STAR GROUP LP
For the period ended Mar 31, 2024. Filed May 1, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Mar 31, 2024 · Filed May 1, 2024
SGU$13.18+0.2%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2023-12-31; filed 2024-02-07.
0000950170-24-012209
Item 2. - Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-03-31; filed 2024-05-01.
0000950170-24-051273
Item 2. - Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 125 previous paragraphs and 180 current paragraphs.
85 unchanged; 36 reworded; 39 added; 4 removed; 0 previous and 20 current paragraphs rearranged.
Tables are not compared: 13 previous and 19 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (39)
Current report
(a) On April 30, 2024, the NYMEX ultra low sulfur diesel contract closed at $2.51 per gallon or $0.27 per gallon lower than the average of $2.78 through the first six months of Fiscal 2024.
Current report
The temperatures experienced during the hedge period through March 31, 2024 and March 31, 2023 were warmer than the strikes in the weather hedge contracts. As a result at March 31, 2024 and March 31, 2023, the Company reduced delivery and branch expenses and recorded a receivable under those contracts of $7.5 million and $12.5 million, respectively. The amounts were received in full in April 2024 and April 2023.
Current report
For fiscal 2025, the Company entered into weather hedge contracts with the similar hedge period described above. The maximum that the Company can receive is $15.0 million annually and we are additionally obligated to make an annual payment capped at $5.0 million if degree days exceed the Payment Threshold. If we had this same amount of coverage in place during fiscal 2024 we would have been paid an additional $7.5 million more than fiscal 2024.
Current report
(a) Primarily represents changes in delivery timing.
Current report
For the three months ended March 31, 2024, cost of product decreased $76.9 million, or 16.5%, to $389.4 million, compared to $466.3 million for the three months ended March 31, 2023, due to a decrease in wholesale product cost of $0.3775 per gallon, or 12.5%, and a decrease in total volume sold of 4.6%. Product volumes and wholesale product cost include heating oil, propane, motor fuels and other petroleum products.
Current report
During the three months ended March 31, 2024, the change in the fair value of derivative instruments resulted in an $11.8 million credit due to an increase in the market value for unexpired hedges (a $0.7 million credit) and an $11.1 million credit due to the expiration of certain hedged positions.
Current report
For the three months ended March 31, 2024, general and administrative expenses increased by $0.2 million or 2.8%, to $6.9 million, from $6.7 million for the three months ended March 31, 2023, due to a $0.4 million reduction in the gain on sale of fixed assets that was partially offset by $0.2 million of other net expense decreases.
Current report
For the three months ended March 31, 2024, Adjusted EBITDA decreased $5.8 million, to $96.3 million, compared to the three months ended March 31, 2023, as an increase in home heating oil and propane per gallon margins was more than offset by a 4.0 million gallon decrease in home heating oil and propane volume sold and a decrease in the weather hedge benefit of $6.4 million recorded for the quarter as compared to the prior year.
Current report
Six Months Ended March 31, 2024
Current report
Compared to the Six Months Ended March 31, 2023
Current report
Volume
Current report
Volume of motor fuel and other petroleum products sold decreased by 6.3 million gallons, or 9.2%, to 62.5 million gallons for the six months ended March 31, 2024, compared to 68.8 million gallons for the six months ended March 31, 2023.
Current report
Product Sales
Current report
For the six months ended March 31, 2024, product sales decreased by $0.2 billion, or 15.8%, to $1.0 billion, compared to $1.2 billion for the six months ended March 31, 2023, due to a decrease in average selling prices and a decrease in total volume sold of 6.9%. Selling prices decreased largely due to a decrease in wholesale product cost of $0.5048 per gallon, or 15.9%, compared to the six months ended March 31, 2023. Product volumes and wholesale product cost include heating oil, propane, motor fuels and other petroleum products.
Current report
Installations and Service
Current report
For the six months ended March 31, 2024, installation and service revenue increased by $3.6 million, or 2.5%, to $150.3 million, compared to $146.7 million for the six months ended March 31, 2023 driven by an increase in installation sales.
Current report
Cost of Product
Current report
For the six months ended March 31, 2024, cost of product decreased $192.7 million, or 21.8%, to $692.7 million, compared to $885.4 million for the six months ended March 31, 2023, due to a decrease in wholesale product cost of $0.5048 per gallon, or 15.9% and a decrease in total volume sold of 6.9%. Product volumes and wholesale product cost include heating oil, propane, motor fuels and other petroleum products.
Current report
Gross Profit — Product
Current report
For the six months ended March 31, 2024, total product gross profit was $351.1 million, which was $2.7 million, or 0.8%, lower than the six months ended March 31, 2023, due to a decrease in home heating oil and propane volume sold ($20.6 million) and decrease in gross profit from other petroleum products ($2.6 million), that was partially offset by an increase in home heating oil and propane margins ($20.5 million).
Current report
Cost of Installations and Service
Current report
During the six months ended March 31, 2024, the change in the fair value of derivative instruments resulted in a $7.3 million charge due to a decrease in the market value for unexpired hedges (a $3.5 million charge) and a $3.8 million charge due to the expiration of certain hedged positions.
Current report
During the six months ended March 31, 2023, the change in the fair value of derivative instruments resulted in a $20.7 million charge due to a decrease in the market value for unexpired hedges (a $13.5 million charge) and a $7.2 million charge due to the expiration of certain hedged positions.
Current report
Delivery and Branch Expenses
Current report
For the six months ended March 31, 2024, delivery and branch expense increased $4.5 million, or 2.4%, to $198.4 million, compared to $193.9 million for the six months ended March 31, 2023. During the six months ended March 31, 2024, the company recorded a benefit under the weather hedge of $7.5 million compared to a benefit of $12.5 million during the six months ended March 31, 2023 that accounts for a $5.0 million increase in expense. The increase was also driven by $2.7 million of acquisition related expenses and was partially offset by a $3.2 million, or 1.6% reduction in base business expenses. The decrease in the base business was driven by a $4.9 million, or 7.1% reduction in delivery expenses due to the 6.2% decline in home heating oil and propane volume, and other expense reductions of $1.2 million These decreases in the base business were partially offset by an increase in insurance expenses of $2.9 million due to increasing premiums and expected claim costs.
Current report
Depreciation and Amortization Expenses
Current report
For the six months ended March 31, 2024, depreciation and amortization expenses increased $0.7 million, or 4.3%, to $16.1 million, compared to $15.5 million for the six months ended March 31, 2023, primarily due to acquisitions.
