Star Group LP (SGU) 2011 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Star Gas fiscal 2011 second-quarter earnings conference call. At this time all participants are in a listen only mode. Later we will conduct a question and answer session and instructions will be given at that time. (Operator Instructions). As a reminder this conference call is being recorded.

I would now like to introduce your host for today's conference, Mr. Dan Donovan, Chief Executive Officer. Sir, you may begin.

Okay, thanks, Devin. Good morning and thanks to everyone for joining our call and webcast. With me today is Star's Chief Financial Officer, Rich Ambury, and our Chief Operating Officer, Steve Goldman.

After some brief remarks, Rich will review the fiscal second quarter ended March 31, 2011. This will be followed by some comments from Steve Goldman regarding our operating results. And, as always, we will be happy to then take your questions.

Before we begin, Chris Witty, of our Investor Relations firm, Darrow Associates, will read the Safe Harbor statement. Please go ahead.

Thanks, Dan, and good morning. This conference call may include forward-looking statements that represent the Partnership's expectations and beliefs concerning future events that involve risks and uncertainties that may cause the Partnership's actual performance to be materially different from the performance indicated or implied by such statements.

All statements, other than the statements of historical facts included in this conference call, are forward-looking statements. Although the partnership believes that the expectations reflected in such forward-looking statements are reasonable, they can give no assurance that such expectations will prove to have been correct.

Important factors that could cause actual results to differ materially from the Partnership's expectations are disclosed in this conference call and in the Partnership's and annual report on Form 10-K for the fiscal year ended September 30, 2010.

All subsequent written and oral forward-looking statements attributable to the Partnership, or persons acting on its behalf, are expressly qualified in their entirety by the cautionary statements. Unless otherwise required by law, the Partnership undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise after the date of this conference call.

I would now like to turn the call back over to Dan Donovan.

Thanks, Chris. Before turning to the specifics about the business, let me just state the obvious. Last quarter was a very busy time for Star Gas. Two of the key elements in our ongoing business strategy were certainly tested in the second quarter due to the extreme weather and the high price of oil.

The first of these is our goal to always provide a superior customer experience at all points of contact. And the second, no less important, is to manage our cost effectively throughout the organization.

This winter brought special challenges due to the increased snowfall and the problems some municipalities had in snow removal. As many will remember, New York City did not recover from the December 26, 27 blizard for weeks. After which it was created with another 36 inches of snow in January, breaking a monthly record set back in New York City in 1925.

Other areas were similarly affected. Connecticut had a massive snow base throughout the winter. For example, Bridgeport normally averages around 25 inches of snow a year, but they had 59 inches on the ground by the last week in February.

These events obviously made servicing our customers, while managing costs, extremely difficult. But I am pleased to say that we believe we have met these challenges. Even under such trying weather conditions, our employees performed admirably.

While temperatures continued to be cold in the last year, 8.8% colder for the quarter and 7.6% colder for the six-month period, heating oil prices have unfortunately continued to rise to their highest level since 2008.

As I said last time, actually if you take out the run-up in prices experienced during the winter of 2007, 2008, through the price collapse the following summer and fall, we are looking at the highest oil prices ever.

To give some more color, just take a look at spot oil prices. On March 31 of this year New York Harbor spot prices for heating oil where $0.93 per gallon higher than March 31 of 2010. That was $3.09 this year versus $2.16 in 2010 or a 43% increase. And as of the end of April this differential had increased to over $1.

We are glad to hear that the prices are down a little bit these last few days, but you never know where they're going and they are still pretty high.

Obviously, these record prices trigger many customers to take notice, and makes our customer retention job all the more difficult in a competitive market. However, due to our emphasis on serving the customer and training our employees to demonstrate our value as the best company to protect your home, we have been able to maintain a reasonable balance between margins and attrition.

