8-K
CrossAmerica Partners LP (CAPL)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): August 9, 2021
CrossAmerica Partners LP
(Exact name of registrant as specified in its charter)
| Delaware | 001-35711 | 45-4165414 |
|---|---|---|
| (State or other jurisdiction<br><br><br>of incorporation) | (Commission File Number) | (IRS Employer<br><br><br>Identification No.) |
| 600 Hamilton Street, Suite 500<br><br><br>Allentown, PA | 18101 | |
| --- | --- | |
| (Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code: (610) 625-8000
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
|---|---|
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
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 is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
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. ☐
Item 2.02 Results of Operations and Financial Condition.
On August 9, 2021, CrossAmerica Partners LP (“CrossAmerica” or the “Partnership”) issued a press release announcing its financial results for the quarter ended June 30, 2021. A copy of the press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K.
Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
Appointment of Chief Financial Officer
On August 9, 2021, the Board of Directors (the “Board”) of CrossAmerica GP LLC, the general partner (the “General Partner”) of CrossAmerica, appointed Maura Topper as Chief Financial Officer of the General Partner, effective as of August 11, 2021. In that capacity, Ms. Topper will be the principal financial officer of the Partnership. Ms. Topper succeeds Jonathan E. Benfield, currently the Chief Accounting Officer of the General Partner, who has been performing the function of principal financial officer of the Partnership on an interim basis.
Ms. Topper, age 35, has served on the Board since November 19, 2019. Immediately prior to assuming the role of Chief Financial Officer of the General Partner, she served as the Vice President and Chief Financial Officer of Dunne Manning Holdings LLC (“Dunne Manning”), a diversified portfolio of companies operating in the real estate and investing industries and an affiliate of the Topper Group (as defined below), which indirectly owns all of the membership interests of the General Partner and 38.2% of the Partnership’s common units. Prior to joining Dunne Manning in 2014, Ms. Topper graduated from the Masters of Business Administration program at Columbia Business School. Prior to that, she served as a Marketing Account Executive at MSG Promotions, Inc. and a senior accountant in the audit practice of Deloitte & Touche LLP in New York. Ms. Topper graduated from Villanova University in 2008 with a Bachelor of Science degree in Accounting and a Bachelor of Science degree in Business (Finance). From 2012 to 2014, she served as a director on the Board.
Ms. Topper’s annual base salary will be $300,000, and she will be eligible to participate in the Partnership’s annual performance-based incentive program and receive standard executive officer benefits.
Certain Relationships and Related Party Transactions
Ms. Topper is the daughter of Joseph V. Topper, Jr., Chairman of the Board of the General Partner (collectively with his affiliates and family trusts that have ownership interests in the Partnership, the “Topper Group”). In addition, Ms. Topper is the sister-in-law of Keenan D. Lynch, a director of the General Partner and the General Counsel and Corporate Secretary of the Partnership.
Additional information regarding related party transactions with the Topper Group in which the Partnership was or is a participant and in which Ms. Topper had or has a direct or indirect material interest appears in Item 13—Certain Relationships and Related Party Transactions, and Director Independence of CrossAmerica’s Annual Report on Form 10-K for the year ended December 31, 2020, under the headings “Distributions and Payments to our General Partner and Certain Related Parties,” “Agreements with the Topper Group and Affiliates,” and “Other Related Party Transactions,” which information is incorporated herein by reference.
Item 7.01 Regulation FD Disclosure.
Furnished herewith as Exhibit 99.2 are slides that senior management of CrossAmerica will utilize in CrossAmerica’s second quarter 2021 earnings call. The slides are available on the Webcasts & Presentations page of CrossAmerica’s website at www.crossamericapartners.com.
The information in Item 2.02, Item 7.01 and Exhibits 99.1 and 99.2 of Item 9.01 of this report, according to general instruction B.2., shall not be deemed “filed” for the purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that Section, and shall not be incorporated by reference into any registration statement pursuant to the Securities Act of 1933, as amended. By furnishing this information, the Partnership makes no admission as to the materiality of such information that the Partnership chooses to disclose solely because of Regulation FD.
Safe Harbor Statement
Statements contained in the exhibits to this report that state the Partnership’s or its management’s expectations or predictions of the future are forward-looking statements. It is important to note that the Partnership’s actual results could differ materially from those projected in such forward-looking statements. Factors that could affect those results include those mentioned in the Partnership’s Annual Report on Form 10-K for the year ended December 31, 2020 and in subsequent filings that the Partnership has filed with the Securities and Exchange Commission (the “SEC”). The Partnership undertakes no duty or obligation to publicly update or revise the information contained in this report, although the Partnership may do so from time to time as management believes is warranted. Any such updating may be made through the filing of other reports or documents with the SEC, through press releases or through other public disclosure.
