ARKO (ARKO)2025-02-26 21:10Revenue Sources - Cigarettes and other tobacco products accounted for approximately 39% of total merchandise revenues for the year ended December 31, 2024[89]. - Fuel sales represented approximately 79% of total revenues and about 46% of combined fuel, merchandise, and other income margin for the year ended December 31, 2024[91]. - Electric vehicles accounted for approximately 8.1% of all light vehicle sales in the United States in 2024[92]. Market Risks - Significant increases in wholesale cigarette prices and new tobacco regulations could adversely affect demand for tobacco products[90]. - Changes in macro-economic conditions, such as inflation and consumer confidence, could negatively impact demand for fuel and convenience store products[78]. - The volatility of crude oil and wholesale fuel prices could materially impact the company's financial condition and results of operations[91]. - The company faces risks related to the integration of acquired businesses, which could affect anticipated financial benefits[84]. Operational Risks - The company relies on several principal suppliers for fuel and merchandise, and disruptions could adversely affect operations[97]. - The company operates under stringent environmental, health, and safety laws, which may lead to significant compliance costs and liabilities[100]. - The company is vulnerable to cybersecurity risks, with potential breaches leading to significant reputational damage and financial losses[119]. - The company must comply with various data privacy and security regulations, with non-compliance potentially resulting in fines and adverse publicity[122]. - The company relies on third-party carriers for fuel transportation, exposing it to risks such as accidents and environmental pollution[102]. - The company may incur substantial costs for environmental remediation and compliance with evolving regulations related to climate change[106]. Financial Position - As of December 31, 2024, approximately 49% of the company's debt bore interest at variable rates, which could lead to significantly higher debt service requirements if market interest rates increase[132]. - The company's common stock has been volatile, ranging from a high of 4.09 per share between January 1, 2024, and February 17, 2025[142]. - A limited number of stockholders owned approximately 67% of the outstanding voting stock as of December 31, 2024, which may impact corporate governance and decision-making[141]. - The company has 115,771,318 shares of common stock outstanding and warrants to purchase approximately 18.4 million shares, which could affect market price if sold[144]. - Future cash dividends are subject to the discretion of the board and depend on various factors, including cash balances and capital requirements[147]. - The company may face increased tax liabilities due to its corporate structure, particularly with Israeli entities, which could adversely impact financial results[137]. - The company is subject to various financial covenants in its credit facilities, which may restrict its ability to finance operations or expand business activities[133]. Compliance and Governance - The company relies on third-party vendors for PCI DSS compliance, and any failure to comply could result in fines and increased transaction fees[125]. - The company’s insurance policies may not cover all operational risks, potentially leading to significant uninsured losses[130]. - The company’s ability to comply with debt covenants may be impaired by market conditions, risking accelerated repayment of debt[135]. Liquidity and Cash Flow - The company reported a strong liquidity position of approximately 262 million in cash and cash equivalents and 0.03 per share were declared and paid on four occasions in 2024, totaling approximately 125.0 million, with approximately 4.8 million shares repurchased for about 5.89 during 2024[253]. - Cash flows provided by operating activities for the year ended December 31, 2024, were 136.1 million in 2023, primarily due to lower net tax payments and dealer deposits[258]. - Cash used in investing activities decreased by 114.9 million in 2024, with 9.5 million for the SpeedyQ Acquisition[260]. - Financing activities included net receipts of 14.0 million in dividend payments and 4.4 billion, with debt obligations of 450 million in 5.125% Senior Notes due 2029, which are subject to restrictive covenants limiting certain financial activities[265]. - The PNC Line of Credit provides up to 8.2 million in letters of credit outstanding as of December 31, 2024[267]. - GPMP has a revolving credit facility with a principal amount of up to 1.0 billion[270]. - As of December 31, 2024, approximately 418.7 million available[271]. - The interest on the Capital One Line of Credit ranges from 2.25% to 3.25% above Adjusted Term SOFR, or 1.25% to 2.25% above the alternate base rate, depending on GPMP's leverage[272]. Impairment and Valuation - The annual impairment test for goodwill utilized a discount rate of approximately 8.5% for the GPMP reporting unit and 10.5% for the retail reporting unit[281]. - The long-term growth rate used in the terminal year was (0.6)% for the GPMP reporting unit and 3.0% for the retail reporting unit[281]. - The company evaluates property and equipment for impairment when the carrying values may not be recoverable, comparing estimated future cash flows to carrying values[278]. - Deferred tax assets are recognized based on the likelihood of future taxable profit, with management periodically assessing the recoverability of these assets[283]. - The company estimates environmental costs related to gasoline marketing operations and recognizes liabilities when losses are anticipated and can be reasonably estimated[276]. - The Capital One Line of Credit matures on May 5, 2028, providing flexibility for working capital and permitted acquisitions[271]. - The company performs sensitivity analyses on key assumptions such as discount rates and long-term growth rates to assess potential impairments[282].