Release Details

Star Group, L.P. Reports Fiscal 2023 Second Quarter Results

May 3, 2023

STAMFORD, Conn., May 03, 2023 (GLOBE NEWSWIRE) -- 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 second quarter ended March 31, 2023.

Three Months Ended March 31, 2023 Compared to the Three Months Ended March 31, 2022
For the fiscal 2023 second quarter, Star reported a 5.7 percent decline in revenue to $737.6 million compared with $782.5 million in the prior-year period, reflecting a decrease in total volume sold, partially offset by the impact of acquisitions and other factors.

The volume of home heating oil and propane sold during the fiscal 2023 second quarter decreased by 27.8 million gallons, or 18.7 percent, to 121.1 million gallons as the additional volume provided from acquisitions and other factors was more than offset by the impact of extremely warm weather and net customer attrition. Temperatures in Star's geographic areas of operation for the fiscal 2023 second quarter were 18.7 percent warmer than during the fiscal 2022 second quarter and 21.6 percent warmer than normal, as reported by the National Oceanic and Atmospheric Administration. The second quarter of fiscal 2023 was also the warmest such period in over 100 years within the New York City metropolitan area.

Star’s net income declined by $19.3 million in the quarter, to $62.0 million, primarily due to an unfavorable change in the fair value of derivative instruments of $20.6 million, a $2.3 million increase in interest expense, and lower Adjusted EBITDA of $5.5 million, partially offset by an $8.6 million decrease in income tax expense.

Second quarter Adjusted EBITDA decreased by $5.5 million, to $102.2 million, compared to the three months ended March 31, 2022, as the decline in home heating oil and propane volume more than offset an increase in per gallon margins and a $14.0 million higher benefit recorded under the Company’s weather hedge program. For the three months ended March 31, 2023, the Company recorded a benefit of $12.9 million under its weather hedge – reflecting warmer temperatures – versus a charge of $1.1 million for the three months ended March 31, 2022.

“As the largest provider of home heating oil in the nation, our business is highly dependent on weather – which negatively impacted us this quarter,” said Jeff Woosnam, Star Group’s President and Chief Executive Officer. “To put this in perspective, not only were temperatures 21.6 percent warmer than normal, but the period was also the warmest in New York City in 123 years; year-to-date, it was the fourth warmest period on record in this key market. While there is nothing we can do to influence mother nature, we are adept at mitigating, to the extent possible, unusual weather swings like this – managing costs and working capital and adjusting short-term investment decisions. At the same time, our weather hedge program has provided an important buffer under such conditions, as has our disciplined approach to controlling operating expenses even in the face of certain inflationary pressures. As we navigate through the remainder of fiscal 2023 I remain confident in our ability to provide the best possible customer experience and bottom line results.”

Six Months Ended March 31, 2023 Compared to the Six Months Ended March 31, 2022
For the six months ended March 31, 2023, Star reported a 9.0 percent increase in total revenue to $1.4 billion compared with $1.3 billion in the prior-year period, reflecting an increase in selling prices in response to higher wholesale product costs, partially offset by a decrease in total volume sold.

The volume of home heating oil and propane sold during the first six months of fiscal 2023 decreased by 25.6 million gallons, or 10.8 percent, to 210.3 million gallons as the additional volume provided from acquisitions was more than offset by warmer temperatures, net customer attrition and other factors. Temperatures in Star’s geographic areas of operation fiscal year-to-date were 6.9 percent warmer than during the prior-year period and 15.7 percent warmer than normal, as reported by the National Oceanic and Atmospheric Administration.

Star’s net income declined by $20.3 million for the first six months of fiscal 2023, to $75.6 million, primarily due to an unfavorable change in the fair value of derivative instruments of $24.9 million, a $4.4 million increase in interest expense, and lower Adjusted EBITDA of $0.9 million, partially offset by an $9.0 million decrease in income tax expense. 

Year-to-date Adjusted EBITDA decreased by $0.9 million, to $151.2 million, compared to the prior-year period as a decline in home heating oil and propane volume more than offset an increase in per gallon margins and an $11.4 million higher benefit recorded under the Company’s weather hedge. As of March 31, 2023, the Company had recorded a benefit of $12.5 million under its weather hedge program versus a benefit of $1.1 million for the first six months of fiscal 2022.

