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8-K - 8-K - Sprague Resources LP | form8k4q2016invupdate.htm |
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Sprague Resources LP
Quarterly Investor Update
March 10, 2017
2
Safe Harbor
Quarterly Investor Update: This presentation contains unaudited quarterly results which should not be taken as an indication of the results of
operations to be reported for any subsequent period or for the full fiscal year.
Forward-Looking Statements: Some of the statements in this presentation may contain forward-looking statements within the meaning of the
safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such
as “may,” “assume,” “forecast,” “position,” “predict,” “strategy,” “expect,” “intend,” “plan,” “estimate,” “anticipate,” “believe,” “will,” “project,” “budget,”
“potential,” or “continue,” and similar references to future periods. However, the absence of these words does not mean that a statement is not
forward looking. Descriptions of our objectives, goals, plans, projections, estimates, anticipated capital expenditures, cost savings, strategy for
customer retention and strategy for risk management and other statements of future events or conditions are also forward looking statements.
Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based only on our current beliefs,
expectations and assumptions regarding the future of our business, future plans and strategies, projections, anticipated events and trends, the
economy and other future conditions. Our actual future results and financial condition may differ materially from those indicated in the 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. Therefore, you should not rely on any of these forward-looking statements. Important factors that could
cause our actual results and financial condition to differ materially from those indicated in the forward-looking statements include, but are not
limited to, increased competition for our products or services; changes in supply or demand for our products; changes in operating conditions and
costs; changes in the level of environmental remediation spending; potential equipment malfunction; potential labor issues; the legislative or
regulatory environment; terminal construction repair/delays; nonperformance by major customers or suppliers; litigation, and political, economic
and capital market conditions, including the impact of potential terrorist acts and international hostilities. For a more detailed description of these
and other risks and uncertainties, please see the “Risk Factors” section in our most recent Annual Report on Form 10-K and/or most recent 10-Q,
form 8-K and other items filed with the U.S. Securities and Exchange Commission and also available in the “Investor Relations” section of our
website www.spragueenergy.com.
Any forward-looking statement made by us in this presentation is based only on information currently available to us and speaks only as of the
date of this presentation. We undertake no obligation to publicly update any forward-looking statement, whether written or oral, that may be made
from time to time, whether as a result of new information, future developments or otherwise.
Non-GAAP Measures: In this presentation, and in statements we make in connection with this presentation, we refer to certain historical and
forward looking financial measures not prepared in accordance with U.S. generally accepted accounting principles, or GAAP. Non-GAAP
measures include adjusted gross margin, EBITDA, adjusted EBITDA, distributable cash flow, coverage ratio, permanent leverage ratio, liquidity,
maintenance capex and expansion capex. For more information on the non-GAAP measures used in this presentation, including definitions and
reconciliations with comparable GAAP financial measures, please refer to the Non-GAAP Measures in the Appendix at the end of this
presentation.
3
Sprague Overview
Sprague was founded in 1870 and has grown to become one of the largest suppliers of energy and
materials handling services to commercial and industrial customers in the northeast United States and
Quebec today
Sprague’s business is diverse and unique in
the MLP space(1) –
• Control 19 waterborne terminals with 14.1 million
barrels of refined product storage, annually
marketing 1.4 billion gallons
• Market natural gas in 13 states, supplying 62 Bcf of
gas annually
• Handle more than 2.5 million short tons and 276
million gallons annually of third-party bulk and liquid
materials across our docks in 13 terminals
Sprague seeks to deliver increasing distributions to investors by growing distributable cash flow per unit
through four primary business strategies:
• Making accretive terminal and marketing/distribution business acquisitions
• Achieving organic growth in existing business segments
• Limiting exposure to commodity price volatility and credit risk
• Maintaining operational excellence with safe, cost-effective operations and environmental stewardship
(1) As of December 31, 2016 on TTM basis
4
Key Considerations
Outstanding operating performance has resulted in 1.6x coverage on TTM basis(1)
Strong balance sheet, permanent leverage of 2.3x TTM Adjusted EBITDA(1)
Year over year quarterly distribution growth of 12%
Supply teams are experts in unique Northeast logistical challenges
Product and service innovations have generated incremental margins
Long history of safe, cost-effective operations and environmental stewardship
Materials Handling business is 100% fee-based, with typically multi-year contracts
More than 50% of Refined Product sales are made under contract with customers
Opportunity to enhance Natural Gas contract base margins by optimization activities
Strong track record of successful acquisitions
Recent acquisitions offer opportunity to leverage legacy skills and investments
Executing on organic growth projects at compelling effective multiples
Terminaling, Logistics
and Marketing
Expertise
Contract-Based
Income with Upside
Potential
Financial Strength
Visible Growth
Prospects
(1) As of December 31, 2016. See Appendix for Non-GAAP reconciliations
5
Investing to Drive
Growth
2010 to Present
Sprague’s History of Growth
• Acquired leading
transportation fuels supplier
in NYC metro area and
expanded into delivered
fuels business
• Invested in capabilities to
offer material handling
services in paper/forest
products industry
• First supplier to offer
biodiesel products in the
Northeast
• Additional natural gas
acquisitions propelled
down-market expansion to
smaller commercial
customers
• Purchase of Kildair terminal
on St. Lawrence river
terminal expands footprint
into Canada
• Transitioned product
offering to residual fuel
oils, modifying coal
terminals to handle
new liquids
• Maintained reputation
as leading industrial
energy supplier
through multi-source
Btu product offering
• Sprague family sold
business to Royal
Dutch Shell in 1970
• Axel Johnson Inc.
