SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 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): July 31, 2001
Star Gas Partners, L.P.
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(Exact Name of Registrant as Specified in Charter)
Delaware 33-98490 06-1437793
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(State or Other Jurisdiction (Commission File Number) (IRS Employer
Of Incorporation or Organization) 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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Item 2. Acquisition or Disposition of Assets.
On July 31, 2001, a subsidiary of Star Gas Partners, L.P., a Delaware
limited partnership (the "Partnership"), signed an agreement to acquire the
equity of Meenan Oil Co., L.P., a Delaware corporation ("Meenan") and its
affiliates for a purchase price of approximately $120 million, payable in cash
and subject to certain working capital and other adjustments. Meenan is the
third largest home heating oil distributor in the United States. Meenan has
aggregate annual sales of approximately 129.4 million gallons of heating oil and
serves approximately 110,000 home heating oil customers from 8 branch locations
in New York, New Jersey and Pennsylvania. All of these branches are either
within or contiguous to the Partnership's home heating oil division's existing
area of operations.
The amount of consideration for Meenan was determined by arms length
bargaining between the Partnership and Meenan.
The closing of the acquisition is subject to compliance with normal
closing conditions. The Partnership intends to fund the acquisition through the
issuance of additional debt and equity securities.
The agreement generally provides that the sellers shall indemnify the
buyer against damages arising from breaches of representations and warranties,
covenants and unknown liabilities (other than with respect to environmental
matters) subject to certain thresholds and maximum damage limits.
Item 5. Other Events
The Partnership is filing pursuant to this Form 8-K the following
historical press release: Star Gas Significantly Expands Petro Heating Oil
Operations with $120 Million Acquisition of Nation's Third Largest Retail
Distributor; Reports Fiscal Q3 Results; Declares $0.575 Quarterly Distribution
On All Units (Released August 1, 2001).
STAR GAS SIGNIFICANTLY EXPANDS PETRO HEATING OIL OPERATIONS WITH $120 MILLION
ACQUISITION OF NATION'S THIRD LARGEST RETAIL DISTRIBUTOR; REPORTS FISCAL Q3
RESULTS; DECLARES $0.575 QUARTERLY DISTRIBUTION ON ALL UNITS
STAMFORD, CT (August 1, 2001) -- 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
announced it has signed a definitive agreement to purchase Meenan Oil, Inc.
("Meenan") of Syosset, NY for approximately $120 million. Meenan, founded in
1934, is believed to be the third largest retail home heating oil company in the
country with $254 million in revenues for the twelve months ended March 31,
2001. For that same period, Meenan had pro forma EBITDA of $21.6 million, which
would have increased Star's EBITDA by 22% and would have resulted in
Distributable Cash Flow accretion of 23 cents per unit. Meenan will continue to
be operated as a separate business unit under the direction of its current
management team led by Vice President-Operations Dan Donovan.
In addition to this purchase, the Partnership acquired seven
additional businesses, five heating oil and two propane, since April 1, 2001.
This would bring to 18 the acquisitions made since the beginning of fiscal year
2001. The heating oil companies purchased since the beginning of the third
fiscal quarter are Charles L. Booth of North Kingstown, RI; Radiant Fuel Co.,
Inc. of Newton, MA; Tuthill & Young Oil of Port Jefferson, NY; C & W Oil of
Monroe, CT; and Armstrong Heating & Air Conditioning Co., located in Levittown,
PA. The two
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propane companies are SAAM Oil Company, Inc. of Scales Mound, IL and Quality
Propane Service, Inc. of Gwinn, MI.
Star also reported today its results for the nine months and three
months ended June 30, 2001. For the nine month period, before the impact of
SFAS No.133, Star's EBITDA grew 32% to $113.9 million, from $86.5 million in the
year-ago period. Net income per unit, before the impact of SFAS No.133,
increased 11% to $2.36 per unit, compared to $2.13 for the first nine months of
fiscal 2000. As a result of this performance, Star's Distributable Cash Flow
for the twelve months ended June 30, 2001, before the impact of SFAS No.133, was
$56.8 million, or $2.67 per unit.
These nine-month results are primarily attributable to a 24% volume
increase largely due to the 30 businesses Star purchased over the past 21
months. This acquisition program accounted for a 25% increase in EBITDA. The
Company's nine-month performance was also enhanced by a) a return to relatively
normal temperatures compared to the 10% warmer than normal weather experienced
during the prior year's nine months ended June 30, 2000; b) the Company's focus
on operating excellence and customer service which enabled it to continue to
improve gross profit margins, despite the higher energy costs experienced this
past year; and c) to increased air conditioning, heating equipment and appliance
sales.
