Greetings, and welcome to Sunoco's First Quarter 2018 Earnings Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Scott Prischell.
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 to 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 Carl Thales, 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 activities the partnership completed in the Q1. 1st, on January 23, we closed the sale of the majority of our retail assets to 7.11 with total gross proceeds of approximately $3,200,000,000 The results of operating these locations as retail sites for the 1st 22 days of the quarter are reflected in discontinued operations. The same day, we also issued 2,200,000,000 dollars 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 $2,000,000,000 secured debt, the repurchase of $540,000,000 of common units and the repurchase of $300,000,000 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 711 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 field outlets located in West Texas to the commission agent channel. 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 711 fuel supply agreement.
While the 15 year take or pay agreement did not technically start until April 1, we did deliver fuel to 711 in the timeframe between the close of the transaction and the end of the Q1. Additionally, the first step up for the guarantee growth volumes began on April 1. So we expect quarterly run rate contribution starting in Q2 2018 under the fuel supply agreement of approximately 500,000,000 gallons. The remaining annual growth components will phase in each April with growth of 200,000,000 gallons in April of 2019 and 100,000,000 gallons each 2020 2021. Next, I want to provide an update on the tax impact of the 711 transaction.
We made our first tax payment totaling approximately $127,000,000 in early April and anticipate 3 additional payments throughout 2018, with one payment occurring late in the 2nd quarter and one payment each in each of the 3rd and 4th quarters. We believe the total federal and state tax impact will be approximately $480,000,000 In summary, our transformation to 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 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. 2nd, we fixed our balance sheet. We believe the recapitalization positions us to maintain a target leverage ratio of 4.5 times to 4.75 times and a distribution coverage ratio of at least 1.1 times.
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. 1st, our discontinued retail operations were impaired by non recurring transactions expenses and second, our continuing operations are performing well and are in line with our expectations. Now turning to the Q1 results.
The partnership recorded a net loss of $315,000,000 compared to a $1,000,000 gain a year ago. The loss includes a $204,000,000 income tax expense largely attributable to the gain on the 7 Eleven sale and $129,000,000 loss extinguishing debt and preferred securities related to restructuring the balance sheet. Total adjusted EBITDA was down $46,000,000 to $109,000,000 In combination with the restructured balance sheet, our leverage and coverage ratios have improved materially. Specifically, distributable cash flow as adjusted was $85,000,000 an increase of $8,000,000 compared to a year ago. We benefited from lower cash interest expense and lower maintenance capital.
Our DCF coverage in the Q1 was 1x and 1.2x on a trailing 12 month basis. 2 weeks ago, we declared an $0.82.55 per unit distribution, the same as last quarter. Our quarter end leverage as defined by the credit agreement was 3.8 times, down from 5.6 times at year end. We had outstanding letters of credit totaling $8,000,000 and had no borrowings under the $1,500,000,000 credit facility. When you consider the $480,000,000 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 $129,000,000 This amount includes roughly $4,000,000 for non recurring expense associated with converting 207 West Texas locations to commission agent sites. Now looking at operational performance.
Total fuel volume was 1.86 1,000,000,000 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 Q1 contributed 23% of our annual fuel volume. Slide 8 shows fuel margin over time. For the Q1, fuel margin was $0.096 per gallon.
We calculate this fuel margin by adjusting margins to reflect the 711 sale and contract and the move of 2 66 sites to commission agents. $0.096 is consistent with the 3 year average we previously discussed. In the Q1, Sunoco invested $19,000,000 in capital expenditures, consisting of $16,000,000 of growth capital and $3,000,000 of maintenance capital. Growth capital will be driven in large part by the number of contracts we sign. The more contracts we sign, the higher the growth capital.
We expect our growth capital to total roughly $90,000,000 for the year. On the maintenance side, we expect the annual total to be around $40,000,000 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 we discussed with you last December. With the 711 transaction closed and the commission agent conversion complete, we anticipate achieving these annual run rates starting in the Q3. These amounts are other operating expense approximately $325,000,000 G and A expense of approximately $140,000,000 and rent expense of approximately $75,000,000 During the Q1, G and A expense from continuing operations was $35,000,000 up $3,000,000 from a year ago.
