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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2023

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

 

Commission File No. 001-35711

img124392115_0.jpg 

 

CROSSAMERICA PARTNERS LP

(Exact name of registrant as specified in its charter)

 

Delaware

 

45-4165414

(State or Other Jurisdiction of
Incorporation or Organization)

 

(I.R.S. Employer
Identification No.)

 

 

 

 

645 Hamilton Street, Suite 400

Allentown, PA

 

18101

(Zip Code)

(610) 625-8000

(Address of Principal Executive Offices)

 

 (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 every Interactive Data File required to be submitted 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 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,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer ☐

Accelerated filer

Non-accelerated filer ☐

Smaller reporting company

 

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 May 4, 2023, the registrant had outstanding 37,952,950 common units.

 


 

TABLE OF CONTENTS

 

 

PAGE

 

 

 

Commonly Used Defined Terms

 

i

 

 

 

PART I - FINANCIAL INFORMATION

 

1

Item 1. Financial Statements

 

1

Consolidated Balance Sheets as of March 31, 2023 and December 31, 2022

 

1

Consolidated Statements of Operations for the Three Months Ended March 31, 2023 and 2022

 

2

Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2023 and 2022

 

3

Consolidated Statements of Equity and Comprehensive Income for the Three Months Ended March 31, 2023 and 2022

 

4

Condensed Notes to Consolidated Financial Statements

 

5

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

17

Item 3. Quantitative and Qualitative Disclosures about Market Risk

 

30

Item 4. Controls and Procedures

 

30

 

 

 

PART II - OTHER INFORMATION

 

30

Item 1. Legal Proceedings

 

30

Item 1A. Risk Factors

 

30

Item 6. Exhibits

 

30

 

 

 

SIGNATURE

 

32

 

 


 

COMMONLY USED DEFINED TERMS

 

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

 

 

 

Holdings

 

CAPL JKM Holdings LLC, an indirect wholly-owned subsidiary of CrossAmerica and sole member of CAPL JKM Partners

 

 

 

CAPL JKM Partners

 

CAPL JKM Partners LLC, a wholly-owned subsidiary of Holdings

 

 

 

Joe’s Kwik Marts

 

Joe’s Kwik Marts LLC, a wholly-owned subsidiary of CAPL JKM Partners

 

 

 

LGWS

 

Lehigh Gas Wholesale Services, Inc., an indirect wholly-owned subsidiary of CrossAmerica

 

 

 

CrossAmerica Partners LP related parties:

 

DMI

 

Dunne Manning Inc. (formerly Lehigh Gas Corporation), an entity affiliated with the Topper Group

 

 

 

General Partner

 

CrossAmerica GP LLC, the General Partner of CrossAmerica, a Delaware limited liability company, indirectly owned by the Topper Group.

 

 

 

Topper Group

 

Joseph V. Topper, Jr., collectively with his affiliates and family trusts that have ownership interests in the Partnership. Joseph V. Topper, Jr. is the founder of the Partnership and a member of the Board. The Topper Group is a related party and large holder of our common units.

 

 

 

TopStar

 

TopStar Inc., an entity affiliated with a family member of Joseph V. Topper, Jr. TopStar is an operator of convenience stores that leases retail sites from us, and since April 14, 2020, also purchases fuel from us.

 

 

 

Other Defined Terms:

 

 

 

 

 

7-Eleven

 

7-Eleven, Inc.

 

 

 

ASC

 

Accounting Standards Codification

 

 

 

AOCI

 

Accumulated other comprehensive income

 

 

 

ASU

 

Accounting Standards Update

 

 

 

Board

 

Board of Directors of our General Partner

 

 

 

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.

 

 

 

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 as amended and restated by the Amendment and Restatement Agreement, dated as of March 31, 2023, 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.

 

 

 

CSS

 

Community Service Stations, Inc.

