SPRAGUE RESOURCES LP Management’s Discussion and Analysis of Financial Condition and Results of Operations (Form 10-Q)

As used in this Quarterly Report on Form 10-Q ("Quarterly Report"), unless the
context otherwise requires, prior to May 28, 2021, references to "Sprague
Resources," the "Partnership," "we," "our," "us," or like terms, refer to
Sprague Resources LP and its subsidiaries; references to our "General Partner"
refer to Sprague Resources GP LLC; references to "Axel Johnson" or the "Sponsor"
refer to Axel Johnson Inc. and its controlled affiliates, collectively, other
than Sprague Resources, its subsidiaries and its General Partner; and references
to "Sprague Holdings" refer to Sprague Resources Holdings LLC, a wholly owned
subsidiary of Axel Johnson and the owner of our General Partner. Prior to May
28, 2021, our General Partner was a wholly owned subsidiary of Axel Johnson.

As used in this Quarterly Report on Form 10-Q ("Quarterly Report"), unless the
context otherwise requires, effective May 28, 2021, references to "Sprague
Resources," the "Partnership," "we," "our," "us," or like terms, refer to
Sprague Resources LP and its subsidiaries; references to our "General Partner"
refer to Sprague Resources GP LLC; references to "Hartree" or the "Sponsor"
refer to Hartree Partners, LP, other than Sprague Resources, its subsidiaries
and its General Partner; and references to "Sprague Holdings" refer to Sprague
HP Holdings, LLC, a wholly owned subsidiary of Hartree and the owner of our
General Partner. Effective May 28, 2021, our General Partner is a wholly owned
subsidiary of Hartree.

CAUTION REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report and any information incorporated by reference, contains
statements that we believe are "forward-looking statements". Forward looking
statements are statements that express our belief, expectations, estimates, or
intentions, as well as those statements we make that are not statements of
historical fact, including, among other things, statements relating to the
Transaction (as defined below) and the expected benefits thereof.
Forward-looking statements provide our current expectations and contain
projections of results of operations, or financial condition, and/ or forecasts
of future events. Words such as "may", "assume", "forecast", "position", "seek",
"predict", "strategy", "expect", "intend", "plan", "estimate", "anticipate",
"believe", "project", "budget", "outlook", "potential", "will", "could",
"should", or "continue", and similar expressions are used to identify
forward-looking statements. They can be affected by assumptions used or by known
or unknown risks or uncertainties which could cause our actual results to differ
materially from those contained in any forward-looking statement. Consequently,
no forward-looking statements can be guaranteed. You are cautioned not to place
undue reliance on any forward-looking statements.

Factors that could cause actual results to differ from those in the
forward-looking statements include, but are not limited to: (i) changes in
federal, state, local, and foreign laws or regulations including those that
permit us to be treated as a partnership for federal income tax purposes, those
that govern environmental protection and those that regulate the sale of our
products to our customers; (ii) changes in the marketplace for our products or
services resulting from events such as dramatic changes in commodity prices,
increased competition, increased energy conservation, increased use of
alternative fuels and new technologies, changes in local, domestic or
international inventory levels, seasonality, changes in supply, weather and
logistics disruptions, or general reductions in demand; (iii) security risks
including terrorism and cyber-risk, (iv) adverse weather conditions,
particularly warmer winter seasons and cooler summer seasons, climate change,
environmental releases and natural disasters; (v) adverse local, regional,
national, or international economic conditions, including but not limited to,
public health crises that reduce economic activity, affect the demand for travel
(public and private), as well as impacting costs of operation and availability
of supply (including the coronavirus COVID-19 outbreak), unfavorable capital
market conditions and detrimental political developments such as the inability
to move products between foreign locales and the United States; (vi) nonpayment
or nonperformance by our customers or suppliers; (vii) shutdowns or
interruptions at our terminals and storage assets or at the source points for
the products we store or sell, disruptions in our labor force, as well as
disruptions in our information technology systems; (viii) unanticipated capital
expenditures in connection with the construction, repair, or replacement of our
assets; (ix) our ability to integrate acquired assets with our existing assets
and to realize anticipated cost savings and other efficiencies and benefits; and
(x) our ability to successfully complete our organic growth and acquisition
projects and/or to realize the anticipated financial and operational benefits.
These are not all of the important factors that could cause actual results to
differ materially from those expressed in our forward-looking statements. Other
known or unpredictable factors could also have material adverse effects on
future results. Consequently, all of the forward-looking statements made in this
Quarterly Report are qualified by these cautionary statements, and we cannot
assure you that actual results or developments that we anticipate will be
realized or, even if realized, will have the expected consequences to or effect
on us or our business or operations. In light of these risks, uncertainties and
assumptions, the forward-looking events discussed in this Quarterly Report may
not occur.

When considering these forward-looking statements, please note that we provide
additional cautionary discussion of risks and uncertainties in our Annual Report
on Form 10-K for the year ended December 31, 2021, as filed with the U.S.
Securities and Exchange Commission ("SEC") on March 4, 2022 (the "2021 Annual
Report"), in Part I, Item 1A "Risk Factors", in Part II, Item 7 "Management's
Discussion and Analysis of Financial Condition and Results of Operations", and
in Part II, Item 7A "Quantitative and Qualitative Disclosures About Market
Risk". In light of these risks, uncertainties and assumptions, the
forward-looking events discussed in this Quarterly Report may not occur.

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Forward-looking statements contained in this Quarterly Report speak only as of
the date of this Quarterly Report (or other date as specified in this Quarterly
Report) or as of the date given if provided in another filing with the SEC. We
undertake no obligation, and disclaim any obligation, to publicly update, review
or revise any forward-looking statements to reflect events or circumstances
after the date of such statements. All forward looking statements attributable
to us or any person acting on our behalf are expressly qualified in their
entirety by the cautionary statements contained or referred to in our existing
and future periodic reports filed with the SEC.
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Insight

We are a Delaware limited partnership formed in June 2011 by Sprague Holdings
and our General Partner. We engage in the purchase, storage, distribution and
sale of refined products and natural gas, and provide storage and handling
services for a broad range of materials. In October 2013, we became a publicly
traded master limited partnership ("MLP") and our common units representing
limited partner interests are listed on the New York Stock Exchange ("NYSE")
under the ticker symbol "SRLP".

