Exhibit 99.1

Arko Holdings Ltd.

Unaudited Condensed Consolidated Financial Statements

As of September 30, 2020

Index to unaudited condensed consolidated financial statements:
Consolidated balance sheets			1
Consolidated statements of operations			2
Consolidated statements of comprehensive income (loss)			3
Consolidated statements of changes in equity			4
Consolidated statements of cash flows			5-6
Notes to the unaudited condensed consolidated financial statements			7-34

Arko Holdings Ltd.

Unaudited condensed consolidated balance sheets

(in thousands)

 

As of		September 30, 2020				December 31, 2019
Assets
Current assets:
Cash and cash equivalents		$	165,785			$	32,117
Restricted cash with respect to the Company’s bonds			648				4,260
Restricted cash			13,950				14,423
Trade receivables, net			21,376				23,190
Inventory			146,164				157,752
Other current assets			71,892				58,369
Total current assets			419,815				290,111
Non-current assets:
Property and equipment, net			364,463				367,151
Right-of-use assets under operating leases			760,346				793,086
Right-of-use assets under financing leases, net			170,024				180,557
Goodwill			133,952				133,952
Intangible assets, net			18,770				24,971
Restricted investments			31,825				31,825
Non-current restricted cash with respect to the Company’s bonds			1,498				1,963
Equity investment			3,345				3,770
Other non-current assets			14,934				19,979
Total assets		$	1,918,972			$	1,847,365
Liabilities
Current liabilities:
Lines of credit		$	—			$	82,824
Long-term debt, current portion			17,655				19,131
Accounts payable			126,449				128,828
Other current liabilities			85,131				67,519
Operating leases, current portion			36,164				34,303
Financing leases, current portion			7,254				7,876
Total current liabilities			272,653				340,481
Non-current liabilities:
Long-term debt, net			318,667				218,680
Asset retirement obligation			37,683				36,864
Operating leases			788,569				816,558
Financing leases			197,964				202,470
Deferred tax liability			3,936				1,041
Other non-current liabilities			43,157				36,381
Total liabilities			1,662,629				1,652,475
Commitment and contingencies
Shareholders’ equity:
Common stock (NIS 0.01 par value) - authorized: 5,135,153; issued and outstanding: 828,389 and 760,339 shares, respectively			2,930				2,735
Additional paid-in capital			112,831				101,957
Accumulated other comprehensive income			4,918				4,444
Accumulated deficit			(22,236	)			(43,363	)
Total shareholders’ equity			98,443				65,773
Non-controlling interest			157,900				129,117
Total equity			256,343				194,890
Total liabilities and equity		$	1,918,972			$	1,847,365

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

1

Arko Holdings Ltd.

Unaudited condensed consolidated statements of operations

(in thousands, except per share data)

 

		Three months ended September 30,								Nine months ended September 30,
		2020				2019				2020				2019
Revenues:
Fuel revenue		$	539,938			$	721,645			$	1,510,491			$	2,041,167
Merchandise revenue			403,665				370,267				1,119,041				1,038,305
Other revenues, net			16,475				12,383				44,701				37,223
Total revenues			960,078				1,104,295				2,674,233				3,116,695
Operating expenses:
Fuel costs			462,373				658,244				1,279,067				1,872,749
Merchandise costs			290,856				269,985				814,524				755,540
Store operating expenses			131,780				129,599				386,633				377,618
General and administrative expenses			25,403				16,967				64,823				51,079
Depreciation and amortization			16,171				15,582				50,056				46,284
Total operating expenses			926,583				1,090,377				2,595,103				3,103,270
Other expenses, net			1,381				2,354				7,290				4,766
Operating income			32,114				11,564				71,840				8,659
Interest and other financial income			239				343				980				1,025
Interest and other financial expenses			(10,500	)			(11,302	)			(30,405	)			(33,640	)
Income (loss) before income taxes			21,853				605				42,415				(23,956	)
Income tax expense			(4,672	)			(5,527	)			(5,171	)			(2,838	)
Loss from equity investment			(24	)			(92	)			(435	)			(398	)
Net income (loss)		$	17,157			$	(5,014	)		$	36,809			$	(27,192	)
Less: Net income (loss) attributable to non-controlling interests			7,469				1,726				15,682				(1,233	)
Net income (loss) attributable to Arko Holdings Ltd.		$	9,688			$	(6,740	)		$	21,127			$	(25,959	)
Net earnings (loss) per share - basic and diluted		$	0.01			$	(0.01	)		$	0.03			$	(0.03	)
Weighted average shares outstanding:
Basic and diluted			828,196				774,068				803,027				773,696

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

2

Arko Holdings Ltd.

Unaudited condensed consolidated statements of comprehensive income (loss)

(in thousands)

 

		Three months ended September 30,								Nine months ended September 30,
		2020				2019				2020				2019
Net income (loss)		$	17,157			$	(5,014	)		$	36,809			$	(27,192	)
Other comprehensive income:
Foreign currency translation adjustments			479				1,338				474				4,089
Total other comprehensive income			479				1,338				474				4,089
Comprehensive income (loss)		$	17,636			$	(3,676	)		$	37,283			$	(23,103	)
Less: Comprehensive income (loss) attributable to non-controlling interests.			7,469				1,726				15,682				(1,233	)
Comprehensive income (loss) attributable to Arko Holdings Ltd.		$	10,167			$	(5,402	)		$	21,601			$	(21,870	)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

3

Arko Holdings Ltd.

Unaudited condensed consolidated statements of changes in equity

(in thousands)

 