 

 

 

DTW

 

Dealer tank wagon contracts, which are variable market-based cent per gallon priced wholesale motor fuel distribution or supply contracts; DTW also refers to the pricing methodology under such contracts

 

 

 

EBITDA

 

Earnings before interest, taxes, depreciation, amortization and accretion, a non-GAAP financial measure

 

 

 

EMV

 

Payment method based upon a technical standard for smart payment cards, also referred to as chip cards

 

 

 

i


 

Exchange Act

 

Securities Exchange Act of 1934, as amended

 

 

 

Form 10-K

 

CrossAmerica’s Annual Report on Form 10-K for the year ended December 31, 2022

 

 

 

Internal Revenue Code

 

Internal Revenue Code of 1986, as amended

 

 

 

IPO

 

Initial public offering of CrossAmerica Partners LP on October 30, 2012

 

 

 

JKM Credit Facility

 

Credit Agreement, dated as of July 16, 2021, as amended on July 29, 2021 among CAPL JKM Partners, Holdings and Manufacturers and Traders Trust Company, as administrative agent, swingline lender and issuing bank. The Term Loan Facility was paid off and the JKM Credit Facility was terminated on March 31, 2023.

 

 

 

LIBOR

 

London Interbank Offered Rate

 

 

 

MD&A

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

 

 

NYSE

 

New York Stock Exchange

 

 

 

Omnibus Agreement

 

The Omnibus Agreement, effective January 1, 2020, by and among the Partnership, the General Partner and DMI. The terms of the Omnibus Agreement were approved by the independent conflicts committee of the Board, which is composed of the independent directors of the Board. Pursuant to the Omnibus Agreement, DMI agrees, among other things, to provide, or cause to be provided, to the Partnership certain management services at cost without markup.

 

 

 

Partnership Agreement

 

Second Amended and Restated Agreement of Limited Partnership of CrossAmerica Partners LP, dated as of February 6, 2020

 

 

 

Predecessor Entity

 

Wholesale distribution contracts and real property and leasehold interests contributed to the Partnership in connection with the IPO

 

 

 

SEC

 

U.S. Securities and Exchange Commission

 

 

 

SOFR

 

Secured Overnight Financing Rate

 

 

 

Term Loan Facility

 

$185 million delayed draw term loan facility provided under the JKM Credit Facility

 

 

 

U.S. GAAP

 

U.S. Generally Accepted Accounting Principles

 

 

 

WTI

 

West Texas Intermediate crude oil

ii


 

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

CROSSAMERICA PARTNERS LP

CONSOLIDATED BALANCE SHEETS

(Thousands of Dollars, except unit data)

(Unaudited)

 

 

 

March 31,

 

 

December 31,

 

 

 

2023

 

 

2022

 

ASSETS

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

7,517

 

 

$

16,054

 

Accounts receivable, net of allowances of $723 and $686, respectively

 

 

28,568

 

 

 

30,825

 

Accounts receivable from related parties

 

 

524

 

 

 

743

 

Inventory

 

 

47,911

 

 

 

47,307

 

Assets held for sale

 

 

2,012

 

 

 

983

 

Current portion of interest rate swap contracts

 

 

13,448

 

 

 

13,827

 

Other current assets

 

 

11,512

 

 

 

8,667

 

Total current assets

 

 

111,492

 

 

 

118,406

 

Property and equipment, net

 

 

716,918

 

 

 

728,379

 

Right-of-use assets, net

 

 

161,161

 

 

 

164,942

 

Intangible assets, net

 

 

108,338

 

 

 

113,919

 

Goodwill

 

 

99,409

 

 

 

99,409

 

Interest rate swap contracts, less current portion

 

 

968

 

 

 

3,401

 

Other assets

 

 

25,453

 

 

 

26,142

 

Total assets

 

$

1,223,739

 

 

$

1,254,598

 

 

 

 

 

 

 

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Current portion of debt and finance lease obligations

 

$

2,937

 

 

$

11,151

 

Current portion of operating lease obligations

 

 

35,288

 

 

 

35,345

 

Accounts payable

 

 

69,605

 

 

 

77,048

 

Accounts payable to related parties

 

 

5,641

 

 

 

