Form 8-K Sunoco LP For: May 10
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Act of 1934
Date of Report (Date of Earliest Event Reported):
May 10, 2018 (May 9, 2018)
Commission file number: 001-35653
SUNOCO LP
(Exact name of registrant as specified in its charter)
Delaware | 30-0740483 | |
(State or other jurisdiction of incorporation or organization) | (IRS Employer Identification No.) | |
8020 Park Lane, Suite 200 Dallas, TX 75231 (Address of principal executive offices, including zip codes) | ||
Registrant’s telephone number, including area code: (832) 234-3600
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
o | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
o | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
o | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
o | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR 230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR 240.12b-2).
Emerging growth company o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Item 2.02 Results of Operations and Financial Condition.
The following information is furnished under Item 2.02, “Results of Operations and Financial Condition.” This information, including the information contained in Exhibit 99.1 hereto, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing under the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.
On May 9, 2018, Sunoco LP issued a news release announcing its financial results for the first fiscal quarter ended March 31, 2018 and providing access information for an investor conference call to discuss those results. A copy of the news release is attached as Exhibit 99.1 to this Current Report on Form 8-K and is hereby incorporated by reference into this Item 2.02. The conference call will be available for replay approximately 60 days following the date of the call at www.SunocoLP.com.
Item 7.01. Regulation FD Disclosure.
The following information is furnished under Item 7.01, “Regulation FD Disclosure.” This information shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.
On May 9, 2018, the Partnership posted an investor presentation to its website. The presentation is available at www.SunocoLP.com in the Investor Relations section under Events & Presentations. A copy of the presentation is furnished and attached as Exhibit 99.2 hereto and incorporated by reference herein.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.
In accordance with General Instruction B.2 of Form 8-K, the information set forth in the attached Exhibit 99.1 is deemed to be “furnished” and shall not be deemed to be “filed” for purposes of Section 18 of the Exchange Act.
Exhibit Number | Exhibit Description | ||
99.1 | |||
99.2 | |||
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
SUNOCO LP | ||
By: | Sunoco GP LLC, its general partner | |
Date: May 10, 2018 | By: | /s/ Leta McKinley |
Leta McKinley | ||
Vice President, Controller and Principal Accounting Officer | ||
Exhibit 99.1
 | News Release |
Sunoco LP Announces First Quarter Financial and
Operating Results
• | Executed business transformation |
◦ | Closed on divestiture of company-operated sites to 7-Eleven, Inc. with 15-year take-or-pay fuel distribution contract |
◦ | Converted 207 West Texas company-operated sites to commission agent channel |
◦ | Completed refinancing and equity repurchase initiatives |
• | Current quarter cash coverage of 1.00 times and trailing twelve months coverage of 1.22 times with leverage of 3.82 times at the end of the first quarter of 2018 |
◦ | Generated first quarter Net Loss of $315 million, Adjusted EBITDA(1) of $109 million and Distributable Cash Flow(1), as adjusted, of $85 million |
• | Utilized scale to grow fuel distribution and logistics business |
◦ | In April 2018, SUN acquired 26 retail sites from 7-Eleven and converted into commission agent channel |
◦ | In April 2018, SUN acquired the wholesale fuel distribution business and terminal assets from Superior Plus Corporation |
Conference Call Scheduled for 9:30 a.m. CT (10:30 a.m. ET) on Thursday, May 10
DALLAS, May 9, 2018 - Sunoco LP (NYSE: SUN) (“SUN” or the “Partnership”) today announced financial and operating results for the three-month period ended March 31, 2018.
Revenue totaled $3.7 billion, an increase of 33.5 percent, compared to $2.8 billion in the first quarter of 2017. The increase was the result of the average selling price of fuel being higher than last year.
Total gross profit increased to $296 million, compared to $256 million in the first quarter of 2017, as a result of higher motor fuel gross profits.
Loss from continuing operations was $78 million, including a $109 million loss on extinguishment of debt and other, versus income of $12 million in the first quarter of 2017.
Loss from discontinued operations, net of income taxes, was $237 million versus a loss from discontinued operations, net of income taxes, of $11 million in the first quarter of 2017.
Net loss was $315 million, or $3.74 per diluted unit, versus a net income of $1 million, or ($0.22) per diluted unit, in the first quarter of 2017.
