EXHIBIT (b)(21)
Appendix II to
FAIRNESS OPINION PRESENTATION TO THE
SPECIAL COMMITTEE OF THE BOARD OF DIRECTORS OF
STAR GAS CORPORATION
Analyses performed under 15-year weather scenario
Changed Pages Only
CONFIDENTIAL
A.G.EDWARDS & SONS, INC.
INVESTMENT BANKING
February 10, 1999
TABLE OF CONTENTS
Please note: Appendix II follows the same page numbering format as Appendix I
and contains only those pages that changed as a result of performing the
analyses under the 15-year weather scenario. Appendix II should be read in
conjunction with Appendix I.
Section
-------
Overview of Petroleum Heat and Power Co., Inc......................... A
Overview of Star Gas Partners, L.P.................................... B
Pro Forma Merger Analysis............................................. E
Relative Contribution Analysis........................................ G
Discounted Cash Flow Analysis......................................... H
Comparable Transactions Analysis...................................... I
Public Partnership Analysis........................................... J
Pro Forma Model....................................................... K
OVERVIEW OF PETRO
EBITDA PROJECTIONS
($ in thousands)
- -------------------------------------------------------------------------------------------
PROJECTED
----------------------------------------------
ACTUAL ACTUAL NORMALIZED ADJUSTED FOR
LTM 9/98 1998 1998 ACTUAL 1999 2000 2001 2002
---------------------------------------------------------------------------------
EBITDA $34,929 $30,612 $44,749 $43,475 $45,978 $48,375 $50,509
- -------------------------------------------------------------------------------------------
MAJOR ASSUMPTIONS FOR 1999 - 2002
- ---------------------------------
[_] 15 Year Weather
[_] Flat Attrition.
[_] $15 million in 1999 and $30 million in 2000 to 2002 of acquisitions at
4.75x EBITDA multiple using half-year convention.
[_] Increase in gross profit margin of $0.01 in 1999 and $0.005 in 2000 to
2002.
Page A-8
OVERVIEW OF STAR GAS
EBITDA PROJECTIONS
($ in thousands)
- ------------------------------------------------------------------------------
PROJECTED
-------------------------------------------
ACTUAL NORMALIZED ADJUSTED FOR
1998 1998 ACTUAL 1999 2000 2001 2002
--------------------------------------------------------------------
EBITDA $18,906 $20,731 $20,415 $23,749 $25,182 $26,615
- ------------------------------------------------------------------------------
MAJOR ASSUMPTIONS FOR 1999 - 2002
- ---------------------------------
[_] 15 Year Weather
[_] No growth in base business.
[_] $5 million in 1999 and $10 million in 2000 to 2002 of acquisitions at 6.5x
EBITDA multiple using half-year convention.
[_] No increase in gross profit margin.
Page B-4
PRO FORMA MERGER ANALYSIS
[_] A.G. Edwards analyzed the impact of the Transaction on the Partnership's
distributable cash flow per unit, the related accretion, common unit
coverage and total unit coverage on a pro forma basis.
-----------------------------------------------------------------
STAR GAS STAR GAS
STAND-ALONE PRO FORMA
----------- ---------
DCF PER UNIT
1998 Actual $1.30 $1.44
1999 Adjusted for Actual (a) 1.41 1.96
2000 Projected 1.77 2.14
ACCRETION/DILUTION
1998 Actual $0.13
1999 Adjusted for Actual (a) 0.56
2000 Projected 0.37
COMMON UNIT COVERAGE
1998 Actual 0.98x 0.78x
1999 Adjusted for Actual (a) 1.04 1.06
2000 Projected 1.27 1.14
TOTAL UNIT COVERAGE
1998 Actual 0.59x 0.62x
1999 Adjusted for Actual (a) 0.64 0.85
2000 Projected 0.80 0.93
-----------------------------------------------------------------
(a) Adjusted to include actual results through January 21, 1999.
Page E-1
RELATIVE CONTRIBUTION ANALYSIS (a)
($ IN THOUSANDS)
[_] A.G.Edwards analyzed the relative pro forma contribution
of both Star Gas and Petro to the ownership of capital in
the pro forma entity based on Star Gas' and Petro's
historical results from operations and their respective
projections.
STAR GAS' AVERAGE GROSS PROFIT
GROSS PROFIT
CONTRIBUTION [GRAPH APPEARS HERE]
96-98 27.5%
99-00 29.2%
96-00 28.2%
EBITDA (B)
STAR GAS' AVERAGE
EBITDA CONTRIBUTION [GRAPH APPEARS HERE]
96-98 35.4%
99-00 33.1%
96-00 34.5%
- -----------------------------------------
(a) For purposes of its analysis, A.G. Edwards converted Petro's historical
December 31st fiscal year-end to a September 30th fiscal year-end for
comparison purposes. Other measures of relative contribution analysis are
non-meaningful.
(b) Includes only heating oil EBITDA for Petro.
Page G-1
RELATIVE CONTRIBUTION ANALYSIS
($ IN THOUSANDS)
(continued)
For Star Gas' contribution of approximately 28.2% of the combined entity's gross
profit and 34.5% of the combined entity's EBITDA, it will receive approximately
34.8% of the implied firm value.
IMPLIED FIRM VALUE
[PIE CHART APPEARS HERE]
Page G - 2
DISCOUNTED CASH FLOW ANALYSIS
[_] A. G. Edwards performed discounted cash flow analyses for Petro, Star Gas
and Star Gas Pro Forma. For Petro, A. G. Edwards used projected tax-
adjusted operating cash flows for 1999 through 2002, terminal values
calculated on 2002 operating cash flow, and discount rates based on the
related weighted average cost of capital. For Star Gas and Star Gas Pro
Forma, A. G. Edwards used projected DCF for 1999 through 2002, terminal
values calculated on 2002 DCF and discount rates based on the related cost
of equity.
Assumptions:
[_] Weighted average cost of capital ("WACC")
- Petro Stand Alone of 13.4% to 13.9% (calculated WACC of 13.6%)
[_] Cost of Equity
- Star Gas Stand Alone of 9.5% to 10.3% (calculated cost of equity of 9.9%)
- Star Gas Pro Forma of 9.5% to 10.3% (calculated cost of equity of 9.9%)
[_] Terminal value operating cash flow multiple
- Petro Stand Alone of 8.0x to 10.0x (calculated 2000 operating cash flow
multiple of 9.1x)
[_] Terminal value DCF multiple
- Star Gas Stand Alone and Star Gas Pro Forma of 8.5x to 10.5x (calculated
2000 DCF multiple of 9.5x)
Page H - 1
DISCOUNTED CASH FLOW ANALYSIS
(continued)
PETRO STAND ALONE
- ------------------------------------------------------------
TERMINAL VALUE OPERATING CASH FLOW MULTIPLE
15 YEAR ------------------------------------------------
WACC 8.0x 8.5x 9.0x 9.5x 10.0x
- ------------------------------------------------------------
13.4% ($40,163) ($30,848) ($21,534) (12,219) (2,904)
13.6% (41,742) (32,500) (23,259) (14,017) (4,775)
13.9% (43,307) (343,137) (24,967) (15,797) (6,628)
- ------------------------------------------------------------
STAR GAS STAND ALONE
- --------------------------------------------------------------
TERMINAL VALUE DCF MULTIPLE
15 YEAR -------------------------------------------
COST OF EQUITY 8.5x 9.0x 9.5x 10.0x 10.5x
- --------------------------------------------------------------
9.5% $77,230 $80,338 $83,447 $86,555 $89,664
9.9% 76,359 79,427 82,495 85,563 88,631
10.3% 75,502 78,530 81,559 84,587 87,616
- --------------------------------------------------------------
STAR GAS PRO FORMA
- ------------------------------------------------------------------
TERMINAL VALUE DCF MULTIPLE
15 YEAR -----------------------------------------------
COST OF EQUITY 8.5x 9.0x 9.5x 10.0x 10.5x
- ------------------------------------------------------------------
9.5% $92,737 $96,408 $100,079 $103,750 $107,421
9.9% 91,701 95,324 98,948 102,571 106,194
10.3% 90,682 94,258 97,834 101,411 104,987
- ------------------------------------------------------------------
Page H-2
DISCOUNTED CASH FLOW ANALYSIS
PETRO - STAND ALONE
EXCLUDING DISTRIBUTIONS FROM STAR GAS
($ IN THOUSANDS)
- ------------------------------------------------------------------------------------------------------------------------------------
ADJUSTED FOR
ACTUAL
CASH FLOW SUMMARY (a): 1999 2000 2001 2002 TERMINAL
- ----------------- ------------ ------------ ------------ ------------ ------------
EBITDA $41,939 $39,988 $36,799 $33,785
Taxes (500) (500) (500) (500)
Maintenance capital expenditures (3,641) (3,714) (3,788) (3,864)
Working capital increases (b) (500) (500) (500) (500)
------------ ------------ ------------ ------------
Net Operating cash flow (free cash flow) 37,298 35,274 32,011 28,921
---------
WEIGHTED AVERAGE COST OF CAPITAL (c) 13.6%
---------
---------
TERMINAL OPERATING CASH FLOW MULTIPLE (d) 9.1x
---------
Discount factor (e) 0.9380 0.8254 0.7263 0.6391 0.6391
Terminal value (f) $263,181
---------
PRESENT VALUE $274,040 $34,987 $29,116 $23,250 $18,484 $168,202
--------- ------------ ------------ ------------ ------------ ------------
Current net debt and preferred stock (g) ($295,450)
---------
---------
NET PRESENT VALUE OF HEATING OIL EQUITY ($21,410)
---------
- ------------------------------------------------------------------------------------------------------------------------------------
(a) Based on management projections.
(b) A. G. Edwards' estimate.
(c) Based on comparable companies WACC.
(d) Petro's current firm value of $322.1 million/$35.3 million 15-year weather
2000 net operating cash flow=9.1x.
(e) Discounted back to mid-year 1999.
(f) Terminal value calculated using operating cash flow multiple.
(g) Net of $13.8 million of cash. Market value of debt used.
Page H - 3
DISCOUNTED CASH FLOW ANALYSIS
STAR GAS - STAND ALONE
($ IN THOUSANDS)
- ------------------------------------------------------------------------------------------------------------------------------------
ADJUSTED FOR
ACTUAL
DISTRIBUTABLE CASH FLOW SUMMARY (a): 1999 2000 2001 2002 TERMINAL
- ------------------------------- ------------ ------------ ------------ ------------ ------------
EBITDA 20,415 23,749 25,182 26,615
Interest expense (8,600) (8,885) (9,307) (9,788)
Maintenance capital expenditures (2,553) (2,599) (2,646) (2,694)
Cash taxes (25) (25) (25) (25)
------------ ------------ ------------ ------------
Distributable cash flow 9,237 12,240 13,204 14,108
-----------
COST OF EQUITY (b) 9.9%
-----------
-----------
TERMINAL DCF MULTIPLE (c) 9.5x
-----------
Discount factor (d) 0.9540 0.8684 0.7904 0.7194 0.7194
Terminal value (e) $134,026
-----------
PRESENT VALUE $136,446 $8,812 $10,629 $10,436 $10,149 $ 96,419
----------- ------------ ------------ ------------ ------------ ------------
Common units/Total units (f) 60.5%
-----------
===========
EQUITY VALUE TO COMMON UNITS (g) $ 82,495
===========
- ------------------------------------------------------------------------------------------------------------------------------------
(a) Based on management projections.
