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GLOBAL PARTNERS LP 10-Q 2009

Documents found in this filing:

  1. 10-Q
  2. Ex-10.1
  3. Ex-31.1
  4. Ex-31.2
  5. Ex-32.1
  6. Ex-32.2
  7. Ex-32.2

Table of Contents

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 


 

FORM 10-Q

 


 

(Mark One)

 

x

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

 

 

 

 

 

For the quarterly period ended June 30, 2009

 

 

 

 

 

OR

 

 

 

 

o

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

 

 

 

 

 

For the transition period from              to              

 

 

Commission file number 001-32593

 

Global Partners LP

(Exact name of registrant as specified in its charter)

 

Delaware

 

74-3140887

(State or other jurisdiction of incorporation
or organization)

 

(I.R.S. Employer Identification No.)

 

P.O. Box 9161
800 South Street
Waltham, Massachusetts 02454-9161

(Address of principal executive offices, including zip code)

 

(781) 894-8800
(Registrant’s telephone number, including area code)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes x No o

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Date File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files.   Yes o No o

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer o

Accelerated filer x

Non-accelerated filer o

Smaller reporting company o

 

 

(Do not check if a smaller reporting company)

 

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes o No x

 

The issuer had 7,428,139 common units and 5,642,424 subordinated units outstanding as of August 4, 2009.

 

 

 



Table of Contents

 

TABLE OF CONTENTS

 

PART I.          FINANCIAL INFORMATION

 

 

 

Item 1.        Financial Statements

 

 

 

Consolidated Balance Sheets as of June 30, 2009 and December 31, 2008

 

 

 

Consolidated Statements of Operations for the three and six months ended June 30, 2009 and 2008

 

 

 

Consolidated Statements of Cash Flows for the six months ended June 30, 2009 and 2008

 

 

 

Consolidated Statements of Partners’ Equity for the six months ended June 30, 2009

 

 

 

Notes to Consolidated Financial Statements

 

 

 

Item 2.        Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

 

 

Item 3.        Quantitative and Qualitative Disclosures about Market Risk

 

 

 

Item 4.        Controls and Procedures

 

 

 

PART II.        OTHER INFORMATION

 

 

 

Item 1.        Legal Proceedings

 

 

 

Item 1A.     Risk Factors

 

 

 

Item 2.        Unregistered Sales of Equity Securities and Use of Proceeds

 

 

 

Item 6.        Exhibits

 

 

 

SIGNATURES

 

 

 

INDEX TO EXHIBITS

 

 



Table of Contents

 

Item 1.    Financial Statements

 

GLOBAL PARTNERS LP

CONSOLIDATED BALANCE SHEETS

(In thousands, except unit data)

(Unaudited)

 

 

 

June 30,

 

December 31,

 

 

 

2009

 

2008

 

Assets

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

 

$

2,962

 

$

945

 

Accounts receivable, net

 

190,621

 

249,418

 

Accounts receivable—affiliates

 

1,071

 

2,518

 

Inventories

 

369,353

 

240,346

 

Brokerage margin deposits

 

25,863

 

8,991

 

Fair value of forward fixed price contracts

 

8,598

 

161,787

 

Prepaid expenses and other current assets

 

31,570

 

29,302

 

Total current assets

 

630,038

 

693,307

 

Property and equipment, net

 

162,434

 

161,988

 

Intangible assets, net

 

29,939

 

31,403

 

Other assets

 

3,158

 

2,564

 

Total assets

 

$

825,569

 

$

889,262

 

 

 

 

 

 

 

Liabilities and partners’ equity

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Accounts payable

 

$

132,223

 

$

219,783

 

Working capital revolving credit facility—current portion

 

135,814

 

208,210

 

Environmental liabilities—current portion

 

3,296

 

4,191

 

Accrued expenses and other current liabilities

 

63,776

 

54,054

 

Income taxes payable

 

 

520

 

Obligations on forward fixed price contracts

 

14,300

 

7,954

 

Total current liabilities

 

349,409

 

494,712

 

Working capital revolving credit facility—less current portion

 

228,986

 

154,090

 

Acquisition facility

 

71,200

 

71,200

 

Environmental liabilities—less current portion

 

2,314

 

2,377

 

Accrued pension benefit cost

 

9,103

 

8,853

 

Deferred compensation

 

1,752

 

1,663

 

Other long-term liabilities

 

9,294

 

12,899

 

Total liabilities

 

672,058

 

745,794

 

 

 

 

 

 

 

Partners’ equity

 

 

 

 

 

Common unitholders (7,428,139 units issued and 7,367,781 outstanding at June 30, 2009 and 7,428,139 units issued and outstanding at December 31, 2008)

 

166,335

 

163,092

 

Subordinated unitholders (5,642,424 units issued and outstanding at June 30, 2009 and December 31, 2008)

 

(1,274

)

(4,189

)

General partner interest (1.73% interest with 230,303 equivalent units outstanding at June 30, 2009 and December 31, 2008)

 

(53

)

(172

)

Accumulated other comprehensive loss

 

(11,497

)

(15,263

)

Total partners’ equity

 

153,511

 

143,468

 

Total liabilities and partners’ equity

 

$

825,569

 

$

889,262

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

1



Table of Contents

 

GLOBAL PARTNERS LP

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per unit data)

(Unaudited)

 

 

 

Three Months Ended
June 30,

 

Six Months Ended
June 30,

 

 

 

2009

 

2008

 

2009

 

2008

 

 

 

 

 

 

 

 

 

 

 

Sales

 

$

1,201,149

 

$

2,297,709

 

$

2,834,104

 

$

5,018,701

 

Cost of sales

 

1,173,360

 

2,275,036

 

2,755,601

 

4,960,412

 

Gross profit

 

27,789

 

22,673

 

78,503

 

58,289

 

 

 

 

 

 

 

 

 

 

 

Costs and operating expenses:

 

 

 

 

 

 

 

 

 

Selling, general and administrative expenses

 

13,299

 

10,182

 

31,374

 

21,255

 

Operating expenses

 

9,137

 

8,771

 

17,612

 

17,796

 

Amortization expenses

 

803

 

737

 

1,603

 

1,461

 

Total costs and operating expenses

 

23,239

 

19,690

 

50,589

 

40,512

 

 

 

 

 

 

 

 

 

 

 

Operating income

 

4,550

 

2,983

 

27,914

 

