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What changed in CrossAmerica Partners LP's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of CrossAmerica Partners LP'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.

+261 added−312 removedSource: 10-K (2024-02-27) vs 10-K (2023-02-28)

Top changes in CrossAmerica Partners LP's 2023 10-K

261 paragraphs added · 312 removed · 205 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

28 edited+0 added−8 removed18 unchanged
Biggest changeLessee Dealer • We own or lease the property and then lease or sublease the site to a dealer. • The lessee dealer owns all motor fuel and retail site inventory and sets its own pricing and gross profit margins. • We collect wholesale motor fuel margins at rack-plus pricing or, in some cases, DTW. • Under our distribution contracts, we agree to supply a particular branded motor fuel or unbranded motor fuel to a site or group of sites and arrange for all transportation. • Exclusive distribution contracts with dealers who lease property from us run concurrent in length to the retail site’s lease period (generally three to 10 years). • Leases are generally triple net leases. • As of December 31, 2022, the average remaining lease agreement term was 2.6 years.
Biggest changeIndependent Dealer • The independent dealer owns or leases the property and owns all motor fuel and convenience store inventory. • We contract to exclusively distribute motor fuel to the independent dealer at rack-plus pricing or, in some cases, DTW. • Under our distribution contracts, we agree to supply a particular branded motor fuel or unbranded motor fuel to a site or group of sites and arrange for all transportation. • Distribution contracts with independent dealers are typically seven to 15 years in length. • As of December 31, 2023, the average remaining distribution contract term was 4.6 years. 7 Lessee Dealer • We own or lease the property and then lease or sublease the site to a dealer. • The lessee dealer owns all motor fuel and retail site inventory and sets its own pricing and gross profit margins. • We collect wholesale motor fuel margins at rack-plus pricing or, in some cases, DTW. • Under our distribution contracts, we agree to supply a particular branded motor fuel or unbranded motor fuel to a site or group of sites and arrange for all transportation. • Exclusive distribution contracts with dealers who lease property from us run concurrent in length to the retail site’s lease period (generally three to 10 years). • Leases are generally triple net leases. • As of December 31, 2023, the average remaining lease agreement term was 2.6 years.
Company Operated Sites • We own or lease the property, operate the retail site and retain all profits from motor fuel and retail site operations. • We own the merchandise inventory and retain the profits from the sale of convenience merchandise items. • We own the motor fuel inventory and set the motor fuel pricing. • We maintain inventory from the time of the purchase of motor fuel from third-party suppliers until the retail sale to the end customer.
Company Operated • We own or lease the property, operate the retail site and retain all profits from motor fuel and retail site operations. • We own the merchandise inventory and retain the profits from the sale of convenience merchandise items. • We own the motor fuel inventory and set the motor fuel pricing. • We maintain inventory from the time of the purchase of motor fuel from third-party suppliers until the retail sale to the end customer.
ITEM 1. BUSINESS Overview We were formed as a Delaware limited partnership in 2011 primarily engaged in the wholesale distribution of motor fuel and the ownership and leasing of real estate used in the retail distribution of motor fuel. We also generate revenues from the operation of company operated retail sites.
ITEM 1. BUSINESS Overview We were formed as a Delaware limited partnership in 2011 engaged in the wholesale distribution of motor fuel and the ownership and leasing of real estate used in the retail distribution of motor fuel. We also generate revenues from the operation of company operated retail sites.
Commission Sites • We own or lease the property and then lease or sublease the site to the commission agent, who pays rent to us and operates all the non-fuel related operations at the sites for its own account. • We own the motor fuel inventory, set the motor fuel pricing and generate revenue from the retail sale of motor fuels to the end customer. 9 • We pay the commission agent a commission for each gallon of motor fuel sold. • LGW distributes motor fuel on to LGWS, which owns the motor fuel inventory and sells motor fuel to retail customers.
Commission • We own or lease the property and then lease or sublease the site to the commission agent, who pays rent to us and operates all the non-fuel related operations at the sites for its own account. • We own the motor fuel inventory, set the motor fuel pricing and generate revenue from the retail sale of motor fuels to the end customer. • We pay the commission agent a commission for each gallon of motor fuel sold. • LGW distributes motor fuel to LGWS, which owns the motor fuel inventory and sells motor fuel to retail customers.
Our talent management and succession plan process includes the identification of key positions based on current and future business strategies, the identification of potential successors and a plan for talent development. 11
Our talent management and succession plan process includes the identification of key positions based on current and future business strategies, the identification of potential successors and a plan for talent development.
For approximately 61% of gallons sold, we receive a per gallon rate equal to the posted rack price, less any applicable discounts, plus transportation costs, taxes and a fixed rate per gallon of motor fuel. The remaining gallons are either retail sales or wholesale DTW contracts that provide for variable, market-based pricing.
For approximately 60% of gallons sold, we receive a per gallon rate equal to the posted rack price, less any applicable discounts, plus transportation costs, taxes and a fixed rate per gallon of motor fuel. The remaining gallons are either retail sales or wholesale DTW contracts that provide for variable, market-based pricing.
Historically, sales volumes have been highest in the second and third quarters (during the summer activity months) and lowest during the winter months in the first and fourth quarters.
Historically, sales volumes have been highest in the second and third quarters (during the summer months) and lowest during the winter months in the first and fourth quarters.
Supplier Arrangements We distribute branded motor fuel under the Exxon, Mobil, BP, Shell, Sunoco, Valero, Gulf, Citgo, Marathon and Phillips 66 brands to our customers. Branded motor fuels are purchased from major integrated oil companies and refiners under supply agreements. For 2022, we purchased approximately 81% of our motor fuel from four suppliers.
Supplier Arrangements We distribute branded motor fuel under the Exxon, Mobil, BP, Shell, Sunoco, Valero, Gulf, Citgo, Marathon and Phillips 66 brands to our customers. Branded motor fuels are purchased from major integrated oil companies and refiners under supply agreements. For 2023, we purchased approximately 80% of our motor fuel from four suppliers.
Since our IPO and through February 23, 2023, we have completed acquisitions for a total of approximately 1,000 fee and leasehold sites and 700 wholesale fuel supply contracts for total consideration of approximately $1.5 billion; • Enhance our real estate business’ cash flows by owning or leasing sites in prime locations; • Increase cash flows from our wholesale segment by expanding market share and growing rental income over time; • Increase cash flows from our retail segment by operating our retail sites efficiently with a focus on providing excellent value and service; • Maintain strong relationships with major integrated oil companies and refiners; and • Optimize the operations of acquired assets to the most appropriate format (lessee dealer, independent dealer, retail site) to maximize our investment return.
Since our IPO and through February 22, 2024, we have completed acquisitions for a total of approximately 1,000 fee and leasehold sites and 700 wholesale fuel supply contracts for total consideration of approximately $1.5 billion; • Enhance our real estate business’ cash flows by owning or leasing sites in prime locations; • Increase cash flows from our wholesale segment by expanding market share and growing rental income over time; • Increase cash flows from our retail segment by operating our retail sites efficiently with a focus on providing excellent value and service; • Maintain strong relationships with major integrated oil companies and refiners; and • Optimize the operations of our assets to the most appropriate format (lessee dealer, independent dealer, company operated, or commission) to maximize our investment return.
We are one of the ten largest independent distributors by motor fuel volume in the United States for ExxonMobil, BP and Shell, and we also distribute Sunoco, Valero, Gulf, Citgo, Marathon and Phillips 66-branded motor fuels (approximately 92% of the motor fuel we distributed during 2022 was branded).
We are one of the ten largest independent distributors by motor fuel volume in the United States for ExxonMobil, BP and Motiva, and we also distribute Shell, Sunoco, Valero, Gulf, Citgo, Marathon and Phillips 66-branded motor fuels (approximately 94% of the motor fuel we distributed during 2023 was branded).
We believe our competitive strengths will allow us to capitalize on our strategic opportunities, including: • Stable cash flows from real estate rent income and wholesale motor fuel distribution; • Established history of acquiring sites and successfully integrating these sites and operations into our existing business; • Long-term relationships with major integrated oil companies and other key suppliers, which support our negotiations with and enable us to collaboratively work with our suppliers to maximize benefits to the Partnership; and • Prime real estate locations in areas with high traffic and considerable motor fuel consumption.
We believe our competitive strengths will allow us to capitalize on our strategic opportunities, including: • Stable cash flows from diversified operations of our portfolio of assets, including rental income, motor fuel distribution and retail convenience store sales; • Established history of acquiring sites and successfully integrating these sites and operations into our existing business; • Long-term relationships with major integrated oil companies and other key suppliers, which support our negotiations with and enable us to collaboratively work with our suppliers to maximize benefits to the Partnership; and • Prime real estate locations in areas with high traffic and considerable motor fuel consumption.
As of December 31, 2022, 228 employees of the Topper Group provided management services to us under the Omnibus Agreement. In addition, 2,009 store employees of the Topper Group provided services at our company operated sites. Our human capital resources objectives include identifying, recruiting, retaining, incentivizing and integrating our existing and new employees.
As of December 31, 2023, 244 employees of the Topper Group provided management services to us under the Omnibus Agreement. In addition, 2,277 store employees of the Topper Group provided services at our company operated sites. Our human capital resources objectives include identifying, recruiting, retaining, incentivizing and integrating our existing and new employees.
We also have exclusive distribution contracts with independent dealers to distribute motor fuel but do not collect rent from the independent dealers. Below is a description of the wholesale segment's principal customer groups.
We have exclusive motor fuel distribution contracts with lessee dealers who lease the property from us. We also have exclusive distribution contracts with independent dealers to distribute motor fuel but do not collect rent from the independent dealers. Below is a description of the wholesale segment's principal customer groups.
LGW records qualifying wholesale motor fuel distribution gross income and LGWS and Joe’s Kwik Marts record the non-qualifying retail sale.
LGW and CAPL JKM Wholesale record qualifying wholesale motor fuel distribution gross income and LGWS and Joe’s Kwik Marts record the non-qualifying retail sale.
The Topper Group controls the sole member of our General Partner and has the ability to appoint all of the members of the Board and to control and manage the operations and activities of the Partnership. As of February 23, 2023, the Topper Group also has beneficial ownership of a 38.5% limited partner interest in the Partnership.
The Topper Group controls the sole member of our General Partner and has the ability to appoint all of the members of the Board and to control and manage the operations and activities of the Partnership. As of February 22, 2024, the Topper Group also has beneficial ownership of a 38.6% limited partner interest in the Partnership.
LGW records qualifying wholesale motor fuel distribution gross income and LGWS records the non-qualifying retail sale. • As of December 31, 2022, the average remaining motor fuel distribution and lease agreement term for our commission agents was 1.2 years.
LGW records qualifying wholesale motor fuel distribution gross income and LGWS records the non-qualifying retail sale. • As of December 31, 2023, the average remaining motor fuel distribution and lease agreement term for our commission agents was 0.8 years.
As of December 31, 2022, our supply agreements had a weighted-average remaining term of approximately 5.0 years. 10 Competition Our wholesale segment competes with other motor fuel distributors. Major competitive factors for us include, among others, customer service, price and quality of service and availability of products.
As of December 31, 2023, our supply agreements had a weighted-average remaining term of approximately 4.9 years. Competition Our wholesale segment competes with other motor fuel distributors. Major competitive factors for us include, among others, customer service, reliability and availability of products and price.
Our business strategy to achieve our objective of paying and, over time, increasing our quarterly cash distributions, is focused on the following key initiatives: • Expand within and beyond our existing markets through acquisitions.
Our Partnership Agreement does not require us to pay any distributions. 8 Our business strategy to achieve our objective of paying and, over time, increasing our quarterly cash distributions, is focused on the following key initiatives: • Expand within and beyond our existing markets through acquisitions.
Gallons of Motor Fuel Distributed Year Ended December 31, Fuel Distribution Sites End of Year Segment 2022 2021 2020 2022 2021 2020 Independent dealers (a) Wholesale 496 550 450 663 666 687 Lessee dealers Wholesale 348 382 396 619 637 658 DMS Wholesale — — 17 — — — Company operated Retail 328 234 113 255 252 150 Commission agents (b) Retail 168 169 141 200 198 208 Total 1,340 1,335 1,117 1,737 1,753 1,703 (a) Gallons distributed to independent dealers include gallons distributed to sub-wholesalers and commercial accounts, which are not included in the site counts reported above.
Gallons of Motor Fuel Distributed Year Ended December 31, Fuel Distribution Sites End of Year Segment 2023 2022 2021 2023 2022 2021 Independent dealers (a) Wholesale 518 496 550 632 663 666 Lessee dealers Wholesale 325 348 382 569 619 637 Company operated Retail 342 328 234 296 255 252 Commission agents (b) Retail 165 168 169 199 200 198 Total 1,350 1,340 1,335 1,696 1,737 1,753 (a) Gallons distributed to independent dealers include gallons distributed to sub-wholesalers and commercial accounts, which are not included in the site counts reported above.
Retail Segment Our retail segment generated 2022 revenues of $2.3 billion and operating income of $107 million. The retail segment includes the sale of convenience merchandise items at company operated sites and the retail sale of motor fuel at company operated and commission sites. Below is a description of the retail segment's principal customer groups.
Retail Segment The retail segment includes the sale of convenience merchandise items at company operated sites and the retail sale of motor fuel at company operated and commission sites. Below is a description of the retail segment's principal customer groups.
The amount of any distribution is subject to the discretion of the Board, and the Board may modify or revoke the cash distribution policy at any time. Our Partnership Agreement does not require us to pay any distributions.
The amount of any distribution is subject to the discretion of the Board, and the Board may modify or revoke the cash distribution policy at any time.
Subsequent to an acquisition and throughout the life cycle of a site, we evaluate the optimal operation of each site as company operated, lessee dealer or commission, or we consider strategic alternatives, including divesting the site.
Subsequent to an acquisition and throughout the life cycle of a site, we evaluate the optimal operation of each site as company operated, lessee dealer or commission, or we consider strategic alternatives, including divesting the site, which can result in the site becoming an independent dealer site if we continue to supply fuel to it after its divestiture.
Our lease agreements with third-party landlords have an average remaining lease term of 5.0 years as of December 31, 2022. 7 The following table presents rental income (in millions) and the number of sites from which rental income was generated: Rental Income Year Ended December 31, Sites from which Rental Income was Generated End of Year Segment 2022 2021 2020 2022 2021 2020 Lessee dealers Wholesale $ 71.3 $ 71.6 $ 71.4 687 716 753 DMS Retail — — 1.4 — — — Company operated Retail 2.2 1.5 0.6 44 36 21 Commission agents Retail 10.6 10.1 9.8 185 184 195 Total $ 84.1 $ 83.2 $ 83.2 916 936 969 The financial statements reflect the consolidated results of the Partnership and its wholly owned subsidiaries.
The following table presents rental income (in millions) and the number of sites from which rental income was generated: Rental Income Year Ended December 31, Sites from which Rental Income was Generated End of Year Segment 2023 2022 2021 2023 2022 2021 Lessee dealers Wholesale $ 69.7 $ 71.3 $ 71.6 628 687 716 Company operated Retail 2.4 2.2 1.5 50 44 36 Commission agents Retail 10.2 10.6 10.1 188 185 184 Total $ 82.3 $ 84.1 $ 83.2 866 916 936 6 The financial statements reflect the consolidated results of the Partnership and its wholly owned subsidiaries.
Seasonality Our business exhibits substantial seasonality due to our wholesale and retail sites being located in certain geographic areas that are affected by seasonal weather and temperature trends and associated changes in retail customer activity during different seasons.
Major competitive factors include, among others, location, ease of access, product and service selection, motor fuel brands, pricing, customer service, store appearance and cleanliness. 9 Seasonality Our business exhibits substantial seasonality due to our wholesale and retail sites being located in certain geographic areas that are affected by seasonal weather and temperature trends and associated changes in retail customer activity during different seasons.
See Item 7—Results of Operations for additional information on the drivers of the fluctuations in the volume and site counts below.
The following table highlights the aggregate volume of motor fuel distributed to each of our principal customer groups (in millions). See Item 7—Results of Operations for additional information on the drivers of the fluctuations in the volume and site counts below.
As of December 31, 2022, we distributed motor fuel on a wholesale basis to approximately 1,750 sites located in 34 states. We own or lease approximately 1,150 sites, of which we operate 255 as company operated sites. See "Item 7—Recent Developments—Change in Segment Reporting" for information regarding a change in our segment reporting.
As of December 31, 2023, we own or lease approximately 1,100 sites, of which we operate 295 as company operated sites. In all, including our company operated sites, we distributed motor fuel to approximately 1,700 sites located in 34 states.
We own approximately 60% of our properties that we lease to our dealers or utilize in our retail business.
We own approximately 60% of our properties that we lease to our dealers or utilize in our retail business. Our lease agreements with third-party landlords have an average remaining lease term of 4.5 years as of December 31, 2023.
Operations Wholesale Segment Our wholesale segment generated 2022 revenues of $2.7 billion and operating income of $94 million. The wholesale segment includes the wholesale distribution of motor fuel to lessee dealers and independent dealers. We have exclusive motor fuel distribution contracts with lessee dealers who lease the property from us.
Operations Below is a summary of our revenues and operating income by segment (in thousands): Wholesale Retail 2023 2022 2021 2023 2022 2021 Revenues $ 2,290 $ 2,690 $ 2,143 $ 2,096 $ 2,277 $ 1,436 Operating income 91 94 87 97 107 56 Wholesale Segment The wholesale segment includes the wholesale distribution of motor fuel to lessee dealers and independent dealers.
