10-K 1 caplq42015form10k.htm 10-K 10-K
FORM 10-K
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
þ
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2015
OR
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from _______________ to _______________
Commission File No. 001-35711
CROSSAMERICA PARTNERS LP
(Exact name of registrant as specified in its charter)
Delaware
(State or Other Jurisdiction of Incorporation or Organization)
 
45-4165414
(I.R.S. Employer Identification No.)
515 Hamilton Street, Suite 200
Allentown, PA
(Address of Principal Executive Offices)
 
18101
(Zip Code)

(610) 625-8000
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: Common units representing limited partner interests, $0.01 par value per share listed on the New York Stock Exchange.
Securities registered pursuant to Section 12(g) of the Act: None.
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No þ
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No þ
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 þ No o
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 þ No o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. þ
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule12b-2 of the Exchange Act. Large accelerated filer o     Accelerated filer þ     Non-accelerated filer o     Smaller reporting company o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ
The aggregate market value of the voting and non-voting common stock held by non-affiliates was approximately $551.4 million based on the last sales price quoted as of June 30, 2015 on the New York Stock Exchange, the last business day of the registrant’s most recently completed second fiscal quarter.
As of February 17, 2016, the registrant had outstanding 25,585,922 common units and 7,525,000 subordinated units.
Documents Incorporated by Reference: None.



TABLE OF CONTENTS
 
PAGE
 
 
 
 
 
 




CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This annual report includes forward-looking statements, including in the sections entitled “Business, Risk Factors and Properties” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Forward-looking statements include the information concerning our possible or assumed future results of operations, business strategies, financing plans, competitive position, credit ratings, distribution growth, potential growth opportunities, potential operating performance improvements, potential improvements in return on capital employed, the effects of competition and the effects of future legislation or regulations. You can identify our forward-looking statements by the words “anticipate,” “estimate,” “believe,” “continue,” “could,” “intend,” “may,” “plan,” “potential,” “predict,” “seek,” “should,” “will,” “would,” “expect,” “objective,” “projection,” “forecast,” “guidance,” “outlook,” “effort,” “target” and similar expressions. Such statements are based on management’s current views and assumptions, and involve risks and uncertainties that could affect expected results. These forward-looking statements include, among other things, statements regarding:
future retail and wholesale gross profits, including gasoline, diesel and convenience store merchandise gross profits;
our anticipated level of capital investments, primarily through third party acquisitions and drop down transactions with CST, and the effect of these capital investments on our results of operations;
anticipated trends in the demand for, and volumes sold of, gasoline and diesel in the regions where we operate;
volatility in the capital and credit markets;
our ability to integrate acquired businesses and to transition retail sites to dealer operated sites;
expectations regarding environmental, tax and other regulatory initiatives; and
the effect of general economic and other conditions on our business.
In general, we based the forward-looking statements included in this annual report on our current expectations, estimates and projections about our company and the industry in which we operate. We caution you that these statements are not guarantees of future performance as they involve assumptions that, while made in good faith, may prove to be incorrect, and involve risks and uncertainties we cannot predict. In addition, we based many of these forward-looking statements on assumptions about future events that may prove to be inaccurate. Accordingly, our actual outcomes and results may differ materially from what we have expressed or forecasted in the forward-looking statements. Any differences could result from a variety of factors, including the following:
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 or governmental policies 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;

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the impact of worldwide economic and political conditions;
the impact of wars and acts of terrorism;
weather conditions or catastrophic weather-related damage;
earthquakes and other natural disasters;
hazards and risks associated with transporting and storing motor fuel;
unexpected environmental liabilities;
the outcome of pending or future litigation;
our ability to comply with federal and state regulations, including those related to environmental matters, the sale of alcohol, cigarettes and fresh foods, and employment laws and health benefits;
CST’s business strategy and operations and CST’s conflicts of interest with us.
You should consider the areas of risk described above, as well as those set forth in the section entitled “Risk Factors” included elsewhere in this annual report, in connection with considering any forward-looking statements that may be made by us and our businesses generally. We cannot assure you that projected results or events reflected in the forward-looking statements will be achieved or will occur. The forward-looking statements included in this report are made as of the date of this report. 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.

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PART I
ABOUT THIS ANNUAL REPORT
We use the following terms to refer to the items indicated:
“We,” “us,” “our” and “Partnership,” “CrossAmerica” or like terms refer to CrossAmerica Partners LP, a Delaware limited partnership, and, where appropriate in context, to one or more of its subsidiaries, or all of them taken as a whole.
“General Partner” refers to CrossAmerica GP, LLC, a Delaware limited liability company and our general partner.
“CST” refers to CST Brands, Inc., a Delaware corporation, and, where appropriate in context, to one or more of CST’s subsidiaries without the inclusion or consolidation of the operations or subsidiaries of CrossAmerica Partners LP. CST includes CST’s ownership of 100% of the equity interests in the General Partner, 100% of the outstanding incentive distribution rights of CrossAmerica Partners LP and any common units of CrossAmerica Partners LP owned by CST.
“Board” refers to the Board of Directors of our General Partner.
“IPO” refers to our initial public offering that occurred on October 30, 2012. In connection with the IPO, a portion of the business of Dunne Manning, Inc. (“DMI”) and its subsidiaries and affiliates was contributed to the Partnership.
“Partnership Agreement” refers to the First Amended and Restated Limited Partnership Agreement of CrossAmerica, as amended.
“Predecessor” or “Predecessor Entity” refer to the wholesale distribution business of Lehigh Gas - Ohio, LLC, and real property and leasehold interests contributed to us in connection with the IPO by Joseph V. Topper, Jr., our former Chief Executive Officer and continuing member of the Board. This was the portion of the business of DMI and its subsidiaries and affiliates contributed to the Partnership in connection with the IPO.
“Valero” refers to Valero Energy Corporation and, where appropriate in context, to one or more of its subsidiaries, or all of them taken as a whole.
The term “rack” refers to the price at which a wholesale distributor generally purchases motor fuel from an integrated oil company or refiner at the terminal.
The term “DTW” refers to dealer tank wagon contracts, which are variable cent per gallon priced wholesale motor fuel distribution or supply contracts.
The terms “affiliated dealers” or “DMS” refer to Dunne Manning Stores LLC (formerly known as Lehigh Gas-Ohio, LLC), an entity associated with Joseph V. Topper, Jr., a member of our Board and a related party. An affiliated dealer is an operator of retail motor fuel stations that purchases all of its motor fuel requirements from CrossAmerica on a wholesale basis under rack plus pricing. Affiliated dealers lease retail sites from CrossAmerica in accordance with a master lease agreement between the affiliated dealers and CrossAmerica.
The term “asset drops” refers to CST’s sale of ownership interests in its U.S. wholesale fuel supply business or its “New to Industry” real property (“NTI”) convenience stores to CrossAmerica.
Incentive distribution rights (“IDRs”) are partnership interests that provide for special distributions associated with increasing partnership distributions. CST is the owner of 100% of the outstanding IDRs of CrossAmerica.
The “GP Purchase” refers to CST’s purchase from Lehigh Gas Corporation (“LGC”) of 100% of the equity interests in the “General Partner” that was consummated on October 1, 2014. After the GP Purchase, the name of Lehigh Gas Partners LP was changed to CrossAmerica Partners LP.
The “IDR Purchase” refers to CST’s purchase of all of the membership interests in limited liability companies formed by the 2004 Irrevocable Agreement of Trust of Joseph V. Topper, Sr. and the 2008 Irrevocable Agreement of Trust of John B. Reilly, Jr., which owned all of the IDRs in Lehigh Gas Partners LP.
Concurrent with the GP Purchase and IDR Purchase, LGC changed its name to Dunne Manning, Inc. (“DMI”). DMI is a company controlled by Joseph V. Topper, Jr., a member of our Board.
The term Amended Omnibus Agreement refers to the Amended and Restated Omnibus Agreement, dated October 1, 2014, by and among CrossAmerica, the General Partner, DMI, DMS, CST Services LLC and Joseph V. Topper, Jr., which

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amends and restates the original omnibus agreement, which was executed in connection with CrossAmerica’s initial public offering on October 30, 2012.
The term “PMI” refers to our April 2014 acquisition of Petroleum Marketers, Incorporated, which resulted in the acquisition of retail sites in Virginia and West Virginia.
The term “Erickson” refers to our February 2015 acquisition of all of the outstanding capital stock of Erickson Oil Products, Inc. and separate purchases of certain related assets, which resulted in the acquisition of retail sites located in Minnesota, Michigan, Wisconsin and South Dakota.
The term “One Stop” refers to our July 2015 purchase of the company-operated One Stop convenience store network based in Charleston, West Virginia, along with commission agent sites, dealer fuel supply agreements and a freestanding franchised quick service restaurant.

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ITEMS 1., 1A., and 2. BUSINESS, RISK FACTORS AND PROPERTIES
Overview
CrossAmerica is a Delaware limited partnership primarily engaged in the wholesale distribution of motor fuel and the ownership and leasing of real estate used in the retail distribution of motor fuel. We also generate revenues from the operation of convenience stores.
On October 1, 2014, CST completed the GP Purchase and IDR Purchase for $17 million in cash and approximately 2 million shares of CST common stock for aggregate consideration of approximately $90 million. The General Partner manages the operations and activities of CrossAmerica. The General Partner is managed and operated by the Board and executive officers of the General Partner. As a result of the acquisition of the General Partner, CST controls the General Partner and has the right to appoint all members of the Board. Therefore, CST controls the operations and activities of CrossAmerica even though CST does not own a majority of CrossAmerica’s outstanding limited partner units.
The address of CrossAmerica’s principal executive offices is 515 Hamilton Street, Suite 200, Allentown, PA 18101, and our telephone number is (610) 625-8000. Our common units trade on the NYSE under the symbol “CAPL.”
The financial statements are comprised of CrossAmerica and its wholly-owned subsidiaries, and its operations are conducted by the following consolidated wholly-owned subsidiaries:
Lehigh Gas Wholesale LLC (“LGW”), which distributes motor fuels on a wholesale basis and generates qualified income under Section 7704(d) of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”);
LGP Realty Holdings LP (“LGPR”), which functions as the real estate holding company of CrossAmerica and holds the assets that generate rental income that is qualifying under Section 7704(d) of the Internal Revenue Code; and
Lehigh Gas Wholesale Services, Inc. (“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 the retail distribution of motor fuels, convenience items and rental income from leases of real property to a related party is not qualifying income under Section 7704(d) of the Internal Revenue Code.
We conduct our business through two operating segments, Wholesale and Retail. As of December 31, 2015, we distributed motor fuel at nearly 1,100 sites located in 25 states (Pennsylvania, New Jersey, Ohio, New York, Massachusetts, Kentucky, New Hampshire, Maine, Florida, Georgia, North Carolina, Maryland, Delaware, Tennessee, Virginia, Illinois, Indiana, West Virginia, Minnesota, Michigan, Wisconsin, South Dakota, Colorado, Rhode Island and Texas). Additionally, we receive rental income for sites we own in Arizona and New Mexico.
Available Information
CrossAmerica’s internet website is www.crossamericapartners.com. Information on this website is not part of this annual report. Annual reports on CrossAmerica’s Form 10-K, quarterly reports on its Form 10-Q and its current reports on Form 8-K filed with (or furnished to) the SEC are available on this website free of charge, soon after such material is filed or furnished. In this same location, CrossAmerica also posts its corporate governance guidelines, code of ethics and the charters of the committees of our Board. These documents are available in print to any unitholder that makes a written request to 515 Hamilton Street, Suite 200, Allentown, Pennsylvania 18101.
CST’s internet website is www.CSTBrands.com. Information on this website is not part of this annual report. Annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K filed with (or furnished to) the Securities and Exchange Commission (“SEC”) are available on this website free of charge, soon after such material is filed or furnished. In this same location, CST also posts its corporate governance guidelines, code of ethics and the charters of the committees of its Board of Directors. These documents are available in print to any stockholder that makes a written request to CST Brands, Inc. Attn: Corporate Secretary, One Valero Way, Building D, Suite 200, San Antonio, Texas 78249.
Operations
Wholesale Segment
Our primary operation is the wholesale distribution of motor fuel. Our Wholesale segment generated 2015 revenues of $1.9 billion. We are one of the ten largest independent distributors by volume in the United States for ExxonMobil, BP and Motiva, and we

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also distribute Chevron, Sunoco, Valero, Gulf, Citgo and Marathon-branded motor fuels (approximately 85% of the motor fuel we distributed during 2015 was branded). Branded motor fuels are purchased from major integrated oil companies and refiners under supply agreements. We take legal title to the motor fuel when we receive it at the rack and generally arrange for a third-party transportation provider to take delivery of the motor fuel at the rack and deliver it to the appropriate sites in our network. We receive a fixed mark-up per gallon on approximately 87% of our gallons sold. Our fixed mark-up per gallon contracts are impacted by the discount for prompt payment and other rebates and incentives offered by our suppliers. Prompt payment discounts from suppliers are based on a percentage of the purchase price of motor fuel and the dollar value of these discounts varies with motor fuel prices. As such, 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). We also generate a portion of our wholesale gross profit through DTW contracts, which are typically inversely correlated to the movement of crude oil prices (as crude oil prices decline, motor fuel gross profit generally increases). The increase in DTW gross profit is a result of the acquisition cost of motor fuel reducing at a faster rate as compared to the rate retail motor fuel prices decline. This spread can exist for a period of time, thus allowing the Partnership to potentially capture additional margin due to such price volatility.
The following table highlights the aggregate volume of motor fuel distributed by our Wholesale segment to each of our principal customer groups by gallons sold for the periods (in millions):
 
Year Ended December 31,
 
End of Year Sites
 
2015
 
2014
 
2013
 
2015
 
2014
 
2013
Gallons of motor fuel distributed to:
 
 
 
 
 
 
 
 
 
 
 
Independent dealers
418.1

 
396.9

 
237.5

 
370

 
416

 
256

Lessee dealers
169.7

 
143.8

 
126.5

 
290

 
205

 
191

Affiliated dealers
177.6

 
224.0

 
253.5

 
191

 
197

 
265

CST
77.3

 
4.9

 

 
43

 
21

 

Company operated retail convenience
   stores
133.1

 
45.1

 

 
115

 
87

 

Commission agents
75.6

 
73.0

 
20.3

 
66

 
75

 
54

Total
1,051.4

 
887.7

 
637.8

 
1,075

 
1,001

 
766

Independent Dealer Sites
The independent dealer owns or leases the property and owns all fuel and convenience store inventory.
We contract to exclusively distribute fuel to the independent dealer at a fixed mark-up per gallon and, in some cases, DTW.
Distribution contracts with independent dealers are typically 7 to 10 years in length.
As of December 31, 2015, the average remaining distribution contract term was 5.1 years.
Lessee Dealer Sites
We own or lease the property and then lease or sublease the site to a dealer.
The lessee dealer owns all fuel and convenience store inventory and sets its own pricing and gross profit margins.
We collect wholesale fuel margins at a fixed mark-up per gallon and, in some cases, DTW.
Under our distribution contracts, we agree to supply a particular branded motor fuel or unbranded motor fuel to a site or group of sites and arrange for all transportation.
Exclusive distribution contracts with dealers who lease property from us run concurrent in length to the site’s lease period (generally 3 to 10 years).
Leases are generally triple net leases.
As of December 31, 2015, the average remaining lease agreement term was 3.4 years.
Affiliated Dealer Sites
We own or lease the property and then lease or sublease the site to DMS.

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We entered into a 15-year motor fuel distribution agreement with DMS pursuant to which we distribute to DMS motor fuels at a fixed mark-up per gallon.
We entered into 15-year triple-net lease agreements with DMS pursuant to which DMS leases sites from us.
DMS owns motor fuel and convenience store inventory and sets its own pricing and gross profit margin.
As of December 31, 2015, the average remaining term on our fuel distribution agreements with DMS was 11.8 years. The average remaining term on our lease agreements with DMS was 12.1 years.
CST Sites
In conjunction with the joint acquisitions of Nice N Easy Grocery Shoppes (“Nice N Easy”) and Landmark Industries Stores (“Landmark”) with CST, we own the property and then lease or sublease the site to CST.
We entered into a 10-year fuel distribution agreement with CST, pursuant to which we distribute to CST motor fuels at a fixed mark-up per gallon.
We entered into 10-year triple-net lease agreements with CST pursuant to which CST leases sites from us.
CST owns all fuel and convenience store inventory and sets its own pricing and gross profit margin.
As of December 31, 2015, the remaining term on our fuel distribution agreement and lease terms associated with these acquisitions with CST was 8.9 years.
We also generate revenues through leasing or subleasing our real estate. We own or lease real and personal property and we lease or sublease to tenants, the substantial majority of which are wholesale customers as described above. As such, we manage our real estate leasing activities congruently with our wholesale business. We control nearly 56% of the properties that we lease to our dealers or utilize in our retail business. Our lease agreements with third party landlords have an average remaining lease term of 6.7 years as of December 31, 2015. Not all of the rental income we earn is a qualified source of income. Rental income from CST is not qualifying income.
Retail Segment
Our Retail segment generated 2015 revenues of $672.0 million. We own or lease and operate convenience stores, primarily through stores acquired in the PMI, Erickson and One Stop acquisitions. Subsequent to an acquisition, we evaluate the eventual long-term operation of each convenience store acquired: (a) to be integrated into the retail operations of CST, (b) to be converted into a dealer, or (c) other strategic alternatives, including divestiture or longer term operation as a retail site. By converting convenience stores into dealers, we continue to benefit from motor fuel distribution volumes as well as rental income from lease or sublease arrangements. For the year ended December 31, 2015, we converted 77 company-operated convenience stores in our Retail segment to the lessee dealer customer group in our Wholesale segment. As of December 31, 2015, we continue to operate 116 retail sites.
Company Operated Sites
We own or lease the property, operate the convenience store and retain all profits from motor fuel and convenience store operations.
We own the motor fuel inventory at the sites and set the motor fuel pricing at the sites.
We maintain inventory from the time of the purchase of motor fuels from third party suppliers until the retail sale to the end customer. The inventory amount at the sites averages about 3-days’ worth of motor fuel sales.
LGW distributes on a wholesale basis all of the motor fuel required by our company operated sites, which owns the motor fuel inventory and distributes motor fuel to retail customers. LGW records qualifying wholesale motor fuel distribution gross income and LGWS records the non-qualifying retail distribution gross income.
Commission Sites
We own or lease the property and then lease or sublease the site to the commission agent, who pays rent to us and operates all the non-fuel related operations at the sites for its own account.
We own the motor fuel inventory at the sites, set the motor fuel pricing at the sites, and generate revenue from the retail sale of motor fuels to the end customer.

