FORM 10-K

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

 

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 20172021

OR

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File No. 001-35711

CROSSAMERICA PARTNERSCROSSAMERICAPARTNERSLP

(Exact name of registrant as specified in its charter)

 

Delaware

 

45-4165414

(State or Other Jurisdiction of

Incorporation or Organization)

 

(I.R.S. Employer

Identification No.)

 

 

 

515645 Hamilton Street, Suite 200400

Allentown, PA

 

18101

(Zip Code)

(610) 625-8000

(Address of Principal Executive Offices)

 

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: Common units representing limited partner interests, $0.01 par value per share listed on the New York Stock Exchange.

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Units

CAPL

New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None. None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes No

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer   Accelerated filer   Non-accelerated filer   Smaller reporting company   Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

The aggregate market value of the voting and non-votingour common stock held by non-affiliates was approximately $479.4 millionunits based on the last salesclosing price quoted as of June 30, 2017 on the New York Stock Exchange on June 30, 2021, the last business day of the registrant’s most recently completed second fiscal quarter.quarter, held by non-affiliates of the registrant was approximately $350.7 million.

As of February 21, 2018,24, 2022, the registrant had outstanding 34,111,46137,896,556 common units.

Documents Incorporated by Reference: None.


TABLE OF CONTENTS

 

 

 

PAGE

PART I

 

1

Items 1., 1A. and 2. Business, Risk Factors and PropertiesCommonly Used Defined Terms

 

71

Item 1B. Unresolved Staff CommentsCautionary Statement Regarding Forward-Looking Statements

 

364

Item 3. Legal Proceedings1. Business

 

366

Item 4. Mine Safety Disclosures1A. Risk Factors

 

3712

PART IIItem 1B. Unresolved Staff Comments

 

38

Item 2. Properties

38

Item 3. Legal Proceedings

39

Item 4. Mine Safety Disclosures

39

PART II

40

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

38

Item 6. Selected Financial Data

 

40

Item 6. [Reserved]

40

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

4240

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

 

6457

Item 8. Financial Statements and Supplementary Data

 

6457

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

 

10097

Item 9A. Controls and Procedures

 

10097

Item 9B. Other Information

 

10097

PART IIIItem 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

 

10197

PART III

98

Item 10. Directors, Executive Officers and Corporate Governance

 

10198

Item 11. Executive Compensation

 

105103

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

 

124115

Item 13. Certain Relationships and Related Transactions, and Director Independence

 

126117

Item 14. Principal Accountant Fees and Services

 

131120

PART IV

 

132121

Item 15. Exhibits and Financial Statement Schedules

 

132121

SignaturesItem 16. Form 10-K Summary

 

136123

Signatures

124

 

 

 


PART I

PART I

COMMONLY USED DEFINED TERMS

 

The following is a list of certain acronyms and terms generally used in the industry and throughout this document:

 

CrossAmerica Partners LP and subsidiaries:

 

 

 

CrossAmerica PartnerPartners LP

CrossAmerica, the Partnership, we, us, our

 

 

 

LGP OperationsCAPL JKM Wholesale

CAPL JKM Wholesale LLC

a wholly owned subsidiary of the Partnership

Joe’s Kwik Marts

Joe’s Kwik Marts LLC

 

 

 

LGW

Lehigh Gas Wholesale LLC

 

 

 

LGPR

LGP Realty Holdings LP

 

 

 

LGWS

Lehigh Gas Wholesale Services, Inc. and subsidiaries

 

 

CrossAmerica Partners LP related and affiliated parties:

Circle K

Circle K Stores Inc., a Texas corporation, and a wholly owned subsidiary of Couche-Tard

Couche-Tard

Alimentation Couche-Tard Inc. (TSX: ATD.A ATD.B)

Couche-Tard Board

the Board of Directors of Couche-Tard

CST

CST Brands, LLC and subsidiaries, indirectly owned by Circle K

 

 

 

DMI

Dunne Manning Inc. (formerly Lehigh Gas Corporation), an entity affiliated with Joseph V.the Topper Jr., a member of the Board, and a related party and large holder of our common units.Group

 

 

 

DMRDMP

Dunne Manning Realty LP,Partners LLC, an entity affiliated with the Topper Group and controlled by Joseph V. Topper, Jr., a Since November 19, 2019, DMP has owned 100% of the membership interests in the sole member of the Board and a related party.General Partner.

 

 

 

DMS

Dunne Manning Stores LLC (formerly known as Lehigh Gas-Ohio, LLC), an entity associatedaffiliated with the family of Joseph V. Topper Jr., a member of the Board and a related party.Group. Through April 14, 2020, DMS iswas an operator of retail motor fuel stations. DMS leasesleased retail sites from us in accordance with a master lease agreement with us and DMS purchases substantially allpurchased a significant portion of its motor fuel for these sites from us on a wholesale basis under rack plus pricing. The financial results of DMS arewere not consolidated with ours.

 

 

 

General Partner

CrossAmerica GP LLC, the General Partner of CrossAmerica, a Delaware limited liability company.

CST Fuel Supply

CST Fuel Supply LP iscompany, indirectly owned by the parent of CST Marketing and Supply. As of December 31, 2017, our total limited partner interest in CST Fuel Supply was 17.5%.

CST Marketing and Supply

CST Marketing and Supply, LLC, CST’s wholesale motor fuel supply business, which provides wholesale fuel distribution to the majority of CST’s U.S. retail convenience stores on a fixed markup per gallon.

CST Services

CST Services, LLC, a wholly owned subsidiary of Circle KTopper Group

 

 

 

Topper Group

Joseph V. Topper, Jr., collectively with those of his affiliates and family trusts that have ownership interests in the Partnership. Joseph V. Topper, Jr. is the founder of the Partnership and a member of the Board. The Topper Group is a related party and large holder of our Predecessor Entities, including DMIcommon units.

 

 

 

TopstarTopStar

Topstar Enterprises,TopStar Inc., an entity affiliated with a family member of Joseph V. Topper, Jr. TopstarTopStar is an operator of convenience stores that leases retail sites from us, but does not purchaseand since April 14, 2020, also purchases fuel from us.

Recent Acquisitions:

PMI

Petroleum Marketers, Inc., acquired in April 2014

Nice N Easy Assets

The assets acquired from Nice N Easy Grocery Shoppes in November 2014

Landmark Assets

The assets acquired from Landmark Industries in January 2015

1


Erickson

Erickson Oil Products, Inc., acquired in February 2015

One Stop

M&J Operations, LLC, acquired in July 2015

Franchised Holiday Stores

The franchised Holiday stores acquired in March 2016

State Oil Assets

The assets acquired from State Oil Company in September 2016

Jet-Pep Assets

The assets acquired from Jet-Pep, Inc. in November 2017

 

 

Other Defined Terms:

 

Amended Omnibus Agreement

The Amended and Restated Omnibus Agreement, dated October 1, 2014, as amended on February 17, 2016 by and among CrossAmerica, the General Partner, DMI, DMS, CST Services and Joseph V. Topper, Jr., which amends and restates the original omnibus agreement that was executed in connection with CrossAmerica’s initial public offering on October 30, 2012. The terms of the Amended Omnibus Agreement were approved by the conflicts committee of the Board. Pursuant to the Amended Omnibus Agreement, CST Services agrees, among other things, to provide, or cause to be provided, to the Partnership certain management services.

 

 

 

ASC

Accounting Standards Codification

 

 

 

ASU

Accounting Standards Update

 

 

 

Board

Board of Directors of our General Partner

 

 

 

Bonus Plan

The Performance-Based Bonus Compensation Policy is one of the key components of “at-risk” compensation. The Bonus Plan is utilized to reward short-term performance achievements and to motivate and reward employees for their contributions toward meeting financial and strategic goals.

BP

BP p.l.c.

 

 

 

Branded Motor FuelsCARES Act

Motor fuels that are purchased from major integrated oil companiesCoronavirus Aid, Relief, and refiners under supply agreements. We take legal titleEconomic Security Act, an economic stimulus bill signed into law on March 27, 2020 in response to the economic fallout of the COVID-19 Pandemic

CDC

The Center for Disease Control and Prevention

1


Circle K Omnibus Agreement

The Amended and Restated Omnibus Agreement, dated October 1, 2014, as amended effective January 1, 2016, February 1, 2018 and April 29, 2019 by and among CrossAmerica, the General Partner, DMI, DMS, CST Services and Joseph V. Topper, Jr., which amends and restates the original omnibus agreement that was executed in connection with CrossAmerica’s IPO on October 30, 2012. The terms of the Circle K Omnibus Agreement were approved by the independent conflicts committee of the Board. Pursuant to the Circle K Omnibus Agreement, CST Services agreed, among other things, to provide, or cause to be provided, to the Partnership certain management services. See Note 15 to the financial statements for information regarding the termination of this agreement and the concurrent entering into the Transitional Omnibus Agreement.

COVID-19 Pandemic

In December 2019, a novel strain of coronavirus was reported to have surfaced. In March 2020, the World Health Organization declared the outbreak a pandemic.

CST

CST Brands LLC, which merged into Circle K Stores. Inc. on February 28, 2020, and subsidiaries, indirectly owned by Circle K.

CST Fuel Supply

CST Fuel Supply LP is indirectly owned by Circle K and is the parent of CST Marketing and Supply, LLC, CST’s wholesale motor fuel when we receive it atsupply business, which provides wholesale fuel distribution to the rackmajority of CST’s legacy U.S. retail convenience stores on a fixed markup per gallon.

CST Fuel Supply Exchange

Exchange Agreement, dated November 19, 2019, between the Partnership and generally arrange for a third-party transportation providerCircle K, which closed effective March 25, 2020. Pursuant to take deliverythe Exchange Agreement, Circle K transferred to the Partnership certain owned and leased convenience store properties and related assets (including fuel supply agreements) and wholesale fuel supply contracts covering additional sites, and, in exchange, the Partnership transferred to Circle K 100% of the motor fuel at the rack and deliverlimited partnership units it to the appropriate sitesheld in our network.CST Fuel Supply.

 

 

 

DTW

Dealer tank wagon contracts, which are variable market-based cent per gallon priced wholesale motor fuel distribution or supply contracts; DTW also refers to the pricing methodology under such contracts

 

 

 

EBITDA

Earnings before interest, taxes, depreciation, amortization and accretion, a non-GAAP financial measure

 

 

 

EICP

The Partnership’s Lehigh Gas Partners LP Executive Income Continuity Plan, as amended

 

 

 

EMV

Payment method based upon a technical standard for smart payment cards, also referred to as chip cards

Exchange Act

Securities Exchange Act of 1934, as amended

 

 

 

ExxonMobil

ExxonMobil Corporation

 

 

 

FASB

Financial Accounting Standards Board

 

 

 

Form 10-K

CrossAmerica’s Annual Report on Form 10-K for the year ended December 31, 20172021

 

 

FTC

U.S. Federal Trade Commission

 

 

 

Getty Lease

In May 2012, the Predecessor Entity, which represents the portion of the business of Dunne Manning Inc. and its subsidiaries and affiliates contributed to the Partnership in connection with the IPO, entered into a 15-year master lease agreement with renewal options of up to an additional 20 years with Getty Realty Corporation. The Partnership pays fixed rent, which increases 1.5% per year. In addition, the lease requires contingent rent payments based on gallons of motor fuel sold. The Partnership leases sites under the lease in Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, Pennsylvania and Rhode Island.

GP Purchase

CST’s purchasePurchase by DMP from DMI (formerly known as Lehigh Gas Corporation)subsidiaries of Circle K of: 1) 100% of the membership interests in the sole member of the General PartnerPartner; 2) 100% of the Incentive Distribution Rights issued by the Partnership; and 3) an aggregate of 7,486,131 common units of the Partnership. These transactions closed on November 19, 2019.

 

 

 

2


IDRs

Incentive Distribution Rights representrepresented the right to receive an increasing percentage of quarterly distributions after the target distribution levels have been achieved, as defined in our Partnership Agreement. Circle K iswere achieved. As a result of the indirect owner ofGP Purchase, DMP owned 100% of the outstanding IDRs of CrossAmerica.

IDR Purchase

CST’s purchase of all of the membership interests in limited liability companies formed by the 2004 Irrevocable Agreement of Trust of Joseph V. Topper, Sr. and the 2008 Irrevocable Agreement of Trust of John B. Reilly, Jr., which owned all of the IDRs in CrossAmerica (formerly known as Lehigh Gas Partners LP).from November 19, 2019 through February 6, 2020.

 

 

 

Internal Revenue Code

Internal Revenue Code of 1986, as amended

 

 

 

IPO

Initial public offering of CrossAmerica Partners LP on October 30, 2012

 

 

 

2


IRS

Internal Revenue Service

 

 

 

LIBOR

London Interbank Offered Rate

Merger

The merger of Ultra Acquisition Corp. with CST, with CST surviving the merger as a wholly owned subsidiary of Circle K, which closed on June 28, 2017. See Merger Agreement below

Merger Agreement

CST’s Agreement and Plan of Merger (the “Merger Agreement”) entered into on August 21, 2016 with Circle K and Ultra Acquisition Corp., a Delaware corporation and an indirect, wholly owned subsidiary of Circle K (“Merger Sub”). Under and subject to the terms and conditions of the Merger Agreement, on June 28, 2017, Merger Sub was merged with and into CST, with CST surviving the Merger as a wholly owned subsidiary of Circle K.

Merger Sub

Ultra Acquisition Corp., a Delaware corporation and an indirect, wholly owned subsidiary of Circle K

 

 

 

MD&A

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

 

 

MotivaMarathon

Motiva Enterprises, LLCMarathon Petroleum Company LP

 

 

 

NTIMotiva

CST’s new to industry stores opened after January 1, 2008, which is generally when CST began designing and operating its larger format stores that accommodate broader merchandise categories and food offerings and have more fuel dispensers than its legacy storesMotiva Enterprises, LLC

 

 

 

NYSE

New York Stock Exchange

 

 

 

Partnership Agreement

The FirstSecond Amended and Restated Agreement of Limited Partnership of CrossAmerica Partners LP, dated as of October 1, 2014, as amendedFebruary 6, 2020

 

 

 

Plan

In connection with the IPO, the General Partner adopted the Lehigh Gas Partners LP 2012 Incentive Award Plan, a long-term incentive plan for employees, officers, consultants and directors of the General Partner and any of its affiliates who perform services for the Partnership

 

 

 

Predecessor EntitiesEntity

Wholesale distribution business of DMScontracts and real property and leasehold interests contributed to the Partnership in connection with the IPO

QSR

Quick service restaurant

Retail site

A general term to refer to convenience stores, including those operated by commission agents, independent dealers, Circle K, DMS or lessee dealers, as well as company operated sites

RIN

Renewable identification number, an identifier used by governmental agencies to track a specific batch of renewable fuel

 

 

 

SEC

U.S. Securities and Exchange Commission

 

 

 

Tax Cuts and Jobs Act

On December 22, 2017, the U.S. government enacted tax legislation, formally known as Public Law No. 115-97, commonly referred to as the Tax Cuts and Jobs Actsigned into law on December 22, 2017.

 

 

 

Terms Discounts

Discounts for prompt payment and other rebates and incentives from our suppliers for a majority of the gallons of motor fuel purchased by us, which are recorded within cost of sales. Prompt payment discounts are based on a percentage of the purchase price of motor fuel.

 

 

 

3


Topper Group Omnibus Agreement

The Topper Group Omnibus Agreement, effective January 1, 2020, by and among the Partnership, the General Partner and DMI. The terms of the Topper Group Omnibus Agreement were approved by the independent conflicts committee of the Board, which is composed of the independent directors of the Board. Pursuant to the Topper Group Omnibus Agreement, DMI agrees, among other things, to provide, or cause to be provided, to the Partnership certain management services at cost without markup.

Transitional Omnibus Agreement

Upon the closing of the GP Purchase, the Circle K Omnibus Agreement was terminated and the Partnership entered into a Transitional Omnibus Agreement, dated as of November 19, 2019, among the Partnership, the General Partner and Circle K. Pursuant to the Transitional Omnibus Agreement, Circle K agreed, among other things, to continue to provide, or cause to be provided, to the Partnership certain management services, administrative and operating services, as provided under the Circle K Omnibus Agreement through June 30, 2020 with respect to certain services, unless earlier terminated. In addition, from January 1, 2020 until the closing of the CST Fuel Supply Exchange, the General Partner provided Circle K with certain administrative and operational services, on the terms and conditions set forth in the Transitional Omnibus Agreement.

U.S. GAAP

U.S. Generally Accepted Accounting Principles

 

 

 

UST

Underground storage tankstank

 

 

 

Valero

Valero Energy Corporation and, where appropriate in context, one or more of its subsidiaries, or all of them taken as a whole

 

 

 

WTI

West Texas Intermediate crude oil

 


4


CAUTIONARY STATEMENT REGARDINGREGARDING FORWARD-LOOKING STATEMENTS

This Form 10-Kreport includes forward-looking statements including inwithin the section entitled “Management’s Discussionmeaning of the Private Securities Litigation Reform Act of 1995 that involve risks and Analysis of Financial Condition and Results of Operations.”uncertainties. Forward-looking statements include the information concerning our possible or assumed future results of operations, business strategies, financing plans, competitive position, credit ratings, distribution growth, potential growth opportunities, potential operating performance improvements, potential improvements in return on capital employed, the effects of competition and the effects of future legislation or regulations. You can identify our forward-looking statements by the words “anticipate,” “estimate,” “believe,” “continue,” “could,” “intend,” “may,” “plan,” “potential,” “predict,” “seek,” “should,” “will,” “would,” “expect,” “objective,” “projection,” “forecast,” “guidance,” “outlook,” “effort,” “target” and similar expressions. Such statements are based on management’sour current viewsplans and assumptions,expectations and involve risks and uncertainties that could potentially affect expectedactual results. These forward-looking statements include, among other things, statements regarding:

future retail and wholesale gross profits, including gasoline, diesel and convenience store merchandise gross profits;

future retail and wholesale gross profits, including gasoline, diesel and convenience store merchandise gross profits;

our anticipated level of capital investments, primarily through acquisitions, and the effect of these capital investments on our results of operations;

our anticipated level of capital investments, primarily through acquisitions, and the effect of these capital investments on our results of operations;

anticipated trends in the demand for, and volumes sold of, gasoline and diesel in the regions where we operate;

anticipated trends in the demand for, and volumes sold of, gasoline and diesel in the regions where we operate;

volatility in the equity and credit markets limiting access to capital markets;

volatility in the equity and credit markets limiting access to capital markets;

our ability to integrate acquired businesses and to transition retail sites to lessee dealer operated sites;

our ability to integrate acquired businesses;

expectations regarding environmental, tax and other regulatory initiatives; and

expectations regarding environmental, tax and other regulatory initiatives;

the effect of general economic and other conditions on our business; and

the effect of general economic and other conditions on our business.

the anticipated results from closing on the asset purchase agreement entered into with 7-Eleven.

In general, we based the forward-looking statements included in this quarterly report on our current expectations, estimates and projections about our company and the industry in which we operate. We caution you that these statements are not guarantees of future performance as they involve assumptions that, while made in good faith, may prove to be incorrect, and involve risks and uncertainties we cannot predict. We anticipate that subsequent events and market developments will cause our estimates to change. In addition, we based many of these forward-looking statements on assumptions about future events that may prove to be inaccurate. Accordingly, our actual outcomes and results may differ materially from what we have expressed or forecasted in the forward-looking statements. Any differences could result from a variety of factors, including the following:

Couche-Tard’s business strategy and operations and Couche-Tard’s conflicts of interest with us;

the Topper Group’s business strategy and operations and the Topper Group’s conflicts of interest with us;

availability of cash flow to pay the current quarterly distributions on our common units;

the availability and cost of competing motor fuels;

motor fuel price volatility or a reduction in demand for motor fuels;

competition in the industries and geographical areas in which we operate;

the consummation of financing, acquisition or disposition transactions and the effect thereof on our business;

our existing or future indebtedness;

our liquidity, results of operations and financial condition;

failure to comply with applicable tax and other regulations or governmental policies;

future legislation and changes in regulations, governmental policies, immigration laws and restrictions or changes in enforcement or interpretations thereof;

future regulations and actions that could expand the non-exempt status of employees under the Fair Labor Standards Act;

future income tax legislation;

changes in energy policy;

increases in energy conservation efforts;

technological advances;

the impact of worldwide economic and political conditions;

5


 

availability of cash flow to pay the current quarterly distributions on our common units;

the availability and cost of competing motor fuels;

motor fuel price volatility or a reduction in demand for motor fuels, including as a result of the COVID-19 Pandemic;

competition in the industries and geographical areas in which we operate;

the consummation of financing, acquisition or disposition transactions and the effect thereof on our business;

environmental compliance and remediation costs;

our existing or future indebtedness and the related interest expense and our ability to comply with debt covenants;

our liquidity, results of operations and financial condition;

failure to comply with applicable tax and other regulations or governmental policies;

future legislation and changes in regulations, governmental policies, immigration laws and restrictions or changes in enforcement or interpretations thereof;

future regulations and actions that could expand the non-exempt status of employees under the Fair Labor Standards Act;

future income tax legislation;

changes in energy policy;

technological advances;

the impact of worldwide economic and political conditions;


the impact of wars and acts of terrorism;

weather conditions or catastrophic weather-related damage;

weather conditions or catastrophic weather-related damage;

earthquakes and other natural disasters;

earthquakes and other natural disasters;

hazards and risks associated with transporting and storing motor fuel;

hazards and risks associated with transporting and storing motor fuel;

unexpected environmental liabilities;

unexpected environmental liabilities;

the outcome of pending or future litigation; and

the outcome of pending or future litigation; and

our ability to comply with federal and state laws and regulations, including those related to environmental matters, the sale of alcohol, cigarettes and fresh foods, employment, health benefits, including the Affordable Care Act, immigration, and international trade.

our ability to comply with federal and state laws and regulations, including those related to environmental matters, the sale of alcohol, cigarettes and fresh foods, employment and health benefits, including the Affordable Care Act, immigration and international trade.

You should consider the areas of riskrisks and uncertainties described above, as well as those set forthand elsewhere in the section entitledthis report, including under Part I. Item 1A “Risk Factors” and Part II. Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” included in this Form 10-K, in connection with considering any forward-looking statements that may be made by us and our businesses generally. We cannot assure you that projectedanticipated results or events reflected in the forward-looking statements will be achieved or will occur. The forward-looking statements included in this report are made as of the date of this report. We undertake no obligation to publicly release any revisions to any forward-looking statements, to report events or to report the occurrence of unanticipated events after the date of this report.report, except as required by law.

65


ITEMSITEM 1., 1A. and 2. BUSINESS, RISK FACTORS AND PROPERTIES

Overview

We arewere formed as a Delaware limited partnership in 2011 primarily engaged in the wholesale distribution of motor fuel and the ownership and leasing of real estate used in the retail distribution of motor fuel. We also generate revenues from the operation of company operated retail sites.

On June 28, 2017, a wholly owned subsidiaryNovember 19, 2019, subsidiaries of DMP purchased from subsidiaries of Circle K, merged with and into CST, with CST surviving the Merger as an indirect, wholly owned subsidiary of Circle K. Circle K is a wholly owned subsidiary of Couche-Tard.

As a result of the Merger, Circle K indirectly owns allK: 1) 100% of the membership interests in the sole member of ourthe General Partner, as well as a 21.1% limited partner interest in the Partnership and allPartner; 2) 100% of the outstanding IDRs issued by the Partnership; and 3) an aggregate of 7,486,131 common units of the Partnership. As a result of this transaction, we are no longer an affiliate of, and are independent of, Circle K, throughK.

Through its indirect ownership interest incontrol of DMP, the Topper Group controls the sole member of our General Partner and has the ability to appoint all of the members of the Board and to control and manage the operations and activities of the Partnership. As of February 24, 2022, the Topper Group also has beneficial ownership of a 38.5% limited partner interest in the Partnership. 

Our principal executive officesoffice address is 515645 Hamilton Street, Suite 200,400, Allentown, PA 18101, and our telephone number is (610) 625-8000. Our common units trade on the NYSE under the ticker symbol “CAPL.”

We conduct our business through two operating segments – wholesale and retail. As of December 31, 2021, we distributed motor fuel on a wholesale basis to approximately 1,750 sites located in 34 states. We own or lease approximately 1,150 sites, of which we operate 252 as company operated sites.

The financial statements reflect the consolidated results of the Partnership and its wholly owned subsidiaries. Our primary operations are conducted by the following consolidated wholly owned subsidiaries:

 

LGW, which distributes motor fuels on a wholesale basis and generates qualified income under Section 7704(d) of the Internal Revenue Code;

LGW and CAPL JKM Wholesale, which distribute motor fuels on a wholesale basis and generate qualifying income under Section 7704(d) of the Internal Revenue Code;

LGPR, which functions as the real estate holding company of CrossAmerica and holds assets that generate qualified rental income under Section 7704(d) of the Internal Revenue Code; and

LGPR, which functions as the real estate holding company and holds assets that generate qualifying rental income under Section 7704(d) of the Internal Revenue Code;

LGWS, which owns and leases (or leases and sub-leases) real estate and personal property used in the retail sale of motor fuels, as well as provides maintenance and other services to its customers. In addition, LGWS sells motor fuel on a retail basis at sites operated by commission agents. Since our acquisition of retail and wholesale assets that closed on April 14, 2020, LGWS also sells motor fuels on a retail basis and sells convenience merchandise items to end customers at company operated retail sites. Income from LGWS generally is not qualifying income under Section 7704(d) of the Internal Revenue Code; and

LGWS, which owns and leases (or leases and sub-leases) real estate and personal property used in the retail distribution of motor fuels, as well as provides maintenance and other services to its customers. In addition, LGWS distributes motor fuels on a retail basis and sells convenience merchandise items to end customers at company operated retail sites and sells motor fuel on a retail basis at sites operated by commission agents. Income from LGWS generally is not qualifying income under Section 7704(d) of the Internal Revenue Code.

Joe’s Kwik Marts, which owns and leases real estate and personal property at our company operated sites that we recently acquired from 7-Eleven. Joe’s Kwik Marts also sells motor fuels on a retail basis and sells convenience merchandise items to end customers. Income from Joe’s Kwik Marts generally is not qualifying income under Sections 7704(d) of the Internal Revenue Code.

We conduct our business through two operating segments, Wholesale and Retail. As of December 31, 2017, we distributed motor fuel to over 1,200 sites located in 31 states (Alabama, Arizona, Arkansas, Colorado, Delaware, Florida, Georgia, Illinois, Indiana, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, New Hampshire, New Jersey, New Mexico, New York, North Carolina, Ohio, Pennsylvania, Rhode Island, South Dakota, Tennessee, Texas, Vermont, Virginia, West Virginia and Wisconsin).

In 2015, we issued our common units as consideration in the purchase of equity interests in CST Fuel Supply and the real property associated with certain of CST’s NTI retail sites. In addition, we also issued, and may continue to issue, common units as payment to Circle K for charges and expenses incurred by us under the Amended Omnibus Agreement. There is no obligation for Circle K to accept common units representing limited partner interests in lieu of cash for amounts due under the Amended Omnibus Agreement. CST also acquired our common units through open market purchases from September 2015 through December 2015. At December 31, 2017, Circle K indirectly owned 21.1% of our limited partner interests.

Available Information

Our internet website is www.crossamericapartners.com. Information on this website is not part of this Form 10-K. Annual reports on our Form 10-K, quarterly reports on our Form 10-Q and our current reports on Form 8-K filed with (or furnished to) the SEC are available on this website under the “Investor Relations” tab and are free of charge, soon after such material is filed or furnished. In this same location, we also post our corporate governance guidelines, code of ethics and business conduct and the charters of the committees of our Board. These documents are available in print to any unitholder that makes a written request to CrossAmerica Partners L.P. Attn: Corporate Secretary, 515645 Hamilton Street, Suite 200,400, Allentown, Pennsylvania 18101.

Couche-Tard’s internet website is corpo.couche-tard.com/en. Information on this website is not part of this Form 10-K. Annual and quarterly reports are available on this website free of charge. In this same location, Couche-Tard also posts its corporate governance guidelines, code of ethics and conduct and a description of the committees of the Couche-Tard Board. These documents are available in print to any stockholder that makes a written request to Alimentation Couche-Tard, Inc. Attn: Corporate Secretary, 4204 Industrial Boulevard, Laval, Quebec, Canada H7L 0E3.

76


Operations

Wholesale Segment

Our primary operation is the wholesale distribution of motor fuel. Our Wholesalewholesale segment generated 20172021 revenues of $1.9 billion. $3.1 billion and operating income of $138 million. The wholesale segment includes the wholesale distribution of motor fuel to lessee dealers, independent dealers, commission agents, DMS (through the closing of the April 2020 acquisition of retail and wholesale assets as further described in Note 4 to the financial statements), and company operated retail sites. We have exclusive motor fuel distribution contracts with lessee dealers who lease the property from us. We also have exclusive distribution contracts with independent dealers to distribute motor fuel but do not collect rent from the independent dealers. Similar to lessee dealers, we had motor fuel distribution and lease agreements with DMS (through the closing of the acquisition of retail and wholesale assets).

We are one of the ten largest independent distributors by motor fuel volume in the United States for ExxonMobil, BP and Shell, and we also distribute Chevron, Sunoco, Valero, Gulf, Citgo, Marathon and Phillips 66-branded motor fuels (approximately 86%92% of the motor fuel we distributed during 20172021 was branded). We receive a fixed mark-up per gallon of motor fuel onFor approximately 85%62% of gallons sold to our customers.customers, we receive a per gallon rate equal to the posted rack price, less any applicable discounts, plus transportation costs, taxes and a fixed rate per gallon of motor fuel. The remaining gallons are primarily DTW priced contracts, with our customers.including intersegment sales to the retail segment. These contracts provide for variable, market basedmarket-based pricing. An increase in DTW gross profit results from the acquisition cost of wholesale motor fuel declining at a faster rate as compared to the rate retail motor fuel prices decline. Conversely, our DTW motor fuel gross profit declines when the cost of wholesale motor fuel increases at a faster rate as compared to the rate retail motor fuel prices increase.

Regarding our supplier relationships, a majority of our total gallons of motor fuel purchased are subject to discountsTerms Discounts for prompt payment and other rebates and incentives, which are recorded within cost of sales. Prompt payment discounts are based on a percentage of the purchase price of motor fuel. As such, the dollar value of these discounts increaseincreases and decreasedecreases corresponding with motor fuel prices. Therefore, in periods of lower wholesale motor fuel prices, our gross profit is negatively affected, and, in periods of higher wholesale motor fuel prices, our gross profit is positively affected (as it relates to these discounts). Based on our current volumes, we estimate a $10 per barrel change in the price of crude oil would impact our overall annual wholesale motor fuel gross profit by approximately $2$2.8 million related to these payment discounts.

The following table highlights the aggregate volume of motor fuel distributed by our Wholesalewholesale segment to each of our principal customer groups by gallons sold(in millions). See Item 7—Results of Operations for additional information on the periods (in millions):

drivers of the fluctuations in the volume and site counts below.

 

Gallons of Motor Fuel Distributed

Year Ended December 31,

 

 

Wholesale Fuel Distribution Sites

End of Year

 

 

Gallons of Motor Fuel Distributed

Year Ended December 31,

 

 

Wholesale Fuel Distribution Sites

End of Year

 

 

2017

 

 

2016

 

 

2015

 

 

2017

 

 

2016

 

 

2015

 

 

2021

 

 

2020

 

 

2019

 

 

2021

 

 

2020

 

 

2019

 

Independent dealers (a)

 

 

346.2

 

 

 

362.3

 

 

 

418.1

 

 

 

384

 

 

 

403

 

 

 

370

 

 

 

550

 

 

 

450

 

 

 

315

 

 

 

666

 

 

 

687

 

 

 

369

 

Lessee dealers

 

 

309.6

 

 

 

268.4

 

 

 

169.7

 

 

 

438

 

 

 

420

 

 

 

290

 

 

 

382

 

 

 

396

 

 

 

455

 

 

 

637

 

 

 

658

 

 

 

676

 

Commission agents (b)

 

 

169

 

 

 

141

 

 

 

129

 

 

 

198

 

 

 

208

 

 

 

169

 

Company operated retail sites

 

 

234

 

 

 

113

 

 

 

30

 

 

 

252

 

 

 

150

 

 

 

 

DMS

 

 

138.4

 

 

 

164.6

 

 

 

177.6

 

 

 

146

 

 

 

153

 

 

 

191

 

 

 

 

 

 

17

 

 

 

75

 

 

 

 

 

 

 

 

 

68

 

Circle K

 

 

78.1

 

 

 

78.9

 

 

 

77.3

 

 

 

43

 

 

 

43

 

 

 

43

 

Commission agents

 

 

86.3

 

 

 

75.7

 

 

 

75.6

 

 

 

181

 

 

 

95

 

 

 

66

 

Company operated retail sites

 

 

73.4

 

 

 

84.7

 

 

 

133.1

 

 

 

70

 

 

 

73

 

 

 

115

 

Total

 

 

1,032.0

 

 

 

1,034.6

 

 

 

1,051.4

 

 

 

1,262

 

 

 

1,187

 

 

 

1,075

 

 

 

1,335

 

 

 

1,117

 

 

 

1,004

 

 

 

1,753

 

 

 

1,703

 

 

 

1,282

 

 

(a)

Gallons distributed to independent dealers include gallons distributed to subwholesalerssub-wholesalers and commercial accounts, which are not included in the site counts reported above.

(b)

Includes independent commission sites owned or leased by the commission agent.

Description of Principal Customer Groups

Independent Dealer Sites

 

The independent dealer owns or leases the property and owns all motor fuel and convenience store inventory.

The independent dealer owns or leases the property and owns all motor fuel and convenience store inventory.

We contract to exclusively distribute motor fuel to the independent dealer at a fixed mark-up per gallon or, in some cases, DTW.

We contract to exclusively distribute motor fuel to the independent dealer at rack-plus pricing or, in some cases, DTW.

Distribution contracts with independent dealers are typically seven to 10 years in length.

Distribution contracts with independent dealers are typically seven to 15 years in length.

As of December 31, 2021, the average remaining distribution contract term was 5.3 years.

As of December 31, 2017, the average remaining distribution contract term was 5.7 years.


Lessee Dealer Sites

 

We own or lease the property and then lease or sublease the site to a dealer.

We own or lease the property and then lease or sublease the site to a dealer.

The lessee dealer owns all motor fuel and retail site inventory and sets its own pricing and gross profit margins.

We collect wholesale motor fuel margins at rack-plus pricing or, in some cases, DTW.

Under our distribution contracts, we agree to supply a particular branded motor fuel or unbranded motor fuel to a site or group of sites and arrange for all transportation.

Exclusive distribution contracts with dealers who lease property from us run concurrent in length to the retail site’s lease period (generally three to 10 years).

Leases are generally triple net leases.

As of December 31, 2021, the average remaining lease agreement term was 3.1 years.

Commission Agents

LGW distributes motor fuel on a wholesale basis to LGWS, which owns the motor fuel inventory and sells motor fuel to retail customers. LGW records qualifying wholesale motor fuel distribution gross income in our wholesale segment and LGWS records the non-qualifying retail sale in our retail segment.

Company Operated

LGW and CAPL JKM Wholesale distribute on a wholesale basis all of the motor fuel required by our company operated sites to LGWS and Joe’s Kwik Marts, respectively, which owns the motor fuel inventory and sells motor fuel to retail customers. LGW and CAPL JKM Wholesale record qualifying wholesale motor fuel distribution gross income in our wholesale segment and LGWS and Joe’s Kwik Marts record the non-qualifying retail sale in our retail segment.

DMS

Prior to April 14, 2020, we owned or leased property and then leased or subleased the site to DMS and distributed fuel to DMS. DMS owned the motor fuel and retail site inventory and setsset its own pricing and gross profit margins.

We collectmargin. Since the April 14, 2020 acquisition of retail and wholesale motorassets, we no longer sell fuel margins at a fixed mark-up per gallon or, in some cases, DTW.

Under our distribution contracts, we agreenor lease sites to supply a particular branded motor fuel or unbranded motor fuel to a site or group of sites and arrange for all transportation.

Exclusive distribution contracts with dealers who lease property from us run concurrent in lengthDMS. See Note 4 to the retail site’s lease period (generally three to 10 years).financial statements for additional information.

8


Leases are generally triple net leases.

As of December 31, 2017, the average remaining lease agreement term was 3.7 years.

DMS Sites

We own or lease the property and then lease or sublease the site to DMS.

We entered into a 15-year motor fuel distribution agreement with DMS pursuant to which we distribute to DMS motor fuel at a fixed mark-up per gallon.

We entered into 15-year triple-net lease agreements with DMS pursuant to which DMS leases sites from us.

DMS owns motor fuel and retail site inventory and sets its own pricing and gross profit margin.

As of December 31, 2017, the average remaining term on our motor fuel distribution agreements with DMS was 9.8 years. The average remaining term on our lease agreements with DMS was 10.3 years.

Circle K Sites

In conjunction with the joint acquisitions of Nice N Easy Assetstransactions completed in 2014 and Landmark Assets with CST in 2015, we own theowned property and lease theleased retail sites to Circle K. Concurrently with these acquisitions, we entered into a 10-yearWe also distributed motor fuel distribution agreementto Circle K. Many of the sites previously owned and leased to Circle K were sold in the asset exchanges with CST, pursuantCircle K. The sites that have been sold have been reclassified as independent dealer sites as we no longer control the property but continue to distribute fuel to such sites. At the sites to which we continue to distribute to Circle K motor fuels at a fixed mark-up per gallon.

We lease sites to Circle K under a 10-year triple-net master lease agreement.

fuel, Circle K owns all motor fuel and retail site inventory and sets its own pricing and gross profit margin.

As of December 31, 2017, the remaining term2021, we distribute fuel on our fuel distribution agreement was 6.9 years. The average remaining term on our lease agreements witha wholesale basis to 42 Circle K was 7.1 years.sites and lease 11 sites to Circle K. As of December 31, 2021, there are only five sites at which we both supply fuel and lease the property to Circle K, which are categorized in the table above as lessee dealer sites.

Rental Income

We also generate revenues through leasing or subleasing our real estate. We own or lease real and personal property and we lease or sublease that property to tenants, the substantial majority of which are wholesale customers as described above. As such, we manage our real estate leasing activities congruently with our Wholesalewholesale segment. We own approximately 59%60% of our properties that we lease to our dealers or utilize in our retail business. Our lease agreements with third partythird-party landlords have an average remaining lease term of 6.25.6 years as of December 31, 2017. Not all of the rental income we earn is a qualified source of income under Section 7704(d) of the Internal Revenue Code. Rental income from Circle K is not qualifying income under Section 7704(d) of the Internal Revenue Code.2021.

8


The following table presents rental income (in thousands)millions), including rental income from commission agents that is included in the Retailretail segment, and the number of sites from which rental income was generated:

 

 

Rental Income

Year Ended December 31,

 

 

Sites from which Rental

Income was Generated

End of Year

 

 

 

2017

 

 

2016

 

 

2015

 

 

2017

 

 

2016

 

 

2015

 

Total

 

$

86.3

 

 

$

80.6

 

 

$

65.4

 

 

 

885

 

 

 

810

 

 

 

691

 

 

 

Rental Income

Year Ended December 31,

 

 

Sites from which Rental

Income was Generated

End of Year

 

 

 

2021

 

 

2020

 

 

2019

 

 

2021

 

 

2020

 

 

2019

 

Total

 

$

83.2

 

 

$

83.2

 

 

$

90.1

 

 

 

900

 

 

 

948

 

 

 

1,003

 

Rental income decreased in 2020 primarily as a result of terminating leases in connection with the April 2020 acquisition of retail and wholesale assets.

CST Fuel Supply

As of December 31, 2017, our totalIn 2015, we purchased a 17.5% limited partner interest in CST Fuel Supply was 17.5%.from CST. We receivereceived pro rata distributions from CST Fuel Supply related to CST Marketing and Supply’s distribution of motor fuel to the majority of CST’s legacy U.S. retail sites.sites.

9Effective March 25, 2020, we divested our entire interest in CST Fuel Supply in the CST Fuel Supply Exchange as further described in Note 4 to the financial statements.


Retail Segment

Our Retailretail segment generated 20172021 revenues of $492$1.4 billion and operating income of $5.5 million. We own or lease and operateThe retail sites. Subsequent to an acquisition, we evaluatesegment includes the eventual long-term operationsale of each retail site acquired: (a) to be converted into a lessee dealer or (b) other strategic alternatives, including selling the site to Circle K for them to operate as a retail site. By converting retail sites into lessee dealers, we continue to benefit from motor fuel distribution volumes as well as rental income from lease or sublease arrangements while reducing operating expenses. For the year ended December 31, 2017, we converted threeconvenience merchandise items at company operated retail sites in our Retail segment to lessee dealers in our Wholesale segment. As of December 31, 2017, we continue to operate 71 retail sites, including one liquor store to which we do not distribute fuel on a wholesale basis.

Commission Sites

We own or lease the property and then lease or sublease the site to the commission agent, who pays rent to us and operates all the non-fuel related operations at the sites for its own account.

We own the motor fuel inventory at the sites, set the motor fuel pricing at the sites and generate revenue from the retail sale of motor fuelsfuel at company operated and commission sites.

See Note 3 to the end customer.

We payfinancial statements for information related to our acquisition of certain assets from 7-Eleven. With this transaction and the commission agentApril 2020 acquisition of retail and wholesale assets, we not only added wholesale fuel contracts to our portfolio but also added retail assets and reestablished a commissionretail capability that enables us to pursue a broader range of acquisition opportunities and provides greater flexibility for optimizing the class of trade for each gallon of motor fuel sold at the site.asset in our portfolio.

LGW distributes motor fuel on a wholesale basis to LGWS, which owns the motor fuel inventory and distributes motor fuel to commission sites. LGW records qualifying wholesale motor fuel distribution gross income and LGWS records the non-qualifying retail gross income.

As of December 31, 2017, the average remaining motor fuel distribution and lease agreement term was 1.6 years.

Company Operated Sites

 

We own or lease the property, operate the retail site and retain all profits from motor fuel and retail site operations.

We own the merchandise inventory and retain the profits from the sale of convenience merchandise items.

We own the motor fuel inventory and set the motor fuel pricing.

We maintain inventory from the time of the purchase of motor fuel from third-party suppliers until the retail sale to the end customer. On average, we maintain approximately 5-days’ worth of motor fuel sales in inventory at each site.

LGW and CAPL JKM Wholesale distribute on a wholesale basis all of the motor fuel required by our company operated sites to LGWS and Joe’s Kwik Marts, respectively, which owns the motor fuel inventory and sells motor fuel to retail customers. LGW records qualifying wholesale motor fuel distribution gross income in our wholesale segment and LGWS and Joe’s Kwik Marts record the non-qualifying retail sale in our retail segment.

Commission Sites

We own or lease the property and then lease or sublease the site to the commission agent, who pays rent to us and operates all the non-fuel related operations at the sites for its own account.

We own the motor fuel inventory, set the motor fuel pricing and generate revenue from the retail sale of motor fuels to the end customer.

We pay the commission agent a commission for each gallon of motor fuel sold.

LGW distributes motor fuel on a wholesale basis to LGWS, which owns the motor fuel inventory and sells motor fuel to retail customers. LGW records qualifying wholesale motor fuel distribution gross income in our wholesale segment and LGWS records the non-qualifying retail sale in our retail segment.

As of December 31, 2021, the average remaining motor fuel distribution and lease agreement term for our commission agents was 1.2 years.

9


Subsequent to an acquisition and throughout the life cycle of a retail site, and retain all profits from motor fuel and retailwe evaluate the optimal operation of each site operations.

We own the motor fuel inventory at the sites and set the motor fuel pricing at the sites.

We maintain inventory from the time of the purchase of motor fuel from third party suppliers until the retail sale to the end customer. On average, we maintain approximately 5-days’ worth of motor fuel sales in inventory at each site.

LGW distributes on a wholesale basis all of the motor fuel required by ouras company operated, sites, which ownslessee dealer or commission, or we consider strategic alternatives, including divesting the motor fuel inventory and distributes motor fuel to retail customers. LGW records qualifying wholesale motor fuel distribution gross income and LGWS records the non-qualifying retail distribution gross income.site.

10


The following chart depicts how motor fuel and convenience merchandise is procured and distributed to our customer groups and how convenience merchandise items are procured and distributed to our company operated retail sites. The chart also depicts the relationship of our real estate activities to our customer groups.

 

Recent Developments

See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Recent Developments” for a discussion of completed transactions affecting our business and a discussion of the COVID-19 Pandemic.

Business Strategy and Objective

Our primary business objective is to generate sufficient cash flows from operations to make quarterly cash distributions to our unitholders and, over time, to increase our quarterly cash distributions.distributions while maintaining discipline with leverage. The amount of any distribution is subject to the discretion of the Board, and the Board may modify or revoke the cash distribution policy at any time. Our Partnership Agreement does not require us to pay any distributions.

Our business strategy to achieve our objective of paying and, over time, increasing our quarterly cash distributions, is focused on the following key initiatives:

 

Expand within and beyond our existing markets through acquisitions, either on our own or as joint acquisitions with Circle K, as demonstrated by the Jet-Pep Assets acquisition. Since our IPO and through February 21, 2018, we have completed acquisitions for a total of approximately 600 fee and leasehold sites for total consideration of approximately $1.0 billion;

Expand within and beyond our existing markets through acquisitions. Since our IPO and through February 24, 2022, we have completed acquisitions for a total of approximately 1,000 fee and leasehold sites and 700 wholesale fuel supply contracts for total consideration of approximately $1.5 billion;

Enhance our real estate business’ cash flows by owning or leasing sites in prime locations;

Enhance our real estate business’ cash flows by owning or leasing sites in prime locations;

Increase our Wholesale segment by expanding market share;

Increase our wholesale segment by expanding market share and growing rental income over time;

Maintain strong relationships with major integrated oil companies and refiners;

Maintain strong relationships with major integrated oil companies and refiners; and

Convert company operated retail sites to lessee dealer sites to provide for more stable cash flows and maximize qualified income; and

As part of our business strategy with Circle K, we intend, when favorable market conditions exist and pending approval by the Board’s independent conflicts committee and our Board, and the approval of the Couche-Tard Board, as applicable, and mutual agreement upon terms and other conditions, to purchase certain assets from Circle K, which could include a portion of the independent dealer and lessee dealer wholesale business of Circle K and certain non-core retail convenience sites of Circle K with the intent to convert them to lessee dealer sites.

Optimize the operations of acquired assets to the most appropriate format (lessee dealer, independent dealer, retail site) to provide for more stable cash flows and maximize our investment return.

1110


We believe our competitive strengths will allow us to capitalize on our strategic opportunities, including:

 

Stable cash flows from real estate rent income and wholesale motor fuel distribution;

Stable cash flows from real estate rent income and wholesale motor fuel distribution;

Established history of acquiring sites and successfully integrating these sites and operations into our existing business;

Established history of acquiring sites and successfully integrating these sites and operations into our existing business;

Long-term relationships with major integrated oil companies and other key suppliers; and

Long-term relationships with major integrated oil companies and other key suppliers, which support our negotiations with and enable us to collaboratively work with our suppliers to maximize benefits to the Partnership; and

Prime real estate locations in areas with high traffic and considerable motor fuel consumption.

Prime real estate locations in areas with high traffic and considerable motor fuel consumption.

Supplier Arrangements

We distribute Branded Motor Fuelbranded motor fuel under the Exxon, Mobil, BP, Shell, Chevron, Sunoco, Valero, Gulf, Citgo, Marathon and Phillips 66 brands to our customers. Branded Motor Fuelsmotor fuels are purchased from major integrated oil companies and refiners under supply agreements. For the year ended December 31, 2017,2021, our Wholesalewholesale segment purchased approximately 28%37%, 27%22%, 11% and 16%10% of its motor fuel from ExxonMobil, BP, Motiva and Motiva,Marathon, respectively. We purchase the motor fuel at the supplier’s applicable terminal rack price, which typically changes daily. Certain suppliers offer volume rebates or incentive payments to drive volumes and provide an incentive for branding new locations. Certain suppliers require that all or a portion of any such incentive payments be repaid to the supplier in the event that the sites are rebranded within a stated number of years. We also purchase unbranded motor fuel for distribution at a rack price.distribution. As of December 31, 2017,2021, our supply agreements had a weighted-average remaining term of approximately 1.64.9 years.

We purchase fuel supplied to sites acquired in our Jet-Pep Asset acquisition from Circle K. See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Significant Factors Affecting our Profitability—The Significance of Crude Oil and Wholesale Motor Fuel Prices on Our Revenues, Cost of Sales and Gross Profit” for additional discussion of the terms under which this fuel is purchased from Circle K.

Competition

Our Wholesalewholesale segment competes with other motor fuel distributors. Major competitive factors for us include, among others, customer service, price and quality of service and availability of products.

The convenience store industry is highly competitive, fragmented and characterized by ease of entry and constant change in the number and type of retailers offering products and services of the type we sell insold at our retail sites. We compete with other retail site chains, independently owned retail sites, motor fuel stations, supermarkets, drugstores, discount stores, dollar stores, club stores and hypermarkets. Major competitive factors include, among others, location, ease of access, product and service selection, motor fuel brands, pricing, customer service, store appearance, and cleanliness.

Seasonality

Our business exhibits substantial seasonality due to our wholesale and retail sites being located in certain geographic areas that are affected by seasonal weather and temperature trends and associated changes in retail customer activity during different seasons. Historically, sales volumes have been highest in the second and third quarters (during the summer activity months) and lowest during the winter months in the first and fourth quarters.

Trade Names, Service Marks and Trademarks

We are a wholesale distributor of motor fuel for various major integrated oil companies and are licensed to market/resell motor fuel under their respective motor fuel brands.

We are not aware of any facts that would negatively affect our continuing use of any trademarks, trade names or service marks.

Environmental Laws and Regulations

We are subject to extensive federal, state and local environmental laws and regulations, including those relating to USTs, the release or discharge of materials into the air, water and soil, waste management, pollution prevention measures, storage, handling, use and disposal of hazardous materials, the exposure of persons to hazardous materials, greenhouse gas emissions, and characteristics, composition, storage and sale of motor fuel and the health and safety of our employees. We incorporate by reference into this section our disclosures included in Note 2 under the captions “Environmental Matters” and “Asset Retirement Obligations” andas well as Note 1011 under the caption “Asset Retirement Obligations” and Note 16 to the financial statements.

12


Other Regulatory Matters

Our retail sites are subject to regulation by federal, state, and/or local agencies and to licensing and regulations by state and local health, sanitation, safety, fire and other departments relating to the development and operation of retail sites, including regulations relating to zoning and building requirements and the preparation and sale of food.

11


Our retail sites are also subject to federal, state and/or local laws governing such matters as wage rates, overtime, working conditions and citizenship requirements. At the federal, state and local levels, where we operate, there are proposals under consideration from time to time to increase minimum wage rates and modify or restrict immigration policies.

EmployeesHuman Capital

The General Partner manages our operations and activities, Under the Amended Omnibus Agreement, employees of Circle K provide management services to us.Partnership has no direct employees. As of December 31, 2017, pursuant to the Amended Omnibus Agreement, 922021, 215 employees of Circle Kthe Topper Group provided exclusive management services to us.us under the Topper Group Omnibus Agreement. In addition, 2,003 store employees of the Topper Group provided services at our company operated sites.

Our human capital resources objectives include identifying, recruiting, retaining, incentivizing and integrating our existing and new employees. As a customer-centric company with a strong service culture, we constantly work to maintain our position as an employer of December 31, 2017, we had 604 employees who provide serviceschoice. This requires a commitment to our Retail segment, all of whom are employed by oneworkplace inclusion and safety, as well as competitive total compensation that meets the needs of our subsidiaries.employees. Our talent management and succession plan process includes the identification of key positions based on current and future business strategies, the identification of potential successors and a plan for talent development.

13


We are continuing to closely monitor the impact of the evolving effects of the COVID-19 Pandemic on our business. See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Recent Developments—COVID-19 Pandemic” for a discussion of our efforts to reduce the risks of exposure to COVID-19.

ITEM 1A. RISK FACTORS

If any of the following risks were to occur, our business, financial condition or results of operations could be materially and adversely affected. In that case, we might not be able to pay distributions on our common units, the trading price of our common units could decline and you could lose all or part of your investment. Also, please read “Cautionary Statement Regarding Forward-Looking Statements.”

Limited partner interests are inherently different from the capital stock of a corporation although many of the business risks to which we are subject are similar to those that would be faced by a corporation engaged in a similar business.

Risk Factor Summary

Below is a summary of our risk factors:

We may not have sufficient distributable cash from operations to enable us to pay our quarterly distributions.

If we are unable to make acquisitions on economically acceptable terms, our future growth and ability to increase distributions to unitholders will be limited, and any acquisitions are subject to substantial risks.

Volatility in crude oil and wholesale motor fuel costs affect our business, financial condition and results of operations and our ability to make distributions to unitholders.

Seasonality in wholesale motor fuel costs and sales, as well as merchandise sales, affect our business, financial condition and results of operations and our ability to make distributions to unitholders.

Both the wholesale motor fuel distribution and the retail motor fuel industries are characterized by intense competition and fragmentation.

Changes in credit or debit card expenses could reduce our gross profit, especially on motor fuel sold at company-operated retail sites.

New entrants or increased competition in the convenience store industry could result in reduced gross profits.

General economic, financial and political conditions that are largely out of our control could adversely affect our business, financial condition and results of operations and reduce our ability to make distributions to unitholders.

Changes in consumer behavior and travel as a result of changing economic conditions, labor strikes or otherwise could adversely affect our business, financial condition and results of operations and reduce our ability to make distributions to unitholders.

Broad-based business or economic disruptions caused by the COVID-19 Pandemic, or other similar health crises, could adversely affect our business, financial condition, results of operations or cash available for distribution to our unitholders.

A shortage of qualified labor could have a material adverse effect on our business and results of operations.


We are subject to extensive government laws and regulations concerning store merchandise items and environmental laws, and laws, regulations, technological, political and scientific developments regarding climate change and fuel efficiency may decrease demand for motor fuel. We are also subject to federal, state and local laws and regulations that govern the product quality specifications of the motor fuel that we distribute and sell.

Changes 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.

Unfavorable weather conditions could adversely affect our business, financial condition and results of operations and reduce our ability to make distributions to unitholders.

We depend on four principal suppliers for the majority of our motor fuel.

Negative events or developments associated with our branded suppliers could have an adverse impact on our revenues.

We rely on our suppliers to provide trade credit to adequately fund our ongoing operations.

We could be adversely affected by the creditworthiness and performance of our customers, suppliers and contract counterparties.

Pending or future litigation could adversely affect our financial condition and results of operations.

The dangers inherent in the storage and transport of motor fuel could cause disruptions and could expose us to potentially significant losses, costs or liabilities.

We depend on third-party transportation providers for the transportation of all of our motor fuel.

Our motor fuel sales in our wholesale segment are generated under contracts that must be renegotiated or replaced periodically.

We rely on our information technology systems and network infrastructure to manage numerous aspects of our business and could be adversely affected by the failure to protect sensitive customer, employee or vendor data.

Our debt levels and debt covenants may limit our flexibility in obtaining additional financing and in pursuing other business opportunities and our ability to make distributions to unitholders.

An increase in interest rates may cause the market price of our common units to decline and a significant increase in interest rates could adversely affect our ability to service our indebtedness.

We do not own all of the land on which our retail sites and certain facilities are located, which could result in increased costs and disruptions to our operations.

We may not be able to lease sites we own or sub-lease sites we lease on favorable terms.

We rely on DMI and Circle K to indemnify us for any costs or expenses that we incur for certain environmental liabilities and third-party claims.

The Topper Group controls us and may have conflicts of interest with us. Further, our General Partner and its affiliates, including the Topper Group, may have conflicts of interest with us and limited fiduciary duties and they may favor their own interests to the detriment of our unitholders and us.

The Topper Group or the Board may modify or revoke our cash distribution policy at any time at their discretion. Our Partnership Agreement does not require us to pay any distributions at all.

We rely on the employees of the Topper Group to provide key management services to our business pursuant to the Topper Group Omnibus Agreement.

Our General Partner has limited liability regarding our obligations.

If we distribute a significant portion of our cash available for distribution to our partners, our ability to grow and make acquisitions could be limited.

Our Partnership Agreement replaces, eliminates and modifies, as applicable, the duties, including the fiduciary duties, of our General Partner, the Board or any committee thereof, and modifies the burden of proof in any action brought against the General Partner, the Board or any committee thereof.

Our General Partner’s affiliates, including the Topper Group, may compete with us.

Holders of our common units have limited voting rights.

Our General Partner interest or the control of our General Partner may be transferred to a third party without unitholder consent, and our General Partner has a call right that may require unitholders to sell their common units at an undesirable time or price.

The market price of our common units could be adversely affected by sales of substantial amounts of our common units in the public or private markets, including sales by the Topper Group or other large holders.

We may issue unlimited additional units without unitholder approval, which would dilute existing unitholder ownership interests, and our General Partner’s discretion in establishing cash reserves may reduce the amount of cash available for distribution to unitholders.

Our Partnership Agreement restricts the voting rights of unitholders owning 20% or more of our common units.

Management fees and cost reimbursements due to our General Partner and the Topper Group for services provided to us or on our behalf will reduce cash available for distribution to our unitholders.

Our tax treatment depends in large part on our status as a partnership for U.S. federal income tax purposes.


We have subsidiaries that are treated as corporations for U.S. federal income tax purposes and are subject to entity-level U.S. federal, state and local income and franchise tax.

The tax treatment of publicly traded partnerships or an investment in our common units could be subject to potential legislative, judicial or administrative changes and differing interpretations, possibly on a retroactive basis.

Our unitholders are required to pay taxes on their share of income from us even if they do not receive any cash distributions from us.

Unitholders may be subject to limitation on their ability to deduct interest expense incurred by us.

Tax gain or loss on the disposition of our common units could be more or less than expected.

Tax-exempt organizations and non-U.S. persons face unique tax issues from owning common units that may result in adverse tax consequences to them.

Our unitholders are subject to state and local income taxes and return filing requirements in states and localities where they do not live as a result of investing in our common units.

We will treat each purchaser of our common units as having the same tax characteristics on a per-unit basis without regard to the actual common units purchased.

We prorate our items of income, gain, loss and deduction for U.S. federal income tax purposes and allocate them between transferors and transferees of our common units each month based upon the ownership of our common units on the first business day of each month and as of the opening of the applicable exchange on which our common units are listed, instead of on the basis of the date a particular common unit is transferred.

If a unitholder loans their common units to a short seller to cover a short sale of common units, they may be considered to have disposed of those common units for U.S. federal income tax purposes.

We have adopted certain valuation methodologies that may result in a shift of income, gain, loss and deduction between our General Partner and the unitholders.

If the IRS makes audit adjustments to our income tax returns for tax years beginning after 2017, it (and some states) may assess and collect any resulting taxes (including any applicable penalties and interest) directly from us, in which case we may require our unitholders and former unitholders to reimburse us for such taxes (including any applicable penalties or interest) or, if we are required to bear such payment, our cash available for distribution to our unitholders might be substantially reduced.

Risks Relating to Our Industry and Our Business

We may not have sufficient distributable cash from operations to enable us to pay our quarterly distribution following the establishment of cash available for distribution and payment of fees and expenses.

We may not have sufficient cash each quarter to pay quarterly distribution at current levels or at all.

The amount of cash we can distribute on our common units principally depends upon the amount of cash we generate from our operations, which will fluctuate from quarter to quarter based on, among other things:

demand for motor fuel products in the markets we serve, including seasonal fluctuations, and the margin per gallon we earn selling and distributing motor fuel;

demand for motor fuel products in the markets we serve, including seasonal fluctuations, and the margin per gallon we earn selling and distributing motor fuel;

the wholesale price of motor fuel and its impact on the payment discounts we receive;

the wholesale price of motor fuel and its impact on the payment discounts we receive;

seasonal trends in the industries in which we operate;

seasonal trends in the industries in which we operate;

the impact that severe storms could have to our suppliers’ operations;

supply, and the impact that severe storms could have to our suppliers’ and customers’ operations;

competition from other companies that sell motor fuel products or operate retail sites in our targeted market areas;

competition from other companies that sell motor fuel products or operate retail sites in our targeted market areas;

the inability to identify and acquire suitable sites or to negotiate acceptable leases for such sites;

the inability to identify and acquire suitable sites or to negotiate acceptable leases for such sites;

the potential inability to obtain adequate financing to fund our expansion;

the potential inability to obtain adequate financing to fund our expansion;

the level of our operating costs, including the amount and manner in which payments to Circle K are made under the Amended Omnibus Agreement;

the level of our operating costs, including payments to the Topper Group under the Topper Group Omnibus Agreement;

prevailing economic conditions;

prevailing economic conditions;

regulatory actions affecting the supply of or demand for motor fuel, our operations, our existing contracts or our operating costs; and

regulatory actions affecting the supply of or demand for motor fuel, our operations, our existing contracts or our operating costs; and

volatility of prices for motor fuel.

volatility of prices for motor fuel.


In addition, the actual amount of cash we will have available for distribution will depend on other factors such as:

the level and timing of capital expenditures we make;

the restrictions contained in our credit facilities;

our debt service requirements and other liabilities;

the cost of acquisitions, if any;

fluctuations in our working capital needs;

our ability to borrow under our credit facilities and access capital markets on favorable terms, or at all; and

the amount, if any, of cash reserves established by our General Partner in its discretion. 

Incurring additional debt may significantly increase our interest expense and financial leverage and issuing additional limited partner interests may result in significant unitholder dilution and would increase the levelaggregate amount of capital expenditures we make;

cash required to maintain the restrictions contained in our credit facility;

our debt service requirements;

the cost of acquisitions;

fluctuations in our working capital needs;

cash distribution rate, which could materially decrease our ability to borrow under our credit facility to make distributions to our unitholders; and

the amount, if any, of cash reserves established by our General Partner in its discretion. 

Therepay distributions. Consequently, there is no guarantee that we will distribute quarterly cash distributions to our unitholders in any quarter.

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The amount of cash we have available for distribution to unitholders depends primarily on our cash flow rather than on our profitability, which may prevent us from making cash distributions, even during periods when we record net income.

The amount of cash we have available for distribution depends primarily on our cash flow, and not solely on profitability, which will be affected by non-cash items. As a result, we may make cash distributions during periods when we record losses for financial accounting purposes and may not make cash distributions during periods when we record net income for financial accounting purposes.

If we are unable to make acquisitions on economically acceptable terms, our future growth and ability to increase distributions to unitholders will be limited.

Our strategy to grow our business and increase distributions to unitholders is dependent on our ability to make acquisitions that result in an increase in cash flow. Our growth strategy is based, in large part, on our expectation of ongoing divestitures of retail and wholesale fuel distribution assets by industry participants. We may be unable to make accretive acquisitions for any of the following reasons:

we are unable to identify attractive acquisition candidates or negotiate acceptable purchase contracts for them;

we are unable to identify attractive acquisition candidates or negotiate acceptable purchase contracts for them;

we are unable to raise financing for such acquisitions on economically acceptable terms, for example if the market price for our common units declines;

we are unable to raise financing for such acquisitions on economically acceptable terms, for example, if the market price for our common units declines;

we are outbid by competitors; or

we are outbid by competitors; or

we or the seller are unable to obtain any necessary consents.

we or the seller are unable to obtain any necessary consents.

If we are unable to make acquisitions on economically acceptable terms, our future growth and ability to increase distributions to unitholders will be limited. In addition, if we consummate any future acquisitions, our capitalization and results of operations maychange significantly. We may also consummate acquisitions, which at the time of consummation we believe will be accretive, but ultimately may not be accretive.accretive and may in fact result in a decrease in distributable cash flow per unit as a result of incorrect assumptions in our evaluation of such acquisitions, unforeseen consequences, or other external events beyond our control. If any of these events occurred, our future growth could be adversely affected.

Any acquisitions are subject to substantial risks that could adversely affect our business, financial condition and results of operations and reduce our ability to make distributions to unitholders.

Any acquisitions involve potential risks, including, among other things:

the validity of our assumptions about revenues, capital expenditures and operating costs of the acquired business or assets, as well as assumptions about achieving synergies with our existing business;

the validity of our assumptions about revenues, demand, capital expenditures and operating costs of the acquired business or assets, as well as assumptions about achieving synergies with our existing business;

the incurrence of substantial unforeseen environmental and other liabilities arising out of the acquired businesses or assets, including liabilities arising from the operation of the acquired businesses or assets prior to our acquisition, for which we are not indemnified or for which the indemnity is inadequate;

the costs associated with additional debt or equity capital, which may result in a significant increase in our interest expense and financial leverage resulting from any additional debt incurred to finance the acquisition, or the issuance of additional common units on which we will make distributions, either of which could offset the expected accretion to our unitholders from any such acquisition and could be exacerbated by volatility in the equity or debt capital markets;

a failure to realize anticipated benefits, such as increased available distributable cash flow, enhanced competitive position or new customer relationships;

the inability to timely and effectively integrate the operations of recently acquired businesses or assets, particularly those in new geographic areas or in new lines of business;

a decrease in our liquidity by using a significant portion of our available cash or borrowing capacity to finance the acquisition;

the incurrence of other significant charges, such as impairment of goodwill or other intangible assets, asset devaluation or restructuring charges;

performance from the acquired assets and businesses that is below the forecasts we used in evaluating the acquisition;

a significant increase in our working capital requirements;

competition in our targeted market areas;

the incurrence of substantial unforeseen environmental and other liabilities arising out of the acquired businesses or assets, including liabilities arising from the operation of the acquired businesses or assets prior to our acquisition, for which we are not indemnified or for which the indemnity is inadequate;

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the costs associated with additional debt or equity capital, which may result in a significant increase in our interest expense and financial leverage resulting from any additional debt incurred to finance the acquisition, or the issuance of additional common units on which we will make distributions, either of which could offset the expected accretion to our unitholders from any such acquisition and could be exacerbated by volatility in the equity or debt capital markets;

a failure to realize anticipated benefits, such as increased available distributable cash flow, an enhanced competitive position or new customer relationships;

the inability to timely and effectively integrate the operations of recently acquired businesses or assets, particularly those in new geographic areas or in new lines of business;

unforeseen difficulties operating in new and existing product areas or new and existing geographic areas;

a decrease in our liquidity by using a significant portion of our available cash or borrowing capacity to finance the acquisition;

the incurrence of other significant charges, such as impairment of goodwill or other intangible assets, asset devaluation or restructuring charges;

performance from the acquired assets and businesses that is below the forecasts we used in evaluating the acquisition;

a significant increase in our working capital requirements;

competition in our targeted market areas;

customer or key employee loss from the acquired businesses and the inability to hire, train or retain qualified personnel to manage and operate such acquired businesses; and

diversion of our management’s attention from other business concerns.

diversion of our management’s attention from other business concerns.

In addition, our ability to purchase or lease additional sites involves certain potential risks, including the inability to identify and acquire suitable sites or to negotiate acceptable leases or subleases for such sites and difficulties in adapting our distribution and other operational and management systems to an expanded network of sites.

Our reviews of businesses or assets proposed to be acquired are inherently imperfect because it generally is not feasiblepracticable to perform an in-deptha perfect review of businesses and assets involved in each acquisition. Even a detailed review of assets and businesses may not necessarily reveal existing or potential problems, nor will it permit a buyer to become sufficiently familiar with the assets or businesses to fully assess their deficiencies and potential. For example, inspections may not always be performed on every asset, and environmental problems, such as groundwater contamination, are not necessarily observable even when an inspection is undertaken. Unitholders will not have the opportunity to evaluate the economic, financial and other relevant information that we will consider in determining the application of our funds and other resources toward the acquisition of certain businesses or assets.

Given Couche-Tard’s size and the magnitude of its acquisitions and our joint acquisitions with them, we may be subject to FTC review and be required to divest sites even in transactions with which we are not involved.

One of our business strategies is to expand within and beyond our existing locations through acquisitions, either on our own or through joint acquisitions with Couche-Tard. The FTC may review these acquisitions and, in certain cases, we or Couche-Tard may enter into consent decrees to remedy the FTC’s competitive concerns, including by divesting sites. The FTC may not view us as an independent competitor of Couche-Tard for purposes of its substantive antitrust analysis. As a result, FTC consent decrees may require us to make divestitures, even if the transaction is solely a Couche-Tard acquisition. Similarly, Couche-Tard, as the owner of our General Partner, may not support acquisitions that may result in overlaps between the target company and Couche-Tard assets. Further, the possibility of an extended FTC review, which may result in divestiture requests may render potential acquisitions uneconomic or put us at a disadvantage as compared to other bidders. In addition, FTC reviews are costly, potentially adding significant transaction costs, and may negatively impact or delay the execution of our acquisition strategy.

Volatility in crude oil and wholesale motor fuel costs affect our business, financial condition and results of operations and our ability to make distributions to unitholders.

For the year ended December 31, 2017,2021, motor fuel revenues accounted for 91% of our total revenues and motor fuel gross profit accounted for 41%54% of total gross profit. Wholesale motor fuel costs are directly related to, and fluctuate with, the price of crude oil. Volatility in the price of crude oil, and subsequently wholesale motor fuel prices, is caused by many factors, including general political, regulatory and economic conditions, acts of war, terrorism or terrorism,armed conflict, instability in oil producing regions, particularly in the Middle East and South America, and the value of U.S. dollars relative to other foreign currencies, particularly those of oil producing nations. In addition, the supplyof motor fuel and our wholesale purchase costs could be adversely affected in the event of a shortage or oversupply of product, which could result from, among other things, interruptions of fuel production at oil refineries, new supply sources, sustained increases or decreases in global demand or the fact that our motor fuel contracts do not guarantee an uninterrupted, unlimited supply of motor fuel.

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Significant increases and volatility in wholesale motor fuel costs could result in lower gross profit dollars, as an increase in the retail price of motor fuel could impact consumer demand for motor fuel and convenience merchandise and could result in lower wholesale motor fuel gross profit dollars. Dramatic increases in oil prices reduce retail motor fuel gross profits, because wholesale motor fuel costs typically increase faster than retailers are able to pass them along to customers. In addition, significant decreases in oil prices and the corresponding decreases in wholesale motor fuel sales prices can result in lower revenues and gross profit margins, as our wholesale motor fuel gross profits include discounts from our suppliers calculated as a percentage of the cost of wholesale motor fuel. As the market prices of crude oil, and, correspondingly, the market prices of wholesale motor fuel, experience significant and rapid fluctuations, we attempt to pass along wholesale motor fuel price changes to our customers through retail price changes; however, we are not always able to do so immediately. The timing of any related increase or decrease in sales prices is affected by competitive conditions in each geographic market in which we operate. As such, our revenues and gross profit for motor fuel can increase or decrease significantly and rapidly over short periods of time and potentially adversely impact our business, financial condition, results of operations and ability to make distributions to our unitholders. The volatility in crude oil and wholesale motor fuel costs and sales prices makes it extremely difficult to forecast future motor fuel gross profits or predict the effect that future wholesale costs and sales price fluctuations will have on our operating results and financial condition.

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Seasonality in wholesale motor fuel costs and sales, as well as merchandise sales, affect our business, financial condition and results of operations and our ability to make distributions to unitholders.

Oil prices, wholesale motor fuel costs, motor fuel sales volumes, motor fuel gross profits and merchandise sales often experience seasonal fluctuations. For example, consumer demand for motor fuel typically increases during the summer driving season and typically falls during the winter months. Travel, recreation and construction are typically higher in these months in the geographic areas in which we operate, increasing the demand for motor fuel and merchandise that we sell. Therefore, our revenues are typically higher in the second and third quarters of our fiscal year. A significant change in any of these factors, including a significant decrease in consumer demand (other than typical seasonal variations), could materially affect our motor fuel and merchandise volumes, motor fuel gross profit and overall customer traffic, which in turn could have a material adverse effect on our business, financial condition, results of operations and cash available for distribution to our unitholders.

Both the wholesale motor fuel distribution and the retail motor fuel industries are characterized by intense competition and fragmentation, and our failure to effectively compete could adversely affect our business, financial condition and results of operations and reduce our ability to make distributions to unitholders.

The markets for distribution of wholesale motor fuel and the sale of retail motor fuel are highly competitive and fragmented, which results in narrow margins. We have numerous competitors, and some may have significantly greater resources and name recognition than we do. We rely on our ability to provide value added reliable services and to control our operating costs to maintain our margins and competitive position. If we were to fail to maintain the quality of our services, any or all of our wholesale customers could choose alternative distribution sources and expected retail customers could purchase from other retailers, each decreasing our margins. Furthermore, there can be no assurance that major integrated oil companies will notmay decide to distribute their own products in direct competition with us, or that large wholesale customers will notmay attempt to buy directly from the major integrated oil companies. The occurrence of any of these events could have a material adverse effect on our business, results of operations and our ability to make distributions.distributions to our unitholders.

Changes in credit or debit card expenses could reduce our gross profit, especially on motor fuel sold at our company operatedcompany-operated retail sites.

A significant portion of our sales at our company operatedcompany-operated retail sites typically involve payment using credit or debit cards. We are assessed fees as a percentage of transaction amounts and not as a fixed dollar amount or percentage of our gross profits. Higher motor fuel prices result in higher credit and debit card expenses, and an increase in credit or debit card use or an increase in fees would have a similar effect. Therefore, credit and debit card fees charged on motor fuel purchases that are more expensive as a result of higher motor fuel prices are not necessarily accompanied by higher gross profits. In fact, such fees may cause lower gross profits. Lower gross profits on motor fuel sales caused by higher fees may decrease our overall gross profit and could have a material adverse effect on our business, financial condition, results of operations and cash available for distribution to our unitholders.

New entrants or increased competition in the convenience store industry could result in reduced gross profits.

At our company operated retail sites, we compete with numerous other convenience store chains, independent convenience stores, supermarkets, drugstores, discount warehouse clubs, motor fuel service stations, mass merchants, fast food operations and other similar retail outlets. In addition, several non-traditional retailers, including supermarkets and club stores, compete directly with convenience stores. An increase in competition from such competitors, or the entrance of additional competitors, could result in reduced gross profits and have a material adverse effect on our business, financial condition or results of operations.

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General economic, financial and political conditions that are largely out of our control could adversely affect our business, financial condition and results of operations and reduce our ability to make distributions to unitholders.

Recessionary economic conditions, higher interest rates, higher motor fuel and other energy costs, inflation, increases in commodityprices, higher levels of unemployment, higher consumer debt levels, higher tax rates and other changes in tax laws or other economic factors may affect consumer spending or buying habits, and could adversely affect the demand for motor fuel and convenience items we will sell at our retail sites. Unfavorable economic conditions, higher motor fuel prices and unemployment levels can affect consumer confidence, spending patterns and miles driven, with many customers “trading down” to lower priced products in certain categories when unfavorable conditions exist. These factors cancould lead to sales declines in both motor fuel and general merchandise, and in turn could have an adverse impact on our business, financial condition and results of operations.

A tightening of credit in the financial markets or an increase in interest rates may make it more difficult for wholesale customers and suppliers to obtain financing and, depending on the degree to which it occurs, there may because a material increase in the nonpayment or other nonperformance by our customers and suppliers. Even if our credit review and analysis mechanisms work properly, we may experience financial losses in our dealings with these third parties. A material increase in the nonpayment or other nonperformance by our wholesale customers and/or suppliers could adversely affect our business, financial condition, results of operations and cash available for distribution to our unitholders.

Examples of other general economic, financial and political risks include:

a general or prolonged decline in, or shocks to, regional or broader macro-economics;

regulatory changes that could impact the markets in which we operate, which could reduce demand for our goods and services or lead to pricing, currency, or other pressures; and

deflationary economic pressures, which could hinder our ability to operate profitably in view of the challenges inherent in making corresponding deflationary adjustments to our cost structure.

The nature of these types of risks, which are often unpredictable, makes them difficult to plan for, or otherwise mitigate, and they are generally uninsurable, which compounds their potential impact on our business. Any such event could have a material adverse effect on our business, financial condition, results of operations and cash available for distributions to our unitholders.

Terrorist attacks and threatened or actual war or armed conflict may adversely affect our business.

Our business is affected by general economic conditions and fluctuations in consumer confidence and spending, which can decline as a result of numerous factors outside of our control. Terrorist attacks or threats, whether within the United States or abroad, rumors or threats of war, actual conflicts involving the United States or its allies, or military or trade disruptions impacting our suppliers or our customers may adversely impact our operations. Specifically, strategic targets such as energy related assets may be at greater risk of future terrorist attacks than other targets in the United States. These occurrences could have an adverse impact on energy prices, including prices for motor fuels, and an adverse impact on our operations. Any or a combination of these occurrences could have a material adverse effect on our business, financial condition, results of operations and cash available for distribution to our unitholders.

Changes in consumer behavior and travel as a result of changing economic conditions, labor strikes or otherwise could adversely affect our business, financial condition and results of operations and reduce our ability to make distributions to unitholders.

In the retail motor fuel industry, customer traffic is generally driven by consumer preferences and spending trends, growth rates for commercial truck traffic and trends in travel and weather. Changes in economic conditions generally, or in the regions in

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which we operate, could adversely affect consumer spending patterns and travel in our markets. In particular, weakening economic conditions may result in decreases in miles driven and discretionary consumer spending and travel, which affect spending on motor fuel and convenience items. In addition, changes in the types of products and services demanded by consumers or labor strikes in the construction industry or other industries that employ customers who visit our stores,retail sites, may adversely affect our sales and gross profit. Additionally, negative publicity or perception surrounding motor fuel suppliers could adversely affect reputation and brand image, which may negatively affect our motor fuel sales and gross profit. Similarly, advanced technology and increased use of electric or hybrid cars or cars using alternative fuels would reduce demand for motor fuel. Our success depends on our ability to anticipate and respond in a timely manner to changing consumer demands and preferences while continuing to sell products and services that remain relevant to the consumer and thus will positivelygenerally have a positive impact overall merchandise gross profit.

Laws, regulations, technological, political18


Broad-based business or economic disruptions caused by the COVID-19 Pandemic, or other similar health crises, could adversely affect our business, financial condition, results of operations or cash available for distribution to our unitholders.

Global health concerns, such as the COVID-19 Pandemic, could result in social, economic and scientific developments regarding climate changelabor instability that adversely affect employee, customer, vendor, distribution channel and fuel efficiency may decrease demand for motorother business partner relationships, and in so doing could adversely affect our business, financial condition, results of operations and cash flows. For example, federal, state and local governmental actions restricting the ability of our customers to essential travel only, adversely impacts consumption of fuel.

Developments aimed at reducing greenhouse gas emissions’ contribution Sustained limitation on travel, or a general reluctance to climate change may decrease the demand or increase the cost for our major product, petroleum-based motor fuel. Attitudes toward this product and its relationshiptravel due to the environmentCOVID-19 Pandemic, adversely impacts our fuel volumes. Sustained fuel volume decreases and less foot traffic would adversely impact our dealer operated locations which could potentially pose increased credit risks or trigger a default under our fuel supply and lease agreements.

We do not have fleet operations but rely on common carriers to distribute and deliver our products. Although we have not experienced significant disruptions to date, if these distribution channels are adversely impacted by the COVID-19 Pandemic, delivery of our products could be jeopardized.

Although we have not experienced significant costs to date, we may significantly affectincur costs related to the implementation of prescribed safety protocols related to the COVID-19 Pandemic. With the April 14, 2020 closing of our effectivenessacquisition of retail and wholesale assets and the acquisition of certain assets from 7-Eleven in marketing our product2021, the Partnership now has 252 company operated sites. For example, we may incur substantial costs in connection with staffing impacted stores and sales. Government efforts to steer the public toward non-petroleum-based fuel dependent modesclosing and subsequent cleaning of transportation may fosterimpacted stores resulting from a negative perception toward motor fuel or increase costs for our product, thus affecting the public’s attitude toward our major product. New technologies that increase fuel efficiency or offer alternative vehicle power sources or laws or regulations to increase fuel efficiency, reduce consumption or offer alternative vehicle power sources may result in decreased demand for petroleum-based motor fuel.continued spread of COVID-19. We may also incur increased coststemporarily lose the services of employees or experience interruptions in our business which could lead to inefficiencies, interruptions in our regular operations and potential reputational harm. If we do not respond appropriately to the COVID-19 Pandemic or other similar health crises, or if customers do not perceive our response to be adequate for a particular region or our product, whichbusiness as a whole, we may not be able to pass alongcould suffer damage to our customers. These developmentsreputation, which could potentiallymaterially adversely affect our business, financial condition and results of operations in the future.

There can be no assurances that these and other scenarios resulting from the COVID-19 Pandemic, or other similar health crises, will not have a material and adverse effectimpact on our business, financial condition, results of operations or cash available for distribution to our unitholders. We are continuing to monitor this public health crisis and its impact on employees, customers, vendors, distribution channels and other business partners and the overall economic environment within the U.S. and worldwide, but we cannot presently predict the full scope and severity of the disruptions caused by the COVID-19 Pandemic on our business, financial condition, results of operations and cash available for distribution to our unitholders.

Future tobacco legislation, campaigns to discourage smoking, increased useA shortage of tobacco alternatives, increases in tobacco taxes and wholesale cost increases of tobacco products could adversely affect our business, financial condition and results of operations and reduce our ability to make distributions to unitholders.

Sales of tobacco products have historically accounted for a significant portion of our total sales of retail site merchandise. Increases in wholesale cigarette costs and tax increases on tobacco products, as well as future legislation, national and local campaigns to discourage smoking in the U.S., and increased use of tobacco alternatives such as electronic cigarettes, may have an adverse effect on the demand for tobacco products and therefore reduce our revenues and profits. Competitive pressures in our markets can make it difficult to pass price increases on to our customers. These factors could materially and adversely affect our retail price of cigarettes, cigarette unit volume and sales, merchandise gross profit and overall customer traffic. Reduced sales of tobacco products or smaller gross profits on the sales we makequalified labor could have a material adverse effect on our business financial condition,and results of operationsoperations.

Due in part to COVID-19 and cash available for distribution to our unitholders.

Currently, major cigarette manufacturers offer substantial rebates to retailers. We include these rebates as a componentgeneral macroeconomic factors, the Topper Group has experienced labor shortages in certain geographies. Outside suppliers that we rely on have also experienced shortages of qualified labor. The future success of our gross profit. Inoperations depends on our ability, and the event these rebates are no longer offered, or decreased,ability of third parties on which we rely, to identify, recruit, develop and retain qualified and talented individuals in order to supply and deliver our profit from cigarette sales willproducts. A prolonged shortage of qualified labor could decrease accordingly. In addition, reduced retail display allowances on cigarettes offered by cigarette manufacturers negatively affect gross profits. These factors could materially affectour ability to effectively operate our retail price of cigarettes, cigarette unit volumelocations, which would negatively impact our business and revenues, merchandise gross profit and overall customer traffic, which could in turn have a material adverse effect on our business, financial condition, results of operationsoperations. A shortage would also likely result in increased costs from higher overtime, the need to hire temporary help to meet demand, higher wage rates to attract and cash available for distributionretain employees, and higher costs to purchase raw materials or services from such third parties, all of which would negatively impact our unitholders.results of operations.

