UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________________________________________
FORM 10-K
_____________________________________________________________
(Mark One)

		
☒	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934	
For the Fiscal Year Ended: December 31, 2019
or

		
☐	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)
Registrant’s telephone number, including area code: (214) 981-0700
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	
Securities registered pursuant to Section 12(g) of the Act: NONE
_______________________________________________
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes  ý  No  ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes  ☐  No  ý
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 Registration S-T (§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	ý	 	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
At June 30, 2019, the aggregate market value of common units representing limited partner interests held by non-affiliates of the registrant was approximately $1.7 billion based upon the closing price of its common units on the New York Stock Exchange.
The registrant had 83,017,163 common units representing limited partner interests and 16,410,780 Class C units representing limited partner interests outstanding at February 14, 2020.
Documents Incorporated by Reference: None

SUNOCO LP
ANNUAL REPORT ON FORM 10-K
TABLE OF CONTENTS

	
			
 	 	Page	
PART I	 	 	
Item 1.	Business	1	
Item 1A.	Risk Factors	9	
Item 1B.	Unresolved Staff Comments	28	
Item 2.	Properties	28	
Item 3.	Legal Proceedings	28	
Item 4.	Mine Safety Disclosures	28	
 	 	 	
PART II	 	 	
Item 5.	Market for Our Common Equity, Related Unitholder Matters and Issuer Purchases of Equity Securities	29	
Item 6.	Selected Financial Data	30	
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	31	
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	41	
Item 8.	Financial Statements and Supplementary Data	42	
Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	42	
Item 9A.	Controls and Procedures	42	
Item 9B.	Other Information	45	
 	 	 	
PART III	 	 	
Item 10.	Directors, Executive Officers and Corporate Governance	46	
Item 11.	Executive Compensation	51	
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Unitholder Matters	62	
Item 13.	Certain Relationships, Related Transactions and Director Independence	64	
Item 14.	Principal Accounting Fees and Services	65	
 	 	 	
PART IV	 	 	
Item 15.	Exhibits and Financial Statement Schedules	67	
Item 16.	Form 10-K Summary	67	
 	Signatures	71	

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PART I
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This report contains “forward-looking statements.” All statements other than statements of historical fact contained in this report are forward-looking statements, including, without limitation, statements regarding our plans, strategies, prospects and expectations concerning our business, results of operations and financial condition. You can identify many of these statements by looking for words such as “believe,” “expect,” “intend,” “project,” “anticipate,” “estimate,” “continue” or similar words or the negative thereof.
Known material factors that could cause our actual results to differ from those in these forward-looking statements are described below, in “Item 1A. Risk Factors” and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this report.
All forward-looking statements included in this report are based on information available to us on the date of this report. Except as required by law, we undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. All subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the foregoing cautionary statements.
		
Item 1.	Business	
General
As used in this document, the terms “Partnership,” “SUN,” “we,” “us,” or “our” should be understood to refer to Sunoco LP, known prior to October 27, 2014 as Susser Petroleum Partners LP, and our consolidated subsidiaries as applicable and appropriate.
Overview
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 Operating, L.P. (“ETO”), a consolidated subsidiary of Energy Transfer LP. In addition to 100% of the limited liability company interests in our General Partner, ETO owns 28,463,967 of our common interests and all of our incentive distribution rights, as of February 14, 2020.

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The following simplified diagram depicts our organizational structure as of February 14, 2020.

We are engaged in the distribution of motor fuels to independent dealers, distributors, and other commercial customers and the distribution of motor fuels to end customers at retail sites operated by commission agents. Additionally, we receive lease income through the leasing or subleasing of real estate used in the retail distribution of motor fuel. We also operate 75 retail stores located in Hawaii and New Jersey.
As of December 31, 2019, we distribute motor fuels across more than 30 states throughout the East Coast, Midwest, South Central and Southeast regions of the United States from Maine to Florida and from Florida to New Mexico, as well as Hawaii. We distributed approximately 8.2 billion gallons of motor fuel during 2019 through our independent dealers, distributors, other commercial customers, retail sites operated by commission agents and retail sites owned and operated by us.
On April 6, 2017, we entered into an Asset Purchase Agreement (the “Asset Purchase Agreement”) with 7-Eleven, Inc., a Texas corporation (“7-Eleven”) and SEI Fuel Services, Inc., a Texas corporation and wholly-owned subsidiary of 7-Eleven (“SEI Fuel” and together with 7-Eleven, referred to herein collectively as “Buyers”). On January 23, 2018, we completed the disposition of certain assets pursuant to an Amended and Restated Asset Purchase Agreement (the “A&R Purchase Agreement”), by and among us, Buyers and certain other named parties for the limited purposes set forth therein, pursuant to which the parties agreed to amend and restate the Asset Purchase Agreement to reflect certain commercial agreements and updates made by the parties in connection with consummation of the transactions contemplated by the Asset Purchase Agreement. Under the A&R Purchase Agreement, we sold a portfolio of 1,030 company-operated retail fuel outlets in 19 geographic regions, together with ancillary businesses and related assets, including the proprietary Laredo Taco Company brand, for approximately $3.2 billion (the “7-Eleven Transaction”).

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Operating Segments and Subsidiaries
We operate our business as two segments, Fuel Distribution and Marketing and All Other. Our primary operations are conducted by the following consolidated subsidiaries:
		
•	Sunoco, LLC (“Sunoco LLC”), a Delaware limited liability company, primarily distributes motor fuel in 30 states throughout the East Coast, Midwest, South Central and Southeast regions of the United States. Sunoco LLC also processes transmix and distributes refined product through its terminals in Alabama, Texas, Arkansas and New York.	
		
•	Sunoco Retail LLC (“Sunoco Retail”), a Pennsylvania limited liability company, owns and operates retail stores that sell motor fuel and merchandise primarily in New Jersey.	
		
•	Aloha Petroleum LLC, a Delaware limited liability company, distributes motor fuel and operates terminal facilities on the Hawaiian Islands.	
		
•	Aloha Petroleum, Ltd. (“Aloha”), a Hawaii corporation, owns and operates retail stores on the Hawaiian Islands.	
Acquisition
On January 18, 2019, we acquired certain convenience store locations from Speedway LLC for approximately $5 million plus working capital adjustments. We subsequently converted the acquired convenience store locations to commission agent locations.
Recent Developments
On July 1, 2019, we entered into a 50% owned joint venture on the J.C. Nolan diesel fuel pipeline to West Texas and the J.C. Nolan terminal. ETO operates the pipeline for the joint venture, which transports diesel fuel from Hebert, Texas to a terminal in the Midland, Texas area. The pipeline had an initial capacity of 30,000 barrels per day and was successfully commissioned in August 2019. Our investment in this unconsolidated joint venture was $121 million as of December 31, 2019. In addition, we recorded income on the unconsolidated joint venture of $2 million for the year ended December 31, 2019.
On May 31, 2019, we completed the previously announced divestiture to Attis Industries Inc. (NASDAQ: ATIS) (“Attis”) for the sale of our ethanol plant, including the grain malting operation, in Fulton, New York. As part of the transaction, we entered into a 10-year ethanol offtake agreement with Attis. Total consideration for the divestiture was $20 million in cash plus certain working capital adjustments.
On March 14, 2019, we completed a private offering of $600 million in aggregate principal amount of 6.000% senior notes due 2027. We used the proceeds to repay a portion of the outstanding borrowings under our 2018 Revolver. In connection with our issuance of the 2027 Notes, we entered into a registration rights agreement with the initial purchasers pursuant to which we agreed to complete an offer to exchange the 2027 Notes for an issue of registered notes with terms substantively identical to the 2027 Notes and evidencing the same indebtedness as the 2027 Notes on or before March 14, 2020. The exchange offer was completed on July 17, 2019.
Available Information
Our principal executive offices are located at 8111 Westchester Drive, Suite 400, Dallas, Texas 75225. Our telephone number is (214) 981-0700. Our Internet address is www.sunocolp.com. We make available through our website our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as soon as reasonably practicable after we electronically file such material with, or furnish such material to, the Securities and Exchange Commission (the “SEC”). Information contained on our website is not part of this report. The SEC maintains an Internet site at www.sec.gov that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC.
Our Relationship with Energy Transfer Operating, L.P. and Energy Transfer LP
ETO, a consolidated subsidiary of ET, directly owns our general partner, all of our incentive distribution rights and equity interests in the Partnership. ET, one of the largest publicly traded master limited partnerships in the United States in terms of equity market capitalization, directly owns equity interests in ETO.
ETO, through its wholly owned operating subsidiaries, is engaged primarily in natural gas and natural gas liquids transportation, storage and fractionation services. ETO is also engaged in refined product and crude oil operations including transportation, terminalling services, storage and retail marketing of gasoline and middle distillates through its subsidiaries.
One of our principal strengths is our relationship with ETO and ET. As of February 14, 2020, ETO owns 100% of the membership interest in our general partner, all of our incentive distribution rights and 34.3% of our common units. Given the significant ownership, we believe ETO and ET will be motivated to promote and support the successful execution of our business strategies. In particular, we believe it will be in the best interest of each of ETO and ET to facilitate organic growth opportunities and accretive acquisitions from third parties, although neither ETO nor ET is under any obligation to do so.

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Our Business and Operations
Fuel Distribution and Marketing Segment
We are a distributor of motor fuels and other petroleum products which we supply to third-party dealers and distributors, to independent operators of commission agent locations, other commercial consumers of motor fuel and to our retail locations. Also included in the segment are transmix processing plants and refined products terminals. Transmix is the mixture of various refined products (primarily gasoline and diesel) created in the supply chain (primarily in pipelines and terminals) when various products interface with each other. Transmix processing plants separate this mixture and return it to salable products of gasoline and diesel.
We are the exclusive wholesale supplier of the Sunoco-branded motor fuel, supplying an extensive distribution network of 5,474 Sunoco-branded company and third-party operated locations throughout the East Coast, Midwest, South Central and Southeast regions of the United States. We believe we are one of the largest independent motor fuel distributors, by gallons, in Texas and one of the largest distributors of Chevron, Exxon, and Valero branded motor fuel in the United States. In addition to distributing motor fuels, we also distribute other petroleum products such as propane and lubricating oil, and we receive lease income from real estate that we lease or sublease.
During 2019, we purchased motor fuel primarily from independent refiners and major oil companies and distributed it across more than 30 states throughout the East Coast, Midwest, South Central and Southeast regions of the United States, as well as Hawaii to:
		
•	75 company-owned and operated retail stores;	
		
•	537 independently operated commission agent locations where we sell motor fuel to retail customers under commission agent arrangements with such operators;	
		
•	6,742 retail stores operated by independent operators, which we refer to as “dealers” or “distributors,” pursuant to long-term distribution agreements; and	
		
•	2,581 other commercial customers, including unbranded retail stores, other fuel distributors, school districts and municipalities and other industrial customers.	
Dealer Incentives
In addition to motor fuel distribution, we offer dealers the opportunity to participate in merchandise purchasing and promotional programs arranged with vendors. We believe the vendor relationships we have established through our retail operations and our ability to develop programs provide us with an advantage over other distributors when recruiting new dealers into our network, as well as retaining current dealers. Our dealer incentives give our dealers access to discounted rates on products and services that they would likely not be able to obtain on their own.
Sales to Contracted Third Parties
We distribute fuel under long-term contracts to branded distributors, branded and unbranded convenience stores, and branded and unbranded retail fuel outlets operated by third parties. 7-Eleven is the only third party dealer or distributor which is individually over 10% of our Fuel Distribution and Marketing segment or individually over 10%, in terms of revenue, of our aggregate business.
Sunoco-branded supply contracts with distributors generally have both time and volume commitments that establish contract duration. These contracts have an initial term of approximately ten years with an estimated volume-weighted term remaining of approximately four years.
Distribution contracts with retail stores generally commit us to distribute branded (including, but not limited to, Sunoco branded) or unbranded motor fuel to a location or group of locations and arrange for all transportation and logistics. These contracts require, among other things, that dealers maintain the standards established by the applicable fuel brand, if any. The initial term of these contracts range from three to twenty years, with most contracts for ten years.
Our supply contracts and distribution contracts are typically constructed so that we receive either (i) a fee per gallon equal to the posted rack rate, less any applicable commercial discounts, plus transportation costs, taxes and a fixed, volume-based fee, which is usually expressed in cents per gallon, or (ii) receive a variable cent per gallon margin (“dealer tank wagon pricing”).
During 2019, our Fuel Distribution and Marketing business distributed fuel to 537 commission agent locations. Under these arrangements, we generally provide and control motor fuel inventory and price at the site and receive actual retail selling price for each gallon sold, less a commission paid to the independent commission agents.
We continually seek to expand through the addition of new branded dealers, distributors and commission agent locations, new unbranded commercial customers, and through acquisitions of contracts for existing independently operated sites from other distributors. We evaluate potential independent site operators based on their creditworthiness and the quality of their sites and operations, including

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the site’s size and location, projected monthly volumes of motor fuel, monthly merchandise sales, overall financial performance and previous operating experience. We may extend credit to certain dealers based on our credit evaluation process.
Sales to Other Commercial Customers
We distribute unbranded fuel to numerous other customers, including retail stores, unattended fueling facilities and certain other commercial customers. These customers are primarily commercial, governmental and other parties who buy motor fuel by the load or in bulk and who do not generally enter into exclusive contractual relationships with us, if they enter into a contractual relationship with us at all. Sales to these customers are typically made at a quoted price based upon our cost plus taxes, cost of transportation and a margin determined at time of sale, and may provide for immediate payment or the extension of credit for up to 45 days. We also sell propane, lubricating oil and other petroleum products, such as heating fuels, to our commercial customers on both a spot and contracted basis. In addition, we receive income from the manufacture and distribution sale of race fuels at our Marcus Hook, Pennsylvania manufacturing facility.
Fuel Supplier Arrangements
We distribute branded motor fuel under the Aloha, Chevron, Citgo, Conoco, Exxon, Mahalo, Mobil, Phillips 66, Shamrock, Shell, Sunoco, Texaco, and Valero brands. We purchase branded motor fuel from major oil companies and refiners under supply agreements. Our largest branded fuel suppliers in terms of volume are Chevron, Exxon, Phillips 66 and Valero. The branded fuel supply agreements generally have an initial term of three to five years. Each supply agreement typically contains provisions relating to payment terms, use of the supplier’s brand names, credit card processing, compliance with other of the supplier’s requirements, insurance coverage and compliance with legal and environmental requirements, among others.
We also distribute unbranded motor fuel, which we purchase in bulk, on a rack basis based upon prices posted by the refiner at a fuel supply terminal or on a contract basis with the price tied to one or more market indices.
As is typical in the industry, our suppliers generally can terminate the supply contract if we do not comply with any material condition of the contract, including our failure to make payments when due, fraud, criminal misconduct, bankruptcy or insolvency.
Bulk Fuel Purchases
We purchase motor fuel in bulk and hold it in inventory or transport it via pipeline. To mitigate inventory risk, we use commodity futures contracts or other derivative instruments, which are matched in quantity and timing to the anticipated usage of the inventory. We also blend in various additives, including ethanol and biomass-based diesel.
Terminals and Transmix
We operate two transmix processing facilities and thirteen refined product terminals (six in Hawaii and seven in the continental United States). Transmix is the mixture of various refined products (primarily gasoline and diesel) created in the supply chain (primarily in pipelines and terminals) when various products interface with each other. Transmix processing plants separate this mixture and return it to salable products of gasoline and diesel. Our refined product terminals provide storage and distribution services used to supply our own retail stations as well as third-party customers. In addition, we provide services at our terminals to various third-party throughput customers.
Transportation Logistics
We provide transportation logistics for most of our motor fuel deliveries through our own fleet of fuel transportation vehicles as well as third-party and affiliated transportation providers. We arrange for motor fuel to be delivered from the storage terminals to the appropriate sites in our distribution network at prices consistent with those historically charged to third parties for the delivery of fuel. We also deliver motor fuel, propane, and lubricating oils to commercial customers involved in petroleum exploration and production.
Technology
Technology is an important part of our Fuel Distribution and Marketing operations. We utilize a proprietary web-based system that allows our wholesale customers to access their accounts at any time from a personal computer to obtain prices, place orders, and review invoices, credit card transactions and electronic funds transfer notifications. Substantially all of our customer payments are processed by electronic funds transfer. We use an Internet-based system to assist with fuel inventory management and procurement and an integrated distribution fuel system for financial accounting, procurement, billing and inventory management.
All Other Segment
Our All Other segment includes the Partnership’s retail operations in Hawaii and New Jersey, credit card services, and franchise royalties.

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For further detail of our segment results refer to “Item 8. Financial Statements and Supplementary Data - Notes to Consolidated Financial Statements - Note 20 Segment Reporting” and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
Sale of Regulated Products
In certain areas where our convenience stores are located, state or local laws limit the hours of operation for the sale of alcoholic beverages and restrict the sale of alcoholic beverages and tobacco products to persons younger than a certain age. State and local regulatory agencies have the authority to approve, revoke, suspend or deny applications for and renewals of permits and licenses relating to the sale of alcoholic beverages, as well as to issue fines to convenience stores for the improper sale of alcoholic beverages and tobacco products. Failure to comply with these laws may result in the loss of necessary licenses and the imposition of fines and penalties on us.
Real Estate and Lease Arrangements
As of December 31, 2019, our real estate and lease arrangements are as follows:

						
 	Owned	 	Leased	
Dealer and commission agent sites	623	 	317	
Company-operated retail stores	6	 	69	
Warehouses, offices and other	61	 	85	
Total	690		 	471		
Competition
In the Fuel Distribution and Marketing business, we compete primarily with other independent motor fuel distributors. The markets for distribution of motor fuel and the large and growing retail store industry are highly competitive and fragmented, which results in narrow margins. We have numerous competitors, some of which may have significantly greater resources and name recognition than we do. Significant competitive factors include the availability of major brands, customer service, price, range of services offered and quality of service, among others. We rely on our ability to provide value-added and reliable service and control our operating costs in order to maintain our margins and competitive position.
In the All Other segment, we face strong competition in the market for the sale of retail gasoline and merchandise. Our competitors include service stations of large integrated oil companies, independent gasoline service stations, convenience stores, fast food stores, supermarkets, drugstores, dollar stores, club stores and other similar retail outlets, some of which are well-recognized national or regional retail systems. The number of competitors varies depending on the geographical area. Competition also varies with gasoline and convenience store offerings. The principal competitive factors affecting our retail marketing operations include gasoline and diesel acquisition costs, site location, product price, selection and quality, site appearance and cleanliness, hours of operation, store safety, customer loyalty and brand recognition. We compete by pricing gasoline competitively, combining our retail gasoline business with convenience stores that provide a wide variety of products, and using advertising and promotional campaigns.
Seasonality
Our business exhibits some seasonality due to our customers’ increased demand for motor fuel during the late spring and summer months, as compared to the fall and winter months. Travel, recreation and construction activities typically increase in these months in the geographic areas in which we operate, increasing the demand for motor fuel. Therefore, the volume of motor fuel that we distribute is typically somewhat higher in the second and third quarters of our fiscal year. As a result, our results from operations may vary from period to period.
Working Capital Requirements
Related to our retail store operations, we maintain customary levels of fuel and merchandise inventories and carry corresponding payable balances to suppliers of those inventories. In addition, Sunoco LLC purchases a significant amount of unbranded fuel in bulk and stores it for an extended amount of time. We also have rental obligations related to leased locations. Our working capital needs will typically fluctuate over the medium to long term with the price of crude oil, and over the short term due to the timing of motor fuel tax, sales tax, interest and rent payments.

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Environmental Matters
Environmental Laws and Regulations
We are subject to various federal, state and local environmental laws and regulations, including those relating to underground storage tanks; the release or discharge of hazardous materials into the air, water and soil; the generation, storage, handling, use, transportation and disposal of regulated materials; the exposure of persons to regulated materials; and the remediation of contaminated soil and groundwater.
Environmental laws and regulations can restrict or impact our business activities in many ways, such as:
		
•	requiring remedial action to mitigate releases of hydrocarbons, hazardous substances or wastes caused by our operations or attributable to former operators;	
		
•	requiring capital expenditures to comply with environmental control requirements; and	
		
•	enjoining the operations of facilities deemed to be in noncompliance with environmental laws and regulations.	
Failure to comply with environmental laws and regulations may trigger a variety of administrative, civil and criminal enforcement measures, including the assessment of monetary penalties, the imposition of remedial requirements and the issuance of orders enjoining or otherwise curtailing future operations. Certain environmental statutes impose strict, joint and several liability for costs required to clean up and restore sites where hydrocarbons, hazardous substances or wastes have been released or disposed of. Moreover, neighboring landowners and other third parties may file claims for personal injury and property damage allegedly caused by the release of hydrocarbons, hazardous substances or other wastes into the environment.
We believe we are in compliance in all material respects with applicable environmental laws and regulations, and we do not believe that compliance with federal, state or local environmental laws and regulations will have a material adverse effect on our financial position, results of operations or cash available for distribution to our unitholders. Any future change in regulatory requirements could cause us to incur significant costs. We incorporate by reference into this section our disclosures included in Note 14 of the Notes to Consolidated Financial Statements included in “Item 8. Financial Statements and Supplementary Data.”
Hazardous Substances and Releases
Certain environmental laws, including the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (“CERCLA”), impose strict, and under certain circumstances, joint and several, liability on the owner and operator as well as former owners and operators of properties for the costs of investigation, removal or remediation of contamination and also impose liability for any related damages to natural resources without regard to fault. In addition, under CERCLA and similar state laws, as persons who arrange for the transportation, treatment or disposal of hazardous substances, we also may be subject to similar liability at sites where such hazardous substances come to be located. We may also be subject to third-party claims alleging property damage and/or personal injury in connection with releases of or exposure to hazardous substances at, from or in the vicinity of, our current properties or off-site waste disposal sites.
We are required to comply with federal and state financial responsibility requirements to demonstrate that we have the ability to pay for remediation or to compensate third parties for damages incurred as a result of a release of regulated materials from our underground storage tank systems. We meet these requirements primarily by maintaining insurance, which we purchase from private insurers.
Environmental Reserves
We are currently involved in the investigation and remediation of contamination at motor fuel storage and gasoline store sites where releases of regulated substances have been detected. We accrue for anticipated future costs and the related probable state reimbursement amounts for remediation activities. Accordingly, we have recorded estimated undiscounted liabilities for these sites totaling $29 million as of December 31, 2019. As of December 31, 2019, we have additional reserves of $67 million that represent our estimate for future asset retirement obligations for underground storage tanks.
Underground Storage Tanks
We are required to make financial expenditures to comply with regulations governing underground storage tanks adopted by federal, state and local regulatory agencies. Pursuant to the Resource Conservation and Recovery Act of 1976, as amended, the Environmental Protection Agency (“EPA”) has established a comprehensive regulatory program for the detection, prevention, investigation and cleanup of leaking underground storage tanks. State or local agencies are often delegated the responsibility for implementing the federal program or developing and implementing equivalent state or local regulations. We have a comprehensive program in place for performing routine tank testing and other compliance activities, which are intended to promptly detect and investigate any potential releases. We believe we are in compliance in all material respects with requirements applicable to our underground storage tanks.

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Air Emissions
The Federal Clean Air Act (the “Clean Air Act”) and similar state laws impose requirements on emissions to the air from motor fueling activities in certain areas of the country, including those that do not meet state or national ambient air quality standards. These laws may require the installation of vapor recovery systems to control emissions of volatile organic compounds to the air during the motor fueling process. Under the Clean Air Act and comparable state and local laws, permits are typically required to emit regulated air pollutants into the atmosphere. We believe that we currently hold, or have applied for, all necessary air permits and that we would be in compliance in all material respects with applicable air laws and regulations. Although we can give no assurances, we are aware of no changes to air quality regulations that will have a material adverse effect on our financial condition, results of operations or cash available for distribution to our unitholders.
Various federal, state and local agencies have the authority to prescribe product quality specifications for the motor fuels that we sell, largely in an effort to reduce air pollution. Failure to comply with these regulations can result in substantial penalties. Although we can give no assurances, we believe we are currently in compliance in all material respects with these regulations.
Efforts at the federal and state level are currently underway to reduce the levels of greenhouse gas (“GHG”) emissions from various sources in the United States. At the federal level, Congress has considered legislation to reduce GHG emissions in the United States. Such federal legislation may impose a carbon emissions tax or establish a cap-and-trade program or regulation by the EPA. Even in the absence of new federal legislation, GHG emissions have begun to be regulated by the EPA pursuant to the Clean Air Act. For example, in April 2010, the EPA set a new emissions standard for motor vehicles to reduce GHG emissions. New federal or state restrictions on emissions of GHGs that may be imposed in areas of the United States in which we conduct business and that apply to our operations could adversely affect the demand for our products. In addition, in May 2016, the EPA issued final standards that would reduce methane emissions from new and modified oil and natural gas production by up to 45% from 2012 levels by 2025. However, in September 2018, the EPA proposed amendments to the 2016 standards that would reduce fugitive emissions monitoring requirements and expand exceptions to controlling methane emissions from pneumatic pumps, among other changes. In August 2019, the EPA proposed two options for rescinding the 2016 standards. Under the EPA’s preferred alternative, the agency would rescind the methane limits for new, reconstructed and modified oil and natural gas production sources while leaving in place the general emission limits for volatile organic compounds (“VOCs”), and relieve the EPA of its obligation to develop guidelines for methane emissions from existing sources. In addition, the proposal would remove from the oil and natural gas category the natural gas transmission and storage segment. The other proposed alternative would rescind the methane requirements applicable to all oil and natural gas sources, without removing any sources from that source category (and still requiring control of VOCs in general)." Various industry and environmental groups have separately challenged both the 2016 standards and the EPA’s attempts to delay their implementation. Moreover, in August 2015, EPA issued final rules outlining the Clean Power Plan (“CPP”), which was developed in accordance with President Obama’s Climate Action Plan announced the previous year. Under the CPP, carbon pollution from power plants must be reduced over 30% below 2005 levels by 2030. However, the current administration under President Trump announced a plan to replace the CPP with a more business-friendly rule, known as the Affordable Clean Energy rule, in August 2018. The EPA finalized the Affordable Clean Energy rule in June 2019.
In December 2015, the United States and 195 other countries reached an agreement (the “Paris Agreement”) during the 21st Conference of the Parties to the United Nations Framework Convention on Climate Change, a long-term, international framework convention designed to address climate change over the next several decades. In August 2017, the Trump Administration filed formal notice with the United Nations that the United States plans to withdraw from the Paris Agreement and to seek negotiations either to reenter the Paris Agreement on different terms or to establish a new framework agreement. The Trump Administrative formally initiated the withdrawal process in November 2019, which would provide for an exit date of November 2020. Whether the United States will adhere to the Paris Agreement’s exit process is, and the terms on which the United States may reenter the Paris Agreement or a separately negotiated agreement are, uncertain at this time. However, any efforts to control and/or reduce GHG emissions by the United States or other countries, or concerted conservation efforts that result in reduced consumption, could adversely impact demand for our products and, in turn, our financial position and results of operations.
Many studies have discussed the relationship between GHG emissions and climate change. One consequence of climate change noted in many of these reports is the increased severity of extreme weather, such as increased hurricanes and floods. Such events could adversely affect our operations through water damage, powerful winds or increased costs for insurance. Further, there have been recent efforts by members of the general financial and investment communities, such as investment advisors, sovereign wealth funds, public pension funds, universities and other groups, to divest themselves and to promote the divestment of securities issued by companies involved in the fossil fuel market. These entities also have been pressuring lenders to limit financing available to such companies. These efforts may adversely affect the market for our securities and our ability to access capital and financial markets in the future.

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Other Government Regulation
The Petroleum Marketing Practices Act, or “PMPA,” is a federal law that governs the relationship between a refiner and a distributor, as well as between a distributor and branded dealer, pursuant to which the refiner or distributor permits a distributor or dealer to use a trademark in connection with the sale or distribution of motor fuel. Under the PMPA, we may not terminate or fail to renew a branded distributor contract, unless certain enumerated preconditions or grounds for termination or nonrenewal are met and we also comply with the prescribed notice requirements. Additionally, we are subject to state petroleum franchise laws as well as laws specific to gasoline retailers and dealers, including state laws that regulate our relationships with third parties to whom we lease sites and supply motor fuels.
Employee Safety
We are subject to the requirements of the Occupational Safety and Health Act, or “OSHA,” and comparable state statutes that regulate the protection of the health and safety of workers. In addition, OSHA’s hazard communication standards require that information be maintained about hazardous materials used or produced in operations and that this information be provided to employees, state and local government authorities and citizens. We believe that we are in substantive compliance with the applicable OSHA requirements.
Store Operations
Our remaining retail locations are subject to regulation by federal agencies and to licensing and regulations by state and local health, sanitation, safety, fire and other departments relating to the development and operation of convenience stores, including regulations related to zoning and building requirements and the preparation and sale of food.
Our operations are also subject to federal and state laws governing such matters as wage rates, overtime, working conditions and citizenship requirements. At the federal level, there are proposals under consideration from time to time to increase minimum wage rates.
Title to Properties, Permits and Licenses
We believe we have all of the assets needed, including leases, permits and licenses, to operate our business in all material respects. With respect to any consents, permits or authorizations that have not been obtained, we believe that the failure to obtain these consents, permits or authorizations will not have a material adverse effect on our financial position, results of operations or cash available for distribution to our unitholders.
We believe we have satisfactory title to all of our assets. Title to property may be subject to encumbrances, including repurchase rights and use, operating and environmental covenants and restrictions, including restrictions on branded motor fuels that may be sold at such sites. We believe that none of these encumbrances will detract materially from the value of our sites or from our interest in these sites, nor will they interfere materially with the use of these sites in the operation of our business. These encumbrances may, however, impact our ability to sell the site to an entity seeking to use the land for alternative purposes.
Our Employees
We are managed and operated by the board of directors and executive officers of our General Partner, which has sole responsibility for providing us with the employees and other personnel necessary to conduct our operations. All of the employees that conduct our business are employed by our General Partner or its affiliates. As of December 31, 2019, our General Partner and its affiliates had approximately 2,909 employees, 290 of which are represented by labor unions or associations, performing services for our operations, with appropriate costs allocated to us. We believe that we and our General Partner and its affiliates have a satisfactory relationship with employees. Information concerning the executive officers of our General Partner is contained in “Item 10. Directors, Executive Officers and Corporate Governance.”
		
Item 1A.	Risk Factors	
Risks Related to Our Business
Cash distributions are not guaranteed, and our financial leverage could increase, depending on our performance and other external factors.
Cash distributions to unitholders is principally dependent upon cash generated from operations. The amount of cash generated from operations will fluctuate from quarter to quarter based on a number of factors, some of which are beyond our control, which include, amongst others:
		
•	demand for motor fuel in the markets we serve, including seasonal fluctuations in demand for motor fuel;	
		
•	competition from other companies that sell motor fuel products or have convenience stores in the market areas in which we or our commission agents or dealers operate;	
		
•	regulatory action affecting the supply of or demand for motor fuel, our operations, our existing contracts or our operating costs;	

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•	prevailing economic conditions;	
		
•	supply, extreme weather and logistics disruptions; and	
		
•	volatility of margins for motor fuel.	
In addition, the actual amount of cash we will have available for distribution will depend on other factors such as:
		
•	the level and timing of capital expenditures we make;	
		
•	the cost of acquisitions, if any;	
		
•	our debt service requirements and other liabilities;	
		
•	fluctuations in our general working capital needs;	
		
•	reimbursements made to our general partner and its affiliates for all direct and indirect expenses they incur on our behalf pursuant to the partnership agreement;	
		
•	our ability to borrow funds at favorable interest rates and access capital markets;	
		
•	restrictions contained in debt agreements to which we are a party;	
		
•	the level of costs related to litigation and regulatory compliance matters; and	
		
•	the amount of cash reserves established by our general partner in its discretion for the proper conduct of our business.	
If our cash flow from operations is insufficient to satisfy our needs, we cannot be certain that we will be able to obtain bank financing or access the capital markets. Further, incurring additional debt may significantly increase our interest expense and financial leverage and issuing additional limited partner interests may result in significant unitholder dilution and would increase the aggregate amount of cash required to maintain the cash distribution rate which could materially decrease our ability to pay distributions. If additional capital resources are unavailable to us, our business, financial condition, results of operations and ability to make distributions could be materially adversely affected.
General economic, financial, and political conditions may materially adversely affect our results of operations and financial condition.
General economic, financial, and political conditions may have a material adverse effect on our results of operations and financial condition. Declines in consumer confidence and/or consumer spending, changes in unemployment, significant inflationary or deflationary changes or disruptive regulatory or geopolitical events could contribute to increased volatility and diminished expectations for the economy and our markets, including the market for our goods and services, and lead to demand or cost pressures that could negatively and adversely impact our business. These conditions could affect both of our business segments.
Examples of such conditions could include:
		
•	a general or prolonged decline in, or shocks to, regional or broader macro-economies;	
		
•	regulatory changes that could impact the markets in which we operate, such as immigration or trade reform laws or regulations prohibiting or limiting hydraulic fracturing, which could reduce demand for our goods and services or lead to pricing, currency, or other pressures; and	
		
•	deflationary economic pressures, which could hinder our ability to operate profitably in view of the challenges inherent in making corresponding deflationary adjustments to our cost structure.	
The nature of these types of risks, which are often unpredictable, makes them difficult to plan for, or otherwise mitigate, and they are generally uninsurable—which compounds their potential impact on our business.
Our financial condition and results of operations are influenced by changes in the prices of motor fuel, which may adversely impact our margins, our customers’ financial condition and the availability of trade credit.
Our operating results are influenced by prices for motor fuel. General economic and political conditions, acts of war or terrorism and instability in oil producing regions, particularly in the Middle East, South America, Russia and Africa could significantly impact crude oil supplies and refined product petroleum costs. Significant increases or high volatility in petroleum costs could impact consumer demand for motor fuel and convenience merchandise. Such volatility makes it difficult to predict the impact that future petroleum costs fluctuations may have on our operating results and financial condition. We are subject to dealer tank wagon pricing structures at certain locations further contributing to margin volatility. A significant change in any of these factors could materially impact both wholesale and retail fuel margins, the volume of motor fuel we distribute or sell, and overall customer traffic, each of which in turn could have a material adverse effect on our business, financial condition, results of operations and cash available for distribution to our unitholders.

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Significant increases in wholesale motor fuel prices could impact us as some of our customers may have insufficient credit to purchase motor fuel from us at their historical volumes. Higher prices for motor fuel may also reduce our access to trade credit support or cause it to become more expensive.
A significant decrease in demand for motor fuel, including increased consumer preference for alternative motor fuels or improvements in fuel efficiency, in the areas we serve would reduce our ability to make distributions to our unitholders.
Sales of refined motor fuels account for approximately 97% of our total revenues and 75% of our continuing operations gross profit. A significant decrease in demand for motor fuel in the areas we serve could significantly reduce our revenues and our ability to make distributions to our unitholders. Our revenues are dependent on various trends, such as trends in commercial truck traffic, travel and tourism in our areas of operation, and these trends can change. Regulatory action, including government imposed fuel efficiency standards, may also affect demand for motor fuel. Because certain of our operating costs and expenses are fixed and do not vary with the volumes of motor fuel we distribute, our costs and expenses might not decrease ratably or at all should we experience such a reduction. As a result, we may experience declines in our profit margin if our fuel distribution volumes decrease.
Any technological advancements, regulatory changes or changes in consumer preferences causing a significant shift toward alternative motor fuels could reduce demand for the conventional petroleum based motor fuels we currently sell. Additionally, a shift toward electric, hydrogen, natural gas or other alternative-power vehicles could fundamentally change our customers’ shopping habits or lead to new forms of fueling destinations or new competitive pressures.
New technologies have been developed and governmental mandates have been implemented to improve fuel efficiency, which may result in decreased demand for petroleum-based fuel. Any of these outcomes could result in fewer visits to our convenience stores or independently operated commission agents and dealer locations, a reduction in demand from our wholesale customers, decreases in both fuel and merchandise sales revenue, or reduced profit margins, any of which could have a material adverse effect on our business, financial condition, results of operations and cash available for distribution to our unitholders.
The industries in which we operate are subject to seasonal trends, which may cause our operating costs to fluctuate, affecting our cash flow.
We rely in part on consumer travel and spending patterns, and may experience more demand for gasoline in the late spring and summer months than during the fall and winter. Travel, recreation and construction are typically higher in these months in the geographic areas in which we or our commission agents and dealers operate, increasing the demand for motor fuel that we sell and distribute. Therefore, our revenues and cash flows are typically higher in the second and third quarters of our fiscal year. As a result, our results from operations may vary widely from period to period, affecting our cash flow.
The dangers inherent in the storage and transportation of motor fuel could cause disruptions in our operations and could expose us to potentially significant losses, costs or liabilities.
We store motor fuel in underground and aboveground storage tanks. We transport the majority of our motor fuel in our own trucks, instead of by third-party carriers. Our operations are subject to significant hazards and risks inherent in transporting and storing motor fuel. These hazards and risks include, but are not limited to, traffic accidents, fires, explosions, spills, discharges, and other releases, any of which could result in distribution difficulties and disruptions, environmental pollution, governmentally-imposed fines or clean-up obligations, personal injury or wrongful death claims, and other damage to our properties and the properties of others. Any such event not covered by our insurance could have a material adverse effect on our business, financial condition, results of operations and cash available for distribution to our unitholders.
Our fuel storage terminals are subject to operational and business risks which may adversely affect our financial condition, results of operations, cash flows and ability to make distributions to our unitholders.
Our fuel storage terminals are subject to operational and business risks, the most significant of which include the following:
		
•	our inability to renew a ground lease for certain of our fuel storage terminals on similar terms or at all;	
		
•	our dependence on third parties to supply our fuel storage terminals;	
		
•	outages at our fuel storage terminals or interrupted operations due to weather-related or other natural causes;	
		
•	the threat that the nation’s terminal infrastructure may be a future target of terrorist organizations;	
		
•	the volatility in the prices of the products stored at our fuel storage terminals and the resulting fluctuations in demand for our storage services;	
		
•	the effects of a sustained recession or other adverse economic conditions;	
		
•	the possibility of federal and/or state regulations that may discourage our customers from storing gasoline, diesel fuel, ethanol and jet fuel at our fuel storage terminals or reduce the demand by consumers for petroleum products;	

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•	competition from other fuel storage terminals that are able to supply our customers with comparable storage capacity at lower prices; and	
		
•	climate change legislation or regulations that restrict emissions of GHGs could result in increased operating and capital costs and reduced demand for our storage services.	
The occurrence of any of the above situations, amongst others, may affect operations at our fuel storage terminals and may adversely affect our business, financial condition, results of operations, cash flows and ability to make distributions to our unitholders.
Negative events or developments associated with our branded suppliers could have an adverse impact on our revenues.
We believe that the success of our operations is dependent, in part, on the continuing favorable reputation, market value, and name recognition associated with the motor fuel brands sold at our convenience stores and at stores operated by our independent, branded dealers and commission agents. Erosion of the value of those brands could have an adverse impact on the volumes of motor fuel we distribute, which in turn could have a material adverse effect on our business, financial condition, results of operations and ability to make distributions to our unitholders.
Severe weather could adversely affect our business by damaging our suppliers’ or our customers’ facilities or communications networks.
A substantial portion of our wholesale distribution and retail networks are located in regions susceptible to severe storms, including hurricanes. A severe storm could damage our facilities or communications networks, or those of our suppliers or our customers, as well as interfere with our ability to distribute motor fuel to our customers or our customers’ ability to operate their locations. If warmer temperatures, or other climate changes, lead to changes in extreme weather events, including increased frequency, duration or severity, these weather-related risks could become more pronounced. Any weather-related catastrophe or disruption could have a material adverse effect on our business, financial condition and results of operations, potentially causing losses beyond the limits of the insurance we currently carry.
The wholesale motor fuel distribution industry is characterized by intense competition and fragmentation. Failure to effectively compete could result in lower margins.
The market for distribution of wholesale motor fuel is highly competitive and fragmented, which results in narrow margins. We have numerous competitors, some of which may have significantly greater resources and name recognition than us. We rely on our ability to provide value-added, reliable services and to control our operating costs in order to maintain our margins and competitive position. If we fail to maintain the quality of our services, certain of our customers could choose alternative distribution sources and our margins could decrease. While major integrated oil companies have generally continued a strategy of limited direct retail operation and the corresponding wholesale distribution to such sites, such major oil companies could shift from this strategy and decide to distribute their own products in direct competition with us, or large customers could attempt to buy directly from the major oil companies. The occurrence of any of these events could have a material adverse effect on our business, financial condition, results of operations and cash available for distribution to our unitholders.
The convenience store industry is highly competitive and impacted by new entrants. Failure to effectively compete could result in lower sales and lower margins.
The geographic areas in which we operate and supply independently operated commission agent and dealer locations are highly competitive and marked by ease of entry and constant change in the number and type of retailers offering products and services of the type we and our independently operated commission agents and dealers sell in our stores. We compete with other convenience store chains, independently owned convenience stores, motor fuel stations, supermarkets, drugstores, discount stores, dollar stores, club stores, mass merchants and local restaurants. Over the past two decades, several non-traditional retailers, such as supermarkets, hypermarkets, club stores and mass merchants, have impacted the convenience store industry, particularly in the geographic areas in which we operate and supply, by entering the motor fuel retail business. These non-traditional motor fuel retailers have captured a significant share of the motor fuels market, and we expect their market share will continue to grow.
In some of our markets, our competitors have been in existence longer and have greater financial, marketing, and other resources than we or our independently operated commission agents and dealers do. As a result, our competitors may be able to respond better to changes in the economy and new opportunities within the industry. To remain competitive, we must constantly analyze consumer preferences and competitors’ offerings and prices to ensure that we offer a selection of convenience products and services at competitive prices to meet consumer demand. We must also maintain and upgrade our customer service levels, facilities and locations to remain competitive and attract customer traffic to our stores. We may not be able to compete successfully against current and future competitors, and competitive pressures faced by us could have a material adverse effect on our business, results of operations and cash available for distribution to our unitholders.

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If we are unable to make acquisitions on economically acceptable terms from third parties, our future growth and ability to increase distributions to unitholders will be limited.
A portion of our strategy to grow our business is dependent on our ability to make acquisitions that result in an increase in cash flow. The acquisition component of our growth strategy is based, in part, on our expectation of ongoing strategic divestitures of wholesale fuel distribution assets by industry participants. If we are unable to make acquisitions from third parties for any reason, including if we are unable to identify attractive acquisition candidates or negotiate acceptable purchase contracts, we are unable to obtain financing for these acquisitions on economically acceptable terms, we are outbid by competitors, or we or the seller are unable to obtain all necessary consents, our future growth and ability to increase distributions to unitholders will be limited. In addition, if we consummate any future acquisitions, our capitalization and results of operations may change significantly, and unitholders will not have the opportunity to evaluate the economic, financial, and other relevant information considered in determining the application of these funds and other resources. Finally, we may complete acquisitions which at the time of completion we believe will be accretive, but which ultimately may not be accretive. If any of these events were to occur, our future growth would be limited.
Acquisitions are subject to substantial risks that could adversely affect our financial condition and results of operations and reduce our ability to make distributions to unitholders.
Any acquisitions involve potential risks, including, amongst others:
		
•	the validity of our assumptions about revenues, capital expenditures and operating costs of the acquired business or assets, as well as assumptions about achieving synergies with our existing business;	
		
•	the validity of our assessment of environmental and other liabilities, including legacy liabilities;	
		
•	the costs associated with additional debt or equity capital, which may result in a significant increase in our interest expense and financial leverage resulting from any additional debt incurred to finance the acquisition, or the issuance of additional common units on which we will make distributions, either of which could offset the expected accretion to our unitholders from such acquisition and could be exacerbated by volatility in the equity or debt capital markets;	
		
•	a failure to realize anticipated benefits, such as increased available cash per unit, enhanced competitive position or new customer relationships;	
		
•	a decrease in our liquidity by using a significant portion of our available cash or borrowing capacity to finance the acquisition;	
		
•	the incurrence of other significant charges, such as impairment of goodwill or other intangible assets, asset devaluation or restructuring charges; and	
		
•	the risk that our existing financial controls, information systems, management resources and human resources will need to grow to support future growth and we may not be able to react timely.	
Integration of assets acquired in past acquisitions or future acquisitions with our existing business will be a complex, time-consuming and costly process, particularly given that assets acquired to date significantly increased our size and diversified the geographic areas in which we operate. A failure to successfully integrate the acquired assets with our existing business in a timely manner may have a material adverse effect on our business, financial condition, results of operations or cash available for distribution to our unitholders.
The difficulties of integrating past and future acquisitions with our business include, among other things:
		
•	operating a larger combined organization in new geographic areas and new lines of business;	
		
•	hiring, training or retaining qualified personnel to manage and operate our growing business and assets;	
		
•	integrating management teams and employees into existing operations and establishing effective communication and information exchange with such management teams and employees;	
		
•	diversion of management’s attention from our existing business;	
		
•	assimilation of acquired assets and operations, including additional regulatory programs;	
		
•	loss of customers or key employees;	
		
•	maintaining an effective system of internal controls in compliance with the Sarbanes-Oxley Act of 2002 as well as other regulatory compliance and corporate governance matters; and	
		
•	integrating new technology systems for financial reporting.	
If any of these risks or other unanticipated liabilities or costs were to materialize, then desired benefits from past acquisitions and future acquisitions could result in a negative impact to our future results of operations. In addition, acquired assets may perform at levels below the forecasts used to evaluate them, due to factors beyond our control. If the acquired assets perform at levels below the forecasts, then our future results of operations could be negatively impacted.

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Also, our reviews of proposed business or asset acquisitions are inherently imperfect because it is generally not feasible to perform an in-depth review of each such proposal given time constraints imposed by sellers. Even if performed, a detailed review of assets and businesses may not reveal existing or potential problems, and may not provide sufficient familiarity with such business or assets to fully assess their deficiencies and potential. Inspections may not be performed on every asset, and environmental problems, such as groundwater contamination, may not be observable even when an inspection is undertaken.
We do not own all of the land on which our retail service stations are located, and we lease certain facilities and equipment, and we are subject to the possibility of increased costs to retain necessary land use which could disrupt our operations.
We do not own all of the land on which our retail service stations are located. We have rental agreements for approximately 38.0% of the partnership, commission agent or dealer operated retail service stations where we currently control the real estate. We also have rental agreements for certain logistics facilities.  As such, we are subject to the possibility of increased costs under rental agreements with landowners, primarily through rental increases and renewals of expired agreements. We are also subject to the risk that such agreements may not be renewed. Additionally, certain facilities and equipment (or parts thereof) used by us are leased from third parties for specific periods. Our inability to renew leases or otherwise maintain the right to utilize such facilities and equipment on acceptable terms, or the increased costs to maintain such rights, could have a material adverse effect on our financial condition, results of operations and cash flows.
Our operations are subject to federal, state and local laws and regulations pertaining to environmental protection and operational safety that may require significant expenditures or result in liabilities that could have a material adverse effect on our business.
Our business is subject to various federal, state and local environmental laws and regulations, including those relating to terminals, underground storage tanks, the release or discharge of regulated materials into the air, water and soil, the generation, storage, handling, use, transportation and disposal of hazardous materials, the exposure of persons to regulated materials, and the health and safety of our employees. A violation of, liability under, or noncompliance with these laws and regulations, or any future environmental law or regulation, could have a material adverse effect on our business, financial condition, results of operations and cash available for distribution to our unitholders.
Regulations under the Federal Water Pollution Control Act of 1972 (the “Clean Water Act”), the Oil Pollution Act of 1990 (“OPA 90”) and state laws impose regulatory burdens on terminal operations. Spill prevention control and countermeasure requirements of federal and state laws require containment to mitigate or prevent contamination of waters in the event of a refined product overflow, rupture, or leak from above-ground pipelines and storage tanks. The Clean Water Act also requires us to maintain spill prevention control and countermeasure plans at our terminal facilities with above-ground storage tanks and pipelines. In addition, OPA 90 requires that most fuel transport and storage companies maintain and update various oil spill prevention and oil spill contingency plans. Facilities that are adjacent to water require the engagement of Federally Certified Oil Spill Response Organizations to be available to respond to a spill on water from above ground storage tanks or pipelines.
Transportation and storage of refined products over and adjacent to water involves risk and potentially subjects us to strict, joint, and potentially unlimited liability for removal costs and other consequences of an oil spill where the spill is into navigable waters, along shorelines or in the exclusive economic zone of the United States. In the event of an oil spill into navigable waters, substantial liabilities could be imposed upon us. The Clean Water Act imposes restrictions and strict controls regarding the discharge of pollutants into navigable waters, with the potential of substantial liability for the violation of permits or permitting requirements.
Terminal operations and associated facilities are subject to the Clean Air Act as well as comparable state and local statutes. Under these laws, permits may be required before construction can commence on a new source of potentially significant air emissions, and operating permits may be required for sources that are already constructed. If regulations become more stringent, additional emission control technologies may be required at our facilities. Any such future obligation could require us to incur significant additional capital or operating costs.
Terminal operations are subject to additional programs and regulations under the Occupational Safety and Health Act (“OSHA”). Liability under, or a violation of compliance with, these laws and regulations, or any future laws or regulations, could have a material adverse effect on our business, financial condition, results of operations and cash available for distribution to our unitholders.
Certain environmental laws, including CERCLA, impose strict, and under certain circumstances, joint and several, liability on the current and former owners and operators of properties for the costs of investigation and removal or remediation of contamination and also impose liability for any related damages to natural resources without regard to fault. Under CERCLA and similar state laws, as persons who arrange for the transportation, treatment, and disposal of hazardous substances, we may also be subject to liability at sites where such hazardous substances come to be located. We may be subject to third-party claims alleging property damage and/or personal injury in connection with releases of or exposure to hazardous substances at, from, or in the vicinity of our current or former properties or off-site waste disposal sites. Costs associated with the investigation and remediation of contamination, as well as associated third party claims, could be substantial, and could have a material adverse effect on our business, financial condition, results of operations and our ability to service our outstanding indebtedness. In addition, the presence of, or failure to remediate, identified or unidentified contamination

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at our properties could materially and adversely affect our ability to sell or rent such property or to borrow money using such property as collateral.
We are required to make financial expenditures to comply with regulations governing underground storage tanks as adopted by federal, state and local regulatory agencies. Compliance with existing and future environmental laws regulating underground storage tank systems of the kind we use may require significant capital expenditures. For example, in July 2015, the EPA published rules that amended existing federal underground storage tank rules, requiring certain upgrades to underground storage tanks and related piping to further ensure the detection, prevention, investigation, and remediation of leaks and spills.
The Clean Air Act and similar state laws impose requirements on emissions from motor fueling activities in certain areas of the country, including those that do not meet state or national ambient air quality standards. These laws may require the installation of vapor recovery systems to control emissions of volatile organic compounds during the motor fueling process. While we believe we are in material compliance with all applicable regulatory requirements with respect to underground storage tank systems of the kind we use, regulatory requirements may become more stringent or apply to an increased number of underground storage tanks in the future, which would require additional, potentially material, expenditures.
We are required to comply with federal and state financial responsibility requirements to demonstrate that we have the ability to pay for cleanups or to compensate third parties for damages incurred as a result of a release of regulated materials from our underground storage tank systems. We seek to comply with these requirements by maintaining insurance that we purchase from private insurers and in certain circumstances, rely on applicable state trust funds, which are funded by underground storage tank registration fees and taxes on wholesale purchases of motor fuels. Coverage afforded by each fund varies and is dependent upon the continued maintenance and solvency of each fund.
We are responsible for investigating and remediating contamination at a number of our current and former properties. We are entitled to reimbursement for certain of these costs under various third-party contractual indemnities and insurance policies, subject to eligibility requirements, deductibles, per incident, annual and aggregate caps. To the extent third parties (including insurers) do not pay for investigation and remediation, and/or insurance is not available, we will be obligated to make these additional payments, which could have a material adverse impact on our business, liquidity, results of operations and cash available for distribution to our unitholders.
We believe we are in material compliance with applicable environmental requirements; however, we cannot ensure that violations of these requirements will not occur in the future. Although we have a comprehensive environmental, health, and safety program, we may not have identified all environmental liabilities at all of our current and former locations; material environmental conditions not known to us may exist; existing and future laws, ordinances or regulations may impose material environmental liability or compliance costs on us; or we may be required to make material environmental expenditures for remediation of contamination that has not been discovered at existing locations or locations that we may acquire.
The occurrence of any of the events described above could have a material adverse effect on our business, financial condition, results of operations and cash available for distribution to our unitholders.
We are subject to federal laws related to the Renewable Fuel Standard.
New laws, new interpretations of existing laws, increased governmental enforcement of existing laws or other developments could require us to make additional capital expenditures or incur additional liabilities. For example, certain independent refiners have initiated discussions with the EPA to change the way the Renewable Fuel Standard (RFS) is administered in an attempt to shift the burden of compliance from refiners and importers to blenders and distributors. Under the RFS, which requires an annually increasing amount of biofuels to be blended into the fuels used by U.S. drivers, refiners/importers are obligated to obtain renewable identification numbers (“RINS”) either by blending biofuel into gasoline or through purchase in the open market. If the obligation was shifted from the importer/refiner to the blender/distributor, the Partnership would potentially have to utilize the RINS it obtains through its blending activities to satisfy a new obligation and would be unable to sell RINS to other obligated parties, which may cause an impact on the fuel margins associated with the Partnership’s sale of gasoline.
The occurrence of any of the events described above could have a material adverse effect on our business, financial condition, results of operations and cash available for distribution to our unitholders.
We are subject to federal, state and local laws and regulations that govern the product quality specifications of refined petroleum products we purchase, store, transport, and sell to our distribution customers.
Various federal, state, and local government agencies have the authority to prescribe specific product quality specifications for certain commodities, including commodities that we distribute. Changes in product quality specifications, such as reduced sulfur content in refined petroleum products, or other more stringent requirements for fuels, could reduce our ability to procure product, require us to incur additional handling costs and/or require the expenditure of capital. If we are unable to procure product or recover these costs through increased selling price, we may not be able to meet our financial obligations. Failure to comply with these regulations could result in substantial penalties.