Our Predecessor was founded in 1870 as the Charles H. Sprague Company in Boston,
Massachusetts; and, in 1905, the company opened the Penobscot Coal and Wharf
Company, a tidewater terminal located in Searsport, Maine. By World War II, the
company was operating eleven terminals and a fleet of two dozen vessels
transporting coal and other products throughout the world. As fuel needs
diversified in the United States, the company expanded its product offerings and
invested in terminals, tankers, and product handling activities. In 1959, the
company expanded its oil marketing activities via entry into the distillate oil
market. In 1970, the company was sold to Royal Dutch Shell's Asiatic Petroleum
subsidiary; and, in 1972, Royal Dutch Shell sold the company to Axel Johnson
Inc., a member of the Axel Johnson Group of Stockholm, Sweden.

On April 20, 2021, the Partnership and Hartree Partner, LP ("Hartree") announced
that Sprague Holdings entered into an agreement to sell to Sprague HP Holdings,
LLC (a wholly-owned subsidiary of Hartree) the interest of Sprague Holdings in
the General Partner, the incentive distribution rights and all of the common
units representing limited partner interests that Sprague Holdings owned in the
Partnership (the "Transaction"). The Transaction was completed and effective on
May 28, 2021.

On January 11, 2022, the Partnership received an unsolicited non-binding
proposal from Hartree pursuant to which Hartree would acquire all of the
outstanding common units of the Partnership that Hartree and its affiliates do
not already own in exchange for $16.50 in cash for each such common unit. The
board of directors of the General Partner has delegated authority to evaluate
and negotiate the proposal to its conflicts committee. The conflicts committee's
evaluation process is currently ongoing.

The Partnership is one of the largest independent wholesale distributors of
refined products in the Northeast United States based on aggregate terminal
capacity. We own, operate and/or control a network of refined products and
materials handling terminals and storage facilities predominantly located in the
Northeast United States from New York to Maine and in Quebec, Canada that have a
combined storage tank capacity of approximately 14.3 million barrels for refined
products and other liquid materials, as well as approximately 2.0 million square
feet of materials handling capacity. We also have access to approximately 51
third-party terminals in the Northeast United States through which we sell or
distribute refined products pursuant to rack, exchange and throughput
agreements.

We operate under four business segments: refined products, natural gas,
materials handling and other operations. See Note 8 - Segment Reporting to our
Condensed Consolidated Financial Statements for a presentation of financial
results by reportable segment and see Part I, Item 2 Management's Discussion and
Analysis of Financial Condition and Results of Operations-Results of Operations
for a discussion of financial results by segment.

In our refined products segment we purchase a variety of refined products, such
as heating oil, diesel fuel, residual fuel oil, kerosene, jet fuel and gasoline
(primarily from refining companies, trading organizations and producers), and
sell them to our customers. We have wholesale customers who resell the refined
products we sell to them and commercial customers who consume the refined
products directly. Our wholesale customers consist of approximately 900 home
heating oil retailers and diesel fuel and gasoline resellers. Our commercial
customers include federal and state agencies, municipalities, regional transit
authorities, drill sites, large industrial companies, real estate management
companies, hospitals, educational institutions, and asphalt paving companies.
Our customers also include businesses engaged in the development of natural gas
resources in Pennsylvania and surrounding states.

In our natural gas segment, we purchase natural gas from natural gas producers and trading companies and sell and distribute natural gas to approximately 15,000 commercial and industrial customer locations in 13 northeastern and central states. from the Atlantic to the United States and Canada.

Our materials handling segment is generally conducted under multi-year
agreements as either fee-based activities or as leasing arrangements when the
right to use an identified asset (such as storage tanks or storage locations)
has been conveyed in the agreement. We offload, store and/or prepare for
delivery a variety of customer-owned products, including asphalt, clay slurry,
salt, gypsum, crude oil, residual fuel oil, coal, petroleum coke, caustic soda,
tallow, pulp and heavy equipment. Historically, a majority of our materials
handling activity has generated qualified income.

Our other operating segment primarily includes the marketing and distribution of coal conducted in our Portland, Maine terminal and the commercial trucking activity carried out by our Canadian subsidiary.

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We take title to the products we sell in our refined products and natural gas
segments. In order to manage our exposure to commodity price fluctuations, we
use derivatives and forward contracts to maintain a position that is
substantially balanced between product purchases and product sales. We do not
take title to any of the products in our materials handling segment.

As of March 31, 2022, our Sponsor, through its ownership of Sprague Holdings,
owns 19,548,849 common units representing an aggregate of 74.5% of the limited
partner interest in the Partnership. Sprague Holdings also owns the General
Partner, which in turn owns a non-economic interest in the Partnership. Sprague
Holdings currently holds incentive distribution rights ("IDRs") which entitle it
to receive increasing percentages of the cash the Partnership distributes from
distributable cash flow in excess of $0.7676 per unit per quarter, up to a
maximum of 50.0%. The maximum distribution of 50% does not include any
distributions that Sprague Holdings may receive on any limited partner units
that it owns.

COVID-19

In 2022, a wide array of sectors continue to be affected by COVID-19, its
variants and the related supply chain disruptions brought on by the pandemic,
including but not limited to energy, transportation, manufacturing and
commercial and retail businesses and global economic conditions continue to be
volatile. With the easing of restrictions, health advancements and other ongoing
measures to alleviate the pandemic in 2021 and the first quarter of 2022, demand
for refined products appears to have normalized. In order to continue to
mitigate the effects of the pandemic, we continue to focus on the safety of
employees and other stakeholders as well as initiatives relating to cost
reduction, liquidity and operating efficiencies.

