srlp-20201105
0001525287FALSE00015252872020-11-052020-11-05

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): November 5, 2020
 
 
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: (800225-1560
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Units Representing Limited Partner InterestsSRLPNew York Stock Exchange
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:
 
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
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 




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. 






Item 2.02 Results of Operation and Financial Condition
On November 5, 2020, Sprague Resources LP, a Delaware limited partnership (the “Partnership”), issued a press release announcing its financial results for the third quarter ended September 30, 2020 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
99.1        Sprague Resources Press Release dated November 5, 2020.
104         Cover Page Interactive Data File (formatted in Inline XBRL)




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: November 5, 2020


Document

Exhibit 99.1

News Release

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

Sprague Resources LP Reports Third Quarter 2020 Results

Portsmouth, NH (November 5, 2020) - Sprague Resources LP (“Sprague”) (NYSE: SRLP) today reported its financial results for the third quarter ended September 30, 2020.
Third Quarter 2020 Highlights
Net sales were $390.5 million for the third quarter of 2020, compared to net sales of $582.6 million for the third quarter of 2019.
GAAP net income was $9.7 million for the third quarter of 2020, compared to net loss of $9.7 million for the third quarter of 2019.
Adjusted gross margin* was $56.6 million for the third quarter of 2020, compared to adjusted gross margin of $51.7 million for the third quarter of 2019.
Adjusted EBITDA* was $20.2 million for the third quarter of 2020, compared to adjusted EBITDA of $13.9 million for the third quarter of 2019.
"Sprague's Adjusted EBITDA increased by 50% over last year as our extensive storage assets enabled us to capture attractive contango opportunities", said David Glendon, President and Chief Executive Officer.

Refined Products
Volumes in the Refined Products segment decreased 6% to 245.5 million gallons in the third quarter of 2020, compared to 261.4 million gallons in the third quarter of 2019.
Adjusted gross margin in the Refined Products segment increased $7.0 million, or 21%, to $40.4 million in the third quarter of 2020, compared to $33.4 million in the third quarter of 2019.
“While demand destruction associated with the pandemic reduced volumes in transportation fuels, margins improved as the market structure resulted in gains in the value of our inventory," stated Mr. Glendon.

Natural Gas
Natural Gas segment volumes decreased 15% to 10.4 million Bcf in the third quarter of 2020, compared to 12.2 million Bcf in the third quarter of 2019.
Natural Gas adjusted gross margin decreased $3.1 million, or 84%, to $0.6 million for the third quarter of 2020, compared to $3.7 million for the third quarter of 2019.
"Natural Gas results declined as our commercial and industrial customers curtailed usage due to the pandemic and low volatility limited optimization opportunities," added Mr. Glendon.


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


Materials Handling
Materials Handling adjusted gross margin increased by $0.7 million, to $13.8 million for the third quarter of 2020, compared to $13.1 million for the third quarter of 2019.
"Materials Handling increased primarily due to incremental tank rentals at our Kildair facility", concluded Mr. Glendon.
2020 Guidance
Sprague's full year Adjusted EBITDA target remains unchanged at $105 to $120 million.
Quarterly Distribution
On October 26, 2020, 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 September 30, 2020, equivalent to the previous quarter. Sprague also announced that Sprague Resources Holdings LLC, a wholly owned subsidiary of Axel Johnson Inc. and the owner of Sprague’s General Partner will receive cash in respect of the incentive distribution rights payable in connection with the distribution for the third quarter of 2020. The distribution will be paid on November 12, 2020 to unitholders of record as of the close of business on November 6, 2020.
Financial Results Conference Call
Management will review Sprague’s third quarter 2020 financial results in a teleconference call for analysts and investors today, November 5, 2020.
Date and Time:        November 5, 2020 at 1:00 PM ET
Dial-in Numbers:    (866) 516-2130 (U.S. and Canada)
                                         (678) 509-7612 (International)
Participation Code:    1086741

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/phdemj5a. This link is also 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 5, 2020 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 Nine Months Ended September 30, 2020 and 2019
 Three Months Ended September 30,Nine Months Ended September 30,
 2020201920202019
(unaudited)(unaudited)(unaudited)(unaudited)
 ($ in thousands)($ in thousands)
Income Statements Data:
Net sales$390,458 $582,590 $1,708,551 $2,502,916 
Operating costs and expenses:
Cost of products sold (exclusive of depreciation and
amortization)
324,681 534,420 1,499,934 2,302,192 
Operating expenses18,504 20,461 57,787 65,325 
Selling, general and administrative18,045 17,570 57,002 56,309 
Depreciation and amortization8,470 8,466 25,585 25,263 
Total operating costs and expenses369,700 580,917 1,640,308 2,449,089 
Operating income20,758 1,673 68,243 53,827 
Other Income— — 64 128 
Interest income34 121 282 447 
Interest expense(9,552)(9,918)(31,626)(31,915)
Income (loss) before income taxes11,240 (8,124)36,963 22,487 
Income tax provision(1,567)(1,610)(5,680)(3,078)
Net income (loss)9,673 (9,734)31,283 19,409 
Incentive distributions declared(2,074)— (6,218)(4,110)
Limited partners' interest in net income (loss)$7,599 $(9,734)$25,065 $15,299 
Net income (loss) per limited partner unit:
Common - basic$0.33 $(0.43)$1.10 $0.67 
Common - diluted$0.33 $(0.43)$1.09 $0.67 
Units used to compute net income per limited partner unit:
Common - basic22,922,902 22,733,977 22,889,053 22,733,977 
Common - diluted23,031,916 22,733,977 22,970,943 22,757,779 
Distribution declared per unit$0.6675 $0.6675 $2.0025 $2.0025 





