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What changed in SUBURBAN PROPANE PARTNERS LP's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of SUBURBAN PROPANE PARTNERS LP's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+299 added−293 removedSource: 10-K (2024-11-27) vs 10-K (2023-11-22)

Top changes in SUBURBAN PROPANE PARTNERS LP's 2024 10-K

299 paragraphs added · 293 removed · 251 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

83 edited+12 added−10 removed133 unchanged
Biggest changeThe RNG platform includes the following: (1) a large-scale RNG production facility in Stanfield, Arizona that is currently operating and includes seven anaerobic digesters, manure rights from approximately 55,000 dairy cattle and an interconnect with an interstate pipeline; (2) an operating facility in Columbus, Ohio that is currently receiving tipping fees from several large food and beverage providers for processing food waste into fertilizer and biogas, and has an active development project to upgrade the biogas into RNG for sale; (3) rights of first offer for a third RNG facility in the Midwest that is currently being developed by Equilibrium; and (4) the creation of a joint venture to invest in and develop approximately $155.0 million of future RNG projects, of which Suburban Renewable Energy will own approximately 70% and Equilibrium will own approximately 30% once such projects are fully funded.
Biggest changeThe RNG platform includes the following: (1) a large-scale RNG production facility in Stanfield, Arizona that is currently operating and includes seven anaerobic digesters, manure rights from approximately 55,000 dairy cattle and an interconnect with an interstate pipeline and (2) an operating facility in Columbus, Ohio that is currently receiving tipping fees from several large food and beverage providers for processing food waste into fertilizer and biogas, and has an active development project to upgrade the biogas into RNG for sale.
Our Strategy Our business strategy is to deliver increasing value to our Unitholders through initiatives, both internal and external, that are geared toward achieving sustainable profitable growth.
Our business strategy is to deliver increasing value to our Unitholders through initiatives, both internal and external, that are geared toward achieving sustainable profitable growth.
Our acquisition strategy is to focus on businesses with a relatively steady or predictable cash flow that will extend our presence in strategically attractive markets, complement our existing business segments or provide an opportunity to diversify our operations. We are very patient, disciplined and deliberate in evaluating both traditional and renewable energy acquisition opportunities.
Our acquisition strategy is to focus on businesses with a relatively steady or predictable cash flow that will extend our presence in strategically attractive markets, complement our existing business segments or provide an opportunity to diversify our operations. We are patient, disciplined and deliberate in evaluating both traditional and renewable energy acquisition opportunities.
Natural Gas and Electricity We market natural gas and electricity through our 100%-owned subsidiary, Agway Energy Services, LLC (“AES”), in the deregulated markets of New York, Pennsylvania and Maryland, primarily to residential and small commercial customers. Historically, local utility companies provided their customers with all three aspects of electric and natural gas service: generation, transmission and distribution.
Natural Gas and Electricity We market natural gas and electricity through our 100%-owned subsidiary, Agway Energy Services, LLC (“AES”), in the deregulated markets of New York and Pennsylvania, primarily to residential and small commercial customers. Historically, local utility companies provided their customers with all three aspects of electric and natural gas service: generation, transmission and distribution.
Generally, these laws and regulations impose limitations on the discharge of hazardous materials and pollutants and establish standards for the handling, transportation, distribution, treatment, storage and disposal of hazardous materials and solid and hazardous wastes, which may require the investigation, assessment, cleanup, or monitoring of, or compensation for, environmental impacts, including natural resource damages.
Generally, these laws and regulations impose limitations on the discharge of hazardous materials, pollutants and contaminants and establish standards for the handling, transportation, distribution, treatment, storage and disposal of hazardous materials, pollutants, contaminants and solid and hazardous wastes, which may require the investigation, assessment, cleanup, or monitoring of, or compensation for, environmental impacts, including natural resource damages.
We cannot speculate on exactly how the Inflation Reduction Act will be implemented; however, the Act does contain numerous incentives for the production of clean energy for which certain of our renewable energy products, as well as those produced by Oberon and IH, are expected to qualify.
We cannot speculate on exactly how the Inflation Reduction Act will continue to be implemented; however, the Act does contain numerous incentives for the production of clean energy for which certain of our renewable energy products, as well as those produced by Oberon and IH, are expected to qualify.
As part of our commitment to innovating for a sustainable energy future, and in support of our strategic growth initiatives to build out a renewable energy platform, the Partnership created an executive-level position in fiscal 2021 (reporting directly to our President and Chief Executive Officer) entitled Vice President, Strategic Initiatives – Renewable Energy.
As part of our commitment to innovating for a sustainable energy future, and in further support of our strategic growth initiatives to build out a renewable energy platform, the Partnership created an executive-level position in fiscal 2021 (reporting directly to our President and Chief Executive Officer) entitled Vice President, Strategic Initiatives – Renewable Energy.
In support of our core marketing and distribution operations, we install and service a variety of home comfort equipment, particularly in the areas of heating and ventilation. We believe, based on LP/Gas Magazine dated February 2023, that we are the third-largest retail marketer of propane in the United States, measured by retail gallons sold in calendar year 2022.
In support of our core marketing and distribution operations, we install and service a variety of home comfort equipment, particularly in the areas of heating and ventilation. We believe, based on LP/Gas Magazine dated February 2024, that we are the third-largest retail marketer of propane in the United States, measured by retail gallons sold in calendar year 2023.
We believe that if supplies from Crestwood or Targa were interrupted, we would be able to secure adequate propane supplies from other sources without a material disruption of our operations. Nevertheless, the cost of acquiring and transporting such propane might be higher and, at least on a short-term basis, our margins could be affected.
We believe that if supplies from ET or Targa were interrupted, we would be able to secure adequate propane supplies from other sources without a material disruption of our operations. Nevertheless, the cost of acquiring and transporting such propane might be higher and, at least on a short-term basis, our margins could be affected.
While fuel oil supply is more susceptible to longer periods of supply constraint than propane, we believe that our supply arrangements will provide us with sufficient supply sources. Although we make no assurance regarding the availability of supplies of fuel oil in the future, we currently expect to be able to secure adequate supplies during fiscal 2024.
While fuel oil supply is more susceptible to longer periods of supply constraint than propane, we believe that our supply arrangements will provide us with sufficient supply sources. Although we make no assurance regarding the availability of supplies of fuel oil in the future, we currently expect to be able to secure adequate supplies during fiscal 2025.
Other requirements, such as renewable energy credits, are purchased through supply agreements, or on the open market. Electricity pricing under the NYISO and PJM agreements are based on local market indices at the time of delivery. Competition is primarily with local utility companies, as well as other marketers of natural gas and electricity providing similar alternatives as AES.
Other requirements, such as renewable energy credits, are purchased through supply agreements, or on the open market. Electricity pricing under the NYISO and PJM agreements are based on local market indices at the time of contracting. Competition is primarily with local utility companies, as well as other marketers of natural gas and electricity providing similar alternatives as AES.
Our senior leadership team, along with our Audit Committee, review matters reported through the Safety and Ethics Hotline. Confidential and anonymous mechanisms for reporting concerns are also available and described in our Code of Business Conduct and Ethics. Cybersecurity The Partnership’s cybersecurity program is based upon the National Institute of Standards of Technology (NIST) Cybersecurity Framework.
Our senior leadership team, along with our Audit Committee, review matters reported through the Safety and Ethics Hotline. Confidential and anonymous mechanisms for reporting concerns are also available and described in our Code of Business Conduct and Ethics. Cybersecurity The Partnership’s cybersecurity program is based upon the National Institute of Standards of Technology (“NIST”) Cybersecurity Framework.
We identified these three critical corporate pillars to emphasize our ongoing commitment to excellence for the safety and comfort of our customers, our dedication to the safety and career development of our employees, our philanthropic efforts to give back to the communities we serve, our work to advocate for the inherent environmental advantages of using propane as a clean energy solution, our focus on supporting the sustainability needs of our customers and our ongoing strategic efforts to invest in and develop innovative solutions to help lead the way to lower greenhouse gas emissions.
We identified these three critical corporate pillars to emphasize our ongoing commitment to excellence for the safety and comfort of our customers, our dedication to the safety and career development of our employees, our philanthropic efforts to give back to the communities we serve, our work to advocate for the inherent environmental advantages of using propane as a clean energy solution, our focus on supporting the sustainability needs of our customers and our ongoing strategic efforts to invest in and develop innovative solutions to help lead the way to lower GHG emissions.
Specifically, an Order from the New York Public Service Commission (“NY PSC”) regarding low-income consumers went into effect in 2018 and requires that all energy service companies (“ESCOs”) stop serving certain low-income consumers. Similar orders also went into effect in Pennsylvania in 2019 and Maryland in 2023.
Specifically, an Order from the New York Public Service Commission (“NY PSC”) regarding low-income consumers went into effect in 2018 and requires that all energy service companies (“ESCOs”) stop serving certain low-income consumers. Similar orders also went into effect in Pennsylvania in 2019.
It is difficult to predict how the market for our products will be affected by increased temperature volatility, or increased temperatures generally, although if there is an overall trend of unseasonably warmer temperatures in the winter months, it could adversely affect our business. Future developments, such as stricter environmental, health or safety laws and regulations, could affect our operations.
It is difficult to predict how the market for our products will be affected by increased temperature volatility, or increased temperatures generally, although if there is an overall trend of unseasonably warmer temperatures in the winter months, it could adversely affect our business. 10 Table of Contents Future developments, such as stricter environmental, health or safety laws and regulations, could affect our operations.
These deliveries are scheduled through proprietary technology, based upon each customer’s historical consumption patterns and prevailing weather conditions. Additionally, we offer our customers a 3 Table of Contents budget payment plan whereby the customer’s estimated annual propane purchases and service contracts are paid for in a series of estimated equal monthly payments over a twelve-month period.
These deliveries are scheduled through proprietary technology, based upon each customer’s historical consumption patterns and prevailing weather conditions. Additionally, we offer our customers a budget payment plan whereby the customer’s estimated annual propane purchases and service contracts are paid for in a series of estimated equal monthly payments over a twelve-month period.
Additionally, rDME is a carrier for hydrogen, making it easy to deliver this renewable fuel for the growing hydrogen fuel cell industry. Suburban Energy Finance Corp., a direct 100%-owned subsidiary of the Partnership, was formed on November 26, 2003 to serve as co-issuer, jointly and severally with the Partnership, of the Partnership’s senior notes.
Additionally, rDME is a carrier for hydrogen, making it easy to deliver this renewable fuel for the growing hydrogen fuel cell industry. 1 Table of Contents Suburban Energy Finance Corp., a direct 100%-owned subsidiary of the Partnership, was formed on November 26, 2003 to serve as co-issuer, jointly and severally with the Partnership, of the Partnership’s senior notes.
It is also the policy of the Partnership to protect those who 13 Table of Contents communicate their bona fide concerns from any retaliation for such reporting. All employees, customers, vendors and other stakeholders can communicate concerns by calling our Safety and Ethics Hotline, which is hosted by a third party to maintain confidentiality and anonymity when requested.
It is also the policy of the Partnership to protect those who communicate their bona fide concerns from any retaliation for such reporting. All employees, customers, vendors and other stakeholders can communicate concerns by calling our Safety and Ethics Hotline, which is hosted by a third party to maintain confidentiality and anonymity when requested.
This position focuses on identifying, analyzing and developing opportunities within the renewable energy space for potential future acquisitions, partnerships or collaborative arrangements that support the Partnership’s efforts to grow its overall business through investment in, and development of, innovative solutions that will help pave the way to lowering greenhouse gas emissions.
This position focuses on identifying, analyzing and developing opportunities within the renewable energy space for potential future acquisitions, partnerships or collaborative arrangements that support the Partnership’s efforts to grow its overall business through investment in, and development of, innovative solutions that will help pave the way to lowering GHG emissions.
In most cases, the supply contracts do not establish the price of fuel oil in advance; rather, prices are typically established based upon market prices at the time of delivery, plus or minus a differential for transportation and volume discounts. We purchase fuel oil from approximately 20 suppliers at approximately 45 supply points.
In most cases, the supply contracts do not establish the price of fuel oil in advance; rather, prices are typically established based upon market prices at the time of delivery, plus or minus a differential 5 Table of Contents for transportation and volume discounts. We purchase fuel oil from approximately 20 suppliers at approximately 45 supply points.
Upon written request or through an information request link from our website at www.suburbanpropane.com , we will provide, without charge, copies of our Annual Report on Form 10-K for the year ended September 30, 2023, each of the Quarterly Reports on Form 10-Q, current reports filed or furnished on Form 8-K and all amendments to such reports as soon as is reasonably practicable after such reports are electronically filed with or furnished to the SEC.
Upon written request or through an information request link from our website at www.suburbanpropane.com , we will provide, without charge, copies of our Annual Report on Form 10-K for the year ended September 28, 2024, each of the Quarterly Reports on Form 10-Q, current reports filed or furnished on Form 8-K and all amendments to such reports as soon as is reasonably practicable after such reports are electronically filed with or furnished to the SEC.
We present information about our commitment to sustainable and environmentally sound practices on the “Go Green” page on our website, which may be accessed at www.suburbanpropane.com/suburban-propane-experience/go-green . The information included on our “Go Green” page is not intended to be incorporated by reference into this Form 10-K Annual Report.
We present information about our commitment to sustainable and environmentally sound practices on the “Go Green” page on our website, which may be accessed at www.suburbanpropane.com/suburban-propane-experience/go-green . The information included on our “Go Green” page is not intended to be incorporated by reference into this Annual Report.
Our program is comprehensive in scope and covers all of the Partnership’s general corporate Information Technology (IT) systems, as well as operational technology systems supporting our business and the technology systems used by our third-party service providers.
Our program is comprehensive in scope and covers all of the Partnership’s general corporate Information Technology (“IT”) systems, as well as operational technology systems supporting our business and the technology systems used by our third-party service providers.
For example, we have taken a 38% equity stake in Oberon, a producer of low carbon rDME transportation fuel, a 25% equity stake in IH, a veteran-owned and operated start-up company developing a low CI gaseous hydrogen ecosystem, acquired anaerobic digester facilities in Columbus, Ohio and Stanfield, Arizona through the RNG Acquisition that produce or will be producing RNG and we entered into an agreement to produce RNG at Adirondack Farms.
For example, we have taken a 38% equity stake in Oberon, a producer of low carbon rDME transportation fuel, a 25% equity stake in IH, a veteran-owned and operated start-up company developing a low CI gaseous hydrogen ecosystem, acquired anaerobic digester facilities in Columbus, Ohio and Stanfield, Arizona through the RNG Acquisition that produce RNG and we entered into an agreement to produce RNG at Adirondack Farms.
Oberon is focused on the research and development of practical and affordable pathways to zero-emission transportation through its proprietary production process. 1 Table of Contents Oberon’s rDME fuel is a low carbon, zero-soot alternative to petroleum diesel, and when blended with propane can significantly reduce the carbon intensity (“CI”) of propane.
Oberon is focused on the research and development of practical and affordable pathways to zero-emission transportation through its proprietary production process. Oberon’s rDME fuel is a low carbon, zero-soot alternative to petroleum diesel, and when blended with propane can significantly reduce the carbon intensity (“CI”) of propane.
The business strategy of this segment is to expand its market share by concentrating on growth in the customer base and expansion into other deregulated markets that are considered strategic markets. We serve approximately 31,000 natural gas and electricity customers in New York, Pennsylvania and Maryland.
The business strategy of this segment is to expand its market share by concentrating on growth in the customer base and expansion into other deregulated markets that are considered strategic markets. We serve approximately 28,000 natural gas and electricity customers in New York and Pennsylvania.
While the Partnership is not a regulated entity and propane is not a greenhouse gas, these regulations impact both our core business, as well as the retail sale of electricity and natural gas by AES. 8 Table of Contents In June 2022, the U.S. Supreme Court issued a decision in West Virginia v.
While the Partnership is not a regulated entity and propane is not a greenhouse gas, these regulations impact both our core business, as well as the retail sale of electricity and natural gas by AES. In June 2022, the U.S. Supreme Court issued a decision in West Virginia v.
We specialize in the distribution of propane, renewable propane, renewable natural gas (“RNG”), fuel oil and refined fuels, as well as the marketing of natural gas and electricity in deregulated markets and production of and investor in low-carbon fuel alternatives.
We specialize in the distribution of propane, renewable propane, renewable natural gas (“RNG”), fuel oil and refined fuels, as well as the marketing of natural gas and electricity in deregulated markets and production of and investing in low-carbon fuel alternatives.
Governance Highlights Highlights that demonstrate our commitment to sound corporate governance include: • Supervisor and Committee Independence o Eight of our nine Supervisors are independent, as of September 30, 2023 o Our Audit, Compensation and Nominating/Governance Committees are fully independent o Independent Supervisors chair each of our Committees • Board Leadership and Engagement o An independent Supervisor chairs our Board o Independent Supervisors conduct executive sessions at meetings without the presence of members of management o Supervisors attended more than 75% of the total number of meetings of the Board and of the Committees of the Board on which such Supervisor served in fiscal 2023 • Board Evaluations and Effectiveness o Our Board conducts annual self-assessments to evaluate Board and Committee effectiveness, and identify opportunities for improving our Board and Committee operations 12 Table of Contents • Clawback, Insider Trading and Anti-Hedging Policies o Performance-based incentive awards or payments for our officers are subject to both our Clawback Policy and our Incentive Compensation Recoupment Policy, which permits the Partnership to recoup incentive compensation in the event of a material restatement of financial results, or other events that negatively impact the Partnership, including fraudulent or intentional misconduct that results in an adverse impact on our financial performance o Our Insider Trading Policy prohibits our Supervisors, executive officers and certain other key employees from engaging in insider trading, or in hedging transactions or derivative investments involving the Partnership’s equity securities • Share Ownership o Our Equity Holding Policy establishes guidelines for the level of equity holdings in the Partnership that Supervisors and our executive officers are expected to maintain o Supervisors are required to hold Common Units, the value of which is equivalent to 4x the cash portion of their annual retainer (including additional fees to Committee chairs) no later than the measurement date next following the second anniversary of the date upon which the Supervisor joined the Board o Our CEO is required to hold Common Units, the value of which is equivalent to 5x base salary o Other named executive officers are required to hold Common Units, the value of which is equivalent to 2.5x to 3x their base salary, depending upon their position Board Diversity Highlights Our Supervisors have extensive and diverse experience relevant to our business and strategy that enhances the knowledge of our Board and the insight that they provide the Partnership, including significant experience in the following industries: • Retail distribution of energy and other products; • Energy infrastructure and logistics; • Chemical processing and refining; • Energy consulting; • Original equipment manufacturing; • Public policy and government relations; • Mergers and acquisitions; • Investment banking and financial management; and • Business assurance.
