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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934
Date of report (Date of earliest event reported) July 29, 2004
STAR GAS PARTNERS, L.P.
(Exact name of registrant as specified in its charter)
Delaware 33-98490 06-1437793
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
2187 Atlantic Street, Stamford, CT 06902
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (203) 328-7300
--------------
Not Applicable
--------------------------------------------------------------
(Former name or former address, if changed since last report.)
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
Exhibit 99.1 A copy of the Star Gas Partners, L.P. Press Release dated July
29, 2004
ITEM 9. REGULATION FD DISCLOSURE
ITEM 12. RESULTS OF OPERATIONS AND FINANCIAL CONDITION
On July 29, 2004, Star Gas Partners, L.P., a Delaware partnership (the
"Partnership"), issued a press release describing its financial results for its
fiscal third quarter ended June 30, 2004. A copy of the Partnership's press
release has been furnished as Exhibit 99.1 to this Current Report on Form 8-K.
The information in this report shall not be treated as "filed" for purposes of
the Securities Exchange Act of 1934, as amended.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
STAR GAS PARTNERS, L.P.
By: Star Gas LLC (General Partner)
By: /s/ Ami Trauber
-------------------------------
Name: Ami Trauber
Title: Chief Financial Officer
Principal Financial &
Accounting Officer
Date: July 29, 2004
EXHIBIT 99.1
Star Gas Partners, L.P. Reports Third Quarter Operating Results
and Common Unit Distribution
STAMFORD, Conn.--(BUSINESS WIRE)--July 29, 2004--Star Gas
Partners, L.P. (the "Partnership" or "Star") (NYSE: SGU, SGH), a
diversified home energy distributor and services provider specializing
in heating oil and propane, today reported results for the fiscal 2004
third quarter and nine months ended June 30, 2004. For the three
months ended June 30, 2004, Star's volume increased approximately 2%
despite temperatures that were 28% warmer than in the comparative
period in the prior year. This increase was primarily attributable to
the effect of Star's acquisition of 14 companies since April 1, 2003,
representing approximately 119 million gallons of annual volume, which
more than offset the negative impact of weather and customer losses,
primarily a result of high energy prices.
Star's fiscal third quarter is predominantly a non-heating period
and its operating loss rose approximately $4 million, from $26 million
to $30 million due to a) warmer temperatures in the early part of the
quarter impacting results by approximately $9 million; b) gross profit
margins that were lower than the unusually high levels experienced in
the third quarter of fiscal 2003; and c) an increase in Depreciation
and Amortization expense. These items were partially offset by a)
lower equity related compensation expense; b) some operating
improvements associated with the Heating Oil Division's Business
Process Improvement Program; as well as c) a change in heating oil
delivery patterns.
Star's third quarter seasonal net loss increased approximately $5
million to $43 million due to the aforementioned operating loss
increase and higher net interest expense associated with the
Partnership's acquisition program. Diluted net loss per limited
partner unit rose to $1.18 per unit in the third quarter of fiscal
2004, from $1.15 per unit in the third quarter of fiscal 2003.
EBITDA for the three months ended June 30, 2004 was a loss of
$15.8 million, versus a loss of $12.6 million in the fiscal 2003 third
quarter. This decrease in EBITDA was primarily due to the warmer
weather referred to above.
For the nine months ended June 30, 2004, sales increased
approximately 5% to $1.3 billion, compared to $1.2 billion in the same
period in fiscal 2003, due both to volume expansion and higher energy
prices. Volume for the first nine months of FY 2004 increased 2% to
686 million gallons from 673 million gallons in the same period in the
prior year. This was due to Star's acquisition program which more than
offset 8% warmer temperatures and net customer loss in the first three
quarters of fiscal 2004 versus 2003. Operating income for the nine
months ended June 30, 2004 decreased approximately $4 million to $95
million due to a) the estimated $22 million impact of warmer
temperatures; b) the effect of an approximate 4% net customer loss
resulting from both high energy prices and diminished service levels
at Petro associated with the initial stages of its Business Process
Improvement Program; and c) increased Depreciation and Amortization
expense. This was offset by a) the estimated $16 million impact from
the Company's acquisition program; b) a 1.6 cent per-gallon expansion
in gross profit margin in the base operations; and c) certain
improvements in operating results primarily associated with the
Heating Oil Division Business Process Improvement Program.
Net income for the nine months ended June 30, 2004 declined
approximately $4 million to $57 million, from $61 million in the
comparable period in fiscal 2003. This decrease was primarily
attributable to the operating income decline, as well as to higher
interest expense and debt issuance costs, offset by lower income tax
expense, lower income from discontinued operations and the adoption of
SFAS No. 142 for discontinued operations in fiscal 2003, which
resulted in a charge of $3.9 million. Diluted net income per limited
partner unit for the nine months ended June 30, 2004 declined to $1.62
per unit from $1.87 per unit during the same period in fiscal 2003.
