Sunoco LP experienced a large increase in gross profit in 2015. The profit increase is being attributed to a number of different factors.
Sunoco LP’s financial and operating results for the three- and 12- month periods ending Dec. 31, 2015 have been released.
Adjusted EBITDA attributable to partners for the quarter totaled $112.2 million, compared with $65.5 million in the fourth quarter of 2014. The favorable year-over-year comparison primarily reflects the acquisitions of 31.58% of Sunoco LLC in April and Susser Holdings Corp. in July, both of which were acquired from Sunoco LP’s affiliate, Energy Transfer Partners L.P. All fourth quarter 2014 and full year 2014 figures and comparisons represent as previously reported results for the fourth quarter and full year 2014 and do not reflect any retrospective adjustments for the Sunoco LLC and Susser Holdings acquisitions which were accounted for as transactions between entities under common control.
Distributable cash flow attributable to partners, as adjusted, for the quarter was $90.1 million, compared to $51.1 million a year earlier, and distributable cash flow per common unit was $1.03.
Revenue was $3.7 billion for the quarter, up 184.6% compared to $1.3 billion in the fourth quarter of 2014. The increase was the result of the contribution of merchandise and retail fuel sales from the Susser’s Stripes convenience store chain and the wholesale fuel distribution sales and rental income from Sunoco LP’s interest in Sunoco LLC on a consolidated basis, partly offset by the impact of a 37-cent per gallon decrease in the average selling price of fuel.
Total gross profit was $333.2 million for the quarter, compared to $93.2 million in the fourth quarter of 2014. Key drivers of the increase were the contribution from the previously mentioned acquisitions, which resulted in higher-margin retail fuel gallons and merchandise being added to the overall sales mix.
Net income attributable to partners was $7.8 million for the quarter, or (13-cents) per diluted unit, versus $30.1 million, or 83-cents per diluted unit, in the fourth quarter of last year.
On a weighted-average basis, excluding non-controlling interest, fuel margin for all gallons sold in the fourth quarter increased to 15.1-cents per gallon, compared to 13-cents per gallon a year ago. The margin increase was driven by the addition of higher-margin retail gallons sold at Stripes, which were partly offset by the wholesale gallons sold through Sunoco LLC.
Adjusted EBITDA attributable to partners from the wholesale segment was $57.9 million in the fourth quarter. Excluding the non-controlling interest, total wholesale gallons sold in the fourth quarter were 651.8 million, compared with 546.4 million in the fourth quarter of 2014, an increase of 19.3%. This includes gallons sold to affiliate-operated convenience stores, consignment stores and third-party customers, including independent dealers, fuel distributors and commercial customers.
As a result of the Susser acquisition, which converted affiliate volumes to retail volumes, motor fuel gallons sold to affiliates decreased 72.5% from a year ago to 84 million gallons during the fourth quarter of 2015, excluding the non-controlling interest. Affiliate customers for the quarter included Sunoco R&M retail fuel and convenience store sites operated by a subsidiary of ETP. All affiliate gallons are sold to Sunoco’s retail fuel and convenience stores at a fixed margin of four-cents per gallon.
Other third-party wholesale fuel volumes, excluding non-controlling interest, increased from a year ago by 135.1% to 567.7 million gallons related to the acquisition of 31.58% of Sunoco LLC. Gross profit on these gallons was 12.1-cents per gallon, compared to 17.6-cents per gallon a year earlier, driven by a change in customer mix related to the acquisition of the interest in Sunoco LLC.
Adjusted EBITDA attributable to partners related to the retail segment was $54.3 million in the fourth quarter. Total retail gallons sold increased by 488% to 354 million gallons as a result of the acquisition of Susser. The Partnership earned 22.4-cents per gallon on these volumes, compared to 44.5-cents per gallon a year earlier. The addition of lower-margin retail volumes at Stripes drove most of this decrease.
Merchandise sales increased by 918.8% to $400.4 million from a year ago and contributed $132.7 million of gross profit, reflecting the contribution from the Stripes stores.
Retail gallons sold by Stripes locations during the fourth quarter totaled 291.4 million gallons. Gross profit on these gallons was $52 million, or 17.9-cents per gallon. Merchandise sales from these locations totaled $343.6 million and contributed $118.9 million of gross profit. On a same-store sales basis, Stripes store merchandise sales decreased by 1.1% and fuel sales declined 4.9%, primarily reflecting lower year-over-year activity in oil patch markets in South and West Texas. Excluding markets that are directly impacted by oil drilling activity declines, the Stripes business achieved a 4% increase in merchandise sales and a 0.6% decrease in fuel sales volumes on a same-store basis. As of Dec. 31, Sunoco LP operated 725 convenience stores and retail fuel outlets in Texas, New Mexico and Oklahoma primarily under its Stripes brand.