Current report
General and Administrative Expenses
Current report
Finance Charge Income
Current report
For the six months ended March 31, 2024, finance charge income decreased by $1.1 million or 34.3% to $2.0 million, from $3.1 million for the six months ended March 31, 2023, due to less late customer payment charges received on aged receivables that was partially driven by the reduction in sales.
Current report
Interest Expense, Net
Current report
Amortization of Debt Issuance Costs
Current report
For the six months ended March 31, 2024, amortization of debt issuance cost decreased to $0.5 million from $0.6 million for the six months ended March 31, 2023.
Current report
Income Tax Expense
Current report
For the six months ended March 31, 2024, the Company’s income tax expense increased by $3.3 million to $33.0 million, from $29.7 million for the six months ended March 31, 2023. The increase in the income tax expense was driven by a $9.1 million increase in income before income taxes and increase in the effective income tax rate from 28.2% for the six months ended March 31, 2023 to 28.9% for the six months ended March 31, 2024 due primarily to an increase in state income taxes.
Current report
Net Income
Current report
For the six months ended March 31, 2024, Star’s net income increased $5.8 million, to $81.4 million, compared to the six months ended March 31, 2023, primarily due to a favorable change in the fair value of derivative instruments of $13.4 million and a $2.1 million decrease in interest expense that was partially offset by a $5.9 million reduction in Adjusted EBITDA, a $3.3 million increase in income tax expense and a $0.7 million increase in depreciation and amortization expenses.
Current report
Adjusted EBITDA
Removed paragraphs (4)
Previous report
In accordance with ASC 815-45, we recorded a $1.0 million benefit to delivery and branch expenses for the first quarter of fiscal 2024. The final settlement under this weather hedge contract for fiscal 2024 may differ depending on the actual degree-days recorded in the period January 1, 2024 through March 31, 2024. For the first quarter of fiscal 2023, we recorded an expense of $0.4 million which was subsequently reversed as the actual degree-days for the second quarter of fiscal 2023 were warmer than the Payment Thresholds and the Company recorded a benefit of $12.9 million in the second quarter of fiscal 2023.
Previous report
(a) This favorable change may reverse in subsequent periods over the balance of 2024.
Previous report
For the three months ended December 31, 2023, cost of product decreased $115.8 million, or 27.6%, to $303.3 million, compared to $419.1 million for the three months ended December 31, 2022, due to a decrease in total volume sold of 9.9% and a decrease in wholesale product cost of $0.6605 per gallon, or 19.7%. Product volumes and wholesale product cost include heating oil, propane, motor fuels and other petroleum products.
Previous report
During the three months ended December 31, 2022, the change in the fair value of derivative instruments resulted in a $17.6 million charge due to a decrease in the market value for unexpired hedges (a $9.6 million charge) and an $8.0 million charge due to the expiration of certain hedged positions.
Reworded paragraphs (36)
Previous wording
The Company entered into weather hedge contracts for fiscal years 2023 and 2024. The hedge period runs from November 1 through March 31, taken as a whole. The “Payment Thresholds,” or strikes, are set at various levels and are referenced against degree days for the prior ten year average. Under these contracts the maximum amount the Company can receive is $12.5 million annually. For the contracts applicable to fiscal 2023, we were additionally obligated to make an annual payment capped at $5.0 million if degree days exceeded the Payment Threshold. This obligation does not exist under the contract applicable to 2024.
Current wording
The Company entered into weather hedge contracts for fiscal years 2023 and 2024. The hedge period runs from November 1 through March 31, taken as a whole. The “Payment Thresholds,” or strikes, are set at various levels and are referenced against degree days for the prior ten year average. Under these contracts the maximum amount the Company can receive is $12.5 million annually. For the contracts applicable to fiscal 2023, we were additionally obligated to make an annual payment capped at $5.0 million if degree days exceeded the Payment Threshold. This obligation does not exist under the contract applicable to fiscal year 2024.
Previous wording
For the three months ended December 31, 2023, the Company lost 700 accounts (net), or 0.2% of its home heating oil and propane customer base, compared to 7,000 accounts gained (net), or 1.7% of its home heating and oil propane customer base in the prior year comparable period. Gross customer gains were 9,400 less than the prior year's comparable period primarily due to market conditions with regard to physical supply in the first quarter of fiscal 2023 that did not repeat in the current fiscal year, warmer weather and less customer move-ins. Gross customer losses were 1,700 less primarily due to reduction in number of customer relocations.
Current wording
For the six months ended March 31, 2024, the Company lost 5,800 accounts (net), or 1.5% of its home heating oil and propane customer base, compared to 1,800 accounts lost (net), or 0.4% of its home heating and oil propane customer base in the prior year comparable period. Gross customer gains were 9,400 less than the prior year's comparable period primarily due to market conditions with regard to physical supply in the first quarter of fiscal 2023 that did not repeat in the current fiscal year, warmer weather and less customer move-ins. Gross customer losses were 5,400 less due to a reduction in the number of customer relocations and other factors.
Previous wording
During the three months ended December 31, 2023, we estimate that we lost 0.4% of our home heating oil and propane accounts to natural gas and electricity conversions versus 0.4% for the three months ended December 31, 2022 and 0.4% for the three months ended December 31, 2021. Losses to natural gas and electricity in our footprint for the heating oil and propane industry could be greater or less than the Company’s estimates.
Current wording
During the six months ended March 31, 2024, we estimate that we lost 0.7% of our home heating oil and propane accounts to natural gas and electricity conversions versus 0.9% for the six months ended March 31, 2023 and 0.8% for the six months ended March 31, 2022. Losses to natural gas and electricity in our footprint for the heating oil and propane industry could be greater or less than the Company’s estimates.
Previous wording
The timing of acquisitions and the types of products sold by acquired companies impact year-over-year comparisons. During the three months ended December 31, 2023, the Company acquired two heating oil businesses for approximately $2.5 million and in February 2024 purchased the customer list and assets of one propane business and one heating oil business for an aggregate amount of approximately $19.9 million. During fiscal 2023 the Company acquired one propane and two heating oil businesses for approximately $19.8 million. The following tables detail the Company’s acquisition activity and the associated volume sold during the 12-month period prior to the date of acquisition.