		Common Stock								Additional Paid-in Capital				Accumulated Deficit				Accumulated Other Comprehensive Income				Total Shareholders’ Equity				Non- Controlling Interests				Total Equity
		Shares				Amount
Balance at July 1, 2020			828,121			$	2,929			$	112,592			$	(31,924	)		$	4,439			$	88,036			$	152,790			$	240,826
Share-based compensation			—				—				132				—				—				132				—				132
Conversion of convertible bonds			268				1				107				—				—				108				—				108
Distributions to non-controlling interests			—				—				—				—				—				—				(2,359	)			(2,359	)
Other comprehensive income			—				—				—				—				479				479				—				479
Net income			—				—				—				9,688				—				9,688				7,469				17,157
Balance at September 30, 2020			828,389			$	2,930			$	112,831			$	(22,236	)		$	4,918			$	98,443			$	157,900			$	256,343
Balance at July 1, 2019			760,299			$	2,735			$	92,188			$	(19,043	)		$	2,675			$	78,555			$	129,734			$	208,289
Share-based compensation			—				—				123				—				—				123				—				123
Conversion of convertible bonds			24				—				9				—				—				9				—				9
Distributions to non-controlling interests			—				—				—				—				—				—				(2,211	)			(2,211	)
Other comprehensive income			—				—				—				—				1,338				1,338				—				1,338
Net (loss) income			—				—				—				(6,740	)			—				(6,740	)			1,726				(5,014	)
Balance at September 30, 2019			760,323			$	2,735			$	92,320			$	(25,783	)		$	4,013			$	73,285			$	129,249			$	202,534
Balance at January 1, 2020			760,339			$	2,735			$	101,957			$	(43,363	)		$	4,444			$	65,773			$	129,117			$	194,890
Share-based compensation			—				—				387				—				—				387				—				387
Vesting and exercise of restricted share units			1,018				4				(4	)			—				—				—				—				—
Conversion of convertible bonds			333				1				133				—				—				134				—				134
Issuance of rights			66,699				190				11,135				—				—				11,325				—				11,325
Transactions with non-controlling interests			—				—				(777	)			—				—				(777	)			20,194				19,417
Distributions to non-controlling interests			—				—				—				—				—				—				(7,093	)			(7,093	)
Other comprehensive income			—				—				—				—				474				474				—				474
Net income			—				—				—				21,127				—				21,127				15,682				36,809
Balance at September 30, 2020			828,389			$	2,930			$	112,831			$	(22,236	)		$	4,918			$	98,443			$	157,900			$	256,343
Balance at January 1, 2019			759,313			$	2,732			$	91,876			$	(5,135	)		$	(76	)		$	89,397			$	134,772			$	224,169
Cumulative effect of adoption of new accounting standard			—				—				—				5,311				—				5,311				2,289				7,600
Balance at January 1, 2019 after adjustments			759,313			$	2,732			$	91,876			$	176			$	(76	)		$	94,708			$	137,061			$	231,769
Share-based compensation			—				—				354				—				—				354				—				354
Vesting and exercise of restricted share units			986				3				(3	)			—				—				—				—				—
Conversion of convertible bonds			24				—				9				—				—				9				—				9
Transactions with non-controlling interests			—				—				84				—				—				84				(84	)			—
Distributions to non-controlling interests			—				—				—				—				—				—				(6,495	)			(6,495	)
Other comprehensive income			—				—				—				—				4,089				4,089				—				4,089
Net loss			—				—				—				(25,959	)			—				(25,959	)			(1,233	)			(27,192	)
Balance at September 30, 2019			760,323			$	2,735			$	92,320			$	(25,783	)		$	4,013			$	73,285			$	129,249			$	202,534

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

4

Arko Holdings Ltd.

Unaudited condensed consolidated statements of cash flows

(in thousands)

 

		Nine months ended September 30,
		2020				2019
Cash flows from operating activities:
Net income (loss)		$	36,809			$	(27,192	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization			50,056				46,284
Deferred income taxes			2,986				1,030
Gain on bargain purchase			—				(406	)
Loss on disposal of assets and impairment charges			5,565				2,430
Foreign currency loss			436				9,174
Amortization of deferred financing costs, debt discount and premium			2,431				1,340
Amortization of fuel and other vendor agreements			(5,998	)			(6,695	)
Accretion of asset retirement obligation			1,010				1,160
Non-cash rent			5,175				5,693
Charges to allowance for doubtful accounts, net			74				74
Loss from equity investment			435				398
Share-based compensation			387				354
Other operating activities, net			(496	)			—
Changes in assets and liabilities:
Decrease (increase) in trade receivables			1,740				(6,325	)
Decrease (increase) in inventory			11,588				(1,319	)
Increase in other assets			(6,647	)			(3,385	)
(Decrease) increase in accounts payable			(2,372	)			17,072
Increase in other current liabilities			17,058				11,065
Decrease in asset retirement obligation			(159	)			(373	)
Increase (decrease) in non-current liabilities			6,420				(66	)
Net cash provided by operating activities		$	126,498			$	50,313

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

5

Arko Holdings Ltd.

Unaudited condensed consolidated statements of cash flows (cont’d)

(in thousands)

 

		Nine months ended September 30,
		2020				2019
Cash flows from investing activities:
Purchase of property and equipment		$	(28,753	)		$	(29,229	)
Purchase of intangible assets			(30	)			—
Proceeds from sale of property and equipment			438				3,059
Business acquisitions, net of cash			(320	)			(2,825	)
Loans to equity investment			(189	)			(174	)
Net cash used in investing activities		$	(28,854	)		$	(29,169	)
Cash flows from financing activities:
Lines of credit, net		$	(83,063	)		$	(6,815	)
Repayment of related-party loans			(4,517	)			—
Buyback of long-term debt			(1,995	)			—
Receipt of long-term debt, net			159,507				32,964
Repayment of debt			(56,161	)			(15,606	)
Principal payments on financing leases			(6,143	)			(6,634	)
Proceeds from issuance of rights, net			11,332				—
Investment of non-controlling interest in subsidiary			19,325				—
Payment of Provision - Pension Fund			—				(17,500	)
Distributions to non-controlling interests			(7,093	)			(6,487	)
Net cash provided by (used in) financing activities		$	31,192			$	(20,078	)
Effect of exchange rates on cash and cash equivalents and restricted cash			282				1,197
Net increase in cash and cash equivalents and restricted cash			128,836				1,066
Cash and cash equivalents and restricted cash, beginning of period			52,763				49,550
Cash and cash equivalents and restricted cash, end of period		$	181,881			$	51,813
Reconciliation of cash and cash equivalents and restricted cash
Cash and cash equivalents, beginning of period		$	32,117			$	29,891
Restricted cash, beginning of period			14,423				13,749
Restricted cash with respect to the Company’s bonds, beginning of period			6,223				5,910
Cash and cash equivalents and restricted cash, beginning of period		$	52,763			$	49,550
Cash and cash equivalents, end of period		$	165,785			$	38,179
Restricted cash, end of period			13,950				11,059
Restricted cash with respect to the Company’s bonds, end of period			2,146				2,575
Cash and cash equivalents and restricted cash, end of period		$	181,881			$	51,813
Supplementary cash flow information:
Cash received for interest		$	887			$	804
Cash paid for interest			27,040				21,791
Cash received for taxes			864				2,005
Cash paid for taxes			708				1,224
Supplementary noncash activities:
Prepaid insurance premiums financed through notes payable		$	5,034			$	2,941
Purchases of equipment included in accounts payable and accrued expenses			5,471				4,386
Purchase of property and equipment under operating leases			4,057				10,198
Disposals of leases of property and equipment			3,831				1,579
Receipt of related-party receivable payment offset by related-party loan payments			7,133				—
Payment to the pension fund by use of funds held in the indemnification escrow account			—				(1,500	)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

6

Arko Holdings Ltd.

Notes to Unaudited Condensed Consolidated Financial Statements

 

1.

General

Arko Holdings Ltd. (the “Company”) is a public company incorporated in Israel, whose securities are listed for trading on the Tel Aviv Stock Exchange Ltd.

As of September 30, 2020, the main activity of the Company was its holding, through fully owned and controlled subsidiaries, of controlling rights in GPM Investments, LLC (“GPM” and in the notes below including subsidiaries wholly owned and controlled by it). GPM is a Delaware limited liability company formed on June 12, 2002 and is engaged directly and through fully owned and controlled subsidiaries (directly or indirectly) in retail activity which includes the operations of a chain of convenience stores, most of which include adjacent gas stations, and in wholesale activity which includes the supply of fuel to gas stations operated by third parties. The “Group” refers to the Company and its subsidiaries and its affiliates.

