Randy Palmer - Investor Relations Jeremy L. Bergeron - President Steven M. Stellato - VP and Chief Accounting Officer Clayton E. Killinger - EVP and CFO Kimberly S. Lubel - Chairman.

Christopher Mandeville - Jefferies & Company Ben Bienvenu - Stephens, Inc. Robert Balsamo - FBR & Company Ethan Bellamy - Robert W. Baird Mike Gyure - Janney Montgomery.

Good morning and welcome to the CrossAmerica Partners First Quarter 2017 Earnings Call. My name is Brandon and I'll be your operator for today. At this time all participants are in a listen-only mode. Later we will conduct a question-and-answer session.

Please note this conference is being recorded and I will now turn it over to Randy Palmer, Executive Director of Investor Relations. Randy, you may begin..

Thank you, operator. Good morning and thank you for joining the CrossAmerica Partners first quarter 2017 earnings call. With me today are Kim Lubel, Chairman; Jeremy Bergeron, President; Clay Killinger, Chief Financial Officer; Steven Stellato, Chief Accounting Officer and other members of our Executive Leadership Team.

Jeremy will provide a brief overview of CrossAmerica's operational performance and an update on current strategic initiatives and then we will turn the call over to Steve to discuss the financial results. At the end, we will open up the call to questions.

I should point out that today's call will follow some presentation slides that we will utilize during this morning's event. These slides are available as part of the webcast and are posted on the CrossAmerica website.

Before we begin I would like to remind everyone that today's call, including the question-and-answer session, may include forward-looking statements regarding expected revenue, future plans, future operational metrics, and opportunities and expectations of the organization.

There can be no assurance that management's expectations, beliefs and projections will be achieved or that actual results will not differ from the expectations.

Please see CrossAmerica's filings with the Securities and Exchange Commission including annual reports on Form 10-K and quarterly reports on Form 10-Q for a discussion of important factors that could affect our actual results.

Forward-looking statements represent the judgment of CrossAmerica's Management as of today's date and the organization disclaims any intent or obligation to update any forward-looking statements. During today's call we may also provide certain performance measures that do not conform to you U.S. Generally Accepted Accounting Principles or GAAP.

We've provided schedules that reconcile these non-GAAP measures with our reported results on a GAAP basis as part of our earnings press release. Today's call is being webcast and a recording of this conference call will be available on the CrossAmerica website for a period of 60 days. And with that I will now turn the call over to Jeremy Bergeron..

Thank you, Randy. We reported our first quarter 2017 earnings results yesterday afternoon and Steve will go through that detail in a few minutes. But first I wanted to review some of the highlights from our first quarter. If you turn to slide 4 you can see that at the end of the first quarter we had over 1250 locations across the U.S.

that distribute over 1 billion gallons of fuel and generate growth total income of over $80 million on an annual basis. We continue to hold a 17.5% interest in CST fuel supply which generates a $0.05 wholesale margin on approximately 1.8 billion gallons distributed annually within the CST network.

We also currently operate 75 convenience stores in the upper Midwest market. With over 500 owned sites and ground lease control of close to 400 more we have built a sizable real estate portfolio. As I would detail later in this presentation, rental income has grown to be our largest category of gross profit, even greater than wholesale fuel income.

This stable fee based business has aided us in generating consistent results over any economic and commodity environment. On slide 5 I will quickly review our first quarter operating results.

I will discuss a few of the numbers in the table but wanted to know that several of these items, these trends hopefully give you a good indication of our strategy of growing our wholesale business and providing more stable qualified income for our investors, acquiring sites and increasing our volume of fuel gallons distributed, dealerizing of company operated sites which is the effect of lowering our company operated site count and retail gallons distributed as well as operating expenses but significantly grows a more stable rental income stream.

Finally lowering our other general administrative and operating expenses where we can find opportunities.

So as we look at the table I would point out that while our wholesale fuel volume of 230 million gallons was up slightly over the first quarter of last year we captured a healthy increase in our wholesale fuel margin per gallon with an increase of 12% or $0.05 per gallon to $0.056 per gallon.

This is due to several initiatives but was most significantly impacted by the increase in crude oil and wholesale gas prices year-over-year to help boost our supplier terms to discount earned in the period. We also saw an increase in our rental income from our wholesale segment during the quarter improving 13%.

This is primarily due to our dealerization strategy where we converted 77 company operated sites to less the dealer accounts during 2016. Finally we saw a decline of 6% in our G&A and operating expenses during the quarter. We continue to focus on our costs and make reductions where we can.

On the next slide as you look at the pie charts you can see how our successful execution of our dealerization strategy has impacted our segment and category gross profit from the first quarter of 2016 to 2017.

