EX-99.2 4 capl-ex992_11.htm EX-99.2 JET-PEP UNAUDITED INTERIM FINANCIAL STATEMENTS capl-ex992_11.htm

Exhibit 99.2

 

 

JET-PEP, INC. AND AFFILIATED COMPANIES

 

CONSOLIDATED FINANCIAL STATEMENTS


AS OF SEPTEMBER 30, 2017, AND DECEMBER 31, 2016

 

AND FOR THE

 

NINE-MONTH PERIODS ENDED

 

SEPTEMBER 30, 2017 AND 2016

 


 

CONTENTS

 

 

 

PAGE

 

 

Accountants’ Compilation Report

3

 

 

Consolidated Financial Statements

 

 

 

Consolidated Balance Sheets

4

 

 

Consolidated Statements of Income and Stockholder’s Equity

5

 

 

Consolidated Statements of Cash Flows

6

 

 

Notes to the Consolidated Financial Statements

7

 

 

 

 


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ACCOUNTANTS’ COMPILATION REPORT

 

 

Jet Pep, Inc. and Affiliated Companies

Holly Pond, Alabama

 

Management is responsible for the accompanying consolidated financial statements of Jet Pep, Inc. and Affiliated Companies, which comprise the consolidated balance sheets as of September 30, 2017 (unaudited) and December 31, 2016 (audited), and the related consolidated statements of income and stockholder’s equity, and cash flows for the nine-month periods ended September 30, 2017 (unaudited) and 2016 (unaudited), and the related notes to the consolidated financial statements in accordance with accounting principles generally accepted in the United States of America.  We have performed the compilation engagements in accordance with Statements of Standards for Accounting and Review Services promulgated by the Accounting and Review Services Committee of the AICPA.  We did not audit (except for the December 31, 2016 balance sheet) or review the consolidated financial statements nor were we required to perform any procedures to verify the accuracy or completeness of the information provided by management.  Accordingly, we do not express an opinion, a conclusion, nor provide any form of assurance on these consolidated financial statements.

The December 31, 2016 consolidated balance sheet was audited by us, and we expressed an unmodified opinion on it in our report dated December 22, 2017.   We have not performed any auditing procedures since that date.  

 

/s/ Pearce, Bevill, Leesburg, Moore, P.C.

 

Birmingham, Alabama

December 22, 2017

 

- 3 -

 


 

JET-PEP, INC. AND AFFILIATED COMPANIES

 

CONSOLIDATED BALANCE SHEETS

 

SEPTEMBER 30, 2017 AND DECEMBER 31, 2016

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

(unaudited)

 

 

 

 

 

 

September 30, 2017

 

 

December 31, 2016

 

CURRENT ASSETS

 

 

 

 

 

 

 

Cash and cash equivalents

$

10,082,685

 

 

$

6,935,721

 

Accounts receivable, net

 

2,730,233

 

 

 

2,391,620

 

Notes receivable

 

796,670

 

 

 

212,672

 

Inventories, net

 

10,286,045

 

 

 

9,340,417

 

Prepaid expenses

 

260,041

 

 

 

109,128

 

  TOTAL CURRENT ASSETS

 

24,155,674

 

 

 

18,989,558

 

 

 

 

 

 

 

 

 

PROPERTY AND EQUIPMENT, NET

 

45,801,980

 

 

 

50,778,540

 

 

 

 

 

 

 

 

 

OTHER ASSETS

 

 

 

 

 

 

 

Deposits and investments

 

247,673

 

 

 

194,180

 

  TOTAL OTHER ASSETS

 

247,673

 

 

 

194,180

 

 

 

 

 

 

 

 

 

     TOTAL ASSETS

$

70,205,327

 

 

$

69,962,278

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDER'S EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

 

CURRENT LIABILITIES

 

 

 

 

 

 

 

Accounts payable and accrued expenses

$

6,238,396

 

 

$

5,785,527

 

Line of credit

 

1,000,000

 

 

 

-

 

Current portion of long-term debt

 

21,181,416

 

 

 

24,772,478

 

  TOTAL CURRENT LIABILITIES

 

28,419,812

 

 

 

30,558,005

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TOTAL LIABILITIES

 

28,419,812

 

 

 

30,558,005

 

 

 

 

 

 

 

 

 

STOCKHOLDER'S EQUITY

 

 

 

 

 

 

 

Common stock, $1 par value

 

 

 

 

 

 

 

issued, and outstanding

 

14,185

 

 

 

14,185

 

Retained earnings and additional paid-in capital

 

41,771,330

 

 

 

39,390,088

 

 

 

 

 

 

 

 

 

TOTAL STOCKHOLDER'S EQUITY

 

41,785,515

 

 

 

39,404,273

 

 

 

 

 

 

 

 

 

TOTAL LIABILITIES AND STOCKHOLDER'S

 

 

 

 

 

 

 

EQUITY

$

70,205,327

 

 

$

69,962,278

 

 

See accountants’ compilation report.  No assurance is provided on the financial statements.