Governance Highlights Highlights that demonstrate our commitment to sound corporate governance include: • Supervisor and Committee Independence o Seven of our eight Supervisors are independent, as of September 28, 2024; o Our Audit, Compensation and Nominating/Governance Committees are fully independent; and o Independent Supervisors chair each of our Committees. • Board Leadership and Engagement o An independent Supervisor chairs our Board; o Independent Supervisors conduct executive sessions at meetings without the presence of members of management; and o Supervisors attended more than 75% of the total number of meetings of the Board and of the Committees of the Board on which such Supervisor served in fiscal 2024. • Board Evaluations and Effectiveness o Our Board conducts annual self-assessments to evaluate Board and Committee effectiveness, and identify opportunities for improving our Board and Committee operations. • Clawback, Insider Trading and Anti-Hedging Policies o Performance-based incentive awards or payments for our officers are subject to both our Dodd-Frank Clawback Policy and our Incentive Compensation Recoupment Policy, which permit the Partnership to recoup incentive compensation in the event of a material restatement of financial results, or other events that negatively impact the Partnership, including fraudulent or intentional misconduct that results in an adverse impact on our financial performance; and o Our Insider Trading Policy prohibits our Supervisors, executive officers and certain other key employees from engaging in insider trading, or in hedging transactions or derivative investments involving the Partnership’s equity securities. • Share Ownership o Our Equity Holding Policy establishes guidelines for the level of equity holdings in the Partnership that Supervisors and our executive officers are expected to maintain; o Supervisors are required to hold Common Units, the value of which is equivalent to 4x the cash portion of their annual retainer (including additional fees to Committee chairs) no later than the measurement date next following the second anniversary of the date upon which the Supervisor joined the Board; o Our CEO is required to hold Common Units, the value of which is equivalent to 5x base salary; and o Other named executive officers are required to hold Common Units, the value of which is equivalent to 2.5x to 3x their base salary, depending upon their position. 13 Table of Contents Board Diversity Highlights Our Supervisors have extensive and diverse experience relevant to our business and strategy that enhances the knowledge of our Board and the insight that they provide the Partnership, including significant experience in the following industries: • Retail distribution of energy and other products; • Energy infrastructure and logistics; • Energy consulting; • Original equipment manufacturing; • Public policy and government relations; • Mergers and acquisitions; • Investment banking and financial management; and • Business assurance.
We have also executed agreements to purchase and distribute renewable propane, which offers a low CI alternative to traditional propane, gasoline or diesel. We are committed to increasing the availability of blends of traditional propane with rDME and/or renewable propane, renewable propane, hydrogen, and RNG in the coming years.
We have also executed 9 Table of Contents agreements to purchase and distribute renewable propane, which offers a low CI alternative to traditional propane, gasoline or diesel. We are committed to increasing the availability of blends of traditional propane with rDME and/or renewable propane, renewable propane, hydrogen, and RNG in the coming years.
Propane is non-toxic, clean burning and, when consumed, produces virtually no particulate matter. In addition, our equity investment in Oberon is included within the propane segment. Product Distribution and Marketing We distribute propane and renewable propane through a nationwide retail distribution network consisting of approximately 700 locations in 42 states as of September 30, 2023.
Propane is non-toxic, clean burning and, when consumed, produces virtually no particulate matter. In addition, our equity investment in Oberon is included within the propane segment. Product Distribution and Marketing We distribute propane and renewable propane through a nationwide retail distribution network consisting of approximately 700 locations in 42 states as of September 28, 2024.
In support of our efforts to successfully manage and grow our business, we will continue to identify ways to include more ESG initiatives in our strategies that support our customers, employees, investors, and the communities we serve, including initiatives that 10 Table of Contents support our three-pillars strategic plan.
In support of our efforts to successfully manage and grow our business, we will continue to identify ways to include more ESG initiatives in our strategies that support our customers, employees, investors, and the communities we serve, including initiatives that support our three-pillars strategic plan.
Requests should be directed to: Suburban Propane Partners, L.P., Investor Relations, P.O. Box 206, Whippany, New Jersey 07981-0206. The information contained on our website is not included as part of, or incorporated by reference into, this Annual Report on Form 10-K.
Requests should be directed to: Suburban Propane Partners, L.P., Investor Relations, P.O. Box 206, Whippany, New Jersey 07981-0206. The information contained on our website is not included as part of, or incorporated by reference into, this Annual Report on Form 10-K. Our Strategy The Three Pillars of the Suburban Propane Experience.
We have made investments in training our people both on techniques to provide exceptional customer service to our existing customer base, as well as advanced sales training focused on growing our customer base. Selective Acquisitions of Complementary Businesses or Assets.
We have made investments in training our people both on techniques to provide exceptional customer service to our existing customer base, as well as advanced sales training focused on growing our customer base. 2 Table of Contents Selective Acquisitions of Complementary Businesses or Assets.
From our customer service centers, we also sell, install and service heating and cooking appliances to customers who purchase propane from us and, at some locations, sell propane fuel systems for motor vehicles. We sell propane primarily to seven customer markets: residential, commercial, industrial (including engine fuel), government, agricultural, other retail users and wholesale.
From our customer service centers, we also sell, install and service 3 Table of Contents heating and cooking appliances to customers who purchase propane from us and, at some locations, sell propane fuel systems for motor vehicles. We sell propane primarily to seven customer markets: residential, commercial, industrial (including engine fuel), government, agricultural, other retail users and wholesale.
As of September 30, 2023, we were serving the energy needs of approximately 1.0 million residential, commercial, industrial and agricultural customers through approximately 700 locations in 42 states with operations principally concentrated in the east and west coast regions of the United States, as well as portions of the midwest region of the United States and Alaska.
As of September 28, 2024, we were serving the energy needs of approximately 1.0 million residential, commercial, industrial and agricultural customers through approximately 700 locations in 42 states with operations principally concentrated in the east and west coast regions of the United States, as well as portions of the midwest region of the United States and Alaska.
Internal Focus on Driving Operating Efficiencies, Right-Sizing Our Cost Structure and Enhancing Our Customer Mix. We focus internally on improving the efficiency of our existing operations, customer support, managing our cost structure, improving our 2 Table of Contents customer mix, and hardening our cybersecurity defenses.
Internal Focus on Driving Operating Efficiencies, Right-Sizing Our Cost Structure and Enhancing Our Customer Mix. We focus internally on improving the efficiency of our existing operations, customer support, managing our cost structure, improving our customer mix, and hardening our cybersecurity defenses.
While there are differences in the CA LCFS, OR CFP, and WA CFS, all LCFS Programs seek to achieve their goals through annual reductions in a 9 Table of Contents baseline where low CI transportation fuels that are below the baseline generate LCFS Program credits (“LCFS Credits”).
While there are differences in the CA LCFS, OR CFP, and WA CFS, all LCFS Programs seek to achieve their goals through annual reductions in a baseline where low CI transportation fuels that are below the baseline generate LCFS Program credits (“LCFS Credits”).
Supply Our propane supply is purchased from approximately 45 wholesalers at approximately 145 supply points located throughout the United States and Canada. We make purchases primarily under one-year agreements that are subject to annual renewal, and also purchase propane on the spot market.
Supply Our propane supply is purchased from approximately 40 wholesalers at approximately 135 supply points located throughout the United States and Canada. We make purchases primarily under one-year agreements that are subject to annual renewal, and also purchase propane on the spot market.
Approximately 86% of our total propane purchases were from domestic suppliers and 100% came from North America in fiscal 2023. We seek to reduce the effect of propane price volatility on our product costs and to help ensure the availability of propane during periods of short supply.
Approximately 82% of our total propane purchases were from domestic suppliers and 100% came from North America in fiscal 2024. We seek to reduce the effect of propane price volatility on our product costs and to help ensure the availability of propane during periods of short supply.
Construction of the assets began during fiscal 2023, and is expected to be completed by the end of the 2024 calendar year. During fiscal 2020, our Operating Partnership acquired a 38% equity interest in Oberon Fuels, Inc. (“Oberon”), which is a development-stage producer of low carbon renewable dimethyl ether (“rDME”) transportation fuel.
Construction of the assets began during fiscal 2023, and is expected to be completed by the second half of the 2025 calendar year. During fiscal 2020, our Operating Partnership acquired a 38% equity interest in Oberon Fuels, Inc. (“Oberon”), which is a development-stage producer of low carbon renewable dimethyl ether (“rDME”) transportation fuel.
Our current slate of eight independent Supervisors has 37.5% of Supervisors that identify as diverse in gender, race or ethnicity. Safety and Ethics Hotline It is the Partnership’s policy to encourage the communication of bona fide concerns relating to the lawful and ethical conduct of its business, and its audit and accounting procedures or related matters.
Our current slate of seven independent Supervisors has 43% of Supervisors that identify as diverse in gender, race or ethnicity. Safety and Ethics Hotline It is the Partnership’s policy to encourage the communication of bona fide concerns relating to the lawful and ethical conduct of its business, and its audit and accounting procedures or related matters.
On December 28, 2022, Suburban Renewable Energy acquired a platform of RNG production assets from Equilibrium Capital Group (“Equilibrium”), a leading sustainability-driven asset management firm.
On December 28, 2022, Suburban Renewable Energy acquired a platform of RNG production assets (the “RNG Acquisition”) from Equilibrium Capital Group (“Equilibrium”), a leading sustainability-driven asset management firm.
We continuously evaluate our existing facilities to identify opportunities to optimize our return on assets by selectively divesting operations in slower growing markets, generating proceeds that can be reinvested in markets that present greater opportunities for growth. Our objective is to maximize the growth and profit potential of all of our assets. The Three Pillars of the Suburban Propane Experience.
We continuously evaluate our existing facilities to identify opportunities to optimize our return on assets by selectively divesting operations in slower growing markets, generating proceeds that can be reinvested in markets that present greater opportunities for growth. Our objective is to maximize the growth and profit potential of all of our assets.
Our senior leadership team, along with our Audit Committee, receive regular and recurring program updates, metrics, and roadmaps to promote the effectiveness of the program and the alignment with the Partnership’s business objectives. Our program and controls are periodically reviewed and tested by independent third parties to enable the Partnership to employ industry best practices.
Our senior leadership team, along with our Audit Committee, receive regular and recurring program updates, metrics, and roadmaps to promote the effectiveness of the program and the alignment with the Partnership’s business objectives. Our program and controls are periodically reviewed and tested by independent third parties to enable the Partnership to employ industry best practices. See also Item 1C, below.
No other single supplier accounted for 10% or more of our propane purchases in fiscal 2023.
No other single supplier accounted for 10% or more of our propane purchases in fiscal 2024.
Approximately 65% of the fuel oil and refined fuels gallons sold by us in fiscal 2023 were to residential customers, principally for home heating, 7% were to commercial customers, and 7% to other users. Sales of diesel and gasoline accounted for the remaining 21% of total volumes sold in this segment during fiscal 2023.
Approximately 63% of the fuel oil and refined fuels gallons sold by us in fiscal 2024 were to residential customers, principally for home heating, 7% were to commercial customers, and 9% to other users. Sales of diesel and gasoline accounted for the remaining 21% of total volumes sold in this segment during fiscal 2024.
Our operations are principally concentrated in the east and west coast regions of the United States, as well as portions of the midwest region of the United States and Alaska. As of September 30, 2023, we serviced approximately 962,000 propane customers. Typically, our customer service centers are located in suburban and rural areas where natural gas is not readily available.
Our operations are principally concentrated in the east and west coast regions of the United States, as well as portions of the midwest region of the United States and Alaska. As of September 28, 2024, we serviced approximately 950,000 propane customers. Typically, our customer service centers are located in suburban and rural areas where natural gas is not readily available.
As a company with a 95-year legacy of being a trusted and reliable provider of energy and exceptional customer service, our goal is to lead the propane industry in the transition to a renewable energy future that provides value to our customers, Unitholders, employees, and the communities we serve in a way that ensures that we can thrive in a carbon constrained world for the next 95 years and beyond.
As a company with an over 95-year legacy of being a trusted and reliable provider of energy and exceptional customer service, our goal is to lead the propane industry in the transition to a renewable energy future that provides value to our customers, Unitholders, employees, and the communities we serve in a way that ensures that we can thrive in a carbon constrained world for many more years to come.
Based on industry statistics contained in the 2021 Annual Retail Propane Sales Report , as published by the Propane Education & Research Council in December 2022, and LP/Gas Magazine dated February 2022, the ten largest retailers, including us, account for approximately 34% of total retail sales of propane in the United States.
Based on industry statistics contained in the 2022 Annual Retail Propane Sales Report , as published by the Propane Education & Research Council in October 2023, and LP/Gas Magazine dated February 2023, the ten largest retailers, including us, account for approximately 32% of total retail sales of propane in the United States.
We continually monitor our operations with respect to potential environmental issues, including changes in legal requirements and remediation technologies. As of September 30, 2023, we had accrued environmental liabilities of $1.7 million representing the total estimated future liability for remediation and monitoring of all of our properties.
We continually monitor our operations with respect to potential environmental issues, including changes in legal requirements and remediation technologies. As of September 28, 2024, we had accrued environmental liabilities of $1.3 million representing the total estimated future liability for remediation and monitoring of all of our properties.
Starting in fiscal year 2020, the Partnership made great strides in advancing our strategic growth initiatives through our Go Green with Suburban Propane corporate pillar. Specifically, we contracted for the supply and distribution of over 1.0 million gallons annually of renewable propane, to meet customer demand for a renewable energy source.
Starting in fiscal year 2020, the Partnership made great strides in advancing our strategic growth initiatives through our Go Green with Suburban Propane corporate pillar. Specifically, we contracted for the supply of over 10.0 million gallons annually of renewable propane, to meet customer demand 11 Table of Contents for a renewable energy source.
As of September 30, 2023, 62 of our employees were represented by eight different local chapters of labor unions. We believe that our relations with both our union and non-union employees are satisfactory. In addition, we hire temporary workers to meet peak seasonal demands.
As of September 28, 2024, 55 of our employees were represented by eight different local chapters of labor unions. We believe that our relations with both our union and non-union employees are satisfactory. In addition, we hire temporary workers to meet peak seasonal demands.
The further adoption or expansion of federal, state or local climate change law or regulatory programs to reduce emissions of GHGs could require us to incur increased capital and operating costs, with resulting impact on product price.
The further adoption or expansion of federal, state or local climate change law or regulatory programs to reduce emissions of GHGs and disclose our GHG emissions and climate-related financial risks could require us to incur increased capital and operating costs, with resulting impact on product price.
In further support of our SuburbanCares corporate pillar, and our commitment to building a diverse and inclusive culture, we have developed many employee-focused initiatives to support employee career development and hiring, such as our “Steer Your Career” program, which encourages and supports employees to further their education and enhance their knowledge and skills to prepare them for expanded opportunities and responsibilities; our “Heroes Hired Here” program, in which we take pride in our efforts to attract and employ military veterans in recognition and appreciation for the values, leadership, dedication and unique skills that they bring to the Partnership, and support provided to their family members; and our “Apprentice Program,” which provides company-paid, on-the-job training for apprentices to develop their careers and provide them the necessary skills and tools to prepare them for a successful career within the Partnership.
Our Board oversees the process of succession planning and the Compensation Committee of our Board implements programs to compensate, retain and motivate key talent. 12 Table of Contents In further support of our SuburbanCares corporate pillar, and our commitment to building a diverse and inclusive culture, we have developed many employee-focused initiatives to support employee career development and hiring, such as our “Steer Your Career” program, which encourages and supports employees to further their education and enhance their knowledge and skills to prepare them for expanded opportunities and responsibilities; our “Heroes Hired Here” program, in which we take pride in our efforts to attract and employ military veterans in recognition and appreciation of the values, leadership, dedication and unique skills that they bring to the Partnership, and support provided to their family members; and our “Apprentice Program,” which provides company-paid, on-the-job training for apprentices to develop their careers and provides them with the necessary skills and tools to prepare them for a successful career within the Partnership.
Fuel Oil and Refined Fuels Product Distribution and Marketing We market and distribute fuel oil, kerosene, diesel fuel and gasoline to approximately 30,000 residential and commercial customers primarily in the northeast region of the United States. Sales of fuel oil and refined fuels for fiscal 2023 amounted to 19.1 million gallons.
Fuel Oil and Refined Fuels Product Distribution and Marketing We market and distribute fuel oil, kerosene, diesel fuel and gasoline to approximately 27,000 residential and commercial customers primarily in the northeast region of the United States. Sales of fuel oil and refined fuels for fiscal 2024 amounted to 16.9 million gallons.
Although we make no assurance regarding the availability of supplies of propane in the future, we currently expect to be able to secure adequate supplies during fiscal 2024. During fiscal 2023, Crestwood Equity Partners L.P. (“Crestwood”) and Targa Liquids Marketing and Trade LLC (“Targa”) provided approximately 30% and 16% of our total propane purchases, respectively.
Although we make no assurance regarding the availability of supplies of propane in the future, we currently expect to be able to secure adequate supplies during fiscal 2025. During fiscal 2024, Energy Transfer LP (“ET”), which acquired Crestwood Equity Partners L.P., and Targa Liquids Marketing and Trade LLC (“Targa”) provided approximately 30% and 15% of our total propane purchases, respectively.
We utilize a variety of trademarks and tradenames owned by us, including “Suburban Propane,” and “Agway Energy Services” and related marks or designs incorporating such related logos such as “Go Green with Suburban Propane,” “SuburbanCares” and “Energy Guard.” All of the trademarks and tradenames used by Suburban Propane and Agway Energy Services are registered (or have applications pending for registration) with the U.S.
We utilize a variety of trademarks and tradenames owned by us, including “Suburban Propane,” “Suburban Renewables” and “Agway Energy Services” and related marks or designs incorporating related logos such as “Agway Energy Guard” and other marks such as: 7 Table of Contents All of the trademarks and tradenames used by Suburban Propane and Agway Energy Services are registered (or have applications pending and recently allowed for registration) with the U.S.
We sold approximately 396.4 million gallons of propane and 19.1 million gallons of fuel oil and refined fuels to retail customers during the year ended September 30, 2023. Together with our predecessor companies, we have been continuously engaged in the retail propane business since 1928.
We sold approximately 378.3 million gallons of propane and 16.9 million gallons of fuel oil and refined fuels to retail customers during the year ended September 28, 2024. Together with our predecessor companies, we have been continuously engaged in the retail propane business since 1928.
The NFPA’s rules and procedures, as well as comparable state laws and regulations govern the safe handling of distillates (fuel oil, kerosene and diesel fuel) and gasoline and establish industry standards for fuel oil, kerosene, diesel fuel and gasoline storage, distribution and equipment installation and operation in all of the states in which we sell those products.
In some states, these laws and regulations are administered by state agencies, and in others they are administered on a municipal level. 8 Table of Contents The NFPA’s rules and procedures, as well as comparable state laws and regulations govern the safe handling of distillates (fuel oil, kerosene and diesel fuel) and gasoline and establish industry standards for fuel oil, kerosene, diesel fuel and gasoline storage, distribution and equipment installation and operation in all of the states in which we sell those products.
These regulatory actions could require us to incur increased expenses or lost revenue. We cannot predict when, or in what form, additional climate change laws and regulations will be enacted, and what effect such laws and regulations may have on our business, financial condition or operations in the future.
We cannot predict when, or in what form, additional climate change laws and regulations will be enacted, and what effect such laws and regulations may have on our business, financial condition or operations in the future.
