Star Group LP (SGU) 2003 Q4 法說會逐字稿

Welcome to the Star Gas fiscal 2003 fourth quarter and year-end results conference call. (OPERATOR INSTRUCTIONS) As a reminder, this conference is being recorded Thursday, December 4th, 2003. I would now like to turn the conference call over to Ms. Purdy Tran. She is the Investment Relations Representative for Star Gas.

I want to remind everyone that today's conference call 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, realized savings from the business process improvement program, and other factors impacting the propane, home heating oil, natural gas and electricity distribution industries.

Now I would like to turn the call over to Mr. Irik Sevin, Chairman and CEO of Star Gas Partners.

Good morning everyone. Usually the fourth quarter, which is a summer quarter, is not that very significant for us. But what I would like to do is in this conversation today really is going to be broken up into two sections. The first section will be discussing the financial results, both the fourth quarter, and more importantly the full year. And then we will step back and try and take an overview from a more conceptual point of view and strategic point of view about what happened, both this year and potential implications for the future, keeping in mind Purdy's comments that she just relayed to you.

While generally the fourth quarter, which is a summer season quarter, is not that significant for us there are a few things that were interesting about the period. Number one, sales were up about 26 percent, not misleading in the sense that there were two factors contributing to that. One was simply higher energy prices, but also let's keep in mind that there was about a 10 percent volume increase.

While the fourth quarter, summer quarter, is not that significant financially, it is not a bad indicator of the true volume performance and growth performance of the Company in the sense that you don't have what we call weather noise either good, like last year and what we're now experiencing now, or bad like we experienced two years ago. It's not a bad proxy, it's a real indicator of how volume is growing.

And this past fourth quarter it grew about 10 percent, almost exclusively because of the acquisition program we've enjoyed over the past two years in which we bought 22 companies in fiscal '02 and '03. A very important aspect about what we're going to talk about today is actually the impact of these acquisitions.

Generally speaking, acquisitions have a one year delayed impact on our results. What that means is, because most companies are bought after the winter season in any particular year, be it '02 and '03, their full year results are not fully reflected in our performance until the following year. However, they are negatively impacting earnings, be it EBITDA, net income or DCF in the particular year in which they are bought, because by definition, if they are bought after the heating season, the only impact they have on our results are for the summer period.

However, when you get to a volume comparison year to year, the acquisitions in a particular year, as well as in the year prior, are important. Hence, the fourth quarter volume increase of around 10 percent does reflect the general implication as to how volume was increasing year-over-year.

When we get to EBITDA, which to us is a very meaningful measure of our performance, for the quarter on a reported cases, if you can say that according to EBITDA and GAAP, but according to reported EBITDA, the loss, and it's a summer loss, which traditionally is experienced by all propane companies, certainly by heating oil companies and certainly by us, that we all come to understand and expect in the off heating season summer period there are losses sustained. That loss did increase from about $28.5 million to $36.2 million, about a $7.8 million expansion in the summer loss.

However, when you dissect it and you look at it there really was three factors that contributed to that. First, was the acquisitions that we just talked about. Because most of our acquisitions were made in the summer, and most starkly the Ultramar Valero acquisition, which was made in late July, early August, that contributed negative 1 million 2, because it was only with us really for the summer period.

Secondly we had about $4.5 million of reorganization expenses. We've talked about this before. We have $28 million reorganization program, of which this 4.5 spent in the fourth quarter was almost the last piece of that. We have about 1 million 4, 1 million 5 left to spend in fiscal '04. But we did spend $4.5 million on completing that reorganization plan, but that did impact our fourth quarter results, as did the expensing of the increase in the value of equity previously given back in '99 and 2000, which fluctuates every year. And last year in '02, with the decline in the stock price, there was a decline in the value of that compensation. And this year with the increase in the stock price, that equity base compensation simply increased in value, which we expensed.

Those three items, the value of the equity, the fluctuation of the value of the equity, the reorg and the acquisitions all amounted to around $7.7 million for the quarter. If you adjust our EBITDA for the impact of those three items, as expected, the EBITDA loss was virtually the same in the two years, around $28 million in the summer. That's what we expected. That's what we sustained. So the most meaningful part of the summer really was though that we completed the reorg. We had a very, very active acquisition program, and interestingly the stock went up. All those three things, which are positives, actually impacted and grew and expanded the EBITDA loss.

