UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

~~WASHINGTON,~~Washington, D.C. 20549

FORM ~~10–Q~~10-Q

(Mark One)

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

For the quarterly period ended September 30, ~~2017~~2021

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

For the transition period from to

Commission ~~file~~File No. 001-35711

CROSSAMERICA PARTNERS LP

(Exact name of registrant as specified in its charter)

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

~~515~~ 645 Hamilton Street, Suite ~~200~~400 Allentown, PA		18101 (Zip Code) (610) 625-8000
(Address of Principal Executive Offices)		(~~Zip Code)~~Registrant’s telephone number, including area code)

~~(610) 625-8000~~

~~(Registrant’s telephone number, including area code)~~Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Units	CAPL	New York Stock Exchange

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

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

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” ~~“small~~“smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. ~~(Check one):~~


Large accelerated filer	☐	Accelerated filer☒
Non-accelerated filer ☐	☑Smaller reporting company ☐

~~Non-accelerated filer~~	☐ ~~(do not check if a smaller reporting company)~~	~~Smaller reporting company~~	☐

Emerging growth company	☐

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

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

As of November ~~3, 2017,~~4, 2021, the registrant had outstanding ~~33,984,970~~37,891,701 common units.

TABLE OF CONTENTS

		PAGE

Commonly Used Defined Terms		i

PART I - FINANCIAL INFORMATION		1
Item 1. Financial Statements		1
Consolidated Balance Sheets as of September 30, ~~2017~~2021 and December 31, ~~2016~~2020		1
Consolidated Statements of Operations for the Three and Nine Months Ended September 30, ~~2017~~2021 and ~~2016~~2020		2
Consolidated Statements of Cash Flows for the Nine Months Ended September 30, ~~2017~~2021 and ~~2016~~2020		3
~~Condensed Notes to~~ Consolidated ~~Financial~~ Statements of Equity and Comprehensive Income for the Three and Nine Months Ended September 30, 2021 and 2020		4
Condensed Notes to Consolidated Financial Statements		5
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		1920
Item 3. Quantitative and Qualitative Disclosures about Market Risk		37
Item 4. Controls and Procedures		37

PART II - OTHER INFORMATION		38
Item 1. Legal Proceedings		38
Item 1A. Risk Factors		38
Item ~~2. Unregistered Sales of Equity Securities and Use of Proceeds~~6. Exhibits		38
~~Item 6. Exhibits~~		38
SIGNATURE		3940

COMMONLY USED DEFINED TERMS

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

CrossAmerica Partners LP and subsidiaries:

CrossAmerica ~~the Partnership, we, us, our~~Partners LP		CrossAmerica, ~~Partners LP~~the Partnership, CAPL, we, us, our

CAPL JKM Wholesale		CAPL JKM Wholesale LLC

Joe’s Kwik Marts		Joe’s Kwik Marts LLC

LGW		Lehigh Gas Wholesale LLC

LGPR		LGP Realty Holdings LP

LGWS		Lehigh Gas Wholesale Services, Inc. and subsidiaries

CrossAmerica Partners LP related ~~and affiliated parties:~~parties at any point during 2020 or 2021:

~~Circle K~~DMI		~~Circle K Stores~~Dunne Manning Inc. (formerly Lehigh Gas Corporation), ~~a Texas corporation, and a wholly owned subsidiary of Couche-Tard~~an entity affiliated with the Topper Group

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

~~CST~~	~~CST Brands, LLC, a wholly owned subsidiary of Circle K.~~

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

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

General Partner		CrossAmerica GP LLC, the General Partner of CrossAmerica, a Delaware limited liability ~~company.~~company, indirectly owned by the Topper Group.

~~CST Fuel Supply~~Topper Group		~~CST Fuel Supply LP~~Joseph V. Topper, Jr., collectively with his affiliates and family trusts that have ownership interests in the Partnership. Joseph V. Topper, Jr. is the ~~parent~~founder of ~~CST Marketing~~the Partnership and ~~Supply LLC, CST’s wholesale motor fuel supply business, which provides wholesale fuel distribution to~~a member of the ~~majority~~Board. The Topper Group is a related party and large holder of ~~CST’s U.S. retail convenience stores on a fixed markup per gallon. As of September 30, 2017,~~ our ~~total limited partner interest in CST Fuel Supply was 17.5%.~~common units

~~CST Marketing and Supply~~TopStar		CST Marketing and Supply, LLC, CST’s wholesale motor fuel supply business, which provides wholesale fuel distribution to the majority of CST’s U.S. retail convenience stores on a fixed markup per gallon. As of September 30, 2017, our total limited partner interest in CST Marketing and Supply was 17.5%.

~~CST Services~~	~~CST Services, LLC, a wholly owned subsidiary of Circle K~~

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

~~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 from S/S/G Corporation in March 2016~~

~~State Oil Assets~~	~~The assets acquired from State Oil Company in September 2016~~

Other Defined Terms:

~~Amended Omnibus Agreement~~2020 Bonus Plan		The ~~Amended~~2020 Performance-Based Bonus Compensation Policy is one of the key components of “at-risk” compensation. The 2020 Bonus Plan is utilized to reward short-term performance achievements and ~~Restated Omnibus Agreement, dated October 1, 2014, as amended on February 17, 2016 by~~to motivate and ~~among CrossAmerica, the General Partner, Dunne Manning Inc., DMS, CST Services~~reward employees for their contributions toward meeting financial 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~~strategic goals.

ASC		Accounting Standards Codification

ASU		Accounting Standards Update ~~issued by the FASB to communicate changes to the FASB codification.~~

Board		Board of Directors of our General Partner


BP			BP p.l.c.

CDC			The Centers for Disease Control and Prevention

Circle K			Circle K Stores Inc., a Texas corporation, and a wholly owned subsidiary of Alimentation Couche-Tard Inc. (TSX: ATD.A ATD.B)

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

COVID-19 Pandemic			In December 2019, a novel strain of coronavirus was reported to have surfaced. In March 2020, the World Health Organization declared the outbreak a pandemic.

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

CST Fuel Supply			CST Fuel Supply LP is indirectly owned by Circle K and is the parent of CST Marketing and Supply, LLC, CST’s wholesale motor fuel supply business, which provides wholesale fuel distribution to the majority of CST’s legacy U.S. retail convenience stores on a fixed markup per gallon. From July 1, 2015 through March 25, 2020, we owned a 17.5% limited partner interest in CST Fuel Supply.

CST Fuel Supply Exchange			Exchange Agreement, dated November 19, 2019, between the Partnership and Circle K, which closed effective March 25, 2020. Pursuant to the Exchange Agreement, Circle K transferred to the Partnership certain owned and leased convenience store properties and related assets (including fuel supply agreements) and wholesale fuel supply contracts covering additional sites, and, in exchange, the Partnership transferred to Circle K 100% of the limited partnership units it held in CST Fuel Supply.

CST Services			CST Services LLC, a wholly owned subsidiary of Circle K

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

~~EICP~~EMV			~~The Partnership’s Executive Income Continuity Plan,~~Payment method based upon a technical standard for smart payment cards, also referred to as ~~amended~~chip cards

Equity Restructuring Agreement			On January 15, 2020, the Partnership entered into an Equity Restructuring Agreement with the General Partner and Dunne Manning CAP Holdings II LLC (“DM CAP Holdings”), a wholly owned subsidiary of DMP. Pursuant to the Equity Restructuring Agreement, all of the outstanding IDRs of the Partnership, all of which were held by DM CAP Holdings, were cancelled and converted into 2,528,673 newly-issued common units representing limited partner interests in the Partnership based on a value of $45 million and calculated using the 20 business day volume weighted average trading price of our common units ended five business days prior to the execution of the Equity Restructuring Agreement. This transaction closed on February 6, 2020.

Exchange Act			Securities Exchange Act of 1934, as amended

ExxonMobil			ExxonMobil Corporation

FASB			Financial Accounting Standards Board

Form 10-K			CrossAmerica’s Annual Report on Form 10-K for the year ended December 31, ~~2016~~2020

~~Getty lease~~GP Purchase			~~In May 2012, the Predecessor Entity, which represents the portion~~Purchase by DMP from subsidiaries of Circle K of: 1) 100% of the ~~business~~membership interests in the sole member of ~~Dunne Manning Inc.~~the General Partner; 2) 100% of the Incentive Distribution Rights issued by the Partnership; and ~~its subsidiaries and affiliates contributed to~~3) an aggregate of 7,486,131 common units of 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 basedPartnership. These transactions closed on ~~gallons of motor fuel sold. The Partnership leases sites under the lease in Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, Pennsylvania and Rhode Island.~~November 19, 2019.

IDRs		Incentive Distribution Rights ~~which are interests in~~represented the ~~Partnership that provide for special~~right to receive an increasing percentage of quarterly distributions ~~associated with increasing partnership distributions. Couche-Tard is~~after the ~~indirect owner~~target distribution levels were achieved. As a result of the GP Purchase, DMP owned 100% of the outstanding IDRs ~~of CrossAmerica.~~from November 19, 2019 through February 6, 2020.

Internal Revenue Code		Internal Revenue Code of 1986, as amended

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

LIBOR		London Interbank Offered Rate

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

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

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

MD&A	Management’s Discussion and Analysis of Financial Condition and Results of Operations

Marathon		Marathon Petroleum Company LP

Motiva		Motiva Enterprises LLC

~~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 First~~Second Amended and Restated Agreement of Limited Partnership of CrossAmerica Partners LP, dated as of ~~October 1, 2014, as amended~~February 6, 2020

Predecessor Entity		Wholesale distribution ~~business of Lehigh Gas-Ohio, LLC~~contracts and real property and leasehold interests contributed to the Partnership in connection with the IPO

~~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.~~

SEC		U.S. Securities and Exchange Commission

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.


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

U.S. GAAP			~~United States~~U.S. Generally Accepted Accounting Principles

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

WTI			West Texas Intermediate crude oil

iii

PART I - ~~FINANCIAL~~FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

CROSSAMERICA PARTNERS LP

CONSOLIDATED BALANCE SHEETS

(Thousands of Dollars, except unit data)

(Unaudited)

	September 30,			December 31,
	2017			2016			September 30,		December 31,
	(Unaudited)						2021		2020
ASSETS
Current assets:
Cash	$	1,566			1,350
Accounts receivable, net of allowances of $476 and $487, respectively		23,930			29,251
Cash and cash equivalents							$	8,247	$	513
Accounts receivable, net of allowances of $339 and $429, respectively								39,169		28,519
Accounts receivable from related parties		14,994			12,975			836		931
Inventories		12,020			13,164
Inventory								39,552		23,253
Assets held for sale		2,496			2,111			3,901		9,898
Other current assets		7,168			6,556			18,290		11,707
Total current assets		62,174			65,407			109,995		74,821
Property and equipment, net		634,718			677,329			756,642		570,856
Right-of-use assets, net								170,939		167,860
Intangible assets, net		68,989			80,760			120,308		92,912
Goodwill		89,109			89,109			100,115		88,764
Other assets		22,499			19,384			22,006		19,129
Total assets	$	877,489		$	931,989		$	1,280,005	$	1,014,342

LIABILITIES AND EQUITY
Current liabilities:
Current portion of debt and capital lease obligations	$	2,884		$	2,100
Current portion of debt and finance lease obligations							$	9,923	$	2,631
Current portion of operating lease obligations								34,828		31,958
Accounts payable		37,785			34,903			85,717		63,978
Accounts payable to related parties		16,289			9,958			9,205		5,379
Accrued expenses and other current liabilities		19,210			15,705			24,527		23,267
Motor fuel taxes payable		12,081			12,467
Motor fuel and sales taxes payable								23,233		19,735
Total current liabilities		88,249			75,133			187,433		146,948
Debt and capital lease obligations, less current portion		454,773			465,119
Debt and finance lease obligations, less current portion								795,626		527,299
Operating lease obligations, less current portion								141,979		141,380
Deferred tax liabilities, net		39,952			42,923			13,917		15,022
Asset retirement obligations		28,155			27,750			45,430		41,450
Other long-term liabilities		97,085			100,253			34,071		32,575
Total liabilities		708,214			711,178			1,218,456		904,674

Commitments and contingencies

Equity:
Partners’ Capital
Common units—(33,984,970 and 33,524,952 units issued and outstanding at September 30, 2017 and December 31, 2016, respectively)		169,569			221,044
General Partner’s interest		—			—
Total Partners’ Capital		169,569			221,044
Noncontrolling interests		(294	)		(233	)
Common units—37,891,701 and 37,868,046 units issued and outstanding at September 30, 2021 and December 31, 2020, respectively								61,396		112,124
Accumulated other comprehensive income (loss)								153		(2,456	)
Total equity		169,275			220,811			61,549		109,668
Total liabilities and equity	$	877,489		$	931,989		$	1,280,005	$	1,014,342

See Condensed Notes to Consolidated Financial Statements.

CROSSAMERICA PARTNERS LP

CONSOLIDATED STATEMENTS OF OPERATIONS

(Thousands of Dollars, ~~Except Unit~~except unit and ~~Per Unit Amounts)~~per unit amounts)

(Unaudited)

For the Three Months Ended September 30,

For the Nine Months Ended September 30,

2017

2016

2017

2016

Operating revenues^(a)

$
544,092

$
487,950

$
1,542,167

$
1,368,334

Costs of sales^(b)

502,517

448,812

1,421,524

1,251,491

Gross profit

41,575

39,138

120,643

116,843

Income from CST Fuel Supply equity interests

3,752

4,022

11,185

12,318

Operating expenses:

Operating expenses

15,371

14,224

46,853

45,754

General and administrative expenses

5,994

6,142

23,731

18,068

Depreciation, amortization and accretion expense

14,049

13,432

42,675

40,594

Total operating expenses

35,414

33,798

113,259

104,416

Gain on sales of assets, net

2,371

631

2,013

525

Operating income

12,284

9,993

20,582

25,270

Other income (expense), net

121

(59
)

366

375

Interest expense

(7,102
)

(5,634
)

(20,599
)

(16,403
)
Income before income taxes

5,303

4,300

349

9,242

Income tax expense (benefit)

966

1,308

(1,686
)

851

Net income

4,337

2,992

2,035

8,391

Less: net income (loss) attributable to noncontrolling
   interests

4

3

(1
)

9

Net income attributable to limited partners

4,333

2,989

2,036

8,382

IDR distributions

(1,115
)

(877
)

(3,162
)

(2,456
)
Net income (loss) available to limited partners

$
3,218

$
2,112

$
(1,126
)

$
5,926

Net income (loss) per limited partner unit:

Basic earnings per common unit

$
0.09

$
0.06

$
(0.03
)

$
0.18

Diluted earnings per common unit

$
0.09

$
0.06

$
(0.03
)

$
0.18

Basic and diluted earnings per subordinated unit

n/a

n/a

n/a

$
0.18

Weighted-average limited partner units:

Basic common units

33,931,056

33,366,380

33,773,964

31,714,462

Diluted common units^(c)

33,937,702

33,391,096

33,773,964

31,766,802

Basic and diluted subordinated units

—

—

—

1,537,956

Total diluted common and subordinated units

33,937,702

33,391,096

33,773,964

33,304,758

Distribution paid per common and subordinated unit

$
0.6225

$
0.6025

$
1.8525

$
1.7925

Distribution declared (with respect to each respective
   period) per common and subordinated unit

$
0.6275

$
0.6075

$
1.8675

$
1.8075

Supplemental information:

(a) Includes excise taxes of:

$
19,704

$
19,698

$
58,351

$
59,902

(a) Includes revenues from fuel sales to related parties
      of:

101,190

99,891

281,611

280,330

(a) Includes rental income of:

21,644

19,752

65,090

59,634

(b) Includes rental expense of:

4,876

5,103

14,593

14,870

(c) Diluted common units were not used in the calculation of diluted earnings per common unit for the nine months ended
      September 30, 2017 because to do so would have been antidilutive.

	Three Months Ended September 30,						Nine Months Ended September 30,
	2021			2020			2021			2020
Operating revenues ^(a)	$	985,122		$	591,022		$	2,501,740		$	1,381,119
Costs of sales ^(b)		909,391			528,750			2,306,047			1,225,470
Gross profit		75,731			62,272			195,693			155,649

Income from CST Fuel Supply equity interests		—			—			—			3,202
Operating expenses:
Operating expenses ^(c)		34,548			27,508			95,021			63,328
General and administrative expenses		9,903			5,363			24,429			15,440
Depreciation, amortization and accretion expense		19,118			18,590			56,732			51,867
Total operating expenses		63,569			51,461			176,182			130,635
Gain on dispositions and lease terminations, net		426			12,881			375			79,237
Operating income		12,588			23,692			19,886			107,453
Other income, net		127			143			419			358
Interest expense		(4,928	)		(3,522	)		(12,295	)		(13,183	)
Income before income taxes		7,787			20,313			8,010			94,628
Income tax benefit		(1,065	)		(892	)		(1,664	)		(3,868	)
Net income		8,852			21,205			9,674			98,496
IDR distributions		—			—			—			(133	)
Net income available to limited partners	$	8,852		$	21,205		$	9,674		$	98,363

Basic and diluted earnings per common unit	$	0.23		$	0.56		$	0.26		$	2.64

Weighted-average limited partner units:
Basic common units		37,887,493			37,867,647			37,877,273			37,202,087
Diluted common units		37,906,799			37,868,610			37,898,036			37,202,087

Supplemental information:
(a) includes excise taxes of:	$	62,427		$	47,222		$	156,180		$	95,929
(a) includes rent income of:		21,498			19,747			62,832			62,859
(b) excludes depreciation, amortization and accretion
(b) includes rent expense of:		5,968			6,036			17,912			19,088
(c) includes rent expense of:		3,353			3,310			9,814			5,832

See Condensed Notes to Consolidated Financial Statements.

CROSSAMERICA PARTNERS LP

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Thousands of Dollars)

(Unaudited)

	Nine Months Ended September 30,
	2021			2020
Cash flows from operating activities:
Net income	$	9,674		$	98,496
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and accretion expense		56,732			51,867
Amortization of deferred financing costs		1,182			781
Credit loss expense		70			1,014
Deferred income tax benefit		(2,199	)		(4,047	)
Equity-based employee and director compensation expense		1,096			83
Gain on dispositions and lease terminations, net		(375	)		(87,225	)
Changes in operating assets and liabilities, net of acquisitions		10,087			25,534
Net cash provided by operating activities		76,267			86,503

Cash flows from investing activities:
Principal payments received on notes receivable		151			246
Proceeds from Circle K in connection with CST Fuel Supply Exchange		—			23,049
Proceeds from sale of assets		11,012			13,757
Capital expenditures		(32,370	)		(24,439	)
Cash paid in connection with acquisitions, net of cash acquired		(261,993	)		(28,244	)
Net cash used in investing activities		(283,200	)		(15,631	)

Cash flows from financing activities:
Borrowings under revolving credit facilities		167,000			159,098
Repayments on revolving credit facilities		(43,452	)		(170,580	)
Borrowings under the Term Loan Facility		159,950			—
Payments of finance lease obligations		(1,944	)		(1,830	)
Payments of deferred financing costs		(7,135	)		—
Distributions paid on distribution equivalent rights		(93	)		(8	)
Distributions paid to holders of the IDRs		—			(133	)
Distributions paid on common units		(59,659	)		(57,871	)
Net cash provided by (used in) financing activities		214,667			(71,324	)
Net increase (decrease) in cash and cash equivalents		7,734			(452	)

Cash and cash equivalents at beginning of period		513			1,780
Cash and cash equivalents at end of period	$	8,247		$	1,328

See Condensed Notes to Consolidated Financial Statements.

