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Related Party Transactions | 12 Months Ended
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Dec. 31, 2019
Related Party Transactions [Abstract] |
Related Party Transactions | Note 13. RELATED PARTY TRANSACTIONS 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 December 31, 2019 and income statement amounts for transactions with Circle K for the full year of 2019. 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 46 retail sites to Circle K under a master lease agreement each having initial 10-year terms. The 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):
|  | For the Year Ended December 31, |
|  | 2019 |  |  | 2018 |  |  | 2017 |
Revenues from motor fuel sales to Circle K |  | $ | 153,055 |  |  | $ | 162,974 |  |  | $ | 136,649 |
Rental income from Circle K |  |  | 13,898 |  |  |  | 16,791 |  |  |  | 17,021 |
Accounts receivable from Circle K for fuel amounted to $3.1 million and $2.6 million at December 31, 2019 and 2018, 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. Since July 1, 2015, we have owned a 17.5% total interest in CST Fuel Supply. We account for the income derived from our equity interest of CST Fuel Supply as “Income from CST Fuel Supply equity interests” on our statements of income, which amounted to $14.8 million, $14.9 million and $14.9 million for 2019, 2018, and 2017, respectively. Accounts receivable from Circle K related to this income amounted to $0.9 million and $1.0 million at December 31, 2019 and 2018, respectively. Although Circle K is no longer a related party, we continue to hold an interest in CST Fuel Supply and are continuing to recognize income from CST Fuel Supply equity interests since November 19, 2019. See Note 25 for disclosure of the CST Fuel Supply Exchange. In connection with the CST Merger, the FTC approved a final order requiring the divestiture of certain CST retail fuel stations. As a result, in September 2017, 61 sites were sold to a third party and removed from the fuel distribution agreement between CST Marketing and Supply and CST Services. CST Marketing and Supply no longer supplies fuel to such sites. To compensate for the decrease in the amount of motor fuels sold by CST Marketing and Supply, Circle K agreed to purchase at least 114.9 million gallons annually (the “Annual Commitment”) in addition to the volumes continued to be sold under the fuel distribution agreement to retail fuel stations that remain with Circle K after the divestiture. In addition, should Circle-K fail to purchase all or a portion of the Annual Commitment, Circle K has agreed to make monthly payments to CST Marketing and Supply in the amount of the seller’s margin of $0.05 per gallon under the fuel distribution agreement multiplied by the number of gallons not physically sold pursuant to the Annual Commitment. Consequently, the Partnership, by virtue of its 17.5% ownership interest in CST Fuel Supply, the 100% owner of CST Marketing and Supply, will continue to receive its share from the volumes sold to the 61 retail sites prior to the FTC mandated divestiture. This agreement continues until the fuel distribution agreement between CST Marketing and Supply and CST Services is terminated, which had an initial term of 10 years expiring in December 2024. Supplemental balance sheet information for CST Fuel Supply was as follows (in thousands):
|  | December 31, |
|  | 2019 |  |  | 2018 |
Current assets |  | $ | 58,049 |  |  | $ | 8,571 |
Current liabilities |  |  | 123,102 |  |  |  | 58,083 |
CST Fuel Supply purchases gasoline for immediate distribution to specified retail locations through a supply contract with Valero. Fuel purchases are priced at the prevailing daily rack rates at terminals serving the specified locations. Revenues of CST Fuel Supply represent a $0.05 fixed markup on cost of gallons purchased. As a result of the pass-through nature of the fuel supply operations of CST Fuel Supply, we have presented supplemental income statement information beginning with gross profit as the most meaningful measure relevant to users, supplemented by the disclosure of gallons purchased by CST Fuel Supply disclosed in Note 2. CST Fuel Supply does not enter into any other transactions beyond the purchase and resale activities described above. Supplemental income statement information for CST Fuel Supply was as follows (in thousands):
|  | For the Year Ended December 31, |
|  | 2019 |  |  | 2018 |  |  | 2017 |
Gross profit |  | $ | 87,010 |  |  | $ | 85,998 |  |  | $ | 86,880 |
Net income |  |  | 85,310 |  |  |  | 84,305 |  |  |  | 85,174 |
