Sunoco LP Announces First Quarter Financial and Operating Results
Sunoco LP Announces First Quarter Financial and Operating Results
Conference Call Scheduled for 9:30 a.m. CT (10:30 a.m. ET) on Thursday, May 10
DALLAS, May 9, 2018 /PRNewswire/ --
-- Executed business transformation
-- Closed on divestiture of company-operated sites to 7-Eleven, Inc.
with 15-year take-or-pay fuel distribution contract
-- Converted 207 West Texas company-operated sites to commission agent
channel
-- Completed refinancing and equity repurchase initiatives
-- Current quarter cash coverage of 1.00 times and trailing twelve months
coverage of 1.22 times with leverage of 3.82 times at the end of the
first quarter of 2018
-- Generated first quarter Net Loss of $315 million, Adjusted
EBITDA((1)) of $109 million and Distributable Cash Flow((1)), as
adjusted, of $85 million
-- Utilized scale to grow fuel distribution and logistics business
-- In April 2018, SUN acquired 26 retail sites from 7-Eleven and
converted into commission agent channel
-- In April 2018, SUN acquired the wholesale fuel distribution business
and terminal assets from Superior Plus Corporation
Sunoco LP (NYSE: SUN) ("SUN" or the "Partnership") today announced financial and operating results for the three-month period ended March 31, 2018.
Revenue totaled $3.7 billion, an increase of 33.5 percent, compared to $2.8 billion in the first quarter of 2017. The increase was the result of the average selling price of fuel being higher than last year.
Total gross profit increased to $296 million, compared to $256 million in the first quarter of 2017, as a result of higher motor fuel gross profits.
Loss from continuing operations was $78 million, including a $109 million loss on extinguishment of debt and other, versus income of $12 million in the first quarter of 2017.
Loss from discontinued operations, net of income taxes, was $237 million versus a loss from discontinued operations, net of income taxes, of $11 million in the first quarter of 2017.
Net loss was $315 million, or ($3.74) per diluted unit, versus a net income of $1 million, or ($0.22) per diluted unit, in the first quarter of 2017.
Adjusted EBITDA for the quarter totaled $109 million, compared with $155 million in the first quarter of 2017.
Distributable Cash Flow, as adjusted, was $85 million, compared to $77 million a year ago. This year-over-year increase reflects lower cash interest expense and a decrease in maintenance capital spend.
On a weighted-average basis, fuel margin for all gallons sold was 10.5 cents per gallon, compared to 14.5 cents per gallon in the first quarter of 2017. The 4.0 cent per gallon decrease was attributable to a shift in volumes away from the retail segment to the wholesale segment and the adoption of revenue recognition.
Net loss for the wholesale segment was $58 million compared to net income of $38 million a year ago. Adjusted EBITDA was $80 million, versus $91 million in the first quarter of last year. Total wholesale gallons sold were 1,612 million, compared to 1,313 million in the first quarter of 2017, an increase of 22.8 percent. The Partnership earned 8.4 cents per gallon on these volumes, compared to 10.6 cents per gallon a year earlier.
Net loss for the retail segment was $257 million compared to a net loss of $37 million a year ago. Adjusted EBITDA was $29 million, versus $64 million in the first quarter of last year. Total retail gallons sold were 245 million, down from 595 million gallons a year ago as volumes migrated to the wholesale segment. The Partnership earned 24.4 cents per gallon on these volumes, compared to 23.1 cents per gallon a year earlier.
SUN's recent accomplishments include the following:
-- Closed the strategic divestiture of company-operated sites in the
continental United States to 7-Eleven, Inc. on January 23, 2018 for
gross proceeds of approximately $3.2 billion
-- Completed the following refinancing and equity repurchase initiatives:
-- Closed the private offering of $2.2 billion of new senior notes on
January 23, 2018, comprised of $1.0 billion in aggregate principal
amount of 4.875% senior notes due 2023, $800 million in aggregate
principal amount of 5.500% senior notes due 2026 and $400 million in
aggregate principal amount of 5.875% senior notes due 2028. Proceeds
from this offering were used to redeem in full amounts owed under
existing senior notes
-- Repaid in full and terminated the term loan agreement and paid down
all outstanding amounts owed under the revolving credit facility
-- Redeemed $300 million of Series A Preferred Units held by Energy
Transfer Equity for an aggregate redemption amount of approximately
$313 million
-- Repurchased 17,286,859 Sunoco common units owned by Energy Transfer
Partners for aggregate cash consideration of approximately $540
million at a 10-day volume weighted average price of $31.2376 per
unit
Following the conversion of sites to the commission agent channel through April 2018, SUN operates 21 company-operated sites along the New Jersey turnpike and 54 retail sites in Hawaii.
SUN's segment results and other supplementary data are provided after the financial tables below.
