CrossAmerica Partners LP Reports First Quarter 2020 Results
- Reported First Quarter 2020 Operating Income of
$77.4 million and Net Income of$72.1 million compared to Operating Income of$7.6 million and Net Income of$0.2 million for the First Quarter 2019. During the First Quarter 2020,CrossAmerica recorded a gain on sale totaling$70.9 million , primarily driven by the sale of its 17.5% investment in CST Fuel Supply as part of its exchange transaction withCircle K - Generated First Quarter 2020 Adjusted EBITDA of
$25.3 million and Distributable Cash Flow of$20.4 million compared to First Quarter 2019 Adjusted EBITDA of$21.4 million and Distributable Cash Flow of$13.3 million - Reported First Quarter 2020 Gross Profit for the Wholesale Segment of
$35.1 million compared to$29.0 million of Gross Profit for the First Quarter 2019 - Distributed 220.6 million wholesale fuel gallons during the First Quarter 2020 at an average wholesale fuel margin per gallon of
9.0 cents - The Distribution Coverage Ratio for the current quarter was 1.08 times compared to 0.73 times for the comparable period of 2019. The Distribution Coverage Ratio was 1.19 times for the trailing twelve months ended
March 31, 2020 , as compared to 1.03 times for the trailing twelve months endedMarch 31, 2019 - The Board of Directors of CrossAmerica’s
General Partner declared a quarterly distribution of$0.5250 per limited partner unit attributable to the First Quarter 2020 - The Partnership is withdrawing its full-year 2020 guidance in light of the current COVID-19 crisis
“In spite of the COVID-19 pandemic, we closed on acquisitions involving over 550 sites during the quarter and subsequent to the quarter end. Our ability to execute on these transactions in this challenging environment is a testament to the character and resolve of our greatest organizational asset – our people. The completed acquisitions strengthen the Partnership both operationally and financially and will benefit the Partnership in the quarters and years to come,” said
First Quarter Results
Consolidated Results
Operating income was
Non-GAAP measures used in this release include EBITDA, Adjusted EBITDA, Distributable Cash Flow and Distribution Coverage Ratio. These Non-GAAP measures are further described and reconciled to their most directly comparable GAAP measures in the Supplemental Disclosure Regarding Non-GAAP Financial Measures section of this release.
Wholesale Segment
During the first quarter 2020, CrossAmerica’s Wholesale segment generated
The prices paid by the Partnership to its motor fuel suppliers for wholesale motor fuel (which affects the cost of sales) are highly correlated to the price of crude oil. The average daily spot price of West Texas Intermediate crude oil during the first quarter 2020 was
CrossAmerica’s gross profit from Rent for the Wholesale segment was
Operating expenses increased
Adjusted EBITDA for the Wholesale segment was
Retail Segment
For the first quarter 2020, the Retail Segment reported motor fuel gross profit of
With the conversion of the 46 company operated sites to dealer operated sites that occurred in the third quarter 2019, the Partnership did not generate gross profits from merchandise and services during the first quarter 2020.
Operating expenses declined
Adjusted EBITDA for the Retail segment was
The decline in gross profit and Adjusted EBITDA were primarily due to the divestitures and conversions noted above (see Supplemental Disclosure Regarding Non-GAAP Financial Measures section of this release).
Distributable Cash Flow and Distribution Coverage Ratio
Distributable Cash Flow was
Liquidity and Capital Resources
As of
On
On
Distributions
On
Asset Exchange Transactions with
On
- On
February 25, 2020 , the closing of the third tranche of asset exchanges under the Asset Exchange Agreement occurred. In this Third Asset Exchange,Circle K transferred to the Partnership ten (all fee)U.S. company-operated convenience and fuel retail stores having an aggregate value of approximately$11.0 million , and the Partnership transferred toCircle K the real property for five of the master lease properties having an aggregate value of approximately$10.3 million . - On
April 7, 2020 , the fourth exchange was completed and entailedCircle K transferring to the Partnership 13 (11 fee; 2 leased)U.S. company-operated convenience and fuel retail stores having an aggregate value of approximately$13.1 million , and the Partnership transferred toCircle K the real property for seven of the master lease properties having an aggregate value of approximately$12.8 million . - On
May 5, 2020 , a fifth exchange between the two parties closed. In the fifth asset exchange,Circle K transferred to the Partnership 29 (22 fee; 7 leased)U.S. company-operated convenience and fuel retail stores having an aggregate value of approximately$31.5 million , and the Partnership transferred toCircle K the real property for 13 of the master lease properties having an aggregate value of approximately$31.7 million .
