Sunoco LP Announces Second Quarter Financial and Operating Results

DALLAS, Aug. 7, 2019 /PRNewswire/ -- Sunoco LP (NYSE: SUN) ("SUN" or the "Partnership") today reported financial and operating results for the three-month period ended June 30, 2019.

Net income for the quarter was $55 million versus net income of $68 million in the second quarter of 2018.

Adjusted EBITDA((1)) totaled $152 million compared with $140 million in the second quarter of 2018. Results were supported by an increase in the Partnership's fuel volumes and lower operating expenses.

Distributable Cash Flow, as adjusted((1)), was $101 million, compared to $106 million a year ago. This year-over-year decrease reflects higher Adjusted EBITDA offset by higher interest expense and maintenance capital expenditures.

Net income, Adjusted EBITDA and Distributable Cash Flow, as adjusted, included a one-time expense of approximately $8 million related to a reserve for an open contractual dispute.

Recent Accomplishments and Other Developments

    --  Sold a record high 2.05 billion gallons in the second quarter, up 4%
        from the second quarter of 2018. On a weighted-average basis, fuel
        margin for all gallons sold was 9.1 cents per gallon, or 9.4 cents per
        gallon excluding the one-time expense of approximately $8 million this
        quarter.
    --  Reported current quarter cash coverage of 1.17 times and trailing twelve
        months coverage of 1.35 times. Excluding the one-time expense of
        approximately $8 million this quarter, SUN's distribution coverage ratio
        for the second quarter was 1.26 times and trailing twelve months
        coverage was 1.37 times. SUN's leverage ratio of net debt to Adjusted
        EBITDA, calculated in accordance with its credit facility, was 4.20
        times at the end of the second quarter((2)).
    --  Closed on the joint venture with Energy Transfer LP (NYSE: ET) ("Energy
        Transfer") on a diesel fuel pipeline to West Texas. Energy Transfer will
        operate the pipeline for the joint venture, which will transport diesel
        fuel from Hebert, Texas to a terminal in the Midland, Texas area. The
        pipeline is expected to have an initial capacity of 30,000 barrels per
        day and was successfully commissioned in August 2019. SUN expects its
        cash investment to be approximately $50 million.

Distribution

On July 25, 2019, the Board of Directors of SUN's general partner declared a distribution for the second quarter of 2019 of $0.8255 per unit, which corresponds to $3.3020 per unit on an annualized basis. The distribution will be paid on August 14, 2019 to common unitholders of record on August 6, 2019.

Liquidity

At June 30, SUN had borrowings of $117 million against its revolving line of credit and other long-term debt of $2.9 billion. In the second quarter of 2019, SUN did not issue any common units through its at-the-market equity program.

Capital Spending

SUN's gross capital expenditures for the second quarter were $31 million, which included $25 million for growth capital and $6 million for maintenance capital.

Excluding acquisitions, SUN expects to spend at least $100 million on growth capital, including approximately $5 million of growth capital toward the pipeline joint venture with Energy Transfer, and approximately $40 million on maintenance capital for the full year 2019.

SUN's segment results and other supplementary data are provided after the financial tables below.



            (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)            Excluding the one-time expense of
                              approximately $8 million this quarter,
                              SUN's leverage ratio of net debt to
                              Adjusted EBITDA, calculated in
                              accordance with SUN's credit facility,
                              was 4.16 times at the end of the
                              second quarter.

Earnings Conference Call

Sunoco LP management will hold a conference call on Thursday, August 8, at 9:30 a.m. CT (10:30 a.m. ET) to discuss second 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.

Sunoco LP (NYSE: SUN) is a master limited partnership with core operations that include the distribution of motor fuel to approximately 10,000 convenience stores, independent dealers, commercial customers and distributors located in more than 30 states as well as refined product transportation and terminalling assets. SUN's general partner is owned by Energy Transfer Operating, L.P., a wholly owned subsidiary of Energy Transfer LP (NYSE: ET).

