Star Group LP (SGU) 2004 Q2 法說會逐字稿

Ladies and gentlemen, thank you for standing by and welcome to the Star Gas Partners fiscal 2004 second quarter results conference call. [Operator Instructions]. I would now like to turn the conference call over to [inaudible] the investor relations representative. Please go ahead with your call.

Thank you, and good morning. If anyone wishes to access a copy of the press release, you can do so at www.star-gas.com. I would like to remind everyone that today's 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 and other factors impacting the propane and home heating oil distribution industries.

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

Good morning, everyone, and I apologize for your waiting. I was just advised by Global Crossing, this was not a problem specific to our phone call or Jaffoni Collins paying their Global Crossing bill. They are having problems throughout their network, so I apologize for you waiting and I do appreciate your patience.

In terms of this past quarter, this winter quarter, volume was up about 1% and it was some very interesting dynamics this past quarter as the company's very, very active acquisition program over the last 15 months, which has resulted in about 11 acquisitions. All said the effect this past quarter of three things. Number one, temperatures that were about 2.5% warmer than they were for the very cold period last winter. Let me just stop there for a second.

Throughout this winter period, it's very interesting how people would come up to me and discuss, "aren't you having a great year, how cold it is." What's very interesting about the weather pattern this year is number one, it was warmer than last year and the reason is we had this exceptionally cold, exceptionally cold, January, which was the fifth coldest January over the past hundred years and the coldest January since we've been in business.

While that provided some interesting volume impacts because of the very concentrated nature of that weather -- and the very extreme nature of that weather -- the full P&L impacts had as much to do with overtime and expenses almost as it did with providing additional volume.

But getting back to the overall view of our volume for the period. Our very active acquisition program offset the comparably warm quarter, notwithstanding January, versus last year, which, as you may remember, for all three months we sustained very attractively cold temperatures.

Secondly, the acquisition program offset the effect of a change in delivery patterns. I can say that with a certain degree of confidence, in the sense that what we are trying to do this year is improve considerably how we are doing business, especially in the heating oil division. However, that program was to deliver oil in the most efficient basis, and as I said to our operating people, let's not worry about quarterly reports. Let's not worry about short-term, let's get this company on the most efficient basis on an annual basis.

As a result, we did have a change in delivery patterns. We pushed some of the volume from March into April, smoothing out, making it more efficient. That volume, which is about 7 million gallons as indicated, in the10-Q, has materialized in April. So I feel very comfortable that the offset to the acquisitions of the warm weather and the delivery patterns -- the delivery pattern change is indicating itself as a pickup in April.

And the third thing was a loss of 3% of our customer base, which, again, acquisitions offset. When I say 3% loss in our customer base, let me just say it's in both divisions; propane and heating oil. In looking at that and what happened, it really looks like the major driver there had to do with credit losses. What happened is with the large oil and propane bills this past winter, with the cold weather in January, very, very high energy prices.

The two of them just -- it was a confluence that resulted in very large bills for our customers, pushing up receivables, creating some pressure on credit, and resulting in our having to cancel a number of customers for credit purposes. We really can trace back a 3% loss to credit; however, I don't want to stick my head in the sand.

I think our business process redesign at the heating oil division must have had some impact on our customers in terms of customer stability. And while the numbers aren't showing it, I don't want to be so, so naive or blind that we are attributing everything just to that credit factor.

The fourth thing that happened in volume this past year, was a decline in our low-margin commercial base. As a result, our very active acquisition program was able to offset those four factors, leading to a 1% volume growth, which was, however, lower than we had expected, largely because of the change in delivery, the credit losses, and low-margin business.

Notwithstanding a 1% increase in volume, operating profit actually declined somewhat, about $300,000. When you look at it, however, you'll see that D&A expense, depreciation, and amortization actually was increased by 1 million 8, which suggests that other than that noncash item operating profit were up $1.5 million, notwithstanding it being a warmer period than the very cold quarter in fiscal '03. The reason for operating profits being up, other than depreciation and amortization, has to do with the effect both of acquisitions and our continued ability to improve our residential gross profit margins in both the heating oil and in the propane business.

