Sprague Resources LP (“Sprague”) (NYSE:SRLP) today reported its
financial results for the second quarter June 30, 2017.
Second Quarter 2017 Highlights
- Net sales were $513.6 million for the second quarter of 2017,
compared to $477.5 million for the second quarter of 2016.
- Net loss was $7.8 million for the second quarter of 2017,
compared to net loss of $9.7 million for the second quarter of
2016.
- Adjusted gross margin was $40.7 million for the second quarter
of 2017, compared to $48.7 million for the second quarter of
2016.
- Adjusted EBITDA was $4.3 million for the second quarter of
2017, compared to $13.9 million for the second quarter of
2016.
“Our results reflect seasonally weak demand for our products,
while recent acquisitions are starting to make contributions.
Our acquisition pipeline remains active as we focus on
opportunities to expand our geographic footprint, and produce more
ratable cash flow,” said David Glendon, President and Chief
Executive Officer. “Reflecting the results for the second
quarter, we expect full-year adjusted EBITDA to be at the lower end
of the previously issued guidance of $115 to $130 million,” said
Mr. Glendon.
Refined Products
- Volumes in the Refined Products segment increased 3% to 270.3
million gallons in the second quarter of 2017, compared to 263.4
million gallons in the second quarter of 2016.
- Adjusted gross margin in the Refined Products segment increased
$0.1 million to $23.8 million in the second quarter of 2017.
“Sprague's Refined Products sales volumes increased 3% in the
second quarter, supported by recent acquisitions," said
Mr. Glendon. “The Refined Products adjusted gross margin was
flat as volume increases were offset by small declines in unit
margin."
Natural Gas
- Natural Gas segment volumes decreased 5% to 13.5 million Bcf in
the second quarter of 2017, compared to 14.2 million Bcf in the
second quarter of 2016.
- Natural Gas adjusted gross margin decreased $7.3 million, or
74%, to $2.6 million for the second quarter of 2017, compared to
$9.8 million for the second quarter of 2016.
“Our Natural Gas adjusted gross margin declined by $7.3 million
for the quarter, with extended maintenance on the Algonquin
pipeline increasing our supply costs to our customers, and reduced
volatility limiting the level of supply optimization opportunities
relative to the prior year," said Mr. Glendon. "Timing
differences in the second quarter, related to forward positions and
the fair value discount of the forward book, accounted for most of
the remaining decline."
Materials Handling
- Materials Handling adjusted gross margin decreased by $0.3
million, or 3%, to $12.8 million for the second quarter of 2017,
compared to $13.1 million for the second quarter of 2016.
"Sprague's Materials Handling adjusted gross margin decreased
due to a reduction of heavy lift windmill activity offset by
increased asphalt storage and handling fees with the completion of
the asphalt conversion project at our Portsmouth terminal,"
reported Mr. Glendon.
Quarterly Distribution Increase
On July 26, 2017, the Board of Directors of Sprague’s
general partner, Sprague Resources GP LLC, announced its thirteenth
consecutive distribution increase and approved a cash distribution
of $0.6075 per unit for the quarter ended June 30, 2017,
representing a 3% increase over the distribution declared for the
quarter ended March 31, 2017. The distribution will be paid
on August 11, 2017 to unitholders of record as of the close of
business on August 7, 2017.
Financial Results Conference Call
Management will review Sprague’s second quarter 2017 financial
results in a teleconference call for analysts and investors today,
August 9, 2017.
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Date and Time: |
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August 9, 2017 at 1:00
PM ET |
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Dial-in numbers: |
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(866) 516-2130 (U.S.
and Canada) |
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(678) 509-7612
(International) |
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Participation Code: |
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37160764 |
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The conference call may also be accessed live by a webcast
available on the "Investor Relations" page of Sprague's website at
www.spragueenergy.com and will be archived on the website for
one year.
About Sprague Resources LP
Sprague Resources LP is a master limited partnership engaged in
the purchase, storage, distribution and sale of refined petroleum
products and natural gas. Sprague also provides storage and
handling services for a broad range of materials.
Non-GAAP Financial Measures
Adjusted EBITDA, adjusted gross margin and adjusted unit margin
are measures not defined by GAAP. We define EBITDA as net income
(loss) before interest, income taxes, depreciation and
amortization. We define adjusted EBITDA as EBITDA increased by
unrealized hedging losses and decreased by unrealized hedging
gains, in each case with respect to refined products and natural
gas inventory, prepaid forward contracts and natural gas
transportation contracts. We define adjusted gross margin as
net sales less cost of products sold (exclusive of depreciation and
amortization) and decreased by total commodity derivative gains and
losses included in net income (loss) and increased by realized
commodity derivative gains and losses included in net income
(loss), in each case with respect to refined products and natural
gas inventory, prepaid forward contracts and natural gas
transportation contracts.
