# CrossAmerica Partners LP: Form 10-Q for the period ended Mar 31, 2023

- Company: [CrossAmerica Partners LP](/companies/capl.md) (CIK 1538849)
- Form: 10-Q
- Filed: 2023-05-09
- Accepted by EDGAR: May 9, 2023, 01:44 ET
- Period: 2023-03-31
- Accession: 0000950170-23-019077
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1538849/000095017023019077/capl-20230331.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1538849/000095017023019077/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2023-03-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2023-01-01 to 2023-03-31 | $1.02bn | us-gaap:RevenueFromContractWithCustomerIncludingAssessedTax |
| Cost of revenue | 3 months, 2023-01-01 to 2023-03-31 | $934.1m | us-gaap:CostOfGoodsAndServicesSold |
| Gross profit | 3 months, 2023-01-01 to 2023-03-31 | $82.1m | us-gaap:GrossProfit |
| Selling, general and administrative | 3 months, 2023-01-01 to 2023-03-31 | $5.7m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2023-01-01 to 2023-03-31 | $9.1m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2023-01-01 to 2023-03-31 | $12.0m | us-gaap:InterestExpense |
| Income tax | 3 months, 2023-01-01 to 2023-03-31 | −$1.7m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2023-01-01 to 2023-03-31 | −$979.0k | us-gaap:ProfitLoss |
| Operating cash flow | 3 months, 2023-01-01 to 2023-03-31 | $11.5m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 3 months, 2023-01-01 to 2023-03-31 | $6.0m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Dividends paid | 3 months, 2023-01-01 to 2023-03-31 | $19.9m | us-gaap:PaymentsOfDividendsCommonStock |
| Cash and equivalents | at 2023-03-31 | $7.5m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2023-03-31 | $111.5m | us-gaap:AssetsCurrent |
| Total assets | at 2023-03-31 | $1.22bn | us-gaap:Assets |
| Current liabilities | at 2023-03-31 | $157.5m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2023-03-31 | $1.17bn | us-gaap:Liabilities |
| Long-term debt | at 2023-03-31 | $788.3m | us-gaap:LongTermDebt |

## Management's discussion and analysis

As filed, 47,265 characters.

### CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This report includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that involve risks and uncertainties. Forward-looking statements include the information concerning our possible or assumed future results of operations, business strategies, financing plans, competitive position, credit ratings, distribution growth, potential growth opportunities, potential operating performance improvements, potential improvements in return on capital employed, the effects of competition and the effects of future legislation or regulations. You can identify our forward-looking statements by the words “anticipate,” “estimate,” “believe,” “continue,” “could,” “intend,” “may,” “plan,” “potential,” “predict,” “seek,” “should,” “will,” “would,” “expect,” “objective,” “projection,” “forecast,” “guidance,” “outlook,” “effort,” “target” and similar expressions. Such statements are based on our current plans and expectations and involve risks and uncertainties that could potentially affect actual results. These forward-looking statements include, among other things, statements regarding:

- future retail and wholesale gross profits, including gasoline, diesel and convenience store merchandise gross profits;
- our anticipated level of capital investments, primarily through acquisitions, and the effect of these capital investments on our results of operations;
- anticipated trends in the demand for, and volumes sold of, gasoline and diesel in the regions where we operate;
- volatility in the equity and credit markets limiting access to capital markets;
- our ability to integrate acquired businesses;
- expectations regarding environmental, tax and other regulatory initiatives; and
- the effect of general economic and other conditions on our business.

In general, we based the forward-looking statements included in this report on our current expectations, estimates and projections about our company and the industry in which we operate. We caution you that these statements are not guarantees of future performance and involve risks and uncertainties we cannot predict. We anticipate that subsequent events and market developments will cause our estimates to change. In addition, we based many of these forward-looking statements on assumptions about future events that may prove to be inaccurate. Accordingly, our actual outcomes and results may differ materially from what we have expressed or forecasted in the forward-looking statements. Any differences could result from a variety of factors, including the following:

- the Topper Group’s business strategy and operations and the Topper Group’s conflicts of interest with us;
- availability of cash flow to pay the current quarterly distributions on our common units;
- the availability and cost of competing motor fuel resources;
- motor fuel price volatility, including as a result of the conflict in Ukraine;
- a reduction in demand for motor fuels;
- competition in the industries and geographical areas in which we operate;
- the consummation of financing, acquisition or disposition transactions and the effect thereof on our business;
- environmental compliance and remediation costs;
- our existing or future indebtedness and the related interest expense and our ability to comply with debt covenants;
- our liquidity, results of operations and financial condition;
- failure to comply with applicable tax and other regulations or governmental policies;
- future legislation and changes in regulations, governmental policies, immigration laws and restrictions or changes in enforcement or interpretations thereof;
- future regulations and actions that could expand the non-exempt status of employees under the Fair Labor Standards Act;
- future income tax legislation;
- changes in energy policy;
- technological advances;
- the impact of worldwide economic and political conditions;
- the impact of wars and acts of terrorism;
- weather conditions or catastrophic weather-related damage;
- earthquakes and other natural disasters;
- hazards and risks associated with transporting and storing motor fuel;
- unexpected environmental liabilities;
- the outcome of pending or future litigation; and
- our ability to comply with federal and state laws and regulations, including those related to environmental matters, the sale of alcohol, cigarettes and fresh foods, employment and health benefits, immigration and international trade.

