Global Partners Reports Fourth-Quarter and Full-Year 2018 Financial Results

WALTHAM, Mass.–(BUSINESS WIRE)–Global Partners LP (NYSE: GLP) today reported financial results for the
fourth quarter and full year ended December 31, 2018.

We capped 2018 with a record fourth quarter in our Gasoline
Distribution and Station Operations (GDSO) segment,” said Eric Slifka,
the Partnership’s President and Chief Executive Officer. “GDSO product
margin increased more than $46 million in the quarter, primarily driven
by significantly stronger than expected fuel margins in November and
December and a full quarter’s performance of Champlain Oil and Cheshire
Oil, which were acquired in July 2018.

Our full-year results reflect the continued focus on optimizing our
assets and expanding the footprint of our business,” Slifka said. “In
GDSO, the Champlain and Cheshire acquisitions added 136 sites, including
62 owned properties, to our retail portfolio. These transactions further
leverage our terminal assets and drive economies of scale.”

For the fourth quarter of 2018 net income attributable to the
Partnership was $52.5 million, or $1.47 per diluted common limited
partner unit, compared with net income attributable to the Partnership
of $18.6 million, or $0.55 per diluted common limited partner unit, for
the same period of 2017.

Earnings before interest, taxes, depreciation and amortization (EBITDA)
was $109.7 million in the fourth quarter of 2018 compared with $41.0
million in the year-earlier period.

Distributable cash flow (DCF) was $67.6 million in the fourth quarter of
2018 compared with $10.0 million in the same period of 2017. Results for
the fourth quarter of 2017 included a net loss on sale and disposition
of assets of $5.6 million. Excluding this charge, distributable cash
flow would have been $15.6 million for the three months ended December
31, 2017.

Adjusted EBITDA was $109.8 million in the fourth quarter of 2018
compared with $46.7 million in the fourth quarter of 2017.

Gross profit in the fourth quarter of 2018 was $221.8 million compared
with $157.6 million in the fourth quarter of 2017, primarily due to the
strong GDSO fuel margins in the last two months of 2018. Combined
product margin, which is gross profit adjusted for depreciation
allocated to cost of sales, was $244.1 million in the fourth quarter of
2018 compared with $179.1 million in the fourth quarter of 2017.

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
12 months ended December 31, 2018 and 2017.

GDSO segment product margin was $188.5 million in the fourth quarter of
2018, an increase of $46.2 million from $142.3 million in the fourth
quarter of 2017. This performance primarily reflected the strong fuel
margins in November and December and, to a lesser extent, the
acquisitions of Champlain Oil and Cheshire Oil.

Wholesale segment product margin was $48.5 million in the fourth quarter
of 2018 compared with $32.2 million in the fourth quarter of 2017,
primarily due to more favorable market conditions in distillates and
gasoline blendstocks.

Commercial segment product margin was $7.1 million in the fourth quarter
of 2018 compared with $4.5 million in the same period of 2017.

Sales in the fourth quarter of 2018 were $3.3 billion compared with $2.4
billion in the fourth quarter of 2017. Wholesale segment sales were $1.8
billion in the fourth quarter of 2018 compared with $1.2 billion in the
fourth quarter of 2017. GDSO segment sales were $1.1 billion in the
fourth quarter of 2018 compared with $1.0 billion in the fourth quarter
of 2017. Commercial segment sales were $0.4 billion in the fourth
quarter of 2018 compared with $0.2 billion in the fourth quarter of 2017.

Volume in the fourth quarter of 2018 was 1.6 billion gallons compared
with 1.2 billion gallons in the same period of 2017. Wholesale segment
volume was 1.0 billion gallons in the fourth quarter of 2018 compared
with 656.8 million gallons in the fourth quarter of 2017. GDSO volume
was 415.2 million gallons in the fourth quarter of 2018 compared with
400.5 million gallons in the same period of 2017. Commercial segment
volume was 179.2 million gallons in the fourth quarter of 2018
compared with 138.8 million gallons in the same period of 2017.

Recent Highlights

  • Global’s Board of Directors announced a quarterly cash distribution of
    $0.50 per unit, or $2.00 per unit on an annualized basis, on all of
    its outstanding common units for the period from October 1 to December
    31, 2018. The distribution was paid on February 14, 2019 to
    unitholders of record as of the close of business on February 8, 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 November
    15, 2018 through February 14, 2019. This distribution was paid on
    February 15, 2019 to holders of record as of the opening of business
    on February 1, 2019.

