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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934
Date of report (Date of earliest event reported) October 25, 2000
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STAR GAS PARTNERS, L.P.
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(Exact name of registrant as specified in its charter)
Delaware 33-98490 06-1437793
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(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
2187 Atlantic Street, Stamford, CT 06902
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (203) 328-7300
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Not Applicable
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(Former name or former address, if changed since last report.)
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Item 5. Other Events
Star Gas Partners, L.P. a Delaware partnership (the "Reporting Person") is
filing pursuant to this Form 8-K the following historical press release: Star
Gas Partners, L.P. Reports Significant EBITDA Improvement in Fiscal 2000 Third
Quarter Declares Common Unit Distribution and Announces Commencement of Senior
Subordinated Unit Distribution (Released July 25, 2000).
JULY 25, 2000 PRESS RELEASE
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STAR GAS PARTNERS, L.P. REPORTS SIGNIFICANT EBITDA
IMPROVEMENT IN FISCAL 2000 THIRD QUARTER
DECLARES COMMON UNIT DISTRIBUTION AND ANNOUNCES
COMMENCEMENT OF SENIOR SUBORDINATED UNIT DISTRIBUTION
STAMFORD, CT (July 25, 2000) -- Star Gas Partners, L.P. ("Star") (NYSE: SGU,
SGH), a diversified home energy distributor and services provider - specializing
in heating oil, propane, electricity and natural gas, today reported results for
the quarter and nine months ended June 30, 2000, and declared its regular
quarterly distribution of $.575 per unit on its Common units (SGU). Star also
announced that, based on its results in fiscal year 2000, it would commence
quarterly distributions on its Senior Subordinated Units (SGH) at an initial
rate of $.25 cents per unit. The distributions on both the Common and Senior
Subordinated Units will be payable on August 15, 2000 to Unitholders of record
on August 4, 2000.
For the nine months ended June 30, 2000, on a Pro Forma basis, including the
acquisition of Petroleum Heat and Power Co., Inc. ("Petro") in both the nine
months ended June 30, 1999 and 2000, Star's fiscal 2000 EBITDA increased
approximately 13% to $86.5 million, versus $76.2 million in the year-ago period.
For this same nine-month period, net income increased $.11 per unit to $2.13 per
unit, compared to $2.02 for the first nine months of fiscal 1999. These results
were achieved despite temperatures that were approximately 10% warmer than
normal and reflect a series of initiatives, undertaken over the last few years
that have resulted in significant improvements at both the propane and heating
oil divisions, and the contribution made by the recent investment in Total Gas &
Electric (TG&E), a leading marketer of deregulated natural gas and electricity.
The propane division's EBITDA increased 13%, primarily due to the division's
disciplined acquisition program, which increased volume approximately 14%,
internal growth, and a 2.4
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cents per gallon improvement in gross profit margins. Also contributing to this
EBITDA increase was higher profitability from the sale of appliances and other
services. The heating oil division's EBITDA also rose approximately 13%. This
increase resulted from Petro's ability to a) improve its gross profit margins
despite higher wholesale costs; b) generate increased profits from the sale of
additional rationally related products; and c) the contribution from ten
acquisitions made subsequent to October 1, 1999.
TG&E, in which the Partnership purchased a 72.7% controlling interest in April
2000, achieved EBITDA of approximately $300,000 for the nine months ended June
30, 2000. Since the Partnership did not own TG&E in fiscal 1999, no EBITDA
contribution was reflected for that Company in Star's fiscal 1999 three quarters
results.
Star's EBITDA for the three months ended June 30, 2000 improved 48% compared to
the year-earlier period, as the Partnership reduced its non-heating seasonal
EBITDA loss to $5.1 million in the fiscal 2000 third quarter, versus $9.8
million in the comparable fiscal 1999 period. In addition, Star's net loss for
the fiscal third quarter, excluding a one-time deferred tax benefit experienced
in 1999, improved 30 cents per unit, to a seasonal loss of $1.15 per unit,
compared to a loss of $1.45 per unit in the year-ago three-month period.
