10q10k10q10k.net

What changed in SUBURBAN PROPANE PARTNERS LP's 10-K — 2022 vs 2023

vs

Paragraph-level year-over-year comparison of SUBURBAN PROPANE PARTNERS LP'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.

+403 added−350 removedSource: 10-K (2023-11-22) vs 10-K (2022-11-23)

Top changes in SUBURBAN PROPANE PARTNERS LP's 2023 10-K

403 paragraphs added · 350 removed · 300 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

111 edited+21 added−9 removed94 unchanged
Biggest changeSeparately, the State of New York issued a State of Emergency Order in March of 2020 due to the COVID-19 pandemic. While the New York State of Emergency Order for COVID-19 ended in June 2021, other state of emergency orders were issued in July 2021 and remain in effect.
Biggest changeWhile the New York State of Emergency Order for COVID-19 ended in June 2021, other states of emergency were issued in NY and remain in effect. AES has adjusted its marketing programs accordingly. During fiscal 2023, we sold approximately 1.3 million dekatherms of natural gas and 151.6 million kilowatt hours of electricity through the natural gas and electricity segment.
In some states these laws and regulations are administered by state agencies and in others they are administered on a municipal level.
In some states these laws and regulations are administered by state agencies and in others they are administered on a municipal level.
Patent and Trademark Office. We regard our trademarks, tradenames and other proprietary rights as valuable assets and believe that they have significant value in the marketing of our products and services. Government Regulation; Environmental, Health and Safety Matters Our operations are subject to numerous federal, state and local environmental, health and safety laws and regulations.
Patent and Trademark Office. We regard our trademarks, patents, tradenames and other proprietary rights as valuable assets and believe that they have significant value in the marketing of our products and services. Government Regulation; Environmental, Health and Safety Matters Our operations are subject to numerous federal, state and local environmental, health and safety laws and regulations.
In compliance with the DOT’s pipeline safety regulations for “jurisdictional” propane systems that serve multiple customers, we provide training and written instruction for our employees, provide customers with periodic awareness notices and safety information, have established written procedures to minimize the hazards resulting from gas pipeline emergencies and keep records of inspections.
In compliance with the DOT’s pipeline safety regulations for “jurisdictional” propane systems that serve multiple customers, we provide training and written instruction for our employees, provide customers with periodic public awareness notices and safety information, have established written procedures to minimize the hazards resulting from gas pipeline emergencies and keep records of inspections.
The economy-wide energy transition to a low-carbon world offers an opportunity for us to realize top-line organic growth through advancing the significant air quality and climate benefits of traditional propane, and through continued investments in the next generation of even cleaner and lower carbon renewable energy products.
The economy-wide energy transition to a low-carbon world offers an opportunity for us to realize top-line organic growth through advancing the significant air quality and climate benefits of traditional propane, and through continued investments in the next generation of even cleaner and lower CI renewable energy products.
We execute the foregoing strategy within the framework of our three corporate pillars: • Go Green with Suburban Propane : our commitment to advancing the clean air and low-carbon benefits of traditional propane, and to invest in innovative technologies to bring the next generation of renewable energy solutions to market in support of the energy transition; • SuburbanCares : our devotion to the safety and career development of our people, and our philanthropic activities to be a critical positive contributor in the local communities we serve and in our national partnership with the American Red Cross; and • Suburban Commitment to Excellence : our value proposition for our customers, employees and the communities we serve and, in particular, the reliability, dependability and flexibility in our commitment to excellence in safety and customer service.
We execute the foregoing strategy within the framework of our three corporate pillars: • Go Green with Suburban Propane : our commitment to advancing the clean air and low-carbon benefits of traditional propane, and to invest in innovative technologies to bring the next generation of renewable energy solutions to market in support of the energy transition; • SuburbanCares : our devotion to the safety, well-being and career development of our people, and our philanthropic activities to be a critical positive contributor in the local communities we serve and in our national partnership with the American Red Cross; and • Suburban Commitment to Excellence : our value proposition for our customers, employees and the communities we serve and, in particular, the reliability, dependability and flexibility in our commitment to excellence in safety and customer service.
Trademarks and Tradenames We rely primarily on a combination of trademark, trade secret and copyright laws, as well as contractual provisions with employees and third parties, to establish and protect our intellectual property rights.
Trademarks and Tradenames We rely primarily on a combination of trademark, patent, trade secret and copyright laws, as well as contractual provisions with employees and third parties, to establish and protect our intellectual property rights.
We believe that the safety and well-being of our employees, customers, and communities is of the utmost importance. Safety is the top priority for our business and we continue to invest in programs, technology, and training to improve safety throughout our operations.
We believe that the safety and well-being of our employees, customers, and communities is of the utmost importance. Safety is a top priority for our business and we continue to invest in programs, technology, and training to improve safety throughout our operations.
Direct and indirect subsidiaries of the Operating Partnership include Suburban Heating Oil Partners, LLC, which owns and operates the assets of our fuel oil and refined fuels business; Agway Energy Services, LLC, which owns and operates the assets of our natural gas and electricity business; Suburban Sales and Service, Inc., which conducts a portion of our service work and appliance and parts business; and Suburban Renewable Energy, LLC (“Suburban Renewables”), which serves as the platform for our investments in innovative renewable energy technologies and businesses.
Direct and indirect subsidiaries of the Operating Partnership include Suburban Heating Oil Partners, LLC, which owns and operates the assets of our fuel oil and refined fuels business; Agway Energy Services, LLC, which owns and operates the assets of our natural gas and electricity business; Suburban Sales and Service, Inc., which conducts a portion of our service work and appliance and parts business; and Suburban Renewable Energy, LLC (“Suburban Renewable Energy”), which serves as the platform for our investments in innovative renewable energy technologies and businesses.
As a company with a nearly 95-year legacy of being a trusted and reliable provider of energy and exceptional customer service, our goal is to lead the propane industry in the transition to a renewable energy future that provides value to our customers, Unitholders, employees, and the communities we serve in a way that ensures we can thrive in a carbon constrained world for the next 95 years.
As a company with a 95-year legacy of being a trusted and reliable provider of energy and exceptional customer service, our goal is to lead the propane industry in the transition to a renewable energy future that provides value to our customers, Unitholders, employees, and the communities we serve in a way that ensures that we can thrive in a carbon constrained world for the next 95 years and beyond.
In support of our core marketing and distribution operations, we install and service a variety of home comfort equipment, particularly in the areas of heating and ventilation. We believe, based on LP/Gas Magazine dated February 2022, that we are the third-largest retail marketer of propane in the United States, measured by retail gallons sold in the calendar year 2021.
In support of our core marketing and distribution operations, we install and service a variety of home comfort equipment, particularly in the areas of heating and ventilation. We believe, based on LP/Gas Magazine dated February 2023, that we are the third-largest retail marketer of propane in the United States, measured by retail gallons sold in calendar year 2022.
We utilize a variety of trademarks and tradenames owned by us, including “Suburban Propane,” and “Agway Energy Services” and related marks or designs incorporating such related logos such as “Go Green with Suburban Propane” and “Energy Guard.” All of the trademarks and tradenames used by Suburban Propane and Agway Energy Services are registered (or have applications pending for registration) with the U.S.
We utilize a variety of trademarks and tradenames owned by us, including “Suburban Propane,” and “Agway Energy Services” and related marks or designs incorporating such related logos such as “Go Green with Suburban Propane,” “SuburbanCares” and “Energy Guard.” All of the trademarks and tradenames used by Suburban Propane and Agway Energy Services are registered (or have applications pending for registration) with the U.S.
Fuel oil has a more limited use, compared to propane, and is used almost exclusively for space and water heating in residential and commercial buildings. We sell diesel fuel and gasoline to commercial and industrial customers for use primarily to operate motor vehicles. Approximately 45% of our fuel oil customers receive their fuel oil under an automatic delivery system.
Fuel oil has a more limited use, compared to propane, and is used almost exclusively for space and water heating in residential and commercial buildings. We sell diesel fuel and gasoline to commercial and industrial customers for use primarily to operate motor vehicles. Approximately 50% of our fuel oil customers receive their fuel oil under an automatic delivery system.
While fuel oil supply is more susceptible to longer periods of supply constraint than propane, we believe that our supply arrangements will provide us with sufficient supply sources. Although we make no assurance regarding the availability of supplies of fuel oil in the future, we currently expect to be able to secure adequate supplies during fiscal 2023.
While fuel oil supply is more susceptible to longer periods of supply constraint than propane, we believe that our supply arrangements will provide us with sufficient supply sources. Although we make no assurance regarding the availability of supplies of fuel oil in the future, we currently expect to be able to secure adequate supplies during fiscal 2024.
The business strategy of this segment is to expand its market share by concentrating on growth in the customer base and expansion into other deregulated markets that are considered strategic markets. We serve approximately 34,000 natural gas and electricity customers in New York, Pennsylvania and Maryland.
The business strategy of this segment is to expand its market share by concentrating on growth in the customer base and expansion into other deregulated markets that are considered strategic markets. We serve approximately 31,000 natural gas and electricity customers in New York, Pennsylvania and Maryland.
We believe that our operations are in compliance, in all material respects, with applicable worker health and safety standards. We are also subject to laws and regulations governing the security of hazardous materials, including propane, under the Federal Homeland Security Act of 2002, as administered by the Department of Homeland Security (“DHS”).
We believe that our operations comply, in all material respects, with applicable worker health and safety standards. We are also subject to laws and regulations governing the security of hazardous materials, including propane, under the Federal Homeland Security Act of 2002, as administered by the Department of Homeland Security (“DHS”).
Census Bureau’s 2021 American Community Survey, propane ranks as the third most important source of residential energy in the nation, with about 5% of all households using propane as their primary space heating fuel. This level has not changed materially over the previous two decades.
Census Bureau’s 2022 American Community Survey, propane ranks as the third most important source of residential energy in the nation, with about 5% of all households using propane as their primary space heating fuel. This level has not changed materially over the previous two decades.
We cannot speculate on exactly how the Inflation Reduction Act will be implemented; however, the Act does contain numerus incentives for the production of clean energy for which certain of our renewable energy products, as well as those produced by Oberon and IH, are expected to qualify.
We cannot speculate on exactly how the Inflation Reduction Act will be implemented; however, the Act does contain numerous incentives for the production of clean energy for which certain of our renewable energy products, as well as those produced by Oberon and IH, are expected to qualify.
These deliveries are scheduled through proprietary technology, based upon each customer’s historical consumption patterns and prevailing weather conditions. Additionally, we offer our customers a budget payment plan whereby the customer’s estimated annual propane purchases and service contracts are paid for in a series of estimated equal monthly payments over a twelve-month period.
These deliveries are scheduled through proprietary technology, based upon each customer’s historical consumption patterns and prevailing weather conditions. Additionally, we offer our customers a 3 Table of Contents budget payment plan whereby the customer’s estimated annual propane purchases and service contracts are paid for in a series of estimated equal monthly payments over a twelve-month period.
We expect that we will be required to expend funds to participate in the remediation of certain sites, including sites where we have been designated as a potentially responsible party under applicable laws and at sites with aboveground and underground fuel storage tanks. We will also incur other expenses associated with environmental compliance.
We expect that we will be required to expend funds to participate in the remediation of certain sites, including sites where we have been designated as a potentially responsible party under applicable laws and at sites with above ground and underground fuel storage tanks. We will also incur other expenses associated with environmental compliance.
Upon written request or through an information request link from our website at www.suburbanpropane.com , we will provide, without charge, copies of our Annual Report on Form 10-K for the year ended September 24, 2022, each of the Quarterly Reports on Form 10-Q, current reports filed or furnished on Form 8-K and all amendments to such reports as soon as is reasonably practicable after such reports are electronically filed with or furnished to the SEC.
Upon written request or through an information request link from our website at www.suburbanpropane.com , we will provide, without charge, copies of our Annual Report on Form 10-K for the year ended September 30, 2023, each of the Quarterly Reports on Form 10-Q, current reports filed or furnished on Form 8-K and all amendments to such reports as soon as is reasonably practicable after such reports are electronically filed with or furnished to the SEC.
These incentives include grants, loan guaranties, development funding, investment tax credits, and production tax credits. At the state level, the CA LCFS, OR CFP, and WA CFS (collectively “LCFS Programs”) are administered by state agencies and have the goal of reducing GHG emissions from the transportation sector by lowering the carbon intensity of transportation fuels.
These incentives include grants, loan guaranties, development funding, investment tax credits, and production tax credits. At the state level, the CA LCFS, OR CFP, and WA CFS (collectively “LCFS Programs”) are administered by state agencies and have the goal of reducing GHG emissions from the transportation sector by lowering the CI of transportation fuels.
Although the extension of natural gas pipelines to previously unserved geographic areas tends to displace propane distribution 4 Table of Contents in those areas, we believe new opportunities for propane sales may arise as new neighborhoods are developed in geographically remote areas. Propane has some relative advantages over other energy sources.
Although the extension of natural gas pipelines to previously unserved geographic areas tends to displace propane distribution in those areas, we believe new opportunities for propane sales may arise as new neighborhoods are developed in geographically remote areas. Propane has some relative advantages over other energy sources.
With advancements in new technologies for the production of propane from renewable sources, as well as other technological advances to reduce the carbon intensity of traditional propane, our Go Green with Suburban Propane corporate pillar also underscores our commitment to invest in innovative solutions that can contribute to a sustainable energy future.
With advancements in new technologies for the production of propane from renewable sources, as well as other technological advances to reduce the CI of traditional propane, our Go Green with Suburban Propane corporate pillar also underscores our commitment to invest in innovative solutions that can contribute to a sustainable energy future.
During fiscal 2022, Suburban Renewables acquired a 25% equity interest in Independence Hydrogen, Inc. (“IH”), a veteran-owned and operated, privately held company developing a gaseous hydrogen ecosystem to deliver locally sourced hydrogen to local markets, with a primary focus on material handling and backup power applications.
During fiscal 2022, Suburban Renewable Energy acquired a 25% equity interest in Independence Hydrogen, Inc. (“IH”), a veteran-owned and operated, privately held company developing a gaseous hydrogen ecosystem to deliver locally sourced hydrogen to local markets, with a primary focus on material handling and backup power applications.
We own and operate a large propane storage facility in Elk Grove, California. We also operate smaller storage facilities in other locations throughout the Unites States and have rights to use storage facilities in additional locations.
We own and operate a large propane storage facility in Elk Grove, California. We also operate smaller storage facilities in other locations throughout the United States and have rights to use storage facilities in additional locations.
As part of our commitment to innovating for a sustainable energy future, and in support of our strategic growth initiatives to build out a renewable energy platform, the Partnership also created an executive-level position (reporting directly to our President and Chief Executive Officer) entitled Vice President, Strategic Initiatives – Renewable Energy.
As part of our commitment to innovating for a sustainable energy future, and in support of our strategic growth initiatives to build out a renewable energy platform, the Partnership created an executive-level position in fiscal 2021 (reporting directly to our President and Chief Executive Officer) entitled Vice President, Strategic Initiatives – Renewable Energy.
We conduct ongoing training programs to help ensure that our operations are in compliance with these and other applicable safety laws and regulations. We maintain various permits that are necessary to operate our equipment and facilities, some of which may be material to our operations.
We conduct ongoing training programs to help ensure that our operations comply with these and other applicable safety laws and regulations. We maintain various permits that are necessary to operate our equipment and facilities, some of which may be material to our operations.
In support of our efforts to successfully manage and grow our business, we will continue to identify ways to include more ESG initiatives in our strategies that support our customers, employees, investors, and the communities we serve, including initiatives that support our three-pillars strategic plan.
In support of our efforts to successfully manage and grow our business, we will continue to identify ways to include more ESG initiatives in our strategies that support our customers, employees, investors, and the communities we serve, including initiatives that 10 Table of Contents support our three-pillars strategic plan.
Although we make no assurance regarding the availability of supplies of propane in the future, we currently expect to be able to secure adequate supplies during fiscal 2023. During fiscal 2022, Crestwood Equity Partners L.P. (“Crestwood”) and Targa Liquids Marketing and Trade LLC (“Targa”) provided approximately 31% and 16% of our total propane purchases, respectively.
Although we make no assurance regarding the availability of supplies of propane in the future, we currently expect to be able to secure adequate supplies during fiscal 2024. During fiscal 2023, Crestwood Equity Partners L.P. (“Crestwood”) and Targa Liquids Marketing and Trade LLC (“Targa”) provided approximately 30% and 16% of our total propane purchases, respectively.
The Partnership and the Operating Partnership commenced operations in March 1996 in connection with the Partnership’s initial public offering of Common Units. 1 Table of Contents We currently file Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and current reports on Form 8-K with the SEC.
The Partnership and the Operating Partnership commenced operations in March 1996 in connection with the Partnership’s initial public offering of Common Units. We currently file Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and current reports on Form 8-K with the SEC.
Competition The fuel oil industry is a mature industry with total demand expected to remain relatively flat to moderately declining. The fuel oil industry is highly fragmented, characterized by a large number of relatively small, independently owned and operated local 5 Table of Contents distributors.
Competition The fuel oil industry is a mature industry with total demand expected to remain relatively flat to moderately declining. The fuel oil industry is highly fragmented, characterized by a large number of relatively small, independently owned and operated local distributors.
ESG Strategy and Initiatives We are committed to delivering safe, reliable, affordable, and low carbon intensity (“CI”) energy to our customers and the local communities we serve. We have made significant progress on our environmental, social and governance (“ESG”) initiatives, which accelerated with the launch of our Three Pillars of the Suburban Propane Experience in June 2019.
ESG Strategy and Initiatives We are committed to delivering safe, reliable, affordable, and low CI energy to our customers and the local communities we serve. We have made significant progress on our environmental, social and governance (“ESG”) initiatives, which accelerated with the launch of our Three Pillars of the Suburban Propane Experience in June 2019.
As of September 24, 2022, we were serving the energy needs of approximately 1.0 million residential, commercial, industrial and agricultural customers through approximately 700 locations in 42 states with operations principally concentrated in the east and west coast regions of the United States, as well as portions of the midwest region of the United States and Alaska.
As of September 30, 2023, we were serving the energy needs of approximately 1.0 million residential, commercial, industrial and agricultural customers through approximately 700 locations in 42 states with operations principally concentrated in the east and west coast regions of the United States, as well as portions of the midwest region of the United States and Alaska.
Based on industry statistics contained in the 2020 Annual Retail Propane Sales Report , as published by the Propane Education & Research Council in December 2021, and LP/Gas Magazine dated February 2021, the ten largest retailers, including us, account for approximately 33% of total retail sales of propane in the United States.
Based on industry statistics contained in the 2021 Annual Retail Propane Sales Report , as published by the Propane Education & Research Council in December 2022, and LP/Gas Magazine dated February 2022, the ten largest retailers, including us, account for approximately 34% of total retail sales of propane in the United States.
Internal Focus on Driving Operating Efficiencies, Right-Sizing Our Cost Structure and Enhancing Our Customer Mix. We focus internally on improving the efficiency of our existing operations, customer support, managing our cost structure, improving our customer mix, and hardening our cybersecurity defenses.
Internal Focus on Driving Operating Efficiencies, Right-Sizing Our Cost Structure and Enhancing Our Customer Mix. We focus internally on improving the efficiency of our existing operations, customer support, managing our cost structure, improving our 2 Table of Contents customer mix, and hardening our cybersecurity defenses.
Supply Our propane supply is purchased from approximately 40 wholesalers at approximately 160 supply points located throughout the United States and Canada. We make purchases primarily under one-year agreements that are subject to annual renewal, and also purchase propane on the spot market.
Supply Our propane supply is purchased from approximately 45 wholesalers at approximately 145 supply points located throughout the United States and Canada. We make purchases primarily under one-year agreements that are subject to annual renewal, and also purchase propane on the spot market.
Approximately 85% of our total propane purchases were from domestic suppliers and 100% came from North America in fiscal 2022. We seek to reduce the effect of propane price volatility on our product costs and to help ensure the availability of propane during periods of short supply.
Approximately 86% of our total propane purchases were from domestic suppliers and 100% came from North America in fiscal 2023. We seek to reduce the effect of propane price volatility on our product costs and to help ensure the availability of propane during periods of short supply.
Propane is non-toxic, clean burning and, when consumed, produces virtually no particulate matter. In addition, our equity investment in Oberon is included within the propane segment. Product Distribution and Marketing We distribute propane through a nationwide retail distribution network consisting of approximately 700 locations in 42 states as of September 24, 2022.
Propane is non-toxic, clean burning and, when consumed, produces virtually no particulate matter. In addition, our equity investment in Oberon is included within the propane segment. Product Distribution and Marketing We distribute propane and renewable propane through a nationwide retail distribution network consisting of approximately 700 locations in 42 states as of September 30, 2023.
Traditional propane is an alternative fuel under the Clean Air Act Amendments. Propane can offer immediate reductions in carbon emissions and immediate improvements in air quality over other traditional fuels, particularly in the transportation sector. Propane is non-toxic, does not produce sulfur dioxide and emits 60% to 70% fewer smog producing hydrocarbons than gasoline and diesel.
Traditional propane is an alternative fuel under the Clean Air Act Amendments. Propane can offer immediate reductions in carbon emissions and immediate improvements in air quality over other traditional fuels, particularly in the transportation sector. Propane is non-toxic and emits 60% to 70% fewer smog producing hydrocarbons than gasoline and diesel.
The balance of approximately 4% of the propane gallons sold by us in fiscal 2022 were for risk management activities and wholesale customers. No single customer accounted for 10% or more of our propane revenues during fiscal 2022. 3 Table of Contents Retail deliveries of propane are usually made to customers by means of bobtail and rack trucks.
The balance of approximately 4% of the propane gallons sold by us in fiscal 2023 were for risk management activities and wholesale customers. No single customer accounted for 10% or more of our propane revenues during fiscal 2023. Retail deliveries of propane are usually made to customers by means of bobtail and rack trucks.
No other single supplier accounted for 10% or more of our propane purchases in fiscal 2022.
No other single supplier accounted for 10% or more of our propane purchases in fiscal 2023.
The adoption of federal, state or local climate change legislation or regulatory programs to reduce emissions of GHGs could require us to incur increased capital and operating costs, with resulting impact on product price.
