Annual report pursuant to Section 13 and 15(d)

SCHEDULE I

v3.22.0.1
SCHEDULE I
12 Months Ended
Dec. 31, 2021
Statement Of Financial Position [Abstract]  
SEC Schedule, Article 12-04, Condensed Financial Information of Registrant

SCHEDULE I

ARKO Corp. (Parent Company Only)

Condensed Balance Sheets

(in thousands)

 

 

 

 

As of December 31,

 

 

 

2021

 

 

2020

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

88,508

 

 

$

117,179

 

Short-term loans to subsidiaries

 

 

40,119

 

 

 

40,035

 

Other current assets

 

 

10,110

 

 

 

2,147

 

Total current assets

 

 

138,737

 

 

 

159,361

 

Non-current assets:

 

 

 

 

 

 

Investment in subsidiaries

 

 

255,444

 

 

 

178,948

 

Loans to subsidiaries

 

 

450,000

 

 

 

 

Deferred tax asset

 

 

2,403

 

 

 

2,922

 

Total assets

 

$

846,584

 

 

$

341,231

 

Liabilities

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Long-term debt, current portion

 

$

1,500

 

 

$

1,752

 

Other current liabilities

 

 

7,436

 

 

 

11,612

 

Total current liabilities

 

 

8,936

 

 

 

13,364

 

Non-current liabilities:

 

 

 

 

 

 

Long-term debt, net

 

 

442,889

 

 

 

 

Other non-current liabilities

 

 

41,307

 

 

 

36,286

 

Total liabilities

 

$

493,132

 

 

$

49,650

 

 

 

 

 

 

 

 

Series A redeemable preferred stock

 

 

100,000

 

 

 

100,000

 

 

 

 

 

 

 

 

Shareholders' equity

 

 

253,452

 

 

 

191,581

 

Total liabilities, redeemable preferred stock and shareholders' equity

 

$

846,584

 

 

$

341,231

 

 

The accompanying notes are an integral part of the condensed financial statements.

 

SCHEDULE I

ARKO Corp. (Parent Company Only)

Condensed Statements of Operations

(in thousands)

 

 

 

For the Year Ended December 31,

 

 

 

2021

 

 

2020

 

 

2019

 

Income:

 

 

 

 

 

 

 

 

 

Income from loans to subsidiaries and other investee

 

$

6,016

 

 

$

3,960

 

 

$

6,992

 

Other income

 

 

 

 

 

597

 

 

 

712

 

 

 

 

6,016

 

 

 

4,557

 

 

 

7,704

 

Expenses:

 

 

 

 

 

 

 

 

 

General and administrative

 

 

6,152

 

 

 

4,562

 

 

 

2,471

 

Expenses related to loans to subsidiaries and other investee

 

 

 

 

 

2,692

 

 

 

1,281

 

 

 

 

6,152

 

 

 

7,254

 

 

 

3,752

 

(Loss) income before interest and financing income (expenses)

 

 

(136

)

 

 

(2,697

)

 

 

3,952

 

Interest and other financial income

 

 

1,005

 

 

 

1,093

 

 

 

299

 

Interest and other financial expenses

 

 

(10,855

)

 

 

(8,225

)

 

 

(4,832

)

Loss before income taxes

 

 

(9,986

)

 

 

(9,829

)

 

 

(581

)

Income tax expense

 

 

(2,771

)

 

 

(324

)

 

 

(1,140

)

Equity income (loss) from subsidiaries

 

 

71,955

 

 

 

23,863

 

 

 

(41,818

)

Net income (loss)

 

$

59,198

 

 

$

13,710

 

 

$

(43,539

)

Accretion of redeemable preferred stock

 

 

 

 

 

(3,120

)

 

 

 

Series A redeemable preferred stock dividends

 

 

(5,735

)

 

 

(157

)

 

 

 

Net income (loss) attributable to common shareholders

 

$

53,463

 

 

$

10,433

 

 

$

(43,539

)

 

 

The accompanying notes are an integral part of the condensed financial statements.

 

SCHEDULE I

ARKO Corp. (Parent Company Only)

Condensed Statements of Comprehensive Income (Loss)

(in thousands)

 

 

 

For the Year Ended December 31,

 

 

 

2021

 

 

2020

 

 

2019

 

Net income (loss)

 

$

59,198

 

 

$

13,710

 

 

$

(43,539

)

Other comprehensive income:

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

 

 

 

 

4,675

 

 

 

4,520

 

Total other comprehensive income

 

 

 

 

 

4,675

 

 

 

4,520

 

Comprehensive income (loss)

 

$

59,198

 

 

$

18,385

 

 

$

(39,019

)

 

 

The accompanying notes are an integral part of the condensed financial statements.

