STAR GROUP, L.P. (SGU) SEC Filing 10-K Annual report for the fiscal year ending Sunday, September 30, 2018
Star Group, L.P. Reports Fiscal 2018 Fourth Quarter and Full Year Results
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.
Three Months Ended September 30, 2018 Compared to Three Months Ended September 30, 2017
For the fiscal 2018 fourth quarter, Star reported a 26.5 percent increase in total revenue to $229.6 million, compared with $181.6 million in the prior-year period. The revenue growth reflected higher selling prices – in response to an increase in wholesale product cost of $0.4582 per gallon – greater service and installation sales, and an increase in total volume sold. The volume variance was driven by higher sales of other petroleum products, which rose by 12.8 million gallons, or 44.8 percent, to 41.5 million gallons largely due to acquisitions. Sales volume of home heating oil and propane declined by 3.4 million gallons, or 15.2 percent, to 19.2 million gallons as the additional sales volume from acquisitions of 0.7 million gallons was more than offset by net customer attrition (3.2 percent for fiscal 2018) and other factors such as the timing of deliveries between quarters. Home heating oil and propane margins rose in the base business (i.e., excluding acquisitions) and net service profitability improved, reducing the impact of the home heating oil and propane volume decline. Total gross profit in the base business fell by $1.8 million, or 4.3 percent, which was less than the 18.3 percent decline in base business home heating oil and propane volume.
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.”
Fiscal Year Ended September 30, 2018 Compared to Fiscal Year Ended September 30, 2017
Star reported a 26.8 percent increase in total revenue to $1.7 billion, versus $1.3 billion in the prior-year period, due to both higher selling prices – in response to higher wholesale product costs and an increase in total volume sold.
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.
EBITDA and Adjusted EBITDA (Non-GAAP Financial Measures)
EBITDA (Earnings from continuing operations before net interest expense, income taxes, depreciation and amortization) and Adjusted EBITDA (Earnings from continuing operations before net interest expense, income taxes, depreciation and amortization, (increase) decrease in the fair value of derivatives, multiemployer pension plan withdrawal charge, net other income, gain or loss on debt redemption, goodwill impairment, and other non-cash and non-operating charges) are non-GAAP financial measures that are used as supplemental financial measures by management and external users of our financial statements, such as investors, commercial banks and research analysts, to assess:
- our compliance with certain financial covenants included in our debt agreements;
- our financial performance without regard to financing methods, capital structure, income taxes or historical cost basis;
- our operating performance and return on invested capital compared to those of other companies in the retail distribution of refined petroleum products, without regard to financing methods and capital structure;
- our ability to generate cash sufficient to pay interest on our indebtedness and to make distributions to our partners; and
- the viability of acquisitions and capital expenditure projects and the overall rates of return of alternative investment opportunities.
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:
- EBITDA and Adjusted EBITDA do not reflect our cash used for capital expenditures;
- Although depreciation and amortization are non-cash charges, the assets being depreciated or amortized often will have to be replaced and EBITDA and Adjusted EBITDA do not reflect the cash requirements for such replacements;
- EBITDA and Adjusted EBITDA do not reflect changes in, or cash requirements for, our working capital requirements;
- EBITDA and Adjusted EBITDA do not reflect the cash necessary to make payments of interest or principal on our indebtedness; and
- EBITDA and Adjusted EBITDA do not reflect the cash required to pay taxes.
Members of Star's management team will host a webcast and conference call at 11:00 a.m. Eastern Time on December 6, 2018. The webcast will be accessible on the company’s website, at www.stargrouplp.com, and the telephone number for the conference call is 877-327-7688 (or 412-317-5112 for international callers).
About Star Group, L.P.
Star Group, L.P. is a full service provider specializing in the sale of home heating products and services to residential and commercial customers to heat their homes and buildings. The Company also sells and services heating and air conditioning equipment to its home heating oil and propane customers and, to a lesser extent, provides these offerings to customers outside of its home heating oil and propane customer base. In certain of Star's marketing areas, the Company provides plumbing services primarily to its home heating oil and propane customer base. Star also sells diesel, gasoline and home heating oil on a delivery only basis. Star is the nation's largest retail distributor of home heating oil based upon sales volume. Including its propane locations, Star serves customers in the more northern and eastern states within the Northeast, Central and Southeast U.S. regions. Additional information is available by obtaining the Company's SEC filings at www.sec.gov and by visiting Star's website at www.stargrouplp.com, where unit holders may request a hard copy of Star’s complete audited financial statements free of charge.
