Sunoco LP Q2 results: Revenue totaled $2.4 billion; 13% up from same period previous year

DALLAS, 2017-Aug-09 — /EPR Retail News/ —

  • Executed definitive agreement to divest a majority of company-operated convenience stores to 7-Eleven, Inc. and launched sales process for remaining company-operated convenience stores in North and West Texas, New Mexico and Oklahoma
    • Results of the retail divestitures are presented in discontinued operations
  • Maintained quarterly distribution of 82.55 cents and reported current quarter cash coverage of 1.53 times
  • Generated Net Loss of $222 million, Adjusted EBITDA(1) of $220 million and Distributable Cash Flow(1), as adjusted, of $158 million

Sunoco LP (NYSE: SUN) (“SUN” or the “Partnership”) today (Aug 08, 2017) announced financial and operating results for the three-month period ended June 30, 2017.

Revenue totaled $2.4 billion, an increase of 13.0 percent, compared to $2.1 billion in the second quarter of 2016. The increase was the result of the average wholesale selling price of fuel being 14 cents per gallon higher than last year and additional wholesale gallons sold.

Total gross profit declined to $165 million, compared to $227 million in the second quarter of 2016, as a result of lower wholesale motor fuel gross profits.

Income from continuing operations was $34 million, versus $57 million in the second quarter of 2016. General and administrative expenses increased $4 million from the second quarter of 2016 to $40 million driven by transaction-related expenses.  Other operating expenses decreased $1 million from the second quarter of 2016 to $46 million.

Loss from discontinued operations, net of income taxes, was $256 million including a $320 million charge related to assets held for sale, versus income from discontinued operations, net of income taxes, of $15 million in the second quarter of 2016.

Net loss was $222 million, or ($2.53) per diluted unit, versus $72 million, or $0.53 per diluted unit, in the second quarter of 2016.

Adjusted EBITDA for the quarter totaled $220 million, compared with $164 million in the second quarter of 2016.  The favorable year-over-year comparison reflects increased motor fuel gross profit cents per gallon and increased gallons sold.

Distributable Cash Flow, as adjusted, was $158 million, compared to $92 million a year ago. This year over year increase reflects higher Adjusted EBITDA and decreased maintenance capital spend partly offset by increased cash interest expense.

On a weighted-average basis, fuel margin for all gallons sold was 16.2 cents per gallon, compared to 13.8 cents per gallon in the second quarter of 2016.  The 2.4 cents per gallon increase was primarily attributable to higher margins in both the retail and wholesale segments.

Net income for the wholesale segment was $5 million compared to $86 million a year ago due to the impact of inventory valuation adjustments.  Adjusted EBITDA was $93 million, versus $80 million in the second quarter of last year.  Total wholesale gallons sold were 1,374 million, compared to 1,316 million in the second quarter of 2016, an increase of 4.4 percent as a result of growth in the Southwest geography 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 10.1 cents per gallon on these volumes, compared to 8.8 cents per gallon a year earlier.

Net loss for the retail segment was $227 million compared to a net loss of $14 million a year ago primarily due to a $320 million charge related to assets held for sale.  Adjusted EBITDA was $127 million, versus $84 million in the second quarter of last year.  Total retail gallons sold increased by 1.4 percent to 650 million gallons as a result of the increased gallons sold across SUN’s operating geography.  The Partnership earned 29.2 cents per gallon on these volumes, compared to 24.0 cents per gallon a year earlier.

Total merchandise sales increased by 5.4 percent from a year ago to $608 million(2), reflecting the contribution from third party acquisitions and new-to-industry locations opened during the last 12 months. Merchandise sales contributed $196 million of gross profit(3) with a retail merchandise margin of 32.1 percent, a decrease of 0.4 percentage points from the second quarter of 2016.

Same-store merchandise sales increased by 1.0 percent during the second quarter, reflecting growth across all of SUN’s convenience store offerings. Same-store gallons decreased by 2.1 percent as a result of weakness throughout SUN’s retail geography, particularly on the East Coast partly offset by increased same-store gallons sold in Hawaii.  In the Texas oil producing regions, same-store merchandise sales increased by 8.5 percent, and same-store gallons increased 8.7 percent.

As of June 30, 2017, SUN operated 1,353 convenience stores and retail fuel outlets along the East Coast, in the Southwest and in Hawaii. Third party wholesale customers and sites totaled 7,937.

SUN’s other recent accomplishments include the following:

  • 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, Inc. subsidiary under which SUN will supply approximately 2.2 billion gallons of fuel annually.
  • Also on April 6, 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 July 26, 2017 the Board of Directors of SUN’s general partner declared a distribution for the second quarter of 2017 of $0.8255 per unit, which corresponds to $3.3020 per unit on an annualized basis.  The distribution will be paid on August 15 to unitholders of record on August 7.

SUN’s distribution coverage ratio for the second quarter was 1.53 times. The distribution coverage ratio on a trailing 12-month basis was 1.03 times.

Liquidity

At June 30, SUN had borrowings against its revolving line of credit of $825 million and other long-term debt of $3.6 billion.  Availability on the revolving credit facility after borrowings and letters of credit commitments was $655 million.  In the second quarter of 2017, SUN did not issue any common units through its at-the-market equity program.  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 5.97 times at the end of the second quarter.

(1) Adjusted EBITDA and Distributable Cash Flow, as adjusted, 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, as adjusted, and a reconciliation to net income.
(2) Includes $590 million in merchandise sales from discontinued operations.
(3) Includes $191 million in merchandise gross profit from discontinued operations.

Earnings Conference Call

Sunoco LP management will hold a conference call on Wednesday, August 9, at 9:30 a.m. CT (10:30 a.m. ET) to discuss second 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 1,353 convenience stores and retail fuel sites and distributes motor fuel to 7,937 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

Derek Rabe
Senior Analyst
Investor Relations and Finance
(214) 840-5553
derek.rabe@sunoco.com

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

Jeamy Molina
Senior Manager
PR & Communications
(469) 646-1776
jeamy.molina@sunoco.com

SOURCE: Sunoco LP