Daniel P. Donovan - Chief Executive Officer of Kestrel Heat LLC, President of Kestrel Heat LLC and Director of Kestrel Heat LLC Chris Witty Richard F. Ambury - Chief Financial Officer of Kestrel Heat Llc, Executive Vice President of Kestrel Heat Llc, Treasurer of Kestrel Heat Llc and Secretary of Kestrel Heat Llc Steven J. Goldman - Chief Operating Officer of Kestrel Heat LLC and Executive Vice President of Kestrel Heat LLC

Andrew E. Gadlin - Odeon Capital Group LLC, Research Division

Good day, ladies and gentlemen, and welcome to the Star Gas Fiscal 2013 Third Quarter Earnings Conference Call. [Operator Instructions] As a reminder, today's conference is being recorded. I would now like to turn the call over to Dan Donovan, CEO. Please go ahead, sir. Daniel P. Donovan: Thanks, Jaime. Good morning, and thank you to everyone for joining us. With me today is Star's Chief Financial Officer, Rich Ambury; and our Chief Operating Officer, Steve Goldman. After my brief remarks, Rich will review the company's fiscal third quarter ended June 30. This will be followed by comments from Steve regarding operating results. And then, as always, we'll be happy to take your questions. But before we begin, Chris Witty, of our Investor Relations from Darrow Associates, will read the Safe Harbor statement. Please go ahead, Chris.

