NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
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1.
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Organization and Principles of Consolidation
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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 Operating, L.P. (“ETO”), a consolidated subsidiary of Energy Transfer LP (“ET”). As of September 30, 2019, ETO and its subsidiaries owned 100% of the membership interests in our General Partner, all of our incentive distribution rights (“IDRs”) and approximately 34.4% of our common units, which constitutes a 28.7% 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:
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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.
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•
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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.
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Aloha Petroleum LLC, a Delaware limited liability company, distributes motor fuel and operates terminal facilities on the Hawaiian Islands.
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•
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Aloha Petroleum, Ltd. (“Aloha”), a Hawaii corporation, owns and operates retail stores on the Hawaiian Islands.
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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 gross profit, income from operations, net income (loss) and comprehensive income (loss), the balance sheets or statements of cash flows.
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2.
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Summary of Significant Accounting Policies
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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, 2018 filed with the SEC on February 22, 2019.
Significant Accounting Policies
As of September 30, 2019, the only material change in the Partnership’s significant accounting policies, as compared to those described in the Annual Report on Form 10-K for the year ended December 31, 2018, was the adoption of Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic 842), described under Change in Accounting Principle.
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 $101 million and $97 million for the three months ended September 30, 2019 and 2018, respectively, and $295 million and $280 million for the nine months ended September 30, 2019 and 2018, respectively. Merchandise sales and cost of merchandise sales are reported net of sales tax in the accompanying consolidated statements of operations and comprehensive income (loss).
Change in Accounting Principle
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 involves 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 $547 million as of January 1, 2019. In addition to the evaluation performed, we have made appropriate design and implementation updates to our business processes, systems, and internal controls to support the on-going reporting requirements under the new standard.
Topic 842 provides for certain practical expedients that companies can elect to apply for purposes of adoption and implementation of the new standard. The practical expedients utilized by the Partnership are as follows: 1) no reassessment of whether existing contracts contain a lease, 2) no reassessment of the classification of existing leases, 3) no reassessment of initial direct costs for existing leases, 4) exclusion of leases with terms of 12 months or less from evaluation, 5) use of the portfolio approach to determine discount rates, 6) election to not separate non-lease components from lease components in existing lease agreements, and 7) election to not apply the use of hindsight to the active lease population.
The cumulative effect of the changes made to our consolidated January 1, 2019 balance sheet for the adoption of ASU No. 2016-02 was as follows:
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Classification
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Balance at
December 31, 2018
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Adjustments Due to
Topic 842
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Balance at
January 1, 2019
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(in millions)
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Assets
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Property and equipment, net
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$
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1,546
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$
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(1
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)
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$
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1,545
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Lease right-of-use assets
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—
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548
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548
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Liabilities
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Accrued expenses and other current liabilities
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299
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(1
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298
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Current maturities of long term debt
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5
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1
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6
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Operating lease current liabilities
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—
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25
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25
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Long term debt, net
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2,280
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6
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2,286
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Operating lease non-current liabilities
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—
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528
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528
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Other non-current liabilities
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123
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(12
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111
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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.
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4.
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Discontinued Operations
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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. (“7-Eleven”) and SEI Fuel Services, Inc., a 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”). 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 are no longer 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, as amended (the “Supply Agreement”), with 7-Eleven and SEI Fuel. The Supply Agreement consists of a 15-year take-or-pay fuel supply arrangement. For the period from January 1, 2018 through January 22, 2018, we recorded sales to the sites that were subsequently sold to 7-Eleven of $199 million that were eliminated in consolidation. We received payments on trade receivables from 7-Eleven of $1.0 billion and $2.9 billion during the three and nine months ended September 30, 2019, respectively, and $1.0 billion and $2.6 billion during the three and nine months ended September 30, 2018, respectively, subsequent to the closing of the sale.
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. Real estate assets included in this process are company-owned locations, undeveloped greenfield sites and other excess real estate. Properties are 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 properties will be sold through a sealed-bid sale. Of the 97 properties, 52 have been sold and four continue to be marketed by the third-party brokerage firm. Additionally, 32 were sold to 7-Eleven and nine are part of the approximately 207 retail sites located in certain West Texas, Oklahoma and New Mexico markets which are operated by a commission agent. 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 for all periods presented in the consolidated financial statements. All other footnotes present results of the continuing operations.
The Partnership has 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.