The Partnership makes estimates and assumptions that affect the reported amounts
on these consolidated financial statements and accompanying notes as of the date
of the financial statements. The Partnership assessed accounting estimates that
require consideration of forecasted financial information, including, but not
limited to, the allowance for credit losses, the carrying value of goodwill,
intangible assets, and other long-lived assets. This assessment was conducted in
the context of information reasonably available to the Partnership, as well as
consideration of the future potential impacts of COVID-19, and its variants, on
the Partnership's business as of March 31, 2022. While market conditions for our
products and services appear to have stabilized as compared to a year ago, the
pandemic remains fluid, indicating that the full impact may not have been
realized across our business and operations. The economic and operational
landscape has been altered, and it is difficult to determine whether such
changes are temporary or permanent, with challenges related to staffing, supply
chain, and transportation globally. Accordingly if the impact is more severe or
longer in duration than the partnership has assumed, such impact could
potentially result in impairments and increases in credit allowances. As we
strategize with regard to fiscal year 2022 and beyond, we continue to monitor
the evolving impacts of COVID-19 and its variants closely and adapting our
operations to changing demand patterns and the potential impact of the COVID-19
pandemic on future cash flows and access to adequate liquidity.

How management assesses our operating results

Our management uses a variety of financial and operational measures to analyze our performance. These measures include: (1) Adjusted EBITDA and Adjusted Gross Margin, (2) Operating Expenses, (3) Selling, General, and Administrative (or SG&A) Expenses, and (4) Degree Days of heating.

EBITDA, Adjusted EBITDA and Adjusted Gross Margin used in this quarterly report are non-GAAP financial measures.

EBITDA and Adjusted EBITDA

Management believes that adjusted EBITDA is an aid in assessing repeatable
operating performance that is not distorted by non-recurring items or market
volatility and 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 unitholders.

We define EBITDA as net income before interest, income taxes, depreciation and
amortization. We define adjusted EBITDA as EBITDA adjusted for the change in
unrealized hedging gains (losses) with respect to refined products and natural
gas inventory, and natural gas transportation contracts, adjusted for changes in
the fair value of contingent consideration, and adjusted for the impact of
acquisition related expenses.

EBITDA and Adjusted EBITDA are used as supplemental financial measures by external users of our financial statements, such as investors, commercial suppliers, research analysts and commercial banks to assess:

•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 income which, when returned in cash, will be available to pay interest on our debt and make distributions to our shareholders;

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•Repeatable operating performance not distorted by non-recurring items or market volatility; and

•The viability of acquisition and investment projects.

EBITDA and adjusted EBITDA are not prepared in accordance with GAAP and should
not be considered alternatives to net income or operating income, or any other
measure of financial performance presented in accordance with GAAP. EBITDA and
adjusted EBITDA exclude some, but not all, items that affect net income and
operating income.

The GAAP measure most directly comparable to EBITDA and adjusted EBITDA is net
income. EBITDA and adjusted EBITDA should not be considered as alternatives to
net income or cash provided by (used in) operating activities, or any other
measure of financial performance or liquidity presented in accordance with GAAP.
EBITDA and adjusted EBITDA are not presentations made in accordance with GAAP
and have important limitations as analytical tools and should not be considered
in isolation or as substitutes for analysis of our results as reported under
GAAP. Because EBITDA and adjusted EBITDA exclude some, but not all, items that
affect net income and are defined differently by different companies, our
definitions of EBITDA and adjusted EBITDA may not be comparable to similarly
titled measures of other companies.

We recognize that the usefulness of EBITDA and Adjusted EBITDA as assessment tools may have certain limitations, including:

•EBITDA and adjusted EBITDA do not include interest expense. Because we have
borrowed money in order to finance our operations, interest expense is a
necessary element of our costs and impacts our ability to generate profits and
cash flows. Therefore, any measure that excludes interest expense may have
material limitations;

•EBITDA and adjusted EBITDA do not include depreciation charges. Because fixed assets, depreciation, and amortization are a necessary part of our costs and our ability to generate profits, any measure that excludes depreciation and amortization expenses can have significant limitations;

•EBITDA and adjusted EBITDA do not include provision for income taxes. Because
the payment of income taxes is a necessary element of our costs, any measure
that excludes income tax expense may have material limitations;

•EBITDA and Adjusted EBITDA do not reflect capital expenditures or future capital expenditure requirements or contractual commitments;

•EBITDA and Adjusted EBITDA do not reflect changes or cash requirements for working capital; and

•EBITDA and adjusted EBITDA do not allow us to analyze the effect of certain recurring and non-recurring items that significantly affect our net income.

Adjusted gross margin

Management 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. In determining adjusted gross margin, management adjusts its
segment results for the impact of the changes in unrealized gains and losses
with regard to refined products and natural gas inventory, and natural gas
transportation contracts, which are not marked to market for the purpose of
recording unrealized gains or losses in net income. Adjusted gross margin is
also used by external users of our consolidated financial statements to assess
our economic results of operations and our commodity market value reporting to
lenders.

We define adjusted gross margin as net sales less cost of products sold
(exclusive of depreciation and amortization) adjusted for the impact of the
changes in unrealized gains and losses with regard to refined products and
natural gas inventory, and natural gas transportation contracts, which are not
marked to market for the purpose of recording unrealized gains or losses in net
income. Adjusted gross margin has no impact on reported volumes or net sales.

Adjusted gross margin is used as a supplemental financial measure by management to describe our operations and economic performance to investors, commercial suppliers, research analysts and commercial banks to assess:

•The economic results of our operations;

•The market value of our natural gas inventory and transportation contracts for financial reporting to our lenders, as well as for borrowing basis purposes; and

•Repeatable operational performance that is not distorted by non-recurring items or market volatility.

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Adjusted gross margin is not prepared in accordance with GAAP and should not be considered an alternative to net profit or operating profit or any other measure of financial performance presented in accordance with GAAP.

We define adjusted unit gross margin as adjusted gross margin divided by units
sold, as expressed in gallons for refined products and in MMBtus for natural
gas.

For a reconciliation of adjusted gross margin and adjusted EBITDA to the GAAP
measures most directly comparable, see the reconciliation tables included in
"Results of Operations." See Note 8 - Segment Reporting to our Condensed
Consolidated Financial Statements for a presentation of our financial results by
reportable segment.