Item 9.01 Financial Statements and Exhibits
(d) Exhibits
| Exhibit No. | Description |
|---|---|
| 99.1 | Press Release dated August 9, 2021 regarding CrossAmerica’s earnings |
| 99.2 | Investor Presentation Slides of CrossAmerica |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| CrossAmerica Partners LP | ||
|---|---|---|
| By: | CrossAmerica GP LLC | |
| its general partner | ||
| By: | /s/ Keenan D. Lynch | |
| Name: | Keenan D. Lynch | |
| Title: | General Counsel and Corporate Secretary |
Dated: August 9, 2021
capl-ex991_7.htm
Exhibit 99.1
CrossAmerica Partners LP Reports Second Quarter 2021 Results and Announces Appointment of New Chief Financial Officer
| - | Reported Second Quarter 2021 Operating Income of $8.2 million and Net Income of $4.8 million compared to Operating Income of $6.3 million and Net Income of $5.2 million for the Second Quarter 2020 |
|---|---|
| - | Generated Second Quarter 2021 Adjusted EBITDA of $29.7 million and Distributable Cash Flow of $25.0 million compared to Second Quarter 2020 Adjusted EBITDA of $27.7 million and Distributable Cash Flow of $26.0 million |
| --- | --- |
| - | Reported Second Quarter 2021 Gross Profit for the Wholesale Segment of $44.2 million compared to $40.7 million of Gross Profit for the Second Quarter 2020 |
| --- | --- |
| - | Distributed 331.6 million wholesale fuel gallons during the Second Quarter 2021 at an average wholesale fuel margin per gallon of 9.2 cents compared to 260.2 million wholesale fuel gallons at an average wholesale fuel margin per gallon of 10.8 cents during the Second Quarter 2020, an increase of 27% in gallons distributed and a decrease of 15% in margin per gallon |
| --- | --- |
| - | Reported Second Quarter 2021 Gross Profit for the Retail Segment of $21.1 million compared to $15.9 million of Gross Profit for the Second Quarter 2020 |
| --- | --- |
| - | The Distribution Coverage Ratio was 1.22 times for the trailing twelve months ended June 30, 2021 and 1.21 times for the trailing twelve months ended June 30, 2020 |
| --- | --- |
| - | 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 2021 |
| --- | --- |
| - | Began closing on sites in the previously announced $263 million acquisition of 106 convenience store properties from 7-Eleven, Inc. |
| --- | --- |
| - | Announced appointment of Maura Topper as Chief Financial Officer, effective August 11, 2021 |
| --- | --- |
Allentown, PA August 9, 2021 – CrossAmerica Partners LP (NYSE: CAPL) (“CrossAmerica” or the “Partnership”), a leading wholesale fuels distributor, convenience store operator, and owner and lessor of real estate used in the retail distribution of motor fuels, today reported financial results for the second quarter ended June 30, 2021.
“Our solid results this quarter demonstrate the continued strong execution of our strategic plan and the ongoing recovery from the pandemic,” said Charles Nifong, CEO and President of CrossAmerica. “At the end of the quarter, we started closing on the acquisition of assets from 7-Eleven and are continuing to close on sites daily. We are working hard to integrate these excellent assets into our portfolio, and we expect them to be immediately accretive to our financial results.”
Second Quarter Results
Consolidated Results
CrossAmerica reported Operating Income of $8.2 million and Net Income of $4.8 million or earnings of $0.13 per diluted common unit for the second quarter 2021. For the same period in 2020, the Partnership reported Operating Income of $6.3 million and Net Income of $5.2 million or $0.14 per diluted common unit. During the second quarter 2020, Net Income benefited from a $2.9 million income tax benefit that was primarily driven by losses incurred by CrossAmerica’s taxable subsidiaries.
Adjusted EBITDA was $29.7 million for the second quarter 2021 compared to $27.7 million for the same period in 2020, representing an increase of 7% (see Supplemental Disclosure Regarding Non-GAAP Financial Measures section of this release).
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 2021, CrossAmerica’s Wholesale segment generated $44.2 million in gross profit compared to $40.7 million in gross profit for the second quarter 2020, representing an increase of 9%. The Partnership distributed, on a wholesale basis, 331.6 million gallons of motor fuel at an average wholesale gross profit of $0.092 per gallon, resulting in motor fuel gross profit of $30.5 million. For the three-month period ended June 30, 2020, CrossAmerica distributed, on a wholesale basis, 260.2 million gallons of fuel at an average wholesale gross profit of $0.108 per gallon, resulting in motor fuel gross profit of $28.2 million. The 8% increase in motor fuel gross profit was driven by a 27% increase in fuel volume distributed, offset by a 15% decrease in fuel margin per gallon. The main drivers of the volume increase were the asset exchanges with Circle K and the acquisition of retail and wholesale assets as well as the continuing recovery from the COVID-19 Pandemic. In addition, CrossAmerica benefited from higher terms discounts as a result of higher crude prices. These increases were partially offset by a decrease in overall dealer tank wagon (“DTW”) margins due to the movements in crude prices during the second quarter 2021 relative to the second quarter 2020. During the second quarter 2021, the daily spot price of West Texas Intermediate (“WTI”) crude oil rose from $59.19 per barrel on March 31, 2021 to $73.52 per barrel on June 30, 2021, an increase of 24%, which adversely impacted variable priced DTW gallons during the quarter. During the second quarter of 2020, CrossAmerica benefitted from the sharp reduction in wholesale fuel prices particularly at the beginning of the quarter. As such, DTW margins were negatively impacted for the second quarter of 2021 as compared to the second quarter of 2020.
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 2021 was $66.19 per barrel, a 137% increase, compared to the average daily spot price of $27.96 per barrel during the same period in 2020.
CrossAmerica’s gross profit from rent for the Wholesale segment was $13.0 million for the second quarter 2021 compared to $12.3 million for the second quarter 2020, representing an increase of 6%. The increase in rent was primarily driven by $0.5 million in rent concessions that impacted the second quarter 2020.
Operating expenses increased $1.4 million or 15%, primarily as a result of a $1.2 million increase in environmental costs related to remediation, compliance testing and monitoring. Certain environmental remediation costs will be offset in future periods by increased rebates from fuel supply partners.
Operating income for the Wholesale segment was $33.2 million for the second quarter 2021 compared to $31.2 million for the same period in 2020, an increase of 6%. As discussed above, the year-over-year increase was primarily driven by the increase in motor fuel gross profit.
Retail Segment
For the second quarter 2021, the Retail segment reported motor fuel gross profit of $4.9 million. For the same period in 2020, CrossAmerica generated motor fuel gross profit of $3.3 million. The $1.7 million or 50% increase in motor fuel gross profit was attributable to a 42% increase in volume stemming from the increase in company operated sites as a result of the April 2020 acquisition of retail and wholesale assets as well as the continuing recovery from the COVID-19 Pandemic. CrossAmerica’s Wholesale segment supplies the Retail segment on a DTW, or variable margin basis, and as a result, the overall fuel profitability of the retail sites is divided between the Wholesale and Retail segments.
