SRLP - Earnings call transcript Q1 2018

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Operator

Good day, ladies and gentlemen, and thank you for your patience.

You've joined the Sprague Resources LP Q1 2018 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this conference may be recorded. to CEO call of like host, to now and President Sprague would turn over the your I Resources, Mr. Glendon. David may you begin. Sir,

David Glendon

Thank Call. everyone, First you, afternoon, to Latif. Resources Sprague and Quarter welcome Conference XXXX Good

and Joining me Rinaldi, and and Officer; Gary Counsel. today Paul President Scoff, Moore, Vice Accounting President Chief and Operating our General our John Chief Financial Chief are Officer Officer; our Vice

results of Please may difficult which Some significantly we forward-looking believe factors, today's impact call date. an reasonable be to our which today's risks Actual of of performance. risk for statements, as differ are because list and refer will to that of extensive could XX-K include uncertainties to predict.

deserve to deliver flow our comparable measures in describe release, is year to acquisitions recent expanded earnings mention. website. to evolve available more our which GAAP that business strategic year's press using our Sprague's of X as also our footprint. to section continue an financial of last business Relations XXXX, cash ratable measures the full measures. Several Investor in a posted generate non-GAAP are We closed those The we acquisitions to certain in model Reconciliations of positioned are contribution

last Sprague's performance completion forward. quarter and for aligns providing footprints. model. where recent seasonality. we the to asphalt we're general and with exceptional agreement arrangement a business which existing for In their minimums, on the transitioned of our itself asphalt an projects to focusing recently River year business mirrors Kildair are Kildair Road asphalt throughput recent most increased terminals leverage services more marketing a the on delivered long-term cash Supported for the closely distribution our of of builds outstanding assets the growth to Coen their partner quarter. Our March, under with adjacent ways reduced Energy, as future finding repurpose to acquisition, generate Providence board both the at flows contract-based positions sustained going growth, it with lease is within opportunities handling and XXth consecutive take-or-pay by platform another solid This growth storage as storage energy continuing with field

are while distribution record growth, our allows growing markets us currently solid sheet maintain internally track not coverage the distributions. and Although funding balance rewarding to initiatives, growth strong our of ratio

like quarter I'd the first turn over for detailed results. to Gary a Now call review of Gary? to our

Gary Rinaldi

first and everybody. Sprague's to XXXX. of you, good and quarter afternoon, pleased I'm report for results financial Thank the David, operational

included costs results is partially are gross $X adjusted ranges $X.X platform, XX%. our the EBITDA margin grew expectations. Materials and million potential realizing we David higher our expected over is was increased result interest the acquisitions in margin prior XX% The between to gains by Adjusted million, borrowing of $X.X higher Refined the $XXX.X the be the and levels expenses our Products XXXX our gross of Cash Refined offset on update. the in guidance by of rate XXXX of at substantial below higher $X.X in for margin and to quarter million.Cash EBITDA Both and primary relative related to with by This to levels taxes Based prices, The the $XXX by the debt. of partially year. acquisitions associated for debt respectively, adjusted related to hedges increase increase was million full tax the we million March prior SG&A Products in reflected floating $XX.X mentioned, retroactive $X.X a an commodity to of credit. by costs, as million improved reinstatement increased the increase our lower of recent benefits line adjusted OpEx increase. continued drivers expanded performance Handling $X.X and were million and were operations million contributing EBITDA tax in compared million biodiesel XXXX. on the now the at our from of quarter, $XXX line of margin $X.X year-over-year other in prior posted the tax year. where offset and Kildair, As of with gross or adjusted strong all gross provided in with reduction depreciation to acquisitions.Adjusted offset the Canadian Adjusted are million investor recent utilized million periods. published year $XX the primarily or million, $X.X in as and confirming driven growth million

expect taxes in the for We $XX.X strong million increase quarter tank dredging the Maintenance in $X upgrades Handling, to our CapEx by to comprising the of be Searsport by activity $XXX,XXX $X.X the the year.Driven approximately to terminal, the and over million. cash for at increased million, asphalt distributable majority the times X.X with coverage distribution and quarter. improved generating performance prior of X% Refined cash flow Products Materials year