At the residential customer level, margins were up almost 3.5 cents per gallon, a very attractive. And in the 10-K, 10-Q, just to correlate, would show the penny and a half increase. We really got a 3.5 on a same-store sales basis, which is comparing our base business to our base business last year, not including the effect of acquisitions and not including the effect of FASB 133 derivative activities.

What happened is that those two things, our gross profit margin improvement and acquisition improvement offset the effect of the delivery schedule changes, which are coming back in April, net customer losses due to credit, as well as the impact of weather. Net income for the period did decline about $2.5 million, but the majority reason for that had to do with, one is this depreciation driven decline in operating income as well as the impact of profits from discontinued operations.

By that I mean is that on March 31 '03, we told our TG&E subsidiary. TG&E, for those who have been with us for a while, was a natural gas and electric deregulated marketer. We bought that business back in '01, and it's been a rollercoaster ride. The first two years we had some significant problems with it. We actually turned that around. Last year, they made an unusual amount of money, about $2 million, and this year they were trending at around $1 million profit, which is what we expected out of them.

I think the Board and I felt that while the company was turned around, it was stabilized, it was profit making, for a company such as ours that last year earned on a steady state basis 125 million of EBITDA, to have something that we are expecting $1 million out of on $60 million of sales, in an industry that we had hoped three years ago, the deregulated sale of electric and gas was going to be growing, but that just is not in the offing. So on a comparative basis, it really was just a $1 million contributor, and it just wasn't strategically worth to pay attention to a whole separate division with with 60 million in sales for $1 million in profit.

And also the risk of returns weren't there, which is when when you have a business making $1 million with $60 million of sales, one hiccup could derail you, and that just was not our major focus of attention. So what we did, we sold off TG&E; that did create about about a million five negative comparison to last year. Not so much in the sale -- we sold it at a slight profit, $200,000 -- but as I said, last year was an unusually good year for TG&E. They made, this past quarter, about $700,000, which was about a million five less than they made last year.

As a result, the discontinued operation had a negative impact for about a million five on our P&L, leading to the $2.5 million decline in net income this year versus last year. In terms of the six months, the pattern was very similar to the quarter, as is understandable with this quarter really driving the winter. For the six months, volume was up 2%, notwithstanding it being actually 5% warmer than last year. Last year we had a great December, but interestingly, not withstanding 5% warmer, volume was up 2%.

Again, as a very active acquisition program in which we bought 13 companies since last October, offset the effect during this period of 5% warmer weather, as well as the same kind of 3% customer decline and the shedding and loss of low-margin commercial business. But as a result of this 2% increase in volume, operating profits actually were up about half a million dollars for the quarter. And, when you take out the $3.5 million of increase in depreciation and amortization, operating and profit improved for the six months, notwithstanding the comparably warmer year, about $4 million versus last year.

Again, driving that was this acquisition program as well as 2.7 cents per gallon increase in base business residential retail volume. Net income for this period actually increased slightly by about $760,000. But not to be disingenuous about it, included in there, was the impact last year -- about $3.9 million negative -- due to the writedown of good will last year in '03.

Hence, what really happened here is excluding that item, net income would have been down; but again, due to a higher depreciation and higher interest and the warmer weather offsetting the impact of acquisition and higher gross profit margins.

Taking a step back, if you would, and trying to pull this this together as to where is the company and what's happened this past year and what's the implications for the future. I think, number one, is that notwithstanding whatever is going on, we have had just simply a program, a policy, a strategy, and effective execution of an acquisition program. Since we've been business, we've bought 271small propane and heating oil distributorships. That program has driven our growth. It drove the growth this past winter to offset what happened in weather, and that program continues in a very successful, disciplined manner.

The program continues to be -- to look for integratable acquisitions, especially within our own marketing areas, which I will discuss in a second why, which we can integrate very attractive profits from, buy at attractive prices, and not be exposed to the risks associated with larger stepout acquisitions, either in our own industry or other industries. Which, I think, all of us who have been in business for a while understand that when you make an acquisition, much like TG&E, you really don't know what you are buying, notwithstanding any very glamorous press releases or even your own honest thoughts about how wonderful it is to make an acquisition.