(b) Based on cost of equity calculation per WACC analysis.
(c) Star's current equity market value of $115.3 million/$12.2 million 15-year
weather 2000 DCF=9.5x.
(d) Discounted back to mid-year 1999.
(e) Terminal value calculated using DCF multiple.
(f) Total units include common, subordinated and GP units.
(g) Current market value of common units is 3,858 units * $18.06 unit
price=$69,685.
Page H - 4
DISCOUNTED CASH FLOW ANALYSIS
STAR GAS - PRO FORMA
($ IN THOUSANDS)
- ------------------------------------------------------------------------------------------------------------------------------------
ADJUSTED FOR
ACTUAL
DISTRIBUTABLE CASH FLOW SUMMARY (a): 1999 2000 2001 2002 TERMINAL
- ------------------------------- ------------ ------------ ------------ ------------ ------------
EBITDA 64,390 70,227 74,057 77,624
Interest expense (24,819) (25,600) (27,180) (28,252)
Maintenance capital expenditures (6,194) (6,313) (6,434) (6,558)
Cash taxes (525) (625) (675) (725)
------------ ------------ ------------ ------------
Distributable cash flow 32,852 37,689 39,768 42,089
---------
COST OF EQUITY (b) 9.9%
---------
---------
TERMINAL DCF MULTIPLE (c) 9.5x
---------
Discount factor (d) 0.9540 0.8682 0.7901 0.7191 0.7191
Terminal value (e) $399,846
---------
PRESENT VALUE $413,265 $31,340 $32,721 $31,422 $30,265 $287,517
--------- ------------ ------------ ------------ ------------ ------------
Original Common units/Total units (f) 23.9%
---------
---------
EQUITY VALUE TO COMMON UNITS (g) $98,948
---------
- ------------------------------------------------------------------------------------------------------------------------------------
(a) Based on management projections. See Appendix K for model.
(b) Based on cost of equity calculation per WACC analysis.
(c) Star's current firm value of $115.3 million/$12.2 million 15-year weather
2000 DCF=9.5x.
(d) Discounted back to mid-year 1999.
(e) Terminal value calculated using DCF multiple.
(f) Total units include common, newly issued common, senior subordinated,
subordinated and GP units.
(g) Current market value of common units is 3,858 units * $18.06 unit
price=$69,685.
Page H - 5
COMPARABLE TRANSACTIONS ANALYSIS
FIRM VALUATION
[_] A.G. Edwards noted that public disclosure regarding transactions in
the retail home heating oil distribution industry was extremely
limited.
[_] A.G. Edwards analyzed the financial terms related to divestitures by
Petro of its retail home heating oil branches and compared them to the
implied multiples of the aggregate purchase price of Petro's heating
oil assets.
[_] Petro has sold three branches for an average EBITDA multiple of 9.0x.
[_] A.G. Edwards calculated the purchase price of Petro's heating oil
assets and calculated multiples based on Petro's EBITDAs.
------------------------------------------------------------------------
PURCHASE PRICE OF HEATING OIL ASSETS
----------------------------------------
Equity purchase price of heating oil assets including CUs $ 16,054
Cost of Debt to be Redeemed ($206,250 + $2,844 premium) 209,094
Cost of Debt to be Assumed 80,501
Cost of Preferred stock at Redemption Value 31,767
Consent Fees 1,961
Transaction Fees 19,139
---------
Aggregate purchase price of heating oil assets $ 358,516
=========
MULTIPLES
------------------------- ---------------
MULTIPLES NOTES
--------------- ------------------------------------------------
Actual 4 quarters ended 9/30/98 EBITDA (a) 34,929 10.3 x As a multiple of aggregate transaction value.
Adjusted for actual 1999 EBITDA (a) 43,475 8.2 x As a multiple of aggregate transaction value.
Projected 2000 EBITDA (a) 45,978 7.8 x As a multiple of aggregate transaction value.
---------------
______________________
(a) Calculated as gross profit minus SG&A expense and direct delivery expense.
Page I-1
PUBLIC PARTNERSHIP ANALYSIS
[_] A.G. Edwards compared certain financial and market information of Star Gas
on a historical and pro forma basis to that of certain public propane
master limited partnerships which A.G. Edwards deemed relevant for the
purposes of this analysis. A.G. Edwards reviewed the trading multiples
from a total of five master limited partnerships.
[_] The selected propane master limited partnerships are as follows:
- AmeriGas Partners, L.P. - Heritage Propane Partners, L.P.
- Cornerstone Propane Partners, L.P. - Suburban Propane Partners, L.P.
- Ferrellgas Partners, L.P.
[_] No partnership used in the analysis is identical to Star Gas.
PUBLIC COMPARABLE PARTNERSHIPS (a)
---------------------------------------------------------------------------------------------------
PUBLIC PUBLIC
PRO FORMA PARTNERSHIP PARTNERSHIP
STAR STAR MEDIANS RANGES
---------------------------------------------------------------------------------------------------
Distribution yield 12.2% 12.7% 10.4% 8.6% to 12.3%
Market capitalization/LTM EBITDA 11.9x 10.3x 11.5x 9.1x to 13.2x
Market capitalization/1999E EBITDA 11.0x (b) 8.7x (b) 9.8x 8.6x to 11.3x
Equity Market Cap/LTM DCF 13.8x 12.6x 13.2x 9.6x to 15.5x
Equity Market Cap/1999E DCF 12.5x (c) 8.9x (c) 10.5x 9.9x to 12.2x
LTM common unit coverage 1.0x 0.8x 1.5x 0.8x to 1.9x
1999E common unit coverage 1.0x (d) 1.1x (d) 2.0x 0.9x to 2.2x
LTM total unit coverage 0.6x 0.6x 0.8x 0.5x to 1.1x
1999E total unit coverage 0.6x (d) 0.9x (d) 1.1x 0.6x to 1.1x
---------------------------------------------------------------------------------------------------
(a) Public comparable partnerships include: APU, CNO, FGP, HPG and SPH.
(b) Market capitalization/adjusted for actual 1999 EBITDA.
(c) Equity market cap/adjusted for actual 1999 EBITDA.
(d) Adjusted for actual 1999.
Page J-1
PUBLIC PARTNERSHIP ANALYSIS
($ IN MILLIONS, EXCEPT PER UNIT DATA)
====================================================================================================================================
Closing Implied Implied Common
Price on Market Value Firm Distribution Units/
Company Ticker (2/3/99) of Equity Value per Unit Yield Total Units(a)
- ------------------------------------------------------------------------------------------------------------------------------------
Star Gas Partners, L.P. SGU $18.063 $ 115.3 $ 225.2 $2.20 12.2% 60.5%
AmeriGas Partners, L.P. APU 23.625 1,009.8 1,724.0 2.20 9.3% 51.7%
Cornerstone Propane Partners, L.P. (c) (d) CNO 17.500 355.6 610.4 2.16 12.3% 65.5%
Ferrellgas Partners, L.P. (d) (e) FGP 18.688 596.8 1,185.7 2.00 10.7% 46.0%
Heritage Propane Partners, L.P. (d) HPG 23.750 207.9 403.8 2.05 8.6% 55.7%
Suburban Propane Partners, L.P. (f) SPH 19.188 562.4 930.8 2.00 10.4% 73.6%
- ------------------------------------------------------------------------------------------------------------------------------------
Mean 10.3% 58.5%
Median 10.4% 55.7%
====================================================================================================================================
Pro Forma $18.063 $291.1 $ 557.7 (g) $2.30 12.7% 79.9%
================================================================================================================================
LTM Common LTM Total FY99E FY99E Common FY99E Total
Unit Coverage Unit Coverage DCF/unit Unit Coverage Unit Coverage
- --------------------------------------------------------------------------------------------------------------------------------
Star Gas Partners, L.P. 1.0x (b) 0.6x (b) $1.41 1.0x 0.6x
AmeriGas Partners, L.P. 1.5x 0.8x 2.35 2.0x 1.1x
Cornerstone Propane Partners, L.P. (c) (d) 0.8x 0.5x 1.36 0.9x 0.6x
Ferrellgas Partners, L.P. (d) (e) 1.5x 0.7x 2.14 2.2x 1.1x
Heritage Propane Partners, L.P. (d) 1.9x 1.1x 2.35 2.0x 1.1x
Suburban Propane Partners, L.P. (f) 1.3x 1.0x 2.08 1.2x 1.0x
- --------------------------------------------------------------------------------------------------------------------------------
Mean 1.4x 0.8x 1.7x 1.0x
Median 1.5x 0.8x 2.0x 1.1x
================================================================================================================================
Pro Forma 0.8x (b) 0.6x (b) 1.96 1.1x 0.9x
_____________________________________
1999 estimates per A.G. Edwards' research (not adjusted for actual 1999
results), except for Star and Pro Forma.
Implied Firm Value equals, for comparative purposes, common, subordinated and GP
units, multiplied by the market price of common units plus debt, less cash.
(a) Calculated as (common units/ ((common + subordinated units)/0.98).
(b) For Star and Pro forma only, LTM figures are 1998 actuals.
(c) Financial figures not pro forma for acqusition of Propane Continental Inc.
(d) Maintenance capital expenditures assumed to be 8% of EBITDA due to lack of
disclosure.
(e) Financial figures exclude ESOP charge of $0.9 million.
(f) Financial figures exclude $5.1 million gain from sale of minority interest
and $1.8 million loss from impairment of assets.
(g) $291.1 in equity plus $286.2 pro forma debt, less $19.6 in cash and cash
collateral.
Page J-2
PUBLIC PARTNERSHIP ANALYSIS
($ IN MILLIONS, EXCEPT PER UNIT DATA)
(continued)
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL LTM FIRM VALUE/ FIRM VALUE/ EQUITY EQUITY
DEBT/ EBITDA/ LTM 1999E MARKET CAP/ MARKET CAP/
FIRM VALUE INT. EXP. EBITDA EBITDA LTM DCF 1999E DCF
---------------------------------------------------------------------------------------
STAR GAS PARTNERS, L.P. 51.4% 2.4x (a) 11.9x (a) 11.0x 13.8x (a) 12.5x
AmeriGas Partners, L.P. 41.7% 2.3x 11.5x 9.8x 13.7x 10.6x
Cornerstone Propane Partners, L.P. 43.1% 2.4x 13.2x 11.3x 15.5x 12.2x
Ferrellgas Partners, L.P. 50.1% 2.1x 11.8x 9.5x 13.2x 9.9x
Heritage Propane Partners, L.P. 49.1% 2.5x 10.7x 10.3x 10.6x 10.2x
Suburban Propane Partners, L.P. 46.0% 3.3x 9.1x 8.6x 9.6x 10.5x
- -------------------------------------------------------------------------------------------------------------------------------
MEAN 46.0% 2.5x 11.3x 9.9x 12.5x 10.7x
MEDIAN 46.0% 2.4x 11.5x 9.8x 13.2x 10.5x
- -------------------------------------------------------------------------------------------------------------------------------
PRO FORMA 51.3% 2.2x (a) 10.3x (a) 8.7x 12.6x (a) 8.9x
__________________________________
EBITDA is defined as net income (loss) before extraordinary items plus interest,
income taxes, depreciation and amortization, impairment expense, and other
non-recurring and non-operating items.
(a) For Star and Pro forma only, LTM figures are 1998 actuals.