Under the agreement, there are 24
Effective
Completion of Retail and Wholesale Acquisition
On
The Asset Purchase Agreement provides for an aggregate consideration of
Divestment of Assets
During the first quarter 2020,
Withdrawing Guidance
Conference Call
The Partnership will host a conference call on
CONSOLIDATED BALANCE SHEETS
(Thousands of Dollars, except unit data)
| March 31, | December 31, | |||||||
| 2020 | 2019 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 8,907 | $ | 1,780 | ||||
| Accounts receivable, net of allowances of |
28,036 | 38,051 | ||||||
| Accounts receivable from related parties | 1,687 | 4,299 | ||||||
| Motor fuel inventory | 4,945 | 6,230 | ||||||
| Assets held for sale | 16,331 | 13,231 | ||||||
| Other current assets | 5,272 | 5,795 | ||||||
| Total current assets | 65,178 | 69,386 | ||||||
| Property and equipment, net | 574,584 | 565,916 | ||||||
| Right-of-use assets, net | 123,831 | 120,767 | ||||||
| Intangible assets, net | 79,331 | 44,996 | ||||||
| 88,764 | 88,764 | |||||||
| Other assets | 21,184 | 21,318 | ||||||
| Total assets | $ | 952,872 | $ | 911,147 | ||||
| LIABILITIES AND EQUITY | ||||||||
| Current liabilities: | ||||||||
| Current portion of debt and finance lease obligations | $ | 2,515 | $ | 2,471 | ||||
| Current portion of operating lease obligations | 25,127 | 23,485 | ||||||
| Accounts payable | 46,921 | 57,392 | ||||||
| Accounts payable to related parties | 999 | 431 | ||||||
| Accrued expenses and other current liabilities | 14,894 | 16,382 | ||||||
| Motor fuel taxes payable | 10,073 | 12,475 | ||||||
| Total current liabilities | 100,529 | 112,636 | ||||||
| Debt and finance lease obligations, less current portion | 526,981 | 534,859 | ||||||
| Operating lease obligations, less current portion | 104,007 | 100,057 | ||||||
| Deferred tax liabilities, net | 19,233 | 19,369 | ||||||
| Asset retirement obligations | 36,647 | 35,589 | ||||||
| Other long-term liabilities | 34,058 | 30,240 | ||||||
| Total liabilities | 821,455 | 832,750 | ||||||
| Commitments and contingencies | ||||||||
| Equity: | ||||||||
| Common units—(37,023,114 and 34,494,441 units issued and outstanding at |
132,214 | 78,397 | ||||||
| Accumulated other comprehensive loss | (797 | ) | — | |||||
| Total equity | 131,417 | 78,397 | ||||||
| Total liabilities and equity | $ | 952,872 | $ | 911,147 | ||||
CONSOLIDATED STATEMENTS OF OPERATIONS
(Thousands of Dollars, Except Unit and Per Unit Amounts)
(Unaudited)
| Three Months Ended March 31, | ||||||||
| 2020 | 2019 | |||||||
| Operating revenues(a) | $ | 391,695 | $ | 471,786 | ||||
| Costs of sales(b) | 355,966 | 434,709 | ||||||
| Gross profit | 35,729 | 37,077 | ||||||
| Income from CST Fuel Supply equity interests | 3,202 | 3,426 | ||||||
| Operating expenses: | ||||||||
| Operating expenses | 10,723 | 15,353 | ||||||
| General and administrative expenses | 4,480 | 4,418 | ||||||
| Depreciation, amortization and accretion expense | 17,227 | 13,061 | ||||||
| Total operating expenses | 32,430 | 32,832 | ||||||
| Gain (loss) on dispositions and lease terminations, net | 70,931 | (59 | ) | |||||
| Operating income | 77,432 | 7,612 | ||||||
| Other income, net | 137 | 86 | ||||||
| Interest expense | (5,540 | ) | (7,337 | ) | ||||
| Income before income taxes | 72,029 | 361 | ||||||
| Income tax (benefit) expense | (32 | ) | 149 | |||||
| Net income | 72,061 | 212 | ||||||
| IDR distributions | (133 | ) | (133 | ) | ||||
| Net income available to limited partners | $ | 71,928 | $ | 79 | ||||
| Basic and diluted earnings per common unit | $ | 2.00 | $ | 0.00 | ||||
| Weighted-average limited partner units: | ||||||||
| Basic common units | 35,994,972 | 34,444,113 | ||||||
| Diluted common units | 35,995,933 | 34,456,465 | ||||||
| Supplemental information: | ||||||||
| (a) Includes excise taxes of: | $ | 14,937 | $ | 20,444 | ||||
| (a) Includes rent income of: | 22,688 | 21,638 | ||||||
| (b) Includes rent expense of: | 6,920 | 6,659 | ||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Thousands of Dollars)