Adjusted EBITDA for the quarter totaled $109 million, compared with $155 million in the first quarter of 2017.
Distributable Cash Flow, as adjusted, was $85 million, compared to $77 million a year ago. This year-over-year increase reflects lower cash interest expense and a decrease in maintenance capital spend.
On a weighted-average basis, fuel margin for all gallons sold was 10.5 cents per gallon, compared to 14.5 cents per gallon in the first quarter of 2017. The 4.0 cent per gallon decrease was attributable to a shift in volumes away from the retail segment to the wholesale segment and the adoption of revenue recognition.
Net loss for the wholesale segment was $58 million compared to net income of $38 million a year ago. Adjusted EBITDA was $80 million, versus $91 million in the first quarter of last year. Total wholesale gallons sold were 1,612 million, compared to 1,313 million in the first quarter of 2017, an increase of 22.8 percent. The Partnership earned 8.4 cents per gallon on these volumes, compared to 10.6 cents per gallon a year earlier.
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Net loss for the retail segment was $257 million compared to a net loss of $37 million a year ago. Adjusted EBITDA was $29 million, versus $64 million in the first quarter of last year. Total retail gallons sold were 245 million, down from 595 million gallons a year ago as volumes migrated to the wholesale segment. The Partnership earned 24.4 cents per gallon on these volumes, compared to 23.1 cents per gallon a year earlier.
SUN’s recent accomplishments include the following:
• | Closed the strategic divestiture of company-operated sites 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 |
Following the conversion of sites to the commission agent channel through April 2018, SUN operates 21 company-operated sites along the New Jersey turnpike and 54 retail sites in Hawaii.
SUN’s segment results and other supplementary data are provided after the financial tables below.
Distribution
On April 26, 2018, the Board of Directors of SUN’s general partner declared a distribution for the first quarter of 2018 of $0.8255 per unit, which corresponds to $3.3020 per unit on an annualized basis. The distribution will be paid on May 15, 2018 to common unitholders of record on May 7, 2018.
SUN’s distribution coverage ratio for the first quarter was 1.00 times. The distribution coverage ratio on a trailing 12-month basis was 1.22 times.
Liquidity
At March 31, SUN had no borrowings against its revolving line of credit and other long-term debt of $2.3 billion. In the first quarter of 2018, 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 3.82 times at the end of the first 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. |
Earnings Conference Call
Sunoco LP management will hold a conference call on Thursday, May 10, at 9:30 a.m. CT (10:30 a.m. ET) to discuss first 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. An investor presentation accompanying the earnings call will be available in the Investor Relations section of Sunoco’s website at www.SunocoLP.com under Events and Presentations.
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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, [email protected]
Derek Rabe, CFA, Senior Analyst - Investor Relations and Finance
(214) 840-5553, [email protected]
Media:
Alyson Gomez, Director - Communications
(214) 840-5641, [email protected]
Jeamy Molina, Senior Manager - PR & Communications
(214) 840-5594, [email protected]
- Financial Schedules Follow -
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SUNOCO LP
CONSOLIDATED BALANCE SHEETS
(unaudited)
March 31, 2018 | December 31, 2017 | |||||||
(in millions, except units) | ||||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 98 | $ | 28 | ||||
Accounts receivable, net | 451 | 541 | ||||||
Receivables from affiliates | 160 | 155 | ||||||
Inventories, net | 434 | 426 | ||||||
Other current assets | 71 | 81 | ||||||
Assets held for sale | 6 | 3,313 | ||||||
Total current assets | 1,220 | 4,544 | ||||||
Property and equipment, net | 1,522 | 1,557 | ||||||
Other assets: | ||||||||
Goodwill | 1,430 | 1,430 | ||||||
Intangible assets, net | 656 | 768 | ||||||