The Partnership had no assets or liabilities associated with discontinued operations as of September 30, 2019 or December 31, 2018. There were no results of operations associated with discontinued operations for the three and nine months ended September 30, 2019. The results of operations associated with discontinued operations for the three and nine months ended September 30, 2018 are presented in the following table:
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Three Months Ended
September 30, 2018
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Nine Months Ended
September 30, 2018
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(in millions)
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Revenues:
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Motor fuel sales
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$
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—
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$
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256
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Non motor fuel sales (1)
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—
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93
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Total revenues
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—
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349
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Cost of sales and operating expenses:
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Cost of sales
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—
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305
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General and administrative
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—
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7
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Other operating
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—
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57
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Lease expense
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—
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4
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Loss on disposal of assets
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—
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61
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Total cost of sales and operating expenses
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—
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434
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Operating loss
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—
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(85
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Interest expense, net
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—
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2
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Loss on extinguishment of debt
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—
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20
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Loss from discontinued operations before income taxes
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—
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(107
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Income tax expense
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2
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158
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Loss from discontinued operations, net of income taxes
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$
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(2
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$
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(265
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)
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________________________________
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(1)
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Non motor fuel sales includes merchandise sales totaling $89 million for the nine months ended September 30, 2018.
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5.
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Accounts Receivable, net
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Accounts receivable, net, consisted of the following:
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September 30,
2019
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December 31,
2018
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(in millions)
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Accounts receivable, trade
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$
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335
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$
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299
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Credit card receivables
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68
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49
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Other receivables
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49
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28
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Allowance for doubtful accounts
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(2
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(2
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Accounts receivable, net
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$
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450
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$
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374
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Inventories, net, consisted of the following:
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September 30,
2019
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December 31,
2018
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(in millions)
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Fuel
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$
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415
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$
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363
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Other
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7
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11
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Inventories, net
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$
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422
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$
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374
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7.
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Accrued Expenses and Other Current Liabilities
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Current accrued expenses and other current liabilities consisted of the following:
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September 30,
2019
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December 31,
2018
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(in millions)
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Wage and other employee-related accrued expenses
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$
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31
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$
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41
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Accrued tax expense
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67
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91
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Accrued insurance
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32
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31
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Accrued interest expense
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40
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47
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Dealer deposits
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18
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18
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Accrued environmental expense
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6
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6
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Other
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49
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65
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Total
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$
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243
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$
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299
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Long-term debt consisted of the following:
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September 30,
2019
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December 31,
2018
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(in millions)
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Sale leaseback financing obligation
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$
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104
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$
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107
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2018 Revolver
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154
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700
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4.875% Senior Notes Due 2023
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1,000
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1,000
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5.500% Senior Notes Due 2026
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800
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800
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6.000% Senior Notes Due 2027
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600
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—
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5.875% Senior Notes Due 2028
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400
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400
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Finance leases
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42
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1
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Total debt
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3,100
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3,008
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Less: current maturities
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13
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5
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Less: debt issuance costs
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27
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23
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Long-term debt, net of current maturities
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$
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3,060
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$
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2,980
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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.
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 previous revolving credit facility.
As of September 30, 2019, the balance on the 2018 Revolver was $154 million, and $8 million in standby letters of credit were outstanding. The unused availability on the 2018 Revolver at September 30, 2019 was $1.3 billion. The weighted average interest rate on the total amount outstanding at September 30, 2019 was 4.04%. The Partnership was in compliance with all financial covenants at September 30, 2019.
Fair Value of Debt
The estimated fair value of debt is calculated using Level 2 inputs. The fair value of debt as of September 30, 2019 is estimated to be approximately $3.2 billion, based on outstanding balances as of the end of the period using current interest rates for similar securities.
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9.
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Other Non-Current Liabilities
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Other non-current liabilities consisted of the following:
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September 30,
2019
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|
December 31, 2018
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(in millions)
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Reserve for underground storage tank removal
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$
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67
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$
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54
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Reserve for environmental remediation
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25
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|
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29
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Unfavorable lease liability
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14
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|
16
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Accrued straight-line rent
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—
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|
12
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Other
|
11
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|
12
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Total
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$
|
117
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$
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123
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10.
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Related-Party Transactions
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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. In addition, we are party to two related products purchase agreements, one with Philadelphia Energy Solutions Refining & Marketing (“PES”) and one with PES’s product financier, Merrill Lynch Commodities; both purchase agreements contain 12-month terms that automatically renew for consecutive 12-month terms until either party cancels with notice. ETP Retail Holdings, LLC, a subsidiary of ETO, owns a noncontrolling interest in the parent of PES. Beginning in the third quarter of 2018, PES was no longer considered an affiliate of ETO as ETO was no longer considered to have any significant influence over PES’s management or operations. In June 2019, an explosion occurred at the PES refinery complex. On July 21, 2019, PES Holdings, LLC and seven of its subsidiaries, including PES (collectively, the "Debtors") filed voluntary petitions in the United States Bankruptcy Court for the District of Delaware seeking relief under the provisions of Chapter 11 of the United States Bankruptcy Code, as a result of the explosion and fire at the Philadelphia refinery complex. The Debtors have announced an intent to temporarily cease refinery operations. The Debtors have expressed an intent to rebuild the refinery with the proceeds from insurance claims while concurrently running a sale process for their assets and operations. We have been successful at acquiring alternative supplies to replace fuel volume lost from PES and do not anticipate any material impact to our business going forward.
