Market Overview

Global Partners Reports Second-Quarter 2018 Financial Results

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Global Partners LP (NYSE:GLP) today reported financial results for the
second quarter ended June 30, 2018.

"We completed the first half of 2018 with a solid second quarter," said
President and CEO Eric Slifka. "We continue to execute on our strategy
to expand our retail gasoline business with the July acquisitions of
Champlain and Cheshire, which added 136 sites, including 62 owned
properties. The location of these stations in Vermont and New Hampshire
allow us to leverage our terminal assets in Albany, N.Y. and Burlington,
Vt. and drive economies of scale."

For the second quarter of 2018, net income attributable to the
Partnership was $6.4 million, or $0.19 per diluted limited partner unit,
compared with net income attributable to the Partnership of $2.4
million, or $0.07 per diluted limited partner unit, for the same period
of 2017. Earnings before interest, taxes, depreciation and amortization
(EBITDA) was $53.1 million in the second quarter of 2018 compared with
$51.3 million in the year-earlier period. Distributable cash flow (DCF)
was $21.0 million in the second quarter of 2018 versus $21.8 million in
the comparable period of 2017. These results included a $3.0 million
loss on sale and disposition of assets in the second quarter of 2018 and
a $2.4 million loss on sale and disposition of assets in the second
quarter of 2017. Adjusted EBITDA was $56.1 million in the second quarter
of 2018 compared with $53.7 million in the second quarter of 2017.

Gross profit in the second quarter of 2018 was $149.3 million compared
with $135.4 million in the second quarter of 2017, primarily due to
improved product margins in gasoline in the Wholesale segment and
station operations within the Gasoline Distribution and Station
Operations (GDSO) segment. Combined product margin, which is gross
profit adjusted for depreciation allocated to cost of sales, was $169.9
million in the second quarter of 2018 compared with $157.8 million in
the second quarter of 2017.

Combined product margin, EBITDA, Adjusted EBITDA, and DCF are non-GAAP
(Generally Accepted Accounting Principles) financial measures, which are
explained in greater detail below under "Use of Non-GAAP Financial
Measures." Please refer to Financial Reconciliations included in this
news release for reconciliations of these non-GAAP financial measures to
their most directly comparable GAAP financial measures for the three
months ended June 30, 2018 and 2017.

GDSO segment product margin was $125.6 million in the second quarter of
2018, an increase of $3.1 million compared with the second quarter of
2017, primarily reflecting the contribution of Honey Farms, partly
offset by lower fuel margins.

Wholesale segment product margin was $38.5 million in the second quarter
of 2018 compared with $31.2 million in the second quarter of 2017,
primarily due to more favorable market conditions in gasoline.

Commercial segment product margin was $5.8 million in the second quarter
of 2018 compared with $4.1 million in the same period of 2017, primarily
due to an increase in bunkering activity.

Sales in the second quarter of 2018 were $3.1 billion compared with $2.1
billion in the second quarter of 2017 due to increases in prices and in
volume sold. GDSO segment sales were $1.2 billion in the second quarter
of 2018 compared with $947.6 million in the second quarter of 2017.
Wholesale segment sales were $1.6 billion in the second quarter of 2018
compared with $944.7 million in the second quarter of 2017. Commercial
segment sales were $321.7 million in the second quarter of 2018 compared
with $197.3 million in the second quarter of 2017.

Volume in the second quarter of 2018 was 1.3 billion gallons compared
with 1.2 billion gallons in the same period of 2017. GDSO volume was
415.2 million gallons in the second quarter of 2018 compared with 405.4
million gallons in the same period of 2017. Wholesale segment volume was
766.5 million gallons in the second quarter of 2018 compared with 638.6
million gallons in the second quarter of 2017. Commercial segment volume
was 155.5 million gallons in the second quarter of 2018 compared
with 130.9 million gallons in the same period of 2017.