Page J - 3
TRANSACTION SUMMARY AND ASSUMPTIONS
(in thousands except per share and per unit data)
- ---------------------------------------------------------------------------------------------------------------------------------
SUMMARY CASH FLOW AND COVERAGE ANALYSIS
- ---------------------------------------------------------------------------------------------------------------------------------
($ on per Unit basis) PROJECTED
----------------------------------------------------
ACTUAL NORMALIZED ADJ. FOR ACTUAL
1998 1998 1999 2000 2001 2002
-------- ---------- ----------- --------- -------- ---------
STAR STAND ALONE
EBITDA $ 18,906 $ 20,731 $ 20,415 $ 23,749 $ 25,182 $ 26,615
Interest Expense (7,927) (7,667) (8,600) (8,885) (9,307) (9,788)
Maintenance CapEx (2,625) (2,610) (2,553) (2,599) (2,646) (2,694)
Other (25) (25) (25) (25) (25) (25)
-------- ---------- ---------- --------- -------- ---------
Distributable Cash Flow $ 8,329 $ 10,429 $ 9,237 $ 12,240 $ 13,204 $ 14,108
======== ========== ========== ========= ======== =========
DCF per Common Unit $ 2.16 $ 2.70 $ 2.29 $ 2.79 $ 2.80 $ 2.82
DCF/Common Unit MQD 0.98 x 1.23 x 1.04 x 1.27 x 1.27 x 1.28 X
DCF per Total Unit $ 1.30 $ 1.63 $ 1.41 $ 1.77 $ 1.82 $ 1.87
DCF/Total MQD 0.59 x 0.74 x 0.64 x 0.80 x 0.83 x 0.85 x
Indicated Distribution per Common Unit $ 2.20 $ 2.20 $ 2.20 $ 2.20 $ 2.20 $ 2.20
STAR PRO FORMA
EBITDA
------
Star $ 18,906 $ 20,731 $ 20,415 $ 23,749 $ 25,182 $ 26,615
Petro 34,929 40,749 43,475 45,978 48,375 50,509
Synergies 500 500 500 500 500 500
-------- ---------- ---------- --------- -------- ---------
Total 54,335 65,980 64,390 70,227 74,057 77,624
-------- ---------- ---------- --------- -------- ---------
Interest Expense (24,530) (24,448) (24,819) (25,600) (27,180) (28,252)
Maintenance CapEx (6,125) (6,125) (6,194) (6,313) (6,434) (6,558)
Other (525) (525) (525) (625) (675) (725)
-------- ---------- ---------- --------- -------- ---------
Distributable Cash Flow 23,155 34,882 32,852 37,689 39,768 42,089
======== ========== ========== ========= ======== =========
DCF per Common Unit $ 1.80 $ 2.71 $ 2.44 $ 2.63 $ 2.63 $ 2.58
DCF per Sr. Sub & Common Unit $ 1.51 $ 2.27 $ 2.06 $ 2.24 $ 2.25 $ 2.24
DCF per Total Unit $ 1.44 $ 2.16 $ 1.96 $ 2.14 $ 2.16 $ 2.15
Indicated Distribution per Common Unit $ 2.30 $ 2.30 $ 2.30 $ 2.30 $ 2.30 $ 2.30
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
Accretion/Dilution
- ---------------------------------------------------------------------------------------------------------------------------------
DCF per Unit - Star Stand Alone $ 1.30 $ 1.63 $ 1.41 $ 1.77 $ 1.82 $ 1.87
DCF per Unit - Pro Forma $ 1.44 $ 2.16 $ 1.96 $ 2.14 $ 2.16 $ 2.15
- ---------------------------------------------------------------------------------------------------------------------------------
Accretive ($/Unit) $ 0.13 $ 0.53 $ 0.56 $ 0.37 $ 0.34 $ 0.29
Accretive (%) 10.1% 32.5% 39.4% 21.2% 18.9% 15.3%
- ---------------------------------------------------------------------------------------------------------------------------------
Pro Forma Heating Oil DCF per Unit $ 2.32 $ 2.39 $ 2.39 $ 2.33
DPUs Issued as Sr Sub Units at Beg
of Year - - - - - -
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
Pro Forma Credit Analysis
- ---------------------------------------------------------------------------------------------------------------------------------
EBITDA/Interest 2.22 x 2.70 x 2.25 x 2.74 x 2.72 x 2.75 x
LT Debt/EBITDA 5.07 4.18 4.15 4.22 4.20 4.20
LT Debt/EBITDA (Pro Forma for Full-Year
Acquisitions) 4.91 4.04 4.03 4.00 4.00 4.00
# of Units Issued to Meet Debt Covenant - - 1,207 508 1,122 1,170
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
Pro Forma Coverage Ratios
- ---------------------------------------------------------------------------------------------------------------------------------
MQD Coverage
------------
Common Unit 0.78 x 1.18 x 1.06 x 1.14 x 1.14 x 1.12 x
Senior Subordinated Unit 0.66 0.99 0.89 0.97 0.98 0.97
Total Unit 0.62 0.94 0.85 0.93 0.94 0.94
Indicated Distribution Coverage
-------------------------------
Common Unit 0.78 x 1.18 x 1.06 x 1.14 x 1.14 x 1.12 x
Senior Subordinated Unit 0.66 0.99 0.89 0.97 0.98 0.97
Total Unit 0.62 0.94 0.85 0.93 0.94 0.94
- ---------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
CURRENT MODEL ASSUMPTIONS
- ----------------------------------------------------------------------------------------------------
Scenario Version: 15-yr; $15/$30mm @ 4.75x mid-year; $.01 '99, $.005 '00-'01, flat att.
Petro Acqs/yr $15,000 1999 $30,000 2000 on
Star Acqs/yr $ 5,000 1999 $10,000 2000 on
G.P. Interest Subordinate
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
EQUITY RESTRUCTURING
- ----------------------------------------------------------------------------------------------------
Petro
-----------------------------------------
Public Insiders
------------- --------------
Securities Offered Sr Sub Sub & GP
Security Offered per Share 0.11758 0.14318
Total Shares 14,618 11,834
Insiders to Receive Sr. Sub 6,572 (6,572)
Shares to Be Converted 21,190 5,262
Units Offered 2,491 753
DPUs Offered 909
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
SOURCES AND USES OF FUNDS
- ----------------------------------------------------------------------------------------------------
Sources: Uses:
Excess Cash on Hand $ 0 Repay Debt Principal $206,250
New Star Debt 90,000 Redeem Preferred 31,767
New MLP Equity 170,000 Premium on Redemption/
New MLP E Equity - Exchange/Defeasance 2,844
Equity for Consent Fees 1,961 Consent Fees 1,961
Cash Balance 0 Transaction Fees 19,139
--------- ---------
$ 261,960 $261,960
========= =========
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
FINANCING SUMMARY
- ----------------------------------------------------------------------------------------------------
Amount Rate Unit Price
--------- ---------- ------------
New Common Raised $170,000 $19.08 (a)
New Debt Raised 90,000 7.50%
(a) Last 20 Days Average Stock Price @ 2/3
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
UNITS OUTSTANDING
- ----------------------------------------------------------------------------------------------------
Current Pro Forma
--------------------------- ------------------------
Units % Units %
---------- --------- ---------- ---------
Existing Common 3,858.999 60.5% 3,858.999 23.9%
New Common 0 0.0% 9,013.547 55.9%
New Common for Acquisitions 0 0.0% 0.000 0.0%
Common to Petro Shareholders 0 0.0% 0.000 0.0%
Sr Sub (Petro S/H's) 0 0.0% 2,491.500 15.5%
Existing Sub 2,396.078 37.5% 431.126 2.7%
Implied GP 127.655 2.0% 322.350 2.0%
---------- --------- ---------- ---------
Total Units 6,392.732 100.0% 16,117.523 100.0%
========== ========= ========== =========
- ----------------------------------------------------------------------------------------------------
Page 1 of 19
================================================================================
TRANSACTION SUMMARY AND ASSUMPTIONS
(in thousands except per share and per unit data)
OPERATING ASSUMPTIONS
- ------------------------------------------------------------------------------------
Petro Star Star Normal
----------- ----------- ---------------
Normalized Maintenance CapEx $ 3,500 $ 2,625 $2,610
Maintenance CapEx Life 15 yrs 15 yrs
Growth CapEx Life 12.6 yrs 15 yrs
Required Cash at Beginning for Initial Distribution 8,865
Minimum Star Stand Alone Cash Balance $ 1,115
Minimum Star Pro Forma Cash Balance $ 14,882
Consolidation Savings $ 500
Annual Bank Fees $ 943 $ 0
Last 20 Days Average Stock Price @ 2/3 $ 1.01 $ 19.08 2000+
Annual Transaction/Deal Expenses $ 225 $ 450
Debt/EBITDA Bank Covenant Ratio 4.0x
Issue Equity to Meet Bank Debt Covenants (Y/N)? yes
DEBT RESTRUCTURING
- ------------------------------------------------------------------------------------------------------------
Projected
12/31/97
Privates: % Tendered Principal Strategy Price
---------- ----------- ---------- -------
11.96% Sr Notes 100.0% 60,000 Exchange 105.2%
14.10% Sr Notes 100.0% 3,100 Exchange 105.2%
14.10% Sub Notes 100.0% 3,100 Exchange 105.2%
14.33% Pfd Stock 100.0% 4,167 Neg. Tender 100.0%
Publics:
10.13% Sub Notes & Sr Notes 100.0% 50,000 Neg. Tender 100.0%
9.38% Sub Notes & Sr Notes 100.0% 75,000 Tender 100.0%
12.25% Sub Notes & Sr Notes 100.0% 81,250 Tender 103.5%
12.88% Pfd Stock 100.0% 30,000 Tender 92.0%
NEW SECURITY ASSUMPTIONS
- -----------------------------------------------
New MLP Equity
- --------------
Gross Proceeds $170,000
Common Units for Consent Fee 1,961
Common Units to Enron -
--------
Total New Equity Value $171,960
Common Units to Public 9,014 units
New Star Debt
-------------
Gross Proceeds 90,000
Gross Spread % 5.0% Gross Spread % 1.25%
Gross Spread $ $8,500 Gross Spread $ $1,125
Offering Price Share
(current market price) $19.08 Coupon 7.50%
ACQUISITION ASSUMPTIONS
- --------------------------------------------------------------------------------------------------------
Petro Multiple 1998 1999 2000 2001 2002
- ----- ---------- --------- -------- -------- -------- --------
Amount 4.75 x $ 0 $15,000 $30,000 $30,000 $30,000
Timing End Mid Mid Mid Mid
% EBITDA 0.0% 50.0% 50.0% 50.0% 50.0%
Amount 4.75 x $ 0
Timing Beg
% EBITDA in Initial Year 100.0%
Units Issued at: Common $22.00
Sr. Sub. $18.52
Star Stand-Alone
- ----------------
Weather 30 Year
Amount 6.50 x $9,000 $ 5,000 $ 10,000 $ 10,000 $ 10,000
Timing End Mid Mid Mid Mid
% EBITA in Initial Year 0.0% 50.0% 50.0% 50.0% 50.0%
Amount Financed with Equity $ 0 $ 7,572 $ 8,417 $ 6,585 $ 6,300
New Units @: 0 344 383 299 286