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Future litigation could adversely affect our financial condition and results of operations.
We are exposed to various litigation claims in the ordinary course of our wholesale business operations, including dealer litigation and industry-wide or class-action claims arising from the products we carry, the equipment or processes we use or employ or industry-specific business practices. If we were to become subject to any such claims, our defense costs and any resulting awards or settlement amounts may not be fully covered by our insurance policies. Additionally, our retail operations are characterized by a high volume of customer traffic and by transactions involving a wide array of product selections. These operations carry a higher exposure to consumer litigation risk when compared to the operations of companies operating in many other industries. Consequently, we are frequently party to individual personal injury, bad fuel, products liability and other legal actions in the ordinary course of our business. While we believe these actions are generally routine in nature, incidental to the operation of our business and immaterial in scope, if our assessment of any action or actions should prove inaccurate our financial condition and results of operations could be adversely affected.
Because we depend on our senior management’s experience and knowledge of our industry, we could be adversely affected were we to lose key members of our senior management team.
We are dependent on the expertise and continued efforts of our general partner’s senior management team. If, for any reason, our senior executives do not continue to be active, our business, financial condition, or results of operations could be adversely affected. We do not maintain key man life insurance for our senior executives or other key employees.
We compete with other businesses in our market with respect to attracting and retaining qualified employees.
Our continued success depends on our ability to attract and retain qualified personnel in all areas of our business. We compete with other businesses in our market with respect to attracting and retaining qualified employees. A tight labor market, increased overtime and a higher full-time employee ratio may cause labor costs to increase. A shortage of qualified employees may require us to enhance wage and benefits packages in order to compete effectively in the hiring and retention of such employees or to hire more expensive temporary employees. No assurance can be given that our labor costs will not increase, or that such increases can be recovered through increased prices charged to customers. We are especially vulnerable to labor shortages in oil and gas drilling areas when energy prices drive higher exploration and production activity.
We are not fully insured against all risks incident to our business.
We are not fully insured against all risks incident to our business. We may be unable to obtain or maintain insurance with the coverage that we desire at reasonable rates. As a result of market conditions, the premiums and deductibles for certain of our insurance policies have increased and could continue to do so. Certain insurance coverage could become unavailable or available only for reduced amounts of coverage. If we were to incur a significant liability for which we were not fully insured, it could have a material adverse effect on our business, financial condition, results of operations and ability to make distributions to our unitholders.
Terrorist attacks and threatened or actual war may adversely affect our business.
Our business is affected by general economic conditions and fluctuations in consumer confidence and spending, which can decline as a result of numerous factors outside of our control. Terrorist attacks or threats, whether within the United States or abroad, rumors or threats of war, actual conflicts involving the United States or its allies, or military or trade disruptions impacting our suppliers or our customers may adversely impact our operations. Specifically, strategic targets such as energy related assets (which could include refineries that produce the motor fuel we purchase, ports in which crude oil is delivered or attacks to the electrical grid ) may be at greater risk of future terrorist attacks than other targets in the United States. These occurrences could have an adverse impact on energy prices, including prices for motor fuels, and an adverse impact on our operations. Any or a combination of these occurrences could have a material adverse effect on our business, financial condition, results of operations and cash available for distribution to our unitholders.
We rely on our information technology systems to manage numerous aspects of our business, and a disruption of these systems could adversely affect our business.
We depend on our information technology (IT) systems to manage numerous aspects of our business transactions and provide analytical information to management. Our IT systems are an essential component of our business and growth strategies, and a serious disruption to our IT systems could significantly limit our ability to manage and operate our business efficiently. These systems are vulnerable to, among other things, damage and interruption from power loss or natural disasters, computer system and network failures, loss of telecommunications services, physical and electronic loss of data, security breaches and computer viruses, which could result in a loss of sensitive business information, systems interruption or the disruption of our business operations. To protect against unauthorized access or attacks, we have implemented infrastructure protection technologies and disaster recovery plans, but there can be no assurance that a technology systems breach or systems failure will not have a material adverse effect on our financial condition or results of operations.
Our business and our reputation could be adversely affected by the failure to protect sensitive customer, employee or vendor data, whether as a result of cyber security attacks or otherwise, or to comply with applicable regulations relating to data security and privacy.
In the normal course of our business as a motor fuel, food service and merchandise retailer, we obtain large amounts of personal data, including credit and debit card information from our customers. In recent years several retailers have experienced data breaches

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resulting in exposure of sensitive customer data, including payment card information. While we have invested significant amounts in the protection of our IT systems and maintain what we believe are adequate security controls over individually identifiable customer, employee and vendor data provided to us, a breakdown or a breach in our systems that results in the unauthorized release of individually identifiable customer or other sensitive data could nonetheless occur and have a material adverse effect on our reputation, operating results and financial condition. Such a breakdown or breach could also materially increase the costs we incur to protect against such risks. Also, a material failure on our part to comply with regulations relating to our obligation to protect such sensitive data or to the privacy rights of our customers, employees and others could subject us to fines or other regulatory sanctions and potentially to lawsuits.
Cyber attacks are rapidly evolving and becoming increasingly sophisticated. A successful cyber attack resulting in the loss of sensitive customer, employee or vendor data could adversely affect our reputation, results of operations, financial condition and liquidity, and could result in litigation against us or the imposition of penalties. Moreover, a security breach could require that we expend significant additional resources to upgrade further the security measures that we employ to guard against cyber attacks.
We rely on our suppliers to provide trade credit terms to adequately fund our ongoing operations.
Our business is impacted by the availability of trade credit to fund fuel purchases. An actual or perceived downgrade in our liquidity or operations (including any credit rating downgrade by a rating agency) could cause our suppliers to seek credit support in the form of additional collateral, limit the extension of trade credit, or otherwise materially modify their payment terms. Any material changes in our payment terms, including early payment discounts, or availability of trade credit provided by our principal suppliers could impact our liquidity, results of operations and cash available for distribution to our unitholders.
Our future debt levels may impair our financial condition and our ability to make distributions to our unitholders.
We had $3.1 billion of debt outstanding as of December 31, 2019. We have the ability to incur additional debt under our revolving credit facility and the indentures governing our senior notes. The level of our future indebtedness could have important consequences to us, including:
		
•	making it more difficult for us to satisfy our obligations with respect to our senior notes and our credit agreements governing our revolving credit facility and term loan;	
		
•	limiting our ability to borrow additional amounts to fund working capital, capital expenditures, acquisitions, debt service requirements, the execution of our growth strategy and other activities;	
		
•	requiring us to dedicate a substantial portion of our cash flow from operations to pay interest on our debt, which would reduce our cash flow available to make distributions to our unitholders and to fund working capital, capital expenditures, acquisitions, execution of our growth strategy and other activities;	
		
•	making us more vulnerable to adverse changes in general economic conditions, our industry and government regulations and in our business by limiting our flexibility in planning for, and making it more difficult for us to react quickly to, changing conditions; and	
		
•	placing us at a competitive disadvantage compared with our competitors that have less debt.	
In addition, we may not be able to generate sufficient cash flow from our operations to repay our indebtedness when it becomes due and to meet other cash needs. Our ability to service our debt depends upon, amongst other things, our financial and operating performance as impacted by prevailing economic conditions, and financial, business, regulatory and other factors, some of which are beyond our control. In addition, our ability to service our debt will depend on market interest rates, since the rates applicable to a portion of our borrowings fluctuate. If we are not able to pay our debts as they become due, we will be required to pursue one or more alternative strategies, such as selling assets, refinancing or restructuring our indebtedness or selling additional debt or equity securities. We may not be able to refinance our debt or sell additional debt or equity securities or our assets on favorable terms, if at all, and if we must sell our assets, it may negatively affect our ability to generate revenues.
Changes in LIBOR reporting practices or the method in which LIBOR is determined may adversely affect the market value of our current or future debt obligations, including our revolving credit facility.
As of February 14, 2020, we had outstanding approximately $225 million of debt that bears interest at variable interest rates that use the London Interbank Offered Rate (“LIBOR”) as a benchmark rate. On July 27, 2017, the Financial Conduct Authority (the “FCA”), which regulates LIBOR, announced that it intends to stop persuading or compelling banks to submit LIBOR quotations after 2021. It is unclear whether LIBOR will cease to exist or if new methods of calculating LIBOR will be established such that it continues to exist after 2021, or whether any alternative benchmark rate will attain market acceptance as a replacement for LIBOR. It is not possible to predict the further effect of the rules of the FCA, any changes in the methods by which LIBOR is determined or any other reforms to LIBOR that may be enacted in the United Kingdom, the European Union or elsewhere. Any such developments may cause LIBOR to perform differently than in the past, or cease to exist. In addition, any other legal or regulatory changes made by the FCA, the European Commission or any other successor governance or oversight body, or future changes adopted by such body, in the method by which LIBOR is determined or the change from LIBOR to an alternative benchmark rate may result in, among other

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things, a sudden or prolonged increase or decrease in LIBOR, a delay in the publication of LIBOR, and changes in the rules or methodologies in LIBOR, which may discourage market participants from continuing to administer or to participate in LIBOR’s determination, and, in certain situations, could result in LIBOR no longer being determined and published.
If a published U.S. dollar LIBOR rate is unavailable after 2021, the interest rates on our debt which are indexed to LIBOR will be determined using an alternative method, which may result in interest obligations which are more than or do not otherwise correlate over time with the payments that would have been made on such debt if U.S. dollar LIBOR was available in its current form or will be determined using an alternative benchmark rate as negotiated with our counterparties. Further, the same costs and risks that may lead to the discontinuation or unavailability of U.S. dollar LIBOR may make one or more of the alternative methods impossible or impracticable to determine. Alternative benchmark rate(s) may replace LIBOR and could affect our debt securities, derivative instruments, receivables, debt payments and receipts. At this time, it is not possible to predict the effect of any establishment of any alternative benchmark rate(s) and we cannot predict what alternative benchmark rate(s) will be negotiated with our counterparties. Any new benchmark rate will likely not replicate LIBOR exactly, and any changes to benchmark rates may have an uncertain impact on our cost of funds and our access to the capital markets. Any of these proposals or consequences could have a material adverse effect on our financing costs.
Increases in interest rates could reduce the amount of cash we have available for distributions as well as the relative value of those distributions to yield-oriented investors, which could cause a decline in the market value of our common units.
Approximately $162 million of our outstanding indebtedness as of December 31, 2019 bears interest at variable interest rates. Should those rates rise, the amount of cash we would otherwise have available for distribution would ordinarily be expected to decline, which could impact our ability to maintain or grow our quarterly distributions. Additionally, an increase in interest rates in lower risk investment alternatives, such as United States treasury securities, could cause investors to demand a relatively higher distribution yield on our common units, which, unless we are able to raise our distribution, would imply a lower trading price for our common units. Consequently, rising interest rates could cause a significant decline in the market value of our common units.
Our existing debt agreements have substantial restrictions and financial covenants that may restrict our business and financing activities and our ability to pay distributions to our unitholders.
We are dependent upon the earnings and cash flow generated by our operations in order to meet our debt service obligations and to allow us to make cash distributions to our unitholders. The operating and financial restrictions and covenants in our credit agreement, the indentures governing our senior notes and any future financing agreements may restrict our ability to finance future operations or capital needs, to engage in or expand our business activities or to pay distributions to our unitholders. For example, our credit agreement and the indentures governing our senior notes restrict our ability to, among other things:
		
•	incur certain additional indebtedness;	
		
•	incur, permit, or assume certain liens to exist on our properties or assets;	
		
•	make certain investments or enter into certain restrictive material contracts;	
		
•	repurchase units; and	
		
•	merge or dispose of all or substantially all of our assets.	
In addition, our credit agreement contains covenants requiring us to maintain certain financial ratios. See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources” for additional information.
Our future ability to comply with these restrictions and covenants is uncertain and will be affected by the levels of cash flow from our operations and other events or circumstances beyond our control. If market or other economic conditions deteriorate, our ability to comply with these covenants may be impaired. If we violate any provisions of our credit agreement or the indentures governing our senior notes that are not cured or waived within the appropriate time period provided therein, a significant portion of our indebtedness may become immediately due and payable, our ability to make distributions to our unitholders will be inhibited and our lenders’ commitment to make further loans to us may terminate. We might not have, or be able to obtain, sufficient funds to make these accelerated payments.
We depend on cash flow generated by our subsidiaries.
We are a holding company with no material assets other than the equity interests in our subsidiaries. Our subsidiaries conduct all of our operations and own all of our assets. These subsidiaries are distinct legal entities and, under certain circumstances, legal and contractual restrictions may limit our ability to obtain cash from our subsidiaries and our subsidiaries may not be able to, or be permitted to, make distributions to us. In the event that we do not receive distributions from our subsidiaries, we may be unable to meet our financial obligations or make distributions to our unitholders.

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The swaps regulatory provisions of the Dodd-Frank Act and the rules adopted thereunder could have an adverse effect on our ability to use derivative instruments to mitigate the risks of changes in commodity prices and interest rates and other risks associated with our business.
Provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) and rules adopted by the Commodity Futures Trading Commission (the “CFTC”), the SEC and other prudential regulators establish federal regulation of the physical and financial derivatives, including over-the-counter derivatives market and entities, such as us, participating in that market. While most of these regulations are already in effect, the implementation process is still ongoing and the CFTC continues to review and refine its initial rulemakings through additional interpretations and supplemental rulemakings. As a result, any new regulations or modifications to existing regulations could significantly increase the cost of derivative contracts, materially alter the terms of derivative contracts, reduce the availability and/or liquidity of derivatives to protect against risks we encounter, reduce our ability to monetize or restructure our existing derivative contracts, and increase our exposure to less creditworthy counterparties. Any of these consequences could have a material adverse effect on our financial condition, results of operations and cash available for distribution to our unitholders.
The CFTC has re-proposed speculative position limits for certain futures and option contracts in the major energy markets and for swaps that are their economic equivalents, although certain bona fide hedging transactions would be exempt from these position limits provided that various conditions are satisfied. The CFTC has also finalized a related aggregation rule that requires market participants to aggregate their positions with certain other persons under common ownership and control, unless an exemption applies, for purposes of determining whether the position limits have been exceeded. If adopted, the revised position limits rule and its finalized companion rule on aggregation may create additional implementation or operational exposure. In addition to the CFTC federal speculative position limit regime, designated contract markets (“DCMs”) also maintain speculative position limit and accountability regimes with respect to contracts listed on their platform as well as aggregation requirements similar to the CFTC’s final aggregation rule. Any speculative position limit regime, whether imposed at the federal-level or at the DCM-level may impose added operating costs to monitor compliance with such position limit levels, addressing accountability level concerns and maintaining appropriate exemptions, if applicable.
The Dodd-Frank Act requires that certain classes of swaps be cleared on a derivatives clearing organization and traded on a DCM or other regulated exchange, unless exempt from such clearing and trading requirements, which could result in the application of certain margin requirements imposed by derivatives clearing organizations and their members. The CFTC and prudential regulators have also adopted mandatory margin requirements for uncleared swaps entered into between swap dealers and certain other counterparties. We currently qualify for and rely upon an end-user exception from such clearing and margin requirements for the swaps we enter into to hedge our commercial risks. However, the application of the mandatory clearing and trade execution requirements and the uncleared swaps margin requirements to other market participants, such as swap dealers, may adversely affect the cost and availability of the swaps that we use for hedging.
In addition to the Dodd-Frank Act, the European Union and other foreign regulators have adopted and are implementing local reforms generally comparable with the reforms under the Dodd-Frank Act. Implementation and enforcement of these regulatory provisions may reduce our ability to hedge our market risks with non-U.S. counterparties and may make transactions involving cross-border swaps more expensive and burdensome. Additionally, the lack of regulatory equivalency across jurisdictions may increase compliance costs and make it more difficult to satisfy our regulatory obligations.
An impairment of goodwill and intangible assets could reduce our earnings.
As of December 31, 2019, our consolidated balance sheet reflected $1.56 billion of goodwill and $646 million of intangible assets. Goodwill is recorded when the purchase price of a business exceeds the fair value of the tangible and separately measurable intangible net assets. Generally accepted accounting principles (“GAAP”) require us to test goodwill and indefinite-lived intangible assets for impairment on an annual basis or when events or circumstances occur, indicating that goodwill or indefinite-lived intangible assets might be impaired. Long-lived assets such as intangible assets with finite useful lives are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. If we determine that any of our goodwill or intangible assets were impaired, we would be required to take an immediate charge to earnings with a correlative effect on partners’ capital and balance sheet leverage as measured by debt to total capitalization. Impairment charges are allowed to be removed from our debt covenant calculations.
See Note 8 in the accompanying Notes to Consolidated Financial Statements for more information.
Risks Related to Our Structure
ETO owns and controls our general partner, which has sole responsibility for conducting our business and managing our operations. Our general partner and its affiliates, including ETO and ET, have conflicts of interest with us and limited fiduciary duties and they may favor their own interests to the detriment of us and our unitholders.
ETO owns and controls our general partner and appoints all of the officers and directors of our general partner. Although our general partner has a fiduciary duty to manage us in a manner beneficial to us and our unitholders, the executive officers and directors of our general partner have a fiduciary duty to manage our general partner in a manner beneficial to ETO. Therefore, conflicts of interest

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may arise between ETO and its affiliates, including our general partner, on the one hand, and us and our unitholders, on the other hand. In resolving these conflicts of interest, our general partner may favor its own interests and the interests of its affiliates over the interests of our common unitholders. These conflicts include the following situations, among others:
		
•	Our general partner’s affiliates, including ETO, ET and its affiliates, are not prohibited from engaging in other business or activities, including those in direct competition with us.	
		
•	In addition, neither our partnership agreement nor any other agreement requires ETO to pursue a business strategy that favors us. The affiliates of our general partner have fiduciary duties to make decisions in their own best interests and in the best interest of their owners, which may be contrary to our interests. In addition, our general partner is allowed to take into account the interests of parties other than us or our unitholders, such as ETO, in resolving conflicts of interest, which has the effect of limiting its fiduciary duty to our unitholders.	
		
•	Certain officers and directors of our general partner are officers or directors of affiliates of our general partner, and also devote significant time to the business of these entities and are compensated accordingly.	
		
•	Affiliates of our general partner, including ETO, are not limited in their ability to compete with us and may offer business opportunities or sell assets to parties other than us.	
		
•	Our partnership agreement provides that our general partner may, but is not required to, in connection with its resolution of a conflict of interest, seek “special approval” of such resolution by appointing a conflicts committee of the general partner’s board of directors composed of one or more independent directors to consider such conflicts of interest and to either, itself, take action or recommend action to the board of directors, and any resolution of the conflict of interest by the conflicts committee shall be conclusively deemed to be approved by our unitholders.	
		
•	Except in limited circumstances, our general partner has the power and authority to conduct our business without unitholder approval.	
		
•	Our general partner determines the amount and timing of asset purchases and sales, borrowings, repayment of indebtedness and issuances of additional partnership securities and the level of reserves, each of which can affect the amount of cash that is distributed to our unitholders.	
		
•	Our general partner determines the amount and timing of any capital expenditure and whether a capital expenditure is classified as a maintenance capital expenditure or an expansion capital expenditure. These determinations can affect the amount of cash that is distributed to our unitholders.	
		
•	Our general partner may cause us to borrow funds in order to permit the payment of cash distributions, even if the purpose or effect of the borrowing is to make incentive distributions on the incentive distribution rights.	
		
•	Our partnership agreement permits us to distribute up to $25 million as operating surplus, even if it is generated from asset sales, non-working capital borrowings or other sources that would otherwise constitute capital surplus. This cash may be used to fund distributions on the incentive distribution rights.	
		
•	Our general partner determines which costs incurred by it and its affiliates are reimbursable by us.	
		
•	Our partnership agreement does not restrict our general partner from causing us to pay it or its affiliates for any services rendered to us or entering into additional contractual arrangements with its affiliates on our behalf. There is no limitation on the amounts our general partner can cause us to pay it or its affiliates.	
		
•	Our general partner has limited its liability regarding our contractual and other obligations.	
		
•	Our general partner may exercise its right to call and purchase common units if it and its affiliates own more than 80% of the common units.	
		
•	Our general partner controls the enforcement of obligations owed to us by it and its affiliates. In addition, our general partner will decide whether to retain separate counsel or others to perform services for us.	
		
•	ETO may elect to cause us to issue common units to it in connection with a resetting of the target distribution levels related to ETO’s incentive distribution rights without the approval of the conflicts committee of the board of directors of our general partner or our unitholders. This election may result in lower distributions to our common unitholders in certain situations.	
Our general partner has limited its liability regarding our obligations.
Our general partner has limited its liability under contractual arrangements so that the counterparties to such arrangements have recourse only against our assets, and not against our general partner or its assets. Our general partner may therefore cause us to incur indebtedness or other obligations that are nonrecourse to our general partner. Our partnership agreement provides that any action taken by our general partner to limit its liability is not a breach of our general partner’s fiduciary duties, even if we could have obtained more

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favorable terms without the limitation on liability. In addition, we are obligated to reimburse or indemnify our general partner to the extent that it incurs obligations on our behalf. Any such reimbursement or indemnification payments would reduce the amount of cash otherwise available for distribution to our unitholders.
Our general partner may, in its sole discretion, approve the issuance of partnership securities and specify the terms of such partnership securities.
Pursuant to our partnership agreement, our general partner has the ability, in its sole discretion and without the approval of our unitholders, to approve the issuance of securities by the Partnership at any time and to specify the terms and conditions of such securities. The securities authorized to be issued may be issued in one or more classes or series, with such designations, preferences, rights, powers and duties (which may be senior to existing classes and series of partnership securities), as shall be determined by our general partner, including:
		
•	the right to share in Partnership’s profits and losses;	
		
•	the right to share in the Partnership’s distributions;	
		
•	the rights upon dissolution and liquidation of the Partnership;	
		
•	whether, and the terms upon which, the Partnership may redeem the securities;	
		
•	whether the securities will be issued, evidenced by certificates and assigned or transferred; and	
		
•	the right, if any, of the security to vote on matters relating to the Partnership, including matters relating to the relative rights, preferences and privileges of such security.	
Our partnership agreement requires that we distribute all of our available cash, which could limit our ability to grow and make acquisitions.
Our partnership agreement requires that we distribute all of our available cash to our unitholders. Our general partner will
determine the amount and timing of such distributions and has broad discretion to establish and make additions to our reserves in amounts it determines in its reasonable discretion to be necessary or appropriate. As such, we rely primarily upon external financing sources, including borrowings under our revolving credit facility and the issuance of debt and equity securities, to fund our acquisitions and expansion capital requirements. To the extent we are unable to finance growth externally, our cash distribution policy may significantly impair our ability to grow.
In addition, because we distribute all of our available cash, our growth rate may not be as fast as that of businesses that reinvest their available cash to expand ongoing operations. To the extent we issue additional units in connection with any acquisitions or expansion capital expenditures, the payment of distributions on those additional units may increase the risk that we will be unable to maintain or increase our per unit distribution level. There are no limitations in our partnership agreement on our ability to issue additional units, including units ranking senior to existing common units. The incurrence of bank borrowings or other debt to finance our growth strategy may result in increased interest expense, which, in turn, may impact the available cash that we have to distribute to our unitholders.
Our partnership agreement limits the liability and duties of our general partner and restricts the remedies available to us and our common unitholders for actions taken by our general partner that might otherwise constitute breaches of fiduciary duty.
Our partnership agreement limits the liability and duties of our general partner, while also restricting the remedies available to our common unitholders for actions that, without these limitations, might constitute breaches of fiduciary duty. Delaware partnership law permits such contractual reductions of fiduciary duty. By purchasing common units, common unitholders consent to be bound by the partnership agreement, and pursuant to our partnership agreement, each common unitholder consents to various actions and conflicts of interest contemplated in our partnership agreement that might otherwise constitute a breach of fiduciary or other duties under Delaware law. For example:
		
•	Our partnership agreement permits our general partner to make a number of decisions in its individual capacity, as opposed to its capacity as general partner. This entitles our general partner to consider only the interests and factors that it desires, with no duty or obligation to give consideration to the interests of, or factors affecting, our common unitholders. Decisions made by our general partner in its individual capacity will be made by ETO, as the owner of our general partner, and not by the board of directors of our general partner. Examples of such decisions include:	
		
•	whether to exercise limited call rights;	
		
•	how to exercise voting rights with respect to any units it owns;	
		
•	whether to exercise registration rights; and	
		
•	whether to consent to any merger or consolidation, or amendment to our partnership agreement.	

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•	Our partnership agreement provides that our general partner will not have any liability to us or our unitholders for decisions made in its capacity as general partner so long as it acted in good faith, meaning it believed that the decisions were not adverse to the interests of our partnership.	
		
•	Our partnership agreement provides that our general partner and the officers and directors of our general partner will not be liable for monetary damages to us for any acts or omissions unless there has been a final and non-appealable judgment entered by a court of competent jurisdiction determining that our general partner or those persons acted in bad faith or, in the case of a criminal matter, acted with knowledge that such person’s conduct was criminal.	
		
•	Our partnership agreement provides that our general partner will not be in breach of its obligations under the partnership agreement or its duties to us or our limited partners with respect to any transaction involving an affiliate if:	
		
•	the transaction with an affiliate or the resolution of a conflict of interest is:	
		
•	approved by the conflicts committee of the board of directors of our general partner, although our general partner is not obligated to seek such approval; or	
		
•	approved by the vote of a majority of the outstanding common units, excluding any common units owned by our general partner and its affiliates; or	
		
•	the board of directors of our general partner acted in good faith in taking any action or failing to act.	
If an affiliate transaction or the resolution of a conflict of interest is not approved by our common unitholders or the conflicts committee then it will be presumed that, in making its decision, taking any action or failing to act, the board of directors acted in good faith, and in any proceeding brought by or on behalf of any limited partner or the partnership, the person bringing or prosecuting such proceeding will have the burden of overcoming such presumption.
Our partnership agreement limits the forum, venue and jurisdiction of claims, suits, actions or proceedings
Our partnership agreement is governed by Delaware law. Our partnership agreement requires that any claims, suits, actions or proceedings:

•	arising out of or relating in any way to our partnership agreement (including any claims, suits or actions to interpret, apply or enforce the provisions of our partnership agreement or the duties, obligations or liabilities among our limited partners or of our limited partners to us, or the rights or powers of, or restrictions on, our limited partners or us);	
		
•	brought in a derivative manner on our behalf;	
		
•	asserting a claim of breach of a fiduciary duty owed by any director, officer or other employee of us or our general partner, or owed by our general partner, to us or the limited partners;	
		
•	asserting a claim arising pursuant to any provision of the Delaware Act; or	
		
•	asserting a claim governed by the internal affairs doctrine,	
will be exclusively brought in the Court of Chancery of the State of Delaware (or, if such court does not have subject matter jurisdiction thereof, any other court located in the State of Delaware with subject matter jurisdiction). By purchasing a common unit, a limited partner is irrevocably consenting to these limitations and provisions regarding claims, suits, actions or proceedings and submitting to the exclusive jurisdiction of the Court of Chancery of the State of Delaware in connection with any such claims, suits, actions or proceedings.
The provisions may have the effect of discouraging lawsuits against our directors, officers, employees and agents. The enforceability of similar forum selection provisions in other companies’ certificates of incorporation or similar governing documents have been challenged in legal proceedings, and it is possible that, in connection with one or more actions or proceedings described above, a court could find that the forum selection provision contained in our partnership agreement is inapplicable or unenforceable in such action or actions, including with respect to claims arising under the federal securities laws. Limited partners will not be deemed, by operation of the forum selection provision alone, to have waived claims arising under the federal securities laws and the rules and regulations thereunder.
The forum selection provision is intended to apply “to the fullest extent permitted by applicable law” to the above-specified types of actions and proceedings, including, to the extent permitted by the federal securities laws, to lawsuits asserting both the above-specified claims and federal securities claims. However, application of the forum selection provision may in some instances be limited by applicable law. Section 27 of the Exchange Act provides: “The district courts of the United States ... shall have exclusive jurisdiction of violations of the Exchange Act or the rules and regulations thereunder, and of all suits in equity and actions at law brought to enforce any liability or duty created by the Exchange Act or the rules and regulations thereunder.” As a result, the forum selection provision will not apply to actions arising under the Exchange Act or the rules and regulations thereunder. However, Section 22 of the Securities Act provides for concurrent federal and state court jurisdiction over actions under the Securities Act and the rules and regulations thereunder, subject to a limited exception for certain “covered class actions” as defined in Section 16 of the Securities Act and interpreted by the courts.

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Accordingly, we believe that the forum selection provision would apply to actions arising under the Securities Act or the rules and regulations thereunder, except to the extent a particular action fell within the exception for covered class actions.
Cost reimbursements due to our general partner and its affiliates for services provided to us or on our behalf will reduce cash available for distribution to our unitholders. The amount and timing of such reimbursements will be determined by our general partner.
Prior to making any distribution on the common units, we will reimburse our general partner and its affiliates for all expenses they incur and payments they make on our behalf pursuant to our partnership agreement. Our partnership agreement does not limit the amount of expenses for which our general partner and its affiliates may be reimbursed. Our partnership agreement provides that our general partner will determine in good faith the expenses that are allocable to us. Reimbursement of expenses and payment of fees to our general partner and its affiliates will reduce the amount of cash available to pay distributions to our unitholders.
ETO may elect to cause us to issue common units to it in connection with a resetting of the target distribution levels related to its incentive distribution rights, without the approval of the conflicts committee of our general partner’s board of directors or the holders of our common units. This could result in lower distributions to holders of our common units.
ETO has the right, at any time it has received incentive distributions at the highest level to which it is entitled (50%) for each of the prior four consecutive whole fiscal quarters (and the amount of each such did not exceed adjusted operating surplus for each such quarter), to reset the initial target distribution levels at higher levels based on our cash distributions at the time of the exercise of the reset election. Following a reset election by ETO, the minimum quarterly distribution will be adjusted to equal the reset minimum quarterly distribution, and the target distribution levels will be reset to correspondingly higher levels based on the same percentage increases above the reset minimum quarterly distribution reflected by the current target distribution levels.
If ETO elects to reset the target distribution levels, it will be entitled to receive a number of common units equal the number of common units which would have entitled their holder to an average aggregate quarterly cash distribution in the prior two quarters equal to the average of the distributions to ETO on the incentive distribution rights in the prior two quarters. We anticipate that ETO would exercise this reset right in order to facilitate acquisitions or internal growth projects that would not be sufficiently accretive to cash distributions per common unit without such conversion. It is possible, however, that ETO could exercise this reset election at a time when it is experiencing, or expects to experience, declines in the cash distributions it receives related to its incentive distribution rights and may, therefore, desire to be issued common units rather than retain the right to receive incentive distributions based on the initial target distribution levels. As a result, a reset election may cause our common unitholders to experience a reduction in the amount of cash distributions that they would have otherwise received had we not issued new common units to ETO in connection with resetting the target distribution levels.
Holders of our common units have limited voting rights and are not entitled to elect our general partner or its directors.
Unlike the holders of common stock in a corporation, our common unitholders have only limited voting rights on matters affecting our business and, therefore, limited ability to influence management’s decisions regarding our business. Our common unitholders have no right on an annual or ongoing basis to elect our general partner or its board of directors. The board of directors of our general partner, including the independent directors, are chosen entirely by ETO due to its ownership of our general partner, and not by our common unitholders. Unlike a publicly traded corporation, we do not conduct annual meetings of our unitholders to elect directors or conduct other matters routinely conducted at annual meetings of stockholders of corporations. Our partnership agreement also contains provisions limiting the ability of unitholders to call meetings or to acquire information about our operations, as well as other provisions limiting our unitholders’ ability to influence the manner or direction of management.
Even if holders of our common units are dissatisfied, they cannot easily remove our general partner without its consent.
If our unitholders are dissatisfied with the performance of our general partner, they have limited ability to remove our general partner. Our general partner generally may not be removed except upon the vote of the holders of 66⅔% of our outstanding common units, including units owned by our general partner and its affiliates. As of December 31, 2019, ETO and its affiliates held approximately 34.3% of our outstanding common units, which constitutes a 28.6% limited partner interest in us.
Our general partner interest or the control of our general partner may be transferred to a third party without unitholder consent.
Our general partner may transfer its general partner interest to a third party without the consent of our unitholders in a merger, in a sale of all or substantially all of its assets or in other transactions so long as certain conditions are satisfied. Furthermore, our partnership agreement does not restrict the ability of ETO to transfer all or a portion of its interest in our general partner to a third party. Any new owner of our general partner or our general partner interest would then be in a position to replace the board of directors and executive officers of our general partner with its own designees without the consent of unitholders and thereby exert significant control over us, and may change our business strategy.
Our general partner has a limited call right that may require unitholders to sell their common units at an undesirable time or price.
If at any time our general partner and its affiliates own more than 80% of the common units, our general partner will have the right, which it may assign to any of its affiliates or to us, but not the obligation, to acquire all, but not less than all, of the common units

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held by unaffiliated persons at a price equal to the greater of (1) the average of the daily closing price of the common units over the 20 trading days preceding the date three days before notice of exercise of the call right is first mailed and (2) the highest per-unit price paid by our general partner or any of its affiliates for common units during the 90-day period preceding the date such notice is first mailed. As a result, unitholders may be required to sell their common units at an undesirable time or price and may not receive any return or a negative return on their investment. Unitholders may also incur a tax liability upon a sale of their units. Our general partner is not obligated to obtain a fairness opinion regarding the value of the common units to be repurchased by it upon exercise of the limited call right. There is no restriction in our partnership agreement that prevents our general partner from issuing additional common units and exercising its call right.
We may issue additional units without unitholder approval, which would dilute existing unitholder ownership interests.
Our partnership agreement does not limit the number of additional limited partner interests we may issue at any time without the approval of our unitholders. The issuance of additional common units or other equity interests of equal or senior rank will have the following effects:
		
•	our existing unitholders’ proportionate ownership interest in us will decrease;	
		
•	the amount of cash available for distribution on each unit may decrease;	
		
•	the ratio of taxable income to distributions may increase;	
		
•	the relative voting strength of each previously outstanding unit may be diminished; and	
		
•	the market price of the common units may decline.	
The market price of our common units could be adversely affected by sales of substantial amounts of our common units in the public or private markets, including sales by ETO.
As of December 31, 2019, ETO owned 28,463,967 of our common units. The sale or disposition of a substantial portion of these units in the public or private markets could reduce the market price of our outstanding common units.
Our partnership agreement restricts the voting rights of unitholders owning 20% or more of our outstanding common units.
Our partnership agreement restricts unitholders’ voting rights by providing that any units held by a person or group that owns 20% or more of any class of units then outstanding, other than our general partner and its affiliates, their transferees and persons who acquired such units with the prior approval of the board of directors of our general partner, cannot vote on any matter.
The amount of cash we have available for distribution to holders of our units depends primarily on our cash flow and not solely on profitability, which may prevent us from making cash distributions during periods when we record net income.
The amount of cash we have available for distribution depends primarily upon our cash flow, including cash flow from working capital or other borrowings, and not solely on profitability, which will be affected by non-cash items. As a result, we may pay cash distributions during periods when we record net losses for financial accounting purposes and may not pay cash distributions during periods when we record net income.
Unitholders may have liability to repay distributions.
Under certain circumstances, unitholders may have to repay amounts wrongfully returned or distributed to them. Under Section 17-607 of the Delaware Revised Uniform Limited Partnership Act, or the Delaware Act, we may not make a distribution to our unitholders if the distribution would cause our liabilities to exceed the fair value of our assets. Delaware law provides that for a period of three years from the date of an impermissible distribution, limited partners who received the distribution and who knew at the time of the distribution that it violated Delaware law will be liable to the limited partnership for the distribution amount. A purchaser of units who becomes a limited partner is liable for the obligations of the transferring limited partner to make contributions to the partnership that are known to such purchaser at the time it became a limited partner and for unknown obligations if the liabilities could be determined from the partnership agreement. Liabilities to partners on account of their partnership interests and liabilities that are non-recourse to the partnership are not counted for purposes of determining whether a distribution is permitted.
The NYSE does not require a publicly traded partnership like us to comply with certain corporate governance requirements.
Because we are a publicly traded partnership, the NYSE does not require us to have a majority of independent directors on our general partner’s board of directors or to establish a compensation committee or a nominating and corporate governance committee. Accordingly, unitholders do not have the same protections afforded to stockholders of corporations that are subject to all of the corporate governance requirements of the applicable stock exchange.

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Tax Risks to Common Unitholders
Our tax treatment depends on our status as a partnership for U.S. federal income tax purposes, as well as our not being subject to a material amount of entity-level taxation by individual states. If the Internal Revenue Service (“IRS”) were to treat us as a corporation for U.S. federal income tax purposes or we were otherwise subject to a material amount of entity-level taxation, then our cash available for distribution to our unitholders would be substantially reduced.
The anticipated after-tax economic benefit of an investment in our common units depends largely on our being treated as a partnership for U.S. federal income tax purposes.
Despite the fact that we are organized as a limited partnership under Delaware law, we will be treated as a corporation for U.S. federal income tax purposes unless we satisfy a “qualifying income” requirement. Based upon our current operations, we believe we satisfy the qualifying income requirement. Failing to meet the qualifying income requirement or a change in current law could cause us to be treated as a corporation for U.S. federal income tax purposes or otherwise subject us to taxation as an entity.
If we were treated as a corporation for U.S. federal income tax purposes, we would pay U.S. federal income tax on our taxable income at the corporate tax rate, which is currently a maximum of 21%, and would likely pay state income tax at varying rates. Distributions to our unitholders who are treated as holders of corporate stock would generally be taxed again as corporate distributions, and no income, gains, losses, deductions or credits would flow through to our unitholders. Because a tax would be imposed upon us as a corporation, our cash available for distribution to our unitholders would be substantially reduced.
Our partnership agreement provides that if a law is enacted or existing law is modified or interpreted in a manner that subjects us to taxation as a corporation or otherwise subjects us to entity-level taxation for federal, state or local income tax purposes, the minimum quarterly distribution amount and the target distribution amounts may be adjusted to reflect the impact of that law on us.
In addition, changes in current state law may subject us to additional entity-level taxation by individual states. Several states are evaluating ways to subject partnerships to entity-level taxation through the imposition of state income, franchise and other forms of taxation. For example, we are currently subject to the entity-level Texas franchise tax. Imposition of any such additional taxes on us or an increase in the existing tax rates would reduce the cash available for distribution to our unitholders. Therefore, if we were treated as a corporation for U.S. federal income tax purposes or otherwise subjected to a material amount of entity-level taxation, there would be a material reduction in the anticipated cash flow and after-tax return to our unitholders, likely causing a substantial reduction in the value of our common units.
The tax treatment of publicly traded partnerships or an investment in our common units could be subject to potential legislative, judicial or administrative changes or differing interpretations, possibly applied on a retroactive basis.
The present U.S. federal income tax treatment of publicly traded partnerships, including us, or an investment in our common units may be modified by administrative, legislative or judicial changes or differing interpretations at any time. For example, from time to time, members of Congress propose and consider substantive changes to the existing federal income tax laws that affect publicly traded partnerships.
Any modification to the federal income tax laws may be applied retroactively and could make it more difficult or impossible for us to meet the exception for certain publicly traded partnerships to be treated as partnerships for federal income tax purposes. We are unable to predict whether any changes or other proposals will ultimately be enacted, including as a result of fundamental tax reform. Any such changes could negatively impact the value of an investment in our common units.
If the IRS makes audit adjustments to our income tax returns for tax years beginning after December 31, 2017, it (and some states) may assess and collect any taxes (including any applicable penalties and interest) resulting from such audit adjustments directly from us, in which case our cash available for distribution to our unitholders might be substantially reduced.
Pursuant to the Bipartisan Budget Act of 2015, for tax years beginning after December 31, 2017, if the IRS makes audit adjustments to our income tax returns, it (and some states) may assess and collect any taxes (including any applicable penalties and interest) resulting from such audit adjustment directly from us. To the extent possible under the new rules, our general partner may elect to either pay the taxes (including any applicable penalties and interest) directly to the IRS or, if we are eligible, issue a revised Schedule K-1 to each unitholder with respect to an audited and adjusted return. Although our general partner may elect to have our unitholders take such audit adjustment into account in accordance with their interests in us during the tax year under audit, there can be no assurance that such election will be practical, permissible or effective in all circumstances. As a result, our current unitholders may bear some or all of the tax liability resulting from such audit adjustment, even if such unitholders did not own units in us during the tax year under audit. If, as a result of any such audit adjustment, we are required to make payments of taxes, penalties and interest, our cash available for distribution to our unitholders might be substantially reduced.

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We have subsidiaries that are treated as corporations for U.S. federal income tax purposes and are subject to corporate-level income taxes.
Even though we (as a partnership for U.S. federal income tax purposes) are not subject to U.S. federal income tax, some of our operations are currently conducted through subsidiaries that are organized as corporations for U.S. federal income tax purposes. The taxable income, if any, of these subsidiaries is subject to corporate-level U.S. federal income taxes, which may reduce the cash available for distribution to us and, in turn, to our unitholders. If the IRS or other state or local jurisdictions were to successfully assert that these corporations have more tax liability than we anticipate or legislation is enacted that increases the corporate tax rate, then cash available for distribution could be further reduced. The income tax return filing positions taken by these corporate subsidiaries requires significant judgment, use of estimates, and the interpretation and application of complex tax laws. Significant judgment is also required in assessing the amounts of deductible and taxable items. Despite our belief that the income tax return positions taken by these subsidiaries are fully supportable, certain positions may be successfully challenged by the IRS, state or local jurisdictions.
Our unitholders will be required to pay taxes on their share of our income even if they do not receive any cash distributions from us.
Because our unitholders will be treated as partners to whom we will allocate taxable income that could be different in amount than the cash we distribute, our unitholders will be required to pay U.S. federal income taxes and, in some cases, state and local income taxes on their share of our taxable income whether or not they receive cash distributions from us. Our unitholders may not receive cash distributions from us equal to their share of our taxable income or even equal to the actual tax liability that results from that income.
Tax gain or loss on the disposition of our common units could be more or less than expected.
If a unitholder sells its common units, it will recognize a gain or loss equal to the difference between the amount realized and its tax basis in those common units. Because distributions in excess of a unitholder’s allocable share of our net taxable income result in a decrease in its tax basis in its common units, the amount, if any, of such prior excess distributions with respect to the common units it sells will, in effect, become taxable income to the unitholder if it sells such common units at a price greater than its tax basis in those common units, even if the price the unitholder receives is less than its original cost. Furthermore, a substantial portion of the amount realized, whether or not representing gain, may be taxed as ordinary income due to potential recapture of depreciation deductions and certain other items. In addition, because the amount realized includes a unitholder’s share of our nonrecourse liabilities, if a unitholder sells its common units, the unitholder may incur a tax liability in excess of the amount of cash it receives from the sale.
Tax-exempt entities face unique tax issues from owning common units that may result in adverse tax consequences to them.
Investments in our units by tax-exempt entities, including employee benefit plans and individual retirement accounts (known as IRAs) raise issues unique to them. For example, virtually all of our income allocated to unitholders who are organizations exempt from federal income tax, including IRAs and other retirement plans, will be “unrelated business taxable income” and will be taxable to them. Further, with respect to taxable years beginning after December 31, 2017, a tax-exempt entity with more than one unrelated trade or business (including by attribution from investment in a partnership such as ours that is engaged in one or more unrelated trade or business) is required to compute the unrelated business taxable income of such tax-exempt entity separately with respect to each such trade or business (including for purposes of determining any net operating loss deduction). As a result, for years beginning after December 31, 2017, it may not be possible for tax-exempt entities to utilize losses from an investment in our partnership to offset unrelated business taxable income from another unrelated trade or business and vice versa. Tax-exempt entities should consult a tax advisor before investing in our units.
If the IRS contests the U.S. federal income tax positions we take, the market for our common units may be adversely impacted and the cost of any IRS contest will reduce our cash available for distribution to our unitholders.
The IRS may adopt positions that differ from the positions we take. It may be necessary to resort to administrative or court proceedings to sustain some or all of the positions we take. A court may not agree with some or all of the positions we take. Any contest by the IRS may materially and adversely impact the market for our common units and the price at which they trade. The costs of any contest by the IRS will be borne indirectly by our unitholders because the costs will reduce our cash available for distribution.
We treat each purchaser of our common units as having the same tax benefits without regard to the actual common units purchased. The IRS may challenge this treatment, which could adversely affect the value of the common units.
Because we cannot match transferors and transferees of common units, we have adopted depreciation and amortization positions that may not conform to all aspects of existing Treasury Regulations. A successful IRS challenge to those positions could adversely affect the amount of tax benefits available to a unitholder. It also could affect the timing of these tax benefits or the amount of gain from a unitholder’s sale of common units and could have a negative impact on the value of our common units or result in audit adjustments to a unitholder’s tax returns.
We prorate our items of income, gain, loss and deduction between transferors and transferees of our common units each month based upon the ownership of our common units on the first day of each month, instead of on the basis of the date a particular common unit

26

is transferred. The IRS may challenge this treatment, which could change the allocation of items of income, gain, loss and deduction among our unitholders.
We generally prorate our items of income, gain, loss and deduction between transferors and transferees of our common units each month based upon the ownership of our common units on the first day of each month (the “Allocation Date”), instead of on the basis of the date a particular common unit is transferred. Similarly, we generally allocate certain deductions for depreciation of capital additions, gain or loss realized on a sale or other disposition of our assets and, in the discretion of the general partner, any other extraordinary item of income, gain, loss or deduction based upon ownership on the Allocation Date. Treasury Regulations allow a similar monthly simplifying convention, but such regulations do not specifically authorize all aspects of the proration method we have currently adopted. If the IRS were to successfully challenge our proration method, we may be required to change the allocation of items of income, gain, loss and deduction among our unitholders.
A unitholder whose common units are the subject of a securities loan (e.g., a loan to a “short seller” to cover a short sale of common units) may be considered as having disposed of those common units. If so, the unitholder would no longer be treated for U.S. federal income tax purposes as a partner with respect to those common units during the period of the loan and may recognize gain or loss from the disposition.
Because there is no tax concept of loaning a partnership interest, a unitholder whose common units are the subject of a securities loan may be considered as having disposed of the loaned common units. In that case, he may no longer be treated for U.S. federal income tax purposes as a partner with respect to those common units during the period of the loan and the unitholder may recognize gain or loss from such disposition. Moreover, during the period of the loan, any of our income, gain, loss or deduction with respect to those common units may not be reportable by the unitholder and any cash distributions received by the unitholder as to those common units could be fully taxable as ordinary income. Unitholders desiring to assure their status as partners and avoid the risk of gain recognition from a loan of their common units should modify any applicable brokerage account agreements to prohibit their brokers from borrowing their common units.
We have adopted certain valuation methodologies in determining a unitholder’s allocations of income, gain, loss and deduction. The IRS may challenge these methods or the resulting allocations, and such a challenge could adversely affect the value of our common units.
In determining the items of income, gain, loss and deduction allocable to our unitholders, we must routinely determine the fair market value of our respective assets. Although we may from time to time consult with professional appraisers regarding valuation matters, we make many fair market value estimates using a methodology based on the market value of our common units as a means to measure the fair market value of our respective assets. The IRS may challenge these valuation methods and the resulting allocations of income, gain, loss and deduction.
A successful IRS challenge to these methods or allocations could adversely affect the amount, character, and timing of taxable income or loss being allocated to our unitholders. It also could affect the amount of gain from our unitholders’ sale of common units and could have a negative impact on the value of the common units or result in audit adjustments to our unitholders’ tax returns without the benefit of additional deductions.
Unitholders will likely be subject to state and local taxes and return filing requirements in states where they do not live as a result of investing in our common units.
In addition to U.S. federal income taxes, unitholders may be subject to other taxes, including state and local income taxes, unincorporated business taxes, and estate, inheritance or intangibles taxes that may be imposed by the various jurisdictions in which we conduct business or own property now or in the future or in which the unitholder is a resident. We currently own property or do business in a substantial number of states, most of which impose a personal income tax and many impose an income tax on corporations and other entities. We may also own property or do business in other states in the future. Although an analysis of those various taxes is not presented here, each prospective unitholder should consider their potential impact on its investment in us.
Although you may not be required to file a return and pay taxes in some jurisdictions because your income from that jurisdiction falls below the filing and payment requirement, you will be required to file income tax returns and to pay income taxes in many of the jurisdictions in which we do business or own property and may be subject to penalties for failure to comply with those requirements. Some of the jurisdictions may require us, or we may elect, to withhold a percentage of income from amounts to be distributed to a unitholder who is not a resident of the jurisdiction. Withholding, the amount of which may be greater or less than a particular unitholder’s income tax liability to the jurisdiction, generally does not relieve a nonresident unitholder from the obligation to file an income tax return.
It is the responsibility of each unitholder to investigate the legal and tax consequences, under the laws of pertinent jurisdictions, of its investment in us. We strongly recommend that each prospective unitholder consult, and depend on, its own tax counsel or other advisor with regard to those matters. Further, it is the responsibility of each unitholder to file all state, local, and non-U.S., as well as U.S. federal tax returns that may be required of it.

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Unitholders may be subject to limitations on their ability to deduct interest expense we incur.
Our ability to deduct business interest expense will be limited for U.S. federal income tax purposes to an amount equal to our business interest income and 30% of our “adjusted taxable income” during the taxable year computed without regard to any business interest income or expense, and in the case of taxable years beginning before 2022, any deduction allowable for depreciation, amortization, or depletion. Business interest expense that we are not entitled to fully deduct will be allocated to each unitholder as excess business interest and can be carried forward by the unitholder to successive taxable years and used to offset any excess taxable income allocated by us to the unitholder. Any excess business interest expense allocated to a unitholder will reduce the unitholder’s tax basis in its partnership interest in the year of the allocation even if the expense does not give rise to a deduction to the unitholder in that year.
Non-U.S. unitholders will be subject to U.S. federal income taxes and withholding with respect to income and gain from owning our common units.
Non-U.S. persons are generally taxed and subject to U.S. federal income tax filing requirements on income effectively connected with a U.S. trade or business. Income allocated to our unitholders and any gain from the sale of our units will generally be considered to be “effectively connected” with a U.S. trade or business. As a result, distributions to a non-U.S. unitholder will be subject to withholding at the highest applicable effective tax rate and a non-U.S. unitholder who sells or otherwise disposes of a common unit will also be subject to U.S. federal income tax on the gain realized from the sale or disposition of that unit.
A U.S. federal income tax withholding obligation of 10% of the amount realized is generally imposed upon a non-U.S. person’s sale or exchange of an interest in a partnership that is engaged in a U.S. trade or business. However, application of this withholding rule to dispositions of publicly traded partnership interests has been temporarily suspended by the IRS until regulations or other guidance have been finalized. Non-U.S. persons should consult a tax advisor before investing in our common units.
		
Item 1B.	Unresolved Staff Comments	
None.
		
Item 2.	Properties	
A description of our properties is included in “Item 1. Business.” In addition, we own and lease warehouses and offices in Pennsylvania, Texas and Hawaii. While we may require additional warehouse and office space as our business expands, we believe that our existing facilities are adequate to meet our needs for the immediate future, and that additional facilities will be available on commercially reasonable terms as needed.
We believe that we have satisfactory title to or valid rights to use all of our material properties. Although some of our properties are subject to liabilities and leases, liens for taxes not yet due and payable, encumbrances securing payment obligations under non-competition agreements and immaterial encumbrances, easements and restrictions, we do not believe that any such burdens will materially interfere with our continued use of such properties in our business, taken as a whole. In addition, we believe that we have, or are in the process of obtaining, all required material approvals, authorizations, orders, licenses, permits, franchises and consents of, and have obtained or made all required material registrations, qualifications and filings with, the various state and local government and regulatory authorities which relate to ownership of our properties or the operations of our business.
		
Item 3.	Legal Proceedings	
Although we may, from time to time, be involved in litigation and claims arising out of our operations in the normal course of business, we do not believe that we are party to any litigation that will have a material adverse impact to our financial condition or results of operations.
		
Item 4.	Mine Safety Disclosures	
Not applicable.

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Part II
		
Item 5.	Market for Our Common Equity, Related Unitholder Matters and Issuer Purchases of Equity Securities	
Our Partnership Interest
As of February 14, 2020, we had outstanding 83,017,163 common units, 16,410,780 Class C units representing limited partner interests in the Partnership (“Class C Units”), a non-economic general partner interest and incentive distribution rights (“IDRs”). As of February 14, 2020, ETO directly owned approximately 34.3% of our outstanding common units, which constitutes a 28.6% limited partner ownership interest in us. Our general partner, Sunoco GP LLC, is 100% owned by ETO and owns a non-economic general partner interest in us. ETO also owns all of our IDRs. As discussed below, the IDRs represent the right to receive increasing percentages, up to a maximum of 50%, of the cash we distribute from operating surplus (as defined below) in excess of $0.503125 per unit per quarter. Our common units, which represent limited partner interests in us, are listed on the New York Stock Exchange (“NYSE”) under the symbol “SUN.” Our common units have been traded on the NYSE since September 20, 2012.
Holders
At the close of business on February 14, 2020, we had fourteen holders of record of our common units and two holders of record of our Class C units. The number of record holders does not include holders of units in “street names” or persons, partnerships, associations, corporations or other entities identified in security position listings maintained by depositories.
Distributions of Available Cash
Our partnership agreement requires that within 60 days after the end of each quarter, we distribute our available cash to unitholders of record on the applicable record date.
Definition of Available Cash
Available cash generally means, for any quarter, all cash and cash equivalents on hand at the end of the quarter; less, the amount of cash reserves established by our general partner at the date of determination of available cash for the quarter to:
		
•	provide for the proper conduct of our business;	
		
•	comply with applicable law, any of our debt instruments or other agreements or any other obligation; or	
		
•	provide funds for distributions to our unitholders for any one or more of the next four quarters;	
plus, if our general partner so determines on the date of determination, all or any portion of the cash on hand immediately prior to the date of determination of available cash for the quarter, including cash on hand resulting from working capital borrowings made after the end of the quarter.
Minimum Quarterly Distributions
We intend to make a cash distribution 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 the establishment of cash reserves and the payment of costs and expenses, including payments to our general partner and its affiliates. However, there is no guarantee that we will pay the minimum quarterly distribution, as described below, on our common units in any quarter. Even if our cash distribution policy is not modified or revoked, the amount of distributions paid under our policy and the decision to make any distribution is determined by our general partner, taking into consideration the terms of our partnership agreement.
Incentive Distribution Rights
The following table illustrates the percentage allocations of available cash from operating surplus, after the payment of distributions to the Class C unitholders, between our common unitholders and the holder of our IDRs based on the specified target distribution levels. The amounts set forth under “marginal percentage interest in distributions” are the percentage interests of the holder of our IDRs and the common unitholders in any available cash from operating surplus we distribute up to and including the corresponding amount in the column “total quarterly distribution per unit target amount.” The percentage interests shown for our common unitholders and the holder of our IDRs for the minimum quarterly distribution are also applicable to quarterly distribution amounts that are less than the minimum quarterly distribution. ETO currently owns our IDRs.

