Sprague Resources LP Reports Fourth Quarter And Full Year 2013 Results

26 Mar, 2014, 07:00 ET from Sprague Resources LP

PORTSMOUTH, N.H., March 26, 2014 /PRNewswire/ -- Sprague Resources LP ("Sprague") (NYSE: SRLP) today reported its financial results for the fourth quarter and twelve months ended December 31, 2013. 

Sprague completed its initial public offering ("IPO") on October 30, 2013 and, as a result, a portion of Sprague's fourth quarter 2013 results include the financial and operating results of Sprague's predecessor company, which included Kildair, the Canadian business that is not part of Sprague's assets or operations following the completion of the IPO.  The following discussion of financial results excludes the contribution of Kildair prior to Sprague's IPO.  Please see the accompanying financial tables for additional and more detailed information.   

"During the fourth quarter, outstanding logistical execution and customer service drove significant adjusted gross margin growth in both Refined Products and Natural Gas businesses.  Additionally, expansion into new markets and investments in infrastructure improvements contributed volume gains," said David Glendon, President and Chief Executive Officer.  "Our unique ability to provide multi-fuel offerings to customers represents a compelling value proposition during periods of price volatility, as we experienced in the fourth quarter of 2013."

Fourth Quarter 2013 Highlights

  • Adjusted gross margin was $47.8 million for the fourth quarter of 2013, compared to $39.5 million for the fourth quarter of 2012. 
  • Pro forma adjusted EBITDA was $24.2 million for the fourth quarter of 2013, compared to $15.8 million for the fourth quarter of 2012.      
  • Pro forma net sales were $1.2 billion for the fourth quarter of 2013, compared to $1.1 billion for the fourth quarter of 2012.
  • Pro forma net loss was $33.1 million for the fourth quarter of 2013, compared to a net loss of $4.2 million for the fourth quarter of 2012.  The net loss in the fourth quarter was primarily due to derivative losses from Sprague's hedging program, without the accompanying offset for physical positions held. 

Sprague reported distributable cash flow of $18.2 million, on a pro forma basis, for the fourth quarter of 2013, compared to $10.1 million, on a pro forma basis, for the fourth quarter of 2012.  Sprague also reported distribution coverage of 2.2x the minimum quarterly distribution for the fourth quarter of 2013.    

EBITDA, adjusted EBITDA, pro forma adjusted EBITDA and adjusted gross margin are not prepared in accordance with United States generally accepted accounting principles ("GAAP"), and are discussed in greater detail below under "Non-GAAP Financial Measures."  Readers should refer to the financial tables provided in this news release for reconciliation to the most comparable GAAP financial measures for the three and twelve months ended December 31, 2013.

Refined Products

  • Volumes in the Refined Products business segment rose 5% to 351.4 million gallons in the fourth quarter of 2013, compared to 334.7 million gallons in the fourth quarter of 2012. 
  • Adjusted gross margin in the Refined Products segment increased $7.5 million, or 35%, to $28.8 million in the fourth quarter of 2013, compared to the fourth quarter of 2012. 

"Our Refined Products group executed exceptionally well during the fourth quarter in challenging weather and supply conditions.  Our strong performance was also driven by the Bridgeport terminal's first full quarter of contribution after coming on board in July," said Mr. Glendon.  "We were also pleased to complete the assumption of the Commercial Fuels contracts from Hess at the end of the fourth quarter of 2013, and we have been able to successfully leverage our supply and delivery capabilities to this customer set," said Mr. Glendon.

Natural Gas

  • Natural Gas segment volumes decreased 3% to 13.7 Bcf for the fourth quarter 2013, compared to 14.1 Bcf for the fourth quarter 2012.
  • Natural Gas adjusted gross margin increased 41% to $12.0 million for the fourth quarter of 2013, compared to $8.5 million for the fourth quarter of 2012. 

"Our Natural Gas business continues to demonstrate an impressive growth trajectory in the number of accounts served and adjusted gross margin as it shifts the customer mix towards smaller volume commercial and industrial accounts, leveraging our rights to utilize transportation assets and supply portfolio to drive account growth," said Mr. Glendon.

Materials Handling

  • Materials Handling gross margin declined by $2.1 million, or 24%, to $6.7 million for the fourth quarter 2013, compared to the fourth quarter 2012.

"Materials Handling gross margin declined versus the fourth quarter 2012, primarily as the result of timing differences in the receipt of salt and petroleum coke shipments," said Mr. Glendon.