No single customer accounted for 10% or more of our fuel oil and refined fuels revenues during fiscal 2023. 5 Table of Contents Supply We obtain fuel oil and other refined fuels in pipeline, truckload or tankwagon quantities, and have contracts with certain pipeline and terminal operators for the right to temporarily store fuel oil at 13 terminal facilities that we do not own.
Supply We obtain fuel oil and other refined fuels in pipeline, truckload or tankwagon quantities, and have contracts with certain pipeline and terminal operators for the right to temporarily store fuel oil at 13 terminal facilities that we do not own.
Wholesale pricing under annual natural gas supply contracts is based on posted market prices at the time of delivery, and some contracts include a pricing formula that typically is based on prevailing market prices. Our electricity requirements are purchased through the New York Independent System Operator (“NYISO”) and PJM Interconnection (“PJM”).
Supply of natural gas is arranged through annual supply agreements with major national wholesale suppliers. Wholesale pricing under annual natural gas supply contracts is based on posted market prices at the time of contracting. Our electricity requirements are purchased through the New York Independent System Operator (“NYISO”) and PJM Interconnection (“PJM”).
Nonetheless, current EPA leadership has prioritized climate change mitigation measures and has implemented regulations requiring significant reductions in GHG emissions. Changes in the White House and EPA administration may result in changes to the EPA’s prioritization of climate change mitigation. The EPA is also prioritizing environmental justice issues, which may impact how the agency addresses environmental and climate change matters.
Nonetheless, current EPA leadership has prioritized climate change mitigation measures and has implemented regulations requiring significant reductions in GHG emissions. Changes in the White House in the next presidential administration and EPA administration may result in changes to the EPA’s prioritization of climate change mitigation.
Fuel oil is pumped from the tankwagon truck into a stationary storage tank that is located on the customer’s premises, which is owned by the customer. The capacity of customer storage tanks ranges from approximately 275 gallons to approximately 1,000 gallons.
Fuel oil is pumped from the tankwagon truck into a stationary storage tank that is located on the customer’s premises, which is owned by the customer. The capacity of customer storage tanks ranges from approximately 275 gallons to approximately 1,000 gallons. No single customer accounted for 10% or more of our fuel oil and refined fuels revenues during fiscal 2024.
Our Board is involved in leadership development and actively oversees the Partnership’s succession planning, which includes periodic reviews of our talent management strategies, leadership pipeline and succession planning for key executive positions. Our Board oversees the process of succession planning and the Compensation Committee of our Board implements programs to compensate, retain and motivate key talent.
Human Capital Management Our Board, and our management, consider effective talent development and human capital management to be critical components to the Partnership’s continued success. Our Board is involved in leadership development and actively oversees the Partnership’s succession planning process, which includes periodic reviews of our talent management strategies, leadership pipeline and succession planning for key executive positions.
Employees As of September 30, 2023, we had 3,240 full time employees, of whom 606 were engaged in general and administrative activities (including fleet maintenance), 72 were engaged in transportation and product supply activities and 2,562 were customer service center employees, as well as 105 part time employees.
Employees As of September 28, 2024, we had 3,098 full time employees, of whom 612 were engaged in general and administrative activities (including fleet maintenance), 73 were engaged in transportation and product supply activities and 2,413 were customer service center 14 Table of Contents employees, as well as 113 part time employees.
As an energy source, propane competes primarily with natural gas, electricity and fuel oil, principally on the basis of price, availability and portability.
This level has not 4 Table of Contents changed materially over the previous two decades. As an energy source, propane competes primarily with natural gas, electricity and fuel oil, principally on the basis of price, availability and portability.
Additionally, there are environmental laws and regulations specific to the sale of electricity and natural gas in the retail energy market by AES.
Additionally, there are environmental laws and regulations specific to the sale of electricity and natural gas in the retail energy market by AES. Under the various laws and regulations to which we are subject, we must maintain various permits and comply with various monitoring and reporting requirements.
While the New York State of Emergency Order for COVID-19 ended in June 2021, other states of emergency were issued in NY and remain in effect. AES has adjusted its marketing programs accordingly. During fiscal 2023, we sold approximately 1.3 million dekatherms of natural gas and 151.6 million kilowatt hours of electricity through the natural gas and electricity segment.
While the New York State of Emergency Order for COVID-19 ended in June 2021, other states of emergency were issued in NY and remain in effect. AES has adjusted its marketing programs accordingly.
Approximately 96% of the propane gallons sold by us in fiscal 2023 were to retail customers: 42% of those propane gallons to residential customers, 38% to commercial customers, 10% to industrial customers, 6% to government customers and 4% to agricultural customers.
Approximately 96% of our propane gallons sold in fiscal 2024 were to retail customers: 42% of those propane gallons to residential customers, 39% to commercial customers, 9% to industrial customers, 6% to government customers and 4% to agricultural customers. The balance of approximately 4% of our propane gallons sold in fiscal 2024 were for risk management activities and wholesale customers.
When these cylinders are delivered to customers, empty cylinders are refilled in place or transported for replenishment at our distribution locations. We also deliver propane to certain other bulk end users in larger trucks known as transports, which have an average capacity of approximately 9,000 gallons.
We also deliver propane to certain other bulk end users in larger trucks known as transports, which have an average capacity of approximately 9,000 gallons.
As of the fiscal year ended September 30, 2023, the EPA, DOE, and IRS had commenced issuing guidance on some aspects of the implementation of the Inflation Reduction Act, but much relevant guidance is still forthcoming.
As of the fiscal year ended September 28, 2024, the EPA, DOE, and IRS had issued guidance on some aspects of the implementation of the Inflation Reduction Act, but additional relevant guidance, including a suite of regulations implementing various clean energy tax provisions, is still forthcoming.
Under these arrangements, we are paid by the local utility company for all or a portion of customer billings after a specified number of days following the customer billing with no receivables risk to AES. 6 Table of Contents Supply of natural gas is arranged through annual supply agreements with major national wholesale suppliers.
We have arrangements with several local utility companies that provide billing and collection services for a fee. Under these arrangements, we are paid by the local utility company for all or a portion of customer billings after a specified number of days following the customer billing with no receivables risk to AES.
We believe that the safety and well-being of our employees, customers, and communities is of the utmost importance. Safety is a top priority for our business and we continue to invest in programs, technology, and training to improve safety throughout our operations.
Safety is a top priority for our business and we continue to invest in programs, technology, and training to improve safety throughout our operations. We believe that the achievement of superior safety performance is both an important short-term and long-term strategic initiative in supporting our business and managing our operations.
Propane is pumped from bobtail trucks, which have capacities typically ranging from 2,400 gallons to 3,500 gallons of propane, into a stationary storage tank on the customers’ premises. The capacity of these storage tanks ranges from approximately 100 gallons to approximately 1,200 gallons, with a typical tank having a capacity of 300 to 400 gallons.
The capacity of these storage tanks ranges from approximately 100 gallons to approximately 1,200 gallons, with a typical tank having a capacity of 300 to 400 gallons. As is common in the propane industry, we own a significant portion of the storage tanks located on our customers’ premises.
Under the various laws and regulations to which we are subject, we must maintain various permits and comply with various monitoring and reporting requirements. 7 Table of Contents We own real property at locations where hazardous materials may be or may have been present as a result of prior activities.
We own real property at locations where hazardous materials, pollutants and contaminants may be or may have been present as a result of prior activities.
Census Bureau’s 2022 American Community Survey, propane ranks as the third most important source of residential energy in the nation, with about 5% of all households using propane as their primary space heating fuel. This level has not changed materially over the previous two decades.
As of September 28, 2024, the storage capacity at our facility in Elk Grove, California was leased to third parties. Competition According to the U.S. Census Bureau’s 2023 American Community Survey, propane ranks as the third most important source of residential energy in the nation, with about 5% of all households using propane as their primary space heating fuel.
The balance of approximately 4% of the propane gallons sold by us in fiscal 2023 were for risk management activities and wholesale customers. No single customer accounted for 10% or more of our propane revenues during fiscal 2023. Retail deliveries of propane are usually made to customers by means of bobtail and rack trucks.
No single customer accounted for 10% or more of our propane revenues during fiscal 2024. Retail deliveries of propane are usually made to customers by means of bobtail and rack trucks. Propane is pumped from bobtail trucks, which have capacities typically ranging from 2,400 gallons to 3,500 gallons of propane, into a stationary storage tank on the customers’ premises.
In further support of the Partnership’s efforts to advance its Go Green with Suburban Propane corporate pillar, we have officially registered the Go Green with Suburban Propane logo with the United States Patent and Trademark office.
Our Go Green with Suburban Propane logo, as well as several other marks that we highlight in our Trademarks and Tradenames discussion have been registered with the United States Patent and Trademark office in support of our efforts to build a renewable energy platform.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeRISK FACTORS SUMMARY Below is a summary of material factors that make an investment in our Common Units speculative or risky: Risks Related to our Business: • reduced demand for propane, renewable propane, fuel oil and other refined fuels, natural gas, renewable natural gas (“RNG”), and electricity (combined, “our products”) due to weather conditions; • the potential effects of climate change; • increased costs and reduced demand for our products and services due to climate change legislation; • deterioration of general economic and other external conditions; • disruption of our supply chain; • sudden increases in our product and transportation costs; • customer conservation and reduced demand due to price changes; • the highly competitive nature of the retail propane and fuel oil businesses; • reduced demand due to energy efficiency, economic conditions, technological advances and legislative bans; • attracting and retaining qualified employees or finding, developing and retaining key employees; 14 Table of Contents • dependency on our senior management and other key personnel; • conflict, political unrest and other hostilities in regions affecting the economy and the price and availability of our products; • the conflicts in Ukraine and the Middle East and related price volatility and geopolitical instability; • governmental regulation and associated environmental and health and safety costs; • acquiring and retaining retail natural gas and electricity customers; • costs associated with lawsuits, investigations or increases in legal reserves; • making acquisitions on economically acceptable terms and effectively integrating such acquisitions; • current conditions in the global capital and credit markets, and general economic pressures; • credit and regulatory risk resulting from derivative contracts; • adverse impacts on our renewable fuel investments; • a prolonged environment of low prices or reduced demand for RNG; • the availability or value of environmental attributes and tax credits due to state or federal regulations; • the performance of our newly constructed, renovated or developed anaerobic digester facilities; • reliance on gas pipelines that we do not own or control; • growth and diversification plans may not be successful or could expose us to new risks; • reliance on particular management information systems and communication networks; • cybersecurity breaches of our systems and information technology or those of our third-party vendors; and • compliance with data privacy and security laws, rules and regulations that are subject to change and interpretation.
Biggest changeRISK FACTORS SUMMARY Below is a summary of material factors that make an investment in our Common Units speculative or risky: Risks Related to our Business: • reduced demand for propane, renewable propane, fuel oil and other refined fuels, natural gas, renewable natural gas (“RNG”), and electricity (combined, “our products”) due to weather conditions; • the potential effects of climate change; • increased costs and reduced demand for our products and services due to climate change legislation; • deterioration of general economic and other external conditions; • disruption of our supply chain; • sudden increases in our products and transportation costs; • customer conservation and reduced demand due to price changes; • the highly competitive nature of the retail propane and fuel oil businesses; • reduced demand due to energy efficiency, economic conditions, technological advances and legislative bans; • attracting and retaining qualified employees or finding, developing and retaining key employees; • dependency on our senior management and other key personnel; • conflict, political unrest and other hostilities in regions affecting the economy and the price and availability of our products; • the conflicts in Ukraine and the Middle East and related price volatility and geopolitical instability; • governmental regulation and associated costs related to permitting and environmental, health and safety compliance; • acquiring and retaining retail natural gas and electricity customers; • costs associated with lawsuits, investigations or increases in legal reserves; • making acquisitions on economically acceptable terms and effectively integrating such acquisitions; • current conditions in the global capital and credit markets, and general economic pressures; • credit and regulatory risk resulting from derivative contracts; • adverse impacts on our renewable fuel investments; • a prolonged environment of low prices or reduced demand for RNG; • the availability or value of environmental attributes and tax credits due to state or federal regulations; • the performance of our newly constructed, renovated or developed anaerobic digester facilities; • reliance on gas pipelines that we do not own or control; • growth and diversification plans may not be successful or could expose us to new risks; • reliance on particular management information systems and communication networks; • cybersecurity breaches of our systems and information technology or those of our third-party vendors; and • compliance with data privacy and security laws, rules and regulations that are subject to change and interpretation. 15 Table of Contents Risks Related to our Indebtedness and Access to Capital: • current and future debt obligations limiting our financial flexibility; • operating results and generation of cash flows are subject to our ability to continue to control expenses; and • disruptions in the capital and credit markets, including the availability and costs of debt and equity issuances.
Changes to the enabling legislation and/or changes in the regulations implementing those programs, and/or the issuance of new regulations or other governmental guidance, could impact, or eliminate the availability and value of RINs and LCFS Credits, and/or the investment tax credits and production tax credits available under the Inflation Reduction Act.
New legislation, changes to the enabling legislation and/or changes in the regulations implementing those programs, and/or the issuance of new regulations or other governmental guidance, could impact, or eliminate the availability and value of RINs and LCFS Credits, and/or the investment tax credits and production tax credits available under the Inflation Reduction Act.
The competition for propane, fuel oil, and renewable energy acquisitions is intense and we can make no assurance that we will be able to successfully acquire other businesses on economically acceptable terms or at all, or, if we do, that we can integrate and operate those acquired businesses effectively or in a way to realize the expected benefits of such transactions within the anticipated timeframe, or at all, such as cost savings, synergies, sales and growth opportunities.
The competition for propane, fuel oil, and renewable energy acquisitions is intense and we can make no assurance that we will be able to successfully acquire other businesses on economically acceptable terms or at all, or, if we do, that we can integrate and operate those acquired businesses effectively or in a way to realize the expected benefits of such transactions within the anticipated timeframe, or at all, such as cost savings, synergies, tax benefits, sales and growth opportunities.
Volatility in financial markets and deterioration of national and global economic conditions have impacted, and may again impact, our business and operations in a variety of ways, including as follows: • our customers may reduce their discretionary spending, or may forego certain purchases altogether, during economic downturns, and may reduce or delay their payments for our products as a result of significant unemployment or an inability to operate or make payments; • if volatile or negative economic conditions continue to impact our customers, it could lead to customer conservation efforts and increases in customer payment default rates or related challenges in collecting on accounts receivable; 17 Table of Contents • if a significant percentage of our workforce is unable to work, including because of illness or government travel restrictions, our operations may be negatively impacted; • decreased demand in the residential, commercial, industrial, government, agricultural or wholesale markets may adversely affect the market for our products and the performance of our business; • volatility in commodity and other input costs could substantially impact our result of operations; • if our indebtedness increases, or our consolidated EBITDA declines, it could adversely affect our liquidity and lead to increased risks of default under our credit agreement; • it may become more costly or difficult to obtain debt or equity financing to fund investment opportunities, or to refinance our debt in the future, in each case on terms and within a time period acceptable to us; and • climate change, environmental, social and corporate governance issues and uncertainty regarding regulation of such matters may increase our operating costs, impact our access to capital markets and potentially reduce the value of, or demand for, our products.
Volatility in financial markets and deterioration of national and global economic conditions have impacted, and may again impact, our business and operations in a variety of ways, including as follows: • our customers may reduce their discretionary spending, or may forego certain purchases altogether, during economic downturns, and may reduce or delay their payments for our products as a result of significant unemployment or an inability to operate or make payments; • if volatile or negative economic conditions continue to impact our customers, it could lead to customer conservation efforts and increases in customer payment default rates or related challenges in collecting on accounts receivable; • if a significant percentage of our workforce is unable to work, including because of illness or government travel restrictions, our operations may be negatively impacted; • decreased demand in the residential, commercial, industrial, government, agricultural or wholesale markets may adversely affect the market for our products and the performance of our business; • volatility in commodity and other input costs could substantially impact our result of operations; • if our indebtedness increases, or our consolidated EBITDA declines, it could adversely affect our liquidity and lead to increased risks of default under our credit agreement; • it may become more costly or difficult to obtain debt or equity financing to fund investment opportunities, or to refinance our debt in the future, in each case on terms and within a time period acceptable to us; and • climate change, environmental, social and corporate governance issues and uncertainty regarding regulation of such matters may increase our operating costs, impact our access to capital markets and potentially reduce the value of, or demand for, our products.
Changes to the enabling legislation, changes in governmental guidance and/or changes in the regulations implementing those programs could change, or eliminate, the availability and value of a biofuel’s renewable identification number (“RIN”) or Low Carbon Fuel Standard credit (“LCFS Credit”), as well as investment tax credits and production tax credits currently available under the Inflation Reduction Act.
New legislation, changes to the enabling legislation, changes in governmental guidance and/or changes in the regulations implementing those programs could change, or eliminate, the availability and value of a biofuel’s renewable identification number (“RIN”) or Low Carbon Fuel Standard credit (“LCFS Credit”), as well as investment tax credits and production tax credits currently available under the Inflation Reduction Act.
Our customers may also experience the potential physical impacts of climate change and may incur significant costs in preparing for or responding to these efforts, including increasing the mix and resiliency of their energy solutions and supply, which may adversely impact their ability to pay for our products and services or decrease demand for our products and services.
Our customers may also experience the physical impacts of climate change and may incur significant costs in preparing for or responding to these potential impacts, including increasing the mix and resiliency of their energy solutions and supply, which may adversely impact their ability to pay for our products and services or decrease demand for our products and services.
In addition, the integration of an acquired business may result in material unanticipated challenges, expenses, liabilities or competitive responses, including: • a failure to implement our strategy for a particular strategic transaction, including successfully integrating the acquired business into our existing infrastructure, or a failure to realize value from a strategic investment; • inconsistencies between our standards, procedures and policies and those of the acquired business; • costs or inefficiencies associated with the integration of our operational and administrative systems; • an increased scope and complexity of our operations, as well as those of our strategic investments, which could require significant attention from management and could impose constraints on our operations, as well of those of our strategic investments, or other projects; • unforeseen expenses, delays or conditions, including required regulatory or other third party approvals or consents, or provisions in contracts with third-parties that could limit our flexibility to take certain actions; • unexpected or unforeseen capital expenditures associated with acquired businesses or assets to maintain business in the ordinary course; • our ability to continue to monetize certain environmental and/or tax attributes that may be produced through our renewable energy acquisitions or assets; • an inability to retain the customers, employees, suppliers and/or business partners of the acquired business or generate new customers or revenue opportunities through a strategic transaction; • the costs of compliance with local laws and regulations and the implementation of compliance processes, as well as the assumption of unexpected liabilities, litigation, penalties or other enforcement actions; and • higher than expected costs arising due to unforeseen changes in tax, trade, environmental, labor, safety, payroll or pension policies.
