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Global Partners Reports Fourth-Quarter and Full-Year 2017 Financial Results

WALTHAM, Mass.--(BUSINESS WIRE)--Mar. 8, 2018-- Global Partners LP (NYSE: GLP) today reported financial results for the fourth quarter and full year ended December 31, 2017.

“We delivered results in 2017 that exceeded our full-year expectations,” said Eric Slifka, the Partnership’s President and Chief Executive Officer. “Our full-year results were driven by solid overall performance highlighted by our Gasoline Distribution and Station Operations segment, which generated a $28.4 million increase in product margin year-over-year. Our strategy of acquiring, integrating, optimizing and enhancing assets is reflected in our October acquisition of Honey Farms, which expanded our retail portfolio with the addition of 33 locations. The acquisition is on course to be accretive in its first full year of operations.”

For the fourth quarter of 2017, net income attributable to the Partnership was $18.6 million, or $0.55 per diluted limited partner unit; earnings before interest, taxes, depreciation and amortization (EBITDA) was $41.0 million; and distributable cash flow (DCF) was $10.0 million.

Financial results for the fourth quarter of 2017 reflect a $5.6 million net loss on the sale and disposition of assets; and a $16.2 million loss on trustee taxes related to an administratively closed New York State tax audit of the Partnership’s fuel and sales tax returns for the periods between December 2008 through August 2013. The Partnership believes it has meritorious defenses to recover a majority of the tax and interest assessed. As a result of the enactment of the Tax Cuts and Jobs Act, the Partnership’s financial results for the fourth quarter of 2017 reflect a non-cash tax benefit of $22.2 million related to the remeasurement of certain deferred tax assets and liabilities. The Partnership is still in the process of analyzing the impact of the Tax Cuts and Jobs Act and, therefore, the benefit was recorded based on provisional amounts.

Excluding the loss on sale and disposition of assets, Adjusted EBITDA for the fourth quarter of 2017 was $46.7 million, and DCF would have been $15.6 million. Adjusted EBITDA and DCF were both negatively impacted by the $16.2 million loss on trustee taxes.

Gross profit for the fourth quarter of 2017 was $157.6 million compared with $154.5 million in the fourth quarter of 2016. Combined product margin, which is gross profit adjusted for depreciation allocated to cost of sales, was $179.1 million for the fourth quarter of 2017 compared with $175.9 million in the fourth quarter of 2016.

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, 2017 and 2016.

Gasoline Distribution and Station Operations (GDSO) segment product margin was $142.3 million for the fourth quarter of 2017, an increase of $30.6 million compared with the fourth quarter of 2016, primarily reflecting higher fuel margins.

Wholesale segment product margin was $32.2 million in the fourth quarter of 2017 compared with $56.8 million in the fourth quarter of 2016. The decrease was due, in part, to less revenue attributed to the absence of logistics nominations from one particular crude oil contract customer and less favorable market conditions in distillates, partially offset by lower railcar lease expense. Crude oil product margin for the fourth quarter and full year of 2016 each reflected revenue of $28.0 million related to the absence of logistics nominations from the crude oil contract customer, while crude oil product margin for the fourth quarter and full year of 2017 reflected revenue of $10.9 million and $43.2 million, respectively, related to the absence of logistics nominations from that customer.

Commercial segment product margin was $4.5 million in the fourth quarter of 2017 compared with $7.5 million in the same period of 2016, a decrease due in part to the Partnership’s sale of its natural gas marketing and electricity brokerage businesses in February 2017.

Sales for the fourth quarter of 2017 were $2.4 billion compared with $2.3 billion in the fourth quarter of 2016. GDSO segment sales were $1.0 billion in the fourth quarter of 2017 compared with $904.9 million in the fourth quarter of 2016. Wholesale segment sales were $1.2 billion for each of the fourth quarters of 2017 and 2016. Commercial segment sales were $242.1 million for the fourth quarter of 2017 compared with $231.7 million in the fourth quarter of 2016.