Forward Looking Information
This news release includes "forward-looking statements" which represent the Company’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 the products we sell; 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 make strategic acquisitions; the impact of litigation; our ability to contract for our current and future supply needs; natural gas conversions; future union relations and the outcome of current and future union negotiations; the impact of future governmental regulations, including environmental, health and safety regulations; the ability to attract and retain employees; customer creditworthiness; counterparty creditworthiness; marketing plans; general economic conditions and new technology. All statements other than statements of historical facts included in this news release are forward-looking statements. Without limiting the foregoing, the words "believe," "anticipate," "plan," "expect," "seek," "estimate" and similar expressions are intended to identify forward-looking statements. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to be 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 Strategy" in our Annual Report on Form 10-K (the "Form 10-K") for the fiscal year ended September 30, 2018. Important factors that could cause actual results to differ materially from the Company’s expectations ("Cautionary Statements") are disclosed in this news release and in the Form 10-Q. All subsequent written and oral forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by the Cautionary Statements. Unless otherwise required by law, the Company 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 GROUP, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
|Three Months Ended|
|Twelve Months Ended|
|(in thousands, except per unit data)||(unaudited)||(unaudited)|
|Installations and services||71,391||66,815||273,467||258,479|
|Cost and expenses:|
|Cost of product||125,563||82,584||957,843||675,386|
|Cost of installations and services||60,668||56,533||256,652||239,670|
|(Increase) decrease in the fair value of derivative instruments||(4,102||)||(9,219||)||(11,408||)||(2,193||)|
|Delivery and branch expenses||76,459||65,547||357,580||306,534|
|Depreciation and amortization expenses||8,190||7,177||31,575||27,882|
|General and administrative expenses||5,461||6,854||24,227||24,998|
|Finance charge income||(967||)||(766||)||(4,700||)||(4,054||)|
|Operating income (loss)||(41,654||)||(27,126||)||66,068||55,332|
|Interest expense, net||(2,060||)||(1,657||)||(8,716||)||(6,775||)|
|Amortization of debt issuance costs||(254||)||(309||)||(1,288||)||(1,281||)|
|Other income, net||7,043||—||7,043||—|
|Income (loss) before income taxes||(36,925||)||(29,092||)||63,107||47,276|
|Income tax expense (benefit)||(15,475||)||(11,345||)||7,602||20,376|
|Net income (loss)||$||(21,450||)||$||(17,747||)||$||55,505||$||26,900|
|General Partner’s interest in net income (loss)||(131||)||(103||)||314||156|
|Limited Partners’ interest in net income (loss)||$||(21,319||)||$||(17,644||)||$||55,191||$||26,744|
|Per unit data (Basic and Diluted):|
|Net income (loss) available to limited partners||$||(0.40||)||$||(0.32||)||$||1.01||$||0.48|
|Dilutive impact of theoretical distribution of earnings under FASB ASC 260-10-45-60||—||—||0.12||0.02|
|Limited Partner’s interest in net income (loss) under FASB ASC 260-10-45-60||$||(0.40||)||$||(0.32||)||$||0.89||$||0.46|
|Weighted average number of Limited Partner units outstanding (Basic and Diluted)||53,371||55,888||54,764||55,888|
STAR GROUP, L.P. AND SUBSIDIARIES
RECONCILIATION OF EBITDA AND ADJUSTED EBITDA
|Three Months Ended |
|Income tax benefit||(15,475||)||(11,345||)|
|Amortization of debt issuance cost||254||309|
|Interest expense, net||2,060||1,657|
|Depreciation and amortization||8,190||7,177|
|(Increase) / decrease in the fair value of derivative instruments||(4,102||)||(9,219||)|
|Other income, net||(7,043||)||-|
|Add / (subtract)|
|Income tax benefit||15,475||11,345|
|Interest expense, net||(2,060||)||(1,657||)|
|Provision (recovery) for losses on accounts receivable||596||(622||)|
|Change in deferred taxes||(14,956||)||5,683|
|Decrease in receivables||49,355||20,680|
|Increase in inventories||(8,213||)||(14,359||)|
|Increase in customer credit balances||29,940||22,672|
|Change in other operating assets and liabilities||(5,130||)||(16,726||)|
|Net cash provided by (used in) operating activities||$||27,441||$||(2,152||)|
