NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1.
DESCRIPTION OF BUSINESS AND OTHER DISCLOSURES
Circle K and CST Merger
On June 28, 2017, a wholly owned subsidiary of Circle K, merged with and into CST, with CST surviving the Merger as an indirect, wholly owned subsidiary of Circle K. Circle K is a wholly owned subsidiary of Couche-Tard.
As a result of the Merger, Circle K indirectly owns all of the membership interests in the sole member of our General Partner, as well as a 21.7% limited partner interest in the Partnership and all of the IDRs of the Partnership. Circle K, through its indirect ownership interest in the sole member of our General Partner, has the ability to appoint all of the members of the Board and to control and manage our operations and activities.
Description of Business
Our business consists of:
|
•
|
the wholesale distribution of motor fuels;
|
|
•
|
the retail distribution of motor fuels to end customers at retail sites operated by commission agents or us;
|
|
•
|
generating revenues through leasing or subleasing our real estate used in the retail distribution of motor fuels; and
|
|
•
|
the operation of retail sites.
|
The financial statements reflect the consolidated results of the Partnership and its wholly owned subsidiaries. Our primary operations are conducted by the following consolidated wholly owned subsidiaries:
|
•
|
LGW, which distributes motor fuels on a wholesale basis and generates qualified income under Section 7704(d) of the Internal Revenue Code;
|
|
•
|
LGPR, which functions as the real estate holding company and holds assets that generate qualified rental income under Section 7704(d) of the Internal Revenue Code; and
|
|
•
|
LGWS, which owns and leases (or leases and sub-leases) real estate and personal property used in the retail distribution of motor fuels, as well as provides maintenance and other services to its customers. In addition, LGWS distributes motor fuels on a retail basis and sells convenience merchandise items to end customers at company operated retail sites and sells motor fuel on a retail basis at sites operated by commission agents. Income from LGWS generally is not qualified income under Section 7704(d) of the Internal Revenue Code.
|
Interim Financial Statements
These unaudited condensed consolidated financial statements have been prepared in accordance with U.S. GAAP for interim financial information and with the instructions to Form 10-Q and the Exchange Act. Accordingly, they do not include all of the information and notes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. All such adjustments are of a normal recurring nature unless disclosed otherwise. Management believes that the disclosures made are adequate to keep the information presented from being misleading. The financial statements contained herein should be read in conjunction with the consolidated financial statements and notes thereto included in our Form 10-K. Financial information as of September 30, 2018 and for the three and nine months ended September 30, 2018 and 2017 included in the consolidated financial statements has been derived from our unaudited financial statements. Financial information as of December 31, 2017 has been derived from our audited financial statements and notes thereto as of that date.
Operating results for the three and nine months ended September 30, 2018 are not necessarily indicative of the results that may be expected for the year ending December 31, 2018. Our business exhibits seasonality due to our wholesale and retail sites being located in certain geographic areas that are affected by seasonal weather and temperature trends and associated changes in retail customer activity during different seasons. Historically, sales volumes have been highest in the second and third quarters (during the summer activity months) and lowest during the winter months in the first and fourth quarters.
5
CROSSAMERICA PARTNERS LP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results and outcomes could differ from those estimates and assumptions. On an ongoing basis, management reviews its estimates based on currently available information. Changes in facts and circumstances could result in revised estimates and assumptions.
Revenue Recognition
In May 2014, the FASB issued ASU 2014-09–
Revenue from Contracts with Customers (Topic 606)
, which results in comprehensive new revenue accounting guidance, requires enhanced disclosures to help users of financial statements better understand the nature, amount, timing, and uncertainty of revenue that is recognized, and develops a common revenue standard under U.S. GAAP and International Financial Reporting Standards. Specifically, the core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services. This guidance was effective January 1, 2018 and we applied the modified retrospective method of adoption. There was no material impact on the financial statements other than disclosures. This guidance applies to over 90% of our revenues as the only primary revenue stream outside the scope of this guidance is rental income.
Revenues from the delivery of motor fuel are recorded at the time of delivery to our customers, by which time the price is fixed, title to the products has transferred and payment has either been received or collection is reasonably assured, net of applicable discounts and allowances.
Revenues from the sale of convenience store products are recognized at the time of sale to the customer.
Revenues from leasing arrangements for which we are the lessor are recognized ratably over the term of the underlying lease.
See Note 13 for additional information on our revenues and related receivables.
Motor Fuel Taxes
LGW collects motor fuel taxes, which consist of various pass through taxes collected from customers on behalf of taxing authorities, and remits such taxes directly to those taxing authorities. LGW’s accounting policy is to exclude the taxes collected and remitted from wholesale revenues and cost of sales and account for them as liabilities. LGWS’s retail sales and cost of sales include motor fuel taxes as the taxes are included in the cost paid for motor fuel and LGWS has no direct responsibility to collect or remit such taxes to the taxing authorities. This accounting policy is consistent with that used in prior periods.
Investment in CST Fuel Supply
ASU 2016-15–
Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (a consensus of the Emerging Issues Task Force)
was effective January 1, 2018. This ASU provides guidance on cash flow presentation of various specific transactions. We apply the cumulative earnings approach in presenting our cash flows from our investment in CST Fuel Supply. Distributions received are considered returns on investment and classified as cash inflows from operating activities.
Significant Accounting Policies
There have been no other material changes to the significant accounting policies described in our Form 10-K. Certain new financial accounting pronouncements have become effective for our financial statements but the adoption of these pronouncements did not materially impact our financial position, results of operations or disclosures.
New Accounting Guidance Pending Adoption
In February 2016, the FASB issued ASU 2016-02–
Leases (Topic 842).
This standard modifies existing guidance for reporting organizations that enter into leases to increase transparency by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. ASU 2016-02 is effective for fiscal years and interim periods within those years beginning after December 15, 2018, and requires a modified retrospective approach to adoption. This guidance will be effective January 1, 2019.
6
CROSSAMERICA PARTNERS LP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
M
anagement continues to evaluate the impact of this new guidance, but the adoption will have a material impact on our balance sheet as we will be required to recognize right
-of-use assets and lease liabilities for operating leases.
We have performed certain system upgrades and further validated the completeness and accuracy of our lease data.
We intend to apply each of the practical expedients in adopting this new guidance.
S
ince our previous sale-leaseback transactions were accounted for as failed sale-leasebacks, we are required to reassess these leases under the new guidance as part of adopting ASU 2016-02. Although our analysis is not complete, we believe these leases will
be accounted for as operating leases under the new guidance and the assets and sale-leaseback financing obligations currently recorded on the balance sheet will be removed with a transition adjustment to equity upon adoption.