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, Vice President - Investor Relations and Treasury
(214) 840-5660, scott.grischow@sunoco.com
Derek Rabe, CFA, Manager - Investor Relations, Growth and Strategy
(214) 840-5553, derek.rabe@sunoco.com

Media:

Alexis Daniel, Manager - Communications
(214) 981-0739, alexis.daniel@sunoco.com

- Financial Schedules Follow -


                                                   
             
                SUNOCO LP


                                                 
       
               CONSOLIDATED BALANCE SHEETS


                                                       
              (unaudited)




                                                         June 30,                                              December 31,
                                                             2019                                                       2018



                                                                                   (in millions, except units)



     
                Assets



     Current assets:



     Cash and cash equivalents                                        $
              36                                                  $
        56



     Accounts receivable, net                                573                                                               374


      Receivables from affiliates                               2                                                                37



     Inventories, net                                        410                                                               374



     Other current assets                                     77                                                                64



     Total current assets                                  1,098                                                               905





     Property and equipment                                2,074                                                             2,133



     Accumulated depreciation                              (635)                                                            (587)



      Property and equipment, net                           1,439                                                             1,546



     Other assets:


      Lease right-of-use assets, net                          536



     Goodwill                                              1,558                                                             1,559





     Intangible assets                                       914                                                               915



     Accumulated amortization                              (235)                                                            (207)




     Intangible assets, net                                  679                                                               708



     Other non-current assets                                160                                                               161



     Total assets                                                  $
              5,470                                               $
        4,879



                   Liabilities and equity



     Current liabilities:



     Accounts payable                                                $
              530                                                 $
        412


      Accounts payable to affiliates                           24                                                               149


      Accrued expenses and other current
       liabilities                                            306                                                               299


      Operating lease current liabilities                      21


      Current maturities of long-term debt                      6                                                                 5



     Total current liabilities                               887                                                               865


      Operating lease non-current
       liabilities                                            520



     Revolving line of credit                                117                                                               700



     Long-term debt, net                                   2,878                                                             2,280



     Advances from affiliates                                 80                                                                24



     Deferred tax liability                                   90                                                               103


      Other non-current liabilities                           119                                                               123



     Total liabilities                                     4,691                                                             4,095



      Commitments and contingencies



     Equity:



     Limited partners:



     Common unitholders


           (82,749,333 units issued and
            outstanding as of June 30, 2019 and
            82,665,057 units issued and
            outstanding as of December 31, 2018)              779                                                               784


      Class C unitholders -held by
       subsidiaries


           (16,410,780 units issued and
            outstanding as of June 30, 2019 and
            December 31, 2018)




     Total equity                                            779                                                               784


      Total liabilities and equity                                  $
              5,470                                               $
        4,879


                                                                                            
              
                SUNOCO LP


                                                                  
          
                CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)


                                                                                                 
              (unaudited)




                                                                      Three Months Ended June 30,                                        Six Months Ended June 30,


                                                        2019                          2018                       2019                               2018

                                                                                                                                                  ---

                                                                                             (in millions, except unit and per unit amounts)



     
                Revenues:



     Motor fuel sales                                          $
          4,366                                           $
              4,507                           $
           7,949   $
      8,058


      Non motor fuel sales                                74                                         66                                             148                         242



     Lease income                                        35                                         34                                              70                          56




     Total revenues                                   4,475                                      4,607                                           8,167                       8,356


                   Cost of sales and operating expenses:



     Cost of sales                                    4,206                                      4,297                                           7,528                       7,750


      General and administrative                          34                                         34                                              61                          69



     Other operating                                     73                                         86                                             157                         184



     Lease expense                                       16                                         19                                              30                          34


      Loss on disposal of assets
       and impairment charges                              2                                          2                                              50                           5


      Depreciation, amortization
       and accretion                                      47                                         41                                              92                          90


      Total cost of sales and
       operating expenses                              4,378                                      4,479                                           7,918                       8,132



                   Operating income                       97                                        128                                             249                         224



     
                Other expenses:


      Interest expense, net                               43                                         36                                              85                          70


      Loss on extinguishment of
       debt and other, net                               (6)                                                                                      (3)                        109



      Income from continuing
       operations before income
       taxes                                              60                                         92                                             167                          45


      Income tax expense
       (benefit)                                           5                                        (2)                                              3                          29



