Exhibit 99.1
Star Gas Partners, L.P. Reports Fiscal 2007 First Quarter Results
- Star Gas CEO Joe Cavanaugh Announces Retirement; President and
Industry Veteran Dan Donovan Appointed as Star's New CEO
STAMFORD, Conn.--(BUSINESS WIRE)--Feb. 9, 2007--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 2007 first quarter, the
three-month period ended December 31, 2006. The Partnership also
announced that its President Dan Donovan, 60, will assume the
additional role of Chief Executive Officer on June 1, 2007, as Chief
Executive Officer Joseph Cavanaugh has informed the Board of Directors
that he will retire at the age of 70, effective May 31. Mr. Cavanaugh
will retain his seat on Star's Board following his retirement.
For the fiscal 2007 first quarter, Star reported a 20.3 percent
decrease in total revenues to $330.2 million, compared to total
revenues of $414.4 million in the year ago period, as slightly higher
selling prices were more than offset by a reduction in sales of home
heating oil. Home heating oil volume for the fiscal 2007 first quarter
declined 24.4 percent, year-over-year, from 131.3 million gallons to
99.3 million gallons.
The home heating oil volume decline was due to warmer weather and
net customer attrition. Temperatures in Star's geographic areas of
operations for the fiscal 2007 first quarter were 17.8 percent warmer
than the fiscal 2006 first quarter and 19.6 percent warmer than
normal, as reported by the National Oceanic Atmospheric
Administration. For the twelve months ended December 31, 2006, Star's
net customer attrition rate was 6.0 percent. For the fiscal 2007 first
quarter, Star lost approximately 4,100 accounts (net), or 1.0 percent
of its home heating oil customer base, as compared to the fiscal 2006
first quarter in which the Partnership lost 7,200 accounts (net), or
1.6 percent of its customer base.
Home heating oil per gallon margins for the fiscal 2007 first
quarter rose by 0.9 cents per gallon, versus the corresponding fiscal
2006 period, when measured before the impact of change in the fair
value of derivative instruments. Currently, none of Star's derivative
instruments for its price-protected customers or its home heating oil
inventory have been designated for hedge accounting treatment. As a
result, unrealized gains and losses on these derivative instruments
are recorded in earnings. In the fiscal 2006 first quarter, Star
recorded a non-cash charge of $40.6 million, primarily due to a 42
cent per gallon decline in the market value of certain hedges.
Similarly, in the fiscal 2007 first quarter, Star recorded a $6.3
million charge, primarily driven by a 4 cent per gallon decline in the
market value of certain derivative instruments.
Total operating expenses decreased by $14.6 million, or 22.2
percent, to $51.2 million for the fiscal 2007 first quarter, as
compared to $65.8 million for the prior year's quarter, largely due to
a reduction in delivery and branch expenses of $5.0 million associated
with the 24.4 percent decline in volume, a reduction in legal and
professional expenses of $1.5 million, and a $7.2 million benefit
resulting from amounts recorded under the Partnership's weather
insurance contract as temperatures were warmer than normal during the
three-month period. Our weather insurance contract covers the period
from November 1, 2006 to February 28, 2007, taken as a whole. If
January and February 2007 are colder and thus result in more degree
days than the 10 year average, the projected proceeds under this
contract would be reduced and could be reduced to zero. Net interest
expense declined by $3.4 million to $3.3 million for the fiscal 2007
first quarter, due to a reduction in average debt outstanding of
$100.7 million, primarily due to the recapitalization completed in
April 2006 and higher invested cash balances.
For the fiscal 2007 first quarter, net income was $4.7 million, a
$33.1 million improvement versus the net loss for the fiscal 2006
first quarter, as a lower charge for the change in fair value of
derivative instruments of $34.2 million, a reduction in net interest
expense of $3.4 million, and lower depreciation and amortization
expense of $1.1 million, were partially offset by a reduction in
earnings of $5.6 million, driven largely by the 24.4 percent decline
in volume.
