(Thousands of Dollars, except unit data)

	March 31,			December 31,
	2018			2017
	(Unaudited)
ASSETS
Current assets:
Cash	$	1,680		$	3,897
Accounts receivable, net of allowances of $402 and $277, respectively		25,487			27,792
Accounts receivable from related parties		15,826			14,459
Inventories		15,233			15,122
Assets held for sale		10,803			11,708
Other current assets		6,137			7,528
Total current assets		75,166			80,506
Property and equipment, net		671,871			681,000
Intangible assets, net		72,159			76,063
Goodwill		89,109			89,109
Other assets		21,049			20,558
Total assets	$	929,354		$	947,236

LIABILITIES AND EQUITY
Current liabilities:
Current portion of debt and capital lease obligations	$	2,919		$	2,916
Accounts payable		35,726			35,789
Accounts payable to related parties		26,208			25,512
Accrued expenses and other current liabilities		16,040			17,015
Motor fuel taxes payable		11,815			12,241
Total current liabilities		92,708			93,473
Debt and capital lease obligations, less current portion		533,865			529,147
Deferred tax liabilities, net		23,419			24,069
Asset retirement obligations		31,843			31,467
Other long-term liabilities		96,702			98,061
Total liabilities		778,537			776,217

Commitments and contingencies

Equity:
Partners’ Capital
Common units—(34,248,343 and 34,111,461 units issued and outstanding at March 31, 2018 and December 31, 2017, respectively)		151,155			171,337
General Partner’s interest		—			—
Total Partners’ Capital		151,155			171,337
Noncontrolling interests		(338	)		(318	)
Total equity		150,817			171,019
Total liabilities and equity	$	929,354		$	947,236

March 31, December 31,
2017 2016
ASSETS (Unaudited)
Current assets:
Cash $ 5,758
1,350
Accounts receivable, net of allowances of $434 and $487, respectively 22,234
29,251
Accounts receivable from related parties 12,549
12,975
Inventories 12,790
13,164
Assets held for sale 1,375
2,111
Other current assets 6,017
6,556
Total current assets 60,723
65,407
Property and equipment, net 670,968
677,329
Intangible assets, net 76,793
80,760
Goodwill 89,109
89,109
Other assets 19,751
19,384
Total assets $ 917,344
$ 931,989
LIABILITIES AND EQUITY
Current liabilities:
Current portion of debt and capital lease obligations $ 2,123
$ 2,100
Accounts payable 32,058
34,903
Accounts payable to related parties 9,108
9,958
Accrued expenses and other current liabilities 15,704
15,705
Motor fuel taxes payable 12,442
12,467
Total current liabilities 71,435
75,133
Debt and capital lease obligations, less current portion 472,793
465,119
Deferred tax liabilities, net 39,741
42,923
Asset retirement obligations 28,103
27,750
Other long-term liabilities 99,069
100,253
Total liabilities 711,141
711,178
Commitments and contingencies

Equity:
CrossAmerica Partners’ Capital
Common units—(33,725,837 and 33,524,952 units issued and outstanding at March 31, 2017 and December 31, 2016, respectively) 206,459
221,044
General Partner’s interest —
—
Total CrossAmerica Partners’ Capital 206,459
221,044
Noncontrolling interests (256 ) (233 )
Total equity 206,203
220,811
Total liabilities and equity $ 917,344
$ 931,989

See Condensed Notes to Consolidated Financial Statements.

CROSSAMERICA PARTNERS LP

CONSOLIDATED STATEMENTS OF OPERATIONS

(Thousands of Dollars, Except Unit and Per Unit Amounts)

(Unaudited)

	Three Months Ended March 31,
	2018			2017
Operating revenues^(a)	$	554,570		$	469,286
Costs of sales^(b)		514,619			431,840
Gross profit		39,951			37,446

Income from CST Fuel Supply equity interests		3,805			3,603
Operating expenses:
Operating expenses		16,342			15,260
General and administrative expenses		4,720			5,817
Depreciation, amortization and accretion expense		15,500			14,348
Total operating expenses		36,562			35,425
Gain (loss) on sales of assets, net		230			(44	)
Operating income		7,424			5,580
Other income (expense), net		94			118
Interest expense		(8,052	)		(6,702	)
(Loss) income before income taxes		(534	)		(1,004	)
Income tax expense (benefit)		273			(2,701	)
Net (loss) income		(807	)		1,697
Less: net (loss) income attributable to noncontrolling interests		(2	)		1
Net (loss) income attributable to limited partners		(805	)		1,696
IDR distributions		(1,180	)		(992	)
Net (loss) income available to limited partners	$	(1,985	)	$	704

Basic and diluted earnings per limited partner unit	$	(0.06	)	$	0.02

Weighted-average limited partner units:
Basic common units		34,157,088			33,588,163
Diluted common units^(c)		34,165,060			33,622,661

Distribution paid per common unit	$	0.6275		$	0.6125
Distribution declared (with respect to each respective period) per common unit	$	0.5250		$	0.6175
Supplemental information:
(a) Includes excise taxes of:	$	24,358		$	18,552
(a) Includes revenues from fuel sales to and rental income from related parties of:		103,521			94,217
(a) Includes rental income of:		21,721			21,441
(b) Includes rental expense of:		4,815			4,791
(c) Diluted common units were not used in the calculation of diluted earnings per common unit for the three months ended March 31, 2018 because to do so would have been antidilutive.

~~(Unaudited)~~

Three Months Ended March 31,
2017 2016
Operating revenues^(a)
$ 469,286
$ 367,740
Costs of sales^(b)
431,840
330,550
Gross profit 37,446
37,190

Income from CST Fuel Supply equity interests 3,603
4,051
Operating expenses:
Operating expenses 15,260
15,411
General and administrative expenses 5,817
7,005
Depreciation, amortization and accretion expense 14,348
12,900
Total operating expenses 35,425
35,316
Loss on sales of assets, net (44 ) (4 )
Operating income 5,580
5,921
Other income, net 118
118
Interest expense (6,702 ) (5,065 )
Income (loss) before income taxes (1,004 ) 974
Income tax benefit (2,701 ) (795 )
Consolidated net income 1,697
1,769
Less: net income attributable to noncontrolling interests 1
2
Net income attributable to CrossAmerica limited
   Partners
1,696
1,767
IDR distributions (992 ) (759 )
Net income available to CrossAmerica limited
   Partners
$ 704
$ 1,008
Net income per CrossAmerica limited partner unit:
Basic earnings per common unit $ 0.02
$ 0.03
Diluted earnings per common unit $ 0.02
$ 0.03
Basic and diluted earnings per subordinated unit n/a
$ 0.03
Weighted-average CrossAmerica limited partner units:
Basic common units 33,588,163
28,475,363

Diluted common units 33,622,661
28,545,975
Basic and diluted subordinated units —
4,630,769
Total diluted common and subordinated units 33,622,661 33,176,744

Distribution paid per common and subordinated unit $ 0.6125
$ 0.5925
Distribution declared (with respect to each respective
   period) per common and subordinated unit
$ 0.6175
$ 0.5975

Supplemental information:
(a) Includes excise taxes of: $ 18,552
$ 19,893
(a) Includes revenues from fuel sales to related parties of: $ 84,829
$ 73,308
(a) Includes income from rentals of: $ 21,441
$ 19,531
(b) Includes expenses from fuel sales to related parties of: $ 81,968
$ 70,252
(b) Includes expenses from rentals of: $ 4,791
$ 4,748

See Condensed Notes to Consolidated Financial Statements.

CROSSAMERICA PARTNERS LP

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Thousands of Dollars)

(Unaudited)

	Three Months Ended March 31,
	2018			2017
Cash flows from operating activities:
Net (loss) income	$	(807	)	$	1,697
Adjustments to reconcile net (loss) income to net cash flows provided by operating activities:
Depreciation, amortization and accretion expense		15,500			14,348
Amortization of deferred financing costs		428			424
Amortization of (above) below market leases, net		(1	)		27
Provision for losses on doubtful accounts		125			4
Deferred income taxes		(650	)		(3,182	)
Equity-based employee and director compensation expense		43			866
Amended Omnibus Agreement fees settled in common units		3,300			3,300
(Gain) loss on sales of assets, net		(230	)		44
Changes in operating assets and liabilities, net of acquisitions		432			4,244
Net cash provided by operating activities		18,140			21,772

Cash flows from investing activities:
Proceeds from sale of property and equipment		19			342
Capital expenditures		(2,097	)		(2,517	)
Principal payments received on notes receivable		71			64
Net cash used in investing activities		(2,007	)		(2,111	)

Cash flows from financing activities:
Borrowings under the revolving credit facility		40,395			31,026
Repayments on the revolving credit facility		(35,395	)		(24,026	)
Payments of long-term debt and capital lease obligations		(498	)		(495	)
Payments of sale leaseback obligations		(239	)		(201	)
Distributions paid on distribution equivalent rights		(10	)		(7	)
Distributions paid to holders of the IDRs		(1,180	)		(992	)
Distributions paid to noncontrolling interests		(18	)		(24	)
Distributions paid on common units		(21,405	)		(20,534	)
Net cash used in financing activities		(18,350	)		(15,253	)
Net (decrease) increase in cash		(2,217	)		4,408
Cash at beginning of period		3,897			1,350
Cash at end of period	$	1,680		$	5,758

~~(Unaudited)~~

Three Months Ended March 31,
2017 2016
Cash flows from operating activities:
Consolidated net income $ 1,697
$ 1,769
Adjustments to reconcile net income to net cash flows provided by operating activities:
Depreciation, amortization and accretion expense 14,348
12,900
Amortization of deferred financing fees 424
369
Amortization of below market leases, net 27
29
Provision for losses on doubtful accounts 4
24
Deferred income taxes (3,182 ) (894 )
Equity-based employees and directors compensation expense 866
1,282
Amended Omnibus Agreement fees: settled in common units 3,300
2,000
Loss on sales of assets, net 44
4
Changes in working capital, net of acquisitions 4,244
1,086
Net cash provided by operating activities 21,772
18,569
Cash flows from investing activities:
Proceeds from sale of property and equipment 342
47
Capital expenditures (2,517 ) (3,498 )
Principal payments received on notes receivable 64
18
Cash paid in connection with acquisitions, net of cash acquired —
(52,262 )
Cash paid to CST in connection with acquisitions —
(2,900 )
Net cash used in investing activities (2,111 ) (58,595 )
Cash flows from financing activities:
Borrowings under the revolving credit facility 31,026
90,308
Repayments on the revolving credit facility (24,026 ) (25,658 )
Repurchases of common units —
(2,752 )
Payments of long-term debt and capital lease obligations (495 ) (489 )
Payments of sale leaseback obligations (201 ) (173 )
Distributions paid on distribution equivalent rights (7 ) (13 )
Distributions paid to holders of the IDRs (992 ) (759 )
Distributions paid to noncontrolling interests (24 ) (37 )
Distributions paid on common and subordinated units (20,534 ) (19,618 )
Net cash (used in) provided by financing activities (15,253 ) 40,809
Net increase in cash 4,408
783
Cash at beginning of period 1,350
1,192
Cash at end of period $ 5,758
$ 1,975

See Condensed Notes to Consolidated Financial Statements.

CROSSAMERICA PARTNERS LP

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1.DESCRIPTION OF BUSINESS AND OTHER DISCLOSURES

~~CST’s~~

Couche-Tard and CST Merger ~~Agreement~~

~~Under~~

On June 28, 2017, a wholly owned subsidiary of Circle K, merged with and into CST, with CST surviving the ~~terms~~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, ~~Agreement,~~ Circle K ~~Stores Inc. will, through its acquisition~~indirectly owns all of ~~CST, control CST’s interest~~the membership interests in the sole member of our General Partner, ~~and CST’s 20.2%~~as well as a 21.4% limited partner interest in ~~CrossAmerica as well as own~~the Partnership and all of the ~~IDRs. The closing~~IDRs of the ~~transaction is subject to the receipt of regulatory approvals~~Partnership. Circle K, through its indirect ownership interest in the ~~United States~~sole member of our General Partner, has the ability to appoint all of the members of the Board and ~~Canada. The transaction is currently expected~~ to ~~close in the second quarter of 2017.~~

control and manage our operations and activities.

Description of Business

Our business consists of:

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~~

generating revenues through leasing or ~~leasing of retail sites~~subleasing our real estate used in the retail distribution of motor ~~fuels~~fuels; and ~~in turn, generating rental income from the lease or sublease of the retail sites; and~~

the operation of retail 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;

LGPR, which functions as the real estate holding company ~~of CrossAmerica~~ and holds assets that generate qualified rental income ~~that is qualifying~~ 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.

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, our common units as payment for charges and expenses incurred by us under the Amended Omnibus Agreement. There is no obligation for CST or our General Partner to accept partnership units in lieu of cash for amounts due under the Amended Omnibus Agreement. Pursuant to a common unit purchase program announced in September 2015, CST has, from time to time, also acquired our common units through open market purchases. The Merger Agreement prohibits CST from purchasing any of our common units. At March 31, 2017, after giving effect to these transactions, CST owned 20.2% of our limited partner interests.

