<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
-------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to _________
Commission File Number: 0-27300
--------
STAR GAS PARTNERS, L.P.
-----------------------
(Exact name of registrant as specified in its charter)
Delaware 06-1437793
- -------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2187 Atlantic Street, Stamford, Connecticut 06902
- -------------------------------------------------
(Address of principal executive office) (Zip Code)
(203) 328-7300
- -------------------------------------------------
(Registrant's telephone number, including area code)
- -------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the Registrant
was required to file such reports), and (2) had been subject to such filing
requirements for the past 90 days.
Yes X No __
---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of August 6, 1996:
Star Gas Partners, L.P. 2,875,000 Common Units
2,396,078 Subordinated Units
This Report contains a total of 27 pages.
<PAGE>
STAR GAS PARTNERS, L.P. AND SUBSIDIARY
INDEX TO FORM 10-Q
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Part 1 Financial Information:
Item 1 - Financial Statements
Star Gas Partners, L.P. and the Star Gas Group (Predecessor)
------------------------------------------------------------
Condensed Consolidated Balance Sheets as of
June 30, 1996 and September 30, 1995 (Predecessor) 3
Condensed Consolidated Statements of Operations
for the three months ended June 30, 1996 and
June 30, 1995 (Predecessor) 4
Condensed Consolidated Statements of Operations
from October 1 through December 20, 1995 (Predecessor)
and from December 20, 1995 through June 30, 1996 and
October 1, 1994 - June 30, 1995 (Predecessor) 5
Condensed Consolidated Statements of Cash Flows from
October 1 through December 20, 1995 (Predecessor)
and from December 20 through June 30, 1996 and
October 1, 1994 - June 30, 1995 (Predecessor) 6
Condensed Consolidated Statement of Partners' Capital
from December 20, 1995 through June 30, 1996 7
Notes to Condensed Consolidated Financial Statements 8 - 18
Item 2 - Management's Discussion and Analysis of Financial
Conditions and Results of Operations 19 - 25
Part 2 Other Information:
Item 6 - Exhibits and Reports on Form 8-K 26
Signature 27
</TABLE>
2
<PAGE>
STAR GAS PARTNERS, L.P. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
June 30, September 30,
1996 1995
(unaudited) (Predecessor)
----------- --------------
<S> <C> <C>
Assets:
Current assets:
Cash $ 10,335 $ 727
Receivables, net of allowance of $320
and $362, respectively 6,190 6,436
Inventories 2,993 6,154
Prepaid expenses and other current 1,176 949
assets -------- --------
Total current assets 20,694 14,266
-------- --------
Property and equipment 108,989 103,879
Less accumulated depreciation (11,036) (5,192)
-------- --------
97,953 98,687
Intangibles, net of accumulated
amortization of $5,800 and $3,267, 41,561 42,440
respectively and other assets -------- --------
Total assets $160,208 $155,393
======== ========
Liabilities and Partners' Capital/Predecessor Equity
Current liabilities:
Current debt $ - $ 748
Accounts payable 1,961 2,824
Accrued interest 2,058 20
Other accrued expenses 2,504 2,980
Dividends payable - 4,875
Customer credit balances - 3,305
-------- --------
Total current liabilities 6,523 14,752
-------- --------
Long-term debt 85,000 1,389
Due to Petro - 86,002
Other long-term liabilities 252 320
Cumulative redeemable preferred stock - 8,625
Predecessor Equity - 44,305
Partners' Capital:
Common unitholders 56,544 -
Subordinated unitholder 11,582 -
General partner 307 -
-------- --------
Total Partners'
Capital/Predecessor Equity 68,433 44,305
-------- --------
Total Liabilities and Partners'
Capital/Predecessor Equity $160,208 $155,393
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE>
STAR GAS PARTNERS, L.P. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per unit amounts)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended
------------------------
June 30,
June 30, 1995
1996 (Predecessor)
--------- -------------
<S> <C> <C>
Sales $18,416 $16,718
Cost of sales 8,483 7,666
------- -------
Gross profit 9,933 9,052
Delivery and branch 7,768 7,699
Depreciation and amortization 2,546 2,354
General and administrative 2,005 1,719
Net gain (loss) on sales of assets (29) -
------- -------
Operating loss (2,415) (2,720)
Interest expense (net) 1,614 2,155
------- -------
Loss before income taxes (4,029) (4,875)
Income tax expense 17 35
------- -------
Net loss $(4,046) $(4,910)
======= =======
General Partner's interest
in net loss $ (81)
-------
Limited Partners' interest
in net loss $(3,965)
=======
Net loss per Limited Partner unit $ (0.75)
=======
Weighted average number of Limited
Partner units outstanding 5,271
=======
</TABLE>
See accompanying notes to condensed consolidated financial statements
4
<PAGE>
STAR GAS PARTNERS, L.P. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per unit amounts)
(unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
----------------------------------
October 1, 1995 October 1, 1995 October 1, 1994
through December 20, 1995 through through
December 20, 1995 through June 30, 1996 June 30, 1995
(Predecessor) June 30, 1996 (Combined) (Predecessor)
------------------ ------------------ ---------------- ----------------
<S> <C> <C> <C> <C>
Sales $28,159 $71,971 $100,130 $87,389
Cost of sales 12,808 36,061 48,869 41,599
------- ------- -------- -------
Gross profit 15,351 35,910 51,261 45,790
Delivery and branch 7,729 18,759 26,488 26,957
Depreciation and amortization 2,177 5,285 7,462 7,557
General and administrative 1,349 3,543 4,892 4,514
Net gain (loss) on sales
of assets (113) (52) (165) (584)
------- ------- -------- -------
Operating income 3,983 8,271 12,254 6,178
Interest expense (net) 1,922 3,569 5,491 6,415
------- ------- -------- -------
Income (loss) before income
taxes 2,061 4,702 6,763 (237)
Income tax expense 60 33 93 140
------- ------- -------- -------
Net income (loss) $ 2,001 $ 4,669 $ 6,670 $ (377)
======= ======= ======== =======
General Partner's interest
in net income $ 93
-------
Limited Partners' interest
in net income $ 4,576
=======
Net income per Limited Partner unit $0.87
=======
Weighted average number of Limited Partner
units outstanding 5,271
=======
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
