Sunoco LP (SUN) 2018 Q1 法說會逐字稿

Greetings, and welcome to Sunoco's First Quarter 2018 Earnings Call. (Operator Instructions) As a reminder, this conference is being recorded.

I would now like to turn the conference over to your host, Scott Grischow.

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. They 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 as adjusted. Please refer to this quarter's news release for a reconciliation of each financial measure.

Please note that Sunoco LP has moved the operating results, assets and liabilities of our operations that are part of our retail divestitures into discontinued operations. As such, the results presented on today's call are based on continuing operations unless otherwise noted.

Also, a reminder that the information reported on this call speaks only to the company's view as of today, May 10, 2018, so time-sensitive information may no longer be accurate at the time of any replay. You'll find information on the replay in this quarter's earnings release.

This morning, we posted an updated investor presentation to our website. Certain slides in that presentation will be referenced on today's call.

On the call with me this morning are Joe Kim, Sunoco LP's President and Chief Executive Officer; Tom Miller, Chief Financial Officer; Karl Fails, Chief Commercial Officer; and other members of the management team.

Before I turn the call over to Tom, I would like to take a few minutes to recap the transformative activity the partnership completed in the first quarter.

First, on January 23, we closed the sale of the majority of our retail assets to 7-Eleven, with total gross proceeds of approximately $3.2 billion. The results of operating these locations as retail sites for the first 22 days of the quarter are reflected in discontinued operations.

The same day, we also issued $2.2 billion in new senior unsecured notes. This refinancing activity was completed in a very constructive rate environment and lowered our weighted average cost of debt by approximately 100 basis points while also extending our average maturity profile by approximately 4 years.

We used the proceeds from the retail asset divestiture and refinancing to restructure our balance sheet, which included the repayment of approximately $2 billion in secured debt, the repurchase of $540 million of common units and the repurchase of $300 million of preferred units.

Next, we also completed the following activities related to our business transformation. First, we converted 33 of our retail fuel outlets that we were required to retain by the FTC to our commission agent channel. Next, in early April, we acquired 26 retail fuel outlets from 7-Eleven, as required by the FTC. These sites were also converted to the commission agent channel by the middle of April. As we have said in the past, we are excited about this channel as it allows us to retain material fuel distribution income while also receiving a stable rental income stream from the agent.

Finally, on April 1, we completed the conversion of our 207 fuel outlets located in West Texas to the commission agent channel. In addition to the benefits I just mentioned, the conversion of these 207 West Texas locations to the commission agent channel also allows us to participate in the upside in the Permian Basin and retain full optionality to sell this package of sites in the future.

With these conversions now complete, our remaining retail footprint as of the beginning of the second quarter consisted of 21 sites along the New Jersey turnpike and 54 sites in Hawaii.

Turning to our 7-Eleven fuel supply agreement. While the 15-year take-or-pay agreement did not technically start until April 1, we did deliver fuel to 7-Eleven in the time frame between the close of transaction and the end of the first quarter. Additionally, the first step-up for the guarantee growth volumes began on April 1, so we expect a full quarterly run rate contribution starting in Q2 2018 under the fuel supply agreement of approximately 500 million gallons. The remaining annual growth components will phase in each April, with growth of 200 million gallons in April of 2019 and 100 million gallons each in 2020 and 2021.

Next, I want to provide an update on the tax impact of the 7-Eleven transaction. We made our first tax payment, totaling approximately $127 million in early April and anticipate 3 additional payments throughout 2018 with one payment occurring late in the second quarter and one payment each -- in each of the third and fourth quarters. We believe the total federal and state tax impact will be approximately $480 million.

In summary, our transformation to a premier wholesale fuel distribution and logistics business is now complete. We also successfully restructured our balance sheet, which will allow us to operate within our leverage and coverage targets while also delivering on the growth strategy we've previously outlined.

With that, I will turn the call over to Tom.

Thanks, Scott, and good morning, everyone. Before I cover the financial results for the quarter, I want to reemphasize what Scott said regarding 2 of our major accomplishments so far this year.

First, the partnership transformed to a more traditional MLP, converting volatile company-operated retail margins to a 15-year fixed margin take-or-pay contract. Second, we fixed our balance sheet. We believe the recapitalization positions us to maintain a target leverage ratio of 4.5 to 4.75x and a distribution coverage ratio of at least 1.1x.