During the most recent quarter our account gains were slightly greater than last year's second quarter, but our losses increased by 0.3%, resulting in an increase -- well, resulting in an increase in net attrition of 2,200 accounts. Year-to-date net attrition is also greater than last year by 0.3%, or 1,800 accounts.

Much of this can be attributed to the record price for heating oil previously mentioned. While we are not happy to see increased attrition versus last year, we worked hard to keep this down as much as possible, which I think reflects well on our reputation for service and quality.

In times of rising prices, especially at these levels, customer retention is a challenging task. While our employees are trained to handle erratic market conditions, we view the coming months as equally challenging when our customers will decide to sign up for another year of service with or without price protection. Our commitment to customer service and personal communications will be more important than ever.

Steve will speak a little bit more about our overall operating performance in a moment, but I'm let me add that in terms of acquisitions we closed on one small purchase during the quarter, but continue to evaluate an active pipeline of candidates as we come out of the heating season. All of our acquisitions from last year have performed as planned, and we are pleased with the results.

With that I will turn the call over to Rich Ambury to provide some comments on our financial results.

Thanks, Dan, and good morning everyone. For the quarter the total volume of home heating oil and propane rose 21 million gallons, or 14%. Colder temperatures of 9% versus the prior year are about 1% colder than normal. And the impact of acquisitions drove the increase in volume, which were somewhat reduced by net customer attrition.

Our combined home heating oil and propane margin declined by $0.012 per gallon to $0.918 due in part to recent acquisitions, which have historically had a slightly different margin than the base business. On a same-store basis, when you exclude the acquisitions, per gallon margins were $0.926, or less than $0.005 less than the prior-year period.

During the quarter home heating oil costs continued to escalate, which somewhat limited our margin expansion capability. In addition, over 90% of our cap price customers reached their maximum, as compared to the prior period when approximately 70% reach their maximum.

In looking at our operating costs, which includes delivery and branch and G&A, these expenses increased by $14 million due to the additional expenses of over $8 million from our acquisitions, and higher delivery cost of nearly $2 million arising from the numerous winter storms.

Bad debt expense and credit card fees were higher by $2 million as well, reflecting the 33% increase in sales. And insurance claims expense also rose by $2 million, due in part to the severe winter weather conditions. We posted net income in the quarter of $49 million, an increase of $8 million.

Adjusted EBITDA for the quarter increased by $5 million to $79 million, as the impact of colder temperatures and acquisitions were tempered somewhat by net customer attrition and higher operating costs attributable to the severe winter weather and higher wholesale product costs.

For the six-month period home heating oil and propane volume rose by 38 million gallons or 15%, again due to the colder temperatures of 8% versus the prior-year period, and those temperatures were about 2% colder than normal, and acquisitions. We did experience some net customer attrition, and that did reduce the volume sold.

As I previously mentioned, our per gallon margins for the six months declined by $0.005 to approximately $0.91 per gallon, due in part again to acquisitions. On a same-store basis our per gallon margins for the six-month period rose by $0.005 to $0.9170 per gallon.

Total gross profit though did increased by $36 million, due to the increase in volume and a slight improvement in our service and installation profitability.

Our operating costs increased by $23 million, largely again, due to the additional expenses from acquisitions of $16 million, and the added costs attributable to the severe winter weather, along with the increase in sales. We posted net income of $69 million for the six months, an increase of $17 million.

Our adjusted EBITDA for the six months increased by $13 million to $114 million. Acquisitions and the impact of colder temperatures were largely responsible for this increase, which again was somewhat offset by the effects of the higher operating costs and net customer attrition.

As of March 31, 2011, we had cash of about $12 million and borrowings under our revolving credit facility of $32 million. We have reduced these seasonal borrowings to approximately $3 million as of today.

Now I would like to turn the call over to Steve for some comments on the operations.

Thank you, Rich, and good morning everyone. As you have already heard, this past quarter was one of the most difficult ones we have had operationally in quite some time. We were confronted with an extraordinary amount of adverse weather conditions and saw incredible pressures on our customers from a sluggish economy, as well significantly rising oil prices.

