SUNOCO LP, 10-Q filed on 8/5/2021
Quarterly Report
v3.21.2
Document And Entity Information - shares
6 Months Ended
Jun. 30, 2021
Jul. 30, 2021
Document Information [Line Items]    
Document Type 10-Q  
Document Quarterly Report true  
Document Period End Date Jun. 30, 2021  
Document Transition Report false  
Entity File Number 001-35653  
Entity Registrant Name SUNOCO LP  
Entity Incorporation, State or Country Code DE  
Entity Tax Identification Number 30-0740483  
Entity Address, Address Line One 8111 Westchester Drive  
Entity Address, Address Line Two Suite 400  
Entity Address, City or Town Dallas  
Entity Address, State or Province TX  
Entity Address, Postal Zip Code 75225  
City Area Code 214  
Local Phone Number 981-0700  
Title of 12(b) Security Common Units Representing Limited Partner Interests  
Trading Symbol SUN  
Security Exchange Name NYSE  
Entity Current Reporting Status Yes  
Entity Interactive Data Current Yes  
Entity Filer Category Large Accelerated Filer  
Entity Small Business false  
Entity Emerging Growth Company false  
Entity Shell Company false  
Entity Central Index Key 0001552275  
Current Fiscal Year End Date --12-31  
Document Fiscal Year Focus 2021  
Document Fiscal Period Focus Q2  
Amendment Flag false  
Common Units [Member]    
Document Information [Line Items]    
Entity Partnership Units Outstanding   83,352,123
Common Class C [Member]    
Document Information [Line Items]    
Entity Partnership Units Outstanding   16,410,780
v3.21.2
Consolidated Balance Sheets - USD ($)
$ in Millions
Jun. 30, 2021
Dec. 31, 2020
Current assets:    
Cash and cash equivalents $ 87 $ 97
Accounts receivable, net 494 295
Receivables from affiliates 8 11
Inventories, net 488 382
Other current assets 122 62
Total current assets 1,199 847
Property and equipment 2,262 2,231
Accumulated depreciation (862) (806)
Property and equipment, net 1,400 1,425
Other assets:    
Finance lease right-of-use assets, net 9 3
Operating lease right-of-use assets, net 521 536
Goodwill 1,564 1,564
Intangible assets 894 894
Accumulated amortization (334) (306)
Intangible assets, net 560 588
Other noncurrent assets 153 168
Investment in unconsolidated affiliate 134 136
Total assets 5,540 5,267
Current liabilities:    
Accounts payable 519 267
Accounts payable to affiliates 37 79
Accrued expenses and other current liabilities 283 282
Operating lease current liabilities 19 19
Current maturities of long-term debt 6 6
Total current liabilities 864 653
Operating lease noncurrent liabilities 525 538
Revolving line of credit 361 0
Long-term debt, net 2,673 3,106
Advances from affiliates 129 125
Deferred tax liability 103 104
Other noncurrent liabilities 106 109
Total liabilities 4,761 4,635
Commitments and contingencies (Note 10)
Equity:    
Total equity 779 632
Total liabilities and equity 5,540 5,267
Common Units [Member]    
Equity:    
Total equity 779 632
Class C Units [Member]    
Equity:    
Total equity $ 0 $ 0
v3.21.2
Consolidated Balance Sheets (Parenthetical) - shares
Jun. 30, 2021
Dec. 31, 2020
Common Units [Member]    
Equity:    
Limited Partners' Capital Account, Units Issued 83,352,123 83,333,631
Limited Partners' Capital Account, Units Outstanding 83,352,123 83,333,631
Class C Units [Member]    
Equity:    
Limited Partners' Capital Account, Units Issued 16,410,780 16,410,780
Limited Partners' Capital Account, Units Outstanding 16,410,780 16,410,780
v3.21.2
Consolidated Statements of Operations and Comprehensive Income - USD ($)
$ in Millions
3 Months Ended 6 Months Ended
Jun. 30, 2021
Jun. 30, 2020
Jun. 30, 2021
Jun. 30, 2020
Revenues:        
Revenues $ 4,392 $ 2,080 $ 7,863 $ 5,352
Cost of sales and operating expenses:        
Cost of sales 4,039 1,722 7,159 4,886
General and administrative 27 25 51 59
Other operating 61 56 122 151
Lease expense 14 16 29 30
(Gain) loss on disposal of assets (8) 6 (8) 8
Depreciation, amortization and accretion 43 47 90 92
Total cost of sales and operating expenses 4,176 1,872 7,443 5,226
Operating income 216 208 420 126
Interest expense, net (43) (44) (84) (88)