Removed
Regarding our supplier relationships, a material amount of our total gallons of motor fuel purchased are subject to Terms Discounts for prompt payment and other rebates and incentives, which are recorded within cost of sales. Prompt payment discounts are based on a percentage of the purchase price of motor fuel.
Removed
As such, the dollar value of these discounts increases and decreases corresponding with motor fuel prices. Therefore, in periods of lower wholesale motor fuel prices, our gross profit is negatively affected, and, in periods of higher wholesale motor fuel prices, our gross profit is positively affected (as it relates to these discounts).
Removed
Based on our current volumes, we estimate a $10 per barrel change in the price of crude oil would impact our overall annual wholesale motor fuel gross profit by approximately $2.8 million related to these payment discounts. The following table highlights the aggregate volume of motor fuel distributed to each of our principal customer groups (in millions).
Removed
Independent Dealer • The independent dealer owns or leases the property and owns all motor fuel and convenience store inventory. • We contract to exclusively distribute motor fuel to the independent dealer at rack-plus pricing or, in some cases, DTW. • Under our distribution contracts, we agree to supply a particular branded motor fuel or unbranded motor fuel to a site or group of sites and arrange for all transportation. • Distribution contracts with independent dealers are typically seven to 15 years in length. 8 • As of December 31, 2022, the average remaining distribution contract term was 5.1 years.
Removed
DMS Prior to April 14, 2020, we owned or leased property and then leased or subleased the site to DMS and distributed fuel to DMS. DMS owned the motor fuel and retail site inventory and set its own pricing and gross profit margin.
Removed
Since the April 14, 2020 acquisition of retail and wholesale assets, we no longer sell fuel nor lease sites to DMS. CST Fuel Supply In 2015, we purchased a 17.5% limited partner interest in CST Fuel Supply from CST.
Removed
We received pro rata distributions from CST Fuel Supply related to CST Marketing and Supply’s distribution of motor fuel to the majority of CST’s legacy U.S. retail sites. Effective March 25, 2020, we divested our entire interest in CST Fuel Supply in the CST Fuel Supply Exchange.
Removed
Major competitive factors include, among others, location, ease of access, product and service selection, motor fuel brands, pricing, customer service, store appearance, and cleanliness.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

90 edited+14 added−16 removed266 unchanged
Biggest changeDistributions to a non-U.S. person that holds our common units will be reduced by U.S. federal withholding taxes imposed at the highest applicable U.S. federal income tax rate and such non-U.S. person will be required to file U.S. federal income tax returns and pay U.S. federal income tax, to the extent not previously withheld, on his, her or its allocable share of our taxable income and gain.
Biggest changeDistributions to a non-U.S. person that holds our common units will be reduced by U.S. federal withholding taxes imposed at the highest applicable U.S. federal income tax rate and such non-U.S. person will be required to file U.S. federal income tax returns and pay U.S. federal income tax, to the extent not previously withheld, on his, her or its allocable share of our taxable income and gain. 34 Under the Tax Cuts and Jobs Act, if a unitholder sells or otherwise disposes of a common unit, the transferee is required to withhold 10% of the amount realized by the transferor unless the transferor certifies that it is not a foreign person, and we are required to deduct and withhold from the transferee amounts that should have been withheld by the transferee but were not withheld.
Our strategy to grow our business and increase distributions to unitholders is dependent on our ability to make acquisitions that result in an increase in cash flow. Our growth strategy is based, in large part, on our expectation of ongoing divestitures of retail and wholesale fuel distribution assets by industry participants.
Our strategy to grow our business and increase distributions to unitholders is dependent in part on our ability to make acquisitions that result in an increase in cash flow. Our growth strategy is based, in large part, on our expectation of ongoing divestitures of retail and wholesale fuel distribution assets by industry participants.
A tightening of credit in the financial markets or an increase in interest rates may make it more difficult for wholesale customers and suppliers to obtain financing and, depending on the degree to which it occurs, may cause a material increase in the nonpayment or other nonperformance by our customers and suppliers.
A tightening of credit in the financial markets or an increase in interest rates may make it more difficult for wholesale customers and suppliers to obtain financing and, depending on the degree to which it occurs, may cause a material increase in nonpayment or other nonperformance by our customers and suppliers.
Our success depends on our ability to anticipate and respond in a timely manner to changing consumer demands and preferences while continuing to sell products and services that remain relevant to the consumer and thus generally have a positive impact overall merchandise gross profit.
Our success depends on our ability to anticipate and respond in a timely manner to changing consumer demands and preferences while continuing to sell products and services that remain relevant to the consumer and thus generally have a positive impact our overall merchandise gross profit.
These conflicts include the following situations, among others: • our General Partner is allowed to take into account the interests of parties other than us, such as the Topper Group, in resolving conflicts of interest, which has the effect of limiting its fiduciary duty to our unitholders; • neither our Partnership Agreement nor any other agreement requires the Topper Group to pursue a business strategy that favors us; • officers of our General Partner who provide services to us may devote time to affiliates of our General Partner and may be compensated for services rendered to such affiliate; • our Partnership Agreement limits the liability of and reduces fiduciary duties owed by our General Partner and also restricts the remedies available to unitholders for actions that, without the limitations, might constitute breaches of fiduciary duty; • except in limited circumstances, our General Partner has the power and authority to conduct our business without unitholder approval; • our General Partner determines the amount and timing of asset purchases and sales, borrowings, issuances of additional partnership securities and the creation, reductions or increases of cash reserves, each of which can affect the amount of cash that is available for distribution to our unitholders; • our General Partner determines the amount and timing of any capital expenditures and whether a capital expenditure is classified as a maintenance capital expenditure, which reduces operating surplus.
These conflicts include the following situations, among others: • our General Partner is allowed to take into account the interests of parties other than us, such as the Topper Group, in resolving conflicts of interest, which has the effect of limiting its fiduciary duty to our unitholders; • neither our Partnership Agreement nor any other agreement requires the Topper Group to pursue a business strategy that favors us; 26 • officers of our General Partner who provide services to us may devote time to affiliates of our General Partner and may be compensated for services rendered to such affiliate; • our Partnership Agreement limits the liability of and reduces fiduciary duties owed by our General Partner and also restricts the remedies available to unitholders for actions that, without the limitations, might constitute breaches of fiduciary duty; • except in limited circumstances, our General Partner has the power and authority to conduct our business without unitholder approval; • our General Partner determines the amount and timing of asset purchases and sales, borrowings, issuances of additional partnership securities and the creation, reductions or increases of cash reserves, each of which can affect the amount of cash that is available for distribution to our unitholders; • our General Partner determines the amount and timing of any capital expenditures and whether a capital expenditure is classified as a maintenance capital expenditure, which reduces operating surplus.
For example, our Partnership Agreement: • provides that whenever our General Partner, the Board or any committee of the Board makes a determination or takes, or declines to take, any other action in its capacity as the general partner of the Partnership, our General Partner is required to make such determination, or take or decline to take such other action, in good faith, and will not be subject to any higher standard under any Delaware Act (as defined below), or any other law, rule or regulation, or at equity; • provides that any determination, act or failure to act by our General Partner will be deemed in good faith unless such party believed such determination, other action or failure to act, given the totality of the circumstance, was averse to the interests of the Partnership; • in any proceeding brought by the Partnership, any limited partner, or any Person who acquires an interest in a Partnership interest or any other Person who is bound by the Partnership Agreement, challenging such action, determination or failure to act, the Person bringing or prosecuting such proceeding shall have the burden of proving that such determination, action or failure to act was not in good faith; • provides that whenever the General Partner makes a determination or takes or declines to take any other action in its individual capacity as opposed to in its capacity as the general partner of the Partnership, whether under the Partnership Agreement or any other agreement contemplated thereby, then the General Partner, or any affiliate thereof, is entitled to the fullest extent permitted by law, to make such determination or to take or decline to take such other action free of any fiduciary duty, duty of good faith, obligation imposed by Delaware Act, law, rule or in equity to the Partnership, any limited partner or any Person who acquires an interest in a Partnership interest or any other Person who is bound by the Partnership Agreement.
For example, our Partnership Agreement: • provides that whenever our General Partner, the Board or any committee of the Board makes a determination or takes, or declines to take, any other action in its capacity as the general partner of the Partnership, our General Partner is required to make such determination, or take or decline to take such other action, in good faith, and will not be subject to any higher standard under any Delaware Act (as defined below), or any other law, rule or regulation, or at equity; • provides that any determination, act or failure to act by our General Partner will be deemed in good faith unless such party believed such determination, other action or failure to act, given the totality of the circumstance, was averse to the interests of the Partnership; • in any proceeding brought by the Partnership, any limited partner, or any Person who acquires an interest in a Partnership interest or any other Person who is bound by the Partnership Agreement, challenging such action, determination or failure to act, the Person bringing or prosecuting such proceeding shall have the burden of proving that such determination, action or failure to act was not in good faith; 28 • provides that whenever the General Partner makes a determination or takes or declines to take any other action in its individual capacity as opposed to in its capacity as the general partner of the Partnership, whether under the Partnership Agreement or any other agreement contemplated thereby, then the General Partner, or any affiliate thereof, is entitled to the fullest extent permitted by law, to make such determination or to take or decline to take such other action free of any fiduciary duty, duty of good faith, obligation imposed by Delaware Act, law, rule or in equity to the Partnership, any limited partner or any Person who acquires an interest in a Partnership interest or any other Person who is bound by the Partnership Agreement.
For example, our credit facilities may restrict our ability to: • make distributions if any potential default or event of default occurs; • incur additional indebtedness, including the issuance of certain preferred equity interests, or guarantee other indebtedness; • grant liens or make certain negative pledges; • make certain advances, loans or investments; • make any material change to the nature of our business, including mergers, consolidations, liquidations and dissolutions; • make certain capital expenditures in excess of specified levels; • acquire another company; • enter into a sale-leaseback transaction or certain sales or leases of assets; • enter into certain affiliate transactions; or • make certain repurchases of equity interests.
For example, our credit facilities may restrict our ability to: • make distributions if any potential default or event of default occurs; • incur additional indebtedness, including the issuance of certain preferred equity interests, or guarantee other indebtedness; 24 • grant liens or make certain negative pledges; • make certain advances, loans or investments; • make any material change to the nature of our business, including mergers, consolidations, liquidations and dissolutions; • make certain capital expenditures in excess of specified levels; • acquire another company; • enter into a sale-leaseback transaction or certain sales or leases of assets; • enter into certain affiliate transactions; or • make certain repurchases of equity interests.
Even if our credit review and analysis mechanisms work properly, we may experience financial losses in our dealings with these third parties. A material increase in the nonpayment or other nonperformance by our wholesale customers and/or suppliers could adversely affect our business, financial condition, results of operations and cash available for distribution to our unitholders.
Even if our credit review and analysis mechanisms work properly, we may experience financial losses in our dealings with these third parties. A material increase in nonpayment or other nonperformance by our wholesale customers and/or suppliers could adversely affect our business, financial condition, results of operations and cash available for distribution to our unitholders.
Consequently, there is no guarantee that we will distribute quarterly cash distributions to our unitholders in any quarter. 14 The amount of cash we have available for distribution to unitholders depends primarily on our cash flow rather than on our profitability, which may prevent us from making cash distributions, even during periods when we record net income.
Consequently, there is no guarantee that we will distribute quarterly cash distributions to our unitholders in any quarter. The amount of cash we have available for distribution to unitholders depends primarily on our cash flow rather than on our profitability, which may prevent us from making cash distributions, even during periods when we record net income.
If our Omnibus Agreement is terminated, we may suffer interruptions to our business or increased costs to replace these services. The liability of the Topper Group and Couche-Tard is limited under our Omnibus Agreement and Circle K Omnibus Agreement and we have agreed to indemnify the Topper Group and Couche-Tard against certain liabilities, which may expose us to significant expenses.
If our Omnibus Agreement is terminated, we may suffer interruptions to our business or increased costs to replace these services. 27 The liability of the Topper Group and Couche-Tard is limited under our Omnibus Agreement and Circle K Omnibus Agreement and we have agreed to indemnify the Topper Group and Couche-Tard against certain liabilities, which may expose us to significant expenses.
Our counsel has not rendered an opinion on the state, local or non-U.S. tax consequences of an investment in our common units. 36 We will treat each purchaser of our common units as having the same tax characteristics on a per-unit basis without regard to the actual common units purchased.
Our counsel has not rendered an opinion on the state, local or non-U.S. tax consequences of an investment in our common units. We will treat each purchaser of our common units as having the same tax characteristics on a per-unit basis without regard to the actual common units purchased.
As a result, we may make cash distributions during periods when we record losses for financial accounting purposes and may not make cash distributions during periods when we record net income for financial accounting purposes. If we are unable to make acquisitions on economically acceptable terms, our future growth and ability to increase distributions to unitholders will be limited.
As a result, we may make cash distributions during periods when we record losses for financial accounting purposes and may not make cash distributions during periods when we record net income for financial accounting purposes. 13 If we are unable to make acquisitions on economically acceptable terms, our future growth and ability to increase distributions to unitholders will be limited.
The cost of compliance with such laws and regulations may be material. • A significant decrease in demand for motor fuel, including increased consumer preference for alternative motor fuels or improvements in fuel efficiency, in the areas we serve would reduce our ability to make distributions to our unitholders. • Changes in U.S. trade policy, including the imposition of tariffs and the resulting consequences, may have a material adverse impact on our business, operating results and financial condition. • Increased attention to environmental, social and governance (“ESG”) matters and conservation measures may adversely impact our business. • Unfavorable weather conditions could adversely affect our business, financial condition and results of operations and reduce our ability to make distributions to unitholders. • We depend on four principal suppliers for the majority of our motor fuel. • Negative events or developments associated with our branded suppliers could have an adverse impact on our revenues. • We rely on our suppliers to provide trade credit to adequately fund our ongoing operations. • We could be adversely affected by the creditworthiness and performance of our customers, suppliers and contract counterparties. • Pending or future litigation could adversely affect our financial condition and results of operations. • The dangers inherent in the storage and transport of motor fuel could cause disruptions and could expose us to potentially significant losses, costs or liabilities. • We depend on third-party transportation providers for the transportation of all of our motor fuel. • Our motor fuel sales are generated under contracts that must be renegotiated or replaced periodically. • We rely on our information technology systems and network infrastructure to manage numerous aspects of our business and could be adversely affected by the failure to protect sensitive customer, employee or vendor data. 12 • Our debt levels and debt covenants may limit our flexibility in obtaining additional financing and in pursuing other business opportunities and our ability to make distributions to unitholders. • A continued increase in interest rates may cause the market price of our common units to decline and a significant increase in interest rates could adversely affect our ability to service our indebtedness. • We do not own all of the land on which our sites and certain facilities are located, which could result in increased costs and disruptions to our operations. • We may not be able to lease sites we own or sub-lease sites we lease on favorable terms. • We rely on DMI and Circle K to indemnify us for any costs or expenses that we incur for certain environmental liabilities and third-party claims. • The Topper Group controls us and may have conflicts of interest with us.
The cost of compliance with such laws and regulations may be material. • A significant decrease in demand for motor fuel, including increased consumer preference for alternative motor fuels or improvements in fuel efficiency, in the areas we serve would reduce our ability to make distributions to our unitholders. • Changes in U.S. trade policy, including the imposition of tariffs and the resulting consequences, may have a material adverse impact on our business, operating results and financial condition. • Increased attention to environmental, social and governance (“ESG”) matters and conservation measures may adversely impact our business. • Unfavorable weather conditions could adversely affect our business, financial condition and results of operations and reduce our ability to make distributions to unitholders. • We depend on four principal suppliers for the majority of our motor fuel and one principal supplier for our merchandise. • Negative events or developments associated with our branded suppliers could have an adverse impact on our revenues. • We rely on our suppliers to provide trade credit to adequately fund our ongoing operations. • We could be adversely affected by the creditworthiness and performance of our customers, suppliers and contract counterparties. • Pending or future litigation could adversely affect our financial condition and results of operations. • The dangers inherent in the storage and transport of motor fuel could cause disruptions and could expose us to potentially significant losses, costs or liabilities. • We depend on third-party transportation providers for the transportation of all of our motor fuel. • Our motor fuel sales are generated under contracts that must be renegotiated or replaced periodically. • We rely on our information technology systems and network infrastructure to manage numerous aspects of our business and could be adversely affected by the failure to protect sensitive customer, employee or vendor data. • Our debt levels and debt covenants may limit our flexibility in obtaining additional financing and in pursuing other business opportunities and our ability to make distributions to unitholders. • A continued increase in interest rates may cause the market price of our common units to decline and a significant increase in interest rates could adversely affect our ability to service our indebtedness. • We do not own all of the land on which our sites and certain facilities are located, which could result in increased costs and disruptions to our operations. • We may not be able to lease sites we own or sub-lease sites we lease on favorable terms. • We rely on DMI and Circle K to indemnify us for any costs or expenses that we incur for certain environmental liabilities and third-party claims. 11 • The Topper Group controls us and may have conflicts of interest with us.
We may not be able to affect any of these actions on satisfactory terms, or at all. A continued increase in interest rates may cause the market price of our common units to decline and a significant increase in interest rates could adversely affect our ability to service our indebtedness.
We may not be able to take any of these actions on satisfactory terms, or at all. A continued increase in interest rates may cause the market price of our common units to decline and a significant increase in interest rates could adversely affect our ability to service our indebtedness.
