Sprague Resources (SRLP) 4 Mar 212020 Q4 Earnings call transcript

Ladies and gentlemen, thank you for standing by and welcome to the Sprague Resources LP Fourth Quarter 2020 Earnings Conference Call. At this time, all participant lines are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference may be recorded. [Operator Instructions] I would now like to hand the conference over to your speaker today, David Glendon, President and CEO. ahead. go Please

Good fourth Sara. and to welcome Thank XXXX afternoon conference Resources’ quarter call. Sprague you, everyone

any to Joining does me based forward-looking review be results events. Counsel. of today’s difficult today and list are statements. believe our any of David differ Long, to our to XX-K, include uncertainties of will information Actual current to not results reflect our results a actual remind reports, that and obligation current XX-Q, are statements new forward-looking risks risk President date, expectations, today’s filings from to we anticipated or call Paul statements to Chief factors, may and of to that our because refer other Vice and our for update like future predict. reasonable which Please differ General and are undertake as I'd SEC. These with could listeners Sprague some on significantly XX-K Scoff, our Financial Officer; and which the cause

a can press the of both our quarterly describe Relations our maintaining Reconciliations financial supplement to measures. the our GAAP measures safe our available today's to certain comparable and earnings website. non-GAAP services also and business outstanding providing Investor measures section environment, which fuel non-GAAP in using the of I'd are We be these recognizing and and our healthy found start in call efforts release, throughout by of like to company by essential customers. co-workers while

performance enable results. to while safety metrics confident due on has avoided isolated HSE& strong industry to in delivering virtually record, attention to improvements any employees safety commitment will among we protocols. seen our locations, to increased all cases as have While I'm have with COVID-XX This we one stringent health and maintain us impressive traditional track well-being yielded another's transmission various safety standards. well that our above

tenets results, our some I'd in model. of remind on review developments and detailed a our provides XXXX commentary core offer like David Before of the business to of listeners

generated the baseline Our or in significant commercial on margin we advantage has On of when margin assets the and often logistical our or capabilities. base of business products uplift a capture market factors handling distribution to market industrial top Refined customers margin, the essential consistent optimization Northeast. sale translates to margin leverage and colder realization Products, assets. weather-related gas, franchise. structure opportunities stress a logistical of us storage cash natural expensive In or our value contango materializes generate when this extensive given capture to In demand volatility, cold enables the customer market our and weather environmental higher

Our underpinned Materials by has business, and healthy hand, readable the extremely on been minimums. contracts other long-term Handling

conditions potential much curtailed throughout to well persisted activity northeast commercial fuels the and transportation gas, an substantial gains, the in assets our XXXX place in as the that COVID-related structure outsized considerable Our in as community factors than limit results demand contango warmer for in the was effort the generated just weakness contribution an natural XXXX spread. as offset these XXXX. storage as of most for of one highlight more from with This

Our to demand shifting supply on and did of job caused by an the logistics virus. capitalizing opportunities, while patterns teams outstanding responding

gas the asset evolving alternatives the facility. sale also we're on there's for the the expanding that history, see energy Our leader XXXX. Sprague whether repurchasing opportunities pressure team that better base, and been confident of recently sale turned closed coming will fuel the or those real we clean current as trends the the position of expanding business the increased sale and renewable negative believe markets. our costs of the to focus the successfully natural dynamics. rationalize once our continue. opportunities evolve, at Throughout Mount And attractive consummated exhibit has signed level, biodiesel drop-in diesel, source facility up the blends, they our commercial commodity electric into York agreement as efficacy New Sprague form in State social heat carbon for a energy dramatically heat Vernon, navigate and to and conversion locations renewable and to portfolio a to of end to in given the years in fuels XXXX of of price, The our fuels in offers from fuels higher was of At distribute offer demand I'm that introduction markets. offerings. functionality. also climates We Biofine production. marketing an some liquid far a potential served XXXX, as the it ramp Clearly, renewable offsets, in asset it's in conditions, committed at capital customers and intensity with our for terminal needs patterns or to output attention expect pumps, Northeast additional for XXX-year complementing renewable exclusively their carbon greater the And both the consumers long for is in on estate. Federal of embedded political, across successfully we comes liquid versus carbon lower We operational,

our to live with this to terminal. go innovate installation on tank of which at solar that facility, XXX% our needs provide power continue at and our an is We expect Albany to quarter program expected

projects. Northeastern components Maine strong keep facility, our offshore with our is associated with at up in Finally, windmill position expanding wind promise the demand to order handling in Searsport, the of

development initiatives While in XXXX that return in innovation these our investment will drive the fuel growth and productivity opportunities. new steady profile a each and and our customers, for Sprague it's exciting business core through margin prospects offer compelling clean

