11-K 1 a2014form11-k.htm 11-K 2014 Form 11-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



FORM 11-K



FOR ANNUAL REPORTS OF EMPLOYEE STOCK
PURCHASE SAVINGS AND SIMILAR PLANS
PURSUANT TO SECTION 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

(Mark One)
 
þ
ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2014

OR
o
TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from _______________ to _______________

Commission File No. 001-35743
A.
Full title of the plan and address of the plan, if different from that of the issuer named below:
CST BRANDS, INC. SAVINGS PLAN
B.
Name of issuer of the securities held pursuant to the plan and the address of its principal executive office:
CST BRANDS, INC.
One Valero Way
Building D, Suite 200
San Antonio, Texas 78249




Table of Contents
All other supplemental schedules required by the Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974 are omitted because they are not applicable or not required.





REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


To the CST Brands, Inc. Benefit Plans Administrative Committee
CST Brands, Inc. Savings Plan
San Antonio, Texas

We have audited the accompanying statement of net assets available for benefits of the CST Brands, Inc. Savings Plan (Plan) as of December 31, 2014 and 2013, and the related statement of changes in net assets available for benefits for the year ended December 31, 2014. These financial statements are the responsibility of the Plan’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Plan is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing auditing procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Plan's internal control over financial reporting. Accordingly, we express no such opinion. Our audits also include examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management and evaluating the overall financial statement presentation. We believe that our audits provide reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for benefits of the Plan as of December 31, 2014 and 2013, and the changes in its net assets available for benefits for the year ended December 31, 2014, in conformity with accounting principles generally accepted in the United States of America.
The accompanying supplemental information as listed in the table of contents has been subjected to audit procedures performed in conjunction with the audit of the Plan's financial statements. The supplemental information is the responsibility of the Plan's management. Our audit procedures included determining whether the supplemental information reconciles to the financial statements or the underlying accounting and other records, as applicable, and performing procedures to test the completeness and accuracy of the information presented in the supplemental information. In forming our opinion on the supplemental information, we have evaluated whether the supplemental information, including its form and content, is presented in conformity with the Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. In our opinion, the supplemental information as listed in the table of contents is fairly stated, in all material respects, in relation to the financial statements as a whole.

/s/ BKD LLP
San Antonio, Texas
June 11, 2015


CST BRANDS, INC. SAVINGS PLAN
Statements of Net Assets Available for Benefits (in thousands)




 
December 31,
 
2014
 
2013
Assets
 
 
 
Investments at fair value:
 
 
 
Mutual funds
$
47,684

 
$
42,395

Common/collective trusts
67,937

 
63,866

CST Brands, Inc. common stock
4,785

 
3,509

Valero Energy Corporation common stock
27,943

 
32,457

Certificate of deposit
4,305

 
3,955

Money market security
32

 
33

Self-directed accounts
10,221

 
8,027

Total investments at fair value
162,907

 
154,242

 
 
 
 
Receivables:
 
 
 
Notes receivable from participants
9,323

 
8,501

Employer receivable
3,627

 
2,188

Due from broker for securities sold
3

 
325

Total receivables
12,953

 
11,014

 
 
 
 
Net assets available for benefits
$
175,860

 
$
165,256


See Notes to Financial Statements

2

CST BRANDS, INC. SAVINGS PLAN
Statement of Changes in Net Assets Available for Benefits (in thousands)



 
Year Ended
Investment income:
December 31, 2014
Net appreciation in fair value of investments
$
3,452

Interest and dividends
5,049

Other income
54

Total investment income
8,555

 
 
Interest income on notes receivable from participants
336

Contributions:
 
Participants
5,927

Employer
6,626

Rollovers
3,325

Total contributions
15,878

Total additions
24,769

 
 
Deductions:
 
Benefits paid to participants
(14,091
)
Administrative expenses
(74
)
Total deductions
(14,165
)
 
