Attached files
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| 8-K - 8-K - CrossAmerica Partners LP | capl2017mayform8-kinvestor.htm |
May 2017
MLPA Conference
Jeremy Bergeron, President, and
Steven Stellato, Chief Accounting Officer
Investor Update May 2017
Safe Harbor Statement
Statements contained in this presentation that state the Partnership’s or
management’s expectations or predictions of the future are forward-looking
statements. The words “believe,” “expect,” “should,” “intends,” “estimates,” “target”
and other similar expressions identify forward-looking statements. It is important to
note that actual results could differ materially from those projected in such forward-
looking statements. For more information concerning factors that could cause actual
results to differ from those expressed or forecasted, see CrossAmerica’s Forms 10-Q or
Form 10-K filed with the Securities and Exchange Commission and available on
CrossAmerica’s website at www.crossamericapartners.com. If any of these factors
materialize, or if our underlying assumptions prove to be incorrect, actual results may
vary significantly from what we projected. Any forward-looking statement you see or
hear during this presentation reflects our current views as of the date of this
presentation with respect to future events. We assume no obligation to publicly
update or revise these forward-looking statements for any reason, whether as a result
of new information, future events, or otherwise.
2
CrossAmerica Business Overview
Jeremy Bergeron, President
3
Investor Update May 2017
CrossAmerica Partners LP Overview*
• Master limited partnership and leading wholesale fuels distributor, convenience
store lessor, and c-store operator
– Distributes annually over 1 billion gallons of fuel
– Annual gross rental income over $80 million
– Operates 75 retail sites
– 17.5% equity interest in CST Brands’ wholesale
fuels business, approximately 1.8 billion gallons
of annual fuel supply
• Over 1,250 locations – 501 owned sites
– 621 Lessee Dealers
– 394 Independent Dealers
– 75 Company Operated Sites
– 98 Commission Agents
– 71 Non-fuel Tenant Sites (rent only)
• Equity market capitalization of
$880 million and enterprise
value of $1.3 billion
*All information is as of March 31, 2017 4
Investor Update May 2017
2016 and Recent Highlights
• Acquisitions in 2016
– 31 stores acquired from S/S/G Corp (Franchised Holiday Stores), approx. 26 million annual fuel gallons
– 55 lessee dealer and 25 independent dealer accounts acquired from State Oil, approx. 60 million annual
gallons
• Portfolio Optimization
– Continued dealerization process with 77 sites dealerized in 2016
– Closed on a $25 million sale-leaseback transaction in late 2016 (17 properties in the Chicago market)
• Expense Reduction
– Reduced expenses (operating and G&A) 21% from 2015 to 2016
• Capital Strength
– Leverage, as defined under our credit facility, was 4.23 times as of 03/31/17
– Amended credit facility at year-end 2016 to provide additional borrowing flexibility and sale-leaseback
optionality
• Sustained Distribution Growth
– Grew annual distributions 6.1% in 2016 compared to 2015
– Declared distribution attributable to first quarter 2017 of $0.6175 per unit
– 12 consecutive quarters of distribution growth
• Couche-Tard/Circle K proposed merger with CST Brands
– Announced in August 2016
– Potential strategic benefits to CrossAmerica
– Pending regulatory approvals, expected closing in Second Quarter 2017 5
Investor Update May 2017
2012
Dunmore Oil
Acquisition
(Pennsylvania)
Express Lane
Acquisition
(Florida)
2013
Rocky Top
Acquisition
(Tennessee)
Rogers
Acquisition
(Tennessee)
2014 2014 2015 2016
Manchester
Acquisition
(Virginia)
Atlas
Acquisition
(Chicago)
Landmark
Industries
Acquisition
(Texas)
Dropdown of 5%
interest in CST Fuel
Supply
Erickson Oil
Products
Acquisition
(Upper Midwest)
State Oil
Acquisition
(Chicago)
Since IPO in October 2012, Over $800 Million in
Acquisitions
History of Growth
Nice N Easy
Acquisition
(New York)
Dropdown of 12.5% interest
in CST Fuel Supply and 29
Stores
One Stop
Acquisition
(West Virginia)
S/S/G Corp
Acquisition
(Upper Midwest)
6
Petroleum
Marketers, Inc.
