Sunoco LP Announces First Quarter 2020 Financial and Operating Results
DALLAS, May 11, 2020 /PRNewswire/ -- Sunoco LP (NYSE: SUN) ("SUN" or the "Partnership") today reported financial and operating results for the three-month period ended March 31, 2020.
"Our employees have been working on the front lines to continue to serve our country, communities and customers," said Joe Kim, CEO of Sunoco LP. "Our best wishes go out to those affected by COVID-19 and I would like to personally thank our employees and fuel distribution partners for their dedication during this unprecedented time. We have built a resilient business model to withstand various headwinds. We started the year on solid footing and delivered strong first quarter results even with the onset of the pandemic in March. We will continue to take proactive steps to manage through the crisis and ensure a stable, long-term future for Sunoco."
Financial and Operational Highlights
For the three months ended March 31, 2020, net loss was $128 million versus a net income of $109 million in the first quarter of 2019. The net loss includes approximately $227 million of non-cash inventory adjustments resulting from the decline in the price of RBOB.
Adjusted EBITDA((1)) for the quarter totaled $209 million compared with $153 million in the first quarter of 2019. This year-over-year increase reflects higher reported fuel margins of 13.1 cents per gallon driven by a decline in the price of RBOB and the receipt of a $13 million annual make-up payment under the fuel supply agreement with 7-Eleven, Inc. Adjusted EBITDA also included an increase in non motor fuel sales gross profit related to an $18 million favorable legal settlement and an increase in other operating expense related to current expected credit losses of approximately $16 million.
Distributable Cash Flow, as adjusted((1)), for the quarter was $159 million, compared to $99 million a year ago.
The Partnership sold 1.9 billion gallons in the first quarter, down 2% from the first quarter of 2019. On a weighted-average basis, fuel margin for all gallons sold was 13.1 cents per gallon for the first quarter compared to 9.9 cents per gallon a year ago.
Distribution and Coverage
On April 2, 2020, the Board of Directors of SUN's general partner declared a distribution for the first quarter of 2020 of $0.8255 per unit, which corresponds to $3.3020 per unit on an annualized basis. The distribution will be paid on May 19, 2020 to common unitholders of record on May 7, 2020. Current quarter cash coverage was 1.84 times and trailing twelve months coverage was 1.49 times.
Liquidity and Leverage
At March 31, 2020, SUN had borrowings of $265 million against its revolving credit facility and other long-term debt of $2.9 billion. The Partnership maintained ample liquidity of $1.2 billion at the end of the quarter under its $1.5 billion revolving credit facility that matures in July 2023 and has no debt maturities prior to 2023. SUN's leverage ratio of net debt to Adjusted EBITDA, calculated in accordance with its credit facility, was 4.39 times at the end of the first quarter.
Capital Spending
SUN's gross capital expenditures for the first quarter were $41 million, which included $36 million for growth capital and $5 million for maintenance capital.
2020 Business Outlook
The Partnership revised its 2020 capital guidance by reducing full year growth capital expenditures to approximately $75 million and maintenance capital expenditures to $30 million. SUN also began efforts in the second quarter to reduce total operating expenses((2)) by $55 to $70 million over the remainder of the year. SUN lowered 2020 full year operating expense guidance to a range of $460 to $475 million. The combination of unprecedented declines in fuel demand and a volatile commodity price environment will affect the Partnership's outlook for full year 2020 fuel volumes and margins. As a result, SUN is withdrawing its previous guidance on 2020 fuel volume, margin and adjusted EBITDA.
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) Operating expenses include general and administrative, other operating and lease expenses.
Earnings Conference Call
Sunoco LP management will hold a conference call on Tuesday, May 12, at 8:00 a.m. CT (9:00 a.m. ET) to discuss 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 news 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. In addition to the risks and uncertainties previously disclosed, the Partnership has also been, or may in the future be, impacted by new or heightened risks related to the COVID-19 pandemic and the recent sharp decline in commodity prices, and we cannot predict the length and ultimate impact of those risks. 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 (Dollars in millions) (unaudited) March 31, December 31, 2020 2019 Assets Current assets: Cash and cash equivalents $ 31 $ 21 Accounts receivable, net 162 399 Receivables from affiliates 11 12 Inventories, net 182 419 Other current assets 83 73 Total current assets 469 924 Property and equipment 2,170 2,134 Accumulated depreciation (720) (692) Property and equipment, net 1,450 1,442 Other assets: Finance lease right-of-use assets, net 27 29 Operating lease right-of-use assets, net 537 533 Goodwill 1,555 1,555 Intangible assets 905 906 Accumulated amortization (274) (260) Intangible assets, net 631 646 Other noncurrent assets 173 188 Investment in unconsolidated affiliate 135 121 Total assets $ 4,977 $ 5,438 Liabilities and equity Current liabilities: Accounts payable $ 162 $ 445 Accounts payable to affiliates 27 49 Accrued expenses and other current liabilities 171 219 Operating lease current liabilities 20 20 Current maturities of long-term debt 12 11 Total current liabilities 392 744 Operating lease noncurrent liabilities 535 530 Revolving line of credit 265 162 Long-term debt, net 2,896 2,898 Advances from affiliates 139 140 Deferred tax liability 109 109 Other noncurrent liabilities 95 97 Total liabilities 4,431 4,680 Equity: Limited partners: Common unitholders 546 758 (83,017,163 units issued and outstanding as of March 31, 2020 and 82,985,941 units issued and outstanding as of December 31, 2019) Class C unitholders -held by subsidiaries (16,410,780 units issued and outstanding as of March 31, 2020 and December 31, 2019) Total equity 546 758 Total liabilities and equity $ 4,977 $ 5,438
SUNOCO LP CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) (Dollars in millions, except per unit data) (unaudited) Three Months Ended March 31, 2020 2019 Revenues: Motor fuel sales $ 3,166 $ 3,583 Non motor fuel sales 71 74 Lease income 35 35 Total revenues 3,272 3,692 Cost of sales and operating expenses: Cost of sales 3,164 3,322 General and administrative 34 27 Other operating 95 84 Lease expense 14 14 Loss on disposal of assets and impairment charges 2 48 Depreciation, amortization and accretion 45 45 Total cost of sales and operating expenses 3,354 3,540 Operating income (loss) (82) 152 Other income (expense): Interest expense, net (44) (42) Other income (expense), net (3) Equity in earnings of unconsolidated affiliate 1 Income (loss) before income taxes (125) 107 Income tax expense (benefit) 3 (2) Net income (loss) and comprehensive income (loss) $ (128) $ 109 Net income (loss) per common unit: Common units - basic $ (1.78) $ 1.08 Common units - diluted $ (1.78) $ 1.07 Weighted average common units outstanding: Common units - basic 83,013,768 82,711,188 Common units - diluted 83,013,768 83,380,167 Cash distributions 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.