Distribution
On April 26, 2018, the Board of Directors of SUN's general partner declared a distribution for the first quarter of 2018 of $0.8255 per unit, which corresponds to $3.3020 per unit on an annualized basis. The distribution will be paid on May 15, 2018 to common unitholders of record on May 7, 2018.
SUN's distribution coverage ratio for the first quarter was 1.00 times. The distribution coverage ratio on a trailing 12-month basis was 1.22 times.
Liquidity
At March 31, SUN had no borrowings against its revolving line of credit and other long-term debt of $2.3 billion. In the first quarter of 2018, 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 facility, was 3.82 times at the end of the first 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.
Earnings Conference Call
Sunoco LP management will hold a conference call on Thursday, May 10, at 9:30 a.m. CT (10:30 a.m. ET) to discuss first quarter results and recent developments. To participate, dial 877-407-6184 (toll free) or 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. An investor presentation accompanying the earnings call will be available 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 distributes motor fuel to approximately 9,200 convenience stores, independent dealers, commercial customers and distributors located in more than 30 states. SUN's general partner is owned by Energy Transfer Equity, L.P. (NYSE: ETE).
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, CFA, Senior Analyst - Investor Relations and Finance
(214) 840-5553, derek.rabe@sunoco.com
Media:
Alyson Gomez, Director - Communications
(214) 840-5641, alyson.gomez@sunoco.com
Jeamy Molina, Senior Manager - PR & Communications
(214) 840-5594, jeamy.molina@sunoco.com
- Financial Schedules Follow -
SUNOCO LP
CONSOLIDATED BALANCE SHEETS
(unaudited)
March 31, December 31,
2018 2017
---- ----
(in millions, except units)
Assets
Current assets:
Cash and cash
equivalents $98 $28
Accounts
receivable, net 451 541
Receivables from
affiliates 160 155
Inventories, net 434 426
Other current
assets 71 81
Assets held for
sale 6 3,313
--- -----
Total current
assets 1,220 4,544
Property and
equipment, net 1,522 1,557
Other assets:
Goodwill 1,430 1,430
Intangible assets,
net 656 768
Other noncurrent
assets 91 45
Total assets $4,919 $8,344
====== ======
Liabilities and equity
Current liabilities:
Accounts payable $416 $559
Accounts payable to
affiliates 178 206
Accrued expenses
and other current
liabilities 759 368
Current maturities
of long-term debt 5 6
Liabilities
associated with
assets held for
sale - 75
--- ---
Total current
liabilities 1,358 1,214
Revolving line of
credit - 765
Long-term debt, net 2,283 3,519
Advances from
affiliates 85 85
Deferred tax
liability 124 389
Other noncurrent
liabilities 137 125
Total liabilities 3,987 6,097
Commitments and contingencies
(Note 14)
Equity:
Limited partners:
Series A Preferred
unitholder -
affiliated (no
units issued and
outstanding as of
March 31, 2018 and
12,000,000 units
issued and
outstanding as of
December 31, 2017) - 300
Common unitholders
(82,492,008 units
issued and
outstanding as of
March 31, 2018 and
99,667,999 units
issued and
outstanding as of
December 31, 2017) 932 1,947
Class C unitholders
-held by
subsidiary
(16,410,780 units
issued and
outstanding as of
March 31, 2018 and
December 31, 2017) - -
--- ---
Total equity 932 2,247
Total liabilities
and equity $4,919 $8,344
====== ======
SUNOCO LP
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(unaudited)
For the Three Months Ended March 31,
2018 2017
---- ----
(in millions, except unit and per unit
amounts)
Revenues:
Retail motor fuel $445 $353
Wholesale motor fuel sales to third parties 3,094 2,244
Wholesale motor fuel sales to affiliates 12 21
Merchandise 135 131
Rental income 22 22
Other 41 37
--- ---
Total revenues 3,749 2,808
Cost of sales:
Retail motor fuel cost of sales 401 317
Wholesale motor fuel cost of sales 2,945 2,143
Merchandise cost of sales 93 88
Other 14 4
---
Total cost of sales 3,453 2,552
Gross profit 296 256
Operating expenses:
General and administrative 35 32
Other operating 98 92
Rent 15 20
Loss on disposal of assets 3 2
Depreciation, amortization and accretion 49 54
Total operating expenses 200 200
--- ---
Operating income 96 56
Other expenses:
Interest expense, net 34 58
Loss on extinguishment of debt and other 109 -
--- ---
Loss from continuing operations before income taxes (47) (2)
Income tax expense (benefit) 31 (14)
--- ---
Income (loss) from continuing operations (78) 12
