Description of Business, Concentration Risk and Other Disclosures | 3 Months Ended |
Mar. 31, 2015 |
Accounting Policies [Abstract] | |
Description of Business, Concentration Risk and Other Disclosures | DESCRIPTION OF BUSINESS AND OTHER DISCLOSURES |
Description of Business |
On October 1, 2014, CST Brands, Inc. (“CST”) completed the purchase of 100% of the membership interests in Lehigh Gas GP LLC (the “General Partner”) and incentive distribution rights (“IDRs”) of Lehigh Gas Partners LP. After the purchase of the membership interest in its General Partner, the name of Lehigh Gas Partners LP was changed to CrossAmerica Partners LP (“we,” “us,” “our,” “CrossAmerica” or “Company”). The General Partner manages our operations and business activities. The General Partner is managed and operated by the board of directors and executive officers of the General Partner. As a result of the acquisition of the membership interests in the General Partner, CST controls the General Partner and has the right to appoint all members of the board of directors of the General Partner. |
Our business consists of: |
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• | the wholesale distribution of motor fuels (generally using unrelated third party transportation service providers); |
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• | the retail distribution of motor fuels to end customers at sites operated by commission agents or CrossAmerica; |
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• | the owning or leasing of sites used in the retail distribution of motor fuels and, in turn, generating rent income from the lease or sublease of the sites; and |
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• | the operation of convenience stores. |
The financial statements are comprised of CrossAmerica and its wholly-owned subsidiaries. CrossAmerica’s primary operations are conducted by the following consolidated wholly owned subsidiaries: |
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• | Lehigh Gas Wholesale LLC (“LGW”), which distributes motor fuels on a wholesale basis; |
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• | LGP Realty Holdings LP (“LGPR”), which functions as the real estate holding company of CrossAmerica and holds the assets that generate qualified rental income under the the Internal Revenue Code; and |
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• | Lehigh Gas Wholesale Services, Inc. (“LGWS”), which owns and leases (or leases and sub-leases) real estate and personal property used in the retail distribution of motor fuels, which retail distribution income is non-qualified income under the the Internal Revenue Code, as well as provides maintenance and other services to its customers. In addition, LGWS distributes motor fuels on a retail basis to end customers at sites operated by commission agents. Effective April 30, 2014, LGWS also operates convenience stores through its acquisition of Petroleum Marketers Incorporated (“PMI”) and effective February 12, 2015, LGWS operates additional convenience stores as a result of its acquisition of Erickson Oil Products, Inc. (“Erickson”). |
Recently Acquired Retail Sites |
Our retail sites are classified as non-core to the consolidated operations of CST. Non-core stores are acquired sites that are under evaluation to determine whether they have the potential to be fully integrated into CST’s core store operations with respect to convenience store size, location or market demands; thereby being classified by CST as core stores. CST has a dedicated integration team that evaluates our newly acquired convenience stores and assesses their future potential. After evaluating the assets, the team makes a recommendation to classify the stores into the appropriate core or non-core category. We expect this evaluation to occur within twelve months of acquisition. All retail convenience stores we acquire through acquisition are first categorized as non-core. If these stores are not determined by CST to be core stores, these non-core stores will be evaluated for conversion to third party dealers or eventual divestment. By converting non-core stores into dealers, we continue to benefit from motor fuel distribution volumes as well as rental income from lease or sublease arrangements. |
Interim Financial Statements |
These unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X of the Securities Exchange Act of 1934, as amended. 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 Annual Report on Form 10-K (“Form 10-K”) for the year ended December 31, 2014. Financial information as of March 31, 2015 and for the three months ended March 31, 2015 and 2014 included in the condensed notes to the consolidated financial statements has been derived from our unaudited financial statements. Financial information as of December 31, 2014 has been derived from our audited financial statements and notes thereto as of that date. |
Operating results for the three months ended March 31, 2015 are not necessarily indicative of the results that may be expected for the year ending December 31, 2015. Our business exhibits substantial 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 end customer activity behavior 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. |
Reclassifications |
The statement of operations was revised from the presentation included in our Form 10-K for the year ended December 31, 2014 to conform to that presented in the Form 10-K filed by CST. As a result, certain reclassifications were made to prior period amounts to conform to the current year presentation. These reclassifications had no impact on net income or equity for any periods. |
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. |
Significant Accounting Policies |
There have been no material changes to the significant accounting policies described in our Form 10-K. |
New Accounting Pronouncements |
In April 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2015-03—Interest-Imputation of Interest (Subtopic 835-30), which requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. This guidance is effective January 1, 2016. Early adoption is permitted. The guidance is to be applied on a retrospective basis, wherein the balance sheet of each individual period presented should be adjusted to reflect the period-specific effects of applying the new guidance. Management has not yet determined which period the guidance will be adopted. If the guidance were applicable at March 31, 2015, other noncurrent assets and long-term debt would be lower by $6.5 million. |
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 is effective January 1, 2017. Early adoption is not permitted. The guidance can be applied either retrospectively to each prior reporting period presented, or as a cumulative-effect adjustment as of the date of adoption. Management is currently evaluating this new guidance, including how it will apply the guidance at the date of adoption. |
Certain other new financial accounting pronouncements have become effective for our financial statements and the adoption of these pronouncements will not affect our financial position or results of operations, nor will they require any additional disclosures. |
Concentration Risk |
Dunne Manning Stores LLC (formerly Lehigh Gas–Ohio, LLC and referred to as “LGO” or as an “affiliated dealer”) is an operator of retail sites that purchases a significant portion of its motor fuel requirements from us on a wholesale basis and then re-sells motor fuel on a retail basis. LGO also leases motor fuel stations from us. The financial results of LGO are not consolidated with ours. For the three months ended March 31, 2015, CrossAmerica distributed approximately 17% of its total wholesale distribution volumes to LGO. For more information regarding transactions with LGO, see Note 8. |
CrossAmerica purchases a substantial amount of motor fuel from three suppliers. For the three months ended March 31, 2015, CrossAmerica’s wholesale business purchased approximately 27%, 26% and 22% of its motor fuel from ExxonMobil, BP and Motiva, respectively. No other fuel suppliers accounted for 10% or more of CrossAmerica's fuel purchases in the first quarter of 2015. |
The store personnel at the convenience stores we acquired from PMI are employees of Pinehurst Services LLC, to which we pay a management fee pursuant to the terms of an employee staffing agreement. Pinehurst Services LLC employs approximately 750 people that support our convenience store operations and is owned and managed by an unrelated party. We incurred $6.1 million in management fees for the three months ended March 31, 2015 under the employee staffing agreement, which is included in operating expenses on the statement of operations. |