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 	 	 	Marginal percentage interest in distributions	
 	Total quarterly distribution per
Common unit target amount	 	Common
Unitholders	 	IDR Holder	
Minimum Quarterly Distribution	$0.4375	 	100	%	 	—		
First Target Distribution	Above $0.4375 up to $0.503125	 	100	%	 	—		
Second Target Distribution	Above $0.503125 up to $0.546875	 	85	%	 	15	%	
Third Target Distribution	Above $0.546875 up to $0.656250	 	75	%	 	25	%	
Thereafter	Above $0.656250	 	50	%	 	50	%	
Series A Preferred Units
On January 25, 2018, the Partnership redeemed all of the previously outstanding Series A Preferred Units held by ETE for an aggregate redemption amount of approximately $313 million. The redemption amount includes the original consideration of $300 million and a 1% call premium plus accrued and unpaid quarterly distributions.
Class C Units
We have outstanding an aggregate of 16,410,780 Class C units (“Class C Units”) consisting of (i) 5,242,113 Class C Units held by Aloha, and (ii) 11,168,667 Class C Units held by Sunoco Retail.
Class C Units are entitled to receive quarterly distributions at a rate of $0.8682 per Class C Unit. The distributions on the Class C Units are paid out of our available cash, except that the Class C Units do not share in distributions of available cash to the extent such cash is derived from or attributable to any distribution received by us from PropCo (our indirect wholly owned subsidiary that is subject to state and federal income tax), the proceeds of any sale of the membership interests in PropCo, or any interest or principal payments we receive with respect to indebtedness of PropCo or its subsidiaries. The Class C Units are entitled to receive distributions of available cash (other than available cash attributable to PropCo) prior to distributions of such cash being made on our common units. Any unpaid distributions on the Class C Units will accrue interest at a rate of 1.5% per annum until paid in full in cash. The Class C Units are perpetual, do not have any rights of redemption or conversion, do not have the right to vote on any matter except as otherwise required by any non-waivable provision of law, and are not traded on any public securities market.
Equity Compensation Plan
For disclosures regarding securities authorized for issuance under equity compensation plans, see “Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Unitholder Matters.”
		
Item 6.	Selected Financial Data	
The selected financial data should be read in conjunction with the audited consolidated financial statements and related notes thereto and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” included herein.

																				
 	Year Ended December 31,	
 	2019	 	2018	 	2017	 	2016	 	2015	
 	(in millions, except per unit data)	
Statement of Income Data:	 	 	 	 	 	 	 	 	 	
Total revenues	$	16,596		 	$	16,994		 	$	11,723		 	$	9,986		 	$	12,430		
Operating income	$	464		 	$	345		 	$	229		 	$	145		 	$	252		
Income from continuing operations	$	313		 	$	58		 	$	326		 	$	56		 	$	156		
Net income (loss) from continuing operations per common limited partner unit - basic	$	2.84		 	$	(0.25	)	 	$	2.13		 	$	(0.32	)	 	$	0.91		
Net income (loss) from continuing operations per common limited partner unit - diluted	$	2.82		 	$	(0.25	)	 	$	2.12		 	$	(0.32	)	 	$	0.91		
Cash distribution per unit	$	3.30		 	$	3.30		 	$	3.30		 	$	3.29		 	$	2.89		

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 	As of December 31,	
 	2019	 	2018	 	2017	 	2016	 	2015	
 	(in millions)	
Balance Sheet Data (at period end):	 	 	 	 	 	 	 	 	 	
Total assets	$	5,438		 	$	4,879		 	$	8,344		 	$	8,701		 	$	8,842		
Long-term debt, less current maturities	$	3,060		 	$	2,980		 	$	4,284		 	$	4,509		 	$	1,953		
Total equity	$	758		 	$	784		 	$	2,247		 	$	2,196		 	$	5,263		
		
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our audited consolidated financial statements and notes to audited consolidated financial statements included elsewhere in this report.
Adjusted EBITDA is a non-GAAP financial measure of performance that has limitations and should not be considered as a substitute for net income or cash provided by (used in) operating activities. Please see “Key Measures Used to Evaluate and Assess Our Business” below for a discussion of our use of Adjusted EBITDA in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and a reconciliation to net income for the periods presented.
Forward-Looking Statements
This report, including without limitation, our discussion and analysis of our financial condition and results of operations, and any information incorporated by reference, contains statements that we believe are “forward-looking statements.” These forward-looking statements generally can be identified by use of phrases such as “believe,” “plan,” “expect,” “anticipate,” “intend,” “forecast” or other similar words or phrases. Descriptions of our objectives, goals, targets, plans, strategies, costs, anticipated capital expenditures, expected cost savings and benefits are also forward-looking statements. These forward-looking statements are based on our current plans and expectations and involve a number of risks and uncertainties that could cause actual results and events to vary materially from the results and events anticipated or implied by such forward-looking statements, including:
		
•	our ability to make, complete and integrate acquisitions from affiliates or third-parties;	
		
•	business strategy and operations of Energy Transfer Operating, L.P. and Energy Transfer LP and their respective conflicts of interest with us;	
		
•	changes in the price of and demand for the motor fuel that we distribute and our ability to appropriately hedge any motor fuel we hold in inventory;	
		
•	our dependence on limited principal suppliers;	
		
•	competition in the wholesale motor fuel distribution and retail store industry;	
		
•	changing customer preferences for alternate fuel sources or improvement in fuel efficiency;	
		
•	changes in our credit rating, as assigned by rating agencies;	
		
•	a deterioration in the credit and/or capital market;	
		
•	environmental, tax and other federal, state and local laws and regulations;	
		
•	the fact that we are not fully insured against all risk incidents to our business;	
		
•	dangers inherent in the storage and transportation of motor fuel;	
		
•	our ability to manage growth and/or control costs;	
		
•	our reliance on senior management, supplier trade credit and information technology; and	
		
•	our partnership structure, which may create conflicts of interest between us and Sunoco GP LLC, our general partner (“General Partner”), and its affiliates, and limits the fiduciary duties of our General Partner and its affiliates.	
All forward-looking statements are expressly qualified in their entirety by the foregoing cautionary statements.
For a discussion of these and other risks and uncertainties, please refer to “Item 1A. Risk Factors” included herein. The list of factors that could affect future performance and the accuracy of forward-looking statements is illustrative but by no means exhaustive. Accordingly, all forward-looking statements should be evaluated with the understanding of their inherent uncertainty. The forward‑looking statements included in this report are based on, and include, our estimates as of the filing of this report. We anticipate that subsequent

31

events and market developments will cause our estimates to change. However, while we may elect to update these forward-looking statements at some point in the future, we specifically disclaim any obligation to do so except as required by law, even if new information becomes available in the future.
Overview
As used in this Management’s Discussion and Analysis of Financial Condition and Results of Operations, the terms “Partnership,” “SUN,” “we,” “us,” or “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 primarily engaged in the distribution of motor fuels to independent dealers, distributors, and other customers and the distribution of motor fuels to end customers at retail sites operated by commission agents. In addition, we receive lease income through the leasing or subleasing of real estate used in the retail distribution of motor fuel. We also operate 75 retail stores located in Hawaii and New Jersey.
We are managed by our General Partner. As of December 31, 2019, Energy Transfer Operating, L.P. (“ETO”) owns 100% of the membership interests in our General Partner, all of our incentive distribution rights and approximately 34.3% of our common units, which constitutes a 28.6% limited partner interest in us. In October 2018, Energy Transfer Equity, L.P. (“ETE”) and Energy Transfer Partners, L.P. (“ETP”) completed the previously announced merger of ETP with a wholly‑owned subsidiary of ETE in a unit-for-unit exchange. Following the closing of the merger, ETE changed its name to “Energy Transfer LP” (“ET”) and its common units began trading on the New York Stock Exchange under the “ET” ticker symbol on October 19, 2018. In addition, ETP changed its name to “Energy Transfer Operating, L.P.”
In connection with the transaction, immediately prior to closing, ETE contributed 2,263,158 of our common units to ETP in exchange for 2,874,275 ETP common units, and contributed 100% of the limited liability company interests in our General Partner and all of our incentive distribution rights to ETP in exchange for 42,812,389 ETP common units. Additional information is provided in Note 1 of our Notes to Consolidated Financial Statements.
We believe we are one of the largest independent motor fuel distributors by gallons in the United States and one of the largest distributors of Chevron, Exxon, and Valero branded motor fuel in the United States. In addition to distributing motor fuel, we also distribute other petroleum products such as propane and lubricating oil. 
We purchase motor fuel primarily from independent refiners and major oil companies and distribute it across more than 30 states throughout the East Coast, Midwest, South Central and Southeast regions of the United States, as well as Hawaii, to:
		
•	75 company-owned and operated retail stores;	
		
•	537 independently operated commission agent locations where we sell motor fuel to retail customers under commission agent arrangement with such operators;	
		
•	6,742 retail stores operated by independent operators, which we refer to as “dealers” or “distributors,” pursuant to long-term distribution agreements; and	
		
•	2,581 other commercial customers, including unbranded retail stores, other fuel distributors, school districts, municipalities and other industrial customers.	
On January 23, 2018, we sold a portfolio of 1,030 company-operated retail fuel outlets in 19 geographic regions to 7-Eleven.
As of December 31, 2019, we operate 75 retail stores. Our retail stores operate under several brands, including our proprietary brands APlus and Aloha Island Mart, and offer a broad selection of food, beverages, snacks, grocery and non-food merchandise, motor fuels and other services.
Recent Developments
On July 1, 2019, we entered into a 50% owned joint venture on the J.C. Nolan diesel fuel pipeline to West Texas and the J.C. Nolan terminal. ETO operates the pipeline for the joint venture, which transports diesel fuel from Hebert, Texas to a terminal in the Midland, Texas area. The pipeline had an initial capacity of 30,000 barrels per day and was successfully commissioned in August 2019. Our investment in this unconsolidated joint venture was $121 million as of December 31, 2019. In addition, we recorded income on the unconsolidated joint venture of $2 million for the year ended December 31, 2019.
On May 31, 2019, we completed the previously announced divestiture to Attis Industries Inc. (NASDAQ: ATIS) (“Attis”) for the sale of our ethanol plant, including the grain malting operation, in Fulton, New York. As part of the transaction, we entered into a 10-

32

year ethanol offtake agreement with Attis. Total consideration for the divestiture was $20 million in cash plus certain working capital adjustments.
On March 14, 2019, we completed a private offering of $600 million in aggregate principal amount of 6.000% senior notes due 2027. We used the proceeds to repay a portion of the outstanding borrowings under our 2018 Revolver. In connection with our issuance of the 2027 Notes, we entered into a registration rights agreement with the initial purchasers pursuant to which we agreed to complete an offer to exchange the 2027 Notes for an issue of registered notes with terms substantively identical to the 2027 Notes and evidencing the same indebtedness as the 2027 Notes on or before March 14, 2020. The exchange offer was completed on July 17, 2019.
Acquisition
On January 18, 2019, we acquired certain convenience store locations from Speedway LLC for approximately $5 million plus working capital adjustments. We subsequently converted the acquired convenience store locations to commission agent locations.
Market and Industry Trends and Outlook
We expect that certain trends and economic or industry-wide factors will continue to affect our business, both in the short-term and long-term. We base our expectations on information currently available to us and assumptions made by us. To the extent our underlying assumptions about or interpretation of available information prove to be incorrect, our actual results may vary materially from our expected results. Read “Item 1A. Risk Factors” included herein for additional information about the risks associated with purchasing our common units.
Seasonality
Our business exhibits some seasonality due to our customers’ increased demand for motor fuel during the late spring and summer months, as compared to the fall and winter months. Travel, recreation, and construction activities typically increase in these months, driving up the demand for motor fuel sales. Our gallons sold are typically somewhat higher in the second and third quarters of our fiscal years due to this seasonality. Results of operations may therefore vary from period to period.
Key Measures Used to Evaluate and Assess Our Business
Management uses a variety of financial measurements to analyze business performance, including the following key measures:
		
•	Motor fuel gallons sold. One of the primary drivers of our business is the total volume of motor fuel sold through our channels. Fuel distribution contracts with our customers generally provide that we distribute motor fuel at a fixed, volume-based profit margin or at an agreed upon level of price support. As a result, gross profit is directly tied to the volume of motor fuel that we distribute. Total motor fuel gross profit dollars earned from the product of gross profit per gallon and motor fuel gallons sold are used by management to evaluate business performance.	
		
•	Gross profit per gallon. Gross profit per gallon is calculated as the gross profit on motor fuel (excluding non-cash inventory adjustments) divided by the number of gallons sold, and is typically expressed as cents per gallon. Our gross profit per gallon varies amongst our third-party relationships and is impacted by the availability of certain discounts and rebates from suppliers. Retail gross profit per gallon is heavily impacted by volatile pricing and intense competition from retail stores, supermarkets, club stores and other retail formats, which varies based on the market.	
		
•	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 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.	
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” below.
We believe Adjusted EBITDA is 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 Adjusted EBITDA as a measure of financial performance; and	
		
•	our management uses Adjusted EBITDA for internal planning purposes, including aspects of our consolidated operating budget and capital expenditures;	

33

Adjusted EBITDA is not a recognized term under GAAP and does not purport to be an alternative to net income (loss) as a measure of operating performance. Adjusted EBITDA has limitations as an analytical tool, and one should not consider it in isolation or as a substitute for analysis of our results as reported under GAAP. Some of these limitations include:
		
•	it does not reflect interest expense or the cash requirements necessary to service interest or principal payments on our revolving credit facility or term loan;	
		
•	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 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.
Key Operating Metrics
The following information is intended to provide investors with a reasonable basis for assessing our historical operations, but should not serve as the only criteria for predicting our future performance.
Key operating metrics set forth below are presented for the years ended December 31, 2019, 2018 and 2017, and have been derived from our historical consolidated financial statements.

																										
 	 	Year Ended December 31,	
 	 	2019	 	 	2018	
 	 	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	 	$	15,522		 	$	654		 	$	16,176		 	 	$	15,466		 	$	1,038		 	$	16,504		
Non motor fuel sales	 	62		 	216		 	278		 	 	48		 	312		 	360		
Lease income	 	131		 	11		 	142		 	 	118		 	12		 	130		
Total revenues	 	$	15,715		 	$	881		 	$	16,596		 	 	$	15,632		 	$	1,362		 	$	16,994		
Gross profit (1):	 	 	 	 	 	 	 	 	 	 	 	 	 	
Motor fuel sales	 	$	817		 	$	89		 	$	906		 	 	$	673		 	$	123		 	$	796		
Non motor fuel sales	 	53		 	115		 	168		 	 	40		 	156		 	196		
Lease	 	131		 	11		 	142		 	 	118		 	12		 	130		
Total gross profit	 	$	1,001		 	$	215		 	$	1,216		 	 	$	831		 	$	291		 	$	1,122		
Net income (loss) and comprehensive income (loss) from continuing operations	 	290		 	23		 	313		 	 	80		 	(22	)	 	58		
Loss from discontinued operations, net of taxes	 	—		 	—		 	—		 	 	—		 	(265	)	 	(265	)	
Net income (loss) and comprehensive income (loss)	 	$	290		 	$	23		 	$	313		 	 	$	80		 	$	(287	)	 	$	(207	)	
Adjusted EBITDA (2)	 	$	545		 	$	120		 	$	665		 	 	$	554		 	$	84		 	$	638		
Operating data:	 	 	 	 	 	 	 	 	 	 	 	 	 	
Motor fuel gallons sold (3)	 	 	 	 	 	8,193		 	 	 	 	 	 	7,859		
Motor fuel gross profit cents per gallon (3) (4)	 	 	 	 	 		10.1	¢	 	 	 	 	 	 		11.4	¢	
_______________________________
		
(1)	Excludes depreciation, amortization and accretion.	
		
(2)	We define Adjusted EBITDA as described above under “Key Measures Used to Evaluate and Assess Our Business.”	
		
(3)	Includes amounts from discontinued operations in 2018.	
		
(4)	Includes other non-cash adjustments and excludes the impact of inventory adjustments consistent with the definition of Adjusted EBITDA.	

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The following table presents a reconciliation of Adjusted EBITDA to net income (loss) for the years ended December 31, 2019 and 2018:

													
 	 	Year Ended December 31,	 	 	
 	 	2019	 	2018	 	Change	
 	 	(in millions)	
Adjusted EBITDA	 	 	 	 	 	 	
Fuel Distribution and Marketing	 	$	545		 	$	554		 	$	(9	)	
All Other	 	120		 	84		 	36		
Total Adjusted EBITDA	 	665		 	638		 	27		
Depreciation, amortization and accretion	 	(183	)	 	(182	)	 	(1	)	
Interest expense, net (1)	 	(173	)	 	(146	)	 	(27	)	
Non-cash unit-based compensation expense (1)	 	(13	)	 	(12	)	 	(1	)	
Loss on disposal of assets and impairment charges (1)	 	(68	)	 	(80	)	 	12		
Loss on extinguishment of debt and other, net (1)	 	—		 	(129	)	 	129		
Unrealized gain (loss) on commodity derivatives (1)	 	5		 	(6	)	 	11		
Inventory adjustments (1)	 	79		 	(84	)	 	163		
Equity in earnings of unconsolidated affiliate	 	2		 	—		 	2		
Adjusted EBITDA related to unconsolidated affiliate	 	(4	)	 	—		 	(4	)	
Other non-cash adjustments	 	(14	)	 	(14	)	 	—		
Income tax (expense) benefit (1)	 	17		 	(192	)	 	209		
Net income (loss) and comprehensive income (loss)	 	$	313		 	$	(207	)	 	$	520		
_______________________________
		
(1)	Includes amounts from discontinued operations in 2018.	
Year Ended December 31, 2019 Compared to Year Ended December 31, 2018
The following discussion of results for 2019 compared to 2018 compares the operations for the years ended December 31, 2019 and 2018, respectively.
Segment Adjusted EBITDA. Total segment adjusted EBITDA for 2019 was $665 million, an increase of $27 million from 2018. The increase is primarily attributable to the following changes:
		
•	a decrease in operating costs of $143 million, primarily as a result of the divestment of 1,030 company-operated fuel sites to 7-Eleven on January 23, 2018, the conversion of 207 retail sites to commission agent sites during April 2018 and the May 2019 sale of our ethanol plant in Fulton, New York. These expenses include other operating expense, general and administrative expense and lease expense; and	
		
•	an increase in unconsolidated affiliate adjusted EBITDA of $4 million; partially offset by	
		
•	a decrease in non-motor fuel sales gross profit of $44 million, primarily related to lower merchandise gross profit as a result of the divestment of 1,030 company-operated fuel sites to 7-Eleven on January 23, 2018 and the conversion of 207 retail sites to commission agent sites during April 2018; and	
		
•	a decrease in the gross profit on motor fuel sales of $76 million, primarily due to lower fuel margins, a one-time benefit of approximately $25 million related to a cash settlement with a fuel supplier recorded for the year ended December 31, 2018 and a $8 million one-time charge related to a reserve for an open contractual dispute recorded for the year ended December 31, 2019; partially offset by a 4.2% increase in gallons sold for the year ended December 31, 2019 compared to the year ended December 31, 2018.	
Depreciation, Amortization and Accretion. Depreciation, amortization and accretion was $183 million in 2019, a slight increase of $1 million from 2018.
Interest Expense. Interest expense was $173 million in 2019, an increase of $27 million from 2018. The increase is primarily attributable to an increase in total long-term debt.
Non-Cash Unit-Based Compensation Expense. Non-cash unit-based compensation expense was $13 million in 2019, a slight increase of $1 million from 2018.
Loss on Disposal of Assets and Impairment Charges. Loss on disposal of assets and impairment charges was $68 million in 2019, a decrease of $12 million from 2018. The 2019 amount is primarily attributable to a $47 million write-down on assets held for sale and a $21 million loss on disposal of assets related to our ethanol plant in Fulton, New York. The 2018 amount is primarily attributable to the loss on fixed assets driven by the 7-Eleven sale and the $30 million impairment on our contractual rights intangible asset.

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Income Tax Expense/(Benefit). Income tax benefit for 2019 was $17 million, a change of $209 million from 2018. The change is primarily due to the taxable gain recognized on the sales of assets to 7-Eleven in 2018.
The following table sets forth, for the periods indicated, information concerning key measures we rely on to gauge our operating performance:

																										
 	 	Year Ended December 31,	
 	 	2018	 	 	2017	
 	 	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	 	$	15,466		 	$	1,038		 	$	16,504		 	 	$	9,333		 	$	1,577		 	$	10,910		
Non motor fuel sales	 	48		 	312		 	360		 	 	50		 	674		 	724		
Lease income	 	118		 	12		 	130		 	 	77		 	12		 	89		
Total revenues	 	$	15,632		 	$	1,362		 	$	16,994		 	 	$	9,460		 	$	2,263		 	$	11,723		
Gross profit (1):	 	 	 	 	 	 	 	 	 	 	 	 	 	
Motor fuel sales	 	$	673		 	$	123		 	$	796		 	 	$	535		 	$	157		 	$	692		
Non motor fuel sales	 	40		 	156		 	196		 	 	39		 	288		 	327		
Lease	 	118		 	12		 	130		 	 	77		 	12		 	89		
Total gross profit	 	$	831		 	$	291		 	$	1,122		 	 	$	651		 	$	457		 	$	1,108		
Net income (loss) from continuing operations	 	80		 	(22	)	 	58		 	 	167		 	159		 	326		
Loss from discontinued operations, net of taxes	 	—		 	(265	)	 	(265	)	 	 	—		 	(177	)	 	(177	)	
Net income (loss) and comprehensive income (loss)	 	$	80		 	$	(287	)	 	$	(207	)	 	 	$	167		 	$	(18	)	 	$	149		
Adjusted EBITDA (2)	 	$	554		 	$	84		 	$	638		 	 	$	346		 	$	386		 	$	732		
Operating data:	 	 	 	 	 	 	 	 	 	 	 	 	 	
Motor fuel gallons sold (3)	 	 	 	 	 	7,859		 	 	 	 	 	 	7,947		
Motor fuel gross profit cents per gallon (3)(4)	 	 	 	 	 		11.4	¢	 	 	 	 	 	 		15.2	¢	
_______________________________
		
(1)	Excludes depreciation, amortization and accretion.	
		
(2)	We define Adjusted EBITDA as described above under “Key Measures Used to Evaluate and Assess Our Business.”	
		
(3)	Includes amounts from discontinued operations.	
		
(4)	Excludes the impact of inventory adjustments consistent with the definition of Adjusted EBITDA.	
The following table presents a reconciliation of Adjusted EBITDA to net income (loss) for the years ended December 31, 2018 and 2017:

													
 	 	Year Ended December 31,	 	 	
 	 	2018	 	2017	 	Change	
 	 	(in millions)	
Adjusted EBITDA	 	 	 	 	 	 	
Fuel Distribution and Marketing	 	$	554		 	$	346		 	$	208		
All Other	 	84		 	386		 	(302	)	
Total Adjusted EBITDA	 	638		 	732		 	(94	)	
Depreciation, amortization and accretion	 	(182	)	 	(203	)	 	21		
Interest expense, net (1)	 	(146	)	 	(245	)	 	99		
Non-cash unit-based compensation expense (1)	 	(12	)	 	(24	)	 	12		
Loss on disposal of assets and impairment charges (1)	 	(80	)	 	(400	)	 	320		
Loss on extinguishment of debt and other, net (1)	 	(129	)	 	—		 	(129	)	
Unrealized gain (loss) on commodity derivatives (1)	 	(6	)	 	3		 	(9	)	
Inventory fair value adjustment (1)	 	(84	)	 	28		 	(112	)	
Other non-cash adjustment	 	(14	)	 	—		 	(14	)	
Income tax (expense) benefit (1)	 	(192	)	 	258		 	(450	)	
Net income (loss) and comprehensive income (loss)	 	$	(207	)	 	$	149		 	$	(356	)	
_______________________________
		
(1)	Includes amounts from discontinued operations.	

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Year Ended December 31, 2018 Compared to Year Ended December 31, 2017
The following discussion of results for 2018 compared to 2017 compares the operations for the years ended December 31, 2018 and 2017, respectively.
Segment Adjusted EBITDA. Total segment adjusted EBITDA for 2018 was $638 million, a decrease of $94 million from 2017. The decrease is primarily attributable to the following changes:
		
•	a decrease in the gross profit on motor fuel sales of $294 million, primarily due to a 25.2%, or $0.038, decrease in cents per gallons sold as a result of the change in mix of gallons sold from higher gross profit company-operated fuel sites to supplying lower gross profit Fuel Distribution and Marketing gallons as a result of the divestment of 1,030 company-operated fuel sites to 7-Eleven on January 23, 2018;	
		
•	a decrease in other gross profit of $671 million, primarily related to lower merchandise gross profit as a result of the divestment of 1,030 company-operated fuel sites to 7-Eleven on January 23, 2018; offset by	
		
•	a decrease in operating costs of $871 million, as a result of the divestment of 1,030 company-operated fuel sites to 7-Eleven on January 23, 2018. These expenses include other operating expense, general and administrative expense and rent expense.	
Depreciation, Amortization and Accretion. Depreciation, amortization and accretion was $182 million in 2018, a decrease of $21 million from 2017. The decrease is primarily due to the divestment of 1,030 company-operated fuel sites to 7-Eleven on January 23, 2018.
Interest Expense. Interest expense was $146 million in 2018, a decrease of $99 million from 2017. The decrease is primarily attributable to the repayment in full of the Term Loan and a reduction in interest rates from the refinancing of our Senior Notes in January 2018.
Non-Cash Unit-Based Compensation Expense. Non-cash compensation expense was $12 million in 2018, a decrease of $12 million from 2017. The decrease is primarily attributable to additional grants outstanding during the 2017 and severance accrual for certain employees related to the 7-Eleven Transaction recorded in the prior year.
Loss on Disposal of Assets and Impairment Charges. Loss on disposal of assets and impairment charges was $80 million in 2018, a decrease of $320 million from 2017. The 2018 amount is primarily attributable to loss on fixed assets driven by the 7-Eleven sale and the $30 million impairment on our contractual rights intangible. The 2017 amount is primarily attributable to goodwill impairments of $387 million related to assets held for sale.
Income Tax Expense/(Benefit). Income tax expense for 2018 was $192 million, a change of $450 million from 2017. The change is primarily due to the taxable gain recognized on the sales of assets to 7-Eleven and a reduction in the federal corporate income rate per the “Tax Cuts and Jobs Act” recorded in 2017.
Liquidity and Capital Resources
Liquidity
Our principal liquidity requirements are to finance current operations, to fund capital expenditures, including acquisitions from time to time, to service our debt and to make distributions. We expect our ongoing sources of liquidity to include cash generated from operations, borrowings under our revolving credit facility and the issuance of additional long-term debt or partnership units as appropriate given market conditions. We expect that these sources of funds will be adequate to provide for our short-term and long-term liquidity needs.
Our ability to meet our debt service obligations and other capital requirements, including capital expenditures and acquisitions, will depend on our future operating performance which, in turn, will be subject to general economic, financial, business, competitive, legislative, regulatory and other conditions, many of which are beyond our control. As a normal part of our business, depending on market conditions, we will from time to time consider opportunities to repay, redeem, repurchase or refinance our indebtedness. Changes in our operating plans, lower than anticipated sales, increased expenses, acquisitions or other events may cause us to seek additional debt or equity financing in future periods. There can be no guarantee that financing will be available on acceptable terms or at all. Debt financing, if available, could impose additional cash payment obligations and additional covenants and operating restrictions. In addition, any of the items discussed in detail under “Item 1A. Risk Factors” included in this Annual Report on Form 10-K may also significantly impact our liquidity.
As of December 31, 2019, we had $21 million of cash and cash equivalents on hand and borrowing capacity of $1.3 billion under the 2018 Revolver. Based on our current estimates, we expect to utilize capacity under the 2018 Revolver, along with cash from operations, to fund our announced growth capital expenditures and working capital needs for 2019; 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.

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Cash Flows

												
 	Year Ended December 31, 2019	 	Year Ended December 31, 2018	 	Year Ended December 31, 2017	
 	(in millions)	
Net cash provided by (used in)	 	 	 	 	 	
Operating activities - continuing operations	$	435		 	$	447		 	$	303		
Investing activities - continuing operations	(164	)	 	(469	)	 	(132	)	
Financing activities - continuing operations	(306	)	 	(2,684	)	 	(339	)	
Discontinued operations	—		 	2,734		 	93		
Net increase (decrease) in cash and cash equivalents	$	(35	)	 	$	28		 	$	(75	)	
Cash Flows Provided by Operations - Continuing Operations. 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. Net cash provided by operations was $435 million, $447 million, and $303 million for 2019, 2018, and 2017, respectively.
Year Ended December 31, 2019 Compared to Year Ended December 31, 2018
The decrease in cash flows provided by operations was primarily due to decreases in operating assets and liabilities of $41 million, partially offset by, a $29 million increase in cash basis net income compared to the prior year.
Year Ended December 31, 2018 Compared to Year Ended December 31, 2017
The increase in cash flows provided by operations was primarily due to a $161 million increase in cash basis net income compared to the prior year, partially offset by, changes in operating assets and liabilities of $17 million.
Cash Flows Used in Investing Activities - Continuing Operations. Net cash used in investing activities was $164 million , $469 million, and $132 million for 2019, 2018, and 2017, respectively.
Year Ended December 31, 2019 Compared to Year Ended December 31, 2018
Net cash used in investing activities included $5 million and $401 million of cash paid for acquisitions in 2019 and 2018, respectively. Capital expenditures were $148 million and $103 million for 2019 and 2018, respectively. Contributions to unconsolidated affiliate were $41 million and $0 million in 2019 and 2018, respectively. Proceeds from disposal of property and equipment were $30 million and $37 million in 2019 and 2018, respectively.
Year Ended December 31, 2018 Compared to Year Ended December 31, 2017
Net cash used in investing activities included $401 million and $0 million of cash paid for acquisitions in 2018 and 2017, respectively. Capital expenditures were $103 million and $103 million for 2018 and 2017, respectively. Proceeds from disposal of property and equipment were $37 million and $10 million in 2018 and 2017, respectively.
Cash Flows Used in Financing Activities - Continuing Operations. Net cash used in financing activities was $306 million, $2,684 million, and $339 million for 2019, 2018, and 2017, respectively.
Year Ended December 31, 2019
During year ended December 31, 2019 we:
		
•	issued $600 million of 6.000% senior notes due 2027;	
		
•	borrowed $2.4 billion and repaid 3.0 billion under our 2018 Revolver to fund daily operations;	
		
•	paid $353 million in distributions to our unitholders, of which $165 million was paid to ETO.	
Year Ended December 31, 2018
During year ended December 31, 2018 we:
		
•	issued $2.2 billion of Senior Notes, comprised of $1.0 billion in aggregate principal amount of 4.875% senior notes due 2023, $800 million in aggregate principal amount of 5.500% senior notes due 2026 and $400 million in aggregate principal amount of 5.875% senior notes due 2028;	
		
•	borrowed $2.8 billion and repaid $2.9 billion under our 2014 Revolver and 2018 Revolver to fund daily operations; redeemed $2.2 billion of our existing senior notes, comprised of $800 million in aggregate principal amount of 6.250% senior notes due 2021, $600 million in aggregate principal amount of 5.500% senior notes due 2020, and $800 million in aggregate principal amount of 6.375% senior notes due 2023;	

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•	repaid the $1.2 billion Term Loan in full and terminated it; redeemed the outstanding Series A Preferred Units held by ETE for $300 million and a call premium of $3 million; repurchased 17,286,859 SUN common units owned by ETP for aggregate cash consideration of approximately $540 million; and	
		
•	paid $383 million in distributions to our unitholders, of which $192 million was paid to ETO and ET collectively.	
Year Ended December 31, 2017
During year ended December 31, 2017 we:
		
•	received $300 million proceeds from issuance of Series A Preferred Units;	
		
•	borrowed $2.7 billion and repaid $2.9 billion under our 2014 Revolver to fund daily operations;	
		
•	paid $431 million in distributions to our unitholders, of which $251 million was paid to ETP and ETE collectively.	
We intend to pay cash distributions to the holders of our common units and Class C units representing limited partner interests in the Partnership (“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, 2020, we declared a quarterly distribution totaling $69 million, or $0.8255 per common unit based on the results for the three months ended December 31, 2019, excluding distributions to Class C unitholders. The distribution was paid on February 19, 2020 to all unitholders of record on February 7, 2020.
Cash Flows Provided by (Used in) Discontinued Operations. Cash provided by discontinued operations was $2.7 billion and $93.0 million for 2018 and 2017, respectively. Cash provided by (used in) discontinued operations for operating activities was $(484) million for 2018 and $136 million for 2017. Cash provided by (used in) discontinued operations for investing activities was $3.2 billion for 2018 (related to proceeds from 7-Eleven Transaction) and $(38.0) million for 2017. The change in cash included in current assets held for sale was $11 million for 2018 and $(5) million for 2017.
Capital Expenditures
Included in our capital expenditures for 2019 was $40 million in maintenance capital and $108 million in growth capital. Growth capital relates primarily to new store construction and dealer supply contracts.
We currently expect to spend approximately $45 million in maintenance capital and $130 million in growth capital for the full year 2020.
Contractual Obligations and Commitments
Contractual Obligations. We have contractual obligations that are required to be settled in cash. As of December 31, 2019, we had $162 million borrowed on the 2018 Revolver and $2.8 billion outstanding under our Senior Notes. See Note 10 in the accompanying Notes to Consolidated Financial Statements for more information on our debt transactions. Our contractual obligations as of December 31, 2019 were as follows:

																					
 	 	Payments Due by Years	
 	 	Total	 	Less than 1 Year	 	1-3 Years	 	3-5 Years	 	More than 5 Years	
 	 	(in millions)	
Long-term debt obligations, including current portion (1)	 	$	3,097		 	$	11		 	$	25		 	$	1,185		 	$	1,876		
Interest payments (2)	 	954		 	168		 	336		 	226		 	224		
Operating lease obligations (3)	 	1,072		 	51		 	94		 	87		 	840		
Service concession arrangement (4)	 	379		 	15		 	30		 	32		 	302		
Total	 	$	5,502		 	$	245		 	$	485		 	$	1,530		 	$	3,242		
_______________________________
		
(1)	Payments include required principal payments on our debt, finance lease obligations and sale leaseback obligations (see Note 10 to our Consolidated Financial Statements). Assumes the balance of the 2018 Revolver at December 31, 2019 of $162 million remains outstanding until the 2018 Revolver matures in July 2023.	
		
(2)	Includes interest on outstanding debt, finance lease obligations and sale leaseback financing obligations. Includes interest on the 2018 Revolver balance as of December 31, 2019 and commitment fees on the unused portion of the facility through July 2023 using rates in effect at December 31, 2019.	
		
(3)	Includes minimum rental commitments under non-cancelable leases.	
		
(4)	Includes minimum guaranteed payments under service concession arrangements with New Jersey Turnpike Authority and New York Thruway Authority.	

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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 0.9 million barrels with an aggregated unrealized gain of $0.6 million outstanding at December 31, 2019.
Off-Balance Sheet Arrangements
We do not maintain any off-balance sheet arrangements for the purpose of credit enhancement, hedging transactions or other financial or investment purposes.
Impact of Inflation
The impact of inflation has minimal impact on our results of operations, as we generally are able to pass along energy cost increases in the form of increased sales prices to our customers. Inflation in energy prices impacts our sales and cost of motor fuel products and working capital requirements. Increased fuel prices may also require us to post additional letters of credit or other collateral if our fuel purchases exceed unsecured credit limits extended to us by our suppliers. Although we believe we have historically been able to pass on increased costs through price increases and maintain adequate liquidity to support any increased collateral requirements, there can be no assurance that we will be able to do so in the future.
Recent Accounting Pronouncements
See “Item 8. Financial Statements and Supplementary Data - Notes to Consolidated Financial Statements - Note 2. Summary of Significant Accounting Policies” for information on recent accounting pronouncements impacting our business, if applicable.
Application of Critical Accounting Policies
We prepare our consolidated financial statements in conformity with GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Critical accounting policies are those we believe are both most important to the portrayal of our financial condition and results of operations, and require our most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effects of matters that are inherently uncertain. Judgments and uncertainties affecting the application of those policies may result in materially different amounts being reported under different conditions or using different assumptions.
We believe the following policies will be the most critical in understanding the judgments that are involved in preparation of our consolidated financial statements.
Business Combinations and Intangible Assets, Including Goodwill and Push Down Accounting. We account for acquisitions using the purchase method of accounting. Accordingly, assets acquired and liabilities assumed are recorded at their estimated fair values at the acquisition date. The excess of purchase price over fair value of net assets acquired, including the amount assigned to identifiable intangible assets, is recorded as goodwill. Given the time it takes to obtain pertinent information to finalize the acquired company’s balance sheet, it may be several quarters before we are able to finalize those initial fair value estimates. Accordingly, it is not uncommon for the initial estimates to be subsequently revised. The results of operations of acquired businesses are included in the consolidated financial statements from the acquisition date.
Acquisitions of entities under common control are accounted for similar to a pooling of interests, in which the acquired assets and assumed liabilities are recognized at their historic carrying values. The results of operations of the affiliated business acquired are reflected in the Partnership’s consolidated results of operations beginning on the date of common control.
Our recorded identifiable intangible assets primarily include the estimated value assigned to certain customer related and contract-based assets. Identifiable intangible assets with finite lives are amortized over their estimated useful lives, which is the period over which the asset is expected to contribute directly or indirectly to our future cash flows. Supply agreements are amortized on a straight-line basis over the remaining terms of the agreements, which generally range from five to fifteen years. The determination of the fair market value of the intangible asset and the estimated useful life are based on an analysis of all pertinent factors including (1) the use of widely-accepted valuation approaches, the income approach or the cost approach, (2) the expected use of the asset by us, (3) the expected useful life of related assets, (4) any legal, regulatory or contractual provisions, including renewal or extension periods that would cause substantial costs or modifications to existing agreements, and (5) the effects of obsolescence, demand, competition, and other economic factors. Should any of the underlying assumptions indicate that the value of the intangible assets might be impaired, we may be required to reduce the carrying value and subsequent useful life of the asset. If the underlying assumptions governing the amortization of an intangible asset were later determined to have significantly changed, we may be required to adjust the amortization period of such asset to reflect any new estimate of its useful life. Any write-down of the value or unfavorable change in the useful life of an intangible asset would increase expense at that time.

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Customer relations and supply agreements are amortized over a weighted average period of approximately 5 to 20 years. Non-competition agreements are amortized over the terms of the respective agreements. Loan origination costs are amortized over the life of the underlying debt as an increase to interest expense.
At December 31, 2019, we had goodwill recorded in conjunction with past business acquisitions and “push down” accounting totaling $1.6 billion. Under GAAP, goodwill is not amortized. Instead, goodwill is subject to annual reviews on the first day of the fourth fiscal quarter for impairment at a reporting unit level. The reporting unit or units used to evaluate and measure goodwill for impairment are determined primarily from the manner in which the business is managed or operated. A reporting unit is an operating segment or a component that is one level below an operating segment. We have assessed the reporting unit definitions and determined that we have four reporting units that are appropriate for testing goodwill impairment.
Long-lived assets are required to be tested for recoverability whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. Goodwill and intangibles with indefinite lives must be tested for impairment annually or more frequently if events or changes in circumstances indicate that the related asset might be impaired. An impairment loss should be recognized only if the carrying amount of the asset/goodwill is not recoverable and exceeds its fair value.
During the fourth quarter of 2019, management performed the annual impairment tests on our indefinite-lived intangible assets and goodwill for its reporting units. Impairment testing involved a quantitative assessment for one reporting unit and qualitative assessments for the remaining reporting units. No impairments were identified for the reporting units as a result of these tests.
The Partnership determined the fair value of our reporting units using a weighted combination of the discounted cash flow method and the guideline company method. Determining the fair value of a reporting unit requires judgment and the use of significant estimates and assumptions. Such estimates and assumptions include revenue growth rates, operating margins, weighted average costs of capital and future market conditions, among others. The Partnership believes the estimates and assumptions used in our impairment assessments are reasonable and based on available market information, but variations in any of the assumptions could result in materially different calculations of fair value and determinations of whether or not an impairment is indicated. Under the discounted cash flow method, the Partnership determined fair value based on estimated future cash flows of each reporting unit including estimates for capital expenditures, discounted to present value using the risk-adjusted industry rate, which reflect the overall level of inherent risk of the reporting unit. Cash flow projections are derived from one year budgeted amounts plus an estimate of later period cash flows, all of which are determined by management. Subsequent period cash flows are developed for each reporting unit using growth rates that management believes are reasonably likely to occur. Under the guideline company method, the Partnership determined the estimated fair value of each of our reporting units by applying valuation multiples of comparable publicly-traded companies to each reporting unit’s projected EBITDA and then averaging that estimate with similar historical calculations using a three year average. In addition, the Partnership estimated a reasonable control premium representing the incremental value that accrues to the majority owner from the opportunity to dictate the strategic and operational actions of the business.
Income Taxes. As a limited partnership, we are generally not subject to state and federal income tax and would therefore not recognize deferred income tax liabilities and assets for the expected future income tax consequences of temporary differences between financial statement carrying amounts and the related income tax basis. We are, however, subject to a statutory requirement that our non-qualifying income cannot exceed 10% of our total gross income, determined on a calendar year basis under the applicable income tax provisions. If the amount of our non-qualifying income exceeds this statutory limit, we would be taxed as a corporation. Accordingly, certain activities that generate non-qualifying income are conducted through our wholly-owned taxable corporate subsidiary for which we have recognized deferred income tax liabilities and assets. These balances, as well as any income tax expense, are determined through management’s estimations, interpretation of tax laws of multiple jurisdictions and tax planning strategies. If our actual results differ from estimated results due to changes in tax laws, our effective tax rate and tax balances could be affected. As such, these estimates may require adjustments in the future as additional facts become known or as circumstances change.
The benefit of an uncertain tax position can only be recognized in the financial statements if management concludes that it is more likely than not that the position will be sustained with the tax authorities. For a position that is likely to be sustained, the benefit recognized in the financial statements is measured at the largest amount that is greater than 50 percent likely of being realized. In determining the future tax consequences of events that have been recognized in our financial statements or tax returns, judgment is required. Differences between the anticipated and actual outcomes of these future tax consequences could have a material impact on our consolidated results of operations or financial position.
		
Item 7A.	Quantitative and Qualitative Disclosures about Market Risk	
Interest Rate Risk
We are subject to market risk from exposure to changes in interest rates based on our financing, investing and cash management activities. We had outstanding borrowings on the 2018 Revolver of $162 million as of December 31, 2019. The annualized effect of a one percentage point change in floating interest rates on our variable rate debt obligations outstanding at December 31, 2019 would be to change interest expense by approximately $1.6 million. Our primary exposure relates to:

41

		
•	interest rate risk on short-term borrowings; and	
		
•	the impact of interest rate movements on our ability to obtain adequate financing to fund future acquisitions.	
While we cannot predict or manage our ability to refinance existing debt or the impact interest rate movements will have on our existing debt, management evaluates our financial position on an ongoing basis. From time to time, we may enter into interest rate swaps to reduce the impact of changes in interest rates on our floating rate debt. We had no interest rate swaps in effect during the twelve months ended December 31, 2019 and 2018.
Commodity Price Risk
Aloha has terminals on all four major Hawaiian Islands that hold purchased fuel until it is delivered to customers (typically over a two to three week period). Commodity price risks relating to this inventory are not currently hedged. The terminal inventory balance was $24 million at December 31, 2019.
Sunoco LLC holds working inventories of refined petroleum products, renewable fuels, and gasoline blendstocks and transmix in storage. As of December 31, 2019, Sunoco LLC held approximately $361 million of such inventory. While in storage, volatility in the market price of stored motor fuel could adversely impact the price at which we can later sell the motor fuel. However, Sunoco LLC uses futures, forwards and other derivative instruments (collectively, "positions") to hedge a variety of price risks relating to deviations in that inventory from a target base operating level established by management. Derivative instruments utilized consist primarily of exchange-traded futures contracts traded on the NYMEX, CME, and ICE, as well as over-the-counter transactions (including swap agreements) entered into with established financial institutions and other credit-approved energy companies. Sunoco LLC’s policy is generally to purchase only products for which there is a market and to structure sales contracts so that price fluctuations do not materially affect profit. Sunoco LLC also engages in controlled trading in accordance with specific parameters set forth in a written risk management policy. For the 2019 fiscal year, Sunoco LLC maintained an average ten day working inventory. While these derivative instruments represent economic hedges, they are not designated as hedges for accounting purposes.
On a consolidated basis, the Partnership had a position of 0.9 million barrels with an aggregated unrealized gain of $0.6 million outstanding at December 31, 2019.
		
Item 8.	Financial Statements and Supplementary Data	
See Index to Consolidated Financial Statements at Page F-1.
		
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	
None.
		
Item 9A.	Controls and Procedures	
Disclosure Controls and Procedures
We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange Act), that are designed to provide reasonable assurance that the information that we are required to disclose in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure. It should be noted that, because of inherent limitations, our disclosure controls and procedures, however well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of the disclosure controls and procedures are met.
As required by paragraph (b) of Rule 13a-15 under the Exchange Act, our management with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this Form 10-K. Based on such evaluation, our management, including our Chief Executive Officer and Chief Financial Officer, has concluded, as of December 31, 2019, that our disclosure controls and procedures were effective at the reasonable assurance level for which they were designed in that the information required to be disclosed by the Partnership in the reports we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

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Management’s Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) and 15d-15(f) under the Securities Exchange Act. Our internal control over financial reporting is a process that is designed under the supervision of our Chief Executive Officer and Chief Financial Officer and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America. Our internal control over financial reporting includes those policies and procedures that:
		
•	pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets;	
		
•	provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America, and that receipts and expenditures recorded by us are being made only in accordance with authorizations of our management and board of directors; and	
		
•	provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements.	
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies and procedures may deteriorate.
Management conducted its evaluation of the effectiveness of internal control over financial reporting as of December 31, 2019, based on the framework in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 Framework). Management’s assessment included an evaluation of the design of its internal control over financial reporting and testing the operational effectiveness of its internal control over financial reporting. Management reviewed the results of the assessment with the audit committee of the board of directors. Based on its assessment, management determined that, as of December 31, 2019, it maintained effective internal control over financial reporting.
Grant Thornton LLP, the independent registered public accounting firm that audited the consolidated financial statements of the Partnership included in this Annual Report on Form 10-K, has issued an attestation report on the effectiveness of the Partnership’s internal control over financial reporting as of December 31, 2019. The report, which expresses an unqualified opinion on the effectiveness of the Partnership’s internal control over financial reporting as of December 31, 2019, is included in this Item under the heading Report of Independent Registered Public Accounting Firm.
Changes in Internal Control over Financial Reporting
There have been no changes in our internal control over financial reporting during the fourth quarter of fiscal 2019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
From time to time, we make changes to our internal control over financial reporting that are intended to enhance its effectiveness and which do not have a material effect on our overall internal control over financial reporting. We will continue to evaluate the effectiveness of our disclosure controls and procedures and internal control over financial reporting on an ongoing basis and will take action as appropriate.

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors of Sunoco GP LLC and
Unitholders of Sunoco LP

Opinion on internal control over financial reporting
We have audited the internal control over financial reporting of Sunoco LP (a Delaware limited partnership) and subsidiaries (the “Partnership”) as of December 31, 2019, based on criteria established in the 2013 Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). In our opinion, the Partnership maintained, in all material respects, effective internal control over financial reporting as of December 31, 2019, based on criteria established in the 2013 Internal Control-Integrated Framework issued by COSO.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated financial statements of the Partnership as of and for the year ended December 31, 2019, and our report dated February 21, 2020 expressed an unqualified opinion on those financial statements.
Basis for opinion
The Partnership’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Partnership’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Partnership in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and limitations of internal control over financial reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ GRANT THORNTON LLP

Dallas, Texas
February 21, 2020

44

		
Item 9B.	Other Information	
None.

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Part III
		
Item 10.	Directors, Executive Officers and Corporate Governance	
Board of Directors
Our general partner, Sunoco GP LLC (our “General Partner”), manages and directs our operations and activities. The membership interests in our General Partner are solely owned by Energy Transfer Operating, L.P. (“ETO”), a wholly owned subsidiary of Energy Transfer LP (“ET”). Prior to October 19, 2018, the membership interests in our General Partner were solely owned by Energy Transfer Partners, L.L.C., a wholly owned subsidiary of ET. As the sole member of our General Partner, ETO is entitled under the limited liability company agreement of our General Partner to appoint all directors of our General Partner. Our General Partner’s limited liability company agreement provides that our General Partner’s Board of Directors (the “Board”) shall consist of between three and twelve persons, at least three of whom are required to qualify as independent directors. As of December 31, 2019, the Board consisted of seven persons, three of whom qualify as “independent” under the listing standards of the New York Stock Exchange (“NYSE”) and our governance guidelines. Our Board has affirmatively determined that the directors who qualify as “independent” under the NYSE’s listing standards, SEC rules and our governance guidelines are James W. Bryant, Oscar A. Alvarez and Imad K. Anbouba.
As a limited partnership, we are not required by the rules of the NYSE to seek unitholder approval for the election of any of our directors. We do not have a formal process for identifying director nominees, nor do we have a formal policy regarding consideration of diversity in identifying director nominees. We believe, however, that the individuals appointed as directors have experience, skills and qualifications relevant to our business and have a history of service in senior leadership positions with the qualities and attributes required to provide effective oversight of the Partnership. Our Board met four times during fiscal year 2019 and each of our current directors, other than Mr. Alvarez, attended at least 75% of those meetings, and 75% of the meetings of any committees on which they served.
The Board’s Role in Risk Oversight
Our Board generally administers its risk oversight function as a whole. It does so in part through discussion and review of our business, financial and corporate governance practices and procedures, with opportunity for specific inquires of management. In addition, at each regular meeting of the Board, management provides a report of the Partnership’s operational and financial performance, which often prompts questions and feedback from the Board. The audit committee provides additional risk oversight through its quarterly meetings, where it discusses policies with respect to risk assessment and risk management, reviews contingent liabilities and risks that may be material to the Partnership and assesses major legislative and regulatory developments that could materially impact the Partnership’s contingent liabilities and risks. The audit committee is required to discuss any material violations of our policies brought to its attention on an ad hoc basis. Additionally, the compensation committee reviews our overall compensation program and its effectiveness at both linking executive pay to performance and aligning the interests of our executives and our unitholders.
Committees of the Board of Directors
The Board has established standing committees to consider designated matters. The standing committees of the Board are: the audit committee and the compensation committee. The listing standards of the NYSE do not require boards of directors of publicly traded limited partnerships to be composed of a majority of independent directors, nor are they required to have a standing nominating or compensation committee. Notwithstanding, the Board has elected to have a standing compensation committee. We do not have a nominating committee in view of the fact that ETO, which owns our General Partner, appoints the directors to our Board. The Board has adopted governance guidelines for the Board and charters for each of the audit and compensation committees.
Audit Committee
We are required to have an audit committee of at least three members, and all of its members are required to meet the independence and experience standards established by the NYSE and the Exchange Act. The current members of the audit committee are James W. Bryant, Oscar A. Alvarez and Imad K. Anbouba, each of whom are independent under the NYSE’s standards and SEC’s rules for audit committee members. In addition, the Board has determined that Mr. Anbouba, who serves as chairman of the audit committee, has “accounting or related financial management expertise” and constitutes an “audit committee financial expert,” in accordance with SEC and NYSE rules and regulations.
The audit committee assists the Board in its oversight of the integrity of our consolidated financial statements and our compliance with legal and regulatory requirements and partnership policies and controls. The audit committee meets on a regularly-scheduled basis with our independent accountants at least four times each year and is available to meet at their request. Our independent registered public accounting firm has been given unrestricted access to the audit committee and our management, as necessary. The audit committee has the authority and responsibility to review our external financial reporting, to review our procedures for internal auditing and the adequacy of our internal accounting controls, to consider the qualifications and independence of our independent accountants, to engage and resolve disputes with our independent accountants, including the letter of engagement and statement of fees relating to the scope of the annual audit work and special audit work that may be recommended or required by the independent accountants, and to engage the services of

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any other advisors and accountants as the audit committee deems advisable. The committee reviews and discusses the audited financial statements with management, discusses with our independent auditors matters and makes recommendations to the Board relating to our audited financial statements. In addition, the audit committee is authorized to recommend to the Board any changes or modifications to its charter that the committee believes may be required. The charter of the audit committee is publicly available on our website at http://www.sunocolp.com/investors/corporate-governance. The audit committee held four meetings during 2019.
Compensation Committee
Although we are not required under NYSE rules to appoint a compensation committee because we are a limited partnership, the Board established a compensation committee to establish standards and make recommendations concerning the compensation of our officers and directors. The compensation committee is currently chaired by Mr. Bryant and includes Mr. Anbouba. In addition, the compensation committee determines and establishes the standards for any awards to employees and officers providing services to us under the equity compensation plans adopted by our unitholders, including the performance standards or other restrictions pertaining to the vesting of any such awards. Pursuant to the charter of the compensation committee, a director serving as a member of the compensation committee may not be an officer of or employed by our General Partner, us or our subsidiaries. During 2019, neither Mr. Bryant nor Mr. Anbouba was an officer or employee of affiliates of ET, or served as an officer of any company with respect to which any of our executive officers served on such company’s board of directors. In addition, neither Mr. Bryant nor Mr. Anbouba is a former employee of affiliates of ET. The charter of the compensation committee is publicly available on our website at http://www.sunocolp.com/investors/corporate-governance. The compensation committee held four meetings during 2019.
Code of Ethics
The Board has approved a Code of Business Conduct and Ethics which is applicable to all directors, officers and employees of our General Partner and its affiliates, including the principal executive officer, the principal financial officer and the principal accounting officer. The Code of Business Conduct and Ethics is available on our website at http://www.sunocolp.com/investors/corporate-governance (under the ‘Investor Relations/Corporate Governance’ tab) and in print without charge to any unitholder who sends a written request to our secretary at our principal executive offices at 8111 Westchester Drive, Suite 400, Dallas, Texas 75225. We intend to post any amendments of this code, or waivers of its provisions applicable to directors or executive officers of our general partner, including its principal executive officer and principal financial officer, at this location on our website.
Corporate Governance Guidelines
The Board has adopted a set of Corporate Governance Guidelines to promote a common set of expectations as to how the Board and its committees should perform their functions. These principles are published on our website at http://www.sunocolp.com/investors/corporate-governance and reviewed by the Board annually or more often as the Board deems appropriate.
Meetings of Non-Management Directors and Communications with Directors
In accordance with our Corporate Governance Guidelines, the Board holds executive sessions of non-management directors not less than twice annually. These meetings are presided over, on a rotating basis, by the chairman of the audit and compensation committees of the Board. Interested parties may contact the chairman of our audit or compensation committee, or our independent or non-management directors individually or as a group, utilizing the contact information set forth on our website at http://www.sunocolp.com/investors/corporate-governance.
Note that the preceding Internet addresses are for information purposes only and are not intended to be hyperlinked. Accordingly, no information found or provided at those Internet addresses or at our website in general is intended or deemed to be incorporated by reference herein.
Executive Officers and Directors of our General Partner
The following table shows information about the current executive officers and directors of our General Partner. References to “our officers,” “our directors,” or “our board” refer to the officers, directors, and board of directors of our General Partner. Directors are appointed to hold office until their successors have been elected or qualified or until the earlier of their death, resignation, removal or disqualification. Executive officers serve at the discretion of the Board.

