UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON,Washington, D.C. 20549
FORM 10–Q10-Q
(Mark One)
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☑QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2017March 31, 2024
OR
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☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission fileFile No. 001-35711a
CROSSAMERICA PARTNERS LP
(Exact name of registrant as specified in its charter)
Delaware | 45-4165414 | |
(State or Other Jurisdiction of | (I.R.S. Employer | |
645 Hamilton Street, Suite Allentown, PA | 18101 (Zip Code) (610) 625-8000 | |
(Address of Principal Executive Offices) |
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(610) 625-8000
(Registrant’s telephone number, including area code)Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Common Units | CAPL | New York Stock Exchange |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes☑ No ☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes☑ No ☐
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “small“smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer ☐ |
| Accelerated filer |
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Non-accelerated filer ☐ | Smaller reporting company ☐ | |||||
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Emerging growth company | ☐ | |||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑
As of NovemberMay 3, 2017,2024, the registrant had outstanding 33,984,97038,027,194 common units.
COMMONLY USED DEFINED TERMS
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The following is a list of certain acronyms and terms generally used in the industry and throughout this document: | |||||
CrossAmerica Partners LP and subsidiaries: | |||||
CrossAmerica | CrossAmerica Partners LP, the Partnership, CAPL, we, us, our |
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| Joe’s Kwik Marts LLC, a wholly-owned subsidiary of CAPL JKM Partners | ||||
LGWS | Lehigh Gas Wholesale Services, Inc. | ||||
CrossAmerica Partners LP related | |||||
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| Dunne Manning | ||||
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General Partner | CrossAmerica GP LLC, the General Partner of CrossAmerica, a Delaware limited liability | ||||
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TopStar | TopStar Inc., an entity affiliated with a family member of Joseph V. Topper, Jr. TopStar is an operator of convenience stores that leases | ||||
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| Board of Directors of our General Partner | ||||
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Bonus Plan | The Performance-Based Bonus Compensation Policy is one of the key components of “at-risk” compensation. The Bonus Plan is utilized to reward short-term performance achievements and to motivate and reward employees for their contributions toward meeting financial and strategic goals. | ||
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CAPL Credit Facility | Credit Agreement, dated as of April 1, 2019, as amended by the First Amendment to Credit Agreement, dated as of November 19, 2019, and by the Second Amendment to Credit Agreement, dated as of July 28, 2021, and by the Third Amendment to Credit Agreement, dated as of November 9, 2022, and as amended and restated by the Amendment and Restatement Agreement, dated as of March 31, 2023, as amended by the First Amendment to Amendment and Restatement Agreement, dated as of February 20, 2024, among the Partnership and Lehigh Gas Wholesale Services, Inc., as borrowers, the guarantors from time to time party thereto, the lenders from time to time party thereto and Citizens Bank, N.A., as administrative agent. | ||
DTW | Dealer tank wagon contracts, which are variable market-based cent per gallon priced wholesale motor fuel distribution or supply | ||
EBITDA | Earnings before interest, taxes, depreciation, amortization and accretion, a non-GAAP financial measure | ||
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| Securities Exchange Act of 1934, as amended | ||
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| CrossAmerica’s Annual Report on Form 10-K for the year ended December 31, | ||
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Internal Revenue Code | Internal Revenue Code of 1986, as amended | ||
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IPO | Initial public offering of CrossAmerica Partners LP on October 30, 2012 | |
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| Management’s Discussion and Analysis of Financial Condition and Results of Operations | |
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Predecessor Entity | Wholesale distribution | |
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U.S. |
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| West Texas Intermediate crude oil |
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PART I - FINANCIALFINANCIAL INFORMATION
CROSSAMERICA PARTNERS LP
(Thousands of Dollars, except unit data)
(Unaudited)
|
| March 31, |
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| December 31, |
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| 2024 |
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| 2023 |
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ASSETS |
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Current assets: |
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Cash and cash equivalents |
| $ | 6,278 |
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| $ | 4,990 |
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Accounts receivable, net of allowances of $674 and $709, respectively |
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| 35,087 |
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| 31,185 |
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Accounts receivable from related parties |
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| 1,021 |
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| 437 |
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Inventory |
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| 58,037 |
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| 52,344 |
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Assets held for sale |
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| 4,641 |
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|
| 400 |
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Current portion of interest rate swap contracts |
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| 7,169 |
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|
| 9,321 |
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Other current assets |
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| 11,068 |
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|
| 9,845 |
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Total current assets |
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| 123,301 |
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| 108,522 |
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Property and equipment, net |
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| 692,728 |
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|
| 705,217 |
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Right-of-use assets, net |
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| 146,170 |
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|
| 148,317 |
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Intangible assets, net |
|
| 90,422 |
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|
| 95,261 |
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Goodwill |
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| 99,409 |
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|
| 99,409 |
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Deferred tax assets |
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| 1,425 |
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|
| 759 |
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Interest rate swap contracts, less current portion |
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| 4,439 |
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|
| 687 |
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Other assets |
|
| 21,579 |
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|
| 23,510 |
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Total assets |
| $ | 1,179,473 |
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| $ | 1,181,682 |
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LIABILITIES AND EQUITY |
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Current liabilities: |
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Current portion of debt and finance lease obligations |
| $ | 3,133 |
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| $ | 3,083 |
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Current portion of operating lease obligations |
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| 34,973 |
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| 34,787 |
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Accounts payable |
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| 71,490 |
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|
| 68,986 |
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Accounts payable to related parties |
|
| 6,920 |
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|
| 10,180 |
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Accrued expenses and other current liabilities |
|
| 24,570 |
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|
| 23,674 |
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Motor fuel and sales taxes payable |
|
| 18,767 |
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|
| 20,386 |
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Total current liabilities |
|
| 159,853 |
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|
| 161,096 |
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Debt and finance lease obligations, less current portion |
|
| 795,755 |
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| 753,880 |
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Operating lease obligations, less current portion |
|
| 116,351 |
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|
| 118,723 |
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Deferred tax liabilities, net |
|
| 7,652 |
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|
| 12,919 |
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Asset retirement obligations |
|
| 48,329 |
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| 47,844 |
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Interest rate swap contracts |
|
| 1,139 |
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|
| 3,535 |
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Other long-term liabilities |
|
| 52,212 |
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|
| 52,934 |
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Total liabilities |
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| 1,181,291 |
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|
| 1,150,931 |
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Commitments and contingencies (Note 11) |
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Preferred membership interests |
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| 28,401 |
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| 27,744 |
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Equity: |
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Common units— 38,027,194 and 37,983,154 units issued and |
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| (39,616 | ) |
|
| (2,392 | ) |
Accumulated other comprehensive income |
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| 9,397 |
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| 5,399 |
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Total (deficit) equity |
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| (30,219 | ) |
|
| 3,007 |
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Total liabilities and equity |
| $ | 1,179,473 |
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| $ | 1,181,682 |
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The accompanying notes are an integral part of these consolidated financial statements.
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| September 30, |
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| December 31, |
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| 2017 |
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| 2016 |
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| (Unaudited) |
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ASSETS |
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Current assets: |
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Cash |
| $ | 1,566 |
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|
| 1,350 |
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Accounts receivable, net of allowances of $476 and $487, respectively |
|
| 23,930 |
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| 29,251 |
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Accounts receivable from related parties |
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| 14,994 |
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| 12,975 |
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Inventories |
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| 12,020 |
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| 13,164 |
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Assets held for sale |
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| 2,496 |
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| 2,111 |
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Other current assets |
|
| 7,168 |
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| 6,556 |
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Total current assets |
|
| 62,174 |
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| 65,407 |
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Property and equipment, net |
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| 634,718 |
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| 677,329 |
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Intangible assets, net |
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| 68,989 |
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| 80,760 |
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Goodwill |
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| 89,109 |
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| 89,109 |
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Other assets |
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| 22,499 |
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| 19,384 |
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Total assets |
| $ | 877,489 |
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| $ | 931,989 |
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LIABILITIES AND EQUITY |
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Current liabilities: |
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Current portion of debt and capital lease obligations |
| $ | 2,884 |
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| $ | 2,100 |
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Accounts payable |
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| 37,785 |
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|
| 34,903 |
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Accounts payable to related parties |
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| 16,289 |
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|
| 9,958 |
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Accrued expenses and other current liabilities |
|
| 19,210 |
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|
| 15,705 |
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Motor fuel taxes payable |
|
| 12,081 |
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|
| 12,467 |
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Total current liabilities |
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| 88,249 |
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|
| 75,133 |
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Debt and capital lease obligations, less current portion |
|
| 454,773 |
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|
| 465,119 |
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Deferred tax liabilities, net |
|
| 39,952 |
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|
| 42,923 |
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Asset retirement obligations |
|
| 28,155 |
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|
| 27,750 |
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Other long-term liabilities |
|
| 97,085 |
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|
| 100,253 |
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Total liabilities |
|
| 708,214 |
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|
| 711,178 |
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Commitments and contingencies |
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Equity: |
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Partners’ Capital |
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|
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Common units—(33,984,970 and 33,524,952 units issued and outstanding at September 30, 2017 and December 31, 2016, respectively) |
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| 169,569 |
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|
| 221,044 |
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General Partner’s interest |
|
| — |
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| — |
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Total Partners’ Capital |
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| 169,569 |
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| 221,044 |
|
Noncontrolling interests |
|
| (294 | ) |
|
| (233 | ) |
Total equity |
|
| 169,275 |
|
|
| 220,811 |
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Total liabilities and equity |
| $ | 877,489 |
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| $ | 931,989 |
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1
See Condensed Notes to Consolidated Financial Statements.
1
CONSOLIDATED STATEMENTS OF OPERATIONS
(Thousands of Dollars, Except Unitexcept unit and Per Unit Amounts)per unit amounts)
(Unaudited)
|
| Three Months Ended March 31, |
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| 2024 |
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| 2023 |
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Operating revenues (a) |
| $ | 941,548 |
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| $ | 1,016,159 |
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Costs of sales (b) |
|
| 860,200 |
|
|
| 934,100 |
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Gross profit |
|
| 81,348 |
|
|
| 82,059 |
|
|
|
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Operating expenses: |
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|
|
|
|
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Operating expenses (c) |
|
| 52,028 |
|
|
| 45,623 |
|
General and administrative expenses |
|
| 6,838 |
|
|
| 5,739 |
|
Depreciation, amortization and accretion expense |
|
| 18,721 |
|
|
| 19,820 |
|
Total operating expenses |
|
| 77,587 |
|
|
| 71,182 |
|
Loss on dispositions and lease terminations, net |
|
| (16,806 | ) |
|
| (1,767 | ) |
Operating (loss) income |
|
| (13,045 | ) |
|
| 9,110 |
|
Other income, net |
|
| 249 |
|
|
| 261 |
|
Interest expense |
|
| (10,541 | ) |
|
| (12,012 | ) |
Loss before income taxes |
|
| (23,337 | ) |
|
| (2,641 | ) |
Income tax benefit |
|
| (5,797 | ) |
|
| (1,662 | ) |
Net loss |
|
| (17,540 | ) |
|
| (979 | ) |
Accretion of preferred membership interests |
|
| 657 |
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|
| 601 |
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Net loss available to limited partners |
| $ | (18,197 | ) |
| $ | (1,580 | ) |
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Net loss per common unit |
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Basic |
| $ | (0.48 | ) |
| $ | (0.04 | ) |
Diluted |
| $ | (0.48 | ) |
| $ | (0.04 | ) |
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Weighted-average common units: |
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Basic |
|
| 37,994,285 |
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|
| 37,940,332 |
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Diluted |
|
| 37,994,285 |
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|
| 37,940,332 |
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Supplemental information: |
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(a) includes excise taxes of: |
| $ | 70,713 |
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| $ | 69,884 |
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(a) includes rent income of: |
|
| 19,166 |
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|
| 21,320 |
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(b) excludes depreciation, amortization and accretion |
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(b) includes rent expense of: |
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| 5,419 |
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|
| 5,554 |
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(c) includes rent expense of: |
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| 3,942 |
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|
| 3,798 |
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The accompanying notes are an integral part of these consolidated financial statements.
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| For the Three Months Ended September 30, |
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| For the Nine Months Ended September 30, |
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| 2017 |
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| 2016 |
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| 2017 |
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| 2016 |
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Operating revenues(a) |
| $ | 544,092 |
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| $ | 487,950 |
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| $ | 1,542,167 |
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| $ | 1,368,334 |
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Costs of sales(b) |
|
| 502,517 |
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|
| 448,812 |
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|
| 1,421,524 |
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|
| 1,251,491 |
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Gross profit |
|
| 41,575 |
|
|
| 39,138 |
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|
| 120,643 |
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|
| 116,843 |
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Income from CST Fuel Supply equity interests |
|
| 3,752 |
|
|
| 4,022 |
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|
| 11,185 |
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|
| 12,318 |
|
Operating expenses: |
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Operating expenses |
|
| 15,371 |
|
|
| 14,224 |
|
|
| 46,853 |
|
|
| 45,754 |
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General and administrative expenses |
|
| 5,994 |
|
|
| 6,142 |
|
|
| 23,731 |
|
|
| 18,068 |
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Depreciation, amortization and accretion expense |
|
| 14,049 |
|
|
| 13,432 |
|
|
| 42,675 |
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|
| 40,594 |
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Total operating expenses |
|
| 35,414 |
|
|
| 33,798 |
|
|
| 113,259 |
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|
| 104,416 |
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Gain on sales of assets, net |
|
| 2,371 |
|
|
| 631 |
|
|
| 2,013 |
|
|
| 525 |
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Operating income |
|
| 12,284 |
|
|
| 9,993 |
|
|
| 20,582 |
|
|
| 25,270 |
|
Other income (expense), net |
|
| 121 |
|
|
| (59 | ) |
|
| 366 |
|
|
| 375 |
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Interest expense |
|
| (7,102 | ) |
|
| (5,634 | ) |
|
| (20,599 | ) |
|
| (16,403 | ) |
Income before income taxes |
|
| 5,303 |
|
|
| 4,300 |
|
|
| 349 |
|
|
| 9,242 |
|
Income tax expense (benefit) |
|
| 966 |
|
|
| 1,308 |
|
|
| (1,686 | ) |
|
| 851 |
|
Net income |
|
| 4,337 |
|
|
| 2,992 |
|
|
| 2,035 |
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|
| 8,391 |
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Less: net income (loss) attributable to noncontrolling interests |
|
| 4 |
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|
| 3 |
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|
| (1 | ) |
|
| 9 |
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Net income attributable to limited partners |
|
| 4,333 |
|
|
| 2,989 |
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|
| 2,036 |
|
|
| 8,382 |
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IDR distributions |
|
| (1,115 | ) |
|
| (877 | ) |
|
| (3,162 | ) |
|
| (2,456 | ) |
Net income (loss) available to limited partners |
| $ | 3,218 |
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| $ | 2,112 |
|
| $ | (1,126 | ) |
| $ | 5,926 |
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Net income (loss) per limited partner unit: |
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Basic earnings per common unit |
| $ | 0.09 |
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| $ | 0.06 |
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| $ | (0.03 | ) |
| $ | 0.18 |
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Diluted earnings per common unit |
| $ | 0.09 |
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| $ | 0.06 |
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| $ | (0.03 | ) |
| $ | 0.18 |
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Basic and diluted earnings per subordinated unit |
| n/a |
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| n/a |
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| n/a |
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| $ | 0.18 |
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Weighted-average limited partner units: |
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Basic common units |
|
| 33,931,056 |
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|
| 33,366,380 |
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|
| 33,773,964 |
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|
| 31,714,462 |
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Diluted common units(c) |
|
| 33,937,702 |
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|
| 33,391,096 |
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|
| 33,773,964 |
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|
| 31,766,802 |
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Basic and diluted subordinated units |
|
| — |
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|
| — |
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|
| — |
|
|
| 1,537,956 |
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Total diluted common and subordinated units |
|
| 33,937,702 |
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|
| 33,391,096 |
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|
| 33,773,964 |
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|
| 33,304,758 |
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Distribution paid per common and subordinated unit |
| $ | 0.6225 |
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| $ | 0.6025 |
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| $ | 1.8525 |
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| $ | 1.7925 |
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Distribution declared (with respect to each respective period) per common and subordinated unit |
| $ | 0.6275 |
|
| $ | 0.6075 |
|
| $ | 1.8675 |
|
| $ | 1.8075 |
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Supplemental information: |
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(a) Includes excise taxes of: |
| $ | 19,704 |
|
| $ | 19,698 |
|
| $ | 58,351 |
|
| $ | 59,902 |
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(a) Includes revenues from fuel sales to related parties of: |
|
| 101,190 |
|
|
| 99,891 |
|
|
| 281,611 |
|
|
| 280,330 |
|
(a) Includes rental income of: |
|
| 21,644 |
|
|
| 19,752 |
|
|
| 65,090 |
|
|
| 59,634 |
|
(b) Includes rental expense of: |
|
| 4,876 |
|
|
| 5,103 |
|
|
| 14,593 |
|
|
| 14,870 |
|
(c) Diluted common units were not used in the calculation of diluted earnings per common unit for the nine months ended September 30, 2017 because to do so would have been antidilutive. |
| |||||||||||||||
2
See Condensed Notes to Consolidated Financial Statements.
2
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Thousands of Dollars)
(Unaudited)
|
| Three Months Ended March 31, |
| |||||
|
| 2024 |
|
| 2023 |
| ||
Cash flows from operating activities: |
|
|
|
|
|
| ||
Net loss |
| $ | (17,540 | ) |
| $ | (979 | ) |
Adjustments to reconcile net loss to net cash provided by operating activities: |
|
|
|
|
|
| ||
Depreciation, amortization and accretion expense |
|
| 18,721 |
|
|
| 19,820 |
|
Amortization of deferred financing costs |
|
| 483 |
|
|
| 1,848 |
|
Credit loss expense |
|
| — |
|
|
| 37 |
|
Deferred income tax benefit |
|
| (5,932 | ) |
|
| (2,056 | ) |
Equity-based employee and director compensation expense |
|
| 205 |
|
|
| 561 |
|
Loss on dispositions and lease terminations, net |
|
| 16,806 |
|
|
| 1,767 |
|
Changes in operating assets and liabilities, net of acquisitions |
|
| (6,927 | ) |
|
| (9,460 | ) |
Net cash provided by operating activities |
|
| 5,816 |
|
|
| 11,538 |
|
|
|
|
|
|
|
| ||
Cash flows from investing activities: |
|
|
|
|
|
| ||
Principal payments received on notes receivable |
|
| 45 |
|
|
| 53 |
|
Proceeds from sale of assets |
|
| — |
|
|
| 568 |
|
Capital expenditures |
|
| (6,105 | ) |
|
| (6,001 | ) |
Lease termination payments to Applegreen, including inventory purchases |
|
| (19,904 | ) |
|
| — |
|
Net cash used in investing activities |
|
| (25,964 | ) |
|
| (5,380 | ) |
|
|
|
|
|
|
| ||
Cash flows from financing activities: |
|
|
|
|
|
| ||
Borrowings under revolving credit facilities |
|
| 49,000 |
|
|
| 187,400 |
|
Repayments on revolving credit facilities |
|
| (6,740 | ) |
|
| (15,537 | ) |
Repayments on the Term Loan Facility |
|
| — |
|
|
| (158,980 | ) |
Payments of finance lease obligations |
|
| (744 | ) |
|
| (698 | ) |
Payments of deferred financing costs |
|
| (74 | ) |
|
| (6,906 | ) |
Distributions paid on distribution equivalent rights |
|
| (65 | ) |
|
| (56 | ) |
Distributions paid on common units |
|
| (19,941 | ) |
|
| (19,918 | ) |
Net cash provided by (used in) financing activities |
|
| 21,436 |
|
|
| (14,695 | ) |
Net increase (decrease) in cash and cash equivalents |
|
| 1,288 |
|
|
| (8,537 | ) |
|
|
|
|
|
|
| ||
Cash and cash equivalents at beginning of period |
|
| 4,990 |
|
|
| 16,054 |
|
Cash and cash equivalents at end of period |
| $ | 6,278 |
|
| $ | 7,517 |
|
The accompanying notes are an integral part of these consolidated financial statements.
|
| For the Nine Months Ended September 30, |
| |||||
|
| 2017 |
|
| 2016 |
| ||
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
Net income |
| $ | 2,035 |
|
| $ | 8,391 |
|
Adjustments to reconcile net income to net cash flows provided by operating activities: |
|
|
|
|
|
|
|
|
Depreciation, amortization and accretion expense |
|
| 42,675 |
|
|
| 40,594 |
|
Amortization of deferred financing fees |
|
| 1,278 |
|
|
| 1,106 |
|
Amortization of below market leases, net |
|
| 57 |
|
|
| 150 |
|
Provision for losses on doubtful accounts |
|
| 46 |
|
|
| 93 |
|
Deferred income taxes |
|
| (2,971 | ) |
|
| 69 |
|
Equity-based employees and directors compensation expense |
|
| 1,889 |
|
|
| 2,597 |
|
Amended Omnibus Agreement fees settled in common units |
|
| 9,900 |
|
|
| 7,600 |
|
Gain on sales of assets, net |
|
| (2,013 | ) |
|
| (525 | ) |
Erickson working capital adjustment |
|
| — |
|
|
| 335 |
|
Changes in working capital, net of acquisitions |
|
| 13,542 |
|
|
| 3,288 |
|
Net cash provided by operating activities |
|
| 66,438 |
|
|
| 63,698 |
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
Proceeds from sale of property and equipment |
|
| 23,900 |
|
|
| 610 |
|
Capital expenditures |
|
| (10,175 | ) |
|
| (11,567 | ) |
Principal payments received on notes receivable |
|
| 345 |
|
|
| 214 |
|
Refund payment related to the sale by CST of California and Wyoming assets |
|
| — |
|
|
| 17,528 |
|
Cash paid in connection with acquisitions, net of cash acquired |
|
| (2,779 | ) |
|
| (94,173 | ) |
Cash paid to CST in connection with acquisitions |
|
| — |
|
|
| (2,900 | ) |
Net cash provided by (used in) investing activities |
|
| 11,291 |
|
|
| (90,288 | ) |
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
Borrowings under the revolving credit facility |
|
| 88,840 |
|
|
| 178,270 |
|
Repayments on the revolving credit facility |
|
| (98,856 | ) |
|
| (82,182 | ) |
Repurchases of common units |
|
| — |
|
|
| (3,252 | ) |
Payments of long-term debt and capital lease obligations |
|
| (1,509 | ) |
|
| (1,772 | ) |
Payments of sale leaseback obligations |
|
| (635 | ) |
|
| (541 | ) |
Payment of deferred financing fees |
|
| (6 | ) |
|
| — |
|
Contributions from parent company |
|
| 329 |
|
|
| — |
|
Distributions paid on distribution equivalent rights |
|
| (15 | ) |
|
| (34 | ) |
Distributions paid to holders of the IDRs |
|
| (3,162 | ) |
|
| (2,456 | ) |
Distributions paid to noncontrolling interests |
|
| (60 | ) |
|
| (85 | ) |
Distributions paid on common and subordinated units |
|
| (62,439 | ) |
|
| (59,653 | ) |
Net cash (used in) provided by financing activities |
|
| (77,513 | ) |
|
| 28,295 |
|
Net increase in cash |
|
| 216 |
|
|
| 1,705 |
|
Cash at beginning of period |
|
| 1,350 |
|
|
| 1,192 |
|
Cash at end of period |
| $ | 1,566 |
|
| $ | 2,897 |
|
3
See Condensed Notes to Consolidated Financial Statements.