Interim Financial Statements

These unaudited condensed consolidated financial statements have been prepared in accordance with U.S. GAAP for interim financial information and with the instructions to Form 10-Q and the Exchange Act. Accordingly, they do not include all of the information and notes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. All such adjustments are of a normal recurring nature unless disclosed otherwise. Management believes that the disclosures made are adequate to keep the information presented from being misleading. The financial statements contained herein should be read in conjunction with the consolidated financial statements and notes thereto included in our Form 10-K. Financial information as of March 31, ~~2017~~2018 and for the three months ended March 31, ~~2017~~2018 and ~~2016~~2017 included in the consolidated financial statements has been derived from our unaudited financial statements. Financial information as of December 31, ~~2016~~2017 has been derived from our audited financial statements and notes thereto as of that date.

Operating results for the three months ended March 31, ~~2017~~2018 are not necessarily indicative of the results that may be expected for the year ending December 31, ~~2017.~~2018. Our business exhibits 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

~~CROSSAMERICA PARTNERS LP~~

~~CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

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.

CROSSAMERICA PARTNERS LP

CONDENSED 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.

~~Significant Accounting Policies~~

~~There have been no material changes to the significant accounting policies described in our Form 10-K.~~

~~New Accounting Pronouncements~~

Revenue Recognition

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 principle of the guidance 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. ~~With the issuance of ASU 2015-14, which deferred the effective date by one year, this~~This guidance iswas effective January 1, ~~2018. The guidance can be~~2018 and we applied ~~either retrospectively to each prior reporting period presented, or as a cumulative-effect adjustment as of~~ the ~~date~~modified retrospective method of adoption. ~~Although management continues to evaluate the impact of adopting this new guidance, we do not expect the adoption to have a~~There was no material impact on the financial statements ~~although it will affect~~other than 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.

Revenues from the delivery of motor fuel are recorded at 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.

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.

See Note 13 for additional information on our revenues and related receivables.

Motor Fuel Taxes

LGW collects motor fuel taxes, which consist of various pass through taxes collected from customers on behalf of taxing authorities, and remits such taxes directly to those taxing authorities. LGW’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 retail sales and cost of sales include motor fuel taxes as the taxes are included in the cost paid for motor fuel and LGWS has no direct responsibility to collect or remit such taxes to the taxing authorities. This accounting policy is consistent with that used in prior periods.

Investment in CST Fuel Supply

ASU 2016-15–Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (a consensus of the Emerging Issues Task Force)

was effective January 1, 2018. This ASU provides guidance on cash flow presentation of various specific transactions.

We apply the cumulative earnings approach in presenting our cash flows from our investment in CST Fuel Supply. Distributions received are considered returns on investment and classified as cash inflows from operating activities.

Significant Accounting Policies

There have been no other material changes to the significant accounting policies described in our Form 10-K.

New Accounting Guidance Pending Adoption

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 years and interim periods within those years beginning after December 15, 2018, and requires a modified retrospective approach to adoption. ~~Early adoption is permitted.~~This guidance will be effective January 1, 2019. Management continues to evaluate the impact of this new guidance, but the adoption will have a material impact on our balance ~~sheet. We do not anticipate adopting this guidance early.~~sheet as we will be required to recognize right-of-use assets and lease liabilities for operating leases. We intend to apply each of the practical expedients in adopting this new guidance.

CROSSAMERICA PARTNERS LP

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~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. This guidance is effective January 1, 2018 and requires a modified retrospective application through a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption. We have chosen to early adopt the standard effective January 1, 2017, which had no impact as of the date of adoption but could impact us in the future.

~~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. ASU 2017-01 is effective for public fiscal years and interim periods within those years beginning after December 15, 2017. We have chosen to early adopt this standard effective January 1, 2017. Although there was no impact upon adoption, among other things, this guidance will result in the capitalization rather than expensing of acquisition costs in future transactions that will be 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–Intangibles~~–~~Goodwill 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. ASU 2017-04 is effective for a Company's annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. Management has elected to early adopt 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 but the adoption of these pronouncements did not materially impact our financial position, results of operations or disclosures.

~~CROSSAMERICA PARTNERS LP~~

~~CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

Concentration Risk

For the three months ended March 31, ~~2017,~~2018, we distributed ~~approximately 14%~~12% of our total wholesale distribution volumes to DMS and ~~its affiliates and~~ DMS ~~and its affiliates~~ accounted for ~~approximately 23%~~20% of our rental income. For the three months ended March 31, ~~2016,~~2017, we distributed ~~approximately 17%~~14% of our total wholesale distribution volumes to DMS and ~~its affiliates and~~ DMS ~~and its affiliates~~ accounted for ~~approximately 30%~~23% of our rental income. ~~For more information regarding transactions with DMS and its affiliates, see Note 7.~~

For the three months ended March 31, 2017, our wholesale business purchased approximately 28%, 27% and 22% of its motor fuel from ExxonMobil, BP and Motiva (Shell), respectively. For the three months ended March 31, 2016, our wholesale business purchased approximately 29%, 28% and 26% of its motor fuel from ExxonMobil, BP and Motiva (Shell), respectively. No other fuel suppliers accounted for 10% or more2018, we distributed 7% of our ~~motor fuel purchases during the three months ended March 31, 2017 and 2016.~~

~~Valero~~total wholesale distribution volume to Circle K retail sites that are not supplied ~~substantially all of the motor fuel purchased~~ by CST Fuel Supply ~~during all periods presented. During the three months ended March 31, 2017~~ and ~~2016, CST Fuel Supply purchased approximately 0.4 billion and 0.5 billion gallons~~received 19% of ~~motor fuel~~our rental income from ~~Valero, respectively.~~

Circle K. For the three months ended March 31, 2017, we distributed 7% of our total wholesale distribution volume to CST retail sites that are not supplied by CST Fuel Supply and received 20% of our rental income from CST.

For more information regarding transactions with DMS and Circle K, see Note 7.

For the three months ended March 31, ~~2016, we distributed 8%~~2018, our wholesale business purchased approximately 26%, 26%, 12% and 11% of ~~our total wholesale distribution volume to CST retail sites that are not supplied by CST Fuel Supply~~its motor fuel from ExxonMobil, BP, Motiva and ~~received 22% of our rental income from CST.~~

Circle K, respectively. For the three months ended March 31, 2017, ~~we received 9%~~our wholesale business purchased approximately 28%, 27% and 22% of its motor fuel from ExxonMobil, BP and Motiva, respectively. No other fuel suppliers accounted for 10% or more of our ~~rental income from a lessee dealer that operates certain of the retail sites acquired through the PMI and One Stop acquisitions. For~~motor fuel purchases during the three months ended March 31, ~~2016, we received 6%~~2018 and 2017.

Valero supplied substantially all of ~~our rental income~~the motor fuel purchased by CST Fuel Supply during all periods presented. During the three months ended March 31, 2018 and 2017, CST Fuel Supply purchased approximately 0.4 billion gallons of motor fuel from ~~this lessee dealer.~~

Valero.

Note 2. ASSETS HELD FOR SALE

We have classified ~~three and four retail~~12 sites as held for sale at March 31, ~~2017~~2018 and December 31, ~~2016, respectively.~~2017. Of the sites held for sale at March 31, 2018, 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 Circle K and us. These assets are expected to be sold ~~within a year of the date they were initially classified as held for sale.~~in 2018. Assets held for sale were as follows (in thousands):

	March 31,			December 31,
	2018			2017
Land	$	5,040		$	4,946
Buildings and site improvements		5,181			5,785
Equipment		2,332			2,485
Total		12,553			13,216
Less accumulated depreciation		(1,750	)		(1,508	)
Assets held for sale	$	10,803		$	11,708

March 31, December 31,
2017 2016
Land $ 712
$ 882
Buildings and site improvements 742
1,054
Equipment and other 258
702
Total 1,712
2,638
Less accumulated depreciation (337 ) (527 )
Assets held for sale $ 1,375
$ 2,111

We recorded an impairment charge of $1.2 million during the three months ended March 31, 2018 related to the FTC-required divestiture of the Jet-Pep sites, included within depreciation, amortization and accretion expense on the statement of operations.

Note 3. INVENTORIES

Inventories consisted of the following (in thousands):

	March 31,		December 31,
	2018		2017
Retail site merchandise	$	7,699	$	7,806
Motor fuel		7,534		7,316
Inventories	$	15,233	$	15,122

March 31, December 31,
2017 2016
Retail site merchandise $ 8,337
$ 8,374
Motor fuel 4,453
4,790
Inventories $ 12,790
$ 13,164

CROSSAMERICA PARTNERS LP

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 4. PROPERTY AND EQUIPMENT

Property and equipment, net consisted of the following (in thousands):

	March 31,			December 31,
	2018			2017
Land	$	284,794		$	285,682
Buildings and site improvements		362,492			362,207
Leasehold improvements		10,408			10,155
Equipment		186,293			185,733
Construction in progress		2,252			1,797
Property and equipment, at cost		846,239			845,574
Accumulated depreciation and amortization		(174,368	)		(164,574	)
Property and equipment, net	$	671,871		$	681,000

March 31, December 31,
2017 2016
Land $ 280,561
$ 280,400
Buildings and site improvements 347,635
346,834
Leasehold improvements 9,359
9,095
Equipment and other 171,734
169,245
Construction in progress 3,497
3,173
Property and equipment, at cost 812,786
808,747
Accumulated depreciation and amortization (141,818 ) (131,418 )
Property and equipment, net $ 670,968
$ 677,329

Note 5.INTANGIBLE ASSETS

Intangible assets consisted of the following (in thousands):

	March 31, 2018							December 31, 2017
	Gross Amount		Accumulated Amortization			Net Carrying Amount		Gross Amount		Accumulated Amortization			Net Carrying Amount
Wholesale fuel supply contracts/rights	$	127,955	$	(60,146	)	$	67,809	$	127,955	$	(56,915	)	$	71,040
Trademarks		2,064		(952	)		1,112		2,064		(863	)		1,201
Covenant not to compete		4,581		(3,505	)		1,076		4,581		(3,300	)		1,281
Below market leases		11,401		(9,239	)		2,162		11,401		(8,860	)		2,541
Total intangible assets	$	146,001	$	(73,842	)	$	72,159	$	146,001	$	(69,938	)	$	76,063

March 31, 2017 December 31, 2016
Gross Amount Accumulated Amortization Net Carrying Amount Gross Amount Accumulated Amortization Net Carrying Amount
Wholesale fuel supply contracts/rights $ 118,201
$ (47,339 ) $ 70,862
$ 118,201
$ (44,298 ) $ 73,903
Trademarks 1,094
(726 ) 368
1,094
(685 ) 409
Covenant not to compete 4,131
(2,700 ) 1,431
4,131
(2,503 ) 1,628
Below market leases 11,401
(7,269 ) 4,132
12,081
(7,261 ) 4,820
Total intangible assets $ 134,827
$ (58,034 ) $ 76,793
$ 135,507
$ (54,747 ) $ 80,760

Note 6. DEBT

Our balances for long-term debt and capital lease obligations are as follows (in thousands):

	March 31,		December 31,
	2018		2017
$550 million revolving credit facility	$	511,000	$	506,000
Capital lease obligations		26,546		27,220
Note payable		750		765
Total debt and capital lease obligations		538,296		533,985
Current portion		2,919		2,916
Noncurrent portion		535,377		531,069
Deferred financing costs, net		1,512		1,922
Noncurrent portion, net of deferred financing costs	$	533,865	$	529,147

March 31, December 31,
2017 2016
$550 million revolving credit facility $ 448,500
$ 441,500
Note payable 808
822
Capital lease obligations 28,759
28,455
Total debt and capital lease obligations 478,067
470,777
Current portion 2,123
2,100
Noncurrent portion 475,944
468,677
Deferred financing fees (3,151 ) (3,558 )
Noncurrent portion, net of deferred financing fees $ 472,793
$ 465,119

~~CROSSAMERICA PARTNERS LP~~

~~CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

Our ~~$550 million~~ revolving credit facility is secured by substantially all of our assets. Letters of credit outstanding at March 31, ~~2017~~2018 and December 31, ~~2016~~2017 totaled ~~$6.5 million.~~$5.4 million and $6.7 million, respectively, which reduce our availability under the credit facility. The amount of availability at March 31, ~~2017~~2018 under the revolving credit facility, after taking into account debt covenant restrictions, was ~~$85.7~~$33.6 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 revolving credit facility and unrestricted cash on the balance sheet on the date of such acquisition.

CROSSAMERICA PARTNERS LP

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Financial Covenants and Interest Rate

We are required to comply with certain financial covenants under the credit facility. 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 periods following a material ~~acquisition.~~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 for the first ~~three~~four full fiscal quarters following the closing of a material acquisition. If we issued ~~Qualified Senior Notes~~qualified senior notes (as defined in the revolving 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, we are also required to maintain a senior leverage ratio (as defined in the revolving credit facility) of less than or equal to 3.00 : 1.00 and a consolidated interest coverage ratio (as defined in the credit facility) of at least 2.75 : 1.00. As of March 31, ~~2017,~~2018, we were in compliance with these financial covenants.

~~Outstanding~~

At March 31, 2018, outstanding borrowings under the revolving credit facility ~~bear~~bore interest at LIBOR plus a margin of 3.00%. Our borrowings had an effective interest rate of ~~3.95%~~4.74% as of March 31, ~~2017.~~2018.

