Sunoco (SUN) risk factors, FY2024 10-K

Risks Related to Our Structure

1. 01Tax Risks to Common Unitholders
2. 02Cash distributions are not guaranteed and may fluctuate with our performance and other external factors
3. 03Index to Financial Statements
4. 04Changes in U.S. administrative policy, including the imposition of or increases in tariffs on steel and/or other raw materials, changes to existing trade agreements and any resulting changes in international trade relations, may have an adverse effect on us
5. 05Our business could be negatively impacted by the inflationary pressures which may decrease our operating margins and increase working capital investments required to operate our business
6. 06General economic, financial, and political conditions may materially adversely affect our results of operations and financial condition
7. 07Our financial condition and results of operations are influenced by changes in the prices of motor fuel, crude oil or refined petroleum products, which may adversely impact our margins, our customers’ financial condition and the availability of trade credit
8. 08Significant increases in wholesale motor fuel prices could impact us as some of our customers may have insufficient credit to purchase motor fuel from us at their historical volumes. Higher prices for motor fuel may also reduce our access to trade credit support or cause it to become more expensive
9. 09The industries in which we operate are subject to seasonal trends, which may cause our operating costs to fluctuate, affecting our cash flow
10. 10The dangers inherent in the storage and transportation of motor fuel, crude oil, refined petroleum products and anhydrous ammonia could cause disruptions in our operations and could expose us to potentially significant losses, costs or liabilities
11. 11Our pipeline and fuel storage terminals are subject to operational and business risks which may adversely affect our financial condition, results of operations, cash flows and ability to make distributions to our unitholders
12. 12Negative events or developments associated with our branded suppliers could have an adverse impact on our revenues
13. 13Severe weather, which may increase in frequency and intensity due to climate change, could adversely affect our business by damaging our suppliers’ or our customers’ facilities or communications networks
14. 14The wholesale motor fuel distribution industry is characterized by intense competition and fragmentation. Failure to effectively compete could result in lower margins
15. 15The convenience store industry is highly competitive and impacted by new entrants. Failure to effectively compete could result in lower sales and lower margins
16. 16We do not own all of the land on which our retail service stations are located, and we lease certain facilities and equipment, and we are subject to the possibility of increased costs to retain necessary land use which could disrupt our operations
17. 17Future litigation could adversely affect our financial condition and results of operations
18. 18Because we depend on our senior management’s experience and knowledge of our industry, we could be adversely affected were we to lose key members of our senior management team
19. 19We compete with other businesses in our market with respect to attracting and retaining qualified employees
20. 20We are not fully insured against all risks incident to our business
21. 21Terrorist attacks and threatened or actual war may adversely affect our business
22. 22Cybersecurity attacks, data breaches and other disruptions affecting us, or our service providers, could materially and adversely affect our business, operations, reputation, and financial results
23. 23We rely on our information systems to manage numerous aspects of our business, and a disruption of these systems could adversely affect our business
24. 24Our business and our reputation could be adversely affected by the failure to protect sensitive customer, employee or vendor data, whether as a result of cybersecurity attacks or otherwise, or to comply with applicable regulations relating to data security and privacy
25. 25We rely on our suppliers to provide trade credit terms to adequately fund our ongoing operations
26. 26Increases in power prices could adversely affect operating expenses and our ability to make distributions to our unitholders
27. 27We depend on cash flow generated by our subsidiaries
28. 28An impairment of goodwill and intangible assets could reduce our earnings
29. 29If we are unable to make acquisitions on economically acceptable terms from third parties, our future growth and ability to increase distributions to unitholders will be limited
30. 30Acquisitions are subject to substantial risks that could adversely affect our financial condition and results of operations and reduce our ability to make distributions to unitholders
31. 31We could be subject to liabilities from our assets that predate our acquisition of those assets, but that are not covered by indemnification rights we have against the sellers of the assets
32. 32The Inflation Reduction Act of 2022 could accelerate the transition to a low carbon economy and could impose new costs on our operations
33. 33Our operations are subject to federal, state and local laws and regulations, in the U.S., in Mexico and in Europe, relating to the environment, health, safety and security that require us to make substantial expenditures
34. 34prevention and oil spill contingency plans. Facilities that are adjacent to water require the engagement of Federally Certified Oil Spill Response Organizations to be available to respond to a spill on water from above ground storage tanks or pipelines
35. 35compliance costs on us; or we may be required to make material expenditures for the remediation of contamination or pipeline integrity and safety matters
36. 36Our operations are subject to a series of risks related to climate change
37. 37A climate-related decrease in demand for crude oil could negatively affect our business
38. 38Increased attention to environmental, social and governance (“ESG”) matters and conservation measures may adversely impact our business
39. 39We are subject to federal laws related to the RFS
40. 40We are subject to federal, state and local laws and regulations that govern the product quality specifications of refined petroleum products we purchase, store, transport, and sell to our distribution customers
41. 41We operate assets outside of the United States, which exposes us to different legal and regulatory requirements and additional risk
42. 42Disputes regarding a failure to maintain product quality specifications or other claims related to the operation of our assets and the services we provide to our customers may result in unforeseen expenses and could result in the loss of customers