For the fiscal 2007 first quarter, EBITDA increased $28.0 million,
to $16.0 million, as compared to an EBITDA loss of $11.9 million for
the corresponding fiscal 2006 period. For the three months ended
December 31, 2006, EBITDA was reduced by the non-cash change in the
fair value of derivative instruments of $6.3 million. For the three
months ended December 31, 2005, EBITDA was negatively impacted by the
aforementioned $40.6 million change in the fair value of derivative
instruments. EBITDA is a non-GAAP financial measure (see below
reconciliation) that should not be considered as an alternative to net
income (as an indicator of operating performance) or as an alternative
to cash flow (as a measure of liquidity or ability to service debt
obligations). Management believes this information is of interest to
investors as a supplemental measure of the Partnership's operating
performance and provides additional information for evaluating the
Partnership's ability to make the Minimum Quarterly Distribution. The
Partnership is not required to accrue the Minimum Quarterly
Distribution until October 1, 2008.
Star Gas Partners Chief Executive Officer Joseph Cavanaugh,
stated, "Despite abnormally warm temperatures in our operating areas
during the start of the winter heating season, we are pleased with
fiscal 2007 first quarter results, which benefited from $7.2 million
recorded under our weather insurance contract and Star's continued
success in implementing across-the-board expense reductions. We
continue to make progress with customer account attrition, which was
again lower during the current quarter than in the previous year"
Star Gas Chairman Paul Vermylen, stated, "On behalf of my fellow
members of the Star Gas Board and all of the Partnership's employees,
we would like to both congratulate and thank Joe for his numerous
contributions throughout his tenure at Star. We anticipate a seamless
transition for Dan in his new, expanded role as Star's CEO based on
his excellent track record and in-depth understanding of our industry
and the markets and regions in which we operate."
Commenting on his decision to retire, Mr. Cavanaugh, added,
"Having been with the Partnership for the majority of the past 38
years, it is time for me to step down as Chief Executive as I will be
celebrating my 70th birthday this coming May. Dan is a fine choice to
succeed me as he has a tremendous wealth of heating oil industry
experience and he has and will continue to play an instrumental role
in the ongoing operational and financial turnaround at Star."
From 1980 to 2004, Donovan held various management positions with
Meenan Oil Co. LP, including Vice President and General Manager at the
time of its purchase by Star Gas in 2001. Prior to his tenure with
Meenan, he worked for Mobil Oil Corp. from 1971 to 1980.
REMINDER: Star Gas management will host a conference call and
webcast today at 1:00 p.m. (ET). Conference call dial-in is
888/243-1745 or 303/957-1357 (international callers). A webcast is
also available at http://www.star-gas.com/MediaList.cfm and at
www.vcall.com
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 and by visiting Star's
website at www.star-gas.com.
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 effect strategic acquisitions or redeploy
assets, the impact of litigation, the continuing impact of the
business process redesign project and our ability to address issues
related to that project, 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, and marketing plans. All
statements other than statements of historical facts included in this
news release are forward-looking statements. Although the Partnership
believes that the expectations 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 Annual Report on Form 10-K for the
year ended September 30, 2006 and the Partnership's Quarterly Report
on Form 10-Q for the fiscal quarter ended December 31, 2006, 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) Dec. 31, Sept. 30,
2006 2006
------------ ------------
ASSETS (unaudited)
Current assets
Cash and cash equivalents $ 69,736 $ 91,121
Receivables, net of allowances of $7,854
and $6,532, respectively 136,064 87,393
Inventories 76,139 75,859
Fair asset value of derivative instrument 1,639 3,766
Weather insurance contract 7,200 -
Prepaid expenses and other current assets 35,472 37,741
------------ ------------
Total current assets 326,250 295,880
------------ ------------
Property and equipment, net 41,351 42,377
Long-term portion of accounts receivables 3,381 3,513
Goodwill 166,522 166,522
Intangibles, net 55,875 61,007
Deferred charges and other assets, net 10,259 10,899
Long-term assets held for sale 648 1,010
------------ ------------
Total Assets $ 604,286 $ 581,208
============ ============
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities
Accounts payable $ 23,655 $ 21,544
Fair liability value of derivative
instrument 17,354 13,790
Current maturities of long-term debt 96 96
Accrued expenses 69,657 62,651
Unearned service contract revenue 43,567 36,634
Customer credit balances 72,778 73,863
------------ ------------
Total current liabilities 227,107 208,578
------------ ------------
Long-term debt 174,005 174,056
Other long-term liabilities 25,133 25,249
Partners' capital (deficit)
Common unitholders 199,514 194,818
General partner (273) (293)
Accumulated other comprehensive loss (21,200) (21,200)
-------------------------
Total Partners' capital 178,041 173,325
------------ ------------
Total Liabilities and Partners' Capital $ 604,286 $ 581,208
============ ============
STAR GAS PARTNERS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(in thousands, except per unit data) Three Months Ended
December 31,
---------------------
2006 2005
---------- ----------
Sales: (restated)
Product $280,402 $358,869
Installations and service 49,842 55,512
---------- ----------
Total sales 330,244 414,381
Cost and expenses:
Cost of product 206,236 262,280
Cost of installations and service 50,474 57,695
Change in the fair value of derivative
instruments 6,315 40,563
Delivery and branch expenses 46,832 58,998
Depreciation and amortization expenses 7,372 8,485
General and administrative expenses 4,350 6,794
---------- ----------
Operating income (loss) 8,665 (20,434)
Interest expense (5,108) (7,540)
Interest income 1,794 858
Amortization of debt issuance costs (570) (631)
---------- ----------
Income (loss) before income taxes and
cumulative effect of changes in accounting
principles 4,781 (27,747)
Income tax expense 65 250
---------- ----------
Income (loss) before cumulative effect of
changes in accounting principles 4,716 (27,997)
Cumulative effect of changes in accounting
principles - change in inventory pricing method - (344)
---------- ----------
Net income (loss) $4,716 $(28,341)
========== ==========
General Partner's interest in net income (loss) 20 (259)
---------- ----------
Limited Partners' interest in net income (loss) $4,696 $(28,082)
========== ==========
Basic and Diluted income (loss) per Limited
Partner Unit:
Net income (loss) before cumulative effect of
changes in accounting principles $0.06 $(0.77)
---------- ----------
Net income (loss) $0.06 $(0.78)
========== ==========
Weighted average number of Limited Partner
units:
Basic 75,774 35,903
========== ==========
Diluted 75,774 35,903
========== ==========
SUPPLEMENTAL INFORMATION
Earnings (loss) before interest, taxes, depreciation and
amortization from continuing operations (EBITDA)
The Partnership uses EBITDA as a measure of liquidity and it is
being included because the Partnership believes that it provides
investors and industry analysts with additional information to
evaluate the Partnership's ability to pay quarterly distributions.
EBITDA is not a recognized term under generally accepted accounting
principles ("GAAP") and should not be considered as an alternative to
net income/(loss) or net cash provided by operating activities
determined in accordance with GAAP. Because EBITDA as determined by
the Partnership excludes some, but not all of the items that affect
net income/(loss), it may not be comparable to EBITDA or similarly
titled measures used by other companies. The following tables set
forth (i) the calculation of EBITDA and (ii) a reconciliation of
EBITDA, as so calculated, to cash provided by operating activities.
STAR GAS PARTNERS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
RECONCILIATION OF EBITDA
(unaudited)
Three Months Ended
December 31,
---------------------
2006 2005
---------- ----------
(in thousands) (restated)
Net income (loss) before the cumulative effect
of changes in accounting principle $4,716 $(27,997)
Plus:
Income tax expense 65 250
Amortization of debt issuance costs 570 631
Interest expense, net 3,314 6,682
Depreciation and amortization expense 7,372 8,485
---------- ----------
EBITDA 16,037 (11,949)
Add/(subtract)
Income tax expense (65) (250)
Interest expense, net (3,314) (6,682)
Provision for losses on accounts receivable 1,952 1,977
(Gain)/Loss on sales of fixed assets, net (247) 427
Change in fair value of derivative
instruments 6,315 40,563
Increase in weather insurance contract (7,200) -
Change in operating assets and liabilities (34,363) (137,524)
---------- ----------
Net cash used in operating activities $(20,885) ($113,438)
========== ==========
Three Months Ended
December 31,
---------------------
2006 2005
---------- ----------
Home heating oil gallons sold (millions) 99.3 131.3
CONTACT: Star Gas Partners
Investor Relations
203/328-7310
or
Jaffoni & Collins Incorporated
Robert Rinderman / Steven Hecht, 212-835-8500
SGU@jcir.com