Volume for the fourth quarter of 2017 was 1.2 billion gallons compared with 1.3 billion gallons in the same period of 2016. GDSO volume was 400.5 million gallons in the fourth quarter of 2017 compared with 405.6 million gallons in the same period of 2016. Wholesale segment volume was 656.8 million gallons in the fourth quarter of 2017 compared with 757.9 million gallons in the fourth quarter of 2016. Commercial segment volume was 138.8 million gallons in the fourth quarter of 2017 compared with 161.6 million gallons in the same period of 2016.

Recent Highlights

  • 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 October 1 to December 31, 2017. The distribution was paid on February 14, 2018 to unitholders of record as of the close of business on February 9, 2018.

Business Outlook

“Following a year in which we delivered strong results, we begin 2018 well positioned to execute on our growth strategy,” Slifka said.

For full-year 2018, Global expects to generate EBITDA of $180 million to $210 million, which guidance excludes any gain or loss on the sale and disposition of assets, and any goodwill and long-lived asset impairment charges. Furthermore, EBITDA guidance for 2018 excludes the recognition of a one-time income item 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 January 31, 2018 the Partnership determined that the liability was no longer required. This recognition of one-time income will not impact cash flows from operations for the year ending December 31, 2018.

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 2018 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 divestiture program 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 2017 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, 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. 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 the Partnership’s partnership agreement determines its ability to make cash distributions on incentive distribution rights. The investment community also uses a distributable cash flow metric similar to the metric used in the 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. The 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

Global Partners is a midstream logistics and marketing master limited partnership that owns, controls or has access to one of the largest terminal networks of petroleum products and renewable fuels in the Northeast. With approximately 1,500 locations, primarily in the Northeast, Global is one of the largest regional independent owners, suppliers and operators of gasoline stations and convenience stores. Global is also 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 also engaged in the transportation of petroleum products and renewable fuels by rail from the mid-continental U.S. and Canada. 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 Twelve Months Ended
December 31, December 31,
2017       2016 2017       2016
Sales $ 2,400,492 $ 2,312,430 $ 8,920,552 $ 8,239,639
Cost of sales   2,242,923     2,157,952     8,337,500     7,693,149  
Gross profit 157,569 154,478 583,052 546,490
 
Costs and operating expenses:
Selling, general and administrative expenses 43,433 41,344 155,033 149,673
Operating expenses 74,930 69,829 283,650 288,547
Loss on trustee taxes 16,194 - 16,194 -
Lease exit and termination expenses - 80,665 - 80,665
Amortization expense 2,425 2,261 9,206 9,389
Net loss (gain) on sale and disposition of assets 5,667 6,529 (1,624 ) 20,495
Goodwill and long-lived asset impairment   -     -     809     149,972  
Total costs and operating expenses   142,649     200,628     463,268     698,741  
 
Operating income (loss) 14,920 (46,150 ) 119,784 (152,251 )
 
Interest expense (20,394 ) (21,127 ) (86,230 ) (86,319 )
 
(Loss) income before income tax benefit (expense) (5,474 ) (67,277 ) 33,554 (238,570 )
 
Income tax benefit (expense)   23,635     1,615     23,563     (53 )
 
Net income (loss) 18,161 (65,662 ) 57,117 (238,623 )
 
Net loss attributable to noncontrolling interest   393     135     1,635     39,211  
 
Net income (loss) attributable to Global Partners LP 18,554 (65,527 ) 58,752 (199,412 )
 
Less: General partner's interest in net income (loss), including
incentive distribution rights   124     (439 )   394     (1,336 )
 
Limited partners' interest in net income (loss) $ 18,430   $ (65,088 ) $ 58,358   $ (198,076 )
 
Basic net income (loss) per limited partner unit (1) $ 0.55   $ (1.94 ) $ 1.74   $ (5.91 )
 
Diluted net income (loss) per limited partner unit (1) $ 0.55   $ (1.94 ) $ 1.74   $ (5.91 )
 
Basic weighted average limited partner units outstanding 33,645     33,534     33,589     33,525  
 
Diluted weighted average limited partner units outstanding (2) 33,751     33,534     33,634     33,525  

(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 loss per limited partner unit for the three and twelve months ended December 31, 2016, as using the effects of phantom units would have an anti-dilutive effect on net loss per limited partner unit.