In the first quarter of 2016 70% of our segment gross profit was generated by the wholesale business, this increased to 78% in the first quarter of 2017. In regards to our category gross profit you can see the significant shift from the retail elements of our business to wholesale fuel and rent.

As mentioned, rent which is the most stable of all categories increased from 41% of gross profits in the first quarter of 2016 to 46% in 2017, and is now our largest category driver of free cash flow.

Once again this is a testament to our acquisition integration and dealerization strategy to generate more stable qualifying cash flow for our investors. If you would turn to the next slide I would like to recap some of the highlights from the first quarter of 2017.

During the period our adjusted EBITDA increased 7% from 2016 to 2017 as we reduced our overall expenses 6% when compared to the first quarter of 2016. We ended the quarter with a leverage at 4.23 times and the Board of General Partner declared a distribution attributable to the first quarter of $0.6175 per unit that will be paid this month.

We have now grown our distribution for 12 consecutive quarters. Finally I want to mention that the pending merger between Couche-Tard Circle K and the owner of our General Partner CST brands.

As announced with our first quarter results yesterday while there can be no assurances as to timing, CST continues to expect that the merger will be completed this quarter.

We view this as great news as we remain excited about the potential strategic benefit that should have at CrossAmerica and look forward to sharing more detail on these plans in the near future. And with that I’ll now turn to call over to Steve. .

Thank you Jeremy. If you would please turn to slide 9, I would like to touch on our overall first quarter results at CrossAmerica which as you know is our seasonally weakest quarter of the year. Today we reported adjusted EBITDA of nearly $24 million and distributable cash flow of nearly $17 million.

The total distributions paid in the first quarter of 2017 were over $20 million resulting in the coverage of 0.82 times on a paid basis and 0.81 times on a declared basis. Our trailing 12 month coverage was 1.0 times on both the paid and the declared basis.

On the next slide we compare our performance in the first quarter of 2017 against the comparable period in 2016. The primary driver of our year-over-year growth in adjusted EBITDA revolved around our acquisitions, overall integration efforts, and the positive impact from our supplier terms discounts.

You can see the roughly $2.5 million positive contribution associated with our Holiday and State Oil acquisitions and the expense reduction associated with the integration efforts on prior transactions along with the over $1.1 million favorable impact from the supplier terms discounts.

As we have noted in the past we received prompt pay terms discounts from our suppliers as a percentage of the total invoice on the fuel we purchased.

During the first quarter of 2017 with average crude oil prices increasing 55% as compared to the same period for 2016, this resulted in a positive impact on the terms discount that we received from our fuel suppliers.

However this significantly less volatility in wholesale fuel prices period-over-period we did experience a decline associated with our retail fuel margins. Turning to slide 11, we announced on April 26th that the Board of Directors of General Partner declared the distribution of $0.6175 per unit attributable to our first quarter.

This is a half cent per unit increase over the distribution attributable to the fourth quarter of 2016 and marks our 12th consecutive quarterly distribution increase. We continue to target a long term distribution coverage ratio at or above 1.1 times.

As we look at 2017 we expect our distributable cash flow growth to continue to be driven by a combination of accretive acquisitions, strong business performance, and further expense reduction associated with the integration of our acquisitions. As of May 4th we had $92 million of available capacity on our revolver.

Our leverage ratio as defined under our credit facility was 4.23 times at March 31, 2017. In closing we managed through the first quarter and are in a good position as we enter the seasonally stronger second and third quarter driving season.

We feel that the steps we are taking throughout the organization are demonstrating our ability to execute on our growth strategy in a very prudent manner.

Although we have not closed on an acquisition since the State Oil transaction in the second half of last year, we remain very active in the space and look forward to continuing our successful M&A strategy that has built this organization to the size it is today.

In addition with the anticipated merger between CST and Circle K, we feel that CrossAmerica is poised for an exciting future and look forward to detailing those plans relatively soon. With that we will now open it up for questions. .

Thank you. [Operator Instructions]. And from Jefferies we have Chris Mandeville. Please go ahead. .

Hey, good morning.

Can you guys just provide some color on the fairly modest overall wholesale volume growth of about 1% in the quarter, and maybe able to understand how we should be thinking about this growth in the coming quarters? And maybe just drilling down a little bit further, are we focusing on the CST and commission agent sites, it was mentioned in a footnote that about 25 DMS sites were reverted back to you and then converted to commission sites.

I'm just curious if that was really the driving factor behind the 19% volume decline on a per site basis?.