Equity in earnings of unconsolidated affiliate 1 1 2 2
Other income (expense), net 0 0 (7) 0
Income before income taxes 174 165 331 40
Income tax expense 8 8 11 11
Net income and comprehensive income $ 166 $ 157 $ 320 $ 29
Net income (loss) per common unit:        
Basic $ 1.76 $ 1.65 $ 3.37 $ (0.12)
Diluted $ 1.73 $ 1.64 $ 3.33 $ (0.12)
Weighted average common units outstanding:        
Basic 83,350,567 83,030,286 83,346,719 83,022,027
Diluted 84,402,867 83,598,730 84,276,640 83,022,027
Cash distributions per unit $ 0.8255 $ 0.8255 $ 1.6510 $ 1.6510
Common Units [Member]        
Weighted average common units outstanding:        
Basic 83,350,567 83,030,286 83,346,719 83,022,027
Diluted 84,402,867 83,598,730 84,276,640 83,022,027
Motor Fuel Sales [Member]        
Revenues:        
Revenues $ 4,292 $ 1,992 $ 7,655 $ 5,158
Non Motor Fuel Sales [Member]        
Revenues:        
Revenues 66 54 139 125
Lease Income [Member]        
Revenues:        
Revenues $ 34 $ 34 $ 69 $ 69
v3.21.2
Consolidated Statement of Equity
$ in Millions
USD ($)
Beginning balance at Dec. 31, 2019 $ 758
Cash distribution to unitholders (88)
Unit-based compensation 4
Partnership net income (loss) (128)
Ending balance at Mar. 31, 2020 546
Beginning balance at Dec. 31, 2019 758
Partnership net income (loss) 29
Ending balance at Jun. 30, 2020 618
Beginning balance at Mar. 31, 2020 546
Cash distribution to unitholders (88)
Unit-based compensation 3
Partnership net income (loss) 157
Ending balance at Jun. 30, 2020 618
Beginning balance at Dec. 31, 2020 632
Cash distribution to unitholders (88)
Unit-based compensation 4
Partners' Capital, Other (4)
Partnership net income (loss) 154
Ending balance at Mar. 31, 2021 698
Beginning balance at Dec. 31, 2020 632
Partnership net income (loss) 320
Ending balance at Jun. 30, 2021 779
Beginning balance at Mar. 31, 2021 698
Cash distribution to unitholders (88)
Unit-based compensation 3
Partnership net income (loss) 166
Ending balance at Jun. 30, 2021 $ 779
v3.21.2
Consolidated Statements of Cash Flows - USD ($)
$ in Millions
6 Months Ended
Jun. 30, 2021
Jun. 30, 2020
Cash flows from operating activities:    
Net income (loss) and comprehensive income (loss) $ 320 $ 29
Adjustments to reconcile net income to net cash provided by operating activities:    
Depreciation, amortization and accretion 90 92
Amortization of deferred financing fees 4 3
(Gain) loss on disposal of assets (8) 8
Other income (expense), net 7 0
Non-cash unit-based compensation expense 7 7
Deferred income tax 1 5
Inventory valuation adjustment (159) 137
Equity in earnings of unconsolidated affiliate (2) (2)
Changes in operating assets and liabilities, net of acquisitions:    
Accounts receivable, net (199) 129
Receivables from affiliates 3 6
Inventories, net 53 (1)
Other assets (56) 36
Accounts payable 263 (155)
Accounts payable to affiliates (42) (33)
Accrued expenses and other current liabilities 1 23
Other noncurrent liabilities (6) (19)
Net cash provided by operating activities 275 255
Cash flows from investing activities:    
Capital expenditures (48) (59)
Contributions to unconsolidated affiliate 0 (5)
Distributions from unconsolidated affiliate in excess of cumulative earnings 3 4
Proceeds from disposal of property and equipment 14 3
Net cash used in investing activities (31) (57)
Cash flows from financing activities:    
Payments on long-term debt (439) (6)
Revolver borrowings 851 663
Distributions to unitholders (176) (176)
Net cash used in financing activities (254) (186)
Net increase (decrease) in cash and cash equivalents (10) 12
Cash and cash equivalents at beginning of period 97 21
Cash and cash equivalents at end of period 87 33
Supplemental disclosure of non-cash investing activities:    
Change in note payable to affiliate 6 11
Repayments of Lines of Credit $ (490) $ (667)
v3.21.2
Organization and Principles of Consolidation
6 Months Ended
Jun. 30, 2021
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Organization and Principles of Consolidation Organization and Principles of Consolidation
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.