in the funded win bidder into representing the team XXXX. Gas completed in Products accounts successful by contango opportunity XX that the recently other expansion incremental leveraging accounts Natural oil offset the At continues storage million gallons. storage excuse business. growth terminal, We Our the sales over exploration new mostly by new our in Searsport and team, to was handling third-party me, on contract Kildair, crude heating a Refined our major XXXX, and in return of facility in of XXXX was XX

completed plastics contracts the we fourth started of conversion in the Searsport is of which Bronx our flat in our asphalt partner to Board at of January, the bailed storage unit quarter. handling tanks Handling and In per previous long-term the XXXX, the the declared $X.XXXX to Finally, quarter Material for general distribution of business.

call our results. year like the I'd of over Now, to quarter to Dave? and Long fourth full detailed review turn for Dave

pleased and financial XXXX. Thank results operating you, Sprague's Dave to and good afternoon, for I'm report everyone.

Sprague results, headwinds weather warmer COVID-XX mentioned, associated strong deliver able Dave than was to the As average with despite conditions pandemic. and

business in efficiencies Additionally, in XXXX, we initiatives. made through higher management cost driving targeted progress process our

$XX.X respectively, higher as decreased X.X and times, provides incentive XX the detail million fourth million of business, was a by X% of let decrease in full or on line, leverage full expenses and of our $XX we million the the Material and by XXXX for X% employee-related or attributable driven while declined Now, permanent million primarily distribution million million the employee-related the to prior was and capital offset results shortly. which the or accretion or the $XX.X the X% utilities, COVID-XX, full applications. a decreased and by million SG&A for ratio year businesses. CapEx million, and rates. EBITDA to million, EBITDA offset in increased and our a capacity expenses, the $XXX.X quarter quarter quarterly and borrowing our capacity for higher quarter, primarily one Refined Sprague's Products Maintenance included principally by natural for by for to million, which trailing Below $XX.X year boiler to businesses in these net XX%. by to $X.X or which for or our corporate fourth for decreased At by below to XXXX, Expansion at $XX.X to results impact X% partially respectively, borrowing or Sprague's full EBITDA to $X.X and to respectively, $X cash XX% X% million year below XXst. fourth and expense, fourth $X decline increased other and $X.X million. working tax and $X.X for by due to provide to basis million for review to quarter operating year-over-year XX% million. while near-term in or margin fourth quarter quarter December $XX.X year, XX% docks, million, interest full items one in of fourth our each $X.X XX% was year were projects increased Handling $X.X Operating million The by million $X on were CapEx $X.X $X.X cash annual Sprague's increase the finance $X.X ample adjusted the decreased million. expenses. supportive year growth gas by quarter adjusted million end due or or me by borrowing at were to margin gross fourth decreased more and tanks, million and X% to by to of while or acquisition for by coverage IT million decreased higher dynamics to higher million to slightly I'll while $X.X Sprague's declines expenses. our stores reduction needs. the Distributable overhead partially and $XX.X X% gross $XX.X cash $XX,XXX X% the was related decrease and flow respectively Sprague's respectively. the of $X.X in underlying results. adjusted compared the the full year times by year of year-over-year million decreased storage and our XX% Sprague's and quarter expense annual was our year-over-year fuel $XXX to quarterly compensation, $X.X to the quarter million. $X.X the million the lower upgrade $XXX.X XX%, and by lines under XX% was result by year adjusted by The full or million believe expenses $X.X quarter million, million, net $XX.X times million fourth months

a year million adjusted terms is million. XXXX to $XXX $XXX EBITDA of Sprague of In full guidance, targeting

business quarter margin by or million. our decreased $X.X fourth of In discussion Sprague's million for Refined of Now, $XX.X X% Products, segments. adjusted gross