CrossAmerica’s merchandise gross profit and other revenues increased $2.6 million and $1.1 million, respectively, as a result of the increase in company operated sites driven by the April 2020 acquisition of retail and wholesale assets. Merchandise gross profit percentage, net of credit card fees, increased from 25.4% to 26.5%.
Operating expenses increased $4.5 million or 29% primarily due to the increase in company operated sites as a result of the April 2020 acquisition of retail and wholesale assets.
Operating income for the Retail segment was $0.9 million for the second quarter 2021 compared to $0.3 million for the second quarter 2020, primarily as a result of changes in operations noted above.
Acquisition Activity
As of June 30, 2021, CrossAmerica had closed on two sites for total consideration of $4.2 million of its previously announced $263.0 million acquisition of 106 convenience store properties from 7-Eleven. As of August 5, 2021, the Partnership had closed on a total of 32 sites for total consideration of $106.2 million. The remaining 74 sites of the 106 total sites to be acquired are expected to be completed on a rolling basis over the next eight to ten weeks.
Divestment of Assets
For the six months ended June 30, 2021, CrossAmerica divested a total of nine non-core properties and received $3.9 million in connection with these sales. Through August 5, 2021, CrossAmerica divested an additional eight non-core properties and received $2.1 million in proceeds.
Financing Activity
Joe’s Kwik Marts (“JKM”) Credit Facility
On July 16, 2021, CAPL JKM Partners LLC, an indirect wholly-owned subsidiary of CrossAmerica, entered into a Credit Agreement, as amended on July 29, 2021. The JKM Credit Facility provides for a $200 million senior secured credit facility, consisting of a $185 million delayed draw term loan facility and a $15 million revolving credit facility. The JKM Credit Facility will be used to fund the acquisition of the 106 convenience store properties from 7-Eleven discussed above.
Additional details regarding the credit facility are provided in CrossAmerica’s Second Quarter 2021 Form 10-Q.
Amendment to CAPL Credit Facility
On July 28, 2021, the Partnership entered into an amendment to its Credit Agreement, dated as of April 1, 2019. The Amendment, among other things, amended certain provisions relating to unrestricted subsidiaries, increased the maximum level for the consolidated leverage ratio financial covenant, and modified the applicable margin for borrowings under the CAPL Credit Facility.
Additional details regarding the amendment are provided in CrossAmerica’s Second Quarter 2021 Form 10-Q.
Liquidity and Capital Resources
As of June 30, 2021, CrossAmerica had $533.8 million outstanding under its CAPL Credit Facility with defined leverage of 4.42 times. As of August 5, 2021, after taking into consideration the Amendment and debt covenant restrictions, approximately $159.2 million was available for future borrowings under the CAPL Credit Facility. As of August 5, 2021, CrossAmerica has $64.4
million drawn on the JKM Credit Facility Term Loan Facility, with $134.8 million available for future borrowings under the Term Loan Facility and $15.0 million under the revolver.
Distributions
On July 22, 2021, the Board of the Directors of CrossAmerica’s General Partner (“Board”) declared a quarterly distribution of $0.5250 per limited partner unit attributable to the second quarter 2021. As previously announced, the distribution will be paid on August 10, 2021 to all unitholders of record as of August 3, 2021. The amount and timing of any future distributions is subject to the discretion of the Board as provided in CrossAmerica’s Partnership Agreement.
Distributable Cash Flow and Distribution Coverage Ratio
Distributable Cash Flow was $25.0 million for the three-month period ended June 30, 2021, compared to $26.0 million for the same period in 2020. The 4% decrease in Distributable Cash Flow was primarily due to an increase in sustaining capital expenditures partially offset by a decrease in cash interest. Distributable Cash Flow in the second quarter 2020 also benefited from a current tax benefit related primarily to bonus depreciation on eligible capital expenditures. The Distribution Coverage Ratio for the current quarter was 1.26 times compared to 1.31 times for the second quarter 2020. For the trailing twelve- month periods ended June 30, 2021 and June 30, 2020, the Distribution Coverage Ratio was 1.22 and 1.21 times, respectively (see Supplemental Disclosure Regarding Non-GAAP Financial Measures section of this release).
Appointment of Maura Topper as Chief Financial Officer
The Board appointed Ms. Topper as Chief Financial Officer of the partnership effective August 11, 2021.
Ms. Topper was most recently the Chief Financial Officer and Vice President of Investments for Dunne Manning Holdings LLC, the diversified investment organization of the Topper Group. In that role, she led the financing process for the Topper Group’s acquisition of the CrossAmerica general partner in 2019 and the structuring of the recently completed JKM Credit Facility and the amendment to the CAPL Credit Facility to support CrossAmerica’s acquisition of sites from 7-Eleven. She began her career in the Audit practice at Deloitte & Touche LLP. Ms. Topper received a Master of Business Administration degree from Columbia University and a Bachelor of Science degree in Accounting and a Bachelor of Science degree in Business (Finance) from Villanova University.
“In the process of Maura executing the financing of our acquisition, it became obvious that she was undoubtedly the right person for the CFO role,” said Charles Nifong, CEO and President of CrossAmerica. “Maura is already deeply familiar with the organization and will be able to immediately make a positive impact on CrossAmerica.”
Maura Topper commented; “I am looking forward to joining the CrossAmerica team at this exciting and important juncture in the Partnership’s history. As the organization continues to execute on its strategic goals and remain focused on serving its customers across the country, there are many opportunities that I look forward to working with the entire CrossAmerica team to capitalize on for our unitholders.”
Conference Call
The Partnership will host a conference call on August 10, 2021 at 9:00 a.m. Eastern Time to discuss second quarter 2021 earnings results. The conference call numbers are 800-774-6070 or 630-691-2753 and the passcode for both is 8674133#. A live audio webcast of the conference call and the related earnings materials, including reconciliations of non-GAAP financial measures to GAAP financial measures and any other applicable disclosures, will be available on that same day on the investor section of the CrossAmerica website (www.crossamericapartners.com). A slide presentation for the conference call will also be available on the investor section of the Partnership’s website. To listen to the audio webcast, go to https://caplp.gcs-web.com/webcasts-presentations. After the live conference call, an archive of the webcast will be available on the investor section of the CrossAmerica website at https://caplp.gcs-web.com/webcasts-presentations within 24 hours after the call for a period of sixty days.
