Exhibit 99.1
Star Gas Partners, L.P. Reports Fiscal 2007 Third Quarter Results
STAMFORD, Conn.--(BUSINESS WIRE)--Aug. 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 third quarter, a
non-heating season quarter, and the nine-month period ended June 30,
2007.
Three months ended June 30, 2007, compared to three months ended
June 30, 2006
Star reported a 16.2 percent increase in total revenues to $222.5
million, compared to total revenues of $191.5 million, due to an
increase in home heating oil volume of 23.8 percent. The home heating
oil volume increase was due to 30.3 percent colder temperatures,
reduced by net customer attrition. For the twelve months ended June
30, 2007, Star's net customer attrition rate was 5.0 percent, compared
to 6.6 percent and 7.1 percent for fiscal 2006 and fiscal 2005,
respectively.
Star lost approximately 6,000 accounts (net) of its home heating
oil customer base in the fiscal 2007 third quarter, compared to a loss
of 6,500 accounts (net) in the fiscal 2006 third quarter.
Home heating oil per gallon margins rose by 0.7 cents per gallon,
largely due to an increase in the margins realized on sales to
variable pricing plan customers. The service and installation results
improved by $1.2 million, from a profit of $1.7 million (3.6 cents per
gallon) to a profit of $2.9 million (5.0 cents per gallon).
Total operating expenses (delivery, branch, general and
administrative) decreased by $3.4 million, or 6.7 percent, to $48.0
million, as compared to $51.4 million. The decrease was largely due to
lower insurance expenses of $4.7 million, offset by higher delivery
expenses related to the 23.8 percent increase in delivered volume. A
$4.9 million credit, related to derivative instruments, was recorded
due to an increase in market value for unexpired hedges ($2.3 million)
and the expiration of certain hedged positions that were entered in-to
in prior periods ($2.6 million). During the prior-year quarter, a $2.3
million credit, related to derivative instruments, was recorded due to
an increase in market value for unexpired hedges ($3.0 million),
reduced by the expiration of certain hedged positions that were
entered into in prior periods ($0.7 million charge).
Operating loss decreased $15.9 million to a $6.4 million loss, as
compared to a $22.3 million loss. The improvement was due to an
increase in product gross profit of $7.5 million, an increase in net
service and installation profitability of $1.2 million, a favorable
change in the impact of derivative instruments of $2.6 million, lower
depreciation and amortization of $1.2 million and a decrease in
operating expense of $3.4 million.
Interest expense decreased $0.8 million, or 13.0 percent, to $5.0
million, as compared to $5.8 million. This decrease resulted from a
lower average principal amount in total debt outstanding of
approximately $28.1 million. Total debt outstanding declined by $27.8
million due to the Partnership's recapitalization that was completed
on April 28, 2006. Interest income increased $1.2 million to $2.9
million, due to higher invested cash balances.
Income tax benefit was $0.8 million and represents certain state
income tax, alternative minimum federal tax and capital taxes. A
blended rate was applied to pre-tax income to arrive at income tax
expense. Income tax expense for fiscal Q3 2006 was $0.5 million.
Net loss decreased by $25.8 million, to $8.3 million, as compared
to a net loss of $34.1 million. This change was due to a $15.9 million
increase in operating income, lower net interest expense of $2.0
million, lower income tax expense of $1.3 million and the
non-recurrence of a $6.6 million loss on redemption of debt recorded
in the third quarter of 2006.
EBITDA increased $21.3 million to $0.8 million, as compared to a
$20.5 million EBITDA loss, due to an increase in EBITDA from
operations of $12.1 million, a $2.6 million increase relating to the
change in fair value of derivative instruments (from a credit of $2.3
million for the fiscal 2006 three-month period to a credit of $4.9
million for the comparable period of fiscal 2007) and the
non-recurrence of a $6.6 million loss on redemption of debt recorded
in the third quarter of 2006. For the three months ended June 30,
2006, EBITDA increased $2.3 million due to the change in the fair
value of derivative instruments and was reduced by the $6.6 million
loss on redemption of debt. EBITDA 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), but provides additional
information for evaluating the Partnership's ability to make the
Minimum Quarterly Distribution. The Partnership is not required to
make the Minimum Quarterly Distribution until February 2009, for the
quarter ended December 31, 2008.
