STAR GROUP LP

Previous wording

This Quarterly Report on Form 10-Q (this “Report”) includes “forward-looking statements” which represent our expectations or beliefs concerning future events that involve risks and uncertainties, including the impact of geopolitical events on wholesale product cost volatility, the price and supply of the products that we sell, our ability to purchase sufficient quantities of product to meet our customer’s needs, rapid increases in levels of inflation, the consumption patterns of our customers, our ability to obtain satisfactory gross profit margins, the effect of weather conditions on our financial performance, our ability to obtain new customers and retain existing customers, our ability to make strategic acquisitions, the impact of litigation, natural gas conversions and electrification of heating systems, pandemic and future global health pandemics, recessionary economic conditions, future union relations and the outcome of current and future union negotiations, the impact of current and future governmental regulations, including climate change, environmental, health, and safety regulations, the ability to attract and retain employees, customer credit worthiness, counterparty credit worthiness, marketing plans, cyber-attacks, global supply chain issues, labor shortages and new technology, including alternative methods for heating and cooling residences. All statements other than statements of historical facts included in this Report including, without limitation, the statements under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere herein, are forward-looking statements. Without limiting the foregoing, the words “believe,” “anticipate,” “plan,” “expect,” “seek,” “estimate,” and similar expressions are intended to identify forward-looking statements. Although we believe that the expectations reflected in such forward-looking statements are reasonable, we can give no assurance that such expectations will prove to be correct, and actual results may differ materially from those projected as a result of certain risks and uncertainties. These risks and uncertainties include, but are not limited to, those set forth in this Report under the headings “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and in our Fiscal 2023 Form 10-K under Part I Item 1A “Risk Factors.” Important factors that could cause actual results to differ materially from our expectations (“Cautionary Statements”) are disclosed in this Report and in our Fiscal 2023 Form 10-K. All subsequent written and oral forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by the Cautionary Statements. Unless otherwise required by law, we undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise after the date of this Report.

Current wording

This Quarterly Report on Form 10-Q (this “Report”) includes “forward-looking statements” which represent our expectations or beliefs concerning future events that involve risks and uncertainties, including the impact of geopolitical events on wholesale product cost volatility, the price and supply of the products that we sell, our ability to purchase sufficient quantities of product to meet our customer’s needs, rapid increases in levels of inflation, the consumption patterns of our customers, our ability to obtain satisfactory gross profit margins, the effect of weather conditions on our operational and financial performance, our ability to obtain new customers and retain existing customers, our ability to make strategic acquisitions, the impact of litigation, natural gas conversions and electrification of heating systems, future global health pandemics, recessionary economic conditions, future union relations and the outcome of current and future union negotiations, the impact of current and future governmental regulations, including climate change, environmental, health, and safety regulations, the ability to attract and retain employees, customer credit worthiness, counterparty credit worthiness, marketing plans, cyber-attacks, global supply chain issues, labor shortages and new technology, including alternative methods for heating and cooling residences. All statements other than statements of historical facts included in this Report including, without limitation, the statements under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere herein, are forward-looking statements. Without limiting the foregoing, the words “believe,” “anticipate,” “plan,” “expect,” “seek,” “estimate,” and similar expressions are intended to identify forward-looking statements. Although we believe that the expectations reflected in such forward-looking statements are reasonable, we can give no assurance that such expectations will prove to be correct, and actual results may differ materially from those projected as a result of certain risks and uncertainties. These risks and uncertainties include, but are not limited to, those set forth in this Report under the headings “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and in our Fiscal 2024 Form 10-K under Part I Item 1A “Risk Factors.” Important factors that could cause actual results to differ materially from our expectations (“Cautionary Statements”) are disclosed in this Report and in our Fiscal 2024 Form 10-K. All subsequent written and oral forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by the Cautionary Statements. Unless otherwise required by law, we undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise after the date of this Report.

Previous wording

(a) On July 30, 2024, the NYMEX ultra low sulfur diesel contract closed at $2.34 per gallon or $0.35 per gallon lower than the average of $2.69 through the first nine months of Fiscal 2024.

Current wording

(a) On January 31, 2025, the NYMEX ultra low sulfur diesel contract closed at $2.48 per gallon.

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 fiscal year 2024.

Current wording

The Company entered into weather hedge contracts for fiscal year 2025 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 $15.0 million annually for fiscal 2025 and $12.5 million annually for fiscal 2024. For the contracts applicable to fiscal 2025, we are additionally obligated to make an annual payment capped at $5.0 million if degree days exceed the Payment Threshold. This obligation did not exist under the contract applicable for 2024.