3
CONSOLIDATED STATEMENTS OF EQUITY AND COMPREHENSIVE INCOME
(Thousands of Dollars, except unit amounts)
(Unaudited)
|
| Limited Partners' Interest |
|
| AOCI |
|
| Total Equity |
| |||||||
|
| Units |
|
| Dollars |
|
| Dollars |
|
| Dollars |
| ||||
Balance at December 31, 2023 |
|
| 37,983,154 |
|
| $ | (2,392 | ) |
| $ | 5,399 |
|
| $ | 3,007 |
|
Net loss |
|
| — |
|
|
| (17,540 | ) |
|
| — |
|
|
| (17,540 | ) |
Other comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Unrealized gain on interest rate swap contracts |
|
| — |
|
|
| — |
|
|
| 9,131 |
|
|
| 9,131 |
|
Realized gain on interest rate swap contracts |
|
| — |
|
|
| — |
|
|
| (5,133 | ) |
|
| (5,133 | ) |
Total other comprehensive income |
|
| — |
|
|
| — |
|
|
| 3,998 |
|
|
| 3,998 |
|
Comprehensive (loss) income |
|
| — |
|
|
| (17,540 | ) |
|
| 3,998 |
|
|
| (13,542 | ) |
Issuance of units related to 2023 Bonus Plan |
|
| 17,136 |
|
|
| 381 |
|
|
| — |
|
|
| 381 |
|
Vesting of equity awards, net of units withheld for tax |
|
| 26,904 |
|
|
| 598 |
|
|
| — |
|
|
| 598 |
|
Accretion of preferred membership interests |
|
| — |
|
|
| (657 | ) |
|
| — |
|
|
| (657 | ) |
Distributions paid |
|
| — |
|
|
| (20,006 | ) |
|
| — |
|
|
| (20,006 | ) |
Balance at March 31, 2024 |
|
| 38,027,194 |
|
| $ | (39,616 | ) |
| $ | 9,397 |
|
| $ | (30,219 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Balance at December 31, 2022 |
|
| 37,937,604 |
|
| $ | 36,508 |
|
| $ | 16,469 |
|
| $ | 52,977 |
|
Net loss |
|
| — |
|
|
| (979 | ) |
|
| — |
|
|
| (979 | ) |
Other comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Unrealized gain on interest rate swap contracts |
|
| — |
|
|
| — |
|
|
| 137 |
|
|
| 137 |
|
Realized gain on interest rate swap contracts |
|
| — |
|
|
| — |
|
|
| (3,055 | ) |
|
| (3,055 | ) |
Total other comprehensive loss |
|
| — |
|
|
| — |
|
|
| (2,918 | ) |
|
| (2,918 | ) |
Comprehensive loss |
|
| — |
|
|
| (979 | ) |
|
| (2,918 | ) |
|
| (3,897 | ) |
Issuance of units related to 2022 Bonus Plan |
|
| 15,346 |
|
|
| 322 |
|
|
| — |
|
|
| 322 |
|
Accretion of preferred membership interests |
|
| — |
|
|
| (601 | ) |
|
| — |
|
|
| (601 | ) |
Distributions paid |
|
| — |
|
|
| (19,974 | ) |
|
| — |
|
|
| (19,974 | ) |
Balance at March 31, 2023 |
|
| 37,952,950 |
|
| $ | 15,276 |
|
| $ | 13,551 |
|
| $ | 28,827 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
The accompanying notes are an integral part of these consolidated financial statements.
4
CROSSAMERICA PARTNERS LP
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1.DESCRIPTION OF BUSINESS AND OTHER DISCLOSURES
CST’s Merger
CST entered into the Merger Agreement dated as of August 21, 2016, with Circle K and Merger Sub. On June 28, 2017, Merger Sub merged with and into CST, at which time the separate corporate existence of Merger Sub ceased, and CST survived the Merger as an indirect, wholly owned subsidiary of Circle K.
As a result of the Merger, Circle K indirectly owns all of the membership interests in our General Partner, as well as a 20.8% limited partner interest in the Partnership and all of the IDRs of the Partnership. Circle K, through its indirect ownership interest in the sole member of our General Partner, has the ability to appoint all of the members of the Board and to control and manage our operations and activities.
Description of Business
Our business consists of:
the wholesale distribution of motor fuels;
the retail distribution of motor fuels to end customers at retail sites operated by commission agents or us;
the owning or leasing of retail sites used in the retail distribution of motor fuels and, in turn, generating rental income from the lease or sublease of the retail sites; and
the retail sale of motor fuels to end customers at retail sites operated by commission agents and ourselves; and
The financial statements reflectsites, including the consolidated resultssale of the Partnership and its wholly owned subsidiaries. Our primary operations are conducted by the following consolidated wholly owned subsidiaries:
LGW, which distributes motor fuels on a wholesale basis and generates qualified income under Section 7704(d) of the Internal Revenue Code;
LGPR, which functions as the real estate holding company of CrossAmerica and holds assets that generate rental income that is qualifying under Section 7704(d) of the Internal Revenue Code; and
LGWS, which owns and leases (or leases and sub-leases) real estate and personal property used in the retail distribution of motor fuels, as well as provides maintenance and other services to its customers. In addition, LGWS distributes motor fuels on a retail basis and sells convenience merchandise items to end customers at company operated retail sites and sells motor fuel on a retail basis at sites operated by commission agents. Income from LGWS generally is not qualifying income under Section 7704(d) of the Internal Revenue Code.
In 2015, we issued our common units as consideration in the purchase of equity interests in CST Fuel Supply and the real property associated with certain of CST’s NTI retail sites. In addition, we also issued, and may continue to issue, our common units as payment to Circle K for charges and expenses incurred by us under the Amended Omnibus Agreement. There is no obligation for CST or our General Partner to accept common units representing limited partner interests in lieu of cash for amounts due under the Amended Omnibus Agreement. CST also acquired our common units through open market purchases from September 2015 through December 2015. At September 30, 2017, Circle K indirectly owned 20.8% of our limited partner interests.
Interim Financial Statements
These unaudited condensed consolidated financial statements have been prepared in accordance with U.S. GAAP for interim financial information and with the instructions to Form 10-Q and the Exchange Act. Accordingly, they do not include all of the information and notes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. All such adjustments are of a normal recurring nature unless disclosed otherwise. Management believes that the disclosures made are adequate to keep the information presented from being misleading. The financial statements contained herein should be read in conjunction with the consolidated financial statements and notes thereto included in our Form 10-K. Financial information as of September 30, 2017March 31, 2024 and for the three and nine months ended September 30, 2017March 31, 2024 and 20162023 included in the consolidated financial statements has been derived from our unaudited financial statements. Financial information as of December 31, 20162023 has been derived from our audited financial statements and notes thereto as of that date.
CROSSAMERICA PARTNERS LP
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Operating results for the ninethree months ended September 30, 2017March 31, 2024 are not necessarily indicative of the results that may be expected for the year ending December 31, 2017.2024. Our business exhibits seasonality due to our wholesale and retail sites being located in certain geographic areas that are affected by seasonal weather and temperature trends and associated changes in retail customer activity during different seasons. Historically, sales volumes have been highest in the second and third quarters (during the summer activity months) and lowest during the winter months in the first and fourth quarters.
Use of Estimates
The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results and outcomes could differ from those estimates and assumptions. On an ongoing basis, management reviews its estimates based on currently available information. Changes in facts and circumstances could result in revised estimates and assumptions.
Significant Accounting Policies
There have been no material changes to the significant accounting policies described in our Form 10-K.
NewRecently Adopted Accounting Pronouncements
Segment Reporting
In May 2014,November 2023, the FASB issued ASU 2014-09–Revenue from Contracts with Customers (Topic 606), which results2023-07, "Improvements in comprehensiveReportable Segment Disclosures." The amendments in this new revenue accounting guidance requiresimprove reportable segment disclosure requirements, primarily through enhanced disclosures to help users of financial statements better understandabout significant segment expenses. These new disclosures will be required in our Annual Report on Form 10-K for the nature, amount, timing,year ending December 31, 2024 and uncertainty of revenue that is recognized,interim and develops a common revenue standard under U.S. GAAP and International Financial Reporting Standards. Specifically, the core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services. With the issuance of ASU 2015-14, which deferred the effective date by one year, this guidance is effective January 1, 2018. The guidance can be applied either retrospectively to each prior reporting period presented, or as a cumulative-effect adjustment as of the date of adoption.annual reports thereafter. Although management continues to evaluatewe do not anticipate the impact of adopting this new guidance we have completed an assessment and to date, have not identified anywill be material, impact on the financial statements, although it will affect disclosures. This guidance is expectedour disclosures related to apply to over 90% of our revenues asreportable segments starting in our Annual Report on Form 10-K for the only primary revenue stream outside the scope of this guidance is rental income. We anticipate using the modified retrospective method of adoption.year ending December 31, 2024.
In February 2016, the FASB issued ASU 2016-02–Leases (Topic 842). This standard modifies existing guidance for reporting organizations that enter into leases to increase transparency by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. ASU 2016-02 is effective for fiscal years and interim periods within those years beginning after December 15, 2018, and requires a modified retrospective approach to adoption. Early adoption is permitted. Management continues to evaluate the impact of this new guidance, but the adoption will have a material impact on our balance sheet as we will be required to recognize right-of-use assets and lease liabilities for operating leases. We do not anticipate adopting this guidance early. We intend to apply each of the practical expedients in adopting this new guidance.
In October 2016, the FASB issued ASU 2016-16–Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory. This standard requires companies to account for income tax effects of intercompany transactions other than inventory in the period in which the transfer occurs. This guidance is effective January 1, 2018 and requires a modified retrospective application through a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption. We have chosen to early adopt the standard effective January 1, 2017, which had no impact as of the date of adoption but could impact us in the future.5
In January 2017, the FASB issued ASU 2017-01–Business Combinations (Topic 805): Clarifying the Definition of a Business. This standard clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The definition of a business affects many areas of accounting including acquisitions, disposals, goodwill and consolidation. ASU 2017-01 is effective for fiscal years and interim periods within those years beginning after December 15, 2017. We have chosen to early adopt this standard effective January 1, 2017. Although there was no impact upon adoption, among other things, this guidance will result in the capitalization rather than expensing of acquisition costs in future transactions that will be accounted for as asset acquisitions rather than business combinations under the new definition of a business.
5
CROSSAMERICA PARTNERS LP
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Income Taxes
In January 2017,December 2023, the FASB issued ASU 2017-04–Intangibles–Goodwill2023-09, “Improvements to Income Tax Disclosures.” The amendments in this new guidance require that public business entities on an annual basis (1) disclose specific categories in the rate reconciliation and Other (Topic 350): Simplifying the Test(2) provide additional information for Goodwill Impairment. reconciling items that meet a quantitative threshold. This standard removes Step 2 of the goodwill impairment test. A goodwill impairmentnew guidance also requires certain new disclosures such as income taxes paid disaggregated by federal, state and foreign taxes and further disaggregated by individual jurisdictions in which income taxes paid exceeds a quantitative threshold. This new guidance also eliminates certain previously required disclosures. We will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. ASU 2017-04 is effective for a company's annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. Management has elected to early adopt this new guidance effective January 1, 2017, which had no2025. Although we do not anticipate the impact upon adoption but could result in a change in the measurement of an impairment loss if an impairment was requiredadopting this guidance will be material, it will affect our disclosures related to be recorded in the future.income taxes.
Certain other new financial accounting pronouncements have become effective for our financial statements during 2024, but the adoption of these pronouncements did not materially impact our financial position, results of operations or disclosures.
Concentration Risk
For each of the ninethree months ended September 30, 2017March 31, 2024 and 2016,2023, we distributed approximately 14% and 17% of our total wholesale distribution volumes to DMS and its affiliates and DMS and its affiliates accounted for approximately 23% and 27% of our rental income, respectively.
For the nine months ended September 30, 2017 and 2016, we distributed 8% of our total wholesale distribution volume to CST retail sites that are not supplied by CST Fuel Supply and received 22% and 21% of our rental income from CST, respectively.
For more information regarding transactions with DMS and its affiliates and CST, see Note 8.
For the nine months ended September 30, 2017 and 2016, we received 9% of our rental income from a lessee dealer that operates certain of the retail sites acquired through the PMI and One Stop acquisitions.
For the nine months ended September 30, 2017, our wholesale business purchased approximately 28%, 27% and 17% of its motor fuel from ExxonMobil, BP and Motiva, respectively. For the nine months ended September 30, 2016, our wholesale business purchased approximately 29%, 24% and 23% of its motor fuel from ExxonMobil, BP and Motiva (Shell), respectively. No other fuel suppliers accounted for 10% or more80% of our motor fuel purchases duringfrom four suppliers. Approximately 24% and 23% of our motor fuel gallons sold for the ninethree months ended September 30, 2017March 31, 2024 and 2016.2023, respectively, were delivered by two carriers.
Valero supplied substantially all ofFor the motor fuel purchased by CST Fuel Supply during all periods presented. During the ninethree months ended September 30, 2017March 31, 2024 and 2016, CST Fuel Supply2023, respectively, approximately 11% and 20% of our rent income was from two multi-site operators.
For the three months ended March 31, 2024 and 2023, respectively, approximately 50% and 47% of our merchandise was purchased approximately 1.3 billion and 1.4 billion gallons of motor fuel from Valero, respectively. one supplier.
Note 2. ACQUISITIONSAPPLEGREEN ACQUISITION AND LEASE TERMINATION
On August 4, 2017,January 26, 2024, we entered into a definitive asset purchasean agreement (the “Purchase“Applegreen Purchase Agreement”), by to acquire certain assets from Applegreen Midwest, LLC and among (i) CrossAmerica, (ii) Jet-Pep, Inc., and (iii) other persons listed as signatories in the Purchase AgreementApplegreen Florida, LLC (collectively, the “Sellers”) (the “Applegreen Acquisition”). Pursuant toThe assets were acquired via the Purchase Agreement, we have agreed to purchasetermination of the real property andPartnership’s existing lease agreements with the fuel supply business of 92 fee simple sites, and the leasehold interest in 5 leased real property sites; and the fuel supply business to four independent dealers, all located in Alabama (“Acquired Assets”),Sellers at 59 locations, for an aggregate cashtotal consideration of $72.3 million (the “Purchase Price”), subject to certain closing adjustments. We$16.9 million. The transaction closed on a rolling basis by site beginning during the first quarter of 2024 and ending in April 2024. The Partnership also agreed to assume certain liabilities and payacquired for cash the valueinventory at the locations. The terms of the petroleum inventory contained in the retail sites. Circle K also entered into a definitive asset purchase agreementPartnership’s leases with the Sellers.Applegreen Midwest, LLC and Applegreen Florida, LLC could have been extended to 2049 and 2048, respectively, including all renewal options. The closing of the purchase of the Acquired Assets and the closing of the purchase by Circle K of certain related retail and terminaling assets from the Sellers (the “Circle K Agreements”), are mutually conditioned upon each other. We paid a deposit of $2.8 million in the third quarter of 2017.
The closing of the transaction is expected to occur in the fourth quarter of 2017, and is subject to the satisfaction or waiver of customary closing conditions. TheApplegreen Purchase Agreement contains customary representations warranties, agreements and obligationswarranties of the parties and termination and closing conditions. Weas well as indemnification obligations by the Sellers and the Sellers have generally agreedPartnership, respectively, to indemnify each other for breachesother.
Of the 59 locations, 31 locations converted during the first quarter of 2024 and the representations, warranties and covenants containedremaining locations converted in April 2024. This transaction resulted in the Purchase Agreement, subjecttransition of these lessee dealer sites to survival period limitationscompany operated sites.
During the first quarter of 2024, we paid $19.9 million of cash and accrued an additional $1.2 million of cash paid in April 2024. In addition, we recorded a general indemnification cap fornon-cash write-off of deferred rent income of $1.4 million during the Sellers infirst quarter of 2024. We recorded these transactions as follows during the amountfirst quarter of $6.5 million in the aggregate for Sellers’ liabilities under the Purchase Agreement and the Circle K Agreements.2024 (in thousands):
Cash consideration |
|
|
| |
Lease termination payments |
| $ | 15,800 |
|
Inventory purchases |
|
| 4,104 |
|
Total cash paid |
|
| 19,904 |
|
Accrued lease termination payments paid in April 2024 |
|
| 1,183 |
|
Total consideration |
|
| 21,087 |
|
|
|
|
| |
Inventory |
|
| 4,104 |
|
Equipment |
|
| 1,550 |
|
Other assets |
|
| 980 |
|
Loss on lease termination |
|
| 14,453 |
|
Non-cash write-off of deferred rent income |
|
| 1,445 |
|
Total loss on lease termination |
| $ | 15,898 |
|
6
CROSSAMERICA PARTNERS LP
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
We have classified fournine sites and two sites as held for sale at September 30, 2017March 31, 2024 and December 31, 2016. These assets2023, respectively, which are expected to be sold within aone year of the date they were initially classified as held for sale.such classification. Assets held for sale were as follows (in thousands):
|
| September 30, |
|
| December 31, |
|
| March 31, |
| December 31, |
| |||||
|
| 2017 |
|
| 2016 |
|
| 2024 |
|
| 2023 |
| ||||
Land |
| $ | 1,741 |
|
| $ | 882 |
|
| $ | 3,056 |
|
| $ | 240 |
|
Buildings and site improvements |
|
| 1,608 |
|
|
| 1,054 |
|
|
| 3,512 |
|
|
| 380 |
|
Equipment and other |
|
| 489 |
|
|
| 702 |
| ||||||||
Equipment |
|
| 2,579 |
|
|
| 418 |
| ||||||||
Total |
|
| 3,838 |
|
|
| 2,638 |
|
|
| 9,147 |
|
|
| 1,038 |
|
Less accumulated depreciation |
|
| (1,342 | ) |
|
| (527 | ) |
|
| (4,506 | ) |
|
| (638 | ) |
Assets held for sale |
| $ | 2,496 |
|
| $ | 2,111 |
|
| $ | 4,641 |
|
| $ | 400 |
|
The Partnership has continued to focus on divesting lower performing assets. During the three and nine months ended September 30, 2017, as approved by the conflicts committee of our Board,March 31, 2023, we sold 28 properties to DMRone property for $16.6$0.4 million in proceeds, resulting in a $0.5 million loss. Three additional properties and approximately $3.0 million of proceeds remain in escrow, as of September 30, 2017 until certain conditions are met. These sites were generally sites at which we did not supply fuel or represented vacant land.
During the three and nine months ended September 30, 2017, we sold 2 properties as a result of the FTC’s requirements associated with the Merger for $6.7 million, resulting in anet gain of $2.2$0.1 million. In addition, Couche-Tard agreed to reimburse us
See Note 5 for the tax liability incurred on the required sale, resulting in additional proceeds of $0.3 million, which was accountedinformation regarding impairment charges primarily recorded upon classifying sites within assets held for as a contribution to partners’ capital.sale.
During the three and nine months ended September 30, 2017, DMS renewed its contract with one of its customers, triggering a $0.8 million earn-out payment by DMS to us under a contract entered into with DMS at the time of CST acquiring our General Partner in October 2014, which was recorded as a gain.
Note 4. INVENTORIESINVENTORY
InventoriesInventory consisted of the following (in thousands):
|
| March 31, |
|
| December 31, |
| ||
|
| 2024 |
|
| 2023 |
| ||
Merchandise |
| $ | 29,808 |
|
| $ | 26,081 |
|
Motor fuel |
|
| 28,229 |
|
|
| 26,263 |
|
Inventory |
| $ | 58,037 |
|
| $ | 52,344 |
|
See Notes 2 and 15 for information regarding the Applegreen Acquisition and other conversions of lessee dealer sites to company operated sites, which caused a significant portion of the increase in inventory.
|
| September 30, |
|
| December 31, |
| ||
|
| 2017 |
|
| 2016 |
| ||
Retail site merchandise |
| $ | 7,715 |
|
| $ | 8,374 |
|
Motor fuel |
|
| 4,305 |
|
|
| 4,790 |
|
Inventories |
| $ | 12,020 |
|
| $ | 13,164 |
|
Note 5. PROPERTY AND EQUIPMENT
Property and equipment, net consisted of the following (in thousands):
|
| September 30, |
|
| December 31, |
|
| March 31, |
| December 31, |
| |||||
|
| 2017 |
|
| 2016 |
|
| 2024 |
|
| 2023 |
| ||||
Land |
| $ | 270,740 |
|
| $ | 280,400 |
|
| $ | 323,494 |
|
| $ | 326,571 |
|
Buildings and site improvements |
|
| 334,705 |
|
|
| 346,834 |
|
|
| 362,651 |
|
|
| 365,528 |
|
Leasehold improvements |
|
| 9,721 |
|
|
| 9,095 |
|
|
| 16,560 |
|
|
| 16,434 |
|
Equipment and other |
|
| 171,208 |
|
|
| 169,245 |
| ||||||||
Equipment |
|
| 358,585 |
|
|
| 356,160 |
| ||||||||
Construction in progress |
|
| 3,720 |
|
|
| 3,173 |
|
|
| 5,240 |
|
|
| 4,462 |
|
Property and equipment, at cost |
|
| 790,094 |
|
|
| 808,747 |
|
|
| 1,066,530 |
|
|
| 1,069,155 |
|
Accumulated depreciation and amortization |
|
| (155,376 | ) |
|
| (131,418 | ) |
|
| (373,802 | ) |
|
| (363,938 | ) |
Property and equipment, net |
| $ | 634,718 |
|
| $ | 677,329 |
|
| $ | 692,728 |
|
| $ | 705,217 |
|
We recorded impairment charges of $0.3 million and $0.4 million during the three months ended March 31, 2024 and 2023, respectively, included within depreciation, amortization and accretion expenses on the statements of operations. These impairment charges were primarily related to sites initially classified within assets held for sale in connection with our ongoing real estate rationalization effort.