Management evaluates our segment performance based on adjusted gross margin.
Based on the way we manage our business, it is not reasonably possible for us to
allocate the components of operating expenses, selling, general and
administrative expenses and depreciation and amortization among the operating
segments.

Operating Expenses

Operating expenses are costs associated with the operation of the terminals and
truck fleet used in our business. Employee wages, pension and 401(k) plan
expenses, boiler fuel, repairs and maintenance, utilities, insurance, property
taxes, services and lease payments comprise the most significant portions of our
operating expenses. Employee wages and related employee expenses included in our
operating expenses are incurred on our behalf by our General Partner and
reimbursed by us. These expenses remain relatively stable independent of the
volumes through our system but can fluctuate depending on the activities
performed during a specific period.

Selling, general and administrative expenses

Selling, general and administrative expenses ("SG&A") include employee salaries
and benefits, discretionary bonus, marketing costs, corporate overhead,
professional fees, information technology and office space expenses. Employee
wages, related employee expenses and certain rental costs included in our SG&A
expenses are incurred on our behalf by our General Partner and reimbursed by us.

Heating degree days

A "degree day" is an industry measurement of temperature designed to evaluate
energy demand and consumption. Degree days are based on how much the average
temperature departs from a human comfort level of 65°F. Each degree of
temperature above 65°F is counted as one cooling degree day, and each degree of
temperature below 65°F is counted as one heating degree day. Degree days are
accumulated over the course of a year and can be compared to a monthly or a
long-term average ("normal") to see if a month or a year was warmer or cooler
than usual. Degree days are officially observed by the National Weather Service
and archived by the National Climate Data Center. In order to incorporate more
recent average information and to better reflect the geographic locations of our
customer base, we report degree day information for Boston and New York City
(weighted equally) with a historical average for the same geographic locations
over the previous ten-year period.

Hedging activities

We hedge our inventory within the guidelines set in our risk management
policies. In a rising commodity price environment, the market value of our
inventory will generally be higher than the cost of our inventory. For GAAP
purposes, we are required to value our inventory at the lower of cost or net
realizable value. The hedges on this inventory will lose value as the value of
the underlying commodity rises, creating hedging losses. Because we do not
utilize hedge accounting, GAAP requires us to record those hedging losses in our
income statements. In contrast, in a declining commodity price market we
generally incur hedging gains. GAAP requires us to record those hedging gains in
our income statements.

The refined products inventory market valuation is calculated using daily
independent bulk market price assessments from major pricing services (either
Platts or Argus). These third-party price assessments are primarily based in
large, liquid trading hubs including but not limited to, New York Harbor (NYH)
or US Gulf Coast (USGC), with our inventory values determined after adjusting
these prices to the various inventory locations by adding expected cost
differentials (primarily freight) compared to one of these supply sources. Our
natural gas inventory is limited, with the valuation updated monthly based on
the volume and prices at the corresponding inventory locations. The prices are
based on the most applicable monthly Inside FERC, or IFERC, assessments
published by Platts near the beginning of the following month.

Similarly, we can hedge our natural gas transportation assets (i.e., pipeline
capacity) within the guidelines set in our risk management policy. Although we
do not own any natural gas pipelines, we secure the use of pipeline capacity to
support our
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natural gas requirements by either leasing capacity over a pipeline for a
defined time period or by being assigned capacity from a local distribution
company for supplying our customers. As the spread between the price of gas
between the origin and delivery point widens (assuming the value exceeds the
fixed charge of the transportation), the market value of the natural gas
transportation contracts assets will typically increase. If the market value of
the transportation asset exceeds costs, we may seek to hedge or "lock in" the
value of the transportation asset for future periods using available financial
instruments. For GAAP purposes, the increase in value of the natural gas
transportation assets is not recorded as income in the income statements until
the transportation is utilized in the future (i.e., when natural gas is
delivered to our customer). If the value of the natural gas transportation
assets increase, the hedges on the natural gas transportation assets lose value,
creating hedging losses in our income statements. The natural gas transportation
assets market value is calculated daily based on the volume and prices at the
corresponding pipeline locations. The daily prices are based on trader assessed
quotes which represent observable transactions in the market place, with the
end-month valuations primarily based on Platts prices where available or adding
a location differential to the price assessment of a more liquid location.

As described above, pursuant to GAAP, we value our commodity derivative hedges
at the end of each reporting period based on current commodity prices and record
hedging gains or losses, as appropriate. Also as described above, and pursuant
to GAAP, our refined products and natural gas inventory and natural gas
transportation contract rights, to which the commodity derivative hedges relate,
are not marked to market for the purpose of recording gains or losses. In
measuring our operating performance, we rely on our GAAP financial results, but
we also find it useful to adjust those numbers to reflect the changes in
unrealized gains and losses with regard to refined products and natural gas
inventory, and natural gas transportation contracts. By making such adjustments,
as reflected in adjusted gross margin and adjusted EBITDA, we believe that we
are able to align more closely hedging gains and losses to the period in which
the revenue from the sale of inventory and income from transportation contracts
relating to those hedges is realized.

Trends and factors affecting our business

In addition to the other information set forth in this report, please refer to
our 2021 Annual Report for a discussion of the trends and factors that impact
our business.
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Operating results

Our current and future results of operations may not be comparable to our
historical results of operations. Our results of operations may be impacted by,
among other things, swings in commodity prices, primarily in refined products
and natural gas, and acquisitions or dispositions. We use economic hedges to
minimize the impact of changing prices on refined products and natural gas
inventory. As a result, commodity price increases at the end of a period can
create lower gross margins as the economic hedges, or derivatives, for such
inventory may lose value, whereas an increase in the value of such inventory is
disregarded for GAAP financial reporting purposes and recorded at the lower of
cost or net realizable value. Please read "How Management Evaluates Our Results
of Operations."