- 4 -

 


 

JET-PEP, INC. AND AFFILIATED COMPANIES

 

CONSOLIDATED STATEMENTS OF INCOME AND STOCKHOLDER'S EQUITY

 

FOR THE NINE MONTH PERIODS ENDED SEPTEMBER 30, 2017 AND 2016

 

 

 

 

 

 

 

 

 

 

(unaudited)

 

 

(unaudited)

 

 

2017

 

 

2016

 

 

 

 

 

 

 

 

 

NET SALES

$

169,333,675

 

 

$

165,523,222

 

 

 

 

 

 

 

 

 

COST OF GOODS SOLD

 

149,110,804

 

 

 

143,646,103

 

 

 

 

 

 

 

 

 

GROSS PROFIT

 

20,222,871

 

 

 

21,877,119

 

 

 

 

 

 

 

 

 

OPERATING EXPENSES

 

 

 

 

 

 

 

Administrative and selling

 

11,394,015

 

 

 

11,616,463

 

Depreciation and amortization

 

5,680,399

 

 

 

5,732,461

 

 

 

 

 

 

 

 

 

Total operating expenses

 

17,074,414

 

 

 

17,348,924

 

 

 

 

 

 

 

 

 

INCOME FROM OPERATIONS

 

3,148,457

 

 

 

4,528,195

 

 

 

 

 

 

 

 

 

OTHER INCOME (EXPENSE)

 

 

 

 

 

 

 

Rent, net of expenses

 

1,862,981

 

 

 

1,727,691

 

Interest income

 

(7,115

)

 

 

47,373

 

Interest expense

 

(603,126

)

 

 

(667,329

)

Gain on sale of property, plant and equipment

 

288,496

 

 

 

18,879

 

 

 

 

 

 

 

 

 

Total other income (expense)

 

1,541,236

 

 

 

1,126,614

 

 

 

 

 

 

 

 

 

INCOME BEFORE TAXES

 

4,689,693

 

 

 

5,654,809

 

 

 

 

 

 

 

 

 

PROVISION FOR INCOME TAXES

 

94,736

 

 

 

160,900

 

 

 

 

 

 

 

 

 

NET INCOME

 

4,594,957

 

 

 

5,493,909

 

 

 

 

 

 

 

 

 

STOCKHOLDER'S EQUITY AT BEGINNING OF PERIOD

 

39,404,273

 

 

 

37,149,887

 

 

 

 

 

 

 

 

 

DISTRIBUTIONS TO STOCKHOLDER

 

(2,213,715

)

 

 

(2,917,034

)

 

 

 

 

 

 

 

 

STOCKHOLDER'S EQUITY AT END OF PERIOD

$

41,785,515

 

 

$

39,726,762

 

 

 

 

See accountants’ compilation report.  No assurance is provided on the financial statements.


- 5 -

 


 

JET-PEP, INC. AND SUBSIDIARIES

 

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

FOR THE NINE MONTH PERIODS ENDED SEPTEMBER 30, 2017 AND 2016

 

 

 

 

 

 

 

 

 

 

(unaudited)

 

 

(unaudited)

 

 

2017

 

 

2016

 

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

 

 

 

 

Net income

$

4,594,957

 

 

$

5,493,909

 

Adjustments to reconcile net income to net cash

 

 

 

 

 

 

 

from operating activities:

 

 

 

 

 

 

 

Depreciation and amortization

 

5,680,399

 

 

 

5,732,461

 

Gain on sale of property and equipment

 

(288,496

)

 

 

(18,879

)

Adjustments to reconcile net income to net cash

 

 

 

 

 

 

 

from operating activities:

 

 

 

 

 

 

 

Accounts receivable, net

 

(338,613

)

 

 

(384,149

)

Inventories

 

(945,628

)

 

 

2,124,050

 

Prepaid expenses

 

(150,913

)

 

 

1,692,382

 

Deposits and investments

 

(53,493

)

 

 

1,765

 

Accounts payable and accrued expenses

 

452,869

 

 

 

565,514

 

CASH FROM OPERATING ACTIVITIES

 

8,951,082

 

 

 

15,207,053

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

 

 

 

 

 

Proceeds from sales of property and equipment

 

351,604

 

 

 

75,838

 

