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x
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Delaware
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45-2637964
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(State of incorporation)
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(I.R.S. Employer Identification No.)
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Large accelerated filer
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o
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Accelerated filer
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x
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Non-accelerated filer
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o
(Do not check if a smaller reporting company)
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Smaller reporting company
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o
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Page
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Item 1.
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Item 2.
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Item 3.
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Item 4.
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Item 1.
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Item 1A.
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Item 2.
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Item 3.
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Item 4.
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Item 5.
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Item 6.
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Item 1 — Condensed Consolidated Financial Statements
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September 30,
2016 |
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December 31,
2015 |
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(Unaudited)
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|
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Assets
|
|
|
|
||||
Current assets:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
3,449
|
|
|
$
|
30,974
|
|
Accounts receivable, net
|
133,321
|
|
|
160,848
|
|
||
Inventories
|
266,728
|
|
|
241,320
|
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||
Fair value of derivative assets
|
98,299
|
|
|
157,714
|
|
||
Other current assets
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46,200
|
|
|
57,006
|
|
||
Total current assets
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547,997
|
|
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647,862
|
|
||
Property, plant and equipment, net
|
250,713
|
|
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250,909
|
|
||
Intangibles, net
|
24,676
|
|
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22,113
|
|
||
Other assets, net
|
14,926
|
|
|
16,160
|
|
||
Goodwill
|
70,550
|
|
|
63,288
|
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Total assets
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$
|
908,862
|
|
|
$
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1,000,332
|
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Liabilities and unitholders’ equity
|
|
|
|
||||
Current liabilities:
|
|
|
|
||||
Accounts payable
|
$
|
63,307
|
|
|
$
|
91,387
|
|
Accrued liabilities
|
42,571
|
|
|
47,840
|
|
||
Fair value of derivative liabilities
|
58,533
|
|
|
37,178
|
|
||
Due to General Partner
|
7,573
|
|
|
14,021
|
|
||
Current portion of working capital facilities
|
196,851
|
|
|
332,500
|
|
||
Current portion of capital leases and other debt
|
1,424
|
|
|
1,213
|
|
||
Total current liabilities
|
370,259
|
|
|
524,139
|
|
||
Working capital facilities - less current portion
|
104,561
|
|
|
—
|
|
||
Acquisition facility
|
262,400
|
|
|
283,400
|
|
||
Capital leases and other debt - less current portion
|
4,480
|
|
|
3,987
|
|
||
Other liabilities
|
14,637
|
|
|
14,995
|
|
||
Due to General Partner
|
1,194
|
|
|
1,264
|
|
||
Deferred income taxes
|
14,999
|
|
|
15,062
|
|
||
Total liabilities
|
772,530
|
|
|
842,847
|
|
||
Commitments and contingencies (Note 9)
|
|
|
|
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Unitholders’ equity:
|
|
|
|
||||
Common unitholders - public (9,197,649 units and 8,977,378 units issued and outstanding, as of September 30, 2016 and December 31, 2015, respectively)
|
180,732
|
|
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189,483
|
|
||
Common unitholders - affiliated (2,034,378 units issued and outstanding)
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(3,325
|
)
|
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(1,370
|
)
|
||
Subordinated unitholders - affiliated (10,071,970 units issued and outstanding)
|
(28,669
|
)
|
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(18,989
|
)
|
||
Accumulated other comprehensive loss, net of tax
|
(12,406
|
)
|
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(11,639
|
)
|
||
Total unitholders’ equity
|
136,332
|
|
|
157,485
|
|
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Total liabilities and unitholders’ equity
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$
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908,862
|
|
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$
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1,000,332
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|
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Three Months Ended September 30,
|
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Nine Months Ended September 30,
|
||||||||||||
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2016
|
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2015
|
|
2016
|
|
2015
|
||||||||
Net sales
|
$
|
422,779
|
|
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$
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558,022
|
|
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$
|
1,623,173
|
|
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$
|
2,818,123
|
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Cost of products sold (exclusive of depreciation and amortization)
|
383,211
|
|
|
498,537
|
|
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1,463,938
|
|
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2,604,969
|
|
||||
Operating expenses
|
15,725
|
|
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17,870
|
|
|
49,078
|
|
|
54,394
|
|
||||
Selling, general and administrative
|
19,735
|
|
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19,894
|
|
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62,099
|
|
|
71,193
|
|
||||
Depreciation and amortization
|
5,329
|
|
|
5,188
|
|
|
16,001
|
|
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15,365
|
|
||||
Total operating costs and expenses
|
424,000
|
|
|
541,489
|
|
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1,591,116