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Name	Age	Position With Our General Partner	
Matthew S. Ramsey	64	Chairman of the Board	
Joseph Kim	48	President & Chief Executive Officer and Director	
Arnold D. Dodderer	51	General Counsel & Assistant Secretary	
Karl R. Fails	45	Senior Vice President, Chief Operations Officer	
Brian A. Hand	52	Senior Vice President, Chief Development & Marketing Officer	
Thomas R. Miller	59	Chief Financial Officer	
Oscar A. Alvarez	64	Director	
Imad K. Anbouba	65	Director	
James W. Bryant	86	Director	
Christopher R. Curia	64	Director and Executive Vice President, Human Resources	
Thomas E. Long	63	Director	
Matthew S. Ramsey - Chairman of the Board. Mr. Ramsey was appointed as the Chairman of the Board in April 2015, having previously been appointed to the Board in August 2014. Mr. Ramsey is the President and Chief Operating Officer and director of ETO’s general partner and has served in that capacity since November 2015. Mr. Ramsey served as President and Chief Operating Officer and Chairman of the board of directors of PennTex Midstream Partners, LP’s general partner from November 2016 to July 2017. Mr. Ramsey has served on the Board of Directors of the general partner of ET since July 2012. Mr. Ramsey has served on the board of directors of the general partner of USA Compression Partners, LP since April 2018. Prior to joining ETO in November 2015, Mr. Ramsey served as president of Houston-based RPM Exploration Ltd., a private oil and gas exploration partnership generating and drilling 3-D seismic prospects on the Gulf Coast of Texas. Mr. Ramsey formerly served as a director of RSP Permian, Inc. from January 2014 to July 2018. Mr. Ramsey formerly served as President of DDD Energy, Inc. until its sale in 2002. From 1996 to 2000, Mr. Ramsey served as President and Chief Executive Officer of OEC Compression Corporation, Inc., a publicly traded oil field service company, providing gas compression services to a variety of energy clients. Previously, Mr. Ramsey served as Vice President of Nuevo Energy Company (“Nuevo Energy”), an independent energy company. Additionally, he was employed by Torch Energy Advisors, Inc. (“Torch Energy”), a company providing management and operations services to energy companies, including Nuevo Energy, last serving as Executive Vice President. Mr. Ramsey joined Torch Energy as Vice President of Land and was named Senior Vice President of Land in 1992. Mr. Ramsey holds a B.B.A. in Marketing from the University of Texas at Austin and a J.D. from South Texas College of Law. Mr. Ramsey is a graduate of Harvard Business School Advanced Management Program. Mr. Ramsey is licensed to practice law in the State of Texas. He is qualified to practice in the Western District of Texas and the United States Court of Appeals for the Fifth Circuit. Mr. Ramsey formerly served as a director of Southern Union Company. Mr. Ramsey was appointed to serve on our Board in recognition of his vast knowledge of the energy space and valuable industry, operational and management experience.
Joseph Kim -President and Chief Executive Officer and Director. Mr. Kim was appointed to the Board in January 2018 and has served as President and Chief Executive Officer of our General Partner since January 2018. From June 2017 through December 2017, he served as President and Chief Operating Officer and prior to that served as Executive Vice President and Chief Development Officer since October 2015. Prior to joining the Partnership in October 2015, Mr. Kim held various executive positions, including Chief Operating Officer for Pizza Hut and Senior Vice President - Retail Strategy and Growth for Valero Energy. Prior to his 18 years with Pizza Hut and Valero, Mr. Kim worked for Arthur Anderson within both the Audit and Consulting business units. He is a graduate of Trinity University with a bachelor’s degree in Business Administration.
Arnold D. Dodderer - General Counsel & Assistant Secretary. Mr. Dodderer has served as General Counsel & Assistant Secretary of our General Partner since April 2017, as General Counsel since April 2016 and as General Counsel and Assistant Secretary of our affiliate, Sunoco, Inc. (now known as ETC Sunoco Holdings LLC), since April 2013. Between June 2007 and April 2013, Mr. Dodderer served in various capacities for Sunoco, Inc., including Assistant General Counsel and Chief Compliance Officer. Prior to joining Sunoco, Mr. Dodderer began his legal career in 2000 as an associate at the international law firm of K&L Gates. Mr. Dodderer earned a B.A. from the University of Arkansas and a J.D. from the University of Michigan.
Karl R. Fails - Senior Vice President, Chief Operations Officer. Mr. Fails has served as Senior Vice President, Chief Operations Officer of our General Partner since January 2019. He is responsible for all aspects of the petroleum and renewable fuel supply chain, including supply and trading activities, fuel pricing, product quality, trucking transportation and midstream operations, which includes product terminals and transmix processing facilities. Mr. Fails previously held the position of Senior Vice President, Chief Commercial Officer from February 2018 to January 2019, and Executive Vice President - Supply & Trading from January 2017 to January 2018 and held various other leadership positions during his tenure at the Partnership and Sunoco, Inc. (now known as ETC Sunoco Holdings LLC). Prior to joining Sunoco, Inc. in 2010, Mr. Fails served in various operations and engineering roles in the refining business for both Valero Energy and Exxon. He holds Bachelor’s degrees in Chemical Engineering and Math from Brigham Young University and a Master of Business Administration degree from the University of California, Berkeley.

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Brian A. Hand - Senior Vice President, Chief Development & Marketing Officer. Mr. Hand has served as Senior Vice President, Chief Development & Marketing Officer of our General Partner since February 2018. He is responsible for all aspects of the fuel distribution business, including strategic acquisition and divestment, branded/unbranded wholesale, direct dealers, performance products retail fuel pricing, and sales. Mr. Hand previously held the position of Chief Procurement Officer at various Partnership subsidiaries and also held various other leadership positions during his tenure with the Partnership and Sunoco, Inc. (now known as ETC Sunoco Holdings LLC). Prior to joining Sunoco, Inc. in 2010, Mr. Hand served in various leadership positions at Hewlett Packard, Blockbuster, Inc. and Cingular Wireless (now AT&T Mobility). He holds a Bachelor’s degree in Accounting and Business Management from Lebanon Valley College and a Master of Business Administration degree from Widener University.
Thomas R. Miller - Chief Financial Officer. Mr. Miller has served as Chief Financial Officer of our General Partner since May 2016. He was formerly the Senior Vice President, Chief Financial Officer and Treasurer of Cleco Corporation and Cleco Power LLC, a position he was appointed to in 2013. Prior to that, Mr. Miller served as Senior Vice President and Chief Financial Officer of Cleco from 2013 to 2014. Mr. Miller joined Cleco Corporation in 2012 as Vice President and Treasurer. Earlier, he served as Senior Vice President and Treasurer of Solar Trust of America from 2010 to 2012 and Vice President of Treasury as Exelon Corporation from 2002 to 2010. Mr. Miller holds a Bachelor of Arts degree from Indiana University and a Master of Business Administration degree from the University of Chicago.
Oscar A. Alvarez - Director. Mr. Alvarez was appointed to the Board in March 2018. Mr. Alvarez serves on our audit committee. Mr. Alvarez served the Republic of Honduras for over 30 years, and was elected as a Representative in the National Congress of Honduras multiple times before retiring from politics in 2018. Over the course of his political career he was appointed to the cabinet position of Secretary of Security in both 2002 and 2010. Prior to this, he assisted with the diplomatic mission of the Honduran Embassy in Washington D.C. as Assistant Defense Attaché. In 1994, Mr. Alvarez entered the private sector and founded Atessa Seguridad S.A., providing turnkey security services for many major banks in the country of Honduras. A veteran of the Honduran Armed Forces, he is a graduate of United States Army Ranger School in Fort Benning, GA and the Special Forces Qualification Course at Fort Bragg, NC. Mr. Alvarez has a bachelor's degree from Texas A&M University, where he was the first cadet to be commissioned into a foreign army. He has also taken graduate courses in International Relations at Johns Hopkins University. Mr. Alvarez was selected to serve on our Board due to his extensive international experience.
Imad K. Anbouba - Director. Mr. Anbouba was appointed to the Board in March 2018. Mr. Anbouba chairs our audit committee and serves on our compensation committee. Mr. Anbouba has been the President and Chief Executive Officer of MarJam Global Holdings, Inc. since 1999 and previously served Triton Energy Limited in senior managerial positions from June 1987 to July 1998. Mr. Anbouba is a petroleum engineer with more than 35 years of experience in the oil and gas midstream and petrochemical industries. Mr. Anbouba has previously served as a member of the board of directors and Chief Executive Officer of Central Energy GP LLC from May 2012 to November 2013. He has also previously served as a member of the board of the Dallas Wildcatters from August 2010 to May 2013 and member of the board and Vice President of the Dallas Petroleum Club from January 1997 to January 2000 and January 1998 to January 1999, respectively. Mr. Anbouba was selected to our Board based on his extensive experience in the energy industry, including his past experiences as an executive with various energy companies.
James W. Bryant - Director. Mr. Bryant was appointed to the Board in April 2015. Mr. Bryant chairs our compensation committee and serves on our audit committee. Mr. Bryant is a chemical engineer and has more than 40 years of experience in all phases of the natural gas business, specifically in the engineering and management of midstream facilities. Mr. Bryant was a founder of, and currently serves as Chief Executive Officer of Producers Midstream LP, a position he has held since October 2016. Mr. Bryant previously served as a director of Regency GP LLC, the general partner of Regency Energy Partners LP, from July 2010 to April 2015 and was Chairman of the Regency board from April 2014 to April 2015. He also served as a partner and member of the board of directors for Cardinal Midstream, LLC from September 2008 until April 2013, and since then formed JWB Cardinal Investments. Prior to that, he was a co-founder of Cardinal Gas Solutions LP and Regency Gas Services, LLC. Mr. Bryant received a bachelor’s degree in chemical engineering from Louisiana Tech University. Mr. Bryant was selected to serve as a member of the Board based on his more than 40 years of experience in the energy industry as well as his experience as a director on the boards of other public companies.
Christopher R. Curia - Director and Executive Vice President-Human Resources. Mr. Curia was appointed to the Board in August 2014. Mr. Curia has served as Executive Vice President-Human Resources of our General Partner since April 2015. Mr. Curia joined ETO in July 2008 and was appointed the Executive Vice President and Chief Human Resources Officer of ET in January 2015. Mr. Curia has served on the board of directors of the general partner of USA Compression Partners, LP since April 2018. Prior to joining ETO, Mr. Curia held HR leadership positions at both Valero Energy Corporation and Pennzoil and brings with him more than three decades of Human Resources experience in the oil and gas field. He also has several years’ experience in the retail sector of the energy industry. Mr. Curia earned a master’s degree in Industrial Relations from the University of West Virginia. Mr. Curia was selected to serve as a member of the Board due to the valuable perspective he brings from his extensive experience working as a human resources professional in the energy industry, and the insights he brings to the Board on matters such as succession planning, compensation, employee management and acquisition evaluation and integration.

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Thomas E. Long - Director. Mr. Long was appointed to the Board in May 2016. Mr. Long has served as Group Chief Financial Officer of ET’s general partner since February 2016 and as a Director of ET's general partner since April 2019. Mr. Long also served as the Chief Financial Officer and as a director of PennTex Midstream Partners, LP’s general partner, from November 2016 to July 2017. Mr. Long has served on the board of directors of the general partner of USA Compression Partners, LP since April 2018. Mr. Long previously served as Chief Financial Officer of ETO’s general partner since April 2015 and as Executive Vice President and Chief Financial Officer of Regency Energy Partners LP’s general partner from November 2010 to April 2015. From May 2008 to November 2010, Mr. Long served as Vice President and Chief Financial Officer of Matrix Service Company. Prior to joining Matrix, he served as Vice President and Chief Financial Officer of DCP Midstream Partners, LP, a publicly traded natural gas and natural gas liquids midstream business company located in Denver, CO. In that position, he was responsible for all financial aspects of the company since its formation in December 2005. From 1998 to 2005, Mr. Long served in several executive positions with subsidiaries of Duke Energy Corp., one of the nation’s largest electric power companies. Mr. Long was selected to serve on our Board because of his understanding of energy-related corporate finance gained through his extensive experience in the energy industry.
Section 16(a) Beneficial Ownership Reporting Compliance
Each director and executive officer (and, for a specified period, certain former directors and executive officers) of our General Partner and each holder of more than 10 percent of a class of our equity securities is required to report to the SEC his or her pertinent position or relationship, as well as transactions in those securities, by specified dates.
Delinquent Section 16(a) Reports
Based solely upon a review of reports on Forms 3 and 4 (including any amendments) furnished to us during our most recent fiscal year and reports on Form 5 (including any amendments) furnished to us with respect to our most recent fiscal year, and written representations from officers and directors of our General Partner that no Form 5 was required, we believe that all filings applicable to our General Partner’s officers and directors, and our beneficial owners, required by Section 16(a) of the Exchange Act were filed on a timely basis during 2019, with the exception of a late filing by each of Messrs. Long and Ramsey and two late filings by Mr. Curia.
Reimbursement of Expenses of our General Partner
Our General Partner does not receive any management fee or other compensation for its management of us. Our General Partner is reimbursed for all expenses incurred on our behalf. These expenses include all expenses necessary or appropriate to the conduct of our business and are allocable to us, as provided for in our partnership agreement. There is no cap on the amount that may be paid or reimbursed to our General Partner.

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Item 11.	Executive Compensation	
As is commonly the case for many publicly traded limited partnerships, we do not have officers or directors. Instead, we are managed by the board of directors of our General Partner, and the executive officers of our General Partner perform all of our management functions. As a result, the executive officers of our General Partner are essentially our executive officers. ETO controls our General Partner and ETO owns a significant limited partner interest in us. ETO is controlled by ET, and it is ET, as a result, that will be referenced throughout this Item 11. References to “our officers” and “our directors” refer to the officers and directors of our General Partner.
Compensation Discussion and Analysis
Named Executive Officers
This Compensation Discussion and Analysis is focused on the total compensation of the executive officers of our General Partner as set forth below. The executive officers we refer to in this discussion as our “named executive officers,” or “NEOs,” for the 2019 fiscal year are the following officers of our General Partner:

		
Name	Principal Position	
Joseph Kim	President and Chief Executive Officer	
Thomas R. Miller	Chief Financial Officer	
Karl R. Fails	Senior Vice President, Chief Operations Officer	
Brian A. Hand	Senior Vice President, Chief Development & Marketing Officer	
Arnold D. Dodderer	General Counsel & Assistant Secretary	
Our board of directors has established a Compensation Committee to review and make decisions with respect to the compensation determinations of our officers and directors. However, our compensation committee consults with and receive guidance and input, as appropriate, from ET’s compensation committee, ET’s Chairman of the board of directors, and ET’s Executive Vice President and Chief Human Resources Officer to ensure compensation decisions are undertaken consistent with the compensation philosophy and objectives set by ET.
Compensation Philosophy and Objectives
Our compensation philosophy and objectives are substantially the same as those set by ET and are based on the premise that a significant portion of each executive's total compensation should be incentive-based or “at-risk” compensation. We also share ET’s philosophy that executives’ total compensation levels should be competitive in the marketplace for executive talent and abilities. Our General Partner seeks a total compensation program for our NEOs that provides for an annual base compensation rate slightly below the median market (i.e., approximately the 30th to 40th percentile of market) but incentive-based compensation composed of a combination of compensation vehicles designed to reward both short- and long-term performance that are both targeted to pay out at approximately the top-quartile of market for similarly situated retail businesses. Our General Partner believes the incentive-based balance is achieved by (i) the payment of annual discretionary cash bonuses that consider the achievement of the financial performance objectives for a fiscal year set at the beginning of such fiscal year and the individual contributions of our NEOs to the success of the achievement of the annual financial performance objectives, and (ii) the annual grant of time-based restricted unit and/or restricted phantom unit awards under the LTIP, which awards are intended to provide a long-term incentive and retentive value to our key employees to focus their efforts on increasing the market price of our publicly traded units and to increase the cash distribution we pay to our unitholders. As discussed below, our compensation committee the in consultation with our General Partner, and, as applicable ET or the ET Compensation Committee, are responsible for the compensation policies and compensation level of the named executive officers of our General Partner. In this discussion, we refer to our compensation committee as the “Compensation Committee.”
Our compensation program is structured to achieve the following:
		
•	reward executives with an industry-competitive total compensation package of competitive base salaries and significant incentive opportunities yielding a total compensation package approaching the top-quartile of the market;	
		
•	attract, retain and reward talented executive officers and key management employees by providing total compensation competitive with that of other executive officers and key management employees employed by publicly traded limited partnerships of similar size and in similar lines of business;	
		
•	motivate executive officers and key employees to achieve strong financial and operational performance;	
		
•	emphasize performance-based or “at-risk” compensation; and	
		
•	reward individual performance.	

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Components of Executive Compensation
For the year ended December 31, 2019, the compensation paid to our NEOs consisted of the following components:
		
•	annual base salary;	
		
•	non-equity incentive plan compensation consisting solely of discretionary cash bonuses;	
		
•	time-vested restricted unit and/or restricted phantom unit awards under the equity incentive plan;	
		
•	payment of distribution equivalent rights (“DERs”) on unvested time-based restricted unit and/or restricted phantom unit awards under our equity incentive plan;	
		
•	vesting of previously issued time-based restricted unit and/or restricted phantom unit awards issued pursuant to equity incentive plans of affiliates; and	
		
•	401(k) plan employer contributions.	
Methodology
The Compensation Committee considers relevant data available to it to assess our competitive position with respect to base salary, annual short-term incentives and long-term incentive compensation for our executives, including our NEOs. The Compensation Committee also considers individual performance, levels of responsibility, skills and experience.
Periodically, we engage a third-party consultant to provide the compensation committee of our General Partner with market information for compensation levels at peer companies in order to assist in the determination of compensation levels for executives, including the named executive officers. During 2019, Longnecker & Associates (“Longnecker”), the independent compensation advisor to ET was again engaged to provide targeted market review and benchmarking for the identified members of the senior leadership team. In particular, the review by Longnecker was designed to (i) evaluate the market competitiveness of total compensation levels for certain members of senior management, including our named executive officers; (ii) assist in the determination of appropriate compensation levels for our senior management, including the named executive officers; and (iii) confirm that our compensation programs were yielding compensation packages consistent with our overall compensation philosophy. The Partnership was reviewed by Longnecker through various metrics in order to recognize the Partnership’s unique structure, including the facts that (i) the Partnership receives certain shared-service support from ET; and (ii) in other functions, the Partnership operates in a manner consistent with an independent publicly-traded organization. As such, Longnecker reviewed certain of our executive officers, including the named executive officers, in their specific functions to determine the appropriate benchmarking technique. In all circumstances, Longnecker considered our annual revenues and market capitalization levels in its benchmarking. The compensation analysis provided by Longnecker covered all major components of total compensation, including annual base salary, annual short-term cash bonus and long-term incentive awards for our named executive officers as compared to officers of companies similarly situated in terms of structure, annual revenues and market capitalization and made determinations with respect to such officers’ level (i.e. as a corporate, officer, subsidiary officer or shared service function) given the unique characteristics of our structure.
Following Longnecker’s 2019 review, the Compensation Committee reviewed the information provided, including Longnecker’s specific conclusions and recommended considerations for all compensation going forward. The Compensation Committee considered and reviewed the results of the study performed by Longnecker to determine if the results indicated that the compensation programs were yielding a competitive total compensation model prioritizing incentive-based compensation and rewarding achievement of short and long-term performance objectives and considered Longnecker’s conclusions and recommendations. In general, Longnecker found that the Partnership is achieving its stated objectives with respect to the “at-risk” approach and targeted level of compensation for our named executive officers.
In addition to the 2019 compensation analysis, Longnecker also provided advice and feedback on certain other matters, including the appropriateness, targets and composition of the annual equity award pools and the annual bonus awards under our bonus plan.
Base salary. Base salary is designed to provide for a competitive fixed level of pay that attracts and retains executive officers and compensates them for their level of responsibility and sustained individual performance (including experience, scope of responsibility and results achieved). The salaries of our named executive officers are targeted as an annual base salary slightly below median level of market and are determined by the compensation committee. Base salaries also are influenced by internal pay equity (fair and consistent application of compensation practices). At the NEO level, the balance of compensation is weighted toward pay-at-risk compensation (annual bonuses and long-term incentives).
During the 2019 merit review process in July, the compensation committee approved base salary increases of 3.5% to each of the named executive officers. Mr. Kim's salary increased to $533,025 from his previous level of $515,000, Mr. Miller's salary increased to $349,664 from his previous level of $337,840, Mr. Hand's salary increased to $319,815 from his previous level of $309,000, and Mr.

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Dodderer's salary increased to $309,154 from his previous level of $298,700. In connection with Mr. Fails’ promotion to the position of Chief Operations Officer, he received a base pay increase from $316,725 to $335,000 in recognition of his additional responsibilities in January 2019. Mr. Fails also received a 3.5% merit increase to $346,725 at the same time as the other NEOs.
The 3.5% increase for the named executive officers discussed above reflects base salary increases consistent with the 3.5% annual merit increase pool set for all employees of ET and its employing affiliates for 2019 by the respective compensation committees.
Annual Bonus. In addition to base salary, the Compensation Committee makes a determination whether to award discretionary annual cash bonuses to employees, including following the end of the year. These discretionary bonuses, if awarded, are intended to reward our named executive officers for the achievement of financial performance objectives during the year for which the bonuses are awarded in light of the contribution of each individual to our profitability and success during such year.
The Bonus Plan is a discretionary annual cash bonus plan available to all employees, including the named executive officers. The purpose of the Bonus Plan is to reward employees for contributions towards the Partnership’s business goals and to aid in motivating employees. The Bonus Plan is administered by the Compensation Committee and the Compensation Committee has the authority to establish and interpret the rules and regulations relating to the Bonus Plan, to select participants, to determine and approve the size of any actual award amount, to make all determinations, including factual determinations, under the Bonus Plan, and to take all other actions necessary or appropriate for the proper administration of the Bonus Plan.
For each calendar year, or any other period designated by the compensation committee (the “Performance Period”), the compensation committee will evaluate and determine an overall funded cash bonus pool based on achievement of (i) an internal Adjusted EBITDA target (“Adjusted EBITDA Target”), (ii) an internal distributable cash flow target (“DCF Target”) and (iii) performance of each department compared to the applicable departmental budget (“Departmental Budget Target”). The performance criteria are weighted 60% on the achievement of the Adjusted EBITDA Target, 20% on the achievement of the DCF Target and 20% on the achievement of the Departmental Budget Target (collectively “Budget Targets”). The total amount of cash to be allocated to the funded bonus pool will range from 0% to 120% for each of the budgeted DCF Target and Adjusted EBITDA Target and will range from 0% to 100% of the Departmental Budget Target. The maximum funding of the bonus pool is 116% of the total pool target and to achieve such funding each of the Adjusted EBITDA and the DCF Target must achieve 120% funding and the Department Budget target must achieve its 100% target. While the funded bonus pool will reflect an aggregation of performance under each target, in the event performance under the Adjusted EBITDA Target is below 80% of its target, no bonus pool will be funded. If the bonus pool is funded, a participant may earn a cash award for the Performance Period based upon the level of attainment of the Budget Targets and his or her individual performance. Awards are paid in cash as soon as practicable after the end of the Performance Period but in no event later than two and one-half months after the end of the Performance Period.
For 2019, the short-term annual cash bonus pool targets for Messrs. Kim, Miller, Fails, Hand and Dodderer were as follows: for Mr. Kim, 130%; and 100% for Messrs. Miller, Fails and Hand and 80% for Mr. Dodderer.
While the achievement of the various budget targets sets a bonus pool under the Bonus Plan, actual bonus awards are discretionary. These discretionary bonuses, if awarded, are intended to reward our named executive officers for the achievement of the budget targets during the performance period in light of the contribution of each individual to our profitability and success during such year. The compensation committee does not establish its own financial performance objectives in advance for purposes of determining whether to approve any annual bonuses, and it does not utilize any formulaic approach to determine annual bonuses.
In February 2020, the Compensation Committee certified Partnership results to achieve a bonus payout of 100% of the bonus pool, which reflected the achievement of approximately 98.6% of the Adjusted EBITDA Target; 100.3% of the DCF Target and 90.74% of the Departmental Budget Target coming in approximately 10% under total expense budget in respect of 2019 performance under the Bonus Plan. The cash bonuses approved for Messrs. Kim, Miller, Fails, Hand and Dodderer were $680,315, $300,000, $340,000, $313,000 and $242,850, respectively.
In approving the 2019 bonuses of the named executive officers, the compensation committee took into account the achievement by the Partnership of all of the targeted performance objectives for 2019 and the individual performances of each of the named executive officers. The cash bonuses awarded to each of the named executive officers for 2019 performance were materially consistent with their applicable bonus pool targets.
Equity Awards. In 2018, the Board adopted the Sunoco LP 2018 Long-Term Incentive Plan (the “2018 LTIP”). Each of the Sunoco LP 2012 Long-Term Incentive Plan (the “2012 LTIP”) and 2018 LTIP (collectively the “LTIPs”) is designed to provide long-term incentive awards in order to promote achievement of our long-term strategic business objectives. The LTIPs are designed to align the economic interests of the named executive officers, key employees and directors with those of our unitholders and to provide an incentive to management for continuous employment with the General Partner and its affiliates. Each of our named executive officers is eligible to participate in the LTIPs. The LTIPs provide us with the flexibility to grant unit options, restricted units, phantom units, unit appreciation rights, cash awards, distribution equivalent rights, substitute awards, and other unit-based awards, or any combination of the foregoing. These awards are intended to align the interests of plan participants (including our NEOs) with those of our unitholders and to give plan participants the opportunity to share in our long-term performance.

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From time to time, the Compensation Committee may make grants under the plan to employees and/or directors containing such terms as the compensation committee shall determine under the LTIPs. The compensation committee determines the conditions upon which the restricted units granted may become vested or forfeited, and whether or not any such restricted units will have distribution equivalent rights (“DERs”) entitling the grantee to distributions receive an amount in cash equal to cash distributions made by us with respect to a like number of our common units during the restricted period.
For 2019, the annual long-term incentive targets set by the Compensation Committee for the named executive officers were 400% of annual base salary for Mr. Kim; 200% of annual base salary for Messrs. Miller, Fails and Hand, and 150% for Mr. Dodderer. The targets of the named executive officers were the same as the prior year’s targets.
The annual long-term incentive targets are used as the basis to determine the target number of units to be awarded to the eligible participant, including the named executive officers. A multiple of base salary is used to set the pool target, that number is then divided by a weighted average price determined by considering Sunoco’s modified total unitholder return “(TUR”) performance as measured against the average return of Sunoco’s identified peer group over defined time periods. For purposes of establishing an initial price, we utilize a 60 trading-day trailing weighted average price of Sunoco common units prior to November 1, 2019. This average trading price is then subject to adjustment when our TUR is more than 5% greater or less than that of its identified peer group. If the TUR analysis yields a result that is within 5% percent of its identified peer group, the Compensation Committee will simply use the 60 trading day trailing weighted average price divided by the applicable salary multiple to establish a target pool for each eligible participant, including the named executive officers. If our TUR is outside of the 5% deviation, the 60 trading day trailing weighted average will be adjusted up or down based on Sunoco’s performance as compared to the identified group. For 2019, the peer group included the following:

			
PBF Energy	 	CVR Energy	
Delek US Holdings, Inc.	 	Global Partners LP	
Holly Energy Partners, L.P.	 	 	
For 2019, our TUR outperformed the identified peer group based on the average of the identified three comparison periods: (i) year-to-date 2019, (ii) trailing twelve months, and (iii) full-year 2018. Consequently, the 2019 long-term incentive base price was reduced to increase the total available restricted pool by approximately 2.6%.
In December 2019, the Compensation Committee granted restricted units awards to Messrs. Kim, Miller, Fails, Hand and Dodderer of 69,115 units, 20,000 units, 26,000 units, 23,500 units and 16,000 units, respectively under the 2018 LTIP. In approving the grant of such restricted unit awards, the Compensation Committee considered several factors, including the long-term objective of retaining such individuals as key drivers of the Partnership’s future success, the existing level of equity ownership of such individuals and the previous awards to such individuals of equity awards subject to vesting. Additionally, in January 2019 the Compensation Committee granted a special one-time award of 24,000 units to Mr. Fails in January 2019 upon his promotion to Chief Operations Officer. Vesting of the 2019 awards would accelerate in the event of the death or disability of the named executive officer or in the event of a change in control of the partnership as that term is defined under the 2018 LTIP.
All of the restricted units granted, including to the named executive officers, provided for the vesting of 60 percent of the units at the end of the third year from the date of the grant and the vesting of the remaining 40 percent of the units at the end of the fifth year, subject to continued employment of the named executive officers through each specified vesting date. These restricted unit awards entitle the grantee of the unit awards to receive, with respect to each Partnership common unit subject to such restricted unit award that has not either vested or been forfeited, a DER cash payment promptly following each such distribution by us to our unitholders. In approving the grant of such unit awards, the compensation committee took into account a number of performance factors as well as the long-term objective of retaining such individuals as key drivers of the Partnership’s future success, the existing level of equity ownership of such individuals and the previous awards to such individuals of equity awards subject to vesting.
The issuance of common units pursuant to our equity incentive plans is intended to serve as a means of incentive compensation; therefore, no consideration will be payable by the plan participants upon vesting and issuance of the common units.
We believe that permitting the accelerated vesting of equity awards upon a change in control creates an important retention tool for us by enabling employees to realize value from these awards in the event that we undergo a change in control transaction. The actual value to be realized upon any acceleration are discussed below under “Potential Payments Upon a Termination or Change of Control.”
Benefit Plans. Our NEOs are provided compensation in the form of other benefits, including medical, life, dental, and disability insurance in line with competitive market conditions in retail non-store plans sponsored by Sunoco GP LLC. Our NEOs receive the same benefits and are responsible to pay the same premiums, deductibles and out of pocket maximums as other employees participating in these plans.

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Sunoco GP LLC 401(k) Plan. Effective December 31, 2018, our previous 401(k) benefit plan, the Sunoco GP LLC 401(k), was merged into the Energy Transfer LP 401(k) Plan (the “ET 401(k) Plan”). The Energy Transfer LP 401(k) Plan (the “ET 401(k) Plan”) is a defined contribution 401(k) plan, which covers substantially all of our employees, including the named executive officers. Employees may elect to defer up to 100% of their eligible compensation after applicable taxes, as limited under the Internal Revenue Code. We make a matching contribution that is not less than the aggregate amount of matching contributions that would be credited to a participant’s account based on a rate of match equal to 100% of each participant’s elective deferrals up to 5% of covered compensation. The amounts deferred by the participant are fully vested at all times, and the amounts contributed by the Partnership become vested based on years of service. We provide this benefit as a means to incentivize employees and provide them with an opportunity to save for their retirement.
The Partnership provides a 3% profit sharing contribution to employee 401(k) accounts for all employees with a base compensation below a specified threshold. The contribution is in addition to the 401(k) matching contribution and employees become vested based on years of service.
Sunoco GP LLC Severance Plan. In addition, Sunoco GP LLC has also adopted the SUN Severance Plan, which provides for payment of certain severance benefits in the event of Qualifying Termination (as that term is defined in the SUN Severance Plan). In general, the Severance Plan provides payment of one (1) week of annual base salary for each year or partial year of employment service, up to a maximum of fifty-two weeks or one year of annual base salary (with a minimum of eight weeks of annual base salary) and up to three months of continued group health insurance coverage. The SUN Severance Plan also provides that additional benefits in addition to those provided under the Severance Plan may be paid based on special circumstances, which additional benefits shall be unique and non-precedent setting. The Severance Plan is available to all salaried employees on a nondiscriminatory basis; therefore, amounts that would be payable to the named executive officers upon a Qualified Termination have been excluded from “Compensation Tables - Potential Payments Upon a Termination or Change of Control” below.
The benefit levels are summarized below:

					
Employee Level	 	Minimum Severance Pay	 	Maximum Severance Pay	
Senior Manager or below	 	8 weeks of Base Pay	 	26 weeks of Base Pay	
Director or Senior Director	 	16 weeks of Base Pay	 	39 weeks of Base Pay	
Vice President and above	 	26 weeks of Base Pay	 	52 weeks of Base Pay	
Other ET Sponsored Benefit Plans. Our NEOs participate in certain retirement and deferred compensation plans sponsored by ET or its affiliates as described below. The Partnership is not allocated any compensation expense nor does it make any contributions to the plans sponsored by ET or its affiliates.
The Sunoco, Inc. Pension Restoration Plan. The Sunoco, Inc. Pension Restoration Plan is a non-qualified plan that provides for certain retirement benefits that otherwise would be provided under the SCIRP, except for the IRS limits. Effective June 30, 2010, Sunoco Inc. froze pension benefits (including accrued and vested benefits) payable under this plan for all salaried employees. None of our current NEOs participate in this plan.
ET Non-Qualified Deferred Compensation Plan (the “ET NQDC Plan”) is a deferred compensation plan, which permits eligible highly compensated employees to defer a portion of their salary, bonus and/or quarterly non-vested restricted unit and/or restricted phantom unit distribution equivalent income until retirement, termination of employment or other designated distribution event. Each year under the ET NQDC Plan, eligible employees are permitted to make an irrevocable election to defer up to 50 percent of their annual base salary, 50 percent of their quarterly non-vested restricted unit and/or restricted phantom unit distribution income, and/or 50 percent of their discretionary performance bonus compensation during the following year. Pursuant to the ET NQDC Plan, ET may make annual discretionary matching contributions to participants’ accounts; however, ET has not made any discretionary contributions to participants’ accounts and currently has no plans to make any discretionary contributions to participants’ accounts. All amounts credited under the ET NQDC Plan (other than discretionary credits) are immediately 100% vested. Participant accounts are credited with deemed earnings or losses based on hypothetical investment fund choices made by the participants among available funds.
Participants may elect to have their account balances distributed in one lump sum payment or in annual installments over a period of three or five years upon retirement, and in a lump sum upon other termination events. Participants may also elect to take lump-sum in-service withdrawals five years or longer in the future, and such scheduled in-service withdrawals may be further deferred prior to the withdrawal date. Upon a change in control (as defined in the ET NQDC Plan) of ET, all ET NQDC Plan accounts are immediately vested in full. However, distributions are not accelerated and, instead, are made in accordance with the ET NQDC Plan’s normal distribution provisions unless a participant has elected to receive a change of control distribution pursuant to his deferral agreement.

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Risk Assessment Related to Our Compensation Structure
We believe our compensation plans and programs for our named executive officers, as well as the other employees who provide services to us, are appropriately structured and are not reasonably likely to result in material risk to us. We believe our compensation plans and programs are structured in a manner that does not promote excessive risk-taking that could harm our value or reward poor judgment. We also believe we have allocated our compensation among base salary and short and long-term compensation in such a way as to not encourage excessive risk-taking. We use restricted units and/or restricted phantom units rather than unit options for equity awards because restricted units and/or restricted phantom units retain value even in a depressed market so that employees are less likely to take unreasonable risks to get, or keep, options “in-the-money.” Finally, the time-based vesting over five years for our long-term incentive awards ensures that our employees’ interests align with those of our unitholders for our long-term performance.
Accounting and Tax Considerations
We account for the equity compensation expense for equity awards granted under our LTIP in accordance with U.S. generally accepted accounting principles (“GAAP”), which requires us to estimate and record an expense for each equity award over the vesting period of the award. For performance-based restricted units and/or restricted phantom units that are paid out in the form of common units, the value of our common units on the date of grant is used for determining the expense, with an adjustment for the actual performance factors achieved. Thus, the expense for performance-based restricted units and/or restricted phantom units payable in units generally is not adjusted for changes in the trading price of our common units after the date of grant. For market-based awards, the value is determined using a Monte Carlo simulation. The expense for restricted units and/or restricted phantom units settled in common units is recognized ratably over the vesting period. For cash compensation, the accounting rules require us to record it as an expense at the time the obligation is accrued. Because we are a partnership, and our General Partner is a limited liability company, Internal Revenue Code (“Code”) Section 162(m) does not apply to the compensation paid to our NEOs and, accordingly, our compensation committee did not consider its impact in making the compensation recommendations discussed above.
Compensation Committee Interlocks and Insider Participation
Messrs. Anbouba and Bryant are the only members of the compensation committee. During 2019, neither Mr. Anbouba nor Mr. Bryant was an officer or employee of affiliates of ET, or served as an officer of any company with respect to which any of our executive officers served on such company’s board of directors. In addition, neither Mr. Anbouba nor Bryant is a former employee of affiliates of ET.
Compensation Committee Report
The compensation committee of the board of directors of our General Partner has reviewed and discussed the section of this report entitled “Compensation Discussion and Analysis” with the management of the Partnership and approved its inclusion on this annual report on Form 10-K.
Compensation Committee
James W. Bryant (Chairman)
Imad K. Anbouba
The foregoing report shall not be deemed to be incorporated by reference by any general statement or reference to this Annual Report on Form 10-K into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except to the extent that we specifically incorporate this information by reference, and shall not otherwise be deemed filed under those Acts.

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Summary Compensation Table

																										
Name and Principal Position	Year	 	Salary
($) (1)	 	Unit Awards
($) (2)	 	Non-Equity Incentive Plan
Compensation ($) (3)	 	Change in Nonqualified Deferred Compensation Earnings ($)	 	All Other Compensation
($) (4)	 	Total ($)	
Joseph Kim	2019	 	$	523,319		 	$	2,129,433		 	$	680,315		 	$	—		 	$	15,145		 	$	3,348,212		
President and Chief Executive Officer	2018	 	502,772		 	1,964,430		 	719,000		 	—		 	15,541		 	3,201,743		
	2017	 	386,913		 	897,278		 	406,259		 	—		 	9,884		 	1,700,334		
Thomas R. Miller	2019	 	343,297		 	616,200		 	300,000		 	—		 	17,401		 	1,276,898		
Chief Financial Officer and Treasurer	2018	 	332,542		 	538,200		 	365,800		 	—		 	17,066		 	1,253,608		
	2017	 	323,692		 	524,475		 	323,692		 	—		 	9,430		 	1,181,289		
Karl R. Fails	2019	 	338,303		 	1,510,500		 	340,000		 	111,532		 	139,077		 	2,439,412		
Senior Vice President — Chief Operations Officer	2018	 	311,758		 	699,660		 	342,900		 	(28,110	)	 	16,252		 	1,342,460		
	 	 	 	 	 	 	 	 	 	 	 	 			
Brian A. Hand	2019	 	313,992		 	724,035		 	313,000		 	39,837		 	16,403		 	1,407,267		
Senior Vice President — Chief Development & Marketing Officer	2018	 	304,154		 	632,385		 	334,600		 	(6,552	)	 	14,764		 	1,279,351		
	 	 	 	 	 	 	 	 	 	 	 	 			
Arnold D. Dodderer	2019	 	303,525		 	492,960		 	242,850		 	1,164		 	15,425		 	1,055,924		
General Counsel	 	 	 	 	 	 	 	 	 	 	 	 	 	

(1) 	For comparative purposes, the above table provides a summary of the total compensation for each NEO for each of 2017, 2018 and 2019. In accordance with the terms of our partnership agreement, we reimburse our General Partner and its affiliates for compensation related expenses attributable to the portion of the named executive officer’s time dedicated to providing services to us. For the periods presented, amounts reported herein reflect (i) 100% of the cash compensation expense associated with the NEO’s services and (iii) 100% grant date value of phantom unit awards associated with the services performed by each of the NEOs and directors. Cash compensation expenses for each NEO were allocated on the basis of total cash compensation earned by the NEO during the period.	
		
(2) 	The amounts reported for unit awards represent the full grant date fair value of restricted units and/or restricted phantom units granted to each of our NEOs, calculated in accordance with the accounting guidance on share-based payments.	
		
(3) 	Sunoco LP maintains the Bonus Plan which provides for discretionary bonuses. Awards of discretionary bonuses are tied to achievement of targeted performance objectives and described in the Compensation Discussion and Analysis.	
		
(4) 	The amounts reflected for 2019 in this column include (i) 401(k) Plan matching contributions made on behalf of the named executive officers of $11,885 for Mr. Kim, $13,239 for Mr. Hand, $12,304 for Mr. Dodderer and $14,000 each for Messrs. Miller and Fails, (ii) health savings account contributions made on behalf of the named executive officers of $2,000 each for Messrs. Kim, Fails, Hand and Dodderer and $1,000 for Mr. Miller, and (iii) the dollar value of life insurance premiums paid for the benefit of the named executive officers of $1,260 for Mr. Kim, $2,401 for Mr. Miller, $825 for Mr. Fails, $1,163 for Mr. Hand and $1,120 for Mr. Dodderer. Additionally, Mr. Fails received $122,253 of relocation costs for the year ended December 31, 2019.	
The amounts reflected for all periods exclude distribution payments in connection with distribution equivalent rights on unvested unit awards, because the dollar value of such distributions are factored into the grant date fair value reported in the “Unit Awards” column of the Summary Compensation Table at the time that the unit awards and distribution equivalent rights were originally granted. For 2019, distribution payments in connection with distribution equivalent rights totaled $469,769 for Mr. Kim, $211,328 for Mr. Miller, $330,755 for Mr. Fails, $205,431 for Mr. Hand and $162,326 for Mr. Dodderer.

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Grants of Plan-Based Awards in 2019
The table below reflects awards granted to our NEOs under the LTIP during 2019.

												
Name	 	Grant Date	 	Type of Award (1)	 	All Other Stock
Awards:
Number of
Shares of Stock
(#) (1)	 	Grant Date
Fair Value of
Stock Awards
($) (1)	
 	 	 	 	 	 	 	 	 		
Joseph Kim	 	12/16/2019	 	Restricted units	 	69,115		 	$	2,129,433		
Thomas R. Miller	 	12/16/2019	 	Restricted units	 	20,000		 	616,200		
Karl R. Fails	 	12/16/2019	 	Restricted units	 	26,000		 	801,060		
 	 	1/23/2019	 	Restricted units	 	24,000		 	709,440		
Brian A. Hand	 	12/16/2019	 	Restricted units	 	23,500		 	724,035		
Arnold D. Dodderer	 	12/16/2019	 	Restricted units	 	16,000		 	492,960		
		
(1) 	The restricted units granted in December and January 2019 vest 60% in December 2022 and 2021, respectively, and 40% in December 2024 and 2023, respectively. The reported grant date fair value of stock awards was determined in compliance with FASB ASC Topic 718 and are more fully described in Note 19–Unit-Based Compensation in our Notes to Consolidated Financial Statements in “Item 8. Financial Statements and Supplementary Data.”	

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Outstanding Equity Awards at December 31, 2019
The following table reflects NEO equity awards granted under the LTIP Plan that were outstanding at December 31, 2019.

										
 	 	 	 	Unit Awards (1)	
Name	 	Grant Date (1)	 	Number of Shares or Units of Stock That Have Not Vested (#)	 	Market Value of Shares or Units That Have Not Vested ($) (2)	
Joseph Kim	 	12/16/2019	 	69,115		 	$	2,114,919		
 	 	12/19/2018	 	73,000		 	2,233,800		
 	 	12/21/2017	 	31,650		 	968,490		
 	 	12/29/2016	 	9,100		 	278,460		
 	 	12/16/2015	 	6,868		 	210,161		
Thomas R. Miller	 	12/16/2019	 	20,000		 	612,000		
 	 	12/19/2018	 	20,000		 	612,000		
 	 	12/21/2017	 	18,500		 	566,100		
 	 	12/29/2016	 	7,800		 	238,680		
 	 	5/26/2016	 	6,000		 	183,600		
Karl R. Fails	 	12/16/2019	 	26,000		 	795,600		
 	 	1/23/2019	 	24,000		 	734,400		
 	 	12/19/2018	 	26,000		 	795,600		
 	 	12/21/2017	 	20,500		 	627,300		
 	 	12/29/2016	 	7,200		 	220,320		
 	 	12/16/2015	 	3,640		 	111,384		
Brian A. Hand	 	12/16/2019	 	23,500		 	719,100		
 	 	12/19/2018	 	23,500		 	719,100		
 	 	12/21/2017	 	18,000		 	550,800		
 	 	12/29/2016	 	5,100		 	156,060		
 	 	12/16/2015	 	3,328		 	101,837		
Arnold D. Dodderer	 	12/16/2019	 	16,000		 	489,600		
 	 	12/19/2018	 	17,700		 	541,620		
 	 	12/21/2017	 	15,000		 	459,000		
 	 	12/29/2016	 	3,420		 	104,652		
 	 	12/16/2015	 	3,300		 	100,980		
		
(1) 	Common unit awards outstanding vest as follows:	
•at a rate of 60% in December 2022 and 40% in December 2024 for awards granted in December 2019;
•at a rate of 60% in December 2021 and 40% in December 2023 for awards granted in December 2018 and January 2019;
•at a rate of 60% in December 2020 and 40% in December 2022 for awards granted in December 2017;
•100% in December 2021 for the remaining outstanding portion of awards granted in December 2016; and
•100% in December 2020 for the remaining outstanding portion of awards granted in May 2016 and December 2015.
		
(2) 	Based on the closing market price of our common units of $30.60 on December 31, 2019.	

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Units Vested in 2019
The following table provides information regarding the vesting of SUN restricted units and/or restricted phantom units and ET restricted units held by certain of our NEOs during 2019. There are no options outstanding on our common units. 

							
 	Unit Awards	
Name	Number of
Units Acquired
on Vesting (#)	 	Value Realized on
Vesting ($) (1)	
Joseph Kim	21,650		 	$	652,748		
Thomas R. Miller	11,700		 	353,808		
Karl R. Fails	18,828		 	569,359		
Brian A. Hand	12,286		 	371,529		
Arnold D. Dodderer	9,740		 	293,661		
		
(1) 	Amounts presented represent the number of unit awards vested during 2019 and the value realized upon vesting of these awards, which is calculated as the number of units vested multiplied by the closing price of Sunoco LP or ET’s respective common units upon the vesting date.	
Non-Qualified Deferred Compensation
Our NEOs are eligible to participate, and do participate, in a non-qualified deferred compensation plan administered by ET. The following table provides the voluntary salary deferrals made by the named executive officers in 2019 under the ET NQDC Plan and Sunoco Executive DC Plan.

																				
Name	Executive Contributions in Last FY ($)	 	Registrant Contributions in Last FY ($)	 	Aggregate Earnings in Last FY ($)	 	Aggregate Withdrawals/Distributions ($)	 	Aggregate Balance at Last FYE ($)	
Joseph Kim	$	—		 	$	—		 	$	—		 	$	—		 	$	—		
Thomas R. Miller	—		 	—		 	—		 	—		 	—		
Karl R. Fails	85,495		 	—		 	111,532		 	—		 	604,681		
Brian A. Hand	59,459		 	—		 	39,837		 	—		 	206,827		
Arnold D. Dodderer	12,938		 	—		 	1,164		 	—		 	14,102		
Potential Payments upon Termination or Change of Control
Pursuant to the terms of the award agreements issued under the LTIP, in the event of a (i) Change of Control (as defined in the LTIPs) or (ii) termination of employment due to death or disability, all restricted units and/or restricted phantom units shall vest. In the event of a termination of employment for any other reason, all restricted units and/or restricted phantom units that are still unvested shall be forfeited.
In addition, beginning in October 2014, all awards under both the 2012 LTIP and the 2018 LTIP contain a partial acceleration of vesting for qualified retirement, whereby a recipient who voluntarily retires after at least five years of service would be eligible for (i) vesting of 40% of the outstanding award, if the recipient retires at age 65 to 68, or (ii) vesting of 50% of the outstanding award, if the recipient is over the age of 68 upon retirement. Currently none of our NEOs are eligible for partial acceleration upon retirement. The acceleration of these awards at retirement is subject to the provisions of IRC Section 409(a) and such accelerated units shall not be delivered before the earlier of (i) the day that is six months plus one day after the date of separation from service or (ii) the tenth (10th) day after the date of the recipient’s death.
Under the LTIPs, a “Change of Control” means, and shall be deemed to have occurred upon one or more of the following events: (i) any “person” or “group” within the meaning of those terms as used in Sections 13(d) and 14(d)(2) of the Exchange Act, other than members of the General Partner, the Partnership, or an affiliate of either the General Partner or the Partnership, shall become the beneficial owner, by way of merger, consolidation, recapitalization, reorganization or otherwise, of 50% or more of the voting power of the voting securities of the General Partner or the Partnership; (ii) the limited partners of the General Partner or the Partnership approve, in one transaction or a series of transactions, a plan of complete liquidation of the General Partner or the Partnership; (iii) the sale or other disposition by either the General Partner or the Partnership of all or substantially all of its assets in one or more transactions to any Person other than an affiliate; (iv) the General Partner or an affiliate of the General Partner or the Partnership ceases to be the General Partner of the Partnership; (v) any other event specified as a “Change of Control” in the equity incentive plan maintained by Susser at the time of such “Change of Control;” or (vi) any other event specified as a “Change of Control” in an applicable award agreement. Notwithstanding

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the above, with respect to a 409A award, a “Change of Control” shall not occur unless that Change of Control also constitutes a “change in the ownership of a corporation,” a “change in the effective control of a corporation,” or a “change in the ownership of a substantial portion of a corporation’s assets,” in each case, within the meaning of 1.409A-3(i)(5) of the 409A regulations, as applied to non-corporate entities.
The following table shows the amount of incremental value that would have been received by each of the NEOs upon certain events of termination or a change of control resulting in the accelerated vesting of the restricted units and/or restricted phantom units held by our NEOs on December 31, 2019: 

																			
Name	 	Benefit	 	Termination Due to Death or Disability
($) (1)	 	Termination
for any other reason
($)	 	Change of Control
with or without Continued
Employment
($) (1)	 	Not for Cause Termination ($)	
Joseph Kim	 	Unit Vesting	 	$	5,805,830		 	$	—		 	$	5,805,830		 	$	—		
Thomas R. Miller	 	Unit Vesting	 	2,212,380		 	—		 	2,212,380		 	—		
Karl R. Fails	 	Unit Vesting	 	3,284,604		 	—		 	3,284,604		 	—		
Brian A. Hand	 	Unit Vesting	 	2,246,897		 	—		 	2,246,897		 	—		
Arnold D. Dodderer	 	Unit Vesting	 	1,695,852		 	—		 	1,695,852		 	—		

(1) 	The amounts reflected above represent the product of the number of restricted units and/or restricted phantom units that were subject to vesting/restrictions on December 31, 2019 multiplied by the closing price of our common units of $30.60 on that date.	
CEO Pay Ratio
In accordance with Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and Item 402(u) of Regulation S-K, set forth below is information about the relationship of the annual total compensation of Mr. Kim, our President and Chief Executive Officer and the annual total compensation of our employees.
For the 2019 calendar year:
		
•	The annual total compensation of Mr. Kim, as reported in the Summary Compensation Tables of this Item 11 was $3,348,212; and	
		
•	The median total compensation of the employees supporting our Partnership (other than Mr. Kim) was $92,035.	
Based on this information, for 2019 the ratio of the annual total compensation of Mr. Kim to the median of the annual total compensation of the 2,613 employees supporting us as of December 31, 2019 was approximately 36 to 1.
To identify the median of the annual total compensation of the employees supporting the Partnership, the following steps were taken:
		
1.	It was determined that, as of December 31, 2019, the applicable employee populations consisted of 2,613 with all of the identified individuals being employed in the United States. This population consisted of all of our full-time and part-time employees. We did not engage any independent contractors in 2019 that are required to be included in our employee population for the CEO pay ratio evaluation.	
		
2.	To identify the “median employee” from our employee population, we compared the total earnings of our employees as reflected in our payroll records as reported on Form W-2 for 2019.	
		
3.	We identified our median employee using W-2 reporting and applied this compensation measure consistently to all of our employees required to be included in the calculation. We did not make any cost of living adjustments in identifying the “median employee”.	
		
4.	Once we identified our median employee, we combined all elements of the employee’s compensation for 2019 resulting in an annual compensation of $92,035. The difference between such employee’s total earnings and the employee’s total compensation represents the estimated value of the employee’s health care benefits (estimated for the employee and such employee’s eligible dependents at $9,983 and the employee’s 401(k) matching contribution and profit sharing contribution, as applicable estimated at $4,610 per employee).	
		
5.	With respect to Mr. Kim, we used the amount reported in the “Total” column of our 2019 Summary Compensation Table under this Item 11.	

