CAPL - Earnings call transcript Q4 2018 | CrossAmerica Partners LP

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Operator

Good morning, and welcome to the CrossAmerica Partners Fourth Quarter and Year-End 2018 Earnings Call. My name is Brandon and I’ll be your operator for today. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Please note this conference is being recorded. it Randy turn of Executive now Relations. Investor I’ll over Palmer, to Director And Mr. begin. may you Palmer,

Randy Palmer

we and the Thank CrossAmerica’s morning, webcast XXXX website. provide Gerardo to I operator. and quarter, other event. Partners morning’s a open me you, financial members Good and CrossAmerica and the call are that some presentation President; year-end the operational the for and then today year are overview will and highlights slides executive questions. part Financial we’ll the brief These and that of opening will we’ll point CrossAmerica should Evan joining of turn are results. utilize as Smith, Evan the from comments fourth Officer; over call Valencia, our during up the will quarter Gerardo earnings end, on to performance some today’s the this to call Chief With and posted call. of available out CEO the discuss follow thank At and you team. leadership slides

our including and would and reports Commission, will that for from quarterly I affect of organization. actual begin, expected may Please management’s that There expectations. projections XX-Q discussion Exchange filings reports XX-K future that differ be and the regarding remind operational actual not important be a achieved forward-looking to or the Securities results results. factors expectations Form question-and-answer that will see CrossAmerica’s we on Before session, today’s could on with call, of and include annual Form future plans, assurance no revenue, opportunities statements everyone and metrics, including like can the expectations, beliefs

CrossAmerica’s management forward-looking organization today’s the represent intent or and as the of any obligation statements. statements update to Forward-looking judgment disclaims any date of

being measures these not provided to we Principles that basis call, GAAP reconcile GAAP. our provide measures to webcast available of part a on over results is this of Generally We’ve recording or I’ll on also our call call call with period performance schedules be conform website of reported Accepted And with a conference and U.S. today’s a the turn CrossAmerica Gerardo. now that for certain the non-GAAP finance Today’s as may earnings press XX certain days. – do Accounting that, During release. will

Gerardo Valencia

Good XXXX briefly minutes. Thank highlights and afternoon, full-year few and from earnings quarter We and those you, quarter. year-end will through fourth Randy. of wanted I go morning, our review results the results first, operating and yesterday everybody. in Evan to details our some reported a But

operating income and For growth the Wholesale both million, XXXX, full-year our Retail by $X.X income net we and reported businesses. in of million driven $XX of

million income $X.X Our and was the fourth XXXX. $XX.X operating of net quarter for million was income

of million EBITDA XXXX, the quarter XXXX $XX.X X% was the increase adjusted million increase and XXXX. full-year fourth the an for was for X% quarter, over fourth an Our $XXX.X over of

earlier this quarter to Our per delivered momentum $XX.X Board that we the quarter show with and year. was our quarterly the for We month. distributable our the ratio results XX, $X.XXXX initiatives. to We And our fourth strategic of January paid on flow of distribution for cash a unit, million. fourth coverage approved continue XXXX attributable strong strengthened was

Let more into me some go detail.

to Slide and full-year turn If for briefly operating quarter. you of the X, results would review some I our

flows by XXXX. distribute X%, $X.XXX primarily XXXX XX% in with volume the site was We in by a X%. $X.XXX number of fuel full-year fuel Overall, during that Applegreen. which our This our This in our driven third by for importantly, to gross sites of our sites the Florida XXXX. the from our For gross motor gross despite transitioning of in was in increased X% we rental November a grew by while year-over-year, wholesale and profit for wholesale regards Jet-Pep our profit multi-site Retail In acquisition in segment, to Wholesale disruption, the both profit increase by and volume our operator, through XXXX. average of grew more we increasing XXXX. flat relatively quarter and it fuel to third-party to XX% XXXX, other grew resulted XXXX we margin

Our excluding costs our in discipline benefits and our general expenses, X% and administrative overhead. acquisition-related corporate reflecting continued separation declined manage to XXXX,

from the quarter an increase our quarter of our $X.XXX wholesale Wholesale of of during XXXX, fourth XXXX, by to XX%. $XX.X the a gross million strong of This the fourth in increased fuel profit margin primarily fuel For for business driven $XX.X representing quarter. million was fourth

fuel strong company-operated versus of segment, of Rent for quarter increase other XXXX. fourth gross increased which a profit XX% comparing the XXXX of over was within had also Retail an when the XXXX. $X.XXX X% sites our We fourth of margin our quarter and

