10q10k10q10k.net

What changed in ARKO Corp.'s 10-K — 2022 vs 2023

vs

Paragraph-level year-over-year comparison of ARKO Corp.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+371 added−406 removedSource: 10-K (2024-02-27) vs 10-K (2023-02-28)

Top changes in ARKO Corp.'s 2023 10-K

371 paragraphs added · 406 removed · 294 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

65 edited+27 added−31 removed25 unchanged
Biggest changeGPMP Segment The GPMP segment engages in the wholesale distribution of fuel. Our subsidiary, GPM Petroleum LP, which we refer to as GPMP, sells and supplies fuel to substantially all of our retail and wholesale sites on a fixed margin per gallon basis and charges a fixed fee to the fleet fueling sites.
Biggest changeGPM Petroleum LP (“GPMP”) sells fuel at GPMP’s cost of fuel (including taxes and transportation) plus a fixed margin and charges a fixed fee primarily to sites in the fleet fueling segment which are not supplied by GPMP. We own 100% of the general partner of GPMP and, as of December 31, 2023, 99.8% of the GPMP limited partner units.
Competition We operate in a highly competitive retail convenience market, which includes businesses with operations and services that are similar to those that we provide, primarily the sale of convenience items and motor fuels. We face significant competition from other large chain operators, such as: 7-Eleven/Speedway; Circle K; Casey’s; Murphy USA; Quik Trip; Royal Farms; Sheetz; and Wawa.
Competition We operate in the highly competitive retail convenience market, which includes businesses with operations and services that are similar to those that we provide, primarily the sale of convenience items and motor fuels. We face significant competition from other large chain operators, such as: 7-Eleven/Speedway; Circle K; Casey’s; Murphy USA; Quik Trip; Royal Farms; Sheetz; and Wawa.
Foodservice Opportunity. Our current foodservice offering, which varies by store, primarily consists of hot and fresh grab-n-go foods, deli, fried chicken, bakery, pizza, roller grill items and other prepared foods. We have historically relied upon a limited number of franchised quick service restaurants and in-store delis to drive customer traffic.
Our current foodservice offering, which varies by store, primarily consists of hot and fresh grab-n-go foods, deli, fried chicken, bakery, pizza, roller grill items and other prepared foods. We have historically relied upon a limited number of franchised quick service restaurants and in-store delis to drive customer traffic.
The liability for fraudulent credit card transactions shifted from the credit card processor to us in October 2015 for transactions processed inside the convenience stores and shifted to us in April 2021 for transactions at the fuel dispensers. 5 Our operations are subject to federal and state laws governing such matters as minimum wage, overtime, working conditions and employment eligibility requirements.
The liability for fraudulent credit card transactions shifted from the credit card processor to us in October 2015 for transactions processed inside the convenience stores and shifted to us in April 2021 for transactions at the fuel dispensers. Our operations are subject to federal and state laws governing such matters as minimum wage, overtime, working conditions and employment eligibility requirements.
In particular, dollar stores (such as Family Dollar and Dollar General) and pharmacies (such as CVS and Walgreens) have expanded their product offerings to sell snacks, beer and wine and other products that have traditionally been sold by convenience stores, while grocery and large warehouse stores (such as Costco and Wal-Mart) have expanded their fuel offering adjacent to their stores.
In particular, dollar stores (such as Family Dollar and Dollar General) and 4 pharmacies (such as CVS and Walgreens) have expanded their product offerings to sell snacks, beer and wine and other products that have traditionally been sold by convenience stores, while grocery and large warehouse stores (such as Costco and Wal-Mart) have expanded their fuel offering adjacent to their stores.
The sales price to the independent dealer is determined according to the terms of the relevant agreement with the independent dealer, which typically reflects our total fuel costs plus the cost of transportation and a margin, with us generally retaining any prompt pay discounts and rebates, largely eliminating our exposure to commodity price movements.
The sales price to the dealer is determined according to the terms of the relevant agreement with the dealer, which typically reflects our total fuel costs plus the cost of transportation and a margin, with us generally retaining any prompt pay discounts and rebates, largely eliminating our exposure to commodity price movements.
By researching and understanding hiring trends, we have adopted mobile technology to simplify the application process and we have invested in additional recruiting resources and implemented virtual recruiting and interviewing methods. We have also deployed enhanced recruiting techniques to optimize the selection of our talent pool.
By researching and understanding hiring trends, we have adopted mobile technology to simplify the application process and we have invested in additional recruiting 6 resources and implemented virtual recruiting and interviewing methods. We have also deployed enhanced recruiting techniques to optimize the selection of our talent pool.
In our wholesale and GPMP segments, we are also subject to the Petroleum Marketing Practices Act, which is a federal law that applies to the relationships between fuel suppliers and wholesale distributors, as well as between wholesale distributors and independent dealers, regarding the marketing of branded fuel.
In our wholesale and GPMP segments, we are also subject to the Petroleum Marketing Practices Act, which is a federal law that applies to the relationships between fuel suppliers and wholesale distributors, as well as between wholesale distributors and dealers, regarding the marketing of branded fuel.
In arrangements of this type, we own the fuel until the date of sale to the final customer (the consumer) and the gross profit created from the sale of the fuel is allocated between us and the independent dealer based on the terms of the relevant agreement with the independent dealer.
In arrangements of this type, we own the fuel until the date of sale to the final customer (the consumer), and the gross profit created from the sale of the fuel is allocated between us and the dealer based on the terms of the relevant agreement with the dealer.
We routinely post on our website important information, including press releases, investor presentations and financial information, which may be accessed by clicking 7 on the News & Events, Company Info, and Governance sections of www.arkocorp.com.
We routinely post on our website important information, including press releases, investor presentations and financial information, which may be accessed by clicking on the News & Events, Company Info, and Governance sections of www.arkocorp.com.
As a “super-jobber” wholesaler, we believe we are better positioned to gain and renew supply contracts from independent dealers in addition to retail convenience store and wholesale fuel portfolios, and we incentivize our wholesale sales staff based on renewals.
As a “super-jobber” wholesaler, we believe we are better positioned to gain and renew supply contracts from dealers in addition to convenience store and wholesale fuel portfolios, and we incentivize our wholesale sales staff based on renewals.
We believe that the primary barriers into entry in our industry are the significant financial strength required to enter into agreements with suppliers of fuel products and competition from other fuel companies and retail chains. Environmental and Other Government Regulations Our operations are subject to numerous legal and regulatory restrictions and requirements at the federal, state and local levels.
We believe that the primary barriers to entering our industry are the significant financial strength required to enter into agreements with suppliers of fuel products and competition from other fuel companies and retail chains. Environmental and Other Government Regulations Our operations are subject to numerous legal and regulatory restrictions and requirements at the federal, state and local levels.
Proposals have emerged at local, state and federal levels to increase minimum wage rates. We are subject to local, state and federal laws and regulations that address our properties and operations, including, without limitation the transportation, storage and sale of fuel, which have a considerable impact on our operations, including compliance with the requirements and regulations of the U.S.
Proposals have emerged at local, state and federal levels to increase minimum wage rates. 5 With respect to environmental regulations, we are subject to local, state and federal laws and regulations that address our properties and operations, including, without limitation the transportation, storage and sale of fuel, which have a considerable impact on our operations, including compliance with the requirements and regulations of the U.S.
As of December 31, 2022, we operated our stores under more than 20 regional store brands that have been in existence for an average of approximately 50 years, which we consider “a Family of Community Brands.” We leverage their long-term community involvement, highly recognizable brands and customer loyalty in their respective markets.
As of December 31, 2023, we operated our stores under more than 25 regional store brands that have been in existence for an average of approximately 50 years, which we consider “a Family of Community Brands.” We leverage their long-term community involvement, highly recognizable brands and customer loyalty in their respective markets.
ITEM 1. BUSINESS Overview Based in Richmond, VA, ARKO Corp. is a leading independent convenience store operator and, as of December 31, 2022, we were the sixth largest convenience store chain in the United States (“U.S.”) ranked by store count, operating 1,404 retail convenience stores.
ITEM 1. BUSINESS Overview Based in Richmond, VA, ARKO Corp. is a leading independent convenience store operator and, as of December 31, 2023, we were the sixth largest convenience store chain in the United States (“U.S.”) ranked by store count, operating 1,543 retail convenience stores.
Cardlocks compete against retail gas stations, especially those with a significant number of diesel pumps, however, we believe that our cardlock footprint allows for easier access and more efficient fueling for commercial vehicles. Third-party site growth in the fleet fueling segment is driven by commercial customers outsourcing the provision of on-site fleet fueling.
Cardlocks compete against retail gas stations, especially those with a significant number of diesel pumps, however, we believe that our cardlock footprint allows for easier access and more efficient fueling for commercial vehicles than traditional retail fueling locations. Site growth in the fleet fueling segment is driven by commercial customers outsourcing the provision of on-site fleet fueling.
Suppliers We purchase merchandise inventory from two primary wholesale distributors, Core-Mark and Grocery Supply Company, as well as approximately 700 direct store delivery supplier distributors. We leverage our relationships to generate economies of scale across our store base. We purchase motor fuel primarily from large, integrated oil companies and independent refiners under supply agreements.
Suppliers In 2023, we purchased merchandise inventory from two primary wholesale distributors, Core-Mark and Grocery Supply Company, as well as approximately 850 direct store delivery supplier distributors. We leverage our relationships to generate economies of scale across our store base. We purchase motor fuel primarily from large, integrated oil companies and independent refiners under supply agreements.
In certain cases, gross profit is split based on a percentage and in others, we pay a fixed fee per gallon to the independent dealer. • Fuel supply contracts (“Cost Plus”) — 1,430 sites as of December 31, 2022 plus bulk and spot purchasers. In arrangements of this type, the independent dealer purchases the fuel from us.
In certain cases, gross profit is split based on a percentage and in others we pay a fixed fee per gallon to the dealer. • Fuel supply contracts (“Cost Plus”) — 1,537 sites as of December 31, 2023 plus bulk and spot purchasers. In arrangements of this type, the dealer purchases the fuel from us.
We believe that convenience stores managed by individual operators that offer branded or non-branded fuel are also significant competitors in the market. Often, operators of both chains and individual stores compete by selling unbranded fuel at lower retail prices relative to the market.
We believe that convenience stores managed by individual operators who offer branded or non-branded fuel are also significant competitors in the local markets in which we operate. Often, operators of both chains and individual stores compete by selling unbranded fuel at lower retail prices relative to the market.
Our current ESG report is available on our website at www.arkocorp.com. The information related to ESG on our website, including our ESG report, is not, and shall not be deemed to be, a part hereof or incorporated by reference into this or any of our other filings with the U.S. Securities and Exchange Commission (“SEC”).
Our Sustainability Report is available on our website at www.arkocorp.com. The information related to Environmental, Social and Governance on our website, including our Sustainability Report, is not, and shall not be deemed to be, a part hereof or incorporated by reference into this or any of our other filings with the U.S. Securities and Exchange Commission (“SEC”).
With respect to data held by us, including credit card information and data related to loyalty customers, we are subject to federal, state and local requirements related to the possession, use and disclosure of personally identifiable information, including mandated procedures to be followed in the event a data breach were to occur.
With respect to data collected by us or on our behalf, including credit card information and data related to loyalty customers, we are subject to federal, state and local requirements related to the possession, use and disclosure of personally identifiable information, including mandated procedures to be followed in the event a data breach were to occur.
While maintaining established diversified store brands, our stores derive significant value from the scale, corporate infrastructure and centralized marketing programs associated with our large network, including a common loyalty program network which is used as a platform for promotions and marketing initiatives throughout our convenience stores.
While maintaining established diversified store brands, our stores derive significant value from the scale, corporate infrastructure and centralized marketing programs associated with our large network, including a common operating platform and a loyalty program network that we use as a platform for promotions and marketing initiatives throughout our convenience stores.
From 2013 through 2022, we completed 22 acquisitions and our location count has grown from 320 sites in 2011 to 3,261 sites as of December 31, 2022.We believe that our acquired locations combined with our scalable infrastructure represent a strong platform for future growth within the highly fragmented convenience store industry through both strategic acquisitions and organic growth.
From 2013 through 2023, we completed 25 acquisitions, and our site count has grown from 320 sites in 2011 to 3,666 sites as of December 31, 2023.We believe that our acquired locations combined with our scalable infrastructure create a strong platform for future growth within the highly fragmented convenience store industry through both strategic acquisitions and organic growth.
We allocate a portion of our capital expenditure program to compliance with environmental laws and regulations and environmental remediation and such capital expenditures were approximately $1.4 million for the year ended December 31, 2022, and we anticipate expenditures of approximately $5.0 million for the year ending December 31, 2023.
We allocate a portion of our capital expenditure program to compliance with environmental laws and regulations and environmental remediation and such capital expenditures were approximately $4.8 million for the year ended December 31, 2023, and we anticipate expenditures of approximately $9.3 million for the year ending December 31, 2024.
We own, indirectly, 100% of GPM Investments, LLC, a Delaware limited liability company that was formed on June 12, 2002, which we refer to as GPM, and which is our operating entity. Our Business Segments Retail Segment Our primary business is the operation of convenience stores.
We own, indirectly, 100% of GPM Investments, LLC, a Delaware limited liability company that was formed on June 12, 2002, which we refer to as GPM, and which is our primary operating entity.
Additionally, in order to improve the performance of acquired stores, as part of the post-integration process, once our systems are integrated, we implement our store planograms and merchandise assortment in the newly acquired stores and expand category footages where necessary. Enhanced Marketing Initiatives.
Additionally, as part of our post-acquisition process following the integration of our systems, we implement our store planograms and merchandise assortment in newly acquired stores and expand category footages where necessary in order to improve the performance of acquired stores.
We sell branded fuel under the Valero ® , Marathon ® , BP ® , Exxon ® and Shell ® brand names, plus several other brands. In addition to driving customer traffic, we believe that our branded fuel strategy enables us to maintain a secure fuel supply.
We sell branded fuel under brand names including, among others, Valero ® , Marathon ® , BP ® , Exxon ® and Shell ® brand names. In addition to driving customer traffic, we believe that our branded fuel strategy enables us to maintain a secure fuel supply.
With approximately 70% of the convenience store market composed of chains with 50 or fewer locations as of December 2021, we believe that there is ample opportunity to continue to consolidate. We have traditionally acquired a majority of our stores in smaller towns with less concentration of national-chain convenience stores.
With approximately 69% of the convenience store market composed of chains with 50 or fewer locations as of December 2022, we believe that there is ample opportunity to continue to consolidate. We have traditionally acquired our stores in smaller towns that have lower concentrations of national-chain convenience stores.
Our high value fas REWARDS® loyalty program with approximately 1.3 million members is available in the majority of our stores and offers exclusive savings on merchandise and gas to our customers. We are also a leading wholesale distributor of motor fuel, and as of December 31, 2022, we supplied fuel to 1,674 independent dealer locations.
Our fas REWARDS® loyalty program with approximately 2.0 million enrolled members is available in the majority of our stores and offers exclusive savings on merchandise and gas to our enrolled members. We are also a leading wholesale distributor of motor fuel, and as of December 31, 2023, we supplied fuel to 1,825 dealer locations.
Environmental, Social and Governance As a leading operator of convenience stores and gas stations, we are focused on integrating Environmental, Social and Governance (“ESG”) principles that are aligned with our long-term business strategy. We issued our inaugural ESG report in 2022, which includes our baseline governance framework, environmental initiatives and social responsibility initiatives.
Environmental, Social and Governance As a leading operator of convenience stores and gas stations, we are focused on integrating Environmental, Social and Governance principles that are aligned with our long-term business strategy. Our second Sustainability Report issued in 2023 included a description of our baseline governance framework, environmental initiatives and social responsibility initiatives.
In addition, we purchase unbranded fuel from branded and unbranded fuel suppliers to supply 266 unbranded retail fueling locations and 183 cardlock locations. As of December 31, 2022, approximately 80% of our retail fuel locations sold branded fuel.
In addition, we purchase unbranded fuel from branded and unbranded fuel suppliers to supply 267 unbranded retail fueling locations and 298 cardlock locations. As of December 31, 2023, approximately 82% of our retail fuel locations sold branded fuel.
We make final sales to independent dealers (referred to as “lessee-dealers” if the dealers lease the station from us or “open-dealers” if they control the site), sub-wholesalers and bulk and spot purchasers on a fixed-fee basis.
We make final sales to dealers (referred to as a “lessee-dealer” if the dealer leases the station from us or an “open-dealer” if the dealer controls the site), sub-wholesalers and bulk and spot purchasers on a fixed-fee basis.
In the wholesale segment, we supply fuel to third parties both at sites owned or leased by the third party, sites that we own or have a long-term lease, as well as bulk and spot purchasers.
The wholesale business is also competitive. In the wholesale segment, we supply fuel to third-parties both at sites owned or leased by dealers, sites that we own or for which we have a long-term lease, and bulk and spot purchasers.
We also generate revenues from car washes at approximately 80 of our locations. 1 We operate our stores under more than 20 regional store brands (which we consider “a Family of Community Brands”), including 1-Stop, Admiral, Apple Market ® , BreadBox, ExpressStop ® , E-Z Mart ® , fas mart ® , fastmarket®, Handy Mart, Jetz, Jiffi Stop ® , Jiffy Stop, Li’l Cricket, Next Door Store ® , Pride, Roadrunner Markets, Rstore, Scotchman ® , shore stop ® , Town Star, Village Pantry ® and Young’s.
We operate our stores under more than 25 regional store brands (which we consider “a Family of Community Brands”), including 1-Stop, Admiral, Apple Market ® , BreadBox, Corner Mart, Dixie Mart, ExpressStop ® , E-Z Mart ® , fas mart ® , fastmarket®, Flash Market, Handy Mart, Jetz, Jiffi Stop ® , Jiffy Stop, Li’l Cricket, Market Express, Next Door Store ® , Pride, Roadrunner Markets, Rose Mart, Rstore, Scotchman ® , shore stop ® , Speedy’s, Town Star, Uncle’s, Village Pantry ® and Young’s.
Additionally, we use Twitter to distribute Company information, and you can follow us on our Twitter feed (@ARKOInvestors). We encourage investors, the media and other interested parties to review the information we post on our website and on Twitter, together with the information we file with the SEC and announce via press releases, conference calls and webcasts.
We encourage investors, the media and other interested parties to review the information we post on our website, together with the information we file with the SEC and announce via press releases, conference calls and webcasts.
We have developed, and continue to refine, additional training programs for store and district managers, focusing on leadership and other “soft skills.” We help identify clear career paths to retain current employees and attract new employees by encouraging them to grow with the Company through educational training programs, matching employees with their interests or identifying a career trajectory other employees have taken.
We help identify clear career paths to retain current employees and attract new employees by encouraging them to grow with the Company through educational training programs, matching employees with their interests or identifying a career trajectory other employees have taken.
We have several potential grants that we are pursuing. Our goal is to offer EV drivers the convenience and amenities they seek in a charging destination away from their homes, at areas where we identify the demand.
As of December 31, 2023, our total EV charging network consisted of 70 charging stations installed at 19 stores across 11 states. We have several potential grants that we are pursuing. Our goal is to offer EV drivers the convenience and amenities they seek in a charging destination away from their homes, at areas where we identify the demand.
We are well diversified geographically and, as of December 31, 2022, operated across 34 states and the District of Columbia in the Mid-Atlantic, Midwestern, Northeastern, Southeastern and Southwestern United States. We have achieved strong store growth over the last several years, primarily by implementing a highly successful acquisition strategy.
We are diversified geographically and, as of December 31, 2023, operated in the District of Columbia and in more than 30 states in the Mid-Atlantic, Midwestern, Northeastern, Southeastern and Southwestern U.S. We have achieved strong site count growth over the last decade, primarily by implementing a highly successful acquisition strategy.
The wholesale business is also competitive. Our wholesale segment competes with refiners that distribute their own products, as well as other independent third-party motor fuel distributors. Wholesale fuel distributors typically compete by offering shorter 4 contract commitments, lesser collateral requirements and larger incentives to enter into contracts.
For sites that we do not own or lease, in the renewal of contracts we compete with refiners that distribute their own products, as well as other independent third-party motor fuel distributors. Wholesale fuel distributors typically compete by offering shorter contract commitments, lesser collateral requirements and larger incentives to enter into contracts.
On July 22, 2022, we added fleet fueling to our business, which includes the operation of proprietary and third-party cardlock locations (unstaffed fueling locations), and issuance of proprietary fuel cards that provide customers access to a nationwide network of fueling sites. As of December 31, 2022, we operated 183 cardlock locations.
Additionally, we operate a fleet fueling business that included, as of December 31, 2023, the operation of 298 proprietary and third-party cardlock locations (unstaffed fueling locations) and issuance of proprietary fuel cards that provide customers access to a nationwide network of fueling sites.
The advantages and significant benefits of our regional store branding while being part of a leading convenience store operator include: • Each brand, with its own long-term community involvement, is highly recognizable to local customers; • Centralized merchandising, marketing and procurement programs; • Fuel price optimization and purchasing functions; • Comprehensive portfolio of fuel brands with strong consumer recognition through national advertising; • Common loyalty program under the name fas REWARDS ® ; • Centralized environmental management and environmental practices; and • Common IT and point-of-sale platforms.
Concurrently, our Family of Community Brands benefits significantly from being part of a leading convenience store operator given their access to: • Centralized merchandising, marketing and procurement programs; • Fuel price optimization and purchasing functions; • Common loyalty program under the name fas REWARDS ® ; • A comprehensive portfolio of fuel brands with strong consumer recognition through national advertising; • Common IT and point-of-sale platforms; and • Centralized environmental management and environmental practices.
We believe that continued scale advantage has enabled us to become a formidable industry player, enhanced our competitiveness, and positioned us as an acquirer of choice within the industry.
We believe that our business model provides us with strategic flexibility to acquire chains with retail, dealer and cardlock locations. We believe that our scale has enabled us to become a formidable industry player, enhanced our competitiveness, and positioned us as an acquirer of choice within the industry.
II, a Delaware corporation, and ARKO Holdings Ltd., a company organized under the laws of the State of Israel, which we refer to as Arko Holdings. Our shares of common stock, $0.0001 par value per share (“common stock”), and publicly-traded warrants are listed on the Nasdaq Stock Market under the symbols “ARKO” and “ARKOW,” respectively.
Our shares of common stock, $0.0001 par value per share (“common stock”), and publicly-traded warrants are listed on the Nasdaq Stock Market under the symbols “ARKO” and “ARKOW,” respectively.
For the year ended December 31, 2022, the wholesale segment sold 902.6 million gallons of fuel, generating revenues of approximately $3.3 billion.
For the year ended December 31, 2023, the wholesale segment sold 969.3 million gallons of fuel (approximately 43.2% of our total gallons sold in 2023), generating revenues of approximately $3.1 billion.
We believe that we have an expansive, embedded opportunity to enhance our existing store base through several organic growth initiatives, including full and functional remodels, raze-and-rebuild and new-to-industry (“NTI”) opportunities. In 2022, we fully remodeled six stores and we commenced the planning and engineering phase of an NTI store in Atlanta, Texas with expected construction completion in 2024.
We believe that we have an expansive, embedded opportunity to enhance our existing store base through several organic growth initiatives, including full and functional remodels, raze-and-rebuild and new-to-industry opportunities.
The impact from the COVID-19 pandemic on employment trends and the prevailing wage rates in the markets in which we operate, including voluntary increases in wages because of current labor market conditions, have increased our costs associated with recruiting and retaining qualified personnel, and may continue to do so in the future.
Wage rates in the markets in which we operate, including voluntary increases in wages because of current labor market conditions, have increased our costs associated with recruiting and retaining qualified personnel, and may continue to do so in the future. We look to promote employee retention by providing attractive employee benefits such as medical, dental, 401(k) retirement plan and insurance.
Commercial companies using the Quarles fleet cards have gradually shifted from the proprietary fleet card useable only at Quarles-branded locations to the “Universal” fleet card which is a cobranded with Voyager (U.S. Bank) and which can be used at multiple fleet fueling sites. This is a long-term industry trend and we expect this to continue in the upcoming year.
Fleet fueling complements our retail and wholesale segments, from which we believe we can grow and expand our fleet fueling segment. Commercial companies using the Quarles fleet cards have gradually shifted from the proprietary fleet card useable only at Quarles-branded locations to the “Universal” fleet card which is a cobranded with Voyager (U.S.
We have developed training centers for new employees at certain of our regional offices. Our experienced store managers and our corporate trainers conduct the training of store managers from 6 acquired sites in a classroom setting pre- and post-acquisition, as well as on-the-job training.
Our experienced store managers and our regional trainers conduct the training of store managers from acquired sites in a classroom setting pre- and post-acquisition, as well as on-the-job training that extends several weeks once the acquisition is complete.
Additionally, our stores offer a number of traditional convenience store services that generate additional income, including lottery, prepaid products, gift cards, money orders, ATMs, gaming, and other ancillary product and service offerings.
We supplement our foodservice offering with approximately 150 quick service major national brand restaurants. Additionally, we provide a number of traditional convenience store services that generate additional income, including lottery, prepaid products, gift cards, money orders, ATMs, gaming, and other ancillary product and service offerings. We also generate revenues from car washes at approximately 95 of our locations.
We distribute fuel sourced from a number of major oil company suppliers which allows us to approach a wide variety of branded and unbranded independent dealers in order offer a variety of alternative supply arrangements.
In order to mitigate this competition, we typically offer our dealers competitive pricing within the framework of our existing fuel supply agreements, such as those we have with Valero, BP, Shell, Motiva, Marathon and ExxonMobil, with the advantage that we distribute fuel sourced from a number of major oil company suppliers which allows us to approach a wide variety of branded and unbranded dealers in order to offer a variety of alternative supply arrangements.
In addition, the retail segment sold a total of more than 1.0 billion gallons of branded and unbranded fuel to its retail customers.
In addition, the retail segment sold a total of more than 1.1 billion gallons of branded and unbranded fuel to our retail customers. Wholesale Segment The wholesale segment supplies fuel to dealers, sub-wholesalers and bulk and spot purchasers, on either a consignment or cost plus basis.
As such, we derive a significant portion of our revenue from the retail sale of fuel and the products offered in our stores, resulting in our retail stores generating a large proportion of our profitability.
Our Business Segments Retail Segment Our primary business is the operation of convenience stores, and we generate a significant portion of our revenue from the retail sale of products and the fuel at our stores. Consequently, our retail stores generate a large proportion of our profitability.
Human Capital As of December 31, 2022, we employed 12,223 employees, with 10,934 employed in our stores and 1,289 in corporate and field management positions. As of December 31, 2022, none of our employees were represented by a labor union or have terms of employment that are subject to a collective bargaining agreement.
As of December 31, 2023, none of our employees were represented by a labor union or have terms of employment that are subject to a collective bargaining agreement. We consider our relationships with our employees to be good and have not experienced any work stoppages.
As an experienced acquirer, we have demonstrated the ability to generate strong returns on capital and meaningfully improve target performance post-integration through operating expertise and economies of scale. We believe that our unique business model provides us with strategic flexibility to acquire chains with retail, independent dealer and cardlock locations.
We have a dedicated in-house M&A team that focuses on identifying, closing and integrating acquisitions. As an experienced acquirer, we have demonstrated our ability to generate strong returns on capital and meaningfully improve target performance post-integration through operating expertise and economies of scale.
We feel that improving the skills of current staff through training increases productivity and boosts our bottom line at a fraction of the cost of hiring new employees. We offer training based on our employees’ specific job requirements and employee levels through the use of online training modules and on-the-job training conducted by store managers or our Regional Training team.
We value our employees and believe that communication, training, and employee development are key elements of our performance. We feel that improving the skills of our current staff through training increases productivity and boosts our bottom line at a fraction of the cost of hiring new employees.
We believe that we are well positioned because our third-party sites combine on-site cardlock fueling with the ability to utilize our proprietary cardlock sites and fleet card product sales. We accept the majority of fleet cards and retail card types at our cardlock sites, in addition to the Quarles fleet card offerings.
The primary competitors for third-party sites are companies that provide delivered fuels, with national, regional and local companies offering this service. We believe that we are well positioned in the industry because we combine the ability to utilize our proprietary cardlock sites with our fleet card product sales.
Our retail convenience stores offer a wide array of cold and hot foodservice, beverages, cigarettes and other tobacco products, candy, salty snacks, grocery, beer and general merchandise. Almost all stores sell fuel, and we are adding electric vehicle (“EV”) chargers to select sites.
We intentionally focus our marketing and merchandising initiatives at our retail stores to offer our customers an assortment of products with an attractive value proposition. Our retail store offering includes a wide array of cold and hot foodservice, beverages, cigarettes and other tobacco products, candy, salty snacks, grocery, beer and general merchandise.
We have foodservice offerings at approximately 1,150 company-operated stores. The foodservice category varies by store and includes hot and fresh grab-n-go foods, deli, fried chicken, bakery, pizza, roller grill items and other prepared foods. In addition, at our stores we operate over 120 branded quick service restaurants consisting of major national brands.
We have foodservice offerings at approximately 1,260 retail stores, which include hot and fresh grab-n-go foods, deli, fried chicken, bakery, pizza, roller grill items and other prepared foods.
We seek to promote employee retention by providing attractive employee benefits, raising wages where applicable and by granting sign-on, retention, referral and other bonus opportunities to our employees based on their respective roles.
We believe our benefits offerings are competitive in the markets in which we operate. We evaluate wages and other opportunities available to employees within our markets, and, as applicable, grant sign-on, retention, referral and other bonus opportunities to our employees based on their respective roles.
Our Regional Training team conducts the Company and industry-specific training to ensure store management is well-versed in the latest operating policies, standards and techniques. Trainings vary based on employee level, but generally focus on customer service, safety, environmental issues and regulations, as well as our operations and policies.
We continue to refine these training activities, add new training programs for store and district managers, and focus on leadership and other “soft skills.” Our Regional Training team conducts the Company and industry-specific training to ensure store management is well-versed in the latest operating policies, standards, and techniques.
We believe that our focus on secondary and tertiary markets allows us to preserve “local” brand name recognition and align local market needs with capital investment. Corporate Information ARKO Corp. was incorporated under the laws of Delaware on August 26, 2020 for the purpose of facilitating the business combination of Haymaker Acquisition Corp.
Approximately 45% of our retail stores are in cities with populations of fewer than 20,000 people, and approximately 24% of our retail stores are in cities with populations between 20,000 and 50,000 people. We believe that our focus on secondary and tertiary markets allows us to preserve “local” brand name recognition and align local market needs with capital investment.
We have 18 new Sbarro, the Original New York Pizza, locations and are currently working on additional new food offerings of this kind. For the year ended December 31, 2022, the retail segment generated total revenues of approximately $5.6 billion, including approximately $1.7 billion of in-store sales and other revenues.
For the year ended December 31, 2023, the retail segment generated total revenues of approximately $5.8 billion, including approximately $1.9 billion of in-store sales and other revenues. Gross profit dollars from in-store merchandise accounted for 53.4% of our gross profit dollars from our retail segment for the year ended December 31, 2023.
The annual turnover rate of our store employees was approximately 213% in 2022. We seek to recruit and retain qualified personnel to work in our stores.
Employees may also communicate anonymous feedback to the Company, which assists our efforts to improve processes and programs for future and existing employees. We seek to recruit and retain qualified personnel to work in our stores.
On December 6, 2022, we announced our agreement to acquire one of the largest fleet fueling operations in West Texas, which includes 57 proprietary fleet fueling cardlock sites and 52 private cardlock sites. 2 As of December 31, 2022, we operated 183 cardlock locations and for the year ended December 31, 2022, the fleet fueling segment (which commenced its business on July 22, 2022) sold 60.0 million gallons of fuel, generating revenues of approximately $272.8 million in its approximately five months of operation.
The lack of on-site labor required to run these sites also generally offers us compelling economics. As of December 31, 2023, we operated 298 cardlock locations, and, for the year ended December 31, 2023, the fleet fueling segment sold 140.8 million gallons of fuel, generating revenues of approximately $538.8 million.
The fleet fueling segment also includes commissions earned from the sale of fuel using proprietary fuel cards that provide customers access to a nationwide network of fueling sites. The fleet fueling business is a complementary business to our retail and wholesale segments, from which we believe we can grow and expand the Company’s fleet fueling platform.
The fleet fueling segment includes the operation of proprietary and third-party cardlock locations (unstaffed fueling locations) with sales to commercial and municipal entities, and issuance of proprietary fuel cards that provide 2 customers access to a nationwide network of fueling sites.
Removed
Approximately 40% of all our retail stores are in cities with populations of fewer than 20,000 people. Additionally, approximately 20% of all our retail stores are in cities with populations between 20,000 and 50,000 people.
Added
Corporate Information ARKO Corp. was incorporated under the laws of Delaware on August 26, 2020 for the purpose of facilitating the business combination of Haymaker Acquisition Corp. II, a Delaware corporation, and ARKO Holdings Ltd., a company organized under the laws of the State of Israel.
Removed
Our acquired brands have been in existence for an average of approximately 50 years.
Added
In 2024, we launched an extensive new pizza program that offers private label pizza, at an attractive value of $4.99 for enrolled loyalty members, which is currently offered at more than 1,000 stores as take-and-bake from the freezer, and 1 currently available at approximately 225 of those stores also as fresh and hot pizza either whole or by the slice.
Removed
Wholesale Segment The wholesale segment supplies fuel to independent dealers, sub-wholesalers and bulk and spot purchasers, on either a cost plus or consignment basis, as described below. • Consignment contracts — 244 sites as of December 31, 2022.
Added
Almost all stores sell fuel, and we had 70 electric vehicle (“EV”) chargers at 19 stores as of December 31, 2023.
Removed
Fleet Fueling Segment The fleet fueling segment was added to the Company’s business on July 22, 2022 upon the closing of our acquisition from Quarles Petroleum, Incorporated (“Quarles”) of 121 proprietary Quarles-branded cardlock sites and 63 third-party cardlock sites for fleet fueling.
Added
Our acquired brands have been in existence for an average of approximately 50 years, and their names are highly recognizable to local customers. By maintaining the regional store branding of our acquired stores, we believe we retain the goodwill associated with the respective brands’ long-term community involvement.
Removed
For the year ended December 31, 2022, 99.9% of the total fuel gallons distributed by GPMP were to GPM sites. GPM purchases substantially all of its fuel from GPMP and we own 100% of the general partner of GPMP and, as of December 31, 2022, 99.8% of the GPMP limited partner units.
Added
The wholesale segment adds significant fuel volumes to the Company’s robust retail fuel sales, which we believe enhances our purchasing power for our entire platform, including our retail segment, and improves our competitiveness as an acquirer of choice. • Consignment contracts — 288 sites as of December 31, 2023.
Removed
Growth Strategy We believe that we have a significant opportunity to increase our sales and profitability by continuing to execute our operating strategy, growing our store base in existing and contiguous markets through acquisitions, and enhancing the performance of current stores.
Added
Fleet Fueling Segment We added our fleet fueling segment as part of our acquisition of certain assets from Quarles Petroleum, Incorporated (“Quarles”) in July 2022 that included 184 cardlock locations, and we added an additional 111 cardlock locations in our 2023 acquisition of the GASCARD fleet fueling operations of WTG Fuels Holdings, LLC (the “WTG Acquisition”), one of the largest fleet fueling operations in West Texas.
Removed
With our achievement of significant size and scale, we believe that our organic growth strategy, including implementing company-wide marketing and merchandising initiatives, will add significant value to our assets. We believe that this complementary strategy will help further enhance our growth and results of operations.
Added
Bank) and which can be used at more than 230,000 fleet fueling sites. Diesel fuel accounts for approximately 82% of our fleet fueling sales, and, as opposed to retail volumes, commercial volumes have been less impacted by retail fuel consumption trends. Within our fleet fueling segment, we generally achieve fuel margins that are higher than those in our wholesale segment.
Removed
We expect to use a portion of the cash available to us to fund our growth strategy. Specific elements of our growth strategy include the following: Pursue Acquisitions in Existing and Contiguous Markets.