purchased Sprague in
1972
• Expanded into
distillate fuels and
serving wholesale
segment
• Offered customers
access to gasoline
• Entered natural gas
marketing business,
once again serving
industrial account base
with new Btu source
• Leveraged refined
product terminals for
new materials handling
business in coal,
gypsum, and road salt
• Expanded materials
handling business to
include liquids such as
asphalt
• Founded in Boston in
1870 by CH Sprague
• Major coal supplier into
the Northeast US,
helping to fuel
America’s industrial
revolution
• Fleet of steamship
vessels allowed
worldwide coal
procurement and
distribution network
• Coal supplier to US
Fleet in WWI and
WWII
Fueling America’s
Growth
1870 to 1950
Evolving to Meet
New Fuel Needs
1950 to 1985
Expanding the
Product Offering
1985 to 2000
New Geographies
and Capabilities
2000 to 2010
• Refined products
growth powered by
expanded third-party
terminal presence and
investments in Real-
Time® pricing platform
• Initial Public Offering in
late 2013
• Geographical footprint
expands with key
terminal purchases in
NYC, Western MA and
Providence, RI
• Natural gas
acquisitions allow
Sprague to serve
smaller volume
commercial accounts
across a wider footprint
6
Sprague Acquisition History
2001 2003 2005 2007 2009 2011 2013 2015 2017
Mt. Vernon, NY
$1.1 mm
New Bedford, MA
$12.1 mm
Portland, ME
$5.8 mm
Sprague has invested more than $500 million in acquisition growth since 2000 primarily through
non-auction processes that leverage its network of relationships
Everett, MA
$0.7mm
RAD Energy
$23.6 mm
Searsport, ME
(expansion)
$0.5 mm
Houston Energy Services
$6.7 mm
Refined Products Natural Gas Materials Handling
Kildair
(expansion)
$4.7 mm
Bridgeport, CT
$20.7 mm
Kildair (50%)
$71.9 mm
Kildair (50%)
$27.5 mm
Albany, NY
(expansion)
$3.4 mm
Metromedia Energy
$22.0 mm
Bronx, NY and Castle Oil
$56.0 mm
Hess Commercial
$0
Kildair
(dropdown)
$175 mm
Note: Amounts shown exclude consideration paid for working capital. Sprague signed long term operating leases for control of key refined products terminal positions in the
Providence, RI and New Haven, CT markets in April and July of 2014 and subsequently acquired the Providence, RI Capital terminal in February 2017.
Santa Buckley
NG
$17.5 mm
Global NG
$17.3 mm
L.E. Belcher
$20 mm
Capital
$23 mm
7
Refined Products Business
Exploration / Production Refining Transportation
Storage
Commercial / Industrial
Example Customers
• Jobbers/Distributors
• Municipalities
• Manufacturers
• Industrial Users
• Transit Authorities
• Property Managers
Wholesale
Activities
Sprague purchases, transports, stores and markets distillates, unbranded gasoline, residual fuel oil
and asphalt to wholesalers, resellers and commercial customers. Of our total volume sold in 2016,
distillate sales accounted for 73%, gasoline accounted for 13% and residual fuel oil and asphalt
accounted for approximately 14%.
