Sunoco LP (SUN) Q4 2015 Earnings Report, Transcript and Summary

Greetings. And welcome to the Sunoco LP Fourth Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Scott Grischow, Director of IR and Treasury. Thank you. Please go ahead.

Thank you. Before we begin our prepared remarks, I have a few of the usual items to cover. A reminder that today’s call will contain forward-looking statements. These statements are based on management’s beliefs, expectations and assumptions and may include comments regarding the Company’s objectives, targets, plans, strategies, costs, and anticipated capital expenditures. They are subject to the risks and uncertainties that could cause the actual results to differ materially, as described more fully in the Company’s filings with the SEC. During today’s call, we will also discuss certain non-GAAP financial measures including adjusted EBITDA and distributable cash flow. Please refer to yesterday’s news release for a reconciliation of each financial measure. Also, a reminder that information reported on this call speaks only to the Company’s view as of today, February 25, 2016. So, time-sensitive information may no longer be accurate at the time of any replay. You’ll find information on the replay in yesterday’s news release. On the call with me this morning is Bob Owens, Sunoco LP’s Chief Executive Officer, and other members of the management team. I’d now like to turn the call over to Bob.

Thanks, Scott. Good morning, everyone. And, thank you very much for joining us. This morning, we will review the results of the fourth quarter and full year, along with our recent accomplishments and our growth plans. Before going through the fourth quarter and full year 2015 results, let me briefly recap the dropdown transaction that we announced late last year. In that agreement, Sun agreed to acquire the remaining 68.42% of Sunoco LLC and 100% interest in the legacy Sunoco retail business from Energy Transfer Partners for approximately $2.226 billion. The transaction will be funded by a mix of debt and equity, and will complete the transformative dropdown strategy that was first articulated back in April of 2014, when we made the acquisition of Susser Holdings. This transaction is really important to us because it expands the current retail network to the Northeast and further grows the existing wholesale business. Scott will comment further on the transaction in a moment, but I want to say how excited I am about structuring this transaction in terms that will make the acquisition immediately accretive to Sun shareholders when we close it later this quarter. It also simplifies our financials going forward and answers what had been an open question on the minds of investors. Turning next to the distribution we announced in late January. The fourth quarter distribution of $0.801 per unit is an increase of 7.5% from the prior quarter and a full 33.6% versus a year ago. This reflects our continued progress on growing the partnership cash flow through acquisitions and dropdowns, as well as our confidence in the position in the marketplace, both today and more importantly in the future. We’ll talk more about distribution philosophy in a bit. Now, despite the challenging marketing dynamics for some of our business, Sunoco LP delivered solid overall results in the fourth quarter of 2015 with year-over-year growth in both fuel gallons sold, merchandise sales and gross profit. These increases were driven in large part by the contributions from the dropdown transactions that we completed throughout the year of 2015. On a year-over-year basis, I’m pleased to report that total fuel volumes increased to 1 billion gallons after backing out the non-controlling interest for the three months ended December 31, 2015. Total weighted average cents per gallon margin, excluding the non-controlling interest was $0.151 per gallon and this compares to $0.445 in the fourth quarter of 2014 and $0.206 in the third quarter of 2015. The year-over-year decline was attributable to the change in retail gallons sales mix and more importantly, to the record fuel margins that we observed in the fourth quarter of 2014. Although we witnessed a decline in crude oil prices in the fourth quarter of 2015, we also saw less volatility, which contributed to a lower overall margin on both, a year-over-year and quarter-over-quarter basis. Retail merchandise sales were $400.4 million and the gross profit percentage on these sales was 33.1%. Our Stripes convenience store chain delivered positive same-store merchandise sales growth in 2015 and that marks the 27th consecutive year. Not unexpectedly, same-store sales continued to be impacted in Q4 by the ongoing slowdown in the oil patch markets of West and South Texas that make up about 20% of our Texas locations. In the oil patch, merchandise sales on