World News: 12:00 GMT Thursday 6th December 2018. [Star Group, L.P. via Globe Newswire via SPi World News]
STAMFORD, Conn., Dec. 06, 2018 (GLOBE NEWSWIRE) -- Star Group, L.P. (the "Company" or "Star") (NYSE:SGU), a home energy distributor and services provider, today filed its fiscal 2018 annual report on Form 10-K with the SEC and announced financial results for the fiscal 2018 fourth quarter and year ended September 30, 2018.
During the fourth quarter of fiscal 2018, the Company sold its small home security business and recorded a pre-tax gain of $7.0 million after expenses.
Star's net loss increased by $3.8 million, to a loss of $21.5 million, as the gain on sale of the Company’s security business was more than offset by the Adjusted EBITDA loss, as described below.
The Company's Adjusted EBITDA loss for the fiscal 2018 fourth quarter increased by $8.4 million, to $37.6 million, due to an Adjusted EBITDA loss of $1.7 million attributable to acquisitions largely completed after the heating season and an increase in the base business Adjusted EBITDA loss of $6.7 million. In the base business, total gross profit declined by $1.8 million, as previously noted, due to the reduction in home heating oil and propane volume partially mitigated by higher home heating oil and propane margins. Expansion of the Company’s service initiatives, including a concierge program, resulted in higher operating costs of $1.6 million, and bad debt expense was higher by $1.0 million due to an increase in the Company’s reserve for doubtful accounts. In addition, Star took a charge of $0.5 million for severance during the quarter and incurred $0.6 million of rebranding expense. The build-out of certain departments, training for office personnel and delivery drivers, and inflationary pressures accounted for the balance of the increase in the Adjusted EBITDA loss.
Adjusted EBITDA is a non-GAAP financial measure (see reconciliation below) 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) but provides additional information for evaluating the Company’s ability to pay distributions.
"Having faced numerous unusual factors earlier in the year, we ended fiscal 2018 with mixed performance during the fourth quarter,” said Steven J. Goldman, Star’s Chief Executive Officer. “While revenue rose due to higher volumes of other petroleum products, bottom line results were negatively impacted by delivery timing, increased expenses, and by businesses acquired during the non-heating season. During the quarter, we also sold off a small security unit for a net gain of $7.0 million due to the changing landscape of this industry and increasing capital requirements to remain competitive.
“For fiscal 2018 as a whole we completed six acquisitions that brought, in aggregate, approximately 17,000 new accounts to Star across several product categories – home heating oil and propane, other petroleum products, and various services. Such transactions, along with our continued investment in business development, are designed to increase the bond with our customers and improve Star’s long-term operating performance. Given the unexpected nature of this past year – with extreme weather volatility – we know the importance of being prepared for every possibility.”
Home heating oil and propane volume rose by 40.3 million gallons, or 12.7 percent, to 357.2 million gallons, as the additional volume provided from acquisitions and colder weather more than offset the impact of net customer attrition and other factors. Temperatures in Star's geographic areas of operation for fiscal 2018 were 9.0 percent colder than last year’s comparable period but 4.7 percent warmer than normal, as reported by the National Oceanic and Atmospheric Administration. While warmer than normal in aggregate, the fiscal year included extreme weather anomalies – including times when temperatures were nearly 50% colder than normal.
Net income increased by $28.6 million, or 106.3 percent, to $55.5 million due to an increase in Adjusted EBITDA of $5.2 million (discussed below), a favorable change in the fair value of derivative instruments of $9.2 million, the gain on sale from the security business ($7.0 million), and a reduction in the Company’s effective tax rate from 43.1 percent to 12.0 percent, primarily due to the impact of the recently-enacted lower federal statuary rate.
Adjusted EBITDA increased by $5.2 million, or 6.4 percent, to $86.2 million. The increase in Adjusted EBITDA was primarily provided by acquisitions of $4.9 million (which included an Adjusted EBITDA loss for acquisitions completed after the heating season of $0.8 million). In the base business, the additional volume sold, reflecting the impact of colder temperatures, and higher home heating oil and propane margins was reduced by higher operating costs in the base business and a $1.9 million charge under the Company’s weather hedge contract, as temperatures were colder than the payment threshold during contract period. The extreme cold weather conditions experienced in late December 2017 and early January 2018 not only increased demand for service calls but also drove an increase in direct delivery expense as well as many other branch expenses. Certain December and January deliveries were made at premium labor rates, and the unusual weather conditions necessitated increased staffing levels for delivery and office personnel to handle the tremendous influx of customer inquiries regarding the status of their delivery or service call. In addition to these costs and normal increases in salaries, benefits, and other items, delivery and branch expenses were also higher due to an increase in fixed costs, an increase in insurance expense, greater credit card usage and higher bad debt expense, reflecting the increase in sales, rebranding expense, severance costs, and expansion of the Company’s concierge service program.
The method of calculating Adjusted EBITDA may not be consistent with that of other companies, and EBITDA and Adjusted EBITDA both have limitations as analytical tools and so should not be viewed in isolation but in conjunction with measurements that are computed in accordance with GAAP. Some of the limitations of EBITDA and Adjusted EBITDA are:
Chris Witty Darrow Associates 646/438-9385 or
Globe Newswire: 12:00 GMT Thursday 6th December 2018
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