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What changed in STAR GROUP, L.P.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of STAR GROUP, L.P.'s 2022 and 2023 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 2023 report.

+275 added−361 removedSource: 10-K (2023-12-06) vs 10-K (2022-12-07)

Top changes in STAR GROUP, L.P.'s 2023 10-K

275 paragraphs added · 361 removed · 222 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

47 edited+19 added−3 removed67 unchanged
Biggest change(b) In fiscal 2022, the Company's spot purchases of home heating oil greatly exceeded the published NYMEX price due to our suppliers charging a premium over NYMEX for prompt delivery. Acquisitions Part of our business strategy is to pursue select acquisitions. Each acquired company’s operating results are included in the Company’s consolidated financial statements starting on its acquisition date.
Biggest changeAcquisitions Part of our business strategy is to pursue select acquisitions. Each acquired company’s operating results are included in the Company’s consolidated financial statements starting on its acquisition date. Customer lists, other intangibles (excluding goodwill) and trade names are amortized on a straight-line basis over seven to twenty years.
Environmental and Safety Regulations. We are also subject to various federal, state and local environmental, health and safety laws and regulations. Generally, these laws impose limitations on the discharge or emission of pollutants and establish standards for the handling of solid and hazardous wastes.
We are also subject to various federal, state and local environmental, health and safety laws and regulations. Generally, these laws impose limitations on the discharge or emission of pollutants and establish standards for the handling of solid and hazardous wastes.
The key elements of this strategy include the following: Pursue select acquisitions Our senior management team has developed expertise in identifying acquisition opportunities and integrating acquired customers into our operations. We focus on acquiring profitable companies within and outside our current footprint.
The key elements of this strategy include the following: Pursue select acquisitions Our senior management team has developed expertise in identifying acquisition opportunities and integrating acquired customers into our operations. We focus on acquiring companies within and outside our current footprint.
The retail home heating oil industry is mature, with total market demand expected to decline in the foreseeable future due to conversions to natural gas, availability of other alternative energy sources and the installations of more fuel efficient heating systems.
The retail home heating oil industry is mature, with total market demand expected to decline in the foreseeable future due to conversions to natural gas and electricity, availability of other alternative energy sources and the installations of more fuel efficient heating systems.
Please note that any Internet addresses provided in this Annual Report on Form 10-K are for informational purposes only and are not intended to be hyperlinks. Accordingly, no information found and/or provided at such Internet addresses is intended or deemed to be incorporated by reference herein. Legal Structure The following chart summarizes our structure as of September 30, 2022.
Please note that any Internet addresses provided in this Annual Report on Form 10-K are for informational purposes only and are not intended to be hyperlinks. Accordingly, no information found and/or provided at such Internet addresses is intended or deemed to be incorporated by reference herein. Legal Structure The following chart summarizes our structure as of September 30, 2023.
Approximately 95% of our full service residential and commercial home heating oil customers automatically receive deliveries based on prevailing weather conditions. In addition, approximately 32% of our residential customers take advantage of our “smart pay” budget payment plan under which their estimated annual oil and propane deliveries and service billings are paid for in a series of equal monthly installments.
Approximately 94% of our full service residential and commercial home heating oil customers automatically receive deliveries based on prevailing weather conditions. In addition, approximately 32% of our residential customers take advantage of our “smart pay” budget payment plan under which their estimated annual oil and propane deliveries and service billings are paid for in a series of equal monthly installments.
Some dealers provide full service, as we do, and others offer delivery only on a cash-on-delivery basis, which we also do to a significantly lesser extent. In addition, the industry is complex and costly due to regulations, working capital requirements, and the costs and risks of hedging for price protected customers.
Some businesses provide full service, as we do, and others offer delivery only on a cash-on-delivery basis, which we also do to a significantly lesser extent. In addition, the industry is complex and costly due to regulations, working capital requirements, and the costs and risks of hedging for price protected customers.
All of our propane bulk terminals are governed under Homeland Security Chemical Facility Anti-Terrorism Standards programs. We conduct ongoing training programs to help ensure that our operations are in compliance with applicable regulations. We maintain various permits that are necessary to operate some of our facilities, some of which may be material to our operations. 11
All of our propane bulk terminals are governed under Homeland Security Chemical Facility Anti-Terrorism Standards programs. We conduct ongoing training programs to help ensure that our operations are in compliance with applicable regulations. We maintain various permits that are necessary to operate some of our facilities, some of which may be material to our operations. 12
In addition, there are legislative and regulatory efforts underway in several states seeking to encourage homeowners to reduce or even eliminate the consumption of carbon based fuels that we sell. 5 The retail home heating oil industry is highly fragmented, characterized by a large number of relatively small, independently owned and operated local distributors.
In addition, there are legislative and regulatory efforts underway in several states seeking to encourage homeowners to reduce or even eliminate the consumption of fossil fuels that we sell. 5 The retail home heating oil industry is highly fragmented, characterized by a large number of relatively small, independently owned and operated local distributors.
The gross purchase price was allocated $7.3 million to intangible assets, $3.1 million to goodwill, $5.6 million to fixed assets and reduced working capital by $0.4 million. 9 During fiscal 2021, the Company acquired two propane and three heating oil dealers for approximately $42.5 million (using $40.7 million in cash and assuming $1.8 million of liabilities).
The gross purchase price was allocated $7.3 million to intangible assets, $3.1 million to goodwill, $5.6 million to fixed assets and reduced by $0.4 million of negative working capital. 9 During fiscal 2021, the Company acquired two propane and three heating oil businesses for approximately $42.5 million (using $40.7 million in cash and assuming $1.8 million of liabilities).
(“PH&P”) is a wholly owned subsidiary of Star. PH&P is the borrower and Star is the guarantor of the sixth amended and restated credit agreement’s $165 million five-year senior secured term loan and the $400 million ($550 million during the heating season of December through April of each year) revolving credit facility, both due July 6, 2027.
(“PH&P”) is an indirect, wholly owned subsidiary of Star. PH&P is the borrower and Star is the guarantor of the sixth amended and restated credit agreement’s $165 million five-year senior secured term loan and the $400 million ($550 million during the heating season of December through April of each year) revolving credit facility, both due July 6, 2027.
Therefore, our ability to maintain our business or grow within the industry is dependent on the acquisition of other retail distributors, the success of our marketing programs, and the growth of our other service offerings. Based on our records, our customer conversions to natural gas have ranged between 1.1% and 1.5% per year over the last five years.
Therefore, our ability to maintain our business or grow within the industry is dependent on the acquisition of other retail distributors, the success of our marketing programs, and the growth of our other service offerings. Based on our records, our customer conversions to natural gas and electricity have ranged between 1.1% and 1.6% per year over the last five years.
Currently, the Company’s derivative instruments are with the following counterparties: Bank of America, N.A., Bank of Montreal, Cargill, Inc., Citibank, N.A., JPMorgan Chase Bank, N.A., Key Bank, N.A., Toronto-Dominion Bank and Wells Fargo Bank, N.A.
Currently, the Company’s derivative instruments are with the following counterparties: Bank of America, N.A., Bank of Montreal, Cargill, Inc., Citibank, N.A., JPMorgan Chase Bank, N.A., Key Bank, N.A. and Wells Fargo Bank, N.A.
In addition, the Company changed its name, effective October 25, 2017, from “Star Gas Partners, L.P.” to “Star Group, L.P.” to more closely align our name with the scope of our product and service offerings. For tax years after December 31, 2017, unitholders will receive a Form 1099-DIV and will not receive a Schedule K-1 as in previous tax years.
In addition, the Company changed its name, effective October 25, 2017, from “Star Gas Partners, L.P.” to “Star Group, L.P.” to more closely align our name with the scope of our product and service offerings. Unitholders will receive a Form 1099-DIV and will not receive a Schedule K-1 as in tax years prior to December 31, 2017.
Every ten years, the National Oceanic and Atmospheric Administration (“NOAA”) computes and publishes average meteorological quantities, including the average temperature for the last 30 years by geographical location, and the corresponding degree days. The latest and most widely used data covers the years from 1991 to 2020.
Every ten years, the National Oceanic and Atmospheric Administration (“NOAA”) computes and publishes average meteorological quantities, including the average temperature for the last 30 years by geographical location, and the corresponding degree days. The latest data covers the years from 1991 to 2020.
Approximately 95% of our full service residential and commercial home heating oil customers have their deliveries scheduled automatically and 5% of our home heating oil customer base call from time to time to schedule a delivery. Automatic deliveries are scheduled based on each customer’s historical consumption pattern and prevailing weather conditions. Our practice is to bill customers promptly after delivery.
Approximately 94% of our full service residential and commercial home heating oil customers have their deliveries scheduled automatically and 6% of our home heating oil customer base call from time to time to schedule a delivery. Automatic deliveries are scheduled based on each customer’s historical consumption pattern and prevailing weather conditions. Our practice is to bill customers promptly after delivery.
As of September 30, 2022 we had contracts with approximately 127 third-party terminal sites for the right to temporarily store petroleum products at their facilities. Home heating oil and propane purchases are made under supply contracts or on the spot market.
As of September 30, 2023 we had contracts with approximately 124 third-party terminal sites for the right to temporarily store petroleum products at their facilities. Home heating oil and propane purchases are made under supply contracts or on the spot market.
We have entered into New York Mercantile Exchange ("NYMEX") or Platts American Gulf Coast based physical supply contracts for approximately 80% of our expected home heating oil and propane requirements for our full service residential and commercial customers for the fiscal 2023 heating season.
We have entered into New York Mercantile Exchange ("NYMEX") or Platts American Gulf Coast based physical supply contracts for approximately 76% of our expected home heating oil and propane requirements for our full service residential and commercial customers for the fiscal 2024 heating season.
As of November 30, 2022, we had outstanding 35.8 million common partner units (NYSE: “SGU”) representing a 99.1% limited partner interest in Star, and 0.3 million general partner units, representing a 0.9% general partner interest in Star. 3 The following chart depicts the ownership of Star as of November 30, 2022: Star Group, L.P.
As of November 30, 2023, we had outstanding 35.6 million common partner units (NYSE: “SGU”) representing a 99.1% limited partner interest in Star, and 0.3 million general partner units, representing a 0.9% general partner interest in Star. 3 The following chart depicts the ownership of Star as of November 30, 2023: Star Group, L.P.
Percentage of Residential Home Heating Oil Customers September 30, Pricing Programs 2022 2021 2020 2019 2018 Variable 57.0 % 55.0 % 54.4 % 53.9 % 55.2 % Ceiling 37.6 % 39.0 % 38.5 % 39.1 % 36.9 % Fixed 5.4 % 6.0 % 7.1 % 7.0 % 7.9 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % Sales to residential customers ordinarily generate higher per gallon margins than sales to commercial customers.
Percentage of Residential Home Heating Oil Customers September 30, Pricing Programs 2023 2022 2021 2020 2019 Variable 55.6 % 57.0 % 55.0 % 54.4 % 53.9 % Ceiling 37.8 % 37.6 % 39.0 % 38.5 % 39.1 % Fixed 6.6 % 5.4 % 6.0 % 7.1 % 7.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % Sales to residential customers ordinarily generate higher per gallon margins than sales to commercial customers.
Management’s Discussion and Analysis of Financial Condition and Results of Operations – Customer Attrition.) Customers and Pricing The number of home heating oil customers comprise 80% of our product customer base, with propane customers comprising another 15% and motor fuel and other petroleum product customers making up the remaining 5%.
Management’s Discussion and Analysis of Financial Condition and Results of Operations – Customer Attrition.) Customers and Pricing The number of home heating oil customers comprise 78% of our product customer base, with propane customers comprising another 17% and motor fuel and other petroleum product customers making up the remaining 5%.
Due to the seasonal nature of our business and depending on the demands of the 2023 heating season, we anticipate that we will augment our current staffing levels during the heating season from among the 294 employees on temporary leave of absence as of September 30, 2022.
Due to the seasonal nature of our business and depending on the demands of the 2024 heating season, we anticipate that we will augment our current staffing levels during the heating season from among the 279 employees on temporary leave of absence as of September 30, 2023.
Gross customer losses are the result of a number of factors, including price competition, move outs, credit losses and conversions to natural gas. (See Item 7.
Gross customer losses are the result of a number of factors, including price competition, move outs, credit losses and conversions to natural gas and electrified heating systems. (See Item 7.
For the fiscal year 2023 heating season, approximately 73% of the Company’s contracted home heating oil volume with suppliers has a biofuel component. We also have entered into NYMEX or Platts American Gulf Coast based physical supply contracts for approximately 34% of our expected diesel and gasoline requirements for fiscal 2023.
For the fiscal year 2024 heating season, approximately 76% of the Company’s contracted home heating oil volume with suppliers has a biofuel component. We also have entered into NYMEX or Platts American Gulf Coast based physical supply contracts for approximately 43% of our expected diesel and gasoline requirements for fiscal 2024.
For fiscal 2023, approximately 25% of our physical supply contracts are with Shell Oil Products US. All of our supply contracts provide for minimum quantities and in most cases do not establish in advance the price of home heating oil or propane.
For fiscal 2024, approximately 26% of our physical supply contracts are with Shell Trading and Shell Oil Products US. All of our supply contracts provide for minimum quantities and in most cases do not establish in advance the price of home heating oil or propane.
At a special meeting of unitholders held on October 25, 2017, our unitholders voted in favor of proposals to have the Company elect to be treated as a corporation, instead of a partnership, for federal income tax purposes (commonly referred to as a “check-the-box election”), along with amendments to our partnership agreement to effect such changes in income tax classification, in each case effective November 1, 2017.
Our unitholders voted in favor of proposals to have the Company elect to be treated as a corporation, instead of a partnership, for federal income tax purposes (commonly referred to as a “check-the-box election”), along with amendments to our partnership agreement to effect such changes in income tax classification, in each case effective November 1, 2017.
As a commodity, the price of home heating oil is generally impacted by many factors, including economic and geopolitical forces, and, most recently, the war in the Ukraine, and is closely linked to the price of diesel fuel.
As a commodity, the price of home heating oil is generally impacted by many factors, including economic and geopolitical forces, and is closely linked to the price of diesel fuel.
The volatility in the wholesale cost of diesel fuel as measured by the New York Mercantile Exchange (“NYMEX”), for the fiscal years ending September 30, 2018, through 2022, on a quarterly basis, is illustrated in the following chart (price per gallon): Fiscal 2022 (a), (b) Fiscal 2021 Fiscal 2020 Fiscal 2019 Fiscal 2018 Quarter Ended Low High Low High Low High Low High Low High December 31 $ 2.06 $ 2.59 $ 1.08 $ 1.51 $ 1.86 $ 2.05 $ 1.66 $ 2.44 $ 1.74 $ 2.08 March 31 2.36 4.44 1.46 1.97 0.95 2.06 1.70 2.04 1.84 2.14 June 30 3.27 5.14 1.77 2.16 0.61 1.22 1.78 2.12 1.96 2.29 September 30 3.13 4.01 1.91 2.34 1.08 1.28 1.75 2.08 2.05 2.35 (a) On November 30, 2022, the NYMEX ultra low sulfur diesel contract closed at $3.36 per gallon or $0.10 per gallon higher than the average of $3.26 in Fiscal 2022.
The volatility in the wholesale cost of diesel fuel as measured by the New York Mercantile Exchange (“NYMEX”), for the fiscal years ending September 30, 2019, through 2023, on a quarterly basis, is illustrated in the following chart (price per gallon): Fiscal 2023 (a) Fiscal 2022 Fiscal 2021 Fiscal 2020 Fiscal 2019 Quarter Ended Low High Low High Low High Low High Low High December 31 $ 2.78 $ 4.55 $ 2.06 $ 2.59 $ 1.08 $ 1.51 $ 1.86 $ 2.05 $ 1.66 $ 2.44 March 31 2.61 3.55 2.36 4.44 1.46 1.97 0.95 2.06 1.70 2.04 June 30 2.23 2.73 3.27 5.14 1.77 2.16 0.61 1.22 1.78 2.12 September 30 2.38 3.48 3.13 4.01 1.91 2.34 1.08 1.28 1.75 2.08 (a) On November 30, 2023, the NYMEX ultra low sulfur diesel contract closed at $2.83 per gallon.
There are 25 collective bargaining agreements up for renewal in fiscal 2023, covering approximately 743 employees (23%). We believe that our relations with both our union and non-union employees are generally satisfactory. Government Regulations Regulations in Response to Climate Change.
There are 19 collective bargaining agreements up for renewal in fiscal 2024, covering approximately 289 employees (9%). We believe that our relations with both our union and non-union employees are generally satisfactory. Government Regulations Regulations in Response to Climate Change .
During fiscal 2022, total sales were comprised of approximately 58% from home heating oil and propane, 26% from other petroleum products, the majority of which is diesel and gasoline, and 16% from the installation and repair of heating and air conditioning equipment and ancillary services.
During fiscal 2023, total sales were comprised of approximately 62% from home heating oil and propane, 23% from other petroleum products, the majority of which is diesel and gasoline, and 15% from the installation and repair of heating and air conditioning equipment and ancillary services.