The amount of cash we can distribute on our common units principally depends upon the amount of cash we generate from our operations, which will fluctuate from quarter to quarter based on, among other things: • demand for motor fuel products in the markets we serve, including seasonal fluctuations, and the margin per gallon we earn selling and distributing motor fuel; • the wholesale price of motor fuel and its impact on the payment discounts we receive; • seasonal trends in the industries in which we operate; • supply, and the impact that severe storms could have to our suppliers’ and customers’ operations; • competition from other companies that sell motor fuel products or operate retail sites in our targeted market areas; • the inability to identify and acquire suitable sites or to negotiate acceptable leases for such sites; • the potential inability to obtain adequate financing to fund our expansion; • the level of our operating costs, including payments to the Topper Group under the Omnibus Agreement; • prevailing economic conditions; • regulatory actions affecting the supply of or demand for motor fuel, our operations, our existing contracts or our operating costs; and • volatility of prices for motor fuel.
The amount of cash we can distribute on our common units principally depends upon the amount of cash we generate from our operations, which will fluctuate from quarter to quarter based on, among other things: • demand for motor fuel products in the markets we serve, including seasonal fluctuations, and the margin per gallon we earn selling and distributing motor fuel; • the wholesale price of motor fuel and its impact on the payment discounts we receive; • demand for merchandise and services in the markets we serve, including seasonal fluctuations, and the margin percentage we earn; • seasonal trends in the industries in which we operate; • supply, and the impact that severe storms could have to our suppliers’ and customers’ operations; • competition from other companies that sell motor fuel products or operate retail sites in our targeted market areas; • the inability to identify and acquire suitable sites or to negotiate acceptable leases for such sites; • the potential inability to obtain adequate financing to fund our expansion; • the level of our operating costs, including payments to the Topper Group under the Omnibus Agreement; • prevailing economic conditions; • regulatory actions affecting the supply of or demand for motor fuel, our operations, our existing contracts or our operating costs; and • volatility of prices for motor fuel.
A significant change in any of these factors, including a significant decrease in consumer demand (other than typical seasonal variations), could materially affect our motor fuel and merchandise volumes, motor fuel gross profit and overall customer traffic, which in turn could have a material adverse effect on our business, financial condition, results of operations and cash available for distribution to our unitholders. 16 Both the wholesale motor fuel distribution and the retail motor fuel industries are characterized by intense competition and fragmentation, and our failure to effectively compete could adversely affect our business, financial condition and results of operations and reduce our ability to make distributions to unitholders.
A significant change in any of these factors, including a significant decrease in consumer demand (other than typical seasonal variations), could materially affect our motor fuel and merchandise volumes, motor fuel gross profit and overall customer traffic, which in turn could have a material adverse effect on our business, financial condition, results of operations and cash available for distribution to our unitholders. 15 Both the wholesale motor fuel distribution and the retail motor fuel industries are characterized by intense competition and fragmentation, and our failure to effectively compete could adversely affect our business, financial condition and results of operations and reduce our ability to make distributions to unitholders.
If we are unable to make acquisitions on economically acceptable terms, our future growth and ability to increase distributions to unitholders will be limited. In addition, if we consummate any future acquisitions, our capitalization and results of operations may change significantly.
If we are unable to make acquisitions on economically acceptable terms, our future growth and ability to increase distributions to unitholders will likely be limited. In addition, if we consummate any future acquisitions, our capitalization and results of operations may change significantly.
Our operations are subject to a variety of environmental laws and regulations, including those relating to emissions to the air (such as the federal Clean Air Act), discharges into water (such as the federal Clean Water Act), releases of hazardous and toxic substances and remediation of contaminated sites (such as the Comprehensive Environmental Response Compensation and Liability Act of 1980 (“CERCLA”)), and similar state and local laws and regulations. 19 Under CERCLA, we may, as the owner or operator, be liable for the costs of removal or remediation of contamination at our current locations or our former locations, whether or not we knew of, or were responsible for, the presence of such contamination.
Our operations are subject to a variety of environmental laws and regulations, including those relating to emissions to the air (such as the federal Clean Air Act), discharges into water (such as the federal Clean Water Act), releases of hazardous and toxic substances and remediation of contaminated sites (such as the Comprehensive Environmental Response Compensation and Liability Act of 1980 (“CERCLA”)), and similar state and local laws and regulations. 18 Under CERCLA, we may, as the owner or operator, be liable for the costs of removal or remediation of contamination at our current locations or our former locations, whether or not we knew of, or were responsible for, the presence of such contamination.
This effectively permits a “change of control” without the vote or consent of the unitholders. 31 Our General Partner has a call right that may require unitholders to sell their common units at an undesirable time or price.
This effectively permits a “change of control” without the vote or consent of the unitholders. Our General Partner has a call right that may require unitholders to sell their common units at an undesirable time or price.
By purchasing a common unit, a unitholder is treated as having consented to the provisions in the Partnership Agreement, including the provisions discussed above. 30 Our General Partner’s affiliates, including the Topper Group, may compete with us.
By purchasing a common unit, a unitholder is treated as having consented to the provisions in the Partnership Agreement, including the provisions discussed above. Our General Partner’s affiliates, including the Topper Group, may compete with us.
However, a change in our business, or a change in current law, could also cause us to be treated as a corporation for U.S. federal income tax purposes or otherwise subject us to entity-level taxation.
However, a substantial change in our business, or a change in current U.S. federal income tax law, could also cause us to be treated as a corporation for U.S. federal income tax purposes or otherwise subject us to entity-level taxation.
Examples of other general economic, financial and political risks include: • a general or prolonged decline in, or shocks to, regional or broader macro-economics; • regulatory changes that could impact the markets in which we operate, which could reduce demand for our goods and services or lead to pricing, currency, or other pressures; and 17 • deflationary economic pressures, which could hinder our ability to operate profitably in view of the challenges inherent in making corresponding deflationary adjustments to our cost structure.
Examples of other general economic, financial and political risks include: • a general or prolonged decline in, or shocks to, regional or broader macro-economics; • regulatory changes that could impact the markets in which we operate, which could reduce demand for our goods and services or lead to pricing, currency, or other pressures; and 16 • deflationary economic pressures, which could hinder our ability to operate profitably in view of the challenges inherent in making corresponding deflationary adjustments to our cost structure.
Sustained fuel volume decreases and less foot traffic would adversely impact our dealer operated locations which could potentially pose increased credit risks or trigger a default under our fuel supply and lease agreements. We do not have fleet operations but rely on common carriers to distribute and deliver our products.
Sustained fuel volume decreases and less foot traffic would adversely impact our dealer operated locations which could potentially pose increased credit risks or trigger a default under our fuel supply and lease agreements. Also, we do not have fleet operations but rather rely on common carriers to distribute and deliver our products.
Inclement weather conditions could damage our facilities, our suppliers or could have a significant impact on consumer behavior, travel and retail site traffic patterns as well as our ability to operate our retail sites. We could also be affected by regional occurrences, such as energy shortages or increases in energy prices, fires or other natural disasters.
Inclement weather conditions could damage our facilities or those of our suppliers or could have a significant impact on consumer behavior, travel and retail site traffic patterns as well as our ability to operate our retail sites. We could also be affected by regional occurrences, such as energy shortages or increases in energy prices, fires or other natural disasters.
Increasing attention to climate change, societal expectations on companies to address climate change and other ESG matters, investor and societal expectations regarding voluntary ESG disclosures, and consumer demand for alternative forms of energy may result in increased costs, reduced demand for our products, reduced profits, increased investigations and litigation, and negative impacts on our unit price and access to capital markets.
Increasing attention to climate change, societal expectations on companies to address climate change and other ESG matters, investor and societal expectations regarding voluntary or required ESG disclosures, and consumer demand for alternative forms of energy may result in increased costs, reduced demand for our products, reduced profits, increased investigations and litigation, and negative impacts on our unit price and access to capital markets.
Our Partnership Agreement does not require us to pay any distributions at all. • We rely on the employees of the Topper Group to provide key management services to our business pursuant to the Omnibus Agreement. • Our General Partner has limited liability regarding our obligations. • If we distribute a significant portion of our cash available for distribution to our partners, our ability to grow and make acquisitions could be limited. • Our Partnership Agreement replaces, eliminates and modifies, as applicable, the duties, including the fiduciary duties, of our General Partner, the Board or any committee thereof, and modifies the burden of proof in any action brought against the General Partner, the Board or any committee thereof. • Our General Partner’s affiliates, including the Topper Group, may compete with us. • Holders of our common units have limited voting rights. • Our General Partner interest or the control of our General Partner may be transferred to a third party without unitholder consent, and our General Partner has a call right that may require unitholders to sell their common units at an undesirable time or price. • The market price of our common units could be adversely affected by sales of substantial amounts of our common units in the public or private markets, including sales by the Topper Group or other large holders. • We may issue unlimited additional units without unitholder approval, which would dilute existing unitholder ownership interests, and our General Partner’s discretion in establishing cash reserves may reduce the amount of cash available for distribution to unitholders. • Our Partnership Agreement restricts the voting rights of unitholders owning 20% or more of our common units. • Management fees and cost reimbursements due to our General Partner and the Topper Group for services provided to us or on our behalf will reduce cash available for distribution to our unitholders. • Our tax treatment depends in large part on our status as a partnership for U.S. federal income tax purposes. • We have subsidiaries that are treated as corporations for U.S. federal income tax purposes and are subject to entity-level U.S. federal, state and local income and franchise tax. • The tax treatment of publicly traded partnerships or an investment in our common units could be subject to potential legislative, judicial or administrative changes and differing interpretations, possibly on a retroactive basis. • Our unitholders are required to pay taxes on their share of income from us even if they do not receive any cash distributions from us. • Unitholders may be subject to limitation on their ability to deduct interest expense incurred by us. • Tax gain or loss on the disposition of our common units could be more or less than expected. • Tax-exempt organizations and non-U.S. persons face unique tax issues from owning common units that may result in adverse tax consequences to them. • Our unitholders are subject to state and local income taxes and return filing requirements in states and localities where they do not live as a result of investing in our common units. • We will treat each purchaser of our common units as having the same tax characteristics on a per-unit basis without regard to the actual common units purchased. • We prorate our items of income, gain, loss and deduction for U.S. federal income tax purposes and allocate them between transferors and transferees of our common units each month based upon the ownership of our common units on the first business day of each month and as of the opening of the applicable exchange on which our common units are listed, instead of on the basis of the date a particular common unit is transferred. • If a unitholder loans their common units to a short seller to cover a short sale of common units, they may be considered to have disposed of those common units for U.S. federal income tax purposes. 13 • We have adopted certain valuation methodologies that may result in a shift of income, gain, loss and deduction between our General Partner and the unitholders. • If the IRS makes audit adjustments to our income tax returns for tax years beginning after 2017, it (and some states) may assess and collect any resulting taxes (including any applicable penalties and interest) directly from us, in which case we may require our unitholders and former unitholders to reimburse us for such taxes (including any applicable penalties or interest) or, if we are required to bear such payment, our cash available for distribution to our unitholders might be substantially reduced.
Our Partnership Agreement does not require us to pay any distributions at all. • We rely on the employees of the Topper Group to provide key management services to our business pursuant to the Omnibus Agreement. • Our General Partner has limited liability regarding our obligations. • If we distribute a significant portion of our cash available for distribution to our partners, our ability to grow and make acquisitions could be limited. • Our Partnership Agreement replaces, eliminates and modifies, as applicable, the duties, including the fiduciary duties, of our General Partner, the Board or any committee thereof, and modifies the burden of proof in any action brought against the General Partner, the Board or any committee thereof. • Our General Partner’s affiliates, including the Topper Group, may compete with us. • Holders of our common units have limited voting rights. • Our General Partner interest or the control of our General Partner may be transferred to a third party without unitholder consent, and our General Partner has a call right that may require unitholders to sell their common units at an undesirable time or price. • The market price of our common units could be adversely affected by sales of substantial amounts of our common units in the public or private markets, including sales by the Topper Group or other large holders. • We may issue unlimited additional units without unitholder approval, which would dilute existing unitholder ownership interests, and our General Partner’s discretion in establishing cash reserves may reduce the amount of cash available for distribution to unitholders. • Our Partnership Agreement restricts the voting rights of unitholders owning 20% or more of our common units. • Management fees and cost reimbursements due to our General Partner and the Topper Group for services provided to us or on our behalf will reduce cash available for distribution to our unitholders. • Our tax treatment depends in large part on our status as a partnership for U.S. federal income tax purposes. • We have subsidiaries that are treated as corporations for U.S. federal income tax purposes and are subject to entity-level U.S. federal, state and local income and franchise tax. • The tax treatment of publicly traded partnerships or an investment in our common units could be subject to potential legislative, judicial or administrative changes and differing interpretations, possibly on a retroactive basis. • Our unitholders are required to pay taxes on their share of income from us even if they do not receive any cash distributions from us. • Unitholders may be subject to limitation on their ability to deduct interest expense incurred by us. • Tax gain or loss on the disposition of our common units could be more or less than expected. • Tax-exempt organizations and non-U.S. persons face unique tax issues from owning common units that may result in adverse tax consequences to them. • Our unitholders are subject to state and local income taxes and return filing requirements in states and localities where they do not live as a result of investing in our common units. • We will treat each purchaser of our common units as having the same tax characteristics on a per-unit basis without regard to the actual common units purchased. • We prorate our items of income, gain, loss and deduction for U.S. federal income tax purposes and allocate them between transferors and transferees of our common units each month based upon the ownership of our common units on the first business day of each month and as of the opening of the applicable exchange on which our common units are listed, instead of on the basis of the date a particular common unit is transferred. • If a unitholder loans their common units to a short seller to cover a short sale of common units, they may be considered to have disposed of those common units for U.S. federal income tax purposes. • We have adopted certain valuation methodologies that may result in a shift of income, gain, loss and deduction between our General Partner and the unitholders. • If the IRS makes audit adjustments to our income tax returns for tax years beginning after 2017, it (and some states) may assess and collect any resulting taxes (including any applicable penalties and interest) directly from us, in which case we may require our unitholders and former unitholders to reimburse us for such taxes (including any applicable penalties or interest) or, if we are required to bear such payment, our cash available for distribution to our unitholders might be substantially reduced. 12 Risks Relating to Our Industry and Our Business We may not have sufficient distributable cash from operations to enable us to pay our quarterly distribution following the establishment of cash available for distribution and payment of fees and expenses.
Erosion of the value of those brands could have an adverse impact on the volumes of motor fuel we distribute, which in turn could have a material adverse effect on our business, financial condition, results of operations and ability to make distributions to our unitholders. We rely on our suppliers to provide trade credit to adequately fund our ongoing operations.
Erosion of the value of those brands could have an adverse impact on the volumes of motor fuel we sell, which in turn could have a material adverse effect on our business, financial condition, results of operations and ability to make distributions to our unitholders. We rely on our suppliers to provide trade credit to adequately fund our ongoing operations.
If we are unable to procure product or recover these costs through increased sales, our ability to meet our financial obligations could be adversely affected. Failure to comply with these regulations could result in substantial penalties. 23 Our motor fuel sales are generated under contracts that must be renegotiated or replaced periodically.
If we are unable to procure product or recover these costs through increased sales, our ability to meet our financial obligations could be adversely affected. Failure to comply with these regulations could result in substantial penalties. 22 Our motor fuel sales are generated under contracts that must be renegotiated or replaced periodically.
Such determination can affect the amount of cash available for distribution to our unitholders; • our General Partner may cause us to borrow funds in order to permit the payment of cash distributions, even if the purpose or effect of the borrowing is to make incentive distributions; • our Partnership Agreement permits us to distribute up to $15 million as operating surplus, even if it is generated from asset sales, non-working capital borrowings or other sources that would otherwise constitute capital surplus; • our Partnership Agreement does not restrict our General Partner from causing us to pay it or its affiliates for any services rendered to us or entering into additional contractual arrangements with its affiliates on our behalf; • our General Partner intends to limit its liability regarding our contractual and other obligations; • our General Partner may exercise its right to call and purchase our common units if it and its affiliates own more than 80% of our common units; • our General Partner controls the enforcement of obligations that it and its affiliates owe to us; and • our General Partner decides whether to retain separate counsel, accountants or others to perform services for us.
Such determination can affect the amount of cash available for distribution to our unitholders; • our General Partner may cause us to borrow funds in order to permit the payment of cash distributions; • our Partnership Agreement permits us to distribute up to $15 million as operating surplus, even if it is generated from asset sales, non-working capital borrowings or other sources that would otherwise constitute capital surplus; • our Partnership Agreement does not restrict our General Partner from causing us to pay it or its affiliates for any services rendered to us or entering into additional contractual arrangements with its affiliates on our behalf; • our General Partner intends to limit its liability regarding our contractual and other obligations; • our General Partner may exercise its right to call and purchase our common units if it and its affiliates own more than 80% of our common units; • our General Partner controls the enforcement of obligations that it and its affiliates owe to us; and • our General Partner decides whether to retain separate counsel, accountants or others to perform services for us.
Such reduction, if approved by the IRS, will be binding on any affected unitholders. ITEM 1B. UNRESOLVED STAFF COMMENTS None.
Such reduction, if approved by the IRS, will be binding on any affected unitholders. 36 ITEM 1B. UNRESOLVED STAFF COMMENTS None.
These developments could potentially have a material adverse effect on our business, financial condition, results of operations and cash available for distribution to our unitholders. 20 Changes in U.S. trade policy, including the imposition of tariffs and the resulting consequences, may have a material adverse impact on our business, operating results and financial condition.
These developments could potentially have a material adverse effect on our business, financial condition, results of operations and cash available for distribution to our unitholders. 19 Changes in U.S. trade policy, including the imposition of tariffs and the resulting consequences, may have a material adverse impact on our business, operating results and financial condition.
We may elect to conduct additional operations through these corporate subsidiaries in the future. These corporate subsidiaries are subject to corporate-level taxes, at the corporate tax rate, which is currently 21%, and will also likely be subject to state (and possibly local) income tax at varying rates, on their taxable income.
