CrossAmerica Partners LP - Form 8-K Summary
Business Context and Reporting Period
This Current Report (Form 8-K) covers events occurring on July 1, 2015, for CrossAmerica Partners LP (NYSE: CAPL). The filing details the completion of three major asset acquisitions and related equity issuances involving the company's general partner, CST Brands, Inc. (NYSE: CST).
Key Financial Metrics and Transactions
The filing reports three distinct transactions completed on July 1, 2015, all financed through the Partnership's credit facility:
- Fuel Supply Acquisition: Acquired a 12.5% limited partner interest in CST Fuel Supply LP.
- Consideration: 3,303,208 Common Units and $17,527,610 cash.
- Asset Details: CST Fuel owns CST Marketing and Supply LLC, which holds a 10-year fuel supply agreement to sell 1.57 billion gallons annually at a fixed net margin of $0.05 per gallon.
- Real Estate Acquisition (NTI Entities): Acquired membership interests in entities holding real property for 29 "new to industry" stores.
- Consideration: 338,098 Common Units and $124,397,390 cash.
- Lease Terms: Properties leased back to CST Brands subsidiaries under triple net leases at a 7.5% rate with 10-year initial terms.
- One Stop Network Acquisition: Purchased 41 company-operated One Stop convenience stores in Charleston, West Virginia, plus 4 commission agent sites, 9 fuel supply agreements, and one QSR.
- Consideration: Approximately $42.0 million cash.
- Historical Performance (12 months ended Dec 31, 2014): 36 million gallons of fuel sold; $40.5 million in inside sales.
Equity Issuance: An aggregate of 3,641,306 Common Units were issued unregistered to CST Services and CST Subsidiaries in exchange for the assets described above.
Material Changes Versus Prior Period
This filing represents a significant expansion of the Partnership's asset base and revenue streams through related-party transactions. Following these closings, CST Brands owns approximately 15.67% of the Partnership's common units. The filing does not provide comparative financial statements or year-over-year revenue/profit metrics for the Partnership as a whole, as this is a transactional report rather than a periodic financial statement.
Guidance, Outlook, and Risks
Management Commentary: The transactions were unanimously approved by the Conflicts Committee of the General Partner's board. The Committee retained independent legal and financial advisors and determined the consideration was fair to unaffiliated unit holders based on a financial fairness opinion.
Risks and Contingencies:
- Related Party Transactions: Significant assets were acquired from affiliates of the General Partner (CST Brands), requiring conflict of interest oversight.
- Liquidity and Debt: All cash consideration ($141.9 million total) was financed under the Partnership's credit facility, increasing leverage.
- Lease Dependency: The 29 new real estate assets rely on lease payments from CST Brands subsidiaries, which are guaranteed by CST Brands.
Investor Verification Checklist
- Verify the impact of the $141.9 million in new debt on the Partnership's leverage ratios and liquidity covenants.
- Confirm the terms of the fuel supply agreement (1.57 billion gallons at $0.05 margin) and its contribution to future EBITDA.
- Review the lease agreements for the 29 "new to industry" sites to ensure the 7.5% lease rate and 10-year term are binding and guaranteed.
- Assess the integration risks and performance of the newly acquired One Stop network in West Virginia.
- Monitor the dilution effect of the 3.64 million new Common Units issued to CST Brands affiliates.