On April 25, 2018, the credit facility was amended to:

Extend the maturity date from March 4, 2019 to April 25, 2020;

Increase the capacity from $550 million to $650 million;

Extend the period during which the permitted total leverage ratio (as defined in the revolving credit facility) is increased from 4.50 : 1.00 to 5.00 : 1.00 after the closing of a material acquisition (as defined in the revolving credit facility) from three quarters to four quarters; and

Decrease the applicable margin and commitment fee (each as defined in the revolving credit facility), which vary based on our leverage ratio, such that the applicable margin ranges from 1.50% to 2.75% for LIBOR rate loans (as defined in the revolving credit facility) and 0.50% to 1.75% for alternate base rate loans (as defined in the revolving credit facility), and the commitment fee ranges from 0.20% to 0.45%. In general, the applicable margin for LIBOR and alternate base rate loans was reduced by 0.5%.

Note 7. RELATED-PARTY TRANSACTIONS

Transactions with ~~CST~~

Circle K

Fuel Sales and Rental Income

We sell wholesale motor fuel under a master fuel distribution agreement to ~~43 CST~~49 Circle K retail sites and lease real property on 7473 retail sites to ~~CST~~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 wholesale fuel sales and real property rental income from CST and Circle K were as follows (in thousands):

	Three Months Ended March 31,
	2018		2017
Revenues from motor fuel sales to CST and Circle K	$	36,060	$	30,380
Rental income from CST and Circle K		4,198		4,280

Three Months Ended March 31,
2017 2016
Revenues from motor fuel sales to CST $ 30,380
$ 23,257
Rental income from CST $ 4,280
$ 4,317

~~Receivables~~

Accounts receivable from ~~CST were $2.9~~Circle K for fuel amounted to $4.7 million and ~~$3.2~~$3.9 million at March 31, ~~2017~~2018 and December 31, ~~2016, respectively, related~~2017, respectively.

CST Fuel Supply Equity Interests

CST Fuel Supply provides wholesale motor fuel distribution to ~~these transactions.~~

~~Amended Omnibus Agreement~~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 March 31, 2018 and ~~Management Fees~~

2017. We ~~incurred $4.3~~account for the income derived from our equity interest of CST Fuel Supply as “Income from CST Fuel Supply equity” on our statement of operations, which amounted to $3.8 million and ~~$4.5~~$3.6 million for the three months ended March 31, 2018 and 2017, respectively.

CROSSAMERICA PARTNERS LP

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Purchase of Fuel from CST and ~~2016, respectively,~~Circle K

We purchase the fuel supplied to 21 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 $4.9 million and $5.7 million of motor fuel from CST Fuel Supply for the three months ended March 31, 2018 and 2017.

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 $30.9 million of motor fuel from Circle K for the three months ended March 31, 2018.

Circle K acquired Holiday Stationstores, Inc. (Holiday) on December 22, 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 now purchase fuel from Circle K to supply our Holiday-branded sites. These purchases amounted to $11.1 million for the three months ended March 31, 2018. We also pay a franchise fee to Circle K, which amounted to $0.4 million for the three months ended March 31, 2018.

On March 15, 2018, as approved by the independent conflicts committee of our Board, we purchased the leasehold interest in two retail sites from Circle K for $0.2 million. We purchase the fuel supplied to these retail sites from Circle K. Such purchases were insignificant for the three months ended March 31, 2018.

Effective February 1, 2018, Couche-Tard implemented a freight cost initiative by renegotiating hauling agreements, including our wholesale transportation agreements. On May 4, 2018, the independent conflicts committee of our Board approved an amendment to the Omnibus Agreement providing for the payment by us to Couche-Tard of a 2.57% commission on our wholesale transportation costs under contracts included in Couche-Tard’s global contract renegotiations and successfully renegotiated. This commission amounted to $0.1 million for the three months ended March 31, 2018.

Amounts payable to Circle K related to these purchases totaled $6.7 million and $7.0 million at March 31, 2018 and December 31, 2017, respectively.

Amended Omnibus Agreement and Management Fees

We incurred $3.1 million and $4.3 million for the three months ended March 31, 2018 and 2017, including incentive compensation costs and non-cash stock-based compensation expense, under the Amended Omnibus Agreement, which are recorded as a component of operating expenses and general and administrative expenses in the statement of operations. The decrease was driven by personnel and salary reductions effective at the time of the Merger. Amounts payable related to ~~CST were $9.1~~Circle K related to expenses incurred by Circle K in accordance with the Amended Omnibus Agreement totaled $19.4 million and ~~$10.0~~$18.3 million at March 31, ~~2017~~2018 and December 31, ~~2016,~~2017, respectively.

~~CROSSAMERICA PARTNERS LP~~

~~CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

Common Units Issued to CST and Circle K as Consideration for Amounts Due Under the ~~Terms of the~~ Amended Omnibus Agreement

As approved by the independent conflicts committee of the Board, ~~and the executive committee of CST’s board of directors,~~ the Partnership, CST and ~~CST~~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. As approved by the independent conflicts committee, the number of common units issued is based on the volume weighted average daily trading price of the common units for the 20 trading days prior to issuance. We issued the following common units to CST as consideration for amounts due under the terms of the Amended Omnibus Agreement:


Period
~~Period~~	Date of Issuance	Number of Common Units Issued
Quarter ended December 31, ~~2016~~2017	~~February 28, 2017~~ March 1, 2018	~~171,039~~	136,882
Quarter ended March 31, ~~2017~~2018	*	~~128,983~~	155,236

* Expected to be issued on May 10, 2017

*	Expected to be issued on May 21, 2018

~~CST Fuel Supply Equity Interests~~

CST Fuel Supply provides wholesale motor fuel distribution to the majority of CST’s U.S. retail sites on a fixed markup per gallon. We owned a 17.5% total interest in CST Fuel Supply at March 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” on our statement of operations, which amounted to $3.6 million and $4.1 million for the three months ended March 31, 2017 and 2016, respectively.

~~Purchase of Fuel from CST~~

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 subwholesalers. We purchased $5.7 million and $3.0 million of motor fuel from CST Fuel Supply for the three months ended March 31, 2017 and 2016, respectively, in connection with these retail sites.

IDR and Common Unit Distributions

We distributed ~~$1.0~~$1.2 million and ~~$0.8~~$1.0 million to CST related to its ownership of our IDRs and ~~$4.1~~$4.5 million and ~~$3.7~~$4.1 million related to its ownership of our common units during the three months ended March 31, 2018 and 2017, ~~and 2016,~~ respectively.

CROSSAMERICA PARTNERS LP

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Wholesale Motor Fuel Sales and Real Estate Rentals

Revenues from motor fuel sales and rental income from DMS ~~and its affiliates~~ were as follows (in thousands):

	Three Months Ended March 31,
	2018		2017
Revenues from motor fuel sales to DMS	$	58,921	$	54,449
Rental income from DMS		4,285		4,975

Three Months Ended March 31,
2017 2016
Revenues from motor fuel sales to DMS and its affiliates $ 54,449
$ 50,051
Rental income from DMS and its affiliates $ 4,975
$ 5,693

~~Receivables~~

Accounts receivable from DMS ~~and its affiliates~~ totaled ~~$8.3~~$9.6 million and ~~$8.6~~$9.3 million at March 31, ~~2017~~2018 and December 31, ~~2016,~~2017, respectively.

Revenues from rental income from Topstar Enterprises, an entity affiliated with Joseph V. Topper, Jr, a member of the Board, were $0.1 million for ~~each of~~ the three months ended March 31, ~~2017~~2018 and ~~2016.~~

~~We lease~~2017.

CrossAmerica leases real estate from certain entities affiliated with Joseph V. Topper, Jr., a member of the Board. Rent expense paid to these entities was $0.2 million for ~~each of~~ the three months ended March 31, ~~2017~~2018 and ~~2016.~~

2017.

Maintenance and Environmental Costs

Certain maintenance and environmental monitoring and remediation activities are performed by ~~a related party of~~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 $0.2 million ~~and $0.6 million~~ for the three months ended March 31, ~~2017~~2018 and ~~2016, respectively.~~

~~Aircraft Usage Costs~~

~~From time~~2017. Accounts payable 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. Lease costs incurred by us for use of these aircraft were not significant for each of the three months endedthis related party amounted to $0.2 million at March 31, ~~2017~~2018 and ~~2016.~~

~~CROSSAMERICA PARTNERS LP~~

~~CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

December 31, 2017.

Principal Executive Offices

Our principal executive offices are in Allentown, Pennsylvania. We sublease office space from CST that CST leases from an affiliate of John B. Reilly, III and Joseph V. Topper, Jr., ~~directors~~members of our Board. The management fee charged by CST to us under the Amended Omnibus Agreement ~~incorporates~~includes this rental expense, which amounted to $0.2 million ~~and $0.1 million~~ for the three months ended March 31, ~~2017~~2018 and ~~2016, respectively.~~

2017.

Public Relations and Website Consulting Services

We have engaged a company affiliated with John B. Reilly, III, a member of the Board, for public relations and website consulting services. The cost of these services was insignificant for the three months ended March 31, 2018 and 2017.

Note 8. COMMITMENTS AND CONTINGENCIES

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 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.

Environmental Matters

We currently own or lease retail sites where refined petroleum products are ~~a co-defendant, together~~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.

CROSSAMERICA PARTNERS LP

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

We maintain insurance of various types with ~~our General Partner, CST and CST Services LLC, in a lawsuit brought by Charles Nifong, a former employee~~varying levels of CST Services LLC who previously provided services to us as Chief Investment Officer and Vice President of Finance (Court of Common Pleas, Lehigh County, Pennsylvania, case number 2015-1003). The plaintiff alleges breach of contract and associated claims relating to his termination of employment and claimed severance benefitscoverage that is considered adequate under the ~~EICP totaling approximately $1.6 million. We intend~~circumstances to ~~contest the action vigorously. Under the EICP,~~cover operations and properties. The insurance policies are subject to deductibles that are considered reasonable and not excessive. In addition, we ~~are obligated to pay reasonable legal expenses incurred by the plaintiff~~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 ~~this dispute~~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 ~~we are successful in our defense or not,~~to, and the extent to which we ~~expense~~will assume liability for existing environmental conditions.

Environmental liabilities recorded on the balance sheet within accrued expenses and other current liabilities and other long-term liabilities totaled $3.7 million and $3.5 million at March 31, 2018 and December 31, 2017, respectively. Indemnification assets related to third-party escrow funds, state funds or insurance recorded on the balance sheet within other current assets and other noncurrent assets totaled $3.2 million and $3.4 million at March 31, 2018 and December 31, 2017, respectively. 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 ~~incurred.~~

~~Environmental Matters~~

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, the Predecessor Entity must indemnify us for any costs or expenses that it incurs 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. ~~The Predecessor Entity’s~~As such, these environmental liabilities and indemnification assets ~~associated with contributed sites amounted to $5.5 million and $3.5 million at March 31, 2017 and $6.1 million and $5.1 million at December 31, 2016.~~

are recorded on the balance sheet of the Predecessor Entity rather than the balance sheet of the Partnership.

Note 9. 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.

~~CROSSAMERICA PARTNERS LP~~

~~CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

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 ~~2017~~2018 or ~~2016.~~

2017.

As further discussed in Note 10, we have accrued for unvested phantom units and vested and unvested profits interests as a liability and adjust that liability on a recurring basis based on the market price of our common units each balance sheet date. Such fair value measurements are deemed Level 1 measurements.

CROSSAMERICA PARTNERS LP

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Financial Instruments

The fair value of our accounts receivable, notes receivable, and accounts payable approximated their carrying values as of March 31, ~~2017~~2018 and ~~2016~~December 31, 2017 due to the short-term maturity of these instruments. The fair value of the revolving credit facility approximated its carrying values of ~~$448.5~~$511.0 million as of March 31, ~~2017~~2018 and ~~$441.5~~$506.0 million as of December 31, ~~2016,~~2017, due to the frequency with which interest rates are reset and the consistency of the market spread.

Note 10. EQUITY-BASED COMPENSATION

Overview

We record equity-based compensation as a component of general and administrative expenses in the statements of operations. ~~Compensation~~Equity-based compensation expense was insignificant and $0.9 million for the three months ended March 31, 2018 and 2017, ~~and 2016 was $0.9 million and $1.3 million,~~ respectively.

Partnership Equity-Based Awards

~~No Partnership awards were granted to CST employees in the first quarter of 2017.~~

Since we grant awards to employees of CST who provide services to us under the Amended Omnibus Agreement, and since the grants may be settled in cash, unvested phantom units and vested and unvested profits interests 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 at March 31, ~~2017~~2018 and December 31, ~~2016~~2017 totaled ~~$0.8~~$0.6 million and ~~$1.8~~$0.7 million, respectively.

