Kodiak Gas Services Inc

Previous wording

Operations”) and related services are critical to our customers’ ability to reliably produce, gather and transport natural gas and oil. We are a market leader in the Permian Basin, which is the largest producing natural gas and oil basin in the U.S. We operate our large horsepower compression units under stable, fixed-revenue contracts with many upstream and midstream customers. Our compression assets have long useful lives consistent with the expected production lives of the key regions where we operate. We believe our customer-centric business model positions us as the preferred contract compression operator for our customers and creates long-standing relationships. We strategically invest in the training, development and retention of our highly skilled and dedicated employees and believe their expertise and commitment to excellence enhances and differentiates our business model. Furthermore, we maintain an intense focus on being one of the most sustainable and responsible operators of contract compression infrastructure.

Current wording

We are a leading operator of contract compression infrastructure in the U.S. Our compression services and other related services are critical to our customers’ ability to reliably produce, gather and transport natural gas and oil. We are a market leader in the Permian Basin, which is the largest producing natural gas and oil basin in the U.S. We operate our large horsepower compression units under stable, fixed-revenue contracts with many upstream and midstream customers. Our compression assets have long useful lives consistent with the expected production lives of the key regions where we operate. We believe our customer-centric business model positions us as the preferred contract compression operator for our customers and creates long-standing relationships. We strategically invest in the training, development and retention of our highly skilled and dedicated employees and believe their expertise and commitment to excellence enhances and differentiates our business model. Furthermore, we maintain an intense focus on being one of the most sustainable and responsible operators of contract compression infrastructure.

Previous wording

We manage our business through two operating segments: Compression Operations and Other Services. Compression Operations consists of operating Company-owned and customer-owned compression infrastructure to enable the production, gathering and transportation of natural gas and oil. Other Services consists of station construction, maintenance and overhaul, plus other ancillary time and material-based offerings. Our Other Services offerings are often cross sold with Compression Operations.

Current wording

We manage our business through two operating segments: Contract Services and Other Services. Contract Services consists of operating Company-owned and customer-owned compression and gas treating and cooling infrastructure to enable the production, gathering, processing and transportation of natural gas and oil. Other Services consists of station construction, maintenance and overhaul, freight and crane charges, parts sales and other ancillary time and material-based offerings. Our Other Services offerings are often cross sold with Contract Services.

Previous wording

On April 1, 2024, we completed the acquisition of CSI Compressco, pursuant to the terms of the definitive merger agreement executed on December 19, 2023, creating the industry’s largest contract compression fleet with revenue-generating horsepower of approximately 4.3 million. CSI Compressco unitholders received 0.086 shares of Kodiak common stock for each CSI Compressco common unit owned. The Electing Unitholders elected to receive 0.086 limited liability company units representing economic interests in Kodiak Services (along with an equal number of shares of non-economic voting preferred stock of Kodiak) for each CSI Compressco common unit they held. At the option of the holder, each such unit will be redeemable for one share of Kodiak common stock (along with cancellation of a corresponding share of preferred stock), following a six-month post-closing lock-up and subject to certain conditions. See Note 20 (“Subsequent Events”) to our condensed consolidated financial statements for more information.

Current wording

On April 1, 2024, we completed the CSI Acquisition, pursuant to the terms of the Merger Agreement. CSI Compressco unitholders received 0.086 shares of Kodiak common stock for each CSI Compressco common unit owned. The Electing Unitholders received 0.086 limited liability company units representing economic interests in Kodiak Services (along with an equal number of shares of non-economic voting preferred stock of Kodiak) for each CSI Compressco common unit they held. At the option of the holder, each such unit will be redeemable for one share of Kodiak common stock (along with cancellation of a corresponding share of preferred stock), following a six-month post-closing lock-up and subject to certain conditions.