Recent Highlights

  • On July 17, Global acquired the retail fuel and Jiffy Mart-branded
    convenience store assets of Vermont-based Champlain Oil Company. The
    purchase price, excluding inventory, was approximately $134 million.
  • On July 24, the Partnership acquired 10 company-operated gas stations
    and T-Bird branded convenience stores from New Hampshire-based
    Cheshire Oil Company for approximately $32 million, excluding
    inventory.
  • The Partnership completed an offering of 2,760,000 of its 9.75% Series
    A Fixed-to-Floating Rate Cumulative Redeemable Perpetual Preferred
    Units at a price of $25 per unit, which included 360,000 Series A
    Preferred Units purchased pursuant to the full exercise of the
    underwriters' over-allotment option. The offering resulted in net
    proceeds of approximately $66.8 million (after deducting the
    underwriting discount), which Global used to reduce indebtedness under
    its credit agreement.
  • Global's Board of Directors announced an increased quarterly cash
    distribution of $0.4750 per unit, or $1.90 per unit on an annualized
    basis, on all of its outstanding common units for the period from
    April 1 to June 30, 2018. The distribution will be paid on August 14,
    2018 to unitholders of record as of the close of business on August 9,
    2018.

Business Outlook

"Through organic investments and strategic M&A, we are leveraging our
expertise in acquiring, integrating and operating assets," Slifka said.
"We begin the second half of 2018 well positioned financially and
operationally to expand our asset base and continue to execute on our
growth objectives."

Global has revised its full-year 2018 EBITDA guidance to a range of $190
million to $215 million compared with a prior range of $180 million to
$210 million. This guidance excludes any gain or loss on the sale and
disposition of assets, and any goodwill and long-lived asset impairment
charges. EBITDA guidance for 2018 also excludes the recognition in the
first quarter of 2018 of a one-time gain of approximately $52.6 million
as a result of the extinguishment of a contingent liability related to
the Volumetric Ethanol Excise Tax Credit, which tax credit program
expired in 2011. Based upon the significant passage of time from that
2011 date, including underlying statutes of limitation, as of January
31, 2018 the Partnership determined that the liability was no longer
required. This recognition of one-time income did not impact cash flows
from operations for the three months ended March 31, 2018 and will not
impact cash flows from operations for the year ending December 31, 2018.

The Partnership's guidance and future performance are based on
assumptions regarding market conditions such as the crude oil market,
business cycles, demand for petroleum products and renewable fuels,
utilization of assets and facilities, weather, credit markets, the
regulatory and permitting environment and the forward product pricing
curve, which could influence quarterly financial results. The
Partnership believes these assumptions are reasonable given currently
available information and its assessment of historical trends. Because
Global's assumptions and future performance are subject to a wide range
of business risks and uncertainties, the Partnership can provide no
assurance that actual performance will fall within guidance ranges.

With respect to 2018 net income and net cash from operating activities,
the most comparable financial measures to EBITDA calculated in
accordance with GAAP, the Partnership is unable to project either metric
without unreasonable effort and for the following reasons: 1) The
Partnership is unable to project net income because this metric includes
the impact of certain non-cash items, most notably those resulting from
the sale of non-strategic sites, which the Partnership is unable to
project with any reasonable degree of accuracy; and 2) The Partnership
is unable to project net cash from operating activities because this
metric includes the impact of changes in commodity prices, including
their impact on inventory volume and value, receivables, payables and
derivatives, which the Partnership is unable to project with any
reasonable degree of accuracy. Please see the "Use of Non-GAAP Financial
Measures" section of this news release.

Financial Results Conference Call

Management will review the Partnership's second-quarter 2018 financial
results in a teleconference call for analysts and investors today.

   
Time: 10:00 a.m. ET
 
Dial-in numbers: (877) 709-8155 (U.S. and Canada)
 
(201) 689-8881 (International)
 

The call also will be webcast live and archived on Global's website.