The seemingly never-ending amount of snowfall throughout our geographic footprint created a very challenging period for providing the excellent service we pride ourselves on, while still controlling operating expenses.

Despite our best efforts to contain such expenses, our costs in the area of delivery and service were negatively impacted due to severe road conditions. In our ongoing effort to retain and attract new customers, we continued to choose to provide the best service possible, and we believe we did just that.

On previous calls, Dan and I have frequently commented about our emphasis on accountability and employee commitment at all levels in all types of weather conditions. We know that the challenges -- the changes we made over the past several years have given us an ability to provide the best levels of service in the home heating industry. And true to form, our re service departments were able to continue to meet and exceed customer expectations during this period, even with the incredible run-up in heating oil prices.

Our employees realize that difficult quarters like the one that just ended offer the opportunity to show our customers the real difference in what we can provide as an organization. Even so, our customers exited the quarter with some of the highest home heating prices ever experienced due to the prolonged winter weather and general pricing environment.

Such conditions obviously put severe pressure on many of our customers, and we started seeing signs of potentially significant conservation during the last month of the quarter in several operating areas.

We have seen more customers looking for ways to reduce their home heating expense, including changes in fuel type, as well as seeking out discount oil delivery companies with little to no service offering.

We were able to participate to some degree ourselves in this discount arena since we have a COD and mid-tier platform in many geographic areas.

In addition, our expanded service offerings in the area of natural gas, service, plumbing and propane are developing well. And while their impact to the overall business at this point is small, we see them as true growth opportunities going forward.

On the acquisition front, we continue to have ongoing discussions with a number of potential candidates, both large and small in nature. We know our reputation as a fair acquirer and great employer has helped drive the number of interested parties coming to us, particularly during volatile times such as these. With that said, the March quarter is a very busy operating time for most dealers, so it tends to be less active in terms of acquisitions.

The final area I would like to address is expense control. While cost management has always been an integral part of our managerial culture, we are once again going back and taking another look to find any non-value added expenses throughout our organization. Our team is determined to continue posting the best possible results regardless of the challenges we face.

With that, I will turn it back to Dan.

Okay, at this time we will be pleased to address any questions you may have. Devin, you can please open the phone lines for questions.

(Operator Instructions). Timothy Healey, Healey Group.

I wonder if you could comment about the loss of clients -- of your client base predicated on, one, the general downturn in the economy, and the foreclosure problem with mortgages. Simply people abandoning their homes and therefore abandoning their fuel commitments.

And, two, could you comment on whether you see a long term change in the use of home heating from fuel oil to propane, and whether that has any significance say that you can define? Thank you very much.

Sure. Regarding the first portion of your question, weakness in the economy or with inflation in the energy sector, inflation in general, obviously has impacted customer buying habits. And it definitely puts pressure on us, on our volume and our margins.

So far as home foreclosures, there has been an uptick in that. There are a lot of homes that are still out on the market that have not really closed on. But we don't see it as something overwhelming at this time. As a matter of fact, if anything, it might be a little bit better than it had been, but still not as good as it was a few years ago.

We continue to work with our customers with budget plans. We give a lot of flexibility in having people -- in how they pay their bill. And we empathize with our customers with these high energy costs. And we try to do everything we possibly can to make sure that we work with them in any aspect that is going to be make it easier for them. We also understand that customers are having -- because customers are having a hard time, that we try to communicate that with them.

We seem to be having a good dialogue with our customers in that regard, but, overall, we don't really see the economy causing us any more pain than it has over the last few years, which has been quite a bit. So it does affect our receivables somewhat.

In regard to other fuels, we are in the propane business, and it is a growing sector for us. So that is an area that we feel has got a lot of potential. Conversions to natural gas continued about the same rate they have always continued at.