Similar to last quarter, assets, liabilities and operating results associated with the sold retail sites are classified as discontinued ops. Our retained assets, including the West Texas locations, are included in continuing operations. Although splitting our results in this manner adds near-term complexity, it highlights a couple of points. First, our discontinued retail operations were impaired by nonrecurring transaction expenses. And second, our continuing operations are performing well and are in line with our expectations.

Now turning to the first quarter results. The partnership recorded a net loss of $315 million compared to a $1 million gain a year ago. The loss includes a $204 million income tax expense, largely attributable to the gain on the 7-Eleven sale, and $129 million loss extinguishing debt and preferred securities related to restructuring the balance sheet.

Total adjusted EBITDA was down $46 million to $109 million. In combination with the restructured balance sheet, our leverage and coverage ratios have improved materially.

Specifically, distributable cash flow, as adjusted, was $85 million, an increase of $8 million compared to a year ago. We benefited from lower cash interest expense and lower maintenance capital. Our DCF coverage in the first quarter was 1x and 1.2x on a trailing 12-month basis. Two weeks ago, we declared an $0.8255 per unit distribution, the same as last quarter.

Our quarter end leverage, as defined by the credit agreement, was 3.8x, down from 5.6x at year-end. We had outstanding letters of credit totaling $8 million and had no borrowings under the $1.5 billion credit facility.

When you consider the $480 million asset sale tax liability, our leverage would be in the middle of the target range. Our weighted average cost of debt at March 31 was 5.3%.

Slide 4 highlights the performance of our continuing operations. We believe looking at these results rather than consolidated is the appropriate starting point for our go-forward basis. After removing divested retail results, adjusted EBITDA for operations would have been $129 million. This amount includes roughly $4 million for nonrecurring expense associated with converting 207 West Texas locations to commission agent sites.

Now looking at operational performance. Total fuel volume was 1.86 billion gallons. We anticipate that volume will trend higher throughout the year driven by growth in our wholesale business and typical seasonality trends. Over the past few years, the first quarter contributed 23% of our annual fuel volume.

Slide 8 shows fuel margin over time. For the first quarter, fuel margin was $0.096 per gallon. We calculate this fuel margin by adjusting margins to reflect the 7-Eleven sale and contract and the move of 266 sites to commission agents. $0.096 cents is consistent with the 3-year average we've previously discussed.

In the first quarter, Sunoco invested $19 million in capital expenditures, consisting of $16 million of growth capital and $3 million of maintenance capital. Growth capital will be driven in large part by the number of contracts we signed. The more contracts we sign, the higher the growth capital. We expect our growth capital to total roughly $90 million for the year.

On the maintenance side, we expect the annual total to be around $40 million. That said, we have and continue to focus on the efficiency of our maintenance capital spend without compromising safe and prudent management of our assets.

Finally, Slide 5 highlights a number of guidance parameters that we discussed with you last December. With the 7-Eleven transaction closed and the commission agent conversion complete, we anticipate achieving these annual run rates starting in the third quarter. These amounts are other operating expense of approximately $325 million, G&A expense of approximately $140 million and rent expense of approximately $75 million.

During the first quarter, G&A expense from continuing operations was $35 million, up $3 million from a year ago. Other operating expense was $98 million. Although this implies higher than guidance run rate, operating the West Texas sites drove the higher costs.

It's worth noting we expect the second quarter will also have nonrecurring expense associated with the move of the West Texas sites to our commission agent.

Rent expense totaled $15 million. All of these are in line with the projected annual run rate for the new business.

I will now turn the call over to Joe for a strategic update and closing thoughts. Joe?

Good morning. As Tom stated, we had a busy but highly effective first quarter. Even with the noise of the retail divestments, our underlying business is strong. Last year, we outlined a plan. And during the first quarter, we executed on this plan. First, we completed the 7-Eleven transaction. Second, we converted our West Texas sites to the commission agent model. Third, we fixed our balance sheet. And finally, we transformed Sunoco LP into a cost efficient organization. We now have the foundation in place to materially grow.

In April, we closed on the Superior Plus acquisition. This acquisition serves as a blueprint for small bolt-on deal. The highlights include: a 200 million gallon a year wholesale business; 3 terminals that provide fee-based cash flows; material commercial and G&A synergies with the ability to add additional customers; and finally, an attractive post-synergy multiple between 5 and 6x and it's accretive in year 1.

This acquisition is one example of the type of opportunities we continue to pursue in a fragmented marketplace. We have developed a robust pipeline of potential M&A opportunities, will be delivered to only pursue the most attractive opportunities that meet or exceed our financial targets.