17,777

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

(3,422

)

(4,087

)

(7,198

)

(10,117

)

 

 

 

 

 

 

 

 

 

 

Income (loss) before income tax expense

 

1,128

 

(1,104

)

20,716

 

7,660

 

 

 

 

 

 

 

 

 

 

 

Income tax expense

 

(150

)

(150

)

(875

)

(295

)

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

978

 

(1,254

)

19,841

 

7,365

 

 

 

 

 

 

 

 

 

 

 

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

 

(67

)

(28

)

(443

)

(227

)

 

 

 

 

 

 

 

 

 

 

Limited partners’ interest in net income (loss)

 

$

911

 

$

(1,282

)

$

19,398

 

$

7,138

 

 

 

 

 

 

 

 

 

 

 

Basic net income (loss) per limited partner unit

 

$

0.07

 

$

(0.10

)

$

1.48

 

$

0.55

 

 

 

 

 

 

 

 

 

 

 

Diluted net income (loss) per limited partner unit

 

$

0.07

 

$

(0.10

)

$

1.46

 

$

0.55

 

 

 

 

 

 

 

 

 

 

 

Basic weighted average limited partner units outstanding

 

13,059

 

13,071

 

13,065

 

13,071

 

 

 

 

 

 

 

 

 

 

 

Diluted weighted average limited partner units outstanding

 

13,356

 

13,071

 

13,273

 

13,071

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

2



Table of Contents

 

GLOBAL PARTNERS LP

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

 

 

Six Months Ended
June 30,

 

 

 

2009

 

2008

 

 

 

 

 

 

 

Cash flows from operating activities

 

 

 

 

 

Net income

 

$

19,841

 

$

7,365

 

Adjustments to reconcile net income to net cash provided by (used in) operating activities:

 

 

 

 

 

Depreciation and amortization

 

7,460

 

7,111

 

Amortization of deferred financing fees

 

578

 

381

 

Loss on disposition of property and equipment and other

 

 

6

 

Bad debt expense

 

1,155

 

60

 

Stock-based compensation expense

 

917

 

390

 

Changes in operating assets and liabilities:

 

 

 

 

 

Accounts receivable

 

57,642

 

37,071

 

Accounts receivable – affiliate

 

1,447

 

(890

)

Inventories

 

(129,007

)

(3,153

)

Broker margin deposits

 

(16,872

)

(2,941

)

Prepaid expenses, all other current assets and other assets

 

(3,520

)

(5,442

)

Accounts payable

 

(87,559

)

(40,359

)

Income taxes payable

 

(578

)

109

 

Change in fair value of forward fixed price contracts

 

159,535

 

(7,491

)

Accrued expenses and all other current liabilities

 

9,142

 

1,810

 

Net cash provided by (used in) operating activities

 

20,181

 

(5,973

)

 

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

 

Capital expenditures

 

(6,303

)

(5,523

)

Proceeds from sale of property and equipment

 

 

13

 

Net cash used in investing activities

 

(6,303

)

(5,510

)

 

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

 

Proceeds from credit facilities, net

 

2,500

 

26,100

 

Payments on note payable, other

 

 

(1,239

)

Repurchase of common units

 

(1,293

)

 

Distributions to partners

 

(13,068

)

(13,068

)

Net cash (used in) provided by financing activities

 

(11,861

)

11,793

 

 

 

 

 

 

 

Increase in cash and cash equivalents

 

2,017

 

310

 

Cash and cash equivalents at beginning of period

 

945

 

2,110

 

Cash and cash equivalents at end of period

 

$

2,962

 

$

2,420

 

 

 

 

 

 

 

Supplemental information

 

 

 

 

 

Cash paid during the period for interest

 

$

7,289

 

$

10,320

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

3



Table of Contents

 

GLOBAL PARTNERS LP

CONSOLIDATED STATEMENTS OF PARTNERS’ EQUITY

(In thousands)

(Unaudited)

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

General

 

Other

 

Total

 

 

 

Common

 

Subordinated

 

Partner

 

Comprehensive

 

Partners’

 

 

 

Unitholders

 

Unitholders

 

Interest

 

Loss

 

Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2008

 

$

163,092

 

$

(4,189

)

$

(172

)

$

(15,263

)

$

143,468

 

Stock-based compensation

 

917

 

 

 

 

917

 

Phantom unit dividend

 

(8

)

 

 

 

(8

)

Distributions to partners

 

(7,242

)

(5,502

)

(324

)

 

(13,068

)

Repurchase of common units

 

(1,405

)

 

 

 

(1,405

)

Comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

Net income

 

10,981

 

8,417

 

443

 

 

19,841

 

Other comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

Change in fair value of interest rate collars

 

 

 

 

3,415

 

3,415

 

Change in pension liability

 

 

 

 

351

 

351

 

Total comprehensive income

 

 

 

 

 

23,607

 

Balance at June 30, 2009

 

$

166,335

 

$

(1,274

)

$

(53

)

$

(11,497

)

$

153,511

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

4



Table of Contents

 

GLOBAL PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

Note 1.                      Organization and Basis of Presentation

 

Organization

 

Global Partners LP (the “Partnership”) is a publicly traded master limited partnership that engages in the wholesale and commercial distribution of refined petroleum products and small amounts of natural gas and provides ancillary services to companies.

 

The Partnership has five operating subsidiaries:  Global Companies LLC, its subsidiary, Glen Hes Corp., Global Montello Group Corp., Chelsea Sandwich LLC and Global Energy Marketing LLC (“Global Energy”) (the five operating subsidiaries, collectively, the “Companies”).  The Companies (other than Glen Hes Corp.) are wholly owned by Global Operating LLC, a wholly owned subsidiary of the Partnership.  Global Energy was recently formed to expand the Partnership’s natural gas operations.  It is in the process of obtaining licensure and is not yet operational.  In addition, GLP Finance Corp. (“GLP Finance”) is a wholly owned subsidiary of the Partnership.  GLP Finance has no material assets or liabilities.  Its activities will be limited to co-issuing debt securities and engaging in other activities incidental thereto.

 

The Partnership’s 1.73% general partner interest is held by Global GP LLC, the Partnership’s general partner (the “General Partner”).  The General Partner, which is owned by affiliates of the Slifka family, manages the Partnership’s operations and activities and employs its officers and substantially all of its personnel.  The General Partner and affiliates of the General Partner, including its directors and executive officers, own 142,799 common units and 5,642,424 subordinated units, representing a combined 43.5% limited partner interest.

