Partnership withdraws 2020 EBITDA guidance
Global Partners LP (NYSE: GLP) today reported financial results
for the first quarter ended March 31, 2020.
“In the face of the COVID-19 crisis, we continue to provide
essential products and services while prioritizing the safety and
well-being of our employees, guests and customers at our retail
locations and fuel terminals,” said Eric Slifka, President and CEO
of Global Partners. “I am extremely proud of the Global team for
their dedication and compassion during these difficult times. As we
have done for decades, our teams continue to fuel cars, heat homes,
and provide essential goods to local communities and businesses.
Now more than ever, our retail sites have become essential outlets,
serving first responders, healthcare professionals and the
elderly.
“We are pleased with our overall first quarter results,” Slifka
said. “Product margin in our Gasoline Distribution and Station
Operations segment benefited from strong retail fuel margins, in
part due to the steep decline in wholesale gasoline prices. While
that decline in prices adversely impacted our Wholesale segment
product margin in the quarter, our terminal assets are positioned
to take advantage of the resulting contango opportunity.”
Financial Highlights
Net income attributable to the Partnership was $3.3 million, or
$0.05 per diluted common limited partner unit, for the first
quarter of 2020 compared with net income attributable to the
Partnership of $7.1 million, or $0.15 per diluted common limited
partner unit, for the same period of 2019.
Earnings before interest, taxes, depreciation and amortization
(EBITDA) was $44.7 million in the first quarter of 2020 compared
with $58.0 million in the comparable period of 2019.
Adjusted EBITDA was $45.4 million in the first quarter of 2020
versus $58.6 million in the year-earlier period.
Distributable cash flow (DCF) was $22.0 million in the first
quarter of 2020 compared with $27.8 million in the same period of
2019.
Gross profit in the first quarter of 2020 was $145.7 million
compared with $156.8 million in the first quarter of 2019,
primarily due to less favorable market conditions in the Wholesale
segment in part due to geopolitical events and the COVID-19
pandemic, partially offset by higher fuel margins in the GDSO
segment.
Combined product margin, which is gross profit adjusted for
depreciation allocated to cost of sales, was $166.7 million in the
first quarter of 2020 compared with $179.7 million in the first
quarter of 2019.
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 months ended March
31, 2020 and 2019.
GDSO segment product margin was $155.9 million in the first
quarter of 2020, an increase of $17.5 million from $138.4 million
in the first quarter of 2019. The increase was due to higher fuel
margins.
Wholesale segment product margin was $4.9 million in the first
quarter of 2020 compared with $34.8 million in the same period of
2019. In March 2020, the COVID-19 pandemic and the price war
between Saudi Arabia and Russia caused a rapid decline in prices,
steepening the forward product pricing curve, which negatively
impacted margins in the quarter. Significantly warmer weather
during the first quarter of 2020 than the year-earlier period also
negatively impacted margins of weather sensitive products.
Commercial segment product margin was $5.9 million in the first
quarter of 2020 compared with $6.4 million in the first quarter of
2019.
Sales were $2.6 billion in the first quarter of 2020 compared
with $3.0 billion in the first quarter of 2019, primarily due to a
decrease in prices. Wholesale segment sales were $1.5 billion in
the first quarter of 2020 compared with $1.7 billion in the first
quarter of 2019. GDSO segment sales were $0.8 billion in the first
quarter of 2020 compared with $0.9 billion in the first quarter of
2019. Commercial segment sales were $263.4 million in the first
quarter of 2020 and $335.6 million in the first quarter of
2019.
Volume in the first quarter of 2020 was 1.5 billion gallons
compared with 1.6 billion gallons in the same period of 2019.
Wholesale segment volume was 1.0 billion gallons in the first
quarters of 2020 and 2019. GDSO volume was 351.4 million gallons in
the first quarter of 2020 compared with 379.7 million gallons in
the first quarter of 2019. Commercial segment volume was 163.3
million gallons in the first quarter of 2020 compared with 191.5
million gallons in the first quarter of 2019.
Recent Developments
Given the uncertainties surrounding the scope and duration of
COVID-19, the Partnership has proactively taken steps to create
additional financial flexibility:
- On May 7, 2020, Global entered into an amendment to its credit
agreement that temporarily made adjustments to certain covenants
for the four quarters commencing with the quarter ending June 30,
2020.
- On April 27, 2020, the Board of Directors announced a reduction
in the Partnership’s quarterly cash distribution to $0.39375 per
unit on all of its outstanding common units. The distribution will
be paid on May 15, 2020, to unitholders of record as of the close
of business on May 11, 2020.