Purchases of property and equipment

 

(766,947

)

 

 

(861,397

)

Changes in notes receivable, net

 

(583,998

)

 

 

(4,795

)

CASH FROM INVESTING ACTIVITIES

 

(999,341

)

 

 

(790,354

)

 

 

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

 

 

 

 

Net change in line of credit

 

1,000,000

 

 

 

-

 

Proceeds from issuance of long-term debt

 

-

 

 

 

10,000,000

 

Principal payments on long-term debt

 

(3,591,062

)

 

 

(19,847,656

)

Distributions to stockholder

 

(2,213,715

)

 

 

(2,917,034

)

CASH FROM FINANCING ACTIVITIES

 

(4,804,777

)

 

 

(12,764,690

)

 

 

 

 

 

 

 

 

NET INCREASE IN CASH

 

3,146,964

 

 

 

1,652,009

 

 

 

 

 

 

 

 

 

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD

 

6,935,721

 

 

 

5,139,564

 

 

 

 

 

 

 

 

 

CASH AND CASH EQUIVALENTS AT END OF PERIOD

$

10,082,685

 

 

$

6,791,573

 

 

 

 

 

 

 

 

 

SUPPLEMENTAL CASH FLOW DISCLOSURE -

 

 

 

 

 

 

 

Cash paid for interest

$

603,126

 

 

$

667,329

 

Cash paid for income taxes

$

94,736

 

 

$

160,900

 

 

See accountants’ compilation report.  No assurance is provided on the financial statements.

- 6 -

 


 

 

JET-PEP, INC. AND AFFILIATED COMPANIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AS OF SEPTEMBER 30, 2017, AND DECEMBER 31, 2016 AND FOR THE

NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2017 AND 2016

 

1.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICES

 

Nature of Business

 

Organized in 1982, Jet-Pep, Inc. and Affiliated Companies (the Company) distributes gasoline products to customers, principally at convenience stores across Alabama.    

 

Principles of Consolidation

 

The consolidated financial statements include the accounts of Jet Pep, Inc. and its wholly-owned subsidiaries, Morris Oil Company, Inc. and Alabama Oil Company of Etowah County, Inc.  Alabama Oil Company of Etowah County, Inc. purchased 95% of the outstanding stock of National Petroleum Equipment, Inc. in 2000.  

 

The following companies are considered to be variable interest entities under generally accepted accounting principles and will be consolidated into the Company:  Bama Terminaling and Trading, LLC; Leader Transport, Inc.; Britton Oil Company, Inc.; Clean Fuels, Inc.; MYRT, Inc.; RDS Properties, Inc.; Tee’s Enterprises, Inc.; R&S Properties, LLC; Norris Properties, LLC; CSE Properties, LLC; C.R. LLC; J.R. LLC; K.E.N. LLC; S.C.N. LLC; RG Norris LLC; CKESS LLC; Robin LLC; and Stephanie LLC.  (the Affiliated Companies)

 

All significant intercompany balances and transactions have been eliminated in consolidation.

 

Basis of Financial Statement Preparation

 

The consolidated financial statements are prepared under accounting principles generally accepted in the United States of America.

 

Cash and Cash Equivalents

 

The Company considers all highly liquid investments with original maturities of 90 days or less to be cash equivalents.  The Company maintains its cash and cash equivalents in bank deposit accounts which, at times, may exceed federally insured limits.  The Company has not experienced, and does not anticipate, any credit losses on these deposits.

 

Receivables

 

Accounts receivable primarily result from the sales of motor fuels to retail customers at retail sites from debit, credit, and fleet card transactions.   The collection of these receivables usually occurs within 3 to 5 business days after the sale has occurred.  

 

- 7 -

 


 

Inventories

 

Motor fuel inventory consists of gasoline, diesel fuel, and other petroleum products that is stored at the terminal and retail sites.  Fuel inventories are valued at the lower of cost or market, with cost determined by the first-in, first-out (FIFO) method.   Supplies inventory consists of pumps, nozzles and other fuel station replacement parts and are valued at the last-in, first-out (LIFO) method.

 

Property and Equipment

 

Property and equipment is stated at cost, net of accumulated depreciation.  Depreciation is computed using the straight-line method over the estimated useful lives of the related assets. The recovery periods being used are:

 

Item

Estimated Useful Life

Equipment

3 to 7 years

Real estate improvements

15 years

 

Taxes Assessed by Governmental Authorities on Sales Revenue

 

The Company collects various taxes from customers and remits these amounts to applicable taxing authorities.  The Company’s accounting policy is to exclude these taxes from net sales and cost of goods sold.