Star Gas Partners Chief Executive Officer, Dan Donovan, stated,
"Fiscal 2007 Q3 results were highlighted by improvements in Star's per
gallon service and installation results as well as its heating oil
margins. We also implemented further operating expense reductions
during the period, which enhanced results. Of note, net customer
attrition has steadily declined on a trailing twelve-month comparison
over the past three years.
Mr. Donovan continued, "Importantly, we achieved an EBITDA profit
of $0.8 million during the three-month period, versus a $20.5 million
EBITDA loss, primarily due to a nearly $12.1 million improvement in
EBITDA from operations during the quarter. We continue to make
opportunistic acquisitions, and during fiscal 2007 we have purchased
six heating oil companies with a total of 18,000 customers and 16.9
million gallons.
"Through an innovative and proprietary team-building and
role-playing program for employees that we call Boot Camp, Star has
also been making significant progress in reinforcing the importance of
customer service for all employees. The goal has been and will
continue to be focusing all employees on the premise that each of them
plays a critical role in providing customer service and that all must
continually strive for improvement in this area. We hope to achieve
further reductions in net customer attrition as a result of this
program, which will be ongoing to both train and retrain all employees
via our two-day, off-site group sessions that are a major part of Boot
Camp."
Nine months ended June 30, 2007, compared to nine months ended
June 30, 2006
Star experienced a 1.3 percent decrease in revenues to $1.13
billion, compared to $1.15 billion, as a decline in sales volume was
reduced by an increase in selling prices.
Home heating oil volume declined 8.4 million gallons, or 2.4
percent, from 359.7 million gallons to 351.3 million gallons, as the
impact of 3.6 percent colder temperatures was reduced by net customer
attrition. Star lost 15,500 accounts (net), or 3.7 percent of its home
heating oil customer base, as compared to a loss of 24,200 accounts
(net), or 5.4 percent of its home heating oil customer base. This
reduction was due to a 9,600 account reduction in gross customer
losses, partially offset by a 900 account decrease in gross customer
gains.
Home heating oil per gallon margins increased by 3.8 cents, due
largely to the increase in margins realized on sales to variable
priced customers. The service results improved by $4.8 million, from a
loss of $4.9 million (1.4 cents per gallon) to a loss of $0.1 million
(0.0 cents per gallon).
Total operating expenses (delivery, branch, general and
administrative) decreased by $7.0 million, or 3.9 percent, to $174.0
million, in line with the 2.4 percent reduction in volume.
Star recorded a $17.0 million credit, related to derivative
instruments, due to an increase in market value for unexpired hedges
($3.2 million) and the expiration of certain hedged positions that
were entered in to prior periods ($13.8 million). During the year-ago
period, a $27.1 million charge, related to derivative instruments, was
recorded due to the expiration of certain hedged positions that were
entered into in prior periods ($28.0 million charge), partially
off-set by an increase in market value for unexpired hedges ($0.9
million).
Operating income increased $65.6 million to an $85.1 million
profit. The majority of this increase relates to the changes in the
fair value of derivative instruments of $44.1 million. The balance of
the change, or $21.5 million, was largely due to lower operating costs
including net service and installation totaling $18.0 million and
lower depreciation and amortization expense of $2.9 million.
Interest expense decreased $6.0 million, or 28.2 percent, to $15.3
million, as compared to $21.3 million. This decrease resulted from a
lower average principal amount in total debt outstanding of
approximately $84.3 million. Total debt outstanding declined due to
the recapitalization ($70.7 million) and lower working capital
borrowings ($12.9 million). Interest income increased by $2.9 million
to $6.3 million, due to higher invested cash balances.
Income tax expense was $3.1 million and represents certain state
income tax, alternative minimum federal tax and capital taxes. Income
tax expense was $1.2 million in the year-earlier period.
Net income increased by $79.7 million to $71.3 million, versus a
$8.4 million loss, due to a $65.6 million increase in operating
income, lower net interest expense of $8.9 million and the
non-recurrence of a $6.6 million loss on the redemption of debt
recorded in the three months ended June 30, 2006, reduced by higher
income tax expense of $1.9 million.
