Sprague Resources LP Reports Second Quarter 2020 Results
Second Quarter 2020 Highlights
- Net sales were
$358.2 million for the second quarter of 2020, compared to net sales of$662.0 million for the second quarter of 2019.
- GAAP net loss was
$25.1 million for the second quarter of 2020, compared to net loss of$4.8 million for the second quarter of 2019.
- Adjusted gross margin* was
$65.2 million for the second quarter of 2020, compared to adjusted gross margin of$48.3 million for the second quarter of 2019.
- Adjusted EBITDA* was
$28.0 million for the second quarter of 2020, compared to adjusted EBITDA of$9.7 million for the second quarter of 2019.
"Sprague enjoyed a record second quarter as we capitalized on storage assets and benefited from a supportive market structure," said
Refined Products
- Volumes in the Refined Products segment decreased 5% to 264.3 million gallons in the second quarter of 2020, compared to 279.6 million gallons in the second quarter of 2019.
- Adjusted gross margin in the Refined Products segment increased
$25.2 million , or 91%, to$52.9 million in the second quarter of 2020, compared to$27.6 million in the second quarter of 2019.
“While demand destruction associated with the pandemic led to reduced volumes in transportation fuels, storage capabilities generated substantial value in the quarter," stated
Natural Gas
- Natural Gas segment volumes decreased 14% to 11.1 million Bcf in the second quarter of 2020, compared to 12.9 million Bcf in the second quarter of 2019.
- Natural Gas adjusted gross margin decreased
$6.9 million , or 148%, to$(2.2) million for the second quarter of 2020, compared to$4.6 million for the second quarter of 2019.
"Natural Gas results declined as our commercial and industrial customers curtailed usage due to the pandemic," added
Materials Handling
- Materials Handling adjusted gross margin decreased by
$1.4 million , to$12.9 million for the second quarter of 2020, compared to$14.3 million for the second quarter of 2019.
"Materials Handling declined primarily due to the expiration of a crude-by-rail contract last year at Kildair and the elimination of newsprint handling in
2020 Guidance
Assuming normal weather and market structure conditions, we expect to achieve the following:
- Adjusted EBITDA is expected to be in the range of
$105 million to$120 million .
Quarterly Distribution
On
Financial Results Conference Call
Management will review Sprague’s second quarter 2020 financial results in a teleconference call for analysts and investors today,
Date and Time: | |
Dial-in Numbers: | (866) 516-2130 ( |
(678) 509-7612 (International) | |
Participation Code: | 4867387 |
Participants can dial in up to 30 minutes prior to the start of the call. The conference call may also be accessed live by webcast link: https://edge.media-server.com/mmc/p/3bfzrfts. This link is also available on the "Investor Relations - Calendar of Events" page of Sprague's website at www.spragueenergy.com and will be archived on the website for one year. Certain non-GAAP financial information included in the earnings call will we available at the time of the call on the "Investor Relations - Featured Documents" section of Sprague's website.
About
*Non-GAAP Financial Measures
EBITDA, 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.
Cautionary Statement Regarding Forward Looking Statements
Any statements in this press release about future expectations, plans and prospects for
Investor Contact:
+1 800.225.1560
investorrelations@spragueenergy.com
(Financial Tables Below)
Summary Financial Data
Three and Six Months Ended
Three Months Ended |
Six Months Ended |
||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||
(unaudited) | (unaudited) | (unaudited) | (unaudited) | ||||||||||||
($ in thousands) | ($ in thousands) | ||||||||||||||
Income Statements Data: | |||||||||||||||
Net sales | $ | 358,214 | $ | 662,018 | $ | 1,318,093 | $ | 1,920,326 | |||||||
Operating costs and expenses: | |||||||||||||||
Cost of products sold (exclusive of depreciation and amortization) |
325,233 | 608,660 | 1,175,252 | 1,767,772 | |||||||||||
Operating expenses | 18,471 | 21,075 | 39,283 | 44,864 | |||||||||||
Selling, general and administrative | 18,923 | 17,827 | 38,956 | 38,739 | |||||||||||
Depreciation and amortization | 8,518 | 8,408 | 17,115 | 16,797 | |||||||||||
Total operating costs and expenses | 371,145 | 655,970 | 1,270,606 | 1,868,172 | |||||||||||
Operating (loss) income | (12,931 | ) | 6,048 | 47,487 | 52,154 | ||||||||||
Other Income | 64 | 128 | 64 | 128 | |||||||||||
Interest income | 72 | 140 | 248 | 326 | |||||||||||
Interest expense | (10,788 | ) | (10,038 | ) | (22,074 | ) | (21,997 | ) | |||||||
(Loss) income before income taxes | (23,583 | ) | (3,722 | ) | 25,725 | 30,611 | |||||||||
Income tax provision | (1,542 | ) | (1,056 | ) | (4,113 | ) | (1,469 | ) | |||||||