You should consider the risks and uncertainties described above and elsewhere in this report as well as those set forth in the section entitled “Risk Factors” in our Form 10-K in connection with considering any forward-looking statements that may be made by us and our businesses generally. We cannot assure you that anticipated results or events reflected in the forward-looking statements will be achieved or will occur. The forward-looking statements included in this report are made as of the date of this report. We undertake no obligation to publicly release any revisions to any forward-looking statements, to report events or to report the occurrence of unanticipated events after the date of this report, except as required by law.

### MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following MD&A is intended to help the reader understand our results of operations and financial condition. This section is provided as a supplement to, and should be read in conjunction with, our consolidated financial statements and the accompanying notes to these financial statements contained elsewhere in this report, and the MD&A section and the consolidated financial statements and accompanying notes to those financial statements in our Form 10-K. Our Form 10-K contains a discussion of other matters not included herein, such as disclosures regarding critical accounting policies and estimates and contractual obligations.

MD&A is organized as follows:

- **Recent Developments—**This section describes significant recent developments.
- **Significant Factors Affecting Our Profitability—**This section describes the significant impact on our results of operations caused by crude oil commodity price volatility, seasonality and acquisition and financing activities.
- **Results of Operations—**This section provides an analysis of our results of operations, including the results of operations of our business segments, for the three months ended March 31, 2023 and 2022 and non-GAAP financial measures.
- **Liquidity and Capital Resources—**This section provides a discussion of our financial condition and cash flows. It also includes a discussion of our debt, capital requirements, other matters impacting our liquidity and capital resources and an outlook for our business.
- **New Accounting Policies—**This section describes new accounting pronouncements that we have already adopted, those that we are required to adopt in the future and those that became applicable in the current year as a result of new circumstances.
- **Critical Accounting Policies and Estimates—**This section describes the accounting policies and estimates that we consider most important for our business and that require significant judgment.

### Recent Developments

### Amendment and Restatement of CAPL Credit Facility

On March 31, 2023, the Partnership and its subsidiary, LGWS (together with the Partnership, the “Borrowers”), amended and restated the CAPL Credit Facility. As amended, the CAPL Credit Facility provides for an increase of the senior secured revolving credit facility from $750 million to $925 million and extends the maturity date from April 1, 2024 to March 31, 2028. The credit facility can be increased from time to time upon the Partnership’s written request, subject to certain conditions, up to an additional $350 million. The aggregate amount of the outstanding loans and letters of credit under the CAPL Credit Facility cannot exceed the combined revolving commitments then in effect. Certain subsidiaries of the Borrowers are guarantors ("Guarantors") of all of the obligations under the CAPL Credit Facility. All obligations under the CAPL Credit Facility are secured by substantially all of the Partnership’s assets and substantially all of the assets of the Guarantors.

Borrowings under the credit facility bear interest, at the Partnership’s option, at (1) a rate equal to the secured overnight financing rate (“SOFR”), for interest periods of one, three or six months, plus a margin ranging from 1.75% to 2.75% per annum depending on the Partnership’s Consolidated Leverage Ratio (as defined in the CAPL Credit Facility) plus a customary credit spread adjustment or (2) (a) an alternative base rate equal to the greatest of (i) the federal funds rate plus 0.5% per annum, (ii) SOFR for one month interest periods plus 1.00% per annum or (iii) the rate of interest established by the Agent, from time to time, as its prime rate, plus (b) a margin ranging from 0.75% to 1.75% per annum depending on the Partnership’s Consolidated Leverage Ratio. In addition, the Partnership incurs a commitment fee based on the unused portion of the credit facility at a rate ranging from 0.25% to 0.45% per annum depending on the Partnership’s Consolidated Leverage Ratio. Until the Partnership delivers a compliance certificate for the fiscal quarter ending June 30, 2023, the applicable margin for SOFR and alternative base rate loans is 2.25% and 1.25%, respectively, and the commitment fee rate is 0.35%.

The Partnership also has the right to borrow swingline loans under the CAPL Credit Facility in an amount up to $35.0 million. Swingline loans bear interest at the base rate plus the applicable alternative base rate margin.

Letters of credit may be issued under the CAPL Credit Facility up to an aggregate amount of $65.0 million. Letters of credit are subject to a 0.125% fronting fee and other customary administrative charges. Letters of credit accrue a fee at a rate based on the applicable margin of SOFR loans.

The CAPL Credit Facility also contains certain financial covenants. The Partnership is required to maintain a Consolidated Leverage Ratio (as defined in the CAPL Credit Facility) of (i) for each fiscal quarter ending March 31, 2023, June 30, 2023, September 30, 2023 and December 31, 2023, not greater than 5.25 to 1.00, (ii) for each fiscal quarter ending March 31, 2024, June 30, 2024 and September 30, 2024, not greater than 5.00 to 1.00, and (iii) for each fiscal quarter ending December 31, 2024 and thereafter, not greater than 4.75 to 1.00. For the quarter during a Specified Acquisition Period (as defined in the CAPL Credit Facility), such threshold will be increased by increasing the numerator thereof by 0.5, but such numerator may not exceed 5.25 to 1.00. Upon the occurrence of a Qualified Note Offering (as defined in the CAPL Credit Facility), the Consolidated Leverage Ratio threshold when not in a Specified Acquisition Period is increased to 5.25 to 1.00, while the Specified Acquisition Period threshold is 5.50 to 1.00. Upon the occurrence of a Qualified Note Offering, the Partnership is also required to maintain a Consolidated Senior Secured Leverage Ratio (as defined in the CAPL Credit Facility) for the most recently completed four fiscal quarter period of not greater than 3.75 to 1.00. Such threshold is increased to 4.00 to 1.00 for the quarter during a Specified Acquisition Period. The Partnership is also required to maintain a Consolidated Interest Coverage Ratio (as defined in the CAPL Credit Facility) of at least 2.50 to 1.00.