a same-store basis were up just over 15% while total fuel gallons sold were up just over 19%. The sharp decrease in fuel was led primarily by diesel sales, which were off by 32%. All of those numbers were specific to the 20% of locations in the oil patch. As I mentioned, these oil patch stores represent about 20% of the retail portfolio in Texas and pro forma for the final dropdown with sites in the oil patch will represent just over 10% of the total retail portfolio. If you consider the performance of our stores in other very attractive markets such as Hawaii, Washington D.C., Nashville, and Philadelphia, we feel very comfortable with our exposure in the oil patch, and are pleased with the benefits of our diversification. In Texas, Texas is a big state and oil is only one aspect of its economy. We’re looking at organic growth opportunities in areas of the state that are less influenced by oil price cycles for expansion over the next several years. Excluding the oil producing regions, the Stripes market area still represents some of the best opportunities and fastest growing locations within our retail portfolio for continued organic growth. We’ve also seen growth in the Laredo Taco Company. As of December 31st, Laredo Taco had 442 locations, primarily located in the state of Texas. And every new build location received a Laredo Taco offering in site. We are happy to announce that as promised, we are bringing Laredo Taco to the Northeast. We’ve opened the first four locations in Pennsylvania and Tennessee and we’ll be opening an additional two locations by the end of the first quarter with plans to have a minimum of 15 locations to 20 locations opened by the end of 2016. Early returns are excellent, and we’re excited to roll out the balance of the test sites. As we look to expand Laredo Taco outside of Texas, we’re also looking to expand the iconic Sunoco fuel brand within the state of Texas. As of December 31st, we have hoisted the Sunoco diamond at almost 200 locations within the state of Texas. We continued to build our portfolio of attractive wholesale assets in Q4 with the completion in mid-December of an acquisition of wholesale fuel distribution business, serving the Northeast from Alta East Inc. This tuck-in acquisition was the fourth of the year. In total, we made approximately $120 million worth of small acquisitions last year on the heels of the much larger Aloha Petroleum acquisition we completed in December 2014. Coming back to our fourth quarter distribution, we’re really pleased that we’ve been able to continue to provide strong distribution growth through this current market environment. Sunoco’s increase reflects confidence in our growth strategy and our ability to weather volatile commodity price environments, as well as across different economic cycles. With the dropdown transactions behind us, we will now be focused on continuing to deliver deliberate and fair distribution growth while also turning our sights on reducing leverage. Long-term, we believe it’s appropriate to target at least a 1.1 coverage ratio. In a minutes I’ll turn it over to Scott to provide some more detail about Q4 and full year results. But I’d like to wind up my remarks by again addressing a few points that I don’t think have been fully recognized or appreciated by the market, especially over the last few months. The first point is one that I’ve underscored many times in excess, Sunoco LP is not exposed to the downside effect of low oil and gas prices in a way that most other partnerships are. Over time, our fuel margins trend fairly consistently due to discipline in the marketplace. SUN’s diverse geographic positioning and channels of business offer additional built-in stability. Our convenience store markets include some of the fastest growing cities in the country and our merchandise performance has been consistently strong. Although many other MLPs are hurt by low oil prices, our business is generally agnostic to the absolute price of crude oil. Over time, our margins have proven to revert to a mean, making SUN a defensive investment during these varied times of the volatility. We have stable, long-term contracts that support a wholesale business, and our retail store operation has spread across some of the fastest growing markets in the United States. All of this helps mitigate the impact of commodity price volatility and growth differentials in particular regions or in particular states. And while fuel margins may swing from one month or even quarter-to-quarter, over time our fuel margins trend consistently year-in and year-out. And on top of that, merchandise sales at convenience stores within the industry have proved to be largely economic cycle proof. I’d now like to turn the call over to Scott, who will cover highlights of the partnership fourth quarter performance. Scott?

