Terminal Acquisitions and Strong Gasoline Business Help to Offset
Challenging Market Conditions; Partnership Provides Distribution
Outlook
WALTHAM, Mass.--(BUSINESS WIRE)--Aug. 7, 2008--Global Partners LP
(NYSE:GLP) today reported financial results for the second quarter and
six months ended June 30, 2008.
The net loss for the second quarter of 2008 was $1.2 million, or
$0.09 per limited partner unit, based on 13.1 million weighted average
limited partner units outstanding. This result compared with net
income of $0.6 million for the second quarter of 2007. Last year's net
loss of $1.28 per limited partner unit for the second quarter of 2007,
based on 12.3 million weighted average limited partner units
outstanding, was affected by EITF 98-05 in connection with the
placement of Class B units.
Earnings before interest, taxes, depreciation and amortization
(EBITDA) for the second quarter of 2008 were $6.8 million compared
with $5.6 million for the corresponding period of 2007.
Global Partners reported distributable cash flow for the second
quarter of 2008 of $2.2 million compared with $1.6 million for the
second quarter of 2007.
"Given the dramatic and rapid increase in prices in the refined
petroleum products market, we are satisfied with our results for the
second quarter, which historically is one of our weaker reporting
periods," said Global Partners President and Chief Executive Officer
Eric Slifka. "Last year's EBITDA in the second quarter, for example,
represented only 9% of total adjusted EBITDA for the year. Like others
in our sector, we were negatively affected by significantly higher
energy prices that squeezed margins and reduced demand for certain
products. We largely offset these market challenges by expanding our
gasoline business, generating strong contributions from our recent
terminal acquisitions and carefully managing expenses. This quarter's
result also benefited from a $2.5 million change in inventory reserve
estimates as a result of improved operating procedures and
efficiencies.
"The five terminals we acquired from ExxonMobil in 2007 have
diversified our revenues by substantially growing the gasoline
component of our business, and these assets continue to perform on
plan," Slifka said. "During the second quarter, volumes and margins in
our gasoline business increased significantly. Gasoline contributed
approximately 45% to our wholesale net product margin for the second
quarter of 2008, compared with 11% in the same period last year.
"Another factor in our ability to overcome these challenging
market conditions is the condition of our balance sheet, which
continues to supply us with ample liquidity," Slifka said. "Through
our very supportive, 13-member bank group, we recently increased our
borrowing capacity by $100 million and expanded our existing accordion
feature by an additional $100 million. In this high priced market, the
condition of our balance sheet provides us with a competitive
advantage over smaller, less credit-worthy competitors and enables us
to pursue additional opportunities for growth."
Reflecting the partnership's acquisition of the five terminals and
higher refined petroleum product prices, sales for the second quarter
of 2008 increased to $2.3 billion from $1.4 billion for the second
quarter of 2007. Wholesale segment sales were $2.2 billion in the
second quarter of 2008 compared with $1.3 billion for the second
quarter of 2007. Commercial segment sales were $105.2 million for the
second quarter of 2008 compared with $79.9 million in the second
quarter of 2007. Combined gross profit for the three months ended June
30, 2008 was $22.7 million compared with $21.6 million in the same
period of 2007.
Sales for the first six months of 2008 increased to $5.0 billion
from $3.0 billion for the first half of 2007. Wholesale segment sales
were $4.8 billion in the first half of 2008 compared with $2.7 billion
in the same period in 2007. Commercial segment sales were $229.4
million in the first half of 2008 compared with $212.5 million in the
comparable period of 2007. Combined gross profit for the six months
ended June 30, 2008 was $58.3 million compared with $63.9 million in
the first half of 2007.
EBITDA and distributable cash flow are non-GAAP (Generally
Accepted Accounting Principles) financial measures 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 and six months ended June 30, 2008 and 2007.
Recent Highlights:
-- The Board of Directors of Global Partners' general partner,
Global GP LLC, declared a quarterly cash distribution of
$0.4875 per unit ($1.95 per unit on an annualized basis) on
all of its outstanding common and subordinated units for the
period from April 1, 2008 through June 30, 2008. The
distribution will be paid August 14, 2008 to unitholders of
record as of the close of business August 5, 2008.