Units Issued at Price of: $22.00 $ 22.00 $ 22.00 $ 22.00 $ 22.00
Amount 6.50 x $ 0
Timing Beg
% EBITDA in Initial Year 100.0%
EXCHANGE ASSUMPTIONS
- ------------------------------------------------------------------------------------------------------------------------
Existing Gets New Units of:
-------------------------------------------------------
Shareholders of: Shares Common Sr Sub Jnr Sub G.P. DPUs(1)
- ----------------------------------------------------------- ---------- --------- ----------- -------- --------
Public Class A Shareholders 14,618.087 0.000 1,718.795 0.000 0.000 481.478
Insider Class B Shares 11.228 0.000 0.000 0.000 0.000
Insider Class C Shareholders 0.000
Class A & C Shares to Receive Jr Sub & GP 5,262.443 0.000 0.000 431.126 322.350 211.068
Class A Shares to Receive Sr Sub 6,571.740 0.000 772.705 0.000 0.000 216.454
----------- ---------- --------- ----------- -------- --------
26,463.498 0.000 2,491.500 431.126 322.350 909.000
E Sr. Sub 0.000 0.000
--------- --------
Total 2,491.500 909.000
========= ========
(1) Includes 2.0% G.P. Interest
TRANSACTION COSTS SUMMARY
-------------------------------------------------
New MLP Equity $ 8,500 Heating Oil DPU Trigger
------------------------
New Star Debt 1,125 DCF/Unit % Convert
Fairness Opinion 1,275 $2.90 33.3%
Financial Advisory 1,500
Exchange Fees on Public Petro
Debt/Preferred 1,375
Legal Fees 4,200
Printing 1,500
Accounting Fees 200 Consent Fee Calculation
-------------------------------------------------
Other:
-----
Environmental 0 % of Petro Stock 3.3%
Rating Agencies 60 New Petro Shares 874
Roadshow 200 Exchange Ratio 8.50x
-----------
Asset Appraisal 100 New Common Units 102.773
Solicitation expenses 100 Common Unit Price $ 19.08
-----------
Other Bank Fees 150 Implied Value $ 1,961
===========
Other 225
-------
$20,510
=======
Transaction Costs Capped at $19,139
===========================================================================================================================
SUMMARY DISTRIBUTIONS
(in thousands except per share and per unit data)
Projected
--------------------------------------------------
1998 1999 2000 2001 2002
--------- ----------- ---------- ---------- -----------
UNITHOLDER CLASS (1)
COMMON UNITHOLDERS
MQD $ 30,994 $ 32,967 $ 34,841 $ 37,477
Incentive Distributions - - - -
----------- ---------- ---------- -----------
Total $ 30,994 $ 32,967 $ 34,841 $ 37,477
E CAPITAL
Existing Sr. Sub Units - - - -
Number of DPUs Issued as Sr Sub Units - - - -
New Sr. Sub Units - - - -
----------- ---------- ---------- -----------
Total Sr. Sub Units - - - -
Existing Common - - - -
New Common - - - -
----------- ---------- ---------- -----------
Total Common - - - -
Common MQD - - - -
Common Incentive Distributions - - - -
Sr. Sub MQD - - - -
Sr. Sub Incentive Distributions - - - -
----------- ---------- ---------- -----------
Total Distributions - - - -
SENIOR SUBORDINATED UNITHOLDERS(1)
Number of DPUs Issued as Sr Sub Units - - - -
Base MQD $ 0 $ 4,722 $ 4,927 $ 4,613
Incremental MQD from DPUs Issued as Sr. Sub Units - - - -
Incentive Distributions - - - -
Incremental Incentive Distributions from DPUs
Issued as Sr. Sub Units - - - -
----------- ---------- ---------- -----------
Total $ 0 $ 4,722 $ 4,927 $ 4,613
SUBORDINATED UNITHOLDERS(1)
Number of DPUs Issued as Sr Sub Units - - - -
Base MQD $ 0 $ 0 $ 0 $ 0
Incremental MQD from DPUs Issued as Sr. Sub Units - - - -
Incentive Distributions - - - -
Incremental Incentive Distributions from DPUs
Issued as Sr. Sub Units - - - -
----------- ---------- ---------- -----------
Total $ 0 $ 0 $ 0 $ 0
GENERAL PARTNER
Number of DPUs Issued as Sr Sub Units - - - -
Base MQD $ 0 $ 0 $ 0 $ 0
Incremental MQD from DPUs Issued as Sr. Sub Units - - - -
Incentive Distributions - - - -
Incremental Incentive Distributions from DPUs
Issued as Sr. Sub Units - - - -
----------- ---------- ---------- -----------
Total $ 0 $ 0 $ 0 $ 0
UNITHOLDER CLASS TOTAL
Common Unitholders $ 30,994 $ 32,967 $ 34,841 $ 37,477
Senior Subordinated Unitholders - 4,722 4,927 4,613
Subordinated Unitholders - - - -
General Partner - - - -
----------- ---------- ---------- -----------
Total $ 30,994 $ 37,689 $ 39,768 $ 42,089
DISTRIBUTIONS TO DPUs CONVERTED TO SENIOR
Subordinated Units
MQD $ 0 $ 0 $ 0 $ 0
Incentive Distributions - - - -
----------- ---------- ---------- -----------
Total - - - -
check - - - -
______________________________
(1) Reflects distributions for respective Unitholder class. All DPUs are issued
as Senior Subordinated Units but are distributed pro rata to all Petro
shareholders. Consequently, the Subordinated Unitholder class includes DPUs
which have been issued as Senior Subordinated Units.
3 of 19
- --------------------------------------------------------------------------------
TRANSACTION SUMMARY AND ASSUMPTIONS
(in thousands except per share and per unit data)
RECAPITALIZATION ASSUMPTIONS
- --------------------------------------------------------------------------------
(D)EFEASE
(T)ENDER
(R)EDEEM PRINCIPAL MATURITY PERIOD SINKING FUND PAYMENT
LOCKUP (E)XCHANGE AS OF ------------------- COUPON/ --------------------
PETRO INSTRUMENTS: PREMIUM (N)OTHING 9/30/98 M/D YR DIVIDEND PAYMENT YEAR START
- ------------------------- --------------------- ----------- --------- -------- ------------ --------- ----------
11.96% Sr Notes e $ 60,000 v 1-Oct 0 11.960% $ 0 0
14.10% Sr Notes e 3,100 v 15-Jan 2001 14.100% - 1997
14.10% Sub Notes e 3,100 v 15-Jan 2001 14.100% - 1997
10.13% Sub Notes & Sr Notes 0.00% t 50,000 v 1-Apr 2003 10.130% -
9.38% Sub Notes & Sr Notes 0.00% t 75,000 v 1-Feb 2006 9.375% -
12.25% Sub Notes & Sr Notes 0.00% t 81,250 v 1-Feb 2005 12.250% -
8.00% Acq. & Other Notes Pay n 14,508 v 0 8.000% - 0
8.25% Existing Credit Facility n 0 v 1998 8.250% -
0.00% Other Notes n 0 v NA NA 0.000% 0 NA
----------
$286,958
PFRD STOCK:
- ----------
14.33% Pfd Stock t 4,167 v 1-Aug 1999 14.330% 4,167 1997
12.88% Pfd Stock 0.0% t 30,000 v 15-Feb 2009 12.875%
0.00% n 0 0.000%
----------
$ 34,167
----------
Total Petro $321,125
----------
STAR INSTRUMENTS:
- -------------------------
8.04% 1st Mortgage Notes 0.07 n 85,000 v NA NA 8.040% - 0
7.25% WC Revolver 0.00 n 4,785 NA NA 7.250% - NA
7.25% Acquisition Facility 0.01 n 9,000 v NA NA 7.250% - NA
7.50% New Debt n 90,000 v NA NA 7.500% 0 NA
7.17% Pearl Notes 0.01 n 11,000 NA NA 7.170% 0 NA
----------
8.21% $188,785
----------
Total Combined $509,910
==========
% RED./ RED-EXCHG DEFEASANCE RED/EXCHG/DEFEASE EXCHANGED
PETRO INSTRUMENTS: EXCHANGED PRICE PRICE VALUE PREMIUM INT RATE SECURITY TYPE
- ------------------------- ---------- ----------- ----------- ------- ---------- ---------- --------------
11.96% Sr Notes 100.0% 105.2% $ 60,000 $ 0 10.9% Sr Notes
14.10% Sr Notes 100.0% 105.2% 3,100 - 14.10% Sr Notes
14.10% Sub Notes 100.0% 105.2% 3,100 - 14.10% Sub Notes
10.13% Sub Notes & Sr Notes 100.0% 100.0% 106.2% 50,000 - Sub Notes & Sr Notes
9.38% Sub Notes & Sr Notes 100.0% 100.0% 108.2% 75,000 - Sub Notes & Sr Notes
12.25% Sub Notes & Sr Notes 100.0% 103.5% 116.2% 84,094 2,844 Sub Notes & Sr Notes
8.00% Acq. & Other Notes Pay 0.0% 100.0% - - Acq. & Other Notes Pay
8.25% Existing Credit Facility 0.0% 100.0% - - Existing Credit Facility
0.00% Other Notes 0.0% 0.0% - - 11.0% Other Notes
---------
2,844
Pfrd Stock:
- ----------
14.33% Pfd Stock 100.0% 100.0% 4,167 - Pfd Stock
12.88% Pfd Stock 100.0% 92.0% 27,600 - Pfd Stock
0.00% - -
---------
Total Petro $ 0
---------
$2,844
Star Instruments
- -------------------------
8.04% 1st Mortgage Notes 0.0% 0.0% - - 1st Mortgage Notes
7.25% WC Revolver 0.0% 0.0% - - WC Revolver
7.25% Acquisition Facility 0.0% 0.0% - - Acquisition Facility
7.50% New Debt 0.0% 0.0% - - New Debt
7.17% Pearl Notes 0.0% 0.0% - - Pearl Notes
----------
$ 0
----------
$2,844
----------
2,843.75
STAR STAND ALONE DISTRIBUTION ASSUMPTIONS STAR PRO FORMA DISTRIBUTION ASSUMPTIONS
- ------------------------------------------------------------------------------ -------------------------------------------------
Distribution Distribution
------------------ -------------------
Minimum Quarterly Distribution $2.20 Minimum Quarterly Distribution $2.30
First Target Distribution $2.42 First Target Distribution $2.42
Second Target Distribution $2.84 Second Target Distribution $2.84
Third Target Distribution $3.70 Third Target Distribution $3.70
Thereafter NM Thereafter NM
1998
-----------
Target Distribution Level $2.20 Annual Indicated Distribution
Annual Distribution Increase $0.00 Increase $0.00
Target Indicated Distribution
-------------------- Level $2.30
Standard Distribution Structure ("S") or Target ("T") t
-------------------- Standard Distribution Structure ("S) or Target
- ------------------------------------------------------------------------------ ("T")
- ---------------------------------------------------------------------------------------------------------------------
1999 2000 2001 2002 Thereafter
---- ---- ---- ----
Annual Indicated Distribution
Increase $0.00 $0.00 $0.00 $0.00 $0.00
Target Indicated Distribution
Level $2.30 $2.30 $2.30 $2.30
---------
Standard Distribution Structure ("S) or Target
("T") t
----------
- ---------------------------------------------------------------------------------------------------------------------
4 of 19
PRO FORMA OPENING BALANCE SHEET
(in thousands except per share and per unit data)
OPENING BALANCE SHEET STAR GAS PETRO PRO FORMA
------------ ------------
MERGER STAR GAS
------------ ------------
9/30/98 9/30/98 ADJUSTMENTS 9/30/98
------------ ------------ ----------- -----------