When you do that, we feel, in unaligned fields, in new fields, geographically, or from a product point of view, there is exposure. So our strategy is to stay with our knittings, stay with what we understand, stay with what we know.

Secondly, what's happened this past winter, again, is the continued ability to execute our strategy of improving our gross profit margins in what we consider to be --[cough] excuse me -- a very service-oriented business. I think the common wisdom is when people talk about the heating oil and propane business, they think it's a commodity distributorship. It is not.

What we are seeing from our customers is that we are a service-based business; we provide home care; we do over 2.5 million, excuse me, 1.5 million service calls a year; we have over 640 service technicians. And the ability to answer our phones well, the ability to service customers with our technicians, at home, in four hours of response time, is really why our customers buy from us.

We, as you know, avoid large commercial business, price sensitive business, and our strategy is to stay with the relatively service-oriented, price inelastic customer. What we are seeing about consumers in America today is exhibited by Wal-Mart: they are very price sensitive when it comes to products. But when it comes to home service, installation a refrigerator, a plumber, an electrician or us, they are not nearly as price sensitive as they are service sensitive. And so our strategy is to stay in the in the service end of home care.

We are doing that in heating oil; we're doing that in air conditioning; we're doing that in propane; we're doing that in water. This is our business. This is where we think we can enjoy very attractive profitability.

The third thing that happened this past winter is we did undertake two capital raising functions. We think the markets were very attractive, and we raised about $73 million through a $38 million bond offering, small, and a $35 million equity offering, small. What we did with that money is completely pay off our maturities of any debts -- or provide for any maturities of any long-term debt coming due in fiscal '04, as well as pay off our acquisition and bank facilities, so they are at zero.

And what that does is that's just positioned us very well. It really provided the 50/50 financing for last year's acquisitions, as well as prefunding on a 50/50 basis acquisitions we anticipate anticipate this year. We've been in business 25 years. It looks as though acquisitions are coming in at a relatively steady pace. And with the markets the way they were in January and February, we thought it was a propitious time to find ourselves both long on the debt side and provide us with the equity capital base that we commented to the financial community, we would always do, which is keep it 50% equity, 50% debt ratio.

Which is why we did 35 million of debt, 35 million of equity, leaving us with -- and Rich is making a face -- with about 4 million outstanding on our facilities acquisitions now? Yeah, so we've 4 million out of a hundred; we have $96 million of availability to execute our acquisition program this year.

Fifth, we sold TG&E; that provided us with another $14 million of capital. But more importantly, it was a strategic move. Actually, I do have pride that [Bill Kinnery] was able to turn that company around. Those of you who were with us two and three years ago, we were bogged down in a quagmire. I think we turned that around and as soon as we did, I really appreciate the Board's advice on saying, look, strategically, this is not for us.

Probably most importantly, let me talk about our business process design program -- excuse me -- at [Petro]. We have had a strategy that was confirmed over the past few weeks, that where are going long term, that provides us with our guideline, guiding light, our guidepost, so that we don't day-to-day just have to react to crisis, and is it warm, is it cold. Our strategy is to legally, morally, and ethically grow this company through a combination of acquisition and internal growth at the heating oil business.

The strategy is -- and I'm sorry to bore you, but after this winter, I want to confirm it to everybody -- which is to utilize our size, to access superior management team, and access technology, to provide our customer0sensitive -- service-sensitive customers -- with a higher level of service, a differentiatable level of service than our small competitors who just don't have the resources and the technology to do that. And to do that to both stabilize our own customer base, give them a better product, and then use our preeminent size in a industry that is highly fragmented to create a name and brand recognition to grow internally.

This past winter, it was actually a year ago in April that we executed, began executing this strategy that had been planning for a long time, where we switched over to a centralized call center which would take 2.2 million phone calls; switched over to a centralized dispatch center, which would dispatch 646 service techs, and reduce our administrative staff by 26%. We executed that last April.

