Sunoco LP

Previous wording

The following discussion and analysis of our financial condition and results of operations for the years ended December 31, 2023 and 2022 should be read in conjunction with our audited consolidated financial statements and notes to audited consolidated financial statements included elsewhere in this report. For a discussion and analysis of our financial condition and results of operations for the years ended December 31, 2022 and 2021, please see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in conjunction with our audited consolidated financial statements and notes to audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2022 filed with the SEC on February 17, 2023.

Current wording

The following discussion and analysis of our financial condition and results of operations for the years ended December 31, 2024 and 2023 should be read in conjunction with our audited consolidated financial statements and notes to audited consolidated financial statements included elsewhere in this report.

Previous wording

On January 22, 2024, we entered into a definitive agreement with NuStar Energy L.P. (“NuStar”) to acquire NuStar in an all-equity transaction valued at approximately $7.3 billion, including assumed debt. Under the terms of the agreement, NuStar common unitholders will receive 0.400 Sunoco common units for each NuStar common unit. NuStar has approximately 9,500 miles of pipeline and 63 terminal and storage facilities that store and distribute crude oil, refined products, renewable fuels, ammonia and specialty liquids. The transaction is expected to close in the second quarter of 2024, subject to customary closing conditions.

Current wording

On May 3, 2024, we completed the acquisition of 100% of the common units of NuStar Energy L.P. (“NuStar”). Under the terms of the agreement, NuStar common unitholders received 0.400 SUN common units for each NuStar common unit. In connection with the acquisition, we issued approximately 51.5 million common units, which had a fair value of approximately $2.85 billion, assumed debt totaling approximately $3.5 billion, including approximately $56 million of lease related financing obligations, and assumed preferred units with a fair value of approximately $800 million. Subsequent to the closing of the NuStar acquisition, the Partnership redeemed all outstanding NuStar preferred units totaling $784 million, redeemed NuStar's subordinated notes totaling $403 million and repaid and terminated the NuStar credit facility totaling $455 million. NuStar has approximately 9,500 miles of pipeline and 63 terminal and storage facilities that store and distribute crude oil, refined products, renewable fuels, ammonia and specialty liquids. The acquisition is expected to diversify the Partnership’s business, increase scale and provide vertical integration, as well as improving the Partnership’s credit profile and enhancing growth.

Previous wording

On January 11, 2024, we announced that we will acquire liquid fuels terminals in Amsterdam, Netherlands and Bantry Bay, Ireland from Zenith Energy for €170 million including working capital. The transaction is expected to close in the first quarter of 2024, subject to customary closing conditions.

Current wording

On March 13, 2024, we completed the acquisition of liquid fuels terminals in Amsterdam, Netherlands and Bantry Bay, Ireland from Zenith Energy for €170 million ($185 million), including working capital. The acquisition is expected to supply optimization for the Partnership’s existing East Coast business and continues its focus on growing its portfolio of stable midstream income.

Previous wording

On January 11, 2024, we entered into a definitive agreement with 7-Eleven, Inc. to sell 204 convenience stores located in West Texas, New Mexico, and Oklahoma for approximately $1.0 billion, including customary adjustments for fuel and merchandise inventory. As part of the sale, SUN will also amend its existing take-or-pay fuel supply agreement with 7-Eleven, Inc. to incorporate additional fuel gross profit. The transaction is expected to close promptly upon receipt of regulatory approvals and satisfaction of customary closing conditions.

Current wording

On April 16, 2024, we completed the sale of 204 convenience stores located in West Texas, New Mexico and Oklahoma to 7-Eleven, Inc. for approximately $1.0 billion, including customary adjustments for fuel and merchandise inventory. As part of the sale, SUN also amended its existing take-or-pay fuel supply agreement with 7-Eleven, Inc. to incorporate additional fuel gross profit.

Previous wording

•Adjusted EBITDA. Adjusted EBITDA, as used throughout this document, is defined as earnings before net interest expense, income taxes, depreciation, amortization and accretion expense, allocated non-cash unit-based compensation expense, 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, such as gain or loss on disposal of assets and non-cash impairment charges. 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.

Current wording

Adjusted EBITDA, as used throughout this document, is defined as earnings before net interest expense, income taxes, depreciation, amortization and accretion expense, allocated non-cash unit-based compensation expense, 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, such as gain or loss on disposal of assets and non-cash impairment charges. 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.

