GlobeNewswire Inc | Dec 7, 2020 04:15PM EST

December 07, 2020

STAMFORD, Conn., Dec. 07, 2020 (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 2020 fourth quarter and year ended September 30, 2020.

Three Months Ended September 30, 2020 Compared to the Three Months Ended September 30, 2019For the fiscal 2020 fourth quarter, Star reported a 22.3 percent decrease in total revenue to $183.3 million compared with $235.9 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 2020 fourth quarter decreased by 2.9 million gallons, or 13.2 percent, to 19.0 million gallons due to net customer attrition, summertime staffing levels, the timing of certain non winter deliveries and other factors. The volume of other petroleum products sold decreased by 4.6 million gallons, or 10.4 percent, to 39.6 million gallons due to a decline in motor fuel sales, reflecting the impact of COVID-19 on overall economic activity, and the loss of certain accounts.

Stars net loss declined by $3.7 million in the quarter, to $30.2 million, due to a $1.6 million decrease in the Companys Adjusted EBITDA loss (a non-GAAP measure defined below) and a $5.1 million favorable non-cash change in the fair value of derivative instruments. The positive impact from these factors was partially offset by a non-cash charge of $5.7 million relating to the sale of certain non-strategic assets, completed in October 2020.

The fourth quarter Adjusted EBITDA loss decreased by $1.6million, to $27.3million, due to an increase in home heating oil and propane margins, a $1.5 million improvement in net service and installation profitability, and $3.7 million lower operating expenses, partially offset by the impact from lower volumes sold.

Im pleased to announce that, in the face of many economic uncertainties this year, Star Group finished fiscal 2020 with solid performance, well positioned for the future, said Jeff Woosnam, Star Groups President and Chief Executive Officer. For the full year, Adjusted EBITDA rose 37 percent, to $130.3 million, reflecting $46.4 million of lower operating expenses in the base business, higher heating oil and propane margins, and increased service profitability. These results in the middle of an ongoing pandemic clearly demonstrate the value of our services and excellent, dedicated staff. I appreciate everything thats gone into Stars performance these past four quarters, which includes a significant reduction in net customer attrition from the prior years higher levels. With everything weve done to improve service and streamline the business, I feel confident the Company is prepared and can react appropriately to any new challenges as we begin fiscal 2021.

Fiscal Year Ended September 30, 2020 Compared to Fiscal Year Ended September 30, 2019Star reported a 16.3 percent decrease in total revenue to $1.5 billion for fiscal 2020 compared with revenue of $1.8 billion in the prior-year period, largely due to lower average selling prices in response to a decline in wholesale product costs and a 9.3 percent decrease in total volume sold.

The volume of home heating oil and propane sold decreased by 31.9 million gallons, or 9.2 percent, to 313.6 million gallons, as the impact from acquisitions was more than offset by warmer weather, net customer attrition, and other factors. Temperatures in Star's geographic areas of operation were 6.0 percent warmer than during the prior-year period and 10.2 percent warmer than normal, as reported by the National Oceanic and Atmospheric Administration. The volume of other petroleum products sold decreased by 15.6million gallons, or 9.3 percent, to 151.8million gallons, as the additional volume provided by acquisitions of 9.2 million gallons was more than offset by lower wholesale sales (due to warmer weather) and a reduction in motor fuel sales reflecting, in part, the impact of COVID-19 on economic activity, and the loss of certain accounts.

Net income increased by $38.3 million, to $55.9 million, due to an increase in Adjusted EBITDA of $35.0 million and a favorable non-cash change in the fair value of derivative instruments of $22.4 million.

Adjusted EBITDA increased by $35.0million, or 36.7 percent, to $130.3million. Recent acquisitions provided $9.3 million of Adjusted EBITDA, while Adjusted EBITDA in the base business increased by $25.7 million. In the base business, the impact of 6.6 cents higher per gallon home heating oil and propane margins, $46.4 million lower operating expenses (reflecting reduced volumes and various streamlining initiatives), a $12.2 million favorable change in the impact from the Companys weather hedge, and a $5.3 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 and the decline in Stars motor fuel business. With regard to the Companys weather hedge, warmer temperatures during the fiscal 2020 winter hedge period (November through March) resulted in fewer degree days and, per the terms of Stars weather hedge contracts, the collection of $10.1 million. By contrast, the third quarter of fiscal 2020 was colder than normal and resulted in the Company selling more volume than anticipated. If the additional degree days in the third quarter had occurred during the winter hedge period, the payout would have been less than $2.0 million.