Previous wording

In March 2024, the SEC adopted rules to enhance and standardize climate-related disclosures. The final rules require disclosure of the following information in the footnotes to financial statements, subject to certain materiality thresholds:

Current wording

In March 2024, the U.S. Securities and Exchange Commission (“SEC”) adopted rules to enhance and standardize climate-related disclosures. The final rules require disclosure of the following information in the footnotes to financial statements, subject to certain materiality thresholds:

Previous wording

The final rules include a phased-in compliance period for all registrants, with the compliance date dependent on the registrant’s filer status and the content of the disclosure. Based on our current filer status, we will be required to comply with the final rules beginning with our annual report for the fiscal year beginning January 1, 2027. We are assessing the new climate-related disclosure rules, awaiting decisions on their legal status and determining an implementation plan to comply with the disclosure requirements in accordance with the prescribed timeline.

Current wording

The final rules include a phased-in compliance period for all registrants, with the compliance date dependent on the registrant’s filer status and the content of the disclosure. Based on our current filer status, we will be required to comply with the final rules beginning with our annual report for the fiscal year beginning January 1, 2027.

Previous wording

(1)Fleet horsepower includes revenue-generating horsepower and idle horsepower, which is comprised of compression units that do not have a signed contract or are not subject to a firm commitment from our customer(s) and are no longer generating revenue. Fleet horsepower excludes 27,663 and 58,645 of non-marketable or obsolete horsepower as of March 31, 2024, and 2023, respectively.

Current wording

(1)Fleet horsepower includes owned horsepower excluding 27,663 and 32,340 of non-marketable or obsolete horsepower as of June 30, 2024, and 2023, respectively.

Previous wording

The 3.7% increase in fleet horsepower and revenue-generating horsepower, respectively, were primarily attributable to the purchase and deployment of new compression units through organic growth with our existing customer base, as well as select new customers in the key regions in which we operate. The 2.6% increase in revenue-generating horsepower per revenue-generating compression unit was due to the purchase and deployment of new, large horsepower units.

Current wording

The 40.9% increase in fleet horsepower and revenue-generating horsepower, respectively, were primarily attributable to the (i) additional 1.2 million horsepower acquired as part of the CSI Acquisition and (ii) purchase and deployment of new compression units through organic growth. The 30.1% decrease in revenue-generating horsepower per revenue-generating compression unit was due to the lower average horsepower per unit of the fleet as part of the CSI Acquisition.

Previous wording

Selling, General and Administrative Expenses increased $11.7 million (89.7%) for the three months ended March 31, 2024, compared to the three months ended March 31, 2023. This increase was due to a $8.5 million increase in professional fees, primarily related to transactions costs associated with the CSI Acquisition, a $2.0 million increase in stock compensation expense related to equity compensation plans, a $1.0 million increase in other overhead expenses, mostly consisting of insurance, entertainment and office expenses, a $0.1 million increase in labor and benefits and a $0.1 million increase in bad debt expense.

Current wording

Selling, General and Administrative Expenses increased $46.5 million (346.0%) for the three months ended June 30, 2024, compared to the three months ended June 30, 2023. This increase was due to a $14.6 million increase in professional fees, primarily related to transactions costs associated with the CSI Acquisition, a $14.4 million increase in labor and benefits, of which $9.0 million was related to severance, a $5.3 million increase in equity compensation expense related to equity compensation plans, a $4.5 million increase in bad debt expense related to expected credit losses, a $4.4 million increase in software expense, mainly related to the termination of an agreement as part of the CSI Acquisition, and a $3.3 million increase in other overhead expenses, mostly consisting of insurance and facility expenses.

Previous wording

Gain (Loss) on Derivatives increased $27.8 million (347.1%) for the three months ended March 31, 2024, compared to the three months ended March 31, 2023. This increase was primarily related to a $14.3 million increase in the fair value of derivatives and an increase in cash received on derivatives of $5.5 million for the three months ended March 31, 2024, due to an increase in the long-term Secured Overnight Financing Rate (“SOFR”) yield curve, as compared to a $17.9 million decrease in the fair value of derivatives and cash received on derivatives of $9.9 million for the three months ended March 31, 2023, due to a decrease in the long-term SOFR yield curve.