7
CROSSAMERICA PARTNERS LP
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Intangible assets consisted of the following (in thousands):
|
| March 31, 2024 |
|
| December 31, 2023 |
| ||||||||||||||||||
|
| Gross |
|
| Accumulated |
|
| Net |
|
| Gross |
|
| Accumulated |
|
| Net |
| ||||||
Wholesale fuel supply contracts/rights |
| $ | 234,501 |
|
| $ | 145,557 |
|
| $ | 88,944 |
|
| $ | 234,501 |
|
| $ | 140,714 |
|
| $ | 93,787 |
|
Trademarks/licenses |
|
| 2,118 |
|
|
| 787 |
|
|
| 1,331 |
|
|
| 2,078 |
|
|
| 761 |
|
|
| 1,317 |
|
Covenant not to compete |
|
| 200 |
|
|
| 53 |
|
|
| 147 |
|
|
| 200 |
|
|
| 43 |
|
|
| 157 |
|
Total intangible assets |
| $ | 236,819 |
|
| $ | 146,397 |
|
| $ | 90,422 |
|
| $ | 236,779 |
|
| $ | 141,518 |
|
| $ | 95,261 |
|
|
| September 30, 2017 |
|
| December 31, 2016 |
| ||||||||||||||||||
|
| Gross Amount |
|
| Accumulated Amortization |
|
| Net Carrying Amount |
|
| Gross Amount |
|
| Accumulated Amortization |
|
| Net Carrying Amount |
| ||||||
Wholesale fuel supply contracts/rights |
| $ | 118,201 |
|
| $ | (53,607 | ) |
| $ | 64,594 |
|
| $ | 118,201 |
|
| $ | (44,298 | ) |
| $ | 73,903 |
|
Trademarks |
|
| 1,094 |
|
|
| (807 | ) |
|
| 287 |
|
|
| 1,094 |
|
|
| (685 | ) |
|
| 409 |
|
Covenant not to compete |
|
| 4,131 |
|
|
| (3,095 | ) |
|
| 1,036 |
|
|
| 4,131 |
|
|
| (2,503 | ) |
|
| 1,628 |
|
Below market leases |
|
| 11,401 |
|
|
| (8,329 | ) |
|
| 3,072 |
|
|
| 12,081 |
|
|
| (7,261 | ) |
|
| 4,820 |
|
Total intangible assets |
| $ | 134,827 |
|
| $ | (65,838 | ) |
| $ | 68,989 |
|
| $ | 135,507 |
|
| $ | (54,747 | ) |
| $ | 80,760 |
|
Note 7. DEBT
Our balances for long-term debt and capitalfinance lease obligations arewere as follows (in thousands):
|
| September 30, |
|
| December 31, |
| ||
|
| 2017 |
|
| 2016 |
| ||
$550 million revolving credit facility |
| $ | 431,484 |
|
| $ | 441,500 |
|
Note payable |
|
| 779 |
|
|
| 822 |
|
Capital lease obligations |
|
| 27,728 |
|
|
| 28,455 |
|
Total debt and capital lease obligations |
|
| 459,991 |
|
|
| 470,777 |
|
Current portion |
|
| 2,884 |
|
|
| 2,100 |
|
Noncurrent portion |
|
| 457,107 |
|
|
| 468,677 |
|
Deferred financing fees |
|
| (2,334 | ) |
|
| (3,558 | ) |
Noncurrent portion, net of deferred financing fees |
| $ | 454,773 |
|
| $ | 465,119 |
|
|
| March 31, |
|
| December 31, |
| ||
|
| 2024 |
|
| 2023 |
| ||
CAPL Credit Facility |
| $ | 798,260 |
|
| $ | 756,000 |
|
Finance lease obligations |
|
| 10,320 |
|
|
| 11,064 |
|
Total debt and finance lease obligations |
|
| 808,580 |
|
|
| 767,064 |
|
Current portion |
|
| 3,133 |
|
|
| 3,083 |
|
Noncurrent portion |
|
| 805,447 |
|
|
| 763,981 |
|
Deferred financing costs, net |
|
| 9,692 |
|
|
| 10,101 |
|
Noncurrent portion, net of deferred financing costs |
| $ | 795,755 |
|
| $ | 753,880 |
|
Our $550 million revolving credit facilityThe CAPL Credit Facility is secured by substantially all of ourthe Partnership’s assets.
Letters of credit outstanding totaled $5.3 million and $4.5 million at September 30, 2017March 31, 2024 and December 31, 2016 totaled $6.5 million, which reduce our availability under2023, respectively.
Taking the credit facility. The amount of availability at September 30, 2017 under the revolving credit facility, after takinginterest rate swap contracts into account, debt covenant restrictions,the effective interest rate on our CAPL Credit Facility at March 31, 2024 was $53.7 million. In connection with future acquisitions, the revolving credit facility requires, among other things, that we have, after giving effect to such acquisition, at least $20.0 million in the aggregate5.1% (our applicable margin was 2.25% as of borrowing availability under the revolving credit facility and unrestricted cashMarch 31, 2024). See Note 8 for additional information on the balance sheet on the date of such acquisition.our interest rate swap contracts.
Financial Covenants and Interest Rate
We are required to comply withThe CAPL Credit Facility contains certain financial covenants under the credit facility. We arecovenants. The Partnership is required to maintain a total leverage ratioConsolidated Leverage Ratio (as defined in the credit facility)CAPL Credit Facility) of (i) for each fiscal quarter ending March 31, 2024, June 30, 2024 and September 30, 2024, not greater than 5.00 to 1.00, and (ii) for each fiscal quarter ending December 31, 2024 and thereafter, not greater than 4.75 to 1.00. For the quarter during a Specified Acquisition Period (as defined in the CAPL Credit Facility), such threshold will be increased by increasing the numerator thereof by 0.5, but such numerator may not exceed 5.25 to 1.00. Upon the occurrence of a Qualified Note Offering (as defined in the CAPL Credit Facility), the Consolidated Leverage Ratio threshold when not in a Specified Acquisition Period is increased to 5.25 to 1.00, while the Specified Acquisition Period threshold is 5.50 to 1.00. Upon the occurrence of a Qualified Note Offering, the Partnership is also required to maintain a Consolidated Senior Secured Leverage Ratio (as defined in the CAPL Credit Facility) for the most recently completed four fiscal quartersquarter period of lessnot greater than or equal3.75 to 4.50 : 1.00 except for periods following a material acquisition, generally defined as an acquisition with a purchase price of at least $30.0 million. The total leverage ratio shall not exceed 5.00 : . Such threshold is increased to 4.00 to 1.00 for the first three full fiscal quarters following the closing ofquarter during a material acquisition. If we issued Qualified Senior Notes (as defined in the credit facility) in the aggregate principal amount of $175.0 million or greater, the ratio shall not exceed 5.50 : 1.00. If we issued Qualified Senior Notes of $175.0 million or greater, we areSpecified Acquisition Period. The Partnership is also required to maintain a senior leverage ratioConsolidated Interest Coverage Ratio (as defined in the credit facility) of less than or equal to 3.00 : 1.00 and a consolidated interest coverage ratio (as defined in the credit facility)CAPL Credit Facility) of at least 2.75 :2.50 to 1.00.
On February 20, 2024, in connection with our Applegreen Acquisition, we entered into an amendment (the “Amendment”) to the CAPL Credit Facility. The Amendment, among other things, modified the definition of Consolidated EBITDA contained in the Credit Agreement to permit the full addback of certain lease termination expenses incurred in connection with the Applegreen Acquisition and the addback of other lease termination expenses incurred in connection with future transactions, subject to certain terms and conditions.
As of September 30, 2017,March 31, 2024, we were in compliance with theseour financial covenants.
Outstanding borrowingscovenants under the revolving credit facility bear interestCAPL Credit Facility. The amount of availability under the CAPL Credit Facility at LIBOR plus a margin of 3.00%. Our borrowings had an effective interest rate of 4.24% as of September 30, 2017.March 31, 2024, after taking into consideration debt covenant restrictions, was $91.2 million.
8
CROSSAMERICA PARTNERS LP
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In connection with amending the CAPL Credit Facility and terminating the JKM Credit Facility in March 2023, the Partnership wrote off $1.1 million of deferred financing costs in the first quarter of 2023.
Note 8. INTEREST RATE SWAP CONTRACTS
During 2024 and through the date of this report, we held the following interest rate swap contracts (in thousands):
Type |
| Notional Amount |
|
| Termination Date |
| Fixed Rate |
| ||
Spot starting |
| $ | 150,000 |
|
| April 1, 2024 |
|
| 0.413 | % |
Spot starting |
|
| 75,000 |
|
| April 1, 2024 |
|
| 0.298 | % |
Spot starting |
|
| 75,000 |
|
| April 1, 2024 |
|
| 0.298 | % |
Spot starting |
|
| 50,000 |
|
| March 30, 2028 |
|
| 3.287 | % |
Spot starting |
|
| 100,000 |
|
| March 31, 2028 |
|
| 3.287 | % |
Spot starting |
|
| 50,000 |
|
| April 8, 2028 |
|
| 3.282 | % |
Forward starting April 1, 2024 |
|
| 100,000 |
|
| April 1, 2028 |
|
| 2.932 | % |
Spot starting |
|
| 80,000 |
|
| March 31, 2028 |
|
| 4.105 | % |
Spot starting |
|
| 20,000 |
|
| March 31, 2028 |
|
| 4.121 | % |
All of our interest rate swap contracts have been designated as cash flow hedges and are expected to be highly effective.
The fair value of each of these interest rate swap contracts was reported as a separate line item within current assets, noncurrent assets and noncurrent liabilities, as applicable. See Note 12 for additional information on the fair value of the interest rate swap contracts.
We report the unrealized gains and losses on our interest rate swap contracts designated as highly effective cash flow hedges as a component of other comprehensive income and reclassify such gains and losses into earnings (interest expense on our statement of operations) in the same period during which the hedged interest expense is recorded. We recognized a net realized gain from settlements of the interest rate swap contracts of $5.1 million and $3.1 million for the three months ended March 31, 2024 and 2023, respectively.
We currently estimate that a gain of $6.1 million will be reclassified from accumulated other comprehensive income into interest expense during the next 12 months; however, the actual amount that will be reclassified will vary based on changes in interest rates.
Note 9. OPERATING LEASES AS LESSOR
During the first quarter of 2024, we terminated a significant number of operating leases as lessor through our Applegreen Acquisition. See Note 2 for additional information regarding this transaction and the related write-off of deferred rent income.
Motor fuel stations are leased to tenants under operating leases with various expiration dates ranging through 2037. Most lease agreements include provisions for renewals. We generally do not include renewal options in our lease term. Future minimum rental payments under non-cancelable operating leases with third parties as of March 31, 2024 were as follows (in thousands):
2024 |
| $ | 29,826 |
|
2025 |
|
| 32,495 |
|
2026 |
|
| 22,640 |
|
2027 |
|
| 12,672 |
|
2028 |
|
| 7,899 |
|
Thereafter |
|
| 21,489 |
|
Total future minimum lease payments |
| $ | 127,021 |
|
The future minimum rental payments presented above do not include contingent rent based on future inflation, future revenues or volumes of the lessee, or non-lease components for amounts that may be received as tenant reimbursements for certain operating costs.
9
CROSSAMERICA PARTNERS LP
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Deferred rent income from straight-line rent relates to the cumulative amount by which straight-line rental income recorded to date exceeds cash rents billed to date under the lease agreement and totaled $3.3 million and $5.0 million at March 31, 2024 and December 31, 2023, respectively.
Note 8.10. RELATED-PARTY TRANSACTIONS
Transactions with CST
Wholesale Motor Fuel Sales and Rental IncomeReal Estate Rentals
We sell wholesale motor fuel under a master fuel distribution agreement to 48 CST retail sites and lease real property on 73 retail sites to CST under a master lease agreement each having initial 10-year terms. The fuel distribution agreement provides usRevenues from TopStar, an entity affiliated with a fixed wholesale mark-up per gallon. The master lease agreement is a triple net lease.
Revenues from wholesale fuel sales and real property rental income from CSTthe Topper Group, were as follows (in thousands):
|
| For the Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||
|
| 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
| ||||
Revenues from motor fuel sales to CST |
| $ | 36,449 |
|
| $ | 31,738 |
|
| $ | 100,683 |
|
| $ | 87,819 |
|
Rental income from CST |
| $ | 4,262 |
|
| $ | 4,207 |
|
| $ | 12,823 |
|
| $ | 12,841 |
|
Accounts receivable from CST for fuel amounted to $3.5$10.7 million and $3.2 million at September 30, 2017 and December 31, 2016, respectively.
Amended Omnibus Agreement and Management Fees
We incurred $2.9 million and $3.9$11.7 million for the three months ended September 30, 2017March 31, 2024 and 2016 and $11.52023, respectively. Accounts receivable from TopStar was $1.0 million and $12.1$0.4 million at March 31, 2024 and December 31, 2023, respectively.
We lease real estate from the Topper Group. Rent expense under these lease agreements was $2.5 million for each of the three months ended March 31, 2024 and 2023.
Omnibus Agreement
We incurred expenses under the Omnibus Agreement, including costs for store level personnel at our company operated sites as well as other cost reimbursements, totaling $27.8 million and $24.4 million for the ninethree months ended September 30, 2017March 31, 2024 and 2016, respectively, including incentive compensation costs and non-cash stock-based compensation expense under the Amended Omnibus Agreement, which2023, respectively. Such expenses are recorded as a component ofincluded in operating expenses and general and administrative expenses in the statementstatements of operations. Amounts payable to CST were $16.3the Topper Group related to expenses incurred by the Topper Group on our behalf in accordance with the Omnibus Agreement totaled $4.8 million and $10.0$8.4 million at September 30, 2017March 31, 2024 and December 31, 2016,2023, respectively. The amounts payable at September 30, 2017 include separation benefits associated with the Merger
Common Unit Distributions and equity compensation expense associated with CST stock-based awards. See Note 15 for additional information.Other Equity Transactions
Common Units Issued to CST as Consideration for Amounts Due Under the Terms of the Amended Omnibus Agreement
As approved by the independent conflicts committee of the Board, the Partnership and CST mutually agreed to settle, from time to time, some or all of the amounts due under the terms of the Amended Omnibus Agreement in newly issued common units representing limited partner interests in the Partnership. We issued the following common units to CST as consideration for amounts due under the terms of the Amended Omnibus Agreement:
|
|
| ||||
|
|
| ||||
|
|
| ||||
|
|
| ||||
|
|
| ||||
|
|
CST Fuel Supply Equity Interests
CST Fuel Supply provides wholesale motor fuel distributiondistributed $7.7 million to the majority of CST’s legacy U.S. retail sites at cost plus a fixed markup per gallon. We owned a 17.5% total interest in CST Fuel Supply at September 30, 2017 and 2016. We account for the income derived from our equity interest of CST Fuel Supply as “Income from CST Fuel Supply equity” on our statement of operations, which amounted to $3.8 million and $4.0 million for the three months ended September 30, 2017 and 2016, respectively, and $11.2 million and $12.3 million for the nine months ended September 30, 2017 and 2016, respectively.
9
CROSSAMERICA PARTNERS LP
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In connection with the Merger, the Federal Trade Commission (FTC) approved a final order requiring the divestiture by CST of certain retail fuel stations. As a result, in September 2017, 61 sites were sold to a third party and removed from the fuel distribution agreement between CST Marketing and Supply, a wholly-owned subsidiary of CST Fuel Supply, and CST Services, a wholly owned subsidiary of Circle K, and CST Marketing and Supply no longer supplies fuel to such sites. To compensate for the decrease in the amount of motor fuels sold by CST Marketing and Supply, CST Services agreed to purchase at least 114.9 million gallons annually (the “Annual Commitment”) in addition to the volumes continued to be sold under the fuel distribution agreement to retail fuel stations that remain with CST after the divestiture. In addition, should CST Services fail to purchase all or a portion of the Annual Commitment, CST Services has agreed to make monthly payments to CST Marketing and Supply in the amount of the seller’s margin of 5 cents per gallon under the fuel distribution agreement multiplied by the number of gallons not physically sold pursuant to the Annual Commitment. Consequently, the Partnership, by virtue of its 17.5% ownership interest in CST Fuel Supply, the 100% owner of CST Marketing and Supply, will continue to receive its share from the volumes sold to the 61 retail sites prior to the FTC mandated divestiture. This agreement continues until the fuel distribution agreement between CST Marketing and Supply and CST Services is terminated, which had an initial term of 10 years expiring in December 2024.
In July 2016, CST provided a refund payment to us related to our 17.5% interest in CST Fuel Supply resulting from the sale by CST of 79 retail sites in California and Wyoming to 7-Eleven, Inc. and its wholly-owned subsidiary, SEI Fuel Services, Inc., to which CST Fuel Supply no longer supplies motor fuel. The purpose of the refund payment was to make us whole for the decrease in the value of our interest in CST Fuel Supply arising from sales volume decreases. The total refund payment received by us, as approved by the independent conflicts committee of the Board and by the executive committee of the board of directors of CST, was approximately $18.2 million ($17.5 million in cash with the remainder in CrossAmerica common units owned by CST) and was accounted for as a contribution to equity.
Purchase of Fuel from CST
We purchase the fuel supplied to 32 retail sites from CST Fuel Supply of which we own a 17.5% interest, and resell the wholesale motor fuel to independent dealers and sub-wholesalers. We purchased $6.2 million and $5.7 million of motor fuel from CST Fuel Supply for the three months ended September 30, 2017 and 2016, and $17.9 million and $14.7 million for the nine months ended September 30, 2017 and 2016, respectively, in connection with these retail sites.
IDR and Common Unit Distributions
We distributed $1.1 million and $0.9 million to CST related to its ownership of our IDRs and $4.3 million and $3.9 millionTopper Group related to its ownership of our common units duringfor the three months ended September 30, 2017March 31, 2024 and 2016, respectively. 2023.
We distributed $3.2 million and $2.5$2.6 million to CSTaffiliates of John B. Reilly, III related to its ownership of our IDRs and $12.6 million and $11.5 million related to itstheir ownership of our common units during the nine months ended September 30, 2017 and 2016, respectively.
Income Tax Reimbursement
As discussed in Note 3, we sold 2 properties during the three and nine months ended September 30, 2017 as a result of the FTC’s requirements associated with Couche-Tard’s acquisition of CST. Couche-Tard agreed to reimburse us for the tax liability incurred on the required sale, resulting in additional proceeds of $0.3 million, which was accounted for as a contribution to partners’ capital.
Wholesale Motor Fuel Sales and Real Estate Rentals
Revenues from motor fuel sales and rental income from DMS and its affiliates were as follows (in thousands):
|
| For the Three Months Ended September 30, |
|
| For the Nine Months Ended September 30, |
| ||||||||||
|
| 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
| ||||
Revenues from motor fuel sales to DMS and its affiliates |
| $ | 64,741 |
|
| $ | 68,153 |
|
| $ | 180,928 |
|
| $ | 192,511 |
|
Rental income from DMS and its affiliates |
| $ | 4,739 |
|
| $ | 5,037 |
|
| $ | 14,472 |
|
| $ | 16,250 |
|
Accounts receivable from DMS and its affiliates totaled $10.3 million and $8.6 million at September 30, 2017 and December 31, 2016, respectively.
Revenues from rental income from Topstar were $0.2 million and $0.4 million for the three and nine months ended September 30, 2017March 31, 2024 and 2016, respectively.2023.
10
CROSSAMERICA PARTNERS LP
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CrossAmerica leases real estate from certain entities affiliated with Joseph V. Topper, Jr., directorWe recorded accretion on the preferred membership interests issued in March 2022 to related parties of the Board. Rent expense paid to these entities was $0.2$0.7 million and $0.6 million for the three months ended September 30, 2017March 31, 2024 and 2016 and $0.7 million and $0.6 million for the nine months ended September 30, 2017 and 2016,2023, respectively.
As discussed in Note 3, DMS renewed its contract with one of its customers, triggering a $0.8 million earn-out payment by DMS to us under a contract entered into with DMS at the time of CST acquiring our General Partner in October 2014.
Also as discussed in Note 3, we sold 28 properties to DMR during the three and nine months ended September 30, 2017 for $16.6 million.
Maintenance and Environmental Costs
Certain maintenance and environmental monitoring and remediation activities are performed by a related party of Joseph V.an entity affiliated with the Topper Jr., a member of the Board,Group, as approved by the independent conflicts committee of the Board. We incurred charges with this related party of $0.4$1.0 million and $0.3$0.7 million for the three months ended September 30, 2017March 31, 2024 and 2016 and $1.32023, respectively. Accounts payable to this related party amounted to $0.7 million and $1.2$0.3 million at March 31, 2024 and December 31, 2023, respectively.
Convenience Store Products
We purchase certain convenience store products from an affiliate of John B. Reilly, III and Joseph V. Topper, Jr., members of the Board, as approved by the independent conflicts committee of the Board. Merchandise costs amounted to $4.7 million and $4.9 million for the ninethree months ended September 30, 2017March 31, 2024 and 2016,2023, respectively. Amounts payable to this related party amounted to $1.4 million at March 31, 2024 and December 31, 2023.
Vehicle Lease
In connection with the services rendered under the Omnibus Agreement, we lease certain vehicles from an entity affiliated with the Topper Group, as approved by the independent conflicts committee of the Board. Lease expense was an insignificant amount for each of the three months ended March 31, 2024 and 2023.
10
CROSSAMERICA PARTNERS LP
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Principal Executive Offices
Our principal executive offices are in Allentown, Pennsylvania. We subleaselease office space from CST that CST leases from an affiliate of John B. Reilly, III and Joseph V. Topper, Jr., members of our Board, as approved by the independent conflicts committee of the Board. The management fee charged by CST to us under the Amended Omnibus Agreement incorporates this rentalRent expense which amounted to $0.2$0.3 million for each of the three months ended March 31, 2024 and 2023.
