10-Q 1 capl-20220331.htm 10-Q 10-Q
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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, 2022

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

img123468594_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 5, 2022, the registrant had outstanding 37,912,710 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, 2022 and December 31, 2021

 

1

Consolidated Statements of Operations for the Three Months Ended March 31, 2022 and 2021

 

2

Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2022 and 2021

 

3

Consolidated Statements of Equity and Comprehensive Income for the Three Months Ended March 31, 2022 and 2021

 

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

 

29

Item 4. Controls and Procedures

 

29

 

 

 

PART II - OTHER INFORMATION

 

29

Item 1. Legal Proceedings

 

29

Item 1A. Risk Factors

 

29

Item 6. Exhibits

 

30

 

 

 

SIGNATURE

 

31

 

 


 

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

 

 

 

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.

 

 

 

AOCI

 

Accumulated other comprehensive income

 

 

 

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, 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.

 

 

 

COVID-19 Pandemic

 

In December 2019, a novel strain of coronavirus was reported to have surfaced. In March 2020, the World Health Organization declared the outbreak a pandemic.

 

 

 

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

 

 

 

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, 2021

 

 

 

Internal Revenue Code

 

Internal Revenue Code of 1986, as amended

 

 

 

 

i


 

IPO

 

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

 

 

 

JKM Credit Facility

 

Credit Agreement, 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

 

 

 

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 Topper Group 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 Topper Group 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

 

 

 

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,

 

 

 

2022

 

 

2021

 

ASSETS

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

11,149

 

 

$

7,648

 

Accounts receivable, net of allowances of $499 and $458, respectively

 

 

34,392

 

 

 

33,331

 

Accounts receivable from related parties

 

 

951

 

 

 

1,149

 

Inventory

 

 

52,681

 

 

 

46,100

 

Assets held for sale

 

 

4,175

 

 

 

4,907

 

Other current assets

 

 

19,631

 

 

 

13,180

 

Total current assets

 

 

122,979

 

 

 

106,315

 

Property and equipment, net

 

 

757,232

 

 

 

755,454

 

Right-of-use assets, net

 

 

165,605

 

 

 

169,333

 

Intangible assets, net

 

 

105,506

 

 

 

114,187

 

Goodwill

 

 

99,409

 

 

 

100,464

 

Other assets

 

 

30,055

 

 

 

24,389

 

Total assets

 

$

1,280,786

 

 

$

1,270,142

 

 

 

 

 

 

 

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Current portion of debt and finance lease obligations

 

$

2,774

 

 

$

10,939

 

Current portion of operating lease obligations

 

 

34,793

 

 

 

34,832

 

Accounts payable

 

 

80,010

 

 

 

67,173

 

Accounts payable to related parties

 

 

7,915

 

 

 

7,679

 

Accrued expenses and other current liabilities

 

 

20,967

 

 

 

20,682

 

Motor fuel and sales taxes payable

 

 

22,197

 

 

 

22,585

 

Total current liabilities

 

 

168,656

 

 

 

163,890

 

Debt and finance lease obligations, less current portion

 

 

799,034

 

 

 

810,635

 

Operating lease obligations, less current portion

 

 

136,481

 

 

 

140,149

 

Deferred tax liabilities, net

 

 

10,296

 

 

 

12,341

 

Asset retirement obligations

 

 

45,877

 

 

 

45,366

 

Other long-term liabilities

 

 

45,633

 

 

 

41,203

 

Total liabilities

 

 

1,205,977

 

 

 

1,213,584

 

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

 

 

Preferred membership interests

 

 

24,500

 

 

 

 

 

 

 

 

 

 

 

Equity:

 

 

 

 

 

 

Common units—37,912,710 and 37,896,556 units issued and
   outstanding at March 31, 2022 and December 31, 2021, respectively

 

 

38,960

 

 

 

53,528

 

Accumulated other comprehensive income

 