We may elect to conduct additional operations through these corporate subsidiaries in the future. These corporate subsidiaries are subject to corporate-level taxes at the corporate tax rate, which is currently 21% for federal taxes, and will also likely be subject to state (and possibly local) income tax at varying rates, on their taxable income.
We have subsidiaries that are treated as corporations for U.S. federal income tax purposes and are subject to entity-level U.S. federal, state and local income and franchise tax. We conduct a portion of our operations and business through one or more direct and indirect subsidiaries (including LGWS) that are treated as C corporations for U.S. federal income tax purposes.
We have subsidiaries that are treated as corporations for U.S. federal income tax purposes and are subject to entity-level U.S. federal, state and local income and franchise tax. We conduct a portion of our operations and business through one or more direct and indirect subsidiaries that are treated as C corporations for U.S. federal income tax purposes.
Contracts with longer payment cycles or difficulties in enforcing contracts or collecting accounts receivable could lead to material fluctuations in our cash flows and could adversely impact our business, financial condition and results of operations. 22 Pending or future litigation could adversely affect our financial condition and results of operations.
Contracts with longer payment cycles or difficulties in enforcing contracts or collecting accounts receivable could lead to material fluctuations in our cash flows and could adversely impact our business, financial condition and results of operations. 21 Pending or future litigation could adversely affect our financial condition and results of operations.
Increased attention to environmental, social and governance (“ESG”) matters and conservation measures may adversely impact our business.
Increased attention to environmental, social and governance matters and conservation measures may adversely impact our business.
We believe that the success of our operations is dependent, in part, on the continuing favorable reputation, market value, and name recognition associated with the branded motor fuel sold through our wholesale segment and retail segment.
We believe that the success of our operations is dependent, in part, on the continuing favorable reputation, market value and name recognition associated with the branded motor fuel sold through our wholesale and retail segments.
A change of motor fuel suppliers, a disruption in supply or a significant change in pricing with any of these suppliers could have a material adverse effect on our business, financial condition, results of operations and cash available for distribution to our unitholders. Negative events or developments associated with our branded suppliers could have an adverse impact on our revenues.
A change of supplier, a disruption in supply or a significant change in pricing with any of these suppliers could have a material adverse effect on our business, financial condition, results of operations and cash available for distribution to our unitholders. Negative events or developments associated with our branded suppliers could have an adverse impact on our revenues.
Failure to attract and retain these individuals at reasonable compensation levels could have a material adverse effect on our business, financial condition, results of operations and cash available for distribution to our unitholders. We depend on four principal suppliers for the majority of our motor fuel.
Failure to attract and retain these individuals at reasonable compensation levels could have a material adverse effect on our business, financial condition, results of operations and cash available for distribution to our unitholders. We depend on four principal suppliers for the majority of our motor fuel and one principal supplier for our merchandise.
We are exposed to risk related to the creditworthiness and performance of our customers, suppliers and contract counterparties. As of December 31, 2022, we had outstanding accounts receivable totaling $32 million.
We are exposed to risk related to the creditworthiness and performance of our customers, suppliers and contract counterparties. As of December 31, 2023, we had outstanding accounts receivable totaling $32 million.
Reduced demand for our common units resulting from investors seeking other more favorable investment opportunities may cause the trading price of our common units to decline. The interest rate on our credit facilities is variable; therefore, we have exposure to movements in interest rates, subject to our interest rate swap contracts.
Reduced demand for our common units resulting from investors seeking other more favorable investment opportunities may cause the trading price of our common units to decline. The interest rate on the CAPL Credit Facility is variable; therefore, we have exposure to movements in interest rates, subject to our interest rate swap contracts.
The previous U.S. presidential administration indicated its intent to adopt a new approach to trade policy. For example, in 2018, the U.S. government reached a new trade agreement with the Canadian and Mexican governments to replace the North America Free Trade Agreement with the United States-Mexico-Canada Agreement.
The previous U.S. presidential administration indicated its intent to adopt a new approach to trade policy. For example, in 2018, the U.S. government reached a new trade agreement with the Canadian and Mexican governments that replaced the North America Free Trade Agreement with the United States-Mexico-Canada Agreement.
We depend on our information technology (“IT”) systems and network infrastructure to manage numerous aspects of our business and provide analytical information to management. These systems are an essential component of our business and growth strategies, and a serious disruption to them could significantly limit our ability to manage and operate our business efficiently.
We depend on our IT systems and network infrastructure to manage numerous aspects of our business and provide analytical information to management. These systems are an essential component of our business and growth strategies, and a serious disruption to them could significantly limit our ability to manage and operate our business efficiently.
Like all equity investments, an investment in our common units is subject to certain risks. Borrowings under the credit facilities bear interest at variable rates, subject to interest rate swap contracts we entered into to hedge future changes in variable rates.
Like all equity investments, an investment in our common units is subject to certain risks. Borrowings under the CAPL Credit Facility bear interest at variable rates, subject to interest rate swap contracts we entered into to hedge future changes in variable rates.
For example, federal, state and local governmental actions restricting the ability of our customers to essential travel only, adversely impacts consumption of fuel. Sustained limitation on travel, or a general reluctance to travel due to a health crisis, adversely impacts our fuel volumes.
For example, federal, state and local governmental actions restricting the ability of our customers to essential travel only, would adversely impact consumption of fuel. Sustained limitation on travel, or a general reluctance to travel due to a health crisis, would adversely impact our fuel volumes.
The operating and financial restrictions and covenants in our credit facilities and any future financing agreements could adversely affect our ability to finance future operations or capital needs or to engage, expand or pursue our business activities.
The operating and financial restrictions and covenants in the CAPL Credit Facility and any future financing agreements could adversely affect our ability to finance future operations or capital needs or to engage, expand or pursue our business activities.
Our Partnership Agreement provides that if a law is enacted or existing law is modified or interpreted in a manner that results in us becoming subject to either: (a) entity-level taxation for U.S. federal, state, local and/or foreign income and/or withholding tax purposes to which we were not subject prior to such enactment, modification or interpretation, and/or (b) an increased amount of one or more of such taxes (including as a result of an increase in tax rates), then the minimum quarterly distribution amounts and the target distribution amounts may be adjusted (i.e., reduced) to reflect the impact of that law on us.
Imposition of any additional such taxes on us or an increase in the existing tax rates would reduce the cash available for distribution to our unitholders. 32 Our Partnership Agreement provides that if a law is enacted or existing law is modified or interpreted in a manner that results in us becoming subject to either: (a) entity-level taxation for U.S. federal, state, local and/or foreign income and/or withholding tax purposes to which we were not subject prior to such enactment, modification or interpretation, and/or (b) an increased amount of one or more of such taxes (including as a result of an increase in tax rates), then the minimum quarterly distribution amounts and the target distribution amounts may be adjusted (i.e., reduced) to reflect the impact of that law on us.
Further, our ability to insure these locations and the related cost of such insurance coverage could have a material adverse effect on our business, financial condition, results of operations and cash available for distribution to our unitholders. 21 Additionally, many studies have discussed the relationship between GHG emissions and climate change.
Further, our ability to insure these locations and the related cost of such insurance coverage could have a material adverse effect on our business, financial condition, results of operations and cash available for distribution to our unitholders. 20 Additionally, many studies have discussed the relationship between greenhouse gas emissions and climate change.
Volatility in the price of crude oil, and subsequently wholesale motor fuel prices, is caused by many factors, including general political, regulatory and economic conditions, acts of war, terrorism or armed conflict, instability in oil producing regions, particularly in the Middle East and South America, and the value of U.S. dollars relative to other foreign currencies, particularly those of oil producing nations.
Volatility in the price of crude oil, and subsequently wholesale motor fuel prices, is caused by many factors, including general political, regulatory and economic conditions, acts of war, including as a result of the conflict in Ukraine or the war between Israel and Hamas, terrorism or armed conflict, instability in oil producing regions, particularly in the Middle East and South America, and the value of U.S. dollars relative to other foreign currencies, particularly those of oil producing nations.
Any acquisitions involve potential risks, including, among other things: • the validity of our assumptions about revenues, demand, capital expenditures and operating costs of the acquired business or assets, as well as assumptions about achieving synergies with our existing business; • the incurrence of substantial unforeseen environmental and other liabilities arising out of the acquired businesses or assets, including liabilities arising from the operation of the acquired businesses or assets prior to our acquisition, for which we are not indemnified or for which the indemnity is inadequate; • the costs associated with additional debt or equity capital, which may result in a significant increase in our interest expense and financial leverage resulting from any additional debt incurred to finance the acquisition, or the issuance of additional common units on which we will make distributions, either of which could offset the expected accretion to our unitholders from any such acquisition and could be exacerbated by volatility in the equity or debt capital markets; • a failure to realize anticipated benefits, such as increased available distributable cash flow, an enhanced competitive position or new customer relationships; • the inability to timely and effectively integrate the operations of recently acquired businesses or assets, particularly those in new geographic areas or in new lines of business; • unforeseen difficulties operating in new and existing product areas or new and existing geographic areas; • a decrease in our liquidity by using a significant portion of our available cash or borrowing capacity to finance the acquisition; • the incurrence of other significant charges, such as impairment of goodwill or other intangible assets, asset devaluation or restructuring charges; • performance from the acquired assets and businesses that is below the forecasts we used in evaluating the acquisition; 15 • a significant increase in our working capital requirements; • competition in our targeted market areas; • customer or key employee loss from the acquired businesses and the inability to hire, train or retain qualified personnel to manage and operate such acquired businesses; and • diversion of our management’s attention from other business concerns.
Any acquisitions involve potential risks, including, among other things: • the validity of our assumptions about revenues, demand, capital expenditures and operating costs of the acquired business or assets, as well as assumptions about achieving synergies with our existing business; • the incurrence of substantial unforeseen environmental and other liabilities arising out of the acquired businesses or assets, including liabilities arising from the operation of the acquired businesses or assets prior to our acquisition, for which we are not indemnified or for which the indemnity is inadequate; • the costs associated with additional debt or equity capital, which may result in a significant increase in our interest expense and financial leverage resulting from any additional debt incurred to finance the acquisition, or the issuance of additional common units on which we will make distributions, either of which could offset the expected accretion to our unitholders from any such acquisition and could be exacerbated by volatility in the equity or debt capital markets; • a failure to realize anticipated benefits, such as increased available distributable cash flow, an enhanced competitive position or new customer relationships; • the inability to timely and effectively integrate the operations of recently acquired businesses or assets, particularly those in new geographic areas or in new lines of business; • unforeseen difficulties operating in new and existing product areas or new and existing geographic areas; • a decrease in our liquidity by using a significant portion of our available cash or borrowing capacity to finance the acquisition; • the incurrence of other significant charges, such as impairment of goodwill or other intangible assets, asset devaluation or restructuring charges; • performance from the acquired assets and businesses that is below the forecasts we used in evaluating the acquisition; • a significant increase in our working capital requirements; • competition in our targeted market areas; • customer or key employee loss from the acquired businesses and the inability to hire, train or retain qualified personnel to manage and operate such acquired businesses; and • diversion of our management’s attention from other business concerns. 14 In addition, our ability to purchase or lease additional sites involves certain potential risks, including the inability to identify and acquire suitable sites or to negotiate acceptable leases or subleases for such sites and difficulties in adapting our distribution and other operational and management systems to an expanded network of sites.
The General Partner may reduce cash available for distribution by establishing cash reserves for the proper conduct of our business, to comply with applicable law or agreements to which we are a party or to provide funds for future distributions to partners.
The General Partner may reduce cash available for distribution by establishing cash reserves for the proper conduct of our business, to comply with applicable law or agreements to which we are a party or to provide funds for future distributions to partners. These cash reserves will affect the amount of cash available for distribution to unitholders.
We rely on Circle K to indemnify us for any costs or expenses that we incur for environmental liabilities and third-party claims, regardless of when a claim is made, that are based on environmental conditions in existence prior to the closing of the asset exchanges with Circle K and the CST Fuel Supply Exchange.
We rely on Circle K to indemnify us for any costs or expenses that we incur for environmental liabilities and third-party claims, regardless of when a claim is made, that are based on environmental conditions in existence prior to the closing of the various asset exchange transactions with Circle K.
If our General Partner exercised its call right, the effect would be to take us private and, following the deregistering of the units, we would no longer be subject to the reporting requirements of the Exchange Act. As of February 23, 2023, the Topper Group beneficially owned approximately 38.5% of our outstanding common units.
If our General Partner exercised its call right, the effect would be to take us private and, following the deregistering of the units, we would no longer be subject to the reporting requirements of the Exchange Act. As of February 22, 2024, the Topper Group beneficially owned approximately 38.6% of our outstanding common units.
In addition, the actual amount of cash we will have available for distribution will depend on other factors such as: • the level and timing of capital expenditures we make; • the restrictions contained in our credit facilities; • our debt service requirements and other liabilities; • the cost of acquisitions, if any; • fluctuations in our working capital needs; • our ability to borrow under our credit facilities and access capital markets on favorable terms, or at all; and • the amount, if any, of cash reserves established by our General Partner in its discretion.
In addition, the actual amount of cash we will have available for distribution will depend on other factors such as: • the level and timing of capital expenditures we make; • the level and timing of sales of sites in connection with our real estate optimization plan; • the restrictions contained in our credit facilities; • our debt service requirements and other liabilities; • the cost of acquisitions, if any; • fluctuations in our working capital needs; • our ability to borrow under the CAPL Credit Facility and access capital markets on favorable terms, or at all; and • the amount, if any, of cash reserves established by our General Partner in its discretion.
Risk Factor Summary Below is a summary of our risk factors: • We may not have sufficient distributable cash from operations to enable us to pay our quarterly distributions. • If we are unable to make acquisitions on economically acceptable terms, our future growth and ability to increase distributions to unitholders will be limited, and any acquisitions are subject to substantial risks. • Volatility in crude oil and wholesale motor fuel costs affect our business, financial condition and results of operations and our ability to make distributions to unitholders. • Seasonality in wholesale motor fuel costs and sales, as well as merchandise sales, affect our business, financial condition and results of operations and our ability to make distributions to unitholders. • Both the wholesale motor fuel distribution and the retail motor fuel industries are characterized by intense competition and fragmentation. • Changes in credit or debit card expenses could reduce our gross profit, especially on motor fuel sold at company-operated retail sites. • New entrants or increased competition in the convenience store industry could result in reduced gross profits. • General economic, financial and political conditions that are largely out of our control could adversely affect our business, financial condition and results of operations and reduce our ability to make distributions to unitholders. • Changes in consumer behavior and travel as a result of changing economic conditions, labor strikes or otherwise could adversely affect our business, financial condition and results of operations and reduce our ability to make distributions to unitholders. • Broad-based business or economic disruptions caused by health crises could adversely affect our business, financial condition, results of operations or cash available for distribution to our unitholders. • A shortage of qualified labor could have a material adverse effect on our business and results of operations. • We are subject to extensive government laws and regulations concerning store merchandise items, operations, employees, environmental matters and product quality specifications of motor fuel that we distribute and sell.
Also, please read “Cautionary Statement Regarding Forward-Looking Statements.” Limited partner interests are inherently different from the capital stock of a corporation although many of the business risks to which we are subject are similar to those that would be faced by a corporation engaged in a similar business. 10 Risk Factor Summary Below is a summary of our risk factors: • We may not have sufficient distributable cash from operations to enable us to pay our quarterly distributions. • If we are unable to make acquisitions on economically acceptable terms, our future growth and ability to increase distributions to unitholders will be limited, and any acquisitions are subject to substantial risks. • Volatility in crude oil and wholesale motor fuel costs affect our business, financial condition and results of operations and our ability to make distributions to unitholders. • Seasonality in wholesale motor fuel costs and sales, as well as merchandise sales, affect our business, financial condition and results of operations and our ability to make distributions to unitholders. • Both the wholesale motor fuel distribution and the retail motor fuel industries are characterized by intense competition and fragmentation. • Changes in credit or debit card expenses could reduce our gross profit, especially on motor fuel sold at company-operated retail sites. • New entrants or increased competition in the convenience store industry could result in reduced gross profits. • General economic, financial and political conditions that are largely out of our control could adversely affect our business, financial condition and results of operations and reduce our ability to make distributions to unitholders. • Changes in consumer behavior and travel as a result of changing economic conditions, labor strikes or otherwise could adversely affect our business, financial condition and results of operations and reduce our ability to make distributions to unitholders. • Broad-based business or economic disruptions caused by health crises could adversely affect our business, financial condition, results of operations or cash available for distribution to our unitholders. • A shortage of qualified labor could have a material adverse effect on our business and results of operations. • We are subject to extensive government laws and regulations concerning store merchandise items, operations, employees, environmental matters and product quality specifications of motor fuel that we distribute and sell.
As of February 23, 2023, the Topper Group beneficially owned approximately 38.5% of our outstanding common units. Our General Partner interest or the control of our General Partner may be transferred to a third party without unitholder consent.
As of February 22, 2024, the Topper Group beneficially owned approximately 38.6% of our outstanding common units. Our General Partner interest or the control of our General Partner may be transferred to a third party without unitholder consent.
Volatility in crude oil and wholesale motor fuel costs affect our business, financial condition and results of operations and our ability to make distributions to unitholders. For 2022, motor fuel revenues accounted for 92% of our total revenues and motor fuel gross profit accounted for 59% of total gross profit.
Volatility in crude oil and wholesale motor fuel costs affect our business, financial condition and results of operations and our ability to make distributions to unitholders. For 2023, motor fuel revenues accounted for 90% of our total revenues and motor fuel gross profit accounted for 55% of total gross profit.