Concentration Risk
For the nine months ended September 30, 2018, we distributed 12% of our total wholesale distribution volumes to DMS and DMS accounted for 17% of our rental income. For the nine months ended September 30, 2017, we distributed 14% of our total wholesale distribution volumes to DMS and DMS accounted for 23% of our rental income.
In June 2018, we executed master fuel supply and master lease agreements with a third party multi-site operator of retail motor fuel stations, to which we transitioned 43 sites in Florida from DMS in the third quarter of 2018. The master fuel supply and master lease agreements have an initial 10-year term with four 5-year renewal options. See Note 7 for information relating to our recapture of these sites from the master lease agreement with DMS.
For the nine months ended September 30, 2018, we distributed 7% of our total wholesale distribution volume to Circle K retail sites that are not supplied by CST Fuel Supply and received 20% of our rental income from Circle K. For the nine months ended September 30, 2017, we distributed 8% of our total wholesale distribution volume to Circle K retail sites that are not supplied by CST Fuel Supply and received 22% of our rental income from Circle K.
For more information regarding transactions with DMS and Circle K, see Note 7.
For the nine months ended September 30, 2018, our wholesale business purchased approximately 26%, 26%, 12% and 10% of its motor fuel from ExxonMobil, BP, Motiva and Circle K, respectively. For the nine months ended September 30, 2017, our wholesale business purchased approximately 28%, 27% and 17% of its motor fuel from ExxonMobil, BP and Motiva, respectively. No other fuel suppliers accounted for 10% or more of our motor fuel purchases during the nine months ended September 30, 2018 and 2017.
Valero supplied substantially all of the motor fuel purchased by CST Fuel Supply during all periods presented.
Note 2. ASSETS HELD FOR SALE
We classified one site and 12 sites as held for sale at September 30, 2018 and December 31, 2017, respectively. Of the sites held for sale at December 31, 2017, 11 were required to be divested per FTC orders in connection with Circle K’s acquisition of Holiday Stationstores, Inc. (“Holiday”) and the joint acquisition of Jet-Pep Assets by Circle K and us. These assets were sold in the third quarter of 2018 for total proceeds of $4.9 million. Assets held for sale were as follows (in thousands):
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2018
|
|
|
2017
|
|
Land
|
|
$
|
525
|
|
|
$
|
4,946
|
|
Buildings and site improvements
|
|
|
136
|
|
|
|
5,785
|
|
Equipment
|
|
|
158
|
|
|
|
2,485
|
|
Total
|
|
|
819
|
|
|
|
13,216
|
|
Less accumulated depreciation
|
|
|
(247
|
)
|
|
|
(1,508
|
)
|
Assets held for sale
|
|
$
|
572
|
|
|
$
|
11,708
|
|
We recorded impairment charges totaling $8.9 million during the nine months ended September 30, 2018 related to the 11 FTC-required divestitures, included within depreciation, amortization and accretion expense on the statement of operations. The impairment charges include $1.2 million of wholesale fuel distribution rights and $0.3 million of goodwill, most of which relates to the Retail segment. No significant impairments were recorded during the three months ended September 30, 2018 or during the three and nine months ended September 30, 2017.
7
CROSSAMERICA PARTNERS LP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
As part of Circle K’s acquisition of Holiday, the FTC issued a decree in which nine sites were required to be divested to FTC approved third-party buyers (“Upper Midwest Sites”). Since this
wa
s a forced divestiture of assets for us, Circle K has agreed to compensate us
with an amount representing
the difference between
the value of the
nine
Upper Midwest Sites and the proceeds of the sale to FTC approved third-party buyers
, which amounted to $6
.3 million
.
We anticipate
Circle K’s payment to us will be made
during the fourth quarter of 2018
. This payment will be accounted for as a transaction between entities under common control and thus recorded as a contribution to partners’ capital
and will b
e subject to income taxes
.
These sites were divested in September 2018, after the June 15, 2018 deadline specified in the FTC orders. As a result, Couche-Tard and/or the Partnership may be subject to civil penalties, up to a maximum allowed by law of $41,000 per day per violation of the FTC divestiture orders. Circle K has agreed that it would be solely responsible for any such penalties and we have not accrued any liability for such penalties.
During the three and nine months ended September 30, 2017, as approved by the conflicts committee of our Board, we sold 28 properties to DMR for $16.6 million, resulting in a $0.5 million loss. Three additional properties and approximately $3.0 million of proceeds remained in escrow as of September 30, 2017 until certain conditions were met during the fourth quarter of 2017. These sites were generally sites at which we did not supply fuel or represented vacant land.
During the three and nine months ended September 30, 2017, we sold two properties as a result of the FTC’s requirements associated with the Merger for $6.7 million, resulting in a gain of $2.2 million. In addition, Circle K agreed to reimburse us for the tax liability incurred on the required sale, resulting in additional proceeds of $0.3 million, which was accounted for as a contribution to partners’ capital.
During the three and nine months ended September 30, 2017, DMS renewed its contract with one of its customers, triggering a $0.8 million earn-out payment by DMS to us under a contract entered into with DMS at the time of CST acquiring our General Partner in October 2014, which was recorded as a gain.
Note 3. INVENTORIES
Inventories
consisted of the following (in thousands):
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2018
|
|
|
2017
|
|
Retail site merchandise
|
|
$
|
7,061
|
|
|
$
|
7,806
|
|
Motor fuel
|
|
|
8,301
|
|
|
|
7,316
|
|
Inventories
|
|
$
|
15,362
|
|
|
$
|
15,122
|
|
Note 4. PROPERTY AND EQUIPMENT
Property and equipment, net consisted of the following (in thousands):
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2018
|
|
|
2017
|
|
Land
|
|
$
|
284,945
|
|
|
$
|
285,682
|
|
Buildings and site improvements
|
|
|
363,160
|
|
|
|
362,207
|
|
Leasehold improvements
|
|
|
11,165
|
|
|
|
10,155
|
|
Equipment
|
|
|
188,658
|
|
|
|
185,733
|
|
Construction in progress
|
|
|
5,002
|
|
|
|
1,797
|
|
Property and equipment, at cost
|
|
|
852,930
|
|
|
|
845,574
|
|
Accumulated depreciation and amortization
|
|
|
(194,416
|
)
|
|
|
(164,574
|
)
|
Property and equipment, net
|
|
$
|
658,514
|
|
|
$
|
681,000
|
|
8
CROSSAMERICA PARTNERS LP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note
5
.