-- Global Partners signed an amendment to its working capital
revolving credit facility. The amendment increases the
partnership's borrowing capacity with its 13-member bank group
by $100 million to $650 million. The amendment also increases
the existing accordion feature by an additional $100 million
to a total of $200 million. The partnership's credit
facilities mature in April 2011.
Partnership Provides Distribution Outlook
"Global Partners begins the second half of 2008 well positioned,
we believe, with a healthy balance sheet, ample liquidity and
expanding transportation fuel volume that provides us with an
excellent base of business," Slifka said. "As a result, it is
management's intent at this time to recommend to the Board of
Directors of our general partner that we maintain our cash
distribution at $0.4875 per unit for the third and fourth quarters of
2008. While this recommendation is subject to revision each quarter,
the overall margin environment is showing signs of improvement and we
are encouraged about our prospects in the quarters ahead."
Financial Results Conference Call
Management will review Global Partners' second quarter 2008
financial results in a teleconference call for analysts and investors
at 10:00 a.m. ET 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 the Global
Partners' website, www.globalp.com.
Use of Non-GAAP Financial Measures
Adjusted Net (Loss) Income Per Diluted Limited Partner Unit
Global Partners uses adjusted net (loss) income per diluted
limited partner unit to measure its financial performance on a
per-unit basis. Adjusted net (loss) income per diluted limited partner
unit is defined as net (loss) income after adding back the theoretical
amount allocated to the general partner's interest as provided under
Emerging Issues Task Force 03-06, "Participating Securities and the
Two-Class Method under FASB Statement 128" ("EITF 03-06") and a
non-cash reduction in net (loss) income available to limited partners
under Emerging Issues Task Force 98-05, "Accounting for Convertible
Securities with Beneficial Conversion Features or Contingently
Adjustable Conversion Ratios" ("EITF 98-05"), divided by the weighted
average number of outstanding diluted common and subordinated units,
or limited partner units, during the period.
Net (loss) income per diluted limited partner unit as dictated by
EITF 03-06 is theoretical and pro forma in nature and does not reflect
the economic probabilities of whether earnings for an accounting
period would or could be distributed to unitholders. The partnership
agreement does not provide for the quarterly distribution of net
income; rather, it provides for the distribution of available cash,
which is a contractually defined term that generally means all cash on
hand at the end of each quarter after establishment of sufficient cash
reserves required to operate its business. Accordingly, the
distributions we historically paid and will pay in future periods are
not impacted by net (loss) income per diluted limited partner unit as
dictated by EITF 03-06.
The non-cash reduction under EITF 98-05 for the three and six
months ended June 30, 2007 was the result of accounting for the sale
of Class B units. Although EITF 98-05 affected net (loss) income
available to limited partners, it did not affect net income or
distributable cash flow to limited partners, nor did it affect total
unitholders' equity.
Adjusted net (loss) income per diluted limited partner unit is a
non-GAAP financial measure and should not be considered as an
alternative to net (loss) income per diluted limited partner unit or
any other measure of financial performance presented in accordance
with GAAP. In addition, Global Partners' adjusted net (loss) income
per diluted limited partner unit may not be comparable to the adjusted
net (loss) income per diluted limited partner unit or similarly titled
measure of other companies.
EBITDA, Adjusted EBITDA and Net (Loss) Income as Adjusted for
One-time Gains
EBITDA, adjusted EBITDA and net (loss) income as adjusted for
one-time gains are used as supplemental financial measures by
management and 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 and distribution of refined petroleum products
business, without regard to financing methods and capital
structure; and
-- the viability of acquisitions and capital expenditure projects
and the overall rates of return of alternative investment
opportunities.