During fiscal 2022, Global Companies LLC and Motiva Enterprises LLC provided approximately 17% and 14% of our petroleum product purchases, respectively. During fiscal 2021, Motiva Enterprises LLC and Global Companies LLC provided approximately 12% each of our petroleum product purchases. Our supply contracts typically have terms of 6 to 12 months.
During fiscal 2023, Shell Trading and Shell Oil Products US provided approximately 18% of our petroleum purchases and Motiva Enterprises LLC provided 14% of our petroleum product purchases. During fiscal 2022, Global Companies LLC and Motiva Enterprises LLC provided approximately 17% and 14% of our petroleum product purchases, respectively. Our supply contracts typically have terms of 6 to 12 months.
In addition, we also repair and install natural gas heating systems. 6 Pursue environmental sustainability opportunities We are committed to pursuing initiatives that reduce greenhouse gas emissions across our product offerings, by offering a biofuel product (a carbon neutral renewable fuel produced from vegetable oils or animal fats) that is blended into petroleum-based fuel oil and by offering energy efficient heating and air conditioning equipment to our customers .
In addition, we also repair and install natural gas heating systems. 6 Pursue environmental sustainability opportunities We are committed to pursuing initiatives that reduce greenhouse gas emissions across our product offerings, by offering biodiesel blended products (a renewable, biodegradable fuel manufactured from vegetable oils, animal fats, or recycled restaurant grease) and by offering energy efficient heating and air conditioning equipment to our customers .
Certain measures, such as reducing or eliminating GHG emissions from fossil fuel-burning vehicles, boilers and furnaces, if adopted, could significantly negatively impact the Company’s New York State operations, which constitute a material portion of the Company’s business.
These measures, which have or may have the effect of reducing or eliminating GHG emissions from fossil fuel-burning vehicles, boilers and furnaces, could significantly negatively impact the Company’s operations in New York City, New York State and Massachusetts, which together constitute a material portion of the Company’s business.
(During fiscal 2022, we sold 296.1 million gallons of home heating oil and propane and 150.1 million gallons of motor fuel and other petroleum products.) 7 Our full service home heating oil customer base is comprised of 96% residential customers and 4% commercial customers.
(During fiscal 2023, we sold 259.2 million gallons of home heating oil and propane and 139.0 million gallons of motor fuel and other petroleum products.) 7 Our full service home heating oil customer base is comprised of 97% residential customers and 3% commercial customers.
As of September 30, 2022, we had 3,194 employees, of whom 850 were office, clerical and customer service personnel; 906 were equipment technicians; 535 were fuel delivery drivers and mechanics; 592 were management and 311 were employed in sales. Of these employees 1,445 (45%) are represented by 63 different collective bargaining agreements with local chapters of labor unions.
As of September 30, 2023, we had 3,052 employees, of whom 822 were office, clerical and customer service personnel; 831 were equipment technicians; 504 were fuel delivery drivers and mechanics; 579 were management and 316 were employed in sales. Of these employees 1,354 (44%) are represented by 62 different collective bargaining agreements with local chapters of labor unions.
The gross purchase price was allocated $37.3 million to goodwill and intangible assets, $6.2 million to fixed assets and reduced working capital by $1.0 million. During fiscal 2020, the Company acquired two heating oil dealers for approximately $3.3 million (using $3.0 million in cash and assuming $0.3 million of liabilities).
During fiscal 2023, the Company acquired one propane and two heating oil businesses for approximately $19.8 million (using $19.8 million in cash). The gross purchase price was allocated $10.4 million to intangible assets, $8.0 million to goodwill, $2.3 million to fixed assets and reduced by $0.9 million of negative working capital.
We install, maintain, and repair heating and air conditioning equipment and to a lesser extent provide these services outside of our heating oil and propane customer base including 19,400 service contracts for natural gas and other heating systems. In October 2022, we sold certain assets which included a customer list of approximately 6,500 customers.
We install, maintain, and repair heating and air conditioning equipment and to a lesser extent provide these services outside of our heating oil and propane customer base including 20,800 service contracts for natural gas and other heating systems.
As of September 30, 2022, we sold home heating oil and propane to approximately 415,900 full service residential and commercial customers and 75,900 customers on a delivery only basis. Approximately 240,700 of these customers, or 49%, are located in the New York City metropolitan area.
As of September 30, 2023, we sold home heating oil and propane to approximately 402,200 full service residential and commercial customers and 52,400 customers on a delivery only basis. Approximately 252,700 of these customers, or 56%, are located in the New York, New Jersey, and Connecticut.
We strive to create a productive and collaborative work environment for our employees. Our human capital measures and objectives focus on safety of our employees, employee benefits, and employee development and training. The safety of our employees and customers is paramount. We strive to ensure that all employees feel safe in their respective work environment.
In particular, our dedication to providing superior customer service depends significantly on employee satisfaction and retention. We strive to create a productive and collaborative work environment for our employees. Our human capital measures and objectives focus on safety of our employees, employee benefits, and employee development and training. The safety of our employees and customers is paramount.
Other states in which the Company operates and that are material to the Company’s operations, such as Massachusetts and New Jersey, have adopted similar GHG laws or have otherwise announced GHG reduction targets. However, whether and in what manner the CLCPA or other states’ GHG laws or targets could impact the Company remains uncertain at this time.
Other states in which the Company operates and that are material to the Company’s operations, such as Connecticut, Rhode Island and New Jersey, have adopted similar GHG laws or have otherwise announced GHG reduction targets.
In addition, in December 2021, New York City passed Local Law 154 of 2021, which will phase out fossil fuel usage in newly constructed residential and commercial buildings starting in 2024 for lower-rise buildings, and in 2027 for taller buildings. With few exceptions, all new buildings constructed in New York City must be fully electric by 2027.
Starting in 2024, this law will place carbon caps on most buildings larger than 25,000 square feet. In addition, in December 2021, New York City passed Local Law 154 of 2021, which will phase out fossil fuel usage in newly constructed residential and commercial buildings starting in 2024 for lower-rise buildings, and in 2027 for taller buildings.
Throughout the COVID-19 pandemic we have continued to make deliveries and provide service to our customers. Since March 2020, a portion of our office personnel have worked remotely. We believe that our employees have adapted well and continue to be flexible to the changing working conditions.
We strive to ensure that all employees feel safe in their respective work environment. Since March 2020, a portion of our office personnel have worked remotely. We believe that our employees have adapted well and continue to be flexible to the changing working conditions.
Also, in May 2019, New York City enacted Local Law 97 as a part of the Climate Mobilization Act aimed at reducing GHG emissions by 80% from commercial and residential buildings by 2050. Starting in 2024, this law will place carbon caps on most buildings larger than 25,000 square feet.
In May 2019, New York City (location of 3% of our residential home heating oil and propane customers) enacted Local Law 97 as a part of the Climate Mobilization Act aimed at reducing GHG emissions by 80% from commercial and residential buildings by 2050.
Customer lists, other intangibles (excluding goodwill) and trade names are amortized on a straight-line basis over seven to twenty years. During fiscal 2022, the Company acquired five heating oil dealers for approximately $15.6 million (using $13.1 million in cash and assuming $2.5 million of liabilities).
During fiscal 2022, the Company acquired five heating oil businesses for approximately $15.6 million (using $13.1 million in cash and assuming $2.5 million of liabilities).
Numerous states and municipalities have also adopted laws and policies on climate change and emission reduction targets. For example, on July 18, 2019, the State of New York passed the Climate Leadership and Community Protection Act (“CLCPA”).
For example, on July 18, 2019, the State of New York (location of 43% of our residential home heating oil and propane customers) passed the Climate Leadership and Community Protection Act (“CLCPA”).
Employees and Human Capital Management We consider our employees a key factor to Star’s success and we are focused on attracting and retaining the best employees at all levels of our business. In particular, our dedication to providing superior customer service depends significantly on employee satisfaction and retention.
The gross purchase price was allocated $37.3 million to goodwill and intangible assets, $6.2 million to fixed assets and reduced by $1.0 million of negative working capital. Employees and Human Capital Management We consider our employees a key factor to Star’s success and we are focused on attracting and retaining the best employees at all levels of our business.
On August 14, 2020, the New York Department of 10 Environmental Conservation released proposed regulations to limit statewide GHG emissions as a percentage of 1990 emissions to 60% by 2030 and to 15% by 2050.
In December 2022, New York approved the Scoping Plan, which details actions required to advance directives stated in the CLCPA and to enable New York to limit GHG emissions as a percentage of 1990 emissions to 60% by 2030 and to 15% by 2050.
Removed
The gross purchase price was allocated $3.2 million to goodwill and intangible assets, $0.6 million to fixed assets and decreased working capital by $0.5 million. The Company also completed the purchase of assets related to our fiscal 2019 acquisition of a heating oil dealer for an aggregate purchase price of approximately $1.2 million.
Added
States must apply for rebate funding with the U.S. Department of Energy and adopt and administer energy rebate programs within their respective states before homeowners can apply and receive tax rebates under the program.
Removed
Within four years after the effective date (by July 2023), the New York Department of Environmental Conservation must adopt regulations that, in part, include measures to reduce GHG emissions from sources that have a cumulatively significant impact on statewide GHG emissions.
Added
The timing of when the various states within our operating footprint will adopt energy rebate programs in order to distribute homeowner rebates remains uncertain. 10 Numerous states and municipalities have also adopted laws and policies on climate change and emission reduction targets.
Removed
As a significant percentage of our customers are located in the New York City metropolitan area, our business is subject to transition risks related to these climate change laws and policies.
Added
The CLCPA gives the New York Department of Energy Conservation until January 1, 2024 to promulgate regulations to ensure that the State of New York meets the CLCPA’s GHG emission limits as outlined in the Scoping Plan.
Added
On May 2, 2023, the State of New York adopted its 2024 fiscal year budget, which included amendments to New York’s Energy Law and to its Executive Law that prohibit “the installation of fossil-fuel equipment and building systems” in any new buildings under seven stories, except for a new commercial or industrial building greater than 100,000 square feet in conditioned floor area beginning December 31, 2025 (the “Fossil Fuel Ban”).
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The Fossil Fuel Ban applies to equipment that uses heating oil, propane and natural gas for combustion and will then expand to all new buildings beginning January 1, 2029.
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Specifically, the Energy Law and the Executive Law direct the New York State Fire Prevention and Building Code Council (the “Code Council”) to include the Fossil Fuel Ban on installation of fossil-fuel burning equipment and building systems in new buildings in the State of New York’s Energy Conservation Construction Code (the “Energy Code”) and in the Uniform Fire Prevention and Building Code (the “Building Code”).
Added
We understand that the Code Council has begun the process of integrating the Fossil Fuel Ban into the Energy Code and the Building Code.
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On October 12, 2023, a coalition of businesses, trade associations and labor unions including the National Propane Gas Association, New York Propane Gas Association and Mulhern Gas Co., filed a federal lawsuit in the Northern District of New York (Mulhern Gas Co., Inc. et al v.
Added
Rodriguez, et al., Case No. 1:23-cv-1267) claiming that the Fossil Fuel Ban violates federal law. The lawsuit seeks to declare the Fossil Fuel Ban invalid and to block its enforcement on the grounds that it is preempted by the federal Energy Policy and Conservation Act ("EPCA"). It relies on a recent decision by the U.S.
Added
Court of Appeals for the Ninth Circuit (California Restaurant Association v. City of Berkeley) which held that a ban on gas piping in a new building in Berkeley, California was invalid on the basis that it concerned the energy use of appliances covered by the EPCA and was therefore preempted by federal law.
Added
As this legal challenge to the Fossil Fuel Ban is in the very early stages, it is uncertain what impact, if any, it will have on the Company’s operations in the State of New York.
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With few exceptions, all new buildings constructed in New York City must be fully electric by 2027.
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In March 2021, the State of Massachusetts (location of 5% of our residential home heating oil and propane customers) signed into law “An Act Creating A Next-Generation Roadmap for Massachusetts Climate Policy” (the “2021 Climate Law”) that establishes a 2030 limit of at least a 50% reduction in GHG emissions below the 1990 GHG emissions baseline and requires the Secretary of Energy and Environmental Affairs to set interim emissions limits and sector-specific sublimits every five years.
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The 2021 Climate Law tasks the Massachusetts Department of Environmental Protection (the “MassDEP”) with developing a high-level program to meet the emissions limit for residential, commercial, and industrial heating and identified a Clean Heat Standard (“CHS”) as a regulatory option for addressing this requirement.
Added
The proposed regulations released by MassDEP in May 2023 could require, among other things, heating energy suppliers to demonstrate the conversion of approximately 3% of their customers to electric heat each year.
Added
Such proposed regulations, if adopted, could dramatically negatively impact the Company’s Massachusetts operations and impose onerous reporting requirements on the Company. 11 On August 11, 2022, the State of Massachusetts signed into law “An Act Driving Clean Energy and Offshore Wind” (the “2022 Climate Law”).
Added
The 2022 Climate Law establishes a new pilot program to allow up to 10 municipalities to require through zoning that new construction or substantial renovation projects will be fossil-fuel free, and instructs the State’s Department of Energy Resources (“DOER”) to adopt regulations to structure the pilot program. The DOER adopted final regulations structuring the pilot program in July 2023.
Added
The purpose of the pilot program is to allow the DOER to study the implementation of fossil fuel bans in municipalities and evaluate future best practices on decarbonization.
Added
However, while we cannot predict at this time whether and in what manner the New York CLCPA, the Massachusetts 2021 Climate Law, the Massachusetts 2022 Climate Law, or other state and local GHG laws or targets could impact the Company, these measures could over time have a material negative impact on the Company. Environmental and Safety Regulations.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeThe nature of these conflicts is ongoing and includes the following considerations: • The general partner’s affiliates are not prohibited from engaging in other business or activities, including direct competition with us. • The general partner determines the amount and timing of asset purchases and sales, capital expenditures, distributions to unitholders, unit repurchases, borrowings and reserves, each of which can impact the amount of cash, if any, available for distribution to unitholders, and available to pay principal and interest on debt and the amount of incentive distributions payable in respect of the general partner units. • The general partner controls the enforcement of obligations owed to us by the general partner. • The general partner decides whether to retain its counsel or engage separate counsel to perform services for us. • In some instances the general partner may borrow funds in order to permit the payment of distributions to unitholders. • The general partner may limit its liability and reduce its fiduciary duties, while also restricting the remedies available to unitholders for actions that might, without limitations, constitute breaches of fiduciary duty. • Unitholders are deemed to have consented to some actions and conflicts of interest that might otherwise be deemed a breach of fiduciary or other duties under applicable state law. • The general partner is allowed to take into account the interests of parties in addition to the Company in resolving conflicts of interest, thereby limiting its fiduciary duty to the unitholders. • The general partner determines whether to issue additional units or other of our securities. • The general partner determines which costs are reimbursable by us. • The general partner is not restricted from causing us to pay the general partner or its affiliates for any services rendered on terms that are fair and reasonable to us or entering into additional contractual arrangements with any of these entities on our behalf. 26 Cash distributions (if any) are not guaranteed and may fluctuate with performance and reserve requirements.
Biggest changeThe nature of these conflicts is ongoing and includes the following considerations: • The general partner’s affiliates are not prohibited from engaging in other business or activities, including direct competition with us. 20 • The general partner determines the amount and timing of asset purchases and sales, capital expenditures, distributions to unitholders, unit repurchases, and our capital structure, each of which can impact the amount of cash, if any, available for distribution to unitholders, and available to pay principal and interest on debt and the amount of incentive distributions payable in respect of the general partner units. • The general partner decides whether to retain its counsel or engage separate counsel to perform services for us. • Unitholders are deemed to have consented to some actions and conflicts of interest under the Partnership Agreement that might otherwise be deemed a breach of fiduciary or other duties under applicable state law. • Under the Partnership Agreement, the general partner is allowed to take into account the interests of parties in addition to the Company in resolving conflicts of interest, thereby limiting its fiduciary duty to the unitholders. • The general partner determines whether to issue additional units or other of our securities. • The general partner is not restricted from causing us to pay the general partner or its affiliates for any services rendered on terms that are fair and reasonable to us or entering into additional contractual arrangements with any of these entities on our behalf.
Such disruptions may result from weather-related events; natural disasters; international trade disputes or trade policy changes or restrictions; tariffs or import-related taxes; third-party strikes, lock-outs, work stoppages or slowdowns; shortages of supply chain labor, including 29 truck drivers; shipping capacity constraints, including shortages of related equipment; third-party contract disputes; supply or shipping interruptions or costs; military conflicts; acts of terrorism; public health issues, including pandemics and related shut-downs, re-openings, or other actions by the government; civil unrest; or other factors beyond our control.
Such disruptions may result from weather-related events; natural disasters; international trade disputes or trade policy changes or restrictions; tariffs or import-related taxes; third-party strikes, lock-outs, work stoppages or slowdowns; shortages of supply chain labor, including truck drivers; shipping capacity constraints, including shortages of related equipment; third-party contract disputes; supply or shipping interruptions or costs; military conflicts; acts of terrorism; public health issues, including pandemics and related shut-downs, re-openings, or other actions by the government; civil unrest; or other factors beyond our control.