 

Basis of Presentation

 

Interim Financial Statements

 

The accompanying consolidated financial statements as of June 30, 2009 and December 31, 2008 and for the three and six months ended June 30, 2009 and 2008 reflect the accounts of the Partnership.  All intercompany balances and transactions have been eliminated.

 

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) and reflect all adjustments (consisting of normal recurring adjustments) which are, in the opinion of management, necessary for a fair presentation of the financial condition and operating results for the interim periods.  The interim financial information, which has been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”), should be read in conjunction with the consolidated financial statements for the year ended December 31, 2008 and notes thereto contained in the Partnership’s Annual Report on Form 10-K.  The results of operations for the three and six months ended June 30, 2009 are not necessarily indicative of the results of operations that will be realized for the entire year ending December 31, 2009.

 

As demand for some of the Partnership’s refined petroleum products, specifically home heating oil and residual oil for space heating purposes, is generally greater during the winter months, sales are generally higher during the first and fourth quarters of the calendar year which may result in significant fluctuations in the Partnership’s quarterly operating results.

 

5



Table of Contents

 

GLOBAL PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

Note 1.                      Organization and Basis of Presentation (continued)

 

The following table presents the Partnership’s products as a percentage of total sales for the periods presented:

 

 

 

Three Months Ended
June 30,

 

Six Months Ended
June 30,

 

 

 

2009

 

2008

 

2009

 

2008

 

Distillate sales

 

35

%

40

%

51

%

50

%

Gasoline sales

 

60

%

56

%

43

%

45

%

Residual oil sales

 

5

%

4

%

6

%

5

%

 

 

100

%

100

%

100

%

100

%

 

The Partnership had one customer, ExxonMobil Oil Corporation (“ExxonMobil”), who accounted for approximately 25% and 23% of total sales for the three months ended June 30, 2009 and 2008, respectively and approximately 19% and 20% of total sales for the six months ended June 30, 2009 and 2008, respectively.

 

The consolidated balance sheet at December 31, 2008 has been derived from the audited consolidated financial statements and footnotes thereto included in the Partnership’s Annual Report on Form 10-K for the year ended December 31, 2008.

 

Reclassifications

 

Certain prior year amounts in the consolidated financial statements have been reclassified to conform to the current year presentation.

 

Note 2.                      Net Income (Loss) Per Limited Partner Unit

 

On January 1, 2009, the Partnership adopted Emerging Issues Task Force (“EITF”) Issue No. 07-04, “Application of the Two-Class Method under FASB Statement No. 128 to Master Limited Partnerships” (“EITF 07-04”) which specifies the treatment of earnings per unit calculations when incentive distributions rights (“IDRs”) exist in master limited partnerships.  EITF 07-04 provides that net income for the current period is to be reduced by the amount of available cash that will be distributed with respect to that period for purposes of calculating net income per unit.  Any residual amount representing undistributed net income (or losses) is assumed to be allocated to the ownership interests in accordance with the contractual provisions of the partnership agreement.

 

Under the Partnership’s partnership agreement, for any quarterly period, the 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 common and subordinated unitholders, or limited partners’ interest, and to the General Partner’s interest.

 

On April 22, 2009, the board of directors of the General Partner declared a quarterly cash distribution of $0.4875 per unit for the period from January 1, 2009 through March 31, 2009.  On July 23, 2009, the board declared a quarterly cash distribution of $0.4875 per unit for the period from April 1, 2009 through June 30, 2009.  These declared cash distributions resulted in incentive distributions to the General Partner, as the holder of the incentive distribution rights, as indicated above, and enabled the Partnership to reach its second target distribution with respect to such incentive distribution rights.  See Note 9, “Cash Distributions” for further information.

 

6



Table of Contents

 

GLOBAL PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

Note 2.                      Net Income (Loss) Per Limited Partner Unit (continued)

 

The following table provides a reconciliation of net income and the assumed allocation of net income to the limited partners’ interest for purposes of computing net income per limited partner unit for the three and six months ended June 30, 2009 (in thousands, except per unit data):

 

 

 

Three months ended June 30, 2009

 

 

 

 

 

Limited

 

General Partner Interest

 

 

 

 

 

Partner

 

General

 

 

 

 

 

Total

 

Interest

 

Partner

 

IDRs

 

Numerator:

 

 

 

 

 

 

 

 

 

Net income

 

$

978

 

$

911

 

$

67

 

$

 

 

 

 

 

 

 

 

 

 

 

Declared distribution

 

$

6,534

 

$

6,372

 

$

112

 

$

50

 

Assumed allocation of undistributed net income

 

(5,556

)

(5,461

)

(95

)

 

Assumed allocation of net income

 

$

978

 

$

911

 

$

17

 

$

50

 

 

 

 

 

 

 

 

 

 

 

Denominator:

 

 

 

 

 

 

 

 

 

Basic weighted average limited partner units outstanding

 

 

 

13,059

 

 

 

 

 

Dilutive effect of phantom units

 

 

 

297

 

 

 

 

 

Diluted weighted average limited partner units outstanding

 

 

 

13,356

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic net income per limited partner unit

 

 

 

$

0.07

 

 

 

 

 

Diluted net income per limited partner unit

 

 

 

$

0.07

 

 

 

 

 

 

 

 

Six months ended June 30, 2009

 

 

 

 

 

Limited

 

General Partner Interest

 

 

 

 

 

Partner

 

General

 

 

 

 

 

Total

 

Interest

 

Partner

 

IDRs

 

Numerator:

 

 

 

 

 

 

 

 

 

Net income

 

$

19,841

 

$

19,398

 

$

443

 

$

 

 

 

 

 

 

 

 

 

 

 

Declared distribution

 

$

13,068

 

$

12,744

 

$

224

 

$

100

 

Assumed allocation of undistributed net income

 

6,773

 

6,654

 

119

 

 

Assumed allocation of net income

 

$

19,841

 

$

19,398

 

$

343

 

$

100

 

 

 

 

 

 

 

 

 

 

 

Denominator:

 

 

 

 

 

 

 

 

 

Basic weighted average limited partner units outstanding

 

 

 

13,065

 

 

 

 

 

Dilutive effect of phantom units

 

 

 

208

 

 

 

 

 

Diluted weighted average limited partner units outstanding

 

 

 

13,273

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic net income per limited partner unit

 

 

 

$

1.48

 

 

 

 

 

Diluted net income per limited partner unit

 

 

 

$

1.46

 

 

 

 

 

 

At June 30, 2009, limited partner units outstanding excluded common units held on behalf of the Partnership pursuant to its Repurchase Program and for future satisfaction of the General Partner’s Obligations (as defined in Note 12).  These units are not deemed outstanding for purposes of calculating net income per limited partner unit (basic and diluted).