CROSSAMERICA PARTNERS LP
CONSOLIDATED BALANCE SHEETS
(Thousands of Dollars, except unit data)
| December 31, | |||||
|---|---|---|---|---|---|
| 2020 | |||||
| ASSETS | |||||
| Current assets: | |||||
| Cash and cash equivalents | 621 | $ | 513 | ||
| Accounts receivable, net of allowances of 282 and 429, respectively | 35,037 | 28,519 | |||
| Accounts receivable from related parties | 1,147 | 931 | |||
| Inventory | 24,414 | 23,253 | |||
| Assets held for sale | 5,553 | 9,898 | |||
| Other current assets | 14,856 | 11,707 | |||
| Total current assets | 81,628 | 74,821 | |||
| Property and equipment, net | 562,849 | 570,856 | |||
| Right-of-use assets, net | 164,240 | 167,860 | |||
| Intangible assets, net | 85,570 | 92,912 | |||
| Goodwill | 88,764 | 88,764 | |||
| Other assets | 21,500 | 19,129 | |||
| Total assets | 1,004,551 | $ | 1,014,342 | ||
| LIABILITIES AND EQUITY | |||||
| Current liabilities: | |||||
| Current portion of debt and finance lease obligations | 2,679 | $ | 2,631 | ||
| Current portion of operating lease obligations | 32,557 | 31,958 | |||
| Accounts payable | 71,230 | 63,978 | |||
| Accounts payable to related parties | 6,400 | 5,379 | |||
| Accrued expenses and other current liabilities | 21,649 | 23,267 | |||
| Motor fuel and sales taxes payable | 22,320 | 19,735 | |||
| Total current liabilities | 156,835 | 146,948 | |||
| Debt and finance lease obligations, less current portion | 546,759 | 527,299 | |||
| Operating lease obligations, less current portion | 137,559 | 141,380 | |||
| Deferred tax liabilities, net | 15,183 | 15,022 | |||
| Asset retirement obligations | 41,877 | 41,450 | |||
| Other long-term liabilities | 34,199 | 32,575 | |||
| Total liabilities | 932,412 | 904,674 | |||
| Commitments and contingencies | |||||
| Equity: | |||||
| Common units—37,874,868 and 37,868,046 units issued and<br> outstanding at June 30, 2021 and December 31, 2020, respectively | 72,162 | 112,124 | |||
| Accumulated other comprehensive loss | (23 | ) | (2,456 | ) | |
| Total equity | 72,139 | 109,668 | |||
| Total liabilities and equity | 1,004,551 | $ | 1,014,342 |
All values are in US Dollars.
CROSSAMERICA PARTNERS LP
CONSOLIDATED STATEMENTS OF OPERATIONS
(Thousands of Dollars, Except Unit and Per Unit Amounts)
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2021 | 2020 | 2021 | 2020 | |||||||||
| Operating revenues ^(a)^ | $ | 859,334 | $ | 398,402 | $ | 1,516,618 | $ | 790,097 | ||||
| Costs of sales ^(b)^ | 794,240 | 340,754 | 1,396,656 | 696,720 | ||||||||
| Gross profit | 65,094 | 57,648 | 119,962 | 93,377 | ||||||||
| Income from CST Fuel Supply equity interests | — | — | — | 3,202 | ||||||||
| Operating expenses: | ||||||||||||
| Operating expenses ^(c)^ | 31,070 | 25,097 | 60,473 | 35,820 | ||||||||
| General and administrative expenses | 6,876 | 5,597 | 14,526 | 10,077 | ||||||||
| Depreciation, amortization and accretion expense | 19,583 | 16,050 | 37,614 | 33,277 | ||||||||
| Total operating expenses | 57,529 | 46,744 | 112,613 | 79,174 | ||||||||
| Gain (loss) on dispositions and lease terminations, net | 597 | (4,575 | ) | (51 | ) | 66,356 | ||||||
| Operating income | 8,162 | 6,329 | 7,298 | 83,761 | ||||||||
| Other income, net | 204 | 78 | 292 | 215 | ||||||||
| Interest expense | (3,870 | ) | (4,121 | ) | (7,367 | ) | (9,661 | ) | ||||
| Income before income taxes | 4,496 | 2,286 | 223 | 74,315 | ||||||||
| Income tax benefit | (293 | ) | (2,944 | ) | (599 | ) | (2,976 | ) | ||||
| Net income | 4,789 | 5,230 | 822 | 77,291 | ||||||||
| IDR distributions | — | — | — | (133 | ) | |||||||
| Net income available to limited partners | $ | 4,789 | $ | 5,230 | $ | 822 | $ | 77,158 | ||||
| Basic and diluted earnings per common unit | $ | 0.13 | $ | 0.14 | $ | 0.02 | $ | 2.09 | ||||
| Weighted-average limited partner units: | ||||||||||||
| Basic common units | 37,874,868 | 37,736,329 | 37,872,079 | 36,865,651 | ||||||||
| Diluted common units | 37,905,010 | 37,738,150 | 37,902,225 | 36,867,495 | ||||||||
| Supplemental information: | ||||||||||||
| (a) includes excise taxes of: | $ | 50,047 | $ | 33,770 | $ | 93,753 | $ | 48,707 | ||||
| (a) includes rent income of: | 20,862 | 20,424 | 41,334 | 43,112 | ||||||||
| (b) excludes depreciation, amortization and accretion | ||||||||||||
| (b) includes rent expense of: | 6,031 | 6,132 | 11,944 | 13,052 | ||||||||
| (c) includes rent expense of: | 3,265 | 2,522 | 6,461 | 2,522 |
CROSSAMERICA PARTNERS LP
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Thousands of Dollars)
| Six Months Ended June 30, | ||||||
|---|---|---|---|---|---|---|
| 2021 | 2020 | |||||
| Cash flows from operating activities: | ||||||
| Net income | $ | 822 | $ | 77,291 | ||
| Adjustments to reconcile net income to net cash provided by<br><br><br>operating activities: | ||||||
| Depreciation, amortization and accretion expense | 37,614 | 33,277 | ||||
| Amortization of deferred financing costs | 521 | 521 | ||||
| Credit loss expense | 32 | 627 | ||||
| Deferred income tax benefit | (921 | ) | (3,063 | ) | ||