In addition, the integration of an acquired business may result in material unanticipated challenges, expenses, liabilities or competitive responses, including: • a failure to implement our strategy for a particular strategic transaction, including successfully integrating the acquired business into our existing infrastructure, or a failure to realize value from a strategic investment; • inconsistencies between our standards, procedures and policies and those of the acquired business; • costs or inefficiencies associated with the integration of our operational and administrative systems; • an increased scope and complexity of our operations, as well as those of our strategic investments, which could require significant attention from management and could impose constraints on our operations, as well of those of our strategic investments, or other projects; • unforeseen expenses, delays or conditions, including required regulatory or other third party approvals or consents, or provisions in contracts with third-parties that could limit our flexibility to take certain actions; • unexpected or unforeseen capital expenditures associated with acquired businesses or assets to maintain business in the ordinary course; • our ability to continue to monetize certain environmental and/or tax attributes or benefits that may be produced through our renewable energy acquisitions or assets; 23 Table of Contents • an inability to retain the customers, employees, suppliers and/or business partners of the acquired business or generate new customers or revenue opportunities through a strategic transaction; • the costs of compliance with local or federal laws and regulations and the implementation of compliance processes, as well as the assumption of unexpected liabilities, litigation, penalties or other enforcement actions; and • higher than expected costs arising due to unforeseen changes in tax, trade, environmental, labor, safety, payroll or pension policies.
Additionally, the open markets where RINs and LCFS Credits are traded have experienced significant volatility in the past and continued volatility in the future may adversely impact the value of RINs and LCFS Credits sold by us.
Additionally, the markets where RINs and LCFS Credits are traded, have experienced significant volatility in the past and continued volatility in the future may adversely impact the value of RINs and LCFS Credits sold by us.
Our industry in general, as well as the overall trucking industry, is currently experiencing a shortage of qualified drivers and technicians that is exacerbated by several factors, including: • an overall market where high driver turnover exists due to an increased number of alternative employment opportunities; • increased competition for drivers and technicians in the industry, which impacts compensation for those positions; and • a changing workforce demographic with a lack of younger employees who are qualified to join or replace more tenured drivers and technicians as they retire.
Our industry in general, as well as the overall trucking industry, is currently experiencing a shortage of qualified drivers and technicians that is exacerbated by several factors, including: 20 Table of Contents • an overall market where high driver turnover exists due to an increased number of alternative employment opportunities; • increased competition for drivers and technicians in the industry, which impacts compensation for those positions; and • a changing workforce demographic with a lack of younger employees who are qualified to join or replace more tenured drivers and technicians as they retire.
In addition, the acquisition, financing, construction and development of these projects involves numerous risks, including: • the ability to obtain financing for a project on acceptable terms or at all; • difficulties in identifying, obtaining, and permitting suitable sites for new projects; • failure to obtain all necessary rights to land access and use; • inaccuracy of assumptions with respect to the cost and schedule for completing construction; • project delays, including delays in deliveries or increases in the price of equipment or feedstock; • on-site operational issues relating to the availability of feedstock for the anaerobic digesters or other issues relating to the reliable production of projectable quantities of renewable natural gas; labor shortages; and • legal challenges by local populations, permitting and other regulatory issues, license revocation and changes in legal requirements.
In addition, the acquisition, financing, construction, development and operation of these projects involves numerous risks, including: • the ability to obtain financing for a project on acceptable terms or at all; • difficulties in identifying, obtaining, and permitting suitable sites for new projects; • failure to obtain all necessary rights to land access and use; 24 Table of Contents • inaccuracy of assumptions with respect to the cost and schedule for completing construction; • project delays, including delays in deliveries or increases in the price of labor, equipment or feedstock; • on-site operational issues relating to the availability of feedstock for the anaerobic digesters or other issues relating to the reliable production of projectable quantities of renewable natural gas; labor shortages; and • legal challenges by local populations, permitting and other regulatory issues, license revocation and changes in legal requirements.
We may also face increasing competition from other companies seeking to produce fuels from alternative sources. If we are unable to establish production and sales channels that allow us to offer comparable products at attractive prices, we may not be able to compete effectively with these companies.
We may also face increasing competition from other companies seeking to produce fuels from alternative sources. If we are unable to establish feedstock supplies and production and sales channels that allow us to offer comparable products at attractive prices, we may not be able to compete effectively with these companies.
We may be subject to complaints and/or litigation involving our customers, employees and others with whom we conduct business, including claims for bodily injury, death and property damage related to operating hazards and risks normally 21 Table of Contents associated with handling, storing and delivering combustible liquids such as propane, fuel oil and other refined fuels or claims based on allegations of discrimination, wage and hourly pay disputes, and various other claims as a result of other aspects of our business.
We may be subject to complaints and/or litigation involving our customers, employees and others with whom we conduct business, including claims for bodily injury, death and property damage related to operating hazards and risks normally associated with handling, storing and delivering combustible liquids such as propane, fuel oil and other refined fuels or claims based on allegations of discrimination, wage and hourly pay disputes, and various other claims as a result of other aspects of our business.
Damage or disruption to our supply chain, including third-party production or transportation and distribution capabilities, due to weather, including any potential effects of climate change, natural disasters, fires or explosions, terrorism, pandemics, strikes, geopolitical conflict, government action, economic and operational considerations of producers and refineries, or other reasons beyond our control or the control of our suppliers and business partners, could impair our ability to acquire sufficient supplies of the products we sell.
Damage or disruption to our supply chain, including third-party production or transportation and distribution capabilities, due to weather, including any potential effects of climate change, natural disasters, fires or explosions, terrorism, pandemics, strikes, geopolitical conflict, government action, economic and operational considerations of producers and refineries, or other reasons beyond 18 Table of Contents our control or the control of our suppliers and business partners, could impair our ability to acquire sufficient supplies of the products we sell.
The impact of any one or all of the foregoing factors may adversely affect our financial condition and results of operations. The adoption of climate change legislation could negatively impact our operations and result in increased operating costs and reduced demand for the products and services we provide.
The impact of any one or all of the foregoing factors may adversely affect our financial condition and results of operations. The adoption of climate change legislation could negatively impact our operations and result in increased operating costs and reduced demand for the products and services we provide. The U.S.
For example, average temperatures in our service territories were 8% warmer than normal for fiscal 2023, and 10% warmer than normal for fiscal 2022 and fiscal 2021, as measured by the number of heating degree days reported by the National Oceanic and Atmospheric Administration.
For example, average temperatures in our service territories were 10% warmer than normal for fiscal 2024, 8% warmer than normal for fiscal 2023 and 10% warmer than normal for fiscal 2022, as measured by the number of heating degree days reported by the National Oceanic and Atmospheric Administration.
The 23 Table of Contents development of these products may also be negatively affected by production risks resulting from mechanical breakdowns, faulty technology, competitive markets, or changes to the laws and regulations that mandate the use of renewable energy sources, and the other regulatory risks discussed above under the caption, “The adoption of climate change legislation could negatively impact our operations and result in increased operating costs and reduced demand for the products and services we provide.” A prolonged environment of low prices or reduced demand for RNG could have an adverse effect on our long-term business prospects, financial condition and results of renewable operations.
The development of these products may also be negatively affected by production risks resulting from mechanical breakdowns, faulty technology, competitive markets, labor shortages or changes to the laws and regulations that mandate the use of renewable energy sources, and the other regulatory risks discussed above under the caption, “The adoption of climate change legislation could negatively impact our operations and result in increased operating costs and reduced demand for the products and services we provide.” A prolonged environment of low prices or reduced demand for RNG could have an adverse effect on our long-term business prospects, financial condition and results of renewable operations.
Additionally, the open markets where RINs and LCFS Credits are traded have experienced volatility over the past year and may experience continued volatility in the future. There is increasing interest at the federal, state, and local level to further reduce GHG emissions by promoting electrification, incentivizing the production of renewable energy and disincentivizing the use of fossil fuels.
Additionally, the markets where RINs and LCFS Credits are traded, have experienced volatility over past years and may experience continued volatility in the future. There is increasing interest at the federal, state, and local level to further reduce GHG emissions by promoting electrification, incentivizing the production of renewable energy and disincentivizing the use of fossil fuels.
Unitholders have only limited voting rights on matters affecting our business, including the right to elect the members of our Board of Supervisors every three years and the right to vote on the removal of the general partner. It may be difficult for a third party to acquire us, even if doing so would be beneficial to our Unitholders.
Unitholders have only limited voting rights on matters affecting our business, including the right to elect the members of our Board of Supervisors every three years and the right to vote on the removal of the general partner. 29 Table of Contents It may be difficult for a third party to acquire us, even if doing so would be beneficial to our Unitholders.
Accordingly, our current Unitholders may bear some or all of the audit adjustment, even if such Unitholders did not own units during the tax year 29 Table of Contents under audit. If we make payments of taxes, penalties and interest resulting from audit adjustments, cash available to service debt or to make distributions to our Unitholders could be substantially reduced.
Accordingly, our current Unitholders may bear some or all of the audit adjustment, even if such Unitholders did not own units during the tax year under audit. If we make payments of taxes, penalties and interest resulting from audit adjustments, cash available to service debt or to make distributions to our Unitholders could be substantially reduced.
We cannot predict the impact of future changes to the EPA’s prioritization of climate change mitigation or the impact of future GHG legislation or regulations on our business, financial condition or operations in the future. 16 Table of Contents Numerous states, municipalities and regulators have also adopted or proposed laws and policies on climate change, including GHG emission reduction targets and climate disclosure.
We cannot predict the impact of future changes to the EPA’s prioritization of climate change mitigation or the impact of future GHG legislation or regulations on our business, financial condition or operations in the future. Numerous states, municipalities and regulators have also adopted or proposed laws, regulations and policies on climate change, including GHG emission reduction targets and climate disclosure.
The advancement of artificial intelligence (“AI”) and large language models has given rise 25 Table of Contents to additional vulnerabilities and potential entry points for cyber threats. With generative AI tools, threat actors may have additional tools to automate breaches or persistent attacks, evade detection, or generate sophisticated phishing emails.
The advancement of artificial intelligence (“AI”) and large language models has given rise to additional vulnerabilities and potential entry points for cyber threats. With generative AI tools, threat actors may have additional tools to automate breaches or persistent attacks, evade detection, or generate sophisticated phishing emails.
Treasury regulations. A successful IRS challenge to those positions could adversely affect the amount of tax benefits available to a Unitholder or result in a tax imposed upon us and borne by current Unitholders even if such Unitholder did not own units during the tax year under audit.
Treasury regulations. A successful IRS challenge to those positions could adversely affect the amount of tax benefits available to a Unitholder or result in a tax imposed upon us and borne by current Unitholders even if such Unitholder did not own units during the tax 32 Table of Contents year under audit.
We cannot guarantee that a Unitholder will receive cash distributions equal to its allocable share of our taxable income or even the tax liability to it resulting from that income. Ownership of Common Units may have adverse tax consequences for tax-exempt organizations and foreign investors.
We cannot guarantee that a Unitholder will receive cash distributions equal to its allocable share of our taxable income or even the tax liability to it resulting from that income. 31 Table of Contents Ownership of Common Units may have adverse tax consequences for tax-exempt organizations and foreign investors.
Based on these findings, the EPA has begun adopting and implementing regulations to restrict emissions of GHGs from certain industries and require reporting by certain regulated facilities. Current EPA leadership has prioritized climate change mitigation measures and has implemented regulations requiring significant reductions in GHG emissions.
Based on these findings, the EPA has begun adopting and implementing regulations to restrict emissions of GHGs from certain industries and require reporting by certain regulated facilities. EPA leadership through 2024 has prioritized climate change mitigation measures and has implemented regulations requiring significant reductions in GHG emissions.
In that case, a Unitholder may no longer be treated for tax purposes as a partner with respect to those Common Units during the period of the loan to the short seller and 31 Table of Contents may recognize gain or loss from such disposition.
In that case, a Unitholder may no longer be treated for tax purposes as a partner with respect to those Common Units during the period of the loan to the short seller and may recognize gain or loss from such disposition.
Furthermore, should the IRS successfully contest some conventions used by us, a Unitholder could 30 Table of Contents recognize more gain on the sale of Common Units than would be the case under those conventions, without the benefit of decreased income in prior years.
Furthermore, should the IRS successfully contest some conventions used by us, a Unitholder could recognize more gain on the sale of Common Units than would be the case under those conventions, without the benefit of decreased income in prior years.
We can give no assurance that future increases in our costs to acquire and transport propane, fuel oil and natural gas will not have a material adverse effect on our profitability and cash flow. 18 Table of Contents High prices for propane, fuel oil and other refined fuels and natural gas can lead to customer conservation, resulting in reduced demand for our products.
We can give no assurance that future increases in our costs to acquire and transport propane, fuel oil and natural gas will not have a material adverse effect on our profitability and cash flow. High prices for propane, fuel oil and other refined fuels and natural gas can lead to customer conservation, resulting in reduced demand for our products.
Delaware law provides that a limited partner who receives a distribution of this kind and knew at the time of the distribution that the distribution violated Delaware law will be liable to the limited partnership for the distribution amount for three 28 Table of Contents years from the distribution date.
Delaware law provides that a limited partner who receives a distribution of this kind and knew at the time of the distribution that the distribution violated Delaware law will be liable to the limited partnership for the distribution amount for three years from the distribution date.
The EPA issued an Endangerment Finding under the federal Clean Air Act, which determined that emissions of greenhouse gases (“GHG”), such as carbon dioxide, present an endangerment to public health and the environment because emissions of such gases may be contributing to the warming of the earth’s atmosphere, volatility in seasonal temperatures, increased frequency and severity of storms, floods and other climatic changes.
Environmental Protection Agency (“EPA”) issued an Endangerment Finding under the federal Clean Air Act, which determined that emissions of greenhouse gases (“GHG”), such as carbon dioxide, present an endangerment to public health and the environment because emissions of such gases may be contributing to the warming of the earth’s atmosphere, volatility in seasonal temperatures, increased frequency and severity of storms, floods and other climatic changes.
The generation and monetization of environmental attributes by our renewable natural gas assets are subject to state and federal regulations that could negatively impact the availability or value of environmental attributes in the future.
The generation and monetization of environmental attributes by our renewable natural gas assets are subject to state and federal regulations and potential changes in law that could negatively impact the availability or value of environmental attributes in the future.
Our anaerobic digester operations located at Adirondack Farms in New York, and at SuburbanRNG – Columbus, are under construction and upgrading to produce RNG and are expected to begin production in fiscal year 2025.
Our anaerobic digester operations located at Adirondack Farms in New York, and at SuburbanRNG – Columbus, are, respectively under construction and upgrading to produce RNG and are expected to begin production in calendar year 2025.
The amount of distributions that we may make to holders of our Common Units is limited by the senior notes, and the amount of distributions that the Operating Partnership may make to us is limited by our 26 Table of Contents revolving credit facility.
The amount of distributions that we may make to holders of our Common Units is limited by the senior notes, and the amount of distributions that the Operating Partnership may make to us is limited by our revolving credit facility.
Our diversification efforts into the renewable and low CI energy markets or other industries may require additional investments in personnel, equipment and operational infrastructure, and there is no assurance that we will be able to sufficiently grow our presence in these markets.
We continue to seek to strategically diversify and grow our business. Our diversification efforts into the renewable and low CI energy markets or other industries may require additional investments in personnel, equipment and operational infrastructure, and there is no assurance that we will be able to sufficiently grow our presence in these markets.
The price for all credits is impacted by global markets for feedstocks; such as crops, as well as global markets for crude oil, making the RIN market historically volatile.
The price for all credits is impacted by global markets for feedstocks, such as crops and used cooking oil, as well as global markets for crude oil, making the RIN market historically volatile.
For example, in September 2023, California became the first state to pass its own far-reaching mandatory disclosure bills which require any entity doing business in California that meets certain annual revenue thresholds to annually disclose publicly and provide independent third-party attestation on its global Scope 1 and Scope 2 GHG emissions beginning in 2026 for the prior fiscal year, and on its value chain (Scope 3) GHG emissions beginning in 2027.
For example, in October 2023, California became the first state to pass its own far-reaching mandatory disclosure bills which require any entity doing business in California that meets certain annual revenue thresholds to annually disclose publicly and provide independent third-party attestation on its Scope 1 and Scope 2 GHG emissions beginning in 2026 for the prior fiscal year, and on its value chain (Scope 3) GHG emissions beginning in 2027, and biennially disclose its climate-related financial risk beginning in 2026.
The ability of these facilities to meet our performance expectations is subject to the risks inherent in newly constructed RNG production facilities or renovation of such facilities, including delays or problems in construction, degradation of equipment in excess of our expectations, system failures, and outages, interruptions in feedstock supply for the digesters due to operational constraints or changes, fluctuations in demand and/or changes in circumstances that impact the supply of feedstock to the facilities.
The ability of these facilities to meet our performance expectations is subject to the risks inherent in newly constructed RNG production facilities or renovation of such facilities, including delays or problems in construction, labor shortages, weather conditions, availability of reliable power supply, degradation of equipment in excess of our expectations, system failures, and outages, interruptions in feedstock supply for the digesters due to operational constraints or changes, fluctuations in demand and/or changes in circumstances that impact the supply of feedstock to the facilities.
For example, in July 2019, the Climate Leadership and Community Protection Act was signed into law in New York, establishing a statewide climate action framework which includes a target to reduce net GHG emissions to zero by 2050.
For example, in July 2019, the Climate Leadership and Community Protection Act was signed into law in New York, establishing a statewide climate action framework which includes a target to reduce net GHG emissions to 85% of 1990 levels by 2050.
Changes in the White House and EPA administration may result in changes to the EPA’s prioritization of climate change mitigation measures. EPA is also prioritizing environmental justice issues, which may impact how the agency addresses environmental and climate change matters.
Changes in the White House and EPA administration may result in changes to the EPA’s prioritization of climate change mitigation measures. EPA is also prioritizing environmental justice issues, which may impact how the agency addresses environmental and climate change matters and effects on communities facing disadvantages.
The extent and duration of the 20 Table of Contents military action, economic sanctions and resulting market disruptions could be significant and could potentially have a substantial negative impact on the global economy and/or our business for an unknown period of time.
The extent and duration of the military action, economic sanctions and resulting market disruptions have been and could continue to be significant and could potentially have a substantial negative impact on the global economy and/or our business for an unknown period of time.
As of September 30, 2023, our long-term debt consisted of $350.0 million in aggregate principal amount of 5.875% senior notes due March 1, 2027, $650.0 million in aggregate principal amount of 5.0% senior notes due June 1, 2031, $80.6 million in aggregate principal amount of 5.5% Green Bonds due October 1, 2028 through October 1, 2033 and $132.0 million outstanding under our $500.0 million senior secured revolving credit facility.
As of September 28, 2024, our long-term debt consisted of $350.0 million in aggregate principal amount of 5.875% senior notes due March 1, 2027, $650.0 million in aggregate principal amount of 5.0% senior notes due June 1, 2031, $80.6 million in aggregate principal amount of 5.5% green bonds due October 1, 2028 through October 1, 2033 (“Green Bonds”) and $151.0 million outstanding under our $500.0 million senior secured revolving credit facility.
High prices can lead to customer conservation, resulting in reduced demand for our products. Higher commodity, transportation and labor costs due to inflationary conditions have impacted wholesale prices and can cause certain customers to reduce their consumption of energy, which could have a negative impact on our sales and profitability.
High prices can lead to customer conservation, resulting in reduced demand for our products. Higher commodity, transportation and labor costs due to inflationary conditions in recent periods have impacted wholesale prices and caused certain customers to reduce their consumption of energy, which had a negative impact on our sales and profitability during those periods.