Thanks, Bob. Before I get into details for the quarter, I’d like to give you a brief update on the status of the dropdown we announced late last year. As Bob mentioned earlier, we expect to close the transaction in March with some key milestones already behind us. Approximately $685 million of the $750 million equity private placement was funded in December with the remaining $65 million commitment to be funded at close by ETE. These proceeds were used to pay down borrowings under the SUN credit facility; an additional $194 million worth of SUN units will be issued to ETP when the transaction closes. Finally, the $2 billion term loan has been fully underwritten by a core group of SUN relationship banks and will fulfill the majority of the cash portion of the transaction consideration. The dropdown will be effective January 1, 2016 and will complete over $5.5 billion worth of transactions, since the fourth quarter of 2014, increasing SUN’s presence to almost 6,800 retail states and 30 states from Hawaii to Maine. Now looking at some key metrics and trends for the fourth quarter. Adjusted EBITDA for the fourth quarter increased 71.3% from a year ago to $112.2 million. As expected, this increase can largely be attributed to the Sunoco LLC and the Stripes assets to be added to the SUN portfolio in 2015 as well as the approximate $120 million worth of tuck-in acquisitions completed during the year. Distributable cash flow in the fourth quarter increased by 76.3% to $90.1 million. Again, this increase was related to the addition of the Sunoco LLC and Stripes assets offset by the additional interest expense related to dropdown financings and maintenance CapEx for the larger asset portfolio. Distributable cash flow coverage was 1.04 times for the quarter and 1.37 times for the full year 2015. Regarding retail operations, retail fuel gallons sold during the fourth quarter increased almost six times from the fourth quarter last year to 354 million gallons. Retail margins on these gallons finished the quarter at $0.224 per gallon compared to $0.445 per gallon a year ago. This decrease reflects the addition of the Stripes gallons, which are in a lower CPG compared to our relatively small retail segment a year ago, which only consisted of the MACS and Aloha businesses. Also, last year’s $0.445 per gallon in the fourth quarter reflected a very strong margin environment in which WTI fell from North of $90 to just over $50 per barrel. Fuel same-store sales across the retail business decreased by 4.1% during the past quarter. This is primarily due to the continued weakness in the oil producing regions. Excluding these oil producing regions, Stripes fuel same store sales were down 0.6%, most of which is related to decreased diesel demand in and around the oil producing regions, decreased trucking traffic, and some severe weather events in central Texas early in the fourth quarter. MACS and Aloha saw a 0.9% decrease in gallons, sold on a same store basis in the fourth quarter. On the merchandise side of SUN’s retail business, merchandise sales increased almost 9 times to $400.4 million. SUN’s retail merchandise gross profit increased from $10.2 million a year ago to $132.7 million during the fourth quarter. More importantly, the gross profit margin increased from 26.0% a year ago to 33.1% in the fourth quarter of 2015. This increase in both, merchandise sales and the margin on these sales can be attributed to the addition of the Stripes business in 2015. Merchandise same store sales across the business were up 0.8% during the quarter. Stripes on its own saw a decrease in merchandise same store sales of 1.1%. But again outside of the oil producing regions, merchandise same store sales at Stripes were up 4%. MACS and Aloha combined for merchandise same store sales increased 12.5% during the quarter. Turning to the wholesale business, gallons sold to third parties increased over 130% to 567.7 million gallons, compared to the fourth quarter of last year. The wholesale cents per gallon margin on these gallons decreased from $0.176 a year ago to $0.121 for the current quarter. This reflects the addition of the Sunoco LLC gallons at a lower cents per gallon margin and the fourth quarter of 2014 and being a very strong fuel margin environment. Affiliated wholesale gallons during the fourth quarter fell just over 70% year-over-year to 84 million gallons. These affiliate gallons are gallons sold to Sunoco’s retail business which currently resides at ETP. The year-over-year decrease reflects all Stripes gallons being converted to retail gallons, instead of affiliate wholesale gallons. The affiliate gallons for the fourth quarter were sold at a fixed $0.04 per gallon. As a reminder, when the final dropdown closes this quarter, these affiliate gallons will also convert to retail gallons, just as the Stripes gallons did. SUN will only be reporting retail and wholesale gallons starting in the first quarter of 2016. Looking next at our balance sheet, recent financings and capital expenditures, as of December 31st, we had $450 million drawn on our $1.5 billion credit facility, plus $22.5 million of standby letters of credit, leaving unused availability of just over $1 billion. This level of liquidity provides us flexibility to continue our growth strategy which includes acquisitions of various sizes, plus our planned organic growth to increase penetration in markets where we already have strong scale and marketing leverage. Additionally, our plan going forward is to focus equity efforts on an at the market program, subject to favorable market conditions and unit valuation. At present, we remain well within our leverage covenant with net debt to EBITDA pro forma for a full year impact of dropdowns in acquisitions of 4.1 times. Our capital expenditures in Q4 were approximately $107 million, which includes approximately $16 million of maintenance capital. Of the growth capital spend, $39 million was for the construction of Stripes locations with approximately $3 million related to growth in the dealer business. Excluding acquisitions but including the additional capital spending related to the final dropdown assets, we expect maintenance capital for the full year 2016 to be in the range of $100 million to $110 million and growth capital to be between $390 million and $420 million. Approximately $200 million of the total growth capital spending will be allocated to the construction of new to industry sites. We believe we are adequately positioned within our capital structure to continue organic growth within our existing footprint and also take advantage of strategic third-party acquisitions that will drive long-term unitholder value. Before I conclude, allow me to review the upcoming Investor Relations schedule. Sunoco LP will be participating in the following upcoming conferences: The Barclays MLP Corporate Access Day in New York next week on March 1st and 2nd; the Raymond James Institutional Investors Conference in Orlando, the following week on March 7th; and the Deutsche Bank MLP Midstream and Natural Gas Conference in New York on May 10th. We hope to see you there. Operator, that concludes our prepared remarks. You may now open the line for questions.