The only good thing I could say would be the truth about natural gas and about its environmental consequences is getting out there, and some people are thinking twice before they do make a switch. But it is something that we've learned to deal with over the years and we continue to deal with it.

Thank you very much. But, again, may I ask, do you see any important change from the ecological point of view compelling homeowners to switch from old oil tanks in the ground to propane tanks? That happened in my family some years ago up in Putnam County, north of New York City.

No, we don't see an overwhelming need for that. As a matter of fact, you look at number two heating oil as a fuel of the future, believe it or not. A year from now we are going to have ultra low sulfur heating oil. We will also have a biofuel component in it, which means that the emissions from heating oil will be probably less than that of natural gas and propane.

Propane is something that people do put in in rural areas, and that is why we are in that business, the propane business. But we don't see a problem with the tank issue or with our fuel in general, other than some stretchers that people might -- some things that people may say about us that are not exactly true.

But we feel quite confident that people have a lot of good reasons as to why they should stay with home heating oil. And many, many of our customers have upgraded their tanks over the previous years, both above ground and below ground.

I understand. My grandfather put this tank in in 1924, so you could understand what the local community made the new owner take it out.

Right, that happens a lot. A lot of people take out an underground tank, which a lot of times we find the tank was fine, but they just feel better about putting in an aboveground tank. And the technology has changed tremendously, where we have aboveground tanks that are very, very sound that are never going to have to be replaced.

That you own, I believe?

No, we don't own those companies. We buy it from several manufacturers though.

No, no, I think you own the tank, the propane tank, don't you? You actually own the tank rather than the homeowner owns it?

In the propane business usually you own the tank, right, the homeowner doesn't own it. But there are some customers who do own their propane tank.

Okay, thank you very much.

Michael Prouting, 10K Capital.

Hi, guys. Good quarter, I guess, considering the circumstances you're working under. Just a couple of questions. Rich, as far as the per gallon gross margin on the quarter, I guess even outside of the acquisitions it was still down a little bit year-over-year. I wanted to get your thoughts on that.

It was down about $0.005 year-over-year for the quarter. Again, we sought a tremendous increase in home in oil prices during the quarter. As well as our ceiling customers, which comprise greater than 45% of our volume sales. Over 90% of those customers hit the maximum price versus the prior year only 70% hit the maximum price, which gave us a little bit more room to glean some margin last year as opposed to this year.

Okay, so going forward then, I know you don't like to make any forward-looking statements, but you said going to be a forward -- no reason not to think that per gallon margins should normalize going forward?

Let me just say this about your question. Two years ago on these conference calls I made it a point to emphasize the fact that we had a decrease in price along with cold weather. I said it gave us a very near-term positive opportunity that was basically an anomaly. We love decreasing prices because it is good for our customers and it is good for us.

While this year 90% of our customers hit their ceiling, which meant that, hey, there is no margin expansion possible at all for most of those customers. The year before was 70%, and two years ago only 1% of our ceiling customers hit their ceiling price. So you have margin expansion possibilities. But in an up market like this you don't.

So if you could tell me where the price of oil is going to go, if it keeps going higher, if it stays high like that, it is going to be harder to get margin. But we work very hard at trying to balance getting margins with attrition. And that is the biggest challenge that we have when from a macro point of view that is something we're looking at all the time.

Thanks for those comments. You mentioned attrition. On the attrition side, I guess, attrition picked up again a little bit year-over-year. Any thoughts on attrition going forward?

We don't know. But, obviously, people who got a delivery this winter -- we have had customers now get deliveries at very high levels. Two years ago when we had this high price, it was the late spring and it was the summertime, and there were not many deliveries made.

But we have customers now who got deliveries in February and March, who might not be getting another delivery until September. And what is going to stick in their head is the price that they paid when they got that last delivery.

So the challenge to us is to communicate to customers that we have the best pricing options available with our ceiling plan. And that, obviously, we are the best company to protect their home. So it is something that we don't know. I would love to see prices continue down. They are down big today. They were down yesterday, and we hope they continue to fall.