Such restrictions could have an adverse impact on the demand for certain of our products in those jurisdictions, but may have a favorable impact on our emerging renewable energy products. However, there are also many states that have passed laws that prohibit local 19 Table of Contents governments from restricting gas use in buildings.
While such restrictions could have an adverse impact on the demand for certain of our products in those jurisdictions, they may have a favorable impact on our emerging renewable energy products. Additionally, there are also many states that have passed laws that prohibit local governments from restricting gas use in buildings.
We and the Operating Partnership were in compliance with all covenants and terms of the senior notes and the revolving credit facility as of September 30, 2023.
We and the Operating Partnership were in compliance with all covenants and terms of the senior notes and the revolving credit facility as of September 28, 2024.
Tax Risks to our Unitholders: • tax treatment as a partnership for U.S. federal income tax purposes; • legislative, judicial or administrative changes and differing interpretations of tax treatment of partnerships; • potential audit adjustments to our income tax returns for prior tax years by the IRS; • successful IRS contests of the U.S. federal income tax positions we take; • tax liability exceeding cash distributions on Common Units; • adverse tax consequences for tax-exempt organizations and foreign investors; • limitations on the ability of a Unitholder to deduct its share of our losses; • tax gain or loss on the disposition of Common Units being different than expected; • inaccuracy or lack of timeliness in our reporting of partnership tax information; • the IRS challenging our treatment of each purchaser of our Common Units as having the same tax benefits; • the IRS challenging our treatment of how we prorate our items of income, gain, loss and deduction; • negative tax consequences due to defaults on debt or sales of assets; • state, local and other tax considerations; and • the potential consequences of a Unitholder loaning Common Units to a “short seller” to cover a short sale. 15 Table of Contents RISKS RELATED TO OUR BUSINESS Because weather conditions may adversely affect demand for our products, our results of operations and financial condition are vulnerable to warm winters and natural disasters.
Tax Risks to our Unitholders: • tax treatment as a partnership for U.S. federal income tax purposes; • legislative, judicial or administrative changes and differing interpretations of tax treatment of partnerships; • potential audit adjustments to our income tax returns for prior tax years by the IRS; • successful IRS contests of the U.S. federal income tax positions we take; • tax liability exceeding cash distributions on Common Units; • adverse tax consequences for tax-exempt organizations and foreign investors; • limitations on the ability of a Unitholder to deduct its share of our losses; • tax gain or loss on the disposition of Common Units being different than expected; • inaccuracy or lack of timeliness in our reporting of partnership tax information; • the IRS challenging our treatment of each purchaser of our Common Units as having the same tax benefits; • the IRS challenging our treatment of how we prorate our items of income, gain, loss and deduction; • negative tax consequences due to defaults on debt or sales of assets; • state, local and other tax considerations; and • the potential consequences of a Unitholder loaning Common Units to a “short seller” to cover a short sale.
We have a planned construction of natural gas upgrade equipment at SuburbanRNG – Columbus that will require capital expenditures and there is no guarantee that the project will be completed on time or on budget, and our operations could be adversely affected by disruptions or delays which could have a negative impact on revenues and operations.
We are constructing a natural gas upgrade system at SuburbanRNG – Columbus that requires capital expenditures and there is no guarantee that the project will be completed on time or on budget, and our operations could be adversely affected by disruptions or delays which could have a negative impact on revenues and operations.
Our business and operating results are materially affected by worldwide economic conditions. Conditions in the global capital and credit markets, as well as general economic pressures, including high inflation and temporary or prolonged recessionary conditions, could impact consumer and/or business confidence and increase market volatility, which could negatively affect business activity generally.
Conditions in the global capital and credit markets, as well as general economic pressures, including high inflation and temporary or prolonged recessionary conditions, could impact consumer and/or business confidence and increase market volatility, which could negatively affect business activity generally.
Cash distributions on our Common Units are not guaranteed, and depend primarily on our cash flow and our cash on hand. Because they are not directly dependent on profitability, which is affected by non-cash items, our cash distributions might be made during periods when we record losses and might not be made during periods when we record profits.
Because they are not directly dependent on profitability, which is affected by non-cash items, our cash distributions might be made during periods when we record losses and might not be made during periods when we record profits.
We cannot predict what impact changes to existing federal, state, or local programs designed to reduce GHG emissions and address climate change may have on our business.
We cannot predict what impact changes to existing federal, state, or local programs designed to reduce GHG emissions and address climate change may have on our business. Nor can we predict what impact the creation of future federal, state, and local programs designed to reduce GHG emissions and address climate change will have on our business.
To the extent that the Russian military action in Ukraine or the Israel-Hamas war continues and related price volatility and geopolitical instability continue, and to the extent that military action intensifies in those regions or in other parts of the world, which may further increase volatility in the price and supply of propane, fuel oil and other refined fuels and natural gas, our business and results of operations could be adversely impacted.
To the extent that the Russian military action in Ukraine or the Israel-Hamas war continues and related price volatility and geopolitical instability continue, and to the extent that military action intensifies in those regions or in other parts of the world, which may further increase volatility in the price and supply of propane, fuel oil and other refined fuels and natural gas, our business and results of operations could be adversely impacted. 21 Table of Contents Our financial condition and results of operations may be adversely affected by governmental regulation and associated environmental and health and safety costs.
We expect overall demand for propane and fuel oil to be relatively flat to moderately declining over the next several years.
The retail propane and fuel oil industries are mature and highly competitive. We expect overall demand for propane and fuel oil to be relatively flat to moderately declining over the next several years.
The volume of propane, fuel oil and natural gas sold is at its highest during the six-month peak heating season of October through March and is directly affected by the severity and length of the winter months.
Many of our customers rely on propane, fuel oil or natural gas primarily as a heating source. The volume of propane, fuel oil and natural gas sold is at its highest during the six-month peak heating season of October through March and is directly affected by the severity and length of the winter months.
Because of the highly competitive nature of the retail propane and fuel oil businesses, we may not be able to retain existing customers or acquire or attract new customers, which could have an adverse impact on our operating results and financial condition. The retail propane and fuel oil industries are mature and highly competitive.
Future periods of high inflation could also have a negative impact. 19 Table of Contents Because of the highly competitive nature of the retail propane and fuel oil businesses, we may not be able to retain existing customers or acquire or attract new customers, which could have an adverse impact on our operating results and financial condition.
In the New York action, the United States District Court for the Northern District of New York granted AES’ dismissal motion in part in October 2018, but allowed plaintiff’s statutory consumer fraud and breach of contract causes of action to proceed. The court granted summary judgment in our favor on the remaining counts and the complaint was dismissed in full.
In the New York action, the United States District Court for the Northern District of New York granted AES’ dismissal motion in part in October 2018, but allowed plaintiff’s statutory consumer fraud and breach of contract causes of action to proceed.
The distribution channel is also subject to changes in pipeline gas quality standards or other regulatory changes that may also limit our ability to transport RNG on pipelines for delivery to third parties or increase the costs of processing RNG to allow for such deliveries.
The distribution channel is also subject to changes in pipeline gas quality standards or other regulatory changes that may also limit our ability to transport RNG on pipelines for delivery to third parties or increase the costs of processing RNG to allow for such deliveries. 26 Table of Contents Our plans for growth and diversification may not be successful or could expose our business to new risks.
Any one of these factors could result in delays, increased costs or decreases in the amount of expected revenues related to combining the businesses or derived from a strategic transaction and could adversely impact our financial condition or results of operations. 22 Table of Contents Current conditions in the global capital and credit markets, and general economic pressures, may adversely affect our financial position and results of operations.
Any one of these factors could result in delays, increased costs or decreases in the amount of expected revenues related to combining the businesses or derived from a strategic transaction and could adversely impact our financial condition or results of operations.
The Green Bonds contain a financial covenant requiring SuburbanRNG – Stanfield’s debt service coverage ratio, as defined therein, to be not less than 1.25 to 1.00 for any fiscal quarter. SuburbanRNG – Stanfield is in compliance with all covenants and terms of the Green Bonds as of September 30, 2023.
The Green Bonds contain a financial covenant requiring SuburbanRNG – Stanfield’s debt service coverage ratio, as defined therein, to be not less than 1.25 to 1.00 for any fiscal quarter.
This could limit our ability to refinance long-term debt at or in advance of maturities or could force us to access capital and credit markets at rates or terms normally considered to be unreasonable, any of which could adversely affect our results of operations, cash flows and financial condition. 27 Table of Contents RISKS RELATED TO OUR COMMON UNITS Cash distributions are not guaranteed and may fluctuate with our performance and other external factors.
This could limit our ability to refinance long-term debt at or in advance of maturities or could force us to access capital and credit markets at rates or terms normally considered to be unreasonable, any of which could adversely affect our results of operations, cash flows and financial condition.
We cannot predict how many other states and localities will adopt similar laws, if restrictions will be expanded to other fossil-based fuels, and what the impact will be on our financial condition and results of operations.
We cannot predict how many other states and localities will adopt similar laws either restricting or prohibiting the restriction of gas used in residential or commercial buildings. We also cannot predict whether similar restrictions will be expanded to other fossil-based fuels, and what the impact will be on our financial condition and results of operations.
Any successful efforts by individuals to infiltrate, break into, disrupt, damage or otherwise steal from us or our third-party service providers’ security or information systems could expose us to increased costs, litigation expenses, regulatory actions, fines and penalties, or other liabilities that could adversely impact our financial condition or results of operations.
Any successful efforts by individuals to infiltrate, break into, disrupt, damage or otherwise steal from us or our third-party service providers’ security or information systems could expose us to increased costs, litigation expenses, regulatory actions, fines and penalties, or other liabilities that could adversely impact our financial condition or results of operations. 27 Table of Contents We are subject to laws, rules, regulations and policies regarding data privacy and security, and may be subject to additional related laws and regulations in jurisdictions in which we operate.
Due to high inflation in the United States in recent years, we have experienced higher commodity, transportation and labor costs and the cost of tanks and other equipment, which have impacted our profitability in recent periods and may continue to do so while these conditions exist.
Due to high inflation in the United States in recent years, we have experienced higher commodity, transportation and labor costs and increased cost of tanks and other equipment, which have impacted our profitability in recent periods; while inflationary pressures have decreased in recent periods, additional periods of high inflation could negatively impact our profitability.
The amount and terms of our debt may also adversely affect our ability to finance future operations and capital needs, limit our ability to pursue acquisitions and other business opportunities and make our results of operations more susceptible to adverse economic and industry conditions.
SuburbanRNG – Stanfield is in compliance with all covenants and terms of the Green Bonds as of September 28, 2024. 28 Table of Contents The amount and terms of our debt may also adversely affect our ability to finance future operations and capital needs, limit our ability to pursue acquisitions and other business opportunities and make our results of operations more susceptible to adverse economic and industry conditions.
The generation and monetization of environmental attributes and available tax credits or other incentives resulting from our investments in Oberon and IH, our construction and operation of anaerobic digesters through our wholly-owned subsidiary, Suburban Renewable Energy, LLC and our sale of renewable propane, are contingent on several state and federal programs, including renewable fuel standard programs (“RFS”), the Inflation Reduction Act, the Infrastructure Investment and Jobs Act, the California Low Carbon Fuel Standard (“CA LCFS”), the Oregon Clean Fuels Program (“OR CFP”), and the Washington Clean Fuel Standard (“WA CFS”).
It is difficult to predict how the market for our fuels would be affected by changes in regulations or increased temperature volatility, although if there is an overall trend of warmer winter temperatures, it could adversely affect our business. 17 Table of Contents The generation and monetization of environmental attributes and available tax credits or other incentives resulting from our investments in Oberon and IH, our construction and operation of anaerobic digesters through our wholly owned subsidiary, Suburban Renewable Energy, LLC, and our sale of renewable propane, are contingent on several state and federal programs, including the federal Renewable Fuel Standard program (“RFS”), the Inflation Reduction Act, the Infrastructure Investment and Jobs Act, the California Low Carbon Fuel Standard (“CA LCFS”), the Oregon Clean Fuels Program (“OR CFP”), and the Washington Clean Fuel Standard (“WA CFS”).
The anticipated after-tax economic benefit of an investment in our Common Units depends largely on our being treated as a partnership for U.S. federal income tax purposes.
The IRS could treat us as a corporation, which would substantially reduce the cash available for distribution to Unitholders. The anticipated after-tax economic benefit of an investment in our Common Units depends largely on our being treated as a partnership for U.S. federal income tax purposes.
If the frequency or magnitude of significant weather conditions or natural disasters such as floods, droughts, wildfires, hurricanes, blizzards or earthquakes increase, as a result of climate change or for other reasons, our results of operations and our financial performance could be negatively impacted by the extent of damage to our facilities or to our customers’ residential homes and business structures, or of disruption to the supply or delivery of the products we sell.
We can give no assurance that the weather conditions in any quarter or year will not have a material adverse effect on our operations, or that our available cash will be sufficient to pay principal and interest on our indebtedness and distributions to Unitholders. 16 Table of Contents If the frequency or magnitude of significant weather conditions or natural disasters such as floods, droughts, wildfires, hurricanes, blizzards or earthquakes increase, as a result of climate change or for other reasons, our results of operations and our financial performance could be negatively impacted by the extent of damage to our facilities or to our customers’ residential homes and business structures, or of disruption to the supply or delivery of the products we sell.
If this trend of warmer than normal temperatures continues, it could have a negative impact on our financial performance. Furthermore, variations in weather in one or more regions in which we operate can significantly affect the total volume of propane, fuel oil and other refined fuels and natural gas we sell and, consequently, our results of operations.
Furthermore, variations in weather in one or more regions in which we operate can significantly affect the total volume of propane, fuel oil and other refined fuels and natural gas we sell and, consequently, our results of operations.
In addition, the issuance of additional Common Units, or other equity securities, will, over time, result in the allocation of additional taxable income, representing built-in gains at the time of the new issuance, to those Unitholders that existed prior to the new issuance.
In addition, the issuance of additional Common Units, or other equity securities, will, over time, result in the allocation of additional taxable income, representing built-in gains at the time of the new issuance, to those Unitholders that existed prior to the new issuance. 30 Table of Contents TAX RISKS TO OUR UNITHOLDERS Our tax treatment depends on our status as a partnership for U.S. federal income tax purposes.
There are also many efforts to electrify our economy, including goals and mandates at the federal and state level for auto manufacturers to produce, and for governments to acquire, zero-emission vehicles in the upcoming years. Cap and Trade, or Cap and Invest, programs that put a price on carbon emissions have been adopted in California, Oregon and Washington state.
There are also efforts to electrify our economy, including goals and mandates at the federal and state level for auto manufacturers to produce, and for governments to acquire, zero-emission vehicles in the upcoming years.
These industries have also seen an increase in the number of class action lawsuits brought against retailers and relating to their pricing policies and practices. Two such lawsuits were commenced against AES in 2017 and 2018, involving New York and Pennsylvania customers. AES filed motions to dismiss both actions on procedural and substantive grounds.
Two such lawsuits were commenced against AES in 2017 and 2018, involving New York and Pennsylvania customers, respectively. AES filed motions to dismiss both actions on procedural and substantive grounds.
Currently, income from RIN and LCFS Credits is not material to our results of operations; however, as we continue to invest in the build out of our renewable energy platform, we anticipate increased RIN and LCFS Credits income, as well as financial benefits from investment tax credits and production tax credits.
Currently, income from RIN and LCFS Credits is not material to our results of operations; however, as we continue to invest in the build-out of our renewable energy platform, we anticipate increased RIN and LCFS Credits income, as well as financial benefits from investment tax credits and production tax credits. 25 Table of Contents There is increasing interest at the federal, state, and local level to further regulate GHG emissions by incentivizing the production of renewable energy and disincentivizing the use of fossil fuels and in some cases, force the electrification of several aspects of the economy.
Costs associated with lawsuits, investigations or increases in legal reserves that we establish based on our assessment of contingent liabilities could adversely affect our operating results to the extent not covered by insurance. Our operations expose us to various claims, lawsuits and other legal proceedings that arise in and outside of the ordinary course of our business.
The case was ultimately dismissed by the District Court and the dismissal was affirmed by the Second Circuit Court of Appeals in December 2023. 22 Table of Contents Costs associated with lawsuits, investigations or increases in legal reserves that we establish based on our assessment of contingent liabilities could adversely affect our operating results to the extent not covered by insurance.
In addition, our existing fuel oil customers, unlike our existing propane customers, generally own their own tanks, which can result in intensified competition for these customers.
In addition, our existing fuel oil customers, unlike our existing propane customers, generally own their own tanks, which can result in intensified competition for these customers. We also anticipate that the renewable energy market will be increasingly competitive, which could impact our ability to meet our long-term strategic growth initiatives.
Nor can we predict what impact the creation of future federal, state, and local programs designed to reduce GHG emissions and address climate change will have on our business. 24 Table of Contents Certain of our anaerobic digester facilities are newly constructed, are under construction or renovation, or are in development and may not perform as we expect.
Those changes potentially may impact the value of tax incentives related to RNG or may otherwise impact our tax positions. Certain of our anaerobic digester facilities are newly constructed, are under construction or renovation, or are in development and may not perform as we expect.
Weather conditions have a significant impact on the demand for our products, for both heating and agricultural purposes. Many of our customers rely on propane, fuel oil or natural gas primarily as a heating source.
RISKS RELATED TO OUR BUSINESS Because weather conditions may adversely affect demand for our products, our results of operations and financial condition are vulnerable to warm winters and natural disasters. Weather conditions have a significant impact on the demand for our products, for both heating and agricultural purposes.
Removed
Risks Related to our Indebtedness and Access to Capital: • current and future debt obligations limiting our financial flexibility; • operating results and generation of cash flows are subject to our ability to continue to control expenses; and • disruptions in the capital and credit markets, including the availability and costs of debt and equity issuances.
Added
This trend of warmer than normal temperatures has had, and if it continues, could continue to have, a negative impact on our financial performance by reducing demand for our product in the future.
Removed
We can give no assurance that the weather conditions in any quarter or year will not have a material adverse effect on our operations, or that our available cash will be sufficient to pay principal and interest on our indebtedness and distributions to Unitholders.
Added
With respect to disclosure, in March 2024, the SEC adopted climate-change related disclosure rules requiring disclosure of Scope 1 and Scope 2 GHG emissions (but not Scope 3 GHG emissions as originally proposed) and mandating independent attestation as to such disclosures. The SEC’s rules are subject to multiple legal challenges, which have been consolidated in the U.S.
Removed
With respect to disclosure, the SEC has proposed sweeping climate-change related disclosure rules that, if adopted, would require significant disclosure regarding GHG emissions and would require significant time and expense to collect and prepare the information which may need to be gathered due to new disclosure requirements and any regulatory requirements for independent attestation as to such disclosures.
Added
Court of Appeals Eighth Circuit, and on April 4, 2024, the SEC voluntarily stayed the effective date of the legislation pending judicial resolution of the lawsuits filed. Some states are also beginning to propose or adopt their own climate change disclosure requirements that, if implemented, would require significant time and expense to collect and prepare the disclosure requirements.