The Asset Exchange Agreement and related agreements provide that Circle K must indemnify us for any costs or expenses that we incur for environmental liabilities and third-party claims, regardless of when a claim is made, that are based on environmental conditions in existence prior to the closing of the asset exchanges with Circle K and the CST Fuel Supply Exchange.
The agreements associated with the various asset exchange transactions provide that Circle K must indemnify us for any costs or expenses that we incur for environmental liabilities and third-party claims, regardless of when a claim is made, that are based on environmental conditions in existence prior to the closing of the asset exchange transactions with Circle K.
We may issue unlimited additional units without unitholder approval, which would dilute existing unitholder ownership interests. Our Partnership Agreement does not limit the number of additional limited partner interests, including limited partner interests that rank senior to the common units that we may issue at any time without the approval of our unitholders.
Our Partnership Agreement does not limit the number of additional limited partner interests, including limited partner interests that rank senior to the common units that we may issue at any time without the approval of our unitholders.
The market price of our common units could be adversely affected by sales of substantial amounts of our common units in the public or private markets, including sales by the Topper Group or other large holders. As of February 23, 2023, we had 37,937,604 common units outstanding.
The market price of our common units could be adversely affected by sales of substantial amounts of our common units in the public or private markets, including sales by the Topper Group or other large holders. As of February 22, 2024, we had 37,983,154 common units outstanding.
Under the Tax Cuts and Jobs Act, for taxable years beginning after December 31, 2017, our deduction for “business interest” is limited to the sum of our business interest income and 30% of our “adjusted taxable income.” For purposes of this limitation, our adjusted taxable income is computed without regard to any business interest expense or business interest income, and in the case of taxable years beginning before January 1, 2022, any deduction allowable for depreciation, amortization or depletion. 35 Tax gain or loss on the disposition of our common units could be more or less than expected.
Under the Tax Cuts and Jobs Act, for taxable years beginning after December 31, 2017, our deduction for “business interest” is limited to the sum of our business interest income and 30% of our “adjusted taxable income.” For purposes of this limitation, our adjusted taxable income is computed without regard to any business interest expense or business interest income, and in the case of taxable years beginning before January 1, 2022, any deduction allowable for depreciation, amortization or depletion.
Second, under the Tax Cuts and Jobs Act, the partner may also deduct from the partnership’s taxable income allocable to such partner an amount equal to 20% of such qualified business income (subject to certain limits), resulting in a lower effective tax rate for the partner with respect to the partnership’s income.
Second, under the Tax Cuts and Jobs Act, for taxable years beginning after December 31, 2017, and before January 1, 2026, the partner may also deduct from the partnership’s taxable income allocable to such partner an amount equal to 20% of such qualified business income (subject to certain limits), resulting in a lower effective tax rate for the partner with respect to the partnership’s income.
Conflicts of interest may arise in the future between us and our unitholders, on the one hand, and the affiliates of our General Partner and the Topper Group, on the other hand. In resolving these conflicts, the Topper Group may favor its own interests over the interests of our unitholders.
Conflicts of interest may arise in the future between us and our unitholders, on the one hand, and the affiliates of our General Partner and the Topper Group, on the other hand.
However, the Topper Group, as the owner of our General Partner, or the Board may change such policy at any time at their discretion and could elect not to pay distributions for one or more quarters.
However, the Topper Group, as the owner of our General Partner, or the Board may change such policy at any time at their discretion and could elect not to pay distributions for one or more quarters. In addition, the CAPL Credit Facility includes specified restrictions on our ability to make distributions.
As such, we are subject to the possibility that we are unable to renew such leases or are only able to do so with increased costs or more onerous terms, which could have a material adverse effect on our business, financial condition, results of operations and cash available for distribution to our unitholders.
As such, we are subject to the possibility that we are unable to renew such leases or are only able to do so with increased costs or more onerous terms, which could have a material adverse effect on our business, financial condition, results of operations and cash available for distribution to our unitholders. 25 We may not be able to lease sites we own or sub-lease sites we lease on favorable terms and any such failure could adversely affect our business, financial condition and results of operations and reduce our ability to make distributions to unitholders.
A disruption in supply or a change in our relationship with any one of them could adversely affect our business, financial condition and results of operations and reduce our ability to make distributions to unitholders. In 2022, our wholesale business purchased approximately 81% of its motor fuel from four suppliers.
A disruption in supply or a change in our relationship with any one of them could adversely affect our business, financial condition and results of operations and reduce our ability to make distributions to unitholders.
It is also possible that we will operate the site until the dealer is replaced or indefinitely. We rely on our information technology systems and network infrastructure to manage numerous aspects of our business, and a disruption of these systems could adversely affect our business, financial condition and results of operations and reduce our ability to make distributions to unitholders.
We rely on our information technology ("IT") systems and network infrastructure to manage numerous aspects of our business, and a disruption of these systems could adversely affect our business, financial condition and results of operations and reduce our ability to make distributions to unitholders.
A unitholder’s share of our taxable income, and its relationship to any distributions we make, may be affected by a variety of factors, including our economic performance, which may be affected by numerous business, economic, regulatory, legislative, competitive and political uncertainties beyond our control, and certain transactions in which we might engage.
Our unitholders may not receive cash distributions from us equal to their share of our taxable income or even equal to the actual tax due with respect to that income. 33 A unitholder’s share of our taxable income, and its relationship to any distributions we make, may be affected by a variety of factors, including our economic performance, which may be affected by numerous business, economic, regulatory, legislative, competitive and political uncertainties beyond our control, and certain transactions in which we might engage.
In addition, our obligations under our credit facilities will be secured by substantially all of our assets, and if we are unable to repay our indebtedness under our credit facilities, the lenders could seek to foreclose on such assets. 26 We do not own all of the land on which our sites and certain facilities are located, which could result in increased costs and disruptions to our operations.
In addition, our obligations under our credit facilities will be secured by substantially all of our assets, and if we are unable to repay our indebtedness under our credit facilities, the lenders could seek to foreclose on such assets.
It also could affect the amount of taxable gain from our unitholders’ sale of common units and could have a negative impact on the value of the common units or result in audit adjustments to our unitholders’ U.S. federal income tax returns without the benefit of additional deductions. 37 If the IRS makes audit adjustments to our income tax returns for tax years beginning after 2017, it (and some states) may assess and collect any resulting taxes (including any applicable penalties and interest) directly from us, in which case we may require our unitholders and former unitholders to reimburse us for such taxes (including any applicable penalties or interest) or, if we are required to bear such payment, our cash available for distribution to our unitholders might be substantially reduced.
If the IRS makes audit adjustments to our income tax returns for tax years beginning after 2017, it (and some states) may assess and collect any resulting taxes (including any applicable penalties and interest) directly from us, in which case we may require our unitholders and former unitholders to reimburse us for such taxes (including any applicable penalties or interest) or, if we are required to bear such payment, our cash available for distribution to our unitholders might be substantially reduced.
It may be determined that the right, or the exercise of the right by the limited partners as a group, to (i) remove or replace our General Partner, (ii) approve some amendments to our Partnership Agreement or (iii) take other action under our Partnership Agreement constitutes “participation in the control” of our business.
Liabilities to partners on account of their partnership interests and liabilities that are non-recourse to the Partnership are not counted for purposes of determining whether a distribution is permitted. 31 It may be determined that the right, or the exercise of the right by the limited partners as a group, to (i) remove or replace our General Partner, (ii) approve some amendments to our Partnership Agreement or (iii) take other action under our Partnership Agreement constitutes “participation in the control” of our business.
Holders of our common units have limited voting rights and are not entitled to elect our General Partner or the directors of the Board, which could reduce the price at which the common units will trade.
In resolving these conflicts, the Topper Group may favor its own interests over the interests of our unitholders. 29 Holders of our common units have limited voting rights and are not entitled to elect our General Partner or the directors of the Board, which could reduce the price at which the common units will trade.
If we do not respond appropriately to a health crisis, or if customers do not perceive our response to be adequate for a particular region or our business as a whole, we could suffer damage to our reputation, which could materially adversely affect our business, financial condition and results of operations in the future. 18 There can be no assurances that these and other scenarios resulting from a health crisis will not have a material and adverse impact on our business, financial condition, results of operations or cash available for distribution to our unitholders.
If we do not respond appropriately to a health crisis, or if customers do not perceive our response to be adequate for a particular region or our business as a whole, we could suffer damage to our reputation, which could materially adversely affect our business, financial condition and results of operations in the future.
Distributions from any such C corporation will generally be taxed again to unitholders as dividend income to the extent of current and accumulated earnings and profits of such C corporation. The maximum U.S. federal income tax rate applicable to qualified dividend income that is allocable to individuals is 20%.
Distributions from any such C corporation will generally be taxed again to unitholders as dividend income to the extent of current and accumulated earnings and profits of such C corporation.
Additionally, any future issuance of additional common units or other securities, including to our affiliates, will not be subject to the NYSE’s shareholder approval rules that apply to a corporation.
Additionally, any future issuance of additional common units or other securities, including to our affiliates, will not be subject to the NYSE’s shareholder approval rules that apply to a corporation. Accordingly, unitholders will not have the same protections afforded to corporations (other than “controlled companies”) that are subject to all of the NYSE corporate governance requirements.
In addition, we have agreed to provide registration rights to the Topper Group. Under our Partnership Agreement and pursuant to a registration rights agreement that we have entered into, the Topper Group has registration rights relating to the offer and sale of any units that it holds, subject to certain limitations.
Under our Partnership Agreement and pursuant to a registration rights agreement that we have entered into, the Topper Group has registration rights relating to the offer and sale of any units that it holds, subject to certain limitations. 30 We may issue unlimited additional units without unitholder approval, which would dilute existing unitholder ownership interests.
A continued prolonged shortage of qualified labor could have a material adverse effect on our business and results of operations. Due in part to COVID-19 and general macroeconomic factors, the Topper Group has experienced labor shortages in certain geographies. Outside suppliers that we rely on have also experienced shortages of qualified labor.
Due to general macroeconomic factors, the Topper Group has experienced labor shortages in certain geographies. Outside suppliers that we rely on have also experienced shortages of qualified labor.
In addition, the CAPL Credit Facility includes specified restrictions on our ability to make distributions. 28 Our Partnership Agreement does not require us to pay any distributions at all. Accordingly, investors are cautioned not to place undue reliance on the permanence of our distribution policy in making an investment decision.
Our Partnership Agreement does not require us to pay any distributions at all. Accordingly, investors are cautioned not to place undue reliance on the permanence of our distribution policy in making an investment decision. Any modification or revocation of our cash distribution policy could substantially reduce or eliminate the amounts of distributions to our unitholders.
Accordingly, unitholders will not have the same protections afforded to corporations (other than “controlled companies”) that are subject to all of the NYSE corporate governance requirements. 33 Tax Risks Our tax treatment depends in large part on our status as a partnership for U.S. federal income tax purposes and our otherwise not being subject to a material amount of U.S. federal, state and local income or franchise tax.
Tax Risks Our tax treatment depends in large part on our status as a partnership for U.S. federal income tax purposes and our otherwise not being subject to a material amount of U.S. federal, state and local income or franchise tax.
In addition, failure to comply with local, state, provincial and federal laws and regulations to which our operations will be subject may result in penalties and costs that could adversely affect our business and our operating results.
The cost of compliance with these laws and regulations can have a material adverse effect on our operating results and financial condition. In addition, failure to comply with local, state and federal laws and regulations to which our operations are subject may result in penalties and costs that could adversely affect our business and our operating results.
Our business and properties are subject to extensive local, state and federal governmental laws and regulations relating to, among other things, the sale of alcohol, tobacco and money orders, and public accessibility requirements. The cost of compliance with these laws and regulations can have a material adverse effect on our operating results and financial condition.
We are subject to extensive government laws and regulations concerning store merchandise items and operations, and the cost of compliance with such laws and regulations can be material. Our business and properties are subject to extensive local, state and federal governmental laws and regulations relating to, among other things, the sale of alcohol and tobacco and public accessibility requirements.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changePROPERTIES The following table shows the aggregate number of sites we owned or leased by customer group at December 31, 2022: Owned Sites Leased Sites Total Sites Percentage of Total Sites Lessee dealers 403 288 691 61 % Company operated 132 123 255 23 % Commission agents 145 40 185 16 % Total 680 451 1,131 100 % We conduct business at sites located in Alabama, Arkansas, Colorado, Florida, Georgia, Illinois, Indiana, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Missouri, Mississippi, New Hampshire, New Jersey, New Mexico, New York, North Carolina, Ohio, Oklahoma, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Virginia, West Virginia, Wisconsin and Vermont.
Biggest changePROPERTIES The following table shows the aggregate number of sites we owned or leased by customer group at December 31, 2023: Owned Sites Leased Sites Total Sites Lessee dealers 359 273 632 Company operated 169 127 296 Commission agents 146 42 188 Total 674 442 1,116 We conduct business at sites located in Alabama, Arkansas, Colorado, Florida, Georgia, Illinois, Indiana, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Missouri, Mississippi, New Hampshire, New Jersey, New Mexico, New York, North Carolina, Ohio, Oklahoma, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Virginia, West Virginia, Wisconsin and Vermont.
Our principal executive offices are in Allentown, Pennsylvania in approximately 44,000 square feet of leased office space. 38
Our principal executive offices are in Allentown, Pennsylvania in approximately 37,000 square feet of leased office space.
The following table provides a history of our sites acquired, changes between customer groups or sold during 2022: Lessee Dealers Company Operated Commission Agents Total Number at beginning of year 720 252 184 1,156 Acquired 3 6 2 11 Changes between customer groups — (3 ) 3 — Divested (32 ) — (4 ) (36 ) Number at end of year (a) 691 255 185 1,131 (a) Excludes independent commission sites and includes sites where we collect rent but to which we do not distribute motor fuel and closed sites.
The following table provides a summary of our sites acquired, changes between customer groups or sold during 2023: Lessee Dealers Company Operated Commission Agents Total Number at beginning of year 691 255 185 1,131 Acquired — 2 1 3 Changes between customer groups (43 ) 39 4 — Divested (16 ) — (2 ) (18 ) Number at end of year (a) 632 296 188 1,116 (a) Excludes independent commission sites and includes sites where we collect rent but to which we do not distribute motor fuel as well as closed sites.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeWith respect to all such lawsuits, claims and proceedings, we record a reserve when it is probable that a liability has been incurred and the amount of loss can be reasonably estimated. In addition, we disclose matters for which management believes a material loss is at least reasonably possible.
Biggest changeWith respect to all such lawsuits, claims and proceedings, we record an accrual when it is probable that a liability has been incurred and the amount of loss can be reasonably estimated. In addition, we disclose matters for which management believes a material loss is at least reasonably possible.
Additional information regarding legal proceedings is included in Note 16 to the financial statements. ITEM 4. MINE SAFETY DISCLOSURES Not applicable. 39 PART II
Additional information regarding legal proceedings is included in Note 16 to the financial statements. ITEM 4. MINE SAFETY DISCLOSURES Not applicable. 38 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES As of February 23, 2023, we had 37,937,604 common units outstanding, held by approximately 30 holders of record.
Biggest changeITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES As of February 22, 2024, we had 37,983,154 common units outstanding, held by approximately 29 holders of record.
We expect that the Board will reserve excess cash, from time to time, in an effort to sustain or permit gradual or consistent increases in quarterly distributions. Restrictions in our credit facilities could limit our ability to pay distributions upon the occurrence of certain events. See “Item 7.
We expect that the Board will reserve excess cash, from time to time, in an effort to sustain or permit gradual or consistent increases in quarterly distributions. Restrictions in our CAPL Credit Facility could limit our ability to pay distributions upon the occurrence of certain events. See “Item 7.
Modification of our cash distribution policy may result in distributions of amounts less than, or greater than, our minimum quarterly distribution, and revocation of our cash distribution policy could result in no distributions at all. In addition, our CAPL Credit Facility includes certain restrictions on our ability to make cash distributions.
Modification of our cash distribution policy may result in distributions of amounts less than, or greater than, our minimum quarterly distribution, and revocation of our cash distribution policy could result in no distributions at all. In addition, our CAPL Credit Facility includes certain restrictions on our ability to make cash distributions. ITEM 6. [Reserved]
Our cash distribution policy, established by our General Partner, is to distribute each quarter an amount at least equal to the minimum quarterly distribution of $0.4375 per unit on all units ($1.75 per unit on an annualized basis). The distribution declared by the Board on January 19, 2023 was $0.5250 per unit (or $2.10 per unit on an annualized basis).
Our cash distribution policy, established by our General Partner, is to distribute each quarter an amount at least equal to the minimum quarterly distribution of $0.4375 per unit on all units ($1.75 per unit on an annualized basis). The distribution declared by the Board on January 22, 2024 was $0.5250 per unit (or $2.10 per unit on an annualized basis).
Removed
IDRs On February 6, 2020, we closed on the Equity Restructuring Agreement that eliminated the IDRs. See Note 21 for further discussion on the elimination of the IDRs. ITEM 6. [Reserved]

Item 7. Management's Discussion & Analysis

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

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Biggest changeWith the closing of the sixth tranche, the transactions contemplated under the Asset Exchange Agreement were concluded. • On February 6, 2020, we closed on the Equity Restructuring Agreement that eliminated the IDRs. • Effective March 25, 2020, we closed on the CST Fuel Supply Exchange. • On April 14, 2020, we closed on the acquisition of retail and wholesale assets. 2021 • From late June 2021 through December 31, 2021, we closed on the purchase of 103 sites of our 106-site acquisition from 7-Eleven, and in July 2021, we entered into a new credit agreement and amended our existing credit facility as further described in Notes 3 and 11 to the financial statements. 2022 • In February 2022, we closed on the final three properties of our 106-site acquisition from 7-Eleven. • On November 9, 2022, we closed on the acquisition of assets from CSS.