7,798

 

Accrued expenses and other current liabilities

 

 

23,556

 

 

 

23,144

 

Motor fuel and sales taxes payable

 

 

20,471

 

 

 

20,813

 

Total current liabilities

 

 

157,498

 

 

 

175,299

 

Debt and finance lease obligations, less current portion

 

 

776,979

 

 

 

761,638

 

Operating lease obligations, less current portion

 

 

131,429

 

 

 

135,220

 

Deferred tax liabilities, net

 

 

8,532

 

 

 

10,588

 

Asset retirement obligations

 

 

46,794

 

 

 

46,431

 

Other long-term liabilities

 

 

46,923

 

 

 

46,289

 

Total liabilities

 

 

1,168,155

 

 

 

1,175,465

 

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

 

 

Preferred membership interests

 

 

26,757

 

 

 

26,156

 

 

 

 

 

 

 

 

Equity:

 

 

 

 

 

 

Common units— 37,952,950 and 37,937,604 units issued and
   outstanding at March 31, 2023 and December 31, 2022, respectively

 

 

15,276

 

 

 

36,508

 

Accumulated other comprehensive income

 

 

13,551

 

 

 

16,469

 

Total equity

 

 

28,827

 

 

 

52,977

 

Total liabilities and equity

 

$

1,223,739

 

 

$

1,254,598

 

 

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

1


 

CROSSAMERICA PARTNERS LP

CONSOLIDATED STATEMENTS OF OPERATIONS

(Thousands of Dollars, except unit and per unit amounts)

(Unaudited)

 

 

Three Months Ended March 31,

 

 

 

2023

 

 

2022

 

Operating revenues (a)

 

$

1,016,159

 

 

$

1,093,211

 

Costs of sales (b)

 

 

934,100

 

 

 

1,014,381

 

Gross profit

 

 

82,059

 

 

 

78,830

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

Operating expenses (c)

 

 

45,623

 

 

 

42,109

 

General and administrative expenses

 

 

5,739

 

 

 

6,483

 

Depreciation, amortization and accretion expense

 

 

19,820

 

 

 

20,275

 

Total operating expenses

 

 

71,182

 

 

 

68,867

 

Loss on dispositions and lease terminations, net

 

 

(1,767

)

 

 

(244

)

Operating income

 

 

9,110

 

 

 

9,719

 

Other income, net

 

 

261

 

 

 

130

 

Interest expense

 

 

(12,012

)

 

 

(6,661

)

(Loss) income before income taxes

 

 

(2,641

)

 

 

3,188

 

Income tax benefit

 

 

(1,662

)

 

 

(1,859

)

Net (loss) income

 

 

(979

)

 

 

5,047

 

Accretion of preferred membership interests

 

 

601

 

 

 

 

Net (loss) income available to limited partners

 

$

(1,580

)

 

$

5,047

 

 

 

 

 

 

 

 

Basic and diluted (loss) earnings per common unit

 

$

(0.04

)

 

$

0.13

 

 

 

 

 

 

 

 

Weighted-average limited partner units:

 

 

 

 

 

 

Basic common units

 

 

37,940,332

 

 

 

37,900,146

 

Diluted common units

 

 

37,940,332

 

 

 

37,959,441

 

 

 

 

 

 

 

 

Supplemental information:

 

 

 

 

 

 

(a) includes excise taxes of:

 

$

69,884

 

 

$

66,858

 

(a) includes rent income of:

 

 

21,320

 

 

 

20,627

 

(b) excludes depreciation, amortization and accretion

 

 

 

 

 

 

(b) includes rent expense of:

 

 

5,554

 

 

 

5,841

 

(c) includes rent expense of:

 

 

3,798

 

 

 

3,708

 

 

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

2


 

CROSSAMERICA PARTNERS LP

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Thousands of Dollars)

(Unaudited)

 

 

Three Months Ended March 31,

 

 

 

2023

 

 

2022

 

Cash flows from operating activities:

 

 

 

 

 

 

Net (loss) income

 

$

(979

)