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|
|
2,745,921
|
|
||||
Operating (loss) income
|
(1,221
|
)
|
|
16,533
|
|
|
32,057
|
|
|
72,202
|
|
||||
Other (expense) income
|
(19
|
)
|
|
—
|
|
|
(114
|
)
|
|
514
|
|
||||
Interest income
|
40
|
|
|
138
|
|
|
379
|
|
|
367
|
|
||||
Interest expense
|
(6,685
|
)
|
|
(6,399
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)
|
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(20,179
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)
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(20,624
|
)
|
||||
(Loss) income before income taxes
|
(7,885
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)
|
|
10,272
|
|
|
12,143
|
|
|
52,459
|
|
||||
Income tax provision
|
(909
|
)
|
|
(1,692
|
)
|
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(861
|
)
|
|
(2,490
|
)
|
||||
Net (loss) income
|
(8,794
|
)
|
|
8,580
|
|
|
11,282
|
|
|
49,969
|
|
||||
Incentive distributions declared
|
(488
|
)
|
|
(105
|
)
|
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(1,144
|
)
|
|
(154
|
)
|
||||
Limited partners’ interest in net (loss) income
|
$
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(9,282
|
)
|
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$
|
8,475
|
|
|
$
|
10,138
|
|
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$
|
49,815
|
|
|
|
|
|
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||||||||
Net (loss) income per limited partner unit:
|
|
|
|
|
|
|
|
||||||||
Common - basic
|
$
|
(0.44
|
)
|
|
$
|
0.40
|
|
|
$
|
0.48
|
|
|
$
|
2.37
|
|
Common - diluted
|
$
|
(0.44
|
)
|
|
$
|
0.39
|
|
|
$
|
0.46
|
|
|
$
|
2.32
|
|
Subordinated - basic and diluted
|
$
|
(0.44
|
)
|
|
$
|
0.40
|
|
|
$
|
0.48
|
|
|
$
|
2.37
|
|
Units used to compute net (loss) income per limited partner unit:
|
|
|
|
|
|
|
|||||||||
Common - basic
|
11,229,805
|
|
|
10,999,848
|
|
|
11,189,987
|
|
|
10,965,400
|
|
||||
Common - diluted
|
11,229,805
|
|
|
11,253,395
|
|
|
11,506,830
|
|
|
11,199,128
|
|
||||
Subordinated - basic and diluted
|
10,071,970
|
|
|
10,071,970
|
|
|
10,071,970
|
|
|
10,071,970
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Distribution declared per common and subordinated units
|
$
|
0.5625
|
|
|
$
|
0.5025
|
|
|
$
|
1.6425
|
|
|
$
|
1.4625
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Net (loss) income
|
$
|
(8,794
|
)
|
|
$
|
8,580
|
|
|
$
|
11,282
|
|
|
$
|
49,969
|
|
Other comprehensive loss, net of tax:
|
|
|
|
|
|
|
|
||||||||
Unrealized gain (loss) on interest rate swaps
|
|
|
|
|
|
|
|
||||||||
Net gain (loss) arising in the period
|
460
|
|
|
(428
|
)
|
|
(1,176
|
)
|
|
(1,388
|
)
|
||||
Reclassification adjustment related to losses realized in income
|
384
|
|
|
126
|
|
|
1,182
|
|
|
384
|
|
||||
Net change in unrealized gain (loss) on interest
rate swaps
|
844
|
|
|
(302
|
)
|
|
6
|
|
|
(1,004
|
)
|
||||
Tax effect
|
(15
|
)
|
|
8
|
|
|
—
|
|
|
29
|
|
||||
|
829
|
|
|
(294
|
)
|
|
6
|
|
|
(975
|
)
|
||||
Foreign currency translation adjustment
|
(925
|
)
|
|
(156
|
)
|
|
(773
|
)
|
|
(1,405
|
)
|
||||
Other comprehensive loss
|
(96
|
)
|
|
(450
|
)
|
|
(767
|
)
|
|
(2,380
|
)
|
||||
Comprehensive (loss) income
|
$
|
(8,890
|
)
|
|
$
|
8,130
|
|
|
$
|
10,515
|
|
|
$
|
47,589
|
|
|
Common-
Public |
|
Common-
Sprague Holdings |
|
Subordinated-
Sprague Holdings |
|
Incentive Distribution Rights
|
|
Accumulated
Other Comprehensive Loss |
|
Total
|
||||||||||||
Balance at December 31, 2014
|
$
|
171,055
|
|
|
$
|
(5,566
|
)
|
|
$
|
(39,762
|
)
|
|
$
|
—
|
|
|
$
|
(9,833
|
)
|
|
$
|
115,894
|
|
Net income
|
33,218
|
|
|
7,558
|
|
|
37,418
|
|
|
154
|
|
|
—
|
|
|
78,348
|
|
||||||
Other comprehensive loss
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,806
|
)
|
|
(1,806
|
)
|
||||||
Unit-based compensation
|
1,284
|
|
|
292
|
|
|
1,446
|
|
|
—
|
|
|
—
|
|
|
3,022
|
|
||||||
Distributions paid
|
(17,172
|
)
|
|
(3,906
|
)
|
|
(19,337
|
)
|
|
(154
|
)
|
|
—
|
|
|
(40,569
|
)
|
||||||
Common units issued with annual bonus
|
2,088
|
|
|
479
|
|
|
2,372
|
|
|
—
|
|
|
—
|
|
|
4,939
|
|
||||||
Units withheld for employee tax obligations
|
(990
|
)
|
|
(227
|
)
|
|
(1,126
|
)
|
|
—
|
|
|
—
|
|
|
(2,343
|
)
|
||||||
Balance at December 31, 2015
|
189,483
|
|
|
(1,370
|
)
|
|
(18,989
|
)
|
|
—
|
|
|
(11,639
|
)
|
|
157,485
|
|
||||||
Net income
|
4,515
|
|
|
999
|
|
|
4,945
|
|
|
823
|
|
|
—
|
|
|
11,282
|
|
||||||
Other comprehensive loss
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(767
|
)
|
|
(767
|
)
|
||||||
Unit-based compensation
|
1,359
|
|
|
301
|
|
|
1,489
|
|
|
—
|
|
|
—
|
|
|
3,149
|
|
||||||
Distributions paid
|
(14,605
|
)
|
|
(3,250
|
)
|
|
(16,090
|
)
|
|
(823
|
)
|
|
—
|
|
|
(34,768
|
)
|
||||||
Payments for distribution equivalents
|
(110
|
)
|
|
(25
|
)
|
|
(123
|
)
|
|
—
|
|
|
—
|
|
|
(258
|
)
|
||||||
Common units issued with annual bonus
|
1,748
|
|
|
392
|
|
|
1,939
|
|
|
—
|
|
|
—
|
|
|
4,079
|
|
||||||
Units withheld for employee tax obligations
|
(1,658
|
)
|
|
(372
|
)
|
|
(1,840
|
)
|
|
—
|
|
|
—
|
|
|
(3,870
|
)
|
||||||
Balance at September 30, 2016
|
$
|
180,732
|
|
|
$
|
(3,325
|
)
|
|
$
|
(28,669
|
)
|
|
$
|
—
|
|
|
$
|
(12,406
|
)
|
|
$
|
136,332
|
|
|
Nine Months Ended September 30,
|
||||||
|
2016
|
|
2015
|
||||
Cash flows from operating activities
|
|||||||
Net income
|
$
|
11,282
|
|
|
$
|
49,969
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
||||
Depreciation and amortization (includes amortization of deferred debt issuance costs)
|
18,961
|
|
|
18,033
|
|
||
Provision for doubtful accounts
|
237
|
|
|
1,785
|
|
||
Loss (gain) on sale of assets and insurance recoveries
|
106
|
|
|
(482
|
)
|
||
Deferred income taxes
|
(69
|
)
|
|
773
|
|
||
Non-cash unit-based compensation
|
1,664
|
|
|
5,231
|
|
||
Changes in assets and liabilities:
|
|
|
|
||||
Accounts receivable
|
27,086
|
|
|
147,912
|
|
||
Inventories
|
(25,064
|
)
|
|
161,139
|
|
||
Prepaid expenses and other assets
|
13,949
|
|
|
16,113
|
|
||
Fair value of commodity derivative instruments
|
95,121
|
|
|
44,050
|
|
||
Due to General Partner and affiliates
|
(5,960
|
)
|
|
(2,148
|
)
|
||
Accounts payable, accrued liabilities and other
|
(30,218
|
)
|
|
(124,713
|
)
|
||
Net cash provided by operating activities
|
107,095
|
|
|
317,662
|
|
||
Cash flows from investing activities
|
|
|
|
||||
Purchases of property, plant and equipment
|
(11,436
|
)
|
|
(11,044
|
)
|
||
Acquisitions, net of cash acquired
|
(29,065
|
)
|
|
—
|
|
||
Proceeds from property insurance settlement and sale of assets
|
147
|
|
|
407
|
|
||
Net cash used in investing activities
|
(40,354
|
)
|
|
(10,637
|
)
|
||
Cash flows from financing activities
|
|
|
|
||||
Net payments under credit agreements
|
(51,897
|
)
|
|
(260,259
|
)
|
||
Payments on capital lease liabilities and term debt
|
(939
|
)
|
|
(1,061
|
)
|
||
Payments on long-term terminal obligations
|
(449
|
)
|
|
(310
|
)
|
||
Debt issue costs
|
