Sprague Resources LP (“Sprague”) (NYSE: SRLP) today reported its
financial results for the fourth quarter and twelve months ended
December 31, 2018.
Fourth Quarter 2018 Highlights
- Net sales were $1,079.9 million for the fourth quarter of 2018,
compared to $932.2 million for the fourth quarter of 2017.
- GAAP net income was $36.5 million for the fourth quarter of
2018, compared to net loss of $12.9 million for the fourth quarter
of 2017.
- Adjusted gross margin* was $68.4 million for
the fourth quarter of 2018, compared to $82.1 million for the
fourth quarter of 2017.
- Adjusted EBITDA* was $29.0 million for the
fourth quarter of 2018, compared to $41.9 million for the fourth
quarter of 2017.
Full Year 2018 Highlights
- Net sales were $3.8 billion in 2018, compared to net sales of
$2.9 billion in 2017.
- GAAP net income was $79.8 million in 2018, compared to net
income of $29.5 million in 2017.
- Adjusted gross margin was $273.7 million in 2018, compared to
adjusted gross margin of $261.7 million in 2017.
- Adjusted EBITDA was $102.0 million in 2018, compared to
adjusted EBITDA of $109.2 million in 2017.
“Sprague’s adjusted gross margin for 2018 increased by 5% to
$274 million as gains in Materials Handling and Refined Products
were partially offset by a decline in our Natural Gas segment,”
stated David Glendon, President and Chief Executive Officer.
Refined Products
- Volumes in the Refined Products segment increased 8% to 453.7
million gallons in the fourth quarter of 2018, compared to 421.7
million gallons in the fourth quarter of 2017.
- Adjusted gross margin in the Refined Products segment decreased
$7.8 million, or 17%, to $39.3 million in the fourth quarter of
2018, compared to $47.2 million in the fourth quarter of 2017.
- Volumes in the Refined Products segment increased 164.6 million
gallons, or 12%, to 1,580.8 million gallons in 2018 compared to
2017.
- Refined Products adjusted gross margin increased $8.5 million,
or 6%, to $151.0 million in 2018 compared to 2017.
“For the quarter and the fiscal year, Refined Products' adjusted
gross margin increased over 2017 levels on higher discretionary
sales and benefiting largely from the full year contribution of the
2017 acquisitions. These gains, however, were mitigated by a
less attractive market structure to purchase and hold inventory as
well as reduced blending opportunities,” said Mr. Glendon.
Natural Gas
- Natural Gas segment volumes decreased 1% to 17.1 Bcf in the
fourth quarter of 2018, compared to 17.2 Bcf in the fourth quarter
of 2017.
- Natural Gas adjusted gross margin decreased $8.8 million, or
43%, to $11.9 million for the fourth quarter of 2018, compared to
$20.7 million for the fourth quarter of 2017.
- Volumes in the Natural Gas segment decreased 1.5 Bcf, to 60.4
Bcf in 2018 compared to 2017.
- Natural Gas adjusted gross margin decreased 11% to $57.9
million in 2018, compared to $65.1 million in 2017.
"Natural Gas adjusted gross margin declined by 43% during the
fourth quarter and 11% for the year primarily due to fewer pipeline
capacity optimization opportunities and increased competitive
intensity in some of our core markets," said Mr. Glendon.
Materials Handling
- Materials Handling adjusted gross margin increased by $3.0
million, or 24%, to $15.4 million for the fourth quarter of 2018,
compared to $12.4 million for the fourth quarter of 2017.
- Materials Handling adjusted gross margin increased 24% to $57.5
million in 2018 compared to $46.5 million in 2017.
"For the fourth quarter and for the year, the increase in
Materials Handling adjusted gross margin was primarily due to gains
in asphalt and liquid bulk handling at Kildair as well as increased
salt stockpiling and heavy lift activity," reported Mr.
Glendon.
2019 Guidance
With regard to Sprague's anticipated 2019 financial results, and
assuming normal weather and market structure conditions, we expect
to achieve the following through incremental growth and continued
cost management initiatives:
- Adjusted EBITDA is expected to be in the range of $105 million
to $125 million.
- Sprague expects to maintain the 2019 quarterly distributions at
the current distribution level.