|Net cash used in investing activities||$||(793||)||$||(31,162||)|
|Net cash used in financing activities||$||(21,540||)||$||(8,802||)|
|Home heating oil and propane gallons sold||19,200||22,600|
|Other petroleum products||41,500||28,700|
|Total all products||60,700||51,300|
STAR GROUP, L.P. AND SUBSIDIARIES
RECONCILIATION OF EBITDA AND ADJUSTED EBITDA
|Twelve Months Ended |
|Income tax expense||7,602||20,376|
|Amortization of debt issuance cost||1,288||1,281|
|Interest expense, net||8,716||6,775|
|Depreciation and amortization||31,575||27,882|
|(Increase) / decrease in the fair value of derivative instruments||(11,408||)||(2,193||)|
|Other income, net||(7,043||)||-|
|Add / (subtract)|
|Income tax expense||(7,602||)||(20,376||)|
|Interest expense, net||(8,716||)||(6,775||)|
|Provision for losses on accounts receivable||6,283||1,639|
|Change in deferred taxes||14,685||10,134|
|Increase in receivables||(37,149||)||(19,844||)|
|Decrease (increase) in inventories||4,177||(10,598||)|
|Decrease in customer credit balances||(6,563||)||(23,085||)|
|Change in other operating assets and liabilities||6,110||8,942|
|Net cash provided by operating activities||$||57,460||$||21,058|
|Net cash used in investing activities||$||(65,252||)||$||(66,381||)|
|Net cash used in financing activities||$||(30,135||)||$||(41,157||)|
|Home heating oil and propane gallons sold||357,200||316,900|
|Other petroleum products||138,300||112,100|
|Total all products||495,500||429,000|
STAR GROUP, L.P. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
|Cash and cash equivalents||$||14,531||$||52,458|
|Receivables, net of allowance of $8,002 and $5,540, respectively||132,668||96,603|
|Fair asset value of derivative instruments||17,710||5,932|
|Prepaid expenses and other current assets||35,451||26,652|
|Total current assets||256,737||241,241|
|Property and equipment, net||87,618||79,673|
|Deferred charges and other assets, net||13,067||9,843|
|LIABILITIES AND PARTNERS’ CAPITAL|
|Revolving credit facility borrowings||1,500||—|
|Fair liability value of derivative instruments||—||289|
|Current maturities of long-term debt||7,500||10,000|
|Accrued expenses and other current liabilities||116,436||108,449|
|Unearned service contract revenue||60,700||60,133|
|Customer credit balances||61,256||66,723|
|Total current liabilities||283,188||272,333|
|Deferred tax liabilities, net||21,206||6,140|
|Other long-term liabilities||24,012||23,659|
|Accumulated other comprehensive loss, net of taxes||(18,041||)||(18,765||)|
|Total partners’ capital||309,785||306,068|
|Total liabilities and partners’ capital||$||729,971||$||673,917|
646/438-9385 or email@example.com
The following information was filed by STAR GROUP, L.P. on Thursday, December 6, 2018 as an 8K 2.02 statement, which is an earnings press release pertaining to results of operations and financial condition. It may be helpful to assess the quality of management by comparing the information in the press release to the information in the accompanying 10-K Annual Report statement of earnings and operation as management may choose to highlight particular information in the press release.
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- 18468902_143Financial - EarningsThe Company accrues approximately 6% of Adjusted EBITDA, as defined in the profit sharing plan, for distribution to its employees, and this amount is payable when the Company achieves Adjusted EBITDA of at least 70% of the amount budgeted.
- 18468902_218Financial - ExpenseCash was used to finance an increase in accounts receivable of $17.3 million due to an increase in selling prices driven by higher product costs and an increase in day?s sales outstanding over a comparative two year period.
- 18468902_115Financial - EarningsFor fiscal 2018, total product gross profit was $446.5 million, which was $56.8 million, or 14.6%, greater than fiscal 2017, due to an increase in home heating oil and propane volume ($45.6 million) sold at slightly higher margins ($6.6 million), and an increase in gross profit from other petroleum products ($4.6 million).
- 18468902_69Financial - EarningsDuring the first fiscal quarter of fiscal 2017, net customer attrition improved by 6,600 accounts due to competitive margin management, certain marketing incentives, and more normal weather conditions, as we believe that customers did not see a need during the prior fiscal year first quarter (a very warm period) for the higher level of service that we can provide.
