Global Partners Reports Second-Quarter 2018 Financial Results

With organic investments and strategic M&A, Global Partners is leveraging its expertise in acquiring, integrating and operating assets, says Global Partners’ CEO.

Global Partners LP has released its 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.”

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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.

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 Co. 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 Co. 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 Aug. 14, 2018 to unitholders of record as of the close of business on Aug.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 Jan. 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 Dec. 31, 2018.