# Suburban Propane Partners LP: Form 10-Q for the period ended Mar 30, 2024

- Company: [Suburban Propane Partners LP](/companies/sph.md) (CIK 1005210)
- Form: 10-Q
- Filed: 2024-05-09
- Accepted by EDGAR: May 9, 2024, 17:57 ET
- Period: 2024-03-30
- Accession: 0000950170-24-056636
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1005210/000095017024056636/sph-20240330.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1005210/000095017024056636/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2024-03-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2023-12-31 to 2024-03-30 | $498.1m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 6 months, 2023-10-01 to 2024-03-30 | $863.9m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months, 2023-12-31 to 2024-03-30 | $190.1m | us-gaap:CostOfGoodsAndServicesSold |
| Cost of revenue | 6 months, 2023-10-01 to 2024-03-30 | $343.2m | us-gaap:CostOfGoodsAndServicesSold |
| Operating income | 3 months, 2023-12-31 to 2024-03-30 | $136.9m | us-gaap:OperatingIncomeLoss |
| Operating income | 6 months, 2023-10-01 to 2024-03-30 | $185.6m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2023-12-31 to 2024-03-30 | $19.9m | us-gaap:InterestExpense |
| Interest expense | 6 months, 2023-10-01 to 2024-03-30 | $38.1m | us-gaap:InterestExpense |
| Income tax | 3 months, 2023-12-31 to 2024-03-30 | $32.0k | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 6 months, 2023-10-01 to 2024-03-30 | $281.0k | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2023-12-31 to 2024-03-30 | $111.5m | us-gaap:NetIncomeLoss |
| Net income | 6 months, 2023-10-01 to 2024-03-30 | $136.0m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2023-12-31 to 2024-03-30 | $1.72 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 6 months, 2023-10-01 to 2024-03-30 | $2.10 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2023-12-31 to 2024-03-30 | $1.73 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 6 months, 2023-10-01 to 2024-03-30 | $2.12 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2023-12-31 to 2024-03-30 | 64,818 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 6 months, 2023-10-01 to 2024-03-30 | 64,626 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 6 months, 2023-10-01 to 2024-03-30 | $62.4m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 6 months, 2023-10-01 to 2024-03-30 | $25.7m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Cash and equivalents | at 2024-03-30 | $4.4m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2024-03-30 | $226.1m | us-gaap:AssetsCurrent |
| Total assets | at 2024-03-30 | $2.34bn | us-gaap:Assets |
| Current liabilities | at 2024-03-30 | $257.2m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2024-03-30 | $1.69bn | us-gaap:Liabilities |
| Long-term debt | at 2024-03-30 | $1.21bn | us-gaap:LongTermDebtNoncurrent |

## Management's discussion and analysis

As filed, 48,583 characters.

The following is a discussion and analysis of the financial condition and results of operations of the Partnership as of and for the three and six months ended March 30, 2024, seen from our perspective. The discussion and analysis should be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations and the historical consolidated financial statements and notes thereto included in the Annual Report on Form 10-K for the fiscal year ended September 30, 2023.

### Executive Overview

The following are factors that regularly affect our operating results and financial condition. Our business is subject to the risks and uncertainties described in Item 1A included in the Annual Report on Form 10-K for the fiscal year ended September 30, 2023 and in this Quarterly Report. Management currently considers the following events, trends, and uncertainties to be most important to understanding our financial condition and operating performance:

### Product Costs and Supply

The level of profitability in the retail propane, fuel oil, natural gas and electricity businesses is largely dependent on the difference between retail sales price and our costs to acquire and transport products. The unit cost of our products, particularly propane, fuel oil and natural gas, is subject to volatility as a result of supply and demand dynamics or other market conditions, including, but not limited to, economic and political factors impacting crude oil and natural gas supply or pricing. We enter into product supply contracts that are generally one-year agreements subject to annual renewal, and also purchase product on the open market. We attempt to reduce price risk by pricing product on a short-term basis. Our propane supply contracts typically provide for pricing based upon index formulas using the posted prices established at major supply points such as Mont Belvieu, Texas, or Conway, Kansas (plus transportation costs) at the time of delivery.

To supplement our annual purchase requirements, we may utilize forward fixed price purchase contracts to acquire a portion of the propane that we resell to our customers, which allows us to manage our exposure to unfavorable changes in commodity prices and to assure adequate physical supply. The percentage of contract purchases, and the amount of supply contracted for under forward contracts at fixed prices, will vary from year to year based on market conditions.

Changes in our costs to acquire and transport products can occur rapidly over a short period of time and can impact profitability. There is no assurance that we will be able to pass on product acquisition and transportation cost increases fully or immediately, particularly when such costs increase rapidly. Therefore, average retail sales prices can vary significantly from year to year as our costs fluctuate with the propane, fuel oil, crude oil and natural gas commodity markets and infrastructure conditions. In addition, periods of sustained higher commodity and/or transportation prices can lead to customer conservation, resulting in reduced demand for our product.

According to the Energy Information Administration, U.S. propane inventory levels at the end of March 2024 were 51.8 million barrels, which was 7.0% lower than March 2023 levels, albeit 7.8% higher than the five-year average for March. These lower inventory levels in comparison to March 2023 contributed to an increase in average posted propane prices (basis Mont Belvieu, Texas) of 2.8% compared to the prior year second quarter.

### 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. Historically, approximately two‑thirds of our retail propane volume is sold during the six-month peak heating season from October through March. The fuel oil business tends to experience greater seasonality given its more limited use for space heating and approximately three-fourths of our fuel oil volumes are sold between October and March. 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. 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). To the extent necessary, we will reserve cash from the second and first 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. 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. In any given area, sustained warmer than normal temperatures will tend to result in reduced propane, fuel oil and natural gas consumption, while sustained colder than normal temperatures will tend to result in greater consumption.

