Sunoco LP(SUN) - 2024 Q1 - Quarterly Report

PART I Financial Statements Sunoco LP's Q1 2024 unaudited consolidated financial statements show net income increased to $230 million, total assets grew to $7.39 billion, reflecting acquisitions and divestitures Consolidated Balance Sheets | | March 31, 2024 (Millions USD) | December 31, 2023 (Millions USD) | | :--- | :--- | :--- | | Total current assets | $2,723 | $1,927 | | Total assets | $7,392 | $6,826 | | Total current liabilities | $1,647 | $1,373 | | Long-term debt, net | $3,795 | $3,580 | | Total liabilities | $6,271 | $5,848 | | Total equity | $1,121 | $978 | - Total assets increased to $7.39 billion from $6.83 billion, primarily driven by a rise in current assets, which includes $511 million in assets held for sale and a significant increase in cash and cash equivalents to $215 million[9] Consolidated Statements of Operations and Comprehensive Income | | Three Months Ended March 31, 2024 (Millions USD) | Three Months Ended March 31, 2023 (Millions USD) | | :--- | :--- | :--- | | Total revenues | $5,499 | $5,362 | | Operating income | $297 | $199 | | Net income | $230 | $141 | | Diluted EPS | $2.26 | $1.41 | - Net income increased by 63% year-over-year, rising to $230 million in Q1 2024 from $141 million in Q1 2023, primarily driven by higher operating income[12] Consolidated Statements of Equity - Total equity increased from $978 million at the end of 2023 to $1.12 billion as of March 31, 2024, driven by net income of $230 million, partially offset by $91 million in cash distributions to unitholders[15] Consolidated Statements of Cash Flows | | Three Months Ended March 31, 2024 (Millions USD) | Three Months Ended March 31, 2023 (Millions USD) | | :--- | :--- | :--- | | Net cash provided by operating activities | $286 | $326 | | Net cash used in investing activities | ($223) | ($31) | | Net cash provided by (used in) financing activities | $123 | ($188) | | Net increase in cash and cash equivalents | $186 | $107 | - Cash used in investing activities increased significantly to $223 million, primarily due to a $185 million cash payment for an acquisition, while cash from financing activities was positive due to net borrowings of $214 million on the Credit Facility[18] Notes to Consolidated Financial Statements - On May 3, 2024, the company completed its acquisition of NuStar Energy L.P., issuing approximately 50.6 million common units and assuming about $3.4 billion in debt[27] - On March 13, 2024, the company acquired liquid fuels terminals in Amsterdam and Bantry Bay from Zenith Energy for €170 million ($185 million)[28] - On April 16, 2024, the company completed the sale of 204 convenience stores to 7-Eleven, Inc. for approximately $1.0 billion, with related assets and liabilities classified as held for sale on the March 31, 2024 balance sheet[29] - Cost of sales for Q1 2024 included a favorable inventory valuation adjustment of $130 million, a significant increase from the $29 million favorable adjustment in Q1 2023, which was a primary driver of higher net income[31] | Segment | Adjusted EBITDA Q1 2024 (Millions USD) | Adjusted EBITDA Q1 2023 (Millions USD) | | :--- | :--- | :--- | | Fuel Distribution and Marketing | $219 | $195 | | All Other | $23 | $26 | | Total | $242 | $221 | Management's Discussion and Analysis of Financial Condition and Results of Operations Management's discussion highlights Q1 2024 performance, including strategic acquisitions and divestitures, a rise in Adjusted EBITDA to $242 million, and strong liquidity Recent Developments - Completed the acquisition of NuStar Energy L.P. on May 3, 2024, adding approximately 9,500 miles of pipeline and 63 terminal and storage facilities[68] - Acquired liquid fuels terminals in Amsterdam, Netherlands and Bantry Bay, Ireland from Zenith Energy for $185 million on March 13, 2024[69] - Completed the sale of 204 convenience stores in West Texas, New Mexico, and Oklahoma to 7-Eleven, Inc. for approximately $1.0 billion on April 16, 2024[70] Results of Operations | Metric | Q1 2024 | Q1 2023 | Change | | :--- | :--- | :--- | :--- | | Net Income (Millions USD) | $230 | $141 | +$89 | | Adjusted EBITDA (Millions USD) | $242 | $221 | +$21 | | Motor fuel gallons sold (Billions) | 2.11 | 1.93 | +9.0% | | Motor fuel profit (Cents/Gallon) | 11.7 | 12.9 | -1.2 | - Adjusted EBITDA increased by $21 million year-over-year, primarily due to a 9% increase in fuel gallons sold and increased profit from recent acquisitions, partially offset by a $15 million increase in operating costs[78][82] - The significant increase in Net Income was primarily due to favorable inventory valuation adjustments, which were $130 million in Q1 2024 compared to $29 million in Q1 2023[78][80] Liquidity and Capital Resources - As of March 31, 2024, the company had $215 million in cash and $870 million of available borrowing capacity on its Credit Facility[84] - In April 2024, the Partnership issued $1.5 billion in senior notes ($750 million due 2029 and $750 million due 2032) to fund the NuStar acquisition and repay NuStar's debt[95] - Total capital expenditures for Q1 2024 were $41 million, consisting of $27 million for growth capital and $14 million for maintenance capital[93] Quantitative and Qualitative Disclosures about Market Risk The company faces interest rate risk on variable-rate debt, with a 1% change impacting annual interest expense by $6.3 million, and commodity price risk on its ~$900 million inventory, managed with derivatives - The company is exposed to interest rate risk on its $625 million of outstanding variable-rate borrowings, where a one percentage point change in floating rates would alter annual interest expense by approximately $6.3 million[99] - The company faces commodity price risk on its ~$900 million of petroleum product inventory and uses derivative instruments to hedge this risk, with an aggregate unrealized loss of $4.8 million on these positions as of March 31, 2024[101][102] Controls and Procedures Management concluded the company's disclosure controls and procedures were effective as of March 31, 2024, with no material changes to internal controls during the quarter - Based on an evaluation by management, including the CEO and CFO, the company's disclosure controls and procedures were deemed effective as of March 31, 2024[105] - There were no changes in internal control over financial reporting during the first quarter of 2024 that have materially affected, or are reasonably likely to materially affect, these controls[106] PART II Legal Proceedings The company is not party to any litigation expected to have a material adverse impact on its financial condition or operations - The company reports that it is not party to any litigation that is expected to have a material adverse impact on its financial condition or operations[109] Risk Factors New and heightened risks from recent acquisitions include increased dependency on diverse product demand, international operational risks, heightened regulatory scrutiny, and customer retention challenges - The recent acquisitions of NuStar and Zenith terminals introduce new and more significant risks related to their specific operations[111] - The business is now more dependent on the demand for and supply of crude oil, refined products, renewable fuels, and anhydrous ammonia, which are subject to global price fluctuations and factors like alternative fuel adoption and economic conditions[113][114][115] - With assets in Mexico and Europe, the company is exposed to additional risks including political and economic instability, currency fluctuations, and different legal and regulatory requirements[117][121] - Certain acquired interstate common carrier pipelines are subject to regulation by the FERC and the Surface Transportation Board (STB), which could adversely impact the ability to set rates and recover costs[124][128] Exhibits This section lists all exhibits filed with the Form 10-Q, including the NuStar merger agreement, debt indentures, and CEO/CFO certifications - Key exhibits filed include the Agreement and Plan of Merger with NuStar Energy L.P., various debt indentures, and Sarbanes-Oxley certifications from the CEO and CFO[133][137]