Following the consummation on October 6, 2020 of the Empire Acquisition described in Note 3 below, which included the purchase of a wholesale business of supplying fuel to 1,453 gas stations and 84 self-operated convenience stores and gas stations, GPM’s activity included the self-operation of approximately 1,330 sites and the supply of fuel to approximately 1,590 gas stations operated by external operators (dealers), all in 33 states and the District of Columbia in the Mid-Atlantic, Midwestern, Northeastern, Southeastern and Southwestern United States (“US”).

The Group has three reporting segments: retail, wholesale and GPMP. Refer to Note 11 below for further information with respect to segments.

 

2.	Summary of Significant Accounting Policies

Basis for Presentation

All significant intercompany balances and transactions have been eliminated in the accompanying condensed consolidated financial statements, which are prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”).

Interim Financial Statements

The accompanying unaudited condensed consolidated financial statements as of September 30, 2020 and for the nine and three months periods ended September 30, 2020 and 2019 (“interim financial statements”) are unaudited and have been prepared in accordance with U.S. GAAP for interim financial information and Regulation S-X set forth by the Securities and Exchange Commission for interim reporting. In the opinion of management, all adjustments (consisting of normal and recurring adjustments except those otherwise described herein) considered necessary for a fair presentation have been included in the accompanying interim financial statements. However, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. Therefore, the interim financial statements should be read in conjunction with the audited consolidated financial statements and accompanying notes of the Company for the year ended December 31, 2019.

The same significant accounting policies, presentation and methods of computation have been followed in these interim financial statements as were applied in the preparation of the Company’s consolidated financial statements for the year ended December 31, 2019 (the “annual financial statements”).

 

7

Accounting Periods

The Company’s fiscal periods end on the last day of the month, and its fiscal year ends on December 31. This results in the Company experiencing fluctuations in current assets and current liabilities due to purchasing and payment patterns which change based upon the day of the week. As a result, working capital can change from period to period not only due to seasonality and changing business operations, but also due to a change in the day of the week in which each period ends. The Group earns a disproportionate amount of its annual operating income in the second and third quarters as a result of the climate and seasonal buying patterns of its customers. Inclement weather, especially in the Midwest and Northeast regions of the US during the winter months, can negatively impact financial results.

Use of Estimates

In the preparation of interim financial statements, management may make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the interim financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Equity Investment

In September 2020, the Company’s equity investment, Ligad Investments and Construction Ltd. (“Ligad”), entered into an agreement with a third party for the lease of the properties held by it for a period of three years beginning March 1, 2021, in consideration of a fixed lease payment of New Israeli Shekel (“NIS”) 1.2 million (approximately $0.35 million) per year. At the same time, Ligad entered into an option agreement, exercisable until September 2022, for the sale of its properties to a third party who is not the tenant in consideration for NIS 26.5 million (approximately $7.7 million) plus VAT, from which the lease payments that Ligad will receive will be deducted.

Revenue Recognition

Revenue is recognized when control of the promised goods or services is transferred to the customers. This requires the Group to identify contractual performance obligations and determine whether revenue should be recognized at a point in time or over time, based on when control of goods and services transfers to a customer. Control is transferred to the customer over time if the customer simultaneously receives and consumes the benefits provided by the Group’s performance. If a performance obligation is not satisfied over time, the Group satisfies the performance obligation at a point in time.

Revenue is recognized in an amount that reflects the consideration the Group expects to be entitled to in exchange for goods or services.

When the Group satisfies a performance obligation by transferring control of goods or services to the customer, revenue is recognized against contract assets in the amount of consideration for which the Group is entitled. When the consideration amount received from the customer exceeds the amounts recognized as revenue, the Company recognizes a contract liability for the excess.

The Group evaluates if it is a principal or an agent in a transaction to determine whether revenue should be recorded on a gross or a net basis. In performing this analysis, the Group considers first whether it controls the goods before they are transferred to the customers and if it has the ability to direct the use of the goods or obtain benefits from them. The Group also considers the following indicators: (1) the primary obligor, (2) the latitude in establishing prices and selecting suppliers, and (3) the inventory risk borne by the Group before and after the goods have been transferred to the customer. When the Group acts as principal, revenue is recorded on a gross basis. When the Group acts as agent, revenue is recorded on a net basis.

 

8

Fuel revenue and fuel costs included fuel taxes of $131.6 million, $134.3 million, $348.7 million and $372.5 million for the three and nine months ended September 30, 2020 and 2019, respectively.

GPM’s customer loyalty program provides GPM’s customers rights to purchase products at a lower price or at no cost in future periods. The related contract liability for the customer loyalty program was approximately $1.2 million and $1.9 million as of September 30, 2020 and December 31, 2019, respectively, and was included in other current liabilities on the consolidated balance sheets.

Refer to Note 11 for disclosure of the revenue disaggregated by segment and product line, as well as a description of the Company’s reportable segment operations.

New Accounting Pronouncements Adopted During 2020

Accounting for Financial Instrument Credit Losses – In June 2016, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2016-13, Measurement of Credit Losses on Financial Instruments. This standard requires that for most financial assets, losses be based on an expected loss approach which includes estimates of losses over the life of exposure that considers historical, current and forecasted information. Expanded disclosures related to the methods used to estimate the losses as well as a specific disaggregation of balances for financial assets are also required. The Group adopted ASU 2016-13 on January 1, 2020 with no material impact on its interim financial statements.

Lease Modifications – In April 2020, the FASB staff issued a question and answer document (the “Lease Modification Q&A”) focused on the application of lease accounting guidance to lease concessions obtained as a result of the COVID-19 pandemic. Under existing lease guidance, the Company would have to determine, on a lease by lease basis, if a lease concession obtained was a result of a new arrangement reached with the lessor (treated within the lease modification accounting framework) or if a lease concession obtained was under the enforceable rights and obligations within the existing lease agreement (precluded from applying the lease modification accounting framework). The Lease Modification Q&A allows lessees, if certain criteria have been met, to bypass the lease-by-lease analysis, and instead elect to either apply the lease modification accounting framework or not, with such election applied consistently to leases with similar characteristics and similar circumstances. The Group has elected to apply this practical expedient for the period beginning as of April 1, 2020 with no material impact on its interim financial statements.

New Accounting Pronouncements Not Yet Adopted

Simplifying the Accounting for Income Taxes – In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes. The amendments in this ASU simplify the accounting for income taxes by removing certain exceptions to the general principles in ASC 740. The amendments also improve consistent application of and simplify GAAP for other areas of ASC 740 by clarifying and amending existing guidance, such as the accounting for a franchise tax (or similar tax) that is partially based on income. This standard is effective January 1, 2021 for the Group. The Group is assessing the impact of adopting this guidance on its consolidated financial statements.

 

9

Reference Rate Reform – In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848) - Facilitation of the Effects of Reference Rate Reform on Financial Reporting. This standard included optional guidance for a limited period of time to help ease the burden in accounting for the effects of reference rate reform. The new standard is effective for all entities through December 31, 2022. The Company is assessing the impact of this standard on its consolidated financial statements.

