Global Partners Reports Strong Financial Results for the Third Quarter of 2014

- Net Income Attributable to the Partnership of $42.5 Million, up 64.7% Year-over-Year

- EBITDA of $74.7 Million, up 27.8% Year-over-Year

- Distributable Cash Flow of $51.5 Million, up 15.9% Year-over-Year

- Partnership Increases Full-Year 2014 EBITDA Guidance

WALTHAM, Mass.--()--Global Partners LP (NYSE: GLP) today reported financial results for the third quarter ended September 30, 2014.

“We reported strong results in the third quarter, posting solid margin gains in our Wholesale and Gasoline Distribution and Station Operations segments”

Third Quarter 2014 Financial Summary

Net income attributable to Global Partners for the third quarter of 2014 was $42.5 million, or $1.50 per diluted limited partner unit, compared with $25.8 million, or $0.91 per diluted limited partner unit, for the third quarter of 2013.

Combined product margin for the third quarter of 2014 was $170.3 million, compared with $133.5 million for the third quarter of 2013.

Earnings before interest, taxes, depreciation and amortization (EBITDA) for the third quarter of 2014 were $74.7 million, compared with $58.5 million for the same period of 2013.

Distributable cash flow (DCF) for the third quarter of 2014 was $51.5 million, compared with distributable cash flow of $44.4 million for the third quarter of 2013.

Combined product margin, 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 September 30, 2014 and 2013.

“We reported strong results in the third quarter, posting solid margin gains in our Wholesale and Gasoline Distribution and Station Operations segments,” said Eric Slifka, the Partnership’s President and Chief Executive Officer. “Our performance reflected higher throughput at our crude oil transload facilities, increases in wholesale gasoline and gasoline blendstocks product margin and increased profitability in our retail gasoline and convenience store business.

“Through strategic acquisitions and organic projects, we continue to build a portfolio of high-quality, integrated assets,” Slifka said. “Our planned acquisition of Warren Equities will create meaningful economies of scale for our wholesale supply and retail gasoline station and convenience store assets and will serve as a platform for growth.

“In July we announced plans to develop, build and operate a crude oil terminal in Port Arthur, Texas under a long-term lease agreement with Kansas City Southern,” Slifka said. “We are actively pursuing permits for this project that will give us entree to the Gulf region’s significant refining capacity and potential export opportunities. In addition, new pipeline connections are expanding our crude oil gathering capabilities in the Bakken, while on the West Coast our recently received permit moves us a step closer to simultaneously producing ethanol and transloading crude. Together with Albany, N.Y., Clatskanie, OR and our pending Port Arthur terminal project, our national footprint of crude by rail assets allows our customers the flexibility to move product to East, West and Gulf Coast destinations.”

Sales for the third quarter of 2014 were $4.0 billion, compared with $4.4 billion for the same period in 2013. Wholesale segment sales were $2.9 billion, compared with $3.3 billion for the third quarter of 2013. Sales from the Gasoline Distribution and Station Operations (GDSO) segment were $924.8 million, versus $911.7 million for the same period in 2013. Commercial segment sales were $210.6 million, compared with $213.9 million for the third quarter of 2013.

Wholesale segment volume was 1.1 billion gallons in the third quarter of 2014, compared with 1.2 billion gallons for the same period of 2013. Volume in the GDSO segment was 268.9 million gallons for the third quarter of 2014, compared with 276.3 million gallons in the third quarter of 2013. Commercial segment volume was 85.0 million gallons, compared with 84.0 million gallons for the third quarter of 2013.

Gross profit was $155.4 million for the third quarter of 2014, compared with $118.1 million for the third quarter of 2013. Wholesale segment product margin increased to $84.9 million from $64.1 million in the third quarter of 2013. Product margin in the GDSO segment increased to $80.2 million from $64.7 million in the third quarter of 2013. Commercial segment product margin increased to $5.2 million for the third quarter of 2014 from $4.7 million in the same period of 2013.