We are a Delaware master limited partnership. We are managed by our general partner, Sunoco GP LLC (“General Partner”), which is owned by Energy Transfer LP (“ET”). Prior to April 1, 2021, Energy Transfer Operating, L.P. (“ETO”) owned our General Partner. On April 1, 2021, ETO merged into ET with ET surviving the merger. As of June 30, 2021, ET and its subsidiaries owned 100% of the membership interests in our General Partner, all of our incentive distribution rights (“IDRs”) and approximately 34.1% of our common units, which constitutes a 28.5% limited partner interest in us.
The consolidated financial statements are composed of Sunoco LP, a publicly traded Delaware limited partnership, and our wholly‑owned subsidiaries.
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. Sunoco Retail also leases owned sites to commission agents who sell motor fuels to the motoring public on Sunoco Retail's behalf for a commission.
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 material impact on operating income, net income and comprehensive income, the balance sheets or statements of cash flows.
v3.21.2
Summary of Significant Accounting Policies
6 Months Ended
Jun. 30, 2021
Accounting Policies [Abstract]  
Significant Accounting Policies [Text Block] Summary of Significant Accounting Policies
Interim Financial Statements
The accompanying interim consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). Pursuant to Regulation S-X, certain information and disclosures normally included in the annual financial statements have been condensed or omitted. The interim consolidated financial statements and notes included herein should be read in conjunction with the consolidated financial statements and notes included in our Annual Report on Form 10-K for the year ended December 31, 2020 filed with the Securities and Exchange Commission ("SEC") on February 19, 2021.
Significant Accounting Policies
As of June 30, 2021, there have been no changes in the Partnership's significant accounting policies from those described in the Annual Report on Form 10-K for the year ended December 31, 2020 filed with the SEC on February 19, 2021.
Motor Fuel and Sales Taxes
For bulk sales, 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 direct sales to dealer and commercial customers is to exclude the collected motor fuel tax from sales and cost of sales.
For other locations where the Partnership holds inventory, including commission agent arrangements and Partnership-operated retail locations, motor fuel sales and motor fuel cost of sales include motor fuel taxes. Such amounts were $87 million and $64 million for the three months ended June 30, 2021 and 2020, respectively, and $164 million and $144 million for the six months ended June 30, 2021 and 2020, respectively. Merchandise sales and cost of merchandise sales are reported net of sales tax in the accompanying consolidated statements of operations and comprehensive income.
v3.21.2
Accounts Receivable, net
6 Months Ended
Jun. 30, 2021
Accounts Receivable, after Allowance for Credit Loss [Abstract]  
Accounts Receivable, net Accounts Receivable, net
Accounts receivable, net, consisted of the following:
June 30,
2021
December 31,
2020
(in millions)
Accounts receivable, trade$388 $239 
Credit card receivables41 24 
Vendor receivables for rebates and branding30 26 
Other receivables42 13 
Allowance for expected credit losses(7)(7)
Accounts receivable, net$494 $295 
v3.21.2
Inventories, net
6 Months Ended
Jun. 30, 2021
Inventory Disclosure [Abstract]  
Inventories, net Inventories, net 
Due to changes in fuel prices, we recorded an inventory adjustment on the value of fuel inventory of $159 million for the six months ended June 30, 2021.
Fuel inventories are stated at the lower of cost or market using the last-in-first-out (“LIFO”) method. As of June 30, 2021 and December 31, 2020, the carrying value of the Partnership’s fuel inventory included lower of cost or market reserves of $152 million and $311 million, respectively, and the inventory carrying value equaled or exceeded its replacement cost. For the three and six months ended June 30, 2021 and 2020, the Partnership’s consolidated statements of operations and comprehensive income did not include any material amounts of income from the liquidation of LIFO fuel inventory.
Inventories, net, consisted of the following:
June 30,
2021
December 31,
2020
(in millions)
Fuel$480 $374 
Other
Inventories, net$488 $382 
v3.21.2
Accrued Expenses and Other Current Liabilities
6 Months Ended
Jun. 30, 2021
Accrued Expenses And Other Current Liabilities [Abstract]  
Accrued Expenses and Other Current Liabilities Accrued Expenses and Other Current Liabilities
Current accrued expenses and other current liabilities consisted of the following:
June 30,
2021
December 31,
2020
(in millions)
Wage and other employee-related accrued expenses$16 $23 
Accrued tax expense137 135 
Accrued insurance23 24 
Accrued interest expense40 49 
Dealer deposits21 22 
Accrued environmental expense10 
Other36 25 
Total$283 $282 
v3.21.2
Long-Term Debt
6 Months Ended
Jun. 30, 2021
Debt Disclosure [Abstract]  
Long-Term Debt Long-Term Debt 
Long-term debt consisted of the following:
June 30,
2021
December 31,
2020
(in millions)
Sale leaseback financing obligation $94 $97 
2018 Revolver361 — 
4.875% Senior Notes Due 2023 (1)
— 436 
5.500% Senior Notes Due 2026 (2)
800 800 
6.000% Senior Notes Due 2027
600 600 
5.875% Senior Notes Due 2028 (2)
400 400 
4.500% Senior Notes Due 2029
800 800 
Finance leases
Total debt3,064 3,139 
Less: current maturities
Less: debt issuance costs24 27 
Long-term debt, net$3,034 $3,106 
(1) On January 15, 2021, we used proceeds from borrowings on our 2018 Revolver (described below) to repurchase the remaining $436 million outstanding principal amount of our 4.875% senior notes due 2023.