Previous wording

We measure net customer attrition on an ongoing basis for our full service residential and commercial home heating oil and propane customers. Net customer attrition is the difference between gross customer losses and customers added through marketing efforts. Customers added through acquisitions are not included in the calculation of gross customer gains. However, additional customers that are obtained through marketing efforts or lost at newly acquired businesses are included in these calculations from the point of closing going forward. Customer attrition percentage calculations include customers added through acquisitions in the denominators of the calculations on a weighted average basis from the closing date. Gross customer losses are the result of a number of factors, including price competition, move-outs, credit losses, conversions to natural gas and service disruptions. When a customer moves out of an existing home, we count the “move out” as a loss, and, if we are successful in signing up the new homeowner, the “move in” is treated as a gain. The impact of certain geopolitical forces on liquid product prices could increase future attrition due to higher losses from credit related issues.

Current wording

We measure net customer attrition on an ongoing basis for our full service residential and commercial home heating oil and propane customers. Net customer attrition is the difference between gross customer losses and customers added through marketing efforts. Customers added through acquisitions are not included in the calculation of gross customer gains. However, additional customers that are obtained through marketing efforts or lost at newly acquired businesses are included in these calculations from the point of closing going forward. Customer attrition percentage calculations include customers added through acquisitions in the denominators of the calculations on a weighted average basis from the closing date. Gross customer losses are the result of a number of factors, including price competition, move-outs, credit losses, natural gas and electric conversions and service disruptions. When a customer moves out of an existing home, we count the “move out” as a loss, and, if we are successful in signing up the new homeowner, the “move in” is treated as a gain. Customers sourced by alliance partners are included in our home heating oil and propane customer base. Therefore, any changes in the relationships with our alliance partners could impact gross customer gains and losses going forward.

Previous wording

For the nine months ended June 30, 2024, the Company lost 12,100 accounts (net), or 3.1% of its home heating oil and propane customer base, compared to 9,100 accounts lost (net), or 2.2% of its home heating and oil propane customer base in the prior year comparable period. Gross customer gains were 10,000 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 and less customer move-ins. Gross customer losses were 7,000 less due to a reduction in the number of customer relocations and other factors.

Current wording

For the three months ended December 31, 2024, the Company lost 1,400 accounts (net), or 0.3% of its home heating oil and propane customer base, compared to 700 accounts lost (net), or 0.2% of its home heating and oil propane customer base in the prior year comparable period. Gross customer gains were 1,800 accounts less than the prior year's comparable period and gross customer losses were 1,100 accounts less.

Previous wording

During the nine months ended June 30, 2024, we estimate that we lost 1.1% of our home heating oil and propane accounts to natural gas and electricity conversions versus 1.3% for the nine months ended June 30, 2023 and 1.3% for the nine months ended June 30, 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.

Current wording

During the three months ended December 31, 2024, we estimate that we lost 0.4% of our home heating oil and propane accounts to natural gas and electricity conversions, consistent with the 0.4% lost for the three months ended December 31, 2023 and 2022, respectively. 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 nine months ended June 30, 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.

Current wording

During fiscal 2024, the Company acquired one propane and four heating oil businesses for approximately $49.4 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 June 30, 2024, retail volume of home heating oil and propane sold increased by 7.6 million gallons, or 25.3%, to 37.7 million gallons, compared to 30.1 million gallons for the three months ended June 30, 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 June 30, 2024 were 0.5% colder than the three months ended June 30, 2023 and 17.7% warmer than normal, as reported by NOAA. For the twelve months ended June 30, 2024, net customer attrition for the base business was 4.4%. 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 December 31, 2024, retail volume of home heating oil and propane sold increased by 2.3 million gallons, or 2.8%, to 82.4 million gallons, compared to 80.1 million gallons for the three months ended December 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 December 31, 2024 were 4.1% colder than the three months ended December 31, 2023 and 10.5% warmer than normal, as reported by NOAA. For the twelve months ended December 31, 2024, net customer attrition for the base business was 4.3%. 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 3.0 million gallons, or 8.3%, to 32.9 million gallons for the three months ended June 30, 2024, compared to 35.9 million gallons for the three months ended June 30, 2023.

Current wording

Volume of motor fuel and other petroleum products sold decreased by 1.7 million gallons, or 5.2%, to 30.7 million gallons for the three months ended December 31, 2024, compared to 32.4 million gallons for the three months ended December 31, 2023.