Supplemental income statement information for CST Fuel Supply was as follows for the four quarters of 2019 and 2018 (in thousands):
|  | 2019 Quarter Ended (Unaudited) |
|  | March 31 |  |  | June 30 |  |  | September 30 |  |  | December 31 |
Gross profit |  | $ | 21,013 |  |  | $ | 21,870 |  |  | $ | 23,039 |  |  | $ | 21,088 |
Net income |  |  | 20,604 |  |  |  | 21,434 |  |  |  | 22,597 |  |  |  | 20,675 |
|  | 2018 Quarter Ended (Unaudited) |
|  | March 31 |  |  | June 30 |  |  | September 30 |  |  | December 31 |
Gross profit |  | $ | 22,152 |  |  | $ | 21,584 |  |  | $ | 20,665 |  |  | $ | 21,597 |
Net income |  |  | 21,745 |  |  |  | 21,162 |  |  |  | 20,270 |  |  |  | 21,128 |
Purchase of Fuel from Circle K During 2019, we purchased the fuel supplied to the following sets of sites from Circle K:
| • | retail sites acquired in the Jet-Pep Assets acquisition;
| • | Franchised Holiday Stores in the Upper Midwest; we also pay a franchise fee to Circle K, which amounted to $0.5 million for 2019, $1.0 million for 2018 and was insignificant for 2017;
| • | retail sites in which we have a leasehold interest that we acquired from Circle K in March and May of 2018 for $0.5 million;
| • | retail sites acquired from CST in February 2015;
| • | retail sites acquired from Circle K in the first two tranches of the asset exchange; and
| • | certain other retail sites at which we are evaluating our fuel supply options.
In total, we purchased $263.5 million, $191.0 million and $11.3 million for 2019, 2018 and 2017, 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 amounted to $0.9 million and $0.5 million for 2019 and 2018, respectively. Amounts payable to Circle K related to these fuel purchases and freight commissions totaled $13.9 million and $4.3 million at December 31, 2019 and 2018, respectively. Circle K Omnibus Agreement and Management Fees We incurred costs and expenses under the Circle K Omnibus Agreement of $11.6 million (including costs under the Transitional Omnibus Agreement as described below), $11.8 million and $13.9 million for 2019, 2018 and 2017, respectively, including incentive compensation costs and non-cash stock-based compensation expense, which are recorded as a component of operating expenses and general and administrative expenses in the statements of income. In addition, the Partnership recognized charges for severance, benefit and retention costs allocated by Circle K of $0.1 million and $0.8 million for 2019 and 2018, respectively. Such costs are included in general and administrative expenses in the statements of income. On October 29, 2019, the Circle K Omnibus Agreement was amended and restated, effective as of April 29, 2019, to: a) remove references to fixed and variable management fees and call for a simplified quarterly settlement based on actual underlying costs incurred by Circle K; and b) permit for a one-time charge of $183,000 from Circle K to us related to costs incurred by Circle K in connection with the strategic review of our fuel supply. Amounts payable to Circle K related to expenses incurred by Circle K on our behalf in accordance with the Circle K Omnibus Agreement, including the separation benefits discussed above, totaled $11.5 million and $20.2 million at December 31, 2019 and 2018, respectively. Concurrent with the closing of the GP Purchase, we paid Circle K $14.2 million of omnibus charges. The liability balance at December 31, 2019 includes $9.2 million of omnibus charges that will be paid in eight quarterly payments starting March 31, 2020. As such, $4.6 million is classified within other noncurrent liabilities on the December 31, 2019 balance sheet. 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 has 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. In addition, from January 1, 2020 until the closing of the CST Fuel Supply Exchange (see Note 25), the General Partner will provide Circle K with certain administrative and operational services, on the terms and conditions set forth in the Transitional Omnibus Agreement. See Note 25 for disclosure regarding the Topper Group Omnibus Agreement effective January 1, 2020. Common Units Issued to Circle K as Consideration for Amounts due Under the Circle K 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 Circle K Omnibus Agreement in newly issued common units representing limited partner interests in the Partnership. We issued the following common units to Circle K as consideration for amounts due under the terms of the Circle K Omnibus Agreement:
Year |  | Number of Common Units Issued |
2017 |  |  | 550,516 |
2018 |  |  | 292,118 |
No charges allocated to us by Circle K under the Circle K Omnibus Agreement since the first quarter of 2018 have been settled in common units. IDR and Common Unit Distributions We distributed $0.5 million, $1.6 million and $4.3 million to Circle K related to its ownership of our IDRs and $15.7 million, $16.2 million and $17.0 million related to its ownership of our common units during 2019, 2018 and 2017, respectively. Other Transactions with Circle K As discussed in Note 7, we sold two properties during 2017 as a result of the FTC’s requirements associated with Couche-Tard’s acquisition of CST. 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. Also as discussed in Note 7, we sold nine properties during 2018 as a result of the FTC’s requirements associated with Couche-Tard’s acquisition of Holiday. Since this was a forced divestiture of assets for us, Circle K compensated 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. Circle K’s payment to us was received during the fourth quarter of 2018. Transactions with Affiliates of Members of the Board Wholesale Motor Fuel Sales and Real Estate Rentals Revenues from motor fuel sales and rental income from DMS were as follows (in thousands):
|  | For the Year Ended December 31, |
|  | 2019 |  |  | 2018 |  |  | 2017 |
Revenues from motor fuel sales to DMS |  | $ | 142,236 |  |  | $ | 241,151 |  |  | $ | 241,895 |
Rental income from DMS |  |  | 6,326 |  |  |  | 12,569 |  |  |  | 18,753 |
Accounts receivable from DMS totaled $4.1 million and $5.6 million at December 31, 2019 and 2018, respectively. In March 2019, we entered into an amendment of the master lease and master fuel supply agreements with DMS. These amendments resulted in the following:
| • | 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. Of the remaining 70 sites covered by the master lease agreement, DMS may sever up to 20 sites and we may sever up to eight sites. No severs may be made in 2019 beyond the 17 sites noted above, and the required notification period for severs was extended from 30 days to 180 days.
| • | 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.
During the third quarter of 2019, DMS gave notice to sever 12 sites in January 2020 from the master lease and master fuel supply agreements, resulting in the write-off of deferred rent income of $0.6 million, classified within the loss on dispositions and lease terminations, net line item of the statement of income. 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 $2.4 million charge primarily 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 income. See Note 2 for additional information on the agreements entered into with the third-party multi-site operator. As discussed in Note 7, DMS renewed its contract with one of its customers, triggering a $0.8 million earn-out payment by DMS to us in 2017 under a contract entered into with DMS at the time of CST acquiring our General Partner in October 2014. Also as discussed in Note 7, we sold 29 properties to DMR during 2017 for $18.9 million, resulting in a gain of $0.8 million. Revenue from rental income from TopStar, a related party of Mr. Topper, was $0.3 million, $0.3 million and $0.5 million for 2019, 2018 and 2017, respectively. CrossAmerica leases real estate from the Topper Group. Rent expense paid under these lease agreements was $1.1 million, $1.0 million and $0.9 million for 2019, 2018 and 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 $1.0 million, $1.8 million and $1.5 million for 2019, 2018 and 2017, respectively. Accounts payable to this related party amounted to $0.1 million and $0.4 million at December 31, 2019 and 2018, respectively. Principal Executive Offices Our principal executive offices are in Allentown, Pennsylvania. We sublease office space from the Topper Group (formerly Circle K) that the Topper Group 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 Circle K Omnibus Agreement incorporates this rental expense, which amounted to $0.7 million for 2019, 2018 and 2017. 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 amounted to $0.1 million for 2019, 2018 and 2017.

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- Definition The entire disclosure for related party transactions. Examples of related party transactions include transactions between (a) a parent company and its subsidiary; (b) subsidiaries of a common parent; (c) and entity and its principal owners; and (d) affiliates. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 850 -URI http://asc.fasb.org/topic&trid=2122745 + Details
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