Current wording
The timing of acquisitions and the types of products sold by acquired companies impact year-over-year comparisons. During the six months ended March 31, 2024, the Company acquired one propane and three heating oil businesses for approximately $22.6 million. During fiscal 2023 the Company acquired one propane and two heating oil businesses for approximately $19.8 million. The following tables detail the Company’s acquisition activity and the associated volume sold during the 12-month period prior to the date of acquisition.
Previous wording
For the three months ended December 31, 2023, retail volume of home heating oil and propane sold decreased by 9.1 million gallons, or 10.2%, to 80.1 million gallons, compared to 89.2 million gallons for the three months ended December 31, 2022. For those locations where we had existing operations during both periods, which we sometimes refer to as the “base business” (i.e., excluding acquisitions), temperatures (measured on a heating degree day basis) for the three months ended December 31, 2023 were 9.6% warmer than the three months ended December 31, 2022 and 13.8% warmer than normal, as reported by NOAA. For the twelve months ended December 31, 2023, net customer attrition for the base business was 5.4%. The impact of fuel conservation, along with any period-to-period differences in delivery scheduling, the timing of accounts added or lost during the fiscal years, equipment efficiency, and other volume variances not otherwise described, are included in the chart below under the heading “Other.” An analysis of the change in the retail volume of home heating oil and propane, which is based on management’s estimates, sampling, and other mathematical calculations and certain assumptions, is found below:
Current wording
For the three months ended March 31, 2024, retail volume of home heating oil and propane sold decreased by 4.0 million gallons, or 3.3%, to 117.1 million gallons, compared to 121.1 million gallons for the three months ended March 31, 2023. For those locations where we had existing operations during both periods, which we sometimes refer to as the “base business” (i.e., excluding acquisitions), temperatures (measured on a heating degree day basis) for the three months ended March 31, 2024 were 6.9% colder than the three months ended March 31, 2023 and 15.2% warmer than normal, as reported by NOAA. For the twelve months ended March 31, 2024, net customer attrition for the base business was 4.5%. The impact of fuel conservation, along with any period-to-period differences in delivery scheduling, the timing of accounts added or lost during the fiscal years, equipment efficiency, and other volume variances not otherwise described, are included in the chart below under the heading “Other.” An analysis of the change in the retail volume of home heating oil and propane, which is based on management’s estimates, sampling, and other mathematical calculations and certain assumptions, is found below:
Previous wording
Volume of motor fuel and other petroleum products sold decreased by 3.2 million gallons, or 9.2%, to 32.4 million gallons for the three months ended December 31, 2023, compared to 35.6 million gallons for the three months ended December 31, 2022.
Current wording
Volume of motor fuel and other petroleum products sold decreased by 3.0 million gallons, or 9.1%, to 30.2 million gallons for the three months ended March 31, 2024, compared to 33.2 million gallons for the three months ended March 31, 2023.
Previous wording
For the three months ended December 31, 2023, product sales decreased by $121.3 million, or 21.3%, to $448.6 million, compared to $569.9 million for the three months ended December 31, 2022, due to a decrease in total volume sold of 9.9% and a decrease in average selling prices. Selling prices decreased largely due to a decrease in wholesale product cost of $0.6605 per gallon, or 19.7%, compared to the three months ended December 31, 2022. Product volumes and wholesale product cost include heating oil, propane, motor fuels and other petroleum products.
Current wording
For the three months ended March 31, 2024, product sales decreased by $73.9 million, or 11.0%, to $595.3 million, compared to $669.2 million for the three months ended March 31, 2023, due to a decrease in average selling prices and a decrease in total volume sold of 4.6%. Selling prices decreased largely due to a decrease in wholesale product cost of $0.3775 per gallon, or 12.5%, compared to the three months ended March 31, 2023. Product volumes and wholesale product cost include heating oil, propane, motor fuels and other petroleum products.
Previous wording
For the three months ended December 31, 2023, installation and service revenue increased by $1.2 million, or 1.6%, to $79.5 million, compared to $78.3 million for the three months ended December 31, 2022 driven by an increase in installation sales.
Current wording
For the three months ended March 31, 2024, installation and service revenue increased by $2.3 million, or 3.4%, to $70.7 million, compared to $68.4 million for the three months ended March 31, 2023 driven by an increase in service revenue.
Previous wording
The table below calculates our per gallon margins and reconciles product gross profit for home heating oil and propane and motor fuel and other petroleum products. We believe the change in home heating oil and propane margins should be evaluated before the effects of increases or decreases in the fair value of derivative instruments, as we believe that realized per gallon margins should not include the impact of non-cash changes in the market value of hedges before the settlement of the underlying transaction. On that basis, home heating oil and propane margins for the three months ended December 31, 2023 increased by $0.1306 per gallon, or 8.5%, to $1.6758 per gallon, from $1.5452 per gallon during the three months ended December 31, 2022. Going forward, we cannot assume that per gallon margins realized during the three months ended December 31, 2023 are sustainable especially with the volatility in heating oil and propane costs. Product sales and cost of product include home heating oil, propane, other petroleum products and liquidated damages billings.
Current wording
The table below calculates our per gallon margins and reconciles product gross profit for home heating oil and propane and motor fuel and other petroleum products. We believe the change in home heating oil and propane margins should be evaluated before the effects of increases or decreases in the fair value of derivative instruments, as we believe that realized per gallon margins should not include the impact of non-cash changes in the market value of hedges before the settlement of the underlying transaction. On that basis, home heating oil and propane margins for the three months ended March 31, 2024 increased by $0.0839 per gallon, or 5.3%, to $1.6768 per gallon, from $1.5929 per gallon during the three months ended March 31, 2023. Going forward, we cannot assume that per gallon margins realized during the three months ended March 31, 2024 are sustainable especially with the volatility in heating oil and propane costs. Product sales and cost of product include home heating oil, propane, other petroleum products and liquidated damages billings.
Previous wording
For the three months ended December 31, 2023, total product gross profit was $145.2 million, which was $5.6 million, or 3.7%, lower than the three months ended December 31, 2022, due to a decrease in home heating oil and propane volume sold ($14.0 million) and decrease in gross profit from other petroleum products ($2.1 million), that was partially offset by an increase in home heating oil and propane margins ($10.5 million).
Current wording
For the three months ended March 31, 2024, total product gross profit was $205.9 million, which was $3.0 million, or 1.5%, higher than the three months ended March 31, 2023, due to an increase in home heating oil and propane margins ($9.8 million) that was partially offset by a decrease in home heating oil and propane volume sold ($6.4 million) and decrease in gross profit from other petroleum products ($0.4 million).
