Document


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
FORM 8-K 
 
CURRENT REPORT
Pursuant to Section 13 OR 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): May 8, 2019
 
 
 
SPRAGUE RESOURCES LP
(Exact name of registrant as specified in its charter)
 
  
Delaware
 
001-36137
 
45-2637964
(State or other jurisdiction
of incorporation)
 
(Commission
File Number)
 
(IRS Employer
Identification No.)
185 International Drive
Portsmouth, NH 03801
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code: (800) 225-1560
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Units Representing
SRLP
New York Stock Exchange
Partner Interests
 
 
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
 
o
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o








Item 2.02 Results of Operation and Financial Condition
On May 8, 2019, Sprague Resources LP, a Delaware limited partnership (the “Partnership”), issued a press release announcing its financial results for the first quarter ended March 31, 2019 and providing access information for an investor conference call and audio webcast to discuss the results contained therein. A copy of the Partnership’s press release is attached hereto as Exhibit 99.1 and is incorporated by reference into this Item 2.02. An audio archive of the webcast will be available under Calendar of Events in the Investor Relations section of the Partnership’s website (www.spragueenergy.com) for one year following the date of the call.
This information is furnished under Item 2.02, “Results of Operations and Financial Condition.” This information, including the information contained in Exhibit 99.1 attached hereto, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing under the Securities Act of 1933, as amended (the “Securities Act”), or Exchange Act, except as expressly set forth by specific reference in such a filing.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits. 
EXHIBIT
DESCRIPTION
99.1








SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 

SPRAGUE RESOURCES LP
 
 
By:
Sprague Resources GP LLC, its General Partner
 
 
By:
/s/ David C. Long
 
David C. Long
 
Chief Financial Officer
 
 

Dated: May 8, 2019



Exhibit


Exhibit 99.1

http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=12888715&doc=3
News Release

Investor Contact:
Susan Kelly Trahan
+1 800.225.1560
investorrelations@spragueenergy.com

Sprague Resources LP Reports First Quarter 2019 Results

Portsmouth, NH (May 8, 2019) - Sprague Resources LP (“Sprague”) (NYSE: SRLP) today reported its financial results for the first quarter ended March 31, 2019.
First Quarter 2019 Highlights
Net sales were $1,258.3 million for the first quarter of 2019, compared to net sales of $1,331.1 million for the first quarter of 2018.
GAAP net income was $33.9 million for the first quarter of 2019, compared to net income of $74.9 million for the first quarter of 2018.
Adjusted gross margin* was $95.4 million for the first quarter of 2019, compared to adjusted gross margin of $109.5 million for the first quarter of 2018.
Adjusted EBITDA* was $50.9 million for the first quarter of 2019, compared to adjusted EBITDA of $55.1 million for the first quarter of 2018.
"Strong Materials Handling results were offset by weakness in our Refined Products and Natural Gas businesses," said Mr. David Glendon, President and Chief Executive Officer.

Refined Products
Volumes in the Refined Products segment decreased 5% to 549.5 million gallons in the first quarter of 2019, compared to 576.2 million gallons in the first quarter of 2018.
Adjusted gross margin in the Refined Products segment decreased $11.6 million, or 21%, to $44.7 million in the first quarter of 2019, compared to $56.3 million in the first quarter of 2018.
“Declines in our Refined Products business were primarily driven by a weak distillate market structure, limited blending opportunities and lower marine bunker sales," stated Mr. Glendon.

Natural Gas
Natural Gas segment volumes decreased 2% to 19.8 million Bcf in the first quarter of 2019, compared to 20.3 million Bcf in the first quarter of 2018.
Natural Gas adjusted gross margin decreased $5.6 million, or 15%, to $32.3 million for the first quarter of 2019, compared to $37.9 million for the first quarter of 2018.
"Natural Gas results were impacted by lower adjusted unit margins due to increased competitive intensity and fewer logistics optimization opportunities than the first quarter of 2018, " added Mr. Glendon.
Materials Handling
Materials Handling adjusted gross margin increased by $3.3 million, or 25%, to $16.5 million for the first quarter of 2019, compared to $13.1 million for the first quarter of 2018.

         * Please refer to Reconciliation of Net Income (Loss) to Non-GAAP Measures


"Revenue growth at Kildair was the primary driver of the increase in Materials Handling adjusted gross margin," said Mr. Glendon. "Our U.S. operations also experienced modest growth this quarter primarily due to higher asphalt and clay slurry activity."
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:
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 of $0.6675 per unit.
Quarterly Distribution
On April 26, 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 March 31, 2019, consistent with the distribution declared for the quarter ended December 31, 2018. The distribution will be paid on May 14, 2019, to unitholders of record as of the close of business on May 7, 2019.
Financial Results Conference Call
Management will review Sprague’s first quarter 2019 financial results in a teleconference call for analysts and investors today, May 8, 2019.
Date and Time:        May 8, 2019 at 1:00 PM ET
Dial-in Numbers:    (866) 516-2130 (U.S. and Canada)
(678) 509-7612 (International)
Participation Code:    3674055
The conference call may also be accessed live by a webcast 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.
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
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 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 LP
Summary Financial Data
Three Months Ended March 31, 2019 and 2018

