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

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: SUN) is 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

 

 

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.

 

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

 

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