Assets:
-----------
Cash $ 1,115 $ 13,767 $ 0 $ 14,882
-----------
Other Current Assets 16,832 64,045 - 80,877
------------ ------------ ----------- -----------
Total Current Assets 17,947 77,812 - 95,759
PP&E and Intangibles, Net 161,660 107,957 - 269,617
Investments in Unconsolidated Affiliates - 113 (113) -
Other Assets - 12,796 - 12,796
------------ ------------ ----------- -----------
Total Assets 179,607 198,678 (113) 378,172
============ ============ ===========
Liabilities:
Current Liabilities 12,450 78,003 - 90,453
8.25% Existing Credit Facility 4,770 - - 4,770
Long Term Debt 105,000 286,885 (116,250) 275,635
Total Preferred Stock - 34,167 (34,167) -
Other Liabilities 40 10,686 - 10,726
------------ ------------ ----------- -----------
Total Liabilities 122,260 409,741 (150,417) 381,584
Common Shareholder's/Partner's Equity 57,347 (211,063) 150,304 (3,412)
------------ ------------ ----------- -----------
Total Liabilities and Equity $179,607 $ 198,678 ($113) $ 378,172
============ ============ ===========
check - - -
PRO FORMA CAPITAL STRUCTURE STAR GAS PETRO PRO FORMA
------------ ------------
% NOT MERGER STAR GAS
------------ ------------
9/30/98 9/30/98 TENDERED ADJUSTMENTS 9/30/98
------------ ------------ ------------ ----------- -----------
Debt:
8.04% 1st Mortgage Notes $ 85,000 $ 0 $ 0 $ 85,000
7.25% WC Revolver 4,770 - - 4,770
7.25% Acquisition Facility 9,000 - - 9,000
7.17% Pearl Notes 11,000 - - 11,000
11.96% Sr Notes - 60,000 100.0% (60,000) -
14.10% Sr Notes - 3,100 100.0% (3,100) -
14.10% Sub Notes - 3,100 100.0% (3,100) -
10.13% Sub Notes & Sr Notes - 50,000 100.0% (50,000) -
9.38% Sub Notes & Sr Notes - 75,000 100.0% (75,000) -
12.25% Sub Notes & Sr Notes - 81,250 100.0% (81,250) -
0.00% Other Notes - 0 - -
8.00% Acq. & Other Notes Pay - 14,435 - 14,435
8.25% Existing Credit Facility - 0 - -
10.90% Exchanged Debt - - 60,000 60,000
14.10% Exchanged Debt 6,200 6,200
7.50% New Debt - - 90,000 90,000
------------ ------------ ----------- -----------
Total L.T. Debt 109,770 286,885 (116,250) 280,405
------------ ------------ -----------
Preferred Stock:
14.33% Pfd Stock - 4,167 (4,167) -
12.88% Pfd Stock - 30,000 (30,000) -
------------ ------------ ----------- -----------
Total Preferred - 34,167 (34,167) -
------------ ------------ -----------
Common Equity 57,347 (211,063) 150,304 (3,412)
------------ ------------ -----------
Total Capital $167,117 $ 109,989 $ 276,993
============ ============ ===========
5 of 19
================================================================================
(in thousands except per share and per unit data)
STAR GAS STAND ALONE INCOME STATEMENT
ACTUAL NORMALIZED PROJECT
----------------------------------------------------
1998 1998 1999 2000 2001 2002
----------- ----------- ----------- ---------- ---------- -----------
EBITDA $ 18,906 $ 20,731 $ 20,415 $ 23,749 $ 25,182 $ 26,615
Depreciation and Amortization 11,638 12,079 12,218 12,886 13,411 13,852
---------- ---------- --------- --------- ---------- ----------
EBIT 7,268 8,652 8,197 10,863 11,771 12,763
Interest Expense (7,927) (7,667) (8,600) (8,885) (9,307) (9,788)
Interest Income - - - - - -
Other Income - - - - - -
---------- ---------- --------- --------- ---------- ----------
Income Before Taxes (659) 985 (403) 1,978 2,464 2,975
Current Income Taxes (25) (25) (25) (25) (25) (25)
Deferred Income Taxes - - - - - -
---------- ---------- --------- --------- ---------- ----------
Net Income Available to Common $ (684) $ 960 $ (428) $ 1,953 $ 2,439 $ 2,950
========== ========== ========= ========= ========== ==========
STAR GAS STAND ALONE UNITS OUTSTANDING
Common Units
Beginning Balance 3,859 3,859 3,859 4,196 4,571 4,865
Issuance 0 0 337 375 293 281
Buyback 0 0 0 0 0 0
---------- ---------- --------- --------- ---------- ----------
Ending Balance 3,859 3,859 4,196 4,571 4,865 5,145
---------- ---------- --------- --------- ---------- ----------
Average Common Units Outstanding 3,859 3,859 4,028 4,384 4,718 5,005
Subordinated Units
Beginning Balance 2,396 2,396 2,396 2,396 2,396 2,396
Issuance 0 0 0 0 0 0
Buyback 0 0 0 0 0 0
---------- ---------- --------- --------- ---------- ----------
Ending Balance 2,396 2,396 2,396 2,396 2,396 2,396
---------- ---------- --------- --------- ---------- ----------
Average Subordinated Units Outstanding 2,396 2,396 2,396 2,396 2,396 2,396
GP Implied Units
Beginning Balance 128 128 128 135 142 148
Issuance 0 0 7 8 6 6
Buyback 0 0 0 0 0 0
---------- ---------- --------- --------- ---------- ----------
Ending Balance 128 128 135 142 148 154
---------- ---------- --------- --------- ---------- ----------
Average Implied GP Units Outstanding 128 128 131 138 145 151
Total Units 6,383 6,383 6,727 7,110 7,409 7,695
========== ========== ========= ========= ========== ==========
Average Units Outstanding 6,383 6,383 6,555 6,918 7,259 7,552
========== ========== ========= ========= ========== ==========
6 of 19
================================================================================================================================
(in thousands except per share and per unit data)
Actual Projected
----------------------------------------
STAR GAS STAND ALONE BALANCE SHEET 1998 1999 2000 2001 2002
-------- -------- -------- -------- --------
ASSETS:
Cash $ 1,115 $ 1,115 $ 1,115 $ 1,115 $ 1,115
Other Current Assets 16,832 17,826 20,021 20,965 21,909
-------- -------- -------- -------- --------
Total Current Assets 17,947 18,941 21,136 22,080 23,024
PP&E and Intangibles, Net 161,660 157,220 157,383 157,068 156,360
Other Assets - - - - -
-------- -------- -------- -------- --------
Total Assets 179,607 176,161 178,519 179,148 179,384
======== ======== ======== ======== ========
LIABILITIES:
Current Liabilities - Excluding Working Capital Borrowing 12,450 13,444 15,639 16,583 17,527
Total Debt 109,770 112,607 117,619 124,250 130,907
Other Liabilities 40 40 40 40 40
-------- -------- -------- -------- --------
Total Liabilities 122,260 126,090 133,298 140,873 148,473
Partner's Equity 57,347 50,070 45,221 38,275 30,910
-------- -------- -------- -------- --------
Total Liabilities and Equity $179,607 $176,161 $178,519 $179,148 $179,384
======== ======== ======== ======== ========
Check - - - - 0
STAR GAS STAND ALONE CASH FLOW STATEMENT
Net income ($428) $1,953 $2,439 $2,950
Depreciation and Amortization 12,218 12,886 13,411 13,852
Deferred Taxes - - - -
Other Income - - - -
Other Assets/Liabilities - - - -
Change in Working Capital 0 - 0 -
-------- -------- -------- --------
Cash from Operations 11,790 14,839 15,850 16,802
-------- -------- -------- --------
Maintenance CapEx (2,553) (2,599) (2,646) (2,694)
Internal Growth CapEx - - - -
External Growth CapEx (5,000) (10,000) (10,000) (10,000)
-------- -------- -------- --------
Cash from Investments (7,553) (12,599) (12,646) (12,694)
-------- -------- -------- --------
Acquisition Borrowing (2,572) 1,583 3,415 3,700
Remaining Distributions to Repay Debt (0) 0 (0) (0)
Amortization of Mortgage Notes - - - -
Borrowing to Repay Existing Debt - - - -
Borrowings for Changes in WC (0) - (0) -
Borrowing to Pay Full MQD 5,184 2,980 2,766 2,507
Change in Equity 7,572 8,417 6,585 6,300
Transaction/Deal Expenses (225) (450) (450) (450)
Distributions (14,421) (15,220) (15,970) (16,614)
-------- -------- -------- --------
Cash from Financing (4,462) (2,690) (3,654) (4,558)
-------- -------- -------- --------
Net Cash Flow (225) (450) (450) (450)
Initial Cash Balance 1,115 1,115 1,115 1,115
-------- -------- -------- --------
Cash Available for Paydown on WC Revolver and Acq. Facility 890 665 665 665
Minimum Cash Balance 1,115 1,115 1,115 1,115
Borrowing/(Paydown) on WC Revolver and Acq. Facility 225 450 450 450
-------- -------- -------- --------
Net Change in Cash - - - -
-------- -------- -------- --------
Ending Cash Balance $1,115 $1,115 $1,115 $1,115
======== ======== ======== ========
7 of 19
================================================================================
(in thousands except per share and per unit data)
Actual Normalized Projected
----------------------------------------
1998 1998 1999 2000 2001 2002
-------- ---------- --------- --------- ------- ----------
STAR GAS STAND ALONE EBITDA CALCULATION
(See Tab 3: Cases)
- ------------------------------------------------------------------------------------------------------------------------------------
Year 1 Year 2 Year 3 Year 4 Year 5
EBITDA GROWTH RATE 9.7% -1.5% 16.3% 6.0% 5.7%
- ------------------------------------------------------------------------------------------------------------------------------------
BASE EBITDA: Timing
------
End 1998
Mid 1999
Mid 2000
Mid 2001
Mid 2002
Mid 2003
Mid 2004
Mid 2005
-------- -------- -------- -------- -------- --------
TOTAL EBITDA $18,906 $20,731 $20,415 $23,749 $25,182 $26,615
======== ======== ======== ======== ======== ========
PRO FROMA FULL-YEAR EBITDA FOR DEBT COVENENT ANALYSIS 18,906 20,731 20,772 24,463 25,896 27,329
STAR GAS STAND ALONE DEPRECIATION CALCULATION
EXISTING DEPRECIATION $11,638 $12,079 $12,079 $12,079 $12,079 $12,079
1998 Normal 2,610
MAINTENANCE CAPEX: 1998 2,625 $ 0 $ 0 $ 175 $ 175 $ 175 $ 175
Annual Growth: 1.8% 1999 2,553 85 170 170 170
2000 2,599 87 173 173
2001 2,646 88 176
2002 2,694 90
INTERNAL GROWTH CAPEX: 1998 0 - - - - - -
Annual Growth: 0.0% 1999 0 - - - -
2000 0 - - 0
2001 0 -
2002 0
2003 0
2004 0
2005 0
EXTERNAL GROWTH CAPEX: 1998 9,000 - - 600 600 600 600
Annual Growth: 0.0% 1999 5,000 167 333 333 333
2000 10,000 333 667 667
2001 10,000 333 667
2002 10,000 333
2003 10,000