<PAGE>
STAR GAS PARTNERS, L.P. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
October 1, 1995 October 1, 1995 October 1, 1994
through December 20, 1995 through through
December 20, 1995 through June 30, 1996 June 30, 1995
(Predecessor) June 30, 1996 (Combined) (Predecessor)
------------------ ------------------ ---------------- ----------------
Operating activities:
<S> <C> <C> <C> <C>
Net income (loss) $ 2,001 $ 4,669 $ 6,670 $ (377)
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Depreciation and amortization 2,177 5,285 7,462 7,557
Provision for losses on
accounts receivable 101 245 346 421
Loss on sales of assets 113 52 165 572
Changes in operating assets
and liabilities:
Decrease (increase) in receivables (2,779) 2,878 99 1,740
Decrease in inventories 1,430 1,733 3,163 251
Decrease (increase) in prepaid and
other assets (455) 400 (55) 596
Increase (decrease) in accounts
payable 10 (873) (863) (354)
Increase (decrease) in other
current liabilities (1,713) 1,206 (507) (4,086)
Decrease in other long-term
liabilities (12) (56) (68) (60)
-------- -------- -------- --------
Net cash provided by operating
activities 873 15,539 16,412 6,260
-------- -------- -------- --------
Investing activities:
Capital expenditures (1,617) (2,315) (3,932) (6,129)
Purchase of company - (1,527) (1,527) (3,607)
Proceeds from sales of fixed assets 566 130 696 228
Proceeds from sale of business - - - 13,250
-------- -------- -------- --------
Net cash provided by (used in)
investing activities (1,051) (3,712) (4,763) 3,742
-------- -------- -------- --------
Financing activities:
Net repayments under revolving
credit facility - - - (2,300)
Borrowings(repayments) of debt to (31,425) (54,577) (86,002) 782
Petro
Repayments of preferred stock - - - (5,091)
Dividends to Petro (25,538) - (25,538) -
Minimum Quarterly Distribution - (3,348) (3,348) (252)
Loan to Petro (12,000) - (12,000) -
Proceeds from debt placement 85,000 - 85,000 -
Proceeds from offering - 63,306 63,306 -
Repayment of preferred stock to Petro (8,625) - (8,625) -
Debt placement and credit agreement
expenses (1,412) (814) (2,226) -
Expenses of offering - (6,578) (6,578) -
Repayment of other debt (30) - (30) (4,443)
Cash retained by general partner (6,000) - (6,000) -
-------- -------- -------- --------
Net cash used in
financing activities (30) (2,011) (2,041) (11,304)
-------- -------- -------- --------
Net increase (decrease) in cash (208) 9,816 9,608 (1,302)
Cash at beginning of period 727 519 727 1,825
-------- -------- -------- --------
Cash at end of period $ 519 $ 10,335 $ 10,335 $ 523
======== ======== ======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
6
<PAGE>
STAR GAS PARTNERS, L.P. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENT OF PARTNERS' CAPITAL
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
Number of units Total
----------------------------- General Partners'
Common Subordinated Common Subordinated Partner Capital
--------------- ------------ -------- ------------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
Balance December 20, 1995 - - - - - -
Contribution of net assets
from Predecessor - 2,396 $ - $10,956 $225 $11,181
Issuance of Common Units, net 2,875 - 55,875 - 56 55,931
Minimum Quarterly Distribution (1,790) (1,491) (67) (3,348)
Net income - - 2,459 2,117 93 4,669
--------------- ------------ ------- ------- ---- -------
Balance June 30, 1996 2,875 2,396 $56,544 $11,582 $307 $68,433
=============== ============ ======= ======= ==== =======
</TABLE>
See accompanying notes to condensed consolidated financial statements.
7
<PAGE>
STAR GAS PARTNERS, L.P. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED JUNE 30, 1996 AND 1995
1) Partnership Organization and Formation
Star Gas Partners, L.P. ("Star Gas Partners") was formed on October 16,
1995, as a Delaware limited partnership. Star Gas Partners and its
subsidiary, Star Gas Propane, L.P., a Delaware limited partnership, (the
"Operating Partnership") were formed to acquire, own and operate
substantially all of the propane operations and assets and liabilities of
Star Gas Corporation ("Star Gas"), a Delaware corporation (and the general
partner of Star Gas Partners and the Operating Partnership) and the propane
operations and assets and liabilities of Star Gas' parent corporation,
Petroleum Heat and Power Co., Inc., a Minnesota corporation ("Petro"),
(collectively hereinafter referred to as the "Star Gas Group" or the
"Predecessor Company"). The Operating Partnership is, and the Star Gas
Group was, engaged in the marketing and distribution of propane gas and
related appliances to retail and wholesale customers in the United States
located principally in the Midwest and Northeast. On December 20, 1995,
(i) Petro conveyed all of its propane assets and related liabilities to
Star Gas and (ii) Star Gas and its subsidiaries conveyed substantially all
of their assets (other than $83.6 million in cash from the proceeds of the
First Mortgage Notes and certain non-operating assets) to the Operating
Partnership (the "Star Gas Conveyance") in exchange for general and limited
partner interests in the Operating Partnership and the assumption by the
Operating Partnership of substantially all of the liabilities of Star Gas
and its subsidiaries (excluding certain income tax liabilities and certain
other long-term obligations of Star Gas that were assumed by Petro),
including the First Mortgage Notes and approximately $54.6 million in
outstanding Star Gas debt due to Petro. The net book value of the assets
contributed by Star Gas and its subsidiaries to the Operating Partnership
exceeded the liabilities assumed by $10.4 million. Immediately after the
Star Gas Conveyance, Star Gas and its subsidiaries conveyed their limited
partner interests in the Operating Partnership to Star Gas Partners in
exchange for an aggregate of 2.4 million Subordinated Units of limited
partner interest in Star Gas Partners.
Of the $83.6 million in cash retained by the General Partner, $31.5 was
paid to Petro in satisfaction of additional indebtedness, $8.6 million was
used to redeem preferred stock of the General Partner held by Petro, $12.0
million was loaned to Petro, and $6.0 million was retained to be available
to fund the General Partner's additional capital contribution obligation.
The remaining $25.5 million was paid to Petro as dividends.