The incremental borrowings at the closing of the amended and restated CAPL Credit Facility were used to repay outstanding borrowings under the JKM Credit Facility, which was terminated on March 31, 2023, and to pay fees and expenses in connection with the CAPL Credit Facility and the termination of the JKM Credit Facility.

The CAPL Credit Facility prohibits the Partnership from making cash distributions to its unitholders if any event of default occurs or would result from the distribution. In addition, the CAPL Credit Facility contains various covenants that may limit, among other things, the Partnership’s ability to:

- grant liens;
- incur or assume other indebtedness;
- materially alter the character of the Partnership’s business in any material respect;
- enter into certain mergers, liquidations and dissolutions; and
- make certain investments, acquisitions or dispositions.

If an event of default exists under the CAPL Credit Facility, the lenders will be able to accelerate the maturity of the CAPL Credit Facility and exercise other rights and remedies. Events of default include, among others, the following:

- failure to pay any principal under the CAPL Credit Facility when due or any interest, fees or other amounts under the CAPL Credit Facility when due after a grace period;
- failure of any representation or warranty to be true and correct in any material respect;
- failure to perform or otherwise comply with the covenants in the CAPL Credit Facility or in other loan documents without a waiver or amendment;
- any default in the performance of any obligation or condition beyond the applicable grace period relating to any other indebtedness of more than $45.0 million;
- certain judgment default for monetary judgments exceeding $45.0 million;
- bankruptcy or insolvency event involving the Partnership or any of its subsidiaries;
- certain Employee Retirement Income Security Act of 1974 (ERISA) violations;
- a Change of Control (as defined in the CAPL Credit Facility) without a waiver or amendment; and
- failure of the lenders for any reason to have a perfected first priority security interest in a material portion of the collateral granted by the Partnership or any of its subsidiaries.

In connection with amending the CAPL Credit Facility and terminating the JKM Credit Facility, the Partnership wrote off $1.1 million of deferred financing costs in the first quarter of 2023.

See Note 7 to the financial statements for additional information regarding the CAPL Credit Facility and the termination of the JKM Credit Facility.

### Additional Interest Rate Swap Contracts

In April 2023, we entered into four additional interest rate swap contracts. Three of the interest rate swap contracts are spot-start contracts with a total notional amount of $200 million and hedge variable interest rate payments for the five-year term of the CAPL Credit Facility. One of the interest rate swap contracts has a notional amount of $100 million and is a forward-starting interest rate swap contract that hedges variable interest rate payments from the date the existing interest rate swap contracts terminate through the remaining four years of the CAPL Credit Facility. All of these interest rate swap contracts have been designated as cash flow hedges and are expected to be highly effective.

See Note 8 to the financial statements for additional information regarding these additional interest rate swap contracts.

### Acquisition of Assets from CSS

On November 9, 2022, we closed on the acquisition of assets from CSS for a purchase price of $27.5 million plus working capital. The assets consisted of wholesale fuel supply contracts to 38 dealer owned locations, 35 sub-wholesaler accounts and two commission locations (1 fee based and 1 lease). We funded this acquisition through borrowings on the CAPL Credit Facility and cash on hand.

### Significant Factors Affecting our Profitability

### The Significance of Crude Oil and Wholesale Motor Fuel Prices on Our Revenues, Cost of Sales and Gross Profit

The prices paid to our motor fuel suppliers for wholesale motor fuel (which affects our cost of sales) are highly correlated to the price of crude oil. The crude oil commodity markets are highly volatile, and the market prices of crude oil, and, correspondingly, the market prices of wholesale motor fuel, experience significant and rapid fluctuations. For approximately 61% of gallons sold, we receive a per gallon rate equal to the posted rack price, less any applicable discounts, plus transportation costs, taxes and a fixed rate per gallon of motor fuel. The remaining gallons are either retail sales or wholesale DTW contracts that provide for variable, market-based pricing.

Regarding our supplier relationships, a material amount of our total gallons purchased are subject to terms discounts. The dollar value of these discounts varies with changes in motor fuel prices. Therefore, in periods of lower wholesale motor fuel prices, our gross profit is negatively affected, and, in periods of higher wholesale motor fuel prices, our gross profit is positively affected (as it relates to these discounts).

In our retail business, we attempt to pass along wholesale motor fuel price changes to our retail customers through “at the pump” retail price changes; however, market conditions do not always allow us to do so immediately. The timing of any related increase or decrease in “at the pump” retail prices is affected by competitive conditions in each geographic market in which we operate. As such, the prices we charge our customers for motor fuel and the gross profit we receive on our motor fuel sales can increase or decrease significantly over short periods of time.

Changes in our average motor fuel selling price per gallon and gross margin are directly related to the changes in crude oil and wholesale motor fuel prices. Variations in our reported revenues and cost of sales are, therefore, primarily related to the price of crude oil and wholesale motor fuel prices and generally not as a result of changes in motor fuel sales volumes, unless otherwise indicated and discussed below.