Use of Non-GAAP Financial Measures

Product Margin

Global Partners views product margin as an important performance measure
of the core profitability of its operations. The Partnership reviews
product margin monthly for consistency and trend analysis. Global
Partners defines product margin as product sales minus product costs.
Product sales primarily include sales of unbranded and branded gasoline,
distillates, residual oil, renewable fuels, crude oil and propane, as
well as convenience store sales, gasoline station rental income and
revenue generated from logistics activities when the Partnership engages
in the storage, transloading and shipment of products owned by others.
Product costs include the cost of acquiring the refined petroleum
products, renewable fuels, crude oil and propane, and all associated
costs including shipping and handling costs to bring such products to
the point of sale as well as product costs related to convenience store
items and costs associated with logistics activities. The Partnership
also looks at product margin on a per unit basis (product margin divided
by volume). Product margin is a non-GAAP financial measure used by
management and external users of the Partnership's consolidated
financial statements to assess its business. Product margin should not
be considered an alternative to net income, operating income, cash flow
from operations, or any other measure of financial performance presented
in accordance with GAAP. In addition, product margin may not be
comparable to product margin or a similarly titled measure of other
companies.

EBITDA and Adjusted EBITDA

EBITDA and Adjusted EBITDA are non-GAAP financial measures used as
supplemental financial measures by management and may be used by
external users of Global Partners' consolidated financial statements,
such as investors, commercial banks and research analysts, to assess the
Partnership's:

  • compliance with certain financial covenants included in its debt
    agreements;
  • financial performance without regard to financing methods, capital
    structure, income taxes or historical cost basis;
  • ability to generate cash sufficient to pay interest on its
    indebtedness and to make distributions to its partners;
  • operating performance and return on invested capital as compared to
    those of other companies in the wholesale, marketing, storing and
    distribution of refined petroleum products, renewable fuels, crude oil
    and propane, and in the gasoline stations and convenience stores
    business, without regard to financing methods and capital structure;
    and
  • viability of acquisitions and capital expenditure projects and the
    overall rates of return of alternative investment opportunities.

Adjusted EBITDA is EBITDA further adjusted for gains or losses on the
sale and disposition of assets and goodwill and long-lived asset
impairment charges. EBITDA and Adjusted EBITDA should not be considered
as alternatives to net income, operating income, cash flow from
operating activities or any other measure of financial performance or
liquidity presented in accordance with GAAP. EBITDA and Adjusted EBITDA
exclude some, but not all, items that affect net income, and these
measures may vary among other companies. Therefore, EBITDA and Adjusted
EBITDA may not be comparable to similarly titled measures of other
companies.

Distributable Cash Flow

Distributable cash flow is an important non-GAAP financial measure for
the Partnership's limited partners since it serves as an indicator of
success in providing a cash return on their investment. Distributable
cash flow as defined by the Partnership's partnership agreement is net
income plus depreciation and amortization minus maintenance capital
expenditures, as well as adjustments to eliminate items approved by the
audit committee of the board of directors of the Partnership's general
partner that are extraordinary or non-recurring in nature and that would
otherwise increase distributable cash flow.

Distributable cash flow as used in our partnership agreement also
determines our ability to make cash distributions on our incentive
distribution rights. The investment community also uses a distributable
cash flow metric similar to the metric used in our partnership agreement
with respect to publicly traded partnerships to indicate whether or not
such partnerships have generated sufficient earnings on a current or
historic level that can sustain distributions on preferred or common
units or support an increase in quarterly cash distributions on common
units. Our partnership agreement does not permit adjustments for certain
non-cash items, such as net losses on the sale and disposition of assets
and goodwill and long-lived asset impairment charges.

Distributable cash flow should not be considered as an alternative to
net income, operating income, cash flow from operations, or any other
measure of financial performance presented in accordance with GAAP. In
addition, distributable cash flow may not be comparable to distributable
cash flow or similarly titled measures of other companies.

