CrossAmerica Partners LP Reports Third Quarter 2015 Results

ALLENTOWN, Pa.–(BUSINESS WIRE)–CrossAmerica Partners LP (NYSE: CAPL), headquartered in Allentown, PA, a leading wholesale fuels distributor, convenience store operator, and owner and lessor of real estate used in the retail distribution of motor fuels, today reported financial results for the third quarter ended September 30, 2015.

“Our record third quarter results reflect the successful execution of our acquisition and integration strategy at CrossAmerica,” said Jeremy Bergeron, the Partnership’s President. “Thanks to the performance of our recently acquired retail business, the contribution of the assets acquired from CST Brands, and the capture of synergies and cost reductions achieved by our team members, we were able to grow distributable cash flow by more than 83% this quarter compared to the same quarter last year.”

Wholesale Segment

During the third quarter 2015, CrossAmerica distributed, on a wholesale basis, 284.1 million gallons of motor fuel at an average wholesale gross margin of $0.061 per gallon, resulting in a wholesale motor fuel gross profit of $17.3 million. For the three month period ended September 30, 2014, the Partnership distributed, on a wholesale basis, 264.2 million gallons of fuel at an average wholesale gross margin of $0.073 per gallon, resulting in a wholesale motor fuel gross profit of $19.2 million. The decrease of 10% in gross profit from wholesale fuel sales for the third quarter of 2015 relative to 2014 was attributable to a decline in the average wholesale fuel margin partially offset by an 8% increase in volume driven by the acquisitions that have been completed since April 2014. Wholesale fuel margin per gallon for the quarter was lower, primarily due to the decline in the margin the Partnership receives from purchase discounts provided to CrossAmerica by its suppliers. The Partnership receives certain discounts from suppliers based on a percentage of the purchase price of fuel, and the dollar value of these discounts varies with the price of wholesale motor fuel.

CrossAmerica’s gross profit from its Other revenues for the wholesale segment, which primarily consist of rental income, was $9.7 million for the third quarter of 2015 compared to $5.9 million for the same period in 2014. The increase in rental income was primarily associated with the recent acquisitions of real estate, which the Partnership leases to CST.

Operating income for the wholesale segment increased $6.4 million or 41% primarily driven by an increase in rental income, income from CST Fuel Supply and a decline in operating expenses, partially offset by an increase in depreciation, amortization and accretion.

Retail Segment

For the third quarter 2015, the Partnership sold 61.6 million gallons of motor fuel at an average retail motor fuel gross margin of $0.129 per gallon, net of commissions and credit card fees, resulting in a retail gross profit of $8.0 million. For the same period in 2014, CrossAmerica sold 46.5 million gallons at an average retail motor fuel gross margin of $0.053 per gallon, net of commissions and credit card fees, resulting in a retail gross profit of $2.5 million. The increase in retail gross profit from retail motor fuel sales for the third quarter of 2015 relative to 2014 was due primarily to the Erickson and One Stop acquisitions. These acquisitions also contributed to the $11.1 million in gross margin from the sale of food and merchandise during the quarter. For the same period in 2014, CrossAmerica generated $7.4 million in gross margin from the sale of food and merchandise.

Operating income for the retail segment increased nearly $2.4 million primarily driven by an increase in motor fuel and merchandise gross profit, partially offset by an increase in depreciation, amortization and accretion.

Non-GAAP Metrics

Distributable Cash Flow (See Supplemental Disclosure Regarding Non-GAAP Financial Information below) was $25.1 million for the three month period ended September 30, 2015 compared to $13.7 million for the same period in 2014. The increase in Distributable Cash Flow was due primarily to an increase in earnings driven primarily by the 2014 and 2015 acquisitions, including the purchase of CST Fuel Supply equity interests executed in January and July 2015, when compared to the same period in 2014. Distributable Cash Flow per diluted limited partner unit was $0.76 for the three months ended September 30, 2015 and the Partnership made limited partner distribution per unit of $0.5625 during the quarter, resulting in a Distribution Coverage Ratio of 1.35 times.

Liquidity and Capital Resources

CrossAmerica’s revolving credit facility is secured by substantially all of the assets of CrossAmerica and its subsidiaries. As of September 30, 2015, after taking into account letters of credit and debt covenant constraints to availability, approximately $125.4 million was available for future borrowings. In connection with future acquisitions, the revolving credit facility requires, among other things, that the Partnership has, after giving effect to such acquisition, at least $20.0 million of borrowing availability under the revolving credit facility and unrestricted cash on the balance sheet on the date of such acquisition.

Distributions

The Board of the Directors of CrossAmerica’s General Partner has declared a quarterly distribution of $0.5775 per unit with respect to the third quarter of 2015. The distribution will be paid on November 25, 2015 to all unitholders of record as of November 18, 2015. The amount and timing of any distribution is subject to the discretion of the Board of Directors of CrossAmerica’s General Partner.

