10-Q 1 sun-20220930.htm 10-Q sun-20220930

Washington, D.C. 20549

For the Quarterly Period Ended: September 30, 2022
For the transition period from             to
Commission File Number: 001-35653
(Exact name of registrant as specified in its charter) 
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification Number)
8111 Westchester Drive, Suite 400, Dallas, Texas 75225
(Address of principal executive offices, including zip code)
(214) 981-0700
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Units Representing Limited Partner InterestsSUNNew York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ý    No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ý    No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company
Emerging Growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.):    Yes       No  ý
The registrant had 83,763,300 common units representing limited partner interests and 16,410,780 Class C units representing limited partner interests outstanding at October 28, 2022.



Item 1. Financial Statements
(Dollars in millions)
September 30,
December 31,
Current assets:
Cash and cash equivalents$196 $25 
Accounts receivable, net730 526 
Receivables from affiliates10 12 
Inventories, net776 534 
Other current assets151 95 
Total current assets1,863 1,192 
Property and equipment2,675 2,581 
Accumulated depreciation(1,007)(914)
Property and equipment, net1,668 1,667 
Other assets:
Finance lease right-of-use assets, net9 9 
Operating lease right-of-use assets, net514 517 
Goodwill1,588 1,568 
Intangible assets990 902 
Accumulated amortization(396)(360)
Intangible assets, net594 542 
Other noncurrent assets209 188 
Investment in unconsolidated affiliate129 132 
Total assets$6,574 $5,815 
Liabilities and equity
Current liabilities:
Accounts payable$868 $515 
Accounts payable to affiliates110 59 
Accrued expenses and other current liabilities326 291 
Operating lease current liabilities19 19 
Current maturities of long-term debt 6 
Total current liabilities1,323 890 
Operating lease noncurrent liabilities519 521 
Revolving line of credit704 581 
Long-term debt, net2,670 2,668 
Advances from affiliates117 126 
Deferred tax liability151 114 
Other noncurrent liabilities112 104 
Total liabilities5,596 5,004 
Commitments and contingencies (Note 10)
Limited partners:
Common unitholders
(83,763,300 units issued and outstanding as of September 30, 2022 and
83,670,950 units issued and outstanding as of December 31, 2021)
978 811 
Class C unitholders - held by subsidiaries
(16,410,780 units issued and outstanding as of September 30, 2022 and
December 31, 2021)
Total equity978 811 
Total liabilities and equity$6,574 $5,815 
The accompanying notes are an integral part of these consolidated financial statements.

(Dollars in millions, except per unit data)
Three Months Ended September 30,Nine Months Ended September 30,
Motor fuel sales
$6,468 $4,666 $19,423 $12,321 
Non motor fuel sales
90 79 282 218 
Lease income
36 34 106 103 
Total revenues6,594 4,779 19,811 12,642 
Cost of sales and operating expenses:
Cost of sales
6,261 4,472 18,703 11,631 
General and administrative
29 28 86 79 
Other operating
86 70 250 192 
Lease expense
16 15 47 44 
Gain on disposal of assets
Depreciation, amortization and accretion
55 45 151 135 
Total cost of sales and operating expenses6,444 4,626 19,229 12,069 
Operating income150 153 582 573 
Other income (expense):
Interest expense, net(49)(40)(135)(124)
Equity in earnings of unconsolidated affiliate1 1 3 3 
Loss on extinguishment of debt   (7)
Income before income taxes102 114 450 445 
Income tax expense19 10 30 21 
Net income and comprehensive income$83 $104 $420 $424 
Net income per common unit:
$0.76 $1.01 $4.32 $4.38 
$0.75 $1.00 $4.27 $4.33 
Weighted average common units outstanding:
83,763,064 83,352,123 83,728,153 83,348,540 
84,831,037 84,549,277 84,769,526 84,364,321 
Cash distributions per common unit$0.8255 $0.8255 $2.4765 $2.4765 

The accompanying notes are an integral part of these consolidated financial statements.