About Global Partners LP

Global Partners is a midstream logistics and marketing master limited
partnership that owns, controls or has access to one of the largest
terminal networks of petroleum products and renewable fuels in the
Northeast. With approximately 1,600 locations, primarily in the
Northeast, Global is one of the largest regional independent owners,
suppliers and operators of gasoline stations and convenience stores.
Global is also one of the largest distributors of gasoline, distillates,
residual oil and renewable fuels to wholesalers, retailers and
commercial customers in New England and New York. The Partnership is
also engaged in the transportation of petroleum products and renewable
fuels by rail from the mid-continental U.S. and Canada. For additional
information, visit www.globalp.com.

Forward-looking Statements

Certain statements and information in this press release may constitute
"forward-looking statements." The words "believe," "expect,"
"anticipate," "plan," "intend," "foresee," "should," "would," "could" or
other similar expressions are intended to identify forward-looking
statements, which are generally not historical in nature. These
forward-looking statements are based on Global Partners' current
expectations and beliefs concerning future developments and their
potential effect on the Partnership. While management believes that
these forward-looking statements are reasonable as and when made, there
can be no assurance that future developments affecting the Partnership
will be those that it anticipates. All comments concerning the
Partnership's expectations for future revenues and operating results are
based on forecasts for its existing operations and do not include the
potential impact of any future acquisitions. Forward-looking statements
involve significant risks and uncertainties (some of which are beyond
the Partnership's control) and assumptions that could cause actual
results to differ materially from the Partnership's historical
experience and present expectations or projections.

For additional information regarding known material factors that could
cause actual results to differ from the Partnership's projected results,
please see Global Partners' filings with the SEC, including its Annual
Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports
on Form 8-K.

Readers are cautioned not to place undue reliance on forward-looking
statements, which speak only as of the date hereof. The Partnership
undertakes no obligation to publicly update or revise any
forward-looking statements after the date they are made, whether as a
result of new information, future events or otherwise.

               
GLOBAL PARTNERS LP
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per unit data)
(Unaudited)
 
Three Months Ended Six Months Ended
June 30, June 30,
2018 2017 2018 2017
Sales $ 3,126,575 $ 2,089,530 $ 5,929,466 $ 4,360,314
Cost of sales   2,977,314     1,954,168     5,635,875     4,084,925  
Gross profit 149,261 135,362 293,591 275,389
 
Costs and operating expenses:
Selling, general and administrative expenses 39,954 34,679 79,320 71,466
Operating expenses 76,218 71,169 150,267 138,382
Gain on trustee taxes - - (52,627 ) -
Amortization expense 2,437 2,260 4,905 4,521
Net loss (gain) on sale and disposition of assets 3,033   2,381   4,900   (9,481 )
Total costs and operating expenses   121,642     110,489     186,765     204,888  
 
Operating income 27,619 24,873 106,826 70,501
 
Interest expense   (21,613 )   (21,923 )   (43,058 )   (45,210 )
 
Income before income tax benefit (expense) 6,006 2,950 63,768 25,291
 
Income tax benefit (expense)   16     (959 )   929     (795 )
 
Net income 6,022 1,991 64,697 24,496
 
Net loss attributable to noncontrolling interest 391   383   758   824  
 
Net income attributable to Global Partners LP 6,413 2,374 65,455 25,320
 
Less: General partner's interest in net income, including
incentive distribution rights   110     16     506     170  
 
Limited partners' interest in net income $ 6,303   $ 2,358   $ 64,949   $ 25,150  
 
Basic net income per limited partner unit (1) $ 0.19   $ 0.07   $ 1.93   $ 0.75  
 
Diluted net income per limited partner unit (1) $ 0.19   $ 0.07   $ 1.92   $ 0.75  
 
Basic weighted average limited partner units outstanding 33,652     33,554     33,652     33,554  
 
Diluted weighted average limited partner units outstanding 33,863     33,652     33,831     33,619  

 

(1) Under the Partnership's partnership agreement, for any quarterly
period, the incentive distribution rights ("IDRs") participate in net
income only to the extent of the amount of cash distributions actually
declared, thereby excluding the IDRs from participating in the
Partnership's undistributed net income or losses. Accordingly, the
Partnership's undistributed net income is assumed to be allocated to the
limited partners' interest and to the General Partner's general partner
interest. Limited partners' interest in net income is divided by the
weighted average limited partner units outstanding in computing the net
income per limited partner unit.