2004 10,000
2005 10,000
-------- -------- -------- -------- -------- --------
TOTAL DEPRECIATION $11,638 $12,079 $12,218 $12,886 $13,411 $13,852
======== ======== ======== ======== ======== ========
8 of 19
STAR GAS STAND ALONE DEBT SCHEDULE
(in thousands except per share and per unit data)
[CAPTION]
Actual Normalized Projected
----------------------
1998 1998 1999 2000
---------- ---------- ---------- ----------
8.04% 1st Mortgage Notes
Beginning Balance $85,000 $85,000 $85,000 $85,000
Borrowing 0 0 0 0
Amortization 0 0 0 0
---------- ---------- ---------- ----------
Ending Balance $85,000 $85,000 $85,000 $85,000
Interest Payment 8.04% 6,834 6.834 6,834 6,834
Make-Whole Payment 0 0 0 0
7.17% Pearl Notes
Beginning Balance $0 $0 $11,000 $11,000
Borrowing 11,000 11,000 0 0
Amortization 0 0 0 0
---------- ---------- ---------- ----------
Ending Balance $11,000 $11,000 $11,000 $11,000
Interest Payment 7.17% 613 613 789 789
% of year Pearl Notes Outstanding 77.7% 77.7% 0 0
7.25% WC Revolver
Beginning Balance - - $4,770 $4,770
Borrowing for Change in WC - - (0) -
Borrowing/(Payment) 4.770 4,770 0 0
---------- ---------- ---------- ----------
Ending Balance 4,770 4,770 4,770 4,770
Effective Avg WC Balance 6,621 3,034 3,062 3,062
Interest Payment 7.25% 480 220 222 222
7.25% Acquisition Facility
Beginning Balance - - $9,000 $11,837
External Acquisitions 9,000 9,000 (2,572) 1,583
External Acquisitions at Beginning of 1999 - - - -
Internal Acquisitions - - - -
Borrowing to Pay Full MQD - - 5,184 2,980
Borrowings to Repay Existing Debt - - - -
Borrowings/(Payment) - - 225 450
Remaining Distributions to Repay Debt - - (0) 0
---------- ---------- ---------- ----------
Ending Balance 9,000 9,000 11,837 16,849
Interest Payment 7.25% 0 0 755 1,040
TOTAL DEBT
Beginning Balance $85,000 $85,000 $109,770 $112,607
Amortization of Mortgage Notes - - - -
Borrowing for Pearl Notes 11,000 11,000 - -
Borrowing for Changes in WC - - (0) -
Borrowing to Pay Full MQD - - 5,184 2,980
Acquisition Borrowing 9,000 9,000 (2,572) 1,583
Borrowing to Repay Existing Debt - - - -
Remaining Distributions to Repay Debt - - (0) 0
Borrowing/(Payment) in WC Revolver and Acq. Facility 4,770 4,770 225 450
---------- ---------- ---------- ----------
Ending Balance $109,770 $109,770 $112,607 $117,619
========== ========== ========== ==========
INTEREST EXPENSE
Interest Expense $7,927 $7,667 $8,600 $8,885
Bank Fee - - - -
---------- ---------- ---------- ----------
Total Interest Payment $7,927 $7,667 $8,600 $8,885
========== ========== ========== ==========
Projected
----------------------
2001 2002
---------- ----------
8.04% 1st Mortgage Notes
Beginning Balance $85,000 $85,000
Borrowing 0 0
Amortization 0 0
---------- ----------
Ending Balance 85,000 85,000
Interest Payment 8.04% 6,834 6,834
Make-Whole Payment 0 0
7.17% Pearl Notes
Beginning Balance $11,000 $11,000
Borrowing 0 0
Amortization 0 0
---------- ----------
Ending Balance 11,000 11,000
Interest Payment 7.17% 789 789
% of year Pearl Notes Outstanding 0 0
7.25% WC Revolver
Beginning Balance $4,770 $4,770
Borrowing for Change in WC (0) -
Borrowing/(Payment) 0 0
---------- ----------
Ending Balance 4,770 4,770
Effective Avg WC Balance 3,062 3,062
Interest Payment 7.25% 222 222
7.25% Acquisition Facility
Beginning Balance $16,849 $23,480
External Acquisitions 3,415 3,700
External Acquisitions at Beginning of 1999 - -
Internal Acquisitions - -
Borrowing to Pay Full MQD 2,766 2,507
Borrowings to Repay Existing Debt - -
Borrowings/(Payment) 450 450
Remaining Distributions to Repay Debt (0) (0)
---------- ----------
Ending Balance 23,480 30,137
Interest Payment 7.25% 1,462 1,944
Total Debt
Beginning Balance $117,619 $124,250
Amortization of Mortgage Notes - -
Borrowing for Pearl Notes - -
Borrowing for Changes in WC (0) -
Borrowing to Pay Full MQD 2,766 2,507
Acquisition Borrowing 3,415 3,700
Borrowing to Repay Existing Debt - -
Remaining Distributions to Repay Debt (0) (0)
Borrowing/(Payment) in WC Revolver and Acq. Facility 450 450
---------- ----------
Ending Balance $124,250 $130,907
========== ==========
Interest Expense
Interest Expense $9,307 $9,788
Bank Fee - -
---------- ----------
Total Interest Payment $9,307 $9,788
========== ==========
9 of 19
- --------------------------------------------------------------------------------
STAR GAS STAND ALONE SCHEDULE OF ACTUAL DISTRIBUTIONS
(in thousands except per share and per unit data)
Actual Normalized Projected
-----------------------------------------
Assumes Revised Target Distributions Structure 1998 1998 1999 2000 2001 2002
---------- ------------ --------- --------- --------- --------
Distributable Cash
- ------------------
Cash from Operations $10,954 $13,039 $11,790 $14,839 $15,850 $16,802
Maintenance CapEx (2,625) (2,610) (2,553) (2,599) (2,646) (2,694)
Other 0 0 0 0 0 0
-------- ------- ------- ------- ------- -------
Total MLP Distributable Cash Flow 8,329 10,429 9,237 12,240 13,204 14,108
Distributable Cash Flow/Unit $ 1.30 $ 1.63 $ 1.41 $ 1.77 $ 1.82 $ 1.87
Average Units for Calculating Annual Distributions
- --------------------------------------------------
Common Units 3,859 3,859 4,028 4,384 4,718 5,005
Subordinated Units 2,396 2,396 2,396 2,396 2,396 2,396
General Partner Interest Unit Equivalent 128 128 131 138 145 151
-------- ------- ------- ------- ------- -------
Total Units Outstanding 6,383 6,383 6,555 6,918 7,259 7,552
Distribution Levels
- -------------------
MQD $ 2.20 $ 2.20 $ 2.20 $ 2.20 $ 2.20 $ 2.20
First Target $ 2.42 $ 2.42 $ 2.42 $ 2.42 $ 2.42 $ 2.42
Second Target $ 2.84 $ 2.84 $ 2.84 $ 2.84 $ 2.84 $ 2.84
Third Target $ 3.70 $ 3.70 $ 3.70 $ 3.70 $ 3.70 $ 3.70
Indicated Cash Distribution $ 2.20 $ 2.20 $ 2.20 $ 2.20 $ 2.20 $ 2.20
Distribution of MQD
- -------------------
Cash Available 8,329 10,429 9,237 12,240 13,204 14,108
Cash Borrowed to Pay Full MQD 5,713 3,613 5,184 2,980 2,766 2,507
Allocation to:
Common Units 8,490 8,490 8,861 9,644 10,379 11,011
Subordinated Units 5,271 5,271 5,271 5,271 5,271 5,271
General Partner Interest 281 281 288 304 319 332
First Target Distribution
- -------------------------
Cash Available 0 0 0 0 0 0
Cash Required for Target Distribution 0 0 0 0 0 0
Cash Required for Indicated Distribution 0 0 0 0 0 0
Actual Cash Distributed 0 0 0 0 0 0
Allocation to:
Common Units 0 0 0 0 0 0
Subordinated Units 0 0 0 0 0 0
General Partner Interest 0 0 0 0 0 0
Second Target Distribution
- --------------------------
Cash Available 0 0 0 0 0 0
Cash Required for Target Distribution 0 0 0 0 0 0
Cash Required for Indicated Distribution 0 0 0 0 0 0
Actual Cash Distributed 0 0 0 0 0 0
Allocation to:
Common Units 0 0 0 0 0 0
Subordinated Units 0 0 0 0 0 0
General Partner Interest 0 0 0 0 0 0
Incentive Distribution 0 0 0 0 0 0
Third Target Distribution
- -------------------------
Cash Available 0 0 0 0 0 0
Cash Required for Target Distribution 0 0 0 0 0 0
Cash Required for Indicated Distribution 0 0 0 0 0 0
Actual Cash Distributed 0 0 0 0 0 0
Allocation to:
Common Units 0 0 0 0 0 0
Subordinated Units 0 0 0 0 0 0
General Partner Interest 0 0 0 0 0 0
Incentive Distribution 0 0 0 0 0 0
- --------------------------------------------------------------------------------
STAR GAS STAND ALONE SCHEDULE OF ACTUAL DISTRIBUTIONS (CONT'D)
(in thousands except per share and per unit date)
Actual Normalized Project
-----------------------------------------
1998 1998 1999 2000 2001 2002
--------- ------------ --------- -------- --------- ---------
Remaining Distribution
- ----------------------
Cash Available 0 0 0 0 0 0
Allocation to:
Common Units 0 0 0 0 0 0
Subordinated Units 0 0 0 0 0 0
General Partner Interest 0 0 0 0 0 0
Incentive Distribution 0 0 0 0 0 0
Repay Indebtedness (0) 0 0 (0) 0 0
Total Distributions
- -------------------
Common Units 8,490 8,490 8,861 9,644 10,379 11,011
Subordinated Units 5,271 5,271 5,271 5,271 5,271 5,271
General Partner Interest 281 281 288 304 319 332
Incentive Distribution 0 0 0 0 0 0
-------- -------- -------- -------- ------- --------
Total Distributions $14,042 $14,042 $14,421 $15,220 $15,970 $16,614
======== ======== ======== ======== ======= ========
Total Distributions Per Unit
- ----------------------------
Common Unit $ 2.20 $ 2.20 $ 2.20 $ 2.20 $ 2.20 $ 2.20
Subordinated Unit 2.20 2.20 2.20 2.20 2.20 2.20
GP Unit 2.20 2.20 2.20 2.20 2.20 2.20
11 of 19
================================================================================
(in thousands except per share and per units data)
PROJECTED
ACTUAL NORMALIZED -----------------------------------------
1998 1998 1999 2000 2001 2002
------ ---------- -------- ------ ------ ------------
PETRO EBITDA CALCULATION
- ------------------------------------------------------------------------------------------------------------------------------------
YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5
EBITDA GROWTH RATE
- ------------------------------------------------------------------------------------------------------------------------------------
Timing
BASE EBITDA: ------
Acquisitions: End 1998 $0
Mid 1999 15,000
Mid 2000 30,000
Mid 2001 30,000
Mid 2002 30,000
Mid 2003 30,000
Mid 2004 30,000
Mid 2005 30,000
------- ------- ------- ------- ------- -------
TOTAL EBITDA $34,929 $44,749 $43,475 $45,978 $48,375 $50,509
======= ======= ======= ======= ======= =======
Pro Forma Full-Year EBITDA for Debt Covenent Analysis 34,929 44,749 45,011 49,049 $51,446 53,580
PETRO DEPRECIATION CALCULATION
Existing Depreciation $28,946 $24,018 $24,018 $24,018 $24,018 $24,018
Maintenance CapEx: 1998 $ 3,500 - - 233 233 233 233