As we look towards the future, we continue to see a solid underlying business, anchored by our take-or-pay contract and real estate income. In just over 12 months, we have transformed Sunoco LP to what I consider to be the premier independent fuel supply and logistics company. I remain confident in our ability to grow and deliver on our stated financial goals.

Operator, that concludes our prepared remarks. You may open the line for questions.

(Operator Instructions) Our first question comes from the line of Andrew Burd from JPMorgan.

Congratulations for getting so much done in the first quarter. So thanks for the multiple on the Superior Plus acquisition. As you think about the synergies that are embedded within that multiple, can you give us an approximate breakdown of what are kind of fuel costs related synergies on the supply side versus overhead and G&A and things like that?

Andy, this is Karl. The 2 main categories in synergies we get on most of these bolt-on relate to, as you said, the commercial cost of goods sold as well as G&A. I think a reasonable way to think about it is on that acquisition, about half and half and are -- this acquisition is consistent with most of the ones we look at that we can usually get half of the synergy in year 1. And by year 2, we'll be at 100% of that.

Great. And when you talk about the accretion in year 1 for that acquisition, does that contemplate 50-50 equity funding or kind of a permanent funding profile? Or is that just, as announced, putting it on the revolver and cash on hand?

Andy, Tom Miller. Yes, it's all 50-50 financing on the evaluation. The initial funding of it will be to stay within the target leverage range. So initially, it will be funded by -- with the -- of the credit facility. And then I think I should point out that we still have no plans right now of issuing equity this year.

Great. And then just housekeeping questions. How much capital did you spend on those 26 sites that you were required to buy from 7-Eleven?

Andy, that purchase price is $50 million.

Great. And then how are wholesale volume trends outside of the 7-Eleven piece of the pie?

Yes. I think a couple of thoughts on wholesale volumes, Andy. In first quarter, you have normal seasonality. I think Tom mentioned in his prepared remarks first quarter is usually about 23% of our yearly annual volumes. In addition, in much of our geography, you had some late winter storms that contributed to some volume loss in the quarter. As we look at Q2, we see, as expected, our volumes ramping up. And we're comfortable with our business as a whole ramping up over the 8 billion gallon mark for the year.

Great. And final question, on the presentation of your financial results. Is there any expectation that you change the presentation to better reflect, I guess, the new business profile? Or will the next quarter's press release look like this quarter's press release?

Andy, this is Scott. Yes. Certainly, the breakdown of the wholesale and retail segments doesn't likely make sense moving forward given our divestiture of the retail assets. So there will likely be a change of the reporting format moving forward.

Our next question comes from the line of Theresa Chen from Barclays.

I wanted to ask about your maintenance CapEx this quarter, very light relative to the maintained guidance. Any color around that?

Theresa, it's Tom. It is light, I'll agree with that. The first quarter tends to be light. We would expect to see it ramp up towards 40. As we said, 40 is at the high end of the range that we believe, and we will continue to look for ways to be below that. But right now 40 is still our best number.

Okay. And looking to the rest of the year, assuming we're not going to have any more weather aberrations impact to volumes and maintenance ramps up. How do you couch how that affects coverage overall?

As the gallons get added in and we believe the margins -- with the margins, we still stick with that we think our 1.1 is achievable this year.

Theresa, it's Joe. Let me add a little color to that. I guess, on the maintenance capital, whenever we look at our business on a going forward basis, we knew that the first quarter was going to be light. So as far as being light and as we projected out our business, we anticipated a light maintenance capital first quarter whenever we provided our confidence in having that 1.1 that we put on our (inaudible). This was contemplated. So we are light in the first quarter. It's not a prorated $10 million, $10 million, $10 million. It does have some seasonality, but this was all factored in whenever we gave that guidance. On the volume side, I think Karl did a really good job of talking about the ramp-up. Again, the seasonality plays into it. And there's probably 4 other things that I think everybody needs to be aware of. We have our base volume that's going to seasonally grow, which we've already seen it grow in April and we're seeing it grow in May. And then there's other -- you have to also bring in the fact that we've added the -- during the beginning of the second quarter, we added the 26 sites from 7-Eleven. We've added the Superior acquisition and we have organic growth on top of that. And Tom mentioned, we have a $90 million growth capital budget. And that's really a function of us signing up new customers and adding to our volume. So we see this whenever we provided the 8 billion gallons, it was founded on the principle that volumes are going to ramp up and we had other activities that contributed to that number.

Got it. And in terms of that seasonality breakdown, so 23% on average for the first quarter, can you give us the average for the other quarters?

