Sprague Resources LP Reports Second Quarter 2021 Results
Second Quarter 2021 Highlights
- Net sales were
$657.7 million for the second quarter of 2021, compared to net sales of$358.2 million for the second quarter of 2020. - GAAP net loss was
$45.6 million for the second quarter of 2021, compared to net loss of$25.1 million for the second quarter of 2020. - Adjusted gross margin* was
$38.8 million for the second quarter of 2021, compared to adjusted gross margin of$65.2 million for the second quarter of 2020. - Adjusted EBITDA* was
$3.0 million for the second quarter of 2021, compared to adjusted EBITDA of$28.0 million for the second quarter of 2020.
"While second quarter results were weaker than last year's contango-driven gains, Sprague's year-to-date results are consistent with the prior year and our expectations.", said
Refined Products
- Volumes in the Refined Products segment increased 10% to 289.5 million gallons in the second quarter of 2021, compared to 264.3 million gallons in the second quarter of 2020.
- Adjusted gross margin in the Refined Products segment decreased
$25.7 million , or 49%, to$27.2 million in the second quarter of 2021, compared to$52.9 million in the second quarter of 2020.
“Marketing volumes have nearly returned to pre-pandemic levels, while the market structure has retreated from the attractive carry structure experienced last year," stated
Natural Gas
- Natural Gas segment volumes increased 5% to 11.7 million Bcf in the second quarter of 2021, compared to 11.1 million Bcf in the second quarter of 2020.
- Natural Gas adjusted gross margin decreased
$0.5 million , or 21%, to$(2.7) million for the second quarter of 2021, compared to$(2.2) million for the second quarter of 2020.
"Natural Gas volumes are recovering with the return of commercial and industrial activity, though warmer temperatures and lower volatility limited optimization opportunities," added
Materials Handling
- Materials Handling adjusted gross margin decreased by
$0.2 million , to$12.7 million for the second quarter of 2021, compared to$12.9 million for the second quarter of 2020.
"Materials Handling decreased slightly due to reduction in tank leases at our Canadian operations", concluded
Quarterly Distribution
On
2021 Guidance
- With regard to Sprague's anticipated 2021 financial results, and assuming normal weather and market structure conditions, we expect Adjusted EBITDA to be in the range of
$105 million to$120 million . - The Board continues to evaluate our distribution policy each quarter, and we do expect a reduction effective with the 3rd quarter distribution. We believe this reduction will enable the Partnership to fund attractive growth opportunities in the transitioning energy landscape with cash from operations, a more sustainable financial model for the business. The management team will provide more information on this anticipated change during the second quarter earnings call.
Financial Results Conference Call
Management will review Sprague’s second quarter 2021 financial results in a teleconference call for analysts and investors today,
Dial-in Numbers: | (866) 516-2130 ( |
(678) 509-7612 (International) | |
Participation Code: | 5748269 |
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/g5ide42a. This link is also 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, adjusted gross margin, distributable cash flow and distribution coverage ratio 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.
Sprague defines distributable cash flow as adjusted EBITDA less cash interest expense (excluding imputed interest on deferred acquisition payments), cash taxes, and maintenance capital expenditures. Distributable cash flow calculations also reflect the elimination of compensation expense expected to be settled with the issuance of Partnership units, expenses related to business combinations and other adjustments. Distributable cash flow is a significant performance measure used by Sprague and by external users of its financial statements, such as investors, commercial banks and research analysts, to compare the cash generating performance of the Partnership in relation to the cash distributions expected to be paid to its unitholders.
Sprague also calculates the ratio of distributable cash flow to the total cash distribution declared for the period (the distribution coverage ratio) as it provides important information relating to the relationship between Sprague's financial operating performance and its cash distribution capability. Sprague defines the distribution coverage ratio as the ratio of distributable cash flow to the quarterly distribution payable on all outstanding common and subordinated units and incentive distributions.