On July 1, 2019, we entered into a 50% ownership joint venture on the J.C. Nolan diesel fuel pipeline to West Texas. ETO will operate the J. C. Nolan pipeline for the joint venture, which will transport diesel fuel from Hebert, Texas to a terminal in the Midland, Texas area. Our investment in this unconsolidated joint venture was $112 million as of September 30, 2019. In addition, we recorded income on the unconsolidated joint venture of $0.1 million for the three months ended September 30, 2019.
Summary of Transactions
Significant affiliate balances and activity related to the consolidated balance sheets and consolidated statements of operations and comprehensive income (loss) are as follows:
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Net advances from affiliates were $141 million and $24 million as of September 30, 2019 and December 31, 2018, respectively. Advances 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 aforementioned diesel fuel pipeline joint venture with ETO.
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•
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Net accounts receivable from affiliates were $4 million and $37 million as of September 30, 2019 and December 31, 2018, respectively, which are primarily related to motor fuel sales to affiliates.
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|
|
•
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Net accounts payable to affiliates were $70 million and $149 million as of September 30, 2019 and December 31, 2018, respectively, which are related to operational expenses and bulk fuel purchases.
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|
•
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Motor fuel sales to affiliates were $3 million and $1 million for the three months ended September 30, 2019 and 2018, respectively.
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|
|
|
•
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Motor fuel sales to affiliates were $4 million and $23 million for the nine months ended September 30, 2019 and 2018, respectively.
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|
|
|
|
•
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Bulk fuel purchases from affiliates were $177 million and $96 million for the three months ended September 30, 2019 and 2018, respectively, which is included in cost of sales in our consolidated statements of operations and comprehensive income (loss).
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|
|
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•
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Bulk fuel purchases from affiliates were $459 million and $1.8 billion for the nine months ended September 30, 2019 and 2018, respectively, which is included in cost of sales in our consolidated statements of operations and comprehensive income (loss).
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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:
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|
|
|
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|
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Three Months Ended
September 30,
|
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Nine Months Ended
September 30,
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|
|
2019
|
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2018
|
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2019
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2018
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(in millions)
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Fuel Distribution and Marketing Segment
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|
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Dealer
|
$
|
928
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|
|
$
|
998
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|
|
$
|
2,695
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|
|
$
|
2,781
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Distributor
|
2,027
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|
|
2,253
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|
|
5,808
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|
|
6,083
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Unbranded wholesale
|
667
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|
|
762
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|
|
1,940
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|
|
2,011
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Commission agent
|
419
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|
|
437
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|
|
1,233
|
|
|
985
|
|
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Non motor fuel sales
|
14
|
|
|
12
|
|
|
49
|
|
|
41
|
|
|
Lease income
|
31
|
|
|
32
|
|
|
94
|
|
|
82
|
|
|
Total
|
4,086
|
|
|
4,494
|
|
|
11,819
|
|
|
11,983
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All Other Segment
|
|
|
|
|
|
|
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Motor fuel
|
184
|
|
|
212
|
|
|
498
|
|
|
860
|
|
|
Non motor fuel sales
|
55
|
|
|
52
|
|
|
168
|
|
|
265
|
|
|
Lease income
|
6
|
|
|
3
|
|
|
13
|
|
|
9
|
|
|
Total
|
245
|
|
|
267
|
|
|
679
|
|
|
1,134
|
|
|
Total revenue
|
$
|
4,331
|
|
|
$
|
4,761
|
|
|
$
|
12,498
|
|
|
$
|
13,117
|
|
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 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 September 30, 2019 and December 31, 2018 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2019
|
|
December 31, 2018
|
|
|
(in millions)
|
|
Contract balances
|
|
|
|
|
Contract asset
|
$
|
102
|
|
|
$
|
75
|
|
|
Accounts receivable from contracts with customers
|
$
|
403
|
|
|
$
|
348
|
|
|
Contract liability
|
$
|
1
|
|
|
$
|
1
|
|
The amount of revenue recognized in the three and nine months ended September 30, 2019 that was included in the contract liability balance at the beginning of each period was $0.1 million and $0.3 million, respectively, and $0.1 million and $0.4 million in the three and nine months ended September 30, 2018, 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
As of September 30, 2019, the aggregate amount of revenue expected to be recognized related to unsatisfied or partially satisfied franchise fee performance obligations (contract liabilities) is approximately $0.1 million for the remainder of 2019, $0.2 million in 2020, $0.1 million in 2021, and $0.1 million thereafter.