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Compensation of Directors
Our Board periodically reviews and determines the amounts payable to the members of our Board. In January 2018, the Board approved modifications to the compensation of the non-employee directors on our Board. For 2019, the directors of the General Partner who were not employees of the General Partner or its affiliates received, as applicable: an annual cash retainer of $100,000; an annual cash retainer of $15,000 ($25,000 for the chair) for serving on our audit committee; an annual cash retainer of $7,500 ($15,000 for the chair) for serving on our compensation committee; and a cash fee for the engagement of the special committee of the Board (the “Special Committee”), as determined by the Board at the time of such engagement. Such directors also received an annual grant of restricted units and/or restricted phantom units under the LTIP equal to an aggregate of $100,000 divided by the closing price of SUN units on the date of grant. Directors appointed during the year, or who cease to be directors during a year, receive a pro-rated portion of any cash retainers. In addition, each non-employee director who is appointed to the Board for the first time is entitled to receive 2,500 unvested SUN common units. Unit awards granted to non-employee directors will vest 60% after the third year and the remaining 40% after the fifth year after the grant date.
Under the LTIP, the director will forfeit all unvested restricted units and/or restricted phantom units upon a termination of his duties as a director for any reason. If the director ceases providing services due to death or disability (as defined by the LTIP) prior to the date all restricted units and/or restricted phantom units have vested, then all restrictions lapse and all restricted units and/or restricted phantom units become immediately vested. If a Change of Control (as defined under the LTIP) occurs, then all unvested restricted units and/or restricted phantom units become fully vested as of the date of the Change of Control. In addition, our directors will be reimbursed for out-of-pocket expenses incurred in connection with attending meetings of the Board or its committees.
The following table provides a summary of compensation paid to each of our current and former non-employee directors (and Messrs. Ramsey, Long and Curia) for 2019 service:

																					
Name	 	Fees Earned or Paid in Cash ($) (1)	 	Unit Awards ($) (2)	 	Option Awards ($)	 	All Other Compensation ($)	 	Total ($)	
Oscar A. Alvarez	 	$	115,000		 	$	99,991		 	$	—		 	$	—		 	$	214,991		
Imad K. Anbouba	 	132,500		 	99,991		 	—		 	—		 	232,491		
James W. Bryant	 	130,000		 	99,991		 	—		 	—		 	229,991		
Thomas E. Long (3)	 	—		 	600,795		 	—		 	—		 	600,795		
Christopher R. Curia (3)	 	—		 	492,960		 	—		 	—		 	492,960		
Matthew S. Ramsey (3)	 	—		 	696,306		 	—		 	—		 	696,306		
____________________________________________
		
(1) 	The amounts in this column reflect the aggregate dollar amount of fees earned or paid in cash including the annual retainer fee.	
		
(2) 	The amounts reported for unit awards represent the full grant date fair value of the awards granted in 2019, calculated in accordance with FASB ASC Topic 718. These amounts do not correspond to the actual value that may be recognized by the recipient upon any disposition of vested units and do not give effect to any decline or increase in the trading price of our common units since the date of grant. For a discussion of the assumptions and methodologies used in calculating the grant date fair value of the unit awards reported above, see Note 19–Unit-Based Compensation in our Notes to Consolidated Financial Statements. As of December 31, 2019, Mr. Alvarez had 6,187 outstanding restricted phantom units, Mr. Anbouba had 6,187 outstanding restricted phantom units, Mr. Bryant had 12,420 outstanding restricted phantom units, Mr. Long had 70,456 outstanding restricted phantom units, Mr. Curia had 64,111 outstanding restricted phantom units and Mr. Ramsey had 47,239 outstanding restricted phantom units.	
		
(3) 	Messrs. Long (ET's Chief Financial Officer), Curia (ET's EVP-Chief Human Resources Officer) and Ramsey (ET's Chief Operating Officer), are entitled to receive grants of restricted units and/or restricted phantom units pursuant to the LTIP in recognition of their commitment and contribution to us and our unitholders. The restricted units granted in December 2019 will vest 60% in December 2022 and 40% in December 2024, subject to the terms of the award agreement. The awards of restricted units to Messrs. Long, Curia and Ramsey in respect of their contribution to us represent a portion of their total awards as executive officers of ET and the allocation of such percentage to us is in recognition of the portion of their total time spent on our business.	
		
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Unitholder Matters	
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the beneficial ownership of common units and Class C units of the Partnership that are issued and outstanding as of February 14, 2020 and held by:
		
•	each person or group of persons known by us to be beneficial owners of 5% or more of our common or Class C units;	
		
•	each director, director nominee and named executive officer of our general partner; and	

62

		
•	all of our directors and executive officers of our general partner, as a group.	

														
Name of Beneficial Owner (1)	 	Common Units Beneficially Owned (5)	 	Percentage of Commons Units Beneficially Owned	 	Class C Units Beneficially Owned	 	Percentage of
Class C Units Beneficially Owned	 	Percentage of Common and
Class C Units Beneficially Owned	
ETO (2)	 	28,463,967		 	34.3%	 	—		 	—		 	28.6%	
Invesco Ltd. (3)	 	14,563,058		 	17.5%	 	—		 	—		 	14.6%	
Sunoco Retail LLC	 	—		 	—	 	11,168,667		 	68.1	%	 	11.2%	
Aloha Petroleum Ltd (4)	 	—		 	—	 	5,242,113		 	31.9	%	 	5.3%	
Arnold D. Dodderer	 	—		 	*	 	—		 	—		 	*	
Karl R. Fails	 	23,507		 	*	 	—		 	—		 	*	
Brian A. Hand	 	15,528		 	*	 	—		 	—		 	*	
Joseph Kim	 	28,507		 	*	 	—		 	—		 	*	
Thomas R. Miller	 	12,554		 	*	 	—		 	—		 	*	
Oscar A. Alvarez	 	—		 	—	 	—		 	—		 	—	
Imad K. Anbouba	 	—		 	—	 	—		 	—		 	—	
James W. Bryant	 	5,125		 	*	 	—		 	—		 	*	
Christopher R. Curia	 	25,695		 	*	 	—		 	—		 	*	
Thomas E. Long	 	16,557		 	*	 	—		 	—		 	*	
Matthew S. Ramsey	 	2,231		 	*	 	—		 	—		 	*	
All executive officers and directors as a group (twelve persons)	 	129,704		 	*	 	—		 	—		 	*	
____________________________________________
		
*	Represents less than 1%.	
		
(1)	As of the date set forth above, there are no arrangements for any listed beneficial owner to acquire within 60 days common units from options, warrants, rights, conversion privileges or similar obligations. Unless otherwise indicated, the address for all beneficial owners in this table is 8111 Westchester Drive, Suite 400, Dallas, Texas 75225.	
		
(2)	The address for ETO and ETO’s subsidiaries is 8111 Westchester Drive, Suite 600, Dallas, Texas 75225.	
		
(3)	The information contained in the table and this footnote with respect to Invesco Ltd. is based solely on a filing on Schedule 13G/A filed with the Securities and Exchange Commission on February 7, 2020. The business address of the reporting party is 1555 Peachtree Street NE, Suite 1800, Atlanta, GA 30309.	
		
(4)	The address for Aloha is 1001 Bishop Street, Suite 1300, Honolulu, Hawaii 96813.	
		
(5)	Does not include unvested phantom units that may not be voted or transferred prior to vesting. As of February 14, 2020, there were 83,017,163 common units and 16,410,780 Class C Units deemed to be beneficially owned for purposes of the above table.	

63

The following table sets forth, as of February 14, 2020, the number of common units of ET owned by each of the directors and named executive officers of our General Partner and all directors and current executive officers of our General Partner as a group.

						
 	 	ET Common Units Beneficially Owned†	
Name of Beneficial Owner (1)	 	Number of Common Units (2)	 	Percentage of Total Common Units (3)	
Arnold D. Dodderer	 	—		 	*	
Karl R. Fails	 	13,161		 	*	
Brian A. Hand	 	7,440		 	*	
Joseph Kim	 	12,000		 	*	
Thomas R. Miller	 	13,000		 	—	
Oscar A. Alvarez	 	—		 	—	
Imad K. Anbouba	 	7,416		 	*	
James W. Bryant	 	239,696		 	*	
Christopher R. Curia	 	155,608		 	*	
Thomas E. Long	 	221,560		 	*	
Matthew S. Ramsey	 	258,213		 	*	
All executive officers and directors as a group (twelve persons)	 	930,996		 	*	
____________________________________________
		
*	Represents less than 1%.	
		
†	Officers and directors of our General Partner may be deemed to indirectly beneficially own certain limited partnership interests in us or ETO, by virtue of owning common units in ETO or ET, respectively, or based upon their simultaneous service as officers or directors of ETO or ET. Any such deemed ownership is not reflected in the table.	
		
(1)	Unless otherwise indicated, the address for all beneficial owners in this table is 8111 Westchester Drive, Suite 400, Dallas, Texas 75225.	
		
(2)	Beneficial ownership for the purposes of the above table is determined in accordance with the rules and regulation of the Securities and Exchange Commission. These rules generally provide that a person is the beneficial owner of securities if they have or share the power to vote or direct the voting thereof, or to dispose or direct the disposition thereof, or have the right to acquire such powers with sixty (60) days.	
		
(3)	As of February 14, 2020, there were 2,689,897,793 common units of ET deemed to be beneficially owned for purposes of the above table.	
Equity Compensation Plan Information
As of December 31, 2019, a total of 3,346,096 phantom units had been issued under our long-term incentive plans. Total securities remaining available for issuance under our long-term incentive plans as of December 31, 2019 were as follows:
Common Units Remaining Available for Issuance under Our Equity Compensation Plans

											
Plan Category	 	Number of securities to be issued upon exercise of outstanding options, warrants and rights	 	Weighted-average exercise price of outstanding options, warrants and rights	 	Number of securities remaining available for future issuance under equity compensation plans	
Equity compensation plans approved by security holders	 	816,097		 	$	—		 	—		
Equity compensation plans not approved by security holders	 	1,242,374		 	—		 	8,752,803		
Total	 	2,058,471		 	$	—		 	8,752,803		
____________________________________________

Item 13.	Certain Relationships, Related Transactions and Director Independence	
Transactions with ET and its Affiliates
The following table summarizes the distributions and payments made by us to ETO or its affiliates during 2019.

64

	
			
Transaction	Explanation	Amount/Value	
 	 	 	
2019 quarterly distributions on limited partner interests and IDRs held by affiliates.	Represents the aggregate amount of distributions made to affiliates of our general partner in respect of common units and IDRs during 2019.	$165 million	
 	 	 	
Fuel sold to affiliates.	Total revenues we received for fuel gallons sold by us to affiliates of our general partner for 2019.	$7 million	
 	 	 	
Bulk purchases of motor fuel from ETO and its affiliates.	Represents payments made to ETO and its affiliates for bulk motor fuel purchases.	$821 million	
 	 	 	
Reimbursement to our general partner for certain allocated overhead and other expenses.	Total payment to our general partner for reimbursement of overhead and other expenses, including employee compensation costs relating to employees supporting our operations for 2019.	$0.1 million	
Other Transactions with Related Persons
Related Party Agreements
Sunoco, LLC (“Sunoco LLC”) and Sunoco Retail LLC (“Sunoco Retail”) have administrative and support services agreements in place pursuant to which a subsidiary of Sunoco Inc. provided certain general and administrative services to Sunoco LLC and Sunoco Retail during 2019. In addition, Sunoco LLC and Sunoco Retail have treasury services agreements for certain cash management activities with Sunoco (R&M), LLC.
We are party to fee-based commercial agreements with various subsidiaries or affiliates of ETO for pipeline, terminalling and storage services. We also have agreements with subsidiaries of ETO for the purchase and sale of fuel.
Financing Transactions with Affiliates
ETO provides credit support to certain of our suppliers under certain of our supply contracts.
Procedures for Review, Approval and Ratification of Transactions with Related Persons
For a discussion of director independence, see “Item 10. Directors, Executive Officers and Corporate Governance.”
As a policy matter, our Special Committee, comprised of our independent directors, generally reviews any proposed related-party transaction that may be material to the Partnership to determine whether the transaction is fair and reasonable to the Partnership. In determining materiality, our General Partner evaluates several factors including the terms of the transaction, the capital investment required, and the revenues expected from the transaction. While there are no written policies or procedures for the Board to follow in making these determinations, the Board makes those determinations in light of its contractually-limited fiduciary duties to the Partnership’s unitholders. The Partnership Agreement provides that if the Board of Directors, through the Special Committee or otherwise, approves the resolution or course of action taken with respect to a conflict of interest, then it will be presumed that, in making its decision, the Board of Directors acted in good faith, and any proceeding brought by or on behalf of any limited partner or the Partnership, the person bringing or prosecuting such proceedings will have the burden of overcoming such presumption (see “Item 1A. Risk Factors - Risks Related to Conflicts of Interest” in this annual report).
Additionally, we have in place a Code of Business Conduct and Ethics that is applicable to all directors, officers and employees of the Partnership and its subsidiaries and affiliates, that requires the approval by designated executive officers prior to entering into any related party transaction that could present a potential conflict of interest.
		
Item 14.	Principal Accounting Fees and Services	
Audit Fees
The following table presents fees for audit services rendered by Grant Thornton LLP (“Grant Thornton”) for the audit of our annual consolidated financial statements for 2019 and 2018, and fees billed for services rendered by Grant Thornton during the corresponding periods (dollars in millions).

65

	
								
 	Fiscal 2019	 	Fiscal 2018	
Audit Fees (1)	$	2.0		 	$	2.3		
Audit-Related Fees	—		 	—		
Tax Fees	—		 	—		
All Other Fees	—		 	—		
Total	$	2.0		 	$	2.3		
_______________________________
		
(1)	Includes fees for audits of annual financial statements of our companies, reviews of the related quarterly financial statements, and services that are normally provided by the independent accountants in connection with statutory and regulatory filings or engagements, including reviews of documents filed with the SEC and services related to the audit of our internal control over financial reporting.	
Policy for Approval of Audit and Non-Audit Services
Our audit committee charter requires that all services provided by our independent public accountants, both audit and non-audit, must be pre-approved by the audit committee. Pre-approval of audit and non-audit services may be given at any time up to a year before commencement of the specified service.
In determining whether to approve a particular audit or permitted non-audit service, the audit committee will consider, among other things, whether such service is consistent with maintaining the independence of the independent public accountants. The audit committee will also consider whether the independent public accountants are best positioned to provide the most effective and efficient service to us and whether the service might be expected to enhance our ability to manage or control risk or improve audit quality.

66

Part IV
Item 15.    Exhibits and Financial Statement Schedules
(a) The following documents are filed as a part of this Report:
		
(1)	Financial Statements - see Index to Consolidated Financial Statements appearing on page F-1.	
		
(2)	Financial Statement Schedules - None.	
		
(3)	Exhibits - see Exhibit Index set forth on page 72.	
		
Item 16.	Form 10-K Summary	
None.

67

EXHIBIT INDEX

				
Exhibit No.	 	Description	
2.1		 	Asset Purchase Agreement by and among Susser Petroleum Property Company LLC, Sunoco Retail LLC, Stripes LLC, Town & Country Food Stores, Inc., MACS Retail LLC, 7-Eleven, Inc. and SEI Fuel Services, Inc., and, solely for the limited purposes referenced therein, Sunoco, LP, Sunoco Finance Corp. and Sunoco, LLC, dated as of April 6, 2017 (incorporated by reference to the current report on Form 8-K (File Number 001-35653) filed by the registrant on April 6, 2017)	
 	 	 	
2.2		 	Amended and Restated Asset Purchase Agreement by and among Susser Petroleum Property Company LLC, Sunoco Retail LLC, Stripes LLC, Town & Country Food Stores, Inc., MACS Retail LLC, 7-Eleven, Inc. and SEI Fuel Services, Inc., and, solely for the limited purposes referenced therein, Sunoco, LP, Sunoco Finance Corp. and Sunoco, LLC, dated January 23, 2018 (incorporated by reference to the current report on Form 8-K (File Number 001-35653) filed by the registrant on January 24, 2018)	
 	 	 	
3.1		 	Second Amended and Restated Certificate of Limited Partnership Sunoco LP dated as of May 8, 2018 (Incorporated by reference to the quarterly report on Form 10-Q (File Number 001-35653) filed by the registrant on May 10, 2018)	
 	 	 	
3.2		 	First Amended and Restated Agreement of Limited Partnership of Susser Petroleum Partners LP, dated September 25, 2012 (Incorporated by reference to the current report on Form 8-K (File Number 001-35653) filed by the registrant on September 25, 2012)	
 	 	 	
3.3		 	Amendment No. 1 to the First Amended and Restated Agreement of Limited Partnership of Susser Petroleum Partners LP (Incorporated by reference to the current report on Form 8-K (File Number 001-35653) filed by the registrant on October 28, 2014)	
 	 	 	
3.4		 	Amendment No. 2 to the First Amended and Restated Agreement of Limited Partnership of Sunoco LP (Incorporated by reference to the current report on Form 8-K (File Number 001-35653) filed by the registrant on August 6, 2015)	
 	 	 	
3.5		 	Amendment No. 3 to the First Amended and Restated Agreement of Limited Partnership of Sunoco LP (Incorporated by reference to the current report on Form 8-K (File Number 001-35653) filed by the registrant on January 5, 2016)	
 	 	 	
3.6		 	Amendment No. 4 to the First Amended and Restated Agreement of Limited Partnership of Sunoco LP (Incorporated by reference to the current report on Form 8-K (File Number 001-35653) filed by the registrant on June 8, 2016)	
 	 	 	
3.7		 	Amendment No. 5 to the First Amended and Restated Agreement of Limited Partnership of Sunoco LP (Incorporated by reference to the current report on Form 8-K (File Number 001-35653) filed by the registrant on March 31, 2017)	
 	 	 	
3.8		 	Amendment No. 6 to the First Amended and Restated Agreement of Limited Partnership of Sunoco LP dated as of May 8, 2018 (Incorporated by reference to the quarterly report on Form 10-Q (File Number 001-35653) filed by the registrant on May 10, 2018)	
 	 	 	
3.9		 	Amendment No. 7 to the First Amended and Restated Agreement of Limited Partnership of Sunoco LP (Incorporated by reference to Exhibit 3.1 of the quarterly report on Form 10-Q filed by the registrant on August 8, 2019)	
 	 	 	
3.10		 	Certificate of Formation of Susser Petroleum Partners GP LLC (Incorporated by reference to the registration statement on Form S-1 (File Number 333-182276), as amended, originally filed by the registrant on June 22, 2012)	
 	 	 	
3.11		 	Certificate of Amendment to the Certificate of Formation of Susser Petroleum Partners GP LLC (Incorporated by reference to the current report on Form 8-K (File Number 001-35653) filed by the registrant on October 28, 2014)	
 	 	 	
3.12		 	Amended and Restated Limited Liability Company Agreement of Susser Petroleum Partners GP LLC, dated September 25, 2012 (Incorporated by reference to the current report on Form 8-K (File Number 001-35653) filed by the registrant on September 25, 2012)	
 	 	 	
3.13		 	Amendment No. 1 to Amended and Restated Limited Liability Company Agreement of Susser Petroleum Partners GP LLC (Incorporated by reference to the current report on Form 8-K (File Number 001-35653) filed by the registrant on October 28, 2014)	
 	 	 	
3.14		 	Amendment No. 2 to the Amended and Restated Limited Liability Company Agreement of Sunoco GP LLC dated as of June 6, 2016 (Incorporated by reference to the current report on Form 8-K (File Number 001-35653) filed by the registrant on June 8, 2016)	
 	 	 	
3.15		 	Amendment No. 3 to the Amended and Restated Limited Liability Company Agreement of Sunoco GP LLC dated as of May 8, 2018 (Incorporated by reference to the quarterly report on Form 10-Q (File Number 001-35653) filed by the registrant on May 10, 2018)	
 	 	 	
4.1		 	Registration Rights Agreement, dated as of March 31, 2016, by and among Sunoco LP and Energy Transfer Equity, L.P. (Incorporated by reference to the current report on Form 8-K (File Number 001-35653) filed by the registrant on April 1, 2016)	
 	 	 	
4.2		 	Indenture, by and among Sunoco LP, Sunoco Finance Corp., the Guarantors party thereto and U.S. Bank National Association, as Trustee, dated January 23, 2018 (incorporated by reference to the current report on Form 8-K (File Number 001-35653) filed by the registrant on January 29, 2018)	
 	 	 	
4.3		 	First Supplemental Indenture, dated as of January 24, 2019 by and among Sunoco LP, Sunoco Finance Corp, the subsidiary guarantors party thereto and AMID Refined Products LLC, AMID Caddo LLC, AMID NLR LLC, as guarantors, and U.S, Bank, N.A., as trustee (Incorporated by reference to Exhibit 4.4 of the annual report on Form 10-K filed by the registrant on February 22, 2019)	
 	 	 	
4.4		 	Indenture, dated as of March 14, 2019, by and among Sunoco LP, Sunoco Finance Corp., the Guarantors party thereto and U.S. Bank National Association, as Trustee (Incorporated by reference to Exhibit 4.1 of the current report on Form 8-K (File Number 001-35653)  filed by the registrant on March 14, 2019)	
 	 	 	
4.5		 	Description of the registrant’s securities registered pursuant to section 12 of the Securities Exchange Act of 1934 - Description of common units*

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10.1+		 	Susser Petroleum Partners LP 2012 Long-Term Incentive Plan (Incorporated by reference to the registration statement on Form S-1 (File Number 333-182276), as amended, originally filed by the registrant on June 22, 2012)	
 	 	 	
10.2+		 	First Amendment to the Susser Petroleum Partners LP 2012 Long Term Incentive Plan, dated November 4 2014 (Incorporated by reference to the annual report on Form 10-K (File Number 001-35653) filed by the registrant on February 27, 2015)	
 	 	 	
10.3		 	Revised Form of Director Indemnification Agreement (Incorporated by reference to the annual report on Form 10-K (File Number 001-35653) filed by the registrant on March 14, 2014)	
 	 	 	
10.4+		 	Form of Phantom Unit Award Agreement (Incorporated by reference to the registration statement on Form S-1 (File Number 333-182276), as amended, originally filed by the registrant on June 22, 2012)	
 	 	 	
10.5+		 	Form of Restricted Phantom Unit Agreement (Incorporated by reference to the current report on Form 8-K (File Number 001-35653) filed by the registrant on November 14, 2014)	
 	 	 	
10.6+		 	 Form of Time -Vested Restricted Phantom Unit Award Agreement (Incorporated by reference to the annual report on Form 10-K (File Number 001-35653, filed by the registrant on February 24, 2017)	
 	 	 	
10.7		 	Contribution Agreement, dated as of September 25, 2014, by and among Mid-Atlantic Convenience Stores, LLC, ETC M-A Acquisition LLC, Susser Petroleum Partners LP and Energy Transfer Partners, L.P (Incorporated by reference to the current report on Form 8-K (File Number 001-35653) filed by the registrant on October 1, 2014)	
 	 	 	
10.8		 	Purchase and Sale Agreement, entered into as of September 25, 2014, by and among Susser Petroleum Property Company LLC, Susser Petroleum Partners LP and Henger BV Inc. (Incorporated by reference to the current report on Form 8-K (File Number 001-35653) filed by the registrant on October 1, 2014)	
 	 	 	
10.9		 	Amendment No.1, entered into as of December 16, 2014, to Purchase and Sale Agreement, dated as of September 25, 2014, by and among Susser Petroleum Property Company LLC, Susser Petroleum Partners LP and Henger BV Inc. (Incorporated by reference to the current report on Form 8-K (File Number 001-35653) filed by the registrant on December 19, 2014)	
 	 	 	
10.10		 	Contribution Agreement, dated as of March 23, 2015, by and among Sunoco, LLC, ETP Retail Holdings, LLC, Sunoco LP and Energy Transfer Partners, L.P. (Incorporated by reference to the current report on Form 8-K (File Number 001-35653) filed by the registrant on March 23, 2015)	
 	 	 	
10.11		 	Contribution Agreement, dated as of July 14, 2015, by and among Susser Holdings Corporation, Heritage Holdings, Inc., ETP Holdco Corporation, Sunoco LP, Sunoco GP LLC and Energy Transfer Partners, L.P. (Incorporated by reference to the current report on Form 8-K (File Number 001-35653) filed by the registrant on July 15, 2015)	
 	 	 	
10.12		 	Contribution Agreement, dated as of November 15, 2015, by and among Sunoco, LLC, Sunoco, Inc., ETP Retail Holdings, LLC, Sunoco LP, Sunoco GP LLC, and solely with respect to limited provisions therein, Energy Transfer Partners, L.P. (Incorporated by reference to the current report on Form 8-K (File Number 001-35653) filed by the registrant on November 16, 2015)	
 	 	 	
10.13		 	Purchase Agreement, dated April 4, 2016, by and among Sunoco GP LLC, Sunoco LP, Sunoco Finance Corp., certain subsidiaries of Sunoco LP party thereto and Credit Suisse Securities (USA) LLC, as representative of the several initial purchasers named on Schedule A thereto (Incorporated by reference to the current report on Form 8-K (File Number 001-35653) filed by the registrant on April 8, 2016)	
 	 	 	
10.14		 	Equity Distribution Agreement, dated October 4, 2016, by and between Sunoco LP and RBC Capital Markets, LLC, Barclays Capital Inc., Citigroup Global Markets Inc., Credit Agricole Securities (USA) Inc., Credit Suisse Securities (USA) LLC, Deutsche Bank Securities Inc., Goldman, Sachs & Co., J.P. Morgan Securities LLC, Merrill Lynch, Pierce, Fenner & Smith Incorporated, Mizuho Securities USA Inc., Morgan Stanley & Co. LLC, MUFG Securities Americas Inc., Natixis Securities Americas LLC, SMBC Nikko Securities America, Inc., TD Securities (USA) LLC, UBS Securities LLC and Wells Fargo Securities, LLC (Incorporated by reference to the current report on Form 8-K (File Number 001-35653) filed by the registrant on October 4, 2016)	
 	 	 	
10.15		 	Guarantee Agreement by and among Sunoco LP, Sunoco, LLC, 7-Eleven, Inc. and SEI Fuel Services, dated as of April 6, 2017 (Incorporated by reference to the current report on Form 8-K (File Number 001-35653) filed by the registrant on April 6, 2017)	
 	 	 	
10.16		 	Letter Agreement by and among by and among Susser Petroleum Property Company LLC, Sunoco Retail LLC, Stripes LLC, Town & Country Food Stores, Inc., MACS Retail LLC, 7-Eleven, Inc. and SEI Fuel Services, Inc., dated January 8, 2018 (Incorporated by reference to the current report on Form 8-K (File Number 001-35653) filed by registrant on January 9, 2018)	
 	 	 	
10.17		 	Guarantee of Collection, by ETC M-A Acquisition LLC to Sunoco LP and Sunoco Finance Corp., dated January 23, 2018 (Incorporated by reference to the current report on Form 8-K (File Number 001-35653) filed by the registrant on January 29, 2018)	
 	 	 	
10.18		 	Support Agreement, by and among Sunoco, Inc., Sunoco LP, Sunoco Finance Corp. and ETC M-A Acquisition LLC, dated January 23, 2018 (Incorporated by reference to the current report on Form 8-K (File Number 001-35653) filed by the registrant on January 29, 2018)	
 	 	 	
10.19		 	Common Unit Repurchase Agreement, by and among Sunoco LP, Heritage Holdings, Inc. and ETP Holdco Corporation, dated January 24, 2018 (Incorporated by reference to the current report on Form 8-K (File Number 001-35653) filed by the registrant on January 29, 2018)	
 	 	 	
10.20		 	Distribution Motor Fuel Agreement by and between Sunoco, LLC and 7-Eleven, Inc. and SEI Fuel Services, Inc. dated January 23, 2018 (Incorporated by reference to the annual report on Form 10-K (File Number 001-35653) filed by the registrant on February 23, 2018) (asterisks located within the exhibit denote information which has been deleted pursuant to a confidential treatment request filed with the Securities and Exchange Commission)	

69

	
				
10.21		 	First Amendment, dated as of March 29, 2019, to Distributor Motor Fuel Agreement by and between Sunoco, LLC and 7-Eleven, Inc. and SEI Fuel Services, Inc. dated as of January 23, 2018 (asterisks located within the exhibit denote information which has been redacted) (Incorporated by reference to Exhibit 10.1 of the quarterly report on Form 10-Q (File Number 001-35653) filed by the registrant on May 9, 2019)	
 	 	 	
10.22+		 	Sunoco GP LLC Annual Bonus Plan (Incorporated by reference to the current report on Form 8-K (File Number 001-35653) filed by registrant on July 13, 2018)	
 	 	 	
10.23		 	Amended and Restated Credit Agreement, dated as of July 27, 2018, among Sunoco LP, as borrower, Bank of America N.A., as administrative agent, collateral agent, swingline lender and an LC issuer, and the lenders party thereto. (Incorporated by reference to the current report on Form 8-K (File Number 001-35653) filed by registrant on July 31, 2018)	
 	 	 	
10.24+		 	Sunoco LP 2018 Long-term Incentive Plan (Incorporated by reference to the current report on Form 8-K (File Number 001-35653) filed by registrant on November 20, 2018)	
 	 	 	
10.25+		 	Form of Time Vested Restricted Unit/Phantom Unit Agreement (Incorporated by reference to the annual report on Form 10-K (File number 001-35653) filed by the registrant on February 22, 2019)	
 	 	 	
10.26+		 	Form of Heinemann Separation Agreement (Incorporated by reference to the current report on Form 8-K (File Number 001-35653) filed by registrant on November 27,2018)	
 	 	 	
10.27+		 	Form of Heinemann Consulting Agreement (Incorporated by reference to the current report on Form 8-K (File Number 001-35653) filed by registrant on November 27,2018)	
 	 	 	
21.1		 	List of Subsidiaries of the Registrant *	
 	 	 	
23.1		 	Consent of Grant Thornton LLP, independent registered public accounting firm *	
 	 	 	
23.2		 	Consent of Grant Thornton LLP, independent registered public accounting firm *	
 	 	 	
31.1		 	Certification of the Chief Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act *	
 	 	 	
31.2		 	Certification of the Chief Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act *	
 	 	 	
32.1		 	Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes - Oxley Act of 2002 **	
 	 	 	
32.2		 	Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes - Oxley Act of 2002 **	
 	 	 	
99.1		 	Information Related to ETC M-A Acquisition LLC *	
 	 	 	
101.INS		 	Inline XBRL Instance Document	
 	 	 	
101.SCH		 	Inline XBRL Taxonomy Extension Schema Document	
 	 	 	
101.CAL		 	Inline XBRL Taxonomy Extension Calculation	
 	 	 	
101.DEF		 	Inline XBRL Taxonomy Extension Definition	
 	 	 	
101.LAB		 	Inline XBRL Taxonomy Extension Label Linkbase	
 	 	 	
101.PRE		 	Inline XBRL Taxonomy Extension Presentation	
 	 	 	
104		 	Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)	
		
*	Filed herewith.	
		
**	Filed herewith. Pursuant to SEC Release No. 33-8212, this certification will be treated as “accompanying” this Annual Report on Form 10-K and not “filed” as part of such report for purposes of Section 18 of the Securities Exchange Act, as amended, or otherwise subject to the liability of Section 18 of the Securities Exchange Act, as amended, and this certification will not be deemed to be incorporated by reference into any filing under the Securities Exchange Act of 1933, as amended, except to the extent that the registrant specifically incorporates it by reference.	
		
+	Denotes a management contract or compensatory plan or arrangement.	

70

SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Annual Report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized.

	
		
Sunoco LP	
By:	Sunoco GP LLC, its general partner	
By:	/s/ Joseph Kim	
 	Joseph Kim	
 	President and Chief Executive Officer	
 	(On behalf of the registrant, and in his capacity as principal executive officer)	
 	 	
Date:	February 21, 2020	
Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report on Form 10-K has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

					
Signature	 	Title	 	Date	
 	 	 	 	 	
/s/ Joseph Kim	 	Director, President and Chief Executive Officer	 	February 21, 2020	
Joseph Kim	 	(Principal Executive Officer)	 	 	
 	 	 	 	 	
/s/ Thomas R. Miller	 	Chief Financial Officer	 	February 21, 2020	
Thomas R. Miller	 	(Principal Financial Officer)	 	 	
 	 	 	 	 	
/s/ Camilla A. Harris	 	Vice President, Controller and Principal Accounting Officer	 	February 21, 2020	
Camilla A. Harris	 	(Principal Accounting Officer)	 	 	
 	 	 	 	 	
/s/ Matthew S. Ramsey	 	Chairman of the Board	 	February 21, 2020	
Matthew S. Ramsey	 	 	 	 	
 	 	 	 	 	
/s/ Thomas E. Long	 	Director	 	February 21, 2020	
Thomas E. Long	 	 	 	 	
 	 	 	 	 	
/s/ James W. Bryant	 	Director	 	February 21, 2020	
James W. Bryant	 	 	 	 	
 	 	 	 	 	
/s/ Christopher R. Curia	 	Director	 	February 21, 2020	
Christopher R. Curia	 	 	 	 	
 	 	 	 	 	
/s/ Imad K. Anbouba	 	Director	 	February 21, 2020	
Imad K. Anbouba	 	 	 	 	
 	 	 	 	 	
/s/ Oscar A. Alvarez	 	Director	 	February 21, 2020	
Oscar A. Alvarez	 	 	 	 	

71

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

		
 	Page	
Report of Independent Registered Public Accounting Firm	F-2	
 	 	
Consolidated Balance Sheets	F-4	
 	 	
Consolidated Statements of Operations and Comprehensive Income (Loss) 	F-5	
 	 	
Consolidated Statements of Equity	F-6	
 	 	
Consolidated Statements of Cash Flows	F-7	
 	 	
Notes to Consolidated Financial Statements	F-8	

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors of Sunoco GP LLC and
Unitholders of Sunoco LP

Opinion on the financial statements
We have audited the accompanying consolidated balance sheets of Sunoco LP (a Delaware limited partnership) and subsidiaries (the “Partnership”) as of December 31, 2019 and 2018, the related consolidated statements of operations and comprehensive income (loss), equity, and cash flows for each of the three years in the period ended December 31, 2019, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Partnership as of December 31, 2019 and 2018, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2019, in conformity with accounting principles generally accepted in the United States of America.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Partnership’s internal control over financial reporting as of December 31, 2019, based on criteria established in the 2013 Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), and our report dated February 21, 2020 expressed an unqualified opinion thereon.
Change in accounting principle
As discussed in Note 2 to the financial statements, the Partnership has changed its method of accounting for leases due to the adoption of the new leasing standard. The Partnership adopted the new leasing standard by recognizing a cumulative catch-up adjustment to the opening balance sheet as of January 1, 2019.
Basis for opinion
These financial statements are the responsibility of the Partnership’s management. Our responsibility is to express an opinion on the Partnership’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Partnership in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical audit matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.
Goodwill impairment assessment - retail reporting unit
The Partnership has $269 million of goodwill related to the retail reporting unit, which is included within the All Other segment. The Partnership determined it was necessary to estimate the fair value of the retail reporting unit as of October 1, 2019, the Partnership’s assessment date, to determine whether the fair value was less than the carrying amount. The Partnership engaged a third party valuation firm for the estimation of the fair value of the retail reporting unit. As a result of the assessment performed, and as described further in note 8 to the financial statements, the Partnership concluded the fair value of the retail reporting unit exceeded its carrying value, therefore no impairment was identified for the reporting unit. We identified the estimation of the fair value of the retail reporting unit as a critical audit matter.
The principal consideration for our determination that the estimation of fair value of the retail reporting unit was a critical audit matter is because recent quantitative impairment tests have indicated an insignificant cushion between the fair value and the carrying value of

F-2

this reporting unit, and that there was a high estimation uncertainty due to significant judgments with respect to assumptions used to project the future cash flows, including growth rates, operating costs, the discount rate and future market conditions, as well as the valuation methodologies applied by the third party valuation firm.
Our audit procedures related to the estimation of the fair value of the retail reporting unit included the following procedures, among others. We tested the effectiveness of controls relating to management’s review of the assumptions used to project the future cash flows, the reconciliation of future cash flows prepared by management to the data used in the third party valuation report, management’s review of the discount rate used, and the valuation methodologies applied by the third party valuation firm. In addition to testing the effectiveness of controls, we also performed the following:

•	Utilized an internal valuation specialist to evaluate:	
		
◦	The methodologies used and whether they were acceptable for the underlying assets or operations and being applied correctly by performing independent calculations,	
		
◦	The calculation of the discount rate by recalculating the weighted average cost of capital, and	
		
◦	The qualifications of the third party firm engaged by the Partnership based on their credentials and experience.	
		
•	Tested the forecasted cash flows by comparing such items to historical operating results of the reporting unit and by assessing the likelihood or capability of the retail reporting unit to undertake activities or initiatives underpinning significant drivers of growth in the forecasted period.	

/s/ GRANT THORNTON LLP
We have served as the Partnership’s auditor since 2015.
Dallas, Texas
February 21, 2020

F-3

SUNOCO LP
CONSOLIDATED BALANCE SHEETS
(Dollars in millions, except unit data)

								
 	December 31,
2019	 	December 31,
2018	
Assets	 	 	 	
Current assets:	 	 	 	
Cash and cash equivalents	$	21		 	$	56		
Accounts receivable, net	399		 	374		
Receivables from affiliates	12		 	37		
Inventories, net	419		 	374		
Other current assets	73		 	64		
Total current assets	924		 	905		
 	 	 	 	
Property and equipment	2,134		 	2,133		
Accumulated depreciation	(692	)	 	(587	)	
Property and equipment, net	1,442		 	1,546		
Other assets:	 	 	 	
Finance lease right-of-use assets, net	29		 	—		
Operating lease right-of-use assets, net	533		 	—		
Goodwill	1,555		 	1,559		
 	 	 	 	
Intangible assets, net	646		 	708		
Other noncurrent assets	188		 	161		
Investment in unconsolidated affiliate	121		 	—		
Total assets	$	5,438		 	$	4,879		
Liabilities and equity	 	 	 	
Current liabilities:	 	 	 	
Accounts payable	$	445		 	$	412		
Accounts payable to affiliates	49		 	149		
Accrued expenses and other current liabilities	219		 	299		
Operating lease current liabilities	20		 	—		
Current maturities of long-term debt	11		 	5		
Total current liabilities	744		 	865		
Operating lease non-current liabilities	530		 	—		
Revolving line of credit	162		 	700		
Long-term debt, net	2,898		 	2,280		
Advances from affiliates	140		 	24		
Deferred tax liability	109		 	103		
Other noncurrent liabilities	97		 	123		
Total liabilities	4,680		 	4,095		
Commitments and contingencies (Note 14)			 			
Equity:	 	 	 	
Limited partners:	 	 	 	
Common unitholders
(82,985,941 units issued and outstanding as of December 31, 2019 and
82,665,057 units issued and outstanding as of December 31, 2018)	758		 	784		
Class C unitholders - held by subsidiary
(16,410,780 units issued and outstanding as of December 31, 2019 and
December 31, 2018)	—		 	—		
Total equity	758		 	784		
Total liabilities and equity	$	5,438		 	$	4,879		

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

F-4

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

												
 	Year Ended December 31,	
 	2019	 	2018	 	2017	
Revenues:	 	 	 	 	 	
Motor fuel sales	$	16,176		 	$	16,504		 	$	10,910		
Non motor fuel sales	278		 	360		 	724		
Lease income	142		 	130		 	89		
Total revenues	16,596		 	16,994		 	11,723		
Cost of sales and operating expenses:	 	 	 	 	 	
Cost of sales	15,380		 	15,872		 	10,615		
General and administrative	136		 	141		 	140		
Other operating	304		 	363		 	375		
Lease expense	61		 	72		 	81		
Loss on disposal of assets and impairment charges	68		 	19		 	114		
Depreciation, amortization and accretion	183		 	182		 	169		
Total cost of sales and operating expenses	16,132		 	16,649		 	11,494		
Operating income	464		 	345		 	229		
Other expenses (income):	 	 	 	 	 	
Interest expense, net	173		 	144		 	209		
Other expense (income), net	(3	)	 	—		 	—		
Equity in earnings of unconsolidated affiliate	(2	)	 	—		 	—		
Loss on extinguishment of debt and other, net	—		 	109		 	—		
Income from continuing operations before income taxes	296		 	92		 	20		
Income tax expense (benefit)	(17	)	 	34		 	(306	)	
Income from continuing operations	313		 	58		 	326		
Loss from discontinued operations, net of income taxes	—		 	(265	)	 	(177	)	
Net income (loss) and comprehensive income (loss)	$	313		 	$	(207	)	 	$	149		
 	 	 	 	 	 	
Net income (loss) per common unit - basic:	 	 	 	 	 	
Continuing operations	$	2.84		 	$	(0.25	)	 	$	2.13		
Discontinued operations	—		 	(3.14	)	 	(1.78	)	
Net income (loss)	$	2.84		 	$	(3.39	)	 	$	0.35		
 	 	 	 	 	 	
Net income (loss) per common unit - diluted:	 	 	 	 	 	
Continuing operations	$	2.82		 	$	(0.25	)	 	$	2.12		
Discontinued operations	—		 	(3.14	)	 	(1.78	)	
Net income (loss)	$	2.82		 	$	(3.39	)	 	$	0.34		
 	 	 	 	 	 	
Weighted average limited partner units outstanding:	 	 	 	 	 	
Common units - basic	82,755,520		 	84,299,893		 	99,270,120		
Common units - diluted	83,551,962		 	84,820,570		 	99,728,354		
 	 	 	 	 	 	
Cash distribution per unit	$	3.30		 	$	3.30		 	$	3.30		

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

F-5

SUNOCO LP
CONSOLIDATED STATEMENTS OF EQUITY
(Dollars in millions)

												
 	Preferred Units - Affiliated	 	Common Units	 	Total Equity	
Balance at December 31, 2016	$	—		 	$	2,196		 	$	2,196		
Equity issued under ATM, net	—		 	33		 	33		
Equity issued to ETE	300		 	—		 	300		
Cash distribution to unitholders	—		 	(420	)	 	(420	)	
Distribution to preferred units	(23	)	 	—		 	(23	)	
Unit-based compensation	—		 	24		 	24		
Other	—		 	(12	)	 	(12	)	
Partnership net income	23		 	126		 	149		
Balance at December 31, 2017	300		 	1,947		 	2,247		
Common unit repurchase	—		 	(540	)	 	(540	)	
Redemption of preferred units	(300	)	 	—		 	(300	)	
Cash distribution to unitholders	—		 	(369	)	 	(369	)	
Dividend to preferred units	(2	)	 	—		 	(2	)	
Unit-based compensation	—		 	12		 	12		
Cumulative effect of change in revenue recognition accounting principle	—		 	(54	)	 	(54	)	
Other	—		 	(3	)	 	(3	)	
Partnership net income (loss)	2		 	(209	)	 	(207	)	
Balance at December 31, 2018	—		 	784		 	784		
Cash distribution to unitholders	—		 	(353	)	 	(353	)	
Unit-based compensation	—		 	13		 	13		
Other	—		 	1		 	1		
Partnership net income	—		 	313		 	313		
Balance at December 31, 2019	$	—		 	$	758		 	$	758		

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

F-6

SUNOCO LP
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in millions)

													
 	 	Year Ended December 31,	
 	 	2019	 	2018	 	2017	
Cash flows from operating activities:	 	 	 	 	 	 	
Net income (loss)	 	$	313		 	$	(207	)	 	$	149		
Adjustments to reconcile net income (loss) to net cash provided by continuing operating activities:	 	 	 	 	 	 	
Loss from discontinued operations, net of taxes	 	—		 	265		 	177		
Depreciation, amortization and accretion	 	183		 	182		 	169		
Amortization of deferred financing fees	 	7		 	6		 	15		
Loss on disposal of assets and impairment charge	 	68		 	19		 	114		
Loss on extinguishment of debt and other, net	 	—		 	109		 	—		
Other non-cash, net	 	(3	)	 	—		 	—		
Non-cash unit-based compensation expense	 	13		 	12		 	24		
Deferred income tax	 	6		 	6		 	(308	)	
Inventory valuation adjustment	 	(79	)	 	85		 	(24	)	
Equity in earnings of unconsolidated affiliate	 	(2	)	 	—		 	—		
Changes in operating assets and liabilities, net of acquisitions:	 		 		 		
Accounts receivable	 	(44	)	 	201		 	(1	)	
Receivables from affiliates	 	25		 	15		 	(131	)	
Inventories	 	26		 	(11	)	 	21		
Other assets	 	(28	)	 	(45	)	 	7		
Accounts payable	 	72		 	(123	)	 	(44	)	
Accounts payable to affiliates	 	(46	)	 	(15	)	 	97		
Accrued expenses and other current liabilities	 	(92	)	 	(55	)	 	(16	)	
Other noncurrent liabilities	 	16		 	3		 	54		
Net cash provided by continuing operating activities	 	435		 	447		 	303		
Cash flows from investing activities:	 	 	 	 	 	 	
Capital expenditures	 	(148	)	 	(103	)	 	(103	)	
Contributions to unconsolidated affiliate	 	(41	)	 	—		 	—		
Purchase of intangible assets	 	—		 	(2	)	 	(39	)	
Cash paid for acquisitions	 	(5	)	 	(401	)	 	—		
Proceeds from disposal of property and equipment	 	30		 	37		 	10		
Net cash used in investing activities	 	(164	)	 	(469	)	 	(132	)	
Cash flows from financing activities:	 	 	 	 	 	 	
Proceeds from issuance of long-term debt	 	600		 	2,200		 	—		
Payments on long-term debt	 	(9	)	 	(3,450	)	 	(5	)	
Payments on debt extinguishment costs	 	—		 	(93	)	 	—		
Revolver borrowings	 	2,443		 	2,790		 	2,653		
Revolver repayments	 	(2,981	)	 	(2,855	)	 	(2,888	)	
Loan origination costs	 	(6	)	 	(35	)	 	—		
Advances from (to) affiliates	 	—		 	—		 	3		
Proceeds from issuance of common units, net of offering costs	 	—		 	—		 	33		
Common unit repurchase	 	—		 	(540	)	 	—		
Issuance (redemption) of preferred units	 	—		 	(303	)	 	300		
Other cash from financing activities, net	 	—		 	(15	)	 	(4	)	
Distributions to unitholders	 	(353	)	 	(383	)	 	(431	)	
Net cash used in financing activities	 	(306	)	 	(2,684	)	 	(339	)	
Cash flows from discontinued operations:	 	 	 	 	 	 	
Operating activities	 	—		 	(484	)	 	136		
Investing activities	 	—		 	3,207		 	(38	)	
Changes in cash included in current assets held for sale	 	—		 	11		 	(5	)	
Net increase in cash and cash equivalents of discontinued operations	 	—		 	2,734		 	93		
Net increase (decrease) in cash and cash equivalents	 	(35	)	 	28		 	(75	)	
Cash and cash equivalents at beginning of period	 	56		 	28		 	103		
Cash and cash equivalents at end of period	 	$	21		 	$	56		 	$	28		

													
 	 	Year Ended December 31,	
 	 	2019	 	2018	 	2017	
Supplemental disclosure of non-cash investing activities:	 	 	 	 	 	 	
Note payable to affiliate	 	$	75		 	$	—		 	$	—		
Supplemental disclosure of cash flow information:	 		 		 		
Interest paid	 	161		 	140		 	209		
Income taxes paid (refunded), net	 	38		 	501		 	(1	)	

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

F-7

SUNOCO LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
		
1.	Organization and Principles of Consolidation	
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 Operating, L.P. (“ETO”), a consolidated subsidiary of Energy Transfer LP. In October 2018, Energy Transfer Equity, L.P. (“ETE”) and Energy Transfer Partners, L.P. (“ETP”) completed the previously announced merger of ETP with a wholly-owned subsidiary of ETE in a unit-for-unit exchange. Following the closing of the merger, ETE changed its name to “Energy Transfer LP” (“ET”) and its common units began trading on the New York Stock Exchange under the “ET” ticker symbol on October 19, 2018. In addition, ETP changed its name to “Energy Transfer Operating, L.P.”
In connection with the transaction, immediately prior to closing, ETE contributed 2,263,158 of our common units to ETP in exchange for 2,874,275 ETP common units, and contributed 100% of the limited liability company interests in our General Partner and all of our incentive distribution rights to ETP in exchange for 42,812,389 ETP common units. As a result, following the transaction, ETO directly owns our non-economic general partner interest, all of our incentive distribution rights (“IDRs”) and approximately 34.3% of our common units, which constitutes a 28.6% limited partner interest in us as of December 31, 2019.
Effective October 27, 2014, the Partnership changed its name from Susser Petroleum Partners LP (NYSE: SUSP) to Sunoco LP (“SUN,” NYSE: SUN). 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.
The consolidated financial statements are composed of Sunoco LP, a publicly traded Delaware limited partnership, and our wholly‑owned subsidiaries. We distribute motor fuels across more than 30 states throughout the East Coast, Midwest, South Central and Southeast regions of the United States, from Maine to Florida and from Florida to New Mexico, as well as Hawaii. We also operate retail stores in Hawaii and New Jersey.
On April 6, 2017, certain subsidiaries of the Partnership (collectively, the “Sellers”) entered into an Asset Purchase Agreement (the “7-Eleven Purchase Agreement”) with 7-Eleven, Inc., a Texas corporation (“7-Eleven”) and SEI Fuel Services, Inc., a Texas corporation and wholly-owned subsidiary of 7-Eleven (“SEI Fuel,” and, together with 7-Eleven, referred to herein collectively as “Buyers”). On January 23, 2018, we completed the disposition of assets pursuant to the Amended and Restated Asset Purchase Agreement entered by and among Sellers, Buyers and certain other named parties for the limited purposes set forth therein, pursuant to which the parties agreed to amend and restate the 7-Eleven Purchase Agreement to reflect commercial agreements and updates made by the parties in connection with consummation of the transactions contemplated by the 7-Eleven Purchase Agreement. Under the 7-Eleven Purchase Agreement, as amended and restated, we sold a portfolio of 1,030 company operated retail fuel outlets, together with ancillary businesses and related assets to Buyers for approximately $3.2 billion (the “7-Eleven Transaction”). On January 18, 2017, with the assistance of a third-party brokerage firm, we launched a portfolio optimization plan to market and sell 97 real estate assets located in Florida, Louisiana, Massachusetts, Michigan, New Hampshire, New Jersey, New Mexico, New York, Ohio, Oklahoma, Pennsylvania, Rhode Island, South Carolina, Texas and Virginia. The results of these operations (the real estate optimization assets, together with the 7-Eleven Transaction, the “Retail Divestment”) have been reported as discontinued operations in the consolidated financial statements. See Note 4 for more information related to the 7-Eleven Purchase Agreement and discontinued operations. All other footnotes present results of the continuing operations.
On April 1, 2018, the Partnership completed the conversion of 207 retail sites located in certain West Texas, Oklahoma and New Mexico markets to a single commission agent.
Our primary operations are conducted by the following consolidated subsidiaries:
		
•	Sunoco, LLC (“Sunoco LLC”), a Delaware limited liability company, primarily distributes motor fuel in 30 states throughout the East Coast, Midwest, South Central and Southeast regions of the United States. Sunoco LLC also processes transmix and distributes refined product through its terminals in Alabama, Texas, Arkansas and New York.	
		
•	Sunoco Retail LLC (“Sunoco Retail”), a Pennsylvania limited liability company, owns and operates retail stores that sell motor fuel and merchandise primarily in New Jersey.	
		
•	Aloha Petroleum LLC, a Delaware limited liability company, distributes motor fuel and operates terminal facilities on the Hawaiian Islands.	
		
•	Aloha Petroleum, Ltd. (“Aloha”), a Hawaii corporation, owns and operates retail stores on the Hawaiian Islands.	
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 impact on gross margin, income from operations, net income (loss) and comprehensive income (loss), or the balance sheets or statements of cash flows.

F-8

		
2.	Summary of Significant Accounting Policies	
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Fair Value Measurements
We use fair value measurements to measure, among other items, purchased assets, investments, leases and derivative contracts. We also use them to assess impairment of properties, equipment, intangible assets and goodwill. An asset’s fair value is defined as the price at which an asset could be exchanged in a current transaction between knowledgeable, willing parties. A liability’s fair value is defined as the amount that would be paid to transfer the liability to a new obligor, not the amount that would be paid to settle the liability with the creditor. Where available, fair value is based on observable market prices or parameters, or is derived from such prices or parameters. Where observable prices or inputs are not available, unobservable prices or inputs are used to estimate the current fair value, often using an internal valuation model. These valuation techniques involve some level of management estimation and judgment, the degree of which is dependent on the item being valued.
ASC 820 “Fair Value Measurements and Disclosures” prioritizes the inputs used in measuring fair value into the following hierarchy:
		
Level 1	Quoted prices (unadjusted) in active markets for identical assets or liabilities;	
		
Level 2	Inputs other than quoted prices included within Level 1 that are either directly or indirectly observable;	
		
Level 3	Unobservable inputs in which little or no market activity exists, therefore requiring an entity to develop its own assumptions about the assumptions that market participants would use in pricing.	
Cash, accounts receivable, certain other current assets, marketable securities, accounts payable, accrued expenses, and certain other current liabilities are reflected in the Consolidated Balance Sheets at carrying amounts, which approximate the fair value due to their short term nature.
Segment Reporting
We operate our business in two primary operating segments, Fuel Distribution and Marketing and All Other, both of which are included as reportable segments. Our Fuel Distribution and Marketing segment sells motor fuel to our All Other segment and external customers. Our All Other segment includes the Partnership’s credit card services, franchise royalties, and its retail operations in Hawaii and New Jersey.
Acquisition Accounting
Acquisitions of assets or entities that include inputs and processes and have the ability to create outputs are accounted for as business combinations. A purchase price is recorded for tangible and intangible assets acquired and liabilities assumed based on their fair value. The excess of fair value of consideration conveyed over fair value of net assets acquired is recorded as goodwill. The Consolidated Statements of Operations and Comprehensive Income (Loss) for the periods presented include the results of operations for each acquisition from their respective dates of acquisition.
Acquisitions of entities under common control are accounted for similar to a pooling of interests, in which the acquired assets and assumed liabilities are recognized at their historic carrying values. The results of operations of affiliated businesses acquired are reflected in the Partnership’s consolidated results of operations beginning on the date of common control.
Cash and Cash Equivalents
Cash and cash equivalents include cash on hand, demand deposits, and short-term investments with original maturities of three months or less.
Sunoco LLC and Sunoco Retail have treasury services agreements with Sunoco (R&M), LLC, an indirect wholly-owned subsidiary of ETO for certain cash management activities. The net balance of Sunoco LLC and Sunoco Retail activity  is reflected in either “Advances to affiliates” or “Advances from affiliates” on the Consolidated Balance Sheets.

