EXHIBIT 99.1
Star Gas Partners, L.P. Reports Fiscal 2010 Second Quarter Results
Announces Champion Energy Acquisition
STAMFORD, Conn., May 10, 2010 (GLOBE NEWSWIRE) -- Star Gas Partners, L.P. (the "Partnership" or "Star") (NYSE:SGU), a home energy distributor and services provider specializing in heating oil, today announced financial results for its fiscal 2010 second quarter and the six-month period ended March 31, 2010. Star also announced the acquisition of Champion Energy Corporation ("Champion") for $50.2 million plus working capital, which is estimated to be $11.3 million. Star purchased the stock of Champion with cash on hand.
In commenting on this acquisition, Star Gas Partners Chief Executive Officer Mr. Donovan stated, "We are very excited with the acquisition of Champion and look forward to working with their 300 motivated and dedicated employees. Champion serves over 45,000 residential and commercial home heating oil customers in markets where we currently operate and, for their fiscal year ended June 30, 2009, had sales of $151.5 million, generating $9.5 million of Adjusted EBITDA and net income of $1.5 million. During this time, Champion sold 35.2 million gallons of residential home heating oil, 4.1 million gallons of commercial home heating oil, and 8.9 million gallons of other petroleum products. We believe Champion is an excellent fit for Star and are eager to work with their management team. Champion's companies are all local operations whose employees take great pride in the home heating services they have been offering their customers for many years. Under the Star banner, we expect these operations to cont inue following the same tradition of excellence in customer service."
For the fiscal 2010 second quarter, Star reported a 6.0 percent increase in total revenues to $551.7 million, compared to total revenues of $520.5 million in the year ago period, as an increase in home heating oil selling prices more than offset a decline in home heating oil volume. Selling prices rose in response to an increase in wholesale product cost.
Home heating oil volume for the fiscal 2010 second quarter decreased 19.1 million gallons, to 156.8 million gallons due to the impact of warmer temperatures and net customer attrition. Temperatures in Star's geographic areas of operations for the fiscal 2010 second quarter were 8.4 percent warmer than the fiscal 2009 second quarter and were 6.3 percent warmer than normal.
Operating income decreased $35.8 million to $75.1 million largely due to an unfavorable non cash change in the fair value of derivatives of $37.6 million.
The Partnership reported net income of $40.5 million, a $68.1 million decrease versus the fiscal 2009 second quarter, largely due to an unfavorable change in the fair value of derivative instruments of $37.6 million, an increase in deferred income taxes of $26.6 million, a decrease in current tax expense of $1.4 million and a reduction in income relating to repurchasing the Partnership's Senior Notes of $7.3 million.
Adjusted EBITDA decreased $0.7 million to $74.0 million, as compared to $74.7 million for the three months ended March 31, 2009.
EBITDA and Adjusted EBITDA are non-GAAP (Generally Accepted Accounting Principles) financial measures which are explained below in greater detail under "EBITDA and Adjusted EBITDA (non-GAAP Financial Measures)." Please refer to the Supplemental Information included in this news release for reconciliations of these non-GAAP financial measures to their most directly comparable GAAP financial measures for the three and six months ended March 31, 2010 and 2009 for Star, and for the twelve months ended June 30, 2009 for Champion.
In commenting on Star's second quarter results, Mr. Donovan added, "We continued to focus on customer retention this quarter and achieved EBITDA almost equivalent to that of last year. Given the warm weather, particularly in March, which was 25 percent warmer than March 2009, these results speak to our high level of service and sound financial management. These are qualities that not only serve our unitholders but also attract the best acquisition candidates, such as Champion."
For the six months ended March 31, 2010, Star reported a 2.5 percent decrease in total revenues to $900.6 million, compared to total revenues of $923.4 million in the year-ago period, as a reduction in home heating oil volume was partially offset by higher selling prices.
Home heating oil volume decreased 33.3 million gallons to 252.2 million gallons, due to the impact of warmer temperatures and net customer attrition.
Temperatures in Star's geographic areas of operations for the six months ended March 31, 2010 were 7.1 percent warmer than the six months ended March 31, 2009 and approximately 4.7 percent warmer than normal. The higher temperatures were largely due to a warming trend that began in March 2010 and continued into April 2010; temperatures in April 2010 were 29 percent warmer than in April 2009.
Net income decreased $48.1 million to $52.5 million largely due to an increase in deferred income tax expense of $35.8 million and a $10.9 million reduction in income related to repurchasing the Partnership's Senior Notes.
Adjusted EBITDA decreased $9.5 million to $100.7 million for the six months ended March 31, 2010, as the decline in home heating oil volume more than offset the positive impacts of higher per gallon margins and lower operating expenses.