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
(Financial Tables Below)
Summary Financial Data
Three and Six Months Ended
Three Months Ended |
Six Months Ended |
||||||||||||||
2021 | 2020 | 2021 | 2020 | ||||||||||||
(unaudited) | (unaudited) | (unaudited) | (unaudited) | ||||||||||||
($ in thousands) | ($ in thousands) | ||||||||||||||
Income Statements Data: | |||||||||||||||
Net sales | $ | 657,672 | $ | 358,214 | $ | 1,693,805 | $ | 1,318,093 | |||||||
Operating costs and expenses: | |||||||||||||||
Cost of products sold (exclusive of depreciation and amortization) |
659,803 | 325,233 | 1,584,585 | 1,175,252 | |||||||||||
Operating expenses | 19,148 | 18,471 | 38,379 | 39,283 | |||||||||||
Selling, general and administrative | 16,719 | 18,923 | 41,958 | 38,956 | |||||||||||
Depreciation and amortization | 8,258 | 8,518 | 16,741 | 17,115 | |||||||||||
Total operating costs and expenses | 703,928 | 371,145 | 1,681,663 | 1,270,606 | |||||||||||
Other operating income | 9,725 | — | 9,725 | ||||||||||||
Operating (loss) income | (36,531 | ) | (12,931 | ) | 21,867 | 47,487 | |||||||||
Other income | — | 64 | 2 | 64 | |||||||||||
Interest income | 77 | 72 | 143 | 248 | |||||||||||
Interest expense | (8,587 | ) | (10,788 | ) | (17,402 | ) | (22,074 | ) | |||||||
(Loss) income before income taxes | (45,041 | ) | (23,583 | ) | 4,610 | 25,725 | |||||||||
Income tax provision | (562 | ) | (1,542 | ) | (1,433 | ) | (4,113 | ) | |||||||
Net (loss) income | (45,603 | ) | (25,125 | ) | 3,177 | 21,612 | |||||||||
Incentive distributions declared | — | (2,072 | ) | — | (4,144 | ) | |||||||||
Limited partners' interest in net (loss) income | $ | (45,603 | ) | $ | (27,197 | ) | $ | 3,177 | $ | 17,468 | |||||
Net (loss) income per limited partner unit: | |||||||||||||||
Common - basic | $ | (1.74 | ) | $ | (1.19 | ) | $ | 0.13 | $ | 0.76 | |||||
Common - diluted | $ | (1.74 | ) | $ | (1.19 | ) | $ | 0.13 | $ | 0.76 | |||||
Units used to compute net income per limited partner unit: | |||||||||||||||
Common - basic | 26,226,255 | 22,922,902 | 25,066,494 | 22,871,943 | |||||||||||
Common - diluted | 26,226,255 | 22,922,902 | 25,066,494 | 22,937,273 | |||||||||||
Distribution declared per unit | $ | 0.6675 | $ | 0.6675 | $ | 1.3350 | $ | 1.3350 |
Volume,
Three and Six Months Ended
Three Months Ended |
Six Months Ended |
||||||||||||||
2021 | 2020 | 2021 | 2020 | ||||||||||||
(unaudited) | (unaudited) | (unaudited) | (unaudited) | ||||||||||||
($ and volumes in thousands) | |||||||||||||||
Volumes: | |||||||||||||||
Refined products (gallons) | 289,458 | 264,332 | 805,303 | 744,813 | |||||||||||
Natural gas (MMBtus) | 11,692 | 11,141 | 30,527 | 29,469 | |||||||||||
Materials handling (short tons) | 507 | 391 | 924 | 1,277 | |||||||||||
Materials handling (gallons) | 124,444 | 148,872 | 182,303 | 227,319 | |||||||||||
Refined products | $ | 589,142 | $ | 292,889 | $ | 1,505,342 | $ | 1,134,831 | |||||||
Natural gas | 51,360 | 47,988 | 153,935 | 143,766 | |||||||||||
Materials handling | 12,725 | 12,974 | 24,771 | 28,531 | |||||||||||
Other operations | 4,445 | 4,363 | 9,757 | 10,965 | |||||||||||
Total net sales | $ | 657,672 | $ | 358,214 | $ | 1,693,805 | $ | 1,318,093 | |||||||
Reconciliation of Operating Income to Adjusted Gross Margin: | |||||||||||||||
Operating (loss) income | $ | (36,531 | ) | $ | (12,931 | ) | $ | 21,867 | $ | 47,487 | |||||
