Sprague Resources LP (“Sprague”) (NYSE: SRLP) today reported its
financial results for the second quarter ended June 30, 2021.
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 David
Glendon, President and Chief Executive Officer.
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 Mr. Glendon.
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 Mr.
Glendon.
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 Mr. Glendon.
Quarterly Distribution
On July 23, 2021, the Board of Directors ("Board") of
Sprague’s general partner, Sprague Resources GP LLC, announced a
cash distribution of $0.6675 per unit for the quarter ended
June 30, 2021, equivalent to the previous quarter. The
distribution will be paid on August 9, 2021 to unitholders of
record as of the close of business on August 3, 2021.
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,
August 5, 2021 at 1:00 PM EST.
| Dial-in
Numbers: |
(866) 516-2130
(U.S. and Canada) |
| |
(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 Sprague Resources LPSprague 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
MeasuresEBITDA, 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
StatementsAny 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 among other things, 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 5, 2021 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
LPSummary Financial DataThree and
Six Months Ended June 30, 2021 and
2020
| |
Three Months Ended June 30, |
|
Six Months Ended June 30, |
| |
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 |
|
Sprague Resources
LPVolume, Net Sales and Adjusted Gross Margin by
SegmentThree and Six Months Ended June 30,
2021 and 2020
| |
Three Months Ended June 30, |
|
Six Months Ended June 30, |
| |
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 |
|
| Net Sales: |
|
|
|
|
|
|
|
|
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 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sprague Resources
LPReconciliation of Net Income to Non-GAAP
MeasuresThree and Six Months Ended June 30,
2021 and 2020
| |
Three Months Ended June 30, |
|
Six Months Ended June 30, |
| |
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:Paul Scoff +1
800.225.1560investorrelations@spragueenergy.com
Sprague Resources (NYSE:SRLP)
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