 

SCHEDULE I

ARKO Corp. (Parent Company Only)

Condensed Statements of Cash Flows

(in thousands)

 

 

 

For the Year Ended December 31,

 

 

 

2021

 

 

2020

 

 

2019

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$

59,198

 

 

$

13,710

 

 

$

(43,539

)

Adjustments to reconcile net income (loss) to net cash used in operating activities:

 

 

 

 

 

 

 

 

 

Equity (income) loss from subsidiaries

 

 

(71,955

)

 

 

(23,863

)

 

 

41,818

 

Deferred income taxes

 

 

519

 

 

 

(130

)

 

 

 

Amortization of debt discount and premium

 

 

152

 

 

 

(331

)

 

 

(409

)

Depreciation and amortization

 

 

 

 

 

8

 

 

 

11

 

Foreign currency (gain) loss and interest related to intercompany loans

 

 

(4,656

)

 

 

4,703

 

 

 

1,645

 

Share-based compensation

 

 

868

 

 

 

1,891

 

 

 

516

 

Fair value adjustment related to financial liabilities

 

 

5,021

 

 

 

107

 

 

 

 

Other operating activities, net

 

 

 

 

 

(38

)

 

 

 

Changes in assets and liabilities:

 

 

 

 

 

 

 

 

 

(Increase) decrease in other current assets

 

 

(1,586

)

 

 

490

 

 

 

(707

)

Increase in other current liabilities

 

 

3,713

 

 

 

942

 

 

 

15

 

Net cash used in operating activities

 

$

(8,726

)

 

$

(2,511

)

 

$

(650

)

Cash flows from investing activities:

 

 

 

 

 

 

 

 

 

Loans to investees

 

$

(450,000

)

 

$

(68,939

)

 

$

(174

)

Repayments of loans to subsidiaries and other investees

 

 

 

 

 

109,946

 

 

 

14,133

 

Investment in subsidiary

 

 

 

 

 

(107,299

)

 

 

 

Other

 

 

 

 

 

 

 

 

(3

)

Net cash (used in) provided by investing activities

 

 

(450,000

)

 

 

(66,292

)

 

 

13,956

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

 

Proceeds from issuance of long-term debt, net

 

 

442,737

 

 

 

 

 

 

 

Issuance of shares in Merger Transaction

 

 

 

 

 

60,318

 

 

 

 

Payment of Merger Transaction issuance costs

 

 

(4,773

)

 

 

 

 

 

 

Issuance of redeemable preferred stock, net

 

 

 

 

 

96,880

 

 

 

 

Dividends paid on redeemable preferred stock

 

 

(5,892

)

 

 

 

 

 

 

Repayment of long-term debt

 

 

(2,017

)

 

 

(10,953

)

 

 

(10,861

)

Buyback of long-term debt

 

 

 

 

 

(1,995

)

 

 

 

Proceeds from issuance of rights, net

 

 

 

 

 

11,332

 

 

 

 

Other

 

 

 

 

 

 

 

 

(18

)

Net cash provided by (used in) financing activities

 

 

430,055

 

 

 

155,582

 

 

 

(10,879

)

Net (decrease) increase in cash and cash equivalents and restricted cash

 

 

(28,671

)

 

 

86,779

 

 

 

2,427

 

Effect of exchange rate on cash and cash equivalents and restricted cash

 

 

 

 

 

2,875

 

 

 

1,263

 

Cash and cash equivalents and restricted cash, beginning of year

 

 

117,179

 

 

 

27,525

 

 

 

23,835

 

Cash and cash equivalents and restricted cash, end of year

 

$

88,508

 

 

$

117,179

 

 

$

27,525

 

Reconciliation of cash and cash equivalents and restricted cash

 

 

 

 

 

 

 

 

 

Cash and cash equivalents, beginning of year

 

 

117,179

 

 

 

21,302

 

 

 

17,925

 

Restricted cash with respect to bonds, beginning of year

 

 

 

 

 

6,223

 

 

 

5,910

 

Cash and cash equivalents and restricted cash, beginning of year

 

$

117,179

 

 

$

27,525

 

 

$

23,835

 

Cash and cash equivalents, end of year

 

 

88,508

 

 

 

117,179

 

 

 

21,302

 

Restricted cash with respect to bonds, end of year

 

 

 

 

 

 

 

 

6,223

 

Cash and cash equivalents and restricted cash, end of year

 

$

88,508

 

 

$

117,179

 

 

$

27,525

 

 

The accompanying notes are an integral part of the condensed financial statements.

 

SCHEDULE I

ARKO Corp. (Parent Company Only)

Condensed Statements of Cash Flows (cont’d)

(in thousands)

 

 

 

For the Year Ended December 31,

 

 

 

2021

 

 

2020

 

 

2019

 

Supplementary cash flow information:

 

 

 

 

 

 

 

 

 

Cash received for interest

 

$

1,404

 

 

$

2,340

 

 

$

6,714

 

Cash paid for interest

 

 

14

 

 

 

3,840

 

 

 

4,266

 

Cash paid for taxes

 

 

6,175

 

 

 

305

 

 

 

1,123

 

Supplementary noncash activities:

 

 

 

 

 

 

 

 

 

Prepaid insurance premiums financed through notes payable

 

 

1,765

 

 

 

2,190

 

 

 

 

Issuance of shares

 

 

3,000

 

 

 

 

 

 

 

Ares Put Option

 

 

 

 

 

9,201

 

 

 

 

Purchase of property and equipment under operating leases

 

 

 

 

 

 

 

 

49

 

 

The accompanying notes are an integral part of the condensed financial statements.