(Dollars in millions)
Balance at December 31, 2021$811 
Cash distribution to unitholders
Unit-based compensation
Net income
Balance at March 31, 2022944 
Cash distribution to unitholders
Unit-based compensation
Net income
Balance at June 30, 2022980 
Cash distribution to unitholders
Unit-based compensation
Net income
Balance at September 30, 2022$978 
Balance at December 31, 2020$632 
Cash distribution to unitholders
Unit-based compensation
Net income
Balance at March 31, 2021698 
Cash distribution to unitholders
Unit-based compensation
Net income
Balance at June 30, 2021779 
Cash distribution to unitholders
Unit-based compensation
Net income
Balance at September 30, 2021$800 
The accompanying notes are an integral part of these consolidated financial statements.

(Dollars in millions)
Nine Months Ended September 30,
Cash flows from operating activities:
Net income$420 $424 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and accretion151 135 
Amortization of deferred financing fees3 6 
Gain on disposal of assets (8)(12)
Loss on extinguishment of debt  7 
Non-cash unit-based compensation expense12 12 
Deferred income tax38 3 
Inventory valuation adjustment(81)(168)
Equity in earnings of unconsolidated affiliate(3)(3)
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable, net(165)(245)
Receivables from affiliates2 2 
Inventories, net(53)57 
Other assets(36)(79)
Accounts payable292 379 
Accounts payable to affiliates51 (16)
Accrued expenses and other current liabilities20 24 
Other noncurrent liabilities(3)(14)
Net cash provided by operating activities640 512 
Cash flows from investing activities:
Capital expenditures(97)(92)
Distributions from unconsolidated affiliate in excess of cumulative earnings5 6 
Cash paid for acquisition, net of cash acquired(252)(6)
Proceeds from disposal of property and equipment18 27 
Net cash used in investing activities(326)(65)
Cash flows from financing activities:
Payments on long-term debt(1)(442)
Revolver borrowings2,995 878 
Revolver repayments(2,872)(628)
Distributions to unitholders(265)(264)
Net cash used in financing activities(143)(456)
Net increase (decrease) in cash and cash equivalents171 (9)
Cash and cash equivalents at beginning of period25 97 
Cash and cash equivalents at end of period$196 $88 
Supplemental disclosure of non-cash investing activities:
Change in note payable to affiliate$(6)$5 

The accompanying notes are an integral part of these consolidated financial statements.

1.Organization and Principles of Consolidation
As used in this document, the terms “Partnership,” “SUN,” “we,” “us,” and “our” should be understood to refer to Sunoco LP and our consolidated subsidiaries, unless the context clearly indicates otherwise.
We are a Delaware master limited partnership. We are managed by our general partner, Sunoco GP LLC (our “General Partner”), which is owned by Energy Transfer LP (“Energy Transfer”). As of September 30, 2022, Energy Transfer owned 100% of the limited liability company interests in our General Partner, 28,463,967 of our common units, which constitutes a 28.4% limited partner interest in us, and all of our incentive distribution rights ("IDRs").
The consolidated financial statements are composed of Sunoco LP, a publicly traded Delaware limited partnership, and its wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.
On April 1, 2022, we completed the previously announced acquisition of a transmix processing and terminal facility in Huntington, Indiana from Gladieux Capital Partners, LLC for $252 million, net of cash acquired. Management, with the assistance of a third party valuation firm, has determined the fair value of assets and liabilities at the date of the acquisition. Goodwill acquired in connection with the acquisition is deductible for tax purposes.
April 1, 2022
Other current assets56 
Property and equipment73 
Intangible assets98 
Current liabilities(88)
Net assets267 
Cash acquired(15)
Total cash consideration, net of cash acquired$252 
Certain items have been reclassified for presentation purposes to conform to the accounting policies of the consolidated entity. These reclassifications had no material impact on operating income, net income and comprehensive income, the balance sheets or statements of cash flows.
2.Summary of Significant Accounting Policies
Interim Financial Statements
The accompanying interim consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). Pursuant to Regulation S-X, certain information and disclosures normally included in the annual financial statements have been condensed or omitted. The interim consolidated financial statements and notes included herein should be read in conjunction with the consolidated financial statements and notes included in our Annual Report on Form 10-K for the year ended December 31, 2021 filed with the Securities and Exchange Commission ("SEC") on February 18, 2022.
Significant Accounting Policies
As of September 30, 2022, there have been no changes in the Partnership's significant accounting policies from those described in the Annual Report on Form 10-K for the year ended December 31, 2021 filed with the SEC on February 18, 2022.
Motor Fuel and Sales Taxes
Certain motor fuel and sales taxes are collected from customers and remitted to governmental agencies either directly by the Partnership or through suppliers. The Partnership’s accounting policy for wholesale direct sales to dealers, distributors and commercial customers is to exclude the collected motor fuel tax from sales and cost of sales.
For retail locations where the Partnership holds inventory, including commission agent locations, motor fuel sales and motor fuel cost of sales include motor fuel taxes. Such amounts were $76 million and $88 million for the three months ended September 30, 2022 and 2021, respectively, and $219 million and $252 million for the nine months ended September 30, 2022 and 2021,