INTANGIBLE ASSETS
Intangible assets consisted of the following (in thousands):
|
|
September 30, 2018
|
|
|
December 31, 2017
|
|
|
|
Gross
Amount
|
|
|
Accumulated
Amortization
|
|
|
Net
Carrying
Amount
|
|
|
Gross
Amount
|
|
|
Accumulated
Amortization
|
|
|
Net
Carrying
Amount
|
|
Wholesale fuel supply contracts/rights
|
|
$
|
126,734
|
|
|
$
|
(66,268
|
)
|
|
$
|
60,466
|
|
|
$
|
127,955
|
|
|
$
|
(56,915
|
)
|
|
$
|
71,040
|
|
Trademarks
|
|
|
2,064
|
|
|
|
(1,130
|
)
|
|
|
934
|
|
|
|
2,064
|
|
|
|
(863
|
)
|
|
|
1,201
|
|
Covenant not to compete
|
|
|
4,581
|
|
|
|
(3,911
|
)
|
|
|
670
|
|
|
|
4,581
|
|
|
|
(3,300
|
)
|
|
|
1,281
|
|
Below market leases
|
|
|
11,177
|
|
|
|
(9,829
|
)
|
|
|
1,348
|
|
|
|
11,401
|
|
|
|
(8,860
|
)
|
|
|
2,541
|
|
Total intangible assets
|
|
$
|
144,556
|
|
|
$
|
(81,138
|
)
|
|
$
|
63,418
|
|
|
$
|
146,001
|
|
|
$
|
(69,938
|
)
|
|
$
|
76,063
|
|
Note 6. DEBT
Our balances for long-term debt and capital lease obligations are as follows (in thousands):
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2018
|
|
|
2017
|
|
$650 million revolving credit facility
|
|
$
|
516,500
|
|
|
$
|
506,000
|
|
Capital lease obligations
|
|
|
25,474
|
|
|
|
27,220
|
|
Note payable
|
|
|
—
|
|
|
|
765
|
|
Total debt and capital lease obligations
|
|
|
541,974
|
|
|
|
533,985
|
|
Current portion
|
|
|
2,254
|
|
|
|
2,916
|
|
Noncurrent portion
|
|
|
539,720
|
|
|
|
531,069
|
|
Deferred financing costs, net
|
|
|
1,645
|
|
|
|
1,922
|
|
Noncurrent portion, net of deferred financing costs
|
|
$
|
538,075
|
|
|
$
|
529,147
|
|
Our revolving credit facility is secured by substantially all of our assets. Letters of credit outstanding at September 30, 2018 and December 31, 2017 totaled $5.3 million and $6.7 million, respectively, which reduced availability under our credit facility. The amount of availability at September 30, 2018 under the revolving credit facility, after taking into account debt covenant restrictions, was $45.7 million. In connection with future acquisitions, the revolving credit facility requires, among other things, that we have, after giving effect to such acquisitions, at least $20.0 million in the aggregate of borrowing availability under the revolving credit facility and unrestricted cash on the balance sheet on the date of such acquisition.
Financial Covenants and Interest Rate
We are required to comply with certain financial covenants under the credit facility. We are required to maintain (i) a total leverage ratio (as defined in the revolving credit facility) for the most recently completed four fiscal quarters of less than or equal to 4.50 : 1.00, except for periods following a material acquisition, generally defined as an acquisition with a purchase price of at least $30.0 million and (ii) a consolidated interest coverage ratio (as defined in the revolving credit facility) of at least 2.75 : 1.00. The total leverage ratio shall not exceed 5.00 : 1.00 for the first four full fiscal quarters following the closing of a material acquisition. Since the November 2017 Jet-Pep Assets acquisition qualified as a material acquisition, the maximum leverage ratio applicable to the quarter ended September 30, 2018 was 5.00 : 1.00. If we issued qualified senior notes (as defined in the revolving credit facility) in the aggregate principal amount of $175.0 million or greater, the ratio shall not exceed 5.50 : 1.00. If we issued qualified senior notes (as defined in the revolving credit facility) of $175.0 million or greater, we are also required to maintain a senior leverage ratio (as defined in the revolving credit facility) of less than or equal to 3.00 : 1.00. As of September 30, 2018, we were in compliance with these financial covenants.
At September 30, 2018, outstanding borrowings under the revolving credit facility bore interest at LIBOR plus a margin of 2.50%. Our borrowings had an effective interest rate of 4.66% as of September 30, 2018.
9
CROSSAMERICA PARTNERS LP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
On April
2
5
, 2018, the credit facility was amended to:
|
•
|
Extend the maturity date from March 4, 2019 to April 25, 2020;
|
|
•
|
Increase the capacity from $550 million to $650 million;
|
|
•
|
Extend the period during which the permitted total leverage ratio (as defined in the revolving credit facility) is increased from 4.50 : 1.00 to 5.00 : 1.00 after the closing of a material acquisition (as defined in the revolving credit facility) from three quarters to four quarters; and
|
|
•
|
Decrease the applicable margin and commitment fee (each as defined in the revolving credit facility), which vary based on our total leverage ratio, such that the applicable margin ranges from 1.50% to 2.75% for LIBOR rate loans (as defined in the revolving credit facility) and 0.50% to 1.75% for alternate base rate loans (as defined in the revolving credit facility), and the commitment fee ranges from 0.20% to 0.45%. In general, the applicable margin for LIBOR and alternate base rate loans was reduced by 0.5%.
|
Note 7. RELATED-PARTY TRANSACTIONS
Transactions with Circle K
Fuel Sales and Rental Income
We sell wholesale motor fuel under a master fuel distribution agreement to 47 Circle K retail sites and lease real property on 73 retail sites to Circle K under a master lease agreement, each having initial 10-year terms. The master fuel distribution agreement provides us with a fixed wholesale mark-up per gallon. The master lease agreement is a triple net lease.
Revenues from wholesale fuel sales and real property rental income from Circle K were as follows (in thousands):
|
|
Three Months Ended September 30,
|
|
|
Nine Months Ended September 30,
|
|
|
|
2018
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
|
Revenues from motor fuel sales to Circle K
|
|
$
|
46,060
|
|
|
$
|
36,449
|
|
|
$
|
125,627
|
|
|
$
|
100,683
|
|
Rental income from Circle K
|
|
|
4,198
|
|
|
|
4,262
|
|
|
|
12,593
|
|
|
|
12,823
|
|
Accounts receivable from Circle K for fuel amounted to $5.1 million and $3.9 million at September 30, 2018 and December 31, 2017, respectively.
CST Fuel Supply Equity Interests
CST Fuel Supply provides wholesale motor fuel distribution to the majority of CST’s legacy U.S. retail sites at cost plus a fixed markup per gallon. We have owned a 17.5% total interest in CST Fuel Supply since July 2015. We account for the income derived from our equity interest of CST Fuel Supply as “Income from CST Fuel Supply equity interests” on our statement of operations, which amounted to $3.5 million and $3.8 million for the three months ended September 30, 2018 and 2017 and $11.0 million and $11.2 million for the nine months ended September 30, 2018 and 2017, respectively.