We don't have the average for exactly -- for what the rest of the quarter is out there. But the 23% is what we have for the first quarter looking back the last 3 years.

Okay. And for the acquisition pipeline, can you give us any indication of how that looks currently and how quickly you think that you can roll up the industry?

Sure. I mentioned in my prepared remarks that we have a robust pipeline. And so we have post kind of exit in retail, we put together an extensive team and really structured our business so that we can grow out there. I think a couple of things I can say is that this isn't -- the Superior Plus acquisition isn't a one-and-done-type acquisition. The industry is incredibly fragmented. And we think that when it comes to these small bolt-on-type of acquisitions, this is a multiyear runway for it. And with each year, we can do multiple acquisitions. The key to this is that compared to other people that might be looking at this if it's an open auction or kind of one-on-one dealings out there, we think that opportunities are ample. But like I said in the remarks, we're going to be prudent, we're going to be deliberate, we're going to be disciplined to make sure that it meets all the financial targets that we outlined out there. So we feel very optimistic about this runway. And again, we think this is multiyear and multiple every year. But at the same time, we're going to be very deliberate to make sure that it meets our financial criteria.

Got it. And lastly, going back to Karl's comments about the weather aberrations. Can you give a number on what was that onetime impact to EBITDA or DCF?

Yes. Theresa, we don't get that precise on in terms of looking at all the different factors that contributed to it. I guess I'd stick with what we've said around our confidence in the ramp-up. And that for this year, we're going to be at 8 billion gallons-plus.

Our next question comes from the line of Patrick Wang from Robert W. Baird.

My first question is around the recent movement in RIN prices. If prices stay low, how should we think about the implications, if any, to your long-term fuel margin guidance?

Yes. I think a couple comments I'd make. This is Karl. First, if you look at our investor deck on Slide 8, we've recast our margins over the last, really, 13 quarters, including first quarter on a run rate basis. If you look at each of those quarters, there have been varying RIN prices through those quarters. If you look at Q1, RIN prices vary between $0.35 and $0.72. So there's a lot of things that contribute to that. I think Q1 really supports our thesis on RIN prices that they're factored into refining and wholesale margins that our margin portfolio is robust enough that whatever RIN prices we have we're going to fit within the guidance we've given you on margins.

Okay, got it. And then moving to West Texas. Can you discuss fuel demand trends you saw there during the quarter? Have you experienced any or do you expect to hit any bottlenecks in getting supplies to that region if activity continues to ramp?

Pat, it's Joe. As far as -- if you look back on first quarter for West Texas, these 207 sites, it has been the kind of the crown jewel as far as performance. We saw on the same-store sales basis on fuel gallon up about 3.5%. On a merchandise basis, same store, we're up over 6%. So it's a very robust market out there. And as far as bottlenecks out there, I think there is definitely so much activity out there that the bottlenecks might come from various different sources. But we still feel like we have -- there's enough margin out there where people will figure out how to get products out there.

Okay. And then bigger picture, do you expect to get any commercial synergies from Energy Transfer's proposed diesel fuel pipeline out in West Texas, which should be in that 2020 time frame?

Yes. We think that's a great project. And we're still evaluating and see how Sunoco could be a part of this, either from whatever potential avenues that presents itself.

Our next question comes from the line of Ben Brownlow from Raymond James.

I'll stick to two quick questions. Just on the OpEx guidance, the other OpEx, $325 million and getting to that time frame on the third quarter, how much of that reduction from the $98 million that you had in the first quarter to that kind of $325 million annualized run rate, how much of that reduction is just pure pro forma for the commission model versus kind of internal expense initiatives?

Ben, that's a good question. I'm close to saying that all of the costs, that we're on the run rate if you exclude West Texas. We'll have a little bit of cleanup costs in the second quarter. But I think we're -- in terms of operations, we focus clearly on that, that we're within the target $325 million.

Okay. So just to be clear, the bulk of that is just moving to the commission model?

Yes. We had to do all the accounting for it, and we had moved most of our accounts out.

Okay, great. And then just -- kind of I have one more just qualitative question. You touched on RINs playing a part in the fuel margin. But could you just give us kind of a characterization of fuel margin backdrop in the quarter?

Sure. For Q1, we faced typical seasonal margin headwinds. If you think about the -- the RBOB price moved up $0.22 during the quarter. So typically in our business, that's a margin headwind. But on a recast basis, we still came in at $0.096. So I think as you think about the general margin environment that exists and then how Sunoco is positioned and maybe some of the mitigating factors we have that maybe other competitors don't -- I mean, Joe mentioned earlier our 7-Eleven take-or-pay. We have a large portion of rental income. Joe mentioned the strong growth that we have exposure to in the Permian. So I think all of those factors show that even with some headwinds in the quarter, that we came in solidly on the high end of our guidance.