CROSSAMERICA PARTNERS LP

CONSOLIDATED STATEMENTS OF EQUITY AND COMPREHENSIVE INCOME

(Thousands of Dollars, except unit amounts)

(Unaudited)

	Limited Partners' Interest Common Unitholders					Incentive Distribution Rights			AOCI			Total Equity
	Units		Dollars			Dollars			Dollars			Dollars
Balance at June 30, 2021		37,874,868	$	72,162		$	—		$	(23	)	$	72,139
Net income		—		8,852			—			—			8,852
Other comprehensive income
Unrealized loss on interest rate swap contracts		—		—			—			(89	)		(89	)
Realized loss on interest rate swap contracts reclassified from AOCI into interest expense		—		—			—			265			265
Total other comprehensive income		—		—			—			176			176
Comprehensive income		—		8,852			—			176			9,028
Vesting of equity awards, net of units withheld for tax		16,833		318			—			—			318
Tax effect from intra-entity transfer of assets				(12	)								(12	)
Distributions paid		—		(19,924	)		—			—			(19,924	)
Balance at September 30, 2021		37,891,701	$	61,396		$	—		$	153		$	61,549

Balance at June 30, 2020		37,866,005	$	121,732		$	—		$	(3,218	)	$	118,514
Net income		—		21,205			—			—			21,205
Other comprehensive income
Unrealized gain on interest rate swap contracts		—		—			—			13			13
Realized loss on interest rate swap contracts reclassified from AOCI into interest expense		—		—			—			204			204
Total other comprehensive income		—		—			—			217			217
Comprehensive income		—		21,205			—			217			21,422
Vesting of equity awards, net of units withheld for tax		2,041		26			—			—			26
Distributions paid		—		(19,887	)		—			—			(19,887	)
Balance at September 30, 2020		37,868,046	$	123,076		$	—		$	(3,001	)	$	120,075

Balance at December 31, 2020		37,868,046	$	112,124		$	—		$	(2,456	)	$	109,668
Net income		—		9,674			—			—			9,674
Other comprehensive income
Unrealized gain on interest rate swap contracts		—		—			—			1,860			1,860
Realized loss on interest rate swap contracts reclassified from AOCI into interest expense		—		—			—			749			749
Total other comprehensive income		—		—			—			2,609			2,609
Comprehensive income		—		9,674			—			2,609			12,283
Issuance of units related to 2020 Bonus Plan		6,822		126			—			—			126
Tax effect from intra-entity transfer of assets		—		(1,094	)		—			—			(1,094	)
Vesting of equity awards, net of units withheld for tax		16,833		318			—			—			318
Distributions paid		—		(59,752	)		—			—			(59,752	)
Balance at September 30, 2021		37,891,701	$	61,396		$	—		$	153		$	61,549

Balance at December 31, 2019		34,494,441	$	78,397		$	—		$	—		$	78,397
Net income		—		98,363			133			—			98,496
Other comprehensive loss
Unrealized loss on interest rate swap contracts		—		—			—			(3,179	)		(3,179	)
Realized loss on interest rate swap contract reclassified from AOCI into interest expense		—		—			—			178			178
Total other comprehensive loss		—		—			—			(3,001	)		(3,001	)
Comprehensive income (loss)		—		98,363			133			(3,001	)		95,495
Issuance of units to the Topper Group in connection with the Equity Restructuring Agreement		2,528,673		—			—			—			—
Acquisition of assets from entities under common control, net of fair value of common units issued		842,891		4,169			—			—			4,169
Vesting of equity awards, net of units withheld for tax		2,041		26			—			—			26
Distributions paid		—		(57,879	)		(133	)		—			(58,012	)
Balance at September 30, 2020		37,868,046	$	123,076		$	—		$	(3,001	)	$	120,075

See Condensed Notes to Consolidated Financial Statements.

CROSSAMERICA PARTNERS LP

~~CONSOLIDATED STATEMENTS OF CASH FLOWS~~

~~(Thousands of Dollars)~~

~~(Unaudited)~~

For the Nine Months Ended September 30,

2017

2016

Cash flows from operating activities:

Net income

$
2,035

$
8,391

Adjustments to reconcile net income to net cash flows provided by
operating activities:

Depreciation, amortization and accretion expense

42,675

40,594

Amortization of deferred financing fees

1,278

1,106

Amortization of below market leases, net

57

150

Provision for losses on doubtful accounts

46

93

Deferred income taxes

(2,971
)

69

Equity-based employees and directors compensation expense

1,889

2,597

Amended Omnibus Agreement fees settled in common units

9,900

7,600

Gain on sales of assets, net

(2,013
)

(525
)
Erickson working capital adjustment

—

335

Changes in working capital, net of acquisitions

13,542

3,288

Net cash provided by operating activities

66,438

63,698

Cash flows from investing activities:

Proceeds from sale of property and equipment

23,900

610

Capital expenditures

(10,175
)

(11,567
)
Principal payments received on notes receivable

345

214

Refund payment related to the sale by CST of California and Wyoming assets

—

17,528

Cash paid in connection with acquisitions, net of cash acquired

(2,779
)

(94,173
)
Cash paid to CST in connection with acquisitions

—

(2,900
)
Net cash provided by (used in) investing activities

11,291

(90,288
)

Cash flows from financing activities:

Borrowings under the revolving credit facility

88,840

178,270

Repayments on the revolving credit facility

(98,856
)

(82,182
)
Repurchases of common units

—

(3,252
)
Payments of long-term debt and capital lease obligations

(1,509
)

(1,772
)
Payments of sale leaseback obligations

(635
)

(541
)
Payment of deferred financing fees

(6
)

—

Contributions from parent company

329

—

Distributions paid on distribution equivalent rights

(15
)

(34
)
Distributions paid to holders of the IDRs

(3,162
)

(2,456
)
Distributions paid to noncontrolling interests

(60
)

(85
)
Distributions paid on common and subordinated units

(62,439
)

(59,653
)
Net cash (used in) provided by financing activities

(77,513
)

28,295

Net increase in cash

216

1,705

Cash at beginning of period

1,350

1,192

Cash at end of period

$
1,566

$
2,897

~~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 Merger~~

CST entered into the Merger Agreement dated as of August 21, 2016, with Circle K and Merger Sub. On June 28, 2017, Merger Sub merged with and into CST, at which time the separate corporate existence of Merger Sub ceased, and CST survived the Merger as an indirect, wholly owned subsidiary of Circle K.

As a result of the Merger, Circle K indirectly owns all of the membership interests in our General Partner, as well as a 20.8% limited partner interest in the Partnership and all of the IDRs of the Partnership. Circle K, through its indirect ownership interest in the sole member of our General Partner, has the ability to appoint all of the members of the Board and to control and manage our operations and activities.

~~Description of Business~~

Our business consists of:

~~the wholesale distribution of motor fuels;~~

•

the wholesale distribution of motor fuels;

~~the retail distribution of motor fuels to end customers at retail sites operated by commission agents or us;~~

•

the owning or leasing of retail sites used in the retail distribution of motor fuels and, in turn, generating rental income from the lease or sublease of the retail sites;

~~the owning or leasing of retail sites used in the retail distribution of motor fuels and, in turn, generating rental income from the lease or sublease of the retail sites; and~~

•

the retail sale of motor fuels to end customers at retail sites operated by commission agents and, since April 14, 2020, ourselves; and

~~the operation of retail sites.~~

•

since April 14, 2020, the operation of retail sites, including the sale of convenience merchandise to end customers. We had no company operated sites from September 30, 2019 through April 14, 2020.

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

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

•

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

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

•

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

•

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

LGWS, which owns and leases (or leases and sub-leases) real estate and personal property used in the retail distribution of motor fuels, as well as provides maintenance and other services to its customers. In addition, LGWS distributes motor fuels on a retail basis and sells convenience merchandise items to end customers at company operated retail sites and sells motor fuel on a retail basis at sites operated by commission agents. Income from LGWS generally is not qualifying income under Section 7704(d) of the Internal Revenue Code.
•
Joe’s Kwik Marts, which owns and leases real estate and personal property at our company operated sites that we recently acquired from 7-Eleven. Joe’s Kwik Marts also sells motor fuels on a retail basis and sells convenience merchandise items to end customers. Income from Joe’s Kwik Marts generally is not qualifying income under Sections 7704(d) of the Internal Revenue Code.

In 2015, we issued our common units as consideration in the purchase of equity interests in CST Fuel Supply and the real property associated with certain of CST’s NTI retail sites. In addition, we also issued, and may continue to issue, our common units as payment to Circle K for charges and expenses incurred by us under the Amended Omnibus Agreement. There is no obligation for CST or our General Partner to accept common units representing limited partner interests in lieu of cash for amounts due under the Amended Omnibus Agreement. CST also acquired our common units through open market purchases from September 2015 through December 2015. At September 30, 2017, Circle K indirectly owned 20.8% 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 September 30, ~~2017~~2021 and for the three and nine months ended September 30, ~~2017~~2021 and ~~2016~~2020 included in the consolidated financial statements has been derived from our unaudited financial statements. Financial information as of December 31, ~~2016~~2020 has been derived from our audited financial statements and notes thereto as of that date.

~~CROSSAMERICA PARTNERS LP~~

~~CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

Operating results for the three and nine months ended September 30, ~~2017~~2021 are not necessarily indicative of the results that may be expected for the year ending December 31, ~~2017.~~2021. 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 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. The COVID-19 Pandemic has impacted our business and these seasonal trends typical in our business. See the “COVID-19 Pandemic” section below.

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~~

~~In May 2014, the FASB issued ASU 2014-09–Revenue from Contracts with Customers (Topic 606), which results in comprehensive~~Certain 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 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 have completed an assessment and to date, have not identified any material impact on the financial statements, although it will affect disclosures. This guidance is expected to apply to over 90% of our revenues as the only primary revenue stream outside the scope of this guidance is rental income. We anticipate using the modified retrospective method of 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. Management continues to evaluate the impact of this new guidance, but the adoption will have a material impact on our balance sheet as we will be required to recognize right-of-use assets and lease liabilities for operating leases. We do not anticipate adopting this guidance early. We intend to apply each of the practical expedients in adopting this new guidance.

~~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 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.

~~CROSSAMERICA PARTNERS LP~~

~~CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~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 during 2021, but the adoption of these pronouncements did not materially impact our financial position, results of operations or disclosures.

Concentration Risk

~~For~~Approximately 12% and 14% of our rent income for the nine months ended September 30, ~~2017~~2021 and 2016, we distributed approximately 14% and 17% of our total wholesale distribution volumes to DMS and its affiliates and DMS and its affiliates accounted for approximately 23% and 27% of our rental income, respectively. 2020, respectively, was from one multi-site operator.

For the nine months ended September 30, 2017 and 2016, we distributed 8% of our total wholesale distribution volume to CST retail sites that are not supplied by CST Fuel Supply and received 22% and 21% of our rental income from CST, respectively.

~~For more information regarding transactions with DMS and its affiliates and CST, see Note 8.~~

For the nine months ended September 30, 2017 and 2016, we received 9% of our rental income from a lessee dealer that operates certain of the retail sites acquired through the PMI and One Stop acquisitions.

~~For the nine months ended September 30, 2017,~~2021, our wholesale business purchased approximately ~~28%~~36%, ~~27%~~23%, 11% and ~~17%~~10% of its motor fuel from ExxonMobil, BP, Motiva and ~~Motiva,~~Marathon, respectively. For the nine months ended September 30, ~~2016,~~2020, our wholesale business purchased approximately ~~29%~~27%, ~~24%~~22%, 13% and ~~23%~~10% of its motor fuel from ExxonMobil, BP, Motiva and ~~Motiva (Shell),~~Marathon, respectively. No other fuel suppliers accounted for 10% or more of our motor fuel purchases during the nine months ended September 30, ~~2017~~2021 and ~~2016.~~2020.

~~Valero supplied substantially all~~Approximately 16% of ~~the~~our motor fuel ~~purchased by CST Fuel Supply during all periods presented. During~~gallons sold for the nine months ended September 30, ~~2017~~2021 and ~~2016, CST Fuel Supply purchased approximately 1.3 billion and 1.4 billion gallons of motor fuel from Valero, respectively.~~ 2020, respectively, were delivered by one carrier.

~~Note 2. ACQUISITIONS~~Prior Year Acquisitions

On August 4, 2017, we entered into a definitive asset purchase agreement (the “Purchase Agreement”), by and among (i) CrossAmerica, (ii) Jet-Pep, Inc., and (iii) other persons listed as signatories in the Purchase Agreement (collectively the “Sellers”). Pursuant to the Purchase Agreement, we have agreed to purchase the real property and the fuel supply business of 92 fee simple sites, and the leasehold interest in 5 leased real property sites; and the fuel supply business to four independent dealers, all located in Alabama (“Acquired Assets”), for an aggregate cash consideration of $72.3 million (the “Purchase Price”), subject to certain closing adjustments. We ~~also agreed to assume certain liabilities and pay for the value~~completed six tranches of the ~~petroleum inventory contained in the retail sites.~~asset exchange with Circle K ~~also entered into a definitive asset purchase agreement with the Sellers. The closing of the purchase of the Acquired Assets~~on May 21, 2019, September 5, 2019, February 25, 2020, April 7, 2020, May 5, 2020 and September 15, 2020. With the closing of the ~~purchase by~~sixth tranche, the transactions contemplated under the Asset Exchange Agreement we entered into with Circle K on December 17, 2018 (“Asset Exchange Agreement”) were concluded. Through these transactions, we acquired 191 sites in exchange for the real property at 56 sites as well as 17 sites previously owned and operated by the Partnership. Although we no longer collect rent from the sites divested in these transactions, we continue to distribute fuel to them on a wholesale basis.

Effective March 25, 2020, we closed on the CST Fuel Supply Exchange. Through this transaction, we acquired 33 sites, wholesale fuel supply to 331 additional sites and $14.1 million in proceeds in exchange for our investment in CST Fuel Supply.

On April 14, 2020, we closed on the acquisition of ~~certain related~~ retail and ~~terminaling~~wholesale assets. Through these transactions, we expanded the retail operations of the Partnership by 169 sites (154 company operated sites and 15 commission sites) through a combination of (1) entering into new leasing arrangements with related parties as the lessee for 62 sites and (2) terminating contracts where we were previously the lessor and fuel supplier under dealer arrangements for 107 sites that then became company operated sites. As a result of closing on these transactions, we expanded our wholesale fuel distribution by 110 sites, including 53 third-party wholesale dealer contracts, and supply of the 62 newly leased sites.

COVID-19 Pandemic

During the first quarter of 2020, an outbreak of a novel strain of coronavirus spread worldwide, including to the U.S., posing public health risks that have reached pandemic proportions.

We experienced a sharp decrease in fuel volume in mid-to-late March 2020. Although fuel volumes largely recovered during the second half of 2020 and continue to recover in 2021, we cannot predict the scope and severity with which COVID-19 will impact our business, financial condition, results of operations and cash flows. Sustained decreases in fuel volume or erosion of margin could have a material adverse effect on our results of operations, cash flow, financial position and ultimately our ability to pay distributions.

CROSSAMERICA PARTNERS LP

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 2. ACQUISITION OF ASSETS FROM 7-ELEVEN

On April 28, 2021, certain newly formed subsidiaries of CrossAmerica, including Joe’s Kwik Marts (collectively, “Buyer”), entered into an Asset Purchase Agreement (the “Asset Purchase Agreement”) with 7-Eleven, Inc., a Texas corporation (“7-Eleven”), pursuant to which Buyer agreed to purchase certain assets ~~from~~related to the ~~Sellers (the “Circle K Agreements”), are mutually conditioned upon each other. We paid a deposit~~ownership and operations of ~~$2.8 million~~106 company operated sites (90 fee; 16 leased)located in the ~~third quarter~~Mid-Atlantic and Northeast regions of ~~2017.~~the U.S. (collectively, the “Properties”) for an aggregate purchase price of $263.0 million, subject to adjustment in accordance with the terms of the Asset Purchase Agreement. The assets are being sold by 7-Eleven as part of a divestiture process in connection with its previously announced acquisition of the Speedway business from MPC.

The assets being purchased by Buyer include real property and leasehold rights to the Properties, and all inventory and other assets located at the Properties, other than specific excluded assets, such as rights to intellectual property or rights with respect to “7-Eleven” or “Speedway” branding. The vast majority of the sites being purchased have been operating under the Speedway brand, and all sites are being rebranded in connection with the closing of ~~the transaction is expected to occur in the fourth quarter of 2017, and is subject~~such site pursuant to the ~~satisfaction or waiver of customary closing conditions.~~ Asset Purchase Agreement. Buyer is also assuming certain specified liabilities associated with the assets.

The Asset Purchase Agreement contains customary representations, warranties, agreements and obligations of the parties, ~~and termination and closing conditions. We and~~including covenants regarding the ~~Sellers have generally agreed to indemnify each other for breaches~~conduct of the ~~representations, warranties~~business at the Properties prior to the applicable closing of such Property.

Buyer is closing the acquisition of the Properties on a rolling basis of generally 10 sites per week. Through September 30, 2021, Buyer consummated the closing under the Asset Purchase Agreement of 98 Properties for a purchase price of $262.0 million, including inventory and ~~covenants contained~~other working capital, as summarized in the ~~Purchase Agreement, subject~~table below (in thousands).

Inventories	$	11,745
Other current assets		1,301
Property and equipment		200,244
Right-of-use assets		7,886
Goodwill		11,351
Intangible assets		41,655
Total assets	$	274,182

Current portion of operating lease obligations		1,510
Accrued expenses and other current liabilities		675
Operating lease obligations, less current portion		6,376
Asset retirement obligations		3,628
Total liabilities	$	12,189
Total consideration, net of cash acquired	$	261,993

The fair value of inventory was estimated at retail selling price less estimated costs to ~~survival period limitations~~sell and a ~~general indemnification cap~~reasonable profit allowance for the ~~Sellers~~selling effort.

The fair value of land was based on a market approach. The value of buildings and equipment was based on a cost approach. The buildings and equipment are being depreciated on a straight-line basis, with estimated remaining useful lives of 20 years for the buildings and five to 30 years for equipment.

The fair value of the wholesale fuel distribution rights included in intangible assets was based on an income approach. Management believes the ~~amount~~level and timing of ~~$6.5 million~~cash flows represent relevant market participant assumptions. The wholesale fuel distribution rights are being amortized on a straight-line basis over an estimated useful life of approximately 10 years.

The fair value of goodwill represents expected synergies from combining operations, intangible assets that do not qualify for separate recognition, and other factors. All goodwill is anticipated to be deductible for tax purposes.

Management continues to review the valuation and is confirming the result to determine the final purchase price allocation.

We funded these transactions primarily through the new JKM Credit Facility further described in ~~the aggregate for Sellers’ liabilities~~Note 8 as well as undrawn capacity under ~~the Purchase Agreement~~our existing revolving credit facility and ~~the Circle K Agreements.~~cash on hand.

CROSSAMERICA PARTNERS LP

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Through November 4, 2021, we closed on 5 additional Properties for a purchase price of $10.4 million. We anticipate closing on the final 3 Properties once we are in receipt of all required operational licenses and permits.

Aggregate incremental revenues since the closing of the Properties included in CrossAmerica’s statement of operations were $65.3 million for the nine months ended September 30, 2021.

Our pro forma results, giving effect to the acquisition and assuming an acquisition date of January 1, 2020, would have been (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Revenues	$	1,119,219	$	711,413	$	2,911,962	$	1,717,596
Net income		9,805		29,702		22,740		125,625

Such pro forma results are based on historical results of the Partnership, the historical results of the assets acquired or to be acquired from 7-Eleven as they occurred under the ownership of 7-Eleven or MPC, and certain pro forma adjustments relating to acquisition costs, interest expense and income taxes. See our Current Report on Form 8-K/A filed on November 3, 2021, for additional information.

Note 3. ASSETS HELD FOR SALE

We have classified ~~four~~11 sites and 25 sites as held for sale at September 30, ~~2017~~2021 and December 31, ~~2016. These assets~~2020, respectively, which are expected to be sold within aone year of ~~the date they were initially classified as held for sale.~~such classification. Assets held for sale were as follows (in thousands):

	September 30,			December 31,			September 30,			December 31,
	2017			2016			2021			2020
Land	$	1,741		$	882		$	3,127		$	7,889
Buildings and site improvements		1,608			1,054			1,906			2,784
Equipment and other		489			702
Equipment								886			1,152
Total		3,838			2,638			5,919			11,825
Less accumulated depreciation		(1,342	)		(527	)		(2,018	)		(1,927	)
Assets held for sale	$	2,496		$	2,111		$	3,901		$	9,898

The Partnership has continued to focus on divesting lower performing assets. During the three and nine months ended September 30, ~~2017, as approved by the conflicts committee of our Board,~~2021, we sold 2814 and 23 properties ~~to DMR~~ for ~~$16.6~~$4.9 million and $8.8 million in proceeds, resulting in ~~a $0.5~~net gains of $0.4 million ~~loss. Three additional properties~~ and ~~approximately $3.0~~$1.5 million, ~~of proceeds remain in escrow, as of September 30, 2017 until certain conditions are met. These sites were generally sites at which we did not supply fuel or represented vacant land.~~

respectively. During the three and nine months ended September 30, ~~2017,~~2020, we sold 27 and 20 properties ~~as a result~~for $3.8 million and $13.3 million of ~~the FTC’s requirements associated with the Merger for $6.7 million,~~proceeds, resulting in ~~a gain~~net gains of $2.2 ~~million. In addition, Couche-Tard agreed to reimburse us for the tax liability incurred on the required sale, resulting in additional proceeds of $0.3~~ million ~~which was accounted for as a contribution to partners’ capital.~~and $4.0 million, respectively.

During the three and nine months ended September 30, 2017, DMS renewed its contract with one of its customers, triggering a $0.8 million earn-out payment by DMS to us under a contract entered into with DMS at the time of CST acquiring our General Partner in October 2014, which was recorded as a gain.

Note 4. INVENTORIES

Inventories consisted of the following (in thousands):

	September 30,		December 31,		September 30,		December 31,
	2017		2016		2021		2020
Retail site merchandise	$	7,715	$	8,374	$	20,912	$	11,969
Motor fuel		4,305		4,790		18,640		11,284
Inventories	$	12,020	$	13,164	$	39,552	$	23,253

See Note 2 regarding our acquisition of certain assets from 7-Eleven.

