SRLP - Earnings call transcript Q3 2019

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to Sprague Resources LP Third Quarter 2019 Earnings Conference Call. At this time, all participants are in listen-only mode. After the speaker presentation, there will be a question-and-answer session. [Operator Instructions]

I would now like to hand the conference over to your speaker today, David Glendon, President and CEO. sir. ahead go Please

David Glendon

Good XXXX and conference Sonia. Resources to third quarter call. afternoon, you, welcome everyone Sprague Thank

Joining me General today Officer; and are David Long, Scoff, Vice our our President and Counsel. Paul Chief Financial

new obligation that statements date I'd like forward-looking or These not and information be which Sprague are statements reasonable of to expectations, any call on current believe will does statements. our some to based we events. to forward-looking include today's as reflect update listeners any remind to future of undertake today's

Actual differ the XX-Q, are differ list to cause may reports current XX-K refer significantly results could and because filings results XX-K, a uncertainties difficult to from and other of anticipated that of for SEC. Please which actual risks risk results factors, to with and predict. our our our review

both certain supplement describe to measures our GAAP of also business We our Relations found our section and financial our earnings which non-GAAP measures. Reconciliations website. available of these non-GAAP release, in the measures of in quarterly can Investor are be comparable using press

adjusted In total XXXX, EBITDA XX% discipline Adjusted the comparable and of year's million. to increases. quarter margin of a in of increase resulted Sprague nearly strong last $XX generated million, greater over of million a margin $XX gross than the was almost EBITDA XX% ratio $XX XXXX's third cost representing figure gross one-to-one

quarters, and each we've business acquisition versus nature customer seasonal encouraged results our seen fruit third second the of the Although we're bear in new the trend lower our efforts our generates particular, segments. improving three in by business In XXXX. operating of of results

efficiency with to new customers delivered refined leveraging transportation wholesale In our reap their on existing we're accounts by requirements, gaining collaborating assets gains. products,

solutions investment The speed pricing natural in our customer been coding account and greater creativity customer is accompanied process. growth. in volume requirements both and in additional for to has by technology gas, enabling responding productivity our In

contracts long-term Portland seen investments business conversions. materials with capital handling tankage also at in facilities and our Our new has Bronx

uptick Looking forward, curve. demand we're seeing reflected in the effects expected much forward of a XXXX in distillate and IMO tighter

I've our high-demand As contango either when proves the storage structure or logistics invaluable backwardation Sprague from benefit can generates noted expertise healthy incremental real in where in periods. value our past,

regarding We to credit. the reinstatement follow of continue also congressional action blenders the tax biodiesel

In infrastructure continued gas natural northeast expected commodity maintain markets prices in gas, permitting stay even as challenges in new are low. volatility to

Finally, per which general to owner the the of general to of Notably rights $X.XXXX we waive agreed the higher build for our quarter. units. incentive XXXX, unit previous Board the third partner to coverage Sprague's declared is continue of common its a quarter partner quarter of distribution on flat for the as the distribution

any long-term about support potential I'd hope concerns this description health. the and our reinforces dispels for business' sponsor's cuts

believe the in the broader and acknowledge of we that we While space, the market. management have governance GP, LP a MLP on we distinguishes compelling story in concerns the alignment Sprague interests the

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

David Long

increased by natural to handling a attributable margin or by $XXX.X the strength and to as quarterly were everyone. XX% million decrease in refined gross XXXX. increase of compared Sprague's materials products result in Dave, businesses, offset quarter in quarterly million you, Thank $X.X our afternoon, was The adjusted partially business. which and our good to third gas our

primarily third XX% million stockpiling materials with the million $XXX,XXX by third decreased by compared increased our and of boiler due expenses expenses or year. the as prior quarter $X.X X% in $XX.X fuel lower to EBITDA Sprague's associated adjusted quarter or to handling. Operating

XXXX. incentive in cost compensation by forward were reduction that early completed due year to primarily increases projected X%, or were realized initiatives partially in $XXX,XXX by increased which expenses accruals, SG&A modest offset

by increased Below cash taxes over or was for Sprague the EBITDA to million XX% a million primarily $X.X higher by due and in due $XXX,XXX of third of $X.X Maintenance rates. higher the line, recorded year-on-year XX% increased reflecting to third quarter borrowing year, CapEx projects. the cash million. which prior quarterly terminal-related of quarterly quarter, timing $X.X principally increase maintenance to interest $X.X the million, was several or $XXX,XXX while IT CapEx

of Given ratio quarter $XXX,XXX quarter, negative distribution the the in $X.X times permanent of leverage was Sprague's adjusted the EBITDA, December cash X.X third zero quarterly down by year-on-year from flow the times. increase a XX. times coverage to Sprague's for distributable generating At improved million end X.X at third

acquisition was end. at capacity capital borrowing our working lines While quarter $XXX million under and our

to With limited regard to to partners we $XXX EBITDA levels. at million million to $XXX XXXX of guidance, intend adjusted distributions current maintain continue to target year full and

the has distribution to Dave incentive agreed general mentioned, waive As the partner quarter. for rights its

million due now primarily Refined for by increased quarter, X% margins or at adjusted $XX.X to a sales of And Kildair blending discussion while for business the segments. in $X.X economics. to our given gross margin In million, increased XX% volume Products, distillates, strong higher by primarily

gross The gas while In primarily more $XXX,XXX Natural increases Gas, margin favorable conditions. given XX% volume increased quarter sales volumes or were for of valuation forward positions result new due of XX% stronger margins by adjusted while increased to natural by unit to customers, market the year-over-year, improved $X.X million.