CST Equity-Based Awards

In February 2017, CST granted approximately 47,000 equity-based awards ~~of approximately 47,000~~ in the form of time vested restricted stock units of CST and 102,000 in the form of time vested restricted stock units of CST, stock options of CST and market share units of CST for the three months ended March 31, 2017 and 2016, respectively, which were granted to certain employees ~~of CST~~ for services rendered on our behalf. ~~Expense associated with these awards that was charged to us under the Amended Omnibus Agreement was $0.7 million for each of the three months ended March 31, 2017 and 2016.~~

~~At the~~Upon completion of the Merger, ~~each CST stock option, restricted share~~these awards converted to cash awards and restricted stock unit that is outstanding immediately prior to the completion of the Merger, whether vested or unvested, will become fully vested and be converted into the right to receive a cash payment as defined in the Merger Agreement.

At the completion of the Merger, each award of CST restricted stock units that was granted in February 2017 will be converted into the right to receive a cash payment as defined in the Merger Agreement, but such award will remainremained subject to the same vesting terms and payment schedule of three annual tranches as those set forth in the original ~~restricted stock unit~~ award agreement; provided that, upon completion of the Merger, such ~~award~~awards 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.”~~

~~Awards to Members of the Board~~

In December 2016, the Partnership granted 11,476 phantom units to non-employee directors of the Board as a portion of director compensation. Such awards vest in December 2017. All director equity awards contain a provision providing for acceleration of vesting upon a change in control.Retirement. The ~~Merger will constitute a change in control for purposes of these awards.~~

~~The liability for~~expense associated with these awards ~~at March 31, 2017 and December 31, 2016~~that was charged to us under the Amended Omnibus Agreement was $0.1 ~~million. The associated compensation expense was not significant~~million for the three months ended March 31, 2018. Unrecognized compensation expense associated with these awards amounted to $0.6 million and $0.7 million as of March 31, 2018 and December 31, 2017, respectively, which will be recognized over the vesting term through January 2020.

For the three months ended March 31, 2017, the expense associated with CST equity-based awards in the form of time vested restricted stock units of CST, stock options of CST and ~~2016.~~

market share units of CST, which was charged to us under the Amended Omnibus Agreement, was $0.7 million.

Note 11. INCOME TAXES

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, which may differ significantly from income for financial statement purposes, is assessed at the individual limited partner unit holder 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 period presented.

Certain activities that generate non-qualifying income are conducted through LGWS. LGWS is a tax paying corporate subsidiary of ours that is subject to federal and state income taxes. Current and deferred income taxes are recognized on the earnings of LGWS. 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.

We recorded income tax expense (benefit) of $0.3 million and $(2.7) million for the three months ended March 31, 2018 and 2017, respectively, as a result of the income generated (losses incurred) by our corporate subsidiaries. The effective tax rate differs from the combined federal and state statutory rate primarily because only LGWS is subject to income tax.

CROSSAMERICA PARTNERS LP

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note ~~11.~~12. NET INCOME 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 (loss), after deducting the IDRs, by the weighted-average number of outstanding common units.

The following tables provide a reconciliation of net income (loss) and weighted-average units used in computing basic and diluted net income (loss) per limited partner unit for the following periods (in thousands, except unit and per unit amounts):

	Three Months Ended March 31,
	2018			2017
Numerator:
Distributions paid^(a)	$	21,415		$	20,541
Allocation of distributions in excess of net (loss) income		(23,400	)		(19,837	)
Limited partners’ interest in net (loss) income - basic and diluted	$	(1,985	)	$	704
Denominator:
Weighted average limited partnership units outstanding - basic		34,157,088			33,588,163
Adjustment for phantom units^(b)		—			34,498
Weighted average limited partnership units outstanding - diluted		34,157,088			33,622,661
Net income (loss) per limited partnership unit - basic and diluted	$	(0.06	)	$	0.02

Three Months Ended March 31,
2017 2016
Common Units Subordinated Units Common Units Subordinated Units
Numerator:
Distributions paid^(a)
$ 20,541
$ —
$ 15,172
$ 4,459
Allocation of distributions in excess of net income^(b)
(19,837 ) —
(14,305 ) (4,318 )
Limited partners’ interest in net income - basic and diluted $ 704
$ —
$ 867
$ 141

Denominator:
Weighted average limited partnership units outstanding - basic 33,588,163
—
28,475,363
4,630,769
Adjustment for phantom units 34,498
—
70,612
—
Weighted average limited partnership units outstanding - diluted 33,622,661
—
28,545,975
4,630,769

Net income per limited partnership unit - basic $ 0.02
$ —
$ 0.03
$ 0.03
Net income per limited partnership unit - diluted $ 0.02
$ —
$ 0.03
$ 0.03

(a)
~~(a)~~	Distributions paid per unit were ~~$0.6125~~$0.6275 and ~~$0.5925~~$0.6125 during the three months ended March 31, 2018 and 2017, ~~and 2016,~~ respectively.

(b)
~~(b)~~	~~Allocation~~ Excludes 7,971 potentially dilutive securities from the calculation of ~~distributions in excess of net income is based on a pro rata proportion~~diluted earnings per common unit because to do so would be antidilutive for the ~~common and subordinated units as outlined in the Partnership Agreement.~~three months ended March 31, 2018.

~~Note 12. INCOME TAXES~~

Distributions

Distribution activity for ~~financial statement purposes, is assessed at the individual limited partner unit holder level. We are subject to a statutory requirement that non-qualifying income,~~2018 was as ~~defined by the Internal Revenue Code, cannot exceed 10%~~follows:

Quarter Ended

Record Date

Payment Date

Cash

Distribution

(per unit)

Cash

Distribution

(in thousands)

December 31, 2017

February 5, 2018

February 12, 2018

0.6275

21,415

March 31, 2018

May 18, 2018

May 25, 2018

0.5250

17,996

The amount 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 ~~period presented.~~

~~Certain activities that generate non-qualifying income are conducted through LGWS. LGWS is a tax paying corporate subsidiary of ours that~~distribution is subject to ~~federal and state income taxes. Current and deferred income taxes are recognized on~~ the ~~earnings~~discretion of ~~LGWS. Deferred income tax assets and liabilities are recognized for~~ the ~~future tax consequences attributable~~Board, which may modify or revoke our cash distribution policy at any time. Our Partnership Agreement does not require us to ~~temporary differences between~~pay any distributions. As such, there can be no assurance we will continue to pay distributions in the ~~financial statement carrying amounts of existing assets and liabilities and their respective tax bases and are measured using enacted tax rates.~~

We recorded income tax benefits of $2.7 million and $0.8 million for the three months ended March 31, 2017 and 2016, respectively, as a result of losses incurred by our corporate subsidiaries. The effective tax rate differs from the combined federal and state statutory rate because only LGWS is subject to income tax.

~~CROSSAMERICA PARTNERS LP~~

~~CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

future.

Note 13. SEGMENT REPORTING

We conduct our business in two segments: 1) the Wholesale segment and 2) the Retail segment. The wholesale segment includes the wholesale distribution of motor fuel to lessee dealers, independent dealers, commission agents, DMS, CST 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 have motor fuel distribution agreements with DMS and CST and collect rent from both. The Retail 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. 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 Wholesale segment, we also generate revenues through leasing or subleasing real estate in our Retail segment.

CROSSAMERICA PARTNERS LP

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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, net, and the elimination of the Retail segment’s intersegment cost of revenues from motor fuel sales against the Wholesale 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.

The following table reflects activity related to our reportable segments (in thousands):

	Wholesale		Retail		Unallocated			Consolidated
Three Months Ended March 31, 2018
Revenues from fuel sales to external customers	$	382,000	$	127,317	$	—		$	509,317
Intersegment revenues from fuel sales		98,393		—		(98,393	)		—
Revenues from food and merchandise sales		—		22,586		—			22,586
Rent income		19,755		1,966		—			21,721
Other revenue		946		—		—			946
Total revenues	$	501,094	$	151,869	$	(98,393	)	$	554,570

Income from CST Fuel Supply equity interests	$	3,805	$	—	$	—		$	3,805
Operating income (loss)	$	26,163	$	1,349	$	(20,088	)	$	7,424

Three Months Ended March 31, 2017
Revenues from fuel sales to external customers	$	339,088	$	84,203	$	—		$	423,291
Intersegment revenues from fuel sales		61,616		—		(61,616	)		—
Revenues from food and merchandise sales		—		24,020		—			24,020
Rent income		19,639		1,802		—			21,441
Other revenue		534		—		—			534
Total revenues	$	420,877	$	110,025	$	(61,616	)	$	469,286

Income from CST Fuel Supply equity interests	$	3,603	$	—	$	—		$	3,603
Operating income (loss)	$	25,652	$	145	$	(20,217	)	$	5,580

Receivables relating to the revenue streams above are as follows:

	March 31,		December 31,
	2018		2017
Receivables from fuel and merchandise sales	$	35,295	$	35,439
Receivables for rent and other lease-related charges		6,018		6,812
Total accounts receivable	$	41,313	$	42,251

Wholesale Retail Unallocated Consolidated
Three Months Ended March 31, 2017
Revenues from fuel sales to external customers $ 339,088
$ 84,203
$ —
$ 423,291
Intersegment revenues from fuel sales 61,616
—
(61,616 ) —
Revenues from food and merchandise sales —
24,020
—
24,020
Rent income 19,639
1,802
—
21,441
Other revenue 534
—
—
534
Total revenues $ 420,877
$ 110,025
$ (61,616 ) $ 469,286

Income from CST Fuel Supply Equity $ 3,603
$ —
$ —
$ 3,603
Operating income (loss) $ 25,652
$ 145
$ (20,217 ) $ 5,580

Three Months Ended March 31, 2016
Revenues from fuel sales to external customers $ 243,403
$ 74,038
$ —
$ 317,441
Intersegment revenues from fuel sales 48,437
—
(48,437 ) —
Revenues from food and merchandise sales —
30,449

30,449
Rent income 18,199
1,332
—
19,531
Other revenue 319
—
—
319
Total revenues $ 310,358
$ 105,819
$ (48,437 ) $ 367,740
$ (13,179 )
Income from CST Fuel Supply Equity $ 4,051
$ —
$ —
$ 4,051
Operating income (loss) $ 24,041
$ 1,670
$ (19,790 ) $ 5,921

Performance obligations are satisfied as fuel is delivered to the customer. Many of our 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.

Receivables from rent and other lease-related charges are generally collected at the beginning of the month.

CROSSAMERICA PARTNERS LP

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 14. SUPPLEMENTAL CASH FLOW INFORMATION

In order to determine net cash provided by operating activities, net income is adjusted by, among other things, changes in ~~current~~ assets and ~~current~~ liabilities as follows (in thousands):

	Three Months Ended March 31,
	2018			2017
Decrease (increase):
Accounts receivable	$	2,154		$	7,020
Accounts receivable from related parties		(1,128	)		491
Inventories		(114	)		330
Other current assets		1,416			1,223
Other assets		(825	)		(1,257	)
Increase (decrease):
Accounts payable		(63	)		(2,845	)
Accounts payable to related parties		488			(339	)
Motor fuel taxes payable		(426	)		(25	)
Accrued expenses and other current liabilities		(688	)		(210	)
Other long-term liabilities		(382	)		(144	)
Changes in operating assets and liabilities, net of acquisitions	$	432		$	4,244

Three Months Ended March 31,
2017 2016
Decrease (increase):
Accounts receivable $ 7,020
$ (1,207 )
Accounts receivable from related parties 491
(655 )
Inventories 330
4,685
Other current assets 1,223
(560 )
Other assets (1,257 ) (1,702 )
Increase (decrease):
Accounts payable (2,845 ) 782
Accounts payable to related parties (339 ) 2,018
Motor fuel taxes payable (25 ) (3,341 )
Accrued expenses and other current liabilities (210 ) 444
Other long-term liabilities (144 ) 622
Changes in working capital, net of acquisitions $ 4,244
$ 1,086

The above changes in ~~current~~operating 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):

	Three Months Ended March 31,
	2018		2017
Cash paid for interest	$	7,469	$	6,157
Cash paid for income taxes, net of refunds received		135		50

Three Months Ended March 31,
2017 2016
Cash paid for interest $ 6,157
$ 4,695
Cash paid for income taxes, net of refunds received $ 50
$ 708

Supplemental schedule of non-cash investing and financing activities (in thousands):

	Three Months Ended March 31,
	2018		2017
Issuance of capital lease obligations and recognition of asset retirement obligation related to Getty Lease	$	—	$	785
Amended Omnibus Agreement fees settled in our common units		3,218		4,510

Three Months Ended March 31,
2017 2016
Sale of property and equipment in Section 1031 like-kind exchange transactions $ —
$ 909
Issuance of capital lease obligations and recognition of
asset retirement obligation related to Getty lease
$ 785
$ 1,240
Amended Omnibus Agreement fees settled in our
common units
$ 4,510
$ 3,345

~~Note 15. DISTRIBUTIONS~~

~~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
$ 20,534
March 31, 2017 May 8, 2017 May 15, 2017 $ 0.6175
$ 20,906

~~CROSSAMERICA PARTNERS LP~~

~~CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

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.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OFOF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This quarterly report includes forward-looking statements, including in the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” 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’s current views and assumptions, and involve risks and uncertainties that could affect expected 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;

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;

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

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

expectations regarding environmental, tax and other regulatory initiatives; and

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

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. 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:

~~CST’s Merger or its Merger Agreement and interim operating covenants contained therein;~~

the inability to satisfy the conditions specified in the Merger Agreement, including, without limitation, the receipt of necessary governmental or regulatory approvals required to complete the transactions contemplated by the Merger Agreement;

~~CST’s business strategy and operations and CST’s conflicts of interest with us and, post-merger,~~

Couche-Tard’s business strategy and operations and Couche-Tard’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;

environmental compliance and remediation costs;

our existing or future ~~indebtedness;~~indebtedness and the related interest expense;

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;

~~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;

earthquakes and other natural disasters;

hazards and risks associated with transporting and storing motor fuel;

unexpected environmental liabilities;

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, and health benefits, including the Affordable Care ~~Act.~~Act, immigration and international trade.