EBITDA increased $69.3 million to $107.0 million, as compared to
$37.7 million, of which $18.6 million is attributable to operations,
$44.1 million relates to the change in fair value of derivative
instruments (from a charge of $27.1 million to a credit of $17.0
million) and $6.6 million is due to the non-recurrence of the loss on
debt redemption. For the comparable Q3 2006, EBITDA was negatively
impacted by $27.1 million due to the change in the fair value of
derivative instruments and by the $6.6 million loss on debt
redemption. 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 make the Minimum Quarterly Distribution
until February 2009, for the quarter ended December 31, 2008.
REMINDER: Star Gas management will host a conference call and
webcast today at 11:00 a.m. (ET). Conference call dial-in is
800/952-4629 or 415/226-5363 (international callers). A webcast is
also available at www.star-gas.com 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 customers and retain
existing customers; our ability to effect strategic acquisitions or
redeploy assets; the impact of litigation; the continuing residual
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 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 and actual results may
differ materially from those projected as a result of certain risks
and uncertainties. These risks and uncertainties include, but are not
limited to, those set forth under the heading "Risk Factors" and
"Business Initiatives and Strategy" in the Partnership's Annual Report
on Form 10-K for the fiscal year ended September 30, 2006. Without
limiting the foregoing, the words "believe", "anticipate", "plan",
"expect", "seek", "estimate" and similar expressions are intended to
identify forward-looking statements. 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 its Quarterly Report on Form 10-Q
for the fiscal quarter ended June 30, 2007, 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
June 30, September
30,
(in thousands) 2007 2006
- -------------------------------------------- ------------ ------------
(unaudited)
ASSETS
Current assets
Cash and cash equivalents $ 132,837 $ 91,121
Receivables, net of allowance of $9,474
and $6,532, respectively 112,100 87,393
Inventories 60,214 75,859
Fair asset value of derivative
instruments 8,534 3,766
Prepaid expenses and other current
assets 28,167 37,741
------------ ------------
Total current assets 341,852 295,880
------------ ------------
Property and equipment, net 40,386 42,377
Long-term portion of accounts receivables 1,884 3,513
Goodwill 170,719 166,522
Intangibles, net 52,401 61,007
Deferred charges and other assets, net 9,137 10,899
Long-term assets held for sale - 1,010
------------ ------------
Total assets $ 616,379 $ 581,208
============ ============
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities
Accounts payable $ 17,552 $ 21,544
Fair liability value of derivative
instruments 1,762 13,790
Current maturities of long-term debt 49 96
Accrued expenses and other current
liabilities 72,533 62,651
Unearned service contract revenue 36,216 36,634
Customer credit balances 44,746 73,863
------------ ------------
Total current liabilities 172,858 208,578
------------ ------------
Long-term debt 173,903 174,056
Other long-term liabilities 24,966 25,249
Partners' capital
Common unitholders 265,840 194,818
General partner 12 (293)
Accumulated other comprehensive loss (21,200) (21,200)
------------ ------------
Total partners' capital 244,652 173,325
------------ ------------
Total liabilities and partners' capital $ 616,379 $ 581,208
============ ============
STAR GAS PARTNERS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended Nine Months Ended
June 30, June 30,
-------------------- -----------------------
(in thousands, except per
unit data - unaudited) 2007 2006 2007 2006
- ------------------------- --------- ---------- ----------- -----------
(restated) (restated)
Sales:
Product $178,971 $148,742 $ 994,229 $1,003,408
Installations and
service 43,481 42,772 135,391 141,608
--------- ---------- ----------- -----------
Total sales 222,452 191,514 1,129,620 1,145,016
Cost and expenses:
Cost of product 137,922 115,154 730,080 746,022
Cost of installations
and service 40,624 41,112 135,482 146,468
(Increase) decrease in
the fair value of
derivative