| Equity-based employee and director compensation expense | 754 | 48 | ||||
| Loss (gain) on dispositions and lease terminations, net | 51 | (74,189 | ) | |||
| Changes in operating assets and liabilities, net of acquisitions | 2,141 | 27,131 | ||||
| Net cash provided by operating activities | 41,014 | 61,643 | ||||
| Cash flows from investing activities: | ||||||
| Principal payments received on notes receivable | 85 | 172 | ||||
| Proceeds from Circle K in connection with CST Fuel Supply Exchange | — | 16,396 | ||||
| Proceeds from sale of assets | 5,600 | 9,954 | ||||
| Capital expenditures | (21,911 | ) | (10,760 | ) | ||
| Cash paid in connection with acquisitions, net of cash acquired | (4,166 | ) | (22,342 | ) | ||
| Net cash used in investing activities | (20,392 | ) | (6,580 | ) | ||
| Cash flows from financing activities: | ||||||
| Borrowings under the CAPL Credit Facility | 57,000 | 63,201 | ||||
| Repayments on the CAPL Credit Facility | (36,399 | ) | (78,527 | ) | ||
| Payments of long-term debt and finance lease obligations | (1,287 | ) | (1,207 | ) | ||
| Distributions paid on distribution equivalent rights | (63 | ) | (2 | ) | ||
| Distributions paid to holders of the IDRs | — | (133 | ) | |||
| Distributions paid on common units | (39,765 | ) | (37,990 | ) | ||
| Net cash used in financing activities | (20,514 | ) | (54,658 | ) | ||
| Net increase in cash and cash equivalents | 108 | 405 | ||||
| Cash and cash equivalents at beginning of period | 513 | 1,780 | ||||
| Cash and cash equivalents at end of period | $ | 621 | $ | 2,185 |
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, | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2021 | 2020 | 2021 | 2020 | |||||||||
| Gross profit: | ||||||||||||
| Motor fuel–third party | $ | 18,529 | $ | 12,177 | $ | 34,052 | $ | 25,217 | ||||
| Motor fuel–intersegment and related party | 11,961 | 15,989 | 17,690 | 22,842 | ||||||||
| Motor fuel gross profit | 30,490 | 28,166 | 51,742 | 48,059 | ||||||||
| Rent gross profit | 12,973 | 12,262 | 25,466 | 26,391 | ||||||||
| Other revenues | 729 | 300 | 1,863 | 1,415 | ||||||||
| Total gross profit | 44,192 | 40,728 | 79,071 | 75,865 | ||||||||
| Income from CST Fuel Supply equity interests ^(a)^ | — | — | — | 3,202 | ||||||||
| Operating expenses | (10,948 | ) | (9,509 | ) | (20,922 | ) | (18,583 | ) | ||||
| Operating income | $ | 33,244 | $ | 31,219 | $ | 58,149 | $ | 60,484 | ||||
| Motor fuel distribution sites (end of period): ^(b)^ | ||||||||||||
| Motor fuel–third party | ||||||||||||
| Independent dealers ^(c)^ | 675 | 712 | 675 | 712 | ||||||||
| Lessee dealers ^(d)^ | 651 | 682 | 651 | 682 | ||||||||
| Total motor fuel distribution–third party sites | 1,326 | 1,394 | 1,326 | 1,394 | ||||||||
| Motor fuel–intersegment and related party | ||||||||||||
| Commission agents (Retail segment) ^(e)^ | 202 | 212 | 202 | 212 | ||||||||
| Company operated retail sites (Retail segment) | 152 | 150 | 152 | 150 | ||||||||
| Total motor fuel distribution–intersegment and<br><br><br>related party sites | 354 | 362 | 354 | 362 | ||||||||
| Motor fuel distribution sites (average during the period): | ||||||||||||
| Motor fuel-third party distribution | 1,328 | 1,379 | 1,333 | 1,227 | ||||||||
| Motor fuel-intersegment and related party distribution | 353 | 346 | 355 | 289 | ||||||||
| Total motor fuel distribution sites | 1,681 | 1,725 | 1,688 | 1,516 | ||||||||
| Volume of gallons distributed (in thousands) | ||||||||||||
| Third party | 242,392 | 192,927 | 456,100 | 370,424 | ||||||||
| Intersegment and related party | 89,233 | 67,319 | 167,305 | 110,467 | ||||||||
| Total volume of gallons distributed | 331,625 | 260,246 | 623,405 | 480,891 | ||||||||
| Wholesale margin per gallon | $ | 0.092 | $ | 0.108 | $ | 0.083 | $ | 0.100 | ||||
| (a) | Represents income from CrossAmerica’s equity interest in CST Fuel Supply. The CST Fuel Supply Exchange closed on March 25, 2020. | |||||||||||
| --- | --- | |||||||||||
| (b) | In addition, as of June 30, 2021 and 2020, CrossAmerica distributed motor fuel to 14 and 13 sub-wholesalers who distributed to additional sites, respectively. | |||||||||||
| --- | --- | |||||||||||
| (c) | The decrease in the independent dealer site count was primarily attributable to loss of contracts, most of which were lower margin, partially offset by the increase in independent dealer sites as a result of the real estate rationalization effort and the resulting reclassification of the sites from a lessee dealer or commission site to an independent dealer site when CrossAmerica continues to supply the sites after divestiture. | |||||||||||
| --- | --- | |||||||||||
| (d) | The decrease in the lessee dealer site count was primarily attributable to the real estate rationalization effort, partially offset by the lessee dealer sites acquired in the sixth asset exchange with Circle K. | |||||||||||
| --- | --- | |||||||||||
| (e) | The decrease in the commission site count was primarily attributable to CrossAmerica’s real estate rationalization effort. | |||||||||||
