sun-20220331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended: March 31, 2022


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-35653

SUNOCO LP

(Exact name of registrant as specified in its charter)


Delaware						30-0740483
(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 class	Trading Symbol(s)	Name of each exchange on which registered
Common Units Representing Limited Partner Interests	SUN	New 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 83,757,333 common units representing limited partner interests and 16,410,780 Class C units representing limited partner interests outstanding at April 29, 2022.

SUNOCO LP

FORM 10-Q

TABLE OF CONTENTS


						Page
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements						1
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations						14
Item 3. Quantitative and Qualitative Disclosures about Market Risk						22
Item 4. Controls and Procedures						24

PART II – OTHER INFORMATION
Item 1. Legal Proceedings						25
Item 1A. Risk Factors						25
Item 6. Exhibits						25

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

SUNOCO LP

CONSOLIDATED BALANCE SHEETS

(Dollars in millions)

(unaudited)


	March 31, 2022		December 31, 2021
Assets
Current assets:
Cash and cash equivalents	$	104	$	25

Accounts receivable, net	725		526
Receivables from affiliates	13		12
Inventories, net	704		534
Other current assets	478		95

Total current assets	2,024		1,192

Property and equipment	2,572		2,581
Accumulated depreciation	(943)		(914)
Property and equipment, net	1,629		1,667
Other assets:
Finance lease right-of-use assets, net	9		9
Operating lease right-of-use assets, net	517		517
Goodwill	1,568		1,568

Intangible assets	902		902
Accumulated amortization	(372)		(360)
Intangible assets, net	530		542
Other noncurrent assets	196		188
Investment in unconsolidated affiliate	132		132

Total assets	$	6,605	$	5,815
Liabilities and Equity
Current liabilities:
Accounts payable	$	705	$	515
Accounts payable to affiliates	77		59

Accrued expenses and other current liabilities	275		291
Operating lease current liabilities	19		19
Current maturities of long-term debt	—		6

Total current liabilities	1,076		890
Operating lease noncurrent liabilities	522		521
Revolving line of credit	1,012		581
Long-term debt, net	2,668		2,668
Advances from affiliates	121		126
Deferred tax liability	155		114
Other noncurrent liabilities	107		104
Total liabilities	5,661		5,004
Commitments and contingencies (Note 10)
Equity:
Limited partners:
Common unitholders (83,688,670 units issued and outstanding as of March 31, 2022 and 83,670,950 units issued and outstanding as of December 31, 2021)	944		811
Class C unitholders - held by subsidiaries (16,410,780 units issued and outstanding as of March 31, 2022 and December 31, 2021)	—		—
Total equity	944		811
Total liabilities and equity	$	6,605	$	5,815

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

SUNOCO LP

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(Dollars in millions, except per unit data)

(unaudited)


	Three Months Ended March 31,
	2022		2021
Revenues:
Motor fuel sales	$	5,277	$	3,363
Non motor fuel sales	90		73
Lease income	35		35
Total revenues	5,402		3,471
Cost of sales and operating expenses:
Cost of sales	4,972		3,120
General and administrative	27		24
Other operating	81		61
Lease expense	16		15

Depreciation, amortization and accretion	47		47
Total cost of sales and operating expenses	5,143		3,267
Operating income	259		204
Other income (expense):
Interest expense, net	(41)		(41)

Equity in earnings of unconsolidated affiliate	1		1
Loss on extinguishment of debt	—		(7)
Income before income taxes	219		157
Income tax expense	3		3
Net income and comprehensive income	$	216	$	154

Net income per common unit:
Basic	$	2.35	$	1.61
Diluted	$	2.32	$	1.60

Weighted average common units outstanding:
Basic	83,682,902		83,342,828
Diluted	84,729,202		84,141,261

Cash distributions per unit	$	0.8255	$	0.8255

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

SUNOCO LP

CONSOLIDATED STATEMENTS OF EQUITY

(Dollars in millions)

(unaudited)



Balance at December 31, 2021	$	811
Cash distribution to unitholders	(88)
Unit-based compensation	5

Net income	216
Balance at March 31, 2022	$	944

Balance at December 31, 2020	$	632
Cash distribution to unitholders	(88)
Unit-based compensation	4
Other	(4)
Net income	154
Balance at March 31, 2021	$	698

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

SUNOCO LP

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in millions)

(unaudited)


	Three Months Ended March 31,
	2022		2021
Cash flows from operating activities:
Net income	$	216	$	154
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and accretion	47		47
Amortization of deferred financing fees	2		1