 

11,349

 

 

 

3,030

 

Total equity

 

 

50,309

 

 

 

56,558

 

Total liabilities and equity

 

$

1,280,786

 

 

$

1,270,142

 

 

See Condensed Notes to 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,

 

 

 

2022

 

 

2021

 

Operating revenues (a)

 

$

1,093,211

 

 

$

657,284

 

Costs of sales (b)

 

 

1,014,381

 

 

 

602,416

 

Gross profit

 

 

78,830

 

 

 

54,868

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

Operating expenses (c)

 

 

42,109

 

 

 

29,403

 

General and administrative expenses

 

 

6,483

 

 

 

7,650

 

Depreciation, amortization and accretion expense

 

 

20,275

 

 

 

18,031

 

Total operating expenses

 

 

68,867

 

 

 

55,084

 

Loss on dispositions and lease terminations, net

 

 

(244

)

 

 

(648

)

Operating income (loss)

 

 

9,719

 

 

 

(864

)

Other income, net

 

 

130

 

 

 

88

 

Interest expense

 

 

(6,661

)

 

 

(3,497

)

Income (loss) before income taxes

 

 

3,188

 

 

 

(4,273

)

Income tax benefit

 

 

(1,859

)

 

 

(306

)

Net income (loss) available to limited partners

 

$

5,047

 

 

$

(3,967

)

 

 

 

 

 

 

 

Basic and diluted earnings per common unit

 

$

0.13

 

 

$

(0.10

)

 

 

 

 

 

 

 

Weighted-average limited partner units:

 

 

 

 

 

 

Basic common units

 

 

37,900,146

 

 

 

37,869,259

 

Diluted common units

 

 

37,959,441

 

 

 

37,891,130

 

 

 

 

 

 

 

 

Supplemental information:

 

 

 

 

 

 

(a) includes excise taxes of:

 

$

66,858

 

 

$

43,705

 

(a) includes rent income of:

 

 

20,627

 

 

 

20,472

 

(b) excludes depreciation, amortization and accretion

 

 

 

 

 

 

(b) includes rent expense of:

 

 

5,841

 

 

 

5,913

 

(c) includes rent expense of:

 

 

3,708

 

 

 

3,196

 

 

See Condensed Notes to Consolidated Financial Statements.

2


 

CROSSAMERICA PARTNERS LP

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Thousands of Dollars)

(Unaudited)

 

 

 

Three Months Ended March 31,

 

 

 

2022

 

 

2021

 

Cash flows from operating activities:

 

 

 

 

 

 

Net income (loss)

 

$

5,047

 

 

$

(3,967

)

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

 

 

 

 

 

 

Depreciation, amortization and accretion expense

 

 

20,275

 

 

 

18,031

 

Amortization of deferred financing costs

 

 

680

 

 

 

260

 

Credit loss expense

 

 

45

 

 

 

31

 

Deferred income tax benefit

 

 

(2,045

)

 

 

(590

)

Equity-based employee and director compensation expense

 

 

732

 

 

 

368

 

Loss on dispositions and lease terminations, net

 

 

244

 

 

 

648

 

Changes in operating assets and liabilities, net of acquisitions

 

 

3,410

 

 

 

2,887

 

Net cash provided by operating activities

 

 

28,388

 

 

 

17,668

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

Principal payments received on notes receivable

 

 

33

 

 

 

47

 

Proceeds from sale of assets

 

 

1,460

 

 

 

931

 

Capital expenditures

 

 

(8,934

)

 

 

(10,621

)

Cash paid in connection with acquisitions, net of cash acquired

 

 

(1,885

)

 

 

 

Net cash used in investing activities

 

 

(9,326

)

 

 

(9,643

)

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

Borrowings under revolving credit facilities

 

 

30,600

 

 

 

34,500

 

Repayments on revolving credit facilities

 

 

(26,575

)

 

 

(21,539

)