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We pay the commission agent a commission for each gallon of fuel sold at the site.
LGW distributes fuel on a wholesale basis to LGWS, which owns the motor fuel inventory and distributes motor fuel to commission sites. LGW records qualifying wholesale motor fuel distribution gross income and LGWS records the non-qualifying retail gross income.
The following chart depicts how motor fuel is procured and distributed to our customer groups and how convenience merchandise items are procured and distributed to our company owned and operated convenience stores. The chart also depicts the relationship of our real estate activities to our customer groups.
Business Strategy and Objective
Our primary business objective is to make quarterly cash distributions to our unitholders and, over time, to increase our quarterly cash distributions. The amount of any distribution is subject to the discretion of the Board, and the Board may modify or revoke the cash distribution policy at any time. Our Partnership Agreement does not require us to pay any distributions.
Our business strategy to achieve our objective of paying and, over time, increasing our quarterly cash distributions, is focused on the following key initiatives:
Utilize our relationship with CST to maintain and grow our cash flow through joint acquisitions and asset drops;
Expand within and beyond our core markets through acquisitions. Since our IPO and through February 17, 2016, we have completed acquisitions for a total of over 400 fee and leasehold sites for total consideration of $800.0 million;
Enhance our real estate business’ cash flows by owning or leasing sites in prime locations;
Increase our wholesale motor fuel distribution business by expanding market share;
Maintain strong relationships with major integrated oil companies and refiners; and
Utilize operating knowledge to grow retail gross profits after acquisition of convenience stores.
We believe our competitive strengths will allow us to capitalize on our strategic opportunities, including:
Our relationship with CST, one of the largest independent retailers of motor fuel and convenience merchandise items in North America;

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Stable cash flows from real estate rent income and wholesale motor fuel distribution;
Established history of acquiring sites and successfully integrating these sites and operations into our existing business;
Long-term relationships with major integrated oil companies and refiners;
Convenience store operating expertise;
Prime real estate locations in areas with high traffic and considerable motor fuel consumption; and
Strong relationships with key suppliers.
As part of our business strategy with CST, we intend, pending approval by the Board of the General Partner’s independent conflicts committee and mutual agreement upon terms and other conditions, to purchase additional equity interests at fair market value in CST’s wholesale motor fuel supply business (“CST Fuel Supply”). In January 2015 and again in July 2015, we closed on the purchase of a 5% and 12.5%, respectively, limited partner equity interest in CST Fuel Supply. As of February 17, 2016, our total equity interest in CST Fuel Supply is 17.5%.
Additionally, we have issued common units to CST as consideration for asset drops and may, from time to time, issue common units as payment for charges incurred under the Amended Omnibus Agreement.
Supplier Arrangements
We distribute branded motor fuel under the Exxon, Mobil, BP, Shell, Chevron, Sunoco, Valero, Gulf, Citgo and Marathon brands to our customers. Branded motor fuels are purchased from major integrated oil companies and refiners under supply agreements. For the year ended December 31, 2015, our wholesale business purchased approximately 30%, 26% and 26% of its motor fuel from ExxonMobil, BP and Motiva, respectively. We purchase the motor fuel at the supplier’s applicable terminal rack price, which typically changes daily. Certain suppliers offer volume rebates or incentive payments to drive volumes and provide an incentive for branding new locations. Certain suppliers require that all or a portion of any such incentive payments be repaid to the supplier in the event that the sites are rebranded within a stated number of years. We also purchase unbranded motor fuel for distribution at a rack price. As of December 31, 2015, our supply agreements had a weighted-average remaining term of approximately 5.1 years.
Competition
Our wholesale motor fuel distribution business competes with other motor fuel distributors. Independent dealers may choose to purchase their motor fuel supplies directly from the major integrated oil companies. Major competitive factors for us include, among others, customer service, price and quality of service and availability of products.
The convenience store industry is highly competitive and characterized by ease of entry and constant change in the number and type of retailers offering products and services of the type we sell in our convenience stores. We compete with other convenience store chains, independently owned convenience stores, motor fuel stations, supermarkets, drugstores, discount stores, dollar stores, club stores and hypermarkets. Major competitive factors include, among others, location, ease of access, product and service selection, motor fuel brands, pricing, customer service, store appearance, cleanliness and perception of safety.
Seasonality
Our business exhibits substantial seasonality due to our wholesale and retail sites being located in certain geographic areas that are affected by seasonal weather and temperature trends and associated changes in retail customer activity during different seasons. Historically, sales volumes have been highest in the second and third quarters (during the summer activity months) and lowest during the winter months in the first and fourth quarters.
Trade Names, Service Marks and Trademarks
We are a wholesale distributor of motor fuel for various major integrated oil companies and are licensed to market/resell motor fuel under their respective motor fuel brands.
We are not aware of any facts that would negatively affect our continuing use of any trademarks, trade names or service marks.
Environmental Laws and Regulations
We are subject to extensive federal, state and local environmental laws and regulations, including those relating to underground storage tanks (“USTs”), the release or discharge of materials into the air, water and soil, waste management, pollution prevention measures, storage, handling, use and disposal of hazardous materials, the exposure of persons to hazardous materials, greenhouse

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gas emissions, and characteristics, composition, storage and sale of motor fuel and the health and safety of our employees. We incorporate by reference into this section our disclosures included in Note 2 under the captions “Environmental Matters” and “Asset Retirement Obligations” and Note 11 under the caption “Asset Retirement Obligations” of the notes to the consolidated financial statements included elsewhere in this annual report.
Other Regulatory Matters
Our retail sites are subject to regulation by federal, state, and/or local agencies and to licensing and regulations by state and local health, sanitation, safety, fire and other departments relating to the development and operation of retail sites, including regulations relating to zoning and building requirements and the preparation and sale of food.
Our retail operations are also subject to federal, state, and/or local laws governing such matters as wage rates, overtime, working conditions and citizenship requirements. At the federal, state and local levels where we operate, there are proposals under consideration from time to time to increase minimum wage rates.
Employees
As a result of our PMI, Erickson and One Stop acquisitions, as of December 31, 2015, we have 1,052 employees who provide services to our retail operations.
The General Partner manages the operations and activities of CrossAmerica. Under the Amended Omnibus Agreement, employees of CST provide management services to CrossAmerica. As of December 31, 2015, pursuant to the Amended Omnibus Agreement, 77 employees of CST provide exclusive management services to CrossAmerica.


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RISK FACTORS
If any of the following risks were to occur, our business, financial condition or results of operations could be materially and adversely affected. In that case, we might not be able to pay distributions on our common units, the trading price of our common units could decline and you could lose all or part of your investment. Also, please read “Cautionary Statement Regarding Forward-Looking Statements.”
Limited partner interests are inherently different from the capital stock of a corporation although many of the business risks to which we are subject are similar to those that would be faced by a corporation engaged in a similar business.
Risks Relating to Our Industry and Our Business
We may not have sufficient distributable cash from operations to enable us to pay our quarterly distribution following the establishment of cash available for distribution and payment of fees and expenses.
We may not have sufficient cash each quarter to pay our current quarterly distribution or any distribution.
The amount of cash we can distribute on our units principally depends upon the amount of cash we generate from our operations, which will fluctuate from quarter to quarter based on, among other things:
demand for motor fuel products in the markets we serve, including seasonal fluctuations, and the margin per gallon we earn selling and distributing motor fuel;
the wholesale price of motor fuel and its impact on the discounts we receive;
seasonal trends in the industries in which we operate;
the impact severe storms could have to our suppliers’ operations;
competition from other companies that sell motor fuel products or operate convenience stores in our targeted market areas;
the inability to identify and acquire suitable sites or to negotiate acceptable leases for such sites;
the potential inability to obtain adequate financing to fund our expansion;
the level of our operating costs, including payments to CST;
prevailing economic conditions;
regulatory actions affecting the supply of or demand for motor fuel, our operations, our existing contracts or our operating costs; and
volatility of prices for motor fuel.
In addition, the actual amount of cash we will have available for distribution will depend on other factors such as:
the level of capital expenditures we make;
the restrictions contained in our credit facility;
our debt service requirements;
the cost of acquisitions;
fluctuations in our working capital needs;
our ability to borrow under our credit facility to make distributions to our unitholders; and
the amount, if any, of cash reserves established by our General Partner in its discretion. 
There is no guarantee that we will distribute quarterly cash distributions to our unitholders in any quarter. See “Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities—Cash Distribution Policy.”

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The amount of cash we have available for distribution to unitholders depends primarily on our cash flow rather than on our  profitability, which may prevent us from making cash distributions, even during periods when we record net income.
The amount of cash we have available for distribution depends primarily on our cash flow, and not solely on profitability, which will be affected by non-cash items. As a result, we may make cash distributions during periods when we record losses for financial accounting purposes and may not make cash distributions during periods when we record net income for financial accounting purposes.
If we are unable to make acquisitions on economically acceptable terms from CST or third parties, our future growth and ability to increase distributions to unitholders will be limited.
Our strategy to grow our business and increase distributions to unitholders is dependent on our ability to make acquisitions that result in an increase in cash flow. Our growth strategy is based, in large part, on our expectation of ongoing divestitures of retail and wholesale fuel distribution assets by industry participants, including CST. CST has no contractual obligation to contribute any assets to us or accept any offer for its assets that we may choose to make. We may be unable to make accretive acquisitions for any of the following reasons:
we are unable to identify attractive acquisition candidates or negotiate acceptable purchase contracts for them;
we are unable to reach agreement with CST on economically acceptable terms for acquisitions of CST assets;
we are unable to raise financing for such acquisitions on economically acceptable terms, for example if the market price for our common units declines;
we are outbid by competitors; or
we or the seller are unable to obtain any necessary consents.
If we are unable to make acquisitions from CST or third parties, our future growth and ability to increase distributions to unitholders will be limited. In addition, if we consummate any future acquisitions, our capitalization and results of operations may change significantly. We may also consummate acquisitions, which at the time of consummation we believe will be accretive, but ultimately may not be accretive. If any of these events occurred, our future growth would be limited.
Any acquisitions, including future sales to us of assets by CST, are subject to substantial risks that could adversely affect our business, financial condition and results of operations and reduce our ability to make distributions to unitholders.
Any acquisitions, including any future sales of assets to us by CST, involve potential risks, including, among other things:
the validity of our assumptions about revenues, capital expenditures and operating costs of the acquired business or assets, as well as assumptions about achieving synergies with our existing business;
the incurrence of substantial unforeseen environmental and other liabilities arising out of the acquired businesses or assets, including liabilities arising from the operation of the acquired businesses or assets prior to our acquisition, for which we are not indemnified or for which the indemnity is inadequate;
the costs associated with additional debt or equity capital, which may result in a significant increase in our interest expense and financial leverage resulting from any additional debt incurred to finance the acquisition, or the issuance of additional common units on which we will make distributions, either of which could offset the expected accretion to our unitholders from any such acquisition and could be exacerbated by volatility in the equity or debt capital markets;
a failure to realize anticipated benefits, such as increased available cash per unit, enhanced competitive position or new customer relationships;
the inability to timely and effectively integrate the operations of recently acquired businesses or assets, particularly those in new geographic areas or in new lines of business;
a decrease in our liquidity by using a significant portion of our available cash or borrowing capacity to finance the acquisition;
the incurrence of other significant charges, such as impairment of goodwill or other intangible assets, asset devaluation or restructuring charges;
performance from the acquired assets and businesses that is below the forecasts we used in evaluating the acquisition;

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a significant increase in our working capital requirements;
competition in our targeted market areas;
customer or key employee loss from the acquired businesses; and
diversion of our management’s attention from other business concerns.
In addition, our ability to purchase or lease additional sites involves certain potential risks, including the inability to identify and acquire suitable sites or to negotiate acceptable leases or subleases for such sites and difficulties in adapting our distribution and other operational and management systems to an expanded network of sites.
Our reviews of businesses or assets proposed to be acquired are inherently imperfect because it generally is not feasible to perform an in-depth review of businesses and assets involved in each acquisition. Even a detailed review of assets and businesses may not necessarily reveal existing or potential problems, nor will it permit a buyer to become sufficiently familiar with the assets or businesses to fully assess their deficiencies and potential. For example, inspections may not always be performed on every asset, and environmental problems, such as groundwater contamination, are not necessarily observable even when an inspection is undertaken. Unitholders will not have the opportunity to evaluate the economic, financial and other relevant information that we will consider in determining the application of our funds and other resources toward the acquisition of certain businesses or assets.
Volatility in crude oil and wholesale motor fuel costs affect our business, financial condition and results of operations and our ability to make distributions to unitholders.
For the year ended December 31, 2015, motor fuel revenue accounted for 90% of our total revenues and motor fuel gross profit accounted for 51% of total gross profit. Wholesale motor fuel costs are directly related to, and fluctuate with, the price of crude oil. Volatility in the price of crude oil, and subsequently wholesale motor fuel prices, is caused by many factors, including general political conditions, acts of war or terrorism, instability in oil producing regions, particularly in the Middle East and South America, and the value of U.S. dollars relative to other foreign currencies, particularly those of oil producing nations. In addition, the supply of motor fuel and our wholesale purchase costs could be adversely affected in the event of a shortage or oversupply of product, which could result from, among other things, interruptions of fuel production at oil refineries, new supply sources, sustained increases or decreases in global demand or the fact that our motor fuel contracts do not guarantee an uninterrupted, unlimited supply of motor fuel.
Significant increases and volatility in wholesale motor fuel costs could result in lower gross profit dollars, as an increase in the retail price of motor fuel could impact consumer demand for motor fuel and convenience merchandise and could result in lower wholesale motor fuel gross profit dollars. Dramatic increases in oil prices reduce retail motor fuel gross profits, because wholesale motor fuel costs typically increase faster than retailers are able to pass them along to customers. In addition, significant decreases in oil prices and the corresponding decreases in wholesale motor fuel sales prices can result in lower revenues and gross profit margins, as our wholesale motor fuel gross profits include discounts from our suppliers calculated as a percentage of the cost of wholesale motor fuel. As the market prices of crude oil, and, correspondingly, the market prices of wholesale motor fuel, experience significant and rapid fluctuations, we attempt to pass along wholesale motor fuel price changes to our customers through retail price changes; however, we are not always able to do so immediately. The timing of any related increase or decrease in sales prices is affected by competitive conditions in each geographic market in which we operate. As such, our revenues and gross profit for motor fuel can increase or decrease significantly and rapidly over short periods of time and potentially adversely impact our business, financial condition, results of operations and ability to make distributions to our unitholders. The volatility in crude oil and wholesale motor fuel costs and sales prices makes it extremely difficult to forecast future motor fuel gross profits or predict the effect that future wholesale costs and sales price fluctuations will have on our operating results and financial condition.
Seasonality in wholesale motor fuel costs and sales, as well as merchandise sales, affect our business, financial condition and results of operations and our ability to make distributions to unitholders.
Oil prices, wholesale motor fuel costs, motor fuel sales volumes, motor fuel gross profits and merchandise sales often experience seasonal fluctuations. For example, consumer demand for motor fuel typically increases during the summer driving season and typically falls during the winter months. Travel, recreation and construction are typically higher in these months in the geographic areas in which we operate, increasing the demand for motor fuel and merchandise that we sell. Therefore, our revenues are typically higher in the second and third quarters of our fiscal year. A significant change in any of these factors, including a significant decrease in consumer demand (other than typical seasonal variations), could materially affect our motor fuel and merchandise volumes, motor fuel gross profit and overall customer traffic, which in turn could have a material adverse effect on our business, financial condition, results of operations and cash flows.

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Both the wholesale motor fuel distribution and the retail motor fuel industries are characterized by intense competition and fragmentation, and our failure to effectively compete could adversely affect our business, financial condition and results of operations and reduce our ability to make distributions to unitholders.
The markets for distribution of wholesale motor fuel and the sale of retail motor fuel are highly competitive and fragmented, which results in narrow margins. We have numerous competitors and some may have significantly greater resources and name recognition than we do. We rely on our ability to provide value added reliable services and to control our operating costs to maintain our margins and competitive position. If we were to fail to maintain the quality of our services, wholesale customers could choose alternative distribution sources and retail customers could purchase from other retailers, each decreasing our margins. Furthermore, there can be no assurance that major integrated oil companies will not decide to distribute their own products in direct competition with us or that large wholesale customers will not attempt to buy directly from the major integrated oil companies. The occurrence of any of these events could have a material adverse effect on our business, results of operations and our ability to make distributions.
Changes in credit or debit card expenses could reduce our gross profit, especially on motor fuel.
A significant portion of our sales involve payment using credit or debit cards. We are assessed fees as a percentage of transaction amounts and not as a fixed dollar amount or percentage of our gross profits. Higher motor fuel prices result in higher credit and debit card expenses, and an increase in credit or debit card use or an increase in fees would have a similar effect. Therefore, credit and debit card fees charged on motor fuel purchases that are more expensive as a result of higher motor fuel prices are not necessarily accompanied by higher gross profits. In fact, such fees may cause lower gross profits. Lower gross profits on motor fuel sales caused by higher fees may decrease our overall gross profit and could have a material adverse effect on our business, financial condition and results of operations.
General economic conditions that are largely out of our control could adversely affect our business, financial condition and results of operations and reduce our ability to make distributions to unitholders.
Recessionary economic conditions, higher interest rates, higher motor fuel and other energy costs, inflation, increases in commodity prices, higher levels of unemployment, higher consumer debt levels, higher tax rates and other changes in tax laws or other economic factors may affect consumer spending or buying habits, and could adversely affect the demand for products we sell at our retail sites. Unfavorable economic conditions, higher motor fuel prices and unemployment levels can affect consumer confidence, spending patterns and miles driven, with many customers “trading down” to lower priced products in certain categories when unfavorable conditions exist. These factors can lead to sales declines in both motor fuel and general merchandise, and in turn have an adverse impact on our business, financial condition and results of operations.
A tightening of credit in the financial markets or an increase in interest rates may make it more difficult for wholesale customers and suppliers to obtain financing and, depending on the degree to which it occurs, there may be a material increase in the nonpayment or other nonperformance by our customers and suppliers. Even if our credit review and analysis mechanisms work properly, we may experience financial losses in our dealings with these third parties. A material increase in the nonpayment or other nonperformance by our wholesale customers and/or suppliers could adversely affect our business, financial condition, results of operations and ability to make distributions to our unitholders.
Changes in consumer behavior and travel as a result of changing economic conditions, labor strikes or otherwise could adversely affect our business, financial condition and results of operations and reduce our ability to make distributions to unitholders.
In the retail motor fuel industry, customer traffic is generally driven by consumer preferences and spending trends, growth rates for commercial truck traffic and trends in travel and weather. Changes in economic conditions generally, or in the regions in which we operate, could adversely affect consumer spending patterns and travel in our markets. In particular, weakening economic conditions may result in decreases in miles driven and discretionary consumer spending and travel, which affect spending on motor fuel and convenience items. In addition, changes in the types of products and services demanded by consumers or labor strikes in the construction industry or other industries that employ customers who visit our stores, may adversely affect our sales and gross profit. Additionally, negative publicity or perception surrounding motor fuel suppliers could adversely affect their reputation and brand image, which may negatively affect our motor fuel sales and gross profit. Similarly, advanced technology and increased use of “green” automobiles (e.g., those automobiles that do not use petroleum-based motor fuel or that are powered by hybrid engines) would reduce demand for motor fuel. Our success depends on our ability to anticipate and respond in a timely manner to changing consumer demands and preferences while continuing to sell products and services that remain relevant to the consumer and thus will positively impact overall merchandise gross profit.