[Operator Instructions] Our first question comes from the line of Andrew Burd with JP Morgan. Pleased proceed with your question.

First is just a housekeeping question that has been asked before. Scott, you might know this. Can you provide a normalized retail margin and normalized wholesale margin, looking forward for the full run rate business after the dropdown; and also, the split in total gallons between retail and wholesale?

This is Bob. I think as you round numbers, $0.25 a gallon for retail; wholesale, $0.06 to $0.08; and when you weight average it, $0.12 a gallon overall.

And then on a gallon basis Andy, on the retail side, it’s basically a 30-70 split favored to wholesale.

Okay. That’s very helpful, especially with the financials becoming a lot clearer, going forward. And a follow-up, are you expecting positive same store sales across the entire footprint, in 2016?

Yes.

And Bob, you had mentioned a Laredo Taco opportunity outside of Texas; it sounds like quite a large opportunity. Can you talk about the size of one of those typical investments and the return profile? Also broadly speaking, what is the size of the opportunity, if the pilot works out, specifically, how many of the roughly 440 Sunoco stores would be eligible, if the pilot is successful?

I would answer it this way. We’ve got planned right now 20 test locations in the Northeast. I mentioned in my opening remarks the number that we have open. What we’re attempting to determine with the test is what the demand is going to be in smaller footprint locations, up and down the East Coast where in a typical Stripes store where we have 5,000 square feet to work with and a multi-acre site for people to park, and we have seating inside that Sunoco, the legacy 440 Sunoco location range in square footage from just under 2,000 square feet up to about 4,500 square feet. And lot size less than an acre up to a maximum of probably an acre and a half. So that’s what we want to determine from a test standpoint. And, I think we’re only going to know that in terms of scaling, what size the opportunity may be by getting the results of these tests that include different size locations. The investment, depending on what we’re doing in the store, can be in the kind of mid $100,000 range up to north of $1 million, if we do significant inside reconfiguring to accommodate some seating. So, we’ll have more to say about that as we get into the year. At this point in time, what I would tell you is the customer response has been very good; we’ve got to figure out how that’s going to play out, over time with smaller units.

Great. That’s great insight and sounds like a great opportunity. The last quick question, are you able to quantify any cost savings with the recent consolidation of employees from Philadelphia and Corpus to Dallas? And then second on costs, can you talk about how variable OpEx is, in a given Stripes store; should that Stripes store, if it’s in the middle of the Eagle Ford or something and activity gets lower, is there a bunch of cost you can bring out?