### Seasonality Effects on Volumes

Our business is subject to seasonality due to our wholesale and retail sites being located in certain geographic areas that are affected by seasonal weather and temperature trends and associated changes in retail customer activity during different seasons. Historically, sales volumes have been highest in the second and third quarters (during the summer months) and lowest during the winter months in the first and fourth quarters.

### Impact of Inflation

Inflation affects our financial performance by increasing certain components of cost of goods sold, such as fuel, merchandise, and credit card fees. Inflation also affects certain operating expenses, such as labor costs, certain leases, and general and administrative expenses. While our wholesale segment benefits from higher terms discounts as a result of higher fuel costs, inflation could and recently has negatively impacted our cost of goods sold and operating expenses. Although we have historically been able to pass on increased costs through price increases, there can be no assurance that we will be able to do so in the future.

### Impact of Interest Rates

Recent increases in interest rates have increased our interest expense as further described below. See "Recent Developments–Additional Interest Rate Swap Contracts" for information regarding additional interest rate swap contracts we entered into in April 2023.

### Acquisition and Financing Activity

Our results of operations and financial condition are also impacted by our acquisition and financing activities as summarized below.

- In February 2022, we closed on the final three properties of our 106-site acquisition from 7-Eleven.
- In March 2022, Holdings issued $25 million in preferred membership interests.
- On November 9, 2022, we closed on the acquisition of assets from CSS.
- On March 31, 2023, we amended and restated the CAPL Credit Facility and terminated the JKM Credit Facility. See Note 7 to the financial statements for additional information.

### Results of Operations

### Consolidated Income Statement Analysis

Below is an analysis of our consolidated statements of operations and provides the primary reasons for significant increases and decreases in the various income statement line items from period to period. Our consolidated statements of operations are as follows (in thousands):

|  | Three Months Ended March 31, 2023 | 2022 |
| --- | ---: | ---: |
| Operating revenues | $1,016,159 | $1,093,211 |
| Costs of sales | 934,100 | 1,014,381 |
| Gross profit | 82,059 | 78,830 |
| Operating expenses: |  |  |
| Operating expenses | 45,623 | 42,109 |
| General and administrative expenses | 5,739 | 6,483 |
| Depreciation, amortization and accretion expense | 19,820 | 20,275 |
| Total operating expenses | 71,182 | 68,867 |
| Loss on dispositions and lease terminations, net | (1,767) | (244) |
| Operating income | 9,110 | 9,719 |
| Other income, net | 261 | 130 |
| Interest expense | (12,012) | (6,661) |
| (Loss) income before income taxes | (2,641) | 3,188 |
| Income tax benefit | (1,662) | (1,859) |
| Net (loss) income | (979) | 5,047 |
| Accretion of preferred membership interests | 601 | — |
| Net (loss) income available to limited partners | $(1,580) | $5,047 |

### Three Months Ended March 31, 2023 Compared to Three Months Ended March 31, 2022

### Consolidated Results

Operating revenues decreased $77.1 million (7%) and gross profit increased $3.2 million (4%).

#### Operating revenues

Significant items impacting these results were:

- A $61.3 million (10%) decrease in our wholesale segment revenues primarily attributable to a 20% decrease in the average daily spot price of WTI crude oil to $75.93 per barrel for the first quarter of 2023, compared to $95.18 per barrel for the first quarter of 2022. The wholesale price of motor fuel is highly correlated to the price of crude oil. See “Significant Factors Affecting our Profitability—The Significance of Crude Oil and Wholesale Motor Fuel Prices on Our Revenues, Cost of Sales and Gross Profit.” Volume decreased 1% primarily due to lower volume in our base business, partially offset by the volume generated by the acquisition of assets from CSS.
- A $15.8 million (3%) decrease in our retail segment revenues primarily attributable to a 7% decrease in the average retail fuel price from the first quarter of 2022 to the first quarter of 2023 due to the decrease in wholesale motor fuel prices as noted above. Volume increased 3% for the first quarter of 2023 compared to the first quarter of 2022 primarily due to stronger performance in the base business as well as an increase in the retail site count due the sites acquired in the November 2022 acquisition of assets from CSS and the February 2022 acquisition of assets from 7-Eleven. Lastly, merchandise revenues increased $2.9 million (5%) driven by stronger performance in the base business as well as an increase in the company operated site count due to the conversion of lessee dealer and commission sites to company operated sites.

#### Cost of sales

Cost of sales decreased $80.3 million (8%), which was a result of the decrease in wholesale motor fuel prices and decrease in volume in our wholesale segment, partially offset by the volume increase in our retail segment as discussed above.

#### Gross profit

Gross profit increased $3.2 million (4%), which was primarily driven by increases in motor fuel, merchandise and rent gross profit. See “Results of Operations—Segment Results” for additional gross profit analyses.

#### Operating expenses

See “Results of Operations—Segment Results” for analyses.

#### General and administrative expenses

General and administrative expenses decreased $0.7 million (11%) primarily due to a $0.6 million decrease in acquisition-related costs driven by a reduction in legal fees incurred in connection with the acquisition of assets from 7-Eleven.

#### Depreciation, amortization and accretion expense

Depreciation, amortization and accretion expense decreased $0.5 million (2%) primarily driven by lower impairment charges during the period as compared to the same period of 2022.