Recent Highlights

  • The Partnership agreed to acquire 100% of the equity interest in Warren Equities, Inc., one of the largest independent marketers of petroleum products in the Northeast, from the Warren Alpert Foundation for total consideration of approximately $383 million, subject to closing adjustments. Last week, the Partnership received notice of early termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, for the proposed acquisition, which is expected to close in the first quarter of 2015, subject to customary closing conditions. The acquisition is expected to be accretive in the first full year of operations.
  • In connection with the planned acquisition of Warren, Global has amended its revolving credit facility to provide the Partnership with the option to expand the facility by either $75 million or $150 million.
  • The Board of Directors of Global’s general partner, Global GP LLC, declared a quarterly cash distribution of $0.6525 per unit, or $2.61 per unit on an annualized basis, on all of its outstanding common units for the period from July 1 through September 30, 2014. This marked the 10th consecutive increase in the quarterly distribution.

Business Outlook

“Based on our performance through the first three quarters of 2014, we are increasing our full-year EBITDA guidance to a range of $215 million to $230 million,” Slifka said. “We believe that we are well positioned to deliver on our strategic business objectives for the year and going forward. We are focused on continuing to leverage the flexibility of our assets to drive efficiencies across the business.”

The guidance provided by Global Partners is based on assumptions regarding current market conditions, including demand for petroleum products and renewable fuels, weather, credit markets, the regulatory and permitting environment and the forward product pricing curve, which could influence quarterly financial results.

Financial Results Conference Call

Management will review the Partnership’s third-quarter 2014 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, www.globalp.com.

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, natural gas and propane, as well as convenience store sales, gasoline station rental income and revenue generated from the Partnership’s logistics activities. Product costs include the cost of acquiring the refined petroleum products, renewable fuels, crude oil, natural gas 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 the Partnership’s 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 Global Partners’ consolidated financial statements to assess the Partnership’s 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, Global Partners’ product margin may not be comparable to product margin or a similarly titled measure of other companies.

EBITDA

EBITDA is a non-GAAP financial measure used as a supplemental financial measure 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, natural gas and propane, 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.

EBITDA should not be considered as an alternative 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 excludes some, but not all, items that affect net income and this measure may vary among other companies. Therefore, 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 Global Partners’ limited partners since it serves as an indicator of the Partnership's success in providing a cash return on their investment. Distributable cash flow means the Partnership’s 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. Specifically, this financial measure indicates to investors whether or not the Partnership has generated sufficient earnings on a current or historic level that can sustain or support an increase in its quarterly cash distribution. Distributable cash flow is a quantitative standard used by the investment community with respect to publicly traded partnerships. 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, Global Partners' distributable cash flow may not be comparable to distributable cash flow or similarly titled measures of other companies.

About Global Partners LP

A publicly traded master limited partnership, Global Partners LP is a midstream logistics and marketing company. Global owns, controls or has access to one of the largest terminal networks of refined petroleum products and renewable fuels in the Northeast, and is 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. Global is a leader in the purchasing, selling and logistics of transporting domestic and Canadian crude oil and other products by rail across its “virtual pipeline” from the mid-continent region of the U.S. and Canada to the East and West Coasts for distribution to refiners and other customers. With a portfolio of approximately 900 locations primarily in the Northeast, Global also is one of the largest independent owners, suppliers and operators of gasoline stations and convenience stores. In addition, Global is a distributor of natural gas and propane. Global is No. 146 in the Fortune 500 list of America’s largest corporations. For additional information visit www.globalp.com.

Forward-looking Statements

Some of the information contained in this news release may contain forward-looking statements. Forward-looking statements include, without limitation, any statement that may project, indicate or imply future results, events, performance or achievements, and may contain the words “may,” “believe,” “should,” “could,” “expect,” “anticipate,” “plan,” “intend,” “estimate,” “will likely result,” or other similar expressions. In addition, any statement made by Global Partners LP’s management concerning future financial performance (including future revenues, earnings or growth rates), ongoing business strategies or prospects and possible actions by Global Partners LP or its subsidiaries are also forward-looking statements.

Although Global Partners LP believes these forward-looking statements are reasonable as and when made, there may be events in the future that Global Partners LP is not able to predict accurately or control, and there can be no assurance that future developments affecting Global Partners LP’s business will be those that it anticipates. Estimates for Global Partners LP’s future EBITDA are based on a number of assumptions regarding market conditions, including demand for petroleum products and renewable fuels, weather, credit markets, the regulatory and permitting environment and the forward product pricing curve. Therefore, Global Partners LP can give no assurance that its future EBITDA will be as estimated.