The further adoption or expansion of federal, state or local climate change law or regulatory programs to reduce emissions of GHGs could require us to incur increased capital and operating costs, with resulting impact on product price.
Our operations are principally concentrated in the east and west coast regions of the United States, as well as portions of the midwest region of the United States and Alaska. As of September 24, 2022, we serviced approximately 949,000 propane customers. Typically, our customer service centers are located in suburban and rural areas where natural gas is not readily available.
Our operations are principally concentrated in the east and west coast regions of the United States, as well as portions of the midwest region of the United States and Alaska. As of September 30, 2023, we serviced approximately 962,000 propane customers. Typically, our customer service centers are located in suburban and rural areas where natural gas is not readily available.
Accordingly, and unlike many publicly traded partnerships, the Partnership is controlled by our Unitholders through the independently elected Board. 11 Table of Contents Governance Highlights Several highlights that demonstrate our commitment to sound corporate governance include: • Supervisor and Committee Independence o Six of our seven Supervisors are independent, as of September 24, 2022 o Our Audit, Compensation and Nominating/Governance Committees are fully independent o Independent Supervisors chair each of our Committees • Board Leadership and Engagement o An independent Supervisor chairs our Board o Independent Supervisors conduct executive sessions at meetings without the presence of members of management o Supervisors attended more than 75% of the total number of meetings of the Board and of the Committees of the Board on which such Supervisor served in fiscal 2022 • Board Evaluations and Effectiveness o Our Board conducts annual self-assessments to evaluate Board and Committee effectiveness, and identify opportunities for improving our Board and Committee operations • Clawback, Insider Trading and Anti-Hedging Policies o Performance-based incentive awards or payments for our officers are subject to our Incentive Compensation Recoupment Policy, which permits the Partnership to recoup incentive compensation in the event of a material restatement of financial results, or other events that negatively impact the Partnership, including fraudulent or intentional misconduct that results in an adverse impact on our financial performance o Our Insider Trading Policy prohibits our Supervisors, executive officers and certain other key employees from engaging in insider trading, or in hedging transactions or derivative investments involving the Partnership’s equity securities • Share Ownership o Our Equity Holding Policy establishes guidelines for the level of equity holdings in the Partnership that Supervisors and our executive officers are expected to maintain o Supervisors are required to hold Common Units, the value of which is equivalent to 4x the cash portion of their annual retainer (including additional fees to Committee chairs) no later than the measurement date next following the second anniversary of the date upon which the Supervisor joined the Board o Our CEO is required to hold Common Units, the value of which is equivalent to 5x base salary o Other named executive officers are required to hold Common Units, the value of which is equivalent to 2.5x to 3x their base salary, depending upon their position Board Diversity Highlights Our Supervisors have extensive and diverse experience relevant to our business and strategy that enhances the knowledge of our Board and the insight that they provide the Partnership, including significant experience in the following industries: • Retail distribution of energy and other products; • Energy infrastructure and logistics; • Chemical processing and refining; • Energy consulting; • Public policy and government relations; • Mergers and acquisitions; • Investment banking and financial management; and • Business assurance.
Governance Highlights Highlights that demonstrate our commitment to sound corporate governance include: • Supervisor and Committee Independence o Eight of our nine Supervisors are independent, as of September 30, 2023 o Our Audit, Compensation and Nominating/Governance Committees are fully independent o Independent Supervisors chair each of our Committees • Board Leadership and Engagement o An independent Supervisor chairs our Board o Independent Supervisors conduct executive sessions at meetings without the presence of members of management o Supervisors attended more than 75% of the total number of meetings of the Board and of the Committees of the Board on which such Supervisor served in fiscal 2023 • Board Evaluations and Effectiveness o Our Board conducts annual self-assessments to evaluate Board and Committee effectiveness, and identify opportunities for improving our Board and Committee operations 12 Table of Contents • Clawback, Insider Trading and Anti-Hedging Policies o Performance-based incentive awards or payments for our officers are subject to both our Clawback Policy and our Incentive Compensation Recoupment Policy, which permits the Partnership to recoup incentive compensation in the event of a material restatement of financial results, or other events that negatively impact the Partnership, including fraudulent or intentional misconduct that results in an adverse impact on our financial performance o Our Insider Trading Policy prohibits our Supervisors, executive officers and certain other key employees from engaging in insider trading, or in hedging transactions or derivative investments involving the Partnership’s equity securities • Share Ownership o Our Equity Holding Policy establishes guidelines for the level of equity holdings in the Partnership that Supervisors and our executive officers are expected to maintain o Supervisors are required to hold Common Units, the value of which is equivalent to 4x the cash portion of their annual retainer (including additional fees to Committee chairs) no later than the measurement date next following the second anniversary of the date upon which the Supervisor joined the Board o Our CEO is required to hold Common Units, the value of which is equivalent to 5x base salary o Other named executive officers are required to hold Common Units, the value of which is equivalent to 2.5x to 3x their base salary, depending upon their position Board Diversity Highlights Our Supervisors have extensive and diverse experience relevant to our business and strategy that enhances the knowledge of our Board and the insight that they provide the Partnership, including significant experience in the following industries: • Retail distribution of energy and other products; • Energy infrastructure and logistics; • Chemical processing and refining; • Energy consulting; • Original equipment manufacturing; • Public policy and government relations; • Mergers and acquisitions; • Investment banking and financial management; and • Business assurance.
Our SuburbanCares corporate pillar highlights our continued dedication to philanthropic endeavors through the Partnership’s national partnership with the American Red Cross and countless local community sponsorships and events, as well as the many employee-focused initiatives that differentiate the Partnership as a great place to work.
Our SuburbanCares corporate pillar highlights our continued dedication to philanthropic endeavors through our national partnership with the American Red Cross and countless engagements in local community sponsorships and events, as well as the various employee-focused initiatives that differentiate the Partnership as a great place to work.
Our investments in Oberon and IH as well as our agreement with Adirondack Farms are expected to result in the production of rDME, hydrogen, and RNG all of which, along with renewable propane, are products that present an opportunity to generate environmental attributes. The monetization of these environmental attributes occurs under several state and federal programs.
Our investments in Oberon and IH, as well as our anaerobic digesters, are expected to result in the production of rDME, hydrogen, and RNG, respectively, all of which, along with renewable propane, are products that present an opportunity to generate environmental attributes. The monetization of these environmental attributes occurs under several state and federal programs.
We specialize in the distribution of propane, renewable propane, fuel oil and refined fuels, as well as the marketing of natural gas and electricity in deregulated markets and are an investor in low-carbon fuel alternatives.
We specialize in the distribution of propane, renewable propane, renewable natural gas (“RNG”), fuel oil and refined fuels, as well as the marketing of natural gas and electricity in deregulated markets and production of and investor in low-carbon fuel alternatives.
We continually monitor our operations with respect to potential environmental issues, including changes in legal requirements and remediation technologies. As of September 24, 2022, we had accrued environmental liabilities of $1.5 million representing the total estimated future liability for remediation and monitoring of all of our properties.
We continually monitor our operations with respect to potential environmental issues, including changes in legal requirements and remediation technologies. As of September 30, 2023, we had accrued environmental liabilities of $1.7 million representing the total estimated future liability for remediation and monitoring of all of our properties.
Additionally, under the Third Amended and Restated Agreement of Limited Partnership (the “Partnership Agreement”) of the Partnership, there are no incentive distribution rights for the benefit of the General Partner. The Partnership owns (directly and indirectly) all of the limited partner interests in the Operating Partnership. The Common Units represent 100% of the limited partner interests in the Partnership.
Additionally, under the Third Amended and Restated Agreement of Limited Partnership (as amended, the “Partnership Agreement”) of the Partnership, there are no incentive distribution rights for the benefit of the General Partner. The Partnership owns (directly and indirectly) all of the limited partner interests in the Operating Partnership.
Through our strategic investments in Oberon and IH, our collaboration with Adirondack Farms, and partnerships with key participants in the renewable energy sector, we have begun to develop an interconnected portfolio of renewable energy assets that are focused on the distribution of renewable fuels, including hydrogen and renewable natural gas.
Through our RNG Acquisition, strategic investments in Oberon and IH, our collaboration with Adirondack Farms, and collaborations with key participants in the renewable energy sector, we have begun to develop an interconnected portfolio of renewable energy assets that are focused on the distribution of renewable fuels, including hydrogen and RNG.
We are an industry leader in this regard by making strategic investments so we can be positioned to have an adequate clean energy supply as these laws and regulations become operative.
We are an industry leader in this regard by making strategic investments so we can be positioned to have an adequate clean energy supply as these laws and regulations become operative or require deeper emission reductions.
Through our dedicated sales efforts, we are actively promoting the use of propane in the transportation sector, and for each of the last three fiscal years, we sold an average of more than 28.7 million gallons of propane annually to the over-the-road vehicle and forklift markets.
Through our dedicated sales efforts, we are actively promoting the use of propane in the transportation sector, and for the last three fiscal years, we sold an average of nearly 30 million gallons of propane annually to the over-the-road vehicle and forklift markets.
An Order from the New York Public Service Commission (“NY PSC”) regarding low income consumers went into effect in 2018 and required that all energy service companies (“ESCOs”) stop serving certain low-income consumers. A similar order also went into effect in Pennsylvania in 2019.
Specifically, an Order from the New York Public Service Commission (“NY PSC”) regarding low-income consumers went into effect in 2018 and requires that all energy service companies (“ESCOs”) stop serving certain low-income consumers. Similar orders also went into effect in Pennsylvania in 2019 and Maryland in 2023.
Fuel Oil and Refined Fuels Product Distribution and Marketing We market and distribute fuel oil, kerosene, diesel fuel and gasoline to approximately 33,000 residential and commercial customers primarily in the northeast region of the United States. Sales of fuel oil and refined fuels for fiscal 2022 amounted to 22.8 million gallons.
Fuel Oil and Refined Fuels Product Distribution and Marketing We market and distribute fuel oil, kerosene, diesel fuel and gasoline to approximately 30,000 residential and commercial customers primarily in the northeast region of the United States. Sales of fuel oil and refined fuels for fiscal 2023 amounted to 19.1 million gallons.
Approximately 96% of the propane gallons sold by us in fiscal 2022 were to retail customers: 43% of those propane gallons to residential customers, 38% to commercial customers, 10% to industrial customers, 5% to government customers and 4% to agricultural customers.
Approximately 96% of the propane gallons sold by us in fiscal 2023 were to retail customers: 42% of those propane gallons to residential customers, 38% to commercial customers, 10% to industrial customers, 6% to government customers and 4% to agricultural customers.
Approximately 66% of the fuel oil and refined fuels gallons sold by us in fiscal 2022 were to residential customers, principally for home heating, 6% were to commercial customers, and 8% to other users. Sales of diesel and gasoline accounted for the remaining 20% of total volumes sold in this segment during fiscal 2022.
Approximately 65% of the fuel oil and refined fuels gallons sold by us in fiscal 2023 were to residential customers, principally for home heating, 7% were to commercial customers, and 7% to other users. Sales of diesel and gasoline accounted for the remaining 21% of total volumes sold in this segment during fiscal 2023.
In support of our long-term strategic growth initiative to build out a comprehensive renewable energy platform, we acquired a 38% equity stake in Oberon, a 25% stake in IH, and committed to building a dairy waste anaerobic digester in upstate New York for the production of renewable natural gas.
In support of our long-term strategic growth initiative to build out a comprehensive renewable energy platform, we acquired a 38% equity stake in Oberon, a 25% equity stake in IH, committed to building a dairy waste anaerobic digester in upstate New York for the production of RNG, and purchased anaerobic digesters operating in Columbus, Ohio and Stanfield, Arizona.
At the federal level those programs include; the renewable fuel standard program (“RFS”) which was authorized under the Energy Policy Act of 2005 and expanded through the Energy Independence and Security Act of 2007, and the Inflation Reduction Act.
At the federal level those programs include: the renewable fuel standard program (“RFS”), which was authorized under the Energy Policy Act of 2005 and expanded through the Energy Independence and Security Act of 2007, and the Inflation Reduction Act of 2022 (the “Inflation Reduction Act”) that was signed into law in 2022.
We have also executed agreements to purchase and distribute renewable propane, which offers a low carbon intensity alternative to traditional propane, 8 Table of Contents gasoline or diesel. We are committed to increasing the availability of; rDME blended propane, renewable propane, hydrogen, and RNG in the coming years.
We have also executed agreements to purchase and distribute renewable propane, which offers a low CI alternative to traditional propane, gasoline or diesel. We are committed to increasing the availability of blends of traditional propane with rDME and/or renewable propane, renewable propane, hydrogen, and RNG in the coming years.
Also in fiscal 2022, Suburban Renewables entered into an agreement to construct, own and operate a new biodigester system with Adirondack Farms (“Adirondack Farms”) in Clinton County, New York for the production of renewable natural gas (“RNG”).
Also in fiscal 2022, Suburban Renewable Energy entered into an agreement to construct, own and operate a new biodigester system with Adirondack Farms, a family dairy farm located in Clinton County, New York (“Adirondack Farms”) for the production of RNG.
As of September 24, 2022, 55 of our employees were represented by seven different local chapters of labor unions. We believe that our relations with both our union and non-union employees are satisfactory. In addition, we hire temporary workers to meet peak seasonal demands. 13 Table of Contents
As of September 30, 2023, 62 of our employees were represented by eight different local chapters of labor unions. We believe that our relations with both our union and non-union employees are satisfactory. In addition, we hire temporary workers to meet peak seasonal demands.
We sold approximately 401.3 million gallons of propane and 22.8 million gallons of fuel oil and refined fuels to retail customers during the year ended September 24, 2022. Together with our predecessor companies, we have been continuously engaged in the retail propane business since 1928.
We sold approximately 396.4 million gallons of propane and 19.1 million gallons of fuel oil and refined fuels to retail customers during the year ended September 30, 2023. Together with our predecessor companies, we have been continuously engaged in the retail propane business since 1928.
As of September 24, 2022, the majority of the storage capacity at our facility in Elk Grove, California was leased to third parties. Competition According to the U.S.
As of September 30, 2023, the storage capacity at our facility in Elk Grove, California was leased to third parties. 4 Table of Contents Competition According to the U.S.
In this Annual Report, unless otherwise indicated, the terms “Partnership,” “Suburban,” “we,” “us,” and “our” are used to refer to Suburban Propane Partners, L.P. and its consolidated subsidiaries, including the Operating Partnership.
Suburban Energy Finance Corp. has no assets and conducts no business operations. In this Annual Report, unless otherwise indicated, the terms “Partnership,” “Suburban,” “we,” “us” and “our” are used to refer to Suburban Propane Partners, L.P. and its consolidated subsidiaries, including the Operating Partnership.
Confidential and anonymous mechanisms for reporting concerns are also available and described in our Code of Business Conduct and Ethics. Cybersecurity The Partnership’s cybersecurity program is based upon the National Institute of Standards of Technology (NIST) Cybersecurity Framework.
Our senior leadership team, along with our Audit Committee, review matters reported through the Safety and Ethics Hotline. Confidential and anonymous mechanisms for reporting concerns are also available and described in our Code of Business Conduct and Ethics. Cybersecurity The Partnership’s cybersecurity program is based upon the National Institute of Standards of Technology (NIST) Cybersecurity Framework.
There are individual state LCFS Credit markets under the various LCFS Programs, and we can sell our LCFS Credits in these respective open markets. The climate change regulatory landscape is highly complex and continuously evolving.
There are individual state LCFS Credit markets under the various LCFS Programs, and we can sell our LCFS Credits in these respective open markets.
While there are differences in the CA LCFS, OR CFP, and WA CFS, all LCFS Programs seek to achieve their goals through the use of a cap and trade program where low carbon intensity transportation fuels generate LCFS Program credits (“LCFS Credits”).
While there are differences in the CA LCFS, OR CFP, and WA CFS, all LCFS Programs seek to achieve their goals through annual reductions in a 9 Table of Contents baseline where low CI transportation fuels that are below the baseline generate LCFS Program credits (“LCFS Credits”).
Supply We obtain fuel oil and other refined fuels in pipeline, truckload or tankwagon quantities, and have contracts with certain pipeline and terminal operators for the right to temporarily store fuel oil at 13 terminal facilities that we do not own.
No single customer accounted for 10% or more of our fuel oil and refined fuels revenues during fiscal 2023. 5 Table of Contents Supply We obtain fuel oil and other refined fuels in pipeline, truckload or tankwagon quantities, and have contracts with certain pipeline and terminal operators for the right to temporarily store fuel oil at 13 terminal facilities that we do not own.
We continuously evaluate our existing facilities to identify opportunities to optimize our return on assets by selectively divesting operations in slower growing markets, generating proceeds that can be reinvested in markets that present greater opportunities for growth.
We continuously evaluate our existing facilities to identify opportunities to optimize our return on assets by selectively divesting operations in slower growing markets, generating proceeds that can be reinvested in markets that present greater opportunities for growth. Our objective is to maximize the growth and profit potential of all of our assets. The Three Pillars of the Suburban Propane Experience.
Fuel oil is pumped from the tankwagon truck into a stationary storage tank that is located on the customer’s premises, which is owned by the customer. The capacity of customer storage tanks ranges from approximately 275 gallons to approximately 1,000 gallons. No single customer accounted for 10% or more of our fuel oil and refined fuels revenues during fiscal 2022.
Fuel oil is pumped from the tankwagon truck into a stationary storage tank that is located on the customer’s premises, which is owned by the customer. The capacity of customer storage tanks ranges from approximately 275 gallons to approximately 1,000 gallons.
Employees As of September 24, 2022, we had 3,174 full time employees, of whom 587 were engaged in general and administrative activities (including fleet maintenance), 37 were engaged in transportation and product supply activities and 2,550 were customer service center employees, as well as 95 part time employees.
Employees As of September 30, 2023, we had 3,240 full time employees, of whom 606 were engaged in general and administrative activities (including fleet maintenance), 72 were engaged in transportation and product supply activities and 2,562 were customer service center employees, as well as 105 part time employees.
Based on information to date, and because our policies and business practices are designed to comply with all applicable laws, we do not believe that the costs or liabilities associated with such inquiries or requests will result in a material adverse effect on our financial condition or results of operations; however, there can be no assurance that our financial condition or results of operations may not be materially and adversely affected as a result of current or future government investigations or civil litigation derived therefrom. 9 Table of Contents See the Risk Factor entitled “The ability of AES to acquire and retain retail natural gas and electricity customers is highly competitive, price sensitive and may be impacted by changes in state regulations” for a description of certain regulatory and litigation impacts on our AES business.
Based on information to date, and because our policies and business practices are designed to comply with all applicable laws, we do not believe that the costs or liabilities associated with such inquiries or requests will result in a material adverse effect on our financial condition or results of operations; however, there can be no assurance that our financial condition or results of operations may not be materially and adversely affected as a result of current or future government investigations or civil litigation derived therefrom.
The Court determined that the EPA’s emission reduction measures requiring an industry-wide shift in electricity production from coal- and natural gas-fired power plants to renewable power sources require specific congressional authorization which had not been given under the Clean Air Act. In August 2022, the Inflation Reduction Act of 2022 (the “Inflation Reduction Act”) was signed into law.
EPA, which did not preclude, but instead limited the EPA’s ability to regulate GHGs absent clear congressional authorization. The Court determined that the EPA’s emission reduction measures requiring an industry-wide shift in electricity production from coal- and natural gas-fired power plants to renewable power sources require specific congressional authorization, which had not been given under the Clean Air Act.
Other than as a holder of 784 Common Units that will remain in the General Partner, the General Partner does not have any economic interest in us or our Operating Partnership.
Other than as a holder of 784 Common Units that will remain in the General Partner, the General Partner does not have any economic interest in us or our Operating Partnership. Accordingly, and unlike many publicly traded partnerships, the Partnership is controlled by our Unitholders through the independently elected Board.
At the state level, those programs include; the California Low Carbon Fuel Standard (“CA LCFS”), the Oregon Clean Fuels Program (“OR CFP”), and the Washington Clean Fuel Standard (“WA CFS”).
At the state level, transportation fuel programs include: the California Low Carbon Fuel Standard (“CA LCFS”), the Oregon Clean Fuels Program (“OR CFP”), and the Washington Clean Fuel Standard (“WA CFS”). These states also have GHG reduction programs: the California Cap-and-Trade Program; the Oregon Climate Protection Program; and the Washington Cap-and-Invest Program.
For example, we have taken a 38% equity stake in Oberon, a producer of low carbon intensity, rDME transportation fuel, a 25% equity stake in IH, a veteran-owned and operated start-up company developing a low carbon intensity gaseous hydrogen ecosystem, and we entered into an agreement to produce RNG at Adirondack Farms, a family owned dairy farm in upstate New York.
For example, we have taken a 38% equity stake in Oberon, a producer of low carbon rDME transportation fuel, a 25% equity stake in IH, a veteran-owned and operated start-up company developing a low CI gaseous hydrogen ecosystem, acquired anaerobic digester facilities in Columbus, Ohio and Stanfield, Arizona through the RNG Acquisition that produce or will be producing RNG and we entered into an agreement to produce RNG at Adirondack Farms.
We currently cannot determine whether we will incur additional environmental liabilities or the extent or amount of any such liabilities, or the extent to which such additional liabilities would be subject to any contractual indemnification protections. 7 Table of Contents Certain rules and procedures imposed by the National Fire Protection Association (“NFPA”), as well as comparable state laws and regulations, govern the safe handling of propane and establish industry standards for propane storage, distribution and equipment installation and operation in all of the states in which we operate.
Certain rules and procedures imposed by the National Fire Protection Association (“NFPA”), as well as comparable state laws and regulations, govern the safe handling of propane and establish industry standards for propane storage, distribution and equipment installation and operation in all of the states in which we operate.
Many of our customers rely on propane, fuel oil or natural gas primarily as a heating source. Accordingly, the volume sold is directly affected by the severity of the winter weather in our service areas, which can vary substantially from year to year.
Accordingly, the volume sold is directly affected by the severity of the winter weather in our service areas, which can vary substantially from year to year.
This position focuses on identifying, analyzing and developing opportunities within the renewable energy space for potential future acquisitions, partnerships or collaborative arrangements that support the Partnership’s efforts to grow its overall business through investment in, and development of, innovative solutions that will help pave the way to lowering greenhouse gas emissions. 10 Table of Contents We present information about our commitment to sustainable and environmentally sound practices on the “Go Green” page on our website, which may be accessed at www.suburbanpropane.com/suburban-propane-experience/go-green .
This position focuses on identifying, analyzing and developing opportunities within the renewable energy space for potential future acquisitions, partnerships or collaborative arrangements that support the Partnership’s efforts to grow its overall business through investment in, and development of, innovative solutions that will help pave the way to lowering greenhouse gas emissions.