While the expense timing an We was in already G&A declined expenses. I noted, about into going from to as see we XXXX level did due quarter, primarily to uptick such XXXX. of very good G&A G&A X% our our the XXXX. this in And expenses feel our fourth

slide, If like would XXXX. few I from you turn review a highlights to would to the next

Wholesale focus Our and continues business to we to well, on growing developing do and it. continue

motor Wholesale the driven overall profit. Our X%, gross gross increased our for fuel segment profit by

result optimize our both on during an to year. higher margin per increasing noted the and initiatives slide, profitable our gallon margin. most previous a is This realized to gallons I volume of the As we and grow

G&A. to in as operating We the also well our both manage as continue side expenses,

synergies talking management good As level. Overall, a reduction by and basis and throughout at our operating the have about corporate of and to with acquisition with discipline. continue our overall X%, the charges, down driven been manage this reported XXXX, on XX% benefit we excluding both our expenses, along we expenses expenses were that declined was separation

XXXX, Florida. transitioned in XX we During the quarter to sites third of Applegreen

into of as capabilities we working their previously future, to Our quarter, team operating of transition the Applegreen investment a third the forward we complete discussed. plans in with strength good these have very look did and the the sites job given and to their

Moving we and U.S. XXX stores where a CrossAmerica part the will with to In asset Circle we fuel slide. company-operated are receiving exchange master operated retail announced leased convenience our into the in lead the that exchange an for part and Retail by sites in stores of from stores Midwest Circle had be December, XX K, are we K next entered XX that and agreement of segment. where currently currently are Upper U.S. that

will call CrossAmerica. will in we As are be transacted operate sites, during to the and our while under dealers be secured ownership the December, Circle then to K they noted

over these period. a will expect changes We in be done tranches XX-month

dealerization intent on now signed have headway the we of XX XXX of of converted significant and letters already made already process these have regarding contracts. have and two XX over We sites,

first complete to and are transaction of seeing in the track to we on execute first-half progress as accelerated these blueprint XXXX, the still We’re established transactions. we our have

several our leverage K franchise for synergy also these to site capture. the to regarding plans I have Circle wanted We you of update Alabama locations. and our

are We that we the from acquisition Alabama converting those to Jet-Pep acquired the Marathon our sites currently fuel brand.

sub-branded leverage fuel we hard operations, the of had summer. and penetration. several now for these We and this area improvements better brand of launch premium time, them the operators now all locations. market these between through plans and and in better running have We to a have Over recognition will K anticipate our with Circle in be franchise sites performance

our Regarding synergies.

review our third of We the have a completed now of strategic portfolio.

was CST identified earning merging the occurred, few implement and right of have which we quarter focus Brands between in our since We with first plan to and savings, a strategic to growth with are companies. Through Couche-Tard new our we the the brands about line captured provided call. contracts during million a to quarters, first you that have $X.X oil six cost

we plans, believe as our to opportunities lower synergies. synergy As in we total remain we costs there our enter confident are and deliver further XXXX,

some next you want turn our XXXX. and please, slide, for If objectives discuss to would strategies of I the to

to We will in our deliver EBITDA. continue growth

First, through to do us not initiatives that more access capital. require

portfolio. to synergies across capture We review to fuel continue will fuel our implement our strategic

excellent great drive from more our We our offer are who of value have assets, team all our and in as we a Alabama, improve transform developing operators sites.

add efficient the a continue Partner to will with Circle we our across implement General exchange U.S. together and a in K, can value how We seamless way demonstrating asset with

We as U.S. continues industry the consolidate in third-party to assess to the acquisition, continue transaction for will

We unit level our for current on coverage and XXXX, in deleverage improving through to maintain focusing ratio distribution to we’re are our and further our sheet expecting the currently capital and expect structure year. balance our strengthen

to finished with the the share plan Finally, our we fourth year quarters. Overall, were on details to in we overall and the we up with strategy our have we very quarter. business working well more pleased for have coming and resource been you

we as we business base The team. plans great it a is through have to have strengthen further and strong XXXX. We go