… 43 more changes not shown on this page.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

86 edited+8 added−43 removed112 unchanged
Biggest changeWe cannot assure you that the market price of our common stock will not fluctuate widely or decline significantly in the future in response to a number of factors, including, among others, the following: • the realization of any of the risk factors presented in this Annual Report on Form 10-K; • actual or anticipated differences in our estimates, or in the estimates of analysts, for our revenues, results of operations, level of indebtedness, liquidity or financial condition; • additions and departures of key personnel; • failure to comply with the requirements of Nasdaq; • failure to comply with the Sarbanes-Oxley Act or other laws or regulations; • future issuances, sales or resales, or anticipated issuances, sales or resales, of our common stock; • publication of research reports about us, our sites or the convenience store industry generally; • the performance and market valuations of other similar companies; • broad disruptions in the financial markets, including sudden disruptions in the credit markets; • speculation in the press or investment community or trends caused by internet forums; • actual, potential or perceived control, accounting or reporting problems; and 21 • changes in accounting principles, policies and guidelines.
Biggest changeWe cannot assure you that the market price of our common stock will not fluctuate widely or decline significantly in the future in response to a number of factors, including, among others: the realization of any of the risk factors presented in this Annual Report on Form 10-K; actual or anticipated differences in our estimates, or in the estimates of securities analysts, or the expectations of stockholders, or changes by securities analysts in their estimates of our future earnings; failure of our operating results to meet our published guidance; the 18 performance and market valuations of other similar companies; and broad disruptions in the financial markets, including sudden disruptions in the credit markets.
In certain instances, these factors have led to certain delays and increased costs for our projects and although we believe we are successfully navigating these challenges, there can be no assurance that we will be able to achieve our growth targets by successfully implementing this strategy.
In certain instances, these factors have led to delays and increased costs for our projects and although we believe we are successfully navigating these challenges, there can be no assurance that we will be able to achieve our growth targets by successfully implementing this strategy.
In addition, successful cyberattacks, data breaches, or data security incidents, at one of our vendors, other convenience store operators, large retailers or other market participants, whether or not we are directly impacted, could lead to a general loss of customer confidence or affect our supply chain which could negatively affect us, including harming the market perception of the effectiveness of our security measures or harming the reputation of the industry in general, which could result in reduced use of our products and services.
In addition, successful cyberattacks, data breaches, or data security incidents, at one of our vendors, other convenience store operators, large retailers or other market participants, whether or not we are directly impacted, could lead to a general loss of customer confidence or affect our supply chain which could negatively affect us, including harming the market 14 perception of the effectiveness of our security measures or harming the reputation of the industry in general, which could result in reduced use of our products and services.
Our failure to comply with applicable environmental laws and regulations, or a significant contamination at one of our sites requiring remediation of contaminated soil and groundwater on a large scale, could expose us to substantial fines and penalties, as well as administrative, civil and criminal charges, all of which could have a material adverse effect on our business, reputation, financial condition and results of operations.
Our failure to comply with applicable environmental laws and regulations, or a significant contamination at one of our sites requiring remediation of contaminated soil and groundwater on a large scale, could expose us to substantial fines and 12 penalties, as well as administrative, civil and criminal charges, all of which could have a material adverse effect on our business, reputation, financial condition and results of operations.
As such, we are subject to, or affected 16 by, a number of federal, state, and local laws and regulations, as well as contractual obligations and industry standards, that impose certain obligations and restrictions with respect to data privacy and security, and govern our collection, storage, retention, protection, use, processing, transmission, sharing and disclosure of personal and other information including that of our employees, customers, and others.
As such, we are subject to, or affected by, a number of federal, state, and local laws and regulations, as well as contractual obligations and industry standards, that impose certain obligations and restrictions with respect to data privacy and security, and govern our collection, storage, retention, protection, use, processing, transmission, sharing and disclosure of personal and other information including that of our employees, customers, and others.
Expenditures to fulfill these obligations may relate to facilities and sites where past operations followed practices and procedures that were considered acceptable at the time but may require investigative or remedial work or both to meet current or future standards. Most of our fuel is transported by third-party carriers to our retail, independent dealer and fleet fueling sites.
Expenditures to fulfill these obligations may relate to facilities and sites where past operations followed practices and procedures that were considered acceptable at the time but may require investigative or remedial work or both to meet current or future standards. Most of our fuel is transported by third-party carriers to our retail, dealer and fleet fueling sites.
If any of our principal suppliers elects not to renew its contracts with us, we may be unable to replace the volume of motor fuel we currently purchase from such supplier on similar terms or at all. We rely upon our suppliers to timely provide the volumes and types of motor fuels for which they contract.
If any of our principal suppliers elects not to renew its contracts with us, we may be unable to replace the volume of motor fuel we currently purchase from such supplier on similar terms or at all. We rely upon our suppliers to timely provide the volumes and 10 types of motor fuels for which they contract.
This volatility makes it extremely difficult to predict the impact future wholesale cost fluctuations will have on our financial condition and results of operations. Increases in fuel prices generally compress retail fuel margin because fuel costs typically increase faster than retailers are able to pass them along to customers.
This volatility makes it extremely difficult to predict the impact future wholesale cost fluctuations will have on our financial condition and results of operations. Increases in fuel prices generally compress retail fuel margin because fuel costs typically increase faster than retailers are able to pass them along to 9 customers.
Any future declarations of dividends, as well as the amount and timing of such dividends, are subject to capital availability and the discretion of our board of directors, which must evaluate, among other things, whether cash dividends are in the best interest of our stockholders and are in compliance with all applicable laws and any agreements containing provisions that limit our ability to declare and pay cash dividends.
Any future declarations of dividends, as well as the amount and timing of such dividends, are subject to capital availability and the discretion of our Board, which must evaluate, among other things, whether cash dividends are in the best interest of our stockholders and are in compliance with all applicable laws and any agreements containing provisions that limit our ability to declare and pay cash dividends.
Our inability to successfully compete in the marketplace by continuously meeting customer requirements concerning price, quality and service level could have a material adverse effect on our business, financial condition and results of operations. 11 Negative events or developments associated with branded motor fuel suppliers could have a material adverse impact on our revenues.
Our inability to successfully compete in the marketplace by continuously meeting customer requirements concerning price, quality and service level could have a material adverse effect on our business, financial condition and results of operations. Negative events or developments associated with branded motor fuel suppliers could have a material adverse impact on our revenues.
Third parties may also oppose our trademark applications, or otherwise challenge our use of the trademarks. In the event that our trademarks are successfully challenged, we could be forced to rebrand our products or services, which could result in loss of brand recognition, and could require us to devote resources advertising and marketing new brands.
Third-parties may also oppose our trademark applications, or otherwise challenge our use of the 15 trademarks. In the event that our trademarks are successfully challenged, we could be forced to rebrand our products or services, which could result in loss of brand recognition, and could require us to devote resources advertising and marketing new brands.
It is possible that others will independently develop the same or similar technology or otherwise obtain access to our unpatented technology. We use access controls in an effort to prevent unauthorized use or disclosure of our trade secrets and proprietary or confidential information, however, we cannot assure you that these controls will 17 not be circumvented.
It is possible that others will independently develop the same or similar technology or otherwise obtain access to our unpatented technology. We use access controls in an effort to prevent unauthorized use or disclosure of our trade secrets and proprietary or confidential information, however, we cannot assure you that these controls will not be circumvented.
In addition, when prices for motor fuel rise, some of our independent dealers may have insufficient credit to purchase motor fuel from us at their historical volumes. Furthermore, when motor fuel prices decrease, so do prompt payment incentives, which are generally calculated as a percentage of the total purchase price of the motor fuel distributed.
In addition, when prices for motor fuel rise, some of our dealers may have insufficient credit to purchase motor fuel from us at their historical volumes. Furthermore, when motor fuel prices decrease, so do prompt payment incentives, which are generally calculated as a percentage of the total purchase price of the motor fuel distributed.
An event which adversely affects the value of those brands could have a negative impact on the volumes of motor fuel we distribute, which in turn could have a material adverse effect on our business, financial condition and results of operations. We depend on several principal suppliers for our gross fuel purchases and two principal suppliers for merchandise.
An event which adversely affects the value of those brands could have a negative impact on the volumes of motor fuel we distribute, which in turn could have a material adverse effect on our business, financial condition and results of operations. We depend on several principal suppliers for our fuel purchases and two principal suppliers for merchandise.
Numerous governmental authorities, such as the EPA, and analogous state agencies, have the power to monitor and enforce compliance with these laws and regulations and the permits, licenses and approvals issued under them, including fines, which can result in increased pollution control equipment costs or other actions.
Numerous governmental authorities, such as the DOT and EPA, and analogous state agencies, have the power to monitor and enforce compliance with these laws and regulations and the permits, licenses and approvals issued under them, including fines, which can result in increased pollution control equipment costs or other actions.
A failure by a principal supplier to renew its supply agreement, a disruption in supply or an unexpected change in supplier relationships could have a material adverse effect on our business. We depend on several principal suppliers for our gross fuel purchases. Our fuel supply agreements expire on various dates through June 2032.
A failure by a principal supplier to renew its supply agreement, a disruption in supply or an unexpected change in supplier relationships could have a material adverse effect on our business. We depend on several principal suppliers for our fuel purchases. Our fuel supply agreements expire on various dates through June 2032.
Although these costs may be significant to the results of operations, we do not presently 12 expect them to have a material adverse effect on our liquidity or financial position. Accidental leaks and spills requiring cleanup may occur in the ordinary course of business.
Although these costs may be significant to the results of operations, we do not presently expect them to have a material adverse effect on our liquidity or financial position. Accidental leaks and spills requiring cleanup may occur in the ordinary course of business.
A portion of our revenue is generated under fuel supply agreements with independent dealers that must be renegotiated or replaced periodically. If we are unable to successfully renegotiate or replace these agreements, then our results of operations and financial condition could be adversely affected. A portion of our revenue is generated under fuel supply agreements with independent dealers.
A portion of our revenue is generated under fuel supply agreements with dealers that must be renegotiated or replaced periodically. If we are unable to successfully renegotiate or replace these agreements, then our results of operations and financial condition could be adversely affected. A portion of our revenue is generated under fuel supply agreements with dealers.
Our future growth depends on our ability to successfully implement our organic growth strategies, a part of which consists of upgrading and remodeling our convenience stores. A part of our organic growth strategy consists of functional and full remodeling of our convenience stores in order to improve customers’ shopping experience by offering high-quality, convenient and efficient facilities.
Our future growth depends on our ability to successfully implement our growth strategies, a part of which consists of upgrading and remodeling our convenience stores. A part of our growth strategy consists of functional and full remodeling of our convenience stores in order to improve customers’ shopping experience by offering high-quality, convenient and efficient facilities.
Our dividend payments may change from time to time, and we may not continue to declare dividends in the future. A reduction in or elimination of our dividend payments could have a negative effect on our stock price. ITEM 1B. UNRESOLVE D STAFF COMMENTS. None. 22
Our dividend payments may change from time to time, and we may not continue to declare dividends in the future. A reduction in or elimination of our dividend payments could have a negative effect on our stock price. ITEM 1B. UNRESOLVE D STAFF COMMENTS. None.
Additionally, there is a trend toward cardless payment methods, which may require additional 15 investment to implement at our locations. As these trends develop, we will need to align our fleet card offering to the new technologies.
Additionally, there is a trend toward cardless payment methods, which may require additional investment to implement at our locations. As these trends develop, we will need to align our fleet card offering to the new technologies.
As described above, we are also subject to the PCI DSS, which is a standard designed to protect credit card account data as mandated by payment card industry entities. We rely on vendors to handle PCI DSS matters and to ensure PCI DSS compliance.
As described above, we are also subject to PCI DSS, which is a standard designed to protect credit card account data as mandated by payment card industry entities. We rely on vendors to handle PCI DSS matters and to ensure PCI DSS compliance.
If the Federal Forum Provision is found to be unenforceable, we may incur additional costs associated with resolving such matters. The Federal Forum Provision may also impose additional litigation costs on stockholders who assert that the provision is not enforceable 20 or invalid.
If the Federal Forum Provision is found to be unenforceable, we may incur additional costs associated with resolving such matters. The Federal Forum Provision may also impose additional litigation costs on stockholders who assert that the provision is not enforceable or invalid.
Significant increases in wholesale cigarette and other tobacco product prices, current and future tobacco legislation, including restrictions or bans on flavored tobacco products and related advertising, national, state and local campaigns to discourage smoking, a decrease in the consumption of cigarettes, lawsuits against manufacturers and retailers of cigarettes and other tobacco products, reductions in manufacturer rebates for the purchase of tobacco products and increases in, and new, taxes on cigarettes and other tobacco products could have a material adverse effect on the demand for tobacco products and, in turn, on our financial condition and results of operations.
Significant increases in wholesale cigarette and other tobacco product prices, current and future tobacco legislation, including restrictions or bans on flavored and menthol tobacco products and related advertising, national, state and local campaigns to discourage smoking, a decrease in the consumption of cigarettes, increases in retail cigarette prices, lawsuits against manufacturers and retailers of cigarettes and other tobacco products, reductions in manufacturer rebates for the purchase of tobacco products and increases in, and new, taxes on cigarettes and other tobacco products could have a material adverse effect on the demand for tobacco products and, in turn, on our financial condition and results of operations.
Certain environmental laws impose strict, joint and several liability for costs required to clean-up and restore sites where motor fuels or other waste products have been disposed or otherwise released.
Certain environmental laws impose strict, joint and several liability for costs required to clean-up and restore sites where motor fuels or other waste products have been disposed of or otherwise released.
A number of key macro-economic factors, such as rising interest rates, inflation and unemployment, could have a negative effect on consumer habits and spending, and lead to lower demand for fuel and other products sold at our convenience stores and gas stations. The U.S. economy has continued to experience inflationary pressures, which reduce consumer purchasing power.
A number of key macro-economic factors, such as high interest rates, inflation and unemployment, could have a negative effect on consumer habits and spending, and lead to lower demand for fuel and other products sold at our convenience stores and gas stations. The U.S. economy has continued to experience inflationary pressures, which reduce consumer purchasing power.
Any breach of our network or those of our vendors may result in damage to our reputation, the loss of valuable business data, the misappropriation of our valuable intellectual property or trade secret information, misappropriation of our consumers’ or employees’ personal information, key personnel being unable to perform duties or communicate throughout the organization, loss of retail sales, significant costs for data restoration and other adverse impacts on our business.
Any breach of our network or those of our vendors may result in damage to our reputation, the loss of valuable business data, the misappropriation of our valuable intellectual property or trade secret information, misappropriation of our customers’ or employees’ personal information, key personnel being unable to perform duties or communicate throughout the organization, loss of retail sales, significant costs for data restoration and other adverse impacts on our business.
Substantial changes or reforms in the current tax regime could result in increased tax expenses and potentially have a material adverse effect on our financial condition and results of operations. 14 We rely on a large number of store employees. If we do not effectively manage our workforce, our labor costs and results of operations could be adversely affected.
Additionally, substantial changes or reforms in the current tax regime could result in increased tax expenses and potentially have a material adverse effect on our financial condition and results of operations. We rely on a large number of store employees. If we do not effectively manage our workforce, our labor costs and results of operations could be adversely affected.
With approximately 11,000 store employees, our labor costs represent one of our largest store operating expenses, and our business is dependent on our ability to attract, train, and retain the appropriate mix of qualified employees. Most of our store employees are in entry-level or part-time positions, which have historically high turnover rates.
With approximately 12,000 store employees, our labor costs represent one of our largest store operating expenses and our business is dependent on our ability to attract, train, and retain the appropriate mix of qualified employees. Most of our store employees are in entry-level or part-time positions, which have historically high turnover rates.
In addition, numerous states already have, and are looking to expand, data protection and privacy legislation requiring companies like ours to consider solutions to meet differing needs and expectations of consumers. Similar laws have been proposed at the federal level, reflecting a trend toward more stringent privacy legislation in the United States.
In addition, numerous states already have, and are looking to expand, data protection and privacy legislation requiring companies like ours to consider solutions to meet differing needs and expectations of customers. Similar laws have been proposed at the federal level, reflecting a trend toward more stringent privacy legislation in the United States.
Our corporate structure includes Israeli subsidiaries that file tax returns in Israel. Israeli tax authorities may challenge positions taken by such subsidiaries with respect to its tax returns. To the extent such a challenge is sustained, this could increase our worldwide effective tax rate and adversely impact our financial position and results of operations.
Our corporate structure includes Israeli subsidiaries that file tax returns in Israel. Israeli tax authorities may challenge positions taken by such subsidiaries with respect to their tax returns. To the extent such a challenge is sustained, this could increase our worldwide effective tax rate and adversely impact our financial position and results of operations.
Such rules may be reasonable and appropriate in light of the sensitivity and volume of consumer information we hold, the size and complexity of our business, and the cost of available tools to improve security and reduce vulnerabilities, or may require compliance regardless of the compliance costs as compared to the potential security and privacy issues.
Such rules may be reasonable and appropriate in light of the sensitivity and volume of customer information we hold, the size and complexity of our business, and the cost of available tools to improve security and reduce vulnerabilities, or may require compliance regardless of the compliance costs as compared to the potential security and privacy issues.
Our ability to pay dividends in the future and their amount will depend upon, among other factors, our cash balances and potential future capital requirements, debt service requirements, earnings, financial condition, the general economic and regulatory climate, and other factors beyond our control that our board of directors may deem relevant.
Our ability to pay dividends in the future and their amount will depend upon, among other factors, our cash balances and potential future capital requirements, debt service requirements, earnings, financial condition, the general economic and regulatory climate, and other factors beyond our control that our Board may deem relevant.
Significant changes in current consumption of cigarettes and other tobacco products and related regulations and litigation could materially adversely affect our business. Cigarettes and other tobacco products, which accounted for approximately 8% of our total revenues for the year ended December 31, 2022, are a significant revenue source for us.
Significant changes in current consumption of cigarettes and other tobacco products and related regulations and litigation could materially adversely affect our business. Cigarettes and other tobacco products, which accounted for approximately 8% of our total revenues for the year ended December 31, 2023, are a significant revenue source for us.
The Delaware Forum Provision will not apply to any causes of action arising under the Securities Act or the Exchange Act.
The Delaware Forum Provision 17 will not apply to any causes of action arising under the Securities Act or the Exchange Act.
Any acquisition involves potential risks, including, among other things: • We may not be able to successfully integrate the businesses we acquire; • We may not be able to achieve the anticipated synergies and financial improvements from the acquired businesses; • We may not be able to retain key personnel from the acquired businesses; 8 • We may be unable to discover material liabilities of businesses that we acquire until after the completion of the relevant acquisition; • We rely on data from the businesses that we acquire and there may be real or perceived inaccuracies in this data; • Acquisitions may divert the attention of senior management from focusing on our day-to-day operations; • We may experience a decrease in liquidity resulting from our use of a significant portion of cash available for investment or borrowing capacity to finance acquisitions; • Substantial investments in financial controls, information systems, management resources and human resources may be required in order to support future growth; • We may have difficulties in obtaining the required approvals, permits, licenses and consents for the acquired sites or new lines of business; • We may have difficulties complying with regulatory requirements related to financial reporting; and • We may incur additional environmental liabilities and risk when acquiring transportation assets.
Any acquisition involves potential risks, including, among other things: • We may not be able to achieve the anticipated synergies and financial improvements from the acquired businesses; • We may not be able to retain key personnel from the acquired businesses; • We may be unable to discover material liabilities of businesses that we acquire until after the completion of the relevant acquisition; • We rely on data from the businesses that we acquire and there may be real or perceived inaccuracies in this data; • Acquisitions may divert the attention of management from focusing on our day-to-day operations; • We may experience a decrease in liquidity resulting from our use of a significant portion of cash available for investment or borrowing capacity to finance acquisitions; • Substantial investments in financial controls, information systems, management resources and human resources may be required in order to support future growth; • We may have difficulties in obtaining the required approvals, permits, licenses and consents for the acquired sites or new lines of business; • We may have difficulties complying with regulatory requirements related to financial reporting; and 8 • We may incur additional environmental liabilities and risk from the acquired assets.
Our failure to take any steps perceived by the FTC as appropriate or required to protect consumers’ personal information may result in claims by the FTC that we have engaged in unfair or deceptive acts or practices in violation of Section 5(a) of the FTC Act.
Our failure to take any steps perceived by the FTC as appropriate or required to protect customers’ personal information may result in claims by the FTC that we have engaged in unfair or deceptive acts or practices in violation of Section 5(a) of the FTC Act.