… 61 more changes not shown on this page.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

97 edited+64 added−18 removed139 unchanged
Biggest changeOur business and results of operations have been, and may continue to be, adversely affected by changes in national or global economic conditions, including inflation, interest rates, availability of capital markets, consumer spending rates, unemployment rates, energy availability and costs, the negative impacts caused by pandemics and public health crises, and the effects of governmental initiatives to manage economic conditions. 14 Table of Contents Volatility in financial markets and deterioration of national and global economic conditions have impacted, and may again impact, our business and operations in a variety of ways, including as follows: • our customers may reduce their discretionary spending, or may forego certain purchases altogether, during economic downturns, and may reduce or delay their payments for our products as a result of significant unemployment or an inability to operate or make payments; • if volatile or negative economic conditions continue to impact our customers, it could lead to increases in customer payment default rates and/or related challenges in collecting on accounts receivable; • if a significant percentage of our workforce is unable to work, including because of illness or travel or government restrictions, our operations may be negatively impacted; • decreased demand in the residential, commercial, industrial, government, agricultural or wholesale markets may adversely affect our propane, fuel oil and refined fuels, and natural gas and electricity businesses; • volatility in commodity and other input costs could substantially impact our result of operations; • if our indebtedness increases, or our consolidated EBITDA declines, it could adversely affect our liquidity and lead to increased risks of default under our credit agreement; and • it may become more costly or difficult to obtain debt or equity financing to fund investment opportunities, or to refinance our debt in the future, in each case on terms and within a time period acceptable to us.
Biggest changeVolatility in financial markets and deterioration of national and global economic conditions have impacted, and may again impact, our business and operations in a variety of ways, including as follows: • our customers may reduce their discretionary spending, or may forego certain purchases altogether, during economic downturns, and may reduce or delay their payments for our products as a result of significant unemployment or an inability to operate or make payments; • if volatile or negative economic conditions continue to impact our customers, it could lead to customer conservation efforts and increases in customer payment default rates or related challenges in collecting on accounts receivable; 17 Table of Contents • if a significant percentage of our workforce is unable to work, including because of illness or government travel restrictions, our operations may be negatively impacted; • decreased demand in the residential, commercial, industrial, government, agricultural or wholesale markets may adversely affect the market for our products and the performance of our business; • volatility in commodity and other input costs could substantially impact our result of operations; • if our indebtedness increases, or our consolidated EBITDA declines, it could adversely affect our liquidity and lead to increased risks of default under our credit agreement; • it may become more costly or difficult to obtain debt or equity financing to fund investment opportunities, or to refinance our debt in the future, in each case on terms and within a time period acceptable to us; and • climate change, environmental, social and corporate governance issues and uncertainty regarding regulation of such matters may increase our operating costs, impact our access to capital markets and potentially reduce the value of, or demand for, our products.
Our systems’ business continuity plans and insurance programs seek to mitigate such risks, but they cannot fully eliminate the risks as a failure or disruption could be experienced in any of our information systems. We face risks related to cybersecurity breaches of our systems and information technology and those of our third-party vendors.
Our information systems’ business continuity plans and insurance programs seek to mitigate such risks, but they cannot fully eliminate the risks as a failure or disruption could be experienced in any of our information systems. We face risks related to cybersecurity breaches of our systems and information technology and those of our third-party vendors.
As a result, except for some industrial and commercial applications, propane and fuel oil are generally not economically competitive with natural gas in areas where natural gas pipelines already exist. The gradual expansion of the nation’s natural gas distribution systems has made natural gas available in many areas that previously depended upon propane or fuel oil.
As a result, except for some industrial and commercial applications, propane and fuel oil are generally not economically competitive with natural gas in areas where natural gas pipelines already exist. The gradual expansion of the nation’s natural gas distribution systems has made natural gas available in areas that previously depended upon propane or fuel oil.
The federal, state and local climate change regulatory landscape is highly complex and rapidly and continuously evolving. Failure to comply with these federal and state regulations and future laws and regulations designed to reduce GHG emissions and address climate change, could result in the imposition of higher costs, penalties, fines, or restrictions on our operations.
The federal, state and local climate change regulatory landscape is highly complex and rapidly and continuously evolving. Failure to comply with these regulations and any future laws and regulations designed to reduce GHG emissions and address climate change, could result in the imposition of higher costs, penalties, fines, or restrictions on our operations.
Like most companies in the markets in which we operate, we are continuously challenged in attracting, developing and retaining a sufficient number of employees to operate our businesses throughout our operating geographies, particularly with regard to our driver and technician positions.
Like most companies in the markets in which we operate, we are continuously challenged in attracting, developing and retaining a sufficient number of qualified employees to operate our businesses throughout our operating geographies, particularly with regard to our driver and technician positions.
Cybersecurity threats to network and data security are becoming increasingly diverse and sophisticated. As threats become more frequent, intense and sophisticated, the costs of proactive defensive measures may increase as we seek to continue to protect our management information systems, websites and network.
Cybersecurity threats to network and data security are becoming increasingly diverse and sophisticated. As threats become more frequent, intense and sophisticated, the costs of proactive defensive measures may increase as we seek to continue to protect our information systems, websites, and network.
Damage or disruption to our supply chain, including third-party production or transportation and distribution capabilities, due to weather, including any potential effects of climate change, natural disasters, fires or explosions, terrorism, pandemics, strikes, government action, economic and operational considerations of producers and refineries, or other reasons beyond our control or the control of our suppliers and business partners, could impair our ability to acquire sufficient supplies of the products we sell.
Damage or disruption to our supply chain, including third-party production or transportation and distribution capabilities, due to weather, including any potential effects of climate change, natural disasters, fires or explosions, terrorism, pandemics, strikes, geopolitical conflict, government action, economic and operational considerations of producers and refineries, or other reasons beyond our control or the control of our suppliers and business partners, could impair our ability to acquire sufficient supplies of the products we sell.
We rely on our ability to access the capital and credit markets at rates and terms reasonable to us. A disruption in the capital and credit markets or increased volatility could impair our ability to access capital and credit markets at rates and terms acceptable to us or not at all.
We rely on our ability to access the capital and credit markets at rates and terms reasonable to us. A disruption in the capital and credit markets or increased volatility could impair our ability to access capital and credit markets at rates and terms acceptable to us or at all.
The revolving credit facility contains certain financial covenants: • requiring our consolidated interest coverage ratio, as defined, to be not less than 2.5 to 1.0 as of the end of any fiscal quarter; • prohibiting our total consolidated leverage ratio, as defined, from being greater than 5.75 to 1.0 as of the end of any fiscal quarter; • prohibiting the senior secured consolidated leverage ratio, as defined, of the Operating Partnership from being greater than 3.25 to 1.0 as of the end of any fiscal quarter.
The revolving credit facility contains certain financial covenants: • requiring our consolidated interest coverage ratio, as defined therein, to be not less than 2.5 to 1.0 as of the end of any fiscal quarter; • prohibiting our total consolidated leverage ratio, as defined therein, from being greater than 5.75 to 1.0 as of the end of any fiscal quarter; and • prohibiting the senior secured consolidated leverage ratio, as defined therein, of the Operating Partnership from being greater than 3.25 to 1.0 as of the end of any fiscal quarter.
Terrorist attacks, political unrest and hostilities in the Middle East or other energy producing regions could likely lead to increased volatility in the price and availability of propane, fuel oil and other refined fuels and natural gas, as well as our results of operations, our ability to raise capital and our future growth.
Terrorist attacks, political unrest and hostilities, and military action in the Middle East or other energy producing regions could likely lead to increased volatility in the price and availability of propane, fuel oil and other refined fuels and natural gas, as well as our results of operations, our ability to raise capital and our future growth.
Our industry in general, as well as the overall trucking industry, is currently experiencing a shortage of qualified drivers and technicians that is exacerbated by several factors, including: • an overall market where high driver turnover exists due to an increased number of alternative employment opportunities; • increased competition for drivers and technicians in the industry, which impacts compensation for those positions; and • a changing workforce demographic with a lack of younger employees who are qualified to join or replace aging drivers and technicians as they retire.
Our industry in general, as well as the overall trucking industry, is currently experiencing a shortage of qualified drivers and technicians that is exacerbated by several factors, including: • an overall market where high driver turnover exists due to an increased number of alternative employment opportunities; • increased competition for drivers and technicians in the industry, which impacts compensation for those positions; and • a changing workforce demographic with a lack of younger employees who are qualified to join or replace more tenured drivers and technicians as they retire.
While our emerging renewable energy platform may benefit from additional incentives for the growth of renewable energy, it is possible, especially in the short term, that such growth will be outweighed by restrictions placed on our sale of propane, fuel oil and refined fuels, and natural gas.
While our emerging renewable energy platform may benefit from additional incentives for the growth of renewable energy, it is possible, especially in the short term, that such growth will be outweighed by regulatory uncertainty and restrictions placed on our sale of propane, fuel oil and refined fuels, and natural gas.
We cannot guarantee that our insurance will be adequate to protect us from all material expenses related to potential future claims for personal injury and property damage or that these levels of insurance will be available at economical prices, or that all legal matters that arise will be covered by our insurance programs.
We cannot guarantee that our insurance will be adequate to protect us from all material expenses related to potential future claims for personal injury and property damage, that these levels of insurance will be available at economical prices in the future, or that all legal matters that arise will be covered by our insurance programs.
In addition, we will not be able to make any distributions to holders of our Common Units if there is, or after giving effect to such distribution, there would be, an event of default under the indentures governing the senior notes or the senior secured revolving credit facility.
In addition, we will not be able to make any distributions to holders of our Common Units if there is, or after giving effect to such distribution, there would be, an event of default under the indentures governing the senior notes, the senior secured revolving credit facility or the Green Bonds.
A successful IRS challenge to those positions could adversely affect the amount of tax benefits available to a Unitholder or result in a tax imposed upon us and borne by current Unitholders even if such Unitholder did not own units during the tax year under audit.
Treasury regulations. A successful IRS challenge to those positions could adversely affect the amount of tax benefits available to a Unitholder or result in a tax imposed upon us and borne by current Unitholders even if such Unitholder did not own units during the tax year under audit.
We may be subject to complaints and/or litigation involving our customers, employees and others with whom we conduct business, including claims for bodily injury, death and property damage related to operating hazards and risks normally associated with handling, storing and delivering combustible liquids such as propane, fuel oil and other refined fuels or claims based on allegations of discrimination, wage and hourly pay disputes, and various other claims as a result of other aspects of our business.
We may be subject to complaints and/or litigation involving our customers, employees and others with whom we conduct business, including claims for bodily injury, death and property damage related to operating hazards and risks normally 21 Table of Contents associated with handling, storing and delivering combustible liquids such as propane, fuel oil and other refined fuels or claims based on allegations of discrimination, wage and hourly pay disputes, and various other claims as a result of other aspects of our business.
Currently, income from RIN and LCFS Credit is not material to the Partnership results of operations; however, as we continue to invest in the build out of our renewable energy platform, we anticipate increased RIN and LCFS Credit income as well as financial benefits from investment tax credits and production tax credits.
Currently, income from RIN and LCFS Credits is not material to our results of operations; however, as we continue to invest in the build out of our renewable energy platform, we anticipate increased RIN and LCFS Credits income, as well as financial benefits from investment tax credits and production tax credits.
We prorate our items of income, gain, loss and deduction between transferors and transferees of our Common Units each month based upon the ownership of our Common Units on the first day of each month, instead of on the basis of the date a particular Common Unit is transferred.
We prorate our items of income, gain, loss and deduction between transferors and transferees of our Common Units each month based upon the ownership of our Common Units on the first day of each month, instead of on the basis of the date a particular Common Unit is transferred. U.S.
Unitholders will not be liable for assessments in addition to their initial capital investment in the Common Units. Under specific circumstances, however, Unitholders may have to repay to us amounts wrongfully returned or distributed to them.
Unitholders may have liability to repay distributions. Unitholders will not be liable for assessments in addition to their initial capital investment in the Common Units. Under specific circumstances, however, Unitholders may have to repay to us amounts wrongfully returned or distributed to them.
The EPA issued an Endangerment Finding under the federal Clean Air Act, which determined that emissions of GHGs, such as carbon dioxide, present an endangerment to public health and the environment because emissions of such gases may be contributing to the warming of the earth’s atmosphere, volatility in seasonal temperatures, increased frequency and severity of storms, floods and other climatic changes.
The EPA issued an Endangerment Finding under the federal Clean Air Act, which determined that emissions of greenhouse gases (“GHG”), such as carbon dioxide, present an endangerment to public health and the environment because emissions of such gases may be contributing to the warming of the earth’s atmosphere, volatility in seasonal temperatures, increased frequency and severity of storms, floods and other climatic changes.
AES was specifically and solely exempted from complying with the criteria concerning product offerings during the pendency of further rulemaking proceedings. In 18 Table of Contents September 2020, the NY PSC issued another Order reaffirming the Second Reset Order, including the exemption that allows AES to maintain its existing business model in New York while rulemaking proceedings continue.
AES was specifically and solely exempted from complying with the criteria concerning product offerings during the pendency of further rulemaking proceedings. In September 2020, the NY PSC issued another Order reaffirming the Second Reset Order, including the exemption that allows AES to maintain its existing business model in New York while rulemaking proceedings continue.
Accordingly, our current Unitholders may bear some or all of the audit adjustment, even if such Unitholders did not own units during the tax year under audit. If we make payments of taxes, penalties and interest resulting from audit adjustments, cash available to service debt or to make distributions to our Unitholders could be substantially reduced.
Accordingly, our current Unitholders may bear some or all of the audit adjustment, even if such Unitholders did not own units during the tax year 29 Table of Contents under audit. If we make payments of taxes, penalties and interest resulting from audit adjustments, cash available to service debt or to make distributions to our Unitholders could be substantially reduced.
The SEC has also proposed sweeping climate-change related disclosure rules that, if adopted, would require significant disclosure regarding GHG emissions and would require significant time and expense to collect and prepare the information which may need to be gathered due to new disclosure requirements and any regulatory requirements for independent attestation as to such disclosures.
With respect to disclosure, the SEC has proposed sweeping climate-change related disclosure rules that, if adopted, would require significant disclosure regarding GHG emissions and would require significant time and expense to collect and prepare the information which may need to be gathered due to new disclosure requirements and any regulatory requirements for independent attestation as to such disclosures.
A Unitholder’s share of any net passive income may be offset by unused losses from us carried over from prior years, but not by losses from other passive activities, including losses from other publicly-traded partnerships. 26 Table of Contents The tax gain or loss on the disposition of Common Units could be different than expected.
A Unitholder’s share of any net passive income may be offset by unused losses from us carried over from prior years, but not by losses from other passive activities, including losses from other publicly-traded partnerships. The tax gain or loss on the disposition of Common Units could be different than expected.
Our profitability in the retail propane, fuel oil and refined fuels and natural gas businesses is largely dependent on the difference between our costs to acquire and transport product, and retail sales price.
Our profitability in the retail propane, fuel oil and refined fuels and natural gas businesses is largely dependent on the difference between our costs to acquire and transport product, and retail sales prices.
It is the responsibility of each Unitholder to file all U.S. federal, state and local income tax returns that may be required of each Unitholder. 27 Table of Contents A Unitholder whose Common Units are loaned to a “short seller” to cover a short sale of Common Units may be considered as having disposed of those Common Units.
It is the responsibility of each Unitholder to file all U.S. federal, state and local income tax returns that may be required of each Unitholder. A Unitholder whose Common Units are loaned to a “short seller” to cover a short sale of Common Units may be considered as having disposed of those Common Units.
In that case, a Unitholder may no longer be treated for tax purposes as a partner with respect to those Common Units during the period of the loan to the short seller and may recognize gain or loss from such disposition.
In that case, a Unitholder may no longer be treated for tax purposes as a partner with respect to those Common Units during the period of the loan to the short seller and 31 Table of Contents may recognize gain or loss from such disposition.
Furthermore, should the IRS successfully contest some conventions used by us, a Unitholder could recognize more gain on the sale of Common Units than would be the case under those conventions, without the benefit of decreased income in prior years.
Furthermore, should the IRS successfully contest some conventions used by us, a Unitholder could 30 Table of Contents recognize more gain on the sale of Common Units than would be the case under those conventions, without the benefit of decreased income in prior years.
The disruptions to the global economy over the past three years have impeded global supply chains, resulting in longer lead times and increased freight expenses in general.
The disruptions to the global economy over the past several years have impeded global supply chains, resulting in longer lead times and increased freight expenses in general.
While our emerging renewable 20 Table of Contents energy platform may benefit from additional incentives for the growth of renewable energy, our sale of propane, fuel oil and refined fuels, and natural gas may experience significant negative impact from the restrictions placed on the use of fossil fuels.
While our emerging renewable energy platform may benefit from additional incentives for the growth of renewable energy, our sale of propane, fuel oil and refined fuels, and natural gas may experience significant negative impact from the restrictions placed on the use of fossil fuels.
The adoption of federal, state or local climate change legislation or regulatory programs to reduce emissions of GHGs could require us to incur increased capital and operating costs, with resulting impact on product price and demand.
The adoption of federal, state or local climate change legislation or regulatory programs to reduce emissions of GHGs and comply with disclosure obligations could require us to incur increased capital and operating costs, with resulting impact on product price and demand.
Delaware law provides that a limited partner who receives a distribution of this kind and knew at the time of the distribution that the distribution violated Delaware law will be liable to the limited partnership for the distribution amount for three years from the distribution date.
Delaware law provides that a limited partner who receives a distribution of this kind and knew at the time of the distribution that the distribution violated Delaware law will be liable to the limited partnership for the distribution amount for three 28 Table of Contents years from the distribution date.
In addition, any disruptions in the U.S. residential mortgage market (as a result of changes in tax laws or otherwise) and the rate of mortgage foreclosures may adversely affect retail customer demand for our products (in particular, products used for home heating and home comfort equipment) and our business and results of operations.
In addition, any disruptions in the United States residential mortgage market (as a result of changes in tax laws or otherwise) and the rate of mortgage foreclosures may adversely affect retail customer demand for our products (in particular, products used for home heating and home comfort equipment) and our business and results of operations.
The amount of distributions that we may make to holders of our Common Units is limited by the senior notes, and the amount of distributions that the Operating Partnership may make to us is limited by our revolving credit facility.
The amount of distributions that we may make to holders of our Common Units is limited by the senior notes, and the amount of distributions that the Operating Partnership may make to us is limited by our 26 Table of Contents revolving credit facility.
Distributions to foreign persons will be reduced by withholding taxes at the highest applicable effective tax rate, and foreign persons will be required to file U.S. federal income tax returns and pay tax on their share of our taxable income.
Cash distributions paid to foreign persons will be reduced by withholding taxes at the highest applicable effective U.S. tax rate, and foreign persons will be required to file U.S. federal tax returns and pay tax on their share of our taxable income allocated to them.
The extent and duration of the military action, sanctions and resulting market disruptions could be significant and could potentially have a substantial negative impact on the global economy and/or our business for an unknown period of time.
The extent and duration of the 20 Table of Contents military action, economic sanctions and resulting market disruptions could be significant and could potentially have a substantial negative impact on the global economy and/or our business for an unknown period of time.
Because we are dependent in part on independent third parties for the implementation and maintenance of certain aspects of our systems and because some of the causes of system interruptions may be outside of our control, we may not be able to remedy such interruptions in a timely manner, or at all.
Because we are dependent in part on third-party vendors for the implementation and maintenance of certain aspects of our information systems and because some of the causes of information system interruptions may be outside of our control, we may not be able to remedy such interruptions in a timely manner, or at all.
Weather conditions have a significant impact on the demand for propane, fuel oil and other refined fuels and natural gas for both heating and agricultural purposes. Many of our customers rely on propane, fuel oil or natural gas primarily as a heating source.
Weather conditions have a significant impact on the demand for our products, for both heating and agricultural purposes. Many of our customers rely on propane, fuel oil or natural gas primarily as a heating source.
Our Unitholders might be held liable for our obligations as if they were general partners if: • a court or government agency determined that we were conducting business in the state but had not complied with the state’s limited partnership statute; or • Unitholders’ rights to act together to remove or replace the General Partner or take other actions under our Partnership Agreement are deemed to constitute “participation in the control” of our business for purposes of the state’s limited partnership statute. 24 Table of Contents Unitholders may have liability to repay distributions.
Our Unitholders might be held liable for our obligations as if they were general partners if: • a court or government agency determined that we were conducting business in the state but had not complied with the state’s limited partnership statute; or • Unitholders’ rights to act together to remove or replace the General Partner or take other actions under our Partnership Agreement are deemed to constitute “participation in the control” of our business for purposes of the state’s limited partnership statute.
If we are unable to continue to attract and retain a sufficient number of new employees or retain existing employees with the technical skills upon which our business depends, we may be forced to adjust our compensation packages to pay higher wages, or offer other benefits that might impact our cost of labor, or force us at times to operate with fewer employees and face difficulties in meeting delivery demands for our customers, any of which could adversely affect our profitability and results of operations.
If we are unable to continue to attract and retain a sufficient number of new employees or retain existing employees with the technical skills upon which our business depends, we may be forced to adjust our compensation packages to pay higher wages, or offer other benefits that might impact our cost of labor, or force us at times to operate with fewer employees and face difficulties in meeting delivery demands for our customers, in particular during times of higher demand as a result of prolonged periods of cold weather or otherwise, any of which could adversely affect our profitability and results of operations.