| --- | --- |
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, | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2021 | 2020 | 2021 | 2020 | |||||||||
| Gross profit: | ||||||||||||
| Motor fuel | $ | 4,937 | $ | 3,284 | $ | 10,370 | $ | 3,689 | ||||
| Merchandise | 11,969 | 9,384 | 22,333 | 9,384 | ||||||||
| Rent | 1,858 | 2,030 | 3,924 | 3,669 | ||||||||
| Other revenue | 2,311 | 1,221 | 4,170 | 1,221 | ||||||||
| Total gross profit | 21,075 | 15,919 | 40,797 | 17,963 | ||||||||
| Operating expenses | (20,122 | ) | (15,588 | ) | (39,551 | ) | (17,237 | ) | ||||
| Operating income | $ | 953 | $ | 331 | $ | 1,246 | $ | 726 | ||||
| Retail sites (end of period): | ||||||||||||
| Commission agents ^(a)^ | 202 | 212 | 202 | 212 | ||||||||
| Company operated retail sites | 152 | 150 | 152 | 150 | ||||||||
| Total system sites at the end of the period | 354 | 362 | 354 | 362 | ||||||||
| Total system operating statistics: | ||||||||||||
| Average retail fuel sites during the period | 353 | 337 | 355 | 254 | ||||||||
| Motor fuel sales (gallons per site per day) | 2,793 | 2,057 | 2,616 | 1,993 | ||||||||
| Motor fuel gross profit per gallon, net of credit card fees and<br><br><br>commissions | $ | 0.055 | $ | 0.052 | $ | 0.062 | $ | 0.040 | ||||
| Commission agents statistics: | ||||||||||||
| Average retail fuel sites during the period | 203 | 210 | 204 | 190 | ||||||||
| Motor fuel gross profit per gallon, net of credit card fees and<br><br><br>commissions | $ | 0.014 | $ | 0.016 | $ | 0.015 | $ | 0.015 | ||||
| Company operated retail site statistics: | ||||||||||||
| Average retail fuel sites during the period | 150 | 128 | 151 | 64 | ||||||||
| Motor fuel gross profit per gallon, net of credit card fees | $ | 0.093 | $ | 0.096 | $ | 0.109 | $ | 0.096 | ||||
| Merchandise gross profit percentage, net of credit card fees | 26.5 | % | 25.4 | % | 26.9 | % | 25.4 | % | ||||
| (a) | The decrease in the commission site count was primarily attributable to the real estate rationalization effort. | |||||||||||
| --- | --- |
Supplemental Disclosure Regarding Non-GAAP Financial Measures
CrossAmerica uses the non-GAAP financial measures EBITDA, Adjusted EBITDA, Distributable Cash Flow and Distribution Coverage Ratio. EBITDA represents net income available to the Partnership before deducting interest expense, income taxes, depreciation, amortization and accretion (which includes certain impairment charges). Adjusted EBITDA represents EBITDA as further adjusted to exclude equity-based employee and director compensation expense, gains or losses on dispositions and lease terminations, net, and certain discrete acquisition related costs, such as legal and other professional fees, separation benefit costs and certain other discrete non-cash items arising from purchase accounting. Distributable Cash Flow represents Adjusted EBITDA less cash interest expense, sustaining capital expenditures and current income tax benefit or expense. 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.
EBITDA, Adjusted EBITDA, Distributable Cash Flow and Distribution Coverage Ratio are used as supplemental financial measures by management and by external users of the CrossAmerica financial statements, such as investors and lenders. EBITDA and Adjusted EBITDA are used to assess the financial performance without regard to financing methods, capital structure or income taxes and the ability to incur and service debt and to fund capital expenditures. In addition, Adjusted EBITDA is used to assess the operating performance of the CrossAmerica business on a consistent basis by excluding the impact of items which do not result directly from the wholesale distribution of motor fuel, the leasing of real property, or the day to day operations of the Partnership’s
retail site activities. EBITDA, Adjusted EBITDA, Distributable Cash Flow and Distribution Coverage Ratio are also used to assess the ability to generate cash sufficient to make distributions to the Partnership’s unitholders.
CrossAmerica believes the presentation of EBITDA, Adjusted EBITDA, Distributable Cash Flow and Distribution Coverage Ratio provides useful information to investors in assessing the financial condition and results of operations. EBITDA, Adjusted EBITDA, Distributable Cash Flow and Distribution Coverage Ratio should not be considered alternatives to net income or any other measure of financial performance or liquidity presented in accordance with U.S. GAAP. EBITDA, Adjusted EBITDA, Distributable Cash Flow and Distribution Coverage Ratio have important limitations as analytical tools because they exclude some but not all items that affect net income. Additionally, because EBITDA, Adjusted EBITDA, Distributable Cash Flow and Distribution Coverage Ratio may be defined differently by other companies in the industry, the Partnership’s definitions may not be comparable to similarly titled measures of other companies, thereby diminishing their utility.
