GlobeNewswire Inc | Aug 3, 2020 04:15PM EDT

August 03, 2020

STAMFORD, Conn., Aug. 03, 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 third quarter and nine months ended June 30, 2020.

Three Months Ended June 30, 2020 Compared to the Three Months Ended June 30, 2019For the fiscal 2020 third quarter, Star reported an 18.1 percent decrease in total revenue to $232.2 million compared with $283.4 million in the prior-year period, as a decline in selling prices, in response to lower wholesale product costs, and reduced service and installation sales was only partially offset by an increase in home heating oil and propane volume sold.

The volume of home heating oil and propane sold during the fiscal 2020 third quarter increased by 14.3 million gallons, or 38.8 percent, to 51.2 million gallons due to the impact of cooler temperatures, partially offset by net customer attrition and other factors. Temperatures in Star's geographic areas of operation for the fiscal 2020 third quarter were 46.4 percent colder than during the fiscal 2019 third quarter and 17.9 percent colder than normal, as reported by the National Oceanic and Atmospheric Administration. The volume of other petroleum products sold decreased by 8.1million gallons, or 19.0 percent, to 34.2million gallons, as the additional volume provided by acquisitions of 2.0 million gallons was more than offset by a decline in motor fuel sales, reflecting the impact of COVID-19 on overall economic activity, including the loss of certain accounts.

Stars net loss declined by $23.1 million in the quarter due to an increase in the Companys Adjusted EBITDA (a non-GAAP measure defined below) of $25.7 million, as described below, and favorable non-cash change in the fair value of derivative instruments of $4.9 million.

Adjusted EBITDA increased by $25.7million, or 128.2 percent, to $5.7million. Acquisitions provided $1.2 million of Adjusted EBITDA, while Adjusted EBITDA in the base business increased by $24.5 million due to the higher volume of home heating oil and propane sold (reflecting colder temperatures), lower operating expenses in the base business of $10.2 million, and an improvement in net service and installation profitability of $0.9 million, reduced slightly by the decline in Stars motor fuel business.

Stars fiscal third quarter was one of solid performance, most notably the significant increase posted year-over-year in the Companys Adjusted EBITDA, said Jeff Woosnam, Star Groups President and Chief Executive Officer. While lower product costs reduced overall revenue, our heating oil and propane volume rose nearly 40 percent, margins were stable, operating expenses declined by over $10 million in the base business and our net customer attrition was lower than last year. Im very proud of our results during this challenging time, which say as much about the dedication of Stars high caliber team of employees as it does the enduring demand for the products and services we provide.

Nine Months Ended June 30, 2020 Compared to the Nine Months Ended June 30, 2019Star reported a 15.4 percent decrease in total revenue to $1.3 billion for the nine months ended June 30, 2020 compared with revenue of $1.5 billion in the prior-year period, largely due to lower average selling prices, in response to a decline in wholesale product costs, and an 8.9 percent decrease in total volume sold.

The volume of home heating oil and propane sold decreased by 29.0 million gallons, or 9.0 percent, to 294.6 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 11.0million gallons, or 8.9 percent, to 112.2million 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, including the loss of certain accounts.

Net income increased by $34.6 million, to $86.1 million, year-to-date due to an increase in Adjusted EBITDA of $33.4 million and a favorable non-cash change in the fair value of derivative instruments of $17.3 million.

Adjusted EBITDA increased by $33.4million, or 26.9 percent, to $157.6million. Acquisitions provided $9.2 million of Adjusted EBITDA, while Adjusted EBITDA in the base business increased by $24.2 million. In the base business, the impact of higher per gallon home heating oil and propane margins of 6.3 cents per gallon, lower operating expenses of $54.8 million, a favorable change in the impact from the Companys weather hedge of $12.2 million, and an improvement in net service and installation profitability of $3.7 million more than offset the impact from a decrease in volume of home heating oil and propane sold (due to 6.0 percent warmer weather, net customer attrition and other factors) and the aforementioned decline in Stars motor fuel business. With regard to the Companys weather hedge, warmer temperatures during the fiscal 2020 winter hedge period resulted in lower degree days and, per the terms of Stars weather hedge contracts, the collection of $10 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 period covered by the weather hedge (i.e., November through March) 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, net other income, 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, August 4, 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, 2019. 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 March 31, 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.

(financials follow)

STAR GROUP, L.P. AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETS June30, September30, 2020 2019(in thousands) (unaudited) ASSETS Current assets Cash and cash equivalents $ 66,718 $ 4,899 Receivables, net of allowance of $8,757 and 111,915 120,245 $8,378, respectivelyInventories 43,699 64,788 Prepaid expenses and other current assets 28,464 36,898 Total current assets 250,796 226,830 Property and equipment, net 94,826 98,239 Operating lease right-of-use assets 100,765 ? Goodwill 244,574 244,574 Intangibles, net 93,518 107,688 Restricted cash 250 250 Captive insurance collateral 69,607 58,490 Deferred charges and other assets, net 17,788 16,635 Total assets $ 872,124 $ 752,706 LIABILITIES AND PARTNERS? CAPITAL Current liabilities Accounts payable $ 25,081 $ 33,973 Revolving credit facility borrowings ? 24,000 Fair liability value of derivative instruments 10,495 8,262 Current maturities of long-term debt 13,000 9,000 Current portion of operating lease liabilities 19,391 ? Accrued expenses and other current liabilities 153,591 120,839 Unearned service contract revenue 58,121 61,213 Customer credit balances 50,127 68,270 Total current liabilities 329,806 325,557 Long-term debt 112,975 120,447 Long-term operating lease liabilities 86,680 ? Deferred tax liabilities, net 19,153 20,116 Other long-term liabilities 22,235 25,746 Partners? capital Common unitholders 319,522 279,709 General partner (2,041 ) (1,968 )Accumulated other comprehensive loss, net of (16,206 ) (16,901 )taxesTotal partners? capital 301,275 260,840 Total liabilities and partners? capital $ 872,124 $ 752,706