 
Three Months Ended March 31,
 
2019
 
2018
 
(unaudited)
 
(unaudited)
 
($ in thousands)
Income Statements Data:
 
Net sales
$
1,258,308

 
$
1,331,148

Operating costs and expenses:
 
 
 
Cost of products sold (exclusive of depreciation and
 amortization)
1,159,112

 
1,183,982

Operating expenses
23,789

 
23,209

Selling, general and administrative
20,913

 
27,864

Depreciation and amortization
8,388

 
8,425

Total operating costs and expenses
1,212,202

 
1,243,480

Operating income
46,106

 
87,668

Interest income
187

 
112

Interest expense
(11,959
)
 
(9,884
)
Income before income taxes
34,334

 
77,896

Income tax provision
(413
)
 
(2,975
)
Net income
33,921

 
74,921

Incentive distributions declared
(2,055
)
 
(1,714
)
Limited partners’ interest in net income
$
31,866

 
$
73,207

Net income per limited partner unit:
 
 
 
Common - basic
$
1.40

 
$
3.22

Common - diluted
$
1.40

 
$
3.21

Units used to compute net income per limited partner unit:
 
 
Common - basic
22,733,977

 
22,725,346

Common - diluted
22,739,609

 
22,786,889

Distribution declared per unit
$
0.6675

 
$
0.6525







Sprague Resources LP
Volume, Net Sales and Adjusted Gross Margin by Segment
Three Months Ended March 31, 2019 and 2018

 
Three Months Ended March 31,
 
2019
 
2018
 
(unaudited)
 
(unaudited)
 
($ and volumes in thousands)
Volumes:
 
 
Refined products (gallons)
549,492

 
576,240

Natural gas (MMBtus)
19,804

 
20,257

Materials handling (short tons)
922

 
793

Materials handling (gallons)
106,223

 
69,972

Net Sales:
 
 
 
Refined products
$
1,120,123

 
$
1,180,860

Natural gas
114,167

 
129,927

Materials handling
16,481

 
13,148

Other operations
7,537

 
7,213

Total net sales
$
1,258,308

 
$
1,331,148

Reconciliation of Operating Income to Adjusted Gross Margin:
 
 
Operating income
$
46,106

 
$
87,668

Operating costs and expenses not allocated to operating segments:
 
 
Operating expenses
23,789

 
23,209

Selling, general and administrative
20,913

 
27,864

Depreciation and amortization
8,388

 
8,425

Add/(deduct):
 
 
 
    Change in unrealized gain on inventory
4,236

 
(23,561
)
    Change in unrealized value on natural gas
      transportation contracts
(7,988
)
 
(14,068
)
Total adjusted gross margin:
$
95,444

 
$
109,537

Adjusted Gross Margin:
 
 
 
Refined products
$
44,739

 
$
56,335

Natural gas
32,322

 
37,948

Materials handling
16,451

 
13,148

Other operations
1,932

 
2,106

Total adjusted gross margin
$
95,444

 
$
109,537







Sprague Resources LP
Reconciliation of Net Income to Non-GAAP Measures
Three Months Ended March 31, 2019 and 2018
 
 
Three Months Ended March 31,
 
2019
 
2018
 
(unaudited)
 
(unaudited)
 
($ in thousands)
Reconciliation of net income to EBITDA, Adjusted
  EBITDA and Distributable Cash Flow:
 
 
Net income
$
33,921

 
$
74,921

Add/(deduct):
 
 
 
     Interest expense, net
11,772

 
9,772

     Tax provision
413

 
2,975

     Depreciation and amortization
8,388

 
8,425

EBITDA
$
54,494

 
$
96,093

Add/(deduct):
 
 
 
Change in unrealized gain on inventory
4,236

 
(23,561
)
Change in unrealized value on natural gas transportation
 contracts
(7,988
)
 
(14,068
)
Biofuel tax credit

 
(4,022
)
Acquisition related expenses (1)
8

 
443

Other adjustments (2)
171

 
194

Adjusted EBITDA
$
50,921

 
$
55,079

Add/(deduct):
 
 
 
Cash interest expense, net
(10,453
)
 
(8,433
)
Cash taxes
611

 
(2,369
)
Maintenance capital expenditures
(1,466
)
 
(2,262
)
Elimination of expense relating to incentive compensation and directors fees expected to be paid in common units
(197
)
 
838

Other
1

 
304

Distributable cash flow
$
39,417

 
$
43,157

 
(1)
We incur expenses in connection with acquisitions and given the nature, variability of amounts, and the fact that these expenses would not have otherwise been incurred as part of our continuing operations, adjusted EBITDA excludes the impact of acquisition related expenses. 
(2)
Represents the change in fair value of contingent consideration related to the 2017 Coen Energy acquisition and other expense.