For example, certain of GPM’s and GPMP’s credit facilities and our Senior Notes restrict our ability to, among other things: • incur additional debt or issue guarantees; • incur or permit liens to exist on certain property; • pay dividends, redeem stock or make other distributions; • make certain investments, acquisitions or other restricted payments; • enter into certain types of transactions with affiliates; • agree to certain restrictions on the ability of restricted subsidiaries to make payments to us; • engage in certain asset sales; • modify or terminate certain material contracts; and • merge or dispose of all or substantially all of its assets.
For example, certain of our credit facilities and our Senior Notes restrict our ability to, among other things: incur additional debt or issue guarantees; incur or permit liens to exist on certain property; pay dividends, redeem stock or make other distributions; make certain investments, acquisitions or other restricted payments; enter into certain types of transactions with affiliates; agree to certain restrictions on the ability of restricted subsidiaries to make payments to us; engage in certain asset sales; modify or terminate certain material contracts; and merge or dispose of all or substantially all of certain entities’ assets.
The diversion of management’s attention and any delay or difficulty encountered in connection with the integration of the two companies’ operations could have an adverse effect on our business and results of operations. The success of our acquisitions will depend, in part, on our ability to realize the anticipated benefits from combining the acquired business with ours.
The diversion of management’s attention and any delay or difficulty encountered in connection with the integration of the two companies’ operations could have an adverse effect on our business and results of operations. The success of our acquisitions depends, in part, on our ability to realize the anticipated benefits from combining the acquired business with ours.
Such factors include fluctuations in motor fuel prices, an independent dealer’s ability to pay for or accept the contracted volumes and a competitive marketplace for the services offered by us.
Such factors include fluctuations in motor fuel prices, a dealer’s ability to pay for or accept the contracted volumes and a competitive marketplace for the services offered by us.
If we fail to comply with any of these rules or requirements, or if our data security systems are breached or compromised, we may be liable for losses incurred by card issuing banks or customers, subject to fines and higher transaction fees, lose our ability to accept credit or debit card payments from our customers, or process electronic fund transfers or facilitate other types of payments.
If we, or our third-party service providers, fail to comply with any of these rules or requirements, or if our, or our third-party service providers, data security systems are breached or compromised, we may be liable for losses incurred by card issuing banks or customers, subject to fines and higher transaction fees, lose our ability to accept credit or debit card payments from our customers, or process electronic fund transfers or facilitate other types of payments.
In addition, certain of the credit agreements governing GPM’s credit facilities contain covenants requiring GPM to maintain certain financial ratios. See “ Management’s Discussion and Analysis of Financial Condition and Results of Operations—Contractual Obligations and Indebtedness ” for additional information about GPM’s credit facilities and our Senior Notes.
In addition, certain of the credit agreements governing our credit facilities contain covenants requiring us to maintain certain financial ratios. See “ Management’s Discussion and Analysis of Financial Condition and Results of Operations—Contractual Obligations and Indebtedness ” for additional information about our credit facilities and our Senior Notes.
The operating and financial restrictions and covenants in GPM’s credit facilities and our 5.125% Senior Notes due 2029 (the “Senior 18 Notes”), and any future financing agreements, may restrict our ability to finance future operations or expand our business activities.
The operating and financial restrictions and covenants in our credit facilities and our 5.125% Senior Notes due 2029 (the “Senior Notes”), 16 and any future financing agreements, may restrict our ability to finance future operations or expand our business activities.
The success of our operations is dependent, in part, on the continuing favorable reputation, market value and name recognition associated with the motor fuel brands sold at our gas stations and cardlock locations and to independent dealers.
The success of our operations is dependent, in part, on the continuing favorable reputation, market value and name recognition associated with the motor fuel brands sold at our gas stations and to dealers.
Significant increases and volatility in wholesale fuel prices could result in substantial increases in the retail price of motor fuel products, lower fuel gross margin per gallon, lower demand for such products and lower sales to consumers and independent dealers.
Significant increases and volatility in wholesale fuel prices could result in substantial increases in the retail price of motor fuel products, lower fuel gross margin per gallon, lower demand for such products and lower sales to customers and dealers.
Our operations are subject to numerous federal, state and local laws and regulations, including regulations related to the sale of alcohol, cigarettes and other tobacco products, lottery/lotto products, other age-restricted products, operation of gaming machines, various food safety and product quality requirements, environmental laws and regulations, and various employment and tax laws.
Our operations are subject to numerous federal, state and local laws and regulations, including regulations related to the sale of alcohol, cigarettes and other tobacco products, lottery/lotto products, other age-restricted products, operation of gaming machines, various food safety and product quality requirements, environmental laws and regulations, and various employment laws, including requirements for various licenses and registrations.
As these supply agreements expire, they must be renegotiated or replaced. Our fuel supply agreements generally have an initial term of 10 years and, as of December 31, 2022, had a volume-weighted average remaining term of approximately 5.3 years. Our independent dealers have no obligation to renew their fuel supply agreements with us on similar terms or at all.
As these supply agreements expire, they must be renegotiated or replaced. Our fuel supply agreements generally have an initial term of 10 years and, as of December 31, 2023, had a volume-weighted average remaining term of approximately 5.1 years. Our dealers have no obligation to renew their fuel supply agreements with us on similar terms or at all.
We depend on third-party transportation providers for the transportation of most of our motor fuel. Thus, a change of providers or a significant change in our relationship with these providers could have a material adverse effect on our business. Most of the motor fuel we distribute is transported from terminals to gas stations and cardlock locations by third-party transportation providers.
Thus, a change of providers, a significant incident related to a provider, or a significant change in our relationship with these providers could have a material adverse effect on our business. Most of the motor fuel we distribute is transported from terminals to gas stations and cardlock locations by third-party transportation providers.
The impact from the COVID-19 pandemic on employment trends and the prevailing wage rates in the markets in which we operate, including voluntary increases in wages because of current labor market conditions, have increased our costs associated with recruiting and retaining qualified personnel, and may continue to do so in the future.
Current employment trends and the prevailing wage rates in the markets in which we operate, including voluntary increases in wages because of current labor market conditions, have increased our costs associated with recruiting and retaining qualified personnel, and may continue to do so in the future.
In February 2022, we announced that our board of directors authorized a regular dividend program under which we commenced payment of quarterly dividends on our common stock, subject to quarterly declarations by our board of directors.
In February 2022, we announced that our board of directors (the “Board”) authorized a regular dividend program under which we commenced payment of quarterly dividends on our common stock, subject to quarterly declarations in the sole discretion of our Board.
During the year ended December 31, 2022, fuel sales were approximately 81% of our total revenues and approximately 48% of our combined fuel, merchandise and other income margin. Generally, our retail fuel inventory on hand turns quickly in the ordinary course of our business.
During the year ended December 31, 2023, fuel sales were approximately 79% of our total revenues and approximately 46% of our combined fuel, merchandise and other income margin. Generally, our retail fuel inventory on hand turns quickly in the ordinary course of our business.
Sales of a substantial number of shares of our common stock in the public market could cause the price of our common stock to decline. As of December 31, 2022, we had approximately 120.1 million shares of common stock outstanding and warrants to purchase approximately 18.4 million shares of common stock.
Sales of a substantial number of shares of our common stock in the public market could cause the price of our common stock to decline. As of December 31, 2023, we had 116,171,208 shares of common stock outstanding and warrants to purchase approximately 18.4 million shares of common stock.
Any such required divestitures may be on economically unattractive terms, which could result in losses or otherwise reduce the overall economic value of certain acquisitions. If we are unable to make acquisitions, our future growth will be limited. In addition, if we complete any future acquisitions, our capitalization and results of operations may change significantly.
Any such required divestitures may be on economically unattractive terms, which could result in losses or otherwise reduce the overall economic value of certain acquisitions. If our acquisitions are not on economically acceptable terms, our future growth may be negatively impacted. In addition, if we complete any future acquisitions, our capitalization and results of operations may change significantly.
We accept a variety of credit cards and debit cards in our convenience stores and at our fuel dispensers and, accordingly, we are, and will continue to be, subject to significant and evolving regulations and compliance requirements, including obligations to implement enhanced authentication processes that could result in increased costs and liability (see “— We may be held liable for fraudulent credit card transactions on our fuel dispensers ”) and reduce the ease of use of certain payment methods.
We accept a variety of credit cards and debit cards in our convenience stores and at our fuel dispensers and, accordingly, we are, and will continue to be, subject to significant and evolving regulations and compliance requirements, including obligations to 13 implement enhanced authentication processes that could result in increased costs and liability and reduce the ease of use of certain payment methods.
Like most other companies, despite our current security measures and process controls, our information technology systems, and those of our third-party service providers, may be vulnerable to information security breaches, ransomware or extortion, mishandled data, acts of vandalism, computer viruses and interruption or loss of valuable business data.
Like most other companies, despite our current cybersecurity risk management framework (see “Cybersecurity” for additional detail) and process controls, our information technology systems, and those of our third-party service providers, may be vulnerable to information security breaches, ransomware or extortion, mishandled data, acts of vandalism, computer viruses and interruption or loss of valuable business data.
We rely on third parties to provide maintenance and support of our IT Systems, and a failure of any of these third parties to provide adequate and timely support could adversely affect the operation of our IT Systems.
We rely on third-parties to provide maintenance and support of our IT Systems, and to store our data (including customer data) and a failure of any of these third-parties to provide adequate and timely support, or compromise of these third-parties’ systems, could adversely affect the operation of our IT Systems.
You should carefully consider the risks described below, as well as other information contained in this report, including the consolidated financial statements and the notes thereto and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” The occurrence of any of the events discussed below could significantly and adversely affect our business, prospects, results of operations, financial condition, and cash flows.
You should carefully consider the risks described below, as well as other information contained in this Annual Report on Form 10-K, including the audited consolidated financial statements contained in Part II, Item 8 (the “Consolidated Financial 7 Statements”) and the notes thereto and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” The occurrence of any of the events discussed below could significantly and adversely affect our business, prospects, results of operations, financial condition, and cash flows.
We rely on multiple information technology systems and a number of third-party vendor platforms (collectively, “IT Systems”) in order to run and manage our daily operations, including for fuel pricing, loyalty programs, payroll, accounting, budgeting, reporting, and store operations. Such IT Systems allow us to manage various aspects of our business and to provide reliable analytical information to our management.
We rely on multiple information technology systems and a number of third-party vendor platforms (collectively, “IT Systems”) in order to run and manage our daily operations, including for fuel pricing, loyalty programs, payroll, accounting, budgeting, reporting, and store operations.
We do not believe that this will expose us to material chargeback liability. We are subject to payment-related risks that may result in higher operating costs or the inability to process payments, either of which could harm our brand, reputation, business, financial condition and results of operations.
We are subject to payment-related risks that may result in higher operating costs or the inability to process payments, either of which could harm our brand, reputation, business, financial condition and results of operations.
Our failure to comply with applicable labor and employment laws pertaining to, among others, minimum wage, mandated healthcare benefits or paid time-off benefits could result in increased regulatory scrutiny, monetary fines and substantial costs and expenses related to legal proceedings.
Such regulatory action or litigation could adversely affect our business, financial condition and results of operations. Our failure to comply with applicable labor and employment laws pertaining to, among others, minimum wage, mandated healthcare benefits or paid time-off benefits could result in increased regulatory scrutiny, monetary fines and substantial costs and expenses related to legal proceedings.
Finally, higher prices for motor fuel may reduce our access to trade credit or worsen the terms under which such credit is available to us, which could have a material adverse effect on our financial condition and results of operations.
Finally, higher prices for motor fuel may reduce our access to trade credit or worsen the terms under which such credit is available to us, which could have a material adverse effect on our financial condition and results of operations. Significant changes in demand for fuel-based modes of transportation and for trucking services could materially adversely affect our business.
As of December 31, 2022, approximately 38% of our debt bore interest at variable rates. Consequently, significant increases in market interest rates would create substantially higher debt service requirements, which could have a material adverse effect on our overall financial condition, including our ability to service our indebtedness.
As of December 31, 2023, approximately 46% of our debt bore interest at variable rates, which is based on CME Group’s forward-looking Secured Overnight Financing Rate (“SOFR”). Consequently, significant increases in market interest rates would create substantially higher debt service requirements, which could have a material adverse effect on our overall financial condition, including our ability to service our indebtedness.
Temporary or long-term disruptions to our supply chain in connection with unfavorable weather conditions could impact our network of suppliers and distributors, significantly impacting the quality, variety and pricing of merchandise sold at our sites. We may be held liable for fraudulent credit card transactions on our fuel dispensers.
Temporary or long-term disruptions to our supply chain in connection with unfavorable weather conditions could impact our network of suppliers and distributors, significantly impacting the quality, variety and pricing of merchandise sold at our sites.
In 2022, all electric vehicles accounted for approximately 5.8% of all light vehicle sales in the United States.
In 2023, electric vehicles accounted for approximately 7.6% of all light vehicle sales in the United States.
Our ability to meet our changing labor needs while controlling our costs is subject to external factors outside of our control such as labor laws and regulations, unemployment levels, prevailing wage rates, benefit costs, changing demographics, and our reputation and relevance within the labor market.
Our ability to meet our changing labor needs while controlling our costs is subject to external factors outside of our control such as labor laws and mandatory requirements at the local, state and federal levels (such as minimum wages, paid leave time, and other social benefits), unemployment levels, prevailing wage rates, benefit costs, changing demographics, and our reputation and relevance within the labor market.
We are also subject to the compliance requirements of Section 404(b) of the Sarbanes-Oxley Act, which has resulted in us incurring substantial expenses and expending significant management efforts to comply with the Sarbanes-Oxley Act, which we will continue.
We are also subject to the compliance requirements of Section 404(b) of the Sarbanes-Oxley Act, which has resulted in us incurring substantial expenses and expending significant management efforts to comply with the Sarbanes-Oxley Act, which will continue. We cannot assure you that we will at all times in the future be able to report that our internal controls are effective.
The future operation, success and growth of our business depends on streamlined processes made available through our uninhibited access to information systems, global communications, internet activity and other network processes.
Such IT Systems allow us to manage various aspects of our business, communicate with customers, and to provide reliable analytical information to our management. The future operation, success and growth of our business depends on streamlined processes made available through our uninhibited access to information systems, global communications, internet activity and other network processes.
The state of the current labor market could impact our ability to recruit and retain qualified personnel. Additionally, we are dependent on our senior management to operate our business. The loss of any of our executive officers or other key senior management personnel could harm our business. Unfavorable weather conditions could adversely affect our business.
Additionally, we are dependent on certain key employees to operate our business and the loss of any of our executive officers or other key employees could harm our business. Unfavorable weather conditions could adversely affect our business.
Accordingly, those owners, if voting in the same manner, will be able to control the election and removal of our directors and thereby determine corporate and management policies, including potential mergers or acquisitions, payment of dividends, asset sales, amendment of the certificate of incorporation and bylaws and other significant corporate transactions for so long as they retain significant ownership.
Accordingly, this limited number of stockholders can have a material impact in the election and removal of our directors and thereby determine corporate and management policies, including potential mergers or acquisitions, payment of dividends, asset sales, amendment of the certificate of incorporation and bylaws and other significant corporate transactions for so long as they retain significant ownership.
Federal Reserve Board significantly increased the federal funds rate in 2022 and has indicated that further rate increases may be announced in the short-term to combat rising inflation in the United States, which has increased the borrowing costs on our variable rate debt and may increase the cost of any new debt we incur.
Federal Reserve Board significantly increased the federal funds rate in 2022 and 2023, which has increased the borrowing costs on our variable rate debt and may increase the cost of any new debt we incur.
We cannot assure you that we will at all times in the future be able to report that our internal controls are effective. Material weaknesses in the design and operation of the internal control over financial reporting of businesses that we acquire could have a material adverse effect on our business and operating results.
Material weaknesses in the design and operation of the internal control over financial reporting of businesses that we acquire could have a material adverse effect on our business and operating results.
Failure to comply with applicable laws and regulations could result in liabilities, penalties, costs, or license suspension or revocation that could have a material adverse effect on our business.
For more information on potential risks arising from environmental and occupational safety and health laws and regulations, please see “ Business—Environmental and Other Government Regulations .” Failure to comply with applicable laws and regulations could result in liabilities, penalties, costs, or license suspension or revocation that could have a material adverse effect on our business.
If we do not make acquisitions on economically acceptable terms, our future growth may be limited. Furthermore, any acquisitions we complete are subject to substantial risks that could result in losses. Our ability to grow depends substantially on our ability to make acquisitions. We intend to expand our retail business, independent dealer distribution network and fleet fueling network through acquisitions.
If our acquisitions are not on economically acceptable terms, our future growth may be negatively impacted. Furthermore, any acquisitions we complete are subject to substantial risks that could result in losses. Our ability to grow depends, in part, on our ability to make acquisitions.
If we are unable to attract and retain qualified personnel to work in our stores, our operations, customer service levels, reputation, and competitiveness could suffer and our results of operations could be adversely affected. The loss of key senior management personnel or the failure to recruit or retain qualified personnel could materially adversely affect our business.
If we are unable to attract and retain qualified personnel to work in our stores, do not provide proper training, or provide clear succession planning, our operations, customer service levels, reputation, and competitiveness could suffer and our results of operations could be adversely affected.
Such providers may suspend, reduce or terminate their obligations to us if certain events (such as force majeure) occur. A change of key transportation providers, a disruption or cessation in services provided by such providers or a significant change in our relationship with such providers could have a material adverse effect on our business, financial condition and results of operations.
A change of key transportation providers, a disruption or cessation in services provided by such providers, a significant accident or other incident involving a transportation provider, or a significant change in our relationship with such providers could have a material adverse effect on our business, financial condition and results of operations.
Such regulatory action could adversely affect our business, financial condition and results of operations. To the extent we are not able to provide such information because owners of our stock do not provide the necessary documentation to comply, we may have those licenses suspended or revoked.
To the extent we are not able to provide information that is required under such regulations because owners of our stock do not provide the necessary documentation to comply or fail to comply with such regulations, we may have those licenses suspended or revoked.
The transportation of motor fuels, as well as the associated storage of such fuels at locations including convenience stores, are subject to various federal, state and local environmental laws and regulations, including those relating to ownership and operation of storage tanks, the release or discharge of regulated materials into the air, water and soil, the generation, storage, handling, use, transportation and disposal of hazardous materials, the exposure of persons to regulated materials, and the health and safety of employees dedicated to such transportation and storage activities.
These hazards and risks include, but are not limited to, fires, explosions, traffic accidents, spills, discharges and other releases, and cross-drops, any of which could result in distribution difficulties and disruptions, environmental pollution, governmentally-imposed fines or clean-up obligations, personal injury or wrongful death claims and other damage to our properties and the properties of others. 11 The transportation of motor fuels, as well as the associated storage of such fuels at locations including convenience stores, are subject to various federal, state and local environmental laws and regulations, including those relating to ownership and operation of storage tanks, the release or discharge of regulated materials into the air, water and soil, the generation, storage, handling, use, transportation and disposal of hazardous materials, the exposure of persons to regulated materials, and the health and safety of employees dedicated to such transportation and storage activities.
We are subject to extensive tax liabilities imposed by multiple jurisdictions, including income taxes, fuel excise taxes, sales and use taxes, payroll taxes, franchise taxes, property taxes and tobacco taxes. Many of these tax liabilities are subject to periodic audits by the respective taxing authorities.
We are subject to extensive tax liabilities imposed by multiple jurisdictions that potentially have a material adverse effect on our financial condition and results of operations. We are subject to extensive tax liabilities imposed by multiple jurisdictions, including income taxes, fuel excise taxes, sales and use taxes, payroll taxes, franchise taxes, property taxes and tobacco taxes.
If the payment of our debt is accelerated, our assets may be insufficient to repay such debt in full, which could result in our insolvency. SOFR has a limited history, and the future performance of SOFR cannot be predicted based on historical performance.
If the payment of our debt is accelerated, our assets may be insufficient to repay such debt in full, which could result in our insolvency. Risks Related to Our Organizational Structure The majority of our common stock is held by a limited number of stockholders and management and their interests may conflict with yours in the future.
Europay, MasterCard and Visa, or EMV, is a global standard for credit cards that uses computer chips to authenticate and secure chip-card transactions.
Additionally, we pay interchange and other fees, which may increase over time. Europay, MasterCard and Visa, or EMV, is a global standard for credit cards that uses computer chips to authenticate and secure chip-card transactions. The liability for fraudulent credit card transactions shifted from the credit card processor to us in April 2021 for transactions at the fuel dispensers.

