CrossAmerica Partners LP 10-Q for FY2021 Q2

CrossAmerica Partners LP (CAPL)

10-Q 2021-08-10 For: 2021-06-30

Added on April 04, 2026

About this 10-Q

CrossAmerica Partners LP filed this 10-Q on August 10, 2021, covering the quarter ended June 30, 2021 (FY2021 Q2).

Headline figures

Quarter ended June 30, 2021, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $859.33M; up 115.7% from $398.4M a year earlier
Net income: $4.79M; down 8.4% from net income of $5.23M 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 June 30, 2021 and December 31, 2020		1
Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2021 and 2020		2
Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2021 and 2020		3
Consolidated Statements of Equity and Comprehensive Income for the Three and Six Months Ended June 30, 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		19
Item 3. Quantitative and Qualitative Disclosures about Market Risk		35
Item 4. Controls and Procedures		35

PART II - OTHER INFORMATION		35
Item 1. Legal Proceedings		35
Item 1A. Risk Factors		35
Item 6. Exhibits		36

SIGNATURE		37

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, CAPL, we, us, our

CAPL JKM Wholesale			CAPL JKM Wholesale LLC

Joe’s Kwik Marts			Joe’s Kwik Marts LLC

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

	June 30,			December 31,
	2021			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 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

	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

	Limited Partners’ Interest					Incentive
	Common Unitholders					Distribution Rights			Accumulated other 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

Net income		—		4,789			—			—			4,789
Other comprehensive income
Unrealized loss on interest rate swap contracts		—		—			—			(68	)		(68	)
Realized loss on interest rate swap contracts reclassified from AOCI into interest expense		—		—			—			253			253
Total other comprehensive income		—		—			—			185			185
Comprehensive income		—		4,789			—			185			4,974
Tax effect from intra-entity transfer of assets		—		(325	)		—			—			(325	)
Distributions paid		—		(19,916	)		—			—			(19,916	)
Balance at June 30, 2021		37,874,868	$	72,162		$	—		$	(23	)	$	72,139

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

Net income		—		5,230			—			—			5,230
Other comprehensive loss
Unrealized loss on interest rate swap contracts		—		—			—			(2,406	)		(2,406	)
Realized gain on interest rate swap contracts reclassified from AOCI into interest expense		—		—			—			(15	)		(15	)
Total other comprehensive loss		—		—			—			(2,421	)		(2,421	)
Comprehensive income (loss)		—		5,230			—			(2,421	)		2,809
Acquisition of assets from entities under common control, net of fair value of common units issued		842,891		4,169			—			—			4,169
Distributions paid				(19,881	)		—			—			(19,881	)
Balance at June 30, 2020		37,866,005	$	121,732		$	—		$	(3,218	)	$	118,514

Inventories	$	202
Other current assets		4
Property and equipment		2,318
Intangible assets		1,730
Total assets	$	4,254

Accrued expenses and other current liabilities		10
Asset retirement obligations		78
Total liabilities	$	88
Net assets acquired	$	4,166

	June 30, 2021							December 31, 2020
	Gross Amount		Accumulated Amortization			Net Carrying Amount		Gross Amount		Accumulated Amortization			Net Carrying Amount
Wholesale fuel supply contracts/rights	$	183,078	$	(98,392	)	$	84,686	$	187,643	$	(95,694	)	$	91,949
Trademarks/licenses		1,898		(1,142	)		756		1,898		(1,115	)		783
Covenant not to compete		450		(322	)		128		4,552		(4,372	)		180
Total intangible assets	$	185,426	$	(99,856	)	$	85,570	$	194,093	$	(101,181	)	$	92,912

	Three Months Ended		Six Months Ended
	June 30, 2020		June 30, 2020
Revenues from motor fuel sales to DMS	$	7,125	$	29,234
Rental income from DMS		183		1,395

	Wholesale		Retail		Unallocated			Consolidated
Three Months Ended June 30, 2021
Revenues from fuel sales to external customers	$	530,099	$	260,125	$	—		$	790,224
Intersegment revenues from fuel sales		198,878		—		(198,878	)		—
Revenues from food and merchandise sales		—		45,208		—			45,208
Rent income		18,209		2,653		—			20,862
Other revenue		729		2,311		—			3,040
Total revenues	$	747,915	$	310,297	$	(198,878	)	$	859,334

Operating income (loss)	$	33,244	$	953	$	(26,035	)	$	8,162

Three Months Ended June 30, 2020
Revenues from fuel sales to external customers	$	219,337	$	120,208	$	—		$	339,545
Intersegment revenues from fuel sales		78,466		—		(78,466	)		—
Revenues from food and merchandise sales		—		36,912		—			36,912
Rent income		17,663		2,761		—			20,424
Other revenue		300		1,221		—			1,521
Total revenues	$	315,766	$	161,102	$	(78,466	)	$	398,402

Operating income (loss)	$	31,219	$	331	$	(25,221	)	$	6,329

Six Months Ended June 30, 2021
Revenues from fuel sales to external customers	$	928,592	$	457,612	$	—		$	1,386,204
Intersegment revenues from fuel sales		343,330		—		(343,330	)		—
Revenues from food and merchandise sales		—		83,047		—			83,047
Rent income		35,909		5,425		—			41,334
Other revenue		1,863		4,170		—			6,033
Total revenues	$	1,309,694	$	550,254	$	(343,330	)	$	1,516,618

Operating income (loss)	$	58,149	$	1,246	$	(52,097	)	$	7,298

Six Months Ended June 30, 2020
Revenues from fuel sales to external customers	$	521,460	$	185,977	$	—		$	707,437
Intersegment revenues from fuel sales		126,372		—		(126,372	)		—
Revenues from food and merchandise sales (a)		—		36,912		—			36,912
Rent income		38,131		4,981		—			43,112
Other revenue (a)		1,415		1,221		—			2,636
Total revenues	$	687,378	$	229,091	$	(126,372	)	$	790,097

Income from CST Fuel Supply equity interests	$	3,202	$	—	$	—		$	3,202
Operating income	$	60,484	$	726	$	22,551		$	83,761

CAPL Credit Facility	$	533,781
Finance lease obligations		18,394
Total debt and finance lease obligations		552,175
Current portion		2,679
Noncurrent portion		549,496
Deferred financing costs, net		2,737
Noncurrent portion, net of deferred financing costs	$	546,759

	June 30,			December 31,
	2021			2020
Land	$	4,258		$	7,889
Buildings and site improvements		1,513			2,784
Equipment		841			1,152
Total		6,612			11,825
Less accumulated depreciation		(1,059	)		(1,927	)
Assets held for sale	$	5,553		$	9,898

	June 30,			December 31,
	2021			2020
Land	$	241,631		$	241,585
Buildings and site improvements		285,797			284,593
Leasehold improvements		11,191			10,684
Equipment		254,257			236,420
Construction in progress		11,546			15,919
Property and equipment, at cost		804,422			789,201
Accumulated depreciation and amortization		(241,573	)		(218,345	)
Property and equipment, net	$	562,849		$	570,856

Exhibit No.		Description

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.

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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

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)