Biggest changeAcquisition and Financing Activity Our results of operations and financial condition are also impacted by our acquisition and financing activities as summarized below. 2021 • From late June 2021 through December 31, 2021, we closed on the purchase of 103 sites of our 106-site acquisition from 7-Eleven. 2022 • In February 2022, we closed on the final three properties of our 106-site acquisition from 7-Eleven. 42 • In March 2022, Holdings issued $25 million in preferred membership interests. • On November 9, 2022, we closed on the acquisition of assets from CSS. 2023 • On March 31, 2023, we amended and restated the CAPL Credit Facility and terminated the JKM Credit Facility.
Rather, any excess consideration transferred over the fair value of the net assets acquired is allocated on a relative fair value basis to the identifiable net assets other than certain non-qualifying assets as defined in the guidance. We account for business combinations in accordance with the guidance under ASC 805–Business Combinations.
Rather, any excess consideration transferred over the fair value of the net assets acquired is allocated on a relative fair value basis to the identifiable net assets acquired other than certain non-qualifying assets as defined in the guidance. We account for business combinations in accordance with the guidance under ASC 805–Business Combinations.
Specifically, we assess if we have satisfied a performance obligation by transferring control of the property. 56 Accounts receivable primarily result from the sale of motor fuels to customers. Our accounts receivable is generally considered as having a similar risk profile. Credit is extended to a customer based on an evaluation of the customer’s financial condition.
Specifically, we assess if we have satisfied a performance obligation by transferring control of the property. Accounts receivable primarily result from the sale of motor fuels to customers. Our accounts receivable is generally considered as having a similar risk profile. Credit is extended to a customer based on an evaluation of the customer’s financial condition.
We have the ability to fund our capital expenditures by additional borrowings under our CAPL Credit Facility, JKM Credit Facility, or, if available to us on acceptable terms, accessing the capital markets and issuing additional equity, debt securities or other options, such as the sale of assets.
We have the ability to fund our capital expenditures by additional borrowings under our CAPL Credit Facility, or, if available to us on acceptable terms, accessing the capital markets and issuing additional equity, debt securities or other options, such as the sale of assets.
After assessing the totality of events and circumstances, we determined that it is more likely than not that the fair value of our reporting units exceed their carrying amounts and therefore goodwill is not impaired at December 31, 2022 or 2021. Tax Matters As a limited partnership, we are not subject to federal and state income taxes.
After assessing the totality of events and circumstances, we determined that it is more likely than not that the fair value of our reporting units exceed their carrying amounts and therefore goodwill is not impaired at December 31, 2023 or 2022. Tax Matters As a limited partnership, we are not subject to federal and state income taxes.
For approximately 61% of gallons sold, we receive a per gallon rate equal to the posted rack price, less any applicable discounts, plus transportation costs, taxes and a fixed rate per gallon of motor fuel. The remaining gallons are either retail sales or wholesale DTW contracts that provide for variable, market-based pricing.
For approximately 60% of gallons sold, we receive a per gallon rate equal to the posted rack price, less any applicable discounts, plus transportation costs, taxes and a fixed rate per gallon of motor fuel. The remaining gallons are either retail sales or wholesale DTW contracts that provide for variable, market-based pricing.
Additionally, because EBITDA, Adjusted EBITDA, Distributable Cash Flow and Distribution Coverage Ratio may be defined differently by other companies in our industry, our definitions may not be comparable to similarly titled measures of other companies, thereby diminishing their utility. 51 The following table presents reconciliations of EBITDA, Adjusted EBITDA, and Distributable Cash Flow to net income, the most directly comparable U.S.
Additionally, because EBITDA, Adjusted EBITDA, Distributable Cash Flow and Distribution Coverage Ratio may be defined differently by other companies in our industry, our definitions may not be comparable to similarly titled measures of other companies, thereby diminishing their utility. 47 The following table presents reconciliations of EBITDA, Adjusted EBITDA, and Distributable Cash Flow to net income, the most directly comparable U.S.
Whether we will be able to execute acquisitions will depend on market conditions, availability of suitable acquisition targets at attractive terms, acquisition-related compliance with customary regulatory requirements, and our ability to finance such acquisitions on favorable terms and in compliance with our debt covenant restrictions. New Accounting Policies No new accounting guidance significantly impacted our business in 2022.
Whether we will be able to execute acquisitions will depend on market conditions, availability of suitable acquisition targets at attractive terms, acquisition-related compliance with customary regulatory requirements, and our ability to finance such acquisitions on favorable terms and in compliance with our debt covenant restrictions. New Accounting Policies No new accounting guidance significantly impacted our business in 2023.
Two of the key differences in accounting for transactions as asset acquisitions as compared to business combination are summarized below: • Transaction costs are capitalized as a component of the cost of the assets acquired rather than expensed as incurred; • Goodwill is not recognized.
Two of the key differences in accounting for transactions as asset acquisitions as compared to business combinations are summarized below: • Transaction costs are capitalized as a component of the cost of the assets acquired rather than expensed as incurred; • Goodwill is not recognized.
Results of Operations Consolidated Income Statement Analysis Below is an analysis of our consolidated statements of income and provides the primary reasons for significant increases and decreases in the various income statement line items from period to period.
Consolidated Income Statement Analysis Below is an analysis of our consolidated statements of income and provides the primary reasons for significant increases and decreases in the various income statement line items from period to period.
Although we have historically been able to pass on increased costs through price increases, there can be no assurance that we will be able to do so in the future. Impact of Interest Rates Recent increases in interest rates (particularly LIBOR) have increased our interest expense as further described below.
Although we have historically been able to pass on increased costs through price increases, there can be no assurance that we will be able to do so in the future. Impact of Interest Rates Increases in interest rates (particularly SOFR) have increased our interest expense as further described below.
(d) Under the Partnership Agreement, sustaining capital expenditures are capital expenditures made to maintain our long-term operating income or operating capacity.
(c) Under the Partnership Agreement, sustaining capital expenditures are capital expenditures made to maintain our long-term operating income or operating capacity.
In performing our annual impairment analysis, we use qualitative factors to determine whether it is more likely than not (likelihood of more than 50%) that the fair value of a reporting unit is less than its carrying amount, including goodwill.
The annual impairment testing date of goodwill is October 1. In performing our annual impairment analysis, we use qualitative factors to determine whether it is more likely than not (likelihood of more than 50%) that the fair value of a reporting unit is less than its carrying amount, including goodwill.
Regarding our supplier relationships, a material amount of our total gallons purchased are subject to Terms Discounts. The dollar value of these discounts varies with changes in motor fuel prices.
Regarding our supplier relationships, a material amount of our total gallons purchased are subject to prompt payment discounts. The dollar value of these discounts varies with changes in motor fuel prices.
Distributable Cash Flow represents Adjusted EBITDA less cash interest expense, sustaining capital expenditures and current income tax expense. The Distribution Coverage Ratio is computed by dividing Distributable Cash Flow by distributions paid.
Distributable Cash Flow represents Adjusted EBITDA less cash interest expense, sustaining capital expenditures and current income tax expense. The Distribution Coverage Ratio is computed by dividing Distributable Cash Flow by distributions paid on common units.
Gain on dispositions and lease terminations, net During 2022, we recorded a $3.5 million net gain related to sites sold in connection with our ongoing real estate rationalization effort, partially offset by net losses on lease terminations and asset disposals.
Gain on dispositions and lease terminations, net During 2023 and 2022, respectively, we recorded $6.5 million and $3.5 million in net gains related to sites sold in connection with our ongoing real estate rationalization effort, partially offset by net losses on lease terminations and asset disposals.
We expect our ongoing sources of liquidity to include cash generated by operations, proceeds from sales of sites in connection with our real estate rationalization efforts, borrowings under the CAPL Credit Facility and JKM Credit Facility, and if available to us on acceptable terms, issuances of equity and debt securities.
We expect our ongoing sources of liquidity to include cash generated by operations, proceeds from sales of sites in connection with our real estate rationalization efforts, borrowings under the CAPL Credit Facility, and if available to us on acceptable terms, issuances of equity and debt securities. We regularly evaluate alternate sources of capital to support our liquidity requirements.
If the estimated fair value of a reporting unit is less than the carrying value, an impairment charge is recognized for the deficit up to the amount of goodwill recorded. At December 31, 2022 and 2021, we had goodwill totaling $99.4 million and $100.5 million, respectively.
If the estimated fair value of a reporting unit is less than the carrying value, an impairment charge is recognized for the deficit up to the amount of goodwill recorded. At both December 31, 2023 and 2022, we had goodwill totaling $99.4 million.
Examples of sustaining capital expenditures are those made to maintain existing contract volumes, including payments to renew existing distribution contracts, or to maintain our sites in conditions suitable to lease, such as parking lot or roof replacement/renovation, or to replace equipment required to operate the existing business.
Examples of sustaining capital expenditures are those made to maintain existing contract volumes, including payments to renew existing distribution contracts, or to maintain our sites in conditions suitable to lease, such as parking lot or roof replacement/renovation, or to replace equipment required to operate the existing business. (d) Excludes income tax incurred on the sale of sites.
Similarly, our JKM Credit Facility contains financial covenants related to leverage and fixed charge coverage as further described in Note 11 to the financial statements. These financial covenants and other covenants may restrict or limit Holdings’ ability to incur additional indebtedness, make certain capital expenditures or dispose of assets in excess of specified levels, among other restrictions.
The CAPL Credit Facility contains financial covenants related to leverage and interest coverage as further described in Note 11 to the financial statements. These financial covenants and other covenants may restrict or limit our ability to make distributions, incur additional indebtedness, make certain capital expenditures or dispose of assets in excess of specified levels, among other restrictions.
Accretion of preferred membership interests In connection with the issuance of preferred membership interests in March 2022 as further discussed in Note 18 to the financial statements, we recorded accretion of $1.7 million in 2022.
Accretion of preferred membership interests In connection with the issuance of preferred membership interests in March 2022 as further discussed in Note 18 to the financial statements, we recorded accretion in 2023 and 2022 of $2.5 million and $1.7 million, respectively.
Whether we account for a transaction as an asset acquisition or a business combination, determining the fair value of assets and liabilities requires management’s judgment, the utilization of independent valuation experts and involves the use of significant estimates and assumptions with respect to the timing and amounts of future cash inflows and outflows, discount rates, market prices and asset lives, among other items.
The income statement includes the results of operations for each acquisition from their respective date of acquisition. 52 Whether we account for a transaction as an asset acquisition or a business combination, determining the fair value of assets and liabilities requires management’s judgment, the utilization of independent valuation experts and involves the use of significant estimates and assumptions with respect to the timing and amounts of future cash inflows and outflows, discount rates, market prices and asset lives, among other items.
However, our corporate subsidiaries are subject to income taxes. Income tax attributable to our taxable income (including any dividend income from our corporate subsidiaries), which may differ significantly from income for financial statement purposes, is assessed at the individual limited partner unitholder level.
Income tax attributable to our taxable income generated by our nontaxable subsidiaries (including any dividend income from our corporate subsidiaries), which may differ significantly from income for financial statement purposes, is assessed at the individual limited partner unitholder level.
We believe that we will have sufficient cash flow from operations, borrowing capacity under the CAPL Credit Facility and JKM Credit Facility, access to capital markets and alternate sources of funding to meet our financial commitments, debt service obligations, contingencies, anticipated capital expenditures and partnership distributions.
We believe that we will have sufficient cash flow from operations, borrowing capacity under the CAPL Credit Facility, access to capital markets and alternate sources of funding to meet our financial commitments, debt service obligations, contingencies, anticipated capital expenditures and partnership distributions. However, we are subject to business and operational risks that could adversely affect our cash flow.
The judgments made in the determination of the estimated fair value assigned to the assets acquired, the liabilities assumed and any noncontrolling interest in the investee, as well as the estimated useful life of each asset and the duration of each liability, can materially impact the financial statements in periods after acquisition, such as through depreciation and amortization. 57 Goodwill Goodwill represents the excess of the fair value of the consideration conveyed to acquire a business over the fair value of the net assets acquired.
The judgments made in the determination of the estimated fair value assigned to the assets acquired, the liabilities assumed and any noncontrolling interest in the investee, as well as the estimated useful life of each asset and the duration of each liability, can materially impact the financial statements in periods after acquisition, such as through depreciation and amortization.
Distributions Distribution activity for 2022 was as follows (in thousands): Quarter Ended Record Date Payment Date Cash Distribution (per unit) Cash Distribution (in thousands) December 31, 2021 February 3, 2022 February 10, 2022 $ 0.5250 $ 19,896 March 31, 2022 May 3, 2022 May 11, 2022 0.5250 19,904 June 30, 2022 August 3, 2022 August 10, 2022 0.5250 19,913 September 30, 2022 November 3, 2022 November 10, 2022 0.5250 19,912 December 31, 2022 February 3, 2023 February 10, 2023 0.5250 19,917 The amount of any distribution is subject to the discretion of the Board, which may modify or revoke our cash distribution policy at any time.
Distributions Distribution activity for 2023 was as follows (in thousands): Quarter Ended Record Date Payment Date Cash Distribution (per unit) Cash Distribution (in thousands) December 31, 2022 February 3, 2023 February 10, 2023 $ 0.5250 $ 19,918 March 31, 2023 May 3, 2023 May 10, 2023 0.5250 19,925 June 30, 2023 August 4, 2023 August 11, 2023 0.5250 19,934 September 30, 2023 November 3, 2023 November 10, 2023 0.5250 19,935 December 31, 2023 February 2, 2024 February 9, 2024 0.5250 19,941 The amount of any distribution is subject to the discretion of the Board, which may modify or revoke our cash distribution policy at any time.
Non-GAAP Financial Measures We use the non-GAAP financial measures EBITDA, Adjusted EBITDA, Distributable Cash Flow and Distribution Coverage Ratio. EBITDA represents net income before deducting interest expense, income taxes and depreciation, amortization and accretion (which includes certain impairment charges).
Lastly, many other cost categories increased due primarily to inflation. Non-GAAP Financial Measures We use the non-GAAP financial measures EBITDA, Adjusted EBITDA, Distributable Cash Flow and Distribution Coverage Ratio. EBITDA represents net income before deducting interest expense, income taxes and depreciation, amortization and accretion (which includes certain impairment charges).
Income tax expense (benefit) We recorded income tax expense (benefit) of $0.7 million and $(3.2) million for 2022 and 2021, respectively, driven by the income generated (losses incurred) by our taxable subsidiaries.
Income tax expense We recorded income tax expense of $2.5 million and $0.7 million for 2023 and 2022, respectively, driven by the income generated by our taxable subsidiaries.
Of the December 31, 2022 balance, $49.7 million was assigned to the wholesale reporting unit and $49.7 million was assigned to the retail reporting unit.
Of the December 31, 2023 balance, $54.7 million was assigned to the wholesale reporting unit and $44.7 million was assigned to the retail reporting unit.
Investing Activities In 2022, we incurred capital expenditures of $30.4 million driven by site purchases, site upgrades, including store remodels, car wash build-outs, EMV upgrades and rebranding of certain sites, including the sites acquired from 7-Eleven.
In 2022, we incurred capital expenditures of $30 million driven by site purchases, site upgrades, including store remodels, car wash build-outs, EMV upgrades and rebranding of certain sites, including the sites acquired from 7-Eleven. We paid $28 million in connection with the acquisition of assets from CSS and $2 million in connection with the closing of sites acquired from 7-Eleven.
It also includes a discussion of our debt, capital requirements, other matters impacting our liquidity and capital resources and an outlook for our business. 40 • New Accounting Policies —This section describes new accounting pronouncements that we have already adopted, those that we are required to adopt in the future and those that became applicable in the current year as a result of new circumstances. • Critical Accounting Policies and Estimates —This section describes the accounting policies and estimates that we consider most important for our business and that require significant judgment.
It also includes a discussion of our debt, capital requirements, other matters impacting our liquidity and capital resources and an outlook for our business. • New Accounting Policies —This section describes new accounting pronouncements that we have already adopted, those that we are required to adopt in the future and those that became applicable in the current year as a result of new circumstances. • Critical Accounting Policies and Estimates —This section describes the accounting policies and estimates that we consider most important for our business and that require significant judgment. 39 Recent Developments Amendment and Restatement of CAPL Credit Facility On March 31, 2023, the Partnership and its subsidiary, LGWS (together with the Partnership, the “Borrowers”), amended and restated the CAPL Credit Facility.
Revenues from the delivery of motor fuel are recorded at the time of delivery to our customers, by which time the price is fixed, title to the products has transferred and payment has either been received or collection is reasonably assured, net of applicable discounts and allowances.
This guidance applies to over 90% of our revenues as the only primary revenue stream outside the scope of this guidance is rental income. 51 Revenues from the delivery of motor fuel are recorded at the time of delivery to our customers, by which time the price is fixed, title to the products has transferred and payment has either been received or collection is reasonably assured, net of applicable discounts and allowances.
Sustaining capital expenditures are those capital expenditures required to maintain our long-term operating income or operating capacity. Acquisition and growth capital expenditures are those capital expenditures that we expect will increase our operating income or operating capacity over the long term.
Growth capital expenditures, which include individual site purchases, and acquisition capital expenditures are those capital expenditures that we expect will increase our operating income or operating capacity over the long term.
If this threshold is met, the set is not a business. If this threshold is not met, we determine whether the set meets the definition of a business.
If this threshold is met, the set is not a business. If this threshold is not met, we determine whether the set meets the definition of a business. We did not close any major acquisitions in 2023.