For additional information about risks and uncertainties that could cause actual results to differ materially from the expectations Global Partners LP describes in its forward-looking statements, please refer to Global Partners LP’s Annual Report on Form 10-K and subsequent filings the Partnership makes with the Securities and Exchange Commission.

Readers are cautioned not to place undue reliance on the forward-looking statements, which speak only as of the date on which they are made. Global Partners LP expressly disclaims any obligation or undertaking to update forward-looking statements to reflect any change in its expectations or beliefs or any change in events, conditions or circumstances on which any forward-looking statement is based.

 
 
GLOBAL PARTNERS LP
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per unit data)
(Unaudited)
                                 
Three Months Ended Nine Months Ended
September 30, September 30,
2014 2013 2014 2013
Sales $ 4,050,458 $ 4,433,426 $ 13,737,006 $ 14,794,372
Cost of sales   3,895,023     4,315,333     13,335,922     14,523,410  
Gross profit 155,435 118,093 401,084 270,962
 
Costs and operating expenses:
Selling, general and administrative expenses 41,408 27,889 110,379 79,232
Operating expenses 53,315 46,713 152,296 137,420
Amortization expense   4,522     4,773   13,574     13,321  
Total costs and operating expenses   99,245     79,375     276,249     229,973  
 
Operating income 56,190 38,718 124,835 40,989
 
Interest expense (12,324 ) (10,855 ) (35,677 ) (32,113 )
 
Income before income tax expense 43,866 27,863 89,158 8,876
 
Income tax expense   (244 )   (2,727 )   (660 )   (852 )
 
Net income 43,622 25,136 88,498 8,024
 
Net (income) loss attributable to noncontrolling interest (1,114 )   679     (1,699 )   549  
 
Net income attributable to Global Partners LP 42,508 25,815 86,799 8,573
 

Less: General partner's interest in net income, including

incentive distribution rights   1,623     1,042     4,164     2,306  
 
Limited partners' interest in net income $ 40,885   $ 24,773   $ 82,635   $ 6,267  
 
Basic net income per limited partner unit (1) $ 1.50   $ 0.91   $ 3.03   $ 0.23  
 
Diluted net income per limited partner unit (1) $ 1.50   $ 0.91   $ 3.03   $ 0.23  
 
Basic weighted average limited partner units outstanding 27,183     27,333     27,229     27,350  
 
Diluted weighted average limited partner units outstanding (2) 27,307     27,333     27,312     27,593  
 
 

(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.

 

(2)

Basic units were used to calculate diluted net income per limited partner unit for the three months ended September 30, 2013, as using the effects of phantom units would have an anti-dilutive effect on income per limited partner unit.

 
 

 
 
GLOBAL PARTNERS LP
CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
                 
 
September 30, December 31,
2014 2013
Assets
Current assets:
Cash and cash equivalents $ 5,545 $ 9,217
Accounts receivable, net 529,147 686,392
Accounts receivable - affiliates 3,411 1,404
Inventories 455,709 572,806
Brokerage margin deposits 10,792 21,792
Fair value of forward fixed price contracts 57,121 46,007
Prepaid expenses and other current assets   53,989   36,693
Total current assets 1,115,714 1,374,311
 
Property and equipment, net 823,583 803,636
Intangible assets, net 54,195 67,769
Goodwill 154,078 154,078
Other assets   30,124   28,128
 
Total assets $ 2,177,694 $ 2,427,922
 
 
Liabilities and partners' equity
Current liabilities:
Accounts payable $ 545,749 $ 781,119
Working capital revolving credit facility - current portion 113,000 -
Line of credit 700 3,700
Environmental liabilities - current portion 3,320 3,377
Trustee taxes payable 82,133 80,216
Accrued expenses and other current liabilities 63,484 65,963
Obligations on forward fixed price contracts   55,754   38,197
Total current liabilities 864,140 972,572
 
Working capital revolving credit facility - less current portion 92,000 327,000
Revolving credit facility 272,600 434,700
Senior notes 368,012 148,268
Environmental liabilities - less current portion 36,533 37,762
Other long-term liabilities   47,253   44,440
Total liabilities 1,680,538 1,964,742
 
Partners' equity
Global Partners LP equity 447,514 415,237
Noncontrolling interest   49,642   47,943
Total partners' equity   497,156   463,180
 
