Business Combinations

9 Months Ended

Sep. 30, 2022

Business Combinations

Business Combinations

Note 2.    Business Combinations

Acquisition from Tidewater Convenience, Inc.—On September 20, 2022, the Partnership acquired substantially all of the assets from Tidewater in a cash transaction. The acquisition includes 14 company-operated Tidewater convenience stores and 1 fuel site, all located in Virginia. The purchase price was approximately $40.4 million, including inventory. The acquisition was funded with borrowings under the Partnership’s revolving credit facility.

The preliminary fair values of the assets acquired and liabilities assumed as of September 20, 2022, the acquisition date, are set forth in the table below. The excess of the purchase price over the aggregate acquisition date value of identifiable net assets acquired was recorded as goodwill and assigned to the GDSO segment. Substantially all of the goodwill is expected to be deductible for tax purposes. These preliminary acquisition date values were generally determined through established and generally accepted valuation techniques and are subject to change during the measurement period as valuations are finalized. As a result, the acquisition accounting is not complete, and additional information that existed at the acquisition date may become known to the Partnership during the remainder of the measurement period. As of the filing date of this Form 10-Q, the Partnership is still in the process of valuing the assets acquired from Tidewater, including inventory, property and equipment and right of use assets, and liabilities.

The following table presents the preliminary allocation of the purchase price to the estimated fair value of the assets acquired and liabilities assumed at the date of acquisition (in thousands):

Assets purchased:
Inventory	$	1,125
Property and equipment		40,706
Right of use assets		828
Total identifiable assets purchased		42,659
Liabilities assumed:
Environmental liabilities		(2,154)
Lease liability		(508)
Other non-current liabilities		(293)
Total liabilities assumed		(2,955)
Net identifiable assets acquired		39,704
Goodwill		738
Net assets acquired	$	40,442

The fair values of the remaining assets and liabilities noted above approximate their carrying values at September 20, 2022, the acquisition date.

In connection with the acquisition of Tidewater, the Partnership incurred acquisition costs of approximately $0.3 million for each of the three and nine months ended September 30, 2022, which are included in selling, general and administrative expenses in the accompanying consolidated statements of operations.

Acquisition from Miller Oil Co., Inc.—On February 1, 2022, the Partnership acquired substantially all of the retail motor fuel assets from Miller Oil in a cash transaction. The acquisition includes 21 company-operated Miller’s Neighborhood Market convenience stores and 2 fuel sites that are either owned or leased, including lessee dealer and commissioned agent locations, all located in Virginia, and 34 fuel supply only sites, primarily in Virginia. The purchase price was approximately $60.1 million, including inventory. The acquisition was funded with borrowings under the Partnership’s revolving credit facility.

The preliminary fair values of the assets acquired and liabilities assumed as of February 1, 2022, the acquisition date, are set forth in the table below. The excess of the purchase price over the aggregate acquisition date value of identifiable net assets acquired was recorded as goodwill and assigned to the GDSO segment. Substantially all of the goodwill is expected to be deductible for tax purposes. These preliminary acquisition date values were generally determined through established and generally accepted valuation techniques and are subject to change during the measurement period as valuations are finalized. As a result, the acquisition accounting is not complete, and additional information that existed at the acquisition date may become known to the Partnership during the remainder of the measurement period. As of the filing date of this Form 10-Q, the Partnership is still in the process of valuing the assets acquired from Miller Oil, including inventory, property and equipment, right of use assets, intangible assets and liabilities.

The following table presents the preliminary allocation of the purchase price to the estimated fair value of the assets acquired and liabilities assumed at the date of acquisition (in thousands):

Assets purchased:
Inventory	$	2,249
Property and equipment		37,530
Right of use assets		5,139
Intangibles		5,555
Other assets		837
Total identifiable assets purchased		51,310
Liabilities assumed:
Accrued expenses and other current liabilities		(1,190)
Environmental liabilities		(4,816)
Lease liability		(5,969)
Other non-current liabilities		(1,384)
Total liabilities assumed		(13,359)
Net identifiable assets acquired		37,951
Goodwill		22,148
Net assets acquired	$	60,099

During the three months ended September 30, 2022, the Partnership recorded the following changes to the preliminary purchase accounting, which resulted in an increase in goodwill to $22.1 million at September 30, 2022 from $21.8 million at June 30, 2022 (in thousands):

Goodwill – June 30, 2022	$	21,800
Decrease in deferred tax asset		128
Increase in environmental liabilities		220
Goodwill – September 30, 2022	$	22,148

The fair values of the remaining assets and liabilities noted above approximate their carrying values at February 1, 2022, the acquisition date.