 

3.	GPM Investments, LLC

Ares Equity Transaction

On February 28, 2020 (the “Ares Closing Date”), GPM entered into an agreement with Ares Capital Corporation and certain funds managed or controlled by Ares Capital Management (collectively, “Ares”) in which for consideration of $20.0 million (prior to transaction costs), GPM issued to Ares membership units representing 2.0% of GPM’s equity (the “Class F Membership Units”), together with warrants that for an exercise price of $10.0 million in the aggregate (subject to customary adjustments including in the event of certain distributions) can be exercised to acquire membership units that represent 1.0% of GPM’s equity (on a fully diluted basis as of the Ares Closing Date) (the “Ares Warrants”).

At the closing of the Ares Transaction, an amended and restated LLC agreement that regulates the rights between the holders of the membership units of GPM was signed and came into force between the members as detailed in Note 3 to the annual financial statements.

The Ares Warrants are exercisable up to the earliest of: (1) eight years and three months from the date of issuance; (2) the completion of sale subsequent to the Trigger Event (as defined in Note 3 to the annual financial statements); and (3) the later of six months after the Call Option is exercised (as defined below) and 42 months from the issuance date. The Ares Warrants are exercisable to Class G Membership Units that will rank equal to the existing common membership units of GPM, with no priority in distributions or liquidations.

GPM has the right at any time to redeem the Class F Membership Units (in full and not in part) (the “Call Option”) for consideration (the “Call Option Price”) as follows: (1) approximately $27.3 million up to three years from the date of issuance; (2) approximately $33.6 million after the third year and up to the end of five years from the date of issuance; (3) approximately $45.8 million after the fifth year and up to the end of eight years from the date of issuance: and (4) approximately $45.8 million plus 10.5% per annum (quarterly accrued) up to the date the call option is exercised if exercised after the eighth year. All distributions paid to the Class F Membership Units (other than tax distributions) will be deducted from the Call Option Price, to the extent paid.

As a result of the existence of different rights to which the members units in GPM are entitled, the Group’s investment in GPM is accounted for under the hypothetical liquidation at book value method as defined in Note 2 to the annual financial statements, and the Class F Membership Units have preference over all other membership units in the event of liquidation, amounting to $20.0 million during the first three years and at the end of each third, fifth and eighth year from the Ares Closing Date will be raised to the Call Option Price (as defined above) which was in effect for the period prior to the period in which the liquidation occurs. After the end of the eighth year, the priority amount will be increased in case of liquidation at a rate of 10.5% per annum (quarterly compounded). From the aforementioned amounts all distributions paid to the Class F Membership Units (other than tax distributions) until that time, to the extent paid, will be deducted.

 

10

The Class F Membership Units, the Ares Warrants and the Call Option are equity instruments. The consideration received from Ares, net of Ares’ transaction costs, amounted to $19.5 million and was attributable to these three issued equity instruments components based on their fair value as of the issuance date, which was determined based on a Monte-Carlo simulation of GPM’s value over the instruments’ lifetime using a net equity value of $19.5 million for the issued equity instruments.

Due to the preference provided to the Class F Membership Units in liquidation, an amount of $20.0 million was classified in the condensed consolidated interim statements of changes in equity as ‘non-controlling interests.’

The difference between the fair value of the Ares Warrants and the fair value of the Call Option in the amount of $0.5 million, as well as approximately $0.7 million for transaction costs, were allocated to the other common membership unit holders in GPM with 75% to Class B common membership units held by Arko Convenience Store, LLC (“Arko Convenience”) and 25% to Class C and Class E common membership units.

Following the Ares Closing Date, the Company holds (indirectly through Arko Convenience), approximately 73.38% of the common membership units and the voting rights in GPM (effectively approximately 67.99% of the equity). For further details with regard to the membership units of GPM following the Ares transaction and the rights to which they are entitled and the holders, see Note 3 to the annual financial statements.

For details with regard to the planned sale of the Class F Membership Units and the Ares Warrants, see Note 14 below.

Limited Partnership

Further to Note 3.G to the annual financial statements, regarding GPM Petroleum LP (“GPMP”), a limited partnership, in which GPM holds approximately 80.68% of the interests therein, on December 17, 2020, GPM entered into a purchase agreement with the investors in the private placement that took place in January 2016 (“Investor”), according to which the Investor’s full limited partnership units (Class A Limited Partnership Units) in GPMP (approximately 14.52% of the rights in GPMP) will be acquired by GPM for $70 million in cash (plus consideration for the amount of outstanding distributions not yet distributed). The consideration amount is approximately equal to the amount in which, commencing from January 2021, GPM is entitled to acquire the Investor’s interest in GPMP, in accordance with the provisions which have been included in GPMP’s limited partnership agreement since the date of the Investor’s investment in GPMP. In accordance with the provisions of the purchase agreement, the acquisition will take place on the business day immediately preceding the scheduled HYAC Closing Date of the Company’s Merger Transaction defined in Note 14 below with Haymaker Acquisition Corp. II (“HYAC”).

 

11

In addition, on December 18, 2020, GPM entered into two purchase agreements with the Apple Seller and the Riiser Seller, who are the other non-affiliated limited partners of GPMP (and who hold together, approximately 4.8% of the interests in the GPMP, hereinafter: the “GPMP Sellers”), under which the GPMP Sellers will sell to GPM most of their limited partnership units (Class AQ units and Class X units) in consideration for approximately $28 million in cash (the “GPMP Consideration”), an amount equal approximately to the value at which the units were allocated to the GPMP Sellers as part of business combinations completed in 2016 and 2019 plus consideration for outstanding distributions not yet distributed. Each of the GPMP Sellers have agreed immediately following receipt of the GPMP Consideration to purchase HYAC shares from existing HYAC shareholders in an amount that shall not be less than the GPMP Consideration. Following the acquisitions, one of the GPMP Sellers will continue to hold Class X units, representing 0.29% of the interests in GPMP, which are pledged to GPM to secure indemnification obligations granted to GPM by that GPMP Seller in accordance with the terms of the Riiser Acquisition completed in December 2019 as described in Note 3.H. to the annual financial statements (at the end of the pledge period, GPM will have the right to purchase the interests in consideration for approximately $3 million, to be paid in cash or shares as to be determined by GPM). In accordance with the provisions of the purchase agreements, the acquisitions will take place on the business day immediately preceding the scheduled HYAC Closing Date of the Merger Transaction.

The consideration for the above transactions will be paid from GPM’s own sources.

Intercompany Loans Provided by the Company to GPM and its Subsidiaries

Further to Note 3.I. to the annual financial statements, on February 28, 2020, all of the loans provided by the Company to GPM were fully repaid in advance in a total amount of approximately $110 million from funds received from the Ares Loan as defined in Note 4 below.

Simultaneously with the repayment of the aforementioned loans, an early prepayment took place (instead of the original repayment date, as extended, set for August 2021) of an original amount of a loan of $10 million provided in 2015 to GPM by GPM Member LLC (“Holdings”).

As a result of said repayment, the Company’s full rights in the Admiral and E-Z Mart loans pledged in favor of the Company’s Bonds (Series C), the balance of which (including interest receivable) as of December 31, 2019 was approximately $68 million, were released.

Subject to the terms established in the intercompany loan agreements (excluding the Midwest loan), to the extent that the Company prepays the Bonds (Series C), GPM will bear the costs associated with the early prepayment with respect of the prepaid loan amount.

