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): August 7, 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 August 7, 2019, Sprague Resources LP, a Delaware limited partnership (the “Partnership”), issued a press release announcing its financial results for the second quarter ended June 30, 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








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: August 7, 2019



Exhibit


Exhibit 99.1

http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=13046427&doc=3
News Release

Investor Contact:
Paul Scoff
+1 800.225.1560
investorrelations@spragueenergy.com

Sprague Resources LP Reports Second Quarter 2019 Results

Portsmouth, NH (August 7, 2019) - Sprague Resources LP (“Sprague”) (NYSE: SRLP) today reported its financial results for the second quarter ended June 30, 2019.
Second Quarter 2019 Highlights
Net sales were $662.0 million for the second quarter of 2019, compared to net sales of $741.7 million for the second quarter of 2018.
GAAP net loss was $4.8 million for the second quarter of 2019, compared to net loss of $13.2 million for the second quarter of 2018.
Adjusted gross margin* was $48.3 million for the second quarter of 2019, compared to adjusted gross margin of $49.7 million for the second quarter of 2018.
Adjusted EBITDA* was $9.7 million for the second quarter of 2019, compared to adjusted EBITDA of $9.3 million for the second quarter of 2018.
"The seasonal nature of our business generates lower results in the second and third quarters, but each of our three Commercial businesses performed in line with our expectations," said David Glendon, President and Chief Executive Officer.

Refined Products
Volumes in the Refined Products segment decreased 8% to 279.6 million gallons in the second quarter of 2019, compared to 304.2 million gallons in the second quarter of 2018.
Adjusted gross margin in the Refined Products segment decreased $1.0 million, or 4%, to $27.6 million in the second quarter of 2019, compared to $28.7 million in the second quarter of 2018.
“Decreases in Refined Products volumes were driven by a much warmer April than the previous year, though higher adjusted unit margins partially offset the decline," stated Mr. Glendon.

Natural Gas
Natural Gas segment volumes increased 5% to 12.9 million Bcf in the second quarter of 2019, compared to 12.3 million Bcf in the second quarter of 2018.
Natural Gas adjusted gross margin decreased $0.4 million, or 8%, to $4.6 million for the second quarter of 2019, compared to $5.1 million for the second quarter of 2018.
"Natural Gas results saw higher pipeline capacity costs and limited optimization opportunities, particularly given April's warmer weather, " added Mr. Glendon.
Materials Handling
Materials Handling adjusted gross margin increased by $0.1 million, to $14.3 million for the second quarter of 2019, compared to $14.3 million for the second quarter of 2018.

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


"Materials Handling results benefited from the timing of bulk deliveries, offset by reductions in heavy lift activity."
2019 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 $125 million.
Sprague expects to maintain the 2019 quarterly distributions at the current distribution
level of $0.6675 per unit.
Quarterly Distribution
On July 25, 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 June 30, 2019, consistent with the distribution declared for the quarter ended June 30, 2018. The distribution will be paid on August 12, 2019, to unitholders of record as of the close of business on August 5, 2019.
Financial Results Conference Call
Management will review Sprague’s second quarter 2019 financial results in a teleconference call for analysts and investors today, August 7, 2019.
Date and Time:        August 7, 2019 at 1:00 PM ET
Dial-in Numbers:    (866) 516-2130 (U.S. and Canada)
(678) 509-7612 (International)
Participation Code:    2392818
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. 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 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 and Six Months Ended June 30, 2019 and 2018

 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2019
 
2018
 
2019
 
2018
 
(unaudited)
 
(unaudited)
 
(unaudited)
 
(unaudited)
 
($ in thousands)
 
($ in thousands)
Income Statements Data:
 
 
 
 
 
Net sales
$
662,018

 
$
741,656

 
$
1,920,326

 
$
2,072,804

Operating costs and expenses:
 
 
 
 
 
 
 
Cost of products sold (exclusive of depreciation and
 amortization)
608,660

 
696,673

 
1,767,772

 
1,880,655

Operating expenses
21,075

 
22,281

 
44,864

 
45,490

Selling, general and administrative
17,827

 
18,562

 
38,739

 
46,426

Depreciation and amortization
8,408

 
8,378

 
16,797

 
16,803

Total operating costs and expenses
655,970

 
745,894


1,868,172

 
1,989,374

Operating income (loss)
6,048


(4,238
)

52,154

 
83,430

Other Income
128

 

 
128

 

Interest income
140

 
169

 
326

 
281

Interest expense
(10,038
)
 
(9,412
)
 
(21,997
)
 
(19,296
)
(Loss) income before income taxes
(3,722
)

(13,481
)

30,611

 
64,415

Income tax (provision) benefit
(1,056
)
 
286

 
(1,469
)
 
(2,689
)
Net (loss) income
(4,778
)

(13,195
)

29,142

 
61,726

Incentive distributions declared
(2,055
)
 
(2,055
)
 
(4,110
)
 
(3,769
)
Limited partners' interest in net (loss) income
$
(6,833
)

$
(15,250
)

$
25,032

 
$
57,957

Net (loss) income per limited partner unit:
 
 
 
 
 
 
 
Common - basic
$
(0.30
)
 