You should consider the areas of risk described above, as well as those set forth herein and in the section entitled “Risk Factors” included in our 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 projected 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.

~~For additional information regarding CST, CST’s Merger and CST’s Merger Agreement, refer to CST’s Form 10-K, and CST’s Definitive Proxy Statement filed with the SEC on October 11, 2016.~~

MANAGEMENT’S DISCUSSION AND ANALYSIS OF 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, our consolidated financial statements and the accompanying notes to these financial statements contained elsewhere in this report, and the MD&A section and the consolidated financial statements and accompanying notes to those financial statements in our Form 10-K. Our Form 10-K contains a discussion of other matters not included herein, such as disclosures regarding critical accounting policies and estimates and contractual obligations.

MD&A is organized as follows:

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

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, for the three months ended March 31, ~~2017~~2018 and ~~2016~~2017 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.

~~CST’s~~Couche-Tard and CST Merger ~~Agreement~~

~~Under~~

On June 28, 2017, a wholly owned subsidiary of Circle K merged with and into CST, with CST surviving the ~~terms~~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, ~~Agreement,~~ Circle K ~~Stores Inc. will, through its acquisition~~indirectly owns all of ~~CST, control CST’s interest~~the membership interests in the sole member of our General Partner, ~~and CST’s 20.2%~~as well as a 21.4% limited partner interest in ~~us as well as~~the Partnership and all of the ~~IDRs. The transaction is subject to~~outstanding IDRs of the ~~receipt of regulatory approvals~~Partnership. Circle K, through its indirect ownership interest in the ~~United States and Canada. The transaction is currently expected~~sole member of our General Partner, has the ability to ~~close in the second quarter of 2017 (i.e. on or before June 30, 2017). See CST’s Definitive Proxy Statement filed with the SEC on October 11, 2016. See Page 8~~appoint all of the ~~Form 10-K “Items 1., 1A.~~members of the Board and ~~2. Business, Risk Factors~~to control and ~~Properties—Risk Factors—Risks Relating to CST’s Merger.”~~

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 on approximately ~~86%~~80% of gallons sold to our customers. The remaining gallons are primarily DTW priced contracts with our customers. 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.

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. 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 Terms Discounts. The dollar value of these discounts ~~increase~~increases and ~~decrease~~decreases corresponding ~~with~~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).

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 and rapidly over short periods of time.

Changes in our average motor fuel selling price per gallon and gross margin for the periods ended March 31, ~~2017~~2018 and ~~2016~~2017 are directly related to the changes in crude oil and wholesale motor fuel prices over the same period. 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 lower retail motor fuel gross profits in periods when the wholesale cost of motor fuel increases, and higher retail motor fuel gross profits in periods when the wholesale cost of motor fuel declines rapidly.

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 Wholesale 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. 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.

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 ~~February 5, 2016,~~September 27, 2017, as approved by the independent conflicts committee of our Board, we ~~purchased independent dealer and subwholesaler contracts from CST~~sold 29 properties to DMR for ~~$2.9~~$18.9 million. These sites were generally sites at which we did not supply fuel or represented vacant land.

On ~~March 29, 2016,~~November 28, 2017, we ~~closed on~~acquired the ~~acquisition of Franchised Holiday Stores and company operated liquor stores from S/S/G Corporation~~Jet-Pep Assets located in Alabama for approximately ~~$52.4~~$75.6 million, including working capital.

On ~~September 27, 2016,~~April 25, 2018, we ~~acquired the State Oil Assets located~~amended our credit facility as further discussed in ~~the greater Chicago market for approximately $41.9 million, including working capital.~~“Liquidity and Capital Resources̶̶̶̶—Debt.”

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.

Results of Operations

Consolidated Income Statement Analysis

Below is an analysis of our consolidated statements of operations 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 operations are as follows (in thousands):

	Three Months Ended March 31,
	2018			2017
Operating revenues	$	554,570		$	469,286
Costs of sales		514,619			431,840
Gross profit		39,951			37,446

Income from CST Fuel Supply equity interests		3,805			3,603
Operating expenses:
Operating expenses		16,342			15,260
General and administrative expenses		4,720			5,817
Depreciation, amortization and accretion expense		15,500			14,348
Total operating expenses		36,562			35,425
Gain (loss) on sales of assets, net		230			(44	)
Operating income		7,424			5,580
Other income (expense), net		94			118
Interest expense		(8,052	)		(6,702	)
(Loss) income before income taxes		(534	)		(1,004	)
Income tax expense (benefit)		273			(2,701	)
Net (loss) income		(807	)		1,697
Less: net (loss) income attributable to noncontrolling interests		(2	)		1
Net (loss) income attributable to limited partners		(805	)		1,696
IDR distributions		(1,180	)		(992	)
Net (loss) income available to limited partners	$	(1,985	)	$	704

Three Months Ended March 31,
2017 2016
Operating revenues $ 469,286
$ 367,740
Cost of sales 431,840
330,550
Gross profit 37,446
37,190

Income from CST Fuel Supply equity interests 3,603
4,051
Operating expenses:
Operating expenses 15,260
15,411
General and administrative expenses 5,817
7,005
Depreciation, amortization and accretion expense 14,348
12,900
Total operating expenses 35,425
35,316
Loss on sales of assets, net (44 ) (4 )
Operating income 5,580
5,921
Other income, net 118
118
Interest expense (6,702 ) (5,065 )
Income (loss) before income taxes (1,004 ) 974
Income tax benefit (2,701 ) (795 )
Consolidated net income 1,697
1,769
Net income attributable to noncontrolling interests 1
2
Net income attributable to CrossAmerica limited
   Partners
1,696
1,767
Distributions to CST as holder of the incentive
   distribution rights
(992 ) (759 )
Net income available to CrossAmerica limited
   Partners
$ 704
$ 1,008

Three Months Ended March 31, ~~2017~~2018 Compared to Three Months Ended March 31, ~~2016~~2017

Consolidated Results

Operating revenues increased ~~$101.5~~$85.3 million, or ~~28%~~18%, while gross profit increased ~~$0.3~~$2.5 million, or 1%7%.

Operating revenues

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

~~A $110.5~~

An $80.2 million, or ~~36%~~19%, increase in our Wholesale segment revenues primarily attributable to the increase in crude oil ~~prices as well as our recent acquisitions.~~prices. The average daily spot price of WTI crude oil increased ~~55%~~22% to $62.91 per barrel for the first quarter of 2018, compared to $51.62 per barrel ~~during 2017, compared to $33.35 per barrel during 2016.~~for the first quarter of 2017. 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.” In addition, volume increased 5%, driven primarily by the incremental volume from the November 2017 Jet-Pep Assets acquisition.

A ~~$4.2~~$41.8 million, or 4%38%, increase in our Retail segment revenues primarily attributable to a 41% increase in volume driven by the November 2017 Jet-Pep Assets acquisition as well as a 22% increase in crude oil ~~prices and our recent acquisitions, largely offset by conversion of company operated retail sites to lessee dealer sites.~~prices. 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.”

Intersegment revenues

We present the results of operations of our segments ~~consistently~~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 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 increased ~~$13.2~~$36.8 million or 60%, primarily attributable to the ~~increases~~November 2017 Jet-Pep Assets acquisition and the increase in wholesale motor fuel prices discussed above.

Cost of sales

Cost of sales increased ~~$101.3~~$82.8 million or 19% as a result of the increase in wholesale motor fuel prices and ~~gallons sold of motor fuel as noted above.~~November 2017 Jet-Pep Assets acquisition. See “Results of Operations—Segment Results” for additional gross profit analyses.

Operating expenses

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

General and administrative expenses

General and administrative expenses ~~declined $1.2~~decreased $1.1 million or 19% primarily attributable to a $1.0 million decrease in charges allocated under the ~~integration~~Amended Omnibus Agreement for personnel and salary reductions and a $0.8 million decrease in equity compensation expense as a result of ~~prior year acquisitions~~fewer awards outstanding, partially offset by a $0.6 million increase in severance and other ~~cost savings initiatives.~~

acquisition-related costs.

Depreciation, amortization and accretion expense

Depreciation, amortization and accretion expense increased ~~$1.4~~$1.2 million primarily ~~driven by our recent acquisitions.~~

due to a $1.2 million impairment charge recorded on the two Jet-Pep sites required to be divested per FTC order as well as the incremental depreciation, amortization and accretion expense from the November 2017 Jet-Pep Assets acquisition.

Interest expense

Interest expense increased ~~$1.6~~$1.4 million ~~due to additional borrowings to fund our recent acquisitions and an increase in interest rates.~~

~~Income tax benefit~~

~~We recorded income tax benefits of $2.7 million and $0.8 million for 2017 and 2016, respectively. The increase in the income tax benefit was primarily~~ due to an increase in the ~~loss generated~~average interest rate charged on our credit facility borrowings from 4.0% to 4.7% and a $66.3 million increase in the average balance outstanding primarily to fund the November 2017 Jet-Pep Assets acquisition.

Income tax expense

We recorded income tax expense of $0.3 million and an income tax benefit of $2.7 million for the three months ended March 31, 2018 and 2017, respectively. The benefit recorded in the first quarter of 2017 related primarily to losses incurred by our ~~corporate~~taxable subsidiaries.

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 Wholesale segment to our Retail segment). These comparisons are not necessarily indicative of future results.

Wholesale

The following table highlights the results of operations and certain operating metrics of our Wholesale 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):

	Three Months Ended March 31,
	2018			2017
Gross profit:
Motor fuel–third party	$	7,632		$	7,865
Motor fuel–intersegment and related party		6,667			5,481
Motor fuel gross profit		14,299			13,346
Rent and other		16,379			15,970
Total gross profit		30,678			29,316
Income from CST Fuel Supply equity^(a)		3,805			3,603
Operating expenses		(8,320	)		(7,267	)
Adjusted EBITDA^(b)	$	26,163		$	25,652
Motor fuel distribution sites (end of period):^(c)
Motor fuel–third party
Independent dealers		383			394
Lessee dealers^(d)		449			427
Total motor fuel distribution–third party sites		832			821
Motor fuel–intersegment and related party
DMS (related party)^(e)		134			151
CST (related party)		43			43
Commission agents (Retail segment)^(f)		180			98
Company operated retail sites (Retail segment)		71			72
Total motor fuel distribution–intersegment and related party sites		428			364
Motor fuel distribution sites (average during the period):
Motor fuel-third party distribution		824			822
Motor fuel-intersegment and related party distribution		435			364
Total motor fuel distribution sites		1,259			1,186
Volume of gallons distributed (in thousands)
Third party		149,259			151,679
Intersegment and related party		100,249			86,741
Total volume of gallons distributed		249,508			238,420

Wholesale margin per gallon	$	0.057		$	0.056

Three Months Ended March 31,
2017 2016
Gross profit:
Motor fuel–third party $ 7,865
$ 5,614
Motor fuel–intersegment and related party 5,481
6,111
Motor fuel gross profit 13,346
11,725
Rent and other 15,970
14,129
Total gross profit 29,316
25,854

Income from CST Fuel Supply equity^(a)
3,603
4,051
Operating expenses (7,267 ) (5,864 )
Adjusted EBITDA^(b)
$ 25,652
$ 24,041

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

Motor fuel–third party
Independent dealers^(d)
394
390
Lessee dealers^(e)
427
343
Total motor fuel distribution–third party sites 821
733

Motor fuel–intersegment and related party
DMS (related party)^(f)
151
191
CST (related party) 43
43
Commission agents (Retail segment)^(g)
98
66
Company operated retail sites (Retail segment)^(h)
72
94
Total motor fuel distribution–intersegment and
related party sites
364
394

Motor fuel distribution sites (average during the period):
Motor fuel-third party distribution 822
683
Motor fuel-intersegment and related party
distribution
364
406

Three Months Ended March 31,
2017 2016

Total volume of gallons distributed (in thousands) 238,420
236,162

Motor fuel gallons distributed per site per day:⁽ⁱ⁾

Motor fuel–third party
Total weighted average motor fuel distributed–
   third party
1,993
2,108
Independent dealers 2,151
2,329
Lessee dealers 1,846
1,828

Motor fuel–intersegment and related party
Total weighted average motor fuel distributed–
   intersegment and related party
2,583
2,676
DMS (related party) 2,371
2,326
CST (related party) 4,095
4,783
Commission agents (Retail segment) 2,254
2,774
Company operated retail sites (Retail segment) 2,571
2,389

Wholesale margin per gallon–total system $ 0.056
$ 0.050
Wholesale margin per gallon–third party sites^(j)
$ 0.051
$ 0.041
Wholesale margin per gallon–intersegment and
   related party
$ 0.065
$ 0.062

(a)
~~(a)~~	Represents income from our equity interest in CST Fuel Supply.