Current wording

Gain on Derivatives decreased $0.4 million (1.4%) for the six months ended June 30, 2024 compared to the six months ended June 30, 2023. This decrease was primarily related to a $14.3 million increase in the fair value of derivatives and an increase in cash received on derivatives of $12.3 million for the six months ended June 30, 2024, due to an increase in the long-term SOFR yield curve, as compared to a $21.5 million decrease in the fair value of derivatives and cash received on derivatives of $48.5 million for the six months ended June 30, 2023, due to settlement on the termination of derivatives attributable to the Term Loan and a decrease in the long-term SOFR yield curve.

Previous wording

Income Tax Expense increased by $13.9 million (347.5%) for the three months ended March 31, 2024, compared to the three months ended March 31, 2023. This increase was primarily due to an increase in pre-tax income of $56.4 million for the three months ended March 31, 2024, compared to pre-tax loss for the three months ended March 31, 2023.

Current wording

Income Tax Expense increased by $10.4 million (556.2%) for the six months ended June 30, 2024 compared to the six months ended June 30, 2023. This was primarily due to an increase in pre-tax income of $42.1 million for the six months ended June 30, 2024, compared to pre-tax income for the six months ended June 30, 2023.

Previous wording

Our ability to fund operations, finance capital expenditures, service our debt and pay dividends depends on our operating cash flows and access to the capital and credit markets. Our primary sources of liquidity are cash flows generated from our operations and our borrowing availability under the ABL Facility. Our cash flow is affected by numerous factors, including prices and demand for our compression infrastructure assets and services, conditions in the financial markets and various other factors. We believe cash generated by operating activities will be sufficient to service our debt, fund working capital, fund our estimated capital expenditures and, as our Board of Directors may determine from time to time in its discretion, pay dividends.

Current wording

Our ability to fund operations, finance capital expenditures, service our debt and pay dividends depends on our operating cash flows and access to the capital and credit markets. Our primary sources of liquidity are cash flows generated from our operations and our borrowing availability under the ABL Facility. Our cash flow is affected by numerous factors, including prices and demand for our compression infrastructure assets and services, conditions in the financial markets and various other factors. We believe cash generated by operating activities will be sufficient to service our debt, fund working capital, fund our estimated capital expenditures in the short-term and long-term and, as our Board may determine from time to time in its discretion, pay dividends. At June 30, 2024, we had approximately $415.4 million of liquidity consisting of $4.0 million in cash and cash equivalents and $411.4 million available under the ABL Facility.

Previous wording

For the three months ended March 31, 2024, growth capital expenditures were $59.4 million and maintenance capital expenditures were $10.6 million. For the three months ended March 31, 2023, growth capital expenditures were $35.8 million and maintenance capital expenditures were $4.8 million. The increase in growth capital expenditures was primarily related to the timing of compression unit purchases necessary to support operating capacity demand. The increase in maintenance capital expenditures was primarily due to an increase in unit overhauls scheduled based on the age and operating hours of such units.

Current wording

For the six months ended June 30, 2024, growth capital expenditures were $149.8 million and maintenance capital expenditures were $29.8 million. For the six months ended June 30, 2023, growth capital expenditures were $68.3 million and maintenance capital expenditures were $15.7 million. The increase in growth capital expenditures includes a $20.2 million non-cash increase related to our sales tax accrual on compression equipment purchases related to audits we are undergoing with the state of Texas. The remaining amounts were primarily related to the timing of compression unit purchases necessary to support operating capacity demand. The increase in maintenance capital expenditures was primarily due to an increase in unit overhauls scheduled based on the age and operating hours of such units.

Previous wording

Our Board of Directors may elect to declare cash dividends on our common stock, subject to our compliance with applicable law, and depending on, among other things, economic conditions, our financial condition, results of operations, projections, liquidity, earnings, legal requirements and restrictions in the agreements governing our indebtedness (as further discussed herein). The timing, amount and financing of dividends, if any, are subject to the discretion of our Board of Directors from time to time.

Current wording

Our Board of Directors may elect to declare cash dividends on our common stock, subject to our compliance with applicable law, and depending on, among other things, economic conditions, our financial condition, results of operations, projections, liquidity, earnings, legal requirements and restrictions in the agreements governing our indebtedness (as further discussed herein). The timing, amount and financing of dividends, if any, are subject to the discretion of our Board from time to time.