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Legal, technological, political and scientific developments regarding climate change and fuel efficiency may decrease demand for motor fuel.
Developments aimed at reducing greenhouse gas emissions’ contribution to climate change may decrease the demand or increase the cost for our major product, petroleum-based motor fuel. Attitudes toward this product and its relationship to the environment may significantly affect our effectiveness in marketing our product and sales. Government efforts to steer the public toward non-petroleum-based fuel dependent modes of transportation may foster a negative perception toward motor fuel or increase costs for our product, thus affecting the public’s attitude toward our major product. New technologies that increase fuel efficiency or offer alternative vehicle power sources or laws or regulations to increase fuel efficiency, reduce consumption or offer alternative vehicle power sources may result in decreased demand for petroleum-based motor fuel. We may also incur increased costs for our product which we may not be able to pass along to our customers. These developments could potentially have a material adverse effect on our business, financial condition and results of operations.
Future tobacco legislation, campaigns to discourage smoking, increased use of tobacco alternatives, increases in tobacco taxes and wholesale cost increases of tobacco products could adversely affect our business, financial condition and results of operations and reduce our ability to make distributions to unitholders.
Sales of tobacco products have historically accounted for a significant portion of our total sales of convenience store merchandise. Increases in wholesale cigarette costs and tax increases on tobacco products, as well as future legislation, national and local campaigns to discourage smoking in the U.S., and increased use of tobacco alternatives such as electronic cigarettes, may have an adverse effect on the demand for tobacco products, and therefore reduce our revenues and profits. Competitive pressures in our markets can make it difficult to pass price increases on to our customers. These factors could materially and adversely affect our retail price of cigarettes, cigarette unit volume and sales, merchandise gross profit and overall customer traffic. Reduced sales of tobacco products or smaller gross profits on the sales we make could have a material adverse effect on our business, financial condition and results of operations.
Currently, major cigarette manufacturers offer substantial rebates to retailers. We include these rebates as a component of our gross profit. In the event these rebates are no longer offered, or decreased, our profit from cigarette sales will decrease accordingly. In addition, reduced retail display allowances on cigarettes offered by cigarette manufacturers negatively affect gross profits. These factors could materially affect our retail price of cigarettes, cigarette unit volume and revenues, merchandise gross profit and overall customer traffic, which could in turn have a material adverse effect on our business, financial condition and results of operations.
We are subject to extensive government laws and regulations, and the cost of compliance with such laws and regulations can be material.
Our business and properties are subject to extensive local, state and federal governmental laws and regulations relating to, among other things, environmental conditions, the sale of alcohol, tobacco and money orders, employment conditions, including minimum wage requirements, and public accessibility requirements. The cost of compliance with these laws and regulations can have a material adverse effect on our operating results and financial condition. In addition, failure to comply with local, state, provincial and federal laws and regulations to which our operations are subject may result in penalties and costs that could adversely affect our business and our operating results.
In certain areas where our retail sites are located, state or local laws limit the retail sites’ hours of operation or their sale of alcoholic beverages, tobacco products, possible inhalants and lottery tickets, in particular to minors. Failure to comply with these laws could adversely affect our revenues and results of operations because these state and local regulatory agencies have the power to revoke, suspend or deny applications for and renewals of permits and licenses relating to the sale of these products or to seek other remedies, such as the imposition of fines or other penalties. Moreover, these laws may impact our sales volumes in general, as customers who purchase certain products such as alcoholic beverages typically buy other products when they shop. Laws that curtail the consumer’s ability to buy certain products at our convenience stores may curtail consumer demand for other products that we sell.
If a portion of our workforce were to create or become part of a labor union, we could be forced to increase our compensation levels in order to avoid work disruptions or stoppages. Any appreciable increase in the statutory minimum wage or unionization of our workforce could result in an increase in our labor costs and such cost increase, or the penalties for failing to comply with such statutory minimums, could adversely affect our business, financial condition and results of operations.
Further, U.S. health care reform legislation requires us to provide additional health insurance benefits to our employees, or health insurance coverage to additional employees, and has increased our costs and expenses.
Any changes in the laws or regulations described above that are adverse to us and our properties could affect our operating and financial performance. In addition, new regulations are proposed from time to time which, if adopted, could have a material adverse

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effect on our operating results and financial condition.
We are subject to extensive government laws and regulations concerning our employees, and the cost of compliance with such laws and regulations can be material.
Regulations related to wages and other compensation affect our business. Any appreciable increase in applicable employment laws and regulations, including the statutory minimum wage, exemption levels or overtime regulations could result in an increase in labor costs and such cost increase, or the penalties for failing to comply with such statutory minimums, could adversely affect our business, financial condition and results of operations.
Further, the Affordable Care Act and related reforms make and will continue to make sweeping and fundamental changes to the U.S. health care system. This requires us to provide additional health insurance benefits to the employees providing services to us, or health insurance coverage to additional employees, and as a result may increase our costs and expenses. In addition, we are directly and indirectly affected by new tax legislation and regulation and the interpretation of tax laws and regulations. This includes potential changes in tax laws or the interpretation of tax laws relating to incentive compensation such as profit interests. Changes in such legislation, regulation or interpretation could have an adverse effect on our incentive compensation structures and thereby affect our operating results and financial condition.
Any changes in the employment, benefit plan, tax or labor laws or regulations described above that are adverse to us could affect our operating and financial performance. In addition, new regulations are proposed from time to time which, if adopted, could have a material adverse effect on our employment practices, operating results and financial condition.
We are subject to extensive federal, state and local environmental laws, and the cost of complying with such laws may be material.
Our operations are subject to a variety of environmental laws and regulations, including those relating to emissions to the air, discharges into water, releases of hazardous and toxic substances and remediation of contaminated sites. Under various federal, state and local laws and regulations, we may, as the owner or operator, be liable for the costs of removal or remediation of contamination at our current locations or our former locations, whether or not we knew of, or were responsible for, the presence of such contamination. In particular, as an owner and operator of motor fueling stations, we face risks relating to petroleum product contamination that other convenience store operators not engaged in such activities would not face. The remediation costs and other costs required to clean up or treat contaminated sites could be substantial. Contamination on and from our current or former locations may subject us to liability to third parties or governmental authorities for injuries to persons, property or natural resources and may adversely affect our ability to sell or rent our properties or to borrow money using such properties as collateral.
In the U.S., persons who dispose of or arrange for the disposal or treatment of hazardous or toxic substances at third party sites may also be liable for the costs of removal or remediation of such substances at these disposal sites although such sites are not owned by such persons. Our current and historic operation of many locations and the disposal of contaminated soil and groundwater wastes generated during cleanups of contamination at such locations could expose us to such liability.
We are subject to extensive environmental laws and regulations regulating USTs and vapor recovery systems. Compliance with existing and future environmental laws regulating such tanks and systems may require significant expenditures. In the U.S., we pay fees to state “leaking UST” trust funds in states where they exist. These state trust funds are expected to pay or reimburse us for remediation expenses related to contamination associated with USTs subject to their jurisdiction. Such payments are always subject to a deductible paid by us, specified per incident caps and specified maximum annual payments, which vary among the funds.
Additionally, such funds may have eligibility requirements that not all of our sites will meet. To the extent state funds or other responsible parties do not pay or delay payments for remediation, we will be obligated to make these payments, which, in the aggregate, could materially adversely affect our financial condition and results of operations. We can give no assurance that these funds or responsible third parties are or will continue to remain viable. See Note 16 of the notes to consolidated financial statements included elsewhere in this annual report under the caption “Litigation Matters” for a discussion of certain allegations made against us related to the remediation activities of USTs.
Motor fuel operations present risks of soil and groundwater contamination. In the future, we may incur substantial expenditures for remediation of contamination that has not been discovered at existing locations or locations which we may acquire. We regularly monitor our facilities for environmental contamination and record liabilities on our financial statements to cover potential environmental remediation and compliance costs when probable to occur and reasonably estimable. However, we can make no assurance that the liabilities we have recorded are the only environmental liabilities relating to our current and former locations, that material environmental conditions not known to us do not exist, that future laws or regulations will not impose material environmental liability on us or that our actual environmental liabilities will not exceed our reserves. In addition, failure to comply

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with any environmental regulations or an increase in regulations could materially and adversely affect our operating results and financial condition.
Unfavorable weather conditions, the impact of climate change or other trends or developments in the regions in which we operate could adversely affect our business, financial condition and results of operations and reduce our ability to make distributions to unitholders.
Our retail sites are located in regions throughout the U.S. that are susceptible to certain severe weather events and potential impacts of climate change, such as hurricanes, severe thunderstorms, snowstorms, tornadoes and extreme heat and cold. Inclement weather conditions could damage our facilities, our suppliers or could have a significant impact on consumer behavior, travel and convenience store traffic patterns, as well as our ability to operate our retail sites. We could also be affected by regional occurrences, such as energy shortages or increases in energy prices, fires or other natural disasters. Besides these more obvious consequences of severe weather, our ability to insure these locations and the related cost of such insurance may also affect our business, financial condition and results of operations.
We could be adversely affected if we are not able to attract and retain a strong management team.
We are dependent on our ability to attract and retain a strong management team. If, for any reason, we are not able to attract and retain qualified senior personnel, our business, financial condition, results of operations and cash flows could be adversely affected. We also are dependent on our ability to recruit qualified convenience store and field managers. If we fail to attract and retain these individuals at reasonable compensation levels, our operating results may be adversely affected.
We depend on three principal suppliers for the majority of its motor fuel. A disruption in supply or a change in CrossAmerica’s relationship with any one of them could adversely affect our business, financial condition and results of operations and reduce our ability to make distributions to unitholders.
ExxonMobil Corporation, BP p.l.c. and Motiva Enterprises, LLC collectively supplied over 80% of CrossAmerica’s motor fuel purchases in 2015. CrossAmerica purchased approximately 30%, 26% and 26% of its motor fuel from ExxonMobil, BP and Motiva, respectively. A change of motor fuel suppliers, a disruption in supply or a significant change in pricing with any of these suppliers could have a material adverse effect on our business.
We rely on our suppliers to provide trade credit terms to adequately fund our on-going operations.
Our business is impacted by the availability of trade credit to fund motor fuel purchases and inventory purchases of our convenience stores. An actual or perceived downgrade in our liquidity or operations could cause our suppliers to seek credit support in the form of additional collateral, limit the extension of trade credit or otherwise materially modify their payment terms. Any material changes in the payments terms, including payment discounts, or availability of trade credit provided by our principal suppliers could impact our liquidity, results of operations and cash available for distribution to our unitholders.
Pending or future litigation could adversely affect our financial condition and results of operations. Litigation and publicity concerning motor fuel or food quality, health and other issues could result in significant liabilities or litigation costs and cause consumers to avoid our retail sites.
Convenience store businesses can be adversely affected by litigation and complaints from customers or government agencies resulting from motor fuel or food quality, illness or other health or environmental concerns or operating issues stemming from one or more locations. Additionally, we may become a party to individual personal injury, off-specification motor fuel, products liability, consumer protection act, contract disputes, wage and hour unemployment claims and other legal actions in the ordinary course of our business and we are occasionally exposed to industry-wide or class-action claims arising from the products we carry or industry-specific business practices. Adverse publicity about these allegations may negatively affect us, regardless of whether the allegations are true, by discouraging customers from purchasing motor fuel, merchandise or food at one or more of our retail sites. We could also incur significant liabilities if a lawsuit or claim results in a decision against us. Even if we are successful in defending such litigation, our litigation costs could be significant, and the litigation may divert time and money away from our operations and adversely affect our performance. Our defense costs and any resulting damage awards may not be fully covered by our insurance policies. Please see Note 16 of the notes to the consolidated financial statements included elsewhere in this annual report.
The dangers inherent in the storage and transport of motor fuel could cause disruptions and could expose us to potentially significant losses, costs or liabilities.
We store motor fuel in storage tanks at our retail sites. These operations are subject to significant hazards and risks inherent in storing and transporting motor fuel. These hazards and risks include, but are not limited to, fires, explosions, traffic accidents, spills, discharges and other releases, any of which could result in distribution difficulties and disruptions, environmental pollution,

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governmentally imposed fines or cleanup obligations, personal injury or wrongful death claims and other damage to our properties and the properties of others. Any such event could have a material adverse effect on our business, financial condition and results of operations.
We depend on transportation providers for the transportation of substantially all of our motor fuel. Thus, a change of providers or a significant change in our relationship with any of these providers could adversely affect our business, financial condition and results of operations and reduce our ability to make distributions to unitholders.
Substantially all of the motor fuel we distribute is transported from refineries to gas stations by third party carriers. A change of transportation providers, a disruption in service or a significant change in our relationship with any of these transportation carriers could have a material adverse effect on our business and results of operations.
We are subject to federal, state and local laws and regulations that govern the product quality specifications of the motor fuel that we distribute and sell.
Various federal, state and local agencies have the authority to prescribe specific product quality specifications to the sale of commodities. Changes in product quality specifications, such as reduced sulfur content in refined petroleum products, or other more stringent requirements for fuels, could reduce our ability to procure product and our sales volume, require us to incur additional handling costs, and/or require the expenditure of capital. If we are unable to procure product or to recover these costs through increased sales, our ability to meet our financial obligations could be adversely affected. Failure to comply with these regulations could result in substantial penalties.
Our motor fuel sales in our Wholesale segment are generated under contracts that must be renegotiated or replaced periodically. If we are unable to successfully renegotiate or replace these contracts, then our business, financial condition and results of operations and ability to make distributions to unitholders could be adversely affected.
Our Wholesale segment’s motor fuel sales are generated under contracts that must be periodically renegotiated or replaced. As these contracts expire, they must be renegotiated or replaced. We may be unable to renegotiate or replace these contracts when they expire, and the terms of any renegotiated contracts may not be as favorable as the contracts they replace. Whether these contracts are successfully renegotiated or replaced is often times subject to factors beyond our control. Such factors include fluctuations in motor fuel prices, counterparty ability to pay for or accept the contracted volumes and a competitive marketplace for the services offered by us. If we cannot successfully renegotiate or replace our contracts or must renegotiate or replace them on less favorable terms, sales from these arrangements could decline and CrossAmerica’s ability to make distributions to its unitholders could be adversely affected.
We rely on our IT systems and network infrastructure to manage numerous aspects of our business, and a disruption of these systems could adversely affect our business, financial condition and results of operations and reduce our ability to make distributions to unitholders.
We depend on our IT systems and network infrastructure to manage numerous aspects of our business and provide analytical information to management. These systems are an essential component of our business and growth strategies, and a serious disruption to them could significantly limit our ability to manage and operate our business efficiently. These systems are vulnerable to, among other things, damage and interruption from power loss or natural disasters, computer system and network failures, loss of telecommunications services, physical and electronic loss of data, security breaches and computer viruses, which could result in a loss of sensitive business information, systems interruption or the disruption of our business operations. To protect against unauthorized access or attacks, we have implemented infrastructure protection technologies and disaster recovery plans, but there can be no assurance that a technology systems breach or systems failure will not have a material adverse effect on our financial condition or results of operations.
Our business and our reputation could be adversely affected by the failure to protect sensitive customer, employee or vendor data, whether as a result of cyber security attacks or otherwise, or to comply with applicable regulations relating to data security and privacy.
In the normal course of our business as a motor fuel and merchandise retailer, we obtain large amounts of personal data, including credit and debit card information from our customers. While we have invested significant amounts in the protection of our IT systems and maintain what we believe are adequate security controls over individually identifiable customer, employee and vendor data provided to us, a breakdown or a breach in our systems that results in the unauthorized release of individually identifiable customer or other sensitive data could nonetheless occur.
Cyber attacks are rapidly evolving and becoming increasingly sophisticated. A successful cyber attack resulting in the loss of sensitive customer, employee or vendor data could adversely affect our reputation, results of operations, financial condition and

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liquidity, and could result in litigation against us or the imposition of penalties. Moreover, a security breach could require that we expend significant additional resources to upgrade further the security measures that we employ to guard against cyber attacks.
Our debt levels and debt agreement covenants may limit our flexibility in obtaining additional financing and in pursuing other business opportunities.
CrossAmerica has a significant amount of debt. At December 31, 2015, we had $385.5 million of total debt and $100.0 million of availability under the CrossAmerica revolving credit facility. See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity—Debt” for a discussion of our amended and restated credit facility entered into in March 2014. Our level of indebtedness could have important consequences to us, including the following:
our ability to obtain additional financing, if necessary, for working capital, capital expenditures, acquisitions or other purposes may be impaired or such financing may not be available on favorable terms;
covenants contained in our credit facility will require us to meet financial tests that may affect our flexibility in planning for and reacting to changes in our business, including possible acquisition opportunities;
we will need a substantial portion of our cash flow to make interest payments on our indebtedness, reducing the funds that would otherwise be available for operations, future business opportunities and distributions to unitholders;
our debt level will make us more vulnerable than our competitors with less debt to competitive pressures or a downturn in our business or the economy generally; and
our debt level may limit our flexibility in responding to changing business and economic conditions.
Our ability to service our indebtedness will depend upon, among other things, our future financial and operating performance, which will be affected by prevailing economic conditions and financial, business, regulatory and other factors, some of which are beyond our control. If our operating results are not sufficient to service our current or future indebtedness, we will be forced to take actions, such as reducing distributions, reducing or delaying our business activities, acquisitions, investments and/or capital expenditures, selling assets, restructuring or refinancing our indebtedness, or seeking additional equity capital or bankruptcy protection. We may not be able to effect any of these actions on satisfactory terms, or at all.
Our credit facility contains operating and financial restrictions that may limit our business, financing activities and ability to make distributions to unitholders.
The operating and financial restrictions and covenants in our credit facility and any future financing agreements could adversely affect our ability to finance future operations or capital needs or to engage, expand or pursue our business activities. For example, our credit facility may restrict our ability to:
make distributions if any potential default or event of default occurs;
incur additional indebtedness or guarantee other indebtedness;
grant liens or make certain negative pledges;
make certain loans or investments;
make any material change to the nature of our business, including mergers, consolidations, liquidations and dissolutions;
make capital expenditures in excess of specified levels;
acquire another company; or
enter into a sale-leaseback transaction or sale of assets.
Our credit facility will limit our ability to pay distributions upon the occurrence of the following events, among others:
failure to pay any principal when due or any interest, fees or other amounts when due;
failure of any representation or warranty to be true and correct in any material respect;
failure to perform or otherwise comply with the covenants in our credit facility or in other loan documents beyond the applicable notice and grace period;