On December 20, 1995, Star Gas Partners completed its initial public
offering of 2.6 million Common Units, representing Limited Partner
interests, at a price of $22.00 a unit. The net proceeds received of $51.0
million, after deducting underwriting discounts, commissions and expenses
8
<PAGE>
1) Partnership Organization and Formation - Continued
were contributed to the Operating Partnership and used to repay debt due to
Petro which was assumed by the Operating Partnership in the Star Gas
Conveyance.
On January 18, 1996, pursuant to the underwriters' over-allotment option,
Star Gas Partners, L.P. issued an additional 275,000 Common Units at $22.00
per share for $5.6 million, net of underwriting discounts and expenses.
The Partnership will use these proceeds for general corporate purposes.
The General Partner holds a 1.0% general partner interest in Star Gas
Partners and a 1.0101% general partner interest in the Operating
Partnership. Star Gas Partners and the Operating Partnership have no
employees. The General Partner conducts, directs and manages all
activities of Star Gas Partners and the Operating Partnership and is
reimbursed on a monthly basis for all direct and indirect expenses it
incurs on their behalf including the cost of employee wages.
The Condensed Consolidated Financial Statements for the period December
20, 1995 through June 30, 1996 include the accounts of Star Gas Partners,
L.P., the Operating Partnership and its corporate subsidiary, Stellar
Propane Service Corp., collectively referred to herein as (the
"Partnership"). The accompanying Condensed Consolidated Financial
Statements are unaudited and have been prepared in accordance with
generally accepted accounting principles and the rules and regulations of
the Securities and Exchange Commission. They include all adjustments which
the Partnership considers necessary for a fair statement of the results of
the interim periods presented. Such adjustments consisted only of normal
recurring items unless otherwise disclosed. These financial statements
should be read in conjunction with the financial statements and the notes
thereto for the fiscal years ended September 30, 1993, 1994 and 1995
included in the registration statement on Form S-1 (No. 33-98490) of Star
Gas Partners, L.P. filed with the Securities and Exchange Commission in
connection with Star Gas Partners' initial public offering. Due to the
seasonal nature of the Partnership's propane business, the results of
operations for the periods presented are not necessarily indicative of the
results to be expected for a full year.
2) Quarterly Distribution of Available Cash
The Partnership will distribute to its partners, on a quarterly basis,
all of its Available Cash. "Available Cash" generally means, with respect
to any fiscal quarter of the Partnership, all cash on hand at the end of
such quarter, less the amount of cash reserves that are necessary or
appropriate in the reasonable discretion of the General Partner to (i)
provide for the proper conduct of the Partnership's business, (ii) comply
with applicable law or any Partnership debt instrument or other agreement,
or (iii) provide funds for distributions to the Unitholders and the General
Partner during the next four quarters.
9
<PAGE>
2) Quarterly Distribution of Available Cash - Continued
Cash distributions will be characterized as distributions from either
Operating Surplus or Capital Surplus. This distinction affects the amounts
distributed to Unitholders in relation to the General Partner, and under
certain circumstances it determines whether holders of the Subordinated
Units receive any distributions.
Operating Surplus generally refers to (i) the cash balance of the
Partnership on the date the Partnership commences operations, plus $6.0
million, plus all cash receipts of the Partnership, less (ii) all
Partnership operating expenses (including expenses the General Partner
incurred on behalf of the Partnership), debt service payments, maintenance
capital expenditures and reserves established for future debt service and
Partnership operations.
Capital Surplus will generally be generated only by borrowings (other
than for working capital purposes), sales of debt and equity securities and
sales or other dispositions of assets for cash (other than inventory,
accounts receivable and other assets, all as disposed of in the ordinary
course of business).
To avoid the difficulty of trying to determine whether Available Cash
distributed by the Partnership is from Operating Surplus or Capital
Surplus, all Available Cash distributed by the Partnership from any source
will be treated as distributed from Operating Surplus until the sum of all
Available Cash distributed since the commencement of the Partnership equals
the Operating Surplus as of the end of the quarter prior to such
distribution. Any excess Available Cash (irrespective of its source) will
be deemed to be Capital Surplus and distributed accordingly.
If Capital Surplus is distributed in respect of each Common Unit in an
aggregate amount equal to the initial public offering price of the Common
Unit (the "Initial Unit Price"), the distinction between Operating Surplus
and Capital Surplus will cease, and all distributions will be treated as
from Operating Surplus. The General Partner does not expect that there
will be significant distributions from Capital Surplus.
The Subordinated Units are a separate class of interests in the
Partnership, and the rights of holders of such interests to participate in
distributions differ from the rights of the holders of Common Units. For
any given quarter, Available Cash will be distributed to the General
Partner and to the holders of Common Units, and it may also be distributed
to the holders of Subordinated Units, depending upon the amount of
Available Cash for the quarter, amounts distributed in prior quarters,
whether the Subordination Period has ended and other factors discussed
below.
Distribution by the Partnership in an amount equal to 100% of its
Available Cash will generally be made 98% to the Common and Subordinated
Unitholders and 2% to the General Partner, subject to the payment of
incentive distributions in the event Available Cash exceeds the Minimum
10
<PAGE>
2) Quarterly Distribution of Available Cash - Continued
Quarterly Distribution ($0.55) on all Units. To the extent there is
sufficient Available Cash, the holders of Common Units have the right to
receive the Minimum Quarterly Distribution, plus any arrearages, prior to
the distribution of Available Cash to holders of Subordinated Units. Common
Units will not accrue arrearages for any quarter after the end of the
Subordination Period (as defined below) and Subordinated Units will not
accrue any arrearage with respect to distributions for any quarter.
To enhance the Partnership's ability to pay the Minimum Quarterly
Distribution on the Common Units, the General Partner has agreed, subject
to certain limitations, to contribute additional capital to the Partnership
if, and to the extent that, the amount of Available Cash constituting
Operating Surplus (without giving effect to any such additional
contribution) with respect to any quarter is less than the amount necessary
to distribute the Minimum Quarterly Distribution on all outstanding Common
Units for such quarter. As of June 30, 1996, the General Partner's
additional Capital Contribution obligation was $4.5 million.