Other noncurrent assets | 91 | 45 | ||||||
Total assets | $ | 4,919 | $ | 8,344 | ||||
Liabilities and equity | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 416 | $ | 559 | ||||
Accounts payable to affiliates | 178 | 206 | ||||||
Accrued expenses and other current liabilities | 759 | 368 | ||||||
Current maturities of long-term debt | 5 | 6 | ||||||
Liabilities associated with assets held for sale | — | 75 | ||||||
Total current liabilities | 1,358 | 1,214 | ||||||
Revolving line of credit | — | 765 | ||||||
Long-term debt, net | 2,283 | 3,519 | ||||||
Advances from affiliates | 85 | 85 | ||||||
Deferred tax liability | 124 | 389 | ||||||
Other noncurrent liabilities | 137 | 125 | ||||||
Total liabilities | 3,987 | 6,097 | ||||||
Commitments and contingencies (Note 14) | ||||||||
Equity: | ||||||||
Limited partners: | ||||||||
Series A Preferred unitholder - affiliated (no units issued and outstanding as of March 31, 2018 and 12,000,000 units issued and outstanding as of December 31, 2017) | — | 300 | ||||||
Common unitholders (82,492,008 units issued and outstanding as of March 31, 2018 and 99,667,999 units issued and outstanding as of December 31, 2017) | 932 | 1,947 | ||||||
Class C unitholders - held by subsidiary (16,410,780 units issued and outstanding as of March 31, 2018 and December 31, 2017) | — | — | ||||||
Total equity | 932 | 2,247 | ||||||
Total liabilities and equity | $ | 4,919 | $ | 8,344 | ||||
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SUNOCO LP
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(unaudited)
For the Three Months Ended March 31, | ||||||||
2018 | 2017 | |||||||
(in millions, except unit and per unit amounts) | ||||||||
Revenues: | ||||||||
Retail motor fuel | $ | 445 | $ | 353 | ||||
Wholesale motor fuel sales to third parties | 3,094 | 2,244 | ||||||
Wholesale motor fuel sales to affiliates | 12 | 21 | ||||||
Merchandise | 135 | 131 | ||||||
Rental income | 22 | 22 | ||||||
Other | 41 | 37 | ||||||
Total revenues | 3,749 | 2,808 | ||||||
Cost of sales: | ||||||||
Retail motor fuel cost of sales | 401 | 317 | ||||||
Wholesale motor fuel cost of sales | 2,945 | 2,143 | ||||||
Merchandise cost of sales | 93 | 88 | ||||||
Other | 14 | 4 | ||||||
Total cost of sales | 3,453 | 2,552 | ||||||
Gross profit | 296 | 256 | ||||||
Operating expenses: | ||||||||
General and administrative | 35 | 32 | ||||||
Other operating | 98 | 92 | ||||||
Rent | 15 | 20 | ||||||
Loss on disposal of assets | 3 | 2 | ||||||
Depreciation, amortization and accretion | 49 | 54 | ||||||
Total operating expenses | 200 | 200 | ||||||
Operating income | 96 | 56 | ||||||
Other expenses: | ||||||||
Interest expense, net | 34 | 58 | ||||||
Loss on extinguishment of debt and other | 109 | — | ||||||
Loss from continuing operations before income taxes | (47 | ) | (2 | ) | ||||
Income tax expense (benefit) | 31 | (14 | ) | |||||
Income (loss) from continuing operations | (78 | ) | 12 | |||||
Loss from discontinued operations, net of income taxes | (237 | ) | (11 | ) | ||||
Net income (loss) and comprehensive income (loss) | $ | (315 | ) | $ | 1 | |||
Net loss per limited partner unit - basic: | ||||||||
Continuing operations - common units | $ | (1.11 | ) | $ | (0.11 | ) | ||
Discontinued operations - common units | (2.63 | ) | (0.11 | ) | ||||
Net loss - common units | $ | (3.74 | ) | $ | (0.22 | ) | ||
Net loss per limited partner unit - diluted: | ||||||||
Continuing operations - common units | $ | (1.11 | ) | $ | (0.11 | ) | ||
Discontinued operations - common units | (2.63 | ) | (0.11 | ) | ||||
Net loss - common units | $ | (3.74 | ) | $ | (0.22 | ) | ||
Weighted average limited partner units outstanding: | ||||||||
Common units - basic | 89,753,950 | 98,609,608 | ||||||
Common units - diluted | 90,271,751 | 98,715,958 | ||||||
Cash distribution per unit | $ | 0.8255 | $ | 0.8255 | ||||
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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 months ended March 31, 2018 and 2017 and have been derived from our historical consolidated financial statements.
The accompanying footnotes to the following two key operating metrics tables can be found immediately preceding our capital spending discussion.
