CrossAmerica Partners(US:CAPL)2022-02-28 16:00Financial Performance - The wholesale segment generated revenues of $3.1 billion and operating income of $138 million in 2021[30]. - The retail segment generated revenues of $1.4 billion and operating income of $5.5 million in 2021[45]. - Motor fuel revenues accounted for 91% of total revenues in 2021, with motor fuel gross profit making up 54% of total gross profit[88]. - Rental income for 2021 was $83.2 million, consistent with 2020, but down from $90.1 million in 2019[43]. - A $10 per barrel change in crude oil prices is estimated to impact annual wholesale motor fuel gross profit by approximately $2.8 million[31]. - Significant increases in wholesale motor fuel costs could lead to lower gross profit dollars, impacting consumer demand and overall financial performance[90]. - The actual amount of cash available for distribution will depend on various factors, including demand for motor fuel products and operating costs[78]. - The company aims to generate sufficient cash flows to make quarterly cash distributions to unitholders while maintaining leverage discipline[52]. Operations and Distribution - As of December 31, 2021, the company distributed motor fuel to approximately 1,750 sites across 34 states[26]. - The company owns or leases approximately 1,150 sites, with 252 operated as company-operated sites[26]. - The average remaining distribution contract term for independent dealers was 5.3 years as of December 31, 2021[33]. - The average remaining lease agreement term for lessee dealers was 3.1 years as of December 31, 2021[36]. - The company has a weighted-average remaining term of approximately 4.9 years for its supply agreements as of December 31, 2021[56]. - The wholesale segment purchased approximately 37% of its motor fuel from ExxonMobil, 22% from BP, 11% from Motiva, and 10% from Marathon in 2021[56]. - The company relies on four principal suppliers for the majority of its motor fuel, which poses a risk to its operations[72]. - The company does not operate its own fleet but relies on common carriers for product distribution, which could be jeopardized by external disruptions[105]. - The company relies on third-party transportation providers for all motor fuel distribution, and any disruption could adversely affect its financial condition and operations[138]. Market and Competition - The company faces intense competition in both wholesale motor fuel distribution and the convenience store industry[70]. - The company faces intense competition in the wholesale and retail motor fuel markets, which could adversely affect margins and financial results[92]. - Economic conditions, such as recession or inflation, could negatively impact consumer spending and demand for motor fuel and convenience items[96]. - The business exhibits substantial seasonality, with sales volumes historically highest in the second and third quarters[59]. - Seasonal fluctuations affect motor fuel sales, with higher revenues typically seen in the second and third quarters due to increased consumer demand during summer[91]. Risks and Challenges - The company is closely monitoring the impact of the COVID-19 pandemic on its business operations[68]. - Labor shortages due to COVID-19 and macroeconomic factors have negatively impacted operations, potentially increasing costs related to overtime and temporary staffing[108]. - Compliance with extensive government laws and regulations can materially affect operating results and financial condition[109]. - The company faces risks related to environmental laws and potential liabilities for contamination, which could lead to substantial remediation costs[115]. - Changes in credit or debit card expenses could reduce gross profit, particularly on motor fuel sold at company-operated retail sites[93]. - Unfavorable weather conditions could adversely affect operations and reduce the ability to make distributions to unitholders[126]. Debt and Financing - As of December 31, 2021, the company had total debt of $630.6 million and $112.7 million of availability under its revolving CAPL Credit Facility[148]. - A significant increase in interest rates could adversely affect the company's ability to service its debt and may lead to a decline in the market price of its common units[150]. - The company may incur increased interest expenses from additional borrowings to finance growth, impacting cash available for distribution[172]. - The company has significant debt covenants that may limit its flexibility in obtaining additional financing and pursuing business opportunities[154]. Management and Governance - The company is dependent on its ability to attract and retain a strong management team, which is critical for its business success[129]. - The company’s General Partner can make decisions that may not align with the interests of common unitholders, including asset purchases and capital expenditures[165][174]. - The company’s management services are provided by the Topper Group, and termination of this agreement could lead to increased costs or business interruptions[168]. - The Partnership Agreement allows the General Partner to limit its fiduciary duties and conduct business without unitholder approval, potentially affecting cash distributions[165][167]. Taxation and Regulatory Issues - The company may be subject to entity-level taxation if treated as a corporation for U.S. federal income tax purposes, which would significantly reduce cash available for distribution[195]. - Unitholders may have liability to repay distributions if they are deemed impermissible under Delaware law[190]. - The U.S. federal income tax treatment of publicly traded partnerships may be subject to legislative changes that could retroactively affect the partnership status[200]. - Any modifications to U.S. federal income tax laws could negatively impact the value of investments in common units[201]. - The IRS may challenge the company's proration method for allocating income, gain, loss, and deduction among unitholders, which could affect tax liabilities[212]. Acquisitions and Growth Strategy - The company has completed acquisitions totaling approximately $1.5 billion, including around 1,000 fee and leasehold sites and 700 wholesale fuel supply contracts[53]. - The company’s growth strategy is dependent on making accretive acquisitions, which may be limited by market conditions and competition[81]. - In 2021, the company acquired 103 sites, while divesting 45 sites, resulting in a net change to end the year with 1,156 total sites[221].