(2,089
|
)
|
|
(1,938
|
)
|
||
Distributions to unitholders
|
(34,768
|
)
|
|
(29,870
|
)
|
||
Payments for distribution equivalents
|
(258
|
)
|
|
—
|
|
||
Foreign exchange on capital lease obligations
|
7
|
|
|
(226
|
)
|
||
Units withheld for employee tax obligations
|
(3,870
|
)
|
|
(2,343
|
)
|
||
Net cash used in financing activities
|
(94,263
|
)
|
|
(296,007
|
)
|
||
Effect of exchange rate changes on cash balances held in foreign currencies
|
(3
|
)
|
|
(123
|
)
|
||
Net change in cash and cash equivalents
|
(27,525
|
)
|
|
10,895
|
|
||
Cash and cash equivalents, beginning of period
|
30,974
|
|
|
4,080
|
|
||
Cash and cash equivalents, end of period
|
$
|
3,449
|
|
|
$
|
14,975
|
|
Supplemental disclosure of cash flow information
|
|
|
|
||||
Cash paid for interest
|
$
|
17,730
|
|
|
$
|
18,307
|
|
Cash paid for taxes
|
$
|
755
|
|
|
$
|
3,490
|
|
Derivative assets
|
|
|
|
|
$
|
22,678
|
|
Other current assets and prepaids
|
|
|
|
|
2,168
|
|
|
Intangibles and other
|
|
|
|
|
6,539
|
|
|
Natural gas transportation assets
|
|
|
|
|
8,040
|
|
|
Total identifiable assets acquired
|
|
|
|
|
39,425
|
|
|
Accrued liabilities
|
|
|
|
|
219
|
|
|
Derivative liabilities
|
|
|
|
|
15,007
|
|
|
Natural gas transportation liabilities
|
|
|
|
|
2,396
|
|
|
Total liabilities assumed
|
|
|
|
|
17,622
|
|
|
Net identifiable assets acquired
|
|
|
|
|
21,803
|
|
|
Goodwill
|
|
|
|
|
7,262
|
|
|
Net assets acquired
|
|
|
|
|
$
|
29,065
|
|
|
September 30,
2016 |
|
December 31, 2015
|
||||
Fair value of interest rate swaps, net of tax
|
$
|
(820
|
)
|
|
$
|
(826
|
)
|
Cumulative foreign currency translation adjustment
|
(11,586
|
)
|
|
(10,813
|
)
|
||
Accumulated other comprehensive loss, net of tax
|
$
|
(12,406
|
)
|
|
$
|
(11,639
|
)
|
|
September 30,
2016 |
|
December 31,
2015 |
||||
Petroleum and related products
|
$
|
254,122
|
|
|
$
|
215,048
|
|
Asphalt
|
8,991
|
|
|
20,677
|
|
||
Coal
|
2,355
|
|
|
3,713
|
|
||
Natural gas
|
1,260
|
|
|
1,882
|
|
||
Inventories
|
$
|
266,728
|
|
|
$
|
241,320
|
|
|
September 30,
2016 |
|
December 31, 2015
|
||||
Working capital facilities
|
$
|
301,412
|
|
|
$
|
332,500
|
|
Acquisition facility
|
262,400
|
|
|
283,400
|
|
||
Total credit agreement
|
563,812
|
|
|
615,900
|
|
||
Less: current portion of working capital facilities
|
(196,851
|
)
|
|
(332,500
|
)
|
||
Long-term portion
|
$
|
366,961
|
|
|
$
|
283,400
|
|
•
|
U.S. dollar revolving working capital facility of up to
$1.0 billion
to be used for working capital loans and letters of credit in the principal amount equal to the lesser of the Partnership’s borrowing base and
$1.0 billion
;
|
•
|
Multicurrency revolving working capital facility of up to
$120.0 million
to be used by Kildair for working capital loans and letters of credit in the principal amount equal to the lesser of Kildair’s borrowing base and
$120.0 million
;
|
•
|
Revolving acquisition facility of up to
$550.0 million
to be used for loans and letters of credit to fund capital expenditures and acquisitions and other general corporate purposes related to the Partnership’s current businesses; and
|
•
|
Subject to certain conditions, the U.S. dollar or multicurrency revolving working capital facilities may be increased by
$200.0 million
. Additionally, subject to certain conditions, the revolving acquisition facility may be increased by
$200.0 million
.
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
|
(in thousands)
|
||||||||||||||
Net sales:
|
|
|
|
|
|
|
|
||||||||
Refined products
|
$
|
350,528
|
|
|
$
|
488,639
|
|
|
$
|
1,331,197
|
|
|
$
|
2,499,335
|
|
Natural gas
|
55,868
|
|
|
52,568
|
|
|
240,256
|
|
|
265,805
|
|
||||
Materials handling
|
11,304
|
|
|
12,027
|
|
|
35,848
|
|
|
33,905
|
|
||||
Other operations
|
5,079
|
|
|
4,788
|
|
|
15,872
|
|
|
19,078
|
|
||||
Net sales
|
$
|
422,779
|
|
|
$
|
558,022
|
|
|
$
|
1,623,173
|
|
|
$
|
2,818,123
|
|
Adjusted gross margin(1):
|
|
|
|
|
|
|
|
||||||||
Refined products
|
$
|
38,693
|
|
|
$
|
31,852
|
|
|
$
|
104,070
|
|
|
$
|
124,101
|
|
Natural gas
|
2,773
|
|
|
4,423
|
|
|
43,734
|
|
|
40,556
|
|
||||
Materials handling
|
11,305
|
|
|
12,027
|
|
|
35,826
|
|
|
33,899
|
|
||||
Other operations
|
1,985
|
|
|
2,024
|
|
|
6,257
|
|
|
6,648
|
|
||||
Adjusted gross margin
|
54,756
|
|
|
50,326
|
|
|
189,887
|
|
|
205,204
|
|
||||
Reconciliation to operating (loss) income(2):
|
|
|
|
|
|
|
|
||||||||
Add: unrealized (loss) gain on inventory(3)
|
(14,636
|
)
|
|
575
|
|
|
(26,592
|
)
|
|
(5,102
|
)
|
||||
Add: unrealized gain (loss) on prepaid forward contracts(4)
|
120
|
|
|
(2,248
|
)
|
|
1,161
|
|
|
(2,248
|
)
|
||||
Add: unrealized (loss) gain on natural gas transportation
contracts(5)
|
(672
|
)
|
|
10,832
|
|
|
(5,221
|
)
|
|
15,300
|
|
||||
Operating costs and expenses not allocated to operating segments:
|
|
|
|
|
|
|
|||||||||
Operating expenses
|
(15,725
|
)
|
|
(17,870
|
)
|
|
(49,078
|
)
|
|
(54,394
|
)
|
||||
Selling, general and administrative
|
(19,735
|
)
|
|
(19,894
|
)
|
|
(62,099
|
)
|
|
(71,193
|
)
|
||||
Depreciation and amortization
|
(5,329
|
)
|
|
(5,188
|
)
|
|
(16,001
|
)
|
|
(15,365
|
)
|
||||
Operating (loss) income
|
(1,221
|
)
|
|
16,533
|
|
|
32,057
|
|
|
72,202
|
|
||||
Other (expense) income
|
(19
|
)
|
|
—
|
|
|
(114
|
)
|
|
514
|
|
||||
Interest income
|
40
|
|
|
138
|
|
|
379
|
|
|
367
|
|
||||
Interest expense
|
(6,685
|
)
|
|
(6,399
|
)
|
|
(20,179
|
)
|
|
(20,624
|
)
|
||||
Income tax provision
|
(909
|
)
|
|
(1,692
|
)
|
|
(861
|
)
|
|
(2,490
|
)
|
||||
Net (loss) income
|
$
|
(8,794
|
)
|
|
$
|
8,580
|
|
|
$
|
11,282
|
|
|
$
|
49,969
|
|
(1)
|
The Partnership trades, purchases, stores and sells energy commodities that experience market value fluctuations. To manage the Partnership’s underlying performance, including its physical and derivative positions, management utilizes adjusted gross margin, which is a non-GAAP financial measure. Adjusted gross margin is also used by external users of the Partnership’s consolidated financial statements to assess the Partnership’s economic results of operations and its commodity market value reporting to lenders. In determining adjusted gross margin, the Partnership adjusts its segment results for the impact of unrealized hedging gains and losses with regard to refined products and natural gas inventory, prepaid forward contracts and natural gas transportation contracts, which are not marked to market for the purpose of recording unrealized gains or losses in net income (loss). These adjustments align the unrealized hedging gains and losses to the period in which the revenue from the sale of inventory, prepaid fixed forwards and the utilization of transportation contracts relating to those hedges is realized in net income (loss). Adjusted gross margin has no impact on reported volumes or net sales.
|
(2)
|
Reconciliation of adjusted gross margin to operating income, the most directly comparable GAAP measure.