       
GLOBAL PARTNERS LP
CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
 
 
June 30, December 31,
2018 2017
Assets
Current assets:
Cash and cash equivalents $ 7,482 $ 14,858
Accounts receivable, net 423,225 417,263
Accounts receivable - affiliates 4,057 3,773
Inventories 338,320 350,743
Brokerage margin deposits 6,871 9,681
Derivative assets 12,805 3,840
Prepaid expenses and other current assets   85,117   77,977
Total current assets 877,877 878,135
 
Property and equipment, net 1,005,929 1,036,667
Intangible assets, net 51,459 56,545
Goodwill 310,855 312,401
Other assets   32,837   36,421
 
Total assets $ 2,278,957 $ 2,320,169
 
 
Liabilities and partners' equity
Current liabilities:
Accounts payable $ 256,768 $ 313,412
Working capital revolving credit facility - current portion 198,000 126,700
Environmental liabilities - current portion 5,004 5,009
Trustee taxes payable 43,699 110,321
Accrued expenses and other current liabilities 89,789 99,507
Derivative liabilities   14,764   13,708
Total current liabilities 608,024 668,657
 
Working capital revolving credit facility - less current portion 100,000 100,000
Revolving credit facility 185,000 196,000
Senior notes 663,116 661,774
Environmental liabilities - less current portion 50,333 52,968
Financing obligations 150,223 150,334
Deferred tax liabilities 38,607 40,105
Other long-term liabilities   53,672   56,013
Total liabilities 1,848,975 1,925,851
 
Partners' equity
Global Partners LP equity 427,375 390,953
Noncontrolling interest   2,607   3,365
Total partners' equity   429,982   394,318
 
Total liabilities and partners' equity $ 2,278,957 $ 2,320,169

               
GLOBAL PARTNERS LP
FINANCIAL RECONCILIATIONS
(In thousands)
(Unaudited)
  Three Months Ended Six Months Ended
June 30, June 30,
2018 2017 2018 2017
Reconciliation of gross profit to product margin
Wholesale segment:
Gasoline and gasoline blendstocks $ 23,450 $ 18,608 $ 48,837 $ 33,993
Crude oil 5,418 4,761 10,491 11,653
Other oils and related products   9,615     7,828     26,302     37,701  
Total 38,483 31,197 85,630 83,347
Gasoline Distribution and Station Operations segment:
Gasoline distribution 76,954 79,283 147,099 146,438
Station operations   48,680     43,242     92,214     82,137  
Total 125,634 122,525 239,313 228,575
Commercial segment   5,809     4,124     11,046     8,313  
Combined product margin 169,926 157,846 335,989 320,235
Depreciation allocated to cost of sales   (20,665 )   (22,484 )   (42,398 )   (44,846 )
Gross profit $ 149,261   $ 135,362   $ 293,591   $ 275,389  
 
Reconciliation of net income to EBITDA and Adjusted EBITDA
Net income $ 6,022 $ 1,991 $ 64,697 $ 24,496
Net loss attributable to noncontrolling interest   391     383     758     824  
Net income attributable to Global Partners LP 6,413 2,374 65,455 25,320
Depreciation and amortization, excluding the impact of
noncontrolling interest
25,054 26,036 51,173 51,887
Interest expense, excluding the impact of noncontrolling interest 21,613 21,923 43,058 45,210
Income tax (benefit) expense   (16 )   959     (929 )   795  
EBITDA 53,064 51,292 158,757 123,212
Net loss (gain) on sale and disposition of assets   3,033     2,381     4,900     (9,481 )
Adjusted EBITDA (1) $ 56,097   $ 53,673   $ 163,657   $ 113,731  
 