 

$

5,047

 

Adjustments to reconcile net income (loss) to net cash provided by
   operating activities:

 

 

 

 

 

 

Depreciation, amortization and accretion expense

 

 

19,820

 

 

 

20,275

 

Amortization of deferred financing costs

 

 

1,848

 

 

 

680

 

Credit loss expense

 

 

37

 

 

 

45

 

Deferred income tax benefit

 

 

(2,056

)

 

 

(2,045

)

Equity-based employee and director compensation expense

 

 

561

 

 

 

732

 

Loss on dispositions and lease terminations, net

 

 

1,767

 

 

 

244

 

Changes in operating assets and liabilities, net of acquisitions

 

 

(9,460

)

 

 

3,410

 

Net cash provided by operating activities

 

 

11,538

 

 

 

28,388

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

Principal payments received on notes receivable

 

 

53

 

 

 

33

 

Proceeds from sale of assets

 

 

568

 

 

 

1,460

 

Capital expenditures

 

 

(6,001

)

 

 

(8,934

)

Cash paid in connection with acquisitions, net of cash acquired

 

 

 

 

 

(1,885

)

Net cash used in investing activities

 

 

(5,380

)

 

 

(9,326

)

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

Borrowings under revolving credit facilities

 

 

187,400

 

 

 

30,600

 

Repayments on revolving credit facilities

 

 

(15,537

)

 

 

(26,575

)

Borrowings under the Term Loan Facility

 

 

 

 

 

1,120

 

Repayments on the Term Loan Facility

 

 

(158,980

)

 

 

(24,600

)

Net proceeds from issuance of preferred membership interests

 

 

 

 

 

24,500

 

Payments of finance lease obligations

 

 

(698

)

 

 

(658

)

Payments of deferred financing costs

 

 

(6,906

)

 

 

(6

)

Distributions paid on distribution equivalent rights

 

 

(56

)

 

 

(46

)

Distributions paid on common units

 

 

(19,918

)

 

 

(19,896

)

Net cash used in financing activities

 

 

(14,695

)

 

 

(15,561

)

Net (decrease) increase in cash and cash equivalents

 

 

(8,537

)

 

 

3,501

 

 

 

 

 

 

 

 

Cash and cash equivalents at beginning of period

 

 

16,054

 

 

 

7,648

 

Cash and cash equivalents at end of period

 

$

7,517

 

 

$

11,149

 

 

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

3


 

CROSSAMERICA PARTNERS LP

CONSOLIDATED STATEMENTS OF EQUITY AND COMPREHENSIVE INCOME

(Thousands of Dollars, except unit amounts)

(Unaudited)

 

 

 

Limited Partners' Interest
Common Unitholders

 

 

AOCI

 

 

Total Equity

 

 

 

Units

 

 

Dollars

 

 

Dollars

 

 

Dollars

 

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
      reclassified from AOCI into interest expense

 

 

 

 

 

 

 

 

(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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2021

 

 

37,896,556

 

 

$

53,528

 

 

$

3,030

 

 

$

56,558

 

Net income

 

 

 

 

 

5,047

 

 

 

 

 

 

5,047

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

   Unrealized gain on interest rate swap contracts

 

 

 

 

 

 

 

 

8,113

 

 

 

8,113

 

   Realized loss on interest rate swap contracts
      reclassified from AOCI into interest expense

 

 

 

 

 

 

 

 

206

 

 

 

206

 

Total other comprehensive income

 

 

 

 

 

 

 

 

8,319

 

 

 

8,319

 

Comprehensive income

 

 

 

 

 

5,047

 

 

 

8,319

 

 

 

13,366

 

Issuance of units related to 2021 Bonus Plan

 

 

16,154

 

 

 

327

 

 

 

 

 

 

327

 

Distributions paid

 

 

 

 

 

(19,942

)

 

 

 

 

 

(19,942

)

Balance at March 31, 2022

 

 

37,912,710

 

 

$

38,960

 

 

$

11,349

 

 

$

50,309

 

 

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

Our business consists of:

the wholesale distribution of motor fuels;
the owning or leasing of sites used in the retail distribution of motor fuels and, in turn, generating rental income from the lease or sublease of the sites;
the retail sale of motor fuels to end customers at retail sites operated by commission agents and ourselves; and
the operation of retail sites, including the sale of convenience merchandise to end customers.