      Income from continuing
       operations                                         55                                         94                                             164                          16


      Loss from discontinued
       operations, net of income
       taxes                                               -                                      (26)                                                                     (263)



                   Net income (loss) and
                    comprehensive income
                    (loss)                                         $
          55                                              $
              68                             $
           164   $
      (247)





                   Net income (loss) per common unit -basic:


      Continuing operations -
       common units                                              $
          0.44                                            $
              0.91                            $
           1.51  $
      (0.29)


      Discontinued operations -
       common units                                     0.00                                     (0.32)                                           0.00                      (3.05)



      Net income (loss) -common
       units                                                     $
          0.44                                            $
              0.59                            $
           1.51  $
      (3.34)


                   Net income (loss) per common unit -diluted:


      Continuing operations -
       common units                                              $
          0.43                                            $
              0.90                            $
           1.50  $
      (0.29)


      Discontinued operations -
       common units                                     0.00                                     (0.32)                                           0.00                      (3.05)



      Net income (loss) -common
       units                                                     $
          0.43                                            $
              0.58                            $
           1.50  $
      (3.34)


                   Weighted average limited partner units
                    outstanding:


      Common units -basic                         82,742,323                                 82,494,976                                      82,726,842                  86,104,411


      Common units -diluted                       83,509,987                                 82,947,669                                      83,455,021                  86,569,372




                   Cash distributions per unit                 $
          0.8255                                          $
              0.8255                          $
           1.6510  $
      1.6510

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. Our financial statements reflect two reportable segments, Fuel Distribution and Marketing and All Other.

The key operating metrics and accompanying footnotes set forth below are presented for the three months ended June 30, 2019 and 2018 and have been derived from our historical consolidated financial statements.


                                                                                    
     
                Three Months Ended June 30,


                                                                                         2019                                                                                       2018


                                                  Fuel             All Other                 Total                                                       Fuel       All Other            Total
                                     Distribution                                                                                          Distribution
                                          and                                                                                                   and
                                      Marketing                                                                                              Marketing



                                                                      
          
        
        (dollars and gallons in millions, except gross profit per gallon)


                   Revenues:


      Motor fuel sales                                 $
        4,193                                    $
              173                                         $
              4,366                               $
       4,304           $
        203 $
       4,507


      Non motor fuel sales                          16                         58                                               74                                               15                        51                  66



     Lease income                                  31                          4                                               35                                               31                         3                  34


      Total revenues                                   $
        4,240                                    $
              235                                         $
              4,475                               $
       4,350           $
        257 $
       4,607


                   Gross profit (1):


      Motor fuel sales                                   $
        171                                     $
              19                                           $
              190                                 $
       204            $
        23   $
       227


      Non motor fuel sales                          13                         31                                               44                                               18                        31                  49



     Lease                                         31                          4                                               35                                               31                         3                  34



      Total gross profit                                 $
        215                                     $
              54                                           $
              269                                 $
       253            $
        57   $
       310


      Income (loss) from
       continuing operations                        39                         16                                               55                                              101                       (7)                 94


      Loss from discontinued
       operations, net of
       taxes                                                                                                                                                                                         (26)                (26)



      Net income (loss) and
       comprehensive income
       (loss)                                             $
        39                                     $
              16                                            $
              55                                 $
       101          $
        (33)   $
       68


      Adjusted EBITDA (2)                                $
        119                                     $
              33                                           $
              152                                 $
       132             $
        8   $
       140


      Distributable Cash
       Flow, as adjusted (2)                                                                         $
              101                                                                                          $
       106


                   Operating Data:


      Motor fuel gallons sold                                                                2,054                                                                                             1,977


      Motor fuel gross profit
       cents per gallon (3)                                                                    9.1               ¢                                                                               9.9      ¢

The following table presents a reconciliation of Adjusted EBITDA to net income, and Adjusted EBITDA to Distributable Cash Flow, as adjusted:


                                                           Three Months Ended June 30,


                                                  2019                               2018               Change



                                                                                          (in millions)


                   Segment Adjusted EBITDA


      Fuel distribution and
       marketing                                       $
             119                                          $
      132        $
       (13)