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 non-current 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 $4 million and $12 million for the three and nine months ended September 30, 2019, respectively, and $4 million and $10 million for the three and nine months ended September 30, 2018, 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.
|
|
|
|
12.
|
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 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 one 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 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
|
Three Months Ended September 30, 2019
|
|
Nine Months Ended September 30, 2019
|
|
|
|
(in millions)
|
|
Operating lease cost
|
Lease expense
|
$
|
13
|
|
|
$
|
39
|
|
|
Finance lease cost
|
|
|
|
|
|
Amortization of leased assets
|
Depreciation, amortization, and accretion
|
2
|
|
|
2
|
|
|
Interest on lease liabilities
|
Interest expense
|
1
|
|
|
1
|
|
|
Short term lease cost
|
Lease expense
|
1
|
|
|
3
|
|
|
Variable lease cost
|
Lease expense
|
1
|
|
|
3
|
|
|
Sublease income
|
Lease income
|
(12
|
)
|
|
(33
|
)
|
|
Net lease cost
|
|
$
|
6
|
|
|
$
|
15
|
|
|
|
|
|
|
|
|
Lease Term and Discount Rate
|
|
September 30, 2019
|
|
Weighted-average remaining lease term (years)
|
|
|
|
Operating leases
|
|
24
|
|
Finance leases
|
|
6
|
|
Weighted-average discount rate (%)
|
|
|
|
Operating leases
|
|
6%
|
|
Finance leases
|
|
5%
|
|
|
|
|
|
|
|
|
|
Other information
|
|
Nine Months Ended September 30, 2019
|
|
|
|
(in millions)
|
|
Cash paid for amount included in the measurement of lease liabilities
|
|
|
|
Operating cash flows from operating leases
|
|
$
|
(39
|
)
|
|
Operating cash flows from finance leases
|
|
$
|
(1
|
)
|
|
Financing cash flows from finance leases
|
|
$
|
(2
|
)
|
|
Leased assets obtained in exchange for new finance lease liabilities
|
|
$
|
37
|
|
|
Leased assets obtained in exchange for new operating lease liabilities
|
|
$
|
22
|
|
Maturities of lease liabilities as of September 30, 2019 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maturity of lease liabilities
|
|
Operating leases
|
|
Finance leases
|
|
Total
|
|
|
|
(in millions)
|
|
2019 (remainder)
|
|
$
|
13
|
|
|
$
|
2
|
|
|
$
|
15
|
|
|
2020
|
|
50
|
|
|
9
|
|
|
59
|
|
|
2021
|
|
47
|
|
|
9
|
|
|
56
|
|
|
2022
|
|
45
|
|
|
9
|
|
|
54
|
|
|
2023
|
|
44
|
|
|
9
|
|
|
53
|
|
|
Thereafter
|
|
849
|
|
|
10
|
|
|
859
|
|
|
Total lease payment
|
|
1,048
|
|
|
48
|
|
|
1,096
|
|
|
Less: interest
|
|
506
|
|
|
6
|
|
|
512
|
|
|
Present value of lease liabilities
|
|
$
|
542
|
|
|
$
|
42
|
|
|
$
|
584
|
|
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.
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, 2019
|
|
Nine Months Ended September 30, 2019
|
|
|
(in millions)
|
|
Fuel Distribution & Marketing lease income
|
$
|
31
|
|
|
$
|
94
|
|
|
All Other lease income
|
6
|
|
|
13
|
|
|
Total lease income
|
$
|
37
|
|
|
$
|
107
|
|
Minimum future lease payments receivable are as follows:
|
|
|
|
|
|
|
|
|
|
|
September 30, 2019
|
|
|
|
(in millions)
|
|
2019 (remainder)
|
|
$
|
25
|
|
|
2020
|
|
85
|
|
|
2021
|
|
69
|
|
|
2022
|
|
56
|
|
|
2023
|
|
4
|
|
|
Thereafter
|
|
7
|
|
|
Total undiscounted cash flow
|
|
$
|
246
|
|
|
|
|
|
13.