Purchase of Fuel from Circle K
We purchase the fuel supplied to 21 retail sites from CST Fuel Supply, of which we own a 17.5% interest, and resell the wholesale motor fuel to independent dealers and sub-wholesalers. We purchased $4.4 million and $6.2 million of motor fuel from CST Fuel Supply for the three months ended September 30, 2018 and 2017 and $14.7 million and $17.9 million for the nine months ended September 30, 2018 and 2017, respectively.
We also purchase the fuel supplied to 99 commission sites acquired in the Jet-Pep Assets acquisition from Circle K at a terminal owned and operated by Circle K. We purchased $32.7 million and $98.5 million of motor fuel from Circle K for the three and nine months ended September 30, 2018, respectively.
Circle K acquired Holiday on December 22, 2017. Prior to that acquisition, we were a franchisee of Holiday (“Franchised Holiday Stores”), purchased fuel from Holiday and paid a franchise fee to Holiday. As a result of Circle K’s acquisition, we now purchase fuel from Circle K to supply our Franchised Holiday Stores. These fuel purchases amounted to $15.1 million and $39.5 million for the three and nine months ended September 30, 2018, respectively. We also pay a franchise fee to Circle K, which amounted to $0.4 million and $0.9 million for the three and nine months ended September 30, 2018, respectively.
10
CROSSAMERICA PARTNERS LP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In March and May 2018
, we purchased the leasehold
interest in t
hree
retail sites from Circle K for $0.
5
million.
We purchase the fuel supplied to these retail sites from Circle K
, which amounted to $0.
6
million
and $1.3 million
for the three and
nine
months ended
September
30, 2018
, respectively
.
Effective February 1, 2018, Couche-Tard began renegotiating fuel carrier agreements, including our wholesale transportation agreements, with third party carriers. On May 4, 2018, the independent conflicts committee of our Board approved an amendment to the Amended Omnibus Agreement providing for the payment by us to an affiliate of Couche-Tard of a 2.57% commission based on the payments made by us on the renegotiated wholesale transportation contracts to compensate such affiliate of Couche-Tard for its services in connection with the renegotiations of our fuel carrier agreements with third party carriers, which resulted in overall reductions in transportation costs to us. This commission amounted to $0.1 million and $0.4 million for the three and nine months ended September 30, 2018, respectively.
Amounts payable to Circle K related to these fuel purchases and freight commissions totaled $7.1 million and $7.0 million at September 30, 2018 and December 31, 2017, respectively.
Amended Omnibus Agreement and Management Fees
We incurred costs and expenses under the Amended Omnibus Agreement of $2.9 million for both the three months ended September 30, 2018 and 2017 and $8.9 million and $11.5 million for the nine months ended September 30, 2018 and 2017, respectively, including incentive compensation costs and non-cash stock-based compensation expenses, which are recorded as a component of operating expenses and general and administrative expenses in the statement of operations. The decrease for the nine-month period was driven by personnel and salary reductions effective at the time of the Merger.
In addition, during the three and nine months ended September 30, 2017, the Partnership recognized a $0.2 million and $6.8 million charge for severance, benefit, and retention costs allocated by Circle K in relation to the Merger. Such costs are included in general and administrative expenses in the statements of operations.
Amounts payable to Circle K related to expenses incurred by Circle K on our behalf in accordance with the Amended Omnibus Agreement, including the separation benefits discussed above, totaled $19.5 million and $18.3 million at September 30, 2018 and December 31, 2017, respectively.
Common Units Issued to Circle K as Consideration for Amounts Due Under the Amended Omnibus Agreement
As approved by the independent conflicts committee of the Board, the Partnership and Circle K mutually agreed to settle, from time to time, some or all of the amounts due under the terms of the Amended Omnibus Agreement in newly issued common units representing limited partner interests in the Partnership. As approved by the independent conflicts committee, the number of common units issued is based on the volume weighted average daily trading price of the common units for the 20 trading days prior to issuance. We issued the following common units to Circle K as consideration for amounts due under the terms of the Amended Omnibus Agreement:
Period
|
|
Date of Issuance
|
|
Number of
Common
Units Issued
|
|
Quarter ended December 31, 2017
|
|
March 1, 2018
|
|
|
136,882
|
|
Quarter ended March 31, 2018
|
|
May 21, 2018
|
|
|
155,236
|
|
All charges allocated to us by Circle K under the Amended Omnibus Agreement since the first quarter of 2018 have been paid by us in cash.
IDR and Common Unit Distributions
We distributed $0.1 million and $1.1 million to Circle K related to its ownership of our IDRs and $3.9 million and $4.3 million related to its ownership of our common units during the three months ended September 30, 2018 and 2017, respectively. We distributed $1.4 million and $3.2 million to Circle K related to its ownership of our IDRs and $12.3 million and $12.6 million related to its ownership of our common units during the nine months ended September 30, 2018 and 2017, respectively.
11
CROSSAMERICA PARTNERS LP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Transactions with
Affiliates of Members of our Board
Wholesale Motor Fuel Sales and Real Estate Rentals
Revenues from motor fuel sales and rental income from DMS were as follows (in thousands):
|
|
Three Months Ended September 30,
|
|
|
Nine Months Ended September 30,
|
|
|
|
2018
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
|
Revenues from motor fuel sales to DMS
|
|
$
|
68,987
|
|
|
$
|
64,741
|
|
|
$
|
201,283
|
|
|
$
|
180,928
|
|
Rental income from DMS
|
|
|
3,078
|
|
|
|
4,739
|
|
|
|
10,768
|
|
|
|
14,472
|
|
Accounts receivable from DMS totaled $7.8 million and $9.3 million at September 30, 2018 and December 31, 2017, respectively.
During the second quarter of 2018, in connection with the transition of 43 sites in Florida from DMS to a third party multi-site operator of retail motor fuel stations, we accrued a $3.8 million contract termination payment, which was paid to DMS during the third quarter of 2018. This payment was approved by the independent conflicts committee of our Board. Additionally, we recorded a $2.2 million charge to write off deferred rent income related to our recapture of these sites from the master lease agreement with DMS. These charges are included in loss on dispositions and lease terminations, net in the statement of operations. See Note 1 for additional information on the agreements entered into with the third party multi-site operator.
Revenues from rental income from Topstar were $0.1 and $0.2 million for the three and nine months ended September 30, 2018 and $0.2 million and $0.4 million for the three and nine months ended September 30, 2017, respectively.