### Hedging and Risk Management Activities

We engage in hedging and risk management activities to reduce the effect of price volatility on our product costs and to ensure the availability of product during periods of short supply. We enter into propane forward, options and swap agreements with third parties, and use futures and options contracts traded on the New York Mercantile Exchange (“NYMEX”) to purchase and sell propane, fuel oil, crude oil and natural gas at fixed prices in the future. The majority of the futures, forward and options agreements are used to hedge price risk associated with propane and fuel oil physical inventory, as well as, in certain instances, forecasted purchases of propane or fuel oil. 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. Forward contracts are generally settled physically at the expiration of the contract whereas futures, options and swap contracts are generally settled at the expiration of the contract through a net settlement mechanism. Although we use derivative instruments to reduce the effect of price volatility associated with priced physical inventory and forecasted transactions, we do not use derivative instruments for speculative trading purposes. Risk management activities are monitored by an internal Commodity Risk Management Committee, made up of six members of management and reporting to our Audit Committee, through enforcement of our Hedging and Risk Management Policy.

### Inflation and Other Cost Increases

We are experiencing inflationary pressures in the costs of various goods and services we use to operate our business, including volatile wholesale costs for the products we distribute. Although we have not experienced significant disruptions with securing the products we sell, inflationary factors and competition for resources across the supply chain has resulted in increased costs in a wide variety of areas; including labor, transportation costs, operating costs and the cost of capital expansion projects, tanks and other equipment. 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.

### 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 of our Annual Report on Form 10-K for the fiscal year ended September 30, 2023.

Certain amounts included in or affecting our consolidated financial statements and related disclosures must be estimated, requiring management to make certain assumptions with respect to values or conditions that cannot be known with certainty at the time the financial statements are prepared. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“US GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. We are also subject to risks and uncertainties that may cause actual results to differ from estimated results. Estimates are used when accounting for depreciation and amortization of long-lived assets, employee benefit plans, self-insurance and litigation reserves, environmental reserves, allowances for doubtful accounts, asset valuation assessments and valuation of derivative instruments. 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. Any effects on our business, financial position or results of operations resulting from revisions to these estimates are recorded in the period in which the facts that give rise to the revision become known to us. Management has reviewed these critical accounting estimates and related disclosures with the Audit Committee of our Board of Supervisors.

### Results of Operations and Financial Condition

Net income for the second quarter of fiscal 2024 was $111.5 million, or $1.73 per Common Unit, compared to net income of $104.5 million, or $1.63 per Common Unit, in the second quarter of fiscal 2023. Adjusted earnings before interest, taxes, depreciation and amortization (Adjusted EBITDA, as defined and reconciled below) for the second quarter of fiscal 2024 was $147.0 million, compared to $149.0 million in the prior year second quarter.

Retail propane gallons sold in the second quarter of fiscal 2024 of 140.2 million gallons decreased 2.7% compared to the prior year, primarily due to widespread warm weather throughout much of the second quarter, aside from a two-week period of extreme cold temperatures in mid-January 2024. Average temperatures (as measured by heating degree days) across all of our service territories during the second quarter were 8% warmer than normal and 4% cooler than the prior year second quarter (which was heavily influenced by mid-January heating degree days that were 33% colder than the prior year). Average temperatures for the month of February were 1% warmer than the prior year and on par for the warmest February on record; followed by March which was 7% warmer than the prior year.

Average propane prices (basis Mont Belvieu, Texas) for the second quarter of fiscal 2024 increased 2.8% compared to the prior year second quarter. Total gross margin of $308.0 million for the second quarter increased $13.1 million, or 4.4%, compared to the prior year second quarter. Gross margin for the second quarter of fiscal 2024 included a $5.9 million unrealized gain attributable to the mark-to-market adjustment for derivative instruments used in risk management activities, compared to a $4.5 million unrealized loss in the prior year second quarter. These non-cash adjustments, which were reported in cost of products sold, were excluded from Adjusted EBITDA for both periods. Excluding the impact of the mark-to-market adjustments, total gross margin increased $2.7 million, or 0.9%, compared to the prior year second quarter, primarily due to higher unit margins, which increased $0.08 per gallon, more than offsetting the lower volumes sold.

Combined operating and general and administrative expenses of $154.4 million for the second quarter of fiscal 2024 increased $1.2 million, or 0.8%, compared to the prior year second quarter, primarily due to higher payroll and benefit-related expenses, offset to an extent by lower volume-related variable operating costs. In addition, included within general and administrative expenses in the second quarter of the prior year were acquisition-related fees and expenses of $3.4 million, which were excluded from Adjusted EBITDA for the second quarter of fiscal 2023.

On March 15, 2024, we entered into a Fourth Amended and Restated Credit Agreement (the “Credit Agreement”) that provides for a $500 million revolving credit facility (the “Revolving Credit Facility”), of which $154.5 million was outstanding as of March 30, 2024. The Revolving Credit Facility matures on the earlier of (i) the date that is ninety-one (91) days prior to maturity of the 2027 Senior Notes, as defined in Item 1, Note 10 of this Quarterly Report (unless the notes have been refinanced prior to such date) and (ii) March 15, 2029. At the time of the execution of the Credit Agreement, $187.9 million was outstanding under the revolving credit facility of the previous credit agreement, which was rolled into the Revolving Credit Facility under the Credit Agreement. The Credit Agreement amends and restates the previous credit agreement dated March 5, 2020.

Total debt outstanding as of March 30, 2024 increased $22.5 million compared to September 30, 2023, primarily due to seasonal borrowings under our Revolving Credit Facility to help fund working capital needs. During the second quarter of fiscal 2024, we utilized cash flows from operating activities to repay $32.3 million in outstanding borrowings under the Revolving Credit Facility. As a result of this debt repayment, the Total Consolidated Leverage Ratio, as defined in our Credit Agreement, for the twelve-month period ending March 30, 2024 improved to 4.61x compared to 4.72x at the end of the fiscal 2024 first quarter.