|
(3)
|
Inventory is valued at the lower of cost or market. The fair value of the derivatives the Partnership uses to economically hedge its inventory declines or appreciates in value as the value of the underlying inventory appreciates or declines, which creates unrealized hedging losses (gains) with respect to the derivatives that are included in net income (loss).
|
(4)
|
The unrealized hedging gain (loss) on prepaid forward contracts represents the Partnership’s estimate of the change in fair value of the prepaid forward contracts which are not recorded in net income (loss) until the forward contract is settled in the future (i.e., when the commodity is delivered to the customer). As these contracts are prepaid, they do not qualify as derivatives. The fair value of the derivatives the Partnership uses to economically hedge its prepaid forward contracts declines or appreciates in value as the value of the underlying forward contract appreciates or declines, which creates unrealized hedging gains (losses) with respect to the derivatives that are included in net income (loss).
|
(5)
|
The unrealized hedging gain (loss) on natural gas transportation contracts represents the Partnership’s estimate of the change in fair value of the natural gas transportation contracts which are not recorded in net income (loss) until the transportation is utilized in the future (i.e., when natural gas is delivered to the customer), as these contracts do not qualify as derivatives. As the fair value of the natural gas transportation contracts decline or appreciate, the offsetting physical or financial derivative will also appreciate or decline creating unmatched unrealized hedging (losses) gains in net income (loss) as of each period end.
|
|
As of September 30, 2016
|
||||||||||||||
|
Fair Value
Measurement
|
|
Quoted
Prices in
Active
Markets
Level 1
|
|
Significant
Other
Observable
Inputs
Level 2
|
|
Significant
Unobservable
Inputs
Level 3
|
||||||||
Financial assets:
|
|
|
|
|
|
|
|
||||||||
Commodity fixed forwards
|
$
|
97,944
|
|
|
$
|
—
|
|
|
$
|
97,944
|
|
|
$
|
—
|
|
Commodity swaps and options
|
4
|
|
|
—
|
|
|
4
|
|
|
—
|
|
||||
Commodity derivatives
|
97,948
|
|
|
—
|
|
|
97,948
|
|
|
—
|
|
||||
Interest rate swaps
|
344
|
|
|
—
|
|
|
344
|
|
|
—
|
|
||||
Other
|
7
|
|
|
—
|
|
|
7
|
|
|
—
|
|
||||
Total
|
$
|
98,299
|
|
|
$
|
—
|
|
|
$
|
98,299
|
|
|
$
|
—
|
|
Financial liabilities:
|
|
|
|
|
|
|
|
||||||||
Commodity exchange contracts
|
$
|
92
|
|
|
$
|
92
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Commodity fixed forwards
|
56,730
|
|
|
—
|
|
|
56,730
|
|
|
—
|
|
||||
Commodity swaps and options
|
531
|
|
|
—
|
|
|
531
|
|
|
—
|
|
||||
Commodity derivatives
|
57,353
|
|
|
92
|
|
|
57,261
|
|
|
—
|
|
||||
Interest rate swaps
|
1,180
|
|
|
—
|
|
|
1,180
|
|
|
—
|
|
||||
Total
|
$
|
58,533
|
|
|
$
|
92
|
|
|
$
|
58,441
|
|
|
$
|
—
|
|
|
As of December 31, 2015
|
||||||||||||||
|
Fair Value
Measurement |
|
Quoted
Prices in Active Markets Level 1 |
|
Significant
Other Observable Inputs Level 2 |
|
Significant
Unobservable Inputs Level 3 |
||||||||
Financial assets:
|
|
|
|
|
|
|
|
||||||||
Commodity fixed forwards
|
$
|
157,389
|
|
|
$
|
—
|
|
|
$
|
157,389
|
|
|
$
|
—
|
|
Commodity swaps and options
|
51
|
|
|
—
|
|
|
51
|
|
|
—
|
|
||||
Commodity derivatives
|
157,440
|
|
|
—
|
|
|
157,440
|
|
|
—
|
|
||||
Interest rate swaps
|
274
|
|
|
—
|
|
|
274
|
|
|
—
|
|
||||
Total
|
$
|
157,714
|
|
|
$
|
—
|
|
|
$
|
157,714
|
|
|
$
|
—
|
|
Financial liabilities:
|
|
|
|
|
|
|
|
||||||||
Commodity fixed forwards
|
$
|
31,801
|
|
|
$
|
—
|
|
|
$
|
31,801
|
|
|
$
|
—
|
|
Commodity swaps and options
|
4,250
|
|
|
—
|
|
|
4,250
|
|
|
—
|
|
||||
Commodity derivatives
|
36,051
|
|
|
—
|
|
|
36,051
|
|
|
—
|
|
||||
Interest rate swaps
|
1,115
|
|
|
—
|
|
|
1,115
|
|
|
—
|
|
||||
Other
|
12
|
|
|
—
|
|
|
12
|
|
|
—
|
|
||||
Total
|
$
|
37,178
|
|
|
$
|
—
|
|
|
$
|
37,178
|
|
|
$
|
—
|
|
|
As of September 30, 2016
|
||||||||||||||||||||||
|
|
|
|
|
Gross Amount Not Offset in
the Balance Sheet
|
|
|
||||||||||||||||
|
Gross Amounts of
Recognized
Assets/
Liabilities
|
|
Gross
Amounts
Offset in the
Balance Sheet
|
|
Amounts of
Assets/ Liabilities in the Balance Sheet |
|
Financial
Instruments
|
|
Cash
Collateral
Posted
|
|
Net Amount
|
||||||||||||
Commodity derivative assets
|
$
|
97,948
|
|
|
$
|
—
|
|
|
$
|
97,948
|
|
|
$
|
(2,918
|
)
|
|
$
|
(256
|
)
|
|
$
|
94,774
|
|
Interest rate swap derivative assets
|
344
|
|
|
—
|
|
|
344
|
|
|
—
|
|
|
—
|
|
|
344
|
|
||||||
Other assets
|
7
|
|
|
—
|
|
|
7
|
|
|
—
|
|
|
—
|
|
|
7
|
|
||||||
Fair value of derivative assets
|
$
|
98,299
|
|
|
$
|
—
|
|
|
$
|
98,299
|
|
|
$
|
(2,918
|
)
|
|
$
|
(256
|
)
|
|
$
|
95,125
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Commodity derivative liabilities
|
$
|
(57,353
|
)
|
|
$
|
—
|
|
|
$
|
(57,353
|
)
|
|
$
|
2,918
|
|
|
$
|
—
|
|
|
$
|
(54,435
|
)
|
Interest rate swap derivative liabilities
|
(1,180
|
)
|
|
—
|
|
|
(1,180
|
)
|
|
—
|
|
|
—
|
|
|
(1,180
|
)
|
||||||
Fair value of derivative liabilities
|
$
|
(58,533
|
)
|
|
$
|
—
|
|
|
$
|
(58,533
|
)
|
|
$
|
2,918
|
|
|
$
|
—
|
|
|
$
|
(55,615
|
)
|
|
As of December 31, 2015
|
||||||||||||||||||||||
|
|
|
|
|
|
|
Gross Amount Not Offset in
the Balance Sheet |
|
|
||||||||||||||
|
Gross Amounts of
Recognized Assets/ Liabilities |
|
Gross