Previous wording

For the nine months ended June 30, 2024, product sales decreased by $0.2 billion, or 11.6%, to $1.3 billion, compared to $1.5 billion for the nine months ended June 30, 2023, due to a decrease in average selling prices and a decrease in total volume sold of 4.3%. Selling prices decreased largely due to a decrease in wholesale product cost of $0.4308 per gallon, or 14.1%, compared to the nine months ended June 30, 2023. Product volumes and wholesale product cost include heating oil, propane, motor fuels and other petroleum products.

Current wording

For the three months ended December 31, 2024, product sales decreased by $49.1 million, or 10.9%, to $399.5 million, compared to $448.6 million for the three months ended December 31, 2023, due to a decrease in average selling prices. Selling prices decreased largely due to a decrease in wholesale product cost of $0.4969 per gallon, or 18.4%, compared to the three months ended December 31, 2023. Product volumes and wholesale product cost include heating oil, propane, motor fuels and other petroleum products.

Previous wording

For the nine months ended June 30, 2024, cost of product decreased $187.5 million, or 17.8%, to $867.0 million, compared to $1,054.5 million for the nine months ended June 30, 2023, due to a decrease in wholesale product cost of $0.4308 per gallon, or 14.1% and a decrease in total volume sold of 4.3%. Product volumes and wholesale product cost include heating oil, propane, motor fuels and other petroleum products.

Current wording

For the three months ended December 31, 2024, cost of product decreased $54.6 million, or 18.0%, to $248.7 million, compared to $303.3 million for the three months ended December 31, 2023, due to a decrease in wholesale product cost of $0.4969 or 18.4% per gallon slightly offset by an increase in total volume sold of 0.5%. Product volumes and wholesale product cost include heating oil, propane, motor fuels and other petroleum products.

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 June 30, 2024 increased by $0.2506 per gallon, or 17.3%, to $1.6960 per gallon, from $1.4454 per gallon during the three months ended June 30, 2023. Going forward, we cannot assume that per gallon margins realized during the three months ended June 30, 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 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, 2024 increased by $0.0281 per gallon, or 1.7%, to $1.7039 per gallon, from $1.6758 per gallon during the three months ended December 31, 2023. In the base business, home heating and propane margins for the three months ended December 31, 2024 increased by $0.0660 per gallon, or 3.9% to $1.7419 per gallon. Going forward, we cannot assume that per gallon margins realized during the three months ended December 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 June 30, 2024, total product gross profit was $74.7 million, which was $20.2 million, or 37.2%, higher than the three months ended June 30, 2023, due to an increase in home heating oil and propane volume sold ($11.0 million) and an increase in home heating oil and propane margins ($9.5 million), partially offset by a decrease in gross profit from other petroleum products ($0.3 million).

Current wording

For the three months ended December 31, 2024, total product gross profit was $150.8 million, which was $5.6 million, or 3.8%, higher than the three months ended December 31, 2023, due to an increase in home heating oil and propane volume sold ($3.8 million) and an increase in home heating oil and propane margins ($2.4 million), that was partially offset by a decrease in gross profit from other petroleum products ($0.6 million).

Previous wording

Total installation costs for the three months ended June 30, 2024 increased by $1.9 million or 8.2%, to $24.8 million, compared to $22.9 million of installation costs for the three months ended June 30, 2023. This increase was largely due to higher installation sales. Installation costs as a percentage of installation sales were 82.2% for the three months ended June 30, 2024 and 83.4% for the three months ended June 30, 2023. Gross profit from installation increased by $0.8 million.

Current wording

Total installation costs for the three months ended December 31, 2024 increased by $2.8 million or 10.1%, to $30.3 million, compared to $27.5 million of installation costs for the three months ended December 31, 2023. This increase was largely due to higher installation sales from recent acquisitions. Installation costs as a percentage of installation sales were 79.9% for the three months ended December 31, 2024 and 80.1% for the three months ended December 31, 2023. The gross profit from installation increased by $0.8 million.

Previous wording

Service expense increased by $0.6 million, or 1.4%, to $44.3 million for the three months ended June 30, 2024, representing 84.4% of service sales, versus $43.7 million, or 89.0% of service sales, for the three months ended June 30, 2023. 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 profit from service increased by $2.7 million.

Current wording

Service expense increased by $3.8 million, or 8.0%, to $51.4 million for the three months ended December 31, 2024, representing 101.3% of service sales, versus $47.6 million, or 105.3% of service sales, for the three months ended December 31, 2023. This increase was largely due to higher service sales from recent acquisitions. 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. The gross loss from service decreased by $1.7 million.

