NEWS RELEASE
Sunoco LP Announces Third Quarter 2016 Financial
and Operating Results
11/9/2016
- 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.
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
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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
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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
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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
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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
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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:
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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
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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
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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
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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.
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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):
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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.
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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
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