Star Group, L.P. Reports Fiscal 2021 First Quarter Results

Rhea-AI Summary

Star Group, L.P. (NYSE:SGU) reported a 26.6% decrease in total revenue, totaling $373.3 million for the fiscal 2021 first quarter ended December 31, 2020, down from $508.9 million in the previous year. This decline was attributed to lower selling prices and a 16.4% decrease in volume sold, driven by warmer weather and net customer attrition. Despite the revenue drop, net income rose to $37.9 million, aided by a favorable derivative change. First quarter Adjusted EBITDA showed slight improvement at $45.3 million, thanks to effective cost management and acquisitions of propane dealers.

Positive

• Net income increased by $10.1 million to $37.9 million.
• First quarter Adjusted EBITDA improved by $0.3 million to $45.3 million.
• Successfully acquired two propane dealers, adding approximately 7 million gallons of product annually.
• Repurchased 2.6 million common units as part of the ongoing unit repurchase plan.

Negative

• Total revenue decreased by 26.6% to $373.3 million.
• Volume of home heating oil and propane sold dropped by 16.4%, totaling 89.5 million gallons.
• Operating in a market affected by significantly warmer weather, reducing demand.

STAMFORD, Conn., Feb. 03, 2021 (GLOBE NEWSWIRE) -- Star Group, L.P. (the "Company" or "Star") (NYSE:SGU), a home energy distributor and services provider, today announced financial results for the fiscal 2021 first quarter ended December 31, 2020.

Three Months Ended December 31, 2020 Compared to the Three Months Ended December 31, 2019
For the fiscal 2021 first quarter, Star reported a 26.6 percent decrease in total revenue to $373.3 million compared with $508.9 million in the prior-year period, reflecting a decline in selling prices in response to lower wholesale product costs and a decrease in total volume sold.

The volume of home heating oil and propane sold during the fiscal 2021 first quarter decreased by 17.6 million gallons, or 16.4 percent, to 89.5 million gallons due to the impact of warmer weather, net customer attrition, and other factors. Temperatures in Star's geographic areas of operation for the fiscal 2021 first quarter were 13.5 percent warmer than during the fiscal 2020 first quarter and 15.5 percent warmer than normal, as reported by the National Oceanic and Atmospheric Administration.

Star’s net income rose by $10.1 million in the quarter, to $37.9 million, primarily due to a favorable change in the fair value of derivative instruments of $11.0 million, and lower depreciation and amortization expense of $1.1 million, partially offset by an increase in income tax expense of $3.0 million. 

First quarter Adjusted EBITDA improved by $0.3 million, to $45.3 million, as the impact of higher per gallon home heating oil and propane margins, $16.3 million of lower operating expenses (including a $7.0 million favorable change in the impact from the Company’s weather hedge), and a $1.1 million improvement in net service and installation profitability more than offset the impact from a decrease in volume of home heating oil and propane sold. As of December 31, 2020, Star recorded a benefit of $4.0 million under its weather hedging contract, reducing delivery and branch expense. The final benefit (if any) for fiscal 2021 may be lower or higher depending on the accumulation of actual heating degree-days recorded in the period January 1, 2021 through March 31, 2021. Temperatures recorded for January 2021 were warmer than normal.

“We began fiscal 2021 well positioned even in the face of a pandemic,” said Jeff Woosnam, Star Group’s President and Chief Executive Officer. “While the impact from COVID-19 on the heating season has been muted, our performance reflects 13.5 percent warmer weather within our footprint – dampening demand for home heating oil and propane. However, we maintained our focus on cost discipline and customer service while acquiring two propane dealers in late December that will add, in aggregate, roughly 7 million gallons of product annually. We also repurchased 2.6 million common units during the quarter as part of our ongoing unit repurchase plan. As we navigate through the remainder of fiscal 2021, we are confident in our ability to continue providing the best possible customer experience and strong bottom line results during the quarters to come.”

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 4, 2021. The webcast will be accessible on the company’s website, at www.stargrouplp.com, and the telephone number for the conference call is 877-327-7688 (or 412-317-5112 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. In certain of Star's marketing areas, the Company provides plumbing services, primarily to 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 those associated with the severity and duration of the novel coronavirus, or COVID-19, pandemic, the pandemic’s impact on the U.S. and global economies, the timing, scope and effectiveness of federal, state and local governmental responses to the pandemic, the effect of weather conditions on our financial performance; the price and supply of the products that we sell; the consumption patterns of our customers; our ability to obtain satisfactory gross profit margins; our ability to obtain new customers and retain existing customers; our ability to make strategic acquisitions; the impact of litigation; our ability to contract for our current and future supply needs; natural gas conversions; 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 creditworthiness; counterparty creditworthiness; marketing plans; potential cyber-attacks; general economic conditions 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, 2020. 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. Currently, one of the most significant factors, however, is the potential adverse effect of the pandemic of the novel coronavirus, or COVID-19, on the financial condition, results of operations, cash flows and performance of the Company and its customers and counterparties and the global economy and financial markets. The extent to which COVID-19 impacts us and our customers will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of the pandemic, the actions taken to contain the pandemic or mitigate its impact, and the direct and indirect economic effects of the pandemic and containment measures, among others. 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