Removed
Some states are also beginning to propose their own climate change disclosure requirements.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeIn addition, as of September 30, 2023 we had 1,022 bobtail and rack trucks, of which we owned 6%, 86 fuel oil tankwagons, of which we owned 7%, and 1,242 other delivery and service vehicles, of which we owned 18%. We lease the vehicles we do not own.
Biggest changeIn addition, as of September 28, 2024 we had 1,108 bobtail and rack trucks, of which we owned 8%, 94 fuel oil tankwagons, of which we owned 13%, and 1,236 other delivery and service 34 Table of Contents vehicles, of which we owned 19%. We lease the vehicles we do not own.
ITEM 2. P ROPERTIES As of September 30, 2023, we owned approximately 74% of our customer service center and satellite locations and leased the balance of our retail locations from third parties. We own and operate a 22 million gallon refrigerated, above ground propane storage facility in Elk Grove, California.
ITEM 2. P ROPERTIES As of September 28, 2024, we owned approximately 74% of our customer service center and satellite locations and leased the balance of our retail locations from third parties. We own and operate a 22 million gallon refrigerated, above ground propane storage facility in Elk Grove, California.
As of September 30, 2023, we also owned approximately 829,000 customer propane storage tanks with typical capacities of 100 to 500 gallons, 55,000 customer propane storage tanks with typical capacities of over 500 gallons and 245,000 portable propane cylinders with typical capacities of five to ten gallons.
As of September 28, 2024, we also owned approximately 812,000 customer propane storage tanks with typical capacities of 100 to 500 gallons, 53,000 customer propane storage tanks with typical capacities of over 500 gallons and 232,000 portable propane cylinders with typical capacities of five to ten gallons.
As of September 30, 2023, we had a fleet of 10 transport truck tractors, of which we owned 4, and 33 railroad tank cars, of which we owned none.
As of September 28, 2024, we had a fleet of 9 transport truck tractors, of which we owned 3, and 33 railroad tank cars, of which we owned none.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeIn this regard, our natural gas and electricity business was sued in a putative class action suit in the Northern District of New York. The complaint alleged a number of claims under various consumer statutes and common law in New York and Pennsylvania regarding pricing offered to electricity customers in those states.
Biggest changeOur natural gas and electricity business was sued in a putative class action suit in the Northern District of New York. The complaint alleged a number of claims under various consumer statutes and common law in New York and Pennsylvania regarding pricing offered to electricity customers in those states.
MINE SAFETY D ISCLOSURES None. 32 Table of Contents PART II
MINE SAFETY D ISCLOSURES None. 35 Table of Contents PART II
Removed
The case was dismissed in part by the district court, but causes of action based on the New York consumer statute and breach of contract were allowed to proceed. On April 12, 2022, the court granted summary judgment in favor of the Partnership on the remaining counts and the complaint was dismissed in full.
Added
The case was dismissed by the district court and the dismissal was affirmed by the Second Circuit Court of Appeals in December 2023.
Removed
The plaintiff has filed an appeal to the Second Circuit Court of Appeals. The matter has been fully briefed, argued, and a decision is pending. While we believe that the appeal is without merit, we are unable to predict at this time the ultimate outcome of the New York action.
Removed
If the plaintiff prevails on appeal, the matter will return to the trial court for further proceedings. If we are ultimately unable to successfully defend our AES business in this class action lawsuit, a decision rendered against AES could have an adverse impact on AES’s business and operations.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeAs of November 20, 2023, there were 482 Unitholders of record (based on the number of record holders and nominees for those Common Units held in street name). On October 26, 2023, we announced that our Board of Supervisors declared a quarterly distribution of $0.325 per Common Unit for the three months ended September 30, 2023.
Biggest changeAs of November 25, 2024, there were 429 Unitholders of record (based on the number of record holders and nominees for those Common Units held in street name). On October 24, 2024, we announced that our Board of Supervisors declared a quarterly distribution of $0.325 per Common Unit for the three months ended September 28, 2024.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

80 edited+14 added−14 removed62 unchanged
Biggest changeGeneral and administrative expenses of $91.6 million for fiscal 2023 increased $9.8 million, or 12.0%, compared to $81.8 million in the prior year, primarily due to professional fees and expenses of $4.7 million related to the RNG Acquisition, as well as higher payroll costs and other inflationary increases, offset to an extent by a decrease in variable compensation expenses.
Biggest changeGeneral and administrative expenses of $89.9 million for fiscal 2024 decreased $1.7 million, or 1.8%, compared to $91.6 million in the prior year, primarily due to $4.7 million in professional fees and expenses incurred last year related to our RNG Acquisition, as well as lower variable compensation and one less week in fiscal 2024, offset to an extent by higher payroll and benefit related costs and other inflationary increases. 42 Table of Contents Depreciation and Amortization (Dollars in thousands) Fiscal Fiscal Percent 2024 2023 Increase Increase Depreciation and amortization $ 66,975 $ 62,582 $ 4,393 7.0 % As a percent of total revenues 5.0 % 4.4 % Depreciation and amortization expense of $67.0 million in fiscal 2024 increased $4.4 million, or 7.0%, from $62.6 million in the prior year, primarily as a result of depreciation and amortization from the tangible and intangible assets from the RNG Acquisition at the beginning of our second quarter of the prior year, partially offset by one less week in fiscal 2024.
We enter into propane forward, options and swap agreements with third parties, and use futures and options contracts traded on the New York Mercantile Exchange (“NYMEX”) to purchase and sell propane, fuel oil, crude oil and natural gas at fixed prices in the future.
We enter into propane forward, options and swap agreements with third parties, and use futures and options contracts traded on the New York Mercantile Exchange (“NYMEX”) to purchase and sell propane, fuel oil, crude oil, natural gas and electricity at fixed prices in the future.
Historically, approximately two‑thirds of our retail propane volume is sold during the nine-month peak heating season from October through March. The fuel oil business tends to experience greater seasonality given its more limited use for space heating and approximately three-fourths of our fuel oil volumes are sold between October and March.
Historically, approximately two‑thirds of our retail propane volume is sold during the six-month peak heating season from October through March. The fuel oil business tends to experience greater seasonality given its more limited use for space heating and approximately three-fourths of our fuel oil volumes are sold between October and March.
We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying 34 Table of Contents values of assets and liabilities that are not readily apparent from other sources.
We base our estimates on historical experience and on various other assumptions 37 Table of Contents that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.
With other assumptions held constant, an increase or decrease of 100 basis points in the discount rate would have an immaterial impact on net pension and postretirement benefit costs. During fiscal 2022, lump sum pension settlement payments of $3.3 million exceeded the interest and service cost components of the net periodic pension cost of $2.2 million.
With other assumptions held constant, an increase or decrease of 100 basis points in the discount rate would have an immaterial impact on net pension and postretirement benefit costs. During fiscal 2024, lump sum pension settlement payments of $3.9 million exceeded the interest and service cost components of the net periodic pension cost of $3.2 million.
Although we have not experienced significant disruptions with securing the products we sell, inflationary factors and competition for resources across the supply chain has resulted in increased costs in a wide variety of areas, including labor, transportation costs, operating costs and the cost of tanks and other equipment.
Although we have not experienced significant disruptions with securing the products we sell, inflationary factors and competition for resources across the supply chain has resulted in increased costs in a wide variety of areas, including labor, transportation costs, operating costs and the cost of capital expansion projects, tanks and other equipment.
Consistent with past practices, we principally utilize futures and/or options contracts traded on the NYMEX to mitigate the price risk associated with our priced physical inventory, as well as, in certain instances, forecasted purchases of propane or fuel oil.
Consistent with past practices, we principally utilize futures and/or options contracts traded on the NYMEX to mitigate the price risk associated with our priced physical inventory, as well as, in certain instances, forecasted purchases of propane, fuel oil, natural gas and electricity.
Leveraging the strength and stability of our core propane business, we are positioning ourselves for sustainable long-term growth by investing in the clean energy economy of the future as society transitions to lower carbon alternatives.
Leveraging the strength and stability of our core propane business, we are positioning ourselves for sustainable long-term growth by investing in the clean energy economy of the future as society transitions to lower carbon alternatives, while also fostering the growth of our core propane business.
Excluding the effects of these items, as well as the unrealized non-cash mark-to-market adjustments on derivative instruments in both years, Adjusted EBITDA decreased to $275.0 million for fiscal 2023, compared to Adjusted EBITDA of $291.0 million for fiscal 2022. EBITDA represents net income before deducting interest expense, income taxes, depreciation and amortization.
Excluding the effects of these items, as well as the unrealized non-cash mark-to-market adjustments on derivative instruments in both years, Adjusted EBITDA decreased to $250.0 million for fiscal 2024, compared to Adjusted EBITDA of $275.0 million for fiscal 2023. EBITDA represents net income before deducting interest expense, income taxes, depreciation and amortization.
As a result, we recorded a non-cash settlement charge of $1.0 million during fiscal 2021, also in order to accelerate recognition of a portion of cumulative unamortized losses. These unrecognized losses were previously accumulated as a reduction to partners’ capital and were being amortized to expense as part of our net periodic pension cost.
As a result, we recorded a non-cash settlement charge of $0.8 million during fiscal 2022, also in order to accelerate recognition of a portion of cumulative unamortized losses. These unrecognized losses were previously accumulated as a reduction to partners’ capital and were being amortized to expense as part of our net periodic pension cost.
Future minimum rental commitments under noncancelable operating lease agreements as of September 30, 2023 are presented in the table above. Guarantees Certain of our operating leases, primarily those for transportation equipment with remaining lease periods scheduled to expire periodically through fiscal 2032, contain residual value guarantee provisions.
Future minimum rental commitments under noncancelable operating lease agreements as of September 28, 2024 are presented in the table above. Guarantees Certain of our operating leases, primarily those for transportation equipment with remaining lease periods scheduled to expire periodically through fiscal 2032, contain residual value guarantee provisions.
In addition, we sell propane and fuel oil to customers at fixed prices, and enter into derivative instruments to hedge a portion of our exposure to fluctuations in commodity prices as a result of selling the fixed price contracts.
In addition, we sell propane, fuel oil, natural gas and electricity to customers at fixed prices, and enter into derivative instruments to hedge a portion of our exposure to fluctuations in commodity prices as a result of selling the fixed price contracts.
In addition, we sell propane and fuel oil to customers at fixed prices, and enter into derivative instruments to hedge a portion of our exposure to fluctuations in commodity prices as a result of selling the fixed price contracts.
In addition, we sell propane, fuel oil, natural gas and electricity to customers at fixed prices, and enter into derivative instruments to hedge a portion of our exposure to fluctuations in commodity prices as a result of selling the fixed price contracts.
In addition, the payments do not reflect amounts to be recovered from our insurance providers, which amount to $3.2 million, $3.0 million, $2.5 million, $1.6 million, $0.9 million and $4.2 million for each of the next five fiscal years and thereafter, respectively, and are included in other assets on the consolidated balance sheet.
In addition, the payments do not reflect amounts to be recovered from our insurance providers, which amount to $3.3 million, $2.8 million, $2.2 million, $1.5 million, $0.8 million and $3.8 million for each of the next five fiscal years and thereafter, respectively, and are included in other assets on the consolidated balance sheet.
Although the fair value of equipment at the end of its lease term has historically exceeded the guaranteed amounts, the maximum potential amount of aggregate future payments we could be required to make under these leasing arrangements, assuming the equipment is deemed worthless at the end of the lease term, was approximately $39.9 million.
Although the fair value of equipment at the end of its lease term has historically exceeded the guaranteed amounts, the maximum potential amount of aggregate future payments we could be required to make under these leasing arrangements, assuming the equipment is deemed worthless at the end of the lease term, was approximately $42.7 million.
(c) Amounts represent estimated minimum funding requirements for our pension plan. (d) These amounts are included in our consolidated balance sheet and primarily include payments for postretirement and incentive benefits, as well as other contractual obligations.
(c) Amounts represent estimated funding contributions for our pension plan. (d) These amounts are included in our consolidated balance sheet and primarily include payments for postretirement and incentive benefits, as well as other contractual obligations.
Generally, we have, if necessary, up to one year from the acquisition date to finalize our estimates of acquisition date fair values. 35 Table of Contents Results of Operations and Financial Condition Fiscal 2023 included 53 weeks of operations compared to 52 weeks reported in the prior year.
Generally, we have, if necessary, up to one year from the acquisition date to finalize our estimates of acquisition date fair values. 38 Table of Contents Results of Operations and Financial Condition Fiscal year 2024 included 52 weeks of operations compared to 53 weeks reported in the prior year.
Summary of Long-Term Debt Obligations and Revolving Credit Lines As of September 30, 2023, our long-term debt consisted of $350.0 million in aggregate principal amount of 5.875% Senior Notes due March 1, 2027, $650.0 million in aggregate principal amount of 5.0% Senior Notes due June 1, 2031, $80.6 million in aggregate principal amount of 5.5% Green Bonds due October 1, 2028 through October 1, 2033 and $132.0 million outstanding under our $500.0 million senior secured revolving credit facility (“Revolving Credit Facility”) provided by our credit agreement.
Summary of Long-Term Debt Obligations and Revolving Credit Lines As of September 28, 2024, our long-term debt consisted of $350.0 million in aggregate principal amount of 5.875% Senior Notes due March 1, 2027, $650.0 million in aggregate principal amount of 5.0% Senior Notes due June 1, 2031, $80.6 million in aggregate principal amount of 5.5% Green Bonds due October 1, 2028 through October 1, 2033 and $151.0 million outstanding under our $500.0 million senior secured revolving credit facility (“Revolving Credit Facility”) provided by our credit agreement.
As a result, we recorded a non-cash settlement charge of $0.8 million during fiscal 2022, in order to accelerate recognition of a portion of cumulative unamortized losses. Similarly, during fiscal 2021, lump sum pension settlement payments of $3.9 million exceeded the interest and service cost components of the net periodic pension cost of $2.3 million.
As a result, we recorded a non-cash settlement charge of $0.6 million during fiscal 2024, in order to accelerate recognition of a portion of cumulative unamortized losses. Similarly, during fiscal 2022, lump sum pension settlement payments of $3.3 million exceeded the interest and service cost components of the net periodic pension cost of $2.2 million.
This scalable platform complements our existing portfolio of renewable energy assets, both as a stand-alone RNG distributor, or using RNG as a pathway to hydrogen or rDME production. Suburban Propane has a proud 95-year legacy of being a trusted provider of energy to local communities.
This scalable platform complements our existing portfolio of renewable energy assets, both as a stand-alone RNG distributor, or using RNG as a pathway to hydrogen or rDME production. Suburban Propane has a proud legacy of being a trusted provider of energy to local communities for more than 95 years.
Our RNG production facilities are diversified across feedstocks, geographies and revenue streams, and complements Suburban Renewable Energy’s ongoing activity to construct, own and operate an RNG facility at Adirondack Farms. The RNG Acquisition enhanced and increases Suburban Renewable Energy’s presence in RNG production and distribution.
Our RNG production facilities are diversified across feedstocks, geographies and revenue streams, and complements Suburban Renewable Energy’s ongoing activity to construct, own and operate an RNG facility at Adirondack Farms in upstate New York. The RNG Acquisition in fiscal 2023 enhanced and increases Suburban Renewable Energy’s presence in RNG production and distribution.
The discussion for fiscal year 2022 compared to fiscal year 2021 can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended September 24, 2022, which was filed with the SEC on November 23, 2022.
The discussion for fiscal year 2023 compared to fiscal year 2022 can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended September 30, 2023, which was filed with the SEC on November 22, 2023.
As we look ahead to fiscal 2024, our anticipated cash requirements include: (i) maintenance and growth capital expenditures of approximately $40.0 million for the propane segment; (ii) capital expenditures of approximately $28.2 million to support the construction and development efforts for our renewable energy platform; (iii) approximately $71.7 million of interest and income tax payments; and (iv) approximately $83.1 million of distributions to Unitholders, based on the current annualized rate of $1.30 per Common Unit.
As we look ahead to fiscal 2025, our anticipated cash requirements include: (i) maintenance and growth capital expenditures of approximately $40.0 million for the propane segment; (ii) capital expenditures of approximately $39.5 million to support the construction and development efforts for our renewable energy platform; (iii) approximately $74.2 million of interest and income tax payments; and (iv) approximately $83.9 million of distributions to Unitholders, based on the current annualized rate of $1.30 per Common Unit.
Additionally, we have standby letters of credit in the aggregate amount of $42.7 million, in support of retention levels under our casualty insurance programs and certain lease obligations, which expire periodically through April 30, 2024.
Additionally, we have standby letters of credit in the aggregate amount of $30.9 million, in support of retention levels under our casualty insurance programs and certain lease obligations, which expire periodically through April 30, 2025.
Effective January 1, 2006, we changed our postretirement health care plan from a self-insured program to one that is fully insured under which we pay a portion of the insurance premium on behalf of the eligible participants.
Our postretirement health care and life insurance benefit plans are unfunded. Effective January 1, 2006, we changed our postretirement health care plan from a self-insured program to one that is fully insured under which we pay a portion of the insurance premium on behalf of the eligible participants.
We made contribution payments to the defined benefit pension plan of $4.0 million, $3.3 million and $6.3 million in fiscal 2023, fiscal 2022 and fiscal 2021, respectively. As of September 30, 2023 and September 24, 2022, the plan’s projected benefit obligation exceeded the fair value of plan assets by $18.0 million and $20.8 million, respectively.
We made contribution payments to the defined benefit pension plan of $4.0 million, $4.0 million and $3.3 million in fiscal 2024, fiscal 2023 and fiscal 2022, respectively. As of September 28, 2024 and September 30, 2023, the plan’s projected benefit obligation exceeded the fair value of plan assets by $12.6 million and $18.0 million, respectively.
Operating Leases We lease certain property, plant and equipment for various periods under noncancelable operating leases, including 88% of our vehicle fleet, approximately 26% of our customer service centers and portions of our information systems equipment. Rental expense under operating leases was $41.7 million, $41.0 million and $37.8 million for fiscal 2023, 2022 and 2021, respectively.
Operating Leases We lease certain property, plant and equipment for various periods under noncancelable operating leases, including 87% of our vehicle fleet, approximately 26% of our customer service centers and portions of our information systems equipment. Rental expense under operating leases was $44.3 million, $41.7 million and $41.0 million for fiscal 2024, 2023 and 2022, respectively.
For purposes of measuring the projected benefit obligation as of September 30, 2023 and September 24, 2022, we used a discount rate of 5.50% and 5.125%, respectively, reflecting current market rates for debt obligations of a similar duration to our pension obligations.
For purposes of measuring the projected benefit obligation as of September 28, 2024 and September 30, 2023, we used a discount rate of 4.625% and 5.50%, respectively, reflecting current market rates for debt obligations of a similar duration to our pension obligations.
The fair value of residual value guarantees for outstanding operating leases was de minimis as of September 30, 2023 and September 24, 2022. Recently Issued/Adopted Accounting Pronouncements See Part IV, Note 2 of this Annual Report. 43 Table of Contents
The fair value of residual value guarantees for outstanding operating leases was de minimis as of September 28, 2024 and September 30, 2023. Recently Issued/Adopted Accounting Pronouncements See Part IV, Note 2 of this Annual Report.
