CrossAmerica Partners Earnings 2020-06-30

Balance Sheet	Income Statement	Cash Flow
Assets, Equity	Rev, G Profit, Net Income	Ops, Inv, Fin

capl-10q_20200630.htm

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 June 30, 2020

☐	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

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.)

600 Hamilton Street, Suite 500 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 July 31, 2020, the registrant had outstanding 37,868,046 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 June 30, 2020 (unaudited) and December 31, 2019		1
Consolidated Statements of Operations (unaudited) for the Three and Six Months Ended June 30, 2020 and 2019		2
Consolidated Statements of Cash Flows (unaudited) for the Six Months Ended June 30, 2020 and 2019		3
Consolidated Statements of Equity and Comprehensive Income (unaudited) for the Three and Six Months Ended June 30, 2020 and 2019		4
Condensed Notes to Consolidated Financial Statements		5
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		25
Item 3. Quantitative and Qualitative Disclosures about Market Risk		46
Item 4. Controls and Procedures		46
PART II - OTHER INFORMATION		47
Item 1. Legal Proceedings		47
Item 1A. Risk Factors		47
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		47
Item 6. Exhibits		48
SIGNATURE		49

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 Partners LP			CrossAmerica, the Partnership, we, us, our

LGW			Lehigh Gas Wholesale LLC

LGPR			LGP Realty Holdings LP

LGWS			Lehigh Gas Wholesale Services, Inc. and subsidiaries

CrossAmerica Partners LP related parties at any point during 2019 or 2020:

Circle K			Circle K Stores Inc., a Texas corporation, and a wholly owned subsidiary of Couche-Tard

Couche-Tard			Alimentation Couche-Tard Inc. (TSX: ATD.A ATD.B)

CST			CST Brands LLC, which merged into Circle K Stores. Inc on February 28, 2020, and subsidiaries, indirectly owned by Circle K.

CST Fuel Supply			CST Fuel Supply LP is the parent of CST Marketing and Supply, indirectly owned by Circle K. From July 1, 2015 through March 25, 2020, we owned a 17.5% limited partner interest in CST Fuel Supply. See Note 3 to the financial statements for information regarding the closing of the CST Fuel Supply Exchange.

CST Marketing and Supply			CST Marketing and Supply, LLC, indirectly owned by Circle K. It is CST’s wholesale motor fuel supply business, which provides wholesale fuel distribution to the majority of CST’s legacy U.S. retail convenience stores on a fixed markup per gallon.

CST Services			CST Services LLC, a wholly owned subsidiary of Circle K

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

DMP			Dunne Manning Partners LLC, an entity affiliated with the Topper Group and controlled by Joseph V. Topper, Jr. Since November 19, 2019, DMP has owned 100% of the membership interests in the sole member of the General Partner.

DMR			Dunne Manning Realty LP, an entity affiliated with the Topper Group

DMS			Dunne Manning Stores LLC (formerly known as Lehigh Gas-Ohio, LLC), an entity affiliated with the Topper Group. Through April 14, 2020, DMS was an operator of retail motor fuel stations. DMS leased retail sites from us in accordance with a master lease agreement and purchased a significant portion of its motor fuel for these sites from us on a wholesale basis under rack plus pricing. The financial results of DMS are not consolidated with ours. See Note 4 to the financial statements regarding the acquisition of retail and wholesale assets from the Topper Group and related termination of the fuel supply and master lease agreements with us.

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.

Recent Acquisitions:

Franchised Holiday Stores			The franchised Holiday stores acquired in March 2016

Jet-Pep Assets			The assets acquired from Jet-Pep, Inc. in November 2017

Other Defined Terms:

ASC			Accounting Standards Codification

ASU			Accounting Standards Update

Board			Board of Directors of our General Partner

BP			BP p.l.c.

CDC			The Centers for Disease Control and Prevention

Circle K Omnibus Agreement			The Amended and Restated Omnibus Agreement, dated October 1, 2014, as amended effective January 1, 2016, February 1, 2018 and April 29, 2019 by and among CrossAmerica, the General Partner, DMI, DMS, CST Services and Joseph V. Topper, Jr., which amends and restates the original omnibus agreement that was executed in connection with CrossAmerica’s IPO on October 30, 2012. The terms of the Circle K Omnibus Agreement were approved by the independent conflicts committee of the Board. Pursuant to the Circle K Omnibus Agreement, CST Services agreed, among other things, to provide, or cause to be provided, to the Partnership certain management services. See Note 12 to the financial statements for information regarding the termination of this agreement and the concurrent entering into the Transitional Omnibus Agreement.