Sunoco LP also operates approximately 175 convenience stores and fuel outlets in Georgia, Tennessee, Virginia, Maryland and Hawaii, primarily under the MACS, Tigermarket and Aloha Island Mart brands. On a same store sale basis, these stores saw growth of 12.5% in merchandise sales and a 0.9% decline in fuel gallons for the quarter.
Sunoco LP’s other recent accomplishments include the following:
- In November, Sunoco LP announced the dropdown of the remaining wholesale fuel and retail marketing assets from ETP for approximately $2.226 billion. The transaction is expected to close in March 2016. A significant portion of the consideration for the transaction will be provided by a $2.035 billion term loan due October 2019, which was fully underwritten by Credit Suisse, Bank of America Merrill Lynch, Compass Bank, Mizuho Bank and Toronto Dominion. The terms of the term loan will substantially mirror Sunoco LP’s existing $1.5 billion revolving credit facility.
- In conjunction with the dropdown, a group of private investors and Energy Transfer Equity L.P. (ETE) committed to purchase $750 million of Sunoco LP common units in an unregistered private placement at a gross price of $31 per unit, prior to adjustments. The private placement closed and funded in December, with the exception of ETE’s portion, which will fund at the closing of the dropdown transaction. The proceeds of the private placement were used to repay borrowing under Sunoco LP’s revolving credit facility and for general partnership purposes.
- On Dec. 16, a wholly owned subsidiary of Sunoco LP completed the acquisition of a wholesale fuel distribution business serving the Northeastern U.S. from Alta East Inc. for $57 million plus the value of inventory on hand at closing.
FY 2015 Compared to FY 2014
Revenue for the full year 2015 totaled $16.9 billion, a 213% increase compared to full year 2014. Gross profit for this period increased 752.8% year-over-year to $1.5 billion.
Total motor fuel volumes sold to affiliates, excluding the non-controlling interest, decreased by 70.6% to 346.4 million gallons as a result of the Susser acquisition, which converted affiliate volumes to retail volumes. Wholesale gallons sold to third parties, excluding the non-controlling interest, increased by 214.2% to 2.4 billion gallons. Retail gallons sold increased by 1,595.8% to 1.4 billion gallons.
On a weighted-average basis, fuel margin for all gallons sold, excluding the non-controlling interest, increased to 15.1-cents per gallon for the full year 2015, versus seven-cents per gallon in the full year 2014.
Net income attributable to partners for the full year 2015 totaled $87.2 million, a 53.8% increase compared to full year 2014. Adjusted EBITDA attributable to partners was $444.1 million, compared to $122.3 million for the 2014 period, and distributable cash flow, as adjusted was $272.2 million, versus $92.5 million for 2014.
On Jan. 26, the Board of Directors of Sunoco LP’s general partner declared a distribution for the fourth quarter of 2015 of $0.8013 per unit, which corresponds to $3.2052 per unit on an annualized basis. This represents a 7.5% increase compared to the distribution for the third quarter of 2015 and a 33.6% increase compared with the fourth quarter of 2014. This is the Partnership’s 11th consecutive quarterly increase. The distribution was paid on Feb. 16 to unitholders of record on Feb. 5.
Sunoco LP achieved a 1.04 times distribution coverage ratio for the fourth quarter. The coverage ratio was negatively impacted by the private placement completed in December. Sunoco LP achieved a 1.37 times coverage ratio for the 12 months ended Dec. 31, 2015.
At Dec. 31, 2015, Sunoco LP had borrowings against its $1.5 billion revolving credit facility of $450.0 million and $22.5 million in standby letters of credit, leaving unused availability of $1,027.5 million. Net debt to Adjusted EBITDA, pro forma for the 31.58% of Sunoco LLC and Susser Holdings Corp. acquisitions, was 4.1 times at year-end.
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 held a conference call on Thursday, Feb. 25, at 9 a.m. CT (10 a.m. ET) to discuss fourth quarter and full year results and recent developments. The call will be accessible for replay via webcast in the Investor Relations section of Sunoco’s Website at www.SunocoLP.com under Events and Presentations.