(Unaudited)
| Three Months Ended March 31, | ||||||||
| 2020 | 2019 | |||||||
| Cash flows from operating activities: | ||||||||
| Net income | $ | 72,061 | $ | 212 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||
| Depreciation, amortization and accretion expense | 17,227 | 13,061 | ||||||
| Amortization of deferred financing costs | 261 | 290 | ||||||
| Credit loss expense | 91 | 49 | ||||||
| Deferred income taxes | (136 | ) | (666 | ) | ||||
| Equity-based employee and director compensation expense | 31 | 202 | ||||||
| (Gain) loss on dispositions and lease terminations, net | (70,931 | ) | 59 | |||||
| Changes in operating assets and liabilities, net of acquisitions | (810 | ) | (2,209 | ) | ||||
| Net cash provided by operating activities | 17,794 | 10,998 | ||||||
| Cash flows from investing activities: | ||||||||
| Principal payments received on notes receivable | 87 | 85 | ||||||
| Proceeds from |
15,935 | — | ||||||
| Proceeds from sale of assets | 5,032 | — | ||||||
| Capital expenditures | (5,382 | ) | (7,078 | ) | ||||
| Net cash provided by (used) in investing activities | 15,672 | (6,993 | ) | |||||
| Cash flows from financing activities: | ||||||||
| Borrowings under the revolving credit facility | 19,000 | 31,834 | ||||||
| Repayments on the revolving credit facility | (26,500 | ) | (13,334 | ) | ||||
| Payments of long-term debt and finance lease obligations | (595 | ) | (552 | ) | ||||
| Payment of deferred financing costs | — | (613 | ) | |||||
| Distributions paid on distribution equivalent rights | (1 | ) | (16 | ) | ||||
| Distributions paid to holders of the IDRs | (133 | ) | (133 | ) | ||||
| Distributions paid on common units | (18,110 | ) | (18,083 | ) | ||||
| Net cash used in financing activities | (26,339 | ) | (897 | ) | ||||
| Net increase in cash and cash equivalents | 7,127 | 3,108 | ||||||
| Cash and cash equivalents at beginning of period | 1,780 | 3,191 | ||||||
| Cash and cash equivalents at end of period | $ | 8,907 | $ | 6,299 | ||||
Segment Results
Wholesale
The following table highlights the results of operations and certain operating metrics of the Wholesale segment (thousands of dollars, except for the number of distribution sites and per gallon amounts):
| Three Months Ended March 31, | ||||||||
| 2020 | 2019 | |||||||
| Gross profit: | ||||||||
| Motor fuel–third party | $ | 13,040 | $ | 8,068 | ||||
| Motor fuel–intersegment and related party | 6,853 | 6,702 | ||||||
| Motor fuel gross profit | 19,893 | 14,770 | ||||||
| Rent gross profit | 14,129 | 13,591 | ||||||
| Other revenues | 1,115 | 619 | ||||||
| Total gross profit | 35,137 | 28,980 | ||||||
| Income from CST Fuel Supply equity interests(a) | 3,202 | 3,426 | ||||||
| Operating expenses | (9,074 | ) | (8,118 | ) | ||||
| Adjusted EBITDA(b) | $ | 29,265 | $ | 24,288 | ||||
| Motor fuel distribution sites (end of period):(c) | ||||||||
| Motor fuel–third party | ||||||||
| Independent dealers(d) | 660 | 363 | ||||||
| Lessee dealers(e) | 685 | 502 | ||||||
| Total motor fuel distribution–third party sites | 1,345 | 865 | ||||||
| Motor fuel–intersegment and related party | ||||||||
| DMS (related party)(f) | 55 | 82 | ||||||
| 23 | 43 | |||||||
| Commission agents (Retail segment)(h) | 202 | 172 | ||||||
| Company operated retail sites (Retail segment)(i) | — | 63 | ||||||
| Total motor fuel distribution–intersegment and related party sites |
280 | 360 | ||||||
| Motor fuel distribution sites (average during the period): |
||||||||
| Motor fuel-third party distribution | 1,048 | 863 | ||||||
| Motor fuel-intersegment and related party distribution |
258 | 363 | ||||||
| Total motor fuel distribution sites | 1,306 | 1,226 | ||||||
| Volume of gallons distributed (in thousands) | ||||||||
| Third party | 177,497 | 151,397 | ||||||
| Intersegment and related party | 43,148 | 79,836 | ||||||
| Total volume of gallons distributed | 220,645 | 231,233 | ||||||
| Wholesale margin per gallon | $ | 0.090 | $ | 0.064 | ||||
(a) Represents income from CrossAmerica’s equity interest in CST Fuel Supply.