Previous wording

On May 2, 2024, our Board of Directors declared a quarterly cash dividend, which was paid on May 20, 2024, to stockholders of record, determined as of close of business on May 13, 2024 (the “Common Stock Dividend”) and, in conjunction with the Common Stock Dividend, Kodiak Gas Services declared a distribution on its units of $0.38 per unit, payable on May 20, 2024, to all unitholders of record of Kodiak Services as of the close of business on May 16, 2024.

Current wording

On August 1, 2024, the Company’s Board declared the Common Stock Dividend and, in conjunction with the Common Stock Dividend, Kodiak Services declared a distribution on its units of $0.41 per unit payable on August 16, 2024 to all unitholders of record of Kodiak Services as of the close of business on August 12, 2024.

Previous wording

Over the long-term, we expect to fund any dividends and our budgeted growth capital expenditures using our Discretionary Cash Flow. In the event our Discretionary Cash Flow is insufficient for the purpose of funding any such dividends and our budgeted growth capital expenditures for such period, we may fund such shortfall (i) with additional borrowings under our ABL Facility, which, as of March 31, 2024, had $1,068.1 million available (subject to the requirement that our availability, in the case of dividends, under the ABL Facility exceeds the greater of (x) 10% of the total commitments under the facility of $2.2 billion or (y) $200 million) or (ii) reduce our growth capital expenditures for such period. Any such additional borrowings under our ABL Facility will result in an increase in our interest expense for such period. Any such reduction in our growth capital expenditures may result in lower growth in our revenue-generating horsepower in future periods.

Current wording

Over the long-term, we expect to fund any dividends and our budgeted growth capital expenditures using our Discretionary Cash Flow. In the event our Discretionary Cash Flow is insufficient for the purpose of funding any such dividends and our budgeted growth capital expenditures for such period, we may fund such shortfall (i) with additional borrowings under our ABL Facility, which, as of June 30, 2024, had $411.4 million available (subject to the requirement that our availability, in the case of dividends, under the ABL Facility exceeds the greater of (x) 10% of the total commitments under the facility of $2.2 billion or (y) $200 million) or (ii) reduce our growth capital expenditures for such period. Any such additional borrowings under our ABL Facility will result in an increase in our interest expense for such period. Any such reduction in our growth capital expenditures may result in lower growth in our revenue-generating horsepower in future periods.

Previous wording

•Long-term debt of $1.9 billion, of which $1.1 billion is due in 2028 and $750.0 million is due in 2029.

Current wording

•Long-term debt of $2.5 billion, of which $1.8 billion is due in 2028 and $750 million is due in 2029.

Previous wording

•Purchase commitments of $106.6 million, all of which is expected to be settled within the next twelve months; primarily consisting of future commitments to purchase new compression units that have been ordered but not yet received. See Note 13 (“Commitments and Contingencies”) to the condensed consolidated financial statements included elsewhere in this Report.

Current wording

•Purchase commitments of $220.7 million, of which $169.3 million is expected to be settled within the next twelve months; primarily consisting of future commitments to purchase new compression units that have been ordered but not yet received. See Note 14 (“Commitments and Contingencies”) to the condensed consolidated financial statements included elsewhere in this Report.

Previous wording

As of March 31, 2024, other commitments include operating lease payments totaling $33.9 million.

Current wording

As of June 30, 2024, other commitments include operating lease payments totaling $58.9 million.

Previous wording

The following table summarizes our cash flows for the three months ended March 31, 2024, and 2023 (in thousands):

Current wording

The following table summarizes our cash flows for the six months ended June 30, 2024, and 2023 (in thousands):

Previous wording

The $28.3 million increase in net cash provided by operating activities for the three months ended March 31, 2024, compared to the three months ended March 31, 2023, was primarily due to a $26.1 million decrease in interest expense, net of debt issuance cost amortization, and a $6.6 million increase in income from operations adjusted for non-cash operating activity and working capital changes. This increase was partially offset by a $4.4 million decrease in cash received on derivatives.

