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


Conference Call Scheduled for 9:30 a.m. CT (10:30 a.m. ET) on Thursday, February 22

DALLAS, Feb. 21, 2018 /PRNewswire/ --

  • Closed on strategic divestiture of convenience stores to 7-Eleven, Inc. and completed refinancing and equity repurchase initiatives
    • Reduced debt by over $2 billion
    • Refinanced $2.2 billion of senior notes
    • Repurchased over 17 million common limited partner units
    • Redeemed $300 million of Series A Preferred units
  • Maintained quarterly distribution of 82.55 cents and reported current quarter cash coverage of 1.03 times
    • Cash coverage of 1.15 times for the trailing twelve months
  • Generated fourth quarter Net Income of $232 million, Adjusted EBITDA(1) of $158 million and Distributable Cash Flow(1), as adjusted, of $106 million
    • Net income and Adjusted EBITDA results include approximately $25 million of transaction costs related to the retail divestiture

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

Revenue totaled $3.0 billion, an increase of 4.8 percent, compared to $2.8 billion in the fourth quarter of 2016. The increase was the result of the average selling price of fuel being 25 cents per gallon higher than last year.

Total gross profit decreased to $277 million, compared to $296 million in the fourth quarter of 2016, as a result of lower motor fuel gross profits.

Income from continuing operations was $221 million, including $17 million of intangible impairment charges, versus a loss of $122 million in the fourth quarter of 2016, which included $227 million of goodwill impairment charges.  

Income from discontinued operations, net of income taxes, was $11 million, including $23 million of goodwill impairment charges, versus a loss from discontinued operations, net of income taxes, of $463 million in the fourth quarter of 2016, which included $446 million of goodwill and intangibles impairment charges.

Net income was $232 million, or $2.01 per diluted unit, versus a net loss of $585 million, or ($6.32) per diluted unit, in the fourth quarter of 2016.

Adjusted EBITDA for the quarter totaled $158 million, compared with $154 million in the fourth quarter of 2016.

Distributable Cash Flow, as adjusted, was $106 million, compared to $63 million a year ago.  This year-over-year increase reflects higher Adjusted EBITDA, decreased maintenance capital spend and a cash tax benefit compared to a cash tax expense a year ago.

On a weighted-average basis, fuel margin for all gallons sold was 15.3 cents per gallon, compared to 14.3 cents per gallon in the fourth quarter of 2016.  The 1.0 cent per gallon increase was attributable to higher margins in the wholesale segment.

Net income for the wholesale segment was $47 million compared to $63 million a year ago.  Adjusted EBITDA was $90 million, versus $78 million in the fourth quarter of last year.  Total wholesale gallons sold were 1,346 million, compared to 1,359 million in the fourth quarter of 2016, a decrease of 1.0 percent.  The Partnership earned 11.1 cents per gallon on these volumes, compared to 9.0 cents per gallon a year earlier.

Net income for the retail segment was $185 million compared to a net loss of $648 million a year ago.  Adjusted EBITDA was $68 million, versus $76 million in the fourth quarter of last year.  Total retail gallons sold were flat with a year ago at 626 million gallons.  The Partnership earned 24.2 cents per gallon on these volumes, compared to 25.7 cents per gallon a year earlier.

Total merchandise sales increased by 0.5 percent from a year ago to $568 million(2), reflecting an increase in merchandise and restaurant sales across the Texas oil producing regions.  Merchandise sales contributed $173 million of gross profit(3) with a retail merchandise margin of 30.6 percent, an increase of 0.7 percentage points from the fourth quarter of 2016.

Same-store merchandise sales decreased by 0.8 percent and same store gallons decreased by 1.4 percent during the fourth quarter, reflecting weakness across the East Coast.  In the Texas oil producing regions, same-store merchandise sales increased by 11.2 percent, and same-store gallons increased 4.8 percent.