We probably were much too optimistic about the benefits we would get from that in the first year. This first year has been, I thought, challenging. Especially in the middle of the winter, when we really got stressed test. This was a shake down period, our initial cruise, and we had the perfect winter storm. The weather was exceptionally cold. January tested everybody, combined with changing how we were doing business.

During the winter, we were saddened that we were getting the operating improvements, financially, that we had expected this year. As I said to everybody internally, we probably got the benefits that we should have should have expected, we were just too optimistic in terms of the financial benefits that we'd get the first year.

Now, looking back on the winter and calibrating, we have made the adjustments to that model; keeping the model but making the adjustments that are needed. When you open up a call center for the first year -- now speaking to people -- you cannot expect in that first year that call center is going to operate perfectly. We all feel very, very good that since December, customer satisfaction with that call center has improved 30%.

We are up to around 85% customer satisfaction; we want to be at 95 but we've got tremendous traction. We were at around down 66% in December. So, we are addressing, we don't have our head in the sand, this is our first year, we are calibrating it, we are adjusting it, and the call center is now operating probably exactly where it should. Trend line improving, probably get to a 90% customer satisfaction they are saying by June, and then 95 by September.

I don't want to overpromise. If we get to 95, that gives us our level of differentiation. This is still our first year, and what we just want to do is make sure that this thing is working. And as of now, it is. I will tell you in October, November, December, it was rough. We've come through it, and we are now for at least the last eight weeks, it's just fine. It'is just really good and I am pleased.

Same thing with dispatch. First year, just trying to get out the kinks, and it's a process. And so what happened this past year is that first of all, we feel very good that we're stabilized with it. We feel very good that we've adjusted to the issues that have confronted us. But what happened this past year is -- thank God -- that the colder temperature than we expected. Now, again, warmer than last year, but certainly colder than we expected. That the colder than we expected weather has provided us with the financial benefits to offset what we didn't get out of the redesigned -- this first year -- of the redesign.

Hence, as far as we are concerned right now, how we're doing versus our expectations for this past year, for this past quarter, is that we are about $7 million off what we expected. And that is due to the delivery scheduling change, about $1 million in severance that we had as we designed the sales activity at the company, we let go about 44 salesmen as we centralized customer enrollment.

Some consulting fees at the call center, some tail end, that's pretty much over, as well as some equity stock compensation. As the equity goes up, again, we have expense, as we did last year, with equity that had been previously given. So, what that's getting at is that the benefits that we didn't see from the first of the business process improvement were offset by additional money from weather. And we are about 7 million off due to the combination of delivery scheduling, which is coming back, reorganization and similar expenses, and equity improvement, giving a noncash expense to equity previously given.

It's a funny call in the sense that I am not blind or unaware, nor insensitive to what happened this past winter. It wasn't so much it was bad, it was a difficult winter for us in the sense that we are going through this reorg and trying to get it right. Where we sit right now is we believe we have an adjusted platform that we originally expected that we had to tweak. And where the platform is right now is that we believe it gives us the ability to execute our long- term strategy of becoming preeminent in the heating oil industry. It is an industry that, due to the competitive nature of it, really provides us with our strategic opportunities in growth and that's where we are going to go.

Our propane division, it just has for years, it's just under control. I don't know whether we are the best operated propane company; you know, everybody can claim it. All I know is that this company has more than 2.5 times its EBITDA over the last three-years. We have not had one problem there. That company is completely under control.

Every year we get operating savings, we get new sources of revenue from it, and it is just a very, very well run division. [Bill Korman] does just an excellent job in maintaining that. We have utmost trust and confidence in him as to how he runs that division, allowing us to focus our senior management attention on the big opportunity probably in heating oil, where there is very little effective competition.

At this stage, I would like to take any questions.

Thank you, ladies and gentlemen. [Operator Instructions]. The first question comes from the line of Eric [Salve] from Wachovia. Please go ahead with your question.