Public Relations and Website Consulting Services
We have engaged a company affiliated with John B. Reilly, III, member of the Board, for public relations and website consulting services. The cost of these services was insignificant for the three months ended September 30, 2017March 31, 2024 and 2016 and $0.5 million and $0.4 million for the nine months ended September 30, 2017 and 2016, respectively.2023.
Note 9.11. COMMITMENTS AND CONTINGENCIES
Purchase Commitments
We have minimum volume purchase requirements under certain of our fuel supply agreements with a purchase price at prevailing market rates for wholesale distribution. In the event we fail to purchase the required minimum volume for a given contractual period, the underlying third party’s exclusive remedies (depending on the magnitude of the failure) are either termination of the supply agreement and/or a financial penalty per gallon based on the volume shortfall for the given period. We did not incur any significant penalties during the three months ended March 31, 2024 or 2023.
Litigation Matters
We are from time to time party to various lawsuits, claims and other legal proceedings that arise in the ordinary course of business. These actions typically seek, among other things, compensation for alleged personal injury, breach of contract, property damages, environmental damages, employment-related claims and damages, punitive damages, civil penalties or other losses, or injunctive or declaratory relief. With respect to all such lawsuits, claims and proceedings, we record a reservean accrual when it is probable that a liability has been incurred and the amount of loss can be reasonably estimated. In addition, we disclose matters for which management believes a material loss is at least reasonably possible. None ofWe believe that it is not reasonably possible that these proceedings, separately or in the aggregate, are expected towill have a material adverse effect on our consolidated financial position, results of operations or cash flows. In all instances, management has assessed the matter based on current information and made a judgment concerning its potential outcome, giving due consideration to the nature of the claim, the amount and nature of damages sought and the probability of success. Management’s judgment may prove materially inaccurate, and such judgment is made subject to the known uncertainties of litigation.
Environmental Matters
We were a co-defendant, togethercurrently own or lease sites where refined petroleum products are being or have been handled. These sites and the refined petroleum products handled thereon may be subject to federal and state environmental laws and regulations. Under such laws and regulations, we could be required to remove or remediate containerized hazardous liquids or associated generated wastes (including wastes disposed of or abandoned by prior owners or operators), to remediate contaminated property arising from the release of liquids or wastes into the environment, including contaminated groundwater, or to implement best management practices to prevent future contamination.
We maintain insurance of various types with our General Partner, CST and CST Services, in a lawsuit brought by Charles Nifong, a former employeevarying levels of CST Services who, until March 2015, provided services to us as Chief Investment Officer and Vice President of Finance (Court of Common Pleas, Lehigh County, Pennsylvania, case number 2015-1003). Following CST’s acquisition of our General Partner, the plaintiff alleged breach of contract and associated claims relating to his termination of employment and claimed severance benefitscoverage that is considered adequate under the EICP.circumstances to cover operations and properties. The trial occurredinsurance policies are subject to deductibles that are considered reasonable and not excessive. In addition, we have entered into indemnification and escrow agreements with various sellers in early October and the decision by the jury was to award Mr. Nifong a totalconjunction with several of $1.7 million. Such amount was recorded in general and administrative expensestheir respective acquisitions, as further described below. Financial responsibility for the three and nine months ended September 30, 2017. Under the EICP, we were also obligated to pay reasonable legal expenses incurred by the plaintiffenvironmental remediation is negotiated in connection with this dispute,each acquisition transaction. In each case, an assessment is made of potential environmental liability exposure based on available information. Based on that assessment and relevant economic and risk factors, a determination is made whether to, and the extent to which we expensed as incurred. The Partnership incurred total legal feeswill, assume liability for existing environmental conditions.
Environmental liabilities recorded on the balance sheet within accrued expenses and other current liabilities and other long-term liabilities totaled $6.9 million and $7.4 million at March 31, 2024 and December 31, 2023, respectively. Indemnification assets related to this casethird-party escrow funds, state funds or insurance recorded on the balance sheet within other current assets and other noncurrent assets totaled $4.7 million and $5.3 million at March 31, 2024 and December 31, 2023, respectively. State funds represent probable state reimbursement amounts. Reimbursement will depend upon the continued maintenance and solvency of $0.6 millionthe state. Insurance coverage represents amounts deemed probable of reimbursement under insurance policies.
11
CROSSAMERICA PARTNERS LP
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The estimates used in these reserves are based on all known facts at the time and an assessment of the ultimate remedial action outcomes. We will adjust loss accruals as further information becomes available or circumstances change. Among the many uncertainties that impact the estimates are the necessary regulatory approvals for, and potential modifications of, remediation plans, the nine months ended September 30, 2017.amount of data available upon initial assessment of the impact of soil or water contamination, changes in costs associated with environmental remediation services and equipment and the possibility of existing legal claims giving rise to additional claims.
Environmental Matters
Environmental liabilities related to the sites contributed to the Partnership in connection with our IPO have not been assigned to us and are still the responsibility of the Predecessor Entity. Under the Amended Omnibus Agreement, theThe Predecessor Entity must indemnifyindemnified us for any costs or expenses that it incurswe incur for environmental liabilities and third-party claims, regardless of when a claim is made, that are based on environmental conditions in existence prior to the closing of the IPO for contributed sites. The Predecessor Entity’sAs such, these environmental liabilities and indemnification assets associatedare not recorded on the consolidated balance sheet of the Partnership.
Similarly, we have generally been indemnified with contributedrespect to known contamination at sites amounted to $4.4 millionacquired from third parties. As such, these environmental liabilities and $2.8 million at September 30, 2017 and $6.1 million and $5.1 million at December 31, 2016, respectively.indemnification assets are also not recorded on the consolidated balance sheet of the Partnership.
11
CROSSAMERICA PARTNERS LP
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 10.12. FAIR VALUE MEASUREMENTS
General
We measure and report certain financial and non-financial assets and liabilities on a fair value basis. 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 (exit price). U.S. GAAP specifies a three-level hierarchy that is used when measuring and disclosing fair value. The fair value hierarchy gives the highest priority to quoted prices available in active markets (i.e., observable inputs) and the lowest priority to data lacking transparency (i.e., unobservable inputs). An instrument’s categorization within the fair value hierarchy is based on the lowest level of significant input to its valuation. The following is a description of the three hierarchy levels.
Level 1—Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. Active markets are considered to be those in which transactions for the assets or liabilities occur in sufficient frequency and volume to provide pricing information on an ongoing basis.
Level 2—Quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability. This category includes quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in inactive markets.
Level 3—Unobservable inputs are not corroborated by market data. This category is comprised of financial and non-financial assets and liabilities whose fair value is estimated based on internally developed models or methodologies using significant inputs that are generally less readily observable from objective sources.
Transfers into or out of any hierarchy level are recognized at the end of the reporting period in which the transfers occurred. There were no transfers between any levels in 20172024 or 2016.2023.
As further discussed in Note 11,8, we remeasure the fair value of interest rate swap contracts on a recurring basis each balance sheet date. We used an income approach to measure the fair value of these contracts, utilizing a forward yield curve for the same period as the future interest rate swap settlements. These fair value measurements are classified as Level 2 measurements.
We have accrued for unvested phantom units and vested and unvested profits interestsphantom performance units as a liability and adjust that liability on a recurring basis based on the market price of our common units each balance sheet date. SuchThese fair value measurements are deemed Level 1 measurements.
Financial Instruments
The fair value of our accounts receivable, notes receivable, and accounts payable approximated their carrying values as of September 30, 2017March 31, 2024 and 2016December 31, 2023 due to the short-term maturity of these instruments. The fair value of borrowings under the revolving credit facilityCAPL Credit Facility approximated its carrying values of $431.5 millionvalue as of September 30, 2017March 31, 2024 and $441.5 million as of December 31, 2016,2023 due to the frequency with which interest rates are reset and the consistency of the market spread.
Note 13. INCOME TAXES
Note 11. EQUITY-BASED COMPENSATION
Overview
As a limited partnership, we are not subject to federal and state income taxes. However, our corporate subsidiaries are subject to income taxes. Income tax attributable to our taxable income (including any dividend income from our corporate subsidiaries), which may differ significantly from income for financial statement purposes, is assessed at the individual limited partner unitholder level. We record equity-based compensationare subject to a statutory requirement that non-qualifying income, as defined by the Internal Revenue Code, cannot exceed 10% of total gross income for the calendar year. If non-qualifying income exceeds this statutory limit, we would be taxed as a componentcorporation. The non-qualifying income did not exceed the statutory limit in any annual period.
Certain activities that generate non-qualifying income are conducted through our wholly owned taxable corporate subsidiaries. Current and deferred income taxes are recognized on the earnings of generalthese subsidiaries. Deferred income tax assets and administrative expenses inliabilities are recognized for the statementsfuture tax consequences attributable to temporary differences between the financial statement carrying amounts of operations. Compensation expense was $0.2existing assets and liabilities and their respective tax bases and are measured using enacted tax rates.
12
CROSSAMERICA PARTNERS LP
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
We recorded an income tax benefit of $5.8 million and $0.7$1.7 million for the three months ended September 30, 2017March 31, 2024 and 2016, and $1.9 million and $2.6 million for the nine months ended September 30, 2017 and 2016, respectively.
Partnership Equity-Based Awards
Under the Plan, the Partnership granted 1,233 phantom units in June 2017 to an employee of CST who provides services to the Partnership; such phantom units will vest in equal annual installments on the first, second and third anniversaries2023, respectively, as a result of the date of grantlosses incurred by our corporate subsidiaries. The effective tax rate differs from the combined federal and this award was accompanied by tandem distribution equivalent rights that entitle the holder to cash payments equal to the amount of unit distributions authorized to be paid to the holders of our common units
Since we grant awards to employees of CST who provide services to us under the Amended Omnibus Agreement,state statutory rate primarily because only LGWS and since the grants may be settled in cash, unvested phantom units and vested and unvested profits interests receive fair value variable accounting treatment. As such, theyJoe’s Kwik Marts are measured at fair value at each balance sheet reporting date and the cumulative compensation cost recognized is classified as a liability, which is included in accrued expenses and other current liabilities on the consolidated balance sheet. The balance of the accrual at September 30, 2017 and December 31, 2016 totaled $0.8 million and $1.8 million, respectively.
12
CROSSAMERICA PARTNERS LP
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CST granted equity-based awards of approximately 47,000 and 102,000 in the form of time vested restricted stock units of CST, stock options of CST and market share units of CST for the nine months ended September 30, 2017 and 2016, respectively, which were granted to certain employees of CST for services rendered on our behalf. Expense associated with these awards that was charged to us under the Amended Omnibus Agreement was $0.1 million and $0.3 million for the three months ended September 30, 2017 and 2016 and $1.6 million and $1.3 million for the nine months ended September 30, 2017 and 2016, respectively.
At the completion of the Merger, each CST stock option, restricted stock unit and market share unit that was outstanding immediately prior to the completion of the Merger, excluding the CST restricted stock units granted in February 2017, whether vested or unvested, became fully vested and converted into the right to receive a cash payment as defined in the Merger Agreement. The Partnership was allocated a $0.4 million charge upon the accelerated vesting of these awards, included in the expense amounts for the nine months ended September 30, 2017 set forth above.
At the completion of the Merger, each award of CST restricted stock units that was granted in February 2017 converted into the right to receive a cash payment as defined in the Merger Agreement, but such award will remain subject to the same vesting terms and payment schedule as those set forth in the original restricted stock unit award agreement; provided that such award will vest in full upon an involuntary termination of employment without cause, or termination for “Good Reason,” or termination due to death, “Disability” or “Retirement.” Unrecognized compensation expense associated with CST restricted stock units granted in February 2017 amounted to $0.7 million as of September 30, 2017, which will be recognized over the vesting term through January 2020.income tax.
Awards to Members of the Board
In November 2016, the Partnership granted 5,364 phantom units to non-employee directors of the Board as a portion of director compensation. Such awards vested upon the Merger.
In August 2017, the Partnership granted 10,539 phantom units to non-employee directors of the Board as a portion of director compensation. Such awards vest over one year and this award was accompanied by tandem distribution equivalent rights that entitle the holder to cash payments equal to the amount of unit distributions authorized to be paid to the holders of our common units.
The liability for these awards at September 30, 2017 and December 31, 2016 was not significant. The associated compensation expense was not significant for the three months ended September 30, 2017 and 2016 and $0.2 million for the nine months ended September 30, 2017 and 2016.
Note 12.14. NET INCOME PER LIMITED PARTNERCOMMON UNIT
In addition to the common units, we have identified the IDRs as participating securities and compute income per unit using the two-class method under which any excess of distributions declared over net income shall be allocated to the partners based on their respective sharing of income as specified in the Partnership Agreement. Net income per unit applicable to limited partners is computed by dividing the limited partners’ interest in net income (loss), after deducting the IDRs, by the weighted-average number of outstanding common units.
13
CROSSAMERICA PARTNERS LP
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following tables providetable provides a reconciliation of net income (loss) and weighted-average units used in computing basic and diluted net income (loss) per limited partnercommon unit for the following periods (in thousands, except unit and per unit amounts):
|
| Three Months Ended March 31, |
| |||||
|
| 2024 |
|
| 2023 |
| ||
Numerator: |
|
|
|
|
|
| ||
Distributions paid on common units |
| $ | 19,941 |
|
| $ | 19,974 |
|
Allocation of distributions in excess of net income |
|
| (38,138 | ) |
|
| (21,554 | ) |
Limited partners’ interest in net loss - basic and diluted |
|
| (18,197 | ) |
|
| (1,580 | ) |
Denominator: |
|
|
|
|
|
| ||
Weighted-average common units outstanding - basic |
|
| 37,994,285 |
|
|
| 37,940,332 |
|
Adjustment for phantom and phantom performance units (a) |
|
| — |
|
|
| — |
|
Weighted-average common units outstanding - diluted |
|
| 37,994,285 |
|
|
| 37,940,332 |
|
Net loss per common unit - basic |
| $ | (0.48 | ) |
| $ | (0.04 | ) |
Net loss per common unit - diluted |
| $ | (0.48 | ) |
| $ | (0.04 | ) |
|
|
|
|
|
|
| ||
Distributions paid per common unit |
| $ | 0.5250 |
|
| $ | 0.5250 |
|
Distributions declared (with respect to each respective period) per common unit |
| $ | 0.5250 |
|
| $ | 0.5250 |
|
|
| For the Three Months Ended September 30, |
| |||||||||||||
|
| 2017 |
|
| 2016 |
| ||||||||||
|
| Common Units |
|
| Subordinated Units |
|
| Common Units |
|
| Subordinated Units |
| ||||
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distributions paid(a) |
| $ | 21,079 |
|
| $ | — |
|
| $ | 20,125 |
|
| $ | — |
|
Allocation of distributions in excess of net income(b) |
|
| (17,861 | ) |
|
| — |
|
|
| (18,013 | ) |
|
| — |
|
Limited partners’ interest in net income - basic and diluted |
| $ | 3,218 |
|
| $ | — |
|
| $ | 2,112 |
|
| $ | — |
|
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average limited partnership units outstanding - basic |
|
| 33,931,056 |
|
|
| — |
|
|
| 33,366,380 |
|
|
| — |
|
Adjustment for phantom units |
|
| 6,646 |
|
|
| — |
|
|
| 24,716 |
|
|
| — |
|
Weighted average limited partnership units outstanding - diluted |
|
| 33,937,702 |
|
|
| — |
|
|
| 33,391,096 |
|
|
| — |
|
Net income per limited partnership unit - basic |
| $ | 0.09 |
|
| $ | — |
|
| $ | 0.06 |
|
| $ | — |
|
Net income per limited partnership unit - diluted |
| $ | 0.09 |
|
| $ | — |
|
| $ | 0.06 |
|
| $ | — |
|
For the three months ended March 31, 2023, 168,695 potentially dilutive units related to the phantom units and phantom performance units and 1,125,769 potentially dilutive units related to the preferred membership interests were excluded from the calculation of diluted earnings per unit because including them would have been antidilutive.
Distributions
|
| For the Nine Months Ended September 30, |
| |||||||||||||
|
| 2017 |
|
| 2016 |
| ||||||||||
|
| Common Units |
|
| Subordinated Units |
|
| Common Units |
|
| Subordinated Units |
| ||||
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distributions paid(a) |
| $ | 62,439 |
|
| $ | — |
|
| $ | 55,194 |
|
| $ | 4,459 |
|
Allocation of distributions in excess of net income (loss)(b) |
|
| (63,565 | ) |
|
| — |
|
|
| (49,542 | ) |
|
| (4,185 | ) |
Limited partners’ interest in net income (loss) - basic and diluted |
| $ | (1,126 | ) |
| $ | — |
|
| $ | 5,652 |
|
| $ | 274 |
|
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average limited partnership units outstanding - basic |
|
| 33,773,964 |
|
|
| — |
|
|
| 31,714,462 |
|
|
| 1,537,956 |
|
Adjustment for phantom units |
|
| — |
|
|
| — |
|
|
| 52,340 |
|
|
| — |
|
Weighted average limited partnership units outstanding - diluted(c) |
|
| 33,773,964 |
|
|
| — |
|
|
| 31,766,802 |
|
|
| 1,537,956 |
|
Net income (loss) per limited partnership unit - basic |
| $ | (0.03 | ) |
| $ | — |
|
| $ | 0.18 |
|
| $ | 0.18 |
|
Net income (loss) per limited partnership unit - diluted |
| $ | (0.03 | ) |
| $ | — |
|
| $ | 0.18 |
|
| $ | 0.18 |
|
|
|
|
|
|
|
Distributions
Distribution activity for 2017 was2024 is as follows:
Quarter Ended |
| Record Date |
| Payment Date |
| Cash |
|
| Cash |
| ||
December 31, 2023 |
| February 2, 2024 |
| February 9, 2024 |
| $ | 0.5250 |
|
| $ | 19,941 |
|
March 31, 2024 |
| May 3, 2024 |
| May 10, 2024 |
|
| 0.5250 |
|
|
| 19,964 |
|
Quarter Ended |
| Record Date |
| Payment Date |
| Cash Distribution (per unit) |
|
| Cash Distribution (in thousands) |
| ||
December 31, 2016 |
| February 6, 2017 |
| February 13, 2017 |
| $ | 0.6125 |
|
| $ | 20,534 |
|
March 31, 2017 |
| May 8, 2017 |
| May 15, 2017 |
| $ | 0.6175 |
|
| $ | 20,826 |
|
June 30, 2017 |
| August 7, 2017 |
| August 14, 2017 |
| $ | 0.6225 |
|
| $ | 21,079 |
|
September 30, 2017 |
| November 6, 2017 |
| November 13, 2017 |
| $ | 0.6275 |
|
| $ | 21,326 |
|
14
CROSSAMERICA PARTNERS LP
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The amount of any distribution is subject to the discretion of the Board, which may modify or revoke our cash distribution policy at any time. Our Partnership Agreement does not require us to pay any distributions. As such, there can be no assurance we will continue to pay distributions in the future.
Note 13. INCOME TAXES
As a limited partnership, we are not subject to federal and state income taxes, however our corporate subsidiaries are subject to income taxes. Income tax attributable to our taxable income, which may differ significantly from income for financial statement purposes, is assessed at the individual limited partner unit holder level. We are subject to a statutory requirement that non-qualifying income, as defined by the Internal Revenue Code, cannot exceed 10% of total gross income for the calendar year. If non-qualifying income exceeds this statutory limit, we would be taxed as a corporation. The non-qualifying income did not exceed the statutory limit in any period presented.
Certain activities that generate non-qualifying income are conducted through LGWS. LGWS is a tax paying corporate subsidiary of ours that is subject to federal and state income taxes. Current and deferred income taxes are recognized on the earnings of LGWS. Deferred income tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and are measured using enacted tax rates.
We recorded income tax expense of $1.0 million and $1.3 million for the three months ended September 30, 2017 and 2016 and an income tax benefit of $1.7 million and income tax expense of $0.9 million for the nine months ended September 30, 2017 and 2016, respectively, as a result of the income generated or losses incurred by our corporate subsidiaries. The effective tax rate differs from the combined federal and state statutory rate primarily because only LGWS is subject to income tax.
Note 14.15. SEGMENT REPORTING
We conduct our business in two segments: 1) the Wholesalewholesale segment and 2) the Retailretail segment.
The wholesale segment includes the wholesale distribution of motor fuel to lessee dealers and independent dealers, commission agents, DMS, CST and company operated retail sites.dealers. We have exclusive motor fuel distribution contracts with lessee dealers who lease the property from us. We also have exclusive distribution contracts with independent dealers to distribute motor fuel but do not collect rent from the independent dealers. Similar to lessee dealers, we have motor fuel distribution agreements with DMS and CST and collect rent from both.
13
CROSSAMERICA PARTNERS LP
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Retailretail segment includes the sale of convenience merchandise items, the retail sale of motor fuel at company operated retail sites and the retail sale of motor fuel at retail sites operated by commission agents.agents and the sale of convenience merchandise items and the retail sale of motor fuel at company operated sites. A commission agent site is a retail site where we retain title to the motor fuel inventory and sell it directly to our end user customers. At commission agent retail sites, we manage motor fuel inventory pricing and retain the gross profit on motor fuel sales, less a commission to the agent who operates the retail site. Similar to our Wholesalewholesale segment, we also generate revenues through leasing or subleasing real estate in our Retailretail segment.
As part of our evaluation of the economic performance of our retail sites, we will from time to time convert company owned retail sites from our Retail segment to lessee dealers in our Wholesale segment. As a result, we no longer generate revenues from the retail sale of motor fuel or merchandise at these stores subsequent to the date of conversion and we no longer incur retail operating expenses related to these retail sites. However, we continue to supply these retail sites with motor fuel on a wholesale basis pursuant to the fuel supply contract with the lessee dealer. Further, we continue to own/lease the property and earn rental income under lease/sublease agreements with the lessee dealers under triple net leases. The lessee dealer owns all motor fuel and convenience merchandise and retains all gross profit on such operating activities.
Unallocated items consist primarily of general and administrative expenses, depreciation, amortization and accretion expense, gains on sales of assets,dispositions and lease terminations, net, other income, interest expense and the elimination of the Retail segment’s intersegment cost of revenues from motor fuel sales against the Wholesale segment’s intersegment revenues from motor fuel sales. The profit in ending inventory generated by the intersegment motor fuel sales is also eliminated.income tax expense. Total assets by segment are not presented as management does not currently assess performance or allocate resources based on that data.