Quarterly Distribution
On January 23, 2019, the Board of Directors of Sprague’s
general partner, Sprague Resources GP LLC, announced a cash
distribution of $0.6675 per unit for the quarter ended
December 31, 2018, consistent with the distribution declared
for the quarter ended September 30, 2018. The distribution
was paid on February 13, 2019 to unitholders of record as of the
close of business on February 8, 2019.
Sprague Resources LP Schedule K-1s Now
Available
Sprague has finalized 2018 tax packages for its unitholders,
including Schedule K-1 and made available via Sprague’s website at
www.spragueenergy.com under “Investor Relations / K-1 Tax
Information” and the tax packages will be mailed to unitholders by
March 15, 2019. For additional information, unitholders may
call 855-521-8150 Monday through Friday from 8:00 AM to 5:00 PM
CDT, or visit www.taxpackagesupport.com/SRLP.
Financial Results Conference Call
Management will review Sprague’s fourth quarter and fully year
2018 financial results in a teleconference call for analysts and
investors today, March 14, 2019 at 1:00 PM EST.
Dial-in Numbers: |
(866) 516-2130 (U.S. and
Canada) |
|
|
|
(678) 509-7612
(International) |
|
|
Participation
Code: |
5078063 |
|
|
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 under "Calendar of Events" 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 MeasuresEBITDA, adjusted
EBITDA and adjusted gross margin are measures not defined by
GAAP. Sprague defines EBITDA as net income (loss) before
interest, income taxes, depreciation and amortization.
We define adjusted EBITDA as EBITDA increased for 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), changes in fair value of contingent consideration,
adjusted for the impact of acquisition related expenses, and when
applicable, adjusted for the net impact of retroactive legislation
that reinstates an excise tax credit program available for certain
of our biofuel blending activities that had previously expired.
We define adjusted gross margin as net sales less cost of
products sold (exclusive of depreciation and amortization)
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.
Adjusted gross margin has no impact on reported volumes or net
sales.
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 and adjusted gross
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 14, 2019 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.
(Financial Tables Below)
Sprague Resources
LPSummary Financial DataThree and
Twelve Months Ended December 31, 2018 and 2017
|
Three Months Ended December 31, |
|
Twelve Months Ended December 31, |
|
2018 |
|
2017 |
|
2018 |
|
2017 |
|
(unaudited) |
|
(unaudited) |
|
|
|
|
|
($ in thousands) |
Statement of Operations Data: |
|
|
|
|
|
Net sales |
$ |
1,079,874 |
|
|
$ |
932,170 |
|
|
$ |
3,771,133 |
|
|
$ |
2,854,996 |
|
Operating costs and
expenses: |
|
|
|
|
|
|
|
Cost of
products sold (exclusive of depreciation
and amortization) |
983,106 |
|
|
881,928 |
|
|
3,445,385 |
|
|
2,602,788 |
|
Operating
expenses |
22,122 |
|
|
21,660 |
|
|
88,659 |
