CAPL

CrossAmerica Partners LP (CAPL) - 2025 Annual Report Summary

Business Context and Reporting Period

This Form 10-K covers the fiscal year ended December 31, 2025. CrossAmerica Partners LP is a Delaware limited partnership engaged in the wholesale distribution of motor fuel and the ownership/leasing of real estate used in retail fuel distribution. The company operates through two segments: Wholesale (distribution to independent and lessee dealers) and Retail (company-operated and commission agent sites). As of December 31, 2025, the company owned or leased approximately 1,000 sites, distributing fuel to approximately 1,600 sites across 34 states. The Topper Group controls the General Partner and beneficially owns approximately 38.5% of the common units.

Key Financial Metrics (Year Ended Dec 31, 2025)

Material Changes vs. Prior Period

• Revenue Decline: Operating revenues decreased 11% ($436 million) primarily due to a 7% decrease in the consolidated average fuel selling price (WTI crude oil average dropped 15% to $65.39/barrel) and a 5% decrease in volume.
• Profitability Increase: Despite lower revenues, Operating Income increased 38% ($27 million). This was driven by a significant $44.2 million net gain on dispositions and lease terminations related to real estate rationalization, partially offset by higher depreciation and impairment charges ($18.6 million increase).
• Segment Performance:
  • Retail: Operating income increased 4% to $97.5 million, driven by higher motor fuel margins and merchandise gross profit.
  • Wholesale: Operating income decreased 4% to $73.5 million, primarily due to a 19% drop in rent gross profit from site divestitures and conversions.
• Debt Reduction: Total debt decreased by approximately $75 million as proceeds from site sales were used to pay down the Credit Facility.

Guidance, Outlook, and Risks

Outlook: Management anticipates 2026 results will be impacted by continued real estate optimization (converting lessee dealer sites to retail formats and divesting lower-performing assets). While divestitures may reduce gross profit, they are expected to generate gains and reduce interest expense. The company will continue to evaluate acquisitions opportunistically.

Management Commentary: The company successfully maintained its quarterly distribution of $0.5250 per unit ($2.10 annualized), resulting in a distribution coverage ratio of 1.10x. Management emphasizes the importance of optimizing the "highest and best use" of assets to maximize returns.

Key Risks:

• Commodity Volatility: Motor fuel revenues and gross profit are highly sensitive to crude oil price fluctuations.
• Concentration Risk: Approximately 79% of motor fuel is purchased from four suppliers; 53% of merchandise is purchased from one supplier.
• Related Party Dependence: The company relies on the Topper Group for all management services under the Omnibus Agreement ($129.7 million in 2025 expenses).
• Debt Covenants: The Credit Facility contains financial covenants (Leverage Ratio max 4.75:1) that could restrict distributions if violated.

Investor Verification Checklist

• Real Estate Rationalization: Verify the sustainability of operating income growth given the one-time $44.2 million gain on dispositions in 2025.
• Margin Sensitivity: Assess the impact of the 15% drop in WTI crude prices on future prompt payment discounts and gross profit margins.
• Debt Capacity: Confirm current leverage ratios against the 4.75:1 covenant limit, noting the $216.6 million availability under the Credit Facility as of Feb 2026.
• Related Party Transactions: Review the Omnibus Agreement terms and the $129.7 million in management fees to understand cost structure rigidity.
• Site Conversions: Monitor the transition of lessee dealer sites to company-operated/commission sites and the resulting shift in revenue mix from wholesale to retail.