Sprague Resources LP (“Sprague”) (NYSE:SRLP) today reported its
financial results for the third quarter September 30, 2017.
Third Quarter 2017 Highlights
- Net sales were $491.4 million for the third quarter of 2017,
compared to $422.8 million for the third quarter of 2016.
- Net loss was $14.3 million for the third quarter of 2017,
compared to net loss of $8.8 million for the third quarter of
2016.
- Adjusted gross margin was $48.5 million for the third quarter
of 2017, compared to $54.8 million for the third quarter of
2016.
- Adjusted EBITDA was $14.1 million for the third quarter of
2017, compared to $19.3 million for the third quarter of 2016.
“Although conditions in the third quarter were challenging, I'm
pleased with Sprague's ability to leverage a strong balance sheet
to fund organic and acquisition growth. Our recent
investments will increase ratable cash flow and enhance our
portfolio's ability to deliver solid results across a variety of
market conditions,” said David Glendon, President and Chief
Executive Officer. “Reflecting the results for the third
quarter, we expect full-year adjusted EBITDA to be at the lower
end, to modestly below, the previously issued guidance of $115 to
$130 million,” said Mr. Glendon.
Refined Products
- Volumes in the Refined Products segment increased 6% to 251.5
million gallons in the third quarter of 2017, compared to 237.5
million gallons in the third quarter of 2016.
- Adjusted gross margin in the Refined Products segment decreased
$6.7 million to $32.0 million in the third quarter of 2017.
“Sprague's Refined Products sales volumes increased 6% in the
second quarter, supported by recent acquisitions and increased
marine diesel, marine bunker and asphalt sales at Kildair," said
Mr. Glendon. “The decline in the Refined Products adjusted
gross margin was driven primarily by weaker adjusted unit margins
in a well-supplied market, partially offset by the contribution
from our recently completed acquisitions."
Natural Gas
- Natural Gas segment volumes decreased 7% to 11.0 million Bcf in
the third quarter of 2017, compared to 11.8 million Bcf in the
third quarter of 2016.
- Natural Gas adjusted gross margin increased $0.4 million, or
15%, to $3.2 million for the third quarter of 2017, compared to
$2.8 million for the third quarter of 2016.
“Our Natural Gas adjusted gross margin increased $0.4 million
for the quarter, as a 24% increase in adjusted unit gross margins
offset the decline in volume, continuing our trend of focusing on
smaller, higher margin accounts," said Mr. Glendon.
Materials Handling
- Materials Handling adjusted gross margin increased by $0.1
million, or 1%, to $11.4 million for the third quarter of 2017,
compared to $11.3 million for the third quarter of 2016.
"Sprague's Materials Handling adjusted gross margin for the
third quarter improved marginally as a result of increased handling
and throughput activity at Kildair, which was partially offset by
decreased salt handling activity," reported Mr. Glendon.
Quarterly Distribution Increase
On October 26, 2017, the Board of Directors of Sprague’s
general partner, Sprague Resources GP LLC, announced its fourteenth
consecutive distribution increase and approved a cash distribution
of $0.6225 per unit for the quarter ended September 30, 2017,
representing a 2% increase over the distribution declared for the
quarter ended June 30, 2017. The distribution will be paid on
November 13, 2017 to unitholders of record as of the close of
business on November 6, 2017.
Financial Results Conference Call
Management will review Sprague’s third quarter 2017 financial
results in a teleconference call for analysts and investors today,
November 7, 2017.
| Date and Time: |
November 7, 2017 at
1:00 PM ET |
| |
|
|
Dial-in numbers: |
(866) 516-2130 (U.S.
and Canada) |
| |
|
| |
(678) 509-7612
(International) |
| |
|
|
Participation Code: |
87326969 |
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 gross
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. Sprague defines adjusted unit gross
margin as adjusted gross margin divided by units sold, as expressed
in gallons for refined products, and in MMBtu for natural gas.