As cost of products sold does not include depreciation and amortization expense, the gross margin we reference is considered a non-GAAP financial measure. 40 Table of Contents Fiscal Year 2022 Compared to Fiscal Year 2021 We are omitting from this section our discussion of the earliest of the three years of financial information included in this Form 10-K.
As cost of products sold does not include depreciation and amortization expense, the gross margin we reference is considered a non-GAAP financial measure. Fiscal Year 2023 Compared to Fiscal Year 2022 We are omitting from this section our discussion of the earliest of the three years of financial information included in this Annual Report.
Net income for fiscal 2023 was $123.8 million, or $1.94 per Common Unit, compared to $139.7 million, or $2.21 per Common Unit, in fiscal 2022. Adjusted earnings before interest, taxes, depreciation and amortization (Adjusted EBITDA, as defined and reconciled below) was $275.0 million for fiscal 2023, compared to $291.0 million in the prior year.
Net income for fiscal 2024 was $74.2 million, or $1.15 per Common Unit, compared to $123.8 million, or $1.94 per Common Unit, in fiscal 2023. Adjusted earnings before interest, taxes, depreciation and amortization (Adjusted EBITDA, as defined and reconciled below) was $250.0 million for fiscal 2024, compared to $275.0 million in the prior year.
Revenues from the distribution of propane and related activities of $1,232.1 million for fiscal 2023 decreased $81.4 million, or 6.2%, compared to $1,313.6 million for the prior year, primarily due to lower average retail selling prices associated with lower wholesale costs and lower volumes sold.
Revenues from the distribution of propane and related activities of $1,150.0 million for fiscal 2024 decreased $82.1 million, or 6.7%, compared to $1,232.1 million for the prior year, primarily due to lower volumes sold and lower average retail selling prices associated with lower wholesale costs.
General and Administrative Expenses (Dollars in thousands) Fiscal Fiscal Percent 2023 2022 Increase Increase General and administrative expenses $ 91,574 $ 81,756 $ 9,818 12.0 % As a percent of total revenues 6.4 % 5.4 % All costs of our back office support functions, including compensation and benefits for executives and other support functions, as well as other costs and expenses to maintain finance and accounting, treasury, legal, human resources, corporate development and the information systems functions are reported within general and administrative expenses in the consolidated statements of operations.
General and Administrative Expenses (Dollars in thousands) Fiscal Fiscal Percent 2024 2023 (Decrease) (Decrease) General and administrative expenses $ 89,894 $ 91,574 $ (1,680 ) (1.8 )% As a percent of total revenues 6.8 % 6.4 % All costs of our back office support functions, including compensation and benefits for executives and other support functions, as well as other costs and expenses to maintain finance and accounting, treasury, legal, human resources, corporate development and the information systems functions are reported within general and administrative expenses in the consolidated statements of operations.
Net income and EBITDA for fiscal 2022 included (i) a $2.6 million loss on our equity investments in unconsolidated affiliates; and (ii) a $0.8 million pension settlement charge.
Net income and EBITDA for fiscal 2024 included (i) a $18.1 million loss on our equity investments in unconsolidated affiliates; (ii) a $0.6 million pension settlement charge; and (iii) a $0.2 million loss on debt extinguishment.
Net cash used in financing activities of $44.6 million for fiscal 2023 reflected $82.4 million paid for the quarterly distributions to Common Unitholders at a rate of $0.325 per Common Unit paid in respect of the fourth quarter of fiscal 2022 and first three quarters of fiscal 2023, $42.4 million in net borrowings under our revolving credit facility, which were used to fund the acquisitions and investments noted above, and other financing activities of $4.6 million.
Net cash used in financing activities of $72.5 million for fiscal 2024 reflected $83.1 million paid for the quarterly distributions to Common Unitholders at a rate of $0.325 per Common Unit paid in respect of the fourth quarter of fiscal 2023 and first three quarters of fiscal 2024, $19.0 million in net borrowings under our Revolving Credit Facility, which were used to fund the acquisitions and investments noted above, $3.7 million in debt origination costs related to the refinancing of our Credit Agreement in March 2024 and other financing activities of $4.7 million. 44 Table of Contents Net cash used in financing activities of $44.6 million for fiscal 2023 reflected $82.4 million paid for the quarterly distributions to Common Unitholders at a rate of $0.325 per Common Unit paid in respect of the fourth quarter of fiscal 2022 and first three quarters of fiscal 2023, $42.4 million in net borrowings under our Revolving Credit Facility, which were used to fund the acquisitions and investments, and other financing activities of $4.6 million.
Gross margins included a $3.7 million unrealized loss attributable to the mark-to-market adjustment for derivative instruments used in risk management activities in fiscal 2023, compared to a $27.9 million unrealized loss in the prior year. These non-cash adjustments, which were reported in cost of products sold, were excluded from Adjusted EBITDA for both periods.
Gross margins included unrealized losses attributable to the mark-to-market adjustment for derivative instruments used in risk management activities of $14.6 million and $3.7 million in fiscal 2024 and fiscal 2023, respectively. These non-cash adjustments, which were reported in cost of products sold, were excluded from Adjusted EBITDA for both periods.
Earnings before interest, taxes, depreciation and amortization (“EBITDA”) for fiscal 2023 amounted to $260.4 million, compared to $259.6 million for fiscal 2022. Net income and EBITDA for fiscal 2023 included (i) a $6.3 million loss on our equity investments in unconsolidated affiliates; and (ii) $4.7 million in professional fees and expenses related to the RNG Acquisition.
Net income and EBITDA for fiscal 2023 included (i) a $6.3 million loss on our equity investments in unconsolidated affiliates; and (ii) $4.7 million in professional fees and expenses related to the RNG Acquisition.
Operating Expenses (Dollars in thousands) Fiscal Fiscal Percent 2023 2022 Increase Increase Operating expenses $ 478,058 $ 442,411 $ 35,647 8.1 % As a percent of total revenues 33.4 % 29.5 % All costs of operating our retail distribution and appliance sales and service operations, as well as the RNG production facilities, are reported within operating expenses in the consolidated statements of operations.
Operating Expenses (Dollars in thousands) Fiscal Fiscal Percent 2024 2023 (Decrease) (Decrease) Operating expenses $ 476,857 $ 478,058 $ (1,201 ) (0.3 )% As a percent of total revenues 35.9 % 33.4 % All costs of operating our retail distribution and appliance sales and service operations, as well as the RNG production facilities, are reported within operating expenses in the consolidated statements of operations.
A liability driven investment strategy is intended to reduce investment risk and, over the long-term, generate returns on plan assets that largely fund the annual interest on the accumulated benefit obligation.
The execution of this strategy has resulted in an asset allocation that is largely comprised of fixed income securities. A liability driven investment strategy is intended to reduce investment risk and, over the long-term, generate returns on plan assets that largely fund the annual interest on the accumulated benefit obligation.
Liquidity and Capital Resources Analysis of Cash Flows Operating Activities. Net cash provided by operating activities for fiscal 2023 amounted to $225.2 million, an increase of $4.7 million compared to the prior year.
Liquidity and Capital Resources Analysis of Cash Flows Operating Activities. Net cash provided by operating activities for fiscal 2024 amounted to $160.6 million, a decrease of $64.7 million compared to the prior year.
Additionally, the partnership with Equilibrium through the joint venture arrangement provides visible growth and experienced management in the rapidly developing waste-to-energy economy. RNG can be produced from multiple organic waste streams, including agricultural and food waste, helping to reduce methane emissions, while offering a lower carbon solution as a drop-in replacement for traditional natural gas.
RNG can be produced from multiple organic waste streams, including agricultural and food waste, helping to reduce methane emissions, while offering a lower carbon solution as a drop-in replacement for traditional natural gas.
Average propane selling prices for fiscal 2023 decreased 4.6% compared to the prior year, reflecting lower average wholesale costs, resulting in a $58.2 million decrease in revenues. Retail propane gallons sold decreased 4.9 million gallons, or 1.2%, to 396.4 million gallons, resulting in a decrease in revenues of $15.9 million.
Average propane selling prices for fiscal 2024 decreased 2.2% compared to the prior year, reflecting lower average wholesale costs, resulting in a $25.1 million decrease in revenues.
Excluding the impact of the unrealized mark-to-market adjustments, gross margin for fiscal 2023 increased $25.4 million, or 3.1%, compared to the prior year, primarily due to higher propane unit margins and margin contribution from the RNG assets acquired in December 2022, offset to an extent by lower propane volumes sold.
Excluding the impact of the unrealized mark-to-market adjustments, gross margin for fiscal 2024 decreased $23.2 million, or 2.7%, compared to the prior year, primarily due to lower propane volumes sold, partially offset by higher propane unit margins and higher margin contribution from the RNG operations.
Total Consolidated Leverage Ratio, as defined by our credit agreement, represents Adjusted EBITDA calculated on a trailing twelve-month basis plus non-cash compensation costs recognized under our Restricted Unit Plans for the same period.
Total Consolidated Leverage Ratio, as defined by our credit agreement, represents total indebtedness as of the balance sheet date minus unrestricted cash and cash equivalents in an amount not to exceed $25.0 million, divided by Adjusted EBITDA calculated on a trailing twelve-month basis plus non-cash compensation costs recognized under our Restricted Unit Plans for the same period, and other items.
Revenue from the RNG production assets primarily consist of sales of RNG and the associated environmental attributes, and tipping fees charged to third parties for various waste feedstocks.
Revenues from the RNG business primarily consist of sales of RNG and the associated environmental attributes, tipping fees charged to third parties for various waste feedstocks and sales of digestate which is a byproduct of the anaerobic digestion process.
Cost of Products Sold (Dollars in thousands) Percent Fiscal Fiscal Increase Increase 2023 2022 (Decrease) (Decrease) Cost of products sold Propane $ 489,808 $ 601,081 $ (111,273 ) (18.5 )% Fuel oil and refined fuels 65,572 68,298 (2,726 ) (4.0 )% Natural gas and electricity 19,100 27,256 (8,156 ) (29.9 )% All other 15,651 15,488 163 1.1 % Total cost of products sold $ 590,131 $ 712,123 $ (121,992 ) (17.1 )% As a percent of total revenues 41.3 % 47.4 % The cost of products sold reported in the consolidated statements of operations represents the weighted average unit cost of propane, fuel oil and refined fuels, and natural gas and electricity sold, including transportation costs to deliver product from our supply points to storage or to our customer service centers.
Cost of Products Sold (Dollars in thousands) Fiscal Fiscal Percent 2024 2023 (Decrease) (Decrease) Cost of products sold Propane $ 443,596 $ 489,808 $ (46,212 ) (9.4 )% Fuel oil and refined fuels 49,714 65,572 (15,858 ) (24.2 )% Natural gas and electricity 13,782 19,100 (5,318 ) (27.8 )% All other 15,104 15,651 (547 ) (3.5 )% Total cost of products sold $ 522,196 $ 590,131 $ (67,935 ) (11.5 )% As a percent of total revenues 39.3 % 41.3 % The cost of products sold reported in the consolidated statements of operations represents the weighted average unit cost of propane, fuel oil and refined fuels, and natural gas and electricity sold, including transportation costs to deliver product from our supply points to storage or to our customer service centers.
Pension Plan Assets and Obligations We have a noncontributory defined benefit pension plan which was originally designed to cover all of our eligible employees who met certain requirements as to age and length of service.
The Board of Supervisors reviews the level of Available Cash on a quarterly basis based upon information provided by management. 45 Table of Contents Pension Plan Assets and Obligations We have a noncontributory defined benefit pension plan which was originally designed to cover all of our eligible employees who met certain requirements as to age and length of service.
Average propane prices (basis Mont Belvieu, Texas) for fiscal 2023 decreased 38.9% compared to the prior year. Total gross margins of $839.0 million in fiscal 2023 increased $49.7 million, or 6.3%, compared to the prior year.
Average propane prices (basis Mont Belvieu, Texas) for fiscal 2024 were flat compared to the prior year. Total gross margins of $805.0 million in fiscal 2024 decreased $34.1 million, or 4.1%, compared to the prior year.
Retail propane gallons sold in fiscal 2023 of 396.4 million gallons decreased 1.2% compared to the prior year, primarily due to unseasonably warm and inconsistent temperatures throughout the heating season, including near record warm temperatures during January and February, which are the two most critical months for heat-related demand.
Retail propane gallons sold in fiscal 2024 of 378.3 million gallons decreased 4.6% compared to the prior year, primarily due to unseasonably warm and inconsistent temperatures throughout the heating season, particularly during the most critical months (December through February) for heat-related demand, with only a brief burst of extremely cold temperatures in mid-January.
Depreciation and Amortization (Dollars in thousands) Fiscal Fiscal Percent 2023 2022 Increase Increase Depreciation and amortization $ 62,582 $ 58,848 $ 3,734 6.3 % As a percent of total revenues 4.4 % 3.9 % Depreciation and amortization expense of $62.6 million in fiscal 2023 increased $3.7 million, or 6.3%, from $58.8 million in the prior year, primarily as a result of depreciation and amortization from the tangible and intangible assets from the RNG Acquisition, partially offset by accelerated depreciation recorded in the prior year on certain assets taken out of service. 39 Table of Contents Interest Expense, net (Dollars in thousands) Fiscal Fiscal Percent 2023 2022 Increase Increase Interest expense, net $ 73,393 $ 60,658 $ 12,735 21.0 % As a percent of total revenues 5.1 % 4.0 % Net interest expense of $73.4 million for fiscal 2023 increased $12.7 million, or 21.0% from $60.7 million in the prior year, primarily due to the impact of higher benchmark interest rates for borrowings under our Revolving Credit Facility and a higher average level of outstanding borrowings under that facility to fund the RNG Acquisition, as well as the impact of $80.6 million in Green Bonds assumed in the RNG Acquisition.
Interest Expense, net (Dollars in thousands) Fiscal Fiscal Percent 2024 2023 Increase Increase Interest expense, net $ 74,590 $ 73,393 $ 1,197 1.6 % As a percent of total revenues 5.6 % 5.1 % Net interest expense of $74.6 million for fiscal 2024 increased $1.2 million, or 1.6%, from $73.4 million in the prior year, primarily due to the impact of higher benchmark interest rates for borrowings under our Revolving Credit Facility and a higher average level of outstanding borrowings under that facility to fund the RNG Acquisition, as well as the impact of $80.6 million in Green Bonds assumed in the RNG Acquisition.
Cost of products sold associated with our fuel oil and refined fuels segment of $65.6 million for fiscal 2023 decreased $2.7 million, or 4.0%, compared to the prior year.
Cost of products sold associated with our fuel oil and refined fuels segment of $49.7 million for fiscal 2024 decreased $15.9 million, or 24.2%, compared to the prior year. Lower average wholesale costs and lower volumes sold contributed decreases of $8.5 million and $7.4 million, respectively.
The aggregate amounts of long-term debt maturities subsequent to September 30, 2023 are as follows: fiscal 2024: $-0-; fiscal 2025: $132.0 million; fiscal 2026: $-0- ; fiscal 2027: $350.0 million; fiscal 2028: $-0- ; and thereafter: $730.6 million. Total Consolidated Leverage Ratio.
See Part IV, Note 10 of this Annual Report. The aggregate amounts of long-term debt maturities subsequent to September 28, 2024 are as follows: fiscal 2025: $-0-; fiscal 2026: $-0-; fiscal 2027: $501.0 million ; fiscal 2028: $-0-; fiscal 2029: $11.7 million ; and thereafter: $718.9 million. Total Consolidated Leverage Ratio.
The net liability recognized in the consolidated financial statements for the defined benefit pension plan decreased by $2.8 million during fiscal 2023, which was primarily attributable to the contributions made during the year, as well as the increase in the discount rate used to measure the benefit obligation.
The net liability recognized in the consolidated financial statements for the defined benefit pension plan decreased by $5.4 million during fiscal 2024, which was primarily attributable to the contributions made during the year, as well as the return on plan assets. During fiscal 2025, we expect to contribute approximately $4.0 million to the defined benefit pension plan.
These reserves are retained for the proper conduct of our business, the payment of debt principal and interest and for distributions during the next four quarters. The Board of Supervisors reviews the level of Available Cash on a quarterly basis based upon information provided by management.
These reserves are retained for the proper conduct of our business, the payment of debt principal and interest and for distributions during the next four quarters.
Fuel oil and refined fuels gallons sold decreased 3.7 million gallons, or 16.1%, resulting in a $15.0 million decrease in revenues. Average selling prices for fuel oil and refined fuels increased 15.1%, resulting in a $12.0 million increase in revenues.
Average selling prices for fuel oil and refined fuels decreased 9.9%, resulting in a $7.6 million decrease in revenues.
Excluding the impact of the unrealized mark-to-market adjustments, propane unit margins for fiscal 2023 increased $0.04 per gallon, or 2.0%, compared to the prior year.
Excluding the impact of the unrealized mark-to-market adjustments, propane unit margins for fiscal 2024 increased $0.02 per gallon, or 1.3%, compared to the prior year. Combined operating and general and administrative expenses of $566.8 million for fiscal 2024 decreased $2.9 million, or 0.5%, compared to the prior year.
The following table sets forth our calculations of EBITDA and Adjusted EBITDA: (Dollars in thousands) Year Ended September 30, September 24, 2023 2022 Net income $ 123,752 $ 139,708 Add: Provision for income taxes 668 429 Interest expense, net 73,393 60,658 Depreciation and amortization 62,582 58,848 EBITDA 260,395 259,643 Unrealized non-cash losses on changes in fair value of derivatives 3,671 27,929 Equity in losses of unconsolidated affiliates 6,264 2,614 Acquisition-related costs 4,695 — Pension settlement charge — 840 Adjusted EBITDA $ 275,025 $ 291,026 We also reference gross margins, computed as revenues less cost of products sold as those amounts are reported on the consolidated financial statements.
Because EBITDA and Adjusted EBITDA as determined by us excludes some, but not all, items that affect net income, they may not be comparable to EBITDA and Adjusted EBITDA or similarly titled measures used by other companies. 43 Table of Contents The following table sets forth our calculations of EBITDA and Adjusted EBITDA: (Dollars in thousands) Year Ended September 28, September 30, 2024 2023 Net income $ 74,174 $ 123,752 Add: Provision for income taxes 734 668 Interest expense, net 74,590 73,393 Depreciation and amortization 66,975 62,582 EBITDA 216,473 260,395 Unrealized non-cash losses on changes in fair value of derivatives 14,598 3,671 Equity in losses of unconsolidated affiliates 18,119 6,264 Pension settlement charge 638 — Loss on debt extinguishment 215 — Acquisition-related costs — 4,695 Adjusted EBITDA $ 250,043 $ 275,025 We also reference gross margins, computed as revenues less cost of products sold as those amounts are reported on the consolidated financial statements.
All active employees who were eligible 42 Table of Contents to receive health care benefits under the postretirement plan subsequent to March 1, 1998, were provided an increase to their accumulated benefits under the cash balance pension plan. Our postretirement health care and life insurance benefit plans are unfunded.