The following tables set forth information regarding our results of operations
for the periods presented:

                                                             Three Months Ended March 31,                         Increase/(Decrease)
                                                              2022                      2021                      $                      %
                                                                                           (in thousands)
Net sales                                            $     1,813,315               $ 1,036,134          $          777,181                 75  %

Cost of goods sold (excluding depreciation and impairment)

                                              1,729,078                   924,782                     804,296                 87  %
Operating expenses                                            23,235                    19,232                       4,003                 21  %
Selling, general and administrative                           28,720                    25,239                       3,481                 14  %
Depreciation and amortization                                  8,126                     8,482                        (356)                (4) %
Total operating costs and expenses                         1,789,159                   977,735                     811,424                 83  %

Operating income                                              24,156                    58,399                     (34,243)               (59) %
Other income                                                      (1)                        2                          (3)              (150) %
Interest income                                                   28                        67                         (39)               (58) %
Interest expense                                             (10,572)                   (8,815)                      1,757                 20  %
Income before income taxes                                    13,611                    49,653                     (36,042)               (73) %
Income tax benefit (provision)                                 4,335                      (871)                     (5,206)              (598) %
Net income                                           $        17,946               $    48,782          $          (30,836)               (63) %



























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Reconciliation with adjusted gross margin, EBITDA and adjusted EBITDA

The following table sets forth a reconciliation of our consolidated operating
income to our total adjusted gross margin, a non-GAAP measure, for the periods
presented and a reconciliation of our consolidated net income to EBITDA and
Adjusted EBITDA, non-GAAP measures, for the periods presented. See above
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - How Management Evaluates Our Results of Operations - EBITDA and
Adjusted EBITDA" of this report. The table below also presents information on
weather conditions for the periods presented.

                                                                  Three Months Ended March 31,
                                                                         2022                   2021
                                                                           

(in thousands) Reconciliation of operating income to adjusted gross margin: operating income

                                                  $       24,156           $    58,399

Operating expenses and expenses not allocated to operating segments: Operating expenses

                                                        23,235                19,232
Selling, general and administrative                                       28,720                25,239
Depreciation and amortization                                              8,126                 8,482

Add/(deduct):
Change in unrealized loss (gain) on inventory (1)                         15,369               (26,257)

Change in the unrealized value of natural gas transport contracts (2)

                                                             41,923                21,116
Total adjusted gross margin (3):                                  $      141,529           $   106,211
Adjusted Gross Margin by Segment:
Refined products                                                  $       54,126           $    51,033
Natural gas                                                               71,351                41,089
Materials handling                                                        13,130                12,076
Other operations                                                           2,922                 2,013
Total adjusted gross margin                                       $      141,529           $   106,211
Reconciliation of Net Income to Adjusted EBITDA
Net income                                                        $       17,946           $    48,782
Add/(deduct):
Interest expense, net                                                     10,544                 8,748
Tax provision                                                             (4,335)                  871
Depreciation and amortization                                              8,126                 8,482
EBITDA (3):                                                       $       32,281           $    66,883
Add/(deduct):
Change in unrealized loss (gain) on inventory (1)                         15,369               (26,257)

Change in the unrealized value of natural gas transport contracts (2)

                                                             41,923                21,116

Gain on sale of capital assets outside the normal course of business, including gain on insurance recoveries

   -                    (2)

Other adjustments (4)                                                         31                    35
Adjusted EBITDA                                                   $       89,604           $    61,775
Other Data:
Ten Year Average Heating Degree Days (5)                                   2,586                 2,606
Heating Degree Days (5)                                                    2,603                 2,539
Variance from average heating degree days                                      1   %                (3) %
Variance from prior period heating degree days                                 3   %                17  %


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(1)Inventory is valued at the lower of cost or net realizable value. The
adjustment related to change in unrealized gain on inventory which is not
included in net income, represents the estimated difference between inventory
valued at the lower of cost or net realizable value as compared to market
values. 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.
(2)Represents our estimate of the change in fair value of the natural gas
transportation contracts which are not recorded in net 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 income.
(3)For a discussion of the non-GAAP financial measures EBITDA, adjusted EBITDA
and adjusted gross margin, see "How Management Evaluates Our Results of
Operations."
(4)Represents accretion expense related to asset retirement obligations.
(5)For purposes of evaluating our results of operations, we use heating degree
day amounts as reported by the NOAA Regional Climate Center. In order to
incorporate recent average information and to reflect the geographic locations
of our customer base, we report degree day information for Boston and New York
City (weighted equally) with a historical average for the same geographic
locations over the previous ten-year period.














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Analysis of operating segments

Three Months Ended March 31, 2022 compared to Three Months Ended March 31, 2021

                                                        Three Months Ended March 31,                          Increase/(Decrease)
                                                         2022                       2021                      $                      %
                                                                     (in thousands, except adjusted unit gross margin)
Volumes:
Refined products (gallons)                             565,668                     515,845                      49,823                 10  %
Natural gas (MMBtus)                                    17,661                      18,835                      (1,174)                (6) %
Materials handling (short tons)                            631                         466                         165                 35  %
Materials handling (gallons)                            88,154                      57,859                      30,295                 52  %
Net Sales:
Refined products                               $     1,666,830                 $   916,201          $          750,629                 82  %
Natural gas                                            125,844                     102,575                      23,269                 23  %
Materials handling                                      13,093                      12,046                       1,047                  9  %
Other operations                                         7,548                       5,312                       2,236                 42  %
Total net sales                                $     1,813,315                 $ 1,036,134          $          777,181                 75  %
Adjusted Gross Margin:
Refined products                               $        54,126                 $    51,033          $            3,093                  6  %
Natural gas                                             71,351                      41,089                      30,262                 74  %
Materials handling                                      13,130                      12,076                       1,054                  9  %
Other operations                                         2,922                       2,013                         909                 45  %
Total adjusted gross margin                    $       141,529                 $   106,211          $           35,318                 33  %
Adjusted Unit Gross Margin:
Refined products                               $         0.096                 $     0.099          $           (0.003)                (3) %
Natural gas                                    $         4.040                 $     2.182          $            1.858                 85  %



Refined Products

Refined products net sales increased $750.6 million, or 82%, compared to the
same period last year, with the 66% higher average sales price the key factor.
Volumes were 10% higher, also contributing to the higher net sales. Prices were
generally on an upward trend throughout the period as concern over inventory
levels persisted. The price increases were particularly evident following the
late February invasion of the Ukraine by Russia and the associated geopolitical
unrest. Volume gains were higher for all product groups, with the increase the
highest for distillates. The percentage increase in volume was particularly
strong for transportation fuels, with Sprague's gain for both gasoline and
on-road diesel well above that for the overall United States. Residual fuel
volumes were also higher during this time period, partly due to the escalation
in prices of competing fuels such as natural gas and coal.

