ARKO Petroleum (APC) risk factors, FY2025 10-K

Risks Related to Our Business and Industry

1. 01The wholesale motor fuel distribution industry and the fleet fueling business are characterized by intense competition and fragmentation, and our failure to effectively compete could adversely affect our business, financial condition and results of operations
2. 02Our business could be adversely affected by sustained inflationary pressures which may decrease our operating margins and increase working capital investments required to operate our business
3. 03We and our customers experience more demand for motor fuel during the late spring and summer months than during the fall and winter. Travel, recreation and construction activities typically increase in these months in the geographic areas in which we operate, increasing the demand for motor fuel
4. 04Our financial condition and results of operations are influenced by changes in the wholesale prices of motor fuel, which may materially adversely impact our sales, operations, customers’ financial condition and the availability of trade credit
5. 05Significant changes in demand for fuel-based modes of transportation and for trucking services could materially adversely affect our business
6. 06Negative events or developments associated with branded motor fuel suppliers could have a material adverse impact on our revenues
7. 07A significant portion of our revenue is generated under fuel supply agreements with dealers that must be renegotiated or replaced periodically. If we are unable to successfully renegotiate or replace these agreements, then our results of operations and financial condition could be adversely affected
8. 08Because a substantial portion of our revenue is currently derived from ARKO Parent, any development that materially and adversely affects ARKO Parent’s operations, financial condition or market reputation could have a material and adverse impact on us
9. 09Changes in economic conditions, tax or trade policy, and consumer confidence in the U.S. could materially adversely affect our business
10. 10If our acquisitions are not on economically acceptable terms, or if our acquisitions do not perform as we expect, our future growth may be negatively impacted
11. 11possible adverse effects on our reported results of operations or financial position
12. 12Our ability to grow and make acquisitions with cash on hand may be limited by our leverage, the terms of our and ARKO Parent’s indebtedness, and our cash dividend policy
13. 13We may be unable to successfully integrate acquired operations or otherwise realize the expected benefits from our acquisitions, which could adversely affect the expected benefits from our acquisitions and our results of operations and financial condition
14. 14Our operations—including the sale, distribution, transportation, and storage of fuel products—and those of our suppliers and customers are subject to various environmental, health, safety, and operational risks that could materially and adversely affect our business, financial condition, and results of operations
15. 15We are subject to risks regarding sustainability matters
16. 16We and our customers and suppliers are required to obtain, maintain and comply with government permits, licenses and approvals, and failure to obtain, maintain, and comply with such permits, licenses and approvals could adversely affect us or our customers
17. 17Our failure to comply with applicable labor and employment laws pertaining to, among others, minimum wage, overtime, rest breaks, mandated healthcare benefits or paid time-off benefits could result in increased regulatory scrutiny, monetary fines and substantial costs and expenses related to legal proceedings
18. 18We may not have sufficient cash from operations after payment of our expenses, including payments to ARKO Parent and its affiliates, and establishment of cash reserves to enable us to pay the intended quarterly distribution to our stockholders
19. 19As a result of all these factors, we cannot guarantee that we will have sufficient cash generated from operations to pay the quarterly cash dividends to holders of our common stock
20. 20We are subject to extensive tax liabilities imposed by multiple jurisdictions that potentially have a material adverse effect on our financial condition and results of operations
21. 21The loss of key senior management personnel or the failure to recruit or retain qualified senior management personnel could materially adversely affect our business
22. 22Unfavorable seasonal, weather or other climatic conditions could adversely affect our business
23. 23We are subject to payment-related risks that may result in higher operating costs or the inability to process payments, either of which could harm our brand, reputation, business, financial condition and results of operations
24. 24Significant disruptions of information technology systems, breaches of data security or other cybersecurity incidents, or compromised data could materially adversely affect our business
25. 25We are subject to evolving laws, regulations, standards, and contractual obligations related to data privacy and security regulations, and our actual or perceived failure to comply with such obligations could harm our reputation, subject us to significant fines and liability, or otherwise adversely affect our business
26. 26We lease a portion of our sites from third parties or sublease from ARKO Parent, under long-term arrangements with various expiration dates
27. 27We may not be able to lease sites we own or sublease sites we lease on favorable terms and any such failure could adversely affect our results of operations, financial condition and ability to make distributions to our stockholders
28. 28Our business could suffer if we fail to adequately secure, maintain, and enforce our intellectual property rights
29. 29Our operations present risks which may not be fully covered by insurance
30. 30We are a restricted subsidiary and guarantor under the indenture governing the Senior Notes and are subject to various covenants under such indenture, which may adversely affect our operations
31. 31pay dividends, or make distributions or certain other restricted payments, unless dividends are also paid on a pro-rata basis to ARKO Parent
32. 32The agreements governing our indebtedness contain various restrictions and financial covenants that may restrict our business and financing activities
33. 33Our level of indebtedness, together with ARKO Parent’s indebtedness, the terms of our and its borrowings and any future ARKO Parent credit ratings could adversely affect our ability to grow our business, our ability to make cash distributions to our stockholders and our credit ratings and profile
34. 34Our variable rate debt could adversely affect our financial condition and results of operations
35. 35Changes in U.S. trade policy, including the imposition of tariffs and the resulting consequences, may have a material adverse impact on our business, operating results and financial condition