CrossAmerica leases real estate from certain other entities affiliated with Joseph V. Topper, Jr., a member of the Board. Rent expense paid to these entities was $0.3 million and $0.8 million for the three and nine months ended September 30, 2018 and $0.2 million and $0.7 million for the three and nine months ended September 30, 2017, respectively.
Maintenance and Environmental Costs
Certain maintenance and environmental monitoring and remediation activities are performed by an entity affiliated with Joseph V. Topper, Jr., a member of the Board, as approved by the independent conflicts committee of the Board. We incurred charges with this related party of $0.1 million and $0.4 million for the three months ended September 30, 2018 and 2017 and $0.4 million and $1.3 million for the nine months ended September 30, 2018 and 2017, respectively. Accounts payable to this related party amounted to $0.4 million and $0.2 million at September 30, 2018 and December 31, 2017, respectively.
Principal Executive Offices
Our principal executive offices are in Allentown, Pennsylvania. We sublease office space from Circle K that Circle K leases from an affiliate of John B. Reilly, III and Joseph V. Topper, Jr., members of our Board. The management fee charged by Circle K to us under the Amended Omnibus Agreement includes this rental expense, which amounted to $0.2 million and $0.5 million for the three and nine months ended September 30, 2018 and $0.2 million and $0.5 million for the three and nine months ended September 30, 2017, respectively.
Public Relations and Website Consulting Services
We have engaged a company affiliated with John B. Reilly, III, a member of the Board, for public relations and website consulting services. The cost of these services was insignificant for the three and nine months ended September 30, 2018 and 2017.
12
CROSSAMERICA PARTNERS LP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note
8
. COMMITMENTS AND CONTINGENCIES
Purchase Commitments
We have minimum volume purchase requirements under certain of our fuel supply agreements with a purchase price at prevailing market rates for wholesale distribution. In the event we fail to purchase the required minimum volume for a given contract year, the underlying third party’s exclusive remedies (depending on the magnitude of the failure) are either termination of the supply agreement and/or a financial penalty per gallon based on the volume shortfall for the given year. We did not incur any significant penalties in 2017 or 2018.
Litigation Matters
We are from time to time party to various lawsuits, claims and other legal proceedings that arise in the ordinary course of business. These actions typically seek, among other things, compensation for alleged personal injury, breach of contract, property damages, environmental damages, employment-related claims and damages, punitive damages, civil penalties or other losses, or injunctive or declaratory relief. With respect to all such lawsuits, claims and proceedings, we record a reserve when it is probable that a liability has been incurred and the amount of loss can be reasonably estimated. In addition, we disclose matters for which management believes a material loss is at least reasonably possible. None of these proceedings, separately or in the aggregate, are expected to have a material adverse effect on our consolidated financial position, results of operations or cash flows. In all instances, management has assessed the matter based on current information and made a judgment concerning its potential outcome, giving due consideration to the nature of the claim, the amount and nature of damages sought and the probability of success. Management’s judgment may prove materially inaccurate, and such judgment is made subject to the known uncertainties of litigation.
We were a co-defendant, together with our General Partner, CST and CST Services, in a lawsuit brought by a former executive of CST Services who, until March 2015, provided services to us as Chief Investment Officer and Vice President of Finance (Court of Common Pleas, Lehigh County, Pennsylvania, case number 2015-1003, filed in May 2015). In connection with CST’s acquisition of our General Partner in 2014, the plaintiff alleged breach of contract and associated claims relating to his termination of employment and claimed severance benefits under the EICP. In October 2017, a jury awarded the plaintiff a total of $1.7 million. Such amount was recorded in general and administrative expenses in the statements of operations for the three and nine months ended September 30, 2017. Under the EICP, we were also obligated to pay reasonable legal expenses incurred by the plaintiff in connection with this dispute, which we expensed as incurred. The Partnership incurred total legal fees related to this case of $0.6 million for the nine months ended September 30, 2017.
Environmental Matters
We currently own or lease retail sites where refined petroleum products are being or have been handled. These retail sites and the refined petroleum products handled thereon may be subject to federal and state environmental laws and regulations. Under such laws and regulations, we could be required to remove or remediate containerized hazardous liquids or associated generated wastes (including wastes disposed of or abandoned by prior owners or operators), to remediate contaminated property arising from the release of liquids or wastes into the environment, including contaminated groundwater, or to implement best management practices to prevent future contamination.
We maintain insurance of various types with varying levels of coverage that is considered adequate under the circumstances to cover operations and properties. The insurance policies are subject to deductibles that are considered reasonable and not excessive. In addition, we have entered into indemnification and escrow agreements with various sellers in conjunction with several of their respective acquisitions, as further described below. Financial responsibility for environmental remediation is negotiated in connection with each acquisition transaction. In each case, an assessment is made of potential environmental liability exposure based on available information. Based on that assessment and relevant economic and risk factors, a determination is made whether to, and the extent to which we will assume liability for existing environmental conditions.
Environmental liabilities recorded on the balance sheet within accrued expenses and other current liabilities and other long-term liabilities totaled $3.5 million at both September 30, 2018 and December 31, 2017. Indemnification assets related to third-party escrow funds, state funds or insurance recorded on the balance sheet within other current assets and other noncurrent assets totaled $3.1 million and $3.4 million at September 30, 2018 and December 31, 2017, respectively. State funds represent probable state reimbursement amounts. Reimbursement will depend upon the continued maintenance and solvency of the state funds. Insurance coverage represents amounts deemed probable of reimbursement under insurance policies.
13
CROSSAMERICA PARTNERS LP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The estimates used in these reserves are based on all known facts at the time and an assessment of the
ultimate remedial action outcomes. We will adjust loss accruals as further information becomes available or circumstances change. Among the many uncertainties that impact the estimates are the necessary regulatory approvals for, and potential modifications
of remediation plans, the amount of data available upon initial assessment of the impact of soil or water contamination, changes in costs associated with environmental remediation services and equipment and the possibility of existing legal claims giving
rise to additional claims.
Environmental liabilities related to the sites contributed to the Partnership in connection with our IPO have not been assigned to us, and are still the responsibility of the Predecessor Entity. Under the Amended Omnibus Agreement, the Predecessor Entity must indemnify us for any costs or expenses that it incurs for environmental liabilities and third-party claims, regardless of when a claim is made, that are based on environmental conditions in existence prior to the closing of the IPO for contributed sites. As such, these environmental liabilities and indemnification assets are recorded on the balance sheet of the Predecessor Entity rather than the balance sheet of the Partnership.