To the extent that a future cyber-attack, security breach or other such disruption results in a loss or damage to the Company’s data, or the disclosure of PII, PHI or other personal or proprietary information, including customer or employee information, it could cause significant damage to the Company’s 24 reputation, affect relationships with its customers, vendors and employees, lead to claims against the Company, and ultimately harm our business.
To the extent that a future cyber-attack, security breach or other such disruption results in a loss or damage to the Company’s data, or the disclosure of PII, PHI or other personal or proprietary information, including customer or employee information, it could cause significant damage to the Company’s reputation, affect relationships with its customers, vendors and employees, lead to claims against the Company, and ultimately harm our business.
There is increasing attention in the United States and worldwide concerning the issue of climate change and the effect of greenhouse gas (“GHG”) emissions, in particular, from the combustion of carbon-based fossil fuels. Our heating oil and propane products are widely considered to be fossil fuels that produce GHG emissions.
There is increasing attention in the United States and worldwide concerning the issue of climate change and the effect of greenhouse gas (“GHG”) emissions, from the combustion of carbon-based fossil fuels. Our heating oil and propane products are widely considered to be fossil fuels that produce GHG emissions.
Customer losses are the result of various factors, including but not limited to: • wholesale product price volatility; • price competition; • warmer than normal weather; • customer relocations and home sales/foreclosures; • credit worthiness; 19 • service disruptions; and • conversions to natural gas and electricity.
Customer losses are the result of various factors, including but not limited to, wholesale product price volatility, price competition, warmer than normal weather, customer relocations and home sales/foreclosures, credit worthiness, service disruptions, and conversions to natural gas and electricity.
Several factors could require us to make significantly higher future contributions to these plans, including the funding status of the plan, unfavorable investment performance, insolvency or withdrawal of participating employers, changes in demographics and increased benefits to 25 participants.
Several factors could require us to make significantly higher future contributions to these plans, including the funding status of the plan, unfavorable investment performance, insolvency or withdrawal of participating employers, changes in demographics and increased benefits to participants.
Instability in the financial markets as a result of terrorism could also affect our ability to raise capital. Terrorist activity could likely lead to increased volatility in the prices of our products. ITEM 1B. UNRESOLVE D STAFF COMMENTS Not applicable. 30
Instability in the financial markets as a result of terrorism could also affect our ability to raise capital. Terrorist activity could likely lead to increased volatility in the prices of our products. ITEM 1B. UNRESOLVE D STAFF COMMENTS Not applicable.
As a result, we generally realize net income in our first and second fiscal quarters and net losses during our third and fourth fiscal quarters and we expect that the negative impact of seasonality on our third and fourth 21 fiscal quarter operating results will continue.
As a result, we generally realize net income in our first and second fiscal quarters and net losses during our third and fourth fiscal quarters and we expect that the negative impact of seasonality on our third and fourth fiscal quarter operating results will continue.
Depending on the timing and amount of our use of cash, this could significantly reduce the cash available to us in subsequent periods to make payments on borrowings under our Credit Agreement. 28 Restrictive covenants in our Credit Agreement may reduce our operating flexibility.
Depending on the timing and amount of our use of cash, this could significantly reduce the cash available to us in subsequent periods to make payments on borrowings under our Credit Agreement. Restrictive covenants in our Credit Agreement may reduce our operating flexibility.
Periods of high wholesale product costs due to energy market volatility, product supply constraints and inflation have added to our difficulty in reducing net customer attrition. Warmer than normal weather has also contributed to an increase in attrition as customers perceive less need for a full-service provider like ourselves.
Periods of high wholesale product costs due to energy market volatility and inflation have added to our difficulty in reducing net customer attrition. Warmer than normal weather has also contributed to an increase in attrition as customers perceive less need for a full-service provider like ourselves.
Our risk management policies cannot eliminate all commodity risk, basis risk, or the impact of adverse market conditions which can adversely affect our financial condition, results of operations and cash available for distribution to our unitholders. In addition, any noncompliance with our risk management policies could result in significant financial losses.
Our risk management policies cannot eliminate all commodity price risk or the impact of adverse market conditions which can adversely affect our financial condition, results of operations and cash available for distribution to our unitholders. In addition, any noncompliance with our risk management policies could result in significant financial losses.
Fiscal Year Ended September 30, 2022 2021 2020 2019 2018 Customer losses to natural gas conversion (1.5 )% (1.1 )% (1.1 )% (1.4 )% (1.3 )% In addition to our direct customer losses to natural gas competition, any conversion to natural gas or electricity by a heating oil consumer in our geographic footprint reduces the pool of available customers from which we can gain new heating oil customers, and could have a material adverse effect on our business, operating results and financial condition.
Fiscal Year Ended September 30, 2023 2022 2021 2020 2019 Customer losses to natural gas conversion and electricity (1.6 )% (1.5 )% (1.1 )% (1.1 )% (1.4 )% In addition to our direct customer losses to natural gas and electricity competition, any conversion to natural gas or electricity by a heating oil consumer in our geographic footprint reduces the pool of available customers from which we can gain new heating oil customers, and could have a material adverse effect on our business, operating results and financial condition.
Fiscal Year Ended September 30, 2022 2021 2020 2019 2018 Gross customer gains 11.9 % 10.7 % 12.2 % 12.9 % 13.0 % Gross customer losses 15.6 % 14.6 % 15.6 % 18.3 % 16.2 % Net attrition (3.7 %) (3.9 %) (3.4 %) (5.4 %) (3.2 %) The gain of a new customer does not fully compensate for the loss of an existing customer because of the expenses incurred during the first year to add a new customer.
Fiscal Year Ended September 30, 2023 2022 2021 2020 2019 Gross customer gains 12.0 % 11.9 % 10.7 % 12.2 % 12.9 % Gross customer losses 15.6 % 15.6 % 14.6 % 15.6 % 18.3 % Net attrition (3.6 %) (3.7 %) (3.9 %) (3.4 %) (5.4 %) The gain of a new customer does not fully compensate for the loss of an existing customer because of the expenses incurred during the first year to add a new customer.
Risks Related to Customer Attrition, Competition, and Demand for Our Products Our operating results will be adversely affected if we continue to experience significant net customer attrition in our home heating oil and propane customer base. The following table depicts our gross customer gains, gross customer losses and net customer attrition from fiscal year 2018 to fiscal year 2022.
Risks Related to Customer Attrition, Competition, and Demand for Our Products Our operating results will be adversely affected if we continue to experience significant net customer attrition in our home heating oil and propane customer base. The following table depicts our gross customer gains, losses and net attrition from fiscal year 2019 to fiscal year 2023.
General Risk Factors Disruptions in our supply chain and other factors affecting the delivery of our products and services could adversely impact our business.
Disruptions in our supply chain and other factors affecting the delivery of our products and services could adversely impact our business.
A significant portion of our home heating oil volume is sold to individual customers under an arrangement pre-establishing the ceiling sales price or a fixed price of home heating oil over a fixed period.
A significant portion of our home heating oil volume is sold to individual customers under arrangements pre-establishing the ceiling sales price or a fixed price of home heating oil over a fixed period.
We can provide no assurance, however, that these steps will detect and/or prevent all violations of such risk management policies and procedures, particularly if deception or other intentional misconduct is involved. 17 We rely on the continued solvency of our derivatives, insurance and weather hedge counterparties.
We can provide no assurance, however, that these steps will detect and/or prevent all violations of such risk management policies and procedures, particularly if deception or other intentional misconduct is involved. 14 We rely on the continued solvency of our wholesale product suppliers and derivatives, insurance and weather hedge counterparties.
The amount of home heating oil volume that we hedge per price-protected customer is based upon the estimated fuel consumption per average customer, per month. If the actual usage exceeds the amount of the hedged volume on a monthly basis, we could be required to obtain additional volume at unfavorable margins.
The amount of home heating oil volume that we hedge per price-protected customer with diesel fuel derivatives is based upon the estimated fuel consumption per average customer, per month by location. If the actual usage exceeds the amount of the hedged volume on a monthly basis, we could be required to obtain additional volume at unfavorable margins.
Risks Related to Legal, Regulatory and Environmental Matters Our results of operations and financial condition may be adversely affected by governmental regulation and associated environmental and regulatory costs. Our business is subject to a wide range of federal, state and local laws and regulations related to environmental and other matters. Such laws and regulations have become increasingly stringent over time.
Our results of operations and financial condition may be adversely affected by environmental regulations, and regulatory costs. Our business is subject to a wide range of federal, state and local laws and regulations related to environmental and other matters. Such laws and regulations have become increasingly stringent over time.
See “Risk Factors – Since weather conditions may adversely affect the demand for home heating oil and propane, our business, operating results and financial condition are vulnerable to warm winters.” To the extent that changes in climate impact weather patterns, our markets could experience severe weather, including hurricanes.
Since weather conditions may adversely affect the demand for home heating oil and propane, our business, operating results and financial condition are vulnerable to warm winters.” To the extent that changes in climate impact weather patterns, our markets could experience severe weather.
The risks discussed below, any of which could materially and adversely affect our business, financial condition, cash flows, and results of operations, could result in a partial or total loss of your investment, and are not the only risks we face.
The risks discussed below, any of which could materially and adversely affect our business, financial condition, cash flows, results of operations and cash available for distributions to our unitholders, could result in a partial or total loss of your investment, and are not the only risks we face.
A disruption within our supply chain network could adversely affect our ability to deliver our products and services in a timely manner, cause an increase in wholesale prices and a decrease in supply, lost sales, customer attrition, increased supply chain costs, or damage to our reputation.
A disruption within our supply chain network due to unforeseen events beyond our control could adversely affect our ability to deliver our products and services in a timely manner, cause an increase in wholesale prices and a decrease in supply, lost sales, customer attrition, increased supply chain costs, or damage to our reputation.
A substantial portion of our workforce is unionized, and we may face labor actions that could disrupt our operations or lead to higher labor costs and adversely affect our business. As of September 30, 2022, approximately 45% of our employees were covered under 63 different collective bargaining agreements.
A substantial portion of our workforce is unionized, and we may face labor actions that could disrupt our operations or lead to higher labor costs and adversely affect our business. As of September 30, 2023, approximately 44% of our employees were covered under 62 different collective bargaining agreements.
To combat the cause of global warming domestically, President Biden identified climate change as one of his administration’s top priorities and pledged to seek measures that would pave the path for the U.S. to achieve net zero GHG emissions by 2050. In April 2021, President Biden announced the administration’s plan to reduce the U.S.
To combat the cause of global warming domestically, President Biden identified climate change as one of his administration’s top priorities and pledged to seek measures that would pave the path for the U.S. to achieve net zero GHG emissions by 2050.
Subject to the limitations on restricted payments that are contained in our Credit Agreement, we are not required to accumulate cash for the purpose of meeting our future obligations to our lenders. As a result, we may be required to refinance the final payment of our term loan.
Subject to the limitations on restricted payments that are contained in our Credit Agreement, we are not required to accumulate cash for the purpose of meeting our future obligations to our lenders. As a result, we may be required to refinance the final payment of our term loan, which is expected to be $82.6 million.
We have since restored full operational capacity and were able to continue to serve our customers without interruption. We do not believe that this incident had a material adverse effect on our business, operations or financial results. However, we cannot be certain that that similar cyber-attacks will not occur in the future.
We were able to continue to serve our customers without interruption. We do not believe that this incident had a material adverse effect on our business, operations or financial results. However, we cannot be certain that that similar cyber-attacks will not occur in the future.
Our ability to meet those financial ratios and conditions can be affected by events beyond our control, such as weather conditions and general economic conditions. Accordingly, we may be unable to meet those ratios and conditions.
Our ability to meet those financial ratios and conditions can be affected by events beyond our control, such as weather conditions and general economic conditions.
When the customer makes a purchase commitment for the next period we currently purchase option contracts, swaps and futures contracts for a substantial majority of the heating oil that we expect to sell to these price-protected customers.
When the customer makes a purchase commitment for the next period, we currently purchase option contracts, swaps and futures contracts for diesel fuel covering a substantial majority of the heating oil that we expect to sell to these price-protected customers. The price of heating oil is closely linked to the price of diesel fuel.
Accordingly, future growth will depend on our ability to make acquisitions on economically acceptable terms. We cannot assure that we will be able to identify attractive acquisition candidates in our sector in the future or that we will be able to acquire businesses on economically acceptable terms.
Accordingly, our ability to maintain or grow our customer base will depend on our ability to make acquisitions on economically acceptable terms. We cannot assure that we will be able to identify attractive acquisition candidates in the future or that we will be able to acquire businesses on economically acceptable terms.
Any inability to recruit and retain qualified individuals may result in higher turnover and increased labor costs, could compromise the quality of our service, and could have a material adverse effect on our business, financial condition and results of operations. The COVID-19 pandemic exacerbated staffing complexities for us.
Any inability to recruit and retain qualified individuals may result in higher turnover and increased labor costs, could compromise the quality of our service, and could have a material adverse effect on our business, financial condition and results of operations.
We face possible risks and costs associated with effects of changes in climate and severe weather. We cannot predict changes in climate. The physical effects of changes in climate could have a material adverse effect on our business and operations. In addition, a possible consequence of changes in climate is increased volatility in seasonal temperatures.
We face possible risks and costs associated with effects of changes in climate and severe weather. We cannot predict changes in climate. The physical effects of changes in climate could have a material adverse effect on our business and operations.
We may experience additional risks and uncertainties not currently known to us or, as a result of developments occurring in the future, conditions that we currently deem to be immaterial may also materially and adversely affect our business, financial condition, cash flows and results of operations.
We may experience additional risks and uncertainties not currently known to us or, as a result of developments occurring in the future, conditions that we currently deem to be immaterial may also materially and adversely affect us.
Increased conservation and technological advances, including installation of improved insulation and the development of more efficient furnaces and other heating devices, such as electric heat pumps, have adversely affected the demand for our products by retail customers. Future conservation measures or technological advances in heating, conservation, energy generation or other devices might reduce demand and adversely affect our operating results.
Energy efficiency and new technology may reduce the demand for our products and adversely affect our operating results. Increased conservation and technological advances, including installation of improved insulation and the development of more efficient furnaces and other heating devices, such as electric heat pumps, have adversely affected the demand for our products by retail customers.
Any acquisition may involve potential risks to us and ultimately to our unitholders, including: • an increase in our indebtedness; • an increase in our working capital requirements; • an inability to integrate the operations of the acquired business; • an inability to successfully expand our operations into new territories; • the diversion of management’s attention from other business concerns; • an excess of customer loss from the acquired business; • loss of key employees from the acquired business; and • the assumption of additional liabilities including environmental liabilities.
Any acquisition may involve potential risks to us and ultimately to our unitholders, including an increase in our indebtedness, an increase in our working capital requirements, an inability to integrate the operations of the acquired business, an excess of customer loss from the acquired business, loss of key employees from the acquired business and the assumption of additional liabilities, including environmental liabilities .
Weather conditions in regions in which we operate have a significant impact on the demand for home heating oil and propane because our customers depend on this product largely for space heating purposes. As a result, weather conditions may materially adversely impact our business, operating results and financial condition.
Since weather conditions may adversely affect the demand for home heating oil and propane, our business, operating results and financial condition are vulnerable to warm winters. Weather conditions in regions in which we operate have a significant impact on the demand for home heating oil and propane because our customers depend on this product largely for space heating purposes.
Our business is subject to substantial competition. Most of our operating locations compete with numerous distributors, primarily on the basis of price, reliability of service and responsiveness to customer service needs. Each operating location operates in its own competitive environment.
Our business is subject to substantial competition. Most of our operating locations compete with numerous distributors, primarily on the basis of price, reliability of service and responsiveness to customer service needs.
On August 16, 2022, President Biden signed the Inflation Reduction Act which aims to reduce GHG emissions by offering tax and other incentives desired to encourage homeowners to switch to alternative sources of energy than the ones we sell. Numerous states and municipalities have adopted laws and policies on climate change and emission reduction targets.
On August 16, 2022, President Biden signed the Inflation Reduction Act which aims to reduce GHG emissions by offering tax and other incentives desired to encourage homeowners to switch to alternative sources of energy than the ones we sell.
We compete with distributors offering a broad range of services and prices, from full-service distributors, such as ourselves, to those offering delivery only. As do many companies in our business, we provide home heating equipment repair service on a 24-hour-a-day, seven-day-a-week, 52 weeks a year basis. We believe that this tends to build customer loyalty.
Each operating location operates in its own competitive environment. 15 We compete with distributors offering a broad range of services and prices, from full-service distributors, such as ourselves, to those offering delivery only. As do many companies in our business, we provide home heating equipment repair service on a 24-hour-a-day, seven-day-a-week, 52 weeks a year basis.
Any difference between the estimated future sales from inventory and actual sales will create a mismatch between the amount of inventory and the hedges against that inventory, and thus change the commodity risk position that we are trying to maintain. Also, significant increases in the costs of the products we sell can materially increase our costs to carry inventory.
Any difference between the estimated future sales from inventory and actual sales will create a mismatch between the amount of inventory and the hedges against that inventory, and thus change the commodity risk position that we are trying to maintain.
Distributions of available cash by us to unitholders will depend on the amount of cash generated, and distributions may fluctuate based on our performance.