 
Net increase in net assets available for benefits
10,604

Net assets available for benefits, beginning of year
165,256

Net assets available for benefits, end of year
$
175,860


See Notes to Financial Statements

3

CST BRANDS, INC. SAVINGS PLAN
Notes to Financial Statements


Note 1:
Description of the Plan
General
The CST Brands, Inc. Savings Plan, a Safe Harbor Plan (the Plan), was created on May 1, 2013 and is a qualified profit-sharing plan covering certain of CST’s employees in the United States (U.S.). (See “Eligibility and Participation” below for a description of employees eligible for participation in the Plan). The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974, as amended (ERISA).
The description of the Plan included in these notes to financial statements provides only general information. Participants should refer to the plan document for a complete description of the Plan’s provisions.
Plan Administration
On May 1, 2013, Valero Energy Corporation (Valero) completed the separation of its retail business, creating an independent public company named CST Brands, Inc. (the Company or CST). In accordance with the separation and distribution agreement, the separation occurred by way of a pro rata distribution of 80% of the outstanding shares of CST common stock to Valero’s stockholders on May 1, 2013. Each Valero stockholder received one share of CST stock for every nine shares of Valero stock held at the close of business on the record date of April 19, 2013. This distribution included shares of Valero stock held in the Valero Energy Corporation Thrift Plan and the Valero Energy Corporation Savings Plan (the Valero Plans). Participants in the Valero Plans who became employees of CST on May 1, 2013 were 100% vested in their employer contributions in the Plan and their participant account balances were transferred to the Plan on May 1, 2013. The Valero stock held by the Plan as a result of this distribution is frozen to new contributions.
The Company operates in the U.S. and Canada, and is one of the largest independent retailers of motor fuel and convenience merchandise items in North America. The Company’s operations include (i) the sale of motor fuel at convenience stores, commission agent sites and cardlocks (which are unattended self-service fueling stations that provide motor fuel to fleet customers, such as trucking and other commercial customers), (ii) the sale of convenience merchandise items and other services (such as car wash operations, and commissions from lottery, money orders, air/water/vacuum services, video and game rentals and access to automated teller machines), and (iii) the sale of heating oil to residential customers and the sale of heating oil and motor fuel to small commercial customers.
On October 1, 2014, the Company completed the GP Purchase and IDR Purchase for $17 million in cash and approximately 2.0 million shares of CST common stock. As a result, the Company controls the operations of CrossAmerica, a publicly traded limited partnership. CrossAmerica is engaged in the wholesale distribution of motor fuels, consisting of gasoline and diesel fuel, and the ownership and leasing of real estate used in the retail distribution of motor fuels. CrossAmerica’s operations are conducted entirely within the U.S.
The “GP Purchase” refers to the Company’s purchase from Lehigh Gas Corporation (LGC) of 100% of the equity interests in Lehigh Gas GP LLC (the General Partner), the General Partner of Lehigh Gas Partners LP, a publicly traded limited partnership. After the GP Purchase, the name of Lehigh Gas Partners LP was changed to CrossAmerica Partners LP (CrossAmerica). CrossAmerica’s units trade on the New York Stock Exchange (NYSE) under the symbol “CAPL.”
The “IDR Purchase” refers to the Company’s purchase of all of the membership interests in limited liability companies formed by the 2004 Irrevocable Agreement of Trust of Joseph V. Topper, Sr. and the 2008 Irrevocable Agreement of Trust of John B. Reilly, Jr., which owned all of the incentive distribution rights in Lehigh Gas Partners LP.
CrossAmerica’s General Partner manages operations and activities on their behalf. However, neither CrossAmerica, nor their subsidiaries, nor their General Partner have employees as of December 31, 2014. As of December 31, 2014, the majority of CrossAmerica’s management personnel were employees of Dunne Manning, Inc. (DMI) and related employee benefit costs were covered as part of a management fee. On January 1, 2015, all former employees of DMI associated with operating CrossAmerica became our employees with access to our employee benefit plans.
In November 2014, CST and CrossAmerica jointly purchased the assets of Nice N Easy Grocery Shoppes (Nice N Easy). CrossAmerica purchased the real property of 23 fee sites as well as certain wholesale fuel distribution assets. CST purchased the retail operations of 32 company-operated convenience stores and certain other assets, including certain personal property, inventory and working capital. All of the Nice N Easy sites are located in the state of New York and all former Nice N Easy employees became our employees with access to our employee benefit plans.