The following table presents reconciliations of EBITDA, Adjusted EBITDA, and Distributable Cash Flow to net income, the most directly comparable U.S. GAAP financial measure, for each of the periods indicated (in thousands, except for per unit amounts):
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2021 | 2020 | 2021 | 2020 | |||||||||
| Net income available to limited partners | $ | 4,789 | $ | 5,230 | $ | 822 | $ | 77,158 | ||||
| Interest expense | 3,870 | 4,121 | 7,367 | 9,661 | ||||||||
| Income tax benefit | (293 | ) | (2,944 | ) | (599 | ) | (2,976 | ) | ||||
| Depreciation, amortization and accretion expense | 19,583 | 16,050 | 37,614 | 33,277 | ||||||||
| EBITDA | 27,949 | 22,457 | 45,204 | 117,120 | ||||||||
| Equity-based employee and director compensation expense | 386 | 17 | 754 | 48 | ||||||||
| (Gain) loss on dispositions and lease terminations, net ^(a)^ | (597 | ) | 4,575 | 51 | (66,356 | ) | ||||||
| Acquisition-related costs ^(b)^ | 1,967 | 672 | 4,361 | 2,193 | ||||||||
| Adjusted EBITDA | 29,705 | 27,721 | 50,370 | 53,005 | ||||||||
| Cash interest expense | (3,610 | ) | (3,861 | ) | (6,846 | ) | (9,140 | ) | ||||
| Sustaining capital expenditures ^(c)^ | (1,040 | ) | (407 | ) | (2,432 | ) | (1,047 | ) | ||||
| Current income tax (expense) benefit ^(d)^ | (50 | ) | 2,594 | (334 | ) | 3,668 | ||||||
| Distributable Cash Flow | $ | 25,005 | $ | 26,047 | $ | 40,758 | $ | 46,486 | ||||
| Weighted-average diluted common units | 37,905 | 37,738 | 37,902 | 36,867 | ||||||||
| Distributions paid per limited partner unit ^(e)^ | $ | 0.5250 | $ | 0.5250 | $ | 1.0500 | $ | 1.0500 | ||||
| Distribution Coverage Ratio ^(f)^ | 1.26x | 1.31x | 1.02x | 1.20x | ||||||||
| (a) | 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 ended June 30, 2020, CrossAmerica recorded a $67.6 million gain on the sale of its 17.5% investment in CST Fuel Supply. In addition, CrossAmerica recorded gains on the sale of CAPL properties in connection with the asset exchange with Circle K of $6.1 million and $7.9 million for the three and six months ended June 30, 2020, respectively. | |||||||||||
| --- | --- | |||||||||||
| (b) | 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. | |||||||||||
| --- | --- | |||||||||||
| (c) | 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. | |||||||||||
| --- | --- | |||||||||||
| (d) | Consistent with prior divestitures, the current income tax (expense) benefit excludes income tax incurred on the sale of sites. | |||||||||||
| --- | --- | |||||||||||
| (e) | On July 22, 2021, the Board approved a quarterly distribution of $0.5250 per unit attributable to the second quarter of 2021. The distribution is payable on August 10, 2021 to all unitholders of record on August 3, 2021. | |||||||||||
| --- | --- | |||||||||||
| (f) | 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. | |||||||||||
| --- | --- |
About CrossAmerica Partners LP
CrossAmerica Partners LP is a leading wholesale distributor of motor fuels, convenience store operator, and owner and lessee of real estate used in the retail distribution of motor fuels. Its general partner, CrossAmerica GP LLC, is indirectly owned and controlled by entities affiliated with Joseph V. Topper, Jr., the founder of CrossAmerica Partners and a member of the board of the general partner since 2012. Formed in 2012, CrossAmerica Partners LP is a distributor of branded and unbranded petroleum
for motor vehicles in the United States and distributes fuel to approximately 1,700 locations and owns or leases approximately 1,100 sites. With a geographic footprint covering 34 states, the Partnership has well-established relationships with several major oil brands, including ExxonMobil, BP, Shell, Chevron, Sunoco, Valero, Gulf, Citgo, Marathon and Phillips 66. CrossAmerica Partners LP ranks as one of ExxonMobil’s largest distributors by fuel volume in the United States and in the top 10 for additional brands. For additional information, please visit www.crossamericapartners.com.
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 Securities and Exchange Commission, and available on CrossAmerica’s website at www.crossamericapartners.com. The Partnership undertakes no obligation to publicly update or revise any statements in this release, whether as a result of new information, future events or otherwise.
Note to Non-United States Investors: This release is intended to be a qualified notice under Treasury Regulation Section 1.1446-4(b). Brokers and nominees should treat one hundred percent (100%) of CrossAmerica Partners LP’s distributions to non-U.S. investors as attributable to income that is effectively connected with a United States trade or business. Accordingly, CrossAmerica Partners LP’s distributions to non-U.S. investors are subject to federal income tax withholding at the highest applicable effective tax rate.
11
August 2021 Second Quarter 2021 Earnings Call Exhibit 99.2
Forward Looking Statements Statements contained in this presentation that state the Partnership’s or management’s expectations or predictions of the future are forward-looking statements. The words “believe,” “expect,” “should,” “intends,” “anticipates,” “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 annual reports on Form 10-K, quarterly reports on Form 10-Q and other reports filed with the Securities and Exchange Commission and available on the Partnership’s website at www.crossamericapartners.com. If any of these factors materialize, or if our underlying assumptions prove to be incorrect, actual results may vary significantly from what we projected. Any forward-looking statement you see or hear during this presentation reflects our current views as of the date of this presentation with respect to future events. We assume no obligation to publicly update or revise these forward-looking statements for any reason, whether as a result of new information, future events, or otherwise. 2
CrossAmerica Business Overview Charles Nifong, CEO & President 3
Second Quarter Operations Wholesale fuel volume increased 27% 332 million gallons distributed in 2Q21 versus 260 million gallons in 2Q20 Primarily driven by acquisitions and exchanges Continued recovery from COVID-19 Wholesale fuel margin declined 15% 9.2 cents in 2Q21 versus 10.8 cents in 2Q20 Strong Dealer Tank Wagon (DTW) margins in 2Q20 Motor Fuel Gross Profit from the Wholesale Segment increased 8% $30.5 million in 2Q21 versus $28.2 million in 2Q20 Primarily driven by 27% increase in motor fuel volume Overall Gross Profit for Wholesale Segment increased 9% ($44.2 million for 2Q21 versus $40.7 million for 2Q20) Retail Segment’s Gross Profit increased $5.2 million or 32% year-over-year $21.1 million in 2Q21 versus $15.9 million in 2Q20 Increase driven by motor fuel and merchandise gross profit Operating and General and Administrative (G&A) Expenses Operating Expenses increased $6.0 million primarily due to the increase in company operated sites as a result of the April 2020 acquisition of retail and wholesale assets and an increase in environmental costs G&A expenses increased $1.3 million in 2Q21 when compared to 2Q20 primarily driven by acquisition related costs incurred with the acquisition of the 7-Eleven assets
4
CrossAmerica Financial Overview Jon Benfield, Chief Accounting Officer 5
Second Quarter Results Summary 6 Note: See the reconciliation of EBITDA, Adjusted EBITDA and Distributable Cash Flow (or “DCF”) to net income and the definitions of EBITDA, Adjusted EBITDA and DCF in the appendix of this presentation.
