CrossAmerica Partners LP 10-Q for FY2021 Q1

CrossAmerica Partners LP (CAPL)

10-Q 2021-05-11 For: 2021-03-31

Added on April 04, 2026

About this 10-Q

CrossAmerica Partners LP filed this 10-Q on May 11, 2021, covering the quarter ended March 31, 2021 (FY2021 Q1).

Headline figures

Quarter ended March 31, 2021, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $657.28M; up 67.8% from $391.7M a year earlier
Net loss: $3.97M; compared with net income of $72.06M a year earlier

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Delaware		45-4165414
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

600 Hamilton Street, Suite 500 Allentown, PA		18101 (Zip Code) (610) 625-8000
(Address of Principal Executive Offices)		(Registrant’s telephone number, including area code)


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Units	CAPL	New York Stock Exchange


Large accelerated filer ☐	Accelerated filer ☒
Non-accelerated filer ☐	Smaller reporting company ☐
	Emerging growth company ☐

		PAGE

Commonly Used Defined Terms		i

PART I - FINANCIAL INFORMATION		1
Item 1. Financial Statements		1
Consolidated Balance Sheets as of March 31, 2021 and December 31, 2020		1
Consolidated Statements of Operations for the Three Months Ended March 31, 2021 and 2020		2
Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2021 and 2020		3
Consolidated Statements of Equity and Comprehensive Income for the Three Months Ended March 31, 2021 and 2020		4
Condensed Notes to Consolidated Financial Statements		5
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		17
Item 3. Quantitative and Qualitative Disclosures about Market Risk		29
Item 4. Controls and Procedures		30

PART II - OTHER INFORMATION		30
Item 1. Legal Proceedings		30
Item 1A. Risk Factors		30
Item 6. Exhibits		30

SIGNATURE		31

The following is a list of certain acronyms and terms generally used in the industry and throughout this document:

CrossAmerica Partners LP and subsidiaries:

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

LGW			Lehigh Gas Wholesale LLC

LGPR			LGP Realty Holdings LP

LGWS			Lehigh Gas Wholesale Services, Inc. and subsidiaries

CrossAmerica Partners LP related parties at any point during 2020 or 2021:

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

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

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

General Partner			CrossAmerica GP LLC, the General Partner of CrossAmerica, a Delaware limited liability company, indirectly owned by the Topper Group.

Topper Group			Joseph V. Topper, Jr., collectively with his affiliates and family trusts that have ownership interests in the Partnership. Joseph V. Topper, Jr. is the founder of the Partnership and a member of the Board. The Topper Group is a related party and large holder of our common units

TopStar			TopStar Inc., an entity affiliated with a family member of Joseph V. Topper, Jr. TopStar is an operator of convenience stores that leases retail sites from us, and since April 14, 2020, also purchases fuel from us.

Other Defined Terms:

2020 Bonus Plan			The 2020 Performance-Based Bonus Compensation Policy is one of the key components of “at-risk” compensation. The 2020 Bonus Plan is utilized to reward short-term performance achievements and to motivate and reward employees for their contributions toward meeting financial and strategic goals.

ASC			Accounting Standards Codification

ASU			Accounting Standards Update

Board			Board of Directors of our General Partner

BP			BP p.l.c.

CDC			The Centers for Disease Control and Prevention

Circle K			Circle K Stores Inc., a Texas corporation, and a wholly owned subsidiary of Alimentation Couche-Tard Inc. (TSX: ATD.A ATD.B)

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


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

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

CST Fuel Supply			CST Fuel Supply LP is indirectly owned by Circle K and is the parent of CST Marketing and Supply, LLC, CST’s wholesale motor fuel supply business, which provides wholesale fuel distribution to the majority of CST’s legacy U.S. retail convenience stores on a fixed markup per gallon. From July 1, 2015 through March 25, 2020, we owned a 17.5% limited partner interest in CST Fuel Supply.