 

ARKO Corp. (Parent Company Only)

Notes to Condensed Financial Statements

1. General

The condensed financial statements represent the financial information required by SEC Regulation S-X Rule 5-04 for ARKO Corp. (the “Company”), which requires the inclusion of parent company only financial statements if the restricted net assets of consolidated subsidiaries exceed 25% of total consolidated net assets as of the last day of its most recent fiscal year. As of December 31, 2021, the Company’s restricted net assets of its consolidated subsidiary, GPM Investments, LLC (“GPM”), were approximately $713.5 million and exceeded 25% of the Company’s total consolidated net assets. The primary restrictions as of December 31, 2021 were driven by GPM’s financing agreements with PNC which restrict the transfer of non-cash assets from GPM to the Company. These financing agreements also include restrictions on distributions according to which, among other things, GPM’s ability to distribute is subject to certain conditions as defined in the underlying agreements. For more information about GPM’s financing agreements with PNC, refer to Note 12 to the consolidated financial statements.

The Merger Transaction was accounted for as a reverse recapitalization. Under this method of accounting, Haymaker was treated as the “acquired” company and Arko Holdings was considered the accounting acquirer for accounting purposes. The Merger Transaction was treated as the equivalent of Arko Holdings issuing stock in exchange for the net assets of Haymaker, accompanied by a recapitalization. Because Arko Holdings was deemed the accounting acquirer, upon the consummation of the Merger Transaction, the historical financial statements of Arko Holdings became the historical financial statements of the combined company. As a result, the financial statements included in these parent only financial statements reflect the historical operating results of Arko Holdings prior to the Merger Closing Date.

2. Summary of Significant Accounting Policies

The accompanying condensed financial statements have been prepared to present the financial position, results of operations and cash flows of the Company on a stand-alone basis as a holding company. Investments in subsidiaries are accounted for using the equity method. The condensed parent company only financial statements should be read in conjunction with the Company's consolidated financial statements.

3. Long-Term Debt

Senior Notes Offering

On October 21, 2021, the Company completed a private offering of $450 million aggregate principal amount of 5.125% Senior Notes due 2029 (the “Senior Notes”), pursuant to a note purchase agreement dated October 14, 2021, by and among the Company, certain of the Company’s wholly owned domestic subsidiaries (the “Guarantors”), and BofA Securities, Inc., as representative of the several initial purchasers named therein. The Senior Notes are guaranteed, on an unsecured senior basis, by all of the Guarantors. Refer to Note 12 to the consolidated financial statements for further details.

4. Revisions of Previously Issued Financial Statements

The Company has adjusted its consolidated balance sheet as of December 31, 2020 in order to reflect its Public Warrants, Private Warrants and Deferred Shares as liability instruments measured at fair value rather than as equity instruments. The Company has evaluated the materiality of these adjustments and concluded they were not material to any of the prior periods presented and has elected to revise the previously issued financial statements contained within these consolidated financial statements for the periods impacted to correct the effect of these immaterial adjustments.

As a result, the parent only condensed balance sheet as of December 31, 2020 included as comparative figures within these financial statements was revised as follows:

 

 

As of December 31, 2020

 

 

 

As Previously Reported

 

 

Adjustment

 

 

As Revised

 

Selected Condensed Balance Sheet Data:

 

(in thousands)

 

Other non-current liabilities

 

$

9,831

 

 

$

26,455

 

 

$

36,286

 

Total liabilities

 

 

23,195

 

 

 

26,455

 

 

 

49,650

 

Total shareholders' equity

 

 

218,036

 

 

 

(26,455

)

 

 

191,581

 

As a result, the parent only condensed statement of operations and comprehensive income for the year ended December 31, 2020 included as comparative figures within these financial statements was revised as follows:

 

 

For the year ended December 31, 2020

 

 

 

As Previously Reported

 

 

Adjustment

 

 

As Revised

 

Selected Condensed Statement of Operations Data:

 

(in thousands)

 

Interest and other financial income

 

 

570

 

 

 

523

 

 

 

1,093

 

Loss before income taxes

 

 

(10,352

)

 

 

523

 

 

 

(9,829

)

Net income

 

 

13,187

 

 

 

523

 

 

 

13,710

 

 

 

 

For the year ended December 31, 2020

 

 

 

As Previously Reported

 

 

Adjustment

 

 

As Revised

 

Selected Condensed Statement of Comprehensive Income
  Data:

 

(in thousands)

 

Net income

 

$

13,187

 

 

$

523

 

 

$

13,710

 

Comprehensive income

 

 

17,862

 

 

 

523

 

 

 

18,385

 

As a result, the condensed statement of cash flows for the year ended December 31, 2020 included as comparative figures within these financial statements was revised as follows:

 

 

For the year ended December 31, 2020

 

 

 

As Previously Reported

 

 

Adjustment

 

 

As Revised

 

Selected Condensed Statement of Cash Flow Data:

 

(in thousands)

 

Net income

 

$

13,187

 

 

$

523

 

 

$

13,710

 

Fair value adjustment related to financial liabilities

 

 

630

 

 

 

(523

)

 

 

107