Conference Call

The Partnership will host a conference call on November 4, 2015 at 9:00 a.m. Eastern Time (8:00 a.m. Central Time) to discuss third quarter earnings results. The conference call numbers are 800-774-6070 or 630-691-2753 and the passcode for both is 5854571#. A live audio webcast of the conference call and the related earnings materials, including reconciliations of any non-GAAP financial measures to GAAP financial measures and any other applicable disclosures, will be available on that same day on the investor section of the CrossAmerica website (www.crossamericapartners.com). A slide presentation for the conference call will also be available on the investor section of the Partnership’s website. To listen to the audio webcast, go to http://www.crossamericapartners.com/en-us/investors/eventsandpresentations. After the live conference call, a replay will be available for a period of thirty days. The replay numbers are 888-843-7419 or 630-652-3042 and the passcode for both is 5854571#. An archive of the webcast will be available on the investor section of the CrossAmerica website at www.crossamericapartners.com/en-us/investors/eventsandpresentations within 24 hours after the call for a period of sixty days.

Segment Results

Wholesale

The following table highlights the results of operations and certain operating metrics of the Wholesale segment (thousands of dollars, except for the number of distribution sites and per gallon amounts):

Retail

The following table highlights the results of operations and certain operating metrics of the Retail segment (thousands of dollars, except for the number of convenience stores and per gallon amounts):

Supplemental Disclosure Regarding Non-GAAP Financial Measures

CrossAmerica uses non-GAAP financial measures EBITDA, Adjusted EBITDA, and Distributable Cash Flow in this report. EBITDA represents net income available to CrossAmerica limited partners before deducting interest expense, income taxes and depreciation, amortization and accretion. Adjusted EBITDA represents EBITDA as further adjusted to exclude equity funded expenses related to incentive compensation and the Amended Omnibus Agreement, gains or losses on sales of assets, certain discrete acquisition related costs, such as legal and other professional fees and severance expenses associated with recently acquired companies, and certain other discrete non-cash items, such as inventory fair value adjustments arising from purchase accounting. Distributable Cash Flow represents Adjusted EBITDA less cash interest expense, sustaining capital expenditures and current income tax expense.

EBITDA, Adjusted EBITDA, and Distributable Cash Flow are used as supplemental financial measures by management and by external users of CrossAmerica’s financial statements, such as investors and lenders. EBITDA and Adjusted EBITDA are used to assess the Partnership’s 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 CrossAmerica’s 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 the Partnership’s retail convenience store activities. EBITDA, Adjusted EBITDA, and Distributable Cash Flow are also used to assess the ability to generate cash sufficient to make distributions to CrossAmerica’s unit-holders.

The Partnership believes the presentation of EBITDA, Adjusted EBITDA, and Distributable Cash Flow provides useful information to investors in assessing the financial condition and results of operations. EBITDA, Adjusted EBITDA, and Distributable Cash Flow 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, and Distributable Cash Flow have important limitations as analytical tools because they exclude some but not all items that affect net income. Additionally, because EBITDA, Adjusted EBITDA, and Distributable Cash Flow may be defined differently by other companies in CrossAmerica’s industry, the Partnership’s 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):

The following table reconciles segment Adjusted EBITDA to consolidated Adjusted EBITDA (in thousands):

About CrossAmerica Partners LP

CrossAmerica Partners is a leading wholesale distributor of motor fuels and owner and lessee of real estate used in the retail distribution of motor fuels. Its general partner, CrossAmerica GP LLC, is a wholly owned subsidiary of CST Brands, Inc., one of the largest independent retailers of motor fuels and convenience merchandise in North America. Formed in 2012, CrossAmerica Partners LP is a distributor of branded and unbranded petroleum for motor vehicles in the United States and distributes fuel to more than 1,200 locations and owns or leases more than 800 sites. With a geographic footprint covering 25 states, the Partnership has well-established relationships with several major oil brands, including ExxonMobil, BP, Shell, Chevron, Sunoco, Valero, Gulf, Citgo and Marathon. CrossAmerica Partners ranks as one of ExxonMobil’s largest distributors by fuel volume in the United States and in the top 10 for additional brands. For additional information, please visit www.crossamericapartners.com.

Safe Harbor Statement

Statements contained in this release that state the Company’s or management’s expectations or predictions of the future are forward-looking statements. The words “believe,” “expect,” “should,” “intends,” “estimates,” “target” and other similar expressions identify forward-looking statements. It is important to note that actual results could differ materially from those projected in such forward-looking statements. For more information concerning factors that could cause actual results to differ from those expressed or forecasted, see CrossAmerica’s Form 10-Q or Form 10-K filed with the Securities and Exchange Commission, and available on the CrossAmerica’s website at www.crossamericapartners.com. The Partnership undertakes no obligation to publicly update or revise any statements in this release, whether as a result of new information, future events or otherwise.