… 57 more changes not shown on this page.

Item 2. Properties

Properties — owned and leased real estate

2 edited+0 added−0 removed0 unchanged
Biggest changeITEM 2. PR OPERTIES. As of December 31, 2022, we owned 354 properties, including 260 company-operated sites, 47 consignment agent locations, 39 lessee-dealer sites and 8 cardlock locations. Additionally, we have long-term control over a leased property portfolio composed of 1,430 locations as of December 31, 2022.
Biggest changeITEM 2. PR OPERTIES. As of December 31, 2023, we owned 395 properties, including 267 retail stores, 51 consignment agent locations, 44 lessee-dealer sites and 33 cardlock locations. Additionally, we have long-term control over a leased property portfolio composed of 1,640 locations as of December 31, 2023.
Of the leased properties, 1,144 were company-operated stores, 82 were consignment agent locations, 91 were lessee-dealer sites and 113 were cardlock locations.
Of the leased properties, 1,276 were retail stores, 103 were consignment agent locations, 105 were lessee-dealer sites and 156 were cardlock locations.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

1 edited+0 added−0 removed0 unchanged
Biggest changeITEM 3. LEGAL PROCEEDINGS. As of the date of this Annual Report on Form 10-K, we were not party to any material legal proceedings other than those arising in the ordinary course of business. ITEM 4. MINE SAFE TY DISCLOSURES. Not applicable. 23 PART II
Biggest changeITEM 3. LEGAL PROCEEDINGS. As of the date of this Annual Report on Form 10-K, we were not party to any material legal proceedings that would require disclosure pursuant to Item 103 of Regulation S-K. ITEM 4. MINE SAFE TY DISCLOSURES. Not applicable. 20 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

4 edited+3 added−4 removed1 unchanged
Biggest changeInformation concerning the dividends called for by this item is incorporated herein by reference to Note 17, “Equity,” in the consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K. We repurchased no shares of common stock during the fourth quarter of the year ended December 31, 2022.
Biggest changeInformation concerning the dividends called for by this item is incorporated herein by reference to Note 17, “Equity,” in the Consolidated Financial Statements.
The following graph compares the performance of our common stock during the period beginning December 23, 2020 through December 31, 2022, assuming an investment of $100 on December 23, 2020, to that of the total return index for the S&P 500, the Russell 1000, the Russell 2000, the S&P Retail Select Industry Index and a Custom Peer Group.
Performance Graph The following graph compares the performance of our common stock during the period beginning December 23, 2020 through December 31, 2023, assuming an investment of $100 on December 23, 2020, to that of the total return index for the S&P 500, the Russell 2000 and the S&P Retail Select Industry Index.
As of February 24, 2023, there were approximately 19 holders of record of our common stock and 10 holders of record of our publicly-traded warrants to purchase one whole share of common stock at a price of $11.50 per share.
As of February 23, 2024, there were 17 holders of record of our common stock and eight holders of record of our publicly-traded warrants to purchase one whole share of common stock at a price of $11.50 per share.
In calculating total annual stockholder return, reinvestment of dividends, if any, is assumed. The indices are included for comparative purposes only.
In calculating total annual stockholder return, reinvestment of dividends, if any, is assumed. The indices are included for comparative purposes only. They do not necessarily reflect management’s opinion that such indices are an appropriate measure of the relative performance of our common stock.
Removed
Unregistered Sales of Equity Securities and Use of Proceeds All recent sales of unregistered securities were previously reported in a Current Report on Form 8-K or Quarterly Report on Form 10-Q. Performance Graph We are transitioning from the Russell 1000 index to the Russell 2000 index because our common stock is included in the Russell 2000 index.
Added
Purchases of Equity Securities by the Issuer and Affiliated Purchasers The following table presents our share repurchase activity for the quarter ended December 31, 2023 (dollars in thousands, except per share amounts): Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1) Maximum Dollar Value that May Yet Be Purchased Under the Plans or Programs (1) October 1, 2023 to October 31, 2023 452,916 $ 7.43 452,916 $ 34,104 November 1, 2023 to November 30, 2023 450,454 7.43 450,454 30,755 December 1, 2023 to December 31, 2023 227,242 7.74 227,242 28,995 Total 1,130,612 $ 7.49 1,130,612 $ 28,995 (1) All of the above repurchases were made on the open market at prevailing market rates plus related expenses under our stock repurchase program, which authorizes the repurchase of up to $100 million of our common stock.
Removed
We are also transitioning from a Custom Peer Group index to the S&P Retail Select Industry Index, an index in which our common stock is included, because we believe our business includes multiple components and a larger group of retail companies provides a better comparison than just the limited number of public companies in our industry.
Added
We publicly announced this program on February 23, 2022 and announced the increased amount authorized to be repurchased on May 16, 2023.
Removed
All of these indices are included in the following performance graph.
Added
The performance graph shall not be deemed incorporated by reference by any general statement incorporating by reference this Annual Report on Form 10-K into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent we specifically incorporate this information by reference, and shall not otherwise be deemed filed under such acts. 21 12/23/2020 12/31/2021 12/31/2022 12/31/2023 ARKO Corp. $ 100 $ 87.70 $ 87.47 $ 84.61 S&P 500 100 133.65 109.45 138.22 Russell 2000 100 124.75 99.26 116.06 S&P Retail Select Industry Index 100 153.59 104.87 127.46 22
Removed
They do not necessarily reflect management’s opinion that such indices are an appropriate measure of the relative performance of our common stock. 24 12/23/2020 12/31/2021 12/31/2022 ARKO Corp. $ 100 $ 87.70 $ 87.47 S&P 500 100 133.65 109.45 Russell 1000 100 131.80 106.59 Russell 2000 100 124.75 99.26 S&P Retail Select Industry Index 100 153.59 104.87 Peer Group 1 100 120.45 133.20 1 The Custom Peer Group consists of three industry competitors: Murphy USA, Inc., Alimentation Couche-Tard, Inc., and Casey’s General Stores, Inc. 25