We are subject to extensive government laws and regulations concerning store merchandise items and operations, and the cost of compliance with such laws and regulations can be material.

Our business and properties are subject to extensive local, state and federal governmental laws and regulations relating to, among other things, environmental conditions, the sale of alcohol, tobacco and money orders, employment conditions, including minimum wage requirements, and public accessibility requirements. The cost of compliance with these laws and regulations can have a material adverse effect on our operating results and financial condition. In addition, failure to comply with local, state, provincial and federal laws and regulations to which our operations arewill be subject may result in penalties and costs that could adversely affect our business and our operating results.

In certain areas where our retail sites are located, state or local laws limit the retail sites’ hours of operation or their sale of alcoholic beverages, tobacco products, possible inhalants and lottery tickets, in particular to minors. Failure to comply with these laws could adversely affect our revenues and results of operations because these state and local regulatory agencies have the power to revoke, suspend or deny applications for and renewals of permits and licenses relating to the sale of these products or to seek other remedies, such as the imposition of fines or other penalties. Moreover, these laws may impact our sales volumes in general, as customers who purchase certain products such as alcoholic beverages typically buy other products when they shop. Laws that curtail the consumer’s ability to buy certain products at our retail sites may curtail consumer demand for other products that we sell.

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If a portion of our workforce were to create or become part of a labor union, we could be forced to increase our compensation levels in order to avoid work disruptions or stoppages. Any appreciable increase in the statutory minimum wage or unionization of our workforce could result in an increase in our labor costs and such cost increase, or the penalties for failing to comply with such statutory minimums, could adversely affect our business, financial condition, results of operations and cash available for distribution to our unitholders.

Further, the Affordable Care Act requires us to provide additional health insurance benefits to our employees, or health insurance coverage to additional employees, and has increased our costs and expenses.

Any changes in the laws or regulations described above that are adverse to us and our properties could affect our operating and financial performance. In addition, new regulations are proposed from time to time which, if adopted, could have a material adverse effect on our operating results and financial condition.

We are subject to extensive government laws and regulations concerning our employees, and the cost of compliance with such laws and regulations can be material.

Regulations related to wages and other compensation affect our business. Any appreciable increase in applicable employment laws and regulations, including the statutory minimum wage, exemption levels or overtime regulations could result in an increase in labor costs and such cost increase, or the penalties for failing to comply with such statutory minimums, could adversely affect our business, financial condition, results of operations and cash available for distribution to our unitholders.

Further, the Affordable Care Act and related reforms make and will continue to make sweeping and fundamental changes to the U.S. health care system. This requires us to provide additional health insurance benefits to the employees providing services to us, or health insurance coverage to additional employees, and as a result may increase our costs and expenses. In addition, we are directly and indirectly affected by new tax legislation and regulation and the interpretation of tax laws and regulations. This includes potential changes in tax laws or the interpretation of tax laws relating to incentive compensation such as profit interests.compensation. Changes in such legislation, regulation or interpretation could have an adverse effect on our incentive compensation structures, which could affect our ability to recruit, develop and therebyretain talented executives and could have a material adverse effect on our business, financial condition, results of operations and cash available for distribution to our unitholders.

Any changes in the employment, benefit plan, tax or labor laws or regulations described above or new regulations proposed from time to time, could have a material adverse effect on our employment practices, our business, financial condition, results of operations and cash available for distribution to our unitholders.

We are subject to extensive federal, state and local environmental laws, and the cost of complying with such laws may be material.

Our operations are subject to a variety of environmental laws and regulations, including those relating to emissions to the air (such as the federal Clean Air Act), discharges into water (such as the federal Clean Water Act), releases of hazardous and toxic substances and remediation of contaminated sites. Under various federal,sites (such as the Comprehensive Environmental Response Compensation and Liability Act of 1980 (“CERCLA”)), and similar state and local laws and regulations,regulations.

Under CERCLA, we may, as the owner or operator, be liable for the costs of removal or remediation of contamination at our current locations or our former locations, whether or not we knew of, or were responsible for, the presence of such contamination. In particular, as an owner and operator of motor fueling stations, we face risks relating to petroleum product contamination that other retail site operators not engaged in such activities would not face. The remediation costs and other costs required to clean up or treat contaminated sites could be substantial. Contamination on and from our current or former locations may subject us to liability to third parties or governmental authorities for injuries to persons, property or natural resources and may adversely affect our ability to sell or rent our properties or to borrow money using such properties as collateral.

In the U.S.,CERCLA also provides that persons who dispose of or arrange for the disposal or treatment of hazardous or toxic substances at third partythird-party sites may also be liable for the costs of removal or remediation of such substances at these disposal sites although such sites are not owned by such persons. Our currenthistoric and historiccurrent operation of many locations and the disposal of contaminated soil and groundwater wastes generated during cleanups of contamination at such locations could expose us to such liability.

WePursuant to the Resource Conservation and Recovery Act of 1976, as amended, the EPA has established a comprehensive regulatory program for the detection, prevention, investigation and cleanup of leaking underground storage tanks. State or local agencies are subject to extensive environmental lawsoften delegated the responsibility for implementing the federal program or developing and regulations regulating USTs and vapor recovery systems.implementing equivalent state or local regulations. Compliance with existing and future environmental laws regulating such tanks and systems may require significant expenditures. We pay fees to state “leaking UST” trust funds in states where they exist. These state trust funds are expected to pay or reimburse us for remediation expenses related to contamination associated with USTs subject to their jurisdiction. Such payments are always subject to a deductible paid by us, specified per incident caps and specified maximum annual payments, which vary among the funds.

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Additionally, such funds may have eligibility requirements that not all of our current or anticipated sites will meet. To the extent state funds or other responsible parties do not pay or delay payments for remediation, we will be obligated to make these payments, which, in the aggregate, could have a material adverse effect on our business, financial condition, results of operations and cash available for distribution to our unitholders. We can give no assurance that these funds or responsible third parties are or will continue to remain viable.

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Motor fuel operations present risks of soil and groundwater contamination. In the future, we may incur substantial expenditures for remediation of contamination that has not been discovered at existing locations or locations which we may acquire. We regularly monitor our facilities for environmental contamination and record liabilities on our financial statements to cover potential environmental remediation and compliance costs when probable to occur and reasonably estimable. However, we can make no assurance that the liabilities we have recorded are the only environmental liabilities relating to our current and former locations, that material environmental conditions not known to us do not exist, that future laws or regulations will not impose material environmental liability on us or that our actual environmental liabilities will not exceed our reserves. In addition, failure to comply with any environmental regulations, including the Clean Air Act, the Clean Water Act or CERCLA, or an increase in regulations could have a material adverse effect on our business, financial condition, results of operations and cash available for distribution to our unitholders.

Laws, regulations, technological, political and scientific developments regarding climate change and fuel efficiency may decrease demand for motor fuel.

Developments aimed at reducing greenhouse gas emissions’ contribution to climate change may decrease the demand or increase the cost for our major product, petroleum-based motor fuel. Attitudes toward this product and its relationship to the environment may significantly affect our effectiveness in marketing our product and sales. Efforts to steer the public toward non-petroleum-based fuel dependent modes of transportation may foster a negative perception toward motor fuel or increase costs for our product, thus affecting the public’s attitude toward our primary product. New technologies that increase fuel efficiency or offer alternative vehicle power sources or laws or regulations to increase fuel efficiency, reduce consumption or offer alternative vehicle power sources may result in decreased demand for petroleum-based motor fuel. A number of new legal incentives, regulatory requirements and executive initiatives, including the Clean Power Plan (“CPP”), the Affordable Clean Energy (“ACE”) rule that the Environmental Protection Agency (the “EPA”) has proposed to replace the CPP, and various government subsidies such as the extension of certain tax credits for renewable energy, have made these alternative forms of energy more competitive. We may also incur increased costs for our product, which we may not be able to pass along to our customers. These developments could potentially have a material adverse effect on our business, financial condition, results of operations and cash available for distribution to our unitholders.

Changes 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.

The previous U.S. presidential administration indicated its intent to adopt a new approach to trade policy. For example, in 2018, the U.S. government reached a new trade agreement with the Canadian and Mexican governments to replace the North America Free Trade Agreement with the United States-Mexico-Canada Agreement.

The U.S. also initiated tariffs on certain foreign goods and has raised the possibility of imposing significant, additional tariff increases or expanding the tariffs to capture other types of goods. In response, certain foreign governments imposed retaliatory tariffs on goods that their countries import from the U.S.

Changes in U.S. trade policy, including due to the change in the U.S. presidential administration, could result in one or more foreign governments adopting responsive trade policies that make it more difficult or costly for us to do business in or import our products from those countries. This in turn could require us to increase prices to our customers, which may reduce demand, or, if we are unable to increase prices, result in lowering our margin on products sold.

We cannot predict the extent to which the U.S. or other countries will impose quotas, duties, tariffs, taxes or other similar restrictions upon the import or export of our products in the future, nor can we predict future trade policy or the terms of any renegotiated trade agreements and their impact on our business. The adoption and expansion of trade restrictions, the occurrence of a trade war, or other governmental action related to tariffs or trade agreements or policies has the potential to adversely impact demand for our products, our costs, our customers, our suppliers, and the U.S. economy, which in turn could have a material adverse effect on our business, operating results and financial condition.

Unfavorable weather conditions could adversely affect our business, financial condition and results of operations and reduce our ability to make distributions to unitholders.

Our company operated retail sites are located in regions throughout the U.S. that are susceptible to certain severe weather events, , such as hurricanes, flooding, severe thunderstorms, snowstorms, tornadoes and extreme heat and cold. Inclement weather conditions could damage our facilities, our suppliers or could have a significant impact on consumer behavior, travel and retail site traffic patterns as well as our ability to operate our retail sites. We could also be affected by regional occurrences, such as energy shortages or increases in energy prices, fires or other natural disasters. Besides these more obvious consequences of severe weather,Further, our ability to insure these locations and the related cost of such insurance coverage could have a material adverse effect on our business, financial condition, results of operations and cash available for distribution to our unitholders.


Additionally, many studies have discussed the relationship between GHG emissions and climate change. One consequence of climate change noted in many of these reports is the increased severity of extreme weather, such as increased hurricanes and floods. Such events could adversely affect our operations through water damage, powerful winds or increased costs for insurance. Climate change also continues to attract considerable public and scientific attention. Litigation has been filed against companies in the energy industry related to climate change. Should such suits succeed, we could face additional compliance costs or litigation risks.

We could be adversely affected if we are not able to attract and retain a strong management team.

We are dependent on our ability to attract and retain a strong management team. If, for any reason, we are not able to attract and retain qualified senior personnel, our business, financial condition, results of operations and cash flows could be adversely affected. We also are dependent on our ability to recruit qualified retail site and field managers. Failure to attract and retain these individuals at reasonable compensation levels could have a material adverse effect on our business, financial condition, results of operations and cash available for distribution to our unitholders.

We depend on threefour principal suppliers for the majority of our motor fuel. A disruption in supply or a change in our relationship with any one of them could adversely affect our business, financial condition and results of operations and reduce our ability to make distributions to unitholders.

ExxonMobil, BP and Motiva collectively supplied approximately 71% of our motor fuel purchases in 2017. WeIn 2021, we purchased approximately 28%37%, 27%22%, 11% and 16%10% of our motor fuel from ExxonMobil, BP, Motiva and Motiva,Marathon, respectively. A change of motor fuel suppliers, a disruption in supply or a significant change in pricing with any of these suppliers could have a material adverse effect on our business, financial condition, results of operations and cash available for distribution to our unitholders.

Negative events or developments associated with our branded suppliers could have an adverse impact on our revenues.

We believe that the success of our operations is dependent, in part, on the continuing favorable reputation, market value, and name recognition associated with the branded motor fuel sold through our wholesale segment and retail segment. Erosion of the value of those brands could have an adverse impact on the volumes of motor fuel we distribute, which in turn could have a material adverse effect on our business, financial condition, results of operations and ability to make distributions to our unitholders.

We rely on our suppliers to provide trade credit terms to adequately fund our on-goingongoing operations.

Our business is impacted by the availability of trade credit to fund motor fuel purchases and inventory purchases of our retail sites. An actual or perceived downgrade in our liquidity or operations could cause our suppliers to seek credit support in the form of additional collateral, limit the extension of trade credit or otherwise materially modify their payment terms. Any material changes in the payments terms, including payment discounts, or availability of trade credit provided by our principal suppliers, could have a material adverse effect on our business, financial condition, results of operations and cash available for distribution to our unitholders.

20We could be adversely affected by the creditworthiness and performance of our customers, suppliers and contract counterparties.

We are exposed to risk related to the creditworthiness and performance of our customers, suppliers and contract counterparties. As of December 31, 2021, we had outstanding accounts receivable totaling $34.5 million. This amount primarily consisted of vendor rebates due from our suppliers, credit card receivables, receivables arising from the sale of fuel and other products to independent franchised or licensed fuel station operators as well as amounts receivable from other industrial and commercial clients. Contracts with longer payment cycles or difficulties in enforcing contracts or collecting accounts receivable could lead to material fluctuations in our cash flows and could adversely impact our business, financial condition and results of operations.

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Pending or future litigation could adversely affect our financial condition and results of operations. Litigation and publicity concerning motor fuel or food quality, health and other issues could result in significant liabilities or litigation costs and cause consumers to avoid our retail sites.

Retail site businesses can be adversely affected by litigation and complaints from customers or government agencies resulting from motor fuel or food quality, illness or other health or environmental concerns or operating issues stemming from one or more locations. Additionally, we may become a party to litigation pertaining to individual personal injury, off-specification motor fuel, productsproduct liability, consumer protection act,laws, contract disputes, wage and hour unemployment claims and other legal actions in the ordinary course of our business and we are occasionally exposed to industry-wide or class-action claims arising from the products we carry or industry-specific business practices. Adverse publicity about these allegations may negatively affect us, regardless of whether the allegations are true, by discouraging customers from purchasing motor fuel, merchandise or food at one or more of our retail sites. We could also incur significant liabilities if a lawsuit or claim results in a decision against us. Even if we are successful in defending such litigation, our litigation costs could be significant, and the litigation may divert time and money away from our operations and adversely affect our performance. Our defense costs and any resulting damage awards may not be fully covered by our insurance policies.

The dangers inherent in the storage and transport of motor fuel could cause disruptions and could expose us to potentially significant losses, costs or liabilities.

We store motor fuel in storage tanks at our retail sites. These operations are subject to significant hazards and risks inherent in storing and transporting motor fuel. These hazards and risks include, but are not limited to, fires, explosions, traffic accidents, spills, discharges and other releases, any of which could result in distribution difficulties and disruptions, environmental pollution, governmentally imposed fines or cleanup obligations, personal injury or wrongful death claims and other damage to our properties and the properties of others. Any such event

We are not fully insured against all risks incident to our business. We may be unable to maintain or obtain insurance of the type and amount we desire at reasonable rates. As a result of market conditions, premiums and deductibles for certain of our insurance policies have increased and could escalate further. In some instances, certain insurance could become unavailable or available only for reduced amounts of coverage. If we were to incur a significant liability for which we were not fully insured, it could have a material adverse effect on our business, financial condition, results of operations and cash available for distribution to our unitholders.

We depend on third partythird-party transportation providers for the transportation of substantially all of our motor fuel. Thus, a significant change or shortage of drivers and/or providers or a significant change in our relationship or commercial terms with any of these providers could adversely affect our business, financial condition and results of operations and reduce our ability to make distributions to unitholders.

Substantially allAll of the motor fuel we distribute is transported from motor fuel terminals to gas stations by third partythird-party carriers. A change or shortage of transportation providers, a disruption in service or a significant change in our relationship or commercial terms with any of these transportation carriers could have a material adverse effect on our business, financial condition, results of operations and cash available for distribution to our unitholders.

We are subject to federal, state and local laws and regulations that govern the product quality specifications of the motor fuel that we distribute and sell.

Various federal, state and local agencies have the authority to prescribe specific product quality specifications to the sale of commodities. Changes in product quality specifications, such as reformulated fuels mandates, reduced sulfur content in refined petroleum products or other more stringent requirements for fuels, could reduce our ability to procure productproducts and result in a decrease to our sales volume, require us to incur additional handling costs, and/or require the expenditure of capital. If we are unable to procure product or to recover these costs through increased sales, our ability to meet our financial obligations could be adversely affected. Failure to comply with these regulations could result in substantial penalties.

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Our motor fuel sales in our Wholesalewholesale segment are generated under contracts that must be renegotiated or replaced periodically. If we are unable to successfully renegotiate or replace these contracts, then our business, financial condition and results of operations and ability to make distributions to unitholders could be adversely affected.

Our Wholesalewholesale segment’s motor fuel sales are generated under contracts that must be periodically renegotiated or replaced. We may be unable to renegotiate or replace these contracts when they expire, and the terms of any renegotiated contracts may not be as favorable as the contracts they replace. Whether these contracts are successfully renegotiated or replaced is often times subject to factors beyond our control. Such factors include fluctuations in motor fuel prices, counterparty ability to pay for or accept the contracted volumes and a competitive marketplace for the services offered by us. If we cannot successfully renegotiate or replace our contracts or must renegotiate or replace them on less favorable terms, sales from these arrangements could decline, which could have a material adverse effect on our business, financial condition, results of operations and cash available for distribution to our unitholders.

Further, we have contracts with certain multi-site lessee dealers including DMS, that provide for the ability for each party to sever or recapture a certain number of sites from the contract. If sites are severed, we will needseek to replace the dealer, andbut it is possible that the agreement with theany new dealer may not provide for an equivalent fuel margin and/or rental income stream, which could have a material adverse effect on our business, financial condition, results of operations and cash available for distribution to our unitholders. It is also possible that we will operate the site until the dealer is replaced or indefinitely.

We rely on our ITinformation technology systems and network infrastructure to manage numerous aspects of our business, and a disruption of these systems could adversely affect our business, financial condition and results of operations and reduce our ability to make distributions to unitholders.

We depend on our ITinformation technology (“IT”) systems and network infrastructure to manage numerous aspects of our business and provide analytical information to management. These systems are an essential component of our business and growth strategies, and a serious disruption to them could significantly limit our ability to manage and operate our business efficiently. These systems aremay be vulnerable to, among other things, damage and interruption from power loss or natural disasters, computer system and network failures, loss of telecommunications services, physical and electronic loss of data, security breaches and computer viruses, which could result in a loss of sensitive business information, systems interruption or the disruption of our business operations. To protect against unauthorized access or attacks, we have implemented infrastructure protection technologies and disaster recovery plans, but there can be no assurance that a technology systems breach or systems failure, couldwhich may nonetheless occur and go undetected, will not have a material adverse effect on our business, financial condition, results of operations and cash available for distribution to our unitholders.

Our business and our reputation could be adversely affected by the failure to protect sensitive customer, employee or vendor data, whether as a result of cyber security attacks or otherwise, or to comply with applicable regulations relating to data security and privacy.

In the normal course of our business as a motor fuel and merchandise retailer, we obtain large amounts of personal data, including credit and debit card information from our customers. While we have invested significant amounts in the protection of our IT systems and maintain what we believe are adequate security controls over individually identifiable customer, employee and vendor data provided to us, a breakdown or a breach in our systems that results in the unauthorized release of individually identifiable customer or other sensitive data could nonetheless occur.

Cyber attacksCyber-attacks are rapidly evolving and becoming increasingly sophisticated. A successful cyber attackcyber-attack resulting in the loss of sensitive customer, employee or vendor data could adversely affect our reputation, results of operations, financial condition and liquidity, and could result in litigation against us or the imposition of penalties. Moreover, a security breach could require that we expend significant additional resources to further upgrade further the security measures that we employ to guard against cyber attacks.cyber-attacks.

Further, complying with continually evolving regulations associated with the protection of credit and debit card information is costly and taking these measures does not necessarily provide an offsetting financial benefit to us. Failure to comply with these regulations could causesubject us or our dealers to be requiredfines or other regulatory sanctions (potentially including discontinuing operations) and potentially to discontinue operating.lawsuits. Additionally, if we acquire a company that has violated or is not in compliance with applicable data protection laws, we may incur significant liabilities and penalties as a result. The cost of compliance and the ramifications of non-compliance could have a material adverse effect on our business, financial condition, results of operations and cash available for distribution to our unitholders.

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Our debt levels and debt agreement covenants may limit our flexibility in obtaining additional financing and in pursuing other business opportunities.

We have a significant amount of debt. AtAs of December 31, 2017,2021, we had $534.0$630.6 million of total debt and $37.3$112.7 million of availability under theour revolving credit facility. Our credit agreement requires, among other things, that we have, after giving effect to any acquisition, at least $20.0CAPL Credit Facility and $182.5 million in the aggregate, of borrowingtotal debt and $16.7 million of availability under the revolving credit facility and unrestricted cash on the balance sheet on the date of such acquisition.our JKM Credit Facility. Our level of indebtedness could have important consequences to us, including the following:

our ability to obtain additional financing, if necessary, for working capital, capital expenditures, acquisitions or other purposes may be impaired or such financing may not be available on favorable terms;

our ability to obtain additional financing, if necessary, for working capital, capital expenditures, acquisitions or other purposes may be impaired, or such financing may not be available on favorable terms;

covenants contained in our credit facility will require us to meet financial tests that may affect our flexibility in planning for and reacting to changes in our business, including possible acquisition opportunities;

covenants contained in our credit facilities will require us to meet financial tests that may affect our flexibility in planning for and reacting to changes in our business, including possible acquisition opportunities;

we will need a substantial portion of our cash flow to make interest payments on our indebtedness, reducing the funds that would otherwise be available for operations, future business opportunities and distributions to unitholders;

we will need a substantial portion of our cash flow to make interest payments on our indebtedness, reducing the funds that would otherwise be available for operations, future business opportunities and distributions to unitholders;

our debt level will make us more vulnerable than our competitors with less debt to competitive pressures or a downturn in our business or the economy generally; and

our debt level will make us more vulnerable than our competitors with less debt to competitive pressures or a downturn in our business or the economy generally; and

our debt level may limit our flexibility in responding to changing business and economic conditions.

our debt level may limit our flexibility in responding to changing business and economic conditions.

Our ability to service our indebtedness will depend upon, among other things, our future financial and operating performance, which willmay be affected by prevailing economic conditions and financial, business, regulatory and other factors, some of which are beyond our control. If our operating results are not sufficient to service our current or future indebtedness, we will be forced to take actions, such as reducing distributions, reducing or delaying our business activities, acquisitions, investments and/or capital expenditures, selling assets, restructuring or refinancing our indebtedness, or seeking additional equity capital or bankruptcy protection. We may not be able to effectaffect any of these actions on satisfactory terms, or at all.

An increase in interest rates may cause the market price of our common units to decline and a significant increase in interest rates could adversely affect our ability to service our indebtedness.

Like all equity investments, an investment in our common units is subject to certain risks. Borrowings under the credit facilities bear interest at variable rates, subject to interest rate swap contracts we entered into to hedge future changes in variable rates. If market interest rates increase, such variable-rate debt will create higher debt service requirements, which could adversely affect our cash flow and ability to make cash distributions. In exchange for accepting these risks, investors may expect to receive a higher rate of return than would otherwise be obtainable from lower-risk investments. Accordingly, as interest rates rise, the ability of investors to obtain higher risk-adjusted rates of return by purchasing government-backed debt securities may cause a corresponding decline in demand for riskier investments generally, including yield-based equity investments such as publicly traded limited partnership interests. Reduced demand for our common units resulting from investors seeking other more favorable investment opportunities may cause the trading price of our common units to decline.

The interest rate on our credit facilities is variable; therefore, we have exposure to movements in interest rates, subject to our interest rate swap contracts. A significant increase in interest rates could adversely affect our ability to service our indebtedness. The increased cost could make the financing of our business activities more expensive. These added expenses could have an adverse effect on our financial condition, results of operations and cash available for distribution to our unitholders.

LIBOR, the interest rate benchmark used as a reference rate on our variable rate credit facilities, began to be phased out after December 31, 2021, and the publication of certain remaining LIBOR settings is scheduled to cease after June 30, 2023. At this time, no consensus exists as to what rate or rates will become accepted alternatives to LIBOR, although the U.S. Federal Reserve, in connection with the Alternative Reference Rates Committee, a steering committee comprised of large U.S. financial institutions, has identified the Secured Overnight Financing Rate (“SOFR”) as its preferred replacement for U.S. dollar LIBOR. SOFR is a more generic measure than LIBOR and considers the cost of borrowing cash overnight, collateralized by U.S. Treasury securities. Given the inherent differences between LIBOR and SOFR or any other alternative benchmark rate that may be established, there are many uncertainties regarding a transition from LIBOR, including but not limited to the need to amend all contracts with LIBOR as the referenced rate and how this will impact the Partnership’s cost of variable rate debt. The Partnership will also need to consider new contracts and if they should reference an alternative benchmark rate or include suggested fallback language, as published by the Alternative Reference Rates Committee. The consequences of these developments with respect to LIBOR cannot be entirely predicted and span multiple future periods but could result in an increase in the cost of our variable rate debt, which may be detrimental to our financial position or operating results.

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Our credit facility containsfacilities contain operating and financial restrictions that may limit our business, financing activities and ability to make distributions to unitholders.

The operating and financial restrictions and covenants in our credit facilityfacilities and any future financing agreements could adversely affect our ability to finance future operations or capital needs or to engage, expand or pursue our business activities. For example, our credit facilityfacilities may restrict our ability to:

make distributions if any potential default or event of default occurs;

make distributions if any potential default or event of default occurs;

incur additional indebtedness, including the issuance of certain preferred equity interests, or guarantee other indebtedness;

incur additional indebtedness, including the issuance of certain preferred equity interests, or guarantee other indebtedness;

grant liens or make certain negative pledges;

grant liens or make certain negative pledges;

make certain advances, loans or investments;

make certain advances, loans or investments;

make any material change to the nature of our business, including mergers, consolidations, liquidations and dissolutions;

make any material change to the nature of our business, including mergers, consolidations, liquidations and dissolutions;

make certain capital expenditures in excess of specified levels;

make certain capital expenditures in excess of specified levels;

acquire another company;

acquire another company;

enter into a sale-leaseback transaction or certain sales or leases of assets;

enter into a sale-leaseback transaction or certain sales or leases of assets;

enter into certain affiliate transactions; or

enter into certain affiliate transactions; or

make certain repurchases of equity interests.

make certain repurchases of equity interests.

Our credit facility will limitCAPL Credit Facility limits our ability to pay distributions upon the occurrence of the following events, among others:

failure to pay any principal when due or failure to pay any interest, fees or other amounts owing under our credit facility when due, subject to any applicable grace period;

failure to pay any principal when due or failure to pay any interest, fees or other amounts owed under our credit facility when due, subject to any applicable grace period;

failure of any representation or warranty in our credit agreement to be true and correct, and the failure of any representation or warranty in any other agreement delivered in connection with our credit facility to be true and correct in any material respect;

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failure of any representation or warranty in our credit agreement to be true and correct, and the failure of any representation or warranty in any other agreement delivered in connection with our credit facility to be true and correct in any material respect;

failure to perform or otherwise comply with the covenants in our credit facility or in other loan documents beyond the applicable notice and grace period;

any default in the performance of any obligation or condition beyond the applicable grace period relating to any other indebtedness of more than $7.5 million;

any default in the performance of any obligation or condition beyond the applicable grace period relating to any other indebtedness of more than certain thresholds;

failure of the lenders to have a perfected first priority security interest in the collateral pledged by any loan party;

failure of the lenders to have a perfected first priority security interest in the collateral pledged by any loan party;

the entry of one or more judgments in excess of $20.0 million, to the extent any payments pursuant to the judgment are not covered by insurance;

the entry of one or more judgments in excess of certain thresholds, to the extent any payments pursuant to the judgment are not covered by insurance;

a change in ownership control of us or our General Partner;

a change in ownership or control of our General Partner or us;

a violation of the Employee Retirement Income Security Act of 1974, or “ERISA”; and

a violation of the Employee Retirement Income Security Act of 1974, or “ERISA”; and

a bankruptcy or insolvency event involving us or any of our subsidiaries.

a bankruptcy or insolvency event involving us or any of our subsidiaries.

Our ability to comply with the covenants and restrictions contained in our credit facilityfacilities may be affected by events beyond our control, including prevailing economic, financial and industry conditions. If market or other economic conditions deteriorate, our ability to comply with these covenants may be impaired. If we violate any of the restrictions, covenants, ratios or tests in our credit facility,facilities, the debt issued under the credit facilityfacilities may become immediately due and payable, and our lenders’ commitment to makefurther loans to us may terminate. We might not have, or be able to obtain, sufficient funds to make these accelerated payments. In addition, our obligations under our credit facilityfacilities will be secured by substantially all of our assets, and if we are unable to repay our indebtedness under our credit facility,facilities, the lenders could seek to foreclose on such assets.

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We do not own all of the land on which our retail sites and certain facilities are located, which could result in increased costs and disruptions to our operations.

We do not own all of the land on which our retail sites and certain facilities are located, and we lease a portion of such sites from third parties under long-term arrangements with various expiration dates. As such, we are subject to the possibility that we are unable to renew such leases or are only able to do so with increased costs or more onerous terms, which could have a material adverse effect on our business, financial condition, results of operations and cash available for distribution to our unitholders.

We may not be able to lease sites we own or sub-lease sites we lease on favorable terms and any such failure could adversely affect our business, financial condition and results of operations and reduce our ability to make distributions to unitholders.

We may lease and/or sub-lease certain sites to lessee dealers or commission agents Circle K or to DMS where the rent expense is more than the lease payments. If we are unable to obtain tenants on favorable terms for sites we own or lease, the lease payments we receive may not be adequate to cover our rent expense for leased sites and may not be adequate to ensure that we meet our debt service requirements. We cannot provide any assurance that the margins on our wholesale distribution of motor fuels to these sites will be adequate to off-setoffset unfavorable lease terms. The occurrence of these events could have a material adverse effect on our business, financial condition, results of operations and cash available for distribution to our unitholders.

The operations at sites we own or lease are subject to inherent risk, operational hazards and unforeseen interruptions and insurance may not adequately cover any such exposure. The occurrence of a significant event or release that is not fully insured could adversely affect our business, financial condition and results of operations and reduce our ability to make distributions to unitholders.

The presence of flammable and combustible products at our sites provides the potential for fires and explosions that could destroy both property and human life. Furthermore, our operations are subject to unforeseen interruptions such as natural disasters, adverse weather and other events beyond our control. Motor fuels also have the potential to cause environmental damage if improperly handled or released. If any of these events were to occur, we could incur substantial losses and/or curtailment of related operations because of personal injury or loss of life, severe damage to and destruction of property and equipment, and pollution or other environmental damage.

We are not fully insured against all risks incident to our business. We may be unable to maintain or obtain insurance of the type and amount we desire at reasonable rates. As a result of market conditions, premiums and deductibles for certain of our insurance policies have increased and could escalate further. In some instances, certain insurance could become unavailable or available only for reduced amounts of coverage. If we were to incur a significant liability for which we were not fully insured, it could have a material adverse effect on our business, financial condition, results of operations and cash available for distribution to our unitholders.

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We are relyingrely on DMI to indemnify us for any costs or expenses that we incur for environmental liabilities and third-party claims, regardless of when a claim is made, that are based on environmental conditions in existence prior to the closing of the IPO at our Predecessor’sPredecessor Entity’s sites. To the extent escrow accounts, insurance and/or payments from DMI are not sufficient to cover any such costs or expenses, our business, financial condition and results of operations and ability to make distributions to unitholders could be adversely affected.

The AmendedCircle K Omnibus Agreement provides that DMI must indemnify us for any costs or expenses that we incur for environmental liabilities and third-party claims, regardless of when a claim is made, that are based on environmental conditions in existence prior to the closing of the IPO at our Predecessor’sPredecessor Entity’s sites. Such indemnification survives the termination of the Circle K Omnibus Agreement. DMI is the beneficiary of escrow accounts created to cover the cost to remediate certain environmental liabilities. In addition, DMI maintains insurance policies to cover environmental liabilities and/or, where available, participates in state programs that may also assist in funding the costs of environmental liabilities. There are certain sites that were acquired by us in connection with the IPO with existing environmental liabilities that are not covered by escrow accounts, state funds or insurance policies. As of December 31, 2017, DMI had an aggregate of approximately $1.7 million of environmental liabilities on sites acquired by us that are not covered by escrow accounts, state funds or insurance policies. To the extent escrow accounts, insurance and/or payments from DMI are not sufficient to cover any such costs or expenses, our business, liquidity and results of operations could be adversely affected.

We rely on Circle K to indemnify us for any costs or expenses that we incur for environmental liabilities and third-party claims, regardless of when a claim is made, that are based on environmental conditions in existence prior to the closing of the asset exchanges with Circle K and the CST Fuel Supply Exchange. To the extent escrow accounts, insurance and/or payments from Circle K are not sufficient to cover any such costs or expenses, our business, financial condition and results of operations and ability to make distributions to unitholders could be adversely affected.

The Asset Exchange Agreement and related agreements provide that Circle K must indemnify us for any costs or expenses that we incur for environmental liabilities and third-party claims, regardless of when a claim is made, that are based on environmental conditions in existence prior to the closing of the asset exchanges with Circle K and the CST Fuel Supply Exchange. Such indemnification survives the termination of the Circle K Omnibus Agreement. Circle K is the beneficiary of escrow accounts created to cover the cost to remediate certain environmental liabilities. In addition, Circle K maintains insurance policies to cover environmental liabilities and/or, where available, participates in state programs that may also assist in funding the costs of environmental liabilities. To the extent escrow accounts, insurance and/or payments from Circle K are not sufficient to cover any such costs or expenses, our business, liquidity and results of operations could be adversely affected.

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Risks Inherent in an Investment in Usour Structure

Couche-TardThe Topper Group controls us and may have conflicts of interest with us.

Couche-Tard controls and manages the operations and activities of the Partnership, including the election of our Board; decisions regarding mergers, consolidations or acquisitions, the sale of all or substantially all of our assets and other matters affecting our capital structure; and other significant decisions that could impact our financial results and the amount of cash available for distribution to our unitholders. In addition, Couche-Tard may compete directly with us for future acquisitions, which may conflict with our core strategy to grow our business and increase distributions to unitholders. As long as Couche-Tard owns all of the membership interests in the sole member of our General Partner, it will effectively control our decisions, operations and activities.

Couche-Tard owns all of the membership interests in the sole member of our General Partner, which has sole responsibility for conducting our business and managing our operations. Our General Partner and its affiliates, including Couche-Tard,the Topper Group, may have conflicts of interest with us and limited fiduciary duties and they may favor their own interests to the detriment of usour unitholders and our unitholders.us.

Couche-Tard ownsThe Topper Group controls the sole member of and controls our General Partner and therefore has the ability to appoint all of the directors of our Board. Although our General Partner has a legal duty to manage us in good faith, the General Partner and its executive officers (as employees of affiliates of Couche-Tard)the Topper Group) have a fiduciary duty to manage our General Partner in a manner beneficial to its owner, Couche-Tard.the Topper Group. Furthermore, certain officers of our General Partner are directors of our Board or officers of affiliates of our General Partner. Therefore, conflicts of interest may arise between us and our unitholders, on the one hand, and our General Partner and its affiliates, including Couche-Tard,the Topper Group, on the other hand. In resolving these conflicts of interest, under the Partnership Agreement, our General Partner may favor its own interests and the interests of Couche-Tardthe Topper Group over our interests and the interests of our common unitholders. These conflicts include the following situations, among others:

our General Partner is allowed to take into account the interests of parties other than us, such as Couche-Tard, in resolving conflicts of interest, which has the effect of limiting its fiduciary duty to our unitholders;

our General Partner is allowed to take into account the interests of parties other than us, such as the Topper Group, in resolving conflicts of interest, which has the effect of limiting its fiduciary duty to our unitholders;

neither our Partnership Agreement nor any other agreement requires Couche-Tard to pursue a business strategy that favors us;

officers of our General Partner who provide services to us may devote time to affiliates of our General Partner and may be compensated for services rendered to such affiliate;

our Partnership Agreement limits the liability of and reduces fiduciary duties owed by our General Partner and also restricts the remedies available to unitholders for actions that, without the limitations, might constitute breaches of fiduciary duty;

except in limited circumstances, our General Partner has the power and authority to conduct our business without unitholder approval;

our General Partner determines the amount and timing of asset purchases and sales, borrowings, issuances of additional partnership securities and the creation, reductions or increases of cash reserves, each of which can affect the amount of cash that is available for distribution to our unitholders, and to the holders of the IDRs;

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neither our Partnership Agreement nor any other agreement requires the Topper Group to pursue a business strategy that favors us;

officers of our General Partner who provide services to us may devote time to affiliates of our General Partner and may be compensated for services rendered to such affiliate;

our Partnership Agreement limits the liability of and reduces fiduciary duties owed by our General Partner and also restricts the remedies available to unitholders for actions that, without the limitations, might constitute breaches of fiduciary duty;

except in limited circumstances, our General Partner has the power and authority to conduct our business without unitholder approval;

our General Partner determines the amount and timing of asset purchases and sales, borrowings, issuances of additional partnership securities and the creation, reductions or increases of cash reserves, each of which can affect the amount of cash that is available for distribution to our unitholders;

our General Partner determines the amount and timing of any capital expenditures and whether a capital expenditure is classified as a maintenance capital expenditure, which reduces operating surplus. Such determination can affect the amount of cash available for distribution to our unitholders and to the holders of the IDRs;unitholders;

our General Partner may cause us to borrow funds in order to permit the payment of cash distributions, even if the purpose or effect of the borrowing is to make incentive distributions;

our General Partner may cause us to borrow funds in order to permit the payment of cash distributions, even if the purpose or effect of the borrowing is to make incentive distributions;

our Partnership Agreement permits us to distribute up to $15 million as operating surplus, even if it is generated from asset sales, non-working capital borrowings or other sources that would otherwise constitute capital surplus. This cash may be used to fund distributions on the IDRs;

our Partnership Agreement permits us to distribute up to $15 million as operating surplus, even if it is generated from asset sales, non-working capital borrowings or other sources that would otherwise constitute capital surplus;

our Partnership Agreement does not restrict our General Partner from causing us to pay it or its affiliates for any services rendered to us or entering into additional contractual arrangements with its affiliates on our behalf;

our Partnership Agreement does not restrict our General Partner from causing us to pay it or its affiliates for any services rendered to us or entering into additional contractual arrangements with its affiliates on our behalf;

our General Partner intends to limit its liability regarding our contractual and other obligations;

our General Partner intends to limit its liability regarding our contractual and other obligations;

our General Partner may exercise its right to call and purchase our common units if it and its affiliates own more than 80% of our common units;

our General Partner may exercise its right to call and purchase our common units if it and its affiliates own more than 80% of our common units;

our General Partner controls the enforcement of obligations that it and its affiliates owe to us;

our General Partner controls the enforcement of obligations that it and its affiliates owe to us; and

our General Partner decides whether to retain separate counsel, accountants or others to perform services for us;

the holders of our IDRs may transfer their IDRs without unitholder approval; and

our General Partner may elect to cause us to issue common units to the holders of our IDRs in connection with a reset of the target distribution levels related to the IDRs without the approval of the independent conflicts committee of the Board or the unitholders. This election may result in lower distributions to the common unitholders in certain situations.

our General Partner decides whether to retain separate counsel, accountants or others to perform services for us.

Couche-TardThe Topper Group or the Board may modify or revoke our cash distribution policy at any time at their discretion. Our Partnership Agreement does not require us to pay any distributions at all.

The Board has adopted a cash distribution policy pursuant to which we intend to distribute quarterly an amount at least equal to the minimum quarterly distribution of $0.4375 per unit on all of our units to the extent we have sufficient cash from our operations after the establishment of reserves and the payment of our expenses. However, Couche-Tard,the Topper Group, as the owner of our General Partner, or the Board may change such policy at any time at their discretion and could elect not to pay distributions for one or more quarters. In addition, our credit facilitythe CAPL Credit Facility includes specified restrictions on our ability to make distributions.

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Our Partnership Agreement does not require us to pay any distributions at all. Accordingly, investors are cautioned not to place undue reliance on the permanence of our distribution policy in making an investment decision. Any modification or revocation of our cash distribution policy could substantially reduce or eliminate the amounts of distributions to our unitholders. The amount of distributions we make, if any, and the decision to make any distribution at all, will ultimately be determined by Couche-Tardthe Topper Group as the owner of all of the membership interests in the sole member of our General Partner, whose interests may differ from those of our common unitholders.

We rely on the employees of Couche-Tardthe Topper Group to provide key management services to our business pursuant to the AmendedTopper Group Omnibus Agreement. If our AmendedTopper Group Omnibus Agreement were to be terminated, we may not be able to find suitable replacements to perform such services for us without interruption to our business or increased costs.

Under our AmendedTopper Group Omnibus Agreement, Couche-Tardthe Topper Group provides us with the personnel necessary to support our management, administrative and operating services, including accounting, tax, legal, internal audit, risk management and compliance, environmental compliance and remediation management oversight, treasury, information technology and other administrative functions, as well as the management and operation of our wholesale distribution and retail business. If our AmendedTopper Group Omnibus Agreement is terminated, we may suffer interruptions to our business or increased costs to replace these services.

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Distributions with respect to our 17.5% interest in CST Fuel Supply are at the discretion of Couche-Tard.

Couche-Tard controls the general partner of CST Fuel Supply and its wholly owned subsidiary, CST Marketing and Supply. The Partnership owns a 17.5% limited partner interest in CST Fuel Supply and derives substantial economic benefit from distributions made by CST Fuel Supply; however, there is no contractual obligation on Couche-Tard to cause CST Fuel Supply to make distributions, and the decisions as to timing and amount of any distributions are controlled by Couche-Tard. Any decrease in the distributions from CST Fuel Supply with respect to our interest could have a material adverse effect on our business, financial condition, results of operations and cash available for distribution to our unitholders.

The liability of DMIthe Topper Group and Couche-Tard is limited under our AmendedTopper Group Omnibus Agreement and Circle K Omnibus Agreement and we have agreed to indemnify DMIthe Topper Group and Couche-Tard against certain liabilities, which may expose us to significant expenses.

The AmendedTopper Group Omnibus Agreement providesand the Circle K Omnibus Agreement provide that we must indemnify DMIthe Topper Group and Couche-Tard for certain liabilities, including any liabilities incurred by the Topper Group and Couche-Tard attributable to the operating and administrative services provided to us under the agreement, other than liabilities resulting from DMI’sthe Topper Group’s or Couche-Tard’s bad faith, fraud, or willful misconduct, as applicable.

Our General Partner has and intends to limit itslimited liability regarding our obligations.

Our General Partner has and intends to limit itslimited liability under contractual arrangements between us and third parties so that the counterparties to such arrangements have recourse only against our assets, and not against our General Partner or its assets. Our General Partner may therefore cause us to incur indebtedness or other obligations that are nonrecourse to our General Partner. Our Partnership Agreement provides that any action taken by our General Partner to limit its liability is not a breach of our General Partner’s fiduciary duties, even if we could have obtained more favorable terms without the limitation on liability. In addition, we are obligated to reimburse or indemnify our General Partner to the extent that it incurs obligations on our behalf. Any such reimbursement or indemnification payments would reduce the amount of cash otherwise available for distribution to our unitholders.

If we distribute a significant portion of our cash available for distribution to our partners, our ability to grow and make acquisitions could be limited.

We may determine to distribute a significant portion of our cash available for distribution to our unitholders. In addition, we expect to rely primarily upon external financing sources, including commercial bank borrowings and the issuance of debt and equity securities, to fund our acquisitions and expansion capital expenditures. To the extent we are unable to finance growth externally, distributing a significant portion of our cash available for distribution may impair our ability to grow.

In addition, if we distribute a significant portion of our cash available for distribution, our growth may lag behind the growth of businesses that reinvest all of their cash to expand ongoing operations. To the extent we issue additional units in connection with any acquisitions or expansion capital expenditures, the payment of distributions on those additional units may increase the risk that we will be unable to maintain or increase our per unit distribution level. There are no limitations in our Partnership Agreement or our credit facilityCAPL Credit Facility on our ability to issue additional common units, provided there is no default under the credit facility.CAPL Credit Facility. The incurrence of additional commercial borrowings or other debt to finance our growth strategy would result in increased interest expense, which, in turn, may impact the cash available for distribution to our unitholders.

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Our Partnership Agreement replaces, eliminates and modifies, as applicable, the duties, including the fiduciary duties, of our General Partner, the Board or any committee thereof, and modifies the burden of proof in any action brought against the General Partner, the Board or any committee thereof.

Our Partnership Agreement contains provisions that modify the duties of the General Partner, including the fiduciary duties of the General Partner, and restricts the remedies available to unitholders for actions taken by our General Partner that might otherwise constitute breaches of fiduciary duty under Delaware partnership law. For example, our Partnership Agreement:

provides that whenever our General Partner, the Board or any committee of the Board makes a determination or takes, or declines to take, any other action in its capacity as the general partner of the Partnership, our General Partner is required to make such determination, or take or decline to take such other action, in good faith, and will not be subject to any higher standard under any Delaware Act, or any other law, rule or regulation, or at equity;

provides that any determination, act or failure to act by our General Partner will be deemed in good faith unless such party believed such determination, other action or failure to act, given the totality of the circumstance, was adverse to the interests of the Partnership;

provides that whenever our General Partner, the Board or any committee of the Board makes a determination or takes, or declines to take, any other action in its capacity as the general partner of the Partnership, our General Partner is required to make such determination, or take or decline to take such other action, in good faith, and will not be subject to any higher standard under any Delaware Act (as defined below), or any other law, rule or regulation, or at equity;

 

provides that any determination, act or failure to act by our General Partner will be deemed in good faith unless such party believed such determination, other action or failure to act, given the totality of the circumstance, was averse to the interests of the Partnership;

in any proceeding brought by the Partnership, any limited partner, or any Person who acquires an interest in a Partnership Interestinterest or any other Person who is bound by the Partnership Agreement, challenging such action,

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determination or failure to act, the Person bringing or prosecuting such proceeding shall have the burden of proving that such determination, action or failure to act was not in good faith;

provides that whenever the General Partner makes a determination or takes or declines to take any other action in its individual capacity as opposed to in its capacity as the general partner of the Partnership, whether under the Partnership Agreement or any other agreement contemplated thereby, then the General Partner, or any affiliate thereof, are entitled to the fullest extent permitted by law, to make such determination or to take or decline to take such other action free of any fiduciary duty, duty of good faith, obligation imposed by Delaware Act, law, rule or in equity to the Partnership, any limited partner or any Person who acquires an interest in a Partnership interest or any other Person who is bound by the Partnership Agreement. Examples of decisions that our General Partner may make in its individual capacity include:

provides that whenever the General Partner makes a determination or takes or declines to take any other action in its individual capacity as opposed to in its capacity as the general partner of the Partnership, whether under the Partnership Agreement or any other agreement contemplated thereby, then the General Partner, or any affiliate thereof, is entitled to the fullest extent permitted by law, to make such determination or to take or decline to take such other action free of any fiduciary duty, duty of good faith, obligation imposed by Delaware Act, law, rule or in equity to the Partnership, any limited partner or any Person who acquires an interest in a Partnership interest or any other Person who is bound by the Partnership Agreement. Examples of decisions that our General Partner may make in its individual capacity include:

how to allocate business opportunities among us and its affiliates;

how to allocate business opportunities among us and its affiliates;

whether to exercise its call right;

whether to exercise its call right; and

whether to elect to reset target distribution levels; and

whether or not to consent to any merger or consolidation of the Partnership or amendment to the Partnership Agreement.

whether or not to consent to any merger or consolidation of the Partnership or amendment to the Partnership Agreement.

provides that our General Partner and its officers and directors will not be liable for monetary damages to the Partnership or our limited partners resulting from any act or omission unless there has been a final and non-appealable judgment entered by a court of competent jurisdiction determining that our General Partner or its officers and directors, as the case may be, acted in bad faith or, in the case of a criminal matter, acted with knowledge that the conduct was criminal;

provides that our General Partner and its officers and directors will not be liable for monetary damages to the Partnership or our limited partners resulting from any act or omission unless there has been a final and non-appealable judgment entered by a court of competent jurisdiction determining that our General Partner or its officers and directors, as the case may be, acted in bad faith or, in the case of a criminal matter, acted with knowledge that the conduct was criminal;

provides that the General Partner may consult with legal counsel, accountants, appraisers, management consultants, investment bankers and other consultants and advisers selected by it, and any act taken or omitted in reliance upon the advice or opinion (including an opinion of counsel) of such persons as to matters that the General Partner reasonably believes to be within such person’s professional or expert competence shall be conclusively presumed to have been done or omitted in good faith and in accordance with such advice or opinion; and

provides that the General Partner may consult with legal counsel, accountants, appraisers, management consultants, investment bankers and other consultants and advisers selected by it, and any act taken or omitted in reliance upon the advice or opinion (including an opinion of counsel) of such persons as to matters that the General Partner reasonably believes to be within such person’s professional or expert competence shall be conclusively presumed to have been done or omitted in good faith and in accordance with such advice or opinion; and

provides that our General Partner will not be in breach of its obligations under the Partnership Agreement or its fiduciary duties to us or our limited partners if a transaction with an affiliate or the resolution of a conflict of interest is:

provides that our General Partner will not be in breach of its obligations under the Partnership Agreement or its fiduciary duties to us or our limited partners if a transaction with an affiliate or the resolution of a conflict of interest is:

approved by the independent conflicts committee of the Board, although our General Partner is not obligated to seek such approval; or

approved by the independent conflicts committee of the Board, although our General Partner is not obligated to seek such approval; or

approved by the vote of a majority of the outstanding common units, excluding any common units owned by our General Partner and its affiliates.

approved by the vote of a majority of the outstanding common units, excluding any common units owned by our General Partner and its affiliates.

By purchasing a common unit, a unitholder is treated as having consented to the provisions in the Partnership Agreement, including the provisions discussed above.

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Our General Partner’s affiliates, including Couche-Tard,the Topper Group, may compete with us.

Our Partnership Agreement provides that our General Partner will be restricted from engaging in any business activities other than acting as our General Partner and those activities incidental to its ownership interest in us. Except as provided in the AmendedTopper Group Omnibus Agreement, affiliates of our General Partner are not prohibited from engaging in other businesses or activities, including those that might be in direct competition with us.

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Pursuant to the terms of our Partnership Agreement, the doctrine of corporate opportunity, or any analogous doctrine, does not apply to our General Partner, Couche-Tardthe Topper Group or any of their affiliates, including their executive officers and directors. Any such person or entity that becomes aware of a potential transaction, agreement, arrangement or other matter that may be an opportunity for us will not have any duty to communicate or offer such opportunity to us. Any such person or entity will not be liable to us or to any limited partner for breach of any fiduciary duty or other duty by reason of the fact that such person or entity pursues or acquires such opportunity for itself, directs such opportunity to another person or entity or does not communicate such opportunity or information to us. This may create actual and potential conflicts of interest between us and affiliates of our General Partner and result in less than favorable treatment of usour unitholders and our unitholders.us. Conflicts of interest may arise in the future between us and our unitholders, on the one hand, and the affiliates of our General Partner and Couche-Tard,the Topper Group, on the other hand. In resolving these conflicts, Couche-Tardthe Topper Group may favor its own interests over the interests of our unitholders.

Couche-Tard, as the holder of our IDRs, may elect to cause us to issue common units to the holders of our IDRs in connection with a resetting of the target distribution levels related to the IDRs, without the approval of the independent conflicts committee of the Board or the holders of our common units. This could result in lower distributions to holders of our common units.

Under the Partnership Agreement, the holders of our IDRs have the right, at any time when the holders of our IDRs have received incentive distributions at the highest level to which they are entitled (50%) for each of the prior four consecutive fiscal quarters, to reset the initial target distribution levels at higher levels based on our distributions at the time of the exercise of the reset election. Following such a reset election, the minimum quarterly distribution will be adjusted to equal the reset minimum quarterly distribution and the target distribution levels will be reset to correspondingly higher levels based on percentage increases above the reset minimum quarterly distribution.

If the holder of our IDRs elects to reset the target distribution levels, it will be entitled to receive a number of common units. The number of common units to be issued to the holder of our IDRs will equal the number of common units that would have entitled the holder of our IDRs to an aggregate quarterly cash distribution in the prior quarter equal to the distributions to the holder of our IDRs on the IDRs in the prior quarter. It is possible that the holder of our IDRs could exercise this reset election at a time when it is experiencing, or expects to experience, declines in the cash distributions that the holder of our IDRs receives related to the IDRs and may, therefore, desire to be issued common units rather than retain the right to receive IDRs based on the initial target distribution levels. This risk could be elevated if our IDRs are transferred to another party. As a result, a reset election may cause our common unitholders to experience a reduction in the amount of cash distributions that our common unitholders would have otherwise received had we not issued new common units to the holder of our IDRs in connection with resetting the target distribution levels.

Holders of our common units have limited voting rights and are not entitled to elect our General Partner or the directors of the Board, which could reduce the price at which the common units will trade.

Unlike the holders of common stock in a corporation, unitholders have only limited voting rights on matters affecting our business and, therefore, limited ability to influence management’s decisions regarding our business. Unitholders will have no right on an annual or ongoing basis to elect or remove the members of our Board. The Board, including the independent directors, is chosen entirely by Couche-Tard,the Topper Group, as a result of its ownership of all the membership interests in the sole member of our General Partner, and not by our unitholders. Unlike publicly traded corporations, we will not conduct annual meetings of our unitholders to elect directors or conduct other matters routinely conducted at annual meetings of stockholders of corporations. As a result of these limitations, the price at which the common units will trade could be diminished because of the absence or reduction of a takeover premium in the trading price.

Even if holders of our common units are dissatisfied, they may not be able to remove our General Partner.

If our unitholders are dissatisfied with the performance of our General Partner, they will have limited ability to remove our General Partner. The vote of the holders of at least 66 2⁄3% of all outstanding common units voting together as a single class is required to remove our General Partner. As of February 21, 2018, Circle K24, 2022, the Topper Group beneficially owned approximately 21.1%38.5% of our outstanding common units and the Topper Group, including DMI, owned approximately 22.4% of our outstanding common units. Pursuant to a voting agreement, dated October 1, 2014, the Topper Group agreed to vote such units in accordance with the recommendation of the Board, allowing Couche-Tard to effectively block the removal of the General Partner. The voting agreement will remain in effect so long as Mr. Topper is the beneficial owner of 10% or more of the outstanding common units of the Partnership.

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Our General Partner interest or the control of our General Partner may be transferred to a third party without unitholder consent.

Our General Partner may transfer its General Partner interest to a third party in a merger or in a sale of all or substantially all of its assets without the consent of our unitholders. Furthermore, our Partnership Agreement does not restrict the ability of the members of our General PartnerTopper Group to transfer its membership interests in the sole member of our General Partner to a third party. The new members of our General Partner would then be in a position to replace the Board and executive officers of our General Partner with their own designees and thereby exert significant control over the decisions taken by the Board and executive officers of our General Partner. This effectively permits a “change of control” without the vote or consent of the unitholders.

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Our General Partner has a call right that may require unitholders to sell their common units at an undesirable time or price.

If at any time our General Partner and its affiliates hold more than 80% of the common units, our General Partner will have the right, but not the obligation, which it may assign to any of its affiliates or to us, to acquire all, but not less than all, of the common units held by unaffiliated persons at a price equal to the greater of (1) the average of the daily closing price of the common units over the 20 trading days preceding the date that is three days before notice of exercise of the call right is first mailed and (2) the highest per-unit price paid by our General Partner or any of its affiliates for common units during the 90-day period preceding the date such notice is first mailed. As a result, unitholders may be required to sell their common units at an undesirable time or price and may not receive any return or a negative return on their investment. Unitholders may also incur a tax liability upon a sale of their units. Our General Partner is not obligated to obtain a fairness opinion regarding the value of the common units to be repurchased by it upon exercise of the call right. There is no restriction in our Partnership Agreement that prevents our General Partner from issuing additional common units and exercising its call right. If our General Partner exercised its call right, the effect would be to take us private and, iffollowing the deregistering of the units, were subsequently deregistered, we would no longer be subject to the reporting requirements of the Exchange Act. As of December 31, 2017, Circle KFebruary 24, 2022, the Topper Group beneficially owned approximately 21.1%38.5% of our outstanding common units.

The market price of our common units could be adversely affected by sales of substantial amounts of our common units in the public or private markets, including sales by the Topper Group DMI or other large holders.

As of February 21, 2018,24, 2022, we had 34,111,46137,896,556 common units outstanding. Sales by the Topper Group DMI or other large holders such as Couche-Tard, of a substantial number of our common units in the public or private markets, or the perception that such sales might occur, could have a material adverse effect on the price of our common units or could impair our ability to obtain capital through an offering of equity securities. In addition, we have agreed to provide registration rights to the Topper Group, including DMI.Group. Under our Partnership Agreement and pursuant to a registration rights agreement that we have entered into, the Topper Group and DMI havehas registration rights relating to the offer and sale of any units that they hold,it holds, subject to certain limitations.

We may issue unlimited additional units without unitholder approval, which would dilute existing unitholder ownership interests.

Our Partnership Agreement does not limit the number of additional limited partner interests, including limited partner interests that rank senior to the common units that we may issue at any time without the approval of our unitholders. The issuance of additional common units or other equity interests of equal or senior rank could have the following effects:

our existing unitholders’ proportionate ownership interest in us will decrease;

our existing unitholders’ proportionate ownership interest in us will decrease;

the amount of cash available for distribution on each unit may decrease;

the amount of cash available for distribution on each unit may decrease;

the risk that a shortfall in the payment of the minimum quarterly distribution will be borne by our common unitholders will increase;

the risk that a shortfall in the payment of the minimum quarterly distribution will be borne by our common unitholders will increase;

the ratio of taxable income to distributions may increase;

the ratio of taxable income to distributions may increase;

the relative voting strength of each previously outstanding unit may be diminished;

the relative voting strength of each previously outstanding unit may be diminished;

the claims of the common unitholders to our assets in the event of our liquidation may be subordinated; and

the claims of the common unitholders to our assets in the event of our liquidation may be subordinated and/or diluted; and

the market price of our common units may decline.

the market price of our common units may decline.

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Our General Partner’s discretion in establishing cash reserves may reduce the amount of cash available for distribution to unitholders.

The Partnership Agreement requires our General Partner to deduct from operating surplus cash reserves that it determines are necessary to fund our future operating expenditures. The General Partner may reduce cash available for distribution by establishing cash reserves for the proper conduct of our business, to comply with applicable law or agreements to which we are a party or to provide funds for future distributions to partners. These cash reserves will affect the amount of cash available for distribution to unitholders.

Our Partnership Agreement restricts the voting rights of unitholders owning 20% or more of our common units.

Our Partnership Agreement restricts unitholders’ voting rights by providing that any units held by a person or group that owns 20% or more of any class of units then outstanding, other than our General Partner and its affiliates, their transferees and persons who acquired such units with the prior approval of the Board, cannot vote on any matter.

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Management fees and cost reimbursements due to our General Partner and Couche-Tardthe Topper Group for services provided to us or on our behalf will reduce cash available for distribution to our unitholders. The amount and timing of such reimbursements will be determined by our General Partner.

Prior to making any distribution on our common units, we will pay Couche-Tardthe Topper Group the management fee and reimburse our General Partner and Couche-Tardthe Topper Group for all out-of-pocket third-party expenses they incur and payments they make on our behalf, pursuant to the AmendedTopper Group Omnibus Agreement. Our Partnership Agreement provides that our General Partner will determine in good faith the expenses that are allocable to us. In addition, pursuant to the AmendedTopper Group Omnibus Agreement, Couche-Tardthe Topper Group will be entitled to reimbursement for certain expenses that they incur on our behalf. Our Partnership Agreement does not limit the amount of expenses for which our General Partner and Couche-Tardthe Topper Group may be reimbursed. The reimbursement of expenses and payment of fees, if any, to our General Partner and Couche-Tardthe Topper Group will reduce the amount of cash available to pay distributions to our unitholders.

Unitholders may have liability to repay distributions and in certain circumstances may be personally liable for the obligations of the partnership.Partnership.

Under certain circumstances, unitholders may have to repay amounts wrongfully returned or distributed to them. Under Section 17-607 of the Delaware Revised Uniform Limited Partnership Act (the “Delaware Act”), we may not make a distribution to our unitholders if the distribution would cause our liabilities to exceed the fair value of our assets. Delaware law provides that for a period of three years from the date of the impermissible distribution, limited partners who received the distribution and who knew at the time of the distribution that it violated Delaware law will be liable to the limited partnership for the distribution amount. Liabilities to partners on account of their partnership interests and liabilities that are non-recourse to the partnershipPartnership are not counted for purposes of determining whether a distribution is permitted.

It may be determined that the right, or the exercise of the right by the limited partners as a group, to (i) remove or replace our General Partner, (ii) approve some amendments to our Partnership Agreement or (iii) take other action under our Partnership Agreement constitutes “participation in the control” of our business. A limited partner that participates in the control of our business within the meaning of the Delaware Act may be held personally liable for our obligations under the laws of Delaware, to the same extent as our General Partner. This liability would extend to persons who transact business with us under the reasonable belief that the limited partner is a General Partner. Neither our Partnership Agreement nor the Delaware Act specifically provides for legal recourse against our General Partner if a limited partner were to lose limited liability through any fault of our General Partner.

The NYSE does not require a publicly traded partnership like us to comply with certain of its corporate governance requirements.

Our common units are listed on the NYSE. Because we are a publicly traded partnership, the NYSE does not require us to have, and we do not intend to have, a majority of independent directors on our Board. Additionally, the NYSE does not require us as a publicly traded partnershipBoard or to establish and maintain a compensation committee or a nominating and corporate governance committee.

Additionally, any future issuance of additional common units or other securities, including to our affiliates, will not be subject to the NYSE’s shareholder approval rules that apply to a corporation. Accordingly, unitholders will not have the same protections afforded to corporations (other than “controlled companies”) that are subject to all of the NYSE corporate governance requirements.

3133


An increase in interest rates may cause the market price of our common units to decline and a significant increase in interest rates could adversely affect our ability to service our indebtedness.

Like all equity investments, an investment in our common units is subject to certain risks. Borrowings under the credit facility will bear interest at variable rates. If market interest rates increase, such variable-rate debt will create higher debt service requirements, which could adversely affect our cash flow and ability to make cash distributions. In exchange for accepting these risks, investors may expect to receive a higher rate of return than would otherwise be obtainable from lower-risk investments. Accordingly, as interest rates rise, the ability of investors to obtain higher risk-adjusted rates of return by purchasing government-backed debt securities may cause a corresponding decline in demand for riskier investments generally, including yield-based equity investments such as publicly traded limited partnership interests. Reduced demand for our common units resulting from investors seeking other more favorable investment opportunities may cause the trading price of our common units to decline.

The interest rate on our credit facility is variable; therefore, we have exposure to movements in interest rates. A significant increase in interest rates could adversely affect our ability to service our indebtedness. The increased cost could make the financing of our business activities more expensive. These added expenses could have an adverse effect on our financial condition, results of operations and cash available for distribution to our unitholders.

Tax Risks

Our tax treatment depends in large part on our status as a partnership for U.S. federal income tax purposes and our otherwise not being subject to a material amount of U.S. federal, state and local income or franchise tax. If the IRS were to treat us as a corporation for U.S. federal income tax purposes or if we were to otherwise be subject to a material amount of additional entity level income, franchise or other taxation for U.S. federal, state or local tax purposes, then our cash available for distribution to our unitholders would be substantially reduced.

The anticipated after-tax benefit of an investment in our common units depends largely on our being treated as a partnership for U.S. federal income tax purposes. First, a partnership is exempt from U.S. federal income tax, and the partnership’s income is instead allocated to the partners for inclusion on their tax returns. Second, under the Tax Cuts and Jobs Act, the partner may also deduct from the partnership’s taxable income allocable to such partner an amount equal to 20% of such qualified business income (subject to certain limits), resulting in a lower effective tax rate for the partner with respect to the partnership’s income. A publicly traded partnership, such as us, may be treated as a corporation, instead of being treated as a partnership, for U.S. federal income tax purposes unless 90% or more of its gross income for every taxable year it is publicly traded consists of qualifying income. Based on our current operations we believe that we will be able to satisfy this requirement and, thus, be able to be treated as a partnership, rather than a corporation, for U.S. federal income tax purposes. However, a change in our business, or a change in current law, could also cause us to be treated as a corporation for U.S. federal income tax purposes or otherwise subject us to entity-level taxation.

If we were required to be treated as a corporation for U.S. federal income tax purposes or otherwise subject to entity-level taxation, then we would pay U.S. federal income tax on our taxable income at the corporate tax rate which, under current law, is 21%. We would also likely pay state and local income tax at varying rates. Distributions to our unitholders would generally be taxed again as either a dividend (to the extent of our current and accumulated earnings and profits) and/or as taxable gain after recovery of a unitholder’s U.S. federal income tax basis in their units, and no income, gains, losses, deductions or credits would flow through to our unitholders. Because a U.S. federal income tax would be imposed upon us as a corporation, our cash available for distribution to our unitholders would be substantially reduced. Thus, treatment of us as a corporation would result in a material reduction in the anticipated cash flow and after-tax return to our unitholders, likely causing a substantial reduction in the value of our common units.unitholders.

At the state level, were we to be subject to U.S. federal income tax, we would also be subject to the income tax provisions of many states. Moreover, because of widespread state budget deficits and other reasons, several states are evaluating ways to independently subject partnerships to entity-level taxation through the imposition of state income taxes, franchise taxes and other forms of taxation. Imposition of any additional such taxes on us or an increase in the existing tax rates would reduce the cash available for distribution to our unitholders.

Our Partnership Agreement provides that if a law is enacted or existing law is modified or interpreted in a manner that results in us becoming subject to either: (a) entity-level taxation for U.S. federal, state, local and/or foreign income and/or withholding tax purposes to which we were not subject prior to such enactment, modification or interpretation, and/or (b) an increased amount of one or more of such taxes (including as a result of an increase in tax rates), then the minimum quarterly distribution amounts and the target distribution amounts may be adjusted (i.e., reduced) to reflect the impact of that law on us.

32


We have subsidiaries that are treated as corporations for U.S. federal income tax purposes and are subject to entity-level U.S. federal, state and local income and franchise tax.

We conduct a portion of our operations and business through one or more direct and indirect subsidiaries (including LGWS) that are treated as C corporations for U.S. federal income tax purposes (including LGWS).purposes. We may elect to conduct additional operations through these corporate subsidiaries in the future. These corporate subsidiaries are subject to corporate-level taxes, at the corporate tax rate, which is currently 21%, and will also likely be subject to state (and possibly local) income tax at varying rates, on their taxable income. Any such entity level taxes will reduce the cash available for distribution to us and, in turn, to unitholders. If the IRS were to successfully assert that these corporations have more tax liability than we anticipate or legislation were enacted that increased the corporate tax rate, our cash available for distribution to unit holdersunitholders would be further reduced.

A significant amount Distributions from any such C corporation will generally be taxed again to unitholders as dividend income to the extent of our income is attributable to our leasingcurrent and accumulated earnings and profits of real property to DMS. If DMS were to become related to us forsuch C corporation. The maximum U.S. federal income tax purposes,rate applicable to qualified dividend income that is allocable to individuals is 20%. An individual unitholders’ share of dividend and interest income from LGWS or other C corporation subsidiaries would constitute portfolio income that could not be offset by the real property rents that we receive from DMS would no longer constitute qualifying income and we would likely be treated as a corporation for U.S. federal income tax purposes.

A significant amountunitholders’ share of our qualifying income is composed of real property rents from DMS attributable to the sites that DMS leases from us. In general, any real property rents that we receive from a tenantother losses or sub-tenant of ours in which we, directly or indirectly, own or are treated as owning by reason of the application of certain constructive ownership rules: (a) at least 10% of such tenant’s or sub-tenant’s stock (voting power or value) in the case where such tenant or sub-tenant is a corporation for U.S. federal income tax purposes, or (b) an interest of at least 10% of such tenant’s or sub-tenant’s assets or net profits in the case where such tenant or sub-tenant is not a corporation for U.S. federal income tax purposes (as would be the case with respect to DMS), would not constitute qualifying income. After applying certain constructive ownership rules, we will be treated as owning the 5% interest in the assets and net profits of DMS that Joseph V. Topper, Jr. actually and constructively owns. If we were considered to directly or indirectly own an interest of 10% or more of the assets or net profits of DMS, then the real property rents that we receive from DMS would no longer constitute qualifying income in which case, based on our current operations, we would likely no longer qualify to be treated as a “partnership” (and instead would be treated as a corporation) for U.S. federal income tax purposes.deductions.

Our and DMS’ governing documents contain transfer restrictions designed to prevent us from being treated as directly or indirectly owning by reason of the application of constructive ownership rules an interest of 10% or more of DMS’ assets or net profits. We received an opinion of counsel at the closing of the IPO that transfer restrictions are generally enforceable under Delaware law, but a court could determine that these restrictions are inapplicable or unenforceable.34


The tax treatment of publicly traded partnerships or an investment in our common units could be subject to potential legislative, judicial or administrative changes and differing interpretations, possibly on a retroactive basis.

The present U.S. federal income tax treatment of publicly traded partnerships, including us, or of an investment in our common units may be modified by administrative, legislative or judicial changes or differing interpretations at any time. For example, from time to time, members of Congress propose and consider such substantive changes to the existing U.S. federal income tax laws that affect publicly traded partnerships. If successful,implemented, these proposals or other similar proposals could eliminate the qualifying income exception upon which we rely for our treatment as a partnership for U.S. federal income tax purposes.

Any modification to the U.S. federal income tax laws may be applied retroactively and could make it more difficult or impossible for us to be treated as a partnership for U.S. federal income tax purposes. We are unable to predict whether any of these changes or other proposals will ultimately be enacted. Any such changes could negatively impact the value of an investment in our common units.

If the IRS contests the U.S. federal income tax positions we take, the market for our common units may be adversely impacted and the costs of any contest will reduce our cash available for distribution to our unitholders. We have not requested any ruling from the IRS with respect to our treatment as a partnership for U.S. federal income tax purposes or any other U.S. federal income tax matter affecting us. The IRS may adopt positions that differ from the conclusions of our counsel expressed in our disclosures or from the positions we take. It may be necessary to resort to administrative or court proceedings to sustain some or all of our counsel’s conclusions or the positions we take.take, and such positions may ultimately not be sustained. A court may not agree with some or all of our counsel’s conclusions or the positions we take. Any contest with the IRS may materially and adversely impact the market for our common units and the price at which they trade. In addition, the costs of any contest with the IRS, which will be borne indirectly by our unitholders and our General Partner, will result in a reduction in cash available for distribution.

33


Our unitholders are required to pay taxes on their share of income from us even if they do not receive any cash distributions from us. A unitholder's share of our taxable income, and its relationship to any distributions we make, may be affected by a variety of factors, including our economic performance, transactions in which we engage or changes in law and may be substantially different from any estimate we make in connection with a unit offering.

Our unitholders are required to pay U.S. federal income taxes and, in some cases, state and local taxes, on their allocable share of our taxable income and gain even if they do not receive any cash distributions from us. Our unitholders may not receive cash distributions from us equal to their share of our taxable income or even equal to the actual tax due with respect to that income.

A unitholder’s share of our taxable income, and its relationship to any distributions we make, may be affected by a variety of factors, including our economic performance, which may be affected by numerous business, economic, regulatory, legislative, competitive and political uncertainties beyond our control, and certain transactions in which we might engage. For example, we may engage in transactions that produce substantial taxable income allocations to some or all of our unitholders without a corresponding increase in cash distributions to our unitholders, such as a sale or exchange of assets, the proceeds of which are reinvested in our business or used to reduce our debt, or an actual or deemed satisfaction of our indebtedness for an amount less than the adjusted issue price of the debt. A unitholder’s ratio of its share of taxable income to the cash received by it may also be affected by changes in law.

From time to time, in connection with an offering of our common units, we may state an estimate of the ratio of federal taxable income to cash distributions that a purchaser of our common units in that offering may receive in a given period. These estimates depend in part on factors that are unique to the offering with respect to which the estimate is stated, so the expected ratio applicable to other common units will be different, and in many cases less favorable, than these estimates. Moreover, even in the case of common units purchased in the offering to which the estimate relates, the estimate may be incorrect, due to the uncertainties described above, challenges by the IRS to tax reporting positions which we adopt, or other factors. The actual ratio of taxable income to cash distributions could be higher or lower than expected, and any differences could be material and could materially affect the value of our common units.

Unitholders may be subject to limitation on their ability to deduct interest expense incurred by us.

In general, we are entitled to a deduction for interest paid or accrued on indebtedness properly allocable to our trade or business during our taxable year. Under the Tax Cuts and Jobs Act, for taxable years beginning after December 31, 2017, our deduction for “business interest” is limited to the sum of our business interest income and 30% of our “adjusted taxable income.” For purposes of this limitation, our adjusted taxable income is computed without regard to any business interest expense or business interest income, and in the case of taxable years beginning before January 1, 2022, any deduction allowable for depreciation, amortization or depletion.

35


Tax gain or loss on the disposition of our common units could be more or less than expected.

If a unitholder sells common units, the unitholder will recognize a gain or loss equal to the difference between the amount realized and that unitholder’s tax basis in those common units. Distributions per common unit in excess of a unitholder’s allocable share of our net taxable income result in a decrease in that unitholder’s tax basis in its common units. The amount of this decreased tax basis, with respect to the units sold will, in effect, become taxable income to that unitholder, if that unitholder sells such units at a price greater than that unitholder’s tax basis in those units, even if the sales price received is less than the original cost. Furthermore, a substantial portion of the amount realized, whether or not representing gain, may be taxed as ordinary income due to potential recapture of depreciation and amortization deductions and certain other items. In addition, because the amount realized includes a unitholder’s share of our non-recourse liabilities, if a unitholder sells units, that unitholder may incur a tax liability in excess of the amount of cash received from the sale.

Tax-exempt organizations and non-U.S. persons face unique tax issues from owning common units that may result in adverse tax consequences to them.

Investment in our common units by an organizationorganizations that isare exempt from U.S. federal income tax, such as employee benefit plans and individual retirement accounts and non-U.S. persons raises issues unique to them. For example, a substantial amount of our U.S. federal taxable income and gain constitute gross income from an unrelated trade or business and the amount thereof allocable to a tax-exempt organization would be taxable to such organization as unrelated business taxable income. Distributions to a non-U.S. person that holds our common units will be reduced by U.S. federal withholding taxes imposed at the highest applicable U.S. federal income tax rate and such non-U.S. person will be required to file U.S. federal income tax returns and pay U.S. federal income tax, to the extent not previously withheld, on his, her or its allocable share of our taxable income and gain.

Under the Tax Cuts and Jobs Act, if a unitholder sells or otherwise disposes of a common unit, the transferee is required to withhold 10% of the amount realized by the transferor unless the transferor certifies that it is not a foreign person, and we are required to deduct and withhold from the transferee amounts that should have been withheld by the transferee but were not withheld. However, the Department of the Treasury and the IRS have determined that this withholding requirement should not apply to any disposition of a publicly traded interest in a publicly traded partnership (such as us) until regulation or other guidance has been issued clarifying the application of this withholding requirement to dispositions of interests in publicly traded partnerships. Accordingly, while this withholding requirement does not currently apply to interests in us, there can be no assurance that such requirement will not apply in the future.

Any tax-exempt organization or a non-U.S. person should consult its tax advisor before investing in our common units.

Our unitholders are subject to state and local income taxes and return filing requirements in states and localities where they do not live as a result of investing in our common units.

In addition to U.S. federal income taxes, our unitholders will likely be subject to other taxes, such as state and local income taxes, unincorporated business taxes and estate, inheritance or intangible taxes that are imposed by the various jurisdictions in which we do business or own property, even if they do not live in any of those jurisdictions. Our unitholders will likely be required to file state and local income tax returns and pay state and local income taxes in some or all of these various jurisdictions. Further, our unitholders may be subject to penalties for failure to comply with those requirements. We currently conduct business in Alabama, Arizona, Arkansas, Colorado, Delaware, Florida, Georgia, Illinois, Indiana, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, New Hampshire, New Jersey, New Mexico, New York, North Carolina, Ohio, Pennsylvania, Rhode Island, South Dakota, Tennessee, Texas, Vermont, Virginia, West Virginia and Wisconsin34 states (see “Item 2. Properties”). Each unit holderunitholder must assess the need to file and pay income tax in these states on their allocated share of partnership taxable income. We may own property or conduct business in other states, localities or foreign countries in the future. It is the responsibility of each unitholder to file all U.S. federal, state, local and foreign tax returns. In certain states, tax losses may not produce a tax benefit in the year incurred and also may not be available to offset income in subsequent tax years. Some states may require us, or we may elect, to withhold a percentage of income from amounts to be distributed to a unitholder not otherwise exempt from withholding, who is not a resident of the state. Withholding, the amount of which may be greater or less than a particular unitholders’ income tax liability to the state, generally does not relieve a nonresident unitholder from the obligation to file a state income tax return. Amounts withheld may be treated as if distributed to unitholders for purposes of determining the amounts distributed by us. Our counsel has not rendered an opinion on the state, local or non-U.S. tax consequences of an investment in our common units.

36


We will treat each purchaser of our common units as having the same tax benefitscharacteristics on a per-unit basis without regard to the actual common units purchased. The IRS may challenge this treatment, which could adversely affect the value of the common units.

Because we cannot match transferors and transferees of common units, we will adopt depreciation and amortization positions that may not conform to all aspects of existing Treasury Regulations. A successful IRS challenge to those positions could adversely affect the amount of U.S. federal income tax benefits available to our unitholders. It also could affect the timing of these tax benefits or the amount of gain for U.S. federal income tax purposes from any sale of common units and could have a negative impact on the value of our common units or result in audit adjustments to a unitholder’s U.S. federal income tax returns.

34


We prorate our items of income, gain, loss and deduction for U.S. federal income tax purposes and allocate them between transferors and transferees of our common units each month based upon the ownership of our common units on the first business day of each month and as of the opening of the applicable exchange on which our common units are listed, instead of on the basis of the date a particular common unit is transferred. The IRS may challenge this treatment, which could change the allocation of items of income, gain, loss and deduction among our unitholders.

We generally prorate our items of income, gain, loss and deduction between transferors and transferees of our common units each month based upon the ownership of our common units on the first day of each month, instead of on the basis of the date a particular common unit is transferred. Although simplifying conventions are contemplated by the Code and most publicly traded partnerships use similar simplifying conventions, the use of this method may not be permitted under existing Treasury Regulations as there is no direct or indirect controlling authority on this issue. The Department of the Treasury and the IRS have issued Treasury Regulations that provide a safe harbor pursuant to which a publicly traded partnership may useallow a similar monthly simplifying convention, to allocate tax items among transferor and transferee unitholders. The Treasury Regulationsbut such regulations do not specifically authorize the use of the proration method we have adopted. If the IRS were to successfully challenge our proration method, we may be required to change the allocation of items of income, gain, loss and deduction among our unitholders.

If a unitholder loans theirlends its common units to a short seller to cover a short sale of common units, theythe unitholder may be considered to have disposed of those common units for U.S. federal income tax purposes. If so,such event occurs, the unitholder would no longer be treated for U.S. federal income tax purposes as a partner with respect to those common units during the period of the loan and theymay recognize gain or loss as a result of such deemed disposition.

Because a unitholder that lends common units to a “short seller” to cover a short sale of common units may be considered to have disposed of the loaned common units, the unitholder may not be treated for U.S. federal income tax purposes as a partner with respect to those common units during the period of the loan to the short seller and the unitholder may recognize gain or loss from such deemed disposition.

During Moreover, during the period of the loan of common units to the short seller, any of our income, gain, loss or deduction with respect to such common units may not be reportable by the respective unitholder, and any cash distributions received by the unitholder as to those common units could be fully taxable to them as ordinary income. Our counsel has not rendered an opinion regarding the treatment of a unitholder where common units are loaned to a short seller to cover a short sale of common units. Unitholders desiring to assure their status as partners and avoid the risk of gain recognition from a loan of their common unitsto a short seller are urged to consult a tax advisor to discuss whether it is advisable to modify any applicable brokerage account agreements to prohibit their brokers from borrowingloaning their common units.

We have adopted certain valuation methodologies that may result in a shift of income, gain, loss and deduction between our General Partner and the unitholders. The IRS may challenge this treatment, which could adversely affect the value of the common units.

When we issue additional units or engage in certain other transactions, our General Partner will determine the fair market value of our assets and allocate any unrealized gain or loss attributable to our assets to the capital accounts of our unitholders and our General Partner. Although we may from time to time consult with professional appraisers regarding valuation matters, including the valuation of our assets, our General Partner will make many of the fair market value determinations of our assets using a methodology based on the market value of our common units as a means to measure the fair market value of our assets. Our methodology may be viewed as understating or overstating the value of our assets. In that case, there may be a shift of income, gain, loss and deduction between certain unitholders and our General Partner, which may be unfavorable to such unitholders. The IRS may challenge our valuation methods and allocations of income, gain, loss and deduction between our General Partner and certain of our unitholders.

A successful IRS challenge to these methods or allocations could adversely affect the amount of taxable income, gain or loss being allocated to our unitholders for U.S. federal income tax purposes. It also could affect the amount of taxable gain from our unitholders’ sale of common units and could have a negative impact on the value of the common units or result in audit adjustments to our unitholders’ U.S. federal income tax returns without the benefit of additional deductions.

37


If the IRS weremakes audit adjustments to contest the U.S. federalour income tax positionsreturns for tax years beginning after 2017, it (and some states) may assess and collect any resulting taxes (including any applicable penalties and interest) directly from us, in which case we take, it may adversely impact the marketrequire our unitholders and former unitholders to reimburse us for such taxes (including any applicable penalties or interest) or, if we are required to bear such payment, our common units, and the costs of any such contest would reduce distributable cash flowavailable for distribution to our unitholders.unitholders might be substantially reduced.

ThePursuant to the Bipartisan Budget Act of 2015, requires large partnershipsif the IRS makes audit adjustments to pay federalour income tax deficiencies atreturns for tax years beginning after 2017, it (and some states) may assess and collect any resulting taxes (including any applicable interest and penalties) directly from us. We will generally have the partnership level, unlessability to shift any such tax liability to our General Partner and our unitholders in accordance with their interests in us during the partnership electsyear under audit, but there can be no assurance that we will be able to take into account any federaldo so (or will choose to do so) under all circumstances, or that we will be able to (or choose to) effect corresponding shifts in state income or similar tax deficiency by includingliability resulting from the IRS adjustment in states in which we do business in the Form K-1s ofyear under audit or in the partners for the auditedadjustment year. If we make payments of taxes, penalties and interest resulting from audit adjustments, we may require our unitholders and former unitholders to reimburse us for such taxes (including any applicable penalties or interest) or, if we are audited,required to bear such payment, our cash available for distribution to our unitholders might be substantially reduced. Additionally, we may be required to allocate an adjustment disproportionately among our unitholders, causing the publicly traded units to have different capital accounts, unless the IRS issues further guidance.