For the year ended December 31, 2013, Sprague reported adjusted gross margin of $161.3 million, compared to $138.3 million in 2012.  Sprague's pro forma adjusted EBITDA increased $13.0 million to $66.2 million in 2013, compared to $53.2 million in 2012.  On a pro forma basis, Sprague generated distributable cash flow of $40.1 million for the full year 2013, yielding a minimum distribution coverage ratio of 1.2x on all of Sprague's outstanding units as of the year end 2013, compared to $29.9 million of distributable cash flow for the year 2012.

On January 29, 2014, the Board of Directors of Sprague's general partner, Sprague Resources GP, declared an initial pro rata quarterly cash distribution of $0.2825 per unit, or $1.65 per unit on an annualized basis, for the period October 30 through December 31, 2013.  The distribution was paid on February 14, 2014 to unitholders of record as of February 10, 2014.

"Overall, I am thrilled with how our team delivered outstanding customer service and drove strong results in the fourth quarter. Sprague is well positioned to build on this momentum in 2014 as we pursue our growth objectives," concluded Mr. Glendon. 

Sprague Resources LP Schedule K-1s Now Available Sprague has completed 2013 tax packages for its unitholders, including Schedule K-1.  The tax packages have been mailed and are also available via Sprague's website at www.spragueenergy.com under "Investor Relations > K-1 Tax Information".  For additional information, unitholders may call 855-521-8150 Monday through Friday from 8:00 AM to 5:00 PM CST, or visit www.taxpackagesupport.com/SRLP

Financial Results Conference Call Management will review Sprague's fourth quarter 2013 financial results in a teleconference call for analysts and investors today, March 26, 2014.

Date and Time:      

March 26, 2014 at 10:00 AM ET

Dial-in numbers:      

(866) 510-0707 (U.S. and Canada)

(617) 597-5376 (International)

Participation Code:   

20708387

The call will also be webcast live and archived on the investor relations section of Sprague's website, www.spragueenergy.com.

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, pro forma adjusted EBITDA and adjusted gross margin are used as supplemental financial measures by management and external users of Sprague's financial statements, such as investors, commercial banks, trade suppliers and research analysts, to assess:

  • The financial performance of Sprague's assets, operations and return on capital without regard to financing methods, capital structure or historical cost basis;
  • The ability of Sprague's assets to generate cash sufficient to pay interest on its indebtedness and make distributions to its equity holders;
  • The viability of acquisitions and capital expenditure projects;
  • The market value of its inventory and natural gas transportation contracts for financial reporting to its lenders, as well as for borrowing base purposes; and
  • Repeatable operating performance that is not distorted by non-recurring items or market volatility.

Sprague defines EBITDA as net income before interest, income taxes, depreciation and amortization.  Sprague defines adjusted EBITDA as EBITDA 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, and adjusted for the gain on acquisition of a business, write-off of deferred offering costs and bio-fuel excise tax credits.  Sprague defines pro forma adjusted EBITDA as adjusted EBITDA with additional adjustments including public company expenses, gains/losses on the sale of fixed assets and the exclusion of Kildair operations to reflect results as if Sprague were operating as a public company during the defined time periods.

Sprague defines adjusted gross margin as gross margin 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.

EBITDA, adjusted EBITDA, pro forma adjusted EBITDA and adjusted gross margin are not prepared in accordance with United States generally accepted accounting principles ("GAAP"). These measures should not be considered as alternatives to net income, income from operations, cash flows from operating activities or any other measure of financial performance or liquidity presented in accordance with GAAP.  

Forward Looking Statements This press release may include forward-looking statements.  These forward-looking statements involve risks and uncertainties.  When considering these forward-looking statements, you should keep in mind the risk factors and other cautionary statements in Sprague's prospectus and filings with the United States Securities and Exchange Commission (the "SEC"), including those set forth under Item 1A, "Risk Factors" of Sprague's Annual Report on Form 10-K for the year ended December 31, 2013, and as updated by any subsequent reports filed with the SEC.  Sprague undertakes no obligation and does not intend to update these forward-looking statements to reflect events or circumstances occurring after this press release.  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

Volume, Net Sales, Gross Margin and Adjusted Gross Margin

by Segment (Excluding Kildair)

Three Months and Years Ended December 31, 2013 and 2012

Three Months Ended

Years Ended

December 31, 

December 31, 

2013

2012 Predecessor

2013

2012 Predecessor

($ and volumes in thousands)

Volumes:

Refined products (gallons)

351,414

334,698

1,234,128

1,145,634

Natural gas (MMBtus)

13,667

14,093

51,979

49,417

Materials handling (short tons)

529

664

2,145

2,595

Materials handling (gallons)

69,678

61,992

246,708

248,514

Other operations (short tons)

28

33

133

136

Net Sales:

