Sprague Resources LP Reports Fourth Quarter and Full Year 2019 Results
Fourth Quarter 2019 Highlights
- Net sales were
$999.5 million for the fourth quarter of 2019, compared to$1,079.9 million for the fourth quarter of 2018. - GAAP net income was
$11.8 million for the fourth quarter of 2019, compared to net income of$36.5 million for the fourth quarter of 2018. - Adjusted gross margin* was
$72.5 million for the fourth quarter of 2019, compared to$68.4 million for the fourth quarter of 2018. - Adjusted EBITDA* was
$31.1 million for the fourth quarter of 2019, compared to$29.0 million for the fourth quarter of 2018.
Full Year 2019 Highlights
- Net sales were
$3.5 billion in 2019, compared to net sales of$3.8 billion in 2018. - GAAP net income was
$31.3 million in 2019, compared to net income of$79.8 million in 2018. - Adjusted gross margin was
$267.9 million in 2019, compared to adjusted gross margin of$273.7 million in 2018. - Adjusted EBITDA was
$105.6 million in 2019, compared to adjusted EBITDA of$102.0 million in 2018.
“Sprague’s increase in Adjusted EBITDA of 3% over 2018 was partly driven by strong cost discipline in the face of limited market opportunities”, stated
Refined Products
- Volumes in the Refined Products segment decreased 3% to 439.9 million gallons in the fourth quarter of 2019, compared to 453.7 million gallons in the fourth quarter of 2018.
- Adjusted gross margin in the Refined Products segment increased
$5.0 million , or 13%, to$44.3 million in the fourth quarter of 2019, compared to$39.3 million in the fourth quarter of 2018. - Volumes in the Refined Products segment decreased
$50.5 million gallons, or 3%, to 1,530.4 million gallons in 2019 compared to 2018. - Refined Products adjusted gross margin decreased
$0.8 million , or 1%, to$150.1 million in 2019 compared to 2018.
“Refined Products' solid second half results enabled us to end the year on par with 2018, despite a first quarter deficit of
Natural Gas
- Natural Gas segment volumes increased 1% to 17.3 Bcf in the fourth quarter of 2019, compared to 17.1 Bcf in the fourth quarter of 2018.
- Natural Gas adjusted gross margin increased
$1.8 million , or 15%, to$13.6 million for the fourth quarter of 2019, compared to$11.9 million for the fourth quarter of 2018. - Volumes in the Natural Gas segment increased 1.9 Bcf, to 62.3 Bcf in 2019 compared to 2018.
- Natural Gas adjusted gross margin decreased 6% to
$54.3 million in 2019, compared to$57.9 million in 2018.
"Natural Gas business continues to see steady volume growth, though the absence of volatility in the market has limited our opportunities for margin expansion", said
Materials Handling
- Materials Handling adjusted gross margin decreased by
$2.7 million , or 17%, to$12.7 million for the fourth quarter of 2019, compared to$15.4 million for the fourth quarter of 2018. - Materials Handling adjusted gross margin decreased 2% to
$56.6 million in 2019 compared to$57.5 million in 2018.
"Materials Handling saw slight declines for the year due to reductions in heavy lift revenue in the
2020 Guidance
With regard to Sprague's anticipated 2020 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$120 million .
- Sprague expects to maintain the 2020 quarterly distributions at the current distribution level.