Okay. Then, just finally, as far as acquisitions are concerned, I am wondering if you can just characterize the opportunities you see in front of you here? That is my final question, thanks.

Well, you know, coming out of the season usually the people who are interested in possibly selling their business will approach us. And that has happened every year. It has happened this winter. We have gotten several inquiries right now that we are working on.

We think that the pipeline of potential acquisitions could be strong this year. But you never know. It depends upon the expectations of the sellers, what they think their business is worth.

Working capital requirements are going to be very difficult if the price of oil stays where it is, and some of these owners may be looking at that also. So we are optimistic that we will have some good opportunities to look at this spring and summer.

All right, thanks.

[Chester Kirschenbaum], private investor.

I have spoken to the last few conference calls and, frankly, I am thrilled with the way you guys are operating. Great quarter. I hope you continue it. And I have some questions.

A., your share buyback. Are you completed with that and do you expect to increase that share back in the Company's future?

We haven't completed our share buyback. We still have probably another 6 million units or so, round numbers, still to buy under that.

You got another 6 million units to buy?

Right.

Very good -- good. I know periodically you're buying it.

Well, yes. We have a plan that we are in the market with.

Now another question. I know you've improved your financial structure many times, which I think is terrific. However, I see where the long-term debt increased to [$140] million over the last six months. It sounds strange to me how our debt increased so much.

Well, what we did back in the fall, and we did our other offerings, is we refinance the debt that was coming due, which was $82.5 million, and that was coming due in 2013. We refinanced that and put another $48 million so odd worth of debt on the balance sheet, because the size of it -- that was probably the smallest high-yield offering that we could do.

At a lower rate.

And it was at a lower rate. It is 8.875% versus 10.25% that we are paying. And we extended the maturities out to 2017.

Yes, I thought that was terrific. Are we paying off part of our debt periodically quarterly or whatever?

Well, we are not paying off that debt, but, like I said, we have reduced our -- we do have seasonal bank borrowings, and if we didn't put that extra long-term debt on our books, our re seasonal borrowings would have been slightly higher. And we have reduced our seasonal borrowings to $33 million at the end of March and today they are $3.5 million.

I see. Okay. I know our spring and summer quarters are weaker quarters. Are we doing anything to improve business in that regard, expanding our air-conditioning servicing part of the business, or is there any other area that we are trying to improve revenue or business during those slow periods?

Well, you know, air-conditioning we have been in for a long time. Right now being that the winter is over, we hope it gets very hot because that generate interest in air-conditioning. We are a very strong air-conditioning servicing company and air-conditioning installation company. So it is something that could be very good for us. And we also like to serve the whole house, so we do various things.

Steve, why do you talk a little bit about what we are doing on the propane side and security and plumbing?

We have been steadily expanding our propane business, which we see as far less seasonal. We have brought up four new operating locations with propane in the last three months. And we have plans to bring five more on in the next several months throughout our geographic footprint.

It is labor intense doing it. It takes a lot of training to get each site up. And we have to make sure they're well-trained and well-planned, but that seems to be going very, very smoothly, and (inaudible) being received very well because our strong brand recognition in the homeowner's mind.

We have also begun expanding our plumbing services in several areas of our footprint, where we think it serves our customers best. And we see that as less seasonal as well to bring in revenue.

Honestly, the biggest thing we could do in the non-revenue producing seasons in some of these areas is shrink expense, which is our biggest concentration trying to emphasize reducing the expense and structure for the non-heating season. It is really makes the spring season for us a very busy time to come up with creative ways to shrink expense. And that is really where we are very focused on right now.

Great, great, that's great. I know that, as you probably remember, about four, five years ago we had problems with the hedging of the oil price of our customers prior to the seasons. We are very careful about that, and hopefully now we have got hedging -- early prices for the entire heating season up with our customers, we are very careful with that, I hope, aren't we?

