Sunoco LP Announces Third Quarter 2016 Financial and Operating Results

Nov 09, 2016

- Generated Net Income of $44.6 million, Adjusted EBITDA of $188.9 million and Distributable Cash Flow, as adjusted, of $124.1 million
- Maintained quarterly distribution of 82.55 cents and reported current quarter cash coverage of 1.25 times
- Increased gallons sold by 3.8 percent to 2.0 billion gallons compared to the third quarter 2015
- Completed the acquisition of the Fuels Business from Emerge Energy Services LP
Conference Call Scheduled for 9:00 a.m. CT (10:00 a.m. ET) on Thursday, November 10

DALLAS, Nov. 9, 2016 /PRNewswire/ -- Sunoco LP (NYSE: SUN) ("SUN" or the "Partnership") today announced financial and operating results for the three-month period ended September 30, 2016.

Sunoco LP logo

Revenue totaled $4.1 billion, a decrease of 16.3 percent, compared to $4.9 billion in the third quarter of 2015. The decline was the result of a 47.1 cent per gallon decrease in the average selling price of fuel partly offset by increased merchandise sales and additional gallons sold.

Total gross profit was $577.4 million, compared to $524.8 million in the third quarter of 2015.  Key drivers of the increase were higher wholesale motor fuel and merchandise profits partly offset by a decrease in retail motor fuel gross profit.

Income from operations was $104.2 million, versus $93.4 million in the third quarter of 2015, reflecting increased gross profit, partly offset by increased general and administrative and other operating expenses.  The increase in general and administrative expenses was primarily related to relocation costs and associated expenses incurred with the opening of a corporate office in Dallas, Texas, while the increase in other operating expenses was driven by operating more stores on a year-over-year basis.

Net income attributable to partners was $44.6 million, or $0.24 per diluted unit, versus $27.5 million, or $0.30 per diluted unit, in the third quarter of 2015.

Adjusted EBITDA (1) for the quarter totaled $188.9 million, compared with $253.7 million in the third quarter of 2015.  The unfavorable year-over-year comparison reflects lower fuel margins in both the retail and wholesale segments.

Distributable cash flow attributable to partners (1), as adjusted, was $124.1 million, compared to $112.4 million a year earlier.

On a weighted-average basis, fuel margin for all gallons sold decreased to 15.6 cents per gallon, compared to 18.6 cents per gallon in the third quarter of 2015.  The decrease was primarily attributable to increased product costs experienced during the third quarter.

Net income attributable to partners for the wholesale segment was $47.3 million compared to a net income of $2.6 million a year ago.  Adjusted EBITDA was $87.9 million, versus $107.0 million in the third quarter of last year.  Total wholesale gallons sold were 1,371.2 million, compared with 1,308.8 million in the third quarter of 2015, an increase of 4.8 percent.  This includes gallons sold to consignment stores and third-party customers, including independent dealers, fuel distributors and commercial customers. The Partnership earned 10.0 cents per gallon on these volumes, compared to 12.5 cents per gallon a year earlier.

Net loss attributable to partners for the retail segment was $2.8 million compared to a net income of $24.9 million a year ago.  Adjusted EBITDA was $101.1 million, versus $146.7 million in the third quarter of last year.  Total retail gallons sold increased by 1.8 percent to 651.4 million gallons as a result of the contribution from third party acquisitions and new-to-industry locations opened during the last 12 months.  The Partnership earned 27.5 cents per gallon on these volumes, compared to 31.2 cents per gallon a year earlier.

Total merchandise sales increased by 2.7 percent from a year ago to $605.3 million, reflecting the contribution from third party acquisitions and new-to-industry locations opened during the last 12 months.  Merchandise sales contributed $192.3 million of gross profit with a retail merchandise margin of 31.8 percent, a 40 basis point increase from the third quarter of 2015.

Same-store merchandise sales decreased by 2.1 percent, reflecting continued weakness in SUN's convenience store operations in Texas, particularly in the oil producing regions.  Same-store fuel sales decreased by 3.5 percent as a result of weakness throughout the state of Texas, particularly lower year-over-year activity in oil producing markets.  In the Texas oil producing regions, same-store merchandise sales decreased by 13.0 percent, and same-store fuel sales declined 13.7 percent.  Excluding the oil producing regions, same-store sales decreased by 0.4 percent, and same-store gallons decreased by 2.3 percent.