Refined products adjusted gross margin increased $3.1 million, or 6%, compared
to the same period last year as a result of the higher volumes. Overall unit
margins were 3% lower compared to the same period last year due to less
attractive conditions to purchase, store, and hedge oil inventory as well as
margin pressure in the escalating price environment. These negative factors were
particularly impactful to our Canadian operations.

Natural gas

Natural gas net sales increased $23.3 million, or 23%, compared to the same
period last year due to a 31% gain in average sales price. Volumes declined by
6% compared to the same period last year partially offsetting the impact of the
higher prices on net sales.

Natural gas adjusted gross margin increased $30.3 million, or 74%, compared to
the same period last year due to an increase in adjusted unit gross margins. The
gain in adjusted unit gross margins reflect higher prices and generally more
volatile market conditions compared to last year, impacted by periods of cold
weather and geopolitical tension following the invasion of Ukraine by Russia.
Price increases and higher volatility occurred in the cash as well as the
forward markets leading to supply, inventory, and forward position optimization
opportunities. In addition, in accordance with fair value standards under GAAP,
there was an $8.4 million gain associated with the quarterly fair value
measurement of the credit risk associated with our natural gas derivative assets
and liabilities.

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Materials Handling

Materials handling net sales and adjusted gross margin were $1.1 million, or 9%
higher than the same period last year. The gain was mostly due to an increase in
the Canadian operations, reflecting a higher level of 3rd-party storage. Margins
in the U.S. operations were up slightly at $0.1 million higher than last year,
with gains in salt, pulp, and general stevedoring requirements more than
offsetting a decline in asphalt. The largest changes were the reduction in
asphalt margin because of the sale of the Oswego, NY terminal in late April 2021
and the termination of the asphalt contract at the Everett, MA terminal at the
end of 2021 and the gain due to the higher salt margin following the low
activity last year.

Other operations

Net sales from other operations increased $2.2 million, or 42%, driven primarily
by higher coal volumes and prices compared to the same period last year. The
increased coal prices reflect the higher price environment for this commodity
that began in the latter part of 2021 as well as a further spike in prices
following the Russian invasion of the Ukraine in late February. Adjusted gross
margin was $0.9 million or 45% higher than last year, due largely to increased
coal margins, with a higher contribution from the Canadian trucking operations
also a factor.


Operating Costs and Expenses

Three Months Ended March 31, 2022 compared to Three Months Ended March 31, 2021

                                                   Three Months Ended March 31,                         Increase/(Decrease)
                                                     2022                  2021                       $                         %
                                                                                    (in thousands)
Operating expenses                            $        23,235          $   19,232          $              4,003                21%
Selling, general and administrative           $        28,720          $   25,239          $              3,481                14%
Depreciation and amortization                 $         8,126          $    8,482          $               (356)               (4)%
Interest expense, net                         $        10,544          $    8,748          $              1,796                21%


Operating Expenses. Operating expenses increased $4.0 million, or 21%, compared
to the same period last year, primarily reflecting an increase of $1.1 million
of insurance related costs, $1.0 million of utilities, $0.8 million of employee
related costs, $0.6 million of stockpile and boiler fuel expenses, and $0.3
million of vehicle fuel expenses.

Selling, general and administrative expenses. SG&A spending increased $3.5 millionor 14%, compared to the same period last year, mainly due to an increase in $1.6 million in legal costs, $0.7 million in commissions on sales,
$0.5 million in charge of variable compensation, $0.2 million in insurance-related costs, and $0.2 million in personnel costs.

Depreciation and amortization. Depreciation and amortization were roughly stable, with the increase in amortization expense offset by the decrease in amortization expense.

Interest Expense, net. Interest expense, net increased $1.8 million, or 21%,
compared to the same period last year primarily due to increased net borrowing
rates.


Cash and capital resources

Liquidity

Our primary liquidity needs are to fund our working capital requirements,
operating expenses, capital expenditures and quarterly distributions. Cash
generated from operations, our borrowing capacity under our Credit Agreement (as
defined below) and potential future issuances of additional partnership
interests or debt securities are our primary sources of liquidity. At March 31,
2022, we had a working capital deficit of $99.6 million.
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As of March 31, 2022, the undrawn borrowing capacity under the working capital
facilities of our Credit Agreement was $250.9 million and the undrawn borrowing
capacity under the acquisition facility was $48.3 million. We enter our seasonal
peak period during the fourth quarter of each year, during which inventory,
accounts receivable and debt levels increase. As we move out of the winter
season at the end of the first quarter of the following year, typically
inventory is reduced, accounts receivable are collected and converted into cash
and debt is paid down. During the three months ended March 31, 2022, the amount
drawn under the working capital facilities of our Credit Agreement fluctuated
from a low of $413.8 million to a high of $564.9 million.

We believe that we have sufficient liquid assets, cash flow from operations and
borrowing capacity under our Credit Agreement to meet our financial commitments,
debt service obligations, contingencies and anticipated capital expenditures.
However, we are subject to business and operational risks that could adversely
affect our cash flow. A material decrease in our cash flow would likely have an
adverse effect on our ability to meet our financial commitments and debt service
obligations.