|
|
72,284 |
|
Selling,
general and administrative |
17,450 |
|
|
24,110 |
|
|
80,799 |
|
|
87,582 |
|
Depreciation and amortization |
8,232 |
|
|
8,588 |
|
|
33,378 |
|
|
28,125 |
|
Total operating costs
and expenses |
1,030,910 |
|
|
936,286 |
|
|
3,648,221 |
|
|
2,790,779 |
|
Operating
income (loss) |
48,964 |
|
|
(4,116 |
) |
|
122,912 |
|
|
64,217 |
|
Other
(expense) income |
— |
|
|
(75 |
) |
|
293 |
|
|
108 |
|
Interest
income |
173 |
|
|
92 |
|
|
577 |
|
|
339 |
|
Interest
expense |
(10,562 |
) |
|
(8,741 |
) |
|
(38,931 |
) |
|
(31,345 |
) |
Income (loss) before
income taxes |
38,575 |
|
|
(12,840 |
) |
|
84,851 |
|
|
33,319 |
|
Income
tax provision |
(2,048 |
) |
|
(54 |
) |
|
(5,032 |
) |
|
(3,822 |
) |
Net income
(loss) |
36,527 |
|
|
(12,894 |
) |
|
79,819 |
|
|
29,497 |
|
Incentive
distributions declared |
(2,055 |
) |
|
(1,373 |
) |
|
(7,879 |
) |
|
(3,993 |
) |
Limited
partners’ interest in net income (loss) |
$ |
34,472 |
|
|
$ |
(14,267 |
) |
|
$ |
71,940 |
|
|
$ |
25,504 |
|
Net income (loss) per
limited partner unit: |
|
|
|
|
|
|
|
Common -
basic |
$ |
1.52 |
|
|
$ |
(0.63 |
) |
|
$ |
3.17 |
|
|
$ |
1.15 |
|
Common -
diluted |
$ |
1.51 |
|
|
$ |
(0.63 |
) |
|
$ |
3.16 |
|
|
$ |
1.13 |
|
Units used
to compute net income (loss) per limited partner unit: |
|
|
|
|
|
|
Common -
basic |
22,732,886 |
|
|
22,551,361 |
|
|
22,728,218 |
|
|
22,208,964 |
|
Common -
diluted |
22,765,630 |
|
|
22,551,361 |
|
|
22,737,404 |
|
|
22,474,872 |
|
Distribution declared
per unit |
$ |
0.6675 |
|
|
$ |
0.5775 |
|
|
$ |
2.6550 |
|
|
$ |
2.4600 |
|
Sprague Resources
LPVolume, Net Sales and Adjusted Gross Margin by
SegmentThree and Twelve Months Ended
December 31, 2018 and 2017
|
Three Months Ended December 31, |
|
Twelve Months Ended December 31, |
|
2018 |
|
2017 |
|
2018 |
|
2017 |
|
(unaudited) |
|
(unaudited) |
|
|
|
|
|
($ and volumes in thousands) |
Volumes: |
|
|
|
|
|
|
Refined
products (gallons) |
453,684 |
|
|
421,722 |
|
|
1,580,838 |
|
|
1,416,240 |
|
Natural
gas (MMBtus) |
17,098 |
|
|
17,206 |
|
|
60,385 |
|
|
61,883 |
|
Materials
handling (short tons) |
522 |
|
|
487 |
|
|
2,627 |
|
|
2,366 |
|
Materials
handling (gallons) |
153,434 |
|
|
84,000 |
|
|
488,972 |
|
|
385,896 |
|
Net
Sales: |
|
|
|
|
|
|
|
Refined
products |
$ |
961,395 |
|
|
$ |
817,511 |
|
|
$ |
3,357,769 |
|
|
$ |
2,455,577 |
|
Natural
gas |
96,775 |
|
|
96,601 |
|
|
332,038 |
|
|
331,669 |
|
Materials
handling |
15,432 |
|
|
12,395 |
|
|
57,509 |
|
|
46,513 |
|
Other
operations |
6,272 |
|
|
5,663 |
|
|
23,817 |
|
|
21,237 |
|
Total net
sales |
$ |
1,079,874 |
|
|
$ |
932,170 |
|
|
$ |
3,771,133 |
|
|
$ |
2,854,996 |
|
Reconciliation of Operating Income to Adjusted Gross
Margin: |
|
|
|
|
|
|
Operating income |
$ |
48,964 |
|
|
$ |
(4,116 |
) |
|
$ |
122,912 |
|
|
$ |
64,217 |
|
Operating costs and expenses not allocated to operating
segments: |
|
|
|
|
|
|
Operating
expenses |
22,122 |
|
|
21,660 |
|
|
88,659 |
|
|
72,284 |
|
Selling,
general and administrative |
17,450 |
|
|
24,110 |
|
|
80,799 |
|
|
87,582 |
|
Depreciation and amortization |