COVID-19 Pandemic			In December 2019, a novel strain of coronavirus was reported to have surfaced in Wuhan, China. In March 2020, the World Health Organization declared the outbreak a pandemic.

CST Fuel Supply Exchange			Exchange Agreement, dated November 19, 2019, between the Partnership and Circle K, which closed effective March 25, 2020. Pursuant to the Exchange Agreement, Circle K transferred to the Partnership certain owned and leased convenience store properties and related assets (including fuel supply agreements) and wholesale fuel supply contracts covering additional sites, and, in exchange, the Partnership transferred to Circle K 100% of the limited partnership units it held in CST Fuel Supply.

DTW			Dealer tank wagon contracts, which are variable 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

ExxonMobil			ExxonMobil Corporation

FASB			Financial Accounting Standards Board

Form 10-K			CrossAmerica’s Annual Report on Form 10-K for the year ended December 31, 2019

FTC			U.S. Federal Trade Commission

GP Purchase			Purchase by DMP from subsidiaries of Circle K of: 1) 100% of the membership interests in the sole member of the General Partner; 2) 100% of the Incentive Distribution Rights issued by the Partnership; and 3) an aggregate of 7,486,131 common units of the Partnership. These transactions closed on November 19, 2019.

IDRs			Incentive Distribution Rights represented the right to receive an increasing percentage of quarterly distributions after the target distribution levels were achieved. As a result of the GP Purchase, DMP owned 100% of the outstanding IDRs from November 19, 2019 through February 6, 2020. See Note 17 to the financial statements for information regarding the elimination of the IDRs.

Internal Revenue Code			Internal Revenue Code of 1986, as amended

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

LIBOR			London Interbank Offered Rate

MD&A			Management’s Discussion and Analysis of Financial Condition and Results of Operations

Marathon			Marathon Petroleum Company LP

Motiva			Motiva Enterprises LLC

Partnership Agreement			The First Amended and Restated Agreement of Limited Partnership of CrossAmerica Partners LP, dated as of October 1, 2014, as amended. See Note 17 to the financial statements regarding the elimination of the IDRs, which triggered the need to further amend the Partnership Agreement.

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

Terms Discounts			Discounts for prompt payment and other rebates and incentives from our suppliers for a majority of the gallons of motor fuel purchased by us, which are recorded within cost of sales. Prompt payment discounts are based on a percentage of the purchase price of motor fuel.

Topper Group Omnibus Agreement			The Topper Group 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.

Transitional Omnibus Agreement			Upon the closing of the GP Purchase, the Circle K Omnibus Agreement was terminated and the Partnership entered into a Transitional Omnibus Agreement, dated as of November 19, 2019, among the Partnership, the General Partner and Circle K. Pursuant to the Transitional Omnibus Agreement, Circle K agreed, among other things, to continue to provide, or cause to be provided, to the Partnership certain management services, administrative and operating services, as provided under the Circle K Omnibus Agreement through June 30, 2020 with respect to certain services, unless earlier terminated or unless the parties extend the term of certain services. In addition, from January 1, 2020 until the closing of the CST Fuel Supply Exchange, the General Partner provided Circle K with certain administrative and operational services, on the terms and conditions set forth in the Transitional Omnibus Agreement.

U.S. GAAP			U.S. Generally Accepted Accounting Principles

Valero			Valero Energy Corporation and, where appropriate in context, one or more of its subsidiaries, or all of them taken as a whole

WTI			West Texas Intermediate crude oil

iii

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

CROSSAMERICA PARTNERS LP

CONSOLIDATED BALANCE SHEETS

(Thousands of Dollars, except unit data)

	June 30,			December 31,
	2020			2019
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	2,185		$	1,780
Accounts receivable, net of allowances of $1,181 and $557, respectively		35,743			38,051
Accounts receivable from related parties		3,322			4,299
Inventory		19,606			6,230
Assets held for sale		12,139			13,231
Other current assets		9,020			5,795
Total current assets		82,015			69,386
Property and equipment, net		572,471			565,916
Right-of-use assets, net		163,360			120,767
Intangible assets, net		95,523			44,996
Goodwill		88,764			88,764
Other assets		19,527			21,318
Total assets	$	1,021,660		$	911,147