Our renewable fuel investment projects are subject to a number of risks, including the willingness of customers to adopt these fuels, the financing, construction and development of facilities, our ability to generate a sufficient return on our investments, our dependence on third-party partners, and increased regulation and dependence on government funding for commercial viability.
Our renewable fuel investments are subject to a number of risks, including the willingness of customers to adopt these fuels, the financing, construction and development of facilities, our ability to generate a sufficient return on our investments, our dependence on third-party partners, increased or changing regulation, and dependence on government incentives for commercial viability.
In addition, the integration of an acquired business may result in material unanticipated challenges, expenses, liabilities or competitive responses, including: • a failure to implement our strategy for a particular strategic transaction, including successfully integrating the acquired business into our existing infrastructure, or a failure to realize value from a strategic investment; • inconsistencies between our standards, procedures and policies and those of the acquired business; • costs or inefficiencies associated with the integration of our operational and administrative systems; 19 Table of Contents • an increased scope and complexity of our operations which could require significant attention from management and could impose constraints on our operations or other projects; • unforeseen expenses, delays or conditions, including required regulatory or other third-party approvals or consents, or provisions in contracts with third parties that could limit our flexibility to take certain actions; • an inability to retain the customers, employees, suppliers and/or business partners of the acquired business or generate new customers or revenue opportunities through a strategic transaction; • the costs of compliance with local laws and regulations and the implementation of compliance processes, as well as the assumption of unexpected liabilities, litigation, penalties or other enforcement actions; and • higher than expected costs arising due to unforeseen changes in tax, trade, environmental, labor, safety, payroll or pension policies.
In addition, the integration of an acquired business may result in material unanticipated challenges, expenses, liabilities or competitive responses, including: • a failure to implement our strategy for a particular strategic transaction, including successfully integrating the acquired business into our existing infrastructure, or a failure to realize value from a strategic investment; • inconsistencies between our standards, procedures and policies and those of the acquired business; • costs or inefficiencies associated with the integration of our operational and administrative systems; • an increased scope and complexity of our operations, as well as those of our strategic investments, which could require significant attention from management and could impose constraints on our operations, as well of those of our strategic investments, or other projects; • unforeseen expenses, delays or conditions, including required regulatory or other third party approvals or consents, or provisions in contracts with third-parties that could limit our flexibility to take certain actions; • unexpected or unforeseen capital expenditures associated with acquired businesses or assets to maintain business in the ordinary course; • our ability to continue to monetize certain environmental and/or tax attributes that may be produced through our renewable energy acquisitions or assets; • an inability to retain the customers, employees, suppliers and/or business partners of the acquired business or generate new customers or revenue opportunities through a strategic transaction; • the costs of compliance with local laws and regulations and the implementation of compliance processes, as well as the assumption of unexpected liabilities, litigation, penalties or other enforcement actions; and • higher than expected costs arising due to unforeseen changes in tax, trade, environmental, labor, safety, payroll or pension policies.
However, such an assignee is not obligated for liabilities unknown to him at the time he or she became a limited partner if the liabilities could not be determined from the partnership agreement. Our limited partner interest and Unitholders’ percentage of ownership may be diluted in the future and additional taxable income may be allocated to each Unitholder.
However, such an assignee is not obligated for liabilities unknown to them at the time that they became a limited partner if the liabilities could not be determined from the partnership agreement. Our limited partner interest and Unitholders’ percentage of ownership may be diluted in the future and additional taxable income may be allocated to each Unitholder.
Due to high inflation in the United States during fiscal 2022, we have experienced higher commodity, transportation and labor costs and the cost of tanks and other equipment, which have impacted our profitability in recent periods and may continue to do so while high inflationary conditions exist.
Due to high inflation in the United States in recent years, we have experienced higher commodity, transportation and labor costs and the cost of tanks and other equipment, which have impacted our profitability in recent periods and may continue to do so while these conditions exist.
Risks of cybersecurity incidents caused by malicious third parties using sophisticated, targeted methods to circumvent firewalls, encryption, and other security defenses, could include hacking, viruses, malicious software, ransomware, phishing attacks, denial of service attacks and other attempts to capture, disrupt or gain unauthorized access to data are rapidly evolving and could lead to disruptions in our management information systems, websites or other data processing systems, unauthorized release of confidential or otherwise protected information or corruption of data.
Risks of cybersecurity incidents caused by malicious third parties using sophisticated, targeted methods to circumvent firewalls, encryption, and other security defenses, including hacking, viruses, malicious software, ransomware, phishing attacks, denial of service attacks and other attempts to capture, disrupt or gain unauthorized access to data are rapidly evolving and could lead to disruptions in our information systems, websites, or other data processing systems and unauthorized disclosure, deletion or modification of confidential or other protected information.
We can give no assurance that we will be able to acquire other retail distributors, add new customers or retain existing customers. Energy efficiency, general economic conditions and technological advances have affected and may continue to affect demand for propane and fuel oil by our retail customers.
We can give no assurance that we will be able to acquire other retail distributors, open new customer service centers, or add new customers or retain existing customers. Energy efficiency, general economic conditions, technological advances and legislative bans have affected and may continue to affect demand for propane, fuel oil and natural gas by our retail customers.
We and the Operating Partnership were in compliance with all covenants and terms of the senior notes and the revolving credit facility as of September 24, 2022.
We and the Operating Partnership were in compliance with all covenants and terms of the senior notes and the revolving credit facility as of September 30, 2023.
Any successful efforts by individuals to infiltrate, break into, disrupt, damage or otherwise steal from us or our third-party service providers’ security or information systems could damage our reputation and expose us to increased costs, litigation or other liability that could adversely impact our financial condition or results of operations.
Any successful efforts by individuals to infiltrate, break into, disrupt, damage or otherwise steal from us or our third-party service providers’ security or information systems could expose us to increased costs, litigation expenses, regulatory actions, fines and penalties, or other liabilities that could adversely impact our financial condition or results of operations.
As required by U.S. generally accepted accounting principles (“GAAP”), we establish reserves based on our assessment of actual or potential loss contingencies, including contingencies related to legal claims asserted against us.
As required by accounting principles generally accepted in the United States (“GAAP”), we establish reserves based on our assessment of actual or potential loss contingencies, including contingencies related to legal claims asserted against us.
Sudden increases in our costs to acquire and transport propane, fuel oil and other refined fuels and natural gas due to, among other things, our inability to obtain adequate supplies from our usual suppliers, or our inability to obtain adequate supplies of such products from alternative suppliers, or inflationary conditions, may adversely affect our operating results.
Sudden increases in our costs to acquire and transport our products due to, among other things, our inability to obtain adequate supplies from our usual suppliers, or our inability to obtain adequate supplies of such products from alternative suppliers, or inflationary conditions, may adversely affect our operating results.
Additionally, the open markets where RINs and LCFS Credits are traded have experienced increased volatility over the past year and continued volatility in the future may adversely impact the value of RINs and LCFS Credits sold by the Partnership.
Additionally, the open markets where RINs and LCFS Credits are traded have experienced significant volatility in the past and continued volatility in the future may adversely impact the value of RINs and LCFS Credits sold by us.
The competition for these acquisitions is intense and we can make no assurance that we will be able to successfully acquire other businesses on economically acceptable terms or, if we do, that we can integrate the operations of acquired businesses effectively or to realize the expected benefits of such transactions within the anticipated timeframe, or at all, such as cost savings, synergies, sales and growth opportunities.
The competition for propane, fuel oil, and renewable energy acquisitions is intense and we can make no assurance that we will be able to successfully acquire other businesses on economically acceptable terms or at all, or, if we do, that we can integrate and operate those acquired businesses effectively or in a way to realize the expected benefits of such transactions within the anticipated timeframe, or at all, such as cost savings, synergies, sales and growth opportunities.
This could limit our ability to refinance long-term debt at or in advance of maturities or could force us to access capital and credit markets at rates or terms normally considered to be unreasonable. RISKS RELATED TO OUR COMMON UNITS Cash distributions are not guaranteed and may fluctuate with our performance and other external factors.
This could limit our ability to refinance long-term debt at or in advance of maturities or could force us to access capital and credit markets at rates or terms normally considered to be unreasonable, any of which could adversely affect our results of operations, cash flows and financial condition. 27 Table of Contents RISKS RELATED TO OUR COMMON UNITS Cash distributions are not guaranteed and may fluctuate with our performance and other external factors.
To the extent that the Russian military action in Ukraine persists and related price volatility and geopolitical instability continues, and to the extent that any potential military action intensifies in the region or in other parts of the world which may further increase volatility in the price and supply of natural gas, oil, propane and other refined fuels, our business and results of operations could be adversely impacted.
To the extent that the Russian military action in Ukraine or the Israel-Hamas war continues and related price volatility and geopolitical instability continue, and to the extent that military action intensifies in those regions or in other parts of the world, which may further increase volatility in the price and supply of propane, fuel oil and other refined fuels and natural gas, our business and results of operations could be adversely impacted.
We cannot predict what impact changes to existing federal, state, or local programs designed to reduce GHG emissions and address climate change may have on our business. Nor can we predict what impact the creation of future federal, state, and local programs designed to reduce GHG emissions and address climate change will have on our business.
We cannot predict what impact changes to existing federal, state, or local programs designed to reduce GHG emissions and address climate change may have on our business.
There is increasing interest at the federal, state, and local level to further regulate GHG emissions by incentivizing the production of renewable energy and disincentivizing the use of fossil fuels.
There is increasing interest at the federal, state, and local level to further regulate GHG emissions by incentivizing the production of renewable energy and disincentivizing the use of fossil fuels and in some cases, force the electrification of several aspects of the economy.
The success of these businesses is subject to a number of factors and risks, including unpredictability and uncertainty as to the willingness of customers in their intended markets to adopt the use of these fuels, and will be dependent upon perceptions about the benefits of these fuels relative to other alternative fuels; increases, decreases or volatility in demand; use and prices of crude oil, gasoline and other fuels and energy sources; and the adoption or expansion of government policies, programs, funding or incentives in favor of these or alternative fuels.
The success of these businesses and investments is subject to a number of factors and risks, including unpredictability and uncertainty as to the willingness of customers in their intended markets to adopt the use of these fuels, which will be dependent upon perceptions about the benefits of these fuels relative to other alternative fuels; increases, decreases or volatility in demand; on-site operational constraints such as the availability of feedstock or the reliable operation of anaerobic digesters with respect to production of renewable fuels; use and prices of crude oil, gasoline and other fuels and energy sources; and the adoption or expansion of government policies, programs, funding or incentives in favor of these or alternative fuels.
We have expanded our Go Green with Suburban Propane corporate pillar with our investments in renewable and low-carbon energy sources offered through our investments in Oberon and IH and our agreement to build an anaerobic digester at Adirondack Farms.
We have expanded our Go Green with Suburban Propane corporate pillar with our investments in renewable and low-carbon energy sources offered through our investments in Oberon and IH, our agreement to build an anaerobic digester at Adirondack Farms, our purchase of RNG production and distribution assets through SuburbanRNG – Columbus and SuburbanRNG – Stanfield and our sales of renewable propane.
Instability in the financial markets as a result of terrorism or military conflict could also affect our ability to raise capital. The ongoing conflict in Ukraine as a result of Russia’s significant military action has caused, and could intensify, volatility in the price and supply of natural gas, oil, and propane and other refined fuels.
Instability in the financial markets as a result of terrorism or military conflict could also affect our ability to raise capital. The ongoing geopolitical conflicts around the world, including in Ukraine and in the Middle East, have caused, and could intensify, volatility in the price and supply of natural gas, oil, and propane and other refined fuels.
In addition, the acquisition, financing, construction and development of these projects involves numerous risks; including the ability to obtain financing for a project on acceptable terms or at all; difficulties in identifying, obtaining, and permitting suitable sites for new projects; failure to obtain all necessary rights to land access and use; inaccuracy of assumptions with respect to the cost and schedule for completing construction; delays in deliveries or increases in the price of equipment; permitting and other regulatory issues, license revocation and changes in legal requirements.
In addition, the acquisition, financing, construction and development of these projects involves numerous risks, including: • the ability to obtain financing for a project on acceptable terms or at all; • difficulties in identifying, obtaining, and permitting suitable sites for new projects; • failure to obtain all necessary rights to land access and use; • inaccuracy of assumptions with respect to the cost and schedule for completing construction; • project delays, including delays in deliveries or increases in the price of equipment or feedstock; • on-site operational issues relating to the availability of feedstock for the anaerobic digesters or other issues relating to the reliable production of projectable quantities of renewable natural gas; labor shortages; and • legal challenges by local populations, permitting and other regulatory issues, license revocation and changes in legal requirements.
High prices can lead to customer conservation, resulting in reduced demand for our products. In recent months, higher commodity, transportation and labor costs due to inflationary conditions have impacted wholesale prices and caused certain customers to reduce their consumption of energy.
High prices can lead to customer conservation, resulting in reduced demand for our products. Higher commodity, transportation and labor costs due to inflationary conditions have impacted wholesale prices and can cause certain customers to reduce their consumption of energy, which could have a negative impact on our sales and profitability.
In addition to competing with other sources of energy, our propane and fuel oil businesses compete with other distributors of those respective products principally on the basis of price, service and availability.
Propane and fuel oil compete to a lesser extent with each other due to the cost of converting from one source to the other. In addition to competing with other sources of energy, our propane and fuel oil businesses compete with other distributors of those respective products principally on the basis of price, service and availability.
As of September 24, 2022, our long-term debt consisted of $350.0 million in aggregate principal amount of 5.875% senior notes due March 1, 2027, $650.0 million in aggregate principal amount of 5.0% senior notes due June 1, 2031 and $89.6 million outstanding under our $500.0 million senior secured revolving credit facility.
As of September 30, 2023, our long-term debt consisted of $350.0 million in aggregate principal amount of 5.875% senior notes due March 1, 2027, $650.0 million in aggregate principal amount of 5.0% senior notes due June 1, 2031, $80.6 million in aggregate principal amount of 5.5% Green Bonds due October 1, 2028 through October 1, 2033 and $132.0 million outstanding under our $500.0 million senior secured revolving credit facility.
High prices for propane, fuel oil and other refined fuels and natural gas can lead to customer conservation, resulting in reduced demand for our product. Prices for propane, fuel oil and other refined fuels and natural gas are subject to fluctuations in response to changes in wholesale prices and other market conditions beyond our control.
Prices for propane, fuel oil and other refined fuels and natural gas are subject to fluctuations in response to changes in wholesale prices and other market conditions beyond our control.
The plaintiff has filed an appeal to the Second Circuit Court of Appeals. While AES believes that the appeal is without merit and intends to vigorously defend itself in the matter, we are unable to predict at this time the ultimate outcome of the New York action.
The plaintiff has filed an appeal to the Second Circuit Court of Appeals. The matter has been fully briefed, argued, and a decision is pending. While AES believes that the appeal is without merit and has vigorously defended the decision on appeal, we are unable to predict at this time the ultimate outcome of the New York action.
Numerous states and municipalities have also adopted laws and policies on climate change and GHG emission reduction targets. For example, in July 2019, the Climate Leadership and Community Protection Act was signed into law in New York, establishing a statewide climate action framework which includes a target to reduce net GHG emissions to zero by 2050.
For example, in July 2019, the Climate Leadership and Community Protection Act was signed into law in New York, establishing a statewide climate action framework which includes a target to reduce net GHG emissions to zero by 2050.
Any one of these factors could result in delays, increased costs or decreases in the amount of expected revenues related to combining the businesses or derived from a strategic transaction and could adversely impact our financial condition or results of operations.
Any one of these factors could result in delays, increased costs or decreases in the amount of expected revenues related to combining the businesses or derived from a strategic transaction and could adversely impact our financial condition or results of operations. 22 Table of Contents Current conditions in the global capital and credit markets, and general economic pressures, may adversely affect our financial position and results of operations.
However, if we are ultimately unable to successfully defend our AES business in this class action lawsuit, a decision rendered against AES could have an adverse impact on our business and operations.
If the plaintiff prevails on appeal, the matter will return to the trial court for further proceedings. If we are ultimately unable to successfully defend our AES business in this class action lawsuit, a decision rendered against AES could have an adverse impact on our business and operations.
We have opted to purchase insurance coverage for terrorist acts within our property and casualty insurance programs, but we can give no assurance that our insurance coverage will be adequate to fully compensate us for any losses to our business or property resulting from terrorist acts. 17 Table of Contents The conflict in Ukraine and related price volatility and geopolitical instability could negatively impact our business.
We have opted to purchase insurance coverage for terrorist acts within our property and casualty insurance programs, but we can give no assurance that our insurance coverage will be adequate to fully compensate us for any losses to our business or property resulting from terrorist acts.
The adoption of climate change legislation could negatively impact our operations and result in increased operating costs and reduced demand for the products and services we provide.
The impact of any one or all of the foregoing factors may adversely affect our financial condition and results of operations. The adoption of climate change legislation could negatively impact our operations and result in increased operating costs and reduced demand for the products and services we provide.
Our ability to make principal and interest payments depends on our future performance, which is subject to many factors, some of which are beyond our control.
Our ability to make principal and interest payments depends on our future performance, which is subject to many factors, some of which are beyond our control, including, but not limited to, the risks discussed elsewhere in this section.
Furthermore, variations in weather in one or more regions in which we operate can significantly affect the total volume of propane, fuel oil and other refined fuels and natural gas we sell and, consequently, our results of operations.
If this trend of warmer than normal temperatures continues, it could have a negative impact on our financial performance. Furthermore, variations in weather in one or more regions in which we operate can significantly affect the total volume of propane, fuel oil and other refined fuels and natural gas we sell and, consequently, our results of operations.
Because we cannot match transferors and transferees of Common Units and because of other reasons, uniformity of the economic and tax characteristics of the Common Units to a purchaser of Common Units of the same class must be maintained.
Because we cannot match transferors and transferees of Common Units and because of other reasons, uniformity of the economic and tax characteristics of the Common Units to a purchaser of Common Units of the same class must be maintained. To maintain uniformity and for other reasons, we have adopted certain depreciation and amortization conventions that may be inconsistent with U.S.
The development of these products may also be negatively affected by production risks resulting from mechanical breakdowns, faulty technology, competitive markets, or changes to the laws and regulations that mandate the use of renewable energy sources, and the other regulatory risks discussed above under the caption, “ The adoption of climate change legislation could negatively impact our operations and result in increased operating costs and reduced demand for the products and services we provide .” 21 Table of Contents We face risks related to our reliance on particular management information systems and communication networks to effectively manage all aspects of our delivery of propane.
The 23 Table of Contents development of these products may also be negatively affected by production risks resulting from mechanical breakdowns, faulty technology, competitive markets, or changes to the laws and regulations that mandate the use of renewable energy sources, and the other regulatory risks discussed above under the caption, “The adoption of climate change legislation could negatively impact our operations and result in increased operating costs and reduced demand for the products and services we provide.” A prolonged environment of low prices or reduced demand for RNG could have an adverse effect on our long-term business prospects, financial condition and results of renewable operations.
For example, average temperatures in our service territories were 10% warmer than normal for each of fiscal 2022, fiscal 2021 and fiscal 2020, as measured by the number of heating degree days reported by the National Oceanic and Atmospheric Administration (“NOAA”). If this trend continues, it could have a negative impact on our financial performance.
For example, average temperatures in our service territories were 8% warmer than normal for fiscal 2023, and 10% warmer than normal for fiscal 2022 and fiscal 2021, as measured by the number of heating degree days reported by the National Oceanic and Atmospheric Administration.
Future technological advances in heating, conservation and energy generation and continued economic weakness may adversely affect our volumes sold, which, in turn, may adversely affect our financial condition and results of operations. 16 Table of Contents Current conditions in the global capital and credit markets, and general economic pressures, may adversely affect our financial position and results of operations.
Future technological advances in heating, conservation and energy generation and economic weakness may adversely affect our volumes sold, which, in turn, may adversely affect our financial condition and results of operations.
The generation and monetization of the environmental attributes resulting from our investments in Oberon and IH, our agreement with Adirondack Farms to build an anaerobic digester, and our sale of renewable propane are contingent on several state and federal programs; including the RFS, the Inflation Reduction Act, CA LCFS, OR CFP, and WA CFS.
The generation and monetization of the environmental attributes resulting from our renewable natural gas assets and our sale of renewable propane are contingent on several state and federal programs; including the RFS, the Inflation Reduction Act, the Infrastructure Investment and Jobs Act, CA LCFS, OR CFP, and WA CFS.
We will generally have the ability to allocate any such tax liability to our current and former Unitholders in accordance with their interests in us during the year under audit.
If the IRS makes audit adjustments to our income tax returns, it may collect any resulting taxes (including any applicable penalties and interest) directly from us. We will generally have the ability to allocate any such tax liability to our current and former Unitholders in accordance with their interests in us during the year under audit.
From time to time, we enter into hedging transactions to reduce our business risks arising from fluctuations in commodity prices and interest rates.
Our use of derivative contracts involves credit and regulatory risk and may expose us to financial loss. From time to time, we enter into hedging transactions to reduce our business risks arising from fluctuations in commodity prices and interest rates.
As a result, our costs of acquiring and transporting alternative supplies of these products to our facilities may be materially higher at least on a short-term basis.
As a result, our costs of acquiring and transporting alternative supplies of these products to our facilities may be materially higher at least on a short-term basis. Because we may not be able to pass on to our customers immediately, or in full, all increases in our wholesale and transportation costs of our products, these increases could reduce our profitability.