Previous wording

We realized a combined gross profit from service and installation of $13.5 million for the three months ended June 30, 2024 compared to a gross profit of $10.0 million for the three months ended June 30, 2023.

Current wording

We realized a combined gross profit from service and installation of $6.9 million for the three months ended December 31, 2024 compared to a gross profit of $4.4 million for the three months ended December 31, 2023, a $2.5 million increase.

Previous wording

During the three months ended June 30, 2023, the change in the fair value of derivative instruments resulted in a $1.0 million credit as a decrease in the market value for unexpired hedges (a $6.5 million charge) was more than offset by a $7.5 million credit due to the expiration of certain hedged positions.

Current wording

During the three months ended December 31, 2024, the change in the fair value of derivative instruments resulted in a $5.3 million credit as a decrease in the market value for unexpired hedges (a $1.2 million charge) was more than offset by a $6.5 million credit due to the expiration of certain hedged positions.

Previous wording

During the three months ended June 30, 2024, the change in the fair value of derivative instruments resulted in a $1.0 million charge due to a decrease in the market value for unexpired hedges (a $3.0 million charge) that was partially offset by a $2.0 million credit due to the expiration of certain hedged positions.

Current 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.

Previous wording

For the three months ended June 30, 2024, depreciation and amortization expenses decreased $0.5 million, or 5.7%, to $7.2 million, compared to $7.7 million for the three months ended June 30, 2023, primarily due to intangible assets that fully amortized in the prior fiscal year.

Current wording

For the three months ended December 31, 2024, depreciation and amortization expenses decreased $0.5 million, or 5.8%, to $7.9 million, compared to $8.4 million for the three months ended December 31, 2023, primarily due to intangible assets that fully amortized in the prior fiscal year.

Previous wording

For the nine months ended June 30, 2024, finance charge income decreased by $1.2 million or 24.3% to $3.7 million, from $4.9 million for the nine months ended June 30, 2023, due to less late customer payment charges received on aged receivables that was partially driven by the reduction in sales.

Current wording

For the three months ended December 31, 2024, finance charge income decreased by $0.1 million or 12.4% to $0.7 million, from $0.8 million for the three months ended December 31, 2023, due to less late customer payment charges received on aged receivables.

Previous wording

For the three months ended June 30, 2024, net interest expense decreased by $0.7 million, or 20.9%, to $2.7 million compared to $3.4 million for the three months ended June 30, 2023. The year-over-year change was driven by a decrease in average borrowings of $31.3 million from $174.5 million for the three months ended June 30, 2023 to $143.2 million for the three months ended June 30, 2024 that was partially offset by an increase in the weighted average interest rate from 6.7% for the three months ended June 30, 2023 to 7.2% for the three months ended June 30, 2024. To hedge against rising interest rates, the Company utilizes interest rate swaps. At June 30, 2024, approximately 40.0% 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 December 31, 2024, net interest expense decreased by $0.2 million, or 6.4%, to $3.0 million compared to $3.2 million for the three months ended December 31, 2023. The year-over-year change was driven by a decrease in the weighted average interest rate from 7.4% for the three months ended December 31, 2023 to 7.2% for the three months ended December 31, 2024 that was partially offset by an increase in average borrowings of $54.1 million from $156.6 million for the three months ended December 31, 2023 to $210.7 million for the three months ended December 31, 2024. To hedge against rising interest rates, the Company utilizes interest rate swaps. At December 31, 2024, 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.

Previous wording

For the three months ended June 30, 2024, amortization of debt issuance cost was $0.2 million, essentially unchanged from the three months ended June 30, 2023.

Current wording

For the three months ended December 31, 2024, amortization of debt issuance cost was $0.3 million, essentially unchanged from the three months ended December 31, 2023.

Previous wording

For the three months ended June 30, 2024, the Company’s income tax benefit decreased by $5.1 million to $4.2 million, from $9.3 million for the three months ended June 30, 2023. The decrease in the income tax benefit was driven by a $18.0 million increase in income before income taxes.

Current wording

For the three months ended December 31, 2024, the Company’s income tax expense increased by $7.8 million to $13.0 million, from $5.2 million for the three months ended December 31, 2023. The increase in the income tax expense was driven by a $27.8 million increase in income before income taxes.