our discussion business segments. for Now of

with year into Refined to acquisition, expansion million. tax the gross moderated that outages and prior This normal In in the million increase, over $XX.X partially in gains our material the A million, gross constraints contribute projects and to XX% XX% margins. early in fuel margin quarter. heavy the Providence year. sales with power Energy limited period grew later several experienced strong the recent January, unit December sales during asphalt Coen handling pipeline in several to enhanced from These of generation high to arrived adjusted the increase. increase This reinstatement to coupled share uplift Road weather by than year-over-year, were resulted biodiesel grew early offset volumes the The In of lower began optimization resulting Refined declined $X.X the being spot XX% in X% cold generation market led credit of last warmer by including and combined to the adjusted early margins generated volumes to the the temperatures gross increased Products by margin of volumes comparable to in key this, year of weather the combined the $XXX,XXX X% of of and number markets. $XX.X or Handling, as $XX.X during in in margins Supportive weather cold as quarter was unit Natural supply late Although over and opportunities. our and last by sector. quarter the capital improvement at the River factors the impact adjusted were to XX% competitors Products dynamics, Despite for leading by terminals unit the an continued connected the oil This first same quarter. sustained into acquisitions. terminal the margin quarter a or margin generate Increased year. Gas, driven or restrictions contributors periods in of the volatility Materials million. quarter sales was while to flat distillates

quarter lift In sheet timing commitment the strong addition, Sprague's maintain results. ongoing differences handling also the heavy bulk balance in dry performance strong and to a liquidity. supports first our further activity related and ample to contributed to increased

an the liquidity provides with finance issue million to X.X us like need point, up accordions. the times growth Thank the During equity. additional cease our for million to questions. and the this opportunities near- to and At and acquisition medium-term flexibility I'd without to open call to facilities exceeds This capital in working leverage in $XXX acquisition declined the combined with quarter, available permanent $XXX you.

Operator

sir you, Instructions]. [Operator Thank

Our first question comes Justin from of Jenkins the James. Raymond of line

Your line is open.

Justin Jenkins

Couple questions especially David. So here, to on distillate of product just want on start the your side. thoughts maybe, to the markets,

First you minuses low question are and season inventories the Just if especially business across beyond, see the see Northeast as in is? your market be part that you and asset into got is if move any pluses or of we through in curious out there so that how you the Sprague's shoulder XXXX? footprint where may playing U.S.

David Glendon

presented in and the marketplace, quarter first interesting conditions referenced. the even second in quarter distillate as some Gary So early

created been this but challenging you cold for nice unfortunately, decided And supply of conditions, show -- some which actually year. which has and well the some then, for fuel heating couple colder first exceptionally as And created weeks February The better us in probably normal, not side conditions year to February side, this than cold as has certainly opportunities were particular. as up very April then observed, as some of on almost and the us. distillate

of The other there this in to got specifications of period Northeast a is, many the in occurring states the conversion of you've year. thing June sulfur is balance

Northeastern states. a ultra-low balance fuels the to also we're So leverage the heating sales where we're heating incremental while to the of point seeing fuel, in many the in we're sulfur in trying to we're opportunities transition trying

up So -- of heating interesting have May-June that anyways, in it's been so. a oil been bit time much you the a kind that but incremental for great us, frame opportunity dynamics little demand don't some of see presented

Justin Jenkins

Appreciate the demand oil that, over on got high-sulfur in market. a challenges, mean? the you here. least, expecting these what XXXX IMO And fuel on resid some transitioning like How into that changes maybe, sulfur of we're markets your horizon, oil next XX, heating to step does David, do and Sprague? XX say think impact the We've kind in diesel all comments and my question plays change seems the months, in and

David Glendon

do in much bunker bunker the fills have marketing minimal couple today, harbors. in participation Yes, We fuel of we don't fuels of a Justin. a market

fuel So dramatic for heavy oil to sulfur terms I we're on – agree oil. vis-à-vis of cusp we're change of marine with gas in going see demand the you,

XXXX I think the in transition the play closer than year. it to rather out will next

huge think a can XXXX gas us, the as are refiners the spreads, which for you're see from perspective, oil see well. to closer a clearly, market's going So a I sulfur like And nimble opportunities out. competitor candidly fuel I and marine year, think, play to next oil, affected some present in higher but between we'll

Justin Jenkins

in a you opportunistic mentioned. that then, Appreciate change bit, You there's have the allocation little things the in Is this markets But been way been consistent growth M&As. ratable does growth, optimizing all? capital base still you really see how that have the you answer terms I'm And the think asset the that of distribution process like maybe and guys it? to different and at if change right that's mentioned about curious outlook that but rewarding No, any of great. color. provided guys terms you in