To manage Sprague's underlying performance, including its
physical and derivative positions, management utilizes adjusted
gross margin. Adjusted gross margin is also used by external users
of our consolidated financial statements to assess our economic
results of operations and its commodity market value reporting to
lenders. EBITDA and adjusted EBITDA are used as supplemental
financial measures by external users of our financial statements,
such as investors, trade suppliers, research analysts and
commercial banks to assess the financial performance of our assets,
operations and return on capital without regard to financing
methods, capital structure or historical cost basis; the ability of
our assets to generate sufficient revenue, that when rendered to
cash, will be available to pay interest on our indebtedness and
make distributions to our equity holders; repeatable operating
performance that is not distorted by non-recurring items or market
volatility; and, the viability of acquisitions and capital
expenditure projects.
Sprague believes that investors benefit from having access to
the same financial measures that are used by its management and
that these measures are useful to investors because they aid in
comparing its operating performance with that of other companies
with similar operations. The adjusted EBITDA, adjusted gross margin
and adjusted unit margin data presented by Sprague may not be
comparable to similarly titled measures at other companies because
these items may be defined differently by other companies.
Please see the attached reconciliations of net income to adjusted
EBITDA and operating income to adjusted gross margin.
With regard to guidance, reconciliation of non-GAAP adjusted
EBITDA to the closest corresponding GAAP measure (expected net
income (loss)) is not available without unreasonable efforts on a
forward-looking basis due to the inherent difficulty and
impracticality of forecasting certain amounts required by GAAP such
as unrealized gains and losses on derivative hedges, which can have
a significant and potentially unpredictable impact on our future
GAAP financial results.
Forward Looking Statements
This press release may include forward-looking statements that
we believe to be reasonable as of today's date. These
forward-looking statements involve risks and uncertainties and
other factors that are difficult to predict and many of which are
beyond management’s control. Although Sprague believes that the
assumptions underlying these statements are reasonable, investors
are cautioned that such forward-looking statements are inherently
uncertain and involve risks that may affect our business prospects
and performance causing actual results to differ from those
discussed in the foregoing release. Such risks and
uncertainties include, by way of example and not of limitation:
increased competition or changes in the marketplace for our
products or services; changes in supply or demand for our products
or services; security and cyber-risks; adverse weather conditions
or economic conditions; changes in operating conditions and costs;
changes in the level of environmental remediation spending;
potential equipment malfunction; potential labor issues; the
legislative or regulatory environment; unexpected terminal
construction/repair or delays; nonperformance by major customers or
suppliers; our ability to successfully complete our organic growth
and acquisition projects and realize anticipated benefits; and,
political and economic conditions, including the impact of
potential terrorist acts and international hostilities. These and
other applicable risks and uncertainties have been described more
fully in Sprague’s most recent Annual Report on Form 10-K filed
with the U.S. Securities and Exchange Commission (“SEC”) on March
10, 2017, and in our subsequent Form 10-Q, Form 8-K and other
documents filed with or furnished to the SEC.
Sprague undertakes no obligation and does not intend to update
any forward-looking statements to reflect new information or future
events. You are cautioned not to place undue reliance on
these forward-looking statements which speak only as of the date of
this press release.
*****
This release is intended to be a qualified notice under Treasury
Regulation Section 1.1446-4(b). Brokers and nominees should treat
one hundred percent (100.0%) of Sprague’s distributions to non-U.S.
investors as being attributable to income that is effectively
connected with a United States trade or business. Accordingly,
Sprague’s distributions to non-U.S. investors are subject to
federal income tax withholding at the highest applicable effective
tax rate.