|
Interest Expense, net
|
Components of net interest expense were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
|
(in millions)
|
|
Interest expense
|
$
|
43
|
|
|
$
|
35
|
|
|
$
|
126
|
|
|
$
|
105
|
|
|
Amortization of deferred financing fees
|
3
|
|
|
1
|
|
|
5
|
|
|
4
|
|
|
Interest income
|
(1
|
)
|
|
(1
|
)
|
|
(1
|
)
|
|
(4
|
)
|
|
Interest expense, net
|
$
|
45
|
|
|
$
|
35
|
|
|
$
|
130
|
|
|
$
|
105
|
|
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 September 30,
|
|
Nine Months Ended September 30,
|
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
|
(in millions)
|
|
Income tax expense at statutory federal rate
|
$
|
15
|
|
|
$
|
26
|
|
|
$
|
50
|
|
|
$
|
34
|
|
|
Partnership earnings not subject to tax
|
(10
|
)
|
|
(16
|
)
|
|
(46
|
)
|
|
(17
|
)
|
|
Statutory tax rate changes
|
—
|
|
|
(3
|
)
|
|
—
|
|
|
16
|
|
|
Other
|
1
|
|
|
3
|
|
|
5
|
|
|
6
|
|
|
Net income tax expense
|
$
|
6
|
|
|
$
|
10
|
|
|
$
|
9
|
|
|
$
|
39
|
|
As of September 30, 2019, ETO and its subsidiaries owned 28,463,967 common units, which constitutes 34.4% of our outstanding common units, and the public owned 54,286,234 common units. As of September 30, 2019, 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 nine months ended September 30, 2019 is as follows:
|
|
|
|
|
|
|
|
Number of Units
|
|
Number of common units at December 31, 2018
|
82,665,057
|
|
|
Phantom unit vesting
|
85,144
|
|
|
Number of common units at September 30, 2019
|
82,750,201
|
|
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 ETO.
The calculation of net income allocated to the partners is as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
Attributable to Common Units
|
|
|
|
|
|
|
|
|
Distributions
|
$
|
68
|
|
|
$
|
68
|
|
|
$
|
205
|
|
|
$
|
204
|
|
|
Distributions in excess of net income (loss)
|
(21
|
)
|
|
25
|
|
|
(33
|
)
|
|
(398
|
)
|
|
Limited partners' interest in net income (loss)
|
$
|
47
|
|
|
$
|
93
|
|
|
$
|
172
|
|
|
$
|
(194
|
)
|
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 payable during 2019 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Limited Partners
|
|
|
|
Payment Date
|
|
Per Unit Distribution
|
|
Total Cash Distribution
|
|
Distribution to IDR Holders
|
|
|
|
(in millions, except per unit amounts)
|
|
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
|
|
|
|
|
|
16.
|
Unit-Based Compensation
|
A summary of our phantom unit award activity is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
Number of Phantom 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
|
41,311
|
|
|
29.01
|
|
|
Vested
|
(126,993
|
)
|
|
29.20
|
|
|
Forfeited
|
(185,364
|
)
|
|
28.17
|
|
|
Outstanding at September 30, 2019
|
1,852,966
|
|
|
$
|
28.89
|
|
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 was renamed 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 and 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.
The following tables present financial information by segment for the three and nine months ended September 30, 2019 and 2018:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
|
2019
|
|
2018
|
|
|
Fuel Distribution and Marketing
|
|
All Other
|
|
Intercompany Eliminations
|
|
Totals
|
|
Fuel Distribution and Marketing
|
|
All Other
|
|
Intercompany Eliminations
|
|