Capital Strength Leverage, as defined under our credit facility, was 4.42X as of June 30, 2021
Maintain Distribution Rate Distributable Cash Flow of $25.0 million for the three-month period ended June 30, 2021 Distribution rate of $0.5250 per unit ($2.10 per unit annualized) attributable to the second quarter of 2021 TTM coverage ratio was 1.22 times for the period ending 06/30/21 and 1.21 times for the period ending 06/30/20 Capital Expenditures $11.3 million during the second quarter of 2021 $10.3 million of growth capital during the quarter related to EMV upgrades and rebranding of certain sites, including the sites being acquired from 7-Eleven
7 Note: See the reconciliation of EBITDA, Adjusted EBITDA and Distributable Cash Flow (or “DCF”) to net income and the definitions of EBITDA, Adjusted EBITDA and DCF in the appendix of this presentation.
New Credit Facility and Amendment to CAPL Credit Agreement JKM Credit Facility Entered into a credit agreement on July 16, 2021 Agreement among Borrower, CAPL JKM Holdings LLC, an indirect wholly-owned subsidiary of CrossAmerica and the sole member of Borrower, and Manufacturers and Traders Trust Company, as administrative agent, swingline lender and issuing bank Provides for a $200 million senior secured credit facility, consisting of a $185 million delayed draw term loan facility and a $15 million revolving credit facility The JKM Credit Facility will be used to fund the acquisition of the 106 convenience store properties from 7-Eleven Amendment to CAPL Credit Agreement On July 28, 2021, the Partnership entered into an amendment to its Credit Agreement, dated as of April 1, 2019 The Amendment, among other things: amended certain provisions relating to unrestricted subsidiaries, increased the maximum level for the consolidated leverage ratio financial covenant, and modified the applicable margin for borrowings under the CAPL Credit Facility
8 Note: Additional details regarding the JKM Credit Facility and Amendment to the CAPL Credit Agreement are provided in the most recent Second Quarter 2021 Form 10-Q.
Appendix Second Quarter 2021 Earnings Call 9
Non-GAAP Financial Measures 10 We use the non-GAAP financial measures EBITDA, Adjusted EBITDA, Distributable Cash Flow and Distribution Coverage Ratio. EBITDA represents net income available to us before deducting interest expense, income taxes and depreciation, amortization and accretion, which includes certain impairment charges. Adjusted EBITDA represents EBITDA as further adjusted to exclude equity-based employee and director compensation expense, gains or losses on dispositions and lease terminations, certain acquisition related costs, such as legal and other professional fees and separation benefit costs, and certain other non-cash items arising from purchase accounting. Distributable Cash Flow represents Adjusted EBITDA less cash interest expense, sustaining capital expenditures and current income tax benefit or expense. 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.
EBITDA, Adjusted EBITDA, Distributable Cash Flow and Distribution Coverage Ratio are used as supplemental financial measures by management and by external users of our financial statements, such as investors and lenders. EBITDA and Adjusted EBITDA are used to assess our financial performance without regard to financing methods, capital structure or income taxes and the ability to incur and service debt and to fund capital expenditures. In addition, Adjusted EBITDA is used to assess our operating performance of our business on a consistent basis by excluding the impact of items which do not result directly from the wholesale distribution of motor fuel, the leasing of real property, or the day to day operations of our retail site activities. EBITDA, Adjusted EBITDA, Distributable Cash Flow and Distribution Coverage Ratio are also used to assess our ability to generate cash sufficient to make distributions to our unit-holders.
We believe the presentation of EBITDA, Adjusted EBITDA, Distributable Cash Flow and Distribution Coverage Ratio provides useful information to investors in assessing our financial condition and results of operations. EBITDA, Adjusted EBITDA, Distributable Cash Flow and Distribution Coverage Ratio should not be considered alternatives to net income or any other measure of financial performance or liquidity presented in accordance with U.S. GAAP. EBITDA, Adjusted EBITDA, Distributable Cash Flow and Distribution Coverage Ratio have important limitations as analytical tools because they exclude some but not all items that affect net income. Additionally, because EBITDA, Adjusted EBITDA, Distributable Cash Flow and Distribution Coverage Ratio may be defined differently by other companies in our industry, our definitions may not be comparable to similarly titled measures of other companies, thereby diminishing their utility.
Non-GAAP Reconciliation 11 The following table presents reconciliations of EBITDA, Adjusted EBITDA, and Distributable Cash Flow to net income, the most directly comparable U.S. GAAP financial measure, for each of the periods indicated (in thousands, except for per unit amounts): 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 ended June 30, 2020, CrossAmerica recorded a $67.6 million gain on the sale of its 17.5% investment in CST Fuel Supply. In addition, CrossAmerica recorded gains on the sale of CAPL properties in connection with the asset exchange with Circle K of $6.1 million and $7.9 million for the three and six months ended June 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. Consistent with prior divestitures, the current income tax benefit excludes income tax incurred on the sale of sites. On July 22, 2021, the Board approved a quarterly distribution of $0.5250 per unit attributable to the second quarter of 2021. The distribution is payable on August 10, 2021 to all unitholders of record on August 3, 2021. 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.