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 are non-GAAP financial measures that are used as supplemental financial measures by management and external users of our financial statements, such as investors, commercial banks and research analysts, to assess:
- our compliance with certain financial covenants included in our debt agreements;
- our financial performance without regard to financing methods, capital structure, income taxes or historical cost basis;
- our ability to generate cash sufficient to pay interest on our indebtedness and to make distributions to our partners;
- our operating performance and return on invested capital as compared to those of other companies in the retail distribution of refined petroleum products business, without regard to financing methods and capital structure; and
- the viability of acquisitions and capital expenditure projects and the overall rates of return of alternative investment opportunities.
Adjusted EBITDA is calculated as earnings from continuing operations before net interest expense, income taxes, depreciation and amortization, (increase) decrease in the fair value of derivatives, gain or loss on debt redemption, goodwill impairment, and other non-cash and non-operating charges. Management believes the presentation of this measure is relevant and useful because it allows investors to view the Partnership's performance in a manner similar to the method management uses, and makes it easier to compare its results with other companies that have different financing and capital structures. In addition, this measure is consistent with the manner in which the Partnership's debt covenants in its material debt agreements are calculated. Both the Partnership's 10.25 percent Senior Note agreement and its bank credit facility contain covenants that restrict equity distributions, acquisitions, and the amount of debt it can incur. Under the most restrictive of these covenants, which is foun d in the bank credit facility, the agent bank could step in and control all cash transactions for the Partnership if we failed to comply with the minimum availability or the fixed charge coverage ratio. The Partnership is required to maintain either availability (borrowing base less amounts borrowed and letters of credit issued) of $43.5 million or a fixed charge coverage ratio of 1.1 to 1.0 (Adjusted EBITDA being a significant component of this calculation). This method of calculating Adjusted EBITDA may not be consistent with that of other companies and should be viewed in conjunction with measurements that are computed in accordance with GAAP.
Each of EBITDA and Adjusted EBITDA has its limitations as an analytical tool, and it should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP. Some of the limitations of EBITDA and Adjusted EBITDA are:
- EBITDA and Adjusted EBITDA do not reflect our 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, our working capital requirements;
- EBITDA and Adjusted EBITDA do not reflect the cash necessary to make payments of interest or principal on our indebtedness; and
- EBITDA and Adjusted EBITDA do not reflect the cash required to pay taxes.
REMINDER: Star Gas management will host a webcast and conference call Tuesday, May 11 at 11:00 a.m. (ET). The webcast is available at http://www.star-gas.com/MediaList.cfm and at www.vcall.com. The Conference call dial-in is 888-335-0893 (or 970-315-0470 for international callers).
About Star Gas Partners, L.P.
Star Gas Partners, L.P., is the nation's largest retail distributor of home heating oil. Additional information is available by obtaining the Partnership's SEC filings at www.sec.gov and by visiting Star's website at www.star-gas.com, where unitholders 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 Partnership's expectations or beliefs concerning future events that involve risks and uncertainties, including those associated with the effect of weather conditions on our financial performance, the price and supply of home heating oil, the consumption patterns of our customers, our ability to obtain satisfactory gross profit margins, our ability to obtain new accounts and retain existing accounts, our ability to make strategic acquisitions, the impact of litigation, natural gas conversions, future union relations and the outcome of current and future union negotiations, the impact of current and future environmental, health and safety regulations, customer creditworthiness, counterparty creditworthiness, marketing plans and general economic conditions. All statements other than statements of historical facts included in this news release are forward-looking statements. Although the Partnership believes that the expectati ons reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to have been correct. Important factors that could cause actual results to differ materially from the Partnership's expectations ("Cautionary Statements") are disclosed in this news release and in the Partnership's quarterly report on form 10Q for the quarter ended March 31, 2010 and its Annual Report on Form 10-K for the year ended September 30, 2009, including without limitation and in conjunction with the forward-looking statements included in this news release. All subsequent written and oral forward-looking statements attributable to the Partnership or persons acting on its behalf are expressly qualified in their entirety by the Cautionary Statements. Unless otherwise required by law, the Partnership 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 .