Repayment of Note Issued by Holdings and Note Issued to Holdings

Further to Note 18 to the annual financial statements, with regard to the promissory note in the amount of approximately $7.1 million that was issued by Holdings to GPM and the promissory note in the amount of $4.0 million that was issued at that time by Arko Convenience to Holdings, on February 28, 2020, those promissory notes were fully paid.

 

12

Consummated Acquisition – Empire Acquisition

Following a purchase agreement entered into on December 17, 2019 (the “Purchase Agreement”) between a fully owned subsidiary of GPM, GPMP and unrelated third-parties (the “Sellers”), on October 6, 2020 (the “Closing Date”), the acquisition closed for the purchase of (i) the Sellers’ wholesale business of supplying fuel which included 1,453 gas stations operated by others (dealers) and (ii) 84 self-operated convenience stores and gas stations, all in 30 states, out of which 10 states in which GPM was not active in as of September 30, 2020 and the District of Columbia (the “Empire Acquisition”).

As part of the Empire Acquisition, on the Closing Date, the Sellers: (i) sold to GPMP the rights according to agreements with fuel suppliers and all of the rights to supply fuel to 1,537 sites; (ii) sold to a subsidiary of GPM the fee simple ownership rights in 64 sites; (iii) assigned to various of GPM’s subsidiaries leases of 132 sites (including two vacant parcels and one non-operating site) (the “third party leases”); (iv) leased to certain of GPM’s subsidiaries 34 sites (including one vacant parcel) that are valued at approximately $60 million that are owned by the Sellers, at terms as specified below (collectively the “Sellers’ Leases”); and (v) sold and assigned to various of GPM’s subsidiaries and GPMP the equipment, inventory, agreements, intangible assets and other rights with regard to the wholesale and retail businesses acquired (collectively, the “Acquired Operations”).

Beginning on the Closing Date, the Company will consolidate the Acquired Operations in its consolidated financial statements. Due to the short period of time between the Closing Date and the issuance date of the interim financial statements, the initial accounting treatment of the business combination has not been completed.

The consideration to the Sellers for the Acquired Operations, based on the Purchase Agreement and an amendment dated October 5, 2020 (the “Amendment”), was as follows:

 

•

The consideration paid to the Sellers on the Closing Date, after adjustments according to the Amendment, totaled approximately $353 million (the “Base Consideration”), and in addition, approximately $11.5 million was paid for the cash and inventory in the stores, net of deposit amounts and other collateral provided by the dealers, as of the Closing Date (collectively, the “Closing Consideration”). The Closing Consideration is subject to post-closing adjustments.

 

•

On each of the first five anniversaries of the Closing Date, the Sellers will be paid an amount of $4.0 million (total of $20.0 million, instead of $4.5 million and a total of $22.5 million prior to the Amendment) (the “Additional Consideration”). If the Sellers will be entitled to amounts on account of the Contingent Consideration (as defined below), these amounts will initially be applied to accelerate payments on account of the Additional Consideration.

 

•

An amount of up to $45.0 million (instead of up to a total of $42.5 million prior to the Amendment) (the “Contingent Consideration”) will be paid to the Sellers according to mechanisms set forth in the Purchase Agreement, with regard to the occurrence of the following events during the five years from the Closing Date (the “Earnout Period”): (i) sale and lease to third parties or transfer to self-operation by GPM of sites which leases to third parties expired or are scheduled to expire during the Earnout Period, (ii) renewal of agreements with dealers at sites not leased or owned by GPM which agreements expired or are scheduled to expire during the Earnout Period, (iii) improvement in the terms of the agreements with fuel suppliers (with regard to the Acquired Operations and/or GPM’s sites as of the Closing Date), (iv) improvement in the terms of the agreements with transportation companies (with regard to the Acquired Operations and/or GPM’s sites as of the Closing Date), and (v) the closing of additional wholesale transactions that the Sellers has engaged in prior to the Closing Date. The measurement and payment of the Contingent Consideration will be made once a year.

 

13

Each of the Sellers’ Leases is for a term of 15 years, which can be extended by six additional five- year terms, in consideration for an initial total annual base rent payment of approximately $4.2 million, with increases during the term of the lease as set forth in the lease agreement. GPM was granted options to purchase each of the sites during and at the end of the initial five year term and has a right of first refusal to purchase the assets in the event of sale of the assets to third parties during such term, all as determined in the lease agreements.

Approximately 45 out of the 84 sites that are self-operated, as acquired on the Closing Date, continue to be managed after the Closing Date by the management company that operated such sites on behalf of the Sellers, according to a management agreement entered between GPM and the management company (the “Management Agreement”). According to the Management Agreement, the management company is entitled to, in consideration for its services, a weekly fixed fee (on a per site basis) and to additional consideration if the site’s performance is higher than specified in the Management Agreement. In addition, the management company is entitled to the reimbursement of expenses relating to the management services provided, including the employment of store employees. GPM intends to end these management services in the next month for most of the locations as part of the integration process of the Acquired Operations. The Management Agreement can be terminated by 60 days prior notice and a site can be removed from its terms at any time.

The Purchase Agreement includes the Sellers’ undertaking to indemnify GPM for certain breaches of representations and warranties made by the Sellers as specified in the Purchase Agreement, subject to certain time and amounts limitations as determined in the Purchase Agreement.

$350 million of the Closing Consideration was paid by use of the Capital One Line of Credit (see Note 4 below regarding the increase of the Capital One Line of Credit). In addition, on the Closing Date, in accordance with the Ares Credit Agreement as described in Note 4 below, the Delayed Term Loan A in an amount of $63 million was provided to GPM, and was used for the payment of the balance of the Closing Consideration and is to be used by GPM to finance working capital, other payments related to the Empire Acquisition, including payments on account of the Additional Consideration and the Contingent Consideration, at GPM’s discretion.

The closing of the Empire Acquisition was one of the conditions precedent in the closing of the of the Company’s Merger Transaction defined in Note 14 below.

 

14

4.

Debt

 

As of		September 30, 2020				December 31, 2019
		(in thousands)
Arko Holdings Ltd
Bonds (Series C)		$	71,625			$	84,531
Bonds (Series H)			61				277
Arko Convenience
Related-party loan			—				4,000
GPM
PNC lines of credit			—				82,824
PNC term loans			—				39,747
M&T debt			28,491				25,142
Ares term loan			155,037				—
Related-party loan			—				7,718
Insurance premium notes			2,833				714
GPMP
PNC term loan			32,346				32,322
Capital One line of credit			45,929				43,360
Less current portion			(17,655	)			(101,955	)
Total long-term debt		$	318,667			$	218,680

Bonds (Series C)

Buyback Plan

On March 29, 2020, the Company adopted a buyback plan for the acquisition of Bonds (Series C) in an amount of up to $13.9 million, effective until March 31, 2021, at a price to be determined at the discretion of the Company’s management. In April 2020, the Company purchased approximately NIS 7.2 million par value Bonds (Series C) in consideration for approximately $2.0 million (NIS 7.2 million).