In the event the IRS makes an audit adjustment to our income tax returns and we do not or cannot shift the liability to our unitholders in accordance with their interests in us during the year under audit, we will determine atgenerally have the ability to request that time whether to pay the tax deficiency, if any, atIRS reduce the partnership level or to includedetermined underpayment by reducing the adjustment in the Form K-1s of the partners for the audited year.

35


PROPERTIES

The following table shows the aggregate number of sites we owned or leased by customer groups at December 31, 2017:

 

 

Owned

Sites

 

 

Leased

Sites

 

 

Total

Sites

 

 

Percentage of

Total Sites

 

Lessee dealers

 

 

225

 

 

 

258

 

 

 

483

 

 

 

51

%

DMS

 

 

70

 

 

 

77

 

 

 

147

 

 

 

15

%

Circle K

 

 

73

 

 

 

 

 

 

73

 

 

 

8

%

Commission agents

 

 

134

 

 

 

48

 

 

 

182

 

 

 

19

%

Company operated retail sites

 

 

62

 

 

 

9

 

 

 

71

 

 

 

7

%

Total

 

 

564

 

 

 

392

 

 

 

956

 

 

 

100

%

We conduct business at sites located in Alabama, Arizona, Arkansas, Colorado, Delaware, Florida, Georgia, Illinois, Indiana, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, New Hampshire, New Jersey, New Mexico, New York, North Carolina, Ohio, Pennsylvania, Rhode Island, South Dakota, Tennessee, Texas, Vermont, Virginia, West Virginia and Wisconsin.

The following table provides a historysuspended passive loss carryovers of our sites acquired, changes between customer groups or sold during 2017:

 

 

Lessee

Dealers

 

 

DMS

 

 

Circle K

 

 

Commission

Agents

 

 

Company

Operated

 

 

Total

 

Number at beginning of period

 

 

468

 

 

 

168

 

 

 

74

 

 

 

100

 

 

 

76

 

 

 

886

 

Acquired

 

 

2

 

 

 

 

 

 

 

 

 

100

 

 

 

 

 

 

102

 

Changes between customer groups

 

 

29

 

 

 

(7

)

 

 

 

 

 

(17

)

 

 

(5

)

 

 

-

 

Sold

 

 

(14

)

 

 

(14

)

 

 

(1

)

 

 

(1

)

 

 

 

 

 

(30

)

Other

 

 

(2

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2

)

Number at end of period (a)

 

 

483

 

 

 

147

 

 

 

73

 

 

 

182

 

 

 

71

 

 

 

956

 

(a)

This amount excludes 384 independent dealer sites and includes 29 closed sites and 54 sites where we only collect rent.

Our principal executive offices areunitholders (without any compensation from us to such unitholders), to the extent such underpayment is attributable to a net decrease in Allentown, Pennsylvania in approximately 27,000 square feet of leased office space.passive activity losses allocable to certain partners. Such reduction, if approved by the IRS, will be binding on any affected unitholders.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTIES

The following table shows the aggregate number of sites we owned or leased by customer group at December 31, 2021:

 

 

Owned

Sites

 

 

Leased

Sites

 

 

Total

Sites

 

 

Percentage of

Total Sites

 

Lessee dealers

 

 

422

 

 

 

298

 

 

 

720

 

 

 

62

%

Commission agents

 

 

144

 

 

 

40

 

 

 

184

 

 

 

16

%

Company operated

 

 

128

 

 

 

124

 

 

 

252

 

 

 

22

%

Total

 

 

694

 

 

 

462

 

 

 

1,156

 

 

 

100

%

We conduct business at sites located in Alabama, Arkansas, Colorado, Delaware, Florida, Georgia, Illinois, Indiana, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Missouri, Mississippi, New Hampshire, New Jersey, New Mexico, New York, North Carolina, Ohio, Oklahoma, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Virginia, West Virginia and Wisconsin. Our site count includes those involved in our wholesale and retail segments.

The following table provides a history of our sites acquired, changes between customer groups or sold during 2021:

 

 

Lessee

Dealers

 

 

Commission

Agents

 

 

Company

Operated

 

 

Total

 

Number at beginning of year

 

 

753

 

 

 

195

 

 

 

150

 

 

 

1,098

 

Acquired

 

 

 

 

 

 

 

 

103

 

 

 

103

 

Changes between customer groups

 

 

(2

)

 

 

2

 

 

 

 

 

 

 

Divested

 

 

(31

)

 

 

(13

)

 

 

(1

)

 

 

(45

)

Number at end of year (a)

 

 

720

 

 

 

184

 

 

 

252

 

 

 

1,156

 

(a)

Excludes independent commission sites and includes sites where we collect rent but to which we do not distribute motor fuel and closed sites.

Our principal executive offices are in Allentown, Pennsylvania in approximately 46,000 square feet of leased office space.

38


We are from time to time party to various lawsuits, claims and other legal proceedings that arise in the ordinary course of business. These actions typically seek, among other things, compensation for alleged personal injury, breach of contract, property damages, environmental damages, employment-related claims and damages, punitive damages, civil penalties or other losses, or injunctive or declaratory relief. With respect to all such lawsuits, claims and proceedings, we record a reserve when it is probable that a liability has been incurred and the amount of loss can be reasonably estimated. In addition, we disclose matters for which management believes a material loss is at least reasonably possible. None of these proceedings, separately or in the aggregate, are expected to have a material adverse effect on our consolidated financial position, results of operations or cash flows. In all instances, management has assessed the matter based on current information and made a judgment concerning its potential outcome, giving due consideration to the nature of the claim, the amount and nature of damages sought and the probability of success. Management’s judgment may prove materially inaccurate, and such judgment is made subject to the known uncertainties of litigation.

36


We were a co-defendant, together with our General Partner, CST and CST Services LLC, in a lawsuit brought by a former executive of CST Services who, until March 2015, provided services to us as Chief Investment Officer and Vice President of Finance (Court of Common Pleas,  Lehigh County, Pennsylvania, case number 2015-1003). In connection with CST’s acquisition of our General Partner in 2014, the plaintiff alleged breach of contract and associated claims relating to his termination of employment and claimed severance benefits under the EICP. In October 2017, a jury awarded the plaintiff a total of $1.7 million. Under the EICP, we were also obligated to pay reasonable legal expenses incurred by the plaintiff in connection with this dispute.

Additional information regarding legal proceedings is included in Note 1517 to the financial statements.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

3739


PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

As of February 21, 2018,24, 2022, we had 34,111,46137,896,556 common units outstanding, held by approximately 2029 holders of record. Our common units are listed and trade on the NYSE under the symbol “CAPL.” Included in the number of common units outstanding are 6,389,346 common units currently owned by Circle K, which cannot be transferred absent registration with the SEC or an available exemption from the SEC’s registration requirements. See “Security Ownership of Certain Beneficial Owners and Management and Related Unitholder Matters.”

The following table sets forth, for the periods indicated, the high and low sales prices for our common units, as reported by the NYSE, and cash distributions paid per common unit. The last reported sales price of our common units on the NYSE on February 21, 2018 was $23.36 per share.

 

 

Common Unit Price Range

 

 

Cash

Distributions

Paid

per Unit

 

 

 

High

 

 

Low

 

 

 

 

 

2016

 

 

 

 

 

 

 

 

 

 

 

 

First Quarter

 

$

26.65

 

 

$

17.39

 

 

$

0.5925

 

Second Quarter

 

 

25.50

 

 

 

22.50

 

 

 

0.5975

 

Third Quarter

 

 

26.95

 

 

 

23.01

 

 

 

0.6025

 

Fourth Quarter

 

 

27.91

 

 

 

24.07

 

 

 

0.6075

 

2017

 

 

 

 

 

 

 

 

 

 

 

 

First Quarter

 

$

27.94

 

 

$

24.10

 

 

$

0.6125

 

Second Quarter

 

 

26.42

 

 

 

23.26

 

 

 

0.6175

 

Third Quarter

 

 

29.80

 

 

 

24.85

 

 

 

0.6225

 

Fourth Quarter

 

 

27.71

 

 

 

22.57

 

 

 

0.6275

 

Cash Distribution Policy

General

The Board has adopted a policy to make cash distributions per unit each quarter, in an amount determined by the Board following the end of such quarter. In general, we expect that cash distributed for each quarter will equal cash generated from operations less cash needed for maintenance capital expenditures, accrued but unpaid expenses (including the management fee to Circle K)the Topper Group), reimbursement of expenses incurred by our General Partner, debt service and other contractual obligations and reserves for future operating and capital needs or for future distributions to our partners. We expect that the Board will reserve excess cash, from time to time, in an effort to sustain or permit gradual or consistent increases in quarterly distributions. Restrictions in our credit facilityfacilities could limit our ability to pay distributions upon the occurrence of certain events. See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Credit Facility.” The Board may also determine to borrow to fund distributions in quarters when we generate less cash available for distribution than necessary to sustain or grow our cash distributions per unit. The factors that we believe will be the primary drivers of our cash generated from operations are changes in demand for motor fuels, the number of sites to which we distribute motor fuels, the margin per gallon we are able to generate at such sites and the profitability of sites we own and lease.lease, including our company operated sites.

Our cash distribution policy, established by our General Partner, is to distribute each quarter an amount at least equal to the minimum quarterly distribution of $0.4375 per unit on all units ($1.75 per unit on an annualized basis). The distribution declared by the Board on January 24, 201820, 2022 was $0.6275$0.5250 per unit (or $2.51$2.10 per unit on an annualized basis). Our General Partner may determine at any time that it is in the best interest of our Partnership to modify or revoke our cash distribution policy. Modification of our cash distribution policy may result in distributions of amounts less than, or greater than, our minimum quarterly distribution, and revocation of our cash distribution policy could result in no distributions at all. In addition, our credit facilityCAPL Credit Facility includes certain restrictions on our ability to make cash distributions.

38


IDRs

IDRs represent the right to receive an increasing percentage (15.0%, 25.0% and 50.0%) of our quarterly distributions from operating surplus after the minimum quarterly distribution and the target distribution levels (as described under Minimum Quarterly Distribution below) have been achieved. Circle K holds our IDRs and has the right to transfer these rights at any time. The distributions declared since March 2014 exceed the 15% threshold and the distributions declared since June 2015 exceed the 25% threshold.

Minimum Quarterly Distribution

If cash distributions to our unitholders exceed $0.5031 per unit in any quarter, our unitholders and the holders of our IDRs, will receive distributions according to the following percentage allocations:

Total Quarterly Distribution Per

Common and Subordinated Unit

 

Marginal Percentage Interest

in Distribution

 

Target Amount

 

Unitholders

 

 

Holders of IDRs

 

above $0.5031 up to $0.5469

 

 

85

%

 

 

15

%

above $0.5469 up to $0.6563

 

 

75

%

 

 

25

%

above $0.6563

 

 

50

%

 

 

50

%

Quarterly distribution activity during the last two years was as follows:

Quarter Ended

 

Record Date

 

Payment Date

 

Cash

Distributions

Paid

per Unit

 

 

Cash

Distribution

(in millions)

 

December 31, 2015

 

February 12, 2016

 

February 24, 2016

 

$

0.5925

 

 

$

19.6

 

March 31, 2016

 

May 19, 2016

 

May 31, 2016

 

 

0.5975

 

 

 

19.9

 

June 30, 2016

 

August 8, 2016

 

August 15, 2016

 

 

0.6025

 

 

 

20.1

 

September 30, 2016

 

November 4, 2016

 

November 15, 2016

 

 

0.6075

 

 

 

20.4

 

December 31, 2016

 

February 6, 2017

 

February 13, 2017

 

 

0.6125

 

 

 

20.5

 

March 31, 2017

 

May 8, 2017

 

May 15, 2017

 

 

0.6175

 

 

 

20.9

 

June 30, 2017

 

August 7, 2017

 

August 14, 2017

 

 

0.6225

 

 

 

21.1

 

September 30, 2017

 

November 6, 2017

 

November 13, 2017

 

 

0.6275

 

 

 

21.3

 

December 31, 2017

 

February 5, 2018

 

February 12, 2018

 

 

0.6275

 

 

 

21.4

 

We expect to continue the practice of paying quarterly cash distributions, though the timing, declaration, amount and payment of future distributions to unitholders will fall within the discretion of the Board. Our indebtedness also restricts our ability to pay distributions. As such, there can be no assurance we will continue to pay distributions in the future.

Subordination Period

On February 25, 2016,6, 2020, we closed on the subordination period underEquity Restructuring Agreement that eliminated the Partnership Agreement ended. At that time, each outstanding subordinated unit converted into one common unit and as such participates pro rata withIDRs. See Note 21 for further discussion on the other common units in cash distributions.

Unregistered Sales of Equity Securities and Use of Proceeds

Through December 31, 2017, we issued an aggregate of 6,389,346 common units to CST or Circle K as consideration for asset purchases and partial settlementelimination of the management fee. These units are restricted and cannot be transferred absent registration with the SEC or an available exemption from the SEC’s registration requirements. These issuances were made in reliance on Section 4(a)(2) of the Securities Act of 1933, as amended. See “Security Ownership of Certain Beneficial Owners and Management and Related Unitholder Matters.”IDRs. 

39


Common Unit Repurchase Program

On November 2, 2015, our Board approved a common unit repurchase program under Rule 10b-18 of the Exchange Act authorizing us to repurchase up to an aggregate of $25 million of the common units representing limited partner interests in the Partnership. Under the program, we may make purchases in the open market after November 9, 2015 in accordance with Rule 10b-18 of the Exchange Act, or in privately negotiated transactions, pursuant to a trading plan under Rule 10b5-1 of the Exchange Act or otherwise. Any purchases will be funded from available cash on hand. The common unit repurchase program does not require us to acquire any specific number of common units and may be suspended or terminated by us at any time without prior notice. The purchases will not be made from any officer, director or control person of CrossAmerica or Couche-Tard. Since inception, we repurchased $6.9 million, or 287,621 common units, at an average price of $23.84 per common unit. We made no repurchases during 2017. 

Common Unit Purchases by CST

On September 21, 2015, CST approved a unit purchase program under Rule 10b-18 of the Exchange Act, authorizing CST to purchase up to an aggregate of $50 million of the common units representing limited partner interests in us. The unit purchase program does not have a fixed expiration date and may be modified, suspended or terminated at any time at CST’s discretion. Through December 31, 2015, CST had purchased $19.8 million, or 804,667 common units, at an average price of $24.64 per common unit, which cannot be transferred absent registration with the SEC or an available exemption from the SEC’s registration requirements. CST and Circle K made no purchases of common units during 2016 or 2017.

Management Fee Issuance

As approved by the independent conflicts committee of the Board, the Partnership and Circle K mutually agreed to settle, from time to time, a portion of the full amount due under the terms of the Amended Omnibus Agreement in newly issued common units representing limited partner interests in the Partnership. These issuances of common units were made in reliance on Section 4(a)(2) of the Securities Act of 1933, as amended. We issued the following common units to CST or Circle K for the periods presented below under the terms of the Amended Omnibus Agreement:

Quarter Ended

Date of Issuance

Number of

Common

Units Issued

June 30, 2015

July 16, 2015

145,056

September 30, 2015

October 26, 2015

114,256

December 31, 2015

March 31, 2016

145,137

March 31, 2016

May 9, 2016

83,218

June 30, 2016

August 2, 2016

101,087

September 30, 2016

October 27, 2016

110,824

December 31, 2016

February 28, 2017

171,039

March 31, 2017

May 10, 2017

128,983

June 30, 2017

August 9, 2017

124,003

September 30, 2017

November 10, 2017

126,491

December 31, 2017

March 1, 2018

136,882

ITEM 6. SELECTED FINANCIAL DATA[Reserved]

The following selected financial data reflect the operating data for the periods and as of the dates indicated.

To ensure a full understanding, you should read the selected financial data presented below in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the financial statements and accompanying notes included in this Form 10-K.

40


The financial data below are presented in thousands.

 

 

For the Year Ended December 31,

 

 

 

2017

 

 

2016

 

 

2015

 

 

2014

 

 

2013

 

Income Statement Data:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total revenues (a)

 

$

2,094,827

 

 

$

1,869,806

 

 

$

2,226,271

 

 

$

2,664,868

 

 

$

1,936,059

 

Operating income

 

 

32,419

 

 

 

32,171

 

 

 

26,017

 

 

 

8,640

 

 

 

30,177

 

Income (loss) from continuing operations

   after income taxes

 

 

23,176

 

 

 

10,715

 

 

 

11,462

 

 

 

(6,171

)

 

 

18,070

 

Net income (loss) attributable to limited partners

 

 

23,158

 

 

 

10,704

 

 

 

11,441

 

 

 

(6,162

)

 

 

18,070

 

Net income (loss) per common and

   subordinated unit-basic

 

$

0.56

 

 

$

0.22

 

 

$

0.35

 

 

$

(0.32

)

 

$

1.18

 

Net income (loss) per common and

   subordinated unit-diluted

 

$

0.56

 

 

$

0.22

 

 

$

0.35

 

 

$

(0.32

)

 

$

1.18

 

Operating Data:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Wholesale

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average motor fuel distribution sites

 

 

1,183

 

 

 

1,128

 

 

 

1,064

 

 

 

923

 

 

 

708

 

Gallons of motor fuel distributed (in millions)

 

 

1,032.0

 

 

 

1,034.6

 

 

 

1,051.4

 

 

 

887.7

 

 

 

637.8

 

Motor fuel gross margin

 

$

58,844

 

 

$

54,112

 

 

$

58,606

 

 

$

60,606

 

 

$

43,850

 

Motor fuel gross margin per gallon (b)

 

$

0.057

 

 

$

0.052

 

 

$

0.056

 

 

$

0.068

 

 

$

0.069

 

Rent income (a)

 

$

79,344

 

 

$

74,955

 

 

$

59,956

 

 

$

47,348

 

 

$

40,210

 

Retail

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average total system sites

 

 

168

 

 

 

157

 

 

 

202

 

 

 

119

 

 

 

21

 

Gallons of motor fuel sold (in millions)

 

 

160.6

 

 

 

159.7

 

 

 

211.2

 

 

 

136.5

 

 

 

20.2

 

Motor fuel gross margin per gallon

 

$

0.045

 

 

$

0.053

 

 

$

0.092

 

 

$

0.059

 

 

$

0.032

 

Merchandise gross margin percentage

 

 

24.4

%

 

 

24.6

%

 

 

26.3

%

 

 

30.6

%

 

n/a

 

Other Financial Data (unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA (c)

 

$

109,077

 

 

$

103,634

 

 

$

90,314

 

 

$

61,424

 

 

$

54,904

 

Distributable Cash Flow (c)

 

$

81,234

 

 

$

81,628

 

 

$

69,733

 

 

$

44,063

 

 

$

39,296

 

Distributions paid per common unit

 

$

2.4800

 

 

$

2.4000

 

 

$

2.2300

 

 

$

2.0800

 

 

$

1.7273

 

Distribution Coverage (c)

 

0.97x

 

 

1.02x

 

 

1.08x

 

 

1.06x

 

 

1.49x

 

 

 

(a)

Prior to 2016, we netted lease executory costs such as real estate taxes, maintenance and utilities that we paid and re-billed customers against rental income on our statement of income. During the first quarter of 2016, we began accounting for such amounts as rent income and operating expenses and reflected this change in presentation retrospectively back through 2014.

(b)

Fuel margin per gallon represents (1) total revenues from motor fuel sales, less total cost of revenues from motor fuel sales, divided by (2) total gallons of motor fuel distributed.

(c)

See reconciliation of non-GAAP financial measures under the heading “Management’s Discussion of Financial Condition and Results of Operations—Results of Operations—Non-GAAP Financial Measures” below.

 

 

As of December 31,

 

 

 

2017

 

 

2016

 

 

2015

 

 

2014

 

 

2013

 

Balance Sheet Data:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

3,897

 

 

$

1,350

 

 

$

1,192

 

 

$

15,170

 

 

$

4,115

 

Total current assets (a)

 

 

80,506

 

 

 

65,407

 

 

 

58,119

 

 

 

76,805

 

 

 

35,496

 

Total assets (a) (b)

 

 

947,236

 

 

 

931,989

 

 

 

861,444

 

 

 

598,446

 

 

 

391,621

 

Total current liabilities (a)

 

 

93,473

 

 

 

75,133

 

 

 

74,898

 

 

 

95,222

 

 

 

38,857

 

Long-term debt, excluding current portion (b)

 

 

529,147

 

 

 

465,119

 

 

 

403,714

 

 

 

226,815

 

 

 

173,509

 

Total liabilities (a) (b)

 

 

776,217

 

 

 

711,178

 

 

 

592,588

 

 

 

407,955

 

 

 

296,950

 

Total equity

 

 

171,019

 

 

 

220,811

 

 

 

268,856

 

 

 

190,491

 

 

 

94,671

 

(a)

Balances as of December 31, 2013 were not retrospectively adjusted for the adoption of ASU 2015-17, which related to the presentation of deferred taxes.

(b)

Balances as of December 31, 2013 were not retrospectively adjusted for the adoption of ASU 2015-03, which related to the presentation of deferred financing costs.

41


ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OFOF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following MD&A is intended to help the reader understand our results of operations and financial condition. This section is provided as a supplement to and should be read in conjunction with Items 1., 1A.1, 1A and 8.8 (which includes our consolidated financial statements) contained in this report.

MD&A is organized as follows:

CST’s Merger—This section provides information on the Merger.

Recent Developments—This section describes significant recent developments, including our acquisition of certain assets from 7-Eleven.

Significant Factors Affecting Our Profitability

Significant Factors Affecting Our Profitability—This section describes the significant impact on our results of operations caused by crude oil commodity price volatility, seasonality and acquisition and financing activities.

Results of Operations—This section provides an analysis of our results of operations, including the results of operations of our business segments and non-GAAP financial measures.

Liquidity and Capital Resources—This section provides a discussion of our financial condition and cash flows. It also includes a discussion of our debt, capital requirements, other matters impacting our liquidity and capital resources and an outlook for our business.

40


New Accounting Policies—This section describes new accounting pronouncements that we have already adopted, those that we are required to adopt in the future and those that became applicable in the current year as a result of new circumstances.

Critical Accounting Policies and Estimates—This section describes the accounting policies and estimates that we consider most important for our business and that require significant judgment.

Recent Developments

Acquisition of Assets from 7-Eleven

On April 28, 2021, certain newly formed subsidiaries of CrossAmerica, including Joe’s Kwik Marts (collectively, “Buyer”), entered into the Asset Purchase Agreement with 7-Eleven, pursuant to which Buyer agreed to purchase certain assets related to the ownership and operations of 106 company operated sites (90 fee; 16 leased) located in the Mid-Atlantic and Northeast regions of the U.S. (the “Properties”) for an aggregate purchase price of $263.0 million, excluding working capital and subject to adjustment in accordance with the terms of the Asset Purchase Agreement. The assets were sold by 7-Eleven as part of a divestiture process in connection with its previously announced acquisition of the Speedway business from Marathon Petroleum Corporation.

The assets purchased by Buyer include real property and leasehold rights to the Properties, and all inventory and other assets located at the Properties, other than specific excluded assets, such as rights to intellectual property or rights with respect to “7-Eleven” or “Speedway” branding. Substantially all of the sites purchased were operated under the Speedway brand, and all sites were rebranded in connection with the closing of such site pursuant to the Asset Purchase Agreement. Buyer also assumed certain specified liabilities associated with the assets.

Starting in late June 2021, Buyer closed on the acquisition of the Properties on a rolling basis of generally ten sites per week. Through December 31, 2021, Buyer consummated the closing under the Asset Purchase Agreement of 103 Properties for a purchase price of $273.0 million, including inventory and other working capital. In February 2022, we closed on the final three Properties for a purchase price of $3.6 million, a portion of which will be paid on or prior to February 8, 2027.

We funded these transactions primarily through the new JKM Credit Facility further described below, undrawn capacity under our existing revolving credit facility and cash on hand.

JKM Credit Facility

On July 16, 2021, CAPL JKM Partners LLC (“Borrower”), an indirect wholly-owned subsidiary of CrossAmerica, entered into a Credit Agreement, as amended on July 29, 2021 (the “JKM Credit Facility”) among Borrower, JKM Holdings LLC (“Holdings”) and Manufacturers and Traders Trust Company, as administrative agent, swingline lender and issuing bank.

The JKM Credit Facility provides for a $200 million senior secured credit facility, consisting of a $185 million delayed draw term loan facility (the “Term Loan Facility”) and a $15 million revolving credit facility (the “Revolving Credit Facility”). The Revolving Credit Facility permits up to $7.5 million of swingline borrowings and $5.0 million in letters of credit. The interest rate applicable to loans outstanding under the JKM Credit Facility is equal to, at Borrower’s option, either (i) a base rate plus a margin (which will be determined based on Borrower’s consolidated leverage ratio) ranging from 0.50% to 1.50% per annum or (ii) LIBOR plus a margin (which will also be determined based on Borrower’s consolidated leverage ratio) ranging from 1.50% to 2.50% per annum. The Term Loan Facility will amortize in equal quarterly installments equal to 1.50% of the unpaid principal amount of the Term Loan Facility, with the first payment due April 1, 2022 and the balance payable on the maturity date of the Term Loan Facility. Letters of credit are subject to a 0.125% fronting fee and other customary administrative charges. Standby letters of credit accrue a fee at a rate based on the applicable margin of LIBOR loans. In addition, beginning in October 2021, a commitment fee was charged based on the unused portion of the JKM Credit Facility at a rate ranging from 0.25% to 0.375% per annum depending on Borrower’s consolidated leverage ratio. The JKM Credit Facility will mature on July 16, 2026.

The obligations under the JKM Credit Facility are guaranteed by Holdings and its subsidiaries (other than Borrower) and secured by a lien on substantially all of the assets of Holdings and its subsidiaries (including Borrower). The obligations under the JKM Credit Facility are nonrecourse to CrossAmerica and its subsidiaries other than Holdings, Borrower and their respective subsidiaries.


The JKM Credit Facility contains customary events of default and covenants, including, among other things, and subject to certain exceptions, covenants that restrict the ability of Holdings and its subsidiaries to create or incur liens on assets, make investments, incur additional indebtedness, merge or consolidate and dispose of assets.

The JKM Credit Facility also contains financial covenants requiring Borrower to comply with, as of the last day of each fiscal quarter of Borrower, commencing with Borrower’s fiscal quarter ending December 31, 2021, (i) a maximum consolidated leverage ratio of 6.25 to 1.00, with step-downs to 6.00 to 1.00, 5.75 to 1.00, 5.50 to 1.00 and 5.25 to 1.00 on March 31, 2022, March 31, 2023, March 31, 2024 and March 31, 2025, respectively, and (ii) a minimum fixed charge coverage ratio of 1.10 to 1.00.

If an event of default under the JKM Credit Facility occurs and is continuing, the commitments thereunder may be terminated and the principal amount outstanding thereunder, together with all accrued unpaid interest and other amounts owed thereunder, may be declared immediately due and payable.

As of February 24, 2022, we had $183.6 million outstanding under our Term Loan Facility.

Amendment to CAPL Credit Facility

On July 28, 2021, the Partnership entered into an amendment (the “Amendment”) to its Credit Agreement, dated as of April 1, 2019 (as previously amended by the First Amendment to Credit Agreement, dated as of November 19, 2019, the “CAPL Credit Facility”), among the Partnership and Lehigh Gas Wholesale Services, Inc., as borrowers, the guarantors from time to time party thereto, the lenders from time to time party thereto and Citizens Bank, N.A., as administrative agent. The Amendment, among other things, (i) amended certain provisions relating to unrestricted subsidiaries, (ii) increased the maximum level for the consolidated leverage ratio financial covenant to 6.00 to 1.00 for the fiscal quarters ending September 30, 2021 and December 31, 2021, 5.75 to 1.00 for the fiscal quarter ending March 31, 2022, 5.50 to 1.00 for the fiscal quarter ending June 30, 2022, and 5.25 to 1.00 for the fiscal quarter ending September 30, 2022, after which the maximum level generally reverts to 4.75 to 1.00 unless in a specified acquisition period or a qualified note offering has occurred, and (iii) modified the applicable margin for borrowings under the CAPL Credit Facility (as amended by the Amendment), such that borrowings bear interest, at the Partnership’s option, at either LIBOR plus a margin ranging from 1.50% to 3.00% per annum or a base rate plus a margin ranging from 0.50% to 2.00% per annum (in each case depending on the Partnership’s consolidated leverage ratio).

See Notes 3 and 12 to the financial statements for additional information regarding this acquisition and the related financing.

COVID-19 Pandemic

During the first quarter of 2020, an outbreak of a novel strain of coronavirus spread worldwide, including to the U.S., posing public health risks that have reached pandemic proportions. We experienced a sharp decrease in fuel volume in mid-to-late March 2020. Although fuel volumes largely recovered during the second half of 2020 and continued to recover in 2021, we cannot predict the scope and severity with which COVID-19 will impact our business, financial condition, results of operations caused by crude oil commodity price volatility, seasonality and acquisition and financing activities.

Results of Operations—This section provides an analysis of our results of operations, including the results of operations of our business segments, for the years ended December 31, 2017, 2016 and 2015 and non-GAAP financial measures.

Liquidity and Capital Resources—This section provides a discussion of our financial condition and cash flows. It also includes a discussion of our debt, capital requirements, other matters impacting our liquidity and capital resources and an outlook for our business.

New Accounting Policies—This section describes new accounting pronouncements that we have already adopted, those that we are required to adopt in the future and those that became applicable in the current year as a result of new circumstances.

Critical Accounting Policies Involving Critical Accounting Estimates—This section describes the accounting policies and estimates that we consider most important for our business and that require significant judgment.

Couche-Tard and CST Merger

On June 28, 2017, a wholly owned subsidiary of Circle K merged with and into CST, with CST surviving the Merger as an indirect, wholly owned subsidiary of Circle K. Circle K is a wholly owned subsidiary of Couche-Tard.

As a result of the Merger, Circle K indirectly owns all of the membership interests in the sole member of our General Partner, as well as a 21.1% limited partner interest in the Partnership and all of the outstanding IDRs of the Partnership. Circle K, through its indirect ownership interest in the sole member of our General Partner, has the ability to appoint all of the members of the Board and to control and manage the operations and activities of the Partnership. 

Significant Factors Affecting our Profitability

The Significance of Crude Oil and Wholesale Motor Fuel Prices on Our Revenues, Cost of Sales and Gross Profit

Wholesale segment

The prices paid to our motor fuel suppliers for wholesale motor fuel (which affects our cost of sales) are highly correlated to the price of crude oil. The crude oil commodity markets are highly volatile, and the market prices of crude oil, and, correspondingly, the market prices of wholesale motor fuel, experience significant and rapid fluctuations. We receive a fixed mark-up per gallon onFor approximately 85%62% of gallons sold to our customers.customers, we receive a per gallon rate equal to the posted rack price, less any applicable discounts, plus transportation costs, taxes and a fixed rate per gallon of motor fuel. The remaining gallons are primarily DTW priced contracts, with our customers.including intersegment sales to the retail segment. These contracts provide for variable, market based pricing that results in motor fuel gross profit effects similar to retail motor fuel gross profits (as crude oil prices decline, motor fuel gross profit generally increases, as discussed in our Retail segment below). The increase in DTW gross profit results from the acquisition cost of wholesale motor fuel declining at a faster rate as compared to the rate retail motor fuel prices decline. Conversely, our DTW motor fuel gross profit declines when the cost of wholesale motor fuel increases at a faster rate as compared to the rate retail motor fuel prices increase.market-based pricing.

CrossAmerica purchases motor fuel for our Jet-Pep Assets from Circle K at Circle K’s cost plus terminal and administration fees of $0.015 per gallon. Circle K’s cost to supply these sites includes price fluctuations associated with index-based motor fuel pricing for pipeline delivery and the generation and sale of RINs. Circle K has implemented a motor fuel price hedging program to mitigate the price risk during delivery; however, we are exposed to more price risk with these motor fuel purchases from Circle K as compared to our other motor fuel purchases.

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Regarding our supplier relationships, a majority of our total gallons purchased are subject to Terms Discounts. The dollar value of these discounts increases and decreases corresponding to motor fuel prices. Therefore, in periods of lower wholesale motor fuel prices, our gross profit is negatively affected, and, in periods of higher wholesale motor fuel prices, our gross profit is positively affected (as it relates to these discounts).

42


Retail segment

We attempt to pass along wholesale motor fuel price changes to our retail customers through “at the pump” retail price changes; however, market conditions do not always allow us to do so immediately. The timing of any related increase or decrease in “at the pump” retail prices is affected by competitive conditions in each geographic market in which we operate. As such, the prices we charge our customers for motor fuel and the gross profit we receive on our motor fuel sales can increase or decrease significantly over short periods of time.

Changes in our average motor fuel selling price per gallon and gross margin are directly related to the changes in crude oil and wholesale motor fuel prices. Variations in our reported revenues and cost of sales are, therefore, primarily related to the price of crude oil and wholesale motor fuel prices and generally not as a result of changes in motor fuel sales volumes, unless otherwise indicated and discussed below.

We typically experience lowerAs previously reported, we converted 46 company operated sites to dealer operated sites in the third quarter of 2019. As a result of this transition, we did not have any company operated sites for the period from September 30, 2019 through closing on the retail motor fuel gross profits in periods when theand wholesale cost of motor fuel increases, and higher retail motor fuel gross profits in periods when the wholesale cost of motor fuel declines.acquisition on April 14, 2020, since which we have again been operating company operated sites.

Seasonality Effects on Volumes

Our business is subject to seasonality due to our wholesale and retail sites being located in certain geographic areas that are affected by seasonal weather and temperature trends and associated changes in retail customer activity during different seasons. Historically, sales volumes have been highest in the second and third quarters (during the summer months) and lowest during the winter months in the first and fourth quarters.

Impact of Inflation

Inflation affects our financial performance by increasing certain of our operating expenses and cost of goods sold. Operating expenses include labor costs, leases, and general and administrative expenses. While our Wholesalewholesale segment benefits from higher Terms Discounts as a result of higher fuel costs, inflation could negatively impact our Retail segment as a result of higher motor fuel, merchandise and operating costs.expenses. Although we have historically been able to pass on increased costs through price increases, there can be no assurance that we will be able to do so in the future.

Acquisition and Financing Activity

Our results of operations and financial condition are also impacted by our acquisition and financing activities as summarized below.

20152019

In January 2015, we closed on the purchase of a 5% limited partner equity interest in CST Fuel Supply for approximately 1.5 million common units with an aggregate consideration of $60.0 million on the date of closing.

In January 2015, in connection with the joint acquisition by CST and the Partnership of 22 retail sites from Landmark Assets, we acquired the real property of the 22 fee sites for $41.2 million.

In February 2015, we closed on the purchase of all of the outstanding capital stock of Erickson and certain related assets for an aggregate purchase price of $83.8 million, including working capital.

In June 2015, we closed on the sale of 4.6 million common units for net proceeds of approximately $138.5 million. In July 2015, we closed on the sale of an additional 0.2 million common units for net proceeds of approximately $6.4 million in accordance with the underwriters’ option to purchase additional common units associated with the June offering. We used the proceeds to reduce indebtedness outstanding under our credit facility.

In July 2015, we closed on the purchase of a 12.5% limited partner equity interest in CST Fuel Supply for approximately 3.3 million common units and cash in the amount of $17.5 million, with an aggregate consideration of approximately $110.9 million on the date of closing.

43


 

In July 2015,On April 1, 2019, we entered into a credit facility as further discussed in Note 12 to the financial statements.

On May 21, 2019 and September 5, 2019, we completed the purchasefirst two asset exchange transactions with Circle K.

2020

We completed four additional tranches of real property at 29 NTIs from CST inthe asset exchange for an aggregate considerationwith Circle K on February 25, 2020, April 7, 2020, May 5, 2020 and September 15, 2020. With the closing of approximately 0.3 million common units and cash in the amount of $124.4 million, with an aggregate consideration of $134.0 million onsixth tranche, the date of closing.transactions contemplated under the Asset Exchange Agreement have concluded.

On February 6, 2020, we closed on the Equity Restructuring Agreement that eliminated the IDRs.

In July 2015, we closed on the purchase of retail sites from One Stop and certain related assets for $45.0 million, including working capital.

Effective March 25, 2020, we closed on the CST Fuel Supply Exchange.

On April 14, 2020, we closed on the acquisition of retail and wholesale assets.

20162021

On February 5, 2016, we purchased independent dealer and sub-wholesaler contracts from CST for $2.9 million.

On March 29, 2016, we closed on the acquisition of Franchised Holiday Stores and company operated liquor stores from S/S/G Corporation for approximately $52.4 million, including working capital.

On July 7, 2016, CST provided an $18.2 million refund payment to us related to our interest in CST Fuel Supply.

On September 27, 2016, we acquired the State Oil Assets located in the greater Chicago market for approximately $41.9 million, including working capital.

On December 13, 2016, we amended our credit facility to provide additional flexibility to support achieving our growth strategy.

On December 21, 2016, we sold the real property at 17 fee sites acquired in the State Oil Assets acquisition for $25.0 million in proceeds, which were used to repay borrowings under the credit facility. We subsequently leased these sites back under a triple net lease agreement.

From late June 2021 through December 31, 2021, we closed on the purchase of 103 sites of our 106-site acquisition from 7-Eleven, and in July 2021, we entered into a new credit agreement and amended our existing credit facility as further described in Notes 3 and 12 to the financial statements.

2017

On September 6, 2017, we sold two properties to an unaffiliated third party as a result of the FTC’s requirements associated with the Merger for $6.7 million.

On September 27, 2017, as approved by the independent conflicts committee of our Board, we sold 29 properties to DMR for $18.9 million. These sites were generally sites at which we did not supply fuel or represented vacant land.

On November 28, 2017, we acquired the Jet-Pep Assets located in Alabama for approximately $75.6 million, including working capital.

Separation Benefits and Retention Bonuses

During 2017, the Partnership recognized a $5.4 million charge for certain severance and benefit costs associated with certain officers and other employees of CST Services who provided services to the Partnership and who terminated employment upon the consummation of the Merger, which constituted a change in control, as defined in the EICP and CST’s severance plans. Such costs are included in general and administrative expenses and were primarily paid by Circle K in the third quarter of 2017. Accounts payable to related parties includes these costs as we will reimburse Circle K.

In addition, certain participants in the EICP received retention bonuses that will be paid in annual installments that began in July 2017 and will continue through July 2019. The Partnership recorded a $1.0 million charge during 2017 in connection with the payments made by Circle K in July 2017, which were included in general and administrative expenses. In addition, the Partnership recognized a $0.7 million charge in 2017 for the payments expected to be made in July 2018 and July 2019. The Partnership anticipates recognizing future charges totaling $0.9 million over the remaining retention period, of which $0.8 million is anticipated to be recognized in 2018.

We were a co-defendant, together with our General Partner, CST and CST Services LLC, in a lawsuit brought by a former executive of CST Services who, until March 2015, provided services to us as Chief Investment Officer and Vice President of Finance (Court of Common Pleas,  Lehigh County, Pennsylvania, case number 2015-1003). In connection with CST’s acquisition of our General Partner in 2014, the plaintiff alleged breach of contract and associated claims relating to his termination of employment and claimed severance benefits under the EICP. In October 2017, a jury awarded the plaintiff a total of $1.7 million. Under the EICP, we were also obligated to pay reasonable legal expenses incurred by the plaintiff in connection with this dispute.

4443


Acquisition of Jet-Pep Assets

On November 28, 2017, we closed on the acquisition of the real property and the fuel supply business of 101 commission operated retail sites, including 92 fee simple sites, the leasehold interest in five real property sites and the fuel supply business to four independent commission sites, all located in Alabama, from Jet-Pep, Inc. and affiliated entities, for an aggregate cash consideration of $75.6 million, including working capital. On the same day, Circle K closed on the acquisition of certain related retail and terminal assets from Jet-Pep, Inc. and affiliated entities.

Results of Operations

We have omitted discussion of the earliest of the three years covered by our consolidated financial statements presented in this Annual Report because that disclosure was already included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020, filed with the SEC on March 1, 2021. You are encouraged to reference Part II, Item 7, within that report, for a discussion of our financial condition and results of operations for the year ended December 31, 2020 as compared to the year ended December 31, 2019.

Consolidated Income Statement Analysis

Below is an analysis of our consolidated statements of income and provides the primary reasons for significant increases and decreases in the various income statement line items from period to period. Our consolidated statements of income are as follows (in thousands):

 

 

Year Ended December 31,

 

 

Year Ended December 31,

 

 

2017

 

 

2016

 

 

2015

 

 

2021

 

 

2020

 

 

2019

 

Operating revenues

 

$

2,094,827

 

 

$

1,869,806

 

 

$

2,226,271

 

 

$

3,579,259

 

 

$

1,932,323

 

 

$

2,149,429

 

Cost of sales

 

 

1,934,061

 

 

 

1,714,239

 

 

 

2,056,807

 

 

 

3,302,306

 

 

 

1,720,196

 

 

 

1,994,792

 

Gross profit

 

 

160,766

 

 

 

155,567

 

 

 

169,464

 

 

 

276,953

 

 

 

212,127

 

 

 

154,637

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income from CST Fuel Supply equity interests

 

 

14,906

 

 

 

16,048

 

 

 

10,528

 

 

 

 

 

 

3,202

 

 

 

14,768

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses

 

 

61,297

 

 

 

61,074

 

 

 

72,229

 

 

 

134,079

 

 

 

90,928

 

 

 

52,554

 

General and administrative expenses

 

 

27,887

 

 

 

24,156

 

 

 

36,238

 

 

 

30,930

 

 

 

20,991

 

 

 

16,849

 

Depreciation, amortization and accretion expense

 

 

57,470

 

 

 

54,412

 

 

 

48,227

 

 

 

77,852

 

 

 

68,742

 

 

 

55,032

 

Total operating expenses

 

 

146,654

 

 

 

139,642

 

 

 

156,694

 

 

 

242,861

 

 

 

180,661

 

 

 

124,435

 

Gain on sales of assets, net

 

 

3,401

 

 

 

198

 

 

 

2,719

 

Gain (loss) on dispositions and lease terminations, net

 

 

2,037

 

 

 

80,924

 

 

 

(1,648

)

Operating income

 

 

32,419

 

 

 

32,171

 

 

 

26,017

 

 

 

36,129

 

 

 

115,592

 

 

 

43,322

 

Other income (expense), net

 

 

439

 

 

 

848

 

 

 

396

 

Other income, net

 

 

544

 

 

 

503

 

 

 

524

 

Interest expense

 

 

(27,919

)

 

 

(22,757

)

 

 

(18,493

)

 

 

(18,244

)

 

 

(16,587

)

 

 

(27,000

)

Income before income taxes

 

 

4,939

 

 

 

10,262

 

 

 

7,920

 

 

 

18,429

 

 

 

99,508

 

 

 

16,846

 

Income tax benefit

 

 

(18,237

)

 

 

(453

)

 

 

(3,542

)

 

 

(3,225

)

 

 

(7,948

)

 

 

(1,230

)

Net income

 

 

23,176

 

 

 

10,715

 

 

 

11,462

 

 

 

21,654

 

 

 

107,456

 

 

 

18,076

 

Net income attributable to noncontrolling interests

 

 

18

 

 

 

11

 

 

 

21

 

Net income attributable to limited partners

 

 

23,158

 

 

 

10,704

 

 

 

11,441

 

IDR distributions

 

 

(4,337

)

 

 

(3,392

)

 

 

(1,390

)

 

 

 

 

 

(133

)

 

 

(533

)

Net income available to limited partners

 

$

18,821

 

 

$

7,312

 

 

$

10,051

 

 

$

21,654

 

 

$

107,323

 

 

$

17,543

 

 


Year Ended December 31, 20172021 Compared to Year Ended December 31, 20162020

Consolidated Results

Operating revenues increased $225$1.6 billion or 85%, while operating income decreased $79 million or 12%, while gross profit increased $5.2 million, or 3.3%69%.

Operating revenues

Significant items impacting these results prior to the elimination of intercompany revenues were:

A $240 million, or 15%, increase in our Wholesale segment revenues primarily attributable to the increase in crude oil prices. The average daily spot price of WTI crude oil increased 17% to $50.78 per barrel in 2017, compared to $43.29 per barrel in 2016. The wholesale price of motor fuel is highly correlated to the price of crude oil. See “Significant Factors Affecting our Profitability—The Significance of Crude Oil and Wholesale Motor Fuel Prices on Our Revenues, Cost of Sales and Gross Profit.”

A $1.5 billion (89%) increase in our wholesale segment revenues primarily attributable to the increase in crude oil prices. The average daily spot price of WTI crude oil increased 74% to $68.14 per barrel in 2021, compared to $39.16 per barrel in 2020. The wholesale price of motor fuel is highly correlated to the price of crude oil. See “Significant Factors Affecting our Profitability—The Significance of Crude Oil and Wholesale Motor Fuel Prices on Our Revenues, Cost of Sales and Gross Profit.” Volume increased 20% primarily as a result of the volume generated by the asset exchanges with Circle K, the CST Fuel Supply Exchange, the acquisition of the retail and wholesale assets and the acquisition of assets from 7-Eleven (the average number of sites with wholesale fuel distribution increased 6% from 2020 compared to 2021), as well as continuing recovery from the COVID-19 Pandemic.

A $24 million, or 5%, increase in our Retail segment revenues primarily attributable to the increase in crude oil prices, largely offset by conversion of company operated retail sites to lessee dealer sites. See “Significant Factors Affecting our Profitability—The Significance of Crude Oil and Wholesale Motor Fuel Prices on Our Revenues, Cost of Sales and Gross Profit.”

A $756 million (111%) increase in our retail segment revenues primarily attributable to the increase in company operated and commission sites as a result of the April 2020 acquisition of retail and wholesale assets, the March 2020 CST Fuel Supply Exchange and the acquisition of assets from 7-Eleven (the average total system sites increased 27% from 2020 compared to 2021). Volume increased 56% from 2020 to 2021 driven by the acquisitions as well as the continuing recovery from the COVID-19 Pandemic.The average retail fuel price increased 43% between those same periods due primarily due to the increase in wholesale motor fuel prices noted above. In addition, merchandise revenues increased $85.8 million (70%) driven by the acquisition of retail and wholesale assets and the acquisition of assets from 7-Eleven.

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Intersegment revenues

We present the results of operations of our segments on a consistent basis with how our management views the business. Therefore, our segments are presented before intersegment eliminations (which consist of motor fuel sold by our Wholesalewholesale segment to our Retailretail segment). As a result, in order to reconcile to our consolidated change in operating revenues, a discussion of the change in intersegment revenues is included in our consolidated MD&A discussion.

Our intersegment revenues increased $39.2$559 million or 16%(151%), primarily attributable to the increaseincremental intersegment revenues generated by the company operated and commission sites acquired in the April 2020 acquisition of retail and wholesale motor fuel prices discussed above.assets, the March 2020 CST Fuel Supply Exchange, and the acquisition of assets from 7-Eleven, as well as higher volume from the continuing recovery from the COVID-19 Pandemic.

Cost of sales

Cost of sales increased $220 million or 13%$1.6 billion (92%) as a result of the increase in wholesale motor fuel prices.prices and the impact of the increase in sites acquired in the asset exchanges with Circle K, the CST Fuel Supply Exchange, the acquisition of retail and wholesale assets and the acquisition of assets from 7-Eleven, as well as the continuing recovery from the COVID-19 Pandemic.

Gross profit

The $65 million (31%) increase in gross profit was primarily driven by an increase in motor fuel and merchandise gross profit due to: 1) the CST Fuel Supply Exchange, which primarily resulted in an increase in fuel margin partially offset by a decrease in income from CST Fuel Supply equity interests; 2) the acquisition of retail and wholesale assets, which primarily resulted in an increase in fuel margin and merchandise margin and other revenues partially offset by a decrease in lease margin; 3) the acquisition of assets from 7-Eleven, which resulted in an increase in fuel margin, merchandise margin and other revenues; and 4) an increase in volume driven by the continuing recovery from the COVID-19 Pandemic. See “Results of Operations—Segment Results” for additional gross profit analyses.

Income from CST Fuel Supply equity interests and Operating expenses

See “Results of Operations—Segment“Segment Results” for additional operating expenses analyses.

45


General and administrative expenses

General and administrative expenses increased $3.7$9.9 million (47%) primarily attributable to a $7.1 million charge recorded upon closing of the Merger for certain severance and benefit costs for certain terminated officers and other employees of CST Services who provided services to the Partnership and retention bonuses to certain EICP participants and a $1.7 million charge related to a court ruling in favor of a former executive’s claim to benefits under the EICP change in control provisions, partially offsetdriven by a $1.5$6.0 million decrease driven byincrease in acquisition-related costs as a result of higher legal fees incurred in connection with the integrationacquisition of prior year acquisitions and other cost savings initiatives andassets from 7-Eleven, a $3.5$1.9 million decreaseincrease in management fees charged by Circle K and equityrelated to an increase in headcount, a $1.1 million increase in equity-based compensation expense as a result of personnelmore grants being outstanding during 2021 as compared to 2020 and salary reductions effective atoverall higher general and administrative expenses stemming from the timeApril 2020 acquisition of retail and wholesale assets and the Merger.acquisition of assets from 7-Eleven, partially offset by a $1.0 million decrease in credit loss expense.

Depreciation, amortization and accretion expense

Depreciation, amortization and accretion expense increased $3.1$9.1 million (13%) primarily driven byfrom the property and equipment and intangible assets acquired in the asset exchanges with Circle K, the CST Fuel Supply Exchange, the acquisition of retail and wholesale assets and the acquisition of assets from 7-Eleven. We recorded $7.7 million of impairment charges in connection with our recent acquisitions.ongoing real estate rationalization effort and the resulting reclassification of these sites to assets held for sale, as compared to $9.1 million in 2020.

Gain on sales of assets,dispositions and lease terminations, net

During 2017,2021, we recorded a $2.2$3.3 million gain related to sites sold in connection with our ongoing real estate rationalization effort, partially offset by net losses on lease terminations and asset disposals.

During 2020, we recorded a $67.6 million gain on the sale of twoour 17.5% investment in CST Fuel Supply (see Note 4 to the financial statements for additional information). In addition, we recorded $19.3 million in gains related to the properties as required bysold in the FTCasset exchanges with Circle K and $6.4 million in gains related to the sale of sites in connection with our ongoing real estate rationalization effort. Partially offsetting these gains, we recorded a $10.9 million loss on lease terminations, including a write-off of deferred rent income, in connection with the Merger and a $0.8 million gain on the sale of 29 properties to DMR. We also recorded a $0.8 million gain related to the renewal of a contract by DMS with one of its customers, which triggered an earn out payment to be paid by DMS to us in connection with a contract entered into with DMS at the time of CST’sApril 2020 acquisition of our General Partner in October 2014.retail and wholesale assets.

Interest expense

Interest expense increased $5.2$1.7 million (10%) primarily due to an$1.8 million in interest expense on the JKM Credit Facility along with a $0.8 million increase in amortization of deferred financing costs as a result of entering into the JKM Credit Facility and the amendment to the CAPL Credit Facility. The higher interest expense due to the higher outstanding balance on the CAPL Credit Facility (driven by the borrowings to fund a portion of the purchase price of the acquisition of assets from 7-Eleven) was more than offset by a reduction in the average interest rate charged on borrowings under our credit facility borrowingsCAPL Credit Facility from 3.5%2.6% to 4.2% and additional borrowings to fund our recent acquisitions. In addition, we incurred $1.6 million of interest expense in 2017 related to our sale leaseback executed in December 2016.2.1%.

Income tax benefit

We recorded an income tax benefit of $18.2$3.2 million and $0.5$7.9 million for 20172021 and 2016,2020, respectively. The benefit in 2017 was primarily due to the Tax Cuts and Jobs Act, which resulted in a net benefit of $13.2 million. In addition, as a result of a reassessment of the positive and negative evidence supporting whether or not a valuation allowance for deferred tax assets is needed, we released the entire $3.7 million valuation allowance in 2017. See Note 19 for additional information.

46


Year Ended December 31, 2016 Compared to Year Ended December 31, 2015

Consolidated Results

Operating revenues declined $356 million, or 16%, while gross profit declined $13.9 million, or 8%.

Operating revenues

Significant items impacting these results prior to the elimination of intercompany revenues were:

A $268 million, or 14%, decline in our Wholesale segment revenues primarily attributable to:

A $254 million decline (95% of the total decline in Wholesale Segment operating revenues) attributable to a decrease in the wholesale price of our motor fuel. The average daily spot price of West Texas Intermediate crude oil decreased 11% to $43.29 per barrel during 2016, compared to $48.66 per barrel during 2015. The wholesale price of motor fuel is highly correlated to the price of crude oil.

A $29.5 million decrease as a result of the divestiture of low margin wholesale fuel supply contracts and other assets acquired in the PMI acquisition, partially offset by the impact of the Erickson, One Stop, Franchised Holiday Stores and State Oil Assets acquisitions.

Partially offsetting this decline was a $15 million increase primarily related to rental income associated with the acquisition from CST of NTI retail sites in July 2015 and the State Oil Assets acquisition as well as converting company operated retail sites to lessee dealer sites.

A $205 million, or 31%, decline in our Retail segment revenues primarily attributable to:

A decline of $45 million primarily attributable to a decrease in the retail price of our motor fuel driven by a decline in wholesale motor fuel prices as noted above.

A decrease of $124 million from a 24% decrease in motor fuel volumes sold related to the conversion of company operated retail sites to lessee dealer sites during 2015 and 2016, partially offset by the incremental volume generated by the Franchised Holiday Stores acquisition.

A $37 million decline in our merchandise revenues attributable to the conversion of company operated retail sites to lessee dealer sites during 2015 and 2016, partially offset by the incremental merchandise revenues generated by the Franchised Holiday Stores acquisition.

Intersegment revenues

We present the results of operations of our segments consistently with how our management views the business. Therefore, our segments are presented before intersegment eliminations (which consist of motor fuel sold by our Wholesale segment to our Retail segment). As a result, in order to reconcile to our consolidated change in operating revenues, a discussion of the change in intersegment revenues is included in our consolidated MD&A discussion.

Our intersegment revenues decreased $116.9 million, primarily attributable to the declines in price and volume discussed above.

Cost of sales

Cost of sales declined $343 million as a result of the decline in the wholesale price and gallons sold of motor fuel as noted above. See “Results of Operations—Segment Results” for additional gross profit analyses.

Income from CST Fuel Supply equity interests

See “Results of Operations—Segment Results—Wholesale” for discussion.

Operating expenses

See “Results of Operations—Segment Results” for additional operating expenses analyses.

47


General and administrative expenses

General and administrative expenses declined $12.1 million primarily attributable to the integration of prior year acquisitions and other cost savings initiatives, which reduced expenses by approximately $9.9 million. Additionally, equity-based compensation expense decreased $1.2 million as a result of less equity awards being granted in 2016 as compared to 2015.

Depreciation, amortization and accretion expense

Depreciation, amortization and accretion expense increased $6.2 millionbenefits were primarily driven by our 2015 and 2016 acquisitions.

Interest expense

Interest expense increased $4.3 million due to additional borrowings during 2015 and 2016 to fund acquisitions.

Income tax benefit

We recorded income tax benefits of $0.5 million and $3.5 million for 2016 and 2015, respectively. The decrease in the income tax benefit was primarily due to a decrease in the loss generatedlosses incurred by our corporate subsidiaries. In addition, we recorded a reductiontaxable subsidiaries and changes in the valuation allowance of $0.2 million during 2015.state apportionment. See Note 20 for additional information.

Segment Results

We present the results of operations of our segments consistent with how our management views the business. Therefore, our segments are presented before intersegment eliminations (which consist of motor fuel sold by our Wholesalewholesale segment to our Retailretail segment). These comparisons are not necessarily indicative of future results.

4846


Wholesale

The following table highlights the results of operations and certain operating metrics of our Wholesalewholesale segment. The narrative following these tables provides an analysis of the results of operations of that segment (thousands of dollars, except for the number of distribution sites and per gallon amounts):

 

 

Year Ended December 31,

 

 

Year Ended December 31,

 

 

2017

 

 

2016

 

 

2015

 

 

2021

 

 

2020

 

 

2019

 

Gross profit:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Motor fuel–third party

 

$

34,474

 

 

$

29,242

 

 

$

29,377

 

 

$

70,221

 

 

$

55,864

 

 

$

45,117

 

Motor fuel–intersegment and related party

 

 

24,370

 

 

 

24,870

 

 

 

29,229

 

 

 

51,939

 

 

 

46,921

 

 

 

26,801

 

Motor fuel gross profit

 

 

58,844

 

 

 

54,112

 

 

 

58,606

 

 

 

122,160

 

 

 

102,785

 

 

 

71,918

 

Rent and other

 

 

64,197

 

 

 

58,672

 

 

 

45,757

 

Rent gross profit

 

 

50,736

 

 

 

50,411

 

 

 

56,344

 

Other revenues

 

 

3,721

 

 

 

2,344

 

 

 

2,887

 

Total gross profit

 

 

123,041

 

 

 

112,784

 

 

 

104,363

 

 

 

176,617

 

 

 

155,540

 

 

 

131,149

 

Income from CST Fuel Supply equity interests(a)

 

 

14,906

 

 

 

16,048

 

 

 

10,528

 

 

 

 

 

 

3,202

 

 

 

14,768

 

Operating expenses

 

 

(29,323

)

 

 

(25,956

)

 

 

(26,091

)

 

 

(38,776

)

 

 

(35,285

)

 

 

(32,618

)

Adjusted EBITDA(b)

 

$

108,624

 

 

$

102,876

 

 

$

88,800

 

Motor fuel distribution sites (end of period):(c)

 

 

 

 

 

 

 

 

 

 

 

 

Operating income

 

$

137,841

 

 

$

123,457

 

 

$

113,299

 

Motor fuel distribution sites (end of period): (b)

 

 

 

 

 

 

 

 

 

 

 

 

Motor fuel–third party

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Independent dealers(d)

 

 

384

 

 

 

403

 

 

 

370

 

Lessee dealers(e)

 

 

438

 

 

 

420

 

 

 

290

 

Independent dealers (c)

 

 

666

 

 

 

687

 

 

 

369

 

Lessee dealers (d)

 

 

637

 

 

 

658

 

 

 

676

 

Total motor fuel distribution–third party sites

 

 

822

 

 

 

823

 

 

 

660

 

 

 

1,303

 

 

 

1,345

 

 

 

1,045

 

Motor fuel–intersegment and related party

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

DMS (related party)(f)

 

 

146

 

 

 

153

 

 

 

191

 

Circle K (related party)

 

 

43

 

 

 

43

 

 

 

43

 

DMS (related party)

 

 

 

 

 

 

 

 

68

 

Commission agents (Retail segment)(g)(d)

 

 

181

 

 

 

95

 

 

 

66

 

 

 

198

 

 

 

208

 

 

 

169

 

Company operated retail sites (Retail segment)(e)

 

 

70

 

 

 

73

 

 

 

115

 

 

 

252

 

 

 

150

 

 

 

 

Total motor fuel distribution–intersegment

and related party sites

 

 

440

 

 

 

364

 

 

 

415

 

 

 

450

 

 

 

358

 

 

 

237

 

Motor fuel distribution sites (average during the period):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Motor fuel-third party distribution

 

 

823

 

 

 

749

 

 

 

626

 

 

 

1,325

 

 

 

1,276

 

 

 

938

 

Motor fuel-intersegment and related party distribution

 

 

360

 

 

 

379

 

 

 

438

 

 

 

389

 

 

 

336

 

 

 

318

 

Total motor fuel distribution sites

 

 

1,183

 

 

 

1,128

 

 

 

1,064

 

 

 

1,714

 

 

 

1,612

 

 

 

1,256

 

Volume of gallons distributed (in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Third party

 

 

655,754

 

 

 

630,777

 

 

 

553,849

 

 

 

931,288

 

 

 

845,858

 

 

 

706,759

 

Intersegment and related party

 

 

376,212

 

 

 

403,808

 

 

 

497,508

 

 

 

403,675

 

 

 

270,930

 

 

 

297,235

 

Total volume of gallons distributed

 

 

1,031,966

 

 

 

1,034,585

 

 

 

1,051,357

 

 

 

1,334,963

 

 

 

1,116,788

 

 

 

1,003,994

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Wholesale margin per gallon

 

$

0.057

 

 

$

0.052

 

 

$

0.056

 

 

$

0.092

 

 

$

0.092

 

 

$

0.072

 

 

(a)

Represents income from our former equity interest in CST Fuel Supply. The CST Fuel Supply Exchange closed on March 25, 2020.

(b)

Please see the reconciliation of our segment’s Adjusted EBITDA to consolidated net income (loss) under the heading “Results of Operations—Non-GAAP Financial Measures.”

(c)

In addition, as of December 31, 20172021 and 2016, respectively,2020, we distributed motor fuel to 15 and 1413 sub-wholesalers who distributed to additional sites.sites, respectively.

(d)(c)

The decrease in the independent dealer site count from December 31, 20162020 to December 31, 20172021 was primarily attributable to loss of contracts, most of which were lower margin, partially offset by the increase in independent dealer sites as a net 19 terminated motor fuelresult of the real estate rationalization effort and the resulting reclassification of the site from a lessee dealer or commission site to an independent dealer site when we continue to supply contracts that were not renewed.the sites after divestiture.

(d)

The decrease in the lessee dealer and commission site counts from December 31, 2020 to December 31, 2021 were primarily attributable to our real estate rationalization effort.

(e)

The increase in the lessee dealercompany operated site count from December 31, 20162020 to December 31, 20172021 was primarily attributable to the conversion of DMS and commission sites to lessee dealer sites.

(f)

The decrease in the DMS site count from December 31, 2016 to December 31, 2017 was primarily attributable to the conversion of DMS sites to lessee dealer sites.

(g)

The increase in the commission agent site count from December 31, 2016 to December 31, 2017 was primarily due to the 101103 company operated sites acquired in the Jet-Pep Assets acquisition, partially offset by the conversion of commission sites to lessee dealer sites.from 7-Eleven.

4947


Year Ended December 31,20172021 Compared to Year Ended December 31,20162020

TheGross profit increased $21.1 million (14%), while operating income increased $14.4 million (12%). These results were driven by:

Motor fuel gross profit

The $4.7$19.4 million or 9%(19%) increase in motor fuel gross profit was primarily due todriven by a higher margin per gallon realized primarily due to higher DTW margins20% increase in volume as a result of the movementsasset exchanges with Circle K, the CST Fuel Supply Exchange, the acquisition of retail and wholesale assets, the acquisition of assets from 7-Eleven and the continuing recovery from the COVID-19 Pandemic. During 2020, we benefitted from the reduction in crude prices throughout both periods and increased payment discounts and incentives due to the increase in motorwholesale fuel prices. The average daily spot price of WTI crude oil increased 17% to $50.78 per barrel for 2017,As such, DTW margins were negatively impacted in 2021 as compared to $43.29 per barrel for 2016.2020. See “Significant Factors Affecting our Profitability—The Significance of Crude Oil and Wholesale Motor Fuel Prices on Our Revenues, Cost of Sales and Gross Profit.”

Rent and other gross profit

Rent and other gross profit increased $5.5$0.3 million (1%) primarily due to $0.5 million in rent concessions during the second quarter of 2020 and the positive impact from the CST Fuel Supply Exchange, partially offset by a decrease as a result of our September 2016terminating leases in connection with the April 2020 acquisition of the State Oil Assets, as well as converting company operated retail sites to lessee dealer sites throughout 2016 and 2017, partially offset by 25 DMS sites being converted to commission agent sites in the fourth quarter of 2016, which resulted in the rent incomewholesale assets.

Income from these 25 sites being included in the retail segment rather than the wholesale segment.CST Fuel Supply equity interests

Income from CST Fuel Supply equity interests is no longer generated as a result of the March 2020 CST Fuel Supply Exchange.

The decline of $1.1 million was primarily attributable to CST’s July 2016 divestiture of its California and Wyoming retail sites and a decrease in volume driven by the impacts of Hurricane Harvey.

Operating expenses

Operating expenses increased $3.4$3.5 million (10%) primarily as a result of our September 2016 State Oil Assets acquisition, which is substantially offset by ana $2.7 million increase in rent income, as well as our conversionenvironmental costs related to remediation, costs of company operated retail sites to lessee dealer sites throughout 2016compliance testing and 2017.

Year Ended December 31, 2016 Compared to Year Ended December 31, 2015

The results were driven by:

Motor fuel gross profit

The $4.5monitoring and a $1.2 million decreaseincrease in motor fuel gross profit was due to a $3.6 million decline primarily from decreased payment discounts and incentivesinsurance costs due to the declineincrease in motor fuel pricescontrolled sites as a result of the decrease in crude oil and the remaining decline was primarily due to a decline in motor fuel gallons sold due to the termination of commercial wholesale fuel supply contracts and disposing certain terminal assets acquired in the PMI acquisition, partially offset by the impact of the Erickson, One Stop, Franchised Holiday Stores and State Oil Assets acquisitions. The average daily spot price of West Texas Intermediate crude oil decreased 11% to $43.29 per barrel during 2016, compared to $48.66 during 2015. See “Significant Factors Affecting our Profitability—The Significance of Crude Oil and Wholesale Motor Fuel Prices on Our Revenues, Cost of Sales and Gross Profit.”

Rent and other gross profit

Rent and other margin increased $13 million primarily as a result of our acquisition from CST of NTI retail sites in July 2015 and the State Oil Assets acquisition in September 2016, as well as converting company operated retail sites to lessee dealer sites.

Income from CST Fuel Supply equity interests

Income from our investment in CST Fuel Supply increased $5.5 million as a result of the additional 12.5% equity interest we acquired in July 2015, partially offset by CST’s sale of its California and Wyoming retail sites.

Operating expenses

Operating expenses decreased $0.1 million primarily from a $5.2 million cost savings associated with disposing of certain transportation and terminal assets acquired in the PMI acquisition, partially offset by an increase in operating expenses driven by our acquisitions.

5048


Retail

The following table highlights the results of operations and certain operating metrics of our Retailretail segment. The narrative following these tables provides an analysis of the results of operations of that segment (thousands of dollars, except for the number of retail sites, gallons sold per day and per gallon amounts):

 

 

 

Year Ended December 31,

 

 

 

2017

 

 

2016

 

 

2015

 

Gross profit:

 

 

 

 

 

 

 

 

 

 

 

 

Motor fuel

 

$

7,276

 

 

$

8,538

 

 

$

19,444

 

Merchandise and services

 

 

25,434

 

 

 

30,068

 

 

 

41,690

 

Rent and other

 

 

5,001

 

 

 

4,073

 

 

 

4,014

 

Total gross profit

 

 

37,711

 

 

 

42,679

 

 

 

65,148

 

Operating expenses

 

 

(31,974

)

 

 

(35,118

)

 

 

(46,138

)

Acquisition-related costs

 

 

 

 

 

212

 

 

 

 

Inventory fair value adjustments(a)

 

 

 

 

 

91

 

 

 

1,356

 

Adjusted EBITDA(b)

 

$

5,737

 

 

$

7,864

 

 

$

20,366

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Retail sites (end of period):

 

 

 

 

 

 

 

 

 

 

 

 

Commission agents(c)

 

 

181

 

 

 

95

 

 

 

66

 

Company operated retail sites(d)

 

 

71

 

 

 

76

 

 

 

116

 

Total system sites at the end of the period

 

 

252

 

 

 

171

 

 

 

182

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total system operating statistics:

 

 

 

 

 

 

 

 

 

 

 

 

Average retail fuel sites during the period(c)(d)

 

 

168

 

 

 

157

 

 

 

202

 

Motor fuel sales (gallons per site per day)

 

 

2,620

 

 

 

2,780

 

 

 

2,862

 

Motor fuel gross profit per gallon, net of credit card

   fees and commissions

 

$

0.045

 

 

$

0.053

 

 

$

0.092

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commission agents statistics:

 

 

 

 

 

 

 

 

 

 

 

 

Average retail fuel sites during the period(c)

 

 

97

 

 

 

71

 

 

 

70

 

Motor fuel gross profit per gallon, net of credit card

   fees and commissions

 

$

0.011

 

 

$

0.018

 

 

$

0.023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Company operated retail site statistics:

 

 

 

 

 

 

 

 

 

 

 

 

Average retail fuel sites during the period(d)

 

 

71

 

 

 

86

 

 

 

132

 

Motor fuel gross profit per gallon, net of credit card fees

 

$

0.087

 

 

$

0.085

 

 

$

0.130

 

Merchandise and services gross profit percentage,

   net of credit card fees

 

 

24.4

%

 

 

24.6

%

 

 

26.3

%

 

 

Year Ended December 31,

 

 

 

2021

 

 

2020

 

 

2019

 

Gross profit:

 

 

 

 

 

 

 

 

 

 

 

 

Motor fuel

 

$

27,806

 

 

$

12,691

 

 

$

5,147

 

Merchandise

 

 

55,117

 

 

 

32,046

 

 

 

10,169

 

Rent

 

 

8,681

 

 

 

7,608

 

 

 

6,302

 

Other revenue

 

 

9,159

 

 

 

4,626

 

 

 

1,507

 

Total gross profit

 

 

100,763

 

 

 

56,971

 

 

 

23,125

 

Operating expenses

 

 

(95,303

)

 

 

(55,643

)

 

 

(19,936

)

Operating income

 

$

5,460

 

 

$

1,328

 

 

$

3,189

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Retail sites (end of period):

 

 

 

 

 

 

 

 

 

 

 

 

Commission agents (a)

 

 

198

 

 

 

208

 

 

 

169

 

Company operated retail sites (b)

 

 

252

 

 

 

150

 

 

 

 

Total system sites at the end of the period

 

 

450

 

 

 

358

 

 

 

169

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total system operating statistics:

 

 

 

 

 

 

 

 

 

 

 

 

Average retail fuel sites during the period

 

 

389

 

 

 

306

 

 

 

206

 

Volume of gallons sold (in thousands)

 

 

403,850

 

 

 

259,636

 

 

 

160,106

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commission agents statistics:

 

 

 

 

 

 

 

 

 

 

 

 

Average retail fuel sites during the period

 

 

202

 

 

 

199

 

 

 

170

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Company operated retail site statistics:

 

 

 

 

 

 

 

 

 

 

 

 

Average retail fuel sites during the period

 

 

187

 

 

 

107

 

 

 

36

 

Merchandise gross profit percentage

 

 

26.4

%

 

 

26.0

%

 

 

21.2

%

 

(a)

The inventory fair value adjustment represents the expensing of the step-up in value ascribed to inventory acquireddecrease in the Franchised Holiday Stores acquisition.commission site count from December 31, 2020 to December 31, 2021 was primarily attributable to our real estate rationalization effort.

(b)

Please see the reconciliation of our segment’s Adjusted EBITDA to consolidated net income under the heading “Results of Operations—Non-GAAP Financial Measures” below.

(c)

The increase in the commission agentcompany operated site count from December 31, 20162020 to December 31, 20172021 was due primarily attributable to the 101103 company operated sites acquired in the Jet-Pep Assets acquisition, partially offset by the conversion of commission sites to lessee dealer sites.

(d)

The decrease in company operated retail sites relates to the conversion of company operated retail sites to lessee dealer sites.from 7-Eleven.

51


Year Ended December 31,20172021 Compared to Year Ended December 31,20162020

Gross profit declined $5.0increased $43.8 million (77%), while operating expenses declined $3.1 million.

income increased $4.1 million (311%). These results were impacted by:

Gross profit

Our motor fuel gross profit decreased $1.3 million attributable to a 15% decrease in

Our motor fuel gross profit increased $15.1 million (119%) attributable to realizing a higher average margin per gallon as the higher retail fuel margins at our company operated sites comprised a larger percentage of our overall retail fuel margins in 2021 as compared to 2020. In addition, volume increased 56% stemming from the increase in company operated and commission sites as a result of the April 2020 acquisition of retail and wholesale assets, the March 2020 CST Fuel Supply Exchange, the acquisition of assets from 7-Eleven as well as the continuing recovery from the COVID-19 Pandemic (the average total system sites increased 27% from 2020 compared to 2021).

Our merchandise gross profit and other revenues increased $23.1 million and $4.5 million, respectively, as a result of the increase in company operated sites driven by the April 2020 acquisition of retail and wholesale assets and the acquisition of assets from 7-Eleven.

Rent gross profit increased $1.1 million (14%) due primarily to the company operated and commission sites acquired in the April 2020 acquisition of retail and wholesale assets, the March 2020 CST Fuel Supply Exchange and the acquisition of assets from 7-Eleven.

49


Operating expenses

Operating expenses increased $39.7 million (71%) primarily due to the increase in company operated and commission sites as a result of the movement in crude oil prices throughoutApril 2020 acquisition of retail and wholesale assets, the two periods. See “Significant Factors Affecting our Profitability—The Significance of Crude OilMarch 2020 CST Fuel Supply Exchange and Wholesale Motor Fuel Prices on Our Revenues, Cost of Sales and Gross Profit.”

Our merchandise and services gross profit decreased $4.6a $15.8 million or 15%increase as a result of the conversionacquisition of company operated retail sites to lessee dealer sites, partially offset by the incremental gross profit generated by the March 2016 Franchised Holiday Stores acquisition.

Our rent and other gross profit increased $0.9 million primarilyassets from 25 DMS sites being converted to commission agent sites in the fourth quarter of 2016, which resulted in the rent income from these sites being included in the retail segment rather than the wholesale segment. In the second quarter of 2017, some of these 25 sites were converted to lessee dealer sites, which resulted in the rent income being included in the wholesale segment rather than the retail segment.

Operating expenses

The $3.1 million decline in operating expenses was attributable to the conversion of company operated retail sites to lessee dealer sites, partially offset by the impact of the March 2016 Franchised Holiday Stores acquisition and the 25 DMS sites being converted to commission agent sites in the fourth quarter of 2016. In the second quarter of 2017, some of these 25 sites were converted to lessee dealer sites, which resulted in the operating expenses being included in the wholesale segment rather than the retail segment.

Year Ended December 31, 2016 Compared to Year Ended December 31, 20157-Eleven.

Gross profit declined $22.5 million, while operating expenses declined $11.0 million.

These results were impacted by:

Gross profit

Our motor fuel gross profit decreased $10.9 million attributable to a 24% decrease in volume driven by the conversion of company operated retail sites acquired in prior acquisitions to lessee dealer sites during 2015 and 2016 and a 42% decrease in margin per gallon as a result of crude oil prices being more volatile during the second half of 2015 than the second half of 2016 and the resulting impact on our motor fuel gross margin. The daily spot price of WTI crude oil decreased approximately 35% during the last six months of 2015 compared to an increase of approximately 10% during the same period of 2016. See “Significant Factors Affecting our Profitability—The Significance of Crude Oil and Wholesale Motor Fuel Prices on Our Revenues, Cost of Sales and Gross Profit.”

Our merchandise and services gross profit declined $11.6 million as a result of the conversion of company operated retail sites to lessee dealer sites in 2015 and 2016, partially offset by the incremental gross profit generated by the Franchised Holiday Stores acquisition. The decline in our merchandise gross profit percentage was the result of low gross margin items, such as cigarettes, comprising a higher percentage of our merchandise sales as a result of the change in product mix of our stores following our 2015 acquisitions and conversion of company operated retail sites to lessee dealer sites.

Operating expenses

An $11.0 million decline in operating expenses attributable to the conversion of company operated retail sites to lessee dealer sites, partially offset by the impact of the Erickson, One Stop and Franchised Holiday Stores acquisitions.

52


Non-GAAP Financial Measures

We use non-GAAP financial measures EBITDA, Adjusted EBITDA, Distributable Cash Flow and Distribution Coverage Ratio. EBITDA represents net income available to us before deducting interest expense, income taxes and depreciation, amortization and accretion.accretion (which includes certain impairment charges). Adjusted EBITDA represents EBITDA as further adjusted to exclude equity funded expenses related to incentiveequity-based compensation and the Amended Omnibus Agreement,expense, gains or losses on sales of assets,dispositions and lease terminations, net, certain discrete acquisition related costs, such as legal and other professional fees and severance expensesseparation benefit costs associated with recently acquired companies,recent acquisitions, and certain other discrete non-cash items arising from purchase accounting. Distributable Cash Flow represents Adjusted EBITDA less cash interest expense, sustaining capital expenditures and current income tax expense. Distribution Coverage Ratio is computed by dividing Distributable Cash Flow by the weighted average diluted common and subordinated units and then dividing that result by the distributions paid per limited partner unit.

EBITDA, Adjusted EBITDA, Distributable Cash Flow and Distribution Coverage Ratio are used as supplemental financial measures by management and by external users of our financial statements, such as investors and lenders. EBITDA and Adjusted EBITDA are used to assess our financial performance without regard to financing methods, capital structure or income taxes and the ability to incur and service debt and to fund capital expenditures. In addition, Adjusted EBITDA is used to assess the operating performance of our business on a consistent basis by excluding the impact of items which do not result directly from the wholesale distribution of motor fuel, the leasing of real property, or the day to day operations of our retail site activities. EBITDA, Adjusted EBITDA, Distributable Cash Flow and Distribution Coverage Ratio are also used to assess the ability to generate cash sufficient to make distributions to our unitholders.

We believe the presentation of EBITDA, Adjusted EBITDA, Distributable Cash Flow and Distribution Coverage Ratio provides useful information to investors in assessing the financial condition and results of operations. EBITDA, Adjusted EBITDA, Distributable Cash Flow and Distribution Coverage Ratio should not be considered alternatives to net income or any other measure of financial performance or liquidity presented in accordance with U.S. GAAP. EBITDA, Adjusted EBITDA, Distributable Cash Flow and Distribution Coverage Ratio have important limitations as analytical tools because they exclude some but not all items that affect net income. Additionally, because EBITDA, Adjusted EBITDA, Distributable Cash Flow and Distribution Coverage Ratio may be defined differently by other companies in our industry, our definitions may not be comparable to similarly titled measures of other companies, thereby diminishing their utility.

The following table presents reconciliations of EBITDA, Adjusted EBITDA, and Distributable Cash Flow to net income, the most directly comparable U.S. GAAP financial measure, for each of the periods indicated (in thousands, except for per unit amounts):

 

 

 

Year Ended December 31,

 

 

 

2017

 

 

2016

 

 

2015

 

Net income available to limited partners

 

$

18,821

 

 

$

7,312

 

 

$

10,051

 

Interest expense

 

 

27,919

 

 

 

22,757

 

 

 

18,493

 

Income tax benefit

 

 

(18,237

)

 

 

(453

)

 

 

(3,542

)

Depreciation, amortization and accretion

 

 

57,470

 

 

 

54,412

 

 

 

48,227

 

EBITDA

 

 

85,973

 

 

 

84,028

 

 

 

73,229

 

Equity funded expenses related to incentive

   compensation and the Amended Omnibus Agreement (a)

 

 

15,131

 

 

 

16,060

 

 

 

14,036

 

Gain on sales of assets, net

 

 

(3,401

)

 

 

(198

)

 

 

(2,719

)

Acquisition-related costs (b)

 

 

11,374

 

 

 

3,318

 

 

 

4,412

 

Working capital adjustment

 

 

 

 

 

335

 

 

 

 

Inventory fair value adjustments

 

 

 

 

 

91

 

 

 

1,356

 

Adjusted EBITDA

 

 

109,077

 

 

 

103,634

 

 

 

90,314

 

Cash interest expense

 

 

(26,211

)

 

 

(20,974

)

 

 

(16,689

)

Sustaining capital expenditures (c)

 

 

(1,648

)

 

 

(798

)

 

 

(1,318

)

Current income tax expense

 

 

16

 

 

 

(234

)

 

 

(2,574

)

Distributable Cash Flow

 

$

81,234

 

 

$

81,628

 

 

$

69,733

 

Weighted average diluted common and subordinated units

 

 

33,855

 

 

 

33,367

 

 

 

29,086

 

Distributions paid per limited partner unit (d)

 

$

2.4800

 

 

$

2.4000

 

 

$

2.2300

 

Distribution Coverage Ratio (e)

 

0.97x

 

 

1.02x

 

 

1.08x

 

 

 

Year Ended December 31,

 

 

 

2021

 

 

2020

 

 

2019

 

Net income available to limited partners

 

$

21,654

 

 

$

107,323

 

 

$

17,543

 

Interest expense

 

 

18,244

 

 

 

16,587

 

 

 

27,000

 

Income tax benefit

 

 

(3,225

)

 

 

(7,948

)

 

 

(1,230

)

Depreciation, amortization and accretion expense

 

 

77,852

 

 

 

68,742

 

 

 

55,032

 

EBITDA

 

 

114,525

 

 

 

184,704

 

 

 

98,345

 

Equity-based employee and director compensation expense

 

 

1,311

 

 

 

172

 

 

 

1,246

 

(Gain) loss on dispositions and lease terminations, net (a)

 

 

(2,037

)

 

 

(80,924

)

 

 

1,648

 

Acquisition-related costs (b)

 

 

9,461

 

 

 

3,464

 

 

 

2,464

 

Adjusted EBITDA

 

 

123,260

 

 

 

107,416

 

 

 

103,703

 

Cash interest expense

 

 

(16,382

)

 

 

(15,545

)

 

 

(25,973

)

Sustaining capital expenditures (c)

 

 

(4,161

)

 

 

(3,529

)

 

 

(2,406

)

Current income tax benefit (expense) (d)

 

 

(548

)

 

 

14,126

 

 

 

4,799

 

Distributable Cash Flow (a)

 

$

102,169

 

 

$

102,468

 

 

$

80,123

 

Weighted average diluted common units

 

 

37,884

 

 

 

37,369

 

 

 

34,485

 

Distributions paid per limited partner unit (e)

 

$

2.1000

 

 

$

2.1000

 

 

$

2.1000

 

Distribution Coverage Ratio (f)

 

1.28x

 

 

1.31x

 

 

1.11x

 

 

53



(a)

As approved byWe recorded gains on the independent conflicts committeesale of sites in connection with our ongoing real estate rationalization effort of $3.3 million, $6.4 million and $1.4 million in 2021, 2020 and 2019, respectively. In 2020, we also recorded $19.3 million in gains on the Board,sale of sites in connection with the Partnership, CST andasset exchange with Circle K mutually agreed to settle certain amounts due underand a $67.6 million gain on the termssale of our 17.5% investment in CST Fuel Supply. Also in 2020, we recorded a loss on lease terminations, including the Amended Omnibus Agreement in limited partner unitsnon-cash write-off of the Partnership.deferred rent income associated with these leases, of $10.9 million.

(b)

Relates to certain discrete acquisition related costs, such as legal and other professional fees, separation benefit costs and purchase accounting adjustments associated with recently acquired businesses. Acquisition-related costs for 2017 include certain separation benefit costs and retention bonuses paid to certain EICP participants associated with the Merger. Acquisition-related costs for 2017 also includes a $1.7 million charge related to a court ruling in favor of a former executive’s claim to benefits under the EICP in connection with CST’s acquisition of our General Partner. See “Significant Factors Affecting our Profitability—Separation Benefits and Retention Bonuses” for additional information.recent acquisitions.