As previously announced on April 25, 2024, the Partnership’s Board of Supervisors declared a quarterly distribution of $0.325 per Common Unit for the three months ended March 30, 2024. On an annualized basis, this distribution rate equates to $1.30 per Common Unit. The distribution is payable on May 14, 2024 to Common Unitholders of record as of May 7, 2024.

Our anticipated cash requirements for the remainder of fiscal 2024 include: (i) maintenance and growth capital expenditures of approximately $9.3 million and $27.5 million, respectively; (ii) interest and income tax payments of approximately $35.0 million; and (iii) cash distributions of approximately $41.6 million to our Common Unitholders based on the quarterly distribution rate of $0.325 per Common Unit. Based on our liquidity position, which includes cash on hand, availability of funds under our Revolving Credit Facility and expected cash flow from operating activities, we expect to have sufficient funds to meet our current and future obligations.

### Three Months Ended March 30, 2024 Compared to Three Months Ended March 25, 2023

#### Revenues

*(Dollars and gallons in thousands)*

| Revenues | Three Months Ended March 30, 2024 | March 25, 2023 | Increase (Decrease) | Percent Increase (Decrease) |
| --- | ---: | ---: | ---: | ---: |
| Propane | $437,564 | $457,140 | $(19,576) | (4.3)% |
| Fuel oil and refined fuels | 31,595 | 38,126 | (6,531) | (17.1)% |
| Natural gas and electricity | 8,713 | 11,856 | (3,143) | (26.5)% |
| All other | 20,215 | 19,379 | 836 | 4.3% |
| Total revenues | $498,087 | $526,501 | $(28,414) | (5.4)% |
| Retail gallons sold |  |  |  |  |
| Propane | 140,243 | 144,149 | (3,906) | (2.7)% |
| Fuel oil and refined fuels | 6,992 | 7,742 | (750) | (9.7)% |

As discussed above, average temperatures (as measured in heating degree days) across all of our service territories were 8% warmer than normal and 4% cooler than the prior year second quarter. Following a short burst of extreme cold weather in the middle of January, February 2024 temperatures were on par for the warmest on record. The months of February and March collectively were 4% warmer than the comparable prior year period and negatively impacted customer demand for heating purposes.

Revenues from the distribution of propane and related activities of $437.6 million decreased $19.6 million, or 4.3%, compared to the prior year, primarily due to lower volumes sold and lower average retail selling prices. Retail propane gallons sold decreased 3.9 million gallons, or 2.7%, compared to the prior year, primarily due to lower heat-related demand as described above, resulting in a $12.2 million decrease in revenues. Average propane selling prices decreased 1.5% compared to the prior year, reflecting lower average wholesale costs coming into the quarter, resulting in a $6.7 million decrease in revenues. Included within the propane segment are revenues from risk management activities, which decreased $0.7 million primarily due to the impact of lower selling prices on commodity hedging contracts that were settled physically.

Revenues from the distribution of fuel oil and refined fuels of $31.6 million were $6.5 million, or 17.1%, lower than the prior year, primarily due to lower volumes sold and lower average retail selling prices. Fuel oil and refined fuels gallons sold decreased 0.7 million gallons, or 9.7%, resulting in a $3.7 million decrease in revenues. Average fuel oil and refined fuels selling prices decreased 8.1% compared to the prior year, reflecting lower average wholesale costs, resulting in a $2.8 million decrease in revenues.

Revenues in our natural gas and electricity segment of $8.7 million were $3.1 million, or 26.5%, lower than the prior year, primarily due to lower natural gas average selling prices, reflecting lower average wholesale costs, and to a lesser extent, lower volumes sold, primarily due to warmer temperatures in our operating territories and a lower customer base.

Revenues in our all other segment of $20.2 million were $0.8 million, or 4.3%, higher than the prior year, primarily due to an increase in the volume of pipeline injected renewable natural gas (“RNG”) and higher prices for certain environmental attributes. Revenue from the RNG production assets primarily consist of sales of RNG and the associated environmental attributes, and tipping fees charged to third parties for various waste feedstocks.

#### Cost of Products Sold

*(Dollars in thousands)*

| Cost of products sold | Three Months Ended March 30, 2024 | March 25, 2023 | Increase (Decrease) | Percent Increase (Decrease) |
| --- | ---: | ---: | ---: | ---: |
| Propane | $161,190 | $194,854 | $(33,664) | (17.3)% |
| Fuel oil and refined fuels | 20,464 | 26,031 | (5,567) | (21.4)% |
| Natural gas and electricity | 4,760 | 7,187 | (2,427) | (33.8)% |
| All other | 3,706 | 3,536 | 170 | 4.8% |
| Total cost of products sold | $190,120 | $231,608 | $(41,488) | (17.9)% |
| As a percent of total revenues | 38.2% | 44.0% |  |  |

29

The cost of products sold reported in the condensed 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 also includes the cost of appliances and related parts sold or installed by our customer service centers computed on a basis that approximates the average cost of the products.

Given the retail nature of our operations, we maintain a certain level of priced physical inventory to help ensure that our field operations have adequate supply commensurate with the time of year. Our strategy has been, and will continue to be, to keep our physical inventory priced relatively close to market for our field operations. 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. 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 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. 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). We do not use futures or options contracts, or other derivative instruments, for speculative trading purposes. Unrealized non-cash gains or losses from changes in the fair value of derivative instruments that are not designated as cash flow hedges are recorded within cost of products sold. Cost of products sold excludes depreciation and amortization; these amounts are reported separately within the condensed consolidated statements of operations.

From a commodity perspective, wholesale propane prices trended lower than the prior year coming into the second quarter of fiscal 2024. During the second quarter, wholesale propane prices continued to trend lower than the prior year during January 2024, and then rose modestly for the remainder of the second quarter. Overall, average posted propane prices (basis Mont Belvieu, Texas) and fuel oil prices were 2.8% higher and 7.6% lower than the prior year second quarter, respectively. The net change in the fair value of derivative instruments resulted in a $5.9 million unrealized non-cash gain in the second quarter of fiscal 2024, compared to a $4.5 million unrealized non-cash loss in the prior year second quarter, resulting in a net decrease of $10.4 million in cost of products sold year-over-year, all of which was reported within the propane segment. These unrealized mark-to-market adjustments are excluded from Adjusted EBITDA for both periods.