CROSSAMERICA PARTNERS LP

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 5. PROPERTY AND EQUIPMENT

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

	September 30,			December 31,			September 30,			December 31,
	2017			2016			2021			2020
Land	$	270,740		$	280,400		$	319,524		$	241,585
Buildings and site improvements		334,705			346,834			358,210			284,593
Leasehold improvements		9,721			9,095			12,308			10,684
Equipment and other		171,208			169,245
Equipment								304,146			236,420
Construction in progress		3,720			3,173			13,450			15,919
Property and equipment, at cost		790,094			808,747			1,007,638			789,201
Accumulated depreciation and amortization		(155,376	)		(131,418	)		(250,996	)		(218,345	)
Property and equipment, net	$	634,718		$	677,329		$	756,642		$	570,856

~~CROSSAMERICA PARTNERS LP~~See Note 2 regarding our acquisition of certain assets from 7-Eleven.

~~CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

We recorded impairment charges of $1.2 million and $2.7 million during the three months ended September 30, 2021 and 2020 and $6.4 million and $8.2 million during the nine months ended September 30, 2021 and 2020, respectively, included within depreciation, amortization and accretion expenses on the statements of operations. These impairment charges were primarily related to sites initially classified within assets held for sale in connection with our ongoing real estate rationalization effort.

Note 6.INTANGIBLE ASSETS

Intangible assets consisted of the following (in thousands):

	September 30, 2017							December 31, 2016							September 30, 2021							December 31, 2020
	Gross Amount		Accumulated Amortization			Net Carrying Amount		Gross Amount		Accumulated Amortization			Net Carrying Amount		Gross Amount		Accumulated Amortization			Net Carrying Amount		Gross Amount		Accumulated Amortization			Net Carrying Amount
Wholesale fuel supply contracts/rights	$	118,201	$	(53,607	)	$	64,594	$	118,201	$	(44,298	)	$	73,903	$	223,003	$	(103,852	)	$	119,151	$	187,643	$	(95,694	)	$	91,949
Trademarks		1,094		(807	)		287		1,094		(685	)		409
Trademarks/licenses																2,208		(1,156	)		1,052		1,898		(1,115	)		783
Covenant not to compete		4,131		(3,095	)		1,036		4,131		(2,503	)		1,628		450		(345	)		105		4,552		(4,372	)		180
Below market leases		11,401		(8,329	)		3,072		12,081		(7,261	)		4,820
Total intangible assets	$	134,827	$	(65,838	)	$	68,989	$	135,507	$	(54,747	)	$	80,760	$	225,661	$	(105,353	)	$	120,308	$	194,093	$	(101,181	)	$	92,912

See Note 2 regarding our acquisition of certain assets from 7-Eleven.

Note 7. GOODWILL

Changes in goodwill during 2021 were as follows (in thousands):

	Wholesale Segment		Retail Segment		Consolidated
Balance at December 31, 2020	$	74,138	$	14,626	$	88,764
Acquisition		7,946		3,405		11,351
Balance at September 30, 2021	$	82,084	$	18,031	$	100,115

See Note 2 regarding our acquisition of certain assets from 7-Eleven.

CROSSAMERICA PARTNERS LP

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 7.8. DEBT

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

September 30,

December 31,

2017

2016

$550 million revolving credit facility

$
431,484

$
441,500

Note payable

779

822

Capital lease obligations

27,728

28,455

Total debt and capital lease obligations

459,991

470,777

Current portion

2,884

2,100

Noncurrent portion

457,107

468,677

Deferred financing fees

(2,334
)

(3,558
)
Noncurrent portion, net of deferred financing fees

$
454,773

$
465,119

	September 30,		December 31,
	2021		2020
CAPL Credit Facility	$	636,728	$	513,180
JKM Credit Facility		159,950		—
Finance lease obligations		17,736		20,007
Total debt and finance lease obligations		814,414		533,187
Current portion		9,923		2,631
Noncurrent portion		804,491		530,556
Deferred financing costs, net		8,865		3,257
Noncurrent portion, net of deferred financing costs	$	795,626	$	527,299

~~Our $550 million revolving credit facility is secured by substantially all~~As of ~~our assets. Letters of credit outstanding at~~ September 30, ~~2017~~2021, future principal payments on debt and future minimum rental payments on finance lease obligations were as follows (in thousands):

	Debt		Finance Lease Obligations		Total
Remaining in 2021	$	—	$	804	$	804
2022		9,597		3,282		12,879
2023		9,597		3,381		12,978
2024		646,325		3,481		649,806
2025		9,597		3,583		13,180
Thereafter		121,562		4,926		126,488
Total future payments		796,678		19,457		816,135
Less interest component		—		1,721		1,721
		796,678		17,736		814,414
Current portion		7,198		2,725		9,923
Long-term portion	$	789,480	$	15,011	$	804,491

CAPL Credit Facility

On July 28, 2021, the Partnership entered into an amendment (the “Amendment”) to its Credit Agreement, dated as of April 1, 2019 (as previously amended by the First Amendment to Credit Agreement, dated as of November 19, 2019, the “CAPL Credit Facility”), among the Partnership and Lehigh Gas Wholesale Services, Inc., as borrowers, the guarantors from time to time party thereto, the lenders from time to time party thereto and Citizens Bank, N.A., as administrative agent. The Amendment, among other things, (i) amended certain provisions relating to unrestricted subsidiaries, (ii) increased the maximum level for the consolidated leverage ratio financial covenant to 6.00 to 1.00 for the fiscal quarters ending September 30, 2021 and December 31, 2016 totaled $6.5 million, which reduce our availability under the credit facility. The amount of availability at September 30, 2017 under the revolving credit facility, after taking into account debt covenant restrictions, was $53.7 million. In connection with future acquisitions, the revolving credit facility requires, among other things, that we have, after giving effect2021, 5.75 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.~~

~~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 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, 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 full~~ fiscal ~~quarters following~~quarter ending March 31, 2022, 5.50 to 1.00 for the ~~closing of~~fiscal quarter ending June 30, 2022, and 5.25 to 1.00 for the fiscal quarter ending September 30, 2022, after which the maximum level generally reverts to 4.75 to 1.00 unless in a ~~material acquisition. If we issued Qualified Senior Notes~~specified acquisition period or a qualified note offering has occurred, and (iii) modified the applicable margin for borrowings under the CAPL Credit Facility (as ~~defined in~~amended by the ~~credit facility) in~~Amendment), such that borrowings will bear interest, at the ~~aggregate principal amount of $175.0 million~~Partnership’s option, at either LIBOR plus a margin ranging from 1.50% to 3.00% per annum or ~~greater,~~a base rate plus a margin ranging from 0.50% to 2.00% per annum (in each case depending on the ~~ratio shall not exceed 5.50 : 1.00. If we issued Qualified Senior Notes of $175.0 million or greater, we~~Partnership’s consolidated leverage ratio).

We are also required to maintain ~~a senior leverage ratio (as defined in the credit facility) of less than or equal to 3.00 : 1.00 and~~ a consolidated interest coverage ratio (as defined in the ~~credit facility)~~CAPL Credit Facility) of at least ~~2.75 :~~2.50 to 1.00. ~~As of September 30, 2017, we~~We were in compliance with ~~these~~our financial ~~covenants.~~covenants at September 30, 2021.

~~Outstanding borrowings~~Our CAPL Credit Facility is secured by substantially all of our assets, including our equity interest in an indirect wholly-owned subsidiary of CrossAmerica and the sole member of CAPL JKM Partners LLC named CAPL JKM Holdings LLC (“Holdings”), other than the assets of unrestricted subsidiaries designated as such under the ~~revolving~~CAPL Credit Facility. Holdings and its subsidiaries are unrestricted subsidiaries under the CAPL Credit Facility. Letters of credit ~~facility bear interest~~outstanding at ~~LIBOR plus a margin of 3.00%. Our borrowings had an effective interest rate of 4.24% as of~~ September 30, ~~2017.~~2021 and December 31, 2020 totaled $4.0 million. The amount of availability under the CAPL Credit Facility at September 30, 2021, after taking into consideration debt covenant restrictions, was $70.5 million.

810

CROSSAMERICA PARTNERS LP

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Taking the interest rate swap contracts described in Note 9 into account, our effective interest rate on our CAPL Credit Facility at September 30, 2021 was 2.3% (our applicable margin was 2.0% as of September 30, 2021).

JKM Credit Facility

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

The JKM Credit Facility provides for a $200 million senior secured credit facility, consisting of a $185 million delayed draw term loan facility (the “Term Loan Facility”) and a $15 million revolving credit facility (the “Revolving Credit Facility”). The Revolving Credit Facility permits up to $7.5 million of swingline borrowings and $5.0 million in letters of credit. The interest rate applicable to loans outstanding under the JKM Credit Facility is equal to, at Borrower’s option, either (i) a base rate plus a margin (which will be determined based on Borrower’s consolidated leverage ratio) ranging from 0.50% to 1.50% per annum or (ii) LIBOR plus a margin (which will also be determined based on Borrower’s consolidated leverage ratio) ranging from 1.50% to 2.50% per annum. Commencing on the earliest of (a) the date on which the entire amount of the Term Loan Facility has been drawn, (b) the date on which the Term Loan Facility has been terminated or reduced to 0 pursuant to the JKM Credit Facility, and (c) April 16, 2022, the Term Loan Facility will amortize in equal quarterly installments equal to 1.50% of the unpaid principal amount of the Term Loan Facility, with the balance payable on the maturity date of the Term Loan Facility. Letters of credit are subject to a 0.125% fronting fee and other customary administrative charges. Standby letters of credit accrue a fee at a rate based on the applicable margin of LIBOR loans. In addition, beginning in October 2021, a commitment fee was charged based on the unused portion of the JKM Credit Facility at a rate ranging from 0.25% to 0.375% per annum depending on Borrower’s consolidated leverage ratio. The JKM Credit Facility will mature on July 16, 2026.

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

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

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

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

Letters of credit outstanding at September 30, 2021 totaled $0.8 million.

Our borrowings under the JKM Credit Facility had a weighted-average interest rate of 2.6% as of September 30, 2021 (LIBOR plus an applicable margin, which was 2.5% as of September 30, 2021).

As of November 4, 2021, we had $182.5 million outstanding under our Term Loan Facility. The amount of availability under the Term Loan Facility and Revolving Credit Facility at November 4, 2021 was $2.5 million and $14.2 million, respectively.

CROSSAMERICA PARTNERS LP

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 9. INTEREST RATE SWAP CONTRACTS

The interest payments on our CAPL Credit Facility vary based on monthly changes in the one-month LIBOR and changes, if any, in the applicable margin, which is based on our leverage ratio as further discussed in Note 8. To hedge against interest rate volatility on our variable rate borrowings under the CAPL Credit Facility, on March 26, 2020, we entered into an interest rate swap contract. The interest rate swap contract has a notional amount of $150 million, a fixed rate of 0.495% and matures on April 1, 2024. On April 15, 2020, we entered into 2 additional interest rate swap contracts, each with notional amounts of $75 million, a fixed rate of 0.38% and that mature on April 1, 2024. All of these interest rate swap contracts have been designated as cash flow hedges and are expected to be highly effective.

The fair value of these interest rate swap contracts, for which the current portion is included in accrued expenses and other current liabilities and the noncurrent portion is included in other assets or other long-term liabilities, as applicable, was a $0.2 million net asset and a $2.5 million net liability at September 30, 2021 and December 31, 2020, respectively. See Note 12 for additional information on the fair value of the interest rate swap contracts.

We report the unrealized gains and losses on our interest rate swap contracts designated as highly effective cash flow hedges as a component of other comprehensive income and reclassify such gains and losses into earnings in the same period during which the hedged interest expense is recorded. We recognized a net realized loss from settlements of the interest rate swap contracts of $0.3 million and $0.2 million for the three months ended September 30, 2021 and 2020 and $0.7 million and $0.2 million for the nine months ended September 30, 2021 and 2020, respectively.

We currently estimate that a loss of $1.0 million will be reclassified from accumulated other comprehensive loss into interest expense during the next 12 months; however, the actual amount that will be reclassified will vary based on changes in interest rates.

Note 8.10. RELATED-PARTY TRANSACTIONS

~~Transactions with CST~~

Wholesale Motor Fuel Sales and ~~Rental Income~~

We sell wholesale motor fuel under a master fuel distribution agreement to 48 CST retail sites and lease real property on 73 retail sites to CST 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.Real Estate Rentals

Revenues from ~~wholesale~~motor fuel sales and ~~real property~~ rental income from ~~CST~~DMS for the three and nine months ended September 30, 2020 were as follows (in thousands):

For the Three Months Ended September 30,

Nine Months Ended September 30,

2017

2016

2017

2016

Revenues from motor fuel sales to CST

$
36,449

$
31,738

$
100,683

$
87,819

Rental income from CST

$
4,262

$
4,207

$
12,823

$
12,841

	Three Months Ended		Nine Months Ended
	September 30, 2020		September 30, 2020
Revenues from motor fuel sales to DMS	$	612	$	27,127
Rental income from DMS		—		1,395

~~Accounts receivable~~As a result of the acquisition of retail and wholesale assets as further described under “Prior Year Acquisitions” in Note 1, as of April 14, 2020, we 0 longer have any revenue from ~~CST for fuel amounted to $3.5~~DMS.

Revenues from TopStar, an entity affiliated with Joseph V. Topper, Jr., a member of the Board, were $15.7 million and ~~$3.2 million at September 30, 2017 and December 31, 2016, respectively.~~

~~Amended Omnibus Agreement and Management Fees~~

~~We incurred $2.9 million and $3.9~~$9.4 million for the three months ended September 30, ~~2017~~2021 and ~~2016~~2020 and ~~$11.5~~$41.4 million and ~~$12.1~~$12.2 million for the nine months ended September 30, ~~2017~~2021 and ~~2016, respectively,~~2020, respectively. Accounts receivable from TopStar were $0.8 million and $0.7 million at September 30, 2021 and December 31, 2020, respectively. Effective April 14, 2020, we acquired wholesale fuel supply rights, including ~~incentive compensation costs~~this supply contract, as part of the acquisition of retail and ~~non-cash stock-based compensation~~wholesale assets. Prior to April 14, 2020, we were only leasing motor fuel stations to TopStar.

CrossAmerica leases real estate from the Topper Group. Rent expense under these lease agreements, including rent paid under the ~~Amended~~leases entered into in connection with the acquisition of retail and wholesale assets, was $2.3 million and $2.1 million for the three months ended September 30, 2021 and 2020 and $6.8 million and $4.0 million for the nine months ended September 30, 2021 and 2020, respectively.

CROSSAMERICA PARTNERS LP

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Topper Group Omnibus Agreement ~~which~~

We incurred expenses under the Topper Group Omnibus Agreement, including costs for store level personnel at our company operated sites since our April 2020 acquisition of retail and wholesale assets and for our recently acquired Joe’s Kwik Marts sites, totaling $16.9 million and $12.0 million for the three months ended September 30, 2021 and 2020 and $42.7 million and $26.1 million for the nine months ended September 30, 2021 and 2020, respectively. Such expenses are ~~recorded as a component of~~included in operating expenses and general and administrative expenses in the statement of operations. Amounts payable to ~~CST were $16.3~~the Topper Group related to expenses incurred by the Topper Group on our behalf in accordance with the Topper Group Omnibus Agreement totaled $6.8 million and ~~$10.0~~$3.7 million at September 30, ~~2017~~2021 and December 31, 2016, respectively. The amounts payable at September 30, 2017 include separation benefits associated with the Merger and equity compensation expense associated with CST stock-based awards. See Note 15 for additional information.

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

As approved by the independent conflicts committee of the Board, the Partnership and CST mutually agreed to settle, from time to time, some or all of the amounts due under the terms of the Amended Omnibus Agreement in newly issued common units representing limited partner interests in the Partnership. We issued the following common units to CST as consideration for amounts due under the terms of the Amended Omnibus Agreement:

~~Period~~	~~Date of Issuance~~	~~Number of~~ ~~Common~~ ~~Units Issued~~
~~Quarter ended December 31, 2016~~	~~February 28, 2017~~		~~171,039~~
~~Quarter ended March 31, 2017~~	~~May 10, 2017~~		~~128,983~~
~~Quarter ended June 30, 2017~~	~~August 9, 2017~~		~~124,003~~
~~Quarter ended September 30, 2017~~	*		~~126,491~~

*	~~Expected to be issued on November 10, 2017~~

~~CST Fuel Supply Equity Interests~~

CST Fuel Supply provides wholesale motor fuel distribution to the majority of CST’s legacy U.S. retail sites at cost plus a fixed markup per gallon. We owned a 17.5% total interest in CST Fuel Supply at September 30, 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 $3.8 million and $4.0 million for the three months ended September 30, 2017 and 2016, respectively, and $11.2 million and $12.3 million for the nine months ended September 30, 2017 and 2016,2020, respectively.

~~CROSSAMERICA PARTNERS LP~~

~~CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

In connection with the Merger, the Federal Trade Commission (FTC) approved a final order requiring the divestiture by CST of certain retail fuel stations. As a result, in September 2017, 61 sites were sold to a third party and removed from the fuel distribution agreement between CST Marketing and Supply, a wholly-owned subsidiary of CST Fuel Supply, and CST Services, a wholly owned subsidiary of Circle K, and CST Marketing and Supply no longer supplies fuel to such sites. To compensate for the decrease in the amount of motor fuels sold by CST Marketing and Supply, CST Services agreed to purchase at least 114.9 million gallons annually (the “Annual Commitment”) in addition to the volumes continued to be sold under the fuel distribution agreement to retail fuel stations that remain with CST after the divestiture. In addition, should CST Services fail to purchase all or a portion of the Annual Commitment, CST Services has agreed to make monthly payments to CST Marketing and Supply in the amount of the seller’s margin of 5 cents per gallon under the fuel distribution agreement multiplied by the number of gallons not physically sold pursuant to the Annual Commitment. Consequently, the Partnership, by virtue of its 17.5% ownership interest in CST Fuel Supply, the 100% owner of CST Marketing and Supply, will continue to receive its share from the volumes sold to the 61 retail sites prior to the FTC mandated divestiture. This agreement continues until the fuel distribution agreement between CST Marketing and Supply and CST Services is terminated, which had an initial term of 10 years expiring in December 2024.

In July 2016, CST provided a refund payment to us related to our 17.5% interest in CST Fuel Supply resulting from the sale by CST of 79 retail sites in California and Wyoming to 7-Eleven, Inc. and its wholly-owned subsidiary, SEI Fuel Services, Inc., to which CST Fuel Supply no longer supplies motor fuel. The purpose of the refund payment was to make us whole for the decrease in the value of our interest in CST Fuel Supply arising from sales volume decreases. The total refund payment received by us, as approved by the independent conflicts committee of the Board and by the executive committee of the board of directors of CST, was approximately $18.2 million ($17.5 million in cash with the remainder in CrossAmerica common units owned by CST) and was accounted for as a contribution to equity.

~~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 sub-wholesalers. We purchased $6.2 million and $5.7 million of motor fuel from CST Fuel Supply for the three months ended September 30, 2017 and 2016, and $17.9 million and $14.7 million for the nine months ended September 30, 2017 and 2016, respectively, in connection with these retail sites.

IDR and Common Unit Distributions

We distributed ~~$1.1~~$7.6 million and ~~$0.9~~$9.7 million to ~~CST related to its ownership of our IDRs and $4.3 million and $3.9 million~~the Topper Group related to its ownership of our common units during the three months ended September 30, ~~2017~~2021 and ~~2016, respectively. We distributed $3.2~~2020 and $27.1 million and $2.5 million to CST related to its ownership of our IDRs and $12.6 million and $11.5 million related to its ownership of our common units during the nine months ended September 30, 2017 and 2016, respectively.

~~Income Tax Reimbursement~~

As discussed in Note 3, we sold 2 properties during the three and nine months ended September 30, 2017 as a result of the FTC’s requirements associated with Couche-Tard’s acquisition of CST. Couche-Tard agreed to reimburse us for the tax liability incurred on the required sale, resulting in additional proceeds of $0.3 million, which was accounted for as a contribution to partners’ capital.

~~Wholesale Motor Fuel Sales and Real Estate Rentals~~

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

For the Three Months Ended September 30,

For the Nine Months Ended September 30,

2017

2016

2017

2016

Revenues from motor fuel sales to DMS and its affiliates

$
64,741

$
68,153

$
180,928

$
192,511

Rental income from DMS and its affiliates

$
4,739

$
5,037

$
14,472

$
16,250

~~Accounts receivable from DMS and its affiliates totaled $10.3 million and $8.6 million at September 30, 2017 and December 31, 2016, respectively.~~

~~Revenues from rental income from Topstar were $0.2 million and $0.4 million for the three and nine months ended September 30, 2017 and 2016, respectively.~~

~~CROSSAMERICA PARTNERS LP~~

~~CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

CrossAmerica leases real estate from certain entities affiliated with Joseph V. Topper, Jr., director of the Board. Rent expense paid to these entities was $0.2 million for the three months ended September 30, 2017 and 2016 and $0.7 million and $0.6$27.4 million for the nine months ended September 30, ~~2017~~2021 and ~~2016,~~2020, respectively.