Amounts Offset in the Balance Sheet |
|
Amounts of
Assets/
Liabilities
in the
Balance Sheet
|
|
Financial
Instruments |
|
Cash
Collateral Posted |
|
Net Amount
|
||||||||||||
Commodity derivative assets
|
$
|
157,440
|
|
|
$
|
—
|
|
|
$
|
157,440
|
|
|
$
|
(1,811
|
)
|
|
$
|
(1,798
|
)
|
|
$
|
153,831
|
|
Interest rate swap derivative assets
|
274
|
|
|
—
|
|
|
274
|
|
|
—
|
|
|
—
|
|
|
274
|
|
||||||
Fair value of derivative assets
|
$
|
157,714
|
|
|
$
|
—
|
|
|
$
|
157,714
|
|
|
$
|
(1,811
|
)
|
|
$
|
(1,798
|
)
|
|
$
|
154,105
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Commodity derivative liabilities
|
$
|
(36,051
|
)
|
|
$
|
—
|
|
|
$
|
(36,051
|
)
|
|
$
|
1,811
|
|
|
$
|
—
|
|
|
$
|
(34,240
|
)
|
Interest rate swap derivative liabilities
|
(1,115
|
)
|
|
—
|
|
|
(1,115
|
)
|
|
—
|
|
|
—
|
|
|
(1,115
|
)
|
||||||
Other liabilities
|
(12
|
)
|
|
—
|
|
|
(12
|
)
|
|
—
|
|
|
—
|
|
|
(12
|
)
|
||||||
Fair value of derivative liabilities
|
$
|
(37,178
|
)
|
|
$
|
—
|
|
|
$
|
(37,178
|
)
|
|
$
|
1,811
|
|
|
$
|
—
|
|
|
$
|
(35,367
|
)
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Refined products contracts
|
$
|
2,957
|
|
|
$
|
47,481
|
|
|
$
|
(2,176
|
)
|
|
$
|
74,086
|
|
Natural gas contracts
|
(3,370
|
)
|
|
11,435
|
|
|
16,472
|
|
|
12,596
|
|
||||
Total
|
$
|
(413
|
)
|
|
$
|
58,916
|
|
|
$
|
14,296
|
|
|
$
|
86,682
|
|
|
As of September 30, 2016
|
|
As of December 31, 2015
|
||||||||
|
Refined Products
(Barrels)
|
|
Natural Gas
(MMBTUs)
|
|
Refined Products
(Barrels)
|
|
Natural Gas
(MMBTUs)
|
||||
Long contracts
|
10,687
|
|
|
137,403
|
|
|
12,067
|
|
|
123,711
|
|
Short contracts
|
(15,006
|
)
|
|
(80,173
|
)
|
|
(16,558
|
)
|
|
(75,785
|
)
|
Interest Rate Swap Agreements
|
||||||
Beginning
|
|
Ending
|
|
Notional Amount
|
||
January 2016
|
|
January 2017
|
|
$
|
250,000
|
|
September 2016
|
|
April 2017
|
|
$
|
25,000
|
|
January 2017
|
|
January 2018
|
|
$
|
150,000
|
|
January 2018
|
|
January 2019
|
|
$
|
100,000
|
|
|
Time Based and Restricted Units
|
|
Phantom Units
(TUR-based)
|
|
Phantom Units
(OCF-based)
|
|||||||||||||||
|
Units
|
|
Weighted
Average
Grant Date
Fair Value
(per unit)
|
|
Units
|
|
Weighted
Average
Grant Date
Fair Value
(per unit)
|
|
Units
|
|
Weighted
Average Grant Date Fair Value (per unit) |
|||||||||
Nonvested at December 31, 2015
|
12,141
|
|
|
$
|
19.63
|
|
|
215,051
|
|
|
$
|
33.40
|
|
|
—
|
|
|
$
|
—
|
|
Granted
|
—
|
|
|
—
|
|
|
—
|
|
|
$
|
—
|
|
|
166,900
|
|
|
$
|
17.52
|
|
|
Forfeited
|
—
|
|
|
—
|
|
|
(3,000
|
)
|
|
(36.88
|
)
|
|
—
|
|
|
—
|
|
|||
Vested
|
(9,919
|
)
|
|
(20.16
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||
Nonvested at September 30, 2016
|
2,222
|
|
|
$
|
17.33
|
|
|
212,051
|
|
|
$
|
33.35
|
|
|
166,900
|
|
|
$
|
17.52
|
|
|
Common Units
|
|
|
|||||
|
Public
|
|
Sprague
Holdings
|
|
Subordinated
Units
|
|||
Balance as of December 31, 2014
|
8,777,922
|
|
|
2,034,378
|
|
|
10,071,970
|
|
Units issued in connection with employee bonus
|
133,634
|
|
|
—
|
|
|
—
|
|
Units issued in connection with phantom and performance awards
|
58,358
|
|
|
—
|
|
|
—
|
|
Director vested awards
|
7,464
|
|
|
—
|
|
|
—
|
|
Balance as of December 31, 2015
|
8,977,378
|
|
|
2,034,378
|
|
|
10,071,970
|
|
Units issued in connection with employee bonus
|
161,018
|
|
|
—
|
|
|
—
|
|
Units issued in connection with phantom and performance awards
|
55,581
|
|
|
—
|
|
|
—
|
|
Employee vested awards
|
3,672
|
|
|
—
|
|
|
—
|
|
Balance as of September 30, 2016
|
9,197,649
|
|
|
2,034,378
|
|
|
10,071,970
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||
Weighted average limited partner common units - basic
|
11,229,805
|
|
|
10,999,848
|
|
|
11,189,987
|
|
|
10,965,400
|
|
Dilutive effect of unvested restricted and phantom units
|
—
|
|
|
253,547
|
|
|
316,843
|
|
|
233,728
|
|
Weighted average limited partner common units - dilutive
|
11,229,805
|
|
|
11,253,395
|
|
|
11,506,830
|
|
|
11,199,128
|
|
|
Three Months Ended September 30, 2016
|
||||||||||||||
|
Common
|
|
Subordinated
|
|
IDR
|
|
Total
|
||||||||
|
(in thousands, except for per unit amounts)
|
||||||||||||||
Net loss
|
|
|
|
|
|
|
$
|
(8,794
|
)
|
||||||
Distributions declared
|
$
|
6,324
|
|
|
$
|
5,665
|
|
|
$
|
488
|
|
|
$
|
12,477
|
|
Assumed net loss from operations after distributions
|
(11,217
|
)
|
|
(10,054
|
)
|
|
—
|
|
|
(21,271
|
)
|
||||
Assumed net loss to be allocated
|
$
|
(4,893
|
)
|
|
$
|
(4,389
|
)
|
|
$
|
488
|
|
|
$
|
(8,794
|
)
|
Loss per unit - basic
|
$
|
(0.44
|
)
|
|
$
|
(0.44
|
)
|
|
|
|
|
||||
Loss per unit - diluted
|
$
|
(0.44
|
)
|
|
$
|
(0.44
|
)
|
|
|
|
|
|
Three Months Ended September 30, 2015
|
||||||||||||||
|
Common
|
|
Subordinated
|
|
IDR
|
|
Total
|
||||||||
|
(in thousands, except for per unit amounts)
|
||||||||||||||
Net income
|
|
|
|
|
|
|
$
|
8,580
|
|
||||||
Distributions declared
|
$
|
5,533
|
|
|
$
|
5,061
|
|
|
$
|
105
|
|
|
$
|
10,699
|
|
Assumed net loss from operations after distributions
|
(1,109
|
)
|
|
(1,010
|
)
|
|
—
|
|
|
(2,119
|
)
|
||||
Assumed net income to be allocated
|
$
|
4,424
|
|
|
$
|
4,051
|
|
|
$
|
105
|
|
|
$
|
8,580
|
|
Income per unit - basic
|
$
|
0.40
|
|
|
$
|
0.40
|
|
|
|
|
|
||||
Income per unit - diluted
|
$
|
0.39
|
|
|
$
|
0.40
|
|
|
|
|
|
|
Nine Months Ended September 30, 2016
|
||||||||||||||
|
Common
|
|
Subordinated
|
|
IDR
|
|
Total
|
||||||||