$
(0.67
)
 
$
1.10

 
$
2.55

Common - diluted
$
(0.30
)
 
$
(0.67
)
 
$
1.10

 
$
2.54

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

 
22,727,284

 
22,733,977

 
22,726,320

Common - diluted
22,733,977

 
22,727,284

 
22,754,556

 
22,784,336

Distribution declared per unit
$
0.6675

 
$
0.6675

 
$
1.3350

 
$
1.3200







Sprague Resources LP
Volume, Net Sales and Adjusted Gross Margin by Segment
Three and Six Months Ended June 30, 2019 and 2018
 

 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2019
 
2018
 
2019
 
2018
 
(unaudited)
 
(unaudited)
 
(unaudited)
 
(unaudited)
 
($ and volumes in thousands)
Volumes:
 
 
 
 
 
 
Refined products (gallons)
279,562

 
304,248

 
829,054

 
880,488

Natural gas (MMBtus)
12,929

 
12,325

 
32,733

 
32,582

Materials handling (short tons)
523

 
577

 
1,445

 
1,370

Materials handling (gallons)
144,687

 
127,638

 
250,910

 
197,610

Net Sales:
 
 
 
 
 
 
 
Refined products
$
584,313

 
$
664,025

 
$
1,704,436

 
$
1,844,885

Natural gas
58,108

 
58,428

 
172,275

 
188,355

Materials handling
14,313

 
14,218

 
30,794

 
27,366

Other operations
5,284

 
4,985

 
12,821

 
12,198

Total net sales
$
662,018

 
$
741,656

 
$
1,920,326

 
$
2,072,804

Reconciliation of Operating Income (Loss) to Adjusted Gross Margin:
 
 
 
 
 
 
Operating income (loss)
$
6,048

 
$
(4,238
)
 
$
52,154

 
$
83,430

Operating costs and expenses not allocated to operating segments:
 
 
 
 
 
 
Operating expenses
21,075

 
22,281

 
44,864

 
45,490

Selling, general and administrative
17,827

 
18,562

 
38,739

 
46,426

Depreciation and amortization
8,408

 
8,378

 
16,797

 
16,803

Add/(deduct):
 
 
 
 
 
 
 
    Change in unrealized gain on inventory
364

 
971

 
4,598

 
(22,590
)
    Change in unrealized value on natural gas
      transportation contracts
(5,446
)
 
3,716

 
(13,434
)
 
(10,352
)
Total adjusted gross margin:
$
48,276

 
$
49,670

 
$
143,718

 
$
159,207

Adjusted Gross Margin:
 
 
 
 
 
 
 
Refined products
$
27,646

 
$
28,671

 
$
72,384

 
$
85,006

Natural gas
4,647

 
5,055

 
36,968

 
43,003

Materials handling
14,334

 
14,269

 
30,785

 
27,417

Other operations
1,649

 
1,675

 
3,581

 
3,781

Total adjusted gross margin
$
48,276

 
$
49,670

 
$
143,718

 
$
159,207







Sprague Resources LP
Reconciliation of Net Income to Non-GAAP Measures
Three and Six Months Ended June 30, 2019 and 2018
 
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2019
 
2018
 
2019
 
2018
 
(unaudited)
 
(unaudited)
 
(unaudited)
 
(unaudited)
 
($ in thousands)
Reconciliation of net income to EBITDA, Adjusted
  EBITDA and Distributable Cash Flow:
 
 
 
 
 
 
Net (loss) income
$
(4,778
)
 
$
(13,195
)
 
$
29,142

 
$
61,726

Add/(deduct):
 
 
 
 
 
 
 
     Interest expense, net
9,898

 
9,243

 
21,671

 
19,015

     Tax provision
1,056

 
(286
)
 
1,469

 
2,689

     Depreciation and amortization
8,408

 
8,378

 
16,797

 
16,803

EBITDA
$
14,584

 
$
4,140

 
$
69,079

 
$
100,233

Add/(deduct):
 
 
 
 
 
 
 
Change in unrealized gain on inventory
364

 
971

 
4,598

 
(22,590
)
Change in unrealized value on natural gas transportation
 contracts
(5,446
)
 
3,716

 
(13,434
)
 
(10,352
)
Biofuel tax credit

 

 

 
(4,022
)
Acquisition related expenses (1)
2

 
252

 
9

 
695

Other adjustments (2)
174

 
197

 
346

 
391

Adjusted EBITDA
$
9,678

 
$
9,276

 
$
60,598

 
$
64,355

Add/(deduct):
 
 
 
 
 
 
 
Cash interest expense, net
(8,588
)
 
(7,908
)
 
(19,040
)
 
(16,341
)
Cash taxes
(1,726
)
 
308

 
(1,115
)
 
(2,061
)
Maintenance capital expenditures
(2,028
)
 
(3,473
)
 
(3,495
)
 
(5,735
)
Elimination of expense relating to incentive compensation and directors fees expected to be paid in common units
140

 
(594
)
 
(57
)
 
244

Other
(128
)
 

 
(128
)
 
304

Distributable cash flow
$
(2,652
)
 
$
(2,391
)
 
$
36,763

 
$
40,766

 
(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.