Cash distributions (if any) are not guaranteed and may fluctuate with performance and reserve requirements. Distributions of available cash, if any, by us to unitholders will depend on the amount of cash generated, and distributions may fluctuate based on our performance.
At this time, we cannot predict whether, when or in what form climate change legislation provisions and renewable energy standards may be enacted and what the impact of any such legislation or standards may have on our business, financial conditions or operations in the future.
At this time, while we cannot predict whether, when, which, or in what form climate change legislation provisions and GHG emission restrictions may be enacted and what the impact of any such legislation or standards 17 may have on our business, financial conditions or operations in the future, these measures could have a negative impact on our business over time or in the future.
Our substantial indebtedness and other financial obligations could: • impair our ability to obtain additional financing in the future for working capital, capital expenditures, acquisitions, unit repurchases or general partnership purposes; • have a material adverse effect on us if we fail to comply with financial and affirmative and restrictive covenants in our debt agreements and an event of default occurs that is not cured or waived; • require us to dedicate a substantial portion of our cash flow for principal and interest payments on our indebtedness and other financial obligations, thereby reducing the availability of our cash flow to fund working capital and capital expenditures; • expose us to interest rate risk because certain of our borrowings are at variable rates of interest; • limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate; and • place us at a competitive disadvantage compared to our competitors that have proportionally less debt.
Our substantial indebtedness and other financial obligations could: • impair our ability to obtain additional financing in the future for working capital, capital expenditures, acquisitions, unit repurchases, paying distributions or general partnership purposes; • have a material adverse effect on us if we fail to comply with financial and affirmative and restrictive covenants in our debt agreements and an event of default occurs that is not cured or waived; • expose us to interest rate risk because certain of our borrowings are at variable rates of interest; • limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate; and If we are unable to meet our debt service obligations and other financial obligations, we could be forced to restructure or refinance our indebtedness and other financial transactions, seek additional equity capital or sell our assets.
If service at our third-party terminals, the common carrier pipelines used or the barge companies we hire to move product is interrupted, our operations would be adversely affected. The products that we sell are transported in either barge, pipeline or in truckload quantities to third-party terminals where we have contracts to temporarily store our products.
The products that we sell are transported in either barge, pipeline or in truckload quantities to third-party terminals where we have contracts to temporarily store our products. Any significant interruption in the service of these third-party terminals, the common carrier pipelines used or the barge companies that we hire to move product would adversely affect our ability to obtain product.
Increases in wholesale product costs may have adverse effects on our business, financial condition and results of operations, including the following: • reduced profit margins; • customer conservation or attrition due to customers converting to lower cost heating products or suppliers; • reduced liquidity as a result of higher receivables, and/or inventory balances as we must fund a portion of any increase in receivables, inventory and hedging costs from our own resources, thereby tying up funds that would otherwise be available for other purposes; • higher interest expense as a result of increased working capital borrowing to finance higher receivables and/or inventory balances; • higher bad debt expense and credit card processing costs as a result of higher selling prices; and • higher delivery and service vehicle fuel costs. 15 If increases in wholesale product costs cause our working capital requirements to exceed the amounts available under our revolving credit facility or should we fail to maintain the required availability or fixed charge coverage ratio, we would not have sufficient working capital to operate our business, which could have a material adverse effect on our financial condition and results of operations.
Increases in wholesale product costs may have adverse effects on our business, financial condition and results of operations, including the following: • reduced profit margins; • customer conservation; • customer attrition due to customers converting to lower cost heating products or suppliers; • reduced liquidity as a result of higher net receivables including customer credit balances, and/or inventory balances as we must fund a portion of any increase in receivables, inventory and hedging costs from our own cash resources and thereby reduce or eliminate funds that would otherwise be available for distributions and other purposes; • higher interest expense as a result of increased working capital borrowing to finance higher receivables and/or inventory balances; and higher bad debt expense and credit card processing costs as a result of higher selling prices.
As of September 30, 2022, we had approximately $79.9 million of insurance liabilities. Other than matters for which we self-insure, we maintain insurance policies with insurers in amounts and with coverage and deductibles that we believe are reasonable and prudent.
Other than matters for which we self-insure, we maintain insurance policies with insurers in amounts and with coverage and deductibles that we believe are reasonable and prudent.
Accordingly, we could be assessed our share of unfunded liabilities should we terminate participation in these plans, or should there be a mass withdrawal from these plans, or if the plans become insolvent or otherwise terminate.
Accordingly, we could be assessed our share of unfunded liabilities should we terminate participation in these plans, or should there be a mass withdrawal from these plans, or if the plans become insolvent or otherwise terminate. Risks Related to Ownership of Our Common Units Conflicts of interest have arisen and could arise in the future.
Effective internal controls are necessary for us to provide reliable financial reports, prevent fraud and operate successfully as a public company. We may experience difficulties in implementing effective internal controls as part of our integration of acquisitions from private companies, which are not subject to the internal control requirements imposed on public companies.
We may experience difficulties in implementing effective internal controls as part of our integration of acquisitions from private companies, which are not subject to the internal control requirements imposed on public companies.
Approximately 80% of our expected heating oil and propane needs for our full service residential and commercial customers for the fiscal 2023 heating season are covered by physical supply contracts and inventory on-hand at the beginning of the heating season. We intend to satisfy the remainder of our customer’s needs through spot product purchases.
We expect to cover a substantial majority of our expected heating oil and propane needs during the heating season for our full service residential and commercial customers with physical supply contracts and inventory on-hand at the beginning of the heating season. The remainder of our customer’s needs are satisfied through spot product purchases.
We have paid and may continue to pay significantly higher insurance premiums to maintain cyber insurance coverage, and even if we are able to maintain cyber insurance coverage, it may not be sufficient in amounts and scope to cover all harm sustained by the Company in any future cyber-attack or other data security incident.
We have paid and may continue to pay significantly higher insurance premiums to maintain cyber insurance coverage, and even if we are able to maintain cyber insurance coverage, it may not be sufficient in amounts and scope to cover all harm sustained by the Company in any future cyber-attack or other data security incident. 19 Risks Related to Our Workforce Our inability to identify, hire and retain qualified individuals for our workforce could slow our growth and adversely impact our ability to operate our business.
Increases in wholesale product costs may have adverse effects on our business, financial condition, results of operations, or liquidity.
Wholesale Product Price Volatility and Supply Risks Associated with our Business Fluctuations in wholesale product costs may have adverse effects on our business, financial condition, results of operations, or liquidity.
Under our current price-protected programs, approximately 37.6% and 5.4% of our residential customers are respectively categorized as being either ceiling or fixed, respectively, as of September 30, 2022. 16 A significant portion of our home heating oil volume is sold to price-protected customers (ceiling and fixed), and our gross margins could be adversely affected if we are not able to effectively hedge against fluctuations in the volume and cost of product sold to these customers.
A significant portion of our home heating oil volume is sold to price-protected customers (ceiling and fixed), and our gross margins could be adversely affected if we are not able to effectively hedge against fluctuations in the volume and cost of product sold to these customers.
The following table depicts our estimated customer losses to natural gas conversions for the last five fiscal years. Losses to natural gas in our footprint for the home heating oil industry could be greater or less than our estimates.
Losses to natural gas in our footprint for the home heating oil industry could be greater or less than our estimates.
We are not required to accumulate cash for the purpose of meeting our future obligations to our lenders, which may limit the cash available to service the final payment due on the term loan outstanding under our Credit Agreement.
We might then be unable to obtain such financing or capital or sell our assets on satisfactory terms, if at all. We are not required to accumulate cash for the purpose of meeting our future obligations to our lenders, which may limit the cash available to service the final payment due on the term loan outstanding under our Credit Agreement.
At September 30, 2022, we had outstanding under our sixth amended and restated revolving credit facility agreement a $165.0 million term loan, $20.3 million under the revolver portion of the agreement, $5.1 million of letters of credit, and our availability was $189.4 million. We did not have to provide collateral for our hedge positions.
At September 30, 2023, we had outstanding under our sixth amended and restated revolving credit facility agreement a $148.5 million term loan, $0.2 million under the revolver portion of the agreement, $3.2 million of letters of credit, $0.1 million hedge positions were secured under the credit agreement and our availability was $202.1 million.
The risk of global terrorism, political unrest and war may adversely affect the economy and the price and availability of the products that we sell and have a material adverse effect on our business, financial condition and results of operations.
Future conservation measures or technological advances in heating, conservation, energy generation or other devices might reduce demand and adversely affect our operating results. 23 The risk of global terrorism, political unrest and war may adversely affect the economy and the price and availability of the products that we sell and have a material adverse effect on our business, financial condition and results of operations.
As discussed above under “Risk Factor - Significant increases in the wholesale price of home heating oil that cannot be passed on to customers may adversely affect our operating results," we believe that the war in Ukraine and other geopolitical forces have caused a sustained period of high wholesale product costs, which has impacted our profit margins and operating results.
As discussed above under “Risk Factors - Increases in wholesale product costs may have adverse effects on our business, financial condition, results of operations, or liquidity," we believe that the war in Ukraine and other geopolitical forces have caused a sustained period of high wholesale product costs, which has impacted our profit margins and operating results.
However, there can be no assurance that such weather hedge contracts would fully or substantially offset the adverse effects of warmer weather on our business and operating results during such period or that colder weather will result in enough profit to offset a payment by the Company to its provider.
There can be no assurance that our weather hedge contracts, if any, will fully or substantially offset the adverse effects of warmer weather on our business and operating results or that colder weather will result in enough profit to offset our hedging costs. Our operating results are subject to seasonal fluctuations.
Any breach of any of these covenants, failure to meet any of these ratios or conditions, or occurrence of a change of control would result in a default under the terms of the relevant indebtedness or other financial obligations to become immediately due and payable.
Accordingly, we may be unable to meet those ratios and conditions. 22 Any breach of any of these covenants, failure to meet any of these ratios or conditions, or occurrence of a change of control would result in a default under the terms of the Credit Agreement and cause the amounts borrowed to become immediately due and payable.
However, there can be no assurance that the ultimate settlement of these claims will not differ materially from the assumptions used to calculate the liabilities or that the insurance we maintain will be adequate to protect us from all material expenses related to potential future claims for remediation costs and personal and property damage or that these levels of insurance will be available in the future at economical prices, any of which could have a material effect on our results of operations.
However, there can be no assurance that the ultimate settlement of these claims will not differ materially from the assumptions used to calculate the liabilities or that the insurance we maintain will be adequate to protect us from all material expenses related to potential future claims.
Changes to existing tax laws or the enactment of future reform legislation could have a material impact on our financial condition, results of operations and ability to pay distributions to our unitholders.
Changes to existing tax laws or the enactment of future reform legislation could have a material impact on our financial condition, results of operations and ability to pay distributions to our unitholders. 18 Risks Related to Information Technology and Cybersecurity We depend on the use of information technology systems that have been and may in the future be a target of cyber-attacks.
If we do not make acquisitions on economically acceptable terms, our future growth will be limited. Generally, heating oil and propane are secondary energy choices to new housing construction, because natural gas is usually selected when natural gas infrastructure exists. In certain geographies, utilities are building out their natural gas infrastructure. As such, our industry is not a growth industry.
If we do not make acquisitions on economically acceptable terms, we will not be able to replace or grow our declining customer base. Generally, heating oil and propane are secondary energy choices for new housing construction, because natural gas is usually selected when the infrastructure exists.
In addition, should actual usage in any month be less than the hedged volume (including, for example, as a result of early terminations by fixed price customers), our hedging losses could be greater.
In addition, should actual usage in any month be less than the hedged volume (including, for example, as a result of warm winters and early terminations by price protected customers), we may incur additional hedging costs which reduce our gross profit margins.
If we are unable to compete effectively, we may lose existing customers and/or fail to acquire new customers, which would have a material adverse effect on our business, operating results and financial condition. Our operating results will be adversely affected if we experience significant net customer attrition from conversions to alternative energy products, principally natural gas or electricity.
We also compete for retail customers with suppliers of alternative energy products, principally natural gas, propane (in the case of our home heating oil operations) and electricity. If we are unable to compete effectively, we may lose existing customers and/or fail to acquire new customers, which would have a material adverse effect on our business, operating results and financial condition.
Our Credit Agreement contains various covenants that limit our ability and the ability of our subsidiaries to, among other things: • incur indebtedness; • make distributions to our unitholders; • purchase or redeem our outstanding equity interests or subordinated indebtedness; • make investments; • create liens; • sell assets; • engage in transactions with affiliates; • restrict the ability of our subsidiaries to make payments, loans, guarantees and transfers of assets or interests in assets; • engage in sale-leaseback transactions; • effect a merger or consolidation with or into other companies, or a sale of all or substantially all of our properties or assets; and • engage in other lines of business.
Our Credit Agreement contains various covenants that limit our ability and the ability of our subsidiaries to, among other things, incur indebtedness, make distributions to our unitholders, purchase or redeem our outstanding equity interests, sell assets, and engage in other lines of business.
Mark-to-market exposure reduces our borrowing base and as such can reduce the amount available to us under our Credit Agreement. There was no reserve against our borrowing base for derivative instruments during fiscal 2022.
Mark-to-market exposure with our bank group reduces our borrowing base and as such can reduce the amount available to us under our Credit Agreement.
As a result, current and potential unitholders could lose confidence in our financial reporting, which would harm our business and the trading price of our common units.
As a result, current and potential unitholders could lose confidence in our financial reporting, which would harm our business and the trading price of our common units. Effective internal controls are necessary for us to provide reliable financial reports, prevent fraud and operate successfully as a public company.
Risks Related to Information Technology and Cybersecurity We depend on the use of information technology systems that have been and may in the future be a target of cyber-attacks. We rely on multiple information technology systems and networks that are maintained internally and by third-party vendors, and their failure or breach could significantly impede operations.
We rely on multiple information technology systems and networks that are maintained internally and by third-party vendors, and their failure or breach could significantly impede operations.
It is possible that material costs and liabilities will be incurred, including those relating to claims for damages to property and persons and the environment. Legislation in response to climate change has the potential to adversely impact the Company’s operations and reduce demand for our products and services.
It is possible that material costs and liabilities will be incurred, including those relating to claims for damages to property and persons and the environment.
We purchase derivatives, futures and swaps from members of our lending group in order to mitigate exposure to market risk associated with our inventory and the purchase of home heating oil for price-protected customers. Future positions require an initial cash margin deposit and daily mark to market maintenance margin, whereas options are generally paid for as they expire.
We purchase derivatives, futures and swaps of diesel fuel primarily from members of our lending group and Cargill in order to mitigate exposure to market risk associated with our inventory and the purchase of home heating oil for price-protected customers.
When the wholesale price of home heating oil declines significantly after a customer enters into a price protection arrangement, some customers attempt to renegotiate their arrangement in order to enter into a lower cost pricing plan with us or terminate their arrangement and switch to a competitor.
When the wholesale price of home heating oil declines significantly after a customer enters into a price protection arrangement, some customers attempt to renegotiate their arrangement in order to enter into a lower cost pricing plan with us or terminate their arrangement and switch to a competitor, which may which may adversely impact our gross profit and operating results. 13 If, due to supply constraints or shortages, we cannot purchase sufficient quantities of products to meet our customer’s needs, our business and operations will be adversely affected.
New income, sales, use or other tax laws, statutes, rules, regulations or ordinances could be enacted at any time, which could adversely affect our business operations and financial performance. Further, existing tax laws, statutes, rules, regulations or ordinances could be interpreted, changed, modified or applied adversely to us.
Changes in tax laws or regulations may have a material adverse effect on our business, cash flow, financial condition or results of operations. New income, sales, use or other tax laws, statutes, rules, regulations or ordinances could be enacted at any time, which could adversely affect our business operations and financial performance.
Competition for qualified employees have caused us and may continue to cause us to pay higher wages and provide greater benefits. We place a heavy emphasis on the qualification and training of our personnel and spend a significant amount of time and money on training our team members.
We place a heavy emphasis on the qualification and training of our personnel and spend a significant amount of time and money on training our team members.
In some instances homeowners have formed buying cooperatives that seek to purchase home heating oil from distributors at a price lower than individual customers are otherwise able to obtain. We also compete for retail customers with suppliers of alternative energy products, principally natural gas, propane (in the case of our home heating oil operations) and electricity.
We believe that this tends to build customer loyalty. In some instances, homeowners have formed buying cooperatives that seek to purchase home heating oil from distributors at a price lower than individual customers are otherwise able to obtain.
Consequently, our profitability is sensitive to increases in the wholesale product cost caused by changes in supply, geopolitical forces or other market conditions.
Our business is a “margin-based” business in which gross profit depends on the excess of sales prices per gallon over supply costs per gallon. Consequently, our profitability is sensitive to increases in the wholesale product cost caused by changes in supply, geopolitical forces and other market conditions.
During the peak-heating season of October through March, sales of home heating oil and propane historically have represented approximately 80% of our annual volume sold. Actual weather conditions can vary substantially from year to year or from month to month, significantly affecting our financial performance. Climate change may result in increased weather volatility.
As a result, weather conditions may materially adversely impact our business, operating results and financial condition. During the peak-heating season of October through March, sales of home heating oil and propane historically have represented approximately 80% of our annual volume sold.