|
(in thousands, except for per unit amounts)
|
||||||||||||||
Net income
|
|
|
|
|
|
|
$
|
11,282
|
|
||||||
Distributions declared
|
$
|
18,455
|
|
|
$
|
16,542
|
|
|
$
|
1,144
|
|
|
$
|
36,141
|
|
Assumed net loss from operations after distributions
|
(13,119
|
)
|
|
(11,740
|
)
|
|
—
|
|
|
(24,859
|
)
|
||||
Assumed net income to be allocated
|
$
|
5,336
|
|
|
$
|
4,802
|
|
|
$
|
1,144
|
|
|
$
|
11,282
|
|
Income per unit - basic
|
$
|
0.48
|
|
|
$
|
0.48
|
|
|
|
|
|
||||
Income per unit - diluted
|
$
|
0.46
|
|
|
$
|
0.48
|
|
|
|
|
|
|
Nine Months Ended September 30, 2015
|
||||||||||||||
|
Common
|
|
Subordinated
|
|
IDR
|
|
Total
|
||||||||
|
(in thousands, except for per unit amounts)
|
||||||||||||||
Net income
|
|
|
|
|
|
|
$
|
49,969
|
|
||||||
Distributions declared
|
$
|
16,102
|
|
|
$
|
14,730
|
|
|
$
|
154
|
|
|
$
|
30,986
|
|
Assumed net income from operations after distributions
|
9,863
|
|
|
9,120
|
|
|
—
|
|
|
18,983
|
|
||||
Assumed net income to be allocated
|
$
|
25,965
|
|
|
$
|
23,850
|
|
|
$
|
154
|
|
|
$
|
49,969
|
|
Income per unit - basic
|
$
|
2.37
|
|
|
$
|
2.37
|
|
|
|
|
|
||||
Income per unit - diluted
|
$
|
2.32
|
|
|
$
|
2.37
|
|
|
|
|
|
|
|
|
|
Cash Distributed
|
||||||||||||||||
For the Quarter Ended
|
|
Payment Date
|
|
Per Unit
|
|
Common
|
|
Subordinated
|
|
IDR
|
|
Total
|
||||||||
December 31, 2015
|
|
February 12, 2016
|
|
$0.5175
|
|
$
|
5,724
|
|
|
$
|
5,212
|
|
|
$
|
167
|
|
|
$
|
11,103
|
|
March 31, 2016
|
|
May 13, 2016
|
|
$0.5325
|
|
$
|
5,981
|
|
|
$
|
5,363
|
|
|
$
|
275
|
|
|
$
|
11,619
|
|
June 30, 2016
|
|
August 12, 2016
|
|
$0.5475
|
|
$
|
6,150
|
|
|
$
|
5,515
|
|
|
$
|
381
|
|
|
$
|
12,046
|
|
Item 2.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
•
|
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.
|
•
|
The economic results of our operations;
|
•
|
The market value of our inventory and natural gas transportation contracts for financial reporting to our lenders, as well as for borrowing base purposes; and
|
•
|
Repeatable operating performance that is not distorted by non-recurring items or market volatility.
|
|
Nine Months Ended September 30,
|
|
Increase/(Decrease)
|
|||||||||||
|
2016
|
|
2015
|
|
$
|
|
%
|
|||||||
|
($ in thousands)
|
|||||||||||||
Net sales
|
$
|
1,623,173
|
|
|
$
|
2,818,123
|
|
|
$
|
(1,194,950
|
)
|
|
(42
|
)%
|
Cost of products sold (exclusive of depreciation and amortization)
|
1,463,938
|
|
|
2,604,969
|
|
|
(1,141,031
|
)
|
|
(44
|
)%
|
|||
Operating expenses
|
49,078
|
|
|
54,394
|
|
|
(5,316
|
)
|
|
(10
|
)%
|
|||
Selling, general and administrative
|
62,099
|
|
|
71,193
|
|
|
(9,094
|
)
|
|
(13
|
)%
|
|||
Depreciation and amortization
|
16,001
|
|
|
15,365
|
|
|
636
|
|
|
4
|
%
|
|||
Total operating costs and expenses
|
1,591,116
|
|
|
2,745,921
|
|
|
(1,154,805
|
)
|
|
(42
|
)%
|
|||
Operating income
|
32,057
|
|
|
72,202
|
|
|
(40,145
|
)
|
|
(56
|
)%
|
|||
Other (expense) income
|
(114
|
)
|
|
514
|
|
|
(628
|
)
|
|
(122
|
)%
|
|||
Interest income
|
379
|
|
|
367
|
|
|
12
|
|
|
3
|
%
|
|||
Interest expense
|
(20,179
|
)
|
|
(20,624
|
)
|
|
445
|
|
|
(2
|
)%
|
|||
Income before income taxes
|
12,143
|
|
|
52,459
|
|
|
(40,316
|
)
|
|
(77
|
)%
|
|||
Income tax provision
|
(861
|
)
|
|
(2,490
|
)
|
|
1,629
|
|
|
(65
|
)%
|
|||
Net income
|
$
|
11,282
|
|
|
$
|
49,969
|
|
|
$
|
(38,687
|
)
|
|
(77
|
)%
|
(1)
|
Inventory is valued at the lower of cost or market. The fair value of the derivatives we use to economically hedge our inventory declines or appreciates in value as the value of the underlying inventory appreciates or declines, which creates unrealized hedging (losses) gains with respect to the derivatives that are included in net income (loss).
|
(2)
|
The unrealized hedging gain (loss) on prepaid forward contracts represents our estimate of the change in fair value of the prepaid forward contracts which are not recorded in net income (loss) until the forward contract is settled in the future (i.e., when the commodity is delivered to the customer). As these contracts are prepaid, they do not qualify as derivatives. The fair value of the derivatives we use to economically hedge our prepaid forward contracts declines or appreciates in value as the value of the underlying forward contract appreciates or declines, which creates unrealized hedging gains (losses) with respect to the derivatives that are included in net income (loss).
|
(3)
|
The unrealized (gain) loss on natural gas transportation contracts represents our estimate of the change in fair value of the natural gas transportation contracts which are not recorded in net (loss) income until the transportation is utilized in the future (i.e., when natural gas is delivered to the customer), as these contracts are executory contracts that do not qualify as derivatives. As the fair value of the natural gas transportation contracts decline or appreciate, the offsetting physical or financial derivative will also appreciate or decline creating unmatched unrealized hedging losses (gains) in net (loss) income.
|
(4)
|
For a discussion of the non-GAAP financial measures EBITDA, adjusted EBITDA and adjusted gross margin, see “How Management Evaluates Our Results of Operations.”
|
(5)
|
As reported by the NOAA/National Weather Service for the New England oil home heating region over the period of 1981-2011.