(2) In connection with the merger of ETO into ET on April 1, 2021, as discussed in Note 1, the guarantees of the Partnership's senior notes due 2026 and 2028 have been assumed by ET.
Revolving Credit Agreement
The Partnership is party to an 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”). As of June 30, 2021, the balance on the 2018 Revolver was $361 million, and $8 million in standby letters of credit were outstanding. The unused availability on the 2018 Revolver at June 30, 2021 was $1.1 billion. The weighted average interest rate on the total amount outstanding at June 30, 2021 was 2.08%. The Partnership was in compliance with all financial covenants at June 30, 2021.
Fair Value of Debt
The estimated fair value of debt is calculated using Level 2 inputs. The estimated fair value of debt as of June 30, 2021 was approximately $3.2 billion, based on outstanding balances as of the end of the period using current interest rates for similar securities.
v3.21.2
Other Noncurrent Liabilities (Notes)
6 Months Ended
Jun. 30, 2021
Other Liabilities Disclosure [Abstract]  
Other Liabilities Disclosure [Text Block] Other Noncurrent Liabilities
Other noncurrent liabilities consisted of the following:
June 30,
2021
December 31,
2020
 (in millions)
Reserve for underground storage tank removal$77 $75 
Accrued environmental expense, long-term13 16 
Other16 18 
Total$106 $109 
v3.21.2
Related-Party Transactions
6 Months Ended
Jun. 30, 2021
Related Party Transactions [Abstract]  
Related-Party Transactions Related-Party Transactions
We are party to fee-based commercial agreements with various affiliates of ET for pipeline, terminalling and storage services. We also have agreements with subsidiaries of ET 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. ET 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. The carrying value of our investment in this unconsolidated joint venture was $134 million and $136 million as of June 30, 2021 and
December 31, 2020, respectively. In addition, we recorded income on the unconsolidated joint venture of $1 million for both the three months ended June 30, 2021 and 2020 and $2 million for both the six months ended June 30, 2021 and 2020.
Summary of Transactions
Related party transactions with affiliates for the three and six months ended June 30, 2021 and 2020 were as follows (in millions):
Three Months Ended June 30,Six Months Ended June 30,
2021202020212020
Motor fuel sales to affiliates$$37 $$49 
Bulk fuel purchases from affiliates$419 $120 $752 $439 
Significant affiliate balances and activity related to the consolidated balance sheets are as follows:
Net advances from affiliates were $129 million and $125 million as of June 30, 2021 and December 31, 2020, respectively. Advances from affiliates are primarily related to the treasury services agreements between Sunoco LLC and Energy Transfer (R&M), LLC and between Sunoco Retail and Energy Transfer (R&M), LLC, which are in place for purposes of cash management and transactions related to the diesel fuel pipeline joint venture with ET.
Net accounts receivable from affiliates were $8 million and $11 million as of June 30, 2021 and December 31, 2020, respectively, which are primarily related to motor fuel sales to affiliates.
Net accounts payable to affiliates were $37 million and $79 million as of June 30, 2021 and December 31, 2020, respectively, which are related to operational expenses and bulk fuel purchases.
v3.21.2
Revenue (Notes)
6 Months Ended
Jun. 30, 2021
Revenue from Contract with Customer [Abstract]  
Revenue from Contract with Customer [Text Block] 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:
Three Months Ended June 30,Six Months Ended June 30,
2021202020212020
(in millions)
Fuel Distribution and Marketing Segment
Dealer$903 $374 $1,582 $1,035 
Distributor2,123 645 3,738 2,112 
Unbranded wholesale744 548 1,412 1,143 
Commission agent369 363 659 679 
Non motor fuel sales16 20 30 31 
Lease income32 29 65 59 
Total4,187 1,979 7,486 5,059 
All Other Segment
Motor fuel
153 62 264 189 
Non motor fuel sales50 34 109 94 
Lease income10 
Total205 101 377 293 
Total revenue$4,392 $2,080 $7,863 $5,352 
Contract Balances with Customers
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 expected credit losses. The allowance for expected credit losses represents our best estimate of the probable losses associated with potential customer defaults. We estimate the expected credit losses based on historical write-off experience by industry and current expectations of future credit losses.