The Partnership will make distributions to its partners with respect to
each fiscal quarter in an amount equal to all of its Available Cash for
such quarter approximately 45 days after each quarter ending March 31,
June 30, September 30 and December 31. The first distribution commenced
with the quarter ending March 31, 1996 and was paid on May 15, 1996 to
holders of record as of May 1, 1996. The initial distribution was $0.6225
per unit and represented a pro rata distribution of $0.0725 per unit for
the period December 20, 1995 to December 31, 1995 and a quarterly
distribution of $0.55 per unit for the three months ended March 31, 1996.
The distribution for the quarter ending June 30, 1996 of $0.55 will be paid
on August 15, 1996 to holders of record as of August 1, 1996.
3) Distributions from Operating Surplus During Subordination Period
The Subordination Period will generally extend until the first day of any
quarter beginning on or after January 1, 2001 in respect of which (i)
distributions of Available Cash from Operating Surplus on the Common Units
and the Subordinated Units equals or exceeds the sum of the Minimum
Quarterly Distribution on all of the outstanding Common Units and
Subordinated Units with respect to each of the three non-overlapping four-
quarter periods immediately preceding such date, (ii) the Adjusted
Operating Surplus generated during each of the three immediately preceding
non-overlapping four-quarter periods equals or exceeds the sum of the
Minimum Quarterly Distribution on all of the outstanding Common Units and
Subordinated Units during such periods and (iii) there are no arrearages in
payment of the Minimum Quarterly Distribution on the Common Units.
Prior to the end of the Subordination Period, a portion of the
Subordinated Units will convert into Common Units on the first day after
the record date established for any quarter ending on or after March 31,
1999 (with respect to 599,020 of the Subordinated Units) and March 31, 2000
(with respect to an additional 599,020 of the Subordinated Units), on a
cumulative basis, in respect of which (i) distributions of Available
11
<PAGE>
3) Distributions from Operating Surplus During Subordination Period-Continued
Cash from Operating Surplus on the Common Units and the Subordinated Units
equals or exceeds the sum of the Minimum Quarterly Distribution on all of
the outstanding Common Units and Subordinated Units with respect to each of
the three non-overlapping four-quarter periods immediately preceding such
date, (ii) the Adjusted Operating Surplus generated during each of the
three immediately preceding non-overlapping four-quarter periods equals or
exceeds the sum of the Minimum Quarterly Distribution on all of the
outstanding Common Units and Subordinated Units during such periods and
(iii) there are no arrearages in payment of the Minimum Quarterly
Distribution on the Common Units.
4) Long-Term Debt
In December 1995, the General Partner issued $85.0 million of first
mortgage notes (the "First Mortgage Notes") with an annual interest rate of
8.04%. These notes were assumed as part of the Star Gas Conveyance by the
Operating Partnership. The Operating Partnership's obligations under the
First Mortgage Note Agreement are secured, on an equal and ratable basis
with the Operating Partnership's obligations under the Bank Credit
Facilities, by a mortgage on substantially all of the real property and
liens on substantially all of the operating facilities, equipment and other
assets of the Operating Partnership. The First Mortgage Notes will mature
September 15, 2009, and will require semiannual prepayments, without
premium on the principal thereof, beginning on March 15, 2001. Interest is
payable semiannually on March 15 and September 15. For the nine months
ended June 30, 1996 the Partnership paid interest in the amount of $1.7
million.
The First Mortgage Note Agreement contains various restrictive and
affirmative covenants applicable to the Operating Partnership, including
(i) restrictions on the incurrence of additional indebtedness and (ii)
restrictions on certain liens, investments, guarantees, loans, advances,
payments, mergers, consolidations, distributions, sales of assets and other
transactions.
5) Bank Credit Facilities
The Bank Credit Facilities (the "Bank Credit Facilities") consist of a
$25.0 million acquisition facility (the "Acquisition Facility") and a $12.0
million working capital facility (the "Working Capital Facility"). The
Operating Partnership's obligations, under the Bank Credit Facilities, are
secured, on an equal and ratable basis with the Operating Partnership's
obligations under the First Mortgage Notes. The Bank Credit Facilities
will bear interest at a rate based upon either the London Interbank Offered
Rate plus a margin or a Base Rate. This agreement contains covenants
generally similar to those contained in the First Mortgage Notes.
The Working Capital Facility will expire on December 31, 1998. The
Acquisition Facility will revolve until September 30, 1998, after which any
outstanding loans will amortize quarterly in equal principal payments over
a period of 3 1/4 years.
12
<PAGE>
6) Over-allotment Exercise
On January 18, 1996, pursuant to the underwriters' over-allotment option,
Star Gas Partners issued an additional 275,000 Common Units at $22.00 per
share for $5.6 million, net of underwriting discounts and expenses. The
Partnership will use these proceeds for general corporate purposes.
7) Repayment of Additional Debt Due to Petro
In order that the Partnership would commence operations with $6.2 million
of working capital on December 20, 1995, the Conveyance Agreement provided
that the amount of debt due to Petro at closing would be adjusted upwards
or downwards to the extent that the Star Gas Group's net working capital
exceeded or was less than $6.2 million. At closing, net working capital
was $9.7 million and $3.5 million was repaid to Petro on January 18, 1996.
8) Net Income per Limited Partner Unit
Net income per Limited Partner Unit is computed by dividing net income,
after deducting the General Partner's 2.0% interest, by the weighted
average number of Common Units and Subordinated Units outstanding.
9) Commitments and Contingencies
In the ordinary course of business, the Partnership is threatened with,
or is named in, various lawsuits. The Partnership is not a party to any
litigation which individually or in the aggregate could reasonably be
expected to have a material adverse effect on the company.
10) Related Party Transactions
The Partnership has no employees and is managed and controlled by the
General Partner. Pursuant to the Partnership Agreement, the General
Partner is entitled to reimbursement for all direct and indirect expenses
incurred or payments it makes on behalf of the Partnership, and all other
necessary or appropriate expenses allocable to the Partnership or otherwise
reasonably incurred by the General Partner in connection with operating the
Partnership's business. For the period December 20, 1995 through June 30,
1996, the Partnership reimbursed the General Partner approximately $11.5
million representing salary, payroll tax and other compensation paid to the
employees of the General Partner.