Refined products

$     1,064,595

$     1,049,748

$      3,765,516

$      3,593,370

Natural gas

82,139

74,191

304,843

242,006

Materials handling

6,733

8,863

28,446

32,536

Other operations

2,242

2,694

8,221

8,883

Total net sales

$     1,155,709

$     1,135,496

$      4,107,026

$      3,876,795

Gross Margin:

Refined products

$           23,620

$          29,167

$           90,071

$           76,771

Natural gas

(32,316)

(1,537)

(15,677)

9,191

Materials handling

6,730

8,856

28,430

32,320

Other operations

329

882

1,598

2,119

Total gross margin

$           (1,637)

$          37,368

$         104,422

$         120,401

Adjusted Gross Margin:(1)

Refined products

$           28,777

$          21,304

$            90,919

$           76,995

Natural gas

11,972

8,488

40,373

26,844

Materials handling

6,730

8,856

28,430

32,320

Other operations

329

882

1,598

2,119

Total adjusted gross margin

$            47,808

$          39,530

$         161,320

$        138,278

Calculation of Adjusted Gross Margin:

Total gross margin

$            (1,637)

$          37,368

$         104,422

$        120,401

Deduct: total commodity derivative (gains) losses included in net income (loss)

55,309

2,498

75,727

29,257

Add: realized commodity derivative gains (losses) included in net income (loss)

(5,864)

(336)

(18,829)

(11,380)

Total adjusted gross margin

$           47,808

$          39,530

$         161,320

$        138,278

Other Data:

Normal heating degree days(2)

2,318

2,317

6,752

6,787

Actual heating degree days

2,336

2,104

6,624

5,803

Variance from normal heating degree days

0.8%

(9.2)%

(1.9)%

(14.5)%

Variance from prior period actual heating degree days

11.0%

11.6%

14.1%

(7.7)%

1) Gross margin 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

2) As reported by the NOAA/National Weather Service for the New England oil home heating region over the period of 1981-2011

 

Sprague Resources LP

Summary Historical Financial and Operating Data

Three Months and Years Ended December 31, 2013 and 2012

Three Months Ended

Years Ended

December 31, 

December 31, 

2013

2012

2013

2012

(unaudited)

(unaudited)

($ in thousands)

Statement of Operations Data:

Net sales

$     1,193,686

$     1,302,608

$      4,600,734

$      4,043,907

Cost of products sold

1,192,304

1,264,086

4,474,742

3,922,352

Gross margin

1,382

38,522

125,992

121,555

Operating costs and expenses:

Operating expenses

11,395

14,661

51,839

47,054

Selling, general and administrative

13,891

14,079

53,580

46,449

Write-off of deferred offering costs

-

8,931

-

8,931

Depreciation and amortization

2,981

4,207

15,452

11,665

Total operating costs and expenses

28,267

41,878

120,871

114,099

Operating income

(26,885)

(3,356)

5,121

7,456

Gain on acquisition of business

-

1,512

-

1,512

Other income (expense)

(33)

503

568

(160)

Interest income

82

96

603

534

Interest expense

(6,849)

(7,687)

(28,695)

(23,960)

(Loss) income before income taxes and equity in net (loss) income of foreign affiliate

(33,685)

(8,932)

(22,403)

(14,618)

Income tax (provision) benefit

981

(407)

(5,097)

2,796

(Loss) income before equity in net (loss) income of foreign affiliate

(32,704)

(9,339)

(27,500)

(11,822)

Equity in net (loss) income of foreign affiliate

-

-

-

(1,009)

Net (loss) income

$         (32,704)

$           (9,339)

$          (27,500)

$         (12,831)

Less: Predecessor income (loss) through October 29, 2013

$           (2,470)

$              2,734

Limited partners' interest in net income (loss) from October 30, 2013 to December 31, 2013 prior to distributions

$         (30,234)

$         (30,234)

Adjusted EBITDA(1)(unaudited)

$           25,508

$            13,775

$            73,018

$           49,781

Net income (loss) per limited partner unit

(1.50)

(1.50)

Weighted average limited partner units outstanding

20,144

20,144

Other Financial and Operating Data (unaudited)

Capital expenditures

$             5,005

$             2,327

$            22,079

$             7,293

Total refined products volumes sold (barrels)

8,709

10,498

34,261

29,806

Total natural gas volumes sold (MMBtus)

13,667

14,093

51,979

49,417

1) EBITDA 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, and adjusted for the gain on acquisition of business, write-off of deferred offering costs and bio-fuel excise tax credits.