Borrowings under the Term Loan Facility

 

 

1,120

 

 

 

 

Repayments on the Term Loan Facility

 

 

(24,600

)

 

 

 

Net proceeds from issuance of preferred membership interests

 

 

24,500

 

 

 

 

Payments of finance lease obligations

 

 

(658

)

 

 

(633

)

Payments of deferred financing costs

 

 

(6

)

 

 

 

Distributions paid on distribution equivalent rights

 

 

(46

)

 

 

(31

)

Distributions paid on common units

 

 

(19,896

)

 

 

(19,881

)

Net cash used in financing activities

 

 

(15,561

)

 

 

(7,584

)

Net increase in cash and cash equivalents

 

 

3,501

 

 

 

441

 

 

 

 

 

 

 

 

Cash and cash equivalents at beginning of period

 

 

7,648

 

 

 

513

 

Cash and cash equivalents at end of period

 

$

11,149

 

 

$

954

 

 

See Condensed Notes to 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, 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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2020

 

 

37,868,046

 

 

$

112,124

 

 

$

(2,456

)

 

$

109,668

 

Net loss

 

 

 

 

 

(3,967

)

 

 

 

 

 

(3,967

)

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

   Unrealized gain on interest rate swap contracts

 

 

 

 

 

 

 

 

2,017

 

 

 

2,017

 

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

 

 

 

 

 

 

 

 

231

 

 

 

231

 

Total other comprehensive income

 

 

 

 

 

 

 

 

2,248

 

 

 

2,248

 

Comprehensive (loss) income

 

 

 

 

 

(3,967

)

 

 

2,248

 

 

 

(1,719

)

Issuance of units related to 2020 Bonus Plan

 

 

6,822

 

 

 

126

 

 

 

 

 

 

126

 

Tax effect from intra-entity transfer of assets

 

 

 

 

 

(757

)

 

 

 

 

 

(757

)

Distributions paid

 

 

 

 

 

(19,912

)

 

 

 

 

 

(19,912

)

Balance at March 31, 2021

 

 

37,874,868

 

 

$

87,614

 

 

$

(208

)

 

$

87,406

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See Condensed Notes to 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 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;
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, 2022 and for the three months ended March 31, 2022 and 2021 included in the consolidated financial statements has been derived from our unaudited financial statements. Financial information as of December 31, 2021 has been derived from our audited financial statements and notes thereto as of that date.

Operating results for the three months ended March 31, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022. 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. The COVID-19 Pandemic has impacted our business and these seasonal trends typical in our business. See the “COVID-19 Pandemic” section below.

Use of Estimates

The preparation of 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 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

Certain new accounting pronouncements have become effective for our financial statements during 2022, but the adoption of these pronouncements did not materially impact our financial position, results of operations or disclosures.

Concentration Risk

For the three months ended March 31, 2022 and 2021, respectively, our wholesale business purchased approximately 81% and 78% of its motor fuel from four suppliers. Approximately 24% and 29% of our motor fuel gallons sold for the three months ended March 31, 2022 and 2021, respectively, were delivered by two carriers.

For the three months ended March 31, 2022 and 2021, respectively, approximately 22% and 18% of our rent income was from two multi-site operators.

5


CROSSAMERICA PARTNERS LP

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

For the three months ended March 31, 2022 and 2021, respectively, approximately 41% and 42% of our merchandise was purchased from one supplier.

COVID-19 Pandemic

During the first quarter of 2020, an outbreak of a novel strain of coronavirus spread worldwide, including to the U.S., posing public health risks that reached pandemic proportions. We experienced a sharp decrease in fuel volume in mid-to-late March 2020. Although fuel volumes largely recovered during the second half of 2020 and continued to recover in 2021 and 2022, we cannot predict the scope and severity with which COVID-19 will impact our business. Sustained decreases in fuel volume or erosion of margin could have a material adverse effect on our results of operations, cash flow, financial position and ultimately our ability to pay distributions.