43. 43The swaps regulatory provisions of the Dodd-Frank Act and the rules adopted thereunder could have an adverse effect on our ability to use derivative instruments to mitigate the risks of changes in commodity prices and interest rates and other risks associated with our business
44. 44If third-party pipelines and other facilities interconnected to our fuel storage terminals and transmix processing facilities become partially or fully unavailable to transport refined products, our revenues could be adversely affected
45. 45We may be unable to obtain or renew permits necessary for our current or proposed operations, which could inhibit our ability to conduct or expand our business
46. 46Certain of our interstate common carrier pipelines are subject to regulation by the FERC and the STB, which could have an adverse impact on our ability to recover the full cost of operating our pipelines and the revenue we are able to receive from those operations
47. 47The third parties on whom we rely for transportation services to our fuel storage terminals and transmix processing facilities are subject to complex federal, state, and other laws that could adversely affect our financial condition and results of operations
48. 48Our debt levels may impair our financial condition and our ability to make distributions to our unitholders
49. 49Increases in interest rates could reduce the amount of cash we have available for distributions as well as the relative value of those distributions to yield-oriented investors, which could cause a decline in the market value of our common units
50. 50Our existing debt agreements have substantial restrictions and financial covenants that may restrict our business and financing activities and our ability to pay distributions to our unitholders
51. 51Our General Partner has limited its liability regarding our obligations
52. 52Our General Partner may, in its sole discretion, approve the issuance of partnership securities and specify the terms of such partnership securities
53. 53Cost reimbursements due to our General Partner and its affiliates for services provided to us or on our behalf will reduce cash available for distribution to our unitholders. The amount and timing of such reimbursements will be determined by our General Partner
54. 54Our partnership agreement requires that we distribute all of our available cash, which could limit our ability to grow and make acquisitions
55. 55Our partnership agreement limits the liability and duties of our General Partner and restricts the remedies available to us and our common unitholders for actions taken by our General Partner that might otherwise constitute breaches of fiduciary duty if we were a Delaware corporation
56. 56Holders of our common units have limited voting rights and are not entitled to elect our General Partner or its directors
57. 57Even if holders of our common units are dissatisfied, they cannot easily remove our General Partner without its consent
58. 58Our General Partner interest or the control of our General Partner may be transferred to a third party without unitholder consent
59. 59Our General Partner has a limited call right that may require unitholders to sell their common units at an undesirable time or price
60. 60We may issue additional units without unitholder approval, which would dilute existing unitholder ownership interests
61. 61The market price of our common units could be adversely affected by sales of substantial amounts of our common units in the public or private markets, including sales by Energy Transfer
62. 62Our partnership agreement restricts the voting rights of unitholders owning 20% or more of our outstanding common units
63. 63The amount of cash we have available for distribution to holders of our units depends primarily on our cash flow and not solely on profitability, which may prevent us from making cash distributions during periods when we record net income
64. 64Unitholders may have liability to repay distributions
65. 65Our partnership agreement limits the forum, venue and jurisdiction of claims, suits, actions or proceedings
66. 66The NYSE does not require a publicly traded partnership like us to comply with certain corporate governance requirements
67. 67Detail of Tax Risks to Common Unitholders
68. 68The anticipated after-tax economic benefit of an investment in our common units depends largely on our being treated as a partnership for U.S. federal income tax purposes
69. 69The tax treatment of publicly traded partnerships or an investment in our common units could be subject to potential legislative, judicial or administrative changes or differing interpretations, possibly applied on a retroactive basis
70. 7020% of their allocable share of a publicly traded partnership’s “qualified business income,” this deduction is scheduled to expire with respect to taxable years beginning after December 31, 2025
71. 71If the IRS makes audit adjustments to our income tax returns, it (and some states) may assess and collect directly from us taxes (including any applicable penalties and interest) resulting from such audit adjustments, in which case our cash available for distribution to our unitholders might be substantially reduced
72. 72We have subsidiaries that are treated as corporations for U.S. federal income tax purposes and are subject to corporate-level income taxes
73. 73Our unitholders will be required to pay taxes on their share of our income even if they do not receive any cash distributions from us
74. 74Tax gain or loss on the disposition of our common units could be more or less than expected
75. 75Tax-exempt entities face unique tax issues from owning common units that may result in adverse tax consequences to them
76. 76If the IRS contests the U.S. federal income tax positions we take, the market for our common units may be adversely impacted and the cost of any IRS contest will reduce our cash available for distribution to our unitholders
77. 77We treat each purchaser of our common units as having the same tax benefits without regard to the actual common units purchased. The IRS may challenge this treatment, which could result in a unitholder owing more tax and may adversely affect the value of the common units
78. 78We have adopted certain valuation methodologies in determining a unitholder’s allocations of income, gain, loss and deduction. The IRS may challenge these methods or the resulting allocations, and such a challenge could adversely affect the value of our common units
79. 79Unitholders will likely be subject to state and local taxes and return filing requirements in states where they do not live as a result of investing in our common units
80. 80Unitholders may be subject to limitations on their ability to deduct interest expense we incur