(c)

Under the Partnership Agreement, sustaining capital expenditures are capital expenditures made to maintain our long-term operating income or operating capacity. Examples of sustaining capital expenditures are those made to maintain existing contract volumes, including payments to renew existing distribution contracts, or to maintain our sites in conditions suitable to lease, such as parking lot or roof replacement/renovation, or to replace equipment required to operate the existing business.

(d)

Consistent with prior divestitures, the current income tax benefit in 2021, 2020 and 2019 excludes income tax incurred on the sale of sites. 2020 and 2019 also include the tax benefit of 100% bonus depreciation on the eligible assets acquired in the asset exchanges with Circle K as well as certain dispenser upgrades and rebranding costs.

(e)

On January 24, 2018,20, 2022, the Board approved a quarterly distribution of $0.6275$0.5250 per unit attributable to the fourth quarter of 2017.2021. The distribution is payable onwas paid February 12, 201810, 2022 to all unitholders of record on February 5, 2018.3, 2022.

(e)(f)

The distribution coverage ratio is computed by dividing Distributable Cash Flow by the weighted average diluted common and subordinated units and then dividing that result by the distributions paid per limited partner unit.

The following table reconciles our segment Adjusted EBITDA to Consolidated Adjusted EBITDA presented in the table above (in thousands):

 

 

Year Ended December 31,

 

 

 

2017

 

 

2016

 

 

2015

 

Adjusted EBITDA - Wholesale segment

 

$

108,624

 

 

$

102,876

 

 

$

88,800

 

Adjusted EBITDA - Retail segment

 

 

5,737

 

 

 

7,864

 

 

 

20,366

 

Adjusted EBITDA - Total segment

 

$

114,361

 

 

$

110,740

 

 

$

109,166

 

Reconciling items:

 

 

 

 

 

 

 

 

 

 

 

 

Elimination of intersegment profit in ending

   inventory balance

 

 

14

 

 

 

104

 

 

 

(47

)

General and administrative expenses

 

 

(27,887

)

 

 

(24,156

)

 

 

(36,238

)

Other income (expense), net

 

 

439

 

 

 

848

 

 

 

396

 

Equity funded expenses related to incentive

   compensation and the Amended Omnibus Agreement

 

 

15,131

 

 

 

16,060

 

 

 

14,036

 

Working capital adjustment

 

 

 

 

 

335

 

 

 

 

Acquisition-related costs

 

 

11,374

 

 

 

3,106

 

 

 

4,412

 

Net income attributable to noncontrolling interests

 

 

(18

)

 

 

(11

)

 

 

(21

)

IDR distributions

 

 

(4,337

)

 

 

(3,392

)

 

 

(1,390

)

Consolidated Adjusted EBITDA

 

$

109,077

 

 

$

103,634

 

 

$

90,314

 

54


Liquidity and Capital Resources

Liquidity

Our principal liquidity requirements are to finance our operations, fund acquisitions, service our debt and pay distributions to our unitholders and IDR distributions.unitholders. We expect our ongoing sources of liquidity to include cash generated by operations, proceeds from sales of sites in connection with our operations andreal estate rationalization efforts, borrowings under the revolving credit facilityCAPL Credit Facility and JKM Credit Facility, and if available to us on acceptable terms, issuances of equity and debt securities. We regularly evaluate alternate sources of capital including sale-leaseback financing of real property with third parties, to support our liquidity requirements.

Our ability to meet our debt service obligations and other capital requirements, including capital expenditures, acquisitions, and partnership distributions, will depend on our future operating performance, which, in turn, will be subject to general economic, financial, business, competitive, legislative, regulatory and other conditions, many of which are beyond our control. As a normal part of our business, depending on market conditions, we will, from time to time, consider opportunities to repay, redeem, repurchase or refinance our indebtedness. Changes in our operating plans, lower than anticipated sales, increased expenses, acquisitions or other events may cause us to seek additional debt or equity financing in future periods.

We believe that we will have sufficient cash flow from operations, proceeds from the sale of sites in connection with our real estate rationalization effort, borrowing capacity under the revolving credit facilityCAPL Credit Facility and JKM Credit Facility, access to capital markets and alternate sources of funding to meet our financial commitments, debt service obligations, contingencies, anticipated capital expenditures and partnership distributions. However, we are subject to business and operational risks that could adversely affect our cash flow. A material decrease in our cash flows would likely produce an adverse effect on our borrowing capacity as well as our ability to issue additional equity and/or debt securities.securities and/or maintain or increase distributions to unitholders.

See “Recent Developments—COVID-19 Pandemic” for a discussion of the impacts and potential impacts on our liquidity from the COVID-19 Pandemic as well as actions we have taken or could take to mitigate its impact.

Cash Flows

The following table summarizes cash flow activity (in thousands):

 

 

Year Ended December 31,

 

 

Year Ended December 31,

 

 

2017

 

 

2016

 

 

2015

 

 

2021

 

 

2020

 

 

2019

 

Net cash provided by operating activities

 

$

88,960

 

 

$

79,440

 

 

$

64,487

 

 

$

95,468

 

 

$

104,484

 

 

$

72,327

 

Net cash used in investing activities

 

 

(60,113

)

 

 

(96,906

)

 

 

(311,518

)

 

 

(298,690

)

 

 

(19,549

)

 

 

(15,509

)

Net cash (used in) provided by financing activities

 

 

(26,300

)

 

 

17,624

 

 

 

233,053

 

Net cash provided by (used in) financing activities

 

 

210,357

 

 

 

(86,202

)

 

 

(58,229

)

 

Operating Activities

Net cash provided by operating activities increased $9.5decreased $9.0 million for 20172021 compared to 2016, driven primarily by2020. Although the acquisitions drove incremental cash flow generated by our March 2016 Franchised Holiday Stores, September 2016 State Oil Assetsfrom operations, changes in working capital and November 2017 Jet-Pep Assets acquisitions. In addition, we paid $1.1a $6.0 million more of the management fees related to the services provided under the Amended Omnibus Agreementincrease in common units issued to CST (pre-Merger) and Circle K (post-Merger) in 2017 compared to 2016.

Netacquisition costs reduced cash provided by operating activities increased $15.0 million in 2016for 2021 as compared to 2015, driven primarily by incremental cash flow generated by2020.

51


As is typical in our acquisitions. In addition, we settled $3.2 million more in management fees in equity with CST in 2016 compared to 2015.

Investing Activities

In 2017, we paid $75.6 million in the Jet-Pep Assets acquisition and incurred $12.5 million in capital expenditures. In addition, we received $27.6 million of proceeds on sales, largely driven by the sale of 29 properties to DMR and two properties soldindustry, our current liabilities exceed our current assets as a result of the FTC’s requirements associated withlonger settlement of real estate and motor fuel taxes as compared to the Merger.shorter settlement of receivables for fuel, rent and merchandise.

Investing Activities

In 2016,2021, we paid $94.2 million in the Franchised Holiday Stores and State Oil Assets acquisitions and $2.9 million for independent dealer and sub-wholesaler contracts purchased from CST. We also incurred $20.8 million of capital expenditures of $41.9 million driven by site upgrades, including store remodels, carwash build-outs, EMV upgrades, and rebranding of certain sites, including the sites acquired from 7-Eleven. We received $17.5$15.4 million in proceeds from the refund payment related to CST's salesales of the California and Wyoming assets.assets, largely driven by our real estate rationalization effort. We paid $273.0 million in connection with our acquisition of assets from 7-Eleven.

In 2015,2020, we paid $167.8received $23.0 million from Circle K primarily in connection with the Landmark Assets, Erickson and One Stop acquisitions and $141.9 million on the acquisitions of CST’s NTIs and CST Fuel Supply equity interests. We also had $10.2Exchange that closed in March 2020. In addition, we received $21.2 million in proceeds from disposals during 2020 in connection with our real estate rationalization effort and paid $28.2 million in connection with our April 2020 acquisition of retail and wholesale assets. Also, we incurred capital expenditures.expenditures of $37.1 million in 2020.

55


Financing Activities

In 2017,2021, we paid $88.2$79.7 million in distributions. We made net borrowings on our CAPL Credit Facility and JKM Credit Facility of $117.4 million and $182.5 million, respectively, primarily to fund the acquisition of assets from 7-Eleven and to pay $9.4 million in acquisition costs and $7.2 million of deferred financing costs.

In 2020, we paid $77.9 million in distributions and made net borrowingsrepayments on our credit facilityCAPL Credit Facility of $64.5$5.8 million.

In 2016, we paid $83.6 million in distributions and purchased $3.3 million in common units under our common unit purchase program. We received $25.0 million in proceeds on the sale-leaseback transaction and had $83.1 million in net borrowings under our credit facility to fund our acquisitions.

In 2015, we received $144.9 million in net proceeds on equity offerings and $158.0 million in net borrowings under our credit facility to fund our acquisitions. We paid $66.1 million in distributions and purchased $3.6 million in common units under our common unit purchase program.

Refund payment related to CST sale of California and Wyoming assets

On July 7, 2016, in connection with the divestiture of certain California and Wyoming assets and the related decrease in supplied fuel volumes and as approved by the independent conflicts committee of the Board, CST provided a refund payment to the purchase price paid by us for our interest in CST Fuel Supply. The total refund payment received by us was approximately $18.2 million. See Note 12 to the financial statements for additional information.

Distributions

Distribution activity for 20172021 was as follows:follows (in thousands):

 

Quarter Ended

 

Record Date

 

Payment Date

 

Cash Distribution

(per unit)

 

 

Cash Distribution

(in thousands)

 

December 31, 2016

 

February 6, 2017

 

February 13, 2017

 

$

0.6125

 

 

$

20,541

 

March 31, 2017

 

May 8, 2017

 

May 15, 2017

 

 

0.6175

 

 

 

20,832

 

June 30, 2017

 

August 7, 2017

 

August 14, 2017

 

 

0.6225

 

 

 

21,081

 

September 30, 2017

 

November 6, 2017

 

November 13, 2017

 

 

0.6275

 

 

 

21,332

 

December 31, 2017

 

February 5, 2018

 

February 12, 2018

 

 

0.6275

 

 

 

21,413

 

Quarter Ended

 

Record Date

 

Payment Date

 

Cash Distribution

(per unit)

 

 

Cash Distribution

(in thousands)

 

December 31, 2020

 

February 2, 2021

 

February 9, 2021

 

$

0.5250

 

 

$

19,912

 

March 31, 2021

 

May 4, 2021

 

May 11, 2021

 

 

0.5250

 

 

 

19,916

 

June 30, 2021

 

August 3, 2021

 

August 10, 2021

 

 

0.5250

 

 

 

19,924

 

September 30, 2021

 

November 3, 2021

 

November 10, 2021

 

 

0.5250

 

 

 

19,941

 

December 31, 2021

 

February 3, 2022

 

February 10, 2022

 

 

0.5250

 

 

 

19,942

 

 

The amount of any distribution is subject to the discretion of the Board, which may modify or revoke our cash distribution policy at any time. Our Partnership Agreement does not require us to pay any distributions. As such, there can be no assurance we will continue to pay distributions in the future.

IDRs

We distributed $4.3 million and $3.4$0.1 million to CST and Circle Kthe Topper Group with respect to the IDRs in 2017 and 2016, respectively.

Expiration of2020. On February 6, 2020, we closed on the Subordination Period

In accordance withEquity Restructuring Agreement that eliminated the terms of the Partnership Agreement, on February 25, 2016, the first business day after the payment of the fourth quarter 2015 distribution of $0.5925 per unit, the subordination period under the Partnership Agreement ended. At that time, each of the 7,525,000 outstanding subordinated units converted into one common unit and now participates in distributions pro rata with other common units.IDRs.

Debt

As of December 31, 2017,2021, our consolidated debt and capitalfinance lease obligations consisted of the following (in thousands):

 

$550 million revolving credit facility

 

$

506,000

 

Capital lease obligations

 

 

27,220

 

Note payable

 

 

765

 

Total debt and capital lease obligations

 

 

533,985

 

CAPL Credit Facility

 

$

630,575

 

JKM Credit Facility

 

 

182,460

 

Finance lease obligations

 

 

16,809

 

Total debt and finance lease obligations

 

 

829,844

 

Current portion

 

 

2,916

 

 

 

10,939

 

Noncurrent portion

 

 

531,069

 

 

 

818,905

 

Deferred financing costs, net

 

 

1,922

 

 

 

8,270

 

Noncurrent portion, net of deferred financing costs

 

$

529,147

 

 

$

810,635

 

 


56


Our revolving credit facility is secured by substantially all of our assets. Our borrowings underTaking the revolving credit facility had a weighted-average interest rate of 4.44%swap contracts into account, our effective interest rate on our CAPL Credit Facility at December 31, 2021 was 2.8% (our applicable margin was 2.5% as of December 31, 2017 (LIBOR plus an applicable margin, which was 3.00% as of December 31, 2017)2021). Letters of credit outstanding under our CAPL Credit Facility at December 31, 20172021 totaled $6.7$4.0 million. The amount of availability under the revolving credit facilityour CAPL Credit Facility at February 21, 2018,24, 2022, after taking into consideration debt covenant restrictions, was $17.6$104.3 million. In connection with future acquisitions,

The CAPL Credit Facility contains financial covenants related to leverage and interest coverage as further described in Note 12 to the revolving credit facility requires,financial statements. These financial covenants and other covenants may restrict or limit our ability to make distributions, incur additional indebtedness, make certain capital expenditures or dispose of assets in excess of specified levels, among other things, that we have, after giving effect to such acquisition,restrictions.

Our effective interest rate on our JKM Credit Facility at least $20 million in the aggregate of borrowing availability under the revolving credit facility and unrestricted cash on the balance sheet on the date of such acquisition. We are required to maintain a total leverage ratio (as defined in the revolving credit facility) for the most recently completed four fiscal quarters of less than or equal to 4.50 : 1.00, except for the quarter in which a material acquisition occurs and the first three full fiscal quarters following a material acquisition, generally defined as an acquisition with a purchase price of at least $30.0 million, with a ratio of 5.00 : 1.00, and a consolidated interest coverage ratio (as defined in the revolving credit facility) of greater than or equal to 2.75 : 1.00. The computation of our total leverage ratio allows for a pro forma application of the EBITDA (as defined in the revolving credit facility) of acquired entities andDecember 31, 2021 was 4.14 : 1.002.6% (our applicable margin was 2.5% as of December 31, 2017. As2021). Letters of credit outstanding under our JKM Credit Facility at December 31, 2017, we were30, 2021 totaled $0.8 million. The amount of availability under the JKM Credit Facility at February 24, 2022, after taking into consideration debt covenant restrictions, was $14.2 million.

Similarly, our JKM Credit Facility contains financial covenants related to leverage and fixed charge coverage as further described in compliance with theseNote 12 to the financial covenant ratios.statements. These financial covenants and other covenants may restrict or limit Holdings’ ability to incur additional indebtedness, make certain capital expenditures or dispose of assets in excess of specified levels, among other restrictions.

Renegotiation

See “Recent Developments—Acquisition of Rocky Top Purchase Obligation

In connection withAssets from 7-Eleven” and Note 12 to the Rocky Top acquisition that we completed in September 2013, wefinancial statements for information regarding the JKM Credit Facility and an amendment of the CAPL Credit Facility, both entered into a deferred seller financing arrangement, which obligated us to purchase certain sites over a 5-year period for an average $5.2 million per year beginning in 2016 at an approximately 7.7% capitalization rate. In June 2016, we renegotiated the terms with the sellers, eliminating the deferred seller financing obligation and agreeing to terms of a new lease of the assets for an initial term of 15 years and eight months with four renewal options of five years each. Under this triple net lease, annual rent is initially $1.8 million based on a 6.5% capitalization rate and increases 1.5% per year. However, because of the continuing involvement we have with the sites through the lease and sublease of the properties, we recorded the liability on our balance sheet at fair value in June 2016, which approximated its carrying value. This sale-leaseback liability is classified within accrued expenses and other current liabilities and other noncurrent liabilities on the balance sheet.

Sale Leaseback Transaction

In December 2016, we sold the real property at 17 sites acquired through the State Oil Assets asset acquisition for cash proceeds of $25.0 million, which were used to repay borrowings on the credit facility. We leased these properties for an initial term of 15 years with three renewal options of approximately five years each. Under the triple net lease, annual rent is initially $1.6 million based on a 6.5% capitalization rate and increases every five years based on inflation. Because of the continuing involvement we have with the sites through the lease and sublease of the properties, we recorded a liability for the proceeds received and are amortizing this liability over the lease term as rent payments are made. This sale-leaseback liability is classified within accrued expenses and other current liabilities and other noncurrent liabilities on the balance sheet.July 2021.

Capital Expenditures

We make investments to expand, upgrade and enhance existing assets. We categorize our capital requirements as either sustaining capital expenditures, growth capital expenditures or acquisition capital expenditures. Sustaining capital expenditures are those capital expenditures required to maintain our long-term operating income or operating capacity. Acquisition and growth capital expenditures are those capital expenditures that we expect will increase our operating income or operating capacity over the long term. We have the ability to fund our capital expenditures byfrom proceeds from sales of sites in connection with our real estate rationalization effort, through additional borrowings under our revolving credit facilityCAPL Credit Facility and JKM Credit Facility, or, if available to us on acceptable terms, accessing the capital markets and issuing additional equity and debt securities or other options, such as the sale of assets. With the significant decline in energy prices since 2014, access to the capital markets has tightened for the energy and MLP industries as a whole, which has impacted our cost of capital and our ability to raise equity and debt financing at favorable terms.options. Our ability to access the capital markets may have an impact on our ability to fund acquisitions. We may not be able to complete any offering of securities or other options on terms acceptable to us, if at all.

The following table outlines our capital expenditures and acquisitions for 2017, 2016 and 2015 (in thousands):

 

 

Year Ended December 31,

 

 

Year Ended December 31,

 

 

2017

 

 

2016

 

 

2015

 

 

2021

 

 

2020

 

 

2019

 

Sustaining capital

 

$

1,648

 

 

$

798

 

 

$

1,318

 

 

$

4,161

 

 

$

3,529

 

 

$

2,406

 

Growth

 

 

10,840

 

 

 

19,978

 

 

 

8,865

 

 

 

37,698

 

 

 

33,528

 

 

 

22,205

 

Acquisitions

 

 

75,627

 

 

 

97,134

 

 

 

309,702

 

 

 

272,983

 

 

 

28,244

 

 

 

 

Total capital expenditures and acquisitions

 

$

88,115

 

 

$

117,910

 

 

$

319,885

 

 

$

314,842

 

 

$

65,301

 

 

$

24,611

 

 

57As noted previously, the increase in growth capital expenditures was largely driven by site upgrades, including store remodels, car wash build-outs, EMV upgrades, and rebranding of certain sites, including the sites being acquired from 7-Eleven.


A significant portion of our growth capital expenditures are discretionary and we regularly review our capital plans in light of anticipated proceeds from sales of sites.

Contractual Obligations, Contingencies, Off Balance Sheet Arrangements and Concentration Risks

Our contractual obligations asprimarily include payments of December 31, 2017 are summarized below (in thousands):

 

 

Payments Due by Period

 

 

 

2018

 

 

2019

 

 

2020

 

 

2021

 

 

2022

 

 

Thereafter

 

 

Total

 

Long-term debt

 

$

765

 

 

$

506,000

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

506,765

 

Interest payments on debt

 

 

22,282

 

 

 

3,711

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

25,993

 

Capital lease obligations

 

 

2,975

 

 

 

3,079

 

 

 

3,176

 

 

 

3,274

 

 

 

3,374

 

 

 

15,799

 

 

 

31,677

 

Operating lease obligations

 

 

17,249

 

 

 

15,629

 

 

 

13,377

 

 

 

10,702

 

 

 

9,113

 

 

 

29,810

 

 

 

95,880

 

Management fees

 

 

10,272

 

 

 

7,704

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

17,976

 

Sale-leaseback obligations

 

 

6,605

 

 

 

6,673

 

 

 

6,649

 

 

 

6,740

 

 

 

6,832

 

 

 

62,886

 

 

 

96,385

 

Other liabilities

 

 

 

 

 

6,116

 

 

 

1,221

 

 

 

821

 

 

 

718

 

 

 

41,567

 

 

 

50,443

 

Total consolidated obligations

 

$

60,148

 

 

$

548,912

 

 

$

24,423

 

 

$

21,537

 

 

$

20,037

 

 

$

150,062

 

 

$

825,119

 

Interest Payments on Debt

Such amounts include estimates of interest expense related to our credit facility assuming a 4.5% interest rate.

Capital Lease Obligations

We have certain retail site properties under capital leases. Capitaldebt and finance lease obligations in the table above include both principal and interest.

Operating Lease Obligations

Therelated interest payments and operating lease obligations include leases for land, office facilitiesobligations.

As discussed previously, our CAPL Credit Facility matures April 25, 2024 and retail sites. Operatingour JKM Credit Facility matures July 16, 2026. In addition, we have finance lease obligations reflectedthat expire in the table above include all2027 and operating leases that have initial or remaining non-cancelable terms in excess of one year, and are not reduced by minimum rentals to be received by us under subleases. In addition, such amounts do not reflect contingent rentals that may be incurred in addition to minimum rentals.

Our principal executive offices are in Allentown, Pennsylvania, in an office space leased by Circle K, for which the rent is charged to us as a cost under the Amended Omnibus Agreement. Future lease payments on this office lease are included within operating lease obligations.

Sale Leaseback Obligations

The payments in the table above represent payments on sale-leaseback transactions for which the sale was not recognized as a result of the continuing involvement with the sites. As such, the table above includes the payments under the lease.

Management Fees

The payments in the table above represent contractually obligated payments under the Amended Omnibus Agreement.expire through 2041. See Note 12 to the financial statements for additional information.information on our debt and finance lease obligations, Note 13 for information on interest rate swap contracts and Note 14 for information on our operating lease obligations.

Other Liabilities53


Other liabilities include asset retirement obligations described inSee Note 10 to the financial statements11 for information on AROs, Note 16 for information on environmental matters and exclude other liabilities whose payment period or amount is not determinable. For purposes of reflecting amountsNote 17 for asset retirement obligations in the table above, we have made our best estimate of expected payments basedinformation on information available as of December 31, 2017.

Under the terms of various supply agreements, the Partnership is obligated to minimum volume purchases measured in gallons of motor fuel. Future minimumfuel volume purchase requirements are 347 million gallons in 2018, reducing to 33 million gallons in 2022. Future minimum volume purchase requirements from 2023 through 2024 total 50 million gallons. The aggregate dollar amount of the future minimum volume purchase requirements is dependent on the future weighted average wholesale cost per gallon charged under the applicable supply agreements. The amountscommitments and timing of the related payment obligations cannot reasonably be estimated reliably. As a result, payment of these amounts has been excluded from the table above. See Note 15 to the financial statements for additional information.

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Off-Balance Sheet Arrangements

The Amended Omnibus Agreement contingently requires us to perform environmental remediation work as further discussed in Note 14 to the financial statements. We also have operating leases and motor fuel purchase commitments as previously discussed in “Contractual Obligations” and in Notes 13 and 15 to the financial statements.

Other Matters Impacting Liquidity and Capital Resources

Concentration of Customers

In 2017, we distributed approximately 13% of our total wholesale distribution volumes to DMS and its affiliates and DMS and its affiliates accounted for approximately 22% of our rental income. In 2017, we distributed 8% of our total wholesale distribution volume to Circle K retail sites that are not supplied by CST Fuel Supply and received 20% of our rental income from Circle K. For more information regarding transactions with DMS and its affiliates and CST or Circle K, see Note 12 to the financial statements for additional information.

Common Unit Offering

On June 19, 2015, we closed on the sale to the public of 4.6 million common units for net proceeds of approximately $138.5 million. On July 16, 2015, we closed on the sale of an additional 0.2 million common units for net proceeds of approximately $6.4 million in accordance with the underwriters’ option to purchase additional common units. See Note 17 to the financial statements for additional information.

Partnership Common Unit Purchases by CST

On September 21, 2015, CST approved a common unit purchase program under Rule 10b-18 of the Exchange Act, authorizing CST to purchase up to an aggregate of $50 million of the common units representing limited partner interests in the Partnership. The unit purchase program does not have a fixed expiration date and may be modified, suspended or terminated at any time at CST’s discretion. CST made no purchases under the common unit purchase program during 2016 or 2017. From inception until December 31, 2015, CST had purchased $19.8 million, or 804,667 common units, at an average price of $24.64 per common unit, which common units cannot be transferred absent registration with the SEC or an available exemption from the SEC’s registration requirements.

Common Unit Repurchase Program

In November 2015, the Board approved a common unit repurchase program under Rule 10b-18 of the Exchange Act authorizing us to repurchase up to an aggregate of $25 million of the common units representing limited partner interests in the Partnership. Under the program, we may make purchases in the open market in accordance with Rule 10b-18 of the Exchange Act, or in privately negotiated transactions, pursuant to a trading plan under Rule 10b5-1 of the Exchange Act or otherwise. Any purchases will be funded from available cash on hand. The common unit repurchase program does not require us to acquire any specific number of common units and may be suspended or terminated by us at any time without prior notice. The purchases will not be made from any officer, director or control person of the Partnership or CST. We did not repurchase any common units under the plan in 2017. The following table shows the purchases made through December 31, 2016:

Period

 

Total

Number of

Units

Purchased

 

 

Average

Price Paid

per Unit

 

 

Total Cost

of Units

Purchased

 

 

Amount

Remaining

under

the Program

 

2015

 

 

154,158

 

 

$

23.37

 

 

$

3,603,071

 

 

$

21,396,929

 

2016

 

 

133,463

 

 

 

24.37

 

 

 

3,252,653

 

 

 

18,144,276

 

Total

 

 

287,621

 

 

$

23.84

 

 

$

6,855,724

 

 

$

18,144,276

 

Purchase of CST Fuel Supply Equity Interests

In January 2015 and again in July 2015, we closed on the purchase of a 5% and 12.5%, respectively, limited partner equity interest in CST Fuel Supply for aggregate consideration of 4.8 million common units and cash in the amount of $17.5 million. See Note 12 to the financial statements for additional information.

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Acquisition of Landmark Assets

In January 2015, in connection with the joint acquisition by CST and CrossAmerica of 22 retail sites from Landmark Assets, we acquired the real property of the 22 fee sites for $41.2 million. See Note 3 to the financial statements for additional information.

Acquisition of Erickson

In February 2015, we closed on the purchase of all of the outstanding capital stock of Erickson and certain related assets for an aggregate purchase price of $83.8 million, including working capital and net of cash acquired. See Note 3 to the financial statements for additional information.

Purchase of NTI retail sites

In July 2015, we completed the purchase of real property at 29 NTIs from CST in exchange for an aggregate consideration of approximately 0.3 million common units and cash in the amount of $124.4 million, with an aggregate consideration of $134.0 million on the date of closing. See Note 12 to the financial statements for additional information.

Acquisition of One Stop

In July 2015, we closed on the purchase of retail sites from One Stop and certain related assets for $45.0 million, including working capital and net of cash acquired. See Note 3 to the financial statements for additional information.

Purchase of Wholesale Fuel Supply Contracts from CST

In February 2016, CST sold 21 independent dealer contracts and 11 sub-wholesaler contracts to us for $2.9 million. See Notes 3 and 12 to the financial statements for additional information.

Acquisition of Franchised Holiday Stores

On March 29, 2016, we closed on the acquisition of 31 Franchise Holiday Stores and three company operated liquor stores from S/S/G Corporation for approximately $52.4 million, including working capital. See Note 3 to the financial statements for additional information.

Acquisition of State Oil Assets

On September 27, 2016, we acquired certain assets of State Oil Company located in the greater Chicago market for approximately $41.9 million, including working capital. See Note 3 to the financial statements for additional information.

Acquisition of Jet-Pep Assets

On November 28, 2017, we acquired certain assets of Jet-Pep, Inc. and affiliated companies located in Alabama for approximately $75.6 million, including working capital. See Note 3 to the financial statements for additional information.

Contingencies

Environmental Matterslegal matters.

See Note 142 for information on our concentration risks related to the financial statements for a discussion of our environmental matters.customers, fuel suppliers and fuel carriers.

Legal Matters

See Note 15 to the financial statements for a discussion of our legal matters.

Quarterly Results of Operations

See Note 23 to the financial statements for financial and operating quarterly data for each quarter of 2017 and 2016.

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Outlook

As noted previously, the prices paid to our motor fuel suppliers for wholesale motor fuel (which affects our costscost of sales) are highly correlated to the price of crude oil. The crude oil commodity markets are highly volatile, and the market prices of crude oil, and, correspondingly, the market prices of wholesale motor fuel, experience significant and rapid fluctuations, which affect our motor fuel gross profit. See “Significant Factors Affecting our Profitability—The Significance of Crude Oil and Wholesale Motor Fuel Prices on

Our Revenues, Cost of Sales and Gross Profit”results for additional information.

We expect our rent income2022 are anticipated to increase in 2018 based on our recent acquisitions and our expectation that we will continue to convert company operated retail sites to lessee dealers.be impacted by the following:

The acquisition of assets from 7-Eleven is anticipated to increase gross profit in both the wholesale and retail segments.

We anticipate that we will continue to realize reductions in our fuel costs as a result of new or amended fuel purchase contracts.

Our volume starting in mid-March 2020 was negatively impacted by the COVID-19 Pandemic. Although fuel volumes largely recovered during the second half of 2020 and continued to recover in 2021, we cannot predict the scope and severity with which COVID-19 will impact our results. See “Recent Developments—COVID-19 Pandemic” for additional information and actions we have and could take in the future to mitigate its impact.

We will continue to evaluate acquisitions on an opportunistic basis. Additionally, we will pursue acquisition targets that fit into our strategy. Whether we will be able to execute acquisitions will depend on market conditions, availability of suitable acquisition targets at attractive terms, acquisition related compliance with customary regulatory requirements, and our ability to finance such acquisitions on favorable terms and in compliance with our debt covenant restrictions.

New Accounting Policies

For information on recent accounting pronouncements impacting our business, see Note 2 to the financial statements.

Critical Accounting Policies Involving Critical Accountingand Estimates

We prepare our financial statements in conformity with U.S. GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates. See Note 2 to the financial statements for a summary of our significant accounting policies.

Critical accounting policies are those we believe are both most important to the portrayal of our financial condition and results, and require our most difficult, subjective or complex judgments, often because we must make estimates about the effect of matters that are inherently uncertain. Judgments and uncertainties affecting the application of those policies may result in materially different amounts being reported under different conditions or using different assumptions. We believe the following policies to be the most critical in understanding the judgments that are involved in preparing our financial statements.

Revenue Recognition

WeThe core principle of accounting guidance on revenue recognition is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services. This guidance applies to over 90% of our revenues as the only primary revenue stream outside the scope of this guidance is rental income.

Revenues from wholesale motor fuel sales when motor fuel is delivered to the customer. The purchase and delivery of motor fuels generally occurs on the same day. We recognize revenues from retail sales when motor fuel is sold to the customer. We record inventory fromare recorded at the time of delivery to our customers, by which time the purchaseprice is fixed, title to the products has transferred and payment has either been received or collection is reasonably assured, net of motor fuelsapplicable discounts and allowances. Incremental costs incurred to obtain certain contracts with customers are deferred and amortized over the contract term and are included in other noncurrent assets on the balance sheets. Amortization of such costs are classified as a reduction of operating revenues.

Revenues from third party suppliers until the retailsale of convenience store products are recognized at the time of sale to the end customer.

We recognize revenueRevenues from leasing arrangements for which we are the lessor are recognized ratably over the term of the underlying lease. Renewals are not assumed unless reasonably assured.

Revenues54


In transactions in which we sell and lease back property, we apply guidance from retail food and merchandise sales are recognized netASC 606 in determining whether the transfer of applicable provisionsthe property should be accounted for discounts and allowances upon delivery, generally atas a sale. Specifically, we assess if we have satisfied a performance obligation by transferring control of the point of sale.property.

Accounts receivable primarily result from the sale of motor fuels to customers and rental fees for retail sites. The majority of ourcustomers. Our accounts receivable relate to motor fuel sales that canis generally be describedconsidered as high volume and low margin activities.having a similar risk profile. Credit is extended to a customer based on an evaluation of the customer’s financial condition. In certain circumstances collateral may be required from the customer.customer and fuel and lease agreements are generally cross-collateralized when applicable. Receivables are recorded at face value, without interest or discount.

The provisionallowance for bad debtscredit losses is generally based upon a specific analysis of aged accountshistorical experience while also factoring in any new business conditions that might impact the historical analysis, such as market conditions and bankruptcies of particular customers. Bad debt provisions areCredit loss expense is included in selling, general and administrative expenses.

We review all accounts receivable balances on at least a quarterly basisbasis.

LGW and provide an allowance for doubtful accounts based on historical experience and on a specific identification basis.

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LGW collectsCAPL JKM Wholesale collect motor fuel taxes, which consist of various pass throughpass-through taxes collected from customers on behalf of taxing authorities and remits such taxes directly to those taxing authorities. LGW’s and CAPL JKM Wholesale’s accounting policy is to exclude the taxtaxes collected and remitted from wholesale revenues and cost of sales and account for them as liabilities. LGWS’s and Joe’s Kwik Marts’ retail sales and cost of sales include motor fuel taxes as the taxes are included in the cost paid for motor fuel and LGWS hasand Joe’s Kwik Mart’s have no direct responsibility to collect or remit such taxes to the taxing authorities.

See Notes 6 and 22 to the financial statements for additional information on our revenues and related receivables.

Asset Acquisitions and Business Combinations

We early adopted ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business, effective January 1, 2017. Under this guidance,When closing on an acquisition, we must first determine whether substantially all of the fair value of the set of gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets. If this threshold is met, the set is not a business. If this threshold is not met, we determine whether the set meets the definition of a business.

A business is defined as an integrated set of assets and activities that is capable of being conducted and managed for the purpose of providing a return to investors or other owners, members or participants. A business typically has inputs, processes applied to those inputs and outputs that are used to generate a return to investors, but outputs are not required for a set to be a business. A business must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create outputs.

We account for asset acquisitions (i.e., transactions involving the acquisition of a set of assets that does not meet the definition of a business) in accordance with the guidance under ASC 805-50 and other applicable guidance. Asset acquisitions are generally accounted for by allocating the cost of the acquisition to the individual assets acquired and liabilities assumed on a relative fair value basis. Two of the key differences in accounting for transactions as asset acquisitions as compared to business combination are summarized below:

Transaction costs are capitalized as a component of the cost of the assets acquired rather than expensed as incurred;

Transaction costs are capitalized as a component of the cost of the assets acquired rather than expensed as incurred;

Goodwill is not recognized. Rather, any excess consideration transferred over the fair value of the net assets acquired is allocated on a relative fair value basis to the identifiable net assets other than certain non-qualifying assets as defined in the guidance.

Goodwill is not recognized. Rather, any excess consideration transferred over the fair value of the net assets acquired is allocated on a relative fair value basis to the identifiable net assets other than certain non-qualifying assets as defined in the guidance.

We account for business combinations in accordance with the guidance under ASC 805–Business Combinations. The purchase price is recorded for assets acquired and liabilities assumed based on fair value. The excess of the fair value of the consideration conveyed over the fair value of the net assets acquired is recorded as goodwill.

The income statement includes the results of operations for each acquisition from their respective date of acquisition.

Whether we account for a transaction as an asset acquisition or a business combination, determining the fair value of these items requires management’s judgment, the utilization of independent valuation experts and involves the use of significant estimates and assumptions with respect to the timing and amounts of future cash inflows and outflows, discount rates, market prices and asset lives, among other items. The judgments made in the determination of the estimated fair value assigned to the assets acquired, the liabilities assumed and any noncontrolling interest in the investee, as well as the estimated useful life of each asset and the duration of each liability, can materially impact the financial statements in periods after acquisition, such as through depreciation and amortization. For more information on our acquisitions, see Note 3 to the financial statements.

55


Goodwill

Goodwill represents the excess of costthe fair value of the consideration conveyed to acquire a business over the fair value of the net assets of businesses acquired. Goodwill is not amortized, but instead is tested for impairment at the reporting unit level at least annually, and more frequently if events and circumstances indicate that the goodwill might be impaired. The annual impairment testing date of goodwill is October 1.

We early adopted ASU 2017-04, Intangibles–Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, effective January 1, 2017.

In performing our annual impairment analysis, ASC 350–20, Intangibles–Goodwill and Other, allows us towe use qualitative factors to determine whether it is more likely than not (likelihood of more than 50%) that the fair value of a reporting unit is less than its carrying amount, including goodwill. We consider macroeconomic conditions such as developments in equity and credit markets, industry and market conditions such as the competitive environment, cost factors such as changes in our cost of fuel, our financial performance and our unit price.

If, after assessing the totality of events or circumstances, we determine that it is more likely than not that the fair value of a reporting unit exceeds its carrying amount, no further testing is necessary. However, if we determine that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, then we perform the goodwill impairment test.

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In the goodwill impairment test, the reporting unit’s carrying amount (including goodwill) and its fair value are compared. If the estimated fair value of a reporting unit is less than the carrying value, an impairment charge is recognized for the deficit up to the amount of goodwill recorded.

At December 31, 2017,2021 and 2020, we had $89.1goodwill totaling $100.5 million of goodwill recorded in our segments.and $88.8 million, respectively. Of the December 31, 2021 balance, $82.3 million was assigned to the wholesale reporting unit and $18.2 million was assigned to the retail reporting unit. After assessing the totality of events and circumstances, we determined that it is more likely than not that the fair value of our reporting units exceed their carrying amounts and therefore goodwill is not impaired at December 31, 2017.

Asset Retirement Obligations

When we install2021 or acquire USTs, we recognize the estimated future cost to remove our USTs over their estimated useful lives. We record a discounted liability for the fair value of an asset retirement obligation with a corresponding increase to the carrying value of the related long-lived asset at the time a UST is installed. We depreciate the amount added to property and equipment and recognize accretion expense in connection with the discounted liability over the remaining life of the UST.

We base our estimates of such future costs on our prior experience with removal and include normal and customary costs we expect to incur associated with UST removal. We compare our cost estimates with our actual removal cost experience on an annual basis, and when the actual costs we experience exceed our original estimates, we will recognize an additional liability for estimated future costs to remove the USTs. Because these estimates are subjective and are currently based on historical costs with adjustments for estimated future changes in the associated costs, the dollar amount of these obligations could change as more information is obtained.

As of December 31, 2017 and 2016, our liabilities related to the removal of USTs recorded in the consolidated financial statements were $31.5 million and $27.8 million, respectively. A 10% change in our estimate of anticipated future costs for removal of USTs as of December 31, 2017 would change our asset retirement obligation by approximately $3.1 million. See also Note 10 under the caption “Asset Retirement Obligations” to the financial statements.

Environmental Liabilities

As of December 31, 2017 and 2016, our environmental reserves recorded in the consolidated financial statements were $3.5 million and $4.2 million, respectively. These environmental reserves represent our estimates for future expenditures for remediation and related litigation associated with contaminated retail sites as a result of releases (e.g. overfills, spills and releases) and are based on current regulations, historical results and certain other factors.

Environmental liabilities that we have recorded are based on internal and external estimates of costs to remediate retail sites. Factors considered in the estimates of the liability are the expected cost and the estimated length of time to remediate each contaminated site. Estimated remediation costs are not discounted because the timing of payments cannot be reasonably estimated. Reimbursements under state trust fund programs are recognized when received because such amounts are insignificant. The adequacy of the liability is evaluated quarterly and adjustments are made based on updated experience at existing retail sites, newly identified retail sites and changes in governmental policy. A 10% change in our estimate of future costs related to environmental liabilities recorded as of December 31, 2017 would change our environmental liabilities and operating expenses by $0.4 million. See Note 14 to the financial statements for additional information.2020.

Tax Matters

As a limited partnership, we are not subject to federal and state income taxes. However, our corporate subsidiaries are subject to income taxes. Income tax attributable to our taxable income (including any dividend income from our corporate subsidiaries), which may differ significantly from income for financial statement purposes, is assessed at the individual level of the unit holder.limited partner unitholder level. We are subject to a statutory requirement that non-qualifying income, as defined by the Internal Revenue Code, cannot exceed 10% of total gross income for the calendar year. If non-qualifying income exceeds this statutory limit, we would be taxed as a corporation. The non-qualifying income did not exceed the statutory limit in any annual period.

Certain activities that generate non-qualifying income are conducted through our wholly owned taxable corporate subsidiary, LGWS.subsidiaries, LGWS and Joe’s Kwik Marts. Current and deferred income taxes are recognized on the earnings of LGWS.these subsidiaries. Deferred income tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and are measured using enacted tax rates.

Valuation allowances are initially recorded and reevaluated each reporting period by assessing the likelihood of the ultimate realization of a deferred tax asset. We consider a number of factors in assessing the realization of a deferred tax asset, including the reversal of temporary differences, projections of future taxable income and ongoing prudent and feasible tax planning strategies. The amount of deferred tax assets ultimately realized may differ materially from the estimates utilized in the computation of valuation allowances and may materially impact the financial statements in the future.

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As a result of a reassessment of the positive and negative evidence supporting whether or not a valuation allowance for deferred tax assets is needed, we released the entire $3.7 million valuation allowance in 2017. See Note 19 to the financial statements for additional information.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market Risk

Market risk is the risk of loss arising from adverse changes in market rates and prices. The principal market risks to which we are exposed are interest rate risk and commodity price risk.

Interest Rate Risk

As of December 31, 2021, we had $630.6 million outstanding on our CAPL Credit Facility. Our outstanding borrowings bear interest at LIBOR plus an applicable margin, which was 2.5% at December 31, 2021.

On March 26, 2020, we entered into an interest rate swap contract to hedge against interest rate volatility on our variable rate borrowings under the CAPL Credit Facility. The interest rate swap contract has a notional amount of $150 million, a fixed rate of 0.495% and matures on April 1, 2024. On April 15, 2020, we entered into two additional interest rate swap contracts, each with notional amounts of $75 million, a fixed rate of 0.38% and that mature on April 1, 2024. See Note 13 to the financial statements for additional information.

56


Taking the interest rate swap contracts into account, our effective interest rate on our CAPL Credit Facility at December 31, 2021 was 2.8%. A one percentage point change in LIBOR would impact annual interest expense by approximately $3.3 million.

As of December 31, 2021, we had $182.5 million outstanding under our Term Loan Facility. Our borrowings under the JKM Credit Facility had a weighted-average interest rate of 2.6% as of December 31, 2021 (LIBOR plus an applicable margin, which was 2.5% as of December 31, 2021). A one percentage point change in LIBOR would impact annual interest expense by approximately $1.8 million.

Commodity Price Risk

We purchase gasoline and diesel fuel from several suppliers at costs that are subject to market volatility. These purchases are generally made pursuant to contracts or at market prices established with the supplier.

We do not currently engage in hedging activities for these purchases due to our pricing structure that allows us to generally pass on price changes to our customers and related parties.

Interest Rate Risk

As of December 31, 2017, we had $506.0 million outstanding on our revolving credit facility. Our outstanding borrowings bear interest at LIBOR plus an applicable margin, which was 3.00% at December 31, 2017. Our borrowings had a weighted-average interest rate at December 31, 2017 of 4.44%. A one percentage point change in our average rate would impact annual interest expense by approximately $5.1 million.

Commodity Price Risk

We have not historically hedged or managed our price risk with respect to our commodity inventories (gasoline and diesel fuel), as the time period between the purchases of our motor fuel inventory and the sales to our customers is very short.

CrossAmerica purchases motor fuel for our Jet-Pep Assets from Circle K at Circle K’s cost plus terminal and administration fees of $0.015 per gallon. Circle K’s cost to supply these sites includes price fluctuations associated with index-based motor fuel pricing for pipeline delivery and the generation and sale of RINs. Circle K has implemented a motor fuel price hedging program to mitigate the price risk during delivery, thereby lowering our exposure. As such, we are exposed to more price risk with these motor fuel purchases from Circle K as compared to our other motor fuel purchases.

Regarding our supplier relationships, a majority of our total gallons purchased are subject to discountsTerms Discounts for prompt payment and other rebates and incentives, which are recorded within cost of sales. Prompt payment discounts are based on a percentage of the purchase price of motor fuel. As such, the dollar value of these discounts increaseincreases and decreasedecreases corresponding with motor fuel prices. We have not historically hedged or managed our price risk with respect to these terms discounts. Based on our current volumes, we estimate a $10 per barrel change in the price of crude oil would impact our annual wholesale motor fuel gross profit by approximately $2$2.8 million related to these payment discounts.

Foreign Currency Risk

Our operations are located in the U.S., and therefore are not subject to foreign currency risk.

ITEM 8. FINANCIAL STATEMENTS

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

The SEC, as required by Section 404 of the Sarbanes-Oxley Act, adopted rules requiring most companies tothat file reports with the SEC to include a management report on such company’s internal control over financial reporting in its Form 10-K. In addition, our independent registered public accounting firm must attest to our internal control over financial reporting.

The management of CrossAmerica is responsible for establishing and maintaining adequate internal control over financial reporting. This internal control system was designed to provide reasonable assurance to the company’s management and Board regarding the preparation and fair presentation of published financial statements. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. CrossAmerica management assessed the effectiveness of the company’s internal control over financial reporting as of December 31, 2017.2021. In making this assessment, it used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework, 2013 version. Based on our assessment, we believe that, as of December 31, 2017,2021, the Partnership’s internal control over financial reporting is effective based on those criteria.

Attestation Report of the Independent Registered Public Accounting Firm

Grant Thornton LLP (PCAOB ID No. 248), our independent registered public accounting firm, has audited our internal control over financial reporting as of December 31, 2017.2021. Their report dated February 26, 2018,28, 2022, expressed an unqualified opinion on our internal control over financial reporting.

6457


REPORT OF INDEPENDENT REGISTEREDREGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors, General Partner and Limited Partners

CrossAmerica Partners LP

Opinion on the financial statements

We have audited the accompanying consolidated balance sheets of CrossAmerica Partners LP (a Delaware Limited Partnership)partnership) and subsidiaries (the “Partnership”) as of December 31, 20172021 and 2016,2020, the related consolidated statements of income, changes in partners’ capitalequity and comprehensive income and cash flows for each of the three years in the period ended December 31, 2017.2021, and the related notes and financial statement schedule I (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Partnership as of December 31, 20172021 and 2016,2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2017,2021, in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’sPartnership’s internal control over financial reporting as of December 31, 2017,2021, based on criteria established in the 2013 Internal ControlControl—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), and our report dated February 26, 201828, 2022 expressed an unqualified opinion.

Basis for opinion

These financial statements are the responsibility of the Partnership’s management. Our responsibility is to express an opinion on the Partnership’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Partnership in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence supportingregarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical audit matters

Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there are no critical audit matters.

/s/ GRANT THORNTON LLP

We have served as the Company’sPartnership’s auditor since 2011.

Philadelphia, PennsylvaniaArlington, Virginia

February 26, 201828, 2022

6558


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors, General Partner and Limited Partners

CrossAmerica Partners LP

Opinion on internal control over financial reporting

We have audited the internal control over financial reporting of CrossAmerica Partners LP (a Delaware Partnership)partnership) and subsidiaries (the “Partnership”) as of December 31, 20172021, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). In our opinion, the CompanyPartnership maintained, in all material respects, effective internal control over financial reporting as of December 31, 2017,2021, based on criteria established in the 2013 Internal Control—Integrated Framework issued by COSO.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated financial statements of the Partnership as of and for the year ended December 31, 2017,2021, and our report dated February 26, 2018,28, 2022 expressed an unqualified opinion on those financial statements.

Basis for opinion

The Partnership’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’sPartnership’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the CompanyPartnership in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our auditsaudit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and limitations of internal control over financial reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ GRANT THORNTON LLP

Philadelphia, PennsylvaniaArlington, Virginia

February 26, 201828, 2022

6659


CROSSAMERICA PARTNERS LP

CONSOLIDATED BALANCE SHEETS

(Thousands of Dollars, except unit data)

 

 

 

December 31,

 

 

 

2017

 

 

2016

 

 

 

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash

 

$

3,897

 

 

$

1,350

 

Accounts receivable, net of allowances of $277 and $487, respectively

 

 

27,792

 

 

 

29,251

 

Accounts receivable from related parties

 

 

14,459

 

 

 

12,975

 

Inventories

 

 

15,122

 

 

 

13,164

 

Assets held for sale

 

 

11,708

 

 

 

2,111

 

Other current assets

 

 

7,528

 

 

 

6,556

 

Total current assets

 

 

80,506

 

 

 

65,407

 

Property and equipment, net

 

 

681,000

 

 

 

677,329

 

Intangible assets, net

 

 

76,063

 

 

 

80,760

 

Goodwill

 

 

89,109

 

 

 

89,109

 

Other assets

 

 

20,558

 

 

 

19,384

 

Total assets

 

$

947,236

 

 

$

931,989

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Current portion of debt and capital lease obligations

 

$

2,916

 

 

$

2,100

 

Accounts payable

 

 

35,789

 

 

 

34,903

 

Accounts payable to related parties

 

 

25,512

 

 

 

9,958

 

Accrued expenses and other current liabilities

 

 

17,015

 

 

 

15,705

 

Motor fuel taxes payable

 

 

12,241

 

 

 

12,467

 

Total current liabilities

 

 

93,473

 

 

 

75,133

 

Debt and capital lease obligations, less current portion

 

 

529,147

 

 

 

465,119

 

Deferred tax liabilities, net

 

 

24,069

 

 

 

42,923

 

Asset retirement obligations

 

 

31,467

 

 

 

27,750

 

Other long-term liabilities

 

 

98,061

 

 

 

100,253

 

Total liabilities

 

 

776,217

 

 

 

711,178

 

 

 

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity:

 

 

 

 

 

 

 

 

Partners’ Capital

 

 

 

 

 

 

 

 

Common units—(34,111,461 and 33,524,952 units issued and

   outstanding at December 31, 2017 and December 31, 2016, respectively)

 

 

171,337

 

 

 

221,044

 

General Partner’s interest

 

 

 

 

 

 

Total Partners’ Capital

 

 

171,337

 

 

 

221,044

 

Noncontrolling interests

 

 

(318

)

 

 

(233

)

Total equity

 

 

171,019

 

 

 

220,811

 

Total liabilities and equity

 

$

947,236

 

 

$

931,989

 

See Notes to Consolidated Financial Statements.

67


CROSSAMERICA PARTNERS LP

CONSOLIDATED STATEMENTS OF INCOME

(Thousands of Dollars, Except Unit and Per Unit Amounts)

 

 

For the Year Ended December 31,

 

 

 

2017

 

 

2016

 

 

2015

 

Operating revenues(a)

 

$

2,094,827

 

 

$

1,869,806

 

 

$

2,226,271

 

Costs of sales(b)

 

 

1,934,061

 

 

 

1,714,239

 

 

 

2,056,807

 

Gross profit

 

 

160,766

 

 

 

155,567

 

 

 

169,464

 

Income from CST Fuel Supply equity interests

 

 

14,906

 

 

 

16,048

 

 

 

10,528

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses

 

 

61,297

 

 

 

61,074

 

 

 

72,229

 

General and administrative expenses

 

 

27,887

 

 

 

24,156

 

 

 

36,238

 

Depreciation, amortization and accretion expense

 

 

57,470

 

 

 

54,412

 

 

 

48,227

 

Total operating expenses

 

 

146,654

 

 

 

139,642

 

 

 

156,694

 

Gain on sales of assets, net

 

 

3,401

 

 

 

198

 

 

 

2,719

 

Operating income

 

 

32,419

 

 

 

32,171

 

 

 

26,017

 

Other income (expense), net

 

 

439

 

 

 

848

 

 

 

396

 

Interest expense

 

 

(27,919

)

 

 

(22,757

)

 

 

(18,493

)

Income before income taxes

 

 

4,939

 

 

 

10,262

 

 

 

7,920

 

Income tax benefit

 

 

(18,237

)

 

 

(453

)

 

 

(3,542

)

Net income

 

 

23,176

 

 

 

10,715

 

 

 

11,462

 

Less: net income attributable to noncontrolling interests

 

 

18

 

 

 

11

 

 

 

21

 

Net income attributable to limited partners

 

 

23,158

 

 

 

10,704

 

 

 

11,441

 

IDR distributions

 

 

(4,337

)

 

 

(3,392

)

 

 

(1,390

)

Net income available to limited partners

 

$

18,821

 

 

$

7,312

 

 

$

10,051

 

Net income per limited partner unit:

 

 

 

 

 

 

 

 

 

 

 

 

Basic earnings per common unit

 

$

0.56

 

 

$

0.22

 

 

$

0.35

 

Diluted earnings per common unit

 

$

0.56

 

 

$

0.22

 

 

$

0.35

 

Basic and diluted earnings per subordinated unit

 

n/a

 

 

$

0.22

 

 

$

0.35

 

Weighted-average limited partner units:

 

 

 

 

 

 

 

 

 

 

 

 

Basic common units

 

 

33,844,823

 

 

 

32,159,156

 

 

 

21,462,665

 

Diluted common units

 

 

33,855,345

 

 

 

32,216,004

 

 

 

21,561,403

 

Basic and diluted subordinated units

 

 

 

 

 

1,151,366

 

 

 

7,525,000

 

Total diluted common and subordinated units

 

 

33,855,345

 

 

 

33,367,370

 

 

 

29,086,403

 

Distribution paid per common and subordinated unit

 

$

2.4800

 

 

$

2.4000

 

 

$

2.2300

 

Distribution declared (with respect to each respective

   period) per common and subordinated unit

 

$

2.4950

 

 

$

2.4200

 

 

$

2.2800

 

Supplemental information:

 

 

 

 

 

 

 

 

 

 

 

 

(a) Includes excise taxes of:

 

$

79,937

 

 

$

79,537

 

 

$

99,339

 

(a) Includes revenues from fuel sales to and rental

   income from related parties of:

 

 

414,781

 

 

 

411,945

 

 

 

494,090

 

(a) Includes rental income of:

 

 

86,314

 

 

 

80,594

 

 

 

65,431

 

(b) Includes rental expense of:

 

 

19,472

 

 

 

19,656

 

 

 

17,024

 

See Notes to Consolidated Financial Statements.

68


CROSSAMERICA PARTNERS LP

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Thousands of Dollars)

 

 

For the Year Ended December 31,

 

 

 

2017

 

 

2016

 

 

2015

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

23,176

 

 

$

10,715

 

 

$

11,462

 

Adjustments to reconcile net income to net cash flows provided by

   operating activities:

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation, amortization and accretion expense

 

 

57,470

 

 

 

54,412

 

 

 

48,227

 

Amortization of deferred financing costs

 

 

1,707

 

 

 

1,666

 

 

 

1,475

 

Amortization of below market leases, net

 

 

70

 

 

 

198

 

 

 

394

 

Provision for losses on doubtful accounts

 

 

103

 

 

 

36

 

 

 

521

 

Deferred income taxes

 

 

(18,853

)

 

 

(686

)

 

 

(6,116

)

Equity-based employees and directors compensation expense

 

 

1,931

 

 

 

3,927

 

 

 

5,119

 

Amended Omnibus Agreement fees settled in common units

 

 

13,200

 

 

 

12,133

 

 

 

8,917

 

Gain on sales of assets, net

 

 

(3,401

)

 

 

(198

)

 

 

(2,719

)

Gain on settlement of capital lease obligations

 

 

 

 

 

(132

)

 

 

(25

)

Erickson working capital adjustment

 

 

 

 

 

335

 

 

 

 

Changes in working capital, net of acquisitions

 

 

13,557

 

 

 

(2,966

)

 

 

(2,768

)

Net cash provided by operating activities

 

 

88,960

 

 

 

79,440

 

 

 

64,487

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

 

 

 

 

Proceeds from sale of property and equipment

 

 

27,552

 

 

 

2,682

 

 

 

6,409

 

Capital expenditures

 

 

(12,488

)

 

 

(20,776

)

 

 

(10,183

)

Principal payments received on notes receivable

 

 

450

 

 

 

794

 

 

 

1,958

 

Refund payment related to the sale by CST of California and Wyoming

   assets

 

 

 

 

 

17,528

 

 

 

 

Cash paid in connection with acquisitions, net of cash acquired

 

 

(75,627

)

 

 

(94,234

)

 

 

(167,777

)

Cash paid to CST in connection with acquisitions

 

 

 

 

 

(2,900

)

 

 

(141,925

)

Net cash used in investing activities

 

 

(60,113

)

 

 

(96,906

)

 

 

(311,518

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

 

 

 

 

Borrowings under the revolving credit facility

 

 

205,121

 

 

 

214,788

 

 

 

369,495

 

Repayments on the revolving credit facility

 

 

(140,621

)

 

 

(131,699

)

 

 

(211,484

)

Proceeds from issuance of common units

 

 

 

 

 

 

 

 

144,939

 

Proceeds from sale leaseback transactions

 

 

 

 

 

25,035

 

 

 

 

Repurchases of common units

 

 

 

 

 

(3,252

)

 

 

(3,603

)

Payments of long-term debt and capital lease obligations

 

 

(2,032

)

 

 

(2,262

)

 

 

(1,983

)

Payments of sale leaseback obligations

 

 

(865

)

 

 

(734

)

 

 

(682

)

Payment of deferred financing costs

 

 

(6

)

 

 

(694

)

 

 

 

Repayments from related party

 

 

 

 

 

 

 

 

2,465

 

Contributions from Circle K

 

 

329

 

 

 

 

 

 

 

Distributions paid on distribution equivalent rights

 

 

(22

)

 

 

(45

)

 

 

(13

)

Distributions paid to holders of the IDRs

 

 

(4,337

)

 

 

(3,392

)

 

 

(1,390

)

Distributions paid to noncontrolling interests

 

 

(103

)

 

 

(109

)

 

 

(125

)

Distributions paid on common and subordinated units

 

 

(83,764

)

 

 

(80,012

)

 

 

(64,566

)

Net cash (used in) provided by financing activities

 

 

(26,300

)

 

 

17,624

 

 

 

233,053

 

Net increase (decrease) in cash

 

 

2,547

 

 

 

158

 

 

 

(13,978

)

Cash at beginning of period

 

 

1,350

 

 

 

1,192

 

 

 

15,170

 

Cash at end of period

 

$

3,897

 

 

$

1,350

 

 

$

1,192

 

See Notes to Consolidated Financial Statements.

69


CROSSAMERICA PARTNERS LP

CONSOLIDATED STATEMENTS OF PARTNERS’ CAPITAL AND COMPREHENSIVE INCOME

(Thousands of Dollars, Except Unit and Per Unit Amounts)

 

 

Limited Partners’ Interest

 

 

General

 

 

Incentive

 

 

 

 

 

 

 

 

 

 

 

Common

Unitholders

 

 

Subordinated

Units - Affiliates

 

 

Partner’s

Interest

 

 

Distribution

Rights

 

 

Noncontrolling

Interest

 

 

Equity

 

 

 

Units

 

 

Dollars

 

 

Units

 

 

Dollars

 

 

Dollars

 

 

Dollars

 

 

Dollars

 

 

Dollars

 

Balance at December 31, 2014

 

 

15,437,704

 

 

$

281,817

 

 

 

7,525,000

 

 

$

(91,295

)

 

$

 

 

$

 

 

$

(31

)

 

$

190,491

 

Vesting of incentive and director awards, net of units

   withheld for taxes

 

 

96,812

 

 

 

3,261

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,261

 

Issuance of units to CST for the payment of fees under the

   Amended Omnibus Agreement

 

 

259,312

 

 

 

7,200

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

7,200

 

Issuance of units to CST in connection with sale of fuel

   supply interests and purchase of NTIs

 

 

5,139,252

 

 

 

163,292

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

163,292

 

Distributions to CST in connection with sale of fuel

   supply interests

 

 

 

 

 

(182,092

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(182,092

)

Repurchase of common units

 

 

(154,158

)

 

 

(3,603

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3,603

)

Proceeds of equity offering and overallotment exercise,

   net of issuance costs

 

 

4,807,000

 

 

 

144,939

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

144,939

 

Net income and comprehensive income

 

 

 

 

 

7,442

 

 

 

 

 

 

2,609

 

 

 

 

 

 

1,390

 

 

 

21

 

 

 

11,462

 

Distributions paid

 

 

 

 

 

(47,798

)

 

 

 

 

 

(16,781

)

 

 

 

 

 

(1,390

)

 

 

(125

)

 

 

(66,094

)

Balance at December 31, 2015

 

 

25,585,922

 

 

 

374,458

 

 

 

7,525,000

 

 

 

(105,467

)

 

 

 

 

 

 

 

 

(135

)

 

 

268,856

 

Vesting of incentive and director awards, net of units

   withheld for taxes

 

 

107,227

 

 

 

2,606

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,606

 

Conversion of subordinated units

 

 

7,525,000

 

 

 

(109,673

)

 

 

(7,525,000

)

 

 

109,673

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of units to CST for the payment of fees due

   under the Amended Omnibus Agreement

 

 

468,645

 

 

 

11,245

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

11,245

 

Distributions to CST in connection with the purchase

   of independent dealer and subwholesaler contracts

 

 

 

 

 

(2,900

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,900

)

Refund payment related to the sale of California and

   Wyoming assets

 

 

(28,379

)

 

 

17,528

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

17,528

 

Repurchase of common units

 

 

(133,463

)

 

 

(3,252

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3,252

)

Net income and comprehensive income

 

 

 

 

 

7,059

 

 

 

 

 

 

253

 

 

 

 

 

 

3,392

 

 

 

11

 

 

 

10,715

 

Distributions paid

 

 

 

 

 

 

(75,598

)

 

 

 

 

 

(4,459

)

 

 

 

 

 

(3,392

)

 

 

(109

)

 

 

(83,558

)

Other

 

 

 

 

 

(429

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(429

)

Balance at December 31, 2016

 

 

33,524,952

 

 

 

221,044

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(233

)

 

 

220,811

 

Vesting of incentive and director awards, net of units

   withheld for taxes

 

 

35,993

 

 

 

896

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

896

 

Issuance of units to CST and Circle K for the payment of fees

   due under the Amended Omnibus Agreement

 

 

550,516

 

 

 

14,033

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

14,033

 

Contributions from Circle K

 

 

 

 

 

329

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

329

 

Net income and comprehensive income

 

 

 

 

 

18,821

 

 

 

 

 

 

 

 

 

 

 

 

4,337

 

 

 

18

 

 

 

23,176

 

Distributions paid

 

 

 

 

 

(83,786

)

 

 

 

 

 

 

 

 

 

 

 

(4,337

)

 

 

(103

)

 

 

(88,226

)

Balance at December 31, 2017

 

 

34,111,461

 

 

$

171,337

 

 

 

 

 

$

 

 

$

 

 

$

 

 

$

(318

)

 

$

171,019

 

 

 

December 31,

 

 

 

2021

 

 

2020

 

 

 

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

7,648

 

 

$

513

 

Accounts receivable, net of allowances of $458 and $429, respectively

 

 

33,331

 

 

 

28,519

 

Accounts receivable from related parties

 

 

1,149

 

 

 

931

 

Inventory

 

 

46,100

 

 

 

23,253

 

Assets held for sale

 

 

4,907

 

 

 

9,898

 

Other current assets

 

 

13,180

 

 

 

11,707

 

Total current assets

 

 

106,315

 

 

 

74,821

 

Property and equipment, net

 

 

755,454

 

 

 

570,856

 

Right-of-use assets, net

 

 

169,333

 

 

 

167,860

 

Intangible assets, net

 

 

114,187

 

 

 

92,912

 

Goodwill

 

 

100,464

 

 

 

88,764

 

Other assets

 

 

24,389

 

 

 

19,129

 

Total assets

 

$

1,270,142

 

 

$

1,014,342

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Current portion of debt and finance lease obligations

 

$

10,939

 

 

$

2,631

 

Current portion of operating lease obligations

 

 

34,832

 

 

 

31,958

 

Accounts payable

 

 

67,173

 

 

 

63,978

 

Accounts payable to related parties

 

 

7,679

 

 

 

5,379

 

Accrued expenses and other current liabilities

 

 

20,682

 

 

 

23,267

 

Motor fuel and sales taxes payable

 

 

22,585

 

 

 

19,735

 

Total current liabilities

 

 

163,890

 

 

 

146,948

 

Debt and finance lease obligations, less current portion

 

 

810,635

 

 

 

527,299

 

Operating lease obligations, less current portion

 

 

140,149

 

 

 

141,380

 

Deferred tax liabilities, net

 

 

12,341

 

 

 

15,022

 

Asset retirement obligations

 

 

45,366

 

 

 

41,450

 

Other long-term liabilities

 

 

41,203

 

 

 

32,575

 

Total liabilities

 

 

1,213,584

 

 

 

904,674

 

 

 

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity:

 

 

 

 

 

 

 

 

Common units—37,896,556 and 37,868,046 units issued and

   outstanding at December 31, 2021 and 2020, respectively

 

 

53,528

 

 

 

112,124

 

Accumulated other comprehensive income (loss)

 

 

3,030

 

 

 

(2,456

)

Total equity

 

 

56,558

 

 

 

109,668

 

Total liabilities and equity

 

$

1,270,142

 

 

$

1,014,342

 

 

See Notes to Consolidated Financial Statements.

 


CROSSAMERICA PARTNERS LP

CONSOLIDATED STATEMENTS OF INCOME

(Thousands of Dollars, except unit and per unit amounts)

 

 

For the Year Ended December 31,

 

 

 

2021

 

 

2020

 

 

2019

 

Operating revenues (a)

 

$

3,579,259

 

 

$

1,932,323

 

 

$

2,149,429

 

Cost of sales (b)

 

 

3,302,306

 

 

 

1,720,196

 

 

 

1,994,792

 

Gross profit

 

 

276,953

 

 

 

212,127

 

 

 

154,637

 

Income from CST Fuel Supply equity interests

 

 

 

 

 

3,202

 

 

 

14,768

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses (c)

 

 

134,079

 

 

 

90,928

 

 

 

52,554

 

General and administrative expenses

 

 

30,930

 

 

 

20,991

 

 

 

16,849

 

Depreciation, amortization and accretion expense

 

 

77,852

 

 

 

68,742

 

 

 

55,032

 

Total operating expenses

 

 

242,861

 

 

 

180,661

 

 

 

124,435

 

Gain (loss) on dispositions and lease terminations, net

 

 

2,037

 

 

 

80,924

 

 

 

(1,648

)

Operating income

 

 

36,129

 

 

 

115,592

 

 

 

43,322

 

Other income, net

 

 

544

 

 

 

503

 

 

 

524

 

Interest expense

 

 

(18,244

)

 

 

(16,587

)

 

 

(27,000

)

Income before income taxes

 

 

18,429

 

 

 

99,508

 

 

 

16,846

 

Income tax benefit

 

 

(3,225

)

 

 

(7,948

)

 

 

(1,230

)

Net income

 

 

21,654

 

 

 

107,456

 

 

 

18,076

 

IDR distributions

 

 

 

 

 

(133

)

 

 

(533

)

Net income available to limited partners

 

$

21,654

 

 

$

107,323

 

 

$

17,543

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted earnings per common unit

 

$

0.57

 

 

$

2.87

 

 

$

0.51

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-average limited partner units:

 

 

 

 

 

 

 

 

 

 

 

 

Basic common units

 

 

37,880,910

 

 

 

37,369,487

 

 

 

34,454,369

 

Diluted common units (d)

 

 

37,884,124

 

 

 

37,369,487

 

 

 

34,484,801

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Supplemental information:

 

 

 

 

 

 

 

 

 

 

 

 

(a) Includes excise taxes of:

 

$

228,764

 

 

$

141,429

 

 

$

78,004

 

(a) Includes rent income of:

 

 

83,182

 

 

 

83,233

 

 

 

90,139

 

(b) excludes depreciation, amortization and accretion

 

 

 

 

 

 

 

 

 

 

 

 

(b) Includes rent expense of:

 

 

23,765

 

 

 

25,214

 

 

 

27,493

 

(c) Includes rent expense of:

 

 

13,531

 

 

 

9,067

 

 

 

379

 

(d) Diluted common units were not used in the calculation of diluted earnings per common unit

   for 2020 because to do so would have been antidilutive.

 

See Notes to Consolidated Financial Statements.


CROSSAMERICA PARTNERS LP

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Thousands of Dollars)

 

 

For the Year Ended December 31,

 

 

 

2021

 

 

2020

 

 

2019

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

21,654

 

 

$

107,456

 

 

$

18,076

 

Adjustments to reconcile net income to net cash provided by

   operating activities:

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation, amortization and accretion expense

 

 

77,852

 

 

 

68,742

 

 

 

55,032

 

Amortization of deferred financing costs

 

 

1,862

 

 

 

1,042

 

 

 

1,027

 

Credit loss expense

 

 

253

 

 

 

1,210

 

 

 

362

 

Deferred income tax (benefit) expense

 

 

(3,761

)

 

 

(4,436

)

 

 

3,569

 

Equity-based employee and director compensation expense

 

 

1,311

 

 

 

172

 

 

 

1,246

 

(Gain) loss on dispositions and lease terminations, net

 

 

(2,037

)

 

 

(88,912

)

 

 

1,648

 

Changes in operating assets and liabilities, net of acquisitions

 

 

(1,666

)

 

 

19,210

 

 

 

(8,633

)

Net cash provided by operating activities

 

 

95,468

 

 

 

104,484

 

 

 

72,327

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

 

 

 

 

Principal payments received on notes receivable

 

 

793

 

 

 

974

 

 

 

1,098

 

Proceeds from sale of assets

 

 

15,359

 

 

 

21,729

 

 

 

4,856

 

Proceeds from sale of assets to Circle K

 

 

 

 

 

23,049

 

 

 

3,148

 

Capital expenditures

 

 

(41,859

)

 

 

(37,057

)

 

 

(24,611

)

Cash paid in connection with acquisitions, net of cash acquired

 

 

(272,983

)

 

 

(28,244

)

 

 

 

Net cash used in investing activities

 

 

(298,690

)

 

 

(19,549

)

 

 

(15,509

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

 

 

 

 

Borrowings under revolving credit facilities

 

 

194,895

 

 

 

106,180

 

 

 

114,300

 

Repayments on revolving credit facilities

 

 

(77,500

)

 

 

(112,000

)

 

 

(93,300

)

Borrowing under the Term Loan Facility

 

 

182,460

 

 

 

 

 

 

 

Payments of finance lease obligations

 

 

(2,604

)

 

 

(2,458

)

 

 

(2,297

)

Payment of deferred financing costs

 

 

(7,201

)

 

 

 

 

 

(3,972

)

Distributions paid on distribution equivalent rights

 

 

(141

)

 

 

(40

)

 

 

(86

)

Distributions paid to holders of the IDRs

 

 

 

 

 

(133

)

 

 

(533

)

Distributions paid on common units

 

 

(79,552

)

 

 

(77,751

)

 

 

(72,341

)

Net cash provided by (used in) financing activities

 

 

210,357

 

 

 

(86,202

)

 

 

(58,229

)

Net increase (decrease) in cash and cash equivalents

 

 

7,135

 

 

 

(1,267

)

 

 

(1,411

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents at beginning of period

 

 

513

 

 

 

1,780

 

 

 

3,191

 

Cash and cash equivalents at end of period

 

$

7,648

 

 

$

513

 

 

$

1,780

 

See Notes to Consolidated Financial Statements.


CROSSAMERICA PARTNERS LP

CONSOLIDATED STATEMENTS OF EQUITY AND COMPREHENSIVE INCOME

(Thousands of Dollars, except unit amounts)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

Limited Partners’ Interest

Incentive

 

 

other

 

 

 

 

 

 

 

Common

Unitholders

 

 

Distribution

Rights

 

 

comprehensive loss

 

 

Total

Equity

 

 

 

Units

 

 

Dollars

 

 

Dollars

 

 

Dollars

 

 

Dollars

 

Balance at December 31, 2018

 

 

34,444,113

 

 

$

110,933

 

 

$

 

 

$

 

 

 

110,933

 

Net income and comprehensive income

 

 

 

 

 

17,543

 

 

 

533

 

 

 

 

 

 

18,076

 

Vesting of incentive and director awards, net of units

   withheld for taxes

 

 

50,328

 

 

 

862

 

 

 

 

 

 

 

 

 

862

 

Transition adjustment upon adoption of ASC 842, net of tax

 

 

 

 

 

28,896

 

 

 

 

 

 

 

 

 

28,896

 

Asset exchange with Circle K, net of tax

 

 

 

 

 

(7,410

)

 

 

 

 

 

 

 

 

(7,410

)

Distributions paid

 

 

 

 

 

(72,427

)

 

 

(533

)

 

 

 

 

 

(72,960

)

Balance at December 31, 2019

 

 

34,494,441

 

 

 

78,397

 

 

 

 

 

 

 

 

 

78,397

 

Net income

 

 

 

 

 

107,323

 

 

 

133

 

 

 

 

 

 

107,456

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   Unrealized loss on interest rate swap contracts

 

 

 

 

 

 

 

 

 

 

 

(2,859

)

 

 

(2,859

)

   Realized loss on interest rate swap contracts

      reclassified from AOCI into interest expense

 

 

 

 

 

 

 

 

 

 

 

403

 

 

 

403

 

Total other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

(2,456

)

 

 

(2,456

)

Comprehensive income (loss)

 

 

 

 

 

107,323

 

 

 

133

 

 

 

(2,456

)

 

 

105,000

 

Issuance of units to the Topper Group in connection

   with the Equity Restructuring Agreement

 

 

2,528,673

 

 

 

 

 

 

 

 

 

 

 

 

-

 

Acquisition of assets from entities under common

   control, net of fair value of common units issued

 

 

842,891

 

 

 

4,169

 

 

 

 

 

 

 

 

 

4,169

 

Vesting of equity awards, net of units withheld for tax

 

 

2,041

 

 

 

26

 

 

 

 

 

 

 

 

 

26

 

Distributions paid

 

 

 

 

 

(77,791

)

 

 

(133

)

 

 

 

 

 

(77,924

)

Balance at December 31, 2020

 

 

37,868,046

 

 

$

112,124

 

 

$

 

 

$

(2,456

)

 

$

109,668

 

Net income

 

 

 

 

 

21,654

 

 

 

 

 

 

 

 

 

21,654

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   Unrealized gain on interest rate swap contracts

 

 

 

 

 

 

 

 

 

 

 

4,466

 

 

 

4,466

 

   Realized loss on interest rate swap contracts

      reclassified from AOCI into interest expense

 

 

 

 

 

 

 

 

 

 

 

1,020

 

 

 

1,020

 

Total other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

5,486

 

 

 

5,486

 

Comprehensive income

 

 

 

 

 

21,654

 

 

 

 

 

 

5,486

 

 

 

27,140

 

Issuance of units related to 2020 Bonus Plan

 

 

6,822

 

 

 

126

 

 

 

 

 

 

 

 

 

126

 

Tax effect from intra-entity transfer of assets

 

 

 

 

 

(1,094

)

 

 

 

 

 

 

 

 

(1,094

)

Vesting of equity awards, net of units withheld for tax

 

 

21,688

 

 

 

411

 

 

 

 

 

 

 

 

 

411

 

Distributions paid

 

 

 

 

 

(79,693

)

 

 

 

 

 

 

 

 

(79,693

)

Balance at December 31, 2021

 

 

37,896,556

 

 

$

53,528

 

 

$

 

 

$

3,030

 

 

$

56,558

 

See Notes to Consolidated Financial Statements.

63


CROSSAMERICA PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1. DESCRIPTION OF BUSINESS

Couche- Tard and CST MergerPurchase of the General Partner by the Topper Group

CST entered into the Merger Agreement dated asOn November 19, 2019, subsidiaries of August 21, 2016, with Circle K and Merger Sub. On June 28, 2017, Merger Sub merged with and into CST, at which time the separate corporate existence of Merger Sub ceased, and CST survived the Merger as an indirect, wholly owned subsidiaryDMP purchased from subsidiaries of Circle K. Circle K is a wholly owned subsidiary of Couche-Tard.

As a result of the Merger, Circle K indirectly owns allK: 1) 100% of the membership interests in the sole member of ourthe General Partner, as well as a 21.1% limited partner interest in the Partnership and allPartner; 2) 100% of the IDRs issued by the Partnership; and 3) an aggregate of 7,486,131 common units of the Partnership. Circle K, through

Through its indirect ownership interest incontrol of DMP, the Topper Group controls the sole member of our General Partner and has the ability to appoint all of the members of the Board and to control and manage ourthe operations and activities. activities of the Partnership. As of February 24, 2022, the Topper Group has beneficial ownership of a 38.5% limited partner interest in the Partnership.

Description of Business

Our business consists of:

the wholesale distribution of motor fuels;

the wholesale distribution of motor fuels;

the retail distribution of motor fuels to end customers at retail sites operated by commission agents or us;

the owning or leasing of retail sites used in the retail distribution of motor fuels and, in turn, generating rental income from the lease or sublease of the retail sites;

the owning or leasing of retail sites used in the retail distribution of motor fuels and, in turn, generating rental income from the lease or sublease of the retail sites; and

the retail sale of motor fuels to end customers at retail sites operated by commission agents and, since April 14, 2020, ourselves; and

the operation of retail sites.

since April 14, 2020, the operation of retail sites, including the sale of convenience merchandise to end customers. We had no company operated sites from September 30, 2019 through April 14, 2020.

The financial statements reflect the consolidated results of the Partnership and its wholly owned subsidiaries. Our primary operations are conducted by the following consolidated wholly owned subsidiaries:

LGW, which distributes motor fuels on a wholesale basis and generates qualified income under Section 7704(d) of the Internal Revenue Code;

LGW and CAPL JKM Wholesale, which distribute motor fuels on a wholesale basis and generate qualifying income under Section 7704(d) of the Internal Revenue Code;

LGPR, which functions as our real estate holding company and holds assets that generate qualified rental income under Section 7704(d) of the Internal Revenue Code; and

LGPR, which functions as our real estate holding company and holds assets that generate qualifying rental income under Section 7704(d) of the Internal Revenue Code;

LGWS, which owns and leases (or leases and sub-leases) real estate and personal property used in the retail sale of motor fuels, as well as provides maintenance and other services to its customers. In addition, LGWS sells motor fuel on a retail basis at sites operated by commission agents. Since our acquisition of retail and wholesale assets that closed on April 14, 2020, LGWS also sells motor fuels on a retail basis and sells convenience merchandise items to end customers at company operated retail sites. Income from LGWS generally is not qualifying income under Section 7704(d) of the Internal Revenue Code; and

LGWS, which owns and leases (or leases and sub-leases) real estate and personal property used in the retail distribution of motor fuels, as well as provides maintenance and other services to its customers. In addition, LGWS distributes motor fuels on a retail basis and sells convenience merchandise items to end customers at company operated retail sites and sells motor fuel on a retail basis at sites operated by commission agents. Income from LGWS generally is not qualifying income under Section 7704(d) of the Internal Revenue Code.

Joe’s Kwik Marts, which owns and leases real estate and personal property at our company operated sites that we recently acquired from 7-Eleven. Joe’s Kwik Marts also sells motor fuels on a retail basis and sells convenience merchandise items to end customers. Income from Joe’s Kwik Marts generally is not qualifying income under Sections 7704(d) of the Internal Revenue Code.

In 2015, we issued our common units as consideration in the purchase of equity interests in CST Fuel Supply and the real property associated with certain of CST’s NTI retail sites. In addition, we also issued, and may continue to issue, common units as payment to Circle K for charges and expenses incurred by us under the Amended Omnibus Agreement. There is no obligation for Circle K to accept common units representing limited partner interests in lieu of cash for amounts due under the Amended Omnibus Agreement. CST also acquired our common units through open market purchases from September 2015 through December 2015. At December 31, 2017, Circle K indirectly owned 21.1% of our limited partner interests.

Note 2. SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

These consolidated financial statements were prepared in accordance with U.S. GAAP. These financial statements include the consolidated accounts of CrossAmerica and subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.


64


CROSSAMERICA PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results and outcomes could differ from those estimates and assumptions. On an ongoing basis, management reviews its estimates based on currently available information. Changes in facts and circumstances could result in revised estimates and assumptions.

Cash and Cash Equivalents

We consider all short-term investments with maturity of three months or less at the date of purchase to be cash equivalents. Cash and cash equivalents are stated at cost, which, for cash equivalents, approximates fair value due to their short-term maturity. We are potentially subject to financial instrument concentration of credit risk through our cash and cash equivalents. We maintain cash and cash equivalents with several major financial institutions. We have not experienced any losses on our cash equivalents.

Receivables and Financial Instrument Credit Losses

AccountsAccounting guidance regarding credit losses on financial instruments requires that for most financial assets, losses be based on an expected loss approach which includes estimates of losses over the life of exposure that considers historical, current and forecasted information. Disclosures related to the methods used to estimate the losses as well as a specific disaggregation of balances for financial assets are also required.

The primary financial instrument within the scope of this guidance is our accounts receivable, primarilywhich mainly result from the salessale of motor fuels to customers and rental fees for retail sites. The majority of ourcustomers. Our accounts receivable relate to our motor fuel sales that canis generally be describedconsidered as high volume and low margin activities.having a similar risk profile. Credit is extended to a customer, generally a dealer or a commission agent, based on an evaluation of the customer’s financial condition.condition prior to entering into fuel supply and/or lease agreements. In certain circumstances, collateral may be required from the customer.customer and fuel and lease agreements are generally cross-collateralized when applicable. Receivables are recorded at face value, without interest or discount. Receivables include amounts due from financial institutions for customer credit and debit card transactions.

The provisionallowance for bad debtscredit losses is generally based upon a specific analysis of aged accountshistorical experience while also factoring in any new business conditions that might impact the historical analysis, such as market conditions and bankruptcies of particular customers. Bad debt provisions areCredit loss expense is included in selling, general and administrative expenses.

We review all accounts receivable balances on at least a quarterly basis and provide an allowance for doubtful accounts based on historical experience and on a specific identification basis.

Inventories

Motor fuel inventory consists of gasoline, diesel fuel and other petroleum products and is stated at the lower of average cost or net realizable value using the first-in, first-out method. We record inventory from the time of the purchase of motor fuels from third partythird-party suppliers until the retail sale to the end customer.

Food andRetail site merchandise inventory is valued at the lower of average cost or net realizable value using the first-in, first-out method, net of a reservewritten down, as necessary, for potentially obsolete or slow-moving inventory.

Debt Issuance Costs

Debt issuance costs that are incurred in connection with the issuance of debt are deferred and amortized to interest expense using the straight line method (which approximates the effective interest method) over the contractual term of the underlying indebtedness. Debt issuance costs are classified as a reduction of the associated liability.

Asset Acquisitions and Business Combinations

We early adopted ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business, effective January 1, 2017. Under this guidance,When closing on an acquisition, we must first determine whether substantially all of the fair value of the set of gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets. If this threshold is met, the set is not a business. If this threshold is not met, we determine whether the set meets the definition of a business.