Credit Agreement

On May 11, 2021, Sprague Operating Resources LLC (the "U.S. Borrower") and
Kildair Service ULC (the "Canadian Borrower" and, together with the U.S.
Borrower, the "Borrowers"), wholly owned subsidiaries of the Partnership,
entered into a first amendment (the "First Amendment") to the second amended and
restated credit agreement dated as of May 19, 2020 (the "Original Credit
Agreement"; the Original Credit Agreement as amended by the First Amendment, the
"Credit Agreement"). Upon the effective date, the First Amendment increased the
acquisition facility from $430 million to $450 million was accounted for as a
modification of a syndicated loan arrangement with partial extinguishment to the
extent there was a decrease in the borrowing capacity on a creditor by creditor
basis. The Credit Agreement matures on May 19, 2023. The Partnership and certain
of its subsidiaries (the "Subsidiary Guarantors") are guarantors of the
obligations under the Credit Agreement. Obligations under the Credit Agreement
are secured by substantially all of the assets of the Partnership, the Borrowers
and the Subsidiary Guarantors (collectively, the "Loan Parties").

As further described in Note 14 to the condensed consolidated financial statements, subsequent to the quarter ended March 31, 2022the Partnership has amended the Credit Agreement to modify certain terms of the Credit Facility described below.

To March 31, 2022the revolving credit facilities under the credit agreement contained, among other things, the following:


•A committed U.S. dollar revolving working capital facility of up to $465.0
million, subject to borrowing base limits, to be used for working capital loans
and letters of credit;

• Commitment WE revolving working capital facility of up to $200.0 millionsubject to borrowing base limits and at the sole discretion of the lenders, to be used for working capital loans and letters of credit;

• A multi-currency revolving working capital facility of up to $85.0 millionsubject to borrowing base limits, to be used for working capital loans and letters of credit;

• A revolving vesting facility of up to $450.0 million, subject to covenants, to be used for loans and letters of credit to fund capital expenditures and acquisitions and other general corporate purposes; and

•Subject to certain conditions, including the receipt of additional commitments
from lenders, the ability to increase the U.S. dollar revolving working capital
facility to up to $1.2 billion and the multicurrency revolving working capital
facility to up to $320.0 million. Additionally, subject to certain conditions,
the revolving acquisition facility may be increased to up to $750.0 million.

At March 31, 2022, indebtedness under the Credit Agreement bears interest, at
the Borrowers' option, at a rate per annum equal to either (i) the Eurocurrency
Rate (which is the LIBOR Rate for loans denominated in U.S. dollars and CDOR for
loans denominated in Canadian dollars, in each case adjusted for certain
regulatory costs, and in each case with a floor of 0.25%) for interest periods
of one, two (solely with respect to Eurocurrency Rate loans denominated in
Canadian dollars), three or six (solely with respect to Eurocurrency Rate loans
denominated in U.S. dollars) months plus a specified margin or (ii) an alternate
rate plus a specified margin.

At March 31, 2022, for loans denominated in U.S. dollars, the alternate rate is
the Base Rate which is the highest of (a) the U.S. Prime Rate as in effect from
time to time, (b) the greater of the Federal Funds Effective Rate and the
Overnight Bank Funding Rate as in effect from time to time plus 0.50% and
(c) the one-month Eurocurrency Rate for U.S. dollars as in effect from time to
time plus 1.00%.
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To March 31, 2022for loans denominated in Canadian dollars, the alternate rate is the prime rate which is the greater of (a) the Canadian prime rate in effect from time to time and (b) the one-month Eurocurrency rate for WE
dollars in effect from time to time plus 1.00%.

At March 31, 2022, the specified margins for the working capital revolving
facilities vary based on the utilization of the working capital facilities as a
whole, measured on a quarterly basis. The specified margin for (x) the committed
U.S. dollar revolving working capital facility range from 1.00% to 1.50% for
loans bearing interest at the Base Rate and from 2.00% to 2.50% for loans
bearing interest at the Eurocurrency Rate, (y) the uncommitted U.S. dollar
revolving working capital facility range from 0.75% to 1.25% for loans bearing
interest at the Base Rate and 1.75% to 2.25% for loans bearing interest at the
Eurocurrency Rate and (z) the multicurrency revolving working capital facility
range from 1.00% to 1.50% for loans bearing interest at the Base Rate and 2.00%
to 2.50% for loans bearing interest at the Eurocurrency Rate.

At of March 31, 2022, the specified margin for the revolving acquisition
facility varies based on the consolidated total leverage of the Loan Parties.
The specified margin for the revolving acquisition facility range from 1.25% to
2.25% for loans bearing interest at the Base Rate and from 2.25% to 3.25% for
loans bearing interest at the Eurocurrency Rate.

In addition, the Borrowers will incur a commitment fee on the unused portion of
(x) the committed U.S. dollar revolving working capital facility and
multicurrency revolving working capital facility ranging from 0.375% to 0.500%
per annum and (y) the revolving acquisition facility at a rate ranging from
0.35% to 0.50% per annum. Overdue amounts bear interest at the applicable rates
described above plus an additional margin of 2%.

The Credit Agreement contains various covenants and restrictive provisions that,
among other things, prohibit the Partnership from making distributions to
unitholders if any event of default occurs or would result from the distribution
or if the Loan Parties would not be in pro forma compliance with the financial
covenants after giving effect to the distribution. In addition, the Credit
Agreement contains various covenants that are usual and customary for a
financing of this type, size and purpose, including, but not limited to,
covenants that require the Loan Parties to maintain: a minimum consolidated
EBITDA-to-fixed charge ratio, a minimum consolidated net working capital amount
and a maximum consolidated total leverage-to-EBITDA ratio. The Credit Agreement
also limits the Loan Parties ability to incur debt, grant liens, make certain
investments or acquisitions, enter into affiliate transactions and dispose of
assets. The Partnership was in compliance with the covenants under the Credit
Agreement at March 31, 2022.

The Credit Agreement also contains events of default that are usual and
customary for a financing of this type, size and purpose including, among
others, non-payment of principal, interest or fees, violation of certain
covenants, material inaccuracy of representations and warranties, bankruptcy and
insolvency events, cross-payment default and cross-acceleration, material
judgments and events constituting a change of control. If an event of default
exists under the Credit Agreement, the lenders will be able to terminate the
lending commitments, accelerate the maturity of the Credit Agreement and
exercise other rights and remedies with respect to the collateral.

Off-balance sheet arrangements

We have no off-balance sheet arrangements.