4

CST BRANDS, INC. SAVINGS PLAN
Notes to Financial Statements


CST’s and Valero’s common stock trade on the NYSE under the symbols “CST” and “VLO,” respectively.
The Plan is a defined contribution plan sponsored by the Company for the benefit of its eligible employees. Bank of America, N.A. (BANA) is the Trustee under the Plan and has custody of the securities and investments of the Plan through a trust. Merrill Lynch, Pierce, Fenner & Smith Incorporated, an affiliate of BANA, is the record keeper for the Plan. The Plan is administered by CST’s Benefit Plans Administrative Committee (the Committee). The Board of Directors of CST has the right at any time to remove any member of the Committee. Members of the Committee serve without compensation and act by majority vote. The Committee has overall responsibility for the operation and administration of the Plan, including the power to construe and interpret the Plan, decide all questions that arise thereunder, and to delegate responsibilities.
Eligibility and Participation
The Plan was established for all U.S. employees of the Company. These eligible employees are:
A store level employee, defined as an employee of the Company whose principal place of employment is a retail facility serving the motor vehicle public, such as a retail fueling facility, a convenience store, a truck stop, or a restaurant, including facility technician and bookeeping positions, and is identified in the Company records as a store employee. A store level employee may begin contributing to the Plan and is eligible for the safe harbor matching contribution on the first day of the month coincident with or next following completion of one year of service.
An above store level employee, defined as an employee of the Company who is not a store level employee. An above store level employee may begin contributing to the Plan as soon as administratively possible following their date of hire.
Participation in the Plan is voluntary.
Contributions
The Plan permits eligible employees, through a salary deferral election, to have the Company make annual contributions on behalf of the employee in amounts up to 50% of employee’s eligible compensation. Employee rollover and employee Roth contributions are also permitted. The Company makes matching contributions of 100% of the participant’s salary deferral amounts on the first 3% of participant’s compensation and an additional 50% of the participant’s contributions up to the next 2% of the participant’s eligible pay. Company profit-sharing contributions are discretionary as determined by the Company’s Board of Directors. Contributions are subject to certain limitations. The Board of Directors approved $3.6 million and $2.2 million of profit sharing contributions for the year ended December 31, 2014 and period May 1, 2013 (date of inception) through December 31, 2013, respectively, which are shown in the Statements of Net Assets Available for Benefits as an employer receivable.
The Internal Revenue Code (Code) establishes an annual limitation on the amount of individual pre-tax salary deferral contributions. Participants who attained age 50 before the end of the year were eligible to make catch-up contributions.
Participant Accounts
Each participant’s account is credited with the participant’s contribution, the Company’s contribution, plan earnings and is charged with an allocation of administrative expenses. Allocations are based on participant earnings or account balances, as defined. The benefits to which a participant is entitled are the benefits that can be provided from the participant’s vested account.
Vesting
Participants are immediately vested in their voluntary contributions, plus earnings thereon. Additionally, participants are fully vested in CST’s safe harbor matching contributions. To the extent they are made, profit-sharing contributions cliff vest after 3 years of service. Employees will earn time credit toward years of service beginning the first day of employment. For participants employed by the Company or one of its subsidiaries as of the effective date of the Plan or who transfered from Valero on or before August 31, 2013, any prior service recognized under the Valero Plans for such individual was recognized under the Plan for purposes of satisfying any service requirements for eligibility and vesting. At the Company’s discretion in connection with Company acquisition activities, a participant’s prior service

