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Table of Contents
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, 2002
 
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: 33-98490
 
 
STAR GAS PARTNERS, L.P.
(Exact name of registrant as specified in its charter)
 
Delaware
  
06-1437793
(State or other jurisdiction
of incorporation or organization)
  
(I.R.S. Employer
Identification No.)
 
2187 Atlantic Street, Stamford, Connecticut 06902
(Address of principal executive office)
 
(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 Section 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) has been subject to such filing requirements for the past 90 days.  Yes  x  No  ¨
 
Indicate the number of shares outstanding of each issuer’s classes of common stock, as of July 25, 2002:
 
27,130,446
   
Common Units
  3,134,110
   
Senior Subordinated Units
     345,364
   
Junior Subordinated Units
     325,729
   
General Partner Units

Table of Contents
 
STAR GAS PARTNERS, L.P. AND SUBSIDIARIES
 
INDEX TO FORM 10-Q
 
    
    Page    
Part I    Financial Information
     
Item 1—Condensed Consolidated Financial Statements
     
  
3
  
4
  
5
  
6
  
7
  
8-15
  
16-21
  
22
Part II    Other Information:
     
  
22
  
23

2

Table of Contents
 
STAR GAS PARTNERS, L.P. AND SUBSIDIARIES
 
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
 
    
September 30,
2001
     
June 30,
2002
  
           
(unaudited)
  
ASSETS
                  
Current assets
                  
Cash and equivalents
   
$
17,228
 
   
$
53,493
 
Receivables, net of allowance of $11,364 and $10,336, respectively
   
 
104,973
 
   
 
91,495
 
Inventories
   
 
41,130
 
   
 
32,442
 
Prepaid expenses and other current assets
   
 
21,931
 
   
 
25,129
 
    
  
Total current assets
   
 
185,262
 
   
 
202,559
 
    
  
Property and equipment, net
   
 
235,371
 
   
 
239,065
 
Long-term portion of accounts receivable
   
 
6,752
 
   
 
6,753
 
Intangibles and other
   
 
471,434
 
   
 
476,075
 
    
  
Total assets
   
$
898,819
 
   
$
924,452
 
    
  
LIABILITIES AND PARTNERS’ CAPITAL
                  
Current liabilities
                  
Accounts payable
   
$
35,800
 
   
$
23,835
 
Working capital facility borrowings
   
 
13,866
 
   
 
3,672
 
Current maturities of long-term debt
   
 
11,886
 
   
 
71,502
 
Accrued expenses
   
 
77,678
 
   
 
64,932
 
Unearned service contract revenue
   
 
24,575
 
   
 
25,728
 
Customer credit balances
   
 
65,207
 
   
 
54,295
 
    
  
Total current liabilities
   
 
229,012
 
   
 
243,964
 
    
  
Long-term debt
   
 
457,086
 
   
 
392,357
 
Other
   
 
14,457
 
   
 
9,796
 
Partners’ Capital
                  
Common unitholders
   
 
209,911
 
   
 
273,751
 
Subordinated unitholders
   
 
2,772
 
   
 
10,184
 
General partner
   
 
(2,220
)
   
 
(2,106
)
Accumulated other comprehensive income (loss)
   
 
(12,199
)
   
 
(3,494
)
    
  
Total Partners’ Capital
   
 
198,264
 
   
 
278,335
 
    
  
Total Liabilities and Partners’ Capital
   
$
898,819
 
   
$
924,452
 
    
  
 
See accompanying notes to condensed consolidated financial statements.

