Sunoco LP Announces Third Quarter Financial and Operating Results

(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)

Excluding the one-time cash benefit of approximately $25 million this quarter, SUN's leverage ratio of net debt to Adjusted EBITDA, calculated in accordance with SUN's credit facility, was 4.44 times at the end of the third quarter.

SUNOCO LP

CONSOLIDATED BALANCE SHEETS

(unaudited)

September 30,
2018

December 31,
2017

(in millions, except units)

Assets

Current assets:

Cash and cash equivalents

$

15

$

28

Accounts receivable, net

627

541

Receivables from affiliates

134

155

Inventories, net

469

426

Other current assets

80

81

Assets held for sale

6

3,313

Total current assets

1,331

4,544

Property and equipment, net

1,494

1,557

Other assets:

Goodwill

1,534

1,430

Intangible assets, net

655

768

Other noncurrent assets

134

45

Total assets

$

5,148

$

8,344

Liabilities and equity

Current liabilities:

Accounts payable

$

551

$

559

Accounts payable to affiliates

160

206

Accrued expenses and other current liabilities

370

368

Current maturities of long-term debt

5

6

Liabilities associated with assets held for sale

—

75

Total current liabilities

1,086

1,214

Revolving line of credit

493

765

Long-term debt, net

2,281

3,519

Advances from affiliates

85

85

Deferred tax liability

118

389

Other noncurrent liabilities

140

125

Total liabilities

4,203

6,097

Commitments and contingencies (Note 14)

Equity:

Limited partners:

Series A Preferred unitholder - affiliated (no units issued and outstanding as of September 30, 2018 and 12,000,000 units issued and outstanding as of December 31, 2017)

—

300

Common unitholders (82,513,643 units issued and outstanding as of September 30, 2018 and 99,667,999 units issued and outstanding as of December 31, 2017)

945

1,947

Class C unitholders - held by subsidiary (16,410,780 units issued and outstanding as of September 30, 2018 and December 31, 2017)

—

—

Total equity

945

2,247

Total liabilities and equity

$

5,148

$

8,344

SUNOCO LP

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(unaudited)

For the Three Months Ended
September 30,

For the Nine Months Ended
September 30,

2018

2017

2018

2017

(in millions, except unit and per unit amounts)

Revenues:

Motor fuel sales

$

4,662

$

2,849

$

12,720

$

8,152

Rental income

35

22

91

66

Other

64

193

306

546

Total revenues

4,761

3,064

13,117

8,764

Cost of sales:

Motor fuel cost of sales

4,415

2,646

12,041

7,636

Other

13

102

137

297

Total cost of sales

4,428

2,748

12,178

7,933

Gross profit

333

316

939

831

Operating expenses:

General and administrative

34

30

103

98

Other operating

86

96

270

281

Rent

20

20

54

62

Loss (gain) on disposal of assets and impairment charges

(8)

8

(3)

102

Depreciation, amortization and accretion

42

34

132

124

Total operating expenses

174

188

556

667

Operating income

159

128

383

164

Other expenses:

Interest expense, net

35

51

105

163

Loss on extinguishment of debt and other

—

—

109

—

Income from continuing operations before income taxes

124

77

169

1

Income tax expense (benefit)

10

(44)

39

(103)

Income from continuing operations

114

121

130

104

Income (loss) from discontinued operations, net of income taxes

(2)

17

(265)

(187)

Net income (loss) and comprehensive income (loss)

$

112

$

138

$

(135)

$

(83)

Net income (loss) per limited partner unit - basic:

Continuing operations - common units

$

1.16

$

0.92

$

0.84

$

0.22

Discontinued operations - common units

(0.03)

0.17

(3.12)

(1.90)

Net income (loss) - common units

$

1.13

$

1.09

$

(2.28)

$

(1.68)

Net income (loss) per limited partner unit - diluted:

Continuing operations - common units

$

1.15

$

0.91

$

0.83

$

0.22

Discontinued operations - common units

(0.03)

0.17

(3.12)

(1.90)

Net income (loss) - common units

$

1.12

$

1.08

$

(2.29)

$

(1.68)

Weighted average limited partner units outstanding:

Common units - basic

82,506,279

99,469,643

84,891,853

99,185,042

Common units - diluted

83,084,713

100,117,016

85,373,976

99,581,626

Cash distributions per unit

$

0.8255

$

0.8255

$

2.4765

$

2.4765

For the Three Months Ended September 30,

2018

2017

Fuel
Distribution
and Marketing

All Other

Total

Fuel
Distribution
and Marketing

All Other

Total

(dollars and gallons in millions, except gross profit per gallon)

Revenues:

Motor fuel sales

$

4,450

$

212

$

4,662

$

2,435

$

414

$

2,849

Rental income

32

3

35

19

3

22

Other

12

52

64

13

180

193

Total revenues

$

4,494

$

267

$

4,761

$

2,467

$

597

$

3,064

Gross profit:

Motor fuel sales

$

222

$

25

$

247

$

158

$

45

$

203

Rental

32

3

35

19

3

22

Other

7

44

51

13

78

91

Total gross profit

$

261

$

72

$

333

$

190

$

126

$

316

Income from continuing operations

89

25

114

69

52

121

Income (loss) from discontinued operations, net of taxes

—

(2)

(2)

—

17

17

Net income and comprehensive income

$

89

$

23

$

112

$

69

$

69

$

138

Adjusted EBITDA (2)

$

183

$

25

$

208

$

64

$

135

$

199

Distributable Cash Flow, as adjusted (2)

$

149

$

132

Operating Data:

Motor fuel gallons sold (3)

2,004

2,044

Motor fuel gross profit cents per gallon (1) (3)

12.7

¢

14.9

¢

Three Months Ended September 30,

2018

2017

Change

(in millions)

Segment Adjusted EBITDA

Fuel distribution and marketing

$

183

$

64

$

119

All other

25

135

(110)

208

199

9

Depreciation, amortization and accretion (3)

(42)

(29)

(13)

Interest expense, net (3)

(35)

(64)

29

Non-cash compensation expense (3)

(4)

(9)

5

Gain (loss) on disposal of assets and impairment charges (3)

8

(34)

42

Unrealized loss on commodity derivatives (3)

—

6

(6)

Inventory fair value adjustments (3)

(7)

55

(62)

Other non-cash adjustments

(4)

—

(4)

Income before income tax (expense) benefit (3)

124

124

—

Income tax (expense) benefit (3)

(12)

14

(26)

Net income and comprehensive income

$

112

$

138

$

(26)

Adjusted EBITDA

208

199

9

Cash interest expense (3)

34

59

(25)

Current income tax expense (3)

16

5

11

Maintenance capital expenditures (3)

11

10

1

Distributable Cash Flow

$

147

$

125

$

22

Transaction-related expenses (3)

2

14

(12)

Series A Preferred distribution

—

(7)

7

Distributable Cash Flow, as adjusted

$

149

$

132

$

17

_______________________________

(1)      Includes other non-cash adjustments and excludes the impact of inventory fair value adjustments consistent with the definition of Adjusted EBITDA.

(2)      Adjusted EBITDA is defined as earnings before net interest expense, income taxes, depreciation, amortization and accretion expense, allocated non-cash compensation expense, unrealized gains and losses on commodity derivatives and inventory fair value adjustments, and certain other operating expenses reflected in net income that we do not believe are indicative of ongoing core operations, such as gain or loss on disposal of assets and non-cash impairment charges. We define Distributable Cash Flow, as adjusted, as Adjusted EBITDA less cash interest expense, including the accrual of interest expense related to our long-term debt which is paid on a semi-annual basis, Series A Preferred distribution, current income tax expense, maintenance capital expenditures and other non-cash adjustments.

We believe Adjusted EBITDA and Distributable Cash Flow, as adjusted, 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, as adjusted, 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.

Adjusted EBITDA and Distributable Cash Flow, as adjusted, 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. Adjusted EBITDA and Distributable Cash Flow, as adjusted, 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 Adjusted EBITDA does not reflect cash requirements for such replacements; and

•         as not all companies use identical calculations, our presentation of Adjusted EBITDA and Distributable Cash Flow, as adjusted, may not be comparable to similarly titled measures of other companies.

(3)      Includes amounts from discontinued operations.