Global Partners Reports First-Quarter 2019 Financial Results

WALTHAM, Mass.–(BUSINESS WIRE)–Global Partners LP (NYSE: GLP) today reported financial results for the
first quarter ended March 31, 2019.

“Our first-quarter results reflect solid performance,” said Eric Slifka,
the Partnership’s President and Chief Executive Officer. “Product margin
in our Gasoline Distribution and Station Operations (GDSO) segment
increased 22% from the same period in 2018 driven by strong fuel margins
early in the quarter and contributions from the acquisitions of
Champlain Oil and Cheshire Oil.”

Financial Highlights

Net income attributable to the Partnership was $7.1 million, or $0.15
per diluted common limited partner unit, for the first quarter of 2019
compared with net income attributable to the Partnership of $59.0
million, or $1.73 per diluted common limited partner unit, for the same
period of 2018.

In the first quarter of 2018, net income attributable to the
Partnership, earnings before interest, taxes, depreciation and
amortization (EBITDA), distributable cash flow (DCF) and Adjusted EBITDA
included a one-time, non-cash gain of $52.6 million associated with the
extinguishment of a contingent liability related to the Volumetric
Ethanol Excise Tax Credit.

In the first quarter of 2019, EBITDA was $58.0 million compared with
$105.7 million in the year-earlier period.

DCF was $27.8 million in the first quarter of 2019 compared with $79.8
million in the same period of 2018.

Adjusted EBITDA was $58.6 million in the first quarter of 2019 compared
with $107.6 million in the first quarter of 2018.

Gross profit in the first quarter of 2019 was $156.8 million compared
with $144.3 million in the first quarter of 2018, primarily due to
higher margins in the GDSO segment. Combined product margin, which is
gross profit adjusted for depreciation allocated to cost of sales, was
$179.7 million in the first quarter of 2019 compared with $166.1 million
in the first quarter of 2018.

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 March 31, 2019 and 2018.

GDSO segment product margin was $138.4 million in the first quarter of
2019, an increase of $24.7 million from $113.7 million in the first
quarter of 2018 primarily driven by strong fuel margins early in the
quarter and the July 2018 acquisitions of Champlain Oil and Cheshire Oil.

Wholesale segment product margin was $34.8 million in the first quarter
of 2019 compared with $47.1 million in the first quarter of 2018. The
decrease was attributable primarily to the expiration in June 2018 of a
take-or-pay contract with one particular crude oil customer.

Commercial segment product margin was $6.4 million in the first quarter
of 2019 compared with $5.2 million in the same period of 2018 due
primarily to an increase in bunkering activity.

Sales in the first quarter of 2019 were $3.0 billion compared with $2.8
billion in the first quarter of 2018. Wholesale segment sales were $1.7
billion in the first quarter of 2019 compared with $1.6 billion in the
first quarter of 2018. GDSO segment sales were $0.9 billion in the first
quarter of 2019 compared with $1.0 billion in the first quarter of 2018.
Commercial segment sales were $0.3 billion in the first quarter of 2019
and in the first quarter of 2018.

Volume in the first quarter of 2019 was 1.6 billion gallons compared
with 1.4 billion gallons in the same period of 2018. Wholesale segment
volume was 1.0 billion gallons in the first quarter of 2019 compared
with 880.3 million gallons in the first quarter of 2018. GDSO volume was
379.7 million gallons in the first quarter of 2019 compared with 362.5
million gallons in the same period of 2018. Commercial segment volume
was 191.5 million gallons in the first quarter of 2019 compared
with 144.2 million gallons in the same period of 2018.

Recent Highlights

  • Global’s Board of Directors announced an increase of its quarterly
    cash distribution from $0.50 to $0.51 per unit on all of its
    outstanding common units for the period from January 1 to March 31,
    2019. The distribution will be paid on May 15, 2019 to unitholders of
    record as of the close of business on May 10, 2019.
  • Global’s Board of Directors announced a quarterly cash distribution of
    $0.609375 per unit, or $2.4375 per unit on an annualized basis, on the
    Partnership’s Series A preferred units for the period from February
    15, 2019 through May 14, 2019. This distribution will be paid on May
    15, 2019 to holders of record as of the opening of business on May 1,
    2019.
  • Global entered into an amended credit agreement that, among other
    things, extended the maturity date for the $850 million working
    capital revolving credit facility and the $450 million revolving
    credit facility from April 2020 to April 2022 and reduced the
    applicable rate for borrowings and letters of credit under the
    revolving credit facility.