instruments (4,857) (2,257) (17,004) 27,076
Delivery and branch
expenses 44,073 46,543 159,893 163,458
Depreciation and
amortization expenses 7,234 8,436 21,922 24,845
General and
administrative
expenses 3,887 4,853 14,161 17,648
--------- ---------- ----------- -----------
Operating income
(loss) (6,431) (22,327) 85,086 19,499
Interest expense (5,037) (5,787) (15,281) (21,285)
Interest income 2,953 1,704 6,326 3,411
Amortization of debt
issuance costs (571) (595) (1,712) (1,868)
Loss on redemption of
debt - (6,603) - (6,603)
--------- ---------- ----------- -----------
Income (loss) before
income taxes and
cumulative effect of
change in accounting
principles (9,086) (33,608) 74,419 (6,846)
Income tax expense
(benefit) (818) 468 3,092 1,158
--------- ---------- ----------- -----------
Income (loss) before
cumulative effect of
change in accounting
principles (8,268) (34,076) 71,327 (8,004)
Cumulative effect of
change in accounting
principles
- change in inventory
pricing method - - - (344)
--------- ---------- ----------- -----------
Net income (loss) $ (8,268) $(34,076) $ 71,327 $ (8,348)
========= ========== =========== ===========
General Partner's
interest in net
income (loss) (35) (189) 305 40
--------- ---------- ----------- -----------
Limited Partners'
interest in net income
(loss) $ (8,233) $(33,887) $ 71,022 $ (8,388)
========= ========== =========== ===========
Basic and diluted income
per Limited Partner
Unit:
Net income (loss)
before cumulative
effect of change in
accounting principles $ (0.11) $ (0.53) $ 0.94 $ (0.18)
--------- ---------- ----------- -----------
Net income (loss) $ (0.11) $ (0.53) $ 0.94 $ (0.19)
========= ========== =========== ===========
Weighted average number
of Limited Partner units
outstanding:
Basic 75,774 63,944 75,774 45,250
========= ========== =========== ===========
Diluted 75,774 63,944 75,774 45,250
========= ========== =========== ===========
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
Three Months Ended
June 30,
-----------------------
2006
(in thousands) 2007 (restated)
Loss before cumulative effect of changes in
accounting principles $(8,268) $(34,076)
Plus:
Income tax expense (benefit) (818) 468
Amortization of debt issuance costs 571 595
Interest expense, net 2,084 4,083
Depreciation and amortization expense 7,234 8,436
----------- -----------
EBITDA $803 $(20,494)
Add/(subtract)
Income tax expense (benefit) 818 (468)
Interest expense, net (2,084) (4,083)
Provision for losses on accounts
receivable 858 1,851
Gain on sales of fixed assets, net (417) (356)
Increase in fair value of derivative
instruments (4,857) (2,257)
Decrease in weather insurance contract 4,305 -
Loss on redemption of debt - 6,603
Change in operating assets and liabilities 83,500 91,611
--------- ----------
Net cash provided by operating
activities $82,926 $72,407
========= ==========
Three Months Ended
June 30,
------------------------
2007 2006
----------- -----------
Home heating oil gallons sold (millions) 56.9 46.0
SUPPLEMENTAL INFORMATION
- ----------------------------------------------------------------------
STAR GAS PARTNERS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
RECONCILIATION OF EBITDA
Nine Months Ended
June 30,
----------------------
2006
(in thousands) 2007 (restated)
Income (loss) before cumulative effect of
change in accounting principles $71,327 $(8,004)
Plus:
Income tax expense 3,092 1,158
Amortization of debt issuance costs 1,712 1,868
Interest expense, net 8,955 17,874
Depreciation and amortization expense 21,922 24,845
---------- -----------
EBITDA $107,008 $37,741
Add/(subtract)
Income tax expense (3,092) (1,158)
Interest expense, net (8,955) (17,874)
Provision for losses on accounts receivable 5,463 6,310
Gain on sales of fixed assets, net (756) (807)
(Increase)/decrease in the fair value of
derivative instruments (17,004) 27,076
Loss on redemption of debt - 6,603
Change in operating assets and liabilities (27,183) (65,735)
-------- ----------
Net cash provided by operating
activities $55,481 $(7,844)
======== ==========
Nine Months Ended
June 30,
------------------------
2007 2006
----------- -----------
Home heating oil gallons sold (millions) 351.3 359.7
CONTACT: Star Gas Partners
Investor Relations
203-328-7310
or
Jaffoni & Collins Incorporated
Robert Rinderman or Steven Hecht, 212-835-8500
SGU@jcir.com