Lease Accounting

12 Months Ended

Dec. 31, 2019

Leases

In February 2016, the FASB issued ASU No. 2016-02, "Leases (Topic 842)" (“ASU 2016-02”). ASU 2016-02 amended the existing accounting standards for lease accounting by recognizing lease assets and lease liabilities on the balance sheet for those leases classified as operating leases under current GAAP. ASU 2016-02 requires that a lessee should recognize a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term on the balance sheet. We adopted ASU 2016-02 as of January 1, 2019, using the modified retrospective approach. In addition, we elected the package of practical expedients permitted under the transition guidance within the new standard, which among other things, allowed us to carry forward the historical lease classification. We also elected the practical expedient related to land easements, allowing us to carry forward our accounting treatment for land easements on existing agreements. In addition, we elected the hindsight practical expedient to determine the lease term for existing leases. Our election of the hindsight practical expedient resulted in the shortening of lease terms for certain existing leases and the useful lives of corresponding leasehold improvements. In our application of hindsight, we evaluated the performance of the leased stores and the associated markets in relation to our overall real estate strategies, which resulted in the determination that renewal options would not be reasonably certain in determining the expected lease term. Adoption of the new standard resulted in the recording of additional net lease assets and lease liabilities of approximately $110.4 million and $110.7 million, respectively. The standard did not materially impact our consolidated net earnings and had no impact on cash flows.

The Company determines if an arrangement is a lease or contains a lease at inception. Operating lease right-of-use assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. Leases with an initial term of 12 months or less are not recorded on the balance sheet; we recognize lease expense for these leases on a straight-line basis over the lease term. The Company's leases have remaining lease terms of approximately 1 year to 20 years, which may include the option to extend the lease when it is reasonably certain the Company will exercise the option. Most leases include one or more options to renew, with renewal terms that can extend the lease term from five to 20 years or more. The exercise of lease renewal options is at the Company's sole discretion. Due to the uncertainties of future markets, economic factors, technology changes, demographic shifts and behavior, environmental regulatory requirements and other information that impacts decisions as to station location, management has determined that it was not reasonably certain to exercise contract options and they are not included in the lease term. Additionally, short-term leases and leases with variable lease costs are immaterial. The Company reviews all options to extend, terminate, or otherwise modify its lease agreements to determine if changes are required to the right of use assets and liabilities.

As the implicit interest rate is not readily determinable in most of the Company's lease agreements, the Company uses its estimated secured incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments.

Lessor — We have various arrangements for certain spaces for food service and vending equipment under which we are the lessor. These leases meet the criteria for operating lease classification. Lease income associated with these leases is immaterial.

Lessee —We lease land for 215 stations, one terminal, a hangar and various equipment. Our lease agreements do not contain any material residual value guarantees and approximately 102 sites leased from Walmart contain restrictive covenants, though the restrictions are deemed to have an immaterial impact.

Leases are reflected in the following balance sheet accounts:



(Millions of dollars)	Classification	December 31, 2019		December 31, 2018
Assets
Operating (Right-of-use)	Other Assets	$	124.2	$	—
Finance	Property, plant, and equipment, at cost, less accumulated depreciation of $2.2 in 2019 and$1.8 in 2018	3.0		2.9
Total leased assets		$	127.2	$	2.9

Liabilities
Current
Operating	Trade accounts payable and accrued liabilities	$	6.8	$	—
Finance	Current maturities of long-term debt	1.2		1.2
Noncurrent
Operating	Deferred credits and other liabilities	118.5		—
Finance	Long-term debt, including capitalized lease obligations	1.2		1.1
Total lease liabilities		$	127.7	$	2.3

Lease Cost:



		Year Ended December 31,
(Millions of dollars)	Classification	2019
Operating lease cost	Station and other operating expenses	$	14.5
Finance lease cost
Amortization of leased assets	Depreciation & amortization expense	1.2
Interest on lease liabilities	Interest expense	0.1
Net lease costs		$	15.8

Cash flow information:



	Year Ended December 31,
(Millions of dollars)	2019
Cash paid for amounts included in the measurement of liabilities
Operating cash flows required by operating leases	$	13.8
Operating cash flows required by finance leases	$	0.1
Financing cash flows required by finance leases	$	1.4

Maturity of Lease Liabilities:



(Millions of dollars)	Operating leases		Finance leases
2020	$	14.9	$	1.3
2021	14.3		0.9
2022	13.5		0.3
2023	13.0		—
2024	12.2		—
After 2024	148.9		—
Total lease payments	216.8		2.5
less: interest	91.5		0.1
Present value of lease liabilities	$	125.3	$	2.4

The Company adopted ASU 2016-02 on January 1, 2019, and as required, the following disclosure is provided for periods prior to adoption. Future annual minimum lease payments and capital lease commitments as of December 31, 2018 were as follows:



(Millions of dollars)	Operating leases		Capital leases
2019	$	13.7	$	1.5
2020	13.3		1.1
2021	12.5		0.6
2022	11.7		0.1
2023	11.1		—
After 2023	122.6		—
Total lease payments	184.9		3.3
less: interest	—		0.2
Present value of minimum payments	$	184.9	$	3.1

Lease Term and Discount Rate:



	Year Ended December 31,
	2019
Weighted average remaining lease term (years)
Finance leases	2.0
Operating leases	15.6
Weighted average discount rate
Finance leases	4.8	%
Operating leases	6.0	%

Lease Accounting