Acquisition
(WV/VA)
Investor Update May 2017
Growth Drivers
• Capital Discipline
– Executed M&A strategy with two accretive acquisitions in 2016
– Leveraged real estate with sale-leaseback transaction
– Unlocked additional capacity with credit facility enhancements
– Sustaining CapEx of less than $1 million in 2016
• Portfolio Optimization
– 77 sites dealerized in 2016
– Lowering expenses
– Stabilizing cash flow
• Partnership-wide Expense Control
– Reduced expenses $23 million
or 21% from 2015 to 2016
– Despite growing EBITDA(1) 15%
$48
$72
$61
$37 $36
$24
2014 2015 2016
Expenses
(in millions)
Operating General & Administrative
7 (1) See the (i) reconciliation of EBITDA, Adjusted EBITDA and Distributable Cash Flow (or “DCF”) to net income and (ii) the definitions of EBITDA,
Adjusted EBITDA and DCF in the appendix of this presentation.
Investor Update May 2017
Overview of Business Segments
Wholesale Fuels Distributor Convenience Store Lessor Convenience Store Operator
• Purchase and sale of wholesale
motor fuel
– Distribute branded and unbranded
fuel (83% of the motor fuel we
distributed in 2016 was branded)
– Distribute motor fuel to over 1,200
sites located in 29 states
– In 2016, 87% of our gallons sold were
based on a fixed mark-up per gallon
– Provide fuel to several different
types of customer sites including
independent dealers, lessee dealers,
affiliated dealers, CST, our company-
operated stores (Retail Segment) and
commission agents
• Lease or sublease real and
personal property to tenants
– Sites used in the retail distribution
of motor fuels
– Lease agreements are generally 3-
10 years
– Leases are generally triple net
leases
– As of 12/31/16, 810 sites
generating rental income
– We own 57% of our properties that
we lease to our dealers or utilize in
our retail business
• Operation of convenience stores
– Primarily through our Erickson and S/S/G
Corporation (Franchised Holiday) stores
– Own or lease the property
– Retain all profits from motor fuel and
convenience store operations
– Own the motor fuel inventory at the sites
and set the motor fuel pricing at the sites
– As of 03/31/17, operating 75 retail sites
• Manage commission agent sites
– CAPL owns fuel inventory and sets the
retail price, earning retail fuel profit
– As of 03/31/17, own/lease 98
commission agent sites (Retail Segment)
8
WHOLESALE SEGMENT RETAIL SEGMENT
Investor Update May 2017
Wholesale Segment
• Wholesale Fuel Supply
– Averaged 5.2 cpg in 2016 on 1.04 billion gallons
• Historically averaged 5-7 cpg margin
• Fluctuates based on value of prompt-payment discounts
and other factors, including dealer-tank-wagon margins
– Supply Contracts
• 83% of supply contracts are branded supply and
earn prompt-pay discounts and other rebates
and incentives
• 17% of supply contracts are unbranded supply
arrangements and offer no additional discounts
– Dealer Contracts
• 87% of distribution contracts are spot based, or rack+ fixed contracts
• 13% of distribution contracts are dealer-tank-wagon, or rack-to-retail variable contracts
• Rental Income
– Generating rental income at 810 sites, earned Gross Rental Income of $75 million in 2016
– Paying rent on underlying leases at 310 sites, paid $18 million in annual rent expense in
2016
– Recognized Net Rental Income of $57 million in 2016