The balances of the Partnership’s contract assets and contract liabilities as of June 30, 2021 and December 31, 2020 were as follows:
June 30, 2021 December 31, 2020
(in millions)
Contract balances
Contract asset$135 $121 
Accounts receivable from contracts with customers$422 $256 
Contract liability$— $— 
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 the 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 was $5 million and $9 million for the three and six months ended June 30, 2021, respectively, and $5 million and $10 million for the three and six months ended June 30, 2020, 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.
v3.21.2
Commitments And Contingencies
6 Months Ended
Jun. 30, 2021
Leases [Abstract]  
Commitments and Contingencies Commitments and Contingencies
Litigation
We have at various points and may in the future become involved in various legal proceedings arising out of our operations in the normal course of business. These proceedings would be subject to the uncertainties inherent in any litigation, and we regularly assess the need for accounting recognition or disclosure of these contingencies. We would expect to defend ourselves vigorously in all such matters. Based on currently available information, we believe it is unlikely that the outcome of known matters would have a material adverse impact on our financial condition, results of operations or cash flows.
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. 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. Operating leases are included in lease right-of-use (“ROU”) assets, operating lease current liabilities, and operating lease noncurrent liabilities in our consolidated balance sheets. 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 sheets. 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 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 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 on or before the commencement date 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 details of the Partnership's operating and finance lease liabilities are as follows:
June 30,
Lease Term and Discount Rate20212020
Weighted-average remaining lease term (years)
Operating leases2324
Finance leases295
Weighted-average discount rate (%)
Operating leases%%
Finance leases%%
Six Months Ended June 30,
Other information20212020
(in millions)
Cash paid for amount included in the measurement of lease liabilities
Operating cash flows from operating leases$(25)$(26)
Operating cash flows from finance leases$(1)$— 
Financing cash flows from finance leases$— $(3)
Leased assets obtained in exchange for new finance lease liabilities$$— 
Leased assets obtained in exchange for new operating lease liabilities$$
Maturity of lease liabilities (as of June 30, 2021)
Operating leasesFinance leasesTotal
(in millions)
2021 (remainder)$25 $— $25 
202249 — 49 
202347 — 47 
202446 — 46 
202546 — 46 
Thereafter815 16 831 
Total lease payment1,028 16 1,044 
Less: interest484 491 
Present value of lease liabilities$544 $$553 
Lessor Accounting
The Partnership leases or subleases a portion of its real estate portfolio to third party companies as a stable source of long-term revenue. Our lessor and sublease portfolio consists mainly of operating leases with convenience store operators. At this time, most lessor agreements contain 5-year terms with renewal options to extend and early termination options based on established terms specific to the individual agreement.
v3.21.2
Interest Expense, net
6 Months Ended
Jun. 30, 2021
Interest Income (Expense), Net [Abstract]  
Interest Expense, net Interest Expense, net
Components of net interest expense were as follows:
Three Months Ended June 30,Six Months Ended June 30,
2021202020212020
(in millions)
Interest expense$40 $43 $80 $87 
Amortization of deferred financing fees
Interest income— (1)— (2)
Interest expense, net$43 $44 $84 $88 
v3.21.2
Income Tax Expense
6 Months Ended
Jun. 30, 2021
Income Tax Disclosure [Abstract]  
Income Tax Expense Income Tax Expense
As a partnership, we are generally not subject to federal income tax and most state income taxes. However, the Partnership conducts certain activities through corporate subsidiaries which are subject to federal and state income taxes.
Our effective tax rate differs from the statutory rate primarily due to Partnership earnings that are not subject to U.S. federal and most state income taxes at the Partnership level. A reconciliation of income tax expense from continuing operations at the U.S. federal statutory rate of 21% to net income tax expense is as follows:
Three Months Ended June 30,Six Months Ended June 30,
2021202020212020
(in millions)
Income tax expense at statutory federal rate$37 $35 $69 $
Partnership earnings not subject to tax(30)(28)(61)(2)
State and local tax, net of federal benefit
Other(1)— — 
Net income tax expense$$$11 $11 
v3.21.2
Partners' Capital
6 Months Ended
Jun. 30, 2021
Partners' Capital [Abstract]  
Partners' Capital Partners' Capital
As of June 30, 2021, ET and its subsidiaries owned 28,463,967 common units, which constitutes 34.1% of our outstanding common units, and the public owned 54,888,156 common units. As of June 30, 2021, our consolidated subsidiaries owned all of the 16,410,780 Class C units representing limited partner interests in the Partnership (the “Class C Units”).