The Partnership utilized accounting guidance related to intangible assets which lists the pertinent factors to be considered when estimating the useful life of an intangible asset. These factors include, in part, a review of the expected use by the Partnership of the assets acquired, the expected useful life of another asset (or group of assets) related to the acquired assets and legal, regulatory or other contractual provisions that may limit the useful life of an acquired asset. The Partnership amortizes these intangible assets over their estimated useful lives which is consistent with the estimated undiscounted future cash flows of these assets.

As part of the purchase price allocation, identifiable intangible assets include dealer supply contracts that are being amortized over three to eight years. Amortization expense related to the intangible assets was $0.2 million and $0.6 million for the three and nine months ended September 30, 2022, respectively.

In connection with the acquisition of Miller Oil, the Partnership incurred acquisition costs of approximately $0.2 million and $1.0 million for the three and nine months ended September 30, 2022, respectively, which are included in selling, general and administrative expenses in the accompanying consolidated statements of operations.

Acquisition from Consumers Petroleum of Connecticut Incorporated—On January 25, 2022, the Partnership acquired substantially all of the assets from Consumers Petroleum in a cash transaction. The acquisition includes 26 company-owned Wheels convenience stores and related fuel operations located in Connecticut and 22 fuel-supply only

sites located in Connecticut and New York. The purchase price, subject to post-closing adjustments, was approximately $154.7 million, including inventory. The acquisition was funded with borrowings under the Partnership’s revolving credit facility.

The preliminary fair values of the assets acquired and liabilities assumed as of January 25, 2022, the acquisition date, are set forth in the table below. The excess of the purchase price over the aggregate acquisition date value of identifiable net assets acquired was recorded as goodwill and assigned to the GDSO segment. Substantially all of the goodwill is expected to be deductible for tax purposes. These preliminary acquisition date values were generally determined through established and generally accepted valuation techniques and are subject to change during the measurement period as valuations are finalized. As a result, the acquisition accounting is not complete, and additional information that existed at the acquisition date may become known to the Partnership during the remainder of the measurement period. As of the filing date of this Form 10-Q, the Partnership is still in the process of valuing the assets acquired from Consumers Petroleum, including inventory, property and equipment, right of use assets, intangible assets and liabilities.

The following table presents the preliminary allocation of the purchase price to the estimated fair value of the assets acquired and liabilities assumed at the date of acquisition (in thousands):

Assets purchased:
Inventory	$	2,475
Property and equipment		88,262
Right of use assets		4,482
Intangibles		4,136
Other non-current assets		366
Total identifiable assets purchased		99,721
Liabilities assumed:
Accrued expenses and other current liabilities		(192)
Environmental liabilities		(7,161)
Lease liability		(2,372)
Other non-current liabilities		(609)
Total liabilities assumed		(10,334)
Net identifiable assets acquired		89,387
Goodwill		65,340
Net assets acquired	$	154,727

During the three months ended September 30, 2022, the Partnership recorded the following change to the preliminary purchase accounting, which resulted in an increase in goodwill to $65.3 million at September 30, 2022 from $65.2 million at June 30, 2022 (in thousands):

Goodwill – June 30, 2022	$	65,210
Increase in environmental liabilities		130
Goodwill – September 30, 2022	$	65,340

The fair values of the remaining assets and liabilities noted above approximate their carrying values at January 25, 2022, the acquisition date.

The Partnership utilized accounting guidance related to intangible assets which lists the pertinent factors to be considered when estimating the useful life of an intangible asset. These factors include, in part, a review of the expected use by the Partnership of the assets acquired, the expected useful life of another asset (or group of assets) related to the acquired assets and legal, regulatory or other contractual provisions that may limit the useful life of an acquired asset.

The Partnership amortizes these intangible assets over their estimated useful lives which is consistent with the estimated undiscounted future cash flows of these assets.

As part of the purchase price allocation, identifiable intangible assets include dealer supply contracts that are being amortized over four to eight years. Amortization expense related to the intangible assets was $0.2 million and $0.4 million for the three and nine months ended September 30, 2022, respectively

In connection with the acquisition of Consumers Petroleum, the Partnership incurred acquisition costs of approximately $0.1 million and $1.0 million for the three and nine months ended September 30, 2022, respectively, which are included in selling, general and administrative expenses in the accompanying consolidated statements of operations.

Supplemental Pro Forma Information—Revenues and net income not included in the Partnership’s consolidated operating results for Tidewater, Miller Oil and Consumers Petroleum from January 1, 2022 through the respective acquisition date were immaterial.