Sunoco LP Announces Fourth Quarter and Full Year 2016 Financial and Operating Results

Feb 22, 2017

- Maintained quarterly distribution of 82.55 cents, an increase of 3.0 percent compared to fourth quarter 2015

- Increased gallons sold by 6.7 percent to 2.0 billion gallons compared to fourth quarter 2015

- Opened 14 new-to-industry locations during the fourth quarter and 28 locations during the full year 2016. 10 additional locations were opened during the first two months of 2017

- Completed the acquisition of the convenience store, wholesale motor fuel distribution and commercial fuels distribution businesses from Denny Oil Company

Conference Call Scheduled for 9:00 a.m. CT (10:00 a.m. ET) on Thursday, February 23

DALLASFeb. 22, 2017 /PRNewswire/ -- Sunoco LP (NYSE: SUN) ("SUN" or the "Partnership") today announced financial and operating results for the three and twelve-month periods ended December 31, 2016.

Sunoco LP logo

Revenue totaled $4.3 billion, an increase of 4.9 percent, compared to $4.1 billion in the fourth quarter of 2015. The increase was the result of growth in wholesale and retail fuel gallons sold and higher merchandise sales, partly offset by a one cent per gallon decrease in the average selling price of fuel.

Total gross profit was $561.9 million, compared to $464.7 million in the fourth quarter of 2015.  Key drivers of the increase were higher retail and wholesale motor fuel profits due to an increase in total gallons sold.

Loss from operations was $568.4 million, versus income from operations of $51.0 million in the fourth quarter of 2015, reflecting a goodwill impairment charge of $641.6 million and an intangible asset impairment charge of $32.0 million recorded during the fourth quarter, both of which were non-cash items. General and administrative expenses increased $17.9 million from the fourth quarter 2015 to $67.2 million primarily due to acquisition costs and expenses incurred with the opening of a corporate office in Dallas, Texas.  Other operating expenses increased $10.9 million from the fourth quarter 2015 to $267.2 million as a result of stores acquired or opened in the last 12 months.

Net loss attributable to partners was $585.2 million, or ($6.32) per diluted unit, versus net income attributable to partners of $7.8 million, or ($0.13) per diluted unit, in the fourth quarter of 2015.

Adjusted EBITDA attributable to partners (1) for the quarter totaled $153.6 million, compared with $188.7 million in the fourth quarter of 2015.  The unfavorable year-over-year comparison reflects lower cent per gallon fuel margins in the retail and wholesale segments and lower merchandise gross profit contribution.

Distributable cash flow attributable to partners (1), as adjusted, was $62.6 million, compared to $90.1 million a year ago. This year over year decrease reflects an increase in cash interest expense, income tax expense and maintenance capital expenditures.

On a weighted-average basis, fuel margin for all gallons sold decreased to 14.3 cents per gallon, compared to 15.7 cents per gallon in the fourth quarter of 2015.  The decrease was primarily attributable to increased product costs experienced during the fourth quarter.

Net income attributable to partners for the wholesale segment was $61.4 million compared to a net loss of $10.2 million a year ago.  Adjusted EBITDA was $76.9 million, versus $82.7 million in the fourth quarter of last year.  Total wholesale gallons sold were 1,358.7 million, compared to 1,241.0 million in the fourth quarter of 2015, an increase of 9.5 percent as a result of contribution from third party acquisitions during the last 12 months.  This includes gallons sold to consignment stores and third-party customers, including independent dealers, fuel distributors and commercial customers. The Partnership earned 9.0 cents per gallon on these volumes, compared to 9.6 cents per gallon a year earlier.

Net loss attributable to partners for the retail segment was $646.6 million compared to a net income of $17.9 million a year ago.  Adjusted EBITDA was $76.7 million, versus $106.0 million in the fourth quarter of last year.  Total retail gallons sold increased by 1.0 percent to 626.1 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 25.7 cents per gallon on these volumes, compared to 27.8 cents per gallon a year earlier.

Total merchandise sales increased by 3.8 percent from a year ago to $565.8 million, reflecting the contribution from third party acquisitions and new-to-industry locations opened during the last 12 months. Merchandise sales contributed $169.0 million of gross profit with a retail merchandise margin of 29.9 percent, a decrease of 1.2 percentage points from the fourth quarter of 2015.

Same-store merchandise sales were flat during the fourth quarter, reflecting growth in SUN's East Coast operations offset by continued weakness in convenience store operations in Texas, particularly in the oil producing regions.  Same-store gallons decreased by 1.9 percent as a result of weakness throughout the state of Texas, particularly lower year-over-year activity in oil producing regions.  In the Texas oil producing regions, same-store merchandise sales decreased by 4.2 percent, and same-store gallons declined 3.9 percent.  Excluding the oil producing regions, same-store merchandise sales increased by 0.7 percent, and same-store gallons decreased by 1.7 percent.