(Since the end of fiscal 2022, we have paid up to $5.57 per gallon for home heating oil inclusive of the prompt-delivery premium.) The significant increase in product costs resulted in higher operating expenses, such as credit card fees, bad debt expense, and vehicle fuels, and also led to higher working capital requirements, including higher premiums and cash 14 requirements for certain of our hedging instruments.
Significant increases in product costs result in higher operating expenses, such as credit card fees, bad debt expense, and vehicle fuels, and also lead to higher working capital requirements, including higher premiums and cash requirements for some of our hedging instruments.
As a result, we could experience an increase in bad debts from financially distressed customers, which would have a negative effect on our liquidity, results of operations and financial condition. 18 Risks Related to the COVID-19 Pandemic The COVID-19 pandemic has caused disruptions to our operations and has impacted our business; the COVID-19 pandemic or other global health pandemics may continue to impact our business and operations in numerous ways that remain unpredictable.
In addition, recessionary economic conditions could negatively impact the spending and financial viability of our customers. As a result, we could experience an increase in bad debts from financially distressed customers, which would have a negative effect on our liquidity, results of operations and financial condition .
Risks Related to Our Workforce Our inability to identify, hire and retain qualified individuals for our workforce could slow our growth and adversely impact our ability to operate our business. Our success depends in part upon our ability to attract, motivate and retain a sufficient number of qualified employees to meet the needs of our business.
Our success depends in part upon our ability to attract, motivate and retain a sufficient number of qualified employees to meet the needs of our business. We have experienced and may continue to experience shortages of qualified individuals to fill available positions.
Ineffective internal controls over financial reporting could cause our unitholders to lose confidence in our reported financial information, which would likely have a negative effect on the trading price of our common units. 27 Risks Related to Our Indebtedness Our substantial debt and other financial obligations could impair our financial condition and our ability to obtain additional financing and have a material adverse effect on us if we fail to meet our financial and other obligations.
Ineffective internal controls over financial reporting could cause our unitholders to lose confidence in our reported financial information, which would likely have a negative effect on the trading price of our common units. Our unitholder rights plan may discourage potential acquirers of the Company .
In certain cases, we cannot pass on to our customers immediately or in full all cost increases by increasing our retail sales prices. This, in turn, negatively affects our profit margins. In an effort to retain existing accounts and attract new customers we may offer discounts, which will impact the net per gallon gross margin realized.
In certain cases, we cannot pass on to our customers immediately or in full all cost increases by increasing our retail sales prices. This, in turn, negatively affects our profit margins. We cannot predict with any certainty the impact of periods of high wholesale product costs on future profit margins.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeAs of September 30, 2022, we had a fleet of 1,168 truck and transport vehicles, the majority of which were owned, 1,219 service and 377 support vehicles, the majority of which were leased. Our obligations under our Credit Agreement are secured by liens and mortgages on substantially all of the Company’s and subsidiaries’ real and personal property.
Biggest changeAs of September 30, 2023, we had a fleet of approximately 1,118 truck and transport vehicles, the majority of which were owned, 1,189 service and 389 support vehicles, the majority of which were leased. Our obligations under our Credit Agreement are secured by liens and mortgages on substantially all of the Company’s and subsidiaries’ real and personal property.
ITEM 2. PR O PERTIES We currently provide services to our customers in the United States in twelve states and the District of Columbia, ranging from Massachusetts to Maryland from 41 principal operating locations and 77 depots, 53 of which are owned and 65 of which are leased.
ITEM 2. PR O PERTIES We currently provide services to our customers in the United States in twelve states and the District of Columbia, ranging from Massachusetts to Maryland from 40 principal operating locations and 78 depots, 55 of which are owned and 63 of which are leased.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeITEM 3. LEGAL PROCE EDINGS—LITIGATION We are involved from time to time in litigation incidental to the conduct of our business, but we are not currently a party to any material lawsuit or proceeding. ITEM 4. MINE SAF ETY DISCLOSURES Not applicable. 31 PART II
Biggest changeITEM 3. LEGAL PROCE EDINGS—LITIGATION We are involved from time to time in litigation incidental to the conduct of our business, but we are not currently a party to any material lawsuit or proceeding. ITEM 4. MINE SAF ETY DISCLOSURES Not applicable. 24 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeSGU – Common Unit Price Range Distributions Declared High Low per Unit Fiscal Fiscal Fiscal Fiscal Fiscal Fiscal Year Year Year Year Year Year Quarter Ended 2022 2021 2022 2021 2022 2021 December 31, $ 11.35 $ 9.98 $ 9.85 $ 9.07 $ 0.1425 $ 0.1325 March 31, $ 11.28 $ 10.80 $ 9.75 $ 9.31 $ 0.1425 $ 0.1325 June 30, $ 11.67 $ 12.03 $ 9.08 $ 10.10 $ 0.1525 $ 0.1425 September 30, $ 10.15 $ 11.89 $ 8.00 $ 9.58 $ 0.1525 $ 0.1425 As of November 30, 2022, there were approximately 197 holders of record of common units.
Biggest changeSGU – Common Unit Price Range Distributions Declared High Low per Unit Fiscal Fiscal Fiscal Fiscal Fiscal Fiscal Year Year Year Year Year Year Quarter Ended 2023 2022 2023 2022 2023 2022 December 31, $ 12.20 $ 11.35 $ 8.10 $ 9.85 $ 0.1525 $ 0.1425 March 31, $ 13.33 $ 11.28 $ 10.98 $ 9.75 $ 0.1525 $ 0.1425 June 30, $ 15.22 $ 11.67 $ 12.34 $ 9.08 $ 0.1625 $ 0.1525 September 30, $ 14.00 $ 10.15 $ 11.31 $ 8.00 $ 0.1625 $ 0.1525 As of November 30, 2023, there were approximately 189 holders of record of common units.
As a result, $5.5 million was paid to the Common Unit holders, $0.3 million to the general partner unit holders (including $0.3 million of incentive distribution as provided in our Partnership Agreement) and $0.3 million to management pursuant to the management incentive compensation plan which provides for certain members of management to receive incentive distributions that would otherwise be payable to the General Partner. 32 Common Unit Repurchase Plans and Retirement Note 5 to the Consolidated Financial Statements concerning the Company’s repurchase of Common Units during the fiscal year ended September 30, 2022 is incorporated into this Item 5 by reference.
As a result, $5.8 million was paid to the Common Unit holders, $0.3 million to the general partner unit holders (including $0.3 million of incentive distribution as provided in our Partnership Agreement) and $0.3 million to management pursuant to the management incentive compensation plan which provides for certain members of management to receive incentive distributions that would otherwise be payable to the General Partner. 25 Common Unit Repurchase Plans and Retirement Note 5 to the Consolidated Financial Statements concerning the Company’s repurchase of Common Units during the fiscal year ended September 30, 2023 is incorporated into this Item 5 by reference.
In order to pay any distributions to unitholders or repurchase Common Units, the Company must maintain Availability (as defined in the Credit Agreement) of $60 million, 15% of the facility size of $400 million (assuming the non-seasonal aggregate commitment is in effect), on a historical pro forma and forward-looking basis, and a fixed charge coverage ratio of not less than 1.15 measured as of the date of repurchase.
In order to pay any distributions to unitholders or repurchase Common Units, the Company must maintain Availability (as defined in the Credit Agreement) of $60 million, 15% of the facility size of $400 million (assuming the non-seasonal aggregate commitment is in effect), on a historical pro forma and forward-looking basis, and a fixed charge coverage ratio of not less than 1.0 through February 27, 2024 and 1.15 thereafter measured as of the date of repurchase or distribution.
On October 20, 2022, we declared a quarterly distribution of $0.1525 per unit, or $0.61 per unit on an annualized basis, on all Common Units with respect to the fourth quarter of fiscal 2022, paid on November 8, 2022, to holders of record on October 31, 2022.
On October 10, 2023, we declared a quarterly distribution of $0.1625 per unit, or $0.65 per unit on an annualized basis, on all Common Units with respect to the fourth quarter of fiscal 2023, paid on October 30, 2023, to holders of record on October 20, 2023.

Item 7. Management's Discussion & Analysis

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

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Biggest changeThe decrease was driven by a $61.3 million unfavorable change in accounts receivable (including customer credit balances) due primarily to higher sales in the fourth quarter of fiscal 2021 as compared to the fourth quarter of fiscal 2020, a $26.1 million unfavorable change in inventory due primarily to the higher cost of liquid product on hand as of September 30, 2021 as compared to September 30, 2020, a $11.5 million unfavorable change in payroll accruals due to timing, a $9.1 million unfavorable change in cash posted as collateral at derivative counterparties due to higher NYMEX ultra low sulfur diesel contract pricing as of September 30, 2021 as compared to September 30, 2020, $7.8 million of net payroll taxes deferred from fiscal 2020 to fiscal 2021 as a result of certain tax and legislative actions, and a $2.7 million reduction in cash from operations that was partially offset by a $10.1 million favorable change in accounts payable due to the pricing and timing of inventory purchases, and $1.6 million of other changes in working capital.
Biggest changeThe increase was partially offset by a $25.9 million unfavorable change in accounts payable due to the pricing and timing of inventory purchases, an $11.7 million decrease in cash flows from operations, $5.2 million more in payroll taxes paid in the first fiscal quarter of 2023 versus the first fiscal quarter of 2022 as the result of deferring payment of certain payroll tax withholdings in first quarter of fiscal 2021 to the first fiscal quarter of fiscal 2023, and $2.8 million of other net changes in working capital.
Although we believe that the expectations reflected in such forward-looking statements are reasonable, we can give no assurance that such expectations will prove to be correct and actual results may differ materially from those projected as a result of certain risks and uncertainties.
Although we believe that the expectations reflected in such forward-looking statements are reasonable, we can give no assurance that such expectations will prove to be correct. Actual results may differ materially from those projected as a result of certain risks and uncertainties.
In addition, should actual usage in any month be less than the hedged volume, our hedging costs and losses could be greater, thus reducing expected margins. Derivatives FASB ASC 815-10-05 Derivatives and Hedging requires that derivative instruments be recorded at fair value and included in the consolidated balance sheet as assets or liabilities.
In addition, should actual usage in any month be less than the hedged volume, our hedging costs and losses could be greater, thus reducing expected margins. 28 Derivatives FASB ASC 815-10-05 Derivatives and Hedging requires that derivative instruments be recorded at fair value and included in the consolidated balance sheet as assets or liabilities.
(Increase) Decrease in the Fair Value of Derivative Instruments During fiscal 2022, the change in the fair value of derivative instruments resulted in a $17.3 million charge as an increase in the market value for unexpired hedges (a $4.9 million credit) was more than offset by a $22.2 million charge due to the expiration of certain hedged positions.
During fiscal 2022, the change in the fair value of derivative instruments resulted in a $17.3 million charge as an increase in the market value for unexpired hedges (a $4.9 million credit) was more than offset by a $22.2 million charge due to the expiration of certain hedged positions.
The amount of depreciation and amortization that we deduct for book (i.e., financial reporting) purposes will differ from the amount that the Company can deduct for Federal tax purposes. The table below compares the estimated depreciation and amortization for book purposes to the amount that we expect to deduct for Federal tax purposes, based on currently owned assets.
The amount of depreciation and amortization that we deduct for book (i.e., financial reporting) purposes will differ from the amount 27 that the Company can deduct for Federal tax purposes. The table below compares the estimated depreciation and amortization for book purposes to the amount that we expect to deduct for Federal tax purposes, based on currently owned assets.
Under this method, we reconcile net income to cash flows provided by operating activities by adjusting net income for those items that impact net income but do not result in actual cash receipts or payment during the period. 45 Operating Activities Due to the seasonal nature of our business, cash is generally used in operations during the winter (our first and second fiscal quarters) as we require additional working capital to support the high volume of sales during this period, and cash is generally provided by operating activities during the spring and summer (our third and fourth quarters) when customer payments exceed the cost of deliveries.
Under this method, we reconcile net income to cash flows provided by operating activities by adjusting net income for those items that impact net income but do not result in actual cash receipts or payment during the period. 36 Operating Activities Due to the seasonal nature of our business, cash is generally used in operations during the winter (our first and second fiscal quarters) as we require additional working capital to support the high volume of sales during this period, and cash is generally provided by operating activities during the spring and summer (our third and fourth quarters) when customer payments exceed the cost of deliveries.
(See Note 16 - Leases) (c) Represents non-cancelable commitments as of September 30, 2022 for operations such as customer related invoice and statement processing, voice and data phone/computer services, real estate taxes on leased property and our undiscounted future payment obligations to the New England Teamsters and Trucking Industry Pension Fund.
(See Note 16 - Leases) (c) Represents non-cancelable commitments as of September 30, 2023 for operations such as customer related invoice and statement processing, voice and data phone/computer services, real estate taxes on leased property and our undiscounted future payment obligations to the New England Teamsters and Trucking Industry Pension Fund.
Investing Activities Our capital expenditures for fiscal 2022 totaled $18.7 million, as we invested in our fleet and other equipment ($7.7 million), refurbished certain physical plants ($3.4 million), purchased a strategic property ($3.0 million), expanded our propane operations ($2.7 million) and invested in computer hardware and software ($1.9 million).
Our capital expenditures for fiscal 2022 totaled $18.7 million, as we invested in our fleet and other equipment ($7.7 million), refurbished certain physical plants ($3.4 million), purchased a strategic property ($3.0 million), expanded our propane operations ($2.7 million) and invested in computer hardware and software ($1.9 million).
Fiscal Year Ended September 30, 2021 Compared to Fiscal Year Ended September 30, 2020 See Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations within the Form 10-K for the fiscal year ended September 30, 2021 for the fiscal 2021 to fiscal 2020 comparative discussion.
Fiscal Year Ended September 30, 2022 Compared to Fiscal Year Ended September 30, 2021 See Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations within the Form 10-K for the fiscal year ended September 30, 2022 for the fiscal 2022 to fiscal 2021 comparative discussion.
The ultimate resolution of these claims could differ materially from the assumptions used to calculate the self-insurance liabilities, which could have a material adverse effect on results of operations. 49
The ultimate resolution of these claims could differ materially from the assumptions used to calculate the self-insurance liabilities, which could have a material adverse effect on results of operations. 40
Non-cancelable purchase obligations are obligations we incur during the normal course of business, based on projected needs. The Company had no capital lease obligations as of September 30, 2022.
Non-cancelable purchase obligations are obligations we incur during the normal course of business, based on projected needs. The Company had no capital lease obligations as of September 30, 2023.
Financing Activities During fiscal 2022, we refinanced our five-year term loan and the revolving credit facility with the execution of the sixth amended and restated revolving credit facility agreement.
During fiscal 2022, we refinanced our five-year term loan and the revolving credit facility with the execution of the sixth amended and restated revolving credit facility agreement.
The impact of fuel conservation, along with any period-to-period differences in delivery scheduling, the timing of accounts added or lost during the fiscal years, equipment efficiency, and other volume variances not otherwise described, are included in the chart below under the heading “Other.” An analysis of the change in the retail volume of home heating oil and propane, which is based on management’s estimates, sampling, and other mathematical calculations and certain assumptions, is found below: Heating Oil (in millions of gallons) and Propane Volume - Fiscal 2021 305.9 Net customer attrition (13.4 ) Impact of warmer temperatures (1.0 ) Acquisitions 7.4 Sale of certain propane assets (0.2 ) Other (2.6 ) Change (9.8 ) Volume - Fiscal 2022 296.1 The following chart sets forth the percentage by volume of total home heating oil sold to residential variable-price customers, residential price-protected customers, and commercial/industrial/other customers for fiscal 2022 compared to fiscal 2021: Twelve Months Ended Customers September 30, 2022 September 30, 2021 Residential Variable 44.0 % 43.0 % Residential Price-Protected (Ceiling and Fixed Price) 43.3 % 44.9 % Commercial/Industrial/Other 12.7 % 12.1 % Total 100.0 % 100.0 % Volume of motor fuel and other petroleum products sold decreased by 4.0 million gallons, or 2.6%, to 150.1 million gallons for fiscal 2022, compared to 154.1 million gallons for fiscal 2021.
The impact of fuel conservation, along with any period-to-period differences in delivery scheduling, the timing of accounts added or lost during the fiscal years, equipment efficiency, and other volume variances not otherwise described, are included in the chart below under the heading “Other.” An analysis of the change in the retail volume of home heating oil and propane, which is based on management’s estimates, sampling, and other mathematical calculations and certain assumptions, is found below: Heating Oil (in millions of gallons) and Propane Volume - Fiscal 2022 296.1 Net customer attrition (12.1 ) Impact of warmer temperatures (20.7 ) Acquisitions 3.5 Sale of certain assets (2.0 ) Other (5.6 ) Change (36.9 ) Volume - Fiscal 2023 259.2 The following chart sets forth the percentage by volume of total home heating oil sold to residential variable-price customers, residential price-protected customers, and commercial/industrial/other customers for fiscal 2023 compared to fiscal 2022: Twelve Months Ended Customers September 30, 2023 September 30, 2022 Residential Variable 42.1 % 44.0 % Residential Price-Protected (Ceiling and Fixed Price) 44.9 % 43.3 % Commercial/Industrial/Other 13.0 % 12.7 % Total 100.0 % 100.0 % Volume of motor fuel and other petroleum products sold decreased by 11.1 million gallons, or 7.4%, to 139.0 million gallons for fiscal 2023, compared to 150.1 million gallons for fiscal 2022.