The purchase price is recorded for assets acquired and liabilities assumed based on fair value. The excess of the fair value of the consideration conveyed over the fair value of the net assets acquired is recorded as goodwill. The income statement includes the results of operations for each acquisition from their respective date of acquisition.
The purchase price is recorded for assets acquired and liabilities assumed based on fair value. The excess of the fair value of the consideration conveyed over the fair value of the net assets acquired is recorded as goodwill.
See Note 2 for information on our concentration risks related to our customers, fuel suppliers and fuel carriers. 55 Outlook As noted previously, the prices paid to our motor fuel suppliers for wholesale motor fuel (which affects our cost of sales) are highly correlated to the price of crude oil.
Outlook As noted previously, the prices paid to our motor fuel suppliers for wholesale motor fuel (which affects our cost of sales) are highly correlated to the price of crude oil.
See Note 10 for information on AROs, Note 15 for information on environmental matters and Note 16 for information on minimum fuel volume purchase commitments and legal matters.
See Note 10 for information on AROs, Note 15 for information on environmental matters and Note 16 for information on minimum fuel volume purchase commitments and legal matters. See Note 2 for information on our concentration risks related to our customers, fuel suppliers, fuel carriers and merchandise suppliers.
The narrative following these tables provides an analysis of the results of operations of that segment (thousands of dollars, except for the number of distribution sites and per gallon amounts): Year Ended December 31, 2022 2021 2020 Gross profit: Motor fuel gross profit $ 73,378 $ 70,221 $ 57,644 Rent gross profit 50,852 50,736 50,411 Other revenues 6,509 3,721 2,344 Total gross profit 130,739 124,678 110,399 Income from CST Fuel Supply equity interests (a) — — 3,202 Operating expenses (37,072 ) (37,906 ) (34,630 ) Operating income $ 93,667 $ 86,772 $ 78,971 Motor fuel distribution sites (end of period): (b) Independent dealers (c) 663 666 687 Lessee dealers (d) 619 637 658 Total motor fuel distribution sites 1,282 1,303 1,345 Motor fuel distribution sites (average) 1,286 1,325 1,306 Volume of gallons distributed 844,486 931,288 862,938 Margin per gallon $ 0.087 $ 0.075 $ 0.067 (a) Represents income from our former equity interest in CST Fuel Supply.
The narrative following these tables provides an analysis of the results of operations of that segment (thousands of dollars, except for the number of distribution sites and per gallon amounts): Year Ended December 31, 2023 2022 2021 Gross profit: Motor fuel gross profit $ 72,680 $ 73,378 $ 70,221 Rent gross profit 50,873 50,852 50,736 Other revenues 5,248 6,509 3,721 Total gross profit 128,801 130,739 124,678 Operating expenses (37,988 ) (37,072 ) (37,906 ) Operating income $ 90,813 $ 93,667 $ 86,772 Motor fuel distribution sites (end of period): (a) Independent dealers (b) 632 663 666 Lessee dealers (c) 569 619 637 Total motor fuel distribution sites 1,201 1,282 1,303 Average motor fuel distribution sites 1,235 1,286 1,325 Volume of gallons distributed 842,636 844,486 931,288 Margin per gallon $ 0.086 $ 0.087 $ 0.075 (a) In addition, we distributed motor fuel to sub-wholesalers who distributed to additional sites.
The narrative following these tables provides an analysis of the results of operations of that segment (thousands of dollars, except for the number of retail sites, gallons sold and per gallon amounts): Year Ended December 31, 2022 2021 2020 Gross profit: Motor fuel $ 146,546 $ 79,318 $ 57,448 Merchandise 76,135 55,117 32,046 Rent 9,797 8,681 7,608 Other revenue 12,554 9,159 4,626 Total gross profit 245,032 152,275 101,728 Operating expenses (137,636 ) (96,173 ) (56,298 ) Operating income $ 107,396 $ 56,102 $ 45,430 Retail sites (end of period): Company operated retail sites 255 252 150 Commission agents 200 198 208 Total retail segment sites 455 450 358 Total retail segment statistics: Volume of gallons sold 496,634 403,850 259,636 Average retail fuel sites 452 389 306 Margin per gallon, before deducting credit card fees and commissions $ 0.396 $ 0.280 $ 0.298 Company operated site statistics: Average retail fuel sites 253 187 107 Margin per gallon, before deducting credit card fees $ 0.426 $ 0.309 $ 0.349 Merchandise gross profit percentage 27.2 % 26.4 % 26.0 % Commission site statistics: Average retail fuel sites 199 202 199 Margin per gallon, before deducting credit card fees and commissions $ 0.336 $ 0.238 $ 0.260 Year Ended December 31, 2022 Compared to Year Ended December 31, 2021 Gross profit increased $92.8 million (61%), while operating income increased $51.3 million (91%).
The narrative following these tables provides an analysis of the results of operations of that segment (in thousands, except for the number of retail sites and per gallon amounts): Year Ended December 31, 2023 2022 2021 Gross profit: Motor fuel $ 138,729 $ 146,546 $ 79,318 Merchandise 89,847 76,135 55,117 Rent 9,120 9,797 8,681 Other revenue 15,771 12,554 9,159 Total gross profit 253,467 245,032 152,275 Operating expenses (156,758 ) (137,636 ) (96,173 ) Operating income $ 96,709 $ 107,396 $ 56,102 Retail sites (end of period): Company operated retail sites (a) 296 255 252 Commission agents (b) 199 200 198 Total retail segment sites 495 455 450 Total retail segment statistics: Volume of gallons sold 506,535 496,634 403,850 Average retail fuel sites 476 452 389 Margin per gallon, before deducting credit card fees and commissions $ 0.369 $ 0.396 $ 0.280 Company operated site statistics: Average retail fuel sites 283 253 187 Margin per gallon, before deducting credit card fees $ 0.400 $ 0.426 $ 0.309 Merchandise gross profit percentage 28.4 % 27.2 % 26.4 % Commission site statistics: Average retail fuel sites 193 199 202 Margin per gallon, before deducting credit card fees and commissions $ 0.306 $ 0.336 $ 0.238 (a) The increase in the company operated site count from December 31, 2022 to December 31, 2023 was primarily attributable to the conversion of certain lessee dealer and commission agent sites to company operated sites, largely during the second quarter of 2023.
GAAP financial measure, for each of the periods indicated (in thousands, except for per unit amounts): Year Ended December 31, 2022 2021 2020 Net income (a) $ 63,696 $ 21,654 $ 107,456 Interest expense 32,100 18,244 16,587 Income tax expense (benefit) 714 (3,225 ) (7,948 ) Depreciation, amortization and accretion expense 80,625 77,852 68,742 EBITDA 177,135 114,525 184,837 Equity-based employee and director compensation expense 2,294 1,311 172 Gain on dispositions and lease terminations, net (b) (1,143 ) (2,037 ) (80,924 ) Acquisition-related costs (c) 1,508 9,461 3,464 Adjusted EBITDA 179,794 123,260 107,549 Cash interest expense (29,312 ) (16,382 ) (15,545 ) Sustaining capital expenditures (d) (7,164 ) (4,161 ) (3,529 ) Current income tax (expense) benefit (e) (2,466 ) (548 ) 14,126 Distributable Cash Flow $ 140,852 $ 102,169 $ 102,601 Distributions paid $ 79,625 $ 79,552 $ 77,751 Distribution Coverage Ratio (a) 1.77x 1.28x 1.32x (a) Beginning in 2022, we reconcile Adjusted EBITDA to Net income rather than to Net income available to limited partners.
GAAP financial measure, for each of the periods indicated (in thousands, except for the Distribution Coverage Ratio): Year Ended December 31, 2023 2022 2021 Net income $ 42,592 $ 63,696 $ 21,654 Interest expense 43,743 32,100 18,244 Income tax expense (benefit) 2,525 714 (3,225 ) Depreciation, amortization and accretion expense 77,158 80,625 77,852 EBITDA 166,018 177,135 114,525 Equity-based employee and director compensation expense 3,031 2,294 1,311 Gain on dispositions and lease terminations, net (a) (4,737 ) (1,143 ) (2,037 ) Acquisition-related costs (b) 1,460 1,508 9,461 Adjusted EBITDA 165,772 179,794 123,260 Cash interest expense (40,456 ) (29,312 ) (16,382 ) Sustaining capital expenditures (c) (7,654 ) (7,164 ) (4,161 ) Current income tax expense (d) (953 ) (2,466 ) (548 ) Distributable Cash Flow $ 116,709 $ 140,852 $ 102,169 Distributions paid on common units $ 79,712 $ 79,625 $ 79,552 Distribution Coverage Ratio 1.46x 1.77x 1.28x (a) See "Results of Operations–Gain on Dispositions and Lease Terminations, net." (b) Relates to certain acquisition-related costs, such as legal and other professional fees, separation benefit costs and purchase accounting adjustments associated with recent acquisitions.
Our consolidated statements of income are as follows (in thousands): Year Ended December 31, 2022 2021 2020 Operating revenues $ 4,967,424 $ 3,579,259 $ 1,932,323 Cost of sales 4,591,653 3,302,306 1,720,196 Gross profit 375,771 276,953 212,127 Income from CST Fuel Supply equity interests — — 3,202 Operating expenses: Operating expenses 174,708 134,079 90,928 General and administrative expenses 25,575 30,930 20,991 Depreciation, amortization and accretion expense 80,625 77,852 68,742 Total operating expenses 280,908 242,861 180,661 Gain on dispositions and lease terminations, net 1,143 2,037 80,924 Operating income 96,006 36,129 115,592 Other income, net 504 544 503 Interest expense (32,100 ) (18,244 ) (16,587 ) Income before income taxes 64,410 18,429 99,508 Income tax expense (benefit) 714 (3,225 ) (7,948 ) Net income 63,696 21,654 107,456 Accretion of preferred membership interests 1,726 — — IDR distributions — — 133 Net income available to limited partners $ 61,970 $ 21,654 $ 107,323 44 Year Ended December 31, 2022 Compared to Year Ended December 31, 2021 Consolidated Results Operating revenues increased $1.4 billion or 39%, while operating income increased $60 million or 166%.
Our consolidated statements of income are as follows (in thousands): Year Ended December 31, 2023 2022 2021 Operating revenues $ 4,386,263 $ 4,967,424 $ 3,579,259 Cost of sales 4,003,995 4,591,653 3,302,306 Gross profit 382,268 375,771 276,953 Operating expenses: Operating expenses 194,746 174,708 134,079 General and administrative expenses 27,031 25,575 30,930 Depreciation, amortization and accretion expense 77,158 80,625 77,852 Total operating expenses 298,935 280,908 242,861 Gain on dispositions and lease terminations, net 4,737 1,143 2,037 Operating income 88,070 96,006 36,129 Other income, net 790 504 544 Interest expense (43,743 ) (32,100 ) (18,244 ) Income before income taxes 45,117 64,410 18,429 Income tax expense (benefit) 2,525 714 (3,225 ) Net income 42,592 63,696 21,654 Accretion of preferred membership interests 2,488 1,726 — Net income available to limited partners $ 40,104 $ 61,970 $ 21,654 Year Ended December 31, 2023 Compared to Year Ended December 31, 2022 Consolidated Results Operating revenues decreased $581 million (12%) and operating income decreased $7.9 million (8%).
MD&A is organized as follows: • Recent Developments —This section describes significant recent developments, including our acquisition of certain assets from CSS. • Significant Factors Affecting Our Profitability —This section describes the significant impact on our results of operations caused by crude oil commodity price volatility, seasonality and acquisition and financing activities. • Results of Operations —This section provides an analysis of our results of operations, including the results of operations of our business segments and non-GAAP financial measures. • Liquidity and Capital Resources —This section provides a discussion of our financial condition and cash flows.
MD&A is organized as follows: • Recent Developments —This section describes significant recent developments. • Significant Factors Affecting Our Profitability —This section describes the most significant factors impacting our results of operations. • Results of Operations —This section provides an analysis of our results of operations on a consolidated basis and for each of our segments as well as a discussion of non-GAAP financial measures. • Liquidity and Capital Resources —This section provides a discussion of our financial condition and cash flows.
Goodwill is not amortized, but instead is tested for impairment at the reporting unit level at least annually, and more frequently if events and circumstances indicate that the goodwill might be impaired. The annual impairment testing date of goodwill is October 1.
Goodwill Goodwill represents the excess of the fair value of the consideration conveyed to acquire a business over the fair value of the net assets acquired. Goodwill is not amortized, but instead is tested for impairment at the reporting unit level at least annually, and more frequently if events and circumstances indicate that the goodwill might be impaired.
The average daily spot price of WTI crude oil increased 39% from $68.14 per barrel in 2021 to $94.90 per barrel in 2022.
The average spot price of WTI crude oil decreased 18% from $94.90 per barrel in 2022 to $77.58 per barrel in 2023.
The following table outlines our capital expenditures and acquisitions (in thousands): Year Ended December 31, 2022 2021 2020 Sustaining capital $ 7,164 $ 4,161 $ 3,529 Growth 23,187 37,698 33,528 Acquisitions 29,594 272,983 28,244 Total capital expenditures and acquisitions $ 59,945 $ 314,842 $ 65,301 Growth capital expenditures decreased in 2022 as compared with 2021, primarily due to a decrease in rebranding of the sites acquired from 7-Eleven.
The following table outlines our capital expenditures and acquisitions (in thousands): Year Ended December 31, 2023 2022 2021 Sustaining capital $ 7,654 $ 7,164 $ 4,161 Growth 26,974 23,187 37,698 Acquisitions — 29,594 272,983 Total capital expenditures and acquisitions $ 34,628 $ 59,945 $ 314,842 Growth capital expenditures increased in 2023 as compared with 2022, primarily due to an increase in image upgrades that were funded primarily through incentives from our fuel suppliers, partially offset by a reduction in rebranding of certain sites, including the sites acquired from 7-Eleven.
Significant items impacting these results were: Operating revenues • A $547 million (26%) increase in our wholesale segment revenues primarily attributable to a 39% increase in the average daily spot price of WTI crude oil to $94.90 per barrel in 2022, compared to $68.14 per barrel in 2021.
These results were driven by: Operating revenues • A $400 million (15%) decrease in our wholesale segment revenues primarily attributable to an 18% decrease in the average spot price of WTI crude oil to $77.58 per barrel in 2023, compared to $94.90 per barrel in 2022.
These results were driven by: Motor fuel gross profit The $3.2 million (4%) increase in motor fuel gross profit was primarily driven by a 15% increase in our average fuel margin per gallon as compared to 2021 due to higher terms discounts as a result of higher crude prices.
These results were driven by: Motor fuel gross profit The $0.7 million (1%) decrease in motor fuel gross profit was primarily driven by a 1% decrease in our average fuel margin per gallon as compared to 2022 driven by lower terms discounts due to lower crude oil prices, partially offset by better sourcing costs as a result of brand consolidation and other initiatives.
A significant portion of our growth capital expenditures are discretionary and we regularly review our capital plans in light of anticipated proceeds from sales of sites. Contractual Obligations, Contingencies, Off Balance Sheet Arrangements and Concentration Risks Our contractual obligations primarily include payments of debt and finance lease obligations and related interest payments and operating lease obligations.
A significant portion of our growth capital expenditures are discretionary and we regularly review our capital plans in light of anticipated proceeds from sales of sites.
We made net repayments of $47.9 on our credit facilities. We received $24.4 million in net proceeds from the issuance of preferred membership interests during 2022. In 2021, we paid $79.7 million in distributions.
We received $24 million in net proceeds from the issuance of preferred membership interests during 2022.
Operating expenses Operating expenses increased $3.3 million (9%) primarily as a result of a $2.7 million increase in environmental costs related to remediation, costs of compliance testing and monitoring and a $1.2 million increase in insurance costs due to the increase in controlled sites as a result of the acquisitions. 49 Retail The following table highlights the results of operations and certain operating metrics of our retail segment.
Operating expenses Operating expenses increased $0.9 million (2%), primarily as a result of higher maintenance costs and management fees. Retail The following table highlights the results of operations and certain operating metrics of our retail segment.
Although the COVID Pandemic has not significantly impacted our results in 2022, fuel volume recovered throughout 2020 and 2021, which impacts the comparability of our results between periods. 42 Significant Factors Affecting our Profitability The Significance of Crude Oil and Wholesale Motor Fuel Prices on Our Revenues, Cost of Sales and Gross Profit The prices paid to our motor fuel suppliers for wholesale motor fuel (which affects our cost of sales) are highly correlated to the price of crude oil.
All other terms and conditions of the CAPL Credit Facility remain in full force and effect. 41 Significant Factors Affecting our Profitability The Significance of Crude Oil and Wholesale Motor Fuel Prices on Our Revenues, Cost of Sales and Gross Profit The prices paid to our motor fuel suppliers for wholesale motor fuel (which affects our cost of sales) are highly correlated to the price of crude oil.
See “Significant Factors Affecting our Profitability—The Significance of Crude Oil and Wholesale Motor Fuel Prices on Our Revenues, Cost of Sales and Gross Profit.” Volume decreased 9% due in part to the loss of independent dealer contracts, which are generally lower margin, as well as our real estate optimization efforts and general economic conditions. • An $841 million (59%) increase in our retail segment revenues primarily attributable to a 33% increase in the average retail selling price per gallon in 2022 as compared to 2021 generally due to the increase in crude oil prices discussed above.
