CrossAmerica Partners LP engages in the wholesale distribution of motor fuel and the ownership and leasing of real estate used in the retail distribution of motor fuel. The company also generates revenues from the operation of company operated retail sites.
The company conducts its business through two operating segments – Wholesale and Retail. As of December 31, 2023, the company owned or leased approximately 1,100 sites, of which the company operates 295 as company operated sites. In all, inc...
CrossAmerica Partners LP engages in the wholesale distribution of motor fuel and the ownership and leasing of real estate used in the retail distribution of motor fuel. The company also generates revenues from the operation of company operated retail sites.
The company conducts its business through two operating segments – Wholesale and Retail. As of December 31, 2023, the company owned or leased approximately 1,100 sites, of which the company operates 295 as company operated sites. In all, including the company operated sites, the company distributed motor fuel to approximately 1,700 sites located in 34 states.
The company is one of the ten largest independent distributors by motor fuel volume in the United States for ExxonMobil Corporation (ExxonMobil), BP p.l.c. (BP), and Motiva Enterprises, LLC (Motiva). The company also distributes Shell, Sunoco, Valero (Valero Energy Corporation), Gulf, Citgo, Marathon (Marathon Petroleum Company LP), and Phillips 66-branded motor fuels (approximately 94% of the motor fuel the company distributed during 2023 was branded).
The company also generates revenues through leasing or subleasing its real estate. The company owns or leases real and personal property and the company leases or subleases that property to tenants, the substantial majority of which are wholesale customers as described above. The company owns approximately 60% of its properties that the company leases to its dealers or utilize in the company’s retail business. The company’s lease agreements with third-party landlords have an average remaining lease term of 4.5 years as of December 31, 2023.
The company’s primary operations are conducted by the following consolidated wholly owned subsidiaries:
LGW and CAPL JKM Wholesale, which distribute motor fuels on a wholesale basis and generate Qualifying Income under Section 7704(d) of the Internal Revenue Code;
LGPR, which functions as the real estate holding company and holds assets that generate Qualifying Income under Section 7704(d) of the Internal Revenue Code;
LGWS, which owns and leases (or leases and sub-leases) real estate and personal property used in the retail sale of motor fuels, as well as provides maintenance and other services to its customers. In addition, LGWS sells motor fuel on a retail basis at sites operated by commission agents. LGWS also sells motor fuels on a retail basis and sells convenience merchandise items to end customers at company operated retail sites. Income from LGWS generally is not Qualifying Income under Section 7704(d) of the Internal Revenue Code; and
Joe’s Kwik Marts, which owns and leases real estate and personal property at certain of the company operated sites. Joe’s Kwik Marts also sells motor fuels on a retail basis and sells convenience merchandise items to end customers. Income from Joe’s Kwik Marts generally is not Qualifying Income under Sections 7704(d) of the Internal Revenue Code.
Wholesale Segment
The wholesale segment includes the wholesale distribution of motor fuel to lessee dealers and independent dealers. The company has exclusive motor fuel distribution contracts with lessee dealers who lease the property from the company. The company also has exclusive distribution contracts with independent dealers to distribute motor fuel but do not collect rent from the independent dealers. Below is a description of the wholesale segment's principal customer groups.
Independent Dealer
The independent dealer owns or leases the property and owns all motor fuel and convenience store inventory.
The company contracts to exclusively distribute motor fuel to the independent dealer at rack-plus pricing, or in some cases, DTW.
Under the company’s distribution contracts, the company agrees to supply a particular branded motor fuel or unbranded motor fuel to a site or group of sites and arrange for all transportation.
Distribution contracts with independent dealers are typically seven to 15 years in length.
As of December 31, 2023, the average remaining distribution contract term was 4.6 years.
Lessee Dealer
The company owns or leases the property and then lease or sublease the site to a dealer.
The lessee dealer owns all motor fuel and retail site inventory and sets its own pricing and gross profit margins.
The company collects wholesale motor fuel margins at rack-plus pricing or, in some cases, DTW.
Under the company’s distribution contracts, the company agrees to supply a particular branded motor fuel or unbranded motor fuel to a site or group of sites and arrange for all transportation.
Exclusive distribution contracts with dealers who lease property from the company run concurrent in length to the retail site’s lease period (generally three to 10 years).
Leases are generally triple net leases.
As of December 31, 2023, the average remaining lease agreement term was 2.6 years.
Retail Segment
The retail segment includes the sale of convenience merchandise items at company operated sites and the retail sale of motor fuel at company operated and commission sites. Below is a description of the retail segment's principal customer groups.
Company Operated
The company owns or leases the property, operates the retail site and retains all profits from motor fuel and retail site operations.
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The company owns the merchandise inventory and retains the profits from the sale of convenience merchandise items.
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The company owns the motor fuel inventory and sets the motor fuel pricing.
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The company maintains inventory from the time of the purchase of motor fuel from third-party suppliers until the retail sale to the end customer. On average, the company maintains approximately 5-days’ worth of motor fuel sales in inventory at each site.
LGW and CAPL JKM Wholesale distribute all of the motor fuel required by the company operated sites to LGWS and Joe’s Kwik Marts, respectively, which owns the motor fuel inventory and sells motor fuel to retail customers. LGW and CAPL JKM Wholesale record qualifying wholesale motor fuel distribution gross income and LGWS and Joe’s Kwik Marts record the non-qualifying retail sale.
Commission
The company owns or leases the property and then leases or subleases the site to the commission agent, who pays rent to the company and operates all the non-fuel related operations at the sites for its own account.
The company owns the motor fuel inventory, set the motor fuel pricing and generate revenue from the retail sale of motor fuels to the end customer.
The company pays the commission agent a commission for each gallon of motor fuel sold.
LGW distributes motor fuel to LGWS, which owns the motor fuel inventory and sells motor fuel to retail customers. LGW records qualifying wholesale motor fuel distribution gross income and LGWS records the non-qualifying retail sale.
As of December 31, 2023, the average remaining motor fuel distribution and lease agreement term for the company’s commission agents was 0.8 years.
Business Strategy
The company’s business strategies are to:
Expand within and beyond the company’s existing markets through acquisitions. Since the company’s IPO and through February 22, 2024, the company has completed acquisitions for a total of approximately 1,000 fee and leasehold sites and 700 wholesale fuel supply contracts;
Own or lease sites in prime locations;
Operate the company’s retail sites efficiently with a focus on providing excellent value and service;
Maintain strong relationships with major integrated oil companies and refiners; and
Optimize the operations of the company’s assets to the most appropriate format (lessee dealer, independent dealer, company operated, or commission) to maximize the company’s investment return.
Supplier Arrangements
The company distributes branded motor fuel under the Exxon, Mobil, BP, Shell, Sunoco, Valero, Gulf, Citgo, Marathon and Phillips 66 brands to the company’s customers. Branded motor fuels are purchased from major integrated oil companies and refiners under supply agreements. For 2023, the company purchased approximately 80% of the company’s motor fuel from four suppliers. The company also purchases unbranded motor fuel for distribution. As of December 31, 2023, the company’s supply agreements had a weighted-average remaining term of approximately 4.9 years.
Seasonality
The company's business exhibits substantial seasonality due to its 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 (year ended December 2023).
History
The company was founded in 1992. It was incorporated as a Delaware limited partnership in 2011. The company was formerly known as Lehigh Gas Partners LP and changed its name to CrossAmerica Partners LP in 2014.