 

The Partnership applied the provisions of EITF No. 07-04 on a retroactive basis which had an immaterial impact on the limited partners’ interest in net (loss) income and net (loss) income per limited partner unit for the three and six months ended June 30, 2008.

 

7



Table of Contents

 

GLOBAL PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

Note 2.                      Net Income (Loss) Per Limited Partner Unit (continued)

 

The following table provides a reconciliation of net (loss) income and the assumed allocation of net (loss) income to the limited partners’ interest for purposes of computing net income per limited partner unit for the three and six months ended June 30, 2008 (in thousands, except per unit data):

 

 

 

Three months ended June 30, 2008

 

 

 

 

 

Limited

 

General Partner Interest

 

 

 

 

 

Partner

 

General

 

 

 

 

 

Total

 

Interest

 

Partner

 

IDRs

 

Numerator:

 

 

 

 

 

 

 

 

 

Net loss

 

$

(1,254

)

$

(1,282

)

$

28

 

$

 

 

 

 

 

 

 

 

 

 

 

Declared distribution

 

$

6,534

 

$

6,372

 

$

112

 

$

50

 

Assumed allocation of undistributed net loss

 

(7,788

)

(7,654

)

(134

)

 

Assumed allocation of net loss

 

$

(1,254

)

$

(1,282

)

$

(22

)

$

50

 

 

 

 

 

 

 

 

 

 

 

Denominator:

 

 

 

 

 

 

 

 

 

Basic weighted average limited partner units outstanding

 

 

 

13,071

 

 

 

 

 

Diluted weighted average limited partner units outstanding

 

 

 

13,071

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic net loss per limited partner unit

 

 

 

$

(0.10

)

 

 

 

 

Diluted net loss per limited partner unit

 

 

 

$

(0.10

)

 

 

 

 

 

 

 

Six months ended June 30, 2008

 

 

 

 

 

Limited

 

General Partner Interest

 

 

 

 

 

Partner

 

General

 

 

 

 

 

Total

 

Interest

 

Partner

 

IDRs

 

Numerator:

 

 

 

 

 

 

 

 

 

Net income

 

$

7,365

 

$

7,138

 

$

227

 

$

 

 

 

 

 

 

 

 

 

 

 

Declared distribution

 

$

13,068

 

$

12,744

 

$

224

 

$

100

 

Assumed allocation of undistributed net income

 

(5,703

)

(5,606

)

(97

)

 

Assumed allocation of net income

 

$

7,365

 

$

7,138

 

$

127

 

$

100

 

 

 

 

 

 

 

 

 

 

 

Denominator:

 

 

 

 

 

 

 

 

 

Basic weighted average limited partner units outstanding

 

 

 

13,071

 

 

 

 

 

Diluted weighted average limited partner units outstanding

 

 

 

13,071

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic net income per limited partner unit

 

 

 

$

0.55

 

 

 

 

 

Diluted net income per limited partner unit

 

 

 

$

0.55

 

 

 

 

 

 

8



Table of Contents

 

GLOBAL PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

Note 3.                      Comprehensive Income

 

The components of comprehensive income consisted of the following (in thousands):

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

June 30,

 

June 30,

 

 

 

2009

 

2008

 

2009

 

2008

 

Net income (loss)

 

$

978

 

$

(1,254

)

$

19,841

 

$

7,365

 

Change in fair value of interest rate collars

 

2,263

 

2,280

 

3,415

 

(116

)

Change in pension liability

 

593

 

(217

)

351

 

(781

)

Total comprehensive income

 

$

3,834

 

$

809

 

$

23,607

 

$

6,468

 

 

Note 4.                      Inventories

 

The Partnership hedges substantially all of its inventory purchases through futures contracts and swap agreements.  Hedges are executed when inventory is purchased and are identified with that specific inventory.  Changes in the fair value of these contracts, as well as the offsetting gain or loss on the hedged inventory item, are recognized in earnings as an increase or decrease in cost of sales.  All hedged inventory is valued using the lower of cost, as determined by specific identification, or market.  Prior to sale, hedges are removed from specific barrels of inventory, and the then unhedged inventory is sold and accounted for on a first-in, first-out basis.

 

Inventories consisted of the following (in thousands):

 

 

 

June 30,
2009

 

December 31,
2008

 

Distillates: home heating oil, diesel and kerosene

 

$

251,553

 

$

160,000

 

Residual oil

 

31,003

 

24,878

 

Gasoline

 

69,644

 

40,183

 

Blend stock

 

17,153

 

15,285

 

Total

 

$

369,353

 

$

240,346

 

 

In addition to its own inventory, the Partnership has exchange agreements with unrelated third-party suppliers, whereby it may draw inventory from these other suppliers and suppliers may draw inventory from the Partnership.  Positive exchange balances are accounted for as accounts receivable and amounted to $21.8 million and $14.8 million at June 30, 2009 and December 31, 2008, respectively.  Negative exchange balances are accounted for as accounts payable and amounted to $11.5 million and $8.4 million at June 30, 2009 and December 31, 2008, respectively.  Exchange transactions are valued using current quoted market prices.

 

Note 5.                      Derivative Financial Instruments

 

Statement of Financial Accounting Standards (“SFAS”) No. 133, “Accounting for Derivative Instruments and Hedging Activities,” as amended (“SFAS No. 133”) establishes accounting and reporting standards for derivative instruments and hedging activities and requires that an entity recognize derivatives as either assets or liabilities on the balance sheet and measure the instruments at fair value.  Changes in the fair value of the derivative are to be recognized currently in earnings, unless specific hedge accounting criteria are met.

 

Effective January 1, 2009, the Partnership adopted SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities — An Amendment of FASB Statement No. 133” (“SFAS No. 161”) which changes the disclosure requirements for derivative and hedging activities.  SFAS No. 161 requires the Partnership to provide enhanced disclosures about (a) how and why the Partnership uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under SFAS No. 133 and its related interpretations, and (c) how derivative instruments and related hedged items affect the Partnership’s financial position, financial performance and cash flows.