Quarterly Distribution
On
Sprague also announced that
Sprague Resources LP Schedule K-1s
Sprague's finalized 2019 tax packages for its unitholders, including Schedule K-1 will be made available
Financial Results Conference Call
Management will review Sprague’s fourth quarter and full year 2019 financial results in a teleconference call for analysts and investors today,
Dial-in Numbers: | (866) 516-2130 ( |
(678) 509-7612 (International) | |
Participation Code: | 6260296 |
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
*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, as well as 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, 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 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 Twelve Months Ended
Three Months Ended |
Twelve Months Ended |
||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
(unaudited) | (unaudited) | ||||||||||||||
($ in thousands) | |||||||||||||||
Statement of Operations Data: | |||||||||||||||
Net sales | $ | 999,494 | $ | 1,079,874 | $ | 3,502,410 | $ | 3,771,133 | |||||||
Operating costs and expenses: | |||||||||||||||
Cost of products sold (exclusive of depreciation and amortization) |
925,812 | 983,106 | 3,228,003 | 3,445,385 | |||||||||||
Operating expenses | 19,599 | 22,122 | 84,924 | 88,659 | |||||||||||
Selling, general and administrative | 21,826 | 17,450 | 78,135 | 80,799 | |||||||||||
Depreciation and amortization | 8,752 | 8,232 | 34,015 | 33,378 | |||||||||||
Total operating costs and expenses | 975,989 | 1,030,910 | 3,425,077 | 3,648,221 | |||||||||||
Operating income (loss) | 23,505 | 48,964 | 77,333 | 122,912 | |||||||||||
Other (expense) income | (505 | ) | — | (378 | ) | 293 | |||||||||
Interest income | 108 | 173 | 555 | 577 | |||||||||||
Interest expense | (11,029 | ) | (10,562 | ) | (42,944 | ) | (38,931 | ) | |||||||
Income (loss) before income taxes | 12,079 | 38,575 | 34,566 | 84,851 | |||||||||||
Income tax provision | (232 | ) | (2,048 | ) | (3,310 | ) | (5,032 | ) | |||||||
Net income (loss) | 11,847 | 36,527 | 31,256 | 79,819 | |||||||||||
Incentive distributions declared | (2,053 | ) | (2,055 | ) | (6,163 | ) | (7,879 | ) | |||||||
Limited partners’ interest in net income (loss) | $ | 9,794 | $ | 34,472 | $ | 25,093 | $ | 71,940 | |||||||
Net income (loss) per limited partner unit: | |||||||||||||||
Common - basic | $ | 0.43 | $ | 1.52 | $ | 1.10 | $ | 3.17 | |||||||
Common - diluted | $ | 0.43 | $ | 1.51 | $ | 1.10 | $ | 3.16 | |||||||
Units used to compute net income (loss) per limited partner unit: | |||||||||||||||
Common - basic | 22,745,637 | 22,732,886 | 22,736,916 | 22,728,218 | |||||||||||
Common - diluted | 22,797,474 | 22,765,630 | 22,770,883 | 22,737,404 | |||||||||||
Distribution declared per unit | $ | 0.6675 | $ | 0.6675 | $ | 2.6700 | $ | 2.6550 | |||||||
Volume,
Three and Twelve Months Ended
Three Months Ended |
Twelve Months Ended |
||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
(unaudited) | (unaudited) | ||||||||||||||
($ and volumes in thousands) | |||||||||||||||
Volumes: | |||||||||||||||
Refined products (gallons) | 439,923 | 453,684 | 1,530,356 | 1,580,838 | |||||||||||
Natural gas (MMBtus) | 17,331 | 17,098 | 62,266 | 60,385 | |||||||||||
Materials handling (short tons) | 467 | 522 | 2,496 | 2,627 | |||||||||||
Materials handling (gallons) | 111,852 | 153,434 | 480,659 | 488,972 | |||||||||||