than as lower in margin same the ago. from a was differences million than due lower timing $XX.X activities. resulted well Materials as paper this U.S.-based of period reductions In pulp in bulk our the gross deliveries third million, decrease to operations quarter Handling, half tariff-driven handling More year and adjusted $X.X occurred

by expiration customers. of due end which The from of Materials the was Handling partially May, two throughput adjusted a incremental handling gross crude also primarily gains offset margin the at Kildair declined, at contract to

I'd to the for open point, like this call questions. At

Operator

first comes Our question Jeremy Tonet Instructions] [Operator you. JPMorgan. Thank of from

now open. Your line is

Charlie Barber

you I outlook have one the wanted here. sits margins? Products. Hey, looking on Nice higher here you good pretty the the seems afternoon. for about just on This kind quarter distillates Pad And talk low Refined is where then here. marine Charlie on. to inventory quarter at first but Can ask specifically -- fuel secondly, of

the trying that think of present about next couple you Just what up for actually we to could quarters? see should especially show opportunities winter

David Glendon

Thanks Glendon. Dave for it's Charlie, questions. the Hey,

that's and In participation to terms heavy not able dynamics oil. saw both our which you're oil been XXXX starting an dramatic have we that in blending cause we we've stocks enter with as expect outlook, marine beyond. and you from do XXXX on. IMO in And and couple some right, turning Pad too and demand distillate of low nice see distillates The increased call some fuel conditions IMO they winter to fourth to noted on forward we to kind yet, are dislocations as are all-time period the gas the one, Kildair at absolutely and opportunities some distillate at tight capitalize dislocations, there QX but of been real the the stocks given emerging on quarter

tends our for we under think as opportunities experience conditions. those that present some has us really So logistics value to

we look those. So forward to capitalizing on

Charlie Barber

Okay, them? conditions How Gas. you bit year-over-year customer and conditions? great. the give improved benefited how And of was from the Natural little more market account a color can they of market just versus much on then on XX-XX. I'm growth performance weren't that And the you kind assuming

David Glendon

Yes.

more or couple some. the remarks, invested breakdown our real Natural terms, tool and in I quarter whether quarter, the XX-XX technology in I pricing one have invested exact our see volatility our and to We years. can't note the we So multiple with that not second we've of et We customers. my didn't -- would or don't swath Gas dramatic, a that. you -- the the I live this markets year ability did noted a other in new in the than something last we particularly little but is cetera it's I quote wider see it of on cash give in as in over to But bit a this uptick call seeing thing went just significantly took that different products business we're in in prepared

seen over immediate years. your of won't growth, from have an for sign to It's healthy as pickup which next them it period a year two a up. when account we we new typically pretty pickup contracting are starts couple so materializes not the that in to customers point -- months And

So we're see marketing organic to business. of the about Natural growth Gas our continuing in prospect pretty excited

Charlie Barber

me Great. IDR just the for waiver. last quarter-to-quarter. a And one recent on was I then believe it

that business of makes first quarter it when Is have sense being least towards through, that then up. reduction? directed probably given cash that excess the at seasonality next guess the to also And the that of Just frees quarter I XXXX?

David Glendon

So I'm pleased to for Paul to time Scoff, that call our the over to question. the Counsel first General answer turn Charlie

Paul Scoff

a the Charlie. waiver IDR Thanks be basis. determination is on quarterly on going The to

that determination And for quarter do to see move wants I so. how are to we things progressing to make the take it's think opportunity and sponsor forward. as available them our each

Charlie Barber

Okay.

David Glendon

the And more it determination. I'd quarterly that that that on again, mean Charlie. I the and just coverage look at have this But to who's to add we a ratio third we know a obviously very quarters. and is challenged second sponsor supportive believe going generally basis make in you

which I you've I'm which sure repaid. think X-K those seen the the specifies ultimately be could conditions under

Charlie Barber

for it me. Great, thanks. That’s

Operator

Jenkins our from on is comes you. phone And Raymond please question Justin if Thank mute with your next James. unmute. And Justin

Justin Jenkins

make process maybe last everyone. process that looking IDR the I waived quarter? in permanent a little from more the on that IDRs on of about the And thought there then up on Any maybe of question following recover just the Sorry can to the situation? guess a waivers. GP terms this how color

David Glendon

Yes.

we at time some industry transaction in message Justin expect lines. think and look So on a heard - the along an that certainly eliminations -- IDR the that we I engage at understand those has appropriate

make yields the is But at it candidly math given hard to the our common on now units work right current time. the

term think I we that in dynamics units us anything doing LP immediate permit the you saw would in the unless, there see won't better So that.

I said we'd question a an about issue know don't and was the in it address So there on that them? second question we've I became your potential so do terms. if -- answered again it specific when to Justin constructive think always repay

Justin Jenkins

wavier Does XQ? XQ here. distribution partner more guess specifically been payment I the general Or ability or that waived? that's the there permanent that chance No. the on waiver to have for a the recover is from

David Glendon

Okay.

distribution they our would X.Xx. under north opportunity conditions on recover our under coverage effect repayment be do giving of the for basis that coverage look have to back the which So a

Justin Jenkins

it. Got

Okay. the That's and the terms is the outcomes trying then a in here weather huge me to here. know I helpful. any but a range outcome, on million role second up spread in final $XX play of for guidance... guidance. the in got And EBITDA thoughts We've narrow that seasonality question of

David Long

Justin. question Fair No.

what are can two do uncertainty tax quarter and of practical credit the it's factors. and far secondly, performance reality biodiesel see achieved first the One means obviously the in we those be bigger ranges that think some wide I of very fourth drivers is the the quarter in historically the But quarters. our on

at has time. to wide point band guidance understandably this be

Operator

does you. conclude now you This conference ladies and concludes question-and-answer Thank disconnect. our session. gentlemen for call And participating. this and may you today's Thank

Sprague Resources (SRLP) 7 Nov 192019 Q3 Earnings call transcript