(Financial Tables Below)
|
Sprague Resources LP |
Summary Financial Data |
Three and Six Months Ended June 30, 2017
and 2016 |
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|
|
|
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
|
2017 |
|
2016 |
|
2017 |
|
2016 |
|
|
(unaudited) |
|
(unaudited) |
|
(unaudited) |
|
(unaudited) |
|
|
($ in thousands) |
|
($ in thousands) |
Statement of
Operations Data: |
|
|
|
|
|
|
|
|
Net sales |
|
$ |
513,626 |
|
|
$ |
477,487 |
|
|
$ |
1,431,433 |
|
|
$ |
1,200,394 |
|
Operating costs and
expenses: |
|
|
|
|
|
|
|
|
Cost of
products sold (exclusive of depreciation and amortization) |
|
469,058 |
|
|
441,107 |
|
|
1,264,204 |
|
|
1,080,727 |
|
Operating
expenses |
|
16,901 |
|
|
16,524 |
|
|
33,733 |
|
|
33,353 |
|
Selling,
general and administrative |
|
19,624 |
|
|
18,234 |
|
|
45,913 |
|
|
42,364 |
|
Depreciation and amortization |
|
6,950 |
|
|
5,641 |
|
|
12,882 |
|
|
10,672 |
|
Total operating costs
and expenses |
|
512,533 |
|
|
481,506 |
|
|
1,356,732 |
|
|
1,167,116 |
|
Operating
income (loss) |
|
1,093 |
|
|
(4,019 |
) |
|
74,701 |
|
|
33,278 |
|
Other
income (expense) |
|
119 |
|
|
— |
|
|
183 |
|
|
(95 |
) |
Interest
income |
|
88 |
|
|
212 |
|
|
172 |
|
|
339 |
|
Interest
expense |
|
(8,279 |
) |
|
(6,511 |
) |
|
(15,434 |
) |
|
(13,494 |
) |
(Loss) income before
income taxes |
|
(6,979 |
) |
|
(10,318 |
) |
|
59,622 |
|
|
20,028 |
|
Income
tax provision |
|
(813 |
) |
|
573 |
|
|
(2,915 |
) |
|
48 |
|
Net (loss)
income |
|
(7,792 |
) |
|
(9,745 |
) |
|
56,707 |
|
|
20,076 |
|
Incentive
distributions declared |
|
(854 |
) |
|
(381 |
) |
|
(1,596 |
) |
|
(656 |
) |
Limited
partners’ interest in net (loss) income |
|
$ |
(8,646 |
) |
|
$ |
(10,126 |
) |
|
$ |
55,111 |
|
|
$ |
19,420 |
|
Net (loss) income per
limited partner unit: |
|
|
|
|
|
|
|
|
Common -
basic |
|
$ |
(0.39 |
) |
|
$ |
(0.48 |
) |
|
$ |
2.52 |
|
|
$ |
0.91 |
|
Common -
diluted |
|
$ |
(0.39 |
) |
|
$ |
(0.48 |
) |
|
$ |
2.48 |
|
|
$ |
0.89 |
|
Subordinated - basic and diluted |
|
N/A |
|
$ |
(0.48 |
) |
|
N/A |
|
$ |
0.91 |
|
Units used to compute
net income per limited partner unit: |
|
|
|
|
|
|
|
|
Common -
basic |
|
22,319,704 |
|
|
11,229,805 |
|
|
21,864,875 |
|
|
11,169,860 |
|
Common -
diluted |
|
22,319,704 |
|
|
11,229,805 |
|
|
22,200,070 |
|
|
11,456,519 |
|
Subordinated - basic and diluted |
|
N/A |
|
10,071,970 |
|
|
N/A |
|
10,071,970 |
|
Distribution declared
per unit |
|
$ |
0.6075 |
|
|
$ |
0.5475 |
|
|
$ |
1.2000 |
|
|
$ |
1.0800 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sprague Resources LP |
Volume, Net Sales and Adjusted Gross Margin by
Segment |
Three and Six Months Ended June 30, 2017
and 2016 |
|
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
|
2017 |
|
2016 |
|
2017 |
|
2016 |
|
|
(unaudited) |
|
(unaudited) |
|
(unaudited) |
|
(unaudited) |
|
|
($ and volumes in thousands) |
|
($ and volumes in thousands) |
Volumes: |
|
|
|
|
|
|
|
|
Refined
products (gallons) |
|
270,312 |
|
|
263,382 |
|
|
743,022 |
|
|
740,754 |
|
Natural
gas (MMBtus) |
|
13,510 |
|
|
14,158 |
|
|
33,714 |
|
|
32,989 |
|
Materials
handling (short tons) |
|
695 |
|
|
615 |
|
|
1,276 |
|
|
1,252 |
|
Materials
handling (gallons) |
|
152,418 |
|
|
81,018 |
|
|
227,682 |
|
|
156,408 |
|
Net
Sales: |
|
|
|
|
|
|
|
|
Refined
products |
|
$ |
430,984 |
|
|
$ |
390,725 |
|
|
$ |
1,212,574 |
|
|
$ |
980,669 |
|
Natural
gas |
|
65,708 |
|
|
68,769 |
|
|
185,374 |
|
|
184,388 |
|
Materials
handling |
|
12,798 |
|
|
13,153 |
|
|
22,723 |
|
|
24,544 |
|
Other
operations |
|
4,136 |