15During the three months ended March 31, 2024 and 2023, respectively, we converted 53 and eight sites from lessee dealer sites in the wholesale segment to company operated or commission sites in the retail segment. The sites converted during the first quarter of 2024 include 31 sites from the Applegreen Acquisition. See Note 2 for additional information.
CROSSAMERICA PARTNERS LP
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table reflects activity related to our reportable segments (in thousands):
|
| Wholesale |
|
| Retail |
|
| Unallocated |
|
| Consolidated |
| ||||
Three Months Ended March 31, 2024 |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Revenues from fuel sales to external customers |
| $ | 450,579 |
|
| $ | 389,852 |
|
| $ | — |
|
| $ | 840,431 |
|
Revenues from food and merchandise sales |
|
| — |
|
|
| 76,432 |
|
|
| — |
|
|
| 76,432 |
|
Rent income |
|
| 15,979 |
|
|
| 3,187 |
|
|
| — |
|
|
| 19,166 |
|
Other revenue |
|
| 920 |
|
|
| 4,599 |
|
|
| — |
|
|
| 5,519 |
|
Total revenues |
| $ | 467,478 |
|
| $ | 474,070 |
|
| $ | — |
|
| $ | 941,548 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Operating income (loss) |
| $ | 18,065 |
|
| $ | 11,255 |
|
| $ | (42,365 | ) |
| $ | (13,045 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Three Months Ended March 31, 2023 |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Revenues from fuel sales to external customers |
| $ | 521,925 |
|
| $ | 402,946 |
|
| $ | — |
|
| $ | 924,871 |
|
Revenues from food and merchandise sales |
|
| — |
|
|
| 65,266 |
|
|
| — |
|
|
| 65,266 |
|
Rent income |
|
| 17,956 |
|
|
| 3,364 |
|
|
| — |
|
|
| 21,320 |
|
Other revenue |
|
| 1,247 |
|
|
| 3,455 |
|
|
| — |
|
|
| 4,702 |
|
Total revenues |
| $ | 541,128 |
|
| $ | 475,031 |
|
| $ | — |
|
| $ | 1,016,159 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Operating income (loss) |
| $ | 21,669 |
|
| $ | 14,767 |
|
| $ | (27,326 | ) |
| $ | 9,110 |
|
|
| Wholesale |
|
| Retail |
|
| Unallocated |
|
| Consolidated |
| ||||
Three Months Ended September 30, 2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues from fuel sales to external customers |
| $ | 400,296 |
|
| $ | 93,285 |
|
| $ | — |
|
| $ | 493,581 |
|
Intersegment revenues from fuel sales |
|
| 69,504 |
|
|
| — |
|
|
| (69,504 | ) |
|
| — |
|
Revenues from food and merchandise sales |
|
| — |
|
|
| 28,366 |
|
|
| — |
|
|
| 28,366 |
|
Rent income |
|
| 20,008 |
|
|
| 1,636 |
|
|
| — |
|
|
| 21,644 |
|
Other revenue |
|
| 501 |
|
|
| — |
|
|
| — |
|
|
| 501 |
|
Total revenues |
| $ | 490,309 |
|
| $ | 123,287 |
|
| $ | (69,504 | ) |
| $ | 544,092 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from CST Fuel Supply Equity |
| $ | 3,752 |
|
| $ | — |
|
| $ | — |
|
| $ | 3,752 |
|
Operating income (loss) |
| $ | 27,533 |
|
| $ | 2,409 |
|
| $ | (17,658 | ) |
| $ | 12,284 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, 2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues from fuel sales to external customers |
| $ | 348,702 |
|
| $ | 87,318 |
|
| $ | — |
|
| $ | 436,020 |
|
Intersegment revenues from fuel sales |
|
| 63,126 |
|
|
| — |
|
|
| (63,126) |
|
|
| — |
|
Revenues from food and merchandise sales |
|
| — |
|
|
| 31,507 |
|
|
| — |
|
|
| 31,507 |
|
Rent income |
|
| 18,344 |
|
|
| 1,408 |
|
|
| — |
|
|
| 19,752 |
|
Other revenue |
|
| 671 |
|
|
| — |
|
|
| — |
|
|
| 671 |
|
Total revenues |
| $ | 430,843 |
|
| $ | 120,233 |
|
| $ | (63,126 | ) |
| $ | 487,950 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from CST Fuel Supply Equity |
| $ | 4,022 |
|
| $ | — |
|
| $ | — |
|
| $ | 4,022 |
|
Operating income (loss) |
| $ | 27,030 |
|
| $ | 1,893 |
|
| $ | (18,930 | ) |
| $ | 9,993 |
|
Receivables relating to the revenue streams above are as follows (in thousands):
|
| March 31, |
|
| December 31, |
| ||
|
| 2024 |
|
| 2023 |
| ||
Receivables from fuel and merchandise sales |
| $ | 32,853 |
|
| $ | 28,467 |
|
Receivables for rent and other lease-related charges |
|
| 3,255 |
|
|
| 3,155 |
|
Total accounts receivable |
| $ | 36,108 |
|
| $ | 31,622 |
|
|
| Wholesale |
|
| Retail |
|
| Unallocated |
|
| Consolidated |
| ||||
Nine Months Ended September 30, 2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues from fuel sales to external customers |
| $ | 1,122,903 |
|
| $ | 272,289 |
|
| $ | — |
|
| $ | 1,395,192 |
|
Intersegment revenues from fuel sales |
|
| 200,147 |
|
|
| — |
|
|
| (200,147 | ) |
|
| — |
|
Revenues from food and merchandise sales |
|
|
|
|
|
| 80,077 |
|
|
| — |
|
|
| 80,077 |
|
Rent income |
|
| 60,008 |
|
|
| 5,082 |
|
|
| — |
|
|
| 65,090 |
|
Other revenue |
|
| 1,808 |
|
|
| — |
|
|
| — |
|
|
| 1,808 |
|
Total revenues |
| $ | 1,384,866 |
|
| $ | 357,448 |
|
| $ | (200,147 | ) |
| $ | 1,542,167 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from CST Fuel Supply Equity |
| $ | 11,185 |
|
| $ | — |
|
| $ | — |
|
| $ | 11,185 |
|
Operating income (loss) |
| $ | 80,863 |
|
| $ | 4,092 |
|
| $ | (64,373 | ) |
| $ | 20,582 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues from fuel sales to external customers |
| $ | 958,943 |
|
| $ | 253,057 |
|
| $ | — |
|
| $ | 1,212,000 |
|
Intersegment revenues from fuel sales |
|
| 178,772 |
|
|
| — |
|
|
| (178,772) |
|
|
| — |
|
Revenues from food and merchandise sales |
|
| — |
|
|
| 95,253 |
|
|
| — |
|
|
| 95,253 |
|
Rent income |
|
| 55,540 |
|
|
| 4,094 |
|
|
| — |
|
|
| 59,634 |
|
Other revenue |
|
| 1,447 |
|
|
| — |
|
|
| — |
|
|
| 1,447 |
|
Total revenues |
| $ | 1,194,702 |
|
| $ | 352,404 |
|
| $ | (178,772 | ) |
| $ | 1,368,334 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from CST Fuel Supply Equity |
| $ | 12,318 |
|
| $ | — |
|
| $ | — |
|
|
| 12,318 |
|
Operating income (loss) |
| $ | 76,971 |
|
| $ | 6,291 |
|
| $ | (57,992 | ) |
| $ | 25,270 |
|
Performance obligations are satisfied as fuel is delivered to the customer and as merchandise is sold to the consumer. Many of our fuel contracts with our customers include minimum purchase volumes measured on a monthly basis, although revenue from such shortfalls is not material. Receivables from fuel are recognized on a per-gallon rate and are generally collected within 10 days of delivery.
16The balance of unamortized costs incurred to obtain certain contracts with customers was $9.4 million and $10.0 million at March 31, 2024 and December 31, 2023, respectively. Amortization of such costs is recorded against operating revenues and amounted to $0.5 million and $0.4 million for the three months ended March 31, 2024 and 2023, respectively.
Receivables from rent and other lease-related charges are generally collected at the beginning of the month.
14
CROSSAMERICA PARTNERS LP
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 15.16. SUPPLEMENTAL CASH FLOW INFORMATION
In order to determine net cash provided by operating activities, net income is adjusted by, among other things, changes in currentoperating assets and current liabilities as follows (in thousands):
|
| Three Months Ended March 31, |
| |||||
|
| 2024 |
|
| 2023 |
| ||
(Increase) decrease: |
|
|
|
|
|
| ||
Accounts receivable |
| $ | (3,902 | ) |
| $ | 2,220 |
|
Accounts receivable from related parties |
|
| (584 | ) |
|
| 219 |
|
Inventories |
|
| (1,589 | ) |
|
| (604 | ) |
Other current assets |
|
| (423 | ) |
|
| (2,775 | ) |
Other assets |
|
| (885 | ) |
|
| 574 |
|
Increase (decrease): |
|
|
|
|
|
| ||
Accounts payable |
|
| 2,434 |
|
|
| (7,503 | ) |
Accounts payable to related parties |
|
| (3,131 | ) |
|
| (2,013 | ) |
Accrued expenses and other current liabilities |
|
| 987 |
|
|
| (297 | ) |
Motor fuel and taxes payable |
|
| (1,619 | ) |
|
| (342 | ) |
Other long-term liabilities |
|
| 1,785 |
|
|
| 1,061 |
|
Changes in operating assets and liabilities, net of acquisitions |
| $ | (6,927 | ) |
| $ | (9,460 | ) |
|
| For the Nine Months Ended September 30, |
| |||||
|
| 2017 |
|
| 2016 |
| ||
Decrease (increase): |
|
|
|
|
|
|
|
|
Accounts receivable |
| $ | 5,183 |
|
| $ | 941 |
|
Accounts receivable from related parties |
|
| (1,492 | ) |
|
| (2,281 | ) |
Inventories |
|
| 674 |
|
|
| 5,515 |
|
Other current assets |
|
| 166 |
|
|
| (1,249 | ) |
Other assets |
|
| (2,509 | ) |
|
| (3,484 | ) |
Increase (decrease): |
|
|
|
|
|
|
|
|
Accounts payable |
|
| 2,882 |
|
|
| 2,055 |
|
Accounts payable to related parties |
|
| 5,576 |
|
|
| (1,021 | ) |
Motor fuel taxes payable |
|
| (386 | ) |
|
| 1,117 |
|
Accrued expenses and other current liabilities |
|
| 3,270 |
|
|
| (1,644) |
|
Other long-term liabilities |
|
| 178 |
|
|
| 3,339 |
|
Changes in working capital, net of acquisitions |
| $ | 13,542 |
|
| $ | 3,288 |
|
The above changes in currentoperating assets and current liabilities may differ from changes between amounts reflected in the applicable balance sheets for the respective periods due to acquisitions.acquisitions and other non-cash activity.
Supplemental disclosure of cash flow information (in thousands):
|
| Three Months Ended March 31, |
| |||||
|
| 2024 |
|
| 2023 |
| ||
Cash paid for interest |
| $ | 9,925 |
|
| $ | 11,875 |
|
Cash paid (refunded) for income taxes, net |
|
| (17 | ) |
|
| 560 |
|
|
| For the Nine Months Ended September 30, |
| |||||
|
| 2017 |
|
| 2016 |
| ||
Cash paid for interest |
| $ | 19,185 |
|
| $ | 15,355 |
|
Cash paid for income taxes, net of refunds received |
| $ | 822 |
|
| $ | 1,366 |
|
Supplemental schedule of non-cash investing and financing activities (in thousands):
|
| Three Months Ended March 31, |
| |||||
|
| 2024 |
|
| 2023 |
| ||
Accrued capital expenditures |
| $ | 1,269 |
|
| $ | 2,228 |
|
Lease liabilities arising from obtaining right-of-use assets |
|
| 4,823 |
|
|
| 2,972 |
|
Accretion of preferred membership interests |
|
| 657 |
|
|
| 601 |
|
|
| For the Nine Months Ended September 30, |
| |||||
|
| 2017 |
|
| 2016 |
| ||
Sale of property and equipment in Section 1031 like-kind exchange transactions |
| $ | 260 |
|
| $ | 1,300 |
|
Issuance of capital lease obligations and recognition of asset retirement obligation related to Getty lease |
| $ | 740 |
|
| $ | 1,240 |
|
Amended Omnibus Agreement fees settled in our common units |
| $ | 10,880 |
|
| $ | 8,290 |
|
15
17
CROSSAMERICA PARTNERS LP
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
During the nine months ended September 30, 2017, the Partnership recognized a $5.3 million charge for severance and benefit costs associated with certain officers and other employees of CST Services who provided services to the Partnership and who terminated employment upon the consummation of the Merger, which constituted a change in control, as defined in the EICP and CST’s severance plans. Such costs are included in general and administrative expenses and were paid by CST in the third quarter of 2017. Accounts payable to related parties includes these costs as we will reimburse CST.
In addition, certain participants in the EICP received retention bonuses that will be paid in annual installments that began in July 2017 and will continue through July 2019. The Partnership recorded a $1.0 million charge during the nine months ended September 30, 2017 in connection with the payments made by CST in July 2017, which were included in general and administrative expenses. In addition, the Partnership recognized a $0.3 million charge for the three and nine months ended September 30, 2017 for the payments expected to be made in July 2018 and July 2019. The Partnership anticipates recognizing future charges totaling $1.2 million over the remaining retention period, of which $0.3 million, $0.8 million and $0.1 million is anticipated to be recognized in 2017, 2018 and 2019, respectively.
18
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OFOF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This quarterly report includes forward-looking statements including inwithin the section entitled “Management’s Discussionmeaning of the Private Securities Litigation Reform Act of 1995 that involve risks and Analysis of Financial Condition and Results of Operations.”uncertainties. Forward-looking statements include the information concerning our possible or assumed future results of operations, business strategies, financing plans, competitive position, credit ratings, distribution growth, potential growth opportunities, potential operating performance improvements, potential improvements in return on capital employed, the effects of competition and the effects of future legislation or regulations. You can identify our forward-looking statements by the words “anticipate,” “estimate,” “believe,” “continue,” “could,” “intend,” “may,” “plan,” “potential,” “predict,” “seek,” “should,” “will,” “would,” “expect,” “objective,” “projection,” “forecast,” “guidance,” “outlook,” “effort,” “target” and similar expressions. Such statements are based on management’sour current viewsplans and assumptions,expectations and involve risks and uncertainties that could potentially affect expectedactual results. These forward-looking statements include, among other things, statements regarding:
future retail and wholesale gross profits, including gasoline, diesel and convenience store merchandise gross profits;
our anticipated level of capital investments, primarilyincluding through acquisitions, and the effect of these capital investments on our results of operations;
anticipated trends in the demand for, and volumes sold of, gasoline and diesel in the regions where we operate;
volatility in the equity and credit markets limiting access to capital markets;
our ability to integrate acquired businesses and to transition retail sites to dealer operated sites;
expectations regarding environmental, tax and other regulatory initiatives; and
the effect of general economic and other conditions on our business.
In general, we based the forward-looking statements included in this quarterly report on our current expectations, estimates and projections about our company and the industry in which we operate. We caution you that these statements are not guarantees of future performance as they involve assumptions that, while made in good faith, may prove to be incorrect, and involve risks and uncertainties we cannot predict. We anticipate that subsequent events and market developments will cause our estimates to change. In addition, we based many of these forward-looking statements on assumptions about future events that may prove to be inaccurate. Accordingly, our actual outcomes and results may differ materially from what we have expressed or forecasted in the forward-looking statements. Any differences could result from a variety of factors, including the following:
Couche-Tard’sthe Topper Group’s business strategy and operations and Couche-Tard’sthe Topper Group’s conflicts of interest with us;
availability of cash flow to pay the current quarterly distributions on our common units;
the availability and cost of competing motor fuels;
motor fuel price volatility, including as a result of the conflict in Ukraine or the war between Israel and Hamas;
competition in the industries and geographical areas in which we operate;
the consummation of financing, acquisition or disposition transactions and the effect thereof on our business;
environmental compliance and remediation costs;
our liquidity, results of operations and financial condition;
failure to comply with applicable tax and other regulations or governmental policies;
future legislation and changes in regulations, governmental policies, immigration laws and restrictions or changes in enforcement or interpretations thereof;
future regulations and actions that could expand the non-exempt status of employees under the Fair Labor Standards Act;
future income tax legislation;
changes in energy policy;
16
increases in energy conservation efforts;
technological advances;
19
the impact of wars and acts of terrorism;
weather conditions or catastrophic weather-related damage;
earthquakes and other natural disasters;
hazards and risks associated with transporting and storing motor fuel;
unexpected environmental liabilities;
the outcome of pending or future litigation; and
our ability to comply with federal and state laws and regulations, including those related to environmental matters, the sale of alcohol, cigarettes and fresh foods, employment and health benefits including the Affordable Care Act.
You should consider the areas of riskrisks and uncertainties described above and elsewhere in this report as well as those set forth herein and in the section entitled “Risk Factors” included in our Form 10-K in connection with considering any forward-looking statements that may be made by us and our businesses generally. We cannot assure you that projectedanticipated results or events reflected in the forward-looking statements will be achieved or will occur. The forward-looking statements included in this report are made as of the date of this report. We undertake no obligation to publicly release any revisions to any forward-looking statements, to report events or to report the occurrence of unanticipated events after the date of this report, except as required by law.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following MD&A is intended to help the reader understand our results of operations and financial condition. This section is provided as a supplement to, and should be read in conjunction with, our consolidated financial statements and the accompanying notes to these financial statements contained elsewhere in this report, and the MD&A section and the consolidated financial statements and accompanying notes to those financial statements in our Form 10-K. Our Form 10-K contains a discussion of other matters not included herein, such as disclosures regarding critical accounting policies and estimates and contractual obligations.
MD&A is organized as follows:
CST’s MergerRecent Developments—This section provides information on the Merger.
Significant Factors Affecting Our Profitability—This section describes the most significant impact onfactors impacting our results of operations caused by crude oil commodity price volatility, seasonality and acquisition and financing activities.
Results of Operations—This section provides an analysis of our results of operations including the results of operationson a consolidated basis and for each of our business segments for the three and nine months ended September 30, 2017 and 2016 andas well as a discussion of non-GAAP financial measures.
Liquidity and Capital Resources—This section provides a discussion of our financial condition and cash flows. It also includes a discussion of our debt, capital requirements, other matters impacting our liquidity and capital resources and an outlook for our business.
New Accounting Policies—This section describes new accounting pronouncements that we have already adopted, those that we are required to adopt in the future and those that became applicable in the current year as a result of new circumstances.
Critical Accounting Policies Involving Critical Accountingand Estimates—This section describes the accounting policies and estimates that we consider most important for our business and that require significant judgment.
17
CST’s MergerRecent Developments
CSTApplegreen Acquisition and Lease Termination
On January 26, 2024, we entered into an agreement (the “Applegreen Purchase Agreement”) to acquire certain assets from Applegreen Midwest, LLC and Applegreen Florida, LLC (collectively, the Merger Agreement dated as of August 21, 2016, with Circle K and Merger Sub. On June 28, 2017, Merger Sub merged with and into CST, at which time“Sellers”) (the “Applegreen Acquisition”). The assets were acquired via the separate corporate existence of Merger Sub ceased, and CST survived the Merger as an indirect, wholly owned subsidiary of Circle K.
As a resulttermination of the Merger, Circle K indirectly owns allPartnership’s existing lease agreements with the Sellers at 59 locations, for total consideration of $16.9 million. The transaction closed on a rolling basis by site beginning in the first quarter of 2024 and ending in April 2024. The Partnership also acquired for cash the inventory at the locations. The terms of the membership interests in our General Partner,Partnership’s leases with Applegreen Midwest, LLC and Applegreen Florida, LLC could have been extended to 2049 and 2048, respectively, including all renewal options. The Applegreen Purchase Agreement contains customary representations and warranties of the parties as well as a 20.8% limited partner interestindemnification obligations by the Sellers and the Partnership, respectively, to each other.
Of the 59 locations, 31 locations converted during the first quarter of 2024 and the remaining locations converted in April 2024. This transaction resulted in the Partnershiptransition of these lessee dealer sites to company operated sites.
During the first quarter of 2024, we paid $19.9 million of cash and allaccrued an additional $1.2 million of cash paid in April 2024. In addition, we recorded a non-cash write-off of deferred rent income of $1.4 million during the IDRsfirst quarter of 2024. See Note 2 to the Partnership. Circle K, through its indirect ownership interestfinancial statements for additional information.
Amendment of CAPL Credit Facility
On February 20, 2024, in connection with our Applegreen Acquisition, we entered into an amendment (the “Amendment”) to the CAPL Credit Facility. The Amendment, among other things, modified the definition of Consolidated EBITDA contained in the sole memberCredit Agreement to permit the full addback of our General Partner, hascertain lease termination expenses incurred in connection with the abilityApplegreen Acquisition and the addback of other lease termination expenses incurred in connection with future transactions, subject to appoint all of the members of the Board of our General Partnercertain terms and to control and manage the operations and activities of the Partnership. conditions.
20
Significant Factors Affecting our Profitability
The Significance of Crude Oil and Wholesale Motor Fuel Prices on Our Revenues, Cost of Sales and Gross Profit
Wholesale segment
The prices paid to our motor fuel suppliers for wholesale motor fuel (which affects our cost of sales) are highly correlated to the price of crude oil. The crude oil commodity markets are highly volatile, and the market prices of crude oil, and, correspondingly, the market prices of wholesale motor fuel, experience significant and rapid fluctuations. We receive a fixed mark-up per gallon onFor approximately 87%58% of gallons sold, we receive a per gallon rate equal to our customers.the posted rack price, less any applicable discounts, plus transportation costs, taxes and a fixed rate per gallon of motor fuel. The remaining gallons are primarilyeither retail sales or wholesale DTW priced contracts with our customers. These contractsthat provide for variable, market based pricing that results in motor fuel gross profit effects similar to retail motor fuel gross profits (as crude oil prices decline, motor fuel gross profit generally increases, as discussed in our Retail segment below). The increase in DTW gross profit results from the acquisition cost of wholesale motor fuel declining at a faster rate as compared to the rate retail motor fuel prices decline. Conversely, our DTW motor fuel gross profit declines when the cost of wholesale motor fuel increases at a faster rate as compared to the rate retail motor fuel prices increase.market-based pricing.
Regarding our supplier relationships, a majoritymaterial amount of our total gallons purchased are subject to Terms Discounts.prompt payment discounts. The dollar value of these discounts increases and decreases corresponding tovaries with changes in motor fuel prices. Therefore, in periods of lower wholesale motor fuel prices, our gross profit is negatively affected, and, in periods of higher wholesale motor fuel prices, our gross profit is positively affected (as it relates to these discounts).