8
Natural Gas Business
• Power Generation
• Manufacturing
• Retail
• Education
• Government
• Commercial Real Estate
• Health Care
Exploration / Production Processing
Transportation
Storage
Local Distribution (Utility) Example Customers
• Schedules delivery on
major pipelines
• Delivers gas to utilities and/or
customers directly
• Bills customers for supply
• Provides value-added products
and services
Activities
Sprague sells natural gas and related delivery services to industrial, commercial, institutional and
government customers.
9
Materials Handling Business
Offload
Wood Pulp
Offload
Windmill
Components
Store
Asphalt
Rail, Truck, Ship
Store
Newsprint
Source
New England,
Canada
Source
South America, Europe,
Asia, Canada
Customers
Domestic Paper
Mills
Transport
Ship
Transport
Export to
Final
Destination
Load
Crude Oil
Load
Gypsum
Transport
Activity Examples INBOUND
OUTBOUND
Sprague utilizes its waterfront terminal network to offload, store and prepare for delivery a wide variety
of liquid, bulk and break bulk materials on long-term, predominantly fee-based contracts.
10
Heating Oil
43%
Diesel Fuel
28%
Residual Fuel
and Asphalt
14%
Gasoline
13%
Other
Distil lates 2%
Adjusted Gross Margin(1) for Year Ended 2016: $259 million
Refined Products Volume by
Product Segment: 2016
Materials Handled by Category: 2016
Refined Products
55%
Natural Gas
24%
Materials Handling
18%
Earnings Diversity
Other
3%
Liquid Bulk:
- Crude oil
- Refined products
- Asphalt
- Clay slurry
Dry Bulk:
- Salt
- Petroleum coke
- Gypsum
- Coal
Break Bulk:
- Wood pulp
- Paper
Heavy Lift:
- Windmill components
- Generators
(1) See Appendix for Non-GAAP reconciliations
11
Terminal Network
(1) As of December 31, 2016
(2) Does not include ~2.1 million barrels of storage capacity (48 storage tanks) currently out of service and not necessary for current operations
(3) Includes the L.E. Belcher acquisition which closed on February 1, 2017
Storage and Marketing Metrics (1)
Storage Tanks 207
Tank Capacity (2) 14.1 MMbbl
~ TTM Volume 33 million barrels
(3)
12
$0.08
$0.06
$0.08
$0.09
$0.10 $0.10
$0.00
$0.02
$0.04
$0.06
$0.08
$0.10
$0.12
2011 2012 2013 2014 2015 2016
Refined Products Advantages
• One of the largest independent wholesale distributors of refined
products in the Northeast US and Canada
• Access to marine, rail and truck supply sources
• Multiple storage tanks and automated truck loading equipment,
blending and fuel additive injection systems capable of
producing specialized fuel and asphalt
• Long history of safe, cost-effective operations and
environmental stewardship
Asset Network
Marketing Strength
• Logistics and supply expertise keep terminals supplied in the
most adverse conditions, earning reputation for reliability
• Diverse product mix of heating oil, diesel fuel, unbranded
gasoline, residual fuel oil, asphalt, kerosene, jet fuel and
biofuels
• Broad customer portfolio of wholesalers, distributors, federal
and state agencies, municipalities, regional transit authorities,
industrial companies, real estate managers, educational
institutions and marine fuel consumers
• Sprague Real-Time® pricing platform generating high
percentage of contracted customer sales
• Customized fuel management services including onsite bulk
fuel supply construction and fleet card payment capabilities
• Convenient access to customer service personnel, sales
representatives and online account information
Refined Products Adjusted Unit Margin ($/gallon)(1)
Representative “Throughput Model” Margin (2)
Sprague’s large and
strategically located physical
system supports a marketing
business model built on supply
and logistics expertise,
coupled with product and
service innovations, which we
believe generates superior
returns on the asset base over
time as compared to a
traditional throughput model
(2) Source: Sprague
(1) See Appendix for Non-GAAP reconciliations
13
Refined Products – Acquisition Growth
L.E. Belcher asset purchase completed February 1, 2017
• Expands Sprague’s Northeast footprint
• Secures a dominant wholesale and commercial presence in Western, MA
• Adds 295,000 barrels of pipeline supplied storage, the largest distillate position in the I-91 corridor
• Purchase price of $20 million(2), expected to generate $3 to $4 million to adjusted EBITDA(1) and be
accretive to unitholders
Capital Terminal purchase completed February 10, 2017
• Secures access to a strategic terminal location in East Providence previously leased by Sprague
• 1 million barrels of deep water storage
• Total investment of $11 million converts 500,000 barrels of storage to gasoline and enables optimization
of distillate storage at our existing Providence terminal
• Expands gasoline throughput and Materials Handling business, increasing ratable cash flow
• Purchase price of $23 million(2), expected to add $6 million to adjusted EBITDA(1) and be accretive to
unitholders
(1) See Appendix for Non-GAAP reconciliations
(2) Excludes consideration paid for working capital
14
Terms
• On 2/1/2017, Sprague completed the purchase the Springfield, MA refined product terminal assets and associated
wholesale/commercial fuels businesses of Leonard E. Belcher, Incorporated.