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

128 edited+38 added−34 removed44 unchanged
Biggest changeFor the year ended December 31, 2022, total general, administrative, depreciation and amortization expenses were similar with those in the prior year. 35 For the year ended December 31, 2021 compared to the year ended December 31, 2020 For a discussion of the comparable results of operations for the years ended December 31, 2021 and 2020, refer to Part II, Item 7 “Management's Discussion and Analysis of Financial Condition and Results of Operations ” in our Annual Report on Form 10-K for the year ended December 31, 2021, filed with the SEC on February 25, 2022, under the subheading “GPMP Segment – For the year ended December 31, 2021 compared to the year ended December 31, 2020.” Use of Non-GAAP Measures We disclose certain measures on a “same store basis,” which is a non-GAAP measure.
Biggest changeFor the year ended December 31, 2023, total general, administrative, depreciation and amortization expenses increased slightly from those in the year ended December 31, 2022. Use of Non-GAAP Measures We disclose certain measures on a “same store basis,” which is a non-GAAP measure.
Future capital required to finance operations, acquisitions, and raze-and-rebuild, functionally and fully remodel and update stores is expected to come from cash on hand, cash generated by operations, availability under lines of credit, and additional long-term debt and equipment leases, as circumstances may dictate.
Future capital required to finance operations, acquisitions, and raze-and-rebuild, functionally remodel and fully remodel and update stores is expected to come from cash on hand, cash generated by operations, availability under lines of credit and additional long-term debt and equipment leases, as circumstances may dictate.
Repurchases may be effected from time to time through open market purchases, including pursuant to a pre-set trading plan meeting the requirements of Rule 10b5-1(c)of the Exchange Act, privately negotiated transactions, pursuant to accelerated share repurchase agreements entered into with one or more counterparties, or otherwise.
Repurchases may be effected from time to time through open market purchases, including 35 pursuant to a pre-set trading plan meeting the requirements of Rule 10b5-1(c) of the Exchange Act, privately negotiated transactions, pursuant to accelerated share repurchase agreements entered into with one or more counterparties, or otherwise.
Additionally, because of current labor market conditions and the prevailing wage rates in the markets in which we operate, we have voluntarily increased wages, which have increased our costs associated with recruiting and retaining qualified personnel, and may continue to do so in the future.
Additionally, because of current labor market conditions and the prevailing wage rates in the markets in which we operate, we have voluntarily increased wages, which has increased our costs associated with recruiting and retaining qualified personnel, and may continue to do so in the future.
The sales price to the independent dealer is determined according to the terms of the relevant agreement with the independent dealer, which typically reflects our total fuel costs plus the cost of transportation and a margin, with us generally retaining the prompt pay discounts and rebates.
The sales price to the dealer is determined according to the terms of the relevant agreement with the dealer, which typically reflects our total fuel costs plus the cost of transportation and a margin, with us generally retaining the prompt pay discounts and rebates.
(c) Eliminates the non-cash loss (gain) from the sale of property and equipment, the loss (gain) recognized upon the sale of related leased assets and impairment charges on property and equipment and right-of-use assets related to closed and non-performing sites.
(c) Eliminates the non-cash loss from the sale of property and equipment, the loss recognized upon the sale of related leased assets and impairment charges on property and equipment and right-of-use assets related to closed and non-performing sites.
We largely rely on internally generated cash flows and borrowings, which we believe are sufficient to meet our liquidity needs for the foreseeable future.
We largely rely on internally generated cash flows and borrowings for operations, which we believe are sufficient to meet our liquidity needs for the foreseeable future.
For cost plus arrangements, we sell fuel to independent dealers and bulk and spot purchasers on a fixed-fee basis.
For cost plus arrangements, we sell fuel to dealers and bulk and spot purchasers on a fixed-fee basis.
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 37 cause us to seek additional debt or equity financing in future periods.
As a normal part of our business, we will from time to time consider opportunities to repay, redeem, repurchase or refinance our indebtedness, depending on market conditions. 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.
Additionally, we provide a number of traditional convenience store services that generate additional income, including lottery, prepaid products, gift cards, money orders, ATMs, gaming, and other ancillary product and service offerings. We also generate revenues from car washes at approximately 80 of our locations.
Additionally, we provide a number of traditional convenience store services that generate income, including lottery, prepaid products, gift cards, money orders, ATMs, gaming, and other ancillary product and service offerings. We also generate revenues from car washes at approximately 95 of our locations.
Pursuant to the Eighth Amendment, the PNC Line of Credit bears interest, as elected by GPM at: (a) SOFR Adjusted plus Term SOFR (as defined in the agreement) plus a margin of 1.25% to 1.75% or (b) a rate per annum equal to the alternate base rate (as defined in the agreement) plus a margin of 0% to 0.50%.
The PNC Line of Credit bears interest, as elected by GPM at: (a) SOFR Adjusted plus Term SOFR (as defined in the PNC Credit Agreement) plus a margin of 1.25% to 1.75% or (b) a rate per annum equal to the alternate base rate (as defined in the PNC Credit Agreement) plus a margin of 0% to 0.50%.
Pursuant to the amendment, the Capital One Line of Credit generally bears interest, as elected by GPMP at: (a) Adjusted Term SOFR (as defined in the agreement) plus a margin of 2.25% to 3.25% or (b) a rate per annum equal to the alternate base rate (as defined in the agreement) plus a margin of 1.25% to 2.25%.
The Capital One Line of Credit bears interest, as elected by GPMP at: (a) Adjusted Term SOFR (as defined in the agreement) plus a margin of 2.25% to 3.25% or (b) a rate per annum equal to the alternate base rate (as defined in the agreement) plus a margin of 1.25% to 2.25%.
We believe that the presentation of EBITDA, Adjusted EBITDA and Adjusted EBITDA, net of incremental bonuses provides useful information to investors by allowing an understanding of key measures that we use internally for operational decision-making, budgeting, evaluating acquisition targets, and assessing our operating performance.
We believe that the presentation of EBITDA and Adjusted EBITDA provides useful information to investors by allowing an understanding of key measures that we use internally for operational decision-making, budgeting, evaluating acquisition targets, and assessing our operating performance.
GPMP Segment The table below shows the results of the GPMP segment for the years ended December 31, 2022, 2021 and 2020, together with certain key metrics for the segment.
GPMP Segment The table below shows the results of the GPMP segment for the years ended December 31, 2023, 2022 and 2021, together with certain key metrics for the segment.
The discount rate applied to the cash flow projections for the GPMP and the retail reporting units was approximately 9.0% and 10.5%, respectively. The impairment review was sensitive to changes in the key assumptions used. Our key assumptions included revenue and profit growth, capital expenditures, external industry data and past experiences.
The discount rate applied to the cash flow projections for the GPMP and the retail reporting units was approximately 9.0% and 11.0%, respectively. 39 The impairment review was sensitive to changes in the key assumptions used. Our key assumptions included revenue and profit growth, capital expenditures, external industry data and past experiences.
Overview Based in Richmond, VA, we are a leading independent convenience store operator and, as of December 31, 2022, we were the sixth largest convenience store chain in the United States (“U.S.”) ranked by store count, operating 1,404 retail convenience stores.
Overview Based in Richmond, VA, we are a leading independent convenience store operator and, as of December 31, 2023, we were the sixth largest convenience store chain in the United States (“U.S.”) ranked by store count, operating 1,543 retail convenience stores.
EBITDA, Adjusted EBITDA and Adjusted EBITDA, net of incremental bonuses are also used by many of our investors, securities analysts, and other interested parties in evaluating our operational and financial performance across reporting periods.
EBITDA and Adjusted EBITDA are also used by many of our investors, securities analysts, and other interested parties in evaluating our operational and financial performance across reporting periods.
Financing agreement with a syndicate of banks led by Capital One, National Association (“Capital One”) GPMP has a revolving credit facility with a syndicate of banks led by Capital One, National Association, in an aggregate principal amount of up to $500 million (as amended, the “Capital One Line of Credit”).
Financing Agreement with a Syndicate of Banks Led by Capital One, National Association (“Capital One”) GPMP has a revolving credit facility with a syndicate of banks led by Capital One, National Association, in an aggregate principal amount of up to $800 million (the “Capital One Line of Credit”).
At GPMP’s request, the Capital One Line of Credit can be increased up to $700 million, subject to obtaining additional financing commitments from current lenders or from other banks, and subject to certain terms as detailed in the Capital One Line of Credit.
At GPMP’s request, the Capital One Line of Credit can be increased up to $1.0 billion, subject to obtaining additional financing commitments from current lenders or from other banks, and subject to certain terms as detailed in the Capital One Line of Credit.
The calculation of the availability under the PNC Line of Credit is determined monthly subject to terms and limitations as set forth in the PNC Credit Agreement, taking into account the balances of receivables, inventory and letters of credit, among other things. As of December 31, 2022, $5.8 million of letters of credit were outstanding under the PNC Credit Agreement.
The calculation of the availability under the PNC Line of Credit is determined monthly subject to terms and limitations as set forth in the PNC Credit Agreement, taking into account the balances of receivables, inventory and letters of credit, among other things. As of December 31, 2023, $7.3 million of letters of credit were outstanding under the PNC Credit Agreement.
Investing Activities Cash flows used in investing activities primarily reflect capital expenditures for acquisitions and replacing and maintaining existing facilities and equipment used in the business. For the year ended December 31, 2022, cash used for investing activities increased by $3.7 million to $175.5 million from $171.8 million for the year ended December 31, 2021.
Investing Activities Cash flows used in investing activities primarily reflect capital expenditures for acquisitions and replacing and maintaining existing facilities and equipment used in the business. For the year ended December 31, 2023, cash used in investing activities increased by $121.3 million to $296.8 million from $175.5 million for the year ended December 31, 2022.
Please see Note 4 to our consolidated financial statements contained in this Annual Report on Form 10-K for additional information on the 2022 Acquisitions.
For additional information regarding the 2023 Acquisitions, please see Note 4 to the Consolidated Financial Statements contained in this Annual Report on Form 10-K.
For the year ended December 31, 2021 compared to the year ended December 31, 2020 For a discussion of the comparative results of operations for the years ended December 31, 2021 and 2020, refer to Part II, Item 7 “Management's Discussion and Analysis of Financial Condition and Results of Operations ” in our Annual Report on Form 31 10-K for the year ended December 31, 2021, filed with the SEC on February 25, 2022, under the subheading “Consolidated Results – For the year ended December 31, 2021 compared to the year ended December 31, 2020.” Segment Results Retail Segment The table below shows the results of the retail segment for the years ended December 31, 2022, 2021 and 2020, together with certain key metrics for the segment.
For the year ended December 31, 2022 compared to the year ended December 31, 2021 For a discussion of the comparative results of operations for the years ended December 31, 2022 and 2021, refer to Part II, Item 7 “Management's Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on February 28, 2023. 28 Segment Results Retail Segment The table below shows the results of the retail segment for the years ended December 31, 2023, 2022 and 2021, together with certain key metrics for the segment.
(3) Includes financial liabilities related to the 2022 Acquisitions and the 2021 acquisition of ExpressStop stores, assuming lease purchase option is not exercised. (4) Our fuel vendor agreements with suppliers require minimum volume purchase commitments of branded and unbranded gasoline and distillates annually.
(4) Includes financial liabilities related to the 2023 Acquisitions of TEG and WTG, the 2022 Acquisitions of Quarles and Pride and the 2021 acquisition of ExpressStop stores, assuming lease purchase option is not exercised. (5) Our fuel vendor agreements with suppliers require minimum volume purchase commitments of branded and unbranded gasoline and distillates annually.
For the 2022 annual impairment test, the data used for the income approach was directly linked to our internal projections for 2023 through 2027. The long-term growth rate used in the terminal year was 1.1% for the GPMP reporting unit, and was 2.2% for the 42 retail reporting unit, in accordance with the relevant weighted average long-term nominal growth rate.
For the 2023 annual impairment test, the data used for the income approach was directly linked to our internal projections for 2024 through 2028. The long-term growth rate used in the terminal year was (0.2)% for the GPMP reporting unit, and was 2.6% for the retail reporting unit, in accordance with the relevant weighted average long-term nominal growth rate.
The Senior Notes are guaranteed, on an unsecured senior basis, by certain of the Company's wholly owned domestic subsidiaries (the “Guarantors”).
Issued in October 2021, the Senior Notes are guaranteed, on an unsecured senior basis, by certain of the Company’s wholly owned domestic subsidiaries (the “Guarantors”).
As of December 31, 2022, we operated the stores under more than 20 regional store brands, including 1-Stop, Admiral, Apple Market®, BreadBox, ExpressStop, E-Z Mart®, fas mart®, fastmarket®, Handy Mart, Jetz, Jiffi Stop®, Jiffy Stop, Li’l Cricket, Next Door Store®, Pride, Roadrunner Markets, Rstore, Scotchman®, shore stop®, Town Star, Village Pantry® and Young’s.
As of December 31, 2023, we operated the stores under more than 25 regional store brands, including 1-Stop, Admiral, Apple Market®, BreadBox, Corner Mart, Dixie Mart, ExpressStop, E-Z Mart®, fas mart®, fastmarket®, Flash Market, Handy Mart, Jetz, Jiffi Stop®, Jiffy Stop, Li’l Cricket, Market Express, Next Door Store®, Pride, Roadrunner Markets, Rose Mart, Rstore, Scotchman®, shore stop®, Speedy’s, Town Star, Uncle’s, Village Pantry® and Young’s.
The increase in fuel revenue was attributable primarily to a significant increase in the average price of fuel compared to 2021, as well as incremental gallons sold related to the 2022 Acquisitions and the 2021 Acquisitions, which were partially offset by fewer gallons sold at same stores in 2022 compared to 2021.
The increase in fuel revenue was attributable primarily to incremental gallons sold related to the 2023 Acquisitions and the 2022 Acquisitions, which was partially offset by a decrease in the average price of fuel compared to 2022, and fewer gallons sold at same stores in 2023 compared to 2022.
These strategic acquisitions have had, and we expect will continue to have, a significant impact on our reported results and can make period to period comparisons of results difficult.
Our strategic acquisitions have had, and may continue to have, a significant impact on our reported results and can make period to period comparisons of results difficult.
Results of Operations for the years ended December 31, 2022, 2021 and 2020 The period-to-period comparisons of our results of operations contained in this Management’s Discussion and Analysis of Financial Condition and Results of Operation have been prepared using our audited consolidated annual financial statements and related notes included elsewhere in this Annual Report on Form 10-K.
Results of Operations for the years ended December 31, 2023, 2022 and 2021 The period-to-period comparisons of our results of operations contained in this Management’s Discussion and Analysis of Financial Condition and Results of Operation have been prepared using the Consolidated Financial Statements and the notes thereto, and the following discussion should be read in conjunction with such audited annual consolidated financial statements and related notes contained elsewhere in this Annual Report on Form 10-K.
Application of ASC 842, Leases (“ASC 842”) The lease liabilities and right-of-use assets are significantly impacted by the following: • Our determination of whether it is reasonably certain that an extension option will be exercised. • Our determination of whether it is reasonably certain a purchase option will be exercised. • Some of the lease agreements include an increase in the consumer price index coupled with a multiplier and a percentage increase cap effectively assures the cap will be reached each year.
We believe the following critical accounting estimates affect our more significant judgments and estimates used in the preparation of our consolidated financial statements. 38 Application of ASC 842, Leases (“ASC 842”) The lease liabilities and right-of-use assets are significantly impacted by the following: • Our determination of whether it is reasonably certain that an extension option will be exercised. • Our determination of whether it is reasonably certain a purchase option will be exercised. • Some of the lease agreements include an increase in the consumer price index coupled with a multiplier and a percentage increase cap effectively assures the cap will be reached each year.
Each of EBITDA, Adjusted EBITDA and Adjusted EBITDA, net of incremental bonuses is a non-GAAP financial measure. We use EBITDA, Adjusted EBITDA and Adjusted EBITDA, net of incremental bonuses for operational and financial decision-making and believe these measures are useful in evaluating our performance because they eliminate certain items that we do not consider indicators of our operating performance.
We use EBITDA and Adjusted EBITDA for operational and financial decision-making and believe these measures are useful in evaluating our performance because they eliminate certain items that we do not consider indicators of our operating performance.