Totals
|
|
|
(in millions)
|
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Motor fuel sales
|
$
|
4,041
|
|
|
$
|
184
|
|
|
|
|
$
|
4,225
|
|
|
$
|
4,450
|
|
|
$
|
212
|
|
|
|
|
$
|
4,662
|
|
|
Non motor fuel sales
|
14
|
|
|
55
|
|
|
|
|
69
|
|
|
12
|
|
|
52
|
|
|
|
|
64
|
|
|
Lease income
|
31
|
|
|
6
|
|
|
|
|
37
|
|
|
32
|
|
|
3
|
|
|
|
|
35
|
|
|
Intersegment sales
|
430
|
|
|
—
|
|
|
(430
|
)
|
|
—
|
|
|
460
|
|
|
29
|
|
|
(489
|
)
|
|
—
|
|
|
Total revenue
|
4,516
|
|
|
245
|
|
|
(430
|
)
|
|
4,331
|
|
|
4,954
|
|
|
296
|
|
|
(489
|
)
|
|
4,761
|
|
|
Gross profit (1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Motor fuel
|
195
|
|
|
22
|
|
|
|
|
217
|
|
|
222
|
|
|
25
|
|
|
|
|
247
|
|
|
Non motor fuel
|
10
|
|
|
28
|
|
|
|
|
38
|
|
|
7
|
|
|
44
|
|
|
|
|
51
|
|
|
Lease
|
31
|
|
|
6
|
|
|
|
|
37
|
|
|
32
|
|
|
3
|
|
|
|
|
35
|
|
|
Total gross profit
|
236
|
|
|
56
|
|
|
|
|
292
|
|
|
261
|
|
|
72
|
|
|
|
|
333
|
|
|
Total operating expenses
|
141
|
|
|
34
|
|
|
|
|
175
|
|
|
143
|
|
|
31
|
|
|
|
|
174
|
|
|
Operating income
|
95
|
|
|
22
|
|
|
|
|
117
|
|
|
118
|
|
|
41
|
|
|
|
|
159
|
|
|
Interest expense, net
|
37
|
|
|
8
|
|
|
|
|
45
|
|
|
28
|
|
|
7
|
|
|
|
|
35
|
|
|
Income from continuing operations before income taxes
|
58
|
|
|
14
|
|
|
|
|
72
|
|
|
90
|
|
|
34
|
|
|
|
|
124
|
|
|
Income tax expense
|
1
|
|
|
5
|
|
|
|
|
6
|
|
|
1
|
|
|
9
|
|
|
|
|
10
|
|
|
Income from continuing operations
|
57
|
|
|
9
|
|
|
|
|
66
|
|
|
89
|
|
|
25
|
|
|
|
|
114
|
|
|
Loss from discontinued operations,
net of income taxes (See Note 4)
|
—
|
|
|
—
|
|
|
|
|
—
|
|
|
—
|
|
|
(2
|
)
|
|
|
|
(2
|
)
|
|
Net income and comprehensive income
|
$
|
57
|
|
|
$
|
9
|
|
|
|
|
$
|
66
|
|
|
$
|
89
|
|
|
$
|
23
|
|
|
|
|
$
|
112
|
|
|
Depreciation, amortization and accretion
|
36
|
|
|
9
|
|
|
|
|
45
|
|
|
32
|
|
|
10
|
|
|
|
|
42
|
|
|
Interest expense, net
|
37
|
|
|
8
|
|
|
|
|
45
|
|
|
28
|
|
|
7
|
|
|
|
|
35
|
|
|
Income tax expense (2)
|
1
|
|
|
5
|
|
|
|
|
6
|
|
|
1
|
|
|
11
|
|
|
|
|
12
|
|
|
Non-cash compensation expense
|
4
|
|
|
—
|
|
|
|
|
4
|
|
|
1
|
|
|
3
|
|
|
|
|
4
|
|
|
Loss (gain) on disposal of assets and impairment charges
|
(4
|
)
|
|
—
|
|
|
|
|
(4
|
)
|
|
21
|
|
|
(29
|
)
|
|
|
|
(8
|
)
|
|
Unrealized gain on commodity derivatives
|
(1
|
)
|
|
—
|
|
|
|
|
(1
|
)
|
|
—
|
|
|
—
|
|
|
|
|
—
|
|
|
Inventory adjustments
|
26
|
|
|
—
|
|
|
|
|
26
|
|
|
7
|
|
|
—
|
|
|
|
|
7
|
|
|
Equity in earnings of unconsolidated affiliate
|
—
|
|
|
—
|
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
—
|
|
|
Adjusted EBITDA related to unconsolidated affiliate
|
1
|
|
|
—
|
|
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
|
|
—
|
|
|
Other non-cash adjustments
|
4
|
|
|
—
|
|
|
|
|
4
|
|
|
4
|
|
|
—
|
|
|
|
|
4
|
|
|
Adjusted EBITDA
|
$
|
161
|
|
|
$
|
31
|
|
|
|
|
$
|
192
|
|
|
$
|
183
|
|
|
$
|
25
|
|
|
|
|
$
|
208
|
|
|
Capital expenditures
|
$
|
32
|
|
|
$
|
15
|
|
|
|
|
$
|
47
|
|
|
$
|
21
|
|
|
$
|
9
|
|
|
|
|
$
|
30
|
|
|
Total assets as of September 30, 2019 and
December 31, 2018, respectively
|
$
|
4,192
|
|
|
$
|
1,305
|
|
|
|
|
$
|
5,497
|
|
|
$
|
3,878
|
|
|
$
|
1,001
|
|
|
|
|
$
|
4,879
|
|
________________________________
|
|
|
|
(1)
|
Excludes depreciation, amortization and accretion.