Good morning, guys. Just trying to get some clarification on the schedule changing. If you guys could go over that and how that's expected to shift. And if you could quantify, kind of, the amount of money that would potentially shift from the second to third quarter?

Yeah. I'll absolutely do that. Historically, we had a target of delivering approximately 160 gallons per delivery in our heating oil to our customers. It is more efficient to deliver more gallons per drop. This past March, we went to around 175 gallons, making it more efficient. The way we did that is we would delay going to certain homes, waiting an extra day or two until their tank got depleted, they used their own inventory from the last delivery, using their own oil to make heat, allowing us to deliver more oil, and then delivering to them two to three days later.

That shifted about three days worth of volume out of the quarter and into the next quarter, which is about 7 million gallons. We just wouldn't go to some homes so that we could cut back on our drivers in March, have the drivers that are there deliver to fewer homes, but when they get there, they need more oil. We shifted, therefore, two to three days worth of deliveries out of the March quarter and into this next third quarter , June. We saw in April, so I can discuss it, it's in the 10-Q, that's about 7 million gallons; about three days of deliveries.

I don't think in the Q we indicated the amount of money that that represents, and, Eric, I'm going to have to let you look at our own financials and you can figure out historically, if you would, what's our average profit, what's the marginal profit on that gallon. And the way I'd do it is I'd look at our at the historic numbers, because I'm not going to give you projections, look at our historic numbers, take a loot at what you can figure out is our marginal profit on additional volume. And you are going to have to make your own calculation, but I think we put in the 10-Q, or at least I am letting everybody know that there's about 7 million gallons of shift.

Okay. That's great. Yeah, I can definitely calculate that. And then looking out, you know, you spoke to some credit problems. How has your bad debt expense trended, and, looking at that, have you looked at it without TG&E in the prior year period?

Oh, yeah. I mean it's funny that you ask, and I guess everybody's got long memories about TG&E's credit problems, and the buyer of that business really focused in on there. Just --just it doesn't much matter; TG&E is gone but their credit problems were solved last year.

As far as ours are concerned, the heating oil division always had around .4 of 1% bad debt rate. The credit problems are -- they're not credit problems, they are credit cancellations. Meaning what we are trying to do as customers are stringing out, having difficulty making payments, we just don't let them. We just don't want that bad debt expense to get out of line. So we've got more people in the 90 day column. We cancel them, and that's why we have the customer losses. Or at least that contributed to the customer losses to the extent that it suggests that I should mention it to you.

I think with the higher energy prices, we are going to have an increase in bad debt this year. It's also part of the business redesign where we centralize all collections and so this year, we probably will have a higher bad debt expense than we did normally. You know, when you start with a bad debt expense of .4 of 1%, you know, I don't know if it's going to go to .6 of 1%. It's certainly not a problem, but maybe this year it'll be .6 of 1% instead of .4 of 1%.

So it's something that we are watching, but it's certainly not something that is alarming or of concern other than, hey, we want to make every penny we can, and we care about it but it's not raised itself to the level of an issue, if you don't mind.

Okay. And that's of sales, right? That calculation?

Yes, it is.

Okay. And then looking at your cost saves, you guys, some of that is delayed. Are you guys expecting to get some of that in the second half? I noticed the schedule changing and then some of the severance you'll get some of the benefit of not having to incur that. Have you been able to quantify what you expect to get in cost savings in the second half?

Yes.

Or is it an '05 number?

Yes. Let me just deal with it. These cost saves are all, are primarily in the winter. There are some programs in the summer, certainly, that the administrative head count is there. But, primarily, the savings are going to be when you are delivering oil and when you are doing heating repair and maintenance in the winter.

So, probably, the savings that we had hoped to get this year, we are really focusing on not doing anything new ,but executing a plan to get those savings next winter. Right now, we are in a period in a very interesting business where you've got the summer to prepare for next winter.