For the three months ended June 30, 2001, Star's volume increased
approximately 17% to 76.1 million gallons, from 65.4 million gallons in the
comparable period in 2000, despite 12% warmer than prior year temperatures in
the quarter. In addition, gross profit margins increased approximately 4.5
cents per gallon in the fiscal 2001 third quarter, versus the same period in
2000. The fiscal third quarter is a non-heating season period, when seasonal
losses generally increase as the Partnership grows. As a result of a higher
reserve on doubtful accounts, as well as Star's larger size due to acquisitions,
for the three months ended June 30, 2001, the Partnership's EBITDA loss, before
the impact of SFAS No.133, increased to $9.0 million, from $5.1 million in the
same period in fiscal 2000, and its net loss per unit, before the impact of SFAS
No.133, increased to $1.28 per unit, from $1.15 per unit in the third quarter of
fiscal 2000.
Star also declared today its $.575 per unit Minimum Quarterly
Distribution on all units for the quarter ended June 30, 2001, payable on August
14, 2001 to Unitholders of record on August 6, 2001. Star's Partnership
Agreement provides that 303,000 Senior Subordinated Units are to be distributed
proportionally to holders of its Senior Subordinated (NYSE:SGH), Junior
Subordinated and General Partner Units, at the end of any twelve month period in
which its heating oil division has an Adjusted Operating Surplus in excess of
$2.90 per unit. This will take place for a maximum of three non-overlapping
twelve-month periods ending December 31, 2003. While Star's heating oil
division generated an Adjusted Operating Surplus of $3.37 per unit, on an
accrual basis, for the twelve months ended June 30,2001, on a cash basis its
Adjusted Operating Surplus for the period was below the $2.90 per unit necessary
to distribute the 303,000 Senior Subordinated units referred to above. It is
expected however, that the cash receipts and disbursements resulting from this
past year's performance will result in those units being distributed after
completion of the quarter ending September 30, 2001. While the Partnership
currently believes this distribution will be undertaken at that time, there can
be no guarantee of that future event.
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In commenting on these developments, Chairman Irik P. Sevin, stated:
"We view Meenan, which provides us with over 100,000 new retail heating oil
customers, as an excellent, virtually seamless fit with our existing operation,
which is already the nation's leader. Importantly, six of Meenan's eight
divisions operate within Petro's markets, with the other two in contiguous areas
and Meenan's 60-year focus on operating excellence fits well with our business
philosophy. Our plan is to operate Meenan as a separate business unit under its
strong management team. We also hope to sell other rationally related products
such as air conditioning to our new Meenan customers."
Mr. Sevin, continued, "We are also extremely pleased with Star's
strong financial performance over the past nine months and the most recent
quarter. Star's active and successful acquisition program - 30 purchases over
the past 21 months - has grown the Partnership's top line volume by
approximately 15%, and through operating excellence, this growth has translated
into 25% higher EBITDA. Additionally, the significant attention and resources
Star has devoted to developing an organization focused on operating excellence
and customer satisfaction has enabled us to improve margins even in a high
energy cost environment."
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 385,000 customers in the Northeast and Mid-
Atlantic. Star is the nation's eighth largest retail propane distributor,
serving approximately 260,000 customers throughout the Midwest and Northeast.
Star owns a controlling 72.7% interest in Total Gas and Electric, which sells
natural gas and electricity in the Northeast and Mid Atlantic to 70,000
customers.
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)
STAR GAS PARTNERS, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands) (unaudited)
Three Months Ended
June 30,
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2001 2000
Actual Actual
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Sales $166,052 $130,163
Costs and expenses:
Cost of sales 123,269 94,756
Operating expenses 54,063 40,483
TG & E customer acquisition expense 525 932
Depreciation and amortization 11,031 8,847
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Three Months Ended
June 30,
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2001 2000
Actual Actual
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Unit compensation expense 772 599
Net gain (loss) on sales of assets (21) 6
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Operating income (23,629) (15,448)
Interest expense, net 7,887 6,608
Amortization of debt discount 161 141
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Loss before income taxes and minority interest (31,677) (22,197)
Minority interest in net loss of TG & E - (251)
Income tax expense 114 45
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Net loss $(31,791) $(21,991)
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General Partners' interest in net loss $ (449) $ (374)
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Limited Partners' interest in net loss $(31,342) $(21,617)
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Basic net loss per limited partner unit $(1.38) $(1.15)
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Diluted net (loss) per limited partner unit $(1.38) $(1.15)
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Weighted average number of limited partner
units outstanding:
Basic 22,767 18,872
Diluted 22,767 18,872
Supplementary Data:
Retail propane gallons sold 17,746 15,908
Home heating oil gallons sold 58,373 49,451
Distributable Cash Flow:
EBITDA (a) $(11,280) $ (5,076)
Less: Interest expense, net (7,887) (6,608)
Maintenance capital expenditures (638) (950)
Income taxes (114) (45)
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Distributable Cash Flow $(19,919) $(12,679)
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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.