Previous wording

For the nine months ended June 30, 2024, Star’s net income increased $18.6 million, to $70.3 million, compared to the nine months ended June 30, 2023, primarily due to a $13.0 million increase in Adjusted EBITDA, a favorable change in the fair value of derivative instruments of $11.4 million and a $2.9 million decrease in interest expense that was partially offset by an $8.5 million increase in income tax expense and a $0.3 million increase in depreciation and amortization expenses.

Current wording

For the three months ended December 31, 2024, Star’s net income increased $19.9 million, to $32.9 million, compared to the three months ended December 31, 2023, primarily due to a favorable change in the fair value of derivative instruments of $24.3 million, a $2.8 million increase in Adjusted EBITDA, a $0.5 million decrease in depreciation and amortization expenses and a $0.2 million decrease in interest expense that was partially offset by a $7.8 million increase in income tax expense.

Previous wording

During the nine months ended June 30, 2024, cash provided by operating activities decreased $30.3 million, to $72.4 million, compared to $102.7 million during the nine months ended June 30, 2023. The decrease was driven by a decrease in collection of trade receivables on a comparable basis (including accounts receivable and customer credit balance accounts) of $47.7 million and a $2.9 million increase in cash required to purchase product inventory. These reductions in cash provided by operating activities were partially offset by a $13.6 million increase in cash flows from operations, $5.2 million less payroll taxes paid 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 and $1.5 million of other net changes in working capital.

Current wording

During the three months ended December 31, 2024, cash used in operating activities increased $4.3 million, to $64.6 million, compared to $60.3 million in cash used in operating activities during the three months ended December 31, 2023. The increase was driven by a $7.7 million increase in net cash paid for certain hedge positions, a $2.2 million decrease in collection of trade receivables on a comparable basis (including accounts receivable and customer credit balance accounts) and $0.5 million of other net changes in working capital. The increases were partially offset by a $6.1 million favorable change in accounts payable due to timing of inventory purchases.

Previous wording

During the nine months ended June 30, 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.

Current wording

During the three months ended December 31, 2024, the Company acquired a heating oil business for approximately $0.7 million in cash. The gross purchase price was allocated $0.8 million to intangible assets, $0.4 million to goodwill, $0.3 million to fixed assets and reduced by $0.8 million of negative working capital. The Company also sold certain assets for cash proceeds of $0.3 million.

Previous wording

Our capital expenditures for the nine months ended June 30, 2023 totaled $6.7 million, as we invested in computer hardware and software ($0.6 million), refurbished certain physical plants ($0.7 million), expanded our propane operations ($1.0 million) and made additions to our fleet and other equipment ($4.4 million).

Current wording

Our capital expenditures for the three months ended December 31, 2024 totaled $4.0 million, as we invested in computer hardware and software ($0.4 million), refurbished certain physical plants ($0.7 million), expanded our propane operations ($0.3 million) and made additions to our fleet and other equipment ($2.6 million).

Previous wording

During the nine months ended June 30, 2024, $1.4 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 three months ended December 31, 2024, $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.

Previous wording

During the nine months ended June 30, 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.

Current 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.

Previous wording

Our capital expenditures for the nine months ended June 30, 2024 totaled $7.6 million, as we invested in computer hardware and software ($1.0 million), refurbished certain physical plants ($1.7 million), expanded our propane operations ($1.1 million) and made additions to our fleet and other equipment ($3.8 million).

Current 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).

Previous wording

During the nine months ended June 30, 2023, $0.7 million of earnings were reinvested into the irrevocable trust.

Current wording

During the three months ended December 31, 2023, $0.4 million of earnings were reinvested into the irrevocable trust.

Previous wording

During the nine months ended June 30, 2023, we repaid $12.4 million of our term loan, borrowed $125.6 million under our revolving credit facility and subsequently repaid $145.7 million, repurchased 0.5 million Common Units for $4.5 million, in connection with our unit repurchase plan, and paid distributions of $16.7 million to our Common Unit holders and $0.9 million to our General Partner unit holders (including $0.8 million of incentive distributions as provided in our Partnership Agreement).

Current wording

During the three months ended December 31, 2024, we borrowed $7.8 million under our revolving credit facility, repurchased fewer than 0.1 million Common Units, at an average price paid of $11.20 per unit, for $0.1 million, in connection with our unit repurchase plan, and paid distributions of $6.0 million to our Common Unit holders and $0.4 million to our General Partner unit holders (including $0.3 million of incentive distributions as provided in our Partnership Agreement).