Operating costs and expenses not allocated to operating segments: | |||||||||||||||
Operating expenses | 19,148 | 18,471 | 38,379 | 39,283 | |||||||||||
Selling, general and administrative | 16,719 | 18,923 | 41,958 | 38,956 | |||||||||||
Depreciation and amortization | 8,258 | 8,518 | 16,741 | 17,115 | |||||||||||
Other operating income | (9,725 | ) | — | (9,727 | ) | — | |||||||||
Change in unrealized loss (gain) on inventory | 5,369 | 32,326 | (20,888 | ) | 18,775 | ||||||||||
Change in unrealized value on natural gas transportation contracts |
35,592 | (123 | ) | 56,711 | (13,322 | ) | |||||||||
Total adjusted gross margin: | $ | 38,830 | $ | 65,184 | $ | 145,041 | $ | 148,294 | |||||||
Adjusted Gross Margin: | |||||||||||||||
Refined products | $ | 27,165 | $ | 52,861 | $ | 78,198 | $ | 88,650 | |||||||
Natural gas | (2,725 | ) | (2,245 | ) | 38,364 | 27,542 | |||||||||
Materials handling | 12,694 | 12,895 | 24,770 | 28,476 | |||||||||||
Other operations | 1,696 | 1,673 | 3,709 | 3,626 | |||||||||||
Total adjusted gross margin | $ | 38,830 | $ | 65,184 | $ | 145,041 | $ | 148,294 | |||||||
Reconciliation of Net Income to Non-GAAP Measures
Three and Six Months Ended
Three Months Ended |
Six Months Ended |
||||||||||||||
2021 | 2020 | 2021 | 2020 | ||||||||||||
(unaudited) | (unaudited) | (unaudited) | (unaudited) | ||||||||||||
($ in thousands) | ($ in thousands) | ||||||||||||||
Reconciliation of net income to EBITDA, Adjusted EBITDA and Distributable Cash Flow: | |||||||||||||||
Net (loss) income | $ | (45,603 | ) | $ | (25,125 | ) | $ | 3,177 | $ | 21,612 | |||||
Add/(deduct): | |||||||||||||||
Interest expense, net | 8,510 | 10,716 | 17,259 | 21,826 | |||||||||||
Tax provision | 562 | 1,542 | 1,433 | 4,113 | |||||||||||
Depreciation and amortization | 8,258 | 8,518 | 16,741 | 17,115 | |||||||||||
EBITDA | $ | (28,273 | ) | $ | (4,349 | ) | $ | 38,610 | $ | 64,666 | |||||
Add/(deduct): | |||||||||||||||
Change in unrealized loss (gain) on inventory | 5,369 | 32,326 | (20,888 | ) | 18,775 | ||||||||||
Change in unrealized value on natural gas transportation contracts |
35,592 | (123 | ) | 56,711 | (13,322 | ) | |||||||||
Gain on sale of fixed assets not in the ordinary course of business including gain on insurance recoveries | (9,725 | ) | — | (9,727 | ) | — | |||||||||
Acquisition related expenses | — | 1 | — | 1 | |||||||||||
Other adjustments (1) | 35 | 161 | 65 | 320 | |||||||||||
Adjusted EBITDA | $ | 2,998 | $ | 28,016 | $ | 64,771 | $ | 70,440 | |||||||
Add/(deduct): | |||||||||||||||
Cash interest expense, net | (6,664 | ) | (8,314 | ) | (14,031 | ) | (18,144 | ) | |||||||
Cash taxes | (694 | ) | (1,659 | ) | (1,677 | ) | (4,719 | ) | |||||||
Maintenance capital expenditures | (3,515 | ) | (1,271 | ) | (5,523 | ) | (4,034 | ) | |||||||
Elimination of expense relating to incentive compensation and directors fees expected to be paid in common units | 185 | 853 | 2,553 | 1,261 | |||||||||||
Other | (6 | ) | (456 | ) | — | 564 | |||||||||
Distributable cash flow | $ | (7,696 | ) | $ | 17,169 | $ | 46,093 | $ | 45,368 | ||||||
(1) Represents the change in fair value of contingent consideration related to the 2017 Coen Energy acquisition and other expense.
Investor Contact:
+1 800.225.1560
investorrelations@spragueenergy.com
Source: Sprague Resources LP