		December 31,				September 30,
			2020				2020
(in thousands)		(unaudited)
ASSETS
Current assets
Cash and cash equivalents		$	18,847			$	56,911
Receivables, net of allowance of $5,185 and $6,121, respectively			147,011				83,594
Inventories			56,902				50,256
Fair asset value of derivative instruments			5,197				—
Prepaid expenses and other current assets			38,478				29,554
Assets held for sale			—				6,030
Total current assets			266,435				226,345
Property and equipment, net			98,332				93,495
Operating lease right-of-use assets			100,222				99,776
Goodwill			255,425				240,327
Intangibles, net			103,440				90,293
Restricted cash			250				250
Captive insurance collateral			69,988				69,787
Deferred charges and other assets, net			19,322				18,343
Total assets		$	913,414			$	838,616
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities
Accounts payable		$	41,924			$	30,827
Liabilities held for sale			—				1,265
Revolving credit facility borrowings			59,341				—
Fair liability value of derivative instruments			—				11,437
Current maturities of long-term debt			13,000				13,000
Current portion of operating lease liabilities			19,200				19,139
Accrued expenses and other current liabilities			133,713				127,286
Unearned service contract revenue			68,063				58,430
Customer credit balances			74,626				83,471
Total current liabilities			409,867				344,855
Long-term debt			106,606				109,805
Long-term operating lease liabilities			86,419				85,908
Deferred tax liabilities, net			20,908				17,227
Other long-term liabilities			26,998				25,001
Partners' capital
Common unitholders			279,873				273,283
General partner			(2,447	)			(2,506	)
Accumulated other comprehensive loss, net of taxes			(14,810	)			(14,957	)
Total partners' capital			262,616				255,820
Total liabilities and partners' capital		$	913,414			$	838,616

STAR GROUP, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

		Three Months Ended December 31,
(in thousands, except per unit data - unaudited)			2020				2019
Sales:
Product		$	300,332			$	432,688
Installations and services			72,988				76,257
Total sales			373,320				508,945
Cost and expenses:
Cost of product			172,147				287,673
Cost of installations and services			69,303				73,669
(Increase) decrease in the fair value of derivative instruments			(17,395	)			(6,417	)
Delivery and branch expenses			80,687				96,726
Depreciation and amortization expenses			7,957				9,050
General and administrative expenses			6,241				6,506
Finance charge income			(406	)			(713	)
Operating income			54,786				42,451
Interest expense, net			(1,851	)			(2,679	)
Amortization of debt issuance costs			(247	)			(235	)
Income before income taxes			52,688				39,537
Income tax expense			14,828				11,782
Net income		$	37,860			$	27,755
General Partner's interest in net income			296				192
Limited Partners' interest in net income		$	37,564			$	27,563
Per unit data (Basic and Diluted):
Net income available to limited partners		$	0.89			$	0.58
Dilutive impact of theoretical distribution of earnings			0.15				0.09
Basic and diluted income per Limited Partner Unit:		$	0.74			$	0.49
Weighted average number of Limited Partner units outstanding (Basic and Diluted)			42,246				47,266

SUPPLEMENTAL INFORMATION
STAR GROUP, L.P. AND SUBSIDIARIES

RECONCILIATION OF EBITDA AND ADJUSTED EBITDA
(Unaudited)

		Three Months Ended December 31,
(in thousands)			2020				2019
Net income		$	37,860			$	27,755
Plus:
Income tax expense			14,828				11,782
Amortization of debt issuance costs			247				235
Interest expense, net			1,851				2,679
Depreciation and amortization			7,957				9,050
EBITDA			62,743				51,501
(Increase) / decrease in the fair value of derivative instruments			(17,395	)			(6,417	)
Adjusted EBITDA			45,348				45,084
Add / (subtract)
Income tax expense			(14,828	)			(11,782	)
Interest expense, net			(1,851	)			(2,679	)
(Recovery) provision for losses on accounts receivable			(476	)			1,010
Decrease in accounts receivables			(62,989	)			(85,745	)
Decrease in inventories			(7,177	)			(15,427	)
Increase in customer credit balances			(8,987	)			(15,898	)
Change in deferred taxes			3,601				1,336
Change in other operating assets and liabilities			20,358				32,510
Net cash used in operating activities		$	(27,001	)		$	(51,591	)
Net cash used in investing activities		$	(35,903	)		$	(7,663	)
Net cash provided by financing activities		$	24,840			$	68,897
Home heating oil and propane gallons sold			89,500				107,100
Other petroleum products			37,700				41,400
Total all products			127,200				148,500

        

 Source: Star Group, L.P.

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

FAQ

What were Star Group's financial results for Q1 2021?

Star Group reported a total revenue of $373.3 million for Q1 2021, down 26.6% from $508.9 million in Q1 2020.

How did Star Group's net income change in Q1 2021?

Net income rose by $10.1 million to $37.9 million in Q1 2021.

What impact did the weather have on Star Group's business in Q1 2021?

Warmer weather led to a 16.4% decrease in the volume of home heating oil and propane sold.

How did Star Group's Adjusted EBITDA perform in Q1 2021?

Adjusted EBITDA improved by $0.3 million to $45.3 million for Q1 2021.

What strategic moves did Star Group make in Q1 2021?

Star Group acquired two propane dealers, adding roughly 7 million gallons of product annually, and repurchased 2.6 million common units.