A business is defined as an integrated set of assets and activities that is capable of being conducted and managed for the purpose of providing a return to investors or other owners, members or participants. A business typically has inputs, processes applied to those inputs and outputs that are used to generate a return to investors, but outputs are not required for a set to be a business. A business must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create outputs.


CROSSAMERICA PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

We account for asset acquisitions (i.e., transactions involving the acquisition of a set of assets that does not meet the definition of a business) in accordance with the guidance under ASC 805-50 and other applicable guidance. Asset acquisitions are generally accounted for by allocating the cost of the acquisition, including acquisition costs, to the individual assets acquired and liabilities assumed on a relative fair value basis.

65


CROSSAMERICA PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

We account for business combinations in accordance with the guidance under ASC 805–Business Combinations. The purchase price is recorded for assets acquired and liabilities assumed based on fair value. The excess of the fair value of the consideration conveyed over the fair value of the net assets acquired is recorded as goodwill.

The income statement includes the results of operations for each acquisition from their respective date of acquisition.

Whether we account for a transaction as an asset acquisition or a business combination, determining the fair value of these itemsassets and liabilities requires management’s judgment, the utilization of independent valuation experts and involves the use of significant estimates and assumptions with respect to the timing and amounts of future cash inflows and outflows, discount rates, market prices and asset lives, among other items. The judgments made in the determination of the estimated fair value assigned to the assets acquired, the liabilities assumed and any noncontrolling interest in the investee, as well as the estimated useful life of each asset and the duration of each liability, can materially impact the financial statements in periods after acquisition, such as through depreciation and amortization. See Note 3 for additional information on our acquisitions.

Property and Equipment

Property and equipment is recorded at cost, which equals fair value in the case of a business combination or generally approximates fair value in the case of an asset acquisition. Depreciation is recognized using the straight-line method over the estimated useful lives of the related assets, including: 10 to 20 years for buildings and improvements and fivethree to 30 years for equipment. Amortization of leasehold improvements is based upon the shorter of the remaining terms of the leases including renewal periods that are reasonably assured, or the estimated useful lives, which generally range from seven to 10 years.

Expenditures for major renewals and betterments that extend the useful lives of property and equipment are capitalized. Maintenance and repairs are charged to operations as incurred. Gains or losses on the disposition of property and equipment are recorded in the period the sale meets the criteria for recognition.

Intangible Assets

Intangible assets are recorded at fair value in the case of a business combination or at a value that generally approximates fair value in the case of an asset acquisition. Intangible assets associated with wholesale fuel supply contracts and wholesale fuel distribution rights and trademarks are amortized over 10 years. Trademarks and licenses are amortized over periods from five to 15 years. Covenants not to compete are amortized over the shorter of the contract term or five years. Intangible assets associated with above and below market leases are amortized over the applicable lease term. Intangible assets with definitefinite useful lives are amortized over their respective estimated useful lives and reviewed for impairment if we believe that changes or triggering events have occurred that could have caused the carrying value of the intangible assets to exceed its fair value. Intangible assets with indefinite lives are not amortized but are tested for impairment annually or more frequently if events and circumstances indicate that the intangible assets might be impaired. NaN significant impairment charges relating to intangible assets were recorded for any period presented.

Impairment of Assets

Long-lived assets, which include property and equipment and finite-lived intangible assets, are tested for recoverability whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. A long-lived asset is not recoverable if its carrying amount exceeds the sum of the undiscounted cash flows expected to result from its use and eventual disposition. If a long-lived asset is not recoverable, an impairment loss is recognized for the amount by which the carrying amount of the long-lived asset exceeds its fair value, with fair value determined based on discounted estimated net cash flows or other appropriate methods. See Note 8 for information regarding impairment charges recorded primarily upon classifying sites within assets held for sale.

Goodwill

Goodwill represents the excess of cost over the fair value of net assets of businesses acquired. Goodwill is not amortized, but instead is tested for impairment at the reporting unit level at least annually, and more frequently if events and circumstances indicate that the goodwill might be impaired. The annual impairment testing date of goodwill is October 1.


CROSSAMERICA PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

We early adopted ASU 2017-04, Intangibles–Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, effective January 1, 2017.

In performing our annual impairment analysis, ASC 350–20, Intangibles–Goodwill and Other, allows us towe use qualitative factors to determine whether it is more likely than not (likelihood of more than 50%) that the fair value of a reporting unit is less than its carrying amount, including goodwill. We consider macroeconomic conditions such as developments in equity and credit markets, industry and market conditions such as the competitive environment, cost factors such as changes in our cost of fuel, our financial performance and our unit price.

66


CROSSAMERICA PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

If, after assessing the totality of events or circumstances, we determine that it is more likely than not that the fair value of a reporting unit exceeds its carrying amount, no further testing is necessary. However, if we determine that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, then we perform the goodwill impairment test.

In the goodwill impairment test, the reporting unit’s carrying amount (including goodwill) and its fair value are compared. If the estimated fair value of a reporting unit is less than the carrying value, an impairment charge is recognized for the deficit up to the amount of goodwill recorded.

No goodwill was impaired for any period presented.

Debt Issuance Costs

Debt issuance costs that are incurred in connection with the issuance of debt are deferred and amortized to interest expense using the straight-line method (which approximates the effective interest method) over the contractual term of the underlying indebtedness. Debt issuance costs are classified as a reduction of the associated liability unless there is no balance outstanding under a revolving line of credit facility, in which case such costs are classified as an asset.

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. Amounts recorded for environmental liabilities have not been reduced by possible recoveries from third parties.

Asset Retirement Obligations

We record a liability, which is referred to as an asset retirement obligation, at fair value for the estimated cost to remove underground storage tanks (USTs)USTs used to store motor fuel at owned and leased retail sites at the time we incur that liability, which is generally when the UST is installed or upon enteringacquiring the lease.site. We record a discounted liability for the fair value of an asset retirement obligation with a corresponding increase to the carrying value of the related long-lived asset. We depreciate the amount added to property and equipment and recognize accretion expense in connection with the discounted liability over the estimated remaining life of the UST. Accretion expense is reflected in depreciation, amortization and accretion expense. We base our estimates of the anticipated future costs for removal of a UST on our prior experience with removal. Removal costs include the cost to remove the USTs, soil remediation costs resulting from the spillage of small quantities of motor fuel in the normal operations of our business and other miscellaneous costs. We review our assumptions for computing the estimated liability for the removal of USTs on an annual basis. Any change in estimated cash flows is reflected as an adjustment to the liability and the associated asset.

Segment Reporting

We present our segment reporting in accordance with ASC 280–Segment Reporting and engage in both the wholesale and retail distribution of motor fuels, primarily gasoline and diesel fuel. We present our results to our chief operating decision maker segregated between wholesale and retail activities. As a result, we are deemed to conduct our business in two2 segments: 1) the wholesale segment and 2) the retail segment. The class of customer and gross margins are sufficiently different between these two businesses to warrant two reportable segments. See Note 2122 for additional information.

Revenue Recognition

The core principle of accounting guidance on revenue recognition is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services. This guidance applies to over 90% of our revenues as the only primary revenue stream outside the scope of this guidance is rental income.

67


CROSSAMERICA PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Revenues from the delivery of motor fuel are recorded uponat the time of delivery to our customers, by which time the price is fixed, title to the products has transferred and payment has either been received or collection is reasonably assured, net of applicable discounts and allowances.


CROSSAMERICA PARTNERS LP Incremental costs incurred to obtain certain contracts with customers are deferred and amortized over the contract term and are included in other noncurrent assets on the balance sheets. Amortization of such costs are classified as a reduction of operating revenues.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Revenues from the sale of convenience store products are recognized at the time of sale to the customer.

Revenues from leasing arrangements for which we are the lessor are recognized ratably over the term of the underlying lease.

In transactions in which we sell and lease back property, we apply guidance from ASC 606 in determining whether the transfer of the property should be accounted for as a sale. Specifically, we assess if we have satisfied a performance obligation by transferring control of the property.

See Notes 6 and 22 for additional information on our revenues and related receivables.

Cost of Sales

We include in our cost of sales all costs we incur to acquire motor fuel and merchandise, including the costs of purchasing, storing and transporting inventory prior to delivery to our customers. A component of our cost of sales is the discount for prompt payment and other rebates, discounts and incentives offered by our suppliers. Prompt payment discounts from suppliers are based on a percentage of the purchase price of motor fuel and the dollar value of these discounts varies with motor fuel prices. Cost of sales does not include any depreciation of our property and equipment, as these amounts are included in depreciation, amortization and accretion expense on our statements of income.

Motor Fuel Taxes

LGW collectsand CAPL JKM Wholesale collect motor fuel taxes, which consist of various pass throughpass-through taxes collected from customers on behalf of taxing authorities and remitsremit such taxes directly to those taxing authorities. LGW’s and CAPL JKM Wholesale’s accounting policy is to exclude the taxes collected and remitted from wholesale revenues and cost of sales and account for them as liabilities. LGWS’s and Joe’s Kwik Marts’ retail sales and cost of sales include motor fuel taxes as the taxes are included in the cost paid for motor fuel and LGWS hasand Joe’s Kwik Marts have no direct responsibility to collect or remit such taxes to the taxing authorities.

Lease Accounting

We account for leases in accordance with ASC 840–Leases. We lease certain retail sites from third parties under long-term arrangements with various expiration dates. U.S. GAAP

Accounting guidance on leases requires the recognition of lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. In order to measure our lease liability under our leases as lessee, we are required to discount our minimum rental payments using the rate implicit in the lease, unless such rate cannot be readily determined, in which case our incremental borrowing rate is used. As we do not know the amount of our lessors’ initial direct costs, we are generally unable to determine the rate implicit in our leases. As a result, we generally use our incremental borrowing rate, which is the rate we would have to pay to borrow an amount equal to the lease payments on a collateralized basis over a similar term in a similar economic environment. We considered the rates we paid in previous financing and sale-leaseback transactions, the rates on our borrowings under our prior secured revolving credit facility and mortgage rates on commercial properties for various terms in developing our incremental borrowing rates.

ASC 842 requires leases be evaluated and classified as either operating or capitalfinance for financial reporting purposes. The lease term used for lease evaluation includes option periods only in instances in which the exercise of the option period can beis reasonably assured and failure to exercise such options would result in an economic penalty. Minimumcertain. Generally, lease payments are expensed on a straight-line basis over the term of the lease including renewal periods that are reasonably assuredcertain at the inception of the lease. In addition to minimumthese lease payments, certain leases require additional contingent payments based on sales volume or future inflation.inflation, which are expensed as incurred.

We are the lessee in certain sale-leaseback transactionsSee Notes 12 and 14 for certain retail sites, and as we have continuing involvement in the underlying retail sites through a sublease with a lessee dealer or the lease agreement has a repurchase feature, the sale-leaseback arrangements are accounted for as financing transactions.additional information.

Income Taxes

Our wholly owned taxable subsidiaries recognize deferred income tax assets and liabilities for the expected future income tax consequences of temporary differences between financial statement carrying amounts and the related income tax basis.

68


CROSSAMERICA PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Income tax attributable to our earnings and losses, excluding the earnings and losses of our wholly owned taxable subsidiaries, are assessed at the individual level of the unitholder. Accordingly, we do not record a provision for income taxes other than for those earnings and losses generated or incurred by our wholly owned taxable subsidiaries.

In December 2019, the FASB issued ASU 2019-12, “Simplifying the Accounting for Income Taxes.” The amendments in this Update simplify the accounting for income taxes by removing certain exceptions to the general principles in ASC 740. The amendments also improve consistent application of and simplify GAAP for other areas of ASC 740 by clarifying and amending existing guidance, such as the accounting for a franchise tax (or similar tax) that is partially based on income. This standard was effective January 1, 2021 for the Partnership. The impact of adopting this guidance was not material.

Tax positions not meeting the more-likely-than-not recognition threshold at the financial statement date may not be recognized or continue to be recognized under the accounting guidance for income taxes. Where required, we recognize interest and penalties for uncertain tax positions in income taxes.

Valuation allowances are initially recorded and reevaluated each reporting period by assessing the likelihood of the ultimate realization of a deferred tax asset. Management considers a number of factors in assessing the realization of a deferred tax asset, including the reversal of temporary differences, projections of future taxable income and ongoing prudent and feasible tax planning strategies. The amount of deferred tax assets ultimately realized may differ materially from the estimates utilized in the computation of valuation allowances and may materially impact the financial statements in the future.


CROSSAMERICA PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Earnings per Common Unit

In addition to the common and subordinated units, we have identified the IDRs as participating securities and compute income per unit using the two-class method under which any excess of distributions declared over net income shall be allocated to the partners based on their respective sharing of income specified in the Partnership Agreement. Net income per common unit applicable to limited partners (including common and subordinated unitholders) is computed by dividing the limited partners’ interest in net income, after deducting any incentive distributions, by the weighted-average number of outstanding common and subordinated units. As discussed in

See Note 17, all subordinated units converted to common units in21 for disclosure regarding the first quarter of 2016.

New Accounting Pronouncements

In May 2014, the FASB issued ASU 2014-09–Revenue from Contracts with Customers (Topic 606), which results in comprehensive new revenue accounting guidance, requires enhanced disclosures to help users of financial statements better understand the nature, amount, timing, and uncertainty of revenue that is recognized, and develops a common revenue standard under U.S. GAAP and International Financial Reporting Standards. Specifically, the core principleelimination of the guidance is that an entity should recognize revenueIDRs, which closed on February 6, 2020.

Interest Rate Swap Contracts

Commencing in March 2020, the Partnership started to depict the transfer of promised goodsuse interest rate swap contracts to reduce its exposure to unfavorable changes in interest rates. The Partnership accounts for derivative contracts in accordance with ASC Topic 815, “Derivatives and Hedging,” and recognizes derivative instruments as either assets or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services. This guidance was effective January 1, 2018 and we applied the modified retrospective method of adoption. We have completed our assessment and have not identified any material impact on the financial statements, although it will affect disclosures. This guidance applies to over 90% of our revenues as the only primary revenue stream outside the scope of this guidance is rental income.

In February 2016, the FASB issued ASU 2016-02–Leases (Topic 842). This standard modifies existing guidance for reporting organizations that enter into leases to increase transparency by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. ASU 2016-02 is effective for fiscal yearsmeasures those instruments at fair value. The changes in fair value of the derivative transactions are presented in accumulated other comprehensive income and interim periods within those years beginning after December 15, 2018, and requires a modified retrospective approachreclassified to adoption. Early adoption is permitted. Management continues to evaluateinterest expense as the impact of this new guidance, but the adoption will have a material impactinterest payments on our balance sheet as we will be requiredCAPL Credit Facility are made.

The portion of derivative positions that are anticipated to recognize right-of-usesettle within a year are included in other current assets and leaseaccrued expenses and other current liabilities, forwhile the portion of derivative positions that are anticipated to settle beyond a year are recorded in other assets or other long-term liabilities.

Cash inflows and outflows related to derivative instruments are included as a component of operating leases. We will not adopt this guidance early. We intend to apply eachactivities on the statements of cash flows, consistent with the classification of the practical expedients in adopting this new guidance.hedged interest payments on our CAPL Credit Facility.

See Note 13 for information related to our interest rate swap contracts.

Concentration Risks

For 2021, 2020 and 2019, approximately 12%, 12% and 10% of our rent income was from one multi-site operator, respectively.

In October 2016, the FASB issued ASU 2016-16–Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory. This standard requires companies to account for income tax effects of intercompany transactions other than inventory in the period in which the transfer occurs rather than when the assets are transferred outside of the consolidated entity. We have chosen to early adopt the standard effective January 1, 2017, which had no impact as of the date of adoption but could apply to future intra-entity transactions and require us to recognize the income tax effects of those transactions in the period in which the transfer occurs.

In January 2017, the FASB issued ASU 2017-01–Business Combinations (Topic 805): Clarifying the Definition of a Business. This standard clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The definition of a business affects many areas of accounting including acquisitions, disposals, goodwill and consolidation. We early adopted this standard effective January 1, 2017. Although there was no impact upon adoption, among other things, this guidance results in the capitalization rather than expensing of acquisition costs in transactions that are accounted for as asset acquisitions rather than business combinations under the new definition of a business.

In January 2017, the FASB issued ASU 2017-04–IntangiblesGoodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. This standard removes Step 2 of the goodwill impairment test. A goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. Management early adopted this guidance effective January 1, 2017, which had no impact upon adoption but could result in a change in the measurement of an impairment loss if an impairment was required to be recorded in the future.

Certain other new financial accounting pronouncements have become effective for our financial statements and the adoption of these pronouncements will not affect our financial position or results of operations, nor will they require any additional disclosures.

Concentration Risk

For 2017, 2016 and 2015, we distributed approximately 13%, 16% and 17% of our total wholesale distribution volume to Dunne Manning Stores LLC, an entity associated with the family of a member of the Board (DMS) and DMS accounted for approximately 22%, 26% and 36% of our rental income, respectively.


CROSSAMERICA PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For 2017, 2016 and 2015, we distributed 8%, 8% and 7% of our total wholesale distribution volume to CST retail sites that are not supplied by CST Fuel Supply and received 20%, 21% and 17% of our rental income from CST, respectively.

For more information regarding transactions with DMS and its affiliates and CST, see Note 12.

In 2017,2021, our wholesale business purchased approximately 28%37%, 27%22%, 11% and 16%10% of its motor fuel from ExxonMobil, BP, Motiva and Motiva,Marathon, respectively. In 2016,2020, our wholesale business purchased approximately 30%29%, 25%22%, 13% and 24%10% of its motor fuel from ExxonMobil, BP, Motiva and Motiva,Marathon, respectively. In 2015,2019, our wholesale business purchased approximately 30%26%, 26%22%, 15% and 26%12% of its motor fuel from ExxonMobil, BP, Circle K and Motiva, respectively. No other fuel suppliers accounted for 10% or more of our motor fuel purchases during 2017, 20162021, 2020 or 2015.2019.

Valero supplied substantiallyApproximately 15%, 16% and 15% of our motor fuel gallons sold was delivered by one carrier for 2021, 2020 and 2019, respectively.

69


CROSSAMERICA PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

COVID-19 Pandemic

During the first quarter of 2020, an outbreak of a novel strain of coronavirus spread worldwide, including to the U.S., posing public health risks that have reached pandemic proportions.

We experienced a sharp decrease in fuel volume in mid-to-late March 2020. Although fuel volumes largely recovered during the second half of 2020 and continued to recover in 2021, we cannot predict the scope and severity with which COVID-19 will impact our business, financial condition, results of operations and cash flows. Sustained decreases in fuel volume or erosion of margin could have a material adverse effect on our results of operations, cash flow, financial position and ultimately our ability to pay distributions.

Note 3. ACQUISITION OF ASSETS FROM 7-ELEVEN

On April 28, 2021, certain newly formed subsidiaries of CrossAmerica, including Joe’s Kwik Marts (collectively, “Buyer”), entered into an Asset Purchase Agreement (the “Asset Purchase Agreement”) with 7-Eleven, Inc., a Texas corporation (“7-Eleven”), pursuant to which Buyer agreed to purchase certain assets related to the ownership and operations of 106 company operated sites (90 fee; 16 leased) located in the Mid-Atlantic and Northeast regions of the U.S. (collectively, the “Properties”) for an aggregate purchase price of $263.0 million, excluding working capital and subject to adjustment in accordance with the terms of the Asset Purchase Agreement. The assets sold by 7-Eleven were part of a divestiture process in connection with its previously announced acquisition of the Speedway business from Marathon Petroleum Corporation.

The assets purchased by Buyer include real property and leasehold rights to the Properties, and all inventory and other assets located at the Properties, other than specific excluded assets, such as rights to intellectual property or rights with respect to “7-Eleven” or “Speedway” branding. Substantially all of the motor fuelsites purchased by CST Fuel Supply duringwere operated under the Speedway brand, and all periods presented. CST Fuel Supply purchased approximately 1.7 billion, 1.8 billion and 1.9 billion gallonssites were rebranded in connection with the closing of motor fuel from Valero for 2017, 2016 and 2015, respectively.such site pursuant to the Asset Purchase Agreement. Buyer also assumed certain specified liabilities associated with the assets.

Note 3. ACQUISITIONS

Jet-Pep Assets Acquisition

On November 28, 2017, weStarting in late June 2021, Buyer closed on the acquisition of the real property andProperties on a rolling basis of generally 10 sites per week. Through December 31, 2021, Buyer consummated the fuel supply businessclosing under the Asset Purchase Agreement of 101 commission operated retail sites, including 92 fee simple sites, the leasehold interest in five real property sites and the fuel supply business to four independent commission sites, all located in Alabama, from Jet-Pep, Inc. and affiliated entities,103 Properties for aggregate cash considerationa purchase price of $75.6$273.0 million, including the value of the motor fuel inventory containedand other working capital, as summarized in the retail sites and net of the assumption of certain liabilities. On the same day, Circle Ktable below (in thousands).

Inventories

 

$

12,654

 

Other current assets

 

 

1,527

 

Property and equipment

 

 

210,693

 

Right-of-use assets

 

 

10,380

 

Goodwill

 

 

11,700

 

Intangible assets

 

 

40,998

 

Total assets

 

$

287,952

 

 

 

 

 

 

Current portion of operating lease obligations

 

 

1,802

 

Accrued expenses and other current liabilities

 

 

773

 

Operating lease obligations, less current portion

 

 

8,579

 

Asset retirement obligations

 

 

3,815

 

Total liabilities

 

$

14,969

 

Total consideration, net of cash acquired

 

$

272,983

 

In February 2022, we closed on the acquisitionfinal 3 Properties for a purchase price of certain related retail and terminal assets from Jet-Pep, Inc. and affiliated entities.$3.6 million, a portion of which will be paid on or prior to February 8, 2027.

The setfair value of assets acquired did not meetinventory was estimated at retail selling price less estimated costs to sell and a reasonable profit allowance for the definition of a business under ASU 2017-01, and as such, this transaction was accounted for as an asset acquisition. selling effort.

The values ascribed to the assets acquired and liabilities assumed on the date of acquisition were as follows (in thousands):

Current assets (excluding cash and inventories)

 

$

263

 

Inventories

 

 

3,294

 

Assets held for sale

 

 

2,030

 

Property and equipment

 

 

63,450

 

Intangible assets

 

 

11,174

 

Accrued expenses and other current liabilities

 

 

(59

)

Asset retirement obligations

 

 

(3,275

)

Other noncurrent liabilities

 

 

(1,250

)

Total consideration

 

$

75,627

 

Thefair value of land was based on a market approach. The value of buildings and equipment was based on a cost approach. The buildings and equipment are being depreciated on a straight-line basis, with estimated remaining useful lives of 20 years for the buildings and five to 1030 years for equipment.equipment.

70


CROSSAMERICA PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The $9.2 millionfair value of the wholesale fuel distribution rights included in intangiblesintangible assets was based on an income approach and managementapproach. Management believes the level and timing of cash flows represent relevant market participant assumptions. The wholesale fuel distribution rights are being amortized on a straight-line basis over an estimated useful life of approximately 10 years.

The $0.5 millionfair value of goodwill represents expected synergies from combining operations, intangible assets that do not qualify for separate recognition, and other factors. All goodwill is anticipated to be deductible for tax purposes.

Management continues to review the valuation and is confirming the result to determine the final purchase price allocation. Given the final three sites closed in February 2022, we anticipate finalizing purchase accounting during the first half of 2022.

We funded these transactions primarily through the new JKM Credit Facility further described in Note 12 as well as undrawn capacity under our existing revolving credit facility and cash on hand.

Aggregate incremental revenues since the closing of the Properties included in CrossAmerica’s statement of operations were $222.4 million for 2021.

Our pro forma results (unaudited), giving effect to the acquisition and assuming an acquisition date of January 1, 2020, would have been (in thousands):

 

 

For the Year Ended December 31,

 

 

 

2021

 

 

2020

 

Revenues

 

$

3,954,444

 

 

$

2,381,663

 

Net income

 

 

32,189

 

 

 

140,564

 

Such pro forma results are based on historical results of the Partnership, the historical results of the assets acquired or to be acquired from 7-Eleven as they occurred under the ownership of 7-Eleven or Marathon Petroleum Corporation and certain pro forma adjustments relating to acquisition costs, interest expense and income taxes. See our Current Report on Form 8-K/A filed on November 3, 2021, for additional information.

Note 4. PRIOR YEAR ACQUISITIONS

We completed six tranches of the asset exchange with Circle K on May 21, 2019, September 5, 2019, February 25, 2020, April 7, 2020, May 5, 2020 and September 15, 2020. With the closing of the sixth tranche, the transactions contemplated under the Asset Exchange Agreement we entered into with Circle K on December 17, 2018 (“Asset Exchange Agreement”) were concluded. Through these transactions, we acquired 191 sites in exchange for the real property at 56 sites as well as 17 sites previously owned and operated by the Partnership. Although we no longer collect rent from the sites divested in these transactions, we continue to distribute fuel to them on a wholesale basis.

Effective March 25, 2020, we closed on the CST Fuel Supply Exchange. Through this transaction, we acquired 33 sites, wholesale fuel supply agreements was basedto 331 additional sites and $14.1 million in proceeds in exchange for our investment in CST Fuel Supply.

On April 14, 2020, we closed on an income approach,the acquisition of retail and management believeswholesale assets. Through these transactions, we expanded the levelretail operations of the Partnership by 169 sites (154 company operated sites and timing15 commission sites) through a combination of cash flows represent relevant market participant assumptions. The(1) entering into new leasing arrangements with related parties as the lessee for 62 sites and (2) terminating contracts where we were previously the lessor and fuel supplier under dealer arrangements for 107 sites that then became company operated sites. As a result of closing on these transactions, we expanded our wholesale fuel distribution by 110 sites, including 53 third-party wholesale dealer contracts, and supply agreements are being amortized on an accelerated basis over an estimated useful life of approximately 10 years.

The $1.0 million value of the trademarks62 newly leased sites.

Purchase accounting for these prior year acquisitions was based on an income approach using the present value of incremental after-tax cash flows attributable solely to the trademark.finalized during 2020.

The $0.5 million value of the covenant not to compete was based on an income approach using the difference between the present value of after-tax cash flows with and without the covenant not to compete in place. The covenant not to compete intangible asset is being amortized on a straight-line basis over a 5-year period.71



CROSSAMERICA PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Operating revenues since the date of acquisition were $15.5 million for the year ended December 31, 2017.

Acquisition of State Oil Assets

On September 27, 2016, we closed on the acquisition of 57 controlled retail sites (56 fee sites and one leased site) and certain other assets of State Oil Company, being operated as 55 lessee dealer accounts and two non-fuel tenant locations, as well as 25 independent dealer accounts located in the greater Chicago market for approximately $41.9 million, including working capital.

In December 2016, we sold 17 of these retail sites. See Note 10 for additional information.

Acquisition of Franchised Holiday Stores

On March 29, 2016, we closed on the acquisition of 31 Franchised Holiday Stores and three liquor stores from S/S/G Corporation for approximately $52.4 million, including working capital. Of the 34 stores, 31 are located in Wisconsin and three are located in Minnesota. The acquisition was funded by borrowings under our credit facility.

Purchase of Wholesale Fuel Supply Contracts from CST

In February 2016, we purchased 21 independent dealer contracts and 11 sub-wholesaler contracts from CST for $2.9 million. See Note 12 for additional information.

Note 4.5. ASSETS HELD FOR SALE

We have classified 12 and four25 sites as held for sale at December 31, 20172021 and December 31, 2016. Of the sites held for sale at December 31, 2017, 11 are required to be divested per an FTC order in connection with Couche-Tard’s acquisition of Holiday Stationstores, Inc. and the joint acquisition of Jet-Pep Assets by Couche-Tard and us. These assets2020, respectively, which are expected to be sold in 2018.within one year of such classification. Assets held for sale were as follows (in thousands):

 

 

December 31,

 

 

December 31,

 

 

2017

 

 

2016

 

 

2021

 

 

2020

 

Land

 

$

4,946

 

 

$

882

 

 

$

3,042

 

 

$

7,889

 

Buildings and site improvements

 

 

5,785

 

 

 

1,054

 

 

 

2,231

 

 

 

2,784

 

Equipment

 

 

2,485

 

 

 

702

 

 

 

939

 

 

 

1,152

 

Total

 

 

13,216

 

 

 

2,638

 

 

 

6,212

 

 

 

11,825

 

Less accumulated depreciation

 

 

(1,508

)

 

 

(527

)

 

 

(1,305

)

 

 

(1,927

)

Assets held for sale

 

$

11,708

 

 

$

2,111

 

 

$

4,907

 

 

$

9,898

 

 

The Partnership has continued to focus on divesting lower performing assets. During 2017, as approved by the independent conflicts committee of our Board,2021, we sold 2932 properties to Dunne Manning Realty LP, an entity affiliated withfor $14.0 million in proceeds, resulting in a membernet gain of the Board (DMR),$4.1 million. During 2020, we sold 33 properties for $18.9$21.2 million in proceeds, resulting in a net gain of $6.4 million. During 2019, we sold 8 properties for $3.9 million, resulting in a $0.8 million gain. These sites were generally sites at which we did not supply fuel or represented vacant land. net gain of $1.4 million.

See Note 128 for additional information.information regarding impairment charges primarily recorded upon classifying sites within assets held for sale.

During 2017, we sold two properties as a result of the FTC’s requirements associated with the Merger for $6.7 million, resulting in a gain of $2.2 million. In addition, Circle K agreed to reimburse us for the tax liability incurred on the required sale, resulting in additional proceeds of $0.3 million, which was accounted for as a contribution to partners’ capital. See Note 12 for additional information.6. RECEIVABLES

During 2017, DMS renewed its contract with one of its customers, triggering a $0.8 million earn-out payment by DMS to us under a contract entered into with DMS at the time of CST acquiring our General Partner in October 2014, which was recorded as a gain. See Note 12 for additional information.


CROSSAMERICA PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 5. RECEIVABLES

Changes in the allowance for doubtful accounts consisted of the following (in thousands):

 

 

Year Ended December 31,

 

 

Year Ended December 31,

 

 

2017

 

 

2016

 

 

2015

 

 

2021

 

 

2020

 

 

2019

 

Balance as of beginning of year

 

$

487

 

 

$

1,090

 

 

$

754

 

Balance at beginning of year

 

$

429

 

 

$

557

 

 

$

607

 

Increase in allowance charged to expense

 

 

103

 

 

 

36

 

 

 

521

 

 

 

253

 

 

 

1,210

 

 

 

362

 

Accounts charged against the allowance, net of recoveries

 

 

(313

)

 

 

(639

)

 

 

(185

)

 

 

(224

)

 

 

(1,338

)

��

 

(412

)

Balance as of end of year

 

$

277

 

 

$

487

 

 

$

1,090

 

Balance at end of year

 

$

458

 

 

$

429

 

 

$

557

 

Notes receivable from lessee dealers totaled $3.2$0.5 million and $3.5$1.3 million at December 31, 20172021 and 2016,2020, respectively, and are included in other current assets and other noncurrent assets on the consolidated balance sheets.

Note 6.7. INVENTORIES

Inventories consisted of the following (in thousands):

 

 

December 31,

 

 

December 31,

 

 

2017

 

 

2016

 

 

2021

 

 

2020

 

Retail site merchandise

 

$

7,806

 

 

$

8,374

 

 

$

22,518

 

 

$

11,969

 

Motor fuel

 

 

7,316

 

 

 

4,790

 

 

 

23,582

 

 

 

11,284

 

Inventories

 

$

15,122

 

 

$

13,164

 

 

$

46,100

 

 

$

23,253

 

See Note 3 regarding our acquisition of certain assets from 7-Eleven.

72


CROSSAMERICA PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

Note 7.8. PROPERTY AND EQUIPMENT

Property and equipment, net consisted of the following (in thousands):

 

 

December 31,

 

 

December 31,

 

 

2017

 

 

2016

 

 

2021

 

 

2020

 

Land

 

$

285,682

 

 

$

280,400

 

 

$

321,813

 

 

$

241,585

 

Buildings and site improvements

 

 

362,207

 

 

 

346,834

 

 

 

358,335

 

 

 

284,593

 

Leasehold improvements

 

 

10,155

 

 

 

9,095

 

 

 

13,437

 

 

 

10,684

 

Equipment

 

 

185,733

 

 

 

169,245

 

 

 

314,393

 

 

 

236,420

 

Construction in progress

 

 

1,797

 

 

 

3,173

 

 

 

9,457

 

 

 

15,919

 

Property and equipment, at cost

 

 

845,574

 

 

 

808,747

 

 

 

1,017,435

 

 

 

789,201

 

Accumulated depreciation and amortization

 

 

(164,574

)

 

 

(131,418

)

 

 

(261,981

)

 

 

(218,345

)

Property and equipment, net

 

$

681,000

 

 

$

677,329

 

 

$

755,454

 

 

$

570,856

 

See Note 3 regarding our acquisition of certain assets from 7-Eleven.

Approximately $601.3$454 million of property and equipment, net was usedheld for leasing purposes at December 31, 2017.2021.

WeAs discussed in Note 12, we lease sites under a lease with Getty Realty Corporation, for which the building and equipment components are the lessee in certain sale-leaseback transactions for certain retail sites, and because we have continuing involvementclassified as a finance lease. The right-of-use asset associated with this finance lease is included in the underlying retail sites, or the lease agreement has a repurchase feature, the sale-leaseback arrangements are accounted for as lease financing obligations. The table above includes these retail sites, as well as certain leases accounted for as capital leases. The total cost and accumulated amortization of property and equipment recorded by us under sale leaseback transactions and capital leases was $103.0totaled $9.2 million and $30.6$11.7 million respectively, at December 31, 20172021 and $101.02020, respectively, net of accumulated amortization. Amortization of this right-of-use asset is included in depreciation, amortization and accretion expense on the statements of income and amounted to $2.1 million, $2.2 million and $23.9$2.3 million respectively, at December 31, 2016.in 2021, 2020 and 2019, respectively.

See Note 11 for future minimum rental payments on capital lease obligations and Note 10 for future minimum rental payments on sale-leaseback obligations.

Depreciation expense, including amortization of assets recorded under sale-leasebacks and capitalfinance lease obligations, was approximately $42.5$56.1 million, $39.5$51.3 million and $33.7$42.8 million for 2017, 20162021, 2020 and 2015,2019, respectively. TheseIncluded in these amounts include impairmentsare impairment charges primarily recorded whenrelated to sites were classified aswithin assets held for sale amounting to $1.3totaling $7.7 million, $1.1$9.1 million and $0.4$4.5 million for 2017, 2016during 2021, 2020 and 2015,2019, respectively.


CROSSAMERICA PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 8.9.INTANGIBLE ASSETS

Intangible assets consisted of the following (in thousands):

 

 

December 31, 2017

 

 

December 31, 2016

 

 

December 31, 2021

 

 

December 31, 2020

 

 

Gross

Amount

 

 

Accumulated

Amortization

 

 

Net

Carrying

Amount

 

 

Gross

Amount

 

 

Accumulated

Amortization

 

 

Net

Carrying

Amount

 

 

Gross

Amount

 

 

Accumulated

Amortization

 

 

Net

Carrying

Amount

 

 

Gross

Amount

 

 

Accumulated

Amortization

 

 

Net

Carrying

Amount

 

Wholesale fuel supply contracts/rights

 

$

127,955

 

 

$

(56,915

)

 

$

71,040

 

 

$

118,201

 

 

$

(44,298

)

 

$

73,903

 

 

$

212,194

 

 

$

(99,124

)

 

$

113,070

 

 

$

187,643

 

 

$

(95,694

)

 

$

91,949

 

Trademarks

 

 

2,064

 

 

 

(863

)

 

 

1,201

 

 

 

1,094

 

 

 

(685

)

 

 

409

 

Trademarks/licenses

 

 

2,208

 

 

 

(1,174

)

 

 

1,034

 

 

 

1,898

 

 

 

(1,115

)

 

 

783

 

Covenant not to compete

 

 

4,581

 

 

 

(3,300

)

 

 

1,281

 

 

 

4,131

 

 

 

(2,503

)

 

 

1,628

 

 

 

450

 

 

 

(367

)

 

 

83

 

 

 

4,552

 

 

 

(4,372

)

 

 

180

 

Below market leases

 

 

11,401

 

 

 

(8,860

)

 

 

2,541

 

 

 

12,081

 

 

 

(7,261

)

 

 

4,820

 

Total intangible assets

 

$

146,001

 

 

$

(69,938

)

 

$

76,063

 

 

$

135,507

 

 

$

(54,747

)

 

$

80,760

 

 

$

214,852

 

 

$

(100,665

)

 

$

114,187

 

 

$

194,093

 

 

$

(101,181

)

 

$

92,912

 

IntangibleSee Note 3 regarding our acquisition of certain assets associated with wholesale fuel supply contracts/rights are amortized over 10 years using either an accelerated or straight-line amortization method as appropriate. Trademarks are amortized over five years. Covenants not to compete are amortized over the shorter of the contract term or five years. Intangible assets associated with above and below market leases are amortized over the applicable lease term.from 7-Eleven.

Amortization expense including amortization of above and below market lease intangible assets, which is classified as rent expense, was $13.7$20.0 million, $13.7$16.1 million and $13.4$10.9 millionfor the years ended December 31, 2017, 20162021, 2020 and 2015,2019, respectively. Aggregate amortization expense is expected to be $14.8$21.4 million, $12.4$17.4 million, $12.1$14.7 million, $11.5$12.7 million and $10.7$12.0 million for the years ending December 31, 2018, 2019, 2020, 20212022, 2023, 2024, 2025 and 2022,2026, respectively.

73


CROSSAMERICA PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 9.10. GOODWILL

There were no changes in goodwill during 2017. Changes in goodwill during 20162021 consisted of the following (in thousands):

 

 

Wholesale

Segment

 

 

Retail

Segment

 

 

Consolidated

 

Balance at December 31, 2019 and 2020

 

$

74,138

 

 

$

14,626

 

 

$

88,764

 

Acquisition

 

 

8,190

 

 

 

3,510

 

 

 

11,700

 

Balance at December 31, 2021

 

$

82,328

 

 

$

18,136

 

 

$

100,464

 

 

 

 

Wholesale

Segment

 

 

Retail

Segment

 

 

Consolidated

 

Balance at December 31, 2015

 

$

61,548

 

 

$

19,273

 

 

$

80,821

 

Acquisitions

 

 

1,720

 

 

 

6,568

 

 

 

8,288

 

Reassignment

 

 

6,489

 

 

 

(6,489

)

 

 

 

Balance at December 31, 2016 and 2017

 

$

69,757

 

 

$

19,352

 

 

$

89,109

 

Our business strategy includes the conversionSee Note 3 regarding our acquisition of retail sitescertain assets from company operated retail sites to lessee dealers. As a result of these conversions, there is a reduction in future cash flows in the Retail segment and an expected increase in future cash flows that will be received by the Wholesale segment subsequent to the date of conversion. The effect of these conversions during 2016 was a $6.5 million reassignment of goodwill originally assigned to the Retail segment to the Wholesale segment. There was no reassignment during 2017.7-Eleven.

Note 10.11. ACCRUED EXPENSES AND OTHER LONG-TERM LIABILITIES

Accrued expenses and other current liabilities consisted of the following (in thousands):

 

December 31,

 

 

December 31,

 

 

2017

 

 

2016

 

 

2021

 

 

2020

 

Taxes other than income

 

$

8,303

 

 

$

7,177

 

 

$

8,661

 

 

$

9,117

 

Capital expenditures and maintenance expenses

 

 

3,299

 

 

 

5,598

 

Current portion of environmental liabilities

 

 

1,611

 

 

 

1,602

 

 

 

2,419

 

 

 

1,710

 

Current portion of interest rate swap contracts

 

 

 

 

 

1,028

 

Professional fees

 

 

1,115

 

 

 

916

 

Interest

 

 

1,223

 

 

 

993

 

 

 

723

 

 

 

537

 

Current portion of sale leaseback obligations

 

 

1,020

 

 

 

856

 

Equity-based incentive compensation

 

 

707

 

 

 

1,758

 

Professional fees

 

 

522

 

 

 

464

 

Payroll

 

 

531

 

 

 

491

 

Termination benefits

 

 

245

 

 

 

151

 

Other

 

 

2,853

 

 

 

2,213

 

 

 

4,465

 

 

 

4,361

 

Total accrued expenses and other current liabilities

 

$

17,015

 

 

$

15,705

 

 

$

20,682

 

 

$

23,267

 

CROSSAMERICA PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Other long-term liabilities consisted of the following (in thousands):

 

 

December 31,

 

 

 

2021

 

 

2020

 

Security deposits

 

$

17,749

 

 

$

17,417

 

Deferred fuel supplier rebates

 

 

17,038

 

 

 

9,328

 

Environmental liabilities

 

 

2,957

 

 

 

2,204

 

Interest rate swap contracts, less current portion

 

 

 

 

 

1,427

 

Other

 

 

3,459

 

 

 

2,199

 

Total other long-term liabilities

 

$

41,203

 

 

$

32,575

 

  

 

 

December 31,

 

 

 

2017

 

 

2016

 

Sale leaseback obligations, net of deferred financing costs

 

$

76,447

 

 

$

77,412

 

Security deposits

 

 

10,593

 

 

 

9,443

 

Environmental liabilities

 

 

1,926

 

 

 

2,567

 

Above market leases

 

 

2,886

 

 

 

4,841

 

Deferred rent expense

 

 

2,968

 

 

 

3,105

 

Other

 

 

3,241

 

 

 

2,885

 

Total other long-term liabilities

 

$

98,061

 

 

$

100,253

 

Sale Leaseback Obligations

We are the lessee in certain sale-leaseback transactions for certain retail sites that expire through 2032, and as we have continuing involvement in the underlying retail sites through a sublease with a lessee dealer or the lease agreement has a repurchase feature, the sale-leaseback arrangements are accounted for as lease financing obligations. In lieu of recognizing rent expense for the lease rental payments, we record interest expense, which amounted to $3.9 million, $3.3 million and $2.4 million for 2017, 2016 and 2015, respectively. The future minimum lease payments under sale leaseback financing obligations as of December 31, 2017 are as follows (in thousands):

2018

 

$

6,605

 

2019

 

 

6,673

 

2020

 

 

6,649

 

2021

 

 

6,740

 

2022

 

 

6,832

 

Thereafter

 

 

62,886

 

Total future minimum lease payments

 

 

96,385

 

Less interest component

 

 

64,693

 

Present value of minimum lease payments

 

 

31,692

 

Plus net book value of property at end of lease

 

 

24,510

 

Plus deferred gain to be recognized at end of lease

 

 

22,077

 

Gross sale leaseback obligations

 

 

78,279

 

Current portion

 

 

1,020

 

Long-term portion

 

 

77,259

 

Deferred financing costs, net

 

 

812

 

Long-term portion, net of deferred financing costs

 

$

76,447

 

Renegotiation of Rocky Top Purchase Obligation

In connection with the Rocky Top acquisition completed in September 2013, we entered into a deferred seller financing arrangement, which obligated us to purchase certain retail sites over a 5-year period for an average of $5.2 million per year beginning in 2016 at an approximately 7.7% capitalization rate. In June 2016, we renegotiated the terms with the sellers, eliminating the deferred seller financing obligation and agreeing to terms of a new lease of the assets for an initial term of 15 years and eight months with four renewal options of five years each. Under this triple net lease, annual rent is initially $1.8 million based on a 6.5% capitalization rate and increases 1.5% per year. However, because of the continuing involvement we have with the retail sites through the lease and sublease of the properties, we recorded the liability on our balance sheet at fair value in June 2016, which approximated its carrying value. These lease financing obligations are classified within accrued expenses and other current liabilities and other noncurrent liabilities on the consolidated balance sheet.

Sale Leaseback Transaction

In December 2016, we sold the real property at 17 retail sites acquired through the State Oil Assets acquisition for cash proceeds of $25.0 million, which were used to repay borrowings on the credit facility. We lease these properties for an initial term of 15 years with three renewal options of approximately five years each. Under the triple net lease, annual rent is initially $1.6 million based on a 6.5% capitalization rate and increases every five years based on inflation. Because of the continuing involvement we have with the retail sites through the lease and sublease of the properties, we recorded a liability for the proceeds received and are amortizing this liability over the lease term as rent payments are made.


CROSSAMERICA PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Asset Retirement Obligations

Environmental laws in the U.S. require the permanent closure of USTs within one to two years after the USTs are no longer in service, depending on the jurisdiction in which the USTs are located. We have estimated that USTs at our owned retail sites will remain in service approximately 30 years and that we will have an obligation to remove those USTs at that time. For our leased retail sites, our lease agreements generally require that we remove certain improvements, primarily USTs and signage, upon termination of the lease, and so an asset retirement obligation is incurred upon enteringacquiring the lease.site. There are no0 assets that are legally restricted for purposes of settling our asset retirement obligations.

A rollforward of our asset retirement obligation is below (in thousands):

 

 

December 31,

 

 

 

2021

 

 

2020

 

Balance at beginning of year

 

$

41,767

 

 

$

35,777

 

Recognition of asset retirement obligations

 

 

3,840

 

 

 

5,997

 

Changes in estimated cash flows or settlement dates

 

 

(191

)

 

 

(1,086

)

Accretion

 

 

1,762

 

 

 

1,394

 

Obligations settled

 

 

(1,429

)

 

 

(315

)

Balance at end of year

 

 

45,749

 

 

 

41,767

 

Current portion, included within accrued expenses and

   other current liabilities

 

 

383

 

 

 

317

 

Long-term portion

 

$

45,366

 

 

$

41,450

 

74

 

 

 

December 31,

 

 

 

2017

 

 

2016

 

Beginning balance

 

$

27,750

 

 

$

23,484

 

Recognition of asset retirement obligations

 

 

3,525

 

 

 

3,205

 

Changes in estimated cash flows or settlement dates

 

 

(1,078

)

 

 

(291

)

Accretion

 

 

1,427

 

 

 

1,403

 

Obligations settled

 

 

(157

)

 

 

(51

)

Ending balance

 

$

31,467

 

 

$

27,750

 


CROSSAMERICA PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

Note 11.12. DEBT

Our balances for long-term debt and capitalfinance lease obligations are as follows (in thousands):

 

 

December 31,

 

 

December 31,

 

 

2017

 

 

2016

 

 

2021

 

 

2020

 

$550 million revolving credit facility

 

$

506,000

 

 

$

441,500

 

Capital lease obligations

 

 

27,220

 

 

 

28,455

 

Note payable

 

 

765

 

 

 

822

 

Total debt and capital lease obligations

 

 

533,985

 

 

 

470,777

 

CAPL Credit Facility

 

$

630,575

 

 

$

513,180

 

JKM Credit Facility

 

 

182,460

 

 

 

 

Finance lease obligations

 

 

16,809

 

 

 

20,007

 

Total debt and finance lease obligations

 

 

829,844

 

 

 

533,187

 

Current portion

 

 

2,916

 

 

 

2,100

 

 

 

10,939

 

 

 

2,631

 

Noncurrent portion

 

 

531,069

 

 

 

468,677

 

 

 

818,905

 

 

 

530,556

 

Deferred financing costs, net

 

 

1,922

 

 

 

3,558

 

 

 

8,270

 

 

 

3,257

 

Noncurrent portion, net of deferred financing costs

 

$

529,147

 

 

$

465,119

 

 

$

810,635

 

 

$

527,299

 

 

The following representsAs of December 31, 2021, future principal payments on debt and future minimum leaserental payments on capitalfinance lease obligations for the next five yearswere as follows (in thousands): 

 

 

Debt

 

 

Capital Lease Obligations

 

 

Total

 

2018

 

$

765

 

 

$

2,975

 

 

$

3,740

 

2019

 

 

506,000

 

 

 

3,079

 

 

 

509,079

 

2020

 

 

 

 

 

3,176

 

 

 

3,176

 

2021

 

 

 

 

 

3,274

 

 

 

3,274

 

2022

 

 

 

 

 

3,374

 

 

 

3,374

 

Thereafter

 

 

 

 

 

15,799

 

 

 

15,799

 

Total future minimum lease payments

 

 

506,765

 

 

 

31,677

 

 

 

538,442

 

Less interest component

 

 

 

 

 

4,457

 

 

 

4,457

 

 

 

 

506,765

 

 

 

27,220

 

 

 

533,985

 

Current portion

 

 

765

 

 

 

2,151

 

 

 

2,916

 

Long-term portion

 

$

506,000

 

 

$

25,069

 

 

$

531,069

 

 

 

Debt

 

 

Finance Lease Obligations

 

 

Total

 

2022

 

$

8,211

 

 

$

3,230

 

 

$

11,441

 

2023

 

 

10,948

 

 

 

3,328

 

 

 

14,276

 

2024

 

 

641,523

 

 

 

3,427

 

 

 

644,950

 

2025

 

 

10,948

 

 

 

3,527

 

 

 

14,475

 

2026

 

 

141,405

 

 

 

3,629

 

 

 

145,034

 

Thereafter

 

 

 

 

 

1,221

 

 

 

1,221

 

Total future payments

 

 

813,035

 

 

 

18,362

 

 

 

831,397

 

Less impact of discounting

 

 

 

 

 

1,553

 

 

 

1,553

 

Total future principal payments

 

 

813,035

 

 

 

16,809

 

 

 

829,844

 

Current portion

 

 

8,211

 

 

 

2,728

 

 

 

10,939

 

Long-term portion

 

$

804,824

 

 

$

14,081

 

 

$

818,905

 

 


CROSSAMERICA PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

CAPL Credit Facility

The credit facilityCAPL Credit Facility is a $750 million senior secured revolving credit facility, maturing on March 4, 2019, with a total borrowing capacity of $550.0 million, under which swing-line loans may be drawn up to $25.0 million and standby letters of credit may be issued up to an aggregate of $45.0 million.in April 2024. The credit facility maycan be increased from time to time upon our written request, subject to certain conditions, up to an additional $100.0$300 million. Letters of credit outstanding at December 31, 2017 and 2016 totaled $6.7 million and $6.5 million, respectively. The aggregate amount of availability at December 31, 2017 under the revolving credit facility, after taking into account outstanding loans and letters of credit and debt covenant constraints, was $37.3 million. In connection with future acquisitions, the revolving credit facility requires, among other things that we have, after giving effect to such acquisition, at least $20.0 million, in the aggregate, of borrowing availability under the CAPL Credit Facility cannot exceed the combined revolving commitments then in effect.

We also have the right to borrow swingline loans under the CAPL Credit Facility in an amount up to $35.0 million. Swingline loans bear interest at the base rate plus the applicable base rate margin.

Standby letters of credit facilityare permissible under the CAPL Credit Facility up to an aggregate amount of $65.0 million. Standby letters of credit are subject to a 0.125% fronting fee and unrestricted cashother customary administrative charges. Standby letters of credit will accrue a fee at a rate based on the balance sheet on the dateapplicable margin of such acquisition. All obligations under the credit facility areLIBOR loans.

Our CAPL Credit Facility is secured by substantially all of our assets, including our equity interest in an indirect wholly-owned subsidiary of CrossAmerica and the sole member of CAPL JKM Partners LLC named CAPL JKM Holdings LLC (“Holdings”), other than the assets of unrestricted subsidiaries designated as such under the CAPL Credit Facility. Holdings and its subsidiaries are unrestricted subsidiaries under the CAPL Credit Facility.

The CAPL Credit Facility prohibits us from making cash distributions to our unitholders if any event of default occurs or would result from the distribution. 

75


CROSSAMERICA PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

On July 28, 2021, the Partnership entered into an amendment (the “Amendment”) to its Credit Agreement, dated as of April 1, 2019 (as previously amended by the First Amendment to Credit Agreement, dated as of November 19, 2019), among the Partnership and its subsidiaries.

OutstandingLehigh Gas Wholesale Services, Inc., as borrowers, the guarantors from time to time party thereto, the lenders from time to time party thereto and Citizens Bank, N.A., as administrative agent. The Amendment, among other things, (i) amended certain provisions relating to unrestricted subsidiaries, (ii) increased the maximum level for the consolidated leverage ratio financial covenant to 6.00 to 1.00 for the fiscal quarters ending September 30, 2021 and December 31, 2021, 5.75 to 1.00 for the fiscal quarter ending March 31, 2022, 5.50 to 1.00 for the fiscal quarter ending June 30, 2022, and 5.25 to 1.00 for the fiscal quarter ending September 30, 2022, after which the maximum level generally reverts to 4.75 to 1.00 unless in a specified acquisition period or a qualified note offering has occurred, and (iii) modified the applicable margin for borrowings under the revolving credit facilityCAPL Credit Facility (as amended by the Amendment), such that borrowings will bear interest, at the Partnership’s option, at either LIBOR plus an applicablea margin which wasranging from 1.50% to 3.00% at December 31, 2017. Our borrowings hadper annum or a weighted-average interestbase rate plus a margin ranging from 0.50% to 2.00% per annum (in each case depending on the Partnership’s consolidated leverage ratio).

For quarters beginning with the quarter ended September 30, 2022, the maximum level for the consolidated leverage ratio financial covenant is increased to 5.50 to 1.00 for the quarter during a specified acquisition period (as defined in the CAPL Credit Facility). Upon the occurrence of 4.44% at December 31, 2017.

Wea qualified note offering (as defined in the CAPL Credit Facility), the consolidated leverage ratio when not in a specified acquisition period is increased to 5.25 to 1.00, while the specified acquisition period threshold remains 5.50 to 1.00. Upon the occurrence of a qualified note offering, we are required to comply with certain financial covenants under the credit facility. We arealso required to maintain a totalconsolidated senior secured leverage ratio (as defined in the credit facility)CAPL Credit Facility) for the most recently completed four fiscal quartersquarter period of lessnot greater than or equal3.75 to 4.50 : 1.00, except for periods following a material acquisition, generally defined as an acquisition with a purchase price of at least $30.0 million. The total leverage ratio shall not exceed 5.00 :1.00. Such threshold is increased to 4.00 to 1.00 for the quarter in whichduring a materialspecified acquisition closes and the first three full fiscal quarters following the closing of a material acquisition. If we issued Qualified Senior Notes (as defined in the credit facility) in the aggregate principal amount of $175.0 million or greater, the ratio shall not exceed 5.50 : 1.00. If we issued Qualified Senior Notes of $175.0 million or greater, weperiod.

We are also required to maintain a senior leverage ratio (as defined in the credit facility) of less than or equal to 3.00 : 1.00 and a consolidated interest coverage ratio (as defined in the credit facility)CAPL Credit Facility) of at least 2.75 :2.50 to 1.00. AsThese financial covenants and other covenants may restrict or limit our ability to make distributions, incur additional indebtedness, make certain capital expenditures or dispose of December 31, 2017, weassets in excess of specified levels, among other restrictions. We were in compliance with these financial covenants.

The credit facility prohibits us from making distributions to our unitholders if any potential default or event of default occurs or would result from the distribution, or we are not in compliance with our financial covenants. covenants at December 31, 2021.

In addition, we incur a commitment fee based on the unused portion of the CAPL Credit Facility at a rate ranging from 0.25% to 0.50% per annum depending on our consolidated leverage ratio.

Taking the interest rate swap contracts described in Note 13 into account, our effective interest rate on our CAPL Credit Facility at December 31, 2021 was 2.8% (our applicable margin was 2.50% as of December 31, 2021).

Letters of credit outstanding at December 31, 2021 and December 31, 2020 totaled $4.0 million. The amount of availability under the CAPL Credit Facility at December 31, 2021, after taking into consideration debt covenant restrictions, was $112.7 million.

JKM Credit Facility

On July 16, 2021, CAPL JKM Partners LLC (“Borrower”), an indirect wholly-owned subsidiary of CrossAmerica, entered into a Credit Agreement, as amended on July 29, 2021 (the “JKM Credit Facility”) among Borrower, Holdings, Borrower, and Manufacturers and Traders Trust Company, as administrative agent, swingline lender and issuing bank.

The JKM Credit Facility provides for a $200 million senior secured credit facility, consisting of a $185 million delayed draw term loan facility (the “Term Loan Facility”) and a $15 million revolving credit facility (the “Revolving Credit Facility”). The Revolving Credit Facility permits up to $7.5 million of swingline borrowings and $5.0 million in letters of credit. The interest rate applicable to loans outstanding under the JKM Credit Facility is equal to, at Borrower’s option, either (i) a base rate plus a margin (which will be determined based on Borrower’s consolidated leverage ratio) ranging from 0.50% to 1.50% per annum or (ii) LIBOR plus a margin (which will also be determined based on Borrower’s consolidated leverage ratio) ranging from 1.50% to 2.50% per annum. The Term Loan Facility will amortize in equal quarterly installments equal to 1.50% of the unpaid principal amount of the Term Loan Facility, with the first payment due April 1, 2022 and the balance payable on the maturity date of the Term Loan Facility. Letters of credit are subject to a 0.125% fronting fee and other customary administrative charges. Standby letters of credit accrue a fee at a rate based on the applicable margin of LIBOR loans. In addition, beginning in October 2021, a commitment fee was charged based on the unused portion of the JKM Credit Facility at a rate ranging from 0.25% to 0.375% per annum depending on Borrower’s consolidated leverage ratio. The JKM Credit Facility will mature on July 16, 2026.

The obligations under the JKM Credit Facility are guaranteed by Holdings and its subsidiaries (other than Borrower) and secured by a lien on substantially all of the assets of Holdings and its subsidiaries (including Borrower). The obligations under the JKM Credit Facility are nonrecourse to CrossAmerica and its subsidiaries other than Holdings, Borrower and their respective subsidiaries.

76


CROSSAMERICA PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The JKM Credit Facility also contains variousfinancial covenants whichrequiring Borrower to comply with, as of the last day of each fiscal quarter of Borrower, commencing with Borrower’s fiscal quarter ending December 31, 2021, (i) a maximum consolidated leverage ratio of 6.25 to 1.00, with step-downs to 6.00 to 1.00, 5.75 to 1.00, 5.50 to 1.00 and 5.25 to 1.00 on March 31, 2022, March 31, 2023, March 31, 2024 and March 31, 2025, respectively, and (ii) a minimum fixed charge coverage ratio of 1.10 to 1.00. These financial covenants and other covenants may restrict or limit Holdings’ ability to incur additional indebtedness, make certain capital expenditures or dispose of assets in excess of specified levels, among other things,restrictions. We were in compliance with our ability to grant liens; create, incur, assume, or suffer to existfinancial covenants at December 31, 2021.

If an event of default under the JKM Credit Facility occurs and is continuing, the commitments thereunder may be terminated and the principal amount outstanding thereunder, together with all accrued unpaid interest and other indebtedness; or make any material change toamounts owed thereunder, may be declared immediately due and payable.

Letters of credit outstanding at December 31, 2021 totaled $0.8 million. 

Our borrowings under the natureJKM Credit Facility had a weighted-average interest rate of 2.6% as of December 31, 2021 (LIBOR plus an applicable margin, which was 2.5% as of December 31, 2021).

As of December 31, 2021, we had $182.5 million outstanding under our business, including mergers, liquidations,Term Loan Facility. The amount of availability under the Term Loan Facility and dissolutions;Revolving Credit Facility at December 31, 2021 was $2.5 million and make certain investments, acquisitions or dispositions.$14.2 million, respectively.

Note Payable

In connection with a June 2013February 2022, we borrowed $1.1 million under the Term Loan Facility to partially fund the acquisition of certain retailthe final three sites in Florida, we issued a $1.0 million note payable with interest at 4.0%. The note matures July 1, 2018, at which time a balloon payment for all outstanding principal and any unpaid interest is due. The loan is secured by all the real and personal property at these retail sites.from 7-Eleven.

CapitalFinance Lease Obligations

In May 2012, the Predecessor EntitiesEntity entered into a 15-year master lease agreement with renewal options of up to an additional 20 years with Getty. Pursuant to the lease, the Predecessor Entities originally leased 105 retail sites in Massachusetts, New Hampshire and Maine. The lease was assigned to the Partnership. In December 2012, the agreement was amended to add an additional 25 retail sites in New Jersey.Getty Realty Corporation. Since then, the agreement has been amended from time to time to add an insignificant numberor remove retail sites. As of additional retail sites.December 31, 2021, we lease 109 sites under this lease with a weighted-average remaining lease term of 5.3 years. We pay fixed rent, which increases 1.5% per year. In addition, the lease requires contingent rentvariable lease payments based on gallons of motor fuel sold.

Because the fair value of the land at lease inception was estimated to represent more than 25% of the total fair value of the real property subject to the lease, the land element of the lease was analyzed for operating or capital treatment separately from the rest of the property subject to the lease. The land element of the lease was classified as an operating lease and all of the other property was classified as a capital lease. This assessment was not required to be reassessed upon adoption of ASC 842. As such, future minimum leaserental payments are included in both the capitalfinance lease obligations table above as well as the operating lease table in Notes 11 and 13.Note 14.

ThroughThe weighted-average discount rate for this finance lease obligation at December 31, 2017, certain retail sites2021 was 3.5%. Interest on this finance lease obligation amounted to $0.6 million, $0.7 million and $0.8 million for 2021, 2020 and 2019, respectively.

Note 13. INTEREST RATE SWAP CONTRACTS

The interest payments on our CAPL Credit Facility vary based on monthly changes in the one-month LIBOR and changes, if any, in the applicable margin, which is based on our leverage ratio as further discussed in Note 12. To hedge against interest rate volatility on our variable rate borrowings under the CAPL Credit Facility, on March 26, 2020, we entered into an interest rate swap contract. The interest rate swap contract has a notional amount of $150 million, a fixed rate of 0.495% and matures on April 1, 2024. On April 15, 2020, we entered into 2 additional interest rate swap contracts, each with notional amounts of $75 million, a fixed rate of 0.38% and that mature on April 1, 2024. All of these interest rate swap contracts have been terminated fromdesignated as cash flow hedges and are expected to be highly effective.

The fair value of these interest rate swap contracts, for which the lease. Any propertycurrent portion is included in other current assets or accrued expenses and equipmentother current liabilities and the noncurrent portion is included in other assets or capital lease obligations associated with these retail sites were removed fromother long-term liabilities, as applicable, was a $3.0 million net asset and a $2.5 million net liability at December 31, 2021 and 2020, respectively. See Note 18 for additional information on the balance sheet.fair value of the interest rate swap contracts.


77


CROSSAMERICA PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 12. RELATED PARTY TRANSACTIONS

Transactions with Circle K

Fuel Sales and Rental Income

We sell wholesale motor fuel underreport the unrealized gains and losses on our interest rate swap contracts designated as highly effective cash flow hedges as a master fuel distribution agreement to 49 Circle Kcomponent of other comprehensive income and reclassify such gains and losses into earnings in the same period during which the hedged interest expense is recorded. We recognized a net realized loss from settlements of the interest rate swap contracts of $1.0 million and $0.4 million for 2021 and 2020, respectively.

We currently estimate that a gain of $0.1 million will be reclassified from accumulated other comprehensive income into interest expense during the next 12 months; however, the actual amount that will be reclassified will vary based on changes in interest rates

Note 14. OPERATING LEASES

Operating Leases of Retail Sites as Lessee

We lease 462 retail sites from third parties under certain non-cancelable operating leases that expire from time to time through 2041. The weighted-average remaining lease term was 5.6 years as of December 31, 2021.

Lease expense was classified in the statement of income as follows (in thousands):

 

 

Year Ended December 31,

 

 

 

2021

 

 

2020

 

 

2019

 

Cost of sales

 

$

23,765

 

 

$

25,214

 

 

$

27,493

 

Operating expenses

 

 

13,531

 

 

 

9,067

 

 

 

379

 

General and administrative expenses

 

 

1,331

 

 

 

1,081

 

 

 

685

 

Total

 

$

38,627

 

 

$

35,362

 

 

$

28,557

 

Variable lease payments based on inflation or fuel volume included in the table above totaled $3.4 million, $2.3 million and $1.8 million for 2021, 2020 and 2019, respectively. Short-term lease real property on 73 retail sitespayments included in the table above that are excluded from the lease liability amounted to Circle K$1.7 million, $0.8 million and $0.6 million for 2021, 2020 and 2019, respectively. Cash paid for amounts included in the measurement of lease liabilities under a masteroperating leases totaled $33.5 million, $33.1 million and $25.8 million for 2021, 2020 and 2019, respectively.

As of December 31, 2021, future minimum rental payments under operating leases, excluding variable lease agreement each having initial 10-year terms. The fuel distribution agreement provides us with a fixed wholesale mark-up per gallon. The master lease agreement is a triple net lease.

Revenues from wholesale fuel sales and real property rental income from CST and Circle Kpayments or short-term payments, were as follows (in thousands):

. The weighted-average discount rate as of December 31, 2021 was 6.2%.

 

 

For the Year Ended December 31,

 

 

 

2017

 

 

2016

 

 

2015

 

Revenues from motor fuel sales to CST and Circle K

 

$

136,649

 

 

$

118,745

 

 

$

135,813

 

Rental income from CST and Circle K

 

 

17,021

 

 

 

17,188

 

 

 

11,422

 

2022

 

 

36,041

 

2023

 

 

33,691

 

2024

 

 

30,540

 

2025

 

 

28,180

 

2026

 

 

24,092

 

Thereafter

 

 

68,812

 

Total future payments

 

 

221,356

 

Less impact of discounting

 

 

46,375

 

 

 

 

174,981

 

Current portion

 

 

34,832

 

Long-term portion

 

$

140,149

 

 

Accounts receivable from Circle KMost lease agreements include provisions for fuel amountedrenewals. We generally do not include renewal options in our lease term for purposes of measuring our lease liabilities and right-of-use assets unless the sublease to $3.9 million and $3.2 million at December 31, 2017 and December 31, 2016, respectively.our customer extends beyond the term of the head lease.

Amended Omnibus Agreement and Management Fees

We incurred $13.9 million, $15.9 million and $15.3 millionSee Note 4 for 2017, 2016 and 2015, respectively, including incentive compensation costs and non-cash stock-based compensation expense underinformation regarding the Amended Omnibus Agreement, which are recorded as a componentacquisition of operating expenses and general and administrative expensesleasehold interests in the statement of income. Amounts payable to Circle K and CST were $25.3 million and $10.0 million at December 31, 2017 and December 31, 2016, respectively. The amounts payable at December 31, 2017 include separation benefits associatedconnection with the Mergeracquisition of retail and equity compensation expense associatedwholesale assets.

Of our leased sites, we operate 124 of them as company operated sites. Substantially all the remaining leased sites are subleased to lessee dealers or commission agents under leases with CST stock-based awards. See Note 24 for additional information.

Common Units Issuedterms generally ranging from one to CSTten years and Circle K as Consideration for Amounts due Under the Amended Omnibus Agreement

As approved by the independent conflicts committee of the Board, the Partnership, CST and Circle K mutually agreed to settle, from time to time, some or all of the amounts due under the terms of the Amended Omnibus Agreement in newly issued common units representing limited partner interests in the Partnership. We issued the following common units to CST or Circle K as consideration for amounts due under the terms of the Amended Omnibus Agreement:

Year

 

Number of

Common

Units Issued

 

2015

 

 

259,312

 

2016

 

 

440,266

 

2017

 

 

550,516

 

Circle K will receive 136,882 common units on March 1, 2018 as a portion of the payment for the management fees for the fourth quarter of 2017.

CST Fuel Supply Equity Interests

CST Fuel Supply provides wholesale motor fuel distribution to the majority of CST’s legacy U.S. retail sites at cost plus a fixed markup per gallon. We owned a 17.5% total interest in CST Fuel Supply at December 31, 2017 and 2016. We account for the income derived from our equity interest of CST Fuel Supply as “Income from CST Fuel Supply equity interests” on our statement of income, which amounted to $14.9 million, $16.0 million and $10.5 million for 2017, 2016 and 2015, respectively. Accounts receivable from Circle K and CST related to thismay include renewal options. Sublease rental income amounted to $1.2 $34.5million, at December 31, 2017$34.8 million and December 31, 2016.$38.2 million for 2021, 2020 and 2019, respectively.

In connection with the Merger, the FTC approved a final order requiring the divestiture of certain CST retail fuel stations. As a result, in September 2017, 61 sites were sold to a third party and removed from the fuel distribution agreement between CST Marketing and Supply and CST Services. CST Marketing and Supply no longer supplies fuel to such sites. To compensate for the decrease in the amount of motor fuels sold by CST Marketing and Supply, Circle K agreed to purchase at least 114.9 million gallons annually (the “Annual Commitment”) in addition to the volumes continued to be sold under the fuel distribution agreement to retail fuel stations that remain with Circle K after the divestiture. In addition, should Circle-K fail to purchase all or a portion of the Annual Commitment, Circle K has agreed to make monthly payments to CST Marketing and Supply in the78



CROSSAMERICA PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

amount

Operating Leases of the seller’s margin of $0.05 per gallonRetail Sites as Lessor

Motor fuel stations are leased to tenants under the fuel distribution agreement multiplied by the number of gallonsoperating leases with various expiration dates ranging through 2037. Most lease agreements include provisions for renewals. We generally do not physically sold pursuant to the Annual Commitment. Consequently, the Partnership, by virtue of its 17.5% ownership interest in CST Fuel Supply, the 100% owner of CST Marketing and Supply, will continue to receive its share from the volumes sold to the 61 retail sites prior to the FTC mandated divestiture. This agreement continues until the fuel distribution agreement between CST Marketing and Supply and CST Services is terminated, which had an initial term of 10 years expiring in December 2024.

In July 2016, CST provided a refund payment to us related to our 17.5% interest in CST Fuel Supply resulting from the sale by CST of 79 retail sites in California and Wyoming to 7-Eleven, Inc. and its wholly-owned subsidiary, SEI Fuel Services, Inc., to which CST Fuel Supply no longer supplies motor fuel. The purpose of the refund payment was to make us whole for the decrease in the value of our interest in CST Fuel Supply arising from sales volume decreases. The total refund payment received by us, as approved by the independent conflicts committee of the Board, was approximately $18.2 million ($17.5 million in cash with the remainderinclude renewal options in our common units owned by CST) and was accounted forlease term. Future minimum rental payments under non-cancelable operating leases with third parties as a contribution to equity.

Purchase of Fuel from CST and Circle K

We purchase the fuel supplied to 32 retail sites from CST Fuel Supply of which we own a 17.5% interest, and resell the wholesale motor fuel to independent dealers and sub-wholesalers. We purchased $23.8 million and $20.4 million of motor fuel from CST Fuel Supply for the year ended December 31, 2017 and 2016, respectively, in connection with these retail sites.

We also purchase the fuel supplied to 101 retail sites acquired in the Jet-Pep Assets acquisition from a terminal owned and operated by Circle K. We purchased $11.3 million of motor fuel from Circle K in 2017.

Circle K acquired Holiday Stationstores, Inc. (Holiday) on December 15, 2017. Prior to that acquisition, we were a franchisee of Holiday (Franchised Holiday Stores), purchased fuel from Holiday and paid a franchise fee to Holiday. As a result of Circle K’s acquisition, we purchase fuel from Circle K to supply our Holiday-branded sites. For 2017, these purchases amounted to $1.9 million. We also pay a franchise fee to Circle K, which for 2017 was insignificant.

IDR and Common Unit Distributions

We distributed $4.3 million, $3.4 million and $1.4 million to CST or Circle K related to its ownership of our IDRs and $17.0 million, $15.5 million and $8.1 million related to its ownership of our common units during 2017, 2016 and 2015, respectively.

Income Tax Reimbursement

As discussed in Note 4, we sold two properties during the year ended December 31, 2017 as a result of the FTC’s requirements associated with Couche-Tard’s acquisition of CST. Circle K agreed to reimburse us for the tax liability incurred on the required sale, resulting in additional proceeds of $0.3 million, which was accounted for as a contribution to partners’ capital.

Wholesale Motor Fuel Sales and Real Estate Rentals

Revenues from motor fuel sales and rental income from DMS and its affiliates2021 were as follows (in thousands):

 

 

 

For the Year Ended December 31,

 

 

 

2017

 

 

2016

 

 

2015

 

Revenues from motor fuel sales to DMS and its affiliates

 

$

241,895

 

 

$

254,292

 

 

$

322,918

 

Rental income from DMS and its affiliates

 

 

18,753

 

 

 

21,208

 

 

 

23,474

 

2022

 

 

50,189

 

2023

 

 

39,783

 

2024

 

 

33,130

 

2025

 

 

25,792

 

2026

 

 

17,262

 

Thereafter

 

 

33,339

 

Total future minimum lease payments

 

$

199,495

 

 

Accounts receivableThe future minimum rental payments presented above do not include contingent rent based on future inflation, future revenues or volumes of the lessee, or non-lease components for amounts that may be received as tenant reimbursements for certain operating costs.

Deferred rent income from DMSstraight-line rent relates to the cumulative amount by which straight-line rental income recorded to date exceeds cash rents billed to date under the lease agreement and its affiliates totaled $9.3$5.1 million and $8.6$5.3 million at December 31, 20172021 and December 31, 2016,2020, respectively.

Revenue from rental income from Topstar Enterprises, an entity affiliated with a member of the Board, was $0.5 million for 2017, 2016 and 2015.

We lease real estate from certain entities affiliated with Joseph V. Topper, Jr., director of the Board. Rent expense paid to these entities was $0.9 million for 2017, 2016 and 2015.

As discussed in Note 4, DMS renewed its contract with one of its customers, triggering a $0.8 million earn-out payment by DMS to us under a contract entered into with DMS at the time of CST acquiring our General Partner in October 2014.


CROSSAMERICA PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Also as discussed in Note 4, we sold 29 properties to DMR during 2017 for $18.9 million, resulting in a gain of $0.8 million.

Maintenance and Environmental Costs

Certain maintenance and environmental monitoring and remediation activities are performed by an entity affiliated with Joseph V. Topper, Jr., a member of the Board, as approved by the independent conflicts committee of the Board. We incurred charges with this related party of $1.5 million, $1.6 million and $1.3 million for 2017, 2016 and 2015, respectively. Accounts payable to this related party amounted to $0.2 million at December 31, 2017.

Aircraft Usage Costs

From time to time, we lease, on a non-exclusive basis, aircraft owned by a group of individuals that includes Joseph V. Topper, Jr. and John B. Reilly, III, members of our Board, as previously approved in August 2013 by the independent conflicts committee of the Board. We incurred $0.2 million for 2015.

Principal Executive Offices

Our principal executive offices are in Allentown, Pennsylvania. We sublease office space from Circle K that Circle K leases from an affiliate of John B. Reilly, III and Joseph V. Topper, Jr., members of our Board. The management fee charged by Circle K to us under the Amended Omnibus Agreement incorporates this rental expense, which amounted to $0.7 million, $0.6 million and $0.3 million for 2017, 2016 and 2015, respectively.

Public Relations and Website Consulting Services

We have engaged a company affiliated with a member of the Board for public relations and website consulting services. The cost of these services amounted to $0.1 million for 2017, 2016 and 2015.

Note 13. OPERATING LEASES15. RELATED PARTY TRANSACTIONS

Operating LeasesTransactions with Affiliates of Retail Sites as LesseeMembers of the Board

We lease retail sitesWholesale Motor Fuel Sales and Real Estate Rentals

Revenues from third parties under certain non-cancelable operating leases that expiremotor fuel sales and rental income from time to time through 2030. Total rent expense amounted to $21.3 million, $21.7 million and $22.4 million for 2017, 2016 and 2015, respectively.

The future minimum lease payments under operating leases as of December 31, 2017DMS were as follows (in thousands):

 

2018

 

$

17,249

 

2019

 

 

15,629

 

2020

 

 

13,377

 

2021

 

 

10,702

 

2022

 

 

9,113

 

Thereafter

 

 

29,810

 

Total future minimum lease payments

 

$

95,880

 

 

 

For the Year Ended December 31,

 

 

 

2021

 

 

2020

 

 

2019

 

Revenues from motor fuel sales to DMS

 

$

 

 

$

27,127

 

 

$

142,236

 

Rental income from DMS

 

 

 

 

 

1,395

 

 

 

6,326

 

As a result of the acquisition of retail and wholesale assets as further described in Note 4, as of April 14, 2020, we 0 longer have any revenue from DMS.

Revenues from TopStar, an entity affiliated with Joseph V. Topper, Jr., a member of the Board, were $58.0 million, $21.0 million and $0.3 million for 2021, 2020 and 2019, respectively. Accounts receivable from TopStar were $1.3 million and $0.7 million at December 31, 2021 and 2020, respectively. As discussed in Note 4, effective April 14, 2020, we acquired wholesale fuel supply rights, including this supply contract, as part of the acquisition of retail and wholesale assets. Prior to April 14, 2020, we only leased motor fuel stations to TopStar.

CrossAmerica leases real estate from the Topper Group. Rent expense under these lease agreements, including rent incurred under the leases entered into in connection with the acquisition of retail and wholesale assets, was $9.3million, $6.6 million and $1.1 million for 2021, 2020 and 2019, respectively.

Topper Group Omnibus Agreement

On January 15, 2020, the Partnership entered into an Omnibus Agreement, effective as of January 1, 2020 (the “Topper Group Omnibus Agreement”), among the Partnership, the General Partner and DMI. The future minimum lease payments presented above do not include contingent rent based on future inflation, future revenues or volumes, or amounts that may be paid as reimbursements for certain operating costs incurredterms of the Topper Group Omnibus Agreement were approved by the lessor. Most lease agreements include provisions for renewals.independent conflicts committee of the Board, which is composed of the independent directors of the Board.

Contingent rent expense, based on gallons sold, was approximately $1.9 million, $2.1 million and $1.3 million for 2017, 2016 and 2015, respectively.79



CROSSAMERICA PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Operating Leases

Pursuant to the Topper Group Omnibus Agreement, DMI agreed, among other things, to provide, or cause to be provided, to the General Partner for the benefit of Retail Sites as Lessor

Motor fuel stations are leased to tenants underthe Partnership, at cost without markup, certain management, administrative and operating leases with various expiration dates ranging through 2032.services.

The future minimumTopper Group Omnibus Agreement will continue in effect until terminated in accordance with its terms. The Topper Group has the right to terminate the Topper Group Omnibus Agreement at any time upon 180 days’ prior written notice, and the General Partner has the right to terminate the Topper Group Omnibus Agreement at any time upon 60 days’ prior written notice.

We incurred expenses under the Topper Group Omnibus Agreement, including costs for store level personnel at our company operated sites since our April 2020 acquisition of retail and wholesale assets and for our recently acquired Joe’s Kwik Marts sites, totaling $62.5 million and $38.4 million for 2021 and 2020, respectively. Such expenses are included in operating expenses and general and administrative expenses in the statements of income. Amounts payable to the Topper Group related to expenses incurred by the Topper Group on our behalf in accordance with the Topper Group Omnibus Agreement totaled $6.1 million and $3.7 million at December 31, 2021 and 2020, respectively.

IDR and Common Unit Distribution

We distributed $34.7 million, $37.1 million and $16.0 million to the Topper Group related to its ownership of our common units during 2021, 2020 and 2019, respectively. We distributed $0.1 million to the Topper Group related to its ownership of our IDRs during 2020. On February 6, 2020, we closed on the Equity Restructuring Agreement that eliminated the IDRs.

We distributed $6.2 million, $2.0 million and $2.0 million to affiliates of John B. Reilly, III related to their ownership of our common units for 2021, 2020 and 2019, respectively.

Maintenance and Environmental Costs

Certain maintenance and environmental monitoring and remediation activities are performed by an entity affiliated with Joseph V. Topper, Jr., a member of the Board, as approved by the independent conflicts committee of the Board. We incurred charges with this related party of $2.2 million, $0.6 million and $1.0 million for 2021, 2020 and 2019, respectively. Accounts payable to this related party amounted to $0.1 million at December 31, 2020.

Environmental Compliance and Inventory Management Costs

We use certain environmental monitoring and inventory management equipment and services provided by an entity previously affiliated with the Topper Group, as approved by the independent conflicts committee of the Board. We incurred charges with this related party of $0.2 million for 2021 and 2020. This entity was sold in July 2021 and is 0 longer a related party.

Convenience Store Products

We purchase certain convenience store products from an affiliate of John B. Reilly, III and Joseph V. Topper, Jr., members of the Board, as approved by the independent conflicts committee of the Board in connection with the April 2020 acquisition of retail and wholesale assets. Merchandise costs amounted to $19.7 million and $14.4 million for 2021 and 2020, respectively. Amounts payable to this related party amounted to $1.5 million at December 31, 2021 and 2020.

Vehicle Lease

In connection with the services rendered under the Topper Group Omnibus Agreement, we lease payments under non-cancelable operating leasescertain vehicles from an entity affiliated with third parties,Joseph V. Topper, Jr., a member of the Board, as approved by the independent conflicts committee of the Board. Lease expense was $0.1 million for both 2021 and 2020.

Principal Executive Offices

Our principal executive offices are in Allentown, Pennsylvania. We lease office space from an affiliate of John B. Reilly, III and Joseph V. Topper, Jr., members of our Board, as approved by the independent conflicts committee of the Board. Rent expense amounted to $1.3 million, $1.1 million and $0.7 million for 2021, 2020 and 2019, respectively.

Public Relations and Website Consulting Services

We have engaged a company affiliated with a member of the Board for public relations and website consulting services. The cost of these services amounted to $0.1 million for 2021, 2020 and 2019.

80


CROSSAMERICA PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Transactions with Circle K

As a result of the GP Purchase, Circle K is no longer a related party and DMS aswe are independent of Circle K from November 19, 2019 forward. However, for comparability purposes, we have disclosed income statement amounts for transactions with Circle K for the full years of 2021, 2020 and 2019.

Fuel Sales and Rental Income

As of December 31, 20172021, we sell wholesale motor fuel under a master fuel distribution agreement to 42 Circle K retail sites and lease real property on 11 retail sites to Circle K under a master lease agreement each having initial 10-year terms. The fuel distribution agreement provides us with rack-plus pricing. The master lease agreement is a triple net lease. As a result of the asset exchanges with Circle K (see Note 4 for additional information), we have sold most of the sites previously leased to Circle K, resulting in the reduction of rental income over the periods in the table below.

Revenues from wholesale fuel sales and real property rental income from Circle K were as follows (in thousands):

 

 

 

Third Party

 

 

Circle K

 

 

DMS

 

 

Total

 

2018

 

$

32,364

 

 

$

14,178

 

 

$

14,433

 

 

$

60,975

 

2019

 

 

26,565

 

 

 

14,178

 

 

 

14,649

 

 

 

55,392

 

2020

 

 

21,242

 

 

 

14,178

 

 

 

14,869

 

 

 

50,289

 

2021

 

 

17,751

 

 

 

14,178

 

 

 

15,092

 

 

 

47,021

 

2022

 

 

16,201

 

 

 

14,178

 

 

 

15,319

 

 

 

45,698

 

Thereafter

 

 

52,061

 

 

 

33,027

 

 

 

83,029

 

 

 

168,117

 

Total future minimum lease payments

 

 

166,184

 

 

 

103,917

 

 

 

157,391

 

 

 

427,492

 

 

 

For the Year Ended December 31,

 

 

 

2021

 

 

2020

 

 

2019

 

Revenues from motor fuel sales to Circle K

 

$

146,444

 

 

$

97,040

 

 

$

153,055

 

Rental income from Circle K

 

 

2,891

 

 

 

5,641

 

 

 

13,898

 

Through

CST Fuel Supply Equity Interests

CST Fuel Supply provides wholesale motor fuel distribution to the first five yearsmajority of CST’s legacy U.S. retail sites at cost plus a fixed markup per gallon. From July 1, 2015 through the closing of the leaseCST Fuel Supply Exchange, we owned a 17.5% total interest in CST Fuel Supply. We accounted for the income derived from our equity interest of CST Fuel Supply as “Income from CST Fuel Supply equity interests” on our statements of income, which amounted to $3.2 million and $14.8 million for 2020 and 2019, respectively.See Note 4 for information regarding the CST Fuel Supply Exchange.