5

CST BRANDS, INC. SAVINGS PLAN
Notes to Financial Statements


with another employer may be recognized under the plan for purposes of satisfying any service requirements for eligibility to participate and vesting of profit-sharing contributions.
In the event an active participant is determined to be totally and permanently disabled, or dies during active employment, the participant’s profit sharing contributions will become fully vested, if not already fully vested.
Eligible participants rehired following a termination of employment are generally reinstated in the Plan as of their rehire date and may begin contributing as soon as administratively possible. A participant’s continuous service prior to rehire is generally reinstated upon the participant’s rehire date.
For participants who were not vested in the participant’s profit-sharing contributions on the last day worked and were rehired, if the time between termination and rehire is:
Less than 12 months, the period between termination and rehire will be counted toward vesting as though the participant never left. All prior continuous service is reinstated for vesting credit service upon a participant’s rehire.
Greater than 12 months, the period between termination and rehire will be disregarded toward vesting.
If a participant was 100% vested at termination, the participant will always remain vested. An authorized leave of absence does not constitute a break in service provided the participant returns to work immediately after the leave ends.
An employee is deemed to have incurred a break in service when an employee has been severed for twelve consecutive months. If a participant is absent from work for less than a year, the period of absence will count towards their years of service for vesting. One year of service is credited for every 365 days.
Forfeitures
If a participant leaves the Company before becoming fully vested in the Company profit-sharing contributions, the participant will lose the non-vested portion. The non-vested portion or forfeited amount will be placed in a forfeiture account in the Plan and may be used to reduce Company contributions and / or to pay plan expenses. If an employee becomes reemployed with the Company, the amount that was forfeited (if any) will be restored without adjustment for any subsequent earnings or losses. The restored forfeited amount will be adjusted for any vesting previously earned. There were $27 thousand and $15 thousand in forfeitures for the year ended December 31, 2014 and for the period May 1, 2013 (date of inception) through December 31, 2013, respectively.
Investment Options
Investment account options available include various funds. Each participant has the option of directing his contributions into any of the separate investment accounts and may change the allocation daily. The Plan has implemented limitations on the percentage a participant may contribute directly to CST common stock and to the percentage of a participant’s overall total account balance that can be invested in the stock. The percentage of contributions directed to CST common stock cannot exceed 20%. Participants may not request fund transfers into CST common stock to the extent that such transfers would cause the CST common stock investment to exceed 20% of the participant’s total portfolio.
In addition to the various investment funds, the Plan also offers participants having a vested account balance in excess of $100,000 the opportunity to set up self-directed brokerage accounts. Under these types of accounts, participant contributions are invested in all mutual funds distributed through BANA, as well as, securities of the NYSE, American Stock Exchange and certain Over-the-Counter equity securities.
Withdrawals and Distributions
Participants may make the following types of withdrawals of all or part of their respective accounts:
One withdrawal during any six-month period from a participant’s frozen after-tax and/or rollover contribution account types;
upon completion of three years of employment, one withdrawal from a participant’s frozen after-tax, rollover contribution, and/or profit sharing contribution account types;

6

CST BRANDS, INC. SAVINGS PLAN
Notes to Financial Statements


upon completion of five years of employment, one withdrawal from a participant’s frozen matching contribution account, with a similar withdrawal allowed 36 months after the date of a previous withdrawal under this provision; and
upon reaching the age of 59 1/2, the participant can make one withdrawal during any six-month period using all available funds without regard to the contribution type.
Upon a participant’s death, total and permanent disability, or retirement, the participant or the beneficiary of a deceased participant is entitled to the distribution of the entire value of the participant’s account and employer account regardless of whether or not the accounts are fully vested. Upon a participant’s termination for any other reason, the participant is entitled to a distribution of only the value of the participant’s account and the vested portion of the participant’s employer account. A participant or beneficiary may elect to receive the entire distribution in a lump sum payment. Alternatively, a participant may elect to do a direct rollover of any amount eligible for rollover from a participant’s account to a qualified retirement plan or IRA.
If the value of the participant’s accounts at the time distribution is to be made exceeds $1,000 (or a greater amount prescribed by IRS limits), participants may elect to delay distribution until a later date not later than April 1 of the year following the year when the participant turns 70 1/2 years old.
Notes Receivable from Participants
The Plan allows loans to active eligible participants. The minimum amount of a loan is $500. The maximum amount of a participant’s loans is determined by the available loan balance restricted to the lesser of $50,000 or 50% of the participant’s vested account balance. All loans are covered by demand notes and are repayable over a period not to exceed five years (except for loans for the purchase of a principal residence) through payroll withholdings unless the participant is paying the loan in full. Interest on the loans is based on local prevailing rates at the time the loan is made. As of December 31, 2014 and 2013, interest rates on outstanding participant loans ranged from 4.25% to 10.5% and the maturity dates of current outstanding loans range from January 2015 to July 2029. A participant can have two loans outstanding under the Plan at any time.
Administrative Expenses
Plan administrative expenses, including trustee fees and administrative fees, may be paid by the Plan unless paid by CST. CST also provides certain other services at no cost to the Plan. Investment expenses relating to individual participant accounts, such as investment management expenses, have been deducted from interest income or dividend income. Individual participant transaction fees, such as overnight delivery fees and redemption fees, are deducted from the respective participant’s account and are included in withdrawals by participants.
Plan Termination
Although it has not expressed an intention to do so, the Company has the right under the Plan to discontinue its contributions at any time and to terminate the Plan, subject to the provisions of ERISA. In the event of plan termination, participants will become 100% vested in their accounts.
Note 2:
Summary of Significant Accounting Policies
Basis of Presentation
The accompanying financial statements are prepared on the accrual basis of accounting in accordance with U.S. generally accepted accounting principles (GAAP).
Investment contracts held by a defined contribution plan are required to be reported at fair value. However, contract value is the relevant measurement attribute for that portion of the net assets available for benefits of a defined contribution plan attributable to fully benefit-responsive investment contracts, because contract value is the amount participants would receive if they were to initiate permitted transactions under the terms of the Plan. The Statement of Changes in Net Assets Available for Benefits is prepared on a contract value basis, which approximates fair value.