- In late March 2020, Global borrowed $50.0 million under its
revolving credit facility, increasing the cash on the Partnership’s
balance sheet.
- Global has reduced planned expenses and 2020 capital
spending.
Business Outlook
“While the near-term outlook remains uncertain, we believe that
our diversified product portfolio and significant storage capacity
provide operating and financial flexibility that will enable us to
weather the current market challenges and capitalize on
opportunities as market conditions improve,” Slifka said.
Given the uncertainty about the impact of COVID-19 on operations
and demand, Global Partners is withdrawing its previously issued
full-year 2020 EBITDA guidance, which was originally provided on
March 6, 2020.
There is a continuing uncertainty surrounding the short and
long-term impact of COVID-19 to the national and state economies.
Any of those COVID-19 related events or conditions, or other
unforeseen consequences of COVID-19 could significantly adversely
affect our business and financial condition and the business and
financial condition of our customers, suppliers and counterparties.
The ultimate extent of the impact of COVID-19 on our business,
financial condition and results of operations depends in large part
on future developments which are uncertain and cannot be predicted
at this time. That uncertainty includes the duration (including its
potential return) of the COVID-19 pandemic, the geographic regions
so impacted, the extent of said impact within specific boundaries
of those areas and, lastly, the impact to the local, state and
national economies.
Financial Results Conference Call
Management will review the Partnership’s first-quarter 2020
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, https://ir.globalp.com.
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 products 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 1,550 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 Partners 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 Partners engages in the transportation of
petroleum products and renewable fuels by rail from the
mid-continental U.S. and Canada. Global Partners LP, 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 and otherwise 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) including, without
limitation, the impact and duration of the COVID-19 pandemic,
uncertainty around the timing of an economic recovery in the United
States which will impact the demand for the products we sell and
the services we provide, uncertainty around the impact of the
COVID-19 pandemic to our counterparties and our customers and their
corresponding ability to perform their obligations and/or utilize
the products we sell and/or services we provide, uncertainty around
the impact and duration of federal, state and municipal regulations
related to the COVID-19 pandemic, 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
thereof. 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
March 31,
2020
2019
Sales
$
2,595,093
$
2,979,626
Cost of sales
2,449,355
2,822,782
Gross profit
145,738
156,844
Costs and operating expenses: Selling, general and
administrative expenses
40,923
41,090
Operating expenses
82,553
82,944
Lease exit and termination gain
-
(493
)
Amortization expense
2,712
2,976
Net loss on sale and disposition of assets
743
553
Total costs and operating expenses
126,931
127,070
Operating income
18,807
29,774
Interest expense
(21,601
)
(22,956
)
(Loss) income before income tax benefit (expense)
(2,794
)
6,818
Income tax benefit (expense)
5,869
(24
)
Net income
3,075
6,794
Net loss attributable to noncontrolling interest
201
332
Net income attributable to Global Partners LP
3,276
7,126
Less: General partner's interest in net income, including
incentive distribution rights
22
304
Less: Series A preferred limited partner interest in net income
1,682
1,682
Net income attributable to common limited partners
$
1,572
$
5,140
Basic net income per common limited partner unit (1)
$
0.05
$
0.15
Diluted net income per common limited partner unit (1)
$
0.05
$
0.15
Basic weighted average common limited partner units
outstanding
33,868
33,753
Diluted weighted average limited partner units outstanding
34,275
34,230
(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)
March 31,
December 31,
2020
2019
Assets Current assets: Cash and cash equivalents
$
54,389
$
12,042
Accounts receivable, net
189,977
413,195
Accounts receivable - affiliates
10,126
7,823
Inventories
214,408
450,482
Brokerage margin deposits
21,135
34,466
Derivative assets
79,788
4,564
Prepaid expenses and other current assets
109,179
81,940
Total current assets
679,002
1,004,512
Property and equipment, net
1,091,440
1,104,863
Right of use assets, net
291,004
296,746
Intangible assets, net
44,052
46,765
Goodwill
324,341
324,474
Other assets
31,346
31,067
Total assets
$
2,461,185
$
2,808,427
Liabilities and partners' equity Current
liabilities: Accounts payable
$
145,698
$
373,386
Working capital revolving credit facility - current portion
33,900
148,900