Yes. We’re still working on the consolidation between the various offices we’ve got between Philadelphia, Corpus Christi, Houston, and our Dallas facility. What I can say is that the $70.1 million that we committed to the street at the time that we announced the Susser acquisition, we will exceed that target. That comes in a lot of different forms of synergy and we’re pleased with the progress we are making there. With respect to cost variability, I haven’t quantified it. Scott, have you or do you want to get back to Andy, offline?

Yes, I mean in terms of kind of the pro forma breakdown for the fully combined business, we can follow up with you off-line. I think what we are comfortable saying is obviously personnel is going to be the largest single variable piece of OpEx. And then that’s kind of followed right behind it with credit card spending.

Yes, our two largest expense lines with any company operation is labor first, personnel expenses; and second, as Scott said, credit card fees. So, we have a sophisticated modeling system that allocates man hours to sites based on customer accounts and based on sales within specific categories. So, when we have a slowdown in the oil patch, as we are experiencing now, man-hours are adjusted accordingly. That’s roughly 60% of our operating expenses are manpower. And the credit card fees are not the way you’d like to save money, but with both the lower cost of fuel as well as the reduced sales in the merchandise area, results in smaller credit card fees. So, those are the two biggest areas of savings. And we can give you some typical numbers, Scott, we’ll get back to you offline.

[Operator Instructions] Our next question comes from the line of Ben Brownlow with Raymond James. Pleased go ahead with your question.

Thanks for taking the questions. Just a follow-up on the last comment, can you give us a little bit of color on the SG&A quarterly run rate pro forma, after all the drops?

Scott?

Yes. On an annual basis, I think $170 million to $180 million is kind of a representative range for the fully combined business. On a quarterly -- Q3 and the second and third quarters will be a little bit higher, the allocation will be higher for those quarters. But on an annualized basis, $170 million to $180 million is a reasonable modeling estimate.

And on the same-store sales, you gave a lot of metrics and more transparency there. Can you talk about sort of the monthly trends that you saw? And I know it’s a difficult question to ask, but is there any way that you could quantify what you think the weather impact was and as well as what you’re seeing into early first quarter, at the Stripes locations?

At the Stripes locations. Yes, Ben, I don’t have the monthly impact. What we’ve been doing is watching the slowdown in the oil patch and trying to calculate kind of where we think it’s leveling off. And we think we’re largely there. And I guess it may be helpful to give people a little bit more information on that. We tried to do it in both the earnings release and the numbers Scott talked to earlier this morning but if you look at roughly the 20%, that was the result of us identifying specific locations that geographically were in the oil producing areas, primarily Permian and Eagle Ford. If you expand that out recognizing that people live outside the area and commute in, there are service companies that support the area that may not be geographically located inside. You would come up with a second circle that would represent about 25% of the total Stripes locations. With that metric, you would then exclusive of that -- the remaining 75% were plus 1% in fuel sales and plus 4% in terms of merchandise sales. I’m not sure I’m ready to call the bottom here, but the new drilling activity has really slowed down. And we think we’re at a pretty much a steady state basis. And along with Andy’s question earlier, we have adjusted operating expenses everyplace we can. We’re not operating any stores within the geography that are not profitable. It’s just a reality of life with the reduced activity in the oil patch that our sales are down and they are going to stay that way until we see some recovery in commodity prices and activity pick back up.

Thank you. And our next question comes from the line of Sharon Lui with Wells Fargo. Pleased go ahead with your questions.

Just following up, I guess on the trend for same store fuel sales, it looks I guess relatively flat to down. Has price driven demand pretty much leveled off and what are your expectations?

Yes. Hi, Sharon; this is Bob. I’ll tell you -- I’ll just share with you how we plan. We are planning with it to be flat. Absent capital spending or acquisitions, we’re looking at same-store sales to be flat. And I think you correctly have identified some of the factors we’ve got. New vehicle sales are helpful in the trend, SUVs and light pickups but base standards are such that vehicles today are getting much better mileage than they did in the past. We see a mixture across our geography of Maine to Hawaii, mixed economic results, and employment. And when we look at it overall, our belief is flat is the appropriate way to plan.

And one of, I guess your peers is employing a real estate venture structure to help fund its new stores. Just wondering what your thoughts are on employing that type of financing, given the challenging MLP market in terms of raising capital.