Cost of products sold associated with the distribution of propane and related activities of $161.2 million decreased $33.7 million, or 17.3%, compared to the prior year second quarter. Lower average wholesale costs contributed to a decrease in cost of products sold of $14.1 million, while lower volumes sold contributed a $4.8 million decrease. Included within the propane segment are costs from other propane activities, which decreased $4.4 million compared to the prior year due to a decrease in costs for hedging contracts used in risk management activities that were settled physically, as well as the net decrease of $10.4 million resulting from the mark-to-market adjustments on derivative instruments in both periods discussed above.

Cost of products sold associated with our fuel oil and refined fuels segment of $20.5 million decreased $5.6 million, or 21.4%, compared to the prior year second quarter. Lower average wholesale costs and lower volumes sold contributed to decreases of $3.1 million and $2.5 million, respectively.

Cost of products sold in our natural gas and electricity segment of $4.8 million decreased $2.4 million, or 33.8%, compared to the prior year primarily due to lower average wholesale costs, and to a lesser extent, lower usage.

#### Operating Expenses

*(Dollars in thousands)*

|  | Three Months Ended March 30, 2024 | March 25, 2023 | Increase | Percent Increase |
| --- | ---: | ---: | ---: | ---: |
| Operating expenses | $128,311 | $127,450 | $861 | 0.7% |
| As a percent of total revenues | 25.8% | 24.2% |  |  |

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 condensed consolidated statements of operations. 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.

Operating expenses of $128.3 million for the second quarter of fiscal 2024 increased $0.9 million, or 0.7%, compared to the prior year second quarter, primarily due to higher payroll and benefit-related costs, as well as other inflationary effects on our operating costs, substantially offset by lower vehicle fuel costs and other volume-related variable operating costs.

#### General and Administrative Expenses

*(Dollars in thousands)*

|  | Three Months Ended March 30, 2024 | March 25, 2023 | Increase | Percent Increase |
| --- | ---: | ---: | ---: | ---: |
| General and administrative expenses | $26,071 | $25,700 | $371 | 1.4% |
| As a percent of total revenues | 5.2% | 4.9% |  |  |

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 condensed consolidated statements of operations.

General and administrative expenses of $26.1 million for the second quarter of fiscal 2024 increased $0.4 million, or 1.4%, compared to the prior year second quarter, primarily due to higher payroll and benefit-related costs and other inflationary factors. Included in the prior year second quarter were $3.4 million in professional fees and expenses associated with our RNG Acquisition.

#### Depreciation and Amortization

*(Dollars in thousands)*

|  | Three Months Ended March 30, 2024 | March 25, 2023 | Increase | Percent Increase |
| --- | ---: | ---: | ---: | ---: |
| Depreciation and amortization | $16,725 | $16,064 | $661 | 4.1% |
| As a percent of total revenues | 3.4% | 3.1% |  |  |

Depreciation and amortization expense of $16.7 million for the second quarter of fiscal 2024 increased $0.7 million, or 4.1%, compared to the prior year second quarter, primarily as a result of accelerated depreciation for assets taken out of service coupled with additional investments made in our RNG production facilities.

#### Interest Expense, net

*(Dollars in thousands)*

|  | Three Months Ended March 30, 2024 | March 25, 2023 | Increase | Percent Increase |
| --- | ---: | ---: | ---: | ---: |
| Interest expense, net | $19,919 | $19,871 | $48 | 0.2% |
| As a percent of total revenues | 4.0% | 3.8% |  |  |

Net interest expense of $19.9 million for the second quarter of fiscal 2024 was essentially flat to the prior year second quarter. Lower average outstanding borrowings under our Revolving Credit Facility were offset by higher benchmark interest rates for borrowings under that facility. See Liquidity and Capital Resources below for additional discussion.

#### Loss on Debt Extinguishment

In connection with the refinancing of our previous revolving credit facility during the second quarter of fiscal 2024, we recognized a non-cash charge of $0.2 million to write-off a portion of unamortized debt origination costs.

#### EBITDA and Adjusted EBITDA

EBITDA represents net income before deducting interest expense, income taxes, depreciation and amortization. Adjusted EBITDA represents EBITDA excluding the unrealized net gain or loss on mark-to-market activity for derivative instruments and other items, as applicable, as provided in the table below. Our management uses EBITDA and Adjusted EBITDA as supplemental measures of operating performance and we are including them because we believe that they provide our investors and industry analysts with additional information that we determined is useful to evaluate our operating results. EBITDA and Adjusted EBITDA are not recognized terms under US GAAP and should not be considered as an alternative to net income or net cash provided by operating activities determined in accordance with US GAAP. Because EBITDA and Adjusted EBITDA as determined by us excludes some, but not all, items that affect net income, they may not be comparable to EBITDA and Adjusted EBITDA or similarly titled measures used by other companies.

The following table sets forth our calculations of EBITDA and Adjusted EBITDA:

*(Dollars in thousands)*

|  | Three Months Ended March 30, 2024 | March 25, 2023 |
| --- | ---: | ---: |
| Net income | $111,500 | $104,477 |
| Add: |  |  |
| Provision for income taxes | 32 | 225 |
| Interest expense, net | 19,919 | 19,871 |
| Depreciation and amortization | 16,725 | 16,064 |
| EBITDA | 148,176 | 140,637 |
| Unrealized non-cash (gains) losses on changes in fair value of derivatives | (5,868) | 4,501 |
| Equity in losses of unconsolidated affiliates | 4,499 | 413 |
| Loss on debt extinguishment | 215 | — |
| Acquisition-related costs | — | 3,406 |
| Adjusted EBITDA | $147,022 | $148,957 |

We also reference gross margins, computed as revenues less cost of products sold as those amounts are reported on the condensed consolidated financial statements. 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. As cost of products sold does not include depreciation and amortization expense, the gross margin we reference is considered a non-GAAP financial measure.