|
|
4,840 |
|
|
10,762 |
|
|
10,793 |
|
Total net
sales |
|
$ |
513,626 |
|
|
$ |
477,487 |
|
|
$ |
1,431,433 |
|
|
$ |
1,200,394 |
|
Reconciliation of Operating Income (loss) to Adjusted Gross
Margin: |
|
|
|
|
|
|
Operating income (loss) |
|
$ |
1,093 |
|
|
$ |
(4,019 |
) |
|
$ |
74,701 |
|
|
$ |
33,278 |
|
Operating costs and expenses not allocated to operating
segments: |
|
|
|
|
|
|
Operating expenses |
|
16,901 |
|
|
16,524 |
|
|
33,733 |
|
|
33,353 |
|
Selling, general and administrative |
|
19,624 |
|
|
18,234 |
|
|
45,913 |
|
|
42,364 |
|
Depreciation and amortization |
|
6,950 |
|
|
5,641 |
|
|
12,882 |
|
|
10,672 |
|
Add:
unrealized (gain) loss on inventory derivatives |
|
(4,539 |
) |
|
8,652 |
|
|
(29,047 |
) |
|
11,956 |
|
Add:
unrealized (gain) loss on prepaid forward contract derivatives |
|
(267 |
) |
|
(560 |
) |
|
(240 |
) |
|
(1,041 |
) |
Add:
unrealized loss (gain) on natural gas transportation contracts |
|
949 |
|
|
4,205 |
|
|
(6,865 |
) |
|
4,549 |
|
Total adjusted gross margin: |
|
$ |
40,711 |
|
|
$ |
48,677 |
|
|
$ |
131,077 |
|
|
$ |
135,131 |
|
Adjusted Gross
Margin: |
|
|
|
|
|
|
|
|
Refined
products |
|
$ |
23,815 |
|
|
$ |
23,735 |
|
|
$ |
63,293 |
|
|
$ |
65,377 |
|
Natural
gas |
|
2,568 |
|
|
9,839 |
|
|
41,158 |
|
|
40,961 |
|
Materials
handling |
|
12,798 |
|
|
13,129 |
|
|
22,723 |
|
|
24,521 |
|
Other
operations |
|
1,530 |
|
|
1,974 |
|
|
3,903 |
|
|
4,272 |
|
Total
adjusted gross margin |
|
$ |
40,711 |
|
|
$ |
48,677 |
|
|
$ |
131,077 |
|
|
$ |
135,131 |
|
|
Sprague Resources LP |
Reconciliation of Net Income to Non-GAAP
Measures |
Three and Six Months Ended June 30, 2017
and 2016 |
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
|
2017 |
|
2016 |
|
2017 |
|
2016 |
|
|
(unaudited) |
|
(unaudited) |
|
(unaudited) |
|
(unaudited) |
|
|
($ in thousands) |
|
($ in thousands) |
Reconciliation of net income to EBITDA, Adjusted
EBITDA and Distributable Cash
Flow: |
|
|
|
|
|
|
Net (loss)
income |
|
$ |
(7,792 |
) |
|
$ |
(9,745 |
) |
|
$ |
56,707 |
|
|
$ |
20,076 |
|
Add/(deduct): |
|
|
|
|
|
|
|
|
Interest
expense, net |
|
8,191 |
|
|
6,299 |
|
|
15,262 |
|
|
13,155 |
|
Tax
provision |
|
813 |
|
|
(573 |
) |
|
2,915 |
|
|
(48 |
) |
Depreciation and
amortization |
|
6,950 |
|
|
5,641 |
|
|
12,882 |
|
|
10,672 |
|
EBITDA |
|
$ |
8,162 |
|
|
$ |
1,622 |
|
|
$ |
87,766 |
|
|
$ |
43,855 |
|
Add: unrealized (gain)
loss on inventory derivatives |
|
(4,539 |
) |
|
8,652 |
|
|
(29,047 |
) |
|
11,956 |
|
Add: unrealized (gain)
loss on prepaid forward contract derivatives |
|
(267 |
) |
|
(560 |
) |
|
(240 |
) |
|
(1,041 |
) |
Add: unrealized loss
(gain) on natural gas transportation contracts |
|
949 |
|
|
4,205 |
|
|
(6,865 |
) |
|
4,549 |
|
Adjusted
EBITDA |
|
$ |
4,305 |
|
|
$ |
13,919 |
|
|
$ |
51,614 |
|
|
$ |
59,319 |
|
Add/(deduct): |
|
|
|
|
|
|
|
|
Cash
interest expense, net |
|
(5,739 |
) |
|
(5,282 |
) |
|
(11,795 |
) |
|
(11,211 |
) |
Cash
taxes |
|
(1,251 |
) |
|
62 |
|
|
(2,091 |
) |
|
(545 |
) |
Maintenance capital expenditures |
|
(2,673 |
) |
|
(2,107 |
) |
|
(4,213 |
) |
|
(3,736 |
) |
Elimination of expense relating to incentive compensation and
directors fees expected to be paid in common units |
|
1,018 |
|
|
787 |
|
|
1,946 |
|
|
1,023 |
|
Other |
|
1,378 |
|
|
300 |
|
|
1,723 |
|
|
612 |
|
Distributable
cash flow |
|
$ |
(2,962 |
) |
|
$ |
7,679 |
|
|
$ |
37,184 |
|
|
$ |
45,462 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investor Contact:
Kory Arthur
+1 603.766.7401
karthur@spragueenergy.com
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