As of September 30, SUN operated approximately 1,345 convenience stores and retail fuel outlets along the East Coast, in the Southwest and in Hawaii. Third party operated sites totaled 5,600 locations.

SUN's other recent accomplishments include the following:

  • Completed the acquisition of the fuels business from Emerge Energy Services LP for $171.5 million. The fuels business includes two transmix processing plants with attached refined product terminals located in the Birmingham, Alabama and greater Dallas, Texas metro areas and engages in the processing of transmix and the distribution of refined fuels. These two processing plants have attached refined product terminals with over 800,000 barrels of storage capacity.
  • Completed the previously announced acquisition of the convenience store, wholesale motor fuel distribution and commercial fuels distribution businesses serving East Texas and Louisiana from Denny Oil Company for approximately $54.6 million plus inventory on hand at closing, subject to closing adjustments. The acquisition includes six company-operated locations and approximately 127 supply contracts with dealer-owned and dealer-operated sites and over 500 commercial customers. This transaction closed in the fourth quarter on October 12, 2016.

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

Distribution

On October 26, the Board of Directors of SUN's general partner declared a distribution for the third quarter of 2016 of $0.8255 per unit, which corresponds to $3.3020 per unit on an annualized basis.  This distribution is unchanged from the second quarter and represents a 10.7 percent increase compared with the third quarter of 2015. The distribution will be paid on November 15 to unitholders of record on November 7.

SUN's distribution coverage ratio for the third quarter was 1.25 times. The distribution coverage ratio on a trailing 12-month basis was 1.09 times.

Liquidity

At September 30, SUN had borrowings against its revolving line of credit of $958.2 million and other long-term debt of $3.6 billion.  Availability on the revolving credit facility after borrowings and letters of credit commitments was $518.2 million.  Net debt to Adjusted EBITDA, calculated in accordance with SUN's revolving credit facility, was 5.97 times at the end of the third quarter.


(1)

Adjusted EBITDA and distributable cash flow 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, and a reconciliation to net income.

 

Earnings Conference Call

Sunoco LP management will hold a conference call on Thursday, November 10, at 9:00 a.m. CT (10:00 a.m. ET) to discuss third quarter results and recent developments.  To participate, dial 412-902-0003 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 approximately 1,345 retail fuel sites and convenience stores (including APlus, Stripes, Aloha Island Mart and Tigermarket brands)  and distributes motor fuel to convenience stores, independent dealers, commercial customers and distributors located in more than 30 states at approximately 6,900 sites. Our parent -- Energy Transfer Equity, L.P. (NYSE: ETE) -- owns Sunoco's general partner and incentive distribution rights. For more information, visit the Sunoco LP website at www.SunocoLP.com

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 

Patrick Graham, Senior Analyst – Investor Relations and Finance
(214) 840-5678, patrick.graham@sunoco.com 

Media:

Jeff Shields, Communications Manager
(215) 977-6056, jeff.shields@sunoco.com

– Financial Schedules Follow –

 

SUNOCO LP
CONSOLIDATED BALANCE SHEETS
(in thousands, except units)
(unaudited)








September 30,
 2016


December 31,
 2015

Assets





Current assets:





   Cash and cash equivalents


$

80,565


$

72,627

   Advances to affiliates



365,536

   Accounts receivable, net


385,497


308,285

   Accounts receivable from affiliates


8,790


8,074

   Inventories, net


488,780


467,291

   Other current assets


97,621


46,080

Total current assets


1,061,253


1,267,893

Property and equipment, net


3,322,718


3,154,826

Other assets:





   Goodwill


3,236,398


3,111,262

   Intangible assets, net


1,290,764


1,259,440

   Other noncurrent assets


85,868


48,398

Total assets


$

8,997,001


$

8,841,819

Liabilities and equity





Current liabilities:





   Accounts payable


$

439,950


$

433,988

   Accounts payable to affiliates


31,635


14,988

   Advances from affiliates


62,716


   Accrued expenses and other current liabilities


321,349


307,939

   Current maturities of long-term debt


5,010


5,084

Total current liabilities


860,660


761,999

Revolving line of credit


958,236


450,000

Long-term debt, net


3,515,194


1,502,531

Deferred tax liability


694,995


694,383

Other noncurrent liabilities


160,675


170,169

Total liabilities


6,189,760


3,579,082

Commitments and contingencies (Note 11)





Equity:





   Limited partners:





   Common unitholders - public
      (49,588,960 units issued and outstanding as of September 30, 2016 and 
       December 31, 2015)