Previous wording
Total installation costs for the three months ended December 31, 2023 increased by $0.8 million or 2.8%, to $27.5 million, compared to $26.7 million of installation costs for the three months ended December 31, 2022. This increase was largely due to higher installation sales. Installation costs as a percentage of installation sales were 80.1% for the three months ended December 31, 2023 and 81.6% for the three months ended December 31, 2022. Gross profit from installation increased by $0.8 million.
Current wording
Total installation costs for the three months ended March 31, 2024 increased by $0.3 million or 1.8%, to $21.7 million, compared to $21.4 million of installation costs for the three months ended March 31, 2023. This increase was largely due to higher installation sales. Installation costs as a percentage of installation sales were 82.9% for the three months ended March 31, 2024 and 84.8% for the three months ended March 31, 2023. Gross profit from installation increased by $0.7 million.
Previous wording
We realized a combined gross profit from service and installation of $4.4 million for the three months ended December 31, 2023 compared to a gross profit of $1.7 million for the three months ended December 31, 2022, a $2.7 million increase.
Current wording
We realized a combined gross profit from service and installation of $0.1 million for the three months ended March 31, 2024 compared to a gross profit of $0.1 million for the three months ended March 31, 2023.
Previous wording
During the three months ended December 31, 2023, the change in the fair value of derivative instruments resulted in a $19.0 million charge as a decrease in the market value for unexpired hedges (a $19.1 million charge) was partially offset by a $0.1 million credit due to the expiration of certain hedged positions.
Current wording
During the three months ended March 31, 2023, the change in the fair value of derivative instruments resulted in a $3.0 million charge due to a decrease in the market value for unexpired hedges (an $11.5 million charge), partially offset by an $8.5 million credit due to the expiration of certain hedged positions.
Previous wording
For the three months ended December 31, 2023, delivery and branch expense decreased $3.5 million, or 3.6%, to $94.4 million, compared to $97.9 million for the three months ended December 31, 2022. During the first quarter of fiscal 2024, the company recorded a benefit under the weather hedge of $1.0 million compared to a charge of $0.4 million in the prior year’s comparable quarter that accounts for a decrease in expense of $1.4 million. The decrease was also driven by a $2.9 million, or 9.0% reduction in delivery expenses due to the 10.2% decline in home heating oil and propane volume, a $1.0 million decrease in sales and marketing expenses due to a lower level of customer gains and related expenses, and $0.5 million of other net expense reductions. These decreases were partially offset by a $2.3 million increase in insurance expenses due to increasing premiums and expected claim costs.
Current wording
For the three months ended March 31, 2024, delivery and branch expense increased $8.2 million, or 8.5%, to $104.1 million, compared to $95.9 million for the three months ended March 31, 2023. During the quarter ended March 31, 2024, the company recorded a benefit under the weather hedge of $6.5 million compared to a benefit of $12.9 million in the quarter ended March 31, 2023 that accounts for an increase in expense of $6.4 million. The increase was also driven by $1.8 million of acquisition related expenses. In the base business a $1.0 million increase in insurance expenses due to increasing premiums and expected claim costs and $0.7 million of other next expense increases was partially offset by a $1.7 million, or 4.6% reduction in delivery expenses due to the 3.3% decline in home heating oil and propane volume.
Previous wording
For the three months ended December 31, 2023, depreciation and amortization expenses increased $0.6 million, or 7.0%, to $8.4 million, compared to $7.8 million for the three months ended December 31, 2022, primarily due to acquisitions.
Current wording
For the three months ended March 31, 2024, depreciation and amortization expenses increased $0.1 million, or 1.6%, to $7.7 million, compared to $7.6 million for the three months ended March 31, 2023, primarily due to acquisitions.
Previous wording
For the three months ended December 31, 2023, finance charge income decreased by $0.5 million or 41.5% to $0.8 million, from $1.3 million for the three months ended December 31, 2022, due to less late customer payment charges received on aged receivables.
Current wording
For the three months ended March 31, 2024, finance charge income decreased by $0.5 million or 28.9% to $1.3 million, from $1.8 million for the three months ended March 31, 2023, due to less late customer payment charges received on aged receivables that was partially driven by the reduction in sales.
Previous wording
For the three months ended December 31, 2023, net interest expense decreased by $1.1 million, or 24.7%, to $3.2 million compared to $4.3 million for the three months ended December 31, 2022. The year-over-year change was driven by a decrease in average borrowings of $87.7 million from $244.3 million for the three months ended December 31, 2022 to $156.6 million for the three months ended December 31, 2023 that was partially offset by an increase in the weighted average interest rate from 6.1% for the three months ended December 31, 2022 to 7.4% for the three months ended December 31, 2023. To hedge against rising interest rates, the Company utilizes interest rate swaps. At December 31, 2023, approximately 38% of borrowings under Star's variable-rate long term debt were not subject to interest rate increases as a result of interest rate swaps.
Current wording
For the three months ended March 31, 2024, net interest expense decreased by $1.2 million, or 22.7%, to $3.8 million compared to $5.0 million for the three months ended March 31, 2023. The year-over-year change was driven by a decrease in average borrowings of $75.7 million from $276.5 million for the three months ended March 31, 2023 to $200.8 million for the three months ended March 31, 2024 that was partially offset by an increase in the weighted average interest rate from 6.3% for the three months ended March 31, 2023 to 7.1% for the three months ended March 31, 2024. To hedge against rising interest rates, the Company utilizes interest rate swaps. At March 31, 2024, approximately 39% of borrowings under Star's variable-rate long term debt were not subject to interest rate increases as a result of interest rate swaps.
Previous wording
For the three months ended December 31, 2023, amortization of debt issuance cost was $0.3 million, essentially unchanged from the three months ended December 31, 2022.
Current wording
For the three months ended March 31, 2024, amortization of debt issuance cost decreased to $0.2 million from $0.3 million for the three months ended March 31, 2023.
Previous wording
For the three months ended December 31, 2023, the Company’s income tax expense decreased by $0.3 million to $5.2 million, from $5.5 million for the three months ended December 31, 2022. The decrease in the income tax expense was driven by a $0.8 million decline in income before income taxes.
Current wording
For the three months ended March 31, 2024, the Company’s income tax expense increased by $3.6 million to $27.9 million, from $24.3 million for the three months ended March 31, 2023. The increase in the income tax expense was driven by a $10.0 million increase in income before income taxes and increase in the effective income tax rate from 28.1% for the three months ended March 31, 2023 to 29.0% for the three months ended March 31, 2024 due primarily to an increase in state income taxes.
