CrossAmerica Partners LP Reports Second Quarter 2020 Results
- Reported Second Quarter 2020 Operating Income of
$6.3 million and Net Income of$5.2 million compared to Operating Income of$13.9 million and Net Income of$6.4 million for the Second Quarter 2019 - Generated Second Quarter 2020 Adjusted EBITDA of
$27.7 million and Distributable Cash Flow of$26.0 million compared to Second Quarter 2019 Adjusted EBITDA of$27.7 million and Distributable Cash Flow of$22.3 million - Reported Second Quarter 2020 Gross Profit for the Wholesale Segment of
$40.7 million compared to$33.4 million of Gross Profit for the Second Quarter 2019 - Reported Second Quarter 2020 Gross Profit for the Retail Segment of
$15.9 million compared to$8.1 million of Gross Profit for the Second Quarter 2019 - Distributed 260.2 million wholesale fuel gallons during the Second Quarter 2020 at an average wholesale fuel margin per gallon of
10.8 cents - The Distribution Coverage Ratio for the current quarter was 1.31 times compared to 1.24 times for the comparable period of 2019. The Distribution Coverage Ratio was 1.21 times for the trailing twelve months ended
June 30, 2020 , as compared to 1.06 times for the trailing twelve months endedJune 30, 2019 - The Board of Directors of CrossAmerica’s
General Partner declared a quarterly distribution of$0.5250 per limited partner unit attributable to the Second Quarter 2020
“Our operating results in the second quarter demonstrate the resiliency of our business model and validate the strategic actions we have executed. Despite the challenging environment, we generated superior results to the prior year and improved the strategic and financial position of the Partnership,” said
Second 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 second 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 second quarter 2020 was
CrossAmerica’s gross profit from Rent for the Wholesale segment was
Operating expenses increased
Operating income for the Wholesale segment was
Retail Segment
For the second quarter 2020, the Retail Segment reported motor fuel gross profit of
The merchandise gross profit increased
Operating income for the Retail segment was
Distributable Cash Flow and Distribution Coverage Ratio
Distributable Cash Flow was
Liquidity and Capital Resources
As of
Distributions
On
Completion of Retail and Wholesale Acquisition
On
The Asset Purchase Agreement provided for an aggregate consideration of
Asset Exchange Transactions with
On
- 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 23
Divestment of Assets
During the second quarter 2020,
Conference Call
The Partnership will host a conference call on
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 |
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 | ||||||
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 |
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 |
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 |
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 |
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 |
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 June 30, | Six Months Ended June 30, | |||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
Gross profit: | ||||||||||||||||
Motor fuel–third party | $ | 12,177 | $ | 11,343 | $ | 25,217 | $ | 19,411 | ||||||||
Motor fuel–intersegment and related party | 15,989 | 7,691 | 22,842 | 14,393 | ||||||||||||
Motor fuel gross profit | 28,166 | 19,034 | 48,059 | 33,804 | ||||||||||||
Rent gross profit | 12,262 | 13,608 | 26,391 | 27,199 | ||||||||||||
Other revenues | 300 | 710 | 1,415 | 1,329 | ||||||||||||
Total gross profit | 40,728 | 33,352 | 75,865 | 62,332 | ||||||||||||
Income from CST Fuel Supply equity interests(a) | — | 3,734 | 3,202 | 7,160 | ||||||||||||
Operating expenses | (9,509 | ) | (7,407 | ) | (18,583 | ) | (15,525 | ) | ||||||||
Operating income(b) | $ | 31,219 | $ | 29,679 | $ | 60,484 | $ | 53,967 | ||||||||
Motor fuel distribution sites (end of period):(c) | ||||||||||||||||
Motor fuel–third party | ||||||||||||||||
Independent dealers(d) | 712 | 364 | 712 | 364 | ||||||||||||
Lessee dealers(e) | 677 | 571 | 677 | 571 | ||||||||||||
Total motor fuel distribution–third party sites | 1,389 | 935 | 1,389 | 935 | ||||||||||||
Motor fuel–intersegment and related party | ||||||||||||||||
DMS (related party)(f) | — | 73 | — | 73 | ||||||||||||
5 | 37 | 5 | 37 | |||||||||||||
Commission agents (Retail segment)(h) | 212 | 170 | 212 | 170 | ||||||||||||
Company operated retail sites (Retail segment)(i) | 150 | 46 | 150 | 46 | ||||||||||||
Total motor fuel distribution–intersegment and related party sites |
367 | 326 | 367 | 326 | ||||||||||||
Motor fuel distribution sites (average during the period): |
||||||||||||||||
Motor fuel-third party distribution | 1,365 | 899 | 1,207 | 881 | ||||||||||||
Motor fuel-intersegment and related party distribution |
360 | 343 | 309 | 353 | ||||||||||||
Total motor fuel distribution sites | 1,725 | 1,242 | 1,516 | 1,234 | ||||||||||||
Volume of gallons distributed (in thousands) | ||||||||||||||||
Third party | 192,927 | 174,400 | 370,424 | 325,797 | ||||||||||||
Intersegment and related party | 67,319 | 84,202 | 110,467 | 164,038 | ||||||||||||
Total volume of gallons distributed | 260,246 | 258,602 | 480,891 | 489,835 | ||||||||||||
Wholesale margin per gallon | $ | 0.108 | $ | 0.074 | $ | 0.100 | $ | 0.069 |
(a) Represents income from CrossAmerica’s equity interest in CST Fuel Supply.