Reconciliation of net cash provided by (used in) operating
activities to EBITDA and Adjusted EBITDA
Net cash provided by (used in) operating activities $ 87,488 $ 92,362 $ (16,226 ) $ 209,927
Net changes in operating assets and liabilities and certain non-cash
items
(56,124 ) (63,822 ) 132,747 (132,518 )
Net cash from operating activities and changes in operating
assets and liabilities attributable to noncontrolling interest 103 (130 ) 107 (202 )
Interest expense, excluding the impact of noncontrolling interest 21,613 21,923 43,058 45,210
Income tax (benefit) expense   (16 )   959     (929 )   795  
EBITDA 53,064 51,292 158,757 123,212
Net loss (gain) on sale and disposition of assets   3,033     2,381     4,900     (9,481 )
Adjusted EBITDA (1) $ 56,097   $ 53,673   $ 163,657   $ 113,731  
 
Reconciliation of net income to distributable cash flow
Net income $ 6,022 $ 1,991 $ 64,697 $ 24,496
Net loss attributable to noncontrolling interest   391     383     758     824  
Net income attributable to Global Partners LP 6,413 2,374 65,455 25,320
Depreciation and amortization, excluding the impact of
noncontrolling interest
25,054 26,036 51,173 51,887
Amortization of deferred financing fees and senior notes discount 1,717 1,780 3,430 3,671
Amortization of routine bank refinancing fees (1,022 ) (1,063 ) (2,044 ) (2,230 )
Maintenance capital expenditures, excluding the impact of
noncontrolling interest
  (11,162 )   (7,338 )   (17,244 )   (12,685 )
Distributable cash flow (2)(3) $ 21,000   $ 21,789   $ 100,770   $ 65,963  
 
Reconciliation of net cash provided by (used in) operating
activities to distributable cash flow
Net cash provided by (used in) operating activities $ 87,488 $ 92,362 $ (16,226 ) $ 209,927
Net changes in operating assets and liabilities and certain non-cash
items
(56,124 ) (63,822 ) 132,747 (132,518 )
Net cash from operating activities and changes in operating
assets and liabilities attributable to noncontrolling interest 103 (130 ) 107 (202 )
Amortization of deferred financing fees and senior notes discount 1,717 1,780 3,430 3,671
Amortization of routine bank refinancing fees (1,022 ) (1,063 ) (2,044 ) (2,230 )
Maintenance capital expenditures, excluding the impact of
noncontrolling interest
  (11,162 )   (7,338 )   (17,244 )   (12,685 )
Distributable cash flow (2)(3) $ 21,000   $ 21,789   $ 100,770   $ 65,963  
 

(1) Adjusted EBITDA for the six months ended June 30, 2018 includes a
one-time gain of approximately $52.6 million as a result of the
extinguishment of a contingent liability related to a Volumetric Ethanol
Excise Tax Credit.

(2) As defined by the Partnership's partnership agreement, distributable
cash flow is not adjusted for certain non-cash items, such as net losses
on the sale and disposition of assets and goodwill and long-lived asset
impairment charges.

(3) Distributable cash flow includes a net loss on sale and disposition
of assets of $3.0 million and $2.4 million for the three months ended
June 30, 2018 and 2017, respectively, and $4.9 million and $4.7 million
for the six months ended June 30, 2018 and 2017, respectively. Excluding
the loss on sale and disposition of assets, distributable cash flow
would have been $24.0 million and $24.2 million for the three months
ended June 30, 2018 and 2017, respectively, and $105.7 million and $70.7
million for the six months ended June 30, 2018 and 2017, respectively.
For the six months ended June 30, 2018, distributable cash flow also
includes a one-time gain of approximately $52.6 million as a result of
the extinguishment of a contingent liability related to a Volumetric
Ethanol Excise Tax Credit. For the six months ended June 30, 2017,
distributable cash flow also includes a $14.2 million gain on the sale
of the Partnership's natural gas marketing and electricity brokerage
businesses in February 2017.

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