On a net income basis, because most people or many people do monitor that, it's not our most important measure. But on a net income basis, kind of the same phenomenon happened. On a reported basis net income declined by about $8.2 million, i.e., the net income loss in the summer expanded from about $53 million to $61 million. But again, in that $61 million figure was about $9 million worth of these items. The difference between the 9 million and the 7.5 is the interest expense and depreciation related to those acquisitions, primarily the Ultramar acquisition in the summer.

Hence, adjusting again for the reorg, the $4.5 million, the fluctuation in equity values, and the impact on net income of 3.8 million due to acquisitions, actually, net income would have improved by about $2 million. That is on a reported basis. It was off a -- those three items accounted for about $10 million, hence we were up about $2 million in net loss from $52 million last year to around $50 million this year in loss.

And the reason why we were better by about $2 million really had to do with lower depreciation and amortization with the elimination due to Rule 142 of amortizing intangibles. So on an adjusted basis, the way we're looking at it is that net income, or net loss per unit, improved from $1.68 last year to $1.50 for this fourth quarter.

In terms of the most meaningful measure of our performance, DCF, although again in the summer there is not this great variability, and it is a loss item also. On an actual basis, again, we're seeing the same type of about $7.5 million difference in terms of DCF this year versus last year.

Again, adjusting for just those three items, the fluctuation in equity values, the reorg and acquisitions, what transpired was actually DCF was relatively the same amount going from $38 million last year, and being virtually at the same $38 million loss figure this year for DCF. That's different than the reported 46.9, which did -- had been impacted by the 7.5, $8 million worth of items, again, and comp and reorg and acquisitions.

On a per-share basis, therefore, what we're looking at is for the quarter, DCF after taking into account those three items was a negative $1.12 versus a negative $1.26 last year. Interestingly, while the two numbers were virtually flat in terms of the absolute amount of loss, the per-share improved almost 24 cents -- excuse me, almost 14 cents, due to the fact that we had more shares outstanding in a loss period.

Taking a step back again, what happened this past summer is it was a very active period for us. While we aren't selling a lot of propane and heating oil, it's a period in which we're really establishing ourselves for the following year. And this fourth quarter was a very, very active and successful period, in which we completed an additional three acquisitions amounting to almost 50 million gallons, and we completed the reorganization program. A tremendous amount of work the summer, hopefully, which will bear fruit in this upcoming year.

On an annual basis, again just getting back to the numbers so we can put things in perspective. On an annual basis, the real story was simply the weather. As a result of the weather, which was about 9 percent colder than normal, sales were up almost 45 percent to $1.5 billion.

That 45 percent increase in sales from 1 billion to 1.5 billion was primarily due to two factors. One is higher energy prices and the other was weather, which was about 25 percent colder than last year. Nine percent colder than normal, but about 25 percent colder than last year.

Interestingly, unlike the summer, where acquisitions provided about a 10 percent growth, this past winter's volume which grew about 22 percent was almost solely due to that weather. Even though the entire amount of weather does not affect all our sales, the entire growth in volume was almost solely due to weather.

Acquisitions actually only provided about a 3 percent improvement in volume for the year, even though for the quarter it was 10 percent. And the reason for that it is, as I mentioned before, there's always this one year lag between acquisitions and their effecting performance. Since fiscal '02 was a decent, but not as a robust acquisition period for us, we made 12 acquisitions, but only amounting to 25 million gallons during that warm year.

That is what impacted -- those '02 acquisitions is what impacted '03 volume, and it only impacted it by about 3 percent for the full year, because the big amount, which was the '03 acquisitions, weren't done until after the year; hence, the affected the fourth quarter, but did not have a significant impact on the entire year.

Most importantly from a financial point of view, while we reported after Rule 142, amortization of intangible, and Rule 133, which has to do with the inter-quarter affect of our hedging activities, which only affected us by about $900,000 in the whole year. But after those two things, EBITDA increased from $80 million last year -- excuse me, to about $103 million this year. And that's after Rule 142 and 133. That's about a $22 million improvement, or about 28 percent.

Let me not be disingenuous, while most people can spin that, that is an attractive number, we do not consider that in a year that was so cold to have a $22 million improvement to be really significant. But in the $102 million, were the reduction for the three items -- actually four items that I had mentioned before.