7

CST BRANDS, INC. SAVINGS PLAN
Notes to Financial Statements


The Plan has one benefit-responsive investment contract, the Federated Capital Preservation Fund. As disclosed in Note 3, the contract value approximates the fair value of the Federated Capital Preservation Fund as of December 31, 2014 and 2013.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of net assets and changes in net assets and disclosure of contingent assets and liabilities at the date of the financial statements. Actual results could differ from those estimates.
Valuation of Investments
The Plan’s investments are stated at fair value as described in Note 5.
Income Recognition
Purchases and sales of securities are recorded on a trade-date basis. Interest income is recorded on the accrual basis. Dividends are recorded on the ex-dividend date.
Net appreciation (depreciation) includes the Plan’s gains and losses on investments bought and sold as well as held during the year.
Notes Receivable from Participants
Notes receivable from participants are measured at their unpaid principal balance plus any accrued but unpaid interest. Delinquent notes receivable from participants are reclassified as distributions based upon the terms of the Plan. No allowances for credit losses were recorded as of December 31, 2014 or 2013. A note receivable from a participant that has been defaulted upon and not cured within a reasonable period of time may be deemed a distribution from the Plan.
If a note receivable from a participant is not in a default status and the participant makes their final distribution from the Plan, then the participant’s loan balance is reduced and withdrawals to participants are increased to recognize the total taxable income associated with the distribution. If a note receivable from a participant is in a default status and the participant makes their final distribution from the Plan, then the participant’s loan balance is reduced but the withdrawal is not increased because of the deemed distribution associated with the defaulted loan has already been recognized as taxable income.
Benefits Paid to Participants
Benefits paid to participants are recorded when paid.
Plan Tax Status
The Company believes that the Plan is currently designed and being operated in compliance with the applicable requirements of the Code and, therefore believes, that the Plan is qualified and the related trust is tax exempt. As a new individually-designed plan, the Company expects to submit an application to the Internal Revenue Service (IRS) in accordance with the Plan’s normal filing cycle under applicable procedures no later than January 31, 2016, requesting a determination letter from the IRS as to the form of the Plan being qualified under Section 401(a) of the Code and therefore, the related trust tax exempt.
Accounting principles generally accepted in the United States of America require Plan management to evaluate tax positions taken by the Plan and recognize a tax liability (or asset) if the organization has taken an uncertain position that more likely than not would not be sustained upon examination by the IRS. The plan administrator has analyzed the tax positions taken by the Plan, and has concluded that as of December 31, 2014, there are no uncertain positions taken or expected to be taken that would require recognition of a liability (or asset) or disclosure in the financial statements. The Plan is subject to routine audits by taxing jurisdictions; however, there are currently no audits for any tax periods in progress.