Other operating expense was $98,000,000 Although this implies higher than guidance run rate, operating the West Texas sites drove the higher cost. It's worth noting we expect the 2nd quarter will also have non recurring expense associated with the move of the West Texas sites to our commission agent. Rent expense totaled $15,000,000 All of these are in line with the projected annual run rates 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 Q1. Even with the noise of the retail divestments, our underlying business is strong. Last year, we outlined a plan and during the Q1, we executed on this plan. First, we completed the 711 transaction.
2nd, we converted our West Texas sites to the commission agent model. 3rd, we fixed our balance sheet. And finally, we transformed Sonoco 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 deals. The highlights include a 200,000,000 gallon a year wholesale business, 3 terminals that provide fee based cash flows, material commercial and G and A synergies with the ability to add additional customers, and finally, an attractive post synergy multiple between 5 and 6 times 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 and 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.
Thank you. At this time, we will be conducting a question and answer session. Our first question comes from the line of Andrew Bird from JPMorgan. Please proceed with your question.
Hi, thank you and congratulations for getting so much done in the Q1. 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 cost related synergies on the supply side versus overhead and G and A and things like that?
Yes. Good morning, Andy. This is Carl. The 2 main categories of synergies we get on most of these bolt on relate to, as you said, the commercial cost of goods sold as well as G and A. I think a reasonable way to think about it is on that acquisition about half and half and our this acquisition is consistent with most of the ones that 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. Thanks. And when you talk about the accretion in year 1 for that acquisition, does that contemplate fifty-fifty 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 fifty-fifty 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 off 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're required to buy from 711?
Andy, that purchase price is $50,000,000
Great. And then how are wholesale volume trends outside of the 711 piece of the pie?
Yes, I think a couple of thoughts on wholesale volumes, Andy. In Q1, you have normal seasonality. I think Tom mentioned in his prepared remarks, Q1 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 8,000,000,000 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 to
the reporting format moving forward. Good to hear. Thanks for taking the questions.
Our next question comes from the line of Theresa Chen from Barclays. Please proceed with your question.
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 Q1 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, you know, our 1.1 is achievable this year.
Great. Therese, 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 Q1 was going to be light. So as far as being light and as we projected out our business, we anticipated light maintenance capital Q1. Whenever we provided our confidence in having that $1,100,000 that we put on our presentation, this was contemplated. So we are light in the first quarter.
It's not a prorated $10,000,000 $10,000,000 $10,000,000 It does have some seasonality, but this is all factored in whenever we gave that guidance. On the volume side, I think Carl 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 during the during the beginning of the Q2, we added the 26 sites from 711. We've added the Superior acquisition, and we have organic growth on top of that. And Tom mentioned, we have a $90,000,000 growth capital budget. And that's really a function of us signing up new customers and adding to our volumes. So we see this whenever we provided the 8,000,000,000 gallons, it was found on the principle that volumes are going to ramp up and we had other activities that contribute to that number.
Got it. And in terms of that seasonality breakdown, so 23% on average for the Q1. Can you give us the average for the other quarters?
We don't have the average for exactly what the rest of the quarter is out there, but the 23% is what we have for the Q1 looking back to 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 of acquisition. The industry is incredibly fragmented, and we think that when it comes to these small bolt on type of acquisition, this is a multiyear runway for a open auction or kind of 1 on 1 dealings out there, we think the opportunities are ample.
But like I said in the remarks that 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 Carl's comments about the weather operations, can you give a number on what was that one time 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 8,000,000,000 gallons plus.
Thank you.
Our next question comes from the line of Patrick Wang from Robert W. Baird. Please proceed with your question.
Hey, good morning guys. 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. Guidance?
Yes. I think a couple of comments I'd make, this is Carl. First, if you look at our investor deck, on Slide 8, we've recast our margins over the last really 13 quarters, including 1st quarter on a run rate basis. If you look at each of those quarters, there have been varying RIN prices through those quarters. You look at Q1, RIN prices varied between $0.35 $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. Thanks. 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 any bottlenecks in getting supplies to that region if activity continues to ramp?
Hi, Pat. It's Joe. As far as if you look back on Q1 for West Texas, these 207 size, 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 figure out how to get product out there.
Okay. And then bigger picture, do you expect to get any commercial synergies from Energy Transfers proposed diesel fuel pipeline out to West Texas, which should be in that 2020 timeframe?
Yes. We think that's a great project and we're still evaluating and seeing how Sunoco could be a part of this either from whatever potential avenues that presents itself.
All right. Thank you very much.
Thanks, Bhai.
Our next question comes from the line of Ben Brownlow from Raymond James. Please proceed with your question.