1,745,339


1,768,890

   Common unitholders - affiliated
      (45,750,826 units issued and outstanding as of September 30, 2016 and 
       37,776,746 units issued and outstanding as of December 31, 2015)


1,061,902


1,275,558

   Class A unitholders - held by subsidiary
       (no units issued and outstanding as of September 30, 2016 and 
       11,018,744 units issued and outstanding as of December 31, 2015)



   Class C unitholders - held by subsidiary
      (16,410,780 units issued and outstanding as of September 30, 2016 and  
       no units issued and outstanding as of December 31, 2015)



Total partners' capital


2,807,241


3,044,448

Predecessor equity



2,218,289

Total equity


2,807,241


5,262,737

Total liabilities and equity


$

8,997,001


$

8,841,819

 

SUNOCO LP
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(in thousands, except unit and per unit amounts)
(unaudited)














For the Three Months Ended
September 30,


For the Nine Months Ended
September 30,



2016


2015


2016


2015

Revenues









Retail motor fuel


$

1,401,830


$

1,580,815


$

3,876,542


$

4,597,670

Wholesale motor fuel sales to third parties


2,026,454


2,664,186


5,544,905


7,946,323

Wholesale motor fuel sales to affiliates


28,226


3,779


45,065


8,718

Merchandise


605,275


589,299


1,705,963


1,633,102

Rental income


22,883


20,949


67,582


61,265

Other


52,649


47,744


151,740


136,630

Total revenues


4,137,317


4,906,772


11,391,797


14,383,708

Cost of sales










Retail motor fuel


1,222,827


1,384,813


3,428,659


4,114,463

Wholesale motor fuel


1,916,511


2,591,791


5,136,083


7,623,330

Merchandise


412,983


404,179


1,160,001


1,122,970

Other


7,609


1,231


10,357


3,744

Total cost of sales


3,559,930


4,382,014


9,735,100


12,864,507

Gross profit


577,387


524,758


1,656,697


1,519,201

Operating expenses









General and administrative


82,774


61,547


201,688


167,747

Other operating


276,401


266,681


792,194


759,713

Rent


36,231


36,447


105,327


105,564

Loss on disposal of assets


203


747


2,918


894

Depreciation, amortization and accretion


77,628


65,984


234,418


202,927

Total operating expenses


473,237


431,406


1,336,545


1,236,845

Income from operations


104,150


93,352


320,152


282,356

Interest expense, net


54,289


28,517


132,565


57,692

Income before income taxes


49,861


64,835


187,587


224,664

Income tax expense


5,310


30,124


8,890


47,113

Net income and comprehensive income


44,551


34,711


178,697


177,551

Less: Net income and comprehensive income attributable to noncontrolling interest



852



2,545

Less: Preacquisition income allocated to general partner



6,315



117,728

Net income and comprehensive income attributable to partners


$

44,551


$

27,544


$

178,697


$

57,278

Net income per limited partner unit:










Common (basic and diluted)


$

0.24


$

0.30


$

1.25


$

0.96

Subordinated (basic and diluted)


$


$

0.52


$


$

1.21

Weighted average limited partner units outstanding:









Common units - public (basic)


49,588,960


24,340,677


49,588,960


21,486,878

Common units - public (diluted)


49,663,618


24,340,793


49,663,618


21,486,994

Common units - affiliated (basic and diluted)


45,750,826


19,431,349


43,131,603


9,507,137

Subordinated units - affiliated



10,939,436



10,939,436

Cash distribution per common unit


$

0.8255


$

0.7454


$

2.4683


$

2.0838

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 and nine months ended September 30, 2016 and 2015 and have been derived from our historical consolidated financial statements.

The following table sets forth, for the periods indicated, information concerning key measures we rely on to gauge our operating performance (in thousands, except gross profit per gallon):


For the Three Months Ended September 30,


2016



2015


Wholesale


Retail


Total



Wholesale


Retail


Total

Revenues













Retail motor fuel

$


$

1,401,830


$

1,401,830



$


$

1,580,815


$

1,580,815

Wholesale motor fuel sales to third parties

2,026,454



2,026,454



2,664,186



2,664,186

Wholesale motor fuel sales to affiliates

28,226



28,226



3,779



3,779

Merchandise


605,275


605,275




589,299


589,299

Rental income

19,353


3,530


22,883



11,333


9,616


20,949

Other

13,331


39,318


52,649



5,996


41,748


47,744

Total revenues

$

2,087,364


$

2,049,953


$

4,137,317



$

2,685,294


$

2,221,478


$

4,906,772

Gross profit













Retail motor fuel

$


$

179,003


$

179,003



$


$

196,002


$

196,002

Wholesale motor fuel

138,169



138,169



76,174



76,174

Merchandise


192,292


192,292




185,120


185,120

Rental and other

26,629


41,294


67,923



16,099


51,363


67,462

Total gross profit

$

164,798


$

412,589


$

577,387



$

92,273


$

432,485


$

524,758

Net income (loss) and comprehensive income (loss) attributable to partners

$

47,318


$

(2,767)