 

Use of Estimates

 

The preparation of the financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the reporting date and revenues and expenses during the reporting period.  Actual results could differ from those estimates.

 

Variable Interest Entities

 

Accounting principles generally accepted in the United States of America require that if an enterprise is the primary beneficiary of a variable interest entity (VIE), the assets, liabilities, and results of operations of the VIE should be included in the financial statements of the enterprise.  These financial statements have been prepared under generally accepted accounting principles and the assets, liabilities, and results of operations of the 18 affiliated companies have been consolidated into its financial statements.  

 

- 8 -

 


 

Uncertain Tax Positions

 

The Company accounts for uncertain tax positions in accordance with the applicable guidance.  This guidance requires entities to assess their tax positions for the likelihood that they would be overturned upon Internal Revenue Service (IRS) examination or upon examination by state taxing authorities.  In accordance with this guidance, the Company has assessed its tax positions and determined that it does not have any positions at September 30, 2017 and December 31, 2016 that it would be unable to substantiate.  Under statute, the Company is subject to IRS and state taxing authority review for tax years 2014 through 2016.  The Company has filed tax returns through 2016.

 

Environmental Matters

 

Liabilities for future remediation costs are recorded when environmental assessments from governmental regulatory agencies and/or remedial efforts are probable and the costs can be reasonably estimated. Other than for assessments, the timing and magnitude of these accruals generally are based on the completion of investigations or other studies or a commitment to a formal plan of action. Environmental liabilities are based on best estimates of probable undiscounted future costs using currently available technology and applying current regulations, as well as our own internal environmental policies. Environmental liabilities are difficult to assess and estimate due to uncertainties related to the magnitude of possible remediation, the timing of such remediation and the determination of our obligation in proportion to other parties. Such estimates are subject to change due to many factors, including the identification of new retail sites requiring remediation, changes in environmental laws and regulations and their interpretation, additional information related to the extent and nature of remediation efforts and potential improvements in remediation technologies.

 

The Company participates in the Alabama Department of Environmental Management (ADEM) Trust Fund program, which covers costs for eligible investigative and correction action site activities.  No environmental liability has been recorded at September 30, 2017 and December 31, 2016 due to the participation in this program.

 

Income Taxes

 

Jet-Pep, Inc. has elected under the Internal Revenue Code to be taxed as an S corporation.  In lieu of corporate income taxes, the stockholders of an S corporation are taxed on their proportionate share of the company’s taxable income.  Therefore, no provision or liability for income taxes has been included in the accompanying consolidated financial statements for Jet-Pep, Inc.  

 

National Petroleum Equipment, Inc. is a taxable corporation and files federal and state tax returns.   As such, the accompanying consolidated financial statements contain a provision for income taxes.

 

- 9 -

 


 

Income Taxes - Continued

 

The Affiliated Companies are limited liability companies.  A provision for federal and state income taxes has not been reflected in the accompanying consolidated financial statements since any taxable income or loss of the Affiliated Companies is includable in the separate tax returns of the Affiliated Companies’ members.  

 

 

2.  INVENTORY

 

Inventories consisted of the following at September 30, 2017 and December 31, 2016:

 

 

 

September 30, 2017

December 31, 2016

 

Gasoline

 

 

$    6,768,207

 

$   4,868,157

Diesel

 

527,451

1,654,351

Ethanol

 

1,021,830

1,158,563

Other petroleum products

 

822,789

378,941

Supplies

 

    1,145,768

    1,280,405

 

 

 

 

$  10,286,045

 

$   9,340,417

 

 

 

 

3.  PROPERTY AND EQUIPMENT

 

Property and equipment consist of the following at September 30, 2017 and December 31, 2016:

 

 

 

  September 30, 2017

December 31, 2016

 

Land

 

 

$   14,225,942

 

$   13,835,643

Building and improvements

 

28,585,249

28,508,421

Equipment

 

    73,301,436

    73,064,724

 

Less: Accumulated depreciation

 

116,112,627

 

   (64,630,248)

114,877,125

 

   (64,630,248)

 

 

 

 

$   45,801,980

 

$   50,778,540

 

Depreciation expense on property and equipment was $5,680,399 and $5,732,461 for the nine-month periods ended September 30, 2017 and 2016.

 

- 10 -

 


 

4.  LINE OF CREDIT

 

The Company has a $15,000,000 line of credit agreement with a bank. There was $1,000,000 and $0 outstanding as of September 30, 2017 and December 31, 2016, respectively.  Borrowings under the agreement are subject to a variable interest rate based on the 30-day LIBOR interest rate plus 2.0% (2.77% at September 30, 2017).  The agreement is secured by all of the assets of the Company, personally guaranteed by the stockholder, and matures in June 2018.

