Sunoco LP Announces Second Quarter Financial and Operating Results
DALLAS, Aug. 8, 2017 /PRNewswire/ --
-- Executed definitive agreement to divest a majority of company-operated
convenience stores to 7-Eleven, Inc. and launched sales process for
remaining company-operated convenience stores in North and West Texas,
New Mexico and Oklahoma
-- Results of the retail divestitures are presented in discontinued
operations
-- Maintained quarterly distribution of 82.55 cents and reported current
quarter cash coverage of 1.53 times
-- Generated Net Loss of $222 million, Adjusted EBITDA((1)) of $220 million
and Distributable Cash Flow((1)), as adjusted, of $158 million
Sunoco LP (NYSE: SUN) ("SUN" or the "Partnership") today announced financial and operating results for the three-month period ended June 30, 2017.
Revenue totaled $2.4 billion, an increase of 13.0 percent, compared to $2.1 billion in the second quarter of 2016. The increase was the result of the average wholesale selling price of fuel being 14 cents per gallon higher than last year and additional wholesale gallons sold.
Total gross profit declined to $165 million, compared to $227 million in the second quarter of 2016, as a result of lower wholesale motor fuel gross profits.
Income from continuing operations was $34 million, versus $57 million in the second quarter of 2016. General and administrative expenses increased $4 million from the second quarter of 2016 to $40 million driven by transaction-related expenses. Other operating expenses decreased $1 million from the second quarter of 2016 to $46 million.
Loss from discontinued operations, net of income taxes, was $256 million including a $320 million charge related to assets held for sale, versus income from discontinued operations, net of income taxes, of $15 million in the second quarter of 2016.
Net loss was $222 million, or ($2.53) per diluted unit, versus $72 million, or $0.53 per diluted unit, in the second quarter of 2016.
Adjusted EBITDA for the quarter totaled $220 million, compared with $164 million in the second quarter of 2016. The favorable year-over-year comparison reflects increased motor fuel gross profit cents per gallon and increased gallons sold.
Distributable Cash Flow, as adjusted, was $158 million, compared to $92 million a year ago. This year over year increase reflects higher Adjusted EBITDA and decreased maintenance capital spend partly offset by increased cash interest expense.
On a weighted-average basis, fuel margin for all gallons sold was 16.2 cents per gallon, compared to 13.8 cents per gallon in the second quarter of 2016. The 2.4 cents per gallon increase was primarily attributable to higher margins in both the retail and wholesale segments.
Net income for the wholesale segment was $5 million compared to $86 million a year ago due to the impact of inventory valuation adjustments. Adjusted EBITDA was $93 million, versus $80 million in the second quarter of last year. Total wholesale gallons sold were 1,374 million, compared to 1,316 million in the second quarter of 2016, an increase of 4.4 percent as a result of growth in the Southwest geography and contribution from the Emerge acquisition. This includes gallons sold to consignment stores and third-party customers, including independent dealers, fuel distributors and commercial customers. The Partnership earned 10.1 cents per gallon on these volumes, compared to 8.8 cents per gallon a year earlier.
Net loss for the retail segment was $227 million compared to a net loss of $14 million a year ago primarily due to a $320 million charge related to assets held for sale. Adjusted EBITDA was $127 million, versus $84 million in the second quarter of last year. Total retail gallons sold increased by 1.4 percent to 650 million gallons as a result of the increased gallons sold across SUN's operating geography. The Partnership earned 29.2 cents per gallon on these volumes, compared to 24.0 cents per gallon a year earlier.
Total merchandise sales increased by 5.4 percent from a year ago to $608 million((2)), reflecting the contribution from third party acquisitions and new-to-industry locations opened during the last 12 months. Merchandise sales contributed $196 million of gross profit((3)) with a retail merchandise margin of 32.1 percent, a decrease of 0.4 percentage points from the second quarter of 2016.
Same-store merchandise sales increased by 1.0 percent during the second quarter, reflecting growth across all of SUN's convenience store offerings. Same-store gallons decreased by 2.1 percent as a result of weakness throughout SUN's retail geography, particularly on the East Coast partly offset by increased same-store gallons sold in Hawaii. In the Texas oil producing regions, same-store merchandise sales increased by 8.5 percent, and same-store gallons increased 8.7 percent.