~~As discussed in Note 3, DMS renewed~~ We distributed $0.1 million to the Topper Group related to its ~~contract with one~~ownership of ~~its customers, triggering a $0.8 million earn-out payment by DMS to us under a contract entered into with DMS at the time of CST acquiring~~ our ~~General Partner in October 2014.~~

~~Also as discussed in Note 3, we sold 28 properties to DMR~~IDRs during the ~~three and~~ nine months ended September 30, ~~2017~~2020. On February 6, 2020, we closed on the Equity Restructuring Agreement that eliminated the IDRs.

We distributed $2.6 million and $0.5 million to affiliates of John B. Reilly, III related to their ownership of our common units during the three months ended September 30, 2021 and 2020 and $3.6 million and $1.5 million for ~~$16.6 million.~~the nine months ended September 30, 2021 and 2020, respectively.

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 ~~$0.4~~$0.8 million and ~~$0.3~~$0.1 million for the three months ended September 30, ~~2017~~2021 and ~~2016~~2020 and ~~$1.3~~$1.7 million and ~~$1.2~~$0.4 million for the nine months ended September 30, ~~2017~~2021 and ~~2016,~~2020, respectively. Accounts payable to this related party amounted to $0.3 million and $0.1 million at September 30, 2021 and December 31, 2020, respectively.

Environmental Compliance and Inventory Management Costs

We use certain environmental monitoring and inventory management equipment and services provided by an entity previously affiliated with the Topper Group, as approved by the independent conflicts committee of the Board. We incurred charges with this related party of an insignificant amount for the three months ended September 30, 2021 and $0.2 million and an insignificant amount for the nine months ended September 30, 2021 and 2020, respectively. This entity was sold in July 2021 and is 0 longer a related party.

Convenience Store Products

We purchase certain convenience store products from an affiliate of John B. Reilly, III and Joseph V. Topper, Jr., members of the Board, as approved by the independent conflicts committee of the Board in connection with the April 2020 acquisition of retail and wholesale assets. Merchandise costs amounted to $5.2 million and $5.8 million for three months ended September 30, 2021 and 2020 and $14.5 million and $10.9 million for the nine months ended September 30, 2021 and 2020, respectively. Amounts payable to this related party amounted to $1.9 million and $1.5 million at September 30, 2021 and December 31, 2020, respectively.

Vehicle Lease

In connection with the services rendered under the Topper Group Omnibus Agreement, we lease certain vehicles from an entity affiliated with Joseph V. Topper, Jr., a member of the Board, as approved by the independent conflicts committee of the Board. Lease expense was an insignificant amount for the three months ended September 30, 2021 and $0.1 million and an insignificant amount for the nine months ended September 30, 2021 and 2020, respectively.

CROSSAMERICA PARTNERS LP

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Principal Executive Offices

Our principal executive offices are in Allentown, Pennsylvania. We ~~sublease~~lease office space ~~from CST that CST leases~~ from an affiliate of John B. Reilly, III and Joseph V. Topper, Jr., members of our Board, as approved by the independent conflicts committee of the Board. ~~The management fee charged by CST to us under the Amended Omnibus Agreement incorporates this rental~~Rent expense ~~which~~ amounted to ~~$0.2~~$0.3 million and $0.3 million for the three months ended September 30, ~~2017~~2021 and ~~2016~~2020 and ~~$0.5~~$0.9 million and ~~$0.4~~$0.8 million for the nine months ended September 30, ~~2017~~2021 and ~~2016,~~2020, respectively.

Public Relations and Website Consulting Services

We have engaged a company affiliated with a member of the Board for public relations and website consulting services. The cost of these services was insignificant for the three and nine months ended September 30, 2021 and 2020.

Note 9.11. COMMITMENTS AND CONTINGENCIES

Purchase Commitments

We have minimum volume purchase requirements under certain of our fuel supply agreements with a purchase price at prevailing market rates for wholesale distribution. In the event we fail to purchase the required minimum volume for a given contract year, the underlying third party’s exclusive remedies (depending on the magnitude of the failure) are either termination of the supply agreement and/or a financial penalty per gallon based on the volume shortfall for the given year. We did not incur any significant penalties during the nine months ended September 30, 2021 or 2020.

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~~an accrual when it is probable that a liability has been incurred and the amount of loss can be reasonably estimated. In addition, we disclose matters for which management believes a material loss is at least reasonably possible. None 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 ~~were a co-defendant, together~~currently own or lease retail sites where refined petroleum products are being or have been handled. These retail sites and the refined petroleum products handled thereon may be subject to federal and state environmental laws and regulations. Under such laws and regulations, we could be required to remove or remediate containerized hazardous liquids or associated generated wastes (including wastes disposed of or abandoned by prior owners or operators), to remediate contaminated property arising from the release of liquids or wastes into the environment, including contaminated groundwater, or to implement best management practices to prevent future contamination.

We maintain insurance of various types with ~~our General Partner, CST and CST Services, in a lawsuit brought by Charles Nifong, a former employee~~varying levels of CST Services who, until March 2015, provided services to us as Chief Investment Officer and Vice President of Finance (Court of Common Pleas, Lehigh County, Pennsylvania, case number 2015-1003). Following CST’s acquisition of our General Partner, the plaintiff alleged breach of contract and associated claims relating to his termination of employment and claimed severance benefitscoverage that is considered adequate under the ~~EICP.~~circumstances to cover operations and properties. The ~~trial occurred~~insurance policies are subject to deductibles that are considered reasonable and not excessive. In addition, we have entered into indemnification and escrow agreements with various sellers in ~~early October and the decision by the jury was to award Mr. Nifong a total~~conjunction with several of ~~$1.7 million. Such amount was recorded in general and administrative expenses~~their respective acquisitions, as further described below. Financial responsibility for ~~the three and nine months ended September 30, 2017. Under the EICP, we were also obligated to pay reasonable legal expenses incurred by the plaintiff~~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 to, and the extent to which we ~~expensed as incurred. The Partnership incurred total legal fees~~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 $5.6 million and $3.9 million at September 30, 2021 and December 31, 2020, respectively. Indemnification assets related to ~~this case of $0.6~~third-party escrow funds, state funds or insurance recorded on the balance sheet within other current assets and other noncurrent assets totaled $3.5 million ~~for the nine months ended~~and $3.1 million at September 30, ~~2017.~~2021 and December 31, 2020, 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.

~~Environmental Matters~~14

CROSSAMERICA PARTNERS LP

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The estimates used in these reserves are based on all known facts at the time and an assessment of the ultimate remedial action outcomes. We will adjust loss accruals as further information becomes available or circumstances change. Among the many uncertainties that impact the estimates are the necessary regulatory approvals for, and potential modifications of remediation plans, the amount of data available upon initial assessment of the impact of soil or water contamination, changes in costs associated with environmental remediation services and equipment and the possibility of existing legal claims giving rise to additional claims.

Environmental liabilities related to the sites contributed to the Partnership in connection with our IPO have not been assigned to us and are still the responsibility of the Predecessor Entity. ~~Under the Amended Omnibus Agreement, the~~The Predecessor Entity ~~must indemnify~~indemnified us for any costs or expenses that ~~it incurs~~we incur for environmental liabilities and third-party claims, regardless of when a claim is made, that are based on environmental conditions in existence prior to the closing of the IPO for contributed sites. ~~The Predecessor Entity’s~~As such, these environmental liabilities and indemnification assets ~~associated~~are not recorded on the balance sheet of the Partnership.

Similarly, we have generally been indemnified with ~~contributed~~respect to known contamination at sites ~~amounted to $4.4 million~~acquired from third parties, including our acquisition of certain assets from 7-Eleven. As such, these environmental liabilities and ~~$2.8 million at September 30, 2017 and $6.1 million and $5.1 million at December 31, 2016, respectively.~~indemnification assets are also not recorded on the balance sheet of the Partnership.

~~CROSSAMERICA PARTNERS LP~~

~~CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

Note ~~10.~~12. FAIR VALUE MEASUREMENTS

~~General~~

We measure and report certain financial and non-financial assets and liabilities on a fair value basis. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). U.S. GAAP specifies a three-level hierarchy that is used when measuring and disclosing fair value. The fair value hierarchy gives the highest priority to quoted prices available in active markets (i.e., observable inputs) and the lowest priority to data lacking transparency (i.e., unobservable inputs). An instrument’s categorization within the fair value hierarchy is based on the lowest level of significant input to its valuation. ~~The following is a description of the three hierarchy levels.~~

Level 1—Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. Active markets are considered to be those in which transactions for the assets or liabilities occur in sufficient frequency and volume to provide pricing information on an ongoing basis.

Level 2—Quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability. This category includes quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in inactive markets.

Level 3—Unobservable inputs are not corroborated by market data. This category is comprised of financial and non-financial assets and liabilities whose fair value is estimated based on internally developed models or methodologies using significant inputs that are generally less readily observable from objective sources.

Transfers into or out of any hierarchy level are recognized at the end of the reporting period in which the transfers occurred. There were no transfers between any levels in ~~2017~~2021 or ~~2016.~~2020.

As further discussed in Note ~~11,~~9, we entered into interest rate swap contracts during 2020 and remeasure the fair value of such contracts on a recurring basis each balance sheet date. We used an income approach to measure the fair value of these contracts, utilizing a forward LIBOR yield curve for the same period as the future interest rate swap settlements. These fair value measurements are classified as Level 2.

As further discussed in Note 13, we have accrued for unvested phantom units and ~~vested and unvested profits interests~~phantom performance units as a liability and adjust that liability on a recurring basis based on the market price of our common units each balance sheet date. ~~Such~~These fair value measurements are ~~deemed~~classified as Level ~~1 measurements.~~

~~Financial Instruments~~1.

The fair value of our accounts receivable, notes receivable, and accounts payable approximated their carrying values as of September 30, ~~2017~~2021 and ~~2016~~December 31, 2020 due to the short-term maturity of these instruments. The fair ~~value of the revolving credit facility approximated its carrying~~ values of ~~$431.5 million~~borrowings under the CAPL Credit Facility and JKM Credit Facility approximated their carrying values as of September 30, ~~2017~~2021 and ~~$441.5 million as of~~ December 31, ~~2016,~~2020 due to the frequency with which interest rates are reset and the consistency of the market spread.

Note ~~11.~~13. EQUITY-BASED COMPENSATION

~~Overview~~

~~We record equity-based~~Equity-based compensation ~~as a component of general and administrative expenses in the statements of operations. Compensation~~ expense was ~~$0.2~~$0.3 million and ~~$0.7 million~~insignificant for the three months ended September 30, ~~2017~~2021 and ~~2016,~~2020 and ~~$1.9~~$1.1 million and ~~$2.6 million~~insignificant for the nine months ended September 30, ~~2017~~2021 and ~~2016,~~2020, respectively. The liability for equity-based awards was $0.9 million and insignificant at September 30, 2021 and December 31, 2020, respectively.

~~Partnership Equity-Based Awards~~

~~Under the Plan,~~In February 2021, the Partnership granted ~~1,233~~1,509 phantom units ~~in June 2017~~ to ~~an employee~~each of CST who provides services to the Partnership; such phantom units will vest in equal annual installments on the first, second and third anniversaries of the date of grant and this award was accompanied by tandem distribution equivalent rights that entitle the holder to cash payments equal to the amount of unit distributions authorized to be paid to the holders of our common units

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 September 30, 2017 and December 31, 2016 totaled $0.8 million and $1.8 million, respectively.

~~CROSSAMERICA PARTNERS LP~~

~~CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~CST Awards~~

CST granted equity-based awards of approximately 47,000 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 nine months ended September 30, 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 $0.1 million and $0.3 million for the three months ended September 30, 2017 and 2016 and $1.6 million and $1.3 million for the nine months ended September 30, 2017 and 2016, respectively.

At the completion of the Merger, each CST stock option, restricted stock unit and market share unit that was outstanding immediately prior to the completion of the Merger, excluding the CST restricted stock units granted in February 2017, whether vested or unvested, became fully vested and converted into the right to receive a cash payment as defined in the Merger Agreement. The Partnership was allocated a $0.4 million charge upon the accelerated vesting of these awards, included in the expense amounts for the nine months ended September 30, 2017 set forth above.

At the completion of the Merger, each award of CST restricted stock units that was granted in February 2017 converted into the right to receive a cash payment as defined in the Merger Agreement, but such award will remain subject to the same vesting terms and payment schedule as those set forth in the original restricted stock unit award agreement; provided that such award will vest in full upon an involuntary termination of employment without cause, or termination for “Good Reason,” or termination due to death, “Disability” or “Retirement.” Unrecognized compensation expense associated with CST restricted stock units granted in February 2017 amounted to $0.7 million as of September 30, 2017, which will be recognized over the vesting term through January 2020.

~~Awards to Members of the Board~~

~~In November 2016, the Partnership granted 5,364 phantom units to~~3 non-employee directors of the Board as a portion of director compensation. ~~Such awards~~In July 2021, 16,833 phantom units vested, ~~upon the Merger.~~ including those granted in February 2021.

In ~~August 2017,~~July 2021, the Partnership granted ~~10,539~~3,252 phantom units to each of 5 non-employee directors of the ~~Board as a portion of director compensation.~~Board. Such awards will vest ~~over one year and this award was~~in July 2022, conditioned upon continuous service as non-employee directors. These awards were accompanied by tandem distribution equivalent rights that entitle the holder to cash payments equal to the amount of unit distributions authorized to be paid to the holders of our common units.

~~The liability for~~During the second quarter of 2021, 6,090 phantom units and performance-based awards with an initial target value of $0.1 million were forfeited.

CROSSAMERICA PARTNERS LP

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In October 2021, the Partnership granted 33,045 phantom units to employees of the Topper Group. Of these awards, ~~at September 30, 2017 and~~50% vest ratably over three years through December 31, ~~2016 was~~2024 and 50% vest upon the employee’s death, disability or retirement. These awards were accompanied by tandem distribution equivalent rights that entitle the holder to cash payments equal to the amount of unit distributions authorized to be paid to the holders of our common units.

In October 2021, the Partnership granted performance-based awards with an initial target value of $0.8 million. The performance-based awards vest on December 31, 2024 based on attainment of the performance goals set forth in the award agreements. The performance-based awards are weighted 65% for the increase of funds flow from operations per unit (as defined in the award agreements) and 35% for leverage (as defined in the award agreements), with a performance period from January 1, 2022 to December 31, 2024 and the reference period for the year ended December 31, 2021. The payout value for both performance conditions will be interpolated on a linear basis ranging from 0% to 200%, which will then be multiplied by the initial target value to determine the value of the units to be issued. The value of the units will then be divided by the 20-day volume-weighted average closing price of our common units as of the close of trading on the day before the conversion date to determine the actual number of units to be issued.

Note 14. INCOME TAXES

As a limited partnership, we are not ~~significant.~~subject to federal and state income taxes. However, our corporate subsidiaries are subject to income taxes. Income tax attributable to our taxable income (including any dividend income from our corporate subsidiaries), which may differ significantly from income for financial statement purposes, is assessed at the individual limited partner unitholder level. We are subject to a statutory requirement that non-qualifying income, as defined by the Internal Revenue Code, cannot exceed 10% of total gross income for the calendar year. If non-qualifying income exceeds this statutory limit, we would be taxed as a corporation. The ~~associated compensation expense was~~non-qualifying income did not ~~significant~~exceed the statutory limit in any annual period.

Certain activities that generate non-qualifying income are conducted through our wholly owned taxable corporate subsidiaries, LGWS and Joe’s Kwik Marts. Current and deferred income taxes are recognized on the earnings of these subsidiaries. Deferred income tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and are measured using enacted tax rates.

We recorded an income tax benefit of $1.1 million and $0.9 million for the three months ended September 30, ~~2017~~2021 and ~~2016~~2020 and ~~$0.2~~$1.7 million and $3.9 million for the nine months ended September 30, ~~2017~~2021 and ~~2016.~~2020, respectively, as a result of the losses incurred by our corporate subsidiaries. The effective tax rate differs from the combined federal and state statutory rate primarily because only LGWS and Joe’s Kwik Marts are subject to income tax.

Note ~~12.~~15. NET INCOME PER LIMITED PARTNER UNIT

~~In addition to the common units, we have identified the IDRs as participating securities and~~We 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.

13Since February 6, 2020, our common units are the only participating securities. On February 6, 2020, we closed on the Equity Restructuring Agreement that eliminated the IDRs.

CROSSAMERICA PARTNERS LP

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following ~~tables provide~~table provides 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):

For the Three Months Ended September 30,

2017

2016

Common
Units

Subordinated
Units

Common
Units

Subordinated
Units

Numerator:

Distributions paid^(a)

$
21,079

$
—

$
20,125

$
—

Allocation of distributions in excess of net income^(b)

(17,861
)

—

(18,013
)

—

Limited partners’ interest in net income - basic and
   diluted

$
3,218

$
—

$
2,112

$
—

Denominator:

Weighted average limited partnership units
   outstanding - basic

33,931,056

—

33,366,380

—

Adjustment for phantom units

6,646

—

24,716

—

Weighted average limited partnership units
   outstanding - diluted

33,937,702

—

33,391,096

—

Net income per limited partnership unit - basic

$
0.09

$
—

$
0.06

$
—

Net income per limited partnership unit - diluted

$
0.09

$
—

$
0.06

$
—

	Three Months Ended September 30,					Nine Months Ended September 30,
	2021			2020		2021			2020
Numerator:
Distributions paid	$	19,924		$	19,887	$	59,752		$	57,879
Allocation of distributions in excess of net income		(11,072	)		1,318		(50,078	)		40,484
Limited partners’ interest in net income - basic and diluted	$	8,852		$	21,205	$	9,674		$	98,363
Denominator:
Weighted-average common units outstanding - basic		37,887,493			37,867,647		37,877,273			37,202,087
Adjustment for phantom and phantom performance units		19,306			963		20,763			—
Weighted-average common units outstanding - diluted		37,906,799			37,868,610		37,898,036			37,202,087
Net income per common unit - basic and diluted	$	0.23		$	0.56	$	0.26		$	2.64

Distributions paid per common unit	$	0.5250		$	0.5250	$	1.5750		$	1.5750
Distributions declared (with respect to each respective period) per common unit	$	0.5250		$	0.5250	$	1.5750		$	1.5750

For the Nine Months Ended September 30,

2017

2016

Common
Units

Subordinated
Units

Common
Units

Subordinated
Units

Numerator:

Distributions paid^(a)

$
62,439

$
—

$
55,194

$
4,459

Allocation of distributions in excess of net income
   (loss)^(b)

(63,565
)

—

(49,542
)

(4,185
)
Limited partners’ interest in net income (loss) - basic and
   diluted

$
(1,126
)

$
—

$
5,652

$
274

Denominator:

Weighted average limited partnership units
   outstanding - basic

33,773,964

—

31,714,462

1,537,956

Adjustment for phantom units

—

—

52,340

—

Weighted average limited partnership units
   outstanding - diluted^(c)

33,773,964

—

31,766,802

1,537,956

Net income (loss) per limited partnership unit - basic

$
(0.03
)

$
—

$
0.18

$
0.18

Net income (loss) per limited partnership unit - diluted

$
(0.03
)

$
—

$
0.18

$
0.18

~~(a)~~

Distributions paid per unit were $0.6225 and $0.6025 during the three months ended September 30, 2017 and 2016, and $1.8525 and $1.7925 during the nine months ended September 30, 2017 and 2016, respectively.

~~(b)~~

~~Allocation of distributions in excess of net income is based on a pro rata proportion to the common and subordinated units as outlined in the Partnership Agreement.~~

~~(c)~~

~~Excludes 18,217 potentially dilutive securities from the calculation of diluted earnings per common unit because to do so would be antidilutive for the nine months ended September 30, 2017.~~

Distributions

Distribution activity for ~~2017 was~~2021 is 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

$
20,826

June 30, 2017

August 7, 2017

August 14, 2017

$
0.6225

$
21,079

September 30, 2017

November 6, 2017

November 13, 2017

$
0.6275

$
21,326

Quarter Ended

Record Date

Payment Date

Cash

Distribution

(per unit)

Cash

Distribution

(in thousands)

December 31, 2020

February 2, 2021

February 9, 2021

0.5250

19,912

March 31, 2021

May 4, 2021

May 11, 2021

0.5250

19,916

June 30, 2021

August 3, 2021

August 10, 2021

0.5250

19,924

September 30, 2021

November 3, 2021

November 10, 2021

0.5250

19,941

~~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.

~~Note 13. 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 of $1.0 million and $1.3 million for the three months ended September 30, 2017 and 2016 and an income tax benefit of $1.7 million and income tax expense of $0.9 million for the nine months ended September 30, 2017 and 2016, respectively, as a result of the income generated or 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.