Capital expenditure

Our terminals require investments to maintain, expand, upgrade or enhance
existing assets and to comply with environmental and operational regulations.
Our capital requirements primarily consist of maintenance capital expenditures
and expansion capital expenditures. We define maintenance capital expenditures
as capital expenditures made to replace assets, or to maintain the long-term
operating capacity of our assets or operating income. Examples of maintenance
capital expenditures are expenditures required to maintain equipment
reliability, terminal integrity and safety and to address environmental laws and
regulations. Costs for repairs and minor renewals to maintain facilities in
operating condition and that do not extend the useful life of existing assets
will be treated as maintenance expenses as we incur them. We define expansion
capital expenditures as capital expenditures made to increase the long-term
operating capacity of our assets or our operating income whether through
construction or acquisition of additional assets. Examples of expansion capital
expenditures include the acquisition of equipment and the development or
acquisition of additional storage capacity, to the extent such capital
expenditures are expected to expand our operating capacity or our operating
income.

The following table summarizes expansion and maintenance capital expenditures for the periods indicated:

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                                                      Capital Expenditures
                                            Expansion      Maintenance        Total
                                                         (in thousands)
            Three Months Ended March 31,
            2022                           $     826      $      1,963      $ 2,789
            2021                           $     798      $      1,333      $ 2,131



We anticipate that future maintenance capital expenditures will be funded with
cash generated by operations and that future expansion capital requirements will
be provided through long-term borrowings or other debt financings and/or equity
offerings.

Cash Flows

                                                     Three Months Ended March 31,
                                                         2022                   2021
                                                            (in thousands)
  Net cash provided by operating activities   $        92,923               

$88,468

  Net cash used in investing activities       $        (2,613)              

($1,923)

  Net cash used in financing activities       $       (86,413)               $ (83,220)


Operating Activities

Net cash provided by operating activities for the three months ended March 31,
2022 was $92.9 million. Cash inflows for the period were the result of an
increase of $8.8 million in accounts payable and accrued liabilities primarily
relating to the timing of invoice payments for product purchases, a decrease of
$136.2 million in inventories primarily due to less attractive market conditions
to purchase, store and hedge oil compared to last year, $84.1 million
representing the net impact in our derivative instruments as a result of
contract activity and changes in commodity prices during the period and net
income of $17.9 million. These inflows were partially offset by cash outflows as
a result of an increase of $81.1 million in accounts receivable and an increase
of $82.1 million in other assets driven by changes in collateral.

Net cash provided by operating activities for the three months ended March 31,
2021 was $88.5 million. Cash inflows for the period were the result of a
decrease of $67.2 million in inventories largely due to a reduction in seasonal
inventory requirements, net income of $48.8 million, and a decrease of $20.6
million in other assets driven by changes in collateral. These inflows were
offset by cash outflows as a result of an increase of $28.3 million in accounts
receivable driven by a combination of higher sales prices and volumes, a
reduction of $17.0 million in accounts payable and accrued liabilities primarily
relating to the timing of invoice payments for product purchases and $9.6
million representing the net impact in our derivative instruments as a result of
contract activity and changes in commodity prices during the period.

Investing activities

Net cash used in investing activities for the three months ended March 31, 2022
was $2.6 million and primarily resulted from $0.8 million related to expansion
capital expenditures and $2.0 million related to maintenance capital expenditure
projects across our terminal system.

Net cash used in investing activities for the three months ended March 31, 2021
was $1.9 million, and primarily resulted from $0.8 million related to expansion
capital expenditures and $1.3 million related to maintenance capital
expenditures projects across our terminal system.


Fundraising activities

Net cash used in financing activities for the three months ended March 31, 2022
was $86.4 million, and primarily resulted from $73.2 million of payments under
our Credit Agreement due to financing requirements and distributions of $11.4
million.

Net cash used in financing activities for the three months ended March 31, 2021
was $83.2 million, and primarily resulted from 62.7 million of payments under
our Credit Agreement due to reduced financing requirements from accounts
receivable levels, the reduction of inventory levels and distributions of $17.4
million.



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Impact of inflation

While inflation in the United States and Canada has been relatively low in
recent years, it has accelerated in the last 12 months. Although we do not
believe that inflation had a material impact on our results of operations or
financial position for the three months ended March 31, 2022 and 2021, a high
rate of inflation in the future may have an adverse effect on our operating
results depending upon how inflationary pressure impacts the sales price of our
products versus the product costs and operating expenses necessary to generate
and support the selling of these products. In addition, inflation could
materially increase the interest rates on our borrowings under our Credit
Agreement or any future debt.

Significant Accounting Policies and Estimates

Part I, Item, 2, "Management's Discussion and Analysis of Financial Condition
and Results of Operations" discusses our Condensed Consolidated Financial
Statements, which have been prepared in accordance with GAAP. The preparation of
these Condensed Consolidated Financial Statements requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at the date
of the Condensed Consolidated Financial Statements and the reported amounts of
revenues and expenses during the reporting period. Actual results may differ
from these estimates under different assumptions or conditions.

These estimates are based on our knowledge and understanding of current
conditions and actions that we may take in the future. Changes in these
estimates will occur as a result of the passage of time and the occurrence of
future events. Subsequent changes in these estimates may have a significant
impact on our financial condition and results of operations and are recorded in
the period in which they become known. We have identified the following
estimates that, in our opinion, are subjective in nature, require the exercise
of judgment and involve complex analysis: the fair value of derivative assets
and liabilities, goodwill impairment assessment, and revenue recognition and
cost of products sold.

The significant accounting policies and estimates that have been adopted and
followed in the preparation of our Condensed Consolidated Financial Statements
are detailed in Note 1 - Description of Business and Summary of Significant
Accounting Policies included in our 2021 Annual Report. There have been no
changes in these policies and estimates that had a significant impact on the
financial condition and results of operations for the periods covered in this
Quarterly Report.

Recent accounting pronouncements

For information on recent accounting pronouncements affecting our business, see “Recent Accounting Pronouncements” included in Note 1 – Description of Business and Summary of Significant Accounting Policies to our Condensed Consolidated Financial Statements.

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