… 99 more changes not shown on this page.

Item 2. Properties

Properties — owned and leased real estate

4 edited+0 added−0 removed1 unchanged
Biggest changeIn addition, as of September 24, 2022 we had 1,113 bobtail and rack trucks, of which we owned 8%, 108 fuel oil tankwagons, of which we owned 23%, and 1,318 other delivery and service vehicles, of which we owned 22%. We lease the vehicles we do not own.
Biggest changeIn addition, as of September 30, 2023 we had 1,022 bobtail and rack trucks, of which we owned 6%, 86 fuel oil tankwagons, of which we owned 7%, and 1,242 other delivery and service vehicles, of which we owned 18%. We lease the vehicles we do not own.
ITEM 2. P ROPERTIES As of September 24, 2022, we owned approximately 73% of our customer service center and satellite locations and leased the balance of our retail locations from third parties. We own and operate a 22 million gallon refrigerated, aboveground propane storage facility in Elk Grove, California.
ITEM 2. P ROPERTIES As of September 30, 2023, we owned approximately 74% of our customer service center and satellite locations and leased the balance of our retail locations from third parties. We own and operate a 22 million gallon refrigerated, above ground propane storage facility in Elk Grove, California.
As of September 24, 2022, we also owned approximately 836,000 customer propane storage tanks with typical capacities of 100 to 500 gallons, 56,000 customer propane storage tanks with typical capacities of over 500 gallons and 261,000 portable propane cylinders with typical capacities of five to ten gallons.
As of September 30, 2023, we also owned approximately 829,000 customer propane storage tanks with typical capacities of 100 to 500 gallons, 55,000 customer propane storage tanks with typical capacities of over 500 gallons and 245,000 portable propane cylinders with typical capacities of five to ten gallons.
As of September 24, 2022, we had a fleet of 11 transport truck tractors, of which we owned 6, and 33 railroad tank cars, of which we owned none.
As of September 30, 2023, we had a fleet of 10 transport truck tractors, of which we owned 4, and 33 railroad tank cars, of which we owned none.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

2 edited+1 added−0 removed4 unchanged
Biggest changeThe plaintiff has filed an appeal to the Second Circuit Court of Appeals. We believe that the appeal is without merit.
Biggest changeThe plaintiff has filed an appeal to the Second Circuit Court of Appeals. The matter has been fully briefed, argued, and a decision is pending. While we believe that the appeal is without merit, we are unable to predict at this time the ultimate outcome of the New York action.
MINE SAFETY D ISCLOSURES None. 28 Table of Contents PART II
MINE SAFETY D ISCLOSURES None. 32 Table of Contents PART II
Added
If the plaintiff prevails on appeal, the matter will return to the trial court for further proceedings. If we are ultimately unable to successfully defend our AES business in this class action lawsuit, a decision rendered against AES could have an adverse impact on AES’s business and operations.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

1 edited+0 added−0 removed2 unchanged
Biggest changeAs of November 21, 2022, there were 497 Unitholders of record (based on the number of record holders and nominees for those Common Units held in street name). On October 20, 2022, we announced that our Board of Supervisors declared a quarterly distribution of $0.325 per Common Unit for the three months ended September 24, 2022.
Biggest changeAs of November 20, 2023, there were 482 Unitholders of record (based on the number of record holders and nominees for those Common Units held in street name). On October 26, 2023, we announced that our Board of Supervisors declared a quarterly distribution of $0.325 per Common Unit for the three months ended September 30, 2023.