           
GLOBAL PARTNERS LP
CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
 
December 31, December 31,
2017 2016
Assets
Current assets:
Cash and cash equivalents $ 14,858 $ 10,028
Accounts receivable, net 417,263 421,360
Accounts receivable - affiliates 3,773 3,143
Inventories 350,743 521,878
Brokerage margin deposits 9,681 27,653
Derivative assets 3,840 21,382
Prepaid expenses and other current assets   77,977   70,022
Total current assets 878,135 1,075,466
 
Property and equipment, net 1,036,667 1,099,899
Intangible assets, net 56,545 65,013
Goodwill 312,401 294,768
Other assets   36,421   28,874
 
Total assets $ 2,320,169 $ 2,564,020
 
 
Liabilities and partners' equity
Current liabilities:
Accounts payable $ 313,412 $ 320,262
Working capital revolving credit facility - current portion 126,700 274,600
Environmental liabilities - current portion 5,009 5,341
Trustee taxes payable 110,321 101,166
Accrued expenses and other current liabilities 99,507 70,443
Derivative liabilities   13,708   27,413
Total current liabilities 668,657 799,225
 
Working capital revolving credit facility - less current portion 100,000 150,000
Revolving credit facility 196,000 216,700
Senior notes 661,774 659,150
Environmental liabilities - less current portion 52,968 57,724
Financing obligations 150,334 152,444
Deferred tax liabilities 40,105 66,054
Other long-term liabilities   56,013   64,882
Total liabilities 1,925,851 2,166,179
 
Partners' equity
Global Partners LP equity 390,953 392,655
Noncontrolling interest   3,365   5,186
Total partners' equity   394,318   397,841
 
Total liabilities and partners' equity $ 2,320,169 $ 2,564,020
 

                       
GLOBAL PARTNERS LP
FINANCIAL RECONCILIATIONS
(In thousands)
(Unaudited)
  Three Months Ended Twelve Months Ended
December 31, December 31,
2017 2016 2017 2016
Reconciliation of gross profit to product margin
Wholesale segment:
Gasoline and gasoline blendstocks $ 17,709 $ 19,239 $ 82,124 $ 83,742
Crude oil 4,031 15,741 7,279 (13,098 )
Other oils and related products   10,509     21,783     62,799     74,271  
Total 32,249 56,763 152,202 144,915
Gasoline Distribution and Station Operations segment:
Gasoline distribution 95,928 68,923 326,536 289,420
Station operations   46,357     42,787     174,986     183,708  
Total 142,285 111,710 501,522 473,128
Commercial segment   4,523     7,452     17,858     24,018  
Combined product margin 179,057 175,925 671,582 642,061
Depreciation allocated to cost of sales   (21,488 )   (21,447 )   (88,530 )   (95,571 )
Gross profit $ 157,569   $ 154,478   $ 583,052   $ 546,490  
 
Reconciliation of net income (loss) to EBITDA and Adjusted EBITDA
Net income (loss) $ 18,161 $ (65,662 ) $ 57,117 $ (238,623 )
Net loss attributable to noncontrolling interest   393     135     1,635     39,211  
Net income (loss) attributable to Global Partners LP 18,554 (65,527 ) 58,752 (199,412 )
Depreciation and amortization, excluding the impact of noncontrolling interest 25,716 25,116 103,601 108,189
Interest expense, excluding the impact of noncontrolling interest 20,394 21,127 86,230 86,319
Income tax (benefit) expense   (23,635 )   (1,615 )   (23,563 )   53  
EBITDA 41,029 (20,899 ) 225,020 (4,851 )
Net loss (gain) on sale and disposition of assets 5,667 6,529 (1,624 ) 20,495
Goodwill and long-lived asset impairment - - 809 149,972
Goodwill and long-lived asset impairment attributable to noncontrolling interest   -     -     -     (35,834 )
Adjusted EBITDA $ 46,696   $ (14,370 ) $ 224,205   $ 129,782  
 