As of December 31, 2016, SUN operated 1,345 convenience stores and retail fuel outlets along the East Coast, in the Southwest and in Hawaii. Third party wholesale customers totaled 7,845.

SUN's other recent accomplishments include the following:

  • 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 $54.6 million plus inventory on hand at closing, subject to closing adjustments. The acquisition includes six company-operated locations and 127 supply contracts with dealer-owned and dealer-operated sites and over 500 commercial customers.  This transaction closed on October 12, 2016.
  • Retained NRC Realty & Capital Advisors, LLC on January 18, 2017 to assist with strategic alternatives for 99 real estate assets.  Real estate assets in this process are company-owned locations, undeveloped greenfield sites and other excess real estate. 

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

FY 2016 Compared to FY 2015

Revenue for the full year 2016 totaled $15.7 billion, a 15.0 percent decrease compared to full year 2015.  Gross profit for this period increased 11.8 percent year-over-year to $2.2 billion.

Wholesale gallons sold to third parties increased by 2.6 percent to 5.3 billion gallons. Retail gallons sold increased by 1.1 percent to 2.5 billion gallons.  On a weighted-average basis, fuel margin for all gallons sold decreased to 14.4 cents per gallon for the full year 2016, versus 14.9 cents per gallon in the full year 2015.

Total merchandise sales increased by 4.3 percent from full year 2015 to $2.3 billion.  Merchandise sales contributed $716.0 million of gross profit with a retail merchandise margin of 31.5 percent, a 26 basis point increase from full year 2015.

Net loss attributable to partners for the full year 2016 totaled $406.5 million, a decrease of $493.7 million compared to full year 2015. Adjusted EBITDA attributable to partners was $665.3 million, compared to $715.3 million for the 2015 period, and distributable cash flow, as adjusted was $390.3 million, versus $272.2 million for 2015.

Distribution

On February 1, 2017 the Board of Directors of SUN's general partner declared a distribution for the fourth quarter of 2016 of $0.8255 per unit, which corresponds to $3.3020 per unit on an annualized basis.  This distribution was unchanged from the third quarter and represented a 3.0 percent increase compared with the fourth quarter of 2015. The distribution was paid on February 21 to unitholders of record on February 13.

SUN's distribution coverage ratio for the fourth quarter was 0.61 times. The distribution coverage ratio on a trailing 12-month basis was 0.98 times.

Liquidity

At December 31, SUN had borrowings against its revolving line of credit of $1.0 billion and other long-term debt of $3.6 billion.  Availability on the revolving credit facility after borrowings and letters of credit commitments was $469.0 million.  In the fourth quarter of 2016, SUN issued 2.8 million common units through its at-the-market equity program, generating net proceeds of $71.4 million.  Net debt to Adjusted EBITDA, calculated in accordance with SUN's revolving credit facility, was 6.50 times at the end of the fourth 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, February 23, at 9:00 a.m. CT (10:00 a.m. ET) to discuss fourth quarter and full year 2016 results and recent developments.  To participate, dial 201-389-0877 approximately 10 minutes early and ask for the Sunoco LP conference call. The call will also be accessible live and for later replay via webcast in the Investor Relations section of Sunoco's website at www.SunocoLP.com under Events and Presentations.

Sunoco LP (NYSE: SUNis a master limited partnership that operates 1,345 convenience stores and retail fuel sites and distributes motor fuel to 7,845 convenience stores, independent dealers, commercial customers and distributors located in 30 states. Our parent -- Energy Transfer Equity, L.P. (NYSE: ETE) -- owns SUN's general partner and incentive distribution rights.

Forward-Looking Statements

This press release may include certain statements concerning expectations for the future that are forward-looking statements as defined by federal law. Such forward-looking statements are subject to a variety of known and unknown risks, uncertainties, and other factors that are difficult to predict and many of which are beyond management's control. An extensive list of factors that can affect future results are discussed in the Partnership's Annual Report on Form 10-K and other documents filed from time to time with the Securities and Exchange Commission. The Partnership undertakes no obligation to update or revise any forward-looking statement to reflect new information or events.

