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Acquisition of Assets From 7-Eleven | 9 Months Ended
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Sep. 30, 2021
Business Combinations [Abstract] |
Acquisition of Assets From 7-Eleven | Note 2. ACQUISITION OF ASSETS FROM 7-ELEVEN On April 28, 2021, certain newly formed subsidiaries of CrossAmerica, including Joe’s Kwik Marts (collectively, “Buyer”), entered into an Asset Purchase Agreement (the “Asset Purchase Agreement”) with 7-Eleven, Inc., a Texas corporation (“7-Eleven”), pursuant to which Buyer agreed to purchase certain assets related to the ownership and operations of 106 company operated sites (90 fee; 16 leased) located in the Mid-Atlantic and Northeast regions of the U.S. (collectively, the “Properties”) for an aggregate purchase price of $263.0 million, subject to adjustment in accordance with the terms of the Asset Purchase Agreement. The assets are being sold by 7-Eleven as part of a divestiture process in connection with its previously announced acquisition of the Speedway business from MPC. The assets being purchased by Buyer include real property and leasehold rights to the Properties, and all inventory and other assets located at the Properties, other than specific excluded assets, such as rights to intellectual property or rights with respect to “7-Eleven” or “Speedway” branding. The vast majority of the sites being purchased have been operating under the Speedway brand, and all sites are being rebranded in connection with the closing of such site pursuant to the Asset Purchase Agreement. Buyer is also assuming certain specified liabilities associated with the assets. The Asset Purchase Agreement contains customary representations, warranties, agreements and obligations of the parties, including covenants regarding the conduct of the business at the Properties prior to the applicable closing of such Property. Buyer is closing the acquisition of the Properties on a rolling basis of generally ten sites per week. Through September 30, 2021, Buyer consummated the closing under the Asset Purchase Agreement of 98 Properties for a purchase price of $262.0 million, including inventory and other working capital, as summarized in the table below (in thousands).
Inventories |  | $ | 11,745 |
Other current assets |  |  | 1,301 |
Property and equipment |  |  | 200,244 |
Right-of-use assets |  |  | 7,886 |
Goodwill |  |  | 11,351 |
Intangible assets |  |  | 41,655 |
Total assets |  | $ | 274,182 |
Current portion of operating lease obligations |  |  | 1,510 |
Accrued expenses and other current liabilities |  |  | 675 |
Operating lease obligations, less current portion |  |  | 6,376 |
Asset retirement obligations |  |  | 3,628 |
Total liabilities |  | $ | 12,189 |
Total consideration, net of cash acquired |  | $ | 261,993 |
The fair value of inventory was estimated at retail selling price less estimated costs to sell and a reasonable profit allowance for the selling effort. The fair value of land was based on a market approach. The value of buildings and equipment was based on a cost approach. The buildings and equipment are being depreciated on a straight-line basis, with estimated remaining useful lives of 20 years for the buildings and five to 30 years for equipment. The fair value of the wholesale fuel distribution rights included in intangible assets was based on an income approach. Management believes the level and timing of cash flows represent relevant market participant assumptions. The wholesale fuel distribution rights are being amortized on a straight-line basis over an estimated useful life of approximately 10 years. The fair value of goodwill represents expected synergies from combining operations, intangible assets that do not qualify for separate recognition, and other factors. All goodwill is anticipated to be deductible for tax purposes. Management continues to review the valuation and is confirming the result to determine the final purchase price allocation. We funded these transactions primarily through the new JKM Credit Facility further described in Note 8 as well as undrawn capacity under our existing revolving credit facility and cash on hand. Through November 4, 2021, we closed on five additional Properties for a purchase price of $10.4 million. We anticipate closing on the final three Properties once we are in receipt of all required operational licenses and permits. Aggregate incremental revenues since the closing of the Properties included in CrossAmerica’s statement of operations were $65.3 million for the nine months ended September 30, 2021. Our pro forma results, giving effect to the acquisition and assuming an acquisition date of January 1, 2020, would have been (in thousands):
|  | Three Months Ended September 30, |  |  | Nine Months Ended September 30, |
|  | 2021 |  |  | 2020 |  |  | 2021 |  |  | 2020 |
Revenues |  | $ | 1,119,219 |  |  | $ | 711,413 |  |  | $ | 2,911,962 |  |  | $ | 1,717,596 |
Net income |  |  | 9,805 |  |  |  | 29,702 |  |  |  | 22,740 |  |  |  | 125,625 |
Such pro forma results are based on historical results of the Partnership, the historical results of the assets acquired or to be acquired from 7-Eleven as they occurred under the ownership of 7-Eleven or MPC, and certain pro forma adjustments relating to acquisition costs, interest expense and income taxes. See our Current Report on Form 8-K/A filed on November 3, 2021, for additional information.

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- Definition The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable). + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI http://asc.fasb.org/topic&trid=2303972 + Details
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