F-9

Accounts Receivable
The majority of trade receivables are from wholesale fuel customers or from credit card companies related to retail credit card transactions. Wholesale customer credit is extended based on an evaluation of the customer’s financial condition. Receivables are recorded at face value, without interest or discount. The Partnership provides an allowance for doubtful accounts based on historical experience and on a specific identification basis. Credit losses are recorded against the allowance when accounts are deemed uncollectible.
Receivables from affiliates arise from fuel sales and other miscellaneous transactions with non-consolidated affiliates. These receivables are recorded at face value, without interest or discount.
Inventories
Fuel inventories are stated at the lower of cost or market using the last-in-first-out (“LIFO”) method. Under this methodology, the cost of fuel sold consists of actual acquisition costs, which includes transportation and storage costs. Such costs are adjusted to reflect increases or decreases in inventory quantities which are valued based on changes in LIFO inventory layers.
Merchandise inventories are stated at the lower of average cost, as determined by the retail inventory method, or market. We record an allowance for shortages and obsolescence relating to merchandise inventory based on historical trends and any known changes. Shipping and handling costs are included in the cost of merchandise inventories.
Advertising Costs
Advertising costs are expensed as incurred. Advertising costs were $24 million for the years ended December 31, 2019, 2018, and 2017.
Property and Equipment
Property and equipment are recorded at cost. Depreciation is computed on a straight-line basis over the useful lives of assets, estimated to be forty years for buildings, three to fifteen years for equipment and thirty years for storage tanks. Assets under finance leases are depreciated over the life of the corresponding lease.
Amortization of leasehold improvements is based upon the shorter of the remaining terms of the leases including renewal periods that are reasonably assured, or the estimated useful lives, which approximate twenty years. Expenditures for major renewals and betterments that extend the useful lives of property and equipment are capitalized. Maintenance and repairs are charged to operations as incurred. Gains or losses on the disposition of property and equipment are recorded in the period incurred.
Long-Lived Assets and Assets Held for Sale
Long-lived assets are tested for possible impairment whenever events or changes in circumstances indicate the carrying amount of the asset may not be recoverable. If such indicators exist, the estimated undiscounted future cash flows related to the asset are compared to the carrying value of the asset. If the carrying value is greater than the estimated undiscounted future cash flow amount, an impairment charge is recorded within loss on disposal of assets and impairment charge in the Consolidated Statements of Operations and Comprehensive Income (Loss) for amounts necessary to reduce the corresponding carrying value of the asset to fair value. The impairment loss calculations require management to apply judgment in estimating future cash flows.
Properties that have been closed and other excess real property are recorded as assets held and used, and are written down to the lower of cost or estimated net realizable value at the time we close such stores or determine that these properties are in excess and intend to offer them for sale. We estimate the net realizable value based on our experience in utilizing or disposing of similar assets and on estimates provided by our own and third-party real estate experts. Although we have not experienced significant changes in our estimate of net realizable value, changes in real estate markets could significantly impact the net values realized from the sale of assets. When we have determined that an asset is more likely than not to be sold in the next twelve months, that asset is classified as assets held for sale and included in other current assets. We had no assets classified as assets held for sale as of December 31, 2019 or 2018.
Goodwill and Indefinite-Lived Intangible Assets
Goodwill represents the excess of consideration paid over fair value of net assets acquired. Goodwill and intangible assets acquired in a purchase business combination are recorded at fair value as of the date acquired. Acquired intangible assets determined to have an indefinite useful life are not amortized, but are instead tested for impairment at least annually, or more frequently if events and circumstances indicate that the asset might be impaired. The annual impairment test of goodwill and indefinite lived intangible assets is performed as of the first day of the fourth quarter of each fiscal year.
The Partnership uses qualitative factors to determine whether it is more likely than not (likelihood of more than 50%) that the fair value of a reporting unit exceeds its carrying amount, including goodwill. Some of the qualitative factors considered in applying this test include consideration of macroeconomic conditions, industry and market conditions, cost factors affecting the business, overall financial performance of the business, and performance of the unit price of the Partnership.

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If qualitative factors are not deemed sufficient to conclude that the fair value of the reporting unit more likely than not exceeds its carrying value, then a one-step approach is applied in making an evaluation. The evaluation utilizes multiple valuation methodologies, including a market approach (market price multiples of comparable companies) and an income approach (discounted cash flow analysis). The computations require management to make significant estimates and assumptions, including, among other things, selection of comparable publicly traded companies, the discount rate applied to future earnings reflecting a weighted average cost of capital, and earnings growth assumptions. A discounted cash flow analysis requires management to make various assumptions about future sales, operating margins, capital expenditures, working capital, and growth rates. If the evaluation results in the fair value of the reporting unit being lower than the carrying value, an impairment charge is recorded.
Indefinite-lived intangible assets are composed of certain tradenames, and liquor licenses which are not amortized but are evaluated for impairment annually or more frequently if events or changes occur that suggest an impairment in carrying value, such as a significant adverse change in the business climate. Indefinite-lived intangible assets are evaluated for impairment by comparing each asset’s fair value to its book value. Management first determines qualitatively whether it is more likely than not that an indefinite‑lived asset is impaired. If management concludes that it is more likely than not that an indefinite-lived asset is impaired, then its fair value is determined by using the discounted cash flow model based on future revenues estimated to be derived in the use of the asset.
Other Intangible Assets
Other finite-lived intangible assets consist of supply agreements, customer relations, non-competes, and loan origination costs. Separable intangible assets that are not determined to have an indefinite life are amortized over their useful lives and assessed for impairment only if and when circumstances warrant. Determination of an intangible asset’s fair value and estimated useful life are based on an analysis of pertinent factors including (1) the use of widely-accepted valuation approaches, such as the income approach or the cost approach, (2) the expected use of the asset by the Partnership, (3) the expected useful life of related assets, (4) any legal, regulatory or contractual provisions, including renewal or extension period that would cause substantial costs or modifications to existing agreements, and (5) the effects of obsolescence, demand, competition, and other economic factors. Should any of the underlying assumptions indicate that the value of the intangible assets might be impaired, we may be required to reduce the carrying value and remaining useful life of the asset. If the underlying assumptions governing the amortization of an intangible asset were later determined to have significantly changed, we may be required to adjust its amortization period to reflect a new estimate of its useful life. Any write‑down of the value or unfavorable change in the useful life of an intangible asset would increase expense at that time.
Customer relations and supply agreements are amortized on a straight-line basis over the remaining terms of the agreements, which generally range from five to twenty years. Non-competition agreements are amortized over the terms of the respective agreements, and loan origination costs are amortized over the life of the underlying debt as an increase to interest expense.
Asset Retirement Obligations
The estimated future cost to remove an underground storage tank is recognized over the estimated useful life of the storage tank. We record a discounted liability for the future fair value of an asset retirement obligation along with a corresponding increase to the carrying value of the related long-lived asset at the time an underground storage tank is installed. We then depreciate the amount added to property and equipment and recognize accretion expense in connection with the discounted liability over the remaining life of the tank. We base our estimates of the anticipated future costs for tank removal on our prior experience with removals. We review assumptions for computing the estimated liability for tank removal on an annual basis. Any change in estimated cash flows are reflected as an adjustment to both the liability and the associated asset.
Long-lived assets related to Asset Retirement Obligations aggregated $20 million and $11 million, and were reflected as property and equipment, net on our Consolidated Balance Sheets as of December 31, 2019 and 2018, respectively.
Environmental Liabilities
Environmental expenditures related to existing conditions, resulting from past or current operations, and from which no current or future benefit is discernible, are expensed. Expenditures that extend the life of the related property or prevent future environmental contamination are capitalized. We determine and establish a liability on a site-by-site basis when it is probable and can be reasonably estimated. A related receivable is recorded for estimable and probable reimbursements.

F-11

Revenue Recognition
Revenues from motor fuel is recognized either at the time fuel is delivered to the customer or at the time of sale. Shipment and delivery of motor fuel generally occurs on the same day. The Partnership charges wholesale customers for third-party transportation costs, which are recorded net in cost of sales. Through PropCo, our wholly-owned corporate subsidiary, we sell motor fuel to customers on a commission agent basis, in which we retain title to inventory, control access to and sale of fuel inventory, and recognize revenue at the time the fuel is sold to the end customer. In our Fuel Distribution and Marketing segment, we derive additional income from lease income, propane and lubricating oils, and other ancillary product and service offerings. In our All Other segment, we derive other income from merchandise, lottery ticket sales, money orders, prepaid phone cards and wireless services, ATM transactions, car washes, and other ancillary product and service offerings. We record revenue from other retail transactions on a net commission basis when a product is sold and/or services are rendered.
Lease Income
Lease income from operating leases is recognized on a straight-line basis over the term of the lease.
Cost of Sales
We include in cost of sales all costs incurred to acquire fuel and merchandise, including the costs of purchasing, storing, and transporting inventory prior to delivery to our customers. Items are removed from inventory and are included in cost of sales based on the retail inventory method for merchandise and the LIFO method for motor fuel. Cost of sales does not include depreciation of property and equipment as amounts attributed to cost of sales would not be significant. Depreciation is classified within operating expenses in the Consolidated Statements of Operations and Comprehensive Income (Loss).
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 $386 million, $370 million and $234 million, for the years ended December 31, 2019, 2018 and 2017, respectively. Merchandise sales and cost of merchandise sales are reported net of sales tax in the Consolidated Statements of Operations and Comprehensive Income (Loss).
Deferred Branding Incentives
We receive payments for branding incentives related to fuel supply contracts. Unearned branding incentives are deferred and amortized on a straight-line basis over the term of the agreement as a credit to cost of sales.
Lease Accounting
At the inception of each lease arrangement, we determine if the arrangement is a lease or contains an embedded lease and review the facts and circumstances of the arrangement to classify lease assets as operating or finance leases under Topic 842. The Partnership has elected not to record any leases with terms of 12 months or less on the balance sheet.
Balances related to operating leases are included in operating lease ROU assets, accrued and other current liabilities, operating lease current liabilities and non-current operating lease liabilities in our consolidated balance sheets. Finance leases represent a small portion of the active lease agreements and are included in finance lease ROU assets, current maturities of long-term debt and long-term debt, less current maturities in our consolidated balance sheets. The ROU assets represent the Partnership’s right to use an underlying asset for the lease term and lease liabilities represent the obligation of the Partnership to make minimum lease payments arising from the lease for the duration of the lease term.
The Partnership leases a portion of its properties under non-cancelable operating leases, whose initial terms are typically five to fifteen years, with options permitting renewal for additional periods. Most leases include one or more options to renew, with renewal terms that can extend the lease term from one to 20 years or greater. The exercise of lease renewal options is typically at the sole discretion of the Partnership and lease extensions are evaluated on a lease-by-lease basis. Leases containing early termination clauses typically require the agreement of both parties to the lease. At the inception of a lease, all renewal options reasonably certain to be exercised are considered when determining the lease term. The depreciable life of lease assets and leasehold improvements are limited by the expected lease term.
To determine the present value of future minimum lease payments, we use the implicit rate when readily determinable. Presently, because many of our leases do not provide an implicit rate, the Partnership applies its incremental borrowing rate based on the information available at the lease commencement date to determine the present value of minimum lease payments. The operating and finance lease ROU assets include any lease payments made and exclude lease incentives.

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Minimum rent is expensed on a straight-line basis over the term of the lease, including renewal periods that are reasonably assured at the inception of the lease. The Partnership is typically responsible for payment of real estate taxes, maintenance expenses, and insurance. The Partnership also leases certain vehicles, and such leases are typically less than five years.
For short-term leases (leases that have term of twelve months or less upon commencement), lease payments are recognized on a straight-line basis and no ROU assets are recorded.
Earnings Per Unit
In addition to limited partner units, we have identified incentive distribution rights (“IDRs”) as participating securities and compute income per unit using the two-class method under which any excess of distributions declared over net income shall be allocated to the partners based on their respective sharing of income specified in the First Amended and Restated Agreement of Limited Partnership, as amended (the “Partnership Agreement”). Net income per unit applicable to limited partners is computed by dividing limited partners’ interest in net income, after deducting any incentive distributions, distributions on Series A Preferred Units and nonvested phantom unit awards, by the weighted-average number of outstanding common units.
Unit-based Compensation
Under the LP 2012 Long-Term Incentive Plan (the “2012 LTIP”) and the Sunoco LP 2018 Long-Term Incentive Plan (the “2018 LTIP”), various types of awards may be granted to employees, consultants, and directors of our General Partner who provide services for us. Compensation expense related to outstanding awards is recognized over the vesting period based on the grant-date fair value. The grant-date fair value is determined based on the market price of our common units on the grant date. We amortize the grant-date fair value of these awards over their vesting period using the straight-line method. Expenses related to unit-based compensation are included in general and administrative expenses.
Income Taxes
The Partnership is a publicly traded limited partnership and is not taxable for federal and most state income tax purposes. As a result, our earnings or losses, to the extent not included in a taxable subsidiary, for federal and most state purposes are included in the tax returns of the individual partners. Net earnings for financial statement purposes may differ significantly from taxable income reportable to Unitholders as a result of differences between the tax basis and financial basis of assets and liabilities, differences between the tax accounting and financial accounting treatment of certain items, and due to allocation requirements related to taxable income under our Partnership Agreement.
As a publicly traded limited partnership, we are subject to a statutory requirement that our “qualifying income” (as defined by the Internal Revenue Code, related Treasury Regulations, and IRS pronouncements) exceed 90% of our total gross income, determined on a calendar year basis. If our qualifying income were not to meet this statutory requirement, the Partnership would be taxed as a corporation for federal and state income tax purposes. For the years ended December 31, 2019, 2018, and 2017, our qualifying income met the statutory requirement.
The Partnership conducts certain activities through corporate subsidiaries which are subject to federal, state and local income taxes. These corporate subsidiaries include Sunoco Property Company LLC (“PropCo”) and Aloha. The Partnership and its corporate subsidiaries account for income taxes under the asset and liability method.
Under this method, deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rate is recognized in earnings in the period that includes the enactment date. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts more likely than not to be realized.
The determination of the provision for income taxes requires significant judgment, use of estimates, and the interpretation and application of complex tax laws. Significant judgment is required in assessing the timing and amounts of deductible and taxable items and the probability of sustaining uncertain tax positions. The benefits of uncertain tax positions are recorded in our financial statements only after determining a more-likely-than-not probability that the uncertain tax positions will withstand challenge, if any, from taxing authorities. When facts and circumstances change, we reassess these probabilities and record any changes through the provision for income taxes.
In November 2015, new federal partnership audit procedures were signed into law which are effective for tax years beginning after December 31, 2017. Under the new procedures, a partnership would be responsible for paying the imputed underpayment of tax resulting from audit adjustments in the adjustment year even though partnerships are “pass through entities.” However, as an alternative to paying the imputed underpayment of tax at the partnership level, a partnership may elect to provide audit adjustment information to the reviewed year partners, whom in turn would be responsible for paying the imputed underpayment of tax in the adjustment year. The Partnership is currently evaluating the impact, if any, this legislation has on our income taxes policies.

F-13

Change in Accounting Principles
FASB ASU No. 2016-02. In February 2016, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2016-02, Leases (Topic 842), which amends the FASB Accounting Standards Codification (“ASC”) and creates Topic 842, Leases. On January 1, 2019, we adopted ASC Topic 842, which is effective for interim and annual reporting periods beginning on or after December 15, 2018. This Topic requires balance sheet recognition of lease assets and lease liabilities for leases classified as operating leases under previous GAAP. Under the standard, disclosures are required to meet the objective of enabling users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases.
The Partnership elected the modified retrospective approach to adopt Topic 842. This approach involved recognition of an opening cumulative catch-up adjustment to the balance sheet in the period of adoption, January 1, 2019. We have completed a detailed review of contracts representative of our business and assessed the terms under the new standard. Adoption of the standard had a material impact on our consolidated balance sheet, but did not have a material impact on our consolidated statements of operations and comprehensive income or consolidated cash flows. The most significant impact was the recognition of right-of-use (“ROU”) assets and lease liabilities for operating leases, while our accounting for finance leases remained substantially unchanged.
As a result of the evaluation performed, we have recorded adjustments resulting in a net increase to assets and liabilities of approximately $547 million as of January 1, 2019. In addition to the evaluation performed, we have made appropriate design and implementation updates to our business processes, systems, and internal controls to support the on-going reporting requirements under the new standard.
Topic 842 provides for certain practical expedients that companies can elect to apply for purposes of adoption and implementation of the new standard. The practical expedients utilized by the Partnership are as follows: 1) no reassessment of whether existing contracts contain a lease, 2) no reassessment of the classification of existing leases, 3) no reassessment of initial direct costs for existing leases, 4) exclusion of leases with terms of 12 months or less from evaluation, 5) use of the portfolio approach to determine discount rates, 6) election to not separate non-lease components from lease components in existing lease agreements, and 7) election to not apply the use of hindsight to the active lease population.
The cumulative effect of the changes made to our consolidated January 1, 2019 balance sheet for the adoption of ASU No. 2016-02 was as follows:

													
Classification	 	Balance at
December 31, 2018	 	Adjustments Due to
Topic 842	 	Balance at
January 1, 2019	
 	 	(in millions) 	
Assets	 	 	 	 	 	 	
Property and equipment, net	 	$	1,546		 	$	(1	)	 	$	1,545		
Lease right-of-use assets	 	—		 	548		 	548		
Liabilities	 	 	 	 	 	 	
Accrued expenses and other current liabilities	 	299		 	(1	)	 	298		
Current maturities of long term debt	 	5		 	1		 	6		
Operating lease current liabilities	 	—		 	25		 	25		
Long term debt, net	 	2,280		 	6		 	2,286		
Operating lease non-current liabilities	 	—		 	528		 	528		
Other non-current liabilities	 	123		 	(12	)	 	111		

		
3.	Acquisitions and Divestment	
Speedway Acquisition
On January 18, 2019, we acquired certain convenience store locations from Speedway LLC for approximately $5 million plus working capital adjustments. We subsequently converted the acquired convenience store locations to commission agent locations.
Fulton Divestment
On May 31, 2019, we completed the previously announced divestiture to Attis Industries Inc. (NASDAQ: ATIS) (“Attis”) for the sale of our ethanol plant, including the grain malting operation, in Fulton, New York. As part of the transaction, we entered into a 10-year ethanol offtake agreement with Attis. Total consideration for the divestiture was $20 million in cash plus certain working capital adjustments. Pursuant to the offtake agreement wherein Attis sells ethanol to Sunoco, Attis is responsible for remitting taxes related to such sales to the state of New York. Should Attis fail to remit such taxes, under New York law, we could be held jointly and severally

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liable for any unremitted portions for sales that occurred through February 4, 2020. Our current estimate of the net cash exposure for the potential liability is $8 million as of December 31, 2019, which was expensed during the year ended December 31, 2019.
Other Acquisitions
The following is a summary of the allocation of the purchase price paid to the fair values of the net assets, net of cash acquired, of our acquisitions during 2018 (in millions):

																									
 	 	AMID	 	Schmitt	 	BRENCO	 	Sandford	 	Superior	 	7-Eleven	
Current assets	 	$	3		 	$	4		 	$	2		 	$	37		 	$	19		 	$	4		
Property and equipment	 	41		 	20		 	7		 	13		 	20		 	20		
Intangible assets	 	40		 	16		 	12		 	36		 	12		 	—		
Goodwill	 	43		 	6		 	5		 	31		 	10		 	30		
Other noncurrent assets	 	2		 	—		 	—		 	—		 	—		 	—		
Current liabilities	 	(2	)	 	—		 	—		 	(13	)	 	(1	)	 	—		
Deferred tax liabilities	 	—		 	—		 	—		 	(11	)	 	—		 	—		
Other noncurrent liabilities	 	—		 	—		 	—		 	—		 	(2	)	 	—		
Total		$	127		 	$	46		 	$	26		 	$	93		 	$	58		 	$	54		

On December 20, 2018, we completed the acquisition of the refined products terminalling business from American Midstream Partners, LP (NYSE: AMID) for approximately $127 million inclusive of working capital adjustments. The refined products terminalling business consists of terminals located in Texas and Arkansas with a combined 21 tanks, approximately 1.3 million barrels of storage capacity and approximately 77,500 barrels per day of total throughput capacity. The acquisition increased goodwill by $43 million, which is deductible for tax purposes.
On December 18, 2018, we completed the acquisition of the wholesale fuel distribution business from Schmitt Sales, Inc. (“Schmitt”) for approximately $46 million inclusive of working capital adjustments. The acquired wholesale fuels business distributes approximately 180 million gallons of fuel annually across a network of dealer and commission agent-operated locations in the Upstate New York and Pennsylvania markets. The acquisition increased goodwill by $6 million.
On October 16, 2018, we completed the acquisition of BRENCO Marketing Corporation’s fuel distribution business (“BRENCO”) for approximately $26 million inclusive of working capital adjustments. The acquired wholesale fuels business distributes approximately 95 million gallons of fuel annually across a network of approximately 160 dealer and commission agent-operated locations and 100 commercial accounts in Central and East Texas. The acquisition increased goodwill by $5 million.
On August 1, 2018, we completed the acquisition of the equity interests of Sandford Energy, LLC, Sandford Transportation, LLC and their respective subsidiaries (“Sandford”) for approximately $93 million inclusive of working capital and other adjustments. The acquired wholesale fuels business distributes approximately 115 million gallons of fuel annually to exploration, drilling and oil field services customers, primarily in basins in Central and West Texas and Oklahoma. The acquisition increased goodwill by $31 million, which is not deductible for tax purposes.
On April 25, 2018, we completed the acquisition of wholesale fuel distribution assets and related terminal assets from Superior Plus Energy Services, Inc. (“Superior”) for approximately $58 million inclusive of working capital adjustments. The assets consist of a network of approximately 100 dealers, several hundred commercial contracts and three terminals, which are connected to major pipelines serving the Upstate New York market. The acquisition increased goodwill by $10 million.
On April 2, 2018, we completed the acquisition of 26 retail fuel outlets from 7-Eleven and SEI Fuel (“7-Eleven Purchase”) for approximately $54 million, inclusive of working capital adjustment. We subsequently converted the acquired stations from company-operated sites to commission agent locations. The acquisition increased goodwill by $30 million.
		
4.	Discontinued Operations	
On January 23, 2018, we completed the disposition of assets pursuant to the Amended and Restated Asset Purchase Agreement entered by and among Sellers, Buyers and certain other named parties for the limited purposes set forth therein, pursuant to which the parties agreed to amend and restate the 7-Eleven Purchase Agreement to reflect commercial agreements and updates made by the parties in connection with consummation of the transactions contemplated by the 7-Eleven Purchase Agreement. Subsequent to the closing of the 7-Eleven Transaction, previously eliminated wholesale motor fuel sales to the Partnership’s retail locations are reported as wholesale motor fuel sales to third parties. Also, the related accounts receivable from such sales ceased to be eliminated from the Consolidated Balance Sheets and are reported as accounts receivable.
In connection with the closing of the transactions contemplated by the 7-Eleven Purchase Agreement, we entered into a Distributor Motor Fuel Agreement dated as of January 23, 2018 (the “Supply Agreement”), with 7-Eleven and SEI Fuel. The Supply Agreement

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consists of a 15-year take-or-pay fuel supply arrangement. For the period from January 1, 2018 through January 22, 2018, and the year ended December 31, 2017, we recorded sales to the sites that were subsequently sold to 7-Eleven of $199 million and $3.2 billion, respectively, that were eliminated in consolidation. We received payments on trade receivables from 7-Eleven of $3.7 billion and $3.4 billion during the years ended December 31, 2019 and 2018, respectively, subsequent to the closing of the sale.
The Partnership concluded that it meets the accounting requirements for reporting the financial position, results of operations and cash flows of the Retail Divestment as discontinued operations. See Note 1 for further information regarding the Retail Divestment.
As a result of the 7-Eleven Transaction, the Partnership recorded transaction costs of $3 million during 2018, and recorded transaction costs of $37 million and unit-based compensation of $6 million during 2017.
The Partnership recorded a $4 million impairment charge to property and equipment during 2017 as a result of the effects of Hurricane Harvey on the Partnership’s retail operations within discontinued operations.
The Partnership had no assets or liabilities associated with discontinued operations as of December 31, 2019 or 2018. There were no results of operations associated with discontinued operations for the year ended December 31, 2019.
The results of operations associated with discontinued operations are presented in the following table:

								
 	Year Ended December 31,	
 	2018	 	2017	
 	(in millions)	
Revenues:	 	 	 	
Motor fuel sales	$	256		 	$	5,137		
Non motor fuel sales (1)	93		 	1,827		
Total revenues	349		 	6,964		
Cost of sales and operating expenses:	 	 	 	
Cost of sales	305		 	5,806		
General and administrative	7		 	168		
Other operating	57		 	707		
Rent	4		 	56		
Loss on disposal of assets and impairment charge	61		 	286		
Depreciation, amortization and accretion expense	—		 	34		
Total cost of sales and operating expenses	434		 	7,057		
Operating loss	(85	)	 	(93	)	
Interest expense, net	2		 	36		
Loss on extinguishment of debt and other, net	20		 	—		
Loss from discontinued operations before income taxes	(107	)	 	(129	)	
Income tax expense	158		 	48		
Loss from discontinued operations, net of income taxes	$	(265	)	 	$	(177	)	

_______________________________
		
(1)	Non motor fuel sales includes merchandise sales totaling $89 million and $1.8 billion for the years ended December 31, 2018 and 2017, respectively.	
		
5.	Accounts Receivable, net	
Accounts receivable, net, consisted of the following:

								
 	December 31,
2019	 	December 31,
2018	
 	(in millions)	
Accounts receivable, trade	$	337		 	$	299		
Credit card receivables	29		 	49		
Vendor receivables for rebates and branding	19		 	1		
Other receivables	16		 	27		
Allowance for doubtful accounts	(2	)	 	(2	)	
Accounts receivable, net	$	399		 	$	374		

F-16

		
6.	Inventories, net	
Inventories, net consisted of the following:

								
 	December 31,
2019	 	December 31,
2018	
 	(in millions)	
Fuel	$	412		 	$	363		
Other	7		 	11		
Inventories, net	$	419		 	$	374		

		
7.	Property and Equipment, net	
Property and equipment, net consisted of the following:

								
 	December 31,
2019	 	December 31,
2018	
 	(in millions)	
Land	$	515		 	$	518		
Buildings and leasehold improvements	754		 	727		
Equipment	830		 	810		
Construction in progress	35		 	78		
Total property and equipment	2,134		 	2,133		
Less: accumulated depreciation	692		 	587		
Property and equipment, net	$	1,442		 	$	1,546		

Depreciation expense on property and equipment was $121 million, $129 million and $102 million for the years ended December 31, 2019, 2018 and 2017, respectively.
		
8.	Goodwill and Other Intangible Assets	
Goodwill
Goodwill balances and activity for the years ended December 31, 2019 and 2018 consisted of the following:

												
 	Segment	 	 	
 	Fuel Distribution and Marketing	 	All Other	 	Consolidated	
 	(in millions)	
Balance at December 31, 2017	$	752		 	$	678		 	$	1,430		
Goodwill related to 7-Eleven Purchase	30		 	—		 	30		
Goodwill related to Superior acquisition	10		 	—		 	10		
Goodwill related to Sandford acquisition	31		 	—		 	31		
Goodwill related to BRENCO Acquisition	5		 	—		 	5		
Goodwill related to AMID acquisition	44		 	—		 	44		
Goodwill related to Schmitt acquisition	9		 	—		 	9		
Balance at December 31, 2018	881		 	678		 	1,559		
Goodwill adjustment related to AMID acquisition	(1	)	 	—		 	(1	)	
Goodwill adjustment related to Schmitt acquisition	(3	)	 	—		 	(3	)	
Balance at December 31, 2019	$	877		 	$	678		 	$	1,555		

Goodwill represents the excess of the purchase price of an acquired entity over the amounts allocated to the assets acquired and liabilities assumed in a business combination. During the year ended December 31, 2019, we performed our final evaluation of the 7-Eleven Purchase, AMID, Schmitt, BRENCO, Sandford and Superior acquisitions’ purchase accounting analyses with the assistance of a third party valuation firm. Goodwill is recorded at the acquisition date based on a preliminary purchase price allocation and generally may be adjusted when the purchase price allocation is finalized in accordance with ASC 350-20-35 “Goodwill - Subsequent Measurements”.

F-17

During 2017, management performed goodwill impairment testing on its reporting units included in assets held for sale resulting in impairment charges of $387 million. Of this amount, $102 million was allocated to the sites reclassified to continuing operations in the fourth quarter within the retail and Stripes reporting units. Once allocated, management performed goodwill impairment tests on both reporting units to which the goodwill balances were allocated. No goodwill impairment was identified for the retail or Stripes reporting units as a result of these tests. During 2018 and 2019, management performed goodwill impairment testing on its reporting units. No goodwill impairment was identified for the reporting units as a result of these tests.
The Partnership determined the fair value of our reporting units using a weighted combination of the discounted cash flow method and the guideline company method. Determining the fair value of a reporting unit requires judgment and the use of significant estimates and assumptions. Such estimates and assumptions include revenue growth rates, operating margins, weighted average costs of capital and future market conditions, among others. The Partnership believes the estimates and assumptions used in our impairment assessments are reasonable and based on available market information, but variations in any of the assumptions could result in materially different calculations of fair value and determinations of whether or not an impairment is indicated. Under the discounted cash flow method, the Partnership determined fair value based on estimated future cash flows of each reporting unit including estimates for capital expenditures, discounted to present value using the risk-adjusted industry rate, which reflect the overall level of inherent risk of the reporting unit. Cash flow projections are derived from one year budgeted amounts plus an estimate of later period cash flows, all of which are determined by management. Subsequent period cash flows are developed for each reporting unit using growth rates that management believes are reasonably likely to occur. Under the guideline company method, the Partnership determined the estimated fair value of each of our reporting units by applying valuation multiples of comparable publicly-traded companies to each reporting unit’s projected EBITDA and then averaging that estimate with similar historical calculations using a three year average. In addition, the Partnership estimated a reasonable control premium representing the incremental value that accrues to the majority owner from the opportunity to dictate the strategic and operational actions of the business.
Other Intangibles
Gross carrying amounts and accumulated amortization for each major class of intangible assets, excluding goodwill, consisted of the following:

																								
 	December 31, 2019	 	December 31, 2018	
 	Gross
Carrying
Amount	 	Accumulated
Amortization	 	Net
Book Value	 	Gross
Carrying
Amount	 	Accumulated
Amortization	 	Net
Book Value	
 	(in millions)	
Indefinite-lived	 		 	 		 	 		 	 		 	 		 	 		
Tradenames	$	295		 	$	—		 	$	295		 	$	295		 	$	—		 	$	295		
Liquor licenses	12		 	—		 	12		 	12		 	—		 	12		
Finite-lived	 	 	 	 	 	 	 	 	 	 	 	
Customer relations including supply agreements	580		 	252		 	328		 	579		 	198		 	381		
Favorable leasehold arrangements, net (1)	—		 	—		 	—		 	10		 	3		 	7		
Loan origination costs (2)	9		 	3		 	6		 	9		 	1		 	8		
Other intangibles	10		 	5		 	5		 	10		 	5		 	5		
Intangible assets, net	$	906		 	$	260		 	$	646		 	$	915		 	$	207		 	$	708		

_______________________________
		
(1)	As a part of ASC 842, favorable leasehold arrangements were reclassed to adjust the operating lease right-of-use asset.	
		
(2)	Loan origination costs are associated with the Revolving Credit Agreement, see Note 10 for further information.	
We review amortizable intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. If such a review should indicate that the carrying amount of amortizable intangible assets is not recoverable, we reduce the carrying amount of such assets to fair value. We review non-amortizable intangible assets for impairment annually, or more frequently if circumstances dictate.
During the fourth quarter of 2017, 2018 and 2019, we performed the annual impairment tests on our indefinite-lived intangible assets. We recognized impairment charges of $13 million and $4 million on our contractual rights and liquor licenses, respectively, in 2017; $30 million of impairment charge on our contractual rights in 2018, primarily due to decreases in projected future revenues and cash flows from the date the intangible asset was originally recorded; and no impairment in 2019.
Total amortization expense on finite-lived intangibles included in depreciation, amortization and accretion was $56 million, $43 million and $61 million for the years ended December 31, 2019, 2018 and 2017, respectively.

F-18

Customer relations and supply agreements have a remaining weighted-average life of approximately 9 years. Other intangible assets have a remaining weighted-average life of approximately 5 years. Loan origination costs have a remaining weighted-average life of approximately 4 years.
As of December 31, 2019, the Partnership’s estimate of amortization includable in amortization expense and interest expense for each of the five succeeding fiscal years and thereafter for finite-lived intangibles is as follows (in millions):

								
 	Amortization	 	Interest	
2020	$	57		 	$	2		
2021	53		 	2		
2022	44		 	1		
2023	38		 	1		
2024	28		 	—		
Thereafter	113		 	—		
Total	$	333		 	$	6		

9.	Accrued Expenses and Other Current Liabilities	
Current accrued expenses and other current liabilities consisted of the following:

								
 	December 31, 2019	 	December 31, 2018	
 	(in millions)	
Wage and other employee-related accrued expenses	$	32		 	$	41		
Accrued tax expense	42		 	91		
Accrued insurance	27		 	31		
Accrued interest expense	57		 	47		
Dealer deposits	23		 	18		
Accrued environmental expense	6		 	6		
Other	32		 	65		
Total	$	219		 	$	299		

10.	Long-Term Debt	
Long-term debt consisted of the following:

								
 	December 31,
2019	 	December 31,
2018	
 	(in millions)	
Sale leaseback financing obligation	$	103		 	$	107		
2018 Revolver	162		 	700		
4.875% Senior Notes Due 2023	1,000		 	1,000		
5.500% Senior Notes Due 2026	800		 	800		
6.000% Senior Notes Due 2027	600		 	—		
5.875% Senior Notes Due 2028	400		 	400		
Finance leases	32		 	1		
Total debt	3,097		 	3,008		
Less: current maturities	11		 	5		
Less: debt issuance costs	26		 	23		
Long-term debt, net of current maturities	$	3,060		 	$	2,980		

F-19

At December 31, 2019, scheduled future debt principal maturities are as follows (in millions):

				
2020	$	11		
2021	12		
2022	13		
2023	1,175		
2024	10		
Thereafter	1,876		
Total	$	3,097		

2018 Private Offering of Senior Notes
On January 23, 2018, we and certain of our wholly owned subsidiaries, including Sunoco Finance Corp. (together with the Partnership, the “Issuers”) completed a private offering of $2.2 billion of senior notes, comprised of $1.0 billion in aggregate principal amount of 4.875% senior notes due 2023 (the “2023 Notes”), $800 million in aggregate principal amount of 5.500% senior notes due 2026 (the “2026 Notes”) and $400 million in aggregate principal amount of 5.875% senior notes due 2028 (the “2028 Notes” and, together with the 2023 Notes and the 2026 Notes, the “Notes”).
The terms of the Notes are governed by an indenture dated January 23, 2018, among the Issuers, and certain other subsidiaries of the Partnership (the “Guarantors”) and U.S. Bank National Association, as trustee. The 2023 Notes will mature on January 15, 2023 and interest is payable semi-annually on January 15 and July 15 of each year, commencing July 15, 2018. The 2026 Notes will mature on February 15, 2026 and interest is payable semi-annually on February 15 and August 15 of each year, commencing August 15, 2018.  The 2028 Notes will mature on March 15, 2028 and interest is payable semi-annually on March 15 and September 15 of each year, commencing September 15, 2018. The Notes are senior obligations of the Issuers and are guaranteed on a senior basis by all of the Partnership’s existing subsidiaries and certain of its future subsidiaries. The Notes and guarantees are unsecured and rank equally with all of the Issuers’ and each Guarantor’s existing and future senior obligations. The Notes and guarantees are effectively subordinated to the Issuers’ and each Guarantor’s secured obligations, including obligations under the Partnership’s 2018 Revolver (as defined below), to the extent of the value of the collateral securing such obligations, and structurally subordinated to all indebtedness and obligations, including trade payables, of the Partnership’s subsidiaries that do not guarantee the Notes. ETC M-A Acquisition LLC (“ETC M-A”), a subsidiary of ET, guarantees collection to the Issuers with respect to the payment of the principal amount of the Notes. ETC M-A is not subject to any of the covenants under the Indenture.
In connection with our issuance of the Notes, we entered into a registration rights agreement with the initial purchasers pursuant to which we agreed to complete an offer to exchange the Notes for an issue of registered notes with terms substantively identical to each series of Notes and evidencing the same indebtedness as the Notes on or before January 23, 2019. The exchange offer was completed on December 3, 2018.
The Partnership used the proceeds from the private offering, along with proceeds from the 7-Eleven Transaction, to: 1) redeem in full our existing senior notes as of December 31, 2017, comprised of $800 million in aggregate principal amount of 6.250% senior notes due 2021, $600 million in aggregate principal amount of 5.500% senior notes due 2020, and $800 million in aggregate principal amount of 6.375% senior notes due 2023; 2) repay in full and terminate the Term Loan; 3) pay all closing costs in connection with the 7-Eleven Transaction; 4) redeem the outstanding Series A Preferred Units held by ETE for an aggregate redemption amount of approximately $313 million; and 5) repurchase 17,286,859 SUN common units owned by subsidiaries of ETP for aggregate cash consideration of approximately $540 million.
2019 Private Offering of Senior Notes
On March 14, 2019, we, our General Partner and Sunoco Finance Corp. (together with the Partnership, the “2027 Notes Issuers”) completed a private offering of $600 million in aggregate principal amount of 6.000% senior notes due 2027 (the “2027 Notes”).
The terms of the 2027 Notes are governed by an indenture dated March 14, 2019, among the 2027 Notes Issuers, certain subsidiaries of the Partnership (the “2027 Notes Guarantors”) and U.S. Bank National Association, as trustee. The 2027 Notes will mature on April 15, 2027, and interest on the 2027 Notes is payable semi-annually on April 15 and October 15 of each year, commencing October 15, 2019. The 2027 Notes are senior obligations of the 2027 Notes Issuers and are guaranteed on a senior basis by all of the Partnership’s current subsidiaries (other than Sunoco Finance Corp.) that guarantee its obligations under the 2018 Revolver (as defined below) and certain of its future subsidiaries. The 2027 Notes and guarantees are unsecured and rank equally with all of the 2027 Notes Issuers’ and each 2027 Notes Guarantor’s existing and future senior obligations. The 2027 Notes and guarantees are effectively subordinated to the 2027 Notes Issuers’ and each 2027 Notes Guarantor’s secured obligations, including obligations under the 2018 Revolver (as defined below), to the extent of the value of the collateral securing such obligations, and structurally subordinated to all indebtedness and obligations, including trade payables, of the Partnership’s subsidiaries that do not guarantee the 2027 Notes.

F-20

In connection with our issuance of the 2027 Notes, we entered into a registration rights agreement with the initial purchasers pursuant to which we agreed to complete an offer to exchange the 2027 Notes for an issue of registered notes with terms substantively identical to the 2027 Notes and evidencing the same indebtedness as the 2027 Notes on or before March 14, 2020. The exchange offer was completed on July 17, 2019.
The Partnership used the proceeds from the private offering to repay a portion of the outstanding borrowings under our 2018 Revolver (as defined below).
Revolving Credit Agreement
On July 27, 2018, we entered into a new 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 “2018 Revolver”). Borrowings under the 2018 Revolver were used to pay off the Partnership’s existing revolving credit facility entered into on September 25, 2014 (the “2014 Revolver”).
The 2018 Revolver is a $1.50 billion revolving credit facility, expiring July 27, 2023 (which date may be extended in accordance with the terms of the 2018 Revolver). The facility can be increased from time to time upon the Partnership’s written request, subject to certain conditions, up to an additional $750 million. Borrowings under the revolving credit facility will bear interest at a base rate (a rate based off of the higher of (a) the Federal Funds Rate (as defined in the 2018 Revolver) plus 0.5%, (b) Bank of America’s prime rate and (c) one-month LIBOR (as defined therein) plus 1.00%) or LIBOR, in each case plus an applicable margin ranging from 1.25% to 2.25%, in the case of a LIBOR loan, or from 0.250% to 1.25%, in the case of a base rate loan (determined with reference to the Partnership’s Net Leverage Ratio as defined in the 2018 Revolver). Upon the first achievement by the Partnership of an investment grade credit rating, the applicable margin will decrease to a range of 1.125% to 1.75%, in the case of a LIBOR loan, or from 0.125% to 0.750%, in the case of a base rate loan (determined with reference to the credit rating for the Partnership’s senior, unsecured, non-credit enhanced long-term debt and the Partnership’s corporate issuer rating). Interest is payable quarterly if the base rate applies, at the end of the applicable interest period if LIBOR applies and at the end of the month if daily floating LIBOR applies. In addition, the unused portion of the Partnership’s revolving credit facility will be subject to a commitment fee ranging from 0.250% to 0.350%, based on the Partnership’s Leverage Ratio. Upon the first achievement by the Partnership of an investment grade credit rating, the commitment fee will decrease to a range of 0.125% to 0.350%, based on the Partnership’s credit rating as described above.
The 2018 Revolver requires the Partnership to maintain a Net Leverage Ratio of not more than 5.50 to 1.00. The maximum Net Leverage Ratio is subject to upwards adjustment of not more than 6.00 to 1.00 for a period not to exceed three fiscal quarters in the event the Partnership engages in certain specified acquisitions of not less than $50 million (as permitted under the 2018 Revolver). The 2018 Revolver also requires the Partnership to maintain an Interest Coverage Ratio (as defined in the 2018 Revolver) of not less than 2.25 to 1.00.
Indebtedness under the 2018 Revolver is secured by a security interest in, among other things, all of the Partnership’s present and future personal property and all of the present and future personal property of its guarantors, the capital stock of its material subsidiaries (or 66% of the capital stock of material foreign subsidiaries), and any intercompany debt. Upon the first achievement by the Partnership of an investment grade credit rating, all security interests securing the 2018 Revolver will be released.
As of December 31, 2019, the balance on the 2018 Revolver was $162 million, and $8 million in standby letters of credit were outstanding. The unused availability on the 2018 Revolver at December 31, 2019 was $1.33 billion. The weighted average interest rate on the total amount outstanding at December 31, 2019 was 3.75%. The Partnership was in compliance with all financial covenants at December 31, 2019.
Sale Leaseback Financing Obligation
On April 4, 2013, Southside Oil, LLC (“Southside”), a subsidiary of the Partnership, completed a sale leaseback transaction with two separate companies for 50 of its dealer operated sites. As Southside did not meet the criteria for sale leaseback accounting, this transaction was accounted for as a financing arrangement over the course of the lease agreement. The obligations mature in varying dates through 2033, require monthly interest and principal payments, and bear interest at 5.125%. The obligation related to this transaction is included in current and long-term debt and the balance outstanding as of December 31, 2019 was $103 million.
Fair Value of Debt
The estimated fair value of debt is calculated using Level 2 inputs. The fair value of debt as of December 31, 2019, is estimated to be approximately $3.2 billion, based on outstanding balances as of the end of the period using current interest rates for similar securities.

F-21

		
11.	Other Noncurrent Liabilities	
Other noncurrent liabilities consisted of the following:

								
 	December 31, 2019	 	December 31, 2018	
 	(in millions)	
Reserve for underground storage tank removal	$	67		 	$	54		
Accrued environmental expense, long-term	23		 	29		
Unfavorable lease liability (1)	—		 	16		
Others	7		 	24		
Total	$	97		 	$	123		

_______________________________
		
(1)	As a part of ASC 842, unfavorable lease liabilities were reclassed to adjust the operating lease right-of-use asset.	
We record an asset retirement obligation for the estimated future cost to remove underground storage tanks. Revisions to the liability could occur due to changes in tank removal costs, tank useful lives or if federal and/or state regulators enact new guidance on the removal of such tanks. Changes in the carrying amount of asset retirement obligations for the years ended December 31, 2019 and 2018 were as follows:

								
 	Year Ended December 31,	
 	2019	 	2018	
 	(in millions)	
Balance at beginning of year	$	54		 	$	41		
Liabilities incurred	12		 	4		
Liabilities settled	(1	)	 	(1	)	
Accretion expense	2		 	10		
Balance at end of year	$	67		 	$	54		

12.	Related-Party Transactions	
We are party to fee-based commercial agreements with various affiliates of ETO for pipeline, terminalling and storage services. We also have agreements with subsidiaries of ETO for the purchase and sale of fuel.
On July 1, 2019, we entered into a 50% owned joint venture on the J.C. Nolan diesel fuel pipeline to West Texas. ETO operates the J. C. Nolan pipeline for the joint venture, which transports diesel fuel from Hebert, Texas to a terminal in the Midland, Texas area. Our investment in this unconsolidated joint venture was $121 million as of December 31, 2019. In addition, we recorded income on the unconsolidated joint venture of $2 million for the year ended December 31, 2019.
Summary of Transactions
Related party transactions with affiliates for the years ended December 31, 2019, 2018, and 2017 were as follows (in millions): 

												
 	Year Ended December 31,	
 	2019	 	2018	 	2017	
Motor fuel sales to affiliates	$	7		 	$	33		 	$	55		
Bulk fuel purchases from affiliates	$	821		 	$	1,947		 	$	2,416		

Included in the bulk fuel purchases above are purchases from PES, which constituted 8.3% and 19.6% of our total cost of sales for the years ended December 31, 2018 and 2017, respectively.
Additional significant affiliate activity related to the Consolidated Balance Sheets are as follows:
		
•	Net advances from affiliates were $140 million and $24 million at December 31, 2019 and 2018, respectively. Advances to and from affiliates are primarily related to the treasury services agreements between Sunoco LLC and Sunoco (R&M), LLC and Sunoco Retail and Sunoco (R&M), LLC, which are in place for purposes of cash management and transactions related to the diesel fuel pipeline joint venture with ETO.	
		
•	Net accounts receivable from affiliates were $12 million and $37 million at December 31, 2019 and 2018, respectively, which are primarily related to motor fuel sales to affiliates.	

F-22

		
•	Net accounts payable to affiliates were $49 million and $149 million as of December 31, 2019 and 2018, respectively, attributable to operational expenses and bulk fuel purchases.	
		
13.	Revenue	
Disaggregation of Revenue
We operate our business in two primary segments, Fuel Distribution and Marketing and All Other. We disaggregate revenue within the segments by channels.
The following table depicts the disaggregation of revenue by channel within each segment:

									
 	 	Year Ended December 31,	
 	 	2019	 	2018	
 	 	(in millions)	
Fuel Distribution and Marketing Segment	 	 	 	 	
Dealer	 	$	3,542		 	$	3,639		
Distributor	 	7,645		 	7,873		
Unbranded Wholesale	 	2,729		 	2,577		
Commission Agent	 	1,606		 	1,377		
Non motor fuel sales	 	62		 	48		
Lease income	 	131		 	118		
Total	 	15,715		 	15,632		
All Other Segment	 	 	 	 	
Motor fuel	 	654		 	1,038		
Non motor fuel sales	 	216		 	312		
Lease income	 	11		 	12		
Total	 	881		 	1,362		
Total Revenue	 	$	16,596		 	$	16,994		

Fuel Distribution and Marketing Revenue
The Partnership’s Fuel Distribution and Marketing operations earn revenue from the following channels: sales to Dealers, sales to Distributors, Unbranded Wholesale revenue, Commission Agent revenue, Non motor fuel sales, and Lease income. Motor fuel revenue consists primarily of the sale of motor fuel under supply agreements with third party customers and affiliates. Fuel supply contracts with our customers generally provide that we distribute motor fuel at a formula price based on published rates, volume-based profit margin, and other terms specific to the agreement. The customer is invoiced the agreed-upon price with most payment terms ranging less than 30 days. If the consideration promised in a contract includes a variable amount, the Partnership estimates the variable consideration amount and factors in such an estimate to determine the transaction price under the expected value method.
Revenue is recognized under the motor fuel contracts at the point in time the customer takes control of the fuel. At the time control is transferred to the customer the sale is considered final, because the agreements do not grant customers the right to return motor fuel. Under the new standard, to determine when control transfers to the customer, the shipping terms of the contract are assessed as shipping terms are considered a primary indicator of the transfer of control. For FOB shipping point terms, revenue is recognized at the time of shipment. The performance obligation with respect to the sale of goods is satisfied at the time of shipment since the customer gains control at this time under the terms. Shipping and/or handling costs that occur before the customer obtains control of the goods are deemed to be fulfillment activities and are accounted for as fulfillment costs. Once the goods are shipped, the Partnership is precluded from redirecting the shipment to another customer and revenue is recognized.
Commission agent revenue consists of sales from commission agent agreements between the Partnership and select operators. The Partnership supplies motor fuel to sites operated by commission agents and sells the fuel directly to the end customer. In commission agent arrangements, control of the product is transferred at the point in time when the goods are sold to the end customer. To reflect the transfer of control, the Partnership recognizes commission agent revenue at the point in time fuel is sold to the end customer.
The Partnership receives lease income from leased or subleased properties. Revenues from leasing arrangements for which we are the lessor are recognized ratably over the term of the underlying lease.

F-23

All Other Revenue
The Partnership’s All Other operations earn revenue from the following channels: Motor fuel sales, Non motor fuel sales, and Lease income. Motor fuel sales consist of fuel sales to consumers at company-operated retail stores. Non motor fuel sales includes merchandise revenue that comprises the in-store merchandise and foodservice sales at company-operated retail stores, and other revenue that represents a variety of other services within our All Other segment including credit card processing, car washes, lottery, automated teller machines, money orders, prepaid phone cards and wireless services. Revenue from All Other operations is recognized when (or as) the performance obligations are satisfied (i.e. when the customer obtains control of the good or the service is provided).
Contract Balances with Customers
The Partnership satisfies its obligations by transferring goods or services in exchange for consideration from customers. The timing of performance may differ from the timing the associated consideration is paid to or received from the customer, thus resulting in the recognition of a contract asset or a contract liability.
The Partnership recognizes a contract asset when making upfront consideration payments to certain customers. The upfront considerations represent a pre-paid incentive, as these payments are not made for distinct goods or services provided by the customer. The pre-payment incentives are recognized as a contract asset upon payment and amortized as a reduction of revenue over the term of the specific agreement.
The Partnership recognizes a contract liability if the customer’s payment of consideration precedes the Partnership’s fulfillment of the performance obligations. We maintain some franchise agreements requiring dealers to make one-time upfront payments for long-term license agreements. The Partnership recognizes a contract liability when the upfront payment is received and recognizes revenue over the term of the license.
The balances of receivables from contracts with customers listed in the table below include both current trade receivables and long-term receivables, net of allowance for doubtful accounts. The allowance for receivables represents our best estimate of the probable losses associated with potential customer defaults. We determine the allowance based on historical experience and on a specific identification basis.
The balances of the Partnership’s contract assets and contract liabilities as of December 31, 2019 and 2018 are as follows:

												
 	December 31, 2019	 	December 31, 2018	 	Increase/ (Decrease)	
 	(in millions)	
Contract Balances	 	 	 	 	 	
Contract Asset	$	117		 	$	75		 	$	42		
Accounts receivable from contracts with customers	$	366		 	$	348		 	$	18		
Contract Liability	$	—		 	$	1		 	$	(1	)	

The amount of revenue recognized in the years ended December 31, 2019 and 2018 that was included in the contract liability balance at the beginning of each period was $0.4 million and $0.6 million, respectively. This amount of revenue is a result of changes in the transaction price of the Partnership’s contracts with customers. The difference in the opening and closing balances of the contract asset and contract liability primarily results from the timing difference between the Partnership’s performance and the customer’s payment.
Performance Obligations
At contract inception, the Partnership assesses the goods and services promised in its contracts with customers and identifies a performance obligation for each promise to transfer a good or service (or bundle of goods or services) that is distinct. To identify the performance obligations, the Partnership considers all the goods or services promised in the contract, whether explicitly stated or implied based on customary business practices. For a contract that has more than one performance obligation, the Partnership allocates the total contract consideration to each distinct performance obligation on a relative standalone selling price basis. Revenue is recognized when (or as) the performance obligations are satisfied, that is, when the customer obtains control of the good or the service is provided.
The Partnership distributes fuel under long-term contracts to branded distributors, branded and unbranded third party dealers, and branded and unbranded retail fuel outlets. Sunoco-branded supply contracts with distributors generally have both time and volume commitments that establish contract duration. These contracts have an initial term of approximately ten years, with an estimated, volume-weighted term remaining of approximately four years.
As part of the 7-Eleven Purchase Agreement, the Partnership and 7-Eleven and SEI Fuel (collectively, the “Distributor”) have entered into a 15-year take-or-pay fuel supply agreement in which the Distributor is required to purchase a volume of fuel that provides the Partnership a minimum amount of gross profit annually. We expect to recognize this revenue in accordance with the contract as we transfer control of the product to the customer. However, in case of annual shortfall we will recognize the amount payable by the Distributor

F-24

at the sooner of the time at which the Distributor makes up the shortfall or becomes contractually or operationally unable to do so. The transaction price of the contract is variable in nature, fluctuating based on market conditions. The Partnership has elected to take the practical expedient not to estimate the amount of variable consideration allocated to wholly unsatisfied performance obligations.
In some contractual arrangements, the Partnership grants dealers a franchise license to operate the Partnership’s retail stores over the life of a franchise agreement. In return for the grant of the retail store license, the dealer makes a one-time nonrefundable franchise fee payment to the Partnership plus sales based royalties payable to the Partnership at a contractual rate during the period of the franchise agreement. Under the requirements of ASC Topic 606, the franchise license is deemed to be a symbolic license for which recognition of revenue over time is the most appropriate measure of progress toward complete satisfaction of the performance obligation. Revenue from this symbolic license is recognized evenly over the life of the franchise agreement.
Costs to Obtain or Fulfill a Contract
The Partnership recognizes an asset from the costs incurred to obtain a contract (e.g. sales commissions) only if it expects to recover those costs. On the other hand, the costs to fulfill a contract are capitalized if the costs are specifically identifiable to a contract, would result in enhancing resources that will be used in satisfying performance obligations in future, and are expected to be recovered. These capitalized costs are recorded as a part of other current assets and other noncurrent assets and are amortized as a reduction of revenue on a systematic basis consistent with the pattern of transfer of the goods or services to which such costs relate. The amount of amortization on these capitalized costs that the Partnership recognized in the years ended December 31, 2019 and 2018 was $17 million and $14 million, respectively. The Partnership has also made a policy election of expensing the costs to obtain a contract, as and when they are incurred, in cases where the expected amortization period is one year or less.
Practical Expedients Selected by the Partnership
The Partnership elected the following practical expedients in accordance with ASC 606:
		
•	Significant financing component - The Partnership elected not to adjust the promised amount of consideration for the effects of significant financing component if the Partnership expects at contract inception that the period between the transfer of a promised good or service to a customer and when the customer pays for that good or service will be one year or less.	
		