• Purchase price of $20 million(2) in cash, funded with cash on hand and credit facility borrowings
Asset overview
• Two distillate terminals and one distillate storage facility in Springfield, MA with 295,000 barrels of combined capacity
• Largest distillate storage capacity in key I-91 corridor market
• Pipeline supplied terminals from New Haven harbor, offering opportunity to leverage Sprague’s logistics expertise
• Wholesale and commercial businesses will extend and strengthen Sprague brand in core Northeast market through
proprietary distillate marketing opportunities
• Assets and associated businesses expected to generate approximately $3 to $4 million in adjusted EBITDA(1) annually
L.E. Belcher Terminal - Refined Products
(1) See Appendix for Non-GAAP reconciliations
(2) Excludes consideration paid for working capital
15
L.E. Belcher Extends Sprague Inland
L.E. Belcher Assets
• 295,000 barrels of distillate storage in Springfield, MA
• Strongest distillate terminal position in western MA
market
• Supplied via pipeline from deep water New Haven, CT
• Wholesale/Commercial fuels business deepens
Sprague presence in core New England market
(1) After including the L.E. Belcher acquisition which closed on February 1, 2017
20
16
Capital Terminal - Refined Products / Materials Handling
Terms
• On 2/10/2017, Sprague completed the purchase the East Providence, RI refined product terminal asset of Capital Terminal
Company
• Purchase price of $23 million(2) in cash, funded with cash on hand and credit facility borrowings
Asset overview and growth capital investments
• East Providence, RI terminal – 1 million barrels of deep water distillate storage
• $8 million investment will convert 500,000 barrels of East Providence storage to gasoline and ethanol service
• Investment backed by long term gasoline storage and handling agreement with multi-national branded supplier
• Ratable fee for service contract with minimum guarantees
• $3 million Providence terminal investment to optimize distillate storage and expand materials handling capabilities
• Transaction and associated expansion capital investments expected to generate $6 million in adjusted EBITDA(1) annually
as minimum handling volumes increase over the first five years
(1) See Appendix for Non-GAAP reconciliations
(2) Excludes consideration paid for working capital
17
Sprague’s Enhanced Asset Base in Providence
Providence
• 500,000 barrels of storage
• Proprietary distillate marketing
• Liquid bulk materials handling services
• $3 million expansion capex investment planned for
2017
• Investment optimizes distillate storage in Providence
market and allows expanded materials handling
service at terminal
East Providence
• 1 million barrels of storage capacity
• $8 million expansion capex investment planned for
2017
• Upgrading half of storage capacity to gasoline and
ethanol storage service
• Investment backed by long term gasoline storage
and handling agreement with multi-national
branded supplier
18
$0.45
$0.54
$0.78
$1.02
$0.90
$1.01
$0.00
$0.20
$0.40
$0.60
$0.80
$1.00
$1.20
2011 2012 2013 2014 2015 2016
Natural Gas Advantages
• Sizeable market presence of approximately 15,000 commercial
and industrial service locations throughout the Northeast and
Mid-Atlantic states
• Diverse portfolio of industrial customers in the pulp and paper,
chemical, pharmaceutical and metal sectors. Commercial
customer examples include hospitals, universities,
municipalities, government agencies, apartment buildings and
retail stores of varying size
• Wide range of pricing options available to meet various
customer budget and payment needs, unlike utility providers
• Convenient access to customer service personnel, sales
representatives and online account information
• Dual-fuel capabilities (gas or oil) during periods of price