- 18468902_105Revenue - ProductService sales rose in the base business by $6.1 million, or 3.7%, due to higher equipment service contracts for air conditioning, natural gas and home heating oil, increased service billings due in part to the colder temperatures as well as the expansion of other services.
- 18468902_132Financial - DebtThe Company also saw an increase in credit card fees and bad debt expense of $5.7 million tied to the higher cost of product and greater use of credit cards.
- 18468902_169Revenue - GeographyThe 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 and should be viewed in conjunction with measurements that are computed in accordance with GAAP.
- 18468902_211Revenue - GeographyThe 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 and should be viewed in conjunction with measurements that are computed in accordance with GAAP.
- 18468902_163Revenue - ProductIn the base business, the additional volume sold due largely to 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 related to an amount due under our weather hedge contract because temperatures were colder than the Payment Threshold.
- 18468902_46Financial - Cash FlowTo the extent our interest rate derivative instruments designated as cash flow hedges are effective, as defined under this guidance, changes in fair value are recognized in other comprehensive income until the forecasted hedged item is recognized in earnings.
- 18468902_303Financial - ExpenseIn August 2018, the FASB issued ASU No. 2018-15, Intangibles-Goodwill and Other-Internal-Use Software: Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract, which will align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software.
- 18468902_177Revenue - ProductFor fiscal 2017, installation and service sales increased $8.2 million, or 3.3%, to $258.5 million, compared to $250.3 million for fiscal 2016, largely due to higher air conditioning installation and service, sales growth in other services and acquisitions.
- 18468902_159Financial - IncomeExcluding the impact of this net deferred tax liability related tax benefit, our effective income tax rate decreased from 43.1% in fiscal 2017 to 29.6% in fiscal 2018, primarily due to the lower enacted federal statutory income tax rate.
- 18468902_136Financial - ExpenseWe also experienced increases in rent, plant maintenance, higher vehicle fuel costs and increased customer concessions in the base business totaling $2.6 million, incurred rebranding expenses of $1.1 million, and we also took a charge for severance of $0.5 million during the fourth quarter of 2018 as 11 positions were eliminated which should save us over $2 million in fiscal 2019.
- 18468902_314Financial - EarningsKey assumptions used to determine the value of these intangibles include projections of future customer attrition or growth rates, product margin increases, operating expenses, our cost of capital, and corporate income tax rates.
- 18468902_217Financial - IncomeThe $25.2 million increase in cash generated from operations was largely due to the impact of certain tax planning initiatives and the Tax Reform Act on current income taxes and to, a lesser extent, the increase in Adjusted EBITDA.
- 18468902_337Legal - OtherThe ultimate resolution of these claims could differ materially from the assumptions used to calculate the reserves, which could have a material adverse effect on results of operations.
- 18468902_102Revenue - ProductFor fiscal 2018, installation and service sales increased $15.0 million, or 5.8%, to $273.5 million, compared to $258.5 million for fiscal 2017, largely due to acquisitions ($9.2 million) as well as growth in the base business ($5.8 million).
- 18468902_8Revenue - ProductOur liquidity is adversely impacted in times of increasing wholesale product costs, as we must use more cash to fund our hedging requirements as well as the increased levels of accounts receivable and inventory.
- 18468902_157Financial - IncomeThe tax reform reduced the federal statutory income tax rate for corporations from 35% to 21% effective January 1, 2018 and, therefore, the Company?s net deferred tax liability will be realized at a lower statutory tax rate than originally recorded, resulting in a tax benefit to the Company.
- 18468902_162MA - OtherThe increase in Adjusted EBITDA was primarily provided by acquisitions of $4.9 million, which includes an Adjusted EBITDA loss for 2018 acquisitions completed after the heating season of $0.8 million.
- 18468902_20Financial - IncomeExcluding the $11.1 million benefit recorded to income tax expense, our combined federal, state, and local effective income tax rate was reduced from 43.1% at September 30, 2017 to 29.6% for the twelve months ended September 30, 2018.
- 18468902_109Financial - EarningsOn that basis, home heating oil and propane margins for fiscal 2018 increased by $0.0189 per gallon, or 1.7%, to $1.1497 per gallon, from $1.1308 per gallon during fiscal 2017.
- 18468902_110MA - OtherExcluding acquisitions, home heating oil and propane margins increased by $0.0356 per gallon, or 3.2%.
