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 December 31, 2003 |
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
Commission File Number: 333-103873
STAR GAS PARTNERS, L.P.
STAR GAS FINANCE COMPANY
(Exact name of registrants as specified in its charters)
| Delaware | 06-1437793 | |
| Delaware | 75-3094991 | |
| (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) 328-7310
(Registrants’ telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrants (1) have 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) have been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark whether the registrants are accelerated filers (as defined in Rule 12b-2 of the Act). Yes x No ¨
At January 22, 2004, the registrants had units and shares of each issuer’s classes of common stock outstanding as follows:
| Star Gas Partners, L.P. |
Common Units | 30,670,528 | ||||
| Star Gas Partners, L.P. |
Senior Subordinated Units | 3,245,696 | ||||
| Star Gas Partners, L.P. |
Junior Subordinated Units | 345,364 | ||||
| Star Gas Partners, L.P. |
General Partner Units | 325,729 | ||||
| Star Gas Finance Company |
Common Shares | 100 |
STAR GAS PARTNERS, L.P. AND SUBSIDIARIES
| Part I | Financial Information | Page | ||
| Item 1—Condensed Consolidated Financial Statements |
||||
| Condensed Consolidated Balance Sheets as of September 30, 2003 and December 31, 2003 |
3 | |||
| Condensed Consolidated Statements of Operations for the three months ended December 31, 2002 and December 31, 2003 |
4 | |||
| Condensed Consolidated Statements of Comprehensive Income for the three months ended December 31, 2002 and December 31, 2003 |
5 | |||
| Condensed Consolidated Statement of Partners’ Capital for the three months ended December 31, 2003 |
6 | |||
| Condensed Consolidated Statements of Cash Flows for the three months ended December 31, 2002 and December 31, 2003 |
7 | |||
| 8-17 | ||||
| Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations |
18-26 | |||
| Item 3—Quantitative and Qualitative Disclosures About Market Risk | 27 | |||
| Item 4—Controls and Procedures | 27 | |||
| Part II | Other Information: | |||
| Item 6—Exhibits and Reports on Form 8-K | 28 | |||
| Signatures | 29 | |||
-2-
STAR GAS PARTNERS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
| Sept. 30, 2003 |
Dec. 31, 2003 |
|||||||
| (in thousands) | (unaudited) | |||||||
| ASSETS |
||||||||
| Current assets |
||||||||
| Cash and cash equivalents |
$ | 10,111 | $ | 14,241 | ||||
| Receivables, net of allowance of $9,560 and $10,043, respectively |
105,639 | 189,430 | ||||||
| Inventories |
42,391 | 62,890 | ||||||
| Prepaid expenses and other current assets |
52,968 | 44,989 | ||||||
| Total current assets |
211,109 | 311,550 | ||||||
| Property and equipment, net |
262,301 | 259,207 | ||||||
| Long-term portion of accounts receivables |
7,145 | 7,806 | ||||||
| Goodwill |
278,857 | 278,857 | ||||||
| Intangibles, net |
201,784 | 194,368 | ||||||
| Deferred charges and other assets, net |
14,414 | 17,799 | ||||||
| Total Assets |
$ | 975,610 | $ | 1,069,587 | ||||
| LIABILITIES AND PARTNERS’ CAPITAL |
||||||||
| Current liabilities |
||||||||
| Accounts payable |
$ | 31,026 | $ | 53,782 | ||||
| Working capital facility borrowings |
12,000 | 78,500 | ||||||
| Current maturities of long-term debt |
22,847 | 21,571 | ||||||
| Accrued expenses |
83,197 | 88,221 | ||||||
| Unearned service contract revenue |
32,036 | 36,941 | ||||||
| Customer credit balances |
77,558 | 62,354 | ||||||
| Total current liabilities |
258,664 | 341,369 | ||||||
| Long-term debt |
499,341 | 501,845 | ||||||
| Other long-term liabilities |
27,829 | 27,575 | ||||||
| Partners’ capital (deficit) |
||||||||
| Common unitholders |
210,636 | 210,071 | ||||||
| Subordinated unitholders |
(57 | ) | 39 | |||||
| General partner |
(3,082 | ) | (3,075 | ) | ||||
| Accumulated other comprehensive loss |
(17,721 | ) | (8,237 | ) | ||||
| Total Partners’ capital |
189,776 | 198,798 | ||||||
| Total Liabilities and Partners’ Capital |
$ | 975,610 | $ | 1,069,587 | ||||
See accompanying notes to condensed consolidated financial statements.