Note ~~14.~~16. SEGMENT REPORTING

We conduct our business in ~~two~~2 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~~(through the closing of the acquisition of retail and wholesale assets as further described under “Prior Year Acquisitions” in Note 1) 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~~had motor fuel distribution and lease agreements with DMS (through the closing of the acquisition of retail and ~~CST and collect rent from both.~~wholesale assets). 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.~~agents and the sale of convenience merchandise items and the retail sale of motor fuel at company operated sites. A commission agent is a retail site where we retain title to the motor fuel inventory and sell it directly to our end user customers. At commission agent retail sites, we manage motor fuel inventory pricing and retain the gross profit on motor fuel sales, less a commission to the agent who operates the retail site. Similar to our Wholesale segment, we also generate revenues through leasing or subleasing real estate in our Retail segment.

As part of our evaluation of the economic performance of our retail sites, we will from time to time convert company owned retail sites from our Retail segment to lessee dealers in our Wholesale segment. As a result, we no longer generate revenues from the retail sale of motor fuel or merchandise at these stores subsequent to the date of conversion and we no longer incur retail operating expenses related to these retail sites. However, we continue to supply these retail sites with motor fuel on a wholesale basis pursuant to the fuel supply contract with the lessee dealer. Further, we continue to own/lease the property and earn rental income under lease/sublease agreements with the lessee dealers under triple net leases. The lessee dealer owns all motor fuel and convenience merchandise and retains all gross profit on such operating activities.

Unallocated items consist primarily of general and administrative expenses, depreciation, amortization and accretion expense, gains on ~~sales of assets,~~dispositions and lease terminations, net, and the elimination of the 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.

1517

CROSSAMERICA PARTNERS LP

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Wholesale

Retail

Unallocated

Consolidated

Three Months Ended September 30, 2017

Revenues from fuel sales to external customers

$
400,296

$
93,285

$
—

$
493,581

Intersegment revenues from fuel sales

69,504

—

(69,504
)

—

Revenues from food and merchandise sales

—

28,366

—

28,366

Rent income

20,008

1,636

—

21,644

Other revenue

501

—

—

501

Total revenues

$
490,309

$
123,287

$
(69,504
)

$
544,092

Income from CST Fuel Supply Equity

$
3,752

$
—

$
—

$
3,752

Operating income (loss)

$
27,533

$
2,409

$
(17,658
)

$
12,284

Three Months Ended September 30, 2016

Revenues from fuel sales to external customers

$
348,702

$
87,318

$
—

$
436,020

Intersegment revenues from fuel sales

63,126

—

(63,126)

—

Revenues from food and merchandise sales

—

31,507

—

31,507

Rent income

18,344

1,408

—

19,752

Other revenue

671

—

—

671

Total revenues

$
430,843

$
120,233

$
(63,126
)

$
487,950

Income from CST Fuel Supply Equity

$
4,022

$
—

$
—

$
4,022

Operating income (loss)

$
27,030

$
1,893

$
(18,930
)

$
9,993

	Wholesale		Retail		Unallocated			Consolidated		Wholesale		Retail		Unallocated			Consolidated
Nine Months Ended September 30, 2017
Three Months Ended September 30, 2021
Revenues from fuel sales to external customers	$	1,122,903	$	272,289	$	—		$	1,395,192	$	565,022	$	337,214	$	—		$	902,236
Intersegment revenues from fuel sales		200,147		—		(200,147	)		—		260,713		—		(260,713	)		—
Revenues from food and merchandise sales				80,077		—			80,077		—		58,283		—			58,283
Rent income		60,008		5,082		—			65,090		18,441		3,057		—			21,498
Other revenue		1,808		—		—			1,808		795		2,310		—			3,105
Total revenues	$	1,384,866	$	357,448	$	(200,147	)	$	1,542,167	$	844,971	$	400,864	$	(260,713	)	$	985,122

Income from CST Fuel Supply Equity	$	11,185	$	—	$	—		$	11,185
Operating income (loss)	$	80,863	$	4,092	$	(64,373	)	$	20,582	$	39,496	$	2,007	$	(28,915	)	$	12,588

Nine Months Ended September 30, 2016
Three Months Ended September 30, 2020
Revenues from fuel sales to external customers	$	958,943	$	253,057	$	—		$	1,212,000	$	339,277	$	183,617	$	—		$	522,894
Intersegment revenues from fuel sales		178,772		—		(178,772)			—		128,478		—		(128,478	)		—
Revenues from food and merchandise sales		—		95,253		—			95,253		—		46,266		—			46,266
Rent income		55,540		4,094		—			59,634		17,144		2,603		—			19,747
Other revenue		1,447		—		—			1,447		290		1,825		—			2,115
Total revenues	$	1,194,702	$	352,404	$	(178,772	)	$	1,368,334	$	485,189	$	234,311	$	(128,478	)	$	591,022

Income from CST Fuel Supply Equity	$	12,318	$	—	$	—			12,318
Operating income (loss)	$	76,971	$	6,291	$	(57,992	)	$	25,270	$	34,500	$	296	$	(11,104	)	$	23,692

Nine Months Ended September 30, 2021
Revenues from fuel sales to external customers										$	1,493,614	$	794,826	$	—		$	2,288,440
Intersegment revenues from fuel sales											604,043		—		(604,043	)		—
Revenues from food and merchandise sales											—		141,330		—			141,330
Rent income											54,350		8,482		—			62,832
Other revenue											2,658		6,480		—			9,138
Total revenues										$	2,154,665	$	951,118	$	(604,043	)	$	2,501,740

Operating income (loss)										$	97,645	$	3,253	$	(81,012	)	$	19,886

Nine Months Ended September 30, 2020
Revenues from fuel sales to external customers										$	860,737	$	369,594	$	—		$	1,230,331
Intersegment revenues from fuel sales											254,850		—		(254,850	)		—
Revenues from food and merchandise sales											—		83,178		—			83,178
Rent income											55,275		7,584		—			62,859
Other revenue											1,705		3,046		—			4,751
Total revenues										$	1,172,567	$	463,402	$	(254,850	)	$	1,381,119

Income from CST Fuel Supply equity interests										$	3,202	$	—	$	—		$	3,202
Operating income										$	94,984	$	1,022	$	11,447		$	107,453

16From the date of conversion of the 46 company operated sites to dealer operated sites in the third quarter of 2019 through April 14, 2020, we did 0t have any company operated sites.

Receivables relating to the revenue streams above are as follows (in thousands):

	September 30,		December 31,
	2021		2020
Receivables from fuel and merchandise sales	$	34,794	$	23,800
Receivables for rent and other lease-related charges		5,211		5,650
Total accounts receivable	$	40,005	$	29,450

CROSSAMERICA PARTNERS LP

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Performance obligations are satisfied as fuel is delivered to the customer and as merchandise is sold to the consumer. Many of our fuel contracts with our customers include minimum purchase volumes measured on a monthly basis, although such revenue is not material. Receivables from fuel are recognized on a per-gallon rate and are generally collected within 10 days of delivery.

The balance of unamortized costs incurred to obtain certain contracts with customers was $9.9 million and $8.3 million at September 30, 2021 and December 31, 2020, respectively. Amortization of such costs is recorded against operating revenues and amounted to $0.4 million and $0.3 million for the three months ended September 30, 2021 and 2020 and $1.1 million and $0.9 million for the nine months ended September 30, 2021 and 2020, respectively.

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

Note ~~15.~~17. 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~~operating assets and ~~current~~ liabilities as follows (in thousands):

	Nine Months Ended September 30,
	2021			2020
(Increase) decrease:
Accounts receivable	$	(11,008	)	$	934
Accounts receivable from related parties		95			1,339
Inventories		(4,667	)		108
Other current assets		(4,965	)		(3,128	)
Other assets		(1,986	)		(1,504	)
Increase (decrease):
Accounts payable (a)		21,271			13,966
Accounts payable to related parties		3,654			3,553
Motor fuel and sales taxes payable		3,498			8,152
Accrued expenses and other current liabilities		1,203			3,819
Other long-term liabilities		2,992			(1,705	)
Changes in operating assets and liabilities, net of acquisitions	$	10,087		$	25,534

For the Nine Months Ended September 30,

2017

2016

Decrease (increase):

Accounts receivable

$
5,183

$
941

Accounts receivable from related parties

(1,492
)

(2,281
)
Inventories

674

5,515

Other current assets

166

(1,249
)
Other assets

(2,509
)

(3,484
)
Increase (decrease):

Accounts payable

2,882

2,055

Accounts payable to related parties

5,576

(1,021
)
Motor fuel taxes payable

(386
)

1,117

Accrued expenses and other current liabilities

3,270

(1,644)

Other long-term liabilities

178

3,339

Changes in working capital, net of acquisitions

$
13,542

$
3,288

(a)

changes were driven by initial build of accounts payable balances after closing on the acquisition of certain assets from 7-Eleven in 2021 and the acquisition of retail and wholesale assets in 2020.

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):

	For the Nine Months Ended September 30,				Nine Months Ended September 30,
	2017		2016		2021		2020
Cash paid for interest	$	19,185	$	15,355	$	10,876	$	12,679
Cash paid for income taxes, net of refunds received	$	822	$	1,366		941		534

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

For the Nine Months Ended September 30,

2017

2016

Sale of property and equipment in Section 1031
   like-kind exchange transactions

$
260

$
1,300

Issuance of capital lease obligations and recognition
   of asset retirement obligation related to Getty lease

$
740

$
1,240

Amended Omnibus Agreement fees settled in our
   common units

$
10,880

$
8,290

	Nine Months Ended September 30,
	2021		2020
Accrued capital expenditures	$	3,386	$	2,109
Lease liabilities arising from obtaining right-of-use assets		22,358		70,905
Net assets acquired in connection with the asset exchange tranches with Circle K		—		(75,935	)
Net assets acquired in connection with the CST Fuel Supply Exchange with Circle K		—		(54,920	)
Net assets acquired in connection with the acquisition of retail and wholesale assets		—		(17,092	)

~~CROSSAMERICA PARTNERS LP~~

~~CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~Note 16. SEPARATION BENEFITS~~

During the nine months ended September 30, 2017, the Partnership recognized a $5.3 million charge for severance and benefit costs associated with certain officers and other employees of CST Services who provided services to the Partnership and who terminated employment upon the consummation of the Merger, which constituted a change in control, as defined in the EICP and CST’s severance plans. Such costs are included in general and administrative expenses and were paid by CST in the third quarter of 2017. Accounts payable to related parties includes these costs as we will reimburse CST.

In addition, certain participants in the EICP received retention bonuses that will be paid in annual installments that began in July 2017 and will continue through July 2019. The Partnership recorded a $1.0 million charge during the nine months ended September 30, 2017 in connection with the payments made by CST in July 2017, which were included in general and administrative expenses. In addition, the Partnership recognized a $0.3 million charge for the three and nine months ended September 30, 2017 for the payments expected to be made in July 2018 and July 2019. The Partnership anticipates recognizing future charges totaling $1.2 million over the remaining retention period, of which $0.3 million, $0.8 million and $0.1 million is anticipated to be recognized in 2017, 2018 and 2019, respectively.

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

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

•

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

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

•

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

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

•

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

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

•

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

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

•

our ability to integrate acquired businesses;

~~expectations regarding environmental, tax and other regulatory initiatives; and~~

•

expectations regarding environmental, tax and other regulatory initiatives;

•

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

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

•

the anticipated results from closing on the Asset Purchase Agreement entered into with 7-Eleven.

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

~~Couche-Tard’s business strategy and operations and Couche-Tard’s conflicts of interest with us;~~
•
the Topper Group’s business strategy and operations and the Topper Group’s conflicts of interest with us;

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

~~the availability and cost of competing motor fuels;~~

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

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

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

~~our existing or future indebtedness;~~

~~our liquidity, results of operations and financial condition;~~

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

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

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

~~future income tax legislation;~~

~~changes in energy policy;~~

~~increases in energy conservation efforts;~~

~~technological advances;~~

•

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

•

the availability and cost of competing motor fuels;

•

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

•

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

•

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

•

environmental compliance and remediation costs;

•

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

•

our liquidity, results of operations and financial condition;

•

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

•

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

•

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

•

future income tax legislation;

•

changes in energy policy;

•

increases in energy conservation efforts;

•

technological advances;

•

the impact of worldwide economic and political conditions;

~~the impact of wars and acts of terrorism;~~

•

the impact of wars and acts of terrorism;

~~weather conditions or catastrophic weather-related damage;~~

•

weather conditions or catastrophic weather-related damage;

~~earthquakes and other natural disasters;~~

•

earthquakes and other natural disasters;

~~hazards and risks associated with transporting and storing motor fuel;~~

•

hazards and risks associated with transporting and storing motor fuel;

~~unexpected environmental liabilities;~~

•

unexpected environmental liabilities;

~~the outcome of pending or future litigation; and~~

•

the outcome of pending or future litigation; and

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

•

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

You should consider the ~~areas of risk~~risks and uncertainties described above and elsewhere in this report 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~~anticipated results or events reflected in the forward-looking statements will be achieved or will occur. The forward-looking statements included in this report are made as of the date of this report. We undertake no obligation to publicly release any revisions to any forward-looking statements, to report events or to report the occurrence of unanticipated events after the date of this report, except as required by law.

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—This section provides information on the Merger.~~

•

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

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

•

Results of Operations—This section provides an analysis of our results of operations, including the results of operations of our business segments, for the three and nine months ended September 30, 2021 and 2020 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.

Recent Developments

Acquisition of Assets from 7-Eleven

On April 28, 2021, Buyer entered into the Asset Purchase Agreement with 7-Eleven, pursuant to which Buyer agreed to purchase certain assets related to the ownership and operations of 106 company operated sites (90 fee; 16 leased) located in the Mid-Atlantic and Northeast regions of the U.S. (the “Properties”) for an aggregate purchase price of $263.0 million, subject to adjustment in accordance with the terms of the Asset Purchase Agreement. The assets are being sold by 7-Eleven as part of a divestiture process in connection with its previously announced acquisition of the Speedway business from MPC.

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

The Asset Purchase Agreement contains customary representations, warranties, agreements and obligations of the parties, including covenants regarding the conduct of the business at the Properties prior to the applicable closing of such Property.

Buyer is closing the acquisition of the Properties on a rolling basis of generally ten sites per week. Through September 30, 2021, Buyer consummated the closing under the Asset Purchase Agreement of 98 Properties for a purchase price of $262.0 million, including inventory and other working capital.

We funded these transactions primarily through the new JKM Credit Facility further described in Note 8 to the financial statements as well as undrawn capacity under our existing revolving credit facility and cash on hand.

Through November 4, 2021, we closed on five additional Properties for a purchase price of $10.4 million. We anticipate closing on the final three Properties once we are in receipt of all required operational licenses and permits.

JKM Credit Facility

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

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

As of November 4, 2021, we had $182.5 million outstanding under our Term Loan Facility.

Amendment to CAPL Credit Facility

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

See Notes 2 and 8 to the financial statements for additional information regarding this acquisition and the related financing.

COVID-19 Pandemic

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

~~Results of Operations—This section provides an analysis of~~ultimately our ~~results of operations, including the results of operations of our business segments, for the three and nine months ended September 30, 2017 and 2016 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 Merger~~

As a result of the Merger, Circle K indirectly owns all of the membership interests in our General Partner, as well as a 20.8% limited partner interest in the Partnership and all of the IDRs of the Partnership. Circle K, through its indirect ownership interest in the sole member of our General Partner, has the ability to ~~appoint all of the members of the Board of our General Partner and to control and manage the operations and activities of the Partnership.~~ pay distributions.

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~~For the three months ended September 30, 2021, we received a fixed mark-up per gallon on approximately ~~87%~~67% of gallons sold to our customers. The remaining gallons are primarily DTW priced contracts, ~~with our customers.~~including intersegment sales to the Retail segment. These contracts provide for variable, ~~market based~~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 that retail motor fuel prices decline. Conversely, our DTW motor fuel gross profit generally declines when the cost of wholesale motor fuel increases at a faster rate as compared to the rate that retail motor fuel prices increase.

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

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 September 30, 2017 and 2016~~ are directly related to the changes in crude oil and wholesale motor fuel ~~prices over the same period.~~prices. Variations in our reported revenues and cost of sales are, therefore, primarily related to the price of crude oil and wholesale motor fuel prices and generally not as a result of changes in motor fuel sales volumes, unless otherwise indicated and discussed below.

We typically experience 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.~~declines. Since the Wholesale segment supplies all fuel requirements to the Retail segment, a portion of that volatility is absorbed by the Wholesale segment.

As previously reported, we converted 46 company operated sites to dealer operated sites in the third quarter of 2019. As a result of this transition, we did not have any company operated sites for the period from September 30, 2019 through closing on the retail and wholesale acquisition on April 14, 2020, since which we have again been operating company operated sites.

Seasonality Effects on Volumes

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

Impact of Inflation

Inflation affects our financial performance by increasing certain of our operating expenses and cost of goods sold. Operating expenses include labor costs, leases, and general and administrative expenses. While our 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.~~expenses. Although we have historically been able to pass on increased costs through price increases, there can be no assurance that we will be able to do so in the future.

Acquisition and Financing Activity

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

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

•

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

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

•

We completed the final four tranches of the asset exchange with Circle K on February 25, 2020, April 7, 2020, May 5, 2020 and September 15, 2020. With the closing of the sixth tranche, the transactions contemplated under the Asset Exchange were concluded.

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

•

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

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.

•

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

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

•

Through September 30, 2021, we closed on the purchase of 98 sites of our 106-site acquisition from 7-Eleven and in July 2021, we entered into a new credit agreement and amended our existing credit facility as previously discussed under “Recent Developments—Acquisition of Assets from 7-Eleven.”

On September 27, 2017, as approved by the conflicts committee of our Board, we sold 28 properties to DMR for $16.6 million. These sites were generally sites at which we did not supply fuel or represented vacant land.

~~Separation Benefits and Retention Bonuses~~

In addition, certain participants in the EICP received retention bonuses that will be paid in annual installments that began in July 2017 and will continue through July 2019. The Partnership recorded a $1.0 million charge during the nine months ended September 30, 2017 in connection with the payments made by CST in July 2017, which were included in general and administrative expenses. In addition, the Partnership recognized a $0.3 million charge for the three and nine months ended September 30, 2017 the payments expected to be made in July 2018 and July 2019. The Partnership anticipates recognizing future charges totaling $1.2 million over the remaining retention period, of which $0.3 million, $0.8 million and $0.1 million is anticipated to be recognized in 2017, 2018 and 2019, respectively.

~~Acquisition of Jet-Pep Assets~~

The closing of the transaction is expected to occur in the fourth quarter of 2017, and is subject to the satisfaction or waiver of customary closing conditions. The Purchase Agreement contains customary representations, warranties, agreements and obligations of the parties, and termination and closing conditions. We and the Sellers have generally agreed to indemnify each other for breaches of the representations, warranties and covenants contained in the Purchase Agreement, subject to survival period limitations and a general indemnification cap for the Sellers in the amount of $6.5 million in the aggregate for Sellers’ liabilities under the Purchase Agreement and the Circle K Agreements.

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 September 30,						Nine Months Ended September 30,						Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016			2021			2020			2021			2020
Operating revenues	$	544,092		$	487,950		$	1,542,167		$	1,368,334		$	985,122		$	591,022		$	2,501,740		$	1,381,119
Cost of sales		502,517			448,812			1,421,524			1,251,491
Costs of sales														909,391			528,750			2,306,047			1,225,470
Gross profit		41,575			39,138			120,643			116,843			75,731			62,272			195,693			155,649

Income from CST Fuel Supply equity interests		3,752			4,022			11,185			12,318			—			—			—			3,202
Operating expenses:
Operating expenses		15,371			14,224			46,853			45,754			34,548			27,508			95,021			63,328
General and administrative expenses		5,994			6,142			23,731			18,068			9,903	��		5,363			24,429			15,440
Depreciation, amortization and accretion expense		14,049			13,432			42,675			40,594			19,118			18,590			56,732			51,867
Total operating expenses		35,414			33,798			113,259			104,416			63,569			51,461			176,182			130,635
Gain on sales of assets, net		2,371			631			2,013			525
Gain on dispositions and lease terminations, net														426			12,881			375			79,237
Operating income		12,284			9,993			20,582			25,270			12,588			23,692			19,886			107,453
Other income, net		121			(59)			366			375			127			143			419			358
Interest expense		(7,102	)		(5,634	)		(20,599	)		(16,403	)		(4,928	)		(3,522	)		(12,295	)		(13,183	)
Income before income taxes		5,303			4,300			349			9,242			7,787			20,313			8,010			94,628
Income tax expense (benefit)		966			1,308			(1,686	)		851
Income tax benefit														(1,065	)		(892	)		(1,664	)		(3,868	)
Net income		4,337			2,992			2,035			8,391			8,852			21,205			9,674			98,496
Net income (loss) attributable to noncontrolling interests		4			3			(1	)		9
Net income attributable to limited partners		4,333			2,989			2,036			8,382
IDR distributions		(1,115	)		(877	)		(3,162	)		(2,456	)		—			—			—			(133	)
Net income (loss) available to limited partners	$	3,218		$	2,112		$	(1,126	)	$	5,926
Net income available to limited partners													$	8,852		$	21,205		$	9,674		$	98,363

Three Months Ended September 30, ~~2017~~2021 Compared to Three Months Ended September 30, ~~2016~~2020

Consolidated Results

Operating revenues increased ~~$56.1~~$394 million ~~or 12%, while~~(67%) and gross profit increased ~~$2.4~~$13.5 million ~~or 6%~~(22%).