Number one, the reorg for the entire year amounted to about $9.4 million. Again, that's the last phase of our reorg. We've got additional mop up of about 1 million 4, 1 million 5 in '04. But that's programs in completed, but it did cost of about $9.4 million, and that did get deducted from our EBITDA in '03.

The comp was about $9 million. And when I say comp, it was about $9 million of previously given equity that fluctuates in the value each year. And with the downturn in our stock last year, is a return on the value of that stock given as compensation, and hence that was expensed for $9 million this year. Those two things are 18 million.

And then, as part of our reorg we changed our delivery scheduling program. Let me be clear about this. During the year in an effort to deliver more efficiently, understandably and quite obviously, and we did this by increasing the amount of gallons we delivered to each home each time we went there. What that means is that we allowed our homeowners to utilize some of the inventory in their tank, getting their tank a little bit emptier by about 20 gallons, allowing our average delivery to grow from 130 gallons to 150 gallons, giving us greater delivery efficiency.

But in the year which we did it, which was fiscal '03, our customers used 20 gallons of their own inventory rather than 20 gallons which we would have sold them. And with about 500,000 customers that cost us about 10 million gallons worth of volume last year. And we estimate that that cost the Company about $3.9 million, about 39 cents on the margin per each gallon that we didn't deliver last year, because we were seeking a more efficient delivery schedule. But it did impact results last year by about $3.9 million in a onetime item.

As a result of these three things, completion of the reorg, a fluctuation in the equity value previously given, and the delivery scheduling, that's about a $23 million impact. And when you add that to the 102, the Company had EBITDA last year of around $125 million. That versus 82 million in the prior year with the same sort of adjustments, which suggests we're up about $43 million in EBITDA, about 52 percent versus the prior year. And that is the number that probably is appropriate. We're pleased to have gotten it, and it is mostly due to due to three factors. The $43 million was due to weather; was due to 1 cent per gallon margin improvement; and due to the about $4.5 million due to acquisitions made in the prior year, '02, that had a positive affect throughout '03.

In regard to these matters let me just say that it was cold, and that has a few implications. Number one, I think many of us have forgotten, except for Ami who bought us weather insurance, how warm '02 was. I think this weather last year was wonderful in the sense that it did indicate the true earning power of the Company. It was about 9 percent colder than normal. But we were able to translate those temperatures into results. We again were able to consistently increase our margin, and the acquisitions we bought in '02 did perform the way we expected.

When we talk about in the fourth quarter new acquisitions have a loss, but for the full year they're going to have a gain. Look, we bought 270 acquisitions. And we're going to discuss our EBITDA going from $55 million to 125 million largely due to that. But this acquisition program has been successful, and it was successful in impacting '03 results.

From a net income point of view, let me run through that so everyone's kind of clear with what's going on. Last year on a reported basis before Rule 142 and before 133 for inventory management, we're reported a loss last year of $11 million of net income. This year we reported a profit of 212,000, a difference of $11 million, which ostensibly looks attractive. But this 212,000 is quite an anemic number given the cold weather we had.

It's also anemic because there was 3 points in there part deductions for $3.9 million for Rule 142, about $1 million for 133; and therefore, after those two things we really made $5 million versus the prior year's loss, adjusting for those figures, of 16. However, much like EBITDA in the $5 million, there was about $27 million of deductions related to, again, the reorganization, the fluctuation in equity, the delivery scheduling.

And here the acquisitions that again were made in the summer had a very significant impact on '03's net income. But those acquisitions made in the summer had an overall annual impact of around $4.5 million, which was a combination of an EBITDA of around 800 depreciation and amortization and interest expense during the summer.

Taking our net income after 142 and 133 of about $5 million and adjusting it by that 27, we end up with net income for the year of around $31 million. And that represents net income per unit of 97 cents.

I'm not unaware that when we go through this and there are all these comments about these adjustments, people's eyes can roll. But these things did transpire. These things did impact how we have to report the year's results. And when you have a reorganization program that gets expensed, you get stock prices that come back up to where they were in '01 after dropping last year, you change your delivery pattern, they have impacts from a GAAP point of view. And I just wanted to make sure that everybody was aware of them. You deal with them the way you think fit, but I did want to at least explain the numbers, so that you all can take into account and do what you think is appropriate in figuring out what type of year we had.