### Six Months Ended March 30, 2024 Compared to Six Months Ended March 25, 2023

#### Revenues

*(Dollars and gallons in thousands)*

| Revenues | Six Months Ended March 30, 2024 | March 25, 2023 | Increase (Decrease) | Percent Increase (Decrease) |
| --- | ---: | ---: | ---: | ---: |
| Propane | $750,922 | $799,493 | $(48,571) | (6.1)% |
| Fuel oil and refined fuels | 55,493 | 68,267 | (12,774) | (18.7)% |
| Natural gas and electricity | 15,206 | 20,546 | (5,340) | (26.0)% |
| All other | 42,300 | 35,665 | 6,635 | 18.6% |
| Total revenues | $863,921 | $923,971 | $(60,050) | (6.5)% |
| Retail gallons sold |  |  |  |  |
| Propane | 246,788 | 252,913 | (6,125) | (2.4)% |
| Fuel oil and refined fuels | 12,248 | 13,305 | (1,057) | (7.9)% |

Average temperatures (as measured in heating degree days) across all of our service territories for the first six months of fiscal 2024 were 9% warmer than normal and 1% warmer than the prior year first half. The fiscal 2024 heating season was characterized by an inconsistent weather pattern and unseasonably warm temperatures throughout much of our service territories, particularly during the most critical months for heat-related demand, with only a brief burst of cooler weather in mid-January. For the critical heating month of December, average temperatures were 10% warmer than normal and prior year, while for the critical month of February, average temperatures were 12% warmer than normal and 1% warmer than the prior year. Average temperatures for the month of January were 4% warmer than normal and 17% cooler than the prior year, but the increase in heating degree days compared to the prior year were influenced by extreme cold temperatures for a two-week period mid-month. The unseasonably warm and inconsistent weather pattern during the first half of fiscal 2024 adversely impacted heat-related demand.

Revenues from the distribution of propane and related activities of $750.9 million decreased $48.6 million, or 6.1%, compared to the prior year first half, primarily due to lower average selling prices and lower volumes sold. Average propane selling prices decreased 4.0% compared to the prior year period, reflecting lower average wholesale costs, resulting in a $30.7 million decrease in revenues. Retail propane gallons sold decreased 6.1 million gallons, or 2.4%, compared to the prior year, resulting in a $19.2 million decrease in revenues. Included within the propane segment are revenues from other propane activities, which increased $1.3 million primarily due to a higher notional amount of hedging contracts used in risk management activities that were settled physically.

Revenues from the distribution of fuel oil and refined fuels of $55.5 million decreased $12.8 million, or 18.7%, compared to the prior year first half, primarily due to lower average selling prices, coupled with lower volumes sold. Average selling prices for fuel oil and refined fuels decreased 12.5%, resulting in a $7.4 million decrease in revenues. Fuel oil and refined fuels volumes sold decreased 1.1 million gallons, or 7.9%, resulting in a $5.4 million decrease in revenues.

Revenues in our natural gas and electricity segment of $15.2 million were $5.3 million, or 26.0%, lower than the prior year first half, resulting from lower selling prices, lower volumes sold (primarily due to the impact of warmer temperatures on customer demand) and a lower customer base.

Revenues in our all other segment of $42.3 million were $6.6 million, or 18.6%, higher than the prior year first half, primarily due to the impact of the RNG Acquisition, which closed at the beginning of our fiscal 2023 second quarter. Revenue from the RNG production assets primarily consist of sales of RNG and the associated environmental attributes, and tipping fees charged to third parties for various waste feedstocks.

#### Cost of Products Sold

*(Dollars in thousands)*

| Cost of products sold | Six Months Ended March 30, 2024 | March 25, 2023 | Increase (Decrease) | Percent Increase (Decrease) |
| --- | ---: | ---: | ---: | ---: |
| Propane | $288,962 | $344,694 | $(55,732) | (16.2)% |
| Fuel oil and refined fuels | 37,185 | 48,403 | (11,218) | (23.2)% |
| Natural gas and electricity | 8,278 | 13,127 | (4,849) | (36.9)% |
| All other | 8,748 | 8,037 | 711 | 8.8% |
| Total cost of products sold | $343,173 | $414,261 | $(71,088) | (17.2)% |
| As a percent of total revenues | 39.7% | 44.8% |  |  |

In the commodities markets, average posted propane prices (basis Mont Belvieu, Texas) and fuel oil prices were 6.9% and 14.3% lower than the prior year first half, respectively. The net change in the fair value of derivative instruments resulted in unrealized non-cash losses of $4.9 million and $18.2 million in the first six months of fiscal 2024 and 2023, respectively, resulting in a decrease of $13.3 million in cost of products sold year-over-year, all of which was reported within the propane segment. These unrealized mark-to-market adjustments are excluded from Adjusted EBITDA for both periods.

Cost of products sold associated with the distribution of propane and related activities of $289.0 million decreased $55.7 million, or 16.2%, compared to the prior year first half. Lower average wholesale costs contributed to a $32.4 million decrease in cost of products sold, and lower volumes sold contributed to a $7.6 million decrease. Included within the propane segment are costs from other propane activities which decreased $2.4 million compared to the prior year due to a decrease in propane costs for the physical settlement of hedging agreements, coupled with the net decrease in cost of products sold of $13.3 million resulting from the mark-to-market adjustments on derivative instruments in both periods discussed above.

Cost of products sold associated with our fuel oil and refined fuels segment of $37.2 million decreased $11.2 million, or 23.2%, compared to the prior year first half. Lower average wholesale costs and lower volumes sold contributed to decreases in cost of products sold of $7.4 million and $3.8 million, respectively.

Cost of products sold in our natural gas and electricity segment of $8.3 million decreased $4.8 million, or 36.9%, compared to the prior year, due to lower average wholesale costs, as well as lower usage from warmer weather.