respectively. Merchandise sales and cost of merchandise sales are reported net of sales tax in the consolidated statements of operations and comprehensive income.
3.Accounts Receivable, net
Accounts receivable, net, consisted of the following:
September 30,
December 31,
(in millions)
Accounts receivable, trade$587 $428 
Credit card receivables45 37 
Vendor receivables for rebates and branding42 35 
Other receivables57 28 
Allowance for expected credit losses(1)(2)
Accounts receivable, net$730 $526 
4.Inventories, net 
Fuel inventories are stated at the lower of cost or market using the last-in-first-out (“LIFO”) method. As of September 30, 2022 and December 31, 2021, the Partnership’s fuel inventory balance included lower of cost or market reserves of $40 million and $121 million, respectively. The fuel inventory replacement cost was $6 million higher than the fuel inventory balance as of September 30, 2022. For the three and nine months ended September 30, 2022 and 2021, the Partnership’s consolidated statements of operations and comprehensive income did not include any material amounts of income from the liquidation of LIFO fuel inventory. For the three months ended September 30, 2022 and 2021, the Partnership’s cost of sales included unfavorable and favorable inventory adjustments of $40 million and $9 million, respectively, and for the nine months ended September 30, 2022 and 2021, the Partnership’s cost of sales included favorable inventory adjustments of $81 million and $168 million, respectively.
Inventories, net, consisted of the following:
September 30,
December 31,
(in millions)
Fuel$765 $526 
Other11 8 
Inventories, net$776 $534 
5.Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consisted of the following:
September 30,
December 31,
(in millions)
Wage and other employee-related accrued expenses$26 $23 
Accrued tax expense162 152 
Accrued insurance23 22 
Accrued interest expense51 31 
Dealer deposits23 21 
Accrued environmental expense7 7 
Other34 35 
Total$326 $291 