Sprague Resources LP
Volume, Net Sales and Adjusted Gross Margin by Segment
Three and Nine Months Ended September 30, 2020 and 2019
 Three Months Ended September 30,Nine Months Ended September 30,
 2020201920202019
 (unaudited)(unaudited)(unaudited)(unaudited)
 ($ and volumes in thousands)
Volumes:
Refined products (gallons)245,460 261,379 990,273 1,090,433 
Natural gas (MMBtus)10,381 12,202 39,850 44,935 
Materials handling (short tons)449 584 1,726 2,029 
Materials handling (gallons)108,020 117,897 335,339 368,807 
Net Sales:
Refined products$331,536 $515,021 $1,466,367 $2,219,457 
Natural gas40,592 48,987 184,358 221,262 
Materials handling13,880 13,119 42,411 43,913 
Other operations4,450 5,463 15,415 18,284 
Total net sales$390,458 $582,590 $1,708,551 $2,502,916 
Reconciliation of Operating Income to Adjusted Gross Margin:
Operating income$20,758 $1,673 $68,243 $53,827 
Operating costs and expenses not allocated to operating segments:
Operating expenses18,504 20,461 57,787 65,325 
Selling, general and administrative18,045 17,570 57,002 56,309 
Depreciation and amortization8,470 8,466 25,585 25,263 
Add/(deduct):
    Change in unrealized (loss) gain on inventory(17,680)(3,428)1,097 1,169 
    Change in unrealized value on natural gas
transportation contracts
8,498 7,005 (4,824)(6,429)
Total adjusted gross margin:$56,595 $51,747 $204,890 $195,464 
Adjusted Gross Margin:
Refined products$40,449 $33,400 $129,099 $105,783 
Natural gas588 3,681 28,130 40,649 
Materials handling13,811 13,101 42,287 43,886 
Other operations1,747 1,565 5,374 5,146 
Total adjusted gross margin$56,595 $51,747 $204,890 $195,464 





Sprague Resources LP
Reconciliation of Net Income to Non-GAAP Measures
Three and Nine Months Ended September 30, 2020 and 2019
 
 Three Months Ended September 30,Nine Months Ended September 30,
 2020201920202019
 (unaudited)(unaudited)(unaudited)(unaudited)
 ($ in thousands)($ in thousands)
Reconciliation of net income to EBITDA, Adjusted
EBITDA and Distributable Cash Flow:
Net income (loss)$9,673 $(9,734)$31,283 $19,409 
Add/(deduct):
     Interest expense, net9,518 9,797 31,344 31,468 
     Tax provision1,567 1,610 5,680 3,078 
     Depreciation and amortization8,470 8,466 25,585 25,263 
EBITDA$29,228 $10,139 $93,892 $79,218 
Add/(deduct):
Change in unrealized gain on inventory(17,680)(3,428)1,097 1,169 
Change in unrealized value on natural gas transportation
contracts
8,498 7,005 (4,824)(6,429)
Acquisition related expenses— 11 21 
Other adjustments (1)162 176 484 521 
Adjusted EBITDA$20,208 $13,903 $90,650 $74,500 
Add/(deduct):
Cash interest expense, net(8,072)(8,497)(26,216)(27,537)
Cash taxes(1,641)(2,328)(6,360)(3,443)
Maintenance capital expenditures(2,125)(3,544)(6,159)(7,039)
Elimination of expense relating to incentive compensation and directors fees expected to be paid in common units624 126 1,884 69 
Other38 — 602 (128)
Distributable cash flow$9,032 $(340)$54,401 $36,422 
 (1)    Represents the change in fair value of contingent consideration related to the 2017 Coen Energy acquisition and other expense.

v3.20.2
Cover Page
Nov. 05, 2020
Cover [Abstract]  
Entity Central Index Key 0001525287
Document Period End Date Nov. 05, 2020
Document Type 8-K
Entity Registrant Name SPRAGUE RESOURCES LP
Entity Incorporation, State or Country Code DE
Entity File Number 001-36137
Entity Tax Identification Number 45-2637964
Entity Address, Address Line One 185 International Drive
Entity Address, City or Town Portsmouth
Entity Address, State or Province NH
Entity Address, Postal Zip Code 03801
City Area Code 800
Local Phone Number 225-1560
Title of 12(b) Security Common Units Representing Limited Partner Interests
Trading Symbol SRLP
Security Exchange Name NYSE
Written Communications false
Soliciting Material false
Pre-commencement Tender Offer false
Pre-commencement Issuer Tender Offer false
Entity Emerging Growth Company false
Amendment Flag false