(b) Please see the reconciliation of the segment’s operating income to Adjusted EBITDA and related reconciliation of Adjusted EBITDA to 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 288 independent dealer contracts acquired in the CST Fuel Supply Exchange, the asset exchange with
(e) The increase in the lessee dealer site count was primarily attributable to the 107 lessee dealer sites acquired in the asset exchanges with
(f) The decrease in the DMS site count was primarily attributable to the acquisition of retail and wholesale assets that resulted in the termination of 54 leases with DMS and conversion of 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 increase in the company operated site count was primarily attributable to the 154 company operated sites from the acquisition of retail and wholesale assets, partially offset by the conversion of 46 company operated sites to dealer operated sites in the third quarter of 2019.
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 June 30, | Six Months Ended June 30, | |||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
Gross profit: | ||||||||||||||||
Motor fuel | $ | 3,284 | $ | 1,893 | $ | 3,689 | $ | 3,437 | ||||||||
Merchandise(a) | 9,384 | 4,132 | 9,384 | 8,205 | ||||||||||||
Rent | 2,030 | 1,539 | 3,669 | 2,927 | ||||||||||||
Other revenue(a) | 1,221 | 538 | 1,221 | 1,376 | ||||||||||||
Total gross profit | 15,919 | 8,102 | 17,963 | 15,945 | ||||||||||||
Operating expenses | (15,588 | ) | (6,803 | ) | (17,237 | ) | (14,038 | ) | ||||||||
Operating income(b) | $ | 331 | $ | 1,299 | $ | 726 | $ | 1,907 | ||||||||
Retail sites (end of period): | ||||||||||||||||
Commission agents(c) | 212 | 170 | 212 | 170 | ||||||||||||
Company operated retail sites(d) | 150 | 46 | 150 | 46 | ||||||||||||
Total system sites at the end of the period | 362 | 216 | 362 | 216 | ||||||||||||
Total system operating statistics: | ||||||||||||||||
Average retail fuel sites during the period | 337 | 225 | 254 | 230 | ||||||||||||
Motor fuel sales (gallons per site per day) | 2,057 | 2,239 | 1,993 | 2,148 | ||||||||||||
Motor fuel gross profit per gallon, net of credit card fees and commissions |
$ | 0.052 | $ | 0.041 | $ | 0.040 | $ | 0.038 | ||||||||
Commission agents statistics: | ||||||||||||||||
Average retail fuel sites during the period | 210 | 170 | 190 | 171 | ||||||||||||
Motor fuel gross profit per gallon, net of credit card fees and commissions |
$ | 0.016 | $ | 0.015 | $ | 0.015 | $ | 0.016 | ||||||||
Company operated retail site statistics: | ||||||||||||||||
Average retail fuel sites during the period | 128 | 55 | 64 | 59 | ||||||||||||
Motor fuel gross profit per gallon, net of credit card fees |
$ | 0.096 | $ | 0.112 | $ | 0.096 | $ | 0.095 | ||||||||
Merchandise gross profit percentage, net of credit card fees(a) |
25.4 | % | 21.6 | % | 25.4 | % | 21.4 | % |
(a)
(b) Please see the reconciliation of CrossAmerica’s segment’s operating income to Adjusted EBITDA and related reconciliation of Adjusted EBITDA to net income under the heading “Supplemental Disclosure Regarding Non-GAAP Financial Measures” below.