6.Long-Term Debt 
Long-term debt consisted of the following:
September 30,
December 31,
(in millions)
Sale leaseback financing obligation $85 $91 
Credit Facility704 581 
6.000% Senior Notes Due 2027
600 600 
5.875% Senior Notes Due 2028
400 400 
4.500% Senior Notes Due 2029
800 800 
4.500% Senior Notes Due 2030
800 800 
Finance leases9 9 
Total debt3,398 3,281 
Less: current maturities 6 
Less: debt issuance costs24 26 
Long-term debt, net$3,374 $3,249 
Revolving Credit Agreement
On April 7, 2022, we entered into a Second Amended and Restated Credit Agreement with Bank of America, N.A., as Administrative Agent, Collateral Agent, Swingline Lender and a letter of credit issuer (the “Credit Facility”). The Credit Facility amended and restated the former revolving credit facility entered into on July 27, 2018. The Credit Facility is a $1.50 billion revolving credit facility, expiring April 7, 2027 (which date may be extended in accordance with the terms of the Credit Facility). The Credit Facility can be increased from time to time upon our written request, subject to certain conditions, up to an additional $500 million.
As of September 30, 2022, the balance on the Credit Facility was $704 million, and $7 million in standby letters of credit were outstanding. The unused availability on the Credit Facility at September 30, 2022 was $0.8 billion. The weighted average interest rate on the total amount outstanding at September 30, 2022 was 5.11%. The Partnership was in compliance with all financial covenants at September 30, 2022.
Fair Value of Debt
The estimated fair value of debt is calculated using Level 2 inputs. The fair value of debt as of September 30, 2022 is estimated to be approximately $3.0 billion, based on outstanding balances as of the end of the period using current interest rates for similar securities. 
7.Other Noncurrent Liabilities
Other noncurrent liabilities consisted of the following:
September 30,
December 31,
 (in millions)
Asset retirement obligations$82 $79 
Accrued environmental expense, long-term11 12 
Other19 13 
Total$112 $104 
8.Related-Party Transactions
We are party to fee-based commercial agreements with various affiliates of Energy Transfer for pipeline, terminalling and storage services. We also have agreements with subsidiaries of Energy Transfer for the purchase and sale of fuel.
Our investment in the J.C. Nolan pipeline (a joint venture with Energy Transfer) was $129 million and $132 million as of September 30, 2022 and December 31, 2021, respectively. In addition, we recorded income on the unconsolidated joint venture of $1 million for each of the three months ended September 30, 2022 and 2021 and $3 million for each of the nine months ended September 30, 2022 and 2021.

Summary of Transactions
Related party transactions with affiliates for the three and nine months ended September 30, 2022 and 2021 were as follows (in millions):
Three Months Ended September 30,Nine Months Ended September 30,
Motor fuel sales to affiliates$16 $7 $44 $16 
Bulk fuel purchases from affiliates$458 $461 $1,701 $1,213 
Significant affiliate balances and activity related to the consolidated balance sheets are as follows:
Net advances from affiliates were $117 million and $126 million as of September 30, 2022 and December 31, 2021, respectively, related to treasury services agreements with Energy Transfer.
Net accounts receivable from affiliates were $10 million and $12 million as of September 30, 2022 and December 31, 2021, respectively, which were primarily related to motor fuel sales to affiliates.
Net accounts payable to affiliates were $110 million and $59 million as of September 30, 2022 and December 31, 2021, respectively, attributable to operational expenses and bulk fuel purchases.
Disaggregation of Revenue
We operate our business in two primary segments, Fuel Distribution and Marketing and All Other. We disaggregate revenue within the segments by channels.
The following table depicts the disaggregation of revenue by channel within each segment:
Three Months Ended September 30,Nine Months Ended September 30,
(in millions)
Fuel Distribution and Marketing Segment
Distributor$2,757 $2,328 $8,510 $6,066 
Dealer1,211 983 3,692 2,565 
Unbranded wholesale1,859 804 5,315 2,216 
Commission agent443 384 1,361 1,043 
Non motor fuel sales29 21 111 51 
Lease income35 33 99 98 
Total6,334 4,553 19,088 12,039 
All Other Segment
Motor fuel
198 167 545 431 
Non motor fuel sales61 58 171 167 
Lease income1 1 7 5 
Total260 226 723 603 
Total revenue$6,594 $4,779 $19,811 $12,642 
Contract Balances with Customers
The balances of the Partnership’s contract assets and contract liabilities as of September 30, 2022 and December 31, 2021 were as follows:
September 30, 2022 December 31, 2021
(in millions)
Contract balances
Contract asset$182 $157 
Accounts receivable from contracts with customers$631 $463 
Contract liability$ $ 