As of June 30, 2017, SUN operated 1,353 convenience stores and retail fuel outlets along the East Coast, in the Southwest and in Hawaii. Third party wholesale customers and sites totaled 7,937.
SUN's other recent accomplishments include the following:
-- On April 6, SUN announced the planned divestiture of company-operated
convenience stores in the continental United States.
-- SUN entered into a definitive asset purchase agreement for the sale
of a majority of its company-operated convenience stores to
7-Eleven, Inc. Total consideration in the transaction is $3.3
billion in cash plus fuel, merchandise and other inventories.
-- As part of the transaction, SUN will enter into a 15-year
take-or-pay fuel supply agreement with a 7-Eleven, Inc. subsidiary
under which SUN will supply approximately 2.2 billion gallons of
fuel annually.
-- Also on April 6, SUN retained JP Morgan Securities, LLC to manage the
marketing process for the remaining approximately 200 company-operated
convenience stores in North and West Texas, New Mexico and Oklahoma in a
separate process.
SUN's segment results and other supplementary data are provided after the financial tables below.
Distribution
On July 26, 2017 the Board of Directors of SUN's general partner declared a distribution for the second quarter of 2017 of $0.8255 per unit, which corresponds to $3.3020 per unit on an annualized basis. The distribution will be paid on August 15 to unitholders of record on August 7.
SUN's distribution coverage ratio for the second quarter was 1.53 times. The distribution coverage ratio on a trailing 12-month basis was 1.03 times.
Liquidity
At June 30, SUN had borrowings against its revolving line of credit of $825 million and other long-term debt of $3.6 billion. Availability on the revolving credit facility after borrowings and letters of credit commitments was $655 million. In the second quarter of 2017, SUN did not issue any common units through its at-the-market equity program. The leverage ratio of debt to Adjusted EBITDA, calculated in accordance with SUN's credit agreements, including the revolving credit facility and Term Loan A, was 5.97 times at the end of the second quarter.
(1) Adjusted EBITDA and Distributable Cash
Flow, as adjusted, are non-GAAP
financial measures of performance
that have limitations and should not
be considered as a substitute for net
income. Please refer to the
discussion and tables under
"Reconciliations of Non-GAAP
Measures" later in this news release
for a discussion of our use of
Adjusted EBITDA and Distributable
Cash Flow, as adjusted, and a
reconciliation to net income.
(2) Includes $590 million in merchandise
sales from discontinued operations.
(3) Includes $191 million in merchandise
gross profit from discontinued
operations.
Earnings Conference Call
Sunoco LP management will hold a conference call on Wednesday, August 9, at 9:30 a.m. CT (10:30 a.m. ET) to discuss second quarter results and recent developments. To participate, dial 201-389-0877 approximately 10 minutes early and ask for the Sunoco LP conference call. The call will also be accessible live and for later replay via webcast in the Investor Relations section of Sunoco's website at www.SunocoLP.com under Events and Presentations.
Sunoco LP (NYSE: SUN) is a master limited partnership that operates 1,353 convenience stores and retail fuel sites and distributes motor fuel to 7,937 convenience stores, independent dealers, commercial customers and distributors located in 30 states. Our parent -- Energy Transfer Equity, L.P. (NYSE: ETE) -- owns SUN's general partner and incentive distribution rights.
Forward-Looking Statements
This press release may include certain statements concerning expectations for the future that are forward-looking statements as defined by federal law. Such forward-looking statements are subject to a variety of known and unknown risks, uncertainties, and other factors that are difficult to predict and many of which are beyond management's control. An extensive list of factors that can affect future results are discussed in the Partnership's Annual Report on Form 10-K and other documents filed from time to time with the Securities and Exchange Commission. The Partnership undertakes no obligation to update or revise any forward-looking statement to reflect new information or events.
The information contained in this press release is available on our website at www.SunocoLP.com
Qualified Notice
This release is intended to be a qualified notice under Treasury Regulation Section 1.1446-4(b). Brokers and nominees should treat 100 percent of Sunoco LP's distributions to non-U.S. investors as being attributable to income that is effectively connected with a United States trade or business. Accordingly, Sunoco LP's distributions to non-U.S. investors are subject to federal income tax withholding at the highest applicable effective tax rate.
