CrossAmerica Partners(CAPL) - 2022 Q2 - Quarterly Report

PART I - FINANCIAL INFORMATION Financial Statements This section presents CrossAmerica Partners LP's unaudited condensed consolidated financial statements for the periods ended June 30, 2022, including balance sheets, statements of operations, cash flows, and equity Condensed Notes to Consolidated Financial Statements These notes provide detailed explanations of the financial statements, covering business description, accounting policies, acquisitions, debt, related-party transactions, and segment reporting - The company's business is comprised of four main activities: wholesale distribution of motor fuels, owning/leasing and renting retail sites, retail sale of motor fuels, and operation of retail sites with convenience merchandise[24] - In February 2022, the company closed on the final three properties of its 106-site acquisition from 7-Eleven for a purchase price of $3.6 million, funded primarily through the JKM Credit Facility[34] - On March 29, 2022, the company's subsidiary, Holdings, issued $25 million in Series A Preferred Interests to related parties, carrying a 9% per annum preferred return, with proceeds used to prepay debt under the Term Loan Facility[84] Segment Operating Income (Unaudited) | Segment | Three Months Ended June 30, 2022 ($ thousands) | Three Months Ended June 30, 2021 ($ thousands) | Six Months Ended June 30, 2022 ($ thousands) | Six Months Ended June 30, 2021 ($ thousands) | | :--- | :--- | :--- | :--- | :--- | | Wholesale | 44,264 | 33,244 | 81,121 | 58,149 | | Retail | 3,420 | 953 | 4,096 | 1,246 | Consolidated Balance Sheet Highlights (Unaudited) | Account | June 30, 2022 ($ thousands) | December 31, 2021 ($ thousands) | | :--- | :--- | :--- | | Total current assets | 135,445 | 106,315 | | Total assets | 1,275,408 | 1,270,142 | | Total current liabilities | 178,544 | 163,890 | | Total debt and finance lease obligations | 801,006 | 829,844 | | Total liabilities | 1,204,321 | 1,213,584 | | Total equity | 46,094 | 56,558 | Consolidated Statements of Operations Highlights (Unaudited) | Metric | Three Months Ended June 30, 2022 ($ thousands) | Three Months Ended June 30, 2021 ($ thousands) | Six Months Ended June 30, 2022 ($ thousands) | Six Months Ended June 30, 2021 ($ thousands) | | :--- | :--- | :--- | :--- | :--- | | Operating revenues | 1,475,033 | 859,334 | 2,568,244 | 1,516,618 | | Gross profit | 88,945 | 65,094 | 167,775 | 119,962 | | Operating income | 21,072 | 8,162 | 30,791 | 7,298 | | Net income | 13,966 | 4,789 | 19,013 | 822 | | Basic and diluted EPS | $0.35 | $0.13 | $0.49 | $0.02 | Consolidated Statements of Cash Flows Highlights (Unaudited) | Cash Flow Activity | Six Months Ended June 30, 2022 ($ thousands) | Six Months Ended June 30, 2021 ($ thousands) | | :--- | :--- | :--- | | Net cash provided by operating activities | 54,659 | 41,014 | | Net cash used in investing activities | (14,429) | (20,392) | | Net cash used in financing activities | (44,306) | (20,514) | | Net (decrease) increase in cash | (4,076) | 108 | Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) This section provides management's perspective on financial condition and operating results, covering recent developments, profitability factors, segment analysis, liquidity, and non-GAAP reconciliations Recent Developments Key recent developments include the completion of the 7-Eleven site acquisition and the issuance of $25 million in Series A Preferred Interests to prepay debt - In February 2022, the company finalized its 106-site acquisition from 7-Eleven, closing on the last three properties for $3.6 million[117] - In March 2022, the company's subsidiary issued $25 million in Series A Preferred Interests to affiliates of board members Joseph V. Topper, Jr. and John B. Reilly, III, with proceeds used to prepay debt[119] Results of Operations Operating revenues and gross profit significantly increased in Q2 and H1 2022, driven by higher motor fuel prices and contributions from the 7-Eleven acquisition Consolidated Results Comparison (Q2 2022 vs Q2 2021) | Metric | Q2 2022 ($ thousands) | Q2 2021 ($ thousands) | Change (%) | | :--- | :--- | :--- | :--- | | Operating revenues | 1,475,033 | 859,334 | +72% | | Gross profit | 88,945 | 65,094 | +37% | | Net income | 13,966 | 4,789 | +192% | Wholesale Segment Performance (Q2 2022 vs Q2 2021) | Metric | Q2 2022 | Q2 2021 | Change (%) | | :--- | :--- | :--- | :--- | | Gross Profit ($ thousands) | 54,954 | 44,192 | +24% | | Operating Income ($ thousands) | 44,264 | 33,244 | +33% | | Wholesale margin per gallon | $0.118 | $0.092 | +28% | Retail Segment Performance (Q2 2022 vs Q2 2021) | Metric | Q2 2022 ($ thousands) | Q2 2021 ($ thousands) | Change (%) | | :--- | :--- | :--- | :--- | | Gross Profit | 34,946 | 21,075 | +66% | | Operating Income | 3,420 | 953 | +259% | | Motor fuel gross profit | 9,329 | 4,937 | +89% | | Merchandise gross profit | 20,165 | 11,969 | +68% | Non-GAAP Financial Measures This section reconciles non-GAAP measures like EBITDA, Adjusted EBITDA, and Distributable Cash Flow to net income, showing strong distribution coverage Non-GAAP Financial Measures Reconciliation (Unaudited) | Metric | Three Months Ended June 30, 2022 ($ thousands) | Three Months Ended June 30, 2021 ($ thousands) | Six Months Ended June 30, 2022 ($ thousands) | Six Months Ended June 30, 2021 ($ thousands) | | :--- | :--- | :--- | :--- | :--- | | Net income | 13,966 | 4,789 | 19,013 | 822 | | Adjusted EBITDA | 41,383 | 29,705 | 73,351 | 50,370 | | Distributable Cash Flow | 32,411 | 25,005 | 56,659 | 40,758 | | Distribution Coverage Ratio | 1.63x | 1.26x | 1.42x | 1.02x | Liquidity and Capital Resources Primary liquidity sources include cash from operations and credit facilities, with total debt at $801 million and reduced capital expenditures for H1 2022 - As of August 4, 2022, availability under the CAPL Credit Facility was $135.5 million and under the JKM Credit Facility was $10.0 million[195][196] - The company paid distributions of $0.5250 per unit for each of the first two quarters of 2022, totaling approximately $39.8 million for the six-month period[191][192] Capital Expenditures and Acquisitions (Unaudited) | Category | Six Months Ended June 30, 2022 ($ thousands) | Six Months Ended June 30, 2021 ($ thousands) | | :--- | :--- | :--- | | Sustaining capital | 3,217 | 2,432 | | Growth | 13,186 | 19,479 | | Acquisitions | 1,885 | 4,166 | | Total | 18,288 | 26,077 | Quantitative and Qualitative Disclosures about Market Risk No significant changes to the company's market risk have occurred since December 31, 2021, with further details available in the Annual Report on Form 10-K - No significant changes to the company's market risk have occurred since December 31, 2021[207] Controls and Procedures Management concluded that disclosure controls and procedures were effective as of June 30, 2022, with no material changes in internal control over financial reporting - The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective as of June 30, 2022[208] - There were no material changes in internal control over financial reporting during the three months ended June 30, 2022[209] PART II - OTHER INFORMATION Legal Proceedings This section references legal proceedings from Note 11, indicating no anticipated material adverse effect on the company's financial position - The company is party to various lawsuits and legal proceedings arising in the ordinary course of business, but management does not believe these will have a material adverse effect on its consolidated financial position, results of operations, or cash flows[73][210] Risk Factors No material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2021 - There were no material changes in the risk factors disclosed in the company's Form 10-K during the period covered by this report[211] Exhibits This section lists exhibits filed with Form 10-Q, including certifications from executive officers and Inline XBRL documents - The report includes certifications from the Principal Executive Officer and Principal Financial Officer (Exhibits 31.1, 31.2, 32.1, 32.2) and Inline XBRL data files (Exhibit 101 series)[213]