Good morning, and welcome to the CrossAmerica Partners' Second Quarter 2020 Earnings Call. My name is Brandon, and I'll be your operator for today. At this time, all participants are in a listen-only mode. Later, we’ll conduct a question-and-answer session. Please note, this conference is being recorded. I will now turn the call over to John Benfield, Interim Chief Financial Officer. You may begin, sir.

Thank you, operator. Good morning, and thank you for joining the CrossAmerica Partners' second quarter 2020 earnings call. With me today are Charles Nifong, CEO and President, and other members of our executive leadership team. I should point out that today's call will follow some presentation slides that we will utilize during this morning's event. These slides are available as part of the webcast and are posted on the CrossAmerica website. Before we begin, I would like to remind everyone that today's call, including the question-and-answer session, may include forward-looking statements regarding expected revenue, future plans, future operational metrics and opportunities and expectations of the organization. There can be no assurance that management's expectations, beliefs and projections will be achieved or that actual results will not differ from expectations. Please see CrossAmerica's filings with the Securities and Exchange Commission, including annual reports on Form 10-K and quarterly reports on Form 10-Q for a discussion of important factors that could affect our actual results. Forward-looking statements represent the judgment of CrossAmerica's management as of today's date, and the organization disclaims any intent or obligation to update any forward-looking statements. During today's call, we may also provide certain performance measures that do not conform to U.S. generally accepted accounting principles, or GAAP. We've provided schedules that reconcile these non-GAAP measures with our reported results on a GAAP basis as part of our earnings press release. Today's call is being webcast, and a recording of this conference call will be available on the CrossAmerica website for a period of 60 days. With that, I will now turn the call over to Charles.

Thank you, John. I appreciate everyone joining us this morning. We thank you for your interest in the partnership and hope that you all are well. During today's call, I will briefly go through some of the operating highlights for the second quarter. I will also provide some color on the impacts from COVID-19, along with a few other updates along the lines of what I provided in our first quarter earnings call. John will then review in more detail the financial results. If you turn to Slide 4, I will briefly review some of our results from the quarter. For the second quarter of 2020, our wholesale fuel volume increased 1% when compared to the second quarter of 2019, largely due to the impact of acquisitions and exchanges that were completed over the past months offset by the impact of COVID-19. While we only experienced a slight increase in overall fuel volume for the quarter, we saw a strong increase in our wholesale fuel margin per gallon year-over-year, driving our wholesale fuel gross profit up 48% for the quarter. In terms of volume, given the changes in our business and asset mix, the overall volume comparison to prior quarters is not particularly useful. As I did last quarter, I will provide some color on same-site volume performance to provide more insight on business conditions. In terms of same-site year-over-year volume performance, weekly volumes at the start of April were off 45% to 50% on a comparable week year-over-year basis. Since that low, weekly fuel volumes have improved consistently on a week-over-week and year-over-year comparable week basis. In recent weeks, same-site year-over-year comparable week volumes have been off in the high single-digits to low double-digits compared to the prior year. In other words, our same-site weekly volumes have increased from…

Thank you, Charles. If you would please turn to Slide 7, I would like to review our second quarter results for the partnership. We reported adjusted EBITDA of $27.7 million for the second quarter of 2020, which was flat to the same period of 2019. Our distributable cash flow for the second quarter of 2020 was $26 million versus $22.3 million for the second quarter of 2019, reflecting an increase of 17% year-over-year. Our distributable cash flow for the second quarter benefited from the performance of our wholesale segment and from lower cash interest and current tax expense. Our distribution coverage on a paid basis for the second quarter of 2020 was 1.31 times versus 1.24 times for the second quarter of 2019. Our distribution coverage on a trailing 12 month basis was 1.21 times, which was an improvement over the 1.06 times that we experienced for the 12 months ended June 30, 2019. As Charles touched on earlier, our operating expenses increased $11 million for the second quarter of 2020 compared to the second quarter of 2019. Our company-operated sites drove $9 million of that increase. Excluding rent expense, operating expenses at our company-operated sites increased $6 million or 122%. our average company-operated site count increased to 134%. Additionally, a greater percentage of our company-operated sites are leased than in the prior year, and so the rent component of operating expenses at our company-operated sites increased $2 million. On the wholesale side, operating expenses increased $2 million, driven predominantly by the increase in our controlled site count as a result of the transactions closed on since the second quarter of last year. If you would please turn to the next slide, Slide 8. We ended the quarter with a leverage ratio, as defined under our credit facility, of 2.96…

Thank you. We will now begin the question-and-answer session. [Operator Instructions] From Baraboo Growth, we have Walter Morris. Please go ahead.