8

CST BRANDS, INC. SAVINGS PLAN
Notes to Financial Statements


Risks and Uncertainties
The Plan invests in various investment securities. Investment securities are exposed to various risks, such as interest rate, credit and overall market volatility risk. Due to the level of risk associated with certain investment securities, it is reasonably possible that changes in the values of investment securities will occur in the near term and that such changes could materially affect the participants’ account balances and the amounts reported in the Statement of Net Assets Available for Benefits.
New Accounting Pronouncements
In August 2014, the Financial Accounting Standards Board (the “FASB”) issued guidance related to management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern by incorporating and expanding upon certain principles that are currently in U.S. auditing standards and to provide related footnote disclosures. This guidance is effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. Earlier application is permitted. Plan management does not believe this guidance will have a significant impact on the Plan’s financial statements.
In May 2015, the FASB issued guidance related to measuring the fair value of certain investments using the net asset value per share of the investment. The amendments remove the requirement to categorize within the fair value hierarchy all investments for which fair value is measured using the net asset value per share practical expedient. The amendments also remove the requirement to make certain disclosures for all investments that are eligible to be measured at fair value using the net asset value per share practical expedient. Rather, those disclosures are limited to investments for which the entity has elected to measure the fair value using that practical expedient. This guidance is effective for the annual period beginning after December 15, 2016, and for annual periods thereafter. Earlier application is permitted. Plan management does not believe this guidance will have a significant impact on the Plan’s financial statements.
Note 3:
Investments
The Plan’s investments are held by a bank-administered trust fund. The fair value of the Plan’s investments at December 31, 2014 and 2013 were as follows (in thousands):
 
December 31,
 
2014
 
2013
Mutual funds
$
47,684

 
$
42,395

Common/collective trusts
67,937

 
63,866

CST Brands, Inc. common stock
4,785

 
3,509

Valero Energy Corporation common stock
27,943

 
32,457

Certificate of deposit
4,305

 
3,955

Money market security
32

 
33

Self-directed accounts
10,221

 
8,027

Total investments
$
162,907

 
$
154,242

During the year ended December 31, 2014, the Plan’s investments appreciated in fair value as follows (in thousands):
 
Year Ended December 31,
 
2014
Mutual funds
$
50

Common/collective trusts
2,970

Common stock
432

Net appreciation in fair value of investments
$
3,452


9

CST BRANDS, INC. SAVINGS PLAN
Notes to Financial Statements


The fair value of individual investments that represented 5% or more of the Plan’s net assets available for benefits at December 31, 2014 and 2013 were as follows (in thousands):
 
December 31,
 
2014
 
2013
Valero Energy Corporation Common Stock
$
27,943

 
$
32,457

Vanguard PRIMECAP Core Fund
11,289

 
9,451

BlackRock Basic Value Fund
8,815

 
8,629

Federated Capital Preservation Fund (contract values of $20,874 and $21,957, respectively)
20,874

 
21,957

Interest and dividends realized on the Plan’s investments for 2014 were $5.0 million.
Certain events could limit the ability of the Plan to transact at contract value with the issuers of the contracts held by the Federated Capital Preservation Fund. These events include, but are not limited to, layoffs, bankruptcy, plan termination, mergers, and early retirement incentives. These events may cause liquidation of all or a portion of a contract at a market value adjustment. As of December 31, 2014, the occurrence of any of these events, which could limit the Plan’s ability to transact at contract value with participants, is not considered probable.
Note 4:
Party-in-Interest Transactions
Party-in-interest transactions include those with fiduciaries or employees of the Plan, any person who provides services to the Plan, an employer whose employees are covered by the Plan, an employee organization whose members are covered by the Plan, a person who owns 50% or more of such an employer or employee association, or relatives of such persons.
Fees paid by the Plan for investment management services were included as a reduction of the return earned on each fund. In addition, the Plan allows for loans to participants and investment in CST common stock. CST is a party-in-interest to the Plan and provides accounting and administrative services at no cost to the Plan. These transactions are covered by an exemption from the “prohibited transactions” provisions of ERISA and the Code.
Note 5:
Disclosures About Fair Value of Plan Assets and Liabilities
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value measurements must maximize the use of observable inputs and minimize the use of unobservable inputs. There is a hierarchy of three levels of inputs that may be used to measure fair value:
Level 1
Quoted prices in active markets for identical assets or liabilities
Level 2
Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities
Level 3
Unobservable inputs supported by little or no market activity and are significant to the fair value of the assets or liabilities
The valuation methods used to measure the Plan’s financial instruments at fair value are as follows:
CST common stock, Valero common stock and mutual funds are measured at fair value using a market approach based on quotations from national securities exchanges and are categorized in Level 1 of the fair value hierarchy.
The money market security and certificate of deposit represent interest-bearing cash and are therefore categorized in Level 1 of the fair value hierarchy.
Common/collective trusts are stated at fair value as determined by the issuers of the funds based on the fair values of the underlying assets and are categorized in Level 2 of the fair value hierarchy. The fair value of the