(b)
~~(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)
~~(c)~~	In addition, as of March 31, 2018 and 2017, ~~and 2016,~~respectively, we distributed motor fuel to 14 sub-wholesalers who distributed to additional sites.

(d)
~~(d)~~	The increase in the independent dealer site count was primarily attributable to 25 wholesale fuel supply contracts acquired in the State Oil Assets acquisition, partially offset by a net 21 terminated motor fuel supply contracts that were not renewed.


~~(e)~~	The increase in the lessee dealer site count was primarily attributable to converting ~~26 company~~sites operated ~~retail sites in our Retail segment~~by DMS and commission agents to lessee ~~dealers in our Wholesale segment and the 49 sites acquired in the September 2016 State Oil Assets acquisition.~~dealers.

(e)

~~(f)~~

The decrease in the DMS site count was primarily ~~due~~attributable to converting DMS sites ~~reverted back~~ to ~~us and subsequently converted into a third party~~ lessee dealer or commission agent. Through the first five years of the lease with DMS, the lease agreement allows for a limited number of sites to be reverted back to us from the lease by each of DMS and ourselves. This right generally expires October 31, 2017.sites.

(f)
~~(g)~~	The increase in the commission ~~agent~~ site count was primarily attributable to ~~25 reverted DMS~~the 101 sites ~~being converted to commission agent sites in 2016.~~


~~(h)~~	~~The decrease~~acquired in the ~~company operated retail site count was primarily attributable to company operated retail~~Jet-Pep Assets acquisition, partially offset by the conversion of commission sites ~~being converted~~ to lessee dealer sites.


~~(i)~~	Does not include the motor fuel gallons distributed to sub-wholesalers. The decrease in independent dealer gallons sold per day are due to the divestiture of commercial wholesale supply contracts associated with the PMI acquisition, whereby gallons distributed are reduced but the site count is not affected.


~~(j)~~	~~Includes the wholesale gross margin for motor fuel distributed to sub-wholesalers.~~

Three Months Ended March 31,~~2017~~ 2018 Compared to Three Months Ended March 31,~~2016~~

2017

The results were driven by:

Motor ~~Fuel Gross~~fuel gross profit

The ~~$1.6~~$1.0 million or 7% increase in motor fuel gross profit was primarily due to a ~~$1.2 million~~5% increase in volume driven primarily ~~from~~by the November 2017 Jet-Pep Assets acquisition. In addition, we realized a higher margin per gallon primarily due to higher DTW margins as a result of the movements in crude prices throughout both periods and increased payment discounts and incentives due to the increase in motor fuel prices as a result of the increase in crude oil prices. The average daily spot price of WTI crude oil increased ~~55%~~22% to $62.91 per barrel for the first quarter of 2018, compared to $51.62 per barrel ~~during 2017, compared to $33.35 per barrel during 2016.~~for the first quarter of 2017. 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.”

Additionally, for our newly acquired Jet-Pep Assets in Alabama, we are exposed to more price risk as our purchases are based on Circle K’s Platts bulk index-priced contracts with fuel suppliers. During the first quarter of 2018, we experienced lower than normal fuel margins due to some weaker conditions in the region that negatively impacted both our wholesale fuel margin and volumes at these sites. This resulted in our wholesale fuel margin per gallon on fuel delivered to the Jet-Pep Assets being slightly lower than our wholesale fuel margin per gallon on fuel delivered to other retail sites. We do not expect this trend to continue over the long term.

Rent and other gross profit

Rent and other ~~margin~~gross profit increased ~~$1.8~~$0.4 million primarily as a result of ~~our acquisition~~fees received from dealers upon the termination of ~~the State Oil Assets, as well as converting company operated retail sites to lessee dealer sites throughout 2016, partially offset by 25 DMS sites being converted to commission agent sites in 2016.~~

~~Income from CST Fuel Supply equity~~

~~The decline of~~ ~~$0.4 million~~ ~~is attributable to CST’s divestiture of its California and Wyoming retail sites.~~

their contracts.

Operating expenses

Operating expenses increased ~~$1.4~~$1.1 million primarily as a result of ~~our 2016 acquisitions~~environmental costs related to increased compliance requirements in certain states as well as ~~our conversion of company operated retail~~remediation costs incurred at individual sites ~~to lessee dealer sites throughout 2016.~~

that are not covered by state UST funds, insurance or other indemnifications.

Retail

The following table highlights the results of operations and certain operating metrics of our Retail 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 and per gallon amounts):

	Three Months Ended March 31,
	2018			2017
Gross profit:
Motor fuel	$	2,156		$	1,163
Merchandise and services		5,742			5,761
Rent and other		1,473			1,214
Total gross profit		9,371			8,138
Operating expenses		(8,022	)		(7,993	)
Adjusted EBITDA^(a)	$	1,349		$	145

Retail sites (end of period):
Commission agents^(b)		180			98
Company operated retail sites^(c)		71			75
Total system sites at the end of the period		251			173

Total system operating statistics:
Average retail fuel sites during the period		250			170
Motor fuel sales (gallons per site per day)		2,296			2,402
Motor fuel gross profit per gallon, net of credit card fees and commissions	$	0.042		$	0.032

Commission agents statistics:
Average retail fuel sites during the period		180			98
Motor fuel gross profit per gallon, net of credit card fees and commissions	$	0.014		$	0.011

Company operated retail site statistics:
Average retail fuel sites during the period		70			72
Motor fuel gross profit per gallon, net of credit card fees	$	0.101		$	0.056
Merchandise and services gross profit percentage, net of credit card fees		25.4	%		24.0	%

Three Months Ended March 31,
2017 2016
Gross profit:
Motor fuel $ 1,163
$ 2,529
Merchandise and services 5,761
7,715
Rent and other 1,214
973
Total gross profit 8,138
11,217
Operating expenses (7,993 ) (9,547 )
Inventory fair value adjustments^(a)
—
91
Adjusted EBITDA^(b)
$ 145
$ 1,761

Retail sites (end of period):
Commission agents^(c)
98
67
Company operated retail sites^(d)
75
97
Total system sites at the end of the period 173
164
Total system operating statistics:
Average retail fuel sites during the period^(c)(d)
170
173
Motor fuel sales (gallons per site per day) 2,402
2,549
Motor fuel gross profit per gallon, net of credit card
   fees and commissions
$ 0.032
$ 0.063
Commission agents statistics:
Average retail fuel sites during the period^(c)
98
67
Motor fuel sales (gallons per site per day) 2,271
2,767
Motor fuel gross profit per gallon, net of credit card
   fees and commissions
$ 0.011
$ 0.016
Company operated retail site statistics:
Average retail fuel sites during the period^(d)
72
107
Motor fuel sales (gallons per site per day) 2,580
2,413
Motor fuel gross profit per gallon, net of credit card
   fees
$ 0.056
$ 0.097
Merchandise and services sales (per site per day)^(e)
$ 3,558
$ 3,141
Merchandise and services gross profit percentage,
   net of credit card fees
24.0 % 25.3 %

(a)
~~(a)~~	~~The inventory fair value adjustment represents the expensing of the step-up in value ascribed to inventory acquired in the Franchised Holiday Stores acquisition.~~


~~(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.

(b)
~~(c)~~	The increase in the commission ~~agent~~ site count was primarily ~~attributable to 25 reverted DMS~~driven by the 101 sites ~~being converted to~~acquired in the November 2017 Jet-Pep Assets acquisition, partially offset by the conversion of commission ~~agent~~ sites in ~~2016.~~the Retail segment to lessee dealer sites in the Wholesale segment.

(c)
~~(d)~~	The decrease in company operated retail sites relates to the conversion of company operated retail sites to lessee dealer sites.


~~(e)~~	~~Includes the results from car wash sales and commissions from lottery, money orders, air/water/vacuum services and ATM fees.~~

Three Months Ended March 31, ~~2017~~2018 Compared to Three Months Ended March 31, ~~2016~~2017

Gross profit ~~declined $3.1~~increased $1.2 million or 15% while operating expenses ~~declined $1.6 million.~~

were flat.

These results were impacted by:

Gross profit

Our motor fuel gross profit ~~decreased $1.4~~increased $1.0 million attributable to a ~~8% decrease in volume driven by the conversion of company operated retail sites acquired in prior acquisitions to lessee dealer sites and a 49% decrease~~32% increase in margin per gallon as a result of the ~~volatility~~movements in crude oil ~~prices. The average daily spot price of WTI crude oil increased 55% in~~prices throughout the ~~first quarter of 2017 compared to the same period of the prior year.~~two periods. 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 $2.0 million as a result of the conversion of company operated retail sites to lessee dealer sites, partially offset~~ In addition, volume increased 41% driven primarily by the ~~incremental gross profit generated by the Franchised Holiday Stores.~~November 2017 Jet-Pep Assets acquisition.

Our rent and other gross profit increased ~~$0.2~~$0.3 million primarily ~~from 25 DMS sites being converted~~due to ~~commission agent sites in 2016.~~the November 2017 Jet-Pep Assets acquisition.

Operating expenses

~~A $1.6 million decline in~~

Operating expenses were flat due to the incremental operating expenses ~~attributable to~~from the ~~conversion of company operated retail sites to lessee dealer sites, partially~~Jet-Pep Assets acquisition being offset by the impact of converting company operated sites in the ~~Franchised Holiday Stores acquisition.~~

Retail segment to lessee dealer sites in the Wholesale segment.

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, depreciation, amortization and accretion. Adjusted EBITDA represents EBITDA as further adjusted to exclude equity funded expenses related to incentive compensation and the Amended Omnibus Agreement, gains or losses on sales of assets, certain discrete acquisition related costs, such as legal and other professional fees and severance expenses associated with recently acquired companies, 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 ~~unit-holders.~~

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):

	Three Months Ended March 31,
	2018			2017
Net income available to limited partners	$	(1,985	)	$	704
Interest expense		8,052			6,702
Income tax expense (benefit)		273			(2,701	)
Depreciation, amortization and accretion		15,500			14,348
EBITDA		21,840			19,053
Equity funded expenses related to incentive compensation and the Amended Omnibus Agreement (a)		3,343			4,166
Gain on sales of assets, net		(230	)		44
Acquisition-related costs (b)		1,056			473
Adjusted EBITDA		26,009			23,736
Cash interest expense		(7,624	)		(6,157	)
Sustaining capital expenditures (c)		(790	)		(364	)
Current income tax expense		(924	)		(359	)
Distributable Cash Flow	$	16,671		$	16,856
Weighted average diluted common units		34,165			33,623
Distributions paid per limited partner unit (d)	$	0.6275		$	0.6125
Distribution Coverage Ratio (e)	0.78x			0.82x

Three Months Ended March 31,
2017 2016
Net income available to CrossAmerica limited partners $ 704
$ 1,008
Interest expense 6,702
5,065
Income tax benefit (2,701 ) (795 )
Depreciation, amortization and accretion 14,348
12,900
EBITDA 19,053
18,178
Equity funded expenses related to incentive compensation and the Amended Omnibus Agreement^(a)
4,166
3,282
Loss on sales of assets, net 44
4
Acquisition-related costs^(b)
473
660
Inventory fair value adjustments —
91
Adjusted EBITDA 23,736
22,215
Cash interest expense (6,157 ) (4,695 )
Sustaining capital expenditures^(c)
(364 ) (131 )
Current income tax expense (359 ) (100 )
Distributable Cash Flow $ 16,856
$ 17,289

Weighted average diluted common and subordinated units 33,623 33,177

Distributions paid per limited partner unit^(d)
$ 0.6125
$ 0.5925
Distribution Coverage Ratio^(e)
0.82 x 0.88 x

(a)
~~(a)~~	As approved by the independent conflicts committee of the Board, ~~and~~ the ~~executive committee of~~Partnership, CST and ~~its board of directors, the Partnership and CST~~Circle K mutually agreed to settle certain amounts due under the terms of the Amended Omnibus Agreement in limited ~~partnership~~partner units of the Partnership.

(b)
~~(b)~~	Relates to certain discrete acquisition related costs, such as legal and other professional fees, severance expenses and purchase accounting adjustments associated with recently acquired businesses.

(c)

~~(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)
~~(d)~~	On ~~April 26, 2017,~~May 7, 2018, the Board approved a quarterly distribution of ~~$0.6175~~$0.5250 per unit attributable to the first quarter of ~~2017.~~2018. The distribution is payable on May ~~15, 2017~~25, 2018 to all unitholders of record on May ~~8, 2017.~~18, 2018.