In addition, Petro has incurred and was reimbursed for approximately $1.3
million of facility operating costs and management service expenses it
incurred on behalf of the Partnership for the period December 20, 1995
through June 30, 1996. These expenses represent the Partnership's share of
the costs incurred by Petro in conducting the operations of certain shared
branch locations and to provide certain managerial services.
13
<PAGE>
11) Unaudited Pro Forma Financial Information
The accompanying unaudited Pro Forma Condensed Consolidated Statements of
Operations for the three and nine months ended June 30, 1995 and 1996 were
derived from the historical statements of operations of the Star Gas Group,
for the periods October 1, 1994 through June 30, 1995 and October 1, 1995
through December 20, 1995 and the Condensed Consolidated Statement of
Operations of the Partnership from December 20, 1995 through June 30, 1996.
The Pro Forma Condensed Consolidated Statements of Operations were prepared
to reflect the effects of Partnership formation as if it had been completed
in its entirety as of the beginning of the periods presented. However,
these statements do not purport to present the results of operations of the
Partnership had partnership formation actually been completed as of the
beginning of the periods presented. In addition, the Pro Forma Condensed
Consolidated Statements of Operations are not necessarily indicative of the
results of future operations of the Partnership and should be read in
conjunction with the historical Condensed Consolidated Financial Statements
of the Predecessor Company and the Partnership.
14
<PAGE>
11) Unaudited Pro Forma Financial Information - Continued
STAR GAS PARTNERS, L.P. AND SUBSIDIARY
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per unit amounts)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
June 30, June 30,
-------------------- --------------------
1996 1995 1996 1995
--------- --------- ---------- --------
<S> <C> <C> <C> <C>
Sales $18,416 $16,718 $100,130 $85,335
Cost of sales 8,483 7,666 48,869 40,588
------- ------- -------- -------
Gross profit 9,933 9,052 51,261 44,747
Operating expenses 9,773 9,452 31,430 30,256
Depreciation and amortization 2,546 2,354 7,462 7,381
Net gain (loss) on sales of assets (29) - (165) 51
------- ------- -------- -------
Operating income (loss) (2,415) (2,754) 12,204 7,161
Interest expense (net) 1,614 1,614 5,080 5,080
------- ------- -------- -------
Income (loss) before income taxes (4,029) (4,368) 7,124 2,081
Income tax expense 17 17 42 42
------- ------- -------- -------
Net income (loss) $(4,046) $(4,385) $ 7,082 $ 2,039
======= ======= ======== =======
General Partner's interest
in net income (loss) $ (81) $ (88) $ 142 $ 41
------- ------- -------- -------
Limited Partners' interest
in net income (loss) $(3,965) $(4,297) $ 6,940 $ 1,998
======= ======= ======== =======
Net income (loss) per Limited
Partner unit $(0.75) $(0.82) $1.32 $0.38
======= ======= ======== =======
Weighted average number of Limited
Partner units outstanding 5,271 5,271 5,271 5,271
======= ======= ======== =======
Other Data:
EBITDA (A) $ 160 $ (400) $ 19,831 $14,491
Retail propane gallons sold 13,527 12,335 82,532 74,017
</TABLE>
(A) EBITDA is defined as operating income (loss) plus depreciation and
amortization expense and less net gain (loss) on sales of assets. 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.
15
<PAGE>
11) Unaudited Pro Forma Financial Information - Continued
Significant pro forma adjustments reflected in the above data include the
following:
1. For the nine months ended June 30, 1995, the elimination of the results of
the Star Gas Group's propane operations in Southern Georgia from October 1,
1994 - November 16, 1994.
2. For the three and nine months ended June 30, 1995, the elimination of
management fees paid by the Star Gas Group to Petro.
3. For the three and nine months ended June 30, 1995 and the nine months ended
June 30, 1996, the addition of the estimated incremental general and
administrative costs associated with operating as a publicly traded
partnership.
4. For the three and nine months ended June 30, 1995 and the nine months ended
June 30, 1996, an adjustment to interest expense to reflect the repayment
of debt due to Petro and to reflect the interest expense associated with
the First Mortgage Notes and Bank Credit Facility.
5. For the three and nine months ended June 30, 1995 and the nine months ended
June 30, 1996, the elimination of the provision for income taxes, as taxes
on income will be borne by the Partners and not the Partnership, except for
corporate income taxes relative to the Partnership's wholly owned
subsidiary, which will conduct non-qualifying Master Limited Partnership
business.
16
<PAGE>
12) Acquisition
During the nine month period ending June 30, 1996, the Partnership
acquired the assets of one unaffiliated propane dealer. The aggregate
consideration for this acquisition, accounted for by the purchase method,
was approximately $1.5 million. Sales and net income of the acquired
company are included in the Condensed Consolidated Statements of Operations
from the date of acquisition.
Had this acquisition occurred at the beginning of the period, the pro
forma unaudited results of operations for the nine months ended June 30,
1996 would have been as follows:
<TABLE>
<CAPTION>
October 1, 1995 December 20, 1995 October 1, 1995
through through through
December 20, 1995 June 30, 1996 June 30, 1996
----------------- ----------------- ----------------
<S> <C> <C> <C>
Sales $ 28,348 $ 72,211 $ 100,559
========== ========== ===========
Net Income $ 2,014 $ 4,797 $ 6,811
========== ========== ===========
General Partner's interest in net $ 96
income ==========
Limited Partners' interest in net $ 4,701
income ==========
Net income per Limited Partner
unit $ 0.89
==========
Weighted average number of Limited
Partner unit 5,271
==========
</TABLE>
13) Subsequent Event - Acquisition
On July 22, 1996, the Partnership acquired the assets of one unaffiliated
propane dealer. The aggregate consideration for this acquisition,
accounted for by the purchase method, was approximately $0.9 million.
14) Subsequent Event - Retention of Morgan Stanley & Co. Incorporated
On August 1, 1996, the Partnership announced that it has retained Morgan
Stanley & Co., Incorporated to assist it in the development and
consideration of strategic alternatives designed to maximize value for its
unitholders. Alternatives to be investigated may include, but will not be
limited to, the sale or merger of Star Gas.