Current wording

The $54.7 million increase in net cash provided by operating activities for the six months ended June 30, 2024, compared to the six months ended June 30, 2023, was primarily due to a $44.3 million decrease in interest expense, net of debt issuance cost amortization, a $33.7 million increase in non-cash operating items, namely depreciation and amortization, taxes and equity compensation, and a $20.9 million increase from working capital changes, namely changes in accounts receivable, net, accrued and other liabilities, and contract liabilities. This increase was partially offset by a $36.2 million decrease in cash received on derivatives and a $8.0 million decrease in income from operations.

Previous wording

The $11.6 million increase in net cash used in investing activities for the three months ended March 31, 2024, compared to the three months ended March 31, 2023, was primarily due to a $5.8 million increase in maintenance capital expenditures and a $5.8 million increase in growth capital expenditures, net of accrued capital expenditures.

Current wording

The $74.4 million increase in net cash used in investing activities for the six months ended June 30, 2024, compared to the six months ended June 30, 2023, was primarily due to a $14.0 million increase in maintenance capital expenditures, a $69.1 million increase in growth capital expenditures, net of accrued capital expenditures and a $0.7 million decrease in proceeds on sale of property, plant and equipment. This was partially offset by $9.5 million in cash acquired related to the CSI Acquisition.

Previous wording

The $6.5 million decrease in net cash provided by financing activities for the three months ended March 31, 2024, compared to the three months ended March 31, 2023, was primarily due to an increase in dividends paid to stockholders of $29.8 million, $0.4 million increase in cash payments related to offering cost, an increase in net payments over borrowings on debt instruments of $0.3 million and cash paid for shares withheld to cover taxes of $0.3 million. This was offset by a decrease in payments of debt issuance costs of $24.3 million.

Current wording

The $2.9 million increase in net cash used in financing activities for the six months ended June 30, 2024, compared to the six months ended June 30, 2023, was primarily due to an increase in dividends paid to stockholders of $62.4 million, distributions to noncontrolling interests of $2.5 million, $1.2 million increase in cash payments related to offering costs, and cash paid for shares withheld to cover taxes of $0.3 million. This was offset by a $42.3 million distribution made in the prior, a decrease in payments of debt issuance costs of $15.9 million an increase in net borrowings over payments on debt instruments of $2.9 million.

Previous wording

As of January 1, 2022, a wholly owned subsidiary of Kodiak had a revolving asset-based loan credit facility (the “ABL Facility”) with unaffiliated secured lenders and JPMorgan Chase Bank, N.A., as administrative agent. On March 22, 2023, wholly owned subsidiaries of Kodiak entered into the Fourth Amended and Restated ABL Credit Agreement with the lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent (as amended or restated from time to time, the “ABL Credit Agreement”), whereby the total facility (among other things) was increased to $2.2 billion and certain changes were made to our financial covenants and maturity date. On May 31, 2023, the ABL Credit Agreement was amended to, among other things, permit distributions of overallotment proceeds from the IPO and revise the terms related to the payment and prepayment ofthat certain Amended and Restated Credit Agreement, dated as of May 19, 2022, as amended by that certain First Amendment, dated March 31, 2023, among Kodiak Services, Frontier Intermediate Holding, LLC, Wells Fargo Bank, N.A., as Administrative Agent, and the lenders party thereto (the “Term Loan”). On June 27, 2023, the ABL Credit Agreement was further amended to remove the ability to make distributions related to overallotment proceeds from the IPO and to instead require prepayment of the obligations and cash collateralization of any letter of credit exposure upon the issuance of any equity interests by Kodiak pursuant to the overallotment in the IPO. In connection with the IPO, the Company became a borrower under the ABL Facility. As of March 31, 2024, there was $1.0 million in letters of credit outstanding under the ABL Facility. The maturity date of the ABL Facility is March 22, 2028. See Note 9 (“Debt and Credit Facilities”) to the condensed consolidated financial statements included elsewhere in this Report. The ABL Credit Agreement requires that we meet certain financial ratios.