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 March 31, 2023 and for the three months ended March 31, 2023 and 2022 included in the consolidated financial statements has been derived from our unaudited financial statements. Financial information as of December 31, 2022 has been derived from our audited financial statements and notes thereto as of that date.

Operating results for the three months ended March 31, 2023 are not necessarily indicative of the results that may be expected for the year ending December 31, 2023. 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.

Recently Adopted Accounting Pronouncements – Reference Rate Reform

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships and other transactions affected by reference rate reform if certain criteria are met to ease an entity’s financial reporting burden as the market transitions from LIBOR and other interbank offered rates to alternative reference rates. Subsequently, the FASB issued ASU 2021-01 to clarify the scope of Topic 848 and ASU 2022-06 to defer the sunset date of Topic 848. The guidance was effective upon issuance and may be applied through December 31, 2024. This guidance applied to our hedge accounting and hedge documentation as further discussed in Note 8, but did not have a material effect on the Partnership's consolidated financial statements.

Certain other new accounting pronouncements have become effective for our financial statements during 2023, but the adoption of these pronouncements did not materially impact our financial position, results of operations or disclosures.

5


CROSSAMERICA PARTNERS LP

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

Concentration Risk

For the three months ended March 31, 2023 and 2022, respectively, our wholesale business purchased approximately 80% and 81% of its motor fuel from four suppliers. Approximately 23% and 24% of our motor fuel gallons sold for the three months ended March 31, 2023 and 2022, respectively, were delivered by two carriers.

For the three months ended March 31, 2023 and 2022, respectively, approximately 20% and 22% of our rent income was from two multi-site operators.

For the three months ended March 31, 2023 and 2022, respectively, approximately 47% and 48% of our merchandise was purchased from one supplier.

Note 2. ACQUISITIONS

Acquisition of Assets from CSS

On November 9, 2022, we closed on the acquisition of assets from CSS for a purchase price of $27.5 million plus working capital. The assets consisted of wholesale fuel supply contracts to 38 dealer owned locations, 35 sub-wholesaler accounts and two commission locations (1 fee based and 1 lease). We funded this acquisition through borrowings on the CAPL Credit Facility and cash on hand.

Acquisition of Assets from 7-Eleven

In February 2022, we closed on the final three properties of our 106-site acquisition from 7-Eleven for a purchase price of $3.6 million, including inventory and other working capital, of which $1.8 million will be paid on or prior to February 8, 2027.

Note 3. ASSETS HELD FOR SALE

We have classified six sites and three sites as held for sale at March 31, 2023 and December 31, 2022, respectively, which are expected to be sold within one year of such classification. Assets held for sale were as follows (in thousands):

 

 

 

March 31,

 

 

December 31,

 

 

 

2023

 

 

2022

 

Land

 

$

1,292

 

 

$

758

 

Buildings and site improvements

 

 

1,536

 

 

 

457

 

Equipment

 

 

1,412

 

 

 

333

 

Total

 

 

4,240

 

 

 

1,548

 

Less accumulated depreciation

 

 

(2,228

)

 

 

(565

)

Assets held for sale

 

$

2,012

 

 

$

983

 

The Partnership has continued to focus on divesting lower performing assets. During the three months ended March 31, 2023, we sold one property for $0.4 million in proceeds, resulting in a net gain of $0.1 million. During the three months ended March 31, 2022, we sold four properties for $1.5 million in proceeds, resulting in a net gain of $0.3 million.

See Note 5 for information regarding impairment charges primarily recorded upon classifying sites within assets held for sale.

Note 4. INVENTORY

Inventory consisted of the following (in thousands):

 

 

 

March 31,

 

 

December 31,