For the Three Months Ended March 31, | ||||||||||||||||||||||||
2018 | 2017 | |||||||||||||||||||||||
Wholesale | Retail | Total | Wholesale | Retail | Total | |||||||||||||||||||
(dollars and gallons in millions, except gross profit per gallon) | ||||||||||||||||||||||||
Revenues: | ||||||||||||||||||||||||
Retail motor fuel | $ | — | $ | 445 | $ | 445 | $ | — | $ | 353 | $ | 353 | ||||||||||||
Wholesale motor fuel sales to third parties | 3,094 | — | 3,094 | 2,244 | — | 2,244 | ||||||||||||||||||
Wholesale motor fuel sale to affiliates | 12 | — | 12 | 21 | — | 21 | ||||||||||||||||||
Merchandise | — | 135 | 135 | — | 131 | 131 | ||||||||||||||||||
Rental income | 19 | 3 | 22 | 19 | 3 | 22 | ||||||||||||||||||
Other | 14 | 27 | 41 | 13 | 24 | 37 | ||||||||||||||||||
Total revenues | $ | 3,139 | $ | 610 | $ | 3,749 | $ | 2,297 | $ | 511 | $ | 2,808 | ||||||||||||
Gross profit: | ||||||||||||||||||||||||
Retail motor fuel | $ | — | $ | 44 | $ | 44 | $ | — | $ | 36 | $ | 36 | ||||||||||||
Wholesale motor fuel | 161 | — | 161 | 122 | — | 122 | ||||||||||||||||||
Merchandise | — | 42 | 42 | — | 43 | 43 | ||||||||||||||||||
Rental and other | 29 | 20 | 49 | 28 | 27 | 55 | ||||||||||||||||||
Total gross profit | $ | 190 | $ | 106 | $ | 296 | $ | 150 | $ | 106 | $ | 256 | ||||||||||||
Income (loss) from continuing operations | (58 | ) | (20 | ) | (78 | ) | 38 | (26 | ) | 12 | ||||||||||||||
Loss from discontinued operations, net of taxes | — | (237 | ) | (237 | ) | — | (11 | ) | (11 | ) | ||||||||||||||
Net income (loss) and comprehensive income (loss) | $ | (58 | ) | $ | (257 | ) | $ | (315 | ) | $ | 38 | $ | (37 | ) | $ | 1 | ||||||||
Adjusted EBITDA (2) | $ | 80 | $ | 29 | $ | 109 | $ | 91 | $ | 64 | $ | 155 | ||||||||||||
Distributable cash flow, as adjusted (2) | $ | 85 | $ | 77 | ||||||||||||||||||||
Operating Data: | ||||||||||||||||||||||||
Total motor fuel gallons sold: | ||||||||||||||||||||||||
Retail (3) | 245 | 245 | 595 | 595 | ||||||||||||||||||||
Wholesale | 1,612 | 1,612 | 1,313 | 1,313 | ||||||||||||||||||||
Motor fuel gross profit cents per gallon (1): | ||||||||||||||||||||||||
Retail (3) | 24.4¢ | 24.4¢ | 23.1¢ | 23.1¢ | ||||||||||||||||||||
Wholesale | 8.4¢ | 8.4¢ | 10.6¢ | 10.6¢ | ||||||||||||||||||||
Volume-weighted average for all gallons (3) | 10.5¢ | 14.5¢ | ||||||||||||||||||||||
Retail merchandise margin (3) | 29.7 | % | 31.6 | % | ||||||||||||||||||||
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The following table presents a reconciliation of net income to EBITDA, Adjusted EBITDA and distributable cash flow:
For the Three Months Ended March 31, | ||||||||||||||||||||||||
2018 | 2017 | |||||||||||||||||||||||
Wholesale | Retail | Total | Wholesale | Retail | Total | |||||||||||||||||||
(in millions) | ||||||||||||||||||||||||
Net income (loss) and comprehensive income (loss) | $ | (58 | ) | $ | (257 | ) | $ | (315 | ) | $ | 38 | $ | (37 | ) | $ | 1 | ||||||||
Depreciation, amortization and accretion (3) | 28 | 21 | 49 | 22 | 65 | 87 | ||||||||||||||||||
Interest expense, net (3) | 19 | 17 | 36 | 20 | 44 | 64 | ||||||||||||||||||
Income tax expense (benefit) (3) | 1 | 203 | 204 | 1 | (18 | ) | (17 | ) | ||||||||||||||||
EBITDA | $ | (10 | ) | $ | (16 | ) | $ | (26 | ) | $ | 81 | $ | 54 | $ | 135 | |||||||||
Non-cash compensation expense (3) | — | 3 | 3 | — | 4 | 4 | ||||||||||||||||||
Loss on disposal of assets (3) | 3 | 23 | 26 | 2 | 5 | 7 | ||||||||||||||||||
Loss on extinguishment of debt and other (3) | 109 | 20 | 129 | — | — | — | ||||||||||||||||||
Unrealized gain on commodity derivatives (3) | — | — | — | (5 | ) | — | (5 | ) | ||||||||||||||||
Inventory adjustments (3) | (25 | ) | (1 | ) | (26 | ) | 13 | 1 | 14 | |||||||||||||||
Other non-cash adjustments | 3 | — | 3 | — | — | — | ||||||||||||||||||
Adjusted EBITDA | $ | 80 | $ | 29 | $ | 109 | $ | 91 | $ | 64 | $ | 155 | ||||||||||||
Cash interest expense (3) | 34 | 60 | ||||||||||||||||||||||
Current income tax expense (3) | 468 | — | ||||||||||||||||||||||
Transaction-related income taxes (4) | (480 | ) | — | |||||||||||||||||||||
Maintenance capital expenditures (3) | 3 | 18 | ||||||||||||||||||||||