We are very, as you would say, careful with our hedging. And the hedges that we put on are for commitments that our customers want. When we sign up our customers that is when we put our hedges on. We do not try to call the market or time-to-market. And we have no opinion as far as hedging goes as to whether prices are going up or whether prices are going down.

So how do you handle that? If the customer wants to hedge a price for the season, for the heating season, how do you handle that?

Well, what we do is we, each and every day, look at all our customer database files and we can see how many customers are signing up that day. And when we hit a critical mass basically of 500 customers -- and each customer takes roughly 1,000 gallons, or that would be in order for 0.5 million gallons, we would put a hedge on for those 500 customers. We do that each and every day here running through our customer database.

so you buy oil at that -- at current price (multiple speakers).

We will buy a financial -- I guess you would call it derivative. We either buy a swap or some type of call option.

Okay, as long as you're covering yourself. That's good. That's good. Listen, just keep up the great work. I hope you will address the dividend again sometime in the future. And keep up the great work. I'm very proud of you guys. I think you do a wonderful job. And I have been a long-term investor -- a long time investor. I had it during the very good periods, five, six, eight years ago. And then I bought you again about five, six -- about six -- about four years ago when you took over the business and restructured the business. And I am proud of you guys. Just keep up the good work.

And thank you for being an investor.

You're welcome, and just please address a dividend when you can. Take care. Thanks again.

Carlos Rodriguez, Hartford Investment.

I appreciate the questions that were asked by the previous caller. Very good questions. So the Company is trading at about 6.5 times trailing EBITDA right now. And you are upon the acquisition season right now. What kind of multiples are you seeing? Is it still in sort of that 4 to 5 range for a pure fuel oil heating business?

Yes.

Given the headwinds that the Company is facing with respect to higher commodity prices and customer conservation, and the fact that you're competing with natural gas and other heating sources, what is a leverage target that the Company feels comfortable with? You guys are around, I guess, 1.9 times using the seasonal capital hight annual revolver. What is a comfort level as far as the leverage?

If you look at the seasonal borrowings there are receivables in inventory to support that level of borrowing, so the seasonal borrowings are self liquidating. Our level of comfort is probably somewhere in the range of long-term debt to EBITDA between 2 to 2.5 times.

That's all I had. Thanks guys.

James Pappas, JCP Investment Management.

I wanted to ask you about the receivables, $276 million or so. How do you guys see that playing through over the next quarter or so as far as cash goes?

And my second question is really how does that affect how much debt you want to end up with? I understand that as heating oil has gone up your receivables are higher than usual and you needed to borrow a little more. So how do you think about what go forward debt should look like and what the cash balance should come out to, as I think about my model for the next two quarters?

Well, if you look at our days sales outstanding at the end of March this year versus last year they were up a bit, but they're not up astronomically. I believe it is up two or three days this year versus the prior two periods. We fully expect to collect the majority of that money, as we have in the last six or seven years around here.

Again, we look at structuring a company as far as leverage goes on a long-term basis, with the receivables and borrowings under the working capital line being self-liquidated, which we see as inventory comes down and we collect the receivables.

Okay, and so we should see revolver borrowings come down $30 million or so?

Like I said in my opening remarks, they are down to about $3 million as of today.

Okay, great. That is all I had. Thanks.

(Operator Instructions). Michael Prouting, 10K Capital.

I lied, I have one more question. As you look at becoming a cash taxpayer I'm just wondering if you have given any thought to anything you can do structurally, bearing in mind that at one point or another you were considering basically collapsing the LP structure, given that you don't actually derive any tax benefit from that?

So I am just wondering if there is anything you're looking at doing, either structurally or say potentially through acquisitions or what have you in order to, shall we say, to more optimal cash taxpaying situation as you use up those remaining NOLs? Thanks.

