CrossAmerica Remains Focused on Increasing Company-Operated Site Count
ALLENTOWN, Pa. — Heading into its new fiscal year, CrossAmerica Partners LP remains focused on optimizing its portfolio to create long-term value for unitholders, President and CEO Charles Nifong said during the partnership's recent fourth quarter and full year 2023 earnings call.
As part of this strategy, CrossAmerica's efforts to convert certain controlled sites from existing classes of trade to company-operated retail or commission sites will come to fruition with the acquisition of 59 locations from Applegreen Midwest LLC and Applegreen Florida LLC.
The partnership entered into a purchase agreement on Jan. 26 to acquire certain assets from the Applegreen entities. The deal will terminate the existing lease agreements between the two companies at the 59 locations and transfer their operations, plus all inventory, to CrossAmerica.
The term length of the partnership's existing leases with Applegreen Midwest and Applegreen Florida can be extended to 2049 and 2048, respectively, including all renewal options.
Subject to customary closing conditions, the deals are expected to close during the first and second quarters of 2024. The transactions will result in the conversion of these 59 lessee dealer sites to company-operated sites.
Referring to the pending acquired sites as "solid assets," Nifong pointed out that the leasing relationship with Applegreen began before The Topper Group assumed control of CrossAmerica in 2019.
Speaking to unit count, Nifong reported that CrossAmerica is up 41 company-operated retail sites year over year, when comparing 2023 to 2022.
In addition to building upon its network of company-operated sites, CrossAmerica is committed to divesting noncore properties. For the full year ending Dec. 31, 2023, the partnership divested 10 properties for $9.2 million, resulting in a net gain of $6.5 million.
"We were less active with divestitures last year than what we would like and intend to make this an area of increased focus and effort for us in the coming year," Nifong said.
The Retail Front
Looking at its retail segment, CrossAmerica reported that gross profit increased 14% to $69 million during the fourth quarter of 2023. This was driven by increases in motor fuel (11%) and merchandise gross profit (18%).
Same-store merchandise sales, excluding cigarettes, increased 5% for Q4 2023 vs. Q4 2022. Merchandise gross profit increased from 27.5% in Q4 2022 to 28.2% in Q4 2023 due to improved merchandise margins in the packaged beverages and deli categories, Nifong pointed out.
CrossAmerica's retail segment sold 124.5 million fuel gallons during the fourth quarter of 2023, which was relatively flat when compared to the fourth quarter of 2022. Same-store retail segment fuel volume for Q4 2023 declined 3%, dropping from 118.4 million gallons in Q4 2022 to 114.6 million gallons.
[Read more: CrossAmerica Sees Lift in Fuel Volume From Integration of Community Service Stations]
For the 12 months ended Dec. 31, 2023, when compared to full year 2022, CrossAmerica reported:
- The retail segment generated a 3% increase in gross profit.
- Operating expenses increased $19.1 million due to the increase in company-operated stores.
- The retail segment sold 506.5 million fuel gallons — an increase of 2%.
- Same-store fuel volume was 457.2 million gallons.
- Merchandise gross profit increased $16.9 million, or 19%.
- Same-store merchandise sales, excluding cigarettes, increased 8%.
Other Financial Results
CrossAmerica's wholesale segment gross profit increased 1% to $33 million for the fourth quarter of 2023 compared to $32.8 million the fourth quarter of 2022. For the full year, gross profit declined 1% from $130.7 million in 2022 to $128.8 million.
Volume was relatively flat for full year 2023 vs. full year 2022 due to the volume generated by the acquisition of assets from Community Service Stations Inc. offset by the net loss of independent dealer contracts and the conversion of certain lessee dealer sites to company-operated and commission sites.
CrossAmerica reported net income of $16.7 million for the fourth quarter of 2023 compared to $17.1 million for the fourth quarter of 2022. For full year 2023, net income declined to $42.6 million from $63.7 million in 2022.
Adjusted EBITDA was $47.6 million for the fourth quarter, which was an 8% increase vs. the fourth quarter of 2022. Full-year 2023 adjusted EBITDA was $165.8 million compared to $179.8 million a year ago.
"We finished the year with the best fourth quarter in our history. Our financial results for the fourth quarter, and year overall, reflect the ongoing success of our business strategy," Nifong concluded. "We continue to execute well across all of our business operations, which is reflected in our excellent financial results for the past year and our strong balance sheet at yearend. The partnership is well positioned to continue this success into 2024 and beyond."
Allentown-based CrossAmerica Partners is a wholesale distributor of motor fuels, convenience store operator, and owner and lessee of real estate used in the retail distribution of motor fuels. Its general partner, CrossAmerica GP LLC, is indirectly owned and controlled by entities affiliated with Joseph V. Topper, Jr., the founder of CrossAmerica Partners and a member of the board of the general partner since 2012.
Formed in 2012, CrossAmerica Partners LP is a distributor of branded and unbranded petroleum for motor vehicles in the United States. It distributes fuel to approximately 1,700 locations and owns or leases approximately 1,100 sites. Its geographic footprint covers 34 states.