– Completed the private placement of $300 million in SUN preferred equity to ETE
– Maintained quarterly distribution of 82.55 cents, an increase of 1.0 percent compared to first quarter 2016
– Executed definitive agreement to divest a majority of company-operated convenience stores to 7-Eleven, Inc. for $3.3 billion; transaction includes 15-year take-or-pay fuel supply agreement with 7-Eleven
– Launched sales process for remaining company-operated convenience stores in North and West Texas, New Mexico and Oklahoma
Conference Call Scheduled for 9:30 a.m. CT (10:30 a.m. ET) on Thursday, May 4
DALLAS, 2017-May-04 — /EPR Retail News/ — Sunoco LP (NYSE: SUN) (“SUN” or the “Partnership”) today (May 3, 2017) announced financial and operating results for the three-month period ended March 31, 2017.
Revenue totaled $4.4 billion, an increase of 36.7 percent, compared to $3.2 billion in the first quarter of 2016. The increase was the result of the average selling price of fuel being 56 cents per gallon higher than last year, additional wholesale gallons sold and increased merchandise sales.
Total gross profit was $503 million, compared to $511 million in the first quarter of 2016.
The key driver of the decrease was lower wholesale motor fuel profits partly offset by increases in retail motor fuel and merchandise profits.
Income from operations was $48 million, versus $92 million in the first quarter of 2016. General and administrative expenses increased $6 million from the first quarter 2016 to $64 million primarily due to increased salary and benefit costs. Other operating expenses increased $14 million from the first quarter 2016 to $263 million as a result of stores acquired or opened in the last 12 months.
Net income was $1 million, or ($0.22) per diluted unit, versus $62 million, or $0.47 per diluted unit, in the first quarter of 2016.
Adjusted EBITDA (1) for the quarter totaled $155 million, compared with $159 million in the first quarter of 2016. The unfavorable year-over-year comparison reflects decreased wholesale motor fuel gross profit contribution and increased total operating expenses.
Distributable cash flow (1), as adjusted, was $77 million, compared to $112 million a year ago. This year over year decrease reflects an increase in cash interest expense.
On a weighted-average basis, fuel margin for all gallons sold decreased to 14.5 cents per gallon, compared to 14.7 cents per gallon in the first quarter of 2016. The decrease was primarily attributable to lower margins in the wholesale segment.
Net income for the wholesale segment was $42 million compared to $87 million a year ago. Adjusted EBITDA was $95 million, versus $103 million in the first quarter of last year. Total wholesale gallons sold were 1,313 million, compared to 1,233 million in the first quarter of 2016, an increase of 6.5 percent as a result of growth in both the Southwest geography and unbranded business and contribution from the Emerge acquisition. This includes gallons sold to consignment stores and third-party customers, including independent dealers, fuel distributors and commercial customers. The Partnership earned 10.6 cents per gallon on these volumes, compared to 11.4 cents per gallon a year earlier.
Net loss for the retail segment was $41 million compared to a net loss of $25 million a year ago. Adjusted EBITDA was $60 million, versus $56 million in the first quarter of last year. Total retail gallons sold decreased by 2.1 percent to 595 million gallons as a result of the decreased demand across SUN’s operating geography, particularly along the East Coast. The Partnership earned 23.1 cents per gallon on these volumes, compared to 21.3 cents per gallon a year earlier.
Total merchandise sales increased by 3.1 percent from a year ago to $540 million, reflecting the contribution from third party acquisitions and new-to-industry locations opened during the last 12 months. Merchandise sales contributed $170 million of gross profit with a retail merchandise margin of 31.6 percent, a decrease of 0.1 percentage points from the first quarter of 2016.
Same-store merchandise sales decreased by 1.1 percent during the first quarter, reflecting weakness in convenience store and restaurant operations in Texas, partly offset by growth in SUN’s East Coast and Hawaiian operations. Same-store gallons decreased by 5.7 percent as a result of weakness throughout SUN’s retail geography. In the Texas oil producing regions, same-store merchandise sales increased by 1.6 percent, and same-store gallons increased 1.1 percent. Both same store merchandise sales and same store fuel sales were impacted from a leap day in the first quarter of last year by approximately 1.1 percent.
As of March 31, 2017, SUN operated 1,355 convenience stores and retail fuel outlets along the East Coast, in the Southwest and in Hawaii. Third party wholesale customers totaled 7,825.
SUN’s other recent accomplishments include the following:
- On January 18, SUN announced it retained NRC Realty & Capital Advisors, LLC (“NRC”) to assist with strategic alternatives for approximately 100 real estate assets.
- On March 30, SUN and Energy Transfer Equity, L.P. (NYSE: ETE) (“ETE”) announced the completion of a private placement of $300 million in SUN preferred equity to ETE.
- On April 6, SUN announced the planned divestiture of company-operated convenience stores in the continental United States.
- SUN entered into a definitive asset purchase agreement for the sale of a majority of its company-operated convenience stores to 7-Eleven, Inc. Total consideration in the transaction is $3.3 billion in cash plus fuel, merchandise and other inventories.
- As part of the transaction, SUN will enter into a 15-year take-or-pay fuel supply agreement with a 7-Eleven subsidiary under which SUN will supply approximately 2.2 billion gallons of fuel annually.
- SUN retained JP Morgan Securities, LLC to manage the marketing process for the remaining approximately 200 company-operated convenience stores in North and West Texas, New Mexico and Oklahoma in a separate process.
SUN’s segment results and other supplementary data are provided after the financial tables below.
Distribution
On April 27, 2017 the Board of Directors of SUN’s general partner declared a distribution for the first quarter of 2017 of $0.8255 per unit, which corresponds to $3.3020 per unit on an annualized basis. This distribution was unchanged from the fourth quarter 2016 and represented a 1.0 percent increase compared with the first quarter of 2016. The distribution will be paid on May 16 to unitholders of record on May 9.
SUN’s distribution coverage ratio for the first quarter was 0.74 times. The distribution coverage ratio on a trailing 12-month basis was 0.88 times.
Liquidity
At March 31, SUN had borrowings against its revolving line of credit of $761 million and other long-term debt of $3.6 billion. Availability on the revolving credit facility after borrowings and letters of credit commitments was $718 million. In the first quarter of 2017, SUN issued 1.3 million common units through its at-the-market equity program, generating net proceeds of $33 million. The leverage ratio of debt to Adjusted EBITDA, calculated in accordance with SUN’s credit agreements, including the revolving credit facility and Term Loan A, was 6.31 times at the end of the first quarter.
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- 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, May 4, at 9:30 a.m. CT (10:30 a.m. ET) to discuss first quarter 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 1,355 convenience stores and retail fuel sites and distributes motor fuel to 7,825 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.
SOURCE: Sunoco LP
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