arbitrage or supply dislocations
• Electricity brokerage platform rounds out the customer offering
to include liquid fuel, natural gas and power supply
Marketing Strength
Supply and Scheduling Expertise
• All gas supply and scheduling to customer is coordinated by
Sprague employees with deep local market knowledge
• Portfolio of supply contracts, pipeline transportation capacity
leases, storage leases and other physical delivery services
over various terms on all major pipeline systems into Sprague’s
footprint provide guaranteed supply for customers
• Supply portfolio flexibility and diversity offers arbitrage
opportunities for margin expansion above base contract levels
Sprague believes a
marketing model built on
supply and logistics
expertise, coupled with
product and service
innovations, generate
superior returns on the
asset base over time as
compared to wholesale
supply services
Natural Gas Adjusted Unit Margin ($/MMBtu)(1)
Representative Wholesale Supply Services Margin (2)
(2) Source: Sprague
(1) See Appendix for Non-GAAP reconciliations
19
Natural Gas Service Area
Sprague transportation rights:
(1) As of Dec 31, 2016
Supply and Marketing Metrics
(1)
Pipelines 18
States/Utilities 13/42
~ TTM MMBtus 61,732,000
~ Customer Locations 15,000
20
Natural Gas – Acquisition Growth
Terms
• On 2/1/2017, Sprague completed the purchase of the natural gas marketing and electricity brokering business assets of
Global Partners LP (NYSE: GLP)
• $17.3 million(2) total cash purchase price, funded with cash on hand and credit facility borrowings
Assets overview
• Global’s natural gas and electricity businesses consist of supply agreements to approximately 4,000 commercial, industrial,
municipal and institutional customer locations across six states (NY, NJ, MA, RI, NH, ME) within Sprague’s current footprint
• Acquired portfolio of customer supply contracts represents approximately 8 Bcf of annual natural gas demand
• Electricity brokerage contracts represent nearly 1 billion kWh of annual demand
• Deepens Sprague’s penetration of core market footprint and customer base
• Leverages Sprague’s gas supply and scheduling expertise, offering more opportunities for improved economics through
optimization
• Expected annual adjusted EBITDA(1) run rate of $3 million
• Purchase financed through existing acquisition facility liquidity
(1) See Appendix for Non-GAAP reconciliations
(2) Excludes consideration paid for working capital
21
Sprague’s Strengthened Natural Gas Footprint
Key transaction considerations
• Purchase continues to build scale for Sprague’s natural gas and electricity
business in existing New England footprint
• Transaction leverages Sprague’s existing marketing, supply and back office
investments
• Opportunity to sell liquid fuels to customers with dual-fuel capabilities
Acquired portfolio statistics
• 4,000 natural gas and electricity
customer locations
• 8 Bcf of annual gas demand
• 1 billion kWh of annual electricity
brokerage
• New York, New Jersey,
Massachusetts, Rhode Island, New
Hampshire, Maine
22
Materials Handling Advantages
Sprague’s materials
handling business has
historically produced
steady fee-based cash
flows backed by long term
contracts, leveraging
existing refined products
terminals and workforce
Materials Handling Adjusted Gross Margin
(1)
($ in millions)
• Network of waterfront terminals from New York to New England
and Quebec, offering customers unparalleled import/export
access to the densely populated Northeast corridor, Great
Lakes and St. Lawrence Seaway
• Liquid storage capacity for crude oil, refined products, asphalt
and other industrial liquids. Outdoor laydown space (pad
storage) for bulk aggregates and large construction project
cargo. Indoor warehouse capacity for break bulk materials
• Intermodal access to terminals by ocean vessels, rail and truck.