LIABILITIES AND EQUITY
Current liabilities:
Current portion of debt and finance lease obligations	$	2,540		$	2,471
Current portion of operating lease obligations		30,808			23,485
Accounts payable		67,893			57,392
Accounts payable to related parties		8,242			431
Accrued expenses and other current liabilities		19,597			16,382
Motor fuel and sales taxes payable		25,579			12,475
Total current liabilities		154,659			112,636
Debt and finance lease obligations, less current portion		518,614			534,859
Operating lease obligations, less current portion		137,893			100,057
Deferred tax liabilities, net		16,394			19,369
Asset retirement obligations		40,079			35,589
Other long-term liabilities		35,507			30,240
Total liabilities		903,146			832,750

Commitments and contingencies

Equity:
Common units—(37,866,005 and 34,494,441 units issued and outstanding at June 30, 2020 and December 31, 2019, respectively)		121,732			78,397
Accumulated other comprehensive loss		(3,218	)		—
Total equity		118,514			78,397
Total liabilities and equity	$	1,021,660		$	911,147

See Condensed Notes to Consolidated Financial Statements.

CROSSAMERICA PARTNERS LP

CONSOLIDATED STATEMENTS OF OPERATIONS

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

(Unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
	2020			2019			2020			2019
Operating revenues^(a)	$	398,402		$	605,528		$	790,097		$	1,077,314
Costs of sales^(b)		340,754			564,158			696,720			998,867
Gross profit		57,648			41,370			93,377			78,447

Income from CST Fuel Supply equity interests		—			3,734			3,202			7,160
Operating expenses:
Operating expenses		25,097			14,210			35,820			29,563
General and administrative expenses		5,597			4,109			10,077			8,527
Depreciation, amortization and accretion expense		16,050			12,496			33,277			25,557
Total operating expenses		46,744			30,815			79,174			63,647
(Loss) gain on dispositions and lease terminations, net		(4,575	)		(369	)		66,356			(428	)
Operating income		6,329			13,920			83,761			21,532
Other income, net		78			98			215			184
Interest expense		(4,121	)		(7,236	)		(9,661	)		(14,573	)
Income before income taxes		2,286			6,782			74,315			7,143
Income tax (benefit) expense		(2,944	)		341			(2,976	)		490
Net income		5,230			6,441			77,291			6,653
IDR distributions		—			(133	)		(133	)		(266	)
Net income available to limited partners	$	5,230		$	6,308		$	77,158		$	6,387

Basic and diluted earnings per common unit	$	0.14		$	0.18		$	2.09		$	0.19

Weighted-average limited partner units:
Basic common units		37,736,329			34,444,180			36,865,651			34,444,147
Diluted common units		37,738,150			34,461,024			36,867,495			34,461,470

Supplemental information:
(a) Includes excise taxes of:	$	33,770		$	19,906		$	48,707		$	40,350
(a) Includes rent income of:		20,424			21,960			43,112			43,598
(b) Includes rent expense of:		6,132			6,813			13,052			13,472

See Condensed Notes to Consolidated Financial Statements.

CROSSAMERICA PARTNERS LP

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Thousands of Dollars)

(Unaudited)

	Six Months Ended June 30,
	2020			2019
Cash flows from operating activities:
Net income	$	77,291		$	6,653
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and accretion expense		33,277			25,557
Amortization of deferred financing costs		521			545
Credit loss expense		627			49
Deferred income taxes		(3,063	)		1,718
Equity-based employee and director compensation expense		48			326
(Gain) loss on dispositions and lease terminations, net		(74,189	)		428
Changes in operating assets and liabilities, net of acquisitions		27,131			(1,106	)
Net cash provided by operating activities		61,643			34,170

Cash flows from investing activities:
Principal payments received on notes receivable		172			692
Proceeds from Circle K in connection with CST Fuel Supply Exchange		16,396			2,757
Proceeds from sale of property and equipment		9,954			902
Capital expenditures		(10,760	)		(10,710	)
Cash paid in connection with acquisitions, net of cash acquired		(22,342	)		—
Net cash used in investing activities		(6,580	)		(6,359	)

Cash flows from financing activities:
Borrowings under the revolving credit facility		63,201			46,634
Repayments on the revolving credit facility		(78,527	)		(34,334	)
Payments of long-term debt and finance lease obligations		(1,207	)		(1,124	)
Payment of deferred financing costs		—			(3,441	)
Distributions paid on distribution equivalent rights		(2	)		(31	)
Distributions paid to holders of the IDRs		(133	)		(266	)
Distributions paid on common units		(37,990	)		(36,167	)
Net cash used in financing activities		(54,658	)		(28,729	)
Net increase (decrease) in cash and cash equivalents		405			(918	)
Cash and cash equivalents at beginning of period		1,780			3,191
Cash and cash equivalents at end of period	$	2,185		$	2,273

See Condensed Notes to Consolidated Financial Statements.

