Sunoco LP

14. Segment Reporting

Change in Segments

Subsequent to the acquisition of NuStar, management reevaluated the Partnership’s internal reporting, which resulted in changes to the Partnership’s reportable segments. The Partnership’s consolidated financial information now includes three reportable segments: Fuel Distribution, Pipeline Systems and Terminals. The Partnership previously reported reportable segments for Fuel Distribution and Marketing and All Other. The operations within those prior reportable segments have now been reallocated among the new reportable segments, and prior periods have been adjusted accordingly to reflect the current segment presentation. In addition, certain operations within NuStar’s prior standalone reporting have been reallocated based on the post-acquisition internal reporting and management structure; therefore, segment operating results reported herein are not comparable to those previously reported by NuStar in its standalone pre-acquisition financial statements.

Description of Segments

Fuel Distribution. Our Fuel Distribution segment supplies motor fuel to independently-operated dealer stations, distributors, commission agents and other consumers. Also included in our Fuel Distribution segment is lease income from properties that we lease or sublease, as well as the Partnership’s credit card services, franchise royalties and retail operations in Hawaii and New Jersey.

Pipeline Systems. Our Pipeline Systems segment includes the operations of our refined products, crude oil and anhydrous ammonia pipelines, as well as other assets that are operated and managed on an integrated basis with our pipeline systems, including certain terminal and storage assets.

Terminals. Our Terminals segment is composed of our facilities (other than those integrated into the Pipeline Systems segment) that provide storage, handling and other services on a fee basis for refined products, crude oil, specialty chemicals, renewable fuels and other liquids. The segment also includes the operations of our transmix processing facilities.

Segment Operating Results

We report Adjusted EBITDA by segment as a measure of segment performance. We define Adjusted EBITDA as earnings before net interest expense, income taxes, depreciation, amortization and accretion expense, non-cash unit-based compensation expense, gains and losses on disposal of assets, non-cash impairment charges, losses on extinguishment of debt, unrealized gains and losses on commodity derivatives, inventory valuation adjustments, and certain other operating expenses reflected in net income that we do not believe are indicative of ongoing core operations. Inventory valuation 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 tables present financial information by segment for the three and nine months ended September 30, 2024 and 2023: