ACQUISITIONS AND OTHER INVESTING TRANSACTIONS

ETE-ETP Merger and Related Contribution of Assets to ETP

Immediately prior to the closing of the ETE-ETP Merger discussed in Note 1, ETE contributed the following to ETP:


•	2,263,158 common units representing limited partner interests in Sunoco LP to ETP in exchange for 2,874,275 ETP common units;


•	100 percent of the limited liability company interests in Sunoco GP LLC, the sole general partner of Sunoco LP, and all of the IDRs in Sunoco LP, to ETP in exchange for 42,812,389 ETP common units;


•	12,466,912 common units representing limited partner interests in USAC and 100 percent of the limited liability company interests in USA Compression GP, LLC, the general partner of USAC, to ETP in exchange for 16,134,903 ETP common units; and


•	a 100 percent limited liability company interest in Lake Charles LNG and a 60 percent limited liability company interest in each of Energy Transfer LNG Export, LLC, ET Crude Oil Terminals, LLC and ETC Illinois LLC to ETP in exchange for 37,557,815 ETP common units.

ETE will continue to consolidate each of these entities in its consolidated financial statements subsequent to the ETE-ETP Merger, and these transactions will not impact the carrying values of the related assets and liabilities.

USAC Transactions

On April 2, 2018, ETE acquired a controlling interest in USAC, a publicly traded partnership that provides compression services in the United States. Specifically ETE acquired (i) all of the outstanding limited liability company interests in USA Compression GP, LLC (“USAC GP”), the general partner of USAC, and (ii) 12,466,912 USAC common units representing limited partner interests in USAC for cash consideration equal to $250 million (the “USAC Transaction”). Concurrently, USAC cancelled its incentive distribution rights and converted its economic general partner interest into a non-economic general partner interest in exchange for the issuance of 8,000,000 USAC common units to USAC GP.

Concurrent with these transactions, ETP contributed to USAC all of the issued and outstanding membership interests of CDM for aggregate consideration of approximately $1.7 billion, consisting of (i) 19,191,351 USAC common units, (ii) 6,397,965 units of a newly authorized and established class of units representing limited partner interests in USAC (“USAC Class B Units”) and (iii) $1.23 billion in cash, including customary closing adjustments (the “CDM Contribution”). The USAC Class B Units are a new class of partnership interests of USAC that have substantially all of the rights and obligations of a USAC common unit, except the USAC Class B Units will not participate in distributions for the first four quarters following the closing date of April 2, 2018. Each USAC Class B Unit will automatically convert into one USAC common unit on the first business day following the record date attributable to the quarter ending June 30, 2019.

Prior to the CDM Contribution, the CDM entities were indirect wholly-owned subsidiaries of ETP. Beginning April 2018, ETE’s consolidated financial statements reflected USAC as a consolidated subsidiary.

Summary of Assets Acquired and Liabilities Assumed

We accounted for the USAC Transaction using the acquisition method of accounting, which requires, among other things, that assets acquired and liabilities assumed be recognized on the balance sheet at their fair values as of the acquisition date.

The total purchase price was allocated as follows:



	At April 2, 2018
Total current assets	$	786
Property, plant and equipment	1,332
Other non-current assets	15
Goodwill⁽¹⁾	366
Intangible assets	222
	2,721

Total current liabilities	110
Long-term debt, less current maturities	1,527
Other non-current liabilities	2
	1,639

Noncontrolling interest	832

Total consideration	250
Cash received⁽²⁾	711
Total consideration, net of cash received⁽²⁾	$	(461	)


⁽¹⁾	None of the goodwill is expected to be deductible for tax purposes. Goodwill recognized from the business combination primarily relates to the value attributed to additional growth opportunities, synergies and operating leverage within USAC’s operations.


⁽²⁾	Cash received represents cash and cash equivalents held by USAC as of the acquisition date.

The fair values of the assets acquired and liabilities assumed were determined using various valuation techniques, including the income and market approaches.

HPC

ETP previously owned a 49.99% interest in HPC, which owns RIGS. In April 2018, ETP acquired the remaining 50.01% interest in HPC. Prior to April 2018, HPC was reflected as an unconsolidated affiliate in the Partnership’s consolidated financial statements; beginning in April 2018, RIGS is reflected as a wholly-owned subsidiary in the Partnership’s consolidated financial statements.

Sunoco LP Retail Store and Real Estate Sales

On January 23, 2018, Sunoco LP completed the disposition of assets pursuant to the purchase agreement with 7-Eleven, Inc. (the “7-11 Transaction”). As a result of the 7-11 Transaction, previously eliminated wholesale motor fuel sales to Sunoco LP’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 Partnership’s consolidated balance sheets and are reported as accounts receivable.

In connection with the 7-11 Transaction, Sunoco LP entered into a Distributor Motor Fuel Agreement dated as of January 23, 2018 (“Supply Agreement”), with 7-Eleven and SEI Fuel (collectively, “Distributor”). The Supply Agreement consists of a 15-year take-or-pay fuel supply arrangement under which Sunoco LP has agreed to supply approximately 2.0 billion gallons of fuel annually plus additional aggregate growth volumes of up to 500 million gallons to be added incrementally over the first four years. For the period from January 1, 2018 through January 22, 2018 and the three and nine months ended September 30, 2017, Sunoco LP recorded sales to the sites that were subsequently sold to 7-Eleven of $199 million, $926 million and $2.4 billion, respectively, which were eliminated in consolidation. Sunoco LP payments on trade receivables of $1 billion and $2.6 billion from 7-Eleven in the three and nine months ended September 30, 2018 subsequent to the closing of the sale.

On January 18, 2017, with the assistance of a third-party brokerage firm, Sunoco LP 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 are being sold through a sealed-bid. Of the 97 properties, 50 have been sold, one is under contract to be sold, and five 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 Partnership has concluded that it meets the accounting requirements for reporting the financial position, results of operations and cash flows of Sunoco LP’s retail divestment as discontinued operations.

The following tables present the aggregate carrying amounts of assets and liabilities classified as held for sale in the consolidated balance sheet:



	September 30, 2018		December 31, 2017
Carrying amount of assets classified as held for sale:
Cash and cash equivalents	$	—	$	21
Inventories	—		149
Other current assets	—		16
Property, plant and equipment, net	6		1,851
Goodwill	—		796
Intangible assets, net	—		477
Other non-current assets, net	—		3
Total assets classified as held for sale in the Consolidated Balance Sheet	$	6	$	3,313

Carrying amount of liabilities classified as held for sale:
Other current and non-current liabilities	$	—	$	75
Total liabilities classified as held for sale in the Consolidated Balance Sheet	$	—	$	75

The results of operations associated with discontinued operations are presented in the following table:



	Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017
REVENUES	$	—		$	1,802		$	349		$	5,145

COSTS AND EXPENSES
Cost of products sold	—			1,482			305			4,274
Operating expenses	—			182			61			566
Depreciation, depletion and amortization	—			(5		)	—			31
Impairment losses	—			34			—			265
Selling, general and administrative	—			57			7			126
Total costs and expenses	—			1,750			373			5,262
OPERATING LOSS	—			52			(24		)	(117		)
Interest expense, net	—			13			2			21
Loss on extinguishment of debt and other	—			—			20			—
Other, net	—			(8		)	61			—
INCOME (LOSS) FROM DISCONTINUED OPERATIONS BEFORE INCOME TAX EXPENSE	—			47			(107		)	(138		)
Income tax expense	2			30			158			49
INCOME (LOSS) FROM DISCONTINUED OPERATIONS, NET OF INCOME TAXES	$	(2	)	$	17		$	(265	)	$	(187	)
INCOME (LOSS) FROM DISCONTINUED OPERATIONS BEFORE INCOME TAX EXPENSE ATTRIBUTABLE TO ETE	$	—		$	1		$	(10	)	$	(6	)