Previous wording
For the three months ended December 31, 2023, Star’s net income decreased $0.6 million, to $13.0 million, compared to the three months ended December 31, 2022, primarily due to an unfavorable change in the fair value of derivative instruments of $1.4 million and a $0.6 million increase in depreciation and amortization expenses that was partially offset by a $1.1 million decrease in interest expense and a $0.3 million decrease in income tax expense.
Current wording
For the three months ended March 31, 2024, Star’s net income increased $6.3 million, to $68.4 million, compared to the three months ended March 31, 2023, primarily due to a favorable change in the fair value of derivative instruments of $14.8 million and a $1.2 million decrease in interest expense that was partially offset by a $5.8 million decrease in Adjusted EBITDA and a $3.6 million increase in income tax expense.
Previous wording
Service expense decreased by $2.2 million, or 4.4%, to $47.6 million for the three months ended December 31, 2023, representing 105.3% of service sales, versus $49.8 million, or 109.5% of service sales, for the three months ended December 31, 2022. The warmer temperatures drove a decrease in service calls and related expenses. In addition, a large proportion of our service expenses are incurred under fixed-fee prepaid service contract arrangements, therefore trends in service expenses may not directly correlate to trends in the related revenues. Gross loss from service decreased by $1.9 million.
Current wording
Service expense decreased by $0.2 million, or 0.3%, to $96.5 million for the six months ended March 31, 2024, representing 107.5% of service sales, versus $96.7 million, or 109.1% of service sales, for the six months ended March 31, 2023. The warmer temperatures drove a decrease in service calls and related expenses. In addition, a large proportion of our service expenses are incurred under fixed-fee prepaid service contract arrangements, therefore trends in service expenses may not directly correlate to trends in the related revenues. Gross loss from service decreased by $1.4 million.
Previous wording
For the three months ended December 31, 2023, general and administrative expenses increased by $0.1 million or 2.4%, to $7.0 million, from $6.9 million for the three months ended December 31, 2022, due to a $0.3 million increase in salaries and benefits expenses and $0.1 million of other net expense increases, that were partially offset by a $0.3 million decrease in profit sharing expense. The Company accrues approximately 6.0% of Adjusted EBITDA as defined in its profit sharing plan for distribution to its employees. This amount is payable when the Company achieves Adjusted EBITDA of at least 70% of the amount budgeted. The dollar amount of the profit sharing pool adjusts accordingly based on Adjusted EBITDA levels achieved.
Current wording
For the six months ended March 31, 2024, general and administrative expenses increased by $0.3 million or 2.6%, to $13.9 million, from $13.6 million for the six months ended March 31, 2023, due to a $0.4 million reduction in the gain on the sale of fixed assets and a $0.4 million increase in salaries and benefits expenses that were partially offset by a $0.4 million decrease in profit sharing expense and $0.1 million of other net expense decreases. The Company accrues approximately 6.0% of Adjusted EBITDA as defined in its profit sharing plan for distribution to its employees. This amount is payable when the Company achieves Adjusted EBITDA of at least 70% of the amount budgeted. The dollar amount of the profit sharing pool adjusts accordingly based on Adjusted EBITDA levels achieved.
Previous wording
For the three months ended December 31, 2023, Adjusted EBITDA was $49.0 million, essentially unchanged from the three months ended December 31, 2022, as an increase in home heating oil and propane per gallon margins, an increase in service and installation profitability and lower operating costs offset a 9.1 million gallon decrease in home heating oil and propane volume sold.
Current wording
For the six months ended March 31, 2024, Adjusted EBITDA decreased $5.9 million to $145.4 million, compared to the six months ended March 31, 2023, as an increase in home heating oil and propane per gallon margins and an increase in service and installation profitability was more than offset by a 13.0 million gallon decrease in home heating oil and propane volume sold and a decrease in the weather hedge benefit of $5.0 million compared to the prior year.
Previous wording
During the three months ended December 31, 2023, cash used in operating activities decreased $32.4 million, to $60.3 million, compared to $92.7 million in cash used in operating activities during the three months ended December 31, 2022. The decrease was driven by an increase in collection of trade receivables on a comparable basis (including accounts receivable and customer credit balance accounts) of $34.4 million, a $10.0 million increase in collection of derivative settlement receivables on a comparative basis and a $1.9 million decrease in cash required to purchase liquid product inventory. Further, we paid $5.2 million less in payroll taxes in the first fiscal quarter of 2024 versus the first fiscal quarter of 2023 as the result of deferring payment of certain payroll tax withholdings in first quarter of fiscal 2021 to the first fiscal quarter of fiscal 2023. The increases were partially offset by an $11.3 million unfavorable change in accounts payable due to timing of inventory purchases, a $6.8 million increase in net cash paid for certain hedge positions, a $0.5 million decrease in cash flows from operations and $0.5 million of other net changes in working capital.
Current wording
During the six months ended March 31, 2024, cash used in operating activities decreased $8.7 million, to $5.2 million, compared to $13.8 million during the six months ended March 31, 2023. The decrease was driven by an increase in collection of trade receivables on a comparable basis (including accounts receivable and customer credit balance accounts) of $17.2 million and $6.5 million increase in cash flows from operations. Further, we paid $5.2 million less in payroll taxes in the first fiscal quarter of 2024 versus the first fiscal quarter of 2023 as the result of deferring payment of certain payroll tax withholdings in first quarter of fiscal 2021 to the first fiscal quarter of fiscal 2023. These benefits to cash flows from operations were partially offset by a $10.9 million increase in cash required to purchase product inventory, a $5.8 million decrease in collection of derivative settlement receivables on a comparative basis and $3.5 million of other net changes in working capital.
Previous wording
During the three months ended December 31, 2023, the Company acquired two heating oil businesses for an aggregate price of approximately $2.5 million in cash. The gross purchase price was allocated $2.7 million to intangible assets, $0.2 million to goodwill, $0.8 million to fixed assets and reduced by $1.2 million of negative working capital.
Current wording
During the six months ended March 31, 2024, the Company acquired one propane and three heating oil businesses for an aggregate price of approximately $22.6 million in cash. The gross purchase price was allocated $14.4 million to intangible assets, $6.3 million to goodwill, $2.8 million to fixed assets and reduced by $0.9 million of negative working capital.