 

Sprague Resources LP

Summary Pro Forma Financial and Operating Data

Three Months and Years Ended December 31, 2013 and 2012

Pro Forma(1)

Pro Forma(1)

Three Months Ended

Years Ended

December 31, 

December 31, 

2013

2012

2013

2012

(unaudited)

(unaudited)

(unaudited)

(unaudited)

($ in thousands)

Statement of Operations Data:

Net sales

$     1,155,709

$     1,135,496

$      4,107,026

$      3,876,795

Cost of products sold

1,157,346

1,098,128

4,002,604

3,756,394

Gross margin

(1,637)

37,368

104,422

120,401

Operating costs and expenses:

Operating expenses

10,552

11,369

43,084

43,762

Selling, general and administrative

13,080

14,159

47,646

46,212

Write-off of deferred offering costs

-

8,931

-

8,931

Depreciation and amortization

2,444

2,442

9,602

9,900

Total operating costs and expenses

26,076

36,901

100,332

108,805

Operating income

(27,713)

467

4,090

11,596

Gain on acquisition of business

-

-

-

-

Other income (expense)

13

503

656

(160)

Interest income

82

69

592

507

Interest expense

(6,276)

(5,573)

(22,801)

(21,775)

(Loss) income before income taxes

(33,894)

(4,534)

(17,463)

(9,832)

Income tax (provision) benefit

831

300

(776)

651

Net (loss) income

$       (33,063)

$          (4,234)

$        (18,239)

$            (9,181)

Adjusted EBITDA(2)(unaudited)

$         24,189

$          15,833

$          66,225

$            53,165

1) The unaudited pro forma information gives effect to certain pro forma adjustments as if they had occurred as of January 1, 2012. The adjustments are based upon currently available information and certain estimates and assumptions; therefore, actual adjustments will differ from the pro forma adjustments. Pro forma adjustments reflect the following:

  a) The distribution to a wholly-owned subsidiary of Sprague Holdings of 100% of its interest in Sprague Energy Canada Ltd, a wholly owned subsidiary of the Predecessor, which owns all of the equity interest in Kildair

  b) The pro forma adjustment for interest expense and deferred financing fees under the new credit agreement. The calculation is based on the monthly average working capital and acquisition facility multiplied by the decreases in the borrowing rate of 0.50% for borrowings under the working capital facility, less the increase of commitment fees due to the increased size of the facility

  c) The elimination of corporate overhead charges from the Parent offset by increases in incentive compensation

  d) The adjustments to reflect the conversion of the Predecessor to a partnership resulting in the elimination of all U.S. federal income taxes, as well as an adjustment of income taxes in certain state jurisdictions in which the partnership operates, and to record estimated taxes for the activities conducted by the Partnership at the applicable state statutory rates

2) EBITDA 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, and adjusted for the gain on acquisition of business, write-off of deferred offering costs and bio-fuel excise tax credits

 

Sprague Resources LP

Historical and Pro Forma Reconciliation of Net (Loss) Income to EBITDA and Adjusted EBITDA

Three Months and Years Ended December 31, 2013 and 2012

Three Months Ended

Years Ended

December 31, 

December 31, 

2013

2012

2013

2012

(unaudited)

(unaudited)

($ in thousands)

Reconciliation of net (loss) income to adjusted EBITDA:

Net (loss) income

$        (32,704)

$          (9,339)

$        (27,500)

$        (12,831)

Add/(deduct):

     Interest expense, net

6,767

7,591

28,092

23,426

     Tax (benefit) expense

(981)

407

5,097

(2,796)

    Depreciation and amortization

2,981

4,207

15,452

11,665

EBITDA(2)

$        (23,937)

$            2,866

$         21,141

$          19,464

Deduct: total commodity derivative (gains) losses included in net income (loss)

55,003

59

76,203

26,818

Add: realized commodity derivative gains (losses) included in net income (loss)

(5,558)

2,103

(19,305)

(8,941)

Add/(deduct):

Gain on acquisition of business

-

(1,512)

-

(1,512)

Write-off of deferred offering costs

-

8,931

-

8,931

Bio-fuel excise tax credits

-

1,328

(5,021)

5,021

Adjusted EBITDA(3)

$          25,508

$         13,775

$           73,018

$           49,781

Pro Forma(1)

Pro Forma(1)

Three Months Ended

Years Ended

December 31, 

December 31, 

2013

2012

2013

2012

(unaudited)

(unaudited)

(unaudited)

(unaudited)

($ in thousands)

Reconciliation of net (loss) income to adjusted EBITDA:

Net (loss) income

$        (33,063)

$          (4,234)

$        (18,239)

$           (9,181)

Add/(deduct):

     Interest expense, net

6,194

5,504

22,209

21,268

     Tax (benefit) expense

(831)