Repayment of Bonds (Series C)

On June 30, 2020, the Company paid the fourth principal payment of Bonds (Series C) so that as of September 30, 2020, the balance of Bonds (Series C) was NIS 243,234,809 par value. A total of approximately $5.4 million of the said payment was made from the Reserved Principal Account as defined in Note 11 to the annual financial statements.

Collateral

As of September 30, 2020, a total of approximately $2.1 million was deposited in the Reserved Principal and Interest Account as defined in Note 11 to the annual financial statements.

Bonds (Series H)

On February 26, 2020, a voluntary redemption was made in which NIS 309,204 par value of the Bonds (Series H) were redeemed. On March 6, 2020, the Bonds (Series H) ceased trading on the Tel-Aviv Stock Exchange. The balance of the Bonds (Series H) as of September 30, 2020 (after the said redemption and conversions during the period) was NIS 231,715 par value.

In November 2020, the Tel Aviv-Jaffa District Court approved the Company’s application for full early redemption of the Bonds (Series H). On December 8, 2020, the Company redeemed the full outstanding balance of the Bonds (Series H) (NIS 142,477 par value).

 

15

Ares Credit Agreement

On the Ares Closing Date, GPM entered into an agreement with Ares to provide to GPM financing in a total amount of up to $347 million (the “Ares Credit Agreement” and the “Ares Loan,” out of which the Company committed to provide GPM up to $47 million, as part of a syndication that was planned by Ares for the loan). On May 27, 2020, an amendment to the Ares Credit Agreement was signed pursuant to which the Ares Loan amount was reduced to a total of up to $225 million, as detailed below, which was in accordance with Ares’s eligibility under the Ares Credit Agreement to reduce up to $75 million of the total Ares Loan amount. In addition, the Company’s commitment to provide GPM up to $47 million was cancelled and instead on June 30, 2020, the Company provided GPM and certain other fully owned subsidiaries a $25.0 million related-party loan secured by first degree liens on assets owned by GPM and certain other fully owned subsidiaries and Ares and PNC released their liens on such assets.

The following is a description of the key terms of the Ares Credit Agreement as amended in the May 2020 amendment.

A loan in the amount of up to $225 million comprised of the following:

 

•

Initial Term Loan – $162 million that was provided on the Ares Closing Date. The Initial Term Loan and the proceeds of the Class F Membership Units (as described in Note 3 above) were primarily used by GPM to repay the entire outstanding balance of the GPM’s related-party loans in the total amount of approximately $118 million, as well as to prepay the outstanding balance of the term loans from PNC for a total amount of $39.5 million.

 

•

Delayed Term Loan A – per the May 2020 amendment up to $63 million (instead of $135 million pursuant to the Ares Credit Agreement from February 28, 2020) that was to be used by GPM to finance part of the consideration in the Empire Acquisition described in Note 3 above (including working capital) or investment in GPMP in exchange for an additional percentage, that, pursuant to an amendment entered into in August 2020, could be borrowed in two drawings to be made no later than October 10, 2020. The Delayed Term Loan A in an amount of $63 million was provided to GPM on October 6, 2020 as described in Note 3 above.

All of the above bear the same terms as to payment terms, interest and liens.

The Ares Loan principal is being paid in four equal quarterly installments in a total amount of 1% per annum with the remaining balance due on the maturity date of February 28, 2027. GPM is entitled to prepay the Ares Loan at any time, without penalty provided that if the prepayment is made before the end of one year from the Ares Closing Date, a fee of 1% will be paid.

The Ares Loan bears interest, as elected by GPM at: (a) a rate per annum equal to the Ares Alternative Base Rate (“Ares ABR”) plus a margin of 3.75%, or (b) LIBOR as defined in the agreement (not less than 1.5%) plus a margin of 4.75%. After one year from the Ares Closing Date, if the Leverage Ratio will be lower than 4.00 to 1, the margin will be reduced to 3.625% and 4.625%, respectively. The interest is being paid in quarterly installments under Ares ABR loans, and for LIBOR loans, the interest is being paid at the end of each LIBOR period but at least every three months. For unused portions of the Ares Credit Agreement, 1% per annum was paid.

Ares ABR is equal to the greatest of: (i) the prime rate, (ii) the federal funds rate plus 0.5% and (iii) the one-month LIBOR plus 1.00%, all as defined in the agreement.

 

16

For details regarding the pledges provided to Ares as well as the limitations and covenants included under the Ares Credit Agreement, refer to Note 24 to the annual financial statements.

Financing Agreements with PNC Bank, National Association (“PNC”)

On the Ares Closing Date, the outstanding balance of the PNC term loans (as described in Note 11 to the annual financial statements) in the amount of approximately $39.5 million was fully paid (other than the $32.4 million GPMP PNC Term Loan, which is secured by US Treasury or other investment grade securities equal to 98% of the outstanding principal amount).

GPM, certain of its fully owned subsidiaries and PNC entered into an amendment, restatement and consolidation of the current financing agreements between the parties (the “February 2020 Amendment” and the “PNC Credit Line Agreement,” respectively).

The PNC Credit Line Agreement consolidated the GPM PNC Line of Credit and the Holdco PNC Line of Credit (as defined in Note 11 to the annual financial statements) into one credit line in the amount of up to $110 million (the “PNC Line of Credit”). Simultaneously with the closing of the Empire Acquisition (see Note 3 above), in October 2020, the PNC Credit Line Agreement was amended to increase the PNC Line of Credit to up to $140 million.

The PNC Line of Credit bears interest, as elected by GPM at: (a) LIBOR as defined in the PNC Credit Line Agreement plus a margin of 1.75% or (b) a rate per annum equal to the alternate base rate plus a margin of 0.5%, which is equal to the greatest of (a) the PNC base rate, (b) the overnight bank funding rate plus 0.5%, and (c) LIBOR plus 1.0%, subject to the definitions set in the PNC Credit Line Agreement.

Beginning in April 2020, every quarter the LIBOR margin rate is updated based on the quarterly average undrawn availability of the PNC Line of Credit, so that in the event of quarterly average undrawn availability of greater than or equal to 50%, the margin is reduced to 1.25%; in the event of quarterly average undrawn availability less than 50% and greater than or equal to 25%, the margin is reduced to 1.5%; and in the event of quarterly average undrawn availability less than 25%, the margin is 1.75%. For the second quarter ended June 30, 2020, the third quarter ended September 30, 2020 and the fourth quarter ended December 31, 2020, the LIBOR margin rate is 1.75%, 1.25% and 1.25%, respectively. Beginning in April 2020, the alternate base rate margin rate is updated according to the quarterly average undrawn availability to 0%, 0.25% and 0.5%, based on the credit line usage percentages above, respectively. Interest is paid in monthly installments provided that for LIBOR loans, interest is paid at the end of each LIBOR period. For unused amounts of PNC Line of Credit, a fee of 0.375% per annum is paid.

The calculation of the availability under the PNC Line of Credit is determined monthly subject to terms and limitations as set forth in the PNC Credit Line Agreement, taking into account the balances of receivables, inventory and letters of credit, among other things.

No change was made to the maturity date and the ability to prepay (subject to prepayment fee) the PNC Line of Credit as described in Note 11 to the annual financial statements.