Loss on extinguishment of debt	—		7

Non-cash unit-based compensation expense	5		4
Deferred income tax	41		(1)
Inventory valuation adjustment	(120)		(100)
Equity in earnings of unconsolidated affiliate	(1)		(1)
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable, net	(199)		(115)
Receivables from affiliates	(1)		—
Inventories, net	(50)		52
Other assets	(134)		—
Accounts payable	215		168
Accounts payable to affiliates	18		(17)
Accrued expenses and other current liabilities	(16)		(43)
Other noncurrent liabilities	—		(4)
Net cash provided by operating activities	23		152
Cash flows from investing activities:
Capital expenditures	(26)		(18)

Deposit for acquisition	(264)		—
Distributions from unconsolidated affiliate in excess of cumulative earnings	1		3

Proceeds from disposal of property and equipment	4		6
Net cash used in investing activities	(285)		(9)
Cash flows from financing activities:

Payments on long-term debt	(2)		(438)

Revolver borrowings	1,445		472
Revolver repayments	(1,014)		(91)


Distributions to unitholders	(88)		(88)
Net cash provided by (used in) financing activities	341		(145)
Net increase (decrease) in cash and cash equivalents	79		(2)
Cash and cash equivalents at beginning of period	25		97
Cash and cash equivalents at end of period	$	104	$	95

Supplemental disclosure of non-cash investing activities:
Change in note payable to affiliate	$	(4)	$	6

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

SUNOCO LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

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 March 31, 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.

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 March 31, 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 $71 million and $76 million for the three months ended March 31, 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:


	March 31, 2022		December 31, 2021
	(in millions)
Accounts receivable, trade	$	590	$	428
Credit card receivables	50		37
Vendor receivables for rebates and branding	37		35
Other receivables	51		28
Allowance for expected credit losses	(3)		(2)
Accounts receivable, net	$	725	$	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 March 31, 2022 and December 31, 2021, the Partnership’s fuel inventory balance included lower of cost or market reserves of zero and $121 million, respectively. The fuel inventory replacement cost was $112 million higher than the fuel inventory balance as of March 31, 2022. For the three months ended March 31, 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 March 31, 2022 and 2021, the Partnership's cost of sales included favorable inventory adjustments of $120 million and $100 million, respectively.

Inventories, net, consisted of the following:


	March 31, 2022		December 31, 2021
	(in millions)
Fuel	$	694	$	526
Other	10		8
Inventories, net	$	704	$	534

5.Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consisted of the following:


	March 31, 2022		December 31, 2021
	(in millions)
Wage and other employee-related accrued expenses	$	14	$	23
Accrued tax expense	124		152
Accrued insurance	21		22
Accrued interest expense	52		31
Dealer deposits	21		21
Accrued environmental expense	7		7
Other	36		35
Total	$	275	$	291

6.Long-Term Debt

Long-term debt consisted of the following:


	March 31, 2022		December 31, 2021
	(in millions)
Sale leaseback financing obligation	$	85	$	91
2018 Revolver	1,012		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 leases	9		9
Total debt	3,706		3,281
Less: current maturities	—		6
Less: debt issuance costs	26		26
Long-term debt, net	$	3,680	$	3,249

Revolving Credit Agreement

As of March 31, 2022, the balance on the 2018 Revolver was $1.0 billion, and $6 million in standby letters of credit were outstanding. The unused availability on the 2018 Revolver at March 31, 2022 was $0.5 billion. The weighted average interest rate on

the total amount outstanding at March 31, 2022 was 2.40%. The Partnership was in compliance with all financial covenants at March 31, 2022.

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 Agreement”). The maturity date of the Credit Agreement was extended to April 7, 2027 from July 27, 2023.

Fair Value of Debt

The estimated fair value of debt is calculated using Level 2 inputs. The fair value of debt as of March 31, 2022 is estimated to be approximately $3.6 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:


	March 31, 2022		December 31, 2021
	(in millions)
Reserve for underground storage tank removal	$	80	$	79
Accrued environmental expense, long-term	12		12
Other	15		13
Total	$	107	$	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 $132 million and $132 million as of March 31, 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 March 31, 2022 and 2021.

Summary of Transactions

Related party transactions with affiliates for the three months ended March 31, 2022 and 2021 were as follows (in millions):


	Three Months Ended March 31,
	2022		2021
Motor fuel sales to affiliates	$	5	$	2
Bulk fuel purchases from affiliates	$	540	$