Common Units
The change in our outstanding common units for the six months ended June 30, 2021 is as follows: 
Number of Units
Number of common units at December 31, 2020
83,333,631 
Phantom vested units exercised18,492 
Number of common units at June 30, 2021
83,352,123 
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 to incentive cash distributions, which are allocated 100% to ET.

The calculation of net income allocated to the partners is as follows (in millions):
Three Months Ended June 30,Six Months Ended June 30,
2021202020212020
Attributable to Common Units
Distributions $69 $69 $138 $137 
Distributions (in excess of) less than net income78 69 143 (147)
Limited partners' interest in net income (loss)$147 $138 $281 $(10)
Cash Distributions
Our Partnership Agreement sets forth the calculation used to determine the amount and priority of cash distributions that the common unitholders receive.
Cash distributions paid or declared during 2021 were as follows:
Limited Partners
Payment DatePer Unit DistributionTotal Cash DistributionDistribution to IDR Holders
(in millions, except per unit amounts)
August 19, 2021$0.8255 $69 $18 
May 19, 2021$0.8255 $69 $18 
February 19, 2021$0.8255 $69 $18 
v3.21.2
Segment Reporting
6 Months Ended
Jun. 30, 2021
Segment Reporting [Abstract]  
Segment Reporting Disclosure [Text Block] Segment Reporting
Our consolidated financial statements reflect two reportable segments, Fuel Distribution and Marketing and All Other.
We report Adjusted EBITDA by segment as a measure of segment performance. We define Adjusted EBITDA as earnings before net interest expense, income tax expense and depreciation, amortization and accretion expense, non-cash unit-based compensation expense, gains and losses on disposal of assets and non-cash 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. Inventory adjustments that are excluded from the calculation of Adjusted EBITDA represent changes in lower of cost or market reserves on the Partnership's inventory. These amounts are unrealized valuation adjustments applied to fuel volumes remaining in inventory at the end of the period.
The following table presents financial information by segment for the three and six months ended June 30, 2021 and 2020: 
Three Months Ended June 30,
20212020
Fuel Distribution and MarketingAll OtherIntercompany EliminationsTotalsFuel Distribution and MarketingAll OtherIntercompany EliminationsTotals
(in millions)
Revenue
Motor fuel sales$4,139 $153 $4,292 $1,930 $62 $1,992 
Non motor fuel sales16 50 66 20 34 54 
Lease income32 34 29 34 
Intersegment sales379 — (379)— 152 — (152)— 
Total revenue4,566 205 (379)4,392 2,131 101 (152)2,080 
Gross profit (1)
Motor fuel265 12 277 275 19 294 
Non motor fuel14 28 42 13 17 30 
Lease32 34 29 34 
Total gross profit311 42 353 317 41 358 
Total operating expenses99 38 137 117 33 150 
Operating income212 216 200 208 
Interest expense, net(38)(5)(43)(37)(7)(44)
Equity in earnings of unconsolidated affiliate— — 
Income (loss) from operations before income taxes175 (1)174 164 165 
Income tax expense (benefit)(1)
Net income (loss) and comprehensive income (loss)$166 $— $166 $161 $(4)$157 
Depreciation, amortization and accretion36 43 36 11 47 
Interest expense, net38 43 37 44 
Income tax expense (benefit)(1)
Non-cash unit-based compensation expense— — 
(Gain) loss on disposal of assets (7)(1)(8)— 
Unrealized gain on commodity derivatives(2)— (2)— — — 
Inventory adjustments(59)— (59)(87)(3)(90)
Equity in earnings of unconsolidated affiliate(1)— (1)(1)— (1)
Adjusted EBITDA related to unconsolidated affiliate— — 
Other non-cash adjustments— — 
Adjusted EBITDA$191 $10 $201 $160 $22 $182 
Capital expenditures$28 $$30 $15 $$18 
Total assets as of June 30, 2021 and
December 31, 2020, respectively
$4,477 $1,063 $5,540 $3,417 $1,850 $5,267 
________________________________
(1)    Excludes depreciation, amortization and accretion.