Retail segment
WeIn our retail business, we attempt to pass along wholesale motor fuel price changes to our retail customers through “at the pump” retail price changes; however, market conditions do not always allow us to do so immediately. The timing of any related increase or decrease in “at the pump” retail prices is affected by competitive conditions in each geographic market in which we operate. As such, the prices we charge our customers for motor fuel and the gross profit we receive on our motor fuel sales can increase or decrease significantly and rapidly over short periods of time.
Changes in our average motor fuel selling price per gallon and gross margin for the periods ended September 30, 2017 and 2016 are directly related to the changes in crude oil and wholesale motor fuel prices over the same period.prices. Variations in our reported revenues and cost of sales are, therefore, primarily related to the price of crude oil and wholesale motor fuel prices and generally not as a result of changes in motor fuel sales volumes, unless otherwise indicated and discussed below.
We typically experience lower retail motor fuel gross profits in periods when the wholesale cost of motor fuel increases, and higher retail motor fuel gross profits in periods when the wholesale cost of motor fuel declines rapidly.18
Seasonality Effects on Volumes
Our business is subject to seasonality due to our wholesale and retail sites being located in certain geographic areas that are affected by seasonal weather and temperature trends and associated changes in retail customer activity during different seasons. Historically, sales volumes have been highest in the second and third quarters (during the summer months) and lowest during the winter months in the first and fourth quarters.
Impact of Inflation
Inflation affects our financial performance by increasing certain components of our operating expenses and cost of goods sold. Operatingsold, such as fuel, merchandise, and credit card fees. Inflation also affects certain operating expenses, includesuch as labor costs, certain leases, and general and administrative expenses. While our Wholesalewholesale segment benefits from higher Terms Discountsterms discounts as a result of higher fuel costs, inflation could and recently has negatively impactimpacted our Retail segment as a resultcost of higher motor fuel, merchandisegoods sold and operating costs.expenses. Although we have historically been able to pass on increased costs through price increases, there can be no assurance that we will be able to do so in the future.
21
Impact of Interest Rates
Given our interest rate swap contracts, our effective interest rate did not change significantly between the first quarter of 2023 and the first quarter of 2024. However, three of our most favorable interest rate swap contracts matured April 1, 2024. See Item 3 for additional information regarding the impact of the maturity of those interest rate swap contracts on our future interest expense.
Acquisition and Financing Activity
Our results of operations and financial condition are also impacted by our acquisition and financing activities as summarized below.
On February 5, 2016, we purchased independent dealer and sub-wholesaler contracts from CST for $2.9 million.
On March 29, 2016,31, 2023, we closed onamended and restated the acquisitionCAPL Credit Facility and terminated the JKM Credit Facility.
On September 27, 2016, we acquired the State Oil Assets located in the greater Chicago market for approximately $41.9 million, including working capital.
On December 21, 2016, we sold the real property at 17 fee sites acquired in the State Oil Assets acquisition for $25.0 million in proceeds, which were used to repay borrowings under the credit facility. We subsequently leased these sites back under a triple net lease agreement.
On September 6, 2017, we sold two properties as a result of the FTC’s requirements associated with the Merger for $6.7 million.
On September 27, 2017, as approved by the conflicts committee of our Board, we sold 28 properties to DMR for $16.6 million. These sites were generally sites at which we did not supply fuel or represented vacant land.
Separation Benefits and Retention Bonuses
During the nine months ended September 30, 2017, the Partnership recognized a $5.3 million charge for severance and benefit costs associated with certain officers and other employees of CST Services who provided services to the Partnership and who terminated employment upon the consummation of the Merger, which constituted a change in control, as defined in the EICP and CST’s severance plans. Such costs are included in general and administrative expenses and were paid by CST in the third quarter of 2017. Accounts payable to related parties includes these costs as we will reimburse CST.
In addition, certain participants in the EICP received retention bonuses that will be paid in annual installments that began in July 2017 and will continue through July 2019. The Partnership recorded a $1.0 million charge during the nine months ended September 30, 2017 in connection with the payments made by CST in July 2017, which were included in general and administrative expenses. In addition, the Partnership recognized a $0.3 million charge for the three and nine months ended September 30, 2017 the payments expected to be made in July 2018 and July 2019. The Partnership anticipates recognizing future charges totaling $1.2 million over the remaining retention period, of which $0.3 million, $0.8 million and $0.1 million is anticipated to be recognized in 2017, 2018 and 2019, respectively.
Acquisition of Jet-Pep Assets
On August 4, 2017, we entered into a definitive asset purchase agreement (the “Purchase Agreement”), by and among (i) CrossAmerica, (ii) Jet-Pep, Inc., and (iii) other persons listed as signatories in the Purchase Agreement (collectively the “Sellers”). Pursuant to the Purchase Agreement, we have agreed to purchase the real property and the fuel supply business of 92 fee simple sites, and the leasehold interest in 5 leased real property sites; and the fuel supply business to five independent dealers, all located in Alabama (“Acquired Assets”), for an aggregate cash consideration of $72.3 million (the “Purchase Price”), subject to certain closing adjustments. We also agreed to assume certain liabilities and pay for the value of the petroleum inventory contained in the retail sites. Circle K also entered into a definitive asset purchase agreement with the Sellers. The closing of the purchase of the Acquired Assets and the closing of the purchase by Circle K of certain related retail and terminaling assets from the Sellers (the “Circle K Agreements”), are mutually conditioned upon each other.
The closing of the transaction is expected to occur in the fourth quarter of 2017, and is subjectsegment. See Note 2 to the satisfaction or waiver of customary closing conditions. The Purchase Agreement contains customary representations, warranties, agreements and obligations of the parties, and termination and closing conditions. We and the Sellers have generally agreed to indemnify each otherfinancial statements for breaches of the representations, warranties and covenants contained in the Purchase Agreement, subject to survival period limitations and a general indemnification cap for the Sellers in the amount of $6.5 million in the aggregate for Sellers’ liabilities under the Purchase Agreement and the Circle K Agreements.
22
Consolidated Income Statement Analysis
Below is an analysis of our consolidated statements of operations and provides the primary reasons for significant increases and decreases in the various income statement line items from period to period. Our consolidated statements of operations are as follows (in thousands):
|
| Three Months Ended March 31, |
| |||||
|
| 2024 |
|
| 2023 |
| ||
Operating revenues |
| $ | 941,548 |
|
| $ | 1,016,159 |
|
Costs of sales |
|
| 860,200 |
|
|
| 934,100 |
|
Gross profit |
|
| 81,348 |
|
|
| 82,059 |
|
|
|
|
|
|
|
| ||
Operating expenses: |
|
|
|
|
|
| ||
Operating expenses |
|
| 52,028 |
|
|
| 45,623 |
|
General and administrative expenses |
|
| 6,838 |
|
|
| 5,739 |
|
Depreciation, amortization and accretion expense |
|
| 18,721 |
|
|
| 19,820 |
|
Total operating expenses |
|
| 77,587 |
|
|
| 71,182 |
|
Loss on dispositions and lease terminations, net |
|
| (16,806 | ) |
|
| (1,767 | ) |
Operating (loss) income |
|
| (13,045 | ) |
|
| 9,110 |
|
Other income, net |
|
| 249 |
|
|
| 261 |
|
Interest expense |
|
| (10,541 | ) |
|
| (12,012 | ) |
Loss before income taxes |
|
| (23,337 | ) |
|
| (2,641 | ) |
Income tax benefit |
|
| (5,797 | ) |
|
| (1,662 | ) |
Net loss |
|
| (17,540 | ) |
|
| (979 | ) |
Accretion of preferred membership interests |
|
| 657 |
|
|
| 601 |
|
Net loss available to limited partners |
| $ | (18,197 | ) |
| $ | (1,580 | ) |
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||
|
| 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
| ||||
Operating revenues |
| $ | 544,092 |
|
| $ | 487,950 |
|
| $ | 1,542,167 |
|
| $ | 1,368,334 |
|
Cost of sales |
|
| 502,517 |
|
|
| 448,812 |
|
|
| 1,421,524 |
|
|
| 1,251,491 |
|
Gross profit |
|
| 41,575 |
|
|
| 39,138 |
|
|
| 120,643 |
|
|
| 116,843 |
|
Income from CST Fuel Supply equity interests |
|
| 3,752 |
|
|
| 4,022 |
|
|
| 11,185 |
|
|
| 12,318 |
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses |
|
| 15,371 |
|
|
| 14,224 |
|
|
| 46,853 |
|
|
| 45,754 |
|
General and administrative expenses |
|
| 5,994 |
|
|
| 6,142 |
|
|
| 23,731 |
|
|
| 18,068 |
|
Depreciation, amortization and accretion expense |
|
| 14,049 |
|
|
| 13,432 |
|
|
| 42,675 |
|
|
| 40,594 |
|
Total operating expenses |
|
| 35,414 |
|
|
| 33,798 |
|
|
| 113,259 |
|
|
| 104,416 |
|
Gain on sales of assets, net |
|
| 2,371 |
|
|
| 631 |
|
|
| 2,013 |
|
|
| 525 |
|
Operating income |
|
| 12,284 |
|
|
| 9,993 |
|
|
| 20,582 |
|
|
| 25,270 |
|
Other income, net |
|
| 121 |
|
|
| (59) |
|
|
| 366 |
|
|
| 375 |
|
Interest expense |
|
| (7,102 | ) |
|
| (5,634 | ) |
|
| (20,599 | ) |
|
| (16,403 | ) |
Income before income taxes |
|
| 5,303 |
|
|
| 4,300 |
|
|
| 349 |
|
|
| 9,242 |
|
Income tax expense (benefit) |
|
| 966 |
|
|
| 1,308 |
|
|
| (1,686 | ) |
|
| 851 |
|
Net income |
|
| 4,337 |
|
|
| 2,992 |
|
|
| 2,035 |
|
|
| 8,391 |
|
Net income (loss) attributable to noncontrolling interests |
|
| 4 |
|
|
| 3 |
|
|
| (1 | ) |
|
| 9 |
|
Net income attributable to limited partners |
|
| 4,333 |
|
|
| 2,989 |
|
|
| 2,036 |
|
|
| 8,382 |
|
IDR distributions |
|
| (1,115 | ) |
|
| (877 | ) |
|
| (3,162 | ) |
|
| (2,456 | ) |
Net income (loss) available to limited partners |
| $ | 3,218 |
|
| $ | 2,112 |
|
| $ | (1,126 | ) |
| $ | 5,926 |
|
19
Three Months Ended September 30, 2017March 31, 2024 Compared to Three Months Ended September 30, 2016March 31, 2023
Consolidated Results
Operating revenues increased $56.1decreased $75 million or 12%, while gross profit increased $2.4 million, or 6%.
Operating revenues
(7%) and operating income decreased $22 million. Significant items impacting these results prior to the elimination of intercompanywere:
Operating revenues were:
A $59.5$74 million or 14%, increase(14%) decrease in our Wholesalewholesale segment revenues primarily attributable to a 9% decrease in volume driven by the conversion of certain lessee dealer sites to company operated and commission agent sites as well as the net loss of independent dealer contracts. In addition, our average wholesale selling price decreased 5% due primarily to changes in crude oil prices during the course of the quarter compared to last year.
Cost of sales
Cost of sales decreased $74 million (8%), due primarily to lower wholesale volume and lower cost per gallon, partially offset by the increase in merchandise cost of sales driven by the same drivers as discussed above.
Gross profit
Gross profit decreased $0.7 million (1%), which was primarily driven by a decrease in motor fuel and rent gross profit within our wholesale segment, partially offset by an increase in merchandise gross profit driven by the conversion of certain lessee dealer and commission agent sites to company operated sites. See “Results of Operations—Segment Results” for additional gross profit analyses.
Operating expenses
See “Results of Operations—Segment Results” for analyses.
General and administrative expenses
General and administrative expenses increased $1.1 million (19%) primarily driven by higher legal fees and acquisition-related costs.
Depreciation, amortization and accretion expense
Depreciation, amortization and accretion expense decreased $1.1 million (6%) primarily due to assets becoming fully depreciated.
Loss on dispositions and lease terminations, net
During the three months ended March 31, 2024, we recorded a $15.9 million loss on lease termination with Applegreen, including a $1.4 million non-cash write-off of deferred rent income. See Note 2 to the financial statements for additional information. In addition, we recorded $0.9 million of other losses on lease terminations and asset disposals, including non-cash write-offs of deferred rent income.
During the three months ended March 31, 2023, we recorded a $2.0 million loss on lease terminations and asset disposals, partially offset by a $0.2 million gain in connection with our ongoing real estate rationalization effort.
Interest expense
Interest expense decreased $1.5 million (12%) due to the $1.1 million write-off of deferred financing costs in the first quarter of 2023 as a result of the amendment and restatement of the CAPL Credit Facility and termination of the JKM Credit Facility.
20
Income tax benefit
We recorded an income tax benefit of $5.8 million and $1.7 million for the three months ended March 31, 2024 and 2023, respectively, driven by income (losses) generated by our taxable subsidiaries.
Segment Results
We present the results of operations of our segments consistent with how our management views the business.
Wholesale
The following table highlights the results of operations and certain operating metrics of our wholesale segment. The narrative following these tables provides an analysis of the results of operations of that segment (in thousands of dollars, except for the number of distribution sites and per gallon amounts):
|
| Three Months Ended March 31, |
| |||||
|
| 2024 |
|
| 2023 |
| ||
Gross profit: |
|
|
|
|
|
| ||
Motor fuel gross profit |
| $ | 14,603 |
|
| $ | 16,708 |
|
Rent gross profit |
|
| 11,439 |
|
|
| 13,255 |
|
Other revenues |
|
| 920 |
|
|
| 1,247 |
|
Total gross profit |
|
| 26,962 |
|
|
| 31,210 |
|
Operating expenses |
|
| (8,897 | ) |
|
| (9,541 | ) |
Operating income |
| $ | 18,065 |
|
| $ | 21,669 |
|
|
|
|
|
|
|
| ||
Motor fuel distribution sites (end of period): (a) |
|
|
|
|
|
| ||
Independent dealers (b) |
|
| 624 |
|
|
| 643 |
|
Lessee dealers (c) |
|
| 511 |
|
|
| 612 |
|
Total motor fuel distribution sites |
|
| 1,135 |
|
|
| 1,255 |
|
|
|
|
|
|
|
| ||
Average motor fuel distribution sites |
|
| 1,172 |
|
|
| 1,271 |
|
|
|
|
|
|
|
| ||
Volume of gallons distributed |
|
| 184,025 |
|
|
| 201,861 |
|
|
|
|
|
|
|
| ||
Margin per gallon |
| $ | 0.079 |
|
| $ | 0.083 |
|
Three Months Ended March 31,2024 Compared to Three Months Ended March 31,2023
Gross profit decreased $4.2 million (14%) and operating income decreased $3.6 million (17%). These results were impacted by:
Motor fuel gross profit
The $2.1 million decrease (13%) in motor fuel gross profit was primarily due to a 9% decrease in volume driven by the conversion of certain lessee dealer sites to company operated and commission agent sites and the net loss of independent dealer contracts. In addition, our average fuel margin per gallon decreased 4% as compared to the same period of 2023, driven by the movements of crude oil prices. prices within the two periods.
The average daily spot price of WTI crude oil increased 7% to $48.152% from $75.93 per barrel for the thirdfirst quarter of 2017, compared2023 to $44.85$77.50 per barrel for the thirdfirst quarter of 2016. The wholesale price of motor fuel is highly correlated to the price of crude oil, although our average selling price increased 14% from the third quarter of 2016 to the third quarter of 2017.2024. See “Significant Factors Affecting our Profitability—The Significance of Crude Oil and Wholesale Motor Fuel Prices on Our Revenues, Cost of Sales and Gross Profit.”
21
A $3.1
Rent gross profit
Rent gross profit decreased $1.8 million or 3%, increase in our Retail segment revenues(14%) for the first quarter of 2024 compared to the same period of 2023, primarily attributabledue to an increase in crude oil prices, partially offset by the conversion of certain lessee dealer sites to company operated retail sites to lessee dealerand commission agent sites. See “Significant Factors Affecting our Profitability—The Significance of Crude Oil and Wholesale Motor Fuel Prices on Our Revenues, Cost of Sales and Gross Profit.”
23
We present the results of operations of our segments on a consistent basis with how our management views the business. Therefore, our segments are presented before intersegment eliminations (which consist of motor fuel sold by our Wholesale segment to our Retail segment). As a result, in order to reconcile to our consolidated change in operating revenues, a discussion of the change in intersegment revenues is included in our consolidated MD&A discussion.
Our intersegment revenues increased $6.4 million or 10%, primarily attributable to the increase in wholesale motor fuel prices discussed above.
Cost of sales
Cost of sales increased $53.7 million or 12% as a result of the increase in wholesale motor fuel prices. See “Results of Operations—Segment Results” for additional gross profit analyses.
Operating expenses
See “Results of Operations—Segment Results” for additional operating expenses analyses.
General and administrative expenses
General and administrativeOperating expenses decreased $0.1$0.6 million primarily attributable to a $1.1 million reduction in costs as a result of headcount and salary reductions effective at the time of the Merger, a $0.5 million reduction in equity compensation expense as a result of fewer awards outstanding, and a $0.5 million reduction in acquisition costs, partially offset by a $1.7 million charge recorded in the third quarter of 2017 related to a court ruling in favor of a former executive’s claim to benefits under the EICP change in control provisions and a $0.2 million increase in severance expense.
Gain on sales of assets, net
During the third quarter of 2017, we recorded a $2.2 million gain on the sale of two properties as required by the FTC in connection with the Merger and a $0.5 million loss on the sale of 28 properties to DMR. We also recorded an $0.8 million gain related to the renewal of a contract by DMS with one of its customers, which triggered an earn out payment to be paid by DMS to us in connection with a contract entered into with DMS at the time of CST’s acquisition of our General Partner in October 2014.
Interest expense
Interest expense increased $1.5 million due to an increase in the average interest rate charged on our credit facility borrowings from 3.5% to 4.3% and additional borrowings to fund the State Oil Assets acquisition in September 2016. In addition, we incurred $0.4 million of interest expense in the third quarter of 2017 related to our sale leaseback executed in December 2016.
Income tax expense
We recorded income tax expense of $1.0 million and $1.3 million for the three months ended September 30, 2017 and 2016, respectively. The decrease in income tax expense was(7%), primarily due to a decline in the income generated by our corporate subsidiaries.
24
Nine Months Ended September 30,2017 Compared to Nine Months Ended September 30,2016
Consolidated Results
Operating revenues increased $173.8 million, or 13%, while gross profit increased $3.8 million, or 3.3%.
Operating revenues
Significant items impacting these results prior to the elimination of intercompany revenues were:
A $190.2 million, or 16%, increase in our Wholesale segment revenues primarily attributable to the increase in crude oil prices. The average daily spot price of WTI crude oil increased 19% to $49.28 per barrel for the nine months ended September 30, 2017, compared to $41.35 per barrel for the nine months ended September 30, 2016. The wholesale price of motor fuel is highly correlated to the price of crude oil. See “Significant Factors Affecting our Profitability—The Significance of Crude Oil and Wholesale Motor Fuel Prices on Our Revenues, Cost of Sales and Gross Profit.”
A $5.0 million, or 1%, increase in our Retail segment revenues primarily attributable to the increase in crude oil prices, largely offset by conversion of certain lessee dealer sites to company operated retail sites to lessee dealerand commission agent sites. See “Significant Factors Affecting our Profitability—The Significance of Crude Oil and Wholesale Motor Fuel Prices on Our Revenues, Cost of Sales and Gross Profit.”
Intersegment revenues
We present the results of operations of our segments on a consistent basis with how our management views the business. Therefore, our segments are presented before intersegment eliminations (which consist of motor fuel sold by our Wholesale segment to our Retail segment). As a result, in order to reconcile to our consolidated change in operating revenues, a discussion of the change in intersegment revenues is included in our consolidated MD&A discussion.
Our intersegment revenues increased $21.4 million or 12%, primarily attributable to the increase in wholesale motor fuel prices discussed above.
Cost of sales
Cost of sales increased $170.0 million or 14% as a result of the increase in wholesale motor fuel prices. See “Results of Operations—Segment Results” for additional gross profit analyses.
Operating expenses
See “Results of Operations—Segment Results” for additional operating expenses analyses.
General and administrative expenses
General and administrative expenses increased $5.7 million primarily attributable to a $6.8 million charge recorded upon closing of the Merger for severance and benefit costs for certain terminated officers and other employees of CST Services who provided services to the Partnership and retention bonuses to certain EICP participants and a $1.7 million charge related to a court ruling in favor of a former executive’s claim to benefits under the EICP change in control provisions, partially offset by a $1.5 million decrease driven by the integration of prior year acquisitions and other cost savings initiatives and a $1.3 million decrease in management fees charged by CST as a result of headcount and salary reductions effective at the time of the Merger.
Depreciation, amortization and accretion expense
Depreciation, amortization and accretion expense increased $1.7 million primarily driven by our recent acquisitions.
Gain on sales of assets, net
During the nine months ended September 30, 2017, we recorded a $2.2 million gain on the sale of two properties as required by the FTC in connection with the Merger and a $0.5 million loss on the sale of 28 properties to DMR. We also recorded a $0.8 million gain related to the renewal of a contract by DMS with one of its customers, which triggered an earn out payment to be paid by DMS to us in connection with a contract entered into with DMS at the time of CST’s acquisition of our General Partner in October 2014.
25
Interest expense increased $4.2 million due to an increase in the average interest rate charged on our credit facility borrowings from 3.5% to 4.1% and additional borrowings to fund our recent acquisitions. In addition, we incurred $1.2 million of interest expense in 2017 related to our sale leaseback executed in December 2016.
Income tax benefit
We recorded an income tax benefit of $1.7 million and income tax expense of $0.9 million for the nine months ended September 30, 2017 and 2016, respectively. The benefit in 2017 was primarily due to an increase in the loss generated by our corporate subsidiaries.
Segment Results
We present the results of operations of our segments consistent with how our management views the business. Therefore, our segments are presented before intersegment eliminations (which consist of motor fuel sold by our Wholesale segment to our Retail segment). These comparisons are not necessarily indicative of future results.