Business Outlook

We continue to demonstrate our expertise in acquiring, integrating,
operating and leveraging high-quality assets,” Slifka said. “Looking
ahead, we are well positioned to capitalize on opportunities across our
businesses.”

For full-year 2019, Global expects 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 fourth-quarter and full-year
2018 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 the refined petroleum
products, renewable fuels, crude oil 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 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 hereof. 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
December 31,
Twelve Months Ended
December 31,
2018 2017 2018 2017
Sales $ 3,274,301 $ 2,400,492 $ 12,672,602 $ 8,920,552
Cost of sales   3,052,457     2,242,923     12,022,193     8,337,500  
Gross profit 221,844 157,569 650,409 583,052
 
Costs and operating expenses:
Selling, general and administrative expenses 49,555 43,433 171,002 155,033
Operating expenses 87,072 74,930 321,115 283,650
Loss (gain) on trustee taxes 16,194 (52,627 ) 16,194
Lease exit and termination gain (3,506 )
Amortization expense 2,976 2,425 10,960 9,206
Net loss (gain) on sale and disposition of assets 40 5,667 5,880 (1,624 )
Goodwill and long-lived asset impairment           414     809  
Total costs and operating expenses   139,643     142,649     453,238     463,268  
 
Operating income 82,201 14,920 197,171 119,784
 
Interest expense   (23,508 )   (20,394 ) (89,145 )   (86,230 )
 
Income (loss) before income tax (expense) benefit 58,693 (5,474 ) 108,026 33,554
 
Income tax (expense) benefit   (6,523 )   23,635     (5,623 )   23,563  
 
Net income 52,170 18,161 102,403 57,117
 
Net loss attributable to noncontrolling interest   360     393     1,502     1,635  
 
Net income attributable to Global Partners LP 52,530 18,554 103,905 58,752
 

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

554 124 1,033 394
Less: Series A preferred limited partner interest in net income

 

1,682         2,691      
 
Net income attributable common limited partners $ 50,294   $ 18,430   $ 100,181   $ 58,358  
 
Basic net income per common limited partner unit (1) $ 1.49   $ 0.55   $ 2.97   $ 1.74  
 
Diluted net income per common limited partner unit (1) $ 1.47   $ 0.55   $

2.95

  $ 1.74  
 
Basic weighted average common limited partner units outstanding   33,750     33,645     33,701     33,589  
 
Diluted weighted average limited partner units outstanding  

34,066

    33,751    

33,972

    33,634  
 

(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)
           
December 31,
2018 2017
Assets
Current assets:
Cash and cash equivalents $ 8,121 $ 14,858
Accounts receivable, net 334,777 417,263
Accounts receivable – affiliates 5,435 3,773
Inventories 386,442 350,743
Brokerage margin deposits 14,766 9,681
Derivative assets 26,390 3,840
Prepaid expenses and other current assets   98,977   77,977
Total current assets 874,908 878,135
 
Property and equipment, net 1,132,632 1,036,667
Intangible assets, net 58,532 56,545
Goodwill 327,406 312,401
Other assets   30,813   36,421
 
Total assets $ 2,424,291 $ 2,320,169
 
 
Liabilities and partners’ equity
Current liabilities:
Accounts payable $ 308,979 $ 313,412
Working capital revolving credit facility – current portion 103,300 126,700
Environmental liabilities – current portion 6,092 5,009
Trustee taxes payable 42,613 110,321
Accrued expenses and other current liabilities 117,274 99,507
Derivative liabilities   4,494   13,708
Total current liabilities 582,752 668,657
 
Working capital revolving credit facility – less current portion 150,000 100,000
Revolving credit facility 220,000 196,000
Senior notes 664,455 661,774
Environmental liabilities – less current portion 57,132 52,968
Financing obligations 149,997 150,334
Deferred tax liabilities 42,856 40,105
Other long-term liabilities   57,905   56,013
Total liabilities 1,925,097 1,925,851
 
Partners’ equity
Global Partners LP equity 497,331 390,953
Noncontrolling interest   1,863   3,365
Total partners’ equity   499,194   394,318
 
Total liabilities and partners’ equity $ 2,424,291 $ 2,320,169
 
 
GLOBAL PARTNERS LP
FINANCIAL RECONCILIATIONS
(In
thousands)

(Unaudited)
 