     All other                                     33                                           8                         25




     Total                                        152                                         140                         12


      Depreciation, amortization
       and accretion                              (47)                                       (41)                       (6)


      Interest expense, net                       (43)                                       (36)                       (7)


      Non-cash compensation
       expense                                     (3)                                        (3)


      Loss on disposal of assets
       and impairment charges (4)                  (2)                                       (40)                        38


      Loss on extinguishment of
       debt and other, net                           6                                                                     6


      Unrealized loss on commodity
       derivatives                                 (3)                                                                  (3)


      Inventory adjustments                          4                                          32                       (28)


      Other non-cash adjustments                   (4)                                        (3)                       (1)



                   Income before income tax
                    (expense) benefit (4)           60                                          49                         11


      Income tax (expense) benefit
       (4)                                        (5)                                         19                       (24)



                   Net income and comprehensive
                    income                              $
             55                                           $
      68        $
       (13)





                   Adjusted EBITDA                     $
             152                                          $
      140          $
       12


      Cash interest expense                         41                                          34                          7


      Current income tax expense
       (benefit) (4)                                 4                                         (5)                         9


      Transaction-related income
       taxes                                                                                   10                       (10)


      Maintenance capital
       expenditures                                  6                                           2                          4



                   Distributable Cash Flow         101                                          99                          2


      Transaction-related
       expenses (4)                                                                             7                        (7)


                   Distributable Cash Flow, as
                    adjusted                           $
             101                                          $
      106         $
       (5)





                   Distributions to Partners:



     Limited Partners                                  $
             68                                           $
      68



     General Partner                               18                                          18


      Total distributions to be
       paid to partners                                 $
             86                                           $
      86



      Common Units outstanding -
       end of period                              82.7                                        82.5



      Distribution coverage ratio
       (5)                                      1.17x                             1.24x




     (1) Excludes
            depreciation,
            amortization and
            accretion.



     (2) Adjusted EBITDA
            is defined as
            earnings before
            net interest
            expense, income
            taxes,
            depreciation,
            amortization and
            accretion
            expense,
            allocated non-
            cash
            compensation
            expense,
            unrealized gains
            and losses on
            commodity
            derivatives and
            inventory
            adjustments, and
            certain other
            operating
            expenses
            reflected in net
            income that we
            do not believe
            are indicative
            of ongoing core
            operations, such
            as gain or loss
            on disposal of
            assets and non-
            cash impairment
            charges. We
            define
            Distributable
            Cash Flow, as
            adjusted, as
            Adjusted EBITDA
            less cash
            interest
            expense,
            including the
            accrual of
            interest expense
            related to our
            long-term debt
            which is paid on
            a semi-annual
            basis, Series A
            Preferred
            distribution,
            current income
            tax expense,
            maintenance
            capital
            expenditures and
            other non-cash
            adjustments.


           We believe
            Adjusted EBITDA
            and
            Distributable
            Cash Flow, as
            adjusted, 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, as
                              adjusted, 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.


           Adjusted EBITDA
            and
            Distributable
            Cash Flow, as
            adjusted, 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.
            Adjusted EBITDA
            and
            Distributable
            Cash Flow, as
            adjusted, 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 Adjusted EBITDA does
                              not reflect cash requirements for
                              such replacements; and


           --                 as not all companies use identical
                              calculations, our presentation of
                              Adjusted EBITDA and Distributable
                              Cash Flow, as adjusted, may not be
                              comparable to similarly titled
                              measures of other companies.



     (3) Includes other
            non-cash
            adjustments and
            excludes the
            impact of
            inventory
            adjustments
            consistent with
            the definition
            of Adjusted
            EBITDA.



     (4) Includes amounts
            from
            discontinued
            operations for
            the three months
            ended June 30,
            2018.



     (5) The distribution
            coverage ratio
            for a period is
            calculated as
            Distributable
            Cash Flow
            attributable to
            partners, as
            adjusted,
            divided by
            distributions
            expected to be
            paid to partners
            of Sunoco LP in
            respect of such
            a period.

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SOURCE Sunoco LP