|
|
|
|
|
(2)
|
Includes amounts from discontinued operations for the three months ended September 30, 2018.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30,
|
|
|
2019
|
|
2018
|
|
|
Fuel Distribution and Marketing
|
|
All Other
|
|
Intercompany Eliminations
|
|
Totals
|
|
Fuel Distribution and Marketing
|
|
All Other
|
|
Intercompany Eliminations
|
|
Totals
|
|
|
(in millions)
|
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Motor fuel sales
|
$
|
11,676
|
|
|
$
|
498
|
|
|
|
|
$
|
12,174
|
|
|
$
|
11,860
|
|
|
$
|
860
|
|
|
|
|
$
|
12,720
|
|
|
Non motor fuel sales
|
49
|
|
|
168
|
|
|
|
|
217
|
|
|
41
|
|
|
265
|
|
|
|
|
306
|
|
|
Lease income
|
94
|
|
|
13
|
|
|
|
|
107
|
|
|
82
|
|
|
9
|
|
|
|
|
91
|
|
|
Intersegment sales
|
1,257
|
|
|
48
|
|
|
(1,305
|
)
|
|
—
|
|
|
1,271
|
|
|
93
|
|
|
(1,364
|
)
|
|
—
|
|
|
Total revenue
|
13,076
|
|
|
727
|
|
|
(1,305
|
)
|
|
12,498
|
|
|
13,254
|
|
|
1,227
|
|
|
(1,364
|
)
|
|
13,117
|
|
|
Gross profit (1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Motor fuel
|
624
|
|
|
69
|
|
|
|
|
693
|
|
|
587
|
|
|
92
|
|
|
|
|
679
|
|
|
Non motor fuel
|
40
|
|
|
91
|
|
|
|
|
131
|
|
|
35
|
|
|
134
|
|
|
|
|
169
|
|
|
Lease
|
94
|
|
|
13
|
|
|
|
|
107
|
|
|
82
|
|
|
9
|
|
|
|
|
91
|
|
|
Total gross profit
|
758
|
|
|
173
|
|
|
|
|
931
|
|
|
704
|
|
|
235
|
|
|
|
|
939
|
|
|
Total operating expenses
|
415
|
|
|
150
|
|
|
|
|
565
|
|
|
390
|
|
|
166
|
|
|
|
|
556
|
|
|
Operating income
|
343
|
|
|
23
|
|
|
|
|
366
|
|
|
314
|
|
|
69
|
|
|
|
|
383
|
|
|
Interest expense, net
|
108
|
|
|
22
|
|
|
|
|
130
|
|
|
74
|
|
|
31
|
|
|
|
|
105
|
|
|
Loss on extinguishment of debt and other, net
|
(3
|
)
|
|
—
|
|
|
|
|
(3
|
)
|
|
109
|
|
|
—
|
|
|
|
|
109
|
|
|
Income from continuing operations before income taxes
|
238
|
|
|
1
|
|
|
|
|
239
|
|
|
131
|
|
|
38
|
|
|
|
|
169
|
|
|
Income tax expense (benefit)
|
5
|
|
|
4
|
|
|
|
|
9
|
|
|
(1
|
)
|
|
40
|
|
|
|
|
39
|
|
|
Income (loss) from continuing operations
|
233
|
|
|
(3
|
)
|
|
|
|
230
|
|
|
132
|
|
|
(2
|
)
|
|
|
|
130
|
|
|
Loss from discontinued operations,
net of income taxes (See Note 4)
|
—
|
|
|
—
|
|
|
|
|
—
|
|
|
—
|
|
|
(265
|
)
|
|
|
|
(265
|
)
|
|
Net income (loss) and
comprehensive income (loss)
|
$
|
233
|
|
|
$
|
(3
|
)
|
|
|
|
$
|
230
|
|
|
$
|
132
|
|
|
$
|
(267
|
)
|
|
|
|
$
|
(135
|
)
|
|
Depreciation, amortization and accretion (2)
|
107
|
|
|
30
|
|
|
|
|
137
|
|
|
95
|
|
|
37
|
|
|
|
|
132
|
|
|
Interest expense, net (2)
|
108
|
|
|
22
|
|
|
|
|
130
|
|
|
74
|
|
|
33
|
|
|
|
|
107
|
|
|
Income tax expense (benefit) (2)
|
5
|
|
|
4
|
|
|
|
|
9
|
|
|
(1
|
)
|
|
198
|
|
|
|
|
197
|
|
|
Non-cash compensation expense (2)
|
10
|
|
|
—
|
|
|
|
|
10
|
|
|
2
|
|
|
8
|
|
|
|
|
10
|
|
|
Loss on disposal of assets and impairment charges (2)
|
—
|
|
|
46
|
|
|
|
|
46
|
|
|
24
|
|
|
34
|
|
|
|
|
58