(c) The increase in the commission site count was primarily attributable to the 37 commission sites acquired in the CST Fuel Supply Exchange.
(d) The increase in the company operated site count was primarily attributable to the 154 company operated sites from the acquisition of retail and wholesale assets, partially offset by the conversion of 46 company operated sites to dealer operated sites in the third quarter of 2019.
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 June 30, | Six Months Ended June 30, | |||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
Net income available to limited partners | $ | 5,230 | $ | 6,308 | $ | 77,158 | $ | 6,387 | ||||||||
Interest expense | 4,121 | 7,236 | 9,661 | 14,573 | ||||||||||||
Income tax (benefit) expense | (2,944 | ) | 341 | (2,976 | ) | 490 | ||||||||||
Depreciation, amortization and accretion expense | 16,050 | 12,496 | 33,277 | 25,557 | ||||||||||||
EBITDA | 22,457 | 26,381 | 117,120 | 47,007 | ||||||||||||
Equity-based employee and director compensation expense | 17 | 124 | 48 | 326 | ||||||||||||
Loss (gain) on dispositions and lease terminations, net(a) | 4,575 | 369 | (66,356 | ) | 428 | |||||||||||
Acquisition-related costs(b) | 672 | 847 | 2,193 | 1,405 | ||||||||||||
Adjusted EBITDA | 27,721 | 27,721 | 53,005 | 49,166 | ||||||||||||
Cash interest expense | (3,861 | ) | (6,981 | ) | (9,140 | ) | (14,028 | ) | ||||||||
Sustaining capital expenditures(c) | (407 | ) | (437 | ) | (1,047 | ) | (763 | ) | ||||||||
Current income tax benefit(d) | 2,594 | 2,043 | 3,668 | 1,228 | ||||||||||||
Distributable Cash Flow | $ | 26,047 | $ | 22,346 | $ | 46,486 | $ | 35,603 | ||||||||
Weighted-average diluted common units | 37,738 | 34,461 | 36,867 | 34,461 | ||||||||||||
Distributions paid per limited partner unit(e) | $ | 0.5250 | $ | 0.5250 | $ | 1.0500 | $ | 1.0500 | ||||||||
Distribution Coverage Ratio(f) | 1.31x | 1.24x | 1.20x | 0.98x |
- During the three months ended
June 30, 2020 ,CrossAmerica recorded a loss on lease terminations, including the non-cash write-off of deferred rent income associated with these leases, of$10.9 million . During the six months endedJune 30, 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 gains on the sale of CAPL properties in connection with the asset exchange withCircle K of$6.1 million and$7.9 million for the three and six months endedJune 30, 2020 , respectively. - 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
July 23, 2020 , the Board approved a quarterly distribution of$0.5250 per unit attributable to the second quarter of 2020. The distribution is payable onAugust 11, 2020 to all unitholders of record onAugust 4, 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 operating income to Consolidated Adjusted EBITDA presented in the table above (in thousands):
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
Operating income - Wholesale segment | $ | 31,219 | $ | 29,679 | $ | 60,484 | $ | 53,967 | ||||||||
Operating income - Retail segment | 331 | 1,299 | 726 | 1,907 | ||||||||||||
Operating income - Total segment | $ | 31,550 | $ | 30,978 | $ | 61,210 | $ | 55,874 | ||||||||
Reconciling items: | ||||||||||||||||
Elimination of intersegment profit in ending inventory balance |
1,001 | (84 | ) | (451 | ) | 170 | ||||||||||
General and administrative expenses | (5,597 | ) | (4,109 | ) | (10,077 | ) | (8,527 | ) | ||||||||
Other income, net | 78 | 98 | 215 | 184 | ||||||||||||
Equity-based employee and director compensation expense | 17 | 124 | 48 | 326 | ||||||||||||
Acquisition-related costs | 672 | 847 | 2,193 | 1,405 | ||||||||||||
IDR distributions | — | (133 | ) | (133 | ) | (266 | ) | |||||||||
Consolidated Adjusted EBITDA | $ | 27,721 | $ | 27,721 | $ | 53,005 | $ | 49,166 |
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