15) General Partner Financial Statements
The following presents the Condensed Consolidated Balance Sheet as of June
30, 1996 together with the Condensed Consolidated Statement of Operations
of the General Partner, Star Gas Corporation and Subsidiaries, for the
period December 20, 1995 through December 31, 1995 and January 1, 1996
through June 30, 1996.
17
<PAGE>
15) General Partner Financial Statements - Continued
Star Gas Corporation
and Subsidiaries
Condensed Consolidated Balance Sheet
(in thousands)
(unaudited)
<TABLE>
<S> <C>
Assets:
Current assets:
Cash $ 4,632
Due from Petro 3,085
Interest receivable 702
-------
Total current assets 8,419
Note receivable from Petro 12,000
Investment in Partnership 11,889
-------
Total assets $32,308
=======
Liabilities and Shareholders' Equity:
Current liabilities:
Accrued expenses $ 15
Shareholders' equity 32,293
-------
Total liabilities and shareholders' equity $32,308
=======
</TABLE>
Star Gas Corporation
and Subsidiaries
Condensed Consolidated Statement of Operations
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
December 20, 1995 January 1, 1996 December 20, 1995
through through through
December 31, 1995 June 30, 1996 June 30, 1996
----------------- --------------- -----------------
<S> <C> <C> <C>
Revenues:
Reimbursement of employee
expenses from Operating
Partnership $ 883 $ 10,588 $ 11,471
Expenses:
Operating Expenses - 2 2
Cost of employee services 883 10,588 11,471
provided ------- --------- ---------
Operating loss - (2) (2)
Interest income 6 844 850
------- --------- ---------
Income before equity
interest in Star
Gas Partners, L.P. 6 842 848
------- --------- ---------
Share of income of Star
Gas Partners, L.P. 728 1,482 2,210
------- --------- ---------
Net income $ 734 $ 2,324 $ 3,058
======= ========= =========
</TABLE>
18
<PAGE>
STAR GAS PARTNERS, L.P. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS
AND RESULTS OF OPERATIONS
NINE MONTHS ENDED JUNE 30, 1996
- -------------------------------
COMPARED TO NINE MONTHS ENDED JUNE 30, 1995
- -------------------------------------------
Volume
For the nine months ended June 30, 1996, retail propane volume increased 8.7% or
6.6 million gallons to 82.5 million gallons, as compared to 75.9 million gallons
for the nine months ended June 30, 1995. Excluding the divested southern
Georgia operations, which contributed 1.9 million gallons for the nine months
ended June 30, 1995, retail propane increased 11.5% or 8.5 million gallons.
Propane sold to residential and commercial customers increased 18.9% or 10.4
million gallons, due to colder temperatures, acquisitions and internal account
growth. While the residential and commercial market segments were favorably
impacted by the colder temperatures, sales to agricultural customers, who use
propane predominately in the grain drying process, declined by approximately 2.0
million gallons primarily as a result of the unusually dry crop harvest in the
fall of 1995.
Sales
Sales increased 14.6% or $12.7 million, to $100.1 million for the nine months
ended June 30, 1996, as compared to $87.4 million for the nine months ended June
30, 1995. Excluding the results attributable to the southern Georgia
operations, which contributed $2.1 million of sales in the prior year's period,
sales rose $14.8 million due to increased volume and higher retail selling
prices.
Cost of Sales
Cost of sales increased 17.5% or $7.3 million to $48.9 million for the nine
months ended June 30, 1996, as compared to $41.6 million for the nine months
ended June 30, 1995. The divestiture of the southern Georgia operations led to
a $1.0 million reduction in cost of sales, which was offset by an increase of
$8.3 million associated with additional volume sold and higher per gallon
wholesale costs. While the partnership did derive a benefit from the
utilization of its underground storage facility which reduced cost of sales
during the first quarter of the fiscal year, this benefit was offset during the
second quarter by the rapid but temporary spike in wholesale product costs.
19
<PAGE>
Gross Profit
Gross Profit increased 11.9% or $5.5 million, to $51.3 million for the nine
months ended June 30, 1996, as compared to $45.8 million for the nine months
ended June 30, 1995. Adjusting for $1.0 million of gross profit associated with
the divested southern Georgia operations, gross profit increased 14.6% or $6.5
million, as the increase in gross profit provided by the additional volume sold
to higher margin residential and commercial customers more than offset a decline
in gross profit attributable to the rapid rise in wholesale propane costs
experienced during the second quarter of fiscal 1996. Gross profit was also
impacted by a 2.0 million gallon decline in volume sold to lower margin
agricultural customers. In addition, gross profit margins increased due to the
shift in volume towards higher margin residential and commercial customers.
Delivery and Branch Expenses
Delivery and branch expenses declined 1.7% or $0.5 million to $26.5 million for
the nine months ended June 30, 1996 from $27.0 million for nine months ended
June 30, 1995. The divestiture of the southern Georgia operations, which
accounted for a $1.2 million reduction in these expenses was partially offset by
an increase of $0.7 million or 2.8% in the core operations. The increase of $0.7
million in core operations was attributable to the 11.5% increase in volume and
approximately $0.2 million of storm related costs associated with severe winter
weather experienced in the Partnership's Northeast markets. On a per gallon
basis, operating costs in the core operations declined 7.8% due to lower
insurance expense, improved operating efficiencies and economies of scale
achieved in connection with the growth of the Partnership's customer base.
Depreciation and Amortization
Depreciation and amortization expense declined $0.1 million to $7.5 million for
the nine months ended June 30, 1996, as compared to $7.6 million for the nine
months ended June 30, 1995 due to the elimination of depreciation and
amortization expense associated with the divested southern Georgia operations.
General and Administrative Expenses
General and administrative expenses increased approximately $0.4 million to $4.9
million for the nine months ended June 30, 1996, as compared to $4.5 million for
the nine months ended June 30, 1995. This increase was primarily due to $0.4
million of non-recurring expenses associated with certain professionals engaged
by the partnership to assist management in structuring and analyzing two major,
complex acquisition candidates. These acquisitions will not be completed.
Gain (Loss) on Sales of Assets
Loss on sales of assets declined to $0.2 million for the nine months ended June
30, 1996 from $0.6 million for the nine months ended June 30, 1995. During the
nine months ending June 30, 1995, a loss of $0.7 million was recorded in
connection with the sale of the southern Georgia operations.