|
|
Three Months Ended September 30,
|
|
Increase/(Decrease)
|
|||||||||||
|
2016
|
|
2015
|
|
$
|
|
%
|
|||||||
|
($ in thousands, except adjusted unit gross margin)
|
|||||||||||||
Volumes:
|
|
|
|
|
|
|
|
|||||||
Refined products (gallons)
|
237,510
|
|
|
287,574
|
|
|
(50,064
|
)
|
|
(17
|
)%
|
|||
Natural gas (MMBtus)
|
11,810
|
|
|
10,516
|
|
|
1,294
|
|
|
12
|
%
|
|||
Materials handling (short tons)
|
764
|
|
|
790
|
|
|
(26
|
)
|
|
(3
|
)%
|
|||
Materials handling (gallons)
|
78,330
|
|
|
62,244
|
|
|
16,086
|
|
|
26
|
%
|
|||
Net Sales:
|
|
|
|
|
|
|
|
|||||||
Refined products
|
$
|
350,528
|
|
|
$
|
488,639
|
|
|
$
|
(138,111
|
)
|
|
(28
|
)%
|
Natural gas
|
55,868
|
|
|
52,568
|
|
|
3,300
|
|
|
6
|
%
|
|||
Materials handling
|
11,304
|
|
|
12,027
|
|
|
(723
|
)
|
|
(6
|
)%
|
|||
Other operations
|
5,079
|
|
|
4,788
|
|
|
291
|
|
|
6
|
%
|
|||
Total net sales
|
$
|
422,779
|
|
|
$
|
558,022
|
|
|
$
|
(135,243
|
)
|
|
(24
|
)%
|
Adjusted Gross Margin:
|
|
|
|
|
|
|
|
|||||||
Refined products
|
$
|
38,693
|
|
|
$
|
31,852
|
|
|
$
|
6,841
|
|
|
21
|
%
|
Natural gas
|
2,773
|
|
|
4,423
|
|
|
(1,650
|
)
|
|
(37
|
)%
|
|||
Materials handling
|
11,305
|
|
|
12,027
|
|
|
(722
|
)
|
|
(6
|
)%
|
|||
Other operations
|
1,985
|
|
|
2,024
|
|
|
(39
|
)
|
|
(2
|
)%
|
|||
Total adjusted gross margin
|
$
|
54,756
|
|
|
$
|
50,326
|
|
|
$
|
4,430
|
|
|
9
|
%
|
Adjusted Unit Gross Margin:
|
|
|
|
|
|
|
|
|||||||
Refined products
|
$
|
0.163
|
|
|
$
|
0.111
|
|
|
$
|
0.052
|
|
|
47
|
%
|
Natural gas
|
$
|
0.235
|
|
|
$
|
0.421
|
|
|
$
|
(0.186
|
)
|
|
(44
|
)%
|
|
Nine Months Ended September 30,
|
|
Increase/(Decrease)
|
|||||||||||
|
2016
|
|
2015
|
|
$
|
|
%
|
|||||||
|
($ in thousands, except adjusted unit gross margin)
|
|||||||||||||
Volumes:
|
|
|
|
|
|
|
|
|||||||
Refined products (gallons)
|
978,264
|
|
|
1,303,092
|
|
|
(324,828
|
)
|
|
(25
|
)%
|
|||
Natural gas (MMBtus)
|
44,799
|
|
|
42,747
|
|
|
2,052
|
|
|
5
|
%
|
|||
Materials handling (short tons)
|
2,016
|
|
|
1,859
|
|
|
157
|
|
|
8
|
%
|
|||
Materials handling (gallons)
|
234,738
|
|
|
186,984
|
|
|
47,754
|
|
|
26
|
%
|
|||
Net Sales:
|
|
|
|
|
|
|
|
|||||||
Refined products
|
$
|
1,331,197
|
|
|
$
|
2,499,335
|
|
|
$
|
(1,168,138
|
)
|
|
(47
|
)%
|
Natural gas
|
240,256
|
|
|
265,805
|
|
|
(25,549
|
)
|
|
(10
|
)%
|
|||
Materials handling
|
35,848
|
|
|
33,905
|
|
|
1,943
|
|
|
6
|
%
|
|||
Other operations
|
15,872
|
|
|
19,078
|
|
|
(3,206
|
)
|
|
(17
|
)%
|
|||
Total net sales
|
$
|
1,623,173
|
|
|
$
|
2,818,123
|
|
|
$
|
(1,194,950
|
)
|
|
(42
|
)%
|
Adjusted Gross Margin:
|
|
|
|
|
|
|
|
|||||||
Refined products
|
$
|
104,070
|
|
|
$
|
124,101
|
|
|
$
|
(20,031
|
)
|
|
(16
|
)%
|
Natural gas
|
43,734
|
|
|
40,556
|
|
|
3,178
|
|
|
8
|
%
|
|||
Materials handling
|
35,826
|
|
|
33,899
|
|
|
1,927
|
|
|
6
|
%
|
|||
Other operations
|
6,257
|
|
|
6,648
|
|
|
(391
|
)
|
|
(6
|
)%
|
|||
Total adjusted gross margin
|
$
|
189,887
|
|
|
$
|
205,204
|
|
|
$
|
(15,317
|
)
|
|
(7
|
)%
|
Adjusted Unit Gross Margin:
|
|
|
|
|
|
|
|
|||||||
Refined products
|
$
|
0.106
|
|
|
$
|
0.095
|
|
|
$
|
0.011
|
|
|
12
|
%
|
Natural gas
|
$
|
0.976
|
|
|
$
|
0.949
|
|
|
$
|
0.027
|
|
|
3
|
%
|
|
Three Months Ended September 30,
|
|
Increase/(Decrease)
|
||||||||||
|
2016
|
|
2015
|
|
$
|
|
%
|
||||||
|
($ in thousands)
|
|
|
|
|
||||||||
Operating expenses
|
$
|
15,725
|
|
|
$
|
17,870
|
|
|
$
|
(2,145
|
)
|
|
(12)%
|
Selling, general and administrative
|
$
|
19,735
|
|
|
$
|
19,894
|
|
|
$
|
(159
|
)
|
|
(1)%
|
Depreciation and amortization
|
$
|
5,329
|
|
|
$
|
5,188
|
|
|
$
|
141
|
|
|
3%
|
Interest expense, net
|
$
|
6,645
|
|
|
$
|
6,261
|
|
|
$
|
384
|
|
|
6%
|
|
Nine Months Ended September 30,
|
|
Increase/(Decrease)
|
||||||||||
|
2016
|
|
2015
|
|
$
|
|
%
|
||||||
|
($ in thousands)
|
|
|
|
|
||||||||
Operating expenses
|
$
|
49,078
|
|
|
$
|
54,394
|
|
|
$
|
(5,316
|
)
|
|
(10)%
|
Selling, general and administrative
|
$
|
62,099
|
|
|
$
|
71,193
|
|
|
$
|
(9,094
|
)
|
|
(13)%
|
Depreciation and amortization
|
$
|
16,001
|
|
|
$
|
15,365
|
|
|
$
|
636
|
|
|
4%
|
Interest expense, net
|
$
|
19,800
|
|
|
$
|
20,257
|
|
|
$
|
(457
|
)
|
|
(2)%
|
•
|
A U.S. dollar revolving working capital facility of up to $1.0 billion to be used for working capital loans and letters of credit;
|
•
|
A multicurrency revolving working capital facility of up to $120.0 million to be used by Kildair for working capital loans and letters of credit;
|
•
|
A revolving acquisition facility of up to
$550.0 million
to be used for loans and letters of credit to fund capital expenditures and acquisitions and other general corporate purposes related to the Partnership’s current businesses; and
|
•
|
Subject to certain conditions, the U.S. dollar and multicurrency revolving working capital facilities may be increased by $200.0 million in the aggregate. Additionally, subject to certain conditions, the revolving acquisition facility may be increased by $200.0 million.