Crude handling capability via direct access to CN railroad
Premier Asset Locations(2)
Leveraged Workforce and Capabilities
• Ten terminals capable of handling both liquid petroleum
products in service to the refined products business as well as
providing third-party materials handling services
• Diverse set of services offered including ship handling, crane
operations, pile building, warehousing, scaling and potential
transportation to the final customer
• Long history of safe, cost-effective operations and
environmental stewardship
$28.4
$32.3
$28.4
$37.8
$45.6
$45.7
$0
$5
$10
$15
$20
$25
$30
$35
$40
$45
$50
2011 2012 2013 2014 2015 2016
(1) See Appendix for Non-GAAP reconciliations
(2) Refer to Terminal Network slide for additional details
23
Liquid Finger
Dock
Rail Transfer Pad
Nacelles
Road Salt
Pads
Clay Slurry
Rail connection to CP,
CMQ and Pan Am
Liquid
Finger
Dock
Dry Bulk Dock
Food Grade
Warehouses
Available for Development
Blades
Hopper
Coal /
Petcoke Third Party
Tanks
Third Party
Tanks
Storage for Sprague or Third-Party Use
Summary Specifications
Tank Shell Capacity
17 Tanks
1,140,700 Bbls
Dry Bulk Storage
90,000 ft2 Covered
857,000 ft2 Bulk Pad
Total Acreage 157 Acres
Unloading
Blades
Terminal Example - Searsport, Maine
24
Materials Handling – Organic Growth
River Road Terminal Expansion
• $800,000 expansion capital(1) project to upgrade dock capabilities and expand existing service offering
• $4.4 million expansion capital(1) project to convert three tanks to asphalt storage
• Asphalt conversion is backed by a long-term storage and handling agreement with take or pay minimums
• Completion targeted for Q2 2017
Providence Terminal Expansion
• Terminal optimization opportunity created by the acquisition of the Capital Terminal in East Providence
• $3 million expansion capital(1) project to convert two storage tanks to road grade asphalt
• Backed by a long-term storage and handling agreement with take or pay minimums
• Completion targeted for Q3 2017
(1) See Appendix for Non-GAAP reconciliations
25
$0.36
$0.41
$0.46
$0.51
$0.56
1Q
2014
2Q
2014
3Q
2014
4Q
2014
1Q
2015
2Q
2015
3Q
2015
4Q
2015
1Q
2016
2Q
2016
3Q
2016
4Q
2016
Sprague Resources LP (SRLP) Overview
Distribution Per Unit Investment Highlights as of March 10, 2017(1)
Ticker SRLP
Exchange NYSE
SRLP Price Per Unit $26.05
Total Units Outstanding 21.4 million
Market Capitalization $558 million
4Q 2016 Distribution Per Unit $0.5775
Annualized 4Q 2016 Distribution Per Unit $2.31
Yield 8.9%
• Adjusted EBITDA guidance range of $115 to $130 million
(3)
• DCF Maintenance capex $14 to $17 million; Cash interest expense $26 to $30 million
• Expansion capex range of $19 to $22 million
• Operating expense range of $69 to $74 million
• SG&A expense range of $90 to $95 million
• Expect to grow distributions by 1.5 cents/unit per quarter through 2019
Full Year 2017 Guidance as of March 10, 2017(2)
$ / Unit
$0.4275
$0.4425
$0.4575
$0.4725
$0.4875
$0.5025
$0.4125
$0.5175
(1) Source: MarketView, Sprague. See Appendix for Non-GAAP reconciliations
(2) Assumes no future acquisitions, normal weather and market conditions
(3) Sprague does not provide guidance on expected net income (loss) (the GAAP financial measure most directly comparable to adjusted EBITDA) due to the inherent difficulty and
impracticality of forecasting certain amounts required by GAAP such as unrealized gains and losses on derivative hedges
$0.5325
$0.5475
$0.5625
$0.5775
26
Financial Strengths
Outstanding operating performance has resulted in 1.6x coverage on TTM basis(1)
Year over year quarterly distribution growth of 12%
Consistent distribution growth guidance of 1.5 cents/unit per quarter through 2019
Permanent leverage ratio(1) of 2.3x, below long term target of 2.5x to 3.5x
Excess cash flows used to pay down debt and naturally de-lever balance sheet
Supportive credit facility with ample liquidity available to fund meaningful growth
Ability to finance near term acquisition and capex growth without an equity raise
Accretive organic capex projects typically funded with internal operating cash flows
Business success not dependent on energy price levels
Product slate continues to evolve to meet customer’s energy requirements
Lower commodity prices decrease W/C requirements and interest expense
Low Leverage
Strong Coverage
Business Model
Room to Fund Growth
Organically
(1) As of December 31, 2016. See Appendix for Non-GAAP reconciliations
27
$29.9
$40.1
$74.9
$89.7
$79.1
$0
$20
$40
$60
$80
$100
2012 2013 2014 2015 2016
Minimum Distribution Excess Cash
$139.4
$189.0
$245.0
$276.0
$259.3
$0
$50
$100
$150
$200
$250
$300
2012 2013 2014 2015 2016
Refined Products Natural Gas Materials Handling Other
$49.8
$76.2
$105.3
$110.4 $109.0
$0
$20
$40
$60
$80
$100
$120
2012 2013 2014 2015 2016
Financial Performance
Adjusted EBITDA(1)
Q4 2016 Highlights Adjusted Gross Margin(1)
Distributable Cash Flow and Coverage Ratio(1)(2)
($ millions)
($ millions) ($ millions)
0.9x 1.2x
2.1x 2.1x 1.6x
(1) See Appendix for Non-GAAP reconciliations
(2) The presented period 2012 is pro forma per page 56 in Sprague’s S-1 Prospectus. 2013 is a pro forma calculation as presented in Sprague’s March 13, 2015 earnings press release.
