News Details

WALTHAM, Mass.--(BUSINESS WIRE)--Nov. 7, 2016-- Global Partners LP (NYSE:GLP) today reported financial results for the third quarter ended September 30, 2016.

“In our Gasoline Distribution and Station Operations segment, we generated a solid product margin of $136.8 million in the quarter, a result comparable to the strong margin achieved in the same period last year,” said Eric Slifka, President and Chief Executive Officer of Global Partners. “Through the end of Q3, this year we have finalized a $63.5 million sale-leaseback transaction and have completed the sale of certain non-strategic gasoline stations and convenience stores for a total of $57.7 million, which includes the sale of 30 sites in Western New York and Pennsylvania to Mirabito Holdings. In addition, we have added 22 leased gasoline stations and c-stores to our retail portfolio and are proceeding with the sale of other non-strategic retail sites through NRC Realty & Capital Advisors.

“Within our Wholesale segment, gasoline and gasoline blendstocks product margin tripled in the quarter to $21.5 million, as we continued to capitalize on favorable market opportunities and leverage our storage capacity across the Northeast.

“As a result of the uncertainty surrounding the crude oil markets, in the third quarter we recorded a significant non-cash goodwill and long-lived asset impairment charge related to our Wholesale segment that negatively impacted our financial results,” Slifka said.

Financial Results Summary

Global’s financial results for the three months ended September 30, 2016 were impacted by the following:

• a $147.8 million non-cash goodwill and long-lived asset impairment related to the Partnership’s Wholesale reporting unit. The Partnership recognized these impairment charges due to the challenges associated with the crude oil market, including the uncertain timing of any recovery in crude oil prices and differentials, and fixed costs to operate that line of business.
• a $7.5 million net loss on sale and disposition of certain retail gasoline assets.

The net loss attributable to the Partnership for the third-quarter of 2016 was $119.6 million, or $3.54 per limited partner unit, compared with third-quarter 2015 net income of $8.2 million, or $0.16 per diluted limited partner unit. Excluding the net loss on sale and disposition of assets and impairment charges, the net loss attributable to the Partnership for the third quarter of 2016 would have been $82,000.

Earnings before interest, taxes, depreciation and amortization (EBITDA) for the third quarter of 2016 was negative $67.8 million, compared with EBITDA of $59.3 million for the comparable period of 2015. Adjusted EBITDA, which is EBITDA adjusted for the loss on sale and disposition of assets and impairment charges was $51.6 million for the third quarter of 2016 versus $60.0 million for the comparable period of 2015.

Distributable cash flow for the third quarter of 2016 was negative $100.2 million, compared with distributable cash flow of $29.6 million for the same period of 2015. Excluding the net loss on sale and disposition of assets and impairment charges in both periods, distributable cash flow would have been $19.3 million and $30.3 million for the three months ended September 30, 2016 and 2015, respectively.

Gross profit for the third quarter of 2016 was $132.6 million, compared with $152.3 million for the comparable period of 2015. Combined product margin, which is gross profit adjusted for depreciation allocated to cost of sales, was $157.2 million and $178.7 million for the third quarters of 2016 and 2015, respectively.

The Gasoline Distribution and Station Operations (GDSO) segment product margin was $136.8 million versus $137.3 million in the third quarter of 2015.

Wholesale segment product margin was $16.1 million, compared with $35.3 million in the third quarter of 2015, as favorable market conditions in wholesale gasoline were more than offset by negative crude oil product margin of $16.8 million. The crude oil margin primarily reflected tighter differentials, the absence of logistics nominations from one particular contract customer and fixed costs with respect to contracted barges, pipeline commitments and railcar leases. Due to the absence of third quarter 2016 nominations by that customer, the Partnership expects additional revenue of approximately $8.2 million by December 31, 2016 related to the take-or-pay nature of the contract. Revenue from this contract in the fourth quarter of 2016 will reflect those amounts owed for the lack of nominations during the year, which through the first three quarters of 2016 totals $19.8 million.

