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 March 31, 2004
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 Delaware (State or other jurisdiction of incorporation or organization) |
06-1437793 75-3094991 (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 April 23, 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 | 32,165,528 | ||
| Star Gas Partners, L.P. |
Senior Subordinated Units | 3,242,696 | ||
| 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
INDEX TO FORM 10-Q
| Page | ||
| Part I Financial Information |
||
| Item 1 – Condensed Consolidated Financial Statements |
||
| Condensed Consolidated Balance Sheets as of September 30, 2003 and March 31, 2004 |
3 | |
| 4 | ||
| 5 | ||
| Condensed Consolidated Statement of Partners’ Capital for the six months ended March 31, 2004 |
6 | |
| 7 | ||
| 8-16 | ||
| Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations |
17-25 | |
| Item 3 – Quantitative and Qualitative Disclosures About Market Risk |
26 | |
| 26 | ||
| Part II Other Information: |
||
| 27 | ||
| 28 | ||
-2-
STAR GAS PARTNERS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
| (in thousands) | Sept. 30, 2003 |
March 31, 2004 |
||||||
| ASSETS |
||||||||
| Current assets |
||||||||
| Cash and cash equivalents |
$ | 10,044 | $ | 25,677 | ||||
| Receivables, net of allowance of $7,542 and $9,344, respectively |
100,511 | 218,743 | ||||||
| Inventories |
38,561 | 55,911 | ||||||
| Prepaid expenses and other current assets |
51,470 | 46,200 | ||||||
| Net current assets of discontinued operations |
10,523 | — | ||||||
| Total current assets |
211,109 | 346,531 | ||||||
| Property and equipment, net |
261,867 | 254,082 | ||||||
| Long-term portion of accounts receivables |
7,145 | 7,114 | ||||||
| Goodwill |
272,740 | 273,350 | ||||||
| Intangibles, net |
201,468 | 187,255 | ||||||
| Deferred charges and other assets, net |
14,414 | 17,982 | ||||||
| Net long-term assets of discontinued operations |
6,867 | — | ||||||
| Total Assets |
$ | 975,610 | $ | 1,086,314 | ||||
| LIABILITIES AND PARTNERS’ CAPITAL |
||||||||
| Current liabilities |
||||||||
| Accounts payable |
$ | 27,140 | $ | 32,440 | ||||
| Working capital facility borrowings |
12,000 | 85,100 | ||||||
| Current maturities of long-term debt |
22,847 | 22,586 | ||||||
| Accrued expenses |
82,356 | 81,764 | ||||||
| Unearned service contract revenue |
32,036 | 33,427 | ||||||
| Customer credit balances |
74,716 | 26,772 | ||||||
| Net current liabilities of discontinued operations |
7,569 | — | ||||||
| Total current liabilities |
258,664 | 282,089 | ||||||
| Long-term debt |
499,341 | 488,496 | ||||||
| Other long-term liabilities |
27,829 | 27,442 | ||||||
| Partners’ capital (deficit) |
||||||||
| Common unitholders |
210,636 | 298,486 | ||||||
| Subordinated unitholders |
(57 | ) | 6,006 | |||||
| General partner |
(3,082 | ) | (2,523 | ) | ||||
| Accumulated other comprehensive loss |
(17,721 | ) | (13,682 | ) | ||||
| Total Partners’ capital |
189,776 | 288,287 | ||||||
| Total Liabilities and Partners’ Capital |
$ | 975,610 | $ | 1,086,314 | ||||
See accompanying notes to condensed consolidated financial statements.