#### Loss on dispositions and lease terminations, net

During the three months ended March 31, 2023, we recorded a $2.0 million loss on lease terminations and asset disposals, partially offset by a $0.2 million gain in connection with our ongoing real estate rationalization effort.

During the three months ended March 31, 2022, we recorded a $0.5 million loss on lease terminations and asset disposals, partially offset by a $0.3 million gain in connection with our ongoing real estate rationalization effort.

#### Interest expense

Interest expense increased $5.4 million (80%), primarily due to a $4.2 million increase in interest expense (net of the impact of the interest rate swaps) driven by the increase in interest rates. In addition, we wrote off $1.1 million in deferred financing costs in the first quarter of 2023 as a result of the amendment and restatement of the CAPL Credit Facility and termination of the JKM Credit Facility.

#### Income tax expense (benefit)

We recorded an income tax benefit of $1.7 million and $1.9 million for the three months ended March 31, 2023 and 2022, respectively, driven by losses incurred by our taxable subsidiaries.

### Segment Results

We present the results of operations of our segments consistent with how our management views the business.

See Note 14 to the financial statements for information regarding a change in our segment reporting. We have recast the results of our segments for first quarter of 2022 to be consistent with our new segment reporting.

### Wholesale

The following table highlights the results of operations and certain operating metrics of our wholesale segment. The narrative following these tables provides an analysis of the results of operations of that segment (thousands of dollars, except for the number of distribution sites and per gallon amounts):

| Gross profit: | Three Months Ended March 31, 2023 | 2022 |
| --- | ---: | ---: |
| Motor fuel gross profit | $16,708 | $16,184 |
| Rent gross profit | 13,255 | 12,339 |
| Other revenues | 1,247 | 1,786 |
| Total gross profit | 31,210 | 30,309 |
| Operating expenses | (9,541) | (8,716) |
| **Operating income** | $21,669 | $21,593 |
| Motor fuel distribution sites (end of period): (a) |  |  |
| Independent dealers (b) | 643 | 656 |
| Lessee dealers (c) | 612 | 642 |
| Total motor fuel distribution sites | 1,255 | 1,298 |
| **Motor fuel distribution sites (average):** | 1,271 | 1,302 |
| **Volume of gallons distributed** | 201,861 | 203,915 |
| **Margin per gallon** | $0.083 | $0.079 |

(a) In addition, we distributed motor fuel to sub-wholesalers who distributed to additional sites.

(b) The decrease in the independent dealer site count was primarily attributable to the loss of contracts, most of which were lower margin, partially offset by the increase in independent dealer sites as a result of the acquisition of assets from CSS and the ongoing real estate rationalization effort.

(c) The decrease in the lessee dealer site count was primarily attributable to our real estate rationalization effort and the conversion of lessee dealer sites to company operated sites.

### Three Months Ended March 31, 2023 Compared to Three Months Ended March 31, 2022

Gross profit increased $0.9 million (3%) and operating income increased $0.1 million. These results were impacted by:

#### Motor fuel gross profit

The $0.5 million (3%) increase in motor fuel gross profit was primarily driven by a 4% increase in our average fuel margin per gallon as compared to the first quarter of 2022 driven by better sourcing costs as a result of brand consolidation and other initiatives. This increase was partially offset by lower terms discounts. The average spot price of WTI crude oil decreased 20% from $95.18 per barrel for the first quarter of 2022 to $75.93 per barrel for the first quarter of 2023. See “Significant Factors Affecting our Profitability—The Significance of Crude Oil and Wholesale Motor Fuel Prices on Our Revenues, Cost of Sales and Gross Profit.”

Also, volume decreased 1% primarily due to lower volume in our base business, partially offset by the volume generated by the acquisition of assets from CSS.

#### Rent gross profit

The $0.9 million (7%) increase in rent gross profit was primarily driven by rent increases from our customers as well as the reopening of closed sites.

#### Other revenues

Other revenues decreased $0.5 million (30%) due to lower dealer contract termination fees.

#### Operating expenses

Operating expenses increased $0.8 million (9%), primarily as a result of inflation across many cost categories.

### Retail

The following table highlights the results of operations and certain operating metrics of our retail segment. The narrative following these tables provides an analysis of the results of operations of that segment (in thousands, except for the number of retail sites):

| Gross profit: | Three Months Ended March 31, 2023 | 2022 |
| --- | ---: | ---: |
| Motor fuel | $26,760 | $26,304 |
| Merchandise | 18,123 | 16,682 |
| Rent | 2,511 | 2,447 |
| Other revenue | 3,455 | 3,088 |
| Total gross profit | 50,849 | 48,521 |
| Operating expenses | (36,082) | (33,393) |
| **Operating income** | $14,767 | $15,128 |
| **Retail sites (end of period):** |  |  |
| Company operated retail sites (a) | 268 | 255 |
| Commission agents (b) | 194 | 201 |
| Total retail segment sites | 462 | 456 |
| **Total retail segment statistics:** |  |  |
| Volume of gallons sold | 119,085 | 116,040 |
| Average retail fuel sites | 457 | 454 |
| Margin per gallon, before deducting credit card fees and commissions | 0.318 | 0.319 |
| **Company operated site statistics:** |  |  |
| Average retail fuel sites | 258 | 254 |
| Margin per gallon, before deducting credit card fees | $0.341 | $0.327 |
| Merchandise gross profit percentage | 27.8% | 26.8% |
| **Commission site statistics:** |  |  |
| Average retail fuel sites | 198 | 200 |
| Margin per gallon, before deducting credit card fees and commissions | $0.273 | $0.303 |

(a) The increase in the company operated site count was primarily attributable to the conversion of lessee dealer and commission sites to company operated sites, largely in March 2023.

