LP Gas, March 2010
Measuring total return There are various ways for shareholders to analyze their investments T his column is written for the shareholders of all privately held retail propane distribution companies Its purpose is to explore and compare the various ways to look at the returns on your investment What I intend to accomplish is to walk you through some examples of how returns can be calculated and then talk about what this means for you as an investor When we talk about returns we are speaking about them on a percentage basis just as if we are comparing them with the C O L U M N I S T C A R L HUGHES returns on certifi cates of deposit or on mutual funds We will primarily use EBITDA earnings before interest income taxes depreciation and amortization as the measure of fi nancial output It is the simplest most reliable indicator of fi nancial performance Keeping this example as simple as can be lets assume the following Return on EBITDA to historic cost 30 percent 300000 EBITDA 1 million original historic cost In the fi rst example the investors spent 1 million over the companys history for tanks trucks storage etc While this example ignores depreciated value replacement value cost to maintain the assets and the time value of money return on historic cost has meaning to some of us Return on EBITDA to appraised value 20 percent 300000 EBITDA 300000 x fi ve multiple Here we are comparing the current earnings to a realistic market value of the company If we had invested 15 million in the company today and generated 300000 in cash fl ow a 20 percent return would be achieved Matters Business Building A Better Industry Together At AMC we appreciate your business We strive everyday to provide great customer service and are constantly looking to improve our products and services to our valued clients in the Fuel Marketers industry We contract Independent Agents nationwide that are extremely knowledgeable ready and willing to put their expertise in the fuel related industry to use for you Along with being a member of the NPGA for 12 years AMC is also involved in many other state associations We have been a constant presence at various trade shows every year and always look forward to interacting with the convention attendees AMC would like to thank our many customers in the Propane industry for your trust in allowing us to protect your business We are excited to put our knowledge and expertise to work for you Come by and visit with us at our booth at the NPGA Convention April 10 12 Call us today at 8002332398 or visit us on the web at www amcinsurance com 60 LPGas March 2010 www LPGasmagazine com
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