26
The following table highlights the results of operations and certain operating metrics of our Wholesaleretail segment. The narrative following these tables provides an analysis of the results of operations of that segment (thousands of dollars, except for the number of distribution sites and per gallon amounts):
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||
|
| 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
| ||||
Gross profit: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Motor fuel–third party |
| $ | 8,757 |
|
| $ | 8,157 |
|
| $ | 25,659 |
|
| $ | 21,283 |
|
Motor fuel–intersegment and related party |
|
| 6,485 |
|
|
| 6,086 |
|
|
| 17,820 |
|
|
| 19,004 |
|
Motor fuel gross profit |
|
| 15,242 |
|
|
| 14,243 |
|
|
| 43,479 |
|
|
| 40,287 |
|
Rent and other |
|
| 16,074 |
|
|
| 14,263 |
|
|
| 48,740 |
|
|
| 43,162 |
|
Total gross profit |
|
| 31,316 |
|
|
| 28,506 |
|
|
| 92,219 |
|
|
| 83,449 |
|
Income from CST Fuel Supply equity(a) |
|
| 3,752 |
|
|
| 4,022 |
|
|
| 11,185 |
|
|
| 12,318 |
|
Operating expenses |
|
| (7,535 | ) |
|
| (5,498 | ) |
|
| (22,541 | ) |
|
| (18,796 | ) |
Adjusted EBITDA(b) |
| $ | 27,533 |
|
| $ | 27,030 |
|
| $ | 80,863 |
|
| $ | 76,971 |
|
Motor fuel distribution sites (end of period):(c) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Motor fuel–third party |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Independent dealers(d) |
|
| 384 |
|
|
| 404 |
|
|
| 384 |
|
|
| 404 |
|
Lessee dealers(e) |
|
| 439 |
|
|
| 420 |
|
|
| 439 |
|
|
| 420 |
|
Total motor fuel distribution–third party sites |
|
| 823 |
|
|
| 824 |
|
|
| 823 |
|
|
| 824 |
|
Motor fuel–intersegment and related party |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DMS (related party)(f) |
|
| 146 |
|
|
| 179 |
|
|
| 146 |
|
|
| 179 |
|
CST (related party) |
|
| 43 |
|
|
| 43 |
|
|
| 43 |
|
|
| 43 |
|
Commission agents (Retail segment)(g) |
|
| 82 |
|
|
| 67 |
|
|
| 82 |
|
|
| 67 |
|
Company operated retail sites (Retail segment) |
|
| 70 |
|
|
| 75 |
|
|
| 70 |
|
|
| 75 |
|
Total motor fuel distribution–intersegment and related party sites |
|
| 341 |
|
|
| 364 |
|
|
| 341 |
|
|
| 364 |
|
Motor fuel distribution sites (average during the period): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Motor fuel-third party distribution |
|
| 823 |
|
|
| 749 |
|
|
| 822 |
|
|
| 724 |
|
Motor fuel-intersegment and related party distribution |
|
| 344 |
|
|
| 366 |
|
|
| 355 |
|
|
| 387 |
|
Total motor fuel distribution sites |
|
| 1,167 |
|
|
| 1,115 |
|
|
| 1,177 |
|
|
| 1,111 |
|
Volume of gallons distributed (in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Third party |
|
| 169,877 |
|
|
| 163,558 |
|
|
| 491,471 |
|
|
| 461,474 |
|
Intersegment and related party |
|
| 96,312 |
|
|
| 103,563 |
|
|
| 279,649 |
|
|
| 307,720 |
|
Total volume of gallons distributed |
|
| 266,189 |
|
|
| 267,121 |
|
|
| 771,120 |
|
|
| 769,194 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wholesale margin per gallon |
| $ | 0.057 |
|
| $ | 0.053 |
|
| $ | 0.056 |
|
| $ | 0.052 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
27
Three Months Ended September 30,2017 Compared to Three Months Ended September 30,2016
The results were driven by:
Motor fuel gross profit
The $1.0 million or 7% increase in motor fuel gross profit was primarily due to a higher margin per gallon realized primarily due to higher DTW margins as a result of the movements in crude prices throughout both periods and increased payment discounts and incentives due to the increase in motor fuel prices as a result of the increase in crude oil prices. The average daily spot price of WTI crude oil increased 7% to $48.15 per barrel for the third quarter of 2017, compared to $44.85 per barrel for the third quarter of 2016. See “Significant Factors Affecting our Profitability—The Significance of Crude Oil and Wholesale Motor Fuel Prices on Our Revenues, Cost of Sales and Gross Profit.”
Rent and other gross profit
Rent and other gross profit increased $1.8 million primarily as a result of our September 2016 acquisition of the State Oil Assets, as well as converting company operated retail sites to lessee dealer sites throughout 2016 and 2017, partially offset by 25 DMS sites being converted to commission agent sites in the fourth quarter of 2016, which resulted in the rent income from these 25 sites being included in the retail segment rather than the wholesale segment.
Income from CST Fuel Supply equity
The decline of $0.3 million was primarily attributable to a decrease in volume driven the impacts of Hurricane Harvey.
Operating expenses
Operating expenses increased $2.0 million primarily as a result of our September 2016 State Oil Assets acquisition, which is substantially offset by an increase in rent income, as well as our conversion of company operated retail sites to lessee dealer sites throughout 2016 and 2017.
Nine Months Ended September 30, 2017 Compared to Nine Months Ended September 30, 2016
The results were driven by:
Motor fuel gross profit
The $3.2 million increase in motor fuel gross profit was primarily due to a higher margin per gallon realized primarily due to higher DTW margins as a result of the movements in crude prices throughout both periods and increased payment discounts and incentives due to the increase in motor fuel prices as a result of the increase in crude oil prices. The average daily spot price of WTI crude oil increased 19% to $49.28 per barrel for the nine months ended September 30, 2017, compared to $41.35 per barrel for the nine months ended September 30, 2016. See “Significant Factors Affecting our Profitability—The Significance of Crude Oil and Wholesale Motor Fuel Prices on Our Revenues, Cost of Sales and Gross Profit.”
Rent and other gross profit
Rent and other gross profit increased $5.6 million primarily as a result of our September 2016 acquisition of the State Oil Assets, as well as converting company operated retail sites to lessee dealer sites throughout 2016 and 2017, partially offset by 25 DMS sites being converted to commission agent sites in the fourth quarter of 2016, which resulted in the rent income from these 25 sites being included in the retail segment rather than the wholesale segment.
Income from CST Fuel Supply equity
The decline of $1.1 million was primarily attributable to CST’s July 2016 divestiture of its California and Wyoming retail sites and a decrease in volume driven the impacts of Hurricane Harvey.
Operating expenses
Operating expenses increased $3.7 million primarily as a result of our September 2016 State Oil Assets acquisition, which is substantially offset by an increase in rent income, as well as our conversion of company operated retail sites to lessee dealer sites throughout 2016 and 2017.
28
The following table highlights the results of operations and certain operating metrics of our Retail segment. The narrative following these tables provides an analysis of the results of operations of that segment (thousands of dollars,(in thousands, except for the number of retail sites and per gallon amounts):
|
| Three Months Ended March 31, |
| |||||
|
| 2024 |
|
| 2023 |
| ||
Gross profit: |
|
|
|
|
|
| ||
Motor fuel |
| $ | 26,036 |
|
| $ | 26,760 |
|
Merchandise |
|
| 21,443 |
|
|
| 18,123 |
|
Rent |
|
| 2,308 |
|
|
| 2,511 |
|
Other revenue |
|
| 4,599 |
|
|
| 3,455 |
|
Total gross profit |
|
| 54,386 |
|
|
| 50,849 |
|
Operating expenses |
|
| (43,131 | ) |
|
| (36,082 | ) |
Operating income |
| $ | 11,255 |
|
| $ | 14,767 |
|
|
|
|
|
|
|
| ||
Retail sites (end of period): |
|
|
|
|
|
| ||
Company operated retail sites (a) |
|
| 343 |
|
|
| 268 |
|
Commission agents (b) |
|
| 203 |
|
|
| 194 |
|
Total retail segment sites |
|
| 546 |
|
|
| 462 |
|
|
|
|
|
|
|
| ||
Total retail segment statistics: |
|
|
|
|
|
| ||
Volume of gallons sold |
|
| 121,717 |
|
|
| 119,085 |
|
Average retail fuel sites |
|
| 514 |
|
|
| 457 |
|
Margin per gallon, before deducting credit card fees and commissions |
|
| 0.308 |
|
|
| 0.318 |
|
|
|
|
|
|
|
| ||
Company operated site statistics: |
|
|
|
|
|
| ||
Average retail fuel sites |
|
| 315 |
|
|
| 258 |
|
Margin per gallon, before deducting credit card fees |
| $ | 0.327 |
|
| $ | 0.341 |
|
Merchandise gross profit percentage |
|
| 28.1 | % |
|
| 27.8 | % |
|
|
|
|
|
|
| ||
Commission site statistics: |
|
|
|
|
|
| ||
Average retail fuel sites |
|
| 199 |
|
|
| 198 |
|
Margin per gallon, before deducting credit card fees and commissions |
| $ | 0.267 |
|
| $ | 0.273 |
|
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||
|
| 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
| ||||
Gross profit: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Motor fuel |
| $ | 2,042 |
|
| $ | 1,948 |
|
| $ | 5,281 |
|
| $ | 6,838 |
|
Merchandise and services |
|
| 7,008 |
|
|
| 7,614 |
|
|
| 19,558 |
|
|
| 23,362 |
|
Rent and other |
|
| 1,195 |
|
|
| 1,057 |
|
|
| 3,565 |
|
|
| 3,049 |
|
Total gross profit |
|
| 10,245 |
|
|
| 10,619 |
|
|
| 28,404 |
|
|
| 33,249 |
|
Operating expenses |
|
| (7,836 | ) |
|
| (8,726 | ) |
|
| (24,312 | ) |
|
| (26,958 | ) |
Acquisition-related costs |
|
| — |
|
|
| 142 |
|
|
| — |
|
|
| 142 |
|
Inventory fair value adjustments(a) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 91 |
|
Adjusted EBITDA(b) |
| $ | 2,409 |
|
| $ | 2,035 |
|
| $ | 4,092 |
|
| $ | 6,524 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail sites (end of period): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commission agents(c) |
|
| 82 |
|
|
| 67 |
|
|
| 82 |
|
|
| 67 |
|
Company operated retail sites(d) |
|
| 71 |
|
|
| 78 |
|
|
| 71 |
|
|
| 78 |
|
Total system sites at the end of the period |
|
| 153 |
|
|
| 145 |
|
|
| 153 |
|
|
| 145 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total system operating statistics: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average retail fuel sites during the period(c)(d) |
|
| 153 |
|
|
| 142 |
|
|
| 162 |
|
|
| 155 |
|
Motor fuel sales (gallons per site per day) |
|
| 2,778 |
|
|
| 3,002 |
|
|
| 2,632 |
|
|
| 2,828 |
|
Motor fuel gross profit per gallon, net of credit card fees and commissions |
| $ | 0.052 |
|
| $ | 0.050 |
|
| $ | 0.045 |
|
| $ | 0.057 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commission agents statistics: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average retail fuel sites during the period(c) |
|
| 82 |
|
|
| 66 |
|
|
| 90 |
|
|
| 66 |
|
Motor fuel gross profit per gallon, net of credit card fees and commissions |
| $ | 0.013 |
|
| $ | 0.014 |
|
| $ | 0.011 |
|
| $ | 0.016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company operated retail site statistics: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average retail fuel sites during the period(d) |
|
| 71 |
|
|
| 76 |
|
|
| 72 |
|
|
| 89 |
|
Motor fuel gross profit per gallon, net of credit card fees |
| $ | 0.093 |
|
| $ | 0.082 |
|
| $ | 0.083 |
|
| $ | 0.090 |
|
Merchandise and services gross profit percentage, net of credit card fees |
|
| 24.7 | % |
|
| 24.2 | % |
|
| 24.4 | % |
|
| 24.5 | % |
22
|
|
|
|
|
|
|
|
29
Three Months Ended September 30,2017March 31,2024 Compared to Three Months Ended September 30,2016March 31,2023
Gross profit declined $0.4increased $3.5 million while(7%) and operating expenses declined $0.9 million.
income decreased $3.5 million (24%). These results were impacted by:
Gross profit
Our motor fuel gross profit increased $0.1decreased $0.7 million (3%) attributable to a 5% increase3% decrease in margin per gallon for the three months ended March 31, 2024 as a result ofcompared to the same period in 2023, driven by the movements in crude oil prices throughoutwithin the two periods. See “Significant Factors Affecting our Profitability—The Significance of Crude Oil and Wholesale Motor Fuel Prices on Our Revenues, Cost of Sales and Gross Profit.”
Our merchandise and services gross profit declined $0.6 million as a result of the conversion of company operated retail sitesVolume increased 2% due primarily to lessee dealer sites.
Our rent and other gross profit increased $0.1 million primarily from 25 DMS sites being converted to commission agent sitesan increase in the fourth quarter of 2016, which resulted in the rent income from these sites being included in theaverage retail segment rather than the wholesale segment. In the second quarter of 2017, some of these 25 sites were converted to lessee dealer sites, which resulted in the rent income being included in the wholesale segment rather than the retail segment.
Operating expenses
The $0.9 million decline in operating expenses was attributablesite count due to the conversion of certain lessee dealer sites to company operated retail sites to lessee dealerand commission agent sites, partially offset by the impact of the 25 DMS sites being converted to commission agent sitesa decrease in volume in our base business.
Nine Months Ended September 30, 2017 Compared to Nine Months Ended September 30, 2016
Gross profit declined $4.8 million, while operating expenses declined $2.6 million.
These results were impacted by:
Gross profit
Our motor fuel gross profit decreased $1.6 million attributable to a 20% decrease in margin per gallon as a result of the movement in crude oil prices throughout the two periods. See “Significant Factors Affecting our Profitability—The Significance of Crude Oil and Wholesale Motor Fuel Prices on Our Revenues, Cost of Sales and Gross Profit.”
Our merchandise and services gross profit declined $3.8 million or 16% as a result of the conversion ofaverage company operated retail sites to lessee dealer sites, partially offset by the incremental gross profit generated by the March 2016 Franchised Holiday Stores acquisition.
Our rent and other gross profit increased $0.5 million primarily from 25 DMS sites being converted to commission agent sites in the fourth quarter of 2016, which resulted in the rent income from these sites being included in the retail segment rather than the wholesale segment. In the second quarter of 2017, some of these 25 sites were converted to lessee dealer sites, which resulted in the rent income being included in the wholesale segment rather than the retail segment.
Operating expenses
The $2.6 million decline in operating expenses was attributablesite count due to the conversion of company operated retail sites tocertain lessee dealer sites, partially offset by the impact of the March 2016 Franchised Holiday Stores acquisition and the 25 DMS sites being converted to commission agent sites to company operated sites.
Operating expenses
Operating expenses increased $7.0 million (20%) driven by a 22% increase in the fourth quarteraverage company operated site count due to the conversion of 2016. In the second quarter of 2017, some of these 25 sites were converted tocertain lessee dealer and commission agent sites which resulted in the operating expenses being included in the wholesale segment rather than the retail segment.
30
to company operated sites.
We use the non-GAAP financial measures EBITDA, Adjusted EBITDA, Distributable Cash Flow and Distribution Coverage Ratio. EBITDA represents net income available to us before deducting interest expense, income taxes and depreciation, amortization and accretion.accretion (which includes certain impairment charges). Adjusted EBITDA represents EBITDA as further adjusted to exclude equity funded expenses related to incentiveequity-based compensation and the Amended Omnibus Agreement,expense, gains or losses on sales of assets,dispositions and lease terminations, net and certain discrete acquisition related costs, such as legal and other professional fees, and severance expenses associated with recently acquired companies,separation benefit costs and certain other discrete non-cash items arising from purchase accounting. Distributable Cash Flow represents Adjusted EBITDA less cash interest expense, sustaining capital expenditures and current income tax expense. The Distribution Coverage Ratio is computed by dividing Distributable Cash Flow by the weighted average diluted common and subordinated units and then dividing that result by the distributions paid per limited partner unit.on common units.
EBITDA, Adjusted EBITDA, Distributable Cash Flow and Distribution Coverage Ratio are used as supplemental financial measures by management and by external users of our financial statements, such as investors and lenders. EBITDA and Adjusted EBITDA are used to assess our financial performance without regard to financing methods, capital structure or income taxes and the ability to incur and service debt and to fund capital expenditures. In addition, Adjusted EBITDA is used to assess the operating performance of our business on a consistent basis by excluding the impact of items which do not result directly from the wholesale distribution of motor fuel, the leasing of real property, or the day to day operations of our retail site activities. EBITDA, Adjusted EBITDA, Distributable Cash Flow and Distribution Coverage Ratio are also used to assess the ability to generate cash sufficient to make distributions to our unitholders.
We believe the presentation of EBITDA, Adjusted EBITDA, Distributable Cash Flow and Distribution Coverage Ratio provides useful information to investors in assessing the financial condition and results of operations. EBITDA, Adjusted EBITDA, Distributable Cash Flow and Distribution Coverage Ratio should not be considered alternatives to net income or any other measure of financial performance or liquidity presented in accordance with U.S. GAAP. EBITDA, Adjusted EBITDA, Distributable Cash Flow and Distribution Coverage Ratio have important limitations as analytical tools because they exclude some but not all items that affect net income. Additionally, because EBITDA, Adjusted EBITDA, Distributable Cash Flow and Distribution Coverage Ratio may be defined differently by other companies in our industry, our definitions may not be comparable to similarly titled measures of other companies, thereby diminishing their utility.
23
The following table presents reconciliations of EBITDA, Adjusted EBITDA, and Distributable Cash Flow to net income, the most directly comparable U.S. GAAP financial measure, for each of the periods indicated (in thousands, except for per unit amounts)Distribution Coverage Ratio):
|
| Three Months Ended March 31, |
| |||||
|
| 2024 |
|
| 2023 |
| ||
Net loss |
| $ | (17,540 | ) |
| $ | (979 | ) |
Interest expense |
|
| 10,541 |
|
|
| 12,012 |
|
Income tax benefit |
|
| (5,797 | ) |
|
| (1,662 | ) |
Depreciation, amortization and accretion expense |
|
| 18,721 |
|
|
| 19,820 |
|
EBITDA |
|
| 5,925 |
|
|
| 29,191 |
|
Equity-based employee and director compensation expense |
|
| 205 |
|
|
| 561 |
|
Loss on dispositions and lease terminations, net (a) |
|
| 16,806 |
|
|
| 1,767 |
|
Acquisition-related costs (b) |
|
| 632 |
|
|
| 219 |
|
Adjusted EBITDA |
|
| 23,568 |
|
|
| 31,738 |
|
Cash interest expense |
|
| (10,058 | ) |
|
| (10,163 | ) |
Sustaining capital expenditures (c) |
|
| (1,642 | ) |
|
| (2,049 | ) |
Current income tax expense (d) |
|
| (137 | ) |
|
| (394 | ) |
Distributable Cash Flow |
| $ | 11,731 |
|
| $ | 19,132 |
|
Distributions paid on common units |
|
| 19,941 |
|
|
| 19,918 |
|
Distribution Coverage Ratio (a) |
| 0.59x |
|
| 0.96x |
| ||
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||
|
| 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
| ||||
Net income available to limited partners |
| $ | 3,218 |
|
| $ | 2,112 |
|
| $ | (1,126 | ) |
| $ | 5,926 |
|
Interest expense |
|
| 7,102 |
|
|
| 5,634 |
|
|
| 20,599 |
|
|
| 16,403 |
|
Income tax expense (benefit) |
|
| 966 |
|
|
| 1,308 |
|
|
| (1,686 | ) |
|
| 851 |
|
Depreciation, amortization and accretion |
|
| 14,049 |
|
|
| 13,432 |
|
|
| 42,675 |
|
|
| 40,594 |
|
EBITDA |
|
| 25,335 |
|
|
| 22,486 |
|
|
| 60,462 |
|
|
| 63,774 |
|
Equity funded expenses related to incentive compensation and the Amended Omnibus Agreement (a) |
|
| 3,479 |
|
|
| 3,572 |
|
|
| 11,789 |
|
|
| 10,197 |
|
Gain on sales of assets, net |
|
| (2,371 | ) |
|
| (631) |
|
|
| (2,013 | ) |
|
| (525) |
|
Acquisition-related costs (b) |
|
| 2,570 |
|
|
| 1,659 |
|
|
| 10,279 |
|
|
| 2,882 |
|
Inventory fair value adjustments |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 91 |
|
Adjusted EBITDA |
|
| 29,013 |
|
|
| 27,086 |
|
|
| 80,517 |
|
|
| 76,419 |
|
Cash interest expense |
|
| (6,674 | ) |
|
| (5,306) |
|
|
| (19,319 | ) |
|
| (15,355 | ) |
Sustaining capital expenditures (c) |
|
| (565 | ) |
|
| (209) |
|
|
| (1,287 | ) |
|
| (538 | ) |
Current income tax expense |
|
| (267 | ) |
|
| (317) |
|
|
| (387 | ) |
|
| (782 | ) |
Distributable Cash Flow |
| $ | 21,507 |
|
| $ | 21,254 |
|
| $ | 59,524 |
|
| $ | 59,744 |
|
Weighted average diluted common and subordinated units |
|
| 33,938 |
|
|
| 33,391 |
|
|
| 33,792 |
|
|
| 33,305 |
|
Distributions paid per limited partner unit (d) |
| $ | 0.6225 |
|
| $ | 0.6025 |
|
| $ | 1.8525 |
|
| $ | 1.7925 |
|
Distribution Coverage Ratio (e) |
| 1.02x |
|
| 1.06x |
|
| 0.95x |
|
| 1.00x |
| ||||
|
|
31
|
|
|
|
|
|
The following table reconciles our segment Adjusted EBITDA to Consolidated Adjusted EBITDA presented in the table above (in thousands):
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||
|
| 2017 |
|
| 2016 |
|
| 2017 |
|
| 2016 |
| ||||
Adjusted EBITDA - Wholesale segment |
| $ | 27,533 |
|
| $ | 27,030 |
|
| $ | 80,863 |
|
| $ | 76,971 |
|
Adjusted EBITDA - Retail segment |
|
| 2,409 |
|
|
| 2,035 |
|
|
| 4,092 |
|
|
| 6,524 |
|
Adjusted EBITDA - Total segment |
| $ | 29,942 |
|
| $ | 29,065 |
|
| $ | 84,955 |
|
| $ | 83,495 |
|
Reconciling items: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Elimination of intersegment profit in ending inventory balance |
|
| 14 |
|
|
| 13 |
|
| 20 |
|
|
| 145 |
| |
General and administrative expenses |
|
| (5,994 | ) |
|
| (6,142 | ) |
|
| (23,731 | ) |
|
| (18,068 | ) |
Other income, net |
|
| 121 |
|
|
| (59 | ) |
|
| 366 |
|
|
| 375 |
|
Equity funded expenses related to incentive compensation and the Amended Omnibus Agreement |
|
| 3,479 |
|
|
| 3,572 |
|
|
| 11,789 |
|
|
| 10,197 |
|
Working capital adjustment |
|
| — |
|
|
| 335 |
|
|
| — |
|
|
| 335 |
|
Acquisition-related costs |
|
| 2,570 |
|
|
| 1,182 |
|
|
| 10,279 |
|
|
| 2,405 |
|
Net (income) loss attributable to noncontrolling interests |
|
| (4 | ) |
|
| (3 | ) |
|
| 1 |
|
|
| (9 | ) |
IDR distributions |
|
| (1,115 | ) |
|
| (877 | ) |
|
| (3,162 | ) |
|
| (2,456 | ) |
Consolidated Adjusted EBITDA |
| $ | 29,013 |
|
| $ | 27,086 |
|
| $ | 80,517 |
|
| $ | 76,419 |
|
32
Liquidity and Capital Resources
Liquidity
Our principal liquidity requirements are to finance our operations, fund acquisitions, service our debt and pay distributions to our unitholders and IDR distributions.unitholders. We expect our ongoing sources of liquidity to include cash generated by operations, proceeds from sales of sites in connection with our operations andreal estate rationalization efforts, borrowings under the revolving credit facilityCAPL Credit Facility, and if available to us on acceptable terms, issuances of equity and debt securities. We regularly evaluate alternate sources of capital including sale-leaseback financing of real property with third parties, to support our liquidity requirements.