Sure, I will kind of walk us through that little bit Chris in terms of the volume. So we did complete some acquisitions so we added acquisitions with the Holiday stores that were added at the back end of the first quarter last year as well as the State Oil acquisition that was done towards the end of the third quarter last year as well.

Then we had I would say about 10 million gallons of divested volume from the first period compared to last year's first quarter. That was similar to what we talked about in the past, a lot of that was related to some PMI business, commercial business.

I would tell you that those 10 million gallons average I would say about a penny and a half per gallon, so a very low margin gallon volume that we divested over the period. So there is a lot of reasons why you will see the increase in our wholesale margin in period-over-period go from $0.05 last year to $0.056.

The other thing and you alluded to this was the comment in our Q regarding the DMS. So we did take back some sites from Dunne Manning, one of our largest customers. Those were under the lessee dealer segment previously so we were leasing out the real estate and supplying those sites and then they were then operating them as commission agent operators.

We have since in the first quarter have taken those, I think it was at the back half of last year, actually we have taken those back and then we are working directly with the commission agents and pricing the fuel and capturing more of the margin on those sites. So it moved from the lessee dealer category to the commission agent category.

But that did not have an overall effect on our wholesale volume because all of those gallons always flowing through a wholesale volume but the main drivers of the delta in the volume will come from the acquisitions we completed and the volume which we divested them as well. .

Okay, that's helpful and then I guess you just alluded to having divested roughly 10 million gallons of volume, is that the same as it relates to the 21 wholesale contracts that you know having terminated for independent dealers and if there's any additional color as it relates to just that thought process and prospects of further terminations that would be helpful?.

No that's all part of the mix.

I mean it is a constant review of the portfolio and really where our focus should be overall to improve things really put us in a good position as we head into the second and third quarter and making sure our team is focused on all of the sites we have and ensuring we're capturing the most out of the gallons we are running through the network and that was all part of the mix.

.

Okay, and then just turning over to the company operated sites, merchant service gross margins they were down really quite meaningfully around 135 basis points year-on-year.

I imagine that maybe some component of that had to deal with the megawatt [ph] in the prior year but any additional color there?.

No, that's right there were some drivers last year. I think it certainly helped a lot of retailers out in the first quarter that did repeat itself in the first quarter this year. And for us that retail network is searching a state of flux with stores coming in and coming out and managing it.

The team does a great job of maximizing the margin capture opportunities inside the store and there was some work that we've done on those sites as well during the period to really make some investments on outside the store. They were a little disruptive inside the store as well. So, yeah there was a lot of things in the mix as you mentioned. .

Alright, and the last one from me here.

So, post that sale leaseback at the end of 2016 I'm just curious what’s the percentage of your underlying real estate that you now have owned that could potentially be monetized somewhere on a go forward basis?.

That's a good question Chris. We evaluate a lot of our sites. I think we talked about the number of sites we own.

We do have some restrictions with our covenants but what's nice is when we amended our facility on a go forward basis we are not restricted with respect to a lot of these sites that we purchase in terms of not entering into sales lease back. So I couldn't give you a number but its constant evaluation.

I think we have quite a bit of properties but as I mentioned we are somewhat restricted under our current covenants. On a go forward basis we have a lot more flexibility. .

Alright, thanks again guys and best of luck in Q2. .

Thank you..

From Stephens Inc we have Ben Bienvenu. Please go ahead. .

Yes, thanks and good morning. I just wanted to talk through your thought process around balancing distribution growth and leverage and this is now the second quarter where we've seen moderated distribution growth which you have talked about I think a prudent process, but leverage is kind of held in at this 4.2 times EBITDA level.

So just help us think about sort of the appetite for leverage going forward, should we expect any moderation of leverage as we move through the year, and sort of a sustained lower growth rate on the distribution side to help achieve that end goal?.

Sure, so I would say that our leverage position where we are right now we're very comfortable with. I mean I think that the team has done a great job of balancing the portfolio, achieving the growth we've had, and being at the leverage which we are at 4.2 times.

Our growth, we have said over the past several quarters that our plan is to continue to grow in a very prudent, practical manner that's going to deliver the right amount of growth with the right amount of considering the economic conditions that we're under and really what our investors really focus on, what they want to see.

I think if you ask our investors they are very focused on ensuring that the organization maintains a good leverage ratio which we have, they want to see growth, but they understand the need to kind of pull back on that growth compared to what we had done back in 2015.

So that all being said with the backdrop of this pending transaction right with Couche-Tard and CST and then the change over at General Partner, it is really putting ourselves in a position as we go in the second and third quarter, as we come to the close of that transaction it will be poised to kind of take advantage of whatever the market is at that time and really the strategies that we're working through to lay out to the market so that we can capitalize on it.