(300)

776

(651)

     Depreciation and amortization

2,444

2,442

9,602

9,900

EBITDA(2)

$        (25,256)

$            3,412

$          14,348

$           21,336

Deduct: total commodity derivative (gains) losses included in net income (loss)

55,309

2,498

75,727

29,257

Add: realized commodity derivative gains (losses) included in net income (loss)

(5,864)

(336)

(18,829)

(11,380)

Add/(deduct):

Write-off of deferred offering costs

-

8,931

-

8,931

Bio-fuel excise tax credits

-

1,328

(5,021)

5,021

Adjusted EBITDA(3)

$          24,189

$          15,833

$           66,225

$           53,165

1) The unaudited pro forma information gives effect to certain pro forma adjustments as if they had occurred as of January 1, 2012. The adjustments are based upon currently available information and certain estimates and assumptions; therefore, actual adjustments will differ from the pro forma adjustments. Pro forma adjustments reflect the following:

  a) The distribution to a wholly-owned subsidiary of Sprague Holdings of 100% of its interest in Sprague Energy Canada Ltd, a wholly owned subsidiary of the Predecessor, which owns all of the equity interest in Kildair

  b) The pro forma adjustment for interest expense and deferred financing fees under the new credit agreement. The calculation is based on the monthly average working capital and acquisition facility multiplied by the decreases in the borrowing rate of 0.50% for borrowings under the working capital facility, less the increase of commitment fees due to the increased size of the facility

  c) The elimination of corporate overhead charges from the Parent offset by increases in incentive compensation

  d) The adjustments to reflect the conversion of the Predecessor to a partnership resulting in the elimination of all U.S. federal income taxes, as well as an adjustment of income taxes in certain state jurisdictions in which the partnership operates, and to record estimated taxes for the activities conducted by the Partnership at the applicable state statutory rates

2) Net income before interest, income taxes, depreciation and amortization.  

3) EBITDA 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, and adjusted for the gain on acquisition of business, write-off of deferred offering costs and bio-fuel excise tax credits

 

Sprague Resources LP

Pro Forma Reconciliation of Adjusted EBITDA to Distributable Cash Flow

Three Months and Years Ended December 31, 2013 and 2012

Pro Forma(1)

Pro Forma(1)

Three Months Ended

Years Ended

December 31, 

December 31, 

2013

2012

2013

2012

(unaudited)

(unaudited)

(unaudited)

(unaudited)

($ in thousands)

Reconciliation of adjusted EBITDA to distributable cash flow:

Adjusted EBITDA(2)

$        24,189

$        15,833

$         66,225

$         53,165

Add/(deduct):

Cash Interest Expense, net

(5,199)

(4,720)

(18,789)

(17,856)

Cash Taxes

831

300

(776)

651

Maintenance capital expenditures

(2,235)

(1,632)

(6,073)

(5,897)

Estimated incremental selling, general and administrative expense of being a publicly traded partnership

(172)

(514)

(1,716)

(2,058)

Loss (gain) on fixed assets and insurance recoveries

(2)

(446)

(783)

58

Elimination of expense relating to cash incentive payments and directors fees that would have been paid in common units

761

1,256

1,975

1,881

Distributable cash flow

$        18,173

$        10,077

$         40,063

$         29,944

1) The unaudited pro forma information gives effect to certain pro forma adjustments as if they had occurred as of January 1, 2012. The adjustments are based upon currently available information and certain estimates and assumptions; therefore, actual adjustments will differ from the pro forma adjustments. Pro forma adjustments reflect the following:

  a) The distribution to a wholly-owned subsidiary of Sprague Holdings of 100% of its interest in Sprague Energy Canada Ltd, a wholly owned subsidiary of the Predecessor, which owns all of the equity interest in Kildair

  b) The pro forma adjustment for interest expense and deferred financing fees under the new credit agreement. The calculation is based on the monthly average working capital and acquisition facility multiplied by the decreases in the borrowing rate of 0.50% for borrowings under the working capital facility, less the increase of commitment fees due to the increased size of the facility

  c) The elimination of corporate overhead charges from the Parent offset by increases in incentive compensation

  d) The adjustments to reflect the conversion of the Predecessor to a partnership resulting in the elimination of all U.S. federal income taxes, as well as an adjustment of income taxes in certain state jurisdictions in which the partnership operates, and to record estimated taxes for the activities conducted by the Partnership at the applicable state statutory rates

2) EBITDA 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, and adjusted for the gain on acquisition of business, write-off of deferred offering costs and bio-fuel excise tax credits

 

SOURCE Sprague Resources LP



RELATED LINKS

http://www.spragueenergy.com