EBITDA for the nine months ended June 30, 2004 rose approximately
$1 million to $138 million from $137 million in the same period last
year due to acquisitions and gross profit margin improvements.
Star also announced that during the period from April 1, 2004 to
date, the Partnership acquired four heating oil and propane companies
consisting of approximately 7,700 customers. The four companies were
Fuels by Keith of Brandon, VT; B&C Fuel Oil of Pinebush, NY; Shiavoni
Propane of Southampton, NY; and Mabob of Kissimmee, FL.
In commenting on these results, Chairman Irik Sevin stated: "We
are very pleased with certain aspects of this year's performance, most
notably that our aggressive, yet disciplined acquisition program
largely offset the impact of temperatures that were considerably
warmer than last year's. However, there were two aspects of the
business that were particularly challenging. The first was the
implementation of the Heating Oil Division's Business Process
Improvement Program. Since this entailed a complete change in the way
Petro conducts it business, it is understandable that the first
heating season under the new model could require certain adjustments.
As a result of the actions taken throughout this past year, we are
beginning to see many of the operational and customer satisfaction
benefits originally anticipated. Having made many of the adjustments
required, we believe the new platform could provide Petro with a
distinct operating and marketing competitive advantage going forward.
"The second challenge faced, especially this past quarter, was the
unprecedented rise in energy costs. The movement in petroleum prices
generally created a significantly heightened level of customer concern
over propane and heating oil prices and resulted in base company
customer loss.
"While these two factors had a negative impact on first nine
months results, they now appear to offer Star certain longer-term
opportunities. First the Propane Division has already taken advantage
of greater consumer awareness to launch a marketing campaign, which,
while early, has achieved certain positive results. Second, the
Heating Oil Division is utilizing its new centralized platform,
marketing expertise and consumer research to offer consumers new ways
to address their potentially high energy bills. It is anticipated that
this new product will be launched in late August/September, when
consumers are most sensitive to selecting a fuel oil provider for the
upcoming heating season."
Distribution Information
In regard to quarterly distributions, Star declared today its
$0.575 per unit Minimum Quarterly Distribution on its common units for
the quarter ended June 30, 2004, payable on August 13, 2004 to
unitholders of record as of August 9, 2004. Based on the discussion
above, and especially a) the current turbulent and high priced energy
market; b) the Petro division having not yet realized the full
financial benefit of its Redesign Program despite some positive
results; and c) the funds that might be used to take advantage of
Star's new marketing programs, Star believes it is prudent to preserve
its capital and not declare a distribution on its Senior Subordinated,
Junior Subordinated and General Partner Units.
Star Gas Partners, L.P., is a leading distributor of home heating
oil and propane. The Partnership is the nation's largest retail
distributor of home heating oil and the nation's seventh largest
retail propane distributor. Additional information is available at
www.star-gas.com.
This news announcement contains certain forward-looking
information that is subject to certain risks and uncertainties as
indicated from time to time in the Partnership's 10-K, 10-Q, 8-K and
other filings with the Securities and Exchange Commission. Included
risks and uncertainties are the effects of the weather on the
Partnership's financial results, competitive and propane and heating
oil pricing pressures and other factors impacting the propane and home
heating oil distribution industries.
STAR GAS PARTNERS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per unit data)
Three Months Ended
June 30,
---------------------
2004 2003
-------- --------
Sales $ 229,155 $ 216,865
Costs and expenses:
Cost of sales 164,574 149,097
Operating expenses 80,360 80,380
Depreciation and amortization expenses 14,214 13,086
-------- --------
Operating loss (29,993) (25,698)
Interest expense, net (11,372) (10,882)
Amortization of debt issuance costs (794) (606)
-------- --------
Loss from continuing operations before
income taxes (42,159) (37,186)
Income tax expense 75 100
-------- --------
Loss from continuing operations (42,234) (37,286)
Loss from discontinued operations before loss
on sale of TG&E segment, net of income taxes (50) (566)
Loss on sale of TG&E segment, net of income
taxes (247) -
-------- --------
Net loss $ (42,531) $ (37,852)
======== ========
General Partner's interest in net loss $ (405) $ (378)
======== ========
Limited Partners' interest in net loss $ (42,126) $ (37,474)
======== ========
Basic and diluted loss per Limited Partner
unit:
Loss from continuing operations $ (1.17) $ (1.14)
======== ========
Net loss $ (1.18) $ (1.15)
======== ========
Basic weighted average number of
Limited Partner units outstanding 35,756 32,457
======== ========