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any default in the performance of any obligation or condition beyond the applicable grace period relating to any other indebtedness of more than $7.5 million;
failure of the lenders to have a perfected first priority security interest in the collateral pledged by any loan party;
the entry of a judgment in excess of $20.0 million, to the extent any payments pursuant to the judgment are not covered by insurance;
a change in management or ownership control;
a violation of the Employee Retirement Income Security Act of 1974, or “ERISA”; and
a bankruptcy or insolvency event involving us or any of our subsidiaries.
Our ability to comply with the covenants and restrictions contained in our credit facility may be affected by events beyond our control, including prevailing economic, financial and industry conditions. If market or other economic conditions deteriorate, our ability to comply with these covenants may be impaired. If we violate any of the restrictions, covenants, ratios or tests in our credit facility, the debt issued under the credit facility may become immediately due and payable, and our lenders’ commitment to make further loans to us may terminate. We might not have, or be able to obtain, sufficient funds to make these accelerated payments. In addition, our obligations under our credit facility will be secured by substantially all of our assets, and if we are unable to repay our indebtedness under our credit facility, the lenders could seek to foreclose on such assets.
We may not be able to lease sites we own or sub-lease sites we lease on favorable terms and any such failure could adversely affect our business, financial condition and results of operations and reduce our ability to make distributions to unitholders.
We may lease and/or sub-lease certain sites to lessee dealers, commission agents, CST or to DMS where the rent expense is more than the lease payments. If we are unable to obtain tenants on favorable terms for sites we own or lease, the lease payments we receive may not be adequate to cover our rent expense for leased sites and may not be adequate to ensure that we meet our debt service requirements. We cannot provide any assurance that the margins on our wholesale distribution of motor fuels to these sites will be adequate to off-set unfavorable lease terms. The occurrence of these events could adversely affect our results of operations and cash available for distribution to our unitholders.
The operations at sites we own or lease are subject to inherent risk, operational hazards and unforeseen interruptions and insurance may not adequately cover any such exposure. The occurrence of a significant event or release that is not fully insured could adversely affect our business, financial condition and results of operations and reduce our ability to make distributions to unitholders.
The presence of flammable and combustible products at our sites provides the potential for fires and explosions that could destroy both property and human life. Furthermore, our operations are subject to unforeseen interruptions such as natural disasters, adverse weather and other events beyond our control. Motor fuels also have the potential to cause environmental damage if improperly handled or released. If any of these events were to occur, we could incur substantial losses and/or curtailment of related operations because of personal injury or loss of life, severe damage to and destruction of property and equipment, and pollution or other environmental damage.
We are not fully insured against all risks incident to our business. We may be unable to maintain or obtain insurance of the type and amount we desire at reasonable rates. As a result of market conditions, premiums and deductibles for certain of our insurance policies have increased and could escalate further. In some instances, certain insurance could become unavailable or available only for reduced amounts of coverage. If we were to incur a significant liability for which we were not fully insured, it could have a material adverse effect on our financial position and ability to make distributions to unitholders.
We are relying on DMI to indemnify us for any costs or expenses that we incur for environmental liabilities and third-party claims, regardless of when a claim is made, that are based on environmental conditions in existence prior to the closing of the IPO at our Predecessor’s sites. To the extent escrow accounts, insurance and/or payments from DMI are not sufficient to cover any such costs or expenses, our business, financial condition and results of operations and ability to make distributions to unitholders could be adversely affected.
The Amended Omnibus Agreement provides that DMI must indemnify us for any costs or expenses that we incur for environmental liabilities and third-party claims, regardless of when a claim is made, that are based on environmental conditions in existence prior to the closing of the IPO at our Predecessor’s sites. DMI is the beneficiary of escrow accounts created to cover the cost to remediate certain environmental liabilities. In addition, DMI maintains insurance policies to cover environmental liabilities and/or, where

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available, participates in state programs that may also assist in funding the costs of environmental liabilities. There are certain sites that were acquired by us in connection with the IPO with existing environmental liabilities that are not covered by escrow accounts, state funds or insurance policies. As of December 31, 2015, DMI had an aggregate of approximately $2.0 million of environmental liabilities on sites acquired by us that are not covered by escrow accounts, state funds or insurance policies. To the extent escrow accounts, insurance and/or payments from DMI are not sufficient to cover any such costs or expenses, our business, liquidity and results of operations could be adversely affected.
Risks Inherent in an Investment in Us
CST controls us and may have conflicts of interest with us in the future.
Through its GP Purchase, effective October 1, 2014, CST controls the GP, including the election of directors; decisions regarding mergers, consolidations or acquisitions, the sale of all or substantially all of our assets and other matters affecting our capital structure; and other significant decisions that could impact our financial results and the amount of cash available for distribution. In addition, CST may compete directly with us for future acquisitions, which may conflict with our core strategy to grow our business and increase distributions to unitholders. As long as CST continues to own our General Partner, it will continue to be able to effectively control our decisions.
CST controls our General Partner, which has sole responsibility for conducting our business and managing our operations. Our General Partner and its affiliates, including CST, have conflicts of interest with us and limited fiduciary duties and they may favor their own interests to the detriment of us and our unitholders.
CST owns and controls our General Partner and has the ability to appoint all of the directors of our General Partner. Although our General Partner has a legal duty to manage in good faith, the executive officers and directors of our General Partner have a fiduciary duty to manage our General Partner in a manner beneficial to its owner, CST. Furthermore, certain officers of our General Partner are directors or officers of affiliates of our General Partner. Therefore, conflicts of interest may arise in the future between us and our unitholders, on the one hand, and our General Partner and CST, on the other hand. In resolving these conflicts of interest, our General Partner may favor its own interests and the interests of CST over our interests and the interests of our common unitholders. These conflicts include the following situations, among others:
our General Partner is allowed to take into account the interests of parties other than us, such as CST, in resolving conflicts of interest, which has the effect of limiting its fiduciary duty to our unitholders;
neither our Partnership Agreement nor any other agreement requires CST to pursue a business strategy that favors us;
some officers of our General Partner who will provide services to us will devote time to affiliates of our General Partner and may be compensated for services rendered to such affiliate;
our Partnership Agreement limits the liability of and reduces fiduciary duties owed by our General Partner and also restricts the remedies available to unitholders for actions that, without the limitations, might constitute breaches of fiduciary duty;
except in limited circumstances, our General Partner has the power and authority to conduct our business without unitholder approval;
our General Partner determines the amount and timing of asset purchases and sales, borrowings, issuances of additional partnership securities and the creation, reductions or increases of cash reserves, each of which can affect the amount of cash that is available for distribution to our unitholders, including distributions on our subordinated units, and to the holders of the incentive distribution rights, as well as the ability of the subordinated units to convert to common units;
our General Partner determines the amount and timing of any capital expenditures and whether a capital expenditure is classified as a maintenance capital expenditure, which reduces operating surplus. Such determination can affect the amount of cash available for distribution to our unitholders, including distributions on our subordinated units, and to the holders of the incentive distribution rights, as well as the ability of the subordinated units to convert to common units;
our General Partner may cause us to borrow funds in order to permit the payment of cash distributions, even if the purpose or effect of the borrowing is to make a distribution on the subordinated units, to make incentive distributions or to accelerate the expiration of the subordination period;
our Partnership Agreement permits us to distribute up to $15 million as operating surplus, even if it is generated from asset sales, non-working capital borrowings or other sources that would otherwise constitute capital surplus. This cash may be used to fund distributions on our subordinated units or the incentive distribution rights;

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our Partnership Agreement does not restrict our General Partner from causing us to pay it or its affiliates for any services rendered to us or entering into additional contractual arrangements with its affiliates on our behalf;
our General Partner intends to limit its liability regarding our contractual and other obligations;
our General Partner may exercise its right to call and purchase common units if it and its affiliates own more than 80% of the common units;
our General Partner controls the enforcement of obligations that it and its affiliates owe to us;
our General Partner decides whether to retain separate counsel, accountants or others to perform services for us;
the holders of our incentive distribution rights may transfer their incentive distribution rights without unitholder approval; and
our General Partner may elect to cause us to issue common units to the holders of our incentive distribution rights in connection with a resetting of the target distribution levels related to the incentive distribution rights without the approval of the conflicts committee of the Board or the unitholders. This election may result in lower distributions to the common unitholders in certain situations.
The Board may modify or revoke our cash distribution policy at any time at its discretion. Our Partnership Agreement does not require us to pay any distributions at all.
The Board has adopted a cash distribution policy pursuant to which we intend to distribute quarterly an amount at least equal to the minimum quarterly distribution of $0.4375 per unit on all of our units to the extent we have sufficient cash from our operations after the establishment of reserves and the payment of our expenses. However, the Board may change such policy at any time at its discretion and could elect not to pay distributions for one or more quarters. In addition, our credit facility includes certain restrictions on our ability to make distributions.
In addition, our Partnership Agreement does not require us to pay any distributions at all. Accordingly, investors are cautioned not to place undue reliance on the permanence of such a policy in making an investment decision. Any modification or revocation of our cash distribution policy could substantially reduce or eliminate the amounts of distributions to our unitholders. The amount of distributions we make, if any, and the decision to make any distribution at all will be determined by the Board, whose interests may differ from those of our common unitholders. Our General Partner has limited duties to our unitholders, which may permit it to favor its own interests or the interests of CST, to the detriment of our common unitholders.
We rely on the employees of CST to provide key services to our business pursuant to the Amended Omnibus Agreement. If our Amended Omnibus Agreement is terminated, we may not be able to find suitable replacements to perform such services for us without interruption to our business or increased costs.
Under our Amended Omnibus Agreement, CST provides us and our General Partner with the personnel necessary to support our management, administrative and operating services, including accounting, tax, legal, internal audit, risk management and compliance, environmental compliance and remediation management oversight, treasury, information technology and other administrative functions, as well as the management and operation of our wholesale distribution and retail business. If our Amended Omnibus Agreement is terminated, we may suffer interruptions to our business or increased costs to replace these services.
The liability of DMI and CST is limited under our Amended Omnibus Agreement and we have agreed to indemnify DMI and CST against certain liabilities, which may expose us to significant expenses.
The Amended Omnibus Agreement provides that we must indemnify DMI and CST for certain liabilities, including any liabilities incurred by CST attributable to the operating and administrative services provided to us under the agreement, other than liabilities resulting from DMI’s or CST’s bad faith, fraud, or willful misconduct, as applicable.
Our General Partner has and intends to limit its liability regarding our obligations.
Our General Partner has and intends to limit its liability under contractual arrangements between us and third parties so that the counterparties to such arrangements have recourse only against our assets, and not against our General Partner or its assets. Our General Partner may therefore cause us to incur indebtedness or other obligations that are nonrecourse to our General Partner. Our Partnership Agreement provides that any action taken by our General Partner to limit its liability is not a breach of our General Partner’s fiduciary duties, even if we could have obtained more favorable terms without the limitation on liability. In addition, we are obligated to reimburse or indemnify our General Partner to the extent that it incurs obligations on our behalf. Any such reimbursement or indemnification payments would reduce the amount of cash otherwise available for distribution to our unitholders.

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If we distribute a significant portion of our cash available for distribution to our partners, our ability to grow and make acquisitions could be limited.
We may determine to distribute a significant portion of our cash available for distribution to our unitholders. In addition, we expect to rely primarily upon external financing sources, including commercial bank borrowings and the issuance of debt and equity securities, to fund our acquisitions and expansion capital expenditures. To the extent we are unable to finance growth externally, distributing a significant portion of our cash available for distribution may impair our ability to grow.
In addition, if we distribute a significant portion of our cash available for distribution, our growth may not be as fast as that of businesses that reinvest their cash available for distribution to expand ongoing operations. To the extent we issue additional units in connection with any acquisitions or expansion capital expenditures, the payment of distributions on those additional units may increase the risk that we will be unable to maintain or increase our per unit distribution level. There are no limitations in our Partnership Agreement or our new credit facility on our ability to issue additional units, provided there is no default under the credit facility, including units ranking senior to the common units. The incurrence of additional commercial borrowings or other debt to finance our growth strategy would result in increased interest expense, which, in turn, may impact the cash available for distribution to our unitholders.
There are no limitations in our Partnership Agreement on our ability to issue units ranking senior to the common units.
In accordance with Delaware law and the provisions of our Partnership Agreement, we may issue additional partnership interests that are senior to the common units in right of distribution, liquidation and voting. The issuance by us of units of senior rank may (i) reduce or eliminate the amount of cash available for distribution to our common unitholders; (ii) diminish the relative voting strength of the total common units outstanding as a class; or (iii) subordinate the claims of the common unitholders to our assets in the event of our liquidation.
Our Partnership Agreement replaces our General Partner’s fiduciary duties to holders of our units.
Our Partnership Agreement contains provisions that eliminate and replace the fiduciary standards to which our General Partner would otherwise be held by state fiduciary duty law. For example, our Partnership Agreement permits our General Partner to make a number of decisions in its individual capacity, as opposed to in its capacity as our General Partner, or otherwise free of fiduciary duties to us and our unitholders. This entitles our General Partner to consider only the interests and factors that it desires and relieves it of any duty or obligation to give any consideration to any interest of, or factors affecting, us, our affiliates or our limited partners. Examples of decisions that our General Partner may make in its individual capacity include:
 how to allocate business opportunities among us and its affiliates;
whether to exercise its call right;
whether to elect to reset target distribution levels; and
whether or not to consent to any merger or consolidation of the partnership or amendment to the Partnership Agreement.
By purchasing a common unit, a unitholder is treated as having consented to the provisions in the Partnership Agreement, including the provisions discussed above.
Our Partnership Agreement restricts the remedies available to holders of our units for actions taken by our General Partner that might otherwise constitute breaches of fiduciary duty.
Our Partnership Agreement contains provisions that restrict the remedies available to unitholders for actions taken by our General Partner that might otherwise constitute breaches of fiduciary duty under state fiduciary duty law. For example, our Partnership Agreement:
 provides that whenever our General Partner makes a determination or takes, or declines to take, any other action in its capacity as our General Partner, our General Partner is required to make such determination, or take or decline to take such other action, in good faith, and will not be subject to any other or different standard imposed by our Partnership Agreement, Delaware law, or any other law, rule or regulation, or at equity;
provides that our General Partner will not have any liability to us or our unitholders for decisions made in its capacity as a General Partner so long as it acted in good faith, meaning that it believed that the decision was in the best interest of our partnership;

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provides that our General Partner and its officers and directors will not be liable for monetary damages to us or our limited partners resulting from any act or omission unless there has been a final and non-appealable judgment entered by a court of competent jurisdiction determining that our General Partner or its officers and directors, as the case may be, acted in bad faith or, in the case of a criminal matter, acted with knowledge that the conduct was criminal; and
provides that our General Partner will not be in breach of its obligations under the Partnership Agreement or its fiduciary duties to us or our limited partners if a transaction with an affiliate or the resolution of a conflict of interest is:
approved by the conflicts committee of the Board, although our General Partner is not obligated to seek such approval; or
approved by the vote of a majority of the outstanding common units, excluding any common units owned by our General Partner and its affiliates.
In connection with a situation involving a transaction with an affiliate or a conflict of interest, any determination by our General Partner must be made in good faith. If an affiliate transaction or the resolution of a conflict of interest is not approved by our common unitholders or the conflicts committee, then it will be presumed that, in making its decision, taking any action or failing to act, the Board acted in good faith, and in any proceeding brought by or on behalf of any limited partner or the partnership, the person bringing or prosecuting such proceeding will have the burden of overcoming such presumption.
Our General Partner’s affiliates may compete with us.
Our Partnership Agreement provides that our General Partner will be restricted from engaging in any business activities other than acting as our General Partner and those activities incidental to its ownership interest in us. Except as provided in the Amended Omnibus Agreement, affiliates of our General Partner are not prohibited from engaging in other businesses or activities, including those that might be in direct competition with us.
Pursuant to the terms of our Partnership Agreement, the doctrine of corporate opportunity, or any analogous doctrine, does not apply to our General Partner, CST or any of their affiliates, including their executive officers and directors. Any such person or entity that becomes aware of a potential transaction, agreement, arrangement or other matter that may be an opportunity for us will not have any duty to communicate or offer such opportunity to us. Any such person or entity will not be liable to us or to any limited partner for breach of any fiduciary duty or other duty by reason of the fact that such person or entity pursues or acquires such opportunity for itself, directs such opportunity to another person or entity or does not communicate such opportunity or information to us. This may create actual and potential conflicts of interest between us and affiliates of our General Partner and result in less than favorable treatment of us and our unitholders. Conflicts of interest may arise in the future between us and our unitholders, on the one hand, and the affiliates of our General Partner and CST, on the other hand. In resolving these conflicts, CST may favor their own interests over the interests of our unitholders.
CST, as the holder of our incentive distribution rights, may elect to cause us to issue common units to the holders of our incentive distribution rights in connection with a resetting of the target distribution levels related to the incentive distribution rights, without the approval of the conflicts committee of its board of directors or the holders of our common units. This could result in lower distributions to holders of our common units.
CST, as the holder of our incentive distribution rights, has the right, at any time when the holders of our incentive distribution rights have received incentive distributions at the highest level to which they are entitled (50%) for each of the prior four consecutive fiscal quarters, to reset the initial target distribution levels at higher levels based on our distributions at the time of the exercise of the reset election. Following such a reset election, the minimum quarterly distribution will be adjusted to equal the reset minimum quarterly distribution and the target distribution levels will be reset to correspondingly higher levels based on percentage increases above the reset minimum quarterly distribution.
If CST elects to reset the target distribution levels, it will be entitled to receive a number of common units. The number of common units to be issued to CST will equal the number of common units that would have entitled CST to an aggregate quarterly cash distribution in the prior quarter equal to the distributions to CST on the incentive distribution rights in the prior quarter. It is possible that CST could exercise this reset election at a time when it is experiencing, or expects to experience, declines in the cash distributions that CST receives related to the incentive distribution rights and may, therefore, desire to be issued common units rather than retain the right to receive incentive distributions based on the initial target distribution levels. This risk could be elevated if our incentive distribution rights are transferred to another party. As a result, a reset election may cause our common unitholders to experience a reduction in the amount of cash distributions that our common unitholders would have otherwise received had we not issued new common units to the holder of our incentive distribution rights in connection with resetting the target distribution levels.