|
|
Capital Expenditures
|
||||||||||
|
Expansion
|
|
Maintenance
|
|
Total
|
||||||
|
($ in thousands)
|
||||||||||
Three Months Ended September 30,
|
|
|
|
|
|
|
|||||
2016
|
$
|
1,568
|
|
|
$
|
3,018
|
|
|
$
|
4,586
|
|
2015
|
$
|
2,246
|
|
|
$
|
1,854
|
|
|
$
|
4,100
|
|
Nine Months Ended September 30,
|
|
|
|
|
|
|
|||||
2016
|
$
|
5,083
|
|
|
$
|
6,353
|
|
|
$
|
11,436
|
|
2015
|
$
|
4,729
|
|
|
$
|
6,315
|
|
|
$
|
11,044
|
|
|
Nine Months Ended September 30,
|
||||||
|
2016
|
|
2015
|
||||
|
($ in thousands)
|
||||||
Net cash provided by operating activities
|
$
|
107,095
|
|
|
$
|
317,662
|
|
Net cash used in investing activities
|
$
|
(40,354
|
)
|
|
$
|
(10,637
|
)
|
Net cash used in financing activities
|
$
|
(94,263
|
)
|
|
$
|
(296,007
|
)
|
Item 3.
|
Quantitative and Qualitative Disclosures about Market Risk
|
Product Group
|
|
Primary Financial Hedging Instrument
|
Gasolines
|
|
NYMEX RBOB futures contract
|
Distillates
|
|
NYMEX Ultra Low Sulfur Diesel futures contract
|
Residual Fuel Oils
|
|
New York Harbor 1% Sulfur Residual Fuel Oil swaps contract
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Refined products contracts
|
$
|
2,957
|
|
|
$
|
47,481
|
|
|
$
|
(2,176
|
)
|
|
$
|
74,086
|
|
Natural gas contracts
|
(3,370
|
)
|
|
11,435
|
|
|
16,472
|
|
|
12,596
|
|
||||
Total
|
$
|
(413
|
)
|
|
$
|
58,916
|
|
|
$
|
14,296
|
|
|
$
|
86,682
|
|
|
As of September 30, 2016
|
||||||||||||||
|
Fair Value
Measurement |
|
Quoted
Prices in Active Markets Level 1 |
|
Significant
Other Observable Inputs Level 2 |
|
Significant
Unobservable Inputs Level 3 |
||||||||
Financial assets:
|
|
|
|
|
|
|
|
||||||||
Commodity fixed forwards
|
$
|
97,944
|
|
|
$
|
—
|
|
|
$
|
97,944
|
|
|
$
|
—
|
|
Commodity swaps and options
|
4
|
|
|
—
|
|
|
4
|
|
|
—
|
|
||||
Commodity derivatives
|
97,948
|
|
|
—
|
|
|
97,948
|
|
|
—
|
|
||||
Interest rate swaps
|
344
|
|
|
—
|
|
|
344
|
|
|
—
|
|
||||
Other
|
7
|
|
|
—
|
|
|
7
|
|
|
—
|
|
||||
Total
|
$
|
98,299
|
|
|
$
|
—
|
|
|
$
|
98,299
|
|
|
$
|
—
|
|
Financial liabilities:
|
|
|
|
|
|
|
|
||||||||
|
$
|
92
|
|
|
$
|
92
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Commodity fixed forwards
|
56,730
|
|
|
—
|
|
|
56,730
|
|
|
—
|
|
||||
Commodity swaps and options
|
531
|
|
|
—
|
|
|
531
|
|
|
—
|
|
||||
Commodity derivatives
|
57,353
|
|
|
92
|
|
|
57,261
|
|
|
—
|
|
||||
Interest rate swaps
|
1,180
|
|
|
—
|
|
|
1,180
|
|
|
—
|
|
||||
Total
|
$
|
58,533
|
|
|
$
|
92
|
|
|
$
|
58,441
|
|
|
$
|
—
|
|
Item 4.
|
Controls and Procedures
|
Item 1.
|
Legal Proceedings
|
Item 1A.
|
Risk Factors
|
Item 2.
|
Unregistered Sales of Equity Securities and Use of Proceeds
|
(c)
|
None.
|
Item 3.
|
Defaults Upon Senior Securities
|
Item 4.
|
Mine Safety Disclosures
|
Item 5.
|
Other Information
|
Item 6.
|
Exhibits
|
*
|
Filed herewith.
|
**
|
Furnished herewith in accordance with Item 601(b)(32) of Regulation S-K.
|
|
|
|
SPRAGUE RESOURCES LP
|
|
|
|
|
|
By:
|
Sprague Resources GP LLC,
|
|
|
Its General Partner
|
|
|
|
Date: November 7, 2016
|
|
/s/ Gary A. Rinaldi
|
|
|
Senior Vice President, Chief Operating Officer and Chief Financial Officer (on behalf of the registrant, and in his capacity as Principal Financial Officer)
|
Exhibit
No.
|
|
Description
|
|
|
|
3.1
|
|
First Amended and Restated Agreement of Limited Partnership of Sprague Resources LP (incorporated by reference to Exhibit 3.1 of Sprague Resources LP’s Current Report on Form 8-K filed November 5, 2013 (File No. 001-36137)).
|
|
|
|
3.2
|
|
First Amended and Restated Limited Liability Company Agreement of Sprague Resources GP LLC (incorporated by reference to Exhibit 3.2 of Sprague Resources LP’s Current Report on Form 8-K filed November 5, 2013 (File No. 001-36137)).
|
|
|
|
10.1*
|
|
Amended and Restated Director Compensation Summary, Sprague Resources GP LLC.
|
|
|
|
31.1*
|
|
Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, Rule 13a-14(a) /15d-14(a), by Chief Executive Officer.
|
|
|
|
31.2*
|
|
Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, Rule 13a-14(a) /15d-14(a), by Chief Financial Officer.
|
|
|
|
32.1**
|
|
Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, by Chief Executive Officer.
|
|
|
|
32.2**
|
|
Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, by Chief Financial Officer.
|
|
|
|
101.INS*
|
|
XBRL Instance Document
|
|
|
|
101.SCH*
|
|
XBRL Taxonomy Extension Schema Document
|
|
|
|
101.CAL*
|
|
XBRL Taxonomy Extension Calculation
|
|
|
|
101.DEF*
|
|
XBRL Taxonomy Extension Definition
|
|
|
|
101.LAB*
|
|
XBRL Taxonomy Extension Label Linkbase
|
|
|
|
101.PRE*
|
|
XBRL Taxonomy Extension Presentation
|
*
|
Filed herewith.
|
**
|
Furnished herewith in accordance with Item 601(b)(32) of Regulation S-K.
|
|
|
1.
|
I have reviewed this quarterly report on Form 10-Q of Sprague Resources LP;
|
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
|
|
a.
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
|
b.
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
|
c.
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
|
d.
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
|
|
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
|
b.
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
Date: November 7, 2016
|
|
/s/ DAVID C. GLENDON
|
David C. Glendon
|
President and Chief Executive Officer
|
1.
|
I have reviewed this quarterly report on Form 10-Q of Sprague Resources LP;
|
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
|
|
a.
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
|
b.
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
|
c.
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
|
d.
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
|
|
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
|
b.
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
Date: November 7, 2016
|
|
/s/ GARY A. RINALDI
|
Gary A. Rinaldi
|
Senior Vice President, Chief Operating Officer and Chief Financial Officer
|
1.
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 as amended; and
|
2.
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Partnership.
|
Date: November 7, 2016
|
|
/s/ DAVID C. GLENDON
|
David C. Glendon
|
President and Chief Executive Officer
|
(Principal Executive Officer)
|
1.
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 as amended; and
|
2.
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Partnership.
|
Date: November 7, 2016
|
|
/s/ GARY A. RINALDI
|
Gary A. Rinaldi
|
Senior Vice President, Chief Operating Officer and Chief Financial Officer
|
(Principal Financial Officer)
|