So sitting here with 92 million of available capacity with a leverage ratio of 4.2 times and have grown our distribution for basically the past three years consistently, we certainly like our position where we're going, going into the summer [ph] months. .

Great, and then thinking about there's been some recent deal activity in the market, having a lot of them buying large chunk of the snowker [ph] assets, as you are in the market looking for deals we've heard commentary around elevated multiples in the wake of that, I am just curious how do you guys think about wanting to continue to grow distributable cash flow and also not overpaying for deals and what other avenues for growth are there, [indiscernible] maybe signing up incremental dealers, maybe just help us think about the organic growth side of things?.

Sure, so I mean obviously we stated on a consistent basis that majority of our growth is going to come from the M&A field. Acquisition is a big part of our culture as an organization and how we've built to the point that we're in right now.

We've done a lot of deals, there are some transactions that are going out there with multiples higher than we're certainly comfortable going to.

So, but we still see that there is a lot of opportunity in the area in which we have previously played to continue to acquire businesses, integrate, and kind of bring expenses down and manage and grow cash flow.

We do -- we consistently look internally and see where can we maximize cash flow and it's not just from growing volumes it's maximizing the margins in the business, it's managing the expenses in the business.

And those are the things I will tell you as we sit here in the backdrop of the CST, Circle K transaction that we know as an organization we can remain focused on to ensure we're capturing the most amount of cash flow out of the business.

But with that merger coming to a close here relatively soon I would look forward to continuing to returning to the M&A space and really growing cash flow once again through that area. But we don't -- it's not an either or for us it's both and I think we can we can do it both ways. .

Understood and then last one from me, are there any notable disparities in performance by geographies that are worth calling out particularly as we have seen erratic weather in the first quarter?.

No, I wouldn't say -- really there's a lot. I mean I spoke of previously in the call from Chris's question around the 10 million gallons of divested volume.

I will say on a same store basis for our gallons across our network we basically had about a 1.5% decline overall on a same store basis which is pretty good when you consider what rest of the industry has seen. Now we see pockets of that.

We have a lot of stations up in the Northeast and you may be familiar that New Jersey went through a $0.23 per gallon tax increase here in the first -- in beginning of the year that we have to manage through. So we have some stations in New Jersey but we have a lot of stations there in Pennsylvania as well that are kind of stations along the border.

So we may have an impact in one state but saw the benefit in other state.

So those are things that I think consistently happened that we just have to manage through and making sure we're looking to see what our dealers are doing, what the competition is doing and making sure that we're maintaining volume in those markets and that's something we continue to do. .

Great, thanks Jeremy. Best of luck. .

Thanks Ben..

From FBR & Company we have Robert Balsamo, please go ahead. .

How are you doing, maybe another way to ask kind of similar question regarding geography, I was wondering if you saw anything, any impact during the quarter with differentials moving with Gulf Coast and New York Harbor that impacted you at all or?.

Yeah Robert, so I mean if you remember most of our gallons its branded gallons what we're buying from the suppliers where they are more tended to be kind of frac pricing. There isn't a lot of exposure to the spot market, any differentials that maybe seen from different harbors of different geographies.

So for us that's kind of the beauty of kind of the structure we have today where it's pretty consistent margin capture throughout the business and not a lot of swings that could impact us overall. .

And any updates as you get the next quarter under way, as you move towards higher demand seasons on volume demand recovering from a little bit of weakness in 1Q?.

Yes, so as I mentioned we had a good first quarter. As we come into the second quarter we've seen continuing improvements as you would expect as you go deeper into the driving season. So I think we remain very cautiously optimistic about where things are going for us in the second quarter. .

Okay, that's it. Thank you very much. .

Thanks Rob..

From Baird we have Ethan Bellamy. Please go ahead. .

Hey guys, good morning.

You guys are world leading experts on fuel demand in the United States and it looks like fuel demand has decoupled from employment and just from a very big picture I'm kind of interested to hear about what you think about fuel demand and what are the drivers, attrition in the market and what should our outlook be for the next year or couple years?.

I appreciate the question Ethan but I don't know about the compliment if that's certainly deserving for us or not. But I would just simply say that for us the first quarter was a good quarter. We like where we ended up, what we're seeing in the second quarter is continuing to be good trends for us.

We see and we model fuel demand relatively flat going for us throughout the rest of the year. We don't look or really not for us to say any massive swings we expect to see overall in the space.

We're just managing business day by day but it's probably others in the industry that are much more in tune to that, they can give a look at better commentary than we are right now. .

Do you place any weight on EIA data, I mean what do you think is the most credible source out there?.