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Holders of our common units have limited voting rights and are not entitled to elect our General Partner or its directors, which could reduce the price at which the common units will trade.
Unlike the holders of common stock in a corporation, unitholders have only limited voting rights on matters affecting our business and, therefore, limited ability to influence management’s decisions regarding our business. Unitholders will have no right on an annual or ongoing basis to elect our General Partner or its Board. The Board, including the independent directors, is chosen entirely by CST, as a result of its ownership of our General Partner, and not by our unitholders. Unlike publicly traded corporations, we will not conduct annual meetings of our unitholders to elect directors or conduct other matters routinely conducted at annual meetings of stockholders of corporations. As a result of these limitations, the price at which the common units will trade could be diminished because of the absence or reduction of a takeover premium in the trading price.
Even if holders of our common units are dissatisfied, they may not be able to remove our General Partner.
If our unitholders are dissatisfied with the performance of our General Partner, they will have limited ability to remove our General Partner. The vote of the holders of at least 66  23 % of all outstanding common and subordinated units voting together as a single class is required to remove our General Partner. As of February 17, 2016, CST owns approximately 18.7% of our outstanding common units. The Topper Group, including DMI, owns approximately 2.28% of our outstanding common units and 90.19% of our subordinated units, representing 22.5% of all currently outstanding units. Pursuant to a voting agreement, dated October 1, 2014, the Topper Group has agreed to vote such units in accordance with the recommendation of the board of directors of CST or the Board, respectively.
Our General Partner interest or the control of our General Partner may be transferred to a third party without unitholder consent.
Our General Partner may transfer its General Partner interest to a third party in a merger or in a sale of all or substantially all of its assets without the consent of our unitholders. Furthermore, our Partnership Agreement does not restrict the ability of the members of our General Partner to transfer its membership interests in our General Partner to a third party. The new members of our General Partner would then be in a position to replace the Board and executive officers of our General Partner with their own designees and thereby exert significant control over the decisions taken by the Board and executive officers of our General Partner. This effectively permits a “change of control” without the vote or consent of the unitholders.
Our General Partner has a call right that may require unitholders to sell their common units at an undesirable time or price.
If at any time our General Partner and its affiliates own more than 80% of the common units, our General Partner will have the right, but not the obligation, which it may assign to any of its affiliates or to us, to acquire all, but not less than all, of the common units held by unaffiliated persons at a price equal to the greater of (1) the average of the daily closing price of the common units over the 20 trading days preceding the date three days before notice of exercise of the call right is first mailed and (2) the highest per-unit price paid by our General Partner or any of its affiliates for common units during the 90-day period preceding the date such notice is first mailed. As a result, unitholders may be required to sell their common units at an undesirable time or price and may not receive any return or a negative return on their investment. Unitholders may also incur a tax liability upon a sale of their units. Our General Partner is not obligated to obtain a fairness opinion regarding the value of the common units to be repurchased by it upon exercise of the call right. There is no restriction in our Partnership Agreement that prevents our General Partner from issuing additional common units and exercising its call right. If our General Partner exercised its call right, the effect would be to take us private and, if the units were subsequently deregistered, we would no longer be subject to the reporting requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). As of December 31, 2015, the Topper Group, including DMI, owned approximately 3.32% of our outstanding common units and 90.19% of our subordinated units. On February 25, 2016, the end of the subordination period, assuming no additional issuances of units (other than upon the conversion of the subordination of units), the Topper Group, including DMI, will own 22.5% of our common units.
The market price of our common units could be adversely affected by sales of substantial amounts of our common units in the public or private markets, including sales by the Topper Group, DMI or other large holders.
As of February 17, 2016, we had 25,585,922 common units and 7,525,000 subordinated units outstanding. At the end of the subordination period, all of the subordinated units will convert into an equal number of common units. Sales by the Topper Group, DMI or other large holders of a substantial number of our common units in the public markets, or the perception that such sales might occur, could have a material adverse effect on the price of our common units or could impair our ability to obtain capital through an offering of equity securities. In addition, we have agreed to provide registration rights to the Topper Group, including DMI. Under our Partnership Agreement and pursuant to a registration rights agreement that we have entered into, the Topper Group and DMI have registration rights relating to the offer and sale of any units that they hold, subject to certain limitations.

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We may issue unlimited additional units without unitholder approval, which would dilute existing unitholder ownership interests.
Our Partnership Agreement does not limit the number of additional limited partner interests, including limited partner interests that rank senior to the common units that we may issue at any time without the approval of our unitholders. The issuance of additional common units or other equity interests of equal or senior rank could have the following effects:
 our existing unitholders’ proportionate ownership interest in us will decrease;
the amount of cash available for distribution on each unit may decrease;
because a lower percentage of total outstanding units will be subordinated units, the risk that a shortfall in the payment of the minimum quarterly distribution will be borne by our common unitholders will increase;
the ratio of taxable income to distributions may increase;
the relative voting strength of each previously outstanding unit may be diminished;
the claims of the common unitholders to our assets in the event of our liquidation may be subordinated; and
the market price of the common units may decline.
Our General Partner’s discretion in establishing cash reserves may reduce the amount of cash available for distribution to unitholders.
The Partnership Agreement requires our General Partner to deduct from operating surplus cash reserves that it determines are necessary to fund our future operating expenditures. The General Partner may reduce cash available for distribution by establishing cash reserves for the proper conduct of our business, to comply with applicable law or agreements to which we are a party or to provide funds for future distributions to partners. These cash reserves will affect the amount of cash available for distribution to unitholders.
Our Partnership Agreement restricts the voting rights of unitholders owning 20% or more of our common units.
Our Partnership Agreement restricts unitholders’ voting rights by providing that any units held by a person or group that owns 20% or more of any class of units then outstanding, other than our General Partner and its affiliates, their transferees and persons who acquired such units with the prior approval of the Board, cannot vote on any matter.
Management fees and cost reimbursements due to our General Partner and CST for services provided to us or on our behalf will reduce cash available for distribution to our unitholders. The amount and timing of such reimbursements will be determined by our General Partner.
Prior to making any distribution on the common units, we will pay CST the management fee and reimburse our General Partner and CST for all out-of-pocket third-party expenses they incur and payments they make on our behalf. Our partnership agreement provides that our General Partner will determine in good faith the expenses that are allocable to us. In addition, pursuant to the Amended Omnibus Agreement, CST will be entitled to reimbursement for certain expenses that they incur on our behalf. Our partnership agreement does not limit the amount of expenses for which our General Partner and CST may be reimbursed. The reimbursement of expenses and payment of fees, if any, to our General Partner and CST will reduce the amount of cash available to pay distributions to our unitholders.
Unitholders may have liability to repay distributions and in certain circumstances may be personally liable for the obligations of the partnership.
Under certain circumstances, unitholders may have to repay amounts wrongfully returned or distributed to them. Under Section 17-607 of the Delaware Revised Uniform Limited Partnership Act (the “Delaware Act”), we may not make a distribution to our unitholders if the distribution would cause our liabilities to exceed the fair value of our assets. Delaware law provides that for a period of three years from the date of the impermissible distribution, limited partners who received the distribution and who knew at the time of the distribution that it violated Delaware law will be liable to the limited partnership for the distribution amount. Liabilities to partners on account of their partnership interests and liabilities that are non-recourse to the partnership are not counted for purposes of determining whether a distribution is permitted.
It may be determined that the right, or the exercise of the right by the limited partners as a group, to (i) remove or replace our General Partner, (ii) approve some amendments to our Partnership Agreement or (iii) take other action under our Partnership Agreement constitutes “participation in the control” of our business. A limited partner that participates in the control of our business within the meaning of the Delaware Act may be held personally liable for our obligations under the laws of Delaware, to the same

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extent as our General Partner. This liability would extend to persons who transact business with us under the reasonable belief that the limited partner is a General Partner. Neither our Partnership Agreement nor the Delaware Act specifically provides for legal recourse against our General Partner if a limited partner were to lose limited liability through any fault of our General Partner.
The NYSE does not require a publicly traded partnership like us to comply with certain of its corporate governance requirements.
Our common units are listed on the NYSE. Because we are a publicly traded partnership, the NYSE does not require us to have a majority of independent directors on our General Partner’s board of directors. Additionally, the NYSE does not require us as a publicly traded partnership to maintain a compensation committee or a nominating and corporate governance committee. Accordingly, unitholders will not have the same protections afforded to certain corporations that are subject to all of the NYSE corporate governance requirements. Please read “Management—Management of CrossAmerica Partners LP.”
An increase in interest rates may cause the market price of our common units to decline and a significant increase in interest rates could adversely affect our ability to service our indebtedness.
Like all equity investments, an investment in our common units is subject to certain risks. Borrowings under the credit facility will bear interest at variable rates. If market interest rates increase, such variable-rate debt will create higher debt service requirements, which could adversely affect our cash flow and ability to make cash distributions. In exchange for accepting these risks, investors may expect to receive a higher rate of return than would otherwise be obtainable from lower-risk investments. Accordingly, as interest rates rise, the ability of investors to obtain higher risk-adjusted rates of return by purchasing government-backed debt securities may cause a corresponding decline in demand for riskier investments generally, including yield-based equity investments such as publicly traded limited partnership interests. Reduced demand for our common units resulting from investors seeking other more favorable investment opportunities may cause the trading price of our common units to decline.
The interest rate on our credit facility is variable; therefore, we have exposure to movements in interest rates. A significant increase in interest rates could adversely affect our ability to service our indebtedness. The increased cost could make the financing of our business activities more expensive. These added expenses could have an adverse effect on our financial condition, results of operations and cash available for distribution to our unitholders.
Tax Risks
Our tax treatment depends in large part on our status as a partnership for U.S. federal income tax purposes and our otherwise not being subject to a material amount of U.S. federal, state and local income or franchise tax. If the Internal Revenue Service (the “IRS”) were to treat us as a corporation for U.S. federal income tax purposes or if we were to otherwise be subject to a material amount of additional entity level income, franchise or other taxation for U.S. federal, state or local tax purposes, then our cash available for distribution to our unitholders would be substantially reduced.
The anticipated after-tax benefit of an investment in our common units depends largely on our being treated as a partnership for U.S. federal income tax purposes. A publicly traded partnership, such as us, may be treated as a corporation for U.S. federal income tax purposes unless 90% or more of its gross income for every taxable year it is publicly traded consists of qualifying income. Based on our current operations we believe that we will be able to satisfy this requirement and, thus, be able to be treated as a partnership, rather than a corporation, for U.S. federal income tax purposes. However, a change in our business, or a change in current law, could also cause us to be treated as a corporation for U.S. federal income tax purposes or otherwise subject us to entity-level taxation.
If we were required to be treated as a corporation for U.S. federal income tax purposes or otherwise subject to entity-level taxation, then we would pay U.S. federal income tax on our taxable income at the corporate tax rate which, under current law, is a maximum of 35%. We would also likely pay state and local income tax at varying rates. Distributions to our unitholders would generally be taxed again as either a dividend (to the extent of our current and accumulated earnings and profits) and/or as taxable gain after recovery of a unitholder’s U.S. federal income tax basis in their units, and no income, gains, losses, deductions or credits would flow through to our unitholders. Because a U.S. federal income tax would be imposed upon us as a corporation, our cash available for distribution to our unitholders would be substantially reduced. Thus, treatment of us as a corporation would result in a material reduction in the anticipated cash flow and after-tax return to our unitholders, likely causing a substantial reduction in the value of our common units.
At the state level, were we to be subject to federal income tax, we would also be subject to the income tax provisions of many states. Moreover, because of widespread state budget deficits and other reasons, several states are evaluating ways to independently subject partnerships to entity-level taxation through the imposition of state income taxes, franchise taxes and other forms of taxation. For example, we are required to pay Texas margin tax on our gross income apportioned to Texas. Imposition of any additional such taxes on us or an increase in the existing tax rates would reduce the cash available for distribution to our unitholders.

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Our Partnership Agreement provides that if a law is enacted or existing law is modified or interpreted in a manner that results in us becoming subject to either: (a) entity-level taxation for U.S. federal, state, local and/or foreign income and/or withholding tax purposes to which we were not subject prior to such enactment, modification or interpretation, and/or (b) an increased amount of one or more of such taxes (including as a result of an increase in tax rates), then the minimum quarterly distribution amounts and the target distribution amounts may be adjusted (i.e., reduced) to reflect the impact of that law on us.
We have subsidiaries that are treated as corporations for U.S. federal income tax purposes and are subject to entity-level U.S. federal, state and local income and franchise tax.
We conduct a portion of our operations and business through one or more direct and indirect subsidiaries that are treated as corporations for federal income tax purposes (including LGWS). We may elect to conduct additional operations through these corporate subsidiaries in the future. These corporate subsidiaries are subject to corporate-level taxes, which reduce the cash available for distribution to us and, in turn, to unitholders. If the IRS were to successfully assert that these corporations have more tax liability than we anticipate or legislation were enacted that increased the corporate tax rate, our cash available for distribution to unit holders would be further reduced.
A significant amount of our income is attributable to our leasing of real property to DMS. If DMS were to become related to us for U.S. federal income tax purposes, the real property rents that we receive from DMS would no longer constitute qualifying income and we would likely be treated as a corporation for U.S. federal income tax purposes.
A significant amount of our qualifying income is composed of real property rents from DMS attributable to the sites that DMS leases from us. In general, any real property rents that we receive from a tenant or sub-tenant of ours in which we, directly or indirectly, own or are treated as owning by reason of the application of certain constructive ownership rules: (a) at least 10% of such tenant’s or sub-tenant’s stock (voting power or value) in the case where such tenant or sub-tenant is a corporation for U.S. federal income tax purposes, or (b) an interest of at least 10% of such tenant’s or sub-tenant’s assets or net profits in the case where such tenant or sub-tenant is not a corporation for U.S. federal income tax purposes (as would be the case with respect to DMS), would not constitute qualifying income. After applying certain constructive ownership rules, we will be treated as owning the 5% interest in the assets and net profits of DMS that Joseph V. Topper, Jr. actually and constructively owns. If we were considered to directly or indirectly own an interest of 10% or more of the assets or net profits of DMS, then the real property rents that we receive from DMS would no longer constitute qualifying income in which case, based on our current operations, we would likely no longer qualify to be treated as a “partnership” (and instead would be treated as a corporation) for U.S. federal income tax purposes.
Our and DMS’ governing documents contain transfer restrictions designed to prevent us from being treated as directly or indirectly owning by reason of the application of constructive ownership rules an interest of 10% or more of DMS’ assets or net profits. We received an opinion of counsel at the closing of the IPO that transfer restrictions are generally enforceable under Delaware law, but a court could determine that these restrictions are inapplicable or unenforceable.
The tax treatment of publicly traded partnerships or an investment in our common units could be subject to potential legislative, judicial or administrative changes and differing interpretations, possibly on a retroactive basis.
The present U.S. federal income tax treatment of publicly traded partnerships, including us, or of an investment in our common units may be modified by administrative, legislative or judicial changes or differing interpretations at any time. For example, the Obama Administration’s budget proposal for fiscal year 2017 recommends that certain publicly traded partnerships earning income from activities related to fossil fuels be taxed as corporations beginning in 2022. From time to time, members of Congress propose and consider such substantive changes to the existing federal income tax laws that affect publicly traded partnerships. If successful, the Obama Administration’s proposal or other similar proposals could eliminate the qualifying income exception upon which we rely for our treatment as a partnership for U.S. federal income tax purposes.
Any modification to the U.S. federal income tax laws may be applied retroactively and could make it more difficult or impossible for us to be treated as a partnership for U.S. federal income tax purposes. We are unable to predict whether any of these changes or other proposals will ultimately be enacted. Any such changes could negatively impact the value of an investment in our common units.
If the IRS contests the U.S. federal income tax positions we take, the market for our common units may be adversely impacted and the costs of any contest will reduce our cash available for distribution to our unitholders. We have not requested any ruling from the IRS with respect to our treatment as a partnership for U.S. federal income tax purposes or any other U.S. federal income tax matter affecting us. The IRS may adopt positions that differ from the positions we take. It may be necessary to resort to administrative or court proceedings to sustain some or all of the positions we take. A court may not agree with some or all of the positions we take. Any contest with the IRS may materially and adversely impact the market for our common units and the price at which they trade. In addition, the costs of any contest with the IRS, which will be borne indirectly by our unitholders and our General Partner, will result in a reduction in cash available for distribution.