Total liabilities and partners' equity $ 2,177,694 $ 2,427,922

 
 
GLOBAL PARTNERS LP
FINANCIAL RECONCILIATIONS
(In thousands)
(Unaudited)
                               
Three Months Ended Nine Months Ended
September 30, September 30,
2014 2013 2014 2013
Reconciliation of gross profit to product margin
Wholesale segment:
Gasoline and gasoline blendstocks $ 25,370 $ 21,854 $ 70,959 $ 4,786
Crude oil 44,670 24,621 98,256 70,503
Other oils and related products   14,821   17,592   57,964   45,263
Total 84,861 64,067 227,179 120,552
Gasoline Distribution and Station Operations segment:
Gasoline distribution 54,306 43,443 126,629 110,533
Station operations   25,905   21,287   68,609   59,062
Total 80,211 64,730 195,238 169,595
Commercial segment   5,234   4,745   23,295   21,340
Combined product margin 170,306 133,542 445,712 311,487
Depreciation allocated to cost of sales   (14,871)   (15,449)   (44,628)   (40,525)
Gross profit $ 155,435 $ 118,093 $ 401,084 $ 270,962
 
Reconciliation of net income to EBITDA
Net income $ 43,622 $ 25,136 $ 88,498 $ 8,024
Net (income) loss attributable to noncontrolling interest   (1,114)   679   (1,699)   549
Net income attributable to Global Partners LP 42,508 25,815 86,799 8,573
Depreciation and amortization, excluding the impact of noncontrolling interest 19,651 19,061 57,253 50,999
Interest expense, excluding the impact of noncontrolling interest 12,314 10,855 35,635 32,113
Income tax expense   244   2,727   660   852
EBITDA $ 74,717 $ 58,458 $ 180,347 $ 92,537
 
Reconciliation of net cash provided by (used in) operating activities to EBITDA
Net cash provided by (used in) operating activities $ 144,367 $ (73,600) $ 194,001 $ 254,112
Net changes in operating assets and liabilities and certain non-cash items (79,167) 119,537 (42,750) (190,554)

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

(3,041) (1,061) (7,199) (3,986)
Interest expense, excluding the impact of noncontrolling interest 12,314 10,855 35,635 32,113
Income tax expense   244   2,727   660   852
EBITDA $ 74,717 $ 58,458 $ 180,347 $ 92,537
 
Reconciliation of net income to distributable cash flow
Net income $ 43,622 $ 25,136 $ 88,498 $ 8,024
Net (income) loss attributable to noncontrolling interest   (1,114)   679   (1,699)   549
Net income attributable to Global Partners LP 42,508 25,815 86,799 8,573
Depreciation and amortization, excluding the impact of noncontrolling interest 19,651 19,061 57,253 50,999
Amortization of deferred financing fees 1,620 1,744 4,187 5,062
Amortization of senior notes discount 225 105 435 263
Amortization of routine bank refinancing fees (1,339) (985) (3,342) (2,955)
Maintenance capital expenditures   (11,156)   (1,297)   (28,467)   (9,192)
Distributable cash flow $ 51,509 $ 44,443 $ 116,865 $ 52,750
 
 

Reconciliation of net cash provided by (used in) operating activities to
distributable cash flow

Net cash provided by (used in) operating activities $ 144,367 $ (73,600) $ 194,001 $ 254,112
Net changes in operating assets and liabilities and certain non-cash items (79,167) 119,537 (42,750) (190,554)
Amortization of deferred financing fees 1,620 1,744 4,187 5,062
Amortization of senior notes discount 225 105 435 263

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

(3,041) (1,061) (7,199) (3,986)
Amortization of routine bank refinancing fees (1,339) (985) (3,342) (2,955)
Maintenance capital expenditures   (11,156)   (1,297)   (28,467)   (9,192)
Distributable cash flow $ 51,509 $ 44,443 $ 116,865 $ 52,750
 
 

Contacts

Global Partners LP
Daphne H. Foster, 781-894-8800
Chief Financial Officer
or
Edward J. Faneuil, 781-894-8800
Executive Vice President,
General Counsel and Secretary

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Release Summary

Global Partners reported strong financial results for the third quarter of 2014. Net income attributable to the Partnership was $42.5 million, up 64.7% year-over-year.

Global Partners LP