I think EIA data is certainly good data to look at. I think Opus data is good data to review as well.

I think if you look at all of the information you have to look in terms of where you have your businesses and from your geographies you have and what's going on in each of those different markets and what's driving the business and that's something certainly we do. .

Alright and then a more specific question, how many stores did you dealerize this quarter and then what should we expect on sort of a quarterly basis for the balance of the year?.

So we have dealerized I believe two year-to-date, one in the first quarter and I think one since then.

You know for us as you know we took a pretty big cut of that last year dealerizing 77 last year and as we're looking to get to the close of the transaction with Circle K we think we have a lot of good assets that may end up falling or fitting kind of their overall portfolio.

So we have to keep that in mind as we go through and manage it but we're going to continue to look in managing our existing C store operations up there and then we'll see where things go with potential other acquisitions and bringing in another retail into the fold and potentially dealerizing those.

So it's going to be a constant state of flux but I think the two we've done so far this year, I think we could see some more here in the second and third quarter. .

Okay and then last question, look I know you want to have dry powder for the big splash but whatever ACT is going to say or not say about the future of CrossAmerica but can you give us any insight or body language from the ACT folks about how they treat you, have you been spending a lot of time in Canada for example.

I mean I just, you know, I know you guys have the announcement coming but for people that need to own or not own the stock between now and then it's certainly a major driver of positioning here?.

I certainly appreciate that Ethan. I understand, we -- our investors have been very patient and waiting for this store to kind of be put out there in terms of what the plans are post close. I will say we've had very good conversations with the folks over Circle K Couche-Tard.

We're very excited about kind of where things are going and excited about laying out those plans and really engaging with our investors to make sure we understand exactly how we think value can be created for our unit holders as well their shareholders.

You know we've had a lot of time to work on it so we certainly are working diligently working with them and looking forward to going out and telling that story and we look forward to doing that soon. .

Fair enough, thank you Jeremy. .

[Operator Instructions]. And from Janney Montgomery we have Mike Gyure on line, please go ahead. .

Can you guys maybe talk a little bit about the retail motor fuels gross profit per gallon and I guess your expectation for I guess the direction that’s headed maybe back half of the year?.

Sure, I think -- correct me if I am wrong, Mike your question was about retail motor fuel gross profit per gallon?.

Yes. .

Okay, so I think if you compare period-over-period for us under the retail side there's a lot of ins and out that you need to be aware of as we have acquired stores that with the Holiday acquisition as well as the 77 stores which we dealerize last year that I mentioned before. So there are a lot of stations are moved in and out.

Then also you have the 25 DMS sites that moved into the commission agent business late last year as well and so that kind of affected things.

Then the last piece I would say is you know we are a branded supplier, we work with our brands and we're working with one of our largest brands in the upper Midwest to work on making investment in some of these stores.

And so as we do that what we do is we making those investments and with those investments comes an opportunity for us to capture potentially more of a margin on the wholesale side which could lower our retail margin capture going forward. And I think you saw a little bit of that in the first quarter as well.

So those are the types of things -- there's a lot of moving parts in there and I don't want to get too into the weeds with the retail piece of it.

But the team constantly looks at different ways in which how can we maximize qualifying income for our investors, get it on the wholesale side, and working with our suppliers to ensure that we're making investments in our retail sites out there as well.

So it's hard for me to give you any specifics unless Steve has any other comments add on what to expect on the back half of the year because we'll continue to make those types of strategic analysis investments in those stores..

The only other thing I would add there is that in the prior year during the first quarter we had a lot more favorable volatility. We didn't see that in the first quarter obviously in 2017 where crude prices were moving. So as crude was moving up that does have somewhat of an adverse effect in terms of what that CPG is.

Other than that I don't think that there's really I think Jeremy hit on all the key points that were impacting our retail business. .

Okay and then maybe on the G&A front, it looks you guys have done a great job of cutting cost here.

Any big initiatives you got planned for the rest of the year there or just going to continue to look at everything as it come off?.

Yeah, I mean that's been a big focus of ours over the past 12 to 18 months is really focusing in on the G&A and then the only big thing obviously to happen is the pinning transaction with circle K and go forward kind of what that looks like.

So those are -- that's the only thing that I would say on the horizon that we could expect that could have some changes in the G&A and that specifically remains to be seen..

Great, thanks very much..

Alright, thank you. .

Thank you. We will now turn it back to Randy Palmer for closing remarks. .

Okay, operator. Thank you very much, that does complete today's conference call. We appreciate each of you joining us today. If you do have follow-up questions please feel free to contact us. Thank you and have a good day..

Ladies and gentlemen this concludes today's conference. Thank you for....