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Operating Leases
12 Months Ended
Dec. 31, 2019
Leases [Abstract]  
Operating Leases

Note 12. OPERATING LEASES

Operating Leases of Retail Sites as Lessee

We lease 391 retail sites from third parties under certain non-cancelable operating leases that expire from time to time through 2033. The weighted-average remaining lease term was 5.8 years as of December 31, 2019.

Lease expense for 2019 as measured under ASC 842 was classified in the statement of income as follows (in thousands):

 

Cost of sales

 

$

27,495

 

Operating expenses

 

 

379

 

General and administrative expenses

 

 

685

 

Total

 

$

28,559

 

 

Variable lease payments included in the above table are based on inflation, revenues or volumes and totaled $1.8 million for 2019. Short-term lease payments included in the table above that are excluded from the lease liability was $0.6 million for 2019. Cash paid for amounts included in the measurement of lease liabilities under operating leases totaled $25.8 million for 2019.

Lease expense as measured under ASC 840 was $21.5 million and $21.3 million for 2018 and 2017, respectively. Contingent rent expense, based on gallons sold, as measured under ASC 840 was $1.9 million for 2018 and 2017.

As of December 31, 2019, future minimum rental payments under operating leases, excluding variable lease payments or short-term payments, were as follows (in thousands). The weighted-average discount rate as of December 31, 2019 was 6.9%.

 

2020

 

$

24,359

 

2021

 

 

21,647

 

2022

 

 

20,055

 

2023

 

 

18,019

 

2024

 

 

15,712

 

Thereafter

 

 

66,063

 

Total future payments

 

 

165,855

 

Less impact of discounting

 

 

42,313

 

 

 

 

123,542

 

Current portion

 

 

23,485

 

Long-term portion

 

$

100,057

 

 

Most lease agreements include provisions for renewals. We generally do not include renewal options in our lease term for purposes of measuring our lease liabilities and right-of-use assets unless the sublease to our customer extends beyond the term of the head lease.

Substantially all these retail sites are then subleased to lessee dealers (including DMS) or commission agents under leases with terms generally ranging from one to ten years and which may include renewal options. Sublease rental income amounted to $38.2 million for 2019.

Operating Leases of Retail Sites as Lessor

Motor fuel stations are leased to tenants under operating leases with various expiration dates ranging through 2033. Most lease agreements include provisions for renewals. We generally do not include renewal options in our lease term. Future minimum rental payments under non-cancelable operating leases with third parties and DMS as of December 31, 2019 were as follows (in thousands):

 

 

 

Third Party

 

 

DMS

 

 

Total

 

2020

 

$

58,561

 

 

$

4,886

 

 

$

63,447

 

2021

 

 

52,232

 

 

 

4,947

 

 

 

57,179

 

2022

 

 

42,123

 

 

 

5,018

 

 

 

47,141

 

2023

 

 

34,601

 

 

 

5,091

 

 

 

39,692

 

2024

 

 

32,317

 

 

 

5,165

 

 

 

37,482

 

Thereafter

 

 

77,377

 

 

 

18,383

 

 

 

95,760

 

Total future minimum lease payments

 

$

297,211

 

 

$

43,490

 

 

$

340,701

 

 

The future minimum rental payments presented above do not include contingent rent based on future inflation, future revenues or volumes of the lessee, or non-lease components for amounts that may be received as tenant reimbursements for certain operating costs.

 

Deferred rent income from straight-line rent relates to the cumulative amount by which straight-line rental income recorded to date exceeds cash rents billed to date under the lease agreement and totaled $7.1 million and $6.3 million at December 31, 2019 and 2018, respectively.