CrossAmerica Partners LP (CAPL) - 2024 Annual Report Summary
Business Context and Reporting Period
This summary covers the Form 10-K for CrossAmerica Partners LP for the fiscal year ended December 31, 2024. CrossAmerica 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 sites). As of December 31, 2024, the company owned or leased approximately 1,100 sites, distributing fuel to approximately 1,600 sites across 34 states. The Topper Group controls the General Partner and beneficially owns approximately 38.6% of the common units.
Key Financial Metrics
| Metric | 2024 | 2023 |
|---|---|---|
| Operating Revenues | $4,098.3 million | $4,386.3 million |
| Gross Profit | $398.3 million | $382.3 million |
| Operating Income | $70.6 million | $88.1 million |
| Net Income | $22.5 million | $42.6 million |
| Net Income Available to Limited Partners | $19.9 million | $40.1 million |
| EBITDA | $147.3 million | $166.0 million |
| Adjusted EBITDA | $145.5 million | $165.8 million |
| Distributable Cash Flow | $86.0 million | $116.7 million |
| Total Debt | $767.5 million | $756.0 million |
| Credit Facility Availability | $68.9 million | N/A |
| Distributions Paid (Common Units) | $79.9 million | $79.7 million |
| Distribution Coverage Ratio | 1.08x | 1.46x |
Material Changes vs. Prior Period
- Revenue Decline: Consolidated operating revenues decreased 7% to $4.1 billion. The Wholesale segment saw an 18% revenue drop due to a 12% volume decrease (driven by site conversions and contract losses) and lower average selling prices. The Retail segment revenues increased 6% due to a 9% volume increase from site conversions, offset by lower fuel prices.
- Profitability Pressure: Operating income decreased 20% to $70.6 million. While Gross Profit increased 4% to $398.3 million (driven by retail merchandise and fuel margins), Operating Expenses increased significantly, particularly in the Retail segment due to higher labor and operating costs associated with converting lessee dealer sites to company-operated sites.
- Interest Expense: Interest expense increased 20% to $52.3 million, primarily due to the maturity of three favorable interest rate swap contracts in April 2024 and general interest rate increases.
- Site Portfolio Shift: The company converted 107 sites from the Wholesale segment (lessee dealers) to the Retail segment (company-operated or commission) in 2024, including 59 sites acquired via the Applegreen lease termination. This strategic shift increased retail volume but reduced wholesale volume and rent gross profit.
- Asset Sales: The company sold 30 sites in 2024 for $36.3 million, resulting in a net gain of $23.3 million as part of its real estate rationalization effort.
Guidance, Outlook, and Risks
Outlook: Management anticipates 2025 results will be impacted by continued site conversions (increasing retail gross profit and expenses while reducing wholesale gross profit) and ongoing asset divestitures. The company will pursue opportunistic acquisitions subject to market conditions and debt covenants.
Distributions: The Board declared a quarterly distribution of $0.5250 per unit for the fourth quarter of 2024 (annualized $2.10). The minimum quarterly distribution policy is $0.4375 per unit. There is no guarantee of future distributions, which depend on cash flow and debt covenants.
Key Risks:
- Interest Rate Risk: Variable rate debt exposure increases with rising rates, impacting cash flow and distribution coverage.
- Commodity Price Volatility: Fluctuations in crude oil prices directly impact wholesale costs and retail margins.
- Related Party Dependence: The company relies on the Topper Group for management services under the Omnibus Agreement ($125.2 million in 2024 expenses) and for a significant portion of fuel supply and merchandise.
- Debt Covenants: The CAPL Credit Facility contains leverage and interest coverage covenants that could restrict distributions or additional borrowing if violated.
- Environmental Liabilities: Ongoing risks related to underground storage tanks (USTs) and remediation costs.
Investor Verification Checklist
- Distribution Coverage: Verify the sustainability of the 1.08x distribution coverage ratio given the decline in Distributable Cash Flow and rising interest costs.
- Site Conversion Economics: Assess the long-term margin impact of converting wholesale lessee sites to company-operated retail sites, which increases operating expenses (labor, maintenance) while potentially increasing gross profit.
- Debt Maturity and Refinancing: Review the CAPL Credit Facility terms (maturity March 2028) and the impact of the 6.2% effective interest rate on future cash flows.
- Related Party Transactions: Scrutinize the $125.2 million in management fees paid to the Topper Group and the concentration of fuel supply (81% from four suppliers) and merchandise (50% from one supplier).
- Real Estate Rationalization: Monitor the pace and profitability of asset sales and the resulting gains/losses on dispositions.