•	Incremental costs of obtaining a contract - The Partnership generally expenses sales commissions when incurred because the amortization period would have been less than one year. We record these costs within general and administrative expenses. The Partnership elected to expense the incremental costs of obtaining a contract when the amortization period for such contracts would have been one year or less.	
		
•	Shipping and handling costs - The Partnership elected to account for shipping and handling activities that occur after the customer has obtained control of a good as fulfillment activities (i.e., an expense) rather than as a promised service.	
		
•	Measurement of transaction price - The Partnership has elected to exclude from the measurement of transaction price all taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction and collected by the Partnership from a customer (i.e., sales tax, value added tax, etc.).	
		
•	Variable consideration of wholly unsatisfied performance obligations - The Partnership has elected to exclude the estimate of variable consideration to the allocation of wholly unsatisfied performance obligations.	
		
14.	Commitments and Contingencies	
Lessee Accounting
The Partnership leases retail stores, other property, and equipment under non-cancellable operating leases whose initial terms are typically 5 to 15 years, with some having a term of 40 years or more, along with options that permit renewals for additional periods. At the inception of each, we determine if the arrangement is a lease or contains an embedded lease and review the facts and circumstances of the arrangement to classify leased assets as operating or finance under Topic 842. The Partnership has elected not to record any leases with terms of 12 months or less on the balance sheet.
At this time, the majority of active leases within our portfolio are classified as operating leases under the new standard. Operating leases are included in lease right-of-use (“ROU”) assets, operating lease current liabilities, and operating lease non-current liabilities in our consolidated balance sheet. Finance leases represent a small portion of the active lease agreements and are included in ROU assets and long-term debt in our consolidated balance sheet. The ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make minimum lease payments arising from the lease for the duration of the lease term.
Most leases include one or more options to renew, with renewal terms that can extend the lease term from 1 year to 20 years or greater. The exercise of lease renewal options is typically at our discretion. Additionally many leases contain early termination clauses, however early termination typically requires the agreement of both parties to the lease. At lease inception, all renewal options reasonably

F-25

certain to be exercised are considered when determining the lease term. At this time, the Partnership does not have leases that include options to purchase or automatic transfer of ownership of the leased property to the Partnership. The depreciable life of leased assets and leasehold improvements are limited by the expected lease term.
To determine the present value of future minimum lease payments, we use the implicit rate when readily determinable. At this time, many of our leases do not provide an implicit rate, therefore to determine the present value of minimum lease payments we use our incremental borrowing rate based on the information available at lease commencement date. The ROU assets also include any lease payments made and exclude lease incentives.
Minimum rent payments are expensed on a straight-line basis over the term of the lease. In addition, some leases may require additional contingent or variable lease payments based on factors specific to the individual agreement. Variable lease payments we are typically responsible for include payment of real estate taxes, maintenance expenses and insurance.
The components of lease expense consisted of the following:

					
Lease cost	Classification	Year Ended December 31, 2019	
 	 	(in millions)	
Operating lease cost	Lease expense	$	53		
Finance lease cost	 	 	
Amortization of leased assets	Depreciation, amortization, and accretion	4		
Interest on lease liabilities	Interest expense	1		
Short term lease cost	Lease expense	3		
Variable lease cost	Lease expense	5		
Sublease income	Lease income	(43	)	
Net lease cost	 	$	23		

	
			
Lease Term and Discount Rate	 	December 31, 2019	
Weighted-average remaining lease term (years)	 	 	
Operating leases	 	25	
Finance leases	 	5	
Weighted-average discount rate (%)	 	 	
Operating leases	 	6%	
Finance leases	 	5%	

					
Other information	 	Year Ended December 31, 2019	
 	 	(in millions)	
Cash paid for amount included in the measurement of lease liabilities	 	 	
Operating cash flows from operating leases	 	$	(52	)	
Operating cash flows from finance leases	 	$	(1	)	
Financing cash flows from finance leases	 	$	(4	)	
Leased assets obtained in exchange for new finance lease liabilities	 	$	28		
Leased assets obtained in exchange for new operating lease liabilities	 	$	20		

F-26

Maturities of lease liabilities as of December 31, 2019 are as follows:

													
Maturity of lease liabilities	 	Operating leases	 	Finance leases	 	Total	
 	 	(in millions)	
2020	 	$	51		 	$	7		 	$	58		
2021	 	48		 	7		 	55		
2022	 	46		 	7		 	53		
2023	 	44		 	7		 	51		
2024	 	43		 	4		 	47		
Thereafter	 	840		 	5		 	845		
Total lease payment	 	1,072		 	37		 	1,109		
Less: interest	 	522		 	5		 	527		
Present value of lease liabilities	 	$	550		 	$	32		 	$	582		

Lessor Accounting
The Partnership leases or subleases a portion of its real estate portfolio to third party companies as a stable source of long-term revenue. Our lessor and sublease portfolio consists mainly of operating leases with convenience store operators. At this time, most lessor agreements contain 5-year terms with renewal options to extend and early termination options based on established terms specific to the individual agreement.

					
 	 	Year Ended December 31, 2019	
 	 	(in millions)	
Fuel Distribution & Marketing lease income	 	$	131		
All Other lease income	 	11		
Total lease income	 	$	142		

Minimum future lease payments receivable are as follows:

					
 	 	December 31, 2019	
 	 	(in millions)	
2020	 	$	119		
2021	 	96		
2022	 	62		
2023	 	7		
2024	 	2		
Thereafter	 	7		
Total undiscounted cash flow	 	$	293		

Litigation and Contingencies
We may, from time to time, be involved in litigation and claims arising out of our operations in the normal course of business. In the ordinary course of business, we are sometimes threatened with or named as a defendant in various lawsuits seeking actual and punitive damages for personal injury and property damage. We maintain liability insurance with insurers in amounts and with coverage and deductibles management believes are reasonable and prudent, and which are generally accepted in the industry. However, there can be no assurance that the levels of insurance protection currently in effect will continue to be available at reasonable prices or that such levels will remain adequate to protect us from material expenses related to personal injury or property damage in the future. In addition, various regulatory agencies - such as tax authorities, environmental agencies, or other such agencies - may perform audits or reviews to ensure proper compliance with regulations. We are not fully-insured for any claims that may arise from these various agencies and there can be no assurance that any claims arising from these activities would not have an adverse, material effect on our financial statements.

F-27

Environmental Remediation
We are subject to various federal, state and local environmental laws and make financial expenditures in order to comply with regulations governing underground storage tanks adopted by federal, state and local regulatory agencies. In particular, at the federal level, the Resource Conservation and Recovery Act of 1976, as amended, requires the EPA to establish a comprehensive regulatory program for the detection, prevention, and cleanup of leaking underground storage tanks (e.g. overfills, spills, and underground storage tank releases).
Federal and state regulations require us to provide and maintain evidence that we are taking financial responsibility for corrective action and compensating third parties in the event of a release from our underground storage tank systems. In order to comply with these requirements, we have historically obtained private insurance in the states in which we operate. These policies provide protection from third-party liability claims. During 2019, our coverage was $10 million per occurrence and in the aggregate. Our sites continue to be covered by these policies.
We are currently involved in the investigation and remediation of contamination at motor fuel storage and gasoline store sites where releases of regulated substances have been detected. We accrue for anticipated future costs and the related probable state reimbursement amounts for remediation activities. Accordingly, we have recorded estimated undiscounted liabilities for these sites totaling $29 million and $35 million as of December 31, 2019 and 2018, respectively, which are classified as accrued expenses and other current liabilities and other noncurrent liabilities. As of December 31, 2019, we had $1 million in an escrow account to satisfy environmental claims related to the acquisition of Mid-Atlantic Convenience Stores, LLC (“MACS”), $8 million in two escrow accounts available to satisfy claims related to the Emerge acquisition, including environmental claims, and $3 million in one escrow account to satisfy claims related to the Sandford acquisition, including environmental claims.
Deferred Branding Incentives
We receive deferred branding incentives and other incentive payments from a number of our fuel suppliers. A portion of the deferred branding incentives may be passed on to our wholesale branded dealers under the same terms as required by our fuel suppliers. Many of the agreements require repayment of all or a portion of the amount received if we or our branded dealers elect to discontinue selling the specified brand of fuel at certain locations. As of December 31, 2019, the estimated amount of deferred branding incentives that would have to be repaid upon de-branding at these locations was $1.4 million. Of this amount, approximately $0.3 million would be the responsibility of the Partnership’s branded dealers under reimbursement agreements with the dealers. In the event a dealer were to default on this reimbursement obligation, we would be required to make this payment. No liability is recorded for the amount of dealer obligations which would become payable upon de-branding as no such dealer default is considered probable as of December 31, 2019. We have recorded $1.1 million and $1.2 million for deferred branding incentives, net of accumulated amortization, as of December 31, 2019 and 2018, respectively, under other non-current liabilities on our Consolidated Balance Sheets. The Partnership amortizes its retained portion of the incentives to income on a straight-line basis over the term of the agreements.
		
15.	Lease Income under Operating Leases	
The balances of property and equipment that are being leased to third parties for lease income were as follows:

								
 	December 31,
2019	 	December 31,
2018	
 	(in millions)	
Land	$	410		 	$	414		
Buildings and improvements	481		 	506		
Equipment	368		 	306		
Total property and equipment	1,259		 	1,226		
Less: accumulated depreciation	(375	)	 	(321	)	
Property and equipment, net	$	884		 	$	905		

F-28

		
16.	Interest Expense, net	
Components of net interest expense were as follows:

												
 	Year Ended December 31,	
 	2019	 	2018	 	2017	
 	(in millions)	
Interest expense	$	168		 	$	141		 	$	195		
Amortization of deferred financing fees	7		 	6		 	15		
Interest income	(2	)	 	(3	)	 	(1	)	
Interest expense, net	$	173		 	$	144		 	$	209		

17.	Income Tax Expense	
As a partnership, we are generally not subject to federal income tax and most state income taxes. However, the Partnership conducts certain activities through corporate subsidiaries which are subject to federal and state income taxes. The components of the federal and state income tax expense (benefit) are summarized as follows:

												
 	Year Ended December 31,	
 	2019	 	2018	 	2017	
 	(in millions)	
Current:	 	 	 	 	 	
Federal	$	7		 	$	24		 	$	—		
State	(30	)	 	4		 	2		
Total current income tax expense (benefit)	(23	)	 	28		 	2		
Deferred:	 		 	 	 	 	
Federal	2		 	(14	)	 	(302	)	
State	4		 	20		 	(6	)	
Total deferred tax expense (benefit)	6		 	6		 	(308	)	
Net income tax expense (benefit)	$	(17	)	 	$	34		 	$	(306	)	

Our effective tax rate differs from the statutory rate primarily due to Partnership earnings that are not subject to U.S. federal and most state income taxes at the Partnership level. A reconciliation of income tax expense at the U.S. federal statutory rate to net income tax expense (benefit) is as follows:

												
 	Year Ended December 31,	
 	2019	 	2018	 	2017	
 	(in millions)	
Tax at statutory federal rate	$	62		 	$	19		 	$	7		
Partnership earnings not subject to tax	(62	)	 	(9	)	 	(126	)	
Goodwill impairment	—		 	—		 	36		
State and local tax, including federal expense (benefit)	(17	)	 	24		 	(6	)	
Statutory rate change	—		 	—		 	(225	)	
Other	—		 	—		 	8		
Net income tax expense (benefit)	$	(17	)	 	$	34		 	$	(306	)	

In 2019, a current state income tax benefit (including federal benefit) of $17 million was largely attributable to a change in estimate related to state income taxes.
In December 2017, the “Tax Cuts and Jobs Act” was signed into law.  Among other provisions, the highest corporate federal income tax rate was reduced from 35% to 21% for taxable years beginning after December 31, 2017. As noted above, the effect on deferred tax assets and liabilities of a change in tax rate is recognized in earnings in the period that includes the enactment date. As such, a deferred tax benefit in the amount of $225 million was realized in 2017.

F-29

Deferred taxes result from the temporary differences between financial reporting carrying amounts and the tax basis of existing assets and liabilities. Principal components of deferred tax assets and liabilities are as follows:

								
 	December 31, 2019	 	December 31, 2018	
 	(in millions)	
Deferred tax assets:	 		 	 		
Environmental, asset retirement obligations, and other reserves	$	—		 	$	12		
Inventories	—		 	2		
Net operating and other loss carry forwards	4		 	—		
Other	32		 	49		
Total deferred tax assets	36		 	63		
Deferred tax liabilities:	 	 	 	
Property and equipment	24		 	63		
Trademarks and other intangibles	72		 	63		
Investments in affiliates	39		 	15		
Other	10		 	25		
Total deferred tax liabilities	145		 	166		
Net deferred income tax liabilities	$	109		 	$	103		

The following table sets forth the changes in unrecognized tax benefits:

												
 	Years Ended December 31,	
 	2019	 	2018	 	2017	
 	(in millions)	
Balance at beginning of year	$	—		 	$	—		 	$	—		
Additions attributable to tax positions taken in the current year	—		 	—		 	—		
Additions attributable to tax positions taken in prior years	11		 	—		 	—		
Reduction attributable to tax positions taken in prior years	—		 	—		 	—		
Lapse of statute	—		 	—		 	—		
Balance at end of year	$	11		 	$	—		 	$	—		

As of December 31, 2019, we have $11 million ($8 million after federal income tax benefits) related to tax positions which, if recognized, would impact our effective tax rate.
Our policy is to accrue interest and penalties on income tax underpayments (overpayments) as a component of income tax expense. We did not have any material interest and penalties in the periods presented.
The Partnership and its subsidiaries are no longer subject to examination by the Internal Revenue Service (“IRS”) and most state jurisdictions for 2014 and prior years.
		
18.	Partners’ Capital	
As of December 31, 2019, ETO and its subsidiaries owned 28,463,967 common units, which constitute 34.3% of our common units. As of December 31, 2019, our fully consolidating subsidiaries owned 16,410,780 Class C units representing limited partner interests in the Partnership (the “Class C Units”) and the public owned 54,521,974 common units.
Series A Preferred Units
On March 30, 2017, the Partnership entered into a Series A Preferred Unit Purchase Agreement with ET, relating to the issue and sale by the Partnership to ET of 12,000,000 Series A Preferred Units (the “Preferred Units”) representing limited partner interests in the Partnership at a price per Preferred Unit of $25.00 (the “Offering”). The distribution rate for the Preferred Units is 10.00%, per annum, of the $25.00 liquidation preference per unit (the “Liquidation Preference”) (equal to $2.50 per Preferred Unit per annum) until March 30, 2022, at which point the distribution rate will become a floating rate of 8.00% plus three-month LIBOR of the Liquidation Preference. The Preferred Units are redeemable at any time, and from time to time, in whole or in part, at the Partnership’s option at a price per Preferred Unit equal to the Liquidation Preference plus all accrued and unpaid distributions; provided that, if the Partnership redeems the Preferred Units prior to March 30, 2022, then the Partnership will redeem the Preferred Units at 101% of the Liquidation Preference, plus all accrued and unpaid distributions. The Preferred Units are not entitled to any redemption rights or conversion rights. Holders of

F-30

Preferred Units will generally have no voting rights except in certain limited circumstances or as required by law. The Preferred Units were issued in a private transaction exempt from registration under section 4(a)(2) of the Securities Act.
Distributions on Preferred Units are cumulative beginning March 30, 2017, and payable quarterly in arrears, within 60 days, after the end of each quarter, commencing with the quarter ended June 30, 2017.
The Offering closed on March 30, 2017, and the Partnership received proceeds from the Offering of $300 million, which it used to repay indebtedness under its revolving credit facility.
On January 25, 2018, the Partnership redeemed all outstanding Series A Preferred Units held by ET for an aggregate redemption amount of approximately $313 million. The redemption amount includes the original consideration of $300 million and a 1% call premium plus accrued and unpaid quarterly distributions.
Common Units
On March 31, 2016, the Partnership completed a private placement of 2,263,158 common units to ET (the “PIPE Transaction”).
On October 4, 2016, the Partnership entered into an equity distribution agreement for an at-the-market (“ATM”) offering with RBC Capital Markets, LLC, Barclays Capital Inc., Citigroup Global Markets Inc., Credit Agricole Securities (USA) Inc., Credit Suisse Securities (USA) LLC, Deutsche Bank Securities Inc., Goldman, Sachs & Co., J.P. Morgan Securities LLC, Merrill Lynch, Pierce, Fenner & Smith Incorporated, Mizuho Securities USA Inc., Morgan Stanley & Co. LLC, MUFG Securities Americas Inc., Natixis Securities Americas LLC, SMBC Nikko Securities America, Inc., TD Securities (USA) LLC, UBS Securities LLC and Wells Fargo Securities, LLC (collectively, the “Managers”). As of December 31, 2019, $295 million of our common units remained available to be issued under the equity distribution agreement. The Partnership issued 1,268,750 common units from January 1, 2017 through December 31, 2017 in connection with the ATM for $33 million, net of commissions of $0.3 million.
On February 7, 2018, subsequent to the record date for SUN’s fourth quarter 2017 distribution, the Partnership repurchased 17,286,859 SUN common units owned by ETO for aggregate cash consideration of approximately $540 million. The repurchase price per common unit was $31.2376, which is equal to the volume weighted average trading price of SUN common units on the New York Stock Exchange for the ten trading days ending on January 23, 2018. The Partnership funded the repurchase with cash on hand.
Common unit activity for the years ended December 31, 2019 and 2018 was as follows:

			
 	Number of Units		
Number of common units at December 31, 2017	99,667,999		
Common units repurchase	(17,286,859	)	
Phantom unit vesting	283,917		
Number of common units at December 31, 2018	82,665,057		
Phantom unit vesting	320,884		
Number of common units at December 31, 2019	82,985,941		

Allocation of Net Income
Our Partnership Agreement contains provisions for the allocation of net income and loss to the unitholders. For purposes of maintaining partner capital accounts, the Partnership Agreement specifies that items of income and loss shall be allocated among the partners in accordance with their respective percentage interest. Normal allocations according to percentage interests are made after giving effect, if any, to priority income allocations in an amount equal to incentive cash distributions allocated 100% to ETO.
The calculation of net income allocated to the partners is as follows (in millions, except per unit amounts):

												
 	Year Ended December 31,	
 	2019	 	2018	 	2017	
Attributable to Common Units	 		 	 		 	 		
Distributions (a)	$	273		 	$	272		 	$	328		
Distributions in excess of net income	(38	)	 	(557	)	 	(293	)	
Limited partners’ interest in net income (loss)	$	235		 	$	(285	)	 	$	35		
 	 		 	 		 	 		
(a) Distributions declared per unit to unitholders as of record date	$	3.3020		 	$	3.3020		 	$	3.3020		

F-31

Class C Units
Pursuant to the terms of a Contribution Agreement we entered with Susser, Heritage Holdings, Inc., ETP Holdco Corporation, our General Partner and ETP on July 31, 2015, (i) 79,308 common units held by a wholly owned subsidiary of Susser were exchanged for 79,308 Class A Units and (ii) 10,939,436 subordinated units held by wholly owned subsidiaries of Susser were converted into 10,939,436 Class A units.
All Class A Units were exchanged for Class C Units on January 1, 2016.
On January 1, 2016, the Partnership issued an aggregate of 16,410,780 Class C Units consisting of (i) 5,242,113 Class C Units that were issued to Aloha as consideration for the contribution by Aloha to an indirect wholly owned subsidiary of the Partnership of all of Aloha’s assets relating to the wholesale supply of fuel and lubricants, and (ii) 11,168,667 Class C Units that were issued to indirect wholly owned subsidiaries of the Partnership in exchange for all outstanding Class A Units held by such subsidiaries. The Class C Units were valued at $38.5856 per Class C Unit (the “Class C Unit Issue Price”), based on the volume-weighted average price of the Partnership’s Common Units for the five-day trading period ending on December 31, 2015. The Class C Units were issued in private transactions exempt from registration under section 4(a)(2) of the Securities Act.
Class C Units (i) are not convertible or exchangeable into Common Units or any other units of the Partnership and are non-redeemable; (ii) are entitled to receive distributions of available cash of the Partnership (other than available cash derived from or attributable to any distribution received by the Partnership from PropCo, the proceeds of any sale of the membership interests of PropCo, or any interest or principal payments received by the Partnership with respect to indebtedness of PropCo or its subsidiaries) at a fixed rate equal to $0.8682 per quarter for each Class C Unit outstanding, (iii) do not have the right to vote on any matter except as otherwise required by any non-waivable provision of law, (iv) are not allocated any items of income, gain, loss, deduction or credit attributable to the Partnership’s ownership of, or sale or other disposition of, the membership interests of PropCo, or the Partnership’s ownership of any indebtedness of PropCo or any of its subsidiaries (“PropCo Items”), (v) will be allocated gross income (other than from PropCo Items) in an amount equal to the cash distributed to the holders of Class C Units and (vi) will be allocated depreciation, amortization and cost recovery deductions as if the Class C Units were Common Units and 1% of certain allocations of net termination gain (other than from PropCo Items).
Pursuant to the terms described above, these distributions do not have an impact on the Partnership’s consolidated cash flows and as such, are excluded from total cash distributions and allocation of limited partners’ interest in net income.
Incentive Distribution Rights
The following table illustrates the percentage allocations of available cash from operating surplus between our common unitholders and the holder of our IDRs based on the specified target distribution levels, after the payment of distributions to Class C unitholders. The amounts set forth under “marginal percentage interest in distributions” are the percentage interests of our IDR holder and the common unitholders in any available cash from operating surplus we distribute up to and including the corresponding amount in the column “total quarterly distribution per unit target amount.” The percentage interests shown for our common unitholders and our IDR holder for the minimum quarterly distribution are also applicable to quarterly distribution amounts that are less than the minimum quarterly distribution. ETO currently owns our IDRs.

								
 	 	 	Marginal percentage interest in distributions	
 	Total quarterly distribution per Common unit
target amount	 	Common
Unitholders	 	Holder of IDRs	
Minimum Quarterly Distribution	$0.4375	 	100	%	 	—		
First Target Distribution	Above $0.4375 up to $0.503125	 	100	%	 	—		
Second Target Distribution	Above $0.503125 up to $0.546875	 	85	%	 	15	%	
Third Target Distribution	Above $0.546875 up to $0.656250	 	75	%	 	25	%	
Thereafter	Above $0.656250	 	50	%	 	50	%	

Cash Distributions
Our Partnership Agreement sets forth the calculation used to determine the amount and priority of cash distributions that the common unitholders receive.

F-32

Cash distributions paid were as follows: 

													
 	 	Limited Partners	 	 	
Payment Date	 	Per Unit Distribution	 	Total Cash Distribution	 	Distribution to IDR Holders	
 	 	(in millions, except per unit amounts)	
February 19, 2020	 	$	0.8255		 	$	69		 	$	18		
November 19, 2019	 	$	0.8255		 	$	68		 	$	18		
August 14, 2019	 	$	0.8255		 	$	68		 	$	18		
May 15, 2019	 	$	0.8255		 	$	68		 	$	18		
February 14, 2019	 	$	0.8255		 	$	68		 	$	18		
November 14, 2018	 	$	0.8255		 	$	68		 	$	18		
August 15, 2018	 	$	0.8255		 	$	68		 	$	17		
May 15, 2018	 	$	0.8255		 	$	68		 	$	18		
February 14, 2018	 	$	0.8255		 	$	82		 	$	21		
November 14, 2017	 	$	0.8255		 	$	82		 	$	22		
August 15, 2017	 	$	0.8255		 	$	82		 	$	21		
May 16, 2017	 	$	0.8255		 	$	82		 	$	21		
February 21, 2017	 	$	0.8255		 	$	81		 	$	21		

	
					
 	 	Series A Preferred Unit Holder	
Payment Date	 	Total Cash Distribution	
 	 	(in millions)	
January 25, 2018 (1)	 	$	10		
November 14, 2017	 	$	7		
August 15, 2017	 	$	8		

________________________________
		
(1)	$10 million cash distribution paid on January 25, 2018 includes $8 million cash distribution for the three months ended December 31, 2017 and $2 million cash distribution for the period from January 1, 2018 through January 25, 2018.	
		
19.	Unit-Based Compensation	
The Partnership has issued phantom units to its employees and non-employee directors, which vest 60% after three years and 40% after five years. Phantom units have the right to receive distributions prior to vesting. The fair value of these units is the market price of our common units on the grant date, and is amortized over the five-year vesting period using the straight-line method. Unit-based compensation expense related to the Partnership included in our Consolidated Statements of Operations and Comprehensive Income (Loss) was $13 million, $12 million and $24 million for the years ended December 31, 2019, 2018 and 2017, respectively. The total fair value of phantom units vested for the years ended December 31, 2019, 2018 and 2017, was $14 million, $12 million and $9 million, respectively, based on the market price of SUN’s common units as of the vesting date. Unrecognized compensation expenses related to our nonvested phantom units totaled $32 million as of December 31, 2019, which are expected to be recognized over a weighted average period of 4 years. The fair value of nonvested phantom units outstanding as of December 31, 2019 and December 31, 2018, totaled $62 million and $57 million, respectively.

F-33

Phantom unit award activity for the years ended December 31, 2019 and 2018 consisted of the following:

							
 	Number of Phantom Common Units	 	Weighted-Average Grant Date Fair Value	
Outstanding at December 31, 2017	1,777,301		 	$	31.89		
Granted	1,072,600		 	27.67		
Vested	(414,472	)	 	32.92		
Forfeited	(311,417	)	 	31.26		
Outstanding at December 31, 2018	2,124,012		 	29.15		
Granted	655,630		 	30.70		
Vested	(477,256	)	 	30.04		
Forfeited	(189,064	)	 	28.16		
Outstanding at December 31, 2019	2,113,322		 	$	29.21		

The Partnership previously granted cash restricted units, which vested in cash. As of December 31, 2019, no such awards remained outstanding.
		
20.	Segment Reporting	
Our financial statements reflect two reportable segments, Fuel Distribution and Marketing and All Other. After the Retail Divestment and the conversion of 207 retail sites to commission agent sites, the Partnership renamed the former Wholesale segment to Fuel Distribution and Marketing and the former Retail segment to All Other.
We report Adjusted EBITDA by segment as a measure of segment performance. We define Adjusted EBITDA as net income before net interest expense, income tax expense, depreciation, amortization and accretion expense, non-cash compensation expense, gains and losses on disposal of assets and impairment charges, 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.
Fuel Distribution and Marketing Segment
Our Fuel Distribution and Marketing segment purchases motor fuel primarily from independent refiners and major oil companies and supplies it to independently-operated dealer stations under long-term supply agreements, distributors and other consumers of motor fuel, and Partnership-operated stations included in our All Other segment. Also included in the Fuel Distribution and Marketing segment are motor fuel sales to commission agent locations and sales and costs related to processing transmix. We distribute motor fuels across more than 30 states throughout the East Coast, Midwest, South Central and Southeast regions of the United States from Maine to Florida and from Florida to New Mexico, as well as Hawaii. Sales of fuel from our Fuel Distribution and Marketing segment to Partnership-operated stations included in our All Other segment are delivered at cost plus a profit margin. These amounts are included in intercompany eliminations of motor fuel revenue and motor fuel cost of sales. Also included in our Fuel Distribution and Marketing segment is lease income from properties that we lease or sublease.
All Other Segment
Prior to the completion of the Retail Divestment, our All Other segment primarily operated branded retail stores across more than 20 states throughout the East Coast and Southeast regions of the United States with a significant presence in Texas, Pennsylvania, New York, Florida, and Hawaii. These stores offered motor fuel, merchandise, foodservice, and a variety of other services, including car washes, lottery, automated teller machines, money orders, prepaid phone cards and wireless services. The operations of the Retail Divestment are included in discontinued operations in the following segment information. Subsequent to the completion of the Retail Divestment, the remaining All Other segment includes the Partnership’s credit card services, franchise royalties, and retail operations in Hawaii and New Jersey.
The following tables present financial information by segment for the years ended December 31, 2019, 2018 and 2017.

F-34

Segment Financial Data for the Year Ended December 31, 2019

															
 	Fuel Distribution and Marketing	 	All Other	 	Intercompany
Eliminations	 	Totals	
 	(in millions)	
Revenue	 		 	 		 	 		 	 		
Motor fuel sales	$	15,522		 	$	654		 	 		 	$	16,176		
Non motor fuel sales	62		 	216		 	 		 	278		
Lease income	131		 	11		 	 		 	142		
Intersegment sales	1,645		 	48		 	(1,693	)	 	—		
Total revenue	17,360		 	929		 	(1,693	)	 	16,596		
Gross profit (1)	 	 	 	 	 		 	 	
Motor fuel	817		 	89		 	 	 	906		
Non motor fuel	53		 	115		 	 		 	168		
Lease	131		 	11		 	 		 	142		
Total gross profit	1,001		 	215		 	 	 	1,216		
Total operating expenses	550		 	202		 	 		 	752		
Operating income	451		 	13		 	 		 	464		
Interest expense, net	146		 	27		 	 		 	173		
Other expense (income), net	(3	)	 	—		 	 	 	(3	)	
Equity in earnings of unconsolidated affiliate	(2	)	 	—		 	 	 	(2	)	
Income (loss) from continuing operations before income taxes	310		 	(14	)	 	 		 	296		
Income tax expense (benefit)	20		 	(37	)	 	 		 	(17	)	
Net income and comprehensive income	$	290		 	$	23		 	 		 	$	313		
Depreciation, amortization and accretion	144		 	39		 	 		 	183		
Interest expense, net	146		 	27		 	 		 	173		
Income tax expense (benefit)	20		 	(37	)	 	 		 	(17	)	
Non-cash unit-based compensation expense	13		 	—		 	 		 	13		
Loss on disposal of assets and impairment charges	—		 	68		 	 		 	68		
Unrealized gain on commodity derivatives	(5	)	 	—		 	 		 	(5	)	
Inventory adjustments	(79	)	 	—		 	 		 	(79	)	
Equity in earnings of unconsolidated affiliate	(2	)	 	—		 	 	 	(2	)	
Adjusted EBITDA related to unconsolidated affiliate	4		 	—		 	 	 	4		
Other non-cash adjustments	14		 	—		 	 	 	14		
Adjusted EBITDA	$	545		 	$	120		 	 		 	$	665		
Capital expenditures	$	111		 	$	37		 	 		 	$	148		
Total assets, end of period	$	4,189		 	$	1,249		 	 		 	$	5,438		
________________________________
		
(1)	Excludes depreciation, amortization and accretion.	

F-35

Segment Financial Data for the Year Ended December 31, 2018

															
 	Fuel Distribution and Marketing	 	All Other	 	Intercompany
Eliminations	 	Totals	
 	(in millions)	
Revenue	 		 	 		 	 		 	 		
Motor fuel sales	$	15,466		 	$	1,038		 	 	 	$	16,504		
Non motor fuel sales	48		 	312		 	 	 	360		
Lease income	118		 	12		 	 	 	130		
Intersegment sales	1,649		 	120		 	(1,769	)	 	—		
Total revenue	17,281		 	1,482		 	(1,769	)	 	16,994		
Gross profit (1)	 	 	 	 	 	 	 	
Motor fuel	673		 	123		 	 	 	796		
Non motor fuel	40		 	156		 	 	 	196		
Lease	118		 	12		 	 	 	130		
Total gross profit	831		 	291		 	 	 	1,122		
Total operating expenses	538		 	239		 	 	 	777		
Operating income	293		 	52		 	 	 	345		
Interest expense, net	103		 	41		 	 	 	144		
Loss on extinguishment of debt and other, net	109		 	—		 	 	 	109		
Income from continuing operations before income taxes	81		 	11		 	 	 	92		
Income tax expense	1		 	33		 	 	 	34		
Income (loss) from continuing operations	80		 	(22	)	 	 	 	58		
Loss from discontinued operations, net of income taxes	—		 	(265	)	 	 	 	(265	)	
Net income (loss) and comprehensive income (loss)	$	80		 	$	(287	)	 	 	 	$	(207	)	
Depreciation, amortization and accretion	128		 	54		 	 	 	182		
Interest expense, net (2)	103		 	43		 	 	 	146		
Income tax expense (2)	1		 	191		 	 	 	192		
Non-cash unit-based compensation expense (2)	2		 	10		 	 	 	12		
Loss on disposal of assets and impairment charges (2)	27		 	53		 	 	 	80		
Loss on extinguishment of debt and other, net (2)	109		 	20		 	 	 	129		
Unrealized loss on commodity derivatives (2)	6		 	—		 	 	 	6		
Inventory adjustments (2)	84		 	—		 	 	 	84		
Other non-cash adjustments	14		 	—		 	 	 	14		
Adjusted EBITDA	$	554		 	$	84		 	 	 	$	638		
Capital expenditures (2)	$	77		 	$	26		 	 	 	$	103		
Total assets, end of period (2)	$	3,878		 	$	1,001		 	 	 	$	4,879		
________________________________
		
(1)	Excludes depreciation, amortization and accretion.	
		
(2)	Includes amounts from discontinued operations.	

F-36

Segment Financial Data for the Year Ended December 31, 2017

															
 	Fuel Distribution and Marketing	 	All Other	 	Intercompany
Eliminations	 	Totals	
 	(in millions)	
Revenue	 		 	 		 	 		 	 		
Motor fuel sales	$	9,333		 	$	1,577		 	 	 	$	10,910		
Non motor fuel sales	50		 	674		 	 	 	724		
Lease income	77		 	12		 	 	 	89		
Intersegment sales	1,472		 	125		 	(1,597	)	 	—		
Total revenue	10,932		 	2,388		 	(1,597	)	 	11,723		
Gross profit (1)	 	 	 	 	 	 	 	
Motor fuel	535		 	157		 	 	 	692		
Non motor fuel	39		 	288		 	 	 	327		
Lease	77		 	12		 	 	 	89		
Total gross profit	651		 	457		 	 	 	1,108		
Total operating expenses	406		 	473		 	 	 	879		
Operating income (loss)	245		 	(16	)	 	 	 	229		
Interest expense, net	88		 	121		 	 	 	209		
Income (loss) from continuing operations before income taxes	157		 	(137	)	 	 	 	20		
Income tax benefit	(10	)	 	(296	)	 	 	 	(306	)	
Income from continuing operations	167		 	159		 	 	 	326		
Loss from discontinued operations, net of income taxes	—		 	(177	)	 	 	 	(177	)	
Net income (loss) and comprehensive income (loss)	$	167		 	$	(18	)	 	 	 	$	149		
Depreciation, amortization and accretion (2)	118		 	85		 	 	 	203		
Interest expense, net (2)	88		 	157		 	 	 	245		
Income tax benefit (2)	(10	)	 	(248	)	 	 	 	(258	)	
Non-cash unit-based compensation expense (2)	2		 	22		 	 	 	24		
Loss on disposal of assets and impairment charges (2)	8		 	392		 	 	 	400		
Unrealized gain on commodity derivatives (2)	(3	)	 	—		 	 	 	(3	)	
Inventory adjustments (2)	(24	)	 	(4	)	 	 	 	(28	)	
Adjusted EBITDA	$	346		 	$	386		 	 	 	$	732		
Capital expenditures (2)	$	71		 	$	106		 	 	 	$	177		
Total assets, end of period (2)	$	3,130		 	$	5,214		 	 	 	$	8,344		

________________________________
		
(1)	Excludes depreciation, amortization and accretion.	
		
(2)	Includes amounts from discontinued operations.	
		
21.	Net Income per Unit	
Net income per unit applicable to limited partners is computed by dividing limited partners’ interest in net income by the weighted‑average number of outstanding common units. Our net income is allocated to limited partners in accordance with their respective partnership percentages, after giving effect to any priority income allocations for incentive distributions and distributions on employee unit awards. Earnings in excess of distributions are allocated to limited partners based on their respective ownership interests. Payments made to our unitholders are determined in relation to actual distributions declared and are not based on the net income allocations used in the calculation of net income per unit.
In addition to the common units, we identify the IDRs as participating securities and use the two-class method when calculating net income per unit applicable to limited partners, which is based on the weighted-average number of common units outstanding during the period. Diluted net income per unit includes the effects of potentially dilutive units on our common units, consisting of unvested phantom units.

F-37

A reconciliation of the numerators and denominators of the basic and diluted per unit computations is as follows:

												
 	Year Ended December 31,	
 	2019	 	2018	 	2017	
 	(in millions, except units and per unit amounts)	
Income from continuing operations	$	313		 	$	58		 	$	326		
Less:	 	 	 	 	 	
Series A Preferred units	—		 	2		 	23		
Incentive distribution rights	72		 	70		 	85		
Distributions on nonvested phantom unit awards	6		 	6		 	6		
Limited partners’ interest in net income (loss) from continuing operations	$	235		 	$	(20	)	 	$	212		
Loss from discontinued operations, net of taxes	$	—		 	$	(265	)	 	$	(177	)	
Weighted average limited partner units outstanding:	 		 	 		 	 		
Common - basic	82,755,520		 	84,299,893		 	99,270,120		
Common - equivalents	796,442		 	520,677		 	458,234		
Common - diluted	83,551,962		 	84,820,570		 	99,728,354		
Income (loss) from continuing operations per limited partner unit:	 		 	 		 	 		
Common - basic	$	2.84		 	$	(0.25	)	 	$	2.13		
Common - diluted	$	2.82		 	$	(0.25	)	 	$	2.12		
Loss from discontinued operations per limited partner unit:	 	 	 	 	 	
Common - basic	$	—		 	$	(3.14	)	 	$	(1.78	)	
Common - diluted	$	—		 	$	(3.14	)	 	$	(1.78	)	

22.	Selected Quarterly Financial Data (unaudited)	
The following table sets forth certain unaudited financial and operating data for each quarter during 2019 and 2018. The unaudited quarterly information includes all normal recurring adjustments that we consider necessary for a fair presentation of the information shown.

																																
 	2019	 	2018	
 	4th
QTR	 	3rd
QTR	 	2nd
QTR	 	1st
QTR	 	4th
QTR	 	3rd
QTR	 	2nd
QTR	 	1st
QTR	
 	(in millions, except per unit amounts)	
Total revenues	$	4,098		 	$	4,331		 	$	4,475		 	$	3,692		 	$	3,877		 	$	4,761		 	$	4,607		 	$	3,749		
Operating income (loss)	$	98		 	$	117		 	$	97		 	$	152		 	$	(38	)	 	$	159		 	$	128		 	$	96		
Net Income (loss)	$	83		 	$	66		 	$	55		 	$	109		 	$	(72	)	 	$	112		 	$	68		 	$	(315	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Income (loss) from continuing operations per limited partner unit:	 		 	 		 	 		 	 		 	 		 	 		 	 		 	 		
Common - basic	$	0.76		 	$	0.57		 	$	0.44		 	$	1.08		 	$	(1.11	)	 	$	1.16		 	$	0.91		 	$	(1.11	)	
Common - diluted	$	0.75		 	$	0.57		 	$	0.43		 	$	1.07		 	$	(1.11	)	 	$	1.15		 	$	0.90		 	$	(1.11	)	
Income (loss) from discontinued operations per limited partner unit:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Common - basic	$	—		 	$	—		 	$	—		 	$	—		 	$	—		 	$	(0.03	)	 	$	(0.32	)	 	$	(2.63	)	
Common - diluted	$	—		 	$	—		 	$	—		 	$	—		 	$	—		 	$	(0.03	)	 	$	(0.32	)	 	$	(2.63	)	

F-38

Exhibit 4.5

DESCRIPTION OF THE REGISTRANT’S SECURITIES
REGISTERED PURSUANT TO SECTION 12 OF THE
SECURITIES EXCHANGE ACT OF 1934

DESCRIPTION OF COMMON UNITS

The following description of our common units is a summary and does not purport to be complete. It is subject to and qualified in its entirety by reference to our Second Amended and Restated Certificate of Limited Partnership (the “certificate of limited partnership”), and our First Amended and Restated Agreement of Limited Partnership, as amended (the “partnership agreement”), each of which are incorporated by reference as an exhibit to the Annual Report on Form 10-K of which this Exhibit 4.5 is a part. We encourage you to read our Certificate of Limited Partnership, our Partnership Agreement and the applicable provisions of the Delaware Revised Uniform Limited Partnership Act for additional information.
The Common Units
The common units represent limited partner interests in Sunoco LP. The holders of common units are entitled to participate in partnership distributions and exercise the rights and privileges available to limited partners under our partnership agreement.
Our common units are listed on the New York Stock Exchange under the symbol “SUN.”
Voting Rights
The holders of the outstanding common units are entitled to one vote per unit on all matters voted on by unitholders.
Liquidation Rights
Subject to the preferential rights holder of Class C units, in the event of a liquidation, dissolution or winding up of the Partnership, the holders of Common Units are entitled to receive distributions of the assets remaining after satisfaction of all discharge liabilities in accordance with, and to the extent of, the positive balances in their respective capital accounts.
Transfer Agent and Registrar
Duties
Computershare Trust Company, N.A. serves as registrar and transfer agent for our common units. We pay all fees charged by the transfer agent for transfers of common units except the following that must be paid by our unitholders:

•	surety bond premiums to replace lost or stolen certificates or to cover taxes and other governmental charges;	
		
•	special charges for services requested by a common unitholder; and	
		
•	other similar fees or charges.	
There is no charge to our unitholders for disbursements of our cash distributions. We indemnify the transfer agent, its agents and each of their respective stockholders, directors, officers and employees against all claims and losses that may arise out of acts performed or omitted for their activities in that capacity, except for any liability due to any gross negligence or intentional misconduct of the indemnified person or entity.
Resignation or Removal
The transfer agent may resign by notice to us or be removed by us. The resignation or removal of the transfer agent will become effective upon our appointment of a successor transfer agent and registrar and its acceptance of the appointment. If no successor has been appointed and has accepted the appointment within 30 days after notice of the resignation or removal, our general partner may act as the transfer agent and registrar until a successor is appointed.
Transfer of Common Units
Common units are securities and are transferable according to the laws governing transfers of securities. In addition to other rights acquired upon transfer, the transferor gives the transferee the right to become a substituted limited partner in our partnership for the transferred common units.

1

Upon a transfer of common units in accordance with our partnership agreement, each transferee of common units will be admitted as a limited partner with respect to the common units transferred when such transfer and admission is reflected in our books and records. Until a common unit has been transferred on our books, we and the transfer agent may treat the record holder of the common unit as the absolute owner for all purposes, except as otherwise required by law or stock exchange regulations. Our general partner will cause any transfers to be recorded on our books and records no less frequently than quarterly. Each transferee:

•	represents that the transferee has the capacity, power and authority to become bound by our partnership agreement;	
		
•	automatically agrees to be bound by the terms and conditions of, and is deemed to have executed, our partnership agreement; and	
		
•	gives the consents, waivers and approvals contained in our partnership agreement.	
We may, at our discretion, treat the nominee holder of a common unit as the absolute owner. In that case, the beneficial holder’s rights are limited solely to those that it has against the nominee holder as a result of any agreement between the beneficial owner and the nominee holder.
 
OUR CASH DISTRIBUTION POLICY
Our partnership agreement requires that, within 60 days after the end of each quarter, we will distribute all of our available cash to unitholders of record on the applicable record date.
Definition of Available Cash
Available cash, for any quarter, generally consists of all cash and cash equivalents on hand at the end of that quarter:

•	less, the amount of cash reserves that our general partner establishes to:	
		
•	provide for the proper conduct of our business;	
		
•	comply with applicable law, any of our debt instruments or other agreements or any other obligation; or	
		
•	provide funds for distributions to our unitholders for any one or more of the next four quarters;	
		
•	plus, if our general partner so determines on the date of determination, all or any portion of the cash on hand immediately prior to the date of distribution of available cash for the quarter, including cash on hand resulting from working capital borrowings made after the end of the quarter.	
The purpose and effect of the last bullet point above is to allow our general partner, if it so decides, to use cash received by us after the end of the quarter but on or before the date of distribution of available cash for that quarter, including cash on hand resulting from working capital borrowings made after the end of the quarter, to pay distributions to unitholders. Under our partnership agreement, working capital borrowings are borrowings that are made under a credit agreement, commercial paper facility or similar financing arrangement with the intent to repay such borrowings within twelve months from sources other than additional working capital borrowings, and that are used solely for working capital purposes or to pay distributions to partners.  
Operating Surplus and Capital Surplus
All cash distributed to our unitholders is characterized as being paid from either “operating surplus” or “capital surplus.” We distribute available cash from operating surplus differently than available cash from capital surplus. Operating surplus distributions will be made to our unitholders and, if we make quarterly distributions above the first target distribution level described below, to the holder of our incentive distribution rights (“IDRs”). We do not anticipate that we will make any distributions from capital surplus. In such an event, however, any capital surplus distribution would generally be made first to the holders of Class C units, pro rata, of the amount of accrued and unpaid distributions, and then pro rata to all unitholders.
Definition of Operating Surplus
Operating surplus for any period generally means:

•	$25.0 million (as described below); plus	
		
•	all of our cash receipts, excluding cash from interim capital transactions (as defined below), provided that cash receipts from the termination of any hedge contract prior to its stipulated settlement or termination date will be	

2

included in equal quarterly installments over the remaining scheduled life of such hedge contract had it not been terminated; plus
		
•	working capital borrowings made after the end of a period but on or before the date of distribution of operating surplus for that period; plus	
		
•	cash distributions paid on equity issued (including incremental distributions on IDRs), to finance all or a portion of expansion capital expenditures in respect of the period from the date that we enter into a binding obligation to commence the construction, acquisition or improvement of a capital asset until the earlier to occur of the date the capital asset commences commercial service and the date that it is abandoned or disposed of; plus	
		
•	cash distributions paid on equity issued (including incremental distributions on IDRs), to pay the construction period interest on debt incurred, or to pay construction period distributions on equity issued, to finance the expansion capital expenditures referred to above, in each case, in respect of the period from the date that we enter into a binding obligation to commence the construction, acquisition or improvement of a capital asset until the earlier to occur of the date the capital asset is placed in service and the date that it is abandoned or disposed of; less	
		
•	all of our operating expenditures (as defined below); less	
		
•	the amount of cash reserves established by our general partner to provide funds for future operating expenditures; less	
		
•	all working capital borrowings not repaid within twelve months after having been incurred, or repaid within such twelve-month period with the proceeds of additional working capital borrowings; less	
		
•	any cash loss realized on the disposition of an investment capital expenditure	
As described above, operating surplus does not reflect actual cash on hand that is available for distribution to our unitholders and is not limited to cash generated by our operations. For example, it includes a basket of $25.0 million that enables us, if we choose, to distribute as operating surplus up to that amount of cash we receive from non-operating sources such as asset sales, issuances of securities and long-term borrowings that would otherwise be distributed as capital surplus. In addition, the effect of including certain cash distributions on equity interests in operating surplus, as described above, will be to increase operating surplus by the amount of any such cash distributions. As a result, we may also distribute as operating surplus up to that amount of cash that we receive from non-operating sources.
The proceeds of working capital borrowings increase operating surplus and repayments of working capital borrowings are generally operating expenditures, as described below, and thus reduce operating surplus when made. However, if a working capital borrowing is not repaid during the twelve-month period following the borrowing, it will be deemed repaid at the end of such period, thus decreasing operating surplus at such time. When such working capital borrowing is in fact repaid, it will be excluded from operating expenditures because operating surplus will have been previously reduced by the deemed repayment.
We define operating expenditures as all of its cash expenditures, including, but not limited to, taxes, reimbursement of expenses to our general partner or its affiliates, payments made in the ordinary course of business under interest rate hedge agreements or commodity hedge agreements (provided that (1) payments made in connection with the initial purchase of an interest rate hedge contract or a commodity hedge contract will be amortized over the life of the applicable interest rate hedge contract or commodity hedge contract and (2) payments made in connection with the termination of any interest rate hedge contract or commodity hedge contract prior to its stipulated settlement or termination date will be included in operating expenditures in equal quarterly installments over the remaining scheduled life of such contract), compensation of officers, directors and employees of our general partner, repayment of working capital borrowings, debt service payments and maintenance capital expenditures (as discussed in further detail below), provided that operating expenditures do not include:

•	repayment of working capital borrowings deducted from operating surplus pursuant to the penultimate bullet point of the definition of operating surplus above when such repayment actually occurs;	
		
•	payments (including prepayments and prepayment penalties) of principal of and premium on indebtedness other than working capital borrowings;	
		
•	expansion capital expenditures;	
		
•	investment capital expenditures;	
		
•	payment of transaction expenses relating to interim capital transactions;	
		
•	distributions to our partners (including distributions in respect of our IDRs); or	
		
•	repurchases of equity interests (other than repurchases to satisfy obligations under employee benefit plans) or reimbursements of our general partner for such purchases.	
Interim Capital Transactions
We define cash from interim capital transactions to include proceeds from:

3

		
•	borrowings other than working capital borrowings;	
		
•	sales of equity and debt securities; and	
		
•	sales or other dispositions of assets, other than inventory, accounts receivable and other assets sold in the ordinary course of business or assets sold or disposed of as part of normal retirement or replacement of assets.	
Capital Surplus
Capital surplus is defined as any distribution of available cash in excess of operating surplus. Although the cash proceeds from interim capital transactions do not increase operating surplus, all distributions of available cash from whatever source are deemed to be from operating surplus until cumulative distributions of available cash exceed cumulative operating surplus. Thereafter, all distributions of available cash are deemed to be from capital surplus to the extent they continue to exceed cumulative operating surplus.
Characterization of Cash Distributions
We will treat all available cash distributed as coming from operating surplus until the sum of all available cash distributed since the closing of our initial public offering equals the operating surplus as of the most recent date of determination of available cash. We will treat any amount distributed in excess of operating surplus, regardless of its source, as capital surplus. As reflected above, operating surplus includes $25.0 million in addition to our cash balance on the closing date of our initial public offering, cash receipts from our operations and cash from working capital borrowings. This amount does not reflect actual cash on hand that is available for distribution to our unitholders. Rather, it is a provision that will enable us, if we choose, to distribute as operating surplus up to $25.0 million of cash we receive in the future from interim capital transactions that would otherwise be distributed as capital surplus. We do not anticipate that we will make any distributions from capital surplus.
Capital Expenditures
Maintenance capital expenditures reduce operating surplus, but expansion capital expenditures and investment capital expenditures do not. Under our partnership agreement, maintenance capital expenditures are capital expenditures made to maintain our long-term operating income or operating capacity, while expansion capital expenditures are capital expenditures that we expect will increase its operating income or operating capacity over the long term. Examples of maintenance capital expenditures include those expenditures we make to maintain existing contract volumes or renew existing distribution contracts, maintain its real estate leased to third-party dealers in leaseable condition or maintain its company operated convenience stores. Maintenance capital expenditures also include interest (and related fees) on debt incurred and distributions in respect of equity issued (including incremental distributions on IDRs), other than equity issued in any offering, to finance all or any portion of the construction or development of a replacement asset that are paid in respect of the period that begins when we enter into a binding obligation to commence construction or development of a replacement asset and ending on the earlier to occur of the date that such replacement asset commences commercial service and the date that it is disposed of or abandoned. Capital expenditures made solely for investment purposes are not considered maintenance capital expenditures.
Expansion capital expenditures are capital expenditures made to increase our operating capacity over the long term. Examples of expansion capital expenditures include the acquisition of new properties or equipment, to the extent such capital expenditures are expected to expand our long-term operating capacity. Expansion capital expenditures also include interest (and related fees) on debt incurred and distributions in respect of equity issued (including incremental distributions on IDRs) to finance all or any portion of the construction of a capital improvement paid in respect of the period that commences when we enter into a binding obligation to commence construction of a capital improvement and ending on the earlier to occur of the date such capital improvement commences commercial service and the date that it is disposed of or abandoned. Capital expenditures made solely for investment purposes are not be considered expansion capital expenditures.
 
Investment capital expenditures are those capital expenditures that are neither maintenance capital expenditures nor expansion capital expenditures. Investment capital expenditures largely consist of capital expenditures made for investment purposes. Examples of investment capital expenditures include traditional capital expenditures for investment purposes, such as purchases of securities, as well as other capital expenditures that might be made in lieu of such traditional investment capital expenditures, such as the acquisition of a capital asset for investment purposes or the development of assets that are in excess of those needed for the maintenance of our existing operating capacity, but which are not expected to expand, for more than the short term, its operating capacity.
As described above, neither investment capital expenditures nor expansion capital expenditures are included in operating expenditures, and thus do not reduce operating surplus. Because expansion capital expenditures include interest payments (and

4

related fees) on debt incurred to finance all or a portion of the construction, acquisition or development of a capital improvement during the period that begins when we enter into a binding obligation to commence construction, acquisition or development of a capital improvement and ending on the earlier to occur of the date such capital improvement commences commercial service and the date that it is disposed of or abandoned, such interest payments also do not reduce operating surplus. Losses on the disposition of an investment capital expenditure will reduce operating surplus when realized and cash receipts from an investment capital expenditure will be treated as a cash receipt for purposes of calculating operating surplus only to the extent the cash receipt is a return on principal.
Capital expenditures that are made in part for maintenance capital purposes, investment capital purposes and/or expansion capital purposes are allocated as maintenance capital expenditures, investment capital expenditures or expansion capital expenditure by our general partner.
Distributions of Available Cash from Operating Surplus
We will make distributions of available cash from operating surplus for any quarter in the following manner:

•	first, to the holders of our Class C units to the extent of the distribution preference on the Class C units;	
		
•	second, to all of our unitholders holding common units, pro rata, until we distribute for each outstanding common unit an amount equal to the minimum quarterly distribution for that quarter; and	
		
•	thereafter, in the manner as described in the section entitled “Incentive Distribution Rights” below.	
The preceding discussion is based on the assumption that we do not issue additional classes of equity interests.
Incentive Distribution Rights
IDRs represent the right to receive an increasing percentage (15.0%, 25.0% and 50.0%) of quarterly distributions of available cash from operating surplus after the minimum quarterly distribution and the target distribution levels have been achieved. Energy Transfer Operating, L.P. (“ETO”) currently holds all of our IDRs, but may transfer these rights, subject to restrictions in our partnership agreement.
 