(b) Please see the reconciliation of the segment’s Adjusted EBITDA to consolidated net income under the heading “Supplemental Disclosure Regarding Non-GAAP Financial Measures.”
(c) In addition, as of
(d) The increase in the independent dealer site count was primarily attributable to the 290 independent dealer contracts acquired in the CST Fuel Supply Exchange and the asset exchange with
(e) The increase in the lessee dealer site count was primarily attributable to the 125 lessee dealer sites acquired in the asset exchange with
(f) The decrease in the DMS site count was primarily attributable to converting DMS sites to lessee dealer sites.
(g) The decrease in the
(h) The increase in the commission site count was primarily attributable to the 37 commission sites acquired in the CST Fuel Supply Exchange.
(i) The decrease in the company operated site count was primarily attributable to the first tranche of the asset exchange with
Retail
The following table highlights the results of operations and certain operating metrics of the Retail segment (thousands of dollars, except for the number of retail sites, gallons sold per day and per gallon amounts):
| Three Months Ended March 31, | ||||||||
| 2020 | 2019 | |||||||
| Gross profit: | ||||||||
| Motor fuel | $ | 405 | $ | 1,544 | ||||
| Merchandise and services | — | 4,911 | ||||||
| Rent | 1,639 | 1,388 | ||||||
| Total gross profit | 2,044 | 7,843 | ||||||
| Operating expenses | (1,649 | ) | (7,235 | ) | ||||
| Adjusted EBITDA(a) | $ | 395 | $ | 608 | ||||
| Retail sites (end of period): | ||||||||
| Commission agents(b) | 202 | 172 | ||||||
| Company operated retail sites(c) | — | 63 | ||||||
| Total system sites at the end of the period | 202 | 235 | ||||||
| Total system operating statistics: | ||||||||
| Average retail fuel sites during the period | 170 | 235 | ||||||
| Motor fuel sales (gallons per site per day) | 1,865 | 2,060 | ||||||
| Motor fuel gross profit per gallon, net of credit card fees and commissions |
$ | 0.014 | $ | 0.035 | ||||
| Commission agents statistics: | ||||||||
| Average retail fuel sites during the period | 170 | 172 | ||||||
| Motor fuel gross profit per gallon, net of credit card fees and commissions |
$ | 0.014 | $ | 0.016 | ||||
| Company operated retail site statistics: | ||||||||
| Average retail fuel sites during the period | — | 63 | ||||||
| Motor fuel gross profit per gallon, net of credit card fees |
$ | — | $ | 0.080 | ||||
| Merchandise and services gross profit percentage, net of credit card fees |
0.0 | % | 24.5 | % | ||||
(a) Please see the reconciliation of the segment’s Adjusted EBITDA to consolidated net income under the heading “Supplemental Disclosure Regarding Non-GAAP Financial Measures” below.
(b) The increase in the commission site count was primarily attributable to the 37 commission sites acquired in the CST Fuel Supply Exchange.
