10-K: CrossAmerica Partners Reports Strong 2025 Earnings Growth

CrossAmerica Partners LP announced a significant increase in net income and operating income for 2025, driven by strategic real estate rationalization and improved retail segment performance.

Summary

• Net income available to limited partners increased by 96.6% to $39.1 million in 2025 from $19.9 million in 2024.
• Operating income rose by 38% to $97.6 million in 2025, up from $70.6 million in 2024.
• Gross profit increased by 1% to $402.7 million in 2025, compared to $398.3 million in 2024.
• Total operating revenues decreased by 11% to $3.66 billion in 2025, primarily due to a 12% decrease in fuel sales revenue.
• The retail segment's operating income increased by 4% to $97.5 million, while the wholesale segment's operating income decreased by 4% to $73.5 million.
• The company sold 107 sites for $103.3 million in 2025, generating $45.9 million in net gains from real estate rationalization efforts.
• Distributable Cash Flow increased by 2.1% to $87.8 million, and the Distribution Coverage Ratio improved to 1.10x in 2025 from 1.08x in 2024.
• Total debt and finance lease obligations decreased to $697.0 million in 2025 from $775.4 million in 2024.

Sentiment

Score: 7

Explanation: StockSavvy.ai views this as a positive report, primarily driven by strong earnings growth and effective asset management, despite a decline in overall revenues. The improved distribution coverage and debt reduction are favorable, though the underlying fuel volume decline remains a long-term challenge.

Positives

• Net income available to limited partners increased significantly by 96.6% to $39.1 million.
• Operating income grew by 38% to $97.6 million.
• Gross profit saw a 1% increase to $402.7 million.
• Retail segment operating income increased by 4% to $97.5 million, driven by a 4% increase in motor fuel gross profit and a 6% increase in merchandise gross profit.
• Successful real estate rationalization generated substantial net gains of $45.9 million from the sale of 107 sites for $103.3 million.
• Distributable Cash Flow increased by 2.1% to $87.8 million, and the Distribution Coverage Ratio improved to 1.10x, indicating better coverage for distributions.
• Total debt decreased by $78.5 million to $697.0 million, and interest expense declined by 8% due to lower average SOFR rates and reduced debt balance.
• Effective internal controls over financial reporting were deemed effective as of December 31, 2025.
• An amendment to the Getty master lease (subsequent event) resets annual rent to $6.9 million (from variable) and extends the term through April 30, 2037, providing long-term stability.

Negatives

• Total operating revenues decreased by 11% to $3.66 billion, primarily due to a 12% decrease in fuel sales revenue.
• Fuel sales revenue decline was driven by a 7% decrease in the consolidated average fuel selling price and a 5% decrease in volume.
• Wholesale segment operating income decreased by 4% to $73.5 million, and its gross profit decreased by 7%.
• Wholesale motor fuel gross profit decreased by 1% due to a 7% decrease in volume.
• Rent gross profit in the wholesale segment decreased by 19% ($7.9 million) due to site sales and conversions.
• Depreciation, amortization, and accretion expense increased by 18% ($13.6 million), primarily due to an $18.6 million increase in impairment charges.
• Three favorable interest rate swap contracts matured on April 1, 2024, which partially offset the decrease in interest expense from lower SOFR and debt reduction.
• Cash and cash equivalents decreased to $3.1 million at December 31, 2025, from $3.4 million at December 31, 2024.
• Net cash used in financing activities increased significantly to ($160.2 million) in 2025 from ($73.1 million) in 2024.

