CrossAmerica Sells Fuels Businesses

Several buyers take fuels transportation, heating oil, tank wagon other businesses

crossamerica petroleum marketers PMI

ALLENTOWN, Pa. -- CrossAmerica Partners LP has sold the fuels transportation, residential heating oil and tank wagon commercial fuels businesses that were formerly operated by its wholly owned subsidiary, Petroleum Marketers Inc. (PMI), to multiple buyers.

Reliable Tank Line LLC, a division of Quality Oil Co. LLC, purchased the fuels transportation business. The company's terminal branch sold the heating oil and tank wagon commercial fuels business to multiple buyers: Quarles Petroleum Inc.; Davenport Energy Inc.; and, Woodfin Heating Inc.

In May 2014, Lehigh Gas Partners LP, the predecessor of CrossAmerica, purchased PMI, which at the time operated two primary lines of business: convenience stores and petroleum products distribution. CrossAmerica subsequently decided to divest the fuels transportation, residential heating oil and tank wagon commercial fuels businesses, which consisted of customers, bulk storage plants, operational facilities and fleet assets that served customers throughout Virginia.

PMI was incorporated in 1949 and has been supplying and delivering a variety of petroleum products to commercial, dealer, governmental and residential customers for more than 60 years.

Matrix Capital Markets Group Inc., Richmond, Va., provided merger and acquisition advisory services to CrossAmerica on the divestitures.

Meanwhile, CrossAmerica Partners reported financial results for the third quarter ended Sept. 30, 2015.

During the quarter, CrossAmerica distributed, on a wholesale basis, 284.1 million gallons of motor fuel at an average wholesale gross margin of 6.1 cents per gallon, resulting in a wholesale motor fuel gross profit of $17.3 million. For the same period in 2014, it distributed, on a wholesale basis, 264.2 million gallons of fuel at an average wholesale gross margin of 7.33 cents per gallon, resulting in a wholesale motor fuel gross profit of $19.2 million.

The decrease of 10% in gross profit from wholesale fuel sales for third-quarter 2015 relative to 2014 was attributable to a decline in the average wholesale fuel margin partially offset by an 8% increase in volume driven by the acquisitions that have been completed since April 2014. Wholesale fuel margin per gallon for the quarter was lower, primarily due to the decline in the margin the partnership receives from purchase discounts provided to CrossAmerica by its suppliers.

CrossAmerica's gross profit from its other revenues for the wholesale segment, which primarily consist of rental income, was $9.7 million for third-quarter 2015 compared to $5.9 million for the same period in 2014. The increase in rental income was associated with the recent acquisitions of real estate, which the partnership leases to CST Brands.

Operating income for the wholesale segment increased $6.4 million or 41% primarily driven by an increase in rental income, income from CST Fuel Supply and a decline in operating expenses, partially offset by an increase in depreciation, amortization and accretion.

For third-quarter 2015, the partnership sold 61.6 million gallons of motor fuel at an average retail motor fuel gross margin of 12.9 cents per gallon, net of commissions and credit-card fees, resulting in a retail gross profit of $8 million. For the same period in 2014, CrossAmerica sold 46.5 million gallons at an average retail motor fuel gross margin of 5.3 cents per gallon, net of commissions and credit-card fees, resulting in a retail gross profit of $2.5 million. The increase in retail gross profit from retail motor fuel sales for third-quarter 2015 relative to 2014 was due primarily to the Erickson and One Stop convenience-store acquisitions. They also contributed to the $11.1 million in gross margin from the sale of food and merchandise during the quarter. For the same period in 2014, CrossAmerica generated $7.4 million in gross margin from the sale of food and merchandise.

Operating income for the retail segment increased nearly $2.4 million primarily driven by an increase in motor fuel and merchandise gross profit, partially offset by an increase in depreciation, amortization and accretion.

Allentown, Pa.-based CrossAmerica Partners is a leading wholesale distributor of motor fuels and owner and lessee of real estate used in the retail distribution of motor fuels. Formed in 2012, the company distributes fuel to more than 1,050 locations and owns or leases more than 625 sites in 16 states: Pennsylvania, New Jersey, Ohio, Florida, New York, Massachusetts, Kentucky, New Hampshire, Maine, Tennessee, Maryland, Delaware, West Virginia, Virginia, Illinois and Indiana.

CST Brands, one of the largest independent retailers of motor fuels and convenience-store merchandise in North America, owns the general partner of CrossAmerica Partners. Based in San Antonio, CST owns approximately 1,900 locations throughout the southwestern United States, New York and eastern Canada.

Part of CSP's 2015 Convenience Top 101 retailers