 

9



Table of Contents

 

GLOBAL PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

Note 5.                      Derivative Financial Instruments (continued)

 

The following table presents the volume of activity related to the Partnership’s derivative financial instruments at June 30, 2009:

 

 

 

Units(1)

 

Unit of Measure

 

Oil Contracts

 

 

 

 

 

Long

 

8,779

 

Thousands of barrels

 

Short

 

(11,760

)

Thousands of barrels

 

 

 

 

 

 

 

Natural Gas Contracts

 

 

 

 

 

Long

 

19,962

 

Decatherms

 

Short

 

(19,962

)

Decatherms

 

 

 

 

 

 

 

Interest Rate Collars

 

$

200,000

 

Thousands of dollars

 

 


(1)             Number of open positions and gross notional amounts do not quantify risk or represent assets or liabilities of the Partnership, but are used in the calculation of cash settlements under the contracts.

 

Fair Value Hedges

 

The fair value of the Partnership’s derivatives is determined through the use of independent markets and is based upon the prevailing market prices of such instruments at the date of valuation.  The Partnership enters into futures contracts for the receipt or delivery of refined petroleum products in future periods.  The contracts are entered into in the normal course of business to reduce risk of loss of inventory on hand, which could result through fluctuations in market prices.  Changes in the fair value of these contracts, as well as the offsetting gain or loss on the hedged inventory item, are recognized in earnings as an increase or decrease in cost of sales.  Ineffectiveness related to these hedging activities was immaterial at June 30, 2009.

 

The Partnership also uses futures contracts and swap agreements to hedge exposure under forward purchase and sale commitments.  These agreements are intended to hedge the cost component of virtually all of the Partnership’s forward purchase and sale commitments.  Changes in the fair value of these contracts, as well as offsetting gains or losses on the forward fixed price purchase and sale commitments, are recognized in earnings as an increase or decrease in cost of sales.  Gains and losses on net product margin from forward fixed price purchase and sale contracts are reflected in earnings as an increase or decrease in cost of sales as these contracts mature.  Ineffectiveness related to these hedging activities was immaterial at June 30, 2009.

 

10



Table of Contents

 

GLOBAL PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

Note 5.                      Derivative Financial Instruments (continued)

 

The following table presents the gross fair values of the Partnership’s derivative instruments and firm commitments and their location in the Partnership’s consolidated balance sheets at June 30, 2009 and December 31, 2008 (in thousands):

 

 

 

Assets

 

Liabilities

 

 

 

 

 

June 30,

 

December 31,

 

 

 

June 30,

 

December 31,

 

Derivatives Under

 

Balance Sheet

 

2009

 

2008

 

Balance Sheet

 

2009

 

2008

 

SFAS No. 133

 

Location

 

Fair Value

 

Fair Value

 

Location

 

Fair Value

 

Fair Value

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivatives designated as hedging instruments and firm commitments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Oil product contracts(1)

 

(2)

 

$

60,311

 

$

215,237

 

(3)

 

$

68,762

 

$

57,506

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivatives not designated as hedging instruments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Oil product contracts

 

Accrued expenses and
other current liabilities

 

7,411

 

6,739

 

Accrued expenses and
other current liabilities

 

7,491

 

6,799

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total derivatives

 

 

 

$

67,772

 

$

221,976

 

 

 

$

76,253

 

$

64,305

 

 


(1)             Includes forward fixed price purchase and sale contracts as recognized in the Partnership’s consolidated balance sheets at June 30, 2009 and December 31, 2008.

(2)             Fair value of forward fixed price contracts, prepaid expenses and other current assets, accrued and other current liabilities and obligations on forward fixed price contracts

(3)             Obligations on forward fixed price contracts and accrued expenses and other current liabilities

 

The following table presents the amount of gains and losses from derivatives involved in fair value hedging relationships recognized in the Partnership’s consolidated statements of income for the three and six months ended June 30, 2009 and 2008 (in thousands):

 

 

 

 

 

Amount of Gain (Loss)

 

Hedged

 

Location of

 

Amount of Gain (Loss)

 

Derivatives in

 

Location of

 

Recognized in Income

 

Items in

 

Gain (Loss)

 

Recognized in Income

 

SFAS No. 133

 

Gain (Loss)

 

on Derivatives

 

SFAS No. 133

 

Recognized in

 

on Hedged Items

 

Fair Value

 

Recognized in

 

Three Months Ended

 

Fair Value

 

Income on

 

Three Months Ended

 

Hedging

 

Income on

 

June 30,

 

June 30,

 

Hedge

 

Related

 

June 30,

 

June 30,

 

Relationship

 

Derivative

 

2009

 

2008

 

Relationships

 

Hedged Item

 

2009

 

2008

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Oil product contracts

 

Cost of sales

 

$

(99,378

)

$

(85,417

)

Inventories and forward fixed price contracts

 

Cost of sales

 

$

99,699

 

$

85,741

 

 

 

 

 

 

Amount of Gain (Loss)

 

Hedged

 

Location of

 

Amount of Gain (Loss)

 

Derivatives in

 

Location of

 

Recognized in Income

 

Items in

 

Gain (Loss)

 

Recognized in Income

 

SFAS No. 133

 

Gain (Loss)

 

on Derivatives

 

SFAS No. 133

 

Recognized in

 

on Hedged Items

 

Fair Value

 

Recognized in

 

Six Months Ended

 

Fair Value

 

Income on

 

Six Months Ended

 

Hedging

 

Income on

 

June 30,

 

June 30,

 

Hedge

 

Related

 

June 30,

 

June 30,

 

Relationship

 

Derivative

 

2009

 

2008

 

Relationships

 

Hedged Item

 

2009

 

2008

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Oil product contracts

 

Cost of sales

 

$

(199,602

)

$

(82,886

)

Inventories and forward fixed price contracts

 

Cost of sales

 

$

200,247

 

$

83,200

 

 

11



Table of Contents

 

GLOBAL PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

Note 5.                      Derivative Financial Instruments (continued)

 

The Partnership’s derivative financial instruments do not contain credit-risk-related or other contingent features that could cause accelerated payments when these financial instruments are in net liability positions.