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 StatementsAny statements in
this press release about future expectations, plans and prospects
for Sprague Resources LP or about Sprague Resources LP’s future
expectations, beliefs, goals, plans or prospects, constitute
forward-looking statements within the meaning of Section 21E of the
Securities Exchange Act of 1934. Any statements that are not
statements of historical fact (including statements containing the
words “believes,” “plans,” “anticipates,” “expects,” “estimates”
and similar expressions) should also be considered forward-looking
statements. 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 for our
products or services; adverse weather conditions; changes in supply
or demand for our products or services; nonperformance by major
customers or suppliers; changes in operating conditions and costs;
changes in the level of environmental remediation spending;
potential equipment malfunction and unexpected capital
expenditures; our ability to complete organic growth and
acquisition projects; our ability to integrate acquired assets;
potential labor issues; the legislative or regulatory environment;
terminal construction/repair delays; political and economic
conditions; and, the impact of security risks including terrorism,
international hostilities and cyber-risk. These are not all of the
important factors that could cause actual results to differ
materially from those expressed in forward looking
statements. 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 the Partnership's subsequent Form
10-Q, Form 8-K and other documents filed with 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 LPSummary
Financial DataThree and Nine Months Ended
September 30, 2017 and 2016 |
| |
|
|
|
| |
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
| |
2017 |
|
2016 |
|
2017 |
|
2016 |
| |
(unaudited) |
|
(unaudited) |
|
(unaudited) |
|
(unaudited) |
| |
($ in thousands) |
|
($ in thousands) |
| Statement of
Operations Data: |
|
|
|
|
|
|
|
| Net sales |
$ |
491,393 |
|
|
$ |
422,779 |
|
|
$ |
1,922,826 |
|
|
$ |
1,623,173 |
|
| Operating costs and
expenses: |
|
|
|
|
|
|
|
| Cost of
products sold (exclusive of depreciation and amortization) |
456,656 |
|
|
383,211 |
|
|
1,720,860 |
|
|
1,463,938 |
|
| Operating
expenses |
16,891 |
|
|
15,725 |
|
|
50,624 |
|
|
49,078 |
|
| Selling,
general and administrative |
17,559 |
|
|
19,735 |
|
|
63,472 |
|
|
62,099 |
|
|
Depreciation and amortization |
6,655 |
|
|
5,329 |
|
|
19,537 |
|
|
16,001 |
|
| Total operating costs
and expenses |
497,761 |
|
|
424,000 |
|
|
1,854,493 |
|
|
1,591,116 |
|
| Operating
income (loss) |
(6,368 |
) |
|
(1,221 |
) |
|
68,333 |
|
|
32,057 |
|
| Other
income (expense) |
— |
|
|
(19 |
) |
|
183 |
|
|
(114 |
) |
| Interest
income |
75 |
|
|
40 |
|
|
247 |
|
|
379 |
|
| Interest
expense |
(7,170 |
) |
|
(6,685 |
) |
|
(22,604 |
) |
|
(20,179 |