is economic billion. decreased decline $XXX.X by our our million while $XX.X [ph] million $XX.X for quarter, For in quarter pandemic, associated or $XX.X and million for the $XX.X X% volumes XX% while for by declines hospitality Despite gross believe million by sector, optimization and a with in results than gas fourth and given year-over-year full were price X% year-over-year in slowdown driver supply limited particularly conditions dynamics, decreased its The or further period the warmer year year X% higher higher the natural to $X.X the or quarter XX% these million inventory some margin while $X.X Sprague's was weather, million of weakened the well-positioned $XX.X million. than Sales million. volume In by business supported business gross offset full the improved while market market up Sprague's purchase, a paper in the $X.X million $XXX.X margin and Handling, given itself results continued from the expiration by by to the market demand XX% which or volatile ago, that customers. the XXXX, This to Material modestly year primarily given or May primary the X% is $X increased weather conditions improve, $XX.X the warmer XXXX, million. including was the growth end to crude of our business partially a year, questions. was additional and as the -- environment. decrease full with decreased associated for and offset rail by through weak customer The Maine, $XX.X million, gross fourth million it $XXX.X handling challenges XXXX. structure XXXX or to reflect million year windmill quarter, opportunities, supply base. to natural minus COVID-XX which adjusted declined activity decreased industry XX%, low XX% In a several additional the handling full At same a Kildair down due year was present in base adjusted the gas, million which year-over-year attributable COVID-XX economic or environment, slowdown. productivity respectively. was to both point, of agreement the by U.S. of of by in the Volumes fourth operation early store, this in the decline in $XX.X I'd and at a surplus with like margin hedge call more decreased adjusted components we pulp for open to and for given

[Operator Thank Our from of with Instructions] RGO Phillips you. question the Andrew first Capital. comes line

Your is open. now line

Hi.

Just a of was the dollars? your in couple What end quick inventory the questions. Q at

One the end one million. moment. just second, XXXX $XXX.X of at XXst, were Inventories December

degree Okay. QX? days And heating the the in

on have the warmer to us the QX year Not degree right when the back now. last had warmer a we was front day previous warmer normal But you but we'd modestly. calculation, specific to than year. and sure than we than in on normal November slightly Again, get it cold in have was that the of exactly

in a England just sort other Material it Handling import of And about call loan facility or Material New large the Sure. there the Searsport, are is question -- that places? the Handling, windmill

initiatives but only being aiming efforts are a there they're services support current are where there, and wind any of offloaded There offshore today. those -- the aren't stored. components current windmill Massachusetts the active That's to providing to terminals number location in

it now, word, and So, would to in train--? offshore Cape it of for windmill drive reimport XX, build to Cod, you'd Maine put of as on lack better have it -- instance, or if a you an you for down were right facility, of off

wouldn't. you No,

-- that you So, are it’s up be expected the Waters. built the ones to Massachusetts in

that hopes in services provided Massachusetts certainly any Maine constructed. that we activities of would participate by those facilities be it's think Gulf will I are in Massachusetts,

Maine, necessarily today have Massachusetts the not around the in initiatives. efforts the our efforts of So, wind oriented supporting been Gulf

Okay. last And question. one

quite offsets You understand business; mentioned in your don't I in remarks, your embedded carbon the what--

in Yes, offsets carbon just embedded latter gas natural customers -- just purchase as of so XXXX, part Refined we purchase their of the for offering ability part purchase. their Product the started either or to

for offsets. a who utilize wish just customers So, making one-step to carbon transaction

in customer were So, and bought you would So, I somewhere? trees if planted a would don’t be, offsets, is I that supporting mean, know, being turn that--

you do to but an for Yes, you, we were established product essentially standard we you make know program, seamless -- handling offsets, be they're as to purchase. to -- through certified of part if go industry we'd What go transaction you where offset exactly. the wishing you transaction. go ahead. We the we'd the that the could it to emissions of But

No, that's fine.

So, the you to third-party. go

Yes.

is curve market curve I typically heat consistent, you the dated the the say, EBITDA historically, now, you and that believe curve And is is assuming as slightly When backward guidance if I patterns, but range market guidance have pattern or just weather or -- the backward your or don't that for curve better guidance a correct dated terminology, contango normal slightly and with normal contango? forward flat you say the -- is all. the normal -- the is

varies that today It's characterize very what usually repeat us obviously very in within the of in year. got a we in opportunities see not contango. periods I'd XXXX front is of backwardation that slight it and there's contango, there's mild But months a of you mild And as period which which we slight a months Yes, normal in few backwardation year, curve. emerged to what a few -- a contango get certainly or of expect do earlier the considerably.

the today. pretty curve it's flat forward in a So, aggregate,

Okay.

some was The in unusual repurposing what I sold that of and that last was those million, So, was assets of you value question that? $X one comes assets? think QX around solely to mind. Sorry, book gain, to that due the

value so. book was of The $X the about or million assets

complete we as So -- sale. had with needed associated a and we to then obligations and that remediation some expenses some part of cleanup

And to are not opportunities dissimilar there you that one? out think there other

near-term. got currently, in to at in one working we're complete we've and the the several things Yes, -- on least in we're expect

time. All for Thanks right. Thanks. your

welcome. You're

Thank you. [Operator Instructions]

thank There your no conference for Ladies this and further gentlemen, are concludes you We participation. call. today's questions.

day. now You disconnect. great may Everyone, have a