Adjusted EBITDA and net (loss) income as adjusted for one-time
gains reflect the exclusion of the $14.1 million gain on investment
for the six months ended June 30, 2007. EBITDA, adjusted EBITDA and
net (loss) income as adjusted for one-time gains should not be
considered 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,
adjusted EBITDA and net (loss) income as adjusted for one-time gains
exclude some, but not all, items that affect net income, and these
measures may vary among other companies. Therefore, EBITDA, adjusted
EBITDA and net (loss) income as adjusted for one-time gains 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. Specifically, this financial measure indicates to
investors whether or not the partnership has generated sufficient cash
flow 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
reflects the exclusion of the $14.1 million gain on investment for the
six months ended June 30, 2007. Distributable cash flow is a non-GAAP
financial measure and should not be considered as an alternative to
net 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 measure of other
companies.
About Global Partners LP
Global Partners LP, a publicly traded master limited partnership
based in Waltham, Massachusetts, owns, controls and has access to one
of the largest terminal networks of refined petroleum products in the
Northeast. The partnership is one of the largest wholesale
distributors of gasoline, distillates (such as home heating oil,
diesel and kerosene) and residual oil to wholesalers, retailers and
commercial customers in the region. Global Partners LP, a FORTUNE
500(R) company, trades on the New York Stock Exchange under the ticker
symbol "GLP." For additional information, please visit
www.globalp.com.
Safe Harbor Statement
This news release contains certain "forward-looking statements"
within the meaning of the federal securities laws. These
forward-looking statements are identified as any statements that do
not relate strictly to historical or current facts and can generally
be identified by the use of forward-looking terminology including
"will," "may," "believe," "expect," "anticipate," "estimate,"
"continue" or other similar words. Such statements may discuss
business prospects, goals, new developments and future expectations or
contain projections of results of operations, financial condition and
Global Partners LP's ability to make distributions to unitholders.
These statements are not guarantees of performance. Although Global
Partners LP believes these forward-looking statements are based on
reasonable assumptions, statements made regarding future results are
subject to a number of assumptions, uncertainties and risks, many of
which are beyond the control of Global Partners LP, which may cause
actual results to be materially different from the forward-looking
statements contained in this news release. For specific risks and
uncertainties that could cause actual results to differ materially
from forward-looking statements, please refer to Global Partners LP's
Annual Report on Form 10-K for the year ended December 31, 2007 and
subsequent filings the partnership makes with the Securities and
Exchange Commission. All forward-looking statements included in this
news release and all subsequent written or oral forward-looking
statements attributable to Global Partners LP or persons acting on its
behalf are expressly qualified in their entirety by these cautionary
statements. The forward-looking statements speak only as of the date
made, and Global Partners LP undertakes no obligation to publicly
update or revise any forward-looking statements, whether as a result
of new information, future events or otherwise.
The financial statements and financial information presented below
reflect the operations of Global Partners LP.
GLOBAL PARTNERS LP
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except for per unit data)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
------------------------ ------------------------
2008 2007 2008 2007
----------- ----------- ----------- -----------
Sales $2,297,709 $1,384,090 $5,018,701 $2,957,266
Cost of sales 2,275,036 1,362,468 4,960,412 2,893,392
---------- ---------- ---------- ----------
Gross profit 22,673 21,622 58,289 63,874
Costs and operating
expenses:
Selling, general
and
administrative 10,182 11,458 21,255 24,864
Operating expenses 8,771 6,310 17,796 12,200
Amortization
expenses 737 358 1,461 716
---------- ---------- ---------- ----------
Total costs and
operating
expenses 19,690 18,126 40,512 37,780
---------- ---------- ---------- ----------
Operating income 2,983 3,496 17,777 26,094
Interest expense (4,087) (2,523) (10,117) (5,839)
Gain on sale of
investment - - - 14,118
---------- ---------- ---------- ----------
(Loss) income before
income tax expense (1,104) 973 7,660 34,373
Income tax expense (150) (363) (295) (888)
---------- ---------- ---------- ----------
Net (loss) income (1,254) 610 7,365 33,485
Less: General
partner's interest
in net (loss)
income(1) 22 (11) (127) (668)
---------- ---------- ---------- ----------
Limited partners'
interest in net
(loss) income $ (1,232) $ 599 $ 7,238 $ 32,817
========== ========== ========== ==========
Net (loss) income
per limited partner
unit, basic and
diluted(2)(3)(4) $ (0.09) $ (1.28) $ 0.54 $ 0.47
========== ========== ========== ==========
Weighted average
limited partners'
units outstanding,
basic and diluted 13,071 12,325 13,071 11,808
========== ========== ========== ==========
(1) Calculation includes the effect of the private placement of Class
B units on May 9, 2007 and, as a result, the general partner interest
was 1.73% for the three and six months ended June 30, 2008. For the
three and six months ended June 30, 2007, the general partner
interest was 1.83% and 1.99%, respectively, based on weighted
averages.