Operating revenues

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

A $59.5 million, or 14%, increase in our Wholesale segment revenues primarily attributable to the increase in crude oil prices. The average daily spot price of WTI crude oil increased 7% to $48.15 per barrel for the third quarter of 2017, compared to $44.85 per barrel for the third quarter of 2016. The wholesale price of motor fuel is highly correlated to the price of crude oil, although our average selling price increased 14% from the third quarter of 2016 to the third 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.”

•

A $360 million (74%) increase in our Wholesale segment revenues primarily attributable to a 73% increase in the average daily spot price of WTI crude oil to $70.58 per barrel for the third quarter of 2021, compared to $40.89 per barrel for the third quarter of 2020. The wholesale price of motor fuel is highly correlated to the price of crude oil. See “Significant Factors Affecting our Profitability—The Significance of Crude Oil and Wholesale Motor Fuel Prices on Our Revenues, Cost of Sales and Gross Profit.” In addition, volume increased 8% primarily as a result of volume generated by the acquisition of assets from 7-Eleven and the continuing recovery from the COVID-19 Pandemic.

•

A $167 million (71%) increase in our Retail segment revenues primarily attributable to the increase in company operated sites as a result of the acquisition of assets from 7-Eleven and a 43% increase in the average retail fuel price from the third quarter of 2020 to the third quarter of 2021 primarily due to the increase in wholesale motor fuel prices as noted above. Volume also increased 29% for the third quarter of 2021 compared to the third quarter of 2020 as a result of the acquisition of assets from 7-Eleven and the continuing recovery from the COVID-19 Pandemic. Lastly, merchandise revenues increased $12.0 million (26%) driven by the acquisition of assets from 7-Eleven.

A $3.1 million, or 3%, increase in our Retail segment revenues primarily attributable to an increase in crude oil prices, partially offset by the conversion of company operated retail sites to lessee dealer sites. See “Significant Factors Affecting our Profitability—The Significance of Crude Oil and Wholesale Motor Fuel Prices on Our Revenues, Cost of Sales and Gross Profit.”

Intersegment revenues

We present the results of operations of our segments on a consistent basis with how our management views the business. Therefore, our segments are presented before intersegment eliminations (which consist of motor fuel sold by our 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 $6.4 million or 10%, primarily attributable to the increase in wholesale motor fuel prices discussed above.~~

~~Cost of sales~~

~~Cost of sales increased $53.7 million or 12% as a result of the increase in wholesale motor fuel prices. 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 decreased $0.1 million primarily attributable to a $1.1 million reduction in costs as a result of headcount and salary reductions effective at the time of the Merger, a $0.5 million reduction in equity compensation expense as a result of fewer awards outstanding, and a $0.5 million reduction in acquisition costs, partially offset by a $1.7 million charge recorded in the third quarter of 2017 related to a court ruling in favor of a former executive’s claim to benefits under the EICP change in control provisions and a $0.2 million increase in severance expense.

~~Gain on sales of assets, net~~

During the third quarter of 2017, we recorded a $2.2 million gain on the sale of two properties as required by the FTC in connection with the Merger and a $0.5 million loss on the sale of 28 properties to DMR. We also recorded an $0.8 million gain related to the renewal of a contract by DMS with one of its customers, which triggered an earn out payment to be paid by DMS to us in connection with a contract entered into with DMS at the time of CST’s acquisition of our General Partner in October 2014.

~~Interest expense~~

Interest expense increased $1.5 million due to an increase in the average interest rate charged on our credit facility borrowings from 3.5% to 4.3% and additional borrowings to fund the State Oil Assets acquisition in September 2016. In addition, we incurred $0.4 million of interest expense in the third quarter of 2017 related to our sale leaseback executed in December 2016.

~~Income tax expense~~

We recorded income tax expense of $1.0 million and $1.3 million for the three months ended September 30, 2017 and 2016, respectively. The decrease in income tax expense was primarily due to a decline in the income generated by our corporate subsidiaries.

~~Nine Months Ended September 30,2017 Compared to Nine Months Ended September 30,2016~~

~~Consolidated Results~~

~~Operating revenues increased $173.8 million, or 13%, while gross profit increased $3.8 million, or 3.3%.~~

~~Operating revenues~~

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

A $190.2 million, or 16%, increase in our Wholesale segment revenues primarily attributable to the increase in crude oil prices. The average daily spot price of WTI crude oil increased 19% to $49.28 per barrel for the nine months ended September 30, 2017, compared to $41.35 per barrel for the nine months ended September 30, 2016. The wholesale price of motor fuel is highly correlated to the price of crude oil. See “Significant Factors Affecting our Profitability—The Significance of Crude Oil and Wholesale Motor Fuel Prices on Our Revenues, Cost of Sales and Gross Profit.”

A $5.0 million, or 1%, increase in our Retail segment revenues primarily attributable to the increase in crude oil prices, largely offset by conversion of company operated retail sites to lessee dealer sites. See “Significant Factors Affecting our Profitability—The Significance of Crude Oil and Wholesale Motor Fuel Prices on Our Revenues, Cost of Sales and Gross Profit.”

~~Intersegment revenues~~

Our intersegment revenues increased ~~$21.4~~$132 million ~~or 12%~~(103%), primarily attributable to the increase in wholesale ~~motor~~ fuel prices ~~discussed above.~~and the incremental intersegment revenues generated by the company operated sites acquired in the acquisition of assets from 7-Eleven.

Cost of sales

Cost of sales increased ~~$170.0~~$381 million ~~or 14% as~~(72%), which was a result of the increase in wholesale motor fuel ~~prices.~~prices and the acquisition of assets from 7-Eleven and the continuing recovery from the COVID-19 Pandemic discussed above.

Gross profit

Gross profit increased $13.5 million (22%), which was primarily driven by increases in motor fuel, merchandise and other gross profit due to the acquisition of assets from 7-Eleven along with higher terms discounts as a result of higher crude prices in the third quarter of 2021 as compared to the same period in prior year and incremental fuel margin from higher volume driven by the continuing recovery from the COVID-19 Pandemic. 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 increased ~~$5.7~~$4.5 million (85%) primarily ~~attributable~~driven by a $3.8 million increase in acquisition-related costs as a result of higher legal fees incurred in connection with the acquisition of assets from 7-Eleven and a $0.3 million increase in equity-based compensation expense as a result of more grants being outstanding during the third quarter of 2021 as compared to ~~a $6.8 million charge recorded upon closing~~the same period of the ~~Merger for severance~~prior year.

Depreciation, amortization and ~~benefit costs for certain terminated officers~~accretion expense

Depreciation, amortization and ~~other employees~~accretion expense increased $0.5 million (3%) primarily from incremental depreciation, amortization and accretion expense from the property and equipment and intangible assets acquired in the acquisition of CST Services who provided services to the Partnership and retention bonuses to certain EICP participants and a $1.7 million charge related to a court ruling in favor of a former executive’s claim to benefits under the EICP change in control provisions,assets from 7-Eleven, partially offset by a $1.5 million decrease in impairment charges related to our ongoing real estate rationalization effort and the resulting reclassification of these sites to assets held for sale.

Gain on dispositions and lease terminations, net

During the three months ended September 30, 2021, we recorded $0.4 million in gains in connection with our ongoing real estate rationalization effort, partially offset by net losses on lease terminations and asset disposals.

During the three months ended September 30, 2020, we recorded $11.4 million in gains related to the properties sold in the asset exchanges with Circle K. In addition, we recorded $2.2 million in gains in connection with our ongoing real estate rationalization effort.

Interest expense

Interest expense increased $1.4 million (40%), primarily driven by $0.5 million in interest expense incurred on the ~~integration~~JKM Credit Facility along with a $0.4 million increase in amortization of ~~prior year acquisitions and other cost savings initiatives and a $1.3 million decrease in management fees charged by CST~~deferred financing costs as a result of ~~headcount~~entering into the JKM Credit Facility and ~~salary reductions effective at~~ the ~~time~~amendment to the CAPL Credit Facility. Lastly, we incurred $0.4 million more in interest expense on the CAPL Credit Facility due to the higher outstanding balance driven by the borrowings to fund a portion of the ~~Merger.~~purchase price of the acquisition of assets from 7-Eleven.

Income tax benefit

We recorded income tax benefits of $1.1 million and $0.9 million for the three months ended September 30, 2021 and 2020, respectively. The benefits were primarily driven by losses incurred by our taxable subsidiaries.

Nine Months Ended September 30, 2021 Compared to Nine Months Ended September 30, 2020

Consolidated Results

Operating revenues increased $1.1 billion (81%) and gross profit increased $40 million (26%).

Operating revenues

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

•

A $982 million (84%) increase in our Wholesale segment revenues primarily attributable to a 71% increase in the average daily spot price of WTI crude oil to $65.05 per barrel for the nine months ended September 30, 2021, compared to $38.04 per barrel for the nine months ended September 30, 2020. The wholesale price of motor fuel is highly correlated to the price of crude oil. See “Significant Factors Affecting our Profitability—The Significance of Crude Oil and Wholesale Motor Fuel Prices on Our Revenues, Cost of Sales and Gross Profit.” Volume increased 21% primarily as a result of volume generated by the asset exchanges with Circle K, the CST Fuel Supply Exchange, the acquisition of retail and wholesale assets and the acquisition of assets from 7-Eleven (the average number of sites with wholesale fuel distribution increased 7% for the nine months ended September 30, 2021 compared to the same period in 2020) as well as from the continuing recovery from the COVID-19 Pandemic.

•

A $488 million (105%) increase in our Retail segment revenues primarily attributable to the increase in company operated and commission sites as a result of the April 2020 acquisition of retail and wholesale assets, the March 2020 CST Fuel Supply Exchange and the acquisition of the 7-Eleven assets (the average total system sites increased 27% for the nine months ended September 2021 compared to the same period in 2020). Volume increased 57% for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020 driven by the acquisitions as well as the continuing recovery from the COVID-19 Pandemic. The average retail fuel price increased 37% between those same periods due primarily due to the increase in wholesale motor fuel prices as noted above. In addition, merchandise revenues increased $58.2 million (70%) driven by the acquisition of retail and wholesale assets and the acquisition of assets from 7-Eleven.

Intersegment revenues

Our intersegment revenues increased $349 million (137%) primarily attributable to the incremental intersegment revenues generated by the company operated and commission sites acquired in the April 2020 acquisition of retail and wholesale assets, the March 2020 CST Fuel Supply Exchange, the acquisition of assets from 7-Eleven as well as higher volume from the continuing recovery from the COVID-19 Pandemic.

Cost of sales

Cost of sales increased $1.1 billion (88%) as a result of the increase in wholesale motor fuel prices and the impact of the increase in sites acquired in the asset exchanges with Circle K, the CST Fuel Supply Exchange, the acquisition of retail and wholesale assets and the acquisition of assets from 7-Eleven as well as the continuing recovery from the COVID-19 Pandemic discussed above.

Gross profit

The $40 million (26%) increase in gross profit was primarily driven by increases in motor fuel and merchandise gross profit due to 1) the CST Fuel Supply Exchange, which primarily resulted in an increase in fuel margin and a decrease in income from CST Fuel Supply equity interests; 2) the acquisition of retail and wholesale assets, which primarily resulted in an increase in fuel margin and merchandise margin and other revenues partially offset by a decrease in lease margin; 3) the acquisition of assets from 7-Eleven, which resulted in an increase in fuel margin, merchandise margin and other revenues; and 4) an increase in volume driven by the continuing recovery from the COVID-19 Pandemic. See “Results of Operations—Segment Results” for additional gross profit analyses.

Income from CST Fuel Supply equity interests and Operating expenses

See “Results of Operations—Segment Results” for analyses.

General and administrative expenses

General and administrative expenses increased $9.0 million (58%) primarily driven by a $5.9 million increase in acquisition-related costs as a result of higher legal fees incurred in connection with the acquisition of assets from 7-Eleven, a $1.5 million increase in management fees related to the increase in headcount, a $1.0 million increase in equity-based compensation expense as a result of more grants being outstanding during the third quarter of 2021 as compared to the same period of the prior year and overall higher general and administrative expenses stemming from the April 2020 acquisition of retail and wholesale assets, partially offset by a $0.9 million decrease in credit loss expense.

Depreciation, amortization and accretion expense

Depreciation, amortization and accretion expense increased ~~$1.7~~$4.9 million (9%) primarily ~~driven by~~from the property and equipment and intangible assets acquired in the asset exchanges with Circle K, the CST Fuel Supply Exchange, the acquisition of retail and wholesale assets and the acquisition of assets from 7-Eleven. We recorded $6.4 million in impairment charges during the nine months ended September 30, 2021 compared with $8.2 million during the same period of 2020, primarily related to our ~~recent acquisitions.~~ongoing real estate rationalization effort and the resulting reclassification of these sites to assets held for sale.

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

During the nine months ended September 30, ~~2017,~~2021, we recorded a ~~$2.2~~$1.5 million gain related to sites sold in connection with our ongoing real estate rationalization effort, partially offset by net losses on lease terminations and asset disposals.

During the nine months ended September 30, 2020, we recorded a $67.6 million gain on the sale of ~~two~~our 17.5% investment in CST Fuel Supply. In addition, we recorded $19.3 million in gains related to the properties ~~as required by~~sold in the ~~FTC~~asset exchanges with Circle K and $4.0 million in gains related to the sale of sites in connection with our ongoing real estate rationalization effort. Partially offsetting these gains, we recorded a $10.9 loss on lease terminations, including a write-off of deferred rent income, in connection with the Merger and a $0.5 million loss on the sale of 28 properties to DMR. We also recorded a $0.8 million gain related to the renewal of a contract by DMS with one of its customers, which triggered an earn out payment to be paid by DMS to us in connection with a contract entered into with DMS at the time of CST’sApril 2020 acquisition of ~~our General Partner in October 2014.~~retail and wholesale assets.

Interest expense

Interest expense ~~increased $4.2~~decreased $0.9 million (7%) primarily driven by a reduction in interest expense on borrowings under our CAPL Credit Facility due to ~~an increase~~a decrease in the average interest rate ~~charged~~from 2.8% to 2.1%. This decrease was partially offset by higher interest expense due to the higher outstanding balance on ~~our credit facility borrowings from 3.5% to 4.1% and additional~~the CAPL Credit Facility driven by the borrowings to fund ~~our recent acquisitions.~~a portion of the purchase price of the acquisition of assets from 7-Eleven. In addition, we incurred ~~$1.2~~$0.5 million ofin interest expense on the JKM Credit Facility along with a $0.4 million increase in ~~2017 related~~amortization of deferred financing costs as a result of entering into the JKM Credit Facility and the amendment to ~~our sale leaseback executed in December 2016.~~the CAPL Credit Facility.

Income tax benefit

We recorded an income tax ~~benefit~~benefits of $1.7 million and ~~income tax expense of $0.9~~$3.9 million for the nine months ended September 30, ~~2017~~2021 and ~~2016,~~2020, respectively. The ~~benefit in 2017 was~~benefits were primarily ~~due to an increase in the loss generated~~driven by 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 September 30,						Nine Months Ended September 30,						Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016			2021			2020			2021			2020
Gross profit:
Motor fuel–third party	$	8,757		$	8,157		$	25,659		$	21,283		$	18,180		$	15,505		$	52,232		$	40,722
Motor fuel–intersegment and related party		6,485			6,086			17,820			19,004			15,943			15,181			33,633			38,023
Motor fuel gross profit		15,242			14,243			43,479			40,287			34,123			30,686			85,865			78,745
Rent and other		16,074			14,263			48,740			43,162
Rent gross profit														13,264			11,853			38,730			38,244
Other revenues														795			290			2,658			1,705
Total gross profit		31,316			28,506			92,219			83,449			48,182			42,829			127,253			118,694
Income from CST Fuel Supply equity^(a)		3,752			4,022			11,185			12,318
Income from CST Fuel Supply equity interests ^(a)														—			—			—			3,202
Operating expenses		(7,535	)		(5,498	)		(22,541	)		(18,796	)		(8,686	)		(8,329	)		(29,608	)		(26,912	)
Adjusted EBITDA^(b)	$	27,533		$	27,030		$	80,863		$	76,971
Motor fuel distribution sites (end of period):^(c)
Operating income													$	39,496		$	34,500		$	97,645		$	94,984
Motor fuel distribution sites (end of period): ^(b)
Motor fuel–third party
Independent dealers^(d)		384			404			384			404
Lessee dealers^(e)		439			420			439			420
Independent dealers ^(c)														676			683			676			683
Lessee dealers ^(d)														643			672			643			672
Total motor fuel distribution–third party sites		823			824			823			824			1,319			1,355			1,319			1,355
Motor fuel–intersegment and related party
DMS (related party)^(f)		146			179			146			179
CST (related party)		43			43			43			43
Commission agents (Retail segment)^(g)		82			67			82			67
Company operated retail sites (Retail segment)		70			75			70			75
Commission agents (Retail segment) ^(d)														200			211			200			211
Company operated retail sites (Retail segment) ^(e)														248			149			248			149
Total motor fuel distribution–intersegment and related party sites		341			364			341			364			448			360			448			360
Motor fuel distribution sites (average during the period):
Motor fuel-third party distribution		823			749			822			724			1,325			1,345			1,330			1,253
Motor fuel-intersegment and related party distribution		344			366			355			387			395			364			368			327
Total motor fuel distribution sites		1,167			1,115			1,177			1,111			1,720			1,709			1,698			1,580
Volume of gallons distributed (in thousands)
Third party		169,877			163,558			491,471			461,474			244,545			242,826			700,645			613,250
Intersegment and related party		96,312			103,563			279,649			307,720			110,087			84,541			277,392			195,008
Total volume of gallons distributed		266,189			267,121			771,120			769,194			354,632			327,367			978,037			808,258

Wholesale margin per gallon	$	0.057		$	0.053		$	0.056		$	0.052		$	0.096		$	0.094		$	0.088		$	0.097

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

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

~~(c)~~

In addition, as of September 30, ~~2017~~2021 and ~~2016, respectively,~~2020, we distributed motor fuel to ~~15 and~~ 14 sub-wholesalers who distributed to additional sites.

~~(d)~~(c)

The decrease in the independent dealer site count ~~from September 30, 2016 to September 30, 2017~~ was primarily attributable to loss of contracts, most of which were lower margin, partially offset by the increase in independent dealer sites as a ~~net 20 terminated motor fuel~~result of the real estate rationalization effort and the resulting reclassification of the site from a lessee dealer or commission site to an independent dealer site when we continue to supply ~~contracts that were not renewed.~~the sites after divestiture.

(d)	The decreases in the lessee dealer and commission agent site counts were primarily attributable to our real estate rationalization effort.

(e)	The increase in the ~~lessee dealer site count was partially attributable to converting 5~~ company operated ~~retail sites in our Retail segment to lessee dealers in our Wholesale segment.~~

~~(f)~~

During the fourth quarter of 2016, the Partnership recaptured 25 sites from DMS and operated them as commission agent sites. During the second quarter of 2017, CrossAmerica converted some of these recaptured sites to lessee dealers.

~~(g)~~

~~The decrease in the company operated retail~~ site count was primarily attributable to the 98 company operated ~~retail~~ sites ~~being converted to lessee dealer sites.~~from the acquisition of assets from 7-Eleven.

Three Months Ended September 30,~~2017~~2021 Compared to Three Months Ended September 30,~~2016~~2020

Gross profit increased $5.4 million (12%) and operating income increased $5.0 million (14%). The results were driven by:

Motor fuel gross profit

The ~~$1.0~~$3.4 million ~~or 7%~~(11%) increase in motor fuel gross profit was primarily ~~due to a higher margin per gallon realized primarily due to higher DTW margins~~driven by an 8% increase in volume as a result of the ~~movements in crude prices throughout both periods and increased payment~~acquisition of assets from 7-Eleven as well as the continuing recovery from the COVID-19 Pandemic. In addition, we benefited from higher terms discounts ~~and incentives due to the increase in motor fuel prices~~ as a result of ~~the increase in~~higher crude ~~oil~~ prices. The average ~~daily~~ spot price of WTI crude oil increased ~~7% to $48.15~~73% from $40.89 per barrel for the third quarter of ~~2017, compared~~2020 to ~~$44.85~~$70.58 per barrel for the third quarter of ~~2016.~~2021. See “Significant Factors Affecting our Profitability—The Significance of Crude Oil and Wholesale Motor Fuel Prices on Our Revenues, Cost of Sales and Gross Profit.”