Probably most importantly is our DCF, our distributable cash flow and distributable cash flow per unit. The way we calculate it is we take our EBITDA, which is 125 million, we take out interest of around 38, taxes of 1.5 million, maintenance CapEx of 5.4, and we had distributable cash flow this past year of about $80.7 million. With 33 million shares outstanding, that provided us with a DCF per unit of 245.

We think this 245 level, given the weather, is something that is appropriate. We recognize that weather impacted it. We also recognize that this past year we were doing really two things at the Company. One, we were running a company, and two, we were reorganizing the heating oil division, improving its entire structure so it could take care and take advantage of its very unique size. So we're not at all displeased with earning 245 per share DCF after taking into account the three major factors that we discussed.

Taking a step back, I look at the past year as having three major components and three major factors that transpired. One was the weather. I don't know that we're taking weather for granted, but for those of you who lived with us through 2002, the weather last year was welcome. Not only did impact our results, but it really did suggest, as we said in '02, that that was probably an aberration. And with the weather that we're experiencing again so far this year, and let's not count any chickens, it does suggest that '02 was an aberration. It also suggests that we were able to take the weather and translate it into probably the best growth record in the industry.

Second, we continue, and more than continue, the very successful acquisition program. Over the last two years we've acquired 22 companies, amounting to 135 million gallons, over 100,000 customers. Alone in '03 we acquired 10 companies, almost 112 million gallons representing about a 12 percent growth in our company, even taking into account what we expect to lose in terms of the accounts that we have purchased.

This is a very disciplined program. It's a hard program. It's a labor-intensive program. The program is to buy small and midsize companies at attractive prices, which is a low risk, high return but very difficult exercise. We need to buy 22 companies. We don't buy one company. We like this program because we think that no one company is going to derail us, no one acquisition is going to create cultural problems for us, no one acquisition creates integration problems for us.

And if you look at the history of companies, I find that the biggest problem that most of them have been in the pursuit of growth. They take on acquisitions that are problematic. Sometimes it's successful, sometimes they're not. We think our program, where we're buying small and midsize companies, leads to very fine results. I think that's demonstrated.

Since 1999 when we put Star and Petro together, our EBITDA has gone up almost 2.5 times from 55 million to $125 million. More importantly, our DCF per unit has gone from about a $2 to $2.45. And all this has translated most importantly to our shareholders, who putting up $14 in 1999, received $32 worth of value, with the stock going from 14 to 22, with $10 of additional distribution. Providing our shareholders with a 26 percent compound annual return since 1999, putting us in the top 10 percent of performers on the New York Stock Exchange.

With the weather nose, with the reorganization noise, we really can't lose sight, and we try not to here, that our disciplined acquisition program has been a very, very significant aspect of providing the Company and the shareholders and unitholders, excuse me, with some very, very nice returns.

The third thing I want to talk about it is our business process redesign program as the heating oil division. Those of you who have been with us recognize that that's taken place over a five to six year period. It involved a $28 million investment, and it was designed to take advantage of our unique size. We are 200 times the size of our average competitor. We're over 2.5 times the size of our closest competitor in the heating oil space.

We think we have a unique opportunity to start growing this Company internally, as well as through acquisitions. But to do that, we really needed to access developments in technology, and take an industry that has been operating under the same 1950s business model and bring it into the modern-day era. We completed that exercise, at least from a structural point of view, on April 1.

What's going on now is that we're trying to get the benefits of our investment. So far, what we're seeing is that the operating and the financial implications, interestingly, are there. The improvement in customer service that we expected is in progress. Don't take that to mean anything other than what it said. It takes training. It takes reeducation to get to the level where we want get to, which is to be a world-class customer service oriented business. And we think we're getting there.

So the reorganization program from a financial point of view is basically complete. We are getting some of the financial and operating benefit. And we are slowly but surely improving the customer service level to where we think it's going to allow us to grow internally as well as through acquisitions.

One other thing I want to mention is that -- and our financing strategy has always been to be balanced between debt and equity. And with spending about $75 million this year on acquisitions, we finance that with a 34, $35 million equity offering. We've been very disciplined over the last four years in keeping a very balanced capital structure. And as a result of that equity offering, we have a debt to EBITDA ratio calculating conforming with bank agreements at about 3.7 times.