CST Fuel Supply purchases gasoline for immediate distribution to specified retail locations through a supply contract with DMS,Valero. Fuel purchases are priced at the lease agreement allowsprevailing daily rack rates at terminals serving the specified locations. Revenues of CST Fuel Supply represent a $0.05 fixed markup on cost of gallons purchased. As a result of the pass-through nature of the fuel supply operations of CST Fuel Supply, we have presented supplemental income statement information beginning with gross profit as the most meaningful measure relevant to users. CST Fuel Supply does not enter into any other transactions beyond the purchase and resale activities described above. Supplemental income statement information for CST Fuel Supply was as follows (in thousands):

 

 

Period from

January 1 through March 25,

 

 

For the Year Ended December 31,

 

 

 

2020

 

 

2019

 

Gross profit

 

$

17,820

 

 

$

87,010

 

Net income

 

 

17,476

 

 

 

85,310

 

Purchase of Fuel from Circle K

We purchased $40.1 million and $263.5 million of motor fuel from Circle K in 2020 and 2019, respectively.

Transitional Omnibus Agreement, Circle K Omnibus Agreement and Management Fees

Upon the closing of the GP Purchase, the Partnership entered into a limited numberTransitional Omnibus Agreement, dated as of sitesNovember 19, 2019 (the “Transitional Omnibus Agreement”), among the Partnership, the General Partner and Circle K. Pursuant to the Transitional Omnibus Agreement, Circle K agreed, among other things, to continue to provide, or cause to be removed from the lease by each of DMS and us. In November 2017, we entered into an amendment of the master lease with DMS that extended the date through which certain retail sites may be removed from the lease by one year to December 2018.

The future minimum lease payments presented above do not include contingent rent based on future inflation, future revenues or volumes of the lessee, or amounts that may be received as tenant reimbursements for certain operating costs. Most lease agreements include provisions for renewals.

Deferred rent income from straight-line rent relatesprovided, to the cumulative amount by which straight-line rental income recorded to date exceeds cash rents billed to datePartnership certain management, administrative and operating services, as provided under the lease agreementCircle K Omnibus Agreement through June 30, 2020 with respect to certain services, unless earlier terminated.

We incurred expense under the Transitional Omnibus Agreement and totaled $6.9Circle K Omnibus Agreement, including non-cash stock-based compensation expense, totaling $11.6 million for 2019. Such costs are included in general and $5.6administrative expenses in the statements of income.

81


CROSSAMERICA PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

IDR and Common Unit Distributions

We distributed $0.5 million at December 31, 2017to Circle K related to its ownership of our IDRs and 2016, respectively.$15.7 million related to its ownership of our common units during 2019.

Note 14.16. ENVIRONMENTAL MATTERS

We currently own or lease retail sites where refined petroleum products are being or have been handled. These retail sites and the refined petroleum products handled thereon may be subject to federal and state environmental laws and regulations. Under such laws and regulations, we could be required to remove or remediate containerized hazardous liquids or associated generated wastes (including wastes disposed of or abandoned by prior owners or operators), to remediate contaminated property arising from the release of liquids or wastes into the environment, including contaminated groundwater, or to implement best management practices to prevent future contamination.

We maintain insurance of various types with varying levels of coverage that is considered adequate under the circumstances to cover operations and properties. The insurance policies are subject to deductibles that are considered reasonable and not excessive. In addition, we have entered into indemnification and escrow agreements with various sellers in conjunction with several of their respective acquisitions, as further described below. Financial responsibility for environmental remediation is negotiated in connection with each acquisition transaction. In each case, an assessment is made of potential environmental liability exposure based on available information. Based on that assessment and relevant economic and risk factors, a determination is made whether to, and the extent to which we will, assume liability for existing environmental conditions.

The table below presents a rollforward of our environmental liabilityliabilities (in thousands):

 

 

December 31,

 

 

2021

 

 

2020

 

 

2017

 

 

2016

 

Beginning balance

 

$

4,169

 

 

$

2,753

 

Balance at beginning of year

 

$

3,914

 

 

$

3,390

 

Provision for new environmental losses

 

 

1,334

 

 

 

199

 

 

 

2,996

 

 

 

210

 

Changes in estimates for previously incurred losses

 

 

(579

)

 

 

1,752

 

 

 

6

 

 

 

1,403

 

Payments

 

 

(1,387

)

 

 

(535

)

 

 

(1,540

)

 

 

(1,089

)

Total balance

 

 

3,537

 

 

 

4,169

 

Balance at end of year

 

 

5,376

 

 

 

3,914

 

Current portion, included within accrued expenses and other current liabilities

 

 

1,611

 

 

 

1,602

 

 

 

2,419

 

 

 

1,710

 

Long-term portion, included within other long-term liabilities

 

$

1,926

 

 

$

2,567

 

 

$

2,957

 

 

$

2,204

 

CROSSAMERICA PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

At December 31, 2017,2021, we were indemnified by third-party escrow funds, state funds or insurance totaling $3.4$3.2 million, which are recorded as indemnification assets and included within other noncurrent assets on the balance sheet. State funds represent probable state reimbursement amounts. Reimbursement will depend upon the continued maintenance and solvency of the state. Insurance coverage represents amounts deemed probable of reimbursement under insurance policies.

The estimates used in these reserves are based on all known facts at the time and an assessment of the ultimate remedial action outcomes. We will adjust loss accruals as further information becomes available or circumstances change. Among the many uncertainties that impact the estimates are the necessary regulatory approvals for, and potential modifications of remediation plans, the amount of data available upon initial assessment of the impact of soil or water contamination, changes in costs associated with environmental remediation services and equipment and the possibility of existing legal claims giving rise to additional claims.

Environmental liabilities related to the sites contributed to the Partnership in connection with our IPO have not been assigned to us and are still the responsibility of the Predecessor Entity. Under the Amended Omnibus Agreement, theThe Predecessor Entity must indemnifyindemnified us for any costs or expenses that it incurswe incur for environmental liabilities and third-party claims, regardless of when a claim is made, that are based on environmental conditions in existence prior to the closing of the IPO for contributed sites. As such, these environmental liabilities and indemnification assets are not recorded on the balance sheet of the Predecessor Entity rather thanPartnership.

Similarly, we have generally been indemnified with respect to known contamination at sites acquired from third parties, including our acquisition of certain assets from 7-Eleven. As such, these environmental liabilities and indemnification assets are also not recorded on the balance sheet of the Partnership.

82


CROSSAMERICA PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 15.17. COMMITMENTS AND CONTINGENCIES

Purchase Commitments

The futureWe have minimum volume purchase requirements under the existingcertain of our fuel supply agreements are approximate gallons, with a purchase price at prevailing market rates for wholesale distributions. We purchased approximately 928.0 million, 869.6 million and 884.6 million gallons of motor fuel under the existing supply agreements for 2017, 2016 and 2015, respectively.distribution. The following provides total annual future minimum volume purchase requirements (in thousands of gallons):

 

2018

 

 

346,842

 

2019

 

 

314,934

 

2020

 

 

40,729

 

2021

 

 

32,980

 

2022

 

 

32,980

 

Thereafter

 

 

50,000

 

Total

 

 

818,465

 

2022

 

 

656,734

 

2023

 

 

508,331

 

2024

 

 

399,200

 

2025

 

 

349,825

 

2026

 

 

341,721

 

Thereafter

 

 

1,154,233

 

Total

 

 

3,410,044

 

 

In the event for a given contract year we fail to purchase the required minimum volume for a given contract year, the underlying third party’s exclusive remedies (depending on the magnitude of the failure) are either termination of the supply agreement and/or a financial penalty per gallon based on the volume shortfall for the given year. We did not incur any significant penalties for the periods presented.in 2021, 2020 or 2019.

Litigation Matters

We are from time to time party to various lawsuits, claims and other legal proceedings that arise in the ordinary course of business. These actions typically seek, among other things, compensation for alleged personal injury, breach of contract, property damages, environmental damages, employment-related claims and damages, punitive damages, civil penalties or other losses, or injunctive or declaratory relief. With respect to all such lawsuits, claims and proceedings, we record a reservean accrual when it is probable that a liability has been incurred and the amount of loss can be reasonably estimated. In addition, we disclose matters for which management believes a material loss is at least reasonably possible. None ofWe believe that it is not reasonably possible that these proceedings, separately or in the aggregate, are expected towill have a material adverse effect on our consolidated financial position, results of operations or cash flows. In all instances, management has assessed the matter based on current information and made a judgment concerning its potential outcome, giving due consideration to the nature of the claim, the amount and nature of damages sought and the probability of success. Management’s judgment may prove materially inaccurate, and such judgment is made subject to the known uncertainties of litigation.


CROSSAMERICA PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

We were a co-defendant, together with our General Partner, CST and CST Services, in a lawsuit brought by a former executive of CST Services who, until March 2015, provided services to us as Chief Investment Officer and Vice President of Finance (Court of Common Pleas, Lehigh County, Pennsylvania, case number 2015-1003). In connection with CST’s acquisition of our General Partner in 2014, the plaintiff alleged breach of contract and associated claims relating to his termination of employment and claimed severance benefits under the EICP. In October 2017, a jury awarded the plaintiff a total of $1.7 million. Such amount was recorded in general and administrative expenses in 2017. Under the EICP, we were also obligated to pay reasonable legal expenses incurred by the plaintiff in connection with this dispute, which we expensed as incurred. The Partnership incurred total legal fees related to this case of $0.8 million for the year ended December 31, 2017.

Note 16.18. FAIR VALUE MEASUREMENTS

General

We measure and report certain financial and non-financial assets and liabilities on a fair value basis. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). U.S. GAAP specifies a three-level hierarchy that is used when measuring and disclosing fair value. The fair value hierarchy gives the highest priority to quoted prices available in active markets (i.e., observable inputs) and the lowest priority to data lacking transparency (i.e., unobservable inputs). An instrument’s categorization within the fair value hierarchy is based on the lowest level of significant input to its valuation. The following is a description of the three hierarchy levels.

Level 1—Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. Active markets are considered to be those in which transactions for the assets or liabilities occur in sufficient frequency and volume to provide pricing information on an ongoing basis.

Level 2—Quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability. This category includes quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in inactive markets.

Level 3—Unobservable inputs are not corroborated by market data. This category is comprised of financial and non-financial assets and liabilities whose fair value is estimated based on internally developed models or methodologies using significant inputs that are generally less readily observable from objective sources.

Transfers into or out of any hierarchy level are recognized at the end of the reporting period in which the transfers occurred. There were no transfers between any levels in 20172021 or 2016.2020.

83


CROSSAMERICA PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As further discussed in Note 13, we entered into interest rate swap contracts during 2020 and remeasure the fair value of such contracts on a recurring basis each balance sheet date. We used an income approach to measure the fair value of these contracts, utilizing a forward LIBOR yield curve for the same period as the future interest rate swap settlements. These fair value measurements are classified as Level 2.

As further discussed in Note 18,19, we have accrued for unvested phantom units and vested and unvested profits interestsphantom performance units as a liability and adjust that liability on a recurring basis based on the market price of our common units each balance sheet date. SuchThese fair value measurements are deemed Level 1 measurements.

Financial Instruments

The fair value of our accounts receivable, notes receivable, and accounts payable approximated their carrying values as of December 31, 20172021 and 20162020 due to the short-term maturity of these instruments. The fair value of the revolving credit facility approximated its carrying values of $506.0 millionborrowings under the CAPL Credit Facility and JKM Credit Facility approximated their carrying value as of December 31, 20172021 and $441.5 million as of December 31, 2016,2020 due to the frequency with which interest rates are reset and the consistency of the market spread.

Note 17. PARTNERS’ CAPITAL

We issued common units (net of units withheld for income taxes) as a result of the vesting of phantom units and conversion of profits interests previously issued primarily to CST employees who provide services principally to CrossAmerica totaling 35,993 common units in 2017, 107,227 common units in 2016 and 90,671 common units in 2015. See Note 18 for additional information.

In January 2015, we issued 1,497,946 common units to a subsidiary of CST in connection with the acquisition of a 5% interest in CST Fuel Supply. See Note 12 for additional information.

On June 19, 2015, we closed on the sale of 4.6 million common units for net proceeds of approximately $138.5 million. On July 16, 2015, we closed on the sale of an additional 0.2 million common units for net proceeds of approximately $6.4 million in accordance with the underwriters’ option to purchase additional common units associated with the June offering. We used the net proceeds from this offering to reduce indebtedness outstanding under its revolving credit facility.

On July 1, 2015, we issued 3,303,208 of our common units to a subsidiary of CST in connection with the acquisition of an additional 12.5% equity interest in CST Fuel Supply. See Note 12 for additional information.


CROSSAMERICA PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

On July 1, 2015, we issued 338,098 of our common units to subsidiaries of CST in connection with the acquisition of real property at 29 NTIs. See Note 12 for additional information.

See Note 12 for information regarding the issuance of common units to CST and Circle K as payment of a portion of the amounts due under the terms of the Amended Omnibus Agreement.

Common Unit Repurchase Program

In November 2015, the Board approved a common unit repurchase program under Rule 10b-18 of the Exchange Act authorizing us to repurchase up to an aggregate of $25.0 million of the common units representing limited partner interests in the Partnership. Under the program, we may make purchases in the open market in accordance with Rule 10b-18 of the Exchange Act, or in privately negotiated transactions, pursuant to a trading plan under Rule 10b5-1 of the Exchange Act or otherwise. Any purchases will be funded from available cash on hand. The common unit repurchase program does not require us to acquire any specific number of our common units and may be suspended or terminated by us at any time without prior notice. The purchases will not be made from any officer, director or control person of the Partnership or CST. The following table shows the purchases made through December 31, 2016. No purchases were made in 2017.

Period

 

Total

Number of

Units

Purchased

 

 

Average

Price Paid

per Unit

 

 

Total Cost

of Units

Purchased

 

 

Amount

Remaining

under

the Program

 

2015

 

 

154,158

 

 

$

23.37

 

 

$

3,603,071

 

 

$

21,396,929

 

2016

 

 

133,463

 

 

 

24.37

 

 

 

3,252,653

 

 

 

18,144,276

 

Total

 

 

287,621

 

 

$

23.84

 

 

$

6,855,724

 

 

$

18,144,276

 

CST Purchases of Common Units

On September 21, 2015, CST announced that the independent executive committee of its board of directors approved a common unit purchase program under Rule 10b-18 of the Exchange Act, authorizing CST to purchase up to an aggregate of $50 million of the common units representing limited partner interests in us. The common unit purchase program does not have a fixed expiration date and may be modified, suspended or terminated at any time at CST’s discretion.

CST made no purchases under the unit purchase program in 2016 or 2017. From inception until December 31, 2015, CST had purchased $19.8 million, or 804,667 common units, at an average price of $24.64 per common unit, which units cannot be transferred absent registration with the SEC or an available exemption from the SEC’s registration requirements.

Distributions

Quarterly distribution activity for 2017 was as follows:

Quarter Ended

 

Record Date

 

Payment Date

 

Cash

Distribution

(per unit)

 

 

Cash

Distribution

(in thousands)

 

December 31, 2016

 

February 6, 2017

 

February 13, 2017

 

$

0.6125

 

 

$

20,541

 

March 31, 2017

 

May 8, 2017

 

May 15, 2017

 

 

0.6175

 

 

 

20,832

 

June 30, 2017

 

August 7, 2017

 

August 14, 2017

 

 

0.6225

 

 

 

21,081

 

September 30, 2017

 

November 6, 2017

 

November 13, 2017

 

 

0.6275

 

 

 

21,332

 

December 31, 2017

 

February 5, 2018

 

February 12, 2018

 

 

0.6275

 

 

 

21,413

 

The amount of any distribution is subject to the discretion of the Board, which may modify or revoke our cash distribution policy at any time. Our Partnership Agreement does not require us to pay any distributions. As such, there can be no assurance we will continue to pay distributions in the future.

Conversion of Subordinated Units

On February 25, 2016, the first business day after the payment of the distribution of $0.5925 per unit for the fourth quarter of 2015, the subordination period under the Partnership Agreement ended. At that time, each outstanding subordinated unit converted into one common unit and participates pro rata with the other common units in cash distributions.


CROSSAMERICA PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 18.19. EQUITY-BASED COMPENSATION

Partnership Equity-Based Awards

The maximum number of common units that may be delivered with respect to awards under the Plan is 1,505,000. Generally, the Plan provides for grants of restricted units, unit options, performance awards, phantom units, unit awards, unit appreciation rights, distribution equivalent rights, and other unit-based awards, with various limits and restrictions attached to these awards on a grant-by-grant basis. The Plan is administered by the Board or a committee thereof.

The Board may terminate or amend the Plan at any time with respect to any common units for which a grant has not yet been made. The Board also has the right to alter or amend the Plan or any part of the Plan from time to time, including increasing the number of common units that may be granted, subject to unitholder approval as required by the exchange upon which common units are listed at that time; however, no change in any outstanding grant may be made that would adversely affect the rights of a participant with respect to awards granted to a participant prior to the effective date of such amendment or termination, except that the Board may amend any award to satisfy the requirements of Section 409A of the Internal Revenue Code. The Plan will expire on the tenth anniversary of its approval, when common units are no longer available under the Plan for grants or upon its termination by the Board, whichever occurs first.

The table below summarizes our equity-based award activity:

 

 

Employees

 

 

Directors

 

 

Employees

 

 

 

 

 

 

 

 

 

 

 

Phantom

 

 

 

 

 

 

 

 

 

 

 

Performance

 

 

 

 

 

 

 

 

 

 

 

Awards

 

 

 

Phantom Units

 

 

Phantom Units

 

 

Initial Target Value

 

Nonvested at December 31, 2019

 

 

 

 

 

2,041

 

 

$

 

Granted

 

 

48,112

 

 

 

12,306

 

 

 

881

 

Vested

 

 

 

 

 

(2,041

)

 

 

 

Nonvested at December 31, 2020

 

 

48,112

 

 

 

12,306

 

 

$

881

 

Granted

 

 

37,015

 

 

 

20,787

 

 

 

927

 

Forfeited

 

 

(6,090

)

 

 

 

 

 

(135

)

Vested

 

 

(7,004

)

 

 

(16,833

)

 

 

 

Nonvested at December 31, 2021

 

 

72,033

 

 

 

16,260

 

 

$

1,673

 

Phantom Units

In March 2014, we contributed our investments in our operating subsidiaries and certain other assets and liabilities to LGP Operations. Since March 2014, LGP Operations granted profits interests, which are represented by Class B Units in LGP Operations. Upon vesting, Class B Unitholders will be entitled to receive cash distributions proportionate to those received by common unitholders. Class B Units are redeemable two years after they were granted, subject to certain limitations, for cash or common units at the discretion of the Board.

Because the Class B Units are an interest in the equity of LGP Operations, they represent a noncontrolling interest from our perspective. As such, the Class B Units are presented as a noncontrolling interest on the balance sheet and the Class B Unitholders’ interest in the net income of LGP Operations is presented as net income attributable to noncontrolling interests on the statement of income.

It is our intent to settle the phantom units upon vesting by issuing common units and to settle the profits interests upon conversion by the grantee by issuing common units. However, the awards may be settled in cash at the discretion of the Board.

Under the Plan,February 2021, the Partnership granted 1,2331,509 phantom units in June 2017 to an employeeeach of Circle K who provides services to3 non-employee directors of the Partnership; suchBoard as a portion of director compensation. In July 2021, 16,833 phantom units vested, including those granted in February 2021.

In July 2021, the Partnership granted 3,252 phantom units to each of 5 non-employee directors of the Board. Such awards will vest in equal annual installments on the first, second and third anniversaries of the date of grant and this award wasJuly 2022, conditioned upon continuous service as non-employee directors. These awards were accompanied by tandem distribution equivalent rights that entitle the holder to cash payments equal to the amount of unit distributions authorized to be paid to the holders of our common units. There were no grants

During the second quarter of equity-based awards in 2016 to employees. There are 2,620 nonvested2021, 6,090 phantom units outstanding atand performance-based awards with an initial target value of $0.1 million were forfeited.

84


CROSSAMERICA PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

During the fourth quarter of 2021, the Partnership granted 37,015 phantom units to employees of the Topper Group. Of these awards, 50% vest ratably over three years through December 31, 2017.2024 and 50% vest upon the employee’s death, disability or retirement. These awards were accompanied by tandem distribution equivalent rights that entitle the holder to cash payments equal to the amount of unit distributions authorized to be paid to the holders of our common units.

Performance-Based Awards

During the fourth quarter of 2021, the Partnership granted performance-based awards with an initial target value of $0.9 million. The performance-based awards vest on December 31, 2024 based on attainment of the performance goals set forth in the award agreements. The performance-based awards are weighted 65% for the increase of funds flow from operations per unit (as defined in the award agreements) and 35% for leverage (as defined in the award agreements), with a performance period from January 1, 2022 to December 31, 2024 and the reference period for the year ended December 31, 2021. The payout value for both performance conditions will be interpolated on a linear basis ranging from 0% to 200%, which will then be multiplied by the initial target value to determine the value of the units to be issued. The value of the units will then be divided by the 20-day volume-weighted average closing price of our common units as of the close of trading on the day before the conversion date to determine the actual number of units to be issued.

Overall

Since we grant awards to employees of CSTthe Topper Group who provide services to us under the AmendedTopper Group Omnibus Agreement and non-employee directors of the Board, and since the grants may be settled in cash at the discretion of our Board, unvested phantom units and vested and unvested profits interestsperformance-based awards receive fair value variable accounting treatment. As such, they are measured at fair value at each balance sheet reporting date and the cumulative compensation cost recognized is classified as a liability, which is included in accrued expenses and other current liabilities on the consolidated balance sheet. The balance of the accrual was $1.0 and insignificant at December 31, 20172021 and December 31, 2016 totaled $0.7 million and $1.8 million,2020, respectively.

We record equity-based compensation as a component of general and administrative expenses in the statements of income. CompensationEquity-based compensation expense was $1.3 million for the years ended December 31, 2017, 2016 and 2015 was2021, $0.1 million $1.3 millionfor 2020 and $3.0 million, respectively. The weighted average period over which compensation expense related to nonvested awards will be recognized was approximately 1.2 years as of December 31, 2017.

CST Awards

Before the Merger was completed, CST granted equity-based awards of approximately 47,000, 102,000 and 163,000 in the form of time vested restricted stock units of CST, stock options of CST and market share units of CST in 2017, 2016 and 2015, respectively, which were granted to certain employees of CST for services rendered on our behalf. Certain expenses associated with these awards that were charged to us under the Amended Omnibus Agreement amounted to $1.7 million, $2.3 million and $2.2$0.9 million for 2017, 2016 and 2015, respectively.


CROSSAMERICA PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

At the completion2019, which includes approximately $0.5 million of the Merger, each CST stock option, restricted stock unit and market share unit that was outstanding immediately prior to the completion of the Merger, excluding the CST restricted stock units granted in February 2017, whether vested or unvested, became fully vested and converted into the right to receive a cash payment as defined in the Merger Agreement. The Partnership was allocated a $0.4 million chargeexpense recognized upon the accelerated vesting of these awards included inconcurrent with the expense amounts for the year ended December 31, 2017 set forth above.

At the completion of the Merger, each award of CST restricted stock units that was granted in February 2017 converted into the right to receive a cash payment as defined in the Merger Agreement, but such award will remain subject to the same vesting terms and payment schedule as those set forth in the original restricted stock unit award agreement; provided that such award will vest in full upon an involuntary termination of employment without cause, or termination for “Good Reason,” or termination due to death, “Disability” or “Retirement.” Unrecognized compensation expense associated with CST restricted stock units granted in February 2017 amounted to $0.7 million as of December 31, 2017, which will be recognized over the vesting term through January 2020.

Awards to Members of the Board

In November 2016, the Partnership granted 5,364 phantom units to non-employee directors of the Board as a portion of director compensation. Such awards vested upon the Merger.

In August 2017, the Partnership granted 10,539 phantom units to non-employee directors of the Board as a portion of director compensation. Such awards vest over one year and this award was accompanied by tandem distribution equivalent rights that entitle the holder to cash payments equal to the amount of unit distributions authorized to be paid to the holders of our common units.

The liability for these awards at December 31, 2017 and December 31, 2016 was not significant. The associated compensation expense was $0.2 million and $0.3 million for 2017 and 2016, respectively. The expense for 2015 was not significant.GP Purchase.

Note 19.20. INCOME TAXES

As a limited partnership, we are not subject to federal and state income taxes, howevertaxes. However, our corporate subsidiaries are subject to income taxes. Income tax attributable to our taxable income (including any dividend income from our corporate subsidiaries), which may differ significantly from income for financial statement purposes, is assessed at the individual limited partner unit holderunitholder level. Individual unitholders have different investment basis depending upon the timing and price at which they acquired their common units. Further, each unitholder’s tax accounting, which is partially dependent upon the unitholder’s tax position, differs from the accounting followed in the Partnership’s financial statements. Accordingly, the aggregate difference in the basis of the Partnership’s net assets for financial and tax reporting purposes cannot be readily determined because information regarding each unitholder’s tax attributes in the Partnership is not available to the Partnership.

We are subject to a statutory requirement that non-qualifying income, as defined by the Internal Revenue Code, cannot exceed 10% of total gross income for the calendar year. If non-qualifying income exceeds this statutory limit, we would be taxed as a corporation. The non-qualifying income did not exceed the statutory limit in any annual period presented. The reported balance of our net liabilities was greater than the related tax basis of net liabilities by $3.4 million at December 31, 2017 and $9.1 million at December 31, 2016.

Certain activities that generate non-qualifying income are conducted through LGWS.our wholly owned taxable corporate subsidiaries, LGWS is a tax paying corporate subsidiary of ours that is subject to federal and state income taxes.Joe’s Kwik Marts. Current and deferred income taxes are recognized on the earnings of LGWS.these subsidiaries. Deferred income tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and are measured using enacted tax rates.

rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The Tax Cutseffect on deferred tax assets and Jobs Act made changesliabilities of a change in tax rates is recognized in income in the period that affect us including (1) reducingincludes the federal corporateenactment date. The Partnership calculates its current and deferred tax provision based on estimates and assumptions that could differ from actual results reflected in income tax rate to 21 percent beginning January 1, 2018, and (2) providing for the immediate expensing for tax purposes for certain qualified depreciable assets placedreturns filed in service after September 27, 2017. As a result of the rate change, we recognized a net tax benefit of $13.2 million due to the reduction of our net deferred tax liability.subsequent years. Adjustments based on filed returns are recorded when identified.

The Tax cuts and Jobs Act also includes certain limitations on deductions effective for the tax year 2018 and forward, related to deductions for interest expense, employee compensation, and meals and entertainment. These limitations are being evaluated and may impact us. We anticipate that U.S. regulatory agencies and state governments will issue further guidance regarding the changes in deductibility which we will incorporate in our future estimates.85



CROSSAMERICA PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Coronavirus Aid, Relief, and Economic Security (CARES) Act was passed on March 27, 2020, which established a five-year carryback of net operating losses (NOLs) generated in 2018, 2019 and 2020 and temporarily suspended the 80% limitation on the use of NOLs in 2018, 2019 and 2020. The CARES Act also increased the adjusted taxable income limitation from 30% to 50% for business interest deductions under IRC Section 163(j) for 2020 and the adjusted taxable income limitation reverts back to 30% for 2021. As a result of the CARES Act, we carried back $16.9 million in NOLs generated in 2020 to tax years 2015 through 2018, which resulted in the recording of an incremental current benefit of $1.0 million in 2020, representing the difference between the tax at the 21% statutory rate in 2020 as compared the 34% statutory rate at the time for 2015 through 2018.

Components of income tax expense related to net income were as follows (in thousands):

 

 

For the Year Ended December 31,

 

 

For the Year Ended December 31,

 

 

2017

 

 

2016

 

 

2015

 

 

2021

 

 

2020

 

 

2019

 

Current

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. federal

 

$

210

 

 

$

309

 

 

$

1,630

 

 

$

329

 

 

$

(3,973

)

 

$

(4,865

)

U.S. state

 

 

406

 

 

 

(75

)

 

 

944

 

 

 

207

 

 

 

461

 

 

 

66

 

Total current

 

 

616

 

 

 

234

 

 

 

2,574

 

 

 

536

 

 

 

(3,512

)

 

 

(4,799

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deferred

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. federal

 

 

(16,064

)

 

 

(1,369

)

 

 

(4,279

)

 

 

(3,927

)

 

 

(491

)

 

 

4,895

 

U.S. state

 

 

(2,789

)

 

 

682

 

 

 

(1,837

)

 

 

166

 

 

 

(3,945

)

 

 

(1,326

)

Total deferred

 

 

(18,853

)

 

 

(687

)

 

 

(6,116

)

 

 

(3,761

)

 

 

(4,436

)

 

 

3,569

 

Income tax benefit

 

$

(18,237

)

 

$

(453

)

 

$

(3,542

)

 

$

(3,225

)

 

$

(7,948

)

 

$

(1,230

)

The difference between the actual income tax provision and income taxes computed by applying the U.S. federal statutory rate to earnings (losses) before income taxes is attributable to the following (in thousands):

 

 

For the Year Ended December 31,

 

 

For the Year Ended December 31,

 

 

2017

 

 

2016

 

 

2015

 

 

2021

 

 

2020

 

 

2019

 

Consolidated income from continuing operations before income

taxes - all domestic

 

$

4,939

 

 

$

10,262

 

 

$

7,920

 

 

$

18,429

 

 

$

99,508

 

 

$

16,846

 

Income from continuing operations before income taxes of

non-taxable entities

 

 

(7,769

)

 

 

(13,408

)

 

 

(18,409

)

 

 

(37,072

)

 

 

(119,457

)

 

 

(16,902

)

Loss from continuing operations before income taxes of

corporate entities

 

 

(2,830

)

 

 

(3,146

)

 

 

(10,489

)

 

 

(18,643

)

 

 

(19,949

)

 

 

(56

)

Federal income tax benefit at statutory rate

 

 

(962

)

 

 

(1,070

)

 

 

(3,566

)

 

 

(3,915

)

 

 

(4,189

)

 

 

(11

)

Increase (decrease) due to:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rate difference on NOL carryback (a)

 

 

329

 

 

 

(1,003

)

 

 

 

Nondeductible expenses

 

 

384

 

 

 

(37

)

 

 

198

 

 

 

 

 

 

1

 

 

 

54

 

Tax on gains not recognized for book income

 

 

112

 

 

 

1,104

 

 

 

 

Change in valuation allowance

 

 

(3,713

)

 

 

67

 

 

 

(247

)

State income taxes, net of federal income tax benefit

 

 

(878

)

 

 

40

 

 

 

(343

)

State income taxes, net of federal income tax benefit (b)

 

 

372

 

 

 

(2,712

)

 

 

(995

)

Non-taxable refund

 

 

 

 

 

(589

)

 

 

 

 

 

(11

)

 

 

(45

)

 

 

(278

)

Rate change

 

 

(13,180

)

 

 

 

 

 

 

Other

 

 

 

 

 

32

 

 

 

416

 

Total income tax benefit

 

$

(18,237

)

 

$

(453

)

 

$

(3,542

)

 

$

(3,225

)

 

$

(7,948

)

 

$

(1,230

)


(a)

The CARES Act allowed a 5-year carryback of net operating losses generated in 2020, which resulted in the recognition of an incremental benefit at the 34% statutory federal rate in effect for 2015 through 2017 relative to the current statutory federal rate of 21%.

(b)

The state tax expense in 2021 was primarily driven by gross receipts-based or net assets-based tax in certain states. The state tax benefit in 2020 was primarily driven by changes in apportionment due to a reduction in gross receipts in certain combined filing states where we were generally in a net deferred tax liability position and an increase in gross receipts in separate company filing states that do not conform to federal bonus depreciation rules where we are generally in a net deferred tax asset position. The conversion of company operated sites to dealer operated sites in 2019 resulted in a reduction in gross receipts primarily in combined filing states. See Note 4 for information regarding the acquisition of retail and wholesale assets, which resulted in an increase in gross receipts primarily in separate filing states.

86


CROSSAMERICA PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The tax effects of significant temporary differences representing deferred income tax assets and liabilities were as follows (in thousands):

 

 

 

December 31,

 

 

 

2017

 

 

2016

 

Deferred income tax assets:

 

 

 

 

 

 

 

 

Deferred rent expense

 

$

1,298

 

 

$

1,244

 

Above market lease liability

 

 

275

 

 

 

895

 

Capital lease and sale leaseback financing obligations

 

 

14,677

 

 

 

22,557

 

Asset retirement obligations

 

 

7,250

 

 

 

9,445

 

Other assets

 

 

794

 

 

 

1,625

 

Total deferred income tax assets

 

 

24,294

 

 

 

35,766

 

Less: Valuation allowance

 

 

 

 

 

(5,495

)

Net deferred income tax assets

 

 

24,294

 

 

 

30,271

 

 

 

 

 

 

 

 

 

 

Deferred income tax liabilities:

 

 

 

 

 

 

 

 

Deferred rent income

 

 

1,307

 

 

 

982

 

Property and equipment

 

 

45,549

 

 

 

67,523

 

Intangibles

 

 

679

 

 

 

3,832

 

Other assets

 

 

828

 

 

 

857

 

Total deferred income tax liabilities

 

 

48,363

 

 

 

73,194

 

Net deferred income tax liabilities

 

$

24,069

 

 

$

42,923

 

A valuation allowance is required when it is more likely than not that all or a portion of a deferred tax asset will not be realized. All available evidence, both positive and negative, must be considered in determining the need for a valuation allowance. The valuation allowance at December 31, 2016 related primarily to the uncertainty of the availability of future profits to realize the tax benefit of the existing deductible temporary differences. Positive evidence considered in our 2017 assessment included: 1) reversals of taxable temporary differences in future tax years; 2) an observable history of reporting taxable income; 3) projections of future taxable income; 4) feasible and prudent tax planning strategies; and 5) the impact of recently enacted tax reform. Under the Tax Cuts and Jobs Act, among other provisions, any net operating losses generated after 2017 can be carried forward indefinitely. This change, in part, allows for the consideration as a future source of taxable income, reversals of deferred tax liabilities related to indefinite lived liabilities. This income is sufficient to offset the indefinite lived asset generated by the reversals and provides additional positive evidence of future income allowing for the release of the valuation allowance. The release resulted in a tax benefit of $3.7 million.

Changes in the valuation allowance account consisted of the following (in thousands):

 

 

For the Year Ended December 31,

 

 

 

2017

 

 

2016

 

 

2015

 

Balance at beginning of period

 

$

5,495

 

 

$

5,428

 

 

$

5,675

 

Charged to costs and expenses (a)

 

 

(5,495

)

 

 

67

 

 

 

(247

)

Balance at end of period

 

$

 

 

$

5,495

 

 

$

5,428

 

 

 

December 31,

 

 

 

2021

 

 

2020

 

Deferred income tax assets:

 

 

 

 

 

 

 

 

Deferred rent expense

 

$

121

 

 

$

175

 

Operating and finance lease obligations

 

 

34,605

 

 

 

40,274

 

Asset retirement obligations

 

 

10,899

 

 

 

9,847

 

Intangible assets

 

 

9,724

 

 

 

9,994

 

Other assets (a)

 

 

13,798

 

 

 

7,361

 

Total deferred income tax assets

 

 

69,147

 

 

 

67,651

 

 

 

 

 

 

 

 

 

 

Deferred income tax liabilities:

 

 

 

 

 

 

 

 

Deferred rent income

 

 

948

 

 

 

1,036

 

Property and equipment

 

 

50,274

 

 

 

46,174

 

Right-of-use assets

 

 

30,266

 

 

 

35,463

 

Total deferred income tax liabilities

 

 

81,488

 

 

 

82,673

 

Net deferred income tax liabilities

 

$

12,341

 

 

$

15,022

 

 

(a)

Of the 2017 amount charged(a)

Includes a $2.7 million deferred tax asset related to costs and expenses, $1.8a $12.7 million primarily relates to the reduction in the tax rate used to compute the valuation allowance as a result of the Tax Cuts and Jobs Act.federal net operating loss that has no expiration

We provide tax reservesrecord an accrual for federal, state and local and uncertain tax positions. The development of these tax positions requires subjective, critical estimates and judgments about tax matters, potential outcomes and timing. Although the outcome of potential tax examinations is uncertain, in management’s opinion, adequate provisions for income taxes have been made for potential liabilities resulting from these reviews. If actual outcomes differ materially from these estimates, they could have a material impact on our financial condition and results of operations. Differences between actual results and assumptions, or changes in assumptions in future periods, are recorded in the period they become known. To the extent additional information becomes available prior to resolution, such accruals are adjusted to reflect probable outcomes.

As of December 31, 2017 and 2016, weWe did not0t have unrecognized tax benefits.benefits at December 31, 2021 or 2020. Our practice is to recognize interest and penalties related to income tax matters in income tax expense. We had no material interest and penalties for the years ended December 31, 2017, 20162021, 2020 and 2015.


CROSSAMERICA PARTNERS LP2019.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

We file income tax returns with the U.S. federal government as well as the many state jurisdictions in which we operate. The statute remains open for tax years 20142018 through 2017;2021; therefore, these years remain subject to examination by federal, state and local jurisdiction authorities.

Note 20.21. NET INCOME PER LIMITED PARTNER UNIT

Under the Partnership Agreement, a subsidiary of Circle K, as the holder of our IDRs, has an interest in distributions from us that are increasing percentages starting at 15% of quarterly distributions out of the operating surplus (as defined in our Partnership Agreement) in excess of $0.5031 per limited partner unit.

In addition to the common units, we have identified the IDRs as participating securities and compute income per unit using the two-class method under which any excess of distributions declared over net income shall be allocated to the partners based on their respective sharing of income as specified in the Partnership Agreement. Net income per unit applicable to limited partners is computed by dividing the limited partners’ interest in net income, after deducting the IDRs, by the weighted-average number of outstanding common units.

As discussed in Note 17, onSince February 25, 2016, the subordinated units converted into6, 2020, our common units and participates pro-rata withare the other common units in cash distributions.only participating securities. See “Equity Restructuring” below for additional information.

87


CROSSAMERICA PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following tables providetable provides a reconciliation of net income and weighted-average units used in computing basic and diluted net income per limited partner unit for the following periods (in thousands, except unit and per unit amounts):

  

 

 

Years Ended December 31,

 

 

 

2017

 

 

2016

 

 

2015

 

 

 

Common

Units

 

 

Subordinated

Units

 

 

Common

Units

 

 

Subordinated

Units

 

 

Common

Units

 

 

Subordinated

Units

 

Numerator:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Distributions paid(a)

 

$

83,786

 

 

$

 

 

$

75,598

 

 

$

4,459

 

 

$

47,798

 

 

$

16,781

 

Allocation of distributions in

   excess of net income(b)

 

 

(64,965

)

 

 

 

 

 

(68,539

)

 

 

(4,206

)

 

 

(40,356

)

 

 

(14,172

)

Limited partners’ interest in

   net income - basic

 

 

18,821

 

 

 

 

 

 

7,059

 

 

 

253

 

 

 

7,442

 

 

 

2,609

 

Adjustment for phantom units

 

 

 

 

 

 

 

 

 

 

 

 

 

 

9

 

 

 

 

Limited partners’ interest in net

   income - diluted

 

$

18,821

 

 

$

 

 

$

7,059

 

 

$

253

 

 

$

7,451

 

 

$

2,609

 

Denominator:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average

   limited partnership units

   outstanding - basic

 

 

33,844,823

 

 

 

 

 

 

32,159,156

 

 

 

1,151,366

 

 

 

21,462,665

 

 

 

7,525,000

 

Adjustment for phantom units

 

 

10,522

 

 

 

 

 

 

56,848

 

 

 

 

 

 

98,738

 

 

 

-

 

Weighted average

   limited partnership units

   outstanding - diluted

 

 

33,855,345

 

 

 

 

 

 

32,216,004

 

 

 

1,151,366

 

 

 

21,561,403

 

 

 

7,525,000

 

Net income per limited

   partnership unit - basic

 

$

0.56

 

 

$

 

 

$

0.22

 

 

$

0.22

 

 

$

0.35

 

 

$

0.35

 

Net income per limited

   partnership unit - diluted

 

$

0.56

 

 

$

 

 

$

0.22

 

 

$

0.22

 

 

$

0.35

 

 

$

0.35

 

 

 

Years Ended December 31,

 

 

 

2021

 

 

2020

 

 

2019

 

Numerator:

 

 

 

 

 

 

 

 

 

 

 

 

Distributions paid

 

$

79,693

 

 

$

77,791

 

 

$

72,427

 

Allocation of distributions in excess of net income

 

 

(58,039

)

 

 

29,532

 

 

 

(54,884

)

Limited partners’ interest in net income - basic and diluted

 

$

21,654

 

 

$

107,323

 

 

$

17,543

 

Denominator:

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average limited partnership units outstanding - basic

 

 

37,880,910

 

 

 

37,369,487

 

 

 

34,454,369

 

Adjustment for phantom units(a)

 

 

3,214

 

 

 

 

 

 

30,432

 

Weighted average limited partnership units outstanding - diluted

 

 

37,884,124

 

 

 

37,369,487

 

 

 

34,484,801

 

Net income per limited partnership unit - basic and diluted

 

$

0.57

 

 

$

2.87

 

 

$

0.51

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Distributions paid per common unit

 

$

2.1000

 

 

$

2.1000

 

 

$

2.1000

 

Distributions declared (with respect to each respective period) per

   common unit

 

$

2.1000

 

 

$

2.1000

 

 

$

2.1000

 

 

(a)

Distributions paidExcludes 13,364 potentially dilutive securities from the calculation of diluted earnings per common unit were $2.48, $2.40 and $2.23 during 2017, 2016 and 2015, respectively.because to do so would be antidilutive for 2020.

Distributions

Quarterly distribution activity to common unitholders for 2021 was as follows:

(b)

Allocation of distributions in excess of net income is based on a pro rata proportion to the common and subordinated units as outlined in the Partnership Agreement.  

Quarter Ended

 

Record Date

 

Payment Date

 

Cash

Distribution

(per unit)

 

 

Cash

Distribution

(in thousands)

 

December 31, 2020

 

February 2, 2021

 

February 9, 2021

 

 

0.5250

 

 

 

19,912

 

March 31, 2021

 

May 4, 2021

 

May 11, 2021

 

 

0.5250

 

 

 

19,916

 

June 30, 2021

 

August 3, 2021

 

August 10, 2021

 

 

0.5250

 

 

 

19,924

 

September 30, 2021

 

November 3, 2021

 

November 10, 2021

 

 

0.5250

 

 

 

19,941

 

December 31, 2021

 

February 3, 2022

 

February 10, 2022

 

 

0.5250

 

 

 

19,942

 


The amount of any distribution is subject to the discretion of the Board, which may modify or revoke our cash distribution policy at any time. Our Partnership Agreement does not require us to pay any distributions. As such, there can be no assurance we will continue to pay distributions in the future. 

Equity Restructuring

On January 15, 2020, the Partnership entered into an Equity Restructuring Agreement (the “Equity Restructuring Agreement”) with the General Partner and Dunne Manning CAP Holdings II LLC (“DM CAP Holdings”), a wholly owned subsidiary of DMP.

Pursuant to the Equity Restructuring Agreement, all of the outstanding IDRs of the Partnership, all of which were held by DM CAP Holdings, were cancelled and converted into 2,528,673 newly-issued common units representing limited partner interests in the Partnership based on a value of $45 million and calculated using the volume weighted average trading price of $17.80 per common unit for the 20-day period ended on January 8, 2020, 5 business days prior to the execution of the Equity Restructuring Agreement (the “20-day VWAP”).

This transaction closed on February 6, 2020, after the record date for the distribution payable on the Partnership’s common units with respect to the fourth quarter of 2019.

The terms of the Equity Restructuring Agreement were approved by the independent conflicts committee of the Board.

88


CROSSAMERICA PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 21.22. SEGMENT REPORTING

We conduct our business in two2 segments: 1) the Wholesalewholesale segment and 2) the Retailretail segment. The wholesale segment includes the wholesale distribution of motor fuel to lessee dealers, independent dealers, commission agents, DMS Circle K(through the closing of the acquisition of retail and wholesale assets as further described in Note 4), and company operated retail sites. We have exclusive motor fuel distribution contracts with lessee dealers who lease the property from us. We also have exclusive distribution contracts with independent dealers to distribute motor fuel but do not collect rent from the independent dealers. Similar to lessee dealers, we havehad motor fuel distribution and lease agreements with DMS (through the closing of the acquisition of retail and Circle K and collect rent from both.wholesale assets). The Retailretail segment includes the sale of convenience merchandise items, the retail sale of motor fuel at company operated retail sites and the retail sale of motor fuel at retail sites operated by commission agents.agents and the sale of convenience merchandise items and the retail sale of motor fuel at company operated sites. A commission agent is a retail site where we retain title to the motor fuel inventory and sell it directly to our end user customers. At commission agent retail sites, we manage motor fuel inventory pricing and retain the gross profit on motor fuel sales, less a commission to the agent who operates the retail site. Similar to our Wholesalewholesale segment, we also generate revenues through leasing or subleasing real estate in our Retailretail segment.

As part of our evaluation of the economic performance of our retail sites, we will from time to time convert company owned retail sites from our Retail segment to lessee dealers in our Wholesale segment. As a result, we no longer generate revenues from the retail sale of motor fuel or merchandise at these stores subsequent to the date of conversion and we no longer incur retail operating expenses related to these retail sites. However, we continue to supply these retail sites with motor fuel on a wholesale basis pursuant to the fuel supply contract with the lessee dealer. Further, we continue to own/lease the property and earn rental income under lease/sublease agreements with the lessee dealers under triple net leases. The lessee dealer owns all motor fuel and convenience merchandise and retains all gross profit on such operating activities.

Unallocated items consist primarily of general and administrative expenses, depreciation, amortization and accretion expense, gains on sales of assets,dispositions and lease terminations, net, and the elimination of the Retailretail segment’s intersegment cost of revenues from motor fuel sales against the Wholesalewholesale segment’s intersegment revenues from motor fuel sales. The profit in ending inventory generated by the intersegment motor fuel sales is also eliminated. Total assets by segment are not presented as management does not currently assess performance or allocate resources based on that data.


CROSSAMERICA PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table reflects activity related to our reportable segments (in thousands):

 

 

Wholesale

 

 

Retail

 

 

Unallocated

 

 

Consolidated

 

 

Wholesale

 

 

Retail

 

 

Unallocated

 

 

Consolidated

 

Year Ended December 31, 2017

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year Ended December 31, 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues from fuel sales to external customers

 

$

2,067,992

 

 

$

1,206,082

 

 

$

 

 

$

3,274,074

 

Intersegment revenues from fuel sales

 

 

930,348

 

 

 

 

 

 

(930,348

)

 

 

 

Revenues from food and merchandise sales

 

 

 

 

 

209,123

 

 

 

 

 

 

209,123

 

Rent income

 

 

71,536

 

 

 

11,646

 

 

 

 

 

 

83,182

 

Other revenue

 

 

3,721

 

 

 

9,159

 

 

 

 

 

 

12,880

 

Total revenues

 

$

3,073,597

 

 

$

1,436,010

 

 

$

(930,348

)

 

$

3,579,259

 

Operating income (loss)

 

$

137,841

 

 

$

5,460

 

 

$

(107,172

)

 

$

36,129

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year Ended December 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues from fuel sales to external customers

 

$

1,521,408

 

 

$

380,387

 

 

$

 

 

$

1,901,795

 

 

$

1,176,943

 

 

$

541,882

 

 

$

 

 

$

1,718,825

 

Intersegment revenues from fuel sales

 

 

281,561

 

 

 

 

 

 

(281,561

)

 

 

 

 

 

370,916

 

 

 

 

 

 

(370,916

)

 

 

 

Revenues from food and merchandise sales

 

 

 

 

 

104,362

 

 

 

 

 

 

104,362

 

 

 

 

 

 

123,295

 

 

 

 

 

 

123,295

 

Rent income

 

 

79,344

 

 

 

6,970

 

 

 

 

 

 

86,314

 

 

 

72,799

 

 

 

10,434

 

 

 

 

 

 

83,233

 

Other revenue

 

 

2,356

 

 

 

 

 

 

 

 

 

2,356

 

 

 

2,344

 

 

 

4,626

 

 

 

 

 

 

6,970

 

Total revenues

 

$

1,884,669

 

 

$

491,719

 

 

$

(281,561

)

 

$

2,094,827

 

 

$

1,623,002

 

 

$

680,237

 

 

$

(370,916

)

 

$

1,932,323

 

Income from CST Fuel Supply equity interests

 

$

14,906

 

 

$

 

 

$

 

 

$

14,906

 

 

$

3,202

 

 

$

 

 

$

 

 

$

3,202

 

Operating income (loss)

 

$

108,624

 

 

$

5,737

 

 

$

(81,942

)

 

$

32,419

 

 

$

123,457

 

 

$

1,328

 

 

$

(9,193

)

 

$

115,592

 

Year Ended December 31, 2016

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year Ended December 31, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues from fuel sales to external customers

 

$

1,325,563

 

 

$

339,758

 

 

$

 

 

$

1,665,321

 

 

$

1,609,547

 

 

$

397,474

 

 

$

 

 

$

2,007,021

 

Intersegment revenues from fuel sales

 

 

242,399

 

 

 

 

 

 

(242,399

)

 

 

 

 

 

306,070

 

 

 

 

 

 

(306,070

)

 

 

 

Revenues from food and merchandise sales

 

 

 

 

 

122,084

 

 

 

 

 

 

122,084

 

 

 

 

 

 

47,875

 

 

 

 

 

 

47,875

 

Rent income

 

 

74,955

 

 

 

5,639

 

 

 

 

 

 

80,594

 

 

 

81,427

 

 

 

8,712

 

 

 

 

 

 

90,139

 

Other revenue

 

 

1,807

 

 

 

 

 

 

 

 

 

1,807

 

 

 

2,887

 

 

 

1,507

 

 

 

 

 

 

4,394

 

Total revenues

 

$

1,644,724

 

 

$

467,481

 

 

$

(242,399

)

 

$

1,869,806

 

 

$

1,999,931

 

 

$

455,568

 

 

$

(306,070

)

 

$

2,149,429

 

Income from CST Fuel Supply equity interests

 

$

16,048

 

 

$

 

 

$

 

 

$

16,048

 

 

$

14,768

 

 

$

 

 

$

 

 

$

14,768

 

Operating income (loss)

 

$

102,876

 

 

$

7,561

 

 

$

(78,266

)

 

$

32,171

 

 

$

113,299

 

 

$

3,189

 

 

$

(73,166

)

 

$

43,322

 

Year Ended December 31, 2015

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues from fuel sales to external customers

 

$

1,492,425

 

 

$

508,335

 

 

$

 

 

$

2,000,760

 

Intersegment revenues from fuel sales

 

 

359,294

 

 

 

 

 

 

(359,294

)

 

 

 

Revenues from food and merchandise sales

 

 

 

 

 

158,716

 

 

 

 

 

 

158,716

 

Rent income

 

 

59,956

 

 

 

5,475

 

 

 

 

 

 

65,431

 

Other revenue

 

 

1,254

 

 

 

110

 

 

 

 

 

 

1,364

 

Total revenues

 

$

1,912,929

 

 

$

672,636

 

 

$

(359,294

)

 

$

2,226,271

 

Income from CST Fuel Supply equity interests

 

$

10,528

 

 

$

 

 

$

 

 

$

10,528

 

Operating income (loss)

 

$

88,800

 

 

$

19,010

 

 

$

(81,793

)

 

$

26,017

 

89


CROSSAMERICA PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Receivables relating to the revenue streams above are as follows (in thousands):

 

 

December 31,

 

 

 

2021

 

 

2020

 

Receivables from fuel and merchandise sales

 

$

27,932

 

 

$

23,800

 

Receivables for rent and other lease-related charges

 

 

6,548

 

 

 

5,650

 

Total accounts receivable

 

$

34,480

 

 

$

29,450

 

Performance obligations are satisfied as fuel is delivered to the customer and as merchandise is sold to the consumer. Many of our fuel contracts with our customers include minimum purchase volumes measured on a monthly basis, although such revenue is not material. Receivables from fuel are recognized on a per-gallon rate and are generally collected within 10 days of delivery.

The balance of unamortized costs incurred to obtain certain contracts with customers was $11.0 million and $8.3 million at December 31, 2021 and 2020, respectively. Amortization of such costs is recorded against operating revenues and amounted to $1.5 million, $1.2 million and $1.0 million for 2021, 2020 and 2019, respectively

Receivables from rent and other lease-related charges are generally collected at the beginning of the month.

Note 22.23. SUPPLEMENTAL CASH FLOW INFORMATION

In order to determine net cash provided by operating activities, net income is adjusted by, among other things, changes in currentoperating assets and current liabilities as follows (in thousands):

 

 

For the Year Ended December 31,

 

 

For the Year Ended December 31,

 

 

2017

 

 

2016

 

 

2015

 

 

2021

 

 

2020

 

 

2019

 

Decrease (increase):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounts receivable

 

$

1,263

 

 

$

(6,052

)

 

$

5,381

 

 

$

(5,336

)

 

$

7,497

 

 

$

(10,997

)

Accounts receivable from related parties

 

 

(666

)

 

 

(2,104

)

 

 

(2,428

)

 

 

(218

)

 

 

3,368

 

 

 

(1,951

)

Inventories

 

 

863

 

 

 

4,960

 

 

 

9,857

 

 

 

(10,307

)

 

 

(777

)

 

 

7,244

 

Other current assets

 

 

(1,718

)

 

 

2,345

 

 

 

3,092

 

 

 

390

 

 

 

(5,593

)

 

 

(868

)

Other assets

 

 

(3,248

)

 

 

(7,643

)

 

 

(1,356

)

 

 

(2,385

)

 

 

(2,338

)

 

 

(2,697

)

Increase (decrease):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounts payable

 

 

886

 

 

 

2,132

 

 

 

(12,339

)

 

 

2,727

 

 

 

6,559

 

 

 

12,404

 

Accounts payable to related parties

 

 

14,778

 

 

 

(1,851

)

 

 

6,867

 

 

 

1,999

 

 

 

4,517

 

 

 

(12,923

)

Motor fuel taxes payable

 

 

(226

)

 

 

2,649

 

 

 

(1,652

)

 

 

2,850

 

 

 

7,260

 

 

 

1,871

 

Accrued expenses and other current liabilities

 

 

1,708

 

 

 

(1,239

)

 

 

(11,772

)

 

 

(1,378

)

 

 

900

 

 

 

(7,896

)

Other long-term liabilities

 

 

(83

)

 

 

3,837

 

 

 

1,582

 

 

 

9,992

 

 

 

(2,183

)

 

 

7,180

 

Changes in working capital, net of acquisitions

 

$

13,557

 

 

$

(2,966

)

 

$

(2,768

)

Changes in operating assets and liabilities, net of

acquisitions

 

$

(1,666

)

 

$

19,210

 

 

$

(8,633

)

  

The above changes in currentoperating assets and current liabilities may differ from changes between amounts reflected in the applicable balance sheets for the respective periods due to acquisitions.

Supplemental disclosure of cash flow information (in thousands):


 

 

For the Year Ended December 31,

 

 

 

2021

 

 

2020

 

 

2019

 

Cash paid for interest

 

$

16,196

 

 

$

16,000

 

 

$

26,344

 

Cash paid for income taxes, net of refunds received

 

 

331

 

 

 

759

 

 

 

3,296

 

90


CROSSAMERICA PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Supplemental disclosure of cash flow information (in thousands):

 

 

For the Year Ended December 31,

 

 

 

2017

 

 

2016

 

 

2015

 

Cash paid for interest

 

$

25,984

 

 

$

21,127

 

 

$

16,689

 

Cash paid for income taxes, net of refunds received

 

 

1,756

 

 

 

808

 

 

 

5,023

 

 

Supplemental schedule of non-cash investing and financing activities (in thousands):

 

 

 

For the Year Ended December 31,

 

 

 

2017

 

 

2016

 

 

2015

 

Sale of property and equipment in Section 1031

   like-kind exchange transactions

 

$

(1,650

)

 

$

(2,232

)

 

$

(322

)

Acquisition of equity investment in CST Fuel Supply

   funded by issuance of common units

 

 

 

 

 

 

 

 

384

 

Acquisition of property through foreclosure on note

   receivable

 

 

 

 

 

 

 

 

930

 

Removal of property and equipment and capital lease

   obligation for retail sites terminated from Getty lease

 

 

 

 

 

810

 

 

 

1,333

 

Changes in estimate of asset retirement obligations

 

 

(1,078

)

 

 

(291

)

 

 

(591

)

Issuance of capital lease obligations and recognition

   of asset retirement obligation related to Getty lease

 

 

740

 

 

 

1,223

 

 

 

 

Amended Omnibus Agreement fees settled in our

   common units

 

 

14,033

 

 

 

11,245

 

 

 

7,200

 

Units issued to CST as consideration for the NTIs and

   the equity interest in CST Fuel Supply

 

 

 

 

 

 

 

 

163,292

 

Note 23. QUARTERLY FINANCIAL DATA (UNAUDITED)

The following table summarizes quarterly financial data for the years ended December 31, 2017 and 2016 (in thousands):

 

 

2017 Quarter Ended

 

 

 

March 31

 

 

June 30

 

 

September 30

 

 

December 31

 

Operating revenues

 

$

469,286

 

 

$

528,789

 

 

$

544,092

 

 

$

552,660

 

Gross profit

 

 

37,446

 

 

 

41,622

 

 

 

41,575

 

 

 

40,123

 

Operating income

 

 

5,580

 

 

 

2,718

 

 

 

12,284

 

 

 

11,837

 

Net income (loss) attributable to limited partners

 

 

1,696

 

 

 

(3,993

)

 

 

4,333

 

 

 

21,122

 

Basic earnings (loss) per common unit(a)

 

 

0.02

 

 

 

(0.15

)

 

 

0.10

 

 

 

0.59

 

Diluted earnings (loss) per common unit(a)

 

 

0.02

 

 

 

(0.15

)

 

 

0.10

 

 

 

0.59

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2016 Quarter Ended

 

 

 

March 31

 

 

June 30

 

 

September 30

 

 

December 31

 

Operating revenues

 

$

367,740

 

 

$

512,644

 

 

$

487,950

 

 

$

501,472

 

Gross profit

 

 

37,190

 

 

 

40,515

 

 

 

39,138

 

 

 

38,724

 

Operating income

 

 

5,921

 

 

 

9,356

 

 

 

9,993

 

 

 

6,901

 

Net income attributable to limited partners

 

 

1,767

 

 

 

3,626

 

 

 

2,989

 

 

 

2,322

 

Basic earnings per common unit(a)

 

 

0.03

 

 

 

0.08

 

 

 

0.06

 

 

 

0.04

 

Diluted earnings per common unit(a)

 

 

0.03

 

 

 

0.08

 

 

 

0.06

 

 

 

0.04

 

(a)

Earnings (loss) per common unit amounts are computed independently for each of the quarters presented. Therefore, the sum of the quarterly earnings per share amounts may not equal the annual earnings per share amounts.


CROSSAMERICA PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 24. SEPARATION BENEFITS

During the second quarter of 2017, the Partnership recognized a $5.4 million charge for severance and benefit costs associated with certain officers and other employees of CST Services who provided services to the Partnership and who terminated employment upon the consummation of the Merger, which constituted a change in control, as defined in the EICP and CST’s severance plans. Such costs are included in general and administrative expenses and were paid by Circle K in 2017. Accounts payable to related parties includes these costs as we will reimburse Circle K.

In addition, certain participants in the EICP received retention bonuses that will be paid in annual installments that began in July 2017 and will continue through July 2019. The Partnership recorded a $1.0 million charge during 2017 in connection with the payments made by Circle K in July 2017, which were included in general and administrative expenses. In addition, the Partnership recognized a $0.7 million charge in 2017 for the payments expected to be made in July 2018 and July 2019. The Partnership anticipates recognizing future charges totaling $0.9 million over the remaining retention period, of which $0.8 million is anticipated to be recognized in 2018.

See Note 15 for information regarding a $1.7 million charge recorded in 2017 for EICP severance payments to a former executive.

The following table presents a rollforward of accrued separation benefits:

 

 

December 31,

 

 

 

2017

 

 

2016

 

Beginning balance

 

$

255

 

 

$

1,665

 

Provision for separation benefits

 

 

8,916

 

 

 

435

 

Separation benefits paid

 

 

(602

)

 

 

(1,845

)

Ending balance

 

$

8,569

 

 

$

255

 

 

 

For the Year Ended December 31,

 

 

 

2021

 

 

2020

 

 

2019

 

Accrued capital expenditures

 

$

2,048

 

 

$

4,027

 

 

$

1,057

 

Lease liabilities arising from obtaining right-of-use assets

 

 

30,460

 

 

 

70,905

 

 

 

2,879

 

Net assets acquired in connection with the asset exchange

   tranches with Circle K

 

 

 

 

 

(75,935

)

 

 

(35,740

)

Net assets acquired in connection with the CST Fuel

   Supply Exchange with Circle K

 

 

 

 

 

(54,920

)

 

 

 

Net assets acquired in connection with the acquisition of

   retail and wholesale assets

 

 

 

 

 

(17,092

)

 

 

 

 

 


Schedule I

CrossAmerica Partners LP (Parent Company Only)

Condensed Balance Sheets

(Thousands of Dollars)

 

 

December 31,

 

 

 

2021

 

 

2020

 

 

 

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

Total current assets

 

$

115

 

 

$

 

 

 

 

 

 

 

 

 

 

Loans to subsidiaries

 

 

624,326

 

 

 

512,913

 

Investment in subsidiaries

 

 

73,640

 

 

 

126,469

 

Other assets

 

 

2,916

 

 

 

 

Total assets

 

$

700,997

 

 

$

639,382

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

 

 

Total current liabilities

 

$

422

 

 

$

1,667

 

 

 

 

 

 

 

 

 

 

Accounts payable to subsidiaries

 

 

16,908

 

 

 

16,698

 

Long-term debt

 

 

627,109

 

 

 

509,922

 

Other long-term liabilities

 

 

 

 

 

1,427

 

Total liabilities

 

 

644,439

 

 

 

529,714

 

 

 

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity:

 

 

 

 

 

 

 

 

Common units

 

 

53,528

 

 

 

112,124

 

Accumulated other comprehensive income (loss)

 

 

3,030

 

 

 

(2,456

)

Total equity

 

 

56,558

 

 

 

109,668

 

Total liabilities and equity

 

$

700,997

 

 

$

639,382

 

See Notes to Condensed Financial Statements


Schedule I

CrossAmerica Partners LP (Parent Company Only)

Condensed Statements of Comprehensive Income

(Thousands of Dollars)

 

 

For the Year Ended December 31,

 

 

 

2021

 

 

2020

 

 

2019

 

Interest income from subsidiaries

 

$

13,818

 

 

$

14,684

 

 

$

25,058

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Costs and expenses

 

 

 

 

 

 

 

 

 

 

 

 

General and administrative

 

 

236

 

 

 

153

 

 

 

255

 

Interest expense

 

 

13,818

 

 

 

14,684

 

 

 

25,058

 

Loss before equity in net income of subsidiaries

 

 

(236

)

 

 

(153

)

 

 

(255

)

Equity in net income of subsidiaries

 

 

21,890

 

 

 

107,609

 

 

 

18,331

 

Net income

 

 

21,654

 

 

 

107,456

 

 

 

18,076

 

Other comprehensive income (loss)

 

 

5,486

 

 

 

(2,456

)

 

 

 

Comprehensive income

 

$

27,140

 

 

$

105,000

 

 

$

18,076

 

See Notes to Condensed Financial Statements


Schedule I

CrossAmerica Partners LP (Parent Company Only)

Condensed Statements of Cash Flows

(Thousands of Dollars)

 

 

For the Year Ended December 31,

 

 

 

2021

 

 

2020

 

 

2019

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

21,654

 

 

$

107,456

 

 

$

18,076

 

Adjustments to reconcile net income to net cash

   provided by operating activities:

 

 

 

 

 

 

 

 

 

 

 

 

Equity in net income of subsidiaries

 

 

(21,890

)

 

 

(107,609

)

 

 

(18,331

)

Amortization of deferred financing costs

 

 

1,310

 

 

 

1,042

 

 

 

1,027

 

Changes in operating assets and liabilities

 

 

6,512

 

 

 

(3,318

)

 

 

4,062

 

Net cash provided by operating activities

 

 

7,586

 

 

 

(2,429

)

 

 

4,834

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

 

 

 

 

Loans to subsidiaries

 

 

(100,402

)

 

 

(106,180

)

 

 

(114,300

)

Repayment of loans to subsidiaries

 

 

77,500

 

 

 

112,000

 

 

 

93,300

 

Investment in subsidiary

 

 

(94,493

)

 

 

 

 

 

 

Net cash used in investing activities

 

 

(117,395

)

 

 

5,820

 

 

 

(21,000

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

 

 

 

 

Borrowings under revolving credit facilities

 

 

194,895

 

 

 

106,180

 

 

 

114,300

 

Repayments on revolving credit facilities

 

 

(77,500

)

 

 

(112,000

)

 

 

(93,300

)

Payment of deferred financing costs

 

 

(1,519

)

 

 

 

 

 

(3,972

)

Distributions from subsidiaries

 

 

73,626

 

 

 

80,353

 

 

 

72,098

 

Distributions paid on distribution equivalent rights

 

 

(141

)

 

 

(40

)

 

 

(86

)

Distributions paid to holders of the IDRs

 

 

 

 

 

(133

)

 

 

(533

)

Distributions paid on common units

 

 

(79,552

)

 

 

(77,751

)

 

 

(72,341

)

Net cash provided by (used in) financing activities

 

 

109,809

 

 

 

(3,391

)

 

 

16,166

 

Net increase (decrease) in cash and cash equivalents

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents at beginning of period

 

 

 

 

 

 

 

 

 

Cash and cash equivalents at end of period

 

$

 

 

$

 

 

$

 

See Notes to Condensed Financial Statements

94


Schedule I

Notes to Condensed Financial Statements

Note 1. Basis of Presentation

The condensed financial statements represent the financial information required by SEC Regulation S-X Rule 5-04 for CrossAmerica Partners LP (the “Partnership”), 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 Partnership’s restricted net assets of its consolidated subsidiaries were approximately $74.6 million and exceeded 25% of the Partnership’s total consolidated net assets.

The accompanying condensed financial statements have been prepared to present the financial position, results of operations and cash flows of the Partnership 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 Partnership's consolidated financial statements.

Note 2. Long-Term Debt

The Partnership has a credit facility. See Note 12 to the consolidated financial statements for information on the CAPL Credit Facility.


ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTSACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A. CONTROLS AND PROCEDURES

(a) Evaluation of Disclosure Controls and Procedures

Our management has evaluated, with the participation of our principal executive officer and principal financial officer, the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(f) under the Securities Exchange Act of 1934) as of the end of the period covered by this report, and has concluded that our disclosure controls and procedures were effective as of December 31, 2017.2021.

Internal Control over Financial Reporting

 

(a)

Management's Report on Internal Control over Financial Reporting

The management report on our internal control over financial reporting appears in Item 8 and is incorporated herein by reference.

 

(b)

Attestation Report of the Independent Registered Public Accounting Firm

Grant Thornton LLP’s report on our internal control over financial reporting appears in Item 8 and is incorporated herein by reference.

 

(c)

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting (as that term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the quarter ended December 31, 2017,2021, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

ITEM 9B. OTHER INFORMATION

None.

ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

Not applicable.


Part

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Management of CrossAmerica Partners LP

Our General Partner manages our operations and activities on our behalf. The sole member of our General Partner is owned by Couche-Tard, which gives it sole and exclusive authority over our General Partner. Couche-TardDMP indirectly owns all of the membership interests in our General Partner. The Topper Group has sole and exclusive authority over our General Partner. All of our executive officers are employed by an affiliate of Couche-Tard.the Topper Group.

Our General Partner has a Board that oversees our management, operations and activities. Our unitholders are not entitled to elect the directors of the Board or participate in our management or operations. Couche-Tard,The Topper Group, as the indirect owner of our General Partner, has the right to appoint and remove all members of the Board. Our General Partner owes a fiduciary duty to our unitholders. However, our Partnership Agreement contains provisions that limit the fiduciary duties that our General Partner owes to our unitholders. Our General Partner is liable, as general partner, for all of our debts (to the extent not paid from our assets), except for indebtedness or other obligations that are made specifically nonrecourse to it. Whenever possible, our General Partner intends to incur indebtedness or other obligations that are nonrecourse. Except as described in our Partnership Agreement and subject to its fiduciary duty to act in good faith, our General Partner has exclusive management power over our business and affairs.

Our General Partner does not have any employees. All of the personnel who conduct our business are employed by Couche-Tard,an affiliate of the Topper Group, and their services are provided to us pursuant to the AmendedTopper Group Omnibus Agreement, with the exception of the employees who provide services to our Retail segment, all of whom are employed by a subsidiary of the Partnership.Agreement.

Directors and Executive Officers

The Partnership does not directly employ any of the persons responsible for managing or operating the Partnership. We are managed and operated by the Board and the executive officers appointed by our General Partner who are employees of an affiliate of Couche-Tard.the Topper Group. The following table shows information for the directors of our General Partner and our executive officers appointed by our General Partner.

Directors and Executive Officers of the General Partner

 

Current Directors and Executive Officers (1)

 

Age (2) (1)

 

 

Position with our General Partner

Timothy A. MillerJoseph V. Topper, Jr.

 

 

4566

 

 

Chairman of the Board

Jeremy L. BergeronJohn B. Reilly, III

 

 

4560

 

 

Director, President and Chief Executive Officer

Jean Bernier

61

DirectorVice Chairman of the Board

Justin A. Gannon

 

 

6872

 

 

Director

Mickey Kim

 

 

5963

 

 

Director

John B. Reilly, IIIKeenan D. Lynch (2)

 

 

5633

Director, General Counsel and Chief Administrative Officer

Charles M. Nifong, Jr.

48

Director, President and Chief Executive Officer

Maura Topper (3)

35

Director, Chief Financial Officer

Kenneth G. Valosky

61

 

 

Director

Joseph V. Topper, Jr.David F. Hrinak (4)

 

 

6265

 

 

DirectorExecutive Vice President

Claude TessierMatthew Evan Naylor (5)

 

 

5445

 

 

Director

Evan W. Smith

47

Senior Vice President of Finance and Chief Financial Officer

George W. Wilkins

44

Vice President of Operations (Appointed January 24, 2018)

(1)

Matthew McCure served as Vice President, Operations until his resignation on January 24, 2018Retail

(2)(1)

as of December 31, 20172021.

(2)

Mr. Lynch served as Corporate Secretary from November 19, 2019 through January 19, 2022, General Counsel effective February 24, 2020 and was appointed Chief Administrative Officer effective January 20, 2022.

(3)

Ms. Topper was appointed Chief Financial Officer effective August 11, 2021.

(4)

Mr. Hrinak was appointed Executive Vice President effective January 20, 2022.

(5)

Mr. Naylor was appointed Senior Vice President Retail of the GP’s subsidiaries effective November 30, 2021.

 

Our General Partner’s directors hold office until the earlier of their death, resignation, removal, or disqualification or until their successors have been elected and qualified. Our executive officers serve at the discretion of the Board. In selecting and appointing directors to the Board, Couche-Tard,DMP, as the indirect owner of the sole member of our General Partner, does not apply a formal diversity policy or set of guidelines. However, when appointing new directors, Couche-Tardthe Topper Group as the owner of the sole member of our General Partner, will consider each individual director’s qualifications, skills, business experience and capacity to serve as a director, as described below for each director, and the diversity of these attributes for the Board as a whole.

 


Timothy A. Miller

Joseph V. Topper, Jr. has served as a director on the Board since October 2012 and was appointedelected Chairman of the Board on June 2017. He joined Couche-Tard in January 2012, and heeffective November 19, 2019. Mr. Topper is currently serving as Senior Vicethe President Operations and Global Fuels. From February 2016 to November 2017, he held the position of Senior Vice President, Global Fuels. From October 2012 to January 2016, he held the positionDunne Manning Holdings LLC (“Dunne Manning”), a diversified portfolio of Vice President, Fuel. Mr. Miller joined Couche-Tard as Director of Fuels, Real Estate and Facilities. Prior to joining Couche-Tard, he was with BP Plc. for 16 years in a variety of operational, supply, business development and strategy rolescompanies operating in the United Statesreal estate and Europe. He holds a bachelor’s degree in Business Administration from Southern Illinois University.


Jeremy L. Bergeron has beeninvesting industries, affiliated with the Topper Group. Mr. Topper served as President and Chief Executive Officer of ourthe General Partner since June 2017from October 2012 to March 2015. Mr. Topper resigned as President effective March 2015 and his term as Chief Executive Officer ended in September 2015. Mr. Topper also served as Chairman of the Board from October 28, 2012 through September 30, 2014. Mr. Topper has over 30 years of management experience in the wholesale and retail fuel distribution business. In 1987, Mr. Topper purchased his family’s retail fuel business and five years later founded Dunne Manning Inc. (formerly known as Lehigh Gas Corporation), where he has served as a director of the Board since October 2015. He was appointed President of our General Partner in March 2015. Prior to that, Mr. Bergeron served as the Senior Vice President of Integration & Development Operations for CST Brands, Inc. and he served as Vice President and Treasurer for CST Brands, Inc. since its spin-off from Valero Energy Corporation (NYSE: VLO) in 2013. Mr. Bergeron was with Valero Energy Corporation for 17 years and held several management positions with increasing levels of responsibility. He earned a bachelor’s degree in Business Administration in Management and Information Systems from the University of the Incarnate Word and a Master’s degree in Business Administration from the University of Texas at San Antonio. He is also a 2014 graduate of the Stanford Executive Program.

Jean Bernier was appointed as a director of the Board in June 2017. As of December 31, 2017, Mr. Bernier stepped down as Group President, Global Fuels and North-East Operations of Couche-Tard, a position he held since March 2016, and assumed the role as advisor to the Couche-Tard Chief Executive Officer as of that date.since 1992. He previously held the position of Group President Fuel Americas and Operations North East since July 2012. Mr. Bernier has over 25 years of experience in the convenience store, fuel and grocery store sectors of the retail industry. Prior to joining Couche-Tard in 2012, Mr. Bernier was Executive Vice President of Valero Energy Corporation (NYSE: VLO) as well as President of Ultramar Ltd., the Canadian subsidiary of Valero Energy Corporation, where he was responsible for the company’s retail operations as well as corporate functions of communications, supply chain management and information services. From 1996 to 2011, Mr. Bernier held various senior management roles with Ultramar Ltd., including Vice-President Retail Operations in 1998 and 1999 and President from 1999 to 2011. Prior to joining Ultramar Ltd., Mr. Bernier served for nine years in a variety of senior management positions at Provigo, Inc. and held President, Vice-President and Chief Operating Officer level positions. Mr. Bernier holds a bachelor’s degree from the Université de Montréal and a Master’s degree in Industrial Relations from the University of Waterloo, Ontario.

Justin A. Gannon has served as a director of the Board and chairman of the audit committee and member of the conflicts committee since October 2014. Mr. Gannon has acted as an independent consultant and private investor since September 2013. From February 2003 through August 2013, Mr. Gannon served in various roles at Grant Thornton LLP, including as National Leader of Merger and Acquisition Development from June 2011 through August 2013, Central Region Managing Partner from January 2010 through June 2011, Office Managing Partner in Houston, Texas from August 2007 through June 2011 and Office Managing Partner in Kansas City, Missouri from August 2005 to July 2007. From 1971 through 2002, Mr. Gannon worked at Arthur Andersen LLP. Since December 2014, Mr. Gannon has served on the board of directors of California Resources Corporation (NYSE:  CRC) where he serves as chair of the audit committee and member of the compensation committee. Since April 2017, Mr. Gannon has served on the board of directors of Vantage Energy Acquisition Corp. (NASDAQ: VEACU) where he serves as chairman of the audit committee and a member of the compensation committee.CST Brands Inc. from October 2014 until December 2016. He is a former chairmanthe past President/Chairman of the board of directors for Villanova University, Lehigh Valley PBS and the Lehigh Valley PBS Foundation. He also served as a board member for the Good Shepherd Rehabilitation Hospital in Allentown. Mr. Topper holds a Masters’ degree of American Red Cross Chapters in the Tulsa, OklahomaBusiness Administration from Lehigh University and San Antonio, Texas areas. Mr. Gannon received a bachelor’s degree in Accounting from Loyola Marymount University and isVillanova University. Mr. Topper also previously held the designation of a Certified Public Accountant licensed in California (inactive) and Texas.

Mickey Kim was appointed as a director of the Board in June 2017 and he serves as chairman of the conflicts committee and member of the audit committee. Mr. Kim is a Member, Chief Operating Officer and Chief Compliance Officer of Kirr, Marbach & Company, LLC (“KM”), a registered investment adviser. Mr. Kim joined KM in 1986 and has been the firm’s Chief Operating Officer since 1996 and Chief Compliance Officer since 2004. Mr. Kim has also served as Vice-President, Treasurer and Secretary of Kirr, Marbach Partners Funds, Inc., a registered investment company, since 1998. Prior to his position with KM, Mr. Kim was a Senior Research Analyst at Driehaus Capital Management, a Chicago investment management firm, from 1982 to 1985. Mr. Kim has been a Chartered Financial Analyst (CFA) charterholder since 1985 and passed the Certified Public Accountant examination in 1980. He holds a bachelor’s degree in Accounting from the University of Illinois (1980) and a Master’s degree in Business Administration from the University of Chicago (1982). Accountant.

John B. Reilly, III has served as a director ofon the Board since May 2012.2012 and was elected Vice Chairman of the Board effective November 19, 2019. He iswas a member of the Partnership’s audit committee and conflicts committee of the Board sincefrom October 2014.2014 through November 2019. Mr. Reilly has served as the President of City Center Investment Corp since May 2011. Prior to then, he was President of Landmark Communities and Managing Partner of Traditions of America since 1998. Mr. Reilly has thirty years of experience in commercial and residential real estate development and planning, finance management and law. Mr. Reilly serves as a trustee of Lafayette College and also served as the chairman of the board of trustees for the Lehigh Valley Health Network. He holds a Juris Doctor degree from Fordham University Law School and a bachelor’s degree in economics from Lafayette College. He is a Certified Public Accountant and a member of the Pennsylvania Bar Association.


Claude Tessier was appointedJustin A. Gannon has served as a director on the Board and Chairman of its audit committee and member of its conflicts committee since October 2014. Mr. Gannon has acted as an independent consultant and private investor since September 2013. From February 2003 through August 2013, he served in various roles at Grant Thornton LLP, including as National Leader of Merger and Acquisition Development from June 2011 through August 2013, Central Region Managing Partner from January 2010 through June 2011, Office Managing Partner in Houston, Texas from August 2007 through June 2011 and Office Managing Partner in Kansas City, Missouri from August 2005 to July 2007. From 1971 through 2002, Mr. Gannon worked at Arthur Andersen LLP, the last 21 years as an audit partner. From December 2014 until October 2020, Mr. Gannon served on the board of directors of California Resources Corporation (NYSE: CRC) and as chair of the audit committee and member of the compensation committee. Mr. Gannon also served on the board of directors of Vantage Energy Acquisition Corp. (NASDAQ: VEACU) and as chairman of the audit committee and a member of the compensation committee from April 2017 until its dissolution in April 2019. He is a former chairman of the board of directors of American Red Cross Chapters in the Tulsa, Oklahoma and San Antonio, Texas areas. Mr. Gannon received a bachelor’s degree in Accounting from Loyola Marymount University and is a Certified Public Accountant licensed in California (inactive) and Texas.

Mickey Kim has served as a director on the Board and Chairman of its conflicts committee and member of its audit committee since June 2017. HeMr. Kim is a Member, Chief Operating Officer and Chief Compliance Officer of Kirr, Marbach & Company, LLC (“KM”), a registered investment adviser. Mr. Kim joined KM in 1986 and has been KM’s Chief Operating Officer since 1996 and Chief Compliance Officer since 2004. Mr. Kim has also served as Chief Financial Officer of Couche-Tard since January 2016. Prior to joining Couche-Tard, Mr. Tessier held the position of President of the IGA Operations Business Unit at Sobeys Inc. from 2012 to 2016 and was a member of Sobeys Inc.’s Executive Committee. He joined the management team of Sobeys Quebec Inc. in 2003 as Senior Vice President, Finance & Strategic Planning. Mr. Tessier has spent mostTreasurer and Secretary of his professional career in the food industry after serving in several finance positions.Kirr, Marbach Partners Funds, Inc., a registered investment company, since 1998. Prior to his position with Sobeys Inc.,KM, Mr. Tessier gained more than 15 years of senior financial leadership experience with Fly Furniture America, Provigo, Inc. and Costco Wholesale Canada Ltd, including in Chief Financial Officer and Vice President roles. He has also heldKim was a Senior Research Analyst at Driehaus Capital Management, a Chicago investment management positions in Mallette International and PricewaterhouseCoopers LLP (formerly Coopers & Lybrand). Furthermore, hefirm, from 1982 to 1985. Mr. Kim has been involved with various sociala Chartered Financial Analyst (CFA) charter holder since 1985 and community organizations, most notablypassed the Fondation Charles Bruneau.Certified Public Accountant examination in 1980. He also participated in the fundraising campaign of the Fondation de l’Institut de tourisme et d’hôtellerie du Québec. He currently serves as a board member for La Maison des Soins Palliatifs de Laval, a non-profit organization that provides care for patients in terminal phase of illness. Mr. Tessier holds a bachelor’s degree in Accounting from the Université du Québec à MontréalUniversity of Illinois (1980) and a Masters degree in Business Administration from the University of Chicago (1982).

Keenan D. Lynch has served as a director on the Board since November 19, 2019. Mr. Lynch was appointed Chief Administrative Officer of the General Partner effective January 20, 2022 and has been a memberserved as its General Counsel since February 24, 2020. Mr. Lynch served as Corporate Secretary of the Canadian InstituteGeneral Partner from November 19, 2019 through January 19, 2022. Since 2017, he has served as Vice President and General Counsel of Chartered Accountants since 1987.Dunne Manning. Before joining Dunne Manning, from 2015 to 2017, he was an associate at Skadden, Arps, Slate, Meagher & Flom LLP. He holds a Bachelor of Arts from Villanova University, a Juris Doctor from the University of Pennsylvania Law School and an L.L.M. in Taxation from the Villanova University Charles Widger School of Law. 