Ben, let me add one other thing. If you kind of look at our company-operated -- former company-operated business and kind of broke it out into 2 pieces, I think the first quarter showed that for the sites that we sold 7-Eleven, if you look at the 22 days this year versus the 22 days last year that we operated it, margins were definitely down. And then you saw crude spike up in January. And you saw the impact -- we saw the impact to that of the 22 days that we had. West Texas was really the outlier in all this. West Texas remained very, very robust. And that was why one of the key strategic reason why we believe in this region, we wanted to keep this in a commission agent model. But conversely if you look at our presentation that we put out and we updated, you can see that even with -- even though the company-operated margins went down, our recast -- the fuel margins was at $0.096, which is very, very consistent if you look back for the last 3 years where we've averaged $0.093. And every year, it's always above $0.09. So the point that, I guess, I'm trying to reinforce is the headwinds that we saw in the company ops, the way that we've transformed our business, we take out a lot of that volatility.

Our next question comes from the line of Sharon Lui from Wells Fargo Securities.

Just a couple of housekeeping questions. The first is just in terms of additional expenses tied to exiting the retail business or converting the West Texas sites, do you anticipate any additional costs in the second quarter? Or should the second quarter be clean quarters?

Sharon, this is Tom. No, we do expect costs -- I don't really have a very good estimate. As we looked at it this quarter, it was at least 5 and probably a little bit more. Some of it just gets rolled into the continuing operations. We're expecting the same factors going into it for moving CAL's into the commission agent model.

Okay. And then, I guess, in terms of the tax payment through the balance of the year, is that just going to be funded through the revolver?

Yes. That's been the plan all along is to pay this out. So when we did the capital structure, we felt the $2.2 billion in bonds was the right amount to have. And then this will leave us less than 1/3 drawn on our $1.5 billion credit facility.

Okay. And I guess, any thoughts in terms of extending the maturity of the revolver past next year?

Not just thoughts about it, we're moving forward with that right away. We won't let it go current, which what happens in the fall.

Okay. And the size that you're thinking about keeping the same size in terms of the revolver capacity?

Yes.

(Operator Instructions) Our next question comes from the line of Chris Sighinolfi from Jefferies.

First, I just want to clarify something Scott had offered at the end of the prepared remarks, just to make sure I'm understanding it correctly. So the 2.2 billion gallon a year initial supply agreement with 7-Eleven, did I understand that, that formally commenced on April 1 and it will step up each in the next 4 April -- or 3 Aprils, but some volume was delivered in the first quarter sort of under a similar agreement?

Yes. Just one correction. The initial volume that started on April 1 is right around 2 billion. So Scott referenced approximately 500 million gallons a quarter. And then it steps up on the schedule that Scott referenced.

Okay. And is that -- I guess, with regard to the amounts delivered in the first quarter, are you able to give us any color in terms of -- I'm just trying to get an interpretation of if we look at the wholesale volumes that were delivered in 1Q, maybe how much on a 1Q to 2Q step-up we'll see going from whatever was in place in 1Q to the formal agreement that Scott referenced?

Chris, I think the first quarter was a stub period. So the take-or-pay commences on April 1, like we've all talked about. As far as the volume, if you want to look at it, I think you should probably think about it just in the context of our overall business about seasonality. We kind of gave that 23% for the first quarter. I think if you want to get ultraprecise, we haven't gone to that ultraprecise what that step-up is. But I think if you use the 23% that the seasonality ramps up in this business, I think that would be a pretty solid starting point.

Okay. And Joe, does that -- does the contract with 7-Eleven sort of mirror the seasonality that you see in the rest of your business? I.e. is it weighted, let's say, 23% of that 2 billion, would that be what we should expect in the first quarter? Or is it ratable, every quarter is the same amount of take-or-pay?

It's an annual contract, meaning seasonality. Right, the take-or-pay, it's not -- yes, it's an annual contract. So you view it ratably.

Okay, understood. And then you had talked about some of the same-store sales figures being supportive in West Texas. I was just curious on the wholesale front what they might have showcased for the rest of your operations. You mentioned like the retail side that you divested, you saw some margin pressure in the first 3 months.