(e)
~~(e)~~	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):

	Three Months Ended March 31,
	2018			2017
Adjusted EBITDA - Wholesale segment	$	26,163		$	25,652
Adjusted EBITDA - Retail segment		1,349			145
Adjusted EBITDA - Total segment	$	27,512		$	25,797
Reconciling items:
Elimination of intersegment profit in ending inventory balance		(98	)		(8	)
General and administrative expenses		(4,720	)		(5,817	)
Other income, net		94			118
Equity funded expenses related to incentive compensation and the Amended Omnibus Agreement		3,343			4,166
Acquisition-related costs		1,056			473
Net (income) loss attributable to noncontrolling interests		2			(1	)
IDR distributions		(1,180	)		(992	)
Consolidated Adjusted EBITDA	$	26,009		$	23,736

Three Months Ended March 31,
2017 2016
Adjusted EBITDA - Wholesale segment $ 25,652
$ 24,041
Adjusted EBITDA - Retail segment 145
1,761
Adjusted EBITDA - Total segment $ 25,797
$ 25,802

Reconciling items:
Elimination of intersegment profit in ending inventory balance (8 ) 119
General and administrative expenses (5,817 ) (7,005 )
Other income, net 118
118
Equity funded expenses related to incentive compensation and the Amended Omnibus Agreement 4,166
3,282
Acquisition-related costs 473
660
Net income attributable to noncontrolling interests (1 ) (2 )
IDR distributions (992 ) (759 )
Consolidated Adjusted EBITDA $ 23,736
$ 22,215

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. We expect our ongoing sources of liquidity to include cash generated by our operations and borrowings under the revolving 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, borrowing capacity under the revolving credit facility and 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.

Cash Flows

The following table summarizes cash flow activity (in thousands):

	Three Months Ended March 31,
	2018			2017
Net cash provided by operating activities	$	18,140		$	21,772
Net cash used in investing activities		(2,007	)		(2,111	)
Net cash used in financing activities		(18,350	)		(15,253	)

Three Months Ended March 31,
2017 2016
Net Cash Provided by Operating Activities $ 21,772
$ 18,569
Net Cash Used in Investing Activities $ (2,111 ) $ (58,595 )
Net Cash (Used in) Provided by Financing Activities $ (15,253 ) $ 40,809

Operating Activities

Net cash provided by operating activities ~~increased $3.2~~decreased $3.6 million for the three months ended March 31, 2018 compared to the same period in 2017, ~~compared to 2016, driven primarily by~~as the decrease in the change in operating assets and liabilities exceeded the incremental cash flow ~~generated~~from the Jet-Pep Assets acquisition. Quarter over quarter operating cash flow was impacted, in part, by, ~~our acquisitions. In addition, we settled $1.3~~higher net collections of receivables in the prior year period as a result of the timing of credit card settlements and pricing trends discussed elsewhere in this report.

Investing Activities

Net cash used in investing activities included $2.1 million ~~more in management fees related to the services provided under the Amended Omnibus Agreement in equity with CST in 2017 compared to 2016.~~

~~Investing Activities~~

~~We incurred~~and $2.5 million of capital expenditures for the three months ended March 31, 2018 and ~~$3.5~~2017, respectively.

Financing Activities

For the three months ended March 31, 2018, we paid $22.6 million in ~~capital expenditures in 2017~~distributions and ~~2016, respectively. Additionally, in 2016, $52.3 million~~had net borrowings on our credit facility of ~~cash was used in acquiring~~$5.0 million. For the ~~Franchised Holiday Stores and $2.9 million was used to purchase independent dealer and subwholesaler contracts from CST.~~

~~Financing Activities~~

~~During~~three months ended March 31, 2017, we paid $21.6 million in distributions and ~~made net borrowings under our credit facility of $7.0 million. During 2016, we paid $20.4 million in distributions, made~~had net borrowings of ~~$64.7 million primarily to fund our Franchised Holiday Stores acquisition, and purchased $2.8 million in common units under our common unit purchase program.~~

$7.0 million.

Distributions

Distribution activity for ~~2017~~2018 was as follows:

Quarter Ended

Record Date

Payment Date

Cash Distribution

(per unit)

Cash Distribution

(in thousands)

December 31, 2017

February 5, 2018

February 12, 2018

0.6275

21,415

March 31, 2018

May 18, 2018

May 25, 2018

0.5250

17,996

In 2015, following the acquisition of our former General Partner in 2014, we began funding expenses related to the Amended Omnibus Agreement with issuance of common units, which in 2017 alone totaled 550,516 units. While this practice allowed the Partnership to maximize distributable cash flow and increase the equity position of its General Partner, the continued weakness in the MLP market and resulting elevated yield of our common units, has made this a very expensive source of funding for its management fees. Going forward, the Partnership anticipates funding such expenses primarily with cash from existing operations.

IDRs

During the three months ended March 31, 2018 and 2017, we distributed $1.2 million and $1.0 million to ~~CST~~Circle K with respect to the ~~IDRs.~~

~~Expiration of the Subordination Period~~

In accordance with 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 participate in distributions pro rata with other common units.

IDRs, respectively.

Debt

As of March 31, ~~2017,~~2018, our consolidated debt and capital lease obligations consisted of the following (in thousands):

$550 million revolving credit facility	$	511,000
Capital lease obligations		26,546
Note payable		750
Total debt and capital lease obligations		538,296
Current portion		2,919
Noncurrent portion		535,377
Deferred financing costs, net		1,512
Noncurrent portion, net of deferred financing costs	$	533,865

On April 25, 2018, the credit facility was amended to:

Extend the maturity date from March 4, 2019 to April 25, 2020;

Increase the capacity from $550 million to $650 million;

$550 million revolving credit facility $ 448,500
Note payable 808
Capital lease obligations 28,759
Total debt and capital lease obligations 478,067
Current portion 2,123
Noncurrent portion 475,944
Deferred financing fees (3,151 )
Total $ 472,793

Extend the period during which the permitted leverage ratio (as defined in the revolving credit facility) is increased from 4.50 : 1.00 to 5.00 : 1.00 after the closing of a material acquisition (as defined in the revolving credit facility) from three quarters to four quarters; and

Decrease the applicable margin and commitment fee (each as defined in the revolving credit facility), which vary based on our total leverage ratio, such that the applicable margin ranges from 1.50% to 2.75% for LIBOR rate loans (as defined in the revolving credit facility) and 0.50% to 1.75% for alternate base rate loans (as defined in the revolving credit facility), and the commitment fee ranges from 0.20% to 0.45%. In general, the applicable margin for LIBOR and alternate base rate loans was reduced by 0.5%.

Our revolving credit facility is secured by substantially all of our assets. Our borrowings under the revolving credit facility had a weighted-average interest rate of ~~3.95%~~4.74% as of March 31, ~~2017~~2018 (LIBOR plus an applicable margin, which was 3.00% as of March 31, ~~2017)~~2018). Letters of credit outstanding at March 31, ~~2017~~2018 totaled ~~$6.5~~$5.4 million. ~~The credit facility is secured by substantially all of the assets of CrossAmerica and its subsidiaries.~~ The amount of availability under the revolving credit facility at May ~~4, 2017,~~3, 2018, after taking into consideration debt covenant restrictions, was ~~$92.2~~$98.9 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 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 :~~4.50: 1.00, except for the first ~~three~~four full fiscal quarters following a material acquisition, generally defined as an acquisition with a purchase price of at least $30.0 million, during which period the permitted total leverage ratio ~~of 5.00 :~~is increased to 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 :~~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 and was ~~4.23 :~~4.21: 1.00 as of March 31, ~~2017.~~2018. As of March 31, ~~2017,~~2018, we were in compliance with these financial covenant ratios.

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 by additional borrowings under our revolving credit facility or, if available to us on acceptable terms, issuing additional equity, 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. 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 consolidated capital expenditures and acquisitions for the three months ended March 31, ~~2017~~2018 and ~~2016~~2017 (in thousands):

	Three Months Ended March 31,
	2018		2017
Sustaining capital	$	790	$	364
Growth		1,307		2,153
Total capital expenditures and acquisitions	$	2,097	$	2,517

Three Months Ended March 31,
2017 2016
Sustaining capital $ 364
$ 131
Growth 2,153
3,367
Acquisitions —
55,162
Total consolidated capital expenditures and acquisitions $ 2,517
$ 58,660

Other Matters Impacting Liquidity and Capital Resources

Concentration of Customers

For the three months ended March 31, ~~2017,~~2018, we distributed approximately ~~14%~~12% of our total wholesale distribution volumes to DMS and ~~its affiliates and received 23%~~DMS accounted for approximately 20% of our ~~rent income from DMS and its affiliates.~~rental income. For the three months ended March 31, ~~2017,~~2018, we distributed 7% of our total wholesale distribution ~~volumes~~volume to Circle K retail sites that are not supplied by CST Fuel Supply and received ~~20%~~19% of our ~~rent~~rental income from ~~CST.~~Circle K. For ~~the three months ended March 31, 2017, we received 9% of our rent income from a lessee dealer that operates many of the sites acquired through the PMI~~more information regarding transactions with DMS and ~~One Stop acquisitions. See~~Circle K, see Note 7 of the ~~Condensed Notes~~consolidated financial statements.

Outlook

As noted previously, the prices paid to ~~Consolidated Financial Statements~~our motor fuel suppliers for ~~additional information.~~

~~Outlook~~

~~This outlook section does not take into account or give any effect~~wholesale motor fuel (which affects our costs of sales) are highly correlated to the ~~impact~~price of ~~CST’s proposed Merger on our business. See Page 8~~crude oil. The crude oil commodity markets are highly volatile, and the market prices of crude oil, and, correspondingly, the ~~Form 10-K “Items 1., 1A. and 2. Business, Risk Factors and Properties—Risk Factors—Risks Relating to CST’s Merger.”~~

~~As a result~~market prices of ~~our recent acquisitions, we expect our total~~wholesale motor fuel, ~~volume sold for 2017 to be higher than 2016 volumes. While the U.S. energy markets, including wholesale~~experience significant and ~~retail motor fuel prices, are likely to continue to be volatile in 2017, crude prices increased in the latter part of 2016 and have remained at those levels in early 2017,~~rapid fluctuations, which ~~supports the payment terms discount component of~~affect our motor fuel gross ~~margin~~profit. See “Significant Factors Affecting our Profitability—The Significance of Crude Oil and Wholesale Motor Fuel Prices on ~~an absolute basis while this price increase negatively impacts our wholesale DTW contracts~~Our Revenues, Cost of Sales and ~~retail motor fuel gross margins.~~ Gross Profit” for additional information.

We expect our rent income to increase in ~~2017~~2018 based on our recent acquisitions and our expectation that we will continue to convert company operated retail sites to lessee dealers.

~~Upon completion~~

We expect our interest expense to increase in 2018 based on incremental borrowings to fund the November 2017 Jet-Pep acquisition and the increase in interest rates throughout 2017 and 2018. This impact is partially offset by the reduction in interest rates effective with the April 25, 2018 amendment of ~~CST’s proposed Merger, we~~the credit facility.

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

~~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 principle

See Note 1 of the guidance 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. With the issuance of ASU 2015-14, which deferred the effective date by one year, this guidance is effective January 1, 2018. The guidance can be applied either retrospectively to each prior reporting period presented, or as a cumulative-effect adjustment as of the date of adoption. Although management continues to evaluate the impact of adopting this new guidance, we do not expect the adoption to have a material impact on the financial ~~statements, although it will affect disclosures.~~

~~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 years and interim periods within those years beginning after December 15, 2018, and requires a modified retrospective approach to adoption. Early adoption is permitted. Management continues to evaluate the impact of this new guidance, but the adoption will have a material impact on our balance sheet. We do not anticipate adopting this guidance early. We intend to apply each of the practical expedients in adopting this new guidance.

statements.

Critical Accounting Policies Involving Critical Accounting Estimates

The preparation of financial statements in accordance with U.S. GAAP requires us to make estimates and assumptions that affect the amounts reported in our financial statements and accompanying notes. Actual results could differ from those estimates.

There have been no material changes to the critical accounting policies described in our Form 10-K.

ITEM 3. QUANTITATIVE AND ~~QUALITATIVE~~QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market 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 March 31, ~~2017,~~2018, we had ~~$448.5~~$511.0 million outstanding on our revolving credit facility. Our outstanding borrowings bear interest at LIBOR plus an applicable margin, which was 3.00% at March 31, ~~2017.~~2018. Our borrowings had a weighted-average interest rate at March 31, ~~2017~~2018 of ~~3.95%~~4.74%. A one percentage point change in our average rate would impact annual interest expense by approximately ~~$4.5~~$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; however, 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 Terms Discounts. 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~~$2 million related to these Terms Discounts.

Foreign Currency Risk

Our operations are located in the U.S., and therefore we are not subject to foreign currency risk.

ITEM 4. 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)~~13a-15(e) under the ~~Securities~~ Exchange ~~Act of 1934)~~Act) as of the end of the period covered by this report, and ~~has~~based on their evaluation, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures were effective as of March 31, ~~2017.~~

2018.

(b) 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) under the ~~Securities~~ Exchange Act) that occurred during the three months ended March 31, ~~2017,~~2018, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II - ~~OTHER~~OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We hereby incorporate by reference into this Item our disclosures made in Part I, Item 1 of this quarterly report included in Note 8 of the ~~Condensed Notes to Consolidated Financial Statements.~~

consolidated financial statements.

ITEM 1A. RISK FACTORS

There were no material changes in risk factors for the company in the period covered by this report. See the risk factors disclosed in the section entitled “Risk Factors” in our Form 10-K.