Right. Well, I remain hopeful that the market will come to its senses here, but absent that, Sharon what I would say is that we have looked at various options in the past around real estate, we haven’t closed any doors but it’s -- there’s nothing that we have that we are currently interested in doing right now. We’ll see how things progress here over the next few quarters, but as of today, we are pleased with our approach to our balance sheet. We think that our unitholders are very well served with one of our core competencies being management of real estate. Our owners have benefited over the last dozen years by our management of that real estate. And utilizing it as a financing vehicle is not appealing today.

[Operator Instructions] Our next question comes from the line of Steve Schweitzer with Shenkman Capital. Pleased go ahead with your question.

You mentioned your gross margins or your retail margins on the gasoline side, I’m just wondering where you think merchandise sales or gross margins on the merchandise sales are and how they would trend for 2016, and if you have a target in mind for gross margins on the retail side -- on the merchandise sales side?

On the merchandise sales side, what we’re comfortable kind of targeting to and have budgeted is low 30s -- roughly 31% to 33% is a reasonable range for that.

And then, you talked about earlier in the call a pro forma leverage right now of 4.1 times. I’m just wondering how you think about leverage, where you think you’ll end 2016, and if you have any targets in mind?

2016, as we’ve indicated in the past with the final dropdowns coming here, in the first quarter, leverage will be higher than the 4.1 that we ended 2015 with. Right now, I think what we’re targeting and will manage to is mid to high 5 range, exiting 2016. Again, as Bob said, looking to manage that and to chip away at that over time. Again, things like cash coverage and distribution growth and things like that.

And our next question comes from the line of Lin Shen with HITE Hedge Asset Management. Pleased go ahead with your questions.

I just want to clarify something. First of all, when you mentioned that normalized retail and wholesale margin of $0.25 and $0.06 to $0.08, are they only for gasoline or are they including both gasoline and diesel?

That’s gasoline. But, diesel isn’t vastly different.

Okay. And between gasoline and diesel volume -- I mean do you have a ballpark for how much gasoline and how much diesel for your models or your assumption?

Lin, I can follow up with you with a detailed breakdown on the CPG and then the allocation of gallons between those two offline. I’m happy to do that.

Yes, great. And another one, I also want to clarify that in Q4 2014, due to the sharp decline of the crude price, you realized a very high margin that quarter. So, I mean now that crude price is low, if we really see a sharp increase in the crude price in some quarter, should it also maybe impact your margin?

Yes, it will. So, what we’ve seen as the market has evolved over the last few years, prices tend to increase quicker in reaction to commodity price increases than they decrease at times of commodity price decreases. When you think about the makeup of the marketplace as the majors exited and the ownership of the 125 to 150 convenience stores largely in the hands of independent small operators that phenomenon we have witnessed over the past several years. So, as you stated, should we see crude oil price increase, there will be some contraction in margins, until it gets pass-through but it isn’t equal to the expansion -- it’s not likely to be equal to the expansion we saw Q4 of 2014.

The last clarification is that did you also mention that after the dropdown, the total volume or total store numbers in there -- so far slowed down oil patch area is only 10% of your total volume?

That’s correct. That impact -- once all the drops are down, it’ll represent about 10% of the business.

The percentage of store numbers or is volume number you think?

That’s on a location basis.

Yes.

If we kind of look at gallons, it is trending right about the same, maybe 1%, 2% -- 1.5% higher than that, but 10% to 11.5% is a reasonable representation of those sites.

Our next question comes from the line of Anthony Kit with Deutsche Bank. Pleased go ahead with your question.

I just had a quick question on M&A, with your final dropdown completing next month and your focus on organic growth, how should we be thinking about third-party M&A? And you also mentioned that your retail business is a bit more fragmented but also more recession-proof. So, what kind of bid spreads should we be thinking about there? Any guidance would be fantastic.