These results are attributable to the strong operating structure, active
acquisition program and new initiatives at both the propane and heating oil
divisions, as well as TG&E's contribution. The propane division transformed a
--
fiscal 1999 third quarter seasonal $1.4 million EBITDA loss into a slight profit
in the fiscal 2000 third quarter. This improvement was due to a 21% volume
increase, largely attributable to the Partnership's acquisition program, as well
as a 2.4c per gallon increase in gross profit margins in spite of exceptionally
high propane costs. Increased profitability in the sale of appliance and other
rationally related services, and a decline in operating expenses at the propane
division's historic operations also contributed to this earnings performance.
Star's heating oil division EBITDA improved 35% year-over-year, as the division
reduced its non-heating season EBITDA loss to $5.4 million in the fiscal 2000
third quarter, versus $8.3 million in the comparable fiscal 1999 period. This
was due to increased volume, improved gross profit margins as well as increased
profits from the sale of additional rationally related products and services,
primarily air conditioning. The division's improved operating procedures enabled
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it to improve its gross profit margins, despite significantly higher energy
costs, without impacting its account base. In fact, for the second consecutive
quarter the division's customer base, excluding acquisitions, grew in contrast
to its historic attrition rates.
In commenting on Star's strong financial performance, Chairman Irik P. Sevin,
noted: "This past quarter was one of the best in Star's history, indicative of
our performance when we are not impacted by unusually dry or warm weather
conditions. Not only were the period's financial results gratifying, but of
equal importance, were the following:
1) We have begun to see some meaningful results from our effort to
capitalize upon Star's close, service-based relationship with its
600,000 customers. Our hard-working 800 technician service force is
allowing us to successfully market additional rationally related
products and services to Star's account base. The propane division's
water conditioning sale efforts are achieving solid results, and
Petro's initial air conditioning marketing efforts suggest the
possibility of a larger opportunity than originally contemplated;
2) Star's acquisition program continues to be very active. For the nine
months ended June 30, 2000, the Partnership purchased eleven
companies, adding 40,000 new customers and 31 million gallons of
annual volume. In the fiscal 2000 third quarter alone, five
acquisitions were closed, accounting for 17,000 customers and 14
million gallons of annual volume;
3) Total Gas and Electric is growing slightly faster than expected, and
is being integrated into Star's operating format. In addition, cross
marketing initiatives between TG&E and Star's propane and heating oil
divisions have commenced;
4) By focusing on operating excellence and customer sensitivity, we were
able to manage our gross profit margins without impacting our account
base this past year. It was especially pleasing to see the second
consecutive quarter of customer growth, compared to the 4% - 5%
attrition experienced a few years ago;
5) The Partnership's Common units had a 1.1x distributable cash flow
coverage for the latest twelve months ended June 30, 2000. We are very
excited that these
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financial results and our operating performance gave us the comfort to
commence Senior Subordinated Unit distributions at an initial annual
rate of $1.00/unit. Please note that this rate is based on fiscal year
2000 results, not including the impact of acquisitions made this year
which will be fully reflected for the first time in, and taken into
account in determining, 2001 distributions. Holders of those units
have been very patient and we are pleased that Star is in a position
to start making these payments; and
6) The Partnership instituted a long-term management incentive plan,
involving the issuance of Senior Subordinated Units to 27 management
members based on the future growth in the Partnership's Distributable
Cash Flow.
Star Gas Partners, L.P., is a leading distributor of home heating oil, propane
and deregulated natural gas and electricity. Through its wholly owned Petro
subsidiary, Star is the nation's largest retail distributor of home heating oil,
serving approximately 350,000 customers in the Northeast and Mid-Atlantic. Star
is the nation's seventh largest retail propane distributor, serving
approximately 195,000 customers throughout the Midwest and Northeast. Star owns
a controlling 72.7% interest in Total Gas and Electric, which sells natural gas
and electricity to approximately 80,000 customers in the Northeast and Mid
Atlantic.
This news announcement contains certain forward-looking information that is
subject to certain risks and uncertainties as indicated from time to time in the
Partnership's 10-K, 10-Q, 8-K and other filings with the Securities and Exchange
Commission. Included risks and uncertainties are the effects of the weather on
the Partnership's financial results, competitive and propane and heating oil
pricing pressures and other factors impacting the propane, home heating oil,
natural gas and electricity distribution industries.