Risks

• Insufficient distributable cash from operations to pay quarterly distributions.
• Inability to make acquisitions on economically acceptable terms, limiting future growth and distribution increases.
• Substantial risks associated with acquisitions, including unforeseen liabilities, integration difficulties, and failure to realize anticipated benefits.
• Capital expenditures are subject to risks such as below-forecast performance, unforeseen challenges, new competition, and higher costs due to inflation.
• Volatility in crude oil and wholesale motor fuel costs, which accounted for 87% of total revenues and 55% of total gross profit in 2025, can significantly impact profitability.
• Seasonality in wholesale motor fuel costs and sales, as well as merchandise sales, can affect financial results.
• Intense competition and fragmentation in the motor fuel distribution and convenience store industries can lead to narrow margins.
• Changes in credit or debit card expenses, which are assessed as a percentage of transaction amounts, could reduce gross profit, especially with higher motor fuel prices.
• General economic, financial, and political conditions, including recessionary conditions, higher interest rates, inflation, and changes in consumer spending, could adversely affect the business.
• Changes in consumer behavior, preferences, and travel patterns, including increased preference for alternative motor fuels or improvements in fuel efficiency, could significantly decrease demand for motor fuel.
• Broad-based business or economic disruptions caused by health crises could adversely affect employee, customer, vendor, and distribution channel relationships.
• A prolonged shortage of qualified labor could negatively impact operations and increase costs.
• Extensive government laws and regulations concerning store merchandise, operations, employees, environmental matters, and product quality specifications can result in material compliance costs and penalties.
• Changes in U.S. trade policy, including the imposition of tariffs, may have a material adverse impact on business.
• Increased attention to environmental, social, and governance (ESG) matters and conservation measures may result in increased costs, reduced demand for products, and negative impacts on unit price and access to capital markets.
• Unfavorable weather conditions could damage facilities, impact consumer behavior, and increase insurance costs.
• Dependence on four principal suppliers for 79% of motor fuel and one principal supplier for 53% of merchandise creates supply chain risk.
• Reliance on suppliers to provide trade credit to adequately fund ongoing operations.
• Creditworthiness and performance of customers, suppliers, and contract counterparties pose financial risks.
• Pending or future litigation, including claims related to motor fuel or food quality, personal injury, and product liability, could result in significant liabilities.
• Dangers inherent in the storage and transport of motor fuel, such as fires and spills, could lead to significant losses or liabilities.
• Dependence on third-party transportation providers for all motor fuel transport.
• Wholesale motor fuel sales are generated under contracts that must be renegotiated or replaced periodically, with potential for less favorable terms.
• Reliance on IT systems, network infrastructure, and software as a service providers exposes the company to cybersecurity threats and data breaches.
• High debt levels and restrictive debt covenants may limit flexibility in obtaining additional financing and pursuing business opportunities.
• An increase in interest rates could cause the market price of common units to decline and adversely affect the ability to service indebtedness.
• Not owning all land for sites could result in increased costs or disruptions upon lease renewals.
• Inability to lease or sub-lease owned or leased sites on favorable terms.
• Reliance on DMI and other third parties for environmental indemnification, with a risk that these indemnities may be insufficient.
• The Topper Group's control and potential conflicts of interest with the Partnership and its unitholders.
• The General Partner and Board may modify or revoke the cash distribution policy at any time.
• Reliance on Topper Group employees for key management services under the Omnibus Agreement, with risks if the agreement is terminated.
• The Partnership Agreement modifies fiduciary duties of the General Partner and Board, potentially limiting unitholder remedies.
• The General Partner's affiliates, including the Topper Group, may compete with the Partnership.
• Limited voting rights for common unitholders and the General Partner's ability to transfer control without unitholder consent.
• The General Partner's call right may require unitholders to sell their common units at an undesirable time or price.
• Sales of substantial amounts of common units by the Topper Group or other large holders could adversely affect the market price.
• The ability to issue unlimited additional units without unitholder approval could dilute existing ownership interests.
• The General Partner's discretion in establishing cash reserves may reduce cash available for distribution.
• Tax risks, including potential changes in U.S. federal income tax treatment, entity-level taxation, and unitholders being required to pay taxes on income even without cash distributions.

Future Outlook

CrossAmerica Partners anticipates continuing its strategy of optimizing its property portfolio through site conversions and divestitures of lower-performing assets, which are expected to generate gains and reduce interest expense by paying down debt. The company will also opportunistically pursue acquisitions, contingent on market conditions, suitable targets, regulatory compliance, and favorable financing terms, while managing debt covenants. The adoption of new accounting guidance on income tax disclosures (ASU 2024-03) is expected to affect disclosures but not materially impact financial statements for the year ending December 31, 2027.