SUN's recent accomplishments include the following:

  • Closed the strategic divestiture of convenience stores in the continental United States to 7-Eleven, Inc. on January 23, 2018 for gross proceeds of approximately $3.2 billion
  • Completed the following refinancing and equity repurchase initiatives:
    • Closed the private offering of $2.2 billion of new senior notes on January 23, 2018, comprised of $1.0 billion in aggregate principal amount of 4.875% senior notes due 2023, $800 million in aggregate principal amount of 5.500% senior notes due 2026 and $400 million in aggregate principal amount of 5.875% senior notes due 2028.  Proceeds from this offering were used to redeem in full amounts owed under existing senior notes
    • Repaid in full and terminated the term loan agreement and paid down all outstanding amounts owed under the revolving credit facility
    • Redeemed $300 million of Series A Preferred Units held by Energy Transfer Equity for an aggregate redemption amount of approximately $313 million
    • Repurchased 17,286,859 Sunoco common units owned by Energy Transfer Partners for aggregate cash consideration of approximately $540 million at a 10-day volume weighted average price of $31.2376 per unit
  • Entered into a commission agent arrangement for the 207 West Texas sites on December 5, 2017 with conversion expected to occur in the first quarter of 2018

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

FY 2017 Compared to FY 2016

Revenue for the full year 2017 totaled $11.7 billion, a 17.4 percent increase compared to full year 2016.  Gross profit for this period decreased 4.2 percent year-over-year to $1.1 billion.

Income from continuing operations was $326 million for the full year 2017 compared to $56 million in 2016. General and administrative expenses decreased $15 million from 2016 to $140 million.  Other operating expenses increased $1 million from 2016 to $375 million and rent expenses were flat at $81 million.

Loss from discontinued operations, net of income taxes, was $177 million compared to a loss from discontinued operations, net of income taxes, of $462 million in the full year 2016.

Net income attributable to partners for the full year 2017 totaled $149 million compared to a net loss attributable to partners of $406 million a year ago. Adjusted EBITDA attributable to partners was $732 million, compared to $665 million for the 2016 period, and distributable cash flow, as adjusted was $473 million, versus $390 million for 2016.

Wholesale gallons sold to third parties increased by 2.5 percent to 5.4 billion gallons. Retail gallons sold increased by 0.4 percent to 2.5 billion gallons.  On a weighted-average basis, fuel margin for all gallons sold increased to 15.2 cents per gallon for the full year 2017, versus 14.4 cents per gallon in the full year 2016.

Total merchandise sales increased by 2.7 percent from full year 2016 to $2.3 billion(4).  Merchandise sales contributed $737 million of gross profit(5) with a retail merchandise margin of 31.6 percent, 0.1 percent increase from full year 2016.

Distribution

On January 24, 2018, the Board of Directors of SUN's general partner declared a distribution for the fourth quarter of 2017 of $0.8255 per unit, which corresponds to $3.3020 per unit on an annualized basis.  The distribution was paid on February 14 to unitholders of record on February 6.

SUN's distribution coverage ratio for the fourth quarter was 1.03 times. The distribution coverage ratio on a trailing 12-month basis was 1.15 times.

Liquidity

At December 31, SUN had borrowings against its revolving line of credit of $765 million and other long-term debt of $3.6 billion.  Availability on the revolving credit facility after borrowings and letters of credit commitments was $726 million.  In the fourth 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 facility, was 5.58 times at the end of the fourth quarter.  

Earnings Conference Call

Sunoco LP management will hold a conference call on Thursday, February 22, at 9:30 a.m. CT (10:30 a.m. ET) to discuss fourth quarter results and recent developments.  To participate, dial 877-407-6184 (toll free) or 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 distributes motor fuel to approximately 9,200 convenience stores, independent dealers, commercial customers and distributors located in more than 30 states. SUN's general partner is owned by Energy Transfer Equity, L.P. (NYSE: ETE). 

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, CFA, Senior Analyst – Investor Relations and Finance
(214) 840-5553, derek.rabe@sunoco.com

Media:

Alyson Gomez, Director – Communications
(214) 840-5641, alyson.gomez@sunoco.com

Jeamy Molina, Senior Manager – PR & Communications
(214) 840-5594, jeamy.molina@sunoco.com

– Financial Schedules Follow –


 


 

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 segments, 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, 2017 and 2016 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:

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

Capital Spending

SUN's gross capital expenditures for the fourth quarter were $38 million, which included $25 million for growth capital and $13 million for maintenance capital. 

Gross capital expenditures for the full year 2017 were $177 million, which included $129 million for growth capital and $48 million for maintenance capital. 

Excluding acquisitions, SUN expects to spend approximately $90 million on growth capital and approximately $40 million on maintenance capital for the full year 2018.

 

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