Rent ~~and other~~ gross profit

Rent ~~and other~~ gross profit increased ~~$1.8~~$1.4 million (12%) primarily as a result of ~~our September 2016 acquisition of~~ the ~~State Oil Assets, as well as converting company operated retail sites to lessee dealer sites throughout 2016 and 2017, partially offset by 25 DMS sites being converted to commission agent sites~~$0.5 million in rent concessions that impacted the ~~fourth~~third quarter of ~~2016, which resulted in the rent income from these 25 sites being included in the retail segment rather than the wholesale segment.~~2020.

~~Income from CST Fuel Supply equity~~

~~The decline of $0.3 million was primarily attributable to a decrease in volume driven the impacts of Hurricane Harvey.~~

Operating expenses

Operating expenses increased ~~$2.0~~$0.4 million (4%), primarily as a result of ~~our September 2016 State Oil Assets acquisition, which is substantially offset by an increase~~increases in ~~rent income, as well as our conversion of company operated retail sites to lessee dealer sites throughout 2016~~management fees and ~~2017.~~insurance expense.

Nine Months Ended September 30, ~~2017~~2021 Compared to Nine Months Ended September 30, ~~2016~~2020

Gross profit increased $8.6 million (7%) and operating income increased $2.7 million (3%). The results were driven by:

Motor fuel gross profit

The ~~$3.2~~$7.1 million (9%) increase in motor fuel gross profit was primarily ~~due to~~driven by a ~~higher margin per gallon realized primarily due to higher DTW margins~~21% increase in volume as a result of the ~~movements in crude prices throughout both periods~~asset exchanges with Circle K, the CST Fuel Supply Exchange, the acquisition of retail and ~~increased payment~~wholesale assets, the acquisition of assets from 7-Eleven and the continuing recovery from the COVID-19 Pandemic. In addition, we benefited from higher terms discounts ~~and incentives due to the increase in motor fuel prices~~ as a result of ~~the increase in~~higher crude ~~oil~~ prices. The average ~~daily~~ spot price of WTI crude oil increased ~~19% to $49.28~~71% from $38.04 per barrel for the nine months ended September 30, ~~2017, compared~~2020 to ~~$41.35~~$65.05 per barrel for the nine months ended September 30, ~~2016.~~2021. However, DTW margins were lower due to the movements in wholesale fuel prices throughout the nine months ended September 30, 2021 as compared to the same time period of 2020. During the nine months ended September 30, 2021, the daily spot price of WTI crude oil increased from $48 per barrel at the start of the year to $75 per barrel as of September 30, 2021, a 56% increase, which adversely impacted fuel margins for our variable priced gallons during the period. During the nine months ended September 30, 2020, we benefitted from the reduction in wholesale fuel prices. As such, DTW margins were negatively impacted for the first nine months of 2021 as compared to the first nine months of 2020. See “Significant Factors Affecting our Profitability—The Significance of Crude Oil and Wholesale Motor Fuel Prices on Our Revenues, Cost of Sales and Gross Profit.”

Rent ~~and other~~ gross profit

Rent ~~and other~~ gross profit increased ~~$5.6~~$0.5 million (1%) primarily due to $0.5 million in rent concessions during the second quarter of 2020 and the positive impact from the CST Fuel Exchange, partially offset by a decrease as a result of ~~our September 2016~~terminating leases in connection with the April 2020 acquisition of ~~the State Oil Assets, as well as converting company operated~~ retail ~~sites to lessee dealer sites throughout 2016~~ and ~~2017, partially offset by 25 DMS sites being converted to commission agent sites in the fourth quarter of 2016, which resulted in the rent income~~wholesale assets.

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

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

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

Operating expenses

Operating expenses increased ~~$3.7~~$2.7 million (10%) primarily as a result of ~~our September 2016 State Oil Assets acquisition, which is substantially offset by an~~a $1.9 million increase in ~~rent income,~~environmental costs related to remediation, costs of compliance testing and monitoring and a $1.2 million increase in insurance costs due to the increase in controlled sites as ~~well as our conversion~~a result of ~~company operated retail sites to lessee dealer sites throughout 2016 and 2017.~~the acquisitions.

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,~~(in thousands, except for the number of retail ~~sites and per gallon amounts)~~sites):

Three Months Ended
September 30,

Nine Months Ended
September 30,

2017

2016

2017

2016

Gross profit:

Motor fuel

$
2,042

$
1,948

$
5,281

$
6,838

Merchandise and services

7,008

7,614

19,558

23,362

Rent and other

1,195

1,057

3,565

3,049

Total gross profit

10,245

10,619

28,404

33,249

Operating expenses

(7,836
)

(8,726
)

(24,312
)

(26,958
)
Acquisition-related costs

—

142

—

142

Inventory fair value adjustments^(a)

—

—

—

91

Adjusted EBITDA^(b)

$
2,409

$
2,035

$
4,092

$
6,524

Retail sites (end of period):

Commission agents^(c)

82

67

82

67

Company operated retail sites^(d)

71

78

71

78

Total system sites at the end of the period

153

145

153

145

Total system operating statistics:

Average retail fuel sites during the period^(c)(d)

153

142

162

155

Motor fuel sales (gallons per site per day)

2,778

3,002

2,632

2,828

Motor fuel gross profit per gallon, net of credit card
   fees and commissions

$
0.052

$
0.050

$
0.045

$
0.057

Commission agents statistics:

Average retail fuel sites during the period^(c)

82

66

90

66

Motor fuel gross profit per gallon, net of credit card
   fees and commissions

$
0.013

$
0.014

$
0.011

$
0.016

Company operated retail site statistics:

Average retail fuel sites during the period^(d)

71

76

72

89

Motor fuel gross profit per gallon, net of credit card
   fees

$
0.093

$
0.082

$
0.083

$
0.090

Merchandise and services gross profit percentage,
   net of credit card fees

24.7
%

24.2
%

24.4
%

24.5
%

	Three Months Ended September 30,						Nine Months Ended September 30,
	2021			2020			2021			2020
Gross profit:
Motor fuel	$	7,750		$	3,487		$	18,120		$	7,176
Merchandise		15,543			12,305			37,876			21,689
Rent		2,266			1,858			6,190			5,527
Other revenue		2,310			1,825			6,480			3,046
Total gross profit		27,869			19,475			68,666			37,438
Operating expenses		(25,862	)		(19,179	)		(65,413	)		(36,416	)
Operating income	$	2,007		$	296		$	3,253		$	1,022

Retail sites (end of period):
Commission agents ^(a)		200			211			200			211
Company operated retail sites ^(b)		248			149			248			149
Total system sites at the end of the period		448			360			448			360

Total system operating statistics:
Average retail fuel sites during the period		395			359			368			289
Volume of gallons sold (in thousands)		110,523			85,902			278,564			177,855

Commission agents statistics:
Average retail fuel sites during the period		201			209			203			196

Company operated retail site statistics:
Average retail fuel sites during the period		194			150			165			93
Merchandise gross profit percentage		26.7	%		26.6	%		26.8	%		26.1	%

(a)	The ~~inventory fair value adjustment represents the expensing of the step-up in value ascribed to inventory acquired~~decrease in the ~~Franchised Holiday Stores acquisition.~~commission site count was primarily attributable to our real estate rationalization effort.

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

~~(c)~~

During the fourth quarter of 2016, we recaptured 25 sites from DMS and operated them as commission agent sites. During the second quarter of 2017, we converted some of these recaptured sites to lessee dealers.

~~(d)~~

The ~~decrease~~increase in the company operated ~~retail sites relates~~site count was primarily attributable to the ~~conversion of~~98 company operated ~~retail~~ sites ~~to lessee dealer sites.~~from the acquisition of assets from 7-Eleven.

Three Months Ended September 30,~~2017~~2021 Compared to Three Months Ended September 30,~~2016~~2020

Gross profit ~~declined $0.4~~increased $8.4 million ~~while~~(43%) and operating ~~expenses declined $0.9~~income increased $1.7 million.

These results were impacted by:

Gross profit

•

Our motor fuel gross profit increased $4.3 million (122%) attributable to our company operated sites achieving higher fuel margins for the three months ended September 30, 2021 as compared to the same period in 2020, as well as an increased number of company operated sites in the Retail Segment, as company operated sites typically have a higher retail fuel margin than commission agent sites. In addition, volume increased 29% stemming from the increase in company operated sites as a result of the acquisition of assets from 7-Eleven as well as the continuing recovery from the COVID-19 Pandemic.

•

Our merchandise gross profit and other revenues increased $3.2 million and $0.5 million, respectively, as a result of the increase in company operated sites driven by the acquisition of assets from 7-Eleven.

Operating expenses

Operating expenses increased ~~$0.1~~$6.7 million ~~attributable~~(35%) primarily due to a 5%$4.4 million increase ~~in margin per gallon~~ as a result of the ~~movements in crude oil prices throughout~~acquisition of assets from 7-Eleven and higher employment costs at the ~~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 $0.6 million as a result of the conversion of~~ company operated ~~retail~~ sites ~~to lessee dealer sites.~~

~~Our rent and other gross profit increased~~ ~~$0.1 million~~ ~~primarily from 25 DMS sites being converted to commission agent sites~~acquired in the ~~fourth quarter~~April 2020 acquisition of ~~2016, which resulted in the rent income from these sites being included in the~~ retail ~~segment rather than the~~and wholesale segment. In the second quarter of 2017, some of these 25 sites were converted to lessee dealer sites, which resulted in the rent income being included in the wholesale segment rather than the retail segment.assets.

~~Operating expenses~~

The $0.9 million decline in operating expenses was attributable to the conversion of company operated retail sites to lessee dealer sites, partially offset by the impact of the 25 DMS sites being converted to commission agent sites in the fourth quarter of 2016. In the second quarter of 2017, some of these 25 sites were converted to lessee dealer sites, which resulted in the operating expenses being included in the wholesale segment rather than the retail segment.

Nine Months Ended September 30, ~~2017~~2021 Compared to Nine Months Ended September 30, ~~2016~~2020

Gross profit ~~declined $4.8~~increased $31.2 million ~~while~~(83%) and operating ~~expenses declined $2.6~~income increased $2.2 million.

These results were ~~impacted~~driven by:

Gross profit

•

Our motor fuel gross profit increased $10.9 million (153%) attributable to our company operated sites achieving higher fuel margins for the nine months ended September 30, 2021 as compared to the same period in 2020, as well as an increased number of company operated sites in the Retail Segment, as company operated sites typically have a higher retail fuel margin than commission agent sites. In addition, volume increased 57% driven by the increase in company operated and commission sites as a result of the April 2020 acquisition of retail and wholesale assets, the March 2020 CST Fuel Supply Exchange, the acquisition of assets from 7-Eleven as well as the continuing recovery from the COVID-19 Pandemic.

•

Our merchandise gross profit and other revenues increased $16.2 million and $3.4 million, respectively, as a result of the increase in company operated sites driven by the April 2020 acquisition of retail and wholesale assets and the acquisition of assets from 7-Eleven.

~~Our motor fuel gross profit decreased $1.6~~Operating expenses

Operating expenses increased $29.0 million ~~attributable~~(80%) primarily due to ~~a 20% decrease~~the increase in ~~margin per gallon~~company operated and commission sites as a result of the ~~movement in crude oil prices throughout~~April 2020 acquisition of retail and wholesale assets and the ~~two periods. See “Significant Factors Affecting our Profitability—The Significance of Crude Oil~~CST Fuel Supply Exchange and ~~Wholesale Motor Fuel Prices on Our Revenues, Cost of Sales and Gross Profit.”~~

~~Our merchandise and services gross profit declined $3.8~~a $4.4 million ~~or 16%~~increase as a result of the ~~conversion~~acquisition of ~~company operated retail sites to lessee dealer sites, partially offset by the incremental gross profit generated by the March 2016 Franchised Holiday Stores acquisition.~~

~~Our rent and other gross profit increased~~ ~~$0.5 million~~ ~~primarily~~assets from 25 DMS sites being converted to commission agent sites in the fourth quarter of 2016, which resulted in the rent income from these sites being included in the retail segment rather than the wholesale segment. In the second quarter of 2017, some of these 25 sites were converted to lessee dealer sites, which resulted in the rent income being included in the wholesale segment rather than the retail segment.

~~Operating expenses~~

The $2.6 million decline in operating expenses was attributable to the conversion of company operated retail sites to lessee dealer sites, partially offset by the impact of the March 2016 Franchised Holiday Stores acquisition and the 25 DMS sites being converted to commission agent sites in the fourth quarter of 2016. In the second quarter of 2017, some of these 25 sites were converted to lessee dealer sites, which resulted in the operating expenses being included in the wholesale segment rather than the retail segment.

7-Eleven.

Non-GAAP Financial Measures

We use the non-GAAP financial measures EBITDA, Adjusted EBITDA, Distributable Cash Flow and Distribution Coverage Ratio. EBITDA represents net income available to us before deducting interest expense, income taxes and depreciation, amortization and ~~accretion.~~accretion (which includes certain impairment charges). Adjusted EBITDA represents EBITDA as further adjusted to exclude ~~equity funded expenses related to incentive~~equity-based employee and director compensation ~~and the Amended Omnibus Agreement,~~expense, gains or losses on ~~sales of assets,~~dispositions and lease terminations, net and certain discrete acquisition related costs, such as legal and other professional fees, ~~and severance expenses associated with recently acquired companies,~~separation benefit costs 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 benefit or expense. The Distribution Coverage Ratio is computed by dividing Distributable Cash Flow by the ~~weighted average~~weighted-average diluted common ~~and subordinated~~ units and then dividing that result by the distributions paid per limited partner unit.

EBITDA, Adjusted EBITDA, Distributable Cash Flow and Distribution Coverage Ratio are used as supplemental financial measures by management and by external users of our financial statements, such as investors and lenders. EBITDA and Adjusted EBITDA are used to assess our financial performance without regard to financing methods, capital structure or income taxes and the ability to incur and service debt and to fund capital expenditures. In addition, Adjusted EBITDA is used to assess the operating performance of our business on a consistent basis by excluding the impact of items which do not result directly from the wholesale distribution of motor fuel, the leasing of real property, or the day to day operations of our retail site activities. EBITDA, Adjusted EBITDA, Distributable Cash Flow and Distribution Coverage Ratio are also used to assess the ability to generate cash sufficient to make distributions to our unitholders.

We believe the presentation of EBITDA, Adjusted EBITDA, Distributable Cash Flow and Distribution Coverage Ratio provides useful information to investors in assessing the financial condition and results of operations. EBITDA, Adjusted EBITDA, Distributable Cash Flow and Distribution Coverage Ratio should not be considered alternatives to net income or any other measure of financial performance or liquidity presented in accordance with U.S. GAAP. EBITDA, Adjusted EBITDA, Distributable Cash Flow and Distribution Coverage Ratio have important limitations as analytical tools because they exclude some but not all items that affect net income. Additionally, because EBITDA, Adjusted EBITDA, Distributable Cash Flow and Distribution Coverage Ratio may be defined differently by other companies in our industry, our definitions may not be comparable to similarly titled measures of other companies, thereby diminishing their utility.

The following table presents reconciliations of EBITDA, Adjusted EBITDA, and Distributable Cash Flow to net income, the most directly comparable U.S. GAAP financial measure, for each of the periods indicated (in thousands, except for per unit amounts):

Three Months Ended
September 30,

Nine Months Ended
September 30,

2017

2016

2017

2016

Net income available to limited partners

$
3,218

$
2,112

$
(1,126
)

$
5,926

Interest expense

7,102

5,634

20,599

16,403

Income tax expense (benefit)

966

1,308

(1,686
)

851

Depreciation, amortization and accretion

14,049

13,432

42,675

40,594

EBITDA

25,335

22,486

60,462

63,774

Equity funded expenses related to incentive
   compensation and the Amended Omnibus
   Agreement (a)

3,479

3,572

11,789

10,197

Gain on sales of assets, net

(2,371
)

(631)

(2,013
)

(525)

Acquisition-related costs (b)

2,570

1,659

10,279

2,882

Inventory fair value adjustments

—

—

—

91

Adjusted EBITDA

29,013

27,086

80,517

76,419

Cash interest expense

(6,674
)

(5,306)

(19,319
)

(15,355
)
Sustaining capital expenditures (c)

(565
)

(209)

(1,287
)

(538
)
Current income tax expense

(267
)

(317)

(387
)

(782
)
Distributable Cash Flow

$
21,507

$
21,254

$
59,524

$
59,744

Weighted average diluted common and subordinated
   units

33,938

33,391

33,792

33,305

Distributions paid per limited partner unit (d)

$
0.6225

$
0.6025

$
1.8525

$
1.7925

Distribution Coverage Ratio (e)

1.02x

1.06x

0.95x

1.00x

	Three Months Ended September 30,						Nine Months Ended September 30,
	2021			2020			2021			2020
Net income available to limited partners	$	8,852		$	21,205		$	9,674		$	98,363
Interest expense		4,928			3,522			12,295			13,183
Income tax benefit		(1,065	)		(892	)		(1,664	)		(3,868	)
Depreciation, amortization and accretion expense		19,118			18,590			56,732			51,867
EBITDA		31,833			42,425			77,037			159,545
Equity-based employee and director compensation expense		342			35			1,096			83
Gain on dispositions and lease terminations, net ^(a)		(426	)		(12,881	)		(375	)		(79,237	)
Acquisition-related costs ^(b)		4,141			385			8,502			2,578
Adjusted EBITDA		35,890			29,964			86,260			82,969
Cash interest expense		(4,267	)		(3,261	)		(11,113	)		(12,401	)
Sustaining capital expenditures ^(c)		(975	)		(745	)		(3,407	)		(1,792	)
Current income tax (expense) benefit ^(d)		(214	)		3,784			(548	)		7,452
Distributable Cash Flow	$	30,434		$	29,742		$	71,192		$	76,228
Weighted-average diluted common units		37,907			37,869			37,898			37,202
Distributions paid per limited partner unit ^(e)	$	0.5250		$	0.5250		$	1.5750		$	1.5750
Distribution Coverage Ratio ^(f)	1.53x			1.50x			1.19x			1.30x

(a)

~~As approved by~~We recorded gains on the ~~independent conflicts committee~~sale of sites in connection with our ongoing real estate rationalization effort of $0.4 million and $1.5 million for the ~~Board, the Partnership~~three and ~~CST mutually agreed to settle certain amounts due under the terms of the Amended Omnibus Agreement in limited partner units of the Partnership.~~nine months ended September 30, 2021, respectively.

During the three months ended September 30, 2020, we recorded gains on the sale of CAPL Properties in connection with the asset exchange with Circle K of $11.4 million and $19.3 million for the three and nine months ended September 30, 2020, respectively. We also recorded gains on the sale of sites in connection with our ongoing real estate rationalization effort of $2.2 million and $4.0 million for the three and nine months ended September 30, 2020, respectively. During the nine months ended September 30, 2020, we recorded a $67.6 million gain on the sale of our 17.5% investment in CST Fuel Supply. Also during the nine months ended September 30, 2020, we recorded a loss on lease terminations, including the non-cash write-off of deferred rent income associated with these leases, of $10.9 million.

(b)

Relates to certain discrete acquisition related costs, such as legal and other professional fees, ~~severance expenses~~separation benefit costs and certain purchase accounting adjustments associated with recently acquired businesses. Acquisition-related costs for the three and nine months ended September 30, 2017 include severance and benefit expense and retention bonuses paid to certain EICP participants associated with the Merger. See “Significant Factors Affecting our Profitability—Separation Benefits and Retention Bonuses” for additional information. Acquisition-related costs for the three and nine months ended September 30, 2017 also includes a $1.7 million charge related to a court ruling in favor of a former executive’s claim to benefits under the EICP in connection with CST’s acquisition of our General Partner.

(c)

Under the Partnership Agreement, sustaining capital expenditures are capital expenditures made to maintain our long-term operating income or operating capacity. Examples of sustaining capital expenditures are those made to maintain existing contract volumes, including payments to renew existing distribution contracts, or to maintain our sites in conditions suitable to lease, such as parking lot or roof replacement/renovation, or to replace equipment required to operate the existing business.

(d)	Consistent with prior divestitures, the current income tax expense (benefit) excludes income tax incurred on the sale of sites.

(e)	On October ~~24, 2017,~~21, 2021, the Board approved a quarterly distribution of ~~$0.6275~~$0.5250 per unit attributable to the third quarter of ~~2017.~~2021. The distribution is payable on November ~~13, 2017~~10, 2021 to all unitholders of record on November ~~6, 2017.~~3, 2021.

