Sunoco LP Announces Third Quarter 2022 Financial and Operating Results

(1)

Adjusted EBITDA and Distributable Cash Flow, as adjusted, are non-GAAP financial measures of performance that have limitations and should not be considered as a substitute for net income. Please refer to the discussion and tables under "Reconciliations of Non-GAAP Measures" later in this news release for a discussion of our use of Adjusted EBITDA and Distributable Cash Flow, as adjusted, and a reconciliation to net income.

(2)

A reconciliation of non-GAAP forward looking information to corresponding GAAP measures cannot be provided without unreasonable efforts due to the inherent difficulty in quantifying certain amounts due to a variety of factors, including the unpredictability of commodity price movements and future charges or reversals outside the normal course of business which may be significant.

SUNOCO LP
CONSOLIDATED BALANCE SHEETS
(Dollars in millions)
(unaudited)

September 30,
2022

December 31,
2021

Assets

Current assets:

Cash and cash equivalents

$                       196

$                         25

Accounts receivable, net

730

526

Receivables from affiliates

10

12

Inventories, net

776

534

Other current assets

151

95

Total current assets

1,863

1,192

Property and equipment

2,675

2,581

Accumulated depreciation

(1,007)

(914)

Property and equipment, net

1,668

1,667

Other assets:

Finance lease right-of-use assets, net

9

9

Operating lease right-of-use assets, net

514

517

Goodwill

1,588

1,568

Intangible assets

990

902

Accumulated amortization

(396)

(360)

Intangible assets, net

594

542

Other noncurrent assets

209

188

Investment in unconsolidated affiliate

129

132

Total assets

$                    6,574

$                    5,815

Liabilities and equity

Current liabilities:

Accounts payable

$                       868

$                       515

Accounts payable to affiliates

110

59

Accrued expenses and other current liabilities

326

291

Operating lease current liabilities

19

19

Current maturities of long-term debt

—

6

Total current liabilities

1,323

890

Operating lease noncurrent liabilities

519

521

Revolving line of credit

704

581

Long-term debt, net

2,670

2,668

Advances from affiliates

117

126

Deferred tax liability

151

114

Other noncurrent liabilities

112

104

Total liabilities

5,596

5,004

Commitments and contingencies

Equity:

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 equity

978

811

Total liabilities and equity

$                    6,574

$                    5,815

SUNOCO LP
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(Dollars in millions, except per unit data)
(unaudited)

Three Months Ended September 30,

Nine Months Ended September 30,

2022

2021

2022

2021

Revenues:

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 revenues

6,594

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

(3)

(4)

(8)

(12)

Depreciation, amortization and accretion

55

45

151

135

Total cost of sales and operating expenses

6,444

4,626

19,229

12,069

Operating income

150

153

582

573

Other income (expense):

Interest expense, net

(49)

(40)

(135)

(124)

Equity in earnings of unconsolidated affiliate

1

1

3

3

Loss on extinguishment of debt

—

—

—

(7)

Income before income taxes

102

114

450

445

Income tax expense

19

10

30

21

Net income and comprehensive income

$                    83

$                 104

$                 420

$                 424

Net income per common unit:

Basic

$                 0.76

$                1.01

$                4.32

$                4.38

Diluted

$                 0.75

$                1.00

$                4.27

$                4.33

Weighted average common units outstanding:

Basic

83,763,064

83,352,123

83,728,153

83,348,540

Diluted

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

Three Months Ended September 30,

2022

2021

Fuel Distribution
and Marketing

All Other

Total

Fuel Distribution
and Marketing

All Other

Total

(dollars and gallons in millions, except gross profit per gallon)

Revenues:

Motor fuel sales

$           6,270

$           198

$       6,468

$          4,499

$           167

$       4,666

Non motor fuel sales

29

61

90

21

58

79

Lease income

35

1

36

33

1

34

Total revenues

$           6,334

$           260

$       6,594

$          4,553

$           226

$       4,779

Cost of Sales:

Motor fuel sales

$           6,062

$           170

$       6,232

$          4,283

$           152

$       4,435

Non motor fuel sales

2

27

29

9

28

37

Lease

—

—

—

—

—

—

Total cost of sales

$          6,064

$          197

$       6,261

$          4,292

$           180

$       4,472

Net income and comprehensive income

$            83

$          104

Adjusted EBITDA (1)

$              250

$             26

$          276

$             186

$             12

$          198

Operating Data:

Total motor fuel gallons sold

1,986

1,971

Motor fuel gross profit cents per gallon (2)

           13.9 ¢

           11.3 ¢

Three Months Ended September 30,

2022

2021

(in millions)