 

The Company has a $5,500,000 line-of-credit agreement with a bank. There was no outstanding balance as of September 30, 2017 and December 31, 2016.  Borrowings under the agreement are subject to a variable interest rate based on the 30-day LIBOR interest rate plus 3.0% (3.77% at September 30, 2017) not to be less than 3.5%.  The agreement is secured by all of the assets of the Company, personally guaranteed by the stockholder, and matured in June 2017.

 

5.  LONG-TERM DEBT (See Note 9)

 

Long-term debt consists of the following at September 30, 2017 and December 31, 2016:

 

 

September 30, 2017

December 31, 2016

Note payable - bank, due in monthly installments of $101,848, including interest at 3% per year, maturing in 2019, secured by the personal guarantee of the stockholder.

 

 

$    2,465,277

 

 

$   3,313,863

 

Note payable - bank, due in monthly installments of $83,333, including interest at the 30-day LIBOR interest rate plus 2.5% (3.25% at September 30, 2017), maturing in 2019, secured by real estate, equipment and personal guarantee of the stockholder.

 

 

 

 

8,666,667

 

 

 

 

9,416,667

 

Note payable - bank, due in monthly installments of $69,368, including interest at 4.13% per year, maturing in 2017, secured by real estate and the personal guarantee of the stockholder and related parties.  The Company is subject to certain debt covenants.  The Company was in violation of one of those covenants, of which the violation has been waived.


 

 

 

 

-

 

 

 

 

 

 

341,171

 

Note payable - bank, due in monthly installments of $116,398, including interest at 3% per year, maturing in 2019, secured by real estate, the personal guarantee of the stockholder, and the related parties not included in the consolidation.

 

 

 

 

2,817,459

 

 

 

 

3,787,272

 

- 11 -

 


 

5.  LONG-TERM DEBT - CONTINUED

 

 

September 30, 2017

December 31, 2016

Note payable - financial institution, 0% interest, due in monthly installments of $4,961, matures in December 2020, secured by equipment.  

 

 

193,484

 

 

238,135

 

Note payable - financial institution, due in monthly installments of $81,247, including interest at the 30-day LIBOR interest rate plus 2.0% (3.00% at September 30, 2017) maturing in September 2018, secured by property and equipment.

 

 

 

 

 

6,713,268

 

 

 

 

 

7,593,851

 

Note payable - other

    

       325,261

 

 

       325,261

 

Long-term debt - current

$  21,181,416

 

$  24,772,478

 

 

 

6.  RETIREMENT PLAN

 

The Company sponsors a profit sharing and 401(k) Plan covering all employees.  The Plan provides for contributions in such amounts as the Board of Directors may determine annually but not to exceed the amount deductible for federal income tax purposes.  Profit sharing expense totaled $31,021 and $28,470 for the nine-month periods ended September 30, 2017 and 2016.  

 

7.  LEASES

 

Lease terms are from 5 to 20 years on leased stations.  At September 30, 2017 and 2016, rent expense on leased facilities totaled $181,032 for both periods.

 

As of September 30, 2017, the future minimum annual lease payments and sublet income under the Company’s current lease arrangements are as follows:

 

 

Lease Payments

 

Sublet Income

2018

$     146,950

 

$       34,900

2019

141,000

 

30,000

2020

93,500

 

30,000

2021

84,000

 

30,000

2022

77,000

 

25,000

Thereafter

52,500

 

-

 

 

      

$     594,950

 

      

$     149,900


- 12 -

 


 

8.  COMMITMENTS AND CONTINGENCIES

 

The Company committed to purchase approximately 130,000 barrels of unleaded regular conventional gasoline, 5,000 barrels of unleaded premium conventional gasoline, and 15,000 barrels of ultra-low sulfur diesel at the market price of the respective grade gasoline upon the date of delivery.  Delivery under these commitments occurred during 2016.

 

 

9.   SUBSEQUENT EVENT – SALE OF COMPANY

 

On November 28, 2017, the Company closed on the sale of substantially all of its assets to CrossAmerica Partners LP and Circle K Stores, Inc.  CrossAmerica Partners LP acquired 101 commission operated retail sites, comprised of 92 fee sites, 5 lease sites, and 4 independent commission accounts.  Circle K Stores, Inc. acquired a fuel terminal, associated trucking equipment and 18 retail sites.

 

Certain of the Company’s notes payable were paid off at closing of the transaction.  As such, outstanding balances as of September 30, 2017 that were paid off at closing are presented as current liabilities.  

 

- 13 -