Lease liability—current portion
67,084
68,160
Environmental liabilities - current portion
5,009
5,009
Trustee taxes payable
36,082
42,932
Accrued expenses and other current liabilities
70,452
102,802
Derivative liabilities
11,277
12,698
Total current liabilities
369,502
753,887
Working capital revolving credit facility - less current
portion
175,000
175,000
Revolving credit facility
242,700
192,700
Senior notes
690,944
690,533
Long-term lease liability - less current portion
234,513
239,349
Environmental liabilities - less current portion
52,884
54,262
Financing obligations
147,782
148,127
Deferred tax liabilities
52,666
42,879
Other long-term liabilities
55,102
52,451
Total liabilities
2,021,093
2,349,188
Partners' equity Global Partners LP equity
438,719
458,065
Noncontrolling interest
1,373
1,174
Total partners' equity
440,092
459,239
Total liabilities and partners' equity
$
2,461,185
$
2,808,427
GLOBAL PARTNERS LP FINANCIAL RECONCILIATIONS
(In thousands) (Unaudited)
Three Months Ended
March 31,
2020
2019
Reconciliation of gross profit to product margin Wholesale
segment: Gasoline and gasoline blendstocks
$
9,144
$
26,990
Crude oil
(4,470
)
(6,226
)
Other oils and related products
210
14,080
Total
4,884
34,844
Gasoline Distribution and Station Operations segment: Gasoline
distribution
107,230
87,425
Station operations
48,641
50,960
Total
155,871
138,385
Commercial segment
5,915
6,458
Combined product margin
166,670
179,687
Depreciation allocated to cost of sales
(20,932
)
(22,843
)
Gross profit
$
145,738
$
156,844
Reconciliation of net income to EBITDA and Adjusted
EBITDA Net income
$
3,075
$
6,794
Net loss attributable to noncontrolling interest
201
332
Net income attributable to Global Partners LP
3,276
7,126
Depreciation and amortization, excluding the impact of
noncontrolling interest
25,668
27,935
Interest expense, excluding the impact of noncontrolling interest
21,601
22,956
Income tax (benefit) expense
(5,869
)
24
EBITDA
44,676
58,041
Net loss on sale and disposition of assets
743
553
Adjusted EBITDA
$
45,419
$
58,594
Reconciliation of net cash provided by (used in)
operating activities to EBITDA and Adjusted EBITDA Net cash
provided by (used in) operating activities
$
137,917
$
(87,037
)
Net changes in operating assets and liabilities and certain
non-cash items
(109,067
)
122,036
Net cash from operating activities and changes in operating assets
and liabilities attributable to noncontrolling interest
94
62
Interest expense, excluding the impact of noncontrolling interest
21,601
22,956
Income tax (benefit) expense
(5,869
)
24
EBITDA
44,676
58,041
Net loss on sale and disposition of assets
743
553
Adjusted EBITDA
$
45,419
$
58,594
Reconciliation of net income to distributable cash
flow Net income
$
3,075
$
6,794
Net loss attributable to noncontrolling interest
201
332
Net income attributable to Global Partners LP
3,276
7,126
Depreciation and amortization, excluding the impact of
noncontrolling interest
25,668
27,935
Amortization of deferred financing fees and senior notes discount
1,261
1,727
Amortization of routine bank refinancing fees
(940
)
(1,022
)
Maintenance capital expenditures, excluding the impact of
noncontrolling interest
(7,280
)
(8,006
)
Distributable cash flow (1)(2)
21,985
27,760
Distributions to Series A preferred unitholders (3)
(1,682
)
(1,682
)
Distributable cash flow after distributions to Series A preferred
unitholders
$
20,303
$
26,078
Reconciliation of net cash provided by (used in)
operating activities to distributable cash flow Net cash
provided by (used in) operating activities
$
137,917
$
(87,037
)
Net changes in operating assets and liabilities and certain
non-cash items
(109,067
)
122,036
Net cash from operating activities and changes in operating assets
and liabilities attributable to noncontrolling interest
94
62
Amortization of deferred financing fees and senior notes discount
1,261
1,727
Amortization of routine bank refinancing fees
(940
)
(1,022
)
Maintenance capital expenditures, excluding the impact of
noncontrolling interest
(7,280
)
(8,006
)
Distributable cash flow (1)(2)
21,985
27,760
Distributions to Series A preferred unitholders (3)
(1,682
)
(1,682
)
Distributable cash flow after distributions to Series A preferred
unitholders
$
20,303
$
26,078
(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 loss on sale and
disposition of assets of $0.7 million and $0.5 million for the
three months ended March 31, 2020 and 2019, respectively. Excluding
this charge, distributable cash flow would have been $22.7 million
and $28.3 million for the three months ended March 31, 2020 and
2019, respectively.
(3) Distributions to Series A preferred unitholders represent
the distributions payable to the preferred unitholders during the
period. Distributions on the Series A Preferred Units are
cumulative and payable quarterly in arrears on February 15, May 15,
August 15 and November 15 of each year.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200508005103/en/
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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