STAR GROUP, L.P. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF OPERATIONS Three Months Ended Nine Months Ended June30, June30,(in thousands,except per unit 2020 2019 2020 2019data - unaudited)Sales: Product $ 165,182 $ 210,657 $ 1,079,145 $ 1,306,764 Installations and 66,973 72,719 205,018 211,221 servicesTotal sales 232,155 283,376 1,284,163 1,517,985 Cost and expenses: Cost of product 93,264 155,055 666,287 876,920 Cost ofinstallations and 54,732 62,130 189,674 201,841 services(Increase) decreasein the fair value (3,279 ) 1,630 1,974 19,268 of derivativeinstrumentsDelivery and branch 72,756 82,669 254,945 296,026 expensesDepreciation andamortization 8,447 8,225 26,586 23,828 expensesGeneral andadministrative 6,954 5,472 18,882 23,136 expensesFinance charge (1,217 ) (1,872 ) (3,251 ) (4,166 )incomeOperating income 498 (29,933 ) 129,066 81,132 (loss)Interest expense, (2,308 ) (2,967 ) (7,743 ) (8,677 )netAmortization of (241 ) (253 ) (729 ) (756 )debt issuance costsIncome (loss) (2,051 ) (33,153 ) 120,594 71,699 before income taxesIncome tax expense (2,005 ) (10,055 ) 34,477 20,157 (benefit)Net income (loss) $ (46 ) $ (23,098 ) $ 86,117 $ 51,542 General Partner?sinterest in net (1 ) (150 ) 600 319 income (loss)Limited Partners?interest in net $ (45 ) $ (22,948 ) $ 85,517 $ 51,223 income (loss) Per unit data(Basic and Diluted):Net income (loss)available to $ ? $ (0.46 ) $ 1.85 $ 1.00 limited partnersDilutive impact oftheoreticaldistribution of ? ? 0.30 0.14 earnings under FASBASC 260-10-45-60Basic and dilutedincome (loss) per $ ? $ (0.46 ) $ 1.55 $ 0.86 Limited PartnerUnit: Weighted averagenumber of LimitedPartner units 45,246 49,943 46,253 51,431 outstanding (Basicand Diluted)

SUPPLEMENTAL INFORMATIONSTAR GROUP, L.P. AND SUBSIDIARIES

RECONCILIATION OF EBITDA AND ADJUSTED EBITDA(Unaudited) Three Months Ended June30,(in thousands) 2020 2019Net loss $ (46 ) $ (23,098 )Plus: Income tax benefit (2,005 ) (10,055 )Amortization of debt issuance costs 241 253 Interest expense, net 2,308 2,967 Depreciation and amortization 8,447 8,225 EBITDA 8,945 (21,708 )(Increase) / decrease in the fair value of (3,279 ) 1,630 derivative instrumentsAdjusted EBITDA 5,666 (20,078 )Add / (subtract) Income tax benefit 2,005 10,055 Interest expense, net (2,308 ) (2,967 )Provision for losses on accounts receivable 1,353 3,532 Decrease in accounts receivables 74,307 124,456 Decrease in inventories 9,127 5,699 Increase in customer credit balances 13,925 12,299 Change in deferred taxes (1,376 ) (1,871 )Change in other operating assets and 2,723 (26,442 )liabilitiesNet cash provided by operating activities $ 105,422 $ 104,683 Net cash used in investing activities $ (5,521 ) $ (53,268 )Net cash used in financing activities $ (43,484 ) $ (62,070 ) Home heating oil and propane gallons sold 51,200 36,900 Other petroleum products 34,200 42,300 Total all products 85,400 79,200

SUPPLEMENTAL INFORMATIONSTAR GROUP, L.P. AND SUBSIDIARIES

RECONCILIATION OF EBITDA AND ADJUSTED EBITDA(Unaudited) Nine Months Ended June30,(in thousands) 2020 2019Net income $ 86,117 $ 51,542 Plus: Income tax expense 34,477 20,157 Amortization of debt issuance costs 729 756 Interest expense, net 7,743 8,677 Depreciation and amortization 26,586 23,828 EBITDA 155,652 104,960 (Increase) / decrease in the fair value of 1,974 19,268 derivative instrumentsAdjusted EBITDA 157,626 124,228 Add / (subtract) Income tax expense (34,477 ) (20,157 )Interest expense, net (7,743 ) (8,677 )Provision for losses on accounts receivable 4,556 8,500 Decrease (increase) in accounts receivables 4,745 (34,793 )Decrease in inventories 21,135 1,958 Decrease in customer credit balances (18,537 ) (26,177 )Change in deferred taxes (1,154 ) (11,206 )Change in other operating assets and 30,146 28,646 liabilitiesNet cash provided by operating activities $ 156,297 $ 62,322 Net cash used in investing activities $ (18,718 ) $ (80,578 )Net cash (used in) provided by financing $ (75,760 ) $ 9,442 activities Home heating oil and propane gallons sold 294,600 323,600 Other petroleum products 112,200 123,200 Total all products 406,800 446,800

Source: Star Group, L.P.

CONTACT:Star Group, L.P.Investor Relations203/328-7310

Chris WittyDarrow Associates646/438-9385 or cwitty@darrowir.com