Loss from discontinued operations, net of income taxes (237) (11)
---- ---
Net income (loss) and comprehensive income (loss) $(315) $1
===== ===
Net loss per limited partner unit - basic:
Continuing operations - common units $(1.11) $(0.11)
Discontinued operations - common units (2.63) (0.11)
----- -----
Net loss - common units $(3.74) $(0.22)
Net loss per limited partner unit - diluted:
Continuing operations - common units $(1.11) $(0.11)
Discontinued operations - common units (2.63) (0.11)
----- -----
Net loss - common units $(3.74) $(0.22)
Weighted average limited partner units outstanding:
Common units - basic 89,753,950 98,609,608
Common units - diluted 90,271,751 98,715,958
Cash distribution per unit $0.8255 $0.8255
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 March 31, 2018 and 2017 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 March 31,
2018 2017
Wholesale Retail Total Wholesale Retail Total
--------- ------ ----- --------- ------ -----
(dollars and gallons in millions, except gross profit per gallon)
Revenues:
Retail motor fuel $ - $445 $445 $ - $353 $353
Wholesale motor fuel
sales to third parties 3,094 - 3,094 2,244 - 2,244
Wholesale motor fuel
sale to affiliates 12 - 12 21 - 21
Merchandise - 135 135 - 131 131
Rental income 19 3 22 19 3 22
Other 14 27 41 13 24 37
--- --- --- ---
Total revenues $3,139 $610 $3,749 $2,297 $511 $2,808
Gross profit:
Retail motor fuel $ - $44 $44 $ - $36 $36
Wholesale motor fuel 161 - 161 122 - 122
Merchandise - 42 42 - 43 43
Rental and other 29 20 49 28 27 55
--- --- --- --- --- ---
Total gross profit $190 $106 $296 $150 $106 $256
Net income (loss) and
comprehensive income
(loss) from continuing
operations (58) (20) (78) 38 (26) 12
Net loss and
comprehensive loss
from discontinued
operations - (237) (237) - (11) (11)
--- --- --- ---
Net income (loss) and
comprehensive income
(loss) $(58) $(257) $(315) $38 $(37) $1
Adjusted EBITDA (2) $80 $29 $109 $91 $64 $155
Distributable cash
flow, as adjusted (2) $85 $77
Operating Data:
Total motor fuel
gallons sold:
Retail (3) 245 245 595 595
Wholesale 1,612 1,612 1,313 1,313
Motor fuel gross profit
cents per gallon (1):
Retail (3) 24.4¢ 24.4¢ 23.1¢ 23.1¢
Wholesale 8.4¢ 8.4¢ 10.6¢ 10.6¢
Volume-weighted
average for all
gallons (3) 10.5¢ 14.5¢
Retail merchandise
margin (3) 29.7% 31.6%
The following table presents a reconciliation of net income to EBITDA, Adjusted EBITDA and distributable cash flow:
For the Three Months Ended March 31,
2018 2017
Wholesale Retail Total Wholesale Retail Total
--------- ------ ----- --------- ------ -----
(in millions)
Net income (loss) and
comprehensive income
(loss) $(58) $(257) $(315) $38 $(37) $1
Depreciation, amortization
and accretion (3) 28 21 49 22 65 87
Interest expense, net (3) 19 17 36 20 44 64
Income tax expense
(benefit) (3) 1 203 204 1 (18) (17)
--- --- --- --- --- ---
EBITDA $(10) $(16) $(26) $81 $54 $135
Non-cash compensation
expense (3) - 3 3 0 4 4
Loss on disposal of assets
(3) 3 23 26 2 5 7
Loss on extinguishment of
debt and other (3) 109 20 129 - - -
Unrealized gain on
commodity derivatives (3) - - - (5) - (5)
Inventory adjustments (3) (25) (1) (26) 13 1 14
Other non-cash adjustments 3 - 3 - - -
--- --- --- ---
Adjusted EBITDA $80 $29 $109 $91 $64 $155
Cash interest expense (3) 34 60
Current income tax expense
(3) 468 -
Transaction-related
income taxes (4) (480) -
Maintenance capital
expenditures (3) 3 18
--- ---
Distributable cash flow $84 $77
Transaction-related
expenses (3) 3 -
Series A Preferred
distribution (2) -
--- ---
Distributable cash flow,
as adjusted $85 $77
=== ===
_______________________________
(1) Includes other non-cash adjustments and 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
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 cash our business is generating.
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 EBITDA and distributable cash flow may not be comparable to
similarly titled measures of other companies.
(3) Includes amounts from discontinued operations.
(4) Transaction-related income taxes primarily related to
the 7-Eleven Transaction.
Capital Spending
SUN's gross capital expenditures for the first quarter were $19 million, which included $16 million for growth capital and $3 million for maintenance capital.
Excluding acquisitions, SUN expects to spend approximately $90 million on growth capital and approximately $40 million on maintenance capital for the full year 2018.
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SOURCE Sunoco LP