Refined products | $ | 893,468 | $ | 961,395 | $ | 3,112,924 | $ | 3,357,769 | |||||||
Natural gas | 86,690 | 96,775 | 307,952 | 332,038 | |||||||||||
Materials handling | 12,742 | 15,432 | 56,655 | 57,509 | |||||||||||
Other operations | 6,594 | 6,272 | 24,879 | 23,817 | |||||||||||
Total net sales | $ | 999,494 | $ | 1,079,874 | $ | 3,502,410 | $ | 3,771,133 | |||||||
Reconciliation of Operating Income to Adjusted Gross Margin: | |||||||||||||||
Operating income | $ | 23,505 | $ | 48,964 | $ | 77,333 | $ | 122,912 | |||||||
Operating costs and expenses not allocated to operating segments: | |||||||||||||||
Operating expenses | 19,599 | 22,122 | 84,924 | 88,659 | |||||||||||
Selling, general and administrative | 21,826 | 17,450 | 78,135 | 80,799 | |||||||||||
Depreciation and amortization | 8,752 | 8,232 | 34,015 | 33,378 | |||||||||||
Change in unrealized gain on inventory | 11,645 | (13,651 | ) | 12,814 | (32,960 | ) | |||||||||
Change in unrealized value on natural gas transportation contracts | (12,860 | ) | (14,701 | ) | (19,289 | ) | (19,114 | ) | |||||||
Total adjusted gross margin: | $ | 72,467 | $ | 68,416 | $ | 267,932 | $ | 273,674 | |||||||
Adjusted Gross Margin: | |||||||||||||||
Refined products | $ | 44,339 | $ | 39,313 | $ | 150,124 | $ | 150,965 | |||||||
Natural gas | 13,639 | 11,865 | 54,288 | 57,875 | |||||||||||
Materials handling | 12,730 | 15,415 | 56,616 | 57,515 | |||||||||||
Other operations | 1,759 | 1,823 | 6,904 | 7,319 | |||||||||||
Total adjusted gross margin | $ | 72,467 | $ | 68,416 | $ | 267,932 | $ | 273,674 | |||||||
Reconciliation of Net Income (Loss) to Non-GAAP Measures
Three and Twelve Months Ended
Three Months Ended |
Twelve Months Ended |
||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
(unaudited) | (unaudited) | (unaudited) | (unaudited) | ||||||||||||
($ in thousands) | |||||||||||||||
Reconciliation of net (loss) income to EBITDA, Adjusted EBITDA and Distributable Cash Flow: |
|||||||||||||||
Net income (loss) | $ | 11,847 | $ | 36,527 | $ | 31,256 | $ | 79,819 | |||||||
Add/(deduct): | |||||||||||||||
Interest expense, net | 10,921 | 10,389 | 42,389 | 38,354 | |||||||||||
Tax provision | 232 | 2,048 | 3,310 | 5,032 | |||||||||||
Depreciation and amortization | 8,752 | 8,232 | 34,015 | 33,378 | |||||||||||
EBITDA | $ | 31,752 | $ | 57,196 | $ | 110,970 | $ | 156,583 | |||||||
Change in unrealized gain on inventory | 11,645 | (13,651 | ) | 12,814 | (32,960 | ) | |||||||||
Change in unrealized value on natural gas transportation contracts | (12,860 | ) | (14,701 | ) | (19,289 | ) | (19,114 | ) | |||||||
Add: biofuel tax credit | — | — | — | (4,022 | ) | ||||||||||
Add: acquisition related expenses | (7 | ) | 22 | 14 | 747 | ||||||||||
Other adjustments | 521 | 176 | 1,042 | 771 | |||||||||||
Adjusted EBITDA | $ | 31,051 | $ | 29,042 | $ | 105,551 | $ | 102,005 | |||||||
Add/(deduct): | |||||||||||||||
Cash interest expense, net | (9,631 | ) | (9,061 | ) | (37,168 | ) | (33,021 | ) | |||||||
Cash taxes | (1,362 | ) | (1,921 | ) | (4,805 | ) | (4,955 | ) | |||||||
Maintenance capital expenditures | (2,230 | ) | (2,297 | ) | (9,269 | ) | (10,618 | ) | |||||||
Elimination of expense relating to incentive compensation and directors fees expected to be paid in common units | 1,522 | (805 | ) | 1,591 | (896 | ) | |||||||||
Other | 505 | 54 | 377 | 93 | |||||||||||
Distributable cash flow | $ | 19,855 | $ | 15,012 | $ | 56,277 | $ | 52,608 |
Source: Sprague Resources LP