Commercial segment product margin was $4.2 million in the third quarter of 2016, compared with $6.1 million for the same period in 2015, primarily due to a decrease in bunkering activity.

Sales for the third quarter of 2016 were $2.0 billion, compared with $2.5 billion for the same period in 2015 due to a decline in prices and volume sold. Wholesale segment sales were $947.7 million, compared with $1.3 billion for the third quarter of 2015. Sales in the GDSO segment were $920.3 million versus $1.0 billion for the same period in 2015. Commercial segment sales were $162.1 million, compared with $161.5 million for the third quarter of 2015.

Wholesale segment volume was 687.5 million gallons in the third quarter of 2016, compared with 852.2 million gallons for the same period of 2015, primarily due to a decline in crude oil and, to a lesser extent, Wholesale gasoline and gasoline blendstocks.

Volume in the GDSO segment was 415.1 million gallons for the third quarter of 2016, compared with 405.9 million gallons in the third quarter of 2015, primarily attributable to the expansion of the Partnership’s portfolio, including the 22 sites in Western Massachusetts.

Commercial segment volume was 121.9 million gallons, compared with 103.3 million gallons for the third quarter of 2015.

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 and nine months ended September 30, 2016 and 2015.

Recent Developments

• Global’s Board of Directors announced a quarterly cash distribution of $0.4625 per unit, or $1.85 per unit on an annualized basis, on all of its outstanding common units for the period from July 1 to September 30, 2016. The distribution will be paid November 14, 2016 to unitholders of record as of the close of business on November 8, 2016.
• The Partnership completed the sale of 30 non-strategic gasoline stations and convenience stores in New York and Pennsylvania to Mirabito Holdings, Inc. for approximately $40.0 million. The transaction includes long-term supply contracts for branded and unbranded gasoline and other petroleum products.

Business Outlook

Based on its results through the first nine months of 2016 Global expects to achieve full-year EBITDA above the mid-point of its guidance of $170 million to $200 million, which guidance excludes the gain or loss on the sale and disposition of assets and any 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.

Financial Results Conference Call

Management will review the Partnership’s third-quarter 2016 financial results in a teleconference call for analysts and investors today.

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, natural gas and propane, as well as convenience store sales, gasoline station rental income and revenue generated from the Partnership’s logistics activities when it 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, 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 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, 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.

Adjusted EBITDA is EBITDA adjusted for the gain or loss on the sale and disposition of assets and 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 our limited partners since it serves as an indicator of our success in providing a cash return on their investment. Distributable cash flow as defined by our 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 our 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 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 or support an increase in quarterly cash distribution. 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, our 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 midstream logistics and marketing master limited partnership, Global Partners owns, controls or has access to one of the largest terminal networks of petroleum products and renewable fuels in the Northeast. Global also 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. The Partnership is engaged in the transportation of crude oil and other products by rail from the mid-continental U.S. and Canada to the East and West Coasts for distribution to refiners and others. With approximately 1,500 locations, primarily in the Northeast, Global also is one of the largest independent owners, suppliers and operators of gasoline stations and convenience stores. Global is No. 276 in the Fortune 500 list of America’s largest corporations. 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 our current expectations and beliefs concerning future developments and their potential effect on us. While management believes that these forward-looking statements are reasonable as and when made, there can be no assurance that future developments affecting us will be those that we anticipate. All comments concerning our expectations for future revenues and operating results are based on our forecasts for our existing operations and do not include the potential impact of any future acquisitions. Our forward-looking statements involve significant risks and uncertainties (some of which are beyond our control) and assumptions that could cause actual results to differ materially from our historical experience and our present expectations or projections.

For additional information regarding known material factors that could cause our actual results to differ from our projected results, please see our filings with the SEC, including our 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. We undertake 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.

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Source: Global Partners LP

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