Segment Adjusted EBITDA

Fuel distribution and marketing

$                 250

$                 186

All other

26

12

Consolidated Adjusted EBITDA

276

198

Depreciation, amortization and accretion

(55)

(45)

Interest expense, net

(49)

(40)

Non-cash unit-based compensation expense

(4)

(5)

Gain on disposal of assets

3

4

Unrealized loss on commodity derivatives

(23)

(2)

Inventory adjustments

(40)

9

Equity in earnings of unconsolidated affiliate

1

1

Adjusted EBITDA related to unconsolidated affiliate

(2)

(3)

Other non-cash adjustments

(5)

(3)

Income tax expense

(19)

(10)

Net income and comprehensive income

$                   83

$                 104

Adjusted EBITDA (1)

$                 276

$                 198

Adjusted EBITDA related to unconsolidated affiliate

(2)

(3)

Distributable cash flow from unconsolidated affiliate

2

3

Cash interest expense

(46)

(39)

Current income tax expense

(24)

(4)

Maintenance capital expenditures

(11)

(10)

Distributable Cash Flow

195

145

Transaction-related expenses

1

1

Distributable Cash Flow, as adjusted (1)

$                 196

$                 146

Distributions to Partners:

Limited Partners

$                   69

$                   69

General Partners

18

18

Total distributions to be paid to partners

$                   87

$                   87

Common Units outstanding - end of period

83.8

83.4

Distribution coverage ratio (3)

2.24x

1.68x

(1) Adjusted EBITDA is defined as earnings before net interest expense, income taxes, depreciation, amortization and accretion expense, allocated non-cash compensation expense, unrealized gains and losses on commodity derivatives and inventory adjustments, and certain other operating expenses reflected in net income that we do not believe are indicative of ongoing core operations, such as gain or loss on disposal of assets and non-cash impairment charges. We define Distributable Cash Flow, as adjusted, as Adjusted EBITDA less cash interest expense, including the accrual of interest expense related to our long-term debt which is paid on a semi-annual basis, current income tax expense, maintenance capital expenditures and other non-cash adjustments.

We believe Adjusted EBITDA and Distributable Cash Flow, as adjusted, are useful to investors in evaluating our operating performance because:

• Adjusted EBITDA is used as a performance measure under our revolving credit facility;

• securities analysts and other interested parties use such metrics as measures of financial performance, ability to make distributions to our unitholders and debt service capabilities;

• our management uses them for internal planning purposes, including aspects of our consolidated operating budget, and capital expenditures; and

• Distributable Cash Flow, as adjusted, provides useful information to investors as it is a widely accepted financial indicator used by investors to compare partnership performance, and as it provides investors an enhanced perspective of the operating performance of our assets and the cash our business is generating.

Adjusted EBITDA and Distributable Cash Flow, as adjusted, are not recognized terms under GAAP and do not purport to be alternatives to net income (loss) as measures of operating performance or to cash flows from operating activities as a measure of liquidity. Adjusted EBITDA and Distributable Cash Flow, as adjusted, have limitations as analytical tools, and one should not consider them in isolation or as substitutes for analysis of our results as reported under GAAP. Some of these limitations include:

• they do not reflect our total cash expenditures, or future requirements for capital expenditures or contractual commitments;SUN

• they do not reflect changes in, or cash requirements for, working capital;

• they do not reflect interest expense or the cash requirements necessary to service interest or principal payments on our revolving credit facility or senior notes;

• although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and Adjusted EBITDA does not reflect cash requirements for such replacements; and

• as not all companies use identical calculations, our presentation of Adjusted EBITDA and Distributable Cash Flow, as adjusted, may not be comparable to similarly titled measures of other companies.

Adjusted EBITDA reflects amounts for the unconsolidated affiliate based on the same recognition and measurement methods used to record equity in earnings of unconsolidated affiliate. Adjusted EBITDA related to unconsolidated affiliate excludes the same items with respect to the unconsolidated affiliate as those excluded from the calculation of Adjusted EBITDA, such as interest, taxes, depreciation, depletion, amortization and other non-cash items. Although these amounts are excluded from Adjusted EBITDA related to unconsolidated affiliate, such exclusion should not be understood to imply that we have control over the operations and resulting revenues and expenses of such affiliate. We do not control our unconsolidated affiliate; therefore, we do not control the earnings or cash flows of such affiliate. The use of Adjusted EBITDA or Adjusted EBITDA related to unconsolidated affiliate as an analytical tool should be limited accordingly. 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.

(2) Excludes the impact of inventory adjustments consistent with the definition of Adjusted EBITDA.

(3) The distribution coverage ratio for a period is calculated as the non-GAAP measure of Distributable Cash Flow, as adjusted, divided by distributions expected to be paid to partners of Sunoco LP in respect of such a period.