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, multiemployer pension plan withdrawal charge, other income (loss), net, 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 Companys financial statements, such as investors, commercial banks and research analysts, to assess Stars 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 requirements; -- 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, December 8, 2020. The webcast will be accessible on the companys 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, Central and Southeast 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 Stars complete audited financial statements free of charge.

Forward Looking InformationThis news release includes "forward-looking statements" which represent the Companys 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 pandemics 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 Companys expectations ("Cautionary Statements") are disclosed in this news release and in the Form 10-Q, the Form 10-K and our Quarterly Report on Form 10-Q for the quarter ended June 30, 2020. 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.

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STAR GROUP, L.P. AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETS

September 30, September 30, 2020 2019 (in thousands) ASSETS Current assets Cash and cash equivalents $ 56,911 $ 4,899 Receivables, net of allowance of $6,121 and 83,594 120,245 $8,378, respectivelyInventories 50,256 64,788 Prepaid expenses and other current assets 29,554 36,898 Assets held for sale 6,030 -- Total current assets 226,345 226,830 Property and equipment, net 93,495 98,239 Operating lease right-of-use assets 99,776 -- Goodwill 240,327 244,574 Intangibles, net 90,293 107,688 Restricted cash 250 250 Captive insurance collateral 69,787 58,490 Deferred charges and other assets, net 18,343 16,635 Total assets $ 838,616 $ 752,706 LIABILITIES AND PARTNERS' CAPITAL Current liabilities Accounts payable 30,827 $ 33,973 Liabilities held for sale 1,265 -- Revolving credit facility borrowings -- 24,000 Fair liability value of derivative 11,437 8,262 instrumentsCurrent maturities of long-term debt 13,000 9,000 Current portion of operating lease 19,139 -- liabilitiesAccrued expenses and other current 127,286 120,839 liabilitiesUnearned service contract revenue 58,430 61,213 Customer credit balances 83,471 68,270 Total current liabilities 344,855 325,557 Long-term debt 109,805 120,447 Long-term operating lease liabilities 85,908 -- Deferred tax liabilities, net 17,227 20,116 Other long-term liabilities 25,001 25,746 Partners' capital Common unitholders 273,283 279,709 General partner (2,506 ) (1,968 )Accumulated other comprehensive loss, net of (14,957 ) (16,901 )taxesTotal partners' capital 255,820 260,840 Total liabilities and partners' capital $ 838,616 $ 752,706

STAR GROUP, L.P. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF OPERATIONS

Three Months Ended Twelve Months Ended September 30, September 30,(in thousands,except per 2020 2019 2020 2019 unit data) (unaudited) (unaudited) Sales: Product $ 106,881 $ 159,281 $ 1,186,026 $ 1,466,045 Installations 76,414 76,606 281,432 287,827 and servicesTotal sales 183,295 235,887 1,467,458 1,753,872 Cost and expenses:Cost of 72,427 121,639 738,714 998,559 productCost ofinstallations 64,050 65,766 253,724 267,607 and services(Increase)decrease inthe fair value 781 5,845 2,755 25,113 of derivativeinstrumentsDelivery andbranch 68,428 73,007 323,373 369,033 expensesDepreciationand 8,037 9,073 34,623 32,901 amortizationexpensesGeneral andadministrative 6,190 5,278 25,072 28,414 expensesFinance charge (520 ) (939 ) (3,771 ) (5,105 )incomeOperating (36,098 ) (43,782 ) 92,968 37,350 income (loss)Interest (1,959 ) (2,487 ) (9,702 ) (11,164 )expense, netAmortizationof debt (270 ) (276 ) (999 ) (1,032 )issuance costsOther income (5,724 ) -- (5,724 ) -- (loss), netIncome (loss)before income (44,051 ) (46,545 ) 76,543 25,154 taxesIncome taxexpense (13,852 ) (12,640 ) 20,625 7,517 (benefit)Net income $ (30,199 ) $ (33,905 ) $ 55,918 $ 17,637 (loss)GeneralPartner'sinterest in (223 ) (224 ) 377 95 net income(loss)LimitedPartners'interest in $ (29,976 ) $ (33,681 ) $ 55,541 $ 17,542 net income(loss) Per unit data(Basic and Diluted):Net income(loss)available to $ (0.68 ) $ (0.69 ) $ 1.22 $ 0.35 limitedpartnersDilutiveimpact oftheoretical -- -- 0.15 -- distributionof earningsBasic anddiluted income(loss) per $ (0.68 ) $ (0.69 ) $ 1.07 $ 0.35 LimitedPartner Unit: Weightedaverage numberof LimitedPartner units 43,875 48,986 45,656 50,814 outstanding(Basic andDiluted)