Cash Flows for the Years Ended December 31, 2022, 2021 and 2020 Net cash provided by (used in) operating activities, investing activities and financing activities for the years ended December 31, 2022, 2021 and 2020 were as follows: For the Year Ended December 31, 2022 2021 2020 Net cash provided by (used in): (in thousands) Operating activities $ 209,256 $ 159,191 $ 173,842 Investing activities (175,488 ) (171,777 ) (407,551 ) Financing activities 10,555 (26,384 ) 491,048 Effect of exchange rates (97 ) (1,464 ) 2,875 Total $ 44,226 $ (40,434 ) $ 260,214 For the comparison of our cash flows for the years ended December 31, 2021 and 2020, refer to Part II, Item 7 “Management's Discussion and Analysis of Financial Condition and Results of Operations ” in our Annual Report on Form 10-K for the year ended December 31, 2021, filed with the SEC on February 25, 2022, under the subheading “Cash Flows for the Years Ended December 31, 2021, 2020 and 2019.” Operating Activities Cash flows provided by operations are our main source of liquidity.
Cash Flows for the Years Ended December 31, 2023, 2022 and 2021 Net cash provided by (used in) operating activities, investing activities and financing activities for the years ended December 31, 2023, 2022 and 2021 were as follows: For the Year Ended December 31, 2023 2022 2021 Net cash provided by (used in): (in thousands) Operating activities $ 136,094 $ 209,256 $ 159,191 Investing activities (296,822 ) (175,488 ) (171,777 ) Financing activities 85,357 10,555 (26,384 ) Effect of exchange rates 23 (97 ) (1,464 ) Total $ (75,348 ) $ 44,226 $ (40,434 ) For a discussion of the comparison of our cash flows for the years ended December 31, 2022 and 2021, refer to Part II, Item 7 “Management's Discussion and Analysis of Financial Condition and Results of Operations ” in our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on February 28, 2023, under the subheading “Cash Flows for the Years Ended December 31, 2022, 2021 and 2020.” Operating Activities Cash flows provided by operations are our main source of liquidity.
In November 2021, we completed our acquisition of 36 Handy Mart retail convenience stores, and, in May 2021, we completed our acquisition of 60 ExpressStop retail convenience stores (collectively, the “2021 Acquisitions”).
In May 2021, we completed our acquisition of 60 ExpressStop convenience stores, and, in November 2021, we completed our acquisition of 36 Handy Mart convenience stores.
For the Year Ended December 31, Fleet Fueling Segment 2022 Number of sites at beginning of period — Acquired sites 184 Closed, relocated or divested sites (1 ) Number of sites at end of period 183 In recent years, the convenience store industry has focused on increasing and improving in-store foodservice offerings, including fresh foods, quick service restaurants or proprietary food offerings.
For the Year Ended December 31, Fleet Fueling Segment 2023 2022 Number of sites at beginning of period 183 — Acquired sites 111 184 Newly opened or reopened sites 6 — Fleet fueling locations converted from fuel supply locations, net 1 — Closed, relocated or divested sites (3 ) (1 ) Number of sites at end of period 298 183 In recent years, the convenience store industry has focused on increasing and improving in-store foodservice offerings, including fresh foods, quick service restaurants and proprietary food offerings.
The future minimum volume purchase requirements under the existing supply agreements are based on gallons, with a purchase price at prevailing market rates for wholesale distribution. Credit Facilities and Senior Notes Senior Notes On October 21, 2021, the Company completed a private offering of $450 million aggregate principal amount of 5.125% Senior Notes due 2029 (the “Senior Notes”).
The future minimum volume purchase requirements under the existing supply agreements are based on gallons, with a purchase price at prevailing market rates for wholesale distribution. Credit Facilities and Senior Notes Senior Notes As of December 31, 2023, the Company had outstanding $450 million aggregate principal amount of its 5.125% Senior Notes due 2029 (the “Senior Notes”).
Operating income was $167.0 million for the year ended December 31, 2022, as compared to $142.1 million for the year ended December 31, 2021.
Operating income was $118.0 million for the year ended December 31, 2023, as compared to $167.0 million for the year ended December 31, 2022.
During the year ended December 31, 2022, we repurchased approximately 4.5 million shares of common stock under the repurchase program for approximately $39.0 million, or an average share price of $8.60. The share repurchase program does not have a stated expiration date.
During the year ended December 31, 2023, we repurchased approximately 4.2 million shares of common stock under the repurchase program for approximately $32.0 million, or an average share price of $7.54. The share repurchase program does not have a stated expiration date.
For the year ended December 31, 2022, cash flows provided by operating activities were $209.3 million compared to $159.2 million for the year ended December 31, 2021.
For the year ended December 31, 2023, cash flows provided by operating activities were $136.1 million compared to $209.3 million for the year ended December 31, 2022.
We expect to spend a total of approximately $14 million in 2023 to upgrade substantially all our fuel dispensers to be EMV-compliant. We do not expect such capital needs to adversely affect liquidity.
We expect to spend a total of approximately $12 million in 2024 to upgrade a portion of our remaining fuel dispensers to be EMV-compliant. We do not expect such capital needs to adversely affect liquidity.
Therefore, we cannot reasonably estimate the future impact at this time. Seasonality Our business is seasonal, and our operating income in the second and third quarters has historically been significantly greater than in the first and fourth quarters as a result of the generally improved climate and seasonal buying patterns of our customers.
Seasonality Our business is seasonal, and our operating income in the second and third quarters has historically been significantly greater than in the first and fourth quarters as a result of the generally improved climate and seasonal buying patterns of our customers.
There can be no assurance that we will continue to pay such dividends or the amounts of such dividends. In February 2022, we announced that our Board had authorized a share repurchase program for up to an aggregate of $50 million of our outstanding shares of common stock.
There can be no assurance that we will continue to pay such dividends or the amounts of such dividends. In May 2023, we announced that our Board authorized an increase to our share repurchase program from $50 million to up to an aggregate of $100.0 million of our outstanding shares of common stock.
For consignment arrangements, we retain ownership of the fuel inventory at the site, are responsible for the pricing of the fuel to the end consumer and share a portion of the gross profit earned from the sale of fuel by the consignment dealers.
Wholesale Segment Our wholesale segment supplies fuel to dealers, on either a consignment or cost plus basis. For consignment arrangements, we retain ownership of the fuel inventory at the site, are responsible for the pricing of the fuel to the end consumer and share a portion of the gross profit earned from the sale of fuel by the consignment dealers.
Our store count has grown from 320 sites in 2011 to 3,261 sites as of December 31, 2022, of which 1,404 were operated as retail convenience stores, 1,674 were locations at which we supplied fuel to independent dealers and 183 were cardlock locations.
Our store count has grown from 320 sites in 2011 to 3,666 sites as of December 31, 2023, of which 1,543 were operated as retail convenience stores, 1,825 were locations at which we supplied fuel to dealers and 298 were cardlock locations.
As of December 31, 2022, we had no outstanding borrowings under our $140.0 million PNC Line of Credit (as defined below), $0.9 million of unused availability under the M&T equipment line of credit, described below, and $241.0 million of unused availability under our $500.0 million Capital One Line of Credit (as defined below), which we can seek to increase up to $700.0 million, subject to obtaining additional financing commitments from current lenders or other banks, and subject to certain other terms.
As of December 31, 2023, we had no outstanding borrowings under our $140.0 million PNC Line of Credit (as defined below), $19.5 million of unused availability under the M&T equipment line of credit, described below, and $461.2 million of unused availability under our $800 million Capital One Line of Credit (as defined below), which we may elect to increase up to $1.0 billion, subject to obtaining additional financing commitments from current lenders or other banks, and subject to certain other terms.
Fleet Fueling Segment The Quarles Acquisition, which closed on July 22, 2022, added fleet fueling to our business, which includes the operation of proprietary and third-party cardlock locations (unstaffed fueling locations), and issuance of proprietary fuel cards that provide customers access to a nationwide network of fueling sites.
Fleet Fueling Segment Our fleet fueling segment includes the operation of proprietary and third-party cardlock locations (unstaffed fueling locations), and issuance of proprietary fuel cards that provide customers access to a nationwide network of fueling sites.
For the year ended December 31, 2022, depreciation and amortization expenses increased $4.6 million, or 4.7%, as compared to the year ended December 31, 2021 primarily due to assets acquired during 2022 and 2021, largely in connection with the 2022 Acquisitions and the 2021 Acquisitions.
For the year ended December 31, 2023, depreciation and amortization expenses increased $25.8 million, or 25.4%, as compared to the year ended December 31, 2022 primarily due to assets acquired in the past two years, largely in connection with the 2023 Acquisitions and the 2022 Acquisitions.
For the year ended December 31, 2022, income tax expense was $35.6 million compared to $11.6 million for the year ended December 31, 2021, and our effective tax rate for the years ended December 31, 2022 and 2021 was 33.1% and 16.3%, respectively.
For the year ended December 31, 2023, income tax expense was $12.2 million compared to $35.6 million for the year ended December 31, 2022, and our effective tax rate for the years ended December 31, 2023 and 2022 was 26.0% and 33.1%, respectively.
For the year ended December 31, 2022, store operating expenses increased $90.7 million, or 14.4%, as compared to 2021 due to incremental expenses as a result of the 2022 Acquisitions and the 2021 Acquisitions and an increase in expenses at same stores, including higher personnel costs and credit card fees.
For the year ended December 31, 2023, store operating expenses increased $139.0 million, or 19.3%, as compared to 2022 due to incremental expenses as a result of the 2023 Acquisitions, the 2022 Acquisitions and an increase in expenses at same stores, including higher personnel costs partially offset by lower credit card fees.
For the Year Ended December 31, 2022 2021 2020 Revenues: (in thousands) Fuel revenue – inter-segment $ 5,674,516 $ 4,384,227 $ 1,706,233 Fuel revenue – external customers 5,160 5,734 3,923 Other revenues, net 1,024 1,092 897 Other revenues, net – inter-segment 3,651 — — Total revenues 5,684,351 4,391,053 1,711,053 Operating expenses: Fuel costs 5,585,050 4,289,092 1,653,667 General and administrative expenses 2,897 2,970 2,977 Depreciation and amortization 7,369 7,372 7,373 Total operating expenses 5,595,316 4,299,434 1,664,017 Operating income $ 89,035 $ 91,619 $ 47,036 Fuel gallons sold – inter-segment 1,890,946 2,015,907 1,200,658 Fuel gallons sold – external customers 1,592 2,626 2,892 Fuel margin, cents per gallon 1 5.0 5.0 4.7 1 Calculated as fuel revenue less fuel costs divided by fuel gallons sold.
For the Year Ended December 31, 2023 2022 2021 Revenues: (in thousands) Fuel revenue – inter-segment $ 5,149,228 $ 5,674,516 $ 4,384,227 Fuel revenue – external customers 3,681 5,160 5,734 Other revenues, net 939 1,024 1,092 Other revenues, net – inter-segment 10,918 3,651 — Total revenues 5,164,766 5,684,351 4,391,053 Operating expenses: Fuel costs 5,052,391 5,585,050 4,289,092 General and administrative expenses 3,162 2,897 2,970 Depreciation and amortization 7,365 7,369 7,372 Total operating expenses 5,062,918 5,595,316 4,299,434 Other (income), net (598 ) — — Operating income $ 102,446 $ 89,035 $ 91,619 Fuel gallons sold – inter-segment 2,017,522 1,890,946 2,015,907 Fuel gallons sold – external customers 1,364 1,592 2,626 Fuel margin, cents per gallon 1 5.0 5.0 5.0 1 Calculated as fuel revenue less fuel costs divided by fuel gallons sold.
(i) Eliminates other unusual or non-recurring items that we do not consider to be meaningful in assessing operating performance. (j) Eliminates incremental bonuses based on 2020 performance. Liquidity and Capital Resources Our primary sources of liquidity are cash flows from operations, availability under our credit facilities and our cash balances.
(g) Eliminates non-recurring charges related to our internal entity realignment and streamlining. (h) Eliminates other unusual or non-recurring items that we do not consider to be meaningful in assessing operating performance. Liquidity and Capital Resources Our primary sources of liquidity are cash flows from operations, availability under our credit facilities and our cash balances.
For the year ended December 31, 2022, net income attributable to the Company was $71.7 million compared to $59.2 million for the year ended December 31, 2021. For the year ended December 31, 2022, Adjusted EBITDA was $301.1 million, as compared to $256.6 million for the year ended December 31, 2021.
For the year ended December 31, 2023, net income attributable to the Company was $34.4 million compared to $71.7 million for the year ended December 31, 2022. For the year ended December 31, 2023, Adjusted EBITDA was $290.4 million, as compared to $301.1 million for the year ended December 31, 2022.
For the Year Ended December 31, 2022 2021 2020 Revenues: (in thousands) Fuel revenue $ 3,887,549 $ 3,048,893 $ 1,940,303 Merchandise revenue 1,647,642 1,616,404 1,494,342 Other revenues, net 67,280 63,271 53,424 Total revenues 5,602,471 4,728,568 3,488,069 Operating expenses: Fuel costs 3,521,648 2,750,940 1,684,611 Merchandise costs 1,146,423 1,143,494 1,088,032 Store operating expenses 669,848 593,901 515,426 Total operating expenses 5,337,919 4,488,335 3,288,069 Operating income $ 264,552 $ 240,233 $ 200,000 Fuel gallons sold 1,006,469 1,038,561 937,095 Same store fuel gallons sold decrease (%) 1 (8.1 %) (1.3 %) (16.5 %) Fuel margin, cents per gallon 2 41.4 33.7 31.9 Same store merchandise sales (decrease) increase (%) 1 (1.0 %) 1.6 % 3.5 % Same store merchandise sales excluding cigarettes increase (%) 1 2.6 % 4.8 % 4.6 % Merchandise contribution 3 $ 501,219 $ 472,910 $ 406,310 Merchandise margin 4 30.4 % 29.3 % 27.2 % 1 Same store is a common metric used in the convenience store industry.
For the Year Ended December 31, 2023 2022 2021 Revenues: (in thousands) Fuel revenue $ 3,858,777 $ 3,887,549 $ 3,048,893 Merchandise revenue 1,838,001 1,647,642 1,616,404 Other revenues, net 74,406 67,280 63,271 Total revenues 5,771,184 5,602,471 4,728,568 Operating expenses: Fuel costs 3,479,531 3,521,648 2,750,940 Merchandise costs 1,252,879 1,146,423 1,143,494 Store operating expenses 779,448 669,848 593,901 Total operating expenses 5,511,858 5,337,919 4,488,335 Operating income $ 259,326 $ 264,552 $ 240,233 Fuel gallons sold 1,122,321 1,006,469 1,038,561 Same store fuel gallons sold decrease (%) 1 (5.3 %) (8.1 %) (1.3 %) Fuel margin, cents per gallon 2 38.8 41.4 33.7 Same store merchandise sales increase (decrease) (%) 1 0.4 % (1.0 %) 1.6 % Same store merchandise sales excluding cigarettes increase (%) 1 2.5 % 2.6 % 4.8 % Merchandise contribution 3 $ 585,122 $ 501,219 $ 472,910 Merchandise margin 4 31.8 % 30.4 % 29.3 % 1 Same store is a common metric used in the convenience store industry.
For the Year Ended December 31, 2022 2021 2020 Revenues: (in thousands) Fuel revenue $ 3,234,145 $ 2,659,706 $ 508,175 Other revenues, net 23,451 22,298 9,335 Total revenues 3,257,596 2,682,004 517,510 Operating expenses: Fuel costs 3,181,189 2,620,102 499,371 Store operating expenses 42,543 39,904 14,616 Total operating expenses 3,223,732 2,660,006 513,987 Operating income $ 33,864 $ 21,998 $ 3,523 Fuel gallons sold - fuel supply locations 746,513 814,628 210,085 Fuel gallons sold - consignment agent locations 156,059 163,391 57,224 Fuel margin, cents per gallon 1 - fuel supply locations 6.8 5.8 4.5 Fuel margin, cents per gallon 1 - consignment agent locations 30.2 25.4 21.9 1 Calculated as fuel revenue less fuel costs, divided by fuel gallons sold; excludes the estimated fixed margin or fixed fee paid to GPMP for the cost of fuel. 33 For the year ended December 31, 2022 compared to the year ended December 31, 2021 Wholesale Revenues For the year ended December 31, 2022, fuel revenue increased by $574.4 million, or 21.6%, compared to the year ended December 31, 2021.
For the Year Ended December 31, 2023 2022 2021 Revenues: (in thousands) Fuel revenue $ 3,039,904 $ 3,234,145 $ 2,659,706 Other revenues, net 25,775 23,451 22,298 Total revenues 3,065,679 3,257,596 2,682,004 Operating expenses: Fuel costs 2,995,398 3,181,189 2,620,102 Store operating expenses 39,703 42,543 39,904 Total operating expenses 3,035,101 3,223,732 2,660,006 Operating income $ 30,578 $ 33,864 $ 21,998 Fuel gallons sold – fuel supply locations 801,260 746,513 814,628 Fuel gallons sold – consignment agent locations 168,005 156,059 163,391 Fuel margin, cents per gallon 1 – fuel supply locations 6.0 6.8 5.8 Fuel margin, cents per gallon 1 – consignment agent locations 26.5 30.2 25.4 1 Calculated as fuel revenue less fuel costs, divided by fuel gallons sold; excludes the estimated fixed margin or fixed fee paid to GPMP for the cost of fuel.
Our results of operation are significantly impacted by the retail fuel margins we earn on gallons sold. These fuel margins can change rapidly as they are influenced by many factors including: the price of refined products; interruptions in supply caused by severe weather; supply chain disruptions; refinery mechanical failures; and competition in the local markets in which we operate.
These fuel margins can change rapidly as they are influenced by many factors, including: the wholesale cost of fuel; interruptions in supply caused by severe weather; supply chain disruptions; refinery mechanical failures; and competition in the local markets in which we operate.
The increase was due in part to a one-time non-cash tax expense in the amount of approximately $8.9 million for the year ended December 31, 2022 the Company recorded in connection with the internal entity realignment and streamlining and recording of a tax benefit for the year ended December 31, 2021 of approximately $5.5 million as a result of releasing a valuation allowance previously recorded.
The decrease was primarily due to a one-time non-cash tax expense in the amount of approximately $8.9 million for the year ended December 31, 2022 the Company recorded in connection with its internal entity realignment and streamlining.
Trends Impacting Our Business We achieved strong store growth over the last several years, primarily by implementing a highly successful acquisition strategy. From 2013 through 2022, we completed 22 acquisitions.
Trends Impacting Our Business We achieved strong store growth over the last decade, driven primarily by a highly successful acquisition strategy, inclusive of 25 completed acquisitions from 2013 through 2023.
For the year ended December 31, 2022, we spent $98.6 million for capital expenditures, including the purchase of certain fee properties, bean-to-cup coffee equipment, upgrades to fuel dispensers and other investments in our stores.
For the year ended December 31, 2023, we utilized $111.2 million for capital expenditures, including the purchase of certain fee properties, upgrades to fuel dispensers and other investments in our stores.