Annual Growth: 2.0% 1999 3,641 121 243 243 243
2000 3,714 124 248 248
2001 3,788 126 253
2002 3,864 129
2003 3,941
2004 4,020
2005 4,100
Internal Growth CapEx: 1998 $ 0 - - - - - -
Annual Growth: 0.0% 1999 0 - - - -
2000 0 - - -
2001 0 - -
2002 0 -
2003 0
2004 0
2005 0
External Growth CapEx: 1998 $ 0 - - 0 0 0 0
Annual Growth: 0.0% 1999 15,000 595 1,190 1,190 1,190
2000 30,000 1,190 2,381 2,381
2001 30,000 1,190 2,381
2002 30,000 1,190
2003 30,000
2004 30,000
2005 30,000
------- ------- ------- ------- ------- -------
Total Depreciation: 28,946 24,018 24,968 26,999 29,630 32,266
======= ======= ======= ======= ======= =======
12 of 19
________________________________________________________________________________
(in thousands except per share and per unit data)
STAR PRO FORMA INCOME STATEMENT
ACTUAL NORMALIZED PROJECTED
---------------------------------------------------
1998 1998 1999 2000 2001 2002
------------ ------------ ------------ ------------ ------------ ------------
Combined EBITDA $ 53,835 $ 65,480 $ 63,890 $ 69,727 $ 73,557 $ 77,124
Consolidated Savings 500 500 500 500 500 500
------------ ------------ ------------ ------------ ------------ ------------
Pro Forma EBITDA 54,335 65,980 64,390 70,227 74,057 77,624
Depreciation and Amortization 40,584 36,097 37,186 39,885 43,041 46,118
------------ ------------ ------------ ------------ ------------ ------------
EBIT 13,751 29,883 27,204 30,342 31,016 31,506
Interest Expense (24,530) (24,448) (24,819) (25,600) (27,180) (28,252)
Interest Income - - - - - -
Other Income - - - - - -
EBT (10,779) 5,435 2,385 4,742 3,837 3,254
------------ ------------ ------------ ------------ ------------ ------------
Current Income Taxes (525) (525) (525) (625) (675) (725)
Deferred Income Taxes - - - - - -
------------ ------------ ------------ ------------ ------------ ------------
Net Income Available to Common ($11,304)$ 4,910 $ 1,860 $ 4,117 $ 3,162 $ 2,529
============ ============ ============ ============ ============ ============
Pro Forma Full-Year EBITDA for Debt
Covenant Analysis 54,335 65,980 66,283 74,012 77,842 81,409
STAR PRO FORMA UNITS OUTSTANDING
Common Units - -
Beginning Balance 12,873 12,873 14,079 14,588 15,709
Issuance - - - - -
Issued to Meet Debt Covenant Ratio - 1,207 508 1,122 1,170
Issued to E - - - - -
Buyback - - - - -
------------ ------------ ------------ ------------ ------------ ------------
Ending Balance 12,873 12,873 14,079 14,588 15,709 16,879
------------ ------------ ------------ ------------ ------------ ------------
Average Common Units Outstanding 12,873 12,873 13,476 14,333 15,148 16,294
Deferred Participation Units -
Beginning Balance - - 909 909 909 909
DPUs Issued at Beginning of Year - - - - - -
------------ ------------ ------------ ------------ ------------ ------------
Ending Balance - - 909 909 909 909
SR Subordinated Units
Beginning Balance - Sr Sub Units 2,491 2,491 2,491 2,491 2,491
DPUs Issued - - - - -
Sr Sub Issuance - - - - -
Sr. Sub to E - - - - -
Sr Sub Converted to G.P. Interest - - - - -
------------ ------------ ------------ ------------ ------------ ------------
Ending Balance 2,491 2,491 2,491 2,491 2,491 2,491
------------ ------------ ------------ ------------ ------------ ------------
Average Sr Subordinated Units Outstanding 2,491 2,491 2,491 2,491 2,491 2,491
Subordinated Units
Beginning Balance 431 431 431 431 431
Issuance - - - - -
Buyback - - - - -
------------ ------------ ------------ ------------ ------------ ------------
Ending Balance 431 431 431 431 431 431
------------ ------------ ------------ ------------ ------------ ------------
Average Subordinated Units Outstanding 431 431 431 431 431 431
GP Implied Units
Beginning Balance 322 322 322 322 322
Issued in conjunction with DPUs - - - - -
Issued to Meet Debt Covenant Ratio - - - - -
Issued in conjunction with E Equity - - - - -
Buyback - - - - -
------------ ------------ ------------ ------------ ------------ ------------
322 322 322 322 322 322
------------ ------------ ------------ ------------ ------------ ------------
Average Implied GP Units Outstanding 322 322 322 322 322 322
Total Units Outstanding 16,118 16,118 17,324 17,833 18,954 20,124
------------ ------------ ------------ ------------ ------------ ------------
Average Total Units Outstanding 16,118 16,118 16,721 17,578 18,393 19,539
============ ============ ============ ============ ============ ============
Pro Forma Heating Oil Units used for DPU Issue
Calculation 10,166 10,660 11,134 11,987
13 of 19
================================================================================
(in thousands except per share and per unit data)
Actual Projected
-------------------------------------------------
STAR PRO FORMA BALANCE SHEET 1998 1999 2000 2001 2002
---------- ---------- ---------- ---------- ----------
ASSETS:
Cash $ 14,882 $ 14,882 $ 14,882 $ 14,882 $ 14,882
Other Current Assets 80,877 78,697 86,699 91,950 96,840
---------- ---------- ---------- ---------- ----------
Total Current Assets 95,759 93,579 101,581 106,832 111,722
PP&E and Intangibles, Net 269,617 258,625 265,053 268,446 268,886
Other Assets 12,796 12,796 12,796 12,796 12,796
---------- ---------- ---------- ---------- ----------
Total Assets 378,172 365,000 379,430 388,074 393,404
========== ========== ========== ========== ==========
LIABILITIES:
Current Liabilities 90,453 88,273 96,275 101,526 106,416
8.25% Existing Credit Facility 4,770 4,770 4,770 4,770 4,770
Total LT Debt 275,635 267,232 296,048 311,368 325,636
Other Liabilities 10,726 10,726 10,726 10,726 10,726
---------- ---------- ---------- ---------- ----------
Total Liabilities 381,584 371,001 407,819 428,390 447,548
Preferred Stock - - - - -
Common Shareholder's Equity (3,412) (6,001) (28,389) (40,316) (54,144)
---------- ---------- ---------- ---------- ----------
Total Liabilities and Equity $ 378,172 $ 365,000 $ 379,430 $ 388,074 $ 393,404
========== ========== ========== ========== ==========
Check - - - (0) (0)
STAR PRO FORMA CASH FLOW STATEMENT
Net Income $ 1,860 $ 4,117 $ 3,162 $ 2,529
Depreciation and Amortization 37,186 39,885 43,041 46,118
Deferred Taxes - - - -
Other Assets/Liab - - - -
Change in Non-Cash Working Capital - - - -
---------- ---------- ---------- ----------
Cash from Operations 39,046 44,002 46,202 48,647
Maintenance CapEx (6,194) (6,313) (6,434) (6,558)
Internal Growth CapEx - - - -
External Growth CapEx (20,000) (40,000) (40,000) (40,000)
---------- ---------- ---------- ----------
Cash from Investments (26,194) (46,313) (46,434) (46,558)
Acquisition Borrowing 20,000 40,000 40,000 40,000
Remaining Distributions to Repay Debt (1,857) - - -
Amortization of Existing Debt (8,154) (8,141) (60) (60)
Borrowing to Repay Existing Debt 6,054 8,141 60 60
Borrowing for Changes in WC - - - -
Change in Common Equity & GP Interest 26,546 11,184 24,680 25,732
Repayment of Preferred Stock - - - -
Distributions (30,994) (37,689) (39,768) (42,089)
---------- ---------- ---------- ----------
Cash from Financing 11,594 13,495 24,912 23,643
Net Cash Flow 24,446 11,184 24,680 25,732
Initial Cash Balance 14,882 14,882 14,882 14,882
---------- ---------- ---------- ----------
Cash Available for Paydown on WC Revolver and Acq. Facility 39,328 26,066 39,562 40,614
Minimum Cash Balance 14,882 14,882 14,882 14,882
Borrowing/(Paydown) on WC Revolver and Acq. Facility (24,446) (11,184) (24,680) (25,732)
---------- ---------- ---------- ----------
Ending Cash Balance 14,882 14,882 14,882 14,882
Net Change in Cash $ 0 $ 0 $ 0 $ 0
========== ========== ========== ==========
14 of 19
- --------------------------------------------------------------------------------
(in thousands except per share and per unit data)
Actual Normalized Projected
----------------------------------------------
STAR PRO FORMA DEBT SCHEDULE 1998 1998 1999 2000 2001 2002
---------- ---------- ---------- ---------- ---------- ----------
8.04% 1st Mortgage Notes
Beginning Balance $85,000 $85,000 85,000 $85,000 $85,000 $85,000
Borrowing - - - - - -
Amortization - - - - - -
---------- ---------- ---------- ---------- ---------- ----------
Ending balance 85,000 85,000 85,000 85,000 85,000 85,000
Interest Payment 8.04% 6,834 6,834 6,834 6,834 6,834 6,834
7.17% Pearl Notes
Beginning Balance 11,000 11,000 11,000 11,000 11,000 11,000
Borrowing - - - - - -
Amortization - - - - - -
---------- ---------- ---------- ---------- ---------- ----------
Ending balance 11,000 11,000 11,000 11,000 11,000 11,000
Interest Payment 7.17% 613 613 789 789 789 789
% of year Pearl Notes Outstanding 77.7% 77.7%
10.13% Sub Notes & Sr Notes
Beginning Balance 50,000 50,000 - - - -
Borrowing - - - - - -
Amortization (50,000) (50,000) - - - -
---------- ---------- ---------- ---------- ---------- ----------
Ending balance - - - - - -
Interest Payment 10.13% - - - - - -
9.38% Sub Notes & Sr Notes
Beginning Balance 75,000 75,000 - - - -
Borrowing - - - - - -
Amortization (75,000) (75,000) - - - -
---------- ---------- ---------- ---------- ---------- ----------
Ending balance - - - - - -
Interest Payment 9.38% - - - - - -
12.25% Sub Notes & Sr Notes
Beginning Balance 81,250 81,250 - - - -
Borrowing - - - - - -
Amortization (81,250) (81,250) - - - -
---------- ---------- ---------- ---------- ---------- ----------
Ending balance - - - - - -
Interest Payment 12.25% - - - - - -
7.50% New Debt
Beginning Balance - - 90,000 96,054 104,195 104,255
Borrowing 90,000 90,000 6,054 8,141 60 60
Amortization - - - - - -
---------- ---------- ---------- ---------- ---------- ----------
Ending balance 90,000 90,000 96,054 104,195 104,255 104,315