Our ability to meet our debt service obligations and other capital requirements, including capital expenditures, acquisitions, and partnership distributions, will depend on our future operating performance, which, in turn, will be subject to general economic, financial, business, competitive, legislative, regulatory and other conditions, many of which are beyond our control. As a normal part of our business, depending on market conditions, we will, from time to time, consider opportunities to repay, redeem, repurchase or refinance our indebtedness. Changes in our operating plans, lower than anticipated sales, increased expenses, acquisitions or other events may cause us to seek additional debt or equity financing in future periods.
We believe that we will have sufficient cash flow from operations, borrowing capacity under the revolving credit facility andCAPL Credit Facility, access to capital markets and alternate sources of funding to meet our financial commitments, debt service obligations, contingencies, anticipated capital expenditures and partnership distributions. However, we are subject to business and operational risks that could adversely affect our cash flow. A material decrease in our cash flows would likely produce an adverse effect on our borrowing capacity as well as our ability to issue additional equity and/or debt securities.securities and/or maintain or increase distributions to unitholders.
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Cash Flows
The following table summarizes cash flow activity (in thousands):
|
| Three Months Ended March 31, |
| |||||
|
| 2024 |
|
| 2023 |
| ||
Net cash provided by operating activities |
| $ | 5,816 |
|
| $ | 11,538 |
|
Net cash used in investing activities |
|
| (25,964 | ) |
|
| (5,380 | ) |
Net cash provided by (used in) financing activities |
|
| 21,436 |
|
|
| (14,695 | ) |
|
| Nine Months Ended September 30, |
| |||||
|
| 2017 |
|
| 2016 |
| ||
Net cash provided by operating activities |
| $ | 66,438 |
|
| $ | 63,698 |
|
Net cash provided by (used in) investing activities |
| $ | 11,291 |
|
| $ | (90,288 | ) |
Net cash (used in) provided by financing activities |
| $ | (77,513 | ) |
| $ | 28,295 |
|
Operating Activities
Net cash provided by operating activities increased $2.7decreased $5.7 million for the ninethree months ended September 30, 2017March 31, 2024 compared to the same period in 2016, driven2023, primarily attributable to lower fuel margins, partially offset by incrementala $3.3 million net generation of cash flow generated byfrom changes in working capital stemming from timing of settlement of fuel purchases during the first quarter of 2023.
As is typical in our acquisitions. In addition, we settled $2.3 million more in management fees related to the services provided under the Amended Omnibus Agreement in equity with CST for the nine months ended September 30, 2017 compared to the same period in 2016.
Investing Activities
For the nine months ended September 30, 2017, we received $23.9 million of proceeds on sales, largely driven by the sale of 28 properties to DMR and two properties soldindustry, our current liabilities exceed our current assets as a result of the FTC’s requirements associated with Couche-Tard’s acquisitionlonger settlement of CST. real estate and motor fuel taxes as compared to the shorter settlement of receivables for fuel, rent and merchandise.
Investing Activities
We also incurred $10.2capital expenditures of $6 million for each of the three months ended March 31, 2024 and 2023. We paid $19.9 million to Applegreen related to lease terminations and inventory purchases during the three months ended March 31, 2024. We received $0.6 million in capital expenditures and paid a $2.8 million deposit onproceeds primarily from the Jet-Pep acquisition. For the nine months ended September 30, 2016, we received a $17.5 million refund payment on our investment in CST Fuel Supply in connection with CST’s sale of sites in California and Wyoming. In addition, we spent $97.1 million onconnection with our real estate rationalization effort for the acquisitions of the Franchised Holidays Stores, State Oil Assets, and independent dealer and sub-wholesaler contracts from CST. We also incurred $11.6 million in capital expenditures.
Financing Activities
For the ninethree months ended September 30, 2017, weMarch 31, 2023.
Financing Activities
We paid $65.7$20 million in distributions for each of the three months ended March 31, 2024 and 2023. For the three months ended March 31, 2024 and 2023, we made total net repaymentsborrowings on our credit facilityfacilities of $10.0 million. For$42 million and $13 million, respectively. We paid $7 million of deferred financing costs in connection with amending and restating the nine months ended September 30, 2016, we paid $62.2 millionCAPL Credit Facility and terminating the JKM Credit Facility in distributions, made net borrowingsthe first quarter of $96.1 million primarily to fund our Franchised Holiday Stores and State Oil Assets acquisitions, and purchased $3.3 million in common units under our common unit purchase program.2023.
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Distributions
Distribution activity for 20172024 was as follows:
Quarter Ended |
| Record Date |
| Payment Date |
| Cash |
|
| Cash |
| ||
December 31, 2023 |
| February 2, 2024 |
| February 9, 2024 |
| $ | 0.5250 |
|
| $ | 19,941 |
|
March 31, 2024 |
| May 3, 2024 |
| May 10, 2024 |
|
| 0.5250 |
|
|
| 19,964 |
|
Quarter Ended |
| Record Date |
| Payment Date |
| Cash Distribution (per unit) |
|
| Cash Distribution (in thousands) |
| ||
December 31, 2016 |
| February 6, 2017 |
| February 13, 2017 |
| $ | 0.6125 |
|
| $ | 20,534 |
|
March 31, 2017 |
| May 8, 2017 |
| May 15, 2017 |
| $ | 0.6175 |
|
| $ | 20,826 |
|
June 30, 2017 |
| August 7, 2017 |
| August 14, 2017 |
| $ | 0.6225 |
|
| $ | 21,079 |
|
September 30, 2017 |
| November 6, 2017 |
| November 13, 2017 |
| $ | 0.6275 |
|
| $ | 21,326 |
|
The amount of any distribution is subject to the discretion of the Board, which may modify or revoke our cash distribution policy at any time. Our Partnership Agreement does not require us to pay any distributions. As such, there can be no assurance we will continue to pay distributions in the future.
IDRsDebt
During the three and nine months ended September 30, 2017, we distributed $1.1 million and $3.2 million to CST / Couche-Tarde with respect to the IDRs, respectively.
Expiration of the Subordination Period
In accordance with the terms of the Partnership Agreement, on February 25, 2016, the first business day after the payment of the fourth quarter 2015 distribution of $0.5925 per unit, the subordination period under the Partnership Agreement ended. At that time, each of the 7,525,000 outstanding subordinated units converted into one common unit and now participates in distributions pro rata with other common units.
Debt
As of September 30, 2017,March 31, 2024, our consolidated debt and capitalfinance lease obligations consisted of the following (in thousands):
CAPL Credit Facility |
| $ | 798,260 |
|
Finance lease obligations |
|
| 10,320 |
|
Total debt and finance lease obligations |
|
| 808,580 |
|
Current portion |
|
| 3,133 |
|
Noncurrent portion |
|
| 805,447 |
|
Deferred financing costs, net |
|
| 9,692 |
|
Noncurrent portion, net of deferred financing costs |
| $ | 795,755 |
|
See Note 7 to the financial statements for information regarding the amendment of the CAPL Credit Facility.
$550 million revolving credit facility |
| $ | 431,484 |
|
Note payable |
|
| 779 |
|
Capital lease obligations |
|
| 27,728 |
|
Total debt and capital lease obligations |
|
| 459,991 |
|
Current portion |
|
| 2,884 |
|
Noncurrent portion |
|
| 457,107 |
|
Deferred financing fees |
|
| (2,334 | ) |
Noncurrent portion, net of deferred financing fees |
| $ | 454,773 |
|
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Our revolving credit facility is secured by substantially all of our assets. Our borrowings underTaking into account the revolving credit facility had a weighted-average interest rate of 4.24%swap contracts that were effective beyond April 1, 2024, the effective interest rate on our CAPL Credit Facility at March 31, 2024 was 6.7% (our applicable margin was 2.25% as of September 30, 2017 (LIBOR plus an applicable margin, which was 3.00% as of September 30, 2017)March 31, 2024). Letters of credit outstanding at September 30, 2017March 31, 2024 totaled $6.5$5.3 million.
The amount of availability under the revolving credit facilityour CAPL Credit Facility at NovemberMay 3, 2017,2024, after taking into consideration debt covenant restrictions, was $55.2$96 million. In connection with future acquisitions, the revolving credit facility requires, among other things, that we have, after giving effect to such acquisition, at least $20 million in the aggregate of borrowing availability under the revolving credit facility and unrestricted cash on the balance sheet on the date of such acquisition. We are required to maintain a total leverage ratio (as defined in the revolving credit facility) for the most recently completed four fiscal quarters of less than or equal to 4.50: 1.00, except for the first three full fiscal quarters following a material acquisition, generally defined as an acquisition with a purchase price of at least $30.0 million, with a ratio of 5.00: 1.00, and a consolidated interest coverage ratio (as defined in the revolving credit facility) of greater than or equal to 2.75: 1.00. The computation of our total leverage ratio allows for a pro forma application of the EBITDA (as defined in the revolving credit facility) of acquired entities and was 4.03: 1.00 as of September 30, 2017. As of September 30, 2017, we were in compliance with these financial covenant ratios.
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We make investments to expand, upgrade and enhance existing assets. We categorize our capital requirements as either sustaining capital expenditures, growth capital expenditures or acquisition capital expenditures. Sustaining capital expenditures are those capital expenditures required to maintain our long-term operating income or operating capacity. AcquisitionGrowth capital expenditures, which include individual site purchases, and growthacquisition capital expenditures are those capital expenditures that we expect will increase our operating income or operating capacity over the long term. We have the ability to fund our capital expenditures by additional borrowings under our revolving credit facilityCAPL Credit Facility, or, if available to us on acceptable terms, accessing the capital markets and issuing additional equity, debt securities or other options, such as the sale of assets. With the significant decline in energy prices since 2014, access to the capital markets has tightened for the energy and MLP industries as a whole, which has impacted our cost of capital and our ability to raise equity and debt financing at favorable terms. Our ability to access the capital markets may have an impact on our ability to fund acquisitions. We may not be able to complete any offering of securities or other options on terms acceptable to us, if at all.
The following table outlines our consolidated capital expenditures and acquisitions for the nine months ended September 30, 2017 and 2016 (in thousands):
|
| Three Months Ended March 31, |
| |||||
|
| 2024 |
|
| 2023 |
| ||
Sustaining capital |
| $ | 1,642 |
|
| $ | 2,049 |
|
Growth |
|
| 4,463 |
|
|
| 3,952 |
|
Lease termination payments to Applegreen, including inventory purchases |
|
| 19,904 |
|
|
| — |
|
Total capital expenditures, including lease termination payments to Applegreen |
| $ | 26,009 |
|
| $ | 6,001 |
|
|
| Nine Months Ended September 30, |
| |||||
|
| 2017 |
|
| 2016 |
| ||
Sustaining capital |
| $ | 1,287 |
|
| $ | 538 |
|
Growth |
|
| 8,888 |
|
|
| 11,029 |
|
Acquisitions |
|
| 2,779 |
|
|
| 97,073 |
|
Total capital expenditures and acquisitions |
| $ | 12,954 |
|
| $ | 108,640 |
|
Other Matters Impacting Liquidity and Capital Resources
Concentration of Customers
For the nine months ended September 30, 2017, we distributed approximately 14%A significant portion of our total wholesale distribution volumesgrowth capital expenditures are discretionary and we regularly review our capital plans in light of anticipated proceeds from sales of sites.
Concentration Risks
See Note 1 for information on our concentration risks related to DMSour customers, fuel suppliers, fuel carriers and its affiliates and DMS and its affiliates accounted for approximately 23% of our rental income. For the nine months ended September 30, 2017, we distributed 8% of our total wholesale distribution volume to CST retail sites that are not supplied by CST Fuel Supply and received 22% of our rental income from CST. For more information regarding transactions with DMS and its affiliates and CST, see Note 8 of the Condensed Notes to Consolidated Financial Statements.merchandise suppliers.
For the nine months ended September 30, 2017, we received 9% of our rental income from a lessee dealer that operates certain of the retail sites acquired through the PMI and One Stop acquisitions.Outlook
Outlook
As noted previously, the prices paid to our motor fuel suppliers for wholesale motor fuel (which affects our costscost of sales) are highly correlated to the price of crude oil. The crude oil commodity markets are highly volatile, and the market prices of crude oil, and, correspondingly, the market prices of wholesale motor fuel, experience significant and rapid fluctuations, which affect our motor fuel gross profit. See “Significant Factors Affecting
Our results for 2024 are anticipated to be impacted by the following:
We expect our rent incomeApplegreen Acquisition is anticipated to increase gross profit and operating expenses in 2017 based on our recent acquisitionsthe retail segment and our expectation thatreduce gross profit in the wholesale segment.
We will continue to evaluate acquisitions on an opportunistic basis. Additionally, we will pursue acquisition targets that fit into our strategy. Whether we will be able to execute acquisitions will depend on market conditions, availability of suitable acquisition targets at attractive terms, acquisition relatedacquisition-related compliance with customary regulatory requirements, and our ability to finance such acquisitions on favorable terms and in compliance with our debt covenant restrictions.
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In May 2014, the FASB issued ASU 2014-09–Revenue from Contracts with Customers (Topic 606), which results in comprehensiveThere is no new revenue accounting guidance requires enhanced disclosureseffective or pending adoption that has had or is anticipated to help users of financial statements better understand the nature, amount, timing, and uncertainty of revenue that is recognized, and develops a common revenue standard under U.S. GAAP and International Financial Reporting Standards. Specifically, the core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services. With the issuance of ASU 2015-14, which deferred the effective date by one year, this guidance is effective January 1, 2018. The guidance can be applied either retrospectively to each prior reporting period presented, or as a cumulative-effect adjustment as of the date of adoption. Although management continues to evaluate the impact of adopting this new guidance, we have completed an assessment and to date, have not identified any material impact on the financial statements, although it will affect disclosures. This guidance is expected to apply to over 90% of our revenues as the only primary revenue stream outside the scope of this guidance is rental income. We anticipate using the modified retrospective method of adoption.
In February 2016, the FASB issued ASU 2016-02–Leases (Topic 842). This standard modifies existing guidance for reporting organizations that enter into leases to increase transparency by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. ASU 2016-02 is effective for fiscal years and interim periods within those years beginning after December 15, 2018, and requires a modified retrospective approach to adoption. Early adoption is permitted. Management continues to evaluate the impact of this new guidance, but the adoption will have a material impact on our balance sheet as wefinancial statements. See Note 1 to the financial statements for information on new accounting guidance that will be required to recognize right-of-use assetsimpact segment reporting and lease liabilities for operating leases. We do not anticipate adopting this guidance early. We intend to apply each of the practical expedients in adopting this new guidance.
In October 2016, the FASB issued ASU 2016-16–Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory. This standard requires companies to account for income tax effects of intercompany transactions other than inventory in the period in which the transfer occurs. This guidance is effective January 1, 2018 and requires a modified retrospective application through a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption. We have chosen to early adopt the standard effective January 1, 2017, which had no impact as of the date of adoption but could impact us in the future.disclosures.
In January 2017, the FASB issued ASU 2017-01–Business Combinations (Topic 805): Clarifying the Definition of a Business. This standard clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The definition of a business affects many areas of accounting including acquisitions, disposals, goodwill and consolidation. ASU 2017-01 is effective for public fiscal years and interim periods within those years beginning after December 15, 2017. We have chosen to early adopt this standard effective January 1, 2017. Although there was no impact upon adoption, among other things, this guidance will result in the capitalization rather than expensing of acquisition costs in future transactions that will be accounted for as asset acquisitions rather than business combinations under the new definition of a business.
In January 2017, the FASB issued ASU 2017-04–Intangibles–Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. This standard removes Step 2 of the goodwill impairment test. A goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. ASU 2017-04 is effective for a company's annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. Management has elected to early adopt this guidance effective January 1, 2017, which had no impact upon adoption but could result in a change in the measurement of an impairment loss if an impairment was required to be recorded in the future.
Certain other new financial accounting pronouncements have become effective for our financial statements but the adoption of these pronouncements did not materially impact our financial position, results of operations or disclosures.
Critical Accounting Policies Involving Critical Accountingand Estimates
The preparation of financial statements in accordance with U.S. GAAP requires us to make estimates and assumptions that affect the amounts reported in our financial statements and accompanying notes. Actual results could differ from those estimates.
There have been no material changes to the critical accounting policies described in our Form 10-K.
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ITEM 3. QUANTITATIVE AND QUALITATIVEQUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market Risk
We purchase gasoline and diesel fuel from several suppliers at costs that are subject to market volatility. These purchases are generally made pursuant to contracts or at market prices established with the supplier. We do not currently engage in hedging activities for these purchases due to our pricing structure that allows us to generally pass on priceOther than interest rate risk, no significant changes to our customersmarket risk have occurred since December 31, 2023. For a discussion of market risks affecting us, refer to Part II, Item 7A—"Quantitative and related parties.Qualitative Disclosures About Market Risk” included in our Form 10-K.
Interest Rate Risk
As of September 30, 2017,March 31, 2024, we had $431.5$798.3 million outstanding on our revolving credit facility.CAPL Credit Facility. Our outstanding borrowings bear interest at LIBORSOFR plus an applicable margin, which was 3.00% at September 30, 2017. Our borrowings had a weighted-averagemargin.
Taking the interest rate swap contracts into account, the effective interest rate on our CAPL Credit Facility at September 30, 2017 of 4.24%March 31, 2024 was 5.1%.
Taking into account the interest rate swap contracts that were effective beyond April 1, 2024, the effective interest rate on our CAPL Credit Facility at March 31, 2024 would have been 6.7%. A one percentage point change in our average rateSOFR would impact annual interest expense by approximately $4.3$4.0 million.
Commodity Price Risk
We have not historically hedged or managedSee Note 8 to the financial statements for information regarding our price risk with respect to our commodity inventories (gasoline and diesel fuel), as the time period between the purchases of our motor fuel inventory and the sales to our customers is very short.interest rate swap contracts.
Regarding our supplier relationships, a majority of our total gallons purchased are subject to Terms Discounts. We have not historically hedged or managed our price risk with respect to these Terms Discounts. Based on our current volumes, we estimate a $10 per barrel change in the price of crude oil would impact our annual wholesale motor fuel gross profit by approximately $2.2 million related to these Terms Discounts.
Foreign Currency Risk
Our operations are located in the U.S., and therefore are not subject to foreign currency risk.
ITEM 4. CONTROLS AND PROCEDURES
(a) Evaluation of Disclosure Controls and Procedures
Our management has evaluated, with the participation of our principal executive officer and principal financial officer, the effectiveness of our disclosure controls and procedures (as defined in RulesRule 13a-15(e) under the Exchange Act) as of the end of the period covered by this report, and basedreport. Based on theirthis evaluation, our principal executive officerChief Executive Officer and principal financial officer haveChief Financial Officer concluded that our disclosure controls and procedures were effective as of September 30, 2017.March 31, 2024.
(b) Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting (as that term is defined in RulesRule 13a-15(f) under the Exchange Act) that occurred during the three months ended September 30, 2017,March 31, 2024, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
37
PART II - OTHEROTHER INFORMATION
We hereby incorporate by reference into this Item our disclosures made in Part I, Item 1 of this quarterly report included in Note 911 of the Condensed Notes to Consolidated Financial Statements.financial statements.
There were no material changes in risk factors for the company in the period covered by this report. See the risk factors disclosed in the section entitled “Risk Factors”"Risk Factors" in our Form 10-K forduring the year ended December 31, 2016.period covered by this report.
Management Fee Issuance
As discussed in Note 8 to Item 1 in Part I above, on February 28, 2017, May 10, 2017 and August 9, 2017, CrossAmerica issued 171,039, 128,983, and 124,003 common units to a subsidiary of CST/Couche-Tard as partial payment for the amounts incurred for the fourth quarter of 2016, the first quarter of 2017 and the second quarter of 2017 respectively, under the terms of the Amended Omnibus Agreement. This issuance of common units was made in reliance on Section 4(a)(2) of the Securities Act of 1933, as amended.
Exhibit No. | Description | |
10.1 |
| |
| ||
31.1 * | ||
31.2 * | ||
32.1*† | Certification of Principal Executive Officer of CrossAmerica GP LLC pursuant to 18 U.S.C. §1350 | |
32.2*† | Certification of Principal Financial Officer of CrossAmerica GP LLC pursuant to 18 U.S.C. §1350 | |
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* Filed herewith
† Not considered to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that section.
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38
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
CROSSAMERICA PARTNERS LP | ||
By: | CROSSAMERICA GP LLC, its General Partner | |
By: | /s/ | |
| ||
| ||
(Duly Authorized Officer and Principal Financial | ||
Date: November 7, 2017May 8, 2024
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