10

CST BRANDS, INC. SAVINGS PLAN
Notes to Financial Statements


Plan’s investments in the LifePath Index Funds, the Victory Small Cap Value Fund and the SSgA S&P 500 Index Fund are based on the fair values of the underlying assets. The fair value of the Federated Capital Preservation Fund, which primarily holds investments in fully benefit-responsive contracts, is calculated by the issuers using a discounted cash flow model, which considers (i) recent fee bids as determined by recognized dealers, (ii) discount rate, and (iii) the duration of the underlying portfolio securities. The fair value of the Plan’s investment in the Federated Capital Preservation Fund is based on its proportionate ownership of the underlying investments. There are no imposed restrictions as to the redemption of these investments.
The self-directed accounts invest in U.S. government securities, money market securities, corporate bonds, common stock, preferred stock and mutual funds. These investments are measured at fair value using a market approach based on quotations from national securities exchanges and are categorized in Level 1 of the fair value hierarchy.

11

CST BRANDS, INC. SAVINGS PLAN
Notes to Financial Statements


The table below presents information about the Plan’s assets measured at fair value on a recurring basis and indicates the fair value hierarchy of the inputs utilized to determine the fair values as of December 31, 2014 and 2013 (in thousands).
 
 
Fair Value Measurements Using
 
 
Quoted Prices in Active Markets
(Level 1)
 
Significant Other Observable Inputs
(Level 2)
 
Significant Unobservable Inputs
(Level 3)
 
Total as of December 31, 2014
Mutual Funds:
 
 
 
 
 
 
 
 
Foreign funds
 
$
6,406

 
$

 
$

 
$
6,406

Large-cap funds
 
27,055

 

 

 
27,055

Mid-cap funds
 
4,848

 

 

 
4,848

Small-cap funds
 
1,835

 

 

 
1,835

Bond funds
 
7,540

 

 

 
7,540

Common/collective trusts:
 
 
 
 
 
 
 
 
LifePath Index Funds
 

 
39,335

 

 
39,335

Victory Small Cap Value Fund
 

 
883

 

 
883

Federated Capital Preservation Fund
 

 
20,874

 

 
20,874

SSgA S&P 500 Index Fund
 

 
6,845

 

 
6,845

Common stock:
 
 
 
 
 
 
 
 
CST Brands, Inc. common stock
 
4,785

 

 

 
4,785

Valero Energy Corporation common stock
 
27,943

 

 

 
27,943

Certificate of deposit:
 
 
 
 
 
 
 
 
Retirement Bank Account
 
4,305

 

 

 
4,305

Money market account
 
32

 

 

 
32

Self-directed accounts:
 
 
 
 
 
 
 
 
Common stock
 
7,006

 

 

 
7,006

Money market account
 
1,557

 

 

 
1,557

Mutual funds
 
1,138

 

 

 
1,138

Corporate bonds
 
195

 

 

 
195

Certificate of deposit
 
124

 

 

 
124

Cash
 
32

 

 

 
32

Other assets
 
56

 

 

 
56

U.S. government securities
 
46

 

 

 
46

Preferred stock
 
67

 

 

 
67

Investments at fair value
 
$
94,970

 
$
67,937

 
$

 
$
162,907



12

CST BRANDS, INC. SAVINGS PLAN
Notes to Financial Statements


 
 
Fair Value Measurements Using
 
 
Quoted Prices in Active Markets
(Level 1)
 
Significant Other Observable Inputs
(Level 2)
 
Significant Unobservable Inputs
(Level 3)
 
Total as of December 31, 2013
Mutual Funds:
 
 
 
 
 
 
 
 
Foreign funds
 
$
6,604

 
$

 
$

 
$
6,604

Large-cap funds
 
23,915

 

 

 
23,915

Mid-cap funds
 
3,640

 

 

 
3,640

Small-cap funds
 
2,492

 

 

 
2,492

Bond funds
 
5,744

 

 