Costs to Obtain or Fulfill a Contract
For the three and nine months ended September 30, 2022, the Partnership recognized $6 million and $16 million, respectively, and $6 million and $15 million for the three and nine months ended September 30, 2021, respectively, of amortization on capitalized costs incurred to obtain contracts.
10.Commitments and Contingencies
We have at various points and may in the future become involved in various legal proceedings arising out of our operations in the normal course of business. These proceedings would be subject to the uncertainties inherent in any litigation, and we regularly assess the need for accounting recognition or disclosure of these contingencies. We would expect to defend ourselves vigorously in all such matters. Based on currently available information, we believe it is unlikely that the outcome of known matters would have a material adverse impact on our financial condition, results of operations or cash flows.
Lessee Accounting
The details of the Partnership's operating and finance lease liabilities are as follows:
September 30,
Lease Term and Discount Rate20222021
Weighted-average remaining lease term (years)
Operating leases2322
Finance leases2829
Weighted-average discount rate (%)
Operating leases6 %6 %
Finance leases4 %4 %
Nine Months Ended September 30,
Other information20222021
(in millions)
Cash paid for amount included in the measurement of lease liabilities
Operating cash flows from operating leases$(37)$(37)
Operating cash flows from finance leases$ $(1)
Financing cash flows from finance leases$ $(1)
Leased assets obtained in exchange for new finance lease liabilities$ $9 
Leased assets obtained in exchange for new operating lease liabilities$16 $1 
Maturity of lease liabilities (as of September 30, 2022)
Operating leasesFinance leasesTotal
(in millions)
2022 (remainder)$12 $ $12 
202348  48 
202447  47 
202547  47 
202646  46 
Thereafter788 15 803 
Total lease payment988 15 1,003 
Less: interest450 6 456 
Present value of lease liabilities$538 $9 $547 
Lessor Accounting
The Partnership leases or subleases a portion of its real estate portfolio to third party companies as a stable source of long-term revenue. Our lessor and sublease portfolio consists mainly of operating leases with convenience store operators. At this time, most

lessor agreements contain 5-year terms with renewal options to extend and early termination options based on established terms specific to the individual agreement.
11.Income Tax Expense
As a partnership, we are generally not subject to federal income tax and most state income taxes. However, the Partnership conducts certain activities through corporate subsidiaries which are subject to federal and state income taxes.
Our effective tax rate differs from the statutory rate primarily due to Partnership earnings that are not subject to U.S. federal and most state income taxes at the Partnership level. A reconciliation of income tax expense from continuing operations at the U.S. federal statutory rate of 21% to net income tax expense is as follows:
Three Months Ended September 30,Nine Months Ended September 30,
(in millions)
Income tax expense at statutory federal rate$21 $24 $95 $94 
Partnership earnings not subject to tax(6)(18)(72)(79)
State and local tax, net of federal benefit4 2 7 5 
Other 2  1 
Net income tax expense$19 $10 $30 $21 
As of September 30, 2022, Energy Transfer and its subsidiaries owned 28,463,967 common units, which constitutes a 28.4% limited partner interest in the Partnership. As of September 30, 2022, our wholly-owned consolidated subsidiaries owned 16,410,780 Class C units representing limited partner interests in the Partnership (the “Class C Units”) and the public owned 55,299,333 common units.
Common Units
The change in our outstanding common units for the nine months ended September 30, 2022 was as follows: 
Number of Units
Number of common units at December 31, 2021
Vested phantom units exercised92,350 
Number of common units at September 30, 2022
Allocation of Net Income
Our Partnership Agreement contains provisions for the allocation of net income and loss to the unitholders. For purposes of maintaining partner capital accounts, the Partnership Agreement specifies that items of income and loss shall be allocated among the partners in accordance with their respective percentage interest. Normal allocations according to percentage interests are made after giving effect to incentive cash distributions, which are allocated 100% to Energy Transfer.