 

The table below presents the composition and fair value of forward fixed price purchase and sale contracts on the Partnership’s consolidated balance sheet being hedged by the following derivative instruments (in thousands):

 

 

 

June 30,
2009

 

December 31,
2008

 

Futures contracts, net

 

$

(2,642

)

$

138,741

 

Swaps and other, net

 

(3,060

)

15,092

 

Total

 

$

(5,702

)

$

153,833

 

 

The total balances of $(5.7 million) and $153.8 million reflect the fair value of the forward fixed price contract (liability)/asset net of the corresponding asset/(liability) on the accompanying consolidated balance sheets at June 30, 2009 and December 31, 2008, respectively.

 

The Partnership also markets and sells natural gas.  The Partnership generally conducts business by entering into forward purchase commitments for natural gas only when it simultaneously enters into arrangements for the sale of product for physical delivery to third-party users.  The Partnership generally takes delivery under its purchase commitments at the same location as it delivers to third-party users.  Through these transactions, which establish an immediate margin, the Partnership seeks to maintain a position that is substantially balanced between firm forward purchase and sales commitments.  Natural gas is generally purchased and sold at fixed prices and quantities.  Current price quotes from actively traded markets are used in all cases to determine the contracts’ fair value.  Changes in the fair value of these contracts are recognized in earnings as an increase or decrease in cost of sales.

 

The Partnership formally documents all relationships between hedging instruments and hedged items after its risk management objectives and strategy for undertaking the hedge are determined.  The Partnership calculates hedge effectiveness on a quarterly basis.  This process includes specific identification of the hedging instrument and the hedged transaction, the nature of the risk being hedged and how the hedging instrument’s effectiveness will be assessed.  Both at the inception of the hedge and on an ongoing basis, the Partnership assesses whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in fair value of hedged items.  The derivative instruments that qualify for hedge accounting are fair value hedges.

 

The Partnership has a daily margin requirement with its broker based on the prior day’s market results on open futures contracts.  The required brokerage margin balance was $25.9 million and $9.0 million at June 30, 2009 and December 31, 2008, respectively.

 

The Partnership is exposed to credit loss in the event of nonperformance by counterparties of forward purchase and sale commitments, futures contracts, options and swap agreements, but the Partnership has no current reason to expect any material nonperformance by any of these counterparties.  Futures contracts, the primary derivative instrument utilized by the Partnership, are traded on regulated exchanges, greatly reducing potential credit risks.  The Partnership utilizes primarily one clearing broker, a major financial institution, for all New York Mercantile Exchange (“NYMEX”) derivative transactions and the right of offset exists.  Accordingly, the fair value of all derivative instruments is presented on a net basis on the consolidated balance sheets.  Exposure on forward purchase and sale commitments, swap and certain option agreements is limited to the amount of the recorded fair value as of the balance sheet dates.

 

12



Table of Contents

 

GLOBAL PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

Note 5.                      Derivative Financial Instruments (continued)

 

Cash Flow Hedges

 

The Partnership links all hedges that are designated as cash flow hedges to forecasted transactions.  To the extent such hedges are effective, the changes in the fair value of the derivative instrument is reported as a component of other comprehensive income and reclassified into earnings in the same period during which the hedged transaction affects earnings.

 

The Partnership executed two zero premium interest rate collars with major financial institutions.  Each collar is designated as a cash flow hedge and accounted for under the provisions of SFAS No. 133.  The first collar, which became effective on May 14, 2007 and expires on May 14, 2011, is used to hedge the variability in interest payments due to changes in the three-month LIBOR rate with respect to $100.0 million of three-month LIBOR-based borrowings.  Under the first collar, the Partnership capped its exposure at a maximum three-month LIBOR rate of 5.75% and established a minimum floor rate of 3.75%.  As of June 30, 2009, the three-month LIBOR rate of 0.91% was lower than the floor rate.  As a result, in August 2009, the Partnership will remit to the respective financial institution the difference between the floor rate and the current rate which amounted to approximately $379,000 and, at June 30, 2009, was recorded in accrued expenses and other current liabilities on the accompanying consolidated balance sheet.  As of June 30, 2009, the fair value of the first collar was a liability of approximately $4.4 million and was recorded in both other long-term liabilities and accumulated other comprehensive income.  Hedge effectiveness was assessed at inception and is assessed quarterly, prospectively and retrospectively.  The changes in the fair value of the first collar are expected to be highly effective in offsetting the changes in interest rate payments attributable to fluctuations in the three-month LIBOR rate above and below the first collar’s strike rates.  Ineffectiveness related to the first collar was immaterial at June 30, 2009.

 

On September 29, 2008, the Partnership executed its second zero premium interest rate collar.  The second collar, which became effective on October 2, 2008 and expires on October 2, 2013, is used to hedge the variability in cash flows in monthly interest payments made on the Partnership’s $100.0 million one-month LIBOR-based borrowings (and subsequent refinancings thereof) due to changes in the one-month LIBOR rate.  Under the second collar, the Partnership capped its exposure at a maximum one-month LIBOR rate of 5.50% and established a minimum floor rate of 2.70%.  As of June 30, 2009, the one-month LIBOR rate of 0.32% was lower than the floor rate.  As a result, in July 2009, the Partnership remitted to the respective financial institution the difference between the floor rate and the current rate which amounted to approximately $192,000 and, at June 30, 2009, was recorded in accrued expenses and other current liabilities on the accompanying consolidated balance sheet.  As of June 30, 2009, the fair value of the second collar was a liability of approximately $3.0 million and was recorded in both other long-term liabilities and accumulated other comprehensive income in the accompanying consolidated balance sheet.  Hedge effectiveness was assessed at inception and is assessed quarterly, prospectively and retrospectively, using the regression analysis.  The changes in the fair value of the second collar are expected to be highly effective in offsetting the changes in interest rate payments attributable to fluctuations in the one-month LIBOR rate above and below the second collar’s strike rates.  Ineffectiveness related to the second collar was immaterial at June 30, 2009.