8,232 |
|
|
8,588 |
|
|
33,378 |
|
|
28,125 |
|
Change in
unrealized gain on inventory |
(13,651 |
) |
|
15,498 |
|
|
(32,960 |
) |
|
124 |
|
Change in
unrealized value on prepaid forward contracts |
— |
|
|
(169 |
) |
|
— |
|
|
(1,076 |
) |
Change in
unrealized value on natural gas transportation contracts |
(14,701 |
) |
|
16,546 |
|
|
(19,114 |
) |
|
10,441 |
|
Total adjusted gross margin: |
$ |
68,416 |
|
|
$ |
82,117 |
|
|
$ |
273,674 |
|
|
$ |
261,697 |
|
Adjusted Gross
Margin: |
|
|
|
|
|
|
|
Refined
products |
$ |
39,313 |
|
|
$ |
47,160 |
|
|
$ |
150,965 |
|
|
$ |
142,467 |
|
Natural
gas |
11,865 |
|
|
20,705 |
|
|
57,875 |
|
|
65,060 |
|
Materials
handling |
15,415 |
|
|
12,394 |
|
|
57,515 |
|
|
46,512 |
|
Other
operations |
1,823 |
|
|
1,858 |
|
|
7,319 |
|
|
7,658 |
|
Total
adjusted gross margin |
$ |
68,416 |
|
|
$ |
82,117 |
|
|
$ |
273,674 |
|
|
$ |
261,697 |
|
Sprague Resources
LPReconciliation of Net Income (Loss) to Non-GAAP
MeasuresThree and Twelve Months Ended
December 31, 2018 and 2017
|
Three Months Ended December 31, |
|
Twelve Months Ended December 31, |
|
2018 |
|
2017 |
|
2018 |
|
2017 |
|
(unaudited) |
|
(unaudited) |
|
(unaudited) |
|
(unaudited) |
|
($ in thousands) |
Reconciliation of net (loss) income to EBITDA,
Adjusted EBITDA and Distributable Cash
Flow: |
|
|
|
|
|
|
Net income
(loss) |
$ |
36,527 |
|
|
$ |
(12,894 |
) |
|
$ |
79,819 |
|
|
$ |
29,497 |
|
Add/(deduct): |
|
|
|
|
|
|
|
Interest
expense, net |
10,389 |
|
|
8,649 |
|
|
38,354 |
|
|
31,006 |
|
Tax
provision |
2,048 |
|
|
54 |
|
|
5,032 |
|
|
3,822 |
|
Depreciation and
amortization |
8,232 |
|
|
8,588 |
|
|
33,378 |
|
|
28,125 |
|
EBITDA |
$ |
57,196 |
|
|
$ |
4,397 |
|
|
$ |
156,583 |
|
|
$ |
92,450 |
|
Change in unrealized
gain on inventory |
(13,651 |
) |
|
15,498 |
|
|
(32,960 |
) |
|
124 |
|
Change in unrealized
value on prepaid forward contracts |
— |
|
|
(169 |
) |
|
— |
|
|
(1,076 |
) |
Change in unrealized
value on natural gas transportation contracts |
(14,701 |
) |
|
16,546 |
|
|
(19,114 |
) |
|
10,441 |
|
Add: biofuel tax
credit |
— |
|
|
4,022 |
|
|
(4,022 |
) |
|
4,022 |
|
Add: acquisition
related expenses |
22 |
|
|
1,331 |
|
|
747 |
|
|
3,038 |
|
Other adjustments |
176 |
|
|
231 |
|
|
771 |
|
|
231 |
|
Adjusted
EBITDA |
$ |
29,042 |
|
|
$ |
41,856 |
|
|
$ |
102,005 |
|
|
$ |
109,230 |
|
Add/(deduct): |
|
|
|
|
|
|
|
Cash
interest expense, net |
(9,061 |
) |
|
(7,275 |
) |
|
(33,021 |
) |
|
(24,430 |
) |
Cash
taxes |
(1,921 |
) |
|
(152 |
) |
|
(4,955 |
) |
|
(2,966 |
) |
Maintenance capital expenditures |
(2,297 |
) |
|
(3,893 |
) |
|
(10,618 |
) |
|
(12,428 |
) |
Elimination of expense relating to incentive compensation and
directors fees expected to be paid in common units |
(805 |
) |
|
586 |
|
|
(896 |
) |
|
2,289 |
|
Other |
54 |
|
|
126 |
|
|
93 |
|
|
1,023 |
|
Distributable
cash flow |
$ |
15,012 |
|
|
$ |
31,248 |
|
|
$ |
52,608 |
|
|
$ |
72,718 |
|
Investor Contact:Susan Kelly Trahan+1
800.225.1560investorrelations@spragueenergy.com
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