Previous wording

Adjusted EBITDA is a non-GAAP financial measure. For a reconciliation of Adjusted EBITDA to the most directly comparable financial measure calculated and presented in accordance with GAAP, read “Key Operating Metrics and Results of Operations” below.

Current wording

Adjusted EBITDA is a non-GAAP financial measure. For a reconciliation of Adjusted EBITDA to the most directly comparable financial measure calculated and presented in accordance with GAAP, read “Results of Operations” below.

Previous wording

•it does not reflect interest expense or the cash requirements necessary to service interest or principal payments on our Credit Facility;

Current wording

•it does not reflect interest expense or the cash requirements necessary to service interest or principal payments on our Credit Facility or senior notes;

Previous wording

Adjusted EBITDA reflects amounts for unconsolidated affiliates based on the same recognition and measurement methods used to record equity in earnings of unconsolidated affiliates. Adjusted EBITDA related to unconsolidated affiliates excludes the same items with respect to the unconsolidated affiliates 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 affiliates, 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 affiliates; therefore, we do not control the earnings or cash flows of such affiliates. The use of Adjusted EBITDA or Adjusted EBITDA related to unconsolidated affiliates as an analytical tool should be limited accordingly.

Current wording

Adjusted EBITDA reflects amounts for unconsolidated affiliates based on the same recognition and measurement methods used to record equity in earnings of unconsolidated affiliates. Adjusted EBITDA related to unconsolidated affiliates excludes the same items with respect to the unconsolidated affiliates as those excluded from the calculation of Adjusted EBITDA, such as interest, taxes, depreciation, amortization and accretion and other non-cash items. Although these amounts are excluded from Adjusted EBITDA related to unconsolidated affiliates, 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 affiliates; therefore, we do not control the earnings or cash flows of such affiliates. The use of Adjusted EBITDA or Adjusted EBITDA related to unconsolidated affiliates as an analytical tool should be limited accordingly.

Previous wording

Interest Expense. Interest expense was $217 million in 2023, an increase of $35 million from 2022. This increase was primarily attributable to higher interest rates on floating rate debt for the respective periods.

Current wording

Interest Expense. Interest expense was $391 million in 2024, an increase of $174 million from 2023. This increase was primarily attributable to an increase in average total long-term debt, including debt assumed in the NuStar acquisition.

Previous wording

Unrealized (Gain) Loss on Commodity Derivatives. The unrealized gains and losses on our commodity derivatives represent the changes in fair value of our commodity derivatives. The change in unrealized gains and losses between periods was impacted by the notional amounts and commodity price changes on our commodity derivatives. Additional information on commodity derivatives is included in “Item 7A. Quantitative and Qualitative Disclosures about Market Risk” below.

Current wording

Unrealized (Gains) Losses on Commodity Derivatives. The unrealized gains and losses on our commodity derivatives represent the changes in fair value of our commodity derivatives. The change in unrealized gains and losses between periods was impacted by the notional amounts and commodity price changes on our commodity derivatives. Additional information on commodity derivatives is included in “Item 7A. Quantitative and Qualitative Disclosures about Market Risk” below.

Previous wording

Inventory Adjustments. Inventory adjustments 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. For 2023, a decline in fuel prices caused lower of cost or market reserve requirements to increase by $114 million, which reduced net income. For 2022, an increase in fuel prices caused lower of cost or market reserve requirements to decrease by $5 million, which increased net income.

Current wording

Inventory Valuation Adjustments. Inventory valuation adjustments represent changes in lower of cost or market reserves using the last-in, first-out method (“LIFO”) on the Partnership’s inventory. These amounts are unrealized valuation adjustments applied to fuel volumes remaining in inventory at the end of the period. For the years ended December 31, 2024 and 2023, the Partnership’s cost of sales included unfavorable inventory adjustments of $86 million and $114 million, respectively, which decreased net income for the respective periods.

Previous wording

The following table presents a reconciliation of net income to Adjusted EBITDA for the years ended December 31, 2023 and 2022:

Current wording

The following analysis of segment operating results includes a measure of segment profit. Segment profit is a non-GAAP financial measure and is presented herein to assist in the analysis of segment operating results and particularly to facilitate an understanding of the impacts that changes in sales revenues have on the segment performance measure of Segment Adjusted EBITDA. Segment profit is similar to the GAAP measure of gross profit, except that segment profit excludes charges for depreciation, amortization and accretion. The most directly comparable measure to segment profit is gross profit. The following table presents a reconciliation of segment profit to gross profit.