- 18468902_181Financial - EarningsOn that basis, home heating oil and propane margins for fiscal 2017 increased by $0.0086 per gallon, or 0.8%, to $1.1308 per gallon, from $1.1222 per gallon during fiscal 2016.
- 18468902_17Financial - IncomeThe Tax Reform Act contains several key tax provisions that will impact the Company, including the reduction of the corporate Federal income tax rate from 35% to 21% effective January 1, 2018.
- 18468902_155Financial - IncomeFor fiscal 2018, income tax expense decreased by $12.8 million to $7.6 million, from $20.4 million for fiscal 2017.
- 18468902_216Other - OtherDuring fiscal 2018, cash provided by operating activities increased by $36.4 million to $57.5 million, compared to $21.1 million of cash provided by operating activities during fiscal 2017.
- 18468902_308Other - OtherA change in any of these critical accounting estimates could have a material effect on the results of operations.
- 18468902_66Other - OtherFor fiscal 2017, our net customer attrition improved by 16,700 accounts as we lost 6,800 accounts (net), or 1.5%, of our home heating oil and propane customer base, compared to 23,500 accounts lost (net), or 5.1% of our home heating oil and propane customer base, during the prior year?s comparable period.
- 18468902_316Other - OtherWe assess the useful lives of intangible assets based on the estimated period over which we will receive benefit from such intangible assets such as historical evidence regarding customer churn rate.
- 18468902_288Financial - DebtThe update addresses the issues of debt prepayment or debt extinguishment costs, settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing, contingent consideration payments made after a business combination, proceeds from the settlement of insurance claims, proceeds from the settlement of corporate owned life insurance policies, distributions received from equity method investees, beneficial interests in securitization transactions, and separately identifiable cash flows and application of the predominance principle.
- 18468902_44Financial - EarningsOf these hedges, 100% were at their strike price, which reduces our potential for per gallon margin expansion unless the price for home heating oil declines.
- 18468902_76Other - OtherLosses to natural gas in our footprint for the heating oil and propane industry could be greater or less than the Company?s estimates.
- 18468902_111Financial - ExpenseDue to differences in product offerings, marketing plans and operating costs, businesses we acquire through acquisitions may have different home heating oil and propane margins than the base business.
- 18468902_139Financial - ExpenseFor fiscal 2018, depreciation and amortization expense increased by $3.7 million, or 13.2%, to $31.6 million, compared to $27.9 million for fiscal 2017, as increases from acquisitions and accelerated amortization of certain tradenames related to rebranding more than offset the impact of certain assets that became fully amortized.
- 18468902_192Financial - EarningsWe have evaluated our pricing and staffing models for our service offerings in several markets to increase the overall service profitability.
- 18468902_206Financial - IncomeOur effective income tax rate was 43.1% for fiscal 2017, compared to 42.9% for fiscal 2016.
- 18468902_42Revenue - ProductIn addition, should actual usage in any month be less than the hedged volume, our hedging costs and losses could be greater, thus reducing expected margins.
- 18468902_160Financial - EarningsFor fiscal 2018, net income increased $28.6 million, or 106.3%, to $55.5 million, primarily 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 $7.0 million net gain from the sale of customer assets (our security business), and a decrease in the Company?s effective tax rate described above.
- 18468902_12Revenue - ProductVolatility, which is reflected in the wholesale price of home heating oil, has a larger impact on our business when prices rise, as consumer price sensitivity to heating costs increases, often leading to increased gross customer losses.
- 18468902_198Financial - ExpenseFor fiscal 2017, depreciation and amortization expense increased by $1.4 million, or 5.1%, to $27.9 million, compared to $26.5 million for fiscal 2016 as a result of accelerated amortization of certain tradenames related to rebranding.
- 18468902_220Other - OtherFiscal 2016 was 17.8 % warmer than normal and as a result, customers on a budget payment plan built up a credit balance as payments exceeded actual deliveries.
- 18468902_56Other - OtherGross customer losses are the result of a number of factors, including price competition, move-outs, credit losses, conversion to natural gas and service disruptions.
- 18468902_260Financial - DebtLong-term contractual obligations, except for our long-term debt and New England Teamsters and Trucking Industry Pension Fund withdrawal obligations, are not recorded in our consolidated balance sheet.
- 18468902_257Financial - ExpenseIn addition to inflationary pressures on operating expenses and the additional expenses associated with the six acquisitions completed in fiscal 2018, the Company anticipates an estimated increase in operating expenses of $3.0 to $4.0 million in fiscal 2019 over 2018 to fund our concierge service.