Management Comments

• We believe that we will have sufficient cash flow from operations, borrowing capacity under the Credit Facility, access to capital markets and alternate sources of funding to meet our financial commitments, debt service obligations, contingencies, anticipated capital expenditures, distributions on the preferred membership interests and partnership distributions.
• 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 and operating income for the wholesale and retail segments.
• As part of our evaluation of the highest and best use class of trade for each of our properties, we anticipate continuing to divest certain assets, often lower performing properties.
• We will continue to evaluate acquisitions on an opportunistic basis. Additionally, we will pursue acquisition targets that fit into our strategy.
• The Board has adopted a policy to make cash distributions per unit each quarter, in an amount determined by the Board following the end of such quarter.
• Our General Partner may determine at any time that it is in the best interest of our Partnership to modify or revoke our cash distribution policy.

Industry Context

StockSavvy.ai notes that CrossAmerica Partners operates in a highly competitive and fragmented motor fuel distribution and convenience store industry, characterized by narrow margins. The company's strategy of real estate rationalization and optimizing site operations (e.g., converting lessee dealer sites to company-operated) is a common industry response to market pressures and aims to enhance profitability. The decrease in overall fuel volumes aligns with broader trends of increasing fuel efficiency and potential shifts towards alternative fuels, posing a long-term challenge for traditional fuel distributors. The company's dependence on a few major suppliers is typical for branded distributors but introduces concentration risk. The increase in merchandise sales, despite declining fuel volumes, suggests a successful adaptation to evolving consumer habits, where convenience stores increasingly rely on in-store sales for profitability.

Comparison to Industry Standards

• CrossAmerica Partners is one of the ten largest independent distributors by motor fuel volume in the United States for ExxonMobil, BP, and Marathon, indicating a strong market position within its niche.
• The company's strategy of divesting lower-performing properties and converting sites to company-operated or commission agent models is a common practice among fuel and convenience store operators, such as Alimentation Couche-Tard (Circle K) or Casey's General Stores, who continuously optimize their portfolios for higher-margin retail operations.
• The reported 28.5% merchandise gross profit percentage at company-operated sites for 2025 is competitive within the convenience store industry, where merchandise margins typically range from 25% to 35%, comparable to peers focusing on in-store sales growth.
• The Distribution Coverage Ratio of 1.10x for 2025, while improved from 1.08x in 2024, is generally considered adequate for master limited partnerships (MLPs) but is lower than some industry leaders who consistently maintain coverage ratios above 1.2x, suggesting less buffer for unexpected downturns or aggressive growth.
• The weighted-average remaining term of supply agreements at 5.6 years as of December 31, 2025, provides a reasonable level of supply stability, comparable to long-term contracts seen with other large independent distributors.

Management Changes

Corporate Governance

Legal Proceedings

• The company is from time to time party to various lawsuits, claims, and other legal proceedings arising in the ordinary course of business, seeking compensation for alleged personal injury, breach of contract, property damages, environmental damages, employment-related claims, punitive damages, civil penalties, or injunctive/declaratory relief.
• Management believes it is not reasonably possible that these proceedings, separately or in the aggregate, will have a material adverse effect on the consolidated financial position, results of operations, or cash flows.