) |
| (Loss) income before
income taxes |
(13,463 |
) |
|
(7,885 |
) |
|
46,159 |
|
|
12,143 |
|
| Income
tax provision |
(853 |
) |
|
(909 |
) |
|
(3,768 |
) |
|
(861 |
) |
| Net (loss)
income |
(14,316 |
) |
|
(8,794 |
) |
|
42,391 |
|
|
11,282 |
|
| Incentive
distributions declared |
(1,024 |
) |
|
(488 |
) |
|
(2,620 |
) |
|
(1,144 |
) |
| Limited
partners’ interest in net (loss) income |
$ |
(15,340 |
) |
|
$ |
(9,282 |
) |
|
$ |
39,771 |
|
|
$ |
10,138 |
|
| Net (loss) income per
limited partner unit: |
|
|
|
|
|
|
|
| Common -
basic |
$ |
(0.68 |
) |
|
$ |
(0.44 |
) |
|
$ |
1.80 |
|
|
$ |
0.48 |
|
| Common -
diluted |
$ |
(0.68 |
) |
|
$ |
(0.44 |
) |
|
$ |
1.78 |
|
|
$ |
0.46 |
|
|
Subordinated - basic and diluted |
|
N/A |
|
|
$ |
(0.44 |
) |
|
|
N/A |
|
|
$ |
0.48 |
|
| Units used to compute
net income per limited partner unit: |
|
|
|
|
|
|
|
| Common -
basic |
22,543,527 |
|
|
11,229,805 |
|
|
22,093,578 |
|
|
11,189,987 |
|
| Common -
diluted |
22,543,527 |
|
|
11,229,805 |
|
|
22,368,432 |
|
|
11,506,830 |
|
|
Subordinated - basic and diluted |
|
N/A |
|
|
10,071,970 |
|
|
|
N/A |
|
|
10,071,970 |
|
| Distribution declared
per unit |
$ |
0.6225 |
|
|
$ |
0.5625 |
|
|
$ |
1.8225 |
|
|
$ |
1.6425 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Sprague Resources LPVolume,
Net Sales and Adjusted Gross Margin by
SegmentThree and Nine Months Ended
September 30, 2017 and 2016 |
| |
|
|
|
| |
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
| |
2017 |
|
2016 |
|
2017 |
|
2016 |
| |
(unaudited) |
|
(unaudited) |
|
(unaudited) |
|
(unaudited) |
| |
($ and volumes in thousands) |
|
($ and volumes in thousands) |
|
Volumes: |
|
|
|
|
|
|
|
| Refined
products (gallons) |
251,496 |
|
|
237,510 |
|
|
994,518 |
|
|
978,264 |
|
| Natural
gas (MMBtus) |
10,963 |
|
|
11,810 |
|
|
44,677 |
|
|
44,799 |
|
| Materials
handling (short tons) |
603 |
|
|
764 |
|
|
1,879 |
|
|
2,016 |
|
| Materials
handling (gallons) |
74,214 |
|
|
78,330 |
|
|
301,896 |
|
|
234,738 |
|
| Net
Sales: |
|
|
|
|
|
|
|
| Refined
products |
$ |
425,492 |
|
|
$ |
350,528 |
|
|
$ |
1,638,066 |
|
|
$ |
1,331,197 |
|
| Natural
gas |
49,694 |
|
|
55,868 |
|
|
235,068 |
|
|
240,256 |
|
| Materials
handling |
11,395 |
|
|
11,304 |
|
|
34,118 |
|
|
35,848 |
|
| Other
operations |
4,812 |
|
|
5,079 |
|
|
15,574 |
|
|
15,872 |
|
| Total net
sales |
$ |
491,393 |
|
|
$ |
422,779 |
|
|
$ |
1,922,826 |
|
|
$ |
1,623,173 |
|
|
Reconciliation of Operating (loss) Income to Adjusted Gross
Margin: |
|
|
|
|
|
|
|
Operating (loss) income |
(6,368 |
) |
|
(1,221 |
) |
|
68,333 |
|
|
32,057 |
|
| Operating costs and expenses not allocated to operating
segments: |
|
|
|
|
|
|
| Operating
expenses |
16,891 |
|
|
15,725 |
|
|
50,624 |
|
|
49,078 |
|
| Selling,
general and administrative |
17,559 |
|
|
19,735 |
|
|
63,472 |
|
|
62,099 |
|
|
Depreciation and amortization |
6,655 |
|
|
5,329 |
|
|
19,537 |
|