As part of the February 2020 Amendment, definitions in the PNC Credit Line Agreement were changed to conform to the Ares Credit Agreement.

As part of the February 2020 Amendment, letters of credit availability was increased to $40.0 million (instead of $22.0 million as of December 31, 2019). The annual cost of the amount of letters of credit issued was 1.5% of the amount of the letters of credit issued until April 2020 and beginning in April 2020, once every quarter, the cost is updated according to the quarterly average undrawn availability, so that in the

 

17

event of quarterly average undrawn availability of greater than or equal to 50%, the annual cost is reduced to 1.0%; in the event of quarterly average undrawn availability less than 50% and greater than or equal to 25%, the annual cost is reduced to 1.25%; and in the event of quarterly average undrawn availability less than 25%, the annual cost is 1.5%. For the second quarter ended June 30, 2020, the third quarter ended September 30, 2020 and the fourth quarter ended December 31, 2020, the annual cost of the amount of letters of credit issued is 1.5%, 1.0% and 1.0%, respectively.

For details regarding intercreditor agreement, restrictions and limitations and collateral provided under the PNC Credit Line Agreement, see Note 11 to the annual financial statements.

Financing agreement with a syndication of banks led by Capital One, National Association (“Capital One”)

In order to enable funding the majority of the consideration for the Empire Acquisition (as described in Note 3 above) through the Capital One Line of Credit, on April 1, 2020, GPMP entered into an amendment whereby the Capital One Line of Credit (as described in Note 11 to the annual financial statements) was increased from $300 million to $500 million, in accordance with commitments in a total amount of $200 million (the “Increased Amount”) received from US banks, led by Capital One, which Increased Amount was committed by most of the banks in the current syndication of the Capital One Line of Credit along with one additional bank.

The commitment to the Increased Amount was contingent upon the completion of the Empire Acquisition described in Note 3 above by December 31, 2020 without any material changes affecting the lenders, including GPMP’s leverage ratio (pro forma) after the transaction is completed not to exceed 4.15 to 1.00.

On October 6, 2020, $350 million of the Empire Closing Consideration defined in Note 3 above was funded through the Capital One Line of Credit.

At GPMP’s request, the Capital One Line of Credit can be increased up to $700 million (instead of up to $500 million), subject to obtaining additional financing commitments from lenders or from other banks, and subject to certain terms as detailed in the Capital One Line of Credit.

In accordance with the amendment, letters of credit availability was increased to $40.0 million (instead of $10.0 million as of December 31, 2019).

No other substantial terms of the Capital One Credit Facility were changed, other than proforma adjustments that will be included after the closing of the Empire Acquisition.

Financing Agreements with M&T Bank

On May 7, 2020, an amendment was signed to conform the agreements and limitations that are included in the financing agreements with M&T as described in Note 11 to the annual financial statements with those in the PNC Credit Line Agreement.

Financial Covenants

To the extent that the Bonds (Series C and H) are outstanding, the Company has undertaken to meet certain financial covenants, including a net financial debt to net CAP ratio, GPM’s store level EBITDA and GPM’s financial debt to GPM’s store level EBITDA ratio, each as defined under the applicable deed of trust. As of September 30, 2020, the Company was in compliance with all terms and commitments in accordance with the Bonds’ (Series C and H) deeds of trust.

 

18

The PNC Credit Line Agreement includes reporting requirements which are applicable in cases when the usage of the PNC Credit Line exceeds certain limitations set, and it is also required that the undrawn availability use of the credit line will equal to or be greater than 10%, subject to exceptions included in the PNC Credit Line Agreement. As of September 30, 2020, the Company was in compliance with these requirements.

Until May 7, 2020, the M&T Term Loan agreement included financial covenants as were set in the GPM PNC Facility. The amendment signed with M&T as described above included the cancellation of the requirement to comply with said financial covenants and added a requirement to include compliance with the Leverage Ratio detailed in the Ares Credit Agreement.

The Ares Credit Agreement and the M&T Term Loan include a leverage ratio covenant.

The M&T Term Loan also requires GPM to maintain a debt service coverage ratio.

The GPMP PNC Term Loan and the Capital One Credit Facility require GPMP to maintain the certain financial covenants, including leverage ratio and interest coverage expense ratio.

As of September 30, 2020, the Group was in compliance with the obligations and financial covenants under the terms and provisions of its loans.

 

5.

Leases

As of September 30, 2020, the Group leases 1,069 of the convenience stores that it operates, 67 dealer locations and certain office spaces used by GPM as its headquarters in the US and the Company’s headquarters in Israel. Most of the lease agreements are for long-term periods, ranging from 15 to 25 years, and generally include several options for extension periods for five to 10 years each. The leases contain escalation clauses and renewal options as outlined in the agreements. Additionally, the Group leases certain store equipment, office equipment, automatic tank gauges, store lighting, fuel dispensers.

Under ASC 842, Leases, the components of lease cost recorded on the condensed consolidated statements of operations were as follows:

 

		Three months ended September 30,								Nine months ended September 30,
		2020				2019				2020				2019
		(in thousands)
Finance lease cost:
Depreciation of right-of-use assets		$	3,098			$	3,319			$	9,446			$	9,711
Interest on lease liabilities			4,275				4,607				12,960				13,415
Operating lease costs included in store operating expenses			26,590				24,913				80,429				74,522
Operating lease costs included in general and administrative expenses			337				304				984				916
Lease cost related to variable lease payments, short-term leases and leases of low value assets			334				313				654				695
Right-of-use asset impairment charges			501				1,100				1,430				2,433
		$35,135				$34,556				$105,903				$101,692

 

19

Supplemental data related to leases was as follows:

 

As of		September 30, 2020				December 31, 2019
		(in thousands)
Operating leases
Assets
Right-of-use assets under operating leases		$	760,346			$	793,086
Liabilities
Operating leases, current portion			36,164				34,303
Operating leases			788,569				816,558
Total operating leases			824,733				850,861
Weighted average remaining lease term (in years)			13.8				14.5
Weighted average discount rate			8.2	%			8.2	%
Financing leases
Assets
Right-of-use assets		$	207,993			$	213,434
Accumulated amortization			(37,969	)			(32,877	)
Right-of-use assets under financing leases, net			170,024				180,557
Liabilities
Financing leases, current portion			7,254				7,876
Financing leases			197,964				202,470
Total financing leases			205,218				210,346
Weighted average remaining lease term (in years)			23.3				23.6
Weighted average discount rate			8.6	%			8.6	%

In the three and nine months ended September 30, 2020 and 2019, the total cash outflows for leases amounted to approximately $25.7 million, $23.7 million, $76.9 million and $70.4 million, respectively, for operating leases and $6.1 million, $6.5 million, $18.4 million and $18.9 million, respectively, for financing leases.

As of September 30, 2020, maturities of lease liabilities for operating lease obligations and finance lease obligations having an initial or remaining non-cancellable lease terms in excess of one year were as follows. The minimum lease payments presented below include periods where an option is reasonably certain to be exercised and do not take into consideration any future consumer price index adjustments for these agreements.