The information contained in this press release is available on our website at www.SunocoLP.com

Qualified Notice

This release is intended to be a qualified notice under Treasury Regulation Section 1.1446-4(b). Brokers and nominees should treat 100 percent of Sunoco LP's distributions to non-U.S. investors as being attributable to income that is effectively connected with a United States trade or business. Accordingly, Sunoco LP's distributions to non-U.S. investors are subject to federal income tax withholding at the highest applicable effective tax rate.

Contacts

Investors:
Scott Grischow, Senior Director – Investor Relations and Treasury 
(214) 840-5660, scott.grischow@sunoco.com

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

Media:
Alyson Gomez, Director – Communications
(469) 646-1758, alyson.gomez@sunoco.com

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


 

SUNOCO LP

CONSOLIDATED BALANCE SHEETS



December 31,
 2016


December 31,
 2015


(in millions, except units)

Assets




Current assets:




Cash and cash equivalents

$

119



$

73


Advances to affiliates



366


Accounts receivable, net

539



308


Receivables from affiliates

3



8


Inventories, net

573



467


Other current assets

155



46


Total current assets

1,389



1,268


Property and equipment, net

3,373



3,155


Other assets:




Goodwill

2,618



3,111


Intangible assets, net

1,255



1,260


Other noncurrent assets

66



48


Total assets

$

8,701



$

8,842


Liabilities and equity




Current liabilities:




Accounts payable

$

616



$

434


Accounts payable to affiliates

109



15


Advances from affiliates

87




Accrued expenses and other current liabilities

372



308


Current maturities of long-term debt

5



5


Total current liabilities

1,189



762


Revolving line of credit

1,000



450


Long-term debt, net

3,509



1,503


Deferred tax liability

643



694


Other noncurrent liabilities

164



170


Total liabilities

6,505



3,579


Commitments and contingencies




Equity:




Limited partners:




Common unitholders - public (52,430,220 units issued and outstanding as of December 31, 2016 and 49,588,960 units issued and outstanding as of December 31, 2015)

1,467



1,769


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

729



1,276


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




Total partners' capital

2,196



3,045


Predecessor equity



2,218


Total equity

2,196



5,263


Total liabilities and equity

$

8,701



$

8,842



 

SUNOCO LP

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME



Successor



Predecessor


Year Ended 
December 31,
 2016


Year Ended 
December 31,
 2015


September 1, 2014 
through

December 31, 2014



January 1, 2014

through

August 31, 2014


(dollars in millions, except unit and per unit amounts)

Revenues:









Retail motor fuel

$

5,261



$

5,891



$

2,377




$


Wholesale motor fuel sales to third parties

7,812



10,104



4,235




1,275


Wholesale motor fuel sales to affiliates

62



20






2,200


Merchandise

2,272



2,178



651





Rental income

90



81



25




12


Other

201



186



55




5


Total revenues

15,698



18,460



7,343




3,492


Cost of sales:









Retail motor fuel cost of sales

4,650



5,256



2,106





Wholesale motor fuel cost of sales

7,261



9,717



4,204




3,429


Merchandise cost of sales

1,556



1,498



455





Other

12



5



2




2


Total cost of sales

13,479



16,476



6,767




3,431


Gross profit

2,219



1,984



576




61


Operating expenses:









General and administrative

269



217



91




17


Other operating

1,059



1,016



320




5


Rent

140



140



42




1


Loss (gain) on disposal of assets and impairment charge

680



(1)



(1)





Depreciation, amortization and accretion

319



278



86




10


Total operating expenses

2,467



1,650



538




33


Income (loss) from operations

(248)



334



38




28


Interest expense, net

189



88



11




5


Income (loss) before income taxes

(437)



246



27




23


Income tax expense (benefit)

(31)



52



80





Net income (loss) and comprehensive income (loss)

(406)



194



(53)




23


Less: Net income and comprehensive income attributable to noncontrolling interest



4



1





Less: Preacquisition income (loss) allocated to general partner



103



(88)





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

(406)



87



34




23


Net income (loss) per limited partner unit:









Common - basic and diluted

$

(5.26)



$

1.11



$

0.85




$

1.02


Subordinated - basic and diluted

$



$

1.40



$

0.85




$

1.02











Weighted average limited partner units outstanding:









Common units - public (basic)

49,785,543



24,550,388



20,493,065




10,944,309


Common units - public (diluted)

49,813,848



24,572,126



20,499,447




10,969,437


Common units - affiliated (basic and diluted)

43,789,987



15,703,525



79,308




79,308


Subordinated units - affiliated (basic and diluted)



10,010,333



10,939,436




10,939,436











Cash distribution per unit

$

3.29



$

2.89



$

1.15




$

1.02


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 years and three months ended December 31, 2016 and December 31, 2015 and have been derived from our historical consolidated financial statements.