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 and may cause the partnership's actual performance to be materially different from the performance indicated or implied by such statements. All statements, other than 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, it 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 annual report and Form 10-K for the fiscal year ended September 30, 2012. 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'd now like to turn the call back over to Dan Donovan. Dan? Daniel P. Donovan: Okay. Thanks, Chris. After last year's record warm temperatures, we've been very pleased to see 22% colder weather during the first 3 quarters of this year versus fiscal year 2012. Although that's still 4% warmer than normal, it's no surprise that this had a favorable impact on adjusted EBITDA, which increased $26 million or 34% during the 9-month period year-over-year. Various factors such as attrition, conservation and the positive and negative effects of some major storms, including Sandy, impacted our overall results. Our oil prices continue to remain high, while the average spot price was lower this past quarter than during the period ended March 31, 2013. Since June, we have seen an upward trend in the price of home heating oil. This is further complicated by the NYMEX switch to ultra low sulfur diesel contracts. Some states will require this product in the future, but not all have made the switch yet from high sulfur heating oil. New York, however, already requires ultra low sulfur heating oil. So we are purchasing, storing and selling both products. The bottom line is that we're still operating in a high-priced environment for home heating oil. But in areas where ultra low sulfur heating oil is already mandated, our product is as environmentally as clean as natural gas. Unfortunately, there's a price differential [indiscernible] and that makes our jobs harder in terms of keeping customers and maintaining margins. That said, our attrition rate continues to show improvement versus the year-over-year numbers. Attrition for the 9-month period is favorable versus fiscal 2012 by some 5,600 accounts, as additions rose by 2,900 and losses fell by 2,700. As we have said previously, the decline in lost accounts reflects fuel losses due to price and poor credit, while the uptick in new accounts stems from customer referrals and local marketing efforts. We closed on 1 acquisition in the New York area in April and recently closed on another small purchase also in New York, and we continued to discuss and model and analyze several potential transactions that will hopefully result in greater acquisition activity in the current -- coming months. Our acquisitions always remain a priority for us. We also continued to acquire units under our unit repurchase plan and bought 1.7 million during the quarter ending June 30, 2013. The Board also authorized an additional 1.9 million common units to be repurchased, restoring the number of units that may yet to be repurchased to 3 million. Since we started this initiative several years ago, we have acquired a total of 17.8 million units, illustrating our strong belief in the value of the partnership going forward. Lastly, I would just like to mention that this will be my last investor call for Star Gas, as I will be retiring as CEO effective September 30. I appreciate the opportunity I've had over the many years here to interact with investors and others interested in Star Gas. And I can confidently say that the company will be in good hands with Steve Goldman as President and CEO. Of course, as an investor, Board member and in my consultant role, I will remain a strong -- remain to have strong interest in all Star Gas activities. With that, I'll turn the call over to Rich Ambury to provide some comments on the first quarter results. Richard F. Ambury: Thanks, Dan, and good morning, everyone. For the quarter, our home heating oil and propane volume increased by 22% versus last year or about 8 million gallons to 43 million gallons, as the impact of 23% -- 27% colder temperatures more than offset net customer losses for the trailing 12 months of 3.7%. We were able to expand our heating oil and propane margins by about 6% or $0.06 a gallon to $0.98 per gallon versus the third quarter of fiscal 2012. Please keep in mind that the third quarter is a non-heating period with relatively low volumes, so margins can be quite easily impacted. Total gross profit, though, did increase by $10 million due to the combination of higher margins and the impact of colder weather. Delivery and branch expenses increased by 15% or $7 million, primarily due to the 22% increase in home heating oil and propane volume. We posted a net loss for the quarter of $8 million, $4 million higher than the prior-year period, largely due to an unfavorable non-cash change in the fair value of derivative instruments. The adjusted EBITDA loss decreased by $0.8 million to $3.4 million, as the impact of colder temperatures and higher per gallon margins drove an increase in product gross profit, which was reduced by the corresponding increase and higher operating costs. For the 9-month period, home heating oil and propane volume increased by 18% versus last year or 48 million gallons to 304 million gallons, as the impact of colder temperatures of 22% and the additional volume provided by acquisitions more than offset net customer losses, conservation and other factors. On a year-to-date basis, our heating oil and propane margins increased to $0.957 per gallon, up $0.02 versus the first 9 months of fiscal 2012. The combination of slightly higher margins and the impact of colder weather drove an increase in product gross profit of $54 million. Delivery and branch expenses increased by 17% or 29 million gallons -- or $29 million in line with the 18% increase in home heating oil and propane volume. On a cents per gallon basis, excluding the impact of the prior-year weather hedge, delivery and branch expenses actually declined by 7% to $0.60 per gallon. Net income for the 9 months was $44 million or $12 million higher than the prior-year period as the impact of colder temperatures was partially offset by an unfavorable non-cash change in the fair value of derivative instruments of $5 million and the absence of any weather hedge benefit, which contributed $12.5 million in the prior-year period. Adjusted EBITDA increased by 34% or $26 million to $100 million, largely due to the increase in volume. Again, adjusted EBITDA for the 9 months ended June 30, 2012 included the $12.5 million weather hedge benefit. As of June 30, 2013, we had repaid our bank borrowings and had $44 million in cash. And with that, I'd like to turn the call over to Steve. Steven J. Goldman: Thank you, Rich, and good morning, everyone. During this past quarter, our operations continued to produce very positive results, as our customers benefited from our focus on excellent service and responsiveness. We saw solid customer referrals due to our dedication to service this past winter, including during several major storms such as Sandy. While service expenses were greater than last year, this was primarily due to higher volume and additional costs related to the expansion of our non-heating oil services including propane, equipment installation, plumbing and air-conditioning. Our reputation as a home service provider is strong throughout all of our locations and across all of our brands. Thanks to the dedicated efforts of our staff over the past few years. We've worked extremely hard creating a clear message that we believe the key to our success as a company is not to be simply the lowest priced provider, but to provide the best service and the best overall value proposition. We have created an expectation within the company from top to bottom that this must be the way to serve our customers for -- as many of their needs as we can. While this may seem to be the same story over and over again, we do not get tired of telling you since the results have been excellent thus far. Our propane operations remain a priority for us and are growing rapidly similar to our locations, which provide natural gas service, plumbing, emergency home generators, air-conditioning and security services. Our challenge will now be to continue to train and attracting the qualified employees to further expand these businesses. At the same time, we have not stopped looking for ways to control expense and cut operational costs wherever we can. We constantly receive new ideas from our team, who are certainly instrumental in these efforts. One way we know we can reduce expenses further is stronger management. And to this end, we have recently begun an internal mentorship program. This program, thus far, has been very positively welcomed by our employees, and we're already seeing this helping us in many ways and we see that continuing going forward. In the area of acquisitions, we have actually been rather busy looking at a number of businesses, both large and small. As expected, we have seen a pickup in interest since the end of the heating season. And while we only closed on 2 transactions this past quarter, we are optimistic about several others. My final comment, as always, is that I would like to express my thanks to the efforts of our entire team, who have worked hard to produce these good results. And I especially would like to thank Dan, who is participating in his last call today as CEO for the vision and leadership he's provided for all of us. We know where we need to go as a company. Thanks to the path he has laid out these many years. And all of us at Star Gas will continue to work hard in maintaining our focus on the customer going forward. With that, I'll turn the call back over to Dan. Daniel P. Donovan: Okay. Thanks, Steve. At this time, Jaime, we'll be pleased to address any questions that any of our listeners may have. So you can open up the phone lines.