3

Table of Contents
 
STAR GAS PARTNERS, L.P. AND SUBSIDIARIES
 
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
 
    
Three Months Ended
June 30,
     
Nine Months Ended
June 30,
  
    
2001
     
2002
     
2001
   
2002
  
    
(in thousands, except per unit data)
  
Sales
   
$
166,052
 
   
$
188,725
 
   
$
960,003
   
$
886,233
 
Costs and expenses:
                                  
Cost of sales
   
 
123,269
 
   
 
127,012
 
   
 
672,541
   
 
563,241
 
Delivery and branch expenses
   
 
44,337
 
   
 
57,150
 
   
 
151,510
   
 
180,964
 
Depreciation and amortization
   
 
11,031
 
   
 
15,027
 
   
 
31,050
   
 
44,039
 
General and administrative expenses
   
 
9,747
 
   
 
9,768
 
   
 
25,267
   
 
27,216
 
TG&E customer acquisition expense
   
 
525
 
   
 
350
 
   
 
1,896
   
 
756
 
Unit compensation expense
   
 
772
 
   
 
74
 
   
 
1,991
   
 
239
 
    
  
  
  
Operating income (loss)
   
 
(23,629
)
   
 
(20,656
)
   
 
75,748
   
 
69,778
 
Interest expense, net
   
 
7,887
 
   
 
8,767
 
   
 
25,007
   
 
28,668
 
Amortization of debt issuance costs
   
 
161
 
   
 
417
 
   
 
457
   
 
1,036
 
    
  
  
  
Income (loss) before income taxes and cumulative effect of change in accounting principle
   
 
(31,677
)
   
 
(29,840
)
   
 
50,284
   
 
40,074
 
Income tax expense (benefit)
   
 
114
 
   
 
98
 
   
 
1,753
   
 
(1,707
)
    
  
  
  
Income (loss) before cumulative change in accounting principle
   
 
(31,791
)
   
 
(29,938
)
   
 
48,531
   
 
41,781
 
Cumulative effect of change in accounting principle for adoption of SFAS No. 133, net of income taxes
   
 
—  
 
   
 
—  
 
   
 
1,466
   
 
—  
 
    
  
  
  
Net income (loss)
   
$
(31,791
)
   
$
(29,938
)
   
$
49,997
   
$
41,781
 
    
  
  
  
General Partner’s interest in net income (loss)
   
$
(449
)
   
$
(331
)
   
$
745
   
$
488
 
    
  
  
  
Limited Partners’ interest in net income (loss)
   
$
(31,342
)
   
$
(29,607
)
   
$
49,252
   
$
41,293
 
    
  
  
  
Net income (loss) per Limited Partner Unit:
                                  
Basic
   
$
(1.38
)
   
$
(1.02
)
   
$
2.28
   
$
1.47
 
    
  
  
  
Diluted
   
$
(1.38
)
   
$
(1.02
)
   
$
2.27
   
$
1.47
 
    
  
  
  
Basic weighted average number of Limited Partner Units outstanding
   
 
22,767
 
   
 
28,957
 
   
 
21,603
   
 
28,068
 
    
  
  
  
Diluted weighted average number of Limited Partner Units
   
 
22,767
 
   
 
28,957
 
   
 
21,716
   
 
28,110
 
    
  
  
  
 
See accompanying notes to condensed consolidated financial statements.

4

Table of Contents
 
STAR GAS PARTNERS, L.P. AND SUBSIDIARIES
 
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(unaudited)
 
    
Three Months Ended
June 30,
     
Nine Months Ended
June 30,
  
    
2001
     
2002
     
2001
     
2002
  
 (in thousands)   
 
Net income (loss)
   
$
(31,791
)
   
$
(29,938
)
   
$
49,997
 
   
$
41,781
 
Other comprehensive income (loss)
                                    
Unrealized gain (loss) on derivative instruments
   
 
(1,975
)
   
 
538
 
   
 
(10,083
)
   
 
(7,802
)
    
  
  
  
Comprehensive income (loss)
   
$
(33,766
)
   
$
(29,400
)
   
$
39,914
 
   
$
33,979
 
    
  
  
  
Reconciliation of Accumulated Other Comprehensive
Income (loss)
                                    
Balance, beginning of period
   
$
159
 
   
$
(3,899
)
   
$
—  
 
   
$
(12,199
)
Cumulative effect of the adoption of SFAS No. 133
   
 
—  
 
   
 
—  
 
   
 
10,544
 
   
 
—  
 
Current period reclassification to earnings
   
 
(157
)
   
 
(133
)
   
 
(2,434
)
   
 
16,507
 
Current period other comprehensive income (loss)
   
 
(1,975
)
   
 
538
 
   
 
(10,083