Item 7. Management's Discussion & Analysis

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

80 edited+17 added−23 removed59 unchanged
Biggest changeInterest Expense, net (Dollars in thousands) Fiscal Fiscal Percent 2022 2021 Decrease Decrease Interest expense, net $ 60,658 $ 68,132 $ (7,474 ) (11.0 )% As a percent of total revenues 4.0 % 5.3 % Net interest expense of $60.7 million for fiscal 2022 decreased $7.5 million from $68.1 million in the prior year, primarily due to the impact of the refinancing of two tranches of senior notes at lower rates in the third quarter of the prior year, as well as a lower average 35 Table of Contents level of outstanding debt.
Biggest changeDepreciation and Amortization (Dollars in thousands) Fiscal Fiscal Percent 2023 2022 Increase Increase Depreciation and amortization $ 62,582 $ 58,848 $ 3,734 6.3 % As a percent of total revenues 4.4 % 3.9 % Depreciation and amortization expense of $62.6 million in fiscal 2023 increased $3.7 million, or 6.3%, from $58.8 million in the prior year, primarily as a result of depreciation and amortization from the tangible and intangible assets from the RNG Acquisition, partially offset by accelerated depreciation recorded in the prior year on certain assets taken out of service. 39 Table of Contents Interest Expense, net (Dollars in thousands) Fiscal Fiscal Percent 2023 2022 Increase Increase Interest expense, net $ 73,393 $ 60,658 $ 12,735 21.0 % As a percent of total revenues 5.1 % 4.0 % Net interest expense of $73.4 million for fiscal 2023 increased $12.7 million, or 21.0% from $60.7 million in the prior year, primarily due to the impact of higher benchmark interest rates for borrowings under our Revolving Credit Facility and a higher average level of outstanding borrowings under that facility to fund the RNG Acquisition, as well as the impact of $80.6 million in Green Bonds assumed in the RNG Acquisition.
In addition, we sell propane and fuel oil to customers at fixed prices, and enter into derivative instruments to hedge a portion of our exposure to fluctuations in commodity prices as a result of selling the fixed price contracts.
In addition, we sell propane and fuel oil to customers at fixed prices, and enter into derivative instruments to hedge a portion of our exposure to fluctuations in commodity prices as a result of selling the fixed price contracts.
At expiration, the derivative contracts are settled by the delivery of the product to the respective party or are settled by the payment of a net amount equal to the difference between the then market price and the fixed contract price or option exercise price.
At expiration, the derivative contracts are settled by the delivery of the product to the respective party or are settled by the payment to the respective party of a net amount equal to the difference between the then market price and the fixed contract price or option exercise price.
If the financial condition of one or more of our customers were to deteriorate resulting in an impairment in their ability to make payments, additional allowances could be required. As a result of our large customer base, which is comprised of approximately 1.0 million customers, no individual customer account is material.
If the financial condition of one or more of our customers were to deteriorate resulting in an impairment in their ability to make payments, additional allowances could be required. As a result of our large and diverse customer base, which is comprised of approximately 1.0 million customers, no individual customer account is material.
Although we have not experienced significant disruptions with securing the products we sell, inflationary factors and competition for resources across the supply chain has resulted in increased costs in a wide variety of areas, including labor, vehicle and transportation costs, and the cost of tanks and other equipment.
Although we have not experienced significant disruptions with securing the products we sell, inflationary factors and competition for resources across the supply chain has resulted in increased costs in a wide variety of areas, including labor, transportation costs, operating costs and the cost of tanks and other equipment.
This was partially offset by approximately $6.0 million in net proceeds from the sale of property, plant and equipment, as well as the sale of certain assets and operations in a non-strategic market of the propane segment.
This was partially offset by approximately $6.0 million in net proceeds from the sale of property, plant and equipment, as well as the sale of certain assets and operations in a non-strategic market of the propane segment. Financing Activities.
In addition, the payments do not reflect amounts to be recovered from our insurance providers, which amount to $3.5 million, $2.9 million, $2.5 million, $1.7 million, $0.8 million and $4.2 million for each of the next five fiscal years and thereafter, respectively, and are included in other assets on the consolidated balance sheet.
In addition, the payments do not reflect amounts to be recovered from our insurance providers, which amount to $3.2 million, $3.0 million, $2.5 million, $1.6 million, $0.9 million and $4.2 million for each of the next five fiscal years and thereafter, respectively, and are included in other assets on the consolidated balance sheet.
We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.
We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying 34 Table of Contents values of assets and liabilities that are not readily apparent from other sources.
When only a range of possible loss can be established, the most probable amount in the range is accrued. If no amount within this range is a better estimate than any other amount within the range, the minimum amount in the range is accrued. 31 Table of Contents Fair Values of Acquired Assets and Liabilities.
When only a range of possible loss can be established, the most probable amount in the range is accrued. If no amount within this range is a better estimate than any other amount within the range, the minimum amount in the range is accrued. Fair Values of Acquired Assets and Liabilities.
Our management uses gross margin as a supplemental measure of operating performance and we are including it as we believe that it provides our investors and industry analysts with additional information that we determined is useful 36 Table of Contents to evaluate our operating results.
Our management uses gross margin as a supplemental measure of operating performance and we are including it as we believe that it provides our investors and industry analysts with additional information that we determined is useful to evaluate our operating results.
Future minimum rental commitments under noncancelable operating lease agreements as of September 24, 2022 are presented in the table above. Guarantees Certain of our operating leases, primarily those for transportation equipment with remaining lease periods scheduled to expire periodically through fiscal 2032, contain residual value guarantee provisions.
Future minimum rental commitments under noncancelable operating lease agreements as of September 30, 2023 are presented in the table above. Guarantees Certain of our operating leases, primarily those for transportation equipment with remaining lease periods scheduled to expire periodically through fiscal 2032, contain residual value guarantee provisions.
The discussion for fiscal year 2021 compared to fiscal year 2020 can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended September 25, 2021, which was filed with the SEC on November 24, 2021.
The discussion for fiscal year 2022 compared to fiscal year 2021 can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended September 24, 2022, which was filed with the SEC on November 23, 2022.
Although the fair value of equipment at the end of its lease term has historically exceeded the guaranteed amounts, the maximum potential amount of aggregate future payments we could be required to make under these leasing arrangements, assuming the equipment is deemed worthless at the end of the lease term, was approximately $34.0 million.
Although the fair value of equipment at the end of its lease term has historically exceeded the guaranteed amounts, the maximum potential amount of aggregate future payments we could be required to make under these leasing arrangements, assuming the equipment is deemed worthless at the end of the lease term, was approximately $39.9 million.
These operating expenses include the compensation and benefits of field and direct operating support personnel, costs of operating and maintaining our vehicle fleet, overhead and other costs of our purchasing, training and safety departments and other direct and indirect costs of operating our customer service centers.
These operating expenses include the compensation and benefits of field and direct operating support personnel, costs of operating and maintaining our vehicle fleet, overhead and other costs of our purchasing, training and safety departments and other direct and indirect costs of operating our customer service centers and RNG production facilities.
All active employees who were eligible to receive health care benefits under the postretirement plan subsequent to March 1, 1998, were provided an increase to their accumulated benefits under the cash balance pension plan. Our postretirement health care and life insurance benefit plans are unfunded.
All active employees who were eligible 42 Table of Contents to receive health care benefits under the postretirement plan subsequent to March 1, 1998, were provided an increase to their accumulated benefits under the cash balance pension plan. Our postretirement health care and life insurance benefit plans are unfunded.
Excluding the effects of these items, as well as the unrealized non-cash mark-to-market adjustments on derivative instruments in both years, Adjusted EBITDA increased to $291.0 million for fiscal 2022, compared to Adjusted EBITDA of $275.7 million for fiscal 2021. EBITDA represents net income before deducting interest expense, income taxes, depreciation and amortization.
Excluding the effects of these items, as well as the unrealized non-cash mark-to-market adjustments on derivative instruments in both years, Adjusted EBITDA decreased to $275.0 million for fiscal 2023, compared to Adjusted EBITDA of $291.0 million for fiscal 2022. EBITDA represents net income before deducting interest expense, income taxes, depreciation and amortization.
During fiscal 2023, we expect to contribute approximately $3.3 million to the defined benefit pension plan. Our investment policies and strategies, as set forth in the Investment Management Policy and Guidelines, are monitored by a Benefits Committee comprised of five members of management.
During fiscal 2024, we expect to contribute approximately $4.0 million to the defined benefit pension plan. Our investment policies and strategies, as set forth in the Investment Management Policy and Guidelines, are monitored by a Benefits Committee comprised of five members of management.
The net liability recognized in the consolidated financial statements for the defined benefit pension plan decreased by $4.4 million during fiscal 2022, which was primarily attributable to the contributions made during the year, as well as the increase in the discount rate used to measure the benefit obligation.
The net liability recognized in the consolidated financial statements for the defined benefit pension plan decreased by $2.8 million during fiscal 2023, which was primarily attributable to the contributions made during the year, as well as the increase in the discount rate used to measure the benefit obligation.
For purposes of measuring the projected benefit obligation as of September 24, 2022 and September 25, 2021, we used a discount rate of 5.125% and 2.50%, respectively, reflecting current market rates for debt obligations of a similar duration to our pension obligations.
For purposes of measuring the projected benefit obligation as of September 30, 2023 and September 24, 2022, we used a discount rate of 5.50% and 5.125%, respectively, reflecting current market rates for debt obligations of a similar duration to our pension obligations.
As cost of products sold does not include depreciation and amortization expense, the gross margin we reference is considered a non-GAAP financial measure. Fiscal Year 2021 Compared to Fiscal Year 2020 We are omitting from this section our discussion of the earliest of the three years of financials included in this Form 10-K.
As cost of products sold does not include depreciation and amortization expense, the gross margin we reference is considered a non-GAAP financial measure. 40 Table of Contents Fiscal Year 2022 Compared to Fiscal Year 2021 We are omitting from this section our discussion of the earliest of the three years of financial information included in this Form 10-K.
The fair value of residual value guarantees for outstanding operating leases was de minimis as of September 24, 2022 and September 25, 2021. Recently Issued/Adopted Accounting Pronouncements See Part IV, Note 2 of this Annual Report. 39 Table of Contents
The fair value of residual value guarantees for outstanding operating leases was de minimis as of September 30, 2023 and September 24, 2022. Recently Issued/Adopted Accounting Pronouncements See Part IV, Note 2 of this Annual Report. 43 Table of Contents
Under this risk management strategy, realized gains or losses on futures or options contracts, which are reported in cost of products sold, will typically offset losses or gains on the physical inventory once the product is sold (which may or may not occur in the same accounting period).
Under this risk management strategy, realized gains or losses on futures or options contracts, which are reported in cost of products sold, will typically offset losses or gains on the physical inventory once the product is sold or delivered as it pertains to fixed price contracts (which may or may not occur in the same accounting period).
Additionally, we have standby letters of credit in the aggregate amount of $48.9 million, in support of retention levels under our casualty insurance programs and certain lease obligations, which expire periodically through April 30, 2023.
Additionally, we have standby letters of credit in the aggregate amount of $42.7 million, in support of retention levels under our casualty insurance programs and certain lease obligations, which expire periodically through April 30, 2024.
Gross margin for fiscal 2022 included a $27.9 million unrealized loss attributable to the mark-to-market adjustment for derivative instruments used in risk management activities, compared to a $43.1 million unrealized gain in the prior year. These non-cash adjustments, which were reported in cost of products sold, were excluded from Adjusted EBITDA for both periods.
Gross margins included a $3.7 million unrealized loss attributable to the mark-to-market adjustment for derivative instruments used in risk management activities in fiscal 2023, compared to a $27.9 million unrealized loss in the prior year. These non-cash adjustments, which were reported in cost of products sold, were excluded from Adjusted EBITDA for both periods.
On October 20, 2022, we announced that our Board of Supervisors declared a quarterly distribution of $0.325 per Common Unit for the three months ended September 24, 2022. This quarterly distribution rate equates to an annualized rate of $1.30 per Common Unit. The distribution was paid on November 8, 2022 to Common Unitholders of record as of November 1, 2022.
On October 26, 2023, we announced that our Board of Supervisors declared a quarterly distribution of $0.325 per Common Unit for the three months ended September 30, 2023. This quarterly distribution rate equates to an annualized rate of $1.30 per Common Unit. The distribution was paid on November 14, 2023 to Common Unitholders of record as of November 7, 2023.
Operating Leases We lease certain property, plant and equipment for various periods under noncancelable operating leases, including 84% of our vehicle fleet, approximately 27% of our customer service centers and portions of our information systems equipment. Rental expense under operating leases was $41.0 million, $37.8 million and $31.9 million for fiscal 2022, 2021 and 2019, respectively.
Operating Leases We lease certain property, plant and equipment for various periods under noncancelable operating leases, including 88% of our vehicle fleet, approximately 26% of our customer service centers and portions of our information systems equipment. Rental expense under operating leases was $41.7 million, $41.0 million and $37.8 million for fiscal 2023, 2022 and 2021, respectively.
We made contribution payments to the defined benefit pension plan of $3.3 million, $6.3 million and $3.8 million in fiscal 2022, fiscal 2021 and fiscal 2020, respectively. As of September 24, 2022 and September 25, 2021, the plan’s projected benefit obligation exceeded the fair value of plan assets by $20.8 million and $25.2 million, respectively.
We made contribution payments to the defined benefit pension plan of $4.0 million, $3.3 million and $6.3 million in fiscal 2023, fiscal 2022 and fiscal 2021, respectively. As of September 30, 2023 and September 24, 2022, the plan’s projected benefit obligation exceeded the fair value of plan assets by $18.0 million and $20.8 million, respectively.
General and Administrative Expenses (Dollars in thousands) Fiscal Fiscal Percent 2022 2021 Increase Increase General and administrative expenses $ 81,756 $ 74,096 $ 7,660 10.3 % As a percent of total revenues 5.4 % 5.7 % All costs of our back office support functions, including compensation and benefits for executives and other support functions, as well as other costs and expenses to maintain finance and accounting, treasury, legal, human resources, corporate development and the information systems functions are reported within general and administrative expenses in the consolidated statements of operations.
General and Administrative Expenses (Dollars in thousands) Fiscal Fiscal Percent 2023 2022 Increase Increase General and administrative expenses $ 91,574 $ 81,756 $ 9,818 12.0 % As a percent of total revenues 6.4 % 5.4 % All costs of our back office support functions, including compensation and benefits for executives and other support functions, as well as other costs and expenses to maintain finance and accounting, treasury, legal, human resources, corporate development and the information systems functions are reported within general and administrative expenses in the consolidated statements of operations.
Net cash used in investing activities of $94.4 million for fiscal 2022 consisted of capital expenditures of $44.4 million (including $24.3 million to support the growth of operations and $20.1 million for maintenance expenditures), a $30.0 million investment in IH (plus direct transactions costs), as well as $25.6 million used in the acquisition of a retail propane business and other investing activities involving Oberon (see Part IV, Note 4 of this Annual Report in relation to these transactions).
Net cash used in investing activities of $94.4 million for fiscal 2022 consisted of capital expenditures of $44.4 million (including $24.3 million to support the growth of operations and $20.1 million for maintenance expenditures), a $30.0 million investment in IH (plus direct transaction costs), as well as $25.6 million used in the acquisition of a retail propane business and additional investments in Oberon.
Average selling prices for fuel oil and refined fuels increased 49.7%, resulting in a $31.5 million increase in revenues. Fuel oil and refined fuels gallons sold decreased 1.3 million gallons, or 5.3%, resulting in a $3.4 million decrease in revenues.
Fuel oil and refined fuels gallons sold decreased 3.7 million gallons, or 16.1%, resulting in a $15.0 million decrease in revenues. Average selling prices for fuel oil and refined fuels increased 15.1%, resulting in a $12.0 million increase in revenues.
Cost of products sold excludes depreciation and amortization; these amounts are reported separately within the consolidated statements of operations. From a commodity perspective, as discussed above, wholesale propane prices trended higher throughout much of the first half of the fiscal year before generally receding during the second half of the fiscal year.
Cost of products sold excludes depreciation and amortization; these amounts are reported separately within the consolidated statements of operations. From a commodity perspective, as discussed above, wholesale propane prices trended lower throughout much of fiscal 2023.
Summary of Long-Term Debt Obligations and Revolving Credit Lines As of September 24, 2022, our long-term debt consisted of $350.0 million in aggregate principal amount of 5.875% senior notes due March 1, 2027, $650.0 million of the 2031 Senior Notes and $89.6 million outstanding under our $500.0 million senior secured revolving credit facility (“Revolving Credit Facility”) provided by our credit agreement.
Summary of Long-Term Debt Obligations and Revolving Credit Lines As of September 30, 2023, our long-term debt consisted of $350.0 million in aggregate principal amount of 5.875% Senior Notes due March 1, 2027, $650.0 million in aggregate principal amount of 5.0% Senior Notes due June 1, 2031, $80.6 million in aggregate principal amount of 5.5% Green Bonds due October 1, 2028 through October 1, 2033 and $132.0 million outstanding under our $500.0 million senior secured revolving credit facility (“Revolving Credit Facility”) provided by our credit agreement.
Consistent with past practices, we principally utilize futures and/or options contracts traded on the NYMEX to mitigate the price risk associated with our priced physical inventory.
Consistent with past practices, we principally utilize futures and/or options contracts traded on the NYMEX to mitigate the price risk associated with our priced physical inventory, as well as, in certain instances, forecasted purchases of propane or fuel oil.
Total Consolidated Leverage Ratio, as defined by our credit agreement, represents Adjusted EBITDA calculated on a trailing twelve-month basis plus non-cash compensation costs recognized under our Restricted Unit Plans for 37 Table of Contents the same period. To calculate the Total Consolidated Leverage Ratio, divide gross borrowings outstanding as of the current period’s balance sheet date by our Adjusted EBITDA.
Total Consolidated Leverage Ratio, as defined by our credit agreement, represents Adjusted EBITDA calculated on a trailing twelve-month basis plus non-cash compensation costs recognized under our Restricted Unit Plans for the same period.
(Dollars in thousands) Fiscal Fiscal 2022 2021 Long-term borrowings $ 1,089,600 $ 1,132,000 Adjusted EBITDA 291,026 275,680 Compensation costs recognized under Restricted Unit Plans 11,253 10,073 Adjusted EBITDA for use in calculation 302,279 285,753 Total Consolidated Leverage Ratio 3.60 x 3.96 x Partnership Distributions We are required to make distributions in an amount equal to all of our Available Cash, as defined in our Third Amended and Restated Partnership Agreement, as amended (the “Partnership Agreement”), no more than 45 days after the end of each fiscal quarter to holders of record on the applicable record dates.
To calculate the Total Consolidated Leverage Ratio, divide gross borrowings outstanding as of the current period’s balance sheet date by our Adjusted EBITDA. 41 Table of Contents (Dollars in thousands) Fiscal Fiscal 2023 2022 Long-term borrowings $ 1,212,645 $ 1,089,600 Adjusted EBITDA 275,025 291,026 Compensation costs recognized under Restricted Unit Plans 8,260 11,253 Other 168 — Adjusted EBITDA for use in calculation 283,453 302,279 Total Consolidated Leverage Ratio 4.28 x 3.60 x Partnership Distributions We are required to make distributions in an amount equal to all of our Available Cash, as defined in our Third Amended and Restated Partnership Agreement, as amended (the “Partnership Agreement”), no more than 45 days after the end of each fiscal quarter to holders of record on the applicable record dates.
According to the Energy Information Administration, U.S. propane inventory levels at the end of September 2022 were 84.4 million barrels, which was 16.7% higher than September 2021 levels and 2.2% lower than the five-year average for 29 Table of Contents September.
According to the Energy Information Administration, U.S. propane inventory levels at the end of September 2023 were 101.4 million barrels, which was 20.1% higher than September 2022 levels and 11.2% more than the five-year average for September.
As we look ahead to fiscal 2023, our anticipated cash requirements include: (i) maintenance and growth capital expenditures of approximately $45.0 million; (ii) capital expenditures of approximately $33.0 million to support the buildout of our renewable energy platform; (iii) approximately $63.8 million of interest and income tax payments; and (iv) approximately $82.4 million of distributions to Unitholders, based on the current annualized rate of $1.30 per Common Unit.
As we look ahead to fiscal 2024, our anticipated cash requirements include: (i) maintenance and growth capital expenditures of approximately $40.0 million for the propane segment; (ii) capital expenditures of approximately $28.2 million to support the construction and development efforts for our renewable energy platform; (iii) approximately $71.7 million of interest and income tax payments; and (iv) approximately $83.1 million of distributions to Unitholders, based on the current annualized rate of $1.30 per Common Unit.
Partnership employees hired prior to July 1993 and who retired prior to March 1998 are eligible for postretirement health care and life insurance benefits if they reached a specified retirement age while working for the Partnership. Effective March 31, 1998, we froze participation in the postretirement health care benefit plan, with no new retirees eligible to participate in the plan.
We also provide postretirement health care and life insurance benefits for certain retired employees. Partnership employees hired prior to July 1993 and who retired prior to March 1998 are eligible for postretirement health care and life insurance benefits if they reached a specified retirement age while working for the Partnership.
Revenues from the distribution of propane and related activities of $1,313.6 million for fiscal 2022 increased $173.1 million, or 15.2%, compared to $1,140.5 million for the prior year, primarily due to higher average retail selling prices associated with higher wholesale costs, offset to an extent by lower volumes sold.
Revenues from the distribution of propane and related activities of $1,232.1 million for fiscal 2023 decreased $81.4 million, or 6.2%, compared to $1,313.6 million for the prior year, primarily due to lower average retail selling prices associated with lower wholesale costs and lower volumes sold.
See Part IV, Note 10 of this Annual Report. The aggregate amounts of long-term debt maturities subsequent to September 24, 2022 are as follows: fiscal 2023: $-0-; fiscal 2024: $-0-; fiscal 2025: $89.6 million; fiscal 2026: $-0-; fiscal 2027: $350.0 million; and thereafter: $650.0 million. Total Consolidated Leverage Ratio.
The aggregate amounts of long-term debt maturities subsequent to September 30, 2023 are as follows: fiscal 2024: $-0-; fiscal 2025: $132.0 million; fiscal 2026: $-0- ; fiscal 2027: $350.0 million; fiscal 2028: $-0- ; and thereafter: $730.6 million. Total Consolidated Leverage Ratio.
Included within the propane segment are revenues from risk management activities of $20.0 million for fiscal 2022, which decreased $10.5 million primarily due to a lower notional amount of hedging contracts used in risk management activities that were settled physically. 33 Table of Contents Revenues from the distribution of fuel oil and refined fuels of $95.2 million for fiscal 2022 increased $28.1 million, or 41.8%, from $67.1 million for the prior year, primarily due to higher average selling prices associated with higher wholesale costs, partially offset by lower volumes sold.
Included within the propane segment are revenues from risk management activities of $12.7 million for fiscal 2023, which decreased $7.3 million primarily due to the impact of lower selling prices on hedging contracts used in risk management activities that were settled physically. 37 Table of Contents Revenues from the distribution of fuel oil and refined fuels of $92.1 million for fiscal 2023 decreased $3.0 million, or 3.2%, from $95.2 million for the prior year, primarily due to lower volumes sold, offset to an extent by higher average selling prices.
Operating Expenses (Dollars in thousands) Fiscal Fiscal Percent 2022 2021 Increase Increase Operating expenses $ 442,411 $ 411,390 $ 31,021 7.5 % As a percent of total revenues 29.5 % 31.9 % All costs of operating our retail distribution and appliance sales and service operations are reported within operating expenses in the consolidated statements of operations.
Operating Expenses (Dollars in thousands) Fiscal Fiscal Percent 2023 2022 Increase Increase Operating expenses $ 478,058 $ 442,411 $ 35,647 8.1 % As a percent of total revenues 33.4 % 29.5 % All costs of operating our retail distribution and appliance sales and service operations, as well as the RNG production facilities, are reported within operating expenses in the consolidated statements of operations.
Inflation and Other Cost Increases In addition to the evolving impact of the COVID-19 pandemic, we have been impacted by other global and economic events. We are experiencing increased inflation in the costs of various goods and services we use to operate our business, including higher wholesale costs for the products we distribute.