(2) Under the provisions of EITF 03-06, "Participating Securities and
the Two-Class Method under FASB Statement No. 128," net (loss) income
per limited partner unit for the six months ended June 30, 2008 and
2007 assumes a theoretical distribution of earnings. Although this
theoretical calculation provided by EITF 03-06 does not impact the
Partnership's overall net (loss) income, it does reduce the
Partnership's net income per limited partner unit for these periods.
EITF 03-06 does not impact the net (loss) income per limited partner
unit calculation for the three months ended June 30, 2008 and 2007
because the Partnership's net income did not exceed its distribution
for these periods.
(3) In connection with the private placement of Class B units, the
Partnership was required to take into account the effect of EITF 98-
05, "Accounting for Convertible Securities with Beneficial Conversion
Features or Contingently Adjustable Conversion Ratios." As a result,
a non-cash reduction in net (loss) income available to limited
partners was recorded for the three and six months ended June 30,
2007 because the fair value of the Partnership's common units on May
9, 2007 (the date on which the Class B units were issued) was greater
than the purchase price of the Class B units which was established at
the time of the execution of the Unit Purchase Agreement on March 14,
2007. Although EITF 98-05 affected net (loss) income available to
limited partners, it did not affect net income nor did it affect
total unitholders' equity.
(4) Calculation includes the weighted average effect of the private
placement of Class B units which were converted to common units for
the three and six months ended June 30, 2007. Per unit data is
calculated on a quarterly basis pursuant to EITF 03-06; therefore,
per unit data for the six months ended June 30, 2008 and 2007 equals
the sums of the respective first two quarters.
GLOBAL PARTNERS LP
CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
June 30, December 31,
2008 2007
------------ ------------
Assets
Current assets:
Cash and cash equivalents $ 2,420 $ 2,110
Accounts receivable, net 402,035 439,165
Accounts receivable - affiliates 5,198 4,308
Inventories 487,411 484,259
Brokerage margin deposits 15,487 12,545
Fair value of forward fixed price
contracts 1,432 742
Prepaid expenses and other current
assets 22,818 17,736
----------- -----------
Total current assets 936,801 960,865
Property and equipment, net 161,587 161,734
Intangible assets, net 32,809 34,168
Other assets 2,228 2,460
----------- -----------
Total assets $ 1,133,425 $ 1,159,227
=========== ===========
Liabilities and partners' equity
Current liabilities:
Accounts payable $ 330,982 $ 371,341
Working capital revolving credit
facility - current portion 195,740 304,800
Environmental liabilities - current
portion 876 876
Note payable, other - 1,239
Accrued expenses and other current
liabilities 71,049 69,762
Obligations on forward fixed price
contracts and other derivatives 35,092 41,892
----------- -----------
Total current liabilities 633,739 789,910
Working capital revolving credit facility
- less current portion 254,160 119,000
Acquisition facility 71,200 71,200
Environmental liabilities - less current
portion 8,281 8,340
Accrued pension benefit cost 6,618 5,236
Deferred compensation 1,574 1,481
Other long-term liabilities 3,712 3,709
----------- -----------
Total liabilities 979,284 998,876
Partners' equity 154,141 160,351
----------- -----------
Total liabilities and partners' equity $ 1,133,425 $ 1,159,227
=========== ===========