Excellent quarter, gentlemen, congratulations.

Thank you, Walter.

Thank you, Walter.

How much seasonally stronger is the third quarter normally? And are you seeing that trend so far in this year's third quarter?

Hey Walter, this is Charles. So I guess what you're asking indirectly is sort of the volume performance. And as I touched on in my comments earlier, basically what we've seen so far is that for the last several weeks, year-over-year, we've been on a volume basis down around 10%, sometimes more, sometimes less than that. In terms of what the rest of the year is going to look like, obviously, that's a tough one to answer given all the uncertainty with COVID going on. I mean, for example, what's back-to-school going to look like, it just – I would hesitate to make a guess in terms of what things will be. Obviously, as what you touched on, the second and third quarters tend to be our strongest volume quarters, and we're just going to have to see how things play out in regards to that.

Thank you. One other question. Could you discuss your capital deployment strategies going forward now that you have reached your targeted goals announced in November of 1.1 times plus coverage ratio and a leverage ratio in the 4 times to 4.25 times range?

Yes. So again, this is Charles. So I think given with COVID, there's obviously still a lot of uncertainty in regards to how things will progress from here. So you should expect us to see to – for us to continue to be conservative. I think all things being equal, we're going to look to improve our coverage ratio. And then as it relates to capital expenditures, while we're still trying to, for the full extent possible, have somewhat business as normal in terms of how we view capital expenditures, we're obviously being very cautious in regards to what the environment is before we do any significant outlays.

Thank you, Charles.

From Wells Fargo, we have Sharon Lui. Please go ahead.

Hi, good morning.

Good morning.

Just wondering maybe you can share some of the volume trends by region given the shift, I guess, in COVID cases to certain states in your footprint?

Yes. So as I said, for the last several weeks, on average, we've been around 10% off year-over-year, but that varies by geography based on your question. So we still see in the Northeast that they've been lagging. So for example, New Jersey has been a lagger state throughout the whole process and they continue to be so, also New York as well. New York, in particular, we have a lot of sites, some are throughway, and they've been significantly impacted by the lack of travel along that major thoroughfare. In terms of states that seem to be doing a lot better, Alabama is a bright spot for us in terms of its volume performance for the year. They've been very strong. And then also, Virginia has also not been that bad for us either. As you touched on, though, it does seem to vary in regards to whether it's severity of COVID outbreaks, but also, too, in terms of how the states individually are handling the COVID outbreak in terms of the restrictions that they have in place. So for example, Ohio earlier in the year, had a lot more onus restrictions in place. And we saw a significant decline in volume there. It's come back. But given that state government there, if they would choose to go back into a lockdown mode, you would see obviously a significant drop-off in volume.

Okay. And I guess just a question on your expectations for margins going forward. It sounds like you're a bit more conservative relative to some of your competitors. Can you maybe share some of your assumptions and what you expect going forward in terms of margin?

Well, I guess I'll touch on in regards to the margin sort of this quarter. Obviously, the first part of the quarter was very strong. And then since then, they've been good, but not extraordinary as they were in the first part of the quarter. But the interesting part about that is the margins remain good in an environment where typically you would have seen margins compress more given that crude oil prices increased during the quarter. And so I've seen others comment on this as well. I think that with COVID, what we're entering into is uncharted territories in regards to what margins will do because given the drop in volume, obviously, margin isn't a much more important component for the profitability of store operations now because there's not just – not as much inside sales perhaps to go around. And you're looking at perhaps operators rethink how they view that. And so I wouldn't be surprised if margins reset to perhaps a higher level than what they would have been in the past. But it's really too early to say if that's going to be the case or not, but we're optimistic that perhaps it will be.

Okay. Thank you.

[Operator Instructions] Okay. It looks like we have no further questions at the moment.

Okay. Well, if there are no further questions, that will conclude today's call. We appreciate each of you joining us today. Thank you for your interest in the partnership. And if you have any follow-up questions, feel free to contact us. So we look forward to speaking with you next quarter, and thank you, again.

Thank you. Ladies and gentlemen, this concludes today's conference. Thank you for joining, you may now disconnect.