Previous wording
Our capital expenditures for the three months ended December 31, 2022 totaled $3.1 million, as we invested in computer hardware and software ($0.1 million), refurbished certain physical plants ($0.3 million), expanded our propane operations ($0.2 million) and made additions to our fleet and other equipment ($2.5 million).
Current wording
Our capital expenditures for the six months ended March 31, 2024 totaled $6.0 million, as we invested in computer hardware and software ($0.9 million), refurbished certain physical plants ($1.3 million), expanded our propane operations ($0.8 million) and made additions to our fleet and other equipment ($3.0 million).
Previous wording
During the three months ended December 31, 2023, $0.4 million of earnings were reinvested into an irrevocable trust established in connection with our captive insurance company. The cash deposited into the trust is shown on our balance sheet as captive insurance collateral and, correspondingly, reduced cash on our balance sheet. We believe that investments into the irrevocable trust lower our letter of credit fees, increase interest income on invested cash balances, and provide us with certain tax advantages attributable to a captive insurance company.
Current wording
During the six months ended March 31, 2024, $0.9 million of earnings were reinvested into an irrevocable trust established in connection with our captive insurance company. The cash deposited into the trust is shown on our balance sheet as captive insurance collateral and, correspondingly, reduced cash on our balance sheet. We believe that investments into the irrevocable trust lower our letter of credit fees, increase interest income on invested cash balances, and provide us with certain tax advantages attributable to a captive insurance company.
Previous wording
During the three months ended December 31, 2022, the Company sold certain assets for cash proceeds of $2.2 million and acquired two heating oil businesses for an aggregate price of approximately $1.2 million in cash. The gross purchase price was allocated $1.7 million to intangible assets, $0.2 million to goodwill, $0.2 million to fixed assets and reduced by $0.9 million of negative working capital.
Current wording
During the six months ended March 31, 2023, the Company sold certain assets for cash proceeds of $2.2 million and acquired two heating oil businesses for an aggregate price of approximately $1.2 million in cash. The gross purchase price was allocated $1.7 million to intangible assets, $0.2 million to goodwill, $0.2 million to fixed assets and reduced by $0.9 million of negative working capital.
Previous wording
Our capital expenditures for the three months ended December 31, 2023 totaled $3.2 million, as we invested in computer hardware and software ($0.3 million), refurbished certain physical plants ($0.9 million), expanded our propane operations ($0.4 million) and made additions to our fleet and other equipment ($1.6 million).
Current wording
Our capital expenditures for the six months ended March 31, 2023 totaled $5.2 million, as we invested in computer hardware and software ($0.4 million), refurbished certain physical plants ($0.5 million), expanded our propane operations ($0.9 million) and made additions to our fleet and other equipment ($3.4 million).
Previous wording
During the three months ended December 31, 2022, $0.2 million of earnings were reinvested into the irrevocable trust.
Current wording
During the six months ended March 31, 2023, $0.5 million of earnings were reinvested into the irrevocable trust.
Previous wording
During the three months ended December 31, 2023, we repaid $4.0 million of our term loan, borrowed $51.6 million under our revolving credit facility, repurchased fewer than 0.1 million Common Units, at an average price paid of $11.27 per unit, for $0.2 million, in connection with our unit repurchase plan, and paid distributions of $5.8 million to our Common Unit holders and $0.3 million to our General Partner unit holders (including $0.3 million of incentive distributions as provided in our Partnership Agreement).
Current wording
During the six months ended March 31, 2024, we repaid $12.3 million of our term loan, borrowed $79.6 million under our revolving credit facility, repurchased approximately 0.2 million Common Units, at an average price paid of $10.92 per unit, for $2.5 million, in connection with our unit repurchase plan, and paid distributions of $11.6 million to our Common Unit holders and $0.7 million to our General Partner unit holders (including $0.6 million of incentive distributions as provided in our Partnership Agreement).
Previous wording
During the three months ended December 31, 2022, we repaid $4.1 million of our term loan, borrowed $116.3 million under our revolving credit facility, repurchased 0.4 million Common Units for $3.6 million, in connection with our unit repurchase plan, and paid distributions of $5.5 million to our Common Unit holders and $0.3 million to our General Partner unit holders (including $0.3 million of incentive distributions as provided in our Partnership Agreement).
Current wording
During the six months ended March 31, 2023, we repaid $8.3 million of our term loan, borrowed $125.6 million under our revolving credit facility and subsequently repaid $75.9 million, repurchased 0.5 million Common Units for $4.5 million, in connection with our unit repurchase plan, and paid distributions of $10.9 million to our Common Unit holders and $0.6 million to our General Partner unit holders (including $0.5 million of incentive distributions as provided in our Partnership Agreement).
Previous wording
Our primary uses of liquidity are to provide funds for our working capital, capital expenditures, distributions on our units, acquisitions and unit repurchases. Our ability to provide funds for such uses depends on our future performance, which will be subject to prevailing economic, financial, geopolitical and business conditions, weather, the ability to collect current and future accounts receivable, the ability to pass on the full impact of high product costs to customers, the effects of high net customer attrition, conservation, inflation and other factors. Capital requirements, at least in the near term, are expected to be provided by cash flows from operating activities, cash on hand as of December 31, 2023 ($19.9 million) or a combination thereof. We believe that these cash sources will also be sufficient to satisfy our capital requirements in the longer-term. However, if they are not sufficient, we anticipate that working capital will be financed by our revolving credit facility, as discussed below, and from subsequent seasonal reductions in inventory and accounts receivable. As of December 31, 2023, we had accounts receivable of $187.1 million of which $139.8 million is due from residential customers and $47.3 million is due from commercial customers. Our ability to borrow from our bank group is based in part on the aging of these accounts receivable. If these balances do not meet the eligibility tests as defined in our sixth amended and restated credit agreement, our ability to borrow will be reduced and our anticipated cash flow from operating activities will also be reduced. As of December 31, 2023, we had $51.9 million of borrowings under our revolving credit facility, $144.5 million outstanding under our term loan, $3.2 million in letters of credit outstanding and $15.7 million hedge positions were secured under the credit agreement.