ITEM 2. ~~UNRESGISTERED~~UNREGISTERED SALES OF EQUITY SECURITIES

Management Fee Issuance

As discussed in Note 7 to Item 1 in Part I above, on ~~February 28, 2017,~~March 1, 2018, CrossAmerica issued ~~171,039~~136,882 common units to a subsidiary of ~~CST~~Circle K as partial payment for the amounts incurred for the fourth quarter of ~~2016~~2017, under the terms of the Amended Omnibus Agreement. This issuance of common units was made in reliance on Section 4(a)(2) of the Securities Act of 1933, as amended.

ITEM 6. EXHIBITS.

Exhibit No.		Description

~~Exhibit No.~~ 3.1 *	~~Description~~	Third Amendment to First and Restated Agreement of Limited Partnership of CrossAmerica Partners LP, dated as of January 1, 2018

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 *		XBRL Instance Document

101.SCH *		XBRL Taxonomy Extension Schema Document

101.CAL *		XBRL Taxonomy Extension Calculation Linkbase Document

101.LAB *		XBRL Taxonomy Extension Label Linkbase Document

101.PRE *		XBRL Taxonomy Extension Presentation Linkbase Document

101.DEF *		XBRL Taxonomy Extension Definition Linkbase Document

*
*	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.

~~SIGNATURE~~

SIGNATURE

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/ Evan W. Smith
		Evan W. Smith
		Vice President—Finance and Chief Financial Officer
		(Duly Authorized Officer and Principal Financial and Accounting Officer)

~~CROSSAMERICA PARTNERS LP~~

~~By: CROSSAMERICA GP LLC, its General Partner~~

~~By:~~ ~~/s/ Clayton E. Killinger~~

~~Clayton E. Killinger~~

~~Executive Vice President and Chief Financial Officer~~

~~(Duly Authorized Officer and Principal Financial and Accounting Officer)~~

Date: May ~~8, 2017~~

7, 2018


☑
~~(Mark One)~~
þ	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Delaware		45-4165414

~~Delaware~~ (State or Other Jurisdiction of Incorporation or Organization)		~~45-4165414~~ (I.R.S. Employer Identification No.)

600 Hamilton Street, Suite 500 Allentown, PA		18101 (Zip Code) (610) 625-8000
(Address of Principal Executive Offices)		(Registrant’s telephone number, including area code)



Large accelerated filer ☐o	Accelerated filer ☒þ
Non-accelerated filer ☐o ~~(do~~ (Do not check if a smaller reporting company)	Smaller reporting company ☐o
		Emerging growth company ☐o
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. o



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 Partners LP			CrossAmerica, the Partnership, we, us, our	~~CrossAmerica Partners LP~~
~~LGW~~
LGP Operations LLC			a wholly owned subsidiary of the Partnership

LGW			Lehigh Gas Wholesale LLC
~~LGPR~~
LGPR			LGP Realty Holdings LP
~~LGWS~~
LGWS			Lehigh Gas Wholesale Services, Inc. and subsidiaries

CrossAmerica Partners LP related ~~and affiliated~~ parties:
~~CST~~
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, ~~Inc.~~LLC and subsidiaries, indirectly owned by Circle K.
~~DMS~~
DMI			Dunne Manning Inc., an entity affiliated with Joseph V. Topper, Jr., a member of the Board, a related party and large holder of our common units

DMR			Dunne Manning Realty LP, an entity affiliated with Joseph V. Topper, Jr., a member of the Board, a related party and large holder of our common units.

DMS			Dunne Manning Stores LLC (formerly known as Lehigh Gas-Ohio, LLC), an entity ~~associated~~affiliated with the family of Joseph V. Topper, Jr., a member of the Board, ~~and~~ a related ~~party.~~party and large holder of our common units. DMS is an operator of retail motor fuel stations. DMS leases retail sites from us in accordance with a master lease agreement with us and DMS purchases substantially all of its motor fuel for these sites from us on a wholesale basis under rack plus pricing. The financial results of DMS are not consolidated with ~~ours~~ours.

General Partner			CrossAmerica GP LLC, the General Partner of CrossAmerica, a Delaware limited liability company, indirectly owned by Circle K.

CST Fuel Supply			CST Fuel Supply LP is the ~~Parent~~parent of CST Marketing and Supply, indirectly owned by Circle K. As of March 31, 2018, our total limited partner interest in CST Fuel Supply was 17.5%.

CST Marketing and Supply			CST Marketing and Supply, LLC, indirectly owned by Circle K. It is 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. ~~As of March 31, 2017, our total limited partner interest in CST Fuel Supply was 17.5%~~
~~Topstar~~
CST Services			CST Services, LLC, a wholly owned subsidiary of Circle K

Topstar			Topstar Enterprises, an entity ~~associated~~affiliated with Joseph V. Topper, Jr. Topstar is an operator of convenience stores that leases retail sites from us, but does not purchase fuel from usus.

Recent Acquisitions:
~~PMI~~		~~Petroleum Marketers, Inc., acquired in April 2014~~
~~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 ~~by CrossAmerica from S/S/G Corporation~~ in March 2016
~~State Oil~~
Jet-Pep Assets			The assets acquired from ~~State Oil Company~~Jet-Pep, Inc. in ~~September 2016~~November 2017

Other Defined Terms:

Amended Omnibus Agreement			The Amended and Restated Omnibus Agreement, dated October 1, 2014, as amended on February 17, 2016 and May 7, 2018 by and among CrossAmerica, the General Partner, ~~Dunne Manning Inc.,~~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~~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.
~~ASU~~

ASC		Accounting Standards Codification

ASU		Accounting Standards Update
~~Board~~
Board		Board of Directors of our General Partner
BP	~~BP p.l.c.~~
~~Couche-Tard~~ BP	~~Alimentation Couche-Tard Inc. (TSX: ATD.A ATD.B)~~	BP p.l.c.
~~DTW~~
Branded Motor Fuels		Motor fuels that are purchased from major integrated oil companies and refiners under supply agreements. We take legal title to the motor fuel when we receive it at the rack and generally arrange for a third-party transportation provider to take delivery of the motor fuel at the rack and deliver it to the appropriate sites in our network.

DTW		Dealer tank wagon contracts, which are variable cent per gallon priced wholesale motor fuel distribution or supply contracts. DTW also refers to the pricing methodology under such contracts
~~EBITDA~~
EBITDA		Earnings before interest, taxes, depreciation, amortization and accretion, a non-GAAP financial measure
~~EICP~~
EICP		The Partnership’s Lehigh Gas Partners LP Executive Income Continuity Plan, as amended

Exchange Act		Securities Exchange Act of 1934, as amended
~~ExxonMobil~~	~~ExxonMobil Corporation~~
~~FASB~~ ExxonMobil		ExxonMobil Corporation

FASB		Financial Accounting Standards Board


☐
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	~~For the transition period from _______________ to _______________~~

		PAGE

	~~PAGE~~

Commonly Used Defined Terms		i
PART I - FINANCIAL INFORMATION		1
Item 1. Financial Statements		1
Consolidated Balance Sheets as of March 31, ~~2017~~2018 (unaudited) and December 31, ~~2016~~2017		1
Consolidated Statements of Operations (unaudited) for the Three Months Ended March 31, ~~2017~~2018 and ~~2016~~2017		2
Consolidated Statements of Cash Flows (unaudited) for the Three Months Ended March 31, ~~2017~~2018 and ~~2016~~2017		3
Condensed Notes to Consolidated Financial Statements		4
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	15	16
Item 3. Quantitative and Qualitative Disclosures about Market Risk	35	30
Item 4. Controls and Procedures	36	30
PART II - OTHER INFORMATION	37	31
Item 1. Legal Proceedings	37	31
Item 1A. Risk Factors	38	31
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	38	31
Item 6. Exhibits	38	31
SIGNATURE	39	32



Form 10-K		CrossAmerica’s Annual Report on Form 10-K for the year ended December 31, ~~2016~~2017

FTC		U.S. Federal Trade Commission

Getty ~~lease~~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 ~~Maine~~Rhode Island.
~~IDRs~~
IDRs		Incentive Distribution Rights ~~which are partnership interests~~represent the right to receive an increasing percentage of quarterly distributions after the target distribution levels have been achieved, as defined in ~~the~~our Partnership ~~that provide for special distributions associated with increasing partnership distributions. CST~~Agreement. Circle K is the indirect owner of 100% of the outstanding IDRs of ~~CrossAmerica~~CrossAmerica.

Internal Revenue Code		Internal Revenue Code of 1986, as amended
~~IPO~~
IPO		Initial public offering of CrossAmerica Partners LP on October 30, 2012
~~LIBOR~~
LIBOR		London Interbank Offered Rate
~~Merger~~
Merger		The merger of Ultra Acquisition Corp. with CST, with CST surviving the merger as a wholly owned subsidiary of Circle K, ~~Stores Inc.~~which closed on June 28, 2017. See Merger Agreement ~~below~~below.

Merger Agreement		CST’s Agreement and Plan of Merger ~~(the “Merger Agreement”)~~ entered into on August 21, 2016 with Circle K ~~Stores Inc., a Texas corporation (“Parent”),~~ and Ultra Acquisition Corp., a Delaware corporation and an indirect, wholly owned subsidiary of ~~Parent~~Circle K (“Merger Sub”). Under and subject to the terms and conditions of the Merger Agreement, on June 28, 2017, Merger Sub ~~will be~~was merged with and into CST, with CST surviving the Merger as a wholly owned subsidiary of ~~Parent. Parent is a wholly owned subsidiaryof Alimentation Couche-Tard Inc.~~Circle K.

MD&A		Management’s Discussion and Analysis of Financial Condition and Results of Operations
~~Motiva~~
Motiva		Motiva Enterprises LLC
~~NTI~~
NTI		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 stores

Partnership Agreement	~~the~~	The First Amended and Restated Agreement of Limited Partnership of CrossAmerica Partners LP, dated as of October 1, 2014, as amended

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 Entity			Wholesale distribution business of ~~Lehigh Gas-Ohio, LLC~~DMS and real property and leasehold interests contributed in connection with the IPO
~~SEC~~
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 Act

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.

U.S. GAAP			United States Generally Accepted Accounting Principles
~~Valero~~
UST			Underground storage tanks

Valero			Valero Energy Corporation and, where appropriate in context, one or more of its subsidiaries, or all of them taken as a whole
~~WTI~~
WTI			West Texas Intermediate crude oil



	Three Months Ended March 31,
	2017			2016
Operating revenues^(a)	$	469,286		$	367,740
Costs of sales^(b)	431,840			330,550
Gross profit	37,446			37,190

Income from CST Fuel Supply equity interests	3,603			4,051
Operating expenses:
Operating expenses	15,260			15,411
General and administrative expenses	5,817			7,005
Depreciation, amortization and accretion expense	14,348			12,900
Total operating expenses	35,425			35,316
Loss on sales of assets, net	(44		)	(4		)
Operating income	5,580			5,921
Other income, net	118			118
Interest expense	(6,702		)	(5,065		)
Income (loss) before income taxes	(1,004		)	974
Income tax benefit	(2,701		)	(795		)
Consolidated net income	1,697			1,769
Less: net income attributable to noncontrolling interests	1			2
Net income attributable to CrossAmerica limited Partners	1,696			1,767
IDR distributions	(992		)	(759		)
Net income available to CrossAmerica limited Partners	$	704		$	1,008
Net income per CrossAmerica limited partner unit:
Basic earnings per common unit	$	0.02		$	0.03
Diluted earnings per common unit	$	0.02		$	0.03
Basic and diluted earnings per subordinated unit	n/a			$	0.03
Weighted-average CrossAmerica limited partner units:
Basic common units	33,588,163			28,475,363

Diluted common units	33,622,661			28,545,975
Basic and diluted subordinated units	—			4,630,769
Total diluted common and subordinated units	33,622,661			33,176,744

Distribution paid per common and subordinated unit	$	0.6125		$	0.5925
Distribution declared (with respect to each respective period) per common and subordinated unit	$	0.6175		$	0.5975

Supplemental information:
(a) Includes excise taxes of:	$	18,552		$	19,893
(a) Includes revenues from fuel sales to related parties of:	$	84,829		$	73,308
(a) Includes income from rentals of:	$	21,441		$	19,531
(b) Includes expenses from fuel sales to related parties of:	$	81,968		$	70,252
(b) Includes expenses from rentals of:	$	4,791		$	4,748



	March 31, 2017							December 31, 2016
	Gross Amount		Accumulated Amortization			Net Carrying Amount		Gross Amount		Accumulated Amortization			Net Carrying Amount
Wholesale fuel supply contracts/rights	$	118,201	$	(47,339	)	$	70,862	$	118,201	$	(44,298	)	$	73,903
Trademarks	1,094		(726		)	368		1,094		(685		)	409
Covenant not to compete	4,131		(2,700		)	1,431		4,131		(2,503		)	1,628
Below market leases	11,401		(7,269		)	4,132		12,081		(7,261		)	4,820
Total intangible assets	$	134,827	$	(58,034	)	$	76,793	$	135,507	$	(54,747	)	$	80,760



$550 million revolving credit facility	$	448,500
Note payable	808
Capital lease obligations	28,759
Total debt and capital lease obligations	478,067
Current portion	2,123
Noncurrent portion	475,944
Deferred financing fees	(3,151		)
Total	$	472,793