Contacts
Investors:
Scott Grischow, Senior Director - Investor Relations and Treasury
(214) 840-5660, scott.grischow@sunoco.com
Derek Rabe, Senior Analyst - Investor Relations and Finance
(214) 840-5553, derek.rabe@sunoco.com
Media:
Alyson Gomez, Director - Communications
(469) 646-1758, alyson.gomez@sunoco.com
Jeamy Molina, Senior Manager - PR & Communications
(469) 646-1776, jeamy.molina@sunoco.com
- Financial Schedules Follow -
SUNOCO LP
CONSOLIDATED BALANCE SHEETS
(unaudited)
June 30, December 31,
2017 2016
---- ----
(in millions, except units)
Assets
Current assets:
Cash and cash equivalents $97 $99
Accounts receivable, net 398 539
Receivables from affiliates 148 3
Inventories, net 356 385
Other current assets 91 72
Assets held for sale 4,194 291
----- ---
Total current assets 5,284 1,389
Property and equipment, net 1,155 1,188
Other assets:
Goodwill 1,032 1,050
Intangible assets, net 786 752
Other noncurrent assets 54 64
Assets held for sale - 4,258
--- -----
Total assets $8,311 $8,701
====== ======
Liabilities and equity
Current liabilities:
Accounts payable $461 $616
Accounts payable to affiliates 169 109
Advances from affiliates 86 87
Accrued expenses and other current
liabilities 352 372
Current maturities of long-term
debt 5 5
Liabilities associated with assets
held for sale 68 -
--- ---
Total current liabilities 1,141 1,189
Revolving line of credit 825 1,000
Long-term debt, net 3,537 3,509
Deferred tax liability 601 643
Other noncurrent liabilities 106 96
Liabilities associated with assets
held for sale - 68
--- ---
Total liabilities 6,210 6,505
-----
Commitments and contingencies (Note
13)
Equity:
Limited partners:
Series A Preferred unitholder -
affiliated 300 -
(12,000,000 units issued and
outstanding as of June 30, 2017
and
no units issued and outstanding as
of December 31, 2016)
Common unitholders - public 1,291 1,467
(53,718,058 units issued and
outstanding as of June 30, 2017
and
52,430,220 units issued and
outstanding as of December 31,
2016)
Common unitholders - affiliated 510 729
(45,750,826 units issued and
outstanding as of June 30, 2017
and
December 31, 2016)
Class C unitholders -held by
subsidiary - -
(16,410,780 units issued and
outstanding as of June 30, 2017
and
December 31, 2016)
Total equity 2,101 2,196
Total liabilities and equity $8,311 $8,701
====== ======
SUNOCO LP
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(unaudited)
For the Three Months Ended For the Six Months Ended
June 30, June 30,
2017 2016 2017 2016
---- ---- ---- ----
(in millions, except unit and per unit amounts)
Revenues:
Retail motor fuel $39 $46 $77 $91
Wholesale motor fuel sales
to third parties 2,281 1,997 4,525 3,493
Wholesale motor fuel sales
to affiliates 6 10 28 17
Merchandise 18 17 34 33
Rental income 22 22 44 43
Other 34 31 67 74
--- --- --- ---
Total revenues 2,400 2,123 4,775 3,751
Cost of sales:
Retail motor fuel cost of
sales 33 43 66 83
Wholesale motor fuel cost of
sales 2,185 1,839 4,328 3,205
Merchandise cost of sales 13 12 24 23
Other 4 2 8 4
--- --- --- ---
Total cost of sales 2,235 1,896 4,426 3,315
Gross profit 165 227 349 436
Operating expenses:
General and administrative 40 36 72 83
Other operating 46 47 95 85
Rent 12 12 25 24
Loss (gain) on disposal of
assets 3 - 4 (1)
Depreciation, amortization
and accretion 33 28 63 54
--- --- --- ---
Total operating expenses 134 123 259 245
--- --- --- ---
Operating income 31 104 90 191
Interest expense, net 54 44 111 64
--- --- --- ---
Income from continuing
operations before income
taxes (23) 60 (21) 127
Income tax expense (benefit) (57) 3 (70) 5
--- --- --- ---
Income from continuing
operations 34 57 49 122
Income (loss) from
discontinued operations,
net of income taxes (256) 15 (270) 12
---- --- ---- ---
Net income (loss) and
comprehensive income (loss) $(222) $72 $(221) $134
===== === ===== ====
Net income (loss) per limited partner unit -