Current wording
Our primary uses of liquidity are to provide funds for our working capital, capital expenditures, distributions on our units, acquisitions and unit repurchases. Our ability to provide funds for such uses depends on our future performance, which will be subject to prevailing economic, financial, geopolitical and business conditions, weather, the ability to collect current and future accounts receivable, the ability to pass on the full impact of high product costs to customers, the effects of high net customer attrition, conservation, inflation and other factors. Capital requirements, at least in the near term, are expected to be provided by cash flows from operating activities, cash on hand as of March 31, 2024 ($12.1 million) or a combination thereof. We believe that these cash sources will also be sufficient to satisfy our capital requirements in the longer-term. However, if they are not sufficient, we anticipate that working capital will be financed by our revolving credit facility, as discussed below, and from subsequent seasonal reductions in inventory and accounts receivable. As of March 31, 2024, we had accounts receivable of $198.3 million of which $155.5 million is due from residential customers and $42.8 million is due from commercial customers. Our ability to borrow from our bank group is based in part on the aging of these accounts receivable. If these balances do not meet the eligibility tests as defined in our sixth amended and restated credit agreement, our ability to borrow will be reduced and our anticipated cash flow from operating activities will also be reduced. As of March 31, 2024, we had $29.2 million of borrowings under our revolving credit facility, $136.3 million outstanding under our term loan, $3.2 million in letters of credit outstanding and $2.2 million hedge positions were secured under the credit agreement.
Previous wording
Under the terms of the sixth amended and restated credit agreement, as amended, we are required to maintain at all times a fixed charge coverage ratio of not less than 1.0 through February 27, 2024 and 1.15 thereafter if Availability (borrowing base less amounts borrowed and letters of credit issued) is less than 12.5% of the maximum facility size. We are also required to maintain a senior secured leverage ratio that cannot be more than 3.0 as of June 30 th or September 30 th, and no more than 5.5 as of December 31 st or March 31 st. As of December 31, 2023, Availability, as defined in the sixth amended and restated revolving credit facility agreement, as amended, was $189.2 million and we were in compliance with the financial covenants.
Current wording
Under the terms of the sixth amended and restated credit agreement, as amended, we are required to maintain at all times a fixed charge coverage ratio of not less than 1.0 through February 27, 2024 and 1.15 thereafter if Availability (borrowing base less amounts borrowed and letters of credit issued) is less than 12.5% of the maximum facility size. We are also required to maintain a senior secured leverage ratio that cannot be more than 3.0 as of June 30 th or September 30 th, and no more than 5.5 as of December 31 st or March 31 st. As of March 31, 2024, Availability, as defined in the sixth amended and restated revolving credit facility agreement, as amended, was $221.8 million and we were in compliance with the financial covenants.
Previous wording
Maintenance capital expenditures for the remainder of fiscal 2024 are estimated to be approximately $9.0 million to $10.0 million, excluding the capital requirements for leased fleet. In addition, we plan to invest $1.0 million to $2.0 million in our propane operations. If, and only to the extent that, cash distributions to our unitholders remain at the current quarterly level of $0.1625 per unit for the balance of fiscal 2024, the Company would make aggregate payments of approximately $17.3 million to Common Unit holders, $1.0 million to our General Partner (including $0.9 million of incentive distribution as provided for in our Partnership Agreement) and $0.9 million to management pursuant to the management incentive compensation plan which provides for certain members of management to receive incentive distributions that would otherwise be payable to the General Partner. The amount of cash distributions payable to our unitholders, if any, depends on the amount of cash flow generated by the Company and our compliance with certain financial covenants under our sixth amended and restated revolving credit facility agreement. Under the terms of our sixth amended and restated revolving credit facility agreement, our term loan is repayable in quarterly payments of $4.1 million and we expect to pay $16.5 million for the remainder of fiscal 2024. Further, subject to any additional liquidity issues or concerns resulting from wholesale price volatility and our compliance with the financial covenants under our sixth amended and restated revolving credit facility agreement, we may repurchase Common Units pursuant to our unit repurchase plan, as amended from time to time, and seek attractive acquisition opportunities within the Availability constraints of our revolving credit facility and funding resources.
Current wording
Maintenance capital expenditures for the remainder of fiscal 2024 are estimated to be approximately $7.0 million to $8.0 million, excluding the capital requirements for leased fleet. In addition, we plan to invest $1.0 million to $2.0 million in our propane operations. If, and only to the extent that, cash distributions to our unitholders remain at the current quarterly level of $0.1725 per unit for the balance of fiscal 2024, the Company would make aggregate payments of approximately $12.2 million to Common Unit holders, $0.7 million to our General Partner (including $0.7 million of incentive distribution as provided for in our Partnership Agreement) and $0.7 million to management pursuant to the management incentive compensation plan which provides for certain members of management to receive incentive distributions that would otherwise be payable to the General Partner. The amount of cash distributions payable to our unitholders, if any, depends on the amount of cash flow generated by the Company and our compliance with certain financial covenants under our sixth amended and restated revolving credit facility agreement. Under the terms of our sixth amended and restated revolving credit facility agreement, our term loan is repayable in quarterly payments of $4.1 million and we expect to pay $8.3 million for the remainder of fiscal 2024. Further, subject to any additional liquidity issues or concerns resulting from wholesale price volatility and our compliance with the financial covenants under our sixth amended and restated revolving credit facility agreement, we may repurchase Common Units pursuant to our unit repurchase plan, as amended from time to time, and seek attractive acquisition opportunities within the Availability constraints of our revolving credit facility and funding resources.
Previous wording
We believe that there have been no significant changes to our critical accounting policy and critical accounting estimates during the three months ended December 31, 2023 as compared to those we disclosed in Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our annual report on Form 10-K for the fiscal year ended September 30, 2023. While our critical accounting policies and estimates have not changed in any significant way during the three months ended December 31, 2023, the following provides disclosures about our critical accounting policy and critical accounting estimates.
Current wording
We believe that there have been no significant changes to our critical accounting policy and critical accounting estimates during the six months ended March 31, 2024 as compared to those we disclosed in Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our annual report on Form 10-K for the fiscal year ended September 30, 2023. While our critical accounting policies and estimates have not changed in any significant way during the six months ended March 31, 2024, the following provides disclosures about our critical accounting policy and critical accounting estimates.
Rearranged current paragraphs (20)
Current report — wording carried from elsewhere
Service expense increased by $1.9 million, or 4.1%, to $48.8 million for the three months ended March 31, 2024, representing 109.7% of service sales, versus $46.9 million, or 108.6% of service sales, for the three months ended March 31, 2023. The colder temperatures drove an increase in service calls and related expenses. In addition, a large proportion of our service expenses are incurred under fixed-fee prepaid service contract arrangements, therefore trends in service expenses may not directly correlate to trends in the related revenues. Gross loss from service decreased by $0.6 million.