 

		Operating				Financing
		(in thousands)
2020		$	25,294			$	6,169
2021			101,462				23,886
2022			99,945				21,706
2023			100,587				20,139
2024			100,870				19,080
Thereafter			979,567				473,608
Gross lease payments		$	1,407,725			$	564,588
Less: imputed interest			(582,992	)			(359,370	)
Total lease liabilities		$	824,733			$	205,218

 

20

6.	Commitments and Contingencies

Legal Matters

GPM is a party to various legal actions, as both plaintiff and defendant, in the ordinary course of business. The Company’s management believes, based on GPM estimations with support from legal counsel for these matters, that these actions are routine in nature and incidental to the operation of GPM business and is that it is not reasonably possible that the ultimate resolution of these matters will have a material adverse impact on the Group’s business, financial condition, results of operations and cash flows.

 

7.	Shareholders’ Equity

Rights Offering

In April and May 2020, rights were exercised for the purchase of 66,699,053 ordinary shares of the Company offered by way of a rights offering, according to a shelf offering report published by the Company in April 2020, in exchange for a gross amount of $11.4 million. The Company adjusted the basic and diluted earnings per share retroactively for the bonus element for relevant periods presented.

 

8.	Share-based Compensation

The following table summarizes share activity related to restricted share units (“RSUs”) granted to officers and employees of the Company:

 

		Nine months ended September 30,
		2020				2019
		(in thousands)
Nonvested RSUs, January 1			2,136				2,960
Granted			—				200
Forfeited			—				(38	)
Vested and exercised			(1,018	)			(986	)
Nonvested RSUs, September 30			1,118				2,136

 

9.	Earnings Per Share

The following table sets forth the computation of basic and diluted net income per common share:

 

		Three months ended September 30,								Nine months ended September 30,
		2020				2019				2020				2019
		(in thousands)
Net income (loss) attributable to Arko Holdings Ltd.		$	9,688			$	(6,740	)		$	21,127			$	(25,959	)
Weighted average common shares outstanding—Basic			828,196				774,068				803,027				773,696
Effect of dilutive securities:
Common stock equivalents			—				—				—				—
Weighted average common shares outstanding—Diluted			828,196				774,068				803,027				773,696
Net income (loss) per share—Basic and Diluted		$	0.01			$	(0.01	)		$	0.03			$	(0.03	)

 

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The following convertible bonds and restricted share units have been excluded from the computation of diluted earnings per share because their effect would be antidilutive:

 

		As of September 30,
		2020				2019
		(in thousands)
Convertible bonds (par value)			232				1,356
Restricted share units			1,118				2,136

 

10.	Related Party Transactions

 

As of		September 30, 2020				December 31, 2019
		(in thousands)
Current assets:
Due from equity investment		$	114			$	113
Loan to equity investment			885				672
Due from KMG Realty LLC			—				210
Due from related parties			38				38
Non-current assets:
Due from Holdings			—				7,133
Current liabilities:
Due to KMG Realty LLC			(493	)			(5	)
Due to related parties			(110	)			(50	)
Loan from Holdings, including accrued interest			—				(906	)
Non-current liabilities:
Loans from Holdings			—				(10,868	)

As discussed in Note 3 above, on the Ares Closing Date, the Initial Term Loan and the proceeds of the Class F Membership Units were used by GPM to repay the entire outstanding balance of GPM’s related-party loans in the total amount of approximately $118 million (out of which $110 million to the Company). Additionally, the noninterest bearing promissory note in the amount of $7.1 million issued by Holdings was fully paid on the Ares Closing Date. As discussed in Note 4 above, on June 30, 2020, the Company provided GPM and certain other fully owned subsidiaries a $25.0 million related-party loan.

 

11.	Segment Reporting

The reportable segments were determined based on information reviewed by the chief operating decision maker for operational decision-making purposes and the segment information is prepared on the same basis that our chief operating decision maker reviews such financial information. The Company’s reporting segments, are the retail segment, the wholesale segment and the GPMP segment. The Company defines segment earnings as operating income.

The retail segment includes the operation of a chain of retail stores which include convenience stores selling fuel products and other merchandise to retail customers. At its Group operated convenience stores, the Group owns the merchandise and fuel inventory and employs personnel to manage the store.

 

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The wholesale segment supplies fuel to independent dealers, sub-wholesalers and bulk purchasers, on either a cost plus or consignment basis. For consignment arrangements, the Group retains ownership of the fuel inventory at the site, is responsible for the pricing of the fuel to the end consumer, and shares the gross profit with the independent outside operators.

The GPMP segment includes GPMP and primarily includes the sale and supply of fuel to GPM and its subsidiaries selling fuel (both in the Retail and Wholesale segments) at GPMP’s cost of fuel including taxes and transportation plus a fixed margin (4.5 cents per gallon as of September 30, 2020 and effective October 1, 2020 through September 30, 2021, 5.0 cents per gallon) and the supply of fuel to a small number of independent outside operators and bulk purchasers.

The “All Other” segment includes the results of non-reportable segments which do not meet both quantitative and qualitive criteria as defined under ASC 280, Segment Reporting.

The majority of general and administrative expenses, depreciation and amortization, net other expenses, net interest and other financing expenses and income taxes are not allocated to the segments, as well as minor other income items including intercompany operating leases.

With the exception of goodwill, assets and liabilities are not assigned to any particular segment, but rather, managed at the consolidated level. All revenues relevant to reportable segments were generated from sites within the US and substantially all assets were within the US. No external customer represented more than 10% of revenues.

Inter-segment transactions primarily included the distribution of fuel by GPMP to GPM and its subsidiaries selling fuel (both in the Retail and Wholesale segments). The effect of these inter-segment transactions was eliminated in the interim financial statements.

 

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Three months ended September 30, 2020		Retail				Wholesale				GPMP				All Other				Total
		(in thousands)
Revenues
Fuel revenue		$	506,418			$	32,468			$	1,052			$	—			$	539,938
Merchandise revenue			403,665				—				—				—				403,665
Other revenues, net			13,860				2,409				245				—				16,514
Total revenues from external customers			923,943				34,877				1,297				—				960,117
Inter-segment			—				—				352,363				335				352,698
Total revenues from reportable segments			923,943				34,877				353,660				335				1,312,815
Operating income			62,221				1,674				9,360				335				73,590
Interest and other financing expenses, net											(745	)			(184	)			(929	)
Income tax expense															(54	)			(54	)
Loss from equity investment															(24	)			(24	)
Net income from reportable segments																		$	72,583
Three months ended September 30, 2019		Retail				Wholesale				GPMP				All Other				Total
		(in thousands)
Revenues
Fuel revenue		$	676,897			$	42,997			$	1,751			$	—			$	721,645
Merchandise revenue			370,267				—				—				—				370,267
Other revenues, net			10,895				1,302				217				—				12,414
Total revenues from external customers			1,058,059				44,299				1,968				—				1,104,326
Inter-segment			—				—				540,115				1,545				541,660
Total revenues from reportable segments			1,058,059				44,299				542,083				1,545				1,645,986
Operating income			34,115				113				11,781				1,545				47,554
Interest and other financing expenses, net											(517	)			(206	)			(723	)
Income tax expense															(251	)			(251	)
Loss from equity investment															(92	)			(92	)
Net income from reportable segments																		$	46,488

 

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