(nine-month results follow)
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STAR GAS PARTNERS, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands) (unaudited)
Nine Months Ended
June 30,
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2001 2000
Actual Actual
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Sales $960,003 $638,744
Costs and expenses:
Cost of sales 672,541 416,924
Operating expenses 176,798 135,336
TG & E customer acquisition expense 1,896 932
Depreciation and amortization 31,050 25,447
Unit compensation expense 1,991 599
Net gain (loss) on sales of assets 21 56
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Operating income 75,748 59,562
Interest expense, net 25,007 19,981
Amortization of debt discount 457 398
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Income before income taxes and minority interest 50,284 39,183
Minority interest in net loss of TG & E - (251)
Income tax expense 1,753 373
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Income before cumulative effect of change in
accounting principle $ 48,531 $ 39,061
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Cumulative effect of change in accounting 1,466 -
principle for adoption of SFAS No. 133 -------- --------
Net income $ 49,997 $ 39,061
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General Partners' interest in net income $ 745 $ 691
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Limited Partners' interest in net income $ 49,252 $ 38,370
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Basic net income per limited partner unit $2.28 $2.13
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Diluted net income per limited partner unit $2.27 $2.13
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Weighted average number of limited partner
units outstanding:
Basic 21,603 18,056
Diluted 21,716 18,056
Supplementary Data:
Retail propane gallons sold 115,746 91,088
Home heating oil gallons sold 394,648 319,126
Distributable Cash Flow:
EBITDA (a) $110,664 $ 86,484
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Nine Months Ended
June 30,
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2001 2000
Actual Actual
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Less: Interest expense, net (25,007) (19,981)
Maintenance capital expenditures (1,912) (2,462)
Income taxes (1,753) (373)
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Distributable Cash Flow $ 81,992 $ 63,668
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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.
Item 7. Financial Statements, Pro Forma Financial Information and
Exhibits.
(a) Financial Statements of Businesses Acquired:
(i) audited annual historical financial statements of Meenan for
the fiscal years ended June 30, 2000, 1999 and 1998;
(ii) unaudited interim financial statements of Meenan for the
nine month periods ended March 31, 2001 and 2000.
(b) Pro Forma Financial Information:
Statement of operations for the Partnership for the fiscal year
ended September 30, 2000 and for the six months ended March 31,
2001 and a pro forma balance sheet as of March 31, 2001.
(c) Exhibits:
Exhibit
Number Exhibit
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10.1 Purchase Agreement
23.1 Consent of KPMG LLP relating to Meenan audited financial statements.
99.1 Audited annual historical financial statements of Meenan for the
fiscal years ended June 30, 2000, 1999 and 1998.
99.2 Unaudited interim financial statements of Meenan for the nine
month periods ended March 31, 2001 and 2000.
99.3 Pro forma Statement of operations for the Partnership for the fiscal year
ended September 30, 2000 and for the six months ended March 31,
2001 and a pro forma balance sheet as of March 31, 2001.
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SIGNATURES
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, as General Partner
By: /s/ Irik P. Sevin
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Name: Irik P. Sevin
Title: Chairman of the Board
and Chief Executive Officer
Date: August 3, 2001
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INDEX TO EXHIBITS
Exhibit
Number Exhibit
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10.1 Purchase Agreement
23.1 Consent of KPMG LLP relating to Meenan audited financial statements.
99.1 Audited annual historical financial statements of Meenan for the
fiscal years ended June 30, 2000, 1999 and 1998.
99.2 Unaudited interim financial statements of Meenan for the nine month
periods ended March 31, 2001 and 2000.
99.3 Pro forma Statement of operations for the Partnership for the fiscal
year ended September 30, 2000 and for the six months ended March 31,
2001 and a pro forma balance sheet as of March 31, 2001.
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