Business Outlook

We are off to a solid start in 2019,” Slifka said. “Our terminal
network and retail locations continue to perform in line with our
expectations, and we are on track to achieve our full-year EBITDA
guidance.”

For full-year 2019, Global continues to expect to generate EBITDA of
$200 million to $225 million. This EBITDA guidance excludes gains or
losses on the sale and disposition of assets and goodwill and long-lived
asset impairment charges.

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 2019 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 first-quarter 2019 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 products 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, gasoline blendstocks,
    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

With approximately 1,600 locations primarily in the Northeast, Global
Partners is one of the region’s largest independent owners, suppliers
and operators of gasoline stations and convenience stores. Global also
owns, controls or has access to one of the largest terminal networks in
New England and New York, through which it distributes gasoline,
distillates, residual oil and renewable fuels to wholesalers, retailers
and commercial customers. In addition, Global engages in the
transportation of petroleum products and renewable fuels by rail from
the mid-continental U.S. and Canada. Global, a master limited
partnership, trades on the New York Stock Exchange under the ticker
symbol “GLP.” 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 thereof. 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
March 31,
2019 2018
Sales $ 2,979,626 $ 2,802,891
Cost of sales   2,822,782   2,658,561
Gross profit 156,844 144,330
 
Costs and operating expenses:
Selling, general and administrative expenses 41,090 39,366
Operating expenses 82,944 74,049
Gain on trustee taxes (52,627)
Lease exit and termination gain (493)
Amortization expense 2,976 2,468
Net loss on sale and disposition of assets   553   1,867
Total costs and operating expenses   127,070   65,123
 
Operating income 29,774 79,207
 
Interest expense   (22,956)   (21,445)
 
Income before income tax (expense) benefit 6,818 57,762
 
Income tax (expense) benefit   (24)   913
 
Net income 6,794 58,675
 
Net loss attributable to noncontrolling interest   332   367
 
Net income attributable to Global Partners LP 7,126 59,042
 

Less: General partner’s interest in net income, including
incentive distribution rights

304 396
Less: Series A preferred limited partner interest in net income   1,682  
 
Net income attributable common limited partners $ 5,140 $ 58,646
 
Basic net income per common limited partner unit (1) $ 0.15 $ 1.74
 
Diluted net income per common limited partner unit (1) $ 0.15 $ 1.73
 
Basic weighted average common limited partner units outstanding   33,753   33,652
 
Diluted weighted average limited partner units outstanding   34,230   33,802
 

(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 or losses is assumed to be
allocated to the common unitholders and to the General Partner’s general
partner interest. Net income attributable to common limited partners is
divided by the weighted average common units outstanding in computing
the net income per limited partner unit.

 
GLOBAL PARTNERS LP
CONSOLIDATED BALANCE SHEETS
(In
thousands)

(Unaudited)
     
March 31,
2019
December 31,
2018
Assets
Current assets:
Cash and cash equivalents $ 8,638 $ 8,121
Accounts receivable, net 403,676 334,777
Accounts receivable – affiliates 4,873 5,435
Inventories 464,866 386,442
Brokerage margin deposits 19,943 14,766
Derivative assets 8,044 26,390
Prepaid expenses and other current assets   99,144   98,977
Total current assets 1,009,184 874,908
 
Property and equipment, net 1,113,176 1,132,632
Right of use assets, net 312,432
Intangible assets, net 55,220 58,532
Goodwill 326,486 327,406
Other assets   29,492   30,813
 
Total assets $ 2,845,990 $ 2,424,291
 
 
Liabilities and partners’ equity
Current liabilities:
Accounts payable $ 343,198 $ 308,979
Working capital revolving credit facility – current portion 219,500 103,300
Lease liability—current portion 69,777
Environmental liabilities – current portion 6,092 6,092
Trustee taxes payable 39,458 42,613
Accrued expenses and other current liabilities 89,228 117,274
Derivative liabilities   12,916   4,494
Total current liabilities 780,169 582,752
 
Working capital revolving credit facility – less current portion 150,000 150,000
Revolving credit facility 217,000 220,000
Senior notes 665,138 664,455
Long-term lease liability – less current portion 252,464
Environmental liabilities – less current portion 56,374 57,132
Financing obligations 149,860 149,997
Deferred tax liabilities 42,677 42,856
Other long-term liabilities   42,786   57,905
Total liabilities 2,356,468 1,925,097
 