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

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

DTW			Dealer tank wagon contracts, which are variable cent per gallon priced wholesale motor fuel distribution or supply contracts. DTW also refers to the pricing methodology under such contracts

EBITDA			Earnings before interest, taxes, depreciation, amortization and accretion, a non-GAAP financial measure

EMV			Payment method based upon a technical standard for smart payment cards, also referred to as chip cards

Equity Restructuring Agreement			On January 15, 2020, the Partnership entered into an Equity Restructuring Agreement with the General Partner and Dunne Manning CAP Holdings II LLC (“DM CAP Holdings”), a wholly owned subsidiary of DMP. Pursuant to the Equity Restructuring Agreement, all of the outstanding IDRs of the Partnership, all of which were held by DM CAP Holdings, were cancelled and converted into 2,528,673 newly-issued common units representing limited partner interests in the Partnership based on a value of $45 million and calculated using the 20 business day volume weighted average trading price of our common units ended five business days prior to the execution of the Equity Restructuring Agreement. This transaction closed on February 6, 2020.

Exchange Act			Securities Exchange Act of 1934, as amended

ExxonMobil			ExxonMobil Corporation

FASB			Financial Accounting Standards Board

Form 10-K			CrossAmerica’s Annual Report on Form 10-K for the year ended December 31, 2020

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

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

Internal Revenue Code			Internal Revenue Code of 1986, as amended

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

LIBOR			London Interbank Offered Rate

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

Marathon			Marathon Petroleum Company LP

Motiva			Motiva Enterprises LLC

Partnership Agreement			Second Amended and Restated Agreement of Limited Partnership of CrossAmerica Partners LP, dated as of February 6, 2020

Predecessor Entity			Wholesale distribution contracts and real property and leasehold interests contributed to the Partnership in connection with the IPO

SEC			U.S. Securities and Exchange Commission

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

Topper Group Omnibus Agreement			The Topper Group Omnibus Agreement, effective January 1, 2020, by and among the Partnership, the General Partner and DMI. The terms of the Topper Group Omnibus Agreement were approved by the independent conflicts committee of the Board, which is composed of the independent directors of the Board. Pursuant to the Topper Group Omnibus Agreement, DMI agrees, among other things, to provide, or cause to be provided, to the Partnership certain management services at cost without markup.

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

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

WTI			West Texas Intermediate crude oil

	March 31,			December 31,
	2021			2020
ASSETS
Current assets:
Cash and cash equivalents	$	954		$	513
Accounts receivable, net of allowances of $344 and $429, respectively		31,001			28,519
Accounts receivable from related parties		935			931
Inventory		24,357			23,253
Assets held for sale		10,548			9,898
Other current assets		13,069			11,707
Total current assets		80,864			74,821
Property and equipment, net		561,762			570,856
Right-of-use assets, net		170,116			167,860
Intangible assets, net		88,340			92,912
Goodwill		88,764			88,764
Other assets		20,091			19,129
Total assets	$	1,009,937		$	1,014,342

LIABILITIES AND EQUITY
Current liabilities:
Current portion of debt and finance lease obligations	$	2,677		$	2,631
Current portion of operating lease obligations		32,977			31,958
Accounts payable		67,197			63,978
Accounts payable to related parties		5,855			5,379
Accrued expenses and other current liabilities		22,028			23,267
Motor fuel and sales taxes payable		20,594			19,735
Total current liabilities		151,328			146,948
Debt and finance lease obligations, less current portion		539,841			527,299
Operating lease obligations, less current portion		143,017			141,380
Deferred tax liabilities, net		15,189			15,022
Asset retirement obligations		41,590			41,450
Other long-term liabilities		31,566			32,575
Total liabilities		922,531			904,674

Commitments and contingencies

Equity:
Common units—37,874,868 and 37,868,046 units issued and outstanding at March 31, 2021 and December 31, 2020, respectively		87,614			112,124
Accumulated other comprehensive loss		(208	)		(2,456	)
Total equity		87,406			109,668
Total liabilities and equity	$	1,009,937		$	1,014,342