Previous wording

During the nine months ended June 30, 2024, we repaid $12.3 million of our term loan, borrowed $79.6 million under our revolving credit facility and subsequently repaid $79.6 million, repurchased approximately 0.8 million Common Units, at an average price paid of $10.88 per unit, for $9.0 million, in connection with our unit repurchase plan, and paid distributions of $17.7 million to our Common Unit holders and $1.0 million to our General Partner unit holders (including $1.0 million of incentive distributions as provided in our Partnership Agreement).

Current 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).

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 June 30, 2024 ($45.7 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 June 30, 2024, we had accounts receivable of $128.6 million of which $89.7 million is due from residential customers and $38.9 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 June 30, 2024, we had $4.4 million of borrowings under our revolving credit facility, $132.1 million outstanding under our term loan, $5.7 million in letters of credit outstanding and $2.9 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 December 31, 2024 ($48.8 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, 2024, we had accounts receivable of $176.3 million of which $136.2 million is due from residential customers and $40.1 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 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, 2024, we had $7.8 million of borrowings under our revolving credit facility, $204.8 million outstanding under our term loan, $5.2 million in letters of credit outstanding and $9.9 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 June 30, 2024, Availability, as defined in the sixth amended and restated revolving credit facility agreement, as amended, was $201.0 million and we were in compliance with the financial covenants.

Current wording

Under the terms of the credit agreement, if Availability (as defined in the credit agreement) is less than the greater of (a) 12.5% of the Line Cap (lesser of the aggregate revolving commitment and the borrowing base) and (b) $35.0 million, we must maintain a fixed charge coverage ratio of 1.10. We are also required to maintain a senior secured leverage ratio that cannot be more than 3.0 as of June 30th or September 30th, and no more than 5.5 as of December 31st or March 31st. As of December 31, 2024, Availability, as defined in the credit agreement, as amended, was $170.4 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 $2.0 million to $3.0 million, excluding the capital requirements for leased fleet. In addition, we plan to invest $0.5 million to $1.0 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 $6.0 million to Common Unit holders, $0.4 million to our General Partner (including $0.3 million of incentive distribution as provided for in our Partnership Agreement) and $0.3 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 $4.1 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 we are in various stages of pursuing attractive acquisition opportunities within the Availability constraints of our revolving credit facility and funding resources, some of which may close in fiscal 2024.

Current wording

Maintenance capital expenditures for the remainder of fiscal 2025 are estimated to be approximately $8.3 million to $9.3 million, excluding the capital requirements for leased fleet. In addition, we plan to invest $1.0 million to $1.1 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 2025, the Company would make aggregate payments of approximately $17.9 million to Common Unit holders, $1.1 million to our General Partner (including $1.0 million of incentive distribution as provided for in our Partnership Agreement) and $1.0 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 credit agreement. Under the terms of our credit agreement, our term loan is repayable in quarterly payments of $5.3 million and we expect to pay $15.8 million for the remainder of fiscal 2025. Further, subject to any additional liquidity issues or concerns resulting from wholesale price volatility, we intend to continue to 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, including the $68 million acquisition of a propane business in January 2025.

Previous wording

We believe that there have been no significant changes to our critical accounting policy and critical accounting estimates during the nine months ended June 30, 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 nine months ended June 30, 2024, 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 three months ended December 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, 2024. While our critical accounting policies and estimates have not changed in any significant way during the three months ended December 31, 2024, the following provides disclosures about our critical accounting policy and critical accounting estimates.

Previous wording

We currently self-insure a portion of workers’ compensation, auto, general liability and medical claims. We establish and periodically evaluate self-insurance liabilities based upon expectations as to what our ultimate liability may be for outstanding claims using developmental factors based upon historical claim experience, including frequency, severity, demographic factors and other actuarial assumptions, supplemented with the support of a qualified third-party actuary. As of September 30, 2023, we had approximately $77.5 million of self-insurance liabilities. The ultimate resolution of these claims could differ materially from the assumptions used to calculate the self-insurance liabilities, which could have a material adverse effect on results of operations.

Current wording

We currently self-insure a portion of workers’ compensation, auto, general liability and medical claims. We establish and periodically evaluate self-insurance liabilities based upon expectations as to what our ultimate liability may be for outstanding claims using developmental factors based upon historical claim experience, including frequency, severity, demographic factors and other actuarial assumptions, supplemented with the support of a qualified third-party actuary. As of September 30, 2024, we had approximately $76.7 million of self-insurance liabilities. The ultimate resolution of these claims could differ materially from the assumptions used to calculate the self-insurance liabilities, which could have a material adverse effect on results of operations.