 
5,744

Common/collective trusts:
 
 
 
 
 
 
 

LifePath Index Funds
 

 
35,249

 

 
35,249

Victory Small Cap Value Fund
 

 
787

 

 
787

Federated Capital Preservation Fund
 

 
21,957

 

 
21,957

SSgA S&P 500 Index Fund
 

 
5,873

 

 
5,873

Common stock:
 
 
 
 
 
 
 
 
CST Brands, Inc. common stock
 
3,509

 

 

 
3,509

Valero Energy Corporation common stock
 
32,457

 

 

 
32,457

Certificate of deposit:
 
 
 
 
 
 
 
 
Retirement Bank Account
 
3,955

 

 

 
3,955

Money market account
 
33

 

 

 
33

Self-directed accounts:
 
 
 
 
 
 
 


Common stock
 
5,116

 

 

 
5,116

Money market account
 
1,627

 

 

 
1,627

Mutual funds
 
982

 

 

 
982

Corporate bonds
 
232

 

 

 
232

Cash
 
29

 

 

 
29

Other assets
 
21

 

 

 
21

U.S. government securities
 
18

 

 

 
18

Preferred stock
 
2

 

 

 
2

Investments at fair value
 
$
90,376

 
$
63,866

 
$

 
$
154,242

Transfers Between Levels
During the year ended December 31, 2014 and eight months ended December 31, 2013, there were no transfers between assets classified as Level 1 and Level 2.

13




Supplementary Information


CST BRANDS, INC. SAVINGS PLAN
EIN 46-1365950 PN 001
Schedule H, Line 4i – Schedule of Assets (Held at End of Year)
As of December 31, 2014 (in thousands)


Identity of Issue/Description of Investment
 
Current Value
Mutual funds:
 
 
American Funds EuroPacific Growth Fund
 
$
6,406

American Funds Growth Fund of America
 
6,951

Pioneer Bond Fund
 
7,540

Vanguard Mid-Cap Index Fund
 
4,848

Vanguard PRIMECAP Core Fund
 
11,289

BlackRock Small Cap Growth Equity Fund
 
1,835

BlackRock Basic Value Fund
 
8,815

Total mutual funds
 
47,684

Common/collective trusts:
 
 
Victory Small Cap Value Fund
 
883

Lifepath Index Retirement Fund
 
3,410

Lifepath Index Retirement Fund 2015
 

Lifepath Index Retirement Fund 2020
 
4,563

Lifepath Index Retirement Fund 2025
 
8,183

Lifepath Index Retirement Fund 2030
 
7,983

Lifepath Index Retirement Fund 2035
 
5,000

Lifepath Index Retirement Fund 2040
 
3,609

Lifepath Index Retirement Fund 2045
 
2,413

Lifepath Index Retirement Fund 2050
 
2,895

Lifepath Index Retirement Fund 2055
 
1,279

Federated Capital Preservation Fund
 
20,874

SSGA S&P 500 Index Fund
 
6,845

Total common/collective trusts
 
67,937

Common stock:
 
 
*CST Brands, Inc. Common Stock
 
4,785

Valero Energy Corporation Common Stock
 
27,943

Certificate of deposit:
 
 
*Retirement Bank Account
 
4,305

Money market
 
32

Self-directed accounts
 
10,221

*Notes receivable (interest rates range from 4.25% to 10.5%; maturity dates range from January 2015 to July 2029)
 
9,323

 
 
$
172,230

*Party-in-interest to the Plan
See accompanying Report of Independent Registered Public Accounting Firm.





SIGNATURE
The Plan pursuant to the requirements of the Securities Exchange Act of 1934, the CST Brands, Inc. Benefit Plans Administrative Committee has duly caused this annual report to be signed on its behalf by the undersigned hereunto duly authorized.
 
CST BRANDS, INC. SAVINGS PLAN
 
 
 
 
 
 
 
By
/s/ Evan Smith
 
 
Evan Smith
 
 
Chairman of the CST Brands, Inc. Benefit Plans Administrative Committee
 
 
Vice President, CST Brands, Inc.

Date: June 11, 2015





Exhibits
Exhibit No.
Description
23.1*
Consent of BKD, LLP, Independent Registered Public Accounting Firm.
* Filed herewith.