See “Significant Factors Affecting our Profitability—The Significance of Crude Oil and Wholesale Motor Fuel Prices on Our Revenues, Cost of Sales and Gross Profit.” Volume was flat compared to 2022 due to the volume generated by the acquisition of assets from CSS, offset by the net loss of independent dealer contracts and the conversion of certain lessee dealer sites to company operated and commission sites. 43 • A $181 million (8%) decrease in our retail segment revenues primarily attributable to a 13% decrease in the average retail selling price per gallon in 2023 as compared to 2022 generally due to the decrease in wholesale motor fuel prices noted above.
These results were impacted by: Gross profit • Our motor fuel gross profit increased $67.2 million (85%) attributable to a 50% increase in margin per gallon in 2022 compared to 2021 due to greater volatility in the price of crude oil in 2022 compared to 2021.
These results were driven by: Gross profit • Our motor fuel gross profit decreased $7.8 million (5%) attributable to a 7% decrease in margin per gallon in 2023 compared to 2022 due to the steep drop in crude oil prices particularly during the third quarter of 2022.
Income from CST Fuel Supply equity interests and Operating expenses See “Segment Results” for additional analyses. 46 General and administrative expenses General and administrative expenses increased $9.9 million (47%) primarily driven by a $6.0 million increase in acquisition-related costs as a result of higher legal fees incurred in connection with the acquisition of assets from 7-Eleven, a $1.9 million increase in management fees related to an increase in headcount, a $1.1 million increase in equity-based compensation expense as a result of more grants being outstanding during 2021 as compared to 2020 and overall higher general and administrative expenses stemming from the April 2020 acquisition of retail and wholesale assets and the acquisition of assets from 7-Eleven, partially offset by a $1.0 million decrease in credit loss expense.
Operating expenses See “Segment Results” for additional analyses. General and administrative expenses General and administrative expenses increased $1.5 million (6%) driven by an increase in equity-based compensation expense as a result of more grants being outstanding in 2023 as compared to 2022 and higher legal fees.
We have recast the results of our segments for periods prior to October 1, 2022 to be consistent with our new segment reporting. 47 Wholesale The following table highlights the results of operations and certain operating metrics of our wholesale segment.
Segment Results We present the results of operations of our segments consistent with how our management views the business. 44 Wholesale The following table highlights the results of operations and certain operating metrics of our wholesale segment.
As discussed previously, our CAPL Credit Facility matures April 25, 2024 and our JKM Credit Facility matures July 16, 2026. In addition, we have finance lease obligations that expire in 2027 and operating leases that expire through 2041.
Contractual Obligations, Contingencies, Off Balance Sheet Arrangements and Concentration Risks Our contractual obligations primarily include payments of debt and finance lease obligations and related interest payments and operating lease obligations. 50 As discussed previously, our CAPL Credit Facility matures March 31, 2028. In addition, we have finance lease obligations that expire in 2027 and operating leases that expire through 2041.
(c) The decrease in the independent dealer site count from December 31, 2021 to December 31, 2022 was primarily attributable to loss of contracts, most of which were lower margin, partially offset by the increase in independent dealer sites as a result of the acquisition of assets from CSS.
(b) The decrease in the independent dealer site count from December 31, 2022 to December 31, 2023 was primarily attributable to the net loss of contracts, partially offset by divestitures of certain lessee dealer sites but with continued fuel supply.
We paid $27.7 million in connection with the acquisition of assets from CSS and $1.9 million in connection with the closing of sites acquired from 7-Eleven. We received $13.3 million in proceeds primarily from the sale of sites in connection with our real estate rationalization effort.
We received $13 million in proceeds primarily from the sale of sites in connection with our real estate rationalization effort. Financing Activities In 2023, we paid $80 million in distributions to our unitholders. We made net repayments of $9 million on our credit facility.
In 2021, we incurred capital expenditures of $41.9 million driven by site upgrades, including store remodels, carwash build-outs, EMV upgrades and rebranding of certain sites, including the sites acquired from 7-Eleven. We received $15.4 million in proceeds from the sales of assets, largely driven by our real estate rationalization effort.
Investing Activities In 2023, we incurred capital expenditures of $35 million driven by image upgrades funded primarily through incentives from our fuel suppliers, rebranding of certain sites, site upgrades, including store remodels and site purchases. We received $6 million in proceeds primarily from the sale of sites in connection with our real estate rationalization effort.
We funded this acquisition through borrowings on the CAPL Credit Facility and cash on hand. Amendment to CAPL Credit Facility On November 9, 2022, in connection with our acquisition of assets from CSS, we entered into an amendment (the “Amendment”) to the CAPL Credit Facility.
On February 20, 2024, in connection with the Applegreen Acquisition, we entered into an amendment (the “Amendment”) to the CAPL Credit Facility.
See “Recent Developments—Amendment to CAPL Credit Facility” and Note 11 to the financial statements for information regarding the amendment of the CAPL Credit Facility. Capital Expenditures We make investments to expand, upgrade and enhance existing assets. We categorize our capital requirements as either sustaining capital expenditures, growth capital expenditures or acquisition capital expenditures.
Capital Expenditures We make investments to expand, upgrade and enhance existing assets. We categorize our capital requirements as either sustaining capital expenditures, growth capital expenditures or acquisition capital expenditures. Sustaining capital expenditures are those capital expenditures required to maintain our long-term operating income or operating capacity.
The amount of availability under our CAPL Credit Facility at February 23, 2023, after taking into consideration debt covenant restrictions, was $120.5 million. 54 The CAPL Credit Facility contains financial covenants related to leverage and interest coverage as further described in Note 11 to the financial statements.
After taking into consideration debt covenant restrictions and the scheduled change in our maximum leverage ratio from 5.25:1.00 to 5.00:1.00 for the first quarter of 2024, the amount of availability under our CAPL Credit Facility at February 22, 2024 was $125.4 million.
We made net borrowings of $299.9 million of our credit facilities, primarily to fund the acquisition of assets from 7-Eleven and to pay $9.4 million in acquisition costs and $7.2 million of deferred financing costs. In 2020, we paid $77.9 million in distributions and made net repayments on our CAPL Credit Facility of $5.8 million.
We paid $7 million of deferred financing costs in connection with amending and restating the CAPL Credit Facility and terminating the JKM Credit Facility in the first quarter of 2023. In 2022, we paid $80 million in distributions to our unitholders. We made net repayments of $48 million on our credit facilities.
In addition, volume increased 23% stemming from the sites acquired from 7-Eleven. • Our merchandise gross profit and other revenues increased $21.0 million (38%) and $3.4 million (37%), respectively, driven by the sites acquired from 7-Eleven. • Rent gross profit increased $1.1 million (13%) due primarily to the sites acquired in the acquisition of assets from 7-Eleven.
In addition, volume increased 2% due to the site count increase stemming from the conversion of certain lessee dealer sites to company operated and commission sites. • Our merchandise gross profit and other revenues increased $13.7 million (18%) and $3.2 million (26%), respectively, driven by an increase in the company operated site count due to the conversion of certain lessee dealer and commission agent sites to company operated sites, in addition to an increase in sales and margin percentage in our base business.
Cash Flows The following table summarizes cash flow activity (in thousands): Year Ended December 31, 2022 2021 2020 Net cash provided by operating activities $ 161,317 $ 95,468 $ 104,484 Net cash used in investing activities (46,398 ) (298,690 ) (19,549 ) Net cash (used in) provided by financing activities (106,513 ) 210,357 (86,202 ) Operating Activities Net cash provided by operating activities increased $65.8 million in 2022 compared to 2021 primarily attributable to the incremental cash flow generated by the sites acquired from 7-Eleven and the strong fuel margins in 2022.
A material decrease in our cash flows would likely produce an adverse effect on our borrowing capacity as well as our ability to issue additional equity and/or debt securities and/or maintain or increase distributions to unitholders. 48 Cash Flows The following table summarizes cash flow activity (in thousands): Year Ended December 31, 2023 2022 2021 Net cash provided by operating activities $ 117,083 $ 161,317 $ 95,468 Net cash used in investing activities (28,181 ) (46,398 ) (298,690 ) Net cash (used in) provided by financing activities (99,966 ) (106,513 ) 210,357 Operating Activities Net cash provided by operating activities decreased $44 million in 2023 compared to 2022 primarily attributable to lower fuel margins in 2023 and an increase in interest expense driven by higher interest rates.
See “Significant Factors Affecting our Profitability—The Significance of Crude Oil and Wholesale Motor Fuel Prices on Our Revenues, Cost of Sales and Gross Profit.” Additionally, we benefited from better sourcing costs due to our brand consolidation and other initiatives.
See “Significant Factors Affecting our Profitability—The Significance of Crude Oil and Wholesale Motor Fuel Prices on Our Revenues, Cost of Sales and Gross Profit.” Volume was flat for 2023 as compared to 2022 due to the volume generated by the acquisition of assets from CSS offset by the net loss of independent dealer contracts and the conversion of certain lessee dealer sites to company operated and commission sites.
(d) The decrease in the lessee dealer site count from December 31, 2021 to December 31, 2022 was primarily attributable to our real estate rationalization effort. Year Ended December 31, 2022 Compared to Year Ended December 31, 2021 Gross profit increased $6.1 million (5%), while operating income increased $6.9 million (8%).
(b) The decrease in the commission agent site count from December 31, 2022 to December 31, 2023 was primarily attributable to the conversion of certain commission agent sites to company operated sites, largely during the first quarter of 2023, offset by the conversion of certain lessee dealer sites to commission sites, largely during the fourth quarter of 2023. 46 Year Ended December 31, 2023 Compared to Year Ended December 31, 2022 Gross profit increased $8.4 million (3%) and operating income decreased $10.7 million (10%).
Interest expense Interest expense increased $1.7 million (10%) primarily due to $1.8 million in interest expense on the JKM Credit Facility along with a $0.8 million increase in amortization of deferred financing costs as a result of entering into the JKM Credit Facility and the amendment to the CAPL Credit Facility.
In addition, we wrote off $1.1 million in deferred financing costs in the first quarter of 2023 as a result of the amendment and restatement of the CAPL Credit Facility and termination of the JKM Credit Facility.
Letters of credit outstanding under our JKM Credit Facility at December 31, 2022 totaled $0.8 million. The amount of availability under the JKM Credit Facility at February 23, 2023, after taking into consideration debt covenant restrictions, was $14.2 million.
Taking the interest rate swap contracts into account, our effective interest rate on our CAPL Credit Facility at December 31, 2023 was 4.9% (our applicable margin was 2.25% as of December 31, 2023). Letters of credit outstanding under our CAPL Credit Facility at December 31, 2023 totaled $4.5 million.
Cost of sales Cost of sales increased $1.3 billion (39%), which was a result of the increase in wholesale motor fuel prices and the acquisition of assets from 7-Eleven discussed above.
Cost of sales Cost of sales decreased $588 million (13%), which was a result of the decrease in wholesale motor fuel prices, partially offset by the increase in merchandise cost of sales driven by the conversion of certain lessee dealer and commission agent sites to company operated sites discussed above.
Gross profit Gross profit increased $99 million (36%), which was primarily due to a $93 million increase in gross profit from our retail segment driven by the acquisition of assets from 7-Eleven along with realizing a higher margin per gallon. See "Segment Results" for additional analyses. Operating expenses See “Segment Results” for additional analyses.
Gross profit Gross profit increased $6.5 million (2%), which was primarily driven by an increase in merchandise gross profit driven by the conversion of certain lessee dealer and commission agent sites to company operated sites, partially offset by a decrease in motor fuel gross profit within our retail segment. See "Segment Results" for additional gross profit analyses.
Although we have hedged $300 million of our variable-rate debt, we are exposed to changes in interest rates on the balance of our variable-rate debt. 43 Acquisition and Financing Activity Our results of operations and financial condition are also impacted by our acquisition and financing activities as summarized below. 2020 • We completed four additional tranches of the asset exchange with Circle K on February 25, 2020, April 7, 2020, May 5, 2020 and September 15, 2020.
Although we have hedged $600 million of our variable-rate debt, we are exposed to changes in interest rates on the balance of our variable-rate debt.
Our results for 2023 are anticipated to be impacted by the following: • The acquisition of assets from CSS is anticipated to increase gross profit particularly in the wholesale segment. • We anticipate that we will continue to realize reductions in our fuel costs as a result of new or amended fuel purchase contracts. • Given increases in LIBOR, we anticipate higher interest expense.
Our results for 2024 are anticipated to be impacted by the following: • We continue to consider the highest and best use class of trade for each of our properties, which may result in the conversion of sites from one class of trade to another and ultimately increases or decreases in the gross profit for the wholesale and retail segments. • Given increases in SOFR during 2023 and the timing of when certain interest rate swaps expire during 2024 and the rates that were locked in under those swaps, we anticipate higher interest expense in 2024 relative to 2023.
Removed
Recent Developments Acquisition of Assets from CSS On November 9, 2022, we closed on the acquisition of assets from CSS for a purchase price of $27.5 million plus working capital. The assets consisted of wholesale fuel supply contracts to 38 dealer owned locations, 35 sub-wholesaler accounts and two commission locations (1 fee based and 1 lease).
Added
As amended, the CAPL Credit Facility provides for an increase of the senior secured revolving credit facility from $750 million to $925 million and extends the maturity date from April 1, 2024 to March 31, 2028.
Removed
The Amendment, among other things, designates the acquisition of assets from CSS as a specified acquisition (as defined in the CAPL Credit Facility) which results in the maximum leverage ratio increasing to 5.50 to 1.00 through December 31, 2023. See Notes 3 and 11 to the financial statements for additional information regarding this acquisition and the CAPL Credit Facility.
Added
The credit facility can be increased from time to time upon the Partnership’s written request, subject to certain conditions, up to an additional $350 million. The aggregate amount of the outstanding loans and letters of credit under the CAPL Credit Facility cannot exceed the combined revolving commitments then in effect.
Removed
Change in Segment Reporting During the fourth quarter of 2022, we changed our segment reporting to simplify the assessment of performance of our segments. Prior to the fourth quarter, the wholesale segment included the wholesale fuel gross profit on intersegment sales by our wholesale segment to our retail segment.
Added
Certain subsidiaries of the Borrowers are guarantors ("Guarantors") of all of the obligations under the CAPL Credit Facility. All obligations under the CAPL Credit Facility are secured by substantially all of the Partnership’s assets and substantially all of the assets of the Guarantors.
Removed
Likewise, the wholesale segment included an allocation of operating expenses related to the operation of our retail sites consistent with the allocation of the overall fuel gross profit.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeInterest Rate Risk As of December 31, 2022, we had $606.1 million outstanding on our CAPL Credit Facility. Our outstanding borrowings bear interest at LIBOR plus an applicable margin, which was 1.75% at December 31, 2022.
Biggest changeThe principal market risks to which we are exposed are interest rate risk and commodity price risk. 53 Interest Rate Risk As of December 31, 2023, we had $756.0 million outstanding on our CAPL Credit Facility. Our outstanding borrowings bear interest at SOFR plus an applicable margin.
We do not currently engage in hedging activities for these purchases due to our pricing structure that allows us to generally pass on price changes to our customers and related parties. A material amount of our total gallons purchased are subject to Terms Discounts for prompt payment and other rebates and incentives, which are recorded within cost of sales.
We do not currently engage in hedging activities for these purchases due to our pricing structure that allows us to generally pass on price changes to our customers and related parties. A material amount of our total gallons purchased are subject to prompt payment discounts for prompt payment and other rebates and incentives, which are recorded within cost of sales.
Based on our current volumes, we estimate a $10 per barrel change in the price of crude oil would impact our annual wholesale motor fuel gross profit by approximately $2.8 million related to these payment discounts. Foreign Currency Risk Our operations are located in the U.S., and therefore are not subject to foreign currency risk.
Based on our current volumes, we estimate a $10 per barrel change in the price of crude oil would impact our annual wholesale motor fuel gross profit by approximately $2.6 million related to these payment discounts. Foreign Currency Risk Our operations are located in the U.S., and therefore are not subject to foreign currency risk.
Commodity Price Risk We purchase gasoline and diesel fuel from several suppliers at costs that are subject to market volatility. These purchases are generally made pursuant to contracts or at market prices established with the supplier.
A one percentage point change in SOFR would impact annual interest expense by approximately $1.6 million. Commodity Price Risk We purchase gasoline and diesel fuel from several suppliers at costs that are subject to market volatility. These purchases are generally made pursuant to contracts or at market prices established with the supplier.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Market Risk Market risk is the risk of loss arising from adverse changes in market rates and prices. The principal market risks to which we are exposed are interest rate risk and commodity price risk.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Market Risk Market risk is the risk of loss arising from adverse changes in market rates and prices.
Removed
In 2020, we entered into interest rate swap contracts to hedge against interest rate volatility on our variable rate borrowings under the CAPL Credit Facility. The interest rate swap contracts have a total notional amount of $300 million, an average fixed rate of 0.438% and mature on April 1, 2024. See Note 12 to the financial statements for additional information.
Added
See Note 12 to the financial statements for information regarding the amendment of three interest rate swap contracts and the entry into six additional interest rate swap contracts. Taking the interest rate swap contracts into account, our effective interest rate on our CAPL Credit Facility at December 31, 2023 was 4.9%.
Removed
Taking the interest rate swap contracts into account, our effective interest rate on our CAPL Credit Facility at December 31, 2022 was 4.2%. A one percentage point change in LIBOR would impact annual interest expense by approximately $3.1 million. 58 As of December 31, 2022, we had $159.0 million outstanding under our Term Loan Facility.
Removed
Our borrowings under the JKM Credit Facility had a weighted-average interest rate of 6.5% as of December 31, 2022 (LIBOR plus an applicable margin, which was 2.25% as of December 31, 2022). A one percentage point change in LIBOR would impact annual interest expense by approximately $1.6 million.

Other CAPL 10-K year-over-year comparisons