| STAR GAS PARTNERS, L.P. AND SUBSIDIARIES |
| CONDENSED CONSOLIDATED BALANCE SHEETS |
| | | |
| (in thousands) | March 31,
2010 | September 30,
2009 |
| | (unaudited) | |
| ASSETS | | |
| Current assets | | |
| Cash and cash equivalents | $ 53,573 | $ 195,160 |
| Receivables, net of allowance of $9,017 and $6,267, respectively | 188,495 | 58,854 |
| Inventories | 60,200 | 62,636 |
| Fair asset value of derivative instruments | 11,771 | 14,676 |
| Current deferred tax asset, net | 19,785 | 30,135 |
| Prepaid expenses and other current assets | 19,956 | 15,437 |
| Total current assets | 353,780 | 376,898 |
| | | |
| Property and equipment, net | 37,324 | 37,494 |
| Long-term portion of accounts receivables | 671 | 504 |
| Goodwill | 183,065 | 182,942 |
| Intangibles, net | 16,324 | 20,468 |
| Long-term deferred tax asset, net | 10,318 | 36,265 |
| Deferred charges and other assets, net | 7,673 | 9,555 |
| Total assets | $ 609,155 | $ 664,126 |
| | | |
| LIABILITIES AND PARTNERS' CAPITAL | | |
| Current liabilities | | |
| Accounts payable | $ 17,136 | $ 17,103 |
| Revolving credit facility borrowings | 19,094 | -- |
| Fair liability value of derivative instruments | 1,356 | 665 |
| Accrued expenses and other current liabilities | 67,178 | 64,446 |
| Unearned service contract revenue | 40,745 | 37,121 |
| Customer credit balances | 21,055 | 74,153 |
| Total current liabilities | 166,564 | 193,488 |
| | | |
| Long-term debt | 82,827 | 133,112 |
| Other long-term liabilities | 31,185 | 31,192 |
| | | |
| Partners' capital | | |
| Common unitholders | 353,686 | 332,340 |
| General partner | 486 | 309 |
| Accumulated other comprehensive income (loss), net of taxes | (25,593) | (26,315) |
| Total partners' capital | 328,579 | 306,334 |
| Total liabilities and partners' capital | $ 609,155 | $ 664,126 |
| |
| |
| STAR GAS PARTNERS, 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) | 2010 | 2009 | 2010 | 2009 |
| | | | | |
| Sales: | | | | |
| Product | $510,713 | $ 478,762 | $ 812,478 | $ 833,029 |
| Installations and service | 41,019 | 41,738 | 88,073 | 90,321 |
| Total sales | 551,732 | 520,500 | 900,551 | 923,350 |
| Cost and expenses: | | | | |
| Cost of product | 361,713 | 323,705 | 576,228 | 573,411 |
| Cost of installations and service | 42,517 | 44,561 | 88,189 | 93,343 |
| (Increase) decrease in the fair value of derivative instruments | (4,702) | (42,262) | (8,094) | (5,408) |
| Delivery and branch expenses | 67,872 | 71,597 | 124,694 | 135,168 |
| Depreciation and amortization expenses | 3,561 | 6,066 | 7,096 | 12,109 |
| General and administrative expenses | 5,646 | 5,953 | 10,699 | 11,213 |
| Operating income | 75,125 | 110,880 | 101,739 | 103,514 |
| Interest expense | (3,885) | (4,349) | (8,155) | (9,368) |
| Interest income | 935 | 1,196 | 1,329 | 2,288 |
| Amortization of debt issuance costs | (672) | (576) | (1,328) | (1,168) |
| Gains (losses) on redemption of debt | (1,132) | 6,218 | (1,132) | 9,740 |
| Income before income taxes | 70,371 | 113,369 | 92,453 | 105,006 |
| Income tax expense | 29,836 | 4,702 | 39,913 | 4,350 |
| Net income | $40,535 | $ 108,667 | $ 52,540 | $ 100,656 |
| General Partner's interest in net income | 187 | 466 | 241 | 431 |
| Limited Partners' interest in net income | $40,348 | $ 108,201 | $ 52,299 | $ 100,225 |
| | | | | |
| | | | | |
| Per unit data (Basic and Diluted): | | | | |
| Net income available to limited partners | $0.57 | $ 1.43 | $ 0.73 | $ 1.32 |
Dilutive impact of theoretical distribution of earnings under
FASB ASC 260-10-45-60 (EITF 03-06) | 0.09 | 0.26 | 0.11 | 0.24 |
Limited Partner's interest in net income under FASB
ASC 260-10-45-60 | $0.48 | $ 1.17 | $ 0.62 | $ 1.08 |
| | | | | |
| | | | | |
Weighted average number of Limited Partner units outstanding
(Basic and Diluted) | 70,302 | 75,774 | 71,494 | 75,774 |
| |
| SUPPLEMENTAL INFORMATION |
| | | |
| STAR GAS PARTNERS, L.P. AND SUBSIDIARIES |
| RECONCILIATION OF EBITDA AND ADJUSTED EBITDA |
| (Unaudited) |