• Strong performance has resulted in 1.6x distribution
coverage on TTM basis
(1)
• Eleven consecutive quarters of distribution growth
• Year over year quarterly distribution growth of 12%
• Consistent distribution growth guidance of 1.5 cents/unit
per quarter through 2019
• Permanent leverage ratio
(1)
of 2.3x, below long term target
of 2.5x to 3.5x
28
Sprague Condensed Consolidated Balance Sheet
As of December 31, 2016 (1)
(In thousands)
12/31/16 12/31/15
Assets
Current assets:
Cash and cash equivalents $ 2,682 $ 30,974
Accounts receivable, net 221,954 160,848
Inventories 318,899 241,320
Fair value of derivative assets 66,858 157,714
Other current assets 43,316 57,006
Total current assets 653,709 647,862
Property, plant, and equipment, net 251,101 250,909
Intangibles and other assets, net 37,114 38,273
Goodwill, net 70,550 63,288
Total assets $ 1,012,474 $ 1,000,332
12/31/16 12/31/15
Liabilities and unitholders’ equity
Current liabilities:
Accounts payable and accrued liabilities $ 186,681 $ 139,227
Fair value of derivative liabilities 95,339 37,178
Due to General Partner and affiliate 14,218 14,021
Current portion of working capital facilities 153,603 332,500
Current portion of capital leases and other debt 1,358 1,213
Total current liabilities 451,199 524,139
Working capital facilities – less current portion 156,733 -
Acquisition facility 245,400 283,400
Long-term capital leases and other debt 4,165 3,987
Other liabilities 29,540 31,321
Total liabilities 887,037 842,847
Unitholders’ equity 125,437 157,485
Total liabilities and unitholders’ equity $ 1,012,474 $ 1,000,332
(1) A full consolidated balance sheet can be found on page F-4 of Sprague’s most recently filed Annual Report on SEC Form 10-K, available in the “Investor Relations” section of our website
www.spragueenergy.com
29
$0
$200
$400
$600
$800
Q3 2015 Q4 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016
Acquisition Line Working Capital Facility
$555
(in millions) Debt Liquidity (1) (2)
Acquisition Facility $245 $305
Credit Facility, Liquidity and Permanent Leverage
• $1.12 billion Working Capital facilities (includes $120 million multicurrency Working Capital facility)
• $550 million Acquisition facility
• Accordions:
• Combined Working Capital facilities - $200 million
• Acquisition facility - $200 million
• Maximum size is $2.2 billion (including optional contango facility of $125 million)
• Significant capacity and liquidity to finance our ongoing business requirements and growth
• JPMorgan Chase is Administrative Agent (Syndicate of 24 Diverse Lenders)
(in millions) Debt Liquidity (1)
Working Capital Facility $310 $184
Total Facility Size - $1.67 billion (Committed 5 years, expiring December 2019)
Debt and Liquidity(1) as of December 31, 2016
T
otal
Deb
t Permanent
Leverage
Ratio(1)
$554
$616
$527
(1) See Appendix for Non-GAAP reconciliations
(2) As of March 10, 2017, after closing on the L.E. Belcher, Capital and Global transactions, the Acquisition Facility Liquidity was $247 million
$428
2.3x
$564
30
Appendix
31
Summary Unaudited Financial Data
Note: See Appendix for Non-GAAP reconciliations
32
Volume, Net Sales and Adjusted Gross Margin
Note: See Appendix for Non-GAAP reconciliations
33
Reconciliation of Non-GAAP Measures
Note: See Appendix for Non-GAAP reconciliations
34
35
36
37
38
39
40
41
42