Six Months Ended June 30,
20212020
Fuel Distribution and MarketingAll OtherIntercompany EliminationsTotalsFuel Distribution and MarketingAll OtherIntercompany EliminationsTotals
(in millions)
Revenue
Motor fuel sales$7,391 $264 $7,655 $4,969 $189 $5,158 
Non motor fuel sales30 109 139 31 94 125 
Lease income65 69 59 10 69 
Intersegment sales660 — (660)— 445 — (445)— 
Total revenue8,146 377 (660)7,863 5,504 293 (445)5,352 
Gross profit (1)
Motor fuel538 20 558 269 46 315 
Non motor fuel26 51 77 24 58 82 
Lease65 69 59 10 69 
Total gross profit629 75 704 352 114 466 
Total operating expenses208 76 284 272 68 340 
Operating income421 (1)420 80 46 126 
Interest expense, net(75)(9)(84)(75)(13)(88)
Loss on extinguishment of debt(7)— (7)— — — 
Equity in earnings of unconsolidated affiliate— — 
Income (loss) from operations before income taxes341 (10)331 33 40 
Income tax expense (benefit)12 (1)11 11 
Net income (loss) and
comprehensive income
$329 $(9)$320 $$25 $29 
Depreciation, amortization and accretion75 15 90 73 19 92 
Interest expense, net75 84 75 13 88 
Income tax expense (benefit)12 (1)11 11 
Non-cash unit-based compensation expense— — 
(Gain) Loss on disposal of assets and impairment charges(8)— (8)— 
Loss on extinguishment of debt— — — — 
Unrealized (gain) loss on commodity derivatives(7)— (7)— 
Inventory adjustments(159)— (159)139 (2)137 
Equity in earnings of unconsolidated affiliate(2)— (2)(2)— (2)
Adjusted EBITDA related to unconsolidated affiliate— — 
Other non-cash adjustments11 — 11 10 — 10 
Adjusted EBITDA$344 $14 $358 $320 $71 $391 
Capital expenditures$45 $$48 $40 $19 $59 
Total assets as of June 30, 2021 and
December 31, 2020, respectively
$4,477 $1,063 $5,540 $3,417 $1,850 $5,267 
________________________________
(1)    Excludes depreciation, amortization and accretion.
v3.21.2
Net Income per Unit
6 Months Ended
Jun. 30, 2021
Net Income Per Unit [Abstract]  
Net Income per Unit Net Income (Loss) per Common Unit
A reconciliation of the numerators and denominators of the basic and diluted net income per common unit computations is as follows:
Three Months Ended June 30,Six Months Ended June 30,
2021202020212020
(in millions, except units and per unit amounts)
Net income and comprehensive income$166 $157 $320 $29 
Less:
Incentive distribution rights
18 17 36 35 
Distributions on nonvested phantom unit awards
Limited partners interest in net income (loss)
$147 $138 $281 $(10)
Weighted average common units outstanding:
Basic
83,350,567 83,030,286 83,346,719 83,022,027 
Dilutive effect of nonvested phantom unit awards (1)
1,052,300 568,444 929,921 — 
Diluted
84,402,867 83,598,730 84,276,640 83,022,027 
Net income (loss) per common unit:
Basic
$1.76 $1.65 $3.37 $(0.12)
Diluted
$1.73 $1.64 $3.33 $(0.12)
v3.21.2
Organization and Principles of Consolidation Organization and Principles of Consolidation (Policies)
6 Months Ended
Jun. 30, 2021
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Basis of Presentation and Significant Accounting Policies [Text Block]
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 material impact on operating income, net income and comprehensive income, the balance sheets or statements of cash flows.
v3.21.2
Summary of Significant Accounting Policies (Policies)
6 Months Ended
Jun. 30, 2021
Accounting Policies [Abstract]  
Basis of Accounting, Policy [Policy Text Block]
Interim Financial Statements
The accompanying interim consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). Pursuant to Regulation S-X, certain information and disclosures normally included in the annual financial statements have been condensed or omitted. The interim consolidated financial statements and notes included herein should be read in conjunction with the consolidated financial statements and notes included in our Annual Report on Form 10-K for the year ended December 31, 2020 filed with the Securities and Exchange Commission ("SEC") on February 19, 2021.
Recently Issued Accounting Pronouncements Significant Accounting PoliciesAs of June 30, 2021, there have been no changes in the Partnership's significant accounting policies from those described in the Annual Report on Form 10-K for the year ended December 31, 2020 filed with the SEC on February 19, 2021.
Motor Fuel and Sales Taxes
Motor Fuel and Sales Taxes
For bulk sales, 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 direct sales to dealer and commercial customers is to exclude the collected motor fuel tax from sales and cost of sales.
For other locations where the Partnership holds inventory, including commission agent arrangements and Partnership-operated retail locations, motor fuel sales and motor fuel cost of sales include motor fuel taxes. Such amounts were $87 million and $64 million for the three months ended June 30, 2021 and 2020, respectively, and $164 million and $144 million for the six months ended June 30, 2021 and 2020, respectively. Merchandise sales and cost of merchandise sales are reported net of sales tax in the accompanying consolidated statements of operations and comprehensive income.