        Three Months Ended
December 31,
      Twelve Months Ended
December 31,
2018     2017 2018     2017
Reconciliation of gross profit to product margin
Wholesale segment:
Gasoline and gasoline blendstocks $ 22,318 $ 17,709 $ 76,741 $ 82,124
Crude oil 4,274 4,031 7,159 7,279
Other oils and related products   21,912     10,509     53,389     62,799  
Total 48,504 32,249 137,289 152,202
Gasoline Distribution and Station Operations segment:
Gasoline distribution 134,869 95,928 373,303 326,536
Station operations   53,619     46,357     203,098     174,986  
Total 188,488 142,285 576,401 501,522
Commercial segment   7,087     4,523     23,611     17,858  
Combined product margin 244,079 179,057 737,301 671,582
Depreciation allocated to cost of sales   (22,235 )   (21,488 )   (86,892 )   (88,530 )
Gross profit $ 221,844   $ 157,569   $ 650,409   $ 583,052  
 
Reconciliation of net income to EBITDA and Adjusted EBITDA
Net income $ 52,170 $ 18,161 $ 102,403 $ 57,117
Net loss attributable to noncontrolling interest   360     393     1,502     1,635  
Net income attributable to Global Partners LP 52,530 18,554 103,905 58,752
Depreciation and amortization, excluding the impact of
noncontrolling interest
27,156 25,716 105,639 103,601
Interest expense, excluding the impact of noncontrolling interest 23,508 20,394 89,145 86,230
Income tax expense (benefit)   6,523     (23,635 )   5,623     (23,563 )
EBITDA 109,717 41,029 304,312 225,020
Net loss (gain) on sale and disposition of assets 40 5,667 5,880 (1,624 )
Goodwill and long-lived asset impairment           414     809  
Adjusted EBITDA (1) $ 109,757   $ 46,696   $ 310,606   $ 224,205  
 
Reconciliation of net cash provided by (used in) operating
activities to EBITDA and Adjusted EBITDA
Net cash provided by (used in) operating activities $ 214,758 $ (13,999 ) $ 168,856 $ 348,442
Net changes in operating assets and liabilities and certain non-cash
items
(135,160 ) 58,389 40,385 (185,673 )

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

88 (120 ) 303 (416 )
Interest expense, excluding the impact of noncontrolling interest 23,508 20,394 89,145 86,230
Income tax expense (benefit)   6,523     (23,635 )   5,623     (23,563 )
EBITDA 109,717 41,029 304,312 225,020
Net loss (gain) on sale and disposition of assets 40 5,667 5,880 (1,624 )
Goodwill and long-lived asset impairment           414     809  
Adjusted EBITDA (1) $ 109,757   $ 46,696   $ 310,606   $ 224,205  
 
Reconciliation of net income to distributable cash flow
Net income $ 52,170 $ 18,161 $ 102,403 $ 57,117
Net loss attributable to noncontrolling interest   360     393     1,502     1,635  
Net income attributable to Global Partners LP 52,530 18,554 103,905 58,752
Depreciation and amortization, excluding the impact of
noncontrolling interest
27,156 25,716 105,639 103,601
Amortization of deferred financing fees and senior notes discount 1,723 1,715 6,873 7,089
Amortization of routine bank refinancing fees (1,022 ) (1,028 ) (4,088 ) (4,277 )
Non-cash tax reform benefit (22,183 ) (22,183 )
Maintenance capital expenditures, excluding the impact of
noncontrolling interest
  (12,781 )   (12,775 )   (38,641 )   (34,718 )
Distributable cash flow (2)(3) 67,606 9,999 173,688 108,264
Distributions to Series A preferred unitholders (4)   (1,682 )       (2,691 )    
Distributable cash flow after distributions to Series A preferred
unitholders

$

65,924  

$

9,999  

$

170,997  

$

108,264  
 
Reconciliation of net cash provided by (used in) operating
activities to distributable cash flow
Net cash provided by (used in) operating activities $ 214,758 $ (13,999 ) $ 168,856 $ 348,442
Net changes in operating assets and liabilities and certain non-cash
items
(135,160 ) 58,389 40,385 (185,673 )

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

88 (120 ) 303 (416 )
Amortization of deferred financing fees and senior notes discount 1,723 1,715 6,873 7,089
Amortization of routine bank refinancing fees (1,022 ) (1,028 ) (4,088 ) (4,277 )
Non-cash tax reform benefit (22,183 ) (22,183 )
Maintenance capital expenditures, excluding the impact of
noncontrolling interest
  (12,781 )   (12,775 )   (38,641 )   (34,718 )
Distributable cash flow (2)(3) 67,606 9,999 173,688 108,264
Distributions to Series A preferred unitholders (4)   (1,682 )       (2,691 )    
Distributable cash flow after distributions to Series A preferred
unitholders
$ 65,924   $ 9,999   $ 170,997   $ 108,264  
 

Contacts

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

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

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