The following discussion assumes that ETO continues to own our IDRs.
If for any quarter we have distributed available cash from operating surplus to the holders of our Class C units to the extent of their distribution preference and to our common unitholders in an amount equal to the minimum quarterly distribution then we will make distributions of available cash from operating surplus for that quarter in the following manner:

•	first, to all unitholders holding common units, pro rata, until each unitholder receives a total of $0.503125 per common unit for that quarter (the “first target distribution”);	
		
•	second, 85.0% to all unitholders holding common units, pro rata, and 15.0% to ETO (in its capacity as the holder of our IDRs), until each unitholder receives a total of $0.546875 per common unit for that quarter (the “second target distribution”);	
		
•	third, 75.0% to all unitholders holding common units, pro rata, and 25.0% to ETO (in its capacity as the holder of our IDRs), until each unitholder receives a total of $0.65625 per common unit for that quarter (the “third target distribution”); and	
		
•	thereafter, 50.0% to all unitholders holding common units, pro rata, and 50.0% to ETO (in its capacity as the holder of our IDRs).	
Distributions from Capital Surplus
We will make distributions of available cash from capital surplus, if any, in the following manner once the required distributions of available cash (other than Susser Petroleum Property Company LLC (“PropCo”) available cash) are made to the Class C unitholders:

•	first, to all unitholders holding common units, pro rata, until the minimum quarterly distribution level has been reduced to zero as described below; and	
		
•	thereafter, we will make all distributions of available cash from capital surplus as if they were from operating surplus.	

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The preceding paragraph assumes that we do not issue additional classes of equity interests.
Our partnership agreement treats a distribution of capital surplus as the repayment of the initial unit price from our initial public offering, which is a return of capital. The initial public offering price less any distributions of capital surplus per unit is referred to as the “unrecovered initial unit price.” Each time a distribution of capital surplus is made, the minimum quarterly distribution and the target distribution levels will be reduced in the same proportion that the distribution had to the fair market value of our common units immediately prior to the announcement of the distribution (or the average of the closing prices for the 20 consecutive trading days immediately prior to the ex-dividend date). Because distributions of capital surplus will reduce our minimum quarterly distribution and target distribution levels after any of these distributions are made, it may be easier for ETO (in its capacity as the holder of our IDRs) to receive incentive distributions.
Once we distribute capital surplus on a unit in an amount equal to the initial unit price, we will reduce the minimum quarterly distribution and the target distribution levels to zero. We will then make all future distributions from operating surplus, first, to the holders of Class C units to the extent required, and then, 50% being paid to the holders of our common units and 50% to ETO (in its capacity as the holder of our IDRs), assuming that ETO has not transferred the IDRs.
Adjustment to the Minimum Quarterly Distribution and Target Distribution Levels
In addition to adjusting the minimum quarterly distribution and target distribution levels to reflect a distribution of capital surplus, if we combine our units into fewer units or subdivide units into a greater number of units, we will proportionately adjust:
		
•	the minimum quarterly distribution;	
		
•	the target distribution levels; and	
		
•	the unrecovered initial unit price.	
For example, if a two-for-one split of common units should occur, the minimum quarterly distribution, the target distribution levels and the unrecovered initial unit price would each be reduced to 50% of its initial level. We will not make any adjustment by reason of the issuance of additional units for cash or property.
In addition, if legislation is enacted or if existing law is modified or interpreted by a governmental taxing authority, so that we become taxable as a corporation or otherwise subject to taxation as an entity for federal, state or local income tax purposes, it will reduce the minimum quarterly distribution and the target distribution levels for each quarter may, in the sole discretion of our general partner, be reduced by multiplying each distribution level by a fraction, the numerator of which is available cash for that quarter (reduced by the amount of the estimated tax liability for such quarter) and the denominator of which is the sum of available cash for that quarter before any adjustment for estimated taxes. To the extent that the actual tax liability differs from the estimated tax liability for any quarter, the difference will be accounted for in subsequent quarters.
Distributions of Cash Upon Liquidation
General. If we dissolve in accordance with our partnership agreement, we will sell or otherwise dispose of our assets in a process called liquidation. We will first apply the proceeds of liquidation to the payment of its creditors. We will distribute any remaining proceeds to the unitholders and the holder of our IDRs, in accordance with their capital account balances, as adjusted to reflect any gain or loss upon the sale or other disposition of its assets in liquidation.
The allocations of gain and loss upon liquidation are intended, to the extent possible, to permit holders of our common units to receive their unrecovered initial unit price plus the minimum quarterly distribution for the quarter during which liquidation occurs. However, there may not be sufficient gain upon our liquidation to enable our common unitholders to fully recover all of these amounts. Any further net gain recognized upon liquidation will be allocated in a manner that takes into account the IDRs.
Manner of Adjustments for Gain. The manner of the adjustment for gain is set forth in our partnership agreement. We will generally allocate any gain to its partners in the following manner:

•	first, to the holders of our Class C units, pro rata, until the capital account for each Class C unit is equal to the sum of: (1) the unrecovered initial unit price for that Class C unit; and (2) the unpaid amount of all accrued but unpaid distributions on that Class C unit;	
		
•	second, to all our common unitholders, pro rata, until the capital account for each common unit is equal to the sum of:	
		
•	the unrecovered initial unit price; and	
		
•	the unpaid amount of the minimum quarterly distribution for the quarter during which the liquidation occurs;	

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•	third, to all our common unitholders, pro rata, until we allocate under this paragraph an amount per unit equal to:	
		
•	the excess of the first target distribution per unit over the minimum quarterly distribution per unit for each quarter of our existence; less	
		
•	the cumulative amount per unit of any distributions of available cash from operating surplus in excess of the minimum quarterly distribution per unit for each quarter of our existence that we distributed to the unitholders, pro rata;	
		
•	fourth, 85.0% to all our common unitholders, pro rata, and 15.0% to ETO (in its capacity as the holder of our IDRs), until we allocate under this paragraph an amount per unit equal to:	
		
•	the excess of the second target distribution per unit over the first target distribution per unit for each quarter of our existence; less	
		
•	the cumulative amount per unit of any distributions of available cash from operating surplus in excess of the first target distribution per unit for each quarter of our existence that we distributed 85.0% to the unitholders, pro rata, and 15.0% to ETO (in its capacity as the holder of our IDRs);	
		
•	fifth, 75.0% to all our common unitholders, pro rata, and 25.0% to ETO (in its capacity as the holder of our IDRs), until we allocate under this paragraph an amount per unit equal to:	
		
•	the excess of the third target distribution per unit over the second target distribution per unit for each quarter of our existence; less	
		
•	the cumulative amount per unit of any distributions of available cash from operating surplus in excess of the second target distribution per unit for each quarter of our existence that we distributed 75.0% to the unitholders, pro rata, and 25.0% to ETO (in its capacity as the holder of our IDRs); and	
		
•	thereafter, 50.0% to all our common unitholders, pro rata, and 50.0% to ETO (in its capacity as the holder of our IDRs).	
Notwithstanding the foregoing, if immediately prior to making allocations pursuant to the fourth, fifth and sixth clauses above, the capital account of each common unit equals or exceeds the issue price of our Class C units ($38.5856), then we will allocate 1.0% of the remaining items of gain (other than gain attributable to PropCo) to the holders of Class C units, pro rata.
Manner of Adjustments for Losses
We will generally allocate any loss to our unitholders in the following manner:

•	first, to our common unitholders, pro rata, until the capital accounts of our common unitholders have been reduced to zero; and	
		
•	thereafter, to the holders of our Class C units, pro rata, until the capital accounts of the Class C units have been reduced to zero;	
provided, that Class C units will not be allocated any items of loss attributable to the ownership or sale of our membership interests in PropCo or any indebtedness of PropCo or its subsidiaries.
Adjustments to Capital Accounts
We will make adjustments to capital accounts upon the issuance of additional units. In doing so, we generally will allocate any unrealized and, for tax purposes, unrecognized gain resulting from the adjustments to the unitholders and the holders of our IDRs in the same manner as we allocate gain upon liquidation. By contrast to the allocations of gain, and except as provided above, we generally will allocate any unrealized and unrecognized loss resulting from the adjustments to capital accounts upon the issuance of additional units to our common unitholders based on their percentage ownership in the Partnership. In the event we make negative adjustments to the capital accounts as a result of such loss, future positive adjustments resulting from the issuance of additional units will be allocated in a manner designed to reverse the prior negative adjustments, and special allocations will be made upon liquidation in a manner that results, to the extent possible, in our common unitholders’ capital account balances equaling the amounts they would have been if no earlier adjustments for loss had been made. The Class C units will not be allocated any items of gain or loss attributable to our ownership or sale of the membership interests in PropCo or any indebtedness of PropCo or its subsidiaries.

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OUR PARTNERSHIP AGREEMENT
The following is a summary of the material provisions of our partnership agreement.
Organization and Duration
Our partnership was organized in June 2012 and will have a perpetual existence unless terminated pursuant to the terms of our partnership agreement.
Purpose
Our purpose, as set forth in our partnership agreement, is limited to any business activity that is approved by our general partner and that lawfully may be conducted by a limited partnership organized under Delaware law.
Although our general partner has the ability to cause us and our subsidiaries to engage in activities other than the business of the wholesale distribution of motor fuels and other petroleum products and the retail sale of motor fuel and the operation of convenience stores, our general partner has no plans to do so and may decline to do so free of any fiduciary duty or obligation whatsoever to us or our limited partners, including any duty to act in good faith or in the best interests of us or our limited partners. Our general partner is generally authorized to perform all acts it determines to be necessary or appropriate to carry out our purposes and to conduct our business.
Capital Contributions
Unitholders are not obligated to make additional capital contributions, except as described below under “-Limited Liability.”
Voting Rights
The following is a summary of the unitholder vote required for approval of the matters specified below. Matters that require the approval of a “unit majority” require the approval of a majority of the common units, voting as a single class.
In voting their common units, ET, ETO and their affiliates have no fiduciary duty or obligation whatsoever to us or our limited partners, including any duty to act in good faith or in the best interests of us or our limited partners.     

			
Issuance of additional units	  	No approval right.	
 	 	
Amendment of our partnership agreement	  	Certain amendments may be made by our general partner without the approval of our unitholders. Other amendments generally require the approval of a unit majority.	
 	 	
Merger of our partnership or the sale of all or substantially all of our assets	  	Unit majority in certain circumstances.	
 	 	
Dissolution of our partnership	  	Unit majority in certain circumstances.	
 	 	
Continuation of our business upon dissolution	  	Unit majority.	
 	 	
Withdrawal of our general partner	  	Under most circumstances, the approval of the holders of a majority of our common units, excluding common units held by our general partner and its affiliates, is required for the withdrawal of our general partner prior to September 30, 2022, in a manner that would cause a dissolution of our partnership.	
 	 	
Removal of our general partner	  	Not less than 66 2/3% of the outstanding units, voting as a single class, including units held by our general partner and its affiliates.	
 	 	
Transfer of our general partner interest	  	No approval right.	
 	 	
Transfer of ownership interests in our general partner	  	No approval right.	
 	 	
Transfer of incentive distribution rights	  	No approval right.	

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If any person or group other than our general partner and If any person or group other than our general partner and its affiliates acquires beneficial ownership of 20% or more of any class of units then outstanding, that person or group loses voting rights on all of its units. This loss of voting rights does not apply to any person or group that acquires the units from our general partner or its affiliates and any transferees of that person or group approved by our general partner or to any person or group who acquires the units with the specific approval of our general partner.
Applicable Law; Forum, Venue and Jurisdiction
Our partnership agreement is governed by Delaware law. Our partnership agreement requires that any claims, suits, actions or proceedings:

•	arising out of or relating in any way to our partnership agreement (including any claims, suits or actions to interpret, apply or enforce the provisions of our partnership agreement or the duties, obligations or liabilities among our limited partners or of our limited partners to us, or the rights or powers of, or restrictions on, our limited partners or us);	
		
•	brought in a derivative manner on our behalf;	
		
•	asserting a claim of breach of a fiduciary duty owed by any director, officer or other employee of us or our general partner, or owed by our general partner, to us or the limited partners;	
		
•	asserting a claim arising pursuant to any provision of the Delaware Act; or	
		
•	asserting a claim governed by the internal affairs doctrine,	

will be exclusively brought in the Court of Chancery of the State of Delaware (or, if such court does not have subject matter jurisdiction thereof, any other court located in the State of Delaware with subject matter jurisdiction). By purchasing a common unit, a limited partner is irrevocably consenting to these limitations and provisions regarding claims, suits, actions or proceedings and submitting to the exclusive jurisdiction of the Court of Chancery of the State of Delaware in connection with any such claims, suits, actions or proceedings.
Although we believe these provisions will benefit us by providing increased consistency in the application of Delaware law for the specified types of actions and proceedings, the provisions may have the effect of discouraging lawsuits against our directors, officers, employees and agents. The enforceability of similar forum selection provisions in other companies’ certificates of incorporation or similar governing documents have been challenged in legal proceedings, and it is possible that, in connection with one or more actions or proceedings described above, a court could find that the forum selection provision contained in our partnership agreement is inapplicable or unenforceable in such action or actions, including with respect to claims arising under the federal securities laws. Limited partners will not be deemed, by operation of the forum selection provision alone, to have waived claims arising under the federal securities laws and the rules and regulations thereunder.
The forum selection provision is intended to apply “to the fullest extent permitted by applicable law” to the above-specified types of actions and proceedings, including, to the extent permitted by the federal securities laws, to lawsuits asserting both the above-specified claims and federal securities claims. However, application of the forum selection provision may in some instances be limited by applicable law. Section 27 of the Exchange Act provides: “The district courts of the United States ... shall have exclusive jurisdiction of violations of [the Exchange Act] or the rules and regulations thereunder, and of all suits in equity and actions at law brought to enforce any liability or duty created by [the Exchange Act] or the rules and regulations thereunder.” As a result, the forum selection provision will not apply to actions arising under the Exchange Act or the rules and regulations thereunder. However, Section 22 of the Securities Act provides for concurrent federal and state court jurisdiction over actions under the Securities Act and the rules and regulations thereunder, subject to a limited exception for certain “covered class actions” as defined in Section 16 of the Securities Act and interpreted by the courts. Accordingly, we believe that the forum selection provision would apply to actions arising under the Securities Act or the rules and regulations thereunder, except to the extent a particular action fell within the exception for covered class actions.
Limited Liability
Assuming that a limited partner does not participate in the control of our business within the meaning of the Delaware Act and that the limited partner otherwise acts in conformity with the provisions of the partnership agreement, the limited partner’s liability under the Delaware Act will be limited, subject to possible exceptions, to the amount of capital the limited partner is obligated to contribute to us for its common units plus the limited partner’s share of any undistributed profits and assets. If it were determined, however, that the right, or exercise of the right, by the limited partners as a group:

•	to remove or replace our general partner;	
		
•	to approve some amendments to our partnership agreement; or	
		
•	to take other action under our partnership agreement;	

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constituted “participation in the control” of our business for the purposes of the Delaware Act, then the limited partners could be held personally liable for our obligations under the laws of Delaware, to the same extent as the general partner. This liability would extend to persons who transact business with us who reasonably believe that the limited partner is a general partner. Neither our partnership agreement nor the Delaware Act specifically provides for legal recourse against our general partner if a limited partner were to lose limited liability through any fault of our general partner. While this does not mean that a limited partner could not seek legal recourse, we know of no precedent for this type of a claim in Delaware case law.
Under the Delaware Act, a limited partnership may not make a distribution to a partner if, after the distribution, all liabilities of the limited partnership, other than liabilities to partners on account of their partnership interests and liabilities for which the recourse of creditors is limited to specific property of the Partnership, would exceed the fair value of the assets of the limited partnership. For the purpose of determining the fair value of the assets of a limited partnership, the Delaware Act provides that the fair value of property subject to liability for which recourse of creditors is limited shall be included in the assets of the limited partnership only to the extent that the fair value of that property exceeds the nonrecourse liability. The Delaware Act provides that a limited partner who receives a distribution and knew at the time of the distribution that the distribution was in violation of the Delaware Act shall be liable to the limited partnership for the amount of the distribution for three years. Under the Delaware Act, a substituted limited partner of a limited partnership is liable for the obligations of its assignor to make contributions to the Partnership, except that such person is not obligated for liabilities unknown to such person at the time such person became a limited partner and that could not be ascertained from our partnership agreement.
Our subsidiaries currently conduct business in several states and we may have subsidiaries that conduct business in other states in the future. Maintenance of our limited liability as owner of our operating subsidiaries may require compliance with legal requirements in the jurisdictions in which the operating subsidiaries conduct business, including qualifying our subsidiaries to do business there.
Limitations on the liability of members or limited partners for the obligations of a limited liability company or limited partnership have not been clearly established in many jurisdictions. If, by virtue of our ownership interest in our subsidiaries or otherwise, it were to be determined that we were conducting business in any jurisdiction without compliance with the applicable limited partnership or limited liability company statute, or that the right, or exercise of the right, by the limited partners as a group to remove or replace our general partner, to approve some amendments to our partnership agreement, or to take other action under our partnership agreement constituted “participation in the control” of our business for purposes of the statutes of any relevant jurisdiction, then our limited partners could be held personally liable for our obligations under the law of that jurisdiction to the same extent as our general partner under the circumstances. We will operate in a manner that our general partner considers reasonable and necessary or appropriate to preserve the limited liability of our limited partners.
Issuance of Additional Partnership Interests
Our partnership agreement authorizes us to issue an unlimited number of additional partnership interests for the consideration and on the terms and conditions determined by our general partner without the approval of our unitholders.
It is possible that we will fund acquisitions through the issuance of additional common units or other partnership interests. Holders of any additional common units we issue will be entitled to share equally with the then-existing common unitholders in our distributions of available cash. In addition, the issuance of additional common units or other partnership interests may dilute the value of the interests of the then-existing common unitholders in our net assets.
In accordance with Delaware law and the provisions of our partnership agreement, we may also issue additional partnership interests that, as determined by our general partner, may have special voting rights to which the common units are not entitled or be senior in right of distribution to the common units. In addition, our partnership agreement does not prohibit our subsidiaries from issuing equity interests which effectively rank senior to the common units.
Our general partner has the right, which it may from time to time assign in whole or in part to any of its affiliates, to purchase common units or other partnership interests whenever, and on the same terms that, we issue partnership interests to persons other than our general partner and its affiliates, to the extent necessary to maintain the percentage interest of itself and its affiliates, including such interest represented by common units, that existed immediately prior to each issuance. The common unitholders will not have preemptive rights under our partnership agreement to acquire additional common units or other partnership interests.
On January 1, 2016, we issued an aggregate of 16,410,780 Class C units consisting of (i) 5,242,113 Class C units that were issued to Aloha Petroleum, Ltd. (“Aloha”) as consideration for the contribution by Aloha to an indirect wholly owned subsidiary of the Partnership of all of Aloha’s assets relating to the wholesale supply of fuel and lubricants; and (ii) 11,168,667 Class C units that were issued to indirect wholly owned subsidiaries of the Partnership in exchange for all of the outstanding Class A units held by such subsidiaries. For a complete description of our Class C units, please read our Current Report on Form 8-K filed with the SEC on January 5, 2016. As of September 24, 2019, there were 16,410,780 Class C units outstanding.

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On March 30, 2017, we issued 12,000,000 Series A preferred units representing limited partnership interests in us to Energy Transfer Equity, L.P. that ranked senior to our common units with respect to the payment of distributions and distribution of assets upon liquidation, dissolution and winding up. On January 25, 2018, we redeemed all such Series A preferred units.
Amendment of the Partnership Agreement
General
Amendments to our partnership agreement may be proposed only by or with the consent of our general partner. Our general partner, however, will have no duty or obligation to propose any amendment and may decline to do so free of any fiduciary duty or obligation whatsoever to us or our limited partners, including any duty to act in good faith or in the best interests of us or our limited partners. In order to adopt a proposed amendment, other than the amendments discussed under “-No Unitholder Approval” below, our general partner is required to seek written approval of the holders of the number of units required to approve the amendment or to call a meeting of the limited partners to consider and vote upon the proposed amendment. Except as described below, an amendment must be approved by a unit majority.
Prohibited Amendments
No amendment may be made that would:

•	enlarge the obligations of any limited partner without its consent, unless approved by at least a majority of the type or class of limited partner interests so affected; or	
		
•	enlarge the obligations of, restrict, change or modify in any way any action by or rights of, or reduce in any way the amounts distributable, reimbursable or otherwise payable by us to our general partner or any of its affiliates without the consent of our general partner, which consent may be given or withheld at its option.	
The provisions of our partnership agreement preventing the amendments having the effects described in any of the clauses above can only be amended upon the approval of the holders of at least 90% of the outstanding units voting together as a single class (including units owned by our general partner and its affiliates).
No Unitholder Approval
Our general partner may generally make amendments to our partnership agreement without the approval of any limited partner or assignee to reflect:

•	a change in our name, the location of the principal place of our business, our registered agent or our registered office;	
		
•	the admission, substitution, withdrawal or removal of partners in accordance with our partnership agreement;	
		
•	a change that our general partner determines to be necessary or appropriate to qualify or continue our qualification as a limited partnership or a partnership in which the limited partners have limited liability under the laws of any state or to ensure that neither we nor any of our subsidiaries will be treated as an association taxable as a corporation or otherwise taxed as an entity for U.S. federal income tax purposes (to the extent not already treated as such);	
		
•	a change in our fiscal year or taxable year and related changes;	
		
•	an amendment that is necessary, in the opinion of our counsel, to prevent us or our general partner or its directors, officers, agents or trustees from in any manner being subjected to the provisions of the Investment Company Act of 1940, the Investment Advisers Act of 1940, or “plan asset” regulations adopted under the Employee Retirement Income Security Act of 1974, or ERISA, whether or not substantially similar to plan asset regulations currently applied or proposed;	
		
•	an amendment that our general partner determines to be necessary or appropriate in connection with the creation, authorization or issuance of any class or series of partnership interests or rights to acquire partnership interests;	
		
•	any amendment expressly permitted in our partnership agreement to be made by our general partner acting alone;	
		
•	an amendment effected, necessitated or contemplated by a merger agreement that has been approved under the terms of our partnership agreement;	
		
•	any amendment that our general partner determines to be necessary or appropriate to reflect and account for the formation by us of, or our investment in, any corporation, partnership, joint venture, limited liability company or other entity, as otherwise permitted by our partnership agreement;	
		
•	an amendment that is necessary to require the limited partners to provide a statement, certification or other proof to us regarding whether such limited partner is subject to U.S. federal income taxation on the income generated by us;	
		
•	conversions into, mergers with or conveyances to another limited liability entity that is newly formed and has no assets, liabilities or operations at the time of the conversion, merger or conveyance other than those it receives by way of the conversion, merger or conveyance; or	

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•	any other amendments substantially similar to any of the matters described in the clauses above.	

In addition, our general partner may make amendments to our partnership agreement without the approval of any limited partner or transferee in connection with a merger or consolidation approved in connection with our partnership agreement, or if our general partner determines that those amendments:

•	do not adversely affect the limited partners (or any particular class of limited partners) in any material respect;	
		
•	are necessary or appropriate to satisfy any requirements, conditions or guidelines contained in any opinion, directive, order, ruling or regulation of any federal or state agency or judicial authority or contained in any federal or state statute;	
		
•	are necessary or appropriate to facilitate the trading of limited partner interests or to comply with any rule, regulation, guideline or requirement of any securities exchange on which the limited partner interests are or will be listed for trading;	
		
•	are necessary or appropriate for any action taken by our general partner relating to splits or combinations of units under the provisions of our partnership agreement; or	
		
•	are required to effect the intent expressed in the prospectus used in our initial public offering or the intent of the provisions of our partnership agreement or are otherwise contemplated by our partnership agreement.	

Opinion of Counsel and Unitholder Approval
Any amendment that would have a material adverse effect on the rights or preferences of any type or class of outstanding units in relation to other classes of units will require the approval of at least a majority of the type or class of units so affected. Any amendment that would reduce or increase the voting percentage required to take any action other than to remove our general partner or call a meeting of unitholders is required to be approved by the affirmative vote of limited partners whose aggregate outstanding units constitute not less than the voting requirement sought to be reduced or increased.
For amendments of the type not requiring unitholder approval, our general partner will not be required to obtain an opinion of counsel that an amendment will neither result in a loss of limited liability to the limited partners nor result in our being treated as a taxable entity for federal income tax purposes in connection with any of the amendments. No other amendments to our partnership agreement will become effective without the approval of holders of at least 90% of the outstanding units, voting as a single class, unless we first obtain an opinion of counsel to the effect that the amendment will not affect the limited liability under applicable law of any of our limited partners.
Merger, Consolidation, Conversion, Sale or Other Disposition of Assets
A merger or consolidation of us requires the prior consent of our general partner. However, our general partner has no duty or obligation to consent to any merger or consolidation and may decline to do so free of any fiduciary duty or obligation whatsoever to us or our limited partners, including any duty to act in good faith or in the best interest of us or our limited partners. Our general partner may, however, consummate any merger without the prior approval of our unitholders if we are the surviving entity in the transaction, our general partner has received an opinion of counsel regarding limited liability and tax matters, the transaction would not result in an amendment to our partnership agreement (other than an amendment that our general partner could adopt without the consent of other partners), each of our partnership interests will be an identical partnership interest following the transaction and the partnership interests to be issued do not exceed 20% of our outstanding partnership interests (other than IDRs) immediately prior to the transaction.
In addition, our partnership agreement generally prohibits our general partner, without the prior approval of the holders of a unit majority, from causing us to sell, exchange or otherwise dispose of all or substantially all of our assets in a single transaction or a series of related transactions, including by way of merger, consolidation or other combination. Our general partner may, however, mortgage, pledge, hypothecate or grant a security interest in all or substantially all of our assets without such approval. Our general partner may also sell all or substantially all of our assets under a foreclosure or other realization upon those encumbrances without such approval. If the conditions specified in our partnership agreement are satisfied, our general partner may also convert us or any of our subsidiaries into a new limited liability entity or merge us or any of our subsidiaries into, or convey all of our assets to, a newly formed limited liability entity that has no assets, liabilities or operations, if the sole purpose of that conversion, merger or conveyance is to effect a mere change in our legal form into another limited liability entity, our general partner has received an opinion of counsel regarding limited liability and tax matters and the governing instruments of the new entity provide the limited partners and our general partner with substantially the same rights and obligations as those contained in our partnership agreement. Our unitholders are not entitled to dissenters’ rights of appraisal under our partnership agreement or applicable Delaware law in the event of a conversion, merger or consolidation, a sale of substantially all of our assets or any other similar transaction or event.

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Dissolution
We will continue as a limited partnership until dissolved under our partnership agreement. We will dissolve upon:

•	the election of our general partner to dissolve us, if approved by the holders of a unit majority;	
		
•	there being no limited partners, unless we are continued without dissolution in accordance with applicable Delaware law;	
		
•	the entry of a decree of judicial dissolution of our partnership pursuant to the provisions of the Delaware Act; or	
		
•	the withdrawal or removal of our general partner or any other event that results in its ceasing to be our general partner other than by reason of a transfer of its non-economic general partner interest in accordance with our partnership agreement or withdrawal or removal following approval and admission of a successor.	

Upon a dissolution under the last clause above, the holders of a unit majority, may also elect, within specific time limitations, to reconstitute us and continue our business on the same terms and conditions described in our partnership agreement by appointing as successor general partner an entity approved by the holders of units representing a unit majority, subject to our receipt of an opinion of counsel to the effect that:

•	the action would not result in the loss of limited liability under the Delaware Act of any limited partner; and	
		
•	neither our partnership, the reconstituted limited partnership, our operating company nor any of our other subsidiaries would be treated as an association taxable as a corporation or otherwise be taxable as an entity for U.S. federal income tax purposes (to the extent not already so treated or taxed) upon the exercise of that right to continue.	

Liquidation and Distribution of Proceeds
Upon our dissolution, unless our business is continued, the liquidator authorized to wind up our affairs will, acting with all of the powers of our general partner that are necessary or appropriate to liquidate our assets and apply the proceeds of the liquidation as described in “Our Cash Distribution Policy-Distributions of Cash Upon Liquidation.” The liquidator may defer liquidation or distribution of our assets for a reasonable period of time or distribute assets to partners in kind if it determines that a sale would be impractical or would cause undue loss to our partners.
Withdrawal or Removal of Our General Partner
Except as described below, our general partner has agreed not to withdraw voluntarily as our general partner on or prior to September 30, 2022 without obtaining the approval of the holders of at least a majority of the outstanding common units, excluding common units held by our general partner and its affiliates, and furnishing an opinion of counsel regarding limited liability and tax matters. After September 30, 2022, our general partner may withdraw as general partner without first obtaining approval of any unitholder by giving 90 days’ advance notice, and that withdrawal will not constitute a violation of our partnership agreement. Notwithstanding the information above, our general partner may withdraw without unitholder approval upon 90 days’ advance notice to the limited partners if at least 50% of the outstanding common units are held or controlled by one person and its affiliates other than our general partner and its affiliates. In addition, our partnership agreement permits our general partner in some instances to sell or otherwise transfer all of its non-economic general partner interest in us without the approval of the unitholders. Please read “-Transfer of General Partner Interest” and “-Transfer of Incentive Distribution Rights.”
Upon withdrawal of our general partner under any circumstances, other than as a result of a transfer by our general partner of all or a part of its non-economic general partner interest in us, the holders of a unit majority may select a successor to that withdrawing general partner. If a successor is not elected, or is elected but an opinion of counsel regarding limited liability and tax matters cannot be obtained, we will be dissolved, wound up and liquidated, unless within a specified period after that withdrawal, the holders of a unit majority agree in writing to continue our business and to appoint a successor general partner. Please read “-Dissolution.”
Our general partner may not be removed unless that removal is approved by the vote of the holders of not less than 66 2/3% of the outstanding units, voting together as a single class, including units held by our general partner and its affiliates, and we receive an opinion of counsel regarding limited liability and tax matters. Any removal of our general partner is also subject to the approval of a successor general partner by the vote of the holders of a majority of the outstanding common units, voting as separate classes. The ownership of more than 33 1/3% of the outstanding units by our general partner and its affiliates would give them the practical ability to prevent our general partner’s removal.
In the event of the removal of our general partner under circumstances where cause exists or withdrawal of our general partner where that withdrawal violates our partnership agreement, a successor general partner will have the option to purchase the

13

general partner interest of the departing general partner and the IDRs of its affiliates for a cash payment equal to the fair market value of those interests. Under all other circumstances where our general partner withdraws or is removed by the limited partners, the departing general partner will have the option to require the successor general partner to purchase the general partner interest of the departing general partner and the IDRs of its affiliates for fair market value. In each case, this fair market value will be determined by agreement between the departing general partner and the successor general partner. If no agreement is reached within 30 days after the effective date of the departing general partner’s withdrawal or removal, an independent investment banking firm or other independent expert selected by the departing general partner and the successor general partner will determine the fair market value. If the departing general partner and the successor general partner cannot agree upon an expert within 45 days after the withdrawal or removal, then an expert chosen by agreement of the experts selected by each of them will determine the fair market value.
If the option described above is not exercised by either the departing general partner or the successor general partner, the departing general partner’s general partner interest and its IDRs will automatically convert into common units with a value equal to the fair market value of those interests as determined by an investment banking firm or other independent expert selected in the manner described in the preceding paragraph.
In addition, we will be required to reimburse the departing general partner for all amounts due the departing general partner, including, without limitation, all employee-related liabilities, including severance liabilities, incurred for the termination of any employees employed by the departing general partner or its affiliates for our benefit.
Transfer of General Partner Interest
Our general partner may at its option transfer all or any part of its general partner interest without approval from the unitholders, so long as:

•	the transferee agrees to assume the rights and duties of our general partner under our partnership agreement and agrees to be bound by the provisions of our partnership agreement;	
		
•	we receive an opinion of counsel that such transfer would not result in the loss of limited liability under the Delaware Act of any unitholders or cause us to be treated as an association taxable as a corporation or otherwise to be taxed as an entity for U.S. federal income tax purposes (to the extent not already so treated or taxed); and	
		
•	such transferee also agrees to purchase all (or the appropriate portion thereof, if applicable) of the partnership or membership interest held by our general partner as the general partner or managing member, if any, of any of our subsidiaries.	

In the case of a transfer of the general partner interest, the transferee or successor will be subject to compliance with the terms of our partnership agreement and will be admitted as our general partner effective immediately prior to the transfer of the general partner interest.
Our general partner and its affiliates, including ET and ETO, may, at any time, transfer common units or IDRs to one or more persons, without unitholder approval.
Transfer of Ownership Interests in Our General Partner
At any time, the owner of our general partner, may sell or transfer all or part of its ownership interest in our general partner to an affiliate or third party without the approval of our unitholders.
Change of Management Provisions
Our partnership agreement contains specific provisions that are intended to discourage a person or group from attempting to remove Sunoco GP LLC as our general partner or from otherwise changing our management. Please read “-Withdrawal or Removal of Our General Partner” for a discussion of certain consequences of the removal of our general partner. If any person or group, other than our general partner and its affiliates, acquires beneficial ownership of 20% or more of any class of partnership interests, that person or group loses voting rights on all of such person’s or group’s partnership interests. This loss of voting rights does not apply in certain circumstances. Please read “-Meetings; Voting.”
Limited Call Right
If at any time our general partner and its affiliates own more than 80% of the then-issued and outstanding limited partner interests of any class, our general partner will have the right, which it may assign in whole or in part to any of its affiliates or to us, to acquire all, but not less than all, of the limited partner interests of such class held by unaffiliated persons as of a record date to be selected by our general partner, on at least 10 but not more than 60 days’ notice. The purchase price in the event of such a purchase is the greater of:

14

		
•	the highest cash price paid by either of our general partner or any of its affiliates for any limited partner interests of such class purchased within the 90 days preceding the date on which our general partner first mails notice of its election to purchase those limited partner interests; and	
		
•	the average of the daily closing prices per limited partner interest of such class for the 20 consecutive trading days immediately preceding the date three days before the date the notice is mailed.	

As a result of our general partner’s right to purchase outstanding limited partner interests, a holder of limited partner interests may have his limited partner interests purchased at an undesirable time or price. The tax consequences to a unitholder of the exercise of this call right are the same as a sale by that unitholder of his common units in the market. Please read “Material U.S. Federal Income Tax Consequences-Disposition of Common Units.”
Non-Taxpaying Holders; Redemption
To avoid any adverse effect on the maximum applicable rates chargeable to customers by us or any of our future subsidiaries, or in order to reverse an adverse determination that has occurred regarding such maximum rate, our partnership agreement provides our general partner the power to amend the agreement. If our general partner, with the advice of counsel, determines that our not being treated as an association taxable as a corporation or otherwise taxable as an entity for U.S. federal income tax purposes, coupled with the tax status (or lack of proof thereof) of one or more of our limited partners, has, or is reasonably likely to have, a material adverse effect on the maximum applicable rates chargeable to customers by our subsidiaries, then our general partner may adopt such amendments to our partnership agreement as it determines necessary or advisable to:

•	obtain proof of the U.S. federal income tax status of our limited partners (and their owners, to the extent relevant); and	
		
•	permit us to redeem the units held by any person whose tax status has or is reasonably likely to have a material adverse effect on the maximum applicable rates or who fails to comply with the procedures instituted by our general partner to obtain proof of the U.S. federal income tax status. The redemption price in the case of such a redemption will be the average of the daily closing prices per unit for the 20 consecutive trading days immediately prior to the date set for redemption.	

Non-Citizen Assignees; Redemption
If our general partner, with the advice of counsel, determines we are subject to U.S. federal, state or local laws or regulations that, in the reasonable determination of our general partner, create a substantial risk of cancellation or forfeiture of any property that we have an interest in because of the nationality, citizenship or other related status of any limited partner, then our general partner may adopt such amendments to our partnership agreement as it determines necessary or advisable to:

•	obtain proof of the nationality, citizenship or other related status of our limited partners (and their owners, to the extent relevant); and	
		
•	permit us to redeem the units held by any person whose nationality, citizenship or other related status creates substantial risk of cancellation or forfeiture of any property or who fails to comply with the procedures instituted by our general partner to obtain proof of the nationality, citizenship or other related status. The redemption price in the case of such a redemption will be the average of the daily closing prices per unit for the 20 consecutive trading days immediately prior to the date set for redemption.	

Meetings; Voting
Except as described below regarding certain persons or groups owning 20% or more of any class of partnership interests then outstanding and, except for Class C units, record holders of limited partner interests on the record date are entitled to notice of, and to vote at, meetings of our limited partners and to act upon matters for which approvals may be solicited.
Our general partner does not anticipate that any meeting of our unitholders will be called in the foreseeable future. Any action that is required or permitted to be taken by the unitholders may be taken either at a meeting of the unitholders or without a meeting if consents in writing describing the action so taken are signed by holders of the number of units necessary to authorize or take that action at a meeting. Meetings of the unitholders may be called by our general partner or by unitholders owning at least 20% of the outstanding units of the class for which a meeting is proposed. Unitholders may vote either in person or by proxy at meetings. The holders of a majority of the outstanding units of the class or classes for which a meeting has been called, represented in person or by proxy, will constitute a quorum, unless any action by the unitholders requires approval by holders of a greater percentage of the units, in which case the quorum will be the greater percentage.

15

Each record holder of a unit has a vote according to his percentage interest in us (excluding Class C unitholders), although additional limited partner interests having special voting rights could be issued. Please read “-Issuance of Additional Partnership Interests.” However, if at any time any person or group, other than our general partner and its affiliates, a direct transferee of our general partner or its affiliates or a purchaser specifically approved by our general partner, acquires, in the aggregate, beneficial ownership of 20% or more of any class of partnership interests then outstanding, that person or group will lose voting rights on all of its partnership interests and the partnership interests may not be voted on any matter and will not be considered to be outstanding when sending notices of a meeting of unitholders, calculating required votes, determining the presence of a quorum or for other similar purposes. Common units held in nominee or street name account will be voted by the broker or other nominee in accordance with the instruction of the beneficial owner unless the arrangement between the beneficial owner and his nominee provides otherwise.
Any notice, demand, request, report or proxy material required or permitted to be given or made to record common unitholders under our partnership agreement will be delivered to the record holder by us or by the transfer agent.
Status as Limited Partner
By the transfer of common units in accordance with our partnership agreement, each transferee of common units shall be admitted as a limited partner with respect to the common units transferred when such transfer and admission is reflected in our books and records. Except as described under “- Limited Liability,” the common units will be fully paid, and unitholders will not be required to make additional contributions.
Indemnification
Under our partnership agreement, in most circumstances, we will indemnify the following persons, to the fullest extent permitted by law, from and against all losses, claims, damages or similar liabilities:

•	our general partner;	
		
•	any departing general partner;	
		
•	any person who is or was an affiliate of our general partner or any departing general partner;	
		
•	any person who is or was a manager, managing member, general partner, director, officer, employee, agent, fiduciary or trustee of our partnership, our subsidiaries, our general partner, any departing general partner or any of their affiliates;	
		
•	any person who is or was serving at the request of our general partner, any departing general partner or any of their affiliates as an officer, director, manager, managing member, general partner, employee, agent, fiduciary or trustee of another person owing a fiduciary duty to us or our subsidiaries;	
		
•	any person who controls our general partner or any departing general partner; and	
		
•	any person designated by our general partner.	

Any indemnification under these provisions will only be out of our assets. Unless our general partner otherwise agrees, it will not be personally liable for, or have any obligation to contribute or lend funds or assets to us to enable us to effectuate, indemnification. We may purchase insurance against liabilities asserted against and expenses incurred by persons for our activities, regardless of whether we would have the power to indemnify the person against such liabilities under our partnership agreement.
Reimbursement of Expenses
Our partnership agreement requires us to reimburse our general partner for all direct and indirect expenses it incurs or payments it makes on our behalf and all other expenses allocable to us or otherwise incurred by our general partner in connection with operating our business. These expenses will include salary, bonus, incentive compensation and other amounts paid to persons who perform services for us or on our behalf and expenses allocated to our general partner by its affiliates. Our general partner is entitled to determine the expenses that are allocable to us. Our partnership agreement does not limit the amount of expenses for which our general partner and its affiliates may be reimbursed.
Books and Reports
Our general partner is required to keep appropriate books of our business at our principal offices. The books will be maintained for both tax and financial reporting purposes on an accrual basis. For tax and financial reporting purposes, our fiscal year is the calendar year.
We furnish or make available to record holders of our units or other partnership interests, within 105 days after the close of each fiscal year, an annual report containing audited financial statements and a report on those financial statements by our independent registered public accounting firm. Except for our fourth quarter, we also furnish or make available unaudited

16

financial information within 50 days after the close of each quarter. We are deemed to have made any such report available if we file such report with the SEC on EDGAR or make the report available on a publicly available website which we maintain.
We furnish each record holder of a unit with information reasonably required for U.S. federal, state and local tax reporting purposes within 90 days after the close of each calendar year. This information is expected to be furnished in summary form so that some complex calculations normally required of partners can be avoided. Our ability to furnish this summary information to our unitholders depends on their cooperation in supplying us with specific information. Every unitholder will receive information to assist him in determining his U.S. federal and state tax liability and in filing his U.S. federal and state income tax returns, regardless of whether he supplies us with the necessary information.
Right to Inspect Our Books and Records
Our partnership agreement provides that a limited partner can, for a purpose reasonably related to his interest as a limited partner, upon reasonable written demand stating the purpose of such demand and at his own expense, have furnished to him:

•	true and full information regarding the status of our business and financial condition (provided that obligation shall be satisfied to the extent the limited partner is furnished our most recent annual report and any subsequent quarterly or periodic reports required to be filed (or which would be required to be filed) with the SEC pursuant to Section 13 of the Exchange Act);	
		
•	a current list of the name and last known address of each record holder; and	
		
•	a copy of our partnership agreement, our certificate of limited partnership and all amendments thereto, together with copies of the executed copies of all powers of attorney under which they have been executed.	

Our general partner may, and intends to, keep confidential from the limited partners trade secrets or other information the disclosure of which our general partner believes is not in our best interests, could damage us or our business or that we are required by law or by agreements with third parties to keep confidential.
Registration Rights
Under our partnership agreement, we have agreed to register for resale under the Securities Act and applicable state securities laws any common units or other limited partner interests proposed to be sold by our general partner or any of its affiliates, including ET and ETO or their assignees, if an exemption from the registration requirements is not otherwise available. These registration rights continue for two years following any withdrawal or removal of our general partner. We are obligated to pay all expenses incidental to the registration, excluding underwriting discounts.

17

Exhibit 21.1

List of Subsidiaries

		
1.	Aloha Petroleum LLC, a Delaware limited liability company	
		
2.	Aloha Petroleum, Ltd., a Hawaii corporation	
		
3.	Quick Stuff of Texas, Inc., a Texas corporation	
		
4.	SSP BevCo I, LLC, a Texas limited liability company	
		
5.	SSP BevCo II, LLC, a Texas limited liability company	
		
6.	SSP Beverage, LLC, a Texas limited liability company	
		
7.	Stripes Acquisition LLC, a Texas limited liability company	
		
8.	Sunmarks LLC, a Delaware limited liability company	
		
9.	Sunoco Caddo LLC, a Delaware limited liability company	
		
10.	Sunoco Finance Corp., a Delaware corporation	
		
11.	Sunoco, LLC, a Delaware limited liability company	
		
12.	Sunoco NLR LLC, a Delaware limited liability company	
		
13.	Sunoco Refined Products LLC, a Delaware limited liability company	
		
14.	Sunoco Retail LLC, a Pennsylvania limited liability company	
		
15.	Sunoco Property Company LLC, a Delaware limited liability company	
		
16.	TCFS Holdings, Inc., a Texas corporation	
		
17.	Town & Country Food Stores, Inc., a Texas corporation	
		
18.	TND Beverage, LLC, a Texas limited liability company	
		
19.	Sandford Oil Company, Inc., a Texas corporation	
		
20.	SUN LP Pipeline LLC, a Delaware limited liability company	
		
21.	SUN LP Terminals LLC, a Delaware limited liability company	

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We have issued our reports dated February 21, 2020, with respect to the consolidated financial statements and internal control over financial reporting included in the Annual Report of Sunoco LP on Form 10-K for the year ended December 31, 2019. We consent to the incorporation by reference of said reports in the Registration Statements of Sunoco LP on Forms S-3 (File No. 333-227604 and File No. 333-233409) and on Forms S-8 (File No. 333-228708 and File No. 333-184035).

/s/ GRANT THORNTON LLP

Dallas, Texas
February 21, 2020

Exhibit 23.2

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We have issued our report dated February 21, 2020, with respect to the financial statements of ETC M-A Acquisition LLC included in the Annual Report of Sunoco LP on Form 10-K for the year ended December 31, 2019. We consent to the incorporation by reference of said report in the Registration Statements of Sunoco LP on Forms S-3 (File No. 333-227604 and File No. 333-233409) and on Forms S-8 (File No. 333-228708 and File No. 333-184035).

/s/ GRANT THORNTON LLP

Dallas, Texas
February 21, 2020

Exhibit 31.1
CERTIFICATION
I, Joseph Kim, certify that:
		
1.	I have reviewed this annual report on Form 10-K of Sunoco LP;	
		
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;	
		
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;	
		
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:	
		
(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;	
		
(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;	
		
(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and	
		
(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and	
		
5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):	
		
(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and	
		
(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.	

	
		
Date: February 21, 2020	/s/ Joseph Kim	
 	Joseph Kim	
 	President and Chief Executive Officer of Sunoco GP LLC, the general partner of Sunoco LP	

Exhibit 31.2
CERTIFICATION
I, Thomas R. Miller, certify that:
		
1.	I have reviewed this annual report on Form 10-K of Sunoco LP;	
		
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;	
		
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;	
		
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:	
		
(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;	
		
(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;	
		
(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and	
		
(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and	
		
5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):	
		
(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and	
		
(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.	

	
		
Date: February 21, 2020	/s/ Thomas R. Miller	
 	Thomas R. Miller	
 	Chief Financial Officer of Sunoco GP LLC, the general partner of Sunoco LP	

Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
 
In connection with this Annual Report on Form 10-K of Sunoco LP (the “Partnership”) for the year ended December 31, 2019, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Joseph Kim, as President and Chief Executive Officer of Sunoco GP LLC, the general partner of the Partnership, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002 that:

(1)	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and	
		
(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Partnership.	

	
		
Date: February 21, 2020	/s/ Joseph Kim	
 	Joseph Kim	
 	President and Chief Executive Officer of Sunoco GP LLC, the general partner of Sunoco LP	
 
This certification accompanies this Report on Form 10-K pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by such Act, be deemed filed by the Partnership for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
 
In connection with this Annual Report on Form 10-K of Sunoco LP (the “Partnership”) for the year ended December 31, 2019, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Thomas R. Miller, as Chief Financial Officer of Sunoco GP LLC, the general partner of Sunoco LP, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002 that:

(1)	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and	
		
(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Partnership.	

	
		
Date: February 21, 2020	/s/ Thomas R. Miller	
 	Thomas R. Miller	
 	Chief Financial Officer of Sunoco GP LLC, the general partner of Sunoco LP	
 
This certification accompanies this Report on Form 10-K pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by such Act, be deemed filed by the Partnership for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

Exhibit 99.1

ETC M-A Acquisition LLC
Financial Statements
As of December 31, 2019 and 2018
Years Ended December 31, 2019, 2018 and 2017

ETC M-A Acquisition LLC
Table of Contents

	
		
 	Page	
Report of the Independent Registered Public Accounting Firm	i	
Balance Sheets	1	
Statements of Operations	2	
Statement of Equity	3	
Statements of Cash Flows	4	
Notes to Financial Statements	5	

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors of Energy Transfer Partners, L.L.C. and
Member of ETC M-A Acquisition LLC
Opinion on the financial statements
We have audited the accompanying balance sheets of ETC M-A Acquisition LLC (a Delaware limited liability company) (the “Company”) as of December 31, 2019 and 2018, the related statements of operations, equity, and cash flows for each of the three years in the period ended December 31, 2019, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2019 and 2018, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2019, in conformity with accounting principles generally accepted in the United States of America.
Basis for opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the auditing standards of the PCAOB and in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures include examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ GRANT THORNTON LLP
We have served as the Company’s auditor since 2014.
Dallas, Texas
February 21, 2020

i

ETC M-A Acquisition LLC
Balance Sheets
(Dollars in millions)

	
								
 	December 31,	
 	2019	 	2018	
ASSETS	 	 	 	
Current assets:	 	 	 	
Advances to affiliated companies	$	161		 	$	87		
Total current assets	161		 	87		
 	 	 	 	
Investment in unconsolidated affiliate	450		 	210		
Total assets	$	611		 	$	297		
 	 	 	 	
LIABILITIES AND EQUITY	 	 	 	
Current liabilities:	 	 	 	
Accrued and other current liabilities	$	3		 	$	3		
Total current liabilities	3		 	3		
 	 	 	 	
Commitments and contingencies	 	 	 	
 	 	 	 	
Equity:	 	 	 	
Member’s equity	608		 	294		
Total equity	608		 	294		
Total liabilities and equity	$	611		 	$	297		

The accompanying notes are an integral part of these financial statements.
1

ETC M-A Acquisition LLC
Statements of Operations
(Dollars in millions)

	
												
 	Year Ended December 31,	
 	2019	 	2018	 	2017	
Income (loss) from unconsolidated affiliate	$	59		 	$	(37	)	 	$	4		
Net income (loss)	$	59		 	$	(37	)	 	$	4		

The accompanying notes are an integral part of these financial statements.
2

ETC M-A Acquisition LLC
Statement of Equity
(Dollars in millions)

	
				
 	Total	
Balance, December 31, 2016	$	327		
Net income	4		
Balance, December 31, 2017	331		
Net loss	(37	)	
Balance, December 31, 2018	294		
Contribution from ETO	255		
Net income	59		
Balance, December 31, 2019	$	608		

The accompanying notes are an integral part of these financial statements.
3

ETC M-A Acquisition LLC
Statements of Cash Flows
(Dollars in millions)

												
 	Year Ended December 31,	
 	2019	 	2018	 	2017	
Cash flows from operating activities:	 	 	 	 	 	
Net income (loss)	$	59		 	$	(37	)	 	$	4		
Reconciliation of net income (loss) to net cash provided by operating activities:	 	 	 	 	 	
(Income) loss from unconsolidated affiliate	(59	)	 	37		 	(4	)	
Distributions from unconsolidated affiliate	74		 	35		 	35		
Net cash provided by operating activities	74		 	35		 	35		
Cash flow from financing activities:	 	 	 	 	 	
Advances to affiliated company	(74	)	 	(35	)	 	(35	)	
Net cash used in financing activities	(74	)	 	(35	)	 	(35	)	
Change in cash and cash equivalents	—		 	—		 	—		
Cash and cash equivalents, beginning of period	—		 	—		 	—		
Cash and cash equivalents, end of period	$	—		 	$	—		 	$	—		

	
												
 	Year Ended December 31,	
 	2019	 	2018	 	2017	
Supplemental disclosure of non-cash financing and investing activities:									
Contribution of Sunoco LP common units from ETO	$	255			$	—			$	—		

The accompanying notes are an integral part of these financial statements.
4

ETC M-A Acquisition LLC
Notes to Financial Statements
(Dollars in millions)

1.	Operations and Organization:	
ETC M-A Acquisition LLC, a Delaware limited liability company formed in August 2013, (the “Company”) is an indirect wholly-owned subsidiary of Energy Transfer Operating, L.P. (“ETO”).
		
2.	Summary of Significant Accounting Policies:	
Basis of Presentation
The financial statements have been prepared on the accrual basis of accounting in conformity with accounting principles generally accepted in the United States of America (“GAAP”).
For purposes of these financial statements, the aggregate total of 26,200,809 Sunoco LP common units are presented as the investment in unconsolidated affiliate held by the Company as of December 31, 2019.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. Actual results could differ from those estimates.
Cash
The Company considers cash and cash equivalents to include investments with original maturities of three months or less.
Investment in Unconsolidated Affiliate
The Company owns an interest in Sunoco LP which is accounted for by the equity method due to the affiliate relationship resulting from both entities being under the common control of ETO. The Company exercises significant influence over, but does not control, the investee’s operating and financial policies.
Fair Value of Financial Instruments
The carrying amounts recorded for advances to affiliated companies and accrued and other current liabilities in the financial statements approximate fair value because of the short-term maturity of the instruments.
		
3.	Investment in Unconsolidated Affiliate:	
On March 31, 2019, ETO contributed 15,710,865 Sunoco LP common units to the Company
As of December 31, 2019 and December 31, 2018, the Company’s investment in Sunoco LP consisted of 26,200,809 and 10,489,944 Sunoco LP common units, respectively. The Company’s investment represented approximately 32% and 13% of the total outstanding Sunoco LP common units at December 31, 2019 and December 31, 2018, respectively.
The income from the unconsolidated affiliate of $59 million on the Company’s statement of operations for the year ended December 31, 2019 includes the impact of non-cash impairment and loss on disposal of assets recorded by Sunoco LP, which reduced the Company’s income from unconsolidated affiliates by $22 million during the period.
The loss from the unconsolidated affiliate of $37 million on the Company’s statement of operations for the year ended December 31, 2018 includes the impact of non-cash impairments and loss on extinguishment of debt recorded by Sunoco LP, which impacted the Company’s loss from unconsolidated affiliates by $4 million during the period.
The income from the unconsolidated affiliate of $4 million on the Company’s statement of operations for the year ended December 31, 2017 includes the impact of non-cash impairments recorded by Sunoco LP, which reduced the Company’s income from unconsolidated affiliates by $42.5 million during the period.

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4.	Commitments and Contingencies:	
ETC M-A Acquisition LLC Guarantee of Sunoco LP Notes

In connection with previous transactions, the Company has guaranteed collection with respect to the payment of principal amounts of the following senior notes issued by Sunoco LP:
		
•	$1 billion of 4.875% senior notes due 2023;	
		
•	$800 million of 5.50% senior notes due 2026; and	
		
•	$400 million of 5.875% senior notes due 2028.	
Under the guarantee of collection, the Company would have the obligation to pay the principal of each series of notes once all remedies, including in the context of bankruptcy proceedings, have first been fully exhausted against Sunoco LP with respect to such payment obligation, and holders of the notes are still owed amounts in respect of the principal of such notes. The Company will not otherwise be subject to the covenants of the indenture governing the notes.

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