[Operator Instructions] We do have a question from Andrew Gadlin from Odeon Capital Group. Andrew E. Gadlin - Odeon Capital Group LLC, Research Division: My first question was about the 2 recent acquisitions. Could you discuss the size? I mean, whether there were some incremental businesses there and other propane or other services? Daniel P. Donovan: Well, basically, the heating oil businesses -- the small businesses are both located in Long Island. The gallon, if combined, is about 1.5 million gallons. Customers is about 1,500 to 1,600 customers. The multiples we purchased them on are all less than 3.5x, and we think that they fit very well with us. And sometimes, the small acquisitions are the better acquisitions for us because we have a -- sometimes it's easier to grow them because we've, sort of, maintained them as they are. Yet, we get some economies of scale in the long run. Andrew E. Gadlin - Odeon Capital Group LLC, Research Division: Is there a consolidation opportunity with the 2? I mean, are there 2 branches that can be combined into 1? Daniel P. Donovan: A lot of times, we will do that. We will combine them operationally into 1, where they weren't running under 1 general manager, 1 delivery manager, 1 service manager. But we always maintain the separate names because that's how you get to keep the customers. So, yes, we do that. We don't do it on day 1. We take our time to make sure that we do it, so that we can enhance keeping the customers that were there and growing more customers under that particular brand name. Steven J. Goldman: One of the things in regard to that, consolidation, in a lot of cases, is back-office consolidation. And both of these acquisitions will lend themselves to some of that. So when we do these types of small acquisitions, we initially build in some incremental benefits to them because of that. Andrew E. Gadlin - Odeon Capital Group LLC, Research Division: Got it. And that's included in your less than 3x multiple, as you think... Steven J. Goldman: It is. Andrew E. Gadlin - Odeon Capital Group LLC, Research Division: Got it. Okay. Daniel P. Donovan: It's less than 3.5x multiple, not less than 3x. Andrew E. Gadlin - Odeon Capital Group LLC, Research Division: In terms of the competitive environment, it's been a good year for Star Gas, but I'm sure it's been thanks to the weather, a better year for some of the competition. What are you seeing in the market from some of the other players that you come up against? Daniel P. Donovan: Well, we see -- what we always see basically is that, in this business, unfortunately, this is the way it is that people offer a much lower price for a new customer and that customer usually keep that lower price for a period of time and then they try to bring that price up, and we see that same thing happening. We see -- we're getting a good number of people who are interested in valuing their company, seeing if they want to sell. But a lot of times, the expectations of sellers is much higher than reality. So we spend a lot of time talking to people about that. But other than that, the industry is pretty positive. We have a lot of -- believe it or not, we have a lot of good things going for the industry, and that the ultra low sulfur heating oil really is a good product for us. And that seems to be over the next, I would say, 5 years, just about all of the states in the Northeast and the mid-Atlantic, we'll probably be selling that product. So really, it's not too much of a change from any other year at this time. Andrew E. Gadlin - Odeon Capital Group LLC, Research Division: Got it. And I was a little bit -- I'm just catching up on that -- your comment to open about the NYMEX contracts that have been switched. Can you talk about that a little more, and how you're using that in your hedging program? Daniel P. Donovan: Sure. Starting in April, the NYMEX moved to a lower sulfur diesel contract. And all the derivatives that we buy -- or most of the derivatives that we buy are based on that NYMEX contract. So we are hedging the -- both the high sulfur and the low sulfur products that we're purchasing with either NYMEX contracts or over-the-counter derivatives of that NYMEX contract. Andrew E. Gadlin - Odeon Capital Group LLC, Research Division: Got it. And given that not all of the product that you're buying and selling is the low sulfur heating oil, does it create a problem in terms of the hedging? Or is it an opportunity? Daniel P. Donovan: Well, we don't hedge for profit. So we just try to secure everything we have. We had a reverse last year when the NYMEX contract was only trading the high sulfur, and were buying product in New York State at the -- for low sulfur. So we had, kind of, had the reverse issue last year. So we do have experience in dealing with both the high and the low sulfur. It's just now turned around for us.

[Operator Instructions] The next question comes from Ed Olsen [ph].

Great quarter. And, Dan, you're going to go out on top; and, Steve, that's going to be one tough act to follow. Steven J. Goldman: I know that, Ed. Thanks.

Okay. The comment was focused on organic growth in the propane operations. Could you talk a little bit about the volume in that particular -- what does it look like versus last year, the growth rate and buybacks for the current quarter? Has there been activity, and how much? And finally, as a shareholder, my personal view is that you really have addressed the issue of the shareholder value, and you're certainly going to have -- we are certainly going to have a very high volume day to day. I think the market is endorsing what you all had done. Daniel P. Donovan: Sure. I can answer a couple of those. We haven't bought back any units, so far, in the quarter. It's the quarter starting July 1. And with regard to propane volume, it's up about 20% or so year-over-year for the 9 months. If that's helpful. Steven J. Goldman: Ed, one thing to your question, though, that I want to point out. While the volume's up 20%, logistically, the spread of our operation has basically saturated our territory, which was really our primary goal for propane to this point, and I would think we're really ahead of where we expected to be. It's gone exceedingly well, setting ourselves up. We're fully able to compete in all our markets. We are not alone. I'll add that point that there are some significantly good competitors of ours in the heating oil space that have also entered into the propane market. Some are ahead of us, and some are behind us. We have certainly got the attention of some of the larger propane sellers in our territory. Our core offering is excellent service. It's what's driven the growth so far in our volume, and I'm very confident that we're going to be able to continue that service based on the way we've set this up.

Good. And I'm betting that you're going to address that in your acquisition program. Great news on the cost side, on the delivery and the margins. And again, I really appreciate the -- addressing the shareholder value. Good luck, Dan. Daniel P. Donovan: Thank you.

[Operator Instructions] There appear to be no further questions. I would now like to turn the call back over to Mr. Donovan for closing remarks. Daniel P. Donovan: Okay. Thank you, again, Jaime. I want to thank everybody for taking the time to join us today as always and for the ongoing interest in Star Gas. Our next call will be in early December to review the fourth quarter and the fiscal 2013 full year results. Thank you very much.

Ladies and gentlemen, that does conclude the conference for today. Again, thank you for your participation. You may all disconnect. Have a good day.