(financial tables follow)
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STAR GAS PARTNERS, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands) (unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
June 30,
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2000 1999 1999
Actual Actual Pro Forma/(b)/
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<S> <C> <C> <C>
Sales $638,744 $161,430 $455,514
Costs and expenses:
Cost of sales 416,924 85,122 255,091
Operating expenses 135,336 61,673 124,181
TG & E customer acquisition expense 932 - -
Depreciation and amortization 25,447 14,489 25,260
Unit compensation expense 599 - -
Net gain (loss) on sales of assets 56 (96) (76)
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Operating income 59,562 50 50,906
Interest expense, net 19,981 9,760 16,946
Amortization of debt discount 398 218 339
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Income (loss) before income taxes and
minority interest 39,183 (9,928) 33,621
Minority interest in net loss of TG & E 251 - -
Income tax expense (benefit) 373 (5,324) 544
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Net income (loss) $ 39,061 $ (4,604) $ 33,077
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General Partners' interest in net income (loss) $ 691 $ (92) $ 661
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Limited Partners' interest in net income (loss) $ 38,370 $ (4,512) $ 32,416
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Basic and diluted net income (loss) per
Limited partner unit $ 2.13 $ (0.46) $ 2.02
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Weighted average number of
Limited Partner units outstanding 18,056 9,717 16,074
Supplementary Data:
Retail propane gallons sold 91,088 84,924 84,924
Home heating oil gallons sold 319,126 51,860 316,928
Distributable Cash Flow:
EBITDA (a) $ 86,484 $ 14,635 $ 76,242
Less Interest expense, net (19,981) (9,760) (16,946)
Maintenance capital expenditures (2,462) (2,482) (3,596)
Income taxes (373) (44) (544)
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</TABLE>
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<TABLE>
<S> <C> <C> <C>
Distributable Cash Flow $ 63,668 $ 2,349 $ 55,156
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</TABLE>
(a) EBITDA is defined as operating income (loss) plus depreciation and
amortization, TG & E customer acquisition expense and Unit Compensation
Expense, 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.
(b) Pro forma for the effects of the acquisition of Petroleum Heat and Power
Co., Inc. on March 26, 1999 and the issue of an additional 9.5 million
common shares, including the partial exercise of the over-allotment option.
For a complete description of this transaction, see page 31 of the
partnership's prospectus as filed on March 23, 1999 with the Securities and
Exchange Commission.
(more)
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STAR GAS PARTNERS, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended
June 30
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2000 1999
Actual Actual
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<S> <C> <C>
Sales $130,163 $ 79,092
Costs and expenses:
Cost of sales 94,756 52,663
Operating expenses 40,483 36,192
TG & E customer acquisition expense 932 -
Depreciation and amortization 8,847 8,458
Unit compensation expense 599 -
Net gain (loss) on sales of assets 6 (5)
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Operating income (loss) (15,448) (18,226)
Interest expense, net 6,608 5,221
Amortization of debt discount 141 128
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Income (loss) before income taxes and minority interest (22,197) (23,575)
Minority interest in net loss of TG & E 251 -
Income tax expense (benefit) 45 (5,362)
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Net income (loss) $(21,991) $(18,213)
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General Partners' interest in net income (loss) $ (374) $ (364)
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Limited Partners' interest in net income (loss) $(21,617) $(17,849)
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Basic and diluted net income (loss) per
limited partner unit $ (1.15) $ (1.11)
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Weighted average number of
Limited Partner units outstanding 18,872 16,011
Supplementary Data:
Retail propane gallons sold 15,908 13,103
Home heating oil gallons sold 49,451 43,826
Distributable Cash Flow:
EBITDA (a) $ (5,076) $ (9,763)
Less Interest expense, net (6,608) (5,221)
Maintenance capital expenditures (950) (1,625)
Income taxes (45) (6)
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Distributable Cash Flow $(12,679) $(16,615)
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</TABLE>
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(a) EBITDA is defined as operating income (loss) plus depreciation and
amortization, TG & E customer acquisition expense and Unit Compensation
Expense, 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.
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Star Gas Partners, L.P.
By: Star Gas LLC (General Partner)
SIGNATURE TITLE DATE
/s/ Irik P. Sevin Chairman of the Board and October 25, 2000
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Irik P. Sevin Chief Executive Officer
Star Gas LLC
(Principal Executive Officer)