basic:
Continuing operations -
common units $0.04 $0.38 $(0.05) $0.88
Discontinued operations -
common units (2.56) 0.15 (2.72) 0.13
----- ---- ----- ----
Net income (loss) -common
units $(2.52) $0.53 $(2.77) $1.01
Net income (loss) per limited partner unit -
diluted:
Continuing operations -
common units $0.03 $0.38 $(0.05) $0.88
Discontinued operations -
common units (2.56) 0.15 (2.72) 0.13
----- ---- ----- ----
Net income (loss) -common
units $(2.53) $0.53 $(2.77) $1.01
Weighted average limited partner units
outstanding:
Common units -public
(basic) 53,715,598 49,588,960 53,289,557 49,588,960
Common units -public
(diluted) 54,149,181 49,644,916 53,555,219 49,644,916
Common units -affiliated
(basic and diluted) 45,750,826 45,750,826 45,750,826 41,807,600
Cash distribution per unit $0.8255 $0.8255 $1.6510 $1.6428
Key Operating Metrics
The following information is intended to provide investors with a reasonable basis for assessing our historical operations but should not serve as the only criteria for predicting our future performance. We operate our business in two primary operating divisions, wholesale and retail, both of which are included as reportable segments.
Key operating metrics set forth below are presented as of and for the three months ended June 30, 2017 and 2016 and have been derived from our historical consolidated financial statements.
The accompanying footnotes to the following two key operating metrics tables can be found immediately preceding our capital spending discussion.
For the Three Months Ended June 30,
2017 2016
Wholesale Retail Total Wholesale Retail Total
--------- ------ ----- --------- ------ -----
(dollars and gallons in millions, except motor fuel gross profit per gallon)
Revenues:
Retail motor fuel $ - $39 $39 $ - $46 $46
Wholesale motor fuel
sales to third
parties 2,281 - 2,281 1,997 - 1,997
Wholesale motor fuel
sale to affiliates 6 - 6 10 - 10
Merchandise - 18 18 - 17 17
Rental income 19 3 22 19 3 22
Other 12 22 34 6 25 31
Total revenues $2,318 $82 $2,400 $2,032 $91 $2,123
Gross profit:
Retail motor fuel $ - $6 $6 $ - $3 $3
Wholesale motor fuel 102 - 102 168 - 168
Merchandise - 5 5 - 5 5
Rental and other 27 25 52 24 27 51
--- --- --- --- ---
Total gross profit $129 $36 $165 $192 $35 $227
Net income (loss) and
comprehensive income
(loss) from
continuing operations 5 29 34 86 (29) 57
Net income (loss) and
comprehensive income
(loss) from
discontinued
operations - (256) (256) - 15 15
--- ---- ---- --- --- ---
Net income (loss) and
comprehensive income
(loss) $5 $(227) $(222) $86 $(14) $72
Adjusted EBITDA (2) $93 $127 $220 $80 $84 $164
Distributable cash
flow, as adjusted (2) $158 $92
Operating Data:
Total motor fuel
gallons sold:
Retail (3) 650 650 641 641
Wholesale (3) 1,374 1,374 1,316 1,316
Motor fuel gross
profit cents per
gallon (1):
Retail (3) 29.2 ¢ 29.2 ¢ 24.0 ¢ 24.0 ¢
Wholesale (3) 10.1 ¢ 10.1 ¢ 8.8 ¢ 8.8 ¢
Volume-weighted
average for all
gallons (3) 16.2 ¢ 13.8 ¢
Retail merchandise
margin (3) 32.1% 32.5%
The following table presents a reconciliation of net income to EBITDA, Adjusted EBITDA and distributable cash flow for the three months ended June 30, 2017 and 2016:
For the Three Months Ended June 30,
2017 2016
Wholesale Retail Total Wholesale Retail Total
--------- ------ ----- --------- ------ -----
(in millions)
Net income (loss) and
comprehensive income (loss) $5 $(227) $(222) $86 $(14) $72
Depreciation, amortization
and accretion (3) 37 2 39 18 61 79
Interest expense, net (3) 14 44 58 17 34 51
Income tax expense (benefit)
(3) (1) (22) (23) - 1 1
--- --- --- --- --- ---
EBITDA $55 $(203) $(148) $121 $82 $203
Non-cash compensation
expense (3) 1 4 5 2 1 3
Loss on disposal of assets
and impairment charge (3) 2 324 326 - 2 2
Unrealized gain on commodity
derivatives (3) 5 - 5 6 - 6
Inventory adjustments (3) 30 2 32 (49) (1) (50)
--- --- --- --- --- ---