The following table provides a history of our acquisitions, site conversions and site closings for each of the last three years, for the retail, wholesale and fleet fueling segments: For the Year Ended December 31, Retail Segment 2022 2021 2020 Number of sites at beginning of period 1,406 1,330 1,272 Acquired sites 32 97 84 Newly opened or reopened sites — 1 3 Company-controlled sites converted to consignment or fuel supply locations, net (17 ) (9 ) (14 ) Closed, relocated or divested sites (17 ) (13 ) (15 ) Number of sites at end of period 1,404 1,406 1,330 27 For the Year Ended December 31, Wholesale Segment 1 2022 2021 2020 Number of sites at beginning of period 1,628 1,597 128 Acquired sites 46 — 1,453 Newly opened or reopened sites 2 74 76 20 Consignment or fuel supply locations converted from Company-controlled sites, net 17 9 14 Closed, relocated or divested sites (91 ) (54 ) (18 ) Number of sites at end of period 1,674 1,628 1,597 1 Excludes bulk and spot purchasers. 2 Includes all signed fuel supply agreements irrespective of fuel distribution commencement date.
We believe our significant size and scale aids our efforts to successfully deploy our organic growth strategies in our acquired assets, which we anticipate will result in value accretion. 24 The following table provides a history of our acquisitions, site conversions and site closings for each of the last three years, for the retail, wholesale and fleet fueling segments: For the Year Ended December 31, Retail Segment 2023 2022 2021 Number of sites at beginning of period 1,404 1,406 1,330 Acquired sites 166 32 97 Newly opened or reopened sites 4 — 1 Company-controlled sites converted to consignment or fuel supply locations, net (16 ) (17 ) (9 ) Closed, relocated or divested sites (15 ) (17 ) (13 ) Number of sites at end of period 1,543 1,404 1,406 For the Year Ended December 31, Wholesale Segment 1 2023 2022 2021 Number of sites at beginning of period 1,674 1,628 1,597 Acquired sites 190 46 — Newly opened or reopened sites 2 83 74 76 Consignment or fuel supply locations converted from Company-controlled or fleet fueling sites, net 15 17 9 Closed, relocated or divested sites (137 ) (91 ) (54 ) Number of sites at end of period 1,825 1,674 1,628 1 Excludes bulk and spot purchasers. 2 Includes all signed fuel supply agreements irrespective of fuel distribution commencement date.
Retail Segment The retail segment includes the operation of a chain of retail stores, which includes convenience stores selling fuel products and other merchandise to retail customers.
Retail Segment Our retail segment includes the operation of a chain of retail stores, which includes convenience stores selling fuel products and other merchandise to retail customers. At our convenience stores, we own the merchandise and fuel inventory and employ personnel to manage the store.
For the Year Ended December 31, 2022 2021 2020 Revenues: (in thousands) Fuel revenue $ 7,401,090 $ 5,714,333 $ 2,452,401 Merchandise revenue 1,647,642 1,616,404 1,494,342 Other revenues, net 94,067 86,661 63,489 Total revenues 9,142,799 7,417,398 4,010,232 Operating expenses: Fuel costs 6,856,651 5,275,907 2,131,416 Merchandise costs 1,146,423 1,143,494 1,088,032 Store operating expenses 721,174 630,518 532,422 General and administrative expenses 139,969 124,667 94,424 Depreciation and amortization 101,752 97,194 74,396 Total operating expenses 8,965,969 7,271,780 3,920,690 Other expenses, net 9,816 3,536 9,228 Operating income 167,014 142,082 80,314 Interest and other financial expenses, net (59,405 ) (71,207 ) (49,905 ) Income before income taxes 107,609 70,875 30,409 Income tax (expense) benefit (35,557 ) (11,634 ) 1,499 (Loss) income from equity investment (74 ) 186 (1,269 ) Net income $ 71,978 $ 59,427 $ 30,639 Less: Net income attributable to non-controlling interests 231 229 16,929 Net income attributable to ARKO Corp. $ 71,747 $ 59,198 $ 13,710 Less: Accretion and dividends of Series A redeemable preferred stock (5,750 ) (5,735 ) (3,277 ) Net income attributable to common shareholders $ 65,997 $ 53,463 $ 10,433 Fuel gallons sold 1,971,011 2,019,206 1,207,296 Fuel margin, cents per gallon 1 27.6 21.7 26.6 Merchandise contribution 2 $ 501,219 $ 472,910 $ 406,310 Merchandise margin 3 30.4 % 29.3 % 27.2 % Adjusted EBITDA, net of incremental bonuses 4 $ 301,054 $ 256,575 $ 183,392 1 Calculated as fuel revenue less fuel costs divided by fuel gallons sold. 2 Calculated as merchandise revenue less merchandise costs. 3 Calculated as merchandise contribution divided by merchandise revenue. 4 Refer to “ Use of Non-GAAP Measures” below for discussion of this non-GAAP performance measure and related reconciliation to net income.
For the Year Ended December 31, 2023 2022 2021 Revenues: (in thousands) Fuel revenue $ 7,464,372 $ 7,401,090 $ 5,714,333 Merchandise revenue 1,838,001 1,647,642 1,616,404 Other revenues, net 110,358 94,067 86,661 Total revenues 9,412,731 9,142,799 7,417,398 Operating expenses: Fuel costs 6,876,084 6,856,651 5,275,907 Merchandise costs 1,252,879 1,146,423 1,143,494 Store operating expenses 860,134 721,174 630,518 General and administrative expenses 165,294 139,969 124,667 Depreciation and amortization 127,597 101,752 97,194 Total operating expenses 9,281,988 8,965,969 7,271,780 Other expenses, net 12,729 9,816 3,536 Operating income 118,014 167,014 142,082 Interest and other financial expenses, net (71,243 ) (59,405 ) (71,207 ) Income before income taxes 46,771 107,609 70,875 Income tax expense (12,166 ) (35,557 ) (11,634 ) (Loss) income from equity investment (39 ) (74 ) 186 Net income $ 34,566 $ 71,978 $ 59,427 Less: Net income attributable to non-controlling interests 197 231 229 Net income attributable to ARKO Corp. $ 34,369 $ 71,747 $ 59,198 Series A redeemable preferred stock dividends (5,750 ) (5,750 ) (5,735 ) Net income attributable to common shareholders $ 28,619 $ 65,997 $ 53,463 Fuel gallons sold 2,241,805 1,971,011 2,019,206 Fuel margin, cents per gallon 1 26.2 27.6 21.7 Merchandise contribution 2 $ 585,122 $ 501,219 $ 472,910 Merchandise margin 3 31.8 % 30.4 % 29.3 % Adjusted EBITDA 4 $ 290,428 $ 301,054 $ 256,575 1 Calculated as fuel revenue less fuel costs divided by fuel gallons sold. 2 Calculated as merchandise revenue less merchandise costs. 3 Calculated as merchandise contribution divided by merchandise revenue. 4 Refer to “ Use of Non-GAAP Measures” below for discussion of this non-GAAP performance measure and related reconciliation to net income.
EBITDA, Adjusted EBITDA and Adjusted EBITDA, net of incremental bonuses are not recognized terms under GAAP and should not be considered as a substitute for net income or any other financial measure presented in accordance with GAAP.
EBITDA and Adjusted EBITDA are not recognized terms under GAAP and should not be considered as a substitute for net income or any other financial measure presented in accordance with GAAP. These measures have limitations as analytical tools, and should not be considered in isolation or as substitutes for analysis of our results as reported under GAAP.
(2) Includes principal and interest payments. Assumes an interest rate of 6.6% on the $258.3 million of the GPMP Capital One Line of Credit utilized as of December 31, 2022 and a zero balance on the PNC Line of Credit.
(2) Includes principal and interest payments. Assumes an interest rate of 8.2% on the $338.3 million of the Capital One Line of Credit utilized as of December 31, 2023 and a zero balance on the PNC Line of Credit. (3) Deferred payments related to the TEG Acquisition and the Speedy’s Acquisition.
Adjusted EBITDA further adjusts EBITDA by excluding the gain or loss on disposal of assets, impairment charges, acquisition costs, other non-cash items, and other unusual or non-recurring charges. Adjusted EBITDA, net of incremental bonuses further adjusts Adjusted EBITDA by excluding incremental bonuses incurred for 2020 based on 2020 performance.
Adjusted EBITDA further adjusts EBITDA by excluding the gain or loss on disposal of assets, impairment charges, acquisition costs, other non-cash items, and other unusual or non-recurring charges. Both EBITDA and Adjusted EBITDA are non-GAAP financial measures.
For the year ended December 31, 2022, merchandise revenue increased by $31.2 million, or 1.9%, as compared to the year ended December 31, 2021. The Pride Acquisition and 2021 Acquisitions contributed approximately $71.7 million of incremental merchandise revenue. Same store merchandise sales decreased $16.2 million, or 1.0%, for 2022 compared to 2021.
For the year ended December 31, 2023, merchandise revenue increased by $190.4 million, or 11.6%, as compared to the year ended December 31, 2022. The 2023 Acquisitions and the Pride Acquisition contributed approximately $209.5 million of incremental merchandise revenue. Same store merchandise sales increased $6.0 million, or 0.4%, for 2023 compared to 2022.
(d) Eliminates non-cash share-based compensation expense related to the equity incentive program in place to incentivize, retain, and motivate our employees, certain non-employees, and members of our board of directors (the “Board”). (e) Eliminates our share of loss (income) attributable to our unconsolidated equity investment. (f) Eliminates the payment of historical fuel tax liabilities owed for multiple prior periods.
(d) Eliminates non-cash share-based compensation expense related to the equity incentive program in place to incentivize, retain, and motivate our employees, certain non-employees, and members of our Board. (e) Eliminates our share of loss (income) attributable to our unconsolidated equity investment. (f) Eliminates fair value adjustments to the contingent consideration owed to the seller for the 2020 Empire acquisition.
The following table contains a reconciliation of net income to EBITDA, Adjusted EBITDA and Adjusted EBITDA, net of incremental bonuses for the years ended December 31, 2022, 2021 and 2020. 36 For the Year Ended December 31, 2022 2021 2020 (in thousands) Net income $ 71,978 $ 59,427 $ 30,639 Interest and other financing expenses, net 59,405 71,207 49,905 Income tax expense (benefit) 35,557 11,634 (1,499 ) Depreciation and amortization 101,752 97,194 74,396 EBITDA 268,692 239,462 153,441 Non-cash rent expense (a) 7,903 6,359 7,051 Acquisition costs (b) 8,162 5,366 6,031 Loss on disposal of assets and impairment charges (c) 5,731 1,384 6,060 Share-based compensation expense (d) 12,161 5,804 1,891 Loss (income) from equity investment (e) 74 (186 ) 1,269 Fuel taxes paid in arrears (f) — — 819 Adjustment to contingent consideration (g) (2,204 ) (1,740 ) (1,287 ) Internal entity realignment and streamlining (h) 475 — — Other (i) 60 126 302 Adjusted EBITDA $ 301,054 $ 256,575 $ 175,577 Incremental bonuses (j) — — 7,815 Adjusted EBITDA, net of incremental bonuses $ 301,054 $ 256,575 $ 183,392 (a) Eliminates the non-cash portion of rent, which reflects the extent to which our GAAP rent expense recognized exceeds (or is less than) our cash rent payments.
For the Year Ended December 31, 2023 2022 2021 (in thousands) Net income $ 34,566 $ 71,978 $ 59,427 Interest and other financing expenses, net 71,243 59,405 71,207 Income tax expense 12,166 35,557 11,634 Depreciation and amortization 127,597 101,752 97,194 EBITDA 245,572 268,692 239,462 Non-cash rent expense (a) 14,168 7,903 6,359 Acquisition costs (b) 9,079 8,162 5,366 Loss on disposal of assets and impairment charges (c) 6,203 5,731 1,384 Share-based compensation expense (d) 15,015 12,161 5,804 Loss (income) from equity investment (e) 39 74 (186 ) Adjustment to contingent consideration (f) (604 ) (2,204 ) (1,740 ) Internal entity realignment and streamlining (g) — 475 — Other (h) 956 60 126 Adjusted EBITDA $ 290,428 $ 301,054 $ 256,575 (a) Eliminates the non-cash portion of rent, which reflects the extent to which our GAAP rent expense recognized exceeded (or was less than) our cash rent payments.
Additionally, in 2022, the U.S. economy has continued to experience inflationary pressures, which increase the cost of the merchandise we purchase and reduces consumer purchasing power. We have mitigated a portion of these higher costs with retail price increases.
Additionally, throughout 2023, the U.S. economy continued to endure price inflation and the effect of higher prevailing interest rates, which began in 2022 and which has increased merchandise cost and reduced consumer purchasing power. We have mitigated a portion of these higher costs with retail price increases.
The margin is determined according to a formula in the Capital One Line of Credit that depends on GPMP’s leverage. As of December 31, 2022, $0.7 million of letters of credit were outstanding under the Capital One Line of Credit.
The margin is determined according to a formula in the Capital One Line of Credit that depends on GPMP’s leverage.
For the Year Ended December 31, 2022 Revenues: (in thousands) Fuel revenue $ 270,670 Other revenues, net 2,178 Total revenues 272,848 Operating expenses: Fuel costs 245,733 Store operating expenses 8,733 Total operating expenses 254,466 Operating income $ 18,382 Fuel gallons sold – proprietary cardlock locations 57,104 Fuel gallons sold – third-party cardlock locations 2,882 Fuel margin, cents per gallon 1 – proprietary cardlock locations 48.4 Fuel margin, cents per gallon 1 – third-party cardlock locations 6.5 1 Calculated as fuel revenue less fuel costs divided by fuel gallons sold; excludes the estimated fixed fee charged by GPMP to sites in the fleet fueling segment. 34 For the year ended December 31, 2022 Fleet Fueling Revenues For the year ended December 31, 2022, fuel revenue was positively impacted by a high average price of diesel fuel in 2022 following the closing of the Quarles Acquisition.
For the Year Ended December 31, 2023 2022 Revenues: (in thousands) Fuel revenue $ 530,937 $ 270,670 Other revenues, net 7,818 2,178 Total revenues 538,755 272,848 Operating expenses: Fuel costs 481,885 245,733 Store operating expenses 22,298 8,733 Total operating expenses 504,183 254,466 Operating income $ 34,572 $ 18,382 Fuel gallons sold – proprietary cardlock locations 130,995 57,104 Fuel gallons sold – third-party cardlock locations 9,832 2,882 Fuel margin, cents per gallon 1 – proprietary cardlock locations 41.7 48.4 Fuel margin, cents per gallon 1 – third-party cardlock locations 12.4 6.5 1 Calculated as fuel revenue less fuel costs divided by fuel gallons sold; excludes the estimated fixed fee paid to GPMP for the cost of fuel.
(b) Eliminates costs incurred that are directly attributable to historical business acquisitions and salaries of employees whose primary job function is to execute our acquisition strategy and facilitate integration of acquired operations.
For newer leases, our rent expense recognized typically exceeds our cash rent payments, whereas, for more mature leases, rent expense recognized is typically less than our cash rent payments. 34 (b) Eliminates costs incurred that are directly attributable to business acquisitions and salaries of employees whose primary job function is to execute our acquisition strategy and facilitate integration of acquired operations.
Additionally, the Pride Acquisition and 2021 Acquisitions contributed an incremental 64.6 million gallons sold, or $260.6 million in fuel revenue. Underperforming retail stores, which were closed or converted to independent dealers during 2022 in order to optimize profitability, negatively impacted gallons sold during 2022.
Offsetting these decreases, the 2023 Acquisitions and the Pride Acquisition contributed 182.0 million incremental gallons sold, or $639.0 million in fuel revenue. Underperforming retail stores, which we closed or converted to dealers during 2023 in order to optimize profitability, also negatively impacted gallons sold during 2023.
The M&T Term Loan bears interest at LIBOR plus 3.00%, mature in June 2026 and is payable in monthly installments based on a fifteen-year amortization schedule, with the balance of the loan payable at maturity.
The M&T Term Loans bear interest at SOFR Adjusted (as defined in the agreement) plus 2.75% to 3.00% (depending on the loan), mature in June 2026 or November 2028 (depending on the loan) and are payable in monthly installments based on a fifteen-year amortization schedule, with the balance of each loan payable at maturity.
Inter-segment other revenues, net related to the fixed fee primarily charged to sites in the fleet fueling segment (currently 5.0 cents per gallon sold), which began in July 2022 and were $3.7 million for the year ended December 31, 2022.
Inter-segment other revenues, net primarily related to the fixed fee primarily charged to sites in the fleet fueling segment (currently 5.0 cents per gallon sold), which began in July 2022. 33 GPMP Operating Income Fuel margin increased by $5.9 million for the year ended December 31, 2023, as compared to the year ended December 31, 2022, primarily due to greater gallons sold to the retail and wholesale segments at a fixed margin.
The Board declared, and the Company paid, dividends of $0.09 per share of common stock in 2022, totaling approximately $10.9 million. The Board declared a quarterly dividend of $0.03 per share of common stock, to be paid on March 21, 2023 to stockholders of record as of March 9, 2023.
Additionally, the Board declared a quarterly dividend of $0.03 per share of common stock, to be paid on March 21, 2024 to stockholders of record as of March 11, 2024.
For the year ended December 31, 2022, other revenues, net increased by $7.4 million, or 8.5%, compared to the year ended December 31, 2021, primarily due to additional revenue from the 2022 Acquisitions and the 2021 Acquisitions and an increase in income from gaming machines. 30 For the year ended December 31, 2022, total operating expenses increased by $1,694.2 million, or 23.3%, as compared to the year ended December 31, 2021.
For the year ended December 31, 2023, other revenues, net increased by $16.3 million, or 17.3%, compared to the year ended December 31, 2022, primarily due to additional revenue from the 2023 Acquisitions and the 2022 Acquisitions, partially offset by the loss of income from skill gaming machines in Virginia. 27 For the year ended December 31, 2023, total operating expenses increased by $316.0 million, or 3.5%, as compared to the year ended December 31, 2022.
Same store merchandise sales decreased primarily due to lower revenue from cigarettes and reduced demand for essential products given the lessening impacts of the pandemic, which were partially offset by higher packaged beverages, center-store items, frozen food, beer and wine, other tobacco products and franchise revenue as a result of marketing initiatives, including expanded category assortments, new franchise locations and investments in coolers and freezers.
Same store merchandise sales increased primarily due to higher revenue from the Company’s six core destination categories (packaged beverages, candy, salty snacks, packaged sweet snacks, alternative snacks and beer), other tobacco products and franchises as a result of marketing initiatives, including expanded category assortments, new franchise food offerings and investments in coolers and freezers, which was partially offset by lower revenue from cigarettes.
For the year ended December 31, 2022 compared to the year ended December 31, 2021 For the year ended December 31, 2022, fuel revenue increased by $1,686.8 million, or 29.5%, compared to the year ended December 31, 2021.
For the year ended December 31, 2023 compared to the year ended December 31, 2022 For the year ended December 31, 2023, fuel revenue increased by $63.3 million, or 0.9%, compared to the year ended December 31, 2022.
Note 2, “Summary of Significant Accounting Policies,” of the Notes to Consolidated 41 Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K describes the significant accounting policies and methods used in the preparation of the Company’s consolidated financial statements.
Note 2, “Summary of Significant Accounting Policies,” of the Consolidated Financial Statements describes the significant accounting policies and methods used in the preparation of the Company’s consolidated financial statements.
GPMP Segment The GPMP segment includes the operations of GPM Petroleum LP, referred to as GPMP, which primarily sells and supplies fuel to GPM and substantially all of its subsidiaries that sell fuel in the retail and wholesale segments at GPMP’s cost of fuel (including taxes and transportation) plus a fixed margin and a fixed fee charged to sites in the fleet fueling segment.
GPM Petroleum LP (“GPMP”) sells fuel at GPMP’s cost of fuel (including taxes and transportation) plus a fixed margin and charges a fixed fee primarily to sites in the fleet fueling segment which are not supplied by GPMP.