-3-
STAR GAS PARTNERS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
| (in thousands, except per unit data) | Three Months Ended March 31, |
Six Months Ended March 31, |
||||||||||||||
| 2003 |
2004 |
2003 |
2004 |
|||||||||||||
| Sales: |
||||||||||||||||
| Product |
$ | 583,587 | $ | 572,921 | $ | 904,650 | $ | 928,942 | ||||||||
| Installations, service and appliances |
45,117 | 52,468 | 95,385 | 114,464 | ||||||||||||
| Total sales |
628,704 | 625,389 | 1,000,035 | 1,043,406 | ||||||||||||
| Cost and expenses: |
||||||||||||||||
| Cost of product |
371,635 | 353,056 | 561,101 | 572,627 | ||||||||||||
| Cost of installations, service and appliances |
52,181 | 57,109 | 106,201 | 117,815 | ||||||||||||
| Delivery and branch expenses |
86,644 | 96,662 | 161,158 | 180,655 | ||||||||||||
| Depreciation and amortization expenses |
12,788 | 14,597 | 25,512 | 29,022 | ||||||||||||
| General and administrative expenses |
11,748 | 10,592 | 21,905 | 18,695 | ||||||||||||
| Operating income |
93,708 | 93,373 | 124,158 | 124,592 | ||||||||||||
| Interest expense |
(11,393 | ) | (12,729 | ) | (20,343 | ) | (24,381 | ) | ||||||||
| Interest income |
856 | 801 | 1,517 | 1,634 | ||||||||||||
| Amortization of debt issuance costs |
(554 | ) | (774 | ) | (991 | ) | (2,043 | ) | ||||||||
| Loss on redemption of debt |
(181 | ) | — | (181 | ) | — | ||||||||||
| Income from continuing operations before income taxes |
82,436 | 80,671 | 104,160 | 99,802 | ||||||||||||
| Income tax expense |
1,460 | 744 | 2,135 | 1,150 | ||||||||||||
| Income from continuing operations |
80,976 | 79,927 | 102,025 | 98,652 | ||||||||||||
| Income from discontinued operations before gain on sale of TG&E segment and cumulative effect of change in accounting principle, net of income taxes |
2,187 | 496 | 1,078 | 1,083 | ||||||||||||
| Gain on sale of TG&E segment, net of income taxes |
— | 230 | — | 230 | ||||||||||||
| Cumulative effect of change in accounting principle for adoption of SFAS No. 142 for discontinued operations |
— | — | (3,901 | ) | — | |||||||||||
| Net income |
$ | 83,163 | $ | 80,653 | $ | 99,202 | $ | 99,965 | ||||||||
| General Partner’s interest in net income |
$ | 832 | $ | 739 | $ | 992 | $ | 933 | ||||||||
| Limited Partners’ interest in net income |
$ | 82,331 | $ | 79,914 | $ | 98,210 | $ | 99,032 | ||||||||
| Net income per Limited Partner unit: |
||||||||||||||||
| Basic |
$ | 2.54 | $ | 2.27 | $ | 3.03 | $ | 2.86 | ||||||||
| Diluted |
$ | 2.53 | $ | 2.27 | $ | 3.02 | $ | 2.86 | ||||||||
| Basic weighted average number of Limited Partner units outstanding |
32,453 | 35,158 | 32,452 | 34,655 | ||||||||||||
| Diluted number of Limited Partner units |
32,561 | 35,158 | 32,560 | 34,655 | ||||||||||||
See accompanying notes to condensed consolidated financial statements.
-4-
STAR GAS PARTNERS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
| (in thousands) | Three Months Ended March 31, |
Six Months Ended March 31, | |||||||||||||
| 2003 |
2004 |
2003 |
2004 | ||||||||||||
| Net income |
$ | 83,163 | $ | 80,653 | $ | 99,202 | $ | 99,965 | |||||||
| Other comprehensive income: |
|||||||||||||||
| Net unrealized gain (loss) on derivative instruments |
(6,468 | ) | (5,445 | ) | (5,988 | ) | 4,039 | ||||||||
| Comprehensive income |
$ | 76,695 | $ | 75,208 | $ | 93,214 | $ | 104,004 | |||||||
Reconciliation of Accumulated Other Comprehensive Income (Loss)
| (in thousands) | Pension Obligations |
Derivative Instruments |
Total |
|||||||||
| Balance as of September 30, 2002 |
$ | (15,745 | ) | $ | 4,918 | $ | (10,827 | ) | ||||
| Reclassification to earnings |
— | (7,685 | ) | (7,685 | ) | |||||||
| Gain on derivative instruments |
— | 1,697 | 1,697 | |||||||||
| Other comprehensive loss |
— | (5,988 | ) | (5,988 | ) | |||||||