Adjusted EBITDA $93 $127 $220 $80 $84 $164
Cash interest expense (3) 53 48
Income tax expense (current)
(3) 2 -
Maintenance capital
expenditures (3) 7 24
Distributable cash flow $158 $92
Transaction-related
expenses (3) 8 -
Series A Preferred
distribution (8) -
--- ---
Distributable cash flow, as
adjusted $158 $92
==== ===
_______________________________
(1) Excludes the impact of inventory fair value adjustments consistent with
the definition of Adjusted EBITDA.
(2) EBITDA is defined as earnings before net interest expense, income
taxes, depreciation, amortization and accretion expense. Adjusted
EBITDA further adjusts EBITDA to reflect certain other non-recurring
and non-cash items. We define Adjusted EBITDA to also include
adjustments for unrealized gains and losses on commodity derivatives
and inventory fair value adjustments. We define distributable cash
flow as Adjusted EBITDA less cash interest expense, including the
accrual of interest expense related to our long-term debt that is
paid on a semi-annual basis, Series A Preferred distribution, current
income tax expense, maintenance capital expenditures, and other non-
cash adjustments. Further adjustments are made to distributable cash
flow for certain transaction-related and non-recurring expenses that
are included in net income.
We believe EBITDA, Adjusted EBITDA and distributable cash flow are
useful to investors in evaluating our operating performance
because:
Adjusted EBITDA is used as a performance measure under our
revolving credit facility;
securities analysts and other
interested parties use such metrics as measures of financial
performance, ability to make distributions to our unitholders and
debt service capabilities;
our management uses them for internal
planning purposes, including aspects of our consolidated
operating budget, and capital expenditures; and
distributable
cash flow provides useful information to investors as it is a
widely accepted financial indicator used by investors to compare
partnership performance, and as it provides investors an enhanced
perspective of the operating performance of our assets and the
EBITDA, Adjusted EBITDA and distributable cash flow are not
recognized terms under GAAP and do not purport to be alternatives
to net income (loss) as measures of operating performance or to
cash flows from operating activities as a measure of liquidity.
EBITDA, Adjusted EBITDA and distributable cash flow have
limitations as analytical tools, and one should not consider them
in isolation or as substitutes for analysis of our results as
reported under GAAP. Some of these limitations include:
they do not reflect our total cash expenditures, or future
requirements for capital expenditures or contractual commitments;
they do not reflect changes in, or cash requirements for,
working capital;
they do not reflect interest expense or the
cash requirements necessary to service interest or principal
payments on our revolving credit facility or term loan;
although
depreciation and amortization are non-cash charges, the assets
being depreciated and amortized will often have to be replaced in
the future, and EBITDA and Adjusted EBITDA do not reflect cash
requirements for such replacements; and
as not all companies use
identical calculations, our presentation of EBITDA, Adjusted
(3) Includes amounts from discontinued operations.
Capital Spending
SUN's gross capital expenditures for the second quarter were $33 million, which included $26 million for growth capital and $7 million for maintenance capital.
Excluding acquisitions, SUN expects to spend approximately $150 million on growth capital and approximately $80 million on maintenance capital for the full year 2017.
Growth capital spending includes the rebuilding of locations SUN is operating on the Indiana Toll Road.
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SOURCE Sunoco LP