Distributable cash flow | $ | 84 | $ | 77 | ||||||||||||||||||||
Transaction-related expenses (3) | 3 | — | ||||||||||||||||||||||
Series A Preferred distribution | (2 | ) | — | |||||||||||||||||||||
Distributable cash flow, as adjusted | $ | 85 | $ | 77 | ||||||||||||||||||||
_______________________________
(1)Includes other non-cash adjustments and excludes the impact of inventory fair value adjustments consistent with the definition of Adjusted EBITDA.
(2)EBITDA is defined as earnings before net interest expense, income taxes, depreciation, amortization and accretion expense. Adjusted EBITDA further adjusts EBITDA to reflect certain other non-recurring and non-cash items. We define Adjusted EBITDA to also include adjustments for 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 long-term debt that is paid on a semi-annual basis, Series A Preferred distribution, 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.
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 one should not consider them 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 |
• | as 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. |
(3) Includes amounts from discontinued operations.
(4) Transaction-related income taxes primarily related to the 7-Eleven Transaction.
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Capital Spending
SUN's gross capital expenditures for the first quarter were $19 million, which included $16 million for growth capital and $3 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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Exhibit 99.2 INVESTOR PRESENTATION May 2018
FORWARD-LOOKING STATEMENTS Some of the statements in this presentation constitute “forward-looking statements” about Sunoco LP (“SUN”, “we”, “our, and “us”) that involve risks, uncertainties and assumptions, including, without limitation, the expected future performance of SUN (including expected results of operations and financial guidance), and SUN’s future financial condition, operating results, strategy and plans. These forward-looking statements generally can be identified by use of phrases such as “believe,” “plan,” “expect,” “anticipate,” “intend,” “forecast” or other similar words or phrases in conjunction with a discussion of future operating or financial performance. Descriptions of SUN’s and its affiliates’ objectives, goals, targets, plans, strategies, costs, anticipated capital expenditures, expected cost savings, potential acquisitions and related financial projections are also forward-looking statements. These statements represent present expectations or beliefs concerning future events and are not guarantees. Such statements speak only as of the date they are made, and we do not undertake any obligation to update any forward-looking statement. We caution that forward-looking statements involve risks and uncertainties and are qualified by important factors that could cause actual events or results to differ materially from those expressed or implied in any such forward-looking statements. For a discussion of these factors and other risks and uncertainties, please refer to SUN’s filings with the Securities and Exchange Commission (the “SEC”), including those contained in SUN’s 2017 Annual Report on Form10-K and Quarterly Reports on Form10-Q which are available at the SEC’s website at www.sec.gov. This presentation includes certain non-GAAP financial measures as defined under SEC Regulation G. A reconciliation of those measures to the most directly comparable GAAP measures is provided in this presentation. We define EBITDA as net income before net interest expense, income tax expense and depreciation and amortization expense. Adjusted EBITDA further adjusts EBITDA to reflect certain other non-recurring and non-cash items. Investor Relations Contact Information: Scott Grischow Derek Rabe, CFA Senior Director, Treasury & Investor Relations Senior Analyst, Investor Relations & Finance (214) 840-5660 (214) 840-5553 [email protected] [email protected] 2