The key operating metrics by segment and accompanying footnotes set forth below are presented for the three months ended March 31, 2020 and 2019 and have been derived from our historical consolidated financial statements.
Three Months Ended March 31, 2020 2019 Fuel All Other Total Fuel Distribution Distribution and Marketing and Marketing All Other Total (dollars and gallons in millions, except gross profit per gallon) Revenues: Motor fuel sales $ 3,039 $ 127 $ 3,166 $ 3,442 $ 141 $ 3,583 Non motor fuel sales 11 60 71 19 55 74 Lease income 30 5 35 32 3 35 Total revenues $ 3,080 $ 192 $ 3,272 $ 3,493 $ 199 $ 3,692 Gross profit (1): Motor fuel sales $ (6) $ 27 $ 21 $ 258 $ 27 $ 285 Non motor fuel sales 11 41 52 17 33 50 Lease 30 5 35 32 3 35 Total gross profit $ 35 $ 73 $ 108 $ 307 $ 63 $ 370 Net income (loss) and comprehensive income (loss) $ (157) $ 29 $ (128) $ 137 $ (28) $ 109 Adjusted EBITDA (2) $ 160 $ 49 $ 209 $ 118 $ 35 $ 153 Operating Data: Total motor fuel gallons sold 1,898 1,941 Motor fuel gross profit cents per gallon (3) 13.1 ¢ 9.9 ¢
The following table presents a reconciliation of Adjusted EBITDA to net income (loss) and Adjusted EBITDA to Distributable Cash Flow, as adjusted, for the three months ended March 31, 2020 and 2019:
Three Months Ended March 31, 2020 2019 (in millions) Adjusted EBITDA: Fuel distribution and marketing $ 160 $ 118 All other 49 35 Total Adjusted EBITDA 209 153 Depreciation, amortization and accretion (45) (45) Interest expense, net (44) (42) Non-cash unit-based compensation expense (4) (3) Loss on disposal of assets and impairment charges (2) (48) Unrealized gain (loss) on commodity derivatives (6) 6 Inventory adjustments (227) 93 Equity in earnings of unconsolidated affiliate 1 Adjusted EBITDA related to unconsolidated affiliate (2) Other non-cash adjustments (5) (7) Income tax (expense) benefit (3) 2 Net income (loss) and comprehensive income (loss) $ (128) $ 109 Adjusted EBITDA (2) $ 209 $ 153 Adjusted EBITDA related to unconsolidated affiliate 2 Distributable cash flow from unconsolidated affiliate (2) Cash interest expense 43 40 Current income tax expense 2 12 Maintenance capital expenditures 5 4 Distributable Cash Flow 159 97 Transaction-related expenses 2 Distributable Cash Flow, as adjusted (2) $ 159 $ 99 Distributions to Partners: Limited Partners $ 69 $ 68 General Partners 18 18 Total distributions to be paid to partners $ 87 $ 86 Common Units outstanding - end of period 83.0 82.7 Distribution coverage ratio (4) 1.84x 1.15x
____________________ (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. Adjusted EBITDA reflects amounts for the unconsolidated affiliate based on the same recognition and measurement methods used to record equity in earnings of unconsolidated affiliate. Adjusted EBITDA related to unconsolidated affiliate excludes the same items with respect to the unconsolidated affiliate as those excluded from the calculation of Adjusted EBITDA, such as interest, taxes, depreciation, depletion, amortization and other non-cash items. Although these amounts are excluded from Adjusted EBITDA related to unconsolidated affiliate, such exclusion should not be understood to imply that we have control over the operations and resulting revenues and expenses of such affiliate. We do not control our unconsolidated affiliate; therefore, we do not control the earnings or cash flows of such affiliate. The use of Adjusted EBITDA or Adjusted EBITDA related to unconsolidated affiliate as an analytical tool should be limited accordingly. (3) Includes other non-cash adjustments and excludes the impact of inventory adjustments consistent with the definition of Adjusted EBITDA. (4) 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