So right now, we are in the mode of what are we going to do right now to make sure that next winter, we get the savings that we had hoped to get the first year, probably too optimistic, but make sure that we are getting them at least next year. So, I don't think that you are going to see any greater cost savings in these next quarters than we had originally expected. We may, however, get our original expectation in the summer, given what we are seeing in March and April in terms of gallons per hour, calls per eight hours, the metrics that we use to measure productivity and efficiency. It looks like they are there, and so what we originally expected might be there this summer. But it's not very meaningful.

Right now, we are preparing for next winter. In regard to the summer, however, let me be very clear that last year we had about $12 million of expenses due to the reorganization program. That was investing in the program, with a small eye on a GAAP basis, expensing those reorganization expenditures. So that you will see this summer a relatively significant swing versus last year. And let me not make a projection. If you take a look at last year's reported financial performance.

Uh-huh.

I try and avoid the word EBITDA. When you look at it, you will see that in there, there's probably $12 million of reorganization expense and compensation related to previously-granted equity as that equity went up. So, I think that that has to be taken into account and to anybody's calculation of what they expect of us this summer. Whether you also take into account -- oh, and about that, some efficiencies or some additional expenses because we are larger, that's your business.

Okay. That is very helpful. And I really appreciate you guys' time today.

Thank you.

The next the question comes from the line of [Ron Long] from AG Edwards. Please go ahead with your question.

Yes, just to get back to the 7 million gallon --

Shift?

-- shift. You know, for the three months, EBITDA per gallon was around 30 cents, and for the six-months it's around 26 cents. Would you expect it to be closer to the 30 cents for that 7 million gallons or the 26 cents?

Oh, Ron, that's not nice.

I mean, you know, it comes out to be about 2 million bucks.

Yeah. What I would do, Ron is --, and I shouldn't have been sarcastic, a apologize. Those are average levels of profitability, if you don't mind. And the way I look at it, that additional volume, intellectually if you don't mind, is a marginal gallon.

Therefore, I -- what was the 30 cents, was that the three month?

That was the three month. I think it is probably more active of the contribution from that volume. Now, there are other aspects of the business; there are other things going on. I just want you to be aware of that. But as far as that component, I think it's much closer to the three- month number than probably to the sixth.

Are those 7 million gallons going to be kissed good-bye gallons?

Are they going to be what?

You know, the last gallons you put in your customers tanks?

No, they're going to be delivered in April; they are delivered already. Our April is better than we expected by gallons. I'm just making that statement. I've got my April volume, so I can make that statement publicly. I have that down.

Now, the 11 companies that you acquired since January '03, can you give us an idea of how many gallons that represents?

Yes. I have it here, if you just give me one second, I am just going to give it to you right now. I think it's about 100-gallons -- 115 million gallons.

Okay.

Now, don't forget, that's before our own anticipated losses, Ron. Don't -- as you remember, when we buy companies, we anticipate when we purchase them, and we calculate our EBITDA multiple that we pay, we do take into account there's going to to be a haircut. When we buy companies, we expect to lose volume, and we usually use a 15% factor.

Uh-huh.

I don't want to overstate this. We did buy 115. That is probably not what we expect to get out of those.

Okay. You know your net customer loss is at 3%. You know, if you go back a number of years, you are materially higher than that from an attrition standpoint, and you worked real hard to get it down to pretty much flat, or even gaining customers. This, you know, there is a merry-go-round out there in heating oil that, you know, that when somebody gets dumped, somebody else picks them up because those people don't freeze in the dark.

You know, the 3% is maybe a little disturbing to me because I would expected you'd to picked up some customers from other heating oil companies that were doing the same thing that you are doing. Can you comment on that?

Yeah, I'd love to. That 3% were credit losses, and we do not pick up bad credit. So if other people people are doing the same, we ain't getting our fair share because we have improved our credit standards; we think part of the problem for our credit losses was those standards were probably too low, and that we have increased our credit scoring from 550 to 600, Ami. So we don't have a merry-go-round because we exude or exclude or excommunicate poor credit losses, and we don't get our fair share -- thank God -- of the poor credit losses that other people have, number one.

Number two, honestly, I agree with you. First of all I want to point out that the 3%, is that both divisions equally. This is not a heating oil problem. We experience this in propane; we experience this in heating oil; this isn't the old "A" word that we are talking about.