Partner, the continuing are portfolio. General deliver with exchange the completing of our to and from asset to synergies working We working capture drive through growth value our

are focused Evan. leveraging We over turn coverage I it our to ratio will the balance sheet. improving With on and that,

Evan Smith

you, Thank Gerardo.

please results partnership. would full-year for quarter turn the would you like our to X, fourth and to Slide review If I

As adjusted an quarter, of $XX.X we look XXXX, the at EBITDA to in compared XXXX, reflecting of of X%. reported in $XX.X fourth the increase quarter we fourth million million

fourth the million in quarter for $XX.X was flow cash distributable million XXXX. XXXX versus Our of $XX.X

expenses. increase segments, Gerardo cash by adjusted in and but in results As good Retail both touched distributable our and both versus from impacted our equity-funded benefited cash flow earlier, the omnibus on EBITDA Wholesale were

of on paid rose basis XXXX. million in the fourth XXXX. XXXX million, or in XXXX, fourth versus million quarter compared flow of adjusted XXXX. of in million for of X.XX full-year the quarter coverage $XXX.X X% EBITDA a of EBITDA $XX reported increase the the to to distribution the $XX.X Distributable of for adjusted times X.XX Our full-year over times XXXX, $XXX.X cash we And a for was

to the also X.XX of XXXX. at coverage distribution times, compared full-year, increased the times for X.XX to rising end Our

borrowings, facility our down Slide XX, balance turn ratio quarter covenant the fourth in managed to pay to very resulting additional flow at we times, ratios. prior If used cash X.XX our you the with revolver X.XX under from quarter a leverage would financial during compliance next as down and credit times and prudently defined in sheet the

of over coverage resulting we third for had XX, distribution February on $XX.X quarter The our of the of ratio fourth of partnership to XXXX quarter a available paid per times X.XX a facility. in million basis. attributable a XXXX, paid total on credit $X.XXX million, $XX of during a unit the As of

noted I leverage, XXXX, targets, X.XX that the a here I wanted times in In times to to regards in the XX-month from will One trailing target for our move we And continue and was goals ratio. our to trailing XXXX. credit was expect leverage period. coverage will XX-month up and times prior item paid or our for we coverage X.XX noted the coverage previous existing X in facility our basis, targeting towards range. on continue work our coverage it improve X.XX to on be to our As slide, that, mention X.X April maturing XX-K, is to times in to

have completed to have XXXX underlying on we’re to expect the with existing a business of a We into new strong during In ended earlier, of negotiations recently to lenders pleased enter the as credit replace Gerardo five-year our and conclusion, we performance credit base and with our facility facility the XXXX. initiated this quarter. in first-half mentioned note

enter and it coverage that, ratio manage now up to balance will we we will our open we for XXXX, As should that sheet our questions. improve we expect With continue leverage. and

Operator

you. Thank

no go [Operator we ahead. have We [Operator we moment. And Fargo, begin the Lui Wells And at online. Sharon question-and-answer will now Please questions the Instructions] have session. from Instructions]

Sharon Lui

the I Applegreen. Hi. performance to transitioned Good in to of could if wondering the more to those sites change Have And the you update maybe time? was provide that sites morning, is seen, gentlemen. on Applegreen guess, over you I were plan transition just sites? an

Gerardo Valencia

Yes. to Hi, Sharon, good hear you.

work tell transition have in Hurricane very after through Actually, did had that you to with you did get October, to area. those of we a I because to that make of ironically, a and were a But working came work done work impacted we sites. might that supplier actually done them So they we’ve did opportunity, with regards of actually There our we’re lot actually in with as place. lot were doing that, that to the that actually the of lot in. and we that recall, we time together settled that all the that sure a oil refresh can them image several to of we And better well period were Michael some there’s an through of in as Applegreen. transition,

a As you know, is professional Applegreen operator. very

time fortunate that course, region. within many play people that by them and it very came Michael pleased the tragedy of And Hurricane that we was, we’re in so And have a for through.

