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Operating Leases
9 Months Ended
Sep. 30, 2019
Leases [Abstract]  
Operating Leases

Note 9. OPERATING LEASES

Operating Leases of Retail Sites as Lessee

We lease approximately 400 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 5.9 years as of September 30, 2019.

Lease expense for the three and nine months ended September 30, 2019 was classified in the statement of operations as follows (in thousands):

 

 

Three Months

 

 

Nine Months

 

Cost of sales

 

$

7,003

 

 

$

20,475

 

Operating expenses

 

 

29

 

 

 

379

 

General and administrative expenses

 

 

171

 

 

 

513

 

Total

 

$

7,203

 

 

$

21,367

 

 

Variable lease payments included in the above table are based on future inflation, revenues or volumes and totaled $0.5 million and $1.4 million for the three and nine months ended September 30, 2019, respectively. Short-term lease payments included in the table above that are excluded from the lease liability were $0.1 million and $0.4 million for the three and nine months ended September 30, 2019, respectively. Cash paid for amounts included in the measurement of lease liabilities under operating leases totaled $6.5 million and $19.3 million for the three and nine months ended September 30, 2019, respectively.

As of September 30, 2019, future minimum rental payments under operating leases, excluding variable lease payments or short-term lease payments, were as follows (in thousands). The weighted-average discount rate as of September 30, 2019 was 6.9%.

 

2019

 

$

6,325

 

2020

 

 

23,756

 

2021

 

 

21,065

 

2022

 

 

19,472

 

2023

 

 

17,434

 

Thereafter

 

 

81,074

 

Total future minimum rental payments

 

 

169,126

 

Less impact of discounting

 

 

43,960

 

 

 

 

125,166

 

Current portion

 

 

23,615

 

Long-term portion

 

$

101,551

 

 

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 $9.6 million and $28.3 million for the three and nine months ended September 30, 2019, respectively.

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, Circle K and DMS as of September 30, 2019 were as follows (in thousands):

 

 

 

Third Party

 

 

Circle K

 

 

DMS

 

 

Total

 

2019

 

$

13,257

 

 

$

2,173

 

 

$

1,199

 

 

$

16,629

 

2020

 

 

48,906

 

 

 

8,692

 

 

 

4,885

 

 

 

62,483

 

2021

 

 

43,064

 

 

 

8,692

 

 

 

4,946

 

 

 

56,702

 

2022

 

 

32,603

 

 

 

8,692

 

 

 

5,018

 

 

 

46,313

 

2023

 

 

25,284

 

 

 

8,692

 

 

 

5,091

 

 

 

39,067

 

Thereafter

 

 

88,885

 

 

 

20,535

 

 

 

23,548

 

 

 

132,968

 

Total future minimum rental payments

 

$

251,999

 

 

$

57,476

 

 

$

44,687

 

 

$

354,162

 

 

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 $6.5 million and $6.3 million at September 30, 2019 and December 31, 2018, respectively.