Current wording

On March 22, 2023, wholly owned subsidiaries of Kodiak entered into the Fourth Amended and Restated Credit Agreement with the lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent (as amended or restated from time to time, the “ABL Credit Agreement” or “ABL Facility”), which mainly served to extend the maturity date from June 2024 to March 2028. The total commitments under the facility are $2.2 billion. As of June 30, 2024, there were $2.4 million in letters of credit outstanding under the ABL Facility See Note 10 (“Debt and Credit Facilities”) to the condensed consolidated financial statements included elsewhere in this Report. The ABL Credit Agreement requires that we meet certain financial ratios.

Previous wording

On January 22, 2024, Kodiak, Kodiak Services and certain other subsidiaries of Kodiak entered into the Third Amendment to the ABL Credit Agreement (the “Third Amendment”), which amends the Existing ABL Credit Agreement. The Third Amendment, among other things, amended certain provisions of the Existing ABL Credit Agreement (i) to accommodate the consummation of the transactions contemplated by the Merger Agreement, (ii) to account for Kodiak’s organizational structure after giving effect to the transactions contemplated by the Merger Agreement and (iii) include a maximum secured leverage ratio of (x) 3.75 to 1.00 for the first four fiscal quarters after the Company issues any unsecured indebtedness and (y) 3.25 to 1.00 for each fiscal quarter thereafter,.

Current wording

On January 22, 2024, Kodiak entered into the Third Amendment to the ABL Credit Agreement (the “Third Amendment”). The Third Amendment, among other things, amended certain provisions of the ABL Facility (i) to accommodate the consummation of the transactions contemplated by the Merger Agreement and (ii) to account for the Company’s organizational structure after giving effect to the transactions contemplated by the Merger Agreement. Fees and costs totaling $2.9 million were incurred related to the Third Amendment and will be amortized over the life of the loan to interest expense. During the three and six months ended June 30, 2024, $0.9 million and $2.9 million was paid, respectively.

Previous wording

The weighted average interest rate as of March 31, 2024 and December 31, 2023, was 7.68% and 8.08%, respectively, excluding the effect of interest rate swaps. The Company pays an annualized commitment fee of 0.25% on the unused portion of its ABL Facility if borrowings are greater than 50% of total commitments and 0.50% on the unused portion of the ABL Facility if borrowings are less than 50% of total commitments.

Current wording

The weighted average interest rate as of June 30, 2024, and December 31, 2023, was 7.64% and 8.08%, respectively, excluding the effect of interest rate swaps. The Company pays an annualized commitment fee of 0.25% on the unused portion of its ABL Facility if borrowings are greater than 50% of total commitments and 0.50% on the unused portion of the ABL Facility if borrowings are less than 50% of total commitments.

Previous wording

The proceeds from the 2029 Senior Notes were used to repay a portion of the outstanding indebtedness under the ABL Facility and to pay related fees and expenses in connection with the notes offering. In connection with the close of the CSI Acquisition on April 1, 2024, the Company used proceeds from additional draws on the ABL Facility to repay $651.8 million of existing long-term indebtedness assumed in the CSI Acquisition.

Current wording

The proceeds from the 2029 Senior Notes were used to repay a portion of the outstanding indebtedness under the ABL Facility and to pay related fees and expenses in connection with the notes offering. In connection with the close of the CSI Acquisition on April 1, 2024, the Company used proceeds from additional draws on the ABL Facility to repay $651.8 million of existing outstanding indebtedness, except for certain equipment financing obligations, and pay fees and expenses related to the notes offering and the CSI Acquisition..

Previous wording

To mitigate a portion of the exposure to fluctuations in the variable interest rate of the ABL Facility and the Term Loan, we have entered into various derivative instruments.

Current wording

To mitigate a portion of the exposure to fluctuations in the variable interest rate of the ABL Facility, we have entered into various derivative instruments.

Previous wording

(1)Calculated using Adjusted Gross Margin for Compression Operations as a percentage of total Compression Operations revenues.

Current wording

(1)Calculated using Adjusted Gross Margin for Contract Services as a percentage of total Contract Services revenues.