Hi, good morning. Thanks for taking the question. I'll stick to two quick questions. Just on the OpEx guidance, the other OpEx, and the $325,000,000 and getting to that timeframe on the Q3, how much of that reduction from the $98,000,000 that you had in the quarter to that kind of $325,000,000 annualized run rate, how much of that reduction is just pure pro form a for the commission model versus kind of internal expense initiatives?
That's a good question. I'm close to saying that all of the cost that we're on the run rate if you exclude West Texas, we'll have a little bit of cleanup cost in the Q2. But I think we're in terms of operations, if you focus clearly on that, that we're within the target 3.25.
Okay. So to just 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 accountants out.
Okay, great. And then just kind of one more just qualitative question. You touched on RINs playing 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 face typical seasonal margin headwinds. You think about 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 large portion of rental income. Joe mentioned the strong growth a large portion of rental income.
Joe mentioned the strong growth 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 down into 2 pieces. I think the Q1 showed that for the sites that we sold 711, if you look at the 22 days this year and you saw the impact of that we saw the impact of that for 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 reasons why we believe in this region and 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 that company operated margins went down, our recasted fuel margins was at $0.096 which is very, very consistent if you look back for the last 3 years where we averaged $0.093 and every year is always above $0.09 So the point 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.
Great. Thank you for all the color.
Thank you.
Our next question comes from the line of Sharon Lu from Wells Fargo Securities. Please proceed with your question.
Hi, good morning. 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 Q2 or should the Q2 be clean quarters?
Sharon, this is Tom. No, we do expect cost. 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 CALs into the commission agent model.
Okay. And then I guess in terms of the tax payments 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 $2,200,000,000 in bonds was the right amount to have and then this will leave us less than the 3rd drawn on our $1,500,000,000 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 happens in the fall.
Okay. And the size you're thinking about keeping the same size in terms of the revolver capacity? Yes. Okay, great. Thank
Our next question comes from the line of Chris Sighinolfi from Jefferies. Please proceed with your question.
Hi, good morning guys. Thanks for taking my questions. First, I just want to clarify something Scott had to offer at the end of the prepared remarks, just to make sure I'm understanding it correctly. So the 2,200,000,000 gallon a year initial supply agreement with 711, did I understand that that formally commenced on April 1 and it will step up each of the next 4 April or 3 April, but some volume was delivered in the Q1 sort of under a similar agreement?
Yes. Just one correction. The initial volume that started on April 1 is right around 2,000,000,000 dollars So Scott referenced approximately 500,000,000 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 Q1, 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 Scott referenced?
Chris, I think the Q1 was a stop period. So the take or pay commences on April 1, like we've all 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 Q1. I think if you want to get ultra precise, we haven't gone to that ultra precise 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 711 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 $2,000,000,000 Would that be what we should expect in the Q1 or is it ratable every quarter is the same amount take
or pay?
It's an annual contract.
Okay. Meaning seasonality.
Right. The take or pay, it's not yes. 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 supported in West Texas. I was just curious on the wholesale front, what they might have showcased for the rest of your operations? You mentioned that the retail side that you divested, you saw some margin pressure in the first quarter?
Yes, 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 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 on 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 me there? That's all I'm trying to get after.
Yes. And 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 two 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 switch over for the 711 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 wholesale business on a year over year, it was down, contribute to those two 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 a $8,000,000,000 plus type of business.
Okay. And then Joe, if I could, 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 is 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, is 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 influenced. So in 2017, you saw enough of those factors to counteract the 0.30 dollars 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.
Okay. Thanks, Carla. That's really helpful. Tom, I have just one question left and that's that you had provided us sort of a snapshot balance sheet on Page 11 or Slide 11 of the deck. And it shows the date of March 9 sorry May 9 yesterday.
So I'm just curious, is that reflective of the superior purchase that sites acquired from 711 and the 1st cash tax payment or is some of that to come? I'm just wondering if I look at the debt balance where those three items were shake out, when 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 and A activity.
Okay. Really helpful. Thanks a lot, guys.
Our next question comes from the line of Theresa Chen from Barclays. Please proceed with your question.
Hi. I just had a follow-up related to the RINs discussion. Carl, when you think about the prospect 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, 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, particularly as a wholesale fuel company, we want to supply liquid petroleum fuels that our customers want. So we're obviously in the ethanol blending 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.
Thank you. 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 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.