- 18468902_104Revenue - ProductService sales increased by $11.9 million, of which, $5.8 million was related to acquisitions.
- 18468902_126Financial - ExpenseFor fiscal 2018, delivery and branch expenses increased $51.1 million, or 16.7%, to $357.6 million, compared to $306.5 million for fiscal 2017, due to additional costs from acquisitions of $18.2 million, as well as a $31.0 million, or 10.1% expense increase in the base business, and a $1.9 million charge related to an amount due under our weather hedge contract, as temperatures were slightly colder than the Payment Threshold.
- 18468902_208Revenue - ProductFor fiscal 2017, Adjusted EBITDA decreased by $14.7 million, or 15.4%, to $81.0 million as the impact of higher home heating oil and propane volume sold and slightly higher home heating oil and propane margins were more than offset by the absence of a $12.5 million credit as was recorded in the first quarter of 2016 under our weather hedge contract, lower services and installations gross profit, additional staffing expenses in the areas of information technology, customer service, operations management, human resources and sales and marketing and other expense increases.
- 18468902_199Financial - ExpenseFor fiscal 2017, general and administrative expenses increased $1.6 million, to $25.0 million, from $23.4 million for fiscal 2016, primarily due to higher legal and professional expense of $0.9 million and increased staffing of $0.6 million primarily in the human resource area.
- 18468902_227Revenue - GeographyDuring fiscal 2017, cash provided by operating activities decreased by $80.9 million to $21.1 million, when compared to $102.0 million of cash provided by operating activities during fiscal 2016, due to an unfavorable change in cash relating to accounts receivable of $60.4 million (including customer credit balances) and an increase in the cash used to purchase inventory of $20.6 million.
- 18468902_161Other - OtherFor fiscal 2018, Adjusted EBITDA increased by $5.2 million, or 6.4%, to $86.2 million.
- 18468902_149MA - OtherThe increase in average borrowings of $53.1 million was used to fund higher working capital needs, acquisitions and an investment into our captive insurance company.
- 18468902_256MA - OtherWe also intend to continue to repurchase Common Units pursuant to our unit repurchase plan and seek attractive acquisition opportunities within the Availability constraints of our Credit Agreement and funding resources.
- 18468902_284Other - OtherThe update broadens the information that an entity should consider in developing expected credit loss estimates, eliminates the probable initial recognition threshold, and allows for the immediate recognition of the full amount of expected credit losses.
- 18468902_96Revenue - ProductFor fiscal 2018, retail volume of home heating oil and propane sold increased by 40.3 million gallons, or 12.7%, to 357.2 million gallons, compared to 316.9 million gallons for fiscal 2017.
- 18468902_171Revenue - ProductFor fiscal 2017, retail volume of home heating oil and propane sold increased by 14.4 million gallons, or 4.8%, to 316.9 million gallons, compared to 302.5 million gallons for fiscal 2016.
- 18468902_276Other - OtherThis new guidance is effective for our annual reporting period beginning in the first quarter of fiscal 2020, with early adoption permitted.
- 18468902_285Other - OtherThis new guidance is effective for our annual reporting period beginning in the first quarter of fiscal 2021, with early adoption permitted in the first quarter of fiscal 2020.
- 18468902_289Other - OtherThis new guidance is effective for our annual reporting period beginning in the first quarter of fiscal 2019, with early adoption permitted.
- 18468902_293Other - OtherThis new guidance is effective for our annual reporting period beginning in the first quarter of fiscal 2019, with early adoption permitted.
- 18468902_298Other - OtherThis new guidance is effective for our annual reporting period beginning in the first quarter of fiscal 2021, with early adoption permitted.
- 18468902_301Other - OtherThe new guidance is effective for our annual reporting period beginning in the first quarter of fiscal 2021, with early adoption permitted.
- 18468902_304Other - OtherThe new guidance is effective for our annual reporting period beginning in the first quarter of fiscal 2022, with early adoption permitted.
- 18468902_131Financial - ExpenseWe estimate that the extremely cold weather conditions in January 2018 resulted in unanticipated expenses of $2.8 million and the increase in volume sold in the base business resulted in higher costs of $2.6 million.
- 18468902_103Revenue - ProductInstallation sales increased by $3.1 million primarily due to acquisitions.
- 18468902_67Other - OtherThe net customer attrition rate improved by 3.6%.