Yes. Anthony, this is Bob. I think we will continue to see opportunities, given the fragmented nature. I can tell you that we are working on some smaller deals. Right now, we don’t have anything to announce this morning, but I am optimistic that we will be in a position to do that shortly. We are seeing similar kinds of multiples that you saw us pay for whether it was Aloha Petroleum or the $120 million worth of deals we did last year, which are single-digit -- higher single-digit multiples. And we believe that those opportunities will continue to present themselves. As I’ve mentioned in the past, we look at a lot more deals, then we pull the trigger on. We keep an absolute rigid set of criteria and that sites have to be in attractive markets; they have to be assets that we believe will be viable long-term from a competitive standpoint; and the last box that they have to tick, the third leg of the stool, is that we have to be able to complete the deal in a financially attractive price level such that it’s accretive for our unitholders. But, we think we will continue to see opportunities there.

[Operator Instructions] Our next question comes from the line of Kevin Kelly. [Ph] Pleased go ahead with your question.

I was just wondering, do you guys know roughly what the pro forma EBITDA -- I know in the call in I think November, you guys said around 750 was your estimate. I was just curious what actually 2015 was?

2015, right around that. It came I think right on top -- right around $752 million on a combined basis.

Okay. And then, any just quick last comments on -- do you guys have any revisions or changes to your plans on whether or not you might need equity in 2016?

Currently, our plans remain the same. Absent a very attractive M&A opportunity, we don’t currently have in our plan the issuance of any equities. Scott mentioned, we’d like to get an ATM set up and in place. We will utilize it only when it’s attractive to do so, though.

Thank you. [Operator Instructions] We have one more question from the line of William Spinner, Moors and Cabot. Please go ahead with your questions.

Yes. I’m a retail stockbroker and I get a lot of questions from my clients about the risk of you guys being under the ETE umbrella. What can you tell me to make me -- what I can tell them about the risk?

Well, here’s what I would say to them. I think that there’s no question that the market has expressed concern about the percent of our units that are held there and we recognize that overhang. But boy, being a member of the Energy Transfer family, the benefits so far outweigh the negatives. That is what I would say. Secondly, with respect to the overhang, we’ve had no conversations at all about Energy Transfer selling those assets. Sitting with me here is Tom Long. Tom, do you…

Yes, you bet. I can tell you emphatically that there’s absolutely no dialogue going on with any banker or anything else about trying to sell those units. It’s always tough for anyone to say that’s never an option. I know, it’s like asking within Energy Transfer if there’s distribution cuts, if that’s an option. I think we all know that it could be an option but I’d just like to emphasize to you that there is absolutely no dialogue and nothing going on as far as discussions on any type of selling down of those units.

The last thing I would say is I believe we are in agreement within the family that the current value of these, does not reflect where the value ought to be. So, this is a lousy time to sell, one; two, there are tax consequences for them. So, I think it’s something we will continue to communicate with our investors about; we recognize the concern, but there is nothing to report here.

And I would just add on to what Bob said about the tax piece of it, that’s exactly right, very good point in the sense that there’s -- within Energy Transfer, there’s definitely tax impact from selling these units. Anyway, I just wanted to make sure we make that pretty clear to you. Hopefully that’s helpful.

Yes. Thanks a lot.

Thank you. This concludes our question-and-answer session. I’d like to turn the floor back over to management.

Thanks, operator, and I’d like to thank everyone for taking time to join us this morning. I cannot stress enough our belief that Sunoco LP is very well-positioned to continue to deliver sustainable, distributable cash flow and distribution growth to our unitholders despite the fact that many other MLPs are straining to maintain cash flow, much less growth. SUN does not have counterparty risk that many other MLPs have in today’s environment. We are not exposed to commodity prices in the way that most other upstream and midstream players are. Our business model has been tested many times over the past decades. And time and time again our margins revert to the mean and provide consistent cash flows for our owners. I encourage everyone not to focus on the commodity price environment and the impact that it has on our industry, but rather on Sunoco’s track record of delivering consistent value for our unitholders. I look to the dedication and passion of our entire team to keep Sunoco a top tier, retail and wholesale fuel operator with a solid platform for continued growth, both via organic means and through acquisition. Thanks again very much for being with us. This concludes our call.

Thank you. This concludes today’s conference. You may disconnect your lines at this time and thank you for your participation.