Current report — wording carried from elsewhere
For the six months ended March 31, 2024, retail volume of home heating oil and propane sold decreased by 13.0 million gallons, or 6.2%, to 197.3 million gallons, compared to 210.3 million gallons for the six months ended March 31, 2023. For those locations where we had existing operations during both periods, which we sometimes refer to as the “base business” (i.e., excluding acquisitions), temperatures (measured on a heating degree day basis) for the six months ended March 31, 2024 were 0.2% warmer than the six months ended March 31, 2023 and 14.7% warmer than normal, as reported by NOAA. For the twelve months ended March 31, 2024, net customer attrition for the base business was 4.5%. The impact of fuel conservation, along with any period-to-period differences in delivery scheduling, the timing of accounts added or lost during the fiscal years, equipment efficiency, and other volume variances not otherwise described, are included in the chart below under the heading “Other.” An analysis of the change in the retail volume of home heating oil and propane, which is based on management’s estimates, sampling, and other mathematical calculations and certain assumptions, is found below:
Current report — wording carried from elsewhere
The following chart sets forth the percentage by volume of total home heating oil sold to residential variable-price customers, residential price-protected customers and commercial/industrial/other customers for the six months ended March 31, 2024, compared to the six months ended March 31, 2023:
Current report — wording carried from elsewhere
The table below calculates our per gallon margins and reconciles product gross profit for home heating oil and propane and motor fuel and other petroleum products. We believe the change in home heating oil and propane margins should be evaluated before the effects of increases or decreases in the fair value of derivative instruments, as we believe that realized per gallon margins should not include the impact of non-cash changes in the market value of hedges before the settlement of the underlying transaction. On that basis, home heating oil and propane margins for the six months ended March 31, 2024 increased by $0.1037 per gallon, or 6.6%, to $1.6764 per gallon, from $1.5727 per gallon during the six months ended March 31, 2023. Going forward, we cannot assume that per gallon margins realized during the six months ended March 31, 2024 are sustainable especially with the volatility in heating oil and propane costs. Product sales and cost of product include home heating oil, propane, other petroleum products and liquidated damages billings.
Current report — wording carried from elsewhere
Total installation costs for the six months ended March 31, 2024 increased by $1.1 million or 2.3%, to $49.2 million, compared to $48.1 million of installation costs for the six months ended March 31, 2023. This increase was largely due to higher installation sales. Installation costs as a percentage of installation sales were 81.3% for the six months ended March 31, 2024 and 83.0% for the six months ended March 31, 2023. Gross profit from installation increased by $1.4 million.
Current report — wording carried from elsewhere
We realized a combined gross profit from service and installation of $4.6 million for the six months ended March 31, 2024 compared to a gross profit of $1.8 million for the six months ended March 31, 2023, a $2.8 million increase.
Current report — wording carried from elsewhere
(Increase) Decrease in the Fair Value of Derivative Instruments
Current report — wording carried from elsewhere
For the six months ended March 31, 2024, net interest expense decreased by $2.1 million, or 23.6%, to $7.1 million compared to $9.2 million for the six months ended March 31, 2023. The year-over-year change was driven by a decrease in average borrowings of $81.6 million from $260.2 million for the six months ended March 31, 2023 to $178.6 million for the six months ended March 31, 2024 that was partially offset by an increase in the weighted average interest rate from 6.2% for the six months ended March 31, 2023 to 7.2% for the six months ended March 31, 2024. To hedge against rising interest rates, the Company utilizes interest rate swaps. At March 31, 2024, approximately 39% of borrowings under Star's variable-rate long term debt were not subject to interest rate increases as a result of interest rate swaps.
Current report — wording carried from elsewhere
EBITDA and Adjusted EBITDA should not be considered as an alternative to net income, as an indicator of operating performance, or as an alternative to cash flow, as a measure of liquidity or ability to service debt obligations, but provides additional information for evaluating the Company’s ability to make the Minimum Quarterly Distribution. EBITDA and Adjusted EBITDA are calculated as follows:
Current report — wording carried from elsewhere
EBITDA (Earnings from continuing operations before net interest expense, income taxes, depreciation and amortization) and Adjusted EBITDA (Earnings from continuing operations before net interest expense, income taxes, depreciation and amortization, (increase) decrease in the fair value of derivatives, other income (loss), net, multiemployer pension plan withdrawal charge, gain or loss on debt redemption, goodwill impairment, and other non-cash and non-operating charges) are non-GAAP financial measures that are used as supplemental financial measures by management and external users of our financial statements, such as investors, commercial banks and research analysts, to assess:
Current report — wording carried from elsewhere
• our compliance with certain financial covenants included in our debt agreements;
Current report — wording carried from elsewhere
• our financial performance without regard to financing methods, capital structure, income taxes or historical cost basis;
Current report — wording carried from elsewhere
• our operating performance and return on invested capital compared to those of other companies in the retail distribution of refined petroleum products, without regard to financing methods and capital structure;
Current report — wording carried from elsewhere
• our ability to generate cash sufficient to pay interest on our indebtedness and to make distributions to our partners; and
Current report — wording carried from elsewhere
• the viability of acquisitions and capital expenditure projects and the overall rates of return of alternative investment opportunities.
Current report — wording carried from elsewhere
The method of calculating Adjusted EBITDA may not be consistent with that of other companies, and EBITDA and Adjusted EBITDA both have limitations as analytical tools and so should not be viewed in isolation but in conjunction with measurements that are computed in accordance with GAAP. Some of the limitations of EBITDA and Adjusted EBITDA are:
Current report — wording carried from elsewhere
• EBITDA and Adjusted EBITDA do not reflect our cash used for capital expenditures.
Current report — wording carried from elsewhere
• Although depreciation and amortization are non-cash charges, the assets being depreciated or amortized often will have to be replaced and EBITDA and Adjusted EBITDA do not reflect the cash requirements for such replacements;
Current report — wording carried from elsewhere
• EBITDA and Adjusted EBITDA do not reflect changes in, or cash requirements for, our working capital requirements;
Current report — wording carried from elsewhere
• EBITDA and Adjusted EBITDA do not reflect the cash necessary to make payments of interest or principal on our indebtedness; and EBITDA and Adjusted EBITDA do not reflect the cash required to pay taxes.