GLOBAL PARTNERS LP
Financial Reconciliations
(In thousands, except per unit data)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
-------------------- ------------------
2008 2007 2008 2007
---------- --------- -------- ---------
Table 1 - Reconciliation of
net (loss) income to net
(loss) income as adjusted for
one-time gains
------------------------------
Net (loss) income $ (1,254) $ 610 $ 7,365 $ 33,485
Gain on sale of investment - - - (14,118)
--------- -------- ------- --------
Net (loss) income as
adjusted for one-time
gains $ (1,254) $ 610 $ 7,365 $ 19,367
========= ======== ======= ========
Table 2 - Reconciliation of
net (loss) income per diluted
limited partner unit to
adjusted net (loss) income
per diluted limited partner
unit
------------------------------
Net (loss) income per
diluted limited partner
unit under EITF 03-06 and
EITF 98-05 $ (0.09) $ (1.28) $ 0.54 $ 0.47
Dilutive impact of
theoretical distribution
of earnings under EITF
03-06 - - 0.02 1.10
Dilutive impact of non-
cash reduction under EITF
98-05 - 1.33 - 1.33
--------- -------- ------- --------
Adjusted net (loss) income
per diluted limited
partner unit $ (0.09) $ 0.05 $ 0.56 $ 2.90
========= ======== ======= ========
Table 3 - Reconciliation of
net (loss) income to EBITDA
and Adjusted EBITDA
------------------------------
Net (loss) income $ (1,254) $ 610 $ 7,365 $ 33,485
Depreciation and
amortization 3,810 2,067 7,492 3,336
Interest expense 4,087 2,523 10,117 5,839
Income tax expense 150 363 295 888
--------- -------- ------- --------
EBITDA 6,793 5,563 25,269 43,548
Gain on sale of investment - - - (14,118)
--------- -------- ------- --------
Adjusted EBITDA $ 6,793 $ 5,563 $25,269 $ 29,430
========= ======== ======= ========
Table 4 - Reconciliation of
cash flow (used in) provided
by operating activities to
EBITDA and Adjusted EBITDA
------------------------------
Cash flow (used in)
provided by operating
activities $(103,790) $(39,431) $(5,973) $101,297
Net change in operating
assets and liabilities 106,346 42,108 20,830 (64,476)
Interest expense 4,087 2,523 10,117 5,839
Income tax expense 150 363 295 888
--------- -------- ------- --------
EBITDA 6,793 5,563 25,269 43,548
Gain on sale of investment - - - (14,118)
--------- -------- ------- --------
Adjusted EBITDA $ 6,793 $ 5,563 $25,269 $ 29,430
========= ======== ======= ========
Table 5 - Reconciliation of
net (loss) income to
distributable cash flow
------------------------------
Net (loss) income $ (1,254) $ 610 $ 7,365 $ 33,485
Depreciation and
amortization 3,810 2,067 7,492 3,336
Gain on sale of investment - - - (14,118)
Maintenance capital
expenditures (308) (1,100) (800) (1,867)
--------- -------- ------- --------
Distributable cash flow $ 2,248 $ 1,577 $14,057 $ 20,836
========= ======== ======= ========
Table 6 - Reconciliation of
cash flow (used in) provided
by operating activities to
distributable cash flow
------------------------------
Cash flow (used in)
provided by operating
activities $(103,790) $(39,431) $(5,973) $101,297
Net change in operating
assets and liabilities 106,346 42,108 20,830 (64,476)
Gain on sale of investment - - - (14,118)
Maintenance capital
expenditures (308) (1,100) (800) (1,867)
--------- -------- ------- --------
Distributable cash flow $ 2,248 $ 1,577 $14,057 $ 20,836
========= ======== ======= ========
CONTACT: Global Partners LP
Thomas J. Hollister, 781-894-8800
Chief Operating Officer and
Chief Financial Officer
or
Edward J. Faneuil, 781-894-8800
Executive Vice President,
General Counsel and Secretary
SOURCE: Global Partners LP