Diluted number of Limited Partner units 35,756 32,457
======== ========
STAR GAS PARTNERS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per unit data)
Nine Months Ended
June 30,
---------------------
2004 2003
---------- ----------
Sales $1,272,561 $1,216,900
Costs and expenses:
Cost of sales 855,016 816,399
Operating expenses 279,710 263,443
Depreciation and amortization expenses 43,236 38,598
---------- ----------
Operating income 94,599 98,460
Interest expense, net (34,119) (29,708)
Amortization of debt issuance costs (2,837) (1,597)
Loss on redemption of debt - (181)
---------- ----------
Income from continuing operations before
income taxes 57,643 66,974
Income tax expense 1,225 2,235
---------- ----------
Income from continuing operations 56,418 64,739
Income from discontinued operations before gain
on sale of TG&E segment and cumulative effect
of change in accounting principle, net of
income taxes 1,033 512
Loss on sale of TG&E segment, net of income
taxes (17) -
Cumulative effect of change in accounting
principle for adoption of SFAS No. 142 for
discontinued operations - (3,901)
---------- ----------
Net income $ 57,434 $ 61,350
========== ==========
General Partner's interest in net income $ 528 $ 614
========== ==========
Limited Partners' interest in net income $ 56,906 $ 60,736
========== ==========
Basic and diluted income per Limited Partner
unit:
Income from continuing operations $ 1.60 $ 1.97
========== ==========
Net income $ 1.62 $ 1.87
========== ==========
Basic weighted average number of
Limited Partner units outstanding 35,021 32,453
========== ==========
Diluted number of Limited Partner units 35,021 32,561
========== ==========
STAR GAS PARTNERS, L.P. AND SUBSIDIARIES
SUPPLEMENTARY DATA
(in thousands)
Earnings 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 table sets
forth (i) the calculation of EBITDA and (ii) a reconciliation of
EBITDA, as so calculated, to cash provided by operating activities:
Three Months
Ended June 30,
----------------------
2004 2003
----------- ----------
Loss from continuing operations $(42,234) $(37,286)
Plus:
Income tax expense 75 100
Amortization of debt issuance costs 794 606
Interest expense, net 11,372 10,882
Depreciation and amortization 14,214 13,086
----------- ----------
EBITDA $(15,779) $(12,612)
=========== ==========
Nine Months
Ended June 30,
-------------------------
2004 2003
------------ -----------
Income from continuing operations $56,418 $64,739
Plus:
Income tax expense 1,225 2,235
Amortization of debt issuance costs 2,837 1,597
Interest expense, net 34,119 29,708
Depreciation and amortization 43,236 38,598
------------ -----------
EBITDA 137,835 136,877
Add/(subtract)
Loss on redemption of debt - 181
Income tax expense (1,225) (2,235)
Interest expense, net (34,119) (29,708)
Unit compensation expense 121 1,876
Provision for losses on accounts
receivable 7,027 5,193
Loss (gain) on sales of fixed assets, net (198) 128
Change in operating assets and liabilities (73,718) (89,231)
------------ -----------
Net cash provided by operating
activities $35,723 $23,081
============ ===========
Three Months Ended June 30, Nine Months Ended June 30,
--------------------------- --------------------------
2004 2003 2004 2003
-------- -------- -------- --------
Total gallons
sold:
Heating Oil
segment 76,923 79,972 510,554 524,448
Propane segment 26,782 21,666 175,716 148,463
Total gallons
sold 103,705 101,638 686,270 672,911
STAR GAS PARTNERS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
June 30, Sept. 30,
2004 2003
----------------------
ASSETS
Current assets
Cash and cash equivalents $ 19,328 $ 10,044
Receivables, net of allowance of $10,597 and
$7,542, respectively 130,458 100,511
Inventories 43,738 38,561
Prepaid expenses and other current assets 40,257 51,470
Net current assets of discontinued operations - 10,523
---------- ----------
Total current assets 233,781 211,109
---------- ----------
Property and equipment, net 250,351 261,867
Long-term portion of accounts receivables 6,684 7,145
Goodwill 274,097 272,740
Intangibles, net 183,153 201,468
Deferred charges and other assets, net 16,817 14,414
Net long-term assets of discontinued operations - 6,867
---------- ----------
Total Assets $ 964,883 $ 975,610
========== ==========
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities
Accounts payable $ 25,495 $ 27,140
Working capital facility borrowings 29,650 12,000
Current maturities of long-term debt 24,536 22,847
Accrued expenses 82,432 82,356
Unearned service contract revenue 33,528 32,036
Customer credit balances 29,875 74,716
Net current liabilities of discontinued
operations - 7,569
---------- ----------
Total current liabilities 225,516 258,664
---------- ----------
Long-term debt 485,202 499,341
Other long-term liabilities 27,072 27,829
Partners' Capital (Deficit)
Common unitholders 242,213 210,636
Subordinated unitholders (373) (57)
General partner (3,116) (3,082)
Accumulated other comprehensive loss (11,631) (17,721)
---------- ----------
Total Partners' Capital 227,093 189,776
---------- ----------
Total Liabilities and Partners' Capital $ 964,883 $ 975,610
========== ==========
CONTACT: Star Gas Partners, L.P.
Richard F. Ambury, 203/328-7300
or
Jaffoni & Collins Incorporated
Robert L. Rinderman / Purdy Tran, 212/835-8500
SGU@jcir.com