(b) The decrease in the commission site count was primarily attributable to the conversion of commission sites to company operated sites and the real estate rationalization effort.

### Three Months Ended March 31, 2023 Compared to Three Months Ended March 31, 2022

Gross profit increased $2.3 million (5%) and operating income decreased $0.4 million (2%). These results were impacted by:

#### Gross profit

- Our motor fuel gross profit increased $0.5 million (2%) attributable to a 3% increase in volume driven by stronger performance in the base business as well as an increase in the retail site count due the sites acquired in the November 2022 acquisition of assets from CSS and the February 2022 acquisition of assets from 7-Eleven.
- Our merchandise gross profit and other revenues increased $1.4 million (9%) and $0.4 million (12%), respectively, driven by higher sales in our base business as well as an increase in the company operated site count due to the conversion of lessee dealer and commission sites to company operated sites.

#### Operating expenses

Operating expenses increased $2.7 million (8%) driven by an increase in store labor, in part due to expanding hours of operation at many of our company operated sites. In addition, many other cost categories increased due primarily to inflation. Lastly, operating expenses increased due to an increase in the company operated site count due to the conversion of lessee dealer and commission sites to company operated sites.

### Non-GAAP Financial Measures

We use the non-GAAP financial measures EBITDA, Adjusted EBITDA, Distributable Cash Flow and Distribution Coverage Ratio. EBITDA represents net income before deducting interest expense, income taxes and depreciation, amortization and accretion (which includes certain impairment charges). Adjusted EBITDA represents EBITDA as further adjusted to exclude equity-based compensation expense, gains or losses on dispositions and lease terminations, net and certain discrete acquisition related costs, such as legal and other professional fees, separation benefit costs and certain other discrete non-cash items arising from purchase accounting. Distributable Cash Flow represents Adjusted EBITDA less cash interest expense, sustaining capital expenditures and current income tax expense. The Distribution Coverage Ratio is computed by dividing Distributable Cash Flow by distributions paid.

EBITDA, Adjusted EBITDA, Distributable Cash Flow and Distribution Coverage Ratio are used as supplemental financial measures by management and by external users of our financial statements, such as investors and lenders. EBITDA and Adjusted EBITDA are used to assess our financial performance without regard to financing methods, capital structure or income taxes and the ability to incur and service debt and to fund capital expenditures. In addition, Adjusted EBITDA is used to assess the operating performance of our business on a consistent basis by excluding the impact of items which do not result directly from the wholesale distribution of motor fuel, the leasing of real property, or the day to day operations of our retail site activities. EBITDA, Adjusted EBITDA, Distributable Cash Flow and Distribution Coverage Ratio are also used to assess the ability to generate cash sufficient to make distributions to our unitholders.

We believe the presentation of EBITDA, Adjusted EBITDA, Distributable Cash Flow and Distribution Coverage Ratio provides useful information to investors in assessing the financial condition and results of operations. EBITDA, Adjusted EBITDA, Distributable Cash Flow and Distribution Coverage Ratio should not be considered alternatives to net income or any other measure of financial performance or liquidity presented in accordance with U.S. GAAP. EBITDA, Adjusted EBITDA, Distributable Cash Flow and Distribution Coverage Ratio have important limitations as analytical tools because they exclude some but not all items that affect net income. Additionally, because EBITDA, Adjusted EBITDA, Distributable Cash Flow and Distribution Coverage Ratio may be defined differently by other companies in our industry, our definitions may not be comparable to similarly titled measures of other companies, thereby diminishing their utility.

The following table presents reconciliations of EBITDA, Adjusted EBITDA, and Distributable Cash Flow to net income, the most directly comparable U.S. GAAP financial measure, for each of the periods indicated (in thousands, except for per unit amounts):

|  | Three Months Ended March 31, 2023 | 2022 |
| --- | ---: | ---: |
| **Net (loss) income (a)** | $(979) | $5,047 |
| Interest expense | 12,012 | 6,661 |
| Income tax benefit | (1,662) | (1,859) |
| Depreciation, amortization and accretion expense | 19,820 | 20,275 |
| **EBITDA** | 29,191 | 30,124 |
| Equity-based employee and director compensation expense | 561 | 732 |
| Loss on dispositions and lease terminations, net | 1,767 | 244 |
| Acquisition-related costs (b) | 219 | 868 |
| **Adjusted EBITDA** | 31,738 | 31,968 |
| Cash interest expense | (10,163) | (5,981) |
| Sustaining capital expenditures (c) | (2,049) | (1,554) |
| Current income tax expense | (394) | (185) |
| **Distributable Cash Flow** | $19,132 | $24,248 |
| Distributions paid | 19,918 | 19,896 |
| **Distribution Coverage Ratio (a)** | **0.96x** | **1.22x** |

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(a) Beginning in 2022, we reconcile Adjusted EBITDA to Net income rather than to Net income available to limited partners. The difference between Net income and Net income available to limited partners is that, beginning in the second quarter of 2022, the accretion of preferred membership interests issued in late March 2022 is a deduction from Net income in computing Net income available to limited partners. Because Adjusted EBITDA is used to assess our financial performance without regard to capital structure, we believe Adjusted EBITDA should be reconciled with Net income, so that the calculation isn’t impacted by the accretion of preferred membership interests. This approach is comparable to our reconciliation of Adjusted EBITDA to Net income available to limited partners in past periods, as we have not recorded accretion of preferred membership interests in past periods.