~~(e)~~(f)

The distribution coverage ratio is computed by dividing Distributable Cash Flow by the ~~weighted average~~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
September 30,

Nine Months Ended
September 30,

2017

2016

2017

2016

Adjusted EBITDA - Wholesale segment

$
27,533

$
27,030

$
80,863

$
76,971

Adjusted EBITDA - Retail segment

2,409

2,035

4,092

6,524

Adjusted EBITDA - Total segment

$
29,942

$
29,065

$
84,955

$
83,495

Reconciling items:

Elimination of intersegment profit in ending
   inventory balance

14

13

20

145

General and administrative expenses

(5,994
)

(6,142
)

(23,731
)

(18,068
)
Other income, net

121

(59
)

366

375

Equity funded expenses related to incentive
   compensation and the Amended Omnibus
   Agreement

3,479

3,572

11,789

10,197

Working capital adjustment

—

335

—

335

Acquisition-related costs

2,570

1,182

10,279

2,405

Net (income) loss attributable to noncontrolling
   interests

(4
)

(3
)

1

(9
)
IDR distributions

(1,115
)

(877
)

(3,162
)

(2,456
)
Consolidated Adjusted EBITDA

$
29,013

$
27,086

$
80,517

$
76,419

Liquidity and Capital Resources

Liquidity

Our principal liquidity requirements are to finance our operations, fund acquisitions, service our debt and pay distributions to our ~~unitholders and IDR distributions.~~unitholders. We expect our ongoing sources of liquidity to include cash generated by operations, proceeds from sales of sites in connection with our ~~operations and~~real estate rationalization efforts, borrowings under the ~~revolving credit facility~~CAPL Credit Facility and JKM Credit Facility, and if available to us on acceptable terms, issuances of equity and debt securities. We regularly evaluate alternate sources of capital ~~including sale-leaseback financing of real property with third parties,~~ to support our liquidity requirements.

Our ability to meet our debt service obligations and other capital requirements, including capital expenditures, acquisitions, and partnership distributions, will depend on our future operating performance, which, in turn, will be subject to general economic, financial, business, competitive, legislative, regulatory and other conditions, many of which are beyond our control. As a normal part of our business, depending on market conditions, we will, from time to time, consider opportunities to repay, redeem, repurchase or refinance our indebtedness. Changes in our operating plans, lower than anticipated sales, increased expenses, acquisitions or other events may cause us to seek additional debt or equity financing in future periods.

We believe that we will have sufficient cash flow from operations, borrowing capacity under the ~~revolving credit facility~~CAPL Credit Facility and JKM Credit Facility, access to capital markets and alternate sources of funding to meet our financial commitments, debt service obligations, contingencies, anticipated capital expenditures and partnership distributions. However, we are subject to business and operational risks that could adversely affect our cash flow. A material decrease in our cash flows would likely produce an adverse effect on our borrowing capacity as well as our ability to issue additional equity and/or debt ~~securities.~~securities and/or maintain or increase distributions to unitholders.

See “Recent Developments—COVID-19 Pandemic” for a discussion of the impacts and potential impacts on our liquidity from the COVID-19 Pandemic as well as actions we have taken or could take to mitigate its impact.

Cash Flows

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

Nine Months Ended
September 30,

2017

2016

Net cash provided by operating activities

$
66,438

$
63,698

Net cash provided by (used in) investing activities

$
11,291

$
(90,288
)
Net cash (used in) provided by financing activities

$
(77,513
)

$
28,295

	Nine Months Ended September 30,
	2021			2020
Net cash provided by operating activities	$	76,267		$	86,503
Net cash used in investing activities		(283,200	)		(15,631	)
Net cash provided by (used in) financing activities		214,667			(71,324	)

Operating Activities

Net cash provided by operating activities ~~increased $2.7~~decreased $10.2 million for the nine months ended September 30, ~~2017~~2021 compared to the same period in ~~2016, driven~~2020, primarily ~~by incremental cash flow generated by our acquisitions. In addition, we settled $2.3 million more~~attributable to changes in ~~management fees related~~working capital between the two periods. The biggest driver of this decrease relates to the ~~services provided under~~initial build in accounts payable when acquiring company operated sites. For the ~~Amended Omnibus Agreement~~nine months ended September 30, 2020, we acquired approximately 150 company operated sites, all in ~~equity with CST~~April 2020, and the initial build in accounts payable occurred quickly thereafter. For the nine months ended September 30, 2021, we acquired 98 company operated sites from 7-Eleven but through a rolling close process, and therefore the initial build of accounts payable is still occurring for many of these sites. Additionally, acquisition costs increased $5.9 million for the nine months ended September 30, ~~2017~~2021 as compared to the same period in ~~2016.~~2020. These negative drivers were partially offset by the incremental cash flow generated by the sites acquired from 7-Eleven.

As is typical in our industry, our current liabilities exceed our current assets as a result of the longer settlement of real estate and motor fuel taxes as well as operating lease obligations as compared to the shorter settlement of receivables for fuel and rent.

Investing Activities

~~For~~We incurred capital expenditures of $32.4 million and $24.4 million for the nine months ended September 30, ~~2017, we received $23.9 million of proceeds on sales,~~2021 and 2020, respectively. The increase was largely driven by EMV upgrades and rebranding of certain sites, including the ~~sale of 28 properties to DMR~~sites being acquired from 7-Eleven. We received $11.0 million and ~~two properties sold as a result of the FTC’s requirements associated with Couche-Tard’s acquisition of CST. We also incurred $10.2~~$13.8 million in ~~capital expenditures and paid a $2.8 million deposit on the Jet-Pep acquisition. For~~proceeds from sales of assets, largely driven by our real estate rationalization effort, during the nine months ended September 30, ~~2016, we received a $17.5~~2021 and 2020, respectively. We paid $262.0 million refund payment on our investment in CST Fuel Supply in connection with CST’s sale of sites in California and Wyoming. In addition, we spent $97.1 million on the acquisitions of the Franchised Holidays Stores, State Oil Assets, and independent dealer and sub-wholesaler contracts from CST. We also incurred $11.6 million in capital expenditures.

~~Financing Activities~~

~~For~~during the nine months ended September 30, ~~2017,~~2021 in connection with our acquisition of assets from 7-Eleven. We paid $28.2 million during the nine months ended September 30, 2020 in connection with our acquisition of retail and wholesale assets. Lastly, we received $23.0 million from Circle K primarily in connection with the CST Fuel Supply Exchange that closed in March 2020.

Financing Activities

We paid ~~$65.7~~$59.8 million in distributions for the nine months ended September 30, 2021. We made net borrowings on our CAPL Credit Facility and JKM Credit Facility of $123.5 million and $160.0 million for the nine months ended September 30, 2021, respectively, primarily to fund the acquisition of assets from 7-Eleven and to pay $8.5 million in acquisition costs and $7.1 million of deferred financing costs. We paid $58.0 million in distributions and made net repayments on our ~~credit facility~~CAPL Credit Facility of ~~$10.0 million. For~~$11.5 million for the nine months ended September 30, 2016, we paid $62.2 million in distributions, made net borrowings of $96.1 million primarily to fund our Franchised Holiday Stores and State Oil Assets acquisitions, and purchased $3.3 million in common units under our common unit purchase program.2020.

Distributions

Distribution activity for ~~2017~~2021 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

$
20,826

June 30, 2017

August 7, 2017

August 14, 2017

$
0.6225

$
21,079

September 30, 2017

November 6, 2017

November 13, 2017

$
0.6275

$
21,326

Quarter Ended

Record Date

Payment Date

Cash Distribution

(per unit)

Cash Distribution

(in thousands)

December 31, 2020

February 2, 2021

February 9, 2021

0.5250

19,912

March 31, 2021

May 4, 2021

May 11, 2021

0.5250

19,916

June 30, 2021

August 3, 2021

August 10, 2021

0.5250

19,924

September 30, 2021

November 3, 2021

November 10, 2021

0.5250

19,941

~~IDRs~~

~~During the three and nine months ended September 30, 2017, we distributed $1.1 million and $3.2 million to CST / Couche-Tarde with respect to the IDRs, respectively.~~

~~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 participates in distributions pro rata with other common units.

Debt

As of September 30, ~~2017,~~2021, our ~~consolidated~~ debt and ~~capital~~finance lease obligations consisted of the following (in thousands):

$550 million revolving credit facility

$
431,484

Note payable

779

Capital lease obligations

27,728

Total debt and capital lease obligations

459,991

Current portion

2,884

Noncurrent portion

457,107

Deferred financing fees

(2,334
)
Noncurrent portion, net of deferred financing fees

$
454,773

CAPL Credit Facility	$	636,728
JKM Credit Facility		159,950
Finance lease obligations		17,736
Total debt and finance lease obligations		814,414
Current portion		9,923
Noncurrent portion		804,491
Deferred financing costs, net		8,865
Noncurrent portion, net of deferred financing costs	$	795,626

~~Our revolving credit facility is secured by substantially all of our assets. Our borrowings under~~Taking the ~~revolving credit facility had a weighted-average~~ interest rate ~~of 4.24%~~swap contracts into account, our effective interest rate on our CAPL Credit Facility at September 30, 2021 was 2.3% (our applicable margin was 2.0% as of September 30, ~~2017 (LIBOR plus an applicable margin, which was 3.00% as of September 30, 2017)~~2021). Letters of credit outstanding under our CAPL Credit Facility at September 30, ~~2017~~2021 totaled ~~$6.5~~$4.0 million.

Our effective interest rate on our JKM Credit Facility at September 30, 2021 was 2.6% (our applicable margin was 2.5% as of September 30, 2021). Letters of credit outstanding under our JKM Credit Facility at September 30, 2021 totaled $0.8 million.

See “Recent Developments—Acquisition of Assets from 7-Eleven” and Note 8 to the financial statements for information regarding a new credit agreement and an amendment of our existing credit agreement, both entered into in July 2021.

The amount of availability under ~~the revolving credit facility~~our CAPL Credit Facility at November ~~3, 2017,~~4, 2021, after taking into consideration debt covenant restrictions, was ~~$55.2~~$84.6 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 million in the aggregate~~

The amount of ~~borrowing~~ availability under the ~~revolving credit facility~~Term Loan Facility and unrestricted cash on the balance sheet on the date of such acquisition. We are required to maintain a total leverage ratio (as defined in the revolving credit facility) for the most recently completed four fiscal quarters of less than or equal to 4.50: 1.00, except for the first three full fiscal quarters following a material acquisition, generally defined as an acquisition with a purchase price ofRevolving Credit Facility at ~~least $30.0~~November 4, 2021 was $2.5 million ~~with a ratio of 5.00: 1.00,~~ and a consolidated interest coverage ratio (as defined in the revolving credit facility) of greater than or equal to 2.75: 1.00. The computation of our total leverage ratio allows for a pro forma application of the EBITDA (as defined in the revolving credit facility) of acquired entities and was 4.03: 1.00 as of September 30, 2017. As of September 30, 2017, we were in compliance with these financial covenant ratios.$14.2 million, respectively.

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~~CAPL Credit Facility, JKM Credit Facility, or, if available to us on acceptable terms, accessing the capital markets and 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 (in thousands):

	Nine Months Ended September 30,
	2021		2020
Sustaining capital	$	3,407	$	1,792
Growth		28,963		22,647
Acquisitions		261,993		28,244
Total capital expenditures and acquisitions	$	294,363	$	52,683

Growth capital expenditures increased primarily as a result of EMV upgrades and ~~acquisitions~~rebranding of certain sites, including the sites being acquired from 7-Eleven.

Contractual Obligations

Our contractual obligations as of September 30, 2021 are summarized below (in thousands):

	Payments Due by Period
	2021		2022		2023		2024		2025		Thereafter		Total
Long-term debt	$	—	$	9,597	$	9,597	$	646,325	$	9,597	$	121,562	$	796,678
Interest payments on debt		4,674		18,695		18,695		8,739		4,159		2,402		57,364
Finance lease obligations		804		3,282		3,381		3,481		3,583		4,926		19,457
Operating lease obligations		9,079		35,339		33,014		29,625		27,277		88,156		222,490
Total consolidated obligations	$	14,557	$	66,913	$	64,687	$	688,170	$	44,616	$	217,046	$	1,095,989

Long-Term Debt

See Note 8 to the financial statements for additional information on the CAPL Credit Facility and JKM Credit Facility.

Interest Payments on Debt

Such amounts include estimates of interest expense related to our CAPL Credit Facility and our JKM Credit Facility assuming a 2.3% interest rate and a 2.6% interest rate, respectively. The rate assumed on our CAPL Credit Facility takes into account the interest rate swap contracts.

Finance Lease Obligations

We have certain retail site properties under finance leases. Finance lease obligations in the table above include both principal and interest.

Operating Lease Obligations

The operating lease obligations include leases for land, office facilities and retail sites. Operating lease obligations reflected in the table above include all operating leases that have initial or remaining non-cancelable terms in excess of one year and are not reduced by minimum rentals to be received by us under subleases. In addition, such amounts do not reflect contingent rentals that may be incurred in addition to minimum rentals.

Our principal executive offices are in Allentown, Pennsylvania, in an office space leased from a related party. Future lease payments on this office lease are included within operating lease obligations. See Note 10 to the financial statements for additional information.

Other Liabilities

We have excluded asset retirement obligations and other liabilities for which the timing of payment or the amount is not determinable.

Under the terms of various supply agreements, the Partnership is obligated to minimum volume purchases measured in gallons of motor fuel. The aggregate dollar amount of the future minimum volume purchase requirements is dependent on the future weighted average wholesale cost per gallon charged under the applicable supply agreements. The amounts and timing of the related payment obligations cannot reasonably be estimated reliably. As a result, payment of these amounts has been excluded from the table above.

Other Matters Impacting Liquidity and Capital Resources

Concentration of Customers

Approximately 12% of our rent income for the nine months ended September 30, ~~2017 and 2016 (in thousands):~~

Nine Months Ended
September 30,

2017

2016

Sustaining capital

$
1,287

$
538

Growth

8,888

11,029

Acquisitions

2,779

97,073

Total capital expenditures and acquisitions

$
12,954

$
108,640

~~Other Matters Impacting Liquidity and Capital Resources~~

~~Concentration of Customers~~

For the nine months ended September 30, 2017, we distributed approximately 14% of our total wholesale distribution volumes to DMS and its affiliates and DMS and its affiliates accounted for approximately 23% of our rental income. For the nine months ended September 30, 2017, we distributed 8% of our total wholesale distribution volume to CST retail sites that are not supplied by CST Fuel Supply and received 22% of our rental income2021 was from ~~CST. For more information regarding transactions with DMS and its affiliates and CST, see Note 8 of the Condensed Notes to Consolidated Financial Statements.~~

~~For the nine months ended September 30, 2017, we received 9% of our rental income from a lessee dealer that operates certain of the retail sites acquired through the PMI and One Stop acquisitions.~~one multi-site operator.

Outlook

As noted previously, the prices paid to our motor fuel suppliers for wholesale motor fuel (which affects our ~~costs~~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, which affect our motor fuel gross profit. See “Significant Factors Affecting our Profitability—The Significance of Crude Oil and Wholesale Motor Fuel Prices on Our Revenues, Cost of Sales and Gross Profit” for additional information.

~~We expect our rent income~~Our results for 2021 relative to ~~increase in 2017 based on our recent acquisitions and our expectation that we will continue~~2020 are anticipated to ~~convert company operated retail sites to lessee dealers.~~be impacted by the following:

•

Transactions effected pursuant to the Asset Exchange Agreement entered into with Circle K are anticipated to increase motor fuel volume and motor fuel gross profit.

•

The CST Fuel Supply Exchange is anticipated to increase motor fuel volume and motor fuel gross profit.

•

The acquisition of retail and wholesale contracts from the Topper Group and certain other parties is anticipated to increase gross profit both within the Wholesale and Retail segments.

•

Our volume starting in mid-March 2020 was negatively impacted by the COVID-19 Pandemic. Although fuel volumes largely recovered during the second half of 2020 and continue to recover in 2021, we cannot predict the scope and severity with which COVID-19 will impact our results. See “Recent Developments—COVID-19 Pandemic” for additional information.

•

The acquisition of assets from 7-Eleven is anticipated to increase gross profit both within the Wholesale and Retail segments.

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~~There is no new ~~revenue~~ accounting guidance ~~requires enhanced disclosures~~effective or pending adoption that has had or is anticipated 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 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 have completed an assessment and to date, have not identified any material impact on the financial statements, although it will affect disclosures. This guidance is expected to apply to over 90% of our revenues as the only primary revenue stream outside the scope of this guidance is rental income. We anticipate using the modified retrospective method of adoption.

~~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.

~~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.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 priceNo significant changes to our ~~customers~~market risk have occurred since December 31, 2020. For a discussion of market risks affecting us, refer to Part II, Item 7A—"Quantitative and ~~related parties.~~

~~Interest Rate Risk~~

As of September 30, 2017, we had $431.5 million outstanding on our revolving credit facility. Our outstanding borrowings bear interest at LIBOR plus an applicable margin, which was 3.00% at September 30, 2017. Our borrowings had a weighted-average interest rate at September 30, 2017 of 4.24%. A one percentage point changeQualitative Disclosures About Market Risk” included in our ~~average rate would impact annual interest expense by approximately $4.3 million.~~Form 10-K.

~~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.

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 million related to these Terms Discounts.

~~Foreign Currency Risk~~

~~Our operations are located in the U.S., and therefore 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~~Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this ~~report, and based~~report. Based on ~~their~~this evaluation, our ~~principal executive officer~~Chief Executive Officer and ~~principal financial officer have~~Chief Financial Officer concluded that our disclosure controls and procedures were effective as of September 30, ~~2017.~~2021.

(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~~Rule 13a-15(f) under the Exchange Act) that occurred during the three months ended September 30, ~~2017,~~2021, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II - ~~OTH~~EROTHER 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 911 of the ~~Condensed Notes to Consolidated Financial Statements.~~financial statements.

ITEM 1A. RISK FACTORS

~~There were no material changes~~In addition to the other information set forth in ~~risk~~this report, you should carefully consider the factors ~~for the company~~discussed in ~~the period covered by this report. See the risk factors disclosed in the section entitled “Risk Factors”~~Part I, "Item 1A. Risk Factors" in our Form 10-K, ~~for~~as updated and supplemented below, which could materially affect our business, financial condition or future results. The risks described in this report and in our Form 10-K are not the ~~year ended December 31, 2016.~~only risks facing the Partnership. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or future results.

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

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

~~As discussed~~

In our current operating environment, due in ~~Note 8~~part to ~~Item 1~~COVID-19 and general macroeconomic factors, we are experiencing labor shortages in ~~Part I above,~~certain geographies. Outside suppliers that we rely on ~~February 28, 2017, May 10, 2017 and August 9, 2017, CrossAmerica issued 171,039, 128,983, and 124,003 common units to a subsidiary~~have also experienced shortages of ~~CST/Couche-Tard as partial payment for the amounts incurred for the fourth quarter~~qualified labor. The future success of ~~2016, the first quarter of 2017~~our operations depends on our ability, and the ~~second quarter~~ability of ~~2017 respectively, under~~third parties on which we rely, to identify, recruit, develop and retain qualified and talented individuals in order to supply and deliver our products. A prolonged shortage of qualified labor could decrease our ability to effectively operate our retail locations, which would negatively impact our business and could have a material adverse effect on our results of operations. A shortage would also likely result in increased costs from higher overtime, the ~~terms~~need to hire temporary help to meet demand, higher wage rates to attract and retain employees, and higher costs to purchase raw materials or services from such third parties, all of ~~the Amended Omnibus Agreement. This issuance~~which would negatively impact our results of ~~common units was made in reliance on Section 4(a)(2) of the Securities Act of 1933, as amended.~~operations.

ITEM 6. ~~EXHIBITS.~~EXHIBITS

Exhibit No.		Description

10.1 *		~~Award~~Second Amendment to the Credit Agreement, ~~for Phantom Units for Non-Employee Directors with distribution equivalent rights~~dated as of July 28, 2021, among CrossAmerica Partners LP and Lehigh Gas Wholesale Services, Inc., as borrowers, the guarantors from time to time party thereto, the lenders from time to time party thereto and Citizens Bank, N.A., as administrative agent

10.2 *		~~Asset Purchase~~Credit Agreement, dated ~~August 4, 2017, by~~as of July 16, 2021, among CAPL JKM Partners LLC, as borrower, CAPL JKM Holdings LLC, Manufacturers and ~~among CrossAmerica Partners LP~~Traders Trust Company, as administrative agent, swingline lender and ~~Jet-Pep, Inc.~~issuing bank and the other ~~persons listed as signatories in the Purchase Agreement~~lenders party thereto

10.3 *		First Amendment to the Credit Agreement, dated as of July 29, 2021, among CAPL JKM Partners LLC, as borrower, CAPL JKM Holdings LLC, Manufacturers and Traders Trust Company, as administrative agent, swingline lender and issuing bank and the other lenders party thereto

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 101.INS		Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

101.SCH 101.SCH		Inline XBRL Taxonomy Extension Schema Document

101.CAL 101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.LAB 101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE 101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document

101.DEF 101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document

104*		Cover Page Interactive Data File, formatted in Inline XBRL and contained in Exhibit 101

*	Filed herewith

†	Not considered to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that section.

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

Date: November ~~7, 2017~~8, 2021

3940

$550 million revolving credit facility	$	431,484
Note payable		779
Capital lease obligations		27,728
Total debt and capital lease obligations		459,991
Current portion		2,884
Noncurrent portion		457,107
Deferred financing fees		(2,334	)
Noncurrent portion, net of deferred financing fees	$	454,773