	Three Months Ended March 31,
	2021			2020
Operating revenues ^(a)	$	657,284		$	391,695
Costs of sales ^(b)		602,416			355,966
Gross profit		54,868			35,729

Income from CST Fuel Supply equity interests		—			3,202
Operating expenses:
Operating expenses ^(c)		29,403			10,723
General and administrative expenses		7,650			4,480
Depreciation, amortization and accretion expense		18,031			17,227
Total operating expenses		55,084			32,430
(Loss) gain on dispositions and lease terminations, net		(648	)		70,931
Operating (loss) income		(864	)		77,432
Other income, net		88			137
Interest expense		(3,497	)		(5,540	)
(Loss) income before income taxes		(4,273	)		72,029
Income tax benefit		(306	)		(32	)
Net (loss) income		(3,967	)		72,061
IDR distributions		—			(133	)
Net (loss) income available to limited partners	$	(3,967	)	$	71,928

Basic and diluted earnings per common unit	$	(0.10	)	$	2.00

Weighted-average limited partner units:
Basic common units		37,869,259			35,994,972
Diluted common units ^(d)		37,891,130			35,995,933

Supplemental information:
(a) includes excise taxes of:	$	43,705		$	14,937
(a) includes rent income of:		20,472			22,688
(b) excludes depreciation, amortization and accretion
(b) includes rent expense of:		5,913			6,920
(c) includes rent expense of:		3,196			—
(d) Diluted common units were not used in the calculation of diluted earnings per common unit for the three months ended March 31, 2021 because to do so would have been antidilutive.

	Limited Partners’ Interest					Incentive			Accumulated other
	Common Unitholders					Distribution Rights			comprehensive loss			Total Equity
	Units		Dollars			Dollars			Dollars			Dollars
Balance at December 31, 2020		37,868,046	$	112,124		$	—		$	(2,456	)	$	109,668
Net loss		—		(3,967	)		—			—			(3,967	)
Other comprehensive income
Unrealized gain on interest rate swap contracts		—		—			—			2,017			2,017
Realized loss on interest rate swap contracts reclassified from AOCI into interest expense		—		—			—			231			231
Total other comprehensive income		—		—			—			2,248			2,248
Comprehensive (loss) income		—		(3,967	)		—			2,248			(1,719	)
Issuance of units related to 2020 Bonus Plan		6,822		126			—			—			126
Tax effect from intra-entity transfer of assets		—		(757	)		—			—			(757	)
Distributions paid		—		(19,912	)		—			—			(19,912	)
Balance at March 31, 2021		37,874,868	$	87,614		$	—		$	(208	)	$	87,406

Balance at December 31, 2019		34,494,441	$	78,397		$	—		$	—		$	78,397
Net income		—		71,928			133			—			72,061
Other comprehensive loss
Unrealized loss on interest rate swap contracts		—		—			—			(786	)		(786	)
Realized gain on interest rate swap contract reclassified from AOCI into interest expense		—		—			—			(11	)		(11	)
Total other comprehensive loss		—		—			—			(797	)		(797	)
Comprehensive income (loss)		—		71,928			133			(797	)		71,264
Issuance of units to the Topper Group in connection with the Equity Restructuring Agreement		2,528,673		—			—			—			—
Distributions paid		—		(18,111	)		(133	)		—			(18,244	)
Balance at March 31, 2020		37,023,114	$	132,214		$	—		$	(797	)	$	131,417

	March 31, 2021							December 31, 2020
	Gross Amount		Accumulated Amortization			Net Carrying Amount		Gross Amount		Accumulated Amortization			Net Carrying Amount
Wholesale fuel supply contracts/rights	$	187,643	$	(100,223	)	$	87,420	$	187,643	$	(95,694	)	$	91,949
Trademarks/licenses		1,898		(1,128	)		770		1,898		(1,115	)		783
Covenant not to compete		4,552		(4,402	)		150		4,552		(4,372	)		180
Total intangible assets	$	194,093	$	(105,753	)	$	88,340	$	194,093	$	(101,181	)	$	92,912