The accompanying footnotes to the following four key operating metrics tables can be found immediately preceding our capital spending discussion.

 


Year Ended December 31,


2016



2015


Wholesale


Retail


Total



Wholesale


Retail


Total


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

Revenues:













Retail motor fuel

$



$

5,261



$

5,261




$



$

5,891



$

5,891


Wholesale motor fuel sales to third parties

7,812





7,812




10,104





10,104


Wholesale motor fuel sale to affiliates

62





62




20





20


Merchandise



2,272



2,272






2,178



2,178


Rental income

76



14



90




52



29



81


Other

45



156



201




28



158



186


Total revenues

$

7,995



$

7,703



$

15,698




$

10,204



$

8,256



$

18,460


Gross profit:













Retail motor fuel

$



$

611



$

611




$



$

635



$

635


Wholesale motor fuel

613





613




407





407


Merchandise



716



716






680



680


Rental and other

110



169



279




75



187



262


Total gross profit

$

723



$

1,496



$

2,219




$

482



$

1,502



$

1,984


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

$

269



$

(675)



$

(406)




$

(5)



$

92



$

87


Adjusted EBITDA attributable to partners (2)

$

337



$

328



$

665




$

304



$

411



$

715


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





$

390








$

272


Operating Data:













Total motor fuel gallons sold:













Retail



2,517



2,517






2,488



2,488


Wholesale

5,288





5,288




5,154





5,154


Motor fuel gross profit cents per gallon (1):













Retail



24.0¢



24.0¢






26.4¢



26.4¢


Wholesale

9.8¢





9.8¢




9.4¢





9.4¢


Volume-weighted average for all gallons





14.4¢








14.9¢


Retail merchandise margin



31.5

%







31.2

%



The following table presents a reconciliation of net income to EBITDA, Adjusted EBITDA and distributable cash flow:

 


Year Ended December 31


2016



2015


Wholesale


Retail


Total



Wholesale


Retail


Total


(in millions)

Net income (loss) and comprehensive income (loss)

$

269



$

(675)



$

(406)




$

92



$

102



$

194


Depreciation, amortization  and accretion

94



225



319




68



210



278


Interest expense, net

59



130



189




55



33



88


Income tax expense (benefit)

5



(36)



(31)




4



48



52


EBITDA

$

427



$

(356)



$

71




$

219



$

393



$

612


Non-cash compensation expense

6



7



13




4



4



8


Loss (gain) on disposal of assets & impairment charge

(3)



683



680




1



(2)



(1)


Unrealized losses on commodity derivatives

5





5




2





2


Inventory adjustments (4)

(98)



(6)



(104)




78



20



98


Adjusted EBITDA

$

337



$

328



$

665




$

304



$

415



$

719


Net income attributable to noncontrolling interest










4



4


Adjusted EBITDA attributable to partners

$

337



$

328



$

665




$

304



$

411



$

715


Cash interest expense (3)





178








76


Income tax expense (current)












(18)


Maintenance capital expenditures





106








35


Preacquisition earnings












356


Distributable cash flow attributable to partners





$

381








$

266


Transaction-related expenses





9








6


Distributable cash flow attributable to partners, as adjusted





$

390








$

272


The following table sets forth, for the periods indicated, information concerning key measures we rely on to gauge our operating performance:

 


Three Months Ended December 31,


2016



2015


Wholesale


Retail


Total



Wholesale


Retail


Total


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

Revenues:













Retail motor fuel

$



$

1,384



$

1,384




$



$

1,294



$

1,294


Wholesale motor fuel sales to third parties

2,267





2,267




2,158





2,158


Wholesale motor fuel sale to affiliates

17





17




11





11


Merchandise



566



566






545



545


Rental income

19



4



23




17



3



20


Other

15



34



49




10



39



49


Total revenues

$

2,318



$

1,988



$

4,306




$

2,196



$

1,881



$

4,077


Gross profit:













Retail motor fuel

$



$

164



$

164




$



$

152



$

152


Wholesale motor fuel

159





159




76





76


Merchandise



169



169






170



170


Rental and other

30



40



70




26



41



67


Total gross profit

$

189



$

373



$

562




$

102



$

363



$

465


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

$

61



$

(646)



$

(585)




$

(10)



$

18



$

8


Adjusted EBITDA attributable to partners (2)

$

77



$

77



$

154




$

83



$

106



$

189


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





$

63








$

90


Operating Data:













Total motor fuel gallons sold:













Retail



626



626






620



620


Wholesale

1,359





1,359




1,241





1,241


Motor fuel gross profit cents per gallon (1):