Customer gains and losses of home heating oil and propane customers Fiscal Year Ended 2022 2021 2020 Net Net Net Gross Customer Gains / Gross Customer Gains / Gross Customer Gains / Gains Losses (Attrition) Gains Losses (Attrition) Gains Losses (Attrition) First Quarter 19,800 18,500 1,300 19,100 19,900 (800 ) 23,900 23,100 800 Second Quarter 12,700 17,300 (4,600 ) 12,600 17,800 (5,200 ) 12,600 18,200 (5,600 ) Third Quarter 6,400 14,300 (7,900 ) 6,700 12,300 (5,600 ) 8,000 13,600 (5,600 ) Fourth Quarter 11,400 15,800 (4,400 ) 9,500 14,900 (5,400 ) 10,700 15,800 (5,100 ) Total 50,300 65,900 (15,600 ) 47,900 64,900 (17,000 ) 55,200 70,700 (15,500 ) Customer gains (attrition) as a percentage of home heating oil and propane customer base Fiscal Year Ended 2022 2021 2020 Gross Customer Net Gross Customer Net Gross Customer Net Gains Losses Gains / (Attrition) Gains Losses Gains / (Attrition) Gains Losses Gains / (Attrition) First Quarter 4.7 % 4.4 % 0.3 % 4.4 % 4.6 % (0.2 )% 5.3 % 5.1 % 0.2 % Second Quarter 3.0 % 4.1 % (1.1 )% 2.9 % 4.1 % (1.2 )% 2.8 % 4.0 % (1.2 )% Third Quarter 1.5 % 3.4 % (1.9 )% 1.3 % 2.6 % (1.3 )% 1.8 % 3.0 % (1.2 )% Fourth Quarter 2.7 % 3.7 % (1.0 )% 2.1 % 3.3 % (1.2 )% 2.3 % 3.5 % (1.2 )% Total 11.9 % 15.6 % (3.7 )% 10.7 % 14.6 % (3.9 )% 12.2 % 15.6 % (3.4 )% For fiscal 2022, the Company lost 15,600 accounts (net), or 3.7%, of its home heating oil and propane customer base, compared to 17,000 accounts lost (net), or 3.9%, of its home heating oil and propane customer base, during fiscal 2021.
Customer gains and losses of home heating oil and propane customers Fiscal Year Ended 2023 2022 2021 Net Net Net Gross Customer Gains / Gross Customer Gains / Gross Customer Gains / Gains Losses (Attrition) Gains Losses (Attrition) Gains Losses (Attrition) First Quarter 26,500 19,500 7,000 19,800 18,500 1,300 19,100 19,900 (800 ) Second Quarter 9,300 18,100 (8,800 ) 12,700 17,300 (4,600 ) 12,600 17,800 (5,200 ) Third Quarter 5,300 12,600 (7,300 ) 6,400 14,300 (7,900 ) 6,700 12,300 (5,600 ) Fourth Quarter 8,900 14,600 (5,700 ) 11,400 15,800 (4,400 ) 9,500 14,900 (5,400 ) Total 50,000 64,800 (14,800 ) 50,300 65,900 (15,600 ) 47,900 64,900 (17,000 ) Customer gains (attrition) as a percentage of home heating oil and propane customer base Fiscal Year Ended 2023 2022 2021 Gross Customer Net Gross Customer Net Gross Customer Net Gains Losses Gains / (Attrition) Gains Losses Gains / (Attrition) Gains Losses Gains / (Attrition) First Quarter 6.4 % 4.7 % 1.7 % 4.7 % 4.4 % 0.3 % 4.4 % 4.6 % (0.2 )% Second Quarter 2.2 % 4.3 % (2.1 )% 3.0 % 4.1 % (1.1 )% 2.9 % 4.1 % (1.2 )% Third Quarter 1.3 % 3.1 % (1.8 )% 1.5 % 3.4 % (1.9 )% 1.3 % 2.6 % (1.3 )% Fourth Quarter 2.1 % 3.5 % (1.4 )% 2.7 % 3.7 % (1.0 )% 2.1 % 3.3 % (1.2 )% Total 12.0 % 15.6 % (3.6 )% 11.9 % 15.6 % (3.7 )% 10.7 % 14.6 % (3.9 )% 29 For fiscal 2023, the Company lost 14,800 accounts (net), or 3.6%, of its home heating oil and propane customer base, compared to 15,600 accounts lost (net), or 3.7%, of its home heating oil and propane customer base, during fiscal 2022.
We establish and periodically evaluate self-insurance liabilities based upon expectations as to what our ultimate liability may be for outstanding claims using developmental factors based upon historical claim experience, including frequency, severity, demographic factors and other actuarial assumptions, supplemented with the support of a qualified third-party actuary. As of September 30, 2022, we had approximately $79.9 million of self-insurance liabilities.
We establish and periodically evaluate self-insurance liabilities based upon expectations as to what our ultimate liability may be for outstanding claims using developmental factors based upon historical claim experience, including frequency, severity, demographic factors and other actuarial assumptions, supplemented with the support of a qualified third-party actuary. As of September 30, 2023, we had approximately $77.5 million of self-insurance liabilities.
During fiscal 2022, we deposited $1.0 million, and invested another $0.8 million, into an irrevocable trust to secure certain liabilities for our captive insurance company. The cash deposited into the trust is shown on our balance sheet as captive insurance collateral and, correspondingly, reduced cash on our balance sheet.
During fiscal 2023, we deposited $1.6 million, and invested another $0.9 million, into an irrevocable trust to secure certain liabilities for our captive insurance company. The cash deposited into the trust is shown on our balance sheet as captive insurance collateral and, correspondingly, reduced cash on our balance sheet.
For fiscal 2022 and 2021, we entered into weather hedging contracts under which we are entitled to a payment capped at $12.5 million if degree days are less than the Payment Threshold and we are obligated to make an annual payment capped at $5.0 million if degree days exceed the Payment Threshold.
For fiscal 2022 and 2023 we entered into weather hedging contracts under which we were entitled to an annual payment capped at $12.5 million if degree days were less than the Payment Threshold and we were obligated to make an annual payment capped at $5.0 million if degree days exceed the Payment Threshold.
Our ability to provide funds for such uses depends on our future performance, which will be subject to prevailing economic, financial, geopolitical and business conditions, especially in light of the war in the Ukraine and the impact of COVID-19 and, weather, the ability to collect current and future accounts receivable, the ability to pass on the full impact of high product costs to customers, the effects of high net customer attrition, conservation, inflation and other factors.
Our ability to provide funds for such uses depends on our future performance, which will be subject to prevailing economic, financial, geopolitical and business conditions, weather, the ability to collect current and future accounts receivable, the ability to pass on the full impact of high product costs to customers, the effects of high net customer attrition, conservation, inflation and other factors.
Distributions for fiscal 2023, at the current quarterly level of $0.1525 per unit, would result in aggregate payments of approximately $21.8 million to Common Unit holders, $1.2 million to our General Partner (including $1.1 million of incentive distribution as provided for in our Partnership Agreement) and $1.1 million to management pursuant to the management incentive compensation plan which provides for certain members of management to receive incentive distributions that would otherwise be payable to the General Partner.
Distributions for fiscal 2024, at the current quarterly level of $0.1625 per unit, would result in aggregate payments of approximately $23.1 million to Common Unit 38 holders, $1.3 million to our General Partner (including $1.2 million of incentive distribution as provided for in our Partnership Agreement) and $1.2 million to management pursuant to the management incentive compensation plan which provides for certain members of management to receive incentive distributions that would otherwise be payable to the General Partner.
As a commodity, the price of home heating oil is generally impacted by many factors, including economic and geopolitical forces, and, most recently, the war in the Ukraine, and is closely linked to the price of diesel fuel.
As a commodity, the price of home heating oil is generally impacted by many factors, including economic and geopolitical forces and is closely linked to the price of diesel fuel.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Statement Regarding Forward-Looking Disclosure This Annual Report on Form 10-K (this “Report”) includes “forward-looking statements” which represent our expectations or beliefs concerning future events that involve risks and uncertainties, including the impact of geopolitical events, such as the war in the Ukraine, and its impact on wholesale product cost volatility, the price and supply of the products that we sell, our ability to purchase sufficient quantities of product to meet our customer’s needs, rapid increases in levels of inflation approaching 40-year highs, uncertain economic conditions, the consumption patterns of our customers, our ability to obtain satisfactory gross profit margins, the effect of weather conditions on our financial performance, our ability to obtain new customers and retain existing customers, our ability to make strategic acquisitions, the impact of litigation, natural gas conversions, the impact of the novel coronavirus, or COVID-19, pandemic and future global health pandemics, on US and global economies, future union relations and the outcome of current and future union negotiations, the impact of current and future governmental regulations, including climate change, environmental, health, and safety regulations, the ability to attract and retain employees, customer credit worthiness, counterparty credit worthiness, marketing plans, cyber-attacks, increases in interest rates, global supply chain issues, labor shortages and new technology.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Statement Regarding Forward-Looking Disclosure This Annual Report on Form 10-K (this “Report”) includes “forward-looking statements” which represent our expectations or beliefs concerning future events that involve risks and uncertainties, including the impact of geopolitical events on wholesale product cost volatility, the price and supply of the products that we sell, our ability to purchase sufficient quantities of product to meet our customer’s needs, rapid increases in levels of inflation, the consumption patterns of our customers, our ability to obtain satisfactory gross profit margins, the effect of weather conditions on our financial performance, our ability to obtain new customers and retain existing customers, our ability to make strategic acquisitions, the impact of litigation, natural gas conversions and electrification of heating systems, pandemic and future global health pandemics, recessionary economic conditions, future union relations and the outcome of current and future union negotiations, the impact of current and future governmental regulations, including climate change, environmental, health, and safety regulations, the ability to attract and retain employees, customer credit worthiness, counterparty credit worthiness, marketing plans, cyber-attacks, global supply chain issues, labor shortages and new technology, including alternative methods for heating and cooling residences.
Under the terms of the sixth amended and restated credit agreement, we are required to maintain at all times Availability (borrowing base less amounts borrowed and letters of credit issued) of 12.5% of the maximum facility size and a fixed charge coverage ratio of not less than 1.1.
Under the terms of the sixth amended and restated credit agreement, we are required to maintain at all times a fixed charge coverage ratio of not less than 1.0 through February 27, 2024 and 1.15 thereafter if Availability (borrowing base less amounts borrowed and letters of credit issued) is less than 12.5% of the maximum facility size.
Depreciation and Amortization Expenses For fiscal 2022, depreciation and amortization expense decreased $0.9 million, or 2.6%, to $32.6 million, compared to $33.5 million for fiscal 2021, primarily due to lower amortization expense related to intangible assets that fully amortized in the prior fiscal year.
Depreciation and Amortization Expenses For fiscal 2023, depreciation and amortization expense decreased $0.2 million, or 0.8%, to $32.4 million, compared to $32.6 million for fiscal 2022, primarily due to lower amortization expense related to intangible assets that fully amortized in the prior fiscal year.
On that basis, home heating oil and propane margins for fiscal 2022 increased by $0.0569 per gallon, or 4.3%, to $1.3935 per gallon, from $1.3366 per gallon during fiscal 2021. We cannot assume that the per gallon margins realized during fiscal 2022 are sustainable for future periods.
On that basis, home heating oil and propane margins for fiscal 2023 increased by $0.1561 per gallon, or 11.2%, to $1.5496 per gallon, from $1.3935 per gallon during fiscal 2022. We cannot assume that the per gallon margins realized during fiscal 2023 are sustainable for future periods.
EBITDA and Adjusted EBITDA are calculated as follows: Twelve Months Ended September 30, (in thousands) 2022 2021 Net income $ 35,288 $ 87,737 Plus: Income tax expense 13,738 33,675 Amortization of debt issuance cost 955 972 Interest expense, net 10,472 7,816 Depreciation and amortization 32,598 33,485 EBITDA (a) 93,051 163,685 (Increase) / decrease in the fair value of derivative instruments 17,286 (36,138 ) Adjusted EBITDA (a) 110,337 127,547 Add / (subtract) Income tax expense (13,738 ) (33,675 ) Interest expense, net (10,472 ) (7,816 ) Provision (recovery) for losses on accounts receivable 5,411 (248 ) Increase in receivables (43,463 ) (15,171 ) Increase in inventories (21,105 ) (11,472 ) Increase in customer credit balances 5,804 3,054 Change in deferred taxes (3,181 ) 11,361 Change in other operating assets and liabilities 4,314 (4,703 ) Net cash provided by operating activities $ 33,907 $ 68,877 Net cash used in investing activities $ (32,626 ) $ (50,326 ) Net cash provided by (used in) financing activities $ 8,572 $ (70,695 ) 44 (a) EBITDA (Earnings from continuing operations before net interest expense, income taxes, depreciation and amortization) and Adjusted EBITDA (Earnings from continuing operations before net interest expense, income taxes, depreciation and amortization, (increase) decrease in the fair value of derivatives, other income (loss), net, multiemployer pension plan withdrawal charge, gain or loss on debt redemption, goodwill impairment, and other non-cash and non-operating charges) are non-GAAP financial measures that are used as supplemental financial measures by management and external users of our financial statements, such as investors, commercial banks and research analysts, to assess: • our compliance with certain financial covenants included in our debt agreements; • our financial performance without regard to financing methods, capital structure, income taxes or historical cost basis; • our operating performance and return on invested capital compared to those of other companies in the retail distribution of refined petroleum products, without regard to financing methods and capital structure; • our ability to generate cash sufficient to pay interest on our indebtedness and to make distributions to our partners; and • the viability of acquisitions and capital expenditure projects and the overall rates of return of alternative investment opportunities.
EBITDA and Adjusted EBITDA are calculated as follows: Twelve Months Ended September 30, (in thousands) 2023 2022 Net income $ 31,945 $ 35,288 Plus: Income tax expense 13,984 13,738 Amortization of debt issuance cost 1,084 955 Interest expense, net 15,532 10,472 Depreciation and amortization 32,350 32,598 EBITDA (a) 94,895 93,051 (Increase) / decrease in the fair value of derivative instruments 1,977 17,286 Adjusted EBITDA (a) 96,872 110,337 Add / (subtract) Income tax expense (13,984 ) (13,738 ) Interest expense, net (15,532 ) (10,472 ) Provision for losses on accounts receivable 9,761 5,411 Decrease (increase) in receivables 15,566 (43,463 ) Decrease (increase) in inventories 26,994 (21,105 ) Increase in customer credit balances 17,585 5,804 Change in deferred taxes (501 ) (3,181 ) Change in other operating assets and liabilities (13,103 ) 4,314 Net cash provided by operating activities $ 123,658 $ 33,907 Net cash used in investing activities $ (28,197 ) $ (32,626 ) Net cash (used in) provided by financing activities $ (64,890 ) $ 8,572 35 (a) EBITDA (Earnings from continuing operations before net interest expense, income taxes, depreciation and amortization) and Adjusted EBITDA (Earnings from continuing operations before net interest expense, income taxes, depreciation and amortization, (increase) decrease in the fair value of derivatives, other income (loss), net, multiemployer pension plan withdrawal charge, gain or loss on debt redemption, goodwill impairment, and other non-cash and non-operating charges) are non-GAAP financial measures that are used as supplemental financial measures by management and external users of our financial statements, such as investors, commercial banks and research analysts, to assess: • our compliance with certain financial covenants included in our debt agreements; • our financial performance without regard to financing methods, capital structure, income taxes or historical cost basis; • our operating performance and return on invested capital compared to those of other companies in the retail distribution of refined petroleum products, without regard to financing methods and capital structure; • our ability to generate cash sufficient to pay interest on our indebtedness and to make distributions to our partners; and • the viability of acquisitions and capital expenditure projects and the overall rates of return of alternative investment opportunities.
The gross purchase price was allocated $7.3 million to intangible assets, $3.1 million to goodwill, $5.6 million to fixed assets, and reduced by $0.4 million in negative working capital.
The gross purchase price was allocated $10.4 million to intangible assets, $8.0 million to goodwill, $2.3 million to fixed assets, and reduced by $0.9 million in negative working capital.
As of September 30, 2022, we had accounts receivable of $138.3 million of which $82.9 million is due from residential customers and $55.4 million is due from commercial customers. Our ability to borrow from our bank group is based in part on the aging of these accounts receivable.
As of September 30, 2023, we had accounts receivable of $114.1 million of which $69.4 million is due from residential customers and $44.7 million is due from commercial customers. Our ability to borrow from our bank group is based in part on the aging of these accounts receivable.
We believe that investments into the irrevocable trust will lower our letter of credit fees, increase interest income on invested cash balances, and provide us with certain tax advantages attributable to a captive insurance company. During fiscal 2022, the Company acquired five heating oil dealers for approximately $15.6 million (using $13.1 million in cash and assuming $2.5 million of liabilities).