Note 9. FAIR VALUE MEASUREMENTS
General
We measure and report certain financial and non-financial assets and liabilities on a fair value basis. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). U.S. GAAP specifies a three-level hierarchy that is used when measuring and disclosing fair value. The fair value hierarchy gives the highest priority to quoted prices available in active markets (i.e., observable inputs) and the lowest priority to data lacking transparency (i.e., unobservable inputs). An instrument’s categorization within the fair value hierarchy is based on the lowest level of significant input to its valuation. The following is a description of the three hierarchy levels.
Level 1—Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. Active markets are considered to be those in which transactions for the assets or liabilities occur in sufficient frequency and volume to provide pricing information on an ongoing basis.
Level 2—Quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability. This category includes quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in inactive markets.
Level 3—Unobservable inputs are not corroborated by market data. This category is comprised of financial and non-financial assets and liabilities whose fair value is estimated based on internally developed models or methodologies using significant inputs that are generally less readily observable from objective sources.
Transfers into or out of any hierarchy level are recognized at the end of the reporting period in which the transfers occurred. There were no transfers between any levels in 2018 or 2017.
As further discussed in Note 10, we have accrued for unvested phantom units and phantom performance units as a liability and adjust that liability on a recurring basis based on the market price of our common units each balance sheet date. Such fair value measurements are deemed Level 1 measurements.
Financial Instruments
The fair value of our accounts receivable, notes receivable, and accounts payable approximated their carrying values as of September 30, 2018 and December 31, 2017 due to the short-term maturity of these instruments. The fair value of the revolving credit facility approximated its carrying values of $516.5 million as of September 30, 2018 and $506.0 million as of December 31, 2017, due to the frequency with which interest rates are reset and the consistency of the market spread.
Note 10. EQUITY-BASED COMPENSATION
Overview
We record equity-based compensation as a component of general and administrative expenses in the statements of operations. Equity-based compensation expense was $0.2 million for both the three months ended September 30, 2018 and 2017 and $0.3 million and $1.9 million for the nine months ended September 30, 2018 and 2017, respectively.
14
CROSSAMERICA PARTNERS LP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Partnership Equity-Based Awards
Awards to Employees of Circle K who Provide Services to us under the Amended Omnibus Agreement
In August 2018, the Partnership granted 13,547 phantom performance unit awards to employees of Circle K who provide services to us under the Amended Omnibus Agreement, for which 35% vest upon the third anniversary of the grant date of such awards. The remaining 65% are subject to performance conditions relating to fuel volume, Adjusted EBITDA and employee engagement. These awards were accompanied by tandem distribution equivalent rights that entitle the holder to cash payments equal to the amount of unit distributions authorized to be paid to the holders of our common units. These awards may be settled in common units or cash at the discretion of the Board.
Since we grant awards to employees of Circle K who provide services to us under the Amended Omnibus Agreement, and since the grants may be settled in cash, unvested phantom units and phantom performance units receive fair value variable accounting treatment. As such, they are measured at fair value at each balance sheet reporting date and the cumulative compensation cost recognized is classified as a liability, which is included in accrued expenses and other current liabilities on the consolidated balance sheet. The liability was insignificant at September 30, 2018 and $0.7 million at December 31, 2017. The associated compensation cost was insignificant for all periods presented.
Awards to Non-Employee Members of the Board
In August 2018, the Partnership granted 15,580 phantom units to non-employee directors of the Board as a portion of director compensation. Such awards vest over one year and were accompanied by tandem distribution equivalent rights that entitle the holder to cash payments equal to the amount of unit distributions authorized to be paid to the holders of our common units.
In August 2017, the Partnership granted 10,539 phantom units to non-employee directors of the Board as a portion of director compensation. Such awards vested in August 2018.
The liability and associated compensation expense for these awards was insignificant for all periods presented.
CST Equity-Based Awards
In February 2017, CST granted approximately 47,000 equity-based awards in the form of time vested restricted stock units of CST to certain employees for services rendered on our behalf. Upon completion of the Merger, these awards converted to cash awards and remained subject to the same vesting terms and payment schedule of three annual tranches as those set forth in the original award agreement; provided that, upon completion of the Merger, such awards will vest in full upon an involuntary termination of employment without cause, or termination for “Good Reason”, or termination due to death, “Disability” or Retirement. The expense associated with these awards that was charged to us under the Amended Omnibus Agreement was $0.1 million and $0.2 million for the three and nine months ended September 30, 2018, respectively. Unrecognized compensation expense associated with these awards amounted to $0.4 million and $0.7 million as of September 30, 2018 and December 31, 2017, respectively, which will be recognized over the vesting term through January 2020.
For the three and nine months ended September 30, 2017, the expense associated with CST equity-based awards in the form of time vested restricted stock units of CST, stock options of CST and market share units of CST, which was charged to us under the Amended Omnibus Agreement, was $0.1 million and $1.6 million, respectively.
Note 11. INCOME TAXES
As a limited partnership, we are not subject to federal and state income taxes, however our corporate subsidiaries are subject to income taxes. Income tax attributable to our taxable income, which may differ significantly from income for financial statement purposes, is assessed at the individual limited partner unit holder level. We are subject to a statutory requirement that non-qualified income, as defined by the Internal Revenue Code, cannot exceed 10% of total gross income for the calendar year. If non-qualified income exceeds this statutory limit, we would be taxed as a corporation. The non-qualified income did not exceed the statutory limit in any period presented.
Certain activities that generate non-qualified income are conducted through LGWS. LGWS is a tax paying corporate subsidiary of ours that is subject to federal and state income taxes. Current and deferred income taxes are recognized on the earnings of LGWS. Deferred income tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and are measured using enacted tax rates.
15
CROSSAMERICA PARTNERS LP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
We recorded inco
me tax
expense
of $
0.3
million and
$1.0 million
for the three months ended
September
30
, 2018 and 2017,
and
an
income tax
benefit
of $
2.1
million and
$
1
.7 million for the
nine
months ended
September
30, 2018 and 2017,
respectively, as a result of
the income generated
(or
losses incurred) by our corporate subsidiaries. The effective tax rate differs from the combined federal and state statutory rate primarily because only LGWS is subject to income tax.
Note 12. NET INCOME PER LIMITED PARTNER UNIT
In addition to the common units, we have identified the IDRs as participating securities and compute income per unit using the two-class method under which any excess of distributions declared over net income shall be allocated to the partners based on their respective sharing of income as specified in the Partnership Agreement. Net income per unit applicable to limited partners is computed by dividing the limited partners’ interest in net income (loss), after deducting the IDRs, by the weighted-average number of outstanding common units.