Partners’ equity
Global Partners LP equity 487,991 497,331
Noncontrolling interest   1,531   1,863
Total partners’ equity   489,522   499,194
 
Total liabilities and partners’ equity $ 2,845,990 $ 2,424,291
 
 
GLOBAL PARTNERS LP
FINANCIAL RECONCILIATIONS
(In
thousands)

(Unaudited)
     
 
Three Months Ended
March 31,
2019 2018
Reconciliation of gross profit to product margin
Wholesale segment:
Gasoline and gasoline blendstocks $ 26,990 $ 25,387
Crude oil (6,226 ) 5,073
Other oils and related products   14,080     16,687  
Total 34,844 47,147
Gasoline Distribution and Station Operations segment:
Gasoline distribution 87,425 70,145
Station operations   50,960     43,534  
Total 138,385 113,679
Commercial segment   6,458     5,237  
Combined product margin 179,687 166,063
Depreciation allocated to cost of sales   (22,843 )   (21,733 )
Gross profit $ 156,844   $ 144,330  
 
Reconciliation of net income to EBITDA and Adjusted EBITDA
Net income $ 6,794 $ 58,675
Net loss attributable to noncontrolling interest   332     367  
Net income attributable to Global Partners LP 7,126 59,042
Depreciation and amortization, excluding the impact of
noncontrolling interest
27,935 26,119
Interest expense, excluding the impact of noncontrolling interest 22,956 21,445
Income tax expense (benefit)   24     (913 )
EBITDA (1) 58,041 105,693
Net loss on sale and disposition of assets   553     1,867  
Adjusted EBITDA (1) $ 58,594   $ 107,560  
 
Reconciliation of net cash used in operating activities to EBITDA
and Adjusted EBITDA
Net cash used in operating activities $ (87,037 ) $ (103,714 )
Net changes in operating assets and liabilities and certain non-cash
items
122,036 188,871

Net cash from operating activities and changes in operating assets
and liabilities attributable to noncontrolling interest

62 4
Interest expense, excluding the impact of noncontrolling interest 22,956 21,445
Income tax expense (benefit)   24     (913 )
EBITDA (1) 58,041 105,693
Net loss on sale and disposition of assets   553     1,867  
Adjusted EBITDA (1) $ 58,594   $ 107,560  
 
Reconciliation of net income to distributable cash flow
Net income $ 6,794 $ 58,675
Net loss attributable to noncontrolling interest   332     367  
Net income attributable to Global Partners LP 7,126 59,042
Depreciation and amortization, excluding the impact of
noncontrolling interest
27,935 26,119
Amortization of deferred financing fees and senior notes discount 1,727 1,713
Amortization of routine bank refinancing fees (1,022 ) (1,022 )
Maintenance capital expenditures, excluding the impact of
noncontrolling interest
  (8,006 )   (6,082 )
Distributable cash flow (2)(3) 27,760 79,770
Distributions to Series A preferred unitholders (4)   (1,682 )    
Distributable cash flow after distributions to Series A preferred
unitholders
$ 26,078   $ 79,770  
 
Reconciliation of net cash used in operating activities to
distributable cash flow
Net cash used in operating activities $ (87,037 ) $ (103,714 )
Net changes in operating assets and liabilities and certain non-cash
items
122,036 188,871

Net cash from operating activities and changes in operating assets
and liabilities attributable to noncontrolling interest

62 4
Amortization of deferred financing fees and senior notes discount 1,727 1,713
Amortization of routine bank refinancing fees (1,022 ) (1,022 )
Maintenance capital expenditures, excluding the impact of
noncontrolling interest
  (8,006 )   (6,082 )
Distributable cash flow (2)(3) 27,760 79,770
Distributions to Series A preferred unitholders (4)   (1,682 )    
Distributable cash flow after distributions to Series A preferred
unitholders
$ 26,078   $ 79,770  
 

(1) EBITDA and Adjusted EBITDA for the three months ended March 31, 2018
include 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 $0.5 million and $1.9 million for the three months ended March
31, 2019 and 2018, respectively. Excluding the net loss on sale and
disposition of assets, distributable cash flow would have been $28.3
million and $81.6 million for the three months ended March 31, 2019 and
2018, respectively.

Contacts

Global Partners LP

Daphne H. Foster
Chief Financial Officer
(781) 894-8800

Edward J. Faneuil
Executive Vice President, General Counsel
and Secretary
(781) 894-8800

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