Don't forget when you do your numbers, the year-end debt includes the debt for acquisitions, which we have discussed, were actually negatively impacting us. And certainly in our numbers don't reflect the earning power of the acquisitions that were made. So taking that into account as required in our bank agreements, we have a debt to EBITDA ratio of about 3.7, which we think for our business is decent. We probably would like to get that down, quite frankly, to about 3.5, especially in decent years, so that if we ever do have a warm year again, both between the flexibility in our capital structure and the weather insurance we've got, we don't come under pressure.

At this stage I've taken a long time, I apologize for that. But I'd like to open the call to any questions that people may have.

(OPERATOR INSTRUCTIONS) Ron Londe, A.G. Edwards.

Irik, could you give us a feel for how the weather in October and November so far might impact the first quarter, given the weather insurance that you have in place?

Yes. I look at it every day. We've had a real significant turn in the last ten days. October and November year-to-date were about 30 degree days below budget. Below what we expected, with October being decent and about 20 above better, November being about 50 off, for a net 30 off out of November. December, of course, has been wonderful. And it's looking right now with the next 10 day report that everybody can get, as though we will be about 10 to 20 degree days better then our budget.

And Ron, you've been with us, so you know that we budget weather a little bit below the National Weather Service. Weather insurance -- actually, it becomes a bit interesting. Weather insurance is from November through March. And you calculate how many degree days you have from November through March, and see whether or not it is below our strike price. So the cold October, we get the benefit of that without impacting our weather insurance. We just don't expect, and we don't hope to collect on the weather insurance. And we paid our premium, but it's like any other insurance you buy, you pay your premium and you hope you don't collect.

I am curious this morning, Suburban was declared a stalking horse by the Bankruptcy Court involving their Agway offer. Have you looked at that? Are you going to get involved in the auction process? What's your take on it?

We're under a confidentiality agreement regarding that transaction. So it's just something that -- we've done acquisitions now for 24 years, we are just very careful about talking about any acquisitions, about any stage that they're in, whether we're looking at them or we are not looking at them. So don't take as a comment that we are looking at it, because we have a confidentiality. Of course we signed a confidentiality once we looked at it. I'm just not going to comment on whether we're looking, not looking, and where that's going to go.

You're talking about past acquisitions affecting your year ahead future business. The last large acquisition before Valero was the Meon (ph) acquisition. Have you been satisfied with the way that's worked out? How has that contributed to your results in 2003?

The Meon acquisition we're more than satisfied. I don't think an acquisition could have been more textbook and smoother. We bought that company when it had about 20, $21 million worth of EBITDA. We bought it off of a cold year, that was 2001. That company, forgetting the acquisitions we put into it, is operating exactly where we bought it, where we budgeted it. It's a wonderful acquisition. Dan Donovan, who runs it -- it's like in the advertising industry, a separate network. They report to Angelo, but that has worked out just wonderfully. It was a great acquisition. It was a great company. They have a great culture, and they're performing exactly where we expected.

Did you mention that maintenance CapEx was 5.4 million? Was that the number that you talked about?

That the number, 5.4 million.

Do you have an estimate for next year, for 2004?

Ron, you've been with us a long time. You know we're an old-fashioned Company; we don't really talk about next year. But let me just say that $5.4 million figure, if you go back five years, has been very consistent. Because I have got 2002, 2003 in front of me -- 2002 was 5.435, 5.4 million. 2003 was 5.370, so that is the number that we have had historically.

Mark Easterbrook, RBC.

I just got a couple of quick questions. On the maintenance CapEx, what was the quarter -- for the fiscal fourth quarter, what (multiple speakers)

Fiscal fourth was 1 million 1.

In Q you guys break out G&A expenses. Do you have that number, or do I just wait for the Q to come out?

Why don't you would wait for the Q, if you don't mind. We may have it later today, and we'll get back to you with it. But there are a lot of papers here, and I don't want give off the wrong number.

And you just mentioned you don't really forecast anything. Can you give sort of a normalized run rate on the propane, and then also on the home heating oil business, or what the volumes might in a normalized year? Because you guys have made a lot of acquisitions here in the last two quarters or so.

Why don't I tell you what historically we did between the two, if you don't mind my doing that for you. Last -- and you can put your adjustments in given that it was 9 percent colder last year, I think. Why don't we just do it like that. Propane last year, we had a volume of 167 million gallons, and the home heating oil had a volume last year for the twelve months of 567.

