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Business Services Industry

Star Gas Partners, L.P. Reports Fiscal 2008 Second Quarter Results

Business Wire, May 7, 2008

STAMFORD, Conn. -- Star Gas Partners, L.P. (the "Partnership" or "Star") (NYSE: SGU), a home energy distributor and services provider specializing in heating oil, today announced financial results for its fiscal 2008 second quarter and the six-month period ended March 31, 2008.

Three months ended March 31, 2008, compared to three months ended March 31, 2007

The Partnership reported a 15.3 percent increase in total revenue to $665.3 million, as an increase in home heating oil selling prices was reduced by a decline in home heating oil volume. Home heating oil volume declined to 169.4 million gallons, as the additional volume provided by acquisitions was more than offset by the effects of warmer temperatures, net customer attrition, conservation and other factors.

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Home heating oil per gallon margins increased slightly as product costs reached new highs on 13 occasions during the second quarter of fiscal 2008.

Operating income decreased by $33.7 million to $49.1 million, as a decrease in product gross profit of $19.2 million and an unfavorable change in the fair value of derivatives of $20.3 million was reduced by lower operating costs (including depreciation, amortization and net service) of $5.8 million.

Net income declined by $33.3 million to $41.6 million.

Adjusted EBITDA decreased by $13.9 million to $57.8 million, as the additional EBITDA provided from acquisitions was more than offset by the reduction in EBITDA attributable to the decline in home heating oil volume. Adjusted EBITDA is a non-GAAP financial measure (see below reconciliation) that 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. The Partnership is not required to make the Minimum Quarterly Distribution until February 2009, for the quarter ending December 31, 2008.

Star Gas Partners Chief Executive Officer, Daniel P. Donovan, stated, "Home heating oil price records were set and reset 28 times during the first and second quarters of our fiscal year. We have experienced similar conditions in the past and, predictably, customers react by turning down the thermostat and seeking lower prices. There is always a lower price offer in the market and our employees are tasked with re-selling our customers on the value of the service we offer and, of course, responding appropriately to their price concerns.

"This is hard work and we are very proud of the job they have been doing. We have many competitors in each of our markets with most less than one percent our size. Lacking the resources to replace lost customers by acquiring other heating oil businesses, many of these smaller distributors are forced to use economically unsustainable price offers to retain or acquire new customers in times of market stress. We believe that the business retained or acquired in this way is of marginal value. Our preferred choice has been to fight as hard as we sensibly can through internal marketing efforts. We intend to continue pursuing an active acquisition program as another means of obtaining new accounts. Reflective of the market stress described above, our list of active acquisition prospects is longer than it has ever been. We will pursue the best of these opportunities aggressively. Our strong working capital position leaves us well prepared to do so," concluded Mr. Donovan.

Six months ended March 31, 2008, compared to six month ended March 31, 2007

The Partnership reported a 23.4 percent increase in total revenue to $1.1 billion, as an increase in home heating oil selling prices was reduced by a decline in home heating oil volume. Home heating oil volume declined to 282.5 million gallons, as the additional volume provided by acquisitions and slightly colder temperatures was more than offset by the effects of net customer attrition, conservation and other factors.

Home heating oil margins were lower by approximately 1 cent per gallon.

During the first half of fiscal 2007, the Partnership recorded a benefit of $4.3 million under its weather insurance contract. The Partnership did not record any benefit under its weather insurance contract in fiscal 2008.

Operating income decreased by $12.3 million to $79.2 million, as a favorable change in the fair value of derivative instruments of $3.8 million was more than offset by an increase in total operating expenses (including depreciation, amortization and net service) of $4.5 million and a reduction in product gross profit of $11.6 million.

Net income declined by $12.9 million to $66.7 million.

Adjusted EBITDA decreased by $17.0 million to $77.1 million, as the additional EBITDA provided from acquisitions was more than offset by the reduction in EBITDA attributable to the impacts of the decline in home heating oil volume, lower per gallon margins and lower weather insurance benefits.

Business Services Industry

Star Gas Partners, L.P. Reports Fiscal 2008 Second Quarter Results

Business Wire, May 7, 2008

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