- 18468902_223Other - OtherAt the end of fiscal 2017, the Company increased its liquid product inventory to take advantage of market conditions.
- 18468902_62Revenue - ProductThe wholesale cost of home heating oil increased by $0.4667 per gallon year-over-year, putting additional price pressure on retaining our customer base and attracting new customers as price protected customers renewed their plan, after the heating season, product cost rose by $0.5817 per gallon.
- 18468902_120Revenue - ProductThis extremely cold weather resulted in significantly higher demand for service and additional hours worked at premium labor rates.
- 18468902_186Financial - ExpenseTotal installation costs for fiscal 2017 increased by $2.8 million, or 3.7%, to $78.7 million, compared to $75.9 million in installation costs for fiscal 2016, largely due to higher air conditioning installations, sales growth in other services and acquisitions.
- 18468902_15Revenue - ProductThe volatility in the wholesale cost of home heating oil, as measured by the New York Mercantile Exchange ("NYMEX"), for the fiscal years ending September 30, 2014, through 2018, on a quarterly basis, is illustrated in the following chart (price per gallon): On November 30, 2018, the NYMEX ultra low sulfur diesel contract closed at $1.85 per gallon or $0.20 per gallon lower than the average of $2.05 in Fiscal 2018.
- 18468902_48Financial - EarningsTherefore, we experience volatility in earnings as outstanding derivative instruments are marked to market and non-cash gains and losses are recorded prior to the sale of the commodity to the customer.
- 18468902_73Financial - EarningsWe believe that the modest increase in gross customer gains during the second, third and fourth quarters of fiscal 2017 can be in part attributable to competitive margin management and marketing incentives and that the lower level of gross customer losses reflect the impact of increased expenditures in the customer experience area and our focus on customer satisfaction and retention efforts.
- 18468902_205Financial - IncomeFor fiscal 2017, income tax expense decreased by $13.4 million to $20.4 million, from $33.7 million for fiscal 2016, primarily due to a decrease in income before income taxes of $31.4 million.
- 18468902_153Other - OtherDuring fiscal 2018, we sold our security business to a national dealer and recorded a gain of $7.0 million.
- 18468902_225Financial - ExpenseAs a result of these changes in quantities on hand as well as increases in per gallon product costs, a $14.8 million positive change in cash was provided.
- 18468902_50Financial - ExpenseHowever, we ultimately expect those gains and losses to be offset by the cost of product when purchased.
- 18468902_10Financial - DebtWe may also incur higher bad debt expense and credit card processing costs as a result of higher selling prices as well as higher vehicle fuel costs due to the increase in energy costs.
- 18468902_70Other - OtherDuring the second and third quarters of fiscal 2017, net customer attrition improved by 4,400 compared to the prior year period.
- 18468902_318Other - OtherAt September 30, 2018, we had $98.4 million of net intangible assets subject to amortization.
- 18468902_325Other - OtherIntangible assets with finite lives must be assessed for impairment whenever changes in circumstances indicate that the assets may be impaired.
- 18468902_6Other - OtherAll subsequent written and oral forward-looking statements attributable to Star or persons acting on its behalf are expressly qualified in their entirety by the Cautionary Statements.
- 18468902_275Revenue - GeographyThe update requires all leases with a term greater than twelve months to be recognized on the balance sheet by calculating the discounted present value of such leases and accounting for them through a right-of-use asset and an offsetting lease liability, and the disclosure of key information pertaining to leasing arrangements.
- 18468902_21Financial - Cash FlowBook versus Tax Deductions The amount of cash flow that we generate in any given year depends upon a variety of factors including the amount of cash income taxes that we are required to pay, which will increase as tax depreciation and amortization decreases.
- 18468902_65Other - OtherIn addition, higher prices also drove up customer account balances resulting in higher credit-related losses.
- 18468902_130Revenue - ProductCertain 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.
- 18468902_165Revenue - ProductCertain 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.
- 18468902_158Other - OtherThe Company?s effective tax rate declined from 43.1% to 12.0%.
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- Form Type: Annual
- Number of times amended: 0
- Accession Number: 0001564590-18-030539
- Submitted to the SEC: Thursday, December 6, 2018 7:22:10 AM EST
- Accepted by the SEC: Thursday, December 6, 2018
- Fiscal Year ending: September 2018
- Industry: Retail Stores
Positive and negative sentiment analysis is available in these filings:
STAR GROUP, L.P.
Intrinsic Value, Financial Stability and Ratios