CrossAmerica Partners LP — FY2022 Form 10-K
Reporting period: Fiscal year ended December 31, 2022. This is an annual filing, not a standalone fourth-quarter report. CrossAmerica distributes motor fuel wholesale, owns and leases fuel-site real estate, and operates retail fuel and convenience stores in 34 states.
Financial and operating performance
| Metric | 2022 | 2021 |
|---|---|---|
| Revenue | $4.967 billion | $3.579 billion |
| Gross profit | $375.8 million | $277.0 million |
| Operating income | $96.0 million | $36.1 million |
| Net income | $63.7 million | $21.7 million |
| Net income available to limited partners | $62.0 million | $21.7 million |
| Basic and diluted earnings per common unit | $1.63 | $0.57 |
| Cash from operating activities | $161.3 million | $95.5 million |
| Distributable cash flow (non-GAAP) | $140.9 million | $102.2 million |
| Distribution coverage ratio (non-GAAP) | 1.77x | 1.28x |
Gross margin was approximately 7.6% and operating margin approximately 1.9%, calculated from reported revenue and profit. Revenue rose 39% and gross profit 36%; operating income increased substantially from the prior year. Management attributed growth chiefly to higher fuel prices, stronger retail fuel margins, and the 7-Eleven site acquisition. WTI averaged $94.90/barrel in 2022 versus $68.14 in 2021. Wholesale gallons distributed fell 9%, while retail gallons sold rose 23%.
Segments: Wholesale revenue was $2.69 billion and operating income $93.7 million. Retail revenue was $2.28 billion and operating income $107.4 million. Segment results for prior periods were recast after a fourth-quarter 2022 reporting change; wholesale now excludes fuel gross profit on sales to company-operated and commission sites, which is reported in retail.
Liquidity, debt, and distributions
Cash and cash equivalents were $16.1 million at year-end. Current assets were $118.4 million versus current liabilities of $175.3 million; the filing notes this working-capital pattern is typical for the business. Debt and finance lease obligations totaled $779.1 million, including $606.1 million under the CAPL revolving facility and $159.0 million under the JKM facility. Facility availability at December 31, 2022, after covenant restrictions, was $140.1 million and $14.2 million, respectively. By February 23, 2023, CAPL availability was $120.5 million; JKM availability remained $14.2 million.
The CAPL facility matures in April 2024, with $617.2 million of scheduled debt principal payments shown for 2024; the JKM facility matures in July 2026. The effective rates at year-end were 4.2% on CAPL borrowings, after swaps, and 6.5% on JKM borrowings. $300 million of CAPL variable-rate debt was hedged with swaps maturing April 2024. A one-percentage-point LIBOR change was estimated to affect annual interest expense by about $3.1 million on CAPL and $1.6 million on JKM borrowings.
Common-unit distributions were $0.525 per unit each quarter in 2022, or $2.10 annualized; total distributions paid were $79.6 million. The Board declared $0.525 per unit for the quarter ended December 31, 2022, payable in February 2023. Distributions remain discretionary and may be changed or suspended; credit-facility restrictions also apply.
Material changes and unusual items
- The November 2022 CSS acquisition cost $27.5 million plus working capital and added wholesale fuel contracts for 38 dealer-owned locations, 35 sub-wholesaler accounts, and two commission sites. The partnership reported $25.2 million of incremental 2022 revenue after closing.
- The 7-Eleven acquisition was completed with the final three properties closing in February 2022; the 106-site transaction drove much of retail growth and related operating costs.
- In March 2022, a subsidiary issued $25 million of Series A preferred interests to related-party investors. They carry a 9% annual preferred return, compounded quarterly; before October 2026, the return accumulates in the liquidation preference rather than being paid in cash. The interests may be exchanged for common units or cash under specified conditions. Proceeds were used to prepay JKM term debt. The auditor identified classification of these interests as a critical audit matter; the interests are presented as mezzanine equity.
- Net income comparisons with 2020 are affected by $80.9 million of gains on dispositions and lease terminations in 2020, including the CST Fuel Supply sale and Circle K asset transactions.
- Environmental liabilities were $7.5 million at year-end, with $5.2 million of related indemnification or reimbursement assets reported. Three sites were classified as held for sale; 27 properties were sold in 2022 for $12.9 million in proceeds.
Outlook, commentary, and risks
The filing provides no numeric 2023 earnings or cash-flow guidance. Management expected CSS assets to add wholesale gross profit, continued fuel-cost reductions from new or amended purchase contracts, and higher interest expense amid rising rates. Acquisitions remain opportunistic and depend on target availability, financing, market conditions, and covenant compliance.
Key risks include volatile fuel prices and supplier discounts, falling wholesale volumes, intense competition, dependence on four suppliers for approximately 81% of wholesale fuel purchases, reliance on third-party fuel carriers, labor and cost pressures, environmental remediation, and long-term demand risks from fuel efficiency and alternative vehicles. The Topper Group controls the general partner, beneficially owns 38.5% of common units, and has related-party arrangements; conflicts of interest and the discretionary distribution policy are material investor considerations. Management and the auditor reported effective internal control over financial reporting; the financial statement audit opinion was unqualified.
Important facts for investors to verify
- Review the 2024 CAPL facility maturity and refinancing plan, covenant headroom, current availability, and the impact of variable rates after swaps expire.
- Assess whether 2022 retail margins and cash generation are repeatable, given the influence of fuel-price volatility and the 7-Eleven acquisition.
- Reconcile non-GAAP distributable cash flow and the 1.77x coverage ratio with GAAP operating cash flow, maintenance spending, and cash distributions.
- Review the preferred interests’ 9% compounding return, exchange/redemption terms, dilution or cash-payment exposure, and related-party approvals.
- Track supplier and customer concentration, wholesale contract renewals, site divestitures, and environmental reserves and recoveries.
- Confirm the Board’s distribution decisions and restrictions under the credit agreements; the partnership agreement does not require distributions.