Inflation and Other Cost Increases We are experiencing increased inflation in the costs of various goods and services we use to operate our business, including volatile wholesale costs for the products we distribute.
Average propane prices (basis Mont Belvieu, Texas) for fiscal 2022 increased 39.1% compared to the prior year. Total gross margin for fiscal 2022 of $789.3 million decreased $13.9 million, or 1.7%, compared to the prior year.
Average propane prices (basis Mont Belvieu, Texas) for fiscal 2023 decreased 38.9% compared to the prior year. Total gross margins of $839.0 million in fiscal 2023 increased $49.7 million, or 6.3%, compared to the prior year.
Combined operating and general and administrative expenses of $524.2 million for fiscal 2022 increased 8.0% compared to the prior year, primarily due to higher payroll and benefit-related expenses, higher vehicle lease and operating costs, higher variable compensation, higher provisions for doubtful accounts, as well as other inflationary effects on our operating costs.
Combined operating and general and administrative expenses of $569.6 million for fiscal 2023 increased 8.7% compared to the prior year, primarily due to higher payroll and benefit-related expenses, higher vehicle lease and operating costs, operating and acquisition-related costs associated with the RNG assets acquired in December 2022, as well as other inflationary effects on our operating costs.
The decrease was primarily due to a higher level of variable-based compensation payments for awards earned in the respective prior fiscal year, the payment of the employer portion of social security payroll tax that was deferred during a certain portion of fiscal 2020 under the CARES Act, and a larger increase in working capital compared to the prior year, which stemmed from the rise in average wholesale costs of propane (discussed above).
The increase was primarily due to a lower level of working capital compared to the prior year, which stemmed from the decline in wholesale costs of propane (discussed above) coupled with the payment in fiscal 2022 of the employer portion of social security payroll tax that was deferred during a certain portion of fiscal 2020 under the CARES Act, partially offset by lower earnings.
Overall, average posted propane prices (basis Mont Belvieu, Texas) and fuel oil prices during fiscal 2022 were 39.1% and 81.6% higher than the prior year, respectively.
Overall, average posted propane prices (basis Mont Belvieu, Texas) and fuel oil prices during fiscal 2023 were 38.9% and 8.0% lower than the prior year, respectively.
The following table sets forth our calculations of EBITDA and Adjusted EBITDA: (Dollars in thousands) Year Ended September 24, September 25, 2022 2021 Net income $ 139,708 $ 122,793 Add: Provision for income taxes 429 1,110 Interest expense, net 60,658 68,132 Depreciation and amortization 58,848 104,555 EBITDA 259,643 296,590 Unrealized non-cash losses (gains) losses on changes in fair value of derivatives 27,929 (43,121 ) Loss on debt extinguishment — 16,029 Multi-employer pension plan withdrawal charge — 4,317 Pension settlement charge 840 958 Equity in earnings of unconsolidated affiliates 2,614 907 Adjusted EBITDA $ 291,026 $ 275,680 We also reference gross margins, computed as revenues less cost of products sold as those amounts are reported on the consolidated financial statements.
The following table sets forth our calculations of EBITDA and Adjusted EBITDA: (Dollars in thousands) Year Ended September 30, September 24, 2023 2022 Net income $ 123,752 $ 139,708 Add: Provision for income taxes 668 429 Interest expense, net 73,393 60,658 Depreciation and amortization 62,582 58,848 EBITDA 260,395 259,643 Unrealized non-cash losses on changes in fair value of derivatives 3,671 27,929 Equity in losses of unconsolidated affiliates 6,264 2,614 Acquisition-related costs 4,695 — Pension settlement charge — 840 Adjusted EBITDA $ 275,025 $ 291,026 We also reference gross margins, computed as revenues less cost of products sold as those amounts are reported on the consolidated financial statements.
Cost of products sold associated with our fuel oil and refined fuels segment of $68.3 million for fiscal 2022 increased $27.1 million, or 65.9%, compared to the prior year.
Cost of products sold associated with our fuel oil and refined fuels segment of $65.6 million for fiscal 2023 decreased $2.7 million, or 4.0%, compared to the prior year.
Cost of Products Sold (Dollars in thousands) Fiscal Fiscal Percent 2022 2021 Increase Increase Cost of products sold Propane $ 601,081 $ 411,720 $ 189,361 46.0 % Fuel oil and refined fuels 68,298 41,158 27,140 65.9 % Natural gas and electricity 27,256 17,515 9,741 55.6 % All other 15,488 15,085 403 2.7 % Total cost of products sold $ 712,123 $ 485,478 $ 226,645 46.7 % As a percent of total revenues 47.4 % 37.7 % The cost of products sold reported in the consolidated statements of operations represents the weighted average unit cost of propane, fuel oil and refined fuels, and natural gas and electricity sold, including transportation costs to deliver product from our supply points to storage or to our customer service centers.
Cost of Products Sold (Dollars in thousands) Percent Fiscal Fiscal Increase Increase 2023 2022 (Decrease) (Decrease) Cost of products sold Propane $ 489,808 $ 601,081 $ (111,273 ) (18.5 )% Fuel oil and refined fuels 65,572 68,298 (2,726 ) (4.0 )% Natural gas and electricity 19,100 27,256 (8,156 ) (29.9 )% All other 15,651 15,488 163 1.1 % Total cost of products sold $ 590,131 $ 712,123 $ (121,992 ) (17.1 )% As a percent of total revenues 41.3 % 47.4 % The cost of products sold reported in the consolidated statements of operations represents the weighted average unit cost of propane, fuel oil and refined fuels, and natural gas and electricity sold, including transportation costs to deliver product from our supply points to storage or to our customer service centers.
Liquidity and Capital Resources Analysis of Cash Flows Operating Activities. Net cash provided by operating activities for fiscal 2022 amounted to $220.5 million, a decrease of $6.0 million compared to the prior year.
Liquidity and Capital Resources Analysis of Cash Flows Operating Activities. Net cash provided by operating activities for fiscal 2023 amounted to $225.2 million, an increase of $4.7 million compared to the prior year.
Many of our customers rely heavily on propane, fuel oil or natural gas as a heating source. Accordingly, the volume sold is directly affected by the severity of the winter weather in our service areas, which can vary substantially from year to year.
Accordingly, the volume sold is directly affected by the severity of the winter weather in our service areas, which can vary substantially from year to year.
Revenues in our natural gas and electricity segment increased $9.1 million, or 29.9%, to $39.5 million in fiscal 2022 compared to $30.4 million in the prior year, resulting from higher average selling prices, reflecting higher average wholesale costs, offset to an extent by lower volumes sold, primarily due to the impact of warmer temperatures on customer demand and a lower customer base.
Revenues in our natural gas and electricity segment decreased $8.4 million, or 21.1%, to $31.2 million in fiscal 2023 compared to $39.5 million in the prior year, resulting from lower volumes sold, primarily due to the impact of warmer temperatures in our operating territories on customer demand and a lower customer base.
Adjusted earnings before interest, taxes, depreciation and amortization (Adjusted EBITDA, as defined and reconciled below) increased $15.3 million, or 5.6%, to $291.0 million for fiscal 2022, compared to $275.7 million in the prior year.
Net income for fiscal 2023 was $123.8 million, or $1.94 per Common Unit, compared to $139.7 million, or $2.21 per Common Unit, in fiscal 2022. Adjusted earnings before interest, taxes, depreciation and amortization (Adjusted EBITDA, as defined and reconciled below) was $275.0 million for fiscal 2023, compared to $291.0 million in the prior year.
Average propane selling prices for fiscal 2022 increased 21.9% compared to the prior year, reflecting a rise in average wholesale costs, resulting in a $232.3 million increase in revenues. Retail propane gallons sold decreased 18.4 million gallons, or 4.4%, to 401.3 million gallons, resulting in a decrease in revenues of $48.7 million.
Average propane selling prices for fiscal 2023 decreased 4.6% compared to the prior year, reflecting lower average wholesale costs, resulting in a $58.2 million decrease in revenues. Retail propane gallons sold decreased 4.9 million gallons, or 1.2%, to 396.4 million gallons, resulting in a decrease in revenues of $15.9 million.
Cash flows from operations, therefore, are greatest during the second and third fiscal quarters when customers pay for product purchased during the winter heating season. We expect lower operating profits and either net losses or lower net income during the period from April through September (our third and fourth fiscal quarters).
Consequently, sales and operating profits are concentrated in our first and second fiscal quarters. Cash flows from operations, therefore, are greatest during the second and third fiscal quarters when customers pay for product purchased during the winter heating season.
Average temperatures (as measured by heating degree days) across all of our service territories for fiscal 2022 were 10% warmer than normal and comparable to the prior year. However, average temperatures during the critical heat-related demand months of December 2021 through February 2022 were approximately 2.0% warmer than the same period in the prior year.
Average temperatures (as measured by heating degree days) across all of our service territories for fiscal 2023 were 8% warmer than normal and 2% cooler than the prior year. However, for the months of January and February, average temperatures were 16% warmer than normal and 11% warmer than the same period last year.
The fuel oil business tends to experience greater seasonality given its more limited use for space heating and approximately three-fourths of our fuel oil volumes are sold between October and March. Consequently, sales and operating profits are concentrated in our first and second fiscal quarters.
Historically, approximately two‑thirds of our retail propane volume is sold during the nine-month peak heating season from October through March. The fuel oil business tends to experience greater seasonality given its more limited use for space heating and approximately three-fourths of our fuel oil volumes are sold between October and March.
As a result, we recorded a non-cash settlement charge of $1.0 million during fiscal 2021, also in order to accelerate recognition of a portion of cumulative unamortized losses. During fiscal 2020, lump sum pension settlement payments of $3.6 million exceeded the interest and service cost components of the net periodic pension cost of $2.7 million.
As a result, we recorded a non-cash settlement charge of $1.0 million during fiscal 2021, also in order to accelerate recognition of a portion of cumulative unamortized losses. These unrecognized losses were previously accumulated as a reduction to partners’ capital and were being amortized to expense as part of our net periodic pension cost.
Net cash used in investing activities of $34.1 million for fiscal 2021 consisted of capital expenditures of $29.9 million (including $15.4 million to support the growth of operations and $14.5 million for maintenance expenditures), $8.7 million used in the acquisition of a retail propane business and other investing activities involving Oberon, partially offset by $4.5 million in net proceeds from the sale of property, plant and equipment.
Net cash used in investing activities of $170.6 million for fiscal 2023 consisted of the RNG Acquisition (net of cash acquired and Green Bonds assumed) of $108.3 million, capital expenditures of $44.9 million (including approximately $25.2 million to support the growth of operations and $19.7 million for maintenance expenditures), $7.5 million used in the acquisition of a retail propane business, a $3.1 million investment in a privately held start-up entity (plus direct transaction costs) and additional investments in Oberon, partially offset by approximately $4.4 million in proceeds from the sale of property, plant and equipment.
The net change in the fair value of derivative instruments during the fiscal year resulted in unrealized non-cash losses of $27.9 million and unrealized non-cash gains of $43.1 million reported in cost of products sold in fiscal 2022 and 2021, respectively, resulting in a year-over-year increase of $71.1 million in cost of products sold, all of which was reported in the propane segment.
The net change in the fair value of derivative instruments during the fiscal year resulted in unrealized non-cash losses of $3.7 million and $27.9 million reported in cost of products sold in fiscal 2023 and 2022, respectively, resulting in a year-over-year decrease of $24.2 million in cost of products sold, all of which was reported in the propane segment. 38 Table of Contents Cost of products sold associated with the distribution of propane and related activities of $489.8 million for fiscal 2023 decreased $111.3 million, or 18.5%, compared to the prior year.
These and other factors may continue to impact our product costs, expenses, and capital expenditures, and could continue to have an impact on consumer demand as consumers manage the impact of inflation on their resources. 30 Table of Contents Critical Accounting Policies and Estimates Our significant accounting policies are summarized in Note 2—Summary of Significant Accounting Policies included within the Notes to Consolidated Financial Statements section elsewhere in this Annual Report.
These and other factors may continue to impact our product costs, expenses, and capital expenditures, and could continue to have an impact on consumer demand as consumers manage the impact of inflation on their resources.
Fiscal Year 2022 Compared to Fiscal Year 2021 Revenues (Dollars and gallons in thousands) Percent Fiscal Fiscal Increase Increase 2022 2021 (Decrease) (Decrease) Revenues Propane $ 1,313,556 $ 1,140,457 $ 173,099 15.2 % Fuel oil and refined fuels 95,157 67,104 28,053 41.8 % Natural gas and electricity 39,511 30,425 9,086 29.9 % All other 53,241 50,769 2,472 4.9 % Total revenues $ 1,501,465 $ 1,288,755 $ 212,710 16.5 % Retail gallons sold Propane 401,322 419,758 (18,436 ) (4.4 )% Fuel oil and refined fuels 22,767 24,039 (1,272 ) (5.3 )% As discussed above, average temperatures (as measured in heating degree days) across all of our service territories for fiscal 2022 were 10% warmer than normal and comparable to the prior year period.
Fiscal Year 2023 Compared to Fiscal Year 2022 Revenues (Dollars and gallons in thousands) Percent Fiscal Fiscal Increase Increase 2023 2022 (Decrease) (Decrease) Revenues Propane $ 1,232,138 $ 1,313,556 $ (81,418 ) (6.2 )% Fuel oil and refined fuels 92,127 95,157 (3,030 ) (3.2 )% Natural gas and electricity 31,160 39,511 (8,351 ) (21.1 )% All other 73,769 53,241 20,528 38.6 % Total revenues $ 1,429,194 $ 1,501,465 $ (72,271 ) (4.8 )% Retail gallons sold Propane 396,393 401,322 (4,929 ) (1.2 )% Fuel oil and refined fuels 19,103 22,767 (3,664 ) (16.1 )% As discussed above, average temperatures (as measured in heating degree days) across all of our service territories for fiscal 2023 were 8% warmer than normal, albeit 2% cooler than the prior year.
In addition, periods of sustained higher commodity and/or transportation prices can lead to customer conservation, resulting in reduced demand for our product.
In addition, periods of sustained higher commodity and/or transportation prices can lead to customer conservation, resulting in reduced demand for our product. During fiscal 2023, the wholesale cost of propane generally trended lower as the nation’s propane inventory levels improved relative to the prior year and historical averages.
Seasonality The retail propane and fuel oil distribution businesses, as well as the natural gas marketing business, are seasonal because these fuels are primarily used for heating in residential and commercial buildings. Historically, approximately two‑thirds of our retail propane volume is sold during the six-month peak heating season from October through March.
Consistent with our established practice, we adjusted customer pricing as market conditions allowed. 33 Table of Contents Seasonality The retail propane and fuel oil distribution businesses, as well as the retail natural gas marketing business, are seasonal because these fuels are primarily used for heating in residential and commercial buildings.
Higher average wholesale costs contributed to an increase in cost of products sold of $29.3 million, while lower volumes sold contributed to a $2.2 million decrease. 34 Table of Contents Cost of products sold in our natural gas and electricity segment of $27.3 million for fiscal 2022 increased $9.7 million, or 55.6%, compared to the prior year, primarily due to higher natural gas and electricity wholesale costs, partially offset by lower usage.
Cost of products sold in our natural gas and electricity segment of $19.1 million for fiscal 2023 decreased $8.2 million, or 29.9%, compared to the prior year, primarily due to lower natural gas and electricity wholesale costs, coupled with lower usage.
Net Income and Adjusted EBITDA Net income for fiscal 2022 amounted to $139.7 million, or $2.21 per Common Unit, compared to $122.8 million, or $1.96 per Common Unit, in fiscal 2021. Earnings before interest, taxes, depreciation and amortization (“EBITDA”) for fiscal 2022 amounted to $259.6 million, compared to $296.6 million for fiscal 2021.
See Liquidity and Capital Resources below for additional discussion. Net Income and Adjusted EBITDA Net income for fiscal 2023 amounted to $123.8 million, or $1.94 per Common Unit, compared to $139.7 million, or $2.21 per Common Unit, in fiscal 2022.
Net cash used in financing activities for fiscal 2021 of $189.8 million reflected the quarterly distribution to Common Unitholders at a rate of $0.30 per Common Unit paid in respect of the fourth quarter of fiscal 2020, the first and second quarters of fiscal 2021 and the quarterly distribution at a rate of $0.325 per Common Unit paid in respect of the third quarter of fiscal 2021.
Net cash used in financing activities of $44.6 million for fiscal 2023 reflected $82.4 million paid for the quarterly distributions to Common Unitholders at a rate of $0.325 per Common Unit paid in respect of the fourth quarter of fiscal 2022 and first three quarters of fiscal 2023, $42.4 million in net borrowings under our revolving credit facility, which were used to fund the acquisitions and investments noted above, and other financing activities of $4.6 million.
Included within the propane segment are costs from other propane activities which decreased $10.9 million compared to the prior year due to a lower notional amount of hedging contracts used in risk management activities that were settled physically, coupled with the net increase in cost of products sold of $71.1 million resulting from the mark-to-market adjustments on derivative instruments in both periods discussed above.
Included within the propane segment are costs from other propane activities which decreased $18.1 million resulting from the mark-to-market adjustments on derivative instruments in both periods discussed above, partially offset by an increase in costs for physically settled propane hedges.
Operating expenses of $442.4 million for fiscal 2022 increased $31.0 million, or 7.5%, compared to $411.4 million in the prior year, due primarily to higher payroll and benefit-related costs, including higher variable compensation expense, higher vehicle lease and operating costs, higher provisions for doubtful accounts, as well as other inflationary effects on our operating costs.
Operating expenses of $478.1 million for fiscal 2023 increased $35.6 million, or 8.1%, compared to $442.4 million in the prior year, primarily due to higher payroll costs, higher vehicle lease and repair costs, higher travel costs, the operating costs associated with our new RNG production facilities and other inflationary effects on our operating costs.
Generally, we have, if necessary, up to one year from the acquisition date to finalize our estimates of acquisition date fair values. Results of Operations and Financial Condition Net income for fiscal 2022 was $139.7 million, or $2.21 per Common Unit, compared to $122.8 million, or $1.96 per Common Unit, in fiscal 2021.
Generally, we have, if necessary, up to one year from the acquisition date to finalize our estimates of acquisition date fair values. 35 Table of Contents Results of Operations and Financial Condition Fiscal 2023 included 53 weeks of operations compared to 52 weeks reported in the prior year.
General and administrative expenses of $81.8 million for fiscal 2022 increased $7.7 million, or 10.3%, compared to $74.1 million in the prior year, primarily due to higher payroll and benefit-related costs, including higher variable compensation expense given the year-over-year increase in earnings, as well as other inflationary effects on our expense base.
General and administrative expenses of $91.6 million for fiscal 2023 increased $9.8 million, or 12.0%, compared to $81.8 million in the prior year, primarily due to professional fees and expenses of $4.7 million related to the RNG Acquisition, as well as higher payroll costs and other inflationary increases, offset to an extent by a decrease in variable compensation expenses.
To the extent necessary, we will reserve cash from the second and third quarters for distribution to holders of our Common Units in the fourth quarter and the following fiscal year first quarter. Weather Weather conditions have a significant impact on the demand for our products, in particular propane, fuel oil and natural gas, for both heating and agricultural purposes.
Weather Weather conditions have a significant impact on the demand for our products, in particular propane, fuel oil and natural gas, for both heating and agricultural purposes. Many of our customers rely heavily on propane, fuel oil or natural gas as a heating source.
Contractual and Other Obligations The following table summarizes payments due under our known contractual and other obligations as of September 24, 2022: (Dollars in thousands) Fiscal Fiscal Fiscal Fiscal Fiscal Fiscal 2028 and 2023 2024 2025 2026 2027 thereafter Long-term debt obligations — — 89,600 — 350,000 650,000 Interest payments 62,764 59,465 55,873 53,062 42,781 130,000 Operating lease obligations (a) 38,025 32,229 27,831 22,863 12,990 24,553 Self-insurance obligations (b) 15,586 11,909 9,522 6,606 3,376 16,651 Pension contributions (c) — 3,330 3,330 3,330 3,700 26,100 Other obligations (d) 27,635 8,004 7,000 2,275 1,967 20,068 Total $ 144,010 $ 114,937 $ 193,156 $ 88,136 $ 414,814 $ 867,372 (a) Payments exclude costs associated with insurance, taxes and maintenance, which are not material to the operating lease obligations.
Contractual and Other Obligations The following table summarizes payments due under our known contractual and other obligations as of September 30, 2023: (Dollars in thousands) Fiscal Fiscal Fiscal Fiscal Fiscal Fiscal 2029 and 2024 2025 2026 2027 2028 thereafter Long-term debt obligations — 132,000 — 350,000 — 730,645 Interest payments 70,788 60,693 57,498 47,217 36,935 111,498 Operating lease obligations (a) 40,660 36,491 30,991 20,818 15,701 24,501 Self-insurance obligations (b) 13,972 11,705 9,118 6,277 3,402 16,155 Pension contributions (c) 4,000 5,600 4,000 4,000 4,000 8,000 Other obligations (d) 31,588 10,097 12,057 2,294 2,092 18,832 Total $ 161,008 $ 256,586 $ 113,664 $ 430,606 $ 62,130 $ 909,631 (a) Payments exclude costs associated with insurance, taxes and maintenance, which are not material to the operating lease obligations.
Cost of products sold associated with the distribution of propane and related activities of $601.1 million for fiscal 2022 increased $189.4 million, or 46.0%, compared to the prior year. Higher average wholesale costs contributed to a $148.6 million increase in cost of products sold, while lower volumes sold contributed to a $19.4 million decrease.
Lower volumes sold contributed to an $11.0 million decrease in cost of products sold, while higher average wholesale costs from inventory purchased earlier in the year contributed to an increase in cost of products sold of $8.3 million.
(“Oberon”), to support the commercialization of renewable dimethyl ether (“rDME”) as a blend with propane, including our construction of the world’s first commercial Propane+rDME blending facility in our Placentia, California location; • We entered into an agreement with Adirondack Farms, a family-owned dairy farm in upstate New York, to produce renewable natural gas from dairy cow manure; • We announced a collaboration agreement with Iwatani Corporation of America, a wholly owned subsidiary of Iwatani Corporation, Japan’s largest distributor of propane and only fully integrated supplier of hydrogen, to help accelerate the adoption of Propane+rDME, and to explore opportunities to further advance investments in the hydrogen infrastructure in the United States; • We acquired and successfully integrated a well-run propane business in an attractive market in New Mexico; 32 Table of Contents • We extended our reach in certain strategic markets that were not previously served by our existing propane footprint; and, • We strengthened our balance sheet by reducing debt by over $42.0 million with cash flows from operating activities.
(“Oberon”) to support the commercialization of renewable dimethyl ether (“rDME”) as a blend with propane or as a precursor to hydrogen production, and we were the first in the world to begin delivering Propane+rDME at a 4% blend level for use in forklift engines; • We began construction of our anaerobic digester, pursuant to our agreement with Adirondack Farms, a family-owned dairy farm in upstate New York, to produce RNG from dairy cow manure; • We acquired and successfully integrated a well-run propane business in an attractive market in Washington state; • We extended our reach in certain strategic markets that were not previously served by our existing propane footprint; and • We achieved net organic customer base growth, excluding customers acquired in acquisitions. 36 Table of Contents As a result of the net borrowings to fund the RNG Acquisition, reduced in large part by the use of excess cash flow from operating activities, our Consolidated Leverage Ratio, as defined in our credit agreement, measured 4.28x for the fiscal year ended September 30, 2023.
Excluding the impact of the unrealized mark-to-market adjustments, gross margin for fiscal 2022 increased $57.1 million, or 7.5%, compared to the prior year, primarily due to prudent selling price management during a rising and volatile commodity price environment, as well as from the favorable impact of commodity hedges that matured during the period.
Excluding the impact of the unrealized mark-to-market adjustments, gross margin for fiscal 2023 increased $25.4 million, or 3.1%, compared to the prior year, primarily due to higher propane unit margins and margin contribution from the RNG assets acquired in December 2022, offset to an extent by lower propane volumes sold.
Retail propane gallons sold in fiscal 2022 of 401.3 million gallons decreased 4.4% compared to the prior year, primarily due to unseasonably warm and inconsistent temperatures throughout the heating season, customer conservation stemming from the high commodity price environment, and more normalized volumes in certain customer segments that benefitted from COVID restrictions in previous years.
Retail propane gallons sold in fiscal 2023 of 396.4 million gallons decreased 1.2% compared to the prior year, primarily due to unseasonably warm and inconsistent temperatures throughout the heating season, including near record warm temperatures during January and February, which are the two most critical months for heat-related demand.
The weather during fiscal 2022 was characterized by widespread warm temperatures throughout most of our service territories during the critical heat-related demand month of December which lasted into much of January. While a cooling trend arrived late in January, warmer weather returned in mid-February.
The weather pattern during the fiscal 2023 heating season was characterized by exceptionally warm temperatures throughout our East and Midwest service territories, particularly during the most critical months for heat-related demand, while our service territories in the West generally experienced cooler weather throughout the heating season that extended into the second half of the fiscal year.
Average temperatures during the critical heat-related demand months of December 2021 through February 2022 were approximately 2% warmer than the same period in the prior year. The unseasonably warm and erratic weather pattern throughout the majority of fiscal 2022 led to inconsistent heat-related demand, while elevated selling prices due to significantly higher wholesale costs contributed to customer conservation.
For the critical heating months of January and February, overall average temperatures were 16% warmer than normal and 11% warmer than the same period last year, and were on par for the warmest on record for that two-month period. The unseasonably warm and inconsistent weather pattern during much of fiscal 2023 adversely impacted heat-related demand.