You are absolutely right. The NOLs are pretty much -- we have whittled those down. We have several million dollars that will help us for calendar -- not fiscal, but calendar 2011. And we are going to be a full taxpayer, and I'm not so sure there is much we can kind of do about that. We have been telling folks that we will be a full taxpayer in the very, very near future.

So nothing you are looking at doing either structurally or through acquisitions or otherwise to try to forestall that?

Well, we have looked at a few things, but there is -- I haven't really come up with a rabbit to pull out the hat on this one.

Okay. Thanks.

Ed Olson, private investor.

How many shares were bought back in the second quarter?

Zero.

Okay, so that is two quarters, right? With the multiple where it is that is understandable. Are there any significant facilities for sale from any of your acquisitions or facilities and from Star Gas itself?

No, not at this time.

Is there any chance that you would look at a dividend -- the pattern has always been at the end of the year. Is there any chance that pattern would be broken?

No, I mean, we look at it each quarter. The Board makes that decision each quarter, and they try to be a little forward thinking about it, about the uses of our cash. We have talked about this many times, and it really still hangs out there.

We look at acquisitions first. We look at the possibilities of buying units. We look at the possibility of paying down debt. And we, of course, always look at and consider a special distribution or an increase in distribution. But it depends upon what we are seeing in the market.

Right now with the price of oil as high as is, it is probably not a bad idea to hang onto that cash. And, of course, we are always hoping that we could use it for a nice sized acquisition.

Agreed, but a special distribution would be very welcome by your shareholders, and I am sure you appreciate that.

Switching over to the allocation of capital, without disparaging or starving any of the businesses, where would propane rank on a number basis in terms of your allocating capital?

The purchase of propane?

No, no. If you are allocating capital, either on an acquisition basis or allocating capital looking out, let's say, for the next one to three years, where does propane rank in all your businesses?

Well, it ranks very highly. It is very desirable to purchase it -- a business that has propane, if they come our way, particularly if it is a mixed fuel type business. We are vigorously looking at both. It is a little more competitive market to procure those businesses, especially if they were propane only. The propane competitors are typically offering higher multiples. They operate on different operating assumptions than we do at this juncture.

From an organic standpoint, from allocating capital, one of the things that is slowing our growth or at least pacing our growth in the area of organic growth of propane where we bring up these operating sites is the allocation of capital, because we have to procure trucks for both delivery as well as the installation of tanks for propane. We have obviously -- we are doing that in a measured format.

It is a very small part of our business right now. We have actually grown it though in leaps and bounds in a year's time through both organic efforts as well as a couple of acquisitions, most notably one in Rhode Island and one in Pennsylvania. We are going to continue those efforts. And where -- as we broaden the base it will become a more important component of what we do with our capital.

Well, you're beginning to use the word propane more frequently in your press releases, and the multiple that goes along with that. I think everybody understands that.

If you look at the business in terms of goals, where would you want to see propane as a percentage of your business in a fairly reasonable outlook, let's say one to three years, other than bigger?

I really don't know how we can project that. With the multiples out there that the other pure propane players are paying, I doubt we are going to be able to compete with that. Our best competition at these acquisitions are dual fuel acquisitions where they are in heating oil, and they have a component of propane. We had a covenant not to compete that expired, and we couldn't even make those acquisitions up until about 18 months ago. So we're basically going to be making heating oil acquisitions with an element of propane in them.

Right, the competitors obviously have a higher multiple stock, that gives them --.

And they have basically the tax advantages, right.

Sure. Well, anyway, that is the whole security, plumbing, air-conditioning and propane obvious, hopefully, will drive the multiple in the future.

Anyway, nice quarter. Thanks, guys.

I'm am showing no further questions at this time. I would like to turn the call back to Mr. Donovan for closing remarks.

Okay, Devin, thank you. I want to thank everybody for taking the time to join us today, and of course, always for your ongoing interest in our Company, Star Gas. And we look forward to sharing our third-quarter results with you in August. Thank you.

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the program. You may all now disconnect. Thank you and have a nice day.