Previous wording

The Partnership is party to a Second Amended and Restated Credit Agreement among the Partnership, as borrower, the lenders from time to time party thereto and Bank of America, N.A., as administrative agent, collateral agent, swingline lender and a line of credit issuer (the "Credit Facility"). As of December 31, 2023, we had $29 million of cash and cash equivalents on hand and borrowing capacity of $1.084 billion under the Credit Facility. Based on our current estimates, we expect to utilize capacity under the Credit Facility, along with cash from operations, to fund our announced growth capital expenditures and working capital needs; however, we may issue debt or equity securities prior to that time as we deem prudent to provide liquidity for new capital projects or other partnership purposes.

Current wording

The Partnership is party to a Third Amended and Restated Credit Agreement among the Partnership, as borrower, the lenders from time to time party thereto and Bank of America, N.A., as administrative agent, collateral agent, swingline lender and a line of credit issuer (the "Credit Facility"). As of December 31, 2024, we had $94 million of cash and cash equivalents on hand and borrowing capacity of $1.25 billion under the Credit Facility. Based on our current estimates, we expect to utilize capacity under the Credit Facility, along with cash from operations, to fund our announced growth capital expenditures and working capital needs; however, we may issue debt or equity securities prior to that time as we deem prudent to provide liquidity for new capital projects or other partnership purposes.

Previous wording

Changes in cash flows from operating activities between periods primarily result from changes in earnings, excluding the impacts of non-cash items and changes in operating assets and liabilities (net of effects of acquisitions). Non-cash items include recurring non-cash expenses, such as depreciation, depletion and amortization expense and non-cash unit-based compensation expense. Cash flows from operating activities also differ from earnings as a result of non-cash charges that may not be recurring, such as impairment charges. Our daily working capital requirements fluctuate within each month, primarily in response to the timing of payments for motor fuels, motor fuels tax and rent.

Current wording

Changes in cash flows from operating activities between periods primarily result from changes in earnings, excluding the impacts of non-cash items and changes in operating assets and liabilities (net of effects of acquisitions and divestitures). Non-cash items include recurring non-cash expenses, such as depreciation, amortization and accretion expense and non-cash unit-based compensation expense. Cash flows from operating activities also differ from earnings as a result of non-cash charges that may not be recurring, such as impairment charges. Our daily working capital requirements fluctuate within each month, primarily in response to the timing of payments for motor fuels, motor fuels tax and rent.

Previous wording

Net cash provided by operations was $600 million and $561 million, for 2023, and 2022, respectively. The increase in cash flows provided by operations was primarily due to a $26 million net increase in cash basis net income compared to the prior year; partially offset by a decrease in net cash flow from operating assets and liabilities of $13 million compared to the prior year.

Current wording

Net cash provided by operations was $549 million and $600 million for 2024 and 2023, respectively. The increase in cash flows provided by operations was primarily due to a $28 million net increase in net income (excluding the impacts of the gain on West Texas Sale in 2024, as well as depreciation, amortization and accretion, inventory valuation adjustments and other non-cash items) compared to the prior year; partially offset by a decrease in net cash flow from operating assets and liabilities of $79 million compared to the prior year.

Previous wording

Net cash used in investing activities was $288 million and $464 million, for 2023 and 2022, respectively. Net cash used in investing activities included $111 million and $318 million of cash paid for acquisitions in 2023 and 2022, respectively. Capital expenditures were $215 million and $186 million for 2023 and 2022, respectively. Proceeds from disposal of property and equipment were $31 million and $32 million in 2023 and 2022, respectively. Distributions from unconsolidated affiliates in excess of cumulative earnings were $9 million in 2023 and $8 million in 2022.

Current wording

Net cash provided by investing activities was $477 million in 2024 and net cash used in investing activities was $288 million in 2023. Capital expenditures were $344 million and $215 million in 2024 and 2023, respectively. Net cash used in investing activities included $224 million and $111 million of cash paid for acquisitions of terminals and other assets in 2024 and 2023, respectively. In 2024, we received $27 million in cash from the NuStar acquisition and we received $987 million in cash proceeds from the West Texas Sale.

Previous wording

Net cash used in financing activities was $365 million and $40 million for 2023 and 2022, respectively.