The following tables provide a reconciliation of net income (loss) and weighted-average units used in computing basic and diluted net income (loss) per limited partner unit for the following periods (in thousands, except unit and per unit amounts):
|
|
Three Months Ended September 30,
|
|
|
Nine Months Ended September 30,
|
|
|
|
2018
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
|
Numerator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distributions paid
|
|
$
|
18,084
|
|
|
$
|
21,081
|
|
|
$
|
57,501
|
|
|
$
|
62,454
|
|
Allocation of distributions in excess of net income (loss)
|
|
|
(12,909
|
)
|
|
|
(17,863
|
)
|
|
|
(61,379
|
)
|
|
|
(63,580
|
)
|
Limited partners’ interest in net income (loss) - basic
and diluted
|
|
$
|
5,175
|
|
|
$
|
3,218
|
|
|
$
|
(3,878
|
)
|
|
$
|
(1,126
|
)
|
Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average limited partnership units
outstanding - basic
|
|
|
34,439,416
|
|
|
|
33,931,056
|
|
|
|
34,311,998
|
|
|
|
33,773,964
|
|
Adjustment for phantom units
(a)
|
|
|
—
|
|
|
|
6,646
|
|
|
|
—
|
|
|
|
—
|
|
Weighted average limited partnership units
outstanding - diluted
|
|
|
34,439,416
|
|
|
|
33,937,702
|
|
|
|
34,311,998
|
|
|
|
33,773,964
|
|
Net income (loss) per limited partnership unit - basic
and diluted
|
|
$
|
0.15
|
|
|
$
|
0.09
|
|
|
$
|
(0.11
|
)
|
|
$
|
(0.03
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distribution paid per common unit
|
|
$
|
0.5250
|
|
|
$
|
0.6225
|
|
|
$
|
1.6775
|
|
|
$
|
1.8525
|
|
Distribution declared (with respect to each respective
period) per common unit
|
|
$
|
0.5250
|
|
|
$
|
0.6275
|
|
|
$
|
1.5750
|
|
|
$
|
1.8675
|
|
(
a
)
|
Excludes 21,393 and 15,521 potentially dilutive securities from the calculation of diluted earnings per common unit because to do so would be antidilutive for the three and nine months ended September 30, 2018, respectively. Excludes 18,217 potentially dilutive securities from the calculation of diluted earnings per common unit because to do so would be antidilutive for the nine months ended September 30, 2017.
|
Distributions
Distribution activity for 2018 was as follows:
Quarter Ended
|
|
Record Date
|
|
Payment Date
|
|
Cash
Distribution
(per unit)
|
|
|
Cash
Distribution
(in thousands)
|
|
December 31, 2017
|
|
February 5, 2018
|
|
February 12, 2018
|
|
$
|
0.6275
|
|
|
$
|
21,415
|
|
March 31, 2018
|
|
May 18, 2018
|
|
May 25, 2018
|
|
|
0.5250
|
|
|
|
18,002
|
|
June 30, 2018
|
|
August 6, 2018
|
|
August 13, 2018
|
|
|
0.5250
|
|
|
|
18,084
|
|
September 30, 2018
|
|
November 5, 2018
|
|
November 13, 2018
|
|
|
0.5250
|
|
|
|
18,098
|
|
The amount of any distribution is subject to the discretion of the Board, which may modify or revoke our cash distribution policy at any time. Our Partnership Agreement does not require us to pay any distributions. As such, there can be no assurance we will continue to pay distributions in the future.
16
CROSSAMERICA PARTNERS LP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1
3
. SEGMENT REPORTING
We conduct our business in two segments: 1) the Wholesale segment, and 2) the Retail segment. The Wholesale segment includes the wholesale distribution of motor fuel to lessee dealers, independent dealers, commission agents, DMS, Circle K and company operated retail sites. We have exclusive motor fuel distribution contracts with lessee dealers who lease the property from us. We also have exclusive distribution contracts with independent dealers to distribute motor fuel but do not collect rent from the independent dealers. Similar to lessee dealers, we have motor fuel distribution agreements with DMS and Circle K and collect rent from both. The Retail segment includes the sale of convenience merchandise items, the retail sale of motor fuel at company operated retail sites and the retail sale of motor fuel at retail sites operated by commission agents. A commission agent is a retail site where we retain title to the motor fuel inventory and sell it directly to our end user customers. At commission sites, we manage motor fuel inventory pricing and retain the gross profit on motor fuel sales, less a commission to the agent who operates the retail site. Similar to our Wholesale segment, we also generate revenues through leasing or subleasing real estate in our Retail segment.
As part of our business strategy, we will from time to time convert company owned retail sites from our Retail segment to lessee dealers in our Wholesale segment. As a result, we no longer generate revenues from the retail sale of motor fuel or merchandise at these stores subsequent to the date of conversion and we no longer incur retail operating expenses related to these retail sites. However, we continue to supply these retail sites with motor fuel on a wholesale basis pursuant to the fuel supply contract with the lessee dealer. Further, we continue to own/lease the property and earn rental income under lease/sublease agreements with the lessee dealers under triple net leases. The lessee dealer owns all motor fuel and convenience merchandise and retains all gross profit on such operating activities.
Unallocated items consist primarily of general and administrative expenses, depreciation, amortization and accretion expense, gains on sales of assets, net, and the elimination of the Retail segment’s intersegment cost of revenues from motor fuel sales against the Wholesale segment’s intersegment revenues from motor fuel sales. The profit in ending inventory generated by the intersegment motor fuel sales is also eliminated. Total assets by segment are not presented as management does not currently assess performance or allocate resources based on that data.