48%
52%
Fuel Margin Rent and Other
2016 Wholesale
Gross Profit Dollars
9
$54
million $59
million
Investor Update May 2017
Wholesale Segment – Fuel
10
Fuel Volume Distributed by Brand
(2016, gallons in millions)
308
260
234
70
44 41
26 21 16 15
UNBRANDED
Distributed 1.04 billion gallons of motor fuel in 2016
71% increase from IPO year of 2012
OTHER
BRANDS
Investor Update May 2017
Wholesale Segment – Rent
• Rental Income (annuity stream) has become a sizable portion of cash flow contribution
– We own nearly 60% of all sites from which we generate rental income
– Gross Rental Income grew 25% from 2015 to 2016
• Own convenient fueling locations in areas of high consumer demand
– Many of our sites are located in markets where limited availability of undeveloped real estate
provides us a first mover advantage
– Due to prime locations, owned real estate sites have high alternate use values, which provides
additional risk mitigation
332 368
511 556 571
691
810
87
116
76
2010 2011 2012 2013 2014 2015 2016
Sites Owned & Leased
(end of period)
Generating Rental Income Company Operated
$18,961 $20,425 $21,222
$41,577
$47,348
$59,956
$74,955
2010 2011 2012 2013 2014 2015 2016
Gross Rental Income
(in thousands)
11
Investor Update May 2017
Retail Segment
• Own/Lease and Operate 75 Convenience Stores(1)
– All located in Minnesota and Wisconsin
– Operate under three store brands
• FreedomValu, Holiday, or SuperAmerica
– Merchandise and Services
• In 2016, averaged sales of $3,790 pspd at 24.6% margin
• Own/Lease 98 Commission Agent Sites(1)
– Other category is primarily rental income from
agents operating the sites
– CAPL owns fuel inventory and sets pricing, earning retail fuel profit
– CAPL pays agent a commission to operate the site based on gallons sold
• Retail Fuel Margin
– In 2016, Retail Segment averaged 2,780 gallons PSPD, with a 5.3 cpg margin
– In addition, Wholesale Segment distributes to the Retail Segment, capturing
qualifying wholesale fuel supply income
12
20%
70%
10%
Fuel Margin Merchandise and Services Rent
2016 Retail
Gross Profit Dollars
$9
million
$30
million
$4
million
(1) As of March 31, 2017
Investor Update May 2017
Transaction Overview
• Couche-Tard subsidiary to acquire CST 2Q 2017
– Includes assets related to CrossAmerica
– Circle K, a subsidiary of Couche-Tard
• Organizational Relationship Upon Closing
– Couche-Tard controls the general partner of CrossAmerica
– Couche-Tard owns 20% of CrossAmerica limited partner units
– Couche-Tard owns 100% of CrossAmerica Incentive
Distribution Rights (IDRs)
– CrossAmerica owns 17.5% interest in CST Fuel Supply
Operating
Subsidiaries
55%
Limited Partner
Interest
CrossAmerica
Partners LP
NYSE: CAPL
Public
Unitholders
Joseph Topper
& Affiliates
CST Brands, Inc.
Canadian
Operations* US Operations
CrossAmerica
General Partner
25%
Limited Partner
Interest
100%
Ownership Interest
100% Ownership Interest
20% Limited
Partner Interest
100% IDR Interest
100%
Ownership Interest
100%
General Partner Interest
* - Couche-Tard entered into an agreement with another party to sell certain Canadian assets of CST after the merger.
17.5% Interest in
CST Fuel Supply
Note: This organizational chart represents the anticipated post-closing structure and is subject to change. 13
Alimentation Couche-Tard Inc.
