CrossAmerica Partners(US:CAPL)2025-02-26 23:30Financial Performance - In 2024, the total gallons of motor fuel distributed decreased to 1,299 million from 1,350 million in 2023, representing a decline of approximately 3.8%[23] - Operating revenues decreased by $288 million (7%) from 2023 to 2024, totaling $4,098,288 thousand[212] - Cost of sales decreased by $304 million (8%), primarily due to lower wholesale volume and lower cost per gallon[214] - Gross profit increased by $16 million (4%), driven by higher merchandise and motor fuel gross profit in the retail segment[215] - Wholesale segment revenues decreased by $418 million (18%) due to a 12% decrease in volume and a 7% decrease in average wholesale selling price[215] - Retail segment revenues increased to $2,226 million in 2024, up from $2,096 million in 2023, reflecting a growth of about 6.2%[27] - Retail segment revenues increased by $130 million (6%), attributed to a 9% increase in volume and a 23% increase in merchandise revenues[215] - The company recorded a net income of $22,453 thousand for 2024, a decrease from $42,592 thousand in 2023[212] Operational Growth - The company operated 365 sites as of December 31, 2024, an increase from 296 sites in 2023, marking a growth of approximately 23.3%[20] - Food and merchandise sales at company operated sites rose to $390 million in 2024, compared to $316 million in 2023, indicating an increase of about 23.4%[23] - The company completed acquisitions for approximately 1,000 fee and leasehold sites and 700 wholesale fuel supply contracts for a total consideration of approximately $1.5 billion since its IPO[41] - As of December 31, 2024, the company owned or leased a total of 1,080 sites, comprising 646 owned and 434 leased locations[184] - In 2024, the company acquired 1 site, while divesting a total of 37 sites, resulting in a net decrease in the number of sites[185] Cash Distribution and Financial Policies - The company aims to increase quarterly cash distributions over time while maintaining leverage discipline[37] - The cash distribution policy intends to distribute at least $0.4375 per unit quarterly, subject to sufficient cash availability after expenses and reserves[125] - The cash distribution policy includes a minimum quarterly distribution of $0.4375 per unit, with a declared distribution of $0.5250 per unit for Q1 2025[193] - If a significant portion of cash available for distribution is distributed, the company's ability to grow and make acquisitions could be limited, relying on external financing sources[130] - The General Partner has limited liability, meaning counterparties can only seek recourse against the company's assets, not the General Partner's assets[129] Risks and Challenges - The company faces risks including insufficient distributable cash from operations to pay quarterly distributions and volatility in crude oil and wholesale motor fuel costs[49] - The ability to make acquisitions on economically acceptable terms is crucial for future growth and increasing distributions to unitholders[54] - The company relies on four principal suppliers for the majority of motor fuel and one principal supplier for merchandise, which poses risks to operations[49] - Changes in consumer behavior and economic conditions could adversely affect business performance and cash available for distribution[49] - A continued shortage of qualified labor could materially impact operations and increase costs, negatively affecting results[75] - Economic disruptions caused by health crises could adversely affect business operations and cash available for distribution to unitholders[72] - The company faces potential liabilities for environmental remediation costs due to contamination at current and former locations, which could be substantial[82] - The company is exposed to risks related to creditworthiness and performance of customers and suppliers, which could lead to fluctuations in cash flows[100] Regulatory and Compliance Issues - The company is subject to extensive government regulations concerning store operations and environmental matters, which may incur significant compliance costs[49] - Compliance with extensive government laws and regulations can have a material adverse effect on operating results and financial condition[76] - Compliance with environmental laws may require significant expenditures, and state trust funds may not fully cover remediation expenses, impacting financial condition[84] - The company is subject to federal, state, and local laws regarding product quality specifications, which could impact sales volume and increase costs[106] - Compliance with evolving data security regulations is costly, and failure to comply could lead to fines and impact financial condition[111] Market and Economic Conditions - General economic conditions, including inflation and higher interest rates, could adversely affect consumer spending and demand for products[66] - Changes in consumer behavior due to economic conditions may lead to decreased spending on motor fuel and convenience merchandise[71] - Significant increases and volatility in wholesale motor fuel costs could lead to lower gross profit dollars, impacting consumer demand and overall financial performance[60] - Seasonal fluctuations typically result in higher revenues during the second and third quarters due to increased consumer demand for motor fuel[61] - The retail motor fuel industry is characterized by intense competition, which can adversely affect margins and overall financial condition[63] Management and Governance - The General Partner and its affiliates may have conflicts of interest that could affect the company’s operations and unitholder interests[50] - The Topper Group, owning all membership interests in the General Partner, has the discretion to modify or revoke the cash distribution policy, potentially reducing distributions to unitholders[126] - The company is dependent on attracting and retaining a strong management team, with potential impacts on business performance if unable to do so[96] - The Board oversees the annual enterprise risk assessment, including cybersecurity threats and technology risks[183] Cybersecurity and Technology - The company has implemented an enterprise-wide information security platform to manage cybersecurity risks[179] - The company conducts regular assessments and tests of its information security program to identify vulnerabilities[180] - The company recognizes the importance of managing material risks associated with cybersecurity threats, including operational risks and data privacy violations[177] Debt and Financing - As of December 31, 2024, the company had total debt of $767.5 million and $68.9 million available under its revolving CAPL Credit Facility[113] - The company’s ability to service its indebtedness depends on future financial and operating performance, which may be affected by economic conditions[113] - A significant increase in interest rates could adversely affect the company's ability to service its indebtedness and increase financing costs[115] - The CAPL Credit Facility contains operating and financial restrictions that may limit the company's ability to finance future operations or capital needs[116] Taxation - Tax treatment as a partnership is crucial; if treated as a corporation, cash available for distribution would be substantially reduced[150][152] - Corporate subsidiaries are subject to a 21% federal tax rate, which will reduce cash available for distribution[155] - Changes in U.S. federal income tax laws could negatively impact the treatment of the partnership and the value of common units[156][157] - Unitholders must pay taxes on their share of income even if no cash distributions are received[159] - Distributions to non-U.S. persons will be subject to U.S. federal withholding taxes at the highest applicable rate[165]