Revenues from motor fuel sales to DMS		$	22,109
Rental income from DMS			1,213

	Wholesale		Retail		Unallocated			Consolidated
Three Months Ended March 31, 2021
Revenues from fuel sales to external customers	$	398,493	$	197,487	$	—		$	595,980
Intersegment revenues from fuel sales		144,452		—		(144,452	)		—
Revenues from food and merchandise sales		—		37,839		—			37,839
Rent income		17,700		2,772		—			20,472
Other revenue		1,134		1,859		—			2,993
Total revenues	$	561,779	$	239,957	$	(144,452	)	$	657,284

Operating income (loss)	$	24,905	$	293	$	(26,062	)	$	(864	)

Three Months Ended March 31, 2020
Revenues from fuel sales to external customers	$	302,123	$	65,769	$	—		$	367,892
Intersegment revenues from fuel sales		47,906		—		(47,906	)		—
Rent income		20,468		2,220		—			22,688
Other revenue		1,115		—		—			1,115
Total revenues	$	371,612	$	67,989	$	(47,906	)	$	391,695

Income from CST Fuel Supply equity interests	$	3,202	$	—	$	—		$	3,202
Operating income	$	29,265	$	395	$	47,772		$	77,432

Revolving credit facility	$	526,141
Finance lease obligations		19,374
Total debt and finance lease obligations		545,515
Current portion		2,677
Noncurrent portion		542,838
Deferred financing costs, net		2,997
Noncurrent portion, net of deferred financing costs	$	539,841

Exhibit No.		Description

2.1 *		Asset Purchase Agreement, dated April 28, 2021, by and between 7-Eleven Inc., the Speedway Subsidiary Sellers, and CrossAmerica Partners LP

31.1 *		Certification of Principal Executive Officer of CrossAmerica GP LLC as required by Rule 13a-14(a) of the Securities Exchange Act of 1934

31.2 *		Certification of Principal Financial Officer of CrossAmerica GP LLC as required by Rule 13a-14(a) of the Securities Exchange Act of 1934

32.1*†		Certification of Principal Executive Officer of CrossAmerica GP LLC pursuant to 18 U.S.C. §1350

32.2*†		Certification of Principal Financial Officer of CrossAmerica GP LLC pursuant to 18 U.S.C. §1350

101.INS*		Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

101.SCH*		Inline XBRL Taxonomy Extension Schema Document

101.CAL*		Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.LAB*		Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE*		Inline XBRL Taxonomy Extension Presentation Linkbase Document

101.DEF*		Inline XBRL Taxonomy Extension Definition Linkbase Document

104*		Cover Page Interactive Data File, formatted in Inline XBRL and contained in Exhibit 101

	March 31,			December 31,
	2021			2020
Land	$	8,780		$	7,889
Buildings and site improvements		2,302			2,784
Equipment		1,278			1,152
Total		12,360			11,825
Less accumulated depreciation		(1,812	)		(1,927	)
Assets held for sale	$	10,548		$	9,898

	March 31,			December 31,
	2021			2020
Land	$	238,614		$	241,585
Buildings and site improvements		283,835			284,593
Leasehold improvements		10,635			10,684
Equipment		245,352			236,420
Construction in progress		11,764			15,919
Property and equipment, at cost		790,200			789,201
Accumulated depreciation and amortization		(228,438	)		(218,345	)
Property and equipment, net	$	561,762		$	570,856

CROSSAMERICA PARTNERS LP

By:		CROSSAMERICA GP LLC, its General Partner

By:		/s/ Jonathan E. Benfield
		Jonathan E. Benfield
		Chief Accounting Officer
		(Duly Authorized Officer and Principal Financial Officer)