(c) The decrease in the company operated site count was primarily attributable to the first tranche of the asset exchange with
Supplemental Disclosure Regarding Non-GAAP Financial Measures
EBITDA, Adjusted EBITDA, Distributable Cash Flow and Distribution Coverage Ratio are used as supplemental financial measures by management and by external users of the
The following table presents reconciliations of EBITDA, Adjusted EBITDA, and Distributable Cash Flow to net income, the most directly comparable
| Three Months Ended March 31, | ||||||||
| 2020 | 2019 | |||||||
| Net income available to limited partners | $ | 71,928 | $ | 79 | ||||
| Interest expense | 5,540 | 7,337 | ||||||
| Income tax (benefit) expense | (32 | ) | 149 | |||||
| Depreciation, amortization and accretion expense | 17,227 | 13,061 | ||||||
| EBITDA | 94,663 | 20,626 | ||||||
| Equity-based employee and director compensation expense | 31 | 202 | ||||||
| (Gain) loss on dispositions and lease terminations, net(a) | (70,931 | ) | 59 | |||||
| Acquisition-related costs(b) | 1,521 | 558 | ||||||
| Adjusted EBITDA | 25,284 | 21,445 | ||||||
| Cash interest expense | (5,279 | ) | (7,047 | ) | ||||
| Sustaining capital expenditures(c) | (640 | ) | (326 | ) | ||||
| Current income tax benefit (expense)(d) | 1,074 | (815 | ) | |||||
| Distributable Cash Flow | $ | 20,439 | $ | 13,257 | ||||
| Weighted-average diluted common units | 35,996 | 34,456 | ||||||
| Distributions paid per limited partner unit(e) | $ | 0.5250 | $ | 0.5250 | ||||
| Distribution Coverage Ratio(f) | 1.08x | 0.73x | ||||||
- During the three months ended
March 31, 2020 ,CrossAmerica recorded a$67.6 million gain on the sale of its 17.5% investment in CST Fuel Supply. In addition, the Partnership also recorded a gain of$1.8 million related to the sale of five CAPL properties as part of the Third Asset Exchange. - Relates to certain discrete acquisition related costs, such as legal and other professional fees, separation benefit costs and certain purchase accounting adjustments associated with recently acquired businesses.
- Under the Partnership Agreement, sustaining capital expenditures are capital expenditures made to maintain CrossAmerica’s long-term operating income or operating capacity. Examples of sustaining capital expenditures are those made to maintain existing contract volumes, including payments to renew existing distribution contracts, or to maintain CrossAmerica’s sites in conditions suitable to lease, such as parking lot or roof replacement/renovation, or to replace equipment required to operate the existing business.
- Excludes current income tax incurred on the sale of sites.
- On
April 23, 2020 , the Board approved a quarterly distribution of$0.5250 per unit attributable to the first quarter of 2020. The distribution is payable onMay 12, 2020 to all unitholders of record onMay 5, 2020 . - The distribution coverage ratio is computed by dividing Distributable Cash Flow by the weighted-average diluted common units and then dividing that result by the distributions paid per limited partner unit.
The following table reconciles the segment Adjusted EBITDA to Consolidated Adjusted EBITDA presented in the table above (in thousands):
| Three Months Ended March 31, | ||||||||
| 2020 | 2019 | |||||||
| Adjusted EBITDA - Wholesale segment | $ | 29,265 | $ | 24,288 | ||||
| Adjusted EBITDA - Retail segment | 395 | 608 | ||||||
| Adjusted EBITDA - Total segment | $ | 29,660 | $ | 24,896 | ||||
| Reconciling items: | ||||||||
| Elimination of intersegment profit in ending inventory balance |
(1,452 | ) | 254 | |||||
| General and administrative expenses | (4,480 | ) | (4,418 | ) | ||||
| Other income, net | 137 | 86 | ||||||
| Equity-based employee and director compensation expense | 31 | 202 | ||||||
| Acquisition-related costs | 1,521 | 558 | ||||||
| IDR distributions | (133 | ) | (133 | ) | ||||
| Consolidated Adjusted EBITDA | $ | 25,284 | $ | 21,445 | ||||
About
Contact
Investor Relations: Randy Palmer, rpalmer@caplp.com or 210-742-8316
Cautionary Statement Regarding Forward-Looking Statements
Statements contained in this release that state the Partnership’s or management’s expectations or predictions of the future are forward-looking statements. The words “believe,” “expect,” “should,” “intends,” “estimates,” “target” and other similar expressions identify forward-looking statements. It is important to note that actual results could differ materially from those projected in such forward-looking statements. For more information concerning factors that could cause actual results to differ from those expressed or forecasted, see CrossAmerica’s Form 10-K or Forms 10-Q filed with the
Note to
Source: CrossAmerica Partners