Reconciliation of net cash (used in) provided by operating activities to EBITDA and Adjusted EBITDA
Net cash (used in) provided by operating activities $ (13,999 ) $ (134,046 ) $ 348,442 $ (119,886 )
Net changes in operating assets and liabilities and certain non-cash items 58,389 93,852 (185,673 ) (6,795 )
Net cash from operating activities and changes in operating assets and liabilities attributable to noncontrolling interest
(120 ) (217 ) (416 ) 35,458
Interest expense, excluding the impact of noncontrolling interest 20,394 21,127 86,230 86,319
Income tax (benefit) expense   (23,635 )   (1,615 )   (23,563 )   53  
EBITDA 41,029 (20,899 ) 225,020 (4,851 )
Net loss (gain) on sale and disposition of assets 5,667 6,529 (1,624 ) 20,495
Goodwill and long-lived asset impairment - - 809 149,972
Goodwill and long-lived asset impairment attributable to noncontrolling interest   -     -     -     (35,834 )
Adjusted EBITDA $ 46,696   $ (14,370 ) $ 224,205   $ 129,782  
 
Reconciliation of net income (loss) to distributable cash flow
Net income (loss) $ 18,161 $ (65,662 ) $ 57,117 $ (238,623 )
Net loss attributable to noncontrolling interest   393     135     1,635     39,211  
Net income (loss) attributable to Global Partners LP 18,554 (65,527 ) 58,752 (199,412 )
Depreciation and amortization, excluding the impact of noncontrolling interest 25,716 25,116 103,601 108,189
Amortization of deferred financing fees and senior notes discount 1,715 1,906 7,089 7,412
Amortization of routine bank refinancing fees (1,028 ) (1,167 ) (4,277 ) (4,580 )
Non-cash tax reform benefit (22,183 ) - (22,183 ) -
Maintenance capital expenditures, excluding the impact of noncontrolling interest   (12,775 )   (12,135 )   (34,718 )   (32,989 )
Distributable cash flow (1)(2) $ 9,999   $ (51,807 ) $ 108,264   $ (121,380 )
 
Reconciliation of net cash (used in) provided by operating activities to distributable cash flow
Net cash (used in) provided by operating activities $ (13,999 ) $ (134,046 ) $ 348,442 $ (119,886 )
Net changes in operating assets and liabilities and certain non-cash items 58,389 93,852 (185,673 ) (6,795 )
Net cash from operating activities and changes in operating assets and liabilities attributable to noncontrolling interest
(120 ) (217 ) (416 ) 35,458
Amortization of deferred financing fees and senior notes discount 1,715 1,906 7,089 7,412
Amortization of routine bank refinancing fees (1,028 ) (1,167 ) (4,277 ) (4,580 )
Non-cash tax reform benefit (22,183 ) - (22,183 ) -
Maintenance capital expenditures, excluding the impact of noncontrolling interest   (12,775 )   (12,135 )   (34,718 )   (32,989 )
Distributable cash flow (1)(2) $ 9,999   $ (51,807 ) $ 108,264   $ (121,380 )

(1) As defined by the Partnership's partnership agreement, distributable cash flow is not adjusted for certain non-cash items, such as net losses on the sale and disposition of assets and goodwill and long-lived asset impairment charges.

(2) Distributable cash flow includes a net loss on sale and disposition of assets of $5.6 million and $6.5 million for the three months ended December 31, 2017 and 2016, respectively, and $12.5 million and $20.5 million for the twelve months ended December 31, 2017 and 2016, respectively. Distributable cash flow also includes a net goodwill and long-lived asset impairment of $0.8 million and $114.1 million ($149.9 million attributed to the Partnership, offset by $35.8 million attributed to the noncontrolling interest) for the twelve months ended December 31, 2017 and 2016, respectively. For each of the three and twelve months ended December 31, 2016, distributable cash flow includes lease exit and termination expenses of $80.7 million. Excluding the loss on sale and disposition of assets, impairment charges and lease exit and termination expenses, distributable cash flow would have been $15.6 million and $35.4 million for the three months ended December 31, 2017 and 2016, respectively, and $121.6 million and $93.9 million for the twelve months ended December 31, 2017 and 2016, respectively. For the twelve months ended December 31, 2017, distributable cash flow also includes a $14.2 million gain on the sale of the Partnership's natural gas marketing and electricity brokerage businesses in February 2017.

Source: Global Partners LP

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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