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Segment Reporting
12 Months Ended
Dec. 31, 2012
Segment Reporting  
Segment Reporting

Note 17. Segment Reporting

        For several reasons, including the size of the Alliance acquisition, the Partnership's strategic focus on gasoline distribution and station operations which increased in significance with the Alliance acquisition, changes to the Partnership's organizational structure of this operating segment under one divisional president, and how the chief operating decision maker ("CODM") reviews results and makes decisions, the Partnership determined it has three operating segments. Commencing with the quarter ended March 31, 2012, the Partnership's three operating segments, which are also the Partnership's reporting segments, are: (i) Wholesale, (ii) Gasoline Distribution and Station Operations and (iii) Commercial. Each of these operating segments generates revenues and incurs expenses and is evaluated for operating performance on a regular basis. For the years ended December 31, 2012, 2011 and 2010, the Commercial operating segment did not meet the quantitative metrics for disclosure as a reportable segment on a stand-alone basis as defined in accounting guidance related to segment reporting. However, the Partnership has elected to present segment disclosures for the Commercial operating segment as management believes such disclosures are meaningful to the user of the Partnership's financial information.

        The Partnership engages in the distribution of refined petroleum products, renewable fuels, crude oil and natural gas. The Partnership's primary businesses are organized within three reporting segments, (i) Wholesale, (ii) Gasoline Distribution and Station Operations and (iii) Commercial, based on the way the CODM manages the business and on the similarity of customers and expected long-term financial performance of each segment. The accounting policies of the segments are the same as those described in Note 2, "Summary of Significant Accounting Policies."

        In the Wholesale reporting segment, the Partnership sells unbranded gasoline (including gasoline blendstocks such as ethanol and naphtha) and diesel to unbranded gasoline customers and other resellers of transportation fuels. The Partnership sells home heating oil, diesel, kerosene and residual oil to home heating oil retailers and wholesale distributors. The Partnership also sells crude oil to refiners. Generally, customers use their own vehicles or contract carriers to take delivery of the gasoline and distillate products at bulk terminals and inland storage facilities that the Partnership owns or controls or with which it has throughput or exchange arrangements. Crude oil is aggregated by truck or pipeline in the mid-continent, transported on land by train and shipped to refineries on the East Coast in barges. Additionally, ethanol is shipped primarily by rail and by barge.

        In the Gasoline Distribution and Station Operations reporting segment, the Partnership sells branded and unbranded gasoline to gasoline stations and other sub-jobbers. This segment also includes gasoline, convenience store, car wash and other ancillary sales at the Partnership's directly operated stores, as well as rental income from dealer leased gasoline stations.

        The Commercial segment includes sales and deliveries to end user customers in the public sector and to large commercial and industrial end users of unbranded gasoline, home heating oil, diesel, kerosene, residual oil, renewable fuels and natural gas. In the case of commercial and industrial end user customers, the Partnership sells products primarily either through a competitive bidding process or through contracts of various terms. The Commercial segment also includes sales of custom blended fuels delivered by barges or from a terminal dock to ships through bunkering activity.

        Commercial segment end user customers include federal and state agencies, municipalities, large industrial companies, many autonomous authorities such as transportation authorities and water resource authorities, colleges and universities and a group of small utilities. In the Commercial segment, the Partnership generally arranges the delivery of the product to the customer's designated location. The Partnership typically hires third-party common carriers to deliver the product.

        The Partnership evaluates segment performance based on net product margins before allocations of corporate and indirect operating costs, depreciation, amortization (including non-cash charges) and interest. Based on the way the CODM manages the business, it is not reasonably possible for the Partnership to allocate the components of operating costs and expenses among the reportable segments. There were no intersegment sales for any of the years presented below.