Chris, we don't -- same-store metrics for the wholesale business aren't relevant. We wouldn't have that information. We've never really talked about it. That's a retail metric, not a wholesale metric.

Okay. Would we -- So I guess, Scott, would we say that volumes on that legacy business were up year-on-year, were flat year-over-year, were down year-on-year? I mean, I understand there were some weather issues you guys referenced earlier. I'm just trying to gauge -- again, because we have multiple sleeves coming in. Any help you could provide there? That's all I'm trying to get after.

Chris, I think it's fair to say that if you just look at total volume, that we're down. You saw -- I think Tom mentioned we're down 2.5. And I think the 2 variables that we have to look at is there was some weather. But trying to get to the precision of what weather did exactly on volume, that's a pretty shaky science. But the other part of it is that whenever we switched over, whenever we're doing a switchover for the 7-Eleven and for the commission agent model, you don't just flip the switch and not have a little bit of downtime. So that was a contributor of that. So collectively, what we can say is that, that wholesale business on a year-over-year, it was down -- contributed to those 2 factors. But we feel -- like I said, we feel very strongly that the ramp-up that we have in our business based on seasonality and other projects we have going on is going to get right back to what we've always guided on that we have an 8 billion-plus type of business.

And then Joe, if I could, just you were talking earlier about margin dynamics with regard to RBOB price and crude price. And obviously, that's a much more sensitive element on the retail front. But as wholesale, it's sort of one stage removed. I'm just wondering, are there price points at which -- you've operated this business a long time. Historically, we see consumer response or anything like that, that you could gauge for us. We've seen this move in crude. I think it surprised a lot of people. So it certainly surprised me. So I just didn't know if there was something you could offer in terms of how we should think about price response by the consumer and how that might dovetail back on the wholesale.

Yes. This is Karl. I can add a little bit of color. I think the way to think about it is that it's not only the price point, but it's how long that price point stays and how persistent that is. So I mean, you go back in the last decade, I mean, you can see variances in demand. One of the things to remember is, I think we included it in our deck, that demand -- you look at 2016, 2017, starting at the highest levels of gasoline demand in the United States. 2017 equaled 2016, even with a $0.30 rise in average retail prices across the country. So that's one data point you can use that, right, there are a lot of other factors that go into demand other than just price. Price can have an impact. But the strength of the economy, unemployment rate, vehicle miles traveled all influence. So in 2017, you saw enough of those factors to counteract the $0.30 increase in demand. And we're very comfortable with the U.S. economy right now. And I think that will also have a bearing on any demand impacts in 2018.

Tom, I have just one question left. And that's you had provided us sort of a snapshot balance sheet on Page 11 or Slide 11 of the deck, and it shows the data of March -- or sorry, May 9, yesterday. So I'm just curious, is that reflective of the Superior purchase, the sites acquired from 7-Eleven and the first cash tax payment or is some of that to come? I'm just wondering, if I look at the debt balance, where those 3 items will shake out, they were April or early 2Q?

Yes. Chris, this is Scott. Those were as of the end of the quarter. So the first tax payment was made subsequent to that as was some of the M&A activity.

Our next question comes from the line of Theresa Chen from Barclays.

I just had a follow-up related to the RINs discussion. Karl, when you think about the prospects of E15 being sold across the board year round, how do you see this development playing out? Do you think it will actually happen? And if so, how are your assets positioned for this? And what do you think are like the next steps either politically or economically that needs to happen for this to come to fruition?

Yes. Theresa, as you think about -- I mean, there's a lot wrapped up in your question around the RFS. And I think we're -- we stay very close to and try to be part of the conversation around what that looks like going forward between the administration, the EPA and Congress. Obviously, there's differences of opinion in the marketplace on that. As far as E15 goes, E15, I think, is in its infancy of a fuel. There's not a lot of consumer demand that we can see. I think there's still some question marks related to vehicle compatibility from a vehicle manufacturer standpoint. I mean, our overall view is -- and particularly as a wholesale fuel company, we want to supply liquid petroleum fuels that our customers want. So we're obviously in the ethanol-lending business. We'll participate as our customers look at it. Right now it's just not a very big piece of the market. And ultimately, I think one of the things that people think about as you think about gasoline demand and vehicle choices and fuel choices, that a lot of models underrepresent is consumer choice, so we'll see.

Ladies and gentlemen, we have reached the end of the question-and-answer session. And I would like to turn the call back to Scott for closing remarks.

Well, thanks, everyone, for joining us this morning. If you have any follow-up questions, feel free to reach out to me, otherwise we'll talk to you soon. Thank you.

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