 

The following table presents the fair value of the Partnership’s derivative instruments and their location in the Partnership’s consolidated balance sheets at June 30, 2009 and December 31, 2008 (in thousands):

 

 

 

Assets

 

Liabilities

 

 

 

 

 

June 30,

 

December 31,

 

 

 

June 30,

 

December 31,

 

Derivatives Under

 

Balance Sheet

 

2009

 

2008

 

Balance Sheet

 

2009

 

2008

 

SFAS No. 133

 

Location

 

Fair Value

 

Fair Value

 

Location

 

Fair Value

 

Fair Value

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Derivatives designated as hedging instruments

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate collars

 

 

 

$

 

$

 

Other long-term liabilities

 

7,431

 

10,846

 

 

13



Table of Contents

 

GLOBAL PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

Note 5.                      Derivative Financial Instruments (continued)

 

The following table presents the amount of gains and losses from derivatives involved in cash flow hedging relationships recognized in the Partnership’s consolidated statements of income for the three and six months ended June 30, 2009 and 2008 (in thousands):

 

 

 

 

 

 

 

Recognized in Income

 

 

 

 

 

Recognized in Income

 

 

 

 

 

 

 

on Derivatives

 

 

 

 

 

on Derivatives

 

 

 

Amount of Gain (Loss)

 

(Ineffectiveness Portion

 

Amount of Gain (Loss)

 

(Ineffectiveness Portion

 

 

 

Recognized in Other

 

and Amount Excluded

 

Recognized in Other

 

and Amount Excluded

 

 

 

Comprehensive Income

 

from Effectiveness

 

Comprehensive Income

 

from Effectiveness

 

Derivatives in

 

on Derivatives

 

Testing)

 

on Derivatives

 

Testing)

 

SFAS No. 133

 

Three Months Ended

 

Three Months Ended

 

Six Months Ended

 

Six Months Ended

 

Cash Flow

 

June 30,

 

June 30,

 

June 30,

 

June 30,

 

June 30,

 

June 30,

 

June 30,

 

June 30,

 

Hedging Relationship

 

2009

 

2008

 

2009

 

2008

 

2009

 

2008

 

2009

 

2008

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate collars

 

$

2,264

 

$

2,280

 

$

 

$

 

$

3,416

 

$

(116

)

$

 

$

 

 

Ineffectiveness related to the interest rate collars is recognized as interest expense and was immaterial at June 30, 2009.  The effective portion related to the interest rate collars that was originally reported in other comprehensive income and reclassified to earnings was $1.3 million and $2.3 million for the three and six months ended June 30, 2009, respectively.

 

Derivatives Not Involved in a SFAS No. 133 Relationship

 

While the Partnership seeks to maintain a position that is substantially balanced within its product purchase activities, it may experience net unbalanced positions for short periods of time as a result of variances in daily sales and transportation and delivery schedules as well as logistical issues associated with inclement weather conditions.  In connection with managing these positions and maintaining a constant presence in the marketplace, both necessary for its business, the Partnership engages in a controlled trading program for up to an aggregate of 250,000 barrels of refined petroleum products at any one point in time.

 

The following table presents the amount of gains and losses from derivatives not involved in a SFAS No. 133 hedging relationships recognized in the Partnership’s consolidated statements of income for the three and six months ended June 30, 2009 and 2008 (in thousands):

 

 

 

 

 

Amount of Gain (Loss)

 

Amount of Gain (Loss)

 

 

 

Location of

 

Recognized in Income

 

Recognized in Income

 

 

 

Gain (Loss)

 

on Derivatives

 

on Derivatives

 

 

 

Recognized in

 

Three Months Ended

 

Six Months Ended

 

Derivatives Not Designated as Hedging

 

Income on

 

June 30,

 

June 30,

 

June 30,

 

June 30,

 

Instruments Under SFAS No. 133

 

Derivatives

 

2009

 

2008

 

2009

 

2008

 

 

 

 

 

 

 

 

 

 

 

 

 

Oil product contracts

 

Cost of sales

 

$

1,767

 

$

(1,051

)

$

5,752

 

$

4,503

 

 

14



Table of Contents

 

GLOBAL PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

Note 6.                      Debt

 

The Partnership has a senior secured credit agreement (the “Credit Agreement”) with total available commitments of $750.0 million.  There are three facilities under the Credit Agreement:

 

·                  a working capital revolving credit facility to be used for working capital purposes and letters of credit in the principal amount equal to the lesser of the Partnership’s borrowing base and $650.0 million; the $650.0 million includes two $50.0 million seasonal overline facilities that are available each year only during the period between September 1 and June 30;

 

·                  an $85.0 million acquisition facility to be used for funding acquisitions similar to the Partnership’s business line that have a purchase price of $25.0 million or less or $35.0 million or less in the aggregate in any 12-month period; and

 

·                  a $15.0 million revolving credit facility to be used for general purposes, including payment of distributions to the Partnership’s unitholders.

 

In addition, the Credit Agreement has an accordion feature whereby the Partnership may request on the same terms and conditions of its then existing Credit Agreement, provided no Event of Default (as defined in the Credit Agreement) then exists, an increase to:  (1) the acquisition facility by up to another $50.0 million, for a total acquisition facility of up to $135.0 million; and (2) the working capital revolving credit facility by up to another $200.0 million, for a total working capital revolving credit facility of up to $850.0 million.  Any such request for an increase by the Partnership must be in a minimum amount of $5.0 million, and no more than three such requests may be made for each facility.  The Partnership, however, cannot provide assurance that its lending group will agree to fund any request by the Partnership for additional amounts in excess of the total available commitments of $750.0 million.

 

Availability under the Partnership’s working capital revolving credit facility is subject to a borrowing base which is redetermined from time to time and based on specific advance rates on eligible current assets.  Under the Credit Agreement, the Partnership can borrow only up to the level of its then current borrowing base.  Availability under the Partnership’s borrowing base may be affected by events beyond the Partnership’s control, such as changes in refined petroleum product prices, collection cycles, counterparty performance, advance rates and limits and deteriorating economic conditions.  These and other events could require the Partnership to seek waivers or amendments of covenants or alternative sources of financing or to reduce expenditures.  The Partnership can provide no assurance that such waivers, amendments or alternative financing could be obtained or, if obtained, would be on terms acceptable to the Partnership.

 

During the period from January 1, 2008 through July 20, 2008, borrowings under the Partnership’s working capital revolving credit, acquisition and revolving credit facilities bore interest at the Partnership’s option at (1) the Eurodollar rate, plus 1%, 1½% and 1½%, respectively, (2) the cost of funds rate, plus 1%, 1¾% and 1½%, respectively, or (3) the bank’s base rate.