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, May 4, 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 Information
This 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
CONDENSED CONSOLIDATED BALANCE SHEETS

 
    March 31,   September 30,
(in thousands)     2023       2022  
ASSETS   (unaudited)    
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  
         


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  
                 
                 
Per unit data (Basic and Diluted):                
Net income available to limited partners   $ 1.72     $ 2.14     $ 2.09     $ 2.49  
Dilutive impact of theoretical distribution of earnings     0.30       0.39       0.35       0.44  
Basic and diluted income per Limited Partner Unit:   $ 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  
                 


SUPPLEMENTAL INFORMATION
STAR GROUP, L.P. AND SUBSIDIARIES
 
RECONCILIATION OF EBITDA AND ADJUSTED EBITDA
(Unaudited)
 
    Three Months
Ended March 31,
(in thousands)     2023       2022  
Net income   $ 62,041     $ 81,379  
Plus:        
Income tax expense     24,253       32,900  
Amortization of debt issuance costs     258       237  
Interest expense, net     4,963       2,729  
Depreciation and amortization     7,626       8,081  
EBITDA     99,141       125,326  
(Increase) / decrease in the fair value of derivative instruments     3,022       (17,615 )
Adjusted EBITDA     102,163       107,711  
Add / (subtract)        
Income tax expense     (24,253 )     (32,900 )
Interest expense, net     (4,963 )     (2,729 )
Provision for losses on accounts receivable     3,722       2,455  
Increase in accounts receivables     (9,600 )     (86,269 )
Decrease (increase) in inventories     40,326       (1,660 )
Decrease in customer credit balances     (27,068 )     (36,409 )
Change in deferred taxes     (11,155 )     5,229  
Change in other operating assets and liabilities     9,736       4,996  
Net cash provided by (used in) operating activities   $ 78,908     $ (39,576 )
Net cash used in investing activities   $ (2,013 )   $ (6,469 )
Net cash (used in) provided by financing activities   $ (77,401 )   $ 42,488  
         
         
Home heating oil and propane gallons sold     121,100       148,900  
Other petroleum products     33,200       36,300  
Total all products     154,300       185,200  
         

        

SUPPLEMENTAL INFORMATION
STAR GROUP, L.P. AND SUBSIDIARIES
 
   
RECONCILIATION OF EBITDA AND ADJUSTED EBITDA
(Unaudited)
 
   
    Six Months
Ended March 31,
 
(in thousands)     2023       2022    
Net income   $ 75,580     $ 95,868    
Plus:          
Income tax expense     29,716       38,738    
Amortization of debt issuance costs     587       476    
Interest expense, net     9,237       4,787    
Depreciation and amortization     15,463       16,529    
EBITDA     130,583       156,398    
(Increase) / decrease in the fair value of derivative instruments     20,658       (4,212 )  
Adjusted EBITDA     151,241       152,186    
Add / (subtract)          
Income tax expense     (29,716 )     (38,738 )  
Interest expense, net     (9,237 )     (4,787 )  
Provision for losses on accounts receivable     4,768       2,167    
Increase in accounts receivables     (124,764 )     (165,063 )  
Decrease (increase) in inventories     11,609       (18,048 )  
Decrease in customer credit balances     (41,768 )     (50,913 )  
Change in deferred taxes     (12,379 )     4,545    
Change in other operating assets and liabilities     36,413       13,210    
Net cash used in operating activities   $ (13,833 )   $ (105,441 )  
Net cash used in investing activities   $ (4,099 )   $ (13,503 )  
Net cash provided by financing activities   $ 25,397     $ 131,859    
           
           
Home heating oil and propane gallons sold     210,300       235,900    
Other petroleum products     68,800       75,600    
Total all products     279,100       311,500    
           


CONTACT:  
Star Group, L.P.
Investor Relations
203/328-7310 
Chris Witty
Darrow Associates
646/438-9385 or cwitty@darrowir.com

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Source: Star Group, L.P.

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