$

44,551



$

2,595


$

24,949


$

27,544

Adjusted EBITDA attributable to partners (2)

$

87,867


$

101,053


$

188,920



$

106,977


$

142,800


$

249,777

Distributable cash flow attributable to partners, as adjusted (2)





$

124,084







$

112,378

Operating Data













Total motor fuel gallons sold:













Retail



651,386


651,386





639,824


639,824

Wholesale

1,371,236




1,371,236



1,308,814




1,308,814

Motor fuel gross profit (cents per gallon) (1):













Retail



27.5¢







31.2¢



Wholesale

10.0¢







12.5¢





Volume-weighted average for all gallons





15.6¢







18.6¢

Retail merchandise margin



31.8%







31.4%













(1)

Excludes the impact of inventory fair value adjustments consistent with the definition of Adjusted EBITDA.



(2)

We define EBITDA as net income before net interest expense, income tax expense and depreciation, amortization and accretion expense. We define Adjusted EBITDA to include adjustments for non-cash compensation expense, gains and losses on disposal of assets, 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 2020 and 2023 Senior Notes that is paid on a semi-annual basis, 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 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 should not be considered 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
  • because 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.

The following table presents a reconciliation of net income to EBITDA, Adjusted EBITDA and distributable cash flow for the three months ended September 30, 2016 and 2015 (in thousands):


For the Three Months Ended September 30,


2016



2015


Wholesale


Retail


Total



Wholesale


Retail


Total

Net income (loss) and comprehensive income (loss)

$

47,318


$

(2,767)


$

44,551



$

(10,399)


$

45,110


$

34,711

   Depreciation, amortization and accretion

21,819


55,809


77,628



13,571


52,413


65,984

   Interest expense, net

13,198


41,091


54,289



13,106


15,411


28,517

Income tax expense (benefit)

507


4,803


5,310



39


30,085


30,124

EBITDA

$

82,842


$

98,936


$

181,778



$

16,317


$

143,019


$

159,336

   Non-cash stock compensation expense

1,516


1,501


3,017



1,697


435


2,132

   Loss (gain) on disposal of assets

(599)


802


203



921


(174)


747

   Unrealized loss on commodity derivatives

5,689



5,689



735



735

   Inventory fair value adjustment

(1,581)


(186)


(1,767)



87,307


3,456


90,763

Adjusted EBITDA

$

87,867


$

101,053


$

188,920



$

106,977


$

146,736


$

253,713

Adjusted EBITDA attributable to noncontrolling interest






3,936


3,936

Adjusted EBITDA attributable to partners

$

87,867


$

101,053


$

188,920



$

106,977


$

142,800


$

249,777

Cash interest expense (3)





50,681







27,419

Income tax expense (benefit) (current)





(14,574)







537

Maintenance capital expenditures





29,705







8,351

Preacquisition earnings











101,950

Distributable cash flow attributable to partners





$

123,108







$

111,520

Transaction-related expense





976







858

Distributable cash flow attributable to partners, as adjusted





$

124,084







$

112,378













(3)

Reflects the Partnership's cash interest less the cash interest paid on our VIE debt of $2.3 million during the three months ended September 30, 2015.

Capital Spending

SUN's gross capital expenditures for the third quarter were $110.6 million, which included $80.9 million for growth capital and $29.7 million for maintenance capital.  Approximately $36.6 million of the growth capital spent was for the construction of new-to-industry sites, of which three were opened in the third quarter, with 21 currently under construction.

SUN expects capital spending for the full year 2016, excluding acquisitions, to be within the following ranges ($ in millions)

Growth

Maintenance



Low   

   High

    Low   

  High





$360

$380

$100

$110

Growth capital spending includes the construction of at least 35 new-to-industry sites that SUN expects to complete in 2016.

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SOURCE Sunoco LP

Categories: Press Releases