#### Operating Expenses

*(Dollars in thousands)*

|  | Six Months Ended March 30, 2024 | March 25, 2023 | Increase | Percent Increase |
| --- | ---: | ---: | ---: | ---: |
| Operating expenses | $250,381 | $243,161 | $7,220 | 3.0% |
| As a percent of total revenues | 29.0% | 26.3% |  |  |

Operating expenses of $250.4 million for the first half of fiscal 2024 increased $7.2 million, or 3.0%, compared to the prior year first half, primarily due to higher payroll and benefit-related costs, as well as the operating costs associated with our RNG production facilities and other inflationary effects on our operating costs, offset to an extent by lower volume-related variable operating costs.

#### General and Administrative Expenses

*(Dollars in thousands)*

|  | Six Months Ended March 30, 2024 | March 25, 2023 | Increase | Percent Increase |
| --- | ---: | ---: | ---: | ---: |
| General and administrative expenses | $51,641 | $48,712 | $2,929 | 6.0% |
| As a percent of total revenues | 6.0% | 5.3% |  |  |

General and administrative expenses of $51.6 million for the first half of fiscal 2024 increased $2.9 million, or 6.0%, compared to the prior year period, primarily due to increases in payroll and benefit-related costs and other inflationary increases. Included in the prior year were $3.4 million in professional fees and expenses related to our RNG Acquisition.

#### Depreciation and Amortization

*(Dollars in thousands)*

|  | Six Months Ended March 30, 2024 | March 25, 2023 | Increase | Percent Increase |
| --- | ---: | ---: | ---: | ---: |
| Depreciation and amortization | $33,118 | $29,843 | $3,275 | 11.0% |
| As a percent of total revenues | 3.8% | 3.2% |  |  |

Depreciation and amortization expense of $33.1 million in the first half of fiscal 2024 increased $3.3 million, or 11.0%, primarily from the impact of our RNG Acquisition at the beginning of our second quarter of the prior year period.

#### Interest Expense, net

*(Dollars in thousands)*

|  | Six Months Ended March 30, 2024 | March 25, 2023 | Increase | Percent Increase |
| --- | ---: | ---: | ---: | ---: |
| Interest expense, net | $38,111 | $35,865 | $2,246 | 6.3% |
| As a percent of total revenues | 4.4% | 3.9% |  |  |

Net interest expense of $38.1 million in the first half of fiscal 2024 increased $2.2 million compared to the prior year first half, 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. See Liquidity and Capital Resources below for additional discussion.

#### Loss on Debt Extinguishment

In connection with the refinancing of our previous revolving credit facility during the second quarter of fiscal 2024, we recognized a non-cash charge of $0.2 million to write-off a portion of unamortized debt origination costs.

#### EBITDA and Adjusted EBITDA

The following table sets forth our calculations of EBITDA and Adjusted EBITDA:

*(Dollars in thousands)*

|  | Six Months Ended March 30, 2024 | March 25, 2023 |
| --- | ---: | ---: |
| Net income | $135,954 | $149,871 |
| Add: |  |  |
| Provision for income taxes | 281 | 177 |
| Interest expense, net | 38,111 | 35,865 |
| Depreciation and amortization | 33,118 | 29,843 |
| EBITDA | 207,464 | 215,756 |
| Unrealized non-cash losses on changes in fair value of derivatives | 4,918 | 18,207 |
| Equity in losses of unconsolidated affiliates | 9,657 | 695 |
| Loss on debt extinguishment | 215 | — |
| Acquisition-related costs | — | 4,341 |
| Adjusted EBITDA | $222,254 | $238,999 |

34

We also reference gross margins, computed as revenues less cost of products sold as those amounts are reported on the condensed consolidated financial statements. 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. As cost of products sold does not include depreciation and amortization expense, the gross margin we reference is considered a non-GAAP financial measure.

### Liquidity and Capital Resources

### Analysis of Cash Flows

*Operating Activities.* Net cash provided by operating activities for the first half of fiscal 2024 was $62.4 million compared to $105.4 million in the first half of the prior year. The change was primarily due to lower operating income, and an increase in working capital, which stemmed from a smaller decline in the wholesale cost of propane compared to the sharp decline in the prior year period.

*Investing Activities.* Net cash used in investing activities of $30.7 million for the first six months of fiscal 2024 consisted of capital expenditures of $25.7 million (including approximately $15.0 million to support the growth of operations and $10.7 million for maintenance expenditures), $6.0 million used to fund an additional investment in a privately held start-up entity and additional investments in Oberon, partially offset by $1.0 million in proceeds from the sale of property, plant and equipment. See Item 1, Note 4 of this Quarterly Report.

Net cash used in investing activities of $137.5 million for the first half of fiscal 2023 consisted of the RNG Acquisition (net of cash acquired) of $108.8 million, capital expenditures of $24.0 million (including approximately $12.3 million to support the growth of operations and $11.7 million for maintenance expenditures), a $3.0 million investment in a privately held start-up entity (plus direct transactions costs) and additional investments in Oberon, partially offset by approximately $1.5 million in proceeds from the sale of property, plant and equipment.

*Financing Activities.* Net cash used in financing activities of $26.5 million for the first half of fiscal 2024 reflected $22.5 million in net borrowings under our Revolving Credit Facility, which were used to fund a portion of our seasonal working capital needs and the capital expenditures and investments noted above, $41.5 million paid for the quarterly distributions to Common Unitholders at a rate of $0.325 per Common Unit paid in respect of the fourth quarter of fiscal 2023 and first quarter of fiscal 2024, $3.5 million in debt origination costs related to the refinancing of our Credit Agreement in March 2024 and other financing activities of $4.0 million.

Net cash provided by financing activities of $46.0 million for the first six months of fiscal 2023 reflected $90.9 million in net borrowings under our Revolving Credit Facility, which were used to fund the acquisition and investments noted above, and $41.1 million paid for the quarterly distributions to Common Unitholders at a rate of $0.325 per Common Unit paid in respect of the fourth quarter of fiscal 2022 and first quarter of fiscal 2023 and other financing activities of $3.8 million.