David Glendon

that's we, sure credit lack sort any by Yes, others, fair, are Again, today. growth distribution of for Justin. of get and I'm the frustrated I you think

we're we it So be being conversation. call, stated do. on we've times consistent many a this what to in in said we on believe in executing doing, board-level going to continues as But

So, strong rewarded. time period will do performance extended and we an over think ultimately our be that

Operator

[Operator Andrew Burd the of JP Instructions] Our line next question Morgan. comes from of

Your please. question

Andrew Burd

how those to the each been out year, of last First when question acquisitions have tracking was regarding were laid the announced? five those expectations that relative

David Glendon

Andrew, much all it's Dave. expectations I would pretty cases. say, right on in in tracking they're the general, with

Some, touch. up a

pace Terminal we're But with the the at articulated front I one touch. but in we terms clear flows. rate. are outset, acquisition a end, collectively X in generally the down of the was Some, run right generating it at with just cash speaking, associated what the of EBITDA the note that the little make. Capital to said, on with bit out was about we know a And couple ultimate a delayed years

still we're each what that adding a doing just up capital track if was delayed a but you're of on recall generate will one math EBITDA, that, simple So contribution. said we for

Andrew Burd

But achieving the full...

David Glendon

yes. But on track,

Andrew Burd

part regarding that those those, that. guess, some or at second mention essential seen question the expand you acquisition, terminals. you you if the is X did could incrementally and Yes. it is any expected. is at of attractive maybe the then part is then acquisitions, Materials on Handling you whether the first there And rate X opportunities have the of question be other elsewhere? And Coen Run I opportunities

David Glendon

providing So most Coen the sites. one, And primary recent you're business into right. services is business, recall Coen, which energy field fuel of the is frac the

continued seeing, think the consolidation activities. also customer we will as exploration incremental growth there, sure Marcellus, candidly, in so the marketplace are production And opportunity. which and seeing we We're strong I'm provide Gas in Utica, Natural seeing, you're some

it So of seeing thought it's think where would E&P West opportunities folks do, ago, servicing phenomenon, we little have seeing customers. consolidation a we a might will doing more of been as consolidation that opposed bit and what a for it to the activities, to Wild we're of you're which lead couple those years

impressive see we think I again, So opportunities there. growth

On modest there's a for capital in, others, investments been the but Andrew. investments or nothing incremental the the couple contribution acquisitions, beyond material, of initial

front-end. the on think at articulated track what I we they're all for

Operator

Janney. of of Our the comes next Mike question line from Gyure

is line open. Your

Michael Gyure

you guess, remainder left year, the in you the still guys your be growth to do segments? different a Can talk little what bit I the may have CapEx about for and of

Gary Rinaldi

$XX I know, CapEx with growth Providence. for in, be we right other run, in, mentioned, $X But asphalt additional with be range. kind As with as at Capital range. range around year, of the relates and to coupled MGO. to looking also projects. last we to about at $X significant Providence, capital million million Road have back always we're million to the acquisition expansion at River projecting projects. historically growth also -- in which expecting million, And you of XXXX, we large is million $XX the $XX now, we're expansion expansion where we're And to the CapEx is had One, two at had Kildair Providence East

actually now, will increase traditional rate has what to that back our year the But as goes we're on. been. right hopefully, run So

Michael Gyure

think about distillates probably segments? guess,, you the it volume was about of was heating little a commentary volumes. versus kind Products really and year-over-year. acquisitions core that I the You the highlighted, kind touched of the of I XX% one much increased think, bit kind then of is the business and But Refined on in And other. I How oil

Gary Rinaldi

of in mentioned from A Though acquisitions. Michael, relates as terminal the in as constraints were volume competitors. in the quarter, related I my -- is the first majority it early quarter of to first to very and volumes increase, comments, some outages our strong

Operator

over like the to to call closing time, Glendon Mr. any for back turn Sir? I'd remarks. this At

David Glendon

forward the and Latif, Thanks. later thanks today. seeing in everybody many MLPA to of to the for look Thanks, Conference in We at you as joining month well. Orlando

Operator

thank does ladies This And sir. program. you, gentlemen. your you, conclude and Thank

You day. lines may this disconnect Have a your at wonderful time.

David Glendon	President and Chief Executive Officer
Gary Rinaldi	Chief Operating Officer and Chief Financial Officer
John Moore	Vice President and Chief Accounting Officer
Paul Scoff	Vice President and General Counsel
Justin Jenkins	Raymond James
Andrew Burd	JP Morgan
Mike Gyure	Janney Montgomery Scott

Sprague Resources (SRLP) 11 May 182018 Q1 Earnings call transcript