The calculation of net income allocated to common unitholders was as follows (in millions):
Three Months Ended September 30,Nine Months Ended September 30,
Attributable to Common Units
Distributions $69 $68 $207 $206 
Distributions (in excess of) less than net income(6)16 154 159 
Common unitholders' interest in net income$63 $84 $361 $365 
Cash Distributions
Our Partnership Agreement sets forth the calculation used to determine the amount and priority of cash distributions that the common unitholders receive.

Cash distributions paid or declared during 2022 were as follows:
Limited Partners
Payment DatePer Unit DistributionTotal Cash DistributionDistribution to IDR Holders
(in millions, except per unit amounts)
November 18, 2022$0.8255 $69 $18 
August 19, 2022$0.8255 $69 $18 
May 19, 2022$0.8255 $69 $18 
February 18, 2022$0.8255 $69 $18 
13.Segment Reporting
Our consolidated financial statements reflect two reportable segments, Fuel Distribution and Marketing and All Other.
We report Adjusted EBITDA by segment as a measure of segment performance. We define Adjusted EBITDA as earnings before net interest expense, income tax expense and depreciation, amortization and accretion expense, non-cash unit-based compensation expense, gains and losses on disposal of assets and non-cash impairment charges, unrealized gains and losses on commodity derivatives, inventory adjustments, and certain other operating expenses reflected in net income that we do not believe are indicative of ongoing core operations. Inventory adjustments that are excluded from the calculation of Adjusted EBITDA represent changes in lower of cost or market reserves on the Partnership's inventory. These amounts are unrealized valuation adjustments applied to fuel volumes remaining in inventory at the end of the period.
The following table presents financial information by segment for the three and nine months ended September 30, 2022 and 2021: 
Three Months Ended September 30,
Fuel Distribution and MarketingAll OtherIntercompany EliminationsTotalsFuel Distribution and MarketingAll OtherIntercompany EliminationsTotals
(in millions)
Motor fuel sales$6,270 $198 $6,468 $4,499 $167 $4,666 
Non motor fuel sales29 61 90 21 58 79 
Lease income35 1 36 33 1 34 
Intersegment sales141  (141) 117  (117) 
Total revenue$6,475 $260 $(141)$6,594 $4,670 $226 $(117)$4,779 
Net income and comprehensive income$83 $104 
Depreciation, amortization and accretion55 45 
Interest expense, net49 40 
Income tax expense19 10 
Non-cash unit-based compensation expense4 5 
Gain on disposal of assets (3)(4)
Unrealized loss on commodity derivatives23 2 
Inventory adjustments40 (9)
Equity in earnings of unconsolidated affiliate(1)(1)
Adjusted EBITDA related to unconsolidated affiliate2 3 
Other non-cash adjustments5 3 
Adjusted EBITDA$250 $26 $276 $186 $12 $198 
Capital expenditures$32 $10 $42 $34 $10 $44 
Total assets as of September 30, 2022 and
December 31, 2021, respectively
$5,575 $999 $6,574 $4,825 $990 $5,815 


Nine Months Ended September 30,
Fuel Distribution and MarketingAll OtherIntercompany EliminationsTotalsFuel Distribution and MarketingAll OtherIntercompany EliminationsTotals
(in millions)
Motor fuel sales$18,878 $545 $19,423 $11,890 $431 $12,321 
Non motor fuel sales111 171 282 51 167 218 
Lease income99 7 106 98 5 103 
Intersegment sales419  (419) 299  (299) 
Total revenue$19,507 $723 $(419)$19,811 $12,338 $603 $(299)$12,642 
Net income and
comprehensive income
$420 $424 
Depreciation, amortization and accretion151 135 
Interest expense, net135 124 
Income tax expense30 21 
Non-cash unit-based compensation expense12 12 
Gain on disposal of assets and impairment charges(8)(12)
Loss on extinguishment of debt 7 
Unrealized loss (gain) on commodity derivatives3 (5)
Inventory adjustments(81)(168)
Equity in earnings of unconsolidated affiliate(3)(