TSX: ATD.A ATD.B
Investor Update May 2017
Strategic Benefit to CAPL
• Provides continuity with a sponsor whose management culture is aligned
with CrossAmerica
– Disciplined operator with best practices in acquisitions and integration
– Strong and consistent financial performance throughout all economic cycles
– Heightened focus on growing free cash flow, with particular expertise in cost
management
– Well capitalized with solid balance sheet
– Well positioned to lead further consolidation in fragmented industry
• Scale and global reach provides additional operational benefits
– Further strengthens relationship with many of our key suppliers
– Many turnkey branding and franchise programs that can complement our dealer
offerings
• Supports dealer health, which impacts fuel volume growth and additional rental income
potential
• Wholesale operations with
complementary geographic
reach
14
CrossAmerica Financial Overview
Steven Stellato, Chief Accounting Officer
15
Investor Update May 2017
Operating Results
Operating Results
(in thousands, except for per gallon and site count)
2016 2015 % Change
WHOL
ES
AL
E
Motor Fuel Distribution Sites (period avg.) 1,128 1,064 6%
Volume of Gallons Distributed 1,034,585 1,051,357 (2%)
Wholesale Fuel Margin per Gallon $0.052 $0.056 (7%)
Sites Generating Rental Income 810 691 17%
Rental & Other Gross Profit (Net) $58,672 $45,757 28%
RE
TA
IL
Company Operated Sites (period avg.) 86 132 (35%)
Commission Agent Sites (period avg.) 71 70 1%
Volume of Retail Gallons Distributed 159,721 211,243 (24%)
Retail Fuel Margin per Gallon $0.053 $0.092 (42%)
General, Admin. & Operating Expenses $85,230 $108,467 (21%)
16
Investor Update May 2017
$39,296
$44,063
$69,733
$81,628
$54,904
$61,424
$90,314
$103,634
$1.73
$2.08 $2.23
$2.40
$0
$20 ,000
$40 ,000
$60 ,000
$80 ,000
$10 0,000
$12 0,000
2013 2014 2015 2016
Distributable Cash Flow
(in thousands)
Adjusted EBITDA
(in thousands)
Distributions Paid
(in dollars per unit)
Financial Summary(1)
17
(1) See the (i) reconciliation of EBITDA, Adjusted EBITDA and Distributable Cash Flow (or “DCF”) to net income and (ii) the definitions
of EBITDA, Adjusted EBITDA and DCF in the appendix of this presentation.
Investor Update May 2017
Drivers of Cash Flow
Segment Gross Profit(1) Category Gross Profit(1)
(1) Presented before intersegment eliminations. In addition, Rent is combined with the Wholesale and Retail Segments
18
2016
73%
27%
Wholesale Retail
$113
million
$43
million 35%
6%
$9 million 40%
19%
Wholesale Fuel Retail Fuel Rent Merch & Services
$63
million
$30
million
$54
million
2015
62%
38%
Wholesale Retail
$104
million
$65
million 35%
11%
29%
25%
Wholesale Fuel Retail Fuel Rent Merch & Services
$50
million
$42
million
$59
million
$19
million
Shift to more stable,
qualifying cash flow
Investor Update May 2017
Portfolio Optimization
• Continued focus on managing expenses and execution of our integration strategy
– Divested of low-margin, high-expense commercial fuels business acquired with PMI
acquisition
• Divestiture was cash flow positive despite 80 million gallon reduction of wholesale fuel supply
– Continue to apply our processes and systems to reduce operating and general &
administrative expenses following acquisitions
– Converted 77 Company Operated
sites to Lessee Dealer accounts in
2016, yielding a more stable, qualifying
income cash flow stream
Company Operated
Wholesale Fuel Margin
Retail Fuel Margin
Retail Merchandise Margin
− Operating Expenses
− Income Taxes
Lessee Dealer
Wholesale Fuel Margin
Rental Income
19
144
124 121 116
97
80 78 76 75
1Q '15 2Q '15 3Q '15 4Q '15 1Q '16 2Q '16 3Q '16 4Q '16 1Q'17
Company Operated Site Count
(end of period)
Investor Update May 2017
Executing with Measured Growth
• Declared distribution attributable to
first quarter 2017 of $0.6175 per unit
– 0.5 cent per unit increase over
distributions attributable to
fourth quarter 2016
– Increased annual per unit
distribution by 6.1% for 2016
over 2015
• Ended 1Q17 with leverage ratio
of 4.23x, as defined under our credit facility
• Continue to demonstrate financial flexibility to execute growth strategy in any
market cycle
• Pending acquisition of our GP by a U.S. subsidiary of Alimentation Couche-Tard
presents even more opportunity for growth
$0.5125 $0.5225 $0.5325
$0.5425 $0.5475 $0.5625
$0.5775 $0.5925 $0.5975
$0.6025 $0.6075 $0.6125 $0.6175
Q1 '14 Q2 '14 Q3 '14 Q4 '14 Q1 '15 Q2 '15 Q3 '15 Q4 '15 Q1 '16 Q2 '16 Q3 '16 Q4 '16 Q1'17
Distributions per Unit (on declared basis)
20
Appendix
Investor Update
21
Investor Update May 2017
Non-GAAP Financial Measures
22
Investor Update May 2017
Non-GAAP Reconciliation
23