Interest Payment 7.50% 6,750 6,750 6,977 7,509 7,817 7,821
Exchange of 11.96% Senior Notes
Beginning Balance - - 60,000 60,000 60,000 60,000
Borrowing 60,000 60,000 - - - -
Amortization - - - - - -
---------- ---------- ---------- ---------- ---------- ----------
Ending balance 60,000 60,000 60,000 60,000 60,000 60,000
Interest Payment 10.90% 6,540 6,540 6,540 6,540 6,540 6,540
8.00% Acq. & Other Notes Pay
Beginning Balance 16,507 16,507 14,435 8,381 240 180
Borrowing - - - - - -
Amortization (2,072) (2,072) (6,054) (8,141) (60) (60)
---------- ---------- ---------- ---------- ---------- ----------
Ending balance 14,435 14,435 8,381 240 180 120
Interest Payment 8.00% 1,238 1,238 913 345 17 12
15 of 19
====================================================================================================================================
(in thousands except per share and per unit data)
STAR PRO FORMA DEBT SCHEDULE (CONT'D)
ACTUAL NORMALIZED PROJECTED
----------------------------------------------
1998 1998 1999 2000 2001 2002
---------- ---------- ---------- ---------- ---------- ----------
Exchange of 14.10% Senior Notes
Beginning Balance - - 6,200 4,100 4,100 4,100
Borrowing 6,200 6,200 - - - -
Amortization - - (2,100) - - -
---------- ---------- ---------- ---------- ---------- ----------
Ending Balance 6,200 6,200 4,100 4,100 4,100 4,100
Interest Payment 14.10% 874 874 578 578 578 578
7.25% WC Revolver
Beginning Balance - - 4,770 4,770 4,770 4,770
Borrowing for Change in WC - - - - - -
Borrowing to Pay Full MQD - - - - - -
Borrowing/(Payment) 4,770 4,770 - - - -
---------- ---------- ---------- ---------- ---------- ----------
Ending Balance 4,770 4,770 4,770 4,770 4,770 4,770
Effective Avg WC Balance 10,179 9,044 11,338 11,338 11,338 11,338
Interest Payment 7.25% 738 656 822 822 822 822
7.25% Acquisition Facility
Beginning Balance - - 9,000 2,697 31,513 46,833
External Acquisitions 9,000 9,000 20,000 40,000 40,000 40,000
External Acquisitions at Beginning of 1999 - - - - - -
Internal Growth CapEx - - - - - -
Payment - - (24,446) (11,184) (24,680) (25,732)
Remaining Distributions to Repay Debt - - (1,857) - - -
---------- ---------- ---------- ---------- ---------- ----------
Ending Balance 9,000 9,000 2,697 31,513 46,833 61,101
Interest Payment 7.25% $ 0 $ 0 $ 424 $ 1,240 $ 2,840 $ 3,913
TOTAL PRO FROMA DEBT
Beginning Balance $ 318,757 $ 318,757 $280,405 $272,002 $300,818 $316,138
Amortization of Existing Debt (208,322) (208,322) (8,154) (8,141) (60) (60)
Exchange of Notes 66,200 66,200 - - - -
Borrowing for Changes in WC - - - - - -
Acquisition Borrowing 9,000 9,000 20,000 40,000 40,000 40,000
Borrowing to Pay Full MQD - - - - - -
Borrowing to Repay Existing Debt 90,000 90,000 6,054 8,141 60 60
Remaining Distributions to Repay Debt - - (1,857) - - -
Borrowing/(Payment) on WC Revolver and Acq. Facility 4,770 4,770 (24,446) (11,184) (24,680) (25,732)
---------- ---------- ---------- ---------- ---------- ----------
Ending Balance 280,405 280,405 272,002 300,818 316,138 330,406
PREFERRED STOCK
Beginning Balance 34,167 34,167 - - - -
Repayment (34,167) (34,167) - - - -
---------- ---------- ---------- ---------- ---------- ----------
Ending Balance - - - - - -
Dividend Payment 14.33% - - - - - -
Interest Expense/Dividends 23,587 23,505 23,876 24,657 26,237 27,309
Chase Fees 943 943 943 943 943 943
---------- ---------- ---------- ---------- ---------- ----------
Total Interest Payment/Dividends $ 24,530 $ 24,448 $ 24,819 $ 25,600 $ 27,180 $ 28,252
========== ========== ========== ========== ========== ==========
16 of 19
================================================================================================================================
(In Thousands Except Per Share And Per Unit Data)
STAR PRO FORMA DISTRIBUTION SCHEDULE OF ACTUAL DISTRIBUTIONS
Actual Normalized Projected
----------------------------------------
1998 1998 1999 2000 2001 2002
-------- ---------- -------- -------- -------- --------
Distributable Cash
- ------------------
Cash from Operations (excl chg in WC) 29,280 41,007 $39,046 $44,002 $46,202 $48,647
Maintenance CapEx (6,125) (6,125) (6,194) (6,313) (6,434) (6,558)
Other - - - - - -
-------- ---------- -------- -------- -------- --------
Total MLP Distributable Cash Flow 23,155 34,882 32,852 37,689 39,768 42,089
Distributable Cash Flow / Unit $ 1.44 $ 2.16 $ 1.96 $ 2.14 $ 2.16 $ 2.15
Distributable Cash Flow / Unit Pro Forma for DPU
Conversion
Average Units for Calculating Annual Distributions
- --------------------------------------------------
Common Units 12,873 12,873 13,476 14,333 15,148 16,294
SR Subordinated Units 2,491 2,491 2,491 2,491 2,491 2,491
Subordinated Units 431 431 431 431 431 431
General Partner Interest Unit Equivalent 322 322 322 322 322 322
-------- ---------- -------- -------- -------- --------
Total Units Outstanding 16,118 16,118 16,721 17,578 18,393 19,539
Distribution Levels $ 2.30 $ 2.30 $ 2.30 $ 2.30 $ 2.30 $ 2.30
- -------------------
MQD $ 2.30 $ 2.30 $ 2.30 $ 2.30 $ 2.30 $ 2.30
First Target $ 2.42 $ 2.42 $ 2.42 $ 2.42 $ 2.42 $ 2.42
Second Target $ 2.84 $ 2.84 $ 2.84 $ 2.84 $ 2.84 $ 2.84
Third Target $ 3.70 $ 3.70 $ 3.70 $ 3.70 $ 3.70 $ 3.70
Indicated Cash Distribution $ 2.30 $ 2.30 $ 2.30 $ 2.30 $ 2.30 $ 2.30
Distribution of MQD
- -------------------
Cash Available 23,155 34,882 32,852 37,689 39,768 42,089
Allocation to:
Common Units 23,155 29,607 30,994 32,967 34,841 37,477
SR Subordinated Units 0 5,276 0 4,722 4,927 4,613
Subordinated Units 0 0 0 0 0 0
General Partner Interest 0 0 0 0 0 0
First Target Distribution
- -------------------------
Cash Available 0 0 1,857 0 0 0
Cash Required for Target Distribution 0 0 2,008 0 0 0
Cash Required for Indicated Distribution 0 0 0 0 0 0
Actual Cash Distributed 0 0 0 0 0 0
Allocation to:
Common Units 0 0 0 0 0 0
SR Subordinated Units 0 0 0 0 0 0
Subordinated Units 0 0 0 0 0 0
General Partner Interest 0 0 0 0 0 0
Total Distributors to:
Common Units 0 0 0 0 0 0
Sr. Subordinated Units 0 0 0 0 0 0
Subordinated Units 0 0 0 0 0 0
General Partner Interest 0 0 0 0 0 0
17 of 19
================================================================================================================================
(in thousands except per share and per unit data)
STAR PRO FORMA SCHEDULE OF ACTUAL
DISTRIBUTIONS (CONT'D)
Actual Normalized Projected
----------------------------------------
1998 1998 1999 2000 2001 2002
-------- ---------- -------- -------- -------- --------
Second Target Distribution
- --------------------------
Cash Available 0 0 0 0 0 0
Cash Required for Target Distribution 0 0 0 0 0 0
Cash Required for Indicated Distribution 0 0 0 0 0 0
Actual Cash Distributed 0 0 0 0 0 0
Allocation to:
Common Units 0 0 0 0 0 0
Sr. Subordinated Units 0 0 0 0 0 0
Subordinated Units 0 0 0 0 0 0
General Partner Interest 0 0 0 0 0 0
Incentive Right 0 0 0 0 0 0
Incentive Right to GP Interest 0 0 0 0 0 0
Incentive Right to Sub Units 0 0 0 0 0 0
Incentive Right to Sr. Sub Units 0 0 0 0 0 0
Total Distributions to:
Common Units 0 0 0 0 0 0
Sr. Subordinated Units 0 0 0 0 0 0
Subordinated Units 0 0 0 0 0 0
General Partner Interest 0 0 0 0 0 0
Third Target Distribution
- -------------------------
Cash Available:
Cash Required for Target Distribution 0 0 0 0 0 0
Cash Required for Indicated Distribution 0 0 0 0 0 0
Actual Cash Distributed 0 0 0 0 0 0
Allocation to:
Common Units
Sr. Subordinated Units 0 0 0 0 0 0
Subordinated Units 0 0 0 0 0 0
General Partner Interest 0 0 0 0 0 0
Incentive Right 0 0 0 0 0 0
Incentive Right to GP Interest 0 0 0 0 0 0
Incentive Right to Sub Units 0 0 0 0 0 0
Incentive Right to Sr. Sub Units 0 0 0 0 0 0
Total Distributions to:
Common Units 0 0 0 0 0 0
Sr. Subordinated Units 0 0 0 0 0 0
Subordinated Units 0 0 0 0 0 0
General Partner Interest 0 0 0 0 0 0
Remaining Distribution
- ----------------------
Cash Available 0 0 0 0 0 0
Cash Required for Indicated Distribution 0 0 0 0 0 0
Actual Cash Distributed 0 0 0 0 0 0
Allocation to:
Common Units 0 0 0 0 0 0
Sr. Subordinated Units 0 0 0 0 0 0
Subordinated Units 0 0 0 0 0 0
General Partner Interest 0 0 0 0 0 0
Incentive Right
Incentive Right to GP Interest 0 0 0 0 0 0
Incentive Right to Sub Units 0 0 0 0 0 0
Incentive Right to Sr. Sub Units 0 0 0 0 0 0
Repay Indebtedness 0 0 1,857 0 0 0
Total Distributions to:
Common Units 0 0 0 0 0 0
Sr. Subordinated Units 0 0 0 0 0 0
Subordinated Units 0 0 0 0 0 0
General Partner Interest 0 0 0 0 0 0
18 of 19
================================================================================
STAR GAS PRO FORMA SCHEDULE OF ACTUAL DISTRIBUTION (CONT'D)
(in thousands except per share and per unit data)
ACTUAL NORMALIZED PROJECTED
----------------------------------------------------------
1998 1998 1999 2000 2001 2002
---------- ------------ ------------- ----------- ----------- -----------
Total Distributions
- -------------------
Common Units $ 23,155 $ 29,607 $ 30,994 $ 32,967 $ 34,841 $ 37,477
Sr. Subordinated Units 0 5,276 0 4,722 4,927 4,613
Subordinated Units 0 0 0 0 0 0
General Partner Interest 0 0 0 0 0 0
---------- ---------- ---------- ---------- ---------- ----------
Total Distributions $ 23,155 $ 34,882 $ 30,994 $ 37,689 $ 39,768 $ 42,089
========== ========== ========== ========== ========== ==========
14,042 14,042 14,421 15,220 15,970 16,614
Total Distributions Per Unit
- ----------------------------
Common Units $ 1.80 $ 2.30 $ 2.30 $ 2.30 $ 2.30 $ 2.30
Sr. Subordinated Units 0.00 2.12 0.00 1.90 1.98 1.85
Subordinated & GP Units 0.00 0.00 0.00 0.00 0.00 0.00
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