LAYING THE FOUNDATION FOR THE FUTURE ● Executed business transformation • Divested the majority of company-operated retail sites to 7-Eleven • Includes ~2 billion gallons sold under 15-year, take-or-pay fuel supply agreement that grows an additional 500 million gallons over four years • Converted 207 West Texas company-operated retail sites to our commission agent channel • Retained material fuel distribution income and stable rental income • Completed refinancing and equity repurchase initiatives • Extended maturity profile by approximately four years and lowered cost of fixed rate debt by approximately 100 basis points • Reduced debt by over $2 billion • Refinanced $2.2 billion of senior notes • Repurchased over 17 million common limited partner units • Redeemed $300 million of Series A Preferred units ● Utilized scale to grow core fuel distribution business and logistics business in April • Acquired the wholesale fuel distribution business and terminal assets from Superior Plus Corporation • Acquired 26 company-operated retail sites from 7-Eleven and converted into commission agent channel 3
Q1 2018 CONTINUING OPERATIONS RECONCILIATION Reconciliation of Net Income To Adjusted EBITDA Q1 2018 Q1 2018 Consolidated Continuing ($ in millions) Operations (1) Operations (2) Income (loss) from continuing operations ($78) ($78) Loss from discontinued operations, net of income taxes (237) Net income (loss) and comprehensive income (loss) (3) ($315) ($78) Depreciation, amortization and accretion 49 49 Interest expense, net 36 34 Income tax expense (benefit) 204 31 EBITDA ($26) $36 Non-cash compensation expense 3 3 Loss on disposal of assets and impairment charges 26 3 Loss on extinguishment of debt and other 129 109 Unrealized loss on commodity derivatives 0 0 Inventory adjustments (26) (25) Other non-cash adjustment 3 3 Adjusted EBITDA $109 $129 (1) Financial information presented reflects continuing and discontinued operations (2) Financial information presented reflects continuing operations of the wholesale segment and Q1 retail operations including 207 West Texas company-operated sites and 75 company-operated sites in Hawaii and along the New Jersey turnpike (3) Includes transition and transaction related expenses related to the sale of our retail assets to 7-Eleven and the conversion of our West 4 Texas locations to commission agent sites
GUIDANCE ON THE NEW BUSINESS MODEL Operating G&A Rent Cents Per Maintenance Growth Expenses Expenses Expenses Gallon Capital Capital ~$325 million ~$140 million ~$75 million 8.0 to 9.5 range ~$40 million ~$90 million • We expect a • The • We expect • Our range • Maintenance • Growth significant elimination rent expense reflects the new capital will capital will reduction to of back for leased business model be focused be focused our run rate office wholesale with a on ensuring on expenses support locations to significant quality of profitably with the exit required to be consistent fixed-fee operations growing of the retail run the retail over the long contract wholesale business business run volumes reduces run • The range rate G&A represents • The exit of expenses potential the retail quarterly business fluctuations but eliminates we expect to be new-to- at the high end industry of our range builds on an annual basis 5
KEY INVESTMENT HIGHLIGHTS OF THE NEW BUSINESS MODEL 2 3 Significant Portfolio Of Economies Of Stable Income Scale Streams 1 Attractive Fuel Distribution Sector 5 4 Lean Capital Runway Of And Expense Diversified Structure With Growth A Disciplined Financial Strategy 6
SIGNIFICANT ECONOMIES OF SCALE TO THRIVE IN AN 1 & 2 ATTRACTIVE FUEL DISTRIBUTION SECTOR ● Fuel distribution sector remains robust • Fuel distribution margins have been attractive and stable • 2016 and 2017 U.S. gasoline demand was highest on record at 9.3 MBD (1) ● SUN is well positioned to capitalize on sector opportunities • Scale: Over 8 billion gallons a year • Purchase the majority of fuel at bulk and sell at branded prices • Brand Power and Options: Continue to sign up new Sunoco-branded dealers and distributors • Also one of largest distributors of Exxon, Chevron and Valero brands in U.S. ● Focus on fuel distribution makes SUN a compelling investment in a rising, flat or declining fuel demand environment • Rising • Higher fuel demand equates to more gallons sold and more opportunities • Flat or Declining • Growing excess of U.S. refining capacity provides support for fuel distribution…we are short in a long market • Fragmentation provides synergetic acquisition opportunities and allows SUN to further increase our market share (1) Source: U.S. Energy Information Administration 7