Net (loss) income | (25,125 | ) | (4,778 | ) | 21,612 | 29,142 | |||||||||
Incentive distributions declared | (2,072 | ) | (2,055 | ) | (4,144 | ) | (4,110 | ) | |||||||
Limited partners' interest in net (loss) income | $ | (27,197 | ) | $ | (6,833 | ) | $ | 17,468 | $ | 25,032 | |||||
Net (loss) income per limited partner unit: | |||||||||||||||
Common - basic | $ | (1.19 | ) | $ | (0.30 | ) | $ | 0.76 | $ | 1.10 | |||||
Common - diluted | $ | (1.19 | ) | $ | (0.30 | ) | $ | 0.76 | $ | 1.10 | |||||
Units used to compute net income per limited partner unit: | |||||||||||||||
Common - basic | 22,922,902 | 22,733,977 | 22,871,943 | 22,733,977 | |||||||||||
Common - diluted | 22,922,902 | 22,733,977 | 22,937,273 | 22,754,556 | |||||||||||
Distribution declared per unit | $ | 0.6675 | $ | 0.6675 | $ | 1.3350 | $ | 1.3350 |
Volume,
Three and Six Months Ended
Three Months Ended |
Six Months Ended |
||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||
(unaudited) | (unaudited) | (unaudited) | (unaudited) | ||||||||||||
($ and volumes in thousands) | |||||||||||||||
Volumes: | |||||||||||||||
Refined products (gallons) | 264,332 | 279,562 | 744,813 | 829,054 | |||||||||||
Natural gas (MMBtus) | 11,141 | 12,929 | 29,469 | 32,733 | |||||||||||
Materials handling (short tons) | 391 | 523 | 1,277 | 1,445 | |||||||||||
Materials handling (gallons) | 148,872 | 144,687 | 227,319 | 250,910 | |||||||||||
Refined products | $ | 292,889 | $ | 584,313 | $ | 1,134,831 | $ | 1,704,436 | |||||||
Natural gas | 47,988 | 58,108 | 143,766 | 172,275 | |||||||||||
Materials handling | 12,974 | 14,313 | 28,531 | 30,794 | |||||||||||
Other operations | 4,363 | 5,284 | 10,965 | 12,821 | |||||||||||
Total net sales | $ | 358,214 | $ | 662,018 | $ | 1,318,093 | $ | 1,920,326 | |||||||
Reconciliation of Operating Income to Adjusted Gross Margin: | |||||||||||||||
Operating (loss) income | $ | (12,931 | ) | $ | 6,048 | $ | 47,487 | $ | 52,154 | ||||||
Operating costs and expenses not allocated to operating segments: | |||||||||||||||
Operating expenses | 18,471 | 21,075 | 39,283 | 44,864 | |||||||||||
Selling, general and administrative | 18,923 | 17,827 | 38,956 | 38,739 | |||||||||||
Depreciation and amortization | 8,518 | 8,408 | 17,115 | 16,797 | |||||||||||
Add/(deduct): | |||||||||||||||
Change in unrealized gain on inventory | 32,326 | 364 | 18,775 | 4,598 | |||||||||||
Change in unrealized value on natural gas transportation contracts |
(123 | ) | (5,446 | ) | (13,322 | ) | (13,434 | ) | |||||||
Total adjusted gross margin: | $ | 65,184 | $ | 48,276 | $ | 148,294 | $ | 143,718 | |||||||
Adjusted Gross Margin: | |||||||||||||||
Refined products | $ | 52,861 | $ | 27,646 | $ | 88,650 | $ | 72,384 | |||||||
Natural gas | (2,245 | ) | 4,647 | 27,542 | 36,968 | ||||||||||
Materials handling | 12,895 | 14,334 | 28,476 | 30,785 | |||||||||||
Other operations | 1,673 | 1,649 | 3,626 | 3,581 | |||||||||||
Total adjusted gross margin | $ | 65,184 | $ | 48,276 | $ | 148,294 | $ | 143,718 |
Reconciliation of Net Income to Non-GAAP Measures
Three and Six Months Ended
Three Months Ended |
Six Months Ended |
||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||
(unaudited) | (unaudited) | (unaudited) | (unaudited) | ||||||||||||
($ in thousands) | ($ in thousands) | ||||||||||||||
Reconciliation of net income to EBITDA, Adjusted EBITDA and Distributable Cash Flow: |
|||||||||||||||
Net (loss) income | $ | (25,125 | ) | $ | (4,778 | ) | $ | 21,612 | $ | 29,142 | |||||
Add/(deduct): | |||||||||||||||
Interest expense, net | 10,716 | 9,898 | 21,826 | 21,671 | |||||||||||
Tax provision | 1,542 | 1,056 | 4,113 | 1,469 | |||||||||||
Depreciation and amortization | 8,518 | 8,408 | 17,115 | 16,797 | |||||||||||
EBITDA | $ | (4,349 | ) | $ | 14,584 | $ | 64,666 | $ | 69,079 | ||||||
Add/(deduct): | |||||||||||||||
Change in unrealized gain on inventory | 32,326 | 364 | 18,775 | 4,598 | |||||||||||
Change in unrealized value on natural gas transportation contracts |
(123 | ) | (5,446 | ) | (13,322 | ) | (13,434 | ) | |||||||
Acquisition related expenses | 1 | 2 | 1 | 9 | |||||||||||
Other adjustments (1) | 161 | 174 | 320 | 346 | |||||||||||
Adjusted EBITDA | $ | 28,016 | $ | 9,678 | $ | 70,440 | $ | 60,598 | |||||||
Add/(deduct): | |||||||||||||||
Cash interest expense, net | (8,314 | ) | (8,587 | ) | (18,144 | ) | (19,040 | ) | |||||||
Cash taxes | (1,659 | ) | (1,726 | ) | (4,719 | ) | (1,115 | ) | |||||||
Maintenance capital expenditures | (1,271 | ) | (2,029 | ) | (4,034 | ) | (3,495 | ) | |||||||
Elimination of expense relating to incentive compensation and directors fees expected to be paid in common units | 853 | 140 | 1,261 | (57 | ) | ||||||||||
Other | (456 | ) | (128 | ) | 564 | (128 | ) | ||||||||
Distributable cash flow | $ | 17,169 | $ | (2,652 | ) | $ | 45,368 | $ | 36,763 |
(1) Represents the change in fair value of contingent consideration related to the 2017
Source: Sprague Resources LP