### Summary of Long-Term Debt Obligations and Revolving Credit Facility

As of March 30, 2024, our long-term debt consisted of $350.0 million in aggregate principal amount of 5.875% Senior Notes due March 1, 2027, $650.0 million in aggregate principal amount of 5.0% Senior Notes due June 1, 2031, $80.6 million in aggregate principal amount of 5.5% Green Bonds due October 1, 2028 through October 1, 2033 and $154.5 million outstanding under our Revolving Credit Facility provided by our Credit Agreement. Total long-term borrowings as of March 30, 2024 and March 25, 2023 was $1,235.1 million and $1,261.1, million, respectively. See Item 1, Note 10 of this Quarterly Report.

The aggregate amounts of long-term debt maturities subsequent to March 30, 2024 are as follows: fiscal 2024: $-0-; fiscal 2025: $-0-; fiscal 2026: $-0-; fiscal 2027: $504.5 million; fiscal 2028: $-0-; and thereafter: $730.6 million.

*Total Consolidated Leverage Ratio*. Total Consolidated Leverage Ratio, as defined by our Credit Agreement, represents total indebtedness as of the balance sheet date minus unrestricted cash and cash equivalents in an amount not to exceed $25.0 million, divided by Adjusted EBITDA calculated on a trailing twelve-month basis plus non-cash compensation costs recognized under our Restricted Unit Plans for the same period and other items. The measurement of the Total Consolidated Leverage Ratio for the trailing twelve-month periods ended March 30, 2024 and September 30, 2023 was as follows:

*(Dollars in thousands)*

|  | Twelve Months Ended March 30, 2024 | September 30, 2023 |
| --- | ---: | ---: |
| Total debt | $1,235,145 | $1,212,645 |
| Less: cash and cash equivalents (1) | (4,420) |  |
| Total debt, less cash and cash equivalents | $1,230,725 |  |
| Adjusted EBITDA | $258,280 | $275,025 |
| Compensation costs recognized under Restricted Unit Plans | 8,463 | 8,260 |
| Other | — | 168 |
| Adjusted EBITDA for use in calculation | $266,743 | $283,453 |
| **Total Consolidated Leverage Ratio** | **4.61 x** | **4.28 x** |

(1) Effective with the amendment to the Credit Agreement on March 15, 2024, total debt for the Total Consolidated Leverage Ratio covenant is net of unrestricted cash and cash equivalents in an amount not to exceed $25.0 million.

### 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. Available Cash, as defined in the Partnership Agreement, generally means all cash on hand at the end of the respective fiscal quarter less the amount of cash reserves established by the Board of Supervisors in its reasonable discretion for future cash requirements. These reserves are retained for the proper conduct of our business, the payment of debt principal and interest and for distributions during the next four quarters. The Board of Supervisors reviews the level of Available Cash on a quarterly basis based upon information provided by management.

On April 25, 2024, we announced a quarterly distribution of $0.325 per Common Unit, or $1.30 on an annualized basis, in respect of the second quarter of fiscal 2024, payable on May 14, 2024 to holders of record on May 7, 2024.

### Other Commitments

We have a noncontributory, cash balance format, defined benefit pension plan which was frozen to new participants effective January 1, 2000. Effective January 1, 2003, the defined benefit pension plan was amended such that future service credits ceased and eligible employees would receive interest credits only toward their ultimate retirement benefit. We also provide postretirement health care and life insurance benefits for certain retired employees under a plan that was frozen to new participants effective March 31, 1998. At March 30, 2024, we had a liability for the defined benefit pension plan and accrued retiree health and life benefits of $17.0 million and $4.5 million, respectively.

We are self-insured for general and product, workers’ compensation and automobile liabilities up to predetermined thresholds above which third party insurance applies. At March 30, 2024, we had accrued insurance liabilities of $60.3 million, and a receivable of $16.2 million related to the amount of the liability expected to be covered by insurance.

### Legal Matters

We are currently evaluating the impact of recently adopted changes to the New York General Business Law, as well as proposed changes to the New York Public Service Commission’s Uniform Business Practices, on our natural gas and electricity business operated through our 100%-owned subsidiary, Agway Energy Services, LLC (“AES”), and we are in the process of reviewing strategic alternatives for the AES business. See Item 1, Note 13, “Commitments and Contingencies,” Legal Matters subsection of this Quarterly Report.

## Market risk

As filed, 8,749 characters.

### Commodity Price Risk

We enter into product supply contracts that are generally one-year agreements subject to annual renewal, and also purchase product on the open market. Our propane supply contracts typically provide for pricing based upon index formulas using the posted prices established at major supply points such as Mont Belvieu, Texas, or Conway, Kansas (plus transportation costs) at the time of delivery. In addition, to supplement our annual purchase requirements, we may utilize forward fixed price purchase contracts to acquire a portion of the propane that we resell to our customers, which allows us to manage our exposure to unfavorable changes in commodity prices and to ensure adequate physical supply. The percentage of contract purchases, and the amount of supply contracted for under forward contracts at fixed prices, will vary from year to year based on market conditions. In certain instances, and when market conditions are favorable, we are able to purchase product under our supply arrangements at a discount to the market.

Product cost changes can occur rapidly over a short period of time and can impact profitability. We attempt to reduce commodity price risk by pricing product on a short-term basis. The level of priced, physical product maintained in storage facilities and at our customer service centers for immediate sale to our customers will vary depending on several factors, including, but not limited to, price, supply and demand dynamics for a given time of the year. Typically, our on hand priced position does not exceed more than four to eight weeks of our supply needs, depending on the time of the year. In the course of normal operations, we routinely enter into contracts such as forward priced physical contracts for the purchase or sale of propane and fuel oil that, under accounting rules for derivative instruments and hedging activities, qualify for and are designated as normal purchase or normal sale contracts. Such contracts are exempted from fair value accounting and are accounted for at the time product is purchased or sold under the related contract.