Effective March 31, 1998, we froze participation in the postretirement health care benefit plan, with no new retirees eligible to participate in the plan. All active employees who were eligible to receive health care benefits under the postretirement plan subsequent to March 1, 1998, were provided an increase to their accumulated benefits under the cash balance pension plan.
Revenues in our natural gas and electricity segment decreased $8.4 million, or 21.1%, to $31.2 million in fiscal 2023 compared to $39.5 million in the prior year, resulting from lower volumes sold, primarily due to the impact of warmer temperatures in our operating territories on customer demand and a lower customer base.
Revenues in our natural gas and electricity segment decreased $5.3 million, or 17.0%, to $25.9 million in fiscal 2024 compared to $31.2 million in the prior year, resulting from lower volumes sold, primarily due to the impact of warmer weather and a lower customer base, coupled with lower natural gas selling prices (reflective of lower average wholesale costs).
The net change in the fair value of derivative instruments during the fiscal year resulted in unrealized non-cash losses of $3.7 million and $27.9 million reported in cost of products sold in fiscal 2023 and 2022, respectively, resulting in a year-over-year decrease of $24.2 million in cost of products sold, all of which was reported in the propane segment. 38 Table of Contents Cost of products sold associated with the distribution of propane and related activities of $489.8 million for fiscal 2023 decreased $111.3 million, or 18.5%, compared to the prior year.
The net change in the fair value of derivative instruments during the fiscal year resulted in unrealized non-cash losses of $14.6 million and $3.7 million reported in cost of products sold in fiscal 2024 and 2023, respectively, resulting in a year-over-year increase of $10.9 million in cost of products sold, all of which was reported in the propane segment.
Cost of products sold in our natural gas and electricity segment of $19.1 million for fiscal 2023 decreased $8.2 million, or 29.9%, compared to the prior year, primarily due to lower natural gas and electricity wholesale costs, coupled with lower usage.
Cost of products sold in our natural gas and electricity segment of $13.8 million for fiscal 2024 decreased $5.3 million, or 27.8%, compared to the prior year, due to lower average wholesale costs, as well as lower usage from warmer weather and a lower customer base.
Fiscal Year 2023 Compared to Fiscal Year 2022 Revenues (Dollars and gallons in thousands) Percent Fiscal Fiscal Increase Increase 2023 2022 (Decrease) (Decrease) Revenues Propane $ 1,232,138 $ 1,313,556 $ (81,418 ) (6.2 )% Fuel oil and refined fuels 92,127 95,157 (3,030 ) (3.2 )% Natural gas and electricity 31,160 39,511 (8,351 ) (21.1 )% All other 73,769 53,241 20,528 38.6 % Total revenues $ 1,429,194 $ 1,501,465 $ (72,271 ) (4.8 )% Retail gallons sold Propane 396,393 401,322 (4,929 ) (1.2 )% Fuel oil and refined fuels 19,103 22,767 (3,664 ) (16.1 )% As discussed above, average temperatures (as measured in heating degree days) across all of our service territories for fiscal 2023 were 8% warmer than normal, albeit 2% cooler than the prior year.
Fiscal Year 2024 Compared to Fiscal Year 2023 Revenues (Dollars and gallons in thousands) Percent Fiscal Fiscal Increase Increase 2024 2023 (Decrease) (Decrease) Revenues Propane $ 1,150,034 $ 1,232,138 $ (82,104 ) (6.7 )% Fuel oil and refined fuels 73,783 92,127 (18,344 ) (19.9 )% Natural gas and electricity 25,877 31,160 (5,283 ) (17.0 )% All other 77,478 73,769 3,709 5.0 % Total revenues $ 1,327,172 $ 1,429,194 $ (102,022 ) (7.1 )% Retail gallons sold Propane 378,258 396,393 (18,135 ) (4.6 )% Fuel oil and refined fuels 16,861 19,103 (2,242 ) (11.7 )% As discussed above, average temperatures (as measured in heating degree days) across all of our service territories for fiscal 2024 were 10% warmer than normal, and 2% warmer than the prior year.
In addition, periods of sustained higher commodity and/or transportation prices can lead to customer conservation, resulting in reduced demand for our product. During fiscal 2023, the wholesale cost of propane generally trended lower as the nation’s propane inventory levels improved relative to the prior year and historical averages.
In addition, periods of sustained higher commodity and/or transportation prices can lead to customer conservation, resulting in reduced demand for our product.
Revenues in our all other segment of $73.8 million were $20.5 million, or 38.6%, higher than in the corresponding prior year, primarily due to the impact of the RNG Acquisition in December 2022.
Revenues in our all other segment of $77.5 million were $3.7 million, or 5.0%, higher than in the prior year, primarily due to the full year impact of the RNG Acquisition which closed at the beginning of our fiscal 2023 second quarter.
On October 26, 2023, we announced that our Board of Supervisors declared a quarterly distribution of $0.325 per Common Unit for the three months ended September 30, 2023. This quarterly distribution rate equates to an annualized rate of $1.30 per Common Unit. The distribution was paid on November 14, 2023 to Common Unitholders of record as of November 7, 2023.
This quarterly distribution rate equates to an annualized rate of $1.30 per Common Unit. The distribution was paid on November 12, 2024 to Common Unitholders of record as of November 5, 2024.
The weather pattern during the fiscal 2023 heating season was characterized by exceptionally warm temperatures throughout our East and Midwest service territories, particularly during the most critical months for heat-related demand, while our service territories in the West generally experienced cooler weather throughout the heating season that extended into the second half of the fiscal year.
The fiscal 2024 heating season was characterized by an inconsistent weather pattern and unseasonably warm temperatures throughout much of our service territories, particularly during the most critical winter months (December through February) for heat-related demand, with only a brief burst of cooler weather in mid-January.
Average temperatures (as measured by heating degree days) across all of our service territories for fiscal 2023 were 8% warmer than normal and 2% cooler than the prior year. However, for the months of January and February, average temperatures were 16% warmer than normal and 11% warmer than the same period last year.
In addition, the additional week of operations in the prior fiscal year accounted for approximately 5.5 million gallons of the year-over-year decline in volumes. Average temperatures (as measured by heating degree days) across all of our service territories for fiscal 2024 were 10% warmer than normal and 2% warmer than the prior year.
The Benefits Committee employs a liability driven investment strategy, which seeks to increase the correlation of the plan’s assets and liabilities to reduce the volatility of the plan’s funded status. The execution of this strategy has resulted in an asset allocation that is largely comprised of fixed income securities.
Our investment policies and strategies, as set forth in the Investment Management Policy and Guidelines, are monitored by a Benefits Committee comprised of five members of management. The Benefits Committee employs a liability driven investment strategy, which seeks to increase the correlation of the plan’s assets and liabilities to reduce the volatility of the plan’s funded status.
Included within the propane segment are costs from other propane activities which decreased $18.1 million resulting from the mark-to-market adjustments on derivative instruments in both periods discussed above, partially offset by an increase in costs for physically settled propane hedges.
Included within the propane segment are costs from other propane activities which decreased $6.2 million compared to the prior year primarily due to a lower notional amount of hedging contracts used in risk management activities that were settled physically, as well as the net increase of $10.9 million resulting from the mark-to-market adjustments on derivative instruments in both periods discussed above.
See Liquidity and Capital Resources below for additional discussion. Net Income and Adjusted EBITDA Net income for fiscal 2023 amounted to $123.8 million, or $1.94 per Common Unit, compared to $139.7 million, or $2.21 per Common Unit, in fiscal 2022.
Net Income and Adjusted EBITDA Net income for fiscal 2024 amounted to $74.2 million, or $1.15 per Common Unit, compared to $123.8 million, or $1.94 per Common Unit, in fiscal 2023. Earnings before interest, taxes, depreciation and amortization (“EBITDA”) for fiscal 2024 amounted to $216.5 million, compared to $260.4 million for fiscal 2023.
Cost of products sold excludes depreciation and amortization; these amounts are reported separately within the consolidated statements of operations. From a commodity perspective, as discussed above, wholesale propane prices trended lower throughout much of fiscal 2023.
Cost of products sold excludes depreciation and amortization; these amounts are reported separately within the consolidated statements of operations. 41 Table of Contents From a commodity perspective, average posted propane prices (basis Mont Belvieu, Texas) and fuel oil prices during fiscal 2024 were 0.2% higher than the prior year and 13.2% lower than the prior year, respectively.
Included within the propane segment are revenues from risk management activities of $12.7 million for fiscal 2023, which decreased $7.3 million primarily due to the impact of lower selling prices on hedging contracts used in risk management activities that were settled physically. 37 Table of Contents Revenues from the distribution of fuel oil and refined fuels of $92.1 million for fiscal 2023 decreased $3.0 million, or 3.2%, from $95.2 million for the prior year, primarily due to lower volumes sold, offset to an extent by higher average selling prices.
Included within the propane segment are revenues from risk management activities of $11.5 million for fiscal 2024, which decreased $1.2 million primarily due to a lower notional amount of hedging contracts used in risk management activities that were settled physically.
Consistent with our established practice, we adjusted customer pricing as market conditions allowed. 33 Table of Contents Seasonality The retail propane and fuel oil distribution businesses, as well as the retail natural gas marketing business, are seasonal because these fuels are primarily used for heating in residential and commercial buildings.
According to the Energy Information Administration, U.S. propane inventory levels at the end of September 2024 were 97.8 million barrels, which was 3.6% less than September 2023 levels and 5.5% more than the five-year average for September. 36 Table of Contents Seasonality The retail propane and fuel oil distribution businesses, as well as the retail natural gas marketing business, are seasonal because these fuels are primarily used for heating in residential and commercial buildings.
Contractual and Other Obligations The following table summarizes payments due under our known contractual and other obligations as of September 30, 2023: (Dollars in thousands) Fiscal Fiscal Fiscal Fiscal Fiscal Fiscal 2029 and 2024 2025 2026 2027 2028 thereafter Long-term debt obligations — 132,000 — 350,000 — 730,645 Interest payments 70,788 60,693 57,498 47,217 36,935 111,498 Operating lease obligations (a) 40,660 36,491 30,991 20,818 15,701 24,501 Self-insurance obligations (b) 13,972 11,705 9,118 6,277 3,402 16,155 Pension contributions (c) 4,000 5,600 4,000 4,000 4,000 8,000 Other obligations (d) 31,588 10,097 12,057 2,294 2,092 18,832 Total $ 161,008 $ 256,586 $ 113,664 $ 430,606 $ 62,130 $ 909,631 (a) Payments exclude costs associated with insurance, taxes and maintenance, which are not material to the operating lease obligations.
Contractual and Other Obligations The following table summarizes payments due under our known contractual and other obligations as of September 28, 2024: (Dollars in thousands) Fiscal Fiscal Fiscal Fiscal Fiscal Fiscal 2030 and 2025 2026 2027 2028 2029 thereafter Long-term debt obligations $ — $ — $ 501,000 $ — $ 11,707 $ 718,938 Interest payments 73,236 70,838 50,552 36,935 36,614 74,885 Operating lease obligations (a) 42,971 37,440 26,926 21,417 14,891 23,474 Self-insurance obligations (b) 13,562 10,783 8,275 5,823 3,274 15,682 Pension contributions (c) 4,000 4,000 4,000 1,500 — — Other obligations (d) 27,513 11,632 6,027 8,501 2,023 14,883 Total $ 161,282 $ 134,693 $ 596,780 $ 74,176 $ 68,509 $ 847,862 46 Table of Contents (a) Payments exclude costs associated with insurance, taxes and maintenance, which are not material to the operating lease obligations.
Net cash used in investing activities of $94.4 million for fiscal 2022 consisted of capital expenditures of $44.4 million (including $24.3 million to support the growth of operations and $20.1 million for maintenance expenditures), a $30.0 million investment in IH (plus direct transaction costs), as well as $25.6 million used in the acquisition of a retail propane business and additional investments in Oberon.
Net cash used in investing activities of $81.6 million for fiscal 2024 consisted of capital expenditures of $59.4 million (including approximately $38.5 million to support the growth of operations and $20.9 million for maintenance expenditures), $12.9 million used in the acquisition of three retail propane businesses, $12.2 million used to fund additional investments in Oberon, IH and another privately held start-up entity, partially offset by approximately $2.9 million in proceeds from the sale of property, plant and equipment.
To calculate the Total Consolidated Leverage Ratio, divide gross borrowings outstanding as of the current period’s balance sheet date by our Adjusted EBITDA. 41 Table of Contents (Dollars in thousands) Fiscal Fiscal 2023 2022 Long-term borrowings $ 1,212,645 $ 1,089,600 Adjusted EBITDA 275,025 291,026 Compensation costs recognized under Restricted Unit Plans 8,260 11,253 Other 168 — Adjusted EBITDA for use in calculation 283,453 302,279 Total Consolidated Leverage Ratio 4.28 x 3.60 x Partnership Distributions We are required to make distributions in an amount equal to all of our Available Cash, as defined in our Third Amended and Restated Partnership Agreement, as amended (the “Partnership Agreement”), no more than 45 days after the end of each fiscal quarter to holders of record on the applicable record dates.
Partnership Distributions We are required to make distributions in an amount equal to all of our Available Cash, as defined in our Third Amended and Restated Partnership Agreement, as amended (the “Partnership Agreement”), no more than 45 days after the end of each fiscal quarter to holders of record on the applicable record dates.
Operating expenses of $478.1 million for fiscal 2023 increased $35.6 million, or 8.1%, compared to $442.4 million in the prior year, primarily due to higher payroll costs, higher vehicle lease and repair costs, higher travel costs, the operating costs associated with our new RNG production facilities and other inflationary effects on our operating costs.
Operating expenses of $476.9 million for fiscal 2024 decreased $1.2 million, or 0.3%, compared to $478.1 million in the prior year, primarily due to lower volume-related variable operating costs, lower variable compensation and one less week of operations in fiscal 2024, partially offset by higher self-insurance costs and a full year of operating costs associated with our RNG production facilities that were acquired during fiscal 2023.
Acquisition-related costs of $4.7 million during fiscal 2023 were reported within general and administrative expenses, and were excluded from Adjusted EBITDA. In addition to overcoming the challenging weather patterns and inflationary cost environment to deliver solid earnings, we succeeded in accomplishing a number of significant goals in fiscal 2023 as we continued to execute on our long-term strategic growth initiatives.
In addition to mitigating the effects of unseasonably warm temperatures during the peak winter heating months with strong selling price management and controlling expenses, we succeeded in accomplishing a number of significant goals in fiscal 2024 as we continued to execute on our long-term strategic growth initiatives.
Lower average wholesale costs contributed to an $85.6 million decrease in cost of products sold, while lower volumes sold contributed to a $7.6 million decrease.
Cost of products sold associated with the distribution of propane and related activities of $443.6 million for fiscal 2024 decreased $46.2 million, or 9.4%, compared to the prior year. Lower average wholesale costs during much of fiscal 2024 contributed to a $29.6 million decrease in cost of products sold, while lower volumes sold contributed to a $21.3 million decrease.
The increase was primarily due to a lower level of working capital compared to the prior year, which stemmed from the decline in wholesale costs of propane (discussed above) coupled with the payment in fiscal 2022 of the employer portion of social security payroll tax that was deferred during a certain portion of fiscal 2020 under the CARES Act, partially offset by lower earnings.
The decrease was primarily due to lower operating income and an increase in working capital compared to the prior year, which stemmed from a smaller decline in the wholesale cost of propane compared to the sharp decline in the prior year. Investing Activities.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

8 edited+0 added−1 removed24 unchanged
Biggest changeSensitivity Analysis In an effort to estimate our exposure to unfavorable market price changes in commodities related to our open positions under derivative instruments, we developed a model that incorporates the following data and assumptions: a. The fair value of open positions as of September 30, 2023. b.
Biggest changeCash flows associated with derivative instruments are reported as operating activities within the consolidated statement of cash flows. 48 Table of Contents Sensitivity Analysis In an effort to estimate our exposure to unfavorable market price changes in commodities related to our open positions under derivative instruments, we developed a model that incorporates the following data and assumptions: a.
Actual results may be significantly different depending on market conditions and the composition of the open position portfolio. 45 Table of Contents
Actual results may be significantly different depending on market conditions and the composition of the open position portfolio. 49 Table of Contents
In addition, we sell propane and fuel oil to customers at fixed prices, and enter into derivative instruments to hedge a portion of our exposure to fluctuations in commodity prices as a result of selling the fixed price contracts. We do not use derivative instruments for speculative or trading purposes.
In addition, we sell propane, fuel oil, natural gas 47 Table of Contents and electricity to customers at fixed prices, and enter into derivative instruments to hedge a portion of our exposure to fluctuations in commodity prices as a result of selling the fixed price contracts. We do not use derivative instruments for speculative or trading purposes.
The market prices for the underlying commodities used to determine A. above were adjusted adversely by a hypothetical 10% change and compared to the fair value amounts in A. above to project the potential negative impact on earnings that would be recognized for the respective scenario.
The fair value of open positions as of September 28, 2024. b. The market prices for the underlying commodities used to determine A. above were adjusted adversely by a hypothetical 10% change and compared to the fair value amounts in A. above to project the potential negative impact on earnings that would be recognized for the respective scenario.
Based on the sensitivity analysis described above, the hypothetical 10% adverse change in market prices for open derivative instruments as of September 30, 2023 indicates a decrease in potential future net gains of $4.3 million. See also Item 7A of this Annual Report. The above hypothetical change does not reflect the worst case scenario.
Based on the sensitivity analysis described above, the hypothetical 10% adverse change in market prices for open derivative instruments as of September 28, 2024, indicates an increase in potential future net losses of $3.2 million. See also Item 7A of this Annual Report. The above hypothetical change does not reflect the worst case scenario.
Changes in the fair value of derivative instruments that are not designated as cash flow hedges, and that do not meet the normal purchase and normal sale exemption, are recorded in earnings as they occur. Cash flows associated with derivative instruments are reported as operating activities within the consolidated statement of cash flows.
Changes in the fair value of derivative instruments that are not designated as cash flow hedges, and that do not meet the normal purchase and normal sale exemption, are recorded in earnings as they occur.
The interest rate swaps are designated as cash flow hedges. Changes in the fair value of the interest rate swaps are recognized in other comprehensive income (“OCI”) until the hedged item is recognized in earnings.
The interest rate swaps are designated as cash flow hedges. Changes in the fair value of the interest rate swaps are recognized in other comprehensive income (“OCI”) until the hedged item is recognized in earnings. At September 28, 2024, we were not party to any interest rate swap agreement.
On the date that derivative instruments are entered into, we make a determination as to whether the derivative instrument qualifies for designation as a hedge.
Derivative Instruments and Hedging Activities All of our derivative instruments are reported on the balance sheet at their fair values. On the date that derivative instruments are entered into, we make a determination as to whether the derivative instrument qualifies for designation as a hedge.
Removed
At September 30, 2023, we were not party to any interest rate swap agreement. 44 Table of Contents Derivative Instruments and Hedging Activities All of our derivative instruments are reported on the balance sheet at their fair values.

Other SPH 10-K year-over-year comparisons