Related-Party Transactions | Note 12. RELATED-PARTY TRANSACTIONS Transactions with Affiliates of Members of the Board Wholesale Motor Fuel Sales and Real Estate Rentals See Note 4 regarding the termination of the master lease and master fuel supply agreements with DMS in connection with the acquisition of retail and wholesale assets that closed April 14, 2020. Revenues from motor fuel sales and rental income from DMS were as follows (in thousands): Three Months Ended June 30, Six Months Ended June 30, 2020 2019 2020 2019 Revenues from motor fuel sales to DMS $ 7,125 $ 40,579 $ 29,234 $ 74,699 Rental income from DMS 183 1,439 $ 1,395 $ 3,385 Accounts receivable from DMS and affiliates totaled $1.7 million and $4.1 million at June 30, 2020 and December 31, 2019, respectively. In March 2019, we entered into an amendment of the master lease and master fuel supply agreements with DMS. These amendments included the following provisions: • DMS severed 17 sites from the master lease. Since April 1, 2019, DMS has not been charged rent on these sites. We transitioned substantially all of these sites to other dealers by June 30, 2019. • Rental income from DMS for the remainder of the lease term was reduced effective April 1, 2019 by $0.5 million annually. • The markup charged on fuel deliveries to the remaining 85 DMS sites covered by the master fuel supply agreement was reduced effective April 1, 2019 by $0.01 per gallon and by an additional $0.005 per gallon effective January 1, 2020. DMS severed 12 sites in January 2020 from the master lease and master fuel supply agreements. Revenues from TopStar, an entity affiliated with Joseph V. Topper, Jr., were $2.8 million and $0.1 million for the three months ended June 30, 2020 and 2019 and $2.8 million and $0.1 million for the six months ended June 30, 2020 and 2019, respectively. Accounts receivable from TopStar were $0.8 million at June 30, 2020. As a result of acquiring this subwholesale contract as part of the acquisition of retail and wholesale assets, we are supplying fuel to this related party as of April 14, 2020. Prior to April 14, 2020, we were only leasing motor fuel stations to TopStar. CrossAmerica leases real estate from the Topper Group. Rent expense under these lease agreements, including rent paid under the leases entered into in connection with the acquisition of retail and wholesale assets as further discussed in Note 4, was $1.6 million and $0.3 million for the three months ended June 30, 2020 and 2019 and $1.9 million and $0.5 million for the six months ended June 30, 2020 and 2019, respectively. Topper Group Omnibus Agreement On January 15, 2020, the Partnership entered into an Omnibus Agreement, effective as of January 1, 2020 (the “Topper Group Omnibus Agreement”), among the Partnership, the General Partner and DMI. The terms of the Topper Group Omnibus Agreement were approved by the independent conflicts committee of the Board, which is composed of the independent directors of the Board. Pursuant to the Topper Group Omnibus Agreement, DMI agreed, among other things, to provide, or cause to be provided, to the General Partner for the benefit of the Partnership, at cost without markup, certain management, administrative and operating services, which services were previously provided by Circle K under the Transitional Omnibus Agreement, dated as of November 19, 2019, among the Partnership, the General Partner and Circle K. The Topper Group Omnibus Agreement will continue in effect until terminated in accordance with its terms. The Topper Group has the right to terminate the Topper Group Omnibus Agreement at any time upon 180 days’ prior written notice, and the General Partner has the right to terminate the Topper Group Omnibus Agreement at any time upon 60 days’ prior written notice. We incurred expenses under the Topper Group Omnibus Agreement, including costs for store level personnel at our company operated sites since our April 2020 acquisition of retail and wholesale assets, totaling $10.6 million and $14.2 million for the three and six months ended June 30, 2020, respectively. Such expenses are included in operating expenses and general and administrative expenses in the statement of operations. Amounts payable to the Topper Group related to expenses incurred by the Topper Group on our behalf in accordance with the Topper Group Omnibus Agreement totaled $1.9 million at June 30, 2020. IDR and Common Unit Distributions We distributed $9.7 million and $4.0 million to the Topper Group related to its ownership of our common units during the three months ended June 30, 2020 and 2019 and $17.7 million and $7.9 million during the six months ended June 30, 2020 and 2019, respectively. We distributed $0.1 million to the Topper Group related to its ownership of our IDRs during the six months ended June 30, 2020. See Note 17 for information regarding the elimination of the IDRs. Maintenance and Environmental Costs Certain maintenance and environmental 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 $0.2 million and $0.2 million for the three months ended June 30, 2020 and 2019 and $0.3 million and $0.7 million for the six months ended June 30, 2020 and 2019, respectively. Accounts payable to this related party amounted to $0.1 Environmental Compliance and Inventory Management Costs We use certain environmental monitoring and inventory management equipment and services provided 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 an insignificant amount for the three and six months ended June 30, 2020. Convenience Store Products We purchase certain convenience store products from an affiliate of John B. Reilly, III and Joseph V. Topper, Jr., members of the Board, as approved by the independent conflicts committee of the Board in connection with the April 2020 acquisition of retail and wholesale assets. Merchandise costs amounted to $5.1 Vehicle Lease In connection with the services rendered under