The following table reflects activity related to our reportable segments (in thousands):
|
|
Wholesale
|
|
|
Retail
|
|
|
Unallocated
|
|
|
Consolidated
|
|
Three Months Ended September 30, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues from fuel sales to external customers
|
|
$
|
473,682
|
|
|
$
|
148,155
|
|
|
$
|
—
|
|
|
$
|
621,837
|
|
Intersegment revenues from fuel sales
|
|
|
117,468
|
|
|
|
—
|
|
|
|
(117,468
|
)
|
|
|
—
|
|
Revenues from food and merchandise sales
|
|
|
—
|
|
|
|
27,039
|
|
|
|
—
|
|
|
|
27,039
|
|
Rent income
|
|
|
19,128
|
|
|
|
2,021
|
|
|
|
—
|
|
|
|
21,149
|
|
Other revenue
|
|
|
785
|
|
|
|
—
|
|
|
|
—
|
|
|
|
785
|
|
Total revenues
|
|
$
|
611,063
|
|
|
$
|
177,215
|
|
|
$
|
(117,468
|
)
|
|
$
|
670,810
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from CST Fuel Supply equity interests
|
|
$
|
3,479
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
3,479
|
|
Operating income (loss)
|
|
$
|
30,022
|
|
|
$
|
2,065
|
|
|
$
|
(18,435
|
)
|
|
$
|
13,652
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues from fuel sales to external customers
|
|
$
|
400,296
|
|
|
$
|
93,285
|
|
|
$
|
—
|
|
|
$
|
493,581
|
|
Intersegment revenues from fuel sales
|
|
|
69,504
|
|
|
|
—
|
|
|
|
(69,504
|
)
|
|
|
—
|
|
Revenues from food and merchandise sales
|
|
|
—
|
|
|
|
28,366
|
|
|
|
—
|
|
|
|
28,366
|
|
Rent income
|
|
|
20,008
|
|
|
|
1,636
|
|
|
|
—
|
|
|
|
21,644
|
|
Other revenue
|
|
|
501
|
|
|
|
—
|
|
|
|
—
|
|
|
|
501
|
|
Total revenues
|
|
$
|
490,309
|
|
|
$
|
123,287
|
|
|
$
|
(69,504
|
)
|
|
$
|
544,092
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from CST Fuel Supply equity interests
|
|
$
|
3,752
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
3,752
|
|
Operating income (loss)
|
|
$
|
27,533
|
|
|
$
|
2,409
|
|
|
$
|
(17,658
|
)
|
|
$
|
12,284
|
|
17
CROSSAMERICA PARTNERS LP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
|
|
Wholesale
|
|
|
Retail
|
|
|
Unallocated
|
|
|
Consolidated
|
|
Nine Months Ended September 30, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues from fuel sales to external customers
|
|
$
|
1,333,244
|
|
|
$
|
422,966
|
|
|
$
|
—
|
|
|
$
|
1,756,210
|
|
Intersegment revenues from fuel sales
|
|
|
332,978
|
|
|
|
—
|
|
|
|
(332,978
|
)
|
|
|
—
|
|
Revenues from food and merchandise sales
|
|
|
—
|
|
|
|
75,759
|
|
|
|
—
|
|
|
|
75,759
|
|
Rent income
|
|
|
58,277
|
|
|
|
6,054
|
|
|
|
—
|
|
|
|
64,331
|
|
Other revenue
|
|
|
2,375
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2,375
|
|
Total revenues
|
|
$
|
1,726,874
|
|
|
$
|
504,779
|
|
|
$
|
(332,978
|
)
|
|
$
|
1,898,675
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from CST Fuel Supply equity interests
|
|
$
|
11,024
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
11,024
|
|
Operating income (loss)
|
|
$
|
86,373
|
|
|
$
|
5,312
|
|
|
$
|
(72,177
|
)
|
|
$
|
19,508
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues from fuel sales to external customers
|
|
$
|
1,122,903
|
|
|
$
|
272,289
|
|
|
$
|
—
|
|
|
$
|
1,395,192
|
|
Intersegment revenues from fuel sales
|
|
|
200,147
|
|
|
|
—
|
|
|
|
(200,147
|
)
|
|
|
—
|
|
Revenues from food and merchandise sales
|
|
|
—
|
|
|
|
80,077
|
|
|
|
—
|
|
|
|
80,077
|
|
Rent income
|
|
|
60,008
|
|
|
|
5,082
|
|
|
|
—
|
|
|
|
65,090
|
|
Other revenue
|
|
|
1,808
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,808
|
|
Total revenues
|
|
$
|
1,384,866
|
|
|
$
|
357,448
|
|
|
$
|
(200,147
|
)
|
|
$
|
1,542,167
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from CST Fuel Supply equity interests
|
|
$
|
11,185
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
11,185
|
|
Operating income (loss)
|
|
$
|
80,863
|
|
|
$
|
4,092
|
|
|
$
|
(64,373
|
)
|
|
$
|
20,582
|
|
Receivables relating to the revenue streams above are as follows:
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2018
|
|
|
2017
|
|
Receivables from fuel and merchandise sales
|
|
$
|
35,392
|
|
|
$
|
35,439
|
|
Receivables for rent and other lease-related charges
|
|
|
5,592
|
|
|
|
6,812
|
|
Total accounts receivable
|
|
$
|
40,984
|
|
|
$
|
42,251
|
|
Performance obligations are satisfied as fuel is delivered to the customer. Many of our contracts with our customers include minimum purchase volumes measured on a monthly basis. Receivables from fuel are recognized on a per-gallon rate and are generally collected within 10 days of delivery.
Receivables from rent and other lease-related charges are generally collected at the beginning of the month.
18
CROSSAMERICA PARTNERS LP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1
4
. SUPPLEMENTAL CASH FLOW INFORMATION
In order to determine net cash provided by operating activities, net income is adjusted by, among other things, changes in assets and liabilities as follows (in thousands):
|
|
Nine Months Ended September 30,
|
|
|
|
2018
|
|
|
2017
|
|
Decrease (increase):
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
$
|
999
|
|
|
$
|
5,183
|
|
Accounts receivable from related parties
|
|
|
(413
|
)
|
|
|
(1,492
|
)
|
Inventories
|
|
|
(914
|
)
|
|
|
674
|
|
Other current assets
|
|
|
407
|
|
|
|
166
|
|
Other assets
|
|
|
304
|
|
|
|
(2,509
|
)
|
Increase (decrease):
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
|
3,158
|
|
|
|
2,882
|
|
Accounts payable to related parties
|
|
|
380
|
|
|
|
5,576
|
|
Motor fuel taxes payable
|
|
|
(1,144
|
)
|
|
|
(386
|
)
|
Accrued expenses and other current liabilities
|
|
|
(871
|
)
|
|
|
3,270
|
|
Other long-term liabilities
|
|
|
(2,305
|
)
|
|
|
178
|
|
Changes in operating assets and liabilities, net of
acquisitions
|
|
$
|
(399
|
)
|
|
$
|
13,542
|
|
The above changes in operating assets and liabilities may differ from changes between amounts reflected in the applicable balance sheets for the respective periods due to acquisitions.
Supplemental disclosure of cash flow information (in thousands):
|
|
Nine Months Ended September 30,
|
|
|
|
2018
|
|
|
2017
|
|
Cash paid for interest
|
|
$
|
23,145
|
|
|
$
|
19,185
|
|
Cash paid for income taxes, net of refunds received
|
|
|
1,385
|
|
|
|
822
|
|
Supplemental schedule of non-cash investing and financing activities (in thousands):
|
|
Nine Months Ended September 30,
|
|
|
|
2018
|
|
|
2017
|
|
Amended Omnibus Agreement fees settled in our
common units
|
|
$
|
6,518
|
|
|
$
|
10,880
|
|
Sale of property and equipment in Section 1031
like-kind exchange transactions
|
|
|
—
|
|
|
|
260
|
|
Issuance of capital lease obligations and recognition of
asset retirement obligation related to the Getty Lease
|
|
|
—
|
|
|
|
740
|
|
19