So if you're going to do this -- I'm going to give you the historics -- you need to adjust it for probably weather, which was colder, but you also need to adjust that for the acquisitions we made last year, most of them are only being in the fourth quarter -- affecting fourth quarter figures.

And then two more questions. Has the debt balance changed at all? Have you done any acquisitions since the end of September?

No, and the debt balance hasn't changed.

I'm sorry, you referenced weather insurance. Did you say that you guys are actually going to put in -- how much weather insurance are you putting in for this upcoming year?

It was already put in there. I think it was put in back in June or July. As you know, we have a base level that we're buying, and we've contracted to buy every year of $12.5 million of weather insurance that we've contracted for '03, '04, '05, '06. So we have that. And then earlier this year, notwithstanding the cold weather last year, we just committed to everybody to buy it, and I don't think it's a bad idea. You buy insurance. And we bought another $7.5 million worth of insurance for about 2 or $300,000. So we have 19.5, $20 million worth of insurance.

(OPERATOR INSTRUCTIONS) Eric Mark, Goldman Sachs.

I just have a couple of quick questions. I was wondering if you, first of all, could break out the revenues that you had between product and installs in the quarter, and then basically what it was for the last year?

And then secondly, there's been -- I think one of the competitors like BJ Wholesalers has been getting into the business a little bit. I'm wanted just to see what your sense was in terms of competition, and if you're seeing any pricing pressure?

As far as breaking it out on the phone call revenues in terms of petroleum products, versus service, versus installation, that will be in K, and that will just have to wait a few days, if you don't mind.

So that will be out in a few days?

We're going to probably file it the 20th, quite frankly. As far as BJ wholesalers, I hear about it. If you go to industry conferences, it's talked about. Actually we were their first ally, if you don't mind, about two or three years ago. And we worked with them, especially in our New England division. It didn't work out for us. I don't really see it. This is a service-oriented business in the sense that home heating oil, we do about 1.5 million service calls. We've got about 600 service techs. And we are finding the customer, the majority of the customers, I would say the market share is about 60 to 70 percent, needed, want and appreciate the service that's provided by their local provider.

And so the BJ wholesalers, I don't want to have my head in the sand, I don't think it's in the sand. We haven't seen anything to date of any significant impact. Again, we've worked with them for over two years. And we just decided that this was not what the American consumer wanted, notwithstanding the success of Wal-Mart and other companies that have come and changed retailing techniques in this industry. We were going with that. We want to be aware of it. We tested it ourselves for two years, and we just don't see it.

Would they be getting into more of the propane business than the home heating oil?

No. I mean, propane has grown wonderfully from 20 million EBITDA in '99, its $50 million now. We've had great success in the propane business. It's a very stable and a great business. We're very opportunistic. We buy as many, and grow as rapidly as we can in the propane business. Our standards are return on investment. And we're going to grow in either or both of those businesses so long as we can get a proper return on investment.

Historically, they both grown very nicely. Actually, propane probably has grown a bit more than heating oil. But we grow both, we like both, they're different. I think propane is a much more stable business with less opportunity for internal growth due to its stability. I think heating oil has a stable nature to it, but because we don't own a tank, there is more opportunity for growth. And that's what we're trying to do with the reorganization program.

I just have one little follow-up question. I noticed that, and correct me if I'm mistaken, that several of your facilities, whether it's the acquisition, or the CapEx or the working capital facilities, were recently matured, or came due around September of '03. Did you roll those over for another year or so? If you could just discuss what's going on with those facilities.

Rich and Ami are here, and they really put together. We put in a new facility, but I will let Rich or Ami discuss. Rich?

We've rolled over the propane facility for at least another three years. We have a three-year agreement with a two year term on both the acquisition facilities, so that in place.

I'm sorry, what was the maturity on those again? I'm sorry, I didn't hear.

Three years from September, so it would be September '06.

And then is there anything further to on the heating oil facilities that are, I guess, coming due in June of next year?

We're actually in the process of working on those as we speak.

On the propane facilities, are those still around 25 million?

It's 24 million working capital facility, and 50 million-ish of acquisition type facility.

Okay. Does the acquisition facility include -- is that what's combined with the CapEx?

Yes. Acquisition or capital expenditure facility.

Ron Londe, A.G. Edwards.