|
|
|
Loss on extinguishment of debt and other, net (2)
|
(3
|
)
|
|
—
|
|
|
|
|
(3
|
)
|
|
109
|
|
|
20
|
|
|
|
|
129
|
|
|
Unrealized gain on commodity derivatives (2)
|
(4
|
)
|
|
—
|
|
|
|
|
(4
|
)
|
|
—
|
|
|
—
|
|
|
|
|
—
|
|
|
Inventory adjustments (2)
|
(71
|
)
|
|
—
|
|
|
|
|
(71
|
)
|
|
(50
|
)
|
|
(1
|
)
|
|
|
|
(51
|
)
|
|
Equity in earnings of unconsolidated affiliate
|
—
|
|
|
—
|
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
—
|
|
|
Adjusted EBITDA related to unconsolidated affiliate
|
1
|
|
|
—
|
|
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
|
|
—
|
|
|
Other non-cash adjustments
|
12
|
|
|
—
|
|
|
|
|
12
|
|
|
10
|
|
|
—
|
|
|
|
|
10
|
|
|
Adjusted EBITDA
|
$
|
398
|
|
|
$
|
99
|
|
|
|
|
$
|
497
|
|
|
$
|
395
|
|
|
$
|
62
|
|
|
|
|
$
|
457
|
|
|
Capital expenditures (2)
|
$
|
79
|
|
|
$
|
24
|
|
|
|
|
$
|
103
|
|
|
$
|
44
|
|
|
$
|
18
|
|
|
|
|
$
|
62
|
|
|
Total assets as of September 30, 2019 and
December 31, 2018, respectively
|
$
|
4,192
|
|
|
$
|
1,305
|
|
|
|
|
$
|
5,497
|
|
|
$
|
3,878
|
|
|
$
|
1,001
|
|
|
|
|
$
|
4,879
|
|
________________________________
|
|
|
|
(1)
|
Excludes deprecation, amortization and accretion.
|
|
|
|
|
(2)
|
Includes amounts from discontinued operations for the nine months ended September 30, 2018.
|
A reconciliation of the numerators and denominators of the basic and diluted per unit computations is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
|
(in millions, except units and per unit amounts)
|
|
Income from continuing operations
|
$
|
66
|
|
|
$
|
114
|
|
|
$
|
230
|
|
|
$
|
130
|
|
|
Less:
|
|
|
|
|
|
|
|
|
Distributions on Series A Preferred units
|
—
|
|
|
—
|
|
|
—
|
|
|
2
|
|
|
Incentive distribution rights
|
18
|
|
|
18
|
|
|
53
|
|
|
53
|
|
|
Distributions on nonvested phantom unit awards
|
1
|
|
|
1
|
|
|
5
|
|
|
4
|
|
|
Limited partners’ interest in net income from continuing operations
|
$
|
47
|
|
|
$
|
95
|
|
|
$
|
172
|
|
|
$
|
71
|
|
|
Loss from discontinued operations
|
$
|
—
|
|
|
$
|
(2
|
)
|
|
$
|
—
|
|
|
$
|
(265
|
)
|
|
Weighted average limited partner units outstanding:
|
|
|
|
|
|
|
|
|
Common - basic
|
82,749,644
|
|
|
82,506,279
|
|
|
82,734,526
|
|
|
84,891,853
|
|
|
Common - equivalents
|
900,254
|
|
|
578,434
|
|
|
777,595
|
|
|
482,123
|
|
|
Common - diluted
|
83,649,898
|
|
|
83,084,713
|
|
|
83,512,121
|
|
|
85,373,976
|
|
|
Income from continuing operations per limited partner unit:
|
|
|
|
|
|
|
|
|
Common - basic
|
$
|
0.57
|
|
|
$
|
1.16
|
|
|
$
|
2.09
|
|
|
$
|
0.84
|
|
|
Common - diluted
|
$
|
0.57
|
|
|
$
|
1.15
|
|
|
$
|
2.07
|
|
|
$
|
0.83
|
|
|
Loss from discontinued operations per limited partner unit:
|
|
|
|
|
|
|
|
|
Common - basic
|
$
|
0.00
|
|
|
$
|
(0.03
|
)
|
|
$
|
0.00
|
|
|
$
|
(3.12
|
)
|
|
Common - diluted
|
$
|
0.00
|
|
|
$
|
(0.03
|
)
|
|
$
|
0.00
|
|
|
$
|
(3.12
|
)
|