v3.21.2
Inventory (Policies)
6 Months Ended
Jun. 30, 2021
Inventory Disclosure [Abstract]  
Inventory, Policy Fuel inventories are stated at the lower of cost or market using the last-in-first-out (“LIFO”) method. As of June 30, 2021 and December 31, 2020, the carrying value of the Partnership’s fuel inventory included lower of cost or market reserves of $152 million and $311 million, respectively, and the inventory carrying value equaled or exceeded its replacement cost. For the three and six months ended June 30, 2021 and 2020, the Partnership’s consolidated statements of operations and comprehensive income did not include any material amounts of income from the liquidation of LIFO fuel inventory.
v3.21.2
Revenue from Contract with Customer (Policies)
6 Months Ended
Jun. 30, 2021
Revenue from Contract with Customer [Abstract]  
Revenue
Contract Balances with Customers
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 expected credit losses. The allowance for expected credit losses represents our best estimate of the probable losses associated with potential customer defaults. We estimate the expected credit losses based on historical write-off experience by industry and current expectations of future credit losses.
Costs to Obtain or Fulfill a ContractThe 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 the 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 was $5 million and $9 million for the three and six months ended June 30, 2021, respectively, and $5 million and $10 million for the three and six months ended June 30, 2020, 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.
v3.21.2
Partners' Capital Partners' Capital (Policies)
6 Months Ended
Jun. 30, 2021
Partners' Capital [Abstract]  
Allocation of net income [Policy Text Block]
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 to incentive cash distributions, which are allocated 100% to ET.
v3.21.2
Accounts Receivable, net (Tables)
6 Months Ended
Jun. 30, 2021
Accounts Receivable, after Allowance for Credit Loss [Abstract]  
Schedule of Accounts Receivable
Accounts receivable, net, consisted of the following:
June 30,
2021
December 31,
2020
(in millions)
Accounts receivable, trade$388 $239 
Credit card receivables41 24 
Vendor receivables for rebates and branding30 26 
Other receivables42 13 
Allowance for expected credit losses(7)(7)
Accounts receivable, net$494 $295 
v3.21.2
Inventories, net (Tables)
6 Months Ended
Jun. 30, 2021
Inventory Disclosure [Abstract]  
Schedule of Inventories
Inventories, net, consisted of the following:
June 30,
2021
December 31,
2020
(in millions)
Fuel$480 $374 
Other
Inventories, net$488 $382 
v3.21.2
Accrued Expenses and Other Current Liabilities (Tables)
6 Months Ended
Jun. 30, 2021
Accrued Expenses And Other Current Liabilities [Abstract]  
Schedule of Accrued Liabilities
Current accrued expenses and other current liabilities consisted of the following:
June 30,
2021
December 31,
2020
(in millions)
Wage and other employee-related accrued expenses$16 $23 
Accrued tax expense137 135 
Accrued insurance23 24 
Accrued interest expense40 49 
Dealer deposits21 22 
Accrued environmental expense10 
Other36 25 
Total$283 $282 
v3.21.2
Long-Term Debt (Tables)
6 Months Ended
Jun. 30, 2021
Debt Disclosure [Abstract]  
Schedule of Long-term Debt
Long-term debt consisted of the following:
June 30,
2021
December 31,
2020
(in millions)
Sale leaseback financing obligation $94 $97 
2018 Revolver361 — 
4.875% Senior Notes Due 2023 (1)
— 436 
5.500% Senior Notes Due 2026 (2)
800 800 
6.000% Senior Notes Due 2027
600 600 
5.875% Senior Notes Due 2028 (2)
400 400 
4.500% Senior Notes Due 2029
800 800 
Finance leases
Total debt3,064 3,139 
Less: current maturities
Less: debt issuance costs24 27 
Long-term debt, net$3,034 $3,106 
v3.21.2
Other Noncurrent Liabilities (Tables)
6 Months Ended
Jun. 30, 2021
Other Liabilities Disclosure [Abstract]  
Other Noncurrent Liabilities [Table Text Block]
June 30,
2021
December 31,
2020
 (in millions)
Reserve for underground storage tank removal$77 $75 
Accrued environmental expense, long-term13 16 
Other16 18 
Total$106 $109 
v3.21.2
Related-Party Transactions (Tables)
6 Months Ended
Jun. 30, 2021
Related Party Transactions [Abstract]  
Schedule of Related Party Transactions [Table Text Block]
Related party transactions with affiliates for the three and six months ended June 30, 2021 and 2020 were as follows (in millions):
Three Months Ended June 30,Six Months Ended June 30,
2021202020212020
Motor fuel sales to affiliates$$37 $$49 
Bulk fuel purchases from affiliates$419 $120 $752 $439 
v3.21.2
Revenue (Tables)
6 Months Ended
Jun. 30, 2021
Revenue from Contract with Customer [Abstract]  
Disaggregation of Revenue [Table Text Block]
The following table depicts the disaggregation of revenue by channel within each segment:
Three Months Ended June 30,Six Months Ended June 30,
2021