Joseph V. Topper,Charles M. Nifong, Jr. has beenserved as a director on the President of DMI since 2015. Mr. Topper served asBoard and President and Chief Executive Officer of the General Partner, since November 19, 2019. Prior to assuming his current position, Mr. Nifong was the President of Dunne Manning Stores, LLC, a convenience store operator and wholesale fuel provider. Mr. Nifong served as the Chief Investment Officer and Vice President of Finance for the Partnership from October2013 through 2015. Before joining the Partnership, Mr. Nifong worked for more than nine years in investment banking as a Director at Bank of America Merrill Lynch where he worked on an extensive range of capital markets and mergers and acquisitions advisory assignments. Prior to his career in investment banking, Mr. Nifong served as a Captain in the United States Army in armor and reconnaissance units. Mr. Nifong holds a Bachelor of Chemical Engineering with Highest Honor from the Georgia Institute of Technology and Master of Business Administration from the University of Virginia.

Maura Topper has served as a director on the Board since November 19, 2019 and was appointed Chief Financial Officer effective August 11, 2021. Since 2014, she has served as Vice President and Chief Financial Officer of Dunne Manning. Prior to joining Dunne Manning in 2014, Ms. Topper graduated from the Masters of Business Administration program at Columbia Business School. Prior to that, she served as a Marketing Account Executive at MSG Promotions, Inc. and a senior accountant in the audit practice of Deloitte & Touche LLP in New York. Ms. Topper graduated from Villanova University in 2008 with a Bachelor of Science degree in Accounting and a Bachelor of Science in Business (Finance). From 2012 to March 2015.2014, she served as a director on the Board.

Kenneth G. Valosky has served as a director on the Board and a member of its audit committee and conflicts committee since November 19, 2019. He is Assistant to the President of Villanova University. He joined Villanova University in 2000 as the Chief Financial Officer and has served as its Vice President for Finance, Acting Senior Vice President for Administration and Vice President for Administration and Finance and Executive Vice President from 2014 to 2021. He previously held several senior financial positions at Thomas Jefferson University prior to joining Villanova University in 2000. These positions included Director of Internal Audit and Controller. He began his career as a public accountant with Touche Ross & Co. (a predecessor to Deloitte). Mr. Topper resigned as President effective March 2015 and his term as Chief Executive Officer ended on September 2015. Mr. TopperValosky also served as chairmana trustee and chair of the BoardStewardship Committee of the Mercy Health System of Southeastern Pennsylvania, trustee and chair of the Finance Committee of Merion Mercy Academy and as a member of the Auditing and Accounting Committee of the Archdiocese of Philadelphia. He received a B.S. in Accountancy, cum laude from Villanova University and an M.S. in Organizational Dynamics from the University of Pennsylvania. He is a Certified Public Accountant, inactive status in the Commonwealth of Pennsylvania.

David F. Hrinak was appointed Executive Vice President of the General Partner effective January 20, 2022. Prior to that he served as Executive Vice President of Wholesale from February 24, 2020, through January 20, 2022 and Vice President of Operations from November 19, 2019 through February 23, 2020. Mr. Hrinak previously served as Executive Vice President and Chief Operating Officer of the General Partner from 2014 until June 2017 and served as President of the General Partner from May 2012 to October 28, 2012 through2014. He previously served as an officer of DMI from 2005 until the founding of the General Partner and was DMI’s President from September 30, 2014.2010 until May 2012. Mr. TopperHrinak has over 25more than 36 years of management experience in the wholesale and retail fuel distribution business. In 1987,Prior to joining DMI, Mr. Topper purchased his family’s retail fuel business and five years later founded DMI (formerly known as Lehigh Gas Corporation), where heHrinak was the Chief Executive Officer since 1992. Mr. Topper currently serves as chairmanBranded Wholesale Manager at ConocoPhillips.

Matthew Evan Naylor was appointed Senior Vice President Retail of a subsidiary of the boardGeneral Partner effective November 30, 2021. He joined the General Partner with over two decades of trustees for Villanova Universityleadership and operations experience in a wide-range of companies including start-ups, small and mid-size growth organizations, and large billion-dollar P&L portfolios across national networks. Prior to assuming the boardrole of directors for Lehigh Valley PBS. HeSenior Vice President Retail of the General Partner, Mr. Naylor held executive roles in several public retail and service companies. Most notably, he served on the boardas Chief Operations Officer of directors of CST Brands,Monro Inc., a national auto-service and tire retailer from October 2014 until December 2016. He is the pastMarch 2018 through April 2019, Regional Vice President of the boardMurphy USA from May 2017 through March 2018 and Group Vice President of directors for Lehigh Valley PBS and the Lehigh Valley PBS Foundation.Target Corporation from March 2014 through May 2017. He also served as a board member forMajor in the Good Shepherd Rehabilitation HospitalUnited States Army in Allentown.Field Artillery and Psychological Operations. Mr. TopperNaylor holds a Master’s degreeBachelor of Arts in International Relations from Centre College and a Master of Business Administration from Lehigh University and a bachelor’s degree in Accounting from Villanovathe Kellogg School of Management at Northwestern University.  

Family Relationships

Mr. Topper, Chairman of the Board, is alsothe father of Ms. Topper, a Certified Public Accountant.

Evan Smith was appointed Vice Presidentdirector of Financeour General Partner and Chief Financial Officer, and the father-in-law of Mr. Lynch, a director of our General Partner in June 2017. He was previously Vice President and TreasurerGeneral Counsel and Chief Administrative officer, and Ms. Topper is the sister-in-law of CST Brands Inc. since April 2015. He has more than 20 yearsMr. Lynch. There are no other family relationships between any of finance and capital markets experience, including working as an investment fund manager with US Global Investors, a sell-side equity research analyst with Sanders Morris Harris, and a valuation consultant for Arthur Andersen where he began his career in 1994. Mr. Smith has been a CFA charter holder since 2001 and earned a bachelor’s degree in Mechanical Engineering from the Universitydirectors or executive officers of Texas at Austin.the Partnership.


George Wilkins was appointed Vice President of Operations of our General Partner in January 2018. He has served as Vice President since July 2014. Previously, Mr. Wilkins was our Wholesale General Manager since March 2012. During that time, he was responsible for growing and developing our network of dealer operated locations. From 2010 to 2011, Mr. Wilkins worked for LUKOIL North America, where he served as Director of Wholesale Operations and Marketing and as Brand Manager from 2004 to 2010. Mr. Wilkins has over 20 years of diverse experience working for major oil companies, including ConocoPhillips as East Coast Marketing Manager and Regional Strategy Manager for Mobil Oil Corporation. Mr. Wilkins holds a bachelor’s degree in Business Management from Drexel University, as well as an Executive MBA degree from Villanova University.

Director Independence

Section 303A of the NYSE Listed Company Manual provides that limited partnerships are not required to have a majority of independent directors. The Board has adopted a policy that the Board has at all times at least three independent directors or such higher number as may be necessary to comply with the applicable federal securities law requirements. For the purposes of this policy, “independent director” has the meaning set forth in Section 10A(m)(3) of the Exchange Act, any applicable stock exchange rules and the rules and regulations promulgated in the Partnership governance guidelines available on its website www.crossamericapartners.com.

The Board has determined Messrs. Gannon, Kim Gannon and ReillyValosky to be independent as defined under the independence standards established by the NYSE and the Exchange Act. These directors, whom we refer to as independent directors, are not officers or employees of our General Partner or its affiliates and have been determined by the Board to be otherwise independent of Couche-Tardthe Topper Group and its affiliates.


Composition of the Board

The Board consists of eight members. The Board holds regular and special meetings at any time as may be necessary. Regular meetings may be held without notice on dates set by the Board from time to time. Special meetings of the Board or meetings of any committee thereofof the Board may be held at the request of the Chairman of the Board or a majority of the Board (or a majority of the members of such committee) upon at least two days (if the meeting is to be held in person) or 24 hours (if the meeting is to be held telephonically) prior oral or written notice to the other members of the Board or committee or upon such shorter notice as may be approved by the directors or members of such committee. A quorum for a regular or special meeting will exist when a majority of the members are participating in the meeting either in person or by telephone conference. Any action required or permitted to be taken at a meeting of the Board or at any committee may be taken without a meeting if such action is evidenced in writing and signed by a majority of the members of the Board.

Committees of the Board

The Board has an audit committee and a conflicts committee. The charter for each of the committees can be found in its entirety on the Partnership’s website at www.crossamericapartners.com under the “Corporate Governance” tab in the “Investors” section. As a limited partnership, we are not required by NYSE rules to have a compensation committee or a nominating and corporate governance committee. During 2017, the Board held three meetings before the completion of the Merger (“Pre-Merger”) and three meetings after the completion of the Merger (“Post-Merger”) and each director attended 100% of the Board and respective committee meetings while she or he was a director.

Audit Committee

Effective October 1, 2014, Messrs. Gannon and Reilly have served asThe members of the audit committeeAudit Committee are Messrs. Gannon, Kim and on June 28, 2017, Mr. Kim was appointed as member of the audit committee.Valosky. Mr. Gannon serves as chair. The audit committee is comprised entirely of directors who meet the financial literacy standards of the NYSE and the Exchange Act. The rules and regulations established by the NYSE and the Exchange Act also generally require that our audit committee consist entirely of independent directors. The Board has determined that Messrs. Gannon, Kim and ReillyValosky meet the independence standards required of audit committee members by the NYSE and the Exchange Act and that they meet the financial literacy standards of directors who serve on the audit committee, and Mr. Gannon is an “audit committee financial expert” as defined by SEC rules. The audit committee assists the Board in its oversight of the integrity of our financial statements and our compliance with legal and regulatory requirements, Partnership policies and controls, the independent auditor’s qualifications and independence, the performance of the Partnership’s internal audit function and risk assessment and risk management. The audit committee has sole authority with respect to the appointment, retention, compensation, evaluation, oversight of the work and termination of our independent auditors and has the authority to obtain advice and assistance from outside legal, accounting or other advisors as the audit committee deems necessary to carry out its duties and receives appropriate funding, as determined by the audit committee, from the Partnership for such advice and assistance. In 2017, the audit committee held two meetings Pre-Merger and three meetings Post-Merger.


Conflicts Committee

Effective October 1, 2014, Messrs. Gannon and Reilly have served are asThe members of the conflicts committee,Conflicts Committee are Messrs. Gannon, Kim and on June 28, 2017,Valosky. Mr. Kim was appointedserves as chair and member of the conflicts committee.chair. Pursuant to our Partnership Agreement, the members of the conflicts committee may not be officers or employees of our General Partner or directors, officers or employees of its affiliates, must not be holders of any ownership interest in the General Partner or any of its affiliates, other than Partnership units, that is determined by the Board of Directors, after reasonable inquiry, to be likely to have an adverse impact on the ability of such director to fulfill his or her obligations as a member of the Conflicts Committee,conflicts committee, and must meet the independence standards established by the NYSE and the Exchange Act to serve on an audita conflicts committee of a board of directors. The Board has determined that Messrs. Gannon, Kim Gannon and ReillyValosky qualify to serve on the conflicts committee. The conflicts committee is responsible for reviewing specific matters that the Board believes may involve conflicts of interest between the General Partner and its affiliates and the Partnership. The conflicts committee determines if the resolution of such conflict is fair and reasonable to the Partnership. In 2017, the conflicts committee held one meeting Pre-Merger and fourteen meetings Post-Merger.

Meeting of Independent Directors and Communications with Directors

The independent members of the audit committee have met in executive sessions without members of management. The chairman presides over each executive session of the independent directors. Any independent director may request that additional executive sessions of the independent directors be held, and the presiding independent director for the previous session will determine whether to call any such meeting.


Unitholders or interested parties may communicate directly with the Board, any committee of the Board, any independent director, or any one director, by sending written correspondence by mail addressed to the Board, committee or director to the attention of our Corporate Secretary at the following address: c/o Corporate Secretary, CrossAmerica Partners LP, 515645 Hamilton Street, Suite 200,400, Allentown, PA 18101. Communications are distributed to the Board, committee of the Board, or director, as appropriate, depending on the facts and circumstances outlined in the communication. Commercial solicitations or communications will not be forwarded.

Meetings of Unitholders

Our Partnership Agreement provides that the General Partner manages and operates us and that, unlike holders of common stock in a corporation, unitholders only have limited voting rights on matters affecting our business or governance as set forth in our Partnership Agreement. Accordingly, we do not hold annual meetings of unitholders.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Act requires members of the Board and executive officers, and beneficial owners of more than 10% of a class of our equity securities registered pursuant to Section 12 of the Exchange Act (collectively, the “Reporting Persons”), to file reports of beneficial ownership and reports of changes in beneficial ownership of such securities with the SEC. Reporting Persons are required by SEC regulations to furnish to us copies of all Section 16(a) forms filed with the SEC.

SEC regulations require us to identify in this Form 10-K anyone who filed a required report late during the most recent fiscal year. Based on our review of forms we received, or written representations from Reporting Persons stating that they were not required to file these forms, we believe that during 2016 all Section 16(a) filing requirements were satisfied on a timely basis.

Code of Ethics and Business Conduct

The Board has adopted a Code of Ethics and Business Conduct that applies to directors of the General Partner and our executive officers. Our General Partner also expects all employees of Couche-Tardthe Topper Group providing services to or for the benefit of the Partnership and its operating subsidiaries to adhere to the Code of Ethics and Business Conduct. The Code of Ethics and Business Conduct can be found on CrossAmerica Partners’ website at www.crossamericapartners.com under the “Corporate Governance” tab in the “Investors” section. Any amendment to, or waiver from, a provision of the Code of Ethics and Business Conduct for our principal executive officer, principal financial officer, principal accounting officer or persons performing similar functions will be promptly disclosed under the “Corporate Governance” tab at www.crossmericapartners.com. The Board has also adopted Corporate Governance Guidelines that outline important policies and practices regarding our governance, which can also be found in its entirety on CrossAmerica Partners’ website at www.crossamericapartners.com under the “Corporate Governance” tab in the “Investors” section. Requests for print copies of the Code of Ethics and Business Conduct and/or the Corporate Governance Guidelines may be directed to Investor Relations at info@crossamericapartners.com or to Investor Relations, CrossAmerica Partners LP, 515645 Hamilton Street, Suite 200,400, Allentown, PA 18101 or made by telephone at (610) 625-8005. The information contained on, or connected to, our website is not incorporated by reference into this Annual Report on Form 10-K and should not be considered part of this or any other report that we file with or furnish to the SEC.

Reimbursement of Expenses of Our General Partner

Except as otherwise set forth in our AmendedTopper Group Omnibus Agreement, our Partnership Agreement requires us to reimburse our General Partner for all direct and indirect expenses it incurs or payments it makes on our behalf and all other expenses reasonably allocable to us or otherwise incurred by our General Partner in connection with operating our business. The Partnership Agreement does not limit the amount of expenses for which our General Partner and its affiliates may be reimbursed. These expenses include (without limitation) salary, bonus, incentive compensation and other amounts paid to persons who perform services for us or on our behalf and expenses allocated to our General Partner by its affiliates. Our General Partner is entitled to determine in good faith the expenses that are allocable to us. Please read “Item 13. Certain Relationships and Related Party Transactions and Director Independence - Amended– Topper Group Omnibus Agreement.”


ITEM 11. EXECUTIVE COMPENSATION

COMPENSATION DISCUSSION AND ANALYSIS

Overview

We do not directly employ or compensate any of our executive officers, including our named executive officers who were serving as our executive officers at the end of the fiscal year ended December 31, 2021 (“NEOs”), or other employees who provide services necessary for managing our business. Under our Partnership Agreement, the General Partner manages our operations and activities on our behalf. Our General Partner also does not directly employ any of its executive officers or other employees. For theour fiscal year ending December 31, 2017, all2021, our executive officers, including our NEOs, and other personnel who provide services to or on behalf of the Partnershipas more fully described below, were employed and compensated by an affiliate of CST until the MergerTopper Group.

For 2021, the provision of management services by, and by an affiliate of Couche-Tard since. Under our Partnership Agreement, the General Partner manages our operations and activities on our behalf.


Pursuantpayment to, the terms ofTopper Group was governed by the AmendedTopper Group Omnibus Agreement, an affiliate of Couche-Tard provides services to us, includingAgreement.

Named Executive Officers

For 2021, our NEOs were:

Charles M. Nifong, Jr. – Mr. Nifong has served as our Chief Executive Officer and President since November 19, 2019.

Maura Topper – Ms. Topper has served as our Chief Financial Officer since August 11, 2021, during which 90% of Ms. Topper’s time was allocated to the Partnership.

Jonathan E. Benfield – Mr. Benfield has served as our Chief Accounting Officer from November 5, 2020 through August 11, 2021 and during this period as our Interim Chief Financial Officer from April 16, 2021 to August 11, 2021 and as our Chief Financial Officer of Retail since August 11, 2021.

David F. Hrinak – Mr. Hrinak has served as our Executive Vice President of Wholesale from February 14, 2020 through January 19, 2022 and our Executive Vice President since January 20, 2022. During 2021, 95% of Mr. Hrinak’s time was allocated to the Partnership.

Keenan D. Lynch – Mr. Lynch has served as our General Counsel since February 24, 2020 and Chief Administrative Officer since January 20, 2022. He previously served as Corporate Secretary from November 19, 2019 through January 19, 2022. During 2021, 85% of Mr. Lynch’s time was allocated to the Partnership.

Matthew Evan Naylor – Mr. Naylor has served as our Senior Vice President Retail since November 30, 2021.

Eric M. Javidi – Mr. Javidi served as our Chief Financial Officer from November 5, 2020, to April 16, 2021.

The Partnership does not determine the cash compensation for the services provided by our NEOs, and we pay Couche-Tard a management fee, which is approved by the independent conflicts committee of the Board. The Amended Omnibus Agreement is more fully described in Note 12 to the financial statements.

Pre-Merger, the Compensation Committee of the board of directors of CST (the “CST Compensation Committee”) had ultimate decision-making authority with respect to the total compensation of ourits NEOs. Post-Merger, since the Partnership is supported by employees of an affiliate of Couche-Tard,For 2021, the compensation philosophy and practices of Couche-Tard have beenthe Topper Group were used to determine the compensation of the NEOs and all compensation decisions were in the sole discretion of the Topper Group. The compensation philosophy and practices of the Topper Group were used to determine the total compensation of ourthe NEOs and all compensation decisions arewere in the sole discretion of Couche-Tard. All or a portion of suchthe Topper Group.

The compensation may be allocated for reimbursement under the Amended Omnibus Agreement, depending on the time devotedphilosophies and practices of the NEOs’ timeTopper Group during 2021 are described below in this Compensation Discussion and Analysis, and the compensation actually awarded by the Topper Group to the NEOs for their rolesservices to the Partnership during 2021 is set out in the Partnership.accompanying Summary Compensation Table and related compensation tables that follow this Compensation Discussion and Analysis.


Compensation

Named Executive Officers

As of December 31, 2017, our NEOs were:

Jeremy L. Bergeron, President and Chief Executive Officer

Evan W. Smith, Vice President Finance and Chief Financial Officer, since June 28, 2017

Matt McCure, Vice President, Operations, since June 28, 2017

The following individuals served as executive officers until the completion of the Merger on June 28, 2017:

Clayton E. Killinger, Executive Vice President and Chief Financial Officer

David F. Hrinak, Executive Vice President and Chief Operating Officer

Hamlet T. Newsom, Jr., Vice President, General Counsel, Corporate Secretary and Chief Compliance Officer 

Employment for Messrs. Killinger, Hrinak and Newsom was terminated as of date of the Merger, June 28, 2017. Their compensation was determined by the CST Compensation Committee, some or all of which was allocated to us as part of the management fee under the Amended Omnibus Agreement.

Mr. McCure served as Vice President, Operations until his resignation on January 24, 2018. None of Mr. McCure’s compensation was allocated to us as part of the management fee under the Amended Omnibus Agreement nor did the General Partner require the Partnership to reimburse any of Mr. McCure’s compensation.

Except for the management fee we pay to Couche-Tard under the Amended Omnibus Agreement, we do not otherwise pay or reimburse any compensation amounts to or for our NEOs. Awards that CST, Couche-Tard and/or the Partnership granted under their respective plans can be found under the sections “Elements of Executive Compensation- Pre-Merger Long-Term Incentive Compensation: Equity Awards” and “Elements of Executive Compensation- Post-Merger Long-Term Incentive Compensation: Equity Awards.”

Pre-Merger Compensation Objectives and Philosophy

The compensation philosophy of the CST Compensation Committee determined the compensation for some of our NEOs Pre-Merger. Those compensation determinations were not subject to approval by us, our Board or any committees thereof.

Pre-Merger Elements of Executive Compensation

The core elements of the executive compensation program at CST were base salary, short-term incentives (in the form of annual performance-based cash incentives) and long-term incentives (in the form of time-vested equity awards). The CST Compensation Committee adopted guidelines for allocating compensation among base salary, short-term incentive compensation and long-term incentive compensation, between cash and non-cash compensation, and among different forms of non-cash compensation, as shown in the table below. CST’s executive compensation program was evaluated on an ongoing basis and was adapted, as necessary, to ensure continued alignment between long-term company performance and executive compensation.


The compensation for our NEOs prior to the Merger reflected in the 2017 Summary Compensation Table was paid by CST, some or all of which was allocated to us under the Amended Omnibus Agreement as discussed below.

Elements of Executive Compensation

Type of Payment/Benefit

Purpose

Base salary

Fixed cash payments with each executive generally eligible for annual increase

To attract and retain qualified executives

Short-term incentive compensation

Variable annual cash payment tied to key performance metrics and targets, and individual performance assessments

To motivate and reward performance of key business and financial metrics to deliver returns to Partnership unitholders and CST shareholders

Long-term incentive compensation

Restricted Stock Units (“CST RSUs”)

To align long-term interests of NEOs with those of the Partnership’s unitholders and CST shareholders

Pre-Merger Base Salary

The CST Compensation Committee approved the following base salaries for the 2017 fiscal year:

Name (1)

 

2017 Annual

Base Salary

Pre-Merger

 

Jeremy L. Bergeron

 

$

396,500

 

Clayton E. Killinger

 

 

656,500

 

David F. Hrinak

 

 

380,600

 

Hamlet T. Newsom

 

 

327,500

 

(1)

100% of Mr. Bergeron’s compensation, 25% of Mr. Killinger’s compensation, 100% of Mr. Hrinak’s compensation and 75% of Mr. Newsom’s compensation was allocated to the Partnership as part of the management fee under the Amended Omnibus Agreement. Messrs. Smith and McCure were appointed executive officers on June 28, 2017 or Post-Merger.

Pre-Merger Short-Term Incentive Compensation: Annual Performance-Based Cash Incentive

The CST Compensation Committee approved the 2017 Merger short-term incentive plan (“CST Bonus”), including the following performance metrics:

2017 Performance Metrics

% Weight

Why Performance Metric Is Used

Payout Range

CST Brands Total Non-Fuel Gross Margin versus budget for the period ending at the closing of the Merger

50%

Total Non-Fuel Gross Margin represents the total non-fuel gross profit dollars for the CST retail stores. A major strategic goal for CST was to increase the contribution of non-fuel margins to 70% of overall gross profit, including food and merchandise, by enhancing offerings of made to order food, proprietary food and private label programs and an expanded selection of store merchandise, including food, beverage and snack categories. CST believed this performance metric aligned the short-term incentive objectives with the long-term strategies of CST by (i) improving inside store profitability levels and increasing the number of customers that visit the CST network; and (ii) promoting merchandise gross profit growth through the pursuit of quality convenience store acquisitions that contribute to the core asset base, and organic new store growth.

0 - 200%

Consolidated Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) versus budget for the period ending at the closing of the Merger

50%

This metric measured the EBITDA for both the Partnership and CST on a consolidated basis, which was a reflection of how well the Partnership and CST were performing overall against the established goals, representing a holistic view of the Partnership’s and CST’s strategies. This performance metric was a key driver of unitholder return over time.

0 - 200%


As determined by the CST Compensation Committee, each of these performance metrics had a threshold, target and maximum level for the performance year. The maximum incentive award payable to some of our executive officers under the short-term incentive program for the fiscal year ended December 31, 2017, based on the performance metrics described above, was 200% of their respective incentive award targets.

Mr. Bergeron received a pro-rata amount of the CST Bonus with an achievement factor of 126% for the period ending at the closing of the Merger (as approved by the CST Compensation Committee) paid in December 2017, which was allocated to us under the Amended Omnibus Agreement. Since employment for Messrs. Killinger and Newsom was terminated at the Merger, their severance payments, pursuant to their separation agreements, included payment of a pro-rata CST Bonus at target, a portion of which was allocated to us under the Amended Omnibus Agreement. Although employment for Mr. Hrinak was also terminated at the Merger, he was not eligible to receive a pro-rata CST Bonus, as per the terms of the EICP.

Name (1)

 

2017 Annual

Base Salary

Pre-Merger

 

 

Target Short-

Term Incentive

as a % of Base

Salary

 

 

Short-Term

Incentive

Potential

Target at 100%

 

 

2017 Short-

Term Incentive

Payment

Approved

 

Jeremy L. Bergeron

 

$

396,500

 

 

 

65

%

 

$

257,725

 

 

$

162,367

 

Clayton E. Killinger

 

 

656,500

 

 

 

75

%

 

 

492,375

 

 

 

246,188

 

David F. Hrinak

 

 

380,600

 

 

 

60

%

 

 

228,360

 

 

 

 

Hamlet T. Newsom, Jr.

 

 

327,500

 

 

 

50

%

 

 

163,750

 

 

 

81,875

 

(1)

100% of Mr. Bergeron’s compensation, 25% of Mr. Killinger’s compensation, 100% of Mr. Hrinak’s compensation and 75% of Mr. Newsom’s compensation was allocated to the Partnership as part of the management fee under the Amended Omnibus Agreement. Messrs. Smith and McCure were appointed executive officers on June 28, 2017 or Post-Merger.

Pre-Merger Long-Term Incentive Compensation: Equity Awards

Grants of CST Equity Awards

Pre-Merger and in 2017, the CST Compensation Committee approved the grant of equity awards in the form of CST RSUs for some of our NEOs, which, at the Merger, were converted into the right to receive a cash payment equal to the product of (x) the number of shares of CST common stock subject to such award as of the completion of the Merger and (y) the merger consideration, but such awards remained subject to the same vesting terms and payment schedule as those set forth in the original CST RSU award agreement; provided that, upon completion of the Merger, such award will vest in full upon an involuntary termination of employment without cause, or termination for “Good Reason”, or termination due to death, “Disability” or “Retirement.”

Grants of CrossAmerica Equity Awards

Our General Partner previously adopted the Plan for employees, officers, consultants and directors of our General Partner and its affiliates who perform services for us. The Plan provides for the grant of restricted units, unit options, performance awards, phantom units, unit awards, unit appreciation rights, distribution equivalent rights and other unit-based awards. In 2017, no CrossAmerica equity awards were granted to executive officers Pre-Merger. Pre-Merger, non-employee directors of the Board received CrossAmerica equity award grants in the form of phantom units for their service on the Board.

Phantom Units

A phantom unit represents a notional common unit granted under the Plan, which, upon vesting, entitles the holder of the phantom units to receive either a common unit or an amount of cash equal to the fair market value of a common unit at the time of vesting. All or a portion of the phantom units may be settled in common units or cash at the discretion of the Board. Phantom unit awards issued in April 2015 or thereafter are accompanied by tandem distribution equivalent rights that entitle the holder to cash payments equal to the amount of distribution authorized to be paid to the holder of common units. Prior to April 2015, phantom unit awards were issued without distribution equivalent rights.


Profits Interests

Profits interests are represented by Class B Units in our wholly owned subsidiary, LGP Operations, and are designed to constitute “profits interests” within the meaning of the Internal Revenue Code, and published Internal Revenue Service guidance. Class B Units generally will not be taxed at the time of grant, though the holder will be required to report on his/her income tax return his/her allocable share of LGP Operations’ income, gain, loss, deduction and credit, regardless of whether LGP Operations makes a distribution of cash. Instead, such units are generally taxed upon at disposition of the unit or upon the receipt of distributions of money to the extent that such amounts received exceed the holder’s tax basis in the units. Generally, no deduction is available to the Partnership or LGP Operations upon the grant, vesting or disposition of the Class B Units. The profits interests are subject to vesting schedules determined by the Board. Holders of vested Class B Units are entitled to receive distributions from LGP Operations generally on the same terms as our unitholders. Vested Class B Units are redeemable for cash or our common units at the discretion of the Board, beginning on the second anniversary of the grant date at a conversion ratio of not greater than 1:1. In February 2017, the Board approved the redemption of 42,855 profits interests for our common units for participants who elected to redeem their awards after two years from the date of grant. This Board approval included Mr. Topper’s 28,947 profits interests, which he elected not to redeem and are still outstanding.

Post-Merger Compensation Objectives and Philosophy

Post-Merger, the responsibility and authority for compensation-related decisions for Messrs. Bergeron and Smith remain with the human resources department of Circle K. Such compensation determinations were not subject to approval by us, our Board or any committees thereof.

The compensation philosophy of Couche-TardTopper Group is based on performance and the achievement of predetermined objectives, and it is a reflection of the entrepreneurial culture of Couche-Tard, and onethe Topper Group, which is a culture where the financial interests of its executives are aligned with the performance of the company and the investors they represent. The compensation strategy includes variable components linked to short term, medium term and long termlong-term performance. CompensationThe Topper Group compensation plans and programs for executives are designed toto: (i) recruit, develop and retain talented executives; (ii) reward exceptional performance as measured by rewarding them through predetermined and quantifiable objectives; (iii) establish a direct relation between the interests of the executives and those of the shareholders of Couche-Tardthe Topper Group and the unitholders of the Partnership by favoring the creation of value onin the short, medium and long term; (iv) encourage teamwork and promote company values; and (v) support the company’s business strategy. Couche-Tard’sThe Topper Group’s compensation plans and programs are established based on internal principles of equity that take into consideration the role, nature and level of each of the executives as well as external principles of equity such as fair, equitable and competitive compensation terms in comparison to peers as well as those of the market in general.

Post-Merger Elements of Executive Compensation

The three main components toof the remuneration of Couche-Tard’sthe Topper Group’s executive compensation program are base salary, annual incentive plan and long-term incentive plan, as shown in the table below.


The compensation for two of our NEOs, Messrs. Bergeron and Smith, Post-Merger is reflected in the 2017 Summary Compensation Table and was allocated to us under the Amended Omnibus Agreement.

 

Elements of Executive CompensationElement

Description

Objectives

Base salary

Annual compensationbase salary is based on the functional responsibilities and competences of the executives

Attract, retain and motivate executives

Annual Incentive Plan (“AIP”)2021 Performance Based Bonus Compensation Policy

Bonus planPerformance based bonus compensation policy ranging from 40%35% to 60%100% of base salary, which payment is determined by (i) financial objectives (75%); and (ii) personal key result areas (KRAs) (25%)operational objectives

Motivate executives to achieve objectives with a higher degree of difficulty and thereby achieve or exceed the business plan of the companyPartnership

 

Create accountability among executives for the achievement of these financial objectives

 

Align the short-term interests of executives with those of the companyPartnership and its shareholdersunitholders

Long-term incentive compensation

Phantom stock unit plan.plan with grants varying

Grants vary according to position held and

individual contribution

Performance payouts also vary depending on the achievement of special measurable objectives that are key to the financial success of the company

Align long-term interests of executives with those of the companyPartnership and its shareholdersunitholders


Base Salary

The human resources department of the Topper Group approved the following annualized base salaries for the 2021 fiscal year:

Name

2021 Annual

Base Salary  ($) (1)

Charles M. Nifong, Jr.

500,000

Maura Topper

300,000

Jonathan E. Benfield

195,700

David F. Hrinak

233,000

Keenan D. Lynch

269,440

Matthew Evan Naylor

325,000

Eric M. Javidi

300,000

(1)

The amount shown represents annualized base salary, not the portion allocated to the Partnership.

(2)

Mr. Benfield received a salary increase on August 9, 2021 from $190,000 to $195,700.

 

Post-Merger Base SalaryThe Summary Compensation Table reflects the portion of the annualized base salary allocated to the Partnership.

Name (1)

 

2017 Annual

Base Salary

Post-Merger

 

Jeremy L. Bergeron

 

$

300,000

 

Evan W. Smith

 

 

215,500

 

(1)

None of Mr. McCure’s compensation was allocated to us as part of the management fee under the Amended Omnibus Agreement nor did the General Partner require the Partnership to reimburse any of Mr. McCure’s compensation. Mr. McCure was Vice President, Operations from June 28, 2017 to January 24, 2018.

Post-Merger Short-Term Incentive Compensation: Annual Incentive Plan (AIP)Compensation

Performance-Based Bonus Compensation Policy

The Couche-Tard AIP2021 Performance-Based Bonus Compensation Policy (the “2021 Bonus Plan”) is one of the key components of the “at-risk” compensation. The AIP2021 Bonus Plan is utilized to reward short-term performance achievements and to motivate and reward executives for their contributions toward meeting financial and strategic goals.


For Messrs. Bergeron and Smith, Couche-Tardthe NEOs, the Topper Group determined to include, as part of their compensation, the 2017 AIP plan2021 Bonus Plan for the Couche-Tard fiscal year ending on April 29, 2018, includingDecember 31, 2021. As approved by the followingBoard on February 25, 2021, the 2021 Bonus Plan included financial and operational objectives, each with a specified percentage weighting, based on the achievement of (i) Adjusted EBITDA (40%); (ii) acquisition integration (30%); wholesale contract conversion (10%); wholesale volume conversion (10%); and non-core real estate asset divestiture (10%). As set forth in the 2021 Bonus Plan, the EBITDA target bonus will be paid on a sliding scale. All other metrics will be paid only upon achievement of the target. The weight of the metrics is 100% and the payout range is 0-110%.

Under the 2021 Bonus Plan, Mr. Nifong could achieve earnings of 100% of base salary. Ms. Topper could achieve earnings of 50% (prorated) of her base salary. Mr. Benfield could achieve earnings of 35% of his base salary. Mr. Hrinak could achieve earnings of 75% of his base salary. Mr. Lynch could achieve earnings of 50% of his base salary. Mr. Naylor could achieve earnings of 40% (prorated) of his base salary. Mr. Javidi could have achieved earnings of 50% of his base salary.

The purpose of the 2021 Bonus Plan is to motivate executives to achieve objectives with a higher degree of difficulty and thereby achieve or exceed the business plan of the Partnership.

Under the 2021 Bonus Plan, the attainment of performance metrics:

2017 Performance Metrics

% Weight

Why Performance Metric Is Used

Payout Range

Financial objectives based on the achievement of (i) the business unit’s budgeted earnings (60%); and (ii) Couche-Tard’s budgeted net earnings (40%). If the financial objectives are met at less than 90%, no bonus is paid on the financial objectives component

If the budgeted net earnings of Couche-Tard are attained at 90%, bonus should be 10% on the financial objectives component and scaled-up by 10% for each additional percentage point up to a maximum of 250% for Mr. Bergeron and 130% for Mr. Smith of the financial objectives component when the budgeted

net earnings reaches a threshold of 130% for Mr. Bergeron and 110% for Mr. Smith

75%

The purpose of this performance metric is to motivate executives to achieve objectives with a higher degree of difficulty and thereby achieve or exceed the business plan of Couche-Tard.

0 – 250%

KRAs is a metric that includes personal objectives established at the beginning of the measurement period

25%

0 – 100%

Performance metrics and the achievement factor will be calculatedare determined once the measurement period ends by April 29, 2018.on December 31, 2021. Based on the metrics, weightings assigned and results achieved, the payout under the 2021 Bonus Plan for executive officers would be 72.5% of the target bonus amount. In evaluating the performance of personnel under the plan and making its determination of payment amounts, the Board considered the extraordinary efforts of personnel in the successful execution of the transformational transactions of 2021. Furthermore, the Board also considered the exceptional efforts of personnel in ensuring the operational continuity of the Partnership throughout the year despite the continued challenges of the COVID-19 Pandemic. In light of these factors, the Board approved an additional discretionary bonus component for the incentive plan for certain members of senior management. For non-senior management personnel, the bonus plan included departmental goals for each department that were weighted to arrive at a target bonus amount. Overall, the plan paid at a level of 76% of target bonus, with certain personnel at either higher or lower amounts based on their individual and department level performance.


Name

 

2021 Annual

Base Salary(1)

 

 

Target Bonus Plan

as a % of

Base Salary

 

 

Bonus Plan Target

at 100%

 

 

2021 Short Term Incentive Payment Approved (2)(3)(4)(5)

 

Charles M. Nifong, Jr.

 

$

500,000

 

 

 

100

%

 

$

500,000

 

 

$

362,500

 

Maura Topper

 

 

300,000

 

 

 

50

%

 

 

150,000

 

 

 

92,308

 

Jonathan E. Benfield

 

 

195,700

 

 

 

35

%

 

 

68,495

 

 

 

51,457

 

David F. Hrinak

 

 

233,000

 

 

 

75

%

 

 

174,750

 

 

 

201,694

 

Keenan D. Lynch

 

 

269,440

 

 

 

50

%

 

 

134,720

 

 

 

134,720

 

Matthew Evan Naylor

 

 

325,000

 

 

 

40

%

 

 

130,000

 

 

 

7,867

 

Eric M. Javidi

 

 

300,000

 

 

 

50

%

 

 

150,000

 

 

 

 

 

Name

 

2017 Annual

Base Salary

Post-Merger

 

 

Target AIP

as a % of

Base Salary

 

 

AIP Target

at 100%

 

Jeremy L. Bergeron

 

$

300,000

 

 

 

60

%

 

$

180,000

 

Evan W. Smith

 

 

215,500

 

 

 

40

%

 

 

86,200

 

(1)

The amounts shown represent annualized base salary, not the portion allocated to the Partnership.

(2)

The amounts shown will be paid in 2022.

(3)

For Messrs. Hrinak and Lynch and Ms. Topper the amounts include an additional discretionary bonus approved by the Board.

(4)

For Messrs. Nifong, Benfield, Hrinak, Lynch and Naylor and Ms. Topper, the amounts will be paid as follows: the first $25,000 in cash and the remainder of the bonus will be paid 50% in cash and 50% in fully vested common units. The number of common units will be determined on a 20-day volume weighted average price through February 24, 2022 with a payment date on or before March 18, 2022. Mr. Javidi resigned effective April 16, 2021, and is therefore not eligible to receive a bonus.

(5)

Amounts for Mr. Naylor and Ms. Topper are prorated based on their dates of employment

Post-Merger Long-Term Incentive Compensation: Couche-Tard Equity Awards and CrossAmericaCompensation

Grants of Equity Awards

GrantsUnder the Lehigh Gas Partners LP 2012 Incentive Award Plan, in 2021, an aggregate of Couche-Tard Equity Awards

In 2017, Messrs. Bergeron and Smith received grants of Phantom Stock Units (“Couche-Tard PSUs”), which were granted in a percentage of base salary considering the position held by the executive. PSUs vest in three years less a day from the grant date and are payable in cash upon vesting. The Couche-Tard PSU payment is subject to two objectives, one related to employment service (35%) and the other based on Couche-Tard’s performance (65%). The performance objectives are determined at the time of the Couche-Tard PSU grant. The performance objectives are based on financial and competitive components. The degree of difficulty in the nature of these performance objectives is such that their attainment is not guaranteed. The Couche-Tard PSU grant price and payment price, as established, should not be less than the weighted average closing price for a board lot of the Couche-Tard Subordinate Voting Shares traded on the Toronto Stock Exchange for the five trading days preceding the date of grant or date of payment, as applicable.

Grants of CrossAmerica Equity Awards

In 2017, no CrossAmerica25,526 equity awards were granted to executive officers Post-Merger. Post-Merger, non-employee directors of the Board received CrossAmerica equity award grantsMessrs. Nifong, Lynch and Naylor, and Ms. Topper in the form of phantom units for their serviceTime-Based Phantom Units (“TBUAs”) with associated Distribution Equivalent Rights (“DERs”). Of the total number of TBUAs granted, 50% will vest one-third on the Board.


Other Benefits

During 2017, our NEOs, except for Mr. McCure, were eligible to participate in the CST Brands Savings Plan (“CST 401(k)”), a qualified “Safe Harbor” 401(k) retirement plan. All contributions made under CST 401(k) were 100% vested at all times. Messrs. Bergeron and Smith were eligible to participate in the CST 401(k)each December 31 over three years until December 31, 2017.2024 if the executive remains employed over the vesting term, and 50% will vest upon death, disability or retirement, as long as such retirement is not adverse to the interests of the Partnership, as determined by the Board in its sole discretion.

Pre-Merger, someIn addition, Performance Based Awards (“PBUAs”) were granted to Messrs. Nifong, Lynch and Naylor, and Ms. Topper with a target dollar value of our NEOs were eligible$375,000, $101,040, $81,250 and $135,000, respectively, and will be calculated in dollar amounts and then converted into common units, or cash, or both, at the discretion of the Board, based on attainment of the Performance Goals as described below. The PBUAs vest on December 31, 2024. The PBUAs are weighted 65% for Increase of Funds Flow from Operations per Unit and 35% for Partnership Leverage, with performance measured for the period from January 1, 2022 to participateDecember 31, 2024 (“Measurement Period”) and the reference period ending on December 31, 2021.

Increase in Funds Flow from Operations per Unit

The target value with respect to Increase in Funds Flow from Operations per Unit is determined as follows. First, the average Funds Flow from Operations per Unit will be calculated for the Measurement Period. Next, that number will be divided by the Funds Flow from Operations per Unit for the twelve-month period ending on December 31, 2021 as the reference period. The payout percentage for Increase in Funds Flow from Operations per Unit will range from 0-200% of 65% of the Initial Dollar Target Amount.

“Funds Flow from Operations per Unit” is defined as distributable cash flow per Unit, excluding maintenance capital expenditures or any other such capital expenditures typically included in calculating distributable cash flow.

Partnership Leverage

The target value associated with Partnership Leverage is determined as follows. First, Partnership Leverage will be calculated for each of the respective twelve-month periods ending on December 31, 2022, 2023 and 2024. Next, “Average Partnership Leverage” will be calculated as the sum of three times the Leverage for the year ending December 31, 2024, plus two times the Leverage for the year ending December 31, 2023, plus the Leverage for the year ending December 31, 2022, divided by six (i.e., Average Partnership Leverage will be a weighted average with greater emphasis given to the latter years in the CST Brands Excess Savings Plan (the “Excess Savings Plan”), which was a non-qualified deferred compensation program that provides benefits to CST employees whose annual contributions to CST Brands Savings Plan are subject to regulatory limitations. All balances under the Excess Savings Plan were paid at the Merger to all Participants, including someMeasurement Period). The payout percentage for Partnership Leverage will range from 0-200% of our NEOs.

Effective January 1, 2016, certain employees, including some of our NEOs, were eligible to participate in the CST Nonqualified Deferred Compensation Plan (the “NQDC”) pursuant to which NEOs were allowed the opportunity to defer up to 75% of their base salary, up to 100% of their annual bonus and up to 100% of their annual grant of CST RSUs for that calendar year. Pursuant to the Merger Agreement, the CST Compensation Committee approved the termination35% of the NQDC upon closingInitial Dollar Target Amount.


“Partnership Leverage” is defined as the ratio of the Merger. All deferralsPartnership’s total debt as of base salary and excess savings plan accounts were 100% vested and vesting of deferrals of other bonus or equity awards wasa specified date (as determined in accordance with the termsPartnership’s GAAP financial statements) divided by EBITDA for the twelve-month period prior to such specified date. In case of acquisitions, EBITDA will be calculated on a pro forma basis for such acquisitions, providing that the debt incurred for such acquisitions is reflected in the total debt amount.

Distributable cash flow per Unit and EBITDA are calculated consistent with the Partnership’s financial information filed with the Securities and Exchange Commission.

Other Benefits

All NEOs were eligible after completing one year of service to participate in the Dunne Manning 401(k) plan, a qualified safe harbor plan with 100% match of employee contributions up to 4% of the applicable awards.

Pre-Merger, some of ourexecutive’s base salary. All NEOs also receive the same benefits as those generally available to other employees of CST, which were in place until December 31, 2017. Both CST subsidized and voluntary benefit programs were provided and included medical, dental, vision, life insurance and disability coverage.

Post-Merger, Messrs. Bergeron and Smith were eligible to receive the same benefits as those generally available to Circle K executives, including a company vehicle as well as other Circle K subsidized and voluntary benefit programs, including medical, dental, vision, life insurance,and disability coverage and financial planning. Mr. McCure was also eligible to receive the same benefits as those generally available to Circle K executives; however, those benefits were not allocated to the Partnership as part of the Amended Omnibus Agreement nor did the General Partner require the Partnership to reimburse Mr. McCure’s benefit amounts.  insurance.

Other Compensation Policies and Practices

Insider Trading Policy

We maintain an insider trading policy (the “Insider Trading Policy”) that governs trading in our units by directors of the Board and executive officers of the General Partner and Couche-Tard, as well as certain other employees who may have regular access to material non-public information about us. These policies include pre-clearance requirements for all trades and periodic trading “black-out” periods designed with reference to our quarterly financial reporting schedule.

Restrictions on Hedging, Pledging and Other Transactions

Our Insider Trading Policy prohibits “Covered Persons” from (a) speculative transactions such as short sales, puts, calls or other similar derivative transactions, hedging or monetization transactions with respect to the Partnership securities; (b) holding securities of the Partnership in a margin account; and (c) pledging Partnership securities as collateral for loans. For purposes of the Insider Trading Policy, Covered Persons are directors of the Partnership and our General Partner, executive officers of the Partnership or DMI or their affiliates, including our General Partner and those employees who have, or have access to, certain financial information regarding the Partnership and are designated as Covered Persons (and in each case their family members and controlled entities within the meaning of the Insider Trading Policy). Transactions that are otherwise prohibited by our Insider Trading Policy may be approved by the General Counsel of the General Partner, as the compliance officer of our Insider Trading Policy. Compliance with these policies is monitored by the Board. A copy of our Insider Trading Policy is available in its entirety on the CrossAmerica Partners’ website at www.crossamericapartners.com under the “Corporate Governance” tab in the “Investors” section.


Clawback Policy

We have adopted a “clawback” policy that applies to any bonuses and other incentive and equity compensation awarded to our executive officers. This policy provides that, in the event of a material restatement of the Partnership’s financial results due to material noncompliance with certain financial reporting requirements, the Board, or the appropriate committee of the Board, will review all such incentive compensation and, if such incentive compensation would have been lower had it been calculated based on the restated results, the Board, or the appropriate committee of the Board, will (to the extent permitted by law and as appropriate under the circumstances) use reasonable efforts to seek to recover for the benefit of the Partnership all or a portion of such incentive compensation, subject to a three-year look-back period. In July 2015, the SEC proposed new Rule 10D-1 under the Exchange Act to implement the provisions of Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2012, or the Dodd-Frank Act, which requires the SEC to adopt rules relating to the disclosure of a company’s compensation recovery, or “clawback,” policies in connection with an accounting restatement. Once the SEC issues final rules regarding clawback policies, we intend to review and, if necessary, amend our policy to comply with such rules.

Impact of Regulatory Requirements

Internal Revenue CodeWe believe we are a limited partnership and not a corporation for U.S. federal income tax purposes. Therefore, we believe thatIt is not entirely clear whether the compensation paid to the NEOs is not subject to the deduction limitations under Section 162(m) of the Internal Revenue Code and therefore is generally fully deductibleCode. If we are required to be treated as a corporation for U.S. federal income tax purposes.purposes, however, the limitations of Section 162(m) would apply. In any event, compensation decisions in respect of the NEOs will be made in a manner designed to best incentivize appropriate performance.

Non-Qualified Deferred Compensation. CompensationCertain payments under the Partnership’s Executive Income Continuity Plan (the “EICP”) may be subject to the tax rules applicable to non-qualified deferred compensation arrangements of the American Jobs Creation Act of 2004. We believe we are in compliance with such statutory provisions.

Accounting for Stock-Based Compensation. CompensationWe account for stock-based compensation in accordance with the requirements of FASB ASC Topic 718 for all of our stock-based compensation plans. See Note 18 of the notes19 to the financial statements for a discussion of all assumptions made in the calculation of this amount.stock awards to our NEOs.


Risk Assessment

The ACT HR Committee oversees the risk assessment of the compensation programs, policies and practices for all employees. A discussion of this risk assessment is included in Couche-Tard’s Compensation Discussion and Analysis in Part III of Couche-Tard’s Management Proxy Circular disclosed on July 7, 2017, which is available on the Investors Relations section of the Couche-Tard website at www.corpo.couche-tard.com.

Compensation Committee Report*

The members of the Board have reviewed and discussed the Compensation Discussion and Analysis included in this Annual Report on Form 10-K with management and, based on such review and discussions and such other matters the Board deemed relevant and appropriate, the Board has approved the inclusion of the Compensation Discussion and Analysis in this Annual Report on Form 10-K.

 

Members of the Board:

Timothy A. MillerJoseph V. Topper, Jr.

Jeremy L. Bergeron

Jean BernierJohn B. Reilly, III

Justin A. Gannon

Mickey Kim

John B. Reilly, IIIKeenan D. Lynch

Claude TessierCharles M. Nifong, Jr.

Joseph V.Maura Topper Jr.

Kenneth G. Valosky

*

As a publicly traded limited partnership, we are not required to and do not have a compensation committee. Accordingly, the Compensation Committee Report required by Item 407(e)(5) of Regulation S-K is given by the Board as specified by Item 407(e)(5)(i) of Regulation S-K.

As a publicly traded limited partnership, we are not required to and do not have a compensation committee. Accordingly, the Compensation Committee Report required by Item 407(e)(5) of Regulation S-K is given by the Board as specified by Item 407(e)(5)(i) of Regulation S-K.


The foregoing compensation committee report is not “soliciting material,” is not deemed filed with the SEC, and is not to be incorporated by reference into any of the Partnership’s filings under the Securities Act, or the Exchange Act, respectively, whether made before or after the date of this annual report on Form 10-K and irrespective of any general incorporation language therein.

Summary Compensation Table

The following table sets forth certain information with respect to compensation of our NEOs. Except for the management fee we paid to CST and Couche-Tardthe Topper Group under the AmendedTopper Group Omnibus Agreement, we did not pay or reimburse any cash compensation amounts to or for our NEOs in 2017. 

2021. The amounts shown for Messrs. Hrinak and Lynch and Ms. Topper represent only that portion allocable to the Partnership.

Name and Principal Position

 

Year

 

Salary

($)

 

 

Bonus

($)

 

 

Stock

Awards

($) (1)(2)

 

 

Options

Awards

($) (1)(3)

 

 

Non-Equity

Incentive Plan

Compensation

($) (4)

 

 

Change in

Pension Value

and Non-

qualified

Deferred

Compensation

Earnings

($) (5)(6)

 

 

All Other

Compensation

($) (7)

 

 

Total

($) (8)

 

Jeremy L. Bergeron

 

2017

 

 

349,711

 

 

 

 

 

 

1,009,784

 

 

 

 

 

 

162,367

 

 

 

523

 

 

 

522,454

 

 

 

2,044,839

 

   President and Chief Executive

 

2016

 

 

385,000

 

 

 

21,600

 

 

 

449,235

 

 

 

224,595

 

 

 

225,225

 

 

 

5,279

 

 

 

14,517

 

 

 

1,325,451

 

   Officer

 

2015

 

 

359,296

 

 

 

21,600

 

 

 

248,082

 

 

 

175,219

 

 

 

224,250

 

 

 

3,986

 

 

 

74,841

 

 

 

1,107,274

 

Evan W. Smith (9)

 

2017

 

 

114,935

 

 

 

 

 

 

113,508

 

 

 

 

 

 

 

 

 

 

 

 

251,789

 

 

 

480,232

 

   Vice President of Finance and

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   Chief Financial Officer

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Clayton E. Killinger (10)

 

2017

 

 

85,219

 

 

 

 

 

 

361,027

 

 

 

 

 

 

61,547

 

 

 

1,963

 

 

 

590,273

 

 

 

1,100,029

 

   Former Vice President,

 

2016

 

 

656,500

 

 

 

 

 

 

962,955

 

 

 

481,442

 

 

 

443,138

 

 

 

17,368

 

 

 

13,760

 

 

 

2,575,163

 

   Chief Financial Officer

 

2015

 

 

654,981

 

 

 

 

 

 

488,041

 

 

 

732,015

 

 

 

438,750

 

 

 

16,489

 

 

 

17,617

 

 

 

2,347,893

 

Matthew McCure (11)

 

2017

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   Vice President Operations

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

David F. Hrinak

 

2017

 

 

191,764

 

 

 

50,000

 

 

 

399,675

 

 

 

 

 

 

 

 

 

100

 

 

 

1,865,208

 

 

 

2,506,747

 

   Former Executive Vice

 

2016

 

 

371,300

 

 

 

50,000

 

 

 

259,968

 

 

 

129,966

 

 

 

200,502

 

 

 

4,252

 

 

 

13,648

 

 

 

1,029,636

 

   President, Chief

 

2015

 

 

361,118

 

 

 

50,000

 

 

 

491,003

 

 

 

211,408

 

 

 

196,500

 

 

 

 

 

 

2,421

 

 

 

1,312,450

 

   Operations Officer

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Hamlet T. Newsom, Jr. (10)

 

2017

 

 

127,536

 

 

 

 

 

 

159,667

 

 

 

 

 

 

61,406

 

 

 

1,112

 

 

 

560,358

 

 

 

910,080

 

   Former Vice President,

 

2016

 

 

318,000

 

 

 

 

 

 

137,854

 

 

 

68,915

 

 

 

143,100

 

 

 

2,120

 

 

 

11,307

 

 

 

681,296

 

   General Counsel,

 

2015

 

 

236,301

 

 

 

 

 

 

88,554

 

 

 

132,714

 

 

 

117,750

 

 

 

 

 

 

9,925

 

 

 

585,244

 

   Corporate Secretary and

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

   Chief Compliance Officer

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Name and Principal Position

 

Year

 

Salary

($)

 

 

Bonus

($) (2)

 

 

Stock

Awards

($) (3)(4)(5)

 

 

Options

Awards

($) (6)

 

 

Non-Equity

Incentive Plan

Compensation

($) (7)

 

 

All Other

Compensation

($) (8)

 

 

Total

($) (9)

 

Charles M. Nifong, Jr.,

 

2021

 

 

500,000

 

 

 

 

 

 

250,001

 

 

 

 

 

 

 

362,500

 

 

 

54,676

 

 

 

1,167,177

 

  President and Chief Executive Officer

 

2020

 

 

528,846

 

 

 

186,380

 

 

 

250,004

 

 

 

 

 

 

60,000

 

 

 

12,575

 

 

 

1,037,805

 

Maura Topper, Chief Financial Officer

  (1)

 

2021

 

 

103,635

 

 

 

50,000

 

 

 

108,504

 

 

 

 

 

 

42,308

 

 

 

64,158

 

 

 

368,605

 

Jonathan E. Benfield,

 

2021

 

 

192,192

 

 

 

 

 

 

 

 

 

 

 

 

51,457

 

 

 

8,864

 

 

 

252,513

 

  Chief Financial Officer Retail

 

2020

 

 

186,267

 

 

 

24,868

 

 

 

 

 

 

 

 

 

7,980

 

 

 

8,987

 

 

 

228,102

 

 

 

2019

 

 

145,864

 

 

 

8,636

 

 

 

5,270

 

 

 

 

 

 

28,263

 

 

 

10,530

 

 

 

198,563

 

David F. Hrinak,

 

2021

 

 

221,350

 

 

 

75,000

 

 

 

 

 

 

 

 

 

126,694

 

 

 

1,010

 

 

 

424,054

 

  Executive Vice President

 

2020

 

 

255,150

 

 

 

72,686

 

 

 

 

 

 

 

 

 

24,570

 

 

 

1,174

 

 

 

353,580

 

Keenan D. Lynch, General Counsel and

 

2021

 

 

229,025

 

 

 

37,048

 

 

 

85,876

 

 

 

 

 

 

97,672

 

 

 

27,055

 

 

 

476,676

 

  Chief Administrative Officer

 

2020

 

 

223,843

 

 

 

41,849

 

 

 

101,036

 

 

 

 

 

 

12,933

 

 

 

77

 

 

 

379,738

 

Matthew Evan Naylor,

  Senior Vice President Retail

 

2021

 

 

23,750

 

 

 

 

 

 

81,266

 

 

 

 

 

 

7,867

 

 

 

89

 

 

 

112,972

 

Eric M. Javidi,

 

2021

 

 

92,308

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,519

 

 

 

95,827

 

  Former Chief Financial Officer (10)

 

2020

 

 

46,154

 

 

 

12,072

 

 

 

90,010

 

 

 

 

 

 

3,000

 

 

 

158

 

 

 

151,394

 

(1)

(1)

Ms. Topper was appointed Chief Financial Officer effective August 11, 2021, and as such, the amounts reflected are prorated for 2021.

(2)

For Ms. Topper, the amount represents a discretionary bonus under the 2021 Bonus Plan in the amount of $50,000. For Mr. Hrinak, the amount represents a discretionary bonus under the 2021 Bonus Plan in the amount of $75,000. For Mr. Lynch, the amount represents a discretionary bonus under the 2021 Bonus Plan in the amount of $37,048.


(3)

The amounts shown represent the grant date fair value of awards for each of the fiscal years shown computed in accordance with Financial Accounting Standard Board Accounting Standards Codification TopicASC 718, Compensation-Stock Compensation. See Note 18 of19 to the notes of our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2017 filed with the SEC for a discussion of all assumptions made in the calculation of this amount. The grant date fair value for the Performance Based Awards was $0 because the performance period commenced on January 1, 2022. The maximum amount payable pursuant to the Performance Based Awards is $750,000 for Mr. Nifong, $270,000 for Ms. Topper, $202,080 for Mr. Lynch and $162,500 for Mr. Naylor.

(2)

(4)

See the Grants of Plan-Based Awards table for more information regarding CST RSUsTBUAs and Couche-Tard PSUs units awardedthe PBUAs granted in 2017.2021.

(3)

(5)

On February 25, 2021, Ms. Topper received an equity award as a non-employee director with a grant date fair value of $27,500. The remaining grant date fair value of $81,006 represents the TUBA award received and allocable to the Partnership and is discussed in the Grants of Plan-Based Awards Table below.

(6)

There were no stock options granted to NEOs in 2017.2019, 2020 or 2021.

(4)

(7)

The amounts in this column represent cash paymentthe earned underportion of the 2015, 2016 and 2017 CST short-term incentive plansBonus Policy.

(5)

The amounts in this column represent the change in value in the Excess Savings Plan for fiscal years 2015, 2016 and 2017. See the Non-Qualified Deferred Compensation table for additional information for 2017.

(6)(8)

The General Partner does not sponsor any pension benefit plans and none of our NEOs contribute to such a plan.

(7)

The amounts listed as “All Other Compensation” for 20172021 are composed of these items:


 

All Other Compensation

 

Bergeron

 

 

Smith (9)

 

 

Killinger

 

 

Hrinak

 

 

Newsom

 

Severance

 

$

 

 

$

 

 

$

574,438

 

 

$

1,820,790

 

 

$

548,972

 

Circle K Special Consideration Payment

 

 

489,058

 

 

 

245,928

 

 

 

 

 

 

 

 

 

 

CST Savings Plan Company Matching Contribution

 

 

7,320

 

 

 

 

 

 

1,515

 

 

 

7,905

 

 

 

3,779

 

Moving Expenses

 

 

21,987

 

 

 

 

 

 

 

 

 

 

 

 

 

Payment of Accrued Vacation upon Separation

 

 

 

 

 

 

 

 

13,769

 

 

 

30,741

 

 

 

6,259

 

Premiums for group-term life insurance

 

 

1,656

 

 

 

1,064

 

 

 

317

 

 

 

965

 

 

 

622

 

Premiums for personal liability insurance

 

 

2,432

 

 

 

717

 

 

 

234

 

 

 

4,807

 

 

 

726

 

Total All Other Compensation

 

$

522,453

 

 

$

247,709

 

 

$

590,273

 

 

$

1,865,208

 

 

$

560,358

 

All Other Compensation

 

Nifong

 

 

Topper

 

 

Benfield

 

 

Hrinak

 

 

Lynch

 

 

Naylor

 

 

Javidi

 

Company Match to Defined Contribution Plan

 

 

11,600

 

 

 

4,158

 

 

 

7,724

 

 

 

 

 

 

9,755

 

 

 

 

 

 

 

Cell phone taxable compensation

 

 

900

 

 

 

311

 

 

 

900

 

 

 

855

 

 

 

147

 

 

 

69

 

 

 

242

 

Premiums for group-term life insurance

 

 

240

 

 

 

90

 

 

 

240

 

 

 

155

 

 

 

204

 

 

 

20

 

 

 

80

 

Distribution Equivalent Rights

 

 

41,936

 

 

 

3,101

 

 

 

 

 

 

 

 

 

16,948

 

 

 

 

 

 

3,197

 

Director Compensation (cash)

 

 

 

 

 

56,498

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total All Other Compensation

 

$

54,676

 

 

$

64,158

 

 

$

8,864

 

 

$

1,010

 

 

$

27,055

 

 

$

89

 

 

$

3,519

 

(8)

(9)

Represents amounts allocated to the Partnership under the AmendedTopper Omnibus Agreement.

(9)

(10)

Mr. Smith became an executive officer on June 28, 2017, therefore, summary compensation information is presented onlyJavidi resigned effective April 16, 2021, and as such, the amounts reflected are prorated for the period June 28, 2017 through December 31, 2017.2021.

(10)

The amounts shown for 2017 represent the portion of compensation paid to Messrs. Killinger and Newsom by CST that was allocated to us under the Amended Omnibus Agreement. The percentage of compensation allocated to us under the Amended Omnibus Agreement was 25% and 75% of total compensation paid for Mr. Killinger and Mr. Newsom, respectively, in 2017.

(11)

None of Mr. McCure’s compensation was allocated to the Partnership as part of the Management Fee under the Amended Omnibus Agreement nor did the General Partner require the Partnership for reimbursement of Mr. McCure’s compensation.

Bergeron Retention Bonus

At the completion of the Merger, Mr. Bergeron was awarded a retention bonus of $978,116 payable in equal installments in each of July 2017 and July 2018; provided that, in the event Couche-Tard sells its interest in the Partnership and Mr. Bergeron is discharged prior to July 2018, all remaining payments will be accelerated.

Smith Retention Bonus

At the completion of the Merger, Mr. Smith was appointed Vice President Finance and Chief Financial Officer, and was awarded a retention bonus of $737,784 payable in equal installments in each of July 2017, July 2018 and July 2019; provided that, payment of (i) the remaining amount of the retention bonus; and (ii) a lump sum equal to the value remaining under Couche-Tard’s medical, dental and other insurance benefits will be accelerated in the event Couche-Tard sells its interest in the Partnership and Mr. Smith is discharged prior to July 2019.


Grants of Plan-Based Awards

The following table provides information regarding grants of plan-based awards to our NEOs during fiscal year 2017.2021. All equity awards during fiscal year 2017shown were in the form of CST RSUs (Pre-Merger)TBUAs or PBUAs. For Messrs. Hrinak and Couche-Tard PSUs (Post-Merger).Lynch and Ms. Topper, full dollar values are provided and not those allocable to the Partnership as shown in the Summary Compensation Table above.

 

 

 

 

 

 

 

Estimated Future Payouts

Under Non-Equity

Incentive Plan Awards

 

 

Estimated Future Payouts

Under Equity

Incentive Plan Awards (1)

 

 

All Other

Stock Awards:

Number of

Shares of

Stock or Units

 

 

All Other

Option Awards:

Number of

Securities

Underlying

Options

 

 

Exercise

or Base

Price of

Option

Awards

 

 

Grant Date

Fair Value

of Stock

and Option

Awards

 

Name

 

Grant

Date

 

 

Threshold

($)

 

 

Target

($)

 

 

Maximum

($)

 

 

Threshold

(#)

 

 

Target

(#)

 

 

Maximum

(#)

 

 

(#) (2)

 

 

(#)

 

 

($/Sh)

 

 

($) (3)

 

Jeremy L. Bergeron

 

CST STI Plan (4)

 

 

 

 

 

2,577

 

 

 

257,725

 

 

 

515,450

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ACT AIP (5)

 

 

 

 

 

45,000

 

 

 

180,000

 

 

 

382,500

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CST LTI Plan

 

2/16/17

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

14,352

 

 

 

 

 

 

 

 

 

693,776

 

ACT LTI Plan

 

7/20/17

 

 

 

 

 

 

 

 

 

 

 

 

1,733

 

 

 

4,950

 

 

 

4,950

 

 

 

 

 

 

 

 

 

 

 

 

316,008

 

Evan W. Smith (6)

 

ACT AIP (5)

 

 

 

 

 

21,550

 

 

 

86,200

 

 

 

183,175

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ACT AIP

 

7/20/17

 

 

 

 

 

 

 

 

 

 

 

 

622

 

 

 

1,778

 

 

 

1,778

 

 

 

 

 

 

 

 

 

 

 

 

113,508

 

Clayton E. Killinger

 

CST STI Plan (4)

 

 

 

 

 

4,924

 

 

 

492,375

 

 

 

984,750

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CST LTI Plan

 

2/16/17

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

29,874

 

 

 

 

 

 

 

 

 

1,444,109

 

Matthew McCure (7)

 

CST STI Plan

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CST LTI Plan

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

David F. Hrinak

 

CST STI Plan (4)

 

 

 

 

 

2,284

 

 

 

228,360

 

 

 

456,720

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CST LTI Plan

 

2/16/17

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

8,268

 

 

 

 

 

 

 

 

 

399,675

 

Hamlet T. Newsom, Jr.

 

CST STI Plan (4)

 

 

 

 

 

1,638

 

 

 

163,750

 

 

 

327,500

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CST LTI Plan

 

2/16/17

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4,404

 

 

 

 

 

 

 

 

 

212,889

 

 

 

 

 

 

 

Estimated Future Payouts

Under Non-Equity

Incentive Plan Awards

 

 

Estimated Future Payouts

Under Equity

Incentive Plan Awards (1)

 

 

All Other

Stock Awards:

Number of

Shares of

Stock or Units (2)

 

 

Grant Date

Fair Value

of Stock

and Option

Awards (3)

 

Name

 

Grant

Date

 

 

Threshold

($)

 

 

Target

($)

 

 

 

 

Maximum

($)

 

 

Threshold

($)

 

 

Target

($)

 

 

Maximum

($)

 

 

(#)

 

 

($)

 

Charles M. Nifong, Jr.

 

CAPL 2021 Bonus Plan

 

 

 

 

 

 

 

 

 

500,000

 

 

 

 

 

550,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CAPL LTI Plan

 

10/25/2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

375,000

 

 

 

750,000

 

 

 

12,219

 

 

 

250,001

 

Maura Topper

 

CAPL 2021 Bonus Plan

 

 

 

 

 

 

 

 

 

150,000

 

 

 

 

 

165,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CAPL  LTI Plan

 

10/25/2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

135,000

 

 

 

270,000

 

 

 

4,399

 

 

 

90,004

 

Jonathan E. Benfield

 

CAPL 2021 Bonus Plan

 

 

 

 

 

 

 

 

 

68,495

 

 

 

 

 

75,345

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CAPL LTI Plan

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

David F. Hrinak

 

CAPL 2021 Bonus Plan

 

 

 

 

 

 

 

 

 

174,750

 

 

 

 

 

192,225

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CAPL LTI Plan

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Keenan D. Lynch

 

CAPL 2021 Bonus Plan

 

 

 

 

 

 

 

 

 

134,720

 

 

 

 

 

148,192

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CAPL LTI Plan

 

10/25/2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

101,040

 

 

 

202,080

 

 

 

4,938

 

 

 

101,031

 

Matthew Evan Naylor

 

CAPL 2021 Bonus Plan

 

 

 

 

 

 

 

 

 

130,000

 

 

 

 

 

143,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CAPL LTI Plan

 

11/30/2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

81,250

 

 

 

162,500

 

 

 

3,970

 

 

 

81,266

 

Eric M. Javidi

 

CAPL 2021 Bonus Plan

 

 

 

 

 

 

 

 

150,000

 

 

 

 

 

165,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CAPL  LTI Plan

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)

Represents an award of Couche-Tard PSUsPBUAs under the Couche-Tard long-term incentive plan. 35%The PBUAs are granted and calculated in dollar amounts and then will convert into common units or cash, or both, at the discretion of the Couche-Tard PSUs are subject to service-based restrictions until July 19, 2020 and 65% vest in full three (3) years from the date of grantBoard, based on the achievementattainment of certainthe performance goals. Therefore, the columns in this table represent the dollar amounts and not the number of units. The threshold amount representsPBUAs vest on December 31, 2024. The PBUAs are weighted 65% for Increase of Funds Flow from Operations per Unit and 35% for Partnership Leverage, with a performance period from January 1, 2022 to December 31, 2024 and the service-based portion of the award, which will vest without regard to company performance if the executive remains employed over the vesting term.reference period ending on December 31, 2021.

(2)

Represents an award of CST RSUsTBUAs under the CST long-term incentive program. At the completion of the Merger, these CST RSUs were converted into the right to receive a cash payment equal to the product of (x) the number of shares of CST common stock subject to suchplan. Of this award, as of the completion of the Merger and (y) the merger consideration, but such awards remained subject to the same vesting terms and payment schedule as those set forth in the original CST RSU award agreement; provided that, upon completion of the Merger, such award50% will vest in fulla third each on December 31, 2022, 2023 and 2024. The remaining 50% will vest upon an involuntary termination of employment without cause,death, disability or termination for “Good Reason”, or termination due to death, “Disability” or “Retirement.”retirement with board approval.

(3)

The amounts shown represent the grant date fair value of awards for each of the fiscal years shownTBUAs computed in accordance with Financial Accounting Standards Board Accounting Standards Codification TopicASC 718, Compensation-Stock Compensation.

(4)

See Note 19 to the financial statements for a discussion of all assumptions made in the calculation of this amount. The amounts in these rows represent the potential payouts under the 2017 CST short term incentive plan ("CST STI Plan"). The threshold payout is the minimum amount payable, the target payout represents the amount payable for achieving the target level of performance, and the maximum payout represents the maximum amount payable. Since employment for Messrs. Killinger and Newsom was terminated at the Merger, their severance payments, pursuant to their separation agreements, included payment of a pro-rata bonus at target ("CST Bonus") under the CST STI Plan, a portion of which was allocated to us under the Amended Omnibus Agreement. Although employment for Mr. Hrinak was also terminated at the Merger, he was not eligible to receive a pro-rata CST Bonus, as per the terms of the EICP. Mr. Bergeron received a pro-rata amount of the CST Bonus with an achievement factor of 126%grant date fair value for the PBUAs was $0 because the performance period ending at the closing of the Merger, which was paid in December 2017 and allocated to us under the Amended Omnibus Agreement. Of their total compensation, 25% of Mr. Killinger’s compensation and 75% of Mr. Newsom’s compensation was allocated to us under the Amended Omnibus Agreement. Therefore, the same percentage of their respective Grant Date Fair Value of Stock Awards is included in the Summary Compensation Table for each of Messrs. Killinger and Newsom.commenced on January 1, 2022.


(5)

The amounts in these rows represent the potential payouts under the Couche-Tard AIP, which will be earned based on performance for the Couche-Tard 2018 fiscal year. The threshold payout is the minimum amount payable, the target payout represents the amount payable for achieving the target level of performance, and the maximum payout represents the maximum amount payable.

(6)

Mr. Smith became an executive officer on June 28, 2017, therefore, compensation information is presented only for the period June 29, 2017 through December 31, 2017.

(7)

None of Mr. McCure’s compensation was allocated to the Partnership as part of the Management Fee under the Amended Omnibus Agreement nor did the General Partner require the Partnership to reimburse any of Mr. McCure’s compensation.

Outstanding Equity Awards at Fiscal Year End

The following table provides information regarding the number of outstanding equity awards held by our NEOs at December 31, 2017.2021. For Messrs. Hrinak and Lynch and Ms. Topper, full dollar values are provided and not those allocable to the Partnership.

 

 

Stock Awards (1)

 

Name

 

Number of

Shares or Units

of Stock That

Have Not

Vested

(#)

 

 

Market Value

of Shares or

Units of Stock

That Have Not

Vested

($)

 

 

Equity

Incentive Plan

Awards

Number

of Unearned

Shares, Units,

or Other Rights

That Have Not

Vested

(#)

 

 

Equity

Incentive Plan

Awards: Market

or Payout

Value of

Unearned

Shares, Units

or Other Rights

That Have Not

Vested (4)(5)

($)

 

Charles M. Nifong, Jr.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CAPL 2021 Award (2)

 

 

12,219

 

 

 

232,894

 

 

 

 

 

 

375,000

 

CAPL 2020 Award (3)

 

 

14,096

 

 

 

268,670

 

 

 

 

 

 

375,000

 

Maura Topper

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CAPL 2021 Award (2)

 

 

4,399

 

 

 

83,845

 

 

 

 

 

 

135,000

 

CAPL 2020 Award (3)

 

 

 

 

 

 

 

 

 

 

 

 

Jonathan E. Benfield

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CAPL 2021 Award

 

 

 

 

 

 

 

 

 

 

 

 

CAPL 2020 Award

 

 

 

 

 

 

 

 

 

 

 

 

David F. Hrinak

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CAPL 2021 Award

 

 

 

 

 

 

 

 

 

 

 

 

CAPL 2020 Award

 

 

 

 

 

 

 

 

 

 

 

 

Keenan D. Lynch

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CAPL 2021 Award (2)

 

 

4,938

 

 

 

94,118

 

 

 

 

 

 

101,040

 

CAPL 2020 Award (3)

 

 

5,697

 

 

 

108,585

 

 

 

 

 

 

101,040

 

Matthew Evan Naylor

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CAPL 2021 Award (2)

 

 

3,970

 

 

 

75,668

 

 

 

 

 

 

81,250

 

CAPL 2020 Award

 

 

 

 

 

 

 

 

 

 

 

 

Eric M. Javidi

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CAPL 2021 Award

 

 

 

 

 

 

 

 

 

 

 

 

CAPL 2020 Award

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Option Awards

 

 

Stock Awards (1)

 

Name

 

Number of

Securities

Underlying

Unexercised

Options

Exercisable

(#)

 

 

Number of

Securities

Underlying

Unexercised

Options

Unexerciseabe

(#)

 

 

Option

Exercise

Price

($)

 

 

Option

Expiration

Date

 

 

Number of

Shares or Units

of Stock That

Have Not

Vested

(#) (2)

 

 

Market Value

of Shares or

Units of Stock

That Have Not

Vested

($)

 

 

Equity

Incentive Plan

Awards

Number

of Unearned

Shares, Units,

or Other Rights

That Have Not

Vested (3)

 

 

Equity

Incentive Plan

Awards: Market

or Payout

Value of

Unearned

Shares, Units

or Other Rights

That Have Not

Vested

 

Jeremy L. Bergeron

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,387

 

 

 

32,941

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4,950

 

 

 

324,671

 

Evan W. Smith

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Clayton E. Killinger

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,778

 

 

 

116,619

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Matthew McCure

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

David F. Hrinak

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Hamlet T. Newsom, Jr.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)

(1)

The amounts in the Stock Awards sectionbelow include CrossAmerica Phantom UnitsTBUAs and Couche-Tard PSUs.PBUAs.

(2)

Fifty percent of the TBUAs will vest a third each on December 31, 2022, 2023 and 2024. The remaining 50% will vest upon death, disability or retirement with board approval. The market value is based on the December 31, 2021, closing unit price of our common units.

(2)

CrossAmerica Phantom Units vest in one-third (1/3) increments every year for three years(3)

Represents the unvested portion of fifty percent of the TBUAs that vests a third each on December 31, 2022 and 2023. The first third vested on December 31, 2021. The remaining 50% vests upon death, disability or retirement with board approval. The market value is based on the first, second and third anniversariesDecember 31, 2021 closing unit price of the date of grant.our common units.

(4)

Represents the target dollar amount of the PBUAs that will convert into common units or cash, or both, at the discretion of the Board, based on attainment of the Performance Goals. The PBUAs vest on December 31, 2024. The PBUAs are weighted 65% for Increase of Funds Flow from Operations per Unit and 35% for Partnership Leverage, with a performance period from January 1, 2022, to December 31, 2024, and the reference period ending on December 31, 2021.

(3)

35%(5)

Represents the target dollar amount of the Couche-Tard PSUs are subject to service-based restrictions until July 19, 2020 and 65% vest in full three (3) years fromPBUAs that will convert into common units or cash, or both, at the datediscretion of grantthe Board, based on attainment of the achievementPerformance Goals. The Performance Based Awards vest on December 31, 2023. The PBUAs are weighted 65% for Increase of certainFunds Flow from Operations per Unit and 35% for Partnership Leverage, with a performance goals.period from January 1, 2021, to December 31, 2023, and the reference period ending on December 31, 2020.


Option Exercises and Equity Vested

The following table sets forth information regarding vesting during 2021 of awards of the Partnership as well as CST equity awards forheld by our NEOs forin respect of Partnership service. For Messrs. Hrinak and Lynch and Ms. Topper, full dollar values are provided and not those allocable to the fiscal year ended December 31, 2017.

Partnership.

 

 

Option Awards

 

 

Stock Awards

 

Name

 

Number of

Shares or Units

Acquired on

Exercise

(#)

 

 

 

Value Realized

on Exercise

($)

 

 

Number of

Shares or Units

of Stock

Acquired on

Vesting

(#)

 

 

 

Value Realized

on Vesting

($)

 

Jeremy L. Bergeron

 

 

 

 

 

 

 

 

 

1,387

 

(1)

 

 

34,593

 

Evan W. Smith (4)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Clayton E. Killinger

 

 

186,415

 

(2)

 

 

2,248,656

 

 

 

73,118

 

(3)

 

 

3,545,222

 

Matthew McCure (4)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

David F. Hrinak

 

 

31,344

 

(5)

 

 

254,407

 

 

 

21,025

 

(6)

 

 

1,019,848

 

Hamlet T. Newsom, Jr.

 

 

 

 

 

 

 

 

 

6,400

 

(7)

 

 

310,592

 


 

 

Stock Awards

 

Name

 

Number of

Shares or Units

of Stock

Acquired on

Vesting

(#)

 

 

 

Value Realized

on Vesting

($)

 

Charles M. Nifong, Jr.

 

 

5,914

 

(1)

 

 

108,995

 

 

 

 

2,810

 

(2)

 

 

53,730

 

Maura Topper

 

 

1,509

 

(3)

 

 

28,520

 

Jonathan E. Benfield

 

 

183

 

(1)

 

 

3,373

 

David F. Hrinak

 

 

2,011

 

(1)

 

 

37,063

 

Keenan D. Lynch

 

 

729

 

(1)

 

 

13,435

 

 

 

 

1,139

 

(2)

 

 

21,709

 

Matthew Evan Naylor

 

 

 

 

 

 

 

Eric M. Javidi

 

 

 

 

 

 

 

(1)

(1)

Represents an amount that includes one third (1/3)the portion of an award of phantomthe bonus under the 2020 Performance Based Bonus Compensation Policy paid in fully vested common units in the Partnership vested on April 14, 2017, representing 1,387 units.2021.

(2)

Represents one third of the TBUA phantom unit award granted by the Partnership on November 9, 2020, that vested on December 31, 2021.

(2)

Upon the CIC, all outstanding stock options were cancelled and cashed out. The total number of shares includes 25,000 stock options granted on May 6, 2013; 50,043 stock options granted on March 10, 2014; 67,842 stock options granted on March 12, 2015; and 43,530 stock options granted on March 8, 2016.

(3)

(3)

RepresentsOn February 25, 2021, as a non-employee director, Ms. Topper received an amount that includes one third (1/3)equity award of a CST RSU award vested on March 10, 2017, representing 6,294 shares of CST common stock; one third (1/3) of a CST RSU award vested on March 12, 2017, representing 3,929 shares of CST common stock; one third (1/3) of a CST RSU award vested on March 8, 2017, representing  4,141 shares of CST common stock; one third (1/3) of a CST RSU award vested on June 28, 2017, representing  3,929 shares of CST common stock; two thirds (2/3) of a CST RSU award vested on June 28, 2017, representing  8,282 shares of CST common stock; a CST market share units award granted on March 8, 2016$27,500 which vested in full on June 28, 2017 representing 16,669 shares of CST common stock; and an CST RSU award vested in full on June 28, 2017, representing 29,874 shares of CST common stock.July 23, 2021.

(4)

Mr. Smith became an executive officer on June 28, 2017, therefore, compensation information is presented only for the period June 29, 2017 through December 31, 2017. None of Mr. McCure’s compensation was allocated to the Partnership as part of the Management Fee under the Amended Omnibus Agreement nor did the General Partner require the Partnership for reimbursement of Mr. McCure’s compensation.

(5)

Upon the completion of the Merger, all outstanding CST stock options were cancelled and cashed out. The total number of shares includes 19,593 stock options granted on March 12, 2015 and 11,751 stock options granted on March 8, 2016.

(6)

Represents an amount that includes one third (1/3) of a CST RSU award vested on March 12, 2017, representing 1,135 shares of CST common stock; one third (1/3) of a CST RSU award vested on March 8, 2017, representing  1,118 shares of CST common stock; one third (1/3) of a CST RSU award vested on June 28, 2017, representing  1,135 shares of CST common stock; one third (1/3) of a CST RSU award vested on June 28, 2017, representing  2,634 shares of CST common stock; two thirds (2/3) of a CST RSU award vested on June 28, 2017, representing  2,236 shares of CST common stock; a CST market share units award granted on March 8, 2016 vested in full on June 28, 2017 representing 4,499 shares of CST common stock; and an CST RSU award vested in full on June 28, 2017, representing 8,268 shares of CST common stock.

(7)

Represents an amount that includes one third (1/3) of a CST RSU award vested on June 28, 2017, representing 889 shares of CST common stock; a CST market share units award granted on March 8, 2016 vested in full on June 28, 2017 representing 1,107 shares of CST common stock; and an CST RSU award vested in full on June 28, 2017, representing 4,404 shares of CST common stock.


Non-Qualified Deferred Compensation

The following tables include non-qualified deferred compensation.

Pre-Merger Excess Savings Plan

CST established the Excess Savings Plan, which was a non-qualified deferred compensation program to provide benefits to CST employees whose annual contributions to the CST Brands Savings Plan (a qualified 401(k) plan) were subject to the regulatory limitations. Under the Excess Savings Plan, CST made annual contributions in the first quarter of each year for the previous fiscal year. Some of our NEOs participated in the Excess Savings Plan during the fiscal year ended December 31, 2017. The following table provides information concerning the contributions, earnings, withdrawals and distributions in the Excess Savings Plan during the fiscal year ended December 31, 2017.

