CrossAmerica Thirsty for Acquisitions

ALLENTOWN, Pa. — Now that its $48.5-million acquisition of 31 Holiday Stationstores in Wisconsin and Minnesota from SSG Corp. was completed on March 31, CrossAmerica Partners LP is looking for more deals, President Jeremy Bergeron stated Friday during the master limited partnership's (MLP) 2016 fiscal first-quarter earnings call.

“There are ample third-party acquisitions available,” he said. “The acquisition market is still strong. We will continue to look at opportunities.”

Bergeron added that he “likes” the current acquisition environment, but did not divulge details regarding what regions the MLP will look in, or if it prefers large or small purchases. Based on recent history, CrossAmerica has primarily focused on the upper Midwest, factoring in its February 2015 acquisition of 64 convenience stores in Minnesota, Michigan, Wisconsin and South Dakota from Erickson Oil Products.

Results from the acquired Erickson stores were included for its 2016 first quarter, ended March 31, but the SSG stores were not. CrossAmerica's retail division achieved adjusted EBITDA of $1.8 million for the quarter, vs. $4.8 million a year ago. CrossAmerica cited lower retail fuel margins and the continued dealerization of company-operated stores as reasons for the $3-million EBITDA decline.

During the first quarter, CrossAmerica converted 52 of its company-operated locations to lessee accounts, which Bergeron explained yields a more stable income stream for the company's unitholders.

Further detailing its margins, CrossAmerica’s retail division reported a motor fuel gross margin of 6.3 cents per gallon (net of commission and credit credit card fees), compared to 10.2 cents per gallon in its 2015 first quarter. The MLP sold 40.2 million gallons of fuel for a profit of $2.5 million in the latest quarter, vs. 46.3 million gallons and a net profit of $4.7 million during the same period in 2015.

In-store merchandise sales also suffered a decline of $800,000 year over year to $7.7 million. The company again cited dealerization of company-operated stores to explain the decline. 

On a per-store, per-day basis at its 97 company-operated stores for the period ended March 31, CrossAmerica sold 2,413 gallons of fuel, a decline of 251 gallons per site, per day. However, merchandise sales were a strong point, increasing $371 per site, per day to $3,141.

Companywide, CrossAmerica posted operating income of $5.9 million for its most recent quarter, compared to a $400,000 loss in the same period in 2015. EBITDA came in $18.2 million, a 66-percent rise compared to the $11 million it achieved in the first three months of 2015.

"In the first quarter, we continued to execute on our acquisition and integration strategy, resulting in a 71-percent increase to distributable cash flow for our unitholders, compared to the first quarter of 2015," concluded Bergeron. "These efforts, and the strength of our base business, position us well to benefit from the seasonally stronger periods of the spring and summer driving season."

CrossAmerica Partners LP is a wholesale distributor of motor fuels and operator of convenience stores. Its general partner, CrossAmerica GP LLC, is a wholly owned subsidiary of CST Brands Inc. 

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