I just had a couple of balance sheet items that maybe you could give us some clarity on. At the end of 2002 you had 61 million in cash, and this year you have about 10 million. Is that just a timing issue with regard to an offering or something?

Yes, Ron, we raised cash in September of '02, and we paid off $45.3 million of debt on October 1st of 2002. So that was really a timing --.

A one day timing issue, Ron.

And also, the current maturity of a long-term debt this year is significantly lower than last year, 22 million versus 72. Is that a quarterly payment, or is that -- when is that 22.8 due?

Five of it is due in this coming March. Eight of it is due in April, and another five so is due in the falling September. And the other couple of million dollars off the top of my head, I don't know, about 18 or so.

Let me be clear about that. In our facilities, our bank facilities, we have the flexibility of meeting those obligations with our term loan bank facility. Most of us refer to the 50 million of propane and the 50 million of heating oil as acquisition facilities. They're not really, they are term loans, term facilities that can be used either for bank repayment, acquisitions, or capital expenditures.

Absolutely. All those things.

I just wanted to be -- I don't know where you were headed, but I just want to be clear about it.

On your total debt outstanding, what's the all in kind of average coupon rates that you're paying now, or in a long-term debt, whichever is easier for you? You have 40.6 million in interest expense last year on 522 million in debt that would indicate like a 7.7 coupon rate. It is that the right way to look at it? Can you expound upon that?

Yes. I would suspect that you're going to be around an 8 percent level between our long-term, our private placements, our public debt, and our working capital facilities, around 8 percent.

Martin Pearlman, Pearlman & Associates.

I wanted to thank you for the transparency in terms of the cost saving program. You mentioned that the cost, 9.4 million this year, and it'll cost about 1.6 million next year. And then you said you'd save about 8.4 million next year. So if I just look at the reduction in the cost program, that's about 7.8. So my question is, in '04 we will be better off by about 600,000 -- the Company will be better off by about 600,000 than it would have been if there had been no reorganization? And I'm trying to relate that to the $15 million number. Are we saying that there's an additional 14.4 million that will be saved in time, or an additional 6.6 million that will be saved in time?

We will save $8.4 million in fiscal '04, 8.4 over and above whenever level of expenses and revenues we had in '03. That's 8.4, not 600,000.

So we spent 9.4 million (multiple speakers) 8.4 million less?

Excuse me, let me try and do it with you and be clearer than I was in the press release. The entire program is costing approximately $28 million, of which 1.6 million will be spent next year, 9.4 was spent last year, and 17 million was spent prior thereto. So the way to look at it, if you don't mind, is don't link savings in a year with spending in any particular year, because there was an upfront cost that we incurred in '02, '03 and in '04 amounting to around 26 million. And we are going to spend in '04 another 1 million 6, because the whole program is going to be a $28 million program. For that, we will save 8.4 in '04, and we're expecting to save another 6.6 thereafter, '05, '06, for a total of $15 million savings over and above our baseline, call it, in '02.

So that would -- so that would sound a -- because in your calculations for this year's EBITDA, for instance, you X'ed out the 9.4, so it's not -- okay.

That is correct.

I got you. Two other quickies, if I may. The number of units, the number of total units at the end of the year, was that the 33 271 that I saw, or was that --?

It was 33 596. That's weighted average in the fourth quarter. Use 33 7.

Total units?

(indiscernible) to Rich, I'm sorry.

Total units outstanding today are around 34.5 million, because we had an offering in August of 2003.

Right. So that's (indiscernible) everything. Okay. On the last call, and it is brought up periodically about the 8 shares and the cash flow that was necessary from the Petro division in order to generate another, I think it is another $300,000 stock dividend to the H holders. At that point, you said you needed another quarter for the receivables to be paid off, etc., etc. But there's been no mention of it today, so I'm just wondering where that stands.

The receivable levels, given the energy prices, remain high. So it does not look, although it might, it does not look like they're going to come down with these energy prices to a level that going to allow us to meet that target.

(OPERATOR INSTRUCTIONS) At this time, Mr. Sevin, there are no further questions. I will now turn the conference call back to you. Please proceed with your presentation or closing remarks.

I just want to think everybody very much for being involved with us. And I hope we can continue to do an effective job for you. Thank you, goodbye.

Ladies and gentlemen, that does conclude today's conference call. We thank you for participating, and ask that you please disconnect your lines.