20
<PAGE>
Interest Expense
Interest expense declined 14.4% or $0.9 million to $5.5 million for the nine
months ended June 30, 1996, as compared to $6.4 million for the nine months
ended June 30, 1995. This reduction was primarily due to a decline in the
weighted average long-term borrowing rate. For further discussions concerning
the Partnership's current debt structure, refer to footnote 4 of the Condensed
Consolidated Financial Statements.
Income Tax Expense
Income tax expense for the nine months ended June 30, 1996 was approximately
$0.1 million. This expense primarily represents certain state income taxes that
the Star Gas Group was required to pay. Subsequent to December 20, 1995, taxes
on income will be borne by the Partners and not the Partnership, except for
income taxes relating to the Partnership's wholly owned corporate subsidiary
which conducts non-qualifying master limited partnership business.
Net Income
Net Income increased $7.0 million to $6.7 million for the nine months ended June
30, 1996. This improvement of $7.0 million was attributable to the 11.5%
increase in retail propane volume, the positive impact of divesting the southern
Georgia operations and lower non-cash expenses, including the loss on sales of
assets.
EBITDA
EBITDA (defined as operating income plus depreciation and amortization less net
gain (loss) of sale of asset) increased $5.6 million or 38.8% to $19.9 million
for the nine months ended June 30, 1996. The improvement in EBITDA was the
result of the increase in volume associated with colder temperatures and growth
in the Partnership's customer base due to both acquisitions and internal
marketing, partially offset by the impact of lower per gallon gross profit
margins experienced during the second quarter of fiscal 1996. For continuing
operations, delivery and branch expenses declined by 7.8% on a per gallon basis
as a result of cost reduction programs implemented over the past two years.
Also contributing to the increase in EBITDA was the divestiture of the southern
Georgia operations, which negatively impacted EBITDA in the prior year by
approximately $0.3 million.
21
<PAGE>
STAR GAS PARTNERS, L.P. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS
AND RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1996
- --------------------------------
COMPARED TO THREE MONTHS ENDED JUNE 30, 1995
- --------------------------------------------
Volume
For the three months ended June 30, 1996, retail propane volume increased 9.7%
or 1.2 million gallons to 13.5 million gallons, as compared to 12.3 million
gallons for the three months ended June 30, 1995. This increase in volume was
attributable to colder temperatures, the impact of acquisitions and internal
account growth.
Sales
Sales increased 10.2% or $1.7 million to $18.4 million for the three months
ended June 30, 1996, as compared to $16.7 million for the three months ended
June 30, 1995. The increase was primarily due to higher volume and higher
retail selling prices. During the three months ended June 30, 1996, selling
prices were increased to fully reflect the Partnership's response to higher per
gallon wholesale propane costs.
Cost of Sales
Cost of sales increased 10.7% or $0.8 million to $8.5 million from $7.7 million
for three months ended June 30, 1995. This increase was attributable to the
additional volume sold and to higher per gallon wholesale propane costs. While
per gallon propane costs for the three months ended June 30, 1996 were greater
than the prior year's comparable quarter, these costs declined from peak levels
experienced during January through March 1996.
Gross Profit
Gross profit increased 9.7% or $0.9 million, to $9.9 million for the three
months ended June 30, 1996, as compared to $9.0 million for the three months
ended June 30, 1995 due to the increase in volume sold and higher retail propane
gross profit margins. During the three months ended June 30, 1996, the increase
in retail selling prices over the prior year's levels exceeded the change in
wholesale propane costs and resulted in a 1.7 cents per gallon increase in
propane margins.
22
<PAGE>
Delivery and Branch Expenses
Delivery and branch expenses increased slightly to $7.8 million for the three
months ended June 30, 1996, approximately $0.1 million more than the $7.7
million of expenses incurred during the three months ended June 30, 1995.
Despite a 9.7% increase in retail propane volume, these expenses increased only
0.9%. On a per gallon basis these expenses declined by 8.0% due to management's
success in negotiating lower insurance expense and the positive effect of
certain expense reduction initiatives undertaken during the current year.
Depreciation and Amortization
Depreciation and amortization expense increased $0.2 million to $2.5 million for
the three months ended June 30, 1996, as compared to $2.4 million for the three
months ended June 30, 1995 primarily due to the impact of three acquisitions
completed since April 1, 1995 and the amortization of certain deferred charges.
General and Administrative Expenses
General and administrative expenses increased $0.3 million to $2.0 million for
the three months ended June 30, 1996. The increase was primarily attributable
to $0.4 million of non-recurring expenses associated with certain professionals
engaged by the partnership to assist management in structuring and analyzing two
major, complex acquisition candidates. These acquisitions will not be
completed.
Net Interest Expense
Interest expense declined 25.1% or $0.5 million to $1.6 million for the three
months ended June 30, 1996, as compared to $2.2 million for the three months
ended June 30, 1995. This reduction was primarily due to a decline in the
weighted average long term borrowing rate and to interest income generated on
higher cash balances. For further discussions concerning the Partnership's
current debt structure, refer to footnote 4 of the Condensed Consolidated
Financial Statements.
Income Tax Expense
Income tax expense for the three months ended June 30, 1996 represents certain
state income taxes related to the Partnership's wholly owned subsidiary which
conducts non-qualifying master limited partnership business.
23
<PAGE>
Net Income
The net loss for the three months ended June 30, 1996, declined 17.6% or $0.9
million to $4.0 million, as compared to a loss of $4.9 million for the three
months ended June 30, 1995. This improvement was attributable to a $0.9 million
increase in gross profit, and a $0.5 million reduction in interest expense which
were partially offset by higher general and administrative expenses, primarily
legal and professional expenses.