-3-
STAR GAS PARTNERS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
| Three Months Ended December 31, |
||||||||
| (in thousands, except per unit data) | 2002 |
2003 |
||||||
| Sales: |
||||||||
| Product |
$ | 334,712 | $ | 371,866 | ||||
| Installations, service and appliances |
50,268 | 61,996 | ||||||
| Total sales |
384,980 | 433,862 | ||||||
| Cost and expenses: |
||||||||
| Cost of product |
201,327 | 233,326 | ||||||
| Cost of installations, service and appliances |
54,020 | 60,706 | ||||||
| Delivery and branch expenses |
74,514 | 83,993 | ||||||
| Depreciation and amortization expenses |
12,848 | 14,545 | ||||||
| General and administrative expenses |
12,849 | 9,411 | ||||||
| Operating income |
29,422 | 31,881 | ||||||
| Interest expense |
(9,031 | ) | (11,727 | ) | ||||
| Interest income |
661 | 833 | ||||||
| Amortization of debt issuance costs |
(437 | ) | (1,269 | ) | ||||
| Income before income taxes and cumulative effect of change in accounting principle |
20,615 | 19,718 | ||||||
| Income tax expense |
675 | 406 | ||||||
| Income before cumulative effect of change in accounting principle |
19,940 | 19,312 | ||||||
| Cumulative effect of change in accounting principle for adoption of SFAS No. 142, net of income taxes |
(3,901 | ) | — | |||||
| Net income |
$ | 16,039 | $ | 19,312 | ||||
| General Partner’s interest in net income |
$ | 159 | $ | 194 | ||||
| Limited Partners’ interest in net income |
$ | 15,880 | $ | 19,118 | ||||
| Basic and diluted net income per Limited Partner unit |
$ | 0.49 | $ | 0.56 | ||||
| Weighted average number of Limited Partner units outstanding: |
||||||||
| Basic |
32,449 | 34,158 | ||||||
| Diluted |
32,564 | 34,158 | ||||||
See accompanying notes to condensed consolidated financial statements.
-4-
STAR GAS PARTNERS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(unaudited)
| Three Months Ended December 31, | ||||||
| (in thousands) | 2002 |
2003 | ||||
| Net income |
$ | 16,039 | $ | 19,312 | ||
| Other comprehensive income: |
||||||
| Unrealized gain on derivative instruments |
480 | 9,484 | ||||
| Comprehensive income |
$ | 16,519 | $ | 28,796 | ||
Reconciliation of Accumulated Other Comprehensive Income (Loss)
| Pension Plan Obligations |
Derivative Instruments |
Total |
||||||||||
| (in thousands) | ||||||||||||
| Balance as of September 30, 2002 |
$ | (15,745 | ) | $ | 4,918 | $ | (10,827 | ) | ||||
| Reclassification to earnings |
— | (2,702 | ) | (2,702 | ) | |||||||
| Unrealized gain on derivative instruments |
— | 3,182 | 3,182 | |||||||||
| Other comprehensive income |
— | 480 | 480 | |||||||||
| Balance as of December 31, 2002 |
$ | (15,745 | ) | $ | 5,398 | $ | (10,347 | ) | ||||
| Balance as of September 30, 2003 |
$ | (17,214 | ) | $ | (507 | ) | $ | (17,721 | ) | |||
| Reclassification to earnings |
— | 25 | 25 | |||||||||
| Unrealized gain on derivative instruments |
— | 9,459 | 9,459 | |||||||||
| Other comprehensive income |
— | 9,484 | 9,484 | |||||||||
| Balance as of December 31, 2003 |
$ | (17,214 | ) | $ | 8,977 | $ | (8,237 | ) | ||||
See accompanying notes to condensed consolidated financial statements.
-5-
STAR GAS PARTNERS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF PARTNERS’ CAPITAL
(unaudited)
| (in thousands, except per unit amounts) | Common |
Sr. Sub. |
Jr. Sub |
General Partner |
Common |
Senior Sub. |
Junior Sub. |
General Partner |
Accum. Other Comprehensive Income (Loss) |
Partners’ Capital |
||||||||||||||||||||||
| Balance as of September 30, 2003 |
30,671 | 3,142 | 345 | 326 | $ | 210,636 | $ | 1,571 | $ | (1,628 | ) | $ | (3,082 | ) | $ | (17,721 | ) | $ | 189,776 | |||||||||||||
| Net income |
17,069 | 1,846 | 203 | 194 | 19,312 | |||||||||||||||||||||||||||
| Other comprehensive income, net |
9,484 | 9,484 | ||||||||||||||||||||||||||||||
| Unit compensation expense |
52 | 52 | ||||||||||||||||||||||||||||||
| Distributions ($0.575 per unit) |
(17,634 | ) | (1,806 | ) | (199 | ) | (187 | ) | (19,826 | ) | ||||||||||||||||||||||