30



Our unitholders are required to pay taxes on their share of income from us even if they do not receive any cash distributions from us.
Our unitholders are required to pay U.S. federal income taxes and, in some cases, state and local taxes, on their allocable share of our taxable income and gain even if they do not receive any cash distributions from us. Our unitholders may not receive cash distributions from us equal to their share of our taxable income or even equal to the actual tax due with respect to that income.
Tax gain or loss on the disposition of our common units could be more or less than expected.
If a unitholder sells common units, the unitholder will recognize a gain or loss equal to the difference between the amount realized and that unitholder’s tax basis in those common units. Distributions per common unit in excess of a unitholder’s allocable share of our net taxable income result in a decrease in that unitholder’s tax basis in its common units. The amount of this decreased tax basis, with respect to the units sold will, in effect, become taxable income to that unitholder, if that unitholder sells such units at a price greater than that unitholder’s tax basis in those units, even if the sales price received is less than the original cost. Furthermore, a substantial portion of the amount realized, whether or not representing gain, may be taxed as ordinary income due to potential recapture of depreciation and amortization deductions and certain other items. In addition, because the amount realized includes a unitholder’s share of our non-recourse liabilities, if a unitholder sells units, that unitholder may incur a tax liability in excess of the amount of cash received from the sale.
Tax-exempt organizations and non-U.S. persons face unique tax issues from owning common units that may result in adverse tax consequences to them.
Investment in our common units by an organization that is exempt from U.S. federal income tax, such as employee benefit plans, individual retirement accounts (or “IRAs”), and non-U.S. persons raises issues unique to them. For example, a substantial amount of our U.S. federal taxable income and gain constitute gross income from an unrelated trade or business and the amount thereof allocable to a tax-exempt organization would be taxable to such organization as unrelated business taxable income. Distributions to a non-U.S. person that holds our common units will be reduced by U.S. federal withholding taxes imposed at the highest applicable U.S. federal income tax rate and such non-U.S. person will be required to file U.S. federal income tax returns and pay U.S. federal income tax, to the extent not previously withheld, on his, her or its allocable share of our taxable income and gain. Any tax-exempt organization or a non-U.S. person should consult its tax advisor before investing in our common units.
Our unitholders are subject to state and local income taxes and return filing requirements in states and localities where they do not live as a result of investing in our common units.
In addition to U.S. federal income taxes, our unitholders will likely be subject to other taxes, such as foreign, state and local income taxes, unincorporated business taxes and estate, inheritance or intangible taxes that are imposed by the various jurisdictions in which we do business or own property, even if they do not live in any of those jurisdictions. Our unitholders will likely be required to file state and local income tax returns and pay state and local income taxes in some or all of these various jurisdictions. Further, our unitholders may be subject to penalties for failure to comply with those requirements. We currently conduct business in Pennsylvania, New Jersey, Tennessee, Georgia, Ohio, New York, Massachusetts, Kentucky, New Hampshire, Maine, Florida, Maryland, Minnesota, Michigan, Wisconsin, South Dakota, Texas, Delaware, North Carolina, Illinois and Virginia. Each of these states (other than Florida and Texas) currently imposes a personal income tax on individuals (except that Tennessee only imposes a personal income tax on interest and dividends and New Hampshire only imposes a personal income tax on interest, dividends and gambling winnings) as well as an income, business profits and/or a franchise tax on corporations and other entities. We may own property or conduct business in other states, localities or foreign countries in the future. It is the responsibility of each unitholder to file all U.S. federal, state, local and foreign tax returns. Our counsel has not rendered an opinion on the state, local or non U.S. tax consequences of an investment in our common units.
We will treat each purchaser of our common units as having the same tax benefits without regard to the actual common units purchased. The IRS may challenge this treatment, which could adversely affect the value of the common units.
Because we cannot match transferors and transferees of common units, we will adopt depreciation and amortization positions that may not conform to all aspects of existing Treasury Regulations. A successful IRS challenge to those positions could adversely affect the amount of U.S. federal income tax benefits available to our unitholders. It also could affect the timing of these tax benefits or the amount of gain for U.S. federal income tax purposes from any sale of common units and could have a negative impact on the value of our common units or result in audit adjustments to a unitholder’s U.S. federal income tax returns.

31



We prorate our items of income, gain, loss and deduction for U.S. federal income tax purposes, and allocate them, between transferors and transferees of our common units each month based upon the ownership of our common units on the first business day of each month and as of the opening of the applicable exchange on which our common units are listed, instead of on the basis of the date a particular common unit is transferred. The IRS may challenge this treatment, which could change the allocation of items of income, gain, loss and deduction among our unitholders.
We generally prorate our items of income, gain, loss and deduction between transferors and transferees of our common units each month based upon the ownership of our common units on the first day of each month, instead of on the basis of the date a particular common unit is transferred. The use of this proration method may not be permitted under existing Treasury Regulations and although the U.S. Treasury Department issued proposed Treasury Regulations allowing a similar monthly simplifying convention, such regulations are not final and do not specifically authorize the use of the proration method we have adopted. If the IRS were to successfully challenge our proration method or new Treasury Regulations were to be issued, we may be required to change the allocation of items of income, gain, loss and deduction among our unitholders.
If a unitholder loans their common units to a short seller to cover a short sale of common units, they may be considered to have disposed of those common units for U.S. federal income tax purposes. If so, the unitholder would no longer be treated for U.S. federal income tax purposes as a partner with respect to those common units during the period of the loan and they may recognize gain or loss from such deemed disposition.
During the period of the loan of common units to the short seller, any of our income, gain, loss or deduction with respect to such common units may not be reportable by the respective unitholder and any cash distributions received by the unitholder as to those common units could be fully taxable to them as ordinary income. Our counsel has not rendered an opinion regarding the treatment of a unitholder where common units are loaned to a short seller to cover a short sale of common units. Unitholders desiring to assure their status as partners and avoid the risk of gain recognition from a loan of their common units are urged to modify any applicable brokerage account agreements to prohibit their brokers from borrowing their common units.
We have adopted certain valuation methodologies that may result in a shift of income, gain, loss and deduction between our General Partner and the unitholders. The IRS may challenge this treatment, which could adversely affect the value of the common units.
When we issue additional units or engage in certain other transactions, our General Partner will determine the fair market value of our assets and allocate any unrealized gain or loss attributable to our assets to the capital accounts of our unitholders and our General Partner. Although we may from time to time consult with professional appraisers regarding valuation matters, including the valuation of our assets, our General Partner will make many of the fair market value determinations of our assets using a methodology based on the market value of our common units as a means to measure the fair market value of our assets. Our methodology may be viewed as understating or overstating the value of our assets. In that case, there may be a shift of income, gain, loss and deduction between certain unitholders and our General Partner, which may be unfavorable to such unitholders. The IRS may challenge our valuation methods and allocations of income, gain, loss and deduction between our General Partner and certain of our unitholders.
A successful IRS challenge to these methods or allocations could adversely affect the amount of taxable income, gain or loss being allocated to our unitholders for U.S. federal income tax purposes. It also could affect the amount of taxable gain from our unitholders’ sale of common units and could have a negative impact on the value of the common units or result in audit adjustments to our unitholders’ U.S. federal income tax returns without the benefit of additional deductions.
The sale or exchange of 50% or more of the total interest in our capital and profits within a twelve-month period will result in the termination of our partnership for U.S. federal income tax purposes.
We will be considered to have technically terminated as a partnership for U.S. federal income tax purposes if there is a sale or exchange of 50% or more of the total interest in our capital and profits within a twelve-month period. For purposes of determining whether a technical tax termination has occurred, a sale or exchange of 50% or more of the total interest in our capital and profits could occur, if for example, when added to regular market trading, the Topper Group, which owns collectively approximately 22.5% of the total interest in our capital and profits, were to sell or exchange their collective interest in us within a period of twelve months. For purposes of determining whether the 50% threshold has been met, multiple sales of the same interest will be counted only once. Our technical termination would, among other things, result in the closing of our taxable year for all unitholders, which could result in us filing two U.S. federal income tax returns (and unitholders receiving two Schedule K-1s) for one calendar year. However, pursuant to an IRS relief procedure the IRS may allow, among other things, a constructively terminated partnership to provide a single Schedule K-1 for the calendar year in which a termination occurs. Our technical termination could also result in the re-starting of the recovery period for our assets (and, thus, result in a significant deferral of depreciation and amortization deductions allowable in computing our U.S. federal taxable income). In the case of a unitholder reporting on a taxable year other

32



than a calendar year, the closing of our taxable year may also result in more than twelve months of our taxable income or loss being includable in his taxable income for the year of termination. Our technical termination, however, would not affect our classification as a partnership for U.S. federal income tax purposes but instead we would be treated as a new partnership for U.S. federal income tax purposes. If we were treated as a new partnership for U.S. federal income tax purposes, we would be required to make new tax elections and could be subject to penalties if we were unable to determine that a technical termination occurred.
If the IRS were to contest the U.S. federal income tax positions we take, it may adversely impact the market for our common units, and the costs of any such contest would reduce distributable cash flow to our unitholders.
As part of the Bipartisan Budget Act of 2015, legislation was passed requiring large partnerships to pay federal tax deficiencies at the partnership level, unless the partnership elects to take into account any federal tax deficiency by including the adjustment in the Form K-1s of the partners in the year in which the audit is completed. These rules differ from the current rules which require that the IRS to determine the deficiency at the partnership level, but collect the tax deficiency from the partners directly. The new rules are effective for taxable years beginning after December 31, 2017. Partnerships may elect to apply the rules to years beginning after November 2, 2015. We will evaluate the new audit rules and determine at a later date whether or not to elect early application. We will also determine at a later date whether to pay the tax deficiency, if any, at the partnership level or to include the adjustment in the Form K-1s of the partners.
PROPERTIES
The following table shows the aggregate number of sites we owned or leased by customer groups at December 31, 2015:
 
Owned
Sites
 
Leased
Sites
 
Total
Sites
 
Percentage of
Total Sites
Lessee dealers
151

 
202

 
353

 
44
%
Independent dealers

 

 

 

CST
74

 

 
74

 
9
%
Affiliated dealers
97

 
94

 
191

 
24
%
Commission agents
47

 
26

 
73

 
9
%
Company operated
86

 
30

 
116

 
14
%
Total
455

 
352

 
807

 
100
%
We conduct business at sites located in Pennsylvania, New Jersey, Ohio, New York, Massachusetts, Kentucky, New Hampshire, Maine, Florida, Georgia, North Carolina, Maryland, Delaware, Rhode Island, Colorado, Tennessee, Virginia, Illinois, West Virginia, Minnesota, Michigan, Wisconsin, South Dakota, Indiana, New Mexico, Arizona and Texas.
The following table provides a history of our sites acquired, converted to dealer or sold during 2015:
 
Lessee Dealers
 
CST
 
Affiliated Dealers
 
Commission Agents
 
Company Operated
 
Total
Number at beginning of period
274

 
21

 
200

 
76

 
87

 
658

Acquired

 
53

 

 
3

 
106

 
162

Converted to dealer
79

 

 

 
(2
)
 
(77
)
 

Sold

 

 
(6
)
 

 
(1
)
 
(7
)
Other

 

 
(3
)
 
(4
)
 
1

 
(6
)
Number at end of period(a)  
353

 
74

 
191

 
73

 
116

 
807

(a) This amount excludes 370 independent dealer sites and includes 34 closed sites and 68 sites where CrossAmerica only collects rent.
The CrossAmerica principal executive offices are in Allentown, Pennsylvania in approximately 15,200 square feet of office space leased from DMI as of December 31, 2015.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.

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ITEM 3. LEGAL PROCEEDINGS
From time to time, we are involved in litigation incidental to the conduct of our business. We do not expect that any of this litigation, individually or in the aggregate, will have a material adverse effect on our financial condition, results of operations or cash flow.
Additional information regarding legal proceedings is included in Note 16 to the financial statements.


34



PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
As of February 17, 2016, we had 25,585,922 common units outstanding, held by approximately nine holders of record. Our common units are listed and trade on the NYSE under the symbol “CAPL.” Included in the number of common units outstanding are 6,203,231 common units currently owned by CST which cannot be transferred absent registration with the SEC or an available exemption from the SEC’s registration requirements. See “Security Ownership of Certain Beneficial Owners and Management and Related Unitholder Matters.”
The following table sets forth, for the periods indicated, the high and low sales prices for our common units, as reported by the NYSE, and cash distributions paid per common unit, beginning on October 25, 2012, the date our units began trading. The last reported sales price of our common units on the NYSE on February 17, 2016 was $20.90 per share.
 
 
Common Unit Price Range
 
Cash Distributions Declared
Per Unit
 
 
High
 
Low
 
2014
 
 
 
 
 
 
First Quarter
 
$
29.17

 
$
25.50

 
$
0.5125

Second Quarter
 
$
27.85

 
$
25.86

 
$
0.5225

Third Quarter
 
$
38.65

 
$
25.55

 
$
0.5325

Fourth Quarter
 
$
40.82

 
$
29.51

 
$
0.5425

2015
 
 
 
 
 
 
First Quarter
 
$
40.87

 
$
32.03

 
$
0.5425

Second Quarter
 
$
35.89

 
$
26.70

 
$
0.5475

Third Quarter
 
$
31.49

 
$
20.00

 
$
0.5625

Fourth Quarter
 
$
27.69

 
$
21.31

 
$
0.5775

As of February 17, 2016, we had 7,525,000 subordinated units outstanding. These subordinated units are owned, directly or indirectly, by Joseph V. Topper, Jr. and John B. Reilly, III, and are not listed or traded on a public exchange. See “Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Unitholder Matters.” See “Subordination Period” below for information on the anticipated February 25, 2016 conversion of these units to common units.
Cash Distribution Policy
General
The Board has adopted a policy to make cash distributions each quarter, in an amount determined by the Board following the end of such quarter. In general, we expect that cash distributed for each quarter will equal cash generated from operations less cash needed for maintenance capital expenditures, accrued but unpaid expenses (including the management fee to CST) reimbursement of expenses incurred by our General Partner, debt service and other contractual obligations and reserves for future operating and capital needs or for future distributions to our partners. We expect that the Board will reserve excess cash, from time to time, in an effort to sustain or permit gradual or consistent increases in quarterly distributions. Restrictions in our credit facility could limit our ability to pay distributions upon the occurrence of certain events. See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Credit Facility.” The Board may also determine to borrow to fund distributions in quarters when we generate less cash available for distribution than necessary to sustain or grow our cash distributions per unit. The factors that we believe will be the primary drivers of our cash generated from operations are changes in demand for motor fuels, the number of sites to which we distribute motor fuels, the margin per gallon we are able to generate at such sites and the profitability of sites we own and lease.
Our cash distribution policy, established by our General Partner, is to distribute each quarter an amount at least equal to the minimum quarterly distribution of $0.4375 per unit on all units ($1.75 per unit on an annualized basis). The distribution declared by the Board in February 2016 was $0.5925 per unit (or $2.37 per unit on an annualized basis). Our General Partner may determine at any time that it is in the best interest of our Partnership to modify or revoke our cash distribution policy. Modification of our cash distribution policy may result in distributions of amounts less than, or greater than, our minimum quarterly distribution, and

35




revocation of our cash distribution policy could result in no distributions at all. In addition, our credit facility includes certain restrictions on our ability to make cash distributions.
Incentive Distribution Rights
IDRs represent the right to receive an increasing percentage (15.0%, 25.0% and 50.0%) of our quarterly distributions from operating surplus after the minimum quarterly distribution and the target distribution levels (as described under Minimum Quarterly Distribution below) have been achieved. CST holds our IDRs and has the right to transfer these rights at any time. The distributions declared since March 2014 exceed the 15% threshold and the distributions declared since June 2015 exceed the 25% threshold.
Minimum Quarterly Distribution
Our Partnership Agreement provides that, during the subordination period (which we describe below), the common units will have the right to receive distributions from operating surplus each quarter in an amount equal to $0.4375 per common unit, which amount is defined in our Partnership Agreement as the minimum quarterly distribution, plus any arrearages in the payment of the minimum quarterly distribution on the common units from prior quarters, before any distributions of cash from operating surplus may be made on the subordinated units. The practical effect of the subordination period is to increase the likelihood that during such period there will be sufficient cash from operating surplus to pay the minimum quarterly distribution on the common units.
We will pay quarterly distributions, if any, each quarter in the following manner:
first, to the holders of common units, until each common unit has received a minimum quarterly distribution of $0.4375 plus any arrearages from prior quarters;
second, to the holders of subordinated units, until each subordinated unit has received a minimum quarterly distribution of $0.4375; and
third, to all unitholders, pro rata, until each unit has received a distribution of $0.5031.
If cash distributions to our unitholders exceed $0.5031 per unit in any quarter, our unitholders and the holders of our incentive distribution rights, will receive distributions according to the following percentage allocations:
Total Quarterly Distribution Per Common and Subordinated Unit
 
Marginal Percentage Interest in Distribution
Target Amount
  
Unitholders
 
Holders of IDRs
above $0.5031 up to $0.5469
  
 
85
%
 
 
15
%
above $0.5469 up to $0.6563
  
 
75
%
 
 
25
%
above $0.6563
  
 
50
%
 
 
50
%
Quarterly distribution activity during 2015 was as follows:
Quarter Ended
 
Record Date
 
Payment Date
 
Cash Distribution (per unit)
 
Cash Distribution (in millions)
March 31, 2015

June 15, 2015

June 19, 2015

$
0.5475


$
13.4

June 30, 2015

September 4, 2015

September 11, 2015

$
0.5625


$
18.6

September 30, 2015

November 18, 2015

November 25, 2015

$
0.5775


$
19.2

December 31, 2015

February 12, 2016

February 24, 2016

$
0.5925


$
19.6

We expect to continue the practice of paying quarterly cash distributions, though the timing, declaration, amount and payment of future distributions to unitholders will fall within the discretion of the Board. Our indebtedness also restricts our ability to pay distributions. As such, there can be no assurance we will continue to pay distributions in the future.
Subordination Period
On February 25, 2016, the first business day after the payment of the previously announced distribution of $0.5925 per unit for the fourth quarter of 2015, the subordination period under the Partnership Agreement will end. At that time, each outstanding subordinated unit will convert into one common unit and will then participate pro-rata with the other common units in cash distributions.