We believe that investments into the irrevocable trust will lower our letter of credit fees, increase interest income on invested cash balances, and provide us with certain tax advantages attributable to a captive insurance company. During fiscal 2023, the Company acquired one propane and two heating oil businesses for approximately $19.8 million (using $19.8 million in cash).
We realized a combined gross profit from services and installations of $25.6 million for fiscal 2022 compared to a combined gross profit of $28.0 million for fiscal 2021, a $2.4 million decrease in profitability.
Gross profit from service increased $1.3 million. 33 We realized a combined gross profit from services and installations of $24.2 million for fiscal 2023 compared to a combined gross profit of $25.6 million for fiscal 2022, a $1.4 million decrease in profitability.
The volatility in the wholesale cost of diesel fuel as measured by the New York Mercantile Exchange (“NYMEX”), for the fiscal years ending September 30, 2018, through 2022, on a quarterly basis, is illustrated in the following chart (price per gallon): Fiscal 2022 (a), (b) Fiscal 2021 Fiscal 2020 Fiscal 2019 Fiscal 2018 Quarter Ended Low High Low High Low High Low High Low High December 31 $ 2.06 $ 2.59 $ 1.08 $ 1.51 $ 1.86 $ 2.05 $ 1.66 $ 2.44 $ 1.74 $ 2.08 March 31 2.36 4.44 1.46 1.97 0.95 2.06 1.70 2.04 1.84 2.14 June 30 3.27 5.14 1.77 2.16 0.61 1.22 1.78 2.12 1.96 2.29 September 30 3.13 4.01 1.91 2.34 1.08 1.28 1.75 2.08 2.05 2.35 a) On November 30, 2022, the NYMEX ultra low sulfur diesel contract closed at $3.36 per gallon or $0.10 per gallon higher than the average of $3.26 in Fiscal 2022. b) In fiscal 2022, the Company's spot purchases of home heating oil greatly exceeded the published NYMEX price due to our suppliers charging a premium over NYMEX for prompt delivery.
The volatility in the wholesale cost of diesel fuel as measured by the New York Mercantile Exchange (“NYMEX”), for the fiscal years ending September 30, 2019, through 2023, on a quarterly basis, is illustrated in the following chart (price per gallon): Fiscal 2023 (a) Fiscal 2022 Fiscal 2021 Fiscal 2020 Fiscal 2019 Quarter Ended Low High Low High Low High Low High Low High December 31 $ 2.78 $ 4.55 $ 2.06 $ 2.59 $ 1.08 $ 1.51 $ 1.86 $ 2.05 $ 1.66 $ 2.44 March 31 2.61 3.55 2.36 4.44 1.46 1.97 0.95 2.06 1.70 2.04 June 30 2.23 2.73 3.27 5.14 1.77 2.16 0.61 1.22 1.78 2.12 September 30 2.38 3.48 3.13 4.01 1.91 2.34 1.08 1.28 1.75 2.08 a) On November 30, 2023, the NYMEX ultra low sulfur diesel contract closed at $2.83 per gallon.
A change in any of these critical accounting policies and estimates could have a material effect on the results of operations. The Company’s Consolidated Financial Statements may differ based upon different estimates and assumptions. The Company’s critical accounting policies and estimates have been reviewed with the Audit Committee of the Board of Directors.
The Company evaluates its policies and estimates on an on-going basis. A change in any of these critical accounting policies and estimates could have a material effect on the results of operations. The Company’s Consolidated Financial Statements may differ based upon different estimates and assumptions.
Finance Charge Income For fiscal 2022, finance charge income increased by $1.6 million, or 55.5%, to $4.5 million compared to $2.9 million for fiscal 2021, primarily due to higher customer late payment charges. Interest Expense, Net For fiscal 2022, net interest expense increased by $2.7 million, or 34.0%, to $10.5 million compared to $7.8 million for fiscal 2021.
Finance Charge Income For fiscal 2023, finance charge income increased by $1.0 million, or 22.4%, to $5.5 million compared to $4.5 million for fiscal 2022, primarily due to higher customer late payment charges. Interest Expense, Net For fiscal 2023, net interest expense increased by $5.0 million, or 48.3%, to $15.5 million compared to $10.5 million for fiscal 2022.
Delivery and Branch Expenses For fiscal 2022, delivery and branch expenses increased $25.6 million, or 7.8%, to $353.5 million, compared to $327.9 million for fiscal 2021, reflecting an $18.5 million, or 5.6%, increase in expense within the base business, additional costs from acquisitions of $4.8 million and a $2.3 million lower benefit recorded from the Company’s weather hedges.
Delivery and Branch Expenses For fiscal 2023, delivery and branch expenses increased $0.1 million to $353.6 million, compared to $353.5 million for fiscal 2022, due to a $9.3 million, or 2.7%, increase in expense within the base business and additional costs from acquisitions of $2.2 million, that was partially offset by an $11.4 million higher benefit recorded from the Company’s weather hedge.
During fiscal 2021 the Company acquired two propane and three heating oil dealers. The following tables detail the Company’s acquisition activity and the associated volume sold during the 12-month period prior to the date of acquisition.
During fiscal 2022, the Company acquired five heating oil businesses for approximately $15.6 million. The following tables detail the Company’s acquisition activity and the associated volume sold during the 12-month period prior to the date of acquisition.
Capital requirements, at least in the near term, are expected to be provided by cash flows from operating activities, cash on hand as of September 30, 2022 ($14.6 million) or a combination thereof.
Capital requirements, at least in the near term, are expected to be provided by cash flows from operating activities, cash on hand as of September 30, 2023 ($45.2 million) or a combination thereof. We believe that these cash sources will also be sufficient to satisfy our capital requirements in the longer-term.
Cost of Installations and Services Total installation costs for fiscal 2022 increased to $98.8 million, compared to $90.1 million for fiscal 2021, primarily due to increased installation revenues. Installation costs as a percentage of installation sales were 81.6% for fiscal 2022 and 81.5% for fiscal 2021.
Cost of Installations and Services Total installation costs for fiscal 2023 decreased by $3.6 million or 3.6%, to $95.2 million, compared to $98.8 million of installation costs for fiscal 2022, primarily due to lower installation revenues. Installation costs as a percentage of installation sales were 83.0% for fiscal 2023 and 81.6% for fiscal 2022.
(in thousands of gallons) Fiscal 2022 Acquisitions Acquisition Number Month of Acquisition Home Heating Oil and Propane Motor Fuel and Other Petroleum Products Total 1 October 437 48 485 2 December 741 — 741 3 December 1,768 — 1,768 4 March 1,225 446 1,671 5 April 3,678 166 3,844 7,849 660 8,509 (in thousands of gallons) Fiscal 2021 Acquisitions Acquisition Number Month of Acquisition Home Heating Oil and Propane Motor Fuel and Other Petroleum Products Total 1 December 5,452 — 5,452 2 December 1,318 — 1,318 3 February 305 — 305 4 March 1,163 — 1,163 5 April 4,509 166 4,675 12,747 166 12,913 Sale of Certain Assets In October 2022 we sold certain assets, which included a customer list of approximately 6,500 customers, for $2.7 million.
(in thousands of gallons) Fiscal 2024 Acquisitions Acquisition Number Month of Acquisition Home Heating Oil and Propane Motor Fuel and Other Petroleum Products Total 1 November 1,210 222 1,432 2 November 885 369 1,254 2,095 591 2,686 (in thousands of gallons) Fiscal 2023 Acquisitions Acquisition Number Month of Acquisition Home Heating Oil and Propane Motor Fuel and Other Petroleum Products Total 1 October 556 403 959 2 November 494 — 494 3 August 1,447 — 1,447 2,497 403 2,900 (in thousands of gallons) Fiscal 2022 Acquisitions Acquisition Number Month of Acquisition Home Heating Oil and Propane Motor Fuel and Other Petroleum Products Total 1 October 437 48 485 2 December 741 — 741 3 December 1,768 — 1,768 4 March 1,225 446 1,671 5 April 3,678 166 3,844 7,849 660 8,509 30 Sale of Certain Assets In October 2022 we sold certain assets, which included a customer list of approximately 6,500 customers, for $2.7 million (including a deferred purchase price of $0.5 million).
Twelve Months Ended September 30, 2022 September 30, 2021 Home Heating Oil and Propane Amount (in millions) Per Gallon Amount (in millions) Per Gallon Volume 296.1 305.9 Sales $ 1,170.6 $ 3.9539 $ 881.5 $ 2.8816 Cost $ 758.0 $ 2.5604 $ 472.6 $ 1.5450 Gross Profit $ 412.6 $ 1.3935 $ 408.9 $ 1.3366 Motor Fuel and Other Petroleum Products Amount (in millions) Per Gallon Amount (in millions) Per Gallon Volume 150.1 154.1 Sales $ 527.7 $ 3.5156 $ 322.8 $ 2.0951 Cost $ 481.6 $ 3.2083 $ 282.0 $ 1.8304 Gross Profit $ 46.1 $ 0.3073 $ 40.8 $ 0.2647 Total Product Amount (in millions) Amount (in millions) Sales $ 1,698.3 $ 1,204.3 Cost $ 1,239.6 $ 754.6 Gross Profit $ 458.7 $ 449.7 For fiscal 2022, total product gross profit was $458.7 million, which was $9.0 million, or 2.0%, higher than fiscal 2021, as a decrease in home heating oil and propane volume ($13.1 million) was more than offset by the impact of an increase in home heating oil and propane margins ($16.8 million) and an increase in gross profit from other petroleum products ($5.3 million).
Twelve Months Ended September 30, 2023 September 30, 2022 Home Heating Oil and Propane Amount (in millions) Per Gallon Amount (in millions) Per Gallon Volume 259.2 296.1 Sales $ 1,202.2 $ 4.6384 $ 1,170.6 $ 3.9539 Cost $ 800.6 $ 3.0888 $ 758.0 $ 2.5604 Gross Profit $ 401.6 $ 1.5496 $ 412.6 $ 1.3935 Motor Fuel and Other Petroleum Products Amount (in millions) Per Gallon Amount (in millions) Per Gallon Volume 139.0 150.1 Sales $ 448.5 $ 3.2266 $ 527.7 $ 3.5156 Cost $ 403.6 $ 2.9034 $ 481.6 $ 3.2083 Gross Profit $ 44.9 $ 0.3232 $ 46.1 $ 0.3073 Total Product Amount (in millions) Amount (in millions) Sales $ 1,650.7 $ 1,698.3 Cost $ 1,204.2 $ 1,239.6 Gross Profit $ 446.5 $ 458.7 For fiscal 2023, total product gross profit was $446.5 million, which was $12.2 million, or 2.6%, lower than fiscal 2022, as a decrease in home heating oil and propane volume sold ($51.4 million) and a decrease in gross profit from other petroleum products ($1.2 million) was partially offset by the impact of an increase in home heating oil and propane margins ($40.4 million).
Our capital expenditures for fiscal 2021 totaled $15.1 million, as we invested in computer hardware and software ($3.2 million), refurbished certain physical plants ($2.8 million), expanded our propane operations ($2.3 million) and made additions to our fleet and other equipment ($6.8 million).
Investing Activities Our capital expenditures for fiscal 2023 totaled $9.0 million, as we invested in our fleet and other equipment ($5.5 million), refurbished certain physical plants ($1.4 million), expanded our propane operations ($1.0 million) and invested in computer hardware and software ($1.1 million).
Adjusted EBITDA For fiscal 2022, Adjusted EBITDA decreased by $17.2 million, or 13.5%, to $110.3 million compared to fiscal 2021, as the impact of a decline in home heating oil and propane volume of 9.8 million gallons and an increase in operating expenses more than offset an increase in home heating oil and propane per gallon margins of $0.0569, or 4.3%.
Adjusted EBITDA For fiscal 2023, Adjusted EBITDA decreased by $13.5 million, or 12.2%, to $96.9 million compared to fiscal 2022, as a decrease in home heating oil and propane volume of 36.9 million gallons more than offset an increase in per gallon margins and an $11.4 million higher benefit recorded from the Company’s weather hedge.
During fiscal 2021, we repaid $13.0 million of our term loan, borrowed $75.2 million and subsequently repaid $66.5 million under our revolving credit facility, repurchased 4.3 million Common Units for $42.8 million primarily in connection with our unit repurchase plan, and paid distributions of $22.4 million to our Common Unit holders and $1.0 million to our General Partner unit holders (including $0.9 million of incentive distributions as provided in our Partnership Agreement).
We also repurchased 0.5 million Common Units for $4.5 million in connection with our unit repurchase plan, and paid distributions of $22.5 million to our Common Unit holders and $1.2 million to our General Partner unit holders (including $1.16 million of incentive distributions as provided in our Partnership Agreement).
Based on these recent prices, our price-protected customers will be offered renewal contracts at significantly higher prices than last year which, may adversely impact the acceptance rate of these renewals. 39 Consolidated Results of Operations The following is a discussion of the consolidated results of operations of the Company and its subsidiaries and should be read in conjunction with the historical financial and operating data and Notes thereto included elsewhere in this Annual Report. 40 Fiscal Year Ended September 30, 2022 Compared to Fiscal Year Ended September 30, 2021 Volume For fiscal 2022, the retail volume of home heating oil and propane sold decreased by 9.8 million gallons, or 3.2%, to 296.1 million gallons, compared to 305.9 million gallons for fiscal 2021.
Consolidated Results of Operations The following is a discussion of the consolidated results of operations of the Company and its subsidiaries and should be read in conjunction with the historical financial and operating data and Notes thereto included elsewhere in this Annual Report. 31 Fiscal Year Ended September 30, 2023 Compared to Fiscal Year Ended September 30, 2022 Volume For fiscal 2023, the retail volume of home heating oil and propane sold decreased by 36.9 million gallons, or 12.5%, to 259.2 million gallons, compared to 296.1 million gallons for fiscal 2022.
Net Income For fiscal 2022, net income decreased $52.4 million, or 59.8%, to $35.3 million, primarily due to an unfavorable change in the fair value of derivative instruments of $53.4 million, and a decrease in Adjusted EBITDA of $17.2 million, that was partially offset by a decrease in the Company’s income tax expense of $20.0 million.
Net Income For fiscal 2023, net income decreased $3.4 million, or 9.5%, to $31.9 million, primarily due a $13.5 million decrease in Adjusted EBITDA and a $5.0 million increase in interest expense, that was partially offset by a $15.3 million favorable change in the fair value of derivative instruments.
When a customer moves out of an existing home, we count the “move out” as a loss, and if we are successful in signing up the new homeowner, the “move in” is treated as a gain.
When a customer moves out of an existing home, we count the “move out” as a loss, and if we are successful in signing up the new homeowner, the “move in” is treated as a gain. The impact of certain geopolitical forces on liquid product prices could increase future attrition due to higher losses from credit related issues.
For fiscal 2021, the Company lost 17,000 accounts (net), or 3.9%, of its home heating oil and propane customer base, compared to 15,500 accounts lost (net), or 3.4%, of its home heating oil and propane customer base, during fiscal 2020. Gross customer gains were 7,300 less than the prior year’s comparable period, and gross customer losses were 5,800 accounts lower.
For fiscal 2022, the Company lost 15,600 accounts (net), or 3.7%, of its home heating oil and propane customer base, compared to 17,000 accounts lost (net), or 3.9%, of its home heating oil and propane customer base, during fiscal 2021.
During fiscal 2022, we estimate that we lost (1.5%) of our home heating oil and propane accounts to natural gas conversions versus (1.1%) for fiscal 2021 and (1.1%) for fiscal 2020.
During fiscal 2023, we estimate that we lost (1.6%) of our home heating oil and propane accounts to natural gas and electricity conversions versus (1.5%) for fiscal 2022 and (1.1%) for fiscal 2021. Losses to natural gas and electricity in our footprint for the heating oil and propane industry could be greater or less than the Company’s estimates.
During fiscal 2021, we reinvested $1.1 million into an irrevocable trust to secure certain liabilities for our captive insurance company. 46 During fiscal 2021, the Company acquired two propane and three heating oil dealers for approximately $42.5 million (using $40.7 million in cash and assuming $1.8 million of liabilities).
During fiscal 2022, we deposited $1.0 million, and invested another $0.8 million, into an irrevocable trust to secure certain liabilities for our captive insurance company. 37 During fiscal 2022, the Company acquired five heating oil businesses for approximately $15.6 million (using $13.1 million in cash and assuming $2.5 million of liabilities).
During fiscal 2021, the change in the fair value of derivative instruments resulted in a $36.1 million credit due to an increase in the market value for unexpired hedges (a $23.6 million credit) and a $12.5 million credit due to the expiration of certain hedged positions.
(Increase) Decrease in the Fair Value of Derivative Instruments During fiscal 2023, the change in the fair value of derivative instruments resulted in a $2.0 million charge as an increase in the market value for unexpired hedges (a $3.9 million credit) was more than offset by a $5.9 million charge due to the expiration of certain hedged positions.
Our significant accounting policies are discussed in Note 2 of the Notes to the Consolidated Financial Statements.