Previous wording

We define Adjusted EBITDA as net income (loss) before interest expense, net; income tax expense (benefit); and depreciation and amortization; plus (i) loss on extinguishment of debt; (ii) loss (gain) on derivatives; (iii) equity compensation expense; (iv) transaction expenses; (v) loss (gain) on sale of assets; and (vi) impairment of compression equipment. We define Adjusted EBITDA Percentage as Adjusted EBITDA divided by total revenues. Adjusted EBITDA and Adjusted EBITDA Percentage are used as supplemental financial measures by our management and external users of our financial statements, such as investors, commercial banks and other financial institutions, to assess:

Current wording

We define Adjusted EBITDA as net income (loss) before interest expense, net; income tax expense (benefit); and depreciation and amortization; plus (i) loss on extinguishment of debt; (ii) loss (gain) on derivatives; (iii) equity compensation expense; (iv) severance expenses; (v) transaction expenses; (vi) loss (gain) on sale of assets; and (vii) impairment of compression equipment. We define Adjusted EBITDA Percentage as Adjusted EBITDA divided by total revenues. Adjusted EBITDA and Adjusted EBITDA Percentage are used as supplemental financial measures by our management and external users of our financial statements, such as investors, commercial banks and other financial institutions, to assess:

Previous wording

The following table reconciles net income (loss), the most directly comparable GAAP financial measure, to Adjusted EBITDA, its most directly comparable Non-GAAP financial measure, for each of the periods presented(in thousands):

Current wording

The following table reconciles net income, the most directly comparable GAAP financial measure, to Adjusted EBITDA, its most directly comparable Non-GAAP financial measure, for each of the periods presented(in thousands):

Previous wording

(1)For the three months ended March 31, 2024, and March 31, 2023, there were $2.8 million and $0.9 million of non-cash adjustments for equity compensation expense.

Current wording

(1)For the three months ended June 30, 2024, and June 30, 2023, there were $5.3 million and $29.0 thousand of non-cash adjustments for equity compensation expense. For the six months ended June 30, 2024, and June 30, 2023, there were $8.2 million and $0.9 million of non-cash adjustments for equity compensation expense.

Previous wording

(2)Includes amortization of debt issuance costs, non-cash lease expense, provision for credit losses and inventory reserve.

Current wording

(3)Includes amortization of debt issuance costs, non-cash lease expense, provision for credit losses and inventory reserve.

Previous wording

We define Discretionary Cash Flow as net cash provided by operating activities less (i) maintenance capital expenditures;(ii) gain (loss) on sale of property, plant and equipment; (iii) certain changes in operating assets and liabilities; and (iv) certain other expenses; plus (x) transaction expenses. We believe Discretionary Cash Flow is a useful liquidity and performance measure and supplemental financial measure for us in assessing our ability to pay cash dividends to our stockholders, make growth capital expenditures and assess our operating performance. Our ability to pay dividends is subject to limitations due to restrictions contained in our ABL Credit Agreement, as further described elsewhere herein. Discretionary Cash Flow is presented for supplemental informational purposes only and should not be considered a substitute for financial information presented in accordance with GAAP, such as revenues, net income, operating income (loss) or cash flows from operating activities. Discretionary Cash Flow as presented may not be comparable to similarly titled measures of other companies.

Current wording

We define Discretionary Cash Flow as net cash provided by operating activities less (i) maintenance capital expenditures;(ii) gain (loss) on sale of property, plant and equipment; (iii) certain changes in operating assets and liabilities; and (iv) certain other expenses; plus (x) severance expenses; and (y) transaction expenses. We believe Discretionary Cash Flow is a useful liquidity and performance measure and supplemental financial measure for us in assessing our ability to pay cash dividends to our stockholders, make growth capital expenditures and assess our operating performance. Our ability to pay dividends is subject to limitations due to restrictions contained in our ABL Credit Agreement, as further described elsewhere herein. Discretionary Cash Flow is presented for supplemental informational purposes only and should not be considered a substitute for financial information presented in accordance with GAAP, such as revenues, net income, operating income (loss) or cash flows from operating activities. Discretionary Cash Flow as presented may not be comparable to similarly titled measures of other companies.