Risks Related to our Governance Relationship with ARKO Parent

1. 36ARKO Parent controls our Company and has the ability to control the direction of our business
2. 37ARKO Parent indirectly owns 35 million shares of our Class B common stock, representing 73.6% of the economic interests in us, and 93.3% of the combined voting power of our Class A common stock and Class B common stock
3. 38agreements that may adversely affect us including, without limitation, certain master leases to which we and ARKO Parent are party under which we are jointly and severally liable for ARKO Parent’s obligations
4. 39ARKO Parent’s interests may conflict with our interests and the interests of our other stockholders. Conflicts of interest or disputes between ARKO Parent and our Company could be resolved in a manner unfavorable to our Company and our other stockholders
5. 40The resolution of any potential conflicts or disputes between ARKO Parent and us may be less favorable to us than the resolution we might achieve if we were dealing with an unaffiliated third party
6. 41Our amended and restated certificate of incorporation (our “charter”) could prevent us from benefiting from corporate opportunities that might otherwise have been available to us
7. 42The services that ARKO Parent provides to us may not be sufficient to meet our needs, which may result in increased costs and otherwise adversely affect our business
8. 43If ARKO Parent terminates the Management Services Agreement, or defaults in the performance of its obligations under such agreement, we may be unable to contract with a substitute service provider on similar terms, or at all
9. 44The liability and obligations of ARKO Parent is limited under our arrangements with it and we have agreed to indemnify ARKO Parent against claims that it may face in connection with certain of such arrangements
10. 45Certain of the executive officers of ARKO Parent are also our directors and officers, which may create conflicts of interest or the appearance of conflicts of interest
11. 46ARKO Parent may compete with us

Risks Related to Ownership of Our Class A Common Stock

1. 47We have limited operating history as a separate public company, and our historical financial information is not necessarily representative of the results we would have achieved as a separate public company and may not be a reliable indicator of our future results
2. 48The concentrated ownership of our common stock could depress our Class A common stock price
3. 49We cannot predict the effect our multi-class structure may have on the market price of our Class A common stock
4. 50Future sales or distributions of shares of our Class A common stock by ARKO Parent could depress our Class A common stock price, impact our operations or result in a change in control of us
5. 51If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about us, our business or our market, or if they change their recommendations regarding our Class A common stock adversely, the trading price and trading volume of our Class A common stock could decline
6. 52We are a holding company and our only material asset is our interests in our subsidiaries, and we are accordingly dependent upon distributions from our subsidiaries to pay dividends, taxes and other expenses
7. 53We are a “controlled company” within the meaning of the rules of Nasdaq and, as a result, qualify for, and may in the future rely on, exemptions from certain corporate governance requirements. Our stockholders do not have the same protections afforded to stockholders of companies that are subject to such requirements
8. 54the requirement for an annual performance evaluation of our nominating and corporate governance and compensation committees
9. 55We will incur additional costs as a result of being a public company, which may adversely affect our business, financial condition and results of operations
10. 56We may not be able to timely and effectively implement controls and procedures required by Section 404 of the Sarbanes-Oxley Act
11. 57Certain provisions in our charter or our debt facilities may discourage, delay or prevent a change in control or prevent an acquisition of our business at a premium price
12. 58Our charter designates specific courts as the exclusive forum for certain litigation that may be initiated by our stockholders, which could limit our stockholders’ abilities to obtain a favorable judicial forum for disputes with us or our directors, officers or employees