Filing identity and reporting period
The supplied filing is Susser Petroleum Partners LP’s Form 10-Q for the quarter ended September 30, 2013, filed November 8, 2013. This does not match the request metadata naming Sunoco LP; verify that this is the intended issuer. The filing combines predecessor results before the September 2012 IPO with partnership results afterward, so some year-over-year comparisons are not directly comparable.
Financial performance
| Metric | Q3 2013 | Q3 2012 | Nine months 2013 | Nine months 2012 |
|---|---|---|---|---|
| Revenue | $1,163.7 million | $1,109.6 million | $3,363.0 million | $3,268.8 million |
| Gross profit | $18.4 million | $12.8 million | $50.9 million | $36.9 million |
| Income from operations | $10.7 million | $5.5 million | $30.2 million | $14.1 million |
| Net income | $9.6 million | $3.6 million | $27.5 million | $9.0 million |
| Adjusted EBITDA | $13.8 million | $7.9 million | $37.8 million | $20.9 million |
| Distributable cash flow | $12.7 million | $0.6 million | $35.0 million | $0.6 million |
Gross margin was approximately 1.6% of revenue in Q3 2013, compared with 1.2% in Q3 2012; for the nine-month periods it was approximately 1.5% and 1.1%, respectively. Adjusted EBITDA and distributable cash flow are non-GAAP measures. The 2012 distributable cash flow comparison is particularly limited because the partnership began operations after its IPO in September 2012.
Cash flow, debt and liquidity
- Operating cash flow for the first nine months was $48.9 million. Investing activities provided $8.5 million net, reflecting substantial marketable-security purchases and redemptions; financing activities used $46.2 million. Cash increased $11.2 million to $17.9 million.
- Capital expenditures and intangible purchases totaled $101.8 million for the nine months, including $101.3 million of expansion spending; $92.0 million related to convenience-store sale-leasebacks with SUSS.
- Total debt was $184.7 million at September 30: $142.8 million drawn on the $250 million revolving facility and $37.9 million on the term loan. Revolver availability was $97.2 million after $10.0 million of standby letters of credit. The partnership reported compliance with its debt covenants.
- Current assets were $133.2 million and current liabilities $118.4 million. Marketable securities were $37.9 million and collateralized the term loan; the filing says these securities are intended to fund future capital expenditures.
- A one-percentage-point change in floating rates would change annualized interest expense by approximately $1.8 million.
Changes, outlook and risks
Q3 revenue increased 4.9% year over year and nine-month revenue increased 2.9%. Management attributed much of the reported shift between third-party and affiliate fuel sales to consignment sales being reclassified as affiliate sales after the IPO. Under the post-IPO distribution agreement, fuel sold to SUSS earns a fixed margin of about 3 cents per gallon; the predecessor historically earned no margin on those affiliate sales. Higher affiliate volumes and this margin contributed to gross-profit growth. Management’s pro forma comparisons also show higher 2013 gross profit than the comparable 2012 periods.
In September, SUSS contributed Gainesville Fuel, Inc. to the partnership. The contribution included working capital, property and equipment, $9.5 million of goodwill, assumed debt and other liabilities of $21.8 million, and 64,872 newly issued common units to SUSS. The partnership also acquired 22 convenience-store properties from SUSS during the first nine months for $92.0 million; the properties were leased back.
No formal earnings or cash-flow guidance is stated. Management said it expected operating cash flow, marketable-security liquidations, revolver borrowings and, where appropriate, unit issuance to meet liquidity needs. It intended to pay at least the $0.4375 minimum quarterly distribution per unit when cash was available, but noted the distribution was not a legal obligation. On November 4, 2013, it declared a $0.4687 per-unit distribution, totaling $10.3 million, payable November 29.
Key risks identified include dependence on SUSS and its transportation services, reliance on two principal suppliers, renewal or renegotiation of distribution agreements, fuel-price and demand changes, competition, seasonality, acquisition execution, and environmental and fuel-storage risks. Related-party transactions are significant: SUSS is the principal affiliate customer, owns 50.2% of partnership units and holds all incentive distribution rights. The filing reported no legal proceedings.
Important facts for investors to verify
- Confirm issuer identity: the filing is for Susser Petroleum Partners LP, not Sunoco LP.
- Assess reported growth using the pro forma comparisons and account for the predecessor/IPO presentation differences and consignment-sales reclassification.
- Review dependence on SUSS, including affiliate fuel volumes, related-party charges, ownership, incentive distribution rights and the terms of long-term agreements.
- Evaluate the cash available for distributions after expansion spending, debt service and working-capital needs; distinguish non-GAAP distributable cash flow from operating cash flow.
- Monitor revolver utilization, covenant headroom, floating-rate exposure, and the collateral and planned use of marketable securities.
- Review the Gainesville Fuel contribution’s preliminary accounting and the returns and lease terms for the SUSS store sale-leasebacks.