| | | |
| | Three Months Ended
March 31, |
| (in thousands) | 2010 | 2009 |
| | | |
| Net income | $ 40,535 | $ 108,667 |
| Plus: | | |
| Income tax expense | 29,836 | 4,702 |
| Amortization of debt issuance cost | 672 | 576 |
| Interest expense, net | 2,950 | 3,153 |
| Depreciation and amortization | 3,561 | 6,066 |
| EBITDA from continuing operations | 77,554 | 123,164 |
| | | |
| (Increase) / decrease in the fair value of derivative instruments | (4,702) | (42,262) |
| (Gains) / losses on redemption of debt | 1,132 | (6,218) |
| Adjusted EBITDA | 73,984 | 74,684 |
| | | |
| Add / (subtract) | | |
| Income tax expense | (29,836) | (4,702) |
| Interest expense, net | (2,950) | (3,153) |
| Provision for losses on accounts receivable | 3,334 | 4,018 |
| Increase in accounts receivables | (58,338) | (16,585) |
| Decrease in inventories | 11,823 | 26,427 |
| Decrease in customer credit balances | (31,308) | (45,105) |
| Change in deferred taxes | 26,306 | -- |
| Change in other operating assets and liabilities | 3,924 | 17,966 |
| Net cash provided by (used in) operating activities | $ (3,061) | $ 53,550 |
| | | |
| Net cash used in investing activities | $ (1,077) | $ (837) |
| | | |
| Net cash used in financing activities | $ (40,960) | $ (25,008) |
| | | |
| Home heating oil gallons sold | 156,800 | 175,900 |
| |
| |
| SUPPLEMENTAL INFORMATION |
| | | |
| STAR GAS PARTNERS, L.P. AND SUBSIDIARIES |
| RECONCILIATION OF EBITDA AND ADJUSTED EBITDA |
| (Unaudited) |
| | | |
| | Six Months Ended
March 31, |
| (in thousands) | 2010 | 2009 |
| | | |
| Net income | $ 52,540 | $ 100,656 |
| Plus: | | |
| Income tax expense | 39,913 | 4,350 |
| Amortization of debt issuance cost | 1,328 | 1,168 |
| Interest expense, net | 6,826 | 7,080 |
| Depreciation and amortization | 7,096 | 12,109 |
| EBITDA from continuing operations | 107,703 | 125,363 |
| | | |
| (Increase) / decrease in the fair value of derivative instruments | (8,094) | (5,408) |
| (Gains) / losses on redemption of debt | 1,132 | (9,740) |
| Adjusted EBITDA | 100,741 | 110,215 |
| | | |
| Add / (subtract) | | |
| Income tax expense | (39,913) | (4,350) |
| Interest expense, net | (6,826) | (7,080) |
| Provision for losses on accounts receivable | 5,482 | 6,886 |
| Increase in accounts receivables | (135,290) | (71,583) |
| Decrease in inventories | 2,436 | 5,398 |
| Decrease in customer credit balances | (53,098) | (36,392) |
| Change in deferred taxes | 35,788 | -- |
| Change in other operating assets and liabilities | 14,632 | 30,265 |
| Net cash provided by (used in) operating activities | $ (76,048) | $ 33,359 |
| | | |
| Net cash used in investing activities | $ (2,632) | $ (4,841) |
| | | |
| Net cash used in financing activities | $ (62,907) | $ (31,408) |
| | | |
| Home heating oil gallons sold | 252,200 | 285,500 |
| |
| |
| SUPPLEMENTAL INFORMATION |
| | |
| CHAMPION ENERGY CORPORATION |
| RECONCILIATION OF EBITDA AND ADJUSTED EBITDA |
| (Unaudited) |
| | |
| (in thousands) | Twelve Months
Ended
June 30, 2009 |
| | |
| Net income | $ 1,492 |
| Plus: | |
| Income tax benefit | (543) |
| Amortization of deferred charges | 1,247 |
| Interest expense, net | 4,327 |
| Depreciation and amortization | 3,017 |
| EBITDA from continuing operations | 9,540 |
| | |
| (Increase) / decrease in the fair value of derivative instruments | -- |
| (Gains) / losses on redemption of debt | -- |
| Adjusted EBITDA | 9,540 |
| | |
| Add / (subtract) | |
| Income tax benefit | 543 |
| Interest expense, net | (4,327) |
| Decrease in accounts receivables | 5,052 |
| Decrease in inventories | 255 |
| Change in deferred taxes | (874) |
| Change in other operating assets and liabilities | (2,742) |
| Net cash provided by operating activities | $ 7,447 |
| | |
| Net cash used in investing activities | $ (1,063) |
| | |
| Net cash used in financing activities | $ (7,006) |
CONTACT: Star Gas Partners
Investor Relations
203/328-7310
Darrow Associates
Chris Witty
646/438-9385
cwitty@darrowir.com