SUPPLEMENTAL INFORMATIONSTAR GROUP, L.P. AND SUBSIDIARIES

RECONCILIATION OF EBITDA AND ADJUSTED EBITDA(Unaudited)

Three Months Ended September 30,(in thousands) 2020 2019 Net loss $ (30,199 ) $ (33,905 )Plus: Income tax benefit (13,852 ) (12,640 )Amortization of debt issuance costs 270 276 Interest expense, net 1,959 2,487 Depreciation and amortization 8,037 9,073 EBITDA (33,785 ) (34,709 )(Increase) / decrease in the fair value of 781 5,845 derivative instrumentsOther loss (income), net 5,724 -- Adjusted EBITDA (27,280 ) (28,864 )Add / (subtract) Income tax benefit 13,852 12,640 Interest expense, net (1,959 ) (2,487 )Provision for losses on accounts receivable (1,115 ) 1,041 Decrease in accounts receivables 29,621 44,930 Increase in inventories (6,547 ) (8,264 )Increase in customer credit balances 33,312 29,792 Change in deferred taxes (2,390 ) 6,080 Change in other operating assets and (18,123 ) (19,808 )liabilitiesNet cash provided by operating activities $ 19,371 $ 35,060 Net cash used in investing activities $ (9,423 ) $ (1,588 )Net cash used in financing activities $ (19,755 ) $ (34,290 ) Home heating oil and propane gallons sold 19,000 21,900 Other petroleum products 39,600 44,200 Total all products 58,600 66,100

SUPPLEMENTAL INFORMATIONSTAR GROUP, L.P. AND SUBSIDIARIES

RECONCILIATION OF EBITDA AND ADJUSTED EBITDA(Unaudited)

Twelve Months Ended September 30,(in thousands) 2020 2019 Net income $ 55,918 $ 17,637 Plus: Income tax expense 20,625 7,517 Amortization of debt issuance costs 999 1,032 Interest expense, net 9,702 11,164 Depreciation and amortization 34,623 32,901 EBITDA 121,867 70,251 (Increase) / decrease in the fair value of 2,755 25,113 derivative instrumentsOther loss (income), net 5,724 -- Adjusted EBITDA 130,346 95,364 Add / (subtract) Income tax expense (20,625 ) (7,517 )Interest expense, net (9,702 ) (11,164 )Provision for losses on accounts receivable 3,441 9,541 Decrease in accounts receivables 34,366 10,137 Decrease (increase) in inventories 14,588 (6,306 )Increase in customer credit balances 14,775 3,615 Change in deferred taxes (3,544 ) (5,126 )Change in other operating assets and 12,023 8,838 liabilitiesNet cash provided by operating activities $ 175,668 $ 97,382 Net cash used in investing activities $ (28,141 ) $ (82,166 )Net cash used in financing activities $ (95,515 ) $ (24,848 ) Home heating oil and propane gallons sold 313,600 345,500 Other petroleum products 151,800 167,400 Total all products 465,400 512,900

Source: Star Group, L.P.

CONTACT: Chris WittyStar Group, L.P. Darrow AssociatesInvestor Relations 646/438-9385 or cwitty@darrowir.com203/328-7310