Sunoco LP Announces Third Quarter 2020 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)

Operating expenses include general and administrative, other operating and lease expenses.

SUNOCO LP

CONSOLIDATED BALANCE SHEETS

(Dollars in millions)

(unaudited)

September 30,
2020

December 31,
2019

Assets

Current assets:

Cash and cash equivalents

$

63

$

21

Accounts receivable, net

252

399

Receivables from affiliates

6

12

Inventories, net

327

419

Other current assets

39

73

Total current assets

687

924

Property and equipment

2,192

2,134

Accumulated depreciation

(776)

(692)

Property and equipment, net

1,416

1,442

Other assets:

Finance lease right-of-use assets, net

3

29

Operating lease right-of-use assets, net

527

533

Goodwill

1,555

1,555

Intangible assets

900

906

Accumulated amortization

(298)

(260)

Intangible assets, net

602

646

Other noncurrent assets

196

188

Investment in unconsolidated affiliate

137

121

Total assets

$

5,123

$

5,438

Liabilities and equity

Current liabilities:

Accounts payable

$

286

$

445

Accounts payable to affiliates

124

49

Accrued expenses and other current liabilities

225

219

Operating lease current liabilities

19

20

Current maturities of long-term debt

6

11

Total current liabilities

660

744

Operating lease noncurrent liabilities

528

530

Revolving line of credit

87

162

Long-term debt, net

2,877

2,898

Advances from affiliates

135

140

Deferred tax liability

96

109

Other noncurrent liabilities

105

97

Total liabilities

4,488

4,680

Commitments and contingencies

Equity:

Limited partners:

Common unitholders
(83,089,063 units issued and outstanding as of September 30, 2020 and
82,985,941 units issued and outstanding as of December 31, 2019)

635

758

Class C unitholders - held by subsidiaries
(16,410,780 units issued and outstanding as of September 30, 2020 and
December 31, 2019)

—

—

Total equity

635

758

Total liabilities and equity

$

5,123

$

5,438

SUNOCO LP

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(Dollars in millions, except per unit data)

(unaudited)

Three Months Ended September 30,

Nine Months Ended September 30,

2020

2019

2020

2019

Revenues:

Motor fuel sales

$

2,711

$

4,225

$

7,869

$

12,174

Non motor fuel sales

60

69

185

217

Lease income

34

37

103

107

Total revenues

2,805

4,331

8,157

12,498

Cost of sales and operating expenses:

Cost of sales

2,497

4,039

7,383

11,567

General and administrative

28

40

87

101

Other operating

68

79

219

236

Lease expense

16

15

46

45

Loss (gain) on disposal of assets and impairment charges

(1)

(4)

7

46

Depreciation, amortization and accretion

50

45

142

137

Total cost of sales and operating expenses

2,658

4,214

7,884

12,132

Operating income

147

117

273

366

Other income (expense):

Interest expense, net

(43)

(45)

(131)

(130)

Other income (expense), net

—

—

—

3

Equity in earnings of unconsolidated affiliate

1

—

3

—

Income before income taxes

105

72

145

239

Income tax expense

5

6

16

9

Net income and comprehensive income

$

100

$

66

$

129

$

230

Net income per common unit:

Common units - basic

$

0.97

$

0.57

$

0.85

$

2.09

Common units - diluted

$

0.96

$

0.57

$

0.84

$

2.07

Weighted average common units outstanding:

Common units - basic

83,056,365

82,749,644

83,033,556

82,734,526

Common units - diluted

83,770,034

83,649,898

83,668,835

83,512,121

Cash distributions per unit

$

0.8255

$

0.8255

$

2.4765

$

2.4765

Three Months Ended September 30,

2020

2019

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

$

2,600

$

111

$

2,711

$

4,041

$

184

$

4,225

Non motor fuel sales

14

46

60

14

55

69

Lease income

30

4

34

31

6

37

Total revenues

$

2,644

$

161

$

2,805

$

4,086

$

245

$

4,331

Gross profit (1):

Motor fuel sales

$

224

$

13

$

237

$

195

$

22

$

217

Non motor fuel sales

11

26

37

10

28

38

Lease

30

4

34

31

6

37

Total gross profit

$

265

$

43

$

308

$

236

$

56

$

292

Net income (loss) and comprehensive income (loss)

$

107

$

(7)

$

100

$

57

$

9

$

66

Adjusted EBITDA (2)

$

177

$

12

$

189

$

161

$

31

$

192

Operating Data:

Total motor fuel gallons sold

1,853

2,110

Motor fuel gross profit cents per gallon (3)

12.1

¢

11.6

¢

Three Months Ended September 30,

2020

2019

(in millions)

Adjusted EBITDA

Fuel distribution and marketing

$

177

$

161

All other

12

31

Total Adjusted EBITDA

189

192

Depreciation, amortization and accretion

(50)

(45)

Interest expense, net

(43)

(45)

Non-cash unit-based compensation expense

(4)

(4)

Gain on disposal of assets and impairment charges

1

4

Unrealized gain on commodity derivatives

6

1

Inventory adjustments

11

(26)

Equity in earnings of unconsolidated affiliate

1

—

Adjusted EBITDA related to unconsolidated affiliate

(2)

(1)

Other non-cash adjustments

(4)

(4)

Income tax expense

(5)

(6)

Net income and comprehensive income

$

100

$

66

Adjusted EBITDA (2)

$

189

$

192

Adjusted EBITDA related to unconsolidated affiliate

2

1

Distributable cash flow from unconsolidated affiliate

(2)

(1)

Cash interest expense

41

43

Current income tax expense

3

3

Maintenance capital expenditures

6

13

Distributable Cash Flow

139

133

Transaction-related expenses

—

—

Distributable Cash Flow, as adjusted (2)

$

139

$

133

Distributions to Partners:

Limited Partners

$

69

$

68

General Partners

18

18

Total distributions to be paid to partners

$

87

$

86

Common Units outstanding - end of period

83.1

82.8

Distribution coverage ratio (4)

1.61x

1.55x

___________________________

(1)

Excludes depreciation, amortization and accretion.

(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 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.

Adjusted EBITDA reflects amounts for the unconsolidated affiliate based on the same recognition and measurement methods used to record equity in earnings of unconsolidated affiliate. Adjusted EBITDA related to unconsolidated affiliate excludes the same items with respect to the unconsolidated affiliate as those excluded from the calculation of Adjusted EBITDA, such as interest, taxes, depreciation, depletion, amortization and other non-cash items. Although these amounts are excluded from Adjusted EBITDA related to unconsolidated affiliate, such exclusion should not be understood to imply that we have control over the operations and resulting revenues and expenses of such affiliate. We do not control our unconsolidated affiliate; therefore, we do not control the earnings or cash flows of such affiliate. The use of Adjusted EBITDA or Adjusted EBITDA related to unconsolidated affiliate as an analytical tool should be limited accordingly. Inventory adjustments that are excluded from the calculation of Adjusted EBITDA represent changes in lower of cost or market reserves on the Partnership's inventory. These amounts are unrealized valuation adjustments applied to fuel volumes remaining in inventory at the end of the period.

(3)

Excludes the impact of inventory adjustments consistent with the definition of Adjusted EBITDA.

(4)

The distribution coverage ratio for a period is calculated as Distributable Cash Flow attributable to partners, as adjusted, divided by distributions expected to be paid to partners of Sunoco LP in respect of such a period.