Name

 

Executive

contributions

in last FY ($)

 

 

Registrant

contributions in

last FY ($) (1)

 

 

Aggregate

earnings in last

FY ($) (1)

 

 

Aggregate

withdrawals/

distributions ($)

 

 

Aggregate

balance at last

FYE ($)

 

Jeremy L. Bergeron

 

 

 

 

 

305

 

 

 

218

 

 

 

9,787

 

 

 

 

Evan W. Smith

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Clayton E. Killinger

 

 

 

 

 

6,565

 

 

 

1,288

 

 

 

62,550

 

 

 

 

David F. Hrinak

 

 

 

 

 

 

 

 

100

 

 

 

4,352

 

 

 

 

Hamlet T. Newsom, Jr.

 

 

 

 

 

1,260

 

 

 

223

 

 

 

3,603

 

 

 

 

(1)

The sum of the amounts in these columns is included in the "Change in Pension Value and Non-Qualified Deferred Compensation Earnings" for 2017 in the Summary Compensation Table for each NEO.

Pre-Merger Non-Qualified Deferred Compensation Plan

Some of our NEOs participated in the CST Non-Qualified Deferred Compensation Plan and were offered to defer up to 75% of their base salary, up to 100% of their annual bonus and up to 100% of their annual grant of CST RSUs for the year ended December 31, 2017. All deferrals of base salary were 100% vested and vesting of deferrals of other bonus or equity awards is determined in accordance with the terms of the applicable awards.

Name

 

Executive

contributions

in last FY ($) (1)

 

 

Registrant

contributions

in last FY ($)

 

 

Aggregate

Earning in

last FY ($)

 

 

Aggregate

withdrawals/

distributions ($)

 

 

Aggregate

balance at

last FYE ($)

 

Jeremy L. Bergeron

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Evan W. Smith

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Clayton E. Killinger

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

David F. Hrinak

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Hamlet T. Newsom, Jr.

 

 

8,646

 

 

 

 

 

 

33,100

 

 

 

248,889

 

 

 

 

(1)

All amounts in this column are included in the values reflected in the Summary Compensation Table for 2017 in the income category from which they were deferred.

Post-Merger Non-Qualified Deferred Compensation Plan

For the fiscal year ended December 31, 2017, Messrs. Bergeron and Smith were not participants of the Couche-Tard executive retirement plan, a non-qualified plan that provides an annual company contribution equivalent to 8% of the executive base salary into a defined contribution account.

Potential Payments upon Termination or Change in Control

Our executive officers may be entitled to certain payments upon termination of their employment under certain circumstances, in each case, as more fully described below. Any such payments that are to be made in cash will be subject to reimbursement under the AmendedTopper Group Omnibus Agreement.


Executive Income Continuity Plan (the “EICP”)

The Partnership originally adopted the EICP on May 28,in 2014 forand further amended it in 2016. Effective November 5, 2020, the Board terminated the EICP with the consent of all persons who are designated as executive officersparticipants which included all of the General Partner by resolution of the Board (the “Officers”)present NEOs other than Ms. Topper and any persons who provide management servicesMr. Naylor. As further explained below, however, Mr. Benfield remains entitled to the Partnershipcompensation and are designated as plan participants by the Board (each a “Participant”).

Mr. Hrinak, who was our Executive Vice President and Chief Operating Officer until his termination on June 28, 2017, received all benefits that otherwise would have been payable under the EICP and continues to receive certain vested medical benefits. Messrs. Killinger and Newsom received all benefits underhad it not been terminated.

As in effect before its termination, the EICP upon theirhad provided certain cash severance, medical/life benefits continuation, equity incentive award vesting and outplacement and relocation assistance benefits following a qualifying termination of employment on June 28, 2017.

Under the EICP, if an Officer is terminated from providing management services to the Partnership or the General Partner(a termination other than due to death, disability, retirement, cause or voluntary resignation (otherother than for good reason (as(all as defined in the EICP)EICP, as applicable)) (a “Termination”), then such Officer is. The benefits were increased if the termination occurred within the two years after a change in control (within the meaning of the EICP, including the GP Purchase). Notwithstanding the termination of the EICP, Mr. Benfield remains entitled upon a qualifying termination of employment to receive a severancethe benefits to which he would have become entitled under the EICP as in effect prior to its termination. Those benefits include: payment paid in 12 equal monthly installments, equal toof the sum of (i) the Officer’s annualhis salary as of the date of termination, plus (ii) the amount of the Officer’s annualand target bonus underin installments over 12 months (a lump-sum payment equal to 2.99 times the applicable annual incentive compensation plansum of his salary and target bonus if the termination after a change in place atcontrol (other than the timeGP Purchase)); continued medical/life benefits for one year on the same basis as in effect before the termination (three years if the termination occurs (the sumafter a change in control (other than the GP Purchase)); full vesting of (i) and (ii), the “Compensation Amount”). In addition, the Officer (and his dependents, as applicable) will receive the continuation of their medical, dental and other benefits for a period of one year from the date of termination, all unvested awards under the Partnership’s Plan held by such Officer shall vest immediately upon Termination and the Officer is also entitled to be reimbursed forequity incentive awards; outplacement servicesassistance for one year subsequent to the Termination,year; and, in certain circumstances, reimbursement of relocation expenses incurred by reason of such termination. Had Mr. Benfield experienced a qualifying termination of employment on December 31, 2021, the amounts payable to him would have been approximately: a lump-sum cash severance payment equal to $264,195; continued medical/life benefits valued at $861 based on existing cost levels; and legal feesreimbursement for outplacement assistance services had Mr. Benfield experienced a qualifying termination of employment on December 31, 2021 and expenses (allthere was a change in control (other than the GP Purchase) on such date, the amounts payable to him would have been approximately a lump-sum cash severance payment equal to $789,943; continued medical/life benefits valued at $2,583 based on existing cost levels; and reimbursement for outplacement services. Mr. Benfield held no unvested equity incentive awards as of such date, and the “Continued Benefits”). Ifvalue of potential relocation benefits is not meaningfully determinable. The actual amounts payable to Mr. Benfield upon termination of employment, if any, will depend on the Termination ofprevailing circumstances at the time (including whether it is after a change in control (other than the GP Purchase)) and may differ materially from the foregoing.


Lehigh Gas Partners LP 2012 Incentive Award Plan

Under the Lehigh Gas Partners LP 2012 Incentive Award Plan and the award agreements, in the event an Officer occursNEO’s employment is terminated for any reason, all outstanding TBUAs and PBUAs will be forfeited without payment, except that upon an NEO’s death or disability, the TBUAs will vest in connectionfull, and the PBUAs will be determined in accordance with or within 24 months after,its terms, subject to adjustments as the Board may make in its reasonable discretion. Upon a change in control of the Partnership, (which occurred as a resultthe Board in its sole discretion may determine the treatment. If, upon death or disability of the Merger), then the Officer will receive a severance payment, paid in a single lump sum in cash, equal to 2.99 times the Compensation Amount, with the exception of Mr. Killinger, whose severance payment under the EICP was capped at 2.0 times the amount payable under the CST Separation Agreement.

CST Separation Agreements

Under separation agreements with CST (“CST Separation Agreement”), following their termination in connection with the Merger, eachany of Messrs. KillingerNifong, and Newsom were entitled to:

A lump sum cash severance payment equal to the product of (a) 2.0 (for Mr. Killinger)Lynch, and 1.5 (for Mr. Newsom), multiplied by (b) the sum of the executive’s annual base salary plus target annual short term incentive opportunity;

A lump sum cash payment equal to the executive’s target annual short term incentive opportunity for 2017, prorated for the portion of the year elapsedMs. Topper as of the last day of the month of termination, which payment is payableDecember 31,2021, their TBUAs will vest in a lump sum; and,

Continued medical, dental and other insurance benefits for a period of three years from the date of termination on the same basis as immediately prior to the date of termination.

As a condition of receiving the severance benefits under the CST Separation Agreements, each of the executives executed a release of claims and agreed to comply, until June 28, 2018, with restrictive covenants concerning non-competition and non-solicitation of employees, as well as perpetual confidentiality and non-disparagement covenants.

Since the termination in connection with the Merger triggered payment under both the CST Separation Agreement and the EICP, the EICP provides that payments and benefits would be the greater of those provided in either of the CST Separation Agreement or EICP, with the exception of Mr. Killinger. As a result, the payments to Mr. Newsom were based on the EICP, or 2.99 times the Compensation Amount and 75% was allocated to the Partnership. Mr. Killinger received severance payments under both the EICP and the CST Separation Agreement, with his cash severance payments under the EICP capped at the amount of cash severance payable under his CST Separation Agreement. Of the aggregate payment made to Mr. Killinger, 25% was allocated to the Partnership.

All payments due under the EICP are conditioned on the execution by the Participant of a release and non-disparagement agreement.

If amounts payable to an Officer under the EICP (together with any other amounts that are payable by the Partnership as a result of a change in control (collectively, the “Payments”) exceed the amount allowed under Section 280G of the Code for such Officer, thereby subjecting the Officer to an excise tax under section 4999 of the Code, then the Payments shall either be: (i) reduced to the level at which no excise tax applies, such that the full amount of the Payments would be equal to three times the Officer’s “base amount” (as defined in the Code), or (ii) paid in full, which would subject the Officer to the excise tax.amounts of $501,564, $202,703 and $83,845, respectively. The Partnership will determine, in good faith, which outcome produces the best net after tax position for an Officer, but the Partnership will not provide any gross-up payments for excise taxes.


Second Amended and Restated EICP

As permitted under the EICP, on August 18, 2017, the Board approved the Second Amended and Restated CrossAmerica Partners LP EICP (“Second Amendment”), subject to receipt of all required Officer and Participant consents (“Consents”). The Second Amendment will become effective upon receipt of all consents. As of the date of this filing, not all Consents have been received from Participants.

Once effective, the Second Amendment will provide:

No additional individuals will become Participants on or after June 28, 2017; and

With the exception of specified continuing employees of ACT who perform services for the Partnership, no amounts under the EICPPBUAs will be payable in case of a termination post-Merger.

The EICP will automatically terminatevalued at zero as the performance period commences on December 31, 2020 or, if earlier, the date as of which all payments and benefits due under the terms of the EICP have been paid to all individuals who were Participants on June 28, 2017.January 1, 2022.

Therefore, the table below estimates the amount of compensation and benefits to be provided to each of our NEOs in the event of termination of such NEO’s employment under certain circumstances, pursuant to the current terms of the EICP. These amounts are estimates of the amounts that would be paid or provided to our NEOs upon termination of employment or a change in control had the termination occurred on December 31, 2017. The actual amounts can only be determined at the time of such NEO’s separation from Couche-Tard. Accordingly, if termination had taken place prior to December 31, 2017, the amounts payable with respect to the short-term incentive program would have been reduced to reflect the pro rata portion of the NEO’s annual target short-term incentive award.

Name

 

Severance Benefit

 

Termination by the

Company Without

Cause (other than

for Good Reason)

($)

 

 

Termination by the

Company for Good

Reason or Without

Cause in Connection

with a Change of

Control ($)

 

 

Jeremy L. Bergeron

 

Separation Payment

 

 

480,000

 

(1)

 

1,435,200

 

(2)

 

 

Long-Term Incentive Plan

 

 

696,503

 

(3)

 

1,054,114

 

(3)(4)

 

 

Health Benefits

 

 

24,007

 

(5)

 

72,022

 

(6)

Evan W. Smith

 

Separation Payment

 

 

301,700

 

(1)

 

902,083

 

(2)

 

 

Long-Term Incentive Plan

 

 

153,452

 

(3)

 

270,071

 

(3)(4)

 

 

Health Benefits

 

 

13,393

 

(5)

 

40,180

 

(6)

 

 

(1)

Represents 100% of the executive officer's annual base salary and target short-term incentive in effect at December 31, 2017, as provided for in the EICP.

 

(2)

Represents 299% of the executive officer's annual base salary and target short-term incentive in effect at December 31, 2017, as provided for in the EICP.

(3)

Amounts include CST RSUs that were converted into the right to receive a cash payment equal to $696,502.56 and $153,451.86 for Messrs. Bergeron and Smith, respectively. Such awards remained subject to the same vesting terms and payment schedule as those set forth in the original CST RSU award agreement; provided that, upon completion of the Merger, such award will vest in full upon an involuntary termination of employment without cause, or termination for “Good Reason”, or termination due to death, “Disability” or “Retirement.”

(4)

Executive's outstanding ACT PSUs and unvested CrossAmerica phantom units would immediately vest upon termination in connection with a change in control.

(5)

Represents estimated payments for continued coverage under current health plans for up to one year, as provided for the in the EICP.

(6)

Represents estimated payments for continued coverage under current health plans for up to three years, as provided for the in the EICP.

Principal Executive Officer Pay Ratio

We are providing the following information about the relationship of the annual total compensation of our employeesindividuals providing services in respect to the Partnership and the annual total compensation of Jeremy L. Bergeron,Charles M. Nifong, Jr., our Principal Executive Officer (our “PEO”):

 


For the year ended December 31, 2017, our last completed fiscal year:2021:

 

 

the median of the annual total compensation of all employeesindividuals providing services in respect of the Partnership (other than our PEO) was $16,446;$75,487; and

 

the annual total compensation of our PEO as reported above in the Summary Compensation Table was $2,044,839.$1,167,677.

 

Based on this information for the year ended December 31, 2017,2021, we reasonably estimatehave determined that the ratio of our PEO’s annual total compensation to the annual total compensation of our median employee was 124:15:1. Our pay ratio estimate has beenfigure was calculated in a manner consistent with Item 402(u)40(u) of Regulation S-K.

As of October 2, 2017, we had 578 employees (including full-time, part-time and temporary employees) providing services to our Retail segment, all of whomDecember 31, 2021, there were employed by one of our subsidiaries. Most of these employees are customer service associates who service our retail sites; the majority of these employees are part-time employees who do not work more than 30 hours a week. For purposes of identifying our median employee, we did not include the 92161 employees of Circle Kan affiliate of the Topper Group who provided exclusivesubstantial management services to us as of October 2, 2017, as those individuals are employed by Circle K and not by us.for the full year. As discussed in this Form 10-K, our PEO is an employee of Circle K,an affiliate of the Topper Group, but we are including his annual total compensation in the determination of the PEO pay ratio, as required under SEC rules.

The date we used to identify our median employee was December 31, 2021.

We identified our median employee based on the aggregate salary actually paid during the year ended December 31, 20172021 to our 578these employees.

For purposes of determining aggregate salary, we included the amount of base salary and overtime the employee received during the year and all other pay elements related to base salary including, but not limited to, cash bonuses, holiday pay, vacation pay and other paid time off, if any. Aggregate salary amounts did not include any cash bonuses, commissions or other compensation. In making this determination, we annualized the compensation of allexcluded any full-time and part-time permanent employees who were hired in 20172021 but were not employed by us for the entire year ended December 31, 2017.  2021.

Once we identified our median employee, we then determined that employee’s annual total compensation, including any perquisites and other benefits, in the same manner that we determine the annual total compensation of our NEOs for purposes of the Summary Compensation Table disclosed above. The annual total compensation of our median employee a retail store customer service associate, was determined to be $16,446.$75,487. This annual total compensation amount for our median employee was then compared to the annual total compensation of our PEO disclosed above in the Summary Compensation Table,for 2021 of $2,044,839.$1,167,677. The elements included in the PEO’s annual total compensation are fully discussed above in the footnotes to the Summary Compensation Table.

Director Compensation

Overview

On December 31, 2017, the followingSet out below is a discussion of compensation paid for 2021 to individuals who served as non-employee members of our Board during any portion of 2021. Board members who were members to the Board: Timothy A. Miller, Chairmanemployees providing services in respect of the Partnership did not receive any separate compensation for their Board and Senior Vice President, Global Fuels of Couche-Tard; Jeremy L. Bergeron, President and Chief Executive Officer of our General Partner; Claude Tessier, Chief Financial Officer of Couche-Tard; Jean Bernier, Group President, Global Fuels and North-East Operations of Couche-Tard; and John B. Reilly, III; Joseph V. Topper, Jr.; Mickey Kim; and Justin A. Gannon, as non-employee directors of the board of directors of our General Partner.service.


Director Compensation for Fiscal Year 20172021

Pre-Merger,Prior to the February 25, 2021 Board of Directors meeting, the director compensation program was reviewed internally to determine if it was comparable with the Partnership’s peers. During the Board meeting a resolution was approved providing that each non-employee director receivedwould be granted cash compensation of $60,000$62,500 per year (paid on a quarterly basis). and equity awards with a grant date fair value of $62,500. The chairman of each of the audit committee and conflicts committee received additional cash compensation of $10,000 per the fiscal year ended December 31, 2017 (paid on a quarterly basis).

Post-Merger, each non-employee director received cash compensation of $45,000 per year (paid on a quarterly basis). The chairman of each of the audit committee and conflicts committee received additional cash compensation of $10,000 per the fiscal year ended December 31, 2017for 2021 (paid on a quarterly basis). In addition, each non-employee director received $1,000 per each Board meeting attended orand $500 per each Committee meeting attended.

In August 2017, At that time, the Board determined Messrs. Topper and Reilly and Ms. Topper to be non-employee directors and therefore eligible to receive director compensation.  

On February 25, 2021, Messrs. Reilly, Topper and GannonReilly and Ms. Topper received an award of 2,8041,509 phantom units in an amountwith a grant date fair value equal to $72,500$27,500 based on the closing price of the Partnership’s common units on the close of business the day prior to the date of grant as compensation for their service from AprilJanuary 1, 20172021, until June 28, 2018;27, 2021. On July 22, 2021, Messrs. Gannon, Kim, Reilly, Topper and Mr. KimValosky received an award of 2,1273,252 phantom units in an amountwith a grant date fair value equal to $55,000$62,500 based on the closing price of the Partnership’s common units on the close of business the day prior to the date of grant as compensation for histheir service from June 28, 20172021 until June 28, 2018.27, 2022. Such phantom units will be fully vested on the one-year anniversaryvest one year from date of the grant dateaward and include the payment made by the Partnership of distribution equivalent rights equal to the amount of distributions authorized to be paid to holders of common units of the Partnership.


Our directors are reimbursed for all out-of-pocket expenses in connection with attending meetings of the Board or its committees. To the extent permitted under Delaware law, each director is fully indemnified by us for actions associated with being a director.

The following table provides the compensation amounts for each of our non-employee directors for the fiscal year ended December 31, 2017.2021.

 

Current Directors

 

Fees Earned or

Paid in Cash ($) (1)

 

 

Stock or Unit

Awards and Option

Awards ($) (2)

 

 

All Other

Compensation ($)

 

 

Total ($)

 

Timothy A. Miller (3)

 

 

 

 

 

 

 

 

 

 

 

 

Joseph V. Topper, Jr. (4)

 

 

55,500

 

 

 

72,500

 

 

 

 

 

 

128,000

 

John B. Reilly III (4)

 

 

64,500

 

 

 

72,500

 

 

 

 

 

 

137,000

 

Jean Bernier (3)

 

 

 

 

 

 

 

 

 

 

 

 

Claude Tessier (3)

 

 

 

 

 

 

 

 

 

 

 

 

Mickey Kim (4)(5)

 

 

39,500

 

 

 

55,000

 

 

 

 

 

 

94,500

 

Justin A. Gannon (4)(5)

 

 

74,500

 

 

 

72,500

 

 

 

 

 

 

147,000

 

Jeremy L. Bergeron (6)

 

 

 

 

 

 

 

 

 

 

 

 

Former Directors

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Kimberly S. Lubel (7)

 

 

 

 

 

 

 

 

 

 

 

 

Clayton E. Killinger (7)

 

 

 

 

 

 

 

 

 

 

 

 

Gene Edwards (8)

 

 

35,000

 

 

 

 

 

 

 

 

 

35,000

 

Directors

 

Fees Earned or

Paid in Cash ($) (1)

 

 

Stock or Unit

Awards and Option

Awards ($) (2)

 

 

All Other

Compensation ($) (3)

 

 

Total ($)

 

Justin A. Gannon (5)(6)

 

 

83,500

 

 

 

62,500

 

 

 

7,721

 

 

 

153,721

 

Mickey Kim (5)(6)

 

 

83,500

 

 

 

62,500

 

 

 

7,721

 

 

 

153,721

 

Kenneth D. Valosky (5)

 

 

73,500

 

 

 

62,500

 

 

 

7,721

 

 

 

143,721

 

J.B. Reilly Jr. (4)(5)

 

 

71,500

 

 

 

90,000

 

 

 

4,207

 

 

 

165,707

 

Joseph V. Topper, Jr. (4)(5)

 

 

71,500

 

 

 

90,000

 

 

 

4,207

 

 

 

165,707

 

Maura Topper (7)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)

Pre-Merger each DirectorNon-employee directors received a cash retainer of $60,000$62,500 (paid quarterly) and an additional $10,000 to chairs of the Committees. Post-Merger each Director received a cash retainer of $45,000 (paid quarterly) and an additional $10,000 tofor chairs of the Committees. In addition, each non-employee director received $1,000 per each Board meeting attended orand $500 per each Committee meeting attended.

 

(2)

Under the Lehigh Gas Partners LP 2012 Incentive Award Plan, the directors will have the ability to elect to receive either phantom units or profits interests. Phantom units and profits intereststhat can be converted to common units or cash, at the discretion of the Board. The amounts shown represent the grant fair value of awards for each of the years shown computed in accordance with ASC 718, Compensation-Stock Compensation.

(3)

Represents distribution equivalent rights on unvested units.

(3)(4)

Messrs. Miller, Bernier and Tessier were employees of Couche-Tard as of December 31, 2017 and did not receive any compensation for their services as directors ofOn February 25, 2021, the Board for the year ended December 31, 2017. On December 31, 2017, Mr. Bernier stepped down from his position as Group President, Global Fuelsdetermined that Messrs. Topper and North-East Operations of Couche-Tard; however, Mr. Bernier will remain in the Board as a non-employee director.

(4)

As part of the compensation to non-employee directors for the period April 1, 2017 to June 28, 2018, each of Messrs. Gannon, Reilly and Ms. Topper were considered non-employee directors. As such, they received an equity grant of 2,8041,509 phantom units of the Partnershippartnership based upon athe fair market value of $25.86$18.22 per unit, which was the NYSE closing price of our common unitsunit on August 10, 2017. Mr. Kim received an equity grant of 2,127 phantom units of the Partnership based upon a fair market value of $25.86 per unit, which was NYSE closing price of our common units on August 10, 2017. Each of these phantom units will vest in one installment on the anniversary of the date of grant.February 24, 2021. These phantom unit awards were accompanied by tandem distribution equivalent rights that entitleentitled the holder to cash payments equal to the amount of unit distributions authorized to be paid to the holders of Partnership common units. The units vested on July 23, 2021.

(5)

As part of the compensation to non-employee directors for the period June 28, 2021 to June 27, 2022, each of Messrs. Gannon, Kim, Reilly, Topper and Valosky received an equity grant of 3,252 phantom units of the Partnership based upon a fair market value of $19.22 per unit, which was the NYSE closing price of our common units on July 21, 2021. These phantom unit awards were accompanied by tandem distribution equivalent rights that entitled the holder to cash payments equal to the amount of unit distributions authorized to be paid to the holders of Partnership common units. There are no other outstanding equity awards.

(6)

Messrs. Kim and Gannon received additional cash compensation of $10,000 per year for their service as chairman of the conflicts committee and audit committee, respectively.

(6)(7)

Mr. Bergeron isMs. Topper became an employee director on August 11, 2021 and received $56,498 in fees paid in cash and an equity award with a grant date fair value of Circle K and did not receive any$27,500. As an employee director all of her compensation for his services asis reported in the Summary Compensation Table above, including her non-employee director of the Board for the year ending December 31, 2017.compensation.

(7)

Ms. Lubel and Mr. Killinger were employees of CST and did not receive any compensation for their services as directors of the Board for the year ending December 31, 2017.

(8)

Mr. Edwards received additional cash compensation of $5,000 for his service as chairman of the conflicts committee from January 1 through June 28, 2017.


Compensation Committee Interlocks and Insider Participation

None of the directors or executive officers of our General Partner served as members of the compensation committee of another entity that has or had an executive officer who served as a member of our Board during the year ended December 31, 2017.2021. We do not have a separate compensation committee. Decisions regarding the compensation of our NEOs arefor 2021 were made, as applicable, by Couche-Tardthe Topper Group as the owner of our General Partner.Partner prior to the GP Purchase.


ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERSOWNERS AND MANAGEMENT AND RELATED UNITHOLDER MATTERS

As of February 14, 2018,24, 2022, the following table sets forth the beneficial ownership of our common and subordinated units of:

Each person known by us to be a beneficial owner of more than 5% of our outstanding common units;

Each person known by us to be a beneficial owner of more than 5% of our outstanding common units;

Our General Partner;

Each NEO and director of the Board; and

Each NEO and director of the Board; and

All of the executive officers and directors of the Board, as a group.

All of the executive officers and directors of the Board, as a group.

 

 

 

Beneficial Ownership of Common Units

 

Name of Beneficial Owner

 

Number of Units

 

 

 

Percent of Class

 

Greater than 5% Stockholders

 

 

 

 

 

 

 

 

 

Harvest Fund Advisors LLC

 

 

3,060,165

 

(1)

 

 

8.971

%

Oppenheimer Funds, Inc.

 

 

3,416,122

 

(2)

 

 

10.015

%

CrossAmerica GP LLC

 

 

 

(3)

 

 

 

Dunne Manning Inc. (fka Lehigh Gas Corporation)

 

 

3,782,216

 

(4)(5)

 

 

11.088

%

Energy Realty Partners, LLC

 

 

1,854,943

 

(4)(5)

 

 

5.438

%

Alimentation Couche-Tard Inc.

 

 

14,850,543

 

(6)

 

 

43.535

%

Directors

 

 

 

 

 

 

 

 

 

Jeremy L. Bergeron

 

 

12,448

 

(7)

 

*

 

Timothy A. Miller

 

 

 

 

 

*

 

Jean Bernier

 

 

 

 

 

*

 

Justin A. Gannon

 

 

8,257

 

 

 

*

 

Mickey Kim

 

 

 

 

 

*

 

John B. Reilly, III

 

 

930,972

 

(8)

 

 

2.729

%

Claude Tessier

 

 

 

 

 

*

 

Joseph V. Topper, Jr.

 

 

7,656,530

 

(4)(5)(9)(10)

 

 

22.446

%

Named Executive Officers

 

 

 

 

 

 

 

 

 

Evan Smith

 

 

 

 

 

*

 

George Wilkins

 

 

 

 

 

*

 

Directors and executive officers as a group (10 persons)

 

 

8,608,207

 

 

 

 

25.236

%

 

 

Beneficial Ownership of Common Units

 

 

 

Number of

 

 

 

Percent of

 

Name of Beneficial Owner

 

Units

 

 

 

Class

 

Greater than 5% Stockholders**

 

 

 

 

 

 

 

 

 

Patricia Dunne Topper Trust

 

 

12,634,809

 

(1)

 

 

33.3

%

Dunne Manning Inc.

 

 

3,782,216

 

(2)

 

 

10.0

%

DM Partners Management Co LLC

 

 

5,982,871

 

(3)

 

 

15.8

%

Dunne Manning Partners LLC

 

 

5,982,871

 

(3)

 

 

15.8

%

2008 Irrevocable Agreement of Trust of John B. Reilly, Jr.

 

 

4,964,611

 

(4)

 

 

13.1

%

Dunne Manning CAP Holdings I LLC

 

 

4,472,235

 

(3)

 

 

11.8

%

Directors

 

 

 

 

 

 

 

 

 

Joseph V. Topper, Jr.

 

 

14,594,363

 

(5)

 

 

38.5

%

John B. Reilly, III

 

 

4,985,117

 

(4)

 

 

13.2

%

Justin A. Gannon

 

 

21,567

 

 

 

*

 

Mickey Kim

 

 

17,883

 

 

 

*

 

Keenan D. Lynch

 

 

8,062

 

(6)

 

*

 

Charles M. Nifong, Jr.

 

 

16,397

 

 

 

*

 

Maura Topper

 

 

10,110

 

(7)

 

*

 

Kenneth G. Valosky

 

 

10,843

 

 

 

*

 

Named Executive Officers

 

 

 

 

 

 

 

 

 

Jonathan E. Benfield

 

 

3,482

 

 

 

*

 

David F. Hrinak

 

 

41,697

 

 

 

*

 

Matthew Evan Naylor

 

 

 

 

 

*

 

Eric M. Javidi

 

 

 

 

 

*

 

Directors and executive officers as a group (12 persons)**

 

 

19,709,521

 

 

 

 

52.0

%

 

 

 

*

The percentage of common units beneficially owned does not exceed one percent of the common units outstanding

**

The address for each of our officers and directors listed below is 645 Hamilton Street, Suite 400 Allentown, PA 18101. The address for the entities listed under “greater than 5% stockholders” is 645 Hamilton St., Suite 400, Allentown, PA 18101.

 

 

(1)

Harvest Fund Advisors LLC has (i) sole power to vote 3,060,165171,888 common units and (ii) sole power to dispose of 3,060,165 common units, based on its Schedule 13F filed as of December 31, 2017. The address for Harvest Fund Advisors LLC is 100 W. Lancaster Avenue, Suite 200, Wayne, PA 19087.

(2)

Oppenheimer Funds, Inc. has (i) sole power to vote 3,416,122 common units and (ii) sole power to dispose of 3,416,122 common units, based on its Schedule 13G filed as of December 31, 2017. The address for Oppenheimer Funds, Inc. is Two World Financial Center, 225 Liberty Street, New York, NY 10281. 

(3)

CrossAmerica GP LLC isare held directly by the general partner of the Partnership and is wholly owned by CST. 

(4)

In connection with the GP Purchase, Mr. Topper entered into a Voting Agreement dated as of October 1, 2014 by and among Mr. Topper, thePatricia Dunne Topper Trust Dunne Manning Inc. ("DMI"), an entity wholly owned byfor the 2004 Irrevocable Agreement of TrustFamily of Joseph V. Topper, Sr. for which Mr. TopperJr. (the "Trust"). The Trust is the trustee (the “Topper Trust” and collectively, the “Topper Entities”), and CST (the “Voting Agreement”), pursuant to which each of the Topper Entities agrees that at any meeting of the holders of common units of the Partnership, it will vote or cause to be voted such Topper Entities’ units, in accordance with the recommendation of the Board. The Voting Agreement will remain in effect with respect to any Topper Entities for so long as any such Topper Entities is the beneficial owner of 10% or more of the outstanding common units of the Partnership.

(5)

The common units shown as beneficially owned by Mr. Topper include units beneficially owned by entities that are controlled by Mr. Topper, including DMI and Energy Realty Partners, LLC.the Chairman of the Board of the General Partner. All common units owned directly by the Trust are pledged to secure certain indebtedness. The remaining common units thatlisted here are beneficiallydirectly owned by Mr. Topper by wayeach of his control of DMI andDunne Manning Inc., Energy Realty Partners, LLC, are also shown as beneficially owned by thoseNova8516 LP, Dunne Manning Wholesale LLC, Dunne Manning CAP Holdings I LLC and Dunne Manning CAP Holdings II LLC, all entities in the table above. The units shown as beneficially ownedcontrolled by Mr. Topper include 28,947and the Trust. The inclusion of these common units toherein shall not be issued upondeemed an admission that the conversion of vested profits interestsabove have a pecuniary interest in March 2018, unless Mr. Topper elects not to redeem them. See “Executive Compensation-Compensation Discussion and Analysis-Pre-Merger Elements of Executive Compensation-Pre-Merger Long-Term Incentive Compensation: Equity Awards - Profits Interests” for a descriptionall of the profits interests.common units reported herein.


(6)(2)

By virtueAll 3,782,216 common units are held directly by Dunne Manning Inc., which is owned 100% by the Trust and Mr. Topper is its sole director. Mr. Topper may be deemed to beneficially own these common units. The inclusion of these common units herein shall not be deemed an admission that the above have a pecuniary interest in all of the Voting Agreement described above, these amounts include 7,656,530 common units that are owned by Mr. Topper and beneficially owned by entities that are controlled by Mr. Topper, including DMI and Energy Realty Partners, LLC. The common units that are beneficially owned by Mr. Topper by way of his control of DMI and Energy Realty Partners, LLC are also shown as beneficially owned by those entities in the table above.reported herein.

(7)(3)

ConsistsDM Partners Management Co LLC ("DM Management") is a wholly owned subsidiary of 11,061 CrossAmericathe Trust, which is controlled by Mr. Topper. DM Management controls Dunne Manning Partners, LLC, the 100% owner of each of Dunne Manning CAP Holdings I LLC ("CAP Holdings I") and Dunne Manning CAP Holdings II LLC ("CAP Holdings II"). Each of CAP Holdings I and CAP Holdings II directly holds 4,472,235 and 1,510,636 common units, respectively. As a result, each of DM Management and 1,387 CrossAmerica phantomDunne Manning Partners LLC may be deemed to beneficially own an aggregate of 5,982,871 common units. The Trust indirectly owns a majority of the member interests in Dunne Manning Partners LLC. The inclusion of these common units herein shall not be deemed an admission that will vest on April 14, 2018.the above have a pecuniary interest in all of the common units reported herein.

(8)(4)

Mr. Reilly may be deemed to share beneficial ownership of 738,5014,985,117 common units beneficially owned by the 2008 Irrevocable Agreement of Trust of John B. Reilly, Jr. (the “Reilly Trust”) in his capacity as one of two trustees of the Reilly Trust. The inclusion of these common units herein shall not be deemed an admission that the above have a pecuniary interest in all of the common units reported herein.

(9)(5)

Includes 374,453 common units held by The Topper Foundation, a 501(c)(3) non-profit corporation. Mr. Topper, as directorwho makes investment and voting decisions with respect to the common units held by The Topper Foundation, has no pecuniary interest in these common units. 66,904 units are held directly by Mr. Topper in his individual capacity. 637,264 common units are held by MMSCC-2, LLC (Mr. Topper controls 100% of the Board, sole director of DMIvoting shares), and 880,933 common units are held by JVT-JMG EROP Holdings, LP (Mr. Topper controls the general partner and the Trust holds a trustee of a trust that is the sole shareholder of DMI, may be45% limited partner interest). The remaining common units listed here are deemed to have beneficial ownership of the units beneficially owned by DMI. The units beneficially owned by DMI are included in the number of common units shown asbe beneficially owned by Mr. Topper as the trustee of the Trust (see note 2 above). Mr. Topper and entities controlled by Mr. Topper have pledged a total of 3,540,427 common units (representing approximately 9.0% of outstanding common units) pursuant to a loan. Mr. Topper retains beneficial ownership of the pledged shares in the table above. absence of a default. Prior to entering into the pledge, the Board granted Mr. Topper a waiver from the Insider Trading Policy’s prohibition against unit pledges by any director or officer. The inclusion of these common units herein shall not be deemed an admission that the above have a pecuniary interest in all of the common units reported herein.

(10)(6)

Of the 8,062 units held, 6,803 units are held by the Joseph V. Topper, Jr. Irrevocable Agreement of Trust No. 1 f/b/o Shannon T. Lynch, Mr. Topper,Lynch’s wife, and as the sole manager and indirect owner of Energy Realty Partners, LLC,a result, Mr. Lynch may be deemed to be the beneficial owner of such units. The inclusion of these common units herein shall not be deemed an admission that the above have beneficial ownershipa pecuniary interest in all of the common units beneficiallyreported herein.

(7)

Of the 10,110 units held, 6,865 are directly owned and 3,245 are held by Energy Realty Partners, LLC.the Joseph V. Topper, Jr. Irrevocable Agreement of Trust No. 1 f/b/o Maura E. Topper. The inclusion of these common units beneficially owned by Energy Realty Partners, LLC are includedherein shall not be deemed an admission that the above have a pecuniary interest in all of the number ofcommon units shown as beneficially owned by Mr. Topper in the table above. reported herein.

Securities Authorized Forfor Issuance under Equity Compensation Plans

The following table summarizes information about our equity compensation plans as of December 31, 2017:2021:

 

Plan Category

 

Number of securities to

be issued upon exercise

of outstanding options,

warrants and rights (1)

 

 

Weighted-average

exercise price of

outstanding options,

warrants and rights

 

Number of securities

remaining available

for future issuance

under equity

compensation plans

 

 

Number of securities to

be issued upon exercise

of outstanding options,

warrants and rights (1)

 

 

Weighted-average

exercise price of

outstanding options,

warrants and rights

 

Number of securities

remaining available

for future issuance

under equity

compensation plans (2)

 

Equity compensation plans approved by security holders:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Lehigh Gas Partners LP 2012 Incentive Award Plan

 

 

42,106

 

 

n/a

 

 

766,318

 

 

 

185,332

 

 

n/a

 

 

478,851

 

(1)

includes performance based awards assuming a 100% payout at the grant-date 20-day VWAP

(2)

has been reduced by the number of performance based awards assuming a 100% payout at the grant-date 20-day VWAP

 

See Note 1819 to the financial statements for a discussion of the material terms of the Plan.



As of February 21, 2018, Circle K24, 2022, the Topper Group beneficially owned 21.1%or controlled 38.5% of the Partnership’s outstanding units and, pursuant to a voting agreement with Joseph V. Topper, Jr. and certain affiliates, has the power to direct the vote of an additional 22.4% of the Partnership’s outstandingcommon units. Circle K also owns the IDRs.

As of February 21, 2018, Mr. Topper owned or controlled 22.4% of the Partnership’s common units; however, pursuant to a voting agreement Mr. Topper has agreed to vote such common units of CrossAmerica as directed by Circle K.

As of February 21, 2018,24, 2022, John B. Reilly, III owned or controlled 2.7%13.2% of the Partnership’s outstandingcommon units.

The following is a description of related party transactions since January 1, 2017,2021 to which the Partnership was or is a party, in which the amount involved exceeds $120,000 and in which a director, executive officer, holder of more than 5% of our common units or any member of their immediate family had or will have a direct or indirect material interest, other than the arrangements that are described under “Item 12-Potential Payments Upon Termination or Change in Control.” The terms of the transactions and agreements disclosed in this section were determined by and among related parties and, consequently, are not the result of arm’s length negotiations. Such terms are not necessarily at least as favorable to the parties to these transactions and agreements as the terms that could have been obtained from unrelated third parties.

Distributions and Payments to our General Partner and Certain Related Parties

The following table summarizes the distributions and payments to be made by us to our General Partner and certain related parties in connection with the ongoing operation of our business and distributions and payments that would be made by us if we were to liquidate in accordance with the terms of our partnership agreement.Partnership Agreement.

Operational Stage

 

 

 

 

 

Distributions

 

We will generally make cash distributions to the unitholders, including Circle K, its affiliates, Messrs.the Topper Group and Mr. Reilly and their respective affiliates.

Assuming we have sufficient cash available for distribution to pay the full minimum quarterly distribution on all of our outstanding units for four quarters, Circle Kthe Topper Group and its affiliates, Messrs. Topper andMr. Reilly and their respective affiliates would receive an annual distribution of $27.6$34.3 million, collectively, on their common units.

If distributions exceed the minimum quarterly distribution and other higher target levels, Circle K, as the holder of the IDRs, is entitled to increasing percentages of the distributions, up to 50.0% of the distributions above the highest target level.

Cash distributions to our General Partner, DMIthe Topper Group and its affiliates, Messrs. Topper andMr. Reilly and their respective affiliates amounted to $38.0 million and $36.0$40.9 million in 2017 and 2016, respectively.2021.

 

 

 

 

 

Payments to our General Partner

and its affiliates

 

For the year ended December 31, 2017, we paid Circle K a Management Fee of $856,000 per month plus a variable fee of between zero and $0.003 per gallon for wholesale fuel distribution and $0.015 per gallon for retail fuel distribution at sites operated by commission agents. In addition, the Partnership is required to reimburse Circle K for certain outsourced services to be provided by Circle K to or on behalf of the Partnership. The Partnership incurred $13.9 million and $15.9 million in management fees under the Amended Omnibus Agreement for 2017 and 2016, respectively. Circle KTopper Group and CrossAmerica have the right to negotiate the amount of the management fee on an annual basis, or more often as circumstances require.

The Partnership incurred $62.5 million in management fees under the Topper Group Omnibus Agreement for 2021.

 

 

Liquidation Stage

 

 

 

 

Liquidation

 

Upon our liquidation, the partners, including our General Partner, is entitled to receive liquidating distributions according to their particular capital account balances.


Ownership of Our General Partner

Since October 1, 2014, CST (and since June 28, 2017, Circle K)November 19, 2019, the Topper Group has indirectly owned all of the membership interests of our General Partner.


Agreements with CSTthe Topper Group and Circle K and their Affiliates

On October 1, 2014, in connection with the GP Purchase, we entered into certain agreements with CST and Circle K and their affiliates, as described in more detail below.

AmendedTopper Group Omnibus Agreement

WeOn January 15, 2020, the Partnership entered into the Amended and Restatedan Omnibus Agreement, on Octobereffective as of January 1, 2014, by and2020 (the “Topper Group Omnibus Agreement”), among CrossAmerica,the Partnership, the General Partner DMI, DMS, CST Services and Joseph V. Topper, Jr.DMI. The terms of the AmendedTopper Group Omnibus Agreement were approved by the independent conflicts committee of ourthe Board, which is composed of the independent directors of the Board.

Pursuant to the AmendedTopper Group Omnibus Agreement, CST Services agrees,DMI agreed, among other things, to provide, or cause to be provided, to the General Partner for the benefit of the Partnership, at cost without markup, certain management, administrative and operating services.

We incurred expenses under the Topper Group Omnibus Agreement, including costs for store level personnel at our company operated sites since our April 2020 acquisition of retail and wholesale assets and our recently acquired Joe’s Kwik Marts sites, totaling $62.5 million for 2021. Amounts payable to Circle Kthe Topper Group related to these transactions were $25.3 million and $10.0$6.1 million at December 31, 2017 and 2016, respectively. At the end of each calendar year, we and Circle K have the right to negotiate a reduction or increase to the amounts due under the Amended Omnibus Agreement for such year. Circle K and we also have the right to negotiate the amount of the annual management fee as circumstances require. CrossAmerica, CST and Circle K mutually agreed to settle certain amounts due under the terms of the Amended Omnibus Agreement in newly issued common units representing limited partner interests in us. As a result in 2017 and 2016, we issued 550,516 and 440,266 limited partner units to CST Services and Circle K valued at $14.0 million and $11.2 million, respectively. Circle K and CrossAmerica agreed to settle $3.3 million of the fourth quarter 2017 management fee in limited partner units.2021. See Note 1215 to the financial statements for additionalmore information.

Management Services and Term. Pursuant to the AmendedTopper Group Omnibus Agreement, Circle KDMI provides us, or causes to be provided to us, and our General Partner with management, administrative and operating services. These services include accounting, tax, legal, internal audit, risk management and compliance, environmental compliance and remediation management oversight, treasury, information technology and other administrative functions. Circle KThe Topper Group provides the Partnership and our General Partner with personnel necessary to carry out these services and any other services necessary to operate the Partnership’s business as requested by the Partnership. We do not have any obligation to directly compensate the officers of our General Partner or employees of Circle K;the Topper Group; however, the Partnership reimburses Circle Kthe Topper Group under the AmendedTopper Group Omnibus Agreement for its services to the General Partner and Partnership, as described in this section.

The initial term of the AmendedTopper Group Omnibus Agreement is five years and will automatically renew for additional one year terms unless any party provides written notice to the other parties 180 days prior to the end of the then annual term.continue in effect until terminated in accordance with its terms. The PartnershipTopper Group has the right to terminate the agreementTopper Group Omnibus Agreement at any time upon 180 days’ prior written notice, and the General Partner has the right to terminate the Topper Group Omnibus Agreement at any time upon 60 days’ prior written notice.

Fees and Reimbursements. As indicated previously, we pay Circle Kthe Topper Group a management fee for providing services.services at cost without markup. Services provided by, or on behalf of, Circle K,the Topper Group, not outsourced to an independent third party, include accounting; administrative; billing and invoicing; books and record keeping; budgeting, forecasting, and financial planning and analysis; management (including the management and oversight of the MLP’s wholesale motor fuel distribution and real estate business consistent with past practice); operations; payroll; contract administration; maintenance of internal controls; financial reporting, including SEC reporting and compliance; office space; purchasing and materials management; risk management and administration of insurance programs; information technology (includes hardware and software existing or acquired in the future for which title is retained by Circle K)the Topper Group); in-house legal; compensation, benefits and human resources administration; cash management; corporate finance, treasury credit and debt administration; employee training; and miscellaneous administration and overhead expenses. In addition, the Partnership is required to reimburse Circle Kthe Topper Group for certain outsourced services to be provided by Circle Kthe Topper Group to or on behalf of the Partnership, as set forth in the AmendedTopper Group Omnibus Agreement.


Rights of First Refusal. The Amended Omnibus Agreement provides that Mr. Topper, DMI and DMS agree, and are required to cause their controlled affiliates to agree, that for so long as Mr. Topper is an officer or director of the General Partner or CST, if (a) Mr. Topper, DMI, DMS, or any of their controlled affiliates have the opportunity to acquire assets used, or a controlling interest in any business primarily engaged, in the wholesale motor fuel distribution or retail gas station operation businesses, and (b) the assets or businesses proposed to be acquired have a value exceeding $5.0 million in the aggregate, then Mr. Topper, DMI, DMS, or their controlled affiliates will offer such acquisition opportunity to the Partnership and give the Partnership a reasonable opportunity to acquire, at the same price plus any related transaction costs and expenses, such assets or business, either before or promptly after the consummation of such acquisition by Mr. Topper, DMI, DMS, or their controlled affiliates. The decision to acquire or not acquire any such assets or businesses requires the approval of the conflicts committee of the Board. Any assets or businesses that the Partnership does not acquire pursuant to the right of first refusal may be acquired and operated by Mr. Topper, DMI, DMS or their controlled affiliates.

Rights of First Offer. The Amended Omnibus Agreement provides that Mr. Topper, DMI and DMS agree, and are required to cause their controlled affiliates to agree, for so long as Mr. Topper is an officer or director of the General Partner or CST, to notify the Partnership of their desire to sell any of their assets or businesses if (a) Mr. Topper, DMI, DMS, or any of their controlled affiliates, decides to attempt to sell (other than to another controlled affiliate of Mr. Topper, DMI or DMS) any assets used, or any interest in any business primarily engaged, in the wholesale motor fuel distribution or retail gas station operation businesses, to a third party and (b) the assets or businesses proposed to be sold have a value exceeding $5.0 million in the aggregate. Prior to selling such assets or businesses to a third party, Mr. Topper, DMI and DMS are required to negotiate with the Partnership exclusively and in good faith for a reasonable period of time in order to give the Partnership an opportunity to enter into definitive documentation for the purchase and sale of such assets or businesses on terms that are mutually acceptable to Mr. Topper, DMI, DMS, or their controlled affiliates, and the Partnership. If the Partnership and Mr. Topper, DMI, DMS, or their controlled affiliates have not entered into a letter of intent or a definitive purchase and sale agreement with respect to such assets or businesses within such period, Mr. Topper, DMI, DMS, and their controlled affiliates, have the right to sell such assets or businesses to a third party following the expiration of such period on any terms that are acceptable to Mr. Topper, DMI, DMS, or their controlled affiliates, and such third party. The decision to acquire or not to acquire assets or businesses pursuant to this right requires the approval of the conflicts committee of the Board.

Review of Management Fee. At the end of each calendar year, we have the right to submit to Circle K a proposal to reduce the amount of the management fee for such year if we believe that the services performed by Circle K do not justify payment of the amount of management fees paid by us for such year. In addition, Circle K has the right, at the end of each calendar year, to submit to us a proposal to increase the amount of the management fee for such year if Circle K believes that the services performed by Circle K justify an increase in the management fee. If any such proposal is submitted, we will negotiate with Circle K to determine if the management fee for such year should be reduced or increased, and, if so, the amount of such reduction or increase. In addition, upon a material change in our structure or our business, the conflicts committee of our General Partner will review the management fee. If the conflicts committee determines that, based on a change in our structure or our business, the management fee should be modified or otherwise altered, we will negotiate with Circle K to determine the appropriate modification or alteration of the management fee. Effective January 1, 2016, the fixed component of the management fee was increased to $856,000 per month, which was approved by the conflicts committee of the Board.

General Indemnification; Limitation of Liability. Pursuant to the AmendedTopper Group Omnibus Agreement, we are required to indemnify Circle Kthe Topper Group for any liabilities incurred by Circle Kthe Topper Group attributable to the management, administrative and operating services provided to us under the agreement, other than liabilities resulting from Circle K’sthe Topper Group’s bad faith, fraud or willful misconduct. In addition, Circle Kthe Topper Group is required to indemnify us for any liabilities we incur as a result of Circle K’sthe Topper Group’s bad faith, fraud or willful misconduct in providing management, administrative and operating services under the AmendedTopper Group Omnibus Agreement. Other than indemnification claims based on Circle K’sthe Topper Group’s bad faith, fraud or willful misconduct, Circle K’sthe Topper Group’s liability to us for services provided under the AmendedTopper Group Omnibus Agreement cannot exceed $5,000,000 in the aggregate.

Fuel Sales and Rental Income

We sell wholesale motor fuel under a master fuel distribution agreement to 49 Circle K retail sites and lease real property on 73 retail sites to Circle K under a master lease agreement, each having initial 10-year terms. The fuel distribution agreement provides us with a fixed wholesale mark-up per gallon. The master lease agreement is a triple net lease.


Revenues from motor fuel sales and real property rental income from CST and Circle K were as follows (in thousands):

 

 

For the Year Ended December 31,

 

 

 

2017

 

 

2016

 

Revenues from motor fuel sales to CST and Circle K

 

$

136,649

 

 

$

118,745

 

Rental income from CST and Circle K

 

 

17,021

 

 

 

17,188

 

Receivables from CST or Circle K were $3.9 million and $3.2 million at December 31, 2017 and 2016, respectively, related to these transactions.

Investment in CST Fuel Supply

As further discussed in Note 12 to the financial statements, we have a 17.5% limited partner equity interest in CST Fuel Supply. CST Fuel Supply distributes motor fuel primarily to CST’s retail sites at its cost plus a fixed margin of $0.05 per gallon and has no material net assets. CST Fuel Supply distributed approximately 1.7 billion and 1.8 billion gallons of motor fuel during 2017 and 2016, respectively. For 2017 and 2016, we recorded income of $14.9 million and $16.0 million from CST Fuel Supply. Accounts receivable from Circle K and CST related to this income amounted to $1.2 million at December 31, 2017 and December 31, 2016.

Refund payment related to CST sale of California and Wyoming Assets

In July 2016, CST provided a refund payment to us related to our 17.5% interest in CST Fuel Supply resulting from the sale by CST of 79 retail sites in California and Wyoming to 7-Eleven, Inc. and its wholly-owned subsidiary, SEI Fuel Services, Inc., to which CST Fuel Supply no longer supplies motor fuel. The purpose of the refund payment was to make us whole for the decrease in the value of our interest in CST Fuel Supply arising from sales volume decreases. The total refund payment received by the Partnership, as approved by the conflicts committee of the Board, was approximately $18.2 million ($17.5 million in cash with the remainder in common units owned by CST) and was accounted for as a contribution to equity.

Purchase of Motor Fuel from Circle K

We purchase the fuel supplied to 101 sites acquired in the Jet-Pep Assets acquisition from a terminal owned and operated by Circle K. We purchased $11.3 million of motor fuel from Circle K in 2017.

In connection with the December 15, 2017 closing of Circle K’s acquisition of Holiday, we also purchased fuel from Circle K to supply our Holiday-branded sites. For 2017, these purchases amounted to $1.9 million.

Purchase of Wholesale Fuel Supply Contracts from CST

In February 2016, we purchased 21 independent dealer contracts and 11 sub-wholesaler contracts from CST for $2.9 million with historic annual volumes of approximately 20 million gallons. This transaction was approved on our behalf by the conflicts committee of the Board.

We purchase the fuel supplied to these 32 sites from CST Fuel Supply, in which we own a 17.5% interest, and resell the wholesale motor fuel to the independent dealers and sub-wholesalers. We purchased $23.8 million and $20.4 million of motor fuel from CST Fuel Supply in 2017 and 2016, respectively.

Agreements with DMI and Affiliates

DMI is affiliated with our former President and Chief Executive Officer and current director of the Board, Mr. Topper.

Lease Agreements for our Principal Executive Offices

Our principal executive offices are in Allentown, Pennsylvania. Through February 2016, we subleasedWe sublease office space from CSTthe Topper Group that CST leased from DMI. Since February 2016, we have subleased office space from Circle K that Circle K leasedthe Topper Group leases from an affiliate of John B. Reilly, III a directorand Joseph V. Topper, Jr., members of our Board, as approved by the independent conflicts committee of the Board. The management fee charged by Circle K to the Partnership, under the Amended Omnibus Agreement, incorporates this rentalRent expense and amounted to $0.7 million and $0.6$1.3 million for 2017 and 2016, respectively.2021.


Agreements with DMS

DMS is affiliated with our former President and Chief Executive Officer and current director of the Board, Mr. Topper.

DMS is an operator of convenience stores that purchases substantially all of its motor fuel requirements from us on a wholesale basis. DMS also leases certain retail site real estate from us in accordance with a master lease agreement.

Revenues from fuel sales and rental income from DMS and its affiliates were as follows (in thousands):

 

 

For the Year Ended December 31,

 

 

 

2017

 

 

2016

 

Revenues from motor fuel sales to DMS and its affiliates

 

$

241,895

 

 

$

254,292

 

Rental income from DMS and its affiliates

 

 

18,753

 

 

 

21,208

 

Motor fuel is sold to DMS at our cost plus a fixed mark-up per gallon. Receivables from DMS totaled $9.3 million and $8.6 million at December 31, 2017 and 2016, respectively.

Wholesale Fuel Supply Agreement with DMS

In connection with the IPO, the Partnership and DMS entered into a PMPA Franchise Agreement pursuant to which the Partnership is the exclusive distributor of motor fuel to all sites operated by DMS for a period of 15 years. We have the right to impose the brand of fuel that is distributed to DMS. There are no minimum volume requirements that DMS is required to satisfy. We charged DMS rack-plus prices for each grade of product in effect at the time title to the product passes to DMS. We have a right of first refusal in connection with any proposed transfer by DMS of its interest in the wholesale supply agreement. The wholesale supply agreement contains cross-default provisions with each lease agreement with DMS.

Lease Agreement with DMS

On May 28, 2014, we entered into a master lease agreement with DMS, with an effective date of June 1, 2014, which consolidated multiple individual leases then in effect between DMS and the Partnership into a single master lease agreement.

In November 2017, we entered into an amendment of the master lease with DMS that extended the date through which certain retail sites may be removed from the lease by one year to December 2018.

Maintenance and Environmental Costs

Certain maintenance and environmental monitoring and remediation activities are undertaken by Synergy Environmental, Inc., an entity affiliated with Mr. Topper, as approved by the conflicts committee of the Board. We paid $1.5 million and $1.6 million toincurred charges with this related party of $2.2 million for 20172021.

Environmental Compliance and 2016, respectively. AccountsInventory Management Costs

We use certain environmental monitoring and inventory management equipment and services provided by an entity previously affiliated with the Topper Group, as approved by the independent conflicts committee of the Board. We incurred charges with this related party of $0.2 million for 2021. This entity was sold in July 2021 and is no longer a related party.

Convenience Store Products

We purchase certain convenience store products from an affiliate of John B. Reilly, III and Joseph V. Topper, Jr., members of the Board, as approved by the independent conflicts committee of the Board in connection with the April 2020 acquisition of retail and wholesale assets. Merchandise costs amounted to $19.7 million for 2021. Amounts payable to this related party amounted to $0.2$1.5 million at December 31, 2017.2021.

Vehicle Lease

In connection with the services rendered under the Topper Group Omnibus Agreement, we lease certain vehicles from an entity affiliated with Joseph V. Topper, Jr., a member of the Board, as approved by the independent conflicts committee of the Board. Lease expense to this related party was $0.1 million for 2021.

Other Related Party Transactions

LeaseRevenues from TopStar, an entity affiliated with Joseph V. Topper, Jr., were $57.8 million for 2021. Accounts receivable from TopStar were $1.3 million at December 31, 2021. As discussed in Note 4 to the financial statements, effective April 14, 2020, we acquired wholesale fuel supply rights, including this supply contract, as part of the acquisition of retail and Supply Agreements with other Related Parties

The Partnership leases certainwholesale assets. Prior to April 14, 2020, we only leased motor fuel stations to Top Star, a related party of Mr. Topper, under cancelable operating leases. Rent income under these agreements was $0.5 million for 2017 and 2016.TopStar.

The Partnership leases certain motor fuel stations from related parties of Mr.the Topper Group under cancelable operating leases. Rent expense under these agreements, including rent paid under the leases entered into in connection with the acquisition of retail and wholesale assets was $0.9$9.3 million for 2017 and 2016.2021.

Review, Approval and Ratification of Related Person Transactions

The Board has adopted a Code of Ethics and Business Conduct that provides that the Board or its authorized committee will periodically review all related person transactions that are required to be disclosed under SEC rules and, when appropriate, initially authorize or ratify all such transactions. In the event that the Board or its authorized committee considers ratification of a related person transaction and determines not to so ratify, the Code of Ethics and Business Conduct provides that our management will make all reasonable efforts to cancel or annul the transaction.


The Code of Ethics and Business Conduct provides that, in determining whether or not to recommend the initial approval or ratification of a related person transaction, the Board or its authorized committee should consider all of the relevant facts and circumstances available, including (if applicable) but not limited to: (i) whether there is an appropriate business justification for the transaction; (ii) the benefits that accrue to us as a result of the transaction; (iii) the terms available to unrelated third parties entering into similar transactions; (iv) the impact of the transaction on a director’s independence (in the event the related person is a director, an immediate family member of a director or an entity in which a director or an immediately family member of a director is a partner, shareholder, member or executive officer); (v) the availability of other sources for comparable products or services; (vi) whether it is a single transaction or a series of ongoing, related transactions; and (vii) whether entering into the transaction would be consistent with the Code of Ethics and Business Conduct.

Director Independence

For a discussion of the independence of the Board, please see “Item 10. Directors, Executive Officers and Corporate Governance Management.”


ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

The audit committee of the board of directors of our General Partner selected Grant Thornton LLP, or Grant Thornton, an independent registered public accounting firm, to audit our consolidated financial statements for the year ended December 31, 2017.2021. The audit committee’s charter requires the audit committee to approve in advance all audit and non-audit services to be provided by our independent registered public accounting firm. All services reported in the audit, audit-related, tax and all other fees categories below with respect to this 2021 Annual Report on Form 10-K for the year ended December 31, 2017 were approved by the audit committee.

The following table summarizes the aggregate Grant Thornton fees that were allocated to us for independent auditing, tax and related services for each of the last two fiscal years (in thousands):

 

 

Year Ended December 31,

 

 

Year Ended December 31,

 

 

2017

 

 

2016

 

 

2021

 

 

2020

 

Audit fees (1)

 

$

1,133

 

 

$

1,334

 

 

$

1,260

 

 

$

1,234

 

Audit-related fees (2)

 

 

 

 

 

 

 

 

 

 

 

 

Tax fees (3)

 

 

 

 

 

 

 

 

 

 

 

 

All other fees (4)

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

$

1,133

 

 

$

1,334

 

 

$

1,260

 

 

$

1,234

 

 

 

 

(1)

Audit fees represent amounts billed for each of the years presented for professional services rendered in connection with those services normally provided in connection with statutory and regulatory filings or engagements including comfort letters, consents and other services related to SEC matters.

(2)

Audit-related fees represent amounts billed in each of the years presented for assurance and related services that are reasonably related to the performance of the annual audit or quarterly reviews.

(3)

Tax fees represent amounts billed in each of the years presented for professional services rendered in connection with tax compliance, tax advice and tax planning.

(4)

All other fees represent amounts billed in each of the years presented for services not classifiable under the other categories listed in the table above. No such services were rendered by Grant Thornton during 2017 or 2016.

Audit Committee Approval of Audit and Non-audit Services

The audit committee of the board of directors of our General Partner has adopted a pre-approval policy with respect to services which may be performed by Grant Thornton. This policy lists specific audit-related services as well as any other services that Grant Thornton is authorized to perform and sets out specific dollar limits for each specific service, which may not be exceeded without additional audit committee authorization. The audit committee reviews the policy at least annually in order to approve services and limits for the current year. Any service that is not clearly enumerated in the policy must receive specific pre-approval by the audit committee prior to engagement.


PartPART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

 

(a)

1. Financial Statements. The following consolidated financial statements of CrossAmerica Partners, LP are included in Part II, Item 8 of this Form 10-K:

PAGE

Report of Independent Registered Public Accounting Firm

65

Consolidated Balance Sheets as of December 31, 2017 and December 31, 2016

67

Consolidated Statements of Income for the Years Ended December 31, 2017,2016 and 2015

68

Consolidated Statements of Cash Flows for the Years Ended December 31, 2017,2016 and 2015

69

Consolidated Statements of Partners’ Capital and Comprehensive Income for theYears Ended December 31, 2017, 2016 and 2015

70

Notes to Consolidated Financial Statements

7110-K.

 

2. Financial Statement Schedules and Other Financial Information. Schedule I was included in Part II, Item 8. No other financial statement schedules are submitted because either they are inapplicable or because the required information is included in the financial statements or notes thereto.

3. EXHIBITS.Exhibits. Filed as part of this Form 10-K are the following exhibits:

 

Exhibit No.

 

Description

   2.1

 

Fuel Supply Contribution Agreement, dated as of June 15, 2015, by and among CST Brands, Inc., CST Services LLC and CrossAmerica Partners LP (incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K for CrossAmerica Partners LP, filed with the Securities and Exchange Commission on June 15, 2015)

   2.2

Real Estate Contribution Agreement, dated as of June 15, 2015, by and among CST Brands, Inc., CST Diamond Holdings LLC, Big Diamond, LLC, Skipper Beverage Company, LLC, CST Shamrock Stations, Inc., CST Arizona Stations, Inc., CrossAmerica Partners LP and Lehigh Gas Wholesale Services, Inc. (incorporated by reference to Exhibit 2.2 to the Current Report on Form 8-K for CrossAmerica Partners LP, filed with the Securities and Exchange Commission on June 15, 2015)

 

 

 

   2.32.2

 

Master Lease Agreement, dated October 1, 2014, by and among Lehigh Gas Wholesale Services, Inc., as Landlord, and CAPL Operations I, LLC and CST Services LLC, as Tenants, as subsequently amended by Amendment to Master Lease Agreement, dated April 13, 2015, and Second Amendment to Master Lease Agreement, dated June 15, 2015 (incorporated by reference to Exhibit 2.3 to the Current Report on Form 10-Q for CrossAmerica Partners LP, filed with the Securities and Exchange Commission on August 8, 2015)

 

 

 

   2.42.3

 

Form of Addendum to Master Lease Agreement (incorporated by reference to Exhibit 2.4 to the Quarterly Report on Form 10-Q for CrossAmerica Partners LP, filed with the Securities and Exchange Commission on August 8, 2015)

 

 

 

   2.52.4

 

Fuel Distribution Agreement, dated January 1, 2015, by and among CST Marketing and Supply LLC, and certain subsidiaries of CST Services LLC (incorporated by reference to Exhibit 2.5 to the Quarterly Report on Form 10-Q for CrossAmerica Partners LP, filed with the Securities and Exchange Commission on August 8, 2015)

   2.5

Asset Exchange Agreement, dated December 17, 2018 between Circle K Stores Inc. and CrossAmerica Partners LP (incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K for CrossAmerica Partners LP, filed with the Securities and Exchange Commission on December 17, 2018)

   2.6

Exchange Agreement, dated as of November 19, 2019, between Circle K Stores, Inc. and CrossAmerica Partners LP (incorporated by reference to Exhibit 2.1 to the Current Report on 8-K for CrossAmerica Partners LP, filed with the Securities and Exchange Commission on November 21, 2019) **+

   2.7

Asset Purchase Agreement, dated April 28, 2021, by and between 7-Eleven, Inc., the Speedway Subsidiary Sellers, and CrossAmerica Partners (incorporated by reference to Exhibit 2.1 to the Quarterly Report on Form 10-Q for CrossAmerica Partners LP, filed with the Securities and Exchange Commission on May 11, 2021)

 

 

 

   3.1

 

Certificate of Limited Partnership of Lehigh Gas Partners LP (incorporated herein by reference to Exhibit 3.1 to the Registration Statement on Form S-1 for CrossAmerica Partners LP, filed with the Securities and Exchange Commission on May 11, 2012)

 

 

 

   3.2

 

Certificate of Amendment to Certificate of Limited Partnership of Lehigh Gas Partners LP (incorporated by referenced to Exhibit 3.1 to the Current Report on Form 8-K for CrossAmerica Partners LP, filed with the Securities and Exchange Commission on October 3, 2014)

 

 

 

   3.3

 

FirstSecond Amended and Restated Agreement of Limited Partnership of Lehigh GasCrossAmerica Partners LP, dated October 30, 2012,February 6, 2020 (incorporated by and among Lehigh Gas Partners LP, Lehigh Gas GP LLC and Lehigh Gas Corporation (incorporatedreference herein by reference to Exhibit 3.1 to the Current Report on Form 8-K for CrossAmerica Partners LP, filed with the Securities and Exchange Commission on October 30, 2012)February 7, 2020)

 

 

 

   3.44.1

 

First Amendment to First Amended and Restated AgreementDescription of Limited Partnership of Lehigh Gas Partners LP, dated as of October 1, 2014Common Units (incorporated by reference to Exhibit 3.2 to the Current Report on Form 8-K for CrossAmerica Partners LP, filed with the Securities and Exchange Commission on October 3, 2014)


Exhibit No.

Description

   3.5

Second Amendment to First Amended and Restated Agreement of Limited Partnership of CrossAmerica Partners LP, dated as of December 3, 2014 (incorporated by reference herein to Exhibit 3.1 to the Current Report on Form 8-K for CrossAmerica Partners, filed with the Securities and Exchange Commission on December 9, 2014)

  10.1

Omnibus Agreement, dated as of October 30, 2012, by and among Lehigh Gas Partners LP, Lehigh Gas GP LLC, Lehigh Gas Corporation, Lehigh Gas-Ohio, LLC and Joseph V. Topper, Jr. (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K for CrossAmerica Partners LP, filed with the Securities and Exchange Commission on October 30, 2012)

  10.2

Amendment to Omnibus Agreement, dated as of May 1, 2014, by and among Lehigh Gas Partners LP, Lehigh Gas GP LLC and Lehigh Gas Corporation (incorporated by referenced to Exhibit 10.1 to the Current Report on Form 8-K for CrossAmerica Partners LP, filed with the Securities and Exchange Commission on May 1, 2014)

  10.3

Amended and Restated Omnibus Agreement, dated as of October 1, 2014, by and among Lehigh Gas Partners LP, Lehigh Gas GP LLC, Lehigh Gas Corporation, CST Services, LLC and Lehigh Gas-Ohio LLC (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K for CrossAmerica Partners LP, filed with the Securities and Exchange Commission on October 3, 2014)

  10.4

Amendment effective January 1, 2016 of the Amended and Restated Omnibus Agreement, dated as of October 1, 2014, by and among Lehigh Gas Partners LP, Lehigh Gas GP LLC, Lehigh Gas Corporation, CST Services, LLC and Lehigh Gas-Ohio LLC (incorporated by reference to Exhibit 10.44.1 to the Annual Report on Form 10-K for CrossAmerica Partners LP, filed with the Securities and Exchange Commission on February 28, 2017)26, 2020)

 

 

 

  10.510.1

 

Third Amended and Restated Credit Agreement, dated as of March 4, 2014, by and among the Lehigh Gas Partners LP, as borrower, certain domestic subsidiaries of Lehigh Gas Partners LP from time to time party thereto, the lenders party thereto, and RBS Citizens, N.A., KeyBank National Association and Wells Fargo Securities, LLC, as joint lead arranger and joint bookrunners, Wells Fargo Bank National Association, as co-syndication agent, and KeyBank National Association, as co-syndication agent, Bank of America, N.A., as documentation agent, Manufacturers and Traders Trust Company, as documentation agent, Manufacturers And Traders Trust Company, as co-documentation agent, Royal Bank of Canada, as co-documentation agent, Santander Bank, N.A., as co-documentation agent, and Citizens Bank of Pennsylvania, as administrative agent for the lenders thereunder (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K for CrossAmerica Partners LP, filed with the Securities and Exchange Commission on March 6, 2014)

  10.6

First Amendment to Third Amended and Restated Credit Agreement, dated as of July 2, 2014, by and among Lehigh Gas Partners LP, certain domestic subsidiaries of Lehigh Gas Partners LP, the lenders from party thereto, and Citizens Bank of Pennsylvania, as administration agent for the lenders thereunder (incorporated by referenced to Exhibit 10.1 to the Current Report on Form 8-K for CrossAmerica Partners LP, filed with the Securities and Exchange Commission on July 3, 2014)

  10.7

Waiver, Second Amendment to Third Amended and Restated Credit Agreement and Joinder, dated as of September 30, 2014, by and among Lehigh Gas Partners LP and Lehigh Gas Wholesale Services, Inc., certain domestic subsidiaries of Lehigh Gas Partners LP, the lenders party thereto, and Citizens Bank of Pennsylvania, as administrative agent for the lenders thereunder (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K for CrossAmerica Partners LP, filed with the Securities and Exchange Commission on October 3, 2014)

  10.8

Third Amendment to Third Amended and Restated Credit Agreement dated as of July 26, 2016 (incorporated by referenced to Exhibit 10.1 to the Current Report on Form 8-K for CrossAmerica Partners LP, filed with the Securities and Exchange Commission on December 19, 2016)

  10.9

Fourth Amendment to Third Amended and Restated Credit Agreement dated as of December 13, 2016 (incorporated by referenced to Exhibit 10.2 to the Current Report on Form 8-K for CrossAmerica Partners LP, filed with the Securities and Exchange Commission on December 19, 2016)

  10.10

Amendment to PMPA Franchise Agreement, dated as of October 1, 2014, by and between Lehigh Gas Wholesale LLC and Lehigh Gas-Ohio, LLC (incorporated by reference to Exhibit 10.3 to the Current Report on Form 8-K for CrossAmerica Partners LP, filed with the Securities and Exchange Commission on October 3, 2014)

  10.11

Voting Agreement, dated as of October 1, 2014, by and among CST Brands, Inc., Joseph V. Topper, Jr., The 2004 Irrevocable Agreement of Trust of Joseph V. Topper, Sr. and Lehigh Gas Corporation (incorporated by reference to Exhibit 10.4 to the Current Report on Form 8-K For CrossAmerica Partners LP, filed with the Securities and Exchange Commission on October 3, 2014)


Exhibit No.

Description

  10.12

Lehigh Gas Partners LP 2012 Incentive Award Plan, dated as of July 27, 2012 (incorporated by reference to Exhibit 10.11 to the Annual Report on Form 10-K for CrossAmerica Partners LP, filed with the Securities and Exchange Commission on February 19, 2016)

 

 

 


  10.13Exhibit No.

Description

  10.2

 

Form of Lehigh Gas Partners LP 2012 Incentive Award Plan Award Agreement for Phantom Units granted to executive officers from March 15, 2013 (incorporated herein by reference to Exhibit 10.6(b) to the Annual Report on Form 10-K for CrossAmerica Partners LP, filed with the Securities and Exchange Commission on March 28, 2013)

  10.14

Form of Lehigh Gas Partners LP 2012 Incentive Award Plan Award Agreement for Profits Interests with immediate vesting, granted to directors from March 14, 2014 (incorporated by reference to Exhibit 10.6(b) to the Current Report on Form 8-K for CrossAmerica Partners LP, filed with the Securities and Exchange Commission on March 10, 2014)

  10.15

Form of Lehigh Gas Partners LP 2012 Incentive Award Plan Award Agreement for Profits Interests, with one year vesting, granted to directors from March 14, 2014 (incorporated by reference to Exhibit 10.6(c) to the Current Report on Form 8-K for CrossAmerica Partners LP, filed with the Securities and Exchange Commission on March 10, 2014)

  10.16

Form of Lehigh Gas Partners LP 2012 Incentive Award Plan Award Agreement for Profits Interests granted to executive officers from March 14, 2014 (incorporated by reference to Exhibit 10.6(d) to the Current Report on Form 8-K for CrossAmerica Partners LP, filed with the Securities and Exchange Commission on March 10, 2014)

  10.17

Form of Lehigh Gas Partners LP 2012 Incentive Award Plan Award Agreement for Phantom Units for Executive Officers with distribution equivalent rights (incorporated by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q for CrossAmerica Partners LP, filed with the Securities and Exchange Commission on August 8, 2015)

 

 

 

  10.1810.3

 

Form of Lehigh Gas Partners LP 2012 Incentive Award Plan Award Agreement for Phantom Performance Units for Non-Employee DirectorsExecutive Officers and Employees with distribution equivalent rights from December 10,20, 2015 (incorporated by reference to Exhibit 10.17 to the Annual Report on Form 10-K for CrossAmerica Partners LP, filed with the Securities and Exchange Commission on February 19, 2016)

  10.19

Lehigh Gas Partners LP Executive Income Continuity Plan (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K for CrossAmerica Partners LP, filed with the Securities and Exchange Commission on May 30, 2014)

  10.20

Lehigh Gas Partners LP Executive Income Continuity Plan (as amended) (incorporated by reference to Exhibit 10.2 to the Quarterly Report on Form 10-Q for CrossAmerica Partners LP, filed with the Securities and Exchange Commission on November 7, 2014)2018)

 

 

 

  10.2110.4

 

First Amendment to Amended and Revised CrossAmerica Partners LP Executive Income Continuity Plan, dated September 14, 2016Award Agreement for Phantom Units for Non-Employee Directors with distribution equivalent rights (incorporated by reference asto Exhibit 10.2110.1 to the AnnualQuarterly Report on Form 10-K10-Q for CrossAmerica Partners LP, filed with the Securities and Exchange Commission on February 28,November 8, 2017)

 

 

 

  10.2210.5

 

Employment Agreement, dated as of October 1, 2014, by and between CST Services LLC and Joseph V. Topper, Jr. (incorporated by reference to Exhibit 10.5 to the Current Report on Form 8-K for CrossAmerica Partners LP, filed with the Securities and Exchange Commission on October 3, 2014)

  10.23

Master Lease Agreement, dated May 28, 2014, by and among LGP Realty Holdings LP, Lehigh Gas Wholesale Services, Inc. and Lehigh Gas-Ohio, LLC (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K for CrossAmerica Partners LP, filed with the Securities and Exchange Commission on May 30, 2014)

  10.24

GP Purchase Agreement, dated as of August 6, 2014, by and among Lehigh Gas Corporation, CST GP, LLC and CST Brands, Inc.(incorporated by reference to Exhibit 10.20 to the Annual Report on Form 10-K for CrossAmerica Partners LP, filed with the Securities and Exchange Commission on February 27, 2015)

  10.25

IDR Purchase Agreement, dated as of August 6, 2014, by and among The 2004 Irrevocable Agreement of Trust of Joseph V. Topper, Sr., The 2008 Irrevocable Agreement of Trust of John B. Reilly, Jr., CST Brands Holdings, LLC and CST Brands, Inc. (incorporated by reference to Exhibit 10.21 to the Annual Report on Form 10-K for CrossAmerica Partners LP, filed with the Securities and Exchange Commission on February 27, 2015)

  10.26

Contribution Agreement, dated as of December 16, 2014, by and among CST Brands, Inc., CST Services LLC and CrossAmerica Partners LP (incorporated by reference to Exhibit 10.22 to the Annual Report on Form 10-K for CrossAmerica Partners LP, filed with the Securities and Exchange Commission on February 27, 2015)

  10.27

Form of Indemnification Agreement for directors of the Board and certain officers of CrossAmerica GP LLC (incorporated by reference to Exhibit 10.27 to the Quarterly Report on Form 10-Q for CrossAmerica Partners LP, filed with the Securities and Exchange Commission on August 8, 2017)


Exhibit No.

Description

 

 

 

  10.2810.6

 

Second Amendment to the AmendedOmnibus Agreement, effective as of January 1, 2020, by and Revisedamong CrossAmerica Partners LP, Executive Income Continuity Plan, dated June 26, 2017CrossAmerica GP LLC and Dunne Manning Inc. (incorporated by reference to Exhibit 10.2810.1 to the QuarterlyCurrent Report on Form 10-Q8-K for CrossAmerica Partners LP, filed with the Securities and Exchange Commission on August 8, 2017)January 16, 2020) +

 

 

 

  10.2910.7

 

AwardCredit Agreement, dated as of April 1, 2019, among CrossAmerica Partners LP, as borrower, Lehigh Gas Wholesale Services, Inc., as borrower, certain domestic subsidiaries of CrossAmerica Partners LP and Lehigh Gas Wholesale Services, Inc. from time to time party thereto, as guarantors, the lenders from time to time party thereto, and Citizens Bank, N.A., as administrative agent, swing line lender and L/C issuer (incorporated by reference to Exhibit 10.1 to the Current Report on 8-K for Phantom UnitsCrossAmerica Partners LP, filed with the Securities and Exchange Commission on April 2, 2019).

  10.8

Amendment to Credit Agreement, dated as of November 19, 2019, among CrossAmerica Partners LP and Lehigh Gas Wholesale Services, Inc., as borrowers, the guarantors from time to time party thereto, the lenders from time to time party thereto and Citizens Bank, N.A., as administrative agent, swing line lender and L/C issuer (incorporated by reference to Exhibit 10.1 to the Current Report on 8-K for Non-Employee DirectorsCrossAmerica Partners LP, filed with distribution equivalent rightsthe Securities and Exchange Commission on November 21, 2019)

  10.9

Second Amendment to the Credit Agreement, dated as of July 28, 2021, among CrossAmerica Partners LP and Lehigh Gas Wholesale Services, Inc., as borrowers, the guarantors from time to time party thereto, the lenders from time to time party thereto and Citizens Bank, N.A., as administrative agent (incorporated by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q for CrossAmerica Partners LP, filed with the Securities and Exchange Commission on November 8, 2017)9, 2021)

 

 

 

  10.3010.10

 

Asset PurchaseCredit Agreement, dated August 4, 2017, byas of July 16, 2021, among CAPL JKM Partners LLC, as borrower, CAPL JKM Holdings LLC, Manufacturers and among CrossAmerica Partners LPTraders Trust Company, as administrative agent, swingline lender and Jet-Pep, Inc.issuing bank and the other persons listed as signatories in the Purchase Agreementlenders party thereto (incorporated by reference to Exhibit 10.2 to the Quarterly Report on Form 10-Q for CrossAmerica Partners LP, filed with the Securities and Exchange Commission on November 8, 2017)9, 2021)

  10.11

First Amendment to the Credit Agreement, dated as of July 29, 2021, among CAPL JKM Partners LLC, as borrower, CAPL JKM Holdings LLC, Manufacturers and Traders Trust Company, as administrative agent, swingline lender and issuing bank and the other lenders party thereto (incorporated by reference to Exhibit 10.3 to the Quarterly Report on Form 10-Q for CrossAmerica Partners LP, filed with the Securities and Exchange Commission on November 9, 2021)

 

 

 

  21.1 *

 

List of Subsidiaries of CrossAmerica Partners LP

 

 

 

  23.1 *

 

Consent of Grant Thornton LLP

 

 

 

  31.1 *

 

Certification of Principal Executive Officer of CrossAmerica GP LLC as required by Rule 13a-14(a) of the Securities Exchange Act of 1934

 

 

 

  31.2 *

 

Certification of Principal Financial Officer of CrossAmerica GP LLC as required by Rule 13a-14(a) of the Securities Exchange Act of 1934

 

 

 

  32.1*†

 

Certification of Principal Executive Officer of CrossAmerica GP LLC pursuant to 18 U.S.C. §1350

 

 

 

  32.2*†

 

Certification of Principal Financial Officer of CrossAmerica GP LLC pursuant to 18 U.S.C. §1350

 

 

 

101.INS *

 

Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.


Exhibit No.

Description

 

 

101.SCH *

 

Inline XBRL Taxonomy Extension Schema Document

 

 

 

101.CAL *

 

Inline XBRL Taxonomy Extension Calculation Linkbase Document

 

 

 

101.LAB *

 

Inline XBRL Taxonomy Extension Label Linkbase Document

 

 

 

101.PRE *

 

Inline XBRL Taxonomy Extension Presentation Linkbase Document

 

 

 

101.DEF *

 

Inline XBRL Taxonomy Extension Definition Linkbase Document

104 *

Cover Page Interactive Data File, formatted in Inline XBRL and contained in Exhibit 101

 

*

Filed herewith

Not considered to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that section.

+

Non-material schedules have been omitted pursuant to Item 601(a)(5) of Regulation S-K. The Partnership hereby undertakes to furnish supplemental copies of any of the omitted schedules upon request by the SEC.

**

Certain identified information has been omitted pursuant to Item 601(b)(10) of Regulation S-K. The Partnership hereby undertakes to furnish supplemental copies of the unredacted exhibit upon request by the SEC.

ITEM 16. FORM 10-K SUMMARY

None.


SIGNATURES

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

CROSSAMERICA PARTNERS LP

 

 

 

By:

 

CROSSAMERICA GP LLC, its General Partner

 

 

 

By:

 

   /s/ Jeremy L. Bergeron/s/ Charles M. Nifong, Jr.

 

 

Jeremy L. BergeronCharles M. Nifong, Jr.

 

 

President and Chief Executive Officer

 

 

(On behalf of the registrant, and in the capacity of Principal Executive Officer)

 

Date: February 26, 201828, 2022

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on February 26, 2018.28, 2022.

 

Signature

 

Title

 

 

 

/s/ Timothy A. MillerJoseph V. Topper, Jr.

 

Chairman of the Board of Directors

Timothy A. Miller

/s/ Jeremy L. Bergeron

President, Chief Executive Officer and Director

(Principal Executive Officer)

Jeremy L. Bergeron

/s/ Evan W. Smith

Vice President of Finance and Chief Financial Officer

(Principal Financial and Accounting Officer)

Evan W. SmithJoseph V. Topper, Jr.

 

 

 

 

 

/s/ Jean BernierJohn B. Reilly, III

 

Vice Chairman of the Board of Directors

John B. Reilly, III

/s/ Charles M. Nifong, Jr.

President, Chief Executive Officer and Director

Jean BernierCharles M. Nifong, Jr.

(Principal Executive Officer)

/s/ Maura Topper

Chief Financial Officer

Maura Topper

(Principal Financial Officer)

/s/ David A. Sheaffer

Principal Accounting Officer

David A. Sheaffer

(Principal Accounting Officer)

/s/ Keenan D. Lynch

General Counsel, Chief Administrative Officer and Director

Keenan D. Lynch

 

 

 

 

 

/s/ Justin A. Gannon

 

Director

Justin A. Gannon

 

 

 

 

 

/s/ Mickey Kim

 

Director

Mickey Kim

 

 

 

 

 

/s/ John B. Reilly, IIIKenneth G. Valosky

 

Director

John B. Reilly, III

/s/ Claude Tessier

Director

Claude Tessier

/s/ Joseph V. Topper, Jr.

Director

Joseph V. Topper, Jr.Kenneth G. Valosky

 

 

 

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