36


Unregistered Sales of Equity Securities and Use of Proceeds
We issued an aggregate of 5,398,564 common units to CST in 2015 as consideration for the drop downs and settlement of the management fee. These units are restricted and cannot be transferred absent registration with the SEC or an available exemption from the SEC’s registration requirements. These issuances were made in reliance on Section 4(a)(2) of the Securities Act of 1933, as amended. See “Security Ownership of Certain Beneficial Owners and Management and Related Unitholder Matters.”
Common Unit Repurchase Program
On November 2, 2015, our Board approved a common unit repurchase program under Rule 10b-18 of the Exchange Act authorizing us to repurchase up to an aggregate of $25 million of the common units representing limited partner interests in the Partnership. Under the program, we may make purchases in the open market after November 9, 2015 in accordance with Rule 10b-18 of the Exchange Act, or in privately negotiated transactions, pursuant to a trading plan under Rule 10b5-1 of the Exchange Act or otherwise. Any purchases will be funded from available cash on hand. The common unit repurchase program does not require us to acquire any specific number of common units and may be suspended or terminated by CrossAmerica at any time without prior notice. The purchases will not be made from any officer, director or control person of CrossAmerica or CST. The following table shows the purchases during the quarter ended December 31, 2015:
Period
 
Total Number of Units Purchased
 
Average Price Paid per Unit
 
Total Cost of Units Purchased
 
Amount Remaining under the Program
December 1 - December 31, 2015
 
154,158


$
23.37


$
3,603,071


$
21,396,929

Total
 
154,158


$
23.37


$
3,603,071


$
21,396,929

CrossAmerica did not repurchase any common units from January 1, 2016 through the date of this filing.
CrossAmerica Common Unit Purchases by CST
On September 21, 2015, CST announced that the independent executive committee of its board of directors approved a unit purchase program under Rule 10b-18 of the Exchange Act, authorizing CST to purchase up to an aggregate of $50 million of the common units representing limited partner interests in CrossAmerica. The unit purchase program does not have a fixed expiration date and may be modified, suspended or terminated at any time at CST’s discretion. The following table shows the purchases by CST of our common units registered pursuant to Section 12 of the Exchange Act during the quarter ended December 31, 2015:
Period
 
Total Number of Units Purchased
 
Average Price Paid per Unit
 
Total Cost of Units Purchased
 
Amount Remaining under the Program
October 1 - October 31, 2015
 
284,223

 
$
25.15

 
$
7,149,051

 
$
38,912,327

November 1 - November 30, 2015
 
310,070

 
$
25.03

 
$
7,760,789

 
$
31,151,538

December 1 - December 31, 2015
 
40,000

 
$
24.40

 
$
975,964

 
$
30,175,574

Total
 
634,293

 
$
25.04

 
$
15,885,804

 
$
30,175,574

Through February 17, 2016, CST purchased $19.8 million, or 804,667 common units, at an average price of $24.64 per common unit, which cannot be transferred absent registration with the SEC or an available exemption from the SEC’s registration requirements.
Management Fee Issuance
As discussed in Note 15, on July 16, 2015, pursuant to approval by the independent conflicts committee of the General Partner, the Partnership issued 145,056 common units to CST in connection with the amounts incurred for the three months ended June 30, 2015 under the terms of the Amended Omnibus Agreement and on October 26, 2015, the Partnership issued 114,256 common units to CST in connection with the amount incurred for the three months ended September 30, 2015 under the terms of the Amended Omnibus Agreement. This issuance of the common units was made in reliance on Section 4(a)(2) of the Securities Act of 1933, as amended.

37


ITEM 6. SELECTED HISTORICAL CONDENSED CONSOLIDATED AND CONDENSED COMBINED FINANCIAL DATA
The following selected financial data reflect the operating data for the periods and as of the dates indicated. On October 30, 2012, we completed our IPO. At the closing of our IPO, a portion of the business of our Predecessor and its subsidiaries and affiliates was contributed to CrossAmerica. As such, the results of our Predecessor are not comparable to our results as certain assets were not contributed to us as they did not meet our strategic and geographic plan.
To ensure a full understanding, you should read the selected financial data presented below in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the financial statements and accompanying notes included elsewhere in this annual report.

38




The financial data below are presented in thousands.
 
 
Year Ended December 31,
 
 
Consolidated CrossAmerica Partners LP For the Year Ended December 31, 2015
 
Consolidated CrossAmerica Partners LP For the Year Ended December 31, 2014
 
Consolidated CrossAmerica Partners LP For the Year Ended December 31, 2013
 
Consolidated CrossAmerica Partners LP Period from October 31 to December 31, 2012
 
 
Combined Lehigh Gas Entities (Predecessor) Period from January 1 to October 30, 2012
 
Combined Lehigh Gas Entities (Predecessor) For the Year Ended December 31, 2011
Income Statement Data:
 
 
 
 
 
 
 
 
 
 
 
 
 
Total revenues
 
$
2,214,835

 
$
2,655,613

 
$
1,936,059

 
$
311,774

 
 
$
1,573,502

 
$
1,623,564

Operating income
 
26,017

 
8,640

 
30,177

 
881

 
 
15,148

 
21,526

Income (loss) from continuing
   operations after income taxes
 
11,462

 
(6,171
)
 
18,070

 
(1,356
)
 
 
2,805

 
10,689

Net income (loss) attributable
   to partners
 
11,441

 
(6,162
)
 
18,070

 
(1,356
)
 
 
$
3,114

 
$
9,910

Net income (loss) per common
   and subordinated unit-basic
 
$
0.35

 
$
(0.32
)
 
$
1.18

 
$
(0.09
)
 
 
n/a

 
n/a

Net income (loss) per common
   and subordinated unit-diluted
 
$
0.35

 
$
(0.32
)
 
$
1.18

 
$
(0.09
)
 
 
n/a

 
n/a

Operating Data:
 
 
 
 
 
 
 
 
 
 
 
 
 
Wholesale
 
 
 
 
 
 
 
 
 
 
 
 
 
Average motor fuel
   distribution sites
 
1,072

 
923

 
708

 
667

 
 
576

 
459

Gallons of motor fuel
   distributed (in millions) (a)
 
1,051.4

 
887.7

 
637.8

 
103.6

 
 
501.6

 
530.5

Motor fuel gross margin
 
$
58,606

 
$
60,606

 
$
43,850

 
$
9,936

 
 
$
32,788

 
$
38,305

Motor fuel gross margin per
   gallon (b)
 
$
0.056

 
$
0.068

 
$
0.069

 
$
0.096

 
 
$
0.065

 
$
0.072

Rent income
 
$
49,134

 
$
38,498

 
$
40,210

 
$
5,178

 
 
$
16,044

 
$
20,425

Retail
 
 
 
 
 
 
 
 
 
 
 
 
 
Average total system sites
 
202

 
119

 
21

 
n/a

 
 
n/a

 
n/a

Gallons of motor fuel
   sold (in millions)
 
211.2

 
136.5

 
20.2

 
n/a

 
 
n/a

 
n/a

Motor fuel gross margin
   per gallon
 
$
0.100

 
$
0.059

 
$
0.032

 
n/a

 
 
n/a

 
n/a

Merchandise gross margin
   percentage
 
24.9
%
 
30.6
%
 
n/a

 
n/a

 
 
n/a

 
n/a

Other Financial Data
   (unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted EBITDA(d)
 
$
90,314

 
$
61,424

 
$
54,904

 
$
2,992

 
 
$
25,804

 
$
31,232

Distributable Cash Flow(d)
 
$
69,639

 
$
44,063

 
$
39,296

 
$
999

 
 
(c) 

 
(c) 

Distribution(d)
 
$
2.2300

 
$
2.0800

 
$
1.9450

 
$
0.2948

 
 
(c) 

 
(c) 

(a) 
Excludes gallons of motor fuel distributed to sites classified as discontinued operations with respect to the periods presented for our Predecessor.
(b) 
Fuel margin per gallon represents (1) total revenues from fuel sales, less total cost of revenues from fuel sales, divided by (2) total gallons of motor fuel distributed.
(c) 
Results for these periods were not presented as these non-GAAP financial measures were not used at that time.
(d)  
See reconciliation of non-GAAP measures under the heading “Management’s Discussion of Financial Condition and Results of Operations—Results of Operations—Non-GAAP Measures” below.

39




 
 
Consolidated CrossAmerica Partners LP as of December 31, 2015
 
Consolidated CrossAmerica Partners LP as of December 31, 2014
 
Consolidated CrossAmerica Partners LP as of December 31, 2013
 
Combined Lehigh Gas Entities (Predecessor) as of December 31, 2012
 
Combined Lehigh Gas Entities (Predecessor) as of December 31, 2011
Balance Sheet Data:
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
 
$
1,192

 
$
15,170

 
$
4,115

 
$
4,768

 
$
2,082

Total current assets (a)
 
49,769

 
75,322

 
35,496

 
22,974

 
27,982

Total assets (a)
 
853,094

 
596,963

 
391,621

 
317,851

 
271,136

Total current liabilities (a)
 
67,458

 
93,977

 
38,857

 
32,153

 
44,515

Long-term debt, excluding current portion (b)
 
430,632

 
254,403

 
173,509

 
183,751

 
177,529

Total liabilities (a)
 
584,238

 
406,472

 
296,950

 
303,306

 
303,823

Total equity
 
$
268,856

 
$
190,491

 
$
94,671

 
$
14,545

 
$
(32,687
)
(a) Balances as of December 31, 2013, 2012 and 2011 were not retrospectively adjusted for the adoption of ASU 2015-17, which related to the presentation of deferred taxes.
(b) Balances as of December 31, 2013, 2012 and 2011 were not retrospectively adjusted for the adoption of ASU 2015-03, which related to the presentation of deferred financing costs.

40




ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
MD&A is organized as follows:
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 years ended December 31, 2015, 2014 and 2013, an outlook for our business 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 and other matters impacting our liquidity and capital resources.
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.


41



The following MD&A is intended to help the reader understand our results of operations and financial condition. This section is provided as a supplement to, and should be read in conjunction with, Items 1., 1A. and 8. (which includes our consolidated financial statements) included elsewhere in this annual report.
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 are highly correlated to the price of crude oil. The crude oil commodity markets are highly volatile, and the market prices of crude oil, and, correspondingly, the market prices of wholesale motor fuel, experience significant and rapid fluctuations. We receive a fixed mark-up per gallon on approximately 87% of our gallons sold. Our fixed mark-up per gallon contracts are impacted by the discount for prompt payment and other rebates and incentives offered by our suppliers. Prompt payment discounts from suppliers are based on a percentage of the purchase price of motor fuel and the dollar value of these discounts varies with motor fuel prices. As such, 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). We estimate a $10 per barrel change in the price of crude oil would impact our annual wholesale motor fuel gross profit derived from our fixed mark-up per gallon contracts by approximately $2.5 million related to these payment discounts. We also generate a portion of our wholesale gross profit through DTW priced contracts. These contracts provide for variable, market based pricing that results in motor fuel gross profit effects similar to retail motor fuel gross profits (as crude oil prices decline, motor fuel gross profit generally increases). The increase in DTW gross profit results from the acquisition cost of wholesale motor fuel declining at a faster rate as compared to the rate retail motor fuel prices decline. This spread can exist for a period of time, thus allowing CrossAmerica to collect a higher margin from its dealers.
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 motor fuel prices is affected by competitive conditions in each geographic market in which we operate. As such, the retail prices we charge our customers for motor fuel and the gross profit we receive on our retail motor fuel sales can increase or decrease significantly and rapidly over short periods of time due to the volatility of crude oil and wholesale motor fuel prices.
Changes in our average retail motor fuel selling price per gallon and gross profit are directly related to the changes in crude oil and wholesale motor fuel prices. Our retail gross profits are inversely correlated to the movement of crude oil prices (as crude oil prices decline, or are volatile, our motor fuel gross profit generally increases).
Seasonality Effects on Volumes
Our business exhibits substantial seasonality due to our wholesale and retail sites being located in certain geographic areas that are affected by seasonal weather and temperature trends and associated changes in retail customer activity during different seasons. Historically, sales volumes have been highest in the second and third quarters (during the summer months) and lowest during the winter months in the first and fourth quarters.
Impact of Inflation
Inflation in energy prices impacts our sales and cost of motor fuel products and working capital requirements. The impact of inflation has minimal impact on our results of operations, as we generally are able to pass along energy cost increases in the form of increased sales prices to our customers. Although we believe 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.

42




2016
On January 6, 2016, CrossAmerica announced it had entered into a definitive agreement to acquire 31 franchise Holiday Stationstores located in Wisconsin and Minnesota that are being sold by SSG Corporation for approximately $48.5 million. The acquisition is subject to customary conditions to closing and is expected to close in the first half of 2016. See Note 3 of the notes to the consolidated financial statements included elsewhere in this report for additional information.
2015
In January 2015, we closed on the purchase of a 5% limited partner equity interest in CST Fuel Supply for aggregate consideration of 1.5 million common units. See Notes 3 and 16 of the notes to the consolidated financial statements included elsewhere in this report for additional information.
In July 2015, we closed on the purchase of a 12.5% limited partner equity interest in CST Fuel Supply for aggregate consideration of 3.3 million common units and cash in the amount of $17.5 million. See Notes 3 and 16 of the notes to the consolidated financial statements included elsewhere in this report for additional information.
In January 2015, in connection with the joint acquisition by CST and the Partnership of 22 convenience stores from Landmark, we acquired the real property of the 22 fee sites for $41.2 million. See Note 3 of the notes to the consolidated financial statements included elsewhere in this report for additional information.
In February 2015, we closed on the purchase of all of the outstanding capital stock of Erickson and certain related assets for an aggregate purchase price of $84.9 million, subject to certain post-closing adjustments. See Note 3 of the notes to the consolidated financial statements included elsewhere in this report for additional information.
In June 2015, we closed on the sale of 4.6 million common units for net proceeds of approximately $138.5 million. In July 2015, we closed on the sale of an additional 0.2 million common units for net proceeds of approximately $6.4 million in accordance with the underwriters’ option to purchase additional common units associated with the June offering. We used the proceeds to reduce indebtedness outstanding under our credit facility. See Note 17 of the notes to the consolidated financial statements included elsewhere in this report for additional information.
In July 2015, we completed the purchase of real property at 29 NTIs from CST in exchange for an aggregate consideration of approximately 0.3 million common units and cash in the amount of $124.4 million, with an aggregate consideration of $134.0 million on the date of closing. See Note 3 of the notes to the consolidated financial statements included elsewhere in this report for additional information.
In July 2015, we closed on the purchase of convenience stores from One Stop and certain related assets for $44.6 million. See Note 3 of the notes to the consolidated financial statements included elsewhere in this report for additional information.
2014
In March 2014, we entered into an amended and restated credit agreement, and such agreement was further amended on September 30, 2014 (as so amended, the “credit facility”). The credit facility is a senior secured revolving credit facility maturing March 4, 2019 with a total borrowing capacity of $550.0 million, under which swing-line loans may be drawn up to $10.0 million and standby letters of credit may be issued up to an aggregate of $45.0 million.
In April 2014, we acquired PMI for an aggregate purchase price of $73.5 million, which resulted in the acquisition of 87 retail sites in Virginia and West Virginia.
In May 2014, we completed our acquisition of 52 wholesale supply contracts, one sub-wholesaler contract, five fee sites, six leasehold sites and certain other assets from affiliates of Atlas Oil Company for an aggregate purchase price of $39.2 million.
In September 2014, we issued 4.1 million common units resulting in net proceeds of $135.0 million. We used the proceeds to reduce indebtedness outstanding under our credit facility.
On October 1, 2014, CST completed the GP Purchase and we entered into the Amended Omnibus Agreement.
In November 2014, in connection with the joint acquisition by CST and the Partnership of Nice N Easy, we acquired the real property and underground storage tanks relating to 23 fee sites and the fuel distribution agreements with respect to 25 Nice N Easy operated sites for $53.8 million.

43




2013
In September 2013, we purchased 13 motor fuel stations, four leasehold motor fuel stations, assumed certain third-party supply contracts and purchased certain other assets located in the Tri-Cities region of Tennessee area for $21.1 million. 
In September 2013, we purchased one motor fuel station, three leasehold motor fuel stations, assumed certain third-party supply contracts and purchased certain other assets located in the Knoxville, Tennessee area. We paid $10.7 million in cash at closing.
In December 2013, we purchased 44 independent dealer supply contracts, five sub-wholesale supply contracts, two leasehold motor fuel stations and certain assets and equipment, which were held or used by the sellers in connection with their motor fuels business and related convenience store business located in the Richmond, Virginia area, for $10.7 million.
In December 2013, we issued 3.6 million common units resulting in proceeds of $91.4 million. We used the proceeds to reduce indebtedness outstanding under our credit facility and for general purposes.


44




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):
 
 
Year Ended December 31,
 
 
2015
 
2014
 
2013
Operating revenues
 
$
2,214,835

 
$
2,655,613

 
$
1,936,059

Cost of sales
 
2,057,317

 
2,539,967

 
1,863,831

Gross profit
 
157,518

 
115,646

 
72,228

 
 
 
 
 
 
 
Income from CST Fuel Supply
 
10,528

 

 

Operating expenses:
 
 
 
 
 
 
Operating expenses
 
56,257

 
35,055

 
4,577

General and administrative expenses
 
40,264

 
40,319

 
16,558

Depreciation, amortization and accretion expense
 
48,227

 
33,285

 
20,963

Total operating expenses
 
144,748

 
108,659

 
42,098

Gain (loss) on sales of assets, net
 
2,719

 
1,653

 
47

Operating income
 
26,017

 
8,640

 
30,177

Other income, net
 
396

 
466

 
359

Interest expense, net
 
(18,493
)
 
(16,631
)
 
(14,182
)
Income (loss) before income taxes
 
7,920

 
(7,525
)
 
16,354

Income tax benefit
 
(3,542
)
 
(1,354
)
 
(1,716
)
Consolidated net income (loss)
 
11,462

 
(6,171
)
 
18,070

Net income (loss) attributable to noncontrolling interests
 
21

 
(9
)
 

Net income (loss) attributable to CrossAmerica limited
   partners
 
11,441

 
(6,162
)
 
18,070

Distributions to incentive distribution right holders
 
(1,390
)
 
(245
)
 

Net income (loss) available to CrossAmerica limited
   partners
 
$
10,051

 
$
(6,407
)
 
$
18,070


45




Year Ended December 31, 2015 Compared to Year Ended December 31, 2014
Consolidated Results
Operating revenues declined $440.8 million, or 17%, while gross profit increased $41.9 million, or 36%.
Operating revenues
Significant items impacting these results prior to the elimination of intercompany revenues were:
A $445.6 million, or 19%, decline in our Wholesale segment primarily attributable to:
An $879.7 million decline attributable to a decrease in the wholesale price of our motor fuel. The average daily spot price of Brent crude oil decreased 47% to $52.32 per barrel for 2015, compared to $98.97 per barrel for 2014. The wholesale price of motor fuel is highly correlated to the price of crude oil.
Partially offsetting this decline was a $423.7 million increase primarily related to an 18.4% increase in volume from our 2014 and 2015 acquisitions.
Other revenues increased $11.1 million driven by additional rental income from the Nice N Easy, Landmark and NTI acquisitions, as well as our company-operated retail sites being converted to dealer-operated sites during 2015.
A $159.9 million, or 31%, increase in our Retail segment primarily attributable to:
An increase of $242.5 million from a 55% increase in motor fuel volumes sold related to the Erickson and One Stop acquisitions.
A $101.2 million increase in our merchandise revenues attributable to convenience store operations from our 2014 and 2015 acquisitions.
Partially offsetting these revenue increases was a decline of $183.5 million primarily attributable to a decrease in the retail price of our motor fuel driven by a decline in wholesale motor fuel prices as noted above, as well as converting company operated retail sites to independent dealer sites.
Intersegment revenues
We present the results of operations of our segments consistently with how our management views the business. Therefore, our segments are presented before intersegment eliminations (which consists 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 $154.9 million, primarily attributable to an increase in our Wholesale segment selling motor fuel to the convenience stores acquired in the One Stop and the Erickson acquisitions, which are included in our Retail segment.
Cost of sales
Cost of sales declined $482.7 million, primarily from the decline in wholesale gasoline prices, which were partially offset by an increase in volumes purchased by our 2014 and 2015 acquisitions. See “Results of Operations–Segment Results” for additional gross profit analyses.
Income from CST Fuel Supply
See “Results of Operations—Segment Results—Wholesale” for discussion.
Operating expenses
See “Results of Operations—Segment Results” for additional operating expenses analyses.