3 PORTFOLIO OF STABLE INCOME STREAMS Portfolio of Diversified Channels 12.0¢ • 7-Eleven: 15-year take or pay Average : 9.3¢ Minimum : 8.1¢ • Dealers • Commission agents 8.0¢ • Distributors Fuel ~70%(1) • Commercial accounts 4.0¢ • Transmix operations • Other fuel sales (Aloha, turnpikes) 0.0¢ 1Q'15 2Q'15 3Q'15 4Q'15 1Q'16 2Q'16 3Q'16 4Q'16 1Q'17 2Q'17 3Q'17 4Q'17 1Q'18 (1) ~ % % ~ of Gross Profit Fuel margins show stability over the past ~3 years Rental Income Rental • SUN leases, or subleases, locations to third-party operators ~15%(1) • Stable, long-term income Other Other Income ~15%(1) • Includes merchandise income, franchise revenue, credit card services, terminals, and ethanol processing (1) Gross profit percentages and fuel margins are adjusted for impact of 7-Eleven divestment, 7-Eleven fuel supply agreement and the West Texas commission agent arrangement 8
4 LEAN CAPITAL AND EXPENSE STRUCTURE WITH A DISCIPLINED FINANCIAL STRATEGY Maintain Distribution Balanced Capital And Liquidity Disciplined Coverage Financing Overhead Light Leverage Profile Strategy Model Target Target ~1.1x Invest In Projects Maintain Cost Maintain Credit ~4.5x – 4.75x Distribution That Support Efficient Model Facility Leverage Ratio Coverage Leverage And Through Availability And Coverage Targets Growth Secured Capacity • Expect leverage • Expect to • Projects evaluated • Maintenance • Reduced reliance to reach target maintain current using a ~50/50 capital on secured debt range in 2018 distribution level capital structure requirements provides greater on a go forward reduced by financing • Maintain leverage basis • Investments must ~50% for 2018 flexibility within the target be NPV positive range on a go and accretive to • G&A costs • Monitor credit forward basis distributable cash reduced by facility capacity flow while ~50% for 2018 and access to maintaining capital markets leverage 9
5 RUNWAY OF DIVERSIFIED GROWTH Grow Core Manage Expand Into Fuels Logistics And Organic Growth Adjacent Sectors Distribution Business • Consolidation opportunities in • Obtain incremental business • Diversify into adjacent sectors a highly fragmented sector from existing customers to drive further income stability • The sector trades at reasonable • Leverage Sunoco brand as well acquisition multiples as other major fuel brands to • Capitalize on current large fuel sign up new customers distribution business to realize • Leverage scale to quickly synergies through acquisition realize material synergies of logistics assets (e.g., product terminals) • Utilize multi-channel strategy to optimize returns on acquired assets A long runway of growth while maintaining a disciplined financial strategy within our coverage and leverage targets 10
LIQUIDITY AND CAPITAL STRUCTURE Pro Forma Maturity Profile(1) ($ in millions) ● Strong liquidity position: $1.5 billion of undrawn commitments under revolving credit facility ● January 2018 refinancing activity strengthened balance sheet • Extended maturity profile by four years and lowered cost of fixed rate debt by almost 100 basis points $1,500 ● Reduced variable rate and secured debt $1,000 $800 ● Strengthened credit profile reflected in recent credit ratings $400 upgrades by S&P and Fitch 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 Revolving Credit Facility Senior Notes As of 5/9/18 Current Yield - Maturity Balance(1) Bid to Worst $1.5bn Revolver Sep-19 $0 Other Debt - 113 Total Secured Debt $113 4.875% Senior Notes Jan-23 1,000 97.89 5.36% 5.500% Senior Notes Feb-26 800 96.51 6.07% 5.875% Senior Notes Mar-28 400 96.48 6.32% Total Debt $2,313 (Less) Cash and Cash Equivalents (98) Net Debt $2,215 Market Capitalization as of close on May 9, 2018 2,212 Enterprise Value $4,427 (1) Reflects Revolving Credit Facility 2019 maturity balance of $0 as of the end of Q1 2018; excludes $8 million in standby letters of credit outstanding 11