 

Commencing July 21, 2008, borrowings under the working capital revolving credit facility bear interest at (1) the Eurodollar rate plus 1.75% to 2.25%, (2) the cost of funds rate plus 1.75% to 2.25%, or (3) the base rate plus 0.75% to 1.25%, each depending on the pricing level provided in the Credit Agreement, as amended, which in turn depends upon the Combined Interest Coverage Ratio (as such term is defined in the Credit Agreement).  Commencing July 21, 2008, borrowings under the acquisition and revolving credit facilities bear interest at (1) the Eurodollar rate plus 2.25% to 2.75%, (2) the cost of funds rate plus 1.75% to 2.25%, or (3) the base rate plus 0.75% to 1.25%, each depending on the pricing level provided in the Credit Agreement, as amended, which in turn depends upon the Combined Interest Coverage Ratio.  The average interest rate was approximately 3.8% for each of the three months ended June 30, 2009 and 2008.  The average interest rates were approximately 3.8% and 4.2% for the six months ended June 30, 2009 and 2008, respectively.

 

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GLOBAL PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

Note 6.       Debt (continued)

 

In addition, the Partnership executed two zero premium interest rate collars with major financial institutions.  The first collar, which became effective on May 14, 2007, is used to hedge the variability in interest payments due to changes in the three-month LIBOR rate with respect to $100.0 million of three-month LIBOR-based borrowings.  The second collar, which became effective on October 2, 2008, is used to hedge the variability in cash flows in monthly interest payments made on the Partnership’s $100.0 million one-month LIBOR-based borrowings (and subsequent refinancings thereof) due to changes in the one-month LIBOR rate (see Note 5 for further discussion on the interest rate collars).

 

The Partnership incurs a letter of credit fee of 1.75% per annum for each letter of credit issued.  In addition, the Partnership incurs a commitment fee on the unused portion of the three facilities under the Credit Agreement (including the unused portion of either of the seasonal overline facilities exercised by the Partnership) equal to 0.3% to 0.375% per annum, depending on the pricing level and the Combined Interest Coverage Ratio provided in the Credit Agreement.  The Partnership also incurs a facility fee of 0.1% per annum on any unexercised seasonal overline facility during the period between September 1 and June 30 and a seasonal overline fee of $30,000 each time the Partnership elects to exercise either of the seasonal overline facilities.

 

The Credit Agreement will mature on April 22, 2011.  The Partnership classifies a portion of its working capital revolving credit facility as a long-term liability because the Partnership has a multi-year, long-term commitment from its bank group.  The long-term portion of the working capital revolving credit facility was $229.0 million and $154.1 million at June 30, 2009 and December 31, 2008, respectively, representing the amounts expected to be outstanding during the year.  In addition, the Partnership classifies a portion of its working capital revolving credit facility as a current liability because it repays amounts outstanding and reborrows funds based on its working capital requirements.  The current portion of the working capital revolving credit facility was approximately $135.8 million and $208.2 million at June 30, 2009 and December 31, 2008, respectively, representing the amounts the Partnership expects to pay down during the course of the year.

 

As of June 30, 2009, the Partnership had total borrowings outstanding under the Credit Agreement of $436.0 million, including $71.2 million outstanding on the acquisition facility.  In addition, the Partnership had outstanding letters of credit of $54.0 million.  The total remaining availability for borrowings and letters of credit at June 30, 2009 and December 31, 2008 was $260.0 million and $211.3 million, respectively.

 

The Credit Agreement is secured by substantially all of the assets of the Partnership and each of the Companies and is guaranteed by the General Partner.  The Credit Agreement imposes certain requirements including, for example, a prohibition against distributions if any potential default or Event of Default (as defined in the Credit Agreement) would occur, and limitations on the Partnership’s ability to grant liens, make certain loans or investments, incur additional indebtedness or guarantee other indebtedness, make any material change to the nature of the Partnership’s business or undergo a fundamental change, make any material dispositions, acquire another company, enter into a merger, consolidation, sale leaseback transaction or purchase of assets, or make capital expenditures in excess of specified levels.

 

The Credit Agreement imposes financial covenants that require the Partnership to maintain certain minimum working capital amounts, capital expenditure limits, a minimum EBITDA ratio, a minimum combined interest coverage ratio and a maximum leverage ratio.  The Partnership was in compliance with the foregoing covenants at June 30, 2009.  The Credit Agreement also contains a representation whereby there can be no event or circumstance, either individually or in the aggregate, that has had or could reasonably be expected to have a Material Adverse Effect (as defined in the Credit Agreement).

 

The Credit Agreement also requires that in each calendar year, the outstanding amount under the working capital revolving credit facility must be equal to or less than $263.0 million for a period of ten consecutive calendar days.  The Partnership has complied with this provision for the year ending December 31, 2009.

 

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Table of Contents

 

GLOBAL PARTNERS LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

Note 6.       Debt (continued)

 

The Credit Agreement limits distributions by the Partnership to its unitholders to the amount of the Partnership’s available cash and permits borrowings to fund such distributions only under the $15.0 million revolving credit facility.  The revolving credit facility is subject to an annual “clean-down” period, requiring the Partnership to reduce the amount outstanding under the revolving credit facility to $0 for 30 consecutive calendar days in each calendar year.  The Partnership has complied with this provision for the year ending December 31, 2009.

 

The lending group under the Credit Agreement includes the following institutions:  Bank of America, N.A.; Standard Chartered Bank; JPMorgan Chase Bank, N.A.; Societe Generale; RBS Citizens, National Association; Sovereign Bank; Fortis Capital Corp.; Webster Bank National Association; KeyBank National Association; TD Bank, N.A. (f/k/a TD BankNorth, N.A.); Wells Fargo Bank, N.A.; Wachovia Bank, National Association; and Calyon New York Branch.

 

Note 7.                      Employee Benefit Plan with Related Party

 

The General Partner employs substantially all of the Partnership’s employees and charges the Partnership for their services.  The Partnership also reimburses the General Partner for its contributions under the General Partner’s 401(k) Savings and Profit Sharing Plan and the General Partner’s qualified and non-qualified pension plans.  The Partnership’s net periodic benefit cost for the defined benefit pension plan consisted of the following components (in thousands):

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

June 30,

 

June 30,

 

 

 

2009

 

2008

 

2009

 

2008

 

Service cost

 

$

325

 

$

266

 

$

650

 

$

531

 

Interest cost