46




General and administrative expenses
General and administrative expenses declined $0.1 million for the year ended December 31, 2015, compared to the prior year, primarily attributable to a $6.8 million decrease in stock based compensation related to the accelerated vesting as a result of the GP Purchase in 2014. This decrease is offset by higher costs associated with the Erickson and One Stop acquisitions in 2015.
Depreciation, amortization and accretion expense
Depreciation, amortization and accretion expense increased $14.9 million for the year ended December 31, 2015 compared to the prior year, primarily driven by our 2014 and 2015 acquisitions.
Gains on sales of assets, net
Gains on sales of assets, net, increased $1.1 million for the year ended December 31, 2015, compared to the prior year. The net gain recognized for the year ended December 31, 2015 primarily related to the sale of individual sites and the divestiture of certain assets acquired in the PMI acquisition.
Income tax benefit
The income tax benefit increased from $1.4 million for the year ended December 31, 2014 to $3.5 million for the year ended December 31, 2015. The benefit for both periods was due primarily to losses reported by LGWS.

47




Year Ended December 31, 2014 Compared to Year Ended December 31, 2013
Consolidated Results
Operating revenues increased $719.6 million, or 37%, while gross profit increased $43.4 million, or 60%.
Operating revenues
Significant items impacting these results prior to the elimination of intercompany revenues were:
A $423.3 million, or 22%, increase in our Wholesale segment primarily attributable to:
A $312.9 million decline attributable to a decrease in the wholesale price of our motor fuel. The average daily spot price of Brent crude oil decreased to $98.97 per gallon during 2014, compared to $108.56 per gallon during 2013. The wholesale price of motor fuel is highly correlated to the price of crude oil.
Partially offsetting this decline was a $737.9 million increase primarily related to a 39.2% increase in volume from our 2014 acquisitions.
A $442.5 million, or 636%, increase in our Retail segment primarily attributable to:
An increase of $381.1 million attributable to an increase in motor fuel volumes sold related to the PMI acquisition.
A $57.6 million increase in our merchandise revenues attributable to the PMI acquisition.
Intersegment revenues
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 consists of motor fuel sold by our Wholesale segment to our Retail segment). As a result, in order to reconcile to our consolidated change in revenue, a discussion of the change in intersegment revenue is included in our consolidated MD&A discussion.
Our intersegment revenues increased $146.2 million, primarily attributable to an increase in our Wholesale segment selling motor fuel to the convenience stores acquired in the PMI acquisition, which are included in our Retail segment.
Cost of sales
Cost of sales increased $676.1 million, primarily from the decline in wholesale gasoline prices, which were partially offset by an increase in volumes purchased by our 2014 and 2015 acquisitions. See “Results of Operations—Segment Results” for additional gross profit analysis.
Operating expenses
See “Results of Operations—Segment Results” for additional operating expenses analyses.
General and administrative expenses
General and administrative expenses increased $23.8 million for the year ended December 31, 2014, compared to the prior year, primarily from a $6.2 million increase in acquisition costs related to the PMI acquisition, a $1.9 million increase in the fixed management fee allocated to us under the Amended Omnibus Agreement, an $8.5 million increase in equity compensation expense associated with accelerated vesting of equity awards as a result of the GP Purchase and severance costs.

48




Depreciation, amortization and accretion expense
Depreciation, amortization and accretion expense increased $12.3 million for the year ended December 31, 2014 compared to the prior year, primarily driven by our 2013 and 2014 acquisitions.
Gains on sales of assets, net
The net gain recognized for the year ended December 31, 2014 related primarily to two site divestitures.
Income tax benefit
The income tax benefit decreased from $1.7 million for the year ended December 31, 2013 to $1.4 million for the year ended December 31, 2014. The benefit recognized in 2014 and 2013 was the result of a partial release of valuation allowances as a result of net deferred tax liabilities recorded in certain of our 2014 and 2013 acquisitions.

49




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 consists 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):
 
 
Year Ended December 31,
 
 
2015
 
2014
 
2013
Gross profit:
 
 
 
 
 
 
Motor fuel–third party
 
$
29,377

 
$
31,193

 
$
18,037

Motor fuel–intersegment and related party
 
29,229

 
29,413

 
25,813

Motor fuel gross profit
 
58,606

 
60,606

 
43,850

Rent and Other(a)
 
34,935

 
25,471

 
26,536

Total gross profit
 
93,541

 
86,077

 
70,386

 
 
 
 
 
 
 
Income from CST Fuel Supply(b)
 
10,528

 

 

Operating expenses
 
(11,243
)
 
(12,626
)
 
(4,124
)
Adjusted EBITDA(c)
 
$
92,826

 
$
73,451

 
$
66,262

 
 
 
 
 
 
 
Motor fuel distribution sites (end of period):(d)
 
 
 
 
 
 
Motor fuel–third party
 
 
 
 
 
 
Independent dealers(e)
 
370

 
416

 
256

Lessee dealers(f)
 
290

 
205

 
191

Total motor fuel distribution–third party
 
660

 
621

 
447

 
 
 
 
 
 
 
Motor fuel–intersegment and related party
 
 
 
 
 
 
Affiliated dealers (related party)
 
191

 
197

 
265

CST (related party)
 
43

 
21

 

Commission agents (Retail segment)
 
66

 
75

 
54

Company operated retail convenience stores (Retail
   segment)
 
115

 
87

 

Total motor fuel distribution sites–intersegment and related
   party
 
415

 
380

 
319

 
 
 
 
 
 
 
Motor fuel distribution sites (average during the period):
 
 
 
 
 
 
Motor fuel-third party distribution
 
626

 
565

 
391

Motor fuel-intersegment and related party distribution
 
446

 
358

 
316


50




 
 
Year Ended December 31,
 
 
2015
 
2014
 
2013
 
 
 
 
 
 
 
Total volume of gallons distributed (in thousands)
 
1,051,357

 
887,677

 
637,845

 
 
 
 
 
 
 
Motor fuel gallons distributed per site per day:(g)
 
 
 
 
 
 
Motor fuel–third party
 
 
 
 
 
 
Total weighted average motor fuel distributed–third party
 
2,422

 
2,391

 
2,211

Independent dealers
 
2,733

 
2,656

 
2,305

Lessee dealers
 
1,926

 
1,924

 
2,084

 
 
 
 
 
 
 
Motor fuel–intersegment and related party
 
 
 
 
 
 
Total weighted average motor fuel distributed–intersegment
   and related party
 
2,850

 
2,657

 
2,371

Affiliated dealers (related party)
 
2,486

 
2,607

 
2,350

CST (related party)
 
5,032

 
3,832

 

Commission agents (Retail segment)
 
2,909

 
3,101

 
2,669

Company operated retail convenience stores (Retail
   segment)(h)
 
2,669

 
2,271

 

  
 
 
 
 
 
 
Wholesale margin per gallon–total system
 
$
0.056

 
$
0.068

 
$
0.069

Wholesale margin per gallon–third party(i)
 
$
0.050

 
$
0.058

 
$
0.055

Wholesale margin per gallon–intersegment and related party
 
$
0.063

 
$
0.085

 
$
0.083

(a)
Primarily consists of rent margin.
(b)
Represents income from our equity interest in CST Fuel Supply.    
(c)
Please see the reconciliation of our segment’s Adjusted EBITDA to consolidated net income under the heading “Results of Operations—Non-GAAP Financial Measures.”
(d)
In addition, as of December 31, 2015 and 2014, we distributed motor fuel to 17 and 18 sub-wholesalers, respectively, who distribute to additional sites.
(e)
The decline in the independent dealer site count during 2015 compared to 2014 was primarily attributable to 55 terminated motor fuel supply contracts that were not renewed, partially offset by the nine wholesale fuel supply contracts acquired in the One Stop acquisition.
(f)
The increase in the lessee dealer site count during 2015 compared to 2014 is primarily attributable to converting 77 company-operated convenience stores in our Retail segment to the lessee dealer customer group in our Wholesale segment.
(g)
Does not include the motor fuel gallons distributed to sub-wholesalers.
(h)
Motor fuel gallons distributed per site per day increased during 2015 compared to 2014 at our retail convenience stores as a result of our recent acquisitions. See “Executive Overview—Acquisition and Financing Activity” above.
(i)
Includes the wholesale gross margin for motor fuel distributed to sub-wholesalers.


51




Year Ended December 31, 2015 Compared to Year Ended December 31, 2014
The results were driven by:
Motor Fuel Gross profit
The decrease in gross profit was due to a decline of $12.6 million in our motor fuel gross profit primarily attributable to a decline in our payment discounts and incentives, which are discussed under the heading “The Significance of Crude Oil and Wholesale Motor Fuel Prices on Our Revenues, Cost of Sales and Gross Profit” partially offset by an $11.1 million increase primarily attributable to an increase in motor fuel volume.
Rent income
Rent income increased $10.6 million primarily from our acquisitions, including the acquisition and leaseback of NTIs with CST, as well as converting company operated convenience stores to independent dealer sites.
Income from CST Fuel Supply
We recorded $10.5 million of income from our investment in CST Fuel Supply, which we acquired in January (5%) and July (12.5%) of 2015.
Operating expenses
Operating expenses decreased $1.4 million primarily as a result of the divestiture of certain PMI assets during 2015.
Year Ended December 31, 2014 Compared to Year Ended December 31, 2013
The results were driven by:
Motor Fuel Gross profit
The increase in gross profit was due to an increase of $18.5 million primarily attributable to an increase in motor fuel volume sold from our 2014 and 2013 acquisitions. Partially offsetting this increase was a decline of $1.8 million primarily attributable to a decline in our payment discounts and incentives, which are discussed under the heading “The Significance of Crude Oil and Wholesale Motor Fuel Prices on Our Revenues, Cost of Sales and Gross Profit.”
Operating expenses
Operating expenses increased $8.5 million for the year ended December 31, 2014 compared to the same period of the prior year is primarily due to our 2014 and 2013 acquisitions.



52




Retail
The following table highlights the results of operations and certain operating metrics of our Retail segment. The narrative following these tables provides an analysis of the results of operations of that segment (thousands of dollars, except for the number of convenience stores and per gallon amounts):
 
 
Year Ended December 31,
 
 
2015
 
2014
 
2013
Gross profit:
 
 
 
 
 
 
Motor fuel
 
$
21,113

 
$
8,088

 
$
652

Merchandise
 
39,621

 
17,598

 

Other
 
3,290

 
3,989

 
1,208

Total gross profit
 
64,024

 
29,675

 
1,860

Operating expenses
 
(45,014
)
 
(22,429
)
 
(403
)
Inventory fair value adjustments
 
1,356

 
1,483

 

Adjusted EBITDA(a)
 
$
20,366

 
$
8,729

 
$
1,457

 
 
 
 
 
 
 
Retail sites (end of period):
 
 
 
 
 
 
Commission agents
 
66

 
75

 
54

Company-operated convenience stores(b)
 
116

 
87

 

Total system sites at the end of the period
 
182

 
162

 
54

Total system operating statistics:
 
 
 
 
 
 
Average retail sites during the period(b)
 
202

 
119

 
21

Motor fuel sales (gallons per site per day)
 
2,862

 
3,148

 
2,654

Motor fuel gross profit per gallon, net of credit card fees and
   commissions
 
$
0.100

 
$
0.059

 
$
0.032

Commission agents statistics:
 
 
 
 
 
 
Average retail sites during the period
 
70

 
64

 
21

Motor fuel sales (gallons per site per day)
 
2,957

 
3,086

 
2,654

Motor fuel gross profit per gallon, net of credit card fees and
   commissions
 
$
0.023

 
$
0.003

 
$
0.032

Company-operated convenience store retail site statistics:
 
 
 
 
 
 
Average retail sites during the period(b)
 
132

 
54

 

Motor fuel sales (gallons per site per day)
 
2,812

 
3,221

 

Motor fuel gross profit per gallon, net of credit card fees
 
$
0.143

 
$
0.123

 
$

Merchandise sales (per site per day)(c)
 
$
3,347

 
$
2,902

 
$

Merchandise gross profit percentage, net of credit card fees(c)
 
24.9
%
 
30.6
%
 


(a)
Please see the reconciliation of our segment’s Adjusted EBITDA to consolidated net income under the heading “Results of Operations—Non-GAAP Financial Measures” below.
(b)
The increase in retail sites relates to our acquisitions. See “Executive Overview—Acquisition and Financing Activity” above.
(c)
During the second quarter of 2015, CrossAmerica began classifying the net margin from lottery tickets within merchandise revenues and reflected this change in presentation retrospectively.


53




Year Ended December 31, 2015 Compared to Year Ended December 31, 2014
Gross profit increased $34.3 million, while operating expenses increased $22.6 million.
These results were driven by:
Gross profit
A $13.0 million increase in our motor fuel gross profit due to an increase in our cents per gallon gross profit associated with the lower wholesale cost of motor fuel and higher volumes associated with our acquisitions.
Our merchandise gross profit increased $22.0 million attributable to our acquisitions, while our merchandise gross profit percentage declined. The decline in our merchandise gross profit percentage was the result of low gross margin items, such as cigarettes, comprising a higher percentage of our merchandise sales as a result of our 2015 acquisitions. Additionally, we converted 52 sites acquired in the PMI acquisition to the dealer customer group during 2015, and these sites generally had a higher gross profit product mix.
Operating expenses
A $22.6 million increase in operating expenses attributable to our acquisitions.
Year Ended December 31, 2014 Compared to Year Ended December 31, 2013
Gross profit increased $27.8 million, while operating expenses increased $22.0 million.
These results were driven by:
Gross profit
A $7.4 million increase in our motor fuel gross profit primarily attributable to the PMI acquisition.
Our merchandise gross profit increased $17.6 million attributable to the PMI acquisition.
Operating expenses
A $22.0 million increase in operating expenses attributable to the PMI acquisition.
Outlook
As a result of our recent acquisitions, we expect our total fuel volume sold to continue to increase during 2016 as compared to 2015. Furthermore, based on available industry data, monthly gasoline consumption in the United States increased by 3% during the first ten months of 2015 compared with the same period of 2014. While the global energy markets, including wholesale and retail motor fuel prices, are likely to continue to be volatile in the coming year, low commodity prices in 2016, among other factors, could lead to continued growth in demand for motor fuel, which would positively impact our motor fuel gross margin as a result of an increase in demand from our customers. However, lower wholesale motor fuel prices have a negative impact on our motor fuel gross margin as it relates to the discounts we receive from our motor fuel suppliers.
We expect our rent income to increase in 2016 based on our expectation that we will continue to convert recently acquired company operated sites to lessee dealers. We will continue to evaluate acquisitions on an opportunistic basis. Additionally, we will pursue 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, which are expected to be accretive to CrossAmerica’s unitholders, and our ability to finance such acquisitions on favorable terms.


54




Non-GAAP Financial Measures
We use the non-GAAP financial measures EBITDA, Adjusted EBITDA, and Distributable Cash Flow in this report. EBITDA represents net income before deducting interest expense, income taxes and depreciation, amortization and accretion. Adjusted EBITDA represents EBITDA as further adjusted to exclude equity funded expenses related to incentive compensation and the Amended Omnibus Agreement, gains or losses on sales of assets, certain discrete acquisition related costs, such as legal and other professional fees and severance expenses associated with recently acquired companies, and certain other discrete non-cash items, such as inventory fair value adjustments arising from purchase accounting. Distributable Cash Flow represents Adjusted EBITDA less cash interest expense, sustaining capital expenditures and current income tax expense.
EBITDA, Adjusted EBITDA, and Distributable Cash Flow 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 our 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 our wholesale distribution of motor fuel, the leasing of real property, or the day to day operations of our retail convenience store activities. EBITDA, Adjusted EBITDA, and Distributable Cash Flow are also used to assess our ability to generate cash sufficient to make distributions to our unit-holders.
We believe the presentation of EBITDA, Adjusted EBITDA, and Distributable Cash Flow provides useful information to investors in assessing our financial condition and results of operations. EBITDA, Adjusted EBITDA, and Distributable Cash Flow should not be considered alternatives to net income, net cash provided by operating activities or any other measure of financial performance or liquidity presented in accordance with U.S. GAAP. EBITDA, Adjusted EBITDA, and Distributable Cash Flow have important limitations as analytical tools because they exclude some but not all items that affect net income and net cash provided by operating activities. Additionally, because EBITDA, Adjusted EBITDA, and Distributable Cash Flow 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.

55




 The following table presents reconciliations of EBITDA, Adjusted EBITDA, and Distributable Cash Flow to net income, the most directly comparable U.S. GAAP financial measure, for each of the periods indicated (in thousands, except for per unit amounts):
 
 
Year Ended December 31,
 
 
2015
 
2014
 
2013
Net income available to CrossAmerica limited partners
 
$
10,051

 
$
(6,407
)
 
$
18,070

Interest expense
 
18,493

 
16,631

 
14,192

Less: Income tax benefit
 
(3,542
)
 
(1,354
)
 
(1,716
)
Depreciation, amortization and accretion
 
48,227

 
33,285

 
20,963

EBITDA
 
$
73,229

 
$
42,155

 
$
51,509

Equity funded expenses related to incentive compensation and the Amended Omnibus Agreement(a)
 
14,036

 
11,958

 
3,442

Gain on sales of assets, net
 
(2,719
)
 
(1,653
)
 
(47
)
Acquisition-related costs(b)
 
4,412

 
7,481

 

Inventory fair value adjustments
 
1,356

 
1,483

 

Adjusted EBITDA
 
$
90,314

 
$
61,424

 
$
54,904

Cash interest expense
 
(16,689
)
 
(13,851
)
 
(11,526
)
Sustaining capital expenditures(c)  
 
(1,318
)
 
(3,104
)
 
(2,850
)
Current income tax expense
 
(2,574
)
 
(406
)
 
(1,232
)
Distributable Cash Flow
 
$
69,733

 
$
44,063

 
$
39,296

 
 
 
 
 
 
 
Weighted average diluted common