(b) Relates to certain discrete acquisition related costs, such as legal and other professional fees, separation benefit costs and certain purchase accounting adjustments associated with recently acquired businesses.

(c) Under the Partnership Agreement, sustaining capital expenditures are capital expenditures made to maintain our long-term operating income or operating capacity. Examples of sustaining capital expenditures are those made to maintain existing contract volumes, including payments to renew existing distribution contracts, or to maintain our sites in conditions suitable to lease, such as parking lot or roof replacement/renovation, or to replace equipment required to operate the existing business.

### Liquidity and Capital Resources

### Liquidity

Our principal liquidity requirements are to finance our operations, fund acquisitions, service our debt and pay distributions to our unitholders. We expect our ongoing sources of liquidity to include cash generated by operations, proceeds from sales of sites in connection with our real estate rationalization efforts, borrowings under the CAPL Credit Facility, and if available to us on acceptable terms, issuances of equity and debt securities. We regularly evaluate alternate sources of capital to support our liquidity requirements.

Our ability to meet our debt service obligations and other capital requirements, including capital expenditures, acquisitions, and partnership distributions, will depend on our future operating performance, which, in turn, will be subject to general economic, financial, business, competitive, legislative, regulatory and other conditions, many of which are beyond our control. As a normal part of our business, depending on market conditions, we will, from time to time, consider opportunities to repay, redeem, repurchase or refinance our indebtedness. Changes in our operating plans, lower than anticipated sales, increased expenses, acquisitions or other events may cause us to seek additional debt or equity financing in future periods.

We believe that we will have sufficient cash flow from operations, borrowing capacity under the CAPL Credit Facility, access to capital markets and alternate sources of funding to meet our financial commitments, debt service obligations, contingencies, anticipated capital expenditures and partnership distributions. However, we are subject to business and operational risks that could adversely affect our cash flow. A material decrease in our cash flows would likely produce an adverse effect on our borrowing capacity as well as our ability to issue additional equity and/or debt securities and/or maintain or increase distributions to unitholders.

### Cash Flows

The following table summarizes cash flow activity (in thousands):

|  | Three Months Ended March 31, 2023 | 2022 |
| --- | ---: | ---: |
| Net cash provided by operating activities | $11,538 | $28,388 |
| Net cash used in investing activities | (5,380) | (9,326) |
| Net cash used in financing activities | (14,695) | (15,561) |

#### Operating Activities

Net cash provided by operating activities decreased $16.9 million for the three months ended March 31, 2023 compared to the same period in 2022, primarily attributable to the changes in working capital stemming from timing of settlement of fuel purchases and payment of accrued interest in connection with the amendment and restatement of the CAPL Credit Facility and the termination of the JKM Credit Facility.

As is typical in our industry, our current liabilities exceed our current assets as a result of the longer settlement of real estate and motor fuel taxes as well as operating lease obligations as compared to the shorter settlement of receivables for fuel and rent.

#### Investing Activities

We incurred capital expenditures of $6.0 million and $8.9 million for the three months ended March 31, 2023 and 2022, respectively. The decrease was largely driven by the reduction of rebranding of sites including the sites acquired from 7-Eleven. We paid $1.9 million during the three months ended March 31, 2022 in connection with the closing of the final three sites acquired from 7-Eleven. We received $0.6 million and $1.5 million in proceeds primarily from the sale of sites in connection with our real estate rationalization effort for the three months ended March 31, 2023 and 2022, respectively.

#### Financing Activities

We paid $20.0 million and $19.9 million in distributions for the three months ended March 31, 2023 and 2022, respectively. For the three months ended March 31, 2023 and 2022, respectively, we made total net borrowings (repayments) on our credit facilities of $12.9 million and $(19.5) million. We received $24.5 million in net proceeds from the issuance of preferred membership interests during the three months ended March 31, 2022. We paid $6.9 million of deferred financing costs in connection with amending and restating the CAPL Credit Facility and terminating the JKM Credit Facility in the first quarter of 2023.

### Distributions

Distribution activity for 2023 was as follows:

| Quarter Ended | Record Date | Payment Date | Cash Distribution (per unit) | Cash Distribution (in thousands) |
| --- | --- | --- | ---: | ---: |
| December 31, 2022 | February 3, 2023 | February 10, 2023 | $0.5250 | $19,917 |
| March 31, 2023 | May 3, 2023 | May 10, 2023 | 0.5250 | 19,925 |

The amount of any distribution is subject to the discretion of the Board, which may modify or revoke our cash distribution policy at any time. Our Partnership Agreement does not require us to pay any distributions. As such, there can be no assurance we will continue to pay distributions in the future.

### Debt

As of March 31, 2023, our debt and finance lease obligations consisted of the following (in thousands):

|  |  |
| --- | ---: |
| CAPL Credit Facility | $778,000 |
| Finance lease obligations | 13,256 |
| Total debt and finance lease obligations | 791,256 |
| Current portion | 2,937 |
| Noncurrent portion | 788,319 |
| Deferred financing costs, net | 11,340 |
| Noncurrent portion, net of deferred financing costs | $776,979 |

See Note 7 to the financial statements for information regarding the amendment and restatement of the CAPL Credit Facility and the termination of the JKM Credit Facility.