VP I’m He other where actually future, them. so to I the meeting about talk is and of meetings to George? we responsible would Wilkins. areas like he And with a ask to George with with Ops, them. some terms our is just Applegreen are actually going working in So little he’s recent had bit about that of him

George Wilkins

things. couple Thank Yes. you, like would to I of say Gerardo. a

First, the very closely we’re with those in in actually those with have And sites. gone developing Florida Applegreen improved since they’ve sites, performance working their in those sites. sites

throughout exchange In the are that to the continue including the we addition opportunities are that, rest portfolio, of asset for these Applegreen. to growth the sites of looking strategic part with

Sharon Lui

you tranches? thinking the as XX it the – thinking terms for your behind, makes sites. the think asset you Okay, the like have sense the I is two of mentioned exchange, of letters for operators? to great. you And sign in What these or that signed split the intent I of XXX guess, of Do transactions, evenly, what’s timing new sites you believe

Gerardo Valencia

Yes.

right XX notes this at when So, of point XX actually we in have intent. actually had Sharon, now, now, have XX. we Right letters in what And call, XX. initiated I XX I had the over contracts. my said signed we There’s time. we XX

moving So I’m we’re pace. saying, at just

we speed. CrossAmerica as of planning And can. interest the it’s well are at years. these moving quickly Circle we of We’re two these disclosed, on as in as within complete as as we best K, to finishing course, But,

is, this we our deployed And transaction, Where to with all best you right people about these working the K, make we’re of within units different now happen. so we sure are nine them. if have think so entails business Circle

start make created – to and have a we organization So of process managing a we’re created structure that that within we’ve the we lot sure that seamlessly.

we are is transition very to sure staff operation. a treat make dealers. all and ops where we employees that So operation a their want to company that is in to moving this the And but being that be way going seamless respectful, from the also of to

We of that setting So And we seeing were of have mentioned all quick because the processes. now. started because what of we’re all I contracts, that’s process. established low, ramp-up these we

We as and earnings close the the speed moving I’m We’re communicate finish that are we to we two within we as expect do or this expect now, tranche with at definitely fast and finish more hoping our to transaction, moving first within call. first-half, years, to next to you can. but time the first details by the have

Sharon Lui

Okay, great. Thank you.

Gerardo Valencia

Sharon. Thanks,

Operator

no Okay. turn closing you moment. Instructions] [Operator remarks. Showing at questions the for further it back to Randy, we’ll

Randy Palmer

Okay.

think to I’m I on it pass to Gerardo. going

closing wants I some comments. think to he make

Gerardo Valencia

we just know technical wanted I sure difficulty Yes. were having I difficulties. to some – make

So – okay.

I that mention. things of couple the wanted So to

that, our to versus our delivery asset a overall volume have places, actually be we’re to a one going the working better in sites. of from because is other improve And better means each the make what volume volume with where been to front, quality that bit I returns just and and of on the portfolio, improve while we’ve able to we on where seeing itself. base. And First, focusing done initiatives are of to we margin we’re that the that that, part we’re and I wanted talked sure margin. the about for And different get Alabama there’s

and as very wanted results everybody of then more we’re as pleased fourth what of talked about, So strong going been with the quarter. get to into our we just in of that’s in part a is second conversation to we we’re quarter. we having focusing with that sharing what leave have the set strategy I that, on be And

very team. on organization. the our General And going we how very how and everybody of strategic implementing have our strong great a we proud roles, a have pulled on We we’re their about together, of program. how keep that cost structure team I’m strong Partner is have individuals built we to clear and group a focusing with interact

when talked at strategic on guys that And be assets and to transactions ratio future we’re One for asset with the talking said, As set I exchange, are or the motion looking already next future sure transactions. year. quarter in in we we’re Partner. our of about our have missed we General mention improvement, fuel Alabama deleverage about synergies, a might Evan we’re the and at coverage update you thing of exchanges future balance other improving exchanges, – making sheet also the we’ll assessing for or we we’re of so. focusing our the that rest that the And balance for the

Randy Palmer

good. Very

appreciate Okay, us We today. that complete does joining today’s you call. of conference each

have contact If free a us. do Thanks, to follow-up good questions, please you day. have feel and

Operator

ladies you. gentlemen, and concludes Thank And for conference. you joining. Thank this today’s

may disconnect. You now

CrossAmerica Partners (CAPL) 26 Feb 192018 Q4 Earnings call transcript