… 40 more changes not shown on this page.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

5 edited+0 added−0 removed28 unchanged
Biggest changeBased on the sensitivity analysis described above, the hypothetical 10% adverse change in market prices for open derivative instruments as of September 24, 2022 indicates a decrease in potential future net gains of $11.1 million. See also Item 7A of this Annual Report. The above hypothetical change does not reflect the worst case scenario.
Biggest changeBased on the sensitivity analysis described above, the hypothetical 10% adverse change in market prices for open derivative instruments as of September 30, 2023 indicates a decrease in potential future net gains of $4.3 million. See also Item 7A of this Annual Report. The above hypothetical change does not reflect the worst case scenario.
Interest Rate Risk A portion of our borrowings bear interest at prevailing interest rates based upon, at the Operating Partnership’s option, LIBOR, plus an applicable margin or the base rate, defined as the higher of the Federal Funds Rate plus ½ of 1% or the agent bank’s prime rate, or LIBOR plus 1%, plus the applicable margin.
Interest Rate Risk A portion of our borrowings bear interest at prevailing interest rates based upon, at the Operating Partnership’s option, SOFR, plus an applicable margin or the base rate, defined as the higher of the Federal Funds Rate plus ½ of 1% or the agent bank’s prime rate, or SOFR plus 1%, plus the applicable margin.
Actual results may be significantly different depending on market conditions and the composition of the open position portfolio. 41 Table of Contents
Actual results may be significantly different depending on market conditions and the composition of the open position portfolio. 45 Table of Contents
Sensitivity Analysis In an effort to estimate our exposure to unfavorable market price changes in commodities related to our open positions under derivative instruments, we developed a model that incorporates the following data and assumptions: a. The fair value of open positions as of September 24, 2022. b.
Sensitivity Analysis In an effort to estimate our exposure to unfavorable market price changes in commodities related to our open positions under derivative instruments, we developed a model that incorporates the following data and assumptions: a. The fair value of open positions as of September 30, 2023. b.
At September 24, 2022, we were not party to any interest rate swap agreement. 40 Table of Contents Derivative Instruments and Hedging Activities All of our derivative instruments are reported on the balance sheet at their fair values.
At September 30, 2023, we were not party to any interest rate swap agreement. 44 Table of Contents Derivative Instruments and Hedging Activities All of our derivative instruments are reported on the balance sheet at their fair values.

Other SPH 10-K year-over-year comparisons