Under our hedging and risk management strategies, we enter into a combination of exchange-traded futures and options contracts and, in certain instances, over-the-counter options and swap contracts (collectively, “derivative instruments”) to manage the price risk associated with physical product and with future purchases of the commodities used in our operations, principally propane and fuel oil, as well as to help ensure the availability of product during periods of high demand. In addition, we sell propane and fuel oil to customers at fixed prices, and enter into derivative instruments to hedge a portion of our exposure to fluctuations in commodity prices as a result of selling the fixed price contracts. We do not use derivative instruments for speculative or trading purposes. Futures and swap contracts require that we sell or acquire propane or fuel oil at a fixed price for delivery at fixed future dates. An option contract allows, but does not require, its holder to buy or sell propane or fuel oil at a specified price during a specified time period. However, the writer of an option contract must fulfill the obligation of the option contract, should the holder choose to exercise the option. At expiration, the 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. To the extent that we utilize derivative instruments to manage exposure to commodity price risk and commodity prices move adversely in relation to the contracts, we could suffer losses on those derivative instruments when settled. Conversely, if prices move favorably, we could realize gains. Under our hedging and risk management strategy, realized gains or losses on derivative instruments will typically offset losses or gains on the physical inventory once the product is sold to customers at market prices, or delivered to customers as it pertains to fixed price contracts.

Futures are traded with brokers of the NYMEX and require daily cash settlements in margin accounts. Forward contracts are generally settled at the expiration of the contract term by physical delivery, and swap and options contracts are generally settled at expiration through a net settlement mechanism. Market risks associated with our derivative instruments are monitored daily for compliance with our Hedging and Risk Management Policy which includes volume limits for open positions. Open inventory positions are reviewed and managed daily as to exposures to changing market prices.

### Credit Risk

Exchange-traded futures and options contracts are guaranteed by the NYMEX and, as a result, have minimal credit risk. We are subject to credit risk with over-the-counter forward, swap and options contracts to the extent the counterparties do not perform. We evaluate the financial condition of each counterparty with which we conduct business and establish credit limits to reduce exposure to the risk of non-performance by our counterparties.

### 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. The applicable margin is dependent on the level of our total consolidated leverage (the total ratio of debt to consolidated EBITDA). Therefore, we are subject to interest rate risk on the variable component of the interest rate. From time to time, we enter into interest rate swap agreements to manage a part of our variable interest rate risk. The interest rate swaps are designated as cash flow hedges. Changes in the fair value of the interest rate swaps are recognized in other comprehensive income (“OCI”) until the hedged item is recognized in earnings. At March 30, 2024, we were not party to an interest rate swap agreement.

### Derivative Instruments and Hedging Activities

All of our derivative instruments are reported on the balance sheet at their fair values. On the date that derivative instruments are entered into, we make a determination as to whether the derivative instrument qualifies for designation as a hedge. Changes in the fair value of derivative instruments are recorded each period in current period earnings or OCI, depending on whether a derivative instrument is designated as a hedge and, if so, the type of hedge. For derivative instruments designated as cash flow hedges, we formally assess, both at the hedge contract’s inception and on an ongoing basis, whether the hedge contract is highly effective in offsetting changes in cash flows of hedged items. Changes in the fair value of derivative instruments designated as cash flow hedges are reported in OCI to the extent effective and reclassified into earnings during the same period in which the hedged item affects earnings. The mark-to-market gains or losses on ineffective portions of cash flow hedges are immediately recognized in earnings. Changes in the fair value of derivative instruments that are not designated as cash flow hedges, and that do not meet the normal purchase and normal sale exemption, are recorded in earnings as they occur. Cash flows associated with derivative instruments are reported as operating activities within the condensed consolidated statement of cash flows.

### 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 March 30, 2024.

B. The market prices for the underlying commodities used to determine A. above were adjusted adversely by a hypothetical 10% change and compared to the fair value amounts in A. above to project the potential negative impact on earnings that would be recognized for the respective scenario.

Based on the sensitivity analysis described above, the hypothetical 10% adverse change in market prices for open derivative instruments as of March 30, 2024 indicates a decrease in potential future net gains of $6.5 million. See also Item 7A of our Annual Report on Form 10-K for the fiscal year ended September 30, 2023. The above hypothetical change does not reflect the worst case scenario. Actual results may be significantly different depending on market conditions and the composition of the open position portfolio.

## Controls and procedures

As filed, 1,711 characters.

### Evaluation of Disclosure Controls and Procedures

The Partnership maintains disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) that are designed to provide reasonable assurance that information required to be disclosed in the Partnership’s filings and submissions under the Exchange Act is recorded, processed, summarized and reported within the periods specified in the rules and forms of the SEC and that such information is accumulated and communicated to the Partnership’s management, including its principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

The Partnership completed an evaluation under the supervision and with participation of the Partnership’s management, including the Partnership’s principal executive officer and principal financial officer, of the effectiveness of the design and operation of the Partnership’s disclosure controls and procedures as of March 30, 2024. Based on this evaluation, the Partnership’s principal executive officer and principal financial officer have concluded that, as of March 30, 2024, such disclosure controls and procedures were effective to provide the reasonable assurance described above.

### Changes in Internal Control Over Financial Reporting

There have not been any changes in the Partnership’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the quarter ended March 30, 2024 that have materially affected or are reasonably likely to materially affect its internal control over financial reporting.

## Risk factors

As filed, 235 characters.

In addition to the other information set forth in this report, you should carefully consider the factors discussed in Item 1A. “Risk Factors” in the Partnership’s Annual Report on Form 10-K for the fiscal year ended September 30, 2023.

Filed May 9, 2024.
Source: SEC EDGAR, the filing index for accession 0000950170-24-056636. Last ingested by Listed: Oct 24, 2026, 15:02 ET. No prices; not investment advice.