… 120 more changes not shown on this page.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

8 edited+1 added−0 removed2 unchanged
Biggest changeAs of December 31, 2022, approximately 38% of our debt bore interest at variable rates, therefore, our exposure was relatively low. If our applicable interest rates increase by 1%, then our debt service on an annual basis would increase by approximately $2.9 million.
Biggest changeBased on our outstanding balances at December 31, 2023, if our applicable interest rates increase by 1%, then our debt service on an annual basis would increase by approximately $3.9 million. Interest rates on commercial bank borrowings and debt offerings could be higher than current levels, causing our financing costs to increase accordingly.
Interest Rate Risk We may be subject to market risk from exposure to changes in interest rates based on our financing, investing, and cash management activities. The Senior Notes bear a fixed interest rate, therefore, an increase or decrease in prevailing interest rates has no impact on our debt service for the Senior Notes.
Interest Rate Risk We may be subject to market risk from exposure to changes in interest rates based on our financing, investing, and cash management activities. The Senior Notes bear a fixed rate of interest; therefore, an increase or decrease in prevailing interest rates has no impact on our debt service for the Senior Notes.
In connection with the Quarles Acquisition, we began to make use of derivative commodity instruments to manage risks associated with an immaterial number of gallons designed to offset changes in the price of fuel that are directly tied to firm commitments to purchase diesel fuel.
In connection with the Quarles Acquisition, we began to use derivative commodity instruments to manage risks associated with an immaterial number of gallons designed to offset changes in the price of fuel that are directly tied to firm commitments to purchase diesel fuel.
Significant increases in fuel prices could result in significant increases in the retail price of fuel and in lower sales to consumers and independent dealers. When fuel prices rise, some of our independent dealers may have insufficient credit to purchase fuel from us at their historical volumes.
Significant increases in fuel prices could result in significant increases in the retail price of fuel and in lower sales to consumers and dealers. When fuel prices rise, some of our dealers may have insufficient credit to purchase fuel from us at their historical volumes.
For additional information regarding our interest rate risk, see “Risk Factors—Risks Related to Our Business and Industry—Our variable rate debt could adversely affect our financial condition and results of operations.” 43
For additional information regarding our interest rate risk, see “Risk Factors—Risks Related to Our Business and Industry—Our variable rate debt could adversely affect our financial condition and results of operations.” 40
Because the interchange fees we pay when credit cards are used to make purchases are based on transaction amounts, higher fuel prices at the pump and higher gallon movements result in higher credit card expenses. These additional fees increase operating expenses. Prior to the Quarles Acquisition, we did not engage in any fuel price hedging.
Because the interchange fees we pay when credit cards are used to make purchases are based on transaction amounts, higher fuel prices at the pump and higher gallon movements result in higher credit card expenses. These additional fees increase operating expenses.
Interest rates on commercial bank borrowings and debt offerings could be higher than current levels, causing our financing costs to increase accordingly. Although this could limit our ability to raise funds in the debt capital markets, we expect to remain competitive with respect to acquisitions and capital projects, as our competitors would likely face similar circumstances.
Although this could limit our ability to raise funds in the debt capital markets, we expect to remain competitive with respect to acquisitions and capital projects, as our competitors would likely face similar circumstances.
As of December 31, 2022, the interest rate on our Capital One Line of Credit was 6.6% and the interest rate on our M&T Term Loan was 7.3%. As of December 31, 2021, the interest rate on our Capital One Line of Credit was 3.4% and the interest rate on our M&T Term Loan was 3.1%.
As of December 31, 2022, the interest rate on our Capital One Line of Credit was 6.6% and the interest rate on our M&T Term Loans was 7.3% (the entire M&T equipment loan had a fixed rate). As of December 31, 2023, approximately 46% of our debt bore interest at variable rates.
Added
As of December 31, 2023, the interest rate on our Capital One Line of Credit was 8.2%, the interest rate on our M&T Term Loans was 8.4% and the interest rate on the variable portion of our M&T equipment loan was 8.1% (approximately $16.4 million of the total loan).

Other ARKO 10-K year-over-year comparisons