CROSSAMERICA PARTNERS LP

CONSOLIDATED STATEMENTS OF EQUITY AND COMPREHENSIVE INCOME

(Thousands of Dollars, except unit amounts)

(Unaudited)

Limited Partners’ Interest

Incentive

Accumulated other

Common

Unitholders

Distribution

Rights

comprehensive loss

Total Equity

Units

Dollars

Balance at December 31, 2019

34,494,441

78,397

—

Price	1.00	EPS	-21,501,000
Shares	-0	P/E	-0
MCap	-0	P/FCF	-0
Net Debt	522	EBIT	46
TEV	522	TEV/EBIT	11
TTM 2019-09-30, in MM, except price, ratios

10-Q	2020-06-30	Filed 2020-08-07
10-Q	2020-03-31	Filed 2020-05-07
10-K	2019-12-31	Filed 2020-02-26
10-Q	2019-09-30	Filed 2019-11-08
10-Q	2019-06-30	Filed 2019-08-06
10-Q	2019-03-31	Filed 2019-05-07
10-K	2018-12-31	Filed 2019-02-26
10-Q	2018-09-30	Filed 2018-11-07
10-Q	2018-06-30	Filed 2018-08-07
10-Q	2018-03-31	Filed 2018-05-08
10-K	2017-12-31	Filed 2018-02-27
10-Q	2017-09-30	Filed 2017-11-08
10-Q	2017-06-30	Filed 2017-08-08
10-Q	2017-03-31	Filed 2017-05-09
10-K	2016-12-31	Filed 2017-02-28
10-Q	2016-09-30	Filed 2016-11-08
10-Q	2016-06-30	Filed 2016-08-05
10-Q	2016-03-31	Filed 2016-05-06
10-K	2015-12-31	Filed 2016-02-19
10-Q	2015-09-30	Filed 2015-11-06
10-Q	2015-06-30	Filed 2015-08-07
10-Q	2015-03-31	Filed 2015-05-08
10-K	2014-12-31	Filed 2015-02-27
10-Q	2014-09-30	Filed 2014-11-07
10-Q	2014-06-30	Filed 2014-08-11
10-Q	2014-03-31	Filed 2014-05-08
10-K	2013-12-31	Filed 2014-03-10
10-Q	2013-09-30	Filed 2013-11-12
10-Q	2013-06-30	Filed 2013-08-09
10-Q	2013-03-31	Filed 2013-05-14
10-K	2012-12-31	Filed 2013-03-28
10-Q	2012-09-30	Filed 2012-12-10

8-K	2020-08-06	Earnings, Regulation FD, Exhibits
8-K	2020-07-23	Officers, Regulation FD, Exhibits
8-K	2020-05-06
8-K	2020-05-05
8-K	2020-04-23
8-K	2020-04-14
8-K	2020-04-07
8-K	2020-03-25
8-K	2020-02-25
8-K	2020-02-06
8-K	2020-01-22
8-K	2020-01-15
8-K	2020-01-15
8-K	2019-12-06
8-K	2019-11-19
8-K	2019-11-07
8-K	2019-10-29
8-K	2019-10-24
8-K	2019-09-05
8-K	2019-08-05
8-K	2019-07-18
8-K	2019-05-21
8-K	2019-05-06
8-K	2019-04-25
8-K	2019-04-01
8-K	2019-02-25
8-K	2019-01-29
8-K	2018-12-17
8-K	2018-11-06
8-K	2018-10-24
8-K	2018-08-06
8-K	2018-07-13
8-K	2018-07-09
8-K	2018-05-07
8-K	2018-04-25
8-K	2018-02-26
8-K	2018-02-23
8-K	2018-01-24

EX-31.1	capl-ex311_9.htm
EX-31.2	capl-ex312_6.htm
EX-32.1	capl-ex321_7.htm
EX-32.2	capl-ex322_8.htm

CAPL 10Q Quarterly Report

CrossAmerica Partners Earnings 2020-06-30