|
16,001 |
|
| Add:
unrealized loss (gain) on inventory derivatives |
13,673 |
|
|
14,636 |
|
|
(15,374 |
) |
|
26,592 |
|
| Add:
unrealized (gain) loss on prepaid forward contract derivatives |
(667 |
) |
|
(120 |
) |
|
(907 |
) |
|
(1,161 |
) |
| Add:
unrealized loss (gain) on natural gas transportation contracts |
760 |
|
|
672 |
|
|
(6,105 |
) |
|
5,221 |
|
|
Total adjusted gross margin: |
$ |
48,503 |
|
|
$ |
54,756 |
|
|
$ |
179,580 |
|
|
$ |
189,887 |
|
| Adjusted Gross
Margin: |
|
|
|
|
|
|
|
| Refined
products |
$ |
32,014 |
|
|
$ |
38,693 |
|
|
$ |
95,307 |
|
|
$ |
104,070 |
|
| Natural
gas |
3,197 |
|
|
2,773 |
|
|
44,355 |
|
|
43,734 |
|
| Materials
handling |
11,395 |
|
|
11,305 |
|
|
34,118 |
|
|
35,826 |
|
| Other
operations |
1,897 |
|
|
1,985 |
|
|
5,800 |
|
|
6,257 |
|
| Total
adjusted gross margin |
$ |
48,503 |
|
|
$ |
54,756 |
|
|
$ |
179,580 |
|
|
$ |
189,887 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Sprague Resources
LPReconciliation of Net Income to Non-GAAP
MeasuresThree and Nine Months Ended
September 30, 2017 and 2016 |
| |
|
|
|
| |
Three Months Ended September 30, |
|
Nine Months Ended September 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 |
$ |
(14,316 |
) |
|
$ |
(8,794 |
) |
|
$ |
42,391 |
|
|
$ |
11,282 |
|
| Add/(deduct): |
|
|
|
|
|
|
|
| Interest
expense, net |
7,095 |
|
|
6,645 |
|
|
22,357 |
|
|
19,800 |
|
| Tax
provision |
853 |
|
|
909 |
|
|
3,768 |
|
|
861 |
|
| Depreciation and
amortization |
6,655 |
|
|
5,329 |
|
|
19,537 |
|
|
16,001 |
|
|
EBITDA |
$ |
287 |
|
|
$ |
4,089 |
|
|
$ |
88,053 |
|
|
$ |
47,944 |
|
| Add: unrealized loss
(gain) on inventory derivatives |
13,673 |
|
|
14,636 |
|
|
(15,374 |
) |
|
26,592 |
|
| Add: unrealized (gain)
loss on prepaid forward contract derivatives |
(667 |
) |
|
(120 |
) |
|
(907 |
) |
|
(1,161 |
) |
| Add: unrealized loss
(gain) on natural gas transportation contracts |
760 |
|
|
672 |
|
|
(6,105 |
) |
|
5,221 |
|
| Adjusted
EBITDA |
$ |
14,053 |
|
|
$ |
19,277 |
|
|
$ |
65,667 |
|
|
$ |
78,596 |
|
| Add/(deduct): |
|
|
|
|
|
|
|
| Cash
interest expense, net (excluding imputed interest on deferred
acquisition payments) |
(5,360 |
) |
|
(5,629 |
) |
|
(17,155 |
) |
|
(16,840 |
) |
| Cash
taxes |
(723 |
) |
|
(385 |
) |
|
(2,814 |
) |
|
(930 |
) |
|
Maintenance capital expenditures |
(4,322 |
) |
|
(3,329 |
) |
|
(8,535 |
) |
|
(7,065 |
) |
|
Elimination of expense relating to incentive compensation and
directors fees expected to be paid in common units |
(243 |
) |
|
641 |
|
|
1,703 |
|
|
1,664 |
|
|
Other |
881 |
|
|
386 |
|
|
2,604 |
|
|
998 |
|
| Distributable
cash flow |
$ |
4,286 |
|
|
$ |
10,961 |
|
|
$ |
41,470 |
|
|
$ |
56,423 |
|
Investor Contact:Kory Arthur+1
603.766.7401karthur@spragueenergy.com
Sprague Resources (NYSE:SRLP)
Historical Stock Chart
From Apr 2024 to May 2024
Sprague Resources (NYSE:SRLP)
Historical Stock Chart
From May 2023 to May 2024