Previous wording

We define Free Cash Flow as net cash provided by operating activities less (i) maintenance capital expenditures; (ii) gain (loss) on sale of property, plant and equipment; (iii) certain changes in operating assets and liabilities; (iv) certain other expenses; and (v) net growth capital expenditures; plus (x) transaction expenses; and (z) proceeds from sale of property, plant and equipment. We believe Free Cash Flow is a liquidity measure and useful supplemental financial measure for us in assessing our ability to pursue business opportunities and investments to grow our business and to service our debt. Free Cash Flow is presented for supplemental informational purposes only and should not be considered a substitute for financial information presented in accordance with GAAP, such as revenues, net income (loss), operating income (loss) or cash flows from operating activities. Free Cash Flow as presented may not be comparable to similarly titled measures of other companies.

Current wording

We define Free Cash Flow as net cash provided by operating activities less (i) maintenance capital expenditures; (ii) gain (loss) on sale of property, plant and equipment; (iii) certain changes in operating assets and liabilities; (iv) certain other expenses; and (v) net growth capital expenditures; plus (x) severance expenses; (y) transaction expenses; and (z) proceeds from sale of property, plant and equipment. We believe Free Cash Flow is a liquidity measure and useful supplemental financial measure for us in assessing our ability to pursue business opportunities and investments to grow our business and to service our debt. Free Cash Flow is presented for supplemental informational purposes only and should not be considered a substitute for financial information presented in accordance with GAAP, such as revenues, net income (loss), operating income (loss) or cash flows from operating activities. Free Cash Flow as presented may not be comparable to similarly titled measures of other companies.

Previous wording

(3)Includes non-cash lease expense, provision for credit losses and inventory reserve.

Current wording

(4)Includes non-cash lease expense, provision for credit losses and inventory reserve.

Previous wording

(4)For the three months ended March 31, 2024, and 2023, growth capital expenditures include a $9.9 million increase and a $8.0 million decrease in accrued capital expenditures, respectively.

Current wording

(5)For the three months ended June 30, 2024 and 2023, growth capital expenditures include a $12.6 million decrease and a $2.0 million decrease in accrued capital expenditures, respectively. For the six months ended June 30, 2024, and 2023, growth capital expenditures include a $2.7 million decrease and a $9.9 million decrease in accrued capital expenditures, respectively.

Previous wording

(5)For the three months ended March 31, 2024, and 2023, there were $5.8 million and $2.4 million of non-unit growth capital expenditures, respectively. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Cash Requirements—Capital Expenditures” for information regarding amounts designated as growth capital expenditures.

Current wording

(6)For the three months ended June 30, 2024 and 2023, there were $7.2 million and $4.8 million of non-unit growth capital expenditures, respectively. For the six months ended June 30, 2024, and 2023, there were $13.0 million and $7.2 million of non-unit growth capital expenditures, respectively. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Cash Requirements—Capital Expenditures” for information regarding amounts designated as growth capital expenditures.

Previous wording

The following table reconciles net income (loss) to Discretionary Cash Flow and Free Cash Flow, for each of the periods presented(in thousands):

Current wording

The following table reconciles net income to Discretionary Cash Flow and Free Cash Flow, for each of the periods presented(in thousands):

Previous wording

(1)For the three months ended March 31, 2024, and 2023, there were $2.8 million and $0.9 million of non-cash adjustments for equity compensation expense, respectively.

Current wording

(1)For the three months ended June 30, 2024 and 2023, there were $5.3 million and $29.0 thousand of non-cash adjustments for equity compensation expense. For the six months ended June 30, 2024, and June 30, 2023, there were $8.2 million and $0.9 million of non-cash adjustments for equity compensation expense.

Previous wording

(3)See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Cash Requirements—Capital Expenditures” for information regarding amounts designated as maintenance capital expenditures.

Current wording

(4)See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Cash Requirements—Capital Expenditures” for information regarding amounts designated as maintenance capital expenditures.