Taking the interest rate swap contracts into account, our effective interest rate on our CAPL Credit Facility at March 31, 2023 was 4.98% (our applicable margin was 2.25% as of March 31, 2023). Letters of credit outstanding at March 31, 2023 totaled $4.5 million.

The amount of availability under our CAPL Credit Facility at May 4, 2023, after taking into consideration debt covenant restrictions, was 154 million.

See Note 8 for information regarding the amendment of the three existing interest rate swap contracts and the entry into four new interest rate swap contracts.

### Capital Expenditures

We make investments to expand, upgrade and enhance existing assets. We categorize our capital requirements as either sustaining capital expenditures, growth capital expenditures or acquisition capital expenditures. Sustaining capital expenditures are those capital expenditures required to maintain our long-term operating income or operating capacity. Acquisition and growth capital expenditures are those capital expenditures that we expect will increase our operating income or operating capacity over the long term. We have the ability to fund our capital expenditures by additional borrowings under our CAPL Credit Facility, or, if available to us on acceptable terms, accessing the capital markets and issuing additional equity, debt securities or other options, such as the sale of assets. Our ability to access the capital markets may have an impact on our ability to fund acquisitions. We may not be able to complete any offering of securities or other options on terms acceptable to us, if at all.

The following table outlines our capital expenditures (in thousands):

|  | Three Months Ended March 31, 2023 | 2022 |
| --- | ---: | ---: |
| Sustaining capital | $2,049 | $1,554 |
| Growth | 3,952 | 7,380 |
| Acquisitions | — | 1,885 |
| Total capital expenditures and acquisitions | $6,001 | $10,819 |

Growth capital expenditures decreased primarily due the decrease of rebranding of certain sites, including the sites acquired from 7-Eleven.

A significant portion of our growth capital expenditures are discretionary and we regularly review our capital plans in light of anticipated proceeds from sales of sites.

### Concentration of Customers

For the three months ended March 31, 2023 and 2022, respectively, approximately 20% and 22% of our rent income was from two multi-site operators.

### Outlook

As noted previously, the prices paid to our motor fuel suppliers for wholesale motor fuel (which affects our cost of sales) are highly correlated to the price of crude oil. The crude oil commodity markets are highly volatile, and the market prices of crude oil, and, correspondingly, the market prices of wholesale motor fuel, experience significant and rapid fluctuations, which affect our motor fuel gross profit. See “Significant Factors Affecting our Profitability—The Significance of Crude Oil and Wholesale Motor Fuel Prices on Our Revenues, Cost of Sales and Gross Profit” for additional information.

Our results for 2023 relative to 2022 are anticipated to be impacted by the acquisition of assets from CSS, which is anticipated to increase gross profit within the wholesale segment. In addition, we anticipate that we will continue to realize reductions in our fuel costs as a result of new or amended fuel purchase contracts. We continue to consider the highest and best use class of trade for each of our properties, which may result in the conversion of sites from one class of trade to another and ultimately increases or decreases in the gross profit for the Wholesale and Retail segments. Lastly, given increases in interest rates, we also anticipate higher interest expense in 2023 as compared to 2022.

We will continue to evaluate acquisitions on an opportunistic basis. Additionally, we will pursue acquisition targets that fit into our strategy. Whether we will be able to execute acquisitions will depend on market conditions, availability of suitable acquisition targets at attractive terms, acquisition-related compliance with customary regulatory requirements, and our ability to finance such acquisitions on favorable terms and in compliance with our debt covenant restrictions.

### New Accounting Policies

There is no new accounting guidance effective or pending adoption that has had or is anticipated to have a material impact on our financial statements.

### Critical Accounting Policies and Estimates

There have been no material changes to the critical accounting policies described in our Form 10-K.

## Market risk

As filed, 942 characters.

Other than interest rate risk, no significant changes to our market risk have occurred since December 31, 2022. For a discussion of market risks affecting us, refer to Part II, Item 7A—"Quantitative and Qualitative Disclosures About Market Risk” included in our Form 10-K.

### Interest Rate Risk

As of March 31, 2023, we had $778.0 million outstanding on our CAPL Credit Facility. Our outstanding borrowings bear interest at SOFR plus an applicable margin, which was 2.25% at March 31, 2023.

See Note 8 to the financial statements for information regarding the amendment of our three existing interest rate swap contracts and the entry into four additional interest rate swap contracts.

Taking all of these interest rate swap contracts into account, our effective interest rate on our CAPL Credit Facility at March 31, 2023 was 4.98%. A one percentage point change in SOFR would impact annual interest expense by approximately $2.8 million.

## Controls and procedures

As filed, 901 characters.

#### (a) Evaluation of Disclosure Controls and Procedures

Our management has evaluated, with the participation of our principal executive officer and principal financial officer, the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this report. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of March 31, 2023.

#### (b) Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting (as that term is defined in Rule 13a-15(f) under the Exchange Act) that occurred during the three months ended March 31, 2023, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

## Risk factors

As filed, 158 characters.

There were no material changes in the risk factors disclosed in the section entitled "Risk Factors" in our Form 10-K during the period covered by this report.

Filed May 9, 2023.
Source: SEC EDGAR, the filing index for accession 0000950170-23-019077. Last ingested by Listed: Oct 24, 2026, 15:13 ET. No prices; not investment advice.