The Company’s critical accounting policies and estimates have been reviewed with the Audit Committee of the Board of Directors. Our significant accounting policies are discussed in Note 2 of the Notes to the Consolidated Financial Statements.
For those locations where we had existing operations during both periods, which we sometimes refer to as the “base business” (i.e., excluding acquisitions), temperatures (measured on a heating degree day basis) for fiscal 2022 were 0.5% warmer than fiscal 2021 and 9.3% warmer than normal, as reported by NOAA.
For those locations where we had existing operations during both periods, which we sometimes refer to as the “base business” (i.e., excluding acquisitions), temperatures (measured on a heating degree day basis) for fiscal 2023 were the third warmest in the last 123 years in the New York City metropolitan area.
To the extent future capital requirements exceed cash on hand plus cash flows from operating activities, we anticipate that working capital will be financed by our revolving credit facility, as discussed below, and from subsequent seasonal reductions in inventory and accounts receivable.
However, if they are not sufficient, we anticipate that working capital will be financed by our revolving credit facility, as discussed below, and from subsequent seasonal reductions in inventory and accounts receivable.
As of September 30, 2022, we had $20.3 million borrowings under our revolving credit facility, $165.0 million 47 outstanding under our term loan, and $5.1 million in letters of credit outstanding. We did not have to provide collateral for our hedge positions with the bank group.
As of September 30, 2023, we had $0.2 million borrowings under our revolving credit facility, $148.5 million outstanding under our term loan, $3.2 million in letters of credit outstanding and $0.1 million hedge positions were secured under the credit agreement.
Estimated Depreciation and Amortization Expense (in thousands) Fiscal Year Book Tax 2022 $ 33,553 $ 34,026 2023 30,495 23,954 2024 25,194 21,070 2025 21,135 20,540 2026 16,947 19,896 2027 15,045 18,072 36 Weather Hedge Contracts Weather conditions have a significant impact on the demand for home heating oil and propane because certain customers depend on these products principally for space heating purposes.
Estimated Depreciation and Amortization Expense (in thousands) Fiscal Year Book Tax 2023 $ 33,434 $ 32,739 2024 28,251 25,263 2025 23,566 22,261 2026 19,182 21,406 2027 17,122 19,534 2028 13,494 18,247 Weather Hedge Contracts Weather conditions have a significant impact on the demand for home heating oil and propane because certain customers depend on these products principally for space heating purposes.
Critical Accounting Policy and Critical Accounting Estimates The preparation of financial statements in conformity with Generally Accepted Accounting Principles requires management to establish accounting policies and make estimates and assumptions that affect reported amounts of assets and liabilities at the date of the Consolidated Financial Statements. The Company evaluates its policies and estimates on an on-going basis.
Recent Accounting Pronouncements Refer to Note 2 – Summary of Significant Accounting Policies for discussion regarding the impact of accounting standards that were recently issued but not yet effective, on our consolidated financial statements. 39 Critical Accounting Policy and Critical Accounting Estimates The preparation of financial statements in conformity with Generally Accepted Accounting Principles requires management to establish accounting policies and make estimates and assumptions that affect reported amounts of assets and liabilities at the date of the Consolidated Financial Statements.
General and Administrative Expenses For fiscal 2022, general and administrative expenses decreased $0.2 million, or 0.9%, to $24.9 million, compared to $25.1 million for fiscal 2021, as a $0.9 million increase in salaries and benefits expense was more than offset by a $1.1 million decrease in profit sharing expense.
General and Administrative Expenses For fiscal 2023, general and administrative expenses increased $0.9 million, or 3.6%, to $25.8 million, compared to $24.9 million for fiscal 2022, due to a $1.6 million increase in the Company's frozen pension expense and $0.6 million of increases in salaries and benefits expenses that were partially offset by a $0.8 million decrease in profit sharing expense and $0.5 million of other net expense decreases.
A return to a normal level of installation sales, as many COVID-19 restrictions were removed, drove the increase in installation activity. Gross profit from installations increased by $1.9 million. Service expense increased by $9.2 million, or 5.3%, to $183.9 million for fiscal 2022, representing 98.2% of service sales, versus $174.7 million, or 95.9% of service sales, for fiscal 2021.
Gross profit from installations decreased by $2.7 million due in part to reduced installation sales primarily as a result of the warmer temperatures. Service expense decreased by $1.2 million, or 0.7%, to $182.7 million for fiscal 2023, representing 97.5% of service sales, versus $183.9 million, or 98.2% of service sales, for fiscal 2022.
Service expense rose as the Company resumed normal service work and activity that was curtailed during the fiscal 2021 due to COVID-19. A large proportion of our service expenses are incurred under fixed-fee prepaid service contract arrangements, therefore 42 trends in service expenses may not directly correlate to trends in the related revenues. Gross profit from service decreased $4.3 million.
A large proportion of our service expenses are incurred under fixed-fee prepaid service contract arrangements, therefore trends in service expenses may not directly correlate to trends in the related revenues.
In the base business, higher sales, that were driven by an increase product cost, resulted in $7.0 million of additional bad debts and credit card fees. Also, medical related expenses increased $2.5 million in the base business. Higher diesel and gasoline costs drove a $1.7 million increase in vehicle fuel costs.
The increase in base business expenses was driven by a $4.5 million increase in bad debts and credit card fees, a $2.6 million increase in insurance claims expense, a $2.0 million increase in vehicle fuel expenses due to higher diesel and gasoline costs, and $0.2 million of other net expense increases.
For fiscal 2022, we recorded a benefit of $1.1 million our weather hedge program that reduced delivery and branch expenses, versus a benefit of $3.4 million as for fiscal 2021 due to warmer temperatures during the weather hedge period of November 1st through March 31st.
Temperatures for the fiscal 2023 were 7.7% warmer fiscal 2022 and 16.3% warmer than normal, as reported by NOAA. For fiscal 2023 we recorded a benefit of $12.5 million under our weather hedge program that decreased delivery and branch expenses, versus a benefit of $1.1 million for fiscal 2022.
During fiscal 2021, cash provided by operating activities decreased $106.8 million to $68.9 million, compared to $175.7 million of cash provided by operating activities during fiscal 2020.
During fiscal 2023, cash provided by operating activities increased $89.8 million to $123.7 million, compared to $33.9 million provided by operating activities during fiscal 2022.
Income Tax Expense For fiscal 2022, the Company’s income tax expense decreased by $20.0 million to $13.7 million, from $33.7 million for fiscal 2021, due primarily to a decrease in income before income taxes of $72.4 million that was partially offset by an increase in the effective income tax rate from 27.7% for the fiscal 2021 to 28.0% for fiscal 2022.
The increase was driven primarily by permanent tax differences and other items which increased the effective income tax rate from 28.0% for fiscal 2022 to 30.4% for fiscal 2023 that was partially offset by a $3.1 million decline in income before income taxes.
For fiscal 2022, net customer attrition for the base business was 3.7%.
For fiscal 2023 temperatures were 7.7% warmer than fiscal 2022 and 16.3% warmer than normal, as reported by NOAA. For fiscal 2023, net customer attrition for the base business was 3.5%.
Under the terms of our sixth amended and restated revolving credit facility agreement, our term loan is repayable in quarterly payments of $4.1 million. We deposited $1.0 million in September 2022 for fiscal 2023 into our captive insurance company.
Under the terms of our sixth amended and restated revolving credit facility agreement, our term loan is repayable in quarterly payments of $4.1 million. We are also required to make an additional term loan repayments due to Excess Cash Flow of approximately $4.0 million in fiscal 2024 (see Note 13 - Long-Term Debt and Bank Facility Borrowings).
The hedge period runs from November 1 through March 31, taken as a whole, for each respective fiscal year. For the fiscal 2022 and 2021, we recorded a $1.1 million benefit and a $3.4 million benefit, respectively. For fiscal 2023, the Company has entered into weather hedging contracts with similar arrangements.
The hedge period ran from November 1 through March 31, taken as a whole, for each respective fiscal year. The temperatures experienced during the hedge period through March 31, 2023 and March 31, 2022 were warmer than the Payment Thresholds in our weather hedge contracts.
Product Sales For fiscal 2022, product sales increased $494.0 million, or 41.0%, to $1,698.3 million, compared to $1,204.3 million in fiscal 2021, as an increase in selling prices more than offset a decline in total volume sold. The increase in selling prices was largely attributable to an increase in wholesale product cost of $1.1379 per gallon, or 69.4%.
Product Sales For fiscal 2023, product sales decreased $47.6 million, or 2.8%, to $1,650.7 million, compared to $1,698.3 million in fiscal 2022, due to a decrease in total volume sold of 10.8% that was partially offset by a $0.2457 per gallon, or 8.8% increase in wholesale product cost.
Losses to natural gas in our footprint for the heating oil and propane industry could be greater or less than the Company’s estimates. 38 Acquisitions The timing of acquisitions and the types of products sold by acquired companies impact year-over-year comparisons. During fiscal 2022, the Company acquired five heating oil dealers.
Acquisitions The timing of acquisitions and the types of products sold by acquired companies impact year-over-year comparisons. Subsequent to September 30, 2023 the Company acquired two heating oil businesses for approximately $2.5 million. During fiscal 2023, the Company acquired two heating oil businesses and one propane business for approximately $19.8 million.
The gross purchase price was allocated $37.3 million to goodwill and intangible assets and $6.2 million to fixed assets, and reduced by $1.0 million in negative working capital. On October 27, 2020, the Company sold certain propane assets for cash proceeds of $6.1 million.
The gross purchase price was allocated $7.3 million to intangible assets, $3.1 million to goodwill, $5.6 million to fixed assets, and reduced by $0.4 million in negative working capital. Financing Activities During fiscal 2023, we repaid $16.5 million of our term loan, borrowed $125.6 million under our revolving credit facility and subsequently repaid $145.6 million.
The table below summarizes the payment schedule of our contractual obligations at September 30, 2022 (in thousands): Payments Due by Fiscal Year Total 2023 2024 and 2025 2026 and 2027 Thereafter Debt obligations (a) $ 185,276 $ 32,651 $ 33,000 $ 119,625 $ — Operating lease obligations (b) 116,746 22,024 40,419 28,446 25,857 Purchase obligations and other (c) 57,914 12,653 9,899 4,777 30,585 Interest obligations (d) 42,296 20,068 13,514 8,714 — $ 402,232 $ 87,396 $ 96,832 $ 161,562 $ 56,442 (a) Reflects payments due of debt existing as of September 30, 2022, considering the terms of our sixth amended and restated credit agreement.
The table below summarizes the payment schedule of our contractual obligations at September 30, 2023 (in thousands): Payments Due by Fiscal Year Total 2024 2025 and 2026 2027 and 2028 Thereafter Debt obligations (a) $ 148,740 $ 20,740 $ 33,000 $ 95,000 $ — Operating lease obligations (b) 113,170 23,271 42,040 27,051 20,808 Purchase obligations and other (c) 61,463 13,839 13,040 5,581 29,003 Interest obligations (d) 31,133 16,078 11,850 3,205 — $ 354,506 $ 73,928 $ 99,930 $ 130,837 $ 49,811 (a) Reflects payments due of debt existing as of September 30, 2023, considering the terms of our sixth amended and restated credit agreement.
(d) Reflects interest obligations on our term loan due July 2027 and the unused commitment fee on the revolving credit facility. 48 Recent Accounting Pronouncements Refer to Note 2 – Summary of Significant Accounting Policies for discussion regarding the impact of accounting standards that were recently issued but not yet effective, on our consolidated financial statements.
(d) Reflects interest obligations on our term loan due July 2027 and the unused commitment fee on the revolving credit facility.
Maintenance capital expenditures for fiscal 2023 are estimated to be approximately $10.6 million, excluding the capital requirements for leased fleet which we currently estimate to be $10.7 million. In addition, we plan to invest approximately $2.2 million in our propane operations.
As of September 30, 2023, Availability, as defined in the sixth amended and restated revolving credit facility agreement, was $202.1 million and we were in compliance with the financial covenants. Maintenance capital expenditures for fiscal 2024 are estimated to be approximately $11.5 million, excluding the capital requirements for leased fleet which we currently estimate to be $11.7 million.
During fiscal 2021, we ceased making non-emergency service calls, and we believe that some customers deferred the installation of new equipment. 41 Cost of Product For fiscal 2022, cost of product increased $485.0 million, or 64.3%, to $1,239.6 million, compared to $754.6 million for fiscal 2021, as the impact of a $1.1379 per gallon, or 69.4%, increase in wholesale product cost more than offset a decrease in total volume sold.
Installations and Services Sales For fiscal 2023, installation and service sales decreased $6.2 million, or 2.0%, to $302.1 million, compared to $308.3 million for fiscal 2022, as a decrease in installation sales of $6.3 million primarily as a result of the warmer temperatures was partially offset by an increase in service revenue of $0.1 million. 32 Cost of Product For fiscal 2023, cost of product decreased $35.4 million, or 2.9%, to $1,204.2 million, compared to $1,239.6 million for fiscal 2022, due to a decrease in total volume sold of 10.8% that was partially offset by a $0.2457 per gallon, or 8.8%, increase in wholesale product.
To hedge against rising interest rates, the Company utilizes interest rate swaps. At September 30, 2022, $54.0 million, or 33%, of Star’s long-term debt was fixed. 43 Amortization of Debt Issuance Costs For fiscal 2022, amortization of debt issuance costs was $1.0 million, essentially unchanged from fiscal 2021.
The year-over-year change was driven by an increase in the weighted average interest rate from 3.7% for fiscal 2022 to 6.5% for 2023. To hedge against rising interest rates, the Company utilizes interest rate swaps. At September 30, 2023, approximately 37% of borrowings under Star's variable-rate long term debt were not subject to interest rate increases.
Removed
During the second, third and fourth quarters of fiscal 2022, the wholesale price of home heating oil was extremely volatile and we experienced a significant increase in the cost of our product which adversely impacted our 34 liquidity. We believe these circumstances are attributable to supply and demand imbalances, exacerbated by the war in the Ukraine.
Added
As a result for the fiscal 2023 and 2022, the Company reduced delivery and branch expenses for the gains realized under those contracts of $12.5 million and $1.1 million, respectively. The amounts were received in full in April 2023 and April 2022, respectively.
Removed
The cost of home heating oil, as measured by the New York Mercantile Exchange (“NYMEX”), was $2.36 per gallon on January 1, 2022, peaked at $5.14 on April 28, 2022 and closed at $3.37 on September 30, 2022.
Added
For fiscal 2024, the Company entered into a weather hedge contract with the similar hedge period described above. The maximum that the Company can receive is $12.5 million annually and the Company has no obligation to pay the counterparty beyond the initial premium should degree days exceed the Payment Threshold.
Removed
From time-to-time, the Company (as well as our competition) paid a premium over the NYMEX-published price for product purchased to ensure prompt delivery.
Added
Gross customer gains were 300 lower than the prior year’s comparable period, and gross customer losses were 1,100 accounts lower primarily due to reduction in the number of customer relocations.
Removed
The significant increase in product costs resulted in higher operating expenses, such as credit card fees, bad debt expense, and vehicle fuels, and also led to higher working capital requirements, including higher premiums and cash requirements for certain of our hedging instruments.
Added
Product volumes and wholesale product cost include heating oil, propane, motor fuels and other petroleum products.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeBased on a hypothetical ten percent increase in the cost of product at September 30, 2022, the potential impact on our hedging activity would be to increase the fair market value of these outstanding derivatives by $13.6 million to a fair market value of $31.6 million; and conversely a hypothetical ten percent decrease in the cost of product would decrease the fair market value of these outstanding derivatives by $11.2 million to a fair market value of $6.8 million.
Biggest changeBased on a hypothetical ten percent increase in the cost of product at September 30, 2023, the potential impact on our hedging activity would be to increase the fair market value of these outstanding derivatives by $17.3 million to a fair market value of $27.9 million; and conversely a hypothetical ten percent decrease in the cost of product would decrease the fair market value of these outstanding derivatives by $14.1 million to a fair market value of $(3.5) million.
In the event that interest rates associated with this facility were to increase 100 basis points, the after tax impact on annual future cash flows would be a decrease of $0.9 million. We regularly use derivative financial instruments to manage our exposure to market risk related to changes in the current and future market price of home heating oil.
In the event that interest rates associated with this facility were to increase 100 basis points, the after tax impact on annual future cash flows would be a decrease of $0.6 million. We regularly use derivative financial instruments to manage our exposure to market risk related to changes in the current and future market price of home heating oil.
ITEM 7A. QUANTITATIVE AND QUALITAT IVE DISCLOSURES ABOUT MARKET RISK We are exposed to interest rate risk primarily through our bank credit facilities. We utilize these borrowings to meet our working capital needs. At September 30, 2022, we had outstanding borrowings totaling $185.3 million, of which $131.3 are subject to variable interest rates under our credit agreement.
ITEM 7A. QUANTITATIVE AND QUALITAT IVE DISCLOSURES ABOUT MARKET RISK We are exposed to interest rate risk primarily through our bank credit facilities. We utilize these borrowings to meet our working capital needs. At September 30, 2023, we had outstanding borrowings totaling $148.7 million, of which $93.2 million are subject to variable interest rates under our credit agreement.

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