EBITDA
EBITDA increased $0.5 million to $0.2 million for the three months ended June
30, 1996. This improvement in EBITDA was the result of increased volume due to
growth in the Partnership's customer base attributable to acquisitions and
internal marketing as well as improved retail propane margins. Delivery and
branch expenses declined by 8.0% on a per gallon basis despite an increase of
9.7% in retail propane volume, as a result of cost reduction programs
implemented over the past two years. The favorable results arising from the
volume growth, margin improvement and expense curtailments were offset to a
certain extent by approximately $0.4 million of non-recurring legal and
professional expenses associated with the review of several large acquisition
candidates. EBITDA should not be considered as an alternative to net income as a
measure 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.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
For the nine months ended June 30, 1996, cash flow provided by operating
activities of $16.4 million consisted of $6.7 million of net income, $7.5
million of non cash charges and other changes in working capital items,
principally a reduction in inventory of $3.2 million. Net cash used in
investing activities was $4.8 million for the nine months ended June 30, 1996.
Proceeds from the sale of fixed assets were used to partially fund the $1.5
million acquisition of a propane distributor and $3.9 million of capital
expenditures, including $2.4 million of growth related capital expenditures.
In December 1995, Star Gas issued $85.0 million of First Mortgage Notes with an
interest rate of 8.04% that provided $83.6 million in cash, net of expenses.
(The liability for these notes was assumed by the Operating Partnership pursuant
to the Conveyance Agreement). Star Gas used the net proceeds from these notes
to repay $40.1 million of debt and preferred stock, pay dividends of $25.5
million, and loan $12.0 million, all to Petro and $6.0 million was retained by
Star Gas to fund the General Partner's additional contribution obligation. (See
Footnote 2.) Also in December 1995, the Partnership sold 2.6 million Common
Units, which provided $51.0 million in cash, net of expenses. The proceeds from
this public offering were used to repay $51.0 million of debt due to Petro. In
January 1996, the Partnership paid to Petro $3.5 million representing additional
indebtedness resulting from the excess of working capital over $6.2 million as
provided in the Conveyance Agreement.
24
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES - Continued
- -------------------------------
Pursuant to an overallotment option, in January 1996 the Partnership sold an
additional 275,000 Common Units at $22.00 per share. The net proceeds, after
deducting the underwriting discount of $0.4 million, was $5.6 million. As a
result of the exercise of the over-allotment option, the General Partner was
required to make an additional capital contribution of $56,000. The Partnership
intends to use these funds for general partnership purposes.
The Partnership plans to make distributions in an amount equal to all of its
Available Cash approximately 45 days after the end of each fiscal quarter ending
March 31, June 30, September 30 and December 31, to holders of record on the
applicable record date. The initial distribution of $0.6225 per unit
represented a pro rata distribution of $0.0725 per unit for the period December
20, 1995 to December 31, 1995 and a quarterly distribution of $0.55 per unit for
the three months ended March 31, 1996 and was paid on May 15, 1996. The
distribution for the quarter ending June 30, 1996 of $0.55 will be paid on
August 15, 1996 to holders of record as of August 1, 1996.
Based on its current cash position, bank credit availability and expected net
cash from operating activities, the Partnership expects to be able to meet all
of its above obligations for fiscal 1996, as well as all of its other current
obligations as they become due. For the remainder of fiscal 1996, the
Partnership anticipates paying interest on the First Mortgage Notes of $3.4
million.
On August 1, 1996, the Partnership announced that it has retained Morgan Stanley
& Co. Incorporated to assist it in the development and consideration of
strategic alternatives designed to maximize value for its unitholders.
Alternatives to be investigated may include, but will not be limited to, the
sale or merger of Star Gas.
25
<PAGE>
PART II: OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
- -----------------------------------------
(a) Exhibits Included Within:
------------------------
(27) Financial Data Schedule
(b) Reports on Form 8-K
-------------------
No reports on Form 8-K have been filed during the quarter for
which this report is filed.
26
<PAGE>
SIGNATURE
---------
Pursuant to the requirements of the Securities Exchange Act of 1934, the Company
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized:
Star Gas Partners, L.P.
By: Star Gas Corporation
(General Partner)
Signature Title Date
- --------- ----- ----
By: /s/ William G. Powers, Jr. President August 7, 1996
----------------------
William G. Powers, Jr. Star Gas Corporation
By:/s/ Richard F. Ambury Vice President - Finance August 7, 1996
-----------------
Richard F. Ambury Star Gas Corporation
27
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM STAR GAS
PARTNERS, L.P. AND SUBSIDIARY CONDENSED CONSOLIDATED BALANCE SHEETS AS OF JUNE
30, 1996 AND CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE INTERIM
PERIOD DECEMBER 20, 1995 THROUGH JUNE 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0001002590
<NAME> STAR GAS PARTNERS, L.P.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> DEC-20-1995
<PERIOD-END> JUN-30-1996
<CASH> 10,335
<SECURITIES> 0
<RECEIVABLES> 6,510
<ALLOWANCES> 320
<INVENTORY> 2,993
<CURRENT-ASSETS> 20,694
<PP&E> 108,989
<DEPRECIATION> 11,036
<TOTAL-ASSETS> 160,208
<CURRENT-LIABILITIES> 6,523
<BONDS> 85,000
0
0
<COMMON> 68,126<F1>
<OTHER-SE> 307<F2>
<TOTAL-LIABILITY-AND-EQUITY> 160,208
<SALES> 69,589
<TOTAL-REVENUES> 71,971
<CGS> 36,061
<TOTAL-COSTS> 21,956
<OTHER-EXPENSES> 5,162
<LOSS-PROVISION> 346
<INTEREST-EXPENSE> 3,744
<INCOME-PRETAX> 4,702
<INCOME-TAX> 33
<INCOME-CONTINUING> 4,669
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,669
<EPS-PRIMARY> 0.87
<EPS-DILUTED> 0.87
<FN>
<F1>COMMON STOCK - IN DECEMBER 1995 STAR GAS PARTNERS, L.P. ISSUED COMMON AND
SUBORDINATED UNITS WHICH REPRESENT LIMITED PARTNER INTERESTS. THESE UNITS ARE
CONSIDERED TO POSSESS THE CHARACTERISTICS OF COMMON STOCK AND ARE BOTH INCLUDED
IN THE DETERMINATION OF EPS.
<F2>OTHER SE - REPRESENTS THE GENERAL PARTNER'S INTEREST IN THE PARTNERSHIP AND IS
CLASSIFIED HERE SINCE IT DOES NOT POSSESS THE RELEVANT CHARACTERISTICS OF
EITHER COMMON OR PREFERRED STOCK.
</FN>
</TABLE>