Third, so we are seeing it in propane and we are hearing other propane distributors from public announcers are experiencing the same thing. So heating oil is not getting it any worse than propane. So it's not like we have a particular problem in the heating oil business with the merry-go-round; it is credit. And, number three, however, is we've got to remember, we just changes how [Petro] did business, tremendously. Our whole New England division, we took names that were venerable old names for 50 years and we just rebranded that [Petro].

We do not have as much money as Verizon, we probably didn't do it as well as Verizon, and I would have expected, quite frankly, our customer losses to be higher than 3% in this one year in which we made this business process redesign. We now have a platform to grow that business, so I can understand your concern and consternation. Are we going backwards to the old problem that the heating oil division had? And the answer is no, as evidenced by propane had the same; it's mostly credit; it was a year in which we had a transition.

And quite frankly, if you go to anybody and say, "change your name," what kind of customer dislocations are you going to have? If you come away with 3%, I think it's a great job. Now, I am not trying to defend myself. We have those losses. But going forward, we do not have the cancer that we did at one time, which is the whole reason for this process redesign.

Okay. Over the long term, the real test for the success of an MLP is growing the EBITDA per unit so you can grow the distribution. For the six-month period, for '04, the EBITDA per unit was $4.43 versus $4.59. You know, 3, which was a decline of 3.5%.

Part of that was was because of the units, you know, that you used. Part of it was because of the weather. But can you make a comment on your ability to go forward and enhance the growth of the partnership by enhancing the per unit growth of cash flow?

Yeah. I just want to deal, if you don't mind, for a second -- and that was a six-month period, right, that you were talking about?

Right.

Weather cost us 37 cents per unit, year-to-year. Very simple. If I adjust those numbers for weather versus last year, I am at 480 versus 459. Or 443 versus last year on a weather-adjusted basis would be 421. Now, I'm not trying to kind of, you know, be a wise guy or outsmart you, but you've got to take into account, you know, the weather difference. And that was simply 37 cents.

I was for the six months 5% warmer than last year. Colder than normal, but 5% warmer than last year. So if we are looking at how we are doing EBITDA per unit, I do have to, Ron, you know, just mention that to you, if you don't mind.

No, I understand.

Second, however, notwithstanding just playing the numbers game, this year/last year, our goal is to increase our distributable cash flow every year. We believe we can do that. We have demonstrated we can do that driving that by acquisition, which this past year was about 10%. But most importantly, is to start doing that through internal growth. My goal is -- as any other red-blooded American CEO -- is to grow this company wisely, without inappropriate risk. That's my goal.

I believe we can do it with the long-term strategy that I enunciated; which is to utilize our competitive advantage in the home heating oil, highly fragmented industry, to create a differentiatable product that is a brand, that will grow internally, that will stabilize our customer base and grow by being the only recognizable name. Our strategy is to focus in on those areas where we already have already have a very decent market share, capitalize upon that presence, to expand it in those markets first, and then gradually go into contiguous markets where our name can be known.

In this industry, the heating oil industry, 35% of the consumers only know the name of their own company; another 35% only know the name of one other company. And then any industry there are dislocations, people move in and and move out. We want to capture those customers at play in an industry where nobody knows anybody else's name. So my goal is the same as yours. I think we can do it. Grow the EBITDA, grow the DCF, through a combination of acquisition which we demonstrated, as well as internal growth.

Last question. You have current maturities and long-term debt, 22 million. When does that -- 22.5 million. When does that come due, what month?

Eight million comes due in April and five million comes due in September and we had the cash for those two payments.

Okay, thank you very much much.

Thank you very much, Ron.

Ladies and gentlemen, as a reminder, to register a question, press the 1 followed by the 4. Mr. Sevin, there are no more questions at this time. I will turn the conference back to you. Please continue with your presentation or your closing remarks.

Gentlemen, ladies, thank you very, very much for your involvement with us. If there are any questions offline that you want to ask me, I am certainly here all day. I would love to chat with any of you. Thank you, bye.

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