Related Party Transactions

• The Topper Group beneficially owned or controlled 38.5% of the Partnership's common units as of February 20, 2026.
• John B. Reilly, III owned or controlled 13.1% of the Partnership's common units as of February 20, 2026.
• Revenues from TopStar, an entity affiliated with the Topper Group, were $35.8 million in 2025.
• Rent expense to the Topper Group for leased real estate was $9.7 million in 2025.
• The Partnership purchased a property from TopStar for $0.2 million in February 2025.
• The Partnership sold one property to a related party affiliated with the Topper Group for $2.5 million in 2024, resulting in a net gain of $1.8 million.
• Expenses incurred under the Omnibus Agreement for management, administrative, and operating services provided by the Topper Group totaled $129.7 million in 2025.
• Common unit distributions to the Topper Group amounted to $30.8 million in 2025.
• Common unit distributions to affiliates of John B. Reilly, III amounted to $10.5 million in 2025.
• Charges for maintenance and environmental remediation activities performed by a Topper Group-affiliated entity were $2.1 million in 2025.
• DMI reimbursed the Partnership $0.6 million for certain environmental remediation costs in 2025 under an indemnification agreement.
• Merchandise costs of $19.4 million were incurred from purchases from an affiliate of John B. Reilly, III and Joseph V. Topper, Jr. in 2025.
• Lease expense for vehicles from a Topper Group-affiliated entity was $0.2 million in 2025.
• Rent expense for principal executive offices leased from an affiliate of John B. Reilly, III and Joseph V. Topper, Jr. was $1.1 million in 2025.
• Costs for public relations and website consulting services from a company affiliated with John B. Reilly, III amounted to $0.1 million in 2025.
• Holdings issued 25,000 Series A Preferred Interests to the Topper Group and JBR Investor for $25 million in March 2022, with a 9% preferred return.

Stakeholder Impact

• Shareholders (Unitholders): Benefited from increased net income and distributable cash flow, leading to a stable $0.5250 quarterly distribution per unit and an improved distribution coverage ratio of 1.10x. However, the Topper Group's significant control and limited fiduciary duties, along with the potential for distribution policy modification, introduce governance risks.
• Employees (Topper Group employees providing services): Compensation includes base salary, short-term incentives (2025 Bonus Plan payout 61-69% of target), and long-term equity awards (phantom units, performance-based awards). The company relies entirely on Topper Group employees for management and operations.
• Customers (Wholesale and Retail): Affected by changes in motor fuel pricing and availability, competition, and the ongoing optimization of site formats. Merchandise sales growth indicates continued customer engagement at retail sites.
• Suppliers: The company's dependence on four principal motor fuel suppliers (79% of volume) and one principal merchandise supplier (53% of purchases) means their performance and credit terms are critical.
• Creditors: Debt levels decreased, and the company remains in compliance with Credit Facility covenants, indicating a stable credit profile. Proceeds from asset sales are being used to reduce debt.
• Regulatory Authorities: The company is subject to extensive federal, state, and local environmental, labor, and trade regulations, with compliance costs and potential penalties being a continuous factor. Cybersecurity measures are in place to meet regulatory expectations.

Next Steps

• Continue evaluating the highest and best use class of trade for properties, potentially leading to further site conversions.
• Anticipate continuing to divest lower-performing assets, often with continued fuel supply.
• Utilize proceeds from site sales to pay down borrowings on the Credit Facility.
• Evaluate acquisitions on an opportunistic basis, pursuing targets that fit the company's strategy.
• Comply with new accounting guidance ASU 2024-03, 'Disaggregation of Income Statement Expenses,' for the Annual Report on Form 10-K for the year ending December 31, 2027.
• Cash payment of preferred return on Series A Preferred Interests will begin on October 16, 2026.
• Exercise a purchase option for up to 25 Getty sites between October 1, 2026, and June 30, 2027.

Key Dates

Recommendation

CrossAmerica Partners demonstrated strong financial performance in 2025 with significant increases in net income and operating income, alongside an improved distribution coverage ratio and reduced debt. The strategic real estate rationalization efforts are yielding substantial gains and contributing to a healthier balance sheet. However, the underlying decline in overall fuel volumes and rental income in the wholesale segment, coupled with the inherent risks of a highly competitive and volatile industry, suggest that while the company is managing its business effectively, significant growth catalysts beyond operational optimization and opportunistic acquisitions may be limited. The substantial control by the Topper Group and the modified fiduciary duties also present a governance consideration. Therefore, a 'hold' recommendation is appropriate, acknowledging the solid operational execution and financial stability while recognizing the long-term industry headwinds and governance structure.

Keywords

motor fuel distribution, convenience stores, wholesale fuel, retail fuel, real estate leasing, SEC filing, 10-K, CrossAmerica Partners, CAPL, Topper Group, fuel sales, merchandise sales, EBITDA, Distributable Cash Flow, debt management, acquisitions, site rationalization, corporate governance, risk factors, environmental compliance, cybersecurity, related party transactions, NYSE