Current wording

Net cash used in financing activities was $961 million and $365 million for 2024 and 2023, respectively.

Previous wording

• borrowed $4.1 billion and repaid $3.8 billion under the Credit Facility to fund daily operations; and

Current wording

•borrowed $2.79 billion and repaid $3.45 billion under the Credit Facility to fund daily operations;

Previous wording

• paid $359 million in distributions to our unitholders, of which $166 million was paid to Energy Transfer.

Current wording

•paid $566 million in distributions to our unitholders, of which $226 million was paid to Energy Transfer; and

Previous wording

•borrowed $3.3 billion and repaid $3.8 billion under the Credit Facility to fund daily operations; and

Current wording

•borrowed $3.3 billion and repaid $3.8 billion under the Credit Facility to fund daily operations;

Previous wording

We intend to pay cash distributions to the holders of our common units and Class C Units on a quarterly basis, to the extent we have sufficient cash from our operations after establishment of cash reserves and payment of fees and expenses, including payments to our General Partner and its affiliates. Class C unitholders receive distributions at a fixed rate equal to $0.8682 per quarter for each Class C Unit outstanding. There is no guarantee that we will pay a distribution on our units. On January 25, 2024, we declared a quarterly distribution of $0.8420 per common unit based on the results for the three months ended December 31, 2023, excluding distributions to Class C unitholders. The distribution will be approximately $71 million in the aggregate for common units and approximately $19 million with respect to IDRs, and will be paid on February 20, 2024 to all unitholders of record on February 7, 2024.

Current wording

We intend to pay cash distributions to the holders of our common units and Class C Units on a quarterly basis, to the extent we have sufficient cash from our operations after establishment of cash reserves and payment of fees and expenses, including payments to our General Partner and its affiliates. Class C unitholders receive distributions at a fixed rate equal to $0.8682 per quarter for each Class C Unit outstanding. There is no guarantee that we will pay a distribution on our units. On January 27, 2025, we declared a quarterly distribution of$0.8865 per common unit based on the results for the three months ended December 31, 2024, excluding distributions to Class C unitholders. The distribution will be approximately $121 million in the aggregate for common units and approximately $37 million with respect to IDRs, and will be paid on February 19, 2025 to unitholders of record on February 7, 2025.

Previous wording

We currently expect to spend approximately $70 million in maintenance capital and at least $200 million in growth capital for the full year 2024.

Current wording

We currently expect to spend approximately $150 million in maintenance capital and at least $400 million in growth capital for the full year 2025.

Previous wording

As of December 31, 2023, the balance on the Credit Facility was $411 million, and $5 million in standby letters of credit were outstanding. The unused availability on the Credit Facility at December 31, 2023 was $1.1 billion. The weighted average interest rate on the total amount outstanding at December 31, 2023 was 7.54%. The Partnership was in compliance with all financial covenants at December 31, 2023.

Current wording

As of December 31, 2024, the balance on the Credit Facility was $203 million, and $43 million in standby letters of credit were outstanding. The unused availability on the Credit Facility at December 31, 2024 was $1.25 billion. The weighted average interest rate on the total amount outstanding at December 31, 2024 was 6.57%. The Partnership was in compliance with all financial covenants at December 31, 2024.

Previous wording

•issued $500 million of 7.000% senior notes due 2028;

Current wording

On April 30, 2024, the Partnership issued $750 million of 7.000% senior notes due 2029 and $750 million of 7.250% senior notes due 2032 in a private offering. The Partnership used the net proceeds from the offering to: (i) repay certain outstanding indebtedness of NuStar in connection with the merger between the Partnership and NuStar, (ii) fund the redemption of NuStar's preferred units in connection with the merger and (iii) pay offering fees and expenses.

Previous wording

We periodically enter into derivatives, such as futures and options, to manage our fuel price risk on inventory in the distribution system. Fuel hedging positions are not significant to our operations. On a consolidated basis, the Partnership had a position of 1.1 million barrels with an aggregated unrealized loss of $8.6 million at December 31, 2023.

Current wording

We periodically enter into derivatives, such as futures and options, to manage our fuel price risk on inventory in the distribution system. Fuel hedging positions are not significant to our operations. On a consolidated basis, the Partnership had a position of 0.3 million barrels with an aggregated unrealized loss of $3.8 million at December 31, 2024.