        Summarized financial information for the Partnership's reportable segments for the years ended December 31 is presented in the table below (in thousands):

 
  Year Ended December 31,  
 
  2012   2011 (1)   2010 (1)  

Wholesale Segment:

                   

Sales

                   

Gasoline and gasoline blendstocks

  $ 8,827,621   $ 8,660,412   $ 4,270,844  

Other oils and related products (2)

    4,933,289     3,936,505     2,720,082  
               

Total

  $ 13,760,910   $ 12,596,917   $ 6,990,926  

Net product margin

                   

Gasoline and gasoline blendstocks

  $ 54,639   $ 56,224   $ 54,065  

Other oils and related products (2)

    90,790     67,609     90,346  
               

Total

  $ 145,429   $ 123,833   $ 144,411  

Gasoline Distribution and Station Operations Segment:

                   

Sales (3)

                   

Gasoline

  $ 3,024,775   $ 1,404,988   $ 353,448  

Station operations (4)

    124,131     58,786     16,105  
               

Total

  $ 3,148,906   $ 1,463,774   $ 369,553  

Net product margin

                   

Gasoline

  $ 139,706   $ 56,690   $ 14,017  

Station operations (4)

    66,384     31,491     8,885  
               

Total

  $ 206,090   $ 88,181   $ 22,902  

Commercial Segment:

                   

Sales

  $ 716,181   $ 775,038   $ 441,080  

Net product margin

  $ 18,652   $ 21,975   $ 15,033  

Combined sales and net product margin:

                   

Sales

  $ 17,625,997   $ 14,835,729   $ 7,801,559  

Net product margin (5)

  $ 370,171   $ 233,989   $ 182,346  

Depreciation allocated to cost of sales

    36,683     24,391     15,628  
               

Combined gross profit

  $ 333,488   $ 209,598   $ 166,718  
               

(1)
Segment reporting results for the prior periods have been reclassified to conform to the Partnership's current presentation.

(2)
Other oils and related products primarily consist of distillates, residual oil and, commencing in the fourth quarter ended December 31, 2011, crude oil.

(3)
On March 1, 2012, the Partnership completed its acquisition of Alliance (see Note 3). As these assets were not in place for a portion of the year ended December 31, 2012 or for any portion of the years ended December 31, 2011 and 2010, the above results are not directly comparable for periods prior to March 1, 2012.

(4)
Station operations primarily consist of convenience store sales at the Partnership's directly operated stores and gasoline station rental income.

(5)
Net product margin is a non-GAAP financial measure used by management and external users of the Partnership's consolidated financial statements to assess the Partnership's business. The table above includes a reconciliation of net product margin on a combined basis to gross profit, a directly comparable GAAP financial measure.

        In the Wholesale segment, the Partnership had one customer whose revenues were approximately $2.8 billion (16%), $2.8 billion (19%) and $1.4 billion (19%) of the Partnership's total revenues for the years ended December 31, 2012, 2011 and 2010, respectively.

        A reconciliation of the totals reported for the reportable segments to the applicable line items in the consolidated financial statements is as follows (in thousands):

 
  Year Ended December 31,  
 
  2012   2011   2010  

Combined gross profit

  $ 333,488   $ 209,598   $ 166,718  

Operating costs and expenses not allocated to operating segments:

                   

Selling, general and administrative expenses

    101,463     78,605     66,063  

Operating expenses

    140,413     73,534     47,781  

Restructuring charges

        2,030      

Amortization expense

    7,024     4,800     3,526  
               

Total operating costs and expenses

    248,900     158,969     117,370  
               

Operating income

    84,588     50,629     49,348  

Interest expense

    (36,268 )   (31,209 )   (22,310 )

Income tax expense

    (1,577 )   (68 )    
               

Net income

  $ 46,743   $ 19,352   $ 27,038  
               

 

        There were no foreign sales for the years ended December 31, 2012, 2011 and 2010. The Partnership has no foreign assets.

  • Segment Assets

        In connection with its acquisition of retail gasoline stations from ExxonMobil in September 2010, the Partnership acquired assets of approximately $232.3 million, of which approximately $171.3 million of property and equipment has been allocated to the Gasoline Distribution and Station Operations segment. As of December 31, 2012, these assets had a net book value of approximately $123.3 million.

        In connection with its acquisition of Alliance in March 2012, the Partnership acquired assets of approximately $395.3 million, of which approximately $294.5 million of property and equipment has been allocated to the Gasoline Distribution and Station Operations segment as of the acquisition date. As of December 31, 2012, these assets had a net book value of approximately $283.9 million.

        Due to the commingled nature and uses of the remainder of the Partnership's assets, it is not reasonably possible for the Partnership to allocate these assets among its reportable segments.