the Topper Group Omnibus Agreement, we lease certain vehicles from an entity affiliated with Joseph V. Topper, Jr., a member of the Board, as approved by the independent conflicts committee of the Board. Lease expense was insignificant for the three and six months ended June 30, 2020. Principal Executive Offices Our principal executive offices are in Allentown, Pennsylvania. We sublease office space from the Topper Group that the Topper Group leases from an affiliate of John B. Reilly, III and Joseph V. Topper, Jr., members of our Board, as approved by the independent conflicts committee of the Board. Rent expense amounted to $0.3 million and $0.2 million for the three months ended June 30, 2020 and 2019 and $0.5 million and $0.4 million for the six months ended June 30, 2020 and 2019, respectively. Public Relations and Website Consulting Services We have engaged a company affiliated with a member of the Board, for public relations and website consulting services. The cost of these services was insignificant for the three and six months ended June 30, 2020 and 2019. Transactions with Circle K As a result of the GP Purchase, Circle K is no longer a related party from November 19, 2019 forward. However, for comparability purposes, we have disclosed balance sheet disclosures as of June 30, 2020 and December 31, 2019 and income statement amounts for transactions with Circle K for the three and six months ended June 30, 2020 and 2019. Fuel Sales and Rental Income As of June 30, 2020, we sell wholesale motor fuel under a master fuel distribution agreement to 46 Circle K retail sites and lease real property on 15 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 June 30, Six Months Ended June 30, 2020 2019 2020 2019 Revenues from motor fuel sales to Circle K $ 17,373 $ 42,307 $ 46,597 $ 75,622 Rental income from Circle K 1,385 3,975 4,054 8,172 Accounts receivable from Circle K for fuel amounted to $2.8 million and $3.1 million at June 30, 2020 and December 31, 2019, 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. From July 1, 2015 through the closing of the CST Fuel Supply Exchange, we owned a 17.5% total interest in CST Fuel Supply. We accounted 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 $3.2 million for the six months ended June 30, 2020 and $3.7 million and $7.2 million for the three and six months ended June 30, 2019, respectively. See Note 3 for information regarding the CST Fuel Supply Exchange. Purchase of Fuel from Circle K We purchased $3.0 million and $74.0 million of motor fuel from Circle K for the three months ended June 30, 2020 and 2019 and $39.8 million and $111.4 million for the six months ended June 30, 2020 and 2019, respectively. Effective February 1, 2018, Couche-Tard began renegotiating fuel carrier agreements, including our wholesale transportation agreements, with third party carriers. The independent conflicts committee of our Board approved an amendment to the Circle K Omnibus Agreement effective February 1, 2018 providing for the payment by us to an affiliate of Couche-Tard of a commission based on the volume purchased by us on the renegotiated wholesale transportation contracts. This commission is 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 was $0.2 million for the three months ended June 30, 2019 and insignificant and $0.4 million for the six months ended June 30, 2020 and 2019, respectively. Amounts payable to Circle K related to these fuel purchases and freight commissions totaled $1.5 million and $13.9 million at June 30, 2020 and December 31, 2019, respectively. Transitional Omnibus Agreement, Circle K Omnibus Agreement and Management Fees Upon the closing of the GP Purchase, the Partnership entered into a Transitional Omnibus Agreement, dated as of November 19, 2019 (the “Transitional Omnibus Agreement”), among the Partnership, the General Partner and Circle K. Pursuant to the Transitional Omnibus Agreement, Circle K agreed, among other things, to continue to provide, or cause to be provided, to the Partnership certain management, administrative and operating services, as provided under the Circle K Omnibus Agreement through June 30, 2020 with respect to certain services, unless earlier terminated or unless the parties extend the term of certain services. We incurred expenses under the Transitional Omnibus Agreement and Circle K Omnibus Agreement, including incentive compensation costs and non-cash stock-based compensation expense, totaling $2.7 million and $5.6 million for the three and six months ended June 30, 2019, respectively. Such expenses are included in operating expenses and general and administrative expenses in the statement of operations. Amounts payable to Circle K related to expenses incurred by Circle K on our behalf in accordance with the Transitional Omnibus Agreement totaled $7.7 million and $11.5 million at June 30, 2020 and December 31, 2019, respectively. The liability balance at June 30, 2020 and December 31, 2019 includes omnibus charges that will be paid in equal quarterly payments through December 31, 2021. As such, $2.3 million and $4.6 million is classified within other noncurrent liabilities at June 30, 2020 and December 31, 2019, respectively. In addition, from January 1, 2020 until the closing of the CST Fuel Supply Exchange, the General Partner provided Circle K with certain administrative and operational services, on the terms and conditions set forth in the Transitional Omnibus Agreement. We recorded $0.5 million of income from such services as a reduction of operating expenses on our statement of operations for the period from January 1, 2020 through the closing of the CST Fuel Supply Exchange. IDR and Common Unit Distributions We distributed $0.1 million and $0.3 million to Circle K related to its ownership of our IDRs and $3.9 million and $7.9 million related to its ownership of our common units during the three and six months ended June 30, 2019, respectively. |