Goodwill and Other Intangible Assets

12 Months Ended

Dec. 31, 2019

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill

Goodwill balances and activity for the years ended December 31, 2019 and 2018 consisted of the following:



	Segment
	Fuel Distribution and Marketing			All Other		Consolidated
	(in millions)
Balance at December 31, 2017	$	752		$	678	$	1,430
Goodwill related to 7-Eleven Purchase	30			—		30
Goodwill related to Superior acquisition	10			—		10
Goodwill related to Sandford acquisition	31			—		31
Goodwill related to BRENCO Acquisition	5			—		5
Goodwill related to AMID acquisition	44			—		44
Goodwill related to Schmitt acquisition	9			—		9
Balance at December 31, 2018	881			678		1,559
Goodwill adjustment related to AMID acquisition	(1		)	—		(1		)
Goodwill adjustment related to Schmitt acquisition	(3		)	—		(3		)
Balance at December 31, 2019	$	877		$	678	$	1,555

Goodwill represents the excess of the purchase price of an acquired entity over the amounts allocated to the assets acquired and liabilities assumed in a business combination. During the year ended December 31, 2019, we performed our final evaluation of the 7-Eleven Purchase, AMID, Schmitt, BRENCO, Sandford and Superior acquisitions’ purchase accounting analyses with the assistance of a third party valuation firm. Goodwill is recorded at the acquisition date based on a preliminary purchase price allocation and generally may be adjusted when the purchase price allocation is finalized in accordance with ASC 350-20-35 “Goodwill - Subsequent Measurements”.

During 2017, management performed goodwill impairment testing on its reporting units included in assets held for sale resulting in impairment charges of $387 million. Of this amount, $102 million was allocated to the sites reclassified to continuing operations in the fourth quarter within the retail and Stripes reporting units. Once allocated, management performed goodwill impairment tests on both reporting units to which the goodwill balances were allocated. No goodwill impairment was identified for the retail or Stripes reporting units as a result of these tests. During 2018 and 2019, management performed goodwill impairment testing on its reporting units. No goodwill impairment was identified for the reporting units as a result of these tests.

The Partnership determined the fair value of our reporting units using a weighted combination of the discounted cash flow method and the guideline company method. Determining the fair value of a reporting unit requires judgment and the use of significant estimates and assumptions. Such estimates and assumptions include revenue growth rates, operating margins, weighted average costs of capital and future market conditions, among others. The Partnership believes the estimates and assumptions used in our impairment assessments are reasonable and based on available market information, but variations in any of the assumptions could result in materially different calculations of fair value and determinations of whether or not an impairment is indicated. Under the discounted cash flow method, the Partnership determined fair value based on estimated future cash flows of each reporting unit including estimates for capital expenditures, discounted to present value using the risk-adjusted industry rate, which reflect the overall level of inherent risk of the reporting unit. Cash flow projections are derived from one year budgeted amounts plus an estimate of later period cash flows, all of which are determined by management. Subsequent period cash flows are developed for each reporting unit using growth rates that management believes are reasonably likely to occur. Under the guideline company method, the Partnership determined the estimated fair value of each of our reporting units by applying valuation multiples of comparable publicly-traded companies to each reporting unit’s projected EBITDA and then averaging that estimate with similar historical calculations using a three year average. In addition, the Partnership estimated a reasonable control premium representing the incremental value that accrues to the majority owner from the opportunity to dictate the strategic and operational actions of the business.

Other Intangibles

Gross carrying amounts and accumulated amortization for each major class of intangible assets, excluding goodwill, consisted of the following:



	December 31, 2019						December 31, 2018
	Gross Carrying Amount		Accumulated Amortization		Net Book Value		Gross Carrying Amount		Accumulated Amortization		Net Book Value
	(in millions)
Indefinite-lived
Tradenames	$	295	$	—	$	295	$	295	$	—	$	295
Liquor licenses	12		—		12		12		—		12
Finite-lived
Customer relations including supply agreements	580		252		328		579		198		381
Favorable leasehold arrangements, net (1)	—		—		—		10		3		7
Loan origination costs (2)	9		3		6		9		1		8
Other intangibles	10		5		5		10		5		5
Intangible assets, net	$	906	$	260	$	646	$	915	$	207	$	708

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(1)	As a part of ASC 842, favorable leasehold arrangements were reclassed to adjust the operating lease right-of-use asset.


(2)	Loan origination costs are associated with the Revolving Credit Agreement, see Note 10 for further information.

We review amortizable intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. If such a review should indicate that the carrying amount of amortizable intangible assets is not recoverable, we reduce the carrying amount of such assets to fair value. We review non-amortizable intangible assets for impairment annually, or more frequently if circumstances dictate.

During the fourth quarter of 2017, 2018 and 2019, we performed the annual impairment tests on our indefinite-lived intangible assets. We recognized impairment charges of $13 million and $4 million on our contractual rights and liquor licenses, respectively, in 2017; $30 million of impairment charge on our contractual rights in 2018, primarily due to decreases in projected future revenues and cash flows from the date the intangible asset was originally recorded; and no impairment in 2019.

Total amortization expense on finite-lived intangibles included in depreciation, amortization and accretion was $56 million, $43 million and $61 million for the years ended December 31, 2019, 2018 and 2017, respectively.

Customer relations and supply agreements have a remaining weighted-average life of approximately 9 years. Other intangible assets have a remaining weighted-average life of approximately 5 years. Loan origination costs have a remaining weighted-average life of approximately 4 years.

As of December 31, 2019, the Partnership’s estimate of amortization includable in amortization expense and interest expense for each of the five succeeding fiscal years and thereafter for finite-lived intangibles is as follows (in millions):



	Amortization		Interest
2020	$	57	$	2
2021	53		2
2022	44		1
2023	38		1
2024	28		—
Thereafter	113		—
Total	$	333	$	6