Note 2. 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 working capital), of which $1.8 million will be paid on or prior to February 8, 2027. We recorded the purchase of these properties and adjustments to our previous purchase accounting for the first 103 properties as summarized in the table below (in thousands):

 

Inventories

 

$

271

 

Other current assets

 

 

30

 

Property and equipment

 

 

8,171

 

Intangible assets

 

 

(3,498

)

Goodwill

 

 

(1,027

)

Total assets

 

$

3,947

 

 

 

 

 

Accrued expenses and other current liabilities

 

$

144

 

Other non-current liabilities

 

 

1,800

 

Asset retirement obligations

 

 

118

 

Total liabilities

 

$

2,062

 

Total consideration, net of cash acquired

 

$

1,885

 

 

The fair value of inventory was estimated at retail selling price less estimated costs to sell and a reasonable profit allowance for the selling effort.

The fair value of land was based on a market approach. The value of buildings and equipment was based on a cost approach. The buildings and equipment are being depreciated on a straight-line basis, with estimated remaining useful lives of 20 years for the buildings and five to 30 years for equipment.

The fair value of the wholesale fuel distribution rights included in intangible assets was based on an income approach. Management believes the level and timing of cash flows represent relevant market participant assumptions. The wholesale fuel distribution rights are being amortized on a straight-line basis over an estimated useful life of approximately 10 years.

The fair value of goodwill represents expected synergies from combining operations, intangible assets that do not qualify for separate recognition, and other factors. All goodwill is anticipated to be deductible for tax purposes.

Management continues to review the valuation and is confirming the result to determine the final purchase price allocation. We anticipate finalizing purchase accounting during the second quarter of 2022.

We funded these transactions primarily through the JKM Credit Facility as well as undrawn capacity under the CAPL Credit Facility and cash on hand.

6


CROSSAMERICA PARTNERS LP

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

Note 3. ASSETS HELD FOR SALE

We have classified 10 sites and 12 sites as held for sale at March 31, 2022 and December 31, 2021, 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,

 

 

 

2022

 

 

2021

 

Land

 

$

2,219

 

 

$

3,042

 

Buildings and site improvements

 

 

2,299

 

 

 

2,231

 

Equipment

 

 

840

 

 

 

939

 

Total

 

 

5,358

 

 

 

6,212

 

Less accumulated depreciation

 

 

(1,183

)

 

 

(1,305

)

Assets held for sale

 

$

4,175

 

 

$

4,907

 

 

The Partnership has continued to focus on divesting lower performing assets. During the three months ended March 31, 2022, we sold 4 properties for $1.5 million in proceeds, resulting in a net gain of $0.3 million. During the three months ended March 31, 2021, we sold three properties for $0.9 million in proceeds, resulting in an insignificant net loss.

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

Note 4. INVENTORIES

Inventories consisted of the following (in thousands):

 

 

 

March 31,

 

 

December 31,

 

 

 

2022

 

 

2021

 

Retail site merchandise

 

$

22,611

 

 

$

22,518

 

Motor fuel

 

 

30,070

 

 

 

23,582

 

Inventories

 

$

52,681

 

 

$

46,100

 

 

Note 5. PROPERTY AND EQUIPMENT

Property and equipment, net consisted of the following (in thousands):

 

 

 

March 31,

 

 

December 31,

 

 

 

2022

 

 

2021

 

Land

 

$

326,964

 

 

$

321,813

 

Buildings and site improvements

 

 

361,145

 

 

 

358,335

 

Leasehold improvements

 

 

13,570

 

 

 

13,437

 

Equipment

 

 

321,366

 

 

 

314,393

 

Construction in progress

 

 

10,290

 

 

 

9,457

 

Property and equipment, at cost

 

 

1,033,335

 

 

 

1,017,435

 

Accumulated depreciation and amortization