
|
|
17,923 |
|
|
|
18,085 |
|
Accrued expenses and other current liabilities |
|
|
118,382 |
|
|
|
115,606 |
|
Unearned service contract revenue |
|
|
75,371 |
|
|
|
63,215 |
|
Customer credit balances |
|
|
90,916 |
|
|
|
111,508 |
|
Total current liabilities |
|
|
435,807 |
|
|
|
364,881 |
|
Long-term debt |
|
|
123,258 |
|
|
|
127,327 |
|
Long-term operating lease liabilities |
|
|
74,752 |
|
|
|
77,600 |
|
Deferred tax liabilities, net |
|
|
24,172 |
|
|
|
25,771 |
|
Other long-term liabilities |
|
|
16,298 |
|
|
|
16,175 |
|
Partners’ capital |
|
|
|
|
Common unitholders |
|
|
288,789 |
|
|
|
281,862 |
|
General partner |
|
|
(4,831 |
) |
|
|
(4,615 |
) |
Accumulated other comprehensive loss, net of taxes |
|
|
(13,306 |
) |
|
|
(13,523 |
) |
Total partners’ capital |
|
|
270,652 |
|
|
|
263,724 |
|
Total liabilities and partners’ capital |
|
$ |
944,939 |
|
|
$ |
875,478 |
|
|
|
|
|
|
|
|
|
|
|
STAR GROUP,
L.P. AND SUBSIDIARIESCONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS |
|
|
|
Three MonthsEnded December 31, |
(in
thousands, except per unit data - unaudited) |
|
2023 |
|
2022 |
Sales: |
|
|
|
|
Product |
|
$ |
448,550 |
|
|
$ |
569,929 |
|
Installations and services |
|
|
79,546 |
|
|
|
78,258 |
|
Total sales |
|
|
528,096 |
|
|
|
648,187 |
|
Cost and expenses: |
|
|
|
|
Cost of product |
|
|
303,338 |
|
|
|
419,093 |
|
Cost of installations and services |
|
|
75,107 |
|
|
|
76,543 |
|
(Increase) decrease in the fair value of derivative
instruments |
|
|
19,030 |
|
|
|
17,636 |
|
Delivery and branch expenses |
|
|
94,364 |
|
|
|
97,936 |
|
Depreciation and amortization expenses |
|
|
8,386 |
|
|
|
7,837 |
|
General and administrative expenses |
|
|
7,021 |
|
|
|
6,856 |
|
Finance charge income |
|
|
(771 |
) |
|
|
(1,319 |
) |
Operating income |
|
|
21,621 |
|
|
|
23,605 |
|
Interest expense, net |
|
|
(3,218 |
) |
|
|
(4,274 |
) |
Amortization of debt issuance costs |
|
|
(250 |
) |
|
|
(329 |
) |
Income before income taxes |
|
|
18,153 |
|
|
|
19,002 |
|
Income tax expense |
|
|
5,174 |
|
|
|
5,463 |
|
Net income |
|
$ |
12,979 |
|
|
$ |
13,539 |
|
General Partner’s interest in net income |
|
|
118 |
|
|
|
122 |
|
Limited Partners’ interest in net income |
|
$ |
12,861 |
|
|
$ |
13,417 |
|
|
|
|
|
|
|
|
|
|
|
Per unit data (Basic and Diluted): |
|
|
|
|
Net income available to limited partners |
|
$ |
0.36 |
|
|
$ |
0.37 |
|
Dilutive impact of theoretical distribution of earnings |
|
|
0.04 |
|
|
|
0.04 |
|
Basic and diluted income per Limited Partner Unit: |
|
$ |
0.32 |
|
|
$ |
0.33 |
|
|
|
|
|
|
Weighted average number of Limited Partner units outstanding (Basic
and Diluted) |
|
|
35,593 |
|
|
|
35,916 |
|
|
|
|
|
|
|
SUPPLEMENTAL
INFORMATIONSTAR GROUP, L.P. AND
SUBSIDIARIESRECONCILIATION OF EBITDA AND ADJUSTED
EBITDA(Unaudited) |
|
|
|
Three
MonthsEnded December 31, |
(in
thousands) |
|
2023 |
|
2022 |
Net income |
|
$ |
12,979 |
|
|
$ |
13,539 |
|
Plus: |
|
|
|
|
Income tax expense |
|
|
5,174 |
|
|
|
5,463 |
|
Amortization of debt issuance costs |
|
|
250 |
|
|
|
329 |
|
Interest expense, net |
|
|
3,218 |
|
|
|
4,274 |
|
Depreciation and amortization |
|
|
8,386 |
|
|
|
7,837 |
|
EBITDA |
|
|
30,007 |
|
|
|
31,442 |
|
(Increase) / decrease in the fair value of derivative
instruments |
|
|
19,030 |
|
|
|
17,636 |
|
Adjusted EBITDA |
|
|
49,037 |
|
|
|
49,078 |
|
Add / (subtract) |
|
|
|
|
Income tax expense |
|
|
(5,174 |
) |
|
|
(5,463 |
) |
Interest expense, net |
|
|
(3,218 |
) |
|
|
(4,274 |
) |
Provision for losses on accounts receivable |
|
|
649 |
|
|
|
1,046 |
|
Increase in accounts receivables |
|
|
(73,590 |
) |
|
|
(115,164 |
) |
Increase in inventories |
|
|
(26,805 |
) |
|
|
(28,717 |
) |
Decrease in customer credit balances |
|
|
(21,852 |
) |
|
|
(14,700 |
) |
Change in deferred taxes |
|
|
(1,591 |
) |
|
|
(1,224 |
) |
Change in other operating assets and liabilities |
|
|
22,236 |
|
|
|
26,677 |
|
Net cash used in operating activities |
|
$ |
(60,308 |
) |
|
$ |
(92,741 |
) |
Net cash used in investing activities |
|
$ |
(5,875 |
) |
|
$ |
(2,086 |
) |
Net cash provided by financing activities |
|
$ |
40,917 |
|
|
$ |
102,798 |
|
|
|
|
|
|
|
|
|
|
|
Home heating oil and propane gallons sold |
|
|
80,100 |
|
|
|
89,200 |
|
Other petroleum products |
|
|
32,400 |
|
|
|
35,600 |
|
Total all